M/s Kapsons Agencies Pvt. Ltd., Chandigarh V. JCIT, R-III, Chandigarh

ITA 1010/CHANDI/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5333 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-07-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 16-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Additional evidence; Reasonable cause; Wrong claim; Revenue expenditure; TDS
• Section: 40(a)(ia); 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , ! ' # $ % & ' , ' BEFORE SMT.DIVA SINGH, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.1010, 1011 & 1013/CHD/2017 / ASSESSMENT YEARS : 2010-11 2011-12 & 2013-14 M/S KAPSONS AGENCIES PRIVATE LTD., SCO 104-105, SECTOR 17, CHANDIGARH. THE A.C.I.T., CIRCLE 2(1), LUDHIANA. ./PAN NO: AACCK3368C /APPELLANT /RESPONDENT /ASSESSEE BY: SHRI JASPAL SHARMA, ADV. ! / REVENUE BY: SMT.CHANDERKANTA, SR.DR ' # $ /DATE OF HEARING : 18.07.2019 %&'( $ /DATE OF PRONOUNCEMENT: 23.08.2019 /ORDER PER BENCH : ALL THE ABOVE APPEALS HAVE BEEN PREFERRED BY THE S AME ASSESSEE AGAINST SEPARATE ORDERS OF THE COMMISSION ER OF INCOME TAX (APPEALS)-1, CHANDIGARH [(IN SHORT CIT( A)] DATED 26.4.2017, 7.3.2017 AND 26.4.2017, PASSED U/S 250(6 ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S ACT) ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 2 RELATING TO ASSESSMENT YEARS 2010-11, 2011-12 AND 2 013-14 RESPECTIVELY. 2. AT THE OUTSET IT WAS CONTENDED BY BOTH THE PARTI ES THAT THERE WERE COMMON ISSUES INVOLVED IN THE APPEALS. THESE APPEALS WERE THEREFORE HEARD TOGETHE R AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORD ER. WE SHALL FIRST BE DEALING WITH THE APPEAL OF THE ASSESSEE IN ITA NO.1010/CHD/2017. ITA NO.1010/CHD/2017: (A.Y 2010-11): 3. GROUND NOS.1 AND 4 RAISED, IT WAS STATED BY THE LD.COUNSEL FOR THE ASSESSEE, WERE GENERAL IN NATUR E. THE SAME THEREFORE NEED NO ADJUDICATION. 4. GROUND NO.2 RAISED BY THE ASSESSEE READS AS UNDER: 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONF IRMING THE DISALLOWANCE OF AN AMOUNT OF RS.2,11,095/- UNDE R SECTION 36(1)(III), BEING THE AMOUNT OF INTEREST PA ID ON BANK LOAN FOR SETTING UP NEW STORES OR STORES IN WHICH B USINESS ACTIVITIES DID NOT COMMENCED IN THE YEAR UNDER REFE RENCE. 5. THE ISSUE RAISED IN THE ABOVE GROUND RELATES TO DISALLOWANCE OF INTEREST EXPENSES OF RS.2,11,095/- U/S 36(1)(III) OF THE ACT. THE FACTS RELATING TO THE IS SUE ARE ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 3 THAT THE ASSESSEE HAD RAISED TERM LOAN OF RS.42,48,669/- FOR CAPITAL WORK IN PROGRESS IN NEW STORES AND CLAIMED THE INTEREST PAID THEREON AS REVENUE EXPENDITURE. THE AO DISALLOWED THE SAME HOLDING THAT THE INTEREST RELATED TO THE PERIOD PRI OR TO BUSINESS ACTIVITIES COMMENCING IN THE STORES, I.E P RIOR TO THE ASSET BEING PUT TO USE AND WAS THEREFORE NOT ALLOWABLE AS PER SECTION 36(1)(III) OF THE ACT. THE LD.CIT(A) UPHELD THE DISALLOWANCE HOLDING AT PARA 4 .2 OF HIS ORDER AS UNDER: 4.2 I AGREE WITH THE ADDITION MADE BY THE ASSESSIN G OFFICER. THE APPELLANT HAD TAKEN A TERM LOAN AND IN VESTED IN NEW STORES. THE STORES WERE NOT STARTED, THEREFO RE THE INTEREST EXPENSE HAD TO BE CAPITALIZED AS PER THE P ROVISO TO SECTION 36(L)(III) OF THE ACT. THE ADDITION IS THER EFORE UPHELD AND GROUND OF APPEAL NO. 2 IS DISMISSED. 6. BEFORE US THE LD.COUNSEL FOR THE ASSESSEE CONTEN DED THAT THE CORRECT FACTS RELATING TO THE ISSUE HAD NO T BEEN BROUGHT BEFORE THE AUTHORITIES BELOW. IT WAS CONTEN DED THAT THE ASSESSEE HAD NOT PURCHASED ANY STORES BUT HAD O NLY TAKEN THEM ON RENT AND HAD UTILIZED THE TERM LOANS FOR RENOVATING THE STORES. IT WAS POINTED OUT THAT THE LOANS HAD BEEN SANCTIONED TO THE ASSESSEE BY WAY OF REIMBURSE MENT OF EXPENSES INCURRED ON RENOVATION AND, THEREFORE, THE INTEREST PERTAINED TO THE PERIOD AFTER ACQUISITION OF THE AS SET, IF ANY, ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 4 AND HENCE WAS ALLOWABLE AS PER THE PROVISIONS OF SE CTION 36(1)(III) OF THE ACT. THE ASSESSEE CONTENDED THAT THE SAID FACTS WAS EVIDENT FROM THE SANCTION LETTER OF THE B ANK GRANTING TERM LOAN AND THE LETTER WRITTEN BY THE AS SESSEE TO THE MANAGER OF THE BANK REQUESTING TO REIMBURSE THE EXPENDITURE. THE LD.COUNSEL FOR THE ASSESSEE CONTEN DED THAT THESE WERE ADDITIONAL DOCUMENTS BEING SUBMITTED WHI CH WERE VERY RELEVANT FOR THE ADJUDICATION OF THE ISSU E AND COULD NOT BE PRODUCED BEFORE THE LOWER AUTHORITIES FOR THE REASON THAT THE ASSESSEE HAD SHIFTED ITS OFFICE FRO M CHANDIGARH TO MOHALI IN THE YEAR 2010 AND CERTAIN R ECORDS COULD NOT BE TRACED THEREAFTER. THE ASSESSEE FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE UN DER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 ALONGWITH COPIES OF THE ABOVE STATED ADDITIONAL EVI DENCES AND FURTHER FILED AN AFFIDAVIT STATING THE AFORESAI D FACTS ON OATH THEREIN. THE APPLICATION SUBMITTED READS AS UN DER: THE APPLICANT/APPELLANT BEGS YOUR HONOUR'S PERMISSION TO RELY ON THE DOCUMENTS AS PER ANNEXURE -L ATTACHED WHICH ARE VERY RELEVANT AND NECESSARY TO D ECIDE THE ISSUES IN GROUND NOS. 4(I), 4(III) AND GROUND NO.6. IN THIS BEHALF IT IS RESPECTFULLY SUBMITTED THAT ALL THE DO CUMENTS MENTIONED IN ANNEXURE-! COULD NOT BE FILED DURING T HE ASSESSMENT PROCEEDINGS DUE TO THE REASON THAT SOME OF THE RECORDS/DOCUMENTS WERE MISPLACED DURING THE COURSE OF SHIFTING OUR OFFICE FROM CHANDIGARH TO MOHALI IN TH E YEAR 2010. DESPITE DUE DILIGENCE THESE DOCUMENTS COULD N OT BE ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 5 PRODUCED BEFORE THE LOWER AUTHORITIES. THEREFORE IN THE INTEREST OF NATURAL AND SUBSTANTIAL JUSTICE, THE DO CUMENTS AS MENTIONED IN ANNEXURE-L ATTACHED, MAY KINDLY BE ADM ITTED AS ADDITIONAL EVIDENCE AND BE ADJUDICATED AT THE TI ME OF HEARING. 7. THE LD. DR OBJECTED TO THE ADMISSION OF THE ADDI TIONAL EVIDENCES AND FURTHER RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD BOTH THE PARTIES. DEALING FIRST WI TH THE ISSUE OF ADMITTING THE ADDITIONAL EVIDENCES FILED B EFORE US, WE HOLD THAT THE SAME NEED TO BE ADMITTED. THE DISALLOWANCE OF INTEREST, ADMITTEDLY HAS BEEN MADE FOR THE REASON THAT THE ASSETS /STORES FOR WHICH THE LOANS HAD BEEN TAKEN AND TO WHICH THE INTEREST RELATED, WERE NOT S TARTED DURING THE YEAR. THE ADDITIONAL DOCUMENTS FILED BY THE ASSESSEE BY WAY OF SANCTION LETTER OF BANK FOR TERM LOANS TAKEN AND THE UTILIZATION CERTIFICATE OF THE TERM L OANS GIVEN TO THE BANK BY THE ASSESSEE, ARE IN SUPPORT OF ITS CLAIM THAT INTEREST PAID PERTAINED TO LOANS UTILIZED FOR RENO VATING SHOPS AND NOT ACQUIRING THEM AND IN ANY CASE THE IN TEREST PAID PERTAINED TO PERIOD AFTER THE ASSET FOR WHICH THE LOANS WERE TAKEN WERE PUT TO USE. THE ADDITIONAL EVIDENCE S ,WE FIND, THEREFORE, GO THE ROOT OF THE MATTER AND ARE RELEVANT FOR BRINGING THE CORRECT FACTS ON RECORD FOR ADJUDICATI NG THE ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 6 ISSUE. THERE IS ALSO REASONABLE CAUSE ADDUCED FOR N OT FILING THE SAME EARLIER ON ACCOUNT OF SHIFTING OF THE PRE MISES OF THE COMPANY DUE TO WHICH THE DOCUMENTS GOT MISPLACE D. THE SAME HAS BEEN ALSO AFFIRMED ON OATH BY THE DIRECTOR OF THE ASSESSEE COMPANY. THE REVENUE HAS BEEN UNABLE TO CONTROVERT THE SAME. 9. CONSIDERING THE ABOVE, WE DEEM IT FIT TO ADMIT T HE ADDITIONAL EVIDENCES FOR ADJUDICATION OF THE PRESEN T GROUND. WE FURTHER RESTORE THE MATTER TO THE AO TO DECIDE T HE ISSUE AFRESH. THE AO IS DIRECTED TO VERIFY THE CLAIM OF T HE ASSESSEE AFTER CONSIDERING THE EVIDENCES FILED BY IT AND THE REAFTER ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. NEEDLE SS TO ADD THE ASSESSEE BE GIVEN DUE OPPORTUNITY OF HEARING. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO.3 RAISED BY THE ASSESSEE READS AS UND ER: 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN HAVI NG CONFIRMED THE ALLOWANCE OF DEPRECIATION ON ELECTRIC AL INSTALLATIONS AND FITTINGS AT 10% INSTEAD OF 15% AS CLAIMED BY THE APPELLANT THEREBY CONFIRMING AN ADDI TION OF RS.1,93,193/- TO THE INCOME OF THE APPELLANT. 11. THE DISALLOWANCE DISPUTED IN THE ABOVE GROUND RELATES TO CLAIM OF DEPRECIATION ALLEGEDLY AT A WRONG RATE RESULTING ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 7 IN ADDITION OF RS. 1,93,193/-. THE ASSESSING OFFICE R OBSERVED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 15% ON ELECTRICAL INSTALLATIONS. ON EXAMINI NG THE DETAILS OF THE 'INSTALLATIONS', THE ASSESSING OFFIC ER NOTED THAT THEY INCLUDED ELECTRICAL FITTINGS LIKE PVC WIRES, G I PIPE, BENDS, BOLTS ETC. THE ASSESSING OFFICER OBSERVED TH AT THE INSTALLATIONS WERE PART OF FURNITURE & FITTINGS AND AS PER PRESCRIBED RATE 10% DEPRECIATION WAS ADMISSIBLE INS TEAD OF 15%. NO CONCRETE ARGUMENT WAS EXTENDED BY THE ASSES SEE BEFORE THE ASSESSING OFFICER WHO THEREFORE RESTRICT ED THE CLAIM BY DISALLOWING RS. 1,93,193/- AS EXCESS CLAIM . 12. THE CIT(A) UPHELD THE ORDER OF THE AO HOLDING A S UNDER: 5.2 I HAVE EXAMINED THE PLEA OF THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. THE ADDITION MADE BY THE ASSESSING OFFICER IS UPHELD. THE DETAILS OF ELECTRICAL FITTINGS WERE EXAMINED AND IT BECOMES CLEAR THAT THEY ARE IN THE NATURE OF FURNITURE & FITTINGS. THE RATE OF 10% ON ELECTRICAL FITTINGS HA S BEEN CORRECTLY APPLIED BY THE ASSESSING OFFICER. THE ADDITION MADE BY HER IS CONFIRMED AND GROUND OF APPEAL NO.3 IS DISMISSED. 13. BEFORE US THE LD.COUNSEL FOR THE ASSESSEE REITE RATED THE CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES. 14. THE LD. DR, ON THE OTHER HAND RELIED UPON THE O RDER OF THE CIT(A)/AO. ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 8 15. WE HAVE HEARD THE RIVAL CONTENTIONS. WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A). THE FACTUAL FINDINGS OF THE CIT(A) MADE AFTER PERUSING THE DETAILS FILED BY THE ASSESSEE THAT THE ADDITIONS MADE WERE IN THE NATURE OF FURNITURE AND FITTINGS, HAVE NOT BEEN CON TROVERTED BY THE ASSESSEE BY WAY OF ANY EXPLANATION OR DETAIL FILED BEFORE US, NOR THE LD.COUNSEL FOR THE ASSESSEE WAS ABLE TO POINT OUT ANY DISCREPANCY IN THE FINDINGS OF THE LD .CIT(A). THAT THE APPLICABLE RATE OF DEPRECIATION ON THE SAI D ASSETS IS 10% IS NOT DISPUTED. IN VIEW OF THE SAME, WE FIND N O REASON TO INTERFERE IN THE ORDER OF THE CIT(A) IN RESTRICT ING THE DEPRECIATION TO 10% ON ELECTRIC FITTINGS. THE GROUN D OF APPEAL NO.3 RAISED BY THE ASSESSEE IS DISMISSED. IN EFFECT, THE APPEAL OF THE ASSESSEE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. WE SHALL NOW TAKE UP THE APPEAL OF THE ASSESSEE RELATING TO A.Y 2011-12 IN ITA NO.1011/CHD/2017. ITA NO.1011/CHD/2017: (A.Y 2011-12): 16. GROUND NOS.1 AND 7 RAISED, IT WAS SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE WERE GENERAL IN ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 9 NATURE. THE SAID GROUNDS THEREFORE NEED NO ADJUDICATION. 17. GROUND NO.2 RAISED BY THE ASSESSEE READS AS UNDER: 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED , BOTH ON FACTS AND IN LAW IN HAVI NG CONFIRMED THE ADDITION OF RS. 1,01,632/- MADE TO TH E INCOME OF THE APPELLANT BEING THE DIFFERENCE IN THE AMOUNT OF INTEREST RECEIVABLE ON FDRS ON ACCRUAL BA SIS AND ACCOUNTED FOR BY THE APPELLANT ON RECEIPT BASIS IN THE BOOKS OF ACCOUNTS. 18. THE FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER MADE AN ADDITION OF RS.1,01,632/- ON ACCOUNT OF INTEREST EARNED ON BANK DEPOSITS, BEING THE EXCESS AMOUNT OF INTEREST EARNED STATED IN FORM NO . 26AS AS COMPARED TO THAT RETURNED BY THE ASSESSEE . THE AO NOTED THAT THE ASSESSEE HAD EARNED INTEREST INCOME FROM B ANK DEPOSITS IN HDFC BANK TO THE TUNE OF RS.1,52,944/- , AS REFLECTED IN FORM NO .26AS,ON WHICH TDS OF RS.15,29 4/- WAS DEDUCTED, HOWEVER, INCOME REFLECTED IN THE RETU RN WAS ONLY OF RS.51,313/-. THE ASSESSING OFFICER CONFRONT ED THE ASSESSEE REGARDING THE BALANCE INTEREST OF RS.1,01, 632/-. THE ASSESSEE REPLIED THAT THE INCOME WAS REFLECTED IN SUBSEQUENT YEARS ON MATURITY OF THE FDR. THE ASSESS ING OFFICER OBSERVED THAT AS PER SECTION 5 THE INCOME H AD TO BE ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 10 TAXED IN THE YEAR IN WHICH IT ACCRUED OR AROSE AND THEREFORE ADDED IT TO THE INCOME OF ASSESSEE. 19. THE CIT(A) UPHELD THE ORDER OF THE AO HOLDING A T PARA 5.2 AS UNDER: 5.2 I HAVE EXAMINED THE ISSUE IN DETAIL. THE INCOM E IS CHARGED TO TAX IN THE YEAR THE RIGHT TO THAT INC OME HAS ACCRUED OR ARISEN AS PER SECTION 5 OF THE ACT. INCOME HAS ACCRUED TO THE APPELLANT IN THE CURRENT YEAR AS INTEREST IS GENERATED ON THE DEPOSI T ON DAILY BASIS BUT CREDITED TO ASSESSES ACCOUNT ON THE DAY FDR MATURES. THEREFORE THE ASSESSING OFFICER HAS RIGHTLY ADDED THE INCOME. THE ADDITION IS CONFIRMED AND GROUND OF APPEAL NO. 2 IS DISMISSED. 20. BEFORE US THE LD.COUNSEL FOR THE ASSESSEE REITE RATED THE CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES. 21. THE LD. DR RELIED UPON THE ORDER OF THE AO. 22. WE HAVE HEARD THE RIVAL CONTENTIONS. WE SEE NO REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A). UNDISPU TEDLY THE IN INCOME HAD ACCRUED IN THE IMPUGNED YEAR TO THE A SSESSEE AND TDS ALSO DEDUCTED ON THE SAME. THE SAME HAS, THEREFORE, BEEN RIGHTLY TAXED IN THE IMPUGNED YEAR. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS , THEREFORE, DISMISSED. ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 11 23. GROUND NO.3 RAISED BY THE ASSESSEE READS AS UNDER: 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LA W, IN CONFIRMING THE DISALLOWANCE OF AN AMOUNT OF RS.15,78,866- UNDER SECTION 36(1)(III), BEING THE AMOUNT OF INTEREST PAID ON BANK LOAN FOR SETTING U P NEW STORES/WORK IN PROGRESS/ STORES IN WHICH BUSINESS ACTIVITIES DID NOT COMMENCED IN THE YEAR UNDER REFERENCE. 24. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES THAT THE ABOVE GROUND RAISED BY THE ASSESSEE IN THIS APP EAL WAS IDENTICAL TO GROUND NO.2 RAISED IN ITA NO.1010/CHD/ 2017, RELATING TO DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT ON ACCOUNT OF THE SAME PERTAINING TO THE PERIOD PRI OR TO WHICH THE ASSET/SHOP WAS PUT TO USE. IT WAS CONTEND ED BY THE LD.COUNSEL THAT ADDITIONAL EVIDENCES TO DISPRO VE THIS FINDING OF THE REVENUE AUTHORITIES HAD BEEN FILED I N THIS CASE ALSO AS IN GROUND NO.2 OF ITA NO.1010/CHD/2017 AND THAT THE ARGUMENTS ALSO WERE IDENTICAL. 25. IN VIEW OF THE ABOVE SINCE THE ISSUE IS ADMITTE DLY IDENTICAL TO THAT RAISED IN GROUND NO.2 OF ITA NO.1010/CHD/2017, DEALT WITH US ABOVE OUR DECISION RENDERED THEREIN AT PARA 8 & 9 OF OUR ORDER, WILL A PPLY TO THIS GROUND WITH EQUAL FORCE. FOLLOWING THE SAME WE ADMI T THE ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 12 ADDITIONAL EVIDENCES FILED BY THE ASSESSEE AND REST ORE THE ISSUE TO THE AO TO ADJUDICATE THE ISSUE AFRESH IN T HE LIGHT OF DIRECTIONS GIVEN IN GROUND NO.2 OF ITA NO.1010/CH D/2017. THIS GROUND OF APPEAL NO.3 IS ALLOWED FOR STATIST ICAL PURPOSES. 26. GROUND OF APPEAL NO.4(I), (II),(III) & (IV) RAI SED BY THE ASSESSEE READS AS UNDER: 4. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (APPEALS) HAS ERRED IN HAVING CONFIRMED AN ADDITION OF RS.5,72,741/- BEING THE EXPENDITURE INCURRED BY TH E APPELLANT TOWARDS RENT BY HOLDING THAT AS THE EXPEN DITURE INCURRED ON RENT RELATED TO EARLIER ASSESSMENT YE AR, THE SAME CANNOT BE ALLOWED IN THE YEAR UNDER REFERENC E AS THE APPELLANT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUN TING, (II) IN ANY CASE, THE APPEAL OF THE APPELLANT FOR T HE EARLIER ASSESSMENT YEAR BEING PENDING FOR DISPOSAL BEFORE T HE LEARNED CIT(A), NECESSARY DIRECTIONS SHOULD HAVE BE EN ISSUED FOR THE ALLOW ABILITY OF THE SAME IN THE PRECEDING ASSESSMENT YEAR, (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE CIT(APPEALS) HAS ERRED IN HAVING CONFIRMED AN ADDIT ION OF RS. 2,42,868/- MADE TO THE INCOME OF THE APPELLANT BEING THE AMOUNT OF EXCESS PURCHASE VALUE OF GOODS CLAIME D BY THE APPELLANT AND WHICH WAS CORRECTED BY THE APPELL ANT IN THE SUBSEQUENT ASSESSMENT YEAR THEREBY REDUCING THE PURCHASES FOR THAT YEAR. (IV) IN ANY CASE, THE APPEAL FOR THE SUBSEQUENT ASS ESSMENT YEAR BEING SIMULTANEOUSLY DISPOSED OFF BY THE LEARN ED CIT(APPEALS), IN ALL FAIRNESS, NECESSARY DIRECTIONS SHOULD HAVE BEEN ISSUED FOR THE ALLOW ABILITY OF THE SAME IN THE SUBSEQUENT ASSESSMENT YEAR. ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 13 27. THE BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSING OFFICER CALLED FOR INFORMATION U/S 133(6) OF THE ACT FROM SUPPLIERS OF GOODS OF THE ASSESSEE. THE ASSES SING OFFICER OBSERVED THAT THERE WAS A DIFFERENCE IN THE CLOSING BALANCE WITH RESPECT TO THE ACCOUNTS SUBMITTED BY M /S BENETTON INDIA LTD. AND THE ACCOUNTS OF THE ASSESSE E. THE ASSESSEE WAS ASKED TO RECONCILE THE DIFFERENCE. ON COMPARING THESE ACCOUNTS THE ASSESSING OFFICER OBSE RVED THAT DIFFERENCE OF RS. 5,72,741/- WAS ON ACCOUNT OF RENT OF MARCH 2010 WHICH WAS DEBITED TO THE ACCOUNTS IN F. Y. 2010-11 EVEN WHILE IT PERTAINED TO F.Y. 2009-10. ON BEING CONFRONTED, THE ASSESSEE REPLIED THAT SINCE THE REN T WAS PAID IN THE CURRENT YEAR THEREFORE IT WAS DEBITED IN THI S YEAR. THE ASSESSING OFFICER DID NOT ALLOW THE EXPENDITURE OF RS. 5,72,741 /- HOLDING THAT IT DID NOT PERTAIN TO THE IMPUGNED YEAR. THE ASSESSING OFFICER ALSO OBSERVED THAT THER E WAS A DIFFERENCE OF RS. 2,42,868/- WITH THE ACCOUNTS OBTA INED FROM M/S ADIDAS. THE DIFFERENCE WAS ON ACCOUNT OF DIFFER ENCE IN COST OF GOODS. THE ASSESSEE, HE NOTED HAD BOOKED A N INFLATED COST IN HIS BOOKS BY TAKING THE MRP VALUE. ON BEING CONFRONTED THE ASSESSEE DID NOT FURNISH ANY REPLY T O THE ASSESSING OFFICER ON THIS ISSUE. THE ASSESSING OFFI CER OBSERVED THAT THE EXCESS BOOKING WAS REVERSED IN TH E NEXT ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 14 YEAR. BUT SINCE THERE WAS AN EXCESS CLAIM IN THE CU RRENT YEAR, HE DISALLOWED THIS EXPENDITURE. 28. THE LD.CIT(A) UPHELD THE ORDER OF THE AO HOLDIN G AT PARA 7.3 AS UNDER: 7.3 I HAVE CONSIDERED THESE ISSUES. BOTH THE ADDITIONS WERE MADE ON ACCOUNT OF WRONG CLAIM OF EXPENSES. THE EXPENSE ON RENT OF RS.5,72,741/- FO R MARCH 2010 COULD NOT HAVE BEEN CLAIMED IN F.Y 2010-11. THE APPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE THE EXPENSE WAS REQUIRED TO BE DEBITED IN F.Y 2010-11 AND NOT IN 2011-12. SIMILARLY THE ASSESSING OFFICER HAS RIGHTL Y DISALLOWED INFLATED PURCHASE WITH RESPECT TO BILL FROM M/S ADIDAS, 1 UPHOLD THESE ADDITIONS. GROUND OF APPEAL NO. 4 IS DISMISSED. 29. BEFORE US THE LD.COUNSEL FOR THE ASSESSEE FILED SUBMISSIONS IN WRITING VIS--VIS THE IMPUGNED GROUN DS. THE CONTENT OF THE SAME, BRIEFLY STATED, WAS THAT THE R ENT DISALLOWED THOUGH PERTAINING TO THE MONTH OF MARCH, 2010 I.E. THE PRECEDING YEAR HAD ACTUALLY ACCRUED AND AR OSE IN THE IMPUGNED YEAR SINCE THE AGREEMENT ON ACCOUNT OF WHI CH IT AROSE WAS ENTERED INTO IN THE IMPUGNED YEAR. THE CONTENTIONS MADE IN THIS REGARD AT PARA 1 TO 7 ARE AS UNDER: 1 . THIS GROUND RELATES TO DISALLOWANCE OF RS.5,72,74 17- ON ACCOUNT RENT FOR THE MONTH OF MARCH,2010 WHICH WAS DEBITED BY THE ASSESSEE IN ITS BOOKS FOR THE YE AR UNDER CONSIDERATION I.E. AY 2011-12. IT WAS SUBMITTED BEFORE THE LD.AO THAT 'ALTHOUGH THE RENT RELATES TO THE MONTH OF MARCH,2010 WHEN THE STORE WAS TAKEN OVER BY US FROM BENETTON INDIA PVT. ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 15 LIMITED BUT AS THE PAYMENT WAS MADE IN THE YEAR UNDER REFERENCE, THE SAME WAS ACCOUNTED FOR IN THIS YEAR'(PARA 4.2 OF AO'S ORDER) BUT THE AO DISALLOWED THE SAME WITHOUT ANY FURTHER DISCUSSION. THE LD.CIT(APPEALS) CONFIRMED THE DISALLOWANCE HOLDING THAT THE EXPENSES ON RENT FOR MARCH,2010 COULD NOT HAVE BEEN CLAIMED IN FINANCIAL YEAR 2010-11 AS THE APPELLANT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING(PARA 7.3). 2. THE FACTS IN BRIEF RELATING TO THIS ISSUE, ARE T HAT THE ASSESSEE WAS APPOINTED AS DISTRIBUTOR BY BENETTON INDIA (P )LTD. VIDE 'DISTRIBUTION AGREEMENT' DATED 15.03.2010 (PAGES 46-72 OF PAPER BOOK) TO DISTRIBUT E AND SELL THEIR PRODUCTS IN THE TERRITORY(PUNJAB, HARYANA, HIMACHAL PRADESH, JAMMU & KASHMIR AND UNION TERRITORY OF CHANDIGARH) THROUGH ITS VARIOUS OUTLETS(CLAUSE 2.1 ON PAGE 52 OF PAPER BOOK). THEN A TRIPARTITE LEASE DEED WAS ENTERED INTO ON 12.04.2010 BETWEEN LANDLORD, BENETTON INDIA PVT. LTD. AND ASSESSEE(PAGES 1-19 OF ADDITIONAL EVIDENCE ) SHOWING LANDLORD AS 'LESSORS' AND BENETTON INDIA PVT.LTD. AS 'LESSEE' AND THE ASSESSEE M/S KAPSONS AGENCIES (P)LTD. AS 'NOMINEE'(PAGE 1-2 OF ADDITIONA L EVIDENCE). AS PER CLAUSE 2.2 (PAGE 4 ADDITIONAL EVIDENCE) IT WAS AGREED UPON THAT THE PREMISES SHALL BE HANDED OVER TO NOMINEE BY THE LESSEE ON THE DATE OF EXECUTION OF THIS LEASE DEED. AS PER CLAUSE 3.1 RENT WAS FIXED AT RS.5,76,000/- OR 20% O F NET SALES VALUE PER MONTH PLUS SERVICE TAX WHICHEVER IS HIGHER. FURTHER KIND ATTENTION IS INVITED TO CLAUSE 3.2 OF LEASE DEED AT PAGE 5 OF ADDITIONAL EVIDENCE WHICH IS REPRODUCED AS UNDER: '3.2.THE LESSEE HAS ALREADY MADE PAYMENTS OF MONTHLY RENT TO THE LESSORS UPTO 30 TH APRIL,2010 AS PER TERMS OF PREVIOUS LEASE DEED DATED 25.03.2009 AND ADDENDUM DATED 25.08.2009 WHEREBY THE RENT WAS INCREASED FROM RS.5,00,000/- TO RS.5,76,000/-EXECUTED BETWEEN LESSORS AND LESSEE. THE OBLIGATION TO MAKE PAYMENT OF RENT AFTER EXECUTION OF THIS LEASE DEED SHALL BE OF NOMINEE. WITHOUT PREJUDICE TO THE ABOVE, THE LESSORS HEREBY ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 16 CONFIRM THAT THE LESSEE HAS PAID RENT @ 5,76,000/- PER MONTH UNTIL 31.03.2010.' 3. IT IS CLEAR FROM CLAUSE 3.2 AS REPRODUCED ABOVE, THAT THE RENT TILL 31.03.2010 HAS BEEN PAID BY LESSEE I.E. BENETTON INDIA PVT.LTD AND THE OBLIGATI ON TO PAY RENT BY THE NOMINEE I.E. ASSESSEE, SHALL BE ONLY AFTER EXECUTION OF THIS LEASE DEED I.E. 12.04.2010. 4. FURTHER KIND ATTENTION IS ALSO INVITED TO LETTER DATED 27.03.2014 ADDRESSED TO THE JCIT, CIRCLE 2(1),CHANDIGARH, BY M/S BENETTON INDIA PVT.LTD. FURNISHING INFORMATION U/S 133(6)(PAGES 43-45 OF PAPER BOOK) WHERE IT HAS BEEN CLARIFIED THAT RENTAL AMOUNT HAS BEEN CHARGED TO KAPSONS AGENCIES PVT.LTD. BY M/S BENETTON INDIA PVT.LTD AND FURTHER THAT TAX HAS BEEN DEDUCTED FROM LANDLORD AND DEPOSITED THE SAME TO THE CREDIT OF CENTRAL GOVT. FROM HERE A LSO IT IS CLEAR THAT BENETTON INDIA PVT.LTD. MADE THE PAYMENT OF RENT DIRECTLY TO THE LANDLORD AFTER IDS AND THE ACCOUNT OF ASSESSEE WAS LATER ON DEBITED BY AN AMOUNT OF RS.5,72,741/- ON ACCOUNT OF RENT/CAM/ELECT.CHARGED(PAGE 44-45 OF PAPER BOOK) BY BENETTON INDIA PVT.LTD. 5. FROM THE ABOVE SUBMISSIONS, IT IS CLEAR THAT THE ASSESSEE RIGHTLY ACCOUNTED FOR THE EXPENDITURE OF RS.5,72,741/- DURING THE FINANCIAL YEAR 2010-11(AY 2011-12) AS THE LIABILITY WAS CRYSTALLIZED ONLY AFT ER EXECUTION OF LEASE DEED EXECUTED ON 12.04.2010. ALTERNATIVELY (GROUND 4(II)) IT IS PRAYED THAT NECE SSARY DIRECTIONS MAY BE GIVEN TO ALLOW THE SAME IN THE PRECEDING ASSESSMENT YEAR I.E. ASSTT.YEAR 2010-11 A S THE GENUINENESS OF EXPENDITURE IS NOT IN DOUBT. KIN D ATTENTION IN THIS BEHALF IS INVITED TO THE JUDGEMEN T OF THE HON'BLE ITAT, DELHI BENCH, IN THE CASE OF CAPARO MARUTI LTD.NEW DELHI VS.DCIT, ITA N0.5165 AND 5059/DEL/2014 DECIDED ON 09.08.2017(COPY ATTACHED) WHERE IT HAS BEEN HELD IN PARA 12 ON PAGE 9 OF THE ORDER AS UNDER: '12. THE LD.AR HAS BROUGHT TO OUR NOTICE THAT SUCH AMOUNT WAS SUO MOTU ADDED BY THE ASSESSEE IN ITS COMPUTATION OF TOTAL INCOME FOR THE IMMEDIATELY SUCCEEDING YEAR, NAMELY, A.Y. 2011- ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 17 12. IT WAS SUBMITTED THAT A DIRECTION MAY BE GIVEN TO DELETE SUCH SUO MOTU ADDITION. IN VIEW OF THE FACT THAT WE HAVE UPHELD THE ADDITION OF RS.55,92,096/- AND RS.12,828/- IN THE INSTANT YEAR, IF THESE AMOUNTS WERE, IN FACT SUO MOTU ADDED BY THE ASSESSEE IN THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME FOR SUCCEEDING YEAR, THEN THE SAME SHOULD BE DELETED. WE DIRECT THE ASSESSING OFFICER TO VERIFY THE ASSESSEE'S CONTENTION IN THIS REGARD AND, IF THE SAME IS FOUND TO BE TRUE, THEN, THE CORRESPONDING RELIEF SHOULD BE GIVEN IN THE ASSESSMENT OF THE SUCCEEDING YEAR.' 7. THEREFORE IT IS RESPECTFULLY SUBMITTED THAT IF R ELIEF SOUGHT IN GROUND NO.4(I) IS NOT ALLOWED THEN THE RELIEF SOUGHT AS PER GROUND NO.4(II) MAY KINDLY BE ALLOWED. 30. VIS--VIS THE DISALLOWANCE OF EXCESS PURCHASE DISALLOWED AMOUNTING TO RS.2,24,868/-, THE CONTENTI ON OF THE LD.COUNSEL FOR THE ASSESSEE WAS THAT THERE WAS ACTUALLY NO EXCESS PURCHASE BOOKED BUT IN FACT THE ASSESSEE HAD BEEN UNABLE TO POINT OUT TO THE AUTHORITIES BELOW T HAT AGAINST THE SO CALLED EXCESS PURCHASES OF RS.5,61,6 66/- THE ASSESSEE HAD ENTERED DISCOUNT OF THE IDENTICAL AMOU NT THUS REFLECTING NET PURCHASES OF RS.3,18,798/- ONLY AND THERE WAS, THEREFORE, NO DIFFERENCE WITH RESPECT TO THIS FIGURE AS REFLECTED IN THE BOOKS OF M/S ADIDAS. THE SUBMISSIO NS OF THE ASSESSEE FILED IN WRITING BEFORE US AT PARAS 8 TO 1 0 OF HIS WRITTEN SUBMISSIONS ARE AS UNDER: ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 18 8. THIS GROUND RELATES TO DISALLOWANCE OF RS.2,42,868/- ON ACCOUNT OF EXCESS PURCHASE VALUE FROM M/S ADIDAS BOOKED ON MRP(MAXIMUM RETAIL PRICE) AT RS.5,61,666/- INSTEAD OF WHOLESALE PRIC E AT RS.3,18,798/- AND THUS RESULTING IN DIFFERENCE OF RS.2,42,868/- IN THE ACCOUNT OF M/S ADIDAS. IT WAS SUBMITTED TO ID.AO VIDE REPLY DATED 28.03.3014 AT PAGE 42 OF PAPER BOOK, THAT THE MISTAKE WAS RECTIFI ED BY MAKING NECESSARY RECTIFICATION IN THE NEXT FINANCIAL YEAR. THE AO REJECTED THE EXPLANATION OF ASSESSEE AND MADE DISALLOWANCE. THE LD.CIT(APPEALS) HAS UPHELD THE DISALLOWANCE IN PARA 7.3 (PAGE 5) HOLDING THAT AO HAS RIGHTLY DISALLOWED INFLATED PURCHASE WITH RESPECT TO BILL F ROM M/S ADIDAS. 9. IN THIS BEHALF KIND ATTENTION IS INVITED TO LED GER ACCOUNT OF 'DISCOUNT RECEIVED' PLACED IN ADDITIONAL EVIDENCE AT PAGES 20-26. IT IS RESPECTFULLY SUBMITTED THAT 'DISCOUNT RECEIVED' ACCOUNT WAS CREDITED ON 31.03.2011 BY THE EXCESS AMOUNT OF RS.2,42,868/-(PAGE 25 OF ADDITIONAL EVIDENCE) AND CORRESPONDINGLY LEDGER ACCOUNT OF 'DISCOUNT RECEIVABLE' WAS DEBITED ON 31.03.2011(PAGE 27 OF ADDITIONAL EVIDENCE). THEN THE ACCOUNT OF 'ADIDAS' WAS DEBITED ON 01.04.2011 BY THE AMOUNTS OF RS.1,10,546/- AND RS.1,32,322/-(AGGREGATE RS.2,42,868/-) (PAGES 28 OF ADDITIONAL EVIDENCE) AN D CORRESPONDINGLY LEDGER ACCOUNT OF 'DISCOUNT RECEIVABLE' WAS CREDITED BY THE SAME AMOUNTS ON 01.04.2011(PAGE 29 OF ADDITIONAL EVIDENCE). 10. THEREFORE EFFECT OF EXCESS PURCHASE VALUE CLAI MED, HAS BEEN NEUTRALIZED BY CREDITING THE DISCOUNT ACCOUNT BY THE SAME AMOUNT DURING THIS YEAR ITSELF AND THE ACCOUNT OF ADIDAS WAS ALSO RECONCILED BY MAKING NECESSARY ENTRIES ON 01.04.2011. 31. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT TO SUBSTANTIATE ITS ABOVE CONTENTION IT WISHED TO FILE ADDITIONAL EVIDENCES IN THE FORM THE LEASE DEED ENTERED INTO I N APRIL, 2010 FOR THE PAYMENT OF RENT PERTAINING TO THE MONT H OF ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 19 MARCH, 2010 AND LEDGER ACCOUNT OF DISCOUNT RECEIVE D AND CONTENDED THAT THE SAME COULD NOT BE FILED EARLIER SINCE CERTAIN RECORD AND DOCUMENTS WERE MISPLACED DURING THE COURSE OF SHIFTING OF THE OFFICE FROM CHANDIGARH TO MOHALI IN 2010. AN AFFIDAVIT MAKING THE ABOVE AFFIRMATIONS ON OATH WAS ALSO FILED BEFORE US. IT WAS CONTENDED THAT THE DOCUMENT WAS RELEVANT TO THE ISSUE AND THE ASSESSEE, THEREFO RE, REQUESTED THAT THE SAME BE ADMITTED. THE LD.DR ON THE OTHER HAND RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 32. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THE I SSUE BEFORE US RELATES TO DISALLOWANCE OF RENT PAID FOR THE REASON THAT IT PERTAINED TO PRECEDING YEAR AND DISALLOWANC E OF EXCESS PURCHASES BOOKED .THE LD. COUNSEL FOR THE AS SESSEE HAS FILED ADDITIONAL EVIDENCES BEFORE US CONTRADICT ING THE FINDINGS OF THE REVENUE. COPY OF RENT AGREEMENT ENT ERED INTO DURING THE YEAR HAS BEEN FILED TO SHOW THAT THE IM PUGNED EXPENDITURE AROSE ON ACCOUNT OF THE SAME AND THUS A CCRUED DURING THE YEAR ITSELF. THAT ACCORDINGLY IT COULD N OT BE TREATED AS PRIOR PERIOD EXPENSE. ALSO VIS A VIS EXC ESS PURCHASES BOOKED, THE ASSESSEE HAS FILED COPY OF PU RCHASE ACCOUNT, DISCOUNT ACCOUNT AND LEDGER ACCOUNT OF M/S ADIDAS ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 20 SHOWING THAT CORRESPONDING ENTRY OF DISCOUNT WAS PA SSED IN THE BOOKS OF THE ASSESSEE THUS NEGATIVING THE EXCES S PURCHASES BOOKED. ALL THE DOCUMENTS WE FIND ARE REL EVANT FOR ESTABLISHING THE CORRECT FACTS RELATING TO THE ISSUE FOR ADJUDICATION. ALSO WE FIND THERE WAS REASONABLE CAU SE WITH THE ASSESSEE FOR NOT PRODUCING THEM BEFORE THE LOWE R AUTHORITIES, SINCE AS STATED BY THE DIRECTOR OF THE COMPANY ON OATH, THE DOCUMENTS HAD GOT MISPLACED IN SHIFTIN G OF THE PREMISES OF THE ASSESSEE, WHICH HAS NOT BEEN CONTRO VERTED BY THE REVENUE. WE THEREFORE ADMIT THE ADDITIONAL E VIDENCES .FURTHER SINCE THE FACTS AS CONTENDED BY THE ASSESS EE NEED TO BE VERIFIED, WE RESTORE THIS ISSUE BACK TO THE A O TO VERIFY THE CONTENTION OF THE ASSESSEE AND THEREAFTER ADJUD ICATE THE SAME IN ACCORDANCE WITH LAW. NEEDLESS TO ADD THE AS SESSEE BE GRANTED DUE OPPORTUNITY OF HEARING. THE GROUND OF APPEAL NO.4(I), (II), (III) AND (IV) RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 33. GROUND NO.5 RAISED BY THE ASSESSEE READS AS UND ER: 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(APPEALS) HAS ERRED IN HAVING CONFIRMED DISALLOW ANCE OF AN AMOUNT OF RS.3,79,021/- BEING THE AMOUNT OF EXPENDITURE INCURRED ON FOREIGN TRAVELLING OF THE D IRECTORS BY TREATING THE SAME AS NON BUSINESS EXPENDITURE. ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 21 34. THE FACTS RELATING TO THE ISSUE ARE THAT THE AS SESSING OFFICER MADE ADDITION OF RS. 3,79,021/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES OF THE DIRECTORS OF THE ASS ESSEE COMPANY AND THEIR FAMILY MEMBERS INCURRED ON TRIPS TO CHINA AND TURKEY. THE EXPENDITURE INCLUDED COST OF AIR TICKETS, HOTEL BILLS AND VISA FEE. THE ASSESSING OF FICER CONFRONTED THE ASSESSEE ABOUT THE EXPENSE BEING OF NON- BUSINESS NATURE AS THE COMPANY DID NOT HAVE ANY EXP ORT BUSINESS. THE ASSESSEE IN ITS REPLY STATED THAT THE BOTH THE DIRECTORS WITH THEIR WIVES HAD VISITED THESE COUNTR IES TO KEEP THEMSELVES APPRAISED OF THE LATEST FASHION TRE NDS. THE ASSESSEE HAD NOT FURNISHED BEFORE ASSESSING OFFICER THE INFORMATION REGARDING THE FASHION EXHIBITION/ SHOWS ATTENDED, THEREFORE THE ASSESSING OFFICER DISALLOWE D THESE EXPENSES BEING IN THE NATURE OF PERSONAL USE AND FO R NON- BUSINESS PURPOSES. 35. THE LD.CIT(A) UPHELD THE ORDER OF THE AO HOLDIN G AS UNDER: 8.2 I HAVE CONSIDERED THIS ISSUE. 1 AGREE WITH THE ADDITION MADE BY THE ASSESSING OFFICER. THE APPELLANT DID NOT FURNISH ANY INFORMATION REGARDING THE BUSINESS PURPOSE OF THE FOREIGN TRIPS. THESE TR IPS WERE MADE WITH FAMILY APPARENTLY AS TOURISTS IN PERSONAL CAPACITY AND COULD NOT HAVE BEEN CLAIMED AS BUSINESS EXPENSES. THE ADDITION IS UPHELD AND GROUND OF APPEAL NO. 5 IS DISMISSED. ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 22 36. BEFORE US THE LD.COUNSEL FOR THE ASSESSEE CONTE NDED THAT SINCE THE ASSESSEE WAS DEALING IN APPARELS, TH E DIRECTORS OF THE ASSESSEE COMPANY TRAVELLED ABROAD FOR MAKING PURCHASES. THE LD.COUNSEL FOR THE ASSESSEE T HOUGH FAIRLY CONCEDED THAT THERE WAS NO EVIDENCE AVAILABL E WITH HIM TO SUBSTANTIATE HIS CONTENTION. ALTERNATIVELY, HE CONTENDED THAT THE ENTIRE FOREIGN TRAVELLING IN ANY CASE COULD NOT BE DISALLOWED CONSIDERING THE BUSINESS NE ED OF THE ASSESSEE AND THE SAME MAY BE RESTRICTED TO A REASON ABLE AMOUNT. 37. THE LD. DR FAIRLY AGREED TO THE ALTERNATE CONTE NTION OF THE LD.COUNSEL FOR THE ASSESSEE. 38. WE HAVE HEARD THE RIVAL CONTENTIONS. THE ISSUE RELATES TO DISALLOWANCE OF ENTIRE FOREIGN TRAVELLING EXPEN SES INCURRED BY THE ASSESSEE. WE FIND THAT THOUGH UNDOU BTEDLY THE ASSESSEE HAS NOT FILED ANY EVIDENCE OF FOREIGN TRAVEL UNDERTAKEN FOR THE PURPOSE OF ITS BUSINESS, AT THE SAME TIME, IT CANNOT BE COMPLETELY RULED OUT THAT CERTA IN AMOUNT OF EXPENSES IS INCURRED IN THE COURSE OF ITS BUSIN ESS CONSIDERING THE NATURE OF ITS BUSINESS DEALING IN T RADING OF BRANDED CLOTHES/APPARELS. WE, THEREFORE, CONSIDER 5 0% OF ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 23 THE AMOUNT ACTUALLY CLAIMED BY THE ASSESSEE AS REAS ONABLE AND DISALLOW THE BALANCE 50%. THE GROUND OF APPEAL NO.5 IS THEREFORE PARTLY ALLOW ED. 39. GROUND OF APPEAL NO.6 RAISED BY THE ASSESSEE RE ADS AS UNDER: 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) HAS ERRED IN HAVING CONFIRMED DISALLOW ANCE OF AN AMOUNT OF RS.3,79,914/- MADE BY THE ASSESSING OF FICER BY TAKING RESORT TO THE PROVISIONS OF SECTION 40(A) (IA) BY HOLDING THAT AS NO TDS WAS DEDUCTED OUT OF THE FOLL OWING EXPENDITURE INCURRED BY THE APPELLANT, THE SAME WAS NOT AN ALLOWABLE EXPENDITURE:- (I) EXPENDITURE ON ADVERTISEMENT RS.1,48,748.00 (II) PROFESSIONAL CHARGES PAID TO NOSHEN OCEANIC RS.1,65,450.00 (III) EXPENSES ON REPAIR AND MAINTENANCE RS . 67,716.00 40. BRIEF FACTS RELATING TO THIS GROUND ARE THAT TH E ASSESSING OFFICER MADE ADDITION OF RS.3,79,914/- U/ S 40(A)(IA) AS THE ASSESSEE FAILED TO DEDUCT TDS ON C ONTRACT PAYMENTS. THE DETAILS OF EXPENDITURE ON WHICH TDS W AS NOT DEDUCTED ARE AS UNDER:- HEAD OF EXPENDITURE NAME OF PARTY AMOUNT (IN RS.) ADVERTISEMENT CALENDER INTERNATIONAL 34,935/ - ADVERTISEMENT FINE ADS 26,472/- ADVERTISEMENT KRISHNA NEON SIGNS 87,341/ - PROFESSIONAL CHARGES NOSHE OCEANIC 1, 65,450/- /I REPAIR & MAINTENANCE KONE ELEVATOR 65,716/ - TOTAL 3,79,914/ - ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 24 41. THE CIT(A) UPHELD THE ORDER OF THE AO HOLDING A S UNDER: 9.3 I HAVE CONSIDERED THE ISSUE. THE PAYMENTS MADE WERE IN THE NATURE OF ADVERTISEMENTS EXPENSE/ PROFESSIONAL CHANGES ETC ON WHICH THE APPELLANT WAS LIABLE AS PER LAW TO DEDUCT TDS IRRESPECTIVE OF THE FACT THAT WRITTEN CONTRACT WAS NOT ENTERED. THE CONTRACT IN SUCH CASES IS IMPLIED CONTRACT. SINCE THE APPELLANT DID NOT COMPLY WITH THE TDS LIABILITY THE EXPENDITURE WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER U/S 40(A)(IA) O F THE ACT. ADDITION IS UPHELD AND THE GROUNDS OF APPE AL NOS. 6(A) AND (B) ARE DISMISSED. 42. THE SOLE CONTENTION RAISED BY LD.COUNSEL FOR TH E ASSESSEE BY WAS THAT OUT OF THE ADVERTISEMENT EXPEN SES, THE AMOUNT PAID TO FINE ADS OF RS.26,472/- DID NOT QUAL IFY FOR TAX DEDUCTION AT SOURCE SINCE THE LIMIT FOR TDS W AS RS.30,000/- AND ABOVE. VIS--VIS THE PROFESSIONAL C HARGES TO NOSHE OCEANIC, THE LD.COUNSEL FOR THE ASSESSEE CONT ENDED THAT IN FACT TDS HAD BEEN DEDUCTED ON THE IMPUGNED PAYMENT. HE FILED COPY OF THE TDS CERTIFICATE ISSU ED TO NOSHE OCEANIC AS EVIDENCE AND PLEADED THAT THE SAME MAY BE ADMITTED, BEING RELEVANT TO THE ISSUE AT HAND. H E FURTHER PLEADED THAT THE MATTER BE RESTORED BACK TO THE AO TO VERIFY THE ABOVE CLAIM OF THE ASSESSEE. THE LD.DR DID NOT OBJECT TO THE SAME. ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 25 43. WE HAVE HEARD THE RIVAL CONTENTIONS. CONSIDERIN G THE ABOVE AVERMENTS OF THE ASSESSEE, WE CONSIDER IT FIT TO RESTORE THE ISSUE BACK TO THE AO TO VERIFY BOTH THE CLAIMS OF THE ASSESSEE VIS--VIS THE ADVERTISEMENT PAYMENT TO FIN E ADS NOT QUALIFYING FOR TDS DEDUCTION AND THE FACT THAT TDS HAVING BEEN DEDUCTED TO NOSHE OCEANIC.THE AO IS DIR ECTED TO ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AFTE R DULY VERIFYING THE CONTENTIONS OF THE ASSESSEE. NEEDLESS TO ADD, THE ASSESSEE BE GRANTED DUE OPPORTUNITY OF HEARING. THE GROUND OF APPEAL NO.6 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. IN EFFECT THE APPEAL OF THE ASSESSEE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. WE SHALL NOW TAKE UP THE APPEAL OF THE ASSESSEE PERTAINING TO A.Y 2013-14 ITA NO.1013/CHD/2017: (A.Y 2013-14): 44. IN THIS APPEAL GROUND NOS.1 AND 5,IT WAS STATE D BY THE LD.COUNSEL FOR THE ASSESSEE, WERE GENERAL IN NATU RE. THE SAME THEREFORE NEED NO ADJUDICATION. 45. GROUND NO.2 RAISED BY THE ASSESSEE READS AS UND ER: ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 26 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CLT(A) HAS ERRED , BOTH ON FACTS AND IN LAW IN HAVI NG CONFIRMED THE ADDITION OF RS.7,96,537/- MADE TO THE INCOME OF THE APPELLANT BEING THE DIFFERENCE IN THE AMOUNTS OF RECEIPT AS PER FORM NO. 26AS AND AS ACCOUNTED FO R IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. 46. THE FACTS RELEVANT TO THE ISSUE ARE THAT THE AS SESSING OFFICER MADE AN ADDITION OF RS.7,96,537/- ON ACCOUN T OF MISMATCH IN THE INCOME AS PER 26AS FORM AND INCOME AS PER INCOME TAX RETURN. THE ASSESSING OFFICER EXAMINED T HE 26AS FORM OF THE ASSESSEE AND FOUND THAT THERE WAS DIFFE RENCE OF RS. 7,96,537/- FROM M/S V.F. BRANDS INDIA PVT. LTD. AND IN THE ABSENCE OF ANY EXPLANATION REGARDING THE SAME F ROM THE ASSESSEE, ADDED RS. 7,96,537/- TO THE INCOME OF THE ASSESSEE. 47. THE CIT(A) UPHELD THE ORDER OF THE AO HOLDING A S UNDER: 5.2 I HAVE EXAMINED THE ISSUE IN DETAIL. THE INCOME IS CHARGED TO TAX IN THE YEAR THE RIGHT TO T HAT INCOME HAS ACCRUED OR ARISEN AS PER SECTION 5 OF TH E ACT. INCOME HAS ACCRUED TO THE APPELLANT IN THE CURRENT YEAR. THE ASSESSING OFFICER HAD TO BROUGHT TO TAX IN THIS YEAR AS MERCANTILE SYSTEM IS BEING FOLLOWED. ISSUE OF CREDIT NOTES TO SET-OFF EXPENSE S AGAINST THE INCOME HAS BEEN DONE IN THE NEXT FINANCIAL YEAR AS A RESULT THE INCOME CHARGEABILITY RIGHTLY ADDED THE INCOME. THE ADDITION IS CONFIRMED AND GROUND OF APPEAL NO, 2 IS DISMISSED. 48. BEFORE US THE LD.COUNSEL FOR THE ASSESSEE REITE RATED THE CONTENTION MADE BEFORE THE LOWER AUTHORITIES TH AT ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 27 MISMATCH WAS ON ACCOUNT OF REIMBURSEMENT OF ADVERTISEMENT EXPENSES MADE BY M/S V.F. BRANDS WHIC H WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESS EE IN THE SUBSEQUENT YEAR. IT WAS ALSO POINTED OUT THAT IT HA D BEEN EXPLAINED TO THE AUTHORITIES BELOW THAT THE REASON FOR ACCOUNTING FOR IN THE SUBSEQUENT YEAR WAS THAT THE CREDIT NOTE WAS RECEIVED IN THE SUBSEQUENT YEAR AND, THERE FORE, THE AMOUNT HAD ACCRUED TO THE ASSESSEE IN THE SUBSEQUEN T YEAR ONLY. THE LD.COUNSEL FOR THE ASSESSEE DREW OUR ATTE NTION TO THE SUBMISSIONS MADE IN THIS REGARD BEFORE THE CIT( A) AND REPRODUCED IN THE ORDER OF THE LD.CIT(A) AT PARA 5. 1 OF THE ORDER. 49. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF LOWER AUTHORITIES. 50. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND TH AT THE ASSESSEE HAD CONSISTENTLY PLEADED THAT THE DIFFEREN CE WAS ON ACCOUNT OF REIMBURSEMENT RECEIVED FROM M/S V.F. BRA NDS WHICH WAS BOOKED IN THE SUBSEQUENT YEAR WHEN THE FA CT OF THE REIMBURSEMENT CAME TO ITS KNOWLEDGE BY WAY OF C REDIT NOTES ISSUED. THE CIT(A), WE FIND, DESPITE SPECIFIC AVERMENTS MADE BY THE ASSESSEE UPHELD THE DISALLOWANCE BY GIV ING GENERAL FINDINGS THAT INCOME IS TO BE TAXED ON ACC RUAL BASIS ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 28 AND THAT INCOME HAD ACCRUED TO THE ASSESSEE, WITHOU T ADDRESSING THE FACTS AS STATED BY THE ASSESSEE AND POINTING OUT HOW HE ARRIVED AT THE FINDING THAT INCOME ACCRU ED TO THE ASSESSEE IN THIS YEAR. WE, THEREFORE, CONSIDER IT F IT TO RESTORE THE ISSUE BACK TO THE AO TO CONSIDER THE CONTENTION OF THE ASSESSEE SPECIALLY THE FACT THAT IT WAS THE REIMBUR SEMENT OF EXPENSES AND ALSO THE FACT THAT THE CREDIT NOTE REL ATING TO THE SAME HAD BEEN RECEIVED IN THE NEXT YEAR ONLY. T HE AO IS DIRECTED TO ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 51. GROUND NO.3 RAISED BY THE ASSESSEE READS AS UND ER: 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN HAVI NG CONFIRMED THE ALLOWANCE OF DEPRECIATION ON ELECTRIC AL INSTALLATIONS AND FITTINGS AT 10% INSTEAD OF 15% AS CLAIMED BY THE APPELLANT THEREBY CONFIRMING AN ADDI TION OF RS. 9,05,692/-TO THE INCOME OF THE APPELLANT. 52. BOTH THE PARTIES STATED THAT THE ABOVE GROUND R AISED BY THE ASSESSEE IN THIS APPEAL WAS IDENTICAL TO GROUND NO.3 RAISED IN ASSESSES APPEAL IN ITA NO.1010/CHD/2017 . ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 29 IN VIEW OF THE SAME OUR DECISION RENDERED THEREIN AT PARA 15 WILL APPLY TO THIS GROUND WITH EQUAL FORCE. F OLLOWING THE SAME THIS GROUND OF APPEAL NO.3 IS DISMISSED 53, GROUND NO.4 RAISED BY THE ASSESSEE READS AS UND ER: 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CLT(APPEALS) HAS ERRED IN HAVING CONFIRMED DISALLOWANCE OF AN AMOUNT OF RS. 9,25,537/- BEING T HE AMOUNT OF EXPENDITURE INCURRED ON FOREIGN TRAVEL OF THE DIRECTORS BY TREATING THE SAME AS NON BUSINESS EXPENDITURE. 54. IT IS RELEVANT TO MENTION HERE THAT THE ABOVE G ROUND RAISED BY THE ASSESSEE IN THIS APPEAL, IT WAS ADMIT TED BY BOTH THE PARTIES, WAS IDENTICAL TO GROUND NO.5 RAIS ED IN ASSESSES APPEAL IN ITA NO.1011/CHD/2017 DEALT WITH US ABOVE. IN VIEW OF THE SAME OUR DECISION RENDERED THEREIN A T PARA 37 WILL APPLY TO THIS GROUND WITH EQUAL FORC E. FOLLOWING THE SAME THIS GROUND OF APPEAL NO.4 IS PA RTLY ALLOWED. IN EFFECT THE APPEAL OF THE ASSESSES IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. 55. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE IN ITA NO.1010/CHD/2017, ITA NO.1011/CHD/2017 & ITA ITA NOS.1010 TO 1013/CHD/2017 A.YS.2010-11, 2011-12 &2013-14 30 NO.1013/CHD/2017 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $ % & ' (DIVA SINGH ) (ANNAPURNA GUPTA) ! ' /JUDICIAL MEMBER () ' /ACCOUNTANT MEMBER # /DATED: 23 RD AUGUST, 2019 * * &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35# / GUARD FILE &) ' / BY ORDER, / ASSISTANT REGISTRAR