M/s Badotherm Instruments Holland (P) Ltd., Gurgaon V. DCIT, New Delhi

CO 157/DEL/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6984 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-02-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 19-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEV JYOTI DAS
• Assessee Lawyers: VIRENDER CHAUHAN
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A DELHI) BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 1770(DEL)2011 ASSESSMENT YEAR: 2007-08 DY.COMMISSIONER OF INCOME TAX, M/S.BADOTHERM IN STRUMENTS HOLLAND CIRCLE 2(1), NEW DELHI. V. (P) LTD. ,B-92&93, IMT, SECTOR 5, MANESAR, GURGAON(HARYANA). C.O. NO. 157(DEL)2011 (IN ITA NO. 1770(DEL)2011) ASSESSMENT YEAR: 2007-08 M/S.BADOTHERM INSTRUMENTS HOLLAND (P) LTD.,B-92&93, IMT, SECTOR 5, V. DY.COMMIS SIONER OF INCOME TAX, MANESAR, GURGAON(HARYANA). CIRCLE 2(1), NEW DELHI. (APPELLANT) ( RESPONDENT) DEPARTMENT BY: SHRI DEV JYOTI DAS, CIT/DR ASSESSEE BY: SHR I VIRENDER CHAUHAN, CA ORDER PER A.D. JAIN, J.M. THESE ARE DEPARTMENTS APPEAL AND THE ASSESSEES CR OSS OBJECTION FOR THE ASSESSMENT YEAR 2007-08 AGAINST THE ORDER DATED 24.01.2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)V, N EW DELHI. THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS:- ITA NO. 1770 & CO 157(DEL)2011 2 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DE LETING THE ADDITION OF RS. 86,13,017/- ON ACCOUNT OF UNVERIFIA BLE EXPENSES AND U/S 40(A)(IA) OF THE I.T. ACT WITHOUT TDS AS: A) LD. CIT(A) HAS NOT APPRECIATED THE FACTS OF THE CAS E AND ERRED IN ADMITTING THE ADDITIONAL EVIDENCES. B) THE FACTS AND CIRCUMSTANCES OF THE CASE ARE NOT COV ERED BY ANY EXCEPTIONAL CONDITION LAID DOWN IN RULE 46A OF THE I.T. RULES. C) ONCE THE ASSESSEE ATTENDED THE PROCEEDINGS, THE ONU S TO SUBSTANTIATE ITS CLAIM AND TO FURNISH THE REQUISITE INFORMATION BEFORE THE AO LIES ON IT WHICH IT FAILED TO DO. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DEL ETING THE ADDITION OF RS. 11,38,416/- ON ACCOUNT OF DIFFERENCE IN G.P. RATE, AS NO SPECIFIC FINDING HAS BEEN RECORDED. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DEL ETING THE ADDITION OF RS. 2,67,48,755/- MADE U/S 68 OF THE I.T. ACT IG NORING THAT EVEN AT THE REMAND STAGE THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE TO PROVE THE IDENTITY, CREDIT-WORTHINESS AND GENUINENESS OF THE TRANSACTIONS IN RESPECT OF M/S IMPRODO BV. 4. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DEL ETING THE ADDITION OF RS. 1,51,508/- ON ACCOUNT OF UNVERIFIABLE EXPENS ES IGNORING THAT NO PROPER VOUCHERS OR EVIDENCES WERE FURNISHED BEFO RE THE AO EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR REMAND PROCEEDINGS FOR VERIFICATION OF THESE EXPENSES. 2. THE CROSS OBJECTION OF THE ASSESSEE IS AS FOLLOW S:- 1. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO HAS GROSSLY ERRED IN LAW AND ON FACTS IN FRA MING THE IMPUGNED ASSESSMENT U/S 143(3) AND THAT TOO WITHOUT SERVING MANDATORY NOTICE U/S 143(2) WITHIN THE STATUTORY ALLOWABLE PERIOD. THEREFORE, THE ASSESSMENT COMPLETED AS SUCH MAY BE HELD AB INITIO INVALID. ITA NO. 1770 & CO 157(DEL)2011 3 3. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE HAS STATED AT THE BAR THAT HE DOES NOT PRESS THE CROSS OBJECTION. THE C ROSS OBJECTION FILED BY THE ASSESSEE IS THEREFORE, DISMISSED, AS NOT PRESSE D. 4. COMING TO THE DEPARTMENTS APPEAL, APROPOS GROUN D NO.1, THE DEPARTMENT HAS CHALLENGED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF ` 86,13,017/-, MADE ON ACCOUNT OF UNVERIFIABLE EXPENS ES U/S 40(A)(IA) OF THE I.T. ACT, WITHOUT TDS. 5. THE AO MADE THE FOLLOWING ADDITIONS, APPLYING TH E FOLLOWING SECTION 40(A)(IA) OF THE ACT:- S.NO. DETAILS OF EXPENSES AMOUNT (RS.) 1. LABOUR & JOB WORK 7,59,762/- 2. FREIGHT & CARTAGE 4,52,413/- 3. GENERATOR MAINTENANCE 4,55,152/- 4. DIRECTORS SALARY 12,00,000/- 5. MANAGEMENT CONSULTANCY CHARGES 18,00,000/- 6. SALARY 20,28,262/- 7. PROFESSIONAL CHARGES 1,34,600/- 8. BONUS 1,15,500/- TOTAL 86,13,017/- 6. IT WAS OBSERVED BY THE AO THAT THE AUDITORS OF THE ASSESSEE COMPANY HAD NOT CERTIFIED THAT TDS WAS NOT SHOWN ON THE AFO RESAID EXPENSES; AND THAT ITA NO. 1770 & CO 157(DEL)2011 4 THE ASSESSEE HAD ALSO NOT FURNISHED THE DETAILS OF TAX DEDUCTION AND PROOF OF PAYMENT OF TAX IN THE GOVERNMENT ACCOUNT. 7. THE LD. CIT(A) HAVING DELETED THE SAID ADDITION, THE DEPARTMENT HAS RAISED GROUND NO.1 BEFORE US. 8. CHALLENGING THE IMPUGNED ORDER ON THIS ISSUE, TH E LD. DR HAS CONTENDED THAT WHILE WRONGLY DELETING THE ADDITION WRONGLY MADE, THE LD. CIT(A) HAS NOT APPRECIATED THE FACTS OF THE CASE AN D HAS ERRED IN ADMITTING ADDITIONAL EVIDENCE FILED BY THE ASSESSEE, EVEN THO UGH THE SAID ADDITIONAL EVIDENCE WAS NOT COVERED BY ANY EXCEPTIONAL CONDITI ON AS LAID DOWN IN RULE 46A OF THE I.T. RULES; THAT THE LD. CIT(A) HAS ALS O FAILED TO APPRECIATE THAT THE ASSESSEE MISERABLY FAILED TO SUBSTANTIATE ITS C LAIM BEFORE THE AO AND THAT THE REQUISITE INFORMATION WAS NEVER FURNISHED BEFOR E THE AO EVEN THOUGH THE ASSESSMENT PROCEEDINGS WERE DULY ATTENDED BY THE AS SESSEE AND ADEQUATE OPPORTUNITY WAS GRANTED TO THE ASSESSEE TO DO THE N EEDFUL IN THIS REGARD. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER, STATING THAT IN THE ASSESSMENT PROCEEDINGS, NO SUCH INFORMATION WAS CALLED FOR BY THE AO; THAT THE EXPENDITURE IN QUESTION WAS BEYOND THE PURVIEW OF S ECTION 40(A)(IA) OF THE ACT AND EVEN IN SPITE THEREOF, THE AO WRONGLY MADE THE ADDITIONS, WHICH WERE RIGHTLY DELETED BY THE LD. CIT(A); THAT THE PR OVISIONS OF TDS WERE DULY ITA NO. 1770 & CO 157(DEL)2011 5 COMPLIED WITH BY THE ASSESSEE; THAT THE NECESSARY D ETAILS OF THE EXPENSES, THE TDS THEREON, THE TAX DEPOSIT CHALLANS AND THE COPY OF THE TDS RETURNS WERE DULY FILED. 10. WE HAVE HEARD THE PARTIES ON THIS ISSUE AND WE FIND THAT INDEED, ALL THE REQUISITE DETAILS FORMING PART OF THE PAPER BOOK BE FORE US, WERE DULY FURNISHED BY THE ASSESSEE. IT HAS BEEN FOUND AS A MATTER OF FACT BY THE LD. CIT(A) THAT TDS HAD ACTUALLY BEEN SHOWN ON ALL THE ITEMS OF EXPENDITURE ADDED BY THE AO. IT HAS NOT BEEN SHOWN OTHERWISE. AS SUCH, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DO NOT G ET ATTRACTED AT ALL. IT WAS BEFORE THE LD. CIT(A) THAT THE EVIDENCE OF DEDUCTIO N OF TDS AND THE EVIDENCE OF PAYMENTS WERE FURNISHED. THE LD. CIT( A) EXAMINED ALL THESE DETAILS AND EVIDENCE AND THEREAFTER CAME TO THE CON CLUSION, THAT THE CLAIM OF THE ASSESSEE WAS CORRECT AND THAT THE ADDITION HAD WRONGLY BEEN MADE. THE DETAILS OF TDS WERE ELABORATE INASMUCH AS THEY WERE HEAD-WISE. THE DETAILS OF TDS DEDUCTION AND THE EVIDENCE OF DEPOSI T ALONG WITH THE DETAILS OF TDS HAVE NOT BEEN SHOWN BEFORE US TO BE FACTUALL Y INCORRECT. THEREFORE, THE ORDER OF THE LD. CIT(A) IN THIS REGARD DOES NOT CALL FOR ANY INTERFERENCE AT OUR HANDS, IT BEING AN ORDER PASSED ON FINDING OF F ACT WHICH REMAINS UNCONTROVERTED. 11. HENCE, GROUND NO.1 IS REJECTED. ITA NO. 1770 & CO 157(DEL)2011 6 12. SO FAR AS REGARDS GROUND NO.2, THE DEPARTMENT S TATES THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 11,38,416/- ON ACCOUNT OF DIFFERENCE IN G.P. RATE, NO SPECIFIC FINDING HAVING BEEN RECORDED. 13. WHILE MAKING THE ADDITION OF ` 11,38,416/-, THE AO OBSERVED THAT THE G.P.RATE OF THE ASSESSEE COMPANY HAD COME DOWN FROM 35.34% IN ASSESSMENT YEAR 2006-07 TO 0.44% IN THE YEAR UNDER CONSIDERATION; THAT THE EXPLANATION OF THE ASSESSEE TO THE EFFECT THAT THE FLUCTUATION IN G.P./N.P. RATES WAS DUE TO MARKET COMPETITION AND RECESSION IN INTE RNATIONAL TRADE, WAS NOT ACCEPTABLE. THE AO, AS SUCH, APPLIED A RATIO OF 5 % AND COMPUTED THE G.P., WHICH WAS APPLIED. IT WAS THE RESULTANT DIFFERENCE WHICH WAS ADDED. 14. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED T HAT THE G.P. FOR ASSESSMENT YEAR 2006-07 WAS IN FACT MINUS (-) 35.34 % AND NOT PLUS (+) 35.34%, AS WRONGLY OBSERVED BY THE AO; THAT FOR THE YEAR UNDER CONSIDERATION, THE G.P. WAS MINUS (-) 43.66%; THAT THERE WAS A DECLINE IN THE G.P. SINCE DURING THE YEAR, THE ASSESSEE HAD RECEIV ED INCOME ON ACCOUNT OF REPAIR, SEALING AND ASSEMBLY CHARGES, OF ` 4,05,897/-, WHEREAS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, I.E., ASSESS MENT YEAR 2006-07, THERE WAS A RECEIPT OF ` 43,83,688/- UNDER THE SAID CHARGES; THAT IT WAS AS A RESULT OF THIS THAT THE MARGINS WERE ADVERSELY AFFECTED, F OR A SUM OF ` 39,77,791/-; ITA NO. 1770 & CO 157(DEL)2011 7 THAT THE COST OF RAW MATERIAL CONSUMED IN THE YEAR UNDER CONSIDERATION ROSE FROM 85.40% OF THE SALES IN THE IMMEDIATELY PRECEDI NG ASSESSMENT YEARS TO 89.47%, HAVING AN IMPACT OF ` 10,17,261/- ON THE MARGINS OF THE YEAR UNDER CONSIDERATION; THAT THE FLUCTUATIONS IN THE COST OF RAW-MATERIAL WERE IN THE NATURAL COURSE OF BUSINESS OF THE ASSESSEE; THAT IT WAS DUE TO THESE FACTORS THAT AS COMPARED TO THE MARGINS OF THE IMMEDIATELY PRECEDING ASSESSMENT YEARS, THE MARGINS IN THE YEAR UNDER CONSIDERATION WERE LOWER BY ` 49,95,052/-; AND THAT WHEREAS THE G.P. IN THE EARLI ER YEAR WAS MINUS (-) 35.34%, THAT IN THE YEAR UNDER CONSIDERATION WAS MI NUS (-) 43.66% . ON THE ABOVE CONTENTIONS OF THE ASSESSEE, THE LD. CIT (A) OBSERVED THAT CONSIDERING THAT THE DECLINE IN THE G.P. WAS NOT AS DRASTIC AS POINTED OUT BY THE AO, THE DECLINE WAS NOT CONSIDERED ABNORMALLY; THAT OTHERWISE ALSO, G.P. AND N.P. RATES KEEP ON FLUCTUATING AND ARE NOT CONS TANT EVERY YEAR; AND THAT MERELY BECAUSE OF THE DECLINE IN THE G.P. IN THE AB SENCE OF ANY OTHER MATERIAL, THE AO WAS NOT JUSTIFIED IN ADDING THE DI FFERENCE IN THE G.P. THE ADDITION WAS DELETED BY THE LD. CIT(A) IN THIS MANN ER. 15. THE LD. DR HAS CONTENDED THAT DESPITE THE FACT THAT THE DIFFERENCE IN G.P. REMAINED UNEXPLAINED, WITHOUT RECORDING ANY S PECIFIC FINDING, THE LD. CIT(A) ERRED IN DELETING THE ADDITION CORRECTLY MAD E BY THE AO. ITA NO. 1770 & CO 157(DEL)2011 8 16. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, HAS STRONGLY RELIED ON THE IMPUGNED ORDER. 17. IN THIS REGARD, IT IS SEEN THAT IT WAS ON A FAC TUALLY WRONG BASIS THAT THE AO HAD PROCEEDED TO MAKE THE ADDITION. AS POINTED OUT BEFORE THE LD. CIT(A) AS ALSO BEFORE US AND NOT REFUTED BY THE DEP ARTMENT, THE AO WRONGLY NOTED THAT THE G.P. RATE OF THE ASSESSEE CO MPANY HAS COME DOWN TO 0.44% DURING THE YEAR FROM THAT OF 35.34% FOR ASSES SMENT YEAR 2006-07. ACTUALLY, UNDISPUTEDLY, THE G.P. RATE OF THE ASSESS EE FOR THE EARLIER YEAR WAS MINUS (-) 35.34% AND THAT IN THE YEAR UNDER CONSIDE RATION WAS OF MINUS (-) 43.66%. NOT ONLY THIS, THE ASSESSEE HAD, IN COMPAR ISON TO THE EARLIER YEAR RECEIPT OF ` 43,83,688/- AS REPAIR, SEALING AND ASSEMBLY CHARGES , RECEIVED ONLY ` 4,05,897/- DURING THE YEAR UNDER CONSIDERATION. T HUS, THE MARGINS GOT ADVERSELY AFFECTED FOR AN AMOUNT OF ` 39,77,791/-. THEN, AS COMPARED TO THE RAW MATERIAL CONSUMPTION COST OF 85.40% IN THE EARLIER YEAR, FOR THE YEAR UNDER CONSIDERATION, ITS COST ROSE TO 89.47%. THI S AGAIN, REMAINS UNDISPUTED. IT WAS THIS RISE IN THE COST OF RAW-M ATERIAL CONSUMPTION THAT LED TO AN IMPACT OF ` 10,17,261/- ON THE MARGINS OF THE YEAR UNDER CONSID ERATION. THE MARGINS FOR THE YEAR UNDER CONSIDERATION THUS G OT LOWERED BY ` 49,95,052/-. ITA NO. 1770 & CO 157(DEL)2011 9 18. IT WAS ON THE BASIS OF THE ABOVE PATENT FACTS T HAT THE LD. CIT(A) ARRIVED AT THE CONCLUSION THAT THE DECLINE IN THE G.P. WAS NEITHER DRASTIC NOR ABNORMAL. FURTHER, NOTHING WAS BROUGHT ON RECORD BY THE AO OTHER THAN THE SUPPOSEDLY DRASTIC DECLINE IN G.P., TO MAKE THE ADD ITIONS. THE LD. CIT(A), IN OUR VIEW, CORRECTLY DELETED THE ADDITION. WE, THE REFORE, UPHOLD THE CIT(A)S ORDER ON THIS ISSUE, REJECTING GROUND NO. 2. 19. TURNING TO GROUND NO.3, THE AO MADE ADDITION OF ` 2,67,48,755/- U/S 68 OF THE I.T. ACT, CONCERNING THE FOLLOWING PARTIE S:- S.NO. NAME OF THE PARTY AMOUNT AS ON 31/03/2007 AMOUNT AS ON 31/03/2006 DIFFERENCE 1. INPRODO BV S.2,03,35,696/- RS. 1,16,66,773/- RS . 86,68,923/- 2. KAVITA ANAND HOLDINGS (P) LTD. RS. 19,27,258/- 00.00 RS. 19,27,258/- 3. BLISS ANAND (P) LTD. RS. 1,82,56,595/75 RS. 21,04,021/75 RS. 1,61,52,574/- TOTAL RS. 2,67,48,755/- 20. THE LD. CIT(A) DELETED THE ENTIRE ADDITION. BEFORE US, THOUGH THE ENTIRE FIGURE OF ` 2,67,48,755/- HAS BEEN MENTIONED IN THE BEGINNING OF GROUND NO.3, A READING OF THE COMPLETE GROUND SHOWS THAT THE DEPARTMENT IS IN FACT CHALLENGING THE DELETION OF THE ADDITION WI TH RESPECT TO ONLY ONE OF ITA NO. 1770 & CO 157(DEL)2011 10 THE THREE PARTIES CONCERNED, I.E., M/S. INPRODO BV. THE LEARNED DR HAS SPECIFICALLY BROUGHT THIS TO OUR NOTICE ALSO. AS SUCH, THE FIGURE IN GROUND NO.3, THAT OF ` 2,67,48,755/-, IS TO BE TAKEN ` 2,03,35,696/- , AS ON 31.3.07 AND ` 1,16,66,773/-, AS ON 31.3.2006, PERTAINING TO M/S. INPRODO BV. 21. THE AO, WHILE MAKING THE ADDITION, OBSERVE D THAT NEITHER ANY JUSTIFICATION NOR CONFIRMATION OF THE PARTY HAD BEE N FILED BY THE ASSESSEE; THAT IT APPEARED FROM THE RECORD AVAILABLE THAT UNS ECURED LOANS HAD BEEN RECEIVED FROM THE PARTIES, WHICH WAS DIRECTLY RELAT ED WITH THE ASSESSEE COMPANY; THAT NEITHER THE CREDIT WORTHINESS OF THE PARTY NOR THE GENUINENESS OF THE TRANSACTIONS HAD BEEN PROVED; AND THAT HENCE , THE SUM OF ` 86,68,923/- WAS BEING ADDED. 22. BEFORE THE LD. CIT(A), THE ASSESSEE CONTEN DED THAT WHEN THE ACCOUNTS OF THE ASSESSEE WERE SUBJECT TO AUDIT AND THE SCRUT INY ASSESSMENT FOR ASSESSMENT YEAR 2006-07, THE ADDITIONS MADE BY THE AO, ONLY ON THE BASIS OF SURMISES, COULD NOT BE SUSTAINED; THAT DURING THE Y EAR, THE ASSESSEE HAD RECEIVED UNSECURED LOANS FROM THE PARTY; THAT THE A SSESSEE HAD NOT BEEN PROVIDED A REASONABLE OPPORTUNITY OF BEING HEARD BY THE AO; THAT IT WAS THEREFORE, THAT IT WAS IN THE FIRST APPELLATE PROCE EDINGS THAT THE ASSESSEE WAS FILING NECESSARY DOCUMENTS IN SUPPORT OF THE CLAIM OF THE ASSESSEE THAT THE CASH CREDITOR WAS A GENUINE PARTY. THE ASSESSEE T HUS FILED ADDITIONAL ITA NO. 1770 & CO 157(DEL)2011 11 DOCUMENTS BEFORE THE LD. CIT(A). THE LD. CIT(A) R EMITTED THE SAME TO THE FILE OF THE AO FOR HIS COMMENTS. THEREAFTER, THE LD. CIT(A) DELETED THE ADDITION. 23. THE LD. DR HAS CONTENDED THAT THE LD. C IT(A)HAS ERRED IN DELETING THE ADDITION CORRECTLY MADE BY THE AO; THAT WHILE D OING SO, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT AT THE REMAND STAGE, THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE EVEN THE IDENTITY OR CREDIT WO RTHINESS OF THE CREDITOR, OR THE GENUINENESS OF THE TRANSACTION, IN RESPECT O F M/S. INPRODO BV. IT HAS BEEN SUBMITTED THAT THE DOCUMENTS FILED BY THE ASS ESSEE INCLUDE ONLY THE ZEROX COPY OF THE CONFIRMATION LETTER FROM THE PART Y; THAT NO SPECIFIC INFORMATION OR EXPLANATION WAS GIVEN; THAT THE NOTE S TO THE BALANCE SHEET OF M/S. INPRODO BV [PAGE 196 OF THE ASSESSEES PAPER B OOK (APB FOR SHORT)] SHOWS THAT THE FINANCIAL YEAR FOLLOWED BY THAT COMP ANY IS THE YEAR ENDING 31 ST DECEMBER, WHEREAS THE FINANCIAL YEAR OF THE ASSESS EE IS NOT THE CALENDAR YEAR BUT THE YEAR ENDING 31 ST MARCH; THAT MOREOVER, THE DETAILS UNDER LOANS TO PARTICIPATE INTEREST, SHOWN AGAINST BADOTHRM IN STRUMENTS HOLLAD (P)LTD., INDIA, THE ASSESSEE, IS IN EUROS, AS ALSO IS THE BA LANCE CONFIRMATION OF ACCOUNTS FOR THE PERIOD 1.4.2006 TO 31.3.2007 (COPY AT 176 OF THE APB); THAT NO CONFIRMATION IN THIS REGARD HAS BEEN CARRIED OUT BY THE LD. CIT(A) WHILE DELETING THE ADDITION WELL MADE BY THE AO; AND THAT THE CIT(A)S ORDER IN ITA NO. 1770 & CO 157(DEL)2011 12 THIS REGARD, AS SUCH, IS AN ENTIRELY NON-SPEAKING O RDER, DELETING THE ADDITION WITHOUT ASSIGNING ANY SPECIFIC REASONS. 24. ON THIS COUNT, THE LEARNED COUNSEL FOR TH E ASSESSEE HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. HE, HOWEVER, HAS N OT BEEN ABLE TO CONTROVERT THE ASSERTION OF THE LD. DR THAT NO PROP ER ENQUIRY, AS STATED, WAS CARRIED OUT BY THE LD. CIT(A), NOR WAS SUCH AN ENQ UIRY DIRECTED TO BE CARRIED OUT AND STILL, THE ADDITION WAS DELETED. THE LEAR NED COUNSEL FOR THE ASSESSEE STATES AT THE BAR THAT - (I) THE SPECIFIC EVIDENCE WHICH HE STATES THE ASSESSEE TO HAVE FILED; (II) AS BB DATED 4.6.10, REJOINDER DATED 24.11.10 TO THE ASSESSEES REMAND REPORT AND SUBMISSIONS DATED 27.12.10, ALL F ILED BEFORE THE CIT(A); (III) COPIES WHEREOF HAVE BEEN PLACED BEFORE US IN APB-VO L-II, AT PAGES 1 TO 278 THEREOF; AND (IV) CAN BE EXPLAINED EVEN AT THIS STAGE, WHEREUPON, THE ADDITION WOULD NOT SURVIVE. 25. IN THESE FACTS AND CIRCUMSTANCES, WE FIN D THAT THE MATTER NEEDS TO BE REMITTED TO THE FILE OF THE AO FOR DECISION AFRESH TO THE CIT(A), IT IS SEEN THAT THE LD. CIT(A) DELETED THE ADDITION BY MAKING THE F OLLOWING OBSERVATIONS:- WITH REGARD TO UNSECURED LOANS FROM IMPRODO BV, T HE APPELLANT HAS PRODUCED CONFIRMATION, COPY O F ROC ANNUAL RETURN TO PROVE OF IT BEING SHAREHOLDER AND COPY OF BALANCE SHEET. I HAVE EXAMINED THESE DOCUMENTS AND THEY AR E FOUND TO BE IN ORDER AND ALSO THE CREDITORS HAVE DIRECTLY CO NFIRMED TO THE AO IN RESPONSE TO NOTICE ISSUED BY AO DURING REMAND PROCEEDING. IN VIEW OF THESE FACTS, THE ADDITION O F UNSECURED LOAN OF RS. 2,67,48,755/- IS DIRECTED TO BE DELETED . ITA NO. 1770 & CO 157(DEL)2011 13 26. FROM THE ABOVE OBSERVATIONS OF THE LD. C IT(A), IT APPEARS THAT THOUGH THE LD. CIT(A) HAS FOUND THE DOCUMENTS FILED BY THE ASSESSEE IN THE SHAPE OF, INTER ALIA, BALANCE SHEET, TO BE IN ORDER , AS TO HOW THEY ARE IN ORDER, HAS NOT BEEN DELIBERATED UPON BY THE CIT(A), PARTIC ULARLY, IN VIEW OF THE UNDISPUTED ASSERTION OF THE LD. DR, THAT THE AMOUNT S AS APPEARING IN THE BALANCE SHEET OF THE PARTY AND THAT SHOWN BY THE AS SESSEE DO NOT STAND RECONCILED, THE ONE BEING IN EUROS AND THE OTHER, IN INDIAN RUPEES. ACCORDINGLY, THIS MATTER IS REMANDED TO THE FILE OF THE AO TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW. THE ASSESSEE SHALL BE AFFORDED DUE OPPORTUNITY TO PROVE ITS CASE. THE ASSESSEE, NO D OUBT, SHALL CO-OPERATE WITH THE AO IN THE FRESH PROCEEDINGS BEFORE THE AO. GR OUND NO.3, THEREFORE, FOR STATISTICAL PURPOSES, IS ACCEPTED. 27. THE LAST GROUND TAKEN BY THE DEPARTMENT, I. E., GROUND NO.4 CHALLENGES THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITI ON OF ` 1,51,508/- ON ACCOUNT OF UNVERIFIABLE EXPENSES. 28. THE ASSESSEE HAD CLAIMED THE FOLLOWING E XPENSES:- S.NO. HEADS OF EXPENSES CLAIMED AMOUNT (RS.) 1. EXHIBITION EXPENSES 3,57,795/- 2. REPAIR AND MAINTENANCE 2,96,345/- 3. MISC. EXP. 50,949/- 4. REBATE AND DISCOUNT 30,368/- 5. SHORT AND EXCESS 22,084/- TOTAL 7,57,541/- ITA NO. 1770 & CO 157(DEL)2011 14 29. THE AO DISALLOWED 20% OF THE TOTAL EXPENSES OF ` 7,57,541/-, AMOUNTING TO ` 1,51,508/-, IN THE ABSENCE OF DOCUMENTARY EVIDENCE REGARDING INCURRENCE OF THESE EXPENSES. 30. BEFORE THE LEARNED CIT(A), THE ASSESSEE CON TENDED, AS FOR GROUND NO.3, THAT THE ACCOUNTS OF THE ASSESSEE WERE SUBJEC T TO AUDIT AS ALSO TO SCRUTINY ASSESSMENT FOR ASSESSMENT YEAR 2006-07 AND SO, THE AD-HOC ADDITIONS MADE BY THE AO WERE NOT SUSTAINABLE; THAT THE ASSESSMENT FOR THE PRECEDING YEARS AND THE FOLLOWING YEARS, I.E., ASSE SSMENT YEARS 2006-07 AND 2008-09, HAD BEEN COMPLETED ON THE RETURNED INCOME, BOTH UNDER SECTION 143(2) OF THE ACT; THAT DURING THE ASSESSMENT PROCE EDINGS, THE AO DID NOT PROVIDE THE ASSESSEE SUFFICIENT OPPORTUNITY OF HEAR ING, FLOUTING THE PRINCIPLES OF NATURAL JUSTICE, (FOR WHICH PROPOSITION, NUMEROU S CASE LAWS WERE CITED); AND THAT THE AO WAS BOUND BY THE ORDER OF THE TRIBU NAL, WHICH WAS NOT FOLLOWED. 31. THE LEARNED CIT(A) DELETED THE ADDITION OBS ERVING THAT THE MAJOR EXPENDITURE ON WHICH DISALLOWANCE HAD BEEN MADE, PE RTAINED TO EXHIBITION AND REPAIRS AND MAINTENANCE; THAT DETAILS AND EVIDE NCE FOR THESE EXPENSES HAD BEEN FILED BEFORE THE LEARNED CIT(A) AND HAD BE EN FOUND TO BE IN ORDER; THAT THE OTHER EXPENSES WERE OF SMALL NATURE, INCUR RED IN THE COURSE OF ITA NO. 1770 & CO 157(DEL)2011 15 NORMAL BUSINESS AND WERE ALLOWABLE; THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED AND THE CASE HAD BEEN SUBJECT ED TO SCRUTINY IN THE EARLIER ORDER AS WELL AS SUBSEQUENTLY AND NOTHING A DVERSE HAD BEEN FOUND; AND THAT SO, ONLY BECAUSE VOUCHERS WERE NOT PRODUC ED FOR THE ROUTINE EXPENDITURE DUE TO INADEQUATE OPPORTUNITY AND THE A O DID NOT CHOOSE TO EXAMINE THE SAME DURING REMAND, THE AD-HOC ADDITION HAD NOT BEEN JUSTIFIED. 32. IN THIS REGARD, THE LD. DR HAS CONTENDED T HAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION CORRECTLY MADE; AND THAT W HILE DOING SO, THE LD. CIT(A) HAS FAILED TO CONSIDER THAT NO PROPER VOUCHE RS OR EVIDENCE WERE FURNISHED BEFORE THE AO EITHER DURING THE ASSESSMEN T PROCEEDINGS OR IN THE REMAND PROCEEDINGS FOR VERIFICATION OF THE EXPENSES , EVEN THOUGH ADEQUATE OPPORTUNITY WAS GRANTED TO THE ASSESSEE BY THE AO F OR THE PURPOSE. 33. THE LEARNED COUNSEL FOR THE ASSESSEE, ON T HE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. QUA THIS I SSUE, WE FIND THAT THE DISALLOWANCE WAS MADE BY THE AO FOR THE SOLE REASON OF NON-PRODUCTION OF VOUCHERS BY THE ASSESSEE, INDEED, UNDISPUTEDLY, THE MAIN DISALLOWANCE PERTAINS TO EXPENDITURE ON EXHIBITIONS AND REPAIRS AND MAINTENANCE. THE DETAILS AND EVIDENCE WITH REGARD THERETO WERE FILED BEFORE THE LD. CIT(A). THE REMAINING ADDITION WAS CONCERNING SMALL EXPENDI TURE INCURRED BY THE ASSESSEE IN THE COURSE OF NORMAL BUSINESS. IT WAS, AS SUCH, ALLOWABLE. THE ITA NO. 1770 & CO 157(DEL)2011 16 LD. CIT(A) REMANDED THE EVIDENCE TO THE AO, WHO DID NOT EXAMINE THE SAME. THE LD. CIT(A), HOWEVER, FOUND THE EVIDENCE WHO HAVE SUPPORTED THE CLAIM OF THE ASSESSEE. OTHERWISE TOO, AS RIGH TLY OBSERVED BY THE LD. CIT(A), THE BOOKS OF THE ASSESSEE WERE AUDITED AND THE ASSESSMENTS IN THE EARLIER AS WELL AS SUBSEQUENT ASSESSMENT YEARS WERE SCRUTINY ASSESSMENTS. NOTHING ADVERSE TO THE ASSESSEES CLAIM HAVE BEEN FOUND. THAT BEING SO, THERE WAS NO WARRANT TO MAKE THE AD-HOC ADDITIONS, WHICH WERE RIGHTLY DELETED BY THE LD. CIT(A). 34. IN THIS VIEW OF THE MATTER, THE DELETION O F THE ADDITION IS FOUND TO BE JUSTIFIED AND IS UPHELD. SO, GROUND NO.4 IS REJEC TED. 35. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS PARTLY ALLOWED, AS INDICATED, WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.02.2012. SD/- SD/- (G.D. AGRAWAL) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 22.02.2012. *RM ITA NO. 1770 & CO 157(DEL)2011 17 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ASSISTANT REGISTRAR