INCOME TAX ACT, 1961

Section 32(1)

Depreciation - Tangible assets - Disallowance on basis of statement recorded during survey proceeding under section 133A -

AO disallowed depreciation in respect of various assets which included integrated software, SAESA 1005 IMP Machine, Control Panels, etc. He alleged that the software and machineries were purchased from associated concern and further, during survey in assessee's case, no fixed assets registered was found to have been maintained at the office premises and various assets were not found physically at the factory premises. Further, the AO found that all the assets were not mentioned in asset valuation report found during the survey. Further, the statements were recorded under section 133A from various persons, who said that majority of the software came with machines and only small changes were to be made in the software in consultation with the original suppliers. Accordingly, the AO held that the purchases of the said assets were not genuine and disallowed the depreciation claimed on the same. Held: It was found that the payments for purchasing impugned assets were made through banking channels and relevant details of the said payments were furnished. Further, the list of suppliers along with invoices of machinery purchased was also submitted and the ledger account of associated concern was also furnished. Further, apart from reconciliation chart of plant and machinery, valuation report was also submitted to the effect that machines were very much there and inspection was duly carried out by the surveyor. Further, the assessee requested AO to carry out the physical inspection of the machines but the AO did not bother to inspect the same and also did not consider evidences such as photograph of the plant and machinery submitted before him. Further, it is well settled that AO cannot make addition only on the basis of statement recorded during the survey proceeding under section 133A and there has to be corroborative evidence in support of the contention of the AO. Hence, the addition made on account of disallowance of depreciation would not be sustainable.

Relied:CIT v. S. Khader Khan Son (2013) 352 ITR 480 (SC): 2012 TaxPub(DT) 3088 (SC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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