Case Law Details
Divyashree Infrastructure Vs DCIT (ITAT Bangalore)
Since the assessee was undertaking construction of the projects, all the URD purchases have been included in the “Capital work in progress” account. We notice that the assessing officer has identified URD purchases every year and he has held them to be bogus in nature, i.e., according to AO, the assessee has inflated the expenses by accounting URD purchases. We noticed that the AO did not make addition of the alleged inflated/bogus expenses in the respective years. However, the AO has taken the view that the depreciation claimed should be disallowed. Since the assessee did not claim any depreciation in AY 2008-09 to 2013-14, there was no occasion for the AO to make any addition as per the view taken by him. Since the assessee had claimed depreciation in AY 2014-15 only, the AO disallowed the depreciation so claimed in A.Y. 2014-15.
We find that the assessment order is silent as to the quantum of alleged bogus/inflated expenses. As pointed out by Ld A.R, there are technical specifications regarding the quantum of consumption of various materials in the construction of a building. The moot question is, if the alleged bogus/inflated purchases are removed from the value of construction, whether the same would meet the technical specifications relating to quantum of usage of various materials required for construction of building. Admittedly, this exercise has not been carried out. There was no occasion for the assessee to carry out the said exercise, since it has maintained its stand that all URD purchases are genuine. However, the AO has not done the same. We also notice that the AO has also not effectively dealt with legal effect of the retraction of the sworn statement given by Shri Shyama Raju. However, we do not find it necessary to deal with these questions for the reasons discussed in the ensuing paragraphs.
Be that as it may, we noticed that the assessing officer did not make any addition with regard to the URD purchases, which were considered to be bogus or inflation of expenses, in the respective years. In our considered view, without making addition of alleged bogus/inflated expenses, the A.O. could not have disallowed the depreciation alone in A.Y. 2014-15. Accordingly, we are of the view that the disallowance of depreciation made by the A.O. in assessment year 2014-15 is not justified in the facts and circumstances of the case.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
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