Deputy Commissioner of Income-tax, V. M/s. Indo Enterprises, Latur

ITA 1221/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0041 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value
• Section: 40A(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1221/PUN/2016 / ASSESSMENT YEAR : 2011-12 DCIT, LATUR CIRCLE, LATUR . /APPELLANT VS. M/S. INDO ENTERPRISES, B-44, EKMAT BHAVAN, MIDC, LATUR 413512 PAN :AABCI1869B . / RESPONDENT / APPELLANT BY : SHRI SUDHENDU DAS / RESPONDENT BY : SHRI RAJAN VORA & SHRI RAJENDRA AGIWAL / DATE OF HEARING : 10.09.2018 / DATE OF PRONOUNCEMENT: 19.09.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF C IT(A)-2, AURANGABAD, DATED 31-03-2016 FOR THE ASSESSMENT YEAR 2011- 12. 2. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF PRINTING, PUBLISHING, DISTR IBUTING/SALE OF A NEWSPAPER PUBLISHED IN THE NAME OF EKMAT. ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT NIL. AT THE END OF ASSES SMENT PROCEEDINGS U/S.143(3) OF THE ACT, THE AO DETERMINED THE IN COME AT RS.2,41,99,477/-. AO MADE 4 ADDITIONS, I.E. (1) DIRECTORS REMUNE RATION U/S.40A(2)(B) RS.1,51,50,000/-; (2) ADVANCED RECOVERABLE U/S.3 6(1)(III) ITA NO.1221/PUN/2016 M/S. INDO ENTERPRISES 2 OF THE ACT RS.58,29,210/-; (3) DISALLOWANCE OF EXPENSES U/S.4 0A(3) RS.75,910/-; AND (4) DISALLOWANCE OF ADVERTISEMENT COMMISSION, ADVERTISEMENT EXPENSES, DISTRIBUTION EXPENSES AND HONORA RIUM PAID RS.31,44,357/- ON ADHOC BASIS. WE SHALL NARRATE THE FACTS RELATING TO EACH OF THE ADDITIONS IN THE SUCCEEDING PARAGRAPHS. 2.1 REGARDING THE ISSUE OF ADDITION U/S.40A(2)(B) OF THE ACT, I.E . PAYMENT OF SALARY TO THE DIRECTORS NAMELY, (A) MR. AMIT V. D ESHMUKH; (B) MS.VAISHALI V. DESHMUKH; (C) MR. DHIRAJ V. DESHMUKH; AND (D) MR. RITESH V. DESHMUKH, THE AO HELD THAT THE PAYMENT MADE TO THEM ARE EXCESSIVE AND UNREASONABLE WITHIN THE MEANING OF SECTION 40A(2)(B) OF THE ACT. AO HELD THAT PAYMENT OF SALARY OF RS.1 LAKH PER MONTH EACH I N RESPECT OF 3 DIRECTORS (3 X RS.12 LAKHS) IS REASONABLE. THUS, THE AO ALLO WED ONLY RS.36 LAKHS IN RESPECT OF 3 DIRECTORS AND DISALLOWED THE B ALANCE OF RS.1,56,50,000/- (RS.1,92,50,000 RS.36,00,000). AO DID NOT DISTUR B THE REMUNERATION PAID TO MR. RITESH V. DESHMUKH. FURTHER, THE AO REASONED THAT THE PAYMENT OF RS.1,92,50,000/- IS PAID TO THE 4 DIR ECTORS AGAINST RS.1,19,46,236/- PAID TO 183 EMPLOYEES OF THE COMPANY IS TO O EXCESSIVE AND UNREASONABLE. 2.2 REGARDING THE ADDITION ON ACCOUNT OF INTEREST CHARGE ABLE ON ACCOUNT OF INTEREST FREE ADVANCES MADE BY THE AO INVOKING THE PR OVISIONS OF SECTION 36(1)(III) OF THE ACT, AO HELD THAT FOR CHARGE OF INTERES T INCOME @12% ON SUCH ADVANCES GIVEN BY THE ASSESSEE. ASSESSE E GAVE SUCH ADVANCES TO THE TUNE OF RS.4.86 CRORES (ROUNDED OFF). 2.3 REGARDING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF TRANSP ORT AND OCTROIL/EXPENSES U/S.40A(3) OF THE ACT, THE AO HELD TH AT THE SAME ITA NO.1221/PUN/2016 M/S. INDO ENTERPRISES 3 CONSTITUTES THE CONTRAVENTION TO THE PROVISIONS OF SECT ION 40A(3) OF THE ACT. THUS, AN AMOUNT OF RS.75,910/- WAS ADDED BY THE AO. 2.4 REGARDING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ADVERTISEMENT COMMISSION, ADVERTISEMENT EXPENSES, DISTRIBUT ION EXPENSES AND HONORARIUM PAID U/S.40A(3) OF THE ACT, THE AO EXAMINED THE PAYMENT AND CAME TO THE CONCLUSION THAT THE CLAIMS BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION IS HIGH WHEN COMPARED TO THE EARLIER YEARS. THEREFORE, ON ADHOC BASIS, THE AO RESTRICTED THE CLAIM TO 50% OF THE AMOUNT OF DIFFERENCE BETWEEN THE FIGURES OF CLAIMS IN CUR RENT AND EARLIER YEAR. AO PROVIDED A COMPARATIVE CHART AND DISALLOW ED RS.31,44,357/-. THE DISCUSSION GIVEN IN PARA NO.6 OF THE ASSE SSMENT ORDER IS RELEVANT. 3. AGGRIEVED WITH THE SAID ORDER OF AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE DECISION OF THE CIT(A) ON EACH OF THE ABOVE ADDITIONS IS DISCUSSED IN THE SUCCEEDING PARAGRAPHS. 3.1 REGARDING THE REMUNERATION PAID TO THE DIRECTORS, THE CIT(A) RELIED ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDO SAUDI SERVICES TRAVEL PRIVATE LIMITED 310 ITR 306 (BOM.) AND SUBMITTED THAT THE AO FAILED TO DEMONSTRATE THE APPLICABILITY OF THE P ROVISIONS OF SECTION 40A(2)(B) OF THE ACT. FURTHER, CIT(A) REASONED THAT THE ADDITION IS BASED ON CONJECTURES AND SURMISES AND THE SAME IS NOT CONCEPTUALISED IN THESE PROVISIONS. HE ACCORDINGLY DELETED THE ADDITIONS AS PER THE DISCUSSION GIVEN IN PARA NOS. 13 TO 15 OF THE ORDER OF CIT(A). 3.2 REGARDING THE ADDITION OF RS.58,29,210/- ON ACCOUNT OF N OTIONAL INTEREST @12% ON THE INTEREST-FREE ADVANCES GIVEN BY TH E ASSESSEE, THE CIT(A) HELD THAT THE SAME CONSTITUTES NOTIONAL ADDITION. AC CORDINGLY, ITA NO.1221/PUN/2016 M/S. INDO ENTERPRISES 4 CIT(A) DELETED THE SAME. THE DISCUSSION GIVEN IN PARA NOS . 16 TO 19 OF THE ORDER OF CIT(A) IS RELEVANT. 3.3 REGARDING THE ADDITION MADE BY THE AO U/S.40A(3) OF THE ACT ON ACCOUNT OF TRANSPORT AND OCTROI EXPENSES, THE CIT(A) DISM ISSED THE SAID GROUND AS THE SAME WAS NOT PRESSED BEFORE HIM. 3.4 FINALLY, COMING TO THE ADHOC DISALLOWANCE OF RS.31,44,357/- ON ACCOUNT OF MISCELLANEOUS EXPENSES REFERRED ABOVE, THE CIT (A) DID NOT APPRECIATE THE WAY THE ADHOC ADDITIONS IS MADE. THE CIT(A ) HELD THAT MOST OF THE PAYMENTS ARE MADE IN CHEQUES ONLY AND NOT IN CASH AS WRONGLY DESCRIBED BY THE AO IN THE ASSESSMENT PROCEED INGS. EVENTUALLY, THIS ADDITION WAS ALSO DELETED IN FULL. BEFORE THE TRIBUNAL 4 AGGRIEVED WITH THE RELIED GRANTED BY THE CIT(A), THE REV ENUE FILED THE PRESENT APPEAL WITH THE FOLLOWING GROUNDS : 1. ADDITION ON ACCOUNT OF DISALLOWANCE U/S.40A(2)( B) THE LD.CIT(A) HAS ERRED IN FACTS AS WELL AS LAW BY DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF RS.1,51,50,0 00/- MADE BY THE AO U/S.40A(2)(B). THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT ALL THE DIRECTORS WHO HAVE BEEN PAID HEAVILY, COULD NOT DEV OTE TIME TO THE ASSESSEE COMPANY AS THEY ARE ENGAGED IN THEIR OWN ANOTHER AC TIVITIES. THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT THE DISALLOWANCE MADE BY THE AO WAS BASED ON LOGIC AND REASONABLENESS. 2. ADDITION ON THE ISSUE OF ADHOC ADDITION THE CIT(A) ERRED IN FACTS AS WELL AS IN LAW IN DELE TING THE ADHOC ADDITION MADE AT RS.31,44,357/-. THE LD.CIT(A) FAILED TO AP PRECIATE THE FACT THAT THE AO HAS POINTED OUT THE DEFECTS IN VOUCHERS SUCH AS RECEIPT COLUMN AND SUBJECT FOR WHICH PAYMENTS MADE WERE NOT MENTIONED I N THE VOUCHERS. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. ITA NO.1221/PUN/2016 M/S. INDO ENTERPRISES 5 FROM THE ABOVE, IT IS EVIDENT THAT THE REVENUE ACCEPTED THE DECISION OF THE CIT(A) ON TWO ACCOUNTS AND IS AGITATING ON THE RES T OF TWO ISSUES NAMELY (1) DISALLOWANCE U/S.40A(2)(B) OF THE ACT AND (2) ADHOCISM. WE SHALL TAKE UP THE GROUND WISE ADJUDICATION IN THE FOLLO WING PARAGRAPHS. 5. GROUND NO.1 RAISED BY THE REVENUE RELATES TO THE AD DITION ON ACCOUNT OF DISALLOWANCE U/S.40A(2)(B) OF THE ACT RELATING TO RE MUNERATION PAID TO THE DIRECTORS. RELEVANT FACTS ARE ALREADY DISCUSS ED IN THE PRECEDING PARAGRAPHS OF THIS ORDER. AO RESORTED TO AD HOC DISALLOWANCE AND HELD PAYMENT OF REMUNERATION @ RS.1 LAKH PER MONTH P ER DIRECTOR IS REASONABLE. AO DID NOT INDICATE THE REASONS FOR FIXING THE REMUNERATION OF THE DIRECTORS @ RS.1 LAKH PER MONTH. HE HAS NOT BROUGH T ANY MARKET INFORMATION/COMPARABLE INSTANCES IN THIS REGARD. AO MEREL Y RELIED ON HIS OWN ESTIMATIONS UNSUPPORTED BY INDEPENDENT INFORMATION/EV IDENCES FOR MAKING DISALLOWANCE OF RS.1,51,50,000/-. CIT(A) DISCUSSED THIS IS SUE AT LENGTH AND HELD THE ONUS IS ON THE AO IN MATTERS RELAT ING TO INVOKING OF PROVISIONS OF SECTION 40A(2)(B) OF THE ACT ON MENTIONED THAT THE ASSESSEE DISCHARGED THE PRIMARY ONUS. CIT(A) HELD THAT THE AO SH OULD HAVE MADE USE OF THE SAID INFORMATION FURNISHED BY THE ASSESSEE AND CONDUCED MARKET ENQUIRIES BEFORE QUANTIFYING THE ALLOWABLE REMUNERAT ION TO THE DIRECTORS BASED ON THE SCIENTIFIC DATA OR MARKET DATA OR COMPARABLE CASES ETC. AO HAS NOT DONE ANY OF SUCH EXERCISE. HE MERELY DISALLOWED RESORTING TO ADHOCISM. THEREFORE, THE CIT(A) DID NOT APPRO VE THE ADDITION MADE BY THE AO AND RELIED ON THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF M/S. INDO SAUDI SERVICES TRAVEL PRIVATE LIMITED (SUPRA) . CIT(A) ALSO DID NOT ENTERTAIN THE ADHOC DISALLOWANCE MADE BY THE AO AND DESCRIBED IT AS ARBITRARY AND UNSUPPORTED BY ANY EVIDEN CES. CIT(A) ITA NO.1221/PUN/2016 M/S. INDO ENTERPRISES 6 ANALYSED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT AND REFERRED TO VARIOUS DECISION IN PARA NOS. 10 TO 12 AND HELD AGAINST TH E REVENUE. IN THIS REGARD, WE PERUSED THE RELEVANT ORDER OF CIT(A) AND FIND IT RELEVANT TO EXTRACT THE SAME. THE SAID FINDING GIVEN IN PARA NOS. 13 T O 15 OF HIS ORDER READS AS UNDER : 13. I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATIONS OF THE A.O. THE DISALLOWANCE MADE BY T HE A.O. U/S.40A(2)(B) IS BASED ON CONJECTURES AND SURMISES. HE HAS SIMPLY DISBELIEVED THAT THE DIRECTORS OF THE COMPANY WOULD BE RENDERING ANY SORT OF SERVICE TO THE ASSESSEE COMPANY. ON THE CON TRARY THE ASSESSEE HAS BEEN ABLE TO DEMONSTRATE THAT SPECIFIC AS WELL AS GENERAL FUNCTIONS WERE BEING PERFORMED BY THE DIRECTORS WHICH WERE IN THE INTEREST OF THE LONG-TERM GOALS OF THE ASSESSEE COMPANY. DISALLOWAN CE U/S.40A(2)(B) BY SAYING THAT THE DIRECTORS COULD NOT HAVE PERFORM ED THE SERVICES IS NOT CORRECT. VARIOUS COURTS HAVE HELD THAT THE AO C ANNOT DICTATE TO THE ASSESSEE AS TO HOW THE BUSINESS SHOULD BE DONE. HON 'BLE ITAT IN THE CASE OF BINIT CORPN. V. ITO [1986] 25 TAXMAN 238 (AHD.)(MAG.) HAS AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENT ST ATED THAT FIRST OF ALL THE AO HAS TO SATISFY HIMSELF WHETHER THE EXPENDITU RE ITSELF IS GENUINE OR NOT AND IF IT IS GENUINE THEN FOR THE PURPOSE OF FINDING OUT THE PORTION OF DISALLOWANCE HE SHALL HAVE TO FIND OUT THE FAIR MARKET VALUE OF THE SERVICES AND THIS WOULD PRESUPPOSE THAT SERVICES AR E COMMONLY AVAILABLE FOR WHICH MARKET VALUE CAN BE KNOWN. THER EAFTER, THE AO SHALL HAVE TO EVALUATE THE LEGITIMATE NEEDS OF THE BUSINESS AT A POINT OF TIME WHEN THE SERVICES WERE RENDERED AND THIS WOULD INVOLVE IN INQUIRY AS A BUSINESSMAN BECAUSE IN TIMES OF DIRE NEED SERV ICES ARE OBTAINED EVEN AT HIGHER COST, THE ULTIMATE AIM BEING TO EARN PROFIT OR TO MAINTAIN THE BUSINESS RELATIONS. ACCORDING TO THE ITAT, THE AO SHALL HAVE TO FIND OUT WHAT BENEFIT IS DERIVED BY THE ASSESSEE AND THI S WOULD NOT NECESSARILY CONFINE TO THE YEAR IN QUESTION BUT SHA LL HAVE TO TAKE OVERALL PICTURE DEPENDING UPON THE FACTS OF EACH CASE. EVEN THE BENEFIT ACCRUING TO THE ASSESSEE SHALL HAVE TO BE EVALUATED . THIS AGAIN MAY NOT BE CONFIRMED TO THE PERIOD OF ACCOUNTING YEAR ONLY AND AGAIN IT WOULD NOT BE ESSENTIAL THAT BENEFIT MUST BE IN THE REVENU E FIELD. THEREAFTER ACCORDING TO THE ITAT THE AO SHALL HAVE TO GIVE REA SONABLE OPPORTUNITY TO THE ASSESSEE TO REBUT HIS FINDING. IF COMPARABLE INSTANCES OF OTHER PARTIES ARE NOT AVAILABLE AT LEAST COMPARE WITH EAR LIER YEAR, AD-HOC DISALLOWANCE CANNOT STAND THE TEST OF APPEAL. 14. THE PROVISIONS OF SECTION 40A(2)(B) ARE TO BE A PPLIED WHEN THE AO IS OF THE OPINION THAT AN EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICES FOR WHICH THE PAYMENT IS MADE. IN THE PRESENT CASE, THE ONLY REASON FOR THE IMPUGNED ADDITION WAS AN OUT IN THE MIND OF THE ASSESSING OFFICER THA T IT WILL NOT BE POSSIBLE FOR THE DIRECTORS TO DEVOTE ANY TIME TOWAR DS THE WORKING OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER HAS ALSO DO UBTED THE CONTRIBUTION OF SMT.VAISHALI V. DESHMUKH TOWARDS TH E WORKING OF THE COMPANY ON THE GROUND THAT SHE IS A HOUSEWIFE. THE ASSESSING OFFICER HAS DONE NOTHING AND HAS NOT CONFRONTED ANY OF THE DIRECTORS TO CLEAR HIS DOUBTS THAT THEY HAVE NOT RENDERED ANY SERVICE IN THE FUNCTIONING OF THE ASSESSEE COMPANY. BUT BEFORE ARRIVING TO A CONC LUSION THAT THE PAYMENT WAS EXCESSIVE, THE AO WAS EXPECTED TO PLACE ON RECORD THE REASON FOR HOLDING SUCH OPINION. IT IS NOTED THAT N O SUCH COMPARABLE ITA NO.1221/PUN/2016 M/S. INDO ENTERPRISES 7 INSTANCE WAS QUOTED BY THE AO. IT HAS ALSO BEEN BRO UGHT TO MY NOTICE THAT ALL THE ASSESSEE'S ARE IN THE HIGHEST TAX BRAC KET AND HENCE THERE COULD NOT HAVE BEEN ANY INTENTION TO SAVE THE TAX. AS STATED IN CIRCULAR NO.6-P, DATED 06/07/1968, THE OBJECTIVE BEHIND INTR ODUCTION OF THIS SECTION IS TO PREVENT EVASION OF TAX. IF IT CANNOT BE DEMONSTRATED THAT THERE HAS BEEN ANY EVASION OF TAX DUE TO SUCH REMUN ERATIONS BEING PAID, THERE CANNOT BE A CAUSE FOR ANY DISALLOWANCE. IT HAS BEEN HELD IN THE CASE OF INDO SAUDI SERVICES (SUPRA) BY THE HONOURABLE BOMBAY HIGH COURT AS UNDER: '(V) UNDER THE CEDT CIRCULAR NUMBER 6-P DT. 6TH JUL Y, 1968 IT IS STATED THAT NO DISALLOWANCE IS TO BE MADE IN THE S. 40A(2) IN RESPECT OF PAYMENTS MADE TO THE RELATIVES AND SISTE R CONCERNS WHEN THERE IS NO ATTEMPT TO EVADE TAX. 5. IN VIEW OF THE AFORESAID ADMITTED FACTS WE ARE O F THE VIEW THAT THE TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSIO N THAT THE CIT(A) WAS WRONG IN DISALLOWING HALF PERCENT COMMIS SION PAID TO THE SISTER CONCERN OF THE ASSESSEE DURING THE ASSTT . YRS. 1991-92 AND 1992-93. THE LEARNED ADVOCATE APPEARING FOR THE APPELLANT WAS ALSO NOT IN A POSITION TO POINT OUT HOW THE ASS ESSEE EVADED PAYMENT OF TAX BY ALLEGED PAYMENT OF HIGHER COMMISS ION TO ITS SISTER CONCERN SINCE THE SISTER CONCERN WAS ALSO PA YING TAX AT HIGHER RATE AND COPIES OF THE ASSESSMENT ORDERS OF THE SISTER CONCERN WERE TAKEN ON RECORD BY THE TRIBUNAL.' 15. THUS, THE TOTALITY OF THE CIRCUMSTANCES DEMONST RATES THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE AO TO MAKE SUCH AN AD HOC ADDITION. RESULTANTLY, I DELETE THE ADDITION MADE BY THE ASSE SSING OFFICER U/S.40A(2B). FROM THE ABOVE, IT IS CLEAR THAT THE CIT(A) HAS FOLLOWED TH E SETTLED LAW OF THE LAND QUA THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT AND DELETED THE ADDITION. THE REASONING GIVEN BY THE CIT(A), IN OUR VIEW, IS ON SOUND FOOTING AND, THEREFORE, THE SAME IS SUSTAINABLE. ACCO RDINGLY, GROUND NO.1 RAISED BY THE REVENUE STANDS DISMISSED. 6. GROUND NO.2 RAISED BY THE REVENUE RELATES TO ADDITION OF RS.31,44,357/- ON ACCOUNT OF ADHOC ADDITIONS OUT OF VARIOUS EXPENSES, I.E. ADVERTISEMENT COMMISSION, ADVERTISEMENT EXPENSES, DISTRIBUT ION EXPENSES AND HONORARIUM PAID. IN THIS REGARD, THE CASE OF THE REVENUE IS THAT THESE E XPENSES CLAIMED BY THE ASSESSEE ARE EXORBITANTLY HIGH AS COMPARED WITH THAT OF THE EARLIER FIGURES OF THE YEAR. THE DIFFERENCE IN FIGURES BETWEEN FIGURES OF THE ITA NO.1221/PUN/2016 M/S. INDO ENTERPRISES 8 TWO YEARS WORKS OUT TO RS.62,31,714. IN THE ASSESSMENT , AO DISALLOWED 50% OF THE SAME ON ADHOC BASIS. AO IS OF THE OPINION THA T THESE PAYMENTS ARE INCURRED IN CASH AND THE DOCUMENTATION MA INTAINED BY THE ASSESSEE IS NOT UPTO THE SATISFACTION OF THE AO. HOWEVER , IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) EXAMINED THE BOOKS OF AC COUNT AND HELD THAT THE DOCUMENTATION MAINTAINED BY THE ASSESSEE IS RE ASONABLE AND HELD THAT THE ADDITION MADE BY THE AO, I.E. @50% OF THE S AID EXPENDITURE, IS NOT SUSTAINABLE. RELEVANT DISCUSSION IS GIVEN IN PARA NOS . 21 TO 24 OF THE ORDER OF CIT(A). 7. BEFORE US, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR A TTENTION TO PAGE 299A OF THE PAPER BOOK AND SUBMITTED THAT THE AD VERTISEMENT COMMISSION WAS PAID TO 13 PARTIES AND ALL OF THE PAYEES AR E BORNE ON INCOME-TAX RECORDS. FURTHER, ALL THESE PAYMENTS ARE MA DE TO THEM NOT ONLY BY WAY OF CHEQUES BUT ALSO THE REQUISITE TDS WAS D ONE AS PER RELEVANT PROVISIONS. THEREFORE, THE ENTIRE COMMISSION PAYM ENT OF RS.17,93,789/- SHOULD CONSTITUTE GENUINE PAYMENTS. AOS A TTEMPT IN COMPARING THE SAME WITH THAT OF THE EARLIER YEARS IS ABSO LUTELY UNCALLED FOR AS FACTS AND FIGURES RELATING TO BUSINESS DONE IN THE SE YEARS ARE ENTIRELY DIFFERENT. SIMILARLY, THESE PAYMENTS WAS MADE THRO UGH CHEQUES ONLY. ON EXAMINING THE LEDGER EXTRACTS, AND OTHER ACCO UNTS ON ACCOUNT OF ADVERTISEMENT EXPENDITURE, HONORARIUM EXPENSES ETC., LD . AR SUBMITTED THAT THE PAYMENTS ARE GENUINE. THERE IS NO EVIDENCE TO S UPPORT THE AOS ALLEGATIONS IN THE ORDER OF THE AO. THUS, CIT(A ) CONSIDERED THE SAME AND GRANTED RELIEF. WE ALSO PERUSED THE FINDING GIVEN BY THE CIT(A) AS PER THE DISCUSSION GIVEN IN PARA NO.24 OF HIS ORDER AND THE SAME IS EXTRACTED HERE AS UNDER : ITA NO.1221/PUN/2016 M/S. INDO ENTERPRISES 9 24. I HAVE GIVEN CAREFUL CONSIDERATION TO THE MANN ER IN WHICH THE ADDITION HAS BEEN MADE AND THE SUBMISSIONS MADE BY THE ASSESSEE. FIRST AND FOREMOST IT REQUIRES TO BE STATED THAT THE ASSE SSING OFFICER HAS NOT GIVEN ANY REASON AS TO HOW THE BILLS ARE NOT AUTHENTIC OR GENUINE. THE ASSESSING OFFICER HAS ALSO NOT QUANTIFIED THE AMOUNTS WHICH W ERE NOT FOUND TO BE GENUINE AND HE HAS SIMPLY STATED THAT MOST OF THE A MOUNTS ARE PAID IN CASH AND THAT THE CASH VOUCHERS ARE DEFECTIVE IN RESPEC T OF THE RECEIPT COLUMN AND SUBJECTS. HE HAS NOT EVEN STATED THE DISCREPA NCIES WHICH WERE FOUND ON THE VOUCHERS OR THE BILLS. THE ASSESSING OFFICE R HAS NOT GIVEN ANY SPECIFIC FINDING AS TO FOR WHICH OF THE AMOUNT OF THE EXPENS ES, THE BILLS AND VOUCHERS ARE NOT VERIFIABLE. IN THE ABSENCE OF ANY DETAIL O R DISCUSSION IN THE ASSESSMENT ORDER AGAINST THE ASSESSEE, THE ADDITION S/DISALLOWANCES APPEAR TO BE IN THE NATURE OF AD HOC ADDITION WHICH CANNOT BE SUSTAINED. THE ASSESSING OFFICER HAS NOT BROUGHT OUR ANY MATER IAL ON RECORD TO SHOW THAT THE AFORESAID EXPENSES WERE NEITHER BOGUS OR W ERE NOT SPENT FOR THE PURPOSES OF BUSINESS. THEREFORE, I DIRECT THE ASSE SSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF ADVERTISEMENT COMMISSIO N, ADVERTISEMENT EXPENSES, DISTRIBUTION EXPENSES AND HONORARIUM EXPE NSES. THUS, GROUND NOS.9 TO 11 OF APPEAL ARE ALLOWED AND THE ADDITION IS DELETED. FROM THE ABOVE, IT IS EVIDENT THAT THE CIT(A) EXAMINED THE LEDGER EXTRACTS, MODE OF PAYMENT AND FIND THAT THE AO ERRED IN HOLDING THAT THE CASH VOUCHERS ARE DEFECTIVE. EVENTUALLY, THE CIT(A) DID NO T APPROVE THE ADHOC ADDITION MADE BY THE AO ADOPTING 50% OF THE DIFFEREN TIAL AMOUNT WITH THAT OF THE PREVIOUS YEAR. IN OUR VIEW ALSO, THE AO HAS NOT DONE PROPER JOB AND THERE IS NO INCRIMINATING MATERIAL TO COME TO THE CONCLUSION THAT THE CLAIM OF SAID EXPENSES ON ALL THOSE FOUR ACCOUNTS ARE SUSTAINABLE. THERE IS NO CASE FOR AO TO RESORT TO THE R ULE OF ADHOCISM IN MATTERS OF MAKING THE ASSESSMENT. THEREFORE, WE FIND NO R EASON TO REVERSE THE ORDER OF THE CIT(A). HENCE, WE UPHOLD THE OR DER OF CIT(A) AND AFFIRM THE DELETION OF ADDITION. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 19 TH DAY OF SEPTEMBER, 2018. SD/- SD/- (VIKAS AWASTHY) (D.KARU NAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 19 TH SEPTEMBER, 2018. SATISH ITA NO.1221/PUN/2016 M/S. INDO ENTERPRISES 10 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-2, AURANGABAD 4. / THE PR. CIT-2, AURANGABAD 5. , , / DR B, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.