M/s. Vatika, New Delhi V. DCIT, New Delhi

CO 196/DEL/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5747 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 18-01-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 23-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Difference of opinion; Validity of assessment; Assessment record; Onus to prove; Reason to believe; Change of opinion; Revenue expenditure
• Section: 143(3); 147; 148; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 2159(DEL)/2010 ASSESSMENT YEAR: 2001-02 DEPUTY COMMISSIONER OF INCOME M/S VATIKA LIMITED, TAX, CENTRAL CIRCLE-20, NEW DELHI. VS. (FOR MERLY VATIKA TOWNSHIP PVT. LTD.,), 621, A-DEVIKA TOWER, NEHRU PLACE, NEW DELHI. C.O. NO. 196(DEL)/2010 (ARISING OUT OF ITA NO. 2159(DEL)/2010) ASSESSMENT YEAR: 2001-02 M/S VATIKA LIMITED, DEPUTY COMMISSIONER OF 621, A, DEVIKA TOWER, VS. INCOME-TAX, CENTRAL CIR. 20, NEHRU PLACE, NEW DELHI. NEW DELHI. & ITA NO. 3671(DEL)/2010 ASSESSMENT YEAR: 2004-05 M/S VATIKA LIMITED, DEPUTY COMMISSIONER OF 621, A, DEVIKA TOWER, VS. INCOME-TAX, CENTRAL CIR. 20, NEHRU PLACE, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) CONTD. PAGE NO.2 ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 2 DEPARTMENT BY : SHRI AMRENDRA KUMAR, SR. DR ASSESSEE BY : SHRI C.S. AGGARWAL, SR. ADVOCATE ORDER PER K.G. BANSAL : AM THESE APPEALS AND THE CROSS OBJECTION HAVE BEEN ARGUED IN A CONSOLIDATED MANNER BY THE LD. COUNSEL FOR THE AS SESSEE AND THE LD. DR. THEREFORE, WE FIND IT CONVENIENT TO PASS A CONS OLIDATED ORDER. CROSS OBJECTION NO. 196(DEL)/2010 BY THE ASSESSE E-A.Y. 2001-02 2. THE ASSESSEE HAS TAKEN FOUR GROUNDS IN THE C ROSS-OBJECTION, THE ESSENCE OF WHICH IS THAT THE LD. CIT(APPEALS) ERR ED IN UPHOLDING THE VALIDITY OF ASSESSMENT MADE U/S 143(3) READ W ITH SECTION 148 OF THE INCOME-TAX ACT, 1961, ON 24.12.2008. IT IS MENTIONED THAT THE ORIGINAL ASSESSMENT HAD BEEN MADE U/S 143(3) AND, THER EFORE, REOPENING THE ASSESSMENT TANTAMOUNTS TO CHANGE OF OPINION. I T IS FURTHER MENTIONED THAT THE PRIMA FACIE OPINION FORMED BY THE AO IS NOT BASED ON RELEVANT MATERIAL TO SHOW THAT INCOME HAD ESCAPED ASSESS MENT. IT IS ALSO MENTIONED THAT THE APPROVAL GRANTED BY THE COMM ISSIONER OF INCOME-TAX IS MECHANICAL. IN THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL HAS RAISED AN ADDITIONAL PLEA THAT NO AVERMENT H AS BEEN MADE IN THE ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 3 RECORDED REASONS TO THE EFFECT THAT THE INCOME ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. AS ALL THE FACTS REGARDING THIS PLEA ARE ON RECORD, THE SAME IS CONSIDERED FOR DECIDING THE CROSS- OBJECTION. 2.1 THE FACTS ARE THAT THE ASSESSEE FILED ITS RETURN ON 31.10.2001, DECLARING LOSS OF RS. 56,69,323/-. THE RETURN WAS ACCOMPANIED BY AUDITED ACCOUNTS AND TAX AUDIT REPORT. THE ASS ESSMENT U/S 143(3) WAS MADE ON 10.3.2004, DETERMINING THE LOSS AT RS. 35,67,323/-. THEREAFTER, THE AO ISSUED A NOTICE U/S 148 ON 28.3.2008. FOR DOING SO, THE FOLLOWING REASONS WERE RECORDED:- THE ASSESSMENT OF M/S VATIKA TOWNSHIP PVT. LTD. FOR THE A.Y. 2001-02 WAS COMPLETED IN MARCH, 2004 DETERMI NING A LOSS OF RS. 35,67,323/-. IT HAS COME TO THE NOTI CE THAT THE ASSESSMENT HAD SHOWN DEBIT BALANCE OF RS. 1,36,6 5,956/- IN THE NAME OF M/S AADHARSHILA TOWERS PVT. LTD., WH EREAS M/S AADHARSHILA TOWERS PVT. LTD. HAS SHOWN CREDIT BALANCE OF RS. 27,32,021/- IN THE NAME OF M/S VATIKA TOWNSH IP PVT. LTD. AS SUCH RS. 1,09,33,935/- OUGHT TO BE ADDED T O THE INCOME OF THE ASSESSEE. THEREFORE, I HAVE REASON TO BELIEVE THAT THE INCO ME TO THE TUNE OF RS. 1,09,33,935/- AS ABOVE, CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT. HENCE TO RECOMPUTED THE LOSS/RE- ASSESS THE ABOVE INCOME AND ALSO ANY OTHER INCOME CHARGEA BLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COME TO NOTICE ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 4 SUBSEQUENTLY IN THE COURSE OF THE PROCEEDING UNDE R THE SECTION, THE PROPOSAL IS SUBMITTED FOR NECESS ARY APPROVAL. 2.2 THE ADDITIONAL PLEA TAKEN BY THE LD. COUN SEL IS THAT FOR ASSUMING JURISDICTION TO ISSUE NOTICE U/S 148 TO THE ASS ESSEE, THE AO SHOULD HAVE INTER-ALIA RECORDED IN THE REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY THE REASON OF FAILURE ON TH E PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS N ECESSARY FOR HIS ASSESSMENT. IN THIS CONNECTION, IT IS SUBMITTED THAT THE AS SESSMENT PERTAINS TO ASSESSMENT YEAR 2001-02. ASSESSMENT U/S 143(3) WAS COMPLETED ON 10.3.2004. AND NOTICE U/S 148 WAS ISSUED ON 28 .3.2008. THEREFORE, THE PROVISION CONTAINED IN THE FIRST PROVISO TO SE CTION 147 BECOMES OPERATIONAL, WHICH IS- PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB- SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDE R THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESS MENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF TH E ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE I SSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT AS SESSMENT YEAR. ON PERUSAL ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 5 OF THE REASONS RECORDED BY THE AO, IT WILL BE S EEN THAT IT IS NOWHERE MENTIONED THAT ANY INCOME ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS FOR THE ASSESSMENT. IT HAS ONLY BEEN MENTIONED THAT I H AVE REASON TO BELIEVE THAT THE INCOME TO THE TUNE OF RS. 1,09,33,935/- AS A BOVE, CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. HENCE, TO RE-COMPUTE T HE LOSS/RE-ASSESS THE ABOVE INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAD ESCAPED ASSESSMENT AND WHICH MAY COME TO THE NOT ICE SUBSEQUENTLY IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER THIS S ECTION, THE PROPOSAL IS SUBMITTED FOR NECESSARY APPROVAL. THE APPROVA L WAS REQUIRED U/S 151(2) OF THE ACT. THE REASONS WILL SHOW THAT T HERE IS NOT EVEN A WHISPER ABOUT THE FAILURE OF THE ASSESSEE IN AN Y MANNER RECORDED IN THE REASONS. THEREFORE, REOPENING OF THE ASSESSMENT IS BAD IN LAW. IN REPLY, THE LD. DR RELIED ON THE ORDER OF THE LD. CIT( APPEALS), WHOSE FINDINGS IN THIS MATTER ARE REPRODUCED BELOW:- 4. I HAVE CONSIDERED THE RIVAL POSITION CARE FULLY. DURING THE ASSESSMENT PROCEEDINGS, THE AO HAD MADE THE FOLLOWING OBSERVATION: THE ASSESSEE FILED ITS RETURN SHOWING LOSS OF RS. 56,69,323/- ON 31.10.2001. THE RETURN WAS PROCES SED U/S 143(1) OF THE I.T.ACT, 1961 ON THE RETURNED LOSS. THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3 ) ON 10.3.2004 ON TOTAL LOSS OF RS. 35,67,323/-. IN THE ABOVE NOTED ASSESSMENT ORDER, THE COMPENSATION EXPENSES OF RS. 21,02,000/- ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 6 WERE DISALLOWED AND AFTER APPEAL EFFECT THE T OTAL INCOME WAS DETERMINED AT RS. (-) 56,69,323/-. LATER ON, THE ASSESSMENT RECORDS OF M/S VATIKA T OWNSHIP PRIVATE LTD. FOR THE A.Y. UNDER REFERENCE WERE EXAMINED WITH REFERENCE TO ASSESSMENT RECORDS OF M/S ADHA RSHILA TOWERS PRIVATE LIMITED AND IT CAME TO NOTICE THAT THE DEBIT BALANCE OF M/S ADHARSHILA TOWERS PRIVATE LIMITE D IN THE BALANCE SHEET OF THE ASSESSEE COMPANY WAS SHOWN A T RS. 1,36,65,956/-, WHEREAS IN THE BALANCE SHEET OF M/S ADHARSHILA TOWERS PRIVATE LIMITED, THE CREDIT BALANCE IN THE NAME OF THE ASSESSEE COMPANY WAS SHOWN AT RS . 27,32,021/-. THUS, THERE WAS A CLEAR DIFFERE NCE OF RS. 1,09,33,935/-. SINCE IN THE BOOKS OF ASSESSEE COMPANY THIS BALANCE WAS SHOWN AS DEBIT BALANCE, ACCORDINGLY , ON 31 ST MARCH, 2001, THE ASSESSEE WAS HAVING MORE ASSET S THAN THE LIABILITIES DISCLOSED IN THE BALANCE SHEET. THE ASSETS OF THE ASSESSEE WAS MORE BY RS.1,09,33,935/- WHICH WERE LIABLE TO BE ADDED IN THE INCOME OF THE ASSESSEE. IN VIEW OF THE FACTS NOTED ABOVE, THE AO HAD REASONS TO BELIEVE THAT I NCOME OF RS. 1,09,33,935/- HAS ESCAPED ASSESSMENT WITHIN T HE MEANING OF THE PROVISION TO SECTION 147. HENCE, NOTICE U/S 148 WAS ISSUED ON 28.03.2008 AFTER OBTAINING PRIOR APPROVAL OF CIT (CENTRAL-I), DELHI. 4.1 IT IS SETTLED LAW THAT AT THE STAGE OF ISSUE OF NOTICE, THE AO HAS TO ONLY FORM A PRIMA FACIE OPINION BASED ON RELEVANT MATERIAL THAT INCOME OF THE APPELLANT H AS ESCAPED ASSESSMENT. THE APEX COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD., REPORTED IN 291 ITR 500, WHEREIN AT PAGE 511 HAS HELD AS UNDER:- SECTION 147 AUTHORISES AND PERMITS THE ASSES SING OFFICER TO ASSESS OR RE-ASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD REASON IN THE PH RASE REASON TO BELIEVE WOULD MEAN CAUSE OR JURISDI CTION. IF THE ASSESSING OFFICER HAS CAUSE OR JURISDICTION TO KNO W OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASS ESSMENT. ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 7 THE EXPRESSION CANNOT BE READ TO MEAN THAT TH E ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THAT FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE AS SESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLI CITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAX- PAYERS. AS OBSERVED BY THE SUPREME COURT, IN C ENTRAL PROVINCES MANGANESE ORE CO. LTD. VS. ITO [1991] 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147( A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILLM ENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIA L. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS REASON TO BELIEVE, BUT NOT THE ESTABLISHED FA CT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF N OTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THI S IS SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESS ING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION. ( SEE ITO VS. SELECTED DALURBAND COAL CO. P. LTD. [1996] 217 ITR 597 (SC); RAYMOND WOOLEN MILLS LTD. VS. ITO [1999] 236 ITR 34 (SC). 4.2 RELIANCE IS ALSO PLACED ON THE JUDGMENT OF B AWA ABHAI SINGH VS. DCIT, REPORTED IN 253 ITR 83 (DEL), WHERE THE EXPRESSION REASON TO BELIEVE HAS B EEN ELABORATED AND, HELD AS UNDER: THE LOGIC INDICATED BY THIS COURT IN THE BACKGR OUND OF SECTION 132 IS EQUALLY APPLICABLE TO A CASE UND ER SECTION 147. AT THE COST OF REPETITION WE MAY SAY THAT THE INFORMATION MUST BE SOMETHING MORE THAN A RUMOUR OR GOSSIP OR HUNCH. THERE MUST BE SOME MATERIAL WHICH CAN BE REGAR DED AS INFORMATION, ON THE BASIS OF WHICH THE ASSESSING OFFICER CAN HAVE REASON TO BELIEVE THAT ACTION UNDER SECTIO N 147 IS CALLED FOR. THE JURISDICTION OF THE COURT TO INTERFERE IS VERY LIMITED, AS COURT DOES NOT ACT AS AN APPELLATE AUTHORI TY. NO METICULOUS EXAMINATION OF THE INFORMATION BY THE COURT IS PERMISSIBLE TO DECIDE FOR ITSELF AS TO WHETHER ACTION UNDER ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 8 SECTION 147 IS CALLED FOR. THE REASON TO BELIEV E MUST BE TENABLE IN LAW. ONLY IF THE INFORMATION OR THE REASON HAS NO NEXUS WITH THE BELIEF OR THERE IS NO MATERIAL OR TANGIBLE INFORMATION FOR FORMING OF REQUISITE BELIEF, THEN ONLY THE COURT CAN INTERFERE, OTHERWISE NOT. INFORMATION MEANS THE COMMUNICATION OR RECEPTION OF KNOWLEDGE OR INTELLIGENCE. IT INCLUDES KNOWLED GE OBTAINED FROM INVESTIGATION STUDY OR INSTRUCTION. TO I NFORM MEANS TO IMPART KNOWLEDGE. A DETAIL AVAILABLE IN T HE PAPERS FILED BEFORE THE INCOME-TAX OFFICER DOES NOT BY ITS MERE PRESENCE OR AVAILABILITY BECOME AN ITEM OF INFORMATION. IT IS TRANSMUTED INTO AN ITEM OF INFORMATION ONLY IF AND WHEN ITS EXISTENCE IS REALIZED AND ITS IMPLICATIONS A RE RECOGNIZED. WHETHER A PARTICULAR FACT OR MATERIAL CONSTIT UTES INFORMATION IN A PARTICULAR CASE HAS TO BE DE CIDED WITH REFERENCE TO THE FACTS OF THAT CASE AND THERE CANNOT BE A DEFINITE RULE OR UNIVERSAL APPLICATION AS TO WHE N A PARTICULAR MATERIAL WILL BE TAKEN TO BE AN INFO RMATION. 4.3 DELHI HIGH COURT IN THE CASE OF CIT VS. BATR A BHATTA CO. (2008) 174 TAXMAN 444, HAS OBSERVED THAT I F THERE IS SOME MATERIAL ON THE BASIS OF WHICH, THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, IT IS SUFFICIENT TO INVOKE THE PROVISIONS OF SECTION 147/148. IT DOES NOT MATTER WHETHER THE BELIEF OF THE AO IS ULTIMATEL Y PROVED TO BE RIGHT OR WRONG. 4.4 IN THIS CASE, THE ISSUE INVOLVED WAS NEVER D ISCUSSED IN THE ORIGINAL ORDER U/S 143(3). THE AO HAS COME TO KNOW ABOUT THE ISSUE ONLY ON EXAMINATION OF BOOKS OF ACCOUNT OF M/S VATIKA TOWNSHIP PVT. LTD. AND ADHARSHILA TOWER S PVT. LTD. THE AO HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT DURING THE YEAR AND THE SAME WAS CL EARLY RECORDED BEFORE ISSUING NOTICE U/S 147. THE AO HAS ALSO STATED THAT NOTICE U/S 148 WAS ISSUED ON 28.3.20 08 AFTER TAKING DUE APPROVAL OF THE COMMISSIONER OF INCOME -TAX, CENTRAL-I, NEW DELHI. UNDER THESE CIRCUMSTANCES, I AM OF THE VIEW THAT NOTICE ISSUED U/S 148 OF THE ACT WA S IN ACCORDANCE WITH LAW AND, THEREFORE, ASSUMPTION OF ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 9 JURISDICTION WAS VALID. ACCORDINGLY, THIS GROUN D OF APPEAL IS DISMISSED. 2.3 WE HAVE CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS MADE BEFORE US. IT WILL BE SEEN THAT THE PROVISION CONTAINED IN FIRST PROVISO TO SECTION 147 IS APPLICABLE TO THE FACTS OF THE CASE FOR THE REASONS THAT -(I) ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3); ( II) FOUR YEARS, MENTIONED IN THE PROVISO EXPIRED ON 31.3.2006; AND (III) REASONS WERE RECORDED ON 27.3.2008, AFTER 31.3.2006. 2.4 ON PERUSAL OF THE NOTE, IT IS ALSO CLEAR THA T NO FAILURE WHATSOEVER HAS BEEN ATTRIBUTED TO THE ASSESSEE, WHICH IS ONE OF THE ESSENTIAL CONDITIONS FOR ASSUMING JURISDICTION TO ISSUE NOTICE U/S 148. THIS ISSUE HAS NOT BEEN DECIDED UPON BY THE LD. CIT(APPEALS ) AS IT APPEARS THAT NO SUCH PLEA WAS TAKEN BEFORE HIM. HE HAS, HOWE VER, MENTIONED THAT THIS MATTER WAS NEVER DISCUSSED IN THE ORIGINAL ASSE SSMENT ORDER. THE AO CAME TO KNOW ABOUT THE ISSUE ON EXAMINATION OF B OOKS OF ACCOUNT OF THE ASSESSEE AND ADHARSHILA TOWERS PVT. LTD. AT THE TIME OF REOPENING THE ASSESSMENT ONLY A PRIMA-FACIE REASON TO BELIEVE HAS TO BE ARRIVED AT THAT THE INCOME HAS ESCAPED ASSESSMENT. SINCE TH ERE WAS SUFFICIENT MATERIAL ON RECORD TO SHOW THAT THERE WAS REASON TO BELIEVE AS ABOVE, THE ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 10 AO WAS RIGHT IN REOPENING THE ASSESSMENT. TH E LD. CIT(APPEALS) MAY OR MAY NOT BE CORRECT IN COMING TO THESE CONCLUS IONS BUT ONE OF THE ESSENTIAL CONDITIONS, ON THE FACTS OF THE CASE, IS THAT THE REASONS SHOULD HAVE SHOWN THAT THE INCOME ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TR ULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IN ABSENCE THER EOF, THE REOPENING OF THE ASSESSMENT CANNOT BE UPHELD. SINCE THE ISSUE ST ANDS DECIDED BY US BY PLAIN READING OF THE STATUTORY PROVISION, IT I S NOT NECESSARY FOR US TO GO INTO VARIOUS CASES CITED BY THE LD. COUNSEL FOR THE ASSESSEE. IT IS HELD ACCORDINGLY. FURTHER, IN VIEW OF THIS DECISIO N, IT IS NOT NECESSARY TO GO INTO OTHER GROUNDS TAKEN IN THE APPEAL. ITA NO. 2159(DEL)/2010- APPEAL OF THE REVENUE- A. Y. 2001-02 3. IN VIEW OF OUR FINDING THAT REOPENING OF THE ASSESSMENT IS BAD IN LAW, IT IS NOT NECESSARY FOR US TO DECIDE GROUND NO. 2 OF THE APPEAL OF THE REVENUE, BEING THE ONLY SUBSTANTIVE GROUND, WHICH DEALS WITH THE DELETION OF THE ADDITION OF RS. 1,09,33,935/- MADE BY THE AO. ITA NO. 3671(DEL)/2010- APPEAL OF THE ASSESSEE - A.Y. 2004-05 4. THE ASSESSEE HAD FILED ITS RETURN ON 1.11.200 4, DECLARING TOTAL INCOME OF RS. 2,32,992/-. THE ASSESSEE HAS BEEN CARRYING ON THE BUSINESS ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 11 OF DEVELOPING RESIDENTIAL COLONIES AND COMMERC IAL COMPLEXES. THE ASSESSMENT WAS COMPLETED ON 11.12.2006 AT TOTAL INCOME OF RS. 25,40,200/-. THE ORDER WAS CHALLENGED IN APPEAL , BUT THE SAME WAS DISMISSED BY THE CIT(APPEALS)-XI, NEW DELHI, IN ORDER DATED 6.2.2010 IN APPEAL NO. 63/07-08. 5. GROUND NO. 1 IS GENERAL IN NATURE, WHICH WILL STAND DISPOSED OFF ON DECIDING THE OTHER GROUNDS. IT WAS ALSO NOT AR GUED BY THE LD. COUNSEL. THEREFORE, THIS GROUND IS DISMISSED. 6. GROUND NOS. 2 AND 3 ARE IN RESPECT OF THE ADD ITION OF RS. 20.00 LAKH MADE ON ACCOUNT OF PURCHASE OF LAND IN VILLAGE B ADSHAHPUR. 6.1 IN THIS CONNECTION, IT IS MENTIONED IN THE ASSESSMENT ORDER THAT IN PURSUANCE OF THE OBJECTS, THE ASSESSEE HAD AC QUIRED 23.437 ACRES OF LAND IN VILLAGE BADSHAHPUR IN THE IMMEDIATELY PRECEDI NG YEAR. IN THIS YEAR, THE ASSESSEE MADE FURTHER PURCHASE OF LAND FOR A SUM OF RS. 5,13,01,480/-. THIS AMOUNT WAS ADDED TO THE STOCK WITHOUT DEB ITING IT TO PROFIT AND LOSS ACCOUNT. IT IS FURTHER MENTIONED THAT THE LAND PURCHASED IN THE IMMEDIATELY PRECEDING YEAR AND THIS YEAR ARE CONTIGUOUS, WHICH HAVE ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 12 BEEN ACQUIRED FROM THE SAME PERSONS FOR THE HO USING PROJECT. IN THE EARLIER YEAR, PURCHASES WERE MADE @ RS. 1.75 LAK H PER KANAL WHILE PURCHASES IN THIS YEAR HAVE BEEN SHOWN AT RS. 1 .25 LAKH PER KANAL. SINCE THE ADJOINING LANDS FROM THE SAME PERSON S WERE PURCHASED AT LESSER VALUE IN THIS YEAR, THE ASSESSEE WAS REQ UIRED TO ESTABLISH THE PURCHASE PRICE. THE ASSESSEE FURNISHED COPIES OF SALE DEEDS. HOWEVER, NO OTHER EVIDENCE WAS FURNISHED WHICH WOULD SU GGEST THAT THE LAND RATE HAD FALLEN IN A PERIOD OF ABOUT 10 MONTHS. THER EFORE, THE PURCHASE PRICE WAS TAKEN AT RS. 1.75 LAKH PER CANAL, LEADING TO ADDITION OF RS. 20.00 LAKH. THE LD. CIT(APPEALS) CONFIRMED THIS ADDI TION BY MENTIONING THAT THE LAND WAS PURCHASED FROM A CONNECTED PERSON, S HRI VED PRAKASH CHAUDHARY. THE ASSESSEE TRIED TO EXPLAIN THE LO WER RATE BY RELYING ON THE SITE PLAN, WHICH IS NEITHER CONVINCING NOR STANDS THE TEST OF REASONABLENESS. AGGRIEVED BY THIS ORDER, THE ASSE SSEE IS IN APPEAL BEFORE US. 6.2 THE LD. COUNSEL SUBMITTED THAT THE LAND WAS PURCHASED BY WAY OF REGISTERED SALE DEEDS IN WHICH THE CONSIDERATION WAS AGREED AT RS.1.25 LAKH PER KANAL. BOTH THE PERSONS, I.E., THE SE LLER AND THE BUYER HAD BEEN SEARCHED BUT NO DOCUMENT TO THE CONTRARY WAS FOU ND. THE BURDEN TO PROVE THAT ACTUAL INVESTMENT WAS MORE THAN THE INVESTM ENT RECORDED IN THE BOOKS ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 13 IS ON THE REVENUE FOR MAKING ADDITION AS PER TH E PROVISION CONTAINED IN SECTION 69B. THIS BURDEN HAS NOT BEEN DISCHARGED. THEREFORE, IT HAS BEEN ARGUED THAT THE ADDITION MADE IN THIS BEHALF IS NOT SUSTAINABLE. IN REPLY, THE LD. DR RELIED ON THE ORDERS OF THE LOWER A UTHORITIES. 6.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. SECTION 69B OF THE ACT, REGARDING AM OUNT OF INVESTMENTS ETC. NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNT, R EADS AS UNDER:- WHERE IN ANY FINANCIAL YEAR THE ASSESSEE HAS M ADE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BUL LION, JEWELLERY OR OTHER VALUABLE ARTICLE, AND THE A SSESSING OFFICER FINDS THAT THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENTS OR IN ACQUIRING SUCH BULLION, JEWELLERY OR OTH ER VALUABLE ARTICLE EXCEEDS THE AMOUNT RECORDED IN THIS BEHA LF IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATIO N ABOUT SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACT ORY, THE EXCESS AMOUNT MAY BE DEEMED TO BE THE INCOME OF THE AS SESSEE FOR SUCH FINANCIAL YEAR. 6.4 AS PER THIS PROVISION, THE DIFFERENCE BETWEE N THE INVESTMENT MADE AND THE INVESTMENT RECORDED IN THE BOOKS OF ACCOU NT MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE IF THE ASSESSEE OFFER S NO EXPLANATION ABOUT SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED B Y HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY. T HE PROVISION STIPULATES THAT ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 14 WHERE IN ANY FINANCIAL YEAR, THE ASSESSEE HAD MA DE INVESTMENTS AND THE ASSESSING OFFICER FINDS THAT THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENTS EXCEEDS THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT, THEN, THE DIFFERENCE MAYBE DEEMED TO BE THE INCOME. F ROM THE PROVISION, IT IS CLEAR THAT THE ASSESSING OFFICER HAS TO ASCERTAI N TWO THINGS, I.E.,- (I) INVESTMENT ACTUALLY MADE, AND (II) THE VALUE OF IN VESTMENT RECORDED IN THE BOOKS OF ACCOUNT. IN THIS CASE, THE AO HAS NOT ASCERTAINED THE INVESTMENT ACTUALLY MADE BY THE ASSESSEE. INST EAD OF ACTUAL INVESTMENT, HE ESTIMATED THE SAME ON THE BASIS OF PURCHASES MADE LAST YEAR. THERE IS NO FACT ON RECORD THAT THE ACTUAL INVESTMENT MAD E IN THIS YEAR WAS AT THE SAME RATE AS IN LAST YEAR. THE BURDEN IS ON THE ASSESSING OFFICER TO ASCERTAIN THE ACTUAL INVESTMENT AND PROVE THAT IT WAS MORE THAN THE INVESTMENT RECORDED IN THE BOOKS. THE ACTUAL IN VESTMENT CANNOT BE ESTIMATED IN ABSENCE OF ANY EVIDENCE TO THE CONT RARY ON RECORD. IN SUCH A CIRCUMSTANCE, WE ARE OF THE VIEW THAT THE LOWE R AUTHORITIES ERRED IN MAKING ADDITION OF RS.20.00 LAKH TO THE TOTAL IN COME OF THE ASSESSEE. THUS, THESE GROUNDS ARE ALLOWED. ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 15 7. GROUND NO. 4 IS AGAINST DISALLOWANCE OF THE D EPRECIATION OF RS. 2,63,360/- ON THE MERCEDES CAR, WHICH WAS PURCH ASED BY THE ASSESSEE ON 31.3.2004 AND STATED TO BE PUT TO USE IN THIS YEAR. 7.1 IN THIS CONNECTION, IT IS MENTIONED IN THE A SSESSMENT ORDER THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSE SSEE COMPANY FILED BILLS IN RESPECT OF ADDITION TO FIXED ASSETS. IT WAS SEEN THAT IT PURCHASED A NEW CAR, MERCEDES BENZ, FOR A SUM OF RS. 26,33,595/- ON 31.3.2004, BEING THE LAST DATE OF THE ACCOUNTING PERIOD, AND CLAIMED DEPRECIATION @ 10%. IT IS FURTHER MENTIONED THAT NO INSURANCE EXPENSE HAS BEEN DEBITED IN THE BOOKS. IT IS ALSO MENTIONED THAT A CAR DOES NOT BECOME ROAD-WORTHY UNLESS THE SAME IS INSURED. THE PURCHASE CONSIDERATION WAS PAYABLE TO TNT MOTORS. THE ASSESSEE DID NOT PRODUCE THE REGISTR ATION CERTIFICATE ALSO. THEREFORE, IT WAS HELD THAT THE CAR HAS NOT BEEN USED FOR THE PURPOSE OF BUSINESS. 7.2 BEFORE THE LD. CIT(APPEALS), IT WAS SUBMITTED THAT REGISTRATION AND PAYMENT OF INSURANCE CHARGES IS NOT PRE-CONDIT IONS FOR ALLOWANCE OF DEPRECIATION. THE CAR WAS DELIVERED TO THE AS SESSEE IN THIS YEAR AND IT WAS PUT TO USE. ON CONSIDERATION OF THE ASSESSMENT ORDER AND THE ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 16 SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(APPEALS) MENTIONED THAT A CAR IS NOT DELIVERED TILL IT IS REGISTERED AND INSURED. THERE IS NO EVIDENCE ON EITHER ACCOUNT. THEREFORE, THE DISALLOWANCE MADE BY THE AO WAS UPHELD. 7.3 BEFORE US, IT IS SUBMITTED BY THE LD. COUNSE L THAT THE WELL SETTLED POSITION OF LAW IS THAT MERE NON-REGISTRATION OF THE VEHICLE DOES NOT DISENTITLE THE ASSESSEE FROM THE CLAIM OF DEPREC IATION. THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT THE CAR WAS PURCHASED ON 31.3.2004. DEPRECIATION HAS BEEN ALLOWED IN SUBSEQUENT YEAR S. THEREFORE, IT IS AGITATED THAT THE DEPRECIATION MAY BE ALLOWED IN THIS YEAR ALSO. IN THE ALTERNATIVE, IT IS SUBMITTED THAT THE ASSESSI NG OFFICER MAY BE DIRECTED TO ALLOW DEPRECIATION ON THE COST OF PURCHASE IN THE IMMEDIATELY SUCCEEDING YEAR. IN REPLY, THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE USER OF THE CAR. IT HAS NOT BEEN REGISTERED OR INSURED. THEREFORE, IT IS AGITATED THAT THE CONCURRENT FINDINGS OF BOTH THE LOWER AUTHORITIES MAY BE UPHELD. 7.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. IN THE CASE OF CIT VS. NAVDURGA TRA NSPORT CO., (1999) 235 ITR 158 (ALL.), RELIED UPON BY THE LD. COUNSEL, THE TRIBUNAL HAD RETURNED ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 17 A FINDING THAT THE ASSESSEE OWNED THE TRUCKS A ND USED THEM FOR THE BUSINESS. IN THIS CONNECTION, IT WAS HELD THAT THE REGISTRATION UNDER THE MOTOR VEHICLES ACT WAS NOT AN ESSENTIAL PRE-R EQUISITE FOR ACQUISITION OF THE OWNERSHIP BUT IT WAS ONLY AN OBLIGATION CA ST ON THE OWNER FOR RUNNING THE VEHICLE IN ANY PUBLIC PLACE. THE FACTS O F THIS CASE ARE QUITE DISTINGUISHABLE. THE ASSESSEE HAS NOT PRODUCED RE GISTRATION CERTIFICATE OR INSURANCE NOTE. THERE IS NO OTHER EVIDENCE T HAT THE CAR WAS USED FOR THE PURPOSE OF BUSINESS. THE BENEFICIAL OWNERSH IP MAY VEST IN THE ASSESSEE EVEN BEFORE THE REGISTRATION OF CAR W HEN IT IS DELIVERED TO IT. HOWEVER, GRANT OF DEPRECIATION REQUIRES SATISFACTI ON OF TWO CONDITIONS- (I) OWNERSHIP OF THE VEHICLE, AND (II) USER OF THE VEH ICLE. THERE IS NO EVIDENCE WHATSOEVER REGARDING THE USER. IN FACT, LACK OF REGISTRATION AND INSURANCE PRECLUDES THE USER IN ANY PUBLIC PLACE. THE CA R CANNOT BE USED IN THE OFFICE PREMISES OF THE ASSESSEE BECAUSE IT HAS TO BE RUN ON THE ROAD FOR THE PURPOSE OF BUSINESS FOR CLAIMING DEPRECIAT ION. ACCORDINGLY, IT IS HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEPRE CIATION IN THIS YEAR. 7.5 COMING TO THE ALTERNATIVE SUBMISSION, THE APPEAL FOR ASSESSMENT YEAR 2005-06 IS NOT PENDING BEFORE US AND, THUS , NO DIRECTION CAN BE ISSUED TO THE AO IN RESPECT OF PROCEEDINGS FOR T HAT YEAR. IT WILL BE MORE ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 18 APPROPRIATE FOR THE ASSESSEE TO APPROACH THE AO FOR APPROPRIATE RELIEF, IF THOUGHT FIT. 7.6 THUS, THIS GROUND IS DISMISSED. 8. GROUND NO.5 IS AGAINST DISALLOWANCE OF RS. 43,8 50/-, BEING 1/5 TH OF THE TOTAL EXPENDITURE OF RS. 2,19,250/- CLAIMED BY THE ASSESSEE UNDER THE HEAD PRELIMINARY EXPENSES. 8.1 IN THIS CONNECTION, IT HAS BEEN MENTIONED IN T HE ASSESSMENT ORDER THAT THE ASSESSEE INCREASED ITS AUTHORISED CAP ITAL FROM RS. 5.00 LAKH TO RS. 2.00 CRORE AND PAID FEES OF RS. 2,19,250/- TO THE REGISTRAR OF COMPANIES. THIS AMOUNT WAS CLAIMED U/S 35D BY AMORTISING IT OVER FIVE YEARS. RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATI ON LTD. VS. CIT, (1997) 225 ITR 792; AND BROOK BOND INDIA LTD. VS. CIT , (1997) 225 ITR 798, IT WAS HELD THAT THE EXPENDITURE IS CAPITAL IN NATURE AND, THEREFORE, THE CLAIM OF 1/5 TH OF THE EXPENDITURE CANNOT BE DISALLOWED. THE L D. CIT(APPEALS) DISMISSED THE APPEAL OF THE ASSESSE E ON THIS GROUND BY STATING THAT SINCE THE FEES PAID TO REGISTRAR O F COMPANIES IS FOR ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 19 ENHANCING THE AUTHORIZED SHARE CAPITAL, IT CANN OT BE TAKEN AS REVENUE EXPENDITURE COVERED U/S 35D. THEREFORE, THE ORDE R OF THE AO WAS UPHELD. 8.2 BEFORE US, NO PARTICULAR ARGUMENT HAS BEEN MADE IN RESPECT OF THIS DISALLOWANCE. HOWEVER, IN THE SYNOPSIS, THE ASS ESSEE DEALT WITH THIS ITEM IN PARAGRAPH 7, WHERE IT WAS CLUBBED WITH M ANY OTHER EXPENSES WITHOUT MAKING ANY MENTION OF THIS EXPENDITURE. FURTHER, IN GROUND NO. 5.1, IT IS MENTIONED THAT THE LD. CIT(APPEALS) O VERLOOKED THE FACT THAT SUCH EXPENDITURE WAS LINKED TO EXPANSION OF BU SINESS AND SHOULD HAVE BEEN CONSIDERED U/S 35D AS TECHNICALLY THE BUS INESS OF THE ASSESSEE IS AT PRELIMINARY STAGE. FROM THE FACTS, IT IS OBVIOUS THAT THE EXPENDITURE IS FOR INCREASING THE AUTHORIZING CAPITAL AND, THEREFORE, IT IS IN THE CAPITAL FIELD AS PER THE DECISIONS REFERRED TO BY THE AO. ON P ERUSAL OF SECTION 35D, WE FIND THAT THIS EXPENDITURE IS NOT COVERED FOR DE DUCTION EITHER UNDER CLAUSE (I) OR CLAUSE (II) OF SUB-SECTION (1) OF SECTION 3 5D READ WITH SECTION 35D(2). THEREFORE, THE CLAIM IS EX-FACIE UNTENABLE. DURING THE COURSE OF ARGUMENTS, THE LD. COUNSEL ALSO STATED THAT THIS GROUND MAY BE TAKEN AS NOT PRESSED. WITHOUT CONSIDERING THE ORAL SUBMISSION , THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES IS UPHELD. ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 20 9. GROUND NO. 6 IS AGAINST DISALLOWANCE OF RS. 35,2 8,416/-, BEING 25% OF THE EXPENSES SHOWN AS INVENTORIES, AMOUNTING TO RS. 1,41,14,457/-. IT IS MENTIONED THAT THE LD. CIT(APPEALS) FAIL ED TO APPRECIATE THAT THERE WAS NO BASIS FOR MAKING THE DISALLOWANCE MADE BY THE AO. 9.1 IN THIS CONNECTION, IT IS MENTIONED IN THE ASS ESSMENT ORDER THAT THE ASSESSEE DEBITED SUMS OF RS. 66,44,105/- AS ADV ERTISEMENT AND BUSINESS PROMOTION EXPENSES; RS. 46,14,862/- AS LEGAL AND PROFESSIONAL CHARGES; RS. 11,14,201/- AS FENCING AND LANDSCAPING EXPE NSES, AND RS. 17,41,289/- AS TRAVELING AND CONVEYANCE EXPENSES. THE TOTAL OF THESE EXPENSES HAS BEEN SHOWN AT RS. 1,41,14,457/-. THE ASSESSEE WA S REQUIRED TO PRODUCE EVIDENCE TO SHOW THAT THE EXPENSES HAVE BEEN INCU RRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN COMP LIANCE THERETO, THE ASSESSEE FURNISHED THE DETAILS ALONG WITH A FEW VOUCHERS. NO SATISFACTORY EXPLANATION WAS FURNISHED IN RESPEC T OF THE QUERY THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF BUSINESS. ON PERUSAL OF BILLS AND VOUCHERS PRODU CED BY THE ASSESSEE, IT IS MENTIONED THAT THERE WERE A NUMBER OF BILLS IN THE NAME OF VATIKA GROUP, VATIKA GROUP OF COMPANIES OR VATIK A. THE NAME OF THE ASSESSEE WAS WRITTEN ON THESE BILLS SUBSEQUENTLY . THE AO HAS NARRATED ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 21 THE DETAILS OF EIGHT SUCH BILLS ON PAGE NO. 3 OF THE ORDER. THEREAFTER, HE CAME TO THE CONCLUSION THAT ALL THE EXPENSES DEBIT ED IN THE BOOKS OF ACCOUNT DID NOT PERTAIN TO THE BUSINESS OF THE A SSESSEE AND SOME EXPENSES PERTAINED TO THE GROUP AS A WHOLE. IN THESE CIR CUMSTANCES, 25% OF THE EXPENDITURE WAS DISALLOWED. 9.2 IN THE FIRST APPEAL, IT WAS SUBMITTED THAT THE AO HAS NOT HELD THAT THE EXPENSES WERE NOT INCURRED BY THE ASSESSEE COMPANY. HE IGNORED THE SUBMISSIONS MADE BEFORE HIM IN THIS BEHALF IN LE TTER DATED 27.11.2006. THE ONLY OBJECTION IS THAT BILLS HAVE BEEN ISSUED I N THE NAME OF THE GROUP. SO LONG AS THE EXPENDITURE HAS BEEN REALLY INC URRED AND OTHERWISE DEDUCTIBLE, NO DISALLOWANCE CAN BE MADE. IN O THER WORDS, IF THE EXPENSES HAVE BEEN ACTUALLY INCURRED AND THESE A RE IN FURTHERANCE OF LEGITIMATE BUSINESS INTEREST, NO DISALLOWANCE C AN BE MADE AS THE SAME HAD BEEN INCURRED IN THE COURSE OF BUSINESS. TH E LD. CIT(APPEALS) CONSIDERED THE SUBMISSIONS MADE BEFORE HIM. IT IS MENTIONED THAT IF THERE HAD BEEN AN ERROR ON THE PART OF THE PAYEE IN WRIT ING THE CORRECT NAME, THE MISTAKE SHOULD HAVE BEEN GOT RECTIFIED. THIS HA S NOT BEEN DONE. THEREFORE, THE ACTION OF THE AO WAS UPHELD. ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 22 9.3 BEFORE US, IT HAS BEEN SUBMITTED THAT THE EXPENSES DEBITED TOWARDS WORK-IN-PROGRESS HAVE BEEN DISALLOWED PURELY ON ESTIMATE BASIS ON THE GROUND THAT THE BILLS WERE IN THE NAME OF THE GR OUP OR OTHER GROUP COMPANIES. COPIES OF THE BILLS WERE SUBMITTED IN THE COURSE OF HEARING, WHICH HAVE NOW BEEN PLACED IN THE PAPER BOOK ON PA GE NOS. 114 TO 121. THESE BILLS PERTAIN TO ADVERTISEMENT, PROFESSION AL EXPENSES AND TRAVELING EXPENSES. NONE OF THEM RELATE TO FENCING, LANDS CAPING ETC. THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO SUBMIT EXPLANATION IN RESPECT OF THE EXPENDITURE. IT IS FURTHER SUBMITTED THAT THE ASSESSEE BELONGS TO A GROUP OF COMPANIES KNOWN AS VATIKA GROUP, WH ICH HAS BEEN CARRYING ON BUSINESS SINCE LONG. IT IS POSSIBLE THAT T HE SUPPLIER ISSUED BILLS IN SOME OTHER NAME BUT WHEN SUCH BILLS WERE PLACED BEFORE THE AUTHORITIES IN THE COMPANY, THE BILLS WERE CORRECTED BY PUTTING THE CORRECT NAME OF THE ASSESSEE. IN THESE CIRCUMSTANCES, WHAT IS TO BE SEEN IS WHETHER THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUS INESS OF THE ASSESSEE OR NOT. THIS HAS NOT BEEN DONE BY THE AO. IT IS A LSO MENTIONED THAT FURTHER ENQUIRY WOULD HAVE REVEALED THAT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN ANY CASE , THE BILLS WERE DEBITED IN THE BOOKS OF THE ASSESSEE-COMPANY AND TAX WAS DEDUCTED, WHEREVER ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 23 APPLICABLE, FROM THE PAYMENTS. ACCORDINGLY, IT I S ARGUED THAT THE LOWER AUTHORITIES ERRED IN NOT ALLOWING THE WHOLE AMOUN T TO BE CAPITALIZED. IN REPLY, THE LD. DR SUBMITTED THAT THE COMPLETE VERIFICATION WAS NOT GOT DONE EVEN IN THE PROCEEDINGS BEFORE THE LD. CIT( APPEALS). BOTH THE AUTHORITIES HAVE COME TO A CONCURRENT FINDING T HAT A PART OF THE EXPENSES DID NOT RELATE TO THE BUSINESS OF THE ASSESSEE CO MPANY. THEREFORE, IT WAS ARGUED THAT THE DISALLOWANCE MAY BE UPHELD. IN T HE ALTERNATIVE, IT WAS SUGGESTED THAT IF ANY FURTHER ENQUIRY IS REQUIR ED TO ASCERTAIN THE NEXUS BETWEEN THE BUSINESS AND THE EXPENDITURE, THE M ATTER MAY BE RESTORED TO THE FILE OF THE AO. 9.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE AO FOUND THA T SOME BILLS OF THE EXPENDITURE DEBITED IN THE BOOKS OF ACCOUNT DID N OT CONTAIN THE NAME OF THE ASSESSEE, BUT IT CONTAINED SOME OTHER NAME. I TS NAME WAS SUBSEQUENTLY WRITTEN ON THE BILLS. THE MOST SIGNIFICANT EXPE NDITURE IS REGARDING ADVERTISEMENT, AMOUNTING TO RS. 32,36,036/-. TWO B ILLS OF RS. 57,600/- AND RS. 31,08,129/- HAVE BEEN PLACED IN THE PAPER BOO K ON PAGE NOS. 114 AND 115. BOTH THE BILLS ARE IN THE NAME OF VATIKA GROUP. THIS WILL CERTAINLY RAISE A SUSPICION AS TO WHETHER THE EXPENDITUR E WAS INCURRED FOR THE ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 24 PURPOSE OF BUSINESS OF THE ASSESSEE OR NOT. THE CASE MADE OUT BY THE LD. COUNSEL IS THAT THE EXPENDITURE WAS FOR THE PUR POSE OF BUSINESS OF THE ASSESSEE AND THE PAYEES WRONGLY MENTIONED THE AF ORESAID NAME, AS THEY HAD BEEN DEALING EARLIER WITH VARIOUS COMPANIES OF VATIKA GROUP. THE PAYMENT HAS BEEN MADE BY THE ASSESSEE. IT IS AL SO ASSERTED THAT THE EXPENDITURE HAS BEEN INCURRED IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE. HOWEVER, NO EVIDENCE EXISTS ON RECORD T HAT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS O F THE ASSESSEE. THIS CAN BE ASCERTAINED ONLY AFTER LOOKING INTO THE ADVERTI SEMENTS RELEASED BY HERALD ADVERTISING AGENCY AND MONTAGE. IN RESPECT OF OT HER BILLS ALSO, WHERE THE NAME OF THE ASSESSEE DOES NOT APPEAR CORREC TLY, IT IS NECESSARY TO MAKE FURTHER ENQUIRIES TO ASCERTAIN WHETHER THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUS INESS OF THE ASSESSEE. AS SUCH ENQUIRY HAS NOT BEEN CARRIED OUT, WE TH INK IT FIT TO RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE FURTHER ENQU IRY AND DECIDE THE ISSUE AS PER LAW, AFTER GIVING ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. IN THE RESULT:- (I) CROSS OBJECTION NO. 196(DEL)/2010 IS ALLOWED; ITA NOS. 2159 & 3671(DEL)/2010 & C.O NO. 196(DEL)/2010 25 (II) ITA NO. 2159(DEL)/2010 IS DISMISSED; AND (III) ITA NO. 3671(DEL)/2010 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES, AS INDICATED ABOVE. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 FEBRUARY, 2011. SD/- SD/- (RAJPAL YADAV) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 18TH FEBRUARY, 2011. SP SATIA COPY OF THE ORDER FORWARDED TO:- M/S VATIKA LIMITED, NEHRU PLACE, NEW DELHI. DY. CIT, CENTRAL CIR. 20, NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.