M/s Standard Combines Pvt. Ltd., Barnala V. ACIT, Sangrur

CO 32/CHANDI/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7133 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K GOYAL
• Assessee Lawyers: JAI SHREE SHARMA
• Keywords: Business income; Business expenditure; Additional evidence; Corroborative evidences; Capital expenditure
• Section: 37(1); 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 912/CHD/2010 ASSESSMENT YEAR: 2007-08 THE ACIT, VS M/S STANDARD COMBINES PVT. LTD., CIRCLE, BARNALA (PUNJAB) SANGRUR, PAN NO. AAFCS 4440L & C.O. NO. 32/CHD/2010 (IN ITA NO. 912/CHD/2010) ASSESSMENT YEAR: 2007-08 M/S STANDARD COMBINES PVT. LTD., VS THE ACIT, CIRC LE BARNALA (PUNJAB) SANGRUR SANGRUR, PAN NO. AAFCS 4440L (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JAISHREE SHARMA RESPONDENT BY : SHRI D.K.GOYAL DATE OF HEARING : 09.04.2012 DATE OF PRONOUNCEMENT : 11.04.2012 ORDER PER H.L.KARWA, VP THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A), PATIALA DATED 13.5.2010 RELATING TO ASSESSMENT YEAR 2007-08. 2 2. GROUND NO.1 OF THE APPEAL READS AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON ACCOUNT OF DISALLOWANCE UNDER THE HEAD MISC. EXPENSES, WITHO UT APPRECIATING THAT THE SAID PAYMENT HAD NOT BEEN LAI D OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSES SEES BUSINESS AND WAS, THEREFORE, NOT ALLOWABLE. IN TH E ALTERNATIVE, THE PAYMENT WAS IN THE NATURE OF CAPIT AL EXPENDITURE BEING OF ENDURING BENEFIT AND HENCE DISALLOWABLE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A PRIVATE LIMITED COMPANY DERIVES INCOME FROM MANUFACTURING A GRICULTURAL IMPLEMENTS, COMBINES, TRACTORS AND AUTOS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS D EBITED MISC. EXPENSES OF RS. 11,95,980/- TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE STATED THAT PAYMENT OF RS. 10,00,000/- OUT OF RS. 11,95,980/- W AS MADE TO STATE BANK OF INDORE FOR REMOVAL OF BAN FOR FINANCING STANDARD TR ACTORS. THE ASSESSEE ALSO STATED THAT AMOUNT OF RS. 10,00,000/- WAS MADE TO E NTER INTO A MOU (MEMORANDUM OF UNDERSTANDING) WITH STATE BANK OF IN DORE FOR FINANCING STANDARDS-MAKE TRACTORS. THE RELEVANT EXTRACTS OF THE SAME ARE REPRODUCED AS UNDER:- 1 THE PROPOSAL OF PAYMENTS OF RS. 7,35 LACS UPTO 31 ST MARCH 2006 AND BALANCE PAYMENT OF RS. 10.00 LACS ON OR BEFORE 31 ST MAY 2006 IS ACCEPTABLE. 2. IF THE BANK/BRANCH RECOVERS THE OUTSTANDING AMOUNT FROM THE BORROWERS/DEALERS/BANK OFFICER, THE N THE AMOUNT SO RECOVERED FROM THEM WOULD BE FIRST APPROPRIATE FOR RECOVERY OF OUTSTANDING LOAN, INTER EST OUTSTANDING, AND LEGAL EXPENSES ETC. AND REMAINING AMOUNT IF ANY MAY BE REFUNDED TO M/S STANDARD COMBINES PVT LTD. (TRACTOR DIVISION) BARNALA (PUNJA B). 3. AS SOON AS WE RECEIVED RS. 7.35 LACS, WE SHALL RECOMMEND/FORWARD THE PROPOSAL TO THE HIGHER 3 COMPETENT AUTHORITIES FOR LIFTING BAN ON FINANCING OF ITS MAKE OF TRACTOR AND INFORMING/OBTAINING CONCURRENCE FROM NABAD AND IBA. THIS MAY BE EXPECTED TO BE FINALIZED BY 31 ST MAY 2006. ACCORDING TO ASSESSING OFFICER, THE BANK IMPOSED A BAN ON THE FINANCING OF STANDARD-MAKE TRACTORS. THE BAN WAS REMOVED WITH TH E UNDERSTANDING OF MAKING PAYMENTS OF RS. 17,35,000/- (I.E. RS. 7,35,0 00/- UPTO 31.3.2006 AND RS. 10,00,000/- ON OR BEFORE 31.5.2006). DURING TH E FINANCIAL YEAR 2006-07, THE ASSESSEE MADE PAYMENT OF RS. 10,00,000/- TO STA TE BANK OF INDORE FOR LIFTING OF THE BAN ON FINANCING OF STANDARD-MAKE TR ACTORS. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO W HY RS. 10 LACS SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS TH E PAYMENT WAS MADE IN THE SHAPE OF PENALTY LEVIED AND RECOVERED BY THE BANK. IN RESPONSE TO ABOVE QUERY, THE ASSESSEES FILED A REPLY WHICH READS AS U NDER:- 3.2 WE HAVE DEBITED RS. 10,00,000/- UNDER THE HEAD MISC. EXPENSES AS PAYMENT MADE TO STATE BANK OF INDORE AS COMPENSATION FOR REMOVAL OF BAN ON FINANC ING STANDARD MADE TRACTORS. HERE WE WANT TO STATE THAT WE ARE SELLING STANDARD TRACTORS IN THE STATE OF MADHY A PRADESH & CHATTISGARH TO OUR DEALERS WHO SELL THE TRACTORS TO VARIOUS CUSTOMERS/FARMERS. FARMERS GENERALLY PURCHASE THE TRACTORS BY TAKING LOANS FRO M BANKS. STATE BANK OF INDORE IS THE HIGHER LENDER I N THE STATE OF MADHYA PARDESH AS FAR JAS AGRICULTURE SECT OR IS CONCERNED. THEY HAD FINANCED STANDARD MAKE TRACTOR S TO A NUMBER OF CUSTOMERS. OUT OF WHICH CERTAIN LOA NS BECAME IRREGULAR AND THE RECOVERY WAS NOT POSSIBLE. KEEPING IN VIEW HIGH LEVEL OF IRREGULAR LOANS IN STANDARD MAKE TRACTORS THEY IMPOSED A BAN ON FINANCING OF THE SAME. THAT RESULTED IN LOSS OF SA LE IN THE STATE OF MADHYA PARDESH & CHATTISIGARH. ALSO O UR DEALERS IN THESE STATES STARTED THREATENING TO QUIT TO DEALERSHIP OF STANDARD TRACTORS. TO MAKE GOOD THE LOSS OF THE SALES IN THESE STATES AND TO SAVE ON DEALER NETWORK WE APPROACHED THE BANK AUTHORITIES FOR LIFT ING BAN FROM FINANCING OF STANDARD MAKE TRACTORS. AFTE R A LONG DISCUSSION WITH BANK AUTHORITIES THEY AGREED TO LIFT THE BAN FROM STANDARD MAKE TRACTORS ON RECEIPT OF 17.35 LACS VIDE THEIR LETTER NO. 676 DATED 30.3.20 06. 4 4. THE ASSESSING OFFICER DID NOT FIND ANY MERIT IN THE ABOVE REPLY OF THE ASSESSEE STATING THAT THE ASSESSEE HAD NO DIRECT D EALING WITH THE STATE BANK OF INDORE. HE FURTHER OBSERVED THAT THE ASSESSEE HA D NO LIABILITY TO PAY ANY AMOUNT TO THE BANK. THE ASSESSING OFFICER ALSO STA TED THAT THE ASSESSEE HAD PAID THE AMOUNT OF RS. 10 LACS TO THE BANK WHICH WA S THE AMOUNT OF LOAN NOT RECOVERABLE FROM ITS CUSTOMERS. THE ASSESSING OFFI CER ALSO TOOK THE VIEW THAT THE EXPENSES CLAIMED BY THE ASSESSEE WAS NOT I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSES SING OFFICER ALSO HELD THAT THE PAYMENT OF THIS KIND IS AGAINST THE PRINCIPLES OF ACCOUNTING AS SOMEBODY ELSES LIABILITY HAS BEEN DISCHARGED BY THE ASSESSE E AS HAS BEEN CLAIMED AS BUSINESS EXPENDITURE WHICH IS NOT ALLOWABLE. THE A SSESSING OFFICER ALSO HELD THAT THE PAYMENTS IN QUESTION WAS IN THE NATURE OF PENALTY IMPOSED BY THE BANK FOR LIFTING OF BAN IMPOSED ON FINANCING OF THE ASSESSEES TRACTORS. HE, THEREFORE, DISALLOWED THE AMOUNT OF RS. 10 LACS CL AIMED BY THE ASSESSEE AS MISC. EXPENSES. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE TOOK THE FOLLOWING LINE OF ARGUMENTS:- I) THAT THE ASSESSING OFFICER ERRED IN DISALLOWING A S UM OF RS. 10 LACS OUT OF MISC. EXPENSES WHICH WERE ON ACC OUNT OF PAYMENT TO STATE BANK OF INDORE. II) THE ASSESSEE IS MANUFACTURING OF AGRICULTURAL IMPLEMENTS, COMBINES, TRACTORS AND AUTOS. THE COMPA NY IS MANUFACTURING TRACTORS UNDER THE BRAND NAME STANDARD TRACTORS. ALMOST ALL TRACTORS ARE PURCH ASED 5 BY FARMERS BY ARRANGING LOANS FROM BANKS. THE ASSES SEE HAS MAXIMUM SALES OF TRACTORS IN MADHYA PRADESH AND CHATTISGARH. A NUMBER OF TRACTOR LOANS BECAME NON- PERFORMING IN THE ABOVE SAID AREA ON ACCOUNT OF NON - PAYMENT OF INSTALLMENTS BY THE BORROWERS. THE STATE BANK OF INDORE CONDUCTED SURVEY OF TRACTOR LOANS AN D NOTED THAT LARGE NUMBER OF TRACTOR LOANS WHICH WERE NOT PAYING THE INSTALLMENTS, WERE OF STANDARD MAKE. ST ATE BANK OF INDORE IMPOSED BAN ON FINANCE OF TRACTORS O F STANDARD MAKE. THE TRACTOR DEALERS OF ASSESSEE S TARTED THREATENING US TO QUIT THE DEALERSHIP OF STANDARD M AKE IN VIEW OF SHARP DECLINE OF SALE DUE TO NON FINANCING. TO MAKE GOOD THE LOSS OF SALES IN THESE STATES AND TO SAVE THE DEALER NETWORK THE ASSESSEE APPROACHED THE BANK AUTHORITIES FOR LIFTING BAN FROM FINANCING OF STAND ARD MAKE TRACTORS AFTER LONG DISCUSSION WITH BANK AUTHORITIES. THEY AGREED TO LIFT THE BAN ON FINANC ING FROM STANDARD MAKE TRACTORS ON RECEIPT OF RS. 17.35 LAKHS. A SUM OF RS. 7.35 LACS WAS PAID IN MARCH 20 06 AND RS. 10 LACS WERE PAID IN MAY, 2006 AS PER MEMORANDUM OF UNDERSTANDING WITH THE BANK. III) THAT THE ABOVE SAID EXPENDITURE IS FULLY ALLOWABLE U/S 37(1) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE AC T'). IV) THAT THE FIVE CONDITIONS MENTIONED U/S 37(1) OF THE ACT ARE FULFILLED IN THE CASE OF THE ASSESSEE. V) THE TRUE TEST OF EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRADE AND BUSINESS I S THAT IT IS INCURRED BY THE ASSESSEE AS INCIDENTAL TO HIS TRADE FOR THE PURPOSE OF KEEPING THE TRADE GOING AND OF M AKING IT PAY AND NOT IN ANY OTHER CAPACITY THAN THAT OF A TRADER. 6. THE ASSESSEE ALSO RELIED UPON THE FOLLOWING DECI SIONS:- 6 I) CIT V. DELHI SAFE DEPOSIT CO. LTD (1982) 133 ITR 75 6 (SC) II) CIT V. CHANDULAL KESHAVLAL & CO. (1960) 38 ITR 601 (SC) III) CORP OF INDIA LTD. V. CIT (1972) 86 ITR 11 (SC) IV) INDIAN STEEL & WIRE PRODUCTS LTD. V. CIT (1968) 69 ITR 379 (CAL) V) ADDL CIT V. KUBER SINGH BHAGWANDASS (1979) 118 ITR 379 (MP) (FB) VI) ASSAM BROOK LTD V. CIT (2004) 267 ITR 121 (CAL) VII) CIT V. MADRAS REFINERIES LTD. (2004) 266 ITR 170 (M AD) VIII) CIT V. MADRAS REFINERIES LTD. (2004) 266 ITR 170 (M AD ) 7. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE OBS ERVING AS UNDER:- 4.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER, WRIT TEN AS WELL AS ORAL ARGUMENTS OF THE LD. COUNSEL FOR TH E ASSESSEE AND JUDGMENT OF THE TRIBUNAL AND HIGH COUR T CITED BY THE APPELLANT AND FIND FORCE IN THE ARGUME NTS OF THE LD. COUNSEL OF THE APPELLANT, THAT THE PAYMENT OF RS. 10 LACS TO STATE BANK OF INDORE IS NOT IN THE NATUR E OF PENALTY AND IS FOR THE BUSINESS NEEDS OF THE APPELL ANT TO MAINTAIN DEPLETING SALE ON ACCOUNT OF NON FINANCE. I AM INCLINED TO ACCEPT THE CONTENTION OF THE APPELLANT THAT THE PAYMENT IS FULLY COVERED U/S 37(1) AND ALL THE FIVE CONDITIONS STATED IN THE SECTIONS ARE SATISFIED, TH EREFORE, THE ADDITION OF RS. 10 LACS MADE BY THE ASSESSING O FFICER IS NOT SUSTAINABLE AND IS DIRECTED TO BE DELETED . 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. SMT. JAISHREE SHARM A LD. DR HEAVILY RELIED UPON THE ORDER OF THE ASSESSING OFFICER. SHRI D.K. GOYAL, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IN OUR CONSIDERED VIEW, THE CIT(A) WAS FULLY JUSTIFIED IN ALLOWING THE IMPUGNED EXPENDITURE U/S 37(1) OF THE ACT. THE CONDITIONS F OR ALLOWANCE U/S 37(1) OF THE INCOME TAX ACT ARE AS UNDER:- (A) SUCH EXPENDITURE SHOULD NOT BE COVERED IN THE SPECIFIC SECTION I.E. SECTIONS 30 TO 36 OF THE ACT 7 (B) EXPENDITURE SHOULD NOT BE OF CAPITAL NATURE (C) THE EXPENDITURE SHOULD HAVE BEEN INCURRED DURING THE PREVIOUS YEAR. (D) THE EXPENDITURE SHOULD NOT BE OF PERSONAL NATURE (E) THE EXPENDITURE SHOULD HAVE BEEN INCURRED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSI ON. 9. IN THE INSTANT CASE, THERE IS NO DISPUTE REGARDI NG THE CONDITIONS (A) TO (D) (SUPRA). THE CONDITIONS MENTIONED IN (E) PROVI DES THAT THE EXPENDITURE SHOULD HAVE BEEN INCURRED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION. IT IS SETTLED POSITION OF LAW THAT THE EXPRESSION WHOLLY AND EXCLUSIVELY IN SECTION 37(1) DOES NOT MEAN NECESSAR ILY. ORDINARILY, IT IS FOR THE ASSESSEE TO DECIDE WHETHER ANY EXPENDITURE SHOU LD BE INCURRED IN THE COURSE OF ITS OR HIS BUSINESS OR PROFESSION. IT IS ALSO TRUE THAT SUCH EXPENDITURE MAY BE INCURRED VOLUNTARILY AND WITHOUT ANY NECESSITY, AND IF IT IS INCURRED FOR PROMOTING THE BUSINESS AND TO EARN PROFITS, THE ASSESSEE CAN CLAIM DEDUCTION THEREOF U/S 37(1) EVEN THOUGH THERE WAS NO COMPELLING NECESSITY TO INCUR SUCH EXPENDITURE. 10. IN THE INSTANT CASE, PAYMENT OF RS. 10 LACS HAS BEEN MADE TO CARRY ON THE BUSINESS OF THE ASSESSEE IN THE STATE OF MADHYA PRADESH AND CHATTISGARH WHERE THE ASSESSEE HAS SUBSTANTIAL SALES WHICH WERE IN DANGER AND EVEN DEALER NETWORK WHICH TAKES YEARS TO STABILIZE WAS I N DANGER, AS SUCH THE PAYMENT HAS BEEN MADE ON ACCOUNT OF COMMERCIAL EXPE DIENCY AND IS FULLY ALLOWABLE. THERE IS NO DISPUTE THAT THE PAYMENT OF RS. 10 LAKHS HAS BEEN MADE TO THE NATIONALIZED BANK I.E STATE BANK OF IND ORE, WHICH IS SUBSIDIARY OF STATE BANK OF INDIA TO MAINTAIN THE BUSINESS. THE A SSESSING OFFICER ALSO 8 OBSERVED THAT THE PAYMENT OF RS. 7.35 LACS PAID IN MARCH 2006 HAS BEEN ALLOWED AS DEDUCTION UNDER BUSINESS INCOME IN ASSES SMENT YEAR 2006-07. THUS, THERE IS NO JUSTIFICATION IN MAKING DISALLOWA NCE OF SIMILAR PAYMENT MADE BY THE ASSESSEE IN ASSESSMENT YEAR 2007-08. W E ALSO AGREE WITH THIS OBSERVATION OF THE CIT(A) THAT PAYMENT OF RS. 10 LA CS MADE TO THE STATE BANK OF INDORE WAS NOT IN THE NATURE OF PENALTY AND WAS FOR THE BUSINESS NEEDS OF THE ASSESSEE TO MAINTAIN DEPLETING SALES ON ACCOUNT OF NON FINANCE, AND THE PAYMENT IS FULLY COVERED U/S 37(1) OF THE ACT. IN OUR VIEW, THERE IS NO MERIT IN THE ALTERNATIVE SUBMISSION OF THE LD. DR THAT TH E PAYMENT WAS IN THE NATURE OF CAPITAL EXPENDITURE BEING OF ENDURING BEN EFIT AND HENCE DISALLOWABLE. WE, THEREFORE, DO NOT SEE ANY MERIT IN THIS GROUND AND ACCORDINGLY THE SAME IS DISMISSED. 11. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON ACCOUNT OF INVESTMENT IN BUILDING, WTHOUT APPRECIATING THAT THE VALUATION DETERMINED BY THE DISTRICT VALUATION OFFI CER WAS CORRECT AND ALSO, WAS THE ACTUAL INVESTMENT MAD E BY THE ASSESSEE. 12. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFF ICER MADE AN ADDITION OF RS. 4,05,759/- ON ACCOUNT OF DIFFERENCE IN INVES TMENT IN BUILDING AS SHOWN BY THE ASSESSEE AND AS DETERMINED BY THE DVO. ON APPEAL, THE CIT(A) DELETED THE ADDITION OBSERVING THAT THE COURTS HAV E HELD DIFFERENCE UPTO 10% TO 15% HAVE TO BE IGNORED AND NO ADDITION IS CALLED FOR. THE CIT(A) OBSERVED THAT ACTUAL EXPENDITURE BASED ON PROPER V OUCHERS AMOUNTING TO RS. 1,11,68,000/- HAS BEEN DEBITED IN THE BOOKS OF ACCO UNT IN THE YEAR UNDER CONSIDERATION FOR BUILDING AT BARNALA AGAINST WHICH THE DVO HAS MADE 9 VALUATION AT RS. 1,15,73,759/-, A DIFFERENCE OF 3.5 % ONLY. SIMILARLY, THE INVESTMENT IN BUILDING AT SHAHPUR UNIT, BADDI AS PE R BOOKS OF ASSESSEE IS RS. 62,23,884/- AGAINST VALUATION BY DVO AT RS. 60,18,2 92/-. ACCORDING TO CIT(A), THE CONSOLIDATED DIFFERENCE OF RS. 2,00,367 /- ON CONSOLIDATED INVESTMENT AS SHOWN BY ASSESSEE AT RS. 1,93,91,684/ - AND AS DETERMINED BY DVO AT RS. 1,75,92,051/- IS HARDLY 1.14% OF THE VAL UATION MADE. THE CIT(A) TOOK THE VIEW THAT DIFFERENCE UP TO 10% TO 15% HAVE TO BE IGNORED AND NO ADDITION IS CALLED FOR. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE FINDI NGS GIVEN BY CIT(A) ON THIS ISSUE IS TENABLE IN VIEW OF THE DECISION OF HO N'BLE PATNA HIGH COURT IN THE CASE OF BIMLA SINGH V CIT (MISC. APPEAL NO. 46/ 2002, DATE OF DECISION 22.10.2008) (2009) 1 SET 102, WHEREIN IT HAS BEEN H ELD AS UNDER:- IN VALUATION OF PROPERTY, BONAFIDE DIFFERENCE IS B OUND TO OCCUR. DETERMINATION OF VALUE OF PROPERTY BY A VALUER IS GENERALLY A MATTER OF ESTIMATE BASED ON S OME EXTENT ON GUESS AND DESPITE UTMOST BONAFIDE, THE ESTIMATION OF THE VALUE OF THE HOUSE IS BOUND TO VA RY. DIFFERENCE BETWEEN THE COST OF CONSTRUCTION ESTIMAT ED BY THE DEPARTMENT VALUER AND THE COST DISCLOSED BY THE ASSESSEE IS BEING LESS THAN 15%, THE SAID DIFFERENC E IS SO MEAGER THAT ONE CAN ASSUME IT TO BE BONAFIDE DIFFER ENCE, FIT TO BE IGNORED FOR THE PURPOSE OF ADDITION. NO OTHER CONTRARY DECISION OF ANY COURT WAS BROUGHT TO OUR NOTICE BY THE LD. DR. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON 'BLE PATNA HIGH COURT IN THE CASE OF BIMLA SINGH V CIT (SUPRA), WE UPHOLD TH E ORDER OF CIT(A) AND DISMISS GROUND NO.2 OF THE APPEAL. 14. GROUND NOS. 3 AND 4 READ AS UNDER:- 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON ACCOUNT OF 10 DISALLOWANCE UNDER THE HEAD PENALTY ON THE BASIS OF CHALLAN PRODUCED BY THE ASSESSEE WHICH DOES NOT CONCLUSIVELY PROVE THAT THE AMOUNT CHARGED WAS NOT IN THE NATURE OF PENALTY WHEREAS THE TAX AUDITOR HAS G IVEN A CLEAR CUT FINDING THE SAID AMOUNT IS PENALTY CHAR GED BY J&K SALE TAX AUTHORITY AS PER PARA 17(E) OF THE AUDIT REPORT IN FORM NO. 3C. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN GIVING BENEFIT OF DOUBT TO THE ASSESSEE WITHOUT APPRECIATING THAT IN VIEW OF THE C LEAR CUT FINDING OF THE TAX AUDITOR TO THE CONTRARY, IT WAS FOR THE ASSESSEE TO LEAD AN EVIDENCE TO SUBSTANTIAT E ITS CLAIM THAT THE PAYMENT WAS NOT IN THE NATURE OF PEN ALTY AND HAVING FAILED TO DO SO, UNDER THE PROVISIONS OF SECTION 114 OF THE INDIAN EVIDENCE ACT, THE AO WAS JUSTIFIED IN TAKING AN ADVERSE VIEW. 15. VIDE GROUND NOS. 3 AND 4 OF THE APPEAL, THE REV ENUE HAS CHALLENGED THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWAN CE OF RS. 1,43,324/- MADE ON ACCOUNT OF SALES TAX DEBITED TO THE PROFIT AND L OSS ACCOUNT. THE ASSESSING OFFICER TREATED THE AMOUNT OF RS. 1,43,324/- PAID B Y THE ASSESSEE TO J&K SALES TAX AUTHORITIES AS PENALTY. THE ASSESSING OF FICER ASKED THE ASSESSEE AS TO WHY WAS THE PENALTY LEVIED AND WHY SHOULD NOT BE ADDED BACK. IN THIS REGARD, THE ASSESSEE SUBMITTED AS UNDER:- WE HAD SOLD TWO NO. OF TRACTOR VIDE INVOICE 23 DAT ED 28.3.2006 IN THE STATE OF JAMMU & KASHMIR TO M/S MEERA MOTORS (P) LTD., JAMMU AMOUNTING TO RS. 5,96,226/- THE SAME TRACTORS WERE INTERCEPTED BY J& K SALES TAX AUTHORITIES AT KATHUA AND CHARGED TO TAX U/S 67(5) OF THE J&K SALES TAX ACT AT THE MAXIMUM RATE OF TAX OF 24% APPLICABLE IN THE STATE OF J&K SUBJECT TO NIL PENALTY. THE SAME WAS DEPOSITED ON 27.4.2006 VIDE DD NO. 019717 DATED 27.4.2006 AMOUNTING RS. 1,43,324/- TO SETTLE THE ISSUE AND TH E SAME IS CHARGED TO PROFIT AND LOSS ACCOUNT. COPY OF CHALLAN AND BILL IS ALREADY SUBMITTED. 16. THE ASSESSING OFFICER DID NOT FIND FORCE IN THE ABOVE REPLY OF THE ASSESSEE STATING THAT NO DOCUMENTARY EVIDENCE HAS B EEN PROVIDED BY THE 11 ASSESSEE THAT THIS IS SALES TAX LEVIED BY J&K SALES TAX AUTHORITIES AND NOT PENALTY. HE, THEREFORE, DISALLOWED RS. 1,43,324/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE HAS SU BMITTED A COPY OF CHALLAN OF PAYMENT WHICH IS AVAILABLE AT PAGE 14 OF ASSESSE ES PAPER BOOK. THE CHALLAN CONTAINS COLUMN OF TAX, INTEREST AND PENALT Y. WE FIND THAT COLUMN OF TAX HAS BEEN FILLED-IN AND THE COLUMNS OF INTEREST AND PENALTY ARE BLANK AND AS SUCH THE ADDITION OF RS. 1,43,324/- IS UNWARRANT ED. IN OUR VIEW, THE CIT(A) HAS CORRECTLY APPRECIATED THIS CONTENTION OF THE ASSESSEE THAT THE PAYMENT IN QUESTION WAS MADE ON ACCOUNT OF DIFFEREN CE IN TAX IN THE STATES OF PUNJAB AND JAMMU & KASHMIR STATES WHICH HAS BEEN PAID AT THE BARRIER NEAR JAMMU AT THE ENTRY POINT OF JAMMU & KASHMIR. THERE IS NOTHING ON RECORD TO CONTROVERT THE FINDINGS GIVEN BY THE CIT( A) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) AND DISM ISS GROUND NOS. 3 & 4 OF THE APPEAL. 18. C.O. NO. 32/CHD/2010 IN ITS CROSS OBJECTION NO. 32/CHD/2010, THE ASSESSE E HAS TAKEN THE FOLLOWING GROUND:- BECAUSE THE ACTION IS BEING CHALLENGED ON FACTS AND LAW FOR UPHOLDING THE DISALLOWANCE OF DEDUCTION U/S 80G AMOUNTING TO RS. 30,000/- WHEREAS THE NON FILING OF THE EVIDENCE SAME WAS RELATABLE TO THE REASONING OF NOT LOCATABLE IN THE OFFICE. 12 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIALS AVAILABLE ON RECORD. BOTH THE AUTHORITIE S BELOW HAVE CATEGORICALLY STATED THAT NO CERTIFICATE / EVIDENCE OF PAYMENT TO RED CROSS QUALIFYING FOR 100% DEDUCTION WAS BROUGHT ON RECORD. AT THIS STAG E ALSO, THE ASSESSEE HAS NOT SUBMITTED ANY APPLICATION UNDER RULE 29 OF APPE LLATE TRIBUNAL RULES, 1962 FOR PRODUCTION OF ADDITIONAL EVIDENCE OF PAYME NT OF RS. 30,000/- TO RED CROSS QUALIFYING FOR 100% DEDUCTION. IN FACT, THE ASSESSEE FAILED TO DISCHARGE THE BURDEN THAT LAY ON IT UNDER THE LAW. IN THE ABSENCE OF ANY SUPPORTING EVIDENCE, THE CLAIM MADE BY THE ASSESSEE CANNOT BE ALLOWED. CONSEQUENTLY, WE REJECT THE GROUND OF THE ASSESSEE. 20. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF APRIL, 2012 SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 11 TH APRIL, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR