M/s Cremica Frozen Food Pvt. Ltd., Ludhiana V. ACIT, Ludhiana

CO 60/CHANDI/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7154 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 26-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Unexplained expenditure
• Section: 69C; 142(1); 115JB

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. 713/CHD/2011 ASSESSMENT YEAR: 2005-06 THE ACIT, VS M/S CREMICA FROZEN FOOD PVT LTD., CIRCLE-III, LUDHIANA LUDHIANA PAN NO. AAACC6846K & C.O.NO. 60/CHD/2011 (IN ITA NO. 713/CHD/2011) ASSESSMENT YEAR: 2005-06 M/S CREMICA FROZEN FOOD PVT LTD., VS THE ACIT, CIR CLE-III, LUDHIANA LUDHIANA PAN NO. AAACC6846K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARWAL RESPONDENT BY : SHRI MANJEET SINGH DATE OF HEARING : 26.04.2012 DATE OF PRONOUNCEMENT : 17.05.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-I I, LUDHIANA DATED 27.4.2011 RELATING TO ASSESSMENT YEAR 2005-06. 2 2. GROUND NO. 1OF THE REVENUES APPEALS READS AS UN DER:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N REDUCING THE ADDITION U/S 69C OF THE INCOME TAX ACT , 1961 ON ACCOUNT OF EXCESS CONSUMPTION OF RAW MATERIAL TO 15% OF TOTAL ADDITION I.E. FROM RS. 11,88,224/- TO RS. 1,78,234/- THEREBY ALLOWING RELIEF OR RS. 10,09,990 /- WITHOUT GIVING ANY COGENT REASON. 2. GROUND NO.2 OF THE ASSESSEES CROSS OBJECTION RE ADS AS UNDER:- 2. THAT THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,78,234/- ON ACCOUNT OF ALLEGED EXCESS CONSUMPTION OF RAW MATERI AL IN THE MANUFACTURE OF ICE CREAM IGNORING THE FACT T HAT NO DEFECT WAS POINTED OUT IN THE ACCOUNT OF THE APPELL ANT. 3. IN THIS CASE THE ASSESSING OFFICER MADE ADDITION OF RS. 11,88,224/- U/S 69C OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT' ). ON APPEAL, THE CIT(A) ALLOWED A RELIEF OF RS. 10,09,990/- TO THE ASSESSEE AND SUSTAINED THE ADDITION OF RS. 1,78,234/-. THE REVENUE HAS FILED THE INSTA NT APPEAL AGAINST THE RELIEF ALLOWED BY THE CIT(A) AND ASSESSEE HAS FILED THE CR OSS OBJECTION AGAINST THE ADDITION OF RS. 1,78,234/- SUSTAINED BY CIT(A). 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ICE CREAMS. IN TH E ASSESSMENT YEAR 2004-05, THE ASSESSEE FILED THE RETURN OF INCOME ON 31.10.20 05 DECLARING A LOSS OF RS. 64,712/- AND BOOK PROFIT U/S 115JB AT RS. 11,02,368 /-. THE RETURN WAS PROCESSED U/S 143(1) ON 16.1.2006. NOTICES U/S 14 3(2) AND 142(1) ALONGWITH 3 QUESTIONNAIRE WERE ISSUED TO THE ASSESSEE. THE REPL Y DATED 18.12.2007 AND 20.12.2007 SUBMITTED BY THE ASSESSEE WERE FOUND TO BE NOT SATISFACTORY AND LACKED CLARITY AND AUTHENTICITY. THE ASSESSING OFF ICER OBSERVED THAT ON GOING THROUGH THE REPLY FILED BY THE ASSESSEE, CERT AIN COMPLEXITY AROSE AND HE, THEREFORE, REFERRED THE MATTER TO SPECIAL AUDIT U/S 142(2A) AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE AS TO WHY SPECIAL A UDIT SHOULD NOT BE CARRIED OUT AS PER PROVISIONS TO SECTION 142(2A) OF THE ACT . AFTER OBTAINING NECESSARY PERMISSION FROM THE CIT-I, LUDHIANA, THE CASE WAS ASSIGNED FOR SPECIAL AUDIT U/S 142(2A) OF THE ACT TO M/S KUMAR A SHWANI & ASSOCIATES, 85, GREEN PARK, COOL ROAD, JALANDHAR CITY, CHARTERE D ACCOUNTANTS. 5. THE SPECIAL AUDIT WAS CARRIED OUT AND ASSESSEE S UBMITTED THE REPLY ON 30.6.2008 RAISING CERTAIN OBJECTIONS WHICH ARE MENT IONED IN PARA 4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER OBSERVED TH AT THE OBJECTIONS RAISED BY THE ASSESSEE ARE COMPLETELY BASELESS AND WITHOUT ANY SUBSTANCE FOR WHICH HE HAS GIVEN REASONS IN PARA 6 OF THE ASSESSMENT OR DER. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE COMPANY WIT HDREW THEIR OBJECTIONS AGAINST THE SPECIAL AUDIT REPORT VIDE LETTER DATED 21.7.2008. ACCORDING TO ASSESSING OFFICER, IN SPECIAL AUDIT REPORT, THE FOL LOWING POINTS WERE RAISED. 'AS SUBMITTED IN ANNEXURE A-2 CREAM, SUGAR & MILK A RE THE MAIN RAW MATERIALS FOR THE MANUFACTURING OF ICE CRE AM. NO STOCK IS KEPT FOR THE CREAM & MILK. HOWEVER THE STO CK FOR SUGAR IS KEPT. MONTH WISE PURCHASE / /CONSUMPTION O F CREAM IS AS PER ANNEXURE-9. MONTH WISE PURCHASE / CONSUMPTIO N OF MILK IS AS PER ANNEXURE A-10 . MONTH WISE PURCHASE / CONSUMPTION OF SUGAR IS AS PER ANNEXURE A-11. DETAI L OF 4 FLAVOUR WISE SALE OF ICE CREAM IS AS PER ANNEXURE A -12. DETAIL OF MONTH WISE PRODUCTION & SALE OF ICE CREAM ALL FL AVOR IS AS PER ANNEXURE A-13. DETAIL OF QUANTITATIVE & AMOUNT WISE CONSUMPTION OF ALL INGREDIENTS RAW MATERIAL IS AS PER ANNEXURE A-14. DURING THE YEAR THERE WAS MANUFACTURING OF 2,40,519 LTS OF ICE-CREAM. AS PER THE INFORMATION OBTAINED ONE LITE R OF ICE CREAM WEIGHT IS 555GRAMS. SO IN KGS THE PRODUCTION OF ICE CREAM IS 1,33,488.600 KGS. HOWEVER, THE WEIGHT OF A LL THE INGREDIENTS COMES TO 1,48,186.568 KG THEREBY GIVING A DIFFERENCE OF 14,697.968 KG IN PRODUCTION. THE WEIG HT WISE DETAILS OF RAW MATERIAL CONSUMPTION ARE GIVEN IN AN NEXURE A- 15.' 6. REGARDING THE ABOVE DISCREPANCIES, THE ASSESSIN G OFFICER REQUIRED THE ASSESSEE VIDE SHOW CAUSE NOTICE DATED 21.7.2008 TO EXPLAIN THE SAME. THE ASSESSEE VIDE REPLY DATED 5.8.2008 SUBMITTED THAT T HERE IS A VARIATION OF + / - 5% IN THE WEIGHT TO LITER RATIO DUE TO AIR CONTENT VARIATION AND DUE TO DIFFERENT FLAVOURS. ON THIS BASIS, THE ASSESSEE FU RNISHED ITS OWN CALCULATION AND CLAIMED THAT THE ACTUAL VARIANT IN CONSUMPTION AS AGAINST THE STANDARD CONSUMPTION IS ONLY 4561 KG AND NOT 14698 KG AS ALL EGED IN THE SPECIAL AUDIT REPORT. THE ASSESSEE CLAIMED THAT THESE VAR IANCES ARE ONLY 3.07% WHICH IS NEGLIGIBLE. THE ASSESSEE HAS ALSO CLAIMED THAT THE WEIGHT OF ICE CREAM IN ONE LITER IS NOT ALWAYS 555 GMS AND IT CAN VARY. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSES SEE AND MADE AN ADDITION OF RS. 11,88,224/-, OBSERVING AS UNDER:- 5 11.3 THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED . THE OBSERVATIONS MADE BY THE SPECIAL AUDITOR IS FROM TH E RECORDS MAINTAINED BY THE ASSESSEE ITSELF. IF THE ASSESSEE CLAIMS THAT THERE IN NO WAY OF CONVERTING ICE CREAM FROM LITRES TO KGS., THEN IT WILL NEVER BE POSSIBLE TO VERIFY THE ASSESS EE'S PRODUCTION DATA BECAUSE THE RAW MATERIALS ARE IN KG S. AND THE OUTPUT IS IN LITRE. THEREFORE, THE STANDARD ADOPTE D BY THE SPECIAL AUDITOR BASED ON THE INFORMATION OBTAINED B Y THEM FROM ASSESSEE HAS TO BE RELIED UPON. IN ANY CASE TH E CLAIM OF THE ASSESSEE THAT THE CONVERSION RATIO IS VARIABLE DOES AFFECT THE CALCULATION BECAUSE THE VARIATION WILL ALWAYS B E EQUALLY SPREAD ON BOTH SIDES OF THE STANDARD OF 555 GMS. TH E ASSESSEE HAS NOT STATED THAT IF 1,33,488.600 KGS IS NOT THE WEIGHT OF 2,40,519 LITRES OF ICE CREAM THEN ALTERNATIVELY WHA T IS THE WEIGHT OF THIS QUANTITY OF ICE CREAM IN ANY OTHER U NIT OF MEASUREMENT AND WHAT IS ITS BASIS OF THESE CALCULAT ION. THEREFORE, THE EXPLANATION OF THE ASSESSEE IS NOT C REDIBLE AND PLAUSIBLE. THUS, 1,33,488.60 KG OF ICE CREAM PRODUC ED WHILE 1,48,186.568 KGS RAW MATERIAL HAS BEEN USED. BUT FR OM THE ACCOUNT OF THE ASSESSEE IT IS NOT VISIBLE THAT WHAT HAS HAPPENED TO THE DIFFERENCE OF 14,697.968 KGS OF MAT ERIAL. IN ABSENCE OF ANY EXPLANATION OR ANY DOCUMENTARY EVIDE NCE TO PROVE THE CONTENTIONS IT IS LOGICALLY INFERRED THAT THIS MATERIAL HAS ALSO BEEN SOLD AFTER CONVERSION INTO ICE CREAM THUS MAKING UNACCOUNTED SALE OF ICE CREAM. THE TOTAL DECLARED S ALE IS RS. 1,07,91,582/- AND IN QUANTITY IT IS 2,40,519 LITRES = 1,33,488.60 KGS. THUS THE AVERAGE SALE RATE OF ICE CREAM IS RS.80.84 PER KG. THIS AVERAGE SALE PRICE OF RAW MAT ERIAL RS. 80.84 PER KG APPLIED TO 14697.968 KGS OF REPRESENTS UNACCOUNTED EXPENDITURE OF RS. 11,88,224/-, NO EXPE NSE IS HEREBY ALLOWED TO THE ASSESSEED SINCE THIS PRODUCTI ON IS TAKEN OUT OF BOOKS OF ASSESSEE AS CLAIMED BY THE ASSESSEE ON WHICH EXPENSES ARE ALREADY CLAIMED. ON THIS BASIS, THE VA LUE OF UNACCOUNTED EXPENDITURE IS RS.11,88,224/ : . ACCORDINGLY, AN 6 ADDITION OF RS. L1,88,2247- IS MADE TO THE RETURNED INCOME OF THE ASSESSEE U/S 69C OF THE I.T. ACT. I AM SATISFIE D THAT THE ABOVE ACT OF THE ASSESSEE IS WILLFUL ATTEMPT TO CON CEAL INCOME, HENCE, PENALTY PROCEEDINGS U/S 271(1)(C) ARE BEING INITIATED SEPARATELY FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. 7. ON APPEAL, THE CIT(A) DECIDED THE ISSUE OBSERVING AS UNDER:- 5. GROUND NO. 9 IS AGAINST AN ADDITION OF RS, 11, 88,224/- ON ACCOUNT OF EXCESS CONSUMPTION OF RAW MATERIAL IN TH E MANUFACTURE OF ICE CREAM. THE A.O. RELIED ON THE REPORT OF THE SPE CIAL AUDITORS FOR MAKING THE SAID ADDITION ON THE ASSUMPTION THAT SIN CE THE NET WEIGHT OF ONE LITER ICE CREAM IS 555GMS, THE CONSUMPTION OF R AW MATERIAL TO PRODUCE ONE LITER ICE CREAM SHOULD ALSO BE 555 GMS. THIS ASSUMPTION OF A.O CANNOT BE ACCEPTED. IN ANY MANUFACTURING PRO CESS THE PRODUCTION LOSSES ARE INEVITABLE. MANUFACTURING OF ICE CREAM INVOLVES HEATING AND BOILING OF MILK ETC., THEREFORE THERE H AVE TO BE EVAPORATION LOSSES. I ALSO AGREE WITH THE CONTENTION OF THE APP ELLANT THAT THE PRODUCTION OF FOOD PRODUCTS INVOLVES DEALING WITH P ERISHABLE ITEMS WHERE AGAIN WASTAGE CANNOT BE AVOIDED. THE APPELLAN T HAS ALSO MAINTAINED PROPER STOCK RECORDS WHICH HAVE BEEN DUL Y AUDITED AND HAS SUBMITTED THE CHART OF QUANTITATIVE CONSUMPTION IN THE WRITTEN SUBMISSIONS FILED. IT HAS FURTHER, BEEN SUBMITTED T HAT THE ADDITION CANNOT BE MADE MERELY ON THE BASIS OF CONJECTURES A ND SURMISES AND WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS AND RE JECTING THE BOOKS OF ACCOUNT. THE APPELLANT HAS PLACED RELIANCE ON THE F OLLOWING DECISIONS IN SUPPORT OF HIS CONTENTION: I) YOG RAJ SONI V ACIT (2008) 26 SOT 67 (DELHI) (UR O) II) ACIT VS. MAHESHWARI ROSIN &TURPENTINE WORKS & ORS. (2008) 16 DTR (ASR)(TRIB)313 7 III) ACIT VS. MAHESH T PATODIA (2001) 79 ITD 40 (PUNE) IV) ITO VS. ARUN KUMAR GUPTA (2006) 103 TTJ (JD) 134 V) ASHOK KUMAR & CO. VS. ITO (2004) 90 TTJ (ASR) 666 VI) VIJAY INDUSTRIES VS. ITO (2007) 112 TTJ (JP) 35 3 VII) CIT VS. GOTAN LIME KHANIJ UDHYOG (2002) 256 ITR 243 (RAJ) VIII) KUMAR AEROSOLES (P.) LTD. VS. ACIT (1996) 55 TTJ ( DEL)385 IX) CIT VS. CENTRAL PROVINCES MANGANESE ORE CO . LTD. (2008) 296 ITR 217 (BOM) X) NIKKA MAI JEWELLERS VS. ACIT CHANDIGARH BENCH OR DER DATED 24.09.2008 XI) NIKKA MAI JEWELLERS CIT (A) ORDER FOR ASSE SSMENT YEAR 2005-06 DATED 23.12.2008 XII) CIT VS. OM OVERSEAS (2008) 3 15 ITR 185 (P &H ) 5.1 KEEPING IN VIEW THE ABOVE FACTUAL POSITION OF THE CASE AND AFTER CONSIDERING THE FACTS OF THE CASE, I AM OF TH E VIEW THAT THE ADDITION MADE BY THE A.O IS NOT BASED ON ANY COGENT REASON BUT THE EXCESS CONSUMPTION OF RAW MATERIAL IS ALSO NOT FULL Y NEGLIGIBLE, THEREFORE, IT WILL BE FAIR TO RESTRICT THE DISALLOW ANCE TO THE EXTENT OF 15% OF TOTAL DISALLOWANCE. THUS, THE DISALLOWANCE O F RS. 1,78,234/- IS. UPHELD AND REMAINING OF RS. 10,09,990/- IS DIRE CTED TO BE DELETED 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. AS PER THE ASSESSIN G OFFICER, THE SPECIAL AUDITORS HAD PREPARED THE WEIGHT WISE CONSUMPTION O F MATERIALS CONSUMED IN 8 ANNEXURE A-3. IN PARA 11.1 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MENTIONED THAT IT IS OBSERVED FROM THE SPECIAL AUDIT REPORT THAT D URING THE YEAR THERE WAS MANUFACTURING OF 240519 LTS. AS PER THE INFORMATION OBTAINED, ONE LITER OF ICE CREAM WEIGHT IS 555 GMS. SO IN KGS THE PRODUCTION OF ICE CREAM IS 1,33,488.600 KGS. HOWEVER, THE WEI GHT OF ALL THE INGREDIENTS COMES TO 1,48,186.568 KG THEREBY GIVING A DIFFERENC E OF 14,697.968 KG IN PRODUCTION. THE WEIGHT WISE DETAILS OF RAW MATERIAL CONSUMPTION ARE GIVEN IN A-15 OF THE SPECIAL AUDIT REPORT. YOU ARE HEREBY GI VEN THE FINAL OPPORTUNITY TO EXPLAIN THIS DISCREPANCY . IN PARA 11.3, THE ASSESSING OFFICER HAS CALCULATED THE VALUE OF EXTRA CONSUMPTION OF RAW M ATERIAL OF 14697.968 BY TAKING AVERAGE RATE OF THE MATERIAL @ 80.84 AND MAD E AN ADDITION OF RS. 11,88,224/- ON ACCOUNT OF EXCESS CONSUMPTION OF RAW MATERIAL IN THE MANUFACTURING OF ICE CREAM RELYING ON THE REPORT OF THE SPECIAL AUDITORS. THE ASSESSING OFFICER HAS TAKEN THE WEIGHT OF ONE L ITER OF ICE CREAM EQUAL TO 555 GMS. THE ASSESSING OFFICER ASSUMED THAT SINCE T HE NET WEIGHT OF ONE LITER OF ICE CREAM IS 555 GMS, THE CONSUMPTION OF RAW MAT ERIAL TO PRODUCE ONE LITER ICE CREAM SHOULD ALSO BE 555 GMS. IN OUR VIEW, THIS ASSUMPTION OF THE ASSESSING OFFICER IS NOT BASED ON ANY SUPPORTING MA TERIAL. IN OUR CONSIDERED VIEW THERE IS A MERIT IN THE SUBMISSION OF SHRI SUB HASH AGGARWAL, LD. COUNSEL FOR THE ASSESSEE THAT THERE IS NO PROCESS O R EQUIPMENT WHEREBY ONE LITER OF ICE CREAM CAN BE CALCULATED TO BE EQUAL TO 555 GMS. HE FURTHER SUBMITTED THAT EVEN OTHERWISE THE WEIGHT OF ICE CRE AM VARIES FROM FLAVOUR TO FLAVOUR AND THE VARIATION IS FROM 540 GMS TO 580 G MS PER LITER AND THERE IS ALWAYS A VARIATION OF + / - IN THE WEIGHT TO LITER RATIO DUE TO AIR CONTENT VARIATION AT THE TIME OF PRODUCTION OF ICE CREAM. IT IS TRUE THAT IN ANY MANUFACTURING PROCESS, THE PRODUCTION LOSSES CANNOT BE RULED OUT. IN THIS 9 CASE, THE ASSESSING OFFICER HAS MADE ADDITION RELYI NG ON THE OPINION OF SPECIAL AUDITORS AND HE HAS NOT APPLIED HIS MIND IN DEPENDENTLY. SHRI SUBHASH AGGARWAL, LD. COUNSEL FOR THE ASSESSEE POIN TED OUT THAT THE SPECIAL AUDITOR HAVE NOT TAKEN INTO CONSIDERATION THE FOLLO WING IMPORTANT POINT RELATING TO MANUFACTURING OF ICE CREAM. EVAPORATION LOSS OF MILK, CREAM AND OTHER RAW MATER IALS DURING THE PASTEURIZATION (HEATING & BOILING) PROCE SS. PROCESS LINE LOSSES DURING HOMOGENIZATION (PROCESSE D RAW MATERIAL WHICH IS LEFT IN THE PIPE LINE AND CAN NOT BE TAKEN OUT.) LOSS OF PROCESSED RAW MATERIAL IN AGEING VATS WHERE THE RAW MATERIALS ARE STORE PRIOR TO FREEZING. LOSSES DURING THE FREEZING OF PROCESSED RAW MATERIA L TO ICE CREAM OCCUR WHEN THE FREEZER IS CLEANED FOR BAT CH CHANGE OVER. 9. IN OUR VIEW, THE ASSESSING OFFICER HAS NOT CORRE CTLY APPRECIATED THE PROCESS OF MANUFACTURING OF ICE CREAM. IN THIS REGA RD, THE CIT(A) HAS OBSERVED THAT THE MANUFACTURING OF ICE CREAM INVOLV ES HEATING AND BOILING OF MILK ETC. AND, THEREFORE, THERE HAVE TO BE EVAPORAT ION LOSSES. HE FURTHER OBSERVED THAT THE PRODUCTION OF FOOD PRODUCTS INVOL VES DEALING IN PERISHABLE ITEMS WHERE AGAIN WASTAGE CANNOT BE AVOIDED. IN OU R VIEW, THERE WAS NO GROUND FOR MAKING THE ADDITION PARTICULARLY WHEN TH E ASSESSEE HAS MAINTAINED COMPLETE DETAILS OF THE PURCHASES / SALES DULY SUPP ORTED BY BILLS AND VOUCHERS WHICH WERE PRODUCED BEFORE THE ASSESSING OFFICER. THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE SUBJECT TO AUDIT AND THE ASSESSING OFFICER HAS NOT FOUND ANY DISCREPANCY / DEFECT IN THE BOOKS OF ACCOUNT REGULA RLY MAINTAINED BY THE ASSESSEE. WE HAVE ALREADY OBSERVED HEREIN ABOVE TH AT THE ASSESSING OFFICER 10 HAS MADE THE IMPUGNED ADDITION MERELY ON THE BASIS OF OPINION OF SPECIAL AUDITOR WHICH IS NOT BASED ON ANY SCIENTIFIC FORMUL A. WE HAVE ALSO OBSERVED HEREINABOVE THAT THE SPECIAL AUDITOR HAS ALSO NOT TAKEN INTO CONSIDERATION CERTAIN IMPORTANT POIN T RELATING TO MANUFACTURING OF ICE CREAM, THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RELYING UPON THE SPECIAL REPORT OF AUDITORS. IN VIEW OF TH E ABOVE, WE HOLD THAT LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 1,78,234/-. IN FACT NO ADDITION IS CALLED FOR. ACCORDINGLY, WE ALLOW GROU ND NO.2 OF THE ASSESSEES CROSS OBJECTION AND DISMISS GROUND NO.1 OF THE REVE NUES APPEAL. 10. GROUND NO.2 OF THE REVENUE APPEAL READS AS UNDE R:- 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS. 5,850/- MADE ON ACCOUN T OF DISALLOWANCE OF CLUB EXPENDITURE WITHOUT GIVING ANY COGENT REASON. 11. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE MADE A PAYMENT OF RS. 5,850/- AS CLUB EXPENSES. THE ASSES SEE CLAIMED THAT THIS AMOUNT WAS INCURRED FOR BUSINESS PURPOSES. THE ASS ESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT I T IS A PERSONAL EXPENDITURE OF DIRECTORS. 12. ON APPEAL, THE CIT(A) DELETED THE ADDITION RELY ING ON THE FOLLOWING DECISIONS:- 1) CIT V SAMTEL COLOUR LTD (2009) 180 TAXMAN 82 (DEL) 2) STERLITE INDUSTRIES (INDIA) LTD VS ACIT (2006) 6 SO T 497(MUM) 13. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE DECISION OF HON'BLE 11 DELHI HIGH COURT IN THE CASE OF CIT V SAMTEL COLOUR LTD NOW REPORTED IN (2010) 326 ITR 425 (DEL.), WHEREIN IT HAS BEEN HELD THAT THE ADMISSION FEE PAID TOWARDS CORPORATE MEMBERSHIP WAS AN EXPENDITUR E INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND NOT TO WARDS CAPITAL ACCOUNT AS IT ONLY FACILITATED THE SMOOTH AND EFFICIENT RUNNING O F A BUSINESS ENTERPRISE AND DID NOT ADD TO THE PROFIT EARNING APPARATUS OF A BU SINESS ENTERPRISE. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE DELH I HIGH COURT (SUPRA), WE DO NOT SEE ANY MERIT IN THIS GROUND OF APPEAL. ACC ORDINGLY WE DISMISS GROUND NO.2 OF THE REVENUES APPEAL. 14. GROUND NO.1 OF ASSESSEE CROSS OBJECTION NO. 60/ CHD/2011 READS AS UNDER:- 1. THAT THE LD. CIT(A)-II , LUDHIANA HAS ERRED IN DISMISSING THE GROUNDS OF APPEAL RELATING TO SECTIO N 142(2A) WITHOUT GIVING ANY REASONS FOR REJECTION. 15. AT THE TIME OF HEARING, SHRI SUBHASH AGGARWAL, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR THIS GROUND OF C.O. AND, THEREFORE, WE DISMISS THE SAME AS NOT PRESSED. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED WHILE CROSS OBJECTION FIELD BY THE ASSESSEE IS ALLOWED PARTLY A S INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF MAY, 2012 SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 17 TH MAY, 2012 RKK 12 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR