Sukumar buildwell Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1014/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4072 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 24-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAJANAND MEENA
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 1014(DEL)2011 ASSESSMENT YEAR:2006-07 SUKUMAR BUILDWELL PVT. LIMITED, INC OME TAX OFFICER, B-5/263, SECT.3, ROHINI. V. WARD 9(3), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VED JAIN, CA & MS. RANO JAIN, CA RESPONDENT BY: SHRI GAJANAND MEENA , CIT/DR ORDER PER A.D. JAIN, J.M . THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 006-07, TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, ORD ER PASSED BY LD. CIT(A) IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN ENHANCING THE INCOME OF THE ASSESSEE TO ` 2,20,89,000/- AS AGAINST ` 2,18,51,070/- ASSESSED BY THE AO AND ` 66,074/- DECLARED BY THE ASSESSEE. (II) THAT THE ABOVE SAID ENHANCEMENT HAS BEEN MAD E ON ACCOUNT OF EXPENSES INCURRED BY THE ASSESSEE IGNORING THE EXPL ANATION AND EVIDENCES PROVIDED BY THE ASSESSEE. ITA 1014(DEL)2011 2 3.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, C IT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE DISALLOW ANCE OF EXPENSES AMOUNTING TO ` 2,17,85,000/- AS MADE BY THE AO. (II) THAT THE SAID DISALLOWANCE HAS BEEN CONFIRMED IGNORING THE EVIDENCES AND EXPLANATION BROUGHT ON RECORD BY THE ASSESSEE. (III) THAT THE ABOVE DISALLOWANCE IS BEING CONFIRM ED DESPITE THE SAME BEING INCURRED WHOLLY AND EXCLUSIVELY BY THE ASSES SEE. 2. THE ASSESSEE HAD RECEIVED AN AMOUNT OF ` 2,20,89,000/- FROM PACL LTD. ON THE BASIS OF WORK ORDER ISSUED BY M/S.PACL. THE AO OBSERVED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF ` 2,17,85,000/- ON ACCOUNT OF PAYMENT FOR WAGES; THAT HOWEVER, EVEN DESPITE HAVIN G BEEN ASKED TO DO SO, THE ASSESSEE DID NOT PRODUCE CASH VOUCHERS FOR WAGE S. THE AO, ACCORDINGLY, DISALLOWED THE ENTIRE AMOUNT ON ACCOUN T OF PAYMENT OF WAGES AND DETERMINED THE ASSESSEES INCOME AT ` 2,18,51,070/-, AGAINST THE RETURNED INCOME OF ` 66,074/-. 3. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TH E WAGE REGISTER ON ACCOUNT OF PAYMENT OF WAGES. THE LD. CIT(A) REMAN DED THE MATTER TO THE AO. THE AO ANALYZED THE EVIDENCE SUBMITTED BY THE ASSESSEE PERTAINING TO WAGES. IN HIS REMAND REPORT, THE AO SUBMITTED THAT THE DETAILS OF THE EXPENSES MONTH-WISE, MENTIONING THE NAMES OF LABOUR ERS TO WHOM THE ALLEGED PAYMENTS WERE STATEDLY MADE, WERE NOT SUFFI CIENT EVIDENCE IN ITA 1014(DEL)2011 3 SUPPORT OF THE HIGH EXPENSES CLAIMED; THAT THE ALLE GED MUSTER ROLL OF THE WORKERS/LABOURERS FOR EXPENSES OF ` 31,22,140/-, WAS WITHOUT ANY SIGNATURE OF ANY RECIPIENT, AS EVIDENT FROM THE LIST FOR THE MONTHS OF AUGUST AND OCTOBER, 2005 AND FEBRUARY, 2006; THAT ALL THE OTHE R PAYMENTS WERE IN CASH AND MOST OF SUCH PAYMENTS REMAINED PAYABLE AT THE E ND OF EACH MONTH AND AT THE END OF THE FINANCIAL YEAR ENDING ON 31.3.200 6; THAT THE LABOURERS WERE NOT IN A POSITION TO AFFORD AND RECEIVE THE PAYMEN T LESS THAN THE ACTUAL; THAT THE BALANCE PAYABLE AMOUNTS FOR THE MONTHS OF APRIL , MAY AND NOVEMBER, 2005 AND JANUARY, 2006 WERE MORE THAN 60% OF THE TO TAL WAGES OF THESE MONTHS; AND THAT THE PAYABLE WAGES OF ` 70,61,620/-, AS ON 31.3.2006, HAD BEEN ADJUSTED BY WAY OF CASH PAYMENT ON DIFFERENT D ATES, WHICH TOO, WAS WITHOUT ANY EVIDENCE. 4. THE LD. CIT(A) OBSERVED THAT AS SUCH, DESPITE HA VING BEEN AFFORDED A SECOND OPPORTUNITY, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE REGARDING PAYMENT OF ` 31,22,140/- ON ACCOUNT OF WAGES; THAT THE WAGES AMO UNTING TO ` 70,61,620/-, WHICH WERE OUTSTANDING, HAD BEEN ADJUS TED BY WAY OF CASH PAYMENTS ON DIFFERENT DATES AND WITHOUT ANY EVIDENC E; THAT THEREFORE, OUT OF THE TOTAL AMOUNT OF WAGES AMOUNTING TO ` 2,17,85,000/-, THE ASSESSEE HAD REMAINED UNABLE TO FURNISH ANY EVIDENCE REGARDING PAYMENT OF ` ITA 1014(DEL)2011 4 31,22,140/-; AND THAT REGARDING THE REMAINING PAYME NTS, THE ONLY EVIDENCE SUBMITTED BY THE ASSESSEE WAS BY WAY OF SOME SIGNAT URES OF UNIDENTIFIED PERSONS PLACED AGAINST THE ALLEGED PAYMENTS. ACCO RDINGLY, THE LD. CIT(A) REQUIRED THE ASSESSEE TO PRODUCE COPIES OF ELECTRI CITY BILLS, THE NUMBER OF EMPLOYEES OTHER THAN THE DIRECTORS WITH EVIDENCE, M ATERIAL SHOWING AS TO WHEN THE LOANS ADVANCED BY THE ASSESSEE TO VARIOUS COMPANIES WERE RETURNED BY THEM, THE DETAILS OF ADMINISTRATIVE AND OTHER EX PENSES, A COPY OF AGREEMENT, IF ANY, WITH PACL INDIA LTD., WITH PAN N UMBER OF PACL AND LATEST ADDRESS OF THE ASSESSEE, SINCE ALL THE LETTE RS SENT AT THE REGISTERED ADDRESS OF THE COMPANY HAD RETURNED UNSERVED. THE ASSESSEE WAS QUERIED THAT SINCE IT SEEMED THAT IT HAD NOT CARRIED OUT AN Y BUSINESS, AS TO WHY ALL THE EXPENSES BE NOT ADDED BACK TO THE ASSESSEES INCOME . THE ASSESSEE WAS INFORMED THAT THE SAID COMMUNICATION BE TREATED AS A NOTICE OF ENHANCEMENT. 5. IN RESPONSE, THE ASSESSEE SUBMITTED THAT A COPY OF AGREEMENT WITH PACL INDIA LTD. HAD ALREADY BEEN SUBMITTED ALONG WI TH THE SUBMISSIONS FILED EARLIER. HOWEVER, THE ASSESSEE FILED A COPY OF WORK ORDER DATED 24.3.05, WHEREBY PACL INDIA LTD. HAD REQUIRED THE A SSESSEE TO UNDERTAKE THE WORK OF JUNGLE CUTTING/LAND LEVELING @ 1000 PE R TRUCK WITH LABOUR, IN TAMIL NADU. ITA 1014(DEL)2011 5 6. THE LD. CIT(A) OBSERVED THAT THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE SHOWED THAT NO TRAVELLING HAD BEEN UNDERTA KEN BY THE DIRECTORS OF THE ASSESSEE COMPANY AND SO, IT WAS NOT UNDERSTAND ABLE AS TO HOW THE WORK WAS EXECUTED IN TAMIL NADU, WHEN NO EXPENDITURE HAD BEEN DEBITED UNDER THE HEAD OF TRAVELLING. 7. THE ASSESSEE WAS ASKED IF IT WAS HAVING ANY EMPL OYEE OTHER THAN THE DIRECTORS. IN REPLY, THE ASSESSEE SUBMITTED THAT IT WAS IN THE BUSINESS OF EXECUTING CONTRACTS IN REMOTE AREAS ACROSS THE COUN TRY; THAT IT DID NOT HAVE ANY EMPLOYEE OTHER THAN THE DIRECTORS, WHO WORKED FULL TIME AND LOOKED AFTER THE COMPLETE ADMINISTRATION, FINANCIAL AND OP ERATIONAL ASPECTS; THAT SINCE THE DIRECTORS WERE FULLY INVOLVED IN THE BUSI NESS, THERE WAS NO NEED OF ANY CLERICAL STAFF; THAT BESIDES THIS, THE ASSESSEE GOT ITS COMPLETE WORK DONE THROUGH LABOURERS, WHO WERE ENGAGED IN THE RESPECTI VE PLACES WHERE VARIOUS CONTRACTS WERE EXECUTED BY IT; AND THAT THE WAGE SH EETS DEPICTING THE PAYMENT MADE TO THEM HAD BEEN PRODUCED IN THE ASSES SEES EARLIER SUBMISSIONS. 8. THE LD. CIT(A) OBSERVED THAT THE SUBMISSIONS OF THE ASSESSEE SHOWED THAT IT WAS A BOGUS COMPANY WHERE ONLY TWO DIRECTOR S WERE THERE AND NO OTHER STAFF WAS EMPLOYED; THAT STILL, AN AMOUNT OF ` 35,456/- HAD BEEN DEBITED UNDER THE HEAD OF STAFF WELFARE EXPENSES; THAT THE ASSESSEE HAD ALSO DEBITED ITA 1014(DEL)2011 6 WATER AND ELECTRICITY EXPENSES AMOUNTING TO ` 28,700/-; THAT THE ASSESSEE HAD FAILED TO PRODUCE ELECTRICITY BILLS, INSPITE OF HA VING BEEN ASKED TO DO SO; THAT BESIDES, NO EXPENDITURE HAD BEEN INCURRED ON ACCOUN T OF TELEPHONE; THAT THE DIRECTORS NOT HAVING UNDERTAKEN ANY TRAVELING, NOR ANY EXPENDITURE HAVING BEEN INCURRED ON ACCOUNT OF TELEPHONE, IT WAS NOT U NDERSTANDABLE AS TO HOW THE DIRECTORS COMMUNICATED WITH PEOPLE IN TAMIL NAD U TO EXECUTE THE WORK; THAT THE WORK ORDER PRODUCED BY THE ASSESSEE SHOWED THAT THE ASSESSEE WAS TO BE PAID @ 1,000/- PER TRUCK WITH LABOUR; THAT HOWEV ER, NO EXPENDITURE PERTAINING TO TRUCK HAD BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT; THAT FURTHER, THOUGH THE AREA MENTIONED IN THE WORK ORDE R WAS SHOWN AT 22089.50, NO UNIT HAD BEEN MENTIONED THERE-AGAINST; THAT THIS AGAIN WENT TO SHOW THAT THE WORK ORDER WAS AN UNRELIABLE PIECE OF PAPER; THAT AS PER THE TERMS AND CONDITIONS MENTIONED IN THE WORK ORDER, T HE RATES WERE INCLUSIVE OF CARTAGE AND LABOUR AND ALL MATERIALS WERE TO BE PROVIDED BY THE CONTRACTORS; THAT HOWEVER, NEITHER HAD ANY PAYMENT BEEN MADE ON ACCOUNT OF CARTAGE, NOR HAD ANY MATERIAL BEEN PURCHASED BY THE ASSESSEE; THAT THE ASSESSEE HAD GIVEN DETAILS OF ITS BANK ACCOUNT; THA T AS PER THESE DETAILS, THE BANK FROM WHICH THE ASSESSEE OPERATED ITS ACCOUNT, WAS SITUATED IN PITAM PURA, CD BLOCK, HDFC BANK, NEW DELHI; THAT THE ASS ESSEE HAD NOT GIVEN DETAILS OF ANY OTHER BANK ACCOUNT IN TAMIL NADU; TH AT THE BANK STATEMENTS ITA 1014(DEL)2011 7 ISSUED FROM THE PITAM PURA BRANCH OF HDFC BANK SHOW ED WITHDRAWALS IN CASH; THAT WHEN ONCE THERE WAS NO BANK ACCOUNT IN TAMIL NADU AND NO EXPENSE HAD BEEN INCURRED ON TRAVELLING, IT REMAINE D UNEXPLAINED AS TO HOW THE CASH WAS TRANSFERRED TO TAMIL NADU; THAT THE AS SESSEE ALSO COULD NOT PRODUCE ANY AGREEMENT OR CONTRACT WITH PACL, RATHER IT PRODUCED ONLY A WORK ORDER ; THAT THIS WORK ORDER WAS DATED 24.3.0 5 AND STATED THAT THE WORK SHOULD BE OVER WITHIN ONE YEAR, I.E., BY 23.4.06; T HAT THIS IMPLIED THAT WAGES SHOULD HAVE BEEN PAID BY MARCH 2006; THAT HOWEVER, THE OUTSTANDING WAGES AS AT THE END OF MARCH, 2006 WERE OF ` 70,61,620/-; THAT AS PER THE SCHEDULE OF PAYMENT OF WAGES FILED BY THE ASSESSEE, THE TOTA L OUTSTANDING WAGES AS SHOWN BY THE ASSESSEE AS ON 31.3.06, WERE OF ` 70,61,620/- AND THE SUM TOTAL OF THE WAGES DEBITED IN THE PROFIT AND LOSS ACCOUNT FROM AUGUST, 2005 TO MARCH, 2006 WAS OF ` 78,42,905/-; THAT THIS SHOWED THAT THE ASSESSEE HAD NOT PAID THE WAGES FOR THE LAST 8 MONTHS AND STILL THE WORKERS WERE DOING WORK FOR THE ASSESSEE; THAT AS PER THE BALANCE SHEET OF THE ASSESSEE, THE ASSESSEE DID NOT HAVE ANY FIXED ASSETS, YET NO AMOUNT HAD BE EN DEBITED IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF RENT; THAT THE ASSES SEE DID NOT OWN ANY BUILDING, NOR HAD IT PAID RENT EITHER IN DELHI OR I N TAMIL NADU, RAISING QUESTIONS AS TO FROM WHERE IT CARRIED ON ITS OPERAT IONS; THAT THE ASSESSEE HAD BEEN ASKED TO FURNISH COMPLETE DETAILS OF ADMINISTR ATIVE AND OTHER EXPENSES; ITA 1014(DEL)2011 8 THAT IN RESPONSE, THE ASSESSEE HAD MERELY SUBMITTED A COPY OF ITS PROFIT AND LOSS ACCOUNT, BUT NO DETAILS OF VARIOUS EXPENSES IN CURRED, HAD BEEN FILED; THAT IT WAS THUS CLEAR THAT THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS AND THE ENTIRE EXPENDITURE DEBITED IN THE PROFIT AND LOSS A CCOUNT NEEDED TO BE DISALLOWED AND THE TOTAL RECEIPTS SHOWN BY THE ASSE SSEE WERE TO BE TAXED AS THE ASSESSEES INCOME; THAT IT WAS A PLOY OF M/S. P ACL INDIA LTD. TO DIVERT ITS PROFIT TO ANOTHER CONCERN AND TO THEREBY REDUCE ITS INCOME; THAT THE ASSESSEE HAD NOT CARRIED OUT ANY WORK AND IT WAS JU ST A SHAM AGREEMENT BY M/S. PACL INDIA LTD. TO DIVERT ITS INCOME TO THE AS SESSEE COMPANY AND THEN TO WITHDRAW THE ENTIRE AMOUNT IN CASH; THAT IN RESP ONSE TO A QUERY AS TO WHY ALL THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACC OUNT BE NOT DISALLOWED AND THE INCOME BE ENHANCED ACCORDINGLY, THE ASSESSEE HA D SUBMITTED THAT IF THE ACTION OF THE AO WERE TO BE CONSIDERED, IT WOULD ME AN THAT THE GROSS PROFIT RATE IN THE CASE OF THE ASSESSEE WOULD BE ONE HUNDR ED PERCENT; THAT THIS WAS PRACTICALLY IMPOSSIBLE TO ACHIEVE IN ANY BUSINESS; AND THAT THIS REPLY OF THE ASSESSEE WAS NOT FOUND CONVINCING BECAUSE OF THE DI SCREPANCIES DISCUSSED BY THE LD. CIT(A) AND BECAUSE OF THE FAILURE OF THE ASSESSEE TO ESTABLISH THAT IT HAD CARRIED OUT ANY WORK IN TAMIL NADU. ITA 1014(DEL)2011 9 9. IN THIS MANNER, THE LD. CIT(A) DETERMINED THE IN COME OF THE ASSESSEE AT ` 2,20,89,000/- AS AGAINST THAT OF ` 2,18,51,070/-, AS DETERMINED BY THE AO, THEREBY ENHANCING THE ASSESSEES INCOME BY ` 2,37,930/-. 10. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL. 11. CHALLENGING THE IMPUGNED ORDER, THE LEARNED COU NSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN ENHA NCING THE INCOME OF THE ASSESSEE FROM ` 66,074/- AS DECLARED BY THE ASSESSEE AND ` 2,18,51,070/-, AS ASSESSED BY THE A O, TO ` 2,20,89,000/-; THAT IN DOING SO, THE LD. CIT(A) ERRONEOUSLY IGNORED THE EXPLANATION AND EVIDENCE PR OVIDED BY THE ASSESSEE; THAT WHEREAS THE AO HAD ACCEPTED THAT THE WORK WAS ACTUALLY CARRIED OUT BY THE ASSESSEE, BUT NO EVIDENCE HAD BEEN PRODUCED IN SUPPORT OF THE EXPENSES CLAIMED TO HAVE BEEN INCURRED ON ACCOUNT OF WAGES P AID, THE CIT(A) FOUND THE AGREEMENT TO BE SHAM AND AS SUCH, NO WORK TO HA VE BEEN CARRIED OUT BY THE ASSESSEE; THAT THE FINDINGS OF NEITHER OF THE AUTHORITIES BELOW ARE VALID IN LAW; THAT ONCE THE AO FOUND THE WORK TO HAVE BEEN I N FACT CARRIED OUT, IN THE ABSENCE OF EVIDENCE, THE RECOURSE LEFT TO HIM WAS T O REJECT THE BOOKS OF ACCOUNT AND THE RESULTS DECLARED BY THE ASSESSEE AN D THEREAFTER COMPUTE THE INCOME WHICH WOULD CLEARLY HAVE BEEN EARNED IN THE ASSESSEES NATURE OF BUSINESS, BY APPLYING THE PERCENTAGE RATE OF PROFIT ON THE CONTRACT AMOUNT; ITA 1014(DEL)2011 10 THAT SO FAR AS REGARDS THE CIT(A), ONCE IT WAS HEL D THAT THE TRANSACTION WAS A SHAM TRANSACTION AND NO WORK WAS EXECUTED, IT NEEDE D TO BE HELD THAT THE AMOUNT PAID BY PACL WAS NOT THE INCOME OF THE A SSE SSEE, SINCE THE ASSESSEE WAS ONLY A FACILITATOR FOR HELPING PACL IN DIVERTING ITS PROFIT TO THE ASSESSEE, IN ORDER TO REDUCE ITS INCOME; AND THAT A S SUCH, GOING BY THE CIT(A)S FINDINGS, AT BEST, ONLY A PERCENTAGE OF TH E PAYMENT ALLEGEDLY TO HAVE BEEN PAID BY THE ASSESSEE TO THE PACL OUGHT TO HAVE BEEN ADDED IN THE HANDS OF THE ASSESSEE. 12. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY SUP PORTED THE IMPUGNED ORDER. IT WAS SUBMITTED THAT THE CIT(A) HAD DULY C ONSIDERED THE FACTS AND EVIDENCE BROUGHT ON RECORD AND HAD, BY A REASONED S PEAKING ORDER, ARRIVED AT A CONCLUSION THAT THE ALLEGED AGREEMENT BETWEEN PAC L AND THE ASSESSEE COMPANY WAS A SHAM ARRANGEMENT, ENTERED INTO IN ORD ER TO ENABLE PACL TO DIVERT ITS INCOME TO THE ASSESSEE AND THEN TO WITHD RAW THE ENTIRE AMOUNT IN CASH; THAT AS DISCUSSED ELABORATELY BY THE CIT(A), THE ASSESSEE HAD MISERABLY FAILED TO PROVE THE CLAIM OF PAYMENT OF WAGES; THAT IT STOOD ADMITTED THAT THE ASSESSEE DID NOT HAVE ANY EMPLOYEES OTHER THAN ITS DIRECTORS; THAT THESE DIRECTORS DID NOT TRAVEL TO TAMIL NADU; THAT NO PRE MISES WAS TAKEN ON RENT; THAT THE VOUCHERS REGARDING PAYMENT OF WAGES WERE U NSIGNED; THAT SUBSTANTIAL AMOUNTS OF WAGES REMAINED UNPAYABLE AND THE WORKERS WERE STILL ITA 1014(DEL)2011 11 DOING THE WORK FOR THE ASSESSEE; THAT NO TELEPHONE EXPENSES WERE SHOWN TO HAVE BEEN INCURRED; THAT NO ELECTRICITY BILLS WERE PRODUCED; THAT IN THESE FACTS, NO CONCLUSION OTHER THAN THE ONE ARRIVED AT BY THE CIT(A) CAN BE ENVISAGED; THAT AS SUCH, THERE BEING NO ERROR IN TH E ORDER OF THE LD. CIT(A), THE SAME BE CONFIRMED BY DISMISSING THE ASSESSEES APPEAL, WHICH IS UTTERLY SHORN OF MERIT. 13. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE AO, AS DISCUSSED HEREINABOVE, COMPLETED THE ASS ESSMENT, MAKING THE ADDITION OF ` 2,17,85,000/- TO THE INCOME OF THE ASSESSEE, HOLDIN G THAT THE EXPENDITURE WAS UNVERIFIABLE AND WAS BEING, ACCORD INGLY, DISALLOWED. EVIDENTLY, THE AO DID NOT HOLD THE ENTIRE TRANSACTI ON TO BE A SHAM TRANSACTION. IT WAS NOT HELD THAT NO SUCH WORK, AS CLAIMED BY THE ASSESSEE, WAS EXECUTED. THE LD. CIT(A), ON THE OTHER HAND, HELD THE TRANSACTION TO BE A SHAM ONE AND HELD THAT THE ENTIRE EXERCISE WAS TO DIVERT THE PROFIT OF PACL INDIA LTD. TO THE ASSESSEE CONCERN AND TO LATER WIT HDRAW THE SAME IN CASH. THE AO DISALLOWED THE EXPENSES CLAIMED, ON THE BASI S THAT THE ASSESSEE HAD FAILED TO PRODUCE VOUCHERS AND BILLS IN RESPECT OF SUCH PAYMENT. THE LD. CIT(A) ENHANCED THE INCOME OF THE ASSESSEE. 14. NEITHER OF THE ORDERS OF THE AUTHORITIES BELOW, MEETS THE REQUIREMENT OF LAW OF ASSESSING/DETERMINING THE CORRECT INCOME OF THE ASSESSEE. AS FOR ITA 1014(DEL)2011 12 THE AO, ONCE THE AGREEMENT WAS NOT HELD TO BE INGEN UINE, AND THE EXPENDITURE CLAIMED WAS DISALLOWED, IN THE ABSENCE OF EVIDENCE, HE OUGHT TO HAVE COMPUTED THE INCOME OF THE ASSESSEE ON THE BAS IS OF ESTIMATION, REFERRING TO INCOME NORMALLY EARNED IN THE LINE OF BUSINESS CARRIED ON BY THE ASSESSEE AND APPLYING A PERCENTAGE RATE OF PROFIT O N THE CONTRACT AMOUNT. THIS, EVIDENTLY, WAS NOT DONE. 15. THE LD. CIT(A) TOO, DID NOT CARRY HIS CONCLUSIO N TO ITS LOGICAL END. ONCE THE TRANSACTION WAS HELD TO BE SHAM, IT WAS NO T APPROPRIATE, MUCH LESS IN ACCORDANCE WITH LAW, TO TAX THE ENTIRE AMOUNT AS THE INCOME OF THE ASSESSEE. OBVIOUSLY, IN SUCH A SITUATION, AT BEST , WHEN THE ASSESSEE WAS HELD TO BE A FACILITATOR OF THE ALLEGED DESIGN OF PACL T O DIVERT ITS PROFIT TO THE ASSESSEE AND LATER TO WITHDRAW IT, A PERCENTAGE THE REOF, ON ACCOUNT OF THE ASSESSEE HAVING GIVEN SUCH ACCOMMODATION TO PACL, N EEDED TO HAVE BEEN ADDED IN THE HANDS OF THE ASSESSEE, AND NO MORE. 16. FURTHER, IN SUCH A CASE, ONLY THE SERVICE CHARG ES COULD BE ADDED AS THE INCOME OF THE ASSESSEE, AS HAVING BEEN CHARGED FOR PROVIDING THE ACCOMMODATION TO PACL. THIS HAS NOT BEEN DONE BY EITHER OF THE AUTHORITIES BELOW. 17. IN THE ABOVE VIEW OF THE MATTER, WE REMIT THIS ISSUE TO THE FILE OF THE AO, TO BE DECIDED, BY DETERMINING THE SERVICE CHARG ES EARNED BY THE ITA 1014(DEL)2011 13 ASSESSEE FOR PROVIDING THE ACCOMMODATION TO PACL IN DIA LTD. AND TO ADD THE SAME IN THE HANDS OF THE ASSESSEE. 18. IN THE RESULT, FOR STATISTICAL PURPOSES, THE AP PEAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.05.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10.05.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR