S.P.Mani and Mohan Dairy, Erode v. ACIT Circle 1, Erode

ITA 1321/CHNY/2018 | 2014-2015
Pronouncement Date: 05-11-2019 | Result: Allowed

Appeal Details

RSA Number 132121714 RSA 2018
Assessee PAN AAKFS5133J
Bench Chennai
Appeal Number ITA 1321/CHNY/2018
Duration Of Justice 1 year(s) 6 month(s) 15 day(s)
Appellant S.P.Mani and Mohan Dairy, Erode
Respondent ACIT Circle 1, Erode
Appeal Type Income Tax Appeal
Pronouncement Date 05-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 05-11-2019
Last Hearing Date 20-02-2019
First Hearing Date 07-03-2019
Assessment Year 2014-2015
Appeal Filed On 20-04-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI . . . ' ' BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI RAMIT KOCHAR ACCOUNTANT MEMBER ./ ITA NO.1321/CHNY/2018 ( ( /ASSESSMENT YEAR: 2014-15 M/S.S.P.MANI AND MOHAN DAIRY 84 JEEVANANTHAM STREET KOLLAMPALAYAM ERODE-638 002. [PAN: AAKFS5133J] V . THE ASST. COMMISSIONER- OF INCOME TAX CIRCLE-1 ERODE. ( + /APPELLANT) ( -+ /RESPONDENT) ./ ITA NO.1403/CHNY/2018 ( ( /ASSESSMENT YEAR: 2014-15 THE DY. COMMISSIONER OF- INCOME TAX CIRCLE-1 NO.15 GANDHIJI ROAD ERODE - 638 001. V . M/S.S.P.MANI AND MOHAN DAIRY 84 JEEVANANTHAM STREET KOLLAMPALAYAM ERODE-638 002. [PAN: AAKFS5133J] ( + /APPELLANT) ( -+ /RESPONDENT) ASSESSEE BY : MRS.G.VARDINI KARTHIK CA DEPARTMENT BY : MS.R.ANITHA JCIT / /DATE OF HEARING : 10.09.2019 / /DATE OF PRONOUNCEMENT : 05.11.2019 ITA NOS.1321 & 1403/CHNY/2018 :- 2 -: / O R D E R PER RAMIT KOCHAR ACCOUNTANT MEMBER : THESE CROSS APPEALS FILED BY ASSESSEE AND REVENUE ARE DIRECTED AGAINST APPELLATE ORDER DATED 14.02.2018 PASSED BY LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-3 COIMBATORE (HEREINAFTER CALLED THE CIT (A)) IN APPEAL NO. 293/16-17 FOR ASSESSME NT YEAR(AY) 2014-15 THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM ASSESSMENT ORDER DATED 30.12.2016 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S. 143(3) OF THE I NCOME-TAX ACT 1961 (HEREINAFTER CALLED THE ACT) FOR AY: 2014-15. B OTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OFF BY THIS COMMON ORDER. 2. THE GROUNDS OF APPEAL RAISED BY ASSESSEE IN MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI (HE REINAFTER CALLED THE TRIBUNAL) IN ITA NO. 1321/CHNY/2018 FOR AY: 2014- 15 READ AS UNDER:- 01. THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS) IS AGAINST LAW FACTS AND EQUITY. 02. THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS) IN UPHOLDING THE ADDITIONS MADE ON CREDITORS IN RESPECT OF THE DETA ILS FOUND AT THE TIME OF SURVEY TO ARRIVE AT A CONCLUSION THAT THE PAYMENTS HAS TO BE MADE W ITHIN 7 DAYS AS PER HIS CALCULATIONS AND THE CREDITORS STANDING BEYOND 7 DAYS WERE TO BE CONSIDERED AS THE LIABILITY CEASED. AS THE CESSATION OF LIABILITY IS THE MATTER OF THE ASSESSEE'S POLICY AND PRUDENCE AND THEY ARE THE BETTER JUDGES TO TAKE A DECISION ON CESSATI ON OF LIABILITIES THE ADDITION MADE U/S 41(1)(A) ON THIS ACCOUNT NEEDS TO BE DELETED. 03. THE COMMISSIONER OF INCOME TAX (APPEALS) OU GHT TO HAVE APPRECIATED THE FACT IN RESPECT OF THE ALL THE ADDITIONS MADE U/S 41(1) IT IS RELIED ON THE DECISION OF THE HONORABLE DELHI HIGH COURT IN THE CASE OF ' CIT VS. HOTLINE ELECTRONICS LTD' (2012) 205 TAXMANN 245 (DELHI) WHERE IN IT IS HELD THAT UNPAI D LIABILITIES CANNOT BE ADDED AS THE ASSESSEE'S INCOME UNDER SECTION 41(1) MERELY BECAUS E THEY REMAINED UNPAID FOR A SUFFICIENTLY LONG TIME AND THAT IT IS REQUIRED OF T HE REVENUE AUTHORITIES TO SHOW THAT THE LIABILITY TO PAY THE CREDITORS HAS CEASED OR HAS BE EN REMITTED BY THE CREDITORS'. IN FACT WITHOUT CONFIRMING FROM THE CREDITORS THE CESSATIO N OF LIABILITY WILL NOT BE POSSIBLE. ITA NOS.1321 & 1403/CHNY/2018 :- 3 -: 04. THE COMMISSIONER OF INCOME TAX (APPEALS) OU GHT TO HAVE APPRECIATED THE FACT THAT A STATEMENT GIVEN AT THE TIME OF SURVEY U/S 13 3A CANNOT BE A BASIS FOR MAKING AN ADDITION AS HELD BY THE HONORABLE MADRAS HIGH COURT IN THE CASE OF 'CIT VS. KADAR KHAN SON' WHICH WAS AFFIRMED BY THE HONORABLE SUPREME C OURT. 05. THE COMMISSIONER OF INCOME TAX (APPEALS) O UGHT TO HAVE UNDERSTOOD THAT THE BOTH CHILLING UNITS WERE PUT IN TO COMMERCIAL USE D URING THE COURSE OF THE YEAR AND THE DISALLOWANCE OF DEPRECIATION RELATING TO ONE OF THE UNIT FOR WANT OF EVIDENCE IS NOT IN ORDER AND HENCE THE CLAIM OF BOTH THE UNITS NEEDS T O BE RESTORED. 06. THE COMMISSIONER OF INCOME TAX (APPEALS) OU GHT TO HAVE UNDERSTOOD THAT THE CHILLING UNITS WERE PUT IN TO COMMERCIAL USE DURING THE COURSE OF THE YEAR AND WITHOUT CONSIDERING THE SAME STATING THAT THE CONSTRUCTION OF THE UNITS WERE NOT COMPLETED DURING THE YEAR AND HENCE THE INTEREST ON LOANS TAK EN FOR THE SAME CANNOT BE CLAIMED AND IS TO BE CAPITALIZED IS IN ERROR. THE DISALLOWA NCE OF INTEREST ON LOANS RELATING TO THESE UNITS TO THE TUNE OF RS. 60 82 257/-NEEDS TO BE DE LETED. 07. FOR THESE AND SUCH OTHER REASONS THAT MAY BE ADDUCED AT THE TIME OF HEARING YOUR APPELLANT PRAYS THAT THE ASSESSMENT MAY KINDLY BE QUASHED AND JUSTICE RENDERED. 2.2 THE GROUNDS OF APPEAL RAISED BY REVENUE IN MEMO OF APPEAL FILED WITH THE TRIBUNAL IN ITA NO. 1403/CHNY/2018 FOR AY: 201 4-15 READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED C1T(A) ERRED BY GRANTING RELIEF OF RS.2.63 CRORES WITHOUT APPRECIAT ING THE FACT THAT THE ADDITION UNDER SECTION 41(1)(A) WAS MADE AFTER PROPERLY ANALYSING THE MILK CREDITOR ACCOUNTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) GRANTED THE RELIEF OF RS.2.63 CRORES ON ASSUMPTION BASIS AND WITHOUT R EJECTING OR REBUTTING THE FINDINGS MENTIONED IN THE ASSESSMENT ORDER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED BY DELETING THE ADDITION MADE OF RS 29 97 542/- UNDER SECTION 6 8 WITHOUT VERIFY AS TO HOW IN THE AUDITED BOOKS OF ACCOUNTS ASSESSEE GAVE EFFECT TO T HE DEFICIT CASH NOTICED DURING THE COURSE OF SURVEY. 4. THE HON'BLE ITAT IS REQUESTED TO CANCEL TH E ORDER OF THE LEARNED CIT(A)-3 COIMBATORE AND UPHOLD THE ORDER OF THE ASSESSING OF FICE ON THE ABOVE ISSUES. 5. THE HON'BLE ITAT IS REQUESTED LEAVE TO ADD AMEND OR MODIFY THE GROUNDS O APPEAL IF NECESSARY IN FUTURE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MILK DAIRY. A SURVEY ACTION U/S.133A O F THE 1961 ACT WAS CARRIED OUT BY REVENUE IN THE PREMISES OF ASSESSEE ON 06.11.2013. DURING THE COURSE OF SURVEY OPERATIONS CONDUCTED BY REVENUE U/S 133A OF ITA NOS.1321 & 1403/CHNY/2018 :- 4 -: THE 1961 ACT THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS.2 05 98 000/- ON ACCOUNT OF WAIVER OF MILK CREDI TORS. THE ASSESSEE IN ITS RETURN OF INCOME FILED WITH REVENUE HOWEVER D ECLARED AN ADDITIONAL INCOME OF RS.2 CRORES. THE CASE WAS SELECTED BY REV ENUE FOR FRAMING OF SCRUTINY ASSESSMENT U/S 143(3) OF THE 1961 ACT AND STATUTORY NOTICES U/S 143(2) AND 142(1) OF THE 1961 ACT WERE ISSUED TO TH E ASSESSEE BY THE AO. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT SUNDRY CREDITORS ON ACCOUNT OF MILK SUPPLIES WERE C LAIMED BY ASSESSEE TO BE RS.13 71 68 433/- AS ON 31.03.2014 AS AGAINST O PENING BALANCE OF RS.10 05 12 485/- AT THE BEGINNING OF THE YEAR. THE AO OBSERVED THAT DESPITE SURRENDER OF RS.2 CRORES ON ACCOUNT OF WAIV ER OF MILK CREDITORS THERE WAS AN INCREASE IN THE CLOSING BALANCE. DURI NG THE COURSE OF SURVEY OPERATIONS IT WAS NOTICED BY REVENUE THAT THE ASSE SSEE WAS NOT REPORTING ACTUAL STATE OF ITS FINANCIAL AFFAIRS. THE AO OBSER VED THAT PURCHASE FIGURES WERE INFLATED AND SINCE THESE INFLATED PURCHASES WE RE NOT PAID BY THE ASSESSEE IT LED TO ACCUMULATION INTO LARGE OUTSTAN DING UNDER THE HEAD SUNDRY CREDITORS FOR MILK PURCHASES. THE AO OBSE RVED THAT DESPITE HUGE OPENING BALANCE OF SUNDRY CREDITORS FOR MILK PURCHA SES TO THE TUNE OF ` 10 05 12 485/- THE ASSESSEE HAD DECLARED RS.2 CR ORES AS INCOME FROM WAIVER OF THE MILK CREDITORS. ON BEING ASKED AS TO HOW THIS FIGURE OF ` 2 CRORES IS ARRIVED AT THE ASSESSEE CAME OUT WITH AN EXPLANATION AS UNDER: THE WAIVER OF SUNDRY CREDITORS TO THE EXTENT OF RS .2 00 00 000/- DURING THE YEAR AND DECLARED AS INCOME. THE SAID CREDITORS LIST ARE E NCLOSED HEREWITH. THE WAIVER OF CREDITORS ARE CONSIDERED ONLY ON THE BASIS OF TRANSACTION WIT H THE ASSESSES; FOR THE PAST PERIOD AND CURRENT YEAR. WE CANNOT WAIVER ALL THE CREDITORS I N THIS DAIRY BUSINESS. SOMETIMES LIKE SEASONAL BUSINESS AT THAT TIME NO. OF SUPPLIERS ARE MORE SOMETIMES (SUMMER SEASON) THEY ARE REDUCING NUMBER BECAUSE MILK INPUT MAY REDUCE. SO IT IS VARYING EVERY YEAR. THERE IS NO REGULAR CONTRACT. SOMETIMES LATER DATE WAIVER CU STOMER MAY COME TO SUPPLY THE MILK ITA NOS.1321 & 1403/CHNY/2018 :- 5 -: VOLUNTARILY. THIS IS NATURE PREVAILING THIS DAIR Y INDUSTRY SO WE CANNOT PREDICT ALL THE PERSONS DO NOT TURN FOR THE SUPPLY THE MILK. SO SEL ECTIVELY DEPENDING ON THE SUPPLIER THE ASSESSEE WAIVED THEIR PAYMENT. IT IS TOTALLY DEPEND S ON THE CUSTOMER TO CUSTOMER.' 3.2 THE AO WAS NOT SATISFIED WITH THE AFORESAID GEN ERALIZED REPLY SUBMITTED BY ASSESSEE AND WAS OF THE VIEW THAT ASSE SSEE COULD NOT EXPLAIN AS TO HOW IT HAS ARRIVED AT A FIGURE OF ` 2 CRORES FOR WRITE OFF DESPITE OTHER CREDITORS WHICH WERE OUTSTANDING FOR PAYMENT FOR A LONG TIME AND THUS THE AO WAS OF THE VIEW THAT THIS WRI TE OFF OF ` 2 CRORES TOWARDS SUNDRY CREDITORS IS NOT A CORRECT/REASONABL E AMOUNT. THE AO OBSERVED THAT THE ASSESSEE HAS AROUND 1000 MILK CEN TER CREDITORS. THE AO EXAMINED LEDGER ACCOUNTS OF THESE MILK CREDITORS AN D OBSERVED THAT IN MANY CASES THE SUNDRY CREDITORS OUTSTANDING FOR PA YMENT REPRESENT OPENING BALANCE AND CONTINUES TO REMAIN OUTSTANDING FOR PAYMENT THROUGHOUT THE YEAR AND THE SAME WERE NOT WRITTEN B ACK AS WAIVED BY CREDITORS BY THE ASSESSEE. THE AO OBSERVED THAT TO TAL OF SUCH CREDITORS ARE TO THE TUNE OF ` 32 70 589/- FOR WHICH LIST WAS ANNEXED BY THE AO ALONG WITH THE ASSESSMENT ORDER. THE AO OBSERVED TH AT THE ASSESSEE HAS NOT GIVEN PROPER EXPLANATION FOR NON INCLUSION OF T HESE SUNDRY CREDITORS FOR WAIVER/DECLARATION OF INCOME. THE AO OBSERVED T HAT THESE MILK SUPPLIERS WERE POOR VILLAGERS WHO CANNOT WAIT FOR MORE THAN A YEAR TO RECEIVE THEIR PAYMENTS AND HENCE AO WAS OF THE VIEW THAT IT IS DIFFICULT TO ACCEPT VERSION OF THE ASSESSEE AND AO WAS OF THE V IEW THAT EITHER THE ASSESSEE HAD PAID THESE SUNDRY CREDITORS OUT OF UNA CCOUNTED FUNDS OR ELSE THE LIABILITY HAS EXTINGUISHED WHICH ATTRACTS PROVI SIONS OF SECTION 41(1)(A) ITA NOS.1321 & 1403/CHNY/2018 :- 6 -: OF THE 1961 ACT. THIS LED AO TO MAKE ADDITIONS TO THE TUNE OF RS.32 70 589/- AS INCOME OF THE ASSESSEE BY INVOKI NG PROVISIONS OF SEC.41(1)(A) OF THE 1961 ACT VIDE ASSESSMENT ORDER DATED 30.12.2016 PASSED BY THE AO U/S. 143(3) OF THE 1961 ACT. 3.3 SIMILARLY THE AO ALSO OBSERVED FROM LIST OF OU TSTANDING MILK CREDITORS WHEREIN LAST PURCHASES WERE MORE THAN A MONTH OLD O R PAYMENTS FOR LAST FEW PURCHASES WERE MADE BACK TO BACK THAT THERE I S NO PREVIOUS BALANCES OF SUNDRY CREDITORS ARE STILL OUTSTANDING TO BE PAID. THE AO MADE ADDITIONS TO THE TUNE OF RS.1 04 62 889/- AS INCOME OF THE ASSESSEE FOR THIS CATEGORY WHICH WAS DETAILED VIDE ANNEXURE ENCL OSED BY THE AO ALONG WITH ASSESSMENT ORDER. THE EMPLOYEE OF THE ASSESSE E SHRI RAMASWAMY IN HIS STATEMENT RECORDED DURING THE COURSE OF SUR VEY PROCEEDINGS CONDUCTED BY REVENUE U/S 133A OF THE 1961 ACT ON 20.11.2013 STATED IN REPLY TO QUESTION NUMBER 6 AND 7 THAT PAYMENT FOR M ILK PURCHASES ARE MADE WITHIN A WEEKS TIME BY THE ASSESSEE TO THE SU PPLIERS. THE AO OBSERVED THAT IN VIEW OF ABOVE THERE IS NO POSSIBI LITY THAT PAYMENTS FOR MILK WILL REMAIN OUTSTANDING FOR A LONG PERIOD AND IN THE OPINION OF THE AO THESE PAYMENTS REMAINING OUTSTANDING TO BE PAID ARE EITHER INFLATED PURCHASE COSTS OR THE ASSESSEE HAD CLEARED THESE P AYMENTS OUT OF UNACCOUNTED FUNDS WHICH IS NOT REFLECTED IN BOOKS O F ACCOUNTS. THE AO OBSERVED THAT NO REASONS ARE FURNISHED BY THE ASSES SEE FOR AMOUNTS REMAINING OUTSTANDING FOR A LONG PERIOD OF TIME . T HE AO ALSO OBSERVED THAT IF THESE ACCOUNTS ARE CAREFULLY ANALYZED THE N IT COULD BE OBSERVED THAT THE ASSESSEE HAS MADE BACK TO BACK PAYMENTS FO R LAST FEW PURCHASES ITA NOS.1321 & 1403/CHNY/2018 :- 7 -: WITHIN A WEEK TIME WHILE THE OLD BALANCES OF MILK SUPPLIERS ARE STILL OUTSTANDING FOR PAYMENTS IMPLYING THAT THE PREVIOU S BALANCES HAVE BEEN CLEARED OFF OUT OF UNDISCLOSED SOURCES OF INCOME WHICH LED AO TO MAKE ADDITION TO THE INCOME OF THE ASSESSEE TO THE TUNE OF RS.1 04 62 889/- BY INVOKING PROVISIONS OF SECTION 41(1)(1) OF THE 1961 ACT VIDE ASSESSMENT ORDER DATED 30.12.2016 PASSED BY THE AO U/S. 143(3) OF THE 1961 ACT. . 3.4 THE AO OBSERVED THAT THIRD CATEGORY OF MILK CRE DITORS ARE THOSE WHO STILL HAVE REGULAR TRANSACTIONS WITH ASSESSEE AND E ACH OF THESE PURCHASES WERE REGULARLY PAID BY ASSESSEE WITHIN A WEEKS TIM E AND HENCE EXCEPT FOR LAST PURCHASES REMAINING UNPAID OLD BALANCES OF S UNDRY CREDITORS SHOWN TO BE OUTSTANDING FOR PAYMENT ARE INCORRECT AND NON -EXISTING. . THE AO EXTRACTED LEDGER ACCOUNT FOR THE MONTH OF MARCH 201 4 OF TOP THIRTY CREDITORS FROM WHOM ASSESSEE HAD PURCHASED MILK IN ITS ASSESSMENT ORDER DATED 30.12.2016 PASSED U/S 143(3) OF THE 196 1 ACT AND ADDED TO THE INCOME OF THE ASSESSEE A SUM OF ` 9 61 80 915/-IN THE HANDS OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 41(1)(A) OF THE 1961 ACT. 3.5 THE AO ALSO OBSERVED THAT DEPARTMENT HAS ALREAD Y MADE AN ADDITION TO THE INCOME OF THE ASSESSEE FOR AY:2013-14 TO THE TUNE OF RS.5 06 56 197/- U/S. 68 OF THE ACT IN RESPECT OF U NEXPLAINED SUNDRY CREDITORS OUTSTANDING AS ON 31.03.2013. IT WAS OBS ERVED BY AO THAT LD.CIT(A) HAS ALREADY DELETED THE AFORESAID ADDITIO N FOR AY: 2013-14 VIDE APPELLATE ORDER DATED 30.08.2016 AND MATTER IS NOW PENDING FOR DISPOSAL BEFORE TRIBUNAL AT THE BEHEST OF REVENUE . THE AO OBSERVED THAT SINCE MATTER FOR AY: 2013-14 HAS NOT REACHED FINALITY OU T OF ADDITIONS TO THE ITA NOS.1321 & 1403/CHNY/2018 :- 8 -: TUNE OF ` 10 99 14 393/- NOW BEING MADE ON ACCOUNT OF WAIVER OF SUNDRY CREDITORS AN AMOUNT OF ` 5 06 56 197/- IS BEING ADDED ON PROTECTIVE BASIS AND IF ADDITIONS FOR AY:2013-14 ARE NOT SUSTAINED B Y APPELLATE AUTHORITIES THEN IN THAT SITUATION THE ENTIRE ADDITIONS TO THE TUNE OF ` 10 99 14 393/- WILL STOOD CONFIRMED AS INCOME IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS FOR IMPUGNED AY UNDER CONSIDERATI ON. 4. THE AO ALSO OBSERVED THAT ASSESSEE HAD CLAIMED DEPRECIATION ON ASSETS IN RESPECT OF TWO NEW CHILLING PLANTS SET UP AT AAYILPATTI AND KARUR IT WAS OBSERVED BY AO THAT AS PER INFORMATION SUBMI TTED BY ASSESSEE DATED 14.10.2016 THESE TWO PLANTS WERE COMMISSIONE D FOR COMMERCIAL PRODUCTION IN THE PREVIOUS YEAR 2014-15 WHICH MENTI ONS THE CONDITIONS UNDER WHICH THESE PLANTS WILL BE OPERATED. THE AO W AS OF THE VIEW THAT IT PROVES THAT THE ASSETS WERE NOT PUT TO USE DURING T HE PREVIOUS YEAR UNDER CONSIDERATION. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION AS DETAILED BELOW W.R.T. ASSETS CONNEC TED WITH THESE TWO NEW CHILLING UNITS AS UNDER: DEPRECIATION ON AAYILPATTY CC BUILDING RS. 22 79 75 5/- DEPRECIATION ON KARUU CC BUILDING RS. 19 41 701/- PLANT & MACHINERY AAYILPATTY RS. 26 23 623/- PLANT & MACHINER KARUU RS. 23 52 815/- -------------- RS. 91 97 894/- -------------- THE AO OBSERVED THAT SINCE THESE TWO UNITS HAVE NOT COMMENCED OPERATIONS DURING THE PREVIOUS YEAR UNDER CONSIDERA TION THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEPRECIATION TO THE TUNE OF ` 91 97 894/- ON THESE TWO CHILLING PLANTS LOCATED AT AAYILPATTI AND KARUR W HICH STOOD DISALLOWED BY ITA NOS.1321 & 1403/CHNY/2018 :- 9 -: AO VIDE ASSESSMENT ORDER DATED 30.12.2016 PASSED B Y AO U/S 143(3) OF THE 1961 ACT. 5. WITH RESPECT TO ADDITIONAL DEPRECIATION CLAIMED BY ASSESSEE TO THE TUNE OF RS.66 35 246/- ON PLANT AND MACHINERY INSTALLED IN THESE TWO CHILLING PLANTS NEWLY SET UP WHICH AS PER AO HAS NOT COMM ENCED OPERATIONS DURING THE PREVIOUS YEAR UNDER CONSIDERATION THE AO OBSERVED THAT ASSESSEE IS ONLY COLLECTING MILK AND PROCESSING AN D PACKING IT FOR SALE AND THERE IS NO MANUFACTURING OR PRODUCTION OF ANY ARTI CLE OR THING CARRIED ON BY THE ASSESSEE . THUS THE AO OBSERVED THAT THE AS SESSEE IS NOT ENTITLED TO CLAIM ADDITIONAL DEPRECIATION . THE AO FURTHER O BSERVED THAT SINCE THESE 2 CHILLING UNITS LOCATED AT AAYILPATI AND KARUR HAV E NOT COMMENCED OPERATIONS DURING THE PREVIOUS YEAR UNDER CONSIDERA TION THEREFORE EVEN OTHERWISE DEPRECIATION IS NOT ALLOWABLE DURING THE YEAR UNDER CONSIDERATION AND HENCE CLAIM OF THE ASSESSEE FOR ADDITIONAL DEPRECIATION TO THE TUNE OF ` 66 35 246/- U/S 32(1)(IIA) OF THE 1961 ACT STOOD DISALLOWED BY AO AND ADDED TO THE INCOME OF THE ASS ESSEE VIDE ASSESSMENT ORDER DATED 30.12.2016 PASSED BY AO U/S 143(3) OF THE 1961 ACT 6. THE AO ALSO OBSERVED THAT ASSESSEE HAS AVAILED T ERM LOANS FOR SETTING UP THESE TWO NEW CHILLING PLANTS AT AAYILPATTY AND KARUR AND INTEREST ON TERM LOANS TO THE TUNE OF ` 60 82 257/- WAS INCURRED BY ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND SINCE THESE TWO UNITS HAVE NOT COMMENCED OPERATIONS TILL THE END OF PREVIOUS YEAR RELEVANT T O IMPUGNED AY WHICH LED AO TO REFER TO PROVISIONS OF SECTION 36(1)(III) OF THE 1961 ACT TO ITA NOS.1321 & 1403/CHNY/2018 :- 10 -: DISALLOW THESE INTEREST EXPENSES WHICH STOOD ADDED TO THE INCOME OF THE ASSSSEEE BY THE AO VIDE ASSESSMENT ORDER DATED 30. 12.2016 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT. 7. THE AO FURTHER OBSERVED THAT DURING THE COURSE O F SURVEY OPERATIONS CONDUCTED BY REVENUE AGAINST THE ASSESSEE ON 06.11. 2013 U/S 133A OF THE 1961 ACT THE CASH TO THE TUNE OF RS.26 35 769 /- WAS PHYSICALLY FOUND BUT HOWEVER CASH BALANCE AS PER AUDITORS STA TEMENT NOW FILED WITH DEPARTMENT AS ON THE DATE OF THE SURVEY WAS RS.56 3 3 311/- WHICH LED TO EXCESS CASH TO THE TUNE OF RS.29 97 542/- REFLECTE D IN BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH LED AO TO CONCLUDE THAT ASSE SSEE HAS INTRODUCED ITS UNACCOUNTED FUNDS TO THE TUNE OF ` 29 97 542/- IN ITS BOOKS OF ACCOUNTS AND SINCE ASSESSEE HAS NOT EXPLAINED SOURCES OF CAS H THE SAID CASH DIFFERENTIAL TO THE TUNE OF RS.29 97 542/- WAS ADDE D BY THE AO AS INCOME OF THE ASSESSEE U/S 68 OF THE 1961 ACT VIDE ASSES SMENT ORDER DATED 30.12.2016 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT . 8. AGGRIEVED BY AN ASSESSMENT FRAMED BY AO VIDE ASS ESSMENT ORDER DATED 30.12.2016 U/S 143(3) OF THE 1961 ACT THE A SSESSEE FILED FIRST APPEAL WITH LD.CIT(A) AND MADE DETAILED CONTENTIONS BEFORE LD.CIT(A). REGARDING FIRST ISSUE OF WAIVER OF SUNDRY CREDITORS U/S 41(1) THE LD.CIT(A) OBSERVED THAT ASSESSEE WAS SURVEYED U/S.1 33A OF THE ACT ON 06.11.2013 WHICH INDICATED INFLATION OF PURCHASES A ND CORRESPONDING ACCUMULATION IN SUNDRY CREDITORS FOR MILK PURCHASE S. THE LEARNED CIT(A) OBSERVED THAT ASSESSEE HAS SURRENDERED ADDITIONAL I NCOME BY WAIVING CERTAIN SUNDRY CREDITORS AND FOR IMPUGNED YEAR UNDE R CONSIDERATION THE ITA NOS.1321 & 1403/CHNY/2018 :- 11 -: ASSESSEE SURRENDERED ADDITIONAL INCOME OF RS.2 CROR ES BY WAY OF WAIVER OF CERTAIN SUNDRY CREDITORS . THE LD CIT(A) OBSERVE D THAT THIS DISCLOSURE BY THE ASSESSEE OF ADDITIONAL INCOME OF ` 2 CRORES WAS AN ADHOC ONE WITHOUT HAVING ANY BASIS. THE LD.CIT(A) OBSERVED THAT AO H AS BROUGHT OUT IN HIS ASSESSMENT ORDER THE REASONING FOR MAKING ADDITION S IN RESPECT OF EACH CATEGORY OF SUNDRY CREDITORS. THE LEARNED CIT(A) OB SERVED THAT FIRST CATEGORY OF THE CREDITORS IS THOSE WHERE BALANCE OU TSTANDING IS MORE THAN ONE YEAR OLD AND SUCH BALANCE WERE NOT DECLARED BY ASSESSEE AS ITS INCOME OF ITS OWN ON ACCOUNT OF WAIVER OF CREDITORS . THE LD CIT(A) OBSERVED THAT SECOND CATEGORY OF SUNDRY CREDITOR IS THOSE WHERE LAST PURCHASE IS MORE THAN ONE MONTH OLD AND PAYMENT FOR LAST PURCHASES WERE MADE BACK TO BACK THE LEARNED CIT(A) OBSERVED THAT LAST CATEGORY IS OF THE CREDITORS WHERE THE ASSESSEE HAD PURCHASED T ILL THE LAST DATE OF THE FINANCIAL YEAR BUT PAYMENTS WERE MADE BACK TO BAC K IMPLYING NO ACTUAL OUTSTANDING. THE LD.CIT(A) OBSERVED THAT ASSESSEE MADE STATEMENT DURING COURSE OF SURVEY OPERATIONS U/S.133A WHEREI N ASSESSEE MADE ADMISSION AND DISCLOSED ITS MODUS OPERANDI WHICH LE D TO SURRENDER OF ADDITIONAL INCOME OF ` 2 CRORES BY THE ASSESSEE FOR IMPUGNED AY UNDER CONSIDERATION WHICH IS NOT RETRACTED BY THE ASSESSE E. THE LEARNED CIT(A) OBSERVED THAT ASSESSEE HAS ADMITTED TO HAVE INFLATE D PURCHASES AND OVERSTATED SUNDRY CREDITORS IN ITS BOOKS OF ACCOUNT S. THE LEARNED CIT(A) OBSERVED THAT GENUINENESS OF SUNDRY CREDITORS BALAN CES IS ALSO IN QUESTION. THE ASSESSEE RELIED ON JUDGMENT IN THE C ASE OF CIT V. HOTLINE ELECTRONICS LIMITED(2012) 205 TAXMAN 245(DELHI) W HILE LD.CIT(A) ITA NOS.1321 & 1403/CHNY/2018 :- 12 -: DISTINGUISHED THE AFORESAID DECISION RELIED UPON BY THE ASSESSEE AND HELD THAT THE ASSESSEE CANNOT TAKE BENEFIT OF THE SAID J UDGMENT WHICH IS DISTINGUISHABLE ON FACTS AND NOT APPLICABLE TO THE CASE OF THE ASSESSEE. 8.2 THE LD.CIT(A) ALSO OBSERVED THAT ASSESSEE IS I N THE BUSINESS OF COLLECTION PROCESSING AND DISTRIBUTION OF MILK . T HE LEARNED CIT(A) OBSERVED THAT ASSESSEE PROCURED MILK FROM FARMERS T HROUGH ITS COLLECTION CENTERS/AGENTS. THE LD.CIT(A) OBSERVED THAT ON PER USAL OF LEDGER ACCOUNTS OF MILK COLLECTION CENTERS/AGENTS WILL REV EAL THAT THE PAYMENTS FOR MILK PURCHASES WERE MADE AT WEEKLY INTERVALS W HICH FOLLOWS A PARTICULAR PATTERN OF BACK TO BACK SETTLEMENT LEAV ING NO CREDIT BALANCES. THE LD.CIT(A) ALSO OBSERVED THAT THESE FARMERS/PROC URING AGENTS CANNOT AFFORD TO EXTEND CREDIT PERIOD OF MORE THAN ONE OR TWO WEEKS. THE LEARNED CIT(A) ALSO OBSERVED THAT ASSESSEE HAS ALSO NOT BRO UGHT ON RECORD ANY DIFFERENCES IN PAYMENTS MADE TO THESE FARMERS/PROCU RING AGENTS OWING TO SPOILAGE QUALITY QUANTITY ETC.. THE LD.CIT(A) O BSERVED THAT TOTAL MILK PURCHASED DURING THE YEAR UNDER CONSIDERATION WAS R S.137 CRS. WHEREIN AVERAGE WEEKLY PURCHASE COMES TO RS.2.63 CRS. THE MILK SUPPLY CREDITOR BALANCE OF ` 13 71 68 433/- TRANSLATES TO 5.21 WEEKS PURCHASES NOT SETTLED. THE LEARNED CIT(A) OBSERVED THAT THIS DEFI ES THE PATTERN OF SETTLEMENT IN ASSESSEES CASE AND SHOWS HUGE ABNORM ALITY OF SUNDRY CREDITORS CARRIED IN THE BALANCE SHEET. THE LD.CIT( A) OBSERVED THAT AO HAS GIVEN ALLOWANCE FOR ONE WEEK PURCHASES OF MILK AMOUNTING TO RS.2.54 CRS. WHILE BALANCE AMOUNT WAS ADDED TO THE INCOME O F THE ASSESSEE U/S.41(1)(A) OF THE ACT TO THE TUNE OF RS.10 99 1 4 393/-. THE LD.CIT(A) ITA NOS.1321 & 1403/CHNY/2018 :- 13 -: AFTER CONSIDERING TOTALITY OF FACTS CREDITOR SETT LEMENT TREND IN THE BUSINESS AND ALSO TO COVER OTHER PRICE VARIATIONS A ND SETTLEMENT DISPUTES WHICH ARE COMMON IN BUSINESS GAVE FURTHER ALLOWANCE FOR ONE WEEK AVERAGE PURCHASES TO THE TUNE OF RS.2.63 CRS. WHIL E THE BALANCE AMOUNT WAS ORDERED TO BE ADDED ON ACCOUNT OF CESSATION OF LIABILITY I.E. THE SUNDRY CREDITORS FOR MILK PURCHASE U/S.41(1)(A) OF THE ACT VIDE APPELLATE ORDER DATED 14.02.2018 PASSED BY LEARNED CIT(A). 8.3 WITH RESPECT TO NEXT ISSUE RELATING TO THE DISA LLOWANCE OF DEPRECIATION ON BUILDINGS AND PLANT & MACHINERY AS WELL ADDITION AL DEPRECIATION ON THE TWO NEW CHILLING PLANTS CLAIMED BY THE ASSESSEE TO BE COMMISSIONED AT AAYILPATTI AND KARUR. THE LD.CIT(A) OBSERVED THAT A O DID NOT ALLOWED DEPRECIATION AS WELL AS ADDITIONAL DEPRECIATION IN THE ABSENCE OF EVIDENCE OF THE COMMISSIONING OF PLANT & MACHINERY AND THERE WERE NO EVIDENCE ON RECORD TO PROVE THAT THESE ASSETS WERE PUT TO USE D URING THE PREVIOUS YEAR RELEVANT TO IMPUGNED ASSESSMENT YEAR. THE LEARNED CIT(A) OBSERVED THAT ASSESSEE HAD FILED BEFORE LD.CIT(A) COPIES OF CERTI FICATE FROM DEPARTMENT OF COMMERCE & INDUSTRIES TAMIL NADU CERTIFICATE F ROM POLLUTION CONTROL BOARD AND EB BILL ETC. IN RESPECT OF THE CHILLING P LANT AT NAVALPATTY VILLAGE NAMAKKAL DISTRICT WHICH SHOWED THAT THE SAID CHILL ING PLANTS WAS COMMISSIONED ON 12.07.2013 . THE LEARNED CIT(A) OBS ERVED THAT HOWEVER NO EVIDENCE IS FURNISHED BY ASSESSEE IN SU PPORT OF COMMISSIONING OF KARUR UNIT. THE LD.CIT(A) DIRECTE D AO TO ALLOW DEPRECIATION ON UNIT LOCATED AT NAVALPATTY VILLAGE. THE LD.CIT(A) ALSO OBSERVED THAT AO VIDE LETTER DATED 09.06.2017 STATE D THAT THE ASSESSEE ITA NOS.1321 & 1403/CHNY/2018 :- 14 -: HAD RECEIVED RS.50 LAKHS AS CAPITAL SUBSIDY FOR SET UP OF THE NEW CHILLING PLANTS WHICH WAS NOT REDUCED FROM ACTUAL COST OF THE CHILLING PLANTS WHILE WORKING OUT DEPRECIATION. THE LEARNED CIT(A) HELD THAT SINCE DEPRECIATION HAS BEEN ALLOWED BY HIM WITH RESPECT TO CHILLING PL ANT LOCATED AT NAVALPATTY VILLAGE THE CAPITAL SUBSIDY RECEIVED IN RESPECT OF THAT PLANT SHALL BE CONSIDERED IN ARRIVING THE DEPRECIATION. 8.4 WITH RESPECT TO ADDITIONAL DEPRECIATION OF RS.6 6 35 246/- DISALLOWED BY AO U/S.32(1)(IIA) OF THE 1961 ACT WITH RESPECT T O BOTH THE CHILLING PLANTS CLAIMED TO BE NEWLY COMMISSIONED DURING THE IMPUGNED AY UNDER CONSIDERATION THE LD.CIT(A) OBSERVED THAT THE AS SESSEE IS ONLY COLLECTING MILK AND PROCESSING & PACKAGING IT FOR SALE AND THE RE IS NO MANUFACTURING OR PRODUCTION ACTIVITY OF ANY ARTICLE OR THING CAR RIED ON BY ASSESSEE TO BECOME ELIGIBLE FOR ADDITIONAL DEPRECIATION WITHIN THE PROVISIONS OF SECTION 32(1)(IIA) OF THE 1961 ACT. THE LD.CIT(A) OBSERVED THAT CHILLING PLANT IS USED FOR PASTEURIZATION AND STANDARDIZATION OF MILK FOR CONSUMPTION WHICH DO NOT CHANGE THE CHARACTER OF MILK PROCESSED AND T HERE IS NO ACTIVITY OF PRODUCTION OR MANUFACTURING CARRIED OUT BY ASSESSEE AND THE ASSESSEE IS NOT ENTITLED FOR ADDITIONAL DEPRECIATION. THE LD.C IT(A) RELIED ON THE DECISION OF THE HYDERABAD-TRIBUNAL IN THE CASE OF C REAMLINE DAIRY PRODUCTS LTD. V. DCIT (2012) 27 TAXMANN.COM 237(HYD-TRIB.) AND ALSO DECISION OF SPECIAL BENCH PUNE TRIBUNAL IN THE CASE OF BG CHIT ALE V. DCIT REPORTED IN (2008) 115 ITD 97(PUNE-SB) TO HOLD THAT THE ASSESSE E IS NOT ENTITLED FOR ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE 1961 ACT VIDE APPELLATE ORDER DATED 14.02.2018 PASSED BY LEARNED CIT(A). ITA NOS.1321 & 1403/CHNY/2018 :- 15 -: 8.5 THE LEARNED CIT(A) DIRECTED AO TO ALLOW INTERES T EXPENSES CLAIMED BY THE ASSESSEE WITH RESPECT TO TERM LOANS BORROWED FO R CHILLING PLANT LOCATED AT NAVALPATTY VILLAGE IN ACCORDANCE WITH PROVISIONS OF SECTION 36(1)(III) OF THE 1961 ACT AS THE LEARNED CIT(A) HAD ALREADY ACC EPTED THAT NEW CHILLING PLANT AT NAVALPATTY VILLAGE HAS COMMENCED OPERATION S DURING THE PREVIOUS YEAR RELEVANT TO IMPUGNED ASSESSMENT YEAR BASED ON CERTIFICATE ISSUED BY DEPARTMENT OF INDUSTRIES & COMMERCE. HOWEVER THE LEARNED CIT(A) CONFIRMED DISALLOWANCE OF INTEREST EXPENSES CLAIMED BY ASSESSEE ON TERM LOANS BORROWED FOR SETTING UP OF CHILLING PLANT LOC ATED AT KARUR ON THE GROUND THAT THERE IS NO EVIDENCE ON RECORD TO PROVE THAT THIS CHILLING PLANT LOCATED AT KARUR HAS COMMENCED OPERATIONS DURING TH E YEAR UNDER CONSIDERATION VIDE APPELLATE ORDER DATED 14.02.201 8 PASSED BY LEARNED CIT(A). 8.6 WITH RESPECT TO THE NEXT ISSUE OF RS.29 97 542/ - AS UNEXPLAINED CASH WHICH WAS ADDED BY AO U/S. 68 OF THE 1961 ACT OWING TO DIFFERENCE BETWEEN PHYSICAL CASH FOUND DURING THE COURSE OF SU RVEY PROCEEDINGS AND THE CASH IN HAND AS IS RECORDED IN AUDITED BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AS PRODUCED BEFORE THE AO DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE LD.CIT(A) OBSERVED THAT THERE APPEARS TO BE SHORTAGE OF CASH IN HAND ON THE DATE OF SURVEY COND UCTED BY REVENUE ON 06.11.2013 U/S 133A OF THE 1961 ACT WHICH COULD BE FOR VARIOUS REASONS BUT SOURCES OF CASH IN ITS BOOKS STOOD EXPLAINED BY ASSESSEE IN HIS AUDITED BOOKS OF ACCOUNTS MAINTAINED IN REGULAR COURSE OF B USINESS AND NOTHING INCRIMINATING IS BROUGHT ON RECORD BY THE AO THUS THE LEARNED CIT(A) ITA NOS.1321 & 1403/CHNY/2018 :- 16 -: ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND HELD T HAT THIS SHORTFALL OF CASH CANNOT BE BROUGHT TO TAX AS UNEXPLAINED IN THE HANDS OF THE ASSESSEE. THUS THIS ADDITION STOOD DELETED BY LD. CIT(A) VIDE APPELLATE ORDER DATED 14.02.2018 PASSED BY LEARNED CIT(A). 9. AGGRIEVED BY APPELLATE ORDER DATED 14.02.2018 PA SSED BY LEARNED CIT(A) BOTH ASSESSEE AND REVENUE HAS COME IN APPEA L BEFORE THE TRIBUNAL. THE REVENUE IS AGGRIEVED BY DELETION OF ADDITION TO THE TUNE OF RS.2.63 CRS. BY ALLOWING FURTHER ALLOWANCE OF CREDI T OF ONE WEEK FOR MILK PURCHASES BY LD.CIT(A) WHEREIN THE EARLIER ADDITI ONS WERE MADE BY AO TOWARDS WAIVER OF SUNDRY CREDITORS U/S 41(1)(1) OF THE 1961 ACT FOR PERIOD OF OUTSTANDING FOR MILK PURCHASES BEYOND ONE WEEK. SECONDLY THE REVENUE IS AGGRIEVED BY DELETION OF ADDITION BY LEA RNED CIT(A) OF RS.29 97 542/- WHICH WAS ADDED EARLIER BY THE AO AS THE INCOME OF THE ASSESSEE AS AN UNEXPLAINED CASH U/S.68 OF THE ACT. THE ASSESSEE ON THE OTHER HAND IS AGGRIEVED BY CONFIRMATION BY LEARNED CIT(A) OF THE ADDITIONS MADE BY AO U/S.41(1)(A) OF THE ACT TOWARDS WAIVER O F SUNDRY CREDITORS EXCEPT RELIEF OF RS.2.63 CRS. GRANTED BY LEARNED CI T(A) BEING CREDIT OF ONE MORE WEEK OF AVERAGE PURCHASES OF MILK. THE ASSESS EE IS ALSO AGGRIEVED BY DISALLOWANCE OF DEPRECIATION ON CHILLING PLANT LOCATED AT KARUR BY LD.CIT(A). THE ASSESSEE IS ALSO AGGRIEVED BY CONFI RMATION OF DISALLOWANCE OF INTEREST EXPENSES BY LD.CIT(A) ON THE GROUND THA T NEW CHILLING PLANT AT KARUR HAS NOT COMMENCED ITS OPERATIONS DURING THE P REVIOUS YEAR RELEVANT TO IMPUGNED AY WHICH WAS EARLIER DISALLOWED BY THE AO WHILE FRAMING ASSESSMENT U/S 143(3) OF THE 1961 ACT . ITA NOS.1321 & 1403/CHNY/2018 :- 17 -: 9.2 THE LD.COUNSEL FOR THE ASSESSEE OPENED ARGUMENT S BEFORE US AND SUBMITTED THAT ASSESSEE IS TRADER IN MILK . IT WAS SUBMITTED THAT THE ASSESSEE HAS GIVEN CREDIT FOR PURCHASE OF MILK TO T HE SUPPLIERS WHICH STOOD ADDED TO THE INCOME OF THE ASSESSEE TO THE T UNE OF RS.10.99 CRS. BY AO ON ACCOUNT OF WAIVER OF LIABILITY BY INVOKING PROVISIONS OF SECTION 41(1)(A) OF THE ACT. OUR ATTENTION WAS DRAWN TO PA RA NO.8 OF ASSESSMENT ORDER AND IT WAS SUBMITTED THAT ADDITIONS WERE MADE IN AY: 2013-14 TO THE TUNE OF RS.5 06 56 197/- BY INVOKING PROVISIONS OF SEC.68 OF THE ACT WHICH WAS MAINLY DUE TO DIFFERENCE IN FIGURES OF SU NDRY CREDITORS IN THE HARD DISC FOUND AT THE TIME OF SURVEY WHEREIN THER E WAS A DIFFERENTIAL OF THE AFORESAID AMOUNT OF ` 5 06 56 197/- IN BALANCE RECORDED IN HARD DISK AS AT 31.03.2013 AND 01.04.2013 OF THE AMOUNTS PAYA BLE TO MILK SUPPLIERS/CREDITORS. IT WAS SUBMITTED BY LEARNED CO UNSEL FOR THE ASSESSEE THAT ADDITIONS ARE AGAIN MADE BY AO WHICH IS DUPLIC ATION TO THIS EXTENT. HOWEVER IT IS FAIRLY SUBMITTED THAT THE ADDITIONS TO THE TUNE OF ` 5 06 56 197/- WAS ADDED BY THE AO ON PROTECTIVE BAS IS AS THE SAME WAS EARLIER ADDED AS INCOME OF THE ASSESSEE FOR AY: 201 3-14. IT WAS ALSO BROUGHT TO OUR NOTICE THAT NOW TRIBUNAL HAS CONFIRM ED ADDITIONS FOR AY: 2013-14 BY ESTIMATING INCOME BY APPLYING AVERAGE GP RATIO FOR THREE YEARS. OUR ATTENTION WAS DRAWN TO TRIBUNAL ORDER IN ASSESSEES OWN CASE IN ITA NO.1810/MDS/2016 FOR AY:2012-13 ORDER DATED 05.08.2016 AND ALSO IN ITA NO.3053/MDS/2016 FOR AY:2013-14 ORDER DATED 26.07.2017. IT WAS SUBMITTED THAT TRIBUNAL IN ASSESEES OWN CAS E FOR AY: 2012-13 AND ITA NOS.1321 & 1403/CHNY/2018 :- 18 -: 2013-14 HAS CONFIRMED ADDITIONS BY ESTIMATING INCOM E OF THE ASSESSEE BY CONSIDERING AVERAGE G.P. RATE OF THREE YEARS THUS THE AFORESAID ADDITIONS MADE BY THE AO TO THE INCOME OF THE ASSESSEE FOR AY : 2013-14 DUE TO DIFFERENTIAL IN FIGURES OF MILK CREDITORS AS AON 31 .03.2013 AND 01.04.2013 HAS BECOME IRRELEVANT. 9.3 THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT IT IS A CASE WHERE THERE IS ADMITTEDLY AN INFLATION OF PURCHASES BY TH E ASSESSEE. IT WAS SUBMITTED BY LEARNED DR THAT SURVEY WAS CONDUCTED B Y REVENUE IN THE CASE OF THE ASSESSEE U/S.133A ON 06.11.2013 AND IT WAS FOUND THAT ASSESSEE IS INFLATING ITS PURCHASES OF MILK. IT WA S SUBMITTED THAT THERE WAS A DECLINE IN GP RATIO OVER THE YEARS. OUR ATT ENTION WAS DRAWN TO ITAT ORDER FOR AY: 2012-13 AND 2013-14 IN ASSESSEE S OWN CASE WHEREIN THE GP RATIO FOR LAST SEVERAL YEARS IS STATED. THUS LEARNED DR PRAYED THAT ASSESSMENT ORDER PASSED BY AO BE CONFIRMED/UPHELD O N THIS ISSUE OF ADDITIONS BEING MADE ON ACCOUNT OF WAIVER OF SUNDRY CREDITORS. THE LEARNED DR SUBMITTED THAT THERE WAS A STATEMENT REC ORDED OF PARTNER DURING THE COURSE OF SURVEY OPERATIONS ON 06.11.201 3 CONDUCTED BY REVENUE AND IN REPLY TO QUESTION NUMBER 32 THE PA RTNER HAS ADMITTED THAT THERE IS AN INFLATION OF PURCHASES. IT WAS SUB MITTED BY LEARNED DR THAT LD.CIT(A) ERRED IN GRANTING RELIEF OF RS.2.63 CRS. TO ASSESSEE ON ACCOUNT OF WAIVER OF SUNDRY CREDITORS BY WAY OF EXT ENDED CREDIT PERIOD OF ONE WEEK. 9.4 THE LD.COUNSEL FOR THE ASSESSEE IN REJOINDER RE LIED UPON DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF DEBI PR ASAD MALVIYA V. CIT ITA NOS.1321 & 1403/CHNY/2018 :- 19 -: REPORTED IN (1952)22 ITR 539(ALL HC) AND SUBMITTED THAT NOW IT IS NOT OPEN FOR AUTHORITIES TO TAKE ANY OTHER VIEW IN THIS YEAR AND ONLY ADDITIONS CAN BE MADE BY ESTIMATING INCOME BY TAKING AVERAGE OF GP OF LAST THREE YEARS. 9.5 THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT ASSESSEE HAS BEEN DENIED DEPRECIATION ON NEW CHILLING PLANT AT KARUR ON THE GROUNDS THAT THE SAID UNIT HAS NOT COMMENCED COMMERCIAL OPERATIONS A S IT WAS NOT PUT TO USE DURING THE PREVIOUS YEAR RELEVANT TO IMPUGNED A SSESSMENT YEAR. THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT IT IS B RINGING ON RECORD CERTIFICATE FROM DEPARTMENT OF TOWN AND COUNTRY PLA NNING DATED 22.05.2012 AND CERTIFICATE DATED 21.08.2015 FROM DI RECTORATE OF INDUSTRIAL SAFETY AND HEALTH TO PROVE THAT KARUR CH ILLING PLANT COMMENCED ITS BUSINESS OPERATIONS DURING THE YEAR UNDER CONSI DERATION . THESE ARE ADMITTEDLY AN ADDITIONAL EVIDENCES FILED BY ASSESSE E FOR THE FIRST TIME BEFORE THE TRIBUNAL. IT WAS SUBMITTED BY LEARNED C OUNSEL FOR THE ASSESSEE THAT ADDITIONAL DEPRECIATION CLAIMED BY ASSESSEE F OR BOTH THE NEW CHILLING PLANTS HAS BEEN DENIED TO THE ASSESSEE ON THE GROUN D THAT ASSESSEE IS UNDERTAKING PASTEURIZATION AND STANDARDIZATION OF M ILK . IT IS SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRO CESSING AND MANUFACTURING OF COW MILK. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1810/MDS/2016 FOR AY: 2012-13 AND ALSO IN ITA NO.3053/MDS/2016 FO R AY: 2013-14 . OUR ATTENTION WAS DRAWN BY LEARNED COUNSEL FOR THE ASSS SSEE TO ORDERS OF AUTHORITIES BELOW. THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT ITA NOS.1321 & 1403/CHNY/2018 :- 20 -: STANDARDIZATION AND PASTEURIZATION OF MILK IS INFAC T MANUFACTURING AND HENCE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIAT ION U/S 32(1)(IA) OF THE 1961 ACT. 9.6 THE LD.DR ON THE OTHER HAND SUBMITTED THAT AS SESSEE HAS NOT RAISED THIS ISSUE OF DENIAL OF DEDUCTION ON ACCOUNT OF ADD ITIONAL DEPRECIATION U/S 32(1)(IIA) IN GROUNDS OF APPEAL FILED WITH THE TRIB UNAL AND IN THE ABSENCE THERE OF NOW AT THIS STAGE IT IS NOT OPEN FOR TH E ASSESSEE TO ARGUE THIS ISSUE BEFORE THE BENCH. 9.7 THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADM ITTED THAT ASSESSEE DID NOT RAISE GROUND OF APPEAL WITH RESPECT TO DISALLOW ANCE OF ADDITIONAL DEPRECIATION U/S 32(1)(IIA) BUT IT WAS SUBMITTED TH AT GENERAL GROUND OF APPEAL IS RAISED BY ASSESSEE IN MEMO OF APPEAL FILE D WITH THE TRIBUNAL WITH RESPECT TO DISALLOWANCE OF DEPRECIATION. 9.8 THE LD.DR SUBMITTED THAT THERE IS A DIFFERENC E OF RS.29 97 542/- IN THE AUDITED CASH BOOK WHICH WAS PRODUCED BY ASSESSE E DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE PHYSICAL CASH FOU ND DURING THE COURSE OF SURVEY THE LD.CIT(A) HAD DELETED THIS ADDITION WITHOUT ANY BASIS AS CASH WAS FOUND SHORT DURING THE COURSE OF SURVEY W HILE HIGHER AMOUNT OF CASH IS REFLECTED ON THE DATE OF SURVEY IN THE AUDI TED BOOKS OF ACCOUNTS PRODUCED BY ASSESSEE BEFORE THE AUTHORITIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS . IT WAS SUBMITTED BY LEARN ED DR THAT LD.CIT(A) WRONGLY GRANTED BENEFIT OF RS.2.63 CRS. TO ASSESSEE U/S.41(1)(A) OF THE ACT BY EXTENDING PERIOD OF CREDIT BY FURTHER 7 DAYS WITHOUT ANY BASIS. THE LEARNED DR WOULD SUBMIT THAT ASSESSEE HAS NOT PROVI DED LIST OF SUNDRY ITA NOS.1321 & 1403/CHNY/2018 :- 21 -: CREDITORS. IT WAS SUBMITTED BY LEARNED DR THAT DET AILED ASSESSMENT ORDER IS PASSED BY AO OUR ATTENTION WAS DRAWN TO PAGE NO S. 2 & 3 OF THE ASSESSMENT ORDER AND IT WAS SUBMITTED THAT SUNDRY C REDITORS WERE OUTSTANDING FOR MORE THAN ONE YEAR . RELIANCE WAS P LACED BY LEARNED DR ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF SHRI PRADEEP KUMAR BIYANI V. ITO REPORTED IN (2019) 260 TAXMAN 2 98(SC). IT WAS SUBMITTED THAT STATEMENT OF SHRI S.P. LOGANATHAN PARTNER IN ASSESSEE FIRM WAS RECORDED ON 24.01.2014. IT WAS SUBMITTED T HAT STATEMENT RECORDED DURING THE COURSE OF SURVEY OPERATIONS U/S .133A IS ADMISSIBLE AND LIABILITY TO TAX CAN BE FASTENED BASED ON THE S AID STATEMENT. 10 WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING CITED CASE LAWS. WE HAVE OBSERVED THAT ASSESSEE IS IN THE BUSINESS OF MILK DIARY AND IS DOING STANDARDIZATION AND PASTEURIZATION OF MILK. A SURVEY ACTION U/S. 133A OF THE 1961 ACT WAS CARRIED OUT BY REVENUE IN THE PREMISES OF ASSESSEE ON 06.11.2013. DURING COURSE OF SURVEY OPERATIONS CONDUCTED BY REVENUE U/S 133A OF THE 1961 ACT THE ASSESSEE HAD VOLUNTARILY DECLARED ADDITIONAL INCOM E OF RS.2 05 98 000/- ON ACCOUNT OF WAIVER OF MILK CREDITORS. THE ASSESS EE IN ITS RETURN OF INCOME FILED WITH REVENUE HOWEVER DECLARED AN ADD ITIONAL INCOME OF RS.2 CRORES ON ACCOUNT OF WAIVER OF MILK CREDITORS. THE CASE WAS SELECTED BY REVENUE FOR FRAMING OF SCRUTINY ASSESSMENT U/S 1 43(3) OF THE 1961 ACT AND STATUTORY NOTICES U/S 143(2) AND 142(1) OF TH E 1961 ACT WERE ISSUED BY AO TO THE ASSESSEE. IT IS OBSERVED THAT ASSESSEE HAS MORE THAN 1000 MILK CENTER CREDITORS AND TOTAL MILK PURCHASES MADE BY THE ASSESSEE WERE ITA NOS.1321 & 1403/CHNY/2018 :- 22 -: TO THE TUNE OF ` 137 CRORES DURING THE YEAR UNDER CONSIDERATION. TH E FIRST ADDITION WAS MADE ON ACCOUNT OF WAIVER OF SUNDRY CR EDITORS BY INVOKING PROVISIONS OF SECTION 41(1)(A) OF THE 1961 ACT MAIN LY ON THE ALLEGATION THAT THE ASSESSEE HAS INFLATED PURCHASES IN ITS BOO KS OF ACCOUNTS WHEREIN BOGUS PURCHASES WERE INTRODUCED BY ASSESSEE IN ITS BOOKS OF ACCOUNTS OR ELSE PAYMENTS WERE MADE TO CREDITORS FOR MILK SUPPL IES OUT OF UNDISCLOSED INCOME OF THE ASSESSEE WHICH DID NOT GET ROUTED THR OUGH BOOKS OF ACCOUNTS AND LED TO THE EXISTENCE OF THESE LARGE CR EDITORS / MILK SUPPLIERS IN BOOKS OF ACCOUNTS WHILE INFACT THESE CREDITOR S IN REALTY DO NOT EXIST AT ALL . BOTH REVENUE AS WELL ASSESSEE ARE AGGRIEVED B Y DECISION OF LEARNED CIT(A) AS PART RELIEF WAS GRANTED BY LEARNED CIT(A ). THE AO HAD ADDED ALL MILK SUPPLIER CREDITORS WHICH WERE EXISTING IN BOOK S OF ACCOUNTS OF THE ASSESSEE AS AT THE END OF PREVIOUS YEAR WHICH WERE OUTSTANDING FOR PAYMENT FOR MORE THAN ONE WEEK WHILE LEARNED CIT( A) GAVE PART RELIEF BY ACCEPTING MILK SUPPLIER CREDITORS WHICH WERE OUT STANDING FOR PAYMENT FOR ONE MORE WEEK BEYOND THAT WHAT WAS ALLOWED BY T HE AO. THE ASSESSEE WAS SURVEYED BY REVENUE U/S 133A ON 06.11. 2013. THE PARTNER OF THE ASSESSEE MR. S.P. LOGANATHAN IN HIS STATEMEN T RECORDED DURING THE COURSE OF SURVEY OPERATIONS ON 06.11.2013 IN REPLY OF QUESTION NUMBER 32 HAS ITSELF ADMITTED THAT THE ASSESSEE IS BOOSTIN G ITS PURCHASES IN ITS BOOKS OF ACCOUNTS AND FICTITIOUS PURCHASES ARE INTR ODUCED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE EMPLOYEE OF THE ASSES SEE SHRI RAMASWAMY IN HIS STATEMENT RECORDED DURING THE COURSE OF SUR VEY PROCEEDINGS CONDUCTED BY REVENUE U/S 133A OF THE 1961 ACT ON 20.11.2013 STATED ITA NOS.1321 & 1403/CHNY/2018 :- 23 -: IN REPLY TO QUESTION NUMBER 6 AND 7 THAT PAYMENT FO R MILK PURCHASES ARE MADE WITHIN A WEEKS TIME BY ASSESSEE TO MILK SUPPL IERS. THE ASSESSEE HAD OF HIS OWN VOLUNTARILY SURRENDERED ` 2.06 CRORES DURING COURSE OF SURVEY OPERATIONS U/S 133A ON 06.11.2013 TOWARDS W AIVER OF SUNDRY CREDITORS ON ACCOUNT OF INFLATED PURCHASES. WHILE F ILING RETURN OF INCOME WITH REVENUE THE ASSESSEE ITSELF HAS VOLUNTARILY OFFERED FOR TAXATION ` 2 CRORES ON ACCOUNT OF WAIVER OF MILK CREDITORS IN TH E RETURN OF INCOME FILED WITH THE REVENUE. INCIDENTALLY AS IS OBSERVED FR OM MATERIAL PLACED ON RECORD LARGE NUMBER OF PAYMENTS AGAINST PURCHASES FOR MILK WERE MADE BY ASSESSEE TO MILK SUPPLIERS IN CASH AND THE SAME WERE NOT PAID THROUGH BANKING CHANNELS. THESE PURCHASES FOR MILK ARE MAD E BY ASSESSEE AND CLAIMED AS AN EXPENDITURE/ DEDUCTION WHILE COMPUTIN G INCOME CHARGEABLE TO TAX AND HENCE ONUS IS ON THE ASSESSEE TO PROVE T HAT THESE PURCHASES FOR MILK ARE GENUINE. NO DOUBT IN EARLIER YEARS VIZ . AY: 2012-13 AND 2013- 14 THE TRIBUNAL WAS PLEASED TO ESTIMATE INCOME OF THE ASSESSEE BY APPLYING AVERAGE GP RATE OF THREE YEARS BUT THAT DO ES NOT ABSOLVE ASSESSEE FROM ITS LIABILITY DEHORS SECTION 41(1)(A) OF THE 1961 ACT WHICH CREATES A DEEMING FICTION TO BRING TO TAX INCOME IN THE HANDS OF TAX-PAYER IN CASE OF REMISSION OR CESSATION OF LIABILITY AS S TIPULATED IN SAID SECTION IN THE STATUTE. BY ESTIMATING INCOME BY APPLYING AVERA GE GP RATE OF THREE YEARS THE TRIBUNAL HAS DIRECTED TO BRING TO TAX FO R AY: 2012-13 AND 2013- 14 SALE REVENUE IN EXCESS OF THE PURCHASE PRICE AN D OTHER ADMISSIBLE EXPENSES BUT THAT DOES NOT ABSOLVE ASSESSEE FROM IT S LIABILITY U/S 41(1)(A) OF THE 1961 ACT IN CASE OF CESSATION OR REMISSION O F TRADING LIABILITIES. ITA NOS.1321 & 1403/CHNY/2018 :- 24 -: THESE MILK CREDITORS ARE INFACT TRADING LIABILITIES OF THE ASSESSEE FOR WHICH ASSESSEE HAS ALREADY CLAIMED DEDUCTION AS AN BUSIN ESS EXPENDITURE/DEDUCTION WHILE COMPUTING INCOME CHARGE ABLE TO TAX OF THE ASSESSEE FOR IMPUGNED AY OR EARLIER AYS AND IF N OW THESE TRADING LIABILITIES CEASES OR REMITTED AS IS CONTEMPLATED U /S 41(1)(A) OF THE 1961 ACT THEN THE ASSESSEE CAN BE FASTENED WITH TAX LI ABILITY IN ACCORDANCE WITH SAID PROVISION. THESE AMOUNT ARE BROUGHT TO T AX BY AO BY INVOKING DEEMING FICTION U/S 41(1)(A) OF THE 1961 ACT ON ACC OUNT OF CESSATION OR REMISSION OF LIABILITY OF MILK CREDITORS AS ARE EXI STING IN THE BOOKS OF ACCOUNTS OF ASSESSEE AS OUTSTANDING FOR PAYMENT AND PRIMARY ONUS IS ON REVENUE TO BRING ON RECORD INCRIMINATING MATERIAL T O PROVE THAT THESE LIABILITIES SHOWN TO BE OUTSTANDING IN BOOKS OF ACC OUNT TO BE PAYABLE BY THE ASSESSEE ARE INFACT NON-EXISTENT LIABILITIES AN D THE ASSESSEE IS HIT BY PROVISIONS OF SECTION 41(1)(A) OF THE 1961 ACT. THE 1961 ACT IS A TAXING STATUTE WHICH IS GOVERNED BY PREPONDERANCE OF PROBA BILITIES AND STRICT RULE OF EVIDENCE MAY NOT BE APPLICABLE. THE NORMAL CONDU CT OF BUSINESS IN REGULAR COURSE AS IS APPLICABLE TO A PARTICULAR BUS INESS ACTIVITIES SHALL ALSO BE HAVING AN IMPORTANT BEARING FOR FASTENING OF TAX LIABILITIES IF PROPER EXPLANATION FOR VARIATIONS IN NORMAL CONDUCT OF BUS INESS COULD NOT BE EXPLAINED/FORTHCOMING FROM THE TAX-PAYER. COMING B ACK TO APPEAL IN HAND THE REVENUE IN ORDER TO DISCHARGE ITS PRIMARY BURDEN AS IS CAST U/S 41(1)(A) OF THE 1961 ACT HAD BROUGHT ON RECORD FOLL OWING INCRIMINATING EVIDENCES/MATERIAL AGAINST ASSESSEE TO DISCHARGE TH EIR ONUS WHILE INVOKING PROVISIONS OF SECTION 41(1)(A) OF THE 1961 ACT:- ITA NOS.1321 & 1403/CHNY/2018 :- 25 -: A) STATEMENT RECORDED OF PARTNER OF THE ASSESSEE FIRM MR. S.P.LOGANATHAN DURING THE COURSE OF SURVEY OPERATIO NS ADMITTING INFLATION OF PURCHASES. B) STATEMENT OF EMPLOYEE MR. RAMASWAMY RECORDED DURING COURSE OF SURVEY WHEREIN HE STATED THAT PAYMENTS FO R MILK ARE MADE BY ASSESSEE WITHIN A WEEKS TIME WHILE BOOKS OF ACCOUNTS ARE SHOWING LARGE BALANCES OF OLD AMOUNTS PURPORTED TO BE PAYABLE TO MILK CREDITORS WHICH DEFY THE SAID STATEMENT OF EMPLOYEE OF THE ASSESSEE. C) SURRENDER OF ` 2.06 CRORES AS INCOME BY THE ASSESSEE DURING THE COURSE OF SURVEY OPERATIONS OWING TO WAIVER OF MILK CREDITORS /BOOSTING OF PURCHASES. D) OFFER FOR TAXATION AFORESAID SURRENDER OF INCOME TO THE TUNE OF ` 2 CRORES IN RETURN OF INCOME FILED VOLUNTARILY B Y ASSESSEE WITH REVENUE. E) THE EXISTENT OF LARGE AMOUNTS OF OLD CREDITORS ON A CCOUNT OF MILK SUPPLIES IN BOOKS OF ACCOUNTS OF THE ASSESSEE TO BE PAYABLE AS ON THE LAST DATED OF PREVIOUS YEAR WHIC H DEFY NORMAL BUSINESS TRANSACTION OF THE ASSESSEE AS IT I S AGAINST ITS OWN NORMAL CONDUCT OF ASSESSEE OF MAKING PAYMENTS T O MILK CREDITORS WITHIN A WEEK TIME. F) THERE WAS A DIFFERENCE IN THE BALANCES OF SUNDRY CR EDITORS OUTSTANDING TO BE PAYABLE FOR MILK SUPPLIES AS ON 3 1.03.2013 AND 01.04.2013 TO THE TUNE OF MORE THAN ` 5 06 56 197/- IN ITA NOS.1321 & 1403/CHNY/2018 :- 26 -: THE HARD DISK IMPOUNDED BY REVENUE IN THE COURSE OF SURVEY OPERATIONS CONDUCTED BY REVENUE U/S 133A ON 06.11.2 013 WHICH LED TO ADDITIONS OF THE SAID AMOUNT AS INCOME OF THE ASSESSEE FOR AY: 2013-14 BY AO BY INVOKING PROVISIO NS OF SECTION 68 OF THE 1961 ACT. THUS THE REVENUE HAS DISCHARGED ITS INITIAL BURDEN THAT LAY ON IT U/S 41(1)(A) OF THE 1961 ACT TO PROVE THAT STATE OF AFF AIRS PRESENTED BY ASSESSEE TO REVENUE AS IS REFLECTED IN ITS AUDITED BOOKS OF ACCOUNTS FOR THE RELEVANT PERIOD IS NOT TRUE AND CORRECT AND THE AMOUNTS OF SUNDRY CREDITORS ARE NON-EXISTENT. THE ONUS NOW GET SHIFTE D TO THE ASSESSEE AND IT IS NOW OPEN FOR THE ASSESSEE TO HAVE REBUTTED T HE FINDINGS OF REVENUE TO PROVE THAT ITS SUNDRY CREDITORS AS ARE EXISTING IN ITS BOOKS OF ACCOUNTS TO BE PAYABLE AS AT THE END OF THE PREVIOUS YEAR A RE GENUINE AND ASSESSEE IS LIABLE TO PAY THE SAID AMOUNT TO MILK C REDITORS AND THE ASSESSEE IS NOT HIT BY THE PROVISIONS OF SECTION 41 (1)(A) OF THE 1961 ACT BY BRINGING ON RECORD COGENT MATERIAL TO REBUT THE INCRIMINATING MATERIAL BROUGHT ON RECORD BY REVENUE. IN A RECENT DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF CIT V. S.AJIT KUMAR RE PORTED IN (2018) 404 ITR 526(SC) HAS IN CONTEXT OF HELD THAT EVIDENCE S FOUND OR COLLECTED DURING SURVEY SIMULTANEOUSLY MADE AT A PREMISES OF CONNECTED PERSON CAN BE USED FOR FASTENING LIABILITY AGAINST THE TAX-PAY ER WHILE FRAMING ITS BLOCK ASSESSMENT WHEREIN HONBLE SUPREME COURT HELD AS U NDER: ITA NOS.1321 & 1403/CHNY/2018 :- 27 -: 15. THE POWER OF SURVEY HAS BEEN PROVIDED UNDER SECTIO N 133A OF THE IT ACT. THEREFORE ANY MATERIAL OR EVIDENCE FOUND/COLLECTED IN A SURVEY WHICH HAS BEEN SIMULTANEOUSLY MADE AT THE PREMISES OF A CONNECTED PERSON CAN BE UTILIZED WHILE MAKING THE BLOCK ASSESSMENT IN RESPECT OF AN ASSESS EE UNDER SECTION 158BB READ WITH SECTION 158 BH OF THE IT ACT. THE SAME WOULD F ALL UNDER THE WORDS 'AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WIT H THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE' OCCURRING IN SECTION158 BB OF THE ACT. IN THE PRESENT CASE THE ASSESSING OFFICER WAS JUSTIFIED IN TAKING THE ADVERSE MATERIAL COLLECTED OR FOUND DURING THE SURVEY OR ANY OTHER METHOD WHILE M AKING THE BLOCK ASSESSMENT. IT IS NOT THAT THE REVENUE IS SOLELY RELYING ON TH E STATEMENT RECORDED DURING COURSE OF SURVEY OPERATIONS RATHER REVENUE I S ALSO RELYING ON THE DIFFERENCE IN SUNDRY CREDITORS AS ON 31.03.2013 AND 01.04.2013 AS RECORDED IN THE HARD DISK IMPOUNDED DURING SURVEY O PERATIONS AND ALSO ON PREPONDERANCE OF PROBABILITIES TO FASTEN TAX LIABIL ITY ON ASSESSEE ON THE GROUNDS OF WAIVER OF SUNDRY CREDITORS . AS IS SEEN FROM LEDGER ACCOUNTS OF MILK SUPPLIERS REPRODUCED BY THE AO IN HIS ASSESSME NT ORDER THAT ASSESSEE IS MAKING PAYMENTS FOR CURRENT INVOICES/SU PPLIES OF MILK TO THE VENDORS BACK TO BACK AGAINST SUPPLIES OF MILK WHI LE OLD PAYABLES FOR MILK SUPPLIES PURPORTED TO BE MADE EARLIER DURING THE YE AR OR IN THE PRECEDING YEARS ARE STILL PENDING/OUTSTANDING FOR PAYMENT IN BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH LED AUTHORITIES BELOW TO DRAW AD VERSE INFERENCE AGAINST ASSESSEE. THE STATEMENT RECORDED DURING SUR VEY COULD BE USED TO CORROBORATE THE EVIDENCES/MATERIAL FOUND/COLLECTED DURING SURVEY AND ALSO FOR DEVIATION AGAINST NORMAL CONDUCT OF BUSINESS IN REGULAR COURSE OF MILK DIARY. THE ONUS HAS NOT ONLY NOW SHIFTED TO THE AS SESSEE BUT IS ALSO HEAVY ON ASSESSEE TO PROPERLY EXPLAIN ALL THESE DEV IATION IN THE MILK CREDITORS OUTSTANDING FOR PAYMENT AT THE YEAR END. IT IS INCOMPREHENSIBLE AND UNBELIEVABLE THAT LARGE NUMBER OF MILK SUPPLIER S WILL JUST SUPPLY MILK ITA NOS.1321 & 1403/CHNY/2018 :- 28 -: TO THE ASSESSEE AND SHALL NOT COME FORWARD OR REMAI NS SILENT WHEN IT COMES TO CLAIMING THEIR PAYMENTS AGAINST MILK SUPPL IES MADE BY THEM. THE AO HAS CATEGORIZED THESE PURCHASES INTO THREE C ATEGORIES AND MADE ADDITIONS TOWARDS WAIVER OF SUNDRY CREDITORS ON THE ALLEGATION THAT EITHER THESE ARE INFLATED BOGUS PURCHASES INTRODUCED IN BO OKS OF ACCOUNTS OR THESE PURCHASES ARE PAID IN CASH OUT OF THE UNDISCL OSED INCOME OF THE ASSESSEE WHICH ARE NOT RECORDED IN BOOKS OF ACCOUNT S OF THE ASSESSEE. THE AO HAD OBSERVED THAT IN SOME CASES OLD PURCHASES AR E OUTSTANDING FOR MORE THAN A YEAR AND THERE ARE NO TRANSACTIONS BY A SSESSEE WITH THESE MILK SUPPLIERS DURING THE ENTIRE YEAR UNDER CONSIDE RATION . THE AO HAS ALSO CATEGORIZED WHEREIN PAYMENTS AGAINST CURRENT P URCHASES ARE MADE BY ASSESSEE BACK TO BACK WHILE OLD PURCHASES FOR M ILK SUPPLIES REMAINS UNPAID. THESE ARE AGAINST NORMAL CONDUCT OF BUSINES S IN REGULAR COURSE OF BUSINESS ACTIVITIES CONDUCTED BY ANY TAX-PAYER IN T HE FIELD OF MILK DIARY . THE LEARNED AO HAS MADE ADDITIONS FOR ALL MILK PURC HASES WHICH ARE OUTSTANDING FOR PAYMENT FOR MORE THAN ONE WEEK WH ILE LEARNED CIT(A) GAVE PART RELIEF BY ACCEPTING THE PURCHASES WHICH W ERE OUTSTANDING FOR PAYMENT FOR ONE MORE WEEK AND ENTIRE PURCHASES OUTS TANDING FOR PAYMENT MORE THAN TWO WEEKS STOOD ADDED TO THE INCO ME OF THE ASSESSEE BY LEARNED CIT(A). HOWEVER THERE COULD BE SOME CAS ES WHEREIN GENUINELY THE ASSESSEE HAD NOT MADE PAYMENTS TO THESE MILK SU PPLIERS CREDITORS AND THE ASSESSEE CONTINUED TO BE LIABLE TO THESE MILK S UPPLIES VENDOR ALBEIT IS PAYMENT IS PENDING FOR MORE THAN ONE/TWO WEEKS. TH IS REQUIRES ENQUIRY AND VERIFICATIONS OF THESE MILK SUPPLIES CREDITORS . THE AUTHORITIES BELOW ITA NOS.1321 & 1403/CHNY/2018 :- 29 -: HAVE HOWEVER MADE NO ENQUIRY WITH MILK SUPPLIES CRE DITORS. NO SUMMONS U/S 131 OR NOTICES U/S 133(6) WERE ISSUED BY AO/LEA RNED CIT(A) TO THESE MILK SUPPLIES CREDITORS TO VERIFY ABOUT THEIR GENUI NENESS AND BONAFIDE RATHER THE ENTIRE SUM WHEREIN THE PAYMENTS WERE OU TSTANDING FOR MORE THAN ONE WEEK STOOD ADDED BY THE AO WHILE LEARNED C IT(A) GAVE PART RELIEF TO THE ASSESSEE BY ACCEPTING CREDITORS WHICH WERE OUTSTANDING UPTO TWO WEEKS. THE ASSESSEE HAS ALSO TO REBUT SAID PRES UMPTION BY BRINGING ON RECORD COMPLETE DETAILS OF EACH OF THESE MILK SU PPLIERS CREDITORS SUCH AS NAME ADDRESS PAN REASONS FOR NON PAYMENTS A NY DISPUTE WITH THESE MILK SUPPLIERS COMMUNICATION WITH THESE MIL K SUPPLIERS CLAIMS FILED BY THESE MILK SUPPLIERS WITH ANY COURT ETC. . IN OUR CONSIDERED VIEW BASED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF SUBSTANTIAL JUSTICE TO BOTH THE PARTIES THE ASSESS EE DESERVES ONE MORE OPPORTUNITY AND THE MATTER NEEDS TO BE SET ASIDE AN D RESTORED TO THE FILE OF THE AO FOR FRAMING FRESH ASSESSMENT DENOVO ON ME RITS IN ACCORDANCE WITH LAW. WE HAVE ALREADY EXPLAINED THE ONUS WHICH LAY ON BOTH THE PARTIES. THE ASSESSEE IS DIRECTED TO PRODUCE COMPLE TE DETAILS OF MILK SUPPLIERS TO THE AO IN SET ASIDE PROCEEDINGS FOR MA KING NECESSARY ENQUIRIES AND VERIFICATIONS IF DEEM FIT BY THE AO IN SET ASIDE PROCEEDINGS . THE AO IS DIRECTED TO PROVIDE PROPER AND ADEQUATE O PPORTUNITY OF BEING HEARD TO ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. THE AO SHALL ADMIT EVIDENCES/E XPLANATIONS FILED BY THE ASSESSEE IN ITS DEFENSE IN SET ASIDE DENOVO ASS ESSMENT PROCEEDINGS IN THE INTEREST OF JUSTICE AND THEN ADJUDICATER ON MER ITS IN ACCORDANCE WITH ITA NOS.1321 & 1403/CHNY/2018 :- 30 -: LAW . THUS APPEAL FILED BY BOTH THE PARTIES ON THIS ISSUE STAND ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 11. THE NEXT ISSUE IN REVENUES APPEAL CONCERNS ITS ELF WITH DIFFERENCE IN PHYSICAL CASH FOUND DURING THE COURSE OF SURVEY OPE RATIONS CONDUCTED BY REVENUE U/S 133A OF THE 1961 ACT ON 06.11.2013 WHI CH WAS PHYSICALLY FOUND TO THE TUNE OF ` 26 35 769/- BUT WHILE FILING ITS RETURN OF INCOME WITH REVENUE THE ASSESSEE HAS SHOWN CASH IN HAND B ALANCE IN ITS AUDITED CASH BOOK TO BE THE TUNE OF ` 56 33 311/- AS ON 06.11.2013. THE AO DID NOT ACCEPTED THIS DIFFERENTIAL AND MADE ADDITIONS T O THE INCOME OF THE ASSESSEE TO THE TUNE OF ` 29 97 542/- U/S 68 OF THE 1961 ACT WHILE FRAMING ASSESSMEN WHILE LEARNED CIT(A) SIMPLY ACC EPTED THE SAID DIFFERENTIAL WITHOUT BRINING ON RECORD RECONCILIATI ON STATEMENTS EXPLAINING SAID DIFFERENTIAL IN CASH BALANCE WHILE ADJUDICATI NG FIRST APPEAL BASED ON THE AMOUNT CERTIFIED BY THE AUDITORS . IN OUR CONSI DERED VIEW THE CASH IN HAND WAS PHYSICALLY FOUND TO BE ` 26 35 769/- DURING THE COURSE OF SURVEY OPERATIONS CONDUCTED BY REVENUE ON 06.11.2013 U/S 1 33A OF THE 1961 ACT AND IT IS THE ASSESSEES MANAGING PARTNER MR. S.P.L OGANTHAN IN HIS STATEMENT RECORDED U/S 133A ON 06.11.2013 IN REPLY TO QUESTION NUMBER 28 STATED THAT CASH BOOK MAINTAINED BY ASSESSEE IS TALLYING WITH PHYSICAL CASH FOUND DURING THE COURSE OF SURVEY OPERATIONS O N 06.11.2013 EXCEPT DIFFERENCE OF ` 684/- WHICH WAS EXPLAINED TO BE DIFFERENCE IN PETT Y CASH. NOW THE ASSESSEE IS CLAIMING CASH BALANCE IN ITS B OOKS OF ACCOUNTS TO BE ` 56 33 311/- AS ON 06.11.2013 AS AGAINST PHYSICAL CA SH FOUND DURING SURVEY OPERATIONS U/S 133A ON 06.11.2013 OF ` 26 35 769/- AND HENCE ITA NOS.1321 & 1403/CHNY/2018 :- 31 -: ONUS IS ON ASSESSEE TO BRING OUT RECONCILIATION STA TEMENT BEFORE THE AUTHORITIES TO RECONCILE JUSTLY THE VARIATION OF ` 29 97 542/- AND TO EXPLAIN THAT INCOME COMPONENT IF ANY ARISING DUE TO AFOR ESAID VARIATION UNDER THE PROVISIONS OF THE 1961 ACT HAS BEEN OFFERED TO TAX AND DUE TAXES PAID TO REVENUE. IN OUR CONSIDERED VIEW BASED ON FACTS A ND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF SUBSTANTIAL JUSTICE TO BOTH THE PARTIES THE MATTER NEEDS TO BE SET ASIDE AND RESTORED TO THE FI LE OF THE AO FOR FRAMING FRESH ASSESSMENT DENOVO ON MERITS IN ACCORDANCE WIT H LAW. THE ASSESSEE IS DIRECTED TO PRODUCE RECONCILIATION STATEMENT REC ONCILING AFORESAID DIFFERENTIAL IN CASH BEFORE THE AO IN SET ASIDE PRO CEEDINGS AND JUSTIFICATION FOR SAID DIFFERENTIAL . THE AO IS DIRECTED TO PRO VIDE PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO ASSESSEE IN ACCORDANC E WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. THE AO SHAL L ADMIT EVIDENCES/EXPLANATIONS FILED BY THE ASSESSEE IN ITS DEFENSE IN SET ASIDE DENOVO ASSESSMENT PROCEEDINGS IN THE INTEREST OF JU STICE AND THEN ADJUDICATE ON MERITS IN ACCORDANCE WITH LAW. THUS APPEAL FILED BY REVENUE ON THIS ISSUE STAND ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 12. THE ASSESSEE IN ITS APPEAL FILED WITH TRIBUNAL HAS RAISED AN GROUND OF APPEAL BEING AGGRIEVED BY DENIAL OF DEPRECIATION ON BUILDINGS AND PLANT & MACHINERY WITH RESPECT TO ITS KARUR CHILLING PLANT. THE DEPRECIATION WAS DISALLOWED BY LEARNED CIT(A) MAINLY ON THE GROUNDS THAT KARUR CHILLING PLANT HAS NOT COMMENCED COMMERCIAL OPERATIONS UNTIL THE END OF PREVIOUS YEAR RELEVANT TO IMPUGNED ASSESSMENT YEAR AS THE AS SESSEE DID NOT FILED ITA NOS.1321 & 1403/CHNY/2018 :- 32 -: ANY EVIDENCE TO SUBSTANTIATE THE SAME. THE ASSESSEE IN COURSE OF APPEAL BEFORE TRIBUNAL HAS FILED EVIDENCES BY WAY OF CERTI FICATE FROM DEPARTMENT OF TOWN AND COUNTRY PLANNING DATED 22.05.012 AND CERTIFICATE FROM DIRECTORATE OF INDUSTRIAL SAFETY AND HEALTH DATED 21.08.2015. THESE ARE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE TRIBUNAL. WE ADMIT THESE ADDITIONAL EVIDENCES IN TH E INTEREST OF JUSTICE . THE AUTHORITIES BELOW HOWEVER DID NOT GET AN OPP ORTUNITY TO VERIFY THESE DOCUMENTS NOR ANY ENQUIRIES COULD BE MADE BY AUTHOR ITIES BELOW IN THE CONTEXT OF THESE ADDITIONAL EVIDENCES TO ARRIVE AT CONCLUSION WHETHER THE NEW KARUR CHILLING PLANT COMMENCED OPERATIONS UNTIL THE END OF PREVIOUS YEAR OR NOT AND HENCE ACCORDINGLY WHETHER THE ASSE SSEE WOULD BE ENTITLED TO GET DEPRECIATION ON BUILDING AND PLANT & MACHINE RY FOR THE YEAR UNDER CONSIDERATION IN ALL FAIRNESS TO BOTH THE PARTIES AND IN THE INTEREST OF JUSTICE WE SET ASIDE AND RESTORE THIS MATTER TO TH E FILE OF THE AO FOR FRAMING FRESH ASSESSMENT DENOVO ON MERITS IN ACCORD ANCE WITH LAW. THE ASSESSEE IS DIRECTED TO PRODUCE THESE ADDITIONAL EV IDENCES BEFORE THE AO IN SET ASIDE PROCEEDINGS FOR MAKING NECESSARY ENQUI RIES AND VERIFICATIONS IF DEEM FIT BY THE AO IN SET ASIDE PROCEEDINGS . THE AO IS DIRECTED TO PROVIDE PROPER AND ADEQUATE OPPORTUNITY OF BEING HE ARD TO ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN AC CORDANCE WITH LAW. THE AO SHALL ADMIT EVIDENCES/EXPLANATIONS FILED BY THE ASSESSEE IN ITS DEFENSE IN SET ASIDE DENOVO ASSESSMENT PROCEEDINGS IN THE I NTEREST OF JUSTICE AND THEN ADJUDICATE THE SAME ON MERITS IN ACCORDANCE WI TH LAW . THUS APPEAL ITA NOS.1321 & 1403/CHNY/2018 :- 33 -: FILED BY ASSESSEE ON THIS ISSUE STAND ALLOWED FOR S TATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 13. THE CONNECTED MATTER WITH THE AFORESAID ALLOWAB ILITY OF DEPRECIATION WITH RESPECT TO KARUR CHILLING PLANT AS DISCUSSED B Y US IN PARA 12 ABOVE IN THIS ORDER IS THE ALLOWABILITY OF INTEREST ON TE RM LOANS BORROWED FOR INCURRING CAPITAL EXPENDITURE FOR INSTALLING SAID KARUR CHILLING PLANT . THE DISALLOWANCE OF INTEREST ON TERM LOANS BORROWED FOR INCURRING CAPITAL EXPENDITURE FOR INSTALLING KARUR CHILLING PLANT WAS ON THE GROUNDS THAT THE SAID KARUR CHILLING PLANT HAD NOT COMMENCED COMMERC IAL OPERATIONS AND THE ASSETS THEREOF WERE NOT PUT TO USE. THE DECISIO N BY THE AO AS TO WHETHER THE ASSESSEE DID COMMENCE COMMERCIAL PRODUC TION AND PUT TO USE ASSETS BEFORE THE END OF PREVIOUS YEAR RELEVANT TO IMPUGNED AY OR NOT AS PER OUR DECISION IN PRECEDING PARA 12 WAS SET AS IDE TO THE AO AND THE DECISION OF THE AO IN SET ASIDE DENOVO PROCEEDINGS SHALL HAVE DIRECT BEARING ON THE ALLOWABILITY OF INTEREST ON TERM LOA NS AVAILED FOR INCURRING CAPITAL EXPENDITURE FOR INSTALLING KARUR CHILLING P LAT. THUS THIS MATTER IS ALSO REMITTED BACK TO THE FILE OF THE AO FOR FRAMIN G DENOVO ASSESSMENT AND OUR OBSERVATIONS AND DIRECTIONS IN PARA 12 ABOV E OF THIS ORDER WILL ALSO EQUALLY APPLY AS TO ALLOWABILITY OR DISALLOWABILITY OF INTEREST EXPENDITURE INCURRED DURING THE YEAR ON TERM LOANS BORROWED FOR INCURRING CAPITAL EXPENDITURE BY WAY OF BUILDING PLANT & MACHINERY E TC. FOR INSTALLING KARUR CHILLING PLANT. WE ORDER ACCORDINGLY. 14. THE NEXT ISSUE RAISED BY LEARNED COUNSEL FOR TH E ASSESSEE IS REGARDING ALLOWABILITY OF ADDITIONAL DEPRECIATION U/S 32(1)(I IA) ON BOTH THE NEW ITA NOS.1321 & 1403/CHNY/2018 :- 34 -: PLANTS AT AAIYILAPATTI AND KARUR. NO GROUNDS OF APP EAL ARE RAISED BY ASSESSEE IN CONTEXT THEREOF WITH RESPECT TO DENIAL OF CLAIM OF ADDITIONAL DEPRECIATION U/S 32(1)(IIA) BY LEARNED CIT(A) AND H ENCE WE ARE AFRAID THAT IN THE ABSENCE THEREOF WE CANNOT ENTERTAIN THIS IS SUE AT THIS STAGE. WE CAN ONLY DECIDE THE ISSUE WHICH ARE SPECIFICALLY RA ISED BEFORE US AND WE CANNOT VENTURE INTO AN UNCHARTERED TERRITORY TO DO FISHING EXPEDITIONS. THIS PLEA RAISED BY ASSESSEE IS NOT ACCEPTED AND STAND R EJECTED. 15. IN THE RESULT BOTH THE APPEALS FILED BY ASSESS EE AND REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 05 TH NOVEMBER 2019 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ' ) ( RAMIT KOCHAR ) /ACCOUNTANT MEMBER /CHENNAI 1 /DATED: 05 TH NOVEMBER 2019. TLN / '2 32 /COPY TO: 1. + /APPELLANT 4. 4 /CIT 2. -+ /RESPONDENT 5. 2 /DR 3. 4 ( ) /CIT(A) 6. ( /GF