C IN INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER . I.T.A. No.5673 Mum 2014 ( Assessment Year : 2010-11) Oasis Infrastructure Pvt. ACIT 10(2), Ltd., 4 t h floor, v. 119-121 B, Shrik ant Aayakar Bhavan, Chambers, Mumbai 400 020. Sion Trombay Road, Near R.K. Studio, Chembur, Mumbai 400 071. . PAN : AAACO5715 H ( Appellant) .. ( Respondent) Assessee by Shri Devendra Jain Revenue by : Shri Naveen Gupta Date of Hearing : 16-6-2016 Date of Pronouncement : 14-09-2016 ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by assessee company, being ITA No. 5673 Mum 2014, is directed against appellate order dated 26th June, 2014 passed by learned Commissioner of Income Tax (Appeals)- 22, Mumbai (hereinafter called CIT(A) ), for assessment year 2010-11, appellate proceedings before learned CIT(A) arising from assessment order dated 18th December, 2012 passed by learned Assessing Officer (hereinafter called AO ) u s 143(3) of Income Tax Act,1961 (Hereinafter called Act ). 2 ITA 5673 Mum 2014 2. grounds of appeal raised by assessee company in memo of appeal filed with Income Tax Appellate Tribunal, Mumbai (hereinafter called Tribunal ) read as under:- 1. On facts and in circumstances of case and in law, learned Assessing Officer -ACIT -10(2), Mumbai has erred in disallowing revenue expense of dismantling, loading, unloading and assembling charges Rs.25,00,000 - paid by appellant for movement of crawler crane, by holding it to be non genuine expense. 3. brief facts of case are that assessee is engaged in business of hiring of cranes and equipments, including mobilization and demobilization. During year assessee has purchased used crane namely Crane Kobelco CKE 2500 from Janak Cranes in working condition at site with all its accessories for consideration of Rs 7.20 crores for which necessary invoice were submitted. assessee Company has furnished proof in form of invoice raised on Janak Cranes for hiring charges earned for period from 8th Feb 2010 to 28th Feb 2010 and 1st March 2010 to 31st March 2010 by putting above referred crane into actual use. assessee Company has claimed to have incurred expenditure of Rs. 25,00,000 - towards dismantling, loading, unloading and assembling of above said Crane from Janak Cranes. assessee was asked by AO to justify as to why above referred expenditure should not be treated as capital expenditure. In response, assessee submitted that said crane was purchased by assessee company in working condition on 5th February, 2010 with all its accessories from Janak Crane at site only. said crane was moved to another site at Kolkata for hiring purpose directly from place at which it was purchased and since crane is crawler crane and cannot travel on road it has to be transported on various trailers and trucks after dismantling into various parts and it will be loaded into various trailers 3 ITA 5673 Mum 2014 for transporting from one place to another and for this, said amount has been paid to Janak Crane for dismantling crane into various parts and loading as well as unloading into trailers and assembling at other site. It was submitted that expenses can be capitalized to asset only and only if such expenditure increases future benefits from existing asset beyond its previously assessed standard of performance and will be included in gross book value, e.g., increase in capacity. It was submitted that crane was purchased in total working and running condition from party and had been directly dispatched to site for work, question of considering expense for dismantling, loading, and unloading and assembling as capital expenditure does not arise and it was rightfully considered as revenue expenditure. crane has started working from 8th February, 2010 onwards for which work order for crane was in name of Janak Cranes and has been changed in assessee company's name from April, 2010 onwards and hence hiring bill for month of Feb & March 2010 were raised on Janak Cranes itself. assessee company was asked by AO to justify genuineness of above expense. No details were provided by assessee company. assessee submitted that crane was purchased by assessee in working condition along with running work order with all its accessories from Janak Cranes at Maithan Power Project site, Jharkhond, only. said crane was moved to another location of same site at Maithan Power project site, Jharkhand for hiring purpose directly from place at which it was purchased under running contract of Janak Cranes only and hiring was started from 8th February, 2010 onwards. It was submitted that crane is crawler crane and cannot travel on road and hence it has to be transported on various trailers and trucks. crane has to be dismantled into various parts. For this purpose amount has to be paid to Janak Cranes for dismantling crane into various parts and loading as well as unloading into trailers and assembling at other location of same 4 ITA 5673 Mum 2014 site of Maithan Power Project, Jharkhand . assessee has submitted following documents to substantiate its claim:- 1) Invoice of Janak Cranes for Rs. 27,57,500 - towards charges. 2) Hiring Invoice on Janak Cranes for Feb & March 2010 raised by assessee company 3) Hiring Invoice on Simplex Infrastructure Ltd from April 2010 onwards raised by assessee company. 4) Work-order of Simplex Infrastructure Ltd in assessee company's name for hiring of crane for same site dated 26.03.2010. 5) Work-order of Janak Cranes for same site earlier dated 22.05.2009. 6) Letters written by assessee company & Janak Cranes for change of work-order dated 22.02.2010. 7) TDS Certificate issued by assessee company for TDS deducted. 8) Ledger account of Janak Cranes for financial year 2009-2010 & 2010-2011 reflecting total transaction of bill, payment, TDS, Service tax etc. 9) Xerox copy of bank statement for payment of Rs. 25,00,000 - to Janak Cranes. A.O. rejected contentions of assessee and observed that assessee in its initial submission stated that after purchase of crane in working condition on 5th February, 2010 from Janak Cranes at site at Maithan Power Project, Jharkhand , it was moved to another site at Kolkata for hiring purpose directly from place at which it was purchased. However, assessee has changed his stand that crane was moved to another location within Maithan Power Project, Jharkhand site for hiring 5 ITA 5673 Mum 2014 purpose. It was observed by A.O. that work order was in name of Janak Cranes and they have continued to raise invoice on Janak Cranes till end of March 2010 and subsequently from April 2010 they have raised invoice on end user party Simplex Infrastructure Limited directly. It was observed that since work order were in name of Janak Cranes assessee has raised invoice on Janak Cranes and were able to get it changed in their name from April, 2010 onwards is proving clearly that assessee had continued operating said crane at same site at Maithan Power Project, Jharkhand only without indulging into mobilization of crane from one site to another site location for which assessee has not furnished any supporting document to prove that crane was in fact mobilized from one location to another location within Maithan Power project site. A.O. also referred to contents of agreement with Janak Cranes and M s Simplex Infrastructures Limited. It was also observed that on 22nd February, 2010 Janak Cranes requested for change of work order to M s Simplex infrastructures Limited to be replaced in favour of assessee company. Similarly on 22nd February, 2010 assessee also wrote to M s Simplex Infrastructures Ltd. for issuance of work order in their name. A.O. accordingly came to conclusion that expenditure claimed by assessee on account of loading and unloading charges is non-genuine which is evident from work order and amount of Rs. 25 lacs was disallowed as business expenses and added to income of assessee by AO vide assessment order dated 18-12-2012 passed by AO u s. 143(3) of Act. 4. Aggrieved by assessment order dated 18-12-2012 passed by A.O. u s 143(3) of Act, assessee filed its first appeal before ld. CIT(A). 5. Before ld. CIT(A), assessee reiterated its submission what were made before A.O. ld. CIT(A) observed that assessee has purchased 250MT Capacity Kobelco CKE 2500 Crane from M s. Janak 6 ITA 5673 Mum 2014 Cranes at Maithon site Jharkhand which was in use at site itself. work order dated 22nd May, 2009 issued by M s Simplex Infrastructures Limited indicate that work connected to Maithon Power Project site, Jharkhand was awarded to M s. Janak Cranes and hire charges for crawler was fixed at Rs.16.5 lacs per month. assessee claimed that above crane was purchased on 5th February, 2010 along with all its accessories from Janak Cranes at Maithon Project site itself. ld. CIT(A) observed from invoice No. 078 that it was raised by Janak Cranes in name of assessee on 2.3.2010 and not on 5.02.2010 and hence contention of assessee that crane was purchased in month of February 2010 cannot be accepted in absence of any concrete evidence. It was also observed that it was not possible to dismantle crane within period of two days and it was reassembled at new location in same site and work started at new site on 8.2.2010. Dismantling such heavy crane into various parts, then loading in trailers, transportation, unloading and finally reassembling at new site was not possible within short period of two days. It was observed that work order given to Janak Cranes was in respect of Maithan site at Jharkhand, whereas description in invoice shows Kolkatta site and hence there is contradiction in assessee s claim. Vide letter dated 22nd February, 2010 for first time M s. Janak Cranes addressed letter to M s. Simplex Infrastructure Limited with request to change work order in favour of assessee at earliest effective from 1st March, 2010. Similarly assessee also addressed letter dated 22nd February, 2010 to M s. Simplex Infrastructure Limited to replace work order in assessee s favour. No evidence in form of revised work contract awarded to assessee for month of February and March 2010 was furnished before ld. CIT(A) which shows that cranes might not have been put into use in month of February and March 2010 by assessee. With respect to expenditure related to transportation, dismantling etc. was paid to M s. Janak Cranes, assessee was directed to file copy of 7 ITA 5673 Mum 2014 invoice raised in support of contention that payment towards dismantling, transportation etc. was genuine. ld. CIT(A) held that date of sale vis-a-vis date of invoice raised in respect of dismantling, transportation etc. compared to claim of use of crane from 5.02.2010 and non mention of transportation in invoice and non existence of contract between assessee and Simplex Infrastructures during this financial year, supplier of crane had only issued accommodation bill for month of February & March, 2010 towards crane hiring. Similarly, alleged dismantling, loading, unloading, assembling and transportation of crane was also accommodation entry given by supplier. work site being in mines dismantling, transportation by hiring trailers and reassembling would definitely be impossible event in two days considering huge size of crane. Considering all these facts, entire transaction is definitely sham and it is colourable device to claim bogus expenditure, hence, entire claim of payment made Rs . 25 lakhs was treated as non genuine and therefore addition made by AO was upheld sustained by learned CIT(A) vide appellate orders dated 26-06-2014. 6. Aggrieved by appellate order dated 26-06-2014 passed by ld. CIT(A), assessee is in appeal before Tribunal. 7. Before Tribunal, ld. Counsel for assessee submitted that assessee acquired crane from Janak Cranes which was operating at Maithan Power Project at Jharkhand on running condition as on where basis along with work order awarded by Simplex Infrastructure Limited for hiring of said crane at Maithan Power Project, Jharkhand. M s Janak Cranes had hired said crane to M s Simplex Infrastructure Ltd. who were contractors for Maithan Power Project at Jharkhand. It was submitted that said crane was dismantled and transported to other location at same site and assembled therein and assessee paid charges of Rs.25,00,000 - + 8 ITA 5673 Mum 2014 service tax to Janak Cranes for said movement of crane . payment was made by crossed account payee cheque on 19-01-2010 against which tax was also deducted at source and invoice was also received from Janak Cranes dated 20-02-2010. said bank ledger account, bank statement , TDS certificate and invoice from Janak cranes is placed in paper book filed with Tribunal. It is submitted that crane was purchased from Janak Cranes for Rs. 7.20 crores against which invoice is placed in paper book page 4 filed with Tribunal. It was submitted that work contract dated 22 25-02-2009 was in favour of Janak Cranes issued by Simplex Infrastructure Limited for hiring of said crane on monthly rental of Rs.16.50 lacs(pb page 11-14).The said work order was changed by Simplex Infrastructure Limited in favour of assessee vide LOI dated 26-03-2010 on same terms and conditions which is placed in paper book page 15-18, in pursuance of request letter written by Janak Cranes(pb page 8 ) and assessee (pb page 7) both dated 22.02.2010 to Simplex Infrastructure Limited to transfer work order in favour of assessee. It was submitted that for interim period from 08-02-2010 to 31-03-2010 , invoicing for hiring of crane was done by assessee on Janak Cranes(page 9-10 pb) as work order was in favour of Janak Cranes , and from April 2010 invoicing was done directly in favour of Simplex Infrastructure Limited (pb page 19-20) as LOI dated 26-03-2010 was issued by Simplex Infrastructure Limited in favour of assessee. It was submitted that authorities below erred in treating said expenses of Rs. 25,00,000 - for demobilization and mobilization of cranes by de-assembling, transportation and assembling at another location with in same site of Maithan Power Project at Jharkhand as not genuine and treating same transaction as sham and colorable device. Thus, it was submitted in nut-shell that said expenses of Rs. 25,00,000 - ( exclusive of service tax amount which is claimed as cenvat credit by assessee ) for dismantling , transportation and re-assembling of crane at different location within site of Maithan 9 ITA 5673 Mum 2014 Project, Jharkhand be allowed as normal business expenditure .The assessee relied upon decision of Hon ble Bombay High Court in case of CIT v. Nikunj Eximp Enterprises Private Limited (2013) 216 Taxman 171(Bom.). 8. Ld. DR rely on appellate orders of learned CIT(A). 9. We have considered rival contentions and perused material on record. We have observed that assessee had purchase 250 MT capacity Crane Kobelco CKE 2500 Sr. No. JD 04 02 407 from Janak Cranes for Rs. 7,20,00,000 - vide invoice no. 078 dated 02-03-2010 of Janak Cranes(paper book page 4) although payments were stated to be made through HDFC Bank Loan-3314541 on 2-3-2010 as per ledger account submitted(page 1 pb), wherein on perusal of ledger account of Janak Cranes submitted by assessee , invoice depicted in ledger account is invoice no 76 dated 01-02- 2010 for Rs. 7,20,00,000 - for purchase of Kobelco Crawler Crane Sr. No. JD04-02407 with complete accessories. Thus , there is discrepancy to that extent in invoice date but be that it may be assessee invoiced Janak Cranes for use of said cranes w.e.f. 08-02-2010 and raised invoices for hiring of cranes in favour of Janak Cranes for month of February March 2010 as work order issued by Simplex Infrastructure Limited was in favour of Janak Cranes which got replaced by issue of LOI in favour of assessee only on 26-03-2010 and assessee started invoicing Simplex Infrastructure Limited directly w.e.f. 01-04-2010 onwards. background is that said crane so acquired by assessee was owned by Janak Cranes and was installed at Maithan Power Project at Jharkhand on hire to Simplex Infrastructure Limited vide work order dated 22 25-05-2009. assessee acquired crane as on where basis from Janak Cranes along with work order for hiring by Simplex Infrastructure Limited at same site location and continued with said crane on hire to Simplex Infrastructure Limited on same terms and condition at same site. There is no evidence on record 10 ITA 5673 Mum 2014 to prove that cranes were de-assembled , transported and re-assembled i.e. demobilized and mobilized at Kolkatta as initially claimed by assessee or at different location at same site at Maithan Power Project at Jharkhand which was subsequently claimed by assessee. assessee has stated to have paid additionally Rs. 25,00,000 - ( exclusive of service tax which was claimed as cenvat credit) to Janak Cranes for said de- assembly, transportation and re-assembly of said crane i.e for demobilization and mobilization of said crane at new location at same site for which no evidence whatsoever is available on record and this contention of assessee cannot be accepted and is hereby rejected. However, if we consider entire sequence of event in totality , it prima facie emerges that assessee initially paid Rs. 25,00,000 - to Janak Cranes on 19-01-2010 which appears prima facie to be advance for booking confirming purchase of crane and thereafter invoice of Rs. 7.20 crore was received on 05-02-2010 being invoice no76 issued by Janak Cranes as per ledger account enclosed in paper book page 1 . Thereafter , HDFC bank loan of Rs. 7.20 crores is reflected for making payment for purchase of crane on 02-03- 2010 . invoice dated 20-02-2010 bearing no 169 for service charges was received which prima facie appears to be for purposes to square off balance of advance outstanding in shape of dismantling, loading, unloading and assembling of cranes against which no evidence for actual execution of stated job in invoice is on record. In our considered view, assessee is not coming out with true and correct facts to reflect true character of said transaction and payment thereof and in our view prima facie it appears that this payment of Rs. 25,00,000 - is connected with purchase of crane but assessee is not coming out with true and correct facts . Revenue has also not brought on record any conclusive evidence to support its contention that these are bogus accommodation entries and transaction is sham and colorable device as no enquiry has been made by AO with Janak Cranes Simplex 11 ITA 5673 Mum 2014 Infrastructure Limited or with HDFC Bank from whom loans were availed . In our considered view and in interest of justice and fair play, this matter needs to be set aside to file of AO for re-determination of issue on merits wherein assessee is directed to produce all necessary evidences and explanations to bring out true and correct nature and character of transaction. AO will examine, enquire and verify contentions of assessee in accordance with law before adjudication matter on merits in accordance with law. Needless to say that proper and adequate opportunity of being heard shall be provided by AO to assessee in accordance with principles of natural justice in accordance with law. We order accordingly. 10. In result, appeal filed by assessee in ITA No. 5673 Mum 2014 is allowed for statistical purposes. Order pronounced in open court on 14th September, 2016. 14-09-2016 Sd - sd - (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 14-09-2016 R.K., Ex. Sr. PS 12 ITA 5673 Mum 2014 Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A)- concerned, Mumbai 4. CIT- Concerned, Mumbai 5. , , DR, ITAT, Mumbai Bench 6. Guard file. BY ORDER, True Copy (Dy. Asstt. Registrar) , ITAT, Mumbai Oasis Infrastructure Pvt. Ltd. v. ACIT – 10(2), Mumbai