LUBE OIL DISTRIBUTORS, MUMBAI V. DCIT 15(1), MUMBAI

ITA 1179/MUM/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49168 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 09-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift; Business expenditure; Commercial expediency
• Section: 142(1); 131; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI R,S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 1179/MUM/2010 ASSESSMENT YEAR: 2007-08 M/S LUBE OIL DISTRIBUTORS, APPELLANT 25, JAKERIA BUNDER ROAD, NEXT TO RAJDOOT HOTEL, COTTON GREEN, MUMBAI 400 033. (PAN - VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT 15(1), MUMBAI APPELLANT BY : MR. BHUPENDRA SHAH RESPONDENT BY : MR. RAJARSHI DWIVEDY ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)- 26, MUMBAI, PASSED ON 29/12/2010 FOR THE AS SESSMENT YEAR 2007-08. 2. GROUND NO. 1 IS DIRECTED AGAINST THE ACTION OF T HE CIT(A) IN CONFIRMING THE DISALLOWANCE RS. 3,29,708/- OUT OF B USINESS DEVELOPMENT EXPENSES. 3. BRIEFLY THE FACTS RELATING TO RAISE THIS GROUND ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM SHOWING INCOME FROM OF DISTRIBUTION OF PRODUCTS OF INDIAN OIL CORPORATION. THE ASSESSEE HA D COMMENCED ITS BUSINESS IN THE YEAR 2003. THE ASSESSEE HAD CLAIMED BUSINESS DEVELOPMENT EXPENSES OF RS. 3,29,708/- AND THE ASSE SSING OFFICER HAD ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 2 DISALLOWED THESE EXPENSES ON THE GROUND THAT THERE IS NO EVIDENCE OF PRESENTATION OF ARTICLES GIFTED TO THE OFFICERS OR THE CUSTOMERS OF THE ASSESSEE. AS ACCORDING TO THE ASSESSING OFFICER BY NOTICE U/S 142(1) DATED 30/10/09 THE ASSESSEE WAS CLEARLY ASKED ABOUT THE EVIDENCE OF THE EXPENDITURE DEBITED UNDER THE HEAD BUSINESS PRO MOTION. THE ASSESSEE FILED SOME DETAILS, FROM WHICH, THE ASSESS ING OFFICER NOTICED THAT THE ASSESSEE PURCHASED GOLD AND SILVER ITEMS, WHICH WERE GIVEN TO THE PERSONS RELATED WITH THE ASSESSEES BUSINESS EXPEDIENCY AND TO MAINTAIN BUSINESS RELATION WITH THE HEAD OF THE IND IAN OIL CORPORATION AND SOME OF THE OFFICERS WHO WERE HAVIN G THE CONTROL OF THE PAYMENTS FOR THE PURCHASES MADE BY THE ASSESSEE . THE ASSESSING OFFICER REJECTED THE SUBMISSIONS OF THE ASSESSEE AS NOT GENUINE. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD NOT PR ODUCED ANY EVIDENCE OF SUCH IMPUGNED GIFT AND MOREOVER, SUCH T YPE OF GIFT CLAIMED TO BE GIVEN TO GOVT. OFFICE FOR FAVOUR, COU LD NOT BE PRESUMED TO BE LEGAL EXPENSES RATHER IT IS PROHIBITED BY LAW AND NOT ALLOWABLE U/S 37 OF THE ACT, THE ASSESSING OFFICER, THEREFORE , DISALLOWED THE EXPENDITURE OF RS. 3,29,708/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SU BMISSION, THE EXTRACT OF WHICH WAS REPRODUCED BY THE CIT(A) IN HI S ORDER AT PAGES 3 & 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE, THE CIT(A) HELD THAT THE ASSESSEE HAD FAILED TO DEMONSTRATE WI TH EVIDENCE THAT SUCH GOLD AND SILVER ITEMS HAVE ACTUALLY BEEN DELIV ERED TO THE ANY OF THE CUSTOMERS, DEALERS, OR BUSINESS RELATED PERSONS . HE FURTHER HELD THAT WHEN ASSESSING OFFICER HAD CHALLENGED THE VERA CITY OF THE CLAIM ITSELF BY ISSUING A SPECIFIC NOTICE U/S 142(1), IT WAS THE RESPONSIBILITY OF THE ASSESSEE TO DEMONSTRATE WITH RELIABLE AND VE RIFIABLE EVIDENCE ABOUT THE ACTUAL UTILITY OF SUCH SO CALLED GIFT ART ICLES. THE EXPLANATION OFFERED BY THE ASSESSEE THAT GOLD COINS WERE GIVEN TO THE PERSONS RELATED WITH BUSINESS EXPEDIENCY AND ALSO MAINTAIN BUSINESS RELATION ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 3 WITH THE HEAD OF OFFICE OF THE INDIAN OIL CORPORATI ON AND SOME OF THE OFFICERS WHO ARE HAVING THE CONTROL OF THE PURCHASE S, IS HIGHLY OBJECTIONABLE AND IF SUCH CLAIM IS APPROVED IN JUDI CIAL FORUM OR IN APPELLATE PROCEEDINGS THEN IT WOULD MEAN JUSTIFICAT ION TO BRIBERY OR KICKBACKS IN THE NAME OF GIFTS TO THE GOVERNMENT OF FICERS. IN VIEW OF THE ABOVE FINDINGS, THE CIT(A) CONFIRMED THE DISALL OWANCE MADE BY THE ASSESSING OFFICER. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE PRESENTATION OF ARTICLES WERE GIFTED OUT O F COMMERCIAL EXPEDIENCY AND TO MAINTAIN BUSINESS RELATIONSHIP WI TH THE OFFICERS OF THE CUSTOMERS OF THE ASSESSEE ON VARIOUS FESTIVALS AND OCCASIONS AND TO THIS EFFECT A LIST OF THE PERSONS ALONG WITH DES IGNATION, ITEM GIFTED WAS DULY SUBMITTED TO THE ASSESSING OFFICER VIDE LE TTER DATED 26/08/09, WHICH IS IN ANNEXURE-5. IT IS CONTENDED T HAT THE ASSESSING OFFICER HAS WRONGLY DISALLOWED THE CLAIM OF THE ASS ESSEE U/S 37 BY HOLDING IT AS ILLEGAL EXPENSES PROHIBITED BY LAW. IN SUPPORT OF THE ASSESSEES CASE, THE LEARNED AR HAS RELIED UPON THE FOLLOWING CASE LAWS:- 1. ITO VS. DHANRAJGIRI RAJA NARSINGIR, [1973 91 IT R 544 (SC) 2. CIT VS. GOBALD MOTOR SERVICES (P) LTD., [1975] 1 00 ITR 240 (MAD.) 3. NM RAYALOO IYER & SONS VS. CIT [1954] 26 ITR 265 (MAD.) 4. WIPRO INFORMATION TECHNOLOGY LTD. VS. DCIT, 88 T TJ 778 (BANG.) 5. CIT VS. AVERY CYCLE LTD., 296 ITR 393 (P&H) 6. ESCORT EMPLOYEES ANCILLARIES LTD., [1997] 71 ITD 163 (CHD- TRIB). 7. GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD. VS. AC IT, 112 TTJ 94(CHD.) 8. ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 4 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, HAS STRONGLY PLACED RELIANCE ON THE ORDERS OF REVEN UE AUTHORITIES. 5. AFTER HEARING THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSING THE RECORD AS WELL AS GOING THROUGH THE OR DERS OF THE AUTHORITIES BELOW, WE FIND THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM BY NOT SUBMITTING PROPER EVIDENCE. MOREOVER, THE EXPLANATION OFFERED BY THE ASSESSEE BEFORE THE ASSESSING OFFICE R IS NOT JUSTIFIABLE AND THE SAME IS GENERAL AND VAGUE AS HAS BEEN HELD BY THE CIT(A). THE CASE LAWS RELIED UPON THE LEARNED COUNSEL FOR T HE ASSESSEE ARE DISTINGUISHABLE ON FACTS AS EACH CASE HAS BEEN DECI DED ON CONSIDERATION OF ITS FACTS AND CIRCUMSTANCES. THERE FORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS. 3,29,708/- MADE BY THE ASSESSING OFFICER AGAINS T THE CLAIM OF THE OF THE ASSESSEE OUT OF BUSINESS DEVELOPMENT EXPENSE S. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS COUNT AN D GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 6. GROUND NO. 2 IS DIRECTED AGAINST THE ACTION OF T HE CIT(A) IN CONFIRMING DISALLOWANCE OF RS. 5,26,664/- OUT OF GO DOWN REPAIRS. 7. THE ASSESSEE HAD CLAIMED RS. 1,50,000/- PROFESSI ONAL FEE TO SUJATA SHA AND SUBMITTED A PHOTO COPY OF SUJATA SHA H DTD. 14.08.08 WHICH SHOES RECEIPT AGAINST DESIGNING AND CONSULTIN G CHARGES OF RESIDENTIAL RENOVATION OF FLAT AT WADALA. ON BEING ASKED TO PRODUCE DELIVERY CHALLAN TRANSPORT RECEIPT AND COPY OF MAP OF RESIDENCE PREPARED BY ARCHITEXT, THE ASSESSEE FILED A SKETCH PURPORTED TO HAVE BEEN PREPARED BY SUJATA SHAH. THE ASSESSING OFFICER OBSERVED THAT THE SAID SKETCH HAD BEEN PREPARED ON A PLAIN PAPER BEARING THE NAME OF SUJATA SHAH, WHICH CLEARLY PROVES THAT JUST FOR THE SAKE OF GODOWN EXPENSES A SKETCH TO THE DEPARTMENT HAD BEEN PRODUC ED. IT WAS OBSERVED THAT FEW COPIES OF BILLS FOR MATERIAL PURC HASED AND ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 5 CONTRACTOR BILL HAD ALSO BEEN PRODUCED. IT WAS HELD THAT NO EVIDENCE HAD BEEN PRODUCED/FURNISHED OF HOW THE CONSTRUCTION MATERIAL HAD REACHED TO SITE OF GODOWN. THE ASSESSING OFFICER WA S OF THE VIEW THAT THE REASON IS OBVIOUS THAT WHEN THE ARCHITECT HAS P REPARED DESIGNING FOR RENOVATION OF RESIDENCE THE MATERIAL PURCHASED IN THE NAME OF GODOWN REPAIR HAS ALSO BEEN UTILIZED IN RESIDENCE. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE TOTAL GODOWN EXPEN SES CLAIMED IN P&L A/C OF RS. 3,76,664/- AND PROFESSIONAL CHARGES OF RS. 1,50,000/-, TOTALING TO RS. 6,26,664/-. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 8. BEFORE THE CIT(A) THE ASSESSEE CONTENDED THAT TH ESE EXPENSES WERE FULLY ALLOWABLE BECAUSE THEY WERE INCURRED FOR REPAIRS AFTER THE MASSIVE RAINFALL, WHICH PERTURBED THE ENTIRE OFFICE AND ADJACENT GODOWN SPACE. IT WAS SUBMITTED THAT AS EXPLAINED D URING THE COURSE OF ASSESSMENT PROCEEDINGS, TO AVOID THE COMPLEXITY IN BILLING THE FULL WORK OF REPAIR WAS GIVEN TO M/S SUJATA SHAH ON TURN KEY BASIS ALONG WITH PROFESSIONAL FEES. THE ASSESSEE RELIED UPON VA RIOUS CASE LAWS BEFORE THE CIT(A) IN SUPPORT OF ITS CASE, WHICH WER E MENTIONED ON PAGE 7 BY THE CIT(A) IN HIS ORDER. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT(A) HELD THAT THERE IS NO MERIT IN THE ARGUMENTS ADVANCED BY THE LEARNED AR IS VERY GENERAL IN NATUR E REVEALING NO EVIDENCE WHICH COULD PROVE, BEYOND DOUBT, THAT THER E WAS AN ACTUAL REPAIRING OF ANY SUCH GODOWN, WHEREAS, THE EVIDENCE ON RECORD CLEARLY PROVED THAT SAME WAS DONE IN RESPECT OF RENOVATION OF FLAT. HE FURTHER HELD THAT THE ASSESSEE HAD FAILED TO DEMONSTRATE WI TH EVIDENCES OF ANY RECEIPT OF REPAIR MATERIAL AT SITE OF GODOWN OR ANY EVIDENCE OF ACKNOWLEDGMENT OF LABOURERS AT SITE. FINALLY, THE C IT(A) HELD THAT ASSESSEE HAD WRONGLY CLAIMED THE PERSONAL EXPENDITU RE IN THE NAME OF BUSINESS EXPENDITURE OR IN THE NAME OF GODOWN REPAI R AND THEREBY HAS OBVIOUSLY INFLATED THE EXPENDITURE WITH A VIEW TO REDUCE THE TAX. ACCORDINGLY, THE CIT(A) CONFIRMED THE DISALLOWANCE OF EXPENDITURE OF ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 6 RS. 5,26,664/- MADE BY THE ASSESSING OFFICER. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 9. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THESE EXPENSES ARE FULLY ALLOWABLE BECAUSE THE Y WERE INCURRED FOR REPAIRS AFTER THE MASSIVE RAINFALL, WHICH PERTURBED THE ENTIRE OFFICE AND ADJACENT GODOWN SPACE AS THE ASSESSEE KEEPS STO CK OF AROUND 15 LACS AND DAILY LOADING AND UNLOADING ALSO IS CARRIE D OUT FROM THIS SPACE. IT IS SUBMITTED THAT THE GODOWN STAFF ALSO S TAYS IN THE ADJACENT GODOWN AND DUE TO HEAVY LOADING AND UNLOADING ACTIV ITIES AT GODOWN SITE, THE ASSESSEE NEEDS TO INCUR REGULAR LEVELING EXPENSES EVERY ALTERNATE YEAR, THEREFORE, THE EXPENDITURE FOR REPA IRS AND MAINTENANCE FOR SUCH PREMISES IS FULLY ALLOWABLE. IN SUPPORT OF ASSESSEES CASE, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON TH E FOLLOWING CASE LAWS:- 1. CIT VS. ANUPAM KOOPOR, 299 ITR 179 2. FC CHAMAN LAL VS. ACIT, 1 SOT 914 3. WEST COAST PAPER MILLS V. JCIT, 100 TTJ 833 (MU M.) 4. VALUE LINE SECURITIES (INDIA) LTD. V. ACIT, 108 ITD 639 (HYD.) 5. ITO VS. AC EXPORT, 13 DTR 98 (MUM.) 6. DCIT VS. ATN INTERNATIONAL LTD., 4 SOT 239 (KOL .) 10. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS RELIED UPON THE ORDERS OF THE REVENUE AUTHORITI ES. 11. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES, PERUSED RECORD AND GONE THROUGH THE ORDERS OF THE A UTHORITIES BELOW AS WELL AS GONE THROUGH THE DECISIONS CITED. WE FIN D THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM OF EXPENDITURE TOWARDS REPAIR OF GODOWN BEFORE THE REVENUE AUTHORITIES. EVEN BEFORE US, THE LEARNED COUNSEL FAILED TO SUBMIT ANY MATERIAL EVIDENCE TO E STABLISH THAT THE EXPENDITURE INCURRED BY THE TOWARDS REPAIR OF GODOW N. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) IN CONFIRM ING THE DISALLOWANCE ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 7 OF RS. 5,26,664/- MADE BY THE ASSESSING OFFICER OUT OF GODOWN REPAIR AND UPHOLD THE ORDER OF CIT(A). ACCORDINGLY, THIS G ROUND RAISED BY THE ASSESSEE IS DISMISSED. 12. GROUND NO. 3 IS DIRECTED AGAINST THE ACTION OF CIT(A) IN CONFIRMING DISALLOWANCE OF RS. 25,342/- OUT OF SALE S PROMOTION. 13. THE ASSESSING OFFICER NOTICED THAT THERE WAS A DEBIT OF RS. 3,74,050/-, WHICH INCLUDED AN AMOUNT OF RS. 25,342/ - AS EXPENDITURE OF MATUNGA GYMKHANA BLENDER PRIDE, FOOD ITEMS, KINN ARY RETAIL SHOP TOTALING SLIPS AND FOR FUNCTION AT MAC ON 27/01/07 CLAIMED TO BE ROAD SHOW EXPENSES. THE ASSESSING OFFICER WAS OF THE VIE W THAT THESE EXPENSES WERE PERSONAL IN NATURE HAVING NO BUSINES S NEED OR BUSINESS EXPEDIENCY, THEREFORE, HE DISALLOWED AN AM OUNT OF RS. 25,342/- OUT OF SALES PROMOTION. AGGRIEVED, THE ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 14. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER HAD ERRED IN DISALLOWING THE EXPENDITURE OF RS. 25,342/- AS THESE EXPENSES WERE INCURRED FOR CONDUCTING ROAD SH OW FOR THE SALES AND PROMOTION OF INDIAN OIL PRODUCTS, THEREFORE, TH E SAME WERE ALLOWABLE EXPENDITURE AS THESE WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THIS CONNECTION, HE RELIED ON VARIOUS CASE LAWS BEFORE THE CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) HELD THAT MAJORITY OF EXPENSES DEBITED UNDER THE HEAD SALES PROMOTION OF RS. 3,74,050/- WAS IN RESPE CT OF CALNDER/DIARY EXCEPT AN AMOUNT OF RS. 25,342/- WHIC H WAS FOUND TO BE NOT FOR ANY BUSINESS PURPOSE BUT FOR PERSONAL U SE OR FOR UNKNOWN REASON AS THE ASSESSEE HAD NOT FURNISHED ANY CONFIR MATION FROM THE INDIAN OIL CORPORATION SHOWING ANY PERMISSION OR IN STRUCTION FOR ADVERTISEMENT OF THEIR PRODUCT BY THE ASSESSEE. THE REFORE, HE SUSTAINED THE DISALLOWANCE OF EXPENDITURE OF RS. 25 ,342/- MADE BY ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 8 THE ASSESSING OFFICER. STILL AGGRIEVED, THE ASSESSE E IS IN APPEAL BEFORE THE ITAT. 15. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE SAID EXPENDITURE IS ALLOWABLE AS HAVING BE EN INCURRED FOR CONDUCTING ROAD SHOW FOR THE SALES & PROMOTION OF I NDIAN OIL PRODUCTS, THEREFORE, THE SAME ARE ALLOWABLE AS EXPE NDITURE WHOLLY AND EXCLUSIVELY INCURRED IN CONNECTION WITH THE BUSINES S OF THE ASSESSEE. IN SUPPORT OF ASSESSEES CASE, THE LEARNED COUNSEL RELIED UPON THE FOLLOWING CASE LAWS:- 1. INDIAN TRADING CORPORATION VS. CIT, [1995] 80 TA XMAN 291(GAU.) 2. CIT VS. ALUMINIUM INDUSTRIES LTD. [1995] 214 ITR 541 (KER.) 3. HEMRAJ NEBHOMAL SONS VS. CIT, 278 ITR 345 (MP) 4. PROJECT TECHNOLOGIST (P) LTD., 98 TTJ 471 (AHD.) 5. ESSAR INVESTMENT LTD. V. DCIT 7 SOT 378 (MUM.) 6. GEMS FINANCIER PVT. LTD., 250 ITR 786 (DEL.) 16. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE ASSESSING OFFICER AS WELL AS CIT(A) IN SUPPORT OF REVENUES CASE. 17. AFTER HEARING THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSING THE RECORD AS WELLS GOING THROUGH THE ORDE RS OF THE REVENUE AUTHORITES AND THE DECISIONS CITED, WE FIND THAT BE FORE THE REVENUE AUTHORITIES THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM THAT THE EXPENDITURE IS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS, THE REVENUE AUTHORITIES MADE THE DISALLOW ANCE OUT OF SALES PROMOTION. EVEN BEFORE US ALSO THE ASSESSEE FAILED TO BRING ANYTHING ON RECORD TO ESTABLISH THAT THE EXPENDITURE INCURRE D ON SALES PROMOTION FOR THE PURPOSE OF ITS BUSINESS. THE CASE RELIED UPON BY THE ASSESSEE ARE NOT OF ANY HELP TO THE CASE OF THE ASS ESSEE AS THEY ARE DISTINGUISHABLE ON FACTS. THEREFORE, WE FIND NO INF IRMITY IN THE ORDER OF CIT(A) IN UPHOLD THE DISALLOWANCE OF RS. 25,342/ - MADE BY THE ASSESSING OFFICER OUT SALES PROMOTION, AND HENCE, W E CONFIRM THE ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 9 ORDER OF CIT(A) ON THIS ISSUE AND DISMISS THE GROUN D RAISED BY THE ASSESSEE. 18. GROUND NO. 4 IS DIRECTED AGAINST THE ACTION OF CIT(A) IN CONFIRMING DISALLOWANCE OF RS. 1,34,673/- OUT OF RE PAIRS AND MAINTENANCE. 19. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 76,673/- AND RS. 58,000/-. ON EXAMINA TION OF THE BILLS SUBMITTED BY THE ASSESSEE, THE ASSESSING OFFICER HE LD THAT THE ASSESSEE INCURRED THE SAID EXPENDITURE TOWARDS RENO VATION OF RESIDENCE AND NOT FOR REPAIR OF GODOWN AS CLAIMED B Y THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE SAI D EXPENDITURE OF RS. 1,34,673/-. AGGRIEVED THE ASSESSEE CARRIED THE MATT ER IN APPEAL BEFORE THE CIT(A). 20. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER HAD DISALLOWED THE SAID EXPENDITURE ON GUES S AND PRESUMPTION AND NOT ON THE BASIS OF ANY EVIDENCE IN POSSESSION. IN SUPPORT OF ASESSSEES CASE, THE ASSESSEE RELIED UPON THE DECIS ION IN THE CASE OF KISHANCHAND CHELLARAM VS. CIT [1980] 125 ITR 713 (S C) AND IN THE CASE OF DWIJENDRA LAL BRAHMACHARI AND OTHERS VS. NE W CENTRAL JUTE MILL LTD., 112 ITR 568 (CAL.). AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE, THE CIT(A) HELD THAT THE ARGUMENT SO ADVA NCED BY THE LEARNED AR DO NOT APPEAR TO BE TENABLE, IN VIEW OF THE FACT THAT MS. SUJATA SHAH HAD CATEGORICALLY MENTIONED IN RECEIPT ABOUT THE RESIDENTIAL RENOVATION OF FLAT AT WADALA AND MOREOV ER, THIS RECEIPT HAD BEEN SUBMITTED BY THE ASSESSEE ITSELF AND NOT COLLE TED BY THE ASSESSING OFFICER AT THE BACK OF THE ASSESSEE, THER EFORE, IT IS THE RESPONSIBILITY OF THE ASSESSEE TO REBUT WITH CONTRA RY EVIDENCES THAT CERTIFICATE/RECEIPT ISSUED BY INTERIOR DESIGNERS IS FALSE. HE WAS FURTHER HELD THAT THE ASSESSEE FAILED TO DEMONSTRATE ANY EV IDENCE OF RENOVATION OF ANY SUCH GODOWN WHEREAS ASSESSING OFF ICER HAD ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 10 UNEARTHED THE VERY IMPORTANT PIECE OF EVIDENCE SHOW ING THE RENOVATION OF FLAT WHICH THE EXPENDITURE HAS BEEN C LAIMED AS IF BUSINESS EXPENDITURE. THE CIT(A), THEREFORE, SUSTAI NED THE DISALLOWANCE OF RS. 13,4,673/- MADE BY THE ASSESSIN G OFFICER. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE ITAT . 21. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSING OFFICER HAS DISREGARDED THE DETA ILS FILED AND ALSO FAILED TO VERIFY THE SAME U/S 131 FROM THE RESPECTI VE PARTIES. IT IS FURTHER CONTENDED THAT THE ADDITION IS MADE ONLY ON THE BASIS OF PRESUMPTIONS AND SURMISES, WHICH IS BAD IN LAW BECA USE INCOME-TAX IS A TAX ON REAL INCOME. IT IS ALSO SUBMITTED THAT THERE IS NO EVIDENCE WITH THE ASSESSING OFFICER TO JUSTIFY THIS EVIDENCE EXCEPT THE GUESS WORK. IN SUPPORT OF ASESSEES CASE, THE LEARNED COU NSEL HAS RELIED UPON THE FOLLOWING CASE LAWS:- 1. KISCHANCHAND CHELLARAM VS. CIT, [1980] 125 ITR 713 (SC) 2. DWIJENDRA LAL BRAHMACHARI & OTHERS V. NEW CENTRA L JUTE MILL LTD., 112 ITR 568 22. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS RELIED UPON THE ORDERS OF ASSESSING OFFICER AND CIT(A). 23. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSING THE RECORD, WE FIND THAT THE ASSESSEE FILE D RECEIPT GIVEN BY MS. SUJATHA SHA BEFORE THE ASSESSING OFFICER WHEREI N IT WAS SPECIFICALLY MENTIONED RENOVATION OF FLAT. THE ASSE SSEE CLAIMED THIS AS BUSINESS EXPENDITURE FOR REPAIRS OF GODOWN. THE CIT (A) GAVE A CATEGORICAL FINDING THAT THE ASSESSEE FAILED TO DEM ONSTRATE ANY EVIDENCE OF RENOVATION OF ANY SUCH GODOWN WHEREAS A SSESSING OFFICER HAD UNEARTHED THE VERY IMPORTANT PIECE OF EVIDENCE SHOWING THE RENOVATION OF FLAT WHICH THE EXPENDITURE HAS BEEN C LAIMED AS IF BUSINESS EXPENDITURE. EVEN BEFORE US, THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM THAT THE EXPENDITURE IS A BU SINESS EXPENDITURE ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 11 AND THE SAME IS INCURRED TOWARDS REPAIRS OF GODOWN. THEREFORE, WE CONFIRM THE ORDER OF CIT(A) ON THIS COUNT AND DISMI SS GROUND RAISED BY THE ASSESSEE. 24. GROUND NO. 5 IS DIRECTED AGAINST THE ACTION OF CIT(A) IN CONFIRMING DISALLOWANCE OF RS. 70,000/- OUT OF PACK ING MATERIALS. 25. THE ASSESSING OFFICER HAD MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE HAD SHOWN TO HAVE PURCHASED PACKING MA TERIALS ON 05/03/2007 OF RS. 76,191/- AND UP TO FEBRUARY, 2007 NO PACKING MATERIALS HAD BEEN PURCHASED, THEREFORE, THE ASSESS ING OFFICER HELD THAT IT CANNOT BE PRESUMED THAT PACKING MATERIALS P URCHASED ON 05/03/07 WAS CONSUMED IN TOTO. SINCE THERE IS NO CL OSING STOCK OR PACKING MATERIALS SHOWN BY THE ASSESSEE, AND CONSID ERING THE FACTS OF THE CASE THAT NO PURCHASE WAS MADE UP TO 04/03/07, THE ASSESSING OFFICER RESTRICTED THE EXPENDITURE TO RS. 6,191/- A ND HAD DISALLOWED AN AMOUNT OF RS. 70,000/- OUT OF PACKING MATERIAL EXPENSES. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 26. BEFORE THE CIT(A), THE LEARNED COUNSEL HAS SUBM ITTED THAT THE ASSESSING OFFICER WAS MADE AWARE OF THE FACT THAT A SSESSEE HAD PURCHASED PACKING MATERIAL OF RS. 2,22,400/- DURING THE YEAR YEAR, WHICH IS OVER AND ABOVE THE SAID SUM OF RS. 76,191/ - WHICH WAS PURCHASED IN THE END OF FEBRUARY. IT IS, THEREFORE, CONTENDED THAT THE FINDING OF ASSESSING OFFICER THAT WHOLE PURCHASE WA S MADE IN LAST MONTH WAS FACTUALLY INCORRECT AND, HENCE, LED TO WR ONG PRESUMPTION. IT IS FURTHER CONTENDED THAT EXPENSES COULD NOT BE DISALLOWED SIMPLY ON THE GROUND THAT SUBSTANTIAL PORTION WAS INCURRED IN THE LAST MONTH ALONE. THE ASSESSEE RELIED UPON THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF VKJ BUILDERS AND CONTRACTS PVT . LTD. CIT 228 CTR 143 (SC). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE, THE CIT(A) HELD THAT THE ASSESSEE HAD FAILED TO PROVE T HAT ALL THE PACKING MATERIALS PURCHASED DURING THE FINANCIAL YEAR 2006- 07 HAD ACTUALLY ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 12 BEEN UTILIZED AND THERE WAS NO PIECE OF PACKING MAT ERIAL REMAINED TO BE AS CLOSING STOCK, WHERE AS ASSESSING OFFICER HAD CATEGORICALLY MENTIONED IN THE ASSESSMENT ORDER THAT ASSESSEE HAD SHOWN TO HAVE PURCHASED PACKING MATERIALS ON 05/03/2008 OF RS. 76 ,191/- AND UP TO FEBRUARY, 2007, THERE WAS NO PURCHASE OF PACKING MATERIALS, THEREFORE, THE FINDING OF ASSESSING OFFICER FOUND T O BE REMAINED UNCONTROVERTED THAT PURCHASE OF PACKING MATERIAL WA S NOT FULLY UTILIZED AFTER 05/03/07 TILL 31/03/07.THE CIT(A) CO NFIRMED THE ACTION OF ASSESSING OFFICER BY HOLDING THAT SINCE THE ASSE SSEE HAS NOT QUANTIFIED THE CONSUMPTION OF RAW MATERIAL, AND THE RE IS AN OPTION TO RE-CALCULATE THE ACTUAL BALANCE, STOCK, THEREFORE, ADDITION OF RS. 70,000/- MADE BY THE ASSESSING OFFICER IS SUSTAINED . STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 27. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT I T IS NOT NECESSARY THAT PACKING MATERIAL SHOULD BE PURCHASED PERIODICALLY AS WRONGLY OBSERVED BY THE ASSESSING OFFICER, AS THIS IS ARBITRARY AND WITHOUT ANY BASIS. IT IS POINTED OUT TO ASSESSING O FFICER THAT THE ASSESSEE HAD PURCHASED PACKING MATERIAL OF RS. 2,22 ,400/- DURING THE YEAR, WHICH IS OVER AND ABOVE THE SAID SUM OF RS. 7 6,191/- WHICH WAS PURCHASED IN THE END OF FEBRUARY, THEREFORE, THE CO NTENTION OF THE ASSESSING OFFICER THAT THE WHOLE PURCHASE IS MADE I N LAST MONTH IS FACTUALLY INCORRECT AND LED TO WRONG SURMISES. IN SUPPORT, HE RELIED UPON THE DECISION IN THE CASE OF RAMA SWARUP SABHAR WAL VS. ITD [1991] 40 TTJ (DEL-TRIB.) AND VKJ BUILDERS AND CONT RACTORS PVT. LTD. VS. CIT, 228 CTR 143 (SC). 28. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 29. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF AUTHORITIES BELOW AND DECISIONS CITED. WE FIND THAT BEFORE CONF IRMING THE ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 13 DISALLOWANCE MADE BY THE ASSESSING OFFICER THE CIT( A) GAVE A CATEGORICAL FINDING THAT THE ARGUMENT OF LEARNED AR THAT THE ASSESSEE HAS PURCHASED PACKING MATERIALS OF RS. 2,22,400/- D URING THE YEAR WHICH WAS OVER AND ABOVE THE SAID PURCHASE OF RS. 7 6,191/- IS NOT A CONVINCING EXPLANATION REGARDING 100% CONSUMPTION O F LAST PURCHASE MADE ON 05/03/07. APPARENTLY, THE ASSESSEE HAS FAIL ED TO EXPLAIN WITH EVIDENCE AS TO HOW ALL THE PURCHASE OF PACKING MATE RIALS MADE ON 05/03/07 WAS FULLY UTILIZED FROM 05/03/07 TO 31/03/ 07. THEREFORE, THE FINDING OF THE ASSESSING OFFICER BECOMES FINAL EVEN IN APPELLATE PROCEEDINGS ALSO. BEFORE US ALSO, THE ASSESSEE FAILED TO EXPLAIN WIT H PROPER EVIDENCE THAT THE PACKING MATERIALS PURCHASE D ON 05/03/07 HAVE BEEN FULLY UTILIZED ON OR BEFORE 31/03/07. THE REFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS HE REBY UPHELD. THUS, THIS GROUND APPEAL OF ASSESSEE IS ALSO DISMISSED. 30. GROUND NO. 6 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN CONFIRMING DISALLOWANCE OF RS. 35,80,000/- OUT OF S ALARY U/S 40A(2)(B) OF THE ACT. 31. THE ASSESSING OFFICER HAD NOTICED THAT THE ASSE SSEE HAD DEBITED EXPENDITURE IN THE NAME OF MS. ARCHANA ADANI OF RS. 1,85,000/- FOR RELATIONSHIP MANAGER, MS. MANALI ADANI OF RS. 1,25, 000/- FOR ADMINISTRATIVE WORK OF THE OFFICE, PARAG ADANI OF R S. 19,50,000/- FOR PURCHASE, SALES AND CONTRPL AT HEAD OFFICE AND RAJI V ADANI OF RS. 19,50,000/- FOR SALES MANAGER CORPORATION. AS ACCOR DING TO THE ASSESSING OFFICER, THE ABOVE PAYMENTS ARE EXCESSIVE AS COMPARED TO THE NORMAL PAYMENTS OF ANY SUCH WORK IF ACTUALLY DO NE BY THESE PERSONS BEING RELATIVE OF PANNA P. ADANI, THE MAIN PARTNER HAVING 98% OF SHARE. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE A SSESSEE HADNOT FURNISHED ANY OTHER EVIDENCE OF ACTUAL WORK DONE BY ANY OF THESE PERSONS IN DAY-TO-DAY FUNCTIONING AND HAD OBSERVED THAT INCREASE OF SALES IS NOT BECAUSE OF THESE RELATIVES ONLY OR NOT BECAUSE OF EFFORTS OF ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 14 ANY SINGLE PERSON BUT IT MIGHT BE ON ACCOUNT OF TEA M EFFORTS OF ALL THE EMPLOYEES OF THE FIRM, WHEREAS, THE ASSESSEE HAD SH OWN HUGE EXPENDITURE ONLY IN THE NAME OF RELATIVE AND NOT IN THE NAME OF OTHER INDEPENDENT EMPLOYEES. ACCORDING TO ASSESSING OFFIC ER, INCENTIVE AND REWARD COULD NOT BE CONFINED TO THE RELATIVES ONLY BUT IT HAD TO BE EQUALLY PROPORTIONED TO OTHER EMPLOYEES IF THERE WA S ANY SUCH REASON FOR REWARDING TO THE EMPLOYEES FOR INCREASE OF SALE S. WHEN THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF SALARY OF EMPLOYEES RIGHT FROM AY 2003-04 ONWARDS, BY THE ASSESSING OFFICER, IT WAS NOT GIVEN ON THE PRETEXT THAT THEY WERE BEING SHREDDED AND NO LONGER REQUIRED HENCE WAS NOT PRESERVED. THIS EXPLANATION OF THE AS SESSEE WAS NOT FOUND SATISFACTORY WITH THE ASSESSING OFFICER. THE ASSESSING OFFICER HAD OBSERVED THAT THE ASSESSEE HAD SHOWN INCENTIVES OF RS. 12,00,000/- TO PARAG ADHANI AND ALSO RS. 12,00,000/ - TO RAJIV ADAN, BUT, THERE WAS NO SUCH HUGE INCENTIVE TO OTHER EMPL OYEES, WHO HAD ACTUALLY DONE THE FIELD WORK. IT WAS NOTED BY THE A SSESSING OFFICER THAT PARTNERS HAD BEEN PAID THE REMUNERATION ONLY O F RS. 50,000/- AND INTEREST ON CAPITAL OF RS. 10,20,000/- AND RETU RN OF INCOME OF THE ASSESSEE WAS ONLY OF RS. 21,52,623/- AFTER EMPLOYIN G CAPITAL OF RS. 1,11,62,674/- WHEREAS IN THE NAME OF SONS OF MR. PA NNA LAL ADANI HAVING 98% SHARE HAD DEBITED SALARY INCLUDING INCEN TIVE AS HIGH AS OF RS. 39 LAKHS. FURTHER, THE ASSESSING OFFICER HAD NO TED THAT NO EVIDENCE OF SPECIAL EFFORT MADE BY THESE TWO PERSON S HAD BEEN BROUGHT ON RECORD WHICH IS OVER AND ABOVE EFFORTS OF THE TH REE PARTNERS AND THE ONLY EVIDENCE PRODUCED BY THE ASSESSEE WAS THE PHOTOGRAPH OF RECEIVING THE RECOGNITION OR REWARD FROM IOC, WHICH WAS NOT BECAUSE OF THEIR EFFORT BUT ONE SON WAS RECEIVING REWARD ON BEHALF OF THE ASSESSEE BEING SON OF THE MAIN PARTNER AND OTHER TW O ARE DAUGHTER-IN- LAWS. IT WAS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE OTHER EMPLOYEE DOING IMPORTANT REQUIRED WORK WAS MR. K. S RIVASTAV, WHOSE SALARY WAS ONLY OF RS. 54,272/- IN FY 200-405 AND T HIS YEAR THE SAME HAD BEEN INCREASED ONLY BY RS. 21,978/- WITH AN INC ENTIVE OF RS. 10,000/- WHEREAS THE INCENTIVE TO SON HAD BEEN ALLO WED BY PARTNER TO ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 15 THE EXTENT OF RS. 24,00,000/- AND IN TOTALITY THE R EMUNERATION OF RS. 39 LAKHS. CONSIDERING ALL THE ABOVE FACTS, THE ASSE SSING OFFICER HAD DISALLOWED THE EXCESSIVE EXPENDITURE DEBITED IN THE NAME OF SONS AND DAUGHTER-IN-LAWS BY THE MAIN PARTNER TO THE EXTENT OF RS. 35,80,400/- BY INVOKING THE PROVISION OF LAW U/S 40A(2)9B) OF T HE ACT, AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRI EVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 32. BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN S UBMISSIONS, THE CONTENTIONS OF WHICH WERE EXTRACTED BY THE CIT(A) I N HIS ORDER AT PAGES 17 TO 20. AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, THE CUIT(A) DISCUSSED THE ISSUE AT LENGTH AT PAGES 17 T O 25 OF HIS ORDER AND HELD THAT IN ULTIMATE ANALYSIS AND IN VIEW OF THE MATERIAL EVIDENCE ON RECORD, DISALLOWANCE OF EXPENDITURE BY VIRTUE OF PROVISION OF LAW U/S 40A(20(B) MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 35,80,400/- OUT OF TOTAL DEBIT OF EXPENDITURE OF RS . 49,51,957/- IS SUSTAINED. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE T HE ITAT. 33. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS DISREGARDED THE VOLU MINOUS DETAILS OF THE, I) WORK DONE BY THE RELATIVES, II) EXPERIENCE OF THOSE PERSONS AND, III) THE LETTERS OF APPOINTMENT OF THE SAID RELATIV ES AND WITHOUT EXAMINING THOSE RELATIVES AND ALSO OVERLOOKING THE FACT THAT THIS AMOUNTS TO DOUBLE TAXATION OF THE SAME INCOME, NAME LY, IN THE HANDS OF THE ASSESSEE AND ALSO IN THE HANDS OF THE RELATI VES. IT IS CONTENDED THAT PARAG ADANI AND RAJIV ADANI ARE THE ACTIVE FAC E OF THE ASSESSEE FIRM AND TO SUBSTANTIATE THE SAME THE ASSESSEE PROD UCED VARIOUS PHOTOGRAPHS AND CORRESPONDENCE WHERE INDIAN OIL COR PORATION CLEARLY ACKNOWLEDGES THE ACTIVE LEADERSHIP IN THE ASSESSEE S BUSINESS, BUT, THE ASSESSING OFFICER HAS COMPLETELY OVERLOOKED THE SE EVIDENCES PRODUCED VIDE LETTER DTD. 12/11/2009. IN SUPPORT, T HE LEARNED COUNSEL HAS RELIED UPON THE FOLLOWING CASE LAWS:- 1. CIT VS. JAINARAIN JAGANNATH [1945] 13 ITR 410 ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 16 2. CIT VS. CHARI & CHARI LTD. [1965] 57 ITR 400 3. ACIT VS. DOON VALLEY MOTORS, 10 SOT 525 (DEL.) 4. NEETA EXPORT V. ITO, 81 TTJ 772 (JOD.) 5. JAGDAMBHA ROLLERS FLOUR MILLS LTD. V. ACIT, 117 ITD 488 6. GUJARAT GUARDIAN LTD. V. CIT, 1 DTR 328 (DEL.) 7. LAXMIPAT SINGHANIA V. CIT [1969] 72 ITR 291 (SC ). 8. WALCHAND & CO. (P) LTD. VS. CIT, [1993] 204 ITR 146 (BOM.) 34. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS RELIED UPON THE ORDERS OF REVENUE AUTHORITIES. 35. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES, PERUSED THE RECORD, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS DECISIONS CITED. THE ASSESSING OFFICER H AD DISALLOWED AN AMOUNT OF RS. 35,80,400/- OUT OF TOTAL DEBIT EXPEND ITURE OF RS. 49,51,957/- ON THE GROUND THAT ASSESSEE HAS DEBITED HUGE EXPENDITURE IN THE NAME OF RELATED PERSONS/RELATIVE OF THE PARTNERS, WHICH IS COMPARATIVELY VERY HIGH AND EXCESSIVE UNRE ASONABLE AND COMES UNDER THE PURVIEW OF PROVISION OF LAW U/S 40A (2)(B) OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSIN G OFFICER HAS DISREGARDED VOLUMINOUS DETAILS OF THE WORK DONE BY THE RELATIVES, EXPERIENCE OF THOSE PERSONS AND THE LETTERS OF APPO INTMENT OF THE SAID RELATIVES AND WITHOUT EXAMINING THOSE RELATIVES AND ALSO OVERLOOKING THE FACT THAT THIS AMOUNTS TO DOUBLE TAXATION OF TH E SAME INCOME, NAMELY, THE HANDS OF THE ASSESSEE AND ALSO IN THE H ANDS OF THE RELATIVES. THE EXPLANATION OF THE ASSESSEE IS THAT MAJOR INCREASE IN SALARIES IS DUE TO SALES INCENTIVES PAID TO RAJIV A ND PARAG ADANI WITH REGARD TO THEIR PERFORMANCE IN INCREASING THE SALES BY 100%. WHILE SUSTAINING THE ADDITION CIT(A) OBSERVED THAT IN AY 2005-06, SALARY OF RAJIV ADANI WAS ONLY RS. 96,000/-, WHICH WAS INCREA SED IN AY 06-07 TO RS. 3.00 LAKH BUT WITHOUT ANY REASON, ASSESSEE H AS INCREASED IT AS HIGH AS OF RS. 19,50,000/-. SIMILAR IS THE FACT IN THE CASE OF PARAG ADANI WHO WAS DRAWN SALARY OF RS. 2,02,000/- IN AY 2005-06, WHICH ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 17 WAS INCREASED TO RS. 6 LAKH IN AY 2006-07 AND SUDDE NLY IT WAS INCREASED TO RS. 19,50,000/- IN AY 2007-08. THE AS SESSEE CONTENDED THAT THERE IS INCREASE IN SALES JUSTIFIES THE INCRE ASE IN SALARY. HOWEVER, THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO JUSTIFY ITS CLAIM. WE ARE OF THE VIEW THAT, IN THE INTEREST OF JUSTICE, THIS ISSUE MAY BE REMITTED BACK TO THE FILE OF THE CIT(A) TO DECIDE THE SAME DE NOVO. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE. WE ALSO DIRECT THE ASSESSEE TO PRODUCE ALL RELEVANT MATERIA L TO JUSTIFY IN INCREASING THE SALARY. 36. GROUND NO. 7 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 11,38,012/- OUT OF CASH EXPENSES INCURRED TOWARDS PACKING, CARTAGE, OFFICE EXPENSES AND ENTERTAINMENT EXPENSES. 37. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEBITED VARIOUS EXPENSES UNDER THE HEAD PACKING, CARTAGE, G ODOWN EXPENSES DELIVERY CHARGES, REPAIRS AND OFFICE EXPENSES WHICH WERE CLAIMED ON THE BASIS OF SELF MADE VOUCHERS OR EVEN WITHOUT VOU CHERS. IT WAS FURTHER NOTICED THAT THE PACKING EXPENSES OF RS. 2, 222,400/-, CARTING EXPENSES OF RS. 9,12,390/- AND OFFICE EXPENSES OF R S. 1,21,527/- HAD BEEN CLAIMED ON THE BASIS OF SELF MADE VOUCHERS AND FURTHER OFFICE EXPENSES OF RS. 25,540/- AND ENTERTAINMENT EXPENSES OF RS. 13,012/- HAD BEEN CLAIMED WITHOUT ANY EVIDENCE. IT WAS POINT ED OUT BY THE ASSESSING OFFICER THAT DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, 10 COPIES OF SELF MADE VOUCHERS OF CARTAGE PRODUCED BEFORE HIM DO NOT HAVE EVEN THUMB IMPRESSION OR SIGNATURE OF RECIPIEN T, ONLY TWO VOUCHERS HAVE THUMB IMPRESSION BUT DO NOT BEAR ANY NAME OF THE RECIPIENT. THEREFORE, THE ASSESSING OFFICER DISALLO WED RS. 2,00,000/- OUT OF TOTAL DEBIT OF PACKING CHARGES OF RS. 2,98,5 91/-, RS. 8,00,000/- OUT OF TOTAL CARTAGE EXPENSES OF RS. 9,12,390/- AND RS. 1,25,000/- OUT ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 18 OF OFFICE EXPENSES OF RS. 1,83,917/- AND RS. 13,012 /- OF ENTERTAINMENT EXPENSES, TOTALING TO RS. 11,38,012/- . AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). 38. THE CONTENTIONS OF THE ASSESSEE WERE MENTIONED BY THE CIT(A) AT PAGES 26, 27 & 28. THE ASSESSEE ALSO RELIED UPON VA RIOUS CASE LAWS BEFORE THE CIT(A), WHICH WERE MENTIONED AT PAGE NO. 28. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) HELD THAT THE ASSESSING OFFICER HAS VERY RIGHTLY POINTED OUT THE FACT OF INFLATION OF EXPENDITURE BY THE ASSESSEE, AS IT IS VERY EVIDENT THAT MOST OF THE EXPENDITURE SO DESCRIBED BY THE ASSESSING OFFICER I S CLAIMED ON THE BASIS OF NON-GENUINE VOUCHERS OR BILLS AND EVEN SEL F MADE VOUCHERS DO NOT REVEAL ANY FACT OF GENUINENESS OF SUCH CLAIM. F INALLY THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER ON THE GROUND THAT THE ASSESSEE FAILED TO PROVE THE GENUIN ENESS OF SUCH EXPENDITURE WITH RELIABLE EVIDENCES. STILL AGGRIEVE D, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 39. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SOME OF THE VOUCHERS, BILL VOUCHERS WERE LYING AT AURANGABAD, BHIWANDI OFFICE AND BALANCE WERE ALL PRODUCED FOR V ERIFICATION TO THE ASSESSING OFFICER AND IN FACT THE ASSESSEE HAD ALRE ADY SUBMITTED A SHORT LIST OF EXPENSES WHERE VOUCHERS NOT SUPPORTED BY EXTERNAL DOCUMENTS, VIDE LETTER DATED 19/11/2009 AT ITEM NO. 5. IT IS CONTENDED THAT THIS LIST CANNOT BE EXTENDED TO DISA LLOWANCE OF SUCH AMOUNT WITHOUT VERIFYING WHOLE FILE OF VOUCHERS PRO DUCED BEFORE THE ASSESSING OFFICER. IN SUPPORT OF ASSESSEES CASE, T HE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE FOLLOWING PREC EDENTS:- 1. GAS & KILN (I) (P) LTD. VS. CIT, [2002] 168 TAXA TION 11 (CAL- TRIB). 2. PHILCO ENGINEERS (P) LTD. VS. ACIT, [2002] TAX L R 220 (DEL- TRIB). ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 19 3. SILICON GRAPHIC SYSTEM (I)(P) LTD. V. DCIT, [200 7] 106 TTJ (DEL-TRIB.) 40. THE LEARNED COUNSEL HAS SUBMITTED THAT THE ASSE SSING OFFICER THE DISALLOWANCE ON ADHOC BASIS AND CONTENDED THAT NO ADDITIONAL CAN BE MADE ON ADHOC BASIS, FOR WHICH HE RELIED ON THE FOLLOWING CASE LAWS:- 1. JAI MURTY MINERAL CHEMICALS, 174 TAXATION 65 (D EL.) 2. SURFACE FISHING EQUIPMENTS, 81 TTJ 448 (JHD) 3. ACIT VS. ARTHUR ANDERSON & CO., [2005] 94 TTJ ( MUM.) 4. MAHENDRA OIL CAKE INDUSTRIES PVT. LTD. V. ACIT, [1996] 55 TTJ (AHD) 711. 5. RAJ ENTERPRISES V. ITO, [1995] 51 TTJ (JP)408 6. RAYMON GLUES & CHEMICALS VS. INSPECTING ASST. CI T, 46 TTJ (AHD) 693. 7. LAVRIDS KNUDSEN MASKINFABRIK (INDIA) LTD. VS. AD DL. CIT [2006] 102 TTJ (PUNE) 882. 8. COCA COLA INDIA LTD. VS. JCIT, [2006] 102 ITD 13 4 (PUNE) 9. TRIMURTI SALT COMPANY VS. ITO [1981] 12 TTJ 485. 41. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS RELIED UPON THE ORDERS OF ASSESSING OFFICER AS WELL AS CIT(A). 42. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE CLAIM WAS MADE BY T HE ASSESSEE ON THE BASIS OF SELF-MADE VOUCHERS OR EVEN WITHOUT VOU CHERS. EVEN BEFORE US, THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM B Y WAY OF MATERIAL EVIDENCE. THE CASES RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS TO THE CASE OF THE ASSESSEE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS. 11,38,012/- MADE OUT OF CASH EXPENSES BEING OR PURCHASE OF PACK ING, FOR CARTAGE, ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 20 OFFICE EXPENSES AND ENTERTAINMENT EXPENSES AND, THE REFORE, THE ORDER OF CIT(A) IS UPHELD. 43. GROUND NO. 8 IS DIRECTED AGAINST THE ACTION OF CIT(A) IN CONFIRMING DISALLOWANCE OF RS. 50,918/- OUT OF CAR AND TELEPHONE EXPENSES. 44. THE ASSESSING OFFICER HAD DISALLOWED 20% OF TOT AL DEBIT OF CAR EXPENSES INCLUDING CAR RENT, INSURANCE AND TELEPHON E EXPENSES @ 20% ON THE GROUND THAT CAR RENTAL HAD BEEN GIVEN TO MR. PARAG ADANI, SON OF PARTNER AND NO LOG BOOK OF CAR HAD BEEN MAINTAIN ED WHICH COULD REVEAL ACTUAL BUSINESS USE OF IT AND FURTHER THERE IS NO REGISTER OF TELEPHONE CALL, THEREFORE, ON THE SAID REASONING, T HE ASSESSING OFFICER DISALLOWED 20% OF TOTAL EXPENDITURE OF RS. 5,09,884 /-, WHICH IS RS. 101,977/-. AGGRIEVED, THE ASSESSEE CARRIED THE MATT ER IN APPEAL BEFORE THE CIT(A). 45. BEFORE THE CIT(A), IT WAS CONTENDED THAT THE AS SESSING OFFICER HAD WRONGLY DISALLOWED THE SAID EXPENDITURE ON AD-H OC BASIS WITHOUT APPRECIATING THE FACT THAT FBT HAD ALREADY BEEN PAI D. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) RESTRICTED THE DISALLOWANCE TO 10% INSTEAD OF 20% AS MADE BY THE A SSESSING OFFICER, RESULTING INTO AN ADDITION OF RS. 50,918/- INSTEAD OF RS. 1,01,977/- ON THE GROUND THAT PERSONAL USE OF CAR AND TELEPHON E BY THE PARTNERS CANNOT BE RULED OUT. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 46. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION IN SPITE OF THE FACT THAT FBT IS ALREADY PAID ON THE SAME. THE LEARNED COUNSEL RE LIED UPON THE FOLLOWING CASE LAWS IN SUPPORT OF ASSESSEES CASE: ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 21 1. GEETANJALI WOOLLENS (P) LTD. VS. CIT[1994] 50 IT D 788 (AHD- TRIB) 2. JEEVAN V. ITO [1982] 29 CTR (TRIB) 11 (BOM) AND GAINDA MAL CHIRANJI LAL VS. ITO [1982] 13 TTJ (CHD-TRIB) 424 3. MODERN SYNTEX (INDIA) LTD. V. CIT, [1996] 130 TA XATION 101 (JP-TRIB). 47. ON THE OTHER HAND, LEANED DEPARTMENTAL REPRESEN TATIVE HAS RELIED UPON THE ORDERS OF THE ASSESSING OFFICER AN D CIT(A). 48. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSING THE RECORD, WE FIND THAT THE ASSESSEE HAS NOT MAINTAINED THE LOG BOOK FOR CAR AND TELEPHONE REGISTER FOR PHONE, WHICH LED TO MAKE THE DISALLOWANCE OF 20% BY THE ASSESSING OFFICER. T HE CIT(A) RESTRICTED THE DISALLOWANCE TO 10%, WHICH IS PROPER , THEREFORE, THE ORDER OF CIT(A) IS HEREBY UPHELD ON THIS COUNT. THE DECISIONS RELIED UPON BY THE ASSESSEE ARE NOT OF HELP TO THE CASE OF THE ASSESSEE. 49. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 22 ND JUNE, 2011. SD/- SD/- (R.S.SYAL) (V. DURGA R AO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 22 ND JUNE, 2011 KV ITA NO. 1179/M/2011 M/S LUBE OIL DISTRIBUTORS 22 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV