M/s. Claridges Hotels Pvt. Ltd., New Delhi V. ACIT, New Delhi

CO 162/DEL/2015

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8113 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 7 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 21-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Depreciation; Business expenditure; Search and seizure; Double taxation relief; Earning of tax free income; Commercial expediency; Rule 8D
• Section: 143(3); 153A; 14A; 37(1); 13; 22; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH FRIDAY/B: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NOS.5850 & 5851/DEL/2014 (ASSESSMENT YEARS: 2011-12 & 2012-13) ACIT, CENTRAL CIRCLE-13, ROOM NO.332, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI. VS. M/S CLARIDGES HOTELS PVT. LTD., 12, AURANGZEB ROAD NEW DELHI. PAN-AAACC 0022B (APPELLANT) (RESPONDENT) CROSS OBJECTION NOS.162 & 163/DEL/2015 (ARISING OUT OF ITA NO.5850 & 5851/DEL/2014) (ASSESSMENT YEARS: 2011-12 & 2012- 13) M/S CLARIDGES HOTELS PVT. LTD., 12, AURANGZEB ROAD, NEW DELHI PAN-AAACC 0022B VS. ACIT, CENTRAL CIRCLE-13, ROOM NO.332, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI (APPELLANT) (RESPONDENT) ITA NO.4302/DEL/2016 (ASSESSMENT YEAR: 2013-14) ACIT, CENTRAL CIRCLE-13, ROOM NO.332, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI. VS. M/S CLARIDGES HOTELS PVT. LTD., 12, AURANGZEB ROAD NEW DELHI. PAN-AAACC 0022B (APPELLANT) (RESPONDENT) 2 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. APPELLANT BY MS. BHARTI SHARMA, CA RESPONDENT BY MS. NIDHI SRIVASTAVA, CIT-DR ORDER PER SUDHANSHU SRIVASTAVA, JM: ITA NO. 5850/DEL/2014 IS THE DEPARTMENTS APPEAL AG AINST THE ORDER DATED 11.08.2014 PASSED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-1, NEW DELHI {CIT(A)} FOR ASSESSMENT YEAR 2011-12. THE CROSS OBJECTION NO.162/DEL/2015 IS THE ASSESSEES CROSS OBJECTION A GAINST THE SAID APPEAL OF THE DEPARTMENT. ITA NO.5851/DEL/2014 IS THE DEPARTM ENTS APPEAL AGAINST ORDER DATED 11.08.2014 PASSED BY THE LD. CIT(A)-1, NEW DELHI FOR ASSESSMENT YEAR 2012-13 AND CROSS OBJECTION NO.163/DEL/2015 IS THE ASSESSEES CROSS OBJECTION AGAINST THE SAID APPEAL OF THE DEPARTMENT . ITA NO.4302/DEL/2016 IS THE DEPARTMENTS APPEAL AGAINST ORDER DATED 18.05.2 016 PASSED BY THE LD. CIT (A)-23, NEW DELHI FOR ASSESSMENT YEAR 2013-14. ALL THESE APPEALS AND CROSS OBJECTIONS WERE HEARD TOGETHER AND THEY ARE BEING D ISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY RUNNING HOTELS UNDER THE NAME & STYLE OF T HE CLARIDGES. A SEARCH 3 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT , 1961 (HEREINAFTER CALLED THE ACT) WAS CARRIED OUT AT THE RESIDENTIAL AND BU SINESS PREMISES OF MR. SURESH NANDA, HIS FAMILY MEMBERS AND BUSINESS ASSOCIATES E TC. ON 24.02.2012. M/S CLARIDGES HOTEL WAS ALSO COVERED U/S 132 OF THE INC OME TAX ACT, 1961. 2.1.0 THE ASSESSMENT FOR ASSESSMENT YEAR 2011-12 WA S MADE U/S 153A OF THE ACT VIDE ORDER DATED 29.03.2014 DETERMINING THE TOTAL INCOME AT RS.12,51,74,139/-, WHEREIN THE FOLLOWING ADDITIONS/DI SALLOWANCES WERE MADE: S. NO. DISALLOWANCE AMOUNT (RS.) A) PAYMENT MADE TO MRS. SONALI PUNJ RS. 75,00,000/- B) ADDITIONAL DISALLOWANCE U/S 14A R.W RULE 8D RS. 2,90,10,000/- C) DEPRECIATION ON CARS RS. 30,65,998/- D) AD- HOC ADDITION OF REPAIR & MAINTENANCE ON CAR RS. 20,00,000/- E) DEPRECIATION ON GYM EQUIPMENT RS. 1,48,791/- 2.1.1 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A) AND THE LD. CIT (A) DELETED ALL THE ADDITIONS EXCEPT SUSTAINING THE DISALLOWANCE U/S 14A OF THE ACT TO THE EXTENT OF RS.37,43,326/- AND UPHOLDI NG THE DISALLOWANCE OF DEPRECIATION ON GYM EQUIPMENT OF RS.1,48,791/-. T HE LD. CIT (A) ALSO DID NOT ADJUDICATE THE ASSESSEES GROUND RELATING TO AD-HOC ADDITION OF RS.20 LACS MADE ON ACCOUNT OF REPAIR-MAINTENANCE OF CAR. 2.1.2 AGAINST THE ORDER OF THE LD. CIT (A), THE DE PARTMENT HAS APPROACHED THE ITAT. THE ASSESSEE HAS ALSO APPROACHED THE ITAT BY FILING CROSS OBJECTIONS. 4 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. THE GROUNDS TAKEN IN THE DEPARTMENTS APPEAL AND TH E ASSESSEES CROSS OBJECTIONS ARE AS UNDER: ITA NO.5850/DEL/2014 1. THE ORDER OF THE LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.75,00,0 00/- MADE BY AO ON ACCOUNT OF DISALLOWANCE OF SALARY PAYMENT TO SMT. SONALI PUNJ. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.2,52,66 ,674/- MADE BY AO OUT OF TOTAL DISALLOWANCE OF RS.2,90,10,000/- MA DE U/D 14A READ WITH RULE 8D OF THE INCOME TAX ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.30,65,9 98/- MADE BY AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION AND C AR RUNNING EXPENSES. CROSS OBJECTION NO.162/DEL/2015 1. THAT THE ORDER U/S 153A OF THE ACT DATED 29.03.20 14 PASSED BY THE LD. AO IS BAD ON FACTS AND IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD CIT (A) HAS ERRED IN NOT CONSIDERING THE THAT THE A DDITIONS WERE MADE U/S 153A DESPITE THE FACT THAT THERE WAS NO IN CRIMINATING DOCUMENT FOUND DURING THE COURSE OF SEARCH. 3. THAT THE LD. CIT (A) HAS ERRED IN SUSTAINING THE DI SALLOWANCE BY RESTRICTING IT TO THE EXTENT OF EXEMPT INCOME EARNE D OF RS 37,42,327/- U/S 14A READ WITH RULE 8D OF INCOME TAX RULES, 1962 IGNORING THE APPELLANT'S CONTENTION THAT NO DISALLO WANCE IS CALLED FOR EXCEEDING RS 19,88,395/- SOU MOTTO DISALLOWED BY AP PELLANT IN ITS RETURN OF INCOME 5 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. 4. THAT THE LD. CIT (A) HAS ERRED IN SUSTAINING THE DI SALLOWANCE DEPRECIATION OF RS.1,48,791/- CLAIMED ON GYM EQUIPM ENTS ALLEGED TO HAVE BEEN INSTALLED AT THE PREMISES OF MANAGING DIR ECTOR. 5. THAT THE ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LD CIT(A) HAS ERRED IN ADJUDICATING THE GROUND OF ADDITION OF AN AD HOC AMOUNT OF RS 20,00,000/- IN RESPECT OF ALLEGED EXPE NSES ON RUNNING AND MAINTENANCE OF CARS. 2.2.0 IN ASSESSMENT YEAR 2012-13, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 29.03.2014 D ETERMINING THE TOTAL INCOME AT RS. 7,99,80,731/- AS AGAINST THE RETURNED OF INCOME OF RS.4,59,51,500/ AFTER MAKING THE FOLLOWING ADDITIONS AND DISALLOWANCES: S. NO. DISALLOWANCE AMOUNT (RS.) A) PAYMENT MADE TO MS. SONALI NANDA RS. 90,00,000/- B) PAYMENT MADE TO M/S APEX ENTERPRISES RS. 35,65,792/- C) ADDITIONAL DISALLOWANCE U/S 14A R.W RULE 8D RS. 1,62,44,330/- D) DEPRECIATION ON CARS AND AD HOC ADDITION OF RS. 20 LAKH ON ACCOUNT OF RUNNING & MAINTENANCE EXPENSES RS. 45,42 ,637/- E) UNEXPLAINED CASH RS. 5,50,000/- 2.2.1 THE ASSESSEES APPEAL BEFORE THE LD. CIT (A) WAS PARTLY ALLOWED IN AS MUCH AS THE LD. CIT (A) DELETED ALL THE ADDITION S EXCEPT DISALLOWANCE OF DEPRECIATION ON GYM EQUIPMENT AMOUNTING TO RS.1,26, 472/-. AGAINST THE ORDER OF THE LD. CIT (A), THE DEPARTMENT HAS FILED AN APPEAL AND THE ASSESSEE HAS PREFERRED MEMORANDUM OF CROSS OBJECTIO NS. THE GROUNDS 6 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. RAISED IN THE APPEAL AND THE CROSS OBJECTIONS ARE A S UNDER: ITA NO.5851/DEL/2014 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW A ND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASETHE LD . CIT (A) HAS ERRED IN LAW INDELETING THE ADDITION OF RS.90,00,00 0/- MADE BY AO ON ACCOUNT OF DISALLOWANCE OF SALARY PAYMENT TO SMT. S ONALI PUNJ. 3.ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD . CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.35,65,7 92/- MADE BY AO ON ACCOUNT OF DISALLOWANCE OF PAYMENT TO M/S APEX E NTERPRISES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 1,62,4 4,330/- MADE BY AO ON ACCOUNT OF DISALLOWANCE U/S 14A READ WITH RUL E 8D OF THE INCOME TAX ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.45,42,6 37/- MADE BY AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION AND CAR RUNNING EXPENSES. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.5,50,00 0/- MADE BY AO ON ACCOUNT OF UNEXPLAINED CASH. 7. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF TH E APPEAL. CROSS OBJECTION NO.163/DEL/2015 1. THAT THE ORDER U/S 153A OF THE ACT DATED 29.03.2014 PASSED BY THE ID. AO IS BAD ON FACTS AND IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE ID CIT(A) HAS ERRED IN NOT CONSIDERING THE THAT THE AD DITIONS WERE 7 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. MADE U/S 153A DESPITE THE FACT THAT THERE WAS NO IN CRIMINATING DOCUMENT FOUND DURING THE COURSE OF SEARCH. 3. THAT THE ID. CIT (A) HAS ERRED IN SUSTAINING THE DI SALLOWANCE DEPRECIATION OF RS. 1,26,637/- CLAIMED ON GYM EQUIP MENTS ALLEGED TO HAVE BEEN INSTALLED AT THE PREMISES OF MANAGING DIRECTOR. 2.3.0 IN ASSESSMENT YEAR 2013-14, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 25.02.2016 DETER MINING THE TOTAL INCOME AT RS.4,83,95,727/- AS AGAINST THE RETURN OF INCOME OF RS.3,23,66,849/- AFTER MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES. 2.3.1 THE ASSESSEES APPEAL AGAINST ORDER OF THE LD. CIT (A) WAS ALLOWED IN TOTO . AGAINST THE SAID ORDER OF THE LD. CIT (A), NOW THE DEPARTMENT HAS APPROACHED THIS TRIBUNAL AND HAS RAI SED THE FOLLOWING GROUNDS OF APPEAL: ITA NO.4302/DEL/2016 1. THE ORDER OF THE LD. CIT (A) IS NOT CORRECT IN LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.67,50,0 00/- ON ACCOUNT OF S. NO. DISALLOWANCE AMOUNT (RS.) A) PAYMENT MADE TO MS. SONALI NANDA RS. 67,00,000/- B) ADDITIONAL DISALLOWANCE U/S 14A R.W. RULE 8D RS. 92,78,887/- 8 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. PAYMENT MADE TO SONALI PUNJ. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.92,78,8 78/- ON ACCOUNT OF DISALLOWANCE MADE U/S 14A R.W.R.8D. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL TH E GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF H EARING OF THE APPEAL. 3.0 THE LD. SR. DR TOOK THE DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2011-12 AS THE LEAD CASE AND SUBMITTED THAT TH E GROUND NO.2 OF DEPARTMENTS APPEAL CHALLENGED THE DELETION OF DISA LLOWANCE OF SALARY PAID TO M/S SONALI NANDA. IT WAS SUBMITTED THAT THE ASSES SING OFFICER HAD MADE THE DISALLOWANCE ON THE GROUND THAT SHE HAD BEEN APP OINTED ONLY BY VIRTUE OF BEING THE DAUGHTER OF MR. SURESH NANDA. IT WAS AL SO SUBMITTED THAT SHE WAS NOT SELECTED THROUGH OPEN OFFER AND THAT SHE WAS NOT EXPERIENCED AND HAD NOT SUBMITTED ANY DETAILS OF HER EMPLOYMENT OTH ER THAN BEING EMPLOYED IN THE CLARIDGES. THE LD. SR. DR SUBMITTED THAT THE LD. CIT (A) HAD DELETED THE DISALLOWANCE WITHOUT CONSIDERING THE OBSERVATIONS OF THE ASSESSING OFFICER. 3.1 ARGUING ON GROUND NO.3 OF THE DEPARTMENT S APPEAL, WHICH WAS ALSO RELATING TO GROUND NO.3 OF ASSESSEES CROSS OB JECTION AND WHICH 9 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. PERTAINED TO DISALLOWANCE OF RS.2,90,10,000/- U/S 14 A OF THE ACT, THE LD. SR. DR SUBMITTED THAT THE ASSESSEE COMPANY HAD EARN ED DIVIDEND INCOME OF RS.57,31,722/- DURING THE YEAR UNDER CONSIDERAT ION BUT HAD MADE A SUO MOTO DISALLOWANCE OF ONLY RS.19,88,395/- IN ITS RETURN O F INCOME. IT WAS SUBMITTED THAT IN SUCH CIRCUMSTANCES, THE ASSES SING OFFICER WAS RIGHT IN CALCULATING THE DISALLOWANCE IN TERMS OF PROVISI ONS OF RULE -8D OF THE INCOME TAX RULES, 1962 AND THE TOTAL DISALLOWANCE HA D BEEN CALCULATED AT RS.3,09,98,396/- AND AFTER GIVING BENEFIT OF SUO MOTO DISALLOWANCE OF RS.19,88,395/-, THE IMPUGNED DISALLOWANCE WAS MADE. I T WAS SUBMITTED THAT THE LD. CIT (A) HAD ERRED IN RESTRICTING THE D ISALLOWANCE TO THE EXEMPT INCOME ONLY. THE SR. DR PLACED HIS RELIANCE ON THE COMPUTATION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THIS R EGARD. 3.2 WITH RESPECT TO GROUND NO.4 OF DEPARTMENT S APPEAL AGAINST DELETION OF DISALLOWANCE OF DEPRECIATION ON CAR AMOU NTING TO RS.10,65,998/- AND ALSO GROUND NO.5 OF ASSESSEES C ROSS OBJECTIONS CHALLENGING THE AD HOC ADDITION OF RS.20 LACS ON ACCOUNT OF CAR RUNNING EXPENSES, THE LD. SR. DR SUBMITTED THAT THE ASSESSI NG OFFICER HAD DISALLOWED THE DEPRECIATION ON CARS SINCE THESE CAR S WERE FOUND AT THE 10 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. RESIDENCES OF MR. SURESH NANDA AND MR. SANJEEV NAND A DURING THE COURSE OF SEARCH AND IT COULD NOT BE DEMONSTRATED THAT THE SE CARS HAD ANY LINK TO THE BUSINESS OF THE ASSESSEE COMPANY. THE LD. SR. D R ALSO SUBMITTED THAT IT WAS FOR THIS REASON THAT AN AD HOC ADDITION OF RS.20 LACS HAD ALSO BEEN MADE BY THE ASSESSING OFFICER ON ACCOUNT OF REPAIRS AND MAINTENANCE/RUNNING OF THESE CARS. THE LD. SR. DR S UBMITTED THAT THE LD. CIT (A) HAD INCORRECTLY DELETED THESE DISALLOWANCES. 3.3 WITH RESPECT TO GROUND NO.2 OF DEPARTMENT S APPEAL FOR ASSESSMENT YEAR 2012-13, THE LD. SR. DR SUBMITTED T HAT THIS GROUND WAS IDENTICAL TO GROUND NO.2 OF DEPARTMENTAL APPEAL IN ASSESSMENT YEAR 2011- 12 I.E., IT PERTAINED TO THE PAYMENT OF SALARY TO M S. SONALI NANDA AND THE ARGUMENTS WERE IDENTICAL. 3.4 WITH RESPECT TO GROUND NO.3 OF THE DEPAR TMENTS APPEAL IN ASSESSMENT YEAR 2012-13, THE LD. SR. DR SUBMITTED T HAT THE SAME PERTAINED TO DISALLOWANCE OF PAYMENT MADE TO M/S APE X ENTERPRISES AMOUNTING TO RS.35,65,792/-. THE SR. DR SUBMITTED T HAT THE DISALLOWANCE HAD BEEN MADE BY THE ASSESSING OFFICER BECAUSE NO T AX HAD DEDUCTED AT SOURCE ON THE PAYMENT MADE TO M/S APEX ENTERPRISES AND BECAUSE NO 11 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. JUSTIFICATION OF THE PAYMENT MADE ALSO COULD BE GIV EN BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT MR. SANJEEV NANDA, S/O MR. S URESH NANDA HAD A CONTROLLING INTEREST IN M/S APEX ENTERPRISES AND I T WAS FOR THIS REASON THAT THE PAYMENT HAD BEEN MADE. 3.5 COMING TO GROUND NO.4 OF THE DEPARTMENTS APPE AL PERTAINING TO DISALLOWANCE OF RS.1,62,44,330/- U/S 14A OF THE ACT, IT WAS SUBMITTED THE DISALLOWANCE HAD BEEN MADE IN TERMS OF RULE-8D OF T HE INCOME TAX RULES,1962 R.W.S 14A OF THE ACT AND THE LD. CIT (A) WAS INCORRECT IN DELETING THE ENTIRE DISALLOWANCE. 3.6 WITH RESPECT TO GROUND NO.5 OF THE DEP ARTMENTS APPEAL REGARDING DEPRECIATION ON CARS AMOUNTING TO RS.45,4 2,637/-, IT WAS SUBMITTED THAT THIS GROUND WAS IDENTICAL TO GROUND N O.4 IN THE DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2011-12 AND THAT THE ARGUMENTS WERE ALSO IDENTICAL. 3.7 WITH RESPECT TO GROUND NO.6 OF DEPARTM ENTS APPEAL PERTAINING TO DELETION OF ADDITION OF RS.5,50,000/- ON ACCOUNT OF UNEXPLAINED CASH FOUND DURING THE SEARCH, IT WAS SUBMITTED THAT SINCE THIS CASH HAD BEEN FOUND DURING THE COURSE OF SEARCH AND NO EXPLANATIO N WAS SUBMITTED 12 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. REGARDING THE SAME BY THE ASSESSEE, ADDITION HAD RI GHTLY BEEN MADE BY THE ASSESSING OFFICER. 3.8 COMING TO DEPARTMENTS APPEAL FOR ASS ESSMENT YEAR 2013-14, THE LD. SR. DR SUBMITTED THAT GROUND NO.2 WAS AGAIN IDENTICAL TO GROUND NO.2 IN ASSESSMENT YEARS 2011-12 AND 2012-13 AND CH ALLENGED THE DELETION OF DISALLOWANCE OF RS.67,50,000/- BEING PAY MENT OF SALARY MADE TO MS. SONALI NANDA. THE LD. SR. DR SUBMITTED THAT THE ARGUMENTS WOULD BE THE SAME IN THIS YEAR ALSO. 3.9 WITH RESPECT TO GROUND NO.3 IN DEPA RTMENTS APPEAL FOR ASSESSMENT YEAR 2013-14, THE LD. SR. DR SUBMITTED T HAT THIS IS PERTAINS TO DISALLOWANCE OF RS.92,78,878/- U/S 14A OF THE ACT. I T WAS SUBMITTED THAT THE DISALLOWANCE HAD BEEN MADE BY THE ASSESSING OFF ICER IN TERMS OF THE PROVISIONS OF RULE-8D OF THE INCOME TAX RULES, 1962 AND HE PLACED RELIANCE ON THE FINDINGS AND COMPUTATION OF THE ASSESSING OF FICER IN THIS REGARD. 4.0 PER CONTRA, THE LD. AUTHORIZED REPRESENT ATIVE (AR) SUBMITTED THAT AS FAR AS THE ISSUE OF PAYMENT OF SALARY TO MR S. SONALI NANDA WAS CONCERNED, SHE WAS APPOINTED AS SENIOR DIRECTOR IN C ORPORATE COMMUNICATION W.E.F. 01.06.2010. SHE HAS ADDITIONAL RESPONSIBILITY OF 13 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. MARKETING AND PROMOTION OF FOOD AND BEVERAGE OUTLET S WITH SPECIAL FOCUS ON BAKERY PROMOTION. IT WAS SUBMITTED THAT MRS. SONALI NANDA WAS INSTRUMENTAL IN ADDING NUMBER OF RECEIPTS WHICH HAD BECOME HIGHLY SUCCESSFUL. IT WAS SUBMITTED THAT APART FROM THIS SH E WAS ALSO INVOLVED IN PUBLIC RELATIONS, ADVERTISEMENT, ETC. SHE HAS EXCEL LENT COMMUNICATION SKILLS, GOOD CONTACTS AND HAS PLEASING PERSONALITY WHICH WAS HELPFUL IN DISCHARGE OF HER DUTIES. IT WAS SUBMITTED THAT APART FROM THIS, SHE HAS WORKED IN A HOTEL IN DUBAI AND U.K AND SHE ALSO HAD AN EXPERIENCE OF RUNNING A RESTAURANT BY THE NAME OF CLIMAX TAVERN ON THE GREENS FOR ALMOST FIVE YEARS. IT WAS SUBMITTED THAT, THEREFORE, IT WAS INCORRECT ON THE PART OF THE ASSESSING OFFICER TO ALLEGE THAT SHE HA D NO WORK EXPERIENCE AND THAT SHE HAD BEEN APPOINTED ONLY BY VIRTUE OF BEING THE DAUGHTER OF MR. SURESH NANDA. IT WAS SUBMITTED THAT DETAILS AND DOCU MENTS RELATING TO THE QUALIFICATIONS AND WORK EXPERIENCE OF MRS. SONALI NA NDA HAD BEEN SUBMITTED BEFORE THE ASSESSING OFFICER AND THAT THE SAME HAD BEEN SIMPLY IGNORED BY THE ASSESSING OFFICER. IT WAS FURTHER SUB MITTED THAT BEING THE DAUGHTER OF ONE OF THE SHAREHOLDERS CANNOT BE A GRO UND FOR DISALLOWING THE SALARY AND THAT FURTHER THERE WAS NO LAW REQUIRING TH AT EMPLOYEES HAVE TO BE SELECTED ONLY THROUGH AN OPEN OFFER. THE LD. AUT HORIZED REPRESENTATIVE 14 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. SUBMITTED THAT THERE WAS A FAILURE ON THE PART OF TH E ASSESSING OFFICER TO DEMONSTRATE THAT SALARY PAYMENT TO MRS. SONALI NAND A WAS NOT FOR THE PURPOSE OF BUSINESS. THE LD. AUTHORIZED REPRESENTAT IVE ALSO SUBMITTED THAT THE ASSESSING OFFICER CANNOT DECIDE THE REASON ABLENESS AND THE COMMERCIAL EXPEDIENCY OF ANY EXPENDITURE INCURRED B Y THE ASSESSEE. THE LD. AUTHORIZED REPRESENTATIVE ALSO PLACED RELIANCE ON THE ORDER OF THE LD. CIT (A) ON THE ISSUE WHEREIN THE LD. CIT (A) HAS OBS ERVED THAT IT WAS NOT IN DISPUTE THAT THE SALARY PAID HAD BEEN TAXED IN THE HANDS OF MRS. SONALI NANDA, THERE WAS NO EVIDENCE TO SUGGEST THAT THE PAY MENT OF SALARY WAS MADE WITHOUT ANY SERVICE BEING RENDERED AND THAT THE OBSERVATIONS OF THE ASSESSING OFFICER WERE NOT BASED ON ANY EVIDENCE. 4.1.0 COMING TO GROUND NO.3 OF DEPARTMENTS A PPEAL AND GROUND NO.3 OF ASSESSEES CROSS OBJECTIONS IN ASSESSMENT YEAR 2 011-12 PERTAINING TO DISALLOWANCE U/S 14A OF THE ACT, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER HAD COMPUTED T HE DISALLOWANCE WITHOUT RECORDING SATISFACTION AS TO WHY THE VOLUNTAR Y DISALLOWANCE OF RS.19,88,395/- MADE BY THE ASSESSEE WAS UNSATISFACTO RY CONSIDERING THE BOOKS OF ACCOUNT. IT WAS SUBMITTED THAT THE ASSESSIN G OFFICER SIMPLY 15 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. PROCEEDED TO MAKE THE DISALLOWANCE IN TERMS OF RULE -8D WITHOUT RECORDING ANY KIND OF SATISFACTION AS REQUIRED U/S 14A (2) OF THE ACT. IT WAS SUBMITTED THAT THE ASSESSING OFFICER DID NOT POINT OUT AS TO HOW THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE WAS NOT CORRECT. IT WAS SUBMITTED THAT THERE WERE PLETHORA OF JUDGMENTS WHEREIN IT HAS BEEN HELD THAT IN ABSENCE OF RECORDING OF SATISFACTION, THE ENTIRE ADDITION H AS TO BE DELETED. IT WAS FURTHER SUBMITTED THAT DUE TO THIS REASON, THE LD. CIT (A) WAS ALSO INCORRECT IN RESTRICTING THE DISALLOWANCE TO THE EXTENT OF EXE MPT INCOME. WITHOUT PREJUDICE, THE LD. AUTHORIZED REPRESENTATIVE ALSO A RGUED THAT NO DISALLOWANCE COULD HAVE BEEN MADE U/S 14A IF NO FRES H INVESTMENT HAD BEEN MADE DURING THE YEAR UNDER CONSIDERATION AND WH ERE THERE WAS AVAILABILITY OF SUFFICIENT INTEREST FREE FUNDS WITH THE ASSESSEE COMPANY. 4.1.1 WITH RESPECT TO THE IDENTICAL GROU ND RAISED BY THE DEPARTMENT IN ASSESSMENT YEAR 2012-13 WHEREIN THE LD. CIT (A) H AD DELETED THE ENTIRE DISALLOWANCE OF RS.1,62,44,330/-, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT, UNDISPUTEDLY, THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. IT WAS A LSO SUBMITTED THAT EVEN THOUGH NO EXEMPT INCOME HAD BEEN EARNED DURING THE YEAR THE 16 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. ASSESSEE HAD MADE A SUO MOTO DISALLOWANCE OF RS.6,70,000/-. IT WAS SUBMITTED THAT APPEAL OF THE ASSESSEE ON IDENTICAL ISSUE WAS ALLOWED BY THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 200 9-10 AND 2010-11 WHEREIN THE ITAT HAD HELD THAT NO DISALLOWANCE CAN BE MADE U/S 14A WHERE THE ASSESEE HAD NOT EARNED ANY EXEMPT INCOME D URING THE YEAR. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE D ELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. ACIT REPORTED IN 378 IT R 33 (DEL). 4.1.2 IN ASSESSMENT YEAR 2013-14 LIKEWI SE, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME AND, THER EFORE, THE DISALLOWANCE OF RS.92,78,878/- MADE BY THE ASSESSING OFFICER HAD RIGHTLY BEEN DELETED BY THE LD. CIT (A). 4.2.0 ARGUING AGAINST GROUND NO.4 OF D EPARTMENTS APPEAL PERTAINING TO DELETION OF DISALLOWANCE OF DEPRECIATI ON ON CARS AMOUNTING TO RS.10,65,998/- AND ALSO RELATING TO GROUND NO.5 OF THE ASSESSEES CROSS OBJECTIONS REGARDING AD HOC ADDITION OF RS.20 LACS ON ACCOUNT OF CAR RUNNING EXPENSES IN ASSESSMENT YEAR 2011-12, THE LD . AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ISSUE WAS COVERED BY THE ORDER OF THE 17 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 200 9-10 AND 2010-11 AND, THEREFORE, THE LD. CIT (A) WAS CORRECT IN DELE TING THE DISALLOWANCE. IT WAS FURTHER SUBMITTED THAT THE LD. CIT (A) HAD FAILE D TO ADJUDICATE ON THE GROUND PERTAINING TO THE AD HOC DISALLOWANCE PERTAINING TO REPAIRS AND MAINTENANCE/RUNNING OF CARS WHICH WAS ALSO COVERED IN ASSESSEES FAVOUR BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2009- 10 AND 2010-11. 4.2.1 THE LD. AUTHORIZED REPRESENTATIVE FURT HER SUBMITTED THAT IN DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2012-13 ALS O THE ISSUE WAS UNDER CHALLENGE AND LIKEWISE THE SAME WAS ALSO COVER ED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE. 4.3.0 COMING TO THE REMAINING GROUNDS IN THE A SSESSEES CROSS OBJECTIONS, THE LD. AUTHORIZED REPRESENTATIVE SUBMI TTED THAT GROUND NO.4 IN ASSESSEES CROSS OBJECTION FOR ASSESSMENT YEAR 2 011-12 AND GROUND NO.3 IN ASSESSEES CROSS OBJECTION FOR ASSESSMENT Y EAR 2012-12 WERE AGAINST THE ORDER OF THE LD. CIT (A) IN UPHOLDING T HE DISALLOWANCE OF DEPRECIATION ON GYM EQUIPMENT. IT WAS SUBMITTED THAT A SIMILAR DISALLOWANCE WAS MADE IN ASSESSMENT YEARS 2009-10 AND 2010-11 AND THE 18 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. SAME HAD BEEN DELETED BY THE ITAT VIDE ORDER DATED 10.11.2017. 4.4.0 THE LD. AUTHORIZED REPRESENTATIVE SUBM ITTED THAT APART FROM THIS, THE DEPARTMENT WAS CHALLENGING THE DELETION OF ADDITION PERTAINING TO PAYMENT MADE TO M/S APEX ENTERPRISES AMOUNTING TO R S.35,65,792/- IN ASSESSMENT YEAR 2012-13. IT WAS SUBMITTED THAT M/S A PEX ENTERPRISES WAS MANAGED BY MR. SANJEEV NANDA WHO IS A BRITISH CIT IZEN AND WAS A NON- RESIDENT DURING ASSESSMENT YEAR 2012-13. IT WAS SUBM ITTED THAT HE HAD EARLIER WORKED WITH THE CLARIDGES IN VARIOUS CAPACITI ES AND HAD DEEP UNDERSTANDING OF ITS WORKING AND, THEREFORE, THE ASS ESSEE COMPANY HAD SOUGHT TO UTILIZE THE EXPERTISE AND EXPERIENCE OF M R. SANJEEV NANDA BY ENTERING INTO AN AGREEMENT WITH A COMPANY MANAGED BY HIM I.E., M/S. APEX ENTERPRISES FZE, UAE. THIS COMPANY WAS APPOINT ED TO EXPLORE OPPORTUNITIES FOR ACQUISITION OF HOTELS AND PROCURE MANAGEMENT CONTRACTS TO BE EXECUTED UNDER THE CLARIDGES BRAND NAME. IT WA S SUBMITTED THAT IT IS NOT IN DISPUTE THAT MR. SANJEEV NANDA HAD CONFIRMED THE RECEIPT OF FEE AND THAT THE FEE HAD BEEN PAID IN TERMS OF GENERAL SALE S AGENT AGREEMENT DATED 01.06.2011 ENTERED INTO WITH M/S APEX ENTERPR ISES AND ANOTHER AGREEMENT DATED 01.07.2011. THE LD. AUTHORIZED REPR ESENTATIVE ALSO 19 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. SUBMITTED THAT THESE TWO AGREEMENTS WERE ALSO FOUND DURING THE COURSE OF SEARCH AND, THUS, THIS EVIDENCE WAS SACROSANCT. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVID ENCE ON RECORD TO PROVE THAT NO SERVICE HAD BEEN RENDERED. IT WAS FURTHER SU BMITTED THAT NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE ON THIS PAYMEN T IN TERMS OF ARTICLES- 14, 7 AND 22.1 OF THE DOUBLE TAXATION AVOIDANCE AGR EEMENT BETWEEN INDIA AND UAE. THE LD. AUTHORIZED REPRESENTATIVE ALSO REL IED ON THE FINDINGS OF THE LD. CIT (A) ON THE ISSUE. 4.5.0 ARGUING AGAINST GROUND NO.5 OF T HE DEPARTMENTS APPEAL CHALLENGING DELETION OF ADDITION OF RS.5,50,000/- O N ACCOUNT OF UNEXPLAINED CASH FOUND DURING THE COURSE OF SEARCH, THE LD. AUT HORIZED REPRESENTATIVE SUBMITTED THAT THE SAME PERTAINED TO SALE OF SCRAP GENERATED DURING RENOVATION AND NORMAL COURSE OF OPERATION OF THE BU SINESS. IT WAS ALSO SUBMITTED THAT THE SAME HAD BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS IN ASSESSMENT YEAR 2012-13. THE LD. AUTHOR IZED REPRESENTATIVE ALSO PLACED RELIANCE ON THE FINDINGS OF THE LD. CIT (A) IN THIS REGARD. 5.0 WE HAVE HEARD THE RIVAL SUBMISSI ONS AND HAVE PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO PERUSED THE IMPUGN ED ORDERS AS WELL AS 20 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. THE PAPER BOOKS FILED BY THE ASSESSEE COMPANY. WE N OW TAKE UP THE GROUNDS RAISED BY BOTH THE PARTIES ONE BY ONE. 5.1.0 THE ISSUE OF PAYMENT OF SAL ARY TO MRS. SONALI NANDA IS COMMON IN ALL THE THREE YEARS UNDER CONSIDERATION A ND THE DEPARTMENT HAS CHALLENGED THE DELETION OF DISALLOWANCE BY THE LD. C IT (A). IT IS SEEN THAT THE ASSESSEE HAS FILED COPIES OF VARIOUS DOCUMENTS BEFORE THE ASSESSING OFFICER AS WELL AS THE LD. CIT (A) TO DEMONSTRATE T HAT MRS. SONALI NANDA WAS APPOINTED IN TERMS OF APPOINTMENT LETTER CONTAIN ING TERMS AND CONDITIONS OF SERVICE AND ALSO THESE DOCUMENTS SUBS TANTIATED THAT MRS. SONALI NANDA HAD VAST EXPERIENCE IN AREAS OF FOOD A ND BEVERAGE, BAKING AND PROMOTIONAL EVENTS. IT IS ALSO NOT IN DISPUTE T HAT MRS. SONALI NANDA HAS DULY REFLECTED THE SALARY PAID TO HER RETURN OF INCOME WHICH HAS ALSO BEEN DULY EVIDENCED. IT IS SEEN THAT THE ASSESSING OFFICER HAS PROCEEDED TO DISALLOW THE SALARY PAID ON THE GROUND THAT SHE WAS E MPLOYED ONLY BY VIRTUE OF HER BEING THE DAUGHTER OF MR. SURESH NAND A AND THAT SHE HAD NOT BEEN SELECTED THOROUGH HER OPEN OFFER. TO OUR MIND THIS CANNOT BE CONSIDERED A VALID GROUND FOR MAKING THE IMPUGNED D ISALLOWANCE IN AS MUCH AS THERE IS NO LAW AGAINST EMPLOYING THE RELATI VES OR SONS OR 21 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. DAUGHTERS OF A SHAREHOLDER/OWNER IF THEY ARE OTHERWIS E DULY QUALIFIED/ EXPERIENCED TO HOLD THE POSITION. IT IS ALSO TO BE NOTED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT THAT THE EXPENDITURE WA S NOT INCURRED FOR THE PURPOSE OF BUSINESS. IN SUCH A SITUATION THE DISALL OWANCE MADE BY THE ASSESSING OFFICER HAS BEEN RIGHTLY DELETED BY THE L D. CIT (A). WE ALSO NOTE THAT THE ASSESSING OFFICER CANNOT DECIDE ON THE REA SONABLENESS AND COMMERCIAL EXPEDIENCY OF A PARTICULAR EXPENDITURE I NCURRED BY THE ASSESSEE AS HAS BEEN LAID DOWN BY THE HONBLE APEX C OURT IN CASE OF S.A. BUILDERS REPORTED IN 288 ITR 01 (SC). THE HONBLE C OURT HELD AS UNDER: ONCE IT IS ESTABLISHED THAT THERE WAS A NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS (WHICH NEED NOT NEC ESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF) THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARMCHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF T HE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFIT S.' 5.1.1 SIMILARLY, THE HONBLE DELHI HIGH COURT IN THE CASE OF DALMIA CEMENT REPORTED IN 254 ITR 377 (DELHI) HAS HELD AS UNDER: UNDER SECTION 37(1) OF THE INCOME-TAX ACT, 1961, T HE JURISDICTION OF THE REVENUE IS CONFINED TO DECIDING THE REALITY OF THE BUSINESS EXPENDITURE, VIZ., 22 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. WHETHER THE AMOUNT CLAIMED AS A DEDUCTION WAS FACTU ALLY EXPENDED OR LAID OUT AND WHETHER IT WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. IT MUST NOT, HOWEVER, SUFFER FROM THE VIC E OF COLLUSIVENESS OR COLOURABLE DEVICE. THE REASONABLENESS OF THE EXPEND ITURE COULD BE GONE INTO ONLY FOR THE PURPOSE OF DETERMINING WHETHER, IN FAC T, THE AMOUNT WAS SPENT. ONCE IT IS ESTABLISHED THAT THERE WAS A NEXUS BETWE EN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS, THE REVENUE CANNOT JUS TIFIABLY CLAIM TO PUT ITSELF IN THE ARMCHAIR OF THE BUSINESSMAN OR IN THE POSITI ON OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABL E EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINES SMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFITS.' 5.1.2 IT IS SEEN THAT THE ASSESSEE HAS GIVEN DETAILS REGARDING SERVICES RENDERED BY MRS. SONALI NANDA BUT THE ASSE SSING OFFICER HAS COMPLETELY DISREGARDED THEM. WE ALSO NOTE THAT THE LD. CIT (A), WHILE DELETING DISALLOWANCE IN ASSESSMENT YEAR 2011-12, H AS NOTED THAT THE PAYMENT OF SALARY HAS NOT BEEN DISPUTED, IT IS NOT DISPUTED THAT THE SALARY PAID HAS BEEN TAXED IN THE HANDS OF MRS. SONALI NAN DA AND THERE WAS NO EVIDENCE TO SUGGEST THAT THE PAYMENT OF SALARY WAS WITHOUT ANY SERVICE RENDERED. THE LD. CIT (A) ALSO OBSERVED THAT THE AR GUMENT THAT THE SALARY PAID WAS ON ACCOUNT OF MRS. SONALI NANDA BEING DAUGH TER OF MR. SURESH NANDA HOLDS NO MATTER IN VIEW OF THE OVERWHELMING EVI DENCE PRODUCED AND THAT THE REVENUE CANNOT PROCEED ON CONSIDERATION NO T BASED ON ANY 23 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. EVIDENCE. IN SUCH CIRCUMSTANCES AND RESPECTFULLY F OLLOWING THE RATIO OF THE JUDGMENTS AS STATED ABOVE, WE ARE UNABLE TO TAKE A VIEW DIFFERENT FROM THE VIEW TAKEN BY THE LD. CIT (A). ACCORDINGLY, GROUND N O.2 STANDS DISMISSED IN ALL THE THREE YEARS UNDER APPEAL. 5.2.0 COMING TO THE ISSUE OF DISALLOWAN CE U/S 14A OF THE ACT, IT IS SEEN THAT IN ASSESSMENT YEAR 2011-12, THE ASSESSEE COMPANY HAD EARNED DIVIDEND INCOME OF RS.57,31,722/- AND THE ASSESSEE COMPANY HAD MADE A SUO MOTO DISALLOWANCE OF RS.19,88,395/-. HOWEVER, THE ASSESS ING OFFICER COMPUTED THE DISALLOWANCE AT RS.2,90,10,000/- AFTER GIVING BENEFIT OF SUO MOTO DISALLOWANCE OF RS.19,88,395/- FROM THE TOTAL FIGUR E OF RS.30,99,83,396/-. THE LD. CIT (A) RESTRICTED THE D ISALLOWANCE OF EXEMPT INCOME OF RS.57,31,722/-. IT IS THE CONTENTION OF T HE ASSESSEE THAT NO SATISFACTION HAD BEEN RECORDED BY THE ASSESSING OFF ICER WHILE MAKING THE IMPUGNED DISALLOWANCE. WE HAVE GONE THROUGH THE IM PUGNED ASSESSMENT ORDER FOR AY 2011-12 AND WE NOTE THAT THE CONTENTIO N OF THE ASSESSEE IS CORRECT IN AS MUCH AS THE ASSESSING OFFICER HAS SIM PLY STATED THAT THE DELHI BENCH OF ITAT IN THE CASE OF ACIT VS. CHEMINV EST LTD. HAD HELD THAT THE DISALLOWANCE U/S 14A CAN BE MADE EVEN IF THERE I S NO EXEMPT INCOME 24 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. GENERATED FROM THAT INVESTMENT. THEREAFTER, THE ASS ESSING OFFICER HAS PROCEEDED TO COMPUTE THE DISALLOWANCE IN TERMS OF R ULE 8D OF THE INCOME TAX RULES. HOWEVER, THE ASSESSING OFFICER HAS NOT P OINTED AS TO HOW THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE WAS INCORRECT. THE HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT REPORTED IN [2012] 347 ITR 272 (DEL.) HELD AS UNDER: SCOPE OF SUB-SECTIONS (2) AND (3) OF SECTION 14A SUB-SECTION (2) OF SECTION 14A PROVIDES THE MANNER IN WHICH THE ASSESSING OFFICER IS TO DETERMINE THE AMOUNTING OF EXPENDITUR E INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME . HOWEVER, IF ONE EXAMINES THE PROVISION CAREFULLY, IT WOULD BE FOUND THAT THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF SUCH EXPENDI TURE ONLY IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSES SEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RES PECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN OTHER WORDS, THE REQUIREMENT OF THE ASSESSING OF FICER EMBARKING UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WOULD BE TRIGGERED ONLY IF THE ASSESSING OFF ICER RETURNS A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLA IM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THEREFORE, THE CONDITION PRECE DENT FOR THE ASSESSING OFFICER ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS THAT THE A SSESSING OFFICER MUST RECORD THAT HE IS NOT SATISFIED WITH THE CORRECTNES S OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SUB-SECTIO N (3) IS NOTHING BUT AN OFFSHOOT OF SUB-SECTION (2) OF SECTION 14A. SUB-SEC TION (3) APPLIES TO CASES WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS B EEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THE ACT. IN OTHER WORDS, SUB-SECTION (2) DEALS WITH CASES WHERE THE A SSESSEE SPECIFIES A POSITIVE AMOUNT OF EXPENDITURE IN RELATION TO INCOM E WHICH DOES NOT FORM PART 25 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. OF THE TOTAL INCOME UNDER THE ACT AND SUB-SECTION ( 3) APPLIES TO CASES WHERE THE ASSESSEE ASSERTS THAT NO EXPENDITURE HAD BEEN I NCURRED IN RELATION TO EXEMPT INCOME. IN BOTH CASES, THE ASSESSING OFFICER , IF SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, CANNOT EMBARK UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE IN ACCORDANCE WITH ANY PRESCR IBED METHOD, AS MENTIONED IN SUB-SECTION (2) OF SECTION 14A. IT IS ONLY IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, IN BOTH CASES, THAT THE ASSESSING OFFICER GETS JURISDICTION TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN ACCORDANCE WITH T HE PRESCRIBED METHOD, THE PRESCRIBED METHOD BEING THE METHOD STIPULATED IN RU LE 8D. WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITUR E OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS FOR THE SAME. [PARA 29] 5.2.1 THUS, AS PER THE HONBLE DEL HI HIGH COURT IN MAXOPP INVESTMENT LTD. VS. CIT (SUPRA), IT IS INCUMBENT O N THE ASSESSING OFFICER TO INDICATE COGENT REASON FOR REJECTING THE CLAIM OF T HE ASSESEE WITH REGARD TO EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, WHILE PROCEEDING TO COMPUTE DISALLOWANCE U/S 14A R.W. RULE 8D. HOWEVER, SUCH SATISFACTION IN PRECARIOUSLY ABSENT IN THE ASSESSMENT ORDER. IN SUC H A SITUATION, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER CANNOT BE UPHELD. SIMILARLY, THE ACTION OF THE LD. CIT (A) IN RESTRICTING THE DI SALLOWANCE TO THE EXEMPT INCOME ALSO HAS NO BASIS AS THERE IS NO RECORDING O F SATISFACTION BY THE ASSESSING OFFICER AS AFORESAID. THEREFORE, GROUND N O.3 OF THE DEPARTMENTAL APPEAL IN ASSESSMENT YEAR 2011-12 STANDS DISMISSED WHEREAS GROUND 26 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. NO.3 OF ASSESSES CROSS OBJECTIONS IN ASSESSMENT YE AR 20110-12 STANDS ALLOWED. IN EFFECT, THE SUO MOTO DISALLOWANCE BY THE ASSESSEE AMOUNTING TO RS.19,88,395/- ONLY REMAINS. 5.2.2 COMING TO THE DEPARTMENTAL GROUNDS CHALLENGING THE DELETION OF DISALLOWANCE U/S 14A OF THE ACT IN ASSES SMENT YEARS 2012-13 AND 2013-14, IT IS SEEN THAT, UNDISPUTEDLY, IN BOTH THESE YEARS THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. THE LD. CIT (A) HAS DELETED THE DISALLOWANCE BY DULY NOTING THE SAME. THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT IN ABSENCE OF EXEMPT INCOME EARNED I S NO LONGER RES INTEGRA. THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINV EST LTD. VS. ACIT REPORTED IN 378 ITR 33 (DELHI) HAS HELD THAT WHERE T HE ASSESSEE DOES NOT EARN ANY EXEMPT INCOME DURING THE YEAR, NO DISALLOWA NCE U/S 14A OF THE ACT CAN BE MADE. WE ALSO NOTE THAT DISALLOWANCES MAD E IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2009-10 AND 2010-11 HAD BE EN DELETED BY THE TRIBUNAL VIDE ORDER DATED 10.11.2017 ON THE GROUND THAT THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. THE RELEVANT OBSERVATIONS OF THE ITAT ARE CONTAINED IN PARA-5 OF THE SAID ORDER AND THE SAME ARE REPRODUCED HEREIN UNDER FOR A READ Y REFERENCE: 27 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. 5. AFTER HEARING BOTH THE PARTIES AND NO PERUSAL O F THE IMPUGNED ORDERS, ONE VERY IMPORTANT FACT WHICH IS PERMITTING THROUGH IS THAT, DURING THE YEAR ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME AND THIS FACT HAS BEEN NOTED BY THE AO ALSO IN THE IMPUGNED ASSESSMENT ORDER AS WELL AS BY THE LD. CIT (A) IN THE IMPUGNED ORDER . THE ASSESSEE HAD RELIED UPON CERTAIN DECISIONS BEFORE BOTH THE AUTHO RITIES CONTENDING THAT, IF THERE IS NO EXEMPT INCOME, THEN NO DISALLO WANCE U/S 14A CAN BE MADE. THIS FACT IS BORNE OUT FROM THE DISCUSSIONS A PPEARING ON PARA 4.1 OF THE LD. CIT (A) ORDER. HENCE ASSESSEE HAS NOT EA RNED ANY EXEMPT INCOME, THEN NO DISALLOWANCE U/S 14A CAN BE MADE IN THIS YEAR IN VIEW OF THE RATIO AND PRINCIPLE LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. ACIT, REPO RTED IN 378 ITR 33 (DEL). THUS, ON THIS GROUND ALONE, WE HOLD THAT THE DISALLOWANCE U/S 14A READ WITH RULE 8D FOR SUMS AMOUNTING TO RS.9,71 ,73,724/- CANNOT BE SUSTAINED AND IS DIRECTED TO BE DELETED. 5.2.3 THEREFORE, IN VIEW OF TH E JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. ACIT (SUPRA) AND THE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2009-10 AS QUOTED ABOVE, WE UPHOLD THE FINDINGS OF THE LD. CIT (A) ON THE ISSUE IN ASSESSMENT YEARS 2012-13 AND 2013-14 AND DISMISS THE GROUNDS R AISED BY THE DEPARTMENT IN THIS REGARD. 5.3.0 THE NEXT ISSUE FOR OUR CONS IDERATION IN DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2012-13 IS DEPRECIATION OF CARS WHICH HAD BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT THESE CARS WERE FOUND TO BE PARKED AT THE RESIDENCES OF MR. SURESH NANDA AND MR. SANJEEV NANDA. SINCE, THESE CARS WERE FOUND TO BE PARKED AT THE RESIDENCES, THE 28 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. ASSESSING OFFICER ALSO PROCEEDED TO MAKE AN AD HOC DISALLOWANCE TOWARDS CAR RUNNING EXPENSES ALSO. IT IS SEEN THAT SIMILAR ADDITION WAS MADE IN ASSESSMENT YEARS 2009-10 AND 2010-11 WHICH WAS SUBSEQ UENTLY DELETED BY THE ITAT VIDE ORDER DATED 10.11.2017. THE RELEVA NT OBSERVATIONS OF THE TRIBUNAL ARE CONTAINED IN PARAGRAPH-8 OF THE SAID O RDER AND THE SAME IS BEING REPRODUCED HEREUNDER FOR READY REFERENCE: 8. AFTER HEARING BOTH THE PARTIES AND ON THE PERUS AL OF THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER, WE FIND THAT SO FAR AS THIS DISALLOWANCE OF DEPRECIATION IS CONCERNED THERE IS NO DISPUTE THAT THESE CARS ARE ASSETS OF THE ASSESSEE COMPANY WHICH HAVE BEEN SHOWN AS PART OF THE FIXED ASSETS IN THE BALANCE SHEET. MOST OF THE CARS ARE APPEARIN G AS WDV IN THE SCHEDULE OF FIXED ASSETS AND DEPRECIATION HAS BEEN CLAIMED AT RS. 13,03,519/-. ONCE THE CARS ARE OWNED BY THE ASSESSE E COMPANY AND IS FOUND TO PART OF FIXED ASSETS THEN, OSTENSIBLY DEPR ECIATION HAS TO BE ALLOWED. THE ASSESSEE BEFORE THE AO AS WELL AS BEFO RE THE LD. CIT (A) HAS CATEGORICALLY SUBMITTED THAT SINCE RENOVATION WORK WAS CARRIED OUT AT HOTEL PREMISES, THEREFORE, THESE CARS WERE PARKED AT THE RESIDENCE OF SHRI SURESH NANDA AND HIS SON SHRI SANJEEV NANDA WHO HELD MAJOR ITY STAKE DIRECTLY OR INDIRECTLY INTHE ASSESSEE COMPANY. MERE PARKING OF CARS AT THE PREMISES OF THESE PERSONS, CANNOT IPSO FACTO LEAD TO AN INFEREN CE THAT THE DEPRECIATION HAS TO BE DISALLOWED WHICH OTHERWISE ARE THE ASSETS OF THE ASSESSEE COMPANY. ASSESSEE HAD ALSO SUBMITTED THAT THESE CAR S WERE USED PURELY AND WHOLLY FOR THE PURPOSE OF HOTEL BUSINESS AND IN ABSENCE OF REBUTTAL OF THIS EXPLANATION, DEPRECIATION CANNOT BE DISALLOWED AND ACCORDINGLY, WE HELD LD. CIT (A) HAS RIGHTLY ALLOWED DEPRECIATION. 5.3.1 RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER OF THE LD. CIT (A) IN DELETING THE SAID ADDITION. THE DEPA RTMENTS GROUNDS RELATING TO THE SAME STANDS DISMISSED IN ASSESSMENT YEARS 20 11-12 AND 2012-13. 29 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. 5.3.2 APART FROM THIS, IT IS AL SO SEEN THAT THE ASSESSING OFFICER HAD MADE AN AD HOC DISALLOWANCE ON ACCOUNT OF RUNNING AND MAINTENANCE EXPENSES ON CAR FOR THE REASON THAT THESE CARS WERE FOUND TO BE PARKED AT THE RESIDENCE OF MR. SURESH NANDA AND MR. SANJEEV N ANDA. THIS ISSUE IS ALSO SETTLED IN THE FAVOUR OF THE ASSESSEE BY ORDER OF THE TRIBUNAL IN ASSESSMENT YEARS 2009-10 AND 2010-11 VIDE ORDER DAT ED 10.11.2017. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE CONTAINED IN PARAGRAPH-13 OF THE SAID ORDER AND THE SAME IS BEING REPRODUCED HEREIN UNDER FOR A READY REFERENCE: 13. SO FAR AS THE ISSUE OF ADHOC DISALLOWANCE OF R S. 20 LACS IN RESPECT OF EXPENSES OF RUNNING AND MAINTENANCE OF CARS, AS DIS CUSSED IN THE DEPARTMENTAL APPEAL, THE ASSESSEE OWNS VARIOUS CARS WHICH ARE PART OF FIXED ASSETS AND IS BEING USED FOR THE PURPOSE OF H OTEL BUSINESS OF THE ASSESSEE. THE AO WHILE MAKING THE DISALLOWANCE HAS MADE PURELY ADHOC DISALLOWANCE WITHOUT PIN POINTING ANY SPECIFIC NATU RE OF EXPENDITURE WHICH CAN BE SAID TO BE NOT FOR THE PURPOSE OF BUSINESS. IN THE CASE OF THE COMPANY, WHICH IS RUNNING A FIVE STAR HOTEL AND USI NG CARS FOR ITS HOTEL BUSINESS AND MAINTAINING ALL THE RECORDS, THE AO HA S TO POINT OUT AS TO WHICH PART OF THE EXPENDITURE DEBITED ARE NOT BEEN VERIFIABLE. SIMPLY BECAUSE CARS WERE PARKED FOR TEMPORARY PERIOD AT TH E PREMISES OF PROMOTERS, IT DOES NOT MEAN IT WERE USED FOR NONBUS INESS PURPOSE. SUCH AN ADHOC DISALLOWANCE CANNOT BE SUSTAINED. LD. CIT (A) HAS NOT EXAMINED THIS ISSUE AT ALL AND GAVE A WRONG FINDING OF FACT THAT AO HAS NOT MADE ANY SUCH DISALLOWANCE. ACCORDINGLY, WE DIRECT THE DELET ION OF SUCH ADHOC DISALLOWANCE MADE BY THE A.O. 5.3.3 ACCORDINGLY, SINCE THE LD. CIT (A) HAS NOT ADJUDICATED THIS ISSUE, THE ASSESSING OFFICER IS DIRECTED TO DE LETE THIS AD HOC 30 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. DISALLOWANCE. 5.4.0 IN ASSESSMENT YEAR 2011-12, THE ONLY GROU ND REMAINING PERTAINS TO GROUND NO.4 OF THE ASSESSEES CROSS OBJ ECTION WHICH CHALLENGES THE SUSTAINANCE OF DISALLOWANCE OF DEPRECIATION ON G YM EQUIPMENT. IT IS SEEN THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF T HE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT Y EAR 2009-10 AND 2010-11 IN PARAGRAPH 21 OF THE ORDER. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE REPRODUCED HEREIN UNDER: 21. AFTER HEARING BOTH THE PARTIES, WE FIND THAT I T IS NOT IN DISPUTE THAT THE EQUIPMENT HAS BEEN BOUGHT BY THE COMPANY A ND IS APPEARING AT THE FIXED ASSETS IN THE BALANCE SHEET OF THE ASSESSEE COMPANY AND SAID ASSETS HAS BEEN ACQUIRED DURING TH E RUNNING OF HOTEL BUSINESS. THEN SIMPLY BECAUSE IT IS BEING USE D BY MANAGING DIRECTOR IT CANNOT BE HELD TO BE FOR PRIVATE USE SO AS TO WARRANT DISALLOWANCE OF DEPRECIATION. AT THE MOST IF ANY EQ UIPMENT HAS BEEN PLACED FOR EXCLUSIVE USE OF MANAGING DIRECTOR THE SAME SHOULD BE ADDED AS PERQUISITE IN THE HANDS OF THE SAID DIR ECTOR BUT CANNOT BE DISALLOWED IN THE HANDS OF THE ASSESSEE COMPANY WHEN THIS ASSET ALREADY FORMS PART OF THE BLOCK OF THE ASSETS AND DEPRECIATION HAS BEEN ALLOWED EARLIER. ACCORDINGLY, WE DO NOT FI ND ANY REASON TO SUSTAIN SUCH DISALLOWANCE AND THE SAME IS DIRECTED TO BE DELETED. 5.4.1 ACCORDINGLY, ASSESSEES GROUND NO.4 IN ITS CROSS OBJECTION FOR ASSESSMENT YEAR 2010-11 AND GROUND NO.3 IN ASSESSEE S CROSS OBJECTION FOR ASSESSMENT YEAR 2012-13 STAND ALLOWED. 31 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. 5.5.0 IN ASSESSMENT YEAR 2012-13 , THE ASSESSING OFFICER HAD ALSO MADE A DISALLOWANCE OF RS.35,65,792/- BEING PAY MENT MADE TO M/S APEX ENTERPRISES. IT WAS THE CONTENTION OF THE ASSE SSING OFFICER THAT NO TAX HAD BEEN DEDUCTED AT SOURCE WHILE MAKING THE PAYMENT AND THAT THE ASSESSEE COULD NOT JUSTIFY THE PAYMENT. IT WAS ALSO THE ALLEGATION OF THE ASSESSING OFFICER THAT M/S APEX ENTERPRISES HAS NOT BROUGHT ANY BUSINESS TO THE ASSESSEE COMPANY AND THAT THE COMPANY WAS AWAR DED CONTRACT FOR THE REASON THAT IT WAS MANAGED BY MR. SANJEEV NANDA, WHO WAS THE SON OF MR. SURESH NANDA. IN THIS REGARD, IT IS SEEN THAT T HE ASSESSEE HAD DULY FILED GENERAL SALES AGENT AGREEMENT DATED 01.06.2011 BETW EEN THE ASSESSEE COMPANY AND M/S. APEX ENTERPRISES FZE, UAE AND ALSO ANOTHER AGREEMENT DATED 01.07.2011 APPOINTING THIS COMPANY AS THE CON SULTANT. APART FROM THIS, CORRESPONDENCES BETWEEN M/S APEX ENTERPRISES AND CLARIDGES HOTELS WERE ALSO SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSING OFFICER COULD NOT BRING ON RECOR D THAT NO SERVICES WERE RENDERED BY M/S APEX ENTERPRISES. IT IS UNDISPUTED THAT NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE ON THE IMPUGNED P AYMENT IN VIEW OF ARTICLES, 14, 7 AND 22.1 OF THE DTAA BETWEEN INDIA AND UAE. THE LD. CIT (A), WHILE DELETING THE ADDITION, OBSERVED THAT THE AGREEMENTS WERE FOUND 32 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. DURING THE COURSE OF SEARCH AND SEIZURE AND THAT, U NDISPUTEDLY, THERE WAS EVIDENCE TO INDICATE THAT EFFORTS WERE MADE BY M/S A PEX ENTERPRISES TOWARDS THE FULFILMENT OF THE TERMS OF THE AGREEMENT . THE LD. CIT (A) ALSO OBSERVED THAT ALTHOUGH THE EFFORTS DID NOT RESULT I NTO ANY CONCRETE PROPOSAL MATERIALISING, FAILURE TO PROCURE BUSINESS DOES NOT LEAD TO THE CONCLUSION THAT THE TRANSACTION WAS NOT GENUINE. WE AGREE WITH T HE OBSERVATIONS OF THE LD. CIT (A) ON THE ISSUE. WE ALSO NEGATE THE ALLEGA TION OF THE ASSESSING OFFICER THAT THE CONTRACT WAS AWARDED ONLY BY VIRTUE OF MR. SANJEEV NANDA BEING THE SON OF MR. SURESH NANDA. HAVING PERUSED T HE RECORDS AND THE EVIDENCES AS WELL AS ASSESSMENT ORDER, IT IS APPARE NT THAT THE ASSESSING OFFICER CHOSE TO IGNORE THESE EVIDENCES AND PROCEED ED TO MAKE THE DISALLOWANCE WITHOUT ANY COGENT REASON. ACCORDINGLY, FINDING NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) ON THE I SSUE, WE DISMISS GROUND NO.3 OF THE DEPARTMENTS APPEAL IN ASSESSMENT YEAR 2012-13. 5.6.0 THE ONLY GROUND REMAINING F OR ADJUDICATION IS NOW GROUND NO.5 IN THE DEPARTMENTS APPEAL FOR ASSESSME NT YEAR 2012-13 WHICH CHALLENGES THE DELETION OF ADDITION OF RS.5,50 ,000/- ON ACCOUNT OF UNEXPLAINED CASH FOUND DURING THE COURSE OF SEARCH. THIS CASH WAS FOUND 33 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. DURING THE COURSE OF SEARCH AND AS PER THE ASSESSIN G OFFICER, NO EXPLANATION WAS OFFERED BY THE ASSESSING OFFICER IN THIS REGARD. IT WAS THE ASSESSEES SUBMISSION THAT THIS CASH PERTAINED TO C ASH RECEIVED FROM SALE OF SCRAP GENERATED DURING THE RENOVATION WORK AS WE LL AS NORMAL OPERATIONS OF THE BUSINESS. IT WAS ALSO SUBMITTED THAT THIS WAS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT DURING THE YEAR UNDER CONSIDER ATION. THE LD. CIT (A), WHILE DELETING THE ADDITION, HAS NOTED THAT ALTHOUGH NO SPECIFIC EXPLANATION WAS GIVEN AT THE TIME OF SEARCH, THE SEIZED CASH HAD BEEN SEPARATELY REFLECTED IN THE AUDITED BALANCE SHEET AND HAS ALSO BEEN INCLUDED IN THE INCOME FROM SALE OF SCRAP OFFERED TO TAX AMOUNTING TO RS.14,08,000/- AND, THUS, THE CASH FOUND AND SEIZED STOOD DULY ACCOUNTE D FOR. THIS FINDING OF FACT HAS NOT BEEN CONTROVERTED AS BEING PERVERSE BY THE LD. SR. DR. IN SUCH A SITUATION, THIS BEING A FINDING OF FACT BY THE LD . CIT (A), WE FIND NO REASON TO INTERFERE WITH SUCH FINDING. ACCORDINGLY, GROUND NO.5 OF DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2012-13 ALSO STANDS DISM ISSED. 34 ITA NOS.5850/DEL/2014 & ORS. C.O. NOS.162 &163/DEL/2015 CLARIDGES HOTEL PVT. LTD. 6.0 IN THE FINAL RESULT, ALL THE THREE APPEALS OF THE DEPARTMENT STAND DISMISSED WHEREAS BOTH THE CROSS OBJECTIONS OF THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED ON 15/01/2021. SD/- - S SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 15/01/2021 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI