D.b. Income Tax Appeal v. M/S. Bohra Industries Limited

D.B. INCOME TAX APPEAL NO. 31/2012.Commissioner of Income Tax, Udaipur Vs.M/s. Bohra Industries Limited // 1 // D.B. INCOME TAX APPEAL NO. 31/2012.Commissioner of Income Tax, Udaipur Vs. M/s. Bohra Industries Limited .. Date of Judgment :: 14[th] January 2013. HON'BLE MR. JUSTICE DINESH MAHESHWARIHON'BLE MR. JUSTICE ARUN BHANSALI Mr. K.K. Bissa, for the appellant. <<>> BY THE COURT:(Per Hon'ble Dinesh Maheshwari,J.) By way of this appeal under Section 260A of the Income TaxAct, 1961 ['the Act'], the revenue seeks to question the order dated16.12.2011 as passed in ITA No.346/Jodh/2009 whereby theIncome Tax Appellate Tribunal, Jodhpur Bench, Jodhpur ['theTribunal'] has affirmed the order dated 19.01.2009 as passed by theCommissioner of Income Tax (Appeals), Udaipur ['the CIT(A)] indeleting disallowance, to the tune of Rs.8,73,445/- towardsdepreciation on building and Rs.20,96,267/- towards interest paid tothe bank, as ordered by the Assessing Officer [‘the AO’] in theassessment order dated 28.12.2007 relating to the respondent-assessee for the assessment year 2005-06. After having heard the learned counsel for the appellant andhaving perused the material placed on record, we are clearly of theview that essentially the matter relates to appreciation of evidenceleading to finding on facts; and no substantial question of law isinvolved in the case. The facts and the background aspects, so far relevant for thepresent purpose, could be noticed in the following: The respondent- D.B. INCOME TAX APPEAL NO. 31/2012.Commissioner of Income Tax, Udaipur Vs.M/s. Bohra Industries Limited// 2 // assessee is engaged in the business of manufacturer of fertilizers.The assessee filed its return for the assessment year 2005-06declaring income as ‘nil’. Thereafter, the return was reviseddeclaring a loss of Rs.3,79,286/-. The AO proceeded to complete theassessment by the questioned order dated 28.12.2007. Theassessee, inter alia, claimed that there had been addition in thefactory building to the tune of Rs.2,50,08,048/- . The AO asked theassessee to furnish the details and also issued notices to several ofthe parties referred to in the bills and the books of accounts. TheAO, while referring to various alleged shortcomings, lacunae andambiguities in the bills/vouchers, proceeded to exclude an amount ofRs.46,81,086/- as claimed to be of labour payment; another sum ofRs.52,48,660/- as the amount spent on building material like Gitti,cement, sand etc.; and yet another amount of Rs.75,39,151/-towards other material supplies. Thus, the AO considered a sum ofRs.1,74,68,897/- to be the bogus capital expenditure and excludedthe same for calculation of the allowable depreciation. In thismanner, the learned AO disallowed depreciation to the tune ofRs.8,73,445/-. On the same considerations, the AO held that thealleged cash had not been used for business and hence, theinterest payment to the bank for an equivalent amount was alsodisallowed. Taking the interest rate of the bank loan at 12% perannum, the disallowance on this score was made to the tune ofRs.20,96,267/-. While making certain other additions, the AOultimately assessed the total income of the assessee atRs.77,22,970/- and passed consequential orders. D.B. INCOME TAX APPEAL NO. 31/2012.Commissioner of Income Tax, Udaipur Vs.M/s. Bohra Industries Limited// 3 // D.B. INCOME TAX APPEAL NO. 31/2012.Commissioner of Income Tax, Udaipur Vs.M/s. Bohra Industries Limited// 3 // Aggrieved by the aforesaid assessment order dated28.12.2007, the assessee preferred an appeal that was consideredand partly allowed by the CIT(A) in his order dated 24.03.2009. Onthe aforesaid disallowance towards depreciation and interest, thelearned CIT(A) did not agree with the observations made by the AOwhile, inter alia, observing that the AO did not deal with the basicpoint as to whether construction of the factory building had beencarried out or not. The learned CIT(A) also observed that the AOdid not make any physical enquiry to verify the exact condition of thefactory building and rather proceeded only on the theory part whiledevoting much of the time in collecting and analyzing thebills/vouchers/wage-sheets and even the aspect of ratio of thebuilding material, masons and labourers. The learned CIT(A) alsofound the AO not correct in appreciation of the statements of thematerial suppliers. The CIT(A) also found that every item ofpurchase, payment, transportation, receipt etc. was recordedproperly in the books of accounts and the AO had nowhere pointedout any defect in such books. The CIT(A), therefore, did not approveof disallowance made by the AO with reference to some proceduralirregularities and presumptions. The CIT(A) also indicated about theobvious flaws in the AO’s approach where total labour payment wasdisallowed, which would practically mean that construction of factorybuilding, whatever, was carried out without any labour payment.Similarly, disallowance towards material supplies was alsodisapproved. The CIT(A), inter alia, observed as under:- D.B. INCOME TAX APPEAL NO. 31/2012.Commissioner of Income Tax, Udaipur Vs.M/s. Bohra Industries Limited // 4 // “.....The AO has nowhere in the assessment order pointedout any defect in the books of account. The disallowanceof materials purchased, labour payment and not acceptingconstruction of factory building on some proceduralirregularities and presumption is not justified. It is to bementioned here that the AO has disallowed total labourpayment of Rs.46,81,086/- which means that theconstruction of factory building even in part was completedwithout any labouor payment. The AO also madedisallowance of Rs.52,48,660/- claimed for materialsupply, gitti, cement sand and etc and Rs.75,39,151/- asother material supply. Here also the position is same asdiscussed on the point of labour payment. The AO hasbrought nothing on record to show that the appellant hasnot incurred expenditure on labour payment and forpurchase of material. Therefore, the AO was not justifiedin disallowing depreciation on building. The disallowanceis deleted. 14.The sixth ground of appeal relates to disallowanceof Rs.20,96,267/- out of interest paid to bank. 15.This ground is consequential to ground No.5above. Following the discussion made for disallowance ofdepreciation on building, the AO disallowed the bankinterest on the amount not utilized for construction. As thedisallowance out of depreciation on building has alreadybeen deleted, here also the same facts involved, thedisallowance of interest is also deleted.” 14.The sixth ground of appeal relates to disallowanceof Rs.20,96,267/- out of interest paid to bank. 15.This ground is consequential to ground No.5above. Following the discussion made for disallowance ofdepreciation on building, the AO disallowed the bankinterest on the amount not utilized for construction. As thedisallowance out of depreciation on building has alreadybeen deleted, here also the same facts involved, thedisallowance of interest is also deleted.” In the department’s appeal against the order so passed by theCIT(A), the Tribunal found that the CIT(A) had considered therelevant aspects minutely before accepting the claim of theassessee; and found no reason to interfere. The Tribunal alsoindicated that it had not been the case of the department that theassessee had shown excessive valuation of the factory building. Itwas further found that the bank loan had been obtained for additionto the building or purchasing machinery; and complete vouchers hadbeen furnished before the bank; and yet further, there was nomaterial difference between the value adopted by the valuer and theexpenditure shown by the assessee. The Tribunal, inter alia,observed as under:- D.B. INCOME TAX APPEAL NO. 31/2012.Commissioner of Income Tax, Udaipur Vs.M/s. Bohra Industries Limited // 5 // “8............. We have heard rival submissions and consideredthem carefully. We have gone through the orders of AssessingOfficer and ld. CIT(A) and the submissions of ld. A/R and foundthat ld. CIT (A) has examined the issue thread bear as all theaspects have been taken into consideration. The assessee hasmaintained complete purchase vouchers and vouchers ofpayment to the labourers. There were certain technical mistakesor error in writing the name as in one case the name of Ramlalwas written as Ramlala, and in one case while making thesignature on the vouchers “ji” word was used after the name ofthe party. This is a routine mistake and if somebody writes 'ji'after his name, it does not change the character of transaction.The ld. CIT (A) has considered this aspect minutely and thenonly has accepted the claim of the assessee. Findings of ld. CIT(A) have been reproduced somewhere above in this order whichremained uncontroverted. Therefore, we see no reason tointerfere with the finding of ld. CIT (A). This is also not the caseof the department that assessee has shown excessive valuationof the factory building as assessee is not claiming any subsidy.The bank loan has been obtained for the purpose of erectingadditional part of the building or purchasing machinery. Thesame has been purchased and complete vouchers have beenfurnished before the Bank for satisfying the bank for taking loan.Valuation has also been obtained by the assesee. there was nomajor difference between the value adopted by the valuer or theexpenditure shown by assessee in its books of account. In viewof these facts and circumstances, we confirm the order of ld. CIT(A) on this issue. 9.Interest is a consequential to the main ground as interestpaid by assessee was paid on borrowed amount from bankwhich is allowable as business expenditure. The CIT (A) hasallowed the same. Accordingly we confirm the order of ld. CIT(A) on this issue also.” Seeking to question the order of the Tribunal, it is contendedthat the AO ordered disallowance after deep scrutiny of the materialplaced before him and the CIT(A) as also the Tribunal have erred indeleting the same. According to the appellant, the question involvedin the matter is as to whether the Tribunal was justified in confirmingthe findings of the CIT(A) in deleting the disallowance while ignoringthe evidence brought on record by the AO; and without rebutting theinfirmities in the bills/vouchers as pointed out by the AO. In our view,the submissions fall short of making out any substantial question oflaw for consideration in this appeal. Seeking to question the order of the Tribunal, it is contendedthat the AO ordered disallowance after deep scrutiny of the materialplaced before him and the CIT(A) as also the Tribunal have erred indeleting the same. According to the appellant, the question involvedin the matter is as to whether the Tribunal was justified in confirmingthe findings of the CIT(A) in deleting the disallowance while ignoringthe evidence brought on record by the AO; and without rebutting theinfirmities in the bills/vouchers as pointed out by the AO. In our view,the submissions fall short of making out any substantial question oflaw for consideration in this appeal. D.B. INCOME TAX APPEAL NO. 31/2012.Commissioner of Income Tax, Udaipur Vs.M/s. Bohra Industries Limited// 6 // The grounds as urged and the questions as suggested allessentially relate to the matters of appreciation of evidence for afactual enquiry and rendering of findings on facts about the factorybuilding construction. True it is that the AO disallowed a part of theclaim made by the assessee with reference to his view of thematerial on record. However, the CIT(A) disagreed with the findingsof the AO after analyzing the material on record and also afterreferring to the ground realities as well as obvious inconsistencies inthe order of the AO. Then, the Tribunal found no reason to interferewhile proceeding on relevant considerations. The matter essentiallyrelated to the facts but the approach of the learned AO could nothave been approved when the same had been either too theoreticalor carried obvious inconsistencies like total disallowance of the claimtowards labour payment despite there being addition to the factorybuilding during the period in question. In an overall comprehension of the matter, we are satisfied thatthe findings on facts have been rendered by the two appellateauthorities in accordance with law and the orders impugned do notappear suffering from any perversity or wrong application of anyprinciple of law. Accordingly and in view of the above, the appeal fails and thesame is dismissed summarily. (ARUN BHANSALI), J. (DINESH MAHESHWARI), J.