Iv. Whether The Itat Rightly Allowed The Commissioner'sappeal On The Issue Which Was Not The Subject Matter Ofappeal? v. Whether The Itat Was Right In Setting Aside The Depreciationof Rs. 29,29,610/- On Account Of Machinery And Rs. 5,63,110/-On Building Of Food Division Granted By

JUDGEMENT RESERVED ON- 30.1.2019JUDGEMENTDELIVERED ON-.13.02.2019 Case :- INCOME TAX APPEAL No. - 263 of 2012Appellant :- M/S G.Surjiwear LimitedRespondent :- The Commissioner Income Tax Bareilly And AnotherCounsel for Appellant :- Rakesh Ranjan Agarwal,Rakesh Ranjan Agarwal,Suyash AgarwalCounsel for Respondent :- Praveen Kumar,S.S.C. I.T. Hon'ble Bharati Sapru,J.Hon'ble Piyush Agrawal,J. Delivered by Hon'ble Piyush Agrawal, J. Hear Sri Suyash Agarwal, learned counsel for theappellant and Sri Praveen Kumar, learned counsel forthe respondents. Present appeal has been filed against the orderdated 14.12.2011 passed by Income Tax AppellateTribunal, Lucknow Bench "A" Lucknow in ITA No.295/LKW/2011 for assessment year 2008-09 in whichfollowing substantial questions of law have beenframed:- "I. Whether the ITAT was right in holding that the Appellantwas not entitled to claim deduction of Rs. 45,50,025 underSection 35(1)(iv) of the Act? II. Whether the VAT Return of March 2008 and certificatesdated 05.06.2010 and 13.08.2010 issued by the statutory VatAuthorities are Public Documents under Section 74 of EvidenceAct, certifying the first date of production of food division on25.03.2008, the ITAT rightly held as not valid piece of evidenceto allow deduction amounting to Rs. 40,50,025/- u/s 35(1)(iv) ofIT Act? III. Whether the Assessment order for A.Y. 2007-08 (01.01.2008to 31.03.2008) dated 31.01.2011 and rectification order dated29.07.2011 passed by the Deputy Commissioner Commercial Tax Sector -3, Shahajahanpur confirming the commencement ofproduction of Food Division as well as assessing thepurchases/sales of Food Division, the ITAT was right in denyingthe deduction u/s 35(1)(iv) of IT Act? IV. Whether the ITAT rightly allowed the Commissioner'sAppeal on the issue which was not the subject matter ofAppeal? V. Whether the ITAT was right in setting aside the depreciationof Rs. 29,29,610/- on account of machinery and Rs. 5,63,110/-on building of Food Division granted by the CIT Appeal?" Brief facts of the case, which arise in the present appeal are that the assessee engaged in themanufacture of Implantable Surgical Devices andDisposable Drops and Dressup. During the year theappellant has alleged to have started new business ofFood Division for manufacture of Ready to CookFood and were producing following items:- 1.Punjabi Chhole 2.Dall Tadka 3.Kashmiri Rajma 4.Dall Makhani 5.Shahi paneer 6.Kadi Pakorra 7.Paneer Chunk Soya sauce It alleged to made first sale of Food Division on25.3.2008. The appellant in the disputed year hasclaimed the deductions of Rs. 45,50,025/- underSection 35(1)(iv) of the Income Tax Act, Rs.29,29,610/- on machinery and Rs. 5,63,110/- onbuilding of Food Division. The Assessing Authority while framing theassessment order have noticed Form No. 3CD whichgives statement of particulars required to be furnished under Section 44AB of Income Tax Act in whichagainst column No. 8 the appellant has furnishedinformation that it was engaged in manufacture ofImplantable Surgical Devices and Disposable Dropsand Dressup and there was no change in the nature ofbusiness or profession. Further, it was also noticed by the AssessingAuthority from profit and loss account of the assesseeand the details of raw-materials consumed, nowhereappellant has made any reference with regard toproduction and profit from the Food Division. Further, from Auditor's Report, it also does notreveal any change in business activities as comparedto the activities in the immediately preceding year. The appellant was called to reply as to why thededuction claimed under Section 35(1)(iv) as well asthe deduction in machinery and Food Division wascarried on during the year under consideration may notbe rejected . Further, it was also noticed by the AssessingAuthority from profit and loss account of the assesseeand the details of raw-materials consumed, nowhereappellant has made any reference with regard toproduction and profit from the Food Division. Further, from Auditor's Report, it also does notreveal any change in business activities as comparedto the activities in the immediately preceding year. The appellant was called to reply as to why thededuction claimed under Section 35(1)(iv) as well asthe deduction in machinery and Food Division wascarried on during the year under consideration may notbe rejected . In response to the notice, the appellant submittedthat the preserved Ready to Cook Food Productionwas started from 25th March, 2008. A certificateissued by Commertial Tax Department certifying thedate of starting production i.e. 25.3.2008 as well ascash purchase vouchers of M/s Sahai Traders fromwhom the appellant has purchased Dal, Haldi, Mirch,Dhania, Chola, etc., were also submitted . Further a computerized generated sales voucheramounting to Rs. 13,000/- being sales of certain itemsto M/s Raju General Stores were also submitted. On the aforesaid information received from theappellant, the Assessing Officer made necessaryinquiry from the above two parties. In absence of confirmation from the above parties with regard topurchase or sale and also in the light of surroundingcircumstances, while passing the assessment orderdated 13.12.2010 has held that the business of FoodDivision has not commenced during the year underconsideration. Accordingly, the Assessing Officer, disallowedthe deduction of Rs. 45,50,025/- as claimed by theappellant under Section 35(1)(iv) of Income Tax Actas well as deduction of Rs. 29,29,610 /- on machineryand Rs. 5,63,110/- on building of Food Division. Against the aforesaid order, the appellant preferred an appeal before the Commissioner ofIncome Tax (Appeals) Bareilly who, vide its orderdated 4.3.2011, allowed the appeal of the assessee andallowed the deduction as claimed. Against the order of CIT (Appeals), the Revenue filed an appeal before the Tribunal. The Tribunal bythe impugned order has allowed the appeal of theRevenue and restored the order of the AssessingAuthority. Against the impugned order the presentappeal has been filed. We have perused the record of the appeal which shows that the appellant in support of its claim has notonly produced relevant purchase and salevouchers/bills but has also submitted a survey reportand certificate issued by the Commercial TaxDepartment. On 14.1.2008, the survey was conductedat the business premises of the appellant and it wasnoticed that the plant and machinery were established.In the said survey a statement was made that theproduction was likely to be started in the month ofMarch or April, 2008. Further the appellant has also filed its annualreturn as prescribed under the U.P. VAT Act, 1998 andin pursuance of the said return so submitted, anassessment order under Section 28(2) of the U.P. VATAct was also framed. While passing the assessment order under theU.P. VAT Act the Assessing Authority has observedthat on the sale of cooking food the rate of tax is 12%but appellant has accepted tax and deposit the sameonly at the rate of 4%. A bare perusal for the record, more precisely the assessment order and survey report dated 14.1.2008filed by the assessee shows that the production wasstarted in March, 2008 and the sale was also made. Tribunal, being a last court of fact, was notjustified in brushing aside the certificate, survey reportand the assessment order passed by one GovernmentDepartment, i.e., Commercial Tax Department of U.P. In view of the aforesaid facts, the view taken bythe Tribunal in brushing aside the assessment orderrelevant for the year under consideration is not correct. While passing the assessment order under theU.P. VAT Act the Assessing Authority has observedthat on the sale of cooking food the rate of tax is 12%but appellant has accepted tax and deposit the sameonly at the rate of 4%. A bare perusal for the record, more precisely the assessment order and survey report dated 14.1.2008filed by the assessee shows that the production wasstarted in March, 2008 and the sale was also made. Tribunal, being a last court of fact, was notjustified in brushing aside the certificate, survey reportand the assessment order passed by one GovernmentDepartment, i.e., Commercial Tax Department of U.P. In view of the aforesaid facts, the view taken bythe Tribunal in brushing aside the assessment orderrelevant for the year under consideration is not correct. The impugned order of the Tribunal dated14.12.2011, is set aside and matter is remanded backto the Tribunal for reconsideration in accordance withlaw. The question of law is answered accordingly infavour of assessee-appellant and against the Revenue. Order Date :- 13.2.2019SY