The Asstt.Commissioner of Income-tax, Hoshiarpur V. Millenium Leather Foils P.Ltd, Distt. Hoshiarpur

ITA 1/ASR/2014

• Counselvise Citation: 120914 RSA 2014
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 09-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARSEM LAL
• Assessee Lawyers: BHAGAT
• Keywords: Business income; Additional evidence
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; (SMC), AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER I.T.A. NO.01 (ASR)/2014 ASSESSMENT YEAR: 2007-08 PAN: AACCM2878B THE ASST. COMMISSIONER OF INCOME TAX, HOSHIARPUR CIRCLE, HOSHIARPUR. VS. MILLENIUM LEATHER FOILS (PVT.) LTD. VPO, SADHOWAL, TEHSIL GARHSHANKAR, DIST:- HOSHIARPUR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. TARSEM LAL (DR) RESPONDENT BY: SH. M.R. BHAGAT, (AR) DATE OF HEARING: 0 9.09.2015 DATE OF PRONOUNCEM ENT: 23.09.2015 ORDER PER A.D. JAIN (JM): THIS IS DEPARTMENTS APPEAL FOR ASST. YEAR 2007-0 8, AGAINST THE ORDER DATED 30.10.2013, PASSED BY THE LEARNED CIT(A), JAL ANDHAR, CONTENDING THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.12,52,020/- MADE BY THE A.O. ON ACCOUNT OF CERTAIN DISALLOWANCES/ADDITI ONS AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S 143(3) OF THE I.T. ACT, 1961. 2. AS PER RECORD, THE FACTS ARE THAT THE ASSESSEE C OMPANY, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF LEATHER FOILS, FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING AN INCOME OF RS. NIL, ON 31.10.2007. HOWEVER, THE INCOME DECLARED AS PER PROVISIONS OF S ECTION 115JB OF THE INCOME TAX ACT, 1961 WAS RS.21,548/-. THE ASSESSMENT IN TH IS CASE WAS COMPLETED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 VIDE ORDER DATED 08.12.2009 AT AN ASSESSED INCOME OF RS.12,52,020/-. WHILE COMPLETING THE . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 2 ASSESSMENT IN THIS CASE, THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS/ DISALLOWANCES TO THE RETURNED INCOME OF THE ASSESSE E: (I.) THE ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF CONSUMABLE STORE EXPENSES RS.1,59,912/- (II.) THE ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF RAW MATERIAL EXPENSES RS.2,62,430/- (III) THE ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF FREE SAMPLE EXPENSES RS.1,37,500/- (IV) THE ADDITION ON ACCOUNT OF VALUE OF GOODS RETURNED BY CUSTOMERS TO ASSESSEE RS. 29,000/- (V) THE ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF JOB WORK EXPENSES. RS.1,40,410/- (VI) THE ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF WAGES EXPENSES RS.92,827/- (VII) THE ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF PURCHASES EXPENSES RS.2,02,267/- (VIII) THE ADDITION ON ACCOUNT OF DIFFERENCE IN ACCOUNTS (RS.13,258/- +58,834/- +RS.13,030/-) RS. 85,122/- (IX) THE ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF PAYMENT MADE TO DALJIT SINGH RS. 45,000/- 3. BY VIRTUE OF THE IMPUGNED ORDER, THE LEARNE D CIT(A) DELETED THE ADDITIONS. AGGRIEVED, THE DEPARTMENT IN APPEAL BEFORE ME. 4. I HAVE HEARD THE PARTIES AND HAVE PERUSED T HE MATERIAL ON RECORD. EACH OF THESE ADDITIONS ARE DEALT WITH AS FOLLOWS. THE B OOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED WITHOUT POINTING OUT ANY DEF ECT THEREIN. THE UNREBUTTED OBSERVATION OF THE LEARNED CIT(A) IN THIS REGARD IS THAT THE OBSERVATIONS MADE . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 3 BY THE A.O. WERE OF A GENERAL NATURE. THIS IS FOUND TO BE CORRECT. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT BY THE A.O. FOR REJEC TING THE BOOKS OF ACCOUNT. ONLY THE EXPENSES OF THE YEAR WERE COMPARED WITH TH OSE OF THE PROCEEDING YEAR. THE EXPLANATION OFFERED BY THE ASSESSEE WITH REGARD TO THE EXPENSES, WAS REJECTED BY THE A.O WITHOUT PASSING A REASONED ORDE R WITH REGARD THERETO. THE A.O MADE HIS OWN ANALYSIS, WHICH THE ASSESSEE WAS N OT EVEN CONFRONTED WITH. MOREOVER, THE GENUINENESS OF THE EXPENSES WAS NEVER DOUBTED. THE A.O BASED HIS FINDING MERELY ON HIS OBSERVATION THAT THE EXPE NSES WERE MORE THAN THOSE INCURRED DURING THE YEAR. IT WAS ON THESE FINDINGS THAT THE LEARNED CIT(A) HELD THE A.O TO BE NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. ANYWAY, THIS ACTION OF THE LEARNED CIT(A) HAS NOWHE RE BEING CHALLENGED BEFORE ME. 5. COMING TO THE ADDITIONS PER SE, THE A.O. COMPARE D THE EXPENSES CLAIMED WITH THOSE INCURRED DURING THE EARLIER YEAR. SO FAR AS REGARDS THE RAW MATERIALS EXPENSES ALSO, THE A.O. MADE A SIMILAR COMPARISON. IT IS SEEN THAT THE STAND OF THE ASSESSEE WITH REGARD TO THE SALES WAS THAT DURI NG THE YEAR, THE ASSESSEE HAD SHOWN SALES OF RS.97,50,761/-, AS AGAINST THOSE OF RS.2,90,69,720/- IN THE PRECEDING YEAR. THE EXPLANATION OFFERED FOR THE FAL L IN THE SALES WAS ACCEPTED BY THE A.O. THE SALES WERE NOT INCREASED BY THE A.O. T HE GROSS PROFIT RATE DURING THE YEAR FOR THE YEAR UNDER CONSIDERATION WAS OF 32 .44%, AS AGAINST THAT OF 29.17% FOR THE PRECEDING YEAR. STILL, THE A.O MADE ADDITION OF RS.1.59,912/-, MAKING DISALLOWANCE OUT OF CONSUMABLE STORES EXPENS ES. THE ASSESSEE HAD PRODUCED IT BOOKS OF ACCOUNT BEFORE THE A.O., INCLU DING CASH REGISTER, GENERAL . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 4 LEDGER, PURCHASE BILLS AND VOUCHERS, STOCK REGISTER AND EXPENSES VOUCHERS. THE A.O. DID NOT FIND ANY DEFECT IN ANY ALL THESE BOOKS OF ACCOUNT. THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE DECREASE IN THE SALES WAS THAT THE PURCHASE PRICE OF PETROLEUM PRODUCTS HAD INCREASED DUE TO RI SE IN THE PRICE OF CRUDE OIL IN THE INTERNATIONAL MARKET, WHICH WAS BEYOND THE A SSESSEES CONTROL. ALL THE PURCHASES OF CONSUMABLE STORES WERE SUPPORTED BY PR OPER BILLS AND DOCUMENTS. THE PAYMENTS OF PURCHASE PRICE OF PETROL EUM PRODUCTS ETC., HAD BEEN MADE BY PAYEES ACCOUNT CHEQUES. THE ASSESSEE H AD EVEN FILED DETAILS OF OPENING AND CLOSING STOCKS. NO DEFECT WAS FOUND THE REIN. THE ASSESSEE HAD PRODUCED A CHART OF PRICES OF CONSUMABLE STORES FOR THE YEAR UNDER CONSIDERATION AND OF THE PRECEDING YEAR, WHICH WAS NOT CONSIDERED BY THE A.O. THE A.O JUST COMPARED THE PERCENTAGE OF THE COSTS O F CONSUMABLE STORES IN THE YEAR UNDER CONSIDERATION AND FOR THE PRECEDING YEAR , MAKING AN ADDITION OF RS.1,59,912/-. THE SALES MADE BY THE ASSESSEE WERE ACCEPTED. ALL THESE FACTS WERE DULY TAKING INTO CONSIDERATION BY THE LEARNED CIT(A) AND IT WAS RIGHTLY OBSERVED BY HIM THAT IT WAS NOT NECESSARY THAT THE EXPENSES REGARDING CONSUMABLE STORES SHOULD ALSO COME DOWN PROPORTIONA TELY WITH THE DECREASE IN SALES, SINCE THE ASSESSEE COULD NOT PRE-SUPPOSE OR ENVISAGE THAT ITS SALES WERE GOING TO THE FALL. THE LEARNED CIT(A) HAS ALSO TAK EN INTO ACCOUNT THAT THE GENUINENESS OF THE EXPENSES WAS NOT CHALLENGED BY T HE A.O. THEREFORE, FINDING NO ERROR THEREWITH, I UPHOLD THE ACTION OF THE LEAR NED CIT(A) IN DELETING THE ADDITION OF RS.1,59,912/- ON ACCOUNT OF DISALLOWANC E OUT OF CONSUMABLE STORES . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 5 EXPENSES AND THAT OF RS.22,62,430/-, ON ACCOUNT OF DISALLOWANCE OUT OF RAW MATERIAL EXPENSES. 6. THE A.O ALSO MADE ADDITION OF RS.1,37,500/- ON ACCOUNT OF DISALLOWANCE OUT OF FREE SAMPLE EXPENSES AND OF RS.29,000/-, ON ACCOUNT OF VALUE OF GOODS RETURNED BY CUSTOMERS TO THE ASSESSEE. THESE ADDITI ONS WERE MADE BY THE A.O. ON AN ESTIMATED BASIS. IN THIS REGARD, IT IS SEEN T HAT THE A.O HAD HIMSELF ACCEPTED GIVING OF FREE SAMPLES TO BE A PART OF THE ASSESSEES BUSINESS. SO MUCH SO, THE A.O HAD HIMSELF ALLOWED 50% OF THE EXP ENSES CONCERNING FREE SAMPLE GIVEN. IN FACT, THE DISALLOWANCE FOR THE OTH ER 50% WAS NOT BASED ON ANY CLEAR JUSTIFICATION OR REASONING. THUS, THIS DISALL OWANCE WAS CLEARLY WITHOUT APPLICATION OF MIND BY THE A.O. LIKEWISE, THE A.O T OOK 25% OF THE SALE VALUE OF THE GOOD RETURNED, TO MAKE THE ADDITION OF RS.29,00 0/-. THIS WAS ALSO WITHOUT ANY BASIS AND WITHOUT ANY APPLICATION OF MIND. THER EFORE, THE LEARNED CIT(A) WAS CORRECT IN DELETING THESE ADDITIONS. THIS ACTIO N OF THE LEARNED CIT(A) IS ALSO UPHOLD. 7. FURTHER, THE A.O MADE ADDITION/ DISALLOWANCE OF RS.1,40,410/-, ON ACCOUNT OF DISALLOWANCE OUT OF JOB WORK EXPENSES. H ERE ALSO, THE ADDITION WAS MADE BY THE A.O WITHOUT ANY BASIS, WITHOUT DOUBTING EITHER THE ACTUAL INCURRENCE OF THE EXPENDITURE, OR THE GENUINENESS T HEREOF. THE A.O MERELY COMPARED THE JOB WORK EXPENSES INCURRED DURING THE YEAR WITH SIMILAR EXPENDITURE IN THE PRECEDING YEAR. IT REMAINS UNDIS PUTED THAT THE ASSESSEE WAS GETTING THE JOB WORK DONE FROM OTHERS. SO MUCH SO, TDS WAS ALSO MADE FROM . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 6 THE PERSONS DOING THE JOB WORK. IT IS ALSO NOT UNDE R CHALLENGE THAT THE JOB WORK CHARGES ARE DIRECTLY PROPORTIONAL TO THE WORK DONE BY THOSE PERSONS. THE A.O INORDINATE COMPARED THE JOB WORK WITH THE SALES MAD E. THE RATES OF THE JOB WORK OF THE ASSESSEE WERE NOT COMPARED WITH THOSE O F OTHER SIMILARLY PLACED ASSESSEES WHICH OUGHT TO HAVE BEEN DONE. AGAIN, IT IS NOWHERE DISPUTED THAT THE PAYMENTS MADE WERE ALL THROUGH ACCOUNT PAYEE CH EQUES AND WERE VERIFIABLE FROM NOT ONLY THE ASSESSEES BOOKS OF AC COUNT, BUT ALSO FROM ITS BANK ACCOUNTS AND THOSE OF THE PERSONS THE DOING THE JOB WORK. THOUGH THE ASSESSEE HAD PROVIDED COMPLETE DETAILS OF THE PERSONS DOING THE JOB WORK, INCLUDING THEIR NAMES AND ADDRESSES, THE A.O DID NOT DEEM IT FIT TO MAKE ANY ENQUIRY WHATSOEVER FROM THEM. THE A.O MADE A SELFANALYSIS O F THE MATTER, BUT EVEN THIS ANALYSIS WAS NOT PUT TO THE ASSESSEE. THE LEARNED C IT(A), HOWEVER, DULY TOOK INTO CONSIDERATION THESE FACTS AND CIRCUMSTANCES WH ILE DEALING THE ADDITION AND THE ACTION OF THE LEARNED CIT(A) IS, ACCORDINGL Y, UPHOLD. 8. THE NEXT ADDITION MADE BY THE A.O WAS OF RS.92,8 27/-, ON ACCOUNT OF DISALLOWANCE OUT OF WAGES EXPENSES. THE ASSESSEE HA D CLAIMED WAGES OF RS.5,13,600/- ON TOTAL SALES OF RS. 97,50,761/-, @ 5.26%, AS AGAINST THE RATE OF 2.54% DURING THE PRECEDING YEAR. THE A.O REJECTED T HE ASSESSEES CONTENTION THAT DESPITE THE DECREASE IN SALES, IT WAS NOT POSS IBLE TO REDUCE THE WORK FORCE IMMEDIATELY, AS THE BUSINESS HAD NOT CLOSED. THE A. O WORKED OUT THE DIFFERENCE IN MONEY TERMS AT RS.2,65,220/-, BEING 2.72% OF RS. 97,50,761/- AND MADE ADDITION OF RS. 92,827/-. THE LEARNED CIT DELETED T HIS ADDITION. HERE ALSO, THE ADDITION WAS MADE BY THE A.O WITHOUT ANY BASIS, WIT HOUT DOUBTING EITHER THE . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 7 FACTUM OF INCURRENCE, OR THE GENUINENESS OF THE EXP ENDITURE CLAIMED. THEREFORE, THE LEARNED CIT(A) IS PERFECTLY JUSTIFIE D IN DELETING THIS ADDITION ALSO. THIS DELETION IS ALSO CONFIRMED. 9. THE A.O ALSO MADE DISALLOWANCE OF RS.2,02,267/- OUT OF PURCHASE EXPENSES. THE ASSESSEE HAD SHOWN PURCHASES OF RS.2, 02,267/- FROM M/S FLINT GROUP INDIA PVT. LTD. BETWEEN 2.7.2006 TO 4.9.2006/ - THROUGH EIGHT BILLS OF DIFFERENT AMOUNTS. HOWEVER, NO PAYMENT WAS MADE TO THE COMPANY DURING THE YEAR. NO EXPLANATION HAVING BEEN OFFERED BY THE ASS ESSEE IN THIS REGARD AND NO EVIDENCE HAVING BEEN BROUGHT, THE A.O MADE THE ADDI TION. THE LEARNED CIT(A) ASKED THE ASSESSEE TO PRODUCE A COPY OF THE RETURN FILED FOR ASST. YEAR 2008-09 ALONG WITH AUDIT REPORT AND COMPUTATION OF INCOME, SO AS TO VERIFY THE BALANCE OUTSTANDING IN THE CASE OF M/S FLINT GROUP INDIA PV T. LTD., AS ALSO TO VERIFY THE ASSESSEES CLAIM MADE IN ASSESSEES WRITTEN SUBMISS IONS AND THE APPLICATION FILED FOR ADMISSION OF ADDITIONAL EVIDENCE, WHEREBY , IT WAS SUBMITTED THAT THE ASSESSEE HAD PRODUCED THE ORIGINAL BILLS BEFORE THE A.O, BUT THE A.O HAD OBJECTED THAT COPIES OF THE BILLS HAD NOT BEEN PROV IDED FOR THE A.OS RECORD. THE ASSESSEE HAD SOUGHT TO PLACE PHOTOCOPIES OF THESE E IGHT BILLS BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) ASKED FOR A REMAND REPOR T FROM THE A.O., IN WHICH, THE A.O SUBMITTED THAT ASSESSEE HAD BEEN SPECIFICAL LY ASKED TO GIVE THE CONFIRMED COPY OF ACCOUNT OF M/S FLINT GROUP INDIA PVT. LTD. AND TO EXPLAIN WHY NO PAYMENT HAD BEEN MADE TO THIS CONCERN; AND T HAT THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION, OR THE COPIES OF BILLS . THE LEARNED CIT(A) ADMITTED THE ADDITIONAL EVIDENCE, WHICH HAS NOT BEEN CHALLEN GED BEFORE ME. THE RETURN . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 8 AND THE AUDIT REPORT OF THE ASSESSEE FOR ASST. YEAR 2008-09 WAS EXAMINED BY THE LEARNED CIT(A). IT WAS FOUND THAT THE ASSESSEE COMPANY HAD WRITTEN OFF THE AMOUNT OF RS.2,02,267/- AND HAD SHOWN IT AS INCOME FOR ASST. YEAR 2008-09. IT WAS THIS VERY AMOUNT WHICH HAS BEEN SHOWN AS PAY ABLE TO M/S FLINT GROUP INDIA PVT. LTD. DURING THE UNDER CONSIDERATION. IN THESE FACTS, THE LEARNED CIT(A) FOUND AND CORRECTLY SO, THAT THE ADDITION MA DE WOULD HAVE A REVENUE NEUTRAL EFFECT IN THE SUCCEEDING YEAR, ASST. YEAR 2 008-09, AS THE INCOME OF THE SUCCEEDING YEARS WOULD HAVE TO BE REDUCED TO THAT E XTENT, IF THE ADDITION MADE DURING THE YEAR WERE TO BE CONFIRMED. THE LEARNED C IT(A) ALSO OBSERVED THAT THE AMOUNT HAD BEEN WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT EVEN BEFORE THE EFFECTIVE START OF THE ASSESSMENT PROCEE DINGS FOR THE YEAR UNDER CONSIDERATION. APROPOS THE ADDITIONAL EVIDENCE FIL ED IN THE SHAPE OF THE COPIES OF BILLS, THE LEARNED CIT(A) OBSERVED THAT THESE BI LLS HAD BEEN RAISED IN THE NAME OF THE ASSESSEE COMPANY BY M/S FLINT GROUP IND IA PVT. LTD. IT WAS ON CONSIDERING THESE FACTORS THAT THE LEARNED CIT(A) D ELETED THE ADDITION MADE. I DO NOT FIND ANYTHING WRONG WITH THIS ACTION OF THE LEARNED CIT(A) ALSO AND THE DELETION IS UPHELD. 10. THE A.O MADE ADDITIONS OF RS.13,258/-, RS. 58,8 34/- AND RS.13,030/ , ON ACCOUNT OF DIFFERENCE IN ACCOUNTS OF THREE PARTI ES, I.E., M/S. EXACT LEATHER AND ACCESSORIES, M/S GEE KAY INTERNATION AND M/S KU NWAR OVERSEAS, RESPECTIVELY, BY OBSERVING AS FOLLOWS: (C) DIFFERENCE IN ACCOUNT WITH DIFFERENT PARTIES: . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 9 THE COPIES OF ACCOUNT OF CERTAIN PARTIES WITH WHOM ASSESSEE HAD MADE PURCHASE AND SALE TRANSACTIONS, REVEALED T HE DIFFERENCE IN ACCOUNTS. THERE ARE DISCUSSED HEREUNDER: (I) M/S EXACT LEATHER AND ACCES SORIES: THE SAID PARTY HAS SHOWN THE CLOSING BALANCE OF RS.1,53,982.90(CR.) IN RESPECT OF ASSESSEE IN HIS L EDGER ACCOUNT BUT ASSESSEE HAS SHOWN RS.1,40,724.49 (DR.) IN HIS PARTY ACCOUNT. THE ASSESSEE ATTRIBUTED THIS DIFFERENCE TO OPENING BALANCE AT RS.18182.41 AND RS.4924/- ON ACCOUNT OF A BILL NOT ENTERED BY PARTY. HOWEVER, THE EXPLANATION IS NOT ENDORSED BY THE SAID PARTY SO THE DIFFERENCE OF RS.13258.41 IS ADDED TO ASSESS EES INCOME. PENALTY PROCEEDINGS U/S 27(1) (C) FOR INACCURATE OF INCOME ARE BEING INITIATED SEPARATELY. ADDITION: RS.13258.41 (II) M/S GEE KAY INTERNATION: THE SAID PARTY HAS SHOWN CREDIT BALANCE O F RS.3,58,205.33 IN THE NAME OF THE ASSESSEE WHEREAS THE ASSESSEE HA S SHOWN DEBIT BALANCE OF RS.5,17,037.33. OUT OF THIS ASSESSEE ATT RIBUTED DIFFERENCE OF RS.58,834/- TOWARDS OPENING BALANCE A ND RS.100000/- ON A/C OF POST DATED CHEQUE OF RS.1,00, 000/- DATED 16.04.2007. THE ASSESSEE COULD NOT EXPLAIN THE REAS ONS FOR DIFFERENCE OF RS.58,834/- IN OPENING BALANCE. SO TH E SAME IS ADDED TO ASSESSEES INCOME. PENALTY PROCEEDINGS U/S 271 (1) (C ) FOR FURNISHING INACCURATE PARTICULARS OF INCOME ARE BEING INITIATED SEPARATELY. ADDITION: RS.58,834/- (III) M/S. KUNWAR OVERASES: THE SAID PARTY HAS SHOWN NIL BALANCE AGAINST THE SA ME OF THE ASSESSEE BUT ASSESSEE HAS SHOWN BALANCE OF RS.13030 /-. IN THE . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 10 ABSENCE OF CONFIRMATION OF THE REASON FOR DIFFERENC E, THE SAME IS ADDED TO ASSESSEES INCOME. PENALTY PROCEEDINGS U/S 271(1) (C) FOR FURNISHING PARTICULARS OF INCOME ARE BEING INITIATE D SEPARATELY. ADDITION: RS.13,030/- 11. THE ASSESSEE MAINTAINED AS FOLLOWS BEFORE THE CIT(A): THE LEARNED ASSESSING OFFICER MADE ADDITION OF RS. 13,258/-, 58,834/- AND 13,030/- BY NOTING THAT THE AMOUNT REC EIVABLE BY THE APPELLANT WAS AT VARIANCE WITH THE AMOUNT SHOWN AS PAYABLE BY THREE PARTIES. IN SUCH CASES THE ACCOUNT OF THE APPELLANT AND THE PARTIES WERE REQUIRED TO BE RECONCILED. IT IS S ETTLED LAW THAT UNLESS THE APPELLANT RIGHTS BACK/RIGHTS OFF ANY AMO UNT IN HIS BOOKS OF ACCOUNT THAT CANNOT HAVE ANY IMPACT ON THE PROFIT OF THE APPELLANT. IT IS PRAYED THAT THE ADDITION OF RS.85, 122/- MAY BE DELETED. 12. IN THE REMAND REPORT FILED, THE A.O DID NOT OFF ER ANY COMMENT. THE CIT(A) DELETED THE ADDITIONS. 13. HERE, IT IS SEEN THAT THE DIFFERENCE WAS ON ACC OUNT OF OPENING BALANCES IN THE ACCOUNTS OF THE PARTY. THIS DIFFERENCE STOOD DU LY RECONCILED BY THE A.O. THIS WAS PRECISELY THE REASON WHY NO COMMENT WAS OFFERED IN THE REMAND REPORT. BESIDES, PART OF THE EXPLANATION HAD ALSO BEEN ACCE PTED BY THE A.O., CONCERNING THE DIFFERENCE IN THE ACCOUNTS. HOWEVER, NO FURTHER ENQUIRY HAD BEEN MADE. STILL, THE AMOUNTS WERE ADDED WITHOUT C ONSIDERING THAT SINCE THE DIFFERENCE WAS ON ACCOUNT OF OPENING BALANCES, NO A DDITION COULD BE MADE IN THE YEAR UNDER CONSIDERATION. ALL THESE FACTORS WER E DULY TAKEN INTO . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 11 CONSIDERATION BY THE LEARNED CIT(A) WHILE ORDERING THE ADDITION TO BE DELETED. FINDING NO ERROR HERE ALSO, THE ACTION OF THE LEARN ED CIT(A) IS CONFIRMED. 14. THE LAST ADDITION/DISALLOWANCE MADE BY THE A .O WAS OF RS.45,000/- ON ACCOUNT OF PART DISALLOWANCE OUT OF PAYMENT MADE TO INTERNAL AUDITOR, SH. DALJIT SINGH. WHILE MAKING THIS DISALLOWANCE, THE A .O OBSERVED AS FOLLOWS: (D) PAYMENT MADE TO SH. DALJIT SINGH ASSESSEE HAS CLAIMED AN EXPENSES OF RS.60,000/- TO WARDS INTERNAL AUDIT FEE PAID TO SH. DALJIT SINGH, CA FOR FIRST ITEM I.E . THE SAME WAS NOT CLAIMED IN THE LAST YEAR THIS IS IN ADDITION TO AUDIT FEE OF R S.10,000/-. THE ASSESSEE HAS PRODUCED CONFIRMATION FROM THE SAID CA STILL IT IS OBSERVED THAT IN SPITE OF NEARLY VERY LITTLE BUSINESS ACTIVITIES IN SECOND HA LF OF THE F.Y 2006-07 I.E. RELEVANT PERIOD AND KEEPING IN VIEW LAST YEARS CLA IM UNDER AUDIT FEE HEAD AT RS.23,260/- ONLY THIS CLAIM OF RS.60,000/- FROM THE BUSINESS IS HIGHLY EXAGGERATED. IN THE TOTALITY OF FACTS AND CIRCUMSTA NCES, THE CLAIM UNDER THIS HEAD IS RESTRICTED TO RS.15,000/- ONLY AND BALANCE RS.4,50,000/- IS ADDED TO ASSESSEES INCOME. PENALTY PROCEEDINGS U/S 271(1)(C ) FOR FURNISHING PARTICULARS OF INCOME ARE BEING INITIATED SEPARATELY. ADDITION RS.45,000/- 15. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THA T ON THE PAYMENT MADE TO SH. DALJIT SINGH, TDS WAS DULY MADE AND DEPOSITED; THAT SH. DALJIT SINGH HAD ALSO FILED A CONFIRMATION [ WHICH WAS PLACED BEFORE THE LEARNED CIT(A)]; THAT THE PROVISIONS OF SECTION 40A (B) OF THE ACT COVER AN I NTERNAL AUDIT ALSO. 16. HERE ALSO, IN THE REMAND REPORT, NO COMMENTS WE RE OFFERED BY THE A.O. THE LEARNED CIT(A) FOUND THE GENUINENESS OF THE EXP ENSES TO HAVE NOT BEEN DOUBTED BY THE A.O. THE PAYMENT WAS ALSO NOT FOUND TO HAVE BEEN MADE TO ANY . ITA NO. 01(ASR)/2014 ASST. YEAR 2007-08 12 RELATED PERSON. THE FACTUM OF TDS HAVING BEEN MADE AND DEPOSITED ALSO WENT IN FAVOUR OF THE ASSESSEE. THE CERTIFICATION/ CONFI RMATION BY SH. DALJIT SINGH ALSO REMAINED UNCHALLENGED. IT WAS ALL THESE POINTS WHICH LED THE LEARNED CIT(A) TO DELETE THE ADDITION MADE. THIS DELETION I S ALSO UPHELD. 17. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 3 RD SEPTEMBER, 2015. SD/- (A.D. JAIN) JUDICIAL ME MBER DATED: 23.09. 2015 /PK/ PS. COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: MILLENIUM LEATHER FOILS (PVT.) LTD. 2. THE ASST. COMMISSIONER OF INCOME TAX, HOSHIARPUR CI RCLE, HOSHIARPUR. 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR .