Prakash Industries Ltd., V. DCIT, Spl. Range,

ITA 1290/DEL/2006

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7135 (ITAT-DELHI)
• Duration Of Justice: 10 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-05-2016
• Assessment Year: 1998-1999
• Appeal Filed On: 17-04-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARCHANA S AWASTHI
• Assessee Lawyers: MEGHA MITTAL
• Keywords: Gift; Depreciation; Peak credit; Notional interest; Revised return; Unabsorbed depreciation
• Section: 43B; 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NOS. 1290, 1291 & 1292/DEL/2006 A.YRS. : 1998-99, 1999-2000 & 2000-01 M/S PRAKASH INDUSTRIES LTD. NEAR IOCL DEPOT CROSSING MAIN NAJAFGARH ROAD, BIJWASAN, NEW DELHI 110 061 (AABCP6765H) VS. DY. COMMISSIONER OF INCOME TAX , SPECIAL RANGE, HISAR (APPELLANT) (RESPONDENT) AND ITA NOS. 4545 & 4546/DEL/2009 A.YRS. : 2001 - 02 & 2002 - 03 ASSTT. COMMISSIONER OF INCOME TAX, HISAR VS. M/S PARKASH INDUSTRIES LTD., DELHI ROAD, HISAR (APPELLANT) (RESPONDENT) AND C.O. NOS. 100 & 101/DEL/2010 (IN ITA NOS. 4545 & 4546/DEL/2009) A.YRS. : 2001-02 & 2002-03 M/S PRAKASH INDUSTRIES LTD. NEAR IOCL DEPOT CROSSING MAIN NAJAFGARH ROAD, BIJWASAN, NEW DELHI 110 061 (AABCP6765H) VS. ASSTT. COMMISSIONER OF INCOME TAX, AYAKAR BHAWAN, SECTOR-14, HISAR (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AJAY WADHWA, ADV. & MS. MEGHA MITTAL, CA DEPARTMENT BY : MS. ARCHANA S. AWASTHI, CIT(DR) ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 2 DATE OF HEARING : 24-05-2016 DATE OF ORDER : 18-07-2016 ORDER PER H.S. SIDHU : JM THESE ARE THE APPEALS FILED BY THE ASSESSEE AS WEL L AS REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE EMANATE OUT OF SEPARATE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), RO HTAK RELEVANT FOR THE ASSESSMENT YEARS 1998-99, 1999-2000, 2000-01, 2 001-02 & 2002-03 RESPECTIVELY. SINCE SOME OF THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON AND IDENTICAL, HENCE, WE ARE DISPOSING OF TH ESE APPEALS AND CROSS OBJECTIONS BY PASSING THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ASSESSEES ITA NO. 1290/DEL/06 (1998-1999) 2. THE GROUNDS RAISED IN THE ASSESSEES APPEAL REA D AS UNDER:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ROHTAK {BR IEFLY 'THE CIT (A)') ERRED IN UPHOLDING DISALLOWANCE OF L EASE RENT OF RS4,96,91,566/- IN RESPECT OF MACHINERIES SUPPLIED BY FOLLOWING PARTIES TO THE LESSORS WHOM THE LEASE REN T WAS PAID. (A) M/S SAHIB ENGINEERING WORKS; (B) M/S PIONEER ENGINEERING WORKS; (C) A.S. MECHANICAL WORKS; (D) A.S. FORGING AND (E) ASHISH ENGINEERING WORKS. 1.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) ERRED IN NOT APPRECIATING THAT MACHINER Y IN ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 3 RESPECT OF WHICH LEASE RENT WAS DISALLOWED WAS FOUN D TO BE INSTALLED AT THE TIME OF ON-SPOT VERIFICATION, COND UCTED BY THE INCOME TAX TEAM ON THE COMMISSION ISSUED BY THE A.O . WHERE THE MACHINERIES ON WHICH THE LEASE RENT WAS D ISALLOWED WAS FOUND TO BE INSTALLED. 1.2 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) ERRED IN APPLYING THE RATIO OF DECISION OF HON'BLE DELHI HIGH COURT IN CIT VS. LA MEDICA, 250 ITR 575. 1.3 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ORDER OF CIT (A) WAS PERVERSE IN AS MUCH AS IT WAS ASSUMED THAT ALL THE PARTIES WHICH SUPPLIED MACHINE RY WERE NON-EXISTENT CONCERNS. 1.4 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) ERRED IN NOT ADMITTING THE ADDITIONAL E VIDENCE FILED TO SHOW THAT LEASE RENT OF RS.1 ,61 ,72,059/- OUT O F DISALLOWED LEASE RENT OF RS. 4,96,91,566/- WAS IN RESPECT OF M ACHINERIES, WHICH WERE SUPPLIED BY THE PARTIES OTHER THAN FIVE PARTIES WHO WERE FOUND TO BE NON-EXISTENT BY THE ASSESSING OFFI CER. 1.5 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 114 OF INDIAN EVIDENCE ACT WERE APPLICABLE TO THE FACTS OF THE CASE. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ADHOC DISALLOWANCE OF RS. 50,00,000/- BEING THE INTEREST ON BORROWED FUNDS UT ILISED IN PAYING LEASE RENT IN RESPECT OF MACHINERIES SUPPLIE D BY ALLEGED BOGUS PARTIES. ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 4 2.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) FAILED TO APPRECIATE THAT LEASE RENT WAS ACTUALLY PAID OUT OF INTERNAL ACCRUALS. 2.2 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) HAS ALTHOUGH ALLOWED RELIEF OF RS. 50 LA CS OUT OF DISALLOWED INTEREST OF RS.49,74,72,803/- IN THE COM PUTATION OF INCOME, BUT ERRED IN DISALLOWING RS. 50 LACS ON ADH OC BASIS BEING THE INTEREST ON BORROWED FUNDS UTILIZED IN PA YING LEASE RENT TO THE GENUINE LESSORS. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF RS.8, 94,021/- BEING PRIOR PERIOD EXPENSES CLAIMED DURING THE YEAR . 4. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING AD HOC DISALLOWANCE O F RS. 5,00,000/- OUT OF STAFF WELFARE AND SALES PROMOTION S EXPENSES ALLEGEDLY FOR THE REASON THAT EXPENSES ON GUESTS CA N NOT BE ALLOWED. 5. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED UPHOLDING ADHOC DISALLOWANCE OF RS.1,00,000/- OUT OF FOREIGN TRAVEL EXPENSES ALLEGE DLY FOR THE REASON THAT DISALLOWANCE WAS REASONABLE. 6. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ADHOC DISALLOWANCE OF RS.30,00,000/- OUT OF REPAIR AND MAINTENANCE ALLEGE DLY FOR THE REASON THAT COMPLETE DETAILS WERE, NOT FURNISHE D. 7. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF RS.2, 00,000/- OUT OF REMUNERATION PAID TO THE MANAGING DIRECTOR A LLEGEDLY FOR THE REASON THAT SINCE COMPANY'S LOSSES ARE INCR EASING AND ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 5 SALES GOING DOWN, INCREASE IN REMUNERATION WAS NOT FOR THE PURPOSE OF BUSINESS. 8. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING AD-HOC DISALLOWANCE O F RS.2,50,000/- OUT OF MISCELLANEOUS EXPENSES ALLEGED LY FOR THE REASON FOR PERSONAL USE CANNOT BE RULED OUT. 9. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED N UPHOLDING AD-HOC DISALLOWANCE OF RS.1,00,000/- OUT OF VEHICLE REPAIR AND MAINTENANCE ALLEGEDLY FOR THE REASON THAT COMPLETE DETAILS WERE NOT FURNI SHED. 10. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ADDITION OF RS.5,15,0 00/- BEING THE AMOUNT RECEIVED FROM M/S PIONEER ENGINEERING WO RKS ALLEGEDLY FOR THE REASON THAT IT IS A BOGUS PARTY A ND THE TRANSACTION WAS NOT A GENUINE TRANSACTION. 11. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN RECORDING SATISFACTION UNDER SE CTION 271 (1 )(C) OF THE ACT IN RESPECT OF DISALLOWANCE OF RS. 4 ,96,91,566/-, RS. 50,00,000/-, RS.5,15,000/-- AND RS.8,94,021/-. 12. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, FROM THE ORDER PASSED BY CIT(A), IT IS EVIDENT THAT SATISFACTION RECORDED UNDER SECTION 271 (1 )(C) OF THE ACT WAS N OT OBJECTIVELY RECORDED. THAT APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE GROUNDS EITHER AT OR BEFORE THE HEARING OF APPEAL. ASSESSEES ITA NO. 1291/DEL/06 (1999-2000) 3. THE GROUNDS RAISED IN THE ASSESSEES APPEAL REA D AS UNDER:- ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 6 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ROHTAK {BR IEFLY 'THE CIT (A)') ERRED IN UPHOLDING DISALLOWANCE OF L EASE RENT OF RS. 3,81,88,929/- IN RESPECT OF MACHINERIES SUPPLIE D BY FOLLOWING PARTIES TO THE LESSORS WHOM THE LEASE REN T WAS PAID. (A) M/S SAHIB ENGINEERING WORKS; (B) M/S PIONEER ENGINEERING WORKS; (C) A.S. MECHANICAL WORKS; (D) A.S. FORGING AND (E) ASHISH ENGINEERING WORKS. 1.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) ERRED IN NOT APPRECIATING THAT MACHINER Y IN RESPECT OF WHICH LEASE RENT WAS DISALLOWED WAS FOUN D TO BE INSTALLED AT THE TIME OF ON-SPOT VERIFICATION, COND UCTED BY THE INCOME TAX TEAM ON THE COMMISSION ISSUED BY THE A.O . WHERE THE MACHINERIES ON WHICH THE LEASE RENT WAS D ISALLOWED WAS FOUND TO BE INSTALLED. 1.2 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) ERRED IN APPLYING THE RATIO OF DECISION OF HON'BLE DELHI HIGH COURT IN CIT VS. LA MEDICA, 250 ITR 575. 1.3 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ORDER OF CIT (A) WAS PERVERSE IN AS MUCH AS IT WAS ASSUMED THAT ALL THE PARTIES WHICH SUPPLIED MACHINE RY WERE NON-EXISTENT CONCERNS. 1.4 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) ERRED IN NOT ADMITTING THE ADDITIONAL E VIDENCE FILED TO SHOW THAT LEASE RENT OF RS.76,12,872/- OUT OF DI SALLOWED ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 7 LEASE RENT OF RS. 3,81,88,299/- WAS IN RESPECT OF M ACHINERIES, WHICH WERE SUPPLIED BY THE PARTIES OTHER THAN FIVE PARTIES WHO WERE FOUND TO BE NON-EXISTENT BY THE ASSESSING OFFI CER. 1.5 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 114 OF INDIAN EVIDENCE ACT WERE APPLICABLE TO THE FACTS OF THE CASE. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ADHOC DISALLOWANCE OF RS. 38,00,000/- BEING THE INTEREST ON BORROWED FUNDS UT ILISED IN PAYING LEASE RENT IN RESPECT OF MACHINERIES SUPPLIE D BY ALLEGED BOGUS PARTIES. 2.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) FAILED TO APPRECIATE THAT LEASE RENT WAS ACTUALLY PAID OUT OF INTERNAL ACCRUALS. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ADHOC DISALLOWANCE O F RS/ 6,00,00/- (947653-347653) OUT OF MISCELLANEOUS EXPE NSES ALLEGEDLY FOR THE REASON FOR PERSONAL USE. 4. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING AD HOC DISALLOWANCE O F RS. 5,00,000/- OUT OF STAFF WELFARE AND SALES PROMOTION S EXPENSES. 5. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED UPHOLDING ADHOC DISALLOWANCE OF RS.1,00,000/- OUT OF FOREIGN TRAVEL EXPENSES ALLEGE DLY FOR THE REASON THAT DISALLOWANCE WAS REASONABLE. ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 8 6. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ADHOC DISALLOWANCE OF RS.40,00,000/- OUT OF REPAIR AND MAINTENANCE ALLEGE DLY FOR THE REASON THAT COMPLETE DETAILS WERE, NOT FURNISHE D. 7. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF RS.2, 00,000/- OUT OF REMUNERATION PAID TO THE MANAGING DIRECTOR A LLEGEDLY FOR THE REASON THAT SINCE COMPANY'S LOSSES ARE INCR EASING AND SALES GOING DOWN, INCREASE IN REMUNERATION WAS NOT FOR THE PURPOSE OF BUSINESS. 8. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING AD-HOC DISALLOWANCE O F RS.75,000/- OUT OF VEHICLE REPAIR AND MAINTENANCE A LLEGEDLY FOR THE REASON THAT COMPLETE DETAILS WERE NOT FURNI SHED. 9. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN RECORDING SATISFACTION UNDER SECTIO N 271(1)(C) OF THE ACT IN RESPECT OF DISALLOWANCE OF RS. 3,81,8 8299/- AND RS. 38,00,000/-. 9.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, FROM THE ORDER PASSED BY THE CIT(A), IT IS EVIDENT THAT SATISFACTION RECORDED UNDER SECTION 271(1)(C) OF TH E ACT WAS NOT OBJECTIVELY RECORDED. THAT APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE GROUNDS EITHER AT OR BEFORE THE HEARING OF A PPEAL. ASSESSEES ITA NO. 1292/DEL/06 (2000-2001) 4. THE GROUNDS RAISED IN THE ASSESSEES APPEAL REA D AS UNDER:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ROHTAK {BR IEFLY ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 9 'THE CIT (A)') ERRED IN UPHOLDING DISALLOWANCE OF L EASE RENT OF RS. 34,74,077/- IN RESPECT OF MACHINERIES SUPPLIED BY FOLLOWING PARTIES TO THE LESSORS WHOM THE LEASE REN T WAS PAID. (A) M/S SAHIB ENGINEERING WORKS; (B) M/S PIONEER ENGINEERING WORKS; (C) A.S. MECHANICAL WORKS; (D) A.S. FORGING AND (E) ASHISH ENGINEERING WORKS. 1.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) ERRED IN NOT APPRECIATING THAT MACHINER Y IN RESPECT OF WHICH LEASE RENT WAS DISALLOWED WAS FOUN D TO BE INSTALLED AT THE TIME OF ON-SPOT VERIFICATION, COND UCTED BY THE INCOME TAX TEAM ON THE COMMISSION ISSUED BY THE A.O . WHERE THE MACHINERIES ON WHICH THE LEASE RENT WAS D ISALLOWED WAS FOUND TO BE INSTALLED. 1.2 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) ERRED IN APPLYING THE RATIO OF DECISION OF HON'BLE DELHI HIGH COURT IN CIT VS. LA MEDICA, 250 ITR 575. 1.3 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ORDER OF CIT (A) WAS PERVERSE IN AS MUCH AS IT WAS ASSUMED THAT ALL THE PARTIES WHICH SUPPLIED MACHINE RY WERE NON-EXISTENT CONCERNS. 1.4 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT (A) ERRED IN NOT ADMITTING THE ADDITIONAL E VIDENCE FILED TO SHOW THAT LEASE RENT OF RS.34,74,077/- OUT OF DI SALLOWED LEASE RENT OF RS. 3,99,983/- WAS IN RESPECT OF MACH INERIES, ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 10 WHICH WERE SUPPLIED BY THE PARTIES OTHER THAN FIVE PARTIES WHO WERE FOUND TO BE NON-EXISTENT BY THE ASSESSING OFFI CER. 1.5 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 114 OF INDIAN EVIDENCE ACT WERE APPLICABLE TO THE FACTS OF THE CASE. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ADHOC DISALLOWANCE OF RS. 3,50,000/- BEING THE INTEREST ON BORROWED FUNDS UTI LISED IN PAYING LEASE RENT IN RESPECT OF MACHINERIES SUPPLIE D BY ALLEGED BOGUS PARTIES. 2.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) FAILED TO APPRECIATE THAT LEASE RENT WAS ACTUALLY PAID OUT OF INTERNAL ACCRUALS. 2.2 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) HAS ALTHOUGH ALLOWED RELIEF OF RS. 3.5 L ACS OUT OF DISALLOWED INTEREST OF RS.1,14,26,79,546/- IN THE C OMPUTATION OF INCOME, BUT ERRED IN DISALLOWING RS. 3.5 LACS ON ADHOC BASIS BEING THE INTEREST ON BORROWED FUNDS UTILIZED IN PA YING LEASE RENT TO THE GENUINE LESSORS. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ADHOC DISALLOWANCE O F RS. 3,15,000/- (388981 - 73981) OUT OF MISCELLANEOUS EX PENSES ALLEGEDLY FOR THE REASON FOR PERSONAL USE. 4. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING AD HOC DISALLOWANCE O F RS. 4,00,000/- OUT OF STAFF WELFARE AND SALES PROMOTION S EXPENSES. ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 11 5. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED UPHOLDING ADHOC DISALLOWANCE OF RS .50,000/- OUT OF FOREIGN TRAVEL EXPENSES ALLEGEDLY FOR THE RE ASON THAT DISALLOWANCE WAS REASONABLE. 6. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ADHOC DISALLOWANCE OF RS.40,00,000/- OUT OF REPAIR AND MAINTENANCE ALLEGE DLY FOR THE REASON THAT COMPLETE DETAILS WERE, NOT FURNISHE D. 7. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF RS.2, 00,000/- OUT OF REMUNERATION PAID TO THE MANAGING DIRECTOR A LLEGEDLY FOR THE REASON THAT SINCE COMPANY'S LOSSES ARE INCR EASING AND SALES GOING DOWN, INCREASE IN REMUNERATION WAS NOT FOR THE PURPOSE OF BUSINESS. 8. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING AD-HOC DISALLOWANCE O F RS.60,000/- OUT OF VEHICLE REPAIR AND MAINTENANCE A LLEGEDLY FOR THE REASON THAT COMPLETE DETAILS WERE NOT FURNI SHED. 9. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN RECORDING SATISFACTION UNDER SECTIO N 271(1)(C) OF THE ACT IN RESPECT OF DISALLOWANCE OF RS. 34,74, 077/- AND RS. 3,50,000/-. 9.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, FROM THE ORDER PASSED BY THE CIT(A), IT IS EVIDENT THAT SATISFACTION RECORDED UNDER SECTION 271(1)(C) OF TH E ACT WAS NOT OBJECTIVELY RECORDED. THAT APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE GROUNDS EITHER AT OR BEFORE THE HEARING OF A PPEAL. ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 12 REVENUES ITA NO. 4545/DEL/09 (2001-2002) 5. THE GROUNDS RAISED IN THE REVENUES APPEAL READ AS UNDER:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES , THE LD. CIT(A), ROHTAK WAS RIGHT IN DELETING THE ADDITION M ADE BY THE AO ON ACCOUNT OF LEASE RENT WITHOUT APPRECIATING TH E FACT THAT THE ASSESSEE HAD TAKEN ASSETS ON LEASE WHICH WERE S UPPLIED TO THE LEASING COMPANY BY BOGUS OR NON EXISTING CON CERNS. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES , THE LD. CIT(A), ROHTAK WAS RIGHT IN DELETING THE ADDITION O N ACCOUNT OF FACTORY EXPENSES, OFFICE MAINTENANCE AND DIWALI EXPENSES MADE BY THE AO WITHOUT APPRECIATING THE FACTS THAT THESE EXPENSES WERE UNVOUCHED. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S, THE LD. CIT(A), ROHTAK WAS RIGHT IN DELETING THE ADDITION M ADE BY THE AO ON ACCOUNT OF REPAIR & MAINTENANCE EXPENSES ON P LANT AND MACHINERY, REPAIR OF BUILDING WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAD FAILED TO FURNISH COMPLETE DE TAILS OF THESE EXPENSES. (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES , THE LD. CIT(A), ROHTAK WAS RIGHT IN DELETING THE ADDITION M ADE BY THE AO ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES WIT HOUT APPRECIATING THE FACTS THAT THESE EXPENSES WERE INC LUSIVE OF EXPENSES RELEVANT TO CRIMINAL CASES, MOREOVER, THE ASSESSEE FAILED TO FURNISH THE DETAILS THEREOF. REVENUES ITA NO. 4546/DEL/09 (2002-2003) 6. THE GROUNDS RAISED IN THE REVENUES APPEAL READ AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN LAW IN DELETING T HE ADDITION ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 13 OF RS.35,00,000/- MADE ON ACCOUNT OF BOGUS LEASE RE NT CLAIMED BY THE ASSESSEE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS RIGHT IN DELETING THE DISAL LOWANCE OF RS4O,OO,OOO/- MADE OUT OF REPAIR EXPENSES. 3. WI ETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD.CIT(A) WAS RIGHT IN LAW IN DELETING TH E DISALLOWANCE OF RS.2.50,000/- MADE OUT OF MANAGERIA L EXPENSES CLAIMED. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD.CIT(A) WAS RIGHT IN LAW IN DELETING TH E DISALLOWANCE OF RS.7.50,000/- OUT OF LEGAL FEE EXPE NSES. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS RIGHT IN LAW IN DELETING TH E DISALLOWANCE OF RS.2.11,111/- MADE OUT OF ADVERTISE MENT EXPENSES. 6. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE G ROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OF F. 7. AFTER PERUSING THE GROUNDS OF THE AFORESAID 5 AP PEALS FILED BY THE ASSESSEE AS WELL AS REVENUE, WE NOTE THAT THE ISSU ES INVOLVED IN THESE APPEALS ARE COMMON IDENTICAL, HENCE, FOR THE SAKE OF CONVENIENCE, WE ARE DEALING WITH THE ITA NO. 1290/DEL/2006 (AY 199 8-99) AS UNDER:- 8. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED THE RETURN OF INCOME ON 30.11.1998 DECLARING TOTAL BUSINESS LOSS OF RS. 2846148766/- CLAIMED TO BE CARRIED FORWARDED TO THE NEXT YEAR AL ONGWITH BROUGHT FORWARD DEPRECIATION FOR EARLIER YEARS. LONG TERM C APITAL LOSS OF RS. 546923/- WAS ALSO CLAIMED TO BE CARRIED FORWARD. THE RETURN WAS ACCOMPANIED BY AUDIT REPORT AS REQUIRED UNDER SECTI ON 44AB OF THE ACT ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 14 ALONGWITH THE AUDITED BALANCE SHEET, PROFIT AND LOS S ACCOUNT AND OTHER RELATED DETAILS. THE RETURN WAS PROCESSED UNDER SEC TION 143(1)(A) ON 30.3.1999 WITHOUT MAKING ANY PRIMA FACIE ADJUSTMENT . SUBSEQUENTLY, THE ASSESSEE FILED THE REVISED RETURN OF INCOME ON 31.3 .2000. IN THE REVISED RETURN, THE ASSESSEE CLAIMED TOTAL BUSINESS LOSS IN CLUDING UNABSORBED DEPRECIATION AT RS. 2852659517/- AND ALSO CLAIMED L ONG TERM CAPITAL LOSS OF RS. 3156405/-. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY UNDER INSTRUCTION NO. 1967. IN ORDER TO COMPLETE THE ASSE SSMENT UNDER SCRUTINY, STATUTORY NOTICE UNDER SECTION 143(2) WAS ISSUED. VARIOUS DETAILS / INFORMATION WERE CALLED FOR BY ISSUING QUESTIONNA IRE AND ALSO THROUGH ORDER SHEET ENTRIES. LD. AUTHORISED REPRESENTATIV E ATTENDED THE PROCEEDINGS ALONGWITH THE SENIOR OFFICERS OF THE COMPANY. VARIOUS DETAILS / INFORMATION AS CALLED FOR HAVE BEEN FILED AND THE CASE WAS DISCUSSED. THEREAFTER, ASSESSMENT WAS COMPLETED AT A GROSS TOTAL INCOME/LOSS OF RS. (-) 2,78,98,72,670/- BY MAKING VARIOUS ADDITIONS U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED AS THE ACT) VIDE ORDER DATED 27.3.2001. BEING AGGRIEVED WITH THE AF ORESAID ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 15.02.2006 HAS PARTLY ALLOWED THE APPEAL OF T HE ASSESSEE. 9. NOW THE ASSESSEE IS AGGRIEVED AGAINST THE IMPUGN ED ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 10. APROPOS GROUND NO. 1 TO 1.5 RELATING TO DISALL OWANCE OF LEASE RENT IN RESPECT OF MACHINERY SUPPLIED BY FIVE ALLEGED SUPPLIERS RS. 4,96,91,566/-:- LD. COUNSEL OF THE ASSESSEE HAS ST ATED THAT THIS ISSUE IS SQUARELY COVERED IN ASSESSEES FAVOUR BY THE ITAT ORDERS IN RESPECT OF ASSESSMENT YEARS 1995-96, 1996-97 AND 1997-98 WHERE IN THE TRIBUNAL DELETED THE DISALLOWANCE OF LEASE RENT. HE PLACED THE COPIES OF THE TRIBUNALS ORDERS FOR THE AFORESAID ASSESSMENT YEAR S IN THE SHAPE OF PAPER BOOK AND STATED THAT THE SAME MAY BE FOLLOWED. ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 15 11. SMT. ARCHANA S AWASTHY, LD. CIT(DR) APPEARE D FOR THE DEPARTMENT AND RELIED UPON THE ORDERS PASSED BY THE LOWER AUTHORITIES AND STATED THAT THE AO AS WELL AS THE LD. CIT(A) HA S PASSED A WELL REASONED ORDER ON THE BASIS OF THE DOCUMENTARY EVID ENCE FILED BY THE ASSESSEE AND RIGHTLY DECIDED THE ISSUES IN DISPUTE AGAINST THE ASSESSEE. SHE HAS ALSO FILED A WRITTEN SUBMISSIONS PREPARED B Y SMT. SULEKHA VERMA, LD. CIT(DR) IN THE COURT ON 24.5.2016 AND ST ATED THAT THE BENCH MAY PERUSE THE SAME AND DECIDE THE APPEALS OF THE ASSESSEE ACCORDINGLY. 12. WE HAVE PERUSED THE WRITTEN SUBMISSIONS FILED B Y THE LD. CIT(DR) IN ALL THESE APPEALS AND FIND THAT THE WRITTEN SUB MISSIONS OF THE LD. CIT(DR) IS ON THE LIMITED ISSUE OF LEASE RENT CLAIM ED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 1998-99 TO 2002-03. SHE STAT ED THAT THE REVENUE HAS ALREADY FILED THE PAPER BOOKS AND REJ OINDER AS WELL AS THE DOCUMENTS OF THE CASE AND THE SAME MAY BE CONSIDERE D. AFTER PERUSING THE WRITTEN SUBMISSIONS FILED BY THE LD. CIT(DR), W E FIND THAT IN THE WRITTEN SUBMISSION, THE LD. CIT(DR) HAS ONLY NARRAT ED THE FACTS OF THE CASES AND HAS WRITTEN THE FINDING OF THE AO IN HER WRITTEN SUBMISSION. NOTHING NEW HAS BEEN POINTED OUT BY THE LD. CIT(DR) IN HER WRITTEN SUBMISSIONS. THE CONTENTION RAISED BY THE LD. CIT(D R) ON ALL THE ISSUES HAS ALREADY BEEN CONSIDERED AND DECIDED IN FAVOUR O R AGAINST THE ASSESSEE BY THE ITAT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS MENTIONED IN THE PRECEDING PARAGRAPHS. 12.1 WE HAVE HEARD THE BOTH PARTIES AND PERUSED A ND CONSIDERED THE RELEVANT RECORD AVAILABLE WITH US ESPECIALLY THE IM PUGNED ORDERS PASSED BY THE REVENUE AUTHORITIES AND THE COPIES OF THE T RIBUNALS ORDERS DATED 15.5.2009 PASSED IN ITA NO. 427/DEL/2006 (A Y 1995-96); COPY OF ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 16 TRIBUNALS ORDER DATED 24.9.2013 PASSED IN ITA NO. 3036/DEL/2010 (AY 1996-97) AND COPY OF TRIBUNALS ORDER DATED 15.1.2 013 RELEVANT FOR THE ASSESSMENT YEAR 1997-98 PASSED IN ITA NO. 90/DEL/12 . FOR THE SAKE OF BREVITY, THE RELEVANT PORTION OF THE ITAT ORDER FO R THE AFORESAID ASSESSMENT YEARS I.E. 1995-96 TO 1997-98 ARE REPROD UCED BELOW. (AY 1995-96) 23. WE HAVE CONSIDERED THE ENTIRE MATTER IN DISPUT E AND ARE OF THE OPINION THAT THE SAME FALLS WITHIN A VERY NARROW CO MPASS. IN THE ORIGINAL ASSESSMENT ORDER DATED 27.03.1998, THE DY . COMMISSIONER OF INCOME-TAX. SPECIAL RANGE, KARNAL HAD DISALLOWED THE LEASE RENT PAID TO VARIOUS COMPANIES AS AFORESAID ON THE GROUN D THAT THE PURCHASE OF ASSETS WERE FOUND TO BE FROM BOGUS CONC ERNS AND HENCE ALL THESE TRANSACTIONS WERE MERELY ON PAPER A ND WERE NOT GENUINE. IN APPEAL .AGAINST THE SAID ORDER, THE CIT CA), PATIALA VIDE HIS ORDER DATED 16.03.2000 CONSIDERED THE ENTIRE IS SUE OF ALLOWABILITY OF LEASE RENT IN DETAIL AND HELD THAT NOTWITHHSTANDING THE SUPPLIER OF THE MACHINE BEING BOGUS, A PHYSICAL VERIFICATION OF THE ASSETS ON WHICH, LEASE RENT IS BEING PAID TO VA RIOUS LESSORS, SHOULD BE CARRIED OUT BY THE DEPARTMENT THROUGH A C HARTERED ENGINEER TO SEE IF THE ASSETS DO EXIST AT THE COMPA NY'S PREMISES AND THEY BEAR THE NAME OF THE LESSER. HENCE THE ASS ESSING OFFICER WAS DIRECTED TO MERELY CARRYOUT THE EXERCISE OF PHY SICAL VERIFICATION AND IF THE RESULT OF THE VERIFICATION WAS THAT THE ASSET WAS FOUND TO BE IN EXISTENCE AND BORE THE NAME OF THE LESSOR, LE ASE RENT WAS TO BE ALLOWED. THE ASSESSING OFFICER HAD TO NECESSARIL Y CARRYOUT THESE DIRECTIONS AND THERE WERE NO SCOPE FOR HIM TO DIGRE SS. HE COULD ONLY HAVE CHALLENGED THESE DIRECTIONS BY FILING AN APPEA L TO THE TRIBUNAL BUT WHILE CARRYING OUT THE ORDER CONSEQUENT TO THE SE DIRECTIONS OF THE CIT(A), PATIALA, HE CERTAINLY COULD NOT HAVE FO LLOWED ANOTHER PA OTHER THAN THAT DIRECTED BY THE LD. CIT(A), PATIALA . THE VERY BASIC PRINCIPLE OF JUDICIAL PROPRIETY AND HIERARCHY IS TH AT THE ORDER OF THE ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 17 HIGHER APPELLATE AUTHORITY MUST NECESSARILY BE FOLL OWED BY THE ASSESSING OFFICER. THERE IS NO SCOPE FOR INTENDMEN T OR DISAGREEMENT. THE ONLY WAY OF DISAGREEING IS BY WAY OF FILING AN APPEAL AGAINST THE ORDER OF THE CIT(A) TO THE TRIBU NAL AND NOT IN ANY OTHER MANNER. THE ID. DR FAILED TO BRING ON REC ORD ANY EVIDENCE AS TO FILING OF APPEAL BEFORE ITAT AGAINST THE ORIGINAL ORDER OF THE LD. CIT(A) DATED 16.3.2002 OR AS TO REVERSAL OF SAID ORDER BY ANY FORUM. THE ASSESSING OFFICER, ROHTAK, CLEARLY E RRED IN LAW IN NOT FOLLOWING THE EXPLICIT DIRECTIONS OF THE CIT(A), PA TIALA VIDE HIS ORDER DATED 16.03.2000. THE LD. CIT(A), ROHTAK ALSO FELL IN ERROR BY NOT ENFORCING THE DECISION OF HIS PREDECESSOR CIT(A), P ATIALA AND WRONGLY PROCEEDED TO ADJUDICATE THE ISSUE ON MERITS WITHOUT APPRECIATING THE FACT, THE SAME HAD ALREADY BEEN AD JUDICATED UPON BY HIS PREDECESSOR AND HE COULD THUS NOT DIFFER. 24. WE WOULD LIKE TO QUOTE HERE THE RELEVANT PORTIO N OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F BHOPAL SUGAR INDUSTRIES LTD (SUPRA) ON THE ISSUE OF JUDICIAL PR OPRIETY: WE THINK THAT THE LEARNED JUDICIAL COMMISSIONER WA S CLEARLY IN ERROR HOLDING THAT NO MANIFEST INJUSTICE RESULTE D FROM THE ORDER OF THE RESPONDENT CONVEYED IN HIS LETTER DATE D MARCH 24, 1955. BY THAT ORDER, THE RESPONDENT VIRTUALLY R EFUSED TO CARRY OUT THE DIRECTIONS WHICH A SUPERIOR TRIBUNAL HAD GIVEN TO HIM IN EXERCISE OF ITS APPELLATE POWERS IN RESPECT OF AN ORDER OF ASSESSMENT MADE BY HIM. SUCH REFUSAL IS IN EFFEC T A DENIAL OF JUSTICE, AND IS FURTHER MORE DESTRUCTIVE OF ONE OF THE BASIC PRINCIPLES IN THE ADMINISTRATION OF JUSTICE BASED A S IT IS IN THIS COUNTRY ON A HIERARCHY OF COURTS. IF A SUBORDINATE TRIBUNAL REFUSES TO CARRY OUT DIRECTIONS GIVEN TO IT BY A SU PERIOR TRIBUNAL IN THE EXERCISE OF ITS APPELLATE POWERS, T HE RESULT WILL BE CHAOS IN THE ADMINISTRATION OF JUSTICE AND WE HA VE INDEED FOUND IT VERY DIFFICULT TO APPRECIATE THE PROCESS O F REASONING ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 18 BY WHICH THE LEARNED JUDICIAL COMMISSIONER WHILE R OUNDLY CONDEMNING THE RESPONDENT FOR REFUSING TO CARRY OUT THE DIRECTIONS OF THE SUPERIOR TRIBUNAL YET HELD THAT N O MANIFEST INJUSTICE RESULTED FROM SUCH REFUSAL' 25. WE HAVE EXAMINED IN DETAIL THE SPOT VERIFICATI ON REPORT CARRIED OUT BY THE DIRECTOR OF INCOME-TAX (INV)-I, RAIPUR, MP ON THE INSTRUCTIONS OF THE ADDL. COMMISSIONER OF IN COME-TAX, HISSAR RANGE, HISSAR. WE FIND THAT THE ANNEXURE OF THE REPORT CONTAINS THE NAME OF EACH OF THE LESSOR TO WHOM LEA SE RENT IS BEING PAID ALONGWITH THE ITEMS SUPPLIED BY HIM AND EXISTING AT THE SITE OF THE ASSESSEE COMPANY AT CHAMPA. THE RE IS ALSO A COLUMN WHEREIN THE ITEMS VERIFIED AT THE SITE BY THE CHARTERED ENGINEER HAVE BEEN MENTIONED AND THESE I TEMS TALLY WITH THE ITEMS LEASED BY THE ASSESSEE COMPANY ON WHICH, LEASE RENT IS BEING PAID. THE CHART ENCLOSED ELSEWHERE IN THIS ORDER HAS BEEN VERIFIED BY US AND WE FIND T HAT THE DIRECTIONS OF THE CIT(A), PATIALA VIDE HIS ORDER DA TED 16.03.2000 HAVE IN FACT BEEN CARRIED OUT BY THE DEP ARTMENT THOUGH BOTH THE ASSESSING OFFICER AND THE CIT(A), R OHTAK CHOSE TO IGNORE THE SAME DESPITE SPECIFIC REFERENCE BEING MADE BY THE ASSESSEE TO THE REPORT OF THE DEPARTMEN TAL ENGINEER BEING AVAILABLE WITH THEM. THE SOLE REASON FOR DISALLOWANCE OF LEASE RENT IS THAT THE SO CALLED SU PPLIERS HAY NO CAPACITY T MANUFACTURE AND HENCE THEY COULD NOT HAVE SOLD THE MACHINERY SAID TO BE LEASED. AS AGAINST THIS PR ESUMPTION, THE PHYSICAL EXAMINATION SHOWS THAT MACHINERY DO EX IST IN THE PREMISES OF ASSESSEE AS A RESULT OF WHICH PRODUCTI ON IS ALSO UNDERTAKEN. IF A PERSON HAS TO LOOK TO HIS HANDS HE NEED NOT SEE IT IN THE MIRROR. THE FACTS SPEAK FOR ITSELF. T HE EXISTENCE OF MACHINERY HAVING BEEN PROVED BY PHYSICAL EXAMINATIO N ITSELF, IT CANNOT BE SAID THAT NO MACHINERY IS TAKEN ON LEA SE FOR ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 19 WHICH LEASE RENT IS PAID. THE OTHER CORROBORATIVE E VIDENCE LIKE LEASE AGREEMENT, PASSING OF MONEY BY BANKING CHANNE LS, DECLARING LEASE INCOME OF RECIPIENTS ETC. ARE OVERW HELMING EVIDENCE AGAINST THE PRESUMPTION THAT MANUFACTURERS DO NOT HAVE CAPACITY TO PRODUCE MACHINERIES. WE THEREFORE HOLD THE LEASE TRANSACTION AS GENUINE 26. ON THE BASIS OF THE EXAMINATION OF FACTS AS BR OUGHT TO OUR NOTICE, WE HOLD THAT THE TOTAL LEASE RENT OF RS 2,4 0.,24,783.00 CLAIMED BY THE ASSESSEE IS FULLY ALLOWABLE. (AY 1996-97) 43. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. W E HAVE ALSO PERUSED THE DETAILS SUBMITTED. THE TOTAL LEAS E RENT DEBITED BY THE ASSESSEE FOR THE YEAR WAS RS.15,87,5 8,775, OUT OF WHICH RS.7,05,28,805/- WAS SEPARATELY DISALL OWED WHICH HAVE CONSIDERED WHILE DECIDING GROUND NO. 9 O F REVENUES APPEAL IN THE PRECEDING PARAS AND WE HAVE UPHELD THE ORDER OF CIT(A) FOR DELETING THE SAME. IN THIS GROUND, THE DISALLOWANCE IS OF REMAINING LEASE RENT ON MACHINER Y OF RS.8,55,60,070/-, LEASE MANAGEMENT FEE OF RS.18,05, 500/- AND LEASE RENT OF BUILDING OF RS.8,64,400/-. THIS DISALLOWANCE WAS MADE ONLY ON THE BASIS THAT NO ADEQUATE DETAILS WERE FURNISHED, HENCE THESE PAYMENTS MUST ALSO BE BOGUS. THESE LEASE RENT HAS BEEN PAID BY BANKING CHANNELS. THE ASSETS HAD BEEN FOUND BY THE CHARTERED ENGINEER ON THE SPO T VERIFICATION AND THE SAME WAS REPORTED BY HIM IN HI S REPORT DATED 08.03.2001. THE SUPPLIERS OF THE MACHINERY/EQUIPMENTS WERE WELL KNOWN LIKE TATA IRON & STEEL CO. ETC. INCLUDING GOVERNMENT ORGANIZATION BHEL. T HE LEASE RENT PAID ON THE ASSETS IN THE SUBSEQUENT YEARS HAS NEVER BEEN DISALLOWED BY THE REVENUE AUTHORITIES NOR HAS THE ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 20 GENUINENESS BEEN DOUBTED. THE LESSORS HAVE CONFIRM ED HAVING GIVEN THE MACHINERY ON LEASE, THE MACHINERY WAS EXISTED ON THE SPOT AND BEING USED. CONSIDERING AL L THESE FACTS, WE FIND NO FAULT IN THE ORDER OF CIT(A) AND WE SUSTAIN THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMI SSED. A.Y. 1997-98 20. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HAVE DEALT THIS ISSUE IN REVENUES APPEAL IN ITA NO. 303 6/DEL/2010 FOR ASSESSMENT YEAR 1996-97 IN PARAS 38 TO 41 OF OR DER DATED 24.09.2013. THE RELEVANT PARA 41 IS REPRODUCED HER EUNDER:- 41. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND T HE CASE LAWS RELIED UPON IN VIEW OF THE FACTS ON RECOR D. THE LEASE RENT IS BEING PAID LARGELY IN RESPECT OF ASSETS WHICH HAVE BEEN IN EXISTENCE FOR THE LAST 2-3 YEA RS. THE LEASE RENT HAS BEEN ALLOWED BY THE ITAT, DELHI IN RESPECT OF ASSESSMENT YEARS 1993-94 AND 1995-96 BY HOLDING THAT THE ASSETS WERE IN EXISTENCE AS PER TH E SPOT VERIFICATION REPORT DATED 08.03.2001 OF THE CHARTER ED ENGINEER APPOINTED BY THE INCOME-TAX DEPARTMENT. THESE DECISIONS OF THE TRIBUNAL HAVE BEEN APPROVED BY THE HONBLE JURISDICTIONAL PUNJAB & HARYANA HIGH CO URT. THEREFORE, THE LEASE RENT PAID IS IN RESPECT OF THE ASSETS PURCHASED IN THE EARLIER YEARS ALSO DESERVE TO BE ALLOWED IN THIS YEAR ALSO. BESIDES THIS, WE FIND T HAT ON THE SPOT VERIFICATION REPORT, THE DEPARTMENT FOUND ALL THE ASSETS WHICH HAVE BEEN ACQUIRED / PURCHASED BY LESSORS FROM THE FIVE PARTIES MENTIONED ABOVE. DUR ING THE HEARING, LD. AR HAS ALSO TAKEN US TO ITEMS REFL ECTED IN THE SPOT VERIFICATION REPORT AND TALLIED IT WITH THE DESCRIPTION OF THE ITEMS OF PLANT & MACHINERY ON WH ICH ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 21 LEASE RENT IS BEING PAID. HENCE, THE EXISTENCE OF THE MACHINERY USED AND PURCHASED FROM THE FIVE PARTIES IS ESTABLISHED. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT IN ASSESSMENT YEARS 1993-94 AN D 1995-96 WHICH HAS BEEN CONFIRMED BY HONBLE PUNJAB & HARYANA HIGH COURT, WE UPHOLD THE DECISION OF CIT(A ) FOR ALLOWING THE LEASE RENT AMOUNTING TO RS.7,05,28,805/-. RESPECTFULLY FOLLOWING OUR AFORESAID DECISIONS, WE DISMISS THE GROUND OF REVENUES APPEAL. 13. AFTER PERUSING THE AFORESAID FINDINGS OF THE TRI BUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1995-96 TO 1997-98, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID TRIBUNALS ORDERS, THEREFORE, WE ARE RESPECTFULLY FO LLOW THE TRIBUNALS ORDER ON THE ISSUE IN DISPUTE, AS AFORESAID AND DELETE THE ADDIT IONS IN DISPUTE AND ALLOW THE COMMON GROUND NO. 1 RELATING TO LEASE RENT PAID BY ASSESSEE I.E RS. 4,96,91,566/- IN 1998-99; RS 3,81,88,299/- IN AY 1999-2000, RS 34,74,077/- IN AY 2000-2001 RAISED IN THE ASSESSEES APPEAL AND DIS MISS THE GROUNDS RAISED BY THE DEPARTMENT FOR AY 2001-02 AND AY 2002-03 LEASE RENT PAID RS 24,43,277/- AND RS 35,00,000/- RESPECTIVELY. 14. APROPOS GROUND NO. 2 RELATING TO ADHOC DISALLOWANCE OF RS. 50 LACS OUT OF INTEREST ON BORROWED FUNDS UTILIZED FOR PAYMENT OF LEASE RENT IN RESPECT OF MACHINERY SUPPLIED BY ALLEGED FIVE PARTIES. LD. C OUNSEL OF THE ASSESSEE HAS STATED THAT THIS ISSUE IS COVERED BY THE ITAT ORDE R FOR A.YS. 1996-97 AND 1997-98 VIDE ITA NOS. 3036/DEL/2010 DATED 24.09.2013 AND 90/D/20 12 DATED 15.01.2014 RESPECTIVELY. WE ALSO FIND THAT THIS GROUND IS LI NKED TO THE FIRST GROUND. ACCORDING TO THE ASSESSEE, THE DISALLOWANCE WAS MAD E FOR REASON THAT SINCE PAYMENT OF LEASE RENT WAS IN RESPECT OF MACHINERY S UPPLIED BY BOGUS PARTIES, THEREFORE, UTILIZATION OF BORROWED FUNDS TO THE EXT ENT OF PAYMENT OF LEASE RENT CANNOT BE SAID TO BE FOR THE PURPOSE OF BUSINESS. LD. COUNSEL OF THE ASSESSEE ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 22 STATE THAT THE ASSESSEE FURTHER CONTENDED THAT FOR A.YS. 200102 AND 200203, THE DEPARTMENT HAS NOT PREFERRED AN APPEAL BEFORE T HE ITAT AGAINST THE SAME ADDITION EVEN THOUGH THE CIT(A) HAS ALLOWED THIS GR OUND IN FAVOUR OF THE ASSESSEE. HOWEVER, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 15. WE HAVE HEARD THE BOTH PARTIES AND PERUSED AND CONS IDERED THE RELEVANT RECORD AVAILABLE WITH US ESPECIALLY THE IM PUGNED ORDERS PASSED BY THE REVENUE AUTHORITIES AND THE COPIES OF THE T RIBUNALS ORDERS DATED 24.9.2013 PASSED IN ITA NO. 3036/DEL/2010 (AY 19960 -97) AND ORDER DATED 15.1.2013 RELEVANT FOR THE ASSESSMENT YEAR 19 97-98 PASSED IN ITA NO. 90/DEL/12. FOR THE SAKE OF BREVITY, THE RELEV ANT PORTION OF THE ITAT ORDER FOR THE AFORESAID ASSESSMENT YEARS I.E. 1996- 97 TO 1997-98 ARE REPRODUCED BELOW. AY 1996-97 47. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE H AVE ALSO PERUSED THE RECORD. WE HAVE UPHELD THE ORDER OF THE CIT(A) , REGARDING THE GENUINENESS OF THE PAYMENT OF LEASE RENT RAISED IN GROUND NO. 9, THEREFORE, WE FIND THAT THERE IS NO JUSTIFICATION IN DISALLOWI NG THE AD HOC AMOUNT OF INTEREST OF RS. 2 CRORES FROM THE INTEREST DEBITED IN THE BOOKS OF ACCOUNT. THEREFORE, WE SUSTAIN THE ORDER OF CIT(A) FOR DELET ING THIS ADDITION. THIS GROUND OF REVENUES APPEAL IS DISMISSED. AY 1997-98 24. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE H AVE DEALT THIS ISSUE IN REVENUES APPEAL IN ITA NO. 3036/DEL/2010 FOR ASSES SMENT YEAR 1996-97 IN PARAS 48 TO 51 OF ORDER DATED 24.09.2013. THE RELEVAN T PARA 51 IS REPRODUCED HEREUNDER:- 51. WE HAVE HEARD BOTH THE SIDES. WE HAVE CONSIDERE D THE RELEVANT MATERIAL AVAILABLE ON RECORD. AFTER CONSI DERING ALL THE RELEVANT MATERIAL, WE FIND THAT THE ADDITION OF RS. 20 CRORES IS PRIMARILY MADE ON THE GROUND THAT FIVE PARTIES WERE BOGUS AND THAT ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 23 THE PAYMENTS BY CHEQUES HAVE BEEN MADE TO THEM BESI DE THE SALE OF RAW MATERIAL. MOST OF THE PAYMENTS MADE TO THESE P ARTIES HAVE BEEN RECEIVED BACK DURING THE YEAR, UNDER CONSIDERA TION. WE FIND THAT THE TRANSACTIONS RELATING TO FOUR PARTIES SHOW S THERE IS A PEAK DEBIT IN THE BOOKS OF THE ASSESSEE RATHER THAN THE PEAK CREDIT. IN OUR CONSIDERED VIEW, THERE CAN BE NO ADDITION ON AC COUNT OF PEAK DEBIT BECAUSE IT REPRESENTS AMOUNT ADVANCED THROUGH BOOKS OF ACCOUNT TO A PARTICULAR PARTY. HOW THE ADVANCE MAD E TO THE PARTIES THROUGH ACCOUNT PAYEE CHEQUES FROM THE BOOKS OF ACC OUNT OF THE ASSESSEE CAN BE ADDED AS INCOME OF THE ASSESSEE. T HE ADDITION U/S 68 OF THE ACT DEALS WITH THE PEAK CREDIT. THE CREDI T IN THE ACCOUNTS REPRESENTS THE ADVANCE DURING THE YEAR UNDER CONSID ERATION. THE ITAT ALSO DEALT SUCH ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1993-94 WHEREIN THE ITAT HAS HELD AS UNDER:- ON PERUSAL OF THE COPY OF THE ACCOUNT OF M/S SAHI B ENGINEERING WORKS IN THE BOOKS OF THE ASSESSEE AT P AGE 102, WE FIND THAT THE AO HAS ADDED TOTAL DEBIT ON ACCOUN T OF SALES UP TO 24TH SEPTEMBER 1992 TOTALING TO RS.1,48,74,249/- . THESE ARE DEBITS IN THE BOOKS OF THE ASSESSEE AND T HE AO HAS NOT MADE ANY ADDITION ON ACCOUNT OF THE AMOUNTS PUR PORTEDLY RECEIVED FROM BANK ACCOUNT NO. 448 OF M/S SAHIB ENGI NEERING WORKS. WHAT IS ADDED AS INCOME IS THE AMOUNT OF PE AK DEBIT BEING VALUE OF GOODS SOLD BY THE ASSESSEE TO M/S SA HIB ENGINEERING WORKS RATHER THAN THE PEAK CREDIT ADDIT ION U/S 68 IS NOT TO BE MADE. IN RESPECT OF PEAK OF DEBIT ENT RIES. THE MONEY TRAIL LEADS TO THE SAID THREE LEASING COMPANI ES M/S KOTAK MAHINDRA FINANCE LTD., SRF FINANCE LTD. AND T IMES GUARANTEE FINANCE LTD. AND THERE IS NO EVIDENCE TO ESTABLISH THAT THE SAID MONEY REMITTED TO M/S KOTAK MAHINDRA FINANCE LTD., SRF FINANCE LTD. AND TIMES GUARANTEE FINANCE LTD. WERE ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 24 THE ASSESSEES FUNDS. UNDER THESE CIRCUMSTANCES, TH E ADDITION OF RS.1,48,74,249/- IS DELETED. ONCE THE ADVANCE MADE TO A PARTY AND THE SAME AMOUN T WAS RECEIVE BACK THEN THERE CANNOT BE ANY ADDITION FOR ESCAPEME NT OF INCOME. AT THE MOST, THE INTEREST MAY BE DISALLOWED IF THE ADVANCES WERE MADE FOR NON-BUSINESS PURPOSES. THIS HAS NOT BEEN DONE BY THE ASSESSING OFFICER AND WE HAVE NO POWER TO DO IT. W ITHOUT GOING DEEP INTO THE ACCOUNTS MERELY STATING THAT ACCOUNTS WERE BENAMI OF THE ASSESSEE IS NOT JUSTIFIED. MOREOVER, THE ITAT IN A SSESSEES OWN CASE HAD HELD THAT FIVE PARTIES ARE GENUINE AND THE ASSE SSING OFFICER IN REMAND REPORT HAS ALREADY TREATED THESE FIVE PARTIE S AS GENUINE. THUS, ALLEGATIONS HOWEVER STRONG BUT THESE CANNOT T AKE PLACE OF EVIDENCE. THE ASSESSING OFFICER HAS FAILED TO DISC HARGE THE ONUS WITH REGARD TO; ESTABLISHING THE FACT REGARDING THE BENA MI OF THESE SOURCES OF THE ASSESSEE. THE ASSESSING OFFICER COU LD HAVE ENQUIRED REGARDING THE PERSON WHO HAS INTRODUCED THE ACCOUNT S FROM THE ACCOUNT OPENING FORM AND THE NECESSARY ENQUIRIES CO ULD HAVE BEEN MADE FROM THE BANKS BUT NOTHING FOR SUCH TYPE HAS B EEN DONE BY THE ASSESSING OFFICER. MERELY STATING THAT THE CHEQUES HAVE BEEN ISSUED TO THE PARTIES AND RECEIVED BACK DURING THE YEAR UN DER CONSIDERATION CANNOT BE A BASIS FOR MAKING SUCH HUGE ADDITION OF RS.20 CRORES. ADDITION CAN BE MADE ONLY IF THERE IS AN ESCAPEMENT OR EVASION OF INCOME. THE ADDITION MADE FOR LEASE RENT PAID TO T HESE PARTIES HAVE BEEN DELETED IN VARIOUS YEARS. THE EXISTENCE OF TH E ASSETS HAS BEEN ESTABLISHED. LEASE RENT PAID ON THE LEASE ASSETS H AS BEEN FOUND ALLOWABLE. IN THESE CIRCUMSTANCES, WE FIND NO FAUL T IN THE ORDER OF THE CIT(A) AND WE SUSTAIN THE SAME ON THIS ISSUE., THIS GROUND OF REVENUES APPEAL IS DISMISSED. 16. AFTER PERUSING THE AFORESAID FINDINGS OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1996-97 TO 1997-98, WE FIND THAT THIS ISSUE IS LINKED TO THE LEASE RENT. SINCE WE HAVE DELETED THE ADDIT ION RELATING TO LEASE RENT, THIS ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 25 ADDITION HAS ALSO TO BE DELETED BOTH ON MERITS AND ALSO RESPECTFULLY FOLLOWING THE EARLIER DECISIONS OF THE ITAT, AS AFORESAID. IN VIE W OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE IN DISPUTE IS SQUARE LY COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID TRIBUNALS ORDERS, THEREFO RE, RESPECTFULLY FOLLOW THE TRIBUNALS ORDER ON THE ISSUE IN DISPUTE, AS AFORES AID WE DELETE THE ADDITIONS IN DISPUTE AND ALLOW THE COMMON GROUND NO. 2 RELATED TO ABOVE SAID NOTIONAL INTEREST RAISED BY ASSESSEE I.E DISALLOWANCE OF RS. 50,00,000/- IN AY 1998-99 (GROUND NO. 2), RS. 38,00,000/- IN AY 1999-2000 (GROU ND NO. 2) AND DISALLOWANCE OF RS 3,50,000/- IN AY 2000-2001 (GROUND NO . 2). 17. APROPOS GROUND NO. 3 INVOLVED AY 1998-99 RELATING TO DISALLOWANCE OF RS. 8,94,021/- BEING PRIOR PERIOD EXPENSES PAID DURING T HE YEAR. 18. WE FIND THAT THIS ISSUE HAS BEEN PARTIALLY DECID ED AGAINST THE ASSESSEE BY THE ITAT. THE ASSESSEE HAS CONTENDED THAT THE BILL S FOR EXPENSES WERE RECEIVED IN THE CURRENT ASSESSMENT YEAR AND, THEREFORE, THE SAM E CRYSTALLIZED DURING THE IMPUGNED ASSESSMENT YEAR. FOR THE SAKE OF CONVENIE NCE, THE RELEVANT PORTION OF THE TRIBUNALS ORDER FOR THE AY 1996-97 CONFIRMING T HE DISALLOWANCE IS REPRODUCED AS UNDER:- 8. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PERU SED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE CASE LAWS RELIED UPON BY BOTH THE SIDES. THE ASSESSING OFFICER HAS MADE A PA TENT MISTAKE WHILE ADDING THE PRIOR PERIOD EXPENSES TO THE INCOME OF T HE ASSESSEE. THE TOTAL PRIOR PERIOD EXPENSES WERE OF RS.96,57,170/- AND THER E WAS PRIOR PERIOD INCOME OF RS.26,16,334/-. THE ASSESSING OFFICER ADDED BOTH THESE AMOUNTS WHICH IS PATENTLY WRONG. THEREFORE, THE CIT (A)JAA S RIGHTLY APPRECIATED THIS FACT AND CONSIDERED THIS MISTAKE IN HIS ORDER. THE SSESSEE'S CONTENTION FOR CONSISTENCY WHEREIN IT WAS CONTENDED THAT IN RE SPECT OF EARLIER YEARS ALSO, THIS ISSUE RELATING TO PRIOR PERIOD EXPENSES HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ASSESSING OFFICER OR BY THE CIT (A). THE DEPARTMENT HAS ALSO NOT FILED FURTHER APPEAL. THE ASSESSEE COM PANY IS HAVING MANY DIVISIONS ALL ACROSS THE COUNTRY AND THERE CAN BE I NSTANCES AND CASES, ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 26 WHERE BILLS FOR EXPENSES ARE RECEIVED AT MUCH LATER DATED OR BEYOND THE FINANCIAL YEAR AND EXPENSES COULD NOT BE BOOKED WHE N THEY ARE INCURRED. FOR SUCH A SITUATION, THE DECISION OF HON'BLE BOMBA Y HIGH COURT IN THE CASE OF NAGRI MILLS CO. LTD, (SUPRA) IS ALSO A GUIDING F ORCE WHILE DECIDING THIS ISSUE OF PRIOR PERIOD EXPENSES. THE EXPENSES WERE I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE BONAFI DE AND GENUINENESS OF EXPENSES IS NOT DOUBTED. HOWEVER, THE ASSESSING OFF ICER OBSERVED THAT THE BILLS OF THE EXPENSES WERE NOT FURNISHED DURING THE ASSESSMENT YEAR PROCEEDINGS. WE HAVE PERUSED THE AUDIT REPORT AND T HE LETTER DATED 15.03.1999 WHICH GIVE THE DETAILS OF EXPENSES. THE EXP ENSES ARE OF VARYING NATURE. THESE PERTAIN TO FREIGHT, REPAIR, ELECTRICI TY, WATER, TELEPHONE, ENTRY TAX, SALES TAX, INTEREST, DISCOUNT, EXGRATIA, BONUS , ADVERTISEMENT, SALE COMMISSION ETC. ASSESSEE CLAIMS THAT EXPENSES TO TH E TUNE OF RS.75,51,613/- WERE TO BE DISALLOWED U/S 43B OF THE A CT FOR THE REASON THAT THESE WERE NOT PAID DURING THE RELEVANT PERIOD AND THESE EXPENSES CAN BE ALLOWED ONLY ON ACTUAL PAYMENTS. THUS, THESE EXPENS ES IN ANY CASE ARE TO BE DISALLOWED IN THOSE PARTICULAR YEARS AND TO BE A LLOWED IN THE YEAR OF ACTUAL PAYMENTS. FURTHER, THIS APPEAL RELATES TO ASSESSMENT YEAR 1996-97 WHERE A CONSIDERABLE TIME HAS BEEN LAPSED. IN COMPA RISON TO TOTAL TURNOVER, THESE EXPENSES ARE NOT OF SIGNIFICANT VOL UME. THE ASSESSEE HAS SUO-MOTTO MADE A DISCLOSURE OF THE PRIOR PERIOD EXP ENSES BOTH BY WAY OF MENTIONING IN THE AUDIT REPORT AND BY FILING THE RE PORT ALONG WITH RETURN OF INCOME. HOWEVER, FOR WANT OF FURTHER FURNISHING OF DETAILS IF THE ISSUE IS RESTORED BACK TO THE ASSESSING OFFICER, NO USEFUL P URPOSE WILL BE SERVED. FURTHER, SUBSTANTIAL AMOUNT OF EXPENSES ARE IN THE NATURE OF THE EXPENSES WHICH ARE ALLOWABLE ONLY ON THE PAYMENT BASIS ALSO PROMPT US NOT TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFI CER. CONSIDERING ALL THESE FACTS, WE FIND IT APPROPRIATE TO SUSTAIN ADDITION O F RS.21,05,557/- BEING DIFFERENCE BETWEEN PRIOR PERIOD EXPENSES DEBITED IN PROFIT & LOSS ACCOUNT AND EXPENSES WHICH CAN BE ALLOWED ONLY ON ACTUAL PA YMENTS. IT WILL BE ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 27 SUFFICIENT TO MEET THE END OF JUSTICE. WE ORDER ACC ORDINGLY. THEREFORE, WE PARTLY ALLOW THIS GROUND OF REVENUE'S APPEAL. 19. ACCORDING TO THE ASSESSING OFFICER, OUT OF PRIOR PERIOD EXPENSES OF RS. 9,43,977/- IDENTIFIED BY THE AUDITORS, EXPENSES AMOU NTING TO RS. 8,94,021/- ARE PRIOR PERIOD EXPENSES AND, THEREFORE, OUGHT TO BE D ISALLOWED. AS PER THE ASSESSEE AND THE AUDIT REPORT, THERE WAS PRIOR PERIOD INCOME OF RS. 7,39,790/- WHICH SHOULD BE OFFSET FROM THE PRIOR PERIOD EXPENSES. H ENCE, THE DISALLOWANCE, IF AT ALL, SHOULD BE OF A SUM OF RS. 1,09,231/-(RS. 8,49,021/- (-) RS. 7,39,790/-). 20. WE ARE ALSO OF THE CONSIDERED VIEW THAT THE CON TENTION OF THE ASSESSEE THAT THE AMOUNT OF PRIOR PERIOD INCOME SHOULD BE OFFSET WITH PRIOR PERIOD EXPENSES. HENCE, WE SET ASIDE THE ISSUE TO THE ASSESSING OFFI CER TO EXAMINE THE CLAIM OF THE ASSESSEE OF OFFSETTING THE PRIOR PERIOD INCOME FROM PRIOR PERIOD EXPENSES AND DECIDE ACCORDINGLY. 21. APROPOS GROUND NO. 4 (AY 1998-99) RELATING TO AD HOC DISALLOWANCE OF RS. 5 LACS OUT OF STAFF WELFARE EXPENSES. LD. COUNSEL OF THE ASSESSEE STATED THAT THIS ISSUE IS ALSO SQUARELY COVERED BY THE ORDER OF THE ITAT SINCE SIMILAR ADHOC DISALLOWANCES WERE MADE FOR THE EARLIER ASSESSMENT YEARS AND THE TRIBUNAL FOR A.YS. 1990-91 TO 1995-96 HAS DELETED THE ADHOC ADDITIO N. IN FACT, THE ASSESSEE CONTENDED THAT RIGHT FROM A.Y. 1990-91 TO A.Y. 1995-9 6, THIS ADHOC ADDITION HAS BEEN DELETED BY THE TRIBUNAL. THE ASSESSEE FURTHER CONTENDED THAT NO SUCH ADHOC ADDITION HAS BEEN MADE BY THE DEPARTMENT FOR A.YS. 2004-05, 2006-07 AND 2007- 08. AS FAR AS THE MERIT OF THE ASSESSEE IS CONCERNE D, THE ASSESSEE CONTENDED THAT THERE IS NO INCURRENCE OF EXPENDITURE ON ENTERTAINM ENT OF OUTSIDERS AND THE EXPENDITURE IS SOLELY ON STAFF WELFARE. THE ASSESSE E FURTHER CONTENDED THAT DONATION OF RS. 1,66,621/- WAS ALREADY DISALLOWED IN THE COMPUTATION OF INCOME. 22. THE DETAILS OF EXPENSES ARE GIVEN IN THE PAPER B OOK AT PAGES 268 TO 272 WHICH HAVE BEEN PERUSED BY US. WE FIND THAT THESE ARE ALL PETTY EXPENSES AND SINCE THE DETAILS OF THE SAME ARE GIVEN, THERE IS N O REASON FOR ANY ADHOC DISALLOWANCE. IT IS SETTLED LAW BY VARIOUS DECISIO NS THAT DISALLOWANCE CAN ONLY BE MADE IN RESPECT OF THE EXPENSES IN THE ABSENCE OF D ETAILS OR ONLY WHEN THE ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 28 ASSESSING OFFICER GIVES SPECIFIC FINDING THAT THE E XPENSES HAVE NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE THE RELEVANT PORTION OF THE ORDER OF THE ITAT IN EARLIER YEARS DELETING THE ADHOC DISALLOWANCE:- AY 1990-91 8. GROUND NO. 4 IS AGAINST SUSTAINING THE DISALLOW ANCE OF RS.2,63,163/- OUT OF STAFF WELFARE EXPENSES DEBITED AT RS.13,15,8 15/-. THE DISALLOWANCE HAS BEEN MADE TREATING THE EXPENSES AS ENTERTAINMEN T EXPENSES. 9. FOLLOWING THE ORDER OF THE TRIBUNAL IN THE EARLIE R ASSESSMENT YEARS I.E. 1988-89 AND THE SUBSEQUENT ASSTT. YEAR 1991-92 AN D IN THE CONTEXT OF IDENTICAL FACTS, WE DELETE THE DISALLOWANCE. THE G ROUND IS ALLOWED. AY 1991-92 9. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED THE MATERIALS ON THE FILE. WE ARE OF THE VIEW THAT THE DISALLOWANCE OF R S.60,000/- SUSTAINED BY THE LD. CIT (A) OUT OF STAFF WELFARE EXPENSES BY TR EATING IT AS EXPENDITURE INCURRED ON ENTERTAINMENT WAS NOT PROPER AND JUSTIF IED. THE ASSESSEE HAD ALREADY SEGREGATED THE ENTERTAINMENT EXPENSES WHICH WERE CONSIDERED SEPARATELY. THERE WAS NO BASIS FOR TREATING PART O F THE STAFF WELFARE EXPENSES AS ENTERTAINMENT EXPENSES. THE TOTAL TURN OVER OF THE ASSESSEE COMPANY WAS RS.108,10,39,817/-. CONSIDERING THE NATU RE AND EXTENT OF BUSINESS THE STAFF WELFARE EXPENSES CLAIMED WERE NO T EXCESSIVE. IN THE ASSTT. YEAR 1990-91 AND 1989-90 THE EXPENDITURE ON STAF F WELFARE WAS RS.13.15 LAKHS AND RS.15.91 LAKHS. 10. CONSIDERING THE AFORESAID FACTS OF THE FACT, WE HOLD THAT THE DISALLOWANCE OF RS.60,000/- SUSTAINED BY THE LD. CIT (A) WAS NOT PROPER AND JUSTIFIED. ACCORDINGLY THE ADDITION IS DELETED. AY 1992-93 ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 29 11. LEARNED AR WITH RESPECT TO THIS GROUND CONTENDE D THAT THE POINT AT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE TRIBUNAL IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR NAMELY 1991-92 WHEREIN THE DISALLOWANCE MADE TO THE TUNE OF RS.60,000/- HAD BEE N DELETED. ACCORDINGLY, IN THE AFOREMENTIONED FACTS AND CIRCUM STANCES, THE SAID ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE. 13. IN THE AFOREMENTIONED FACTS AND CIRCUMSTANCES, R ELYING UPON THE ORDER OF THE TRIBUNAL FOR 1991-92 A.Y., GROUND NO. 3 RAISED BY THE ASSESSEE IS ALLOWED. AY 1994-95 8. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT A SIMILAR ISSUE HAS B EEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YE AR 1991-92 IN ITA NO.442/DEL/95 DELETING THE ENTIRE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT(A). HE HA S ALSO POINTED OUT THAT THE SAID DECISION OF THE TRIBUNAL RENDERED IN ASSES SMENT YEAR 1991-92 HAS BEEN SUBSEQUENTLY FOLLOWED IN DECIDING THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEARA 1988-89, 90-91 AND 92-93 I N ITA NOS. 3005/DEL/94, 1363/DEL/99 AND 5868/DEL/95 RESPECTIVELY. SINCE THE FACTS INVOLVED IN THE YEAR UNDER CONSIDERATION ARE UNDISP UTEDLY SIMILAR, WE RESPECTFULLY FOLLOW THE AFORESAID DECISIONS OF THE TRIBUNAL AND HOLD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS COUNT WAS NOT SUSTAINABLE. THE IMPUGNED ORDER OF LEARNED CIT(A) ON THIS ISSUE IS, THEREFORE, SET ASIDE AND THE ASSESSING OFFICER IS D IRECTED TO DELETE THE ENTIRE ADDITION MADE ON THIS ISSUE. GROUND NO. 4 OF THE RE VENUES APPEAL IS ACCORDINGLY DISMISSED WHEREAS GROUND NOS. 1 TO 3 OF T HE ASSESSEES CROSS- OBJECTION ARE ALLOWED. 23. AFTER PERUSING THE AFORESAID FINDINGS OF THE TRI BUNAL IN ASSESSEES OWN CASE FOR EARLIER, WE ARE OF THE CONSIDERED VIEW THAT CO MPLETE DETAILS OF STAFF WELFARE HAVE BEEN GIVEN AND THERE IS NO SPECIFIC INSTANCE O F THE EXPENSES HAVING BEEN ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 30 INCURRED FOR NON-BUSINESS PURPOSE, WE AFTER RESPECT FULLY FOLLOW THE TRIBUNALS ORDERS, AS AFORESAID, ALLOW THE COMMON GROUND RELA TED TO ADHOC DISALLOWANCE OF STAFF WELFARE I.E RS 5,00,000/- EACH IN AY 1998-99 & 1999-2000 (GROUND NO. 4) AND RS 4,00,000/- IN AY 2000-2001 (GROUND NO. 4) . 24. APROPOS GROUND NOS. 5, 6, 7, 8 AND 9 (AY 1998-99) CHALLENGE THE AD- HOC DISALLOWANCE OF RS. 1 LAC ON ACCOUNT OF FOREIGN TRAVEL EXPENSES, RS. 30 LACS ON ACCOUNT OF REPAIR & MAINTENANCE EXPENSES, RS. 2 LAC S ON ACCOUNT OF REMUNERATION PAID TO MD, RS. 2.5 LACS ON ACCOUNT OF MISCELLANEOUS EXPENSES AND RS. 1 LAC ON ACCOUNT OF VEHICLE REPAIR AND MAINTENANCE AND RESPE CTIVELY. THESE ADDITIONS WERE MADE IN THE EARLIER ASSESSMENT YEARS ALSO. AS POIN TED OUT BY THE LD. COUNSEL OF THE ASSESSEE THAT THE ITAT HAS DELETED THESE ADHOC DISALLOWANCES IN THE EARLIER YEARS. FOR THE SAKE OF CONVENIENCE, WE ARE REPRODU CING THE RELEVANT PORTION OF THE TRIBUNALS ORDER DELETING ON EACH OF THE SAID ADHOC DISALLOWANCE AS UNDER:- REPAIR AND MAINTENANCE AY 1996-97 12. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HAVE ALSO GONE THROUGH THE DETAILS OF THE REPAIRS AND MAINTENANCE IN THE PAPER BOOK AT PAGES 370 TO 451. WE HAVE ALSO PERUSED THE SHOW CAUSE ISSUED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ASKE D ONLY GENERAL DETAILS AND NO SPECIFIC BILLS WERE CALLED FOR. THE ASSESSING O FFICE SHOULD HAVE GONE THROUGH THE DETAILS AND INDICATE WHICH EXPENDITURE HE WANT TO VERIFY FURTHER. THE ASSESSING OFFICER MUST HAVE APPLIED H IS MIND WITH THE DETAILS SUBMITTED BY THE ASSESSEE AND MUST HAVE PINPOINTED THE DISCREPANCIES AND OMISSION. AD HOC DISALLOWANCE CANNOT BE RESORTED T O IN THE ABSENCE OF ANY SPECIFIC DISCREPANCY NOTED IN THE DETAILS SUBMITTED BY THE ASSESSEE. THE ASSESSING OFFICER HAS FAILED TO IDENTIFY THE EXPENS ES AND AMOUNTS WHERE THERE WAS ANY DISCREPANCY AND HE PROPOSED TO DISALL OW THE SAME. IN VIEW OF THESE FACTS, WE FIND NO MERITS IN THE APPEAL OF THE REVENUE ON THIS GROUND. WE ALSO GET THE SUPPORT FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF NATIONAL INDUSTRIAL CORPO RATION REPORTED IN 177 CR ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 31 194 (DEL.). KEEPING THESE FACTS IN VIEW, WE SUSTAIN THE ORDER OF THE CIT(A) ON THIS ISSUE. AY 1997-98 7. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. BOT H THE SIDES RELIED ON THE PLEADINGS MADE IN ITA NO. 3036/DEL/2010 FOR ASSESS MENT YEAR 1996- 97. WE HAVE DEALT SUCH ISSUE IN REVENUES APPEAL IN ITA NO.3036/DEL/2010 FOR ASSESSMENT YEAR 1996-97 IN PARAS 9 TO 12 OF ORDER DATED 24.09.2013. THE RELEVANT PARA 12 IS REPRODUCED HEREUNDER:- 12. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HAVE ALSO GONE THROUGH THE DETAILS OF THE REPAIRS AND MAINTENANCE IN THE PAPER BOOK AT PAGES 370 TO 451. WE HAVE ALSO PERUSED THE SHOW CAUS E ISSUED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ASKED ONLY GENERAL DETAILS AND NO SPECIFIC BILLS WERE CALLED FOR. THE ASSESSING O FFICER SHOULD HAVE GONE THROUGH THE DETAILS AND INDICATE WHICH EXPENDITURE HE WANT TO VERIFY FURTHER. THE ASSESSING OFFICER MUST HAVE APPLIED H IS MIND WITH THE DETAILS SUBMITTED BY THE ASSESSEE AND MUST HAVE PINPOINTED THE DISCREPANCIES AND OMISSIONS. AD HOC DISALLOWANCE CANNOT BE RESORTED TO IN THE ABSENCE OF ANY SPECIFIC DISCREPANCY NOTED IN THE DETAILS SUBMITTED BY THE ASSESSEE. THE ASSESSING OFFICER HAS FAILED TO IDENTIFY THE EXPENS ES AND AMOUNTS WHERE THERE WAS ANY DISCREPANCY AND HE PROPOSED TO DISALL OW THE SAME. IN VIEW OF THESE FACTS, WE FIND NO MERITS IN THE APPEAL OF THE REVENUE ON THIS GROUND. WE ALSO GET THE SUPPORT FROM THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NATIONAL INDUSTRIAL CORPORATI ON REPORTED IN 177 CTR 194 (DEL.). KEEPING THESE FACTS IN VIEW, WE SUSTAIN THE ORDER OF THE CIT(A) ON THIS ISSUE. FACTS BEING SIMILAR, RESPECTFULLY FOLLOWING OUR AFO RESAID ORDER, WE FIND NO MERITS IN THE APPEAL OF THE REVENUE ON THIS ISSUE A ND THIS GROUND IS DISMISSED. MDS REMUNERATION ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 32 AY 1996-97 16. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GO NE THROUGH THE SUBMISSION MADE BY BOTH SIDES. WE FIND THAT TH E ASSESSING OFFICER HAS MADE AN AD HOC DISALLOWANCE WITHOUT APP RECIATING THE FACTS OF THE CASE THAT THE TURNOVER AND THE PROFIT OF THE COMPANY HAS BEEN INCREASED DURING THE YEAR. THE PAYMENT HA S BEEN MADE IN ACCORDANCE WITH SCHEDULE-XIII OF THE COMPANIES A CT, 1956 AND THIS PAYMENT HAS ALSO BEEN APPROVED BY THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE COMPANY. IN VIEW OF THESE FACT S, IT WAS UNJUSTIFIED TO MAKE AN AD HOC DISALLOWANCE OF RS. 1 LAC FROM THE TOTAL PAYMENT OF RS.2.5 LACS TO THE WHOLE TIME MANA GING DIRECTOR OF THE COMPANY. IN VIEW OF THESE FACTS, WE FIND NO ME RITS IN THIS GROUND OF REVENUES APPEAL AND WE SUSTAIN THE ORDER OF THE CIT (A) ON THIS ISSUE. THE GROUND OF REVENUES APPEAL STAN DS DISMISSED. AY 1997-98 8. IN THE GROUND NO. 3, THE ISSUE INVOLVED IS DELE TING THE ADDITION OF RS.2 LACS OUT OF MDS COMMISSION. SIMILAR DISAL LOWANCE HAS BEEN MADE IN THE ASSESSMENT YEAR 1996-97. BOTH THE SIDE S RELIED ON THE PLEADINGS MADE IN ITA NO.3036/DEL/2010 FOR ASSESSME NT YEAR 1996-97. W E HAVE DEALT THIS ISSUE IN REVENUES APPEAL IN ITA NO. 3036/DEL/2010 FOR ASSESSMENT YEAR 1996-97 IN PARAS 13 TO 16 OF ORDER DATED 24.09.2013. THE RELEVANT PARA 16 IS RE PRODUCED HEREUNDER:- 16. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GO NE THROUGH THE SUBMISSION MADE BY BOTH SIDES. WE FIND THAT THE ASSESSING OFFICER HAS MADE AN AD HOC DISALLOWANCE W ITHOUT APPRECIATING THE FACTS OF THE CASE THAT THE TURNOVE R AND PROFIT OF THE COMPANY HAS BEEN INCREASED DURING THE YEAR. THE PAYMENT HAS BEEN MADE IN ACCORDANCE WITH SCHEDULE-X III OF THE COMPANIES ACT, 1956 AND THIS PAYMENT HAS ALSO B EEN ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 33 APPROVED BY THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE COMPANY. IN VIEW OF THESE FACTS, IT WAS UNJUSTIFIE D TO MAKE AN AD HOC DISALLOWANCE OF RS. 1 LAC FROM THE TOTAL PAYMENT OF RS.2.5 LACS TO THE WHOLE TIME MANAGING DIRECTOR OF THE COMPANY. IN VIEW OF THESE FACTS, WE FIND NO MERITS IN THIS GROUND OF REVENUES APPEAL AND WE SUSTAIN THE ORDER OF THE CIT(A) ON THIS ISSUE. THIS GROUND OF REVENUES APP EAL STANDS DISMISSED. RESPECTFULLY FOLLOWING OUR AFORESAID DECISION, WE D ISMISS THIS GROUND OF REVENUES APPEAL. MISCELLANEOUS EXPENSES AY 1996-97 24. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE FIND THAT ASSESSEE HAS HIMSELF DISALLOWED SOME EXPENDITURE WH ICH IS NOT ALLOWABLE. THE ASSESSING OFFICER RELIED ON THE DISALLOWANCE MADE IN ASSESSMENT YEAR 1996-96 WHICH HAS BEEN FINALLY DELETED BY THE ITAT WHILE DECIDING THE ITA NO.2978/DEL/2000 DATED 13.12.2005. THE ASSESSING O FFICER HAS NOT PINPOINTED ANY SPECIFIC DEFECTS IN THE DETA ILS NOR HAS HE FURTHER ASKED ANY DETAILS IN THIS REGARD, THEREF ORE, WE FIND NO DEFECTS IN THE ORDER OF CIT(A). ACCORDINGLY, WE SUSTAIN THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMISSED . AY 1997-98 10. IN THE GROUND NO. 5, THE ISSUE INVOLVED IN DEL ETING THE DISALLOWANCE OF RS. 3 LACS ON ACCOUNT OF MISC. EXPE NSES. THE AO DEALT THIS ISSUE IN PARA 11 AT PAGE 8 OF HIS ORD ER AND THE CIT(A) DEALT THE SAME IN PARA 10 AT PAGES 8 & 9 OF HIS ORDER. LD. DR RELIED ON HIS PLEADINGS MADE BEFORE US IN TH E APPEAL IN ASSESSMENT YEAR 1996-97. LD. AR SUBMITTED THAT IN THE ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 34 ASSESSMENT YEARS 1999-2000, 2000-01, 2001-02 AND 20 02- 03, SPECIFIC DISALLOWANCES WERE MADE ON VARIOUS ACC OUNTS LIKE FREIGHT, COOLIE & CARTAGE, FACTORY & OFFICE MAINTEN ANCE, DIWALI EXPENSES, GENERAL EXPENDITURE, TELEPHONE EXPENSES E TC. AGAINST SOME OF THE ITEMS, DEPARTMENT HAS NOT PREFE RRED APPEAL BEFORE THE ITAT. HE SUBMITTED THAT HOWEVER I N THE 2003-04 AND 2004-05, DISALLOWANCE WAS MADE ONLY ON TELEPHONE EXPENDITURE IN THE MISC. HEAD FROM THE AS SESSMENT YEAR 2006-07 ONWARDS THERE IS NO DISALLOWANCE ON AN Y ACCOUNT IN THE MISC. HEAD. FURTHER, HE RELIED ON TH E SUBMISSIONS MADE IN THE APPEAL IN THE ASSESSMENT YE AR 1996- 97 BEFORE US. 25. WE HAVE ALSO PERUSED THE DETAILS OF FOREIGN TRAV EL EXPENSES ENCLOSED AT PAGES 273-276/PB, REPAIR AND MAINTENANCE AT PAGES 277 -322/PB, MISCELLANEOUS EXPENSES AT PAGES 334 TO 336 AND MD'S REMUNERATION A T PAGES 323 TO 333 AND DO NOT FIND ANY EXPENSE THAT HAS BEEN INCURRED FOR NON -BUSINESS PURPOSE. 26. THE ASSESSEE HAS ALSO CITED THE JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. DALMIA CEMENT (B) LTD. 254 ITR 377 (DEL) WHEREIN IT HAS BEEN HELD THAT REASONABLENESS OF EXPENDITURE CANNOT BE GONE INTO BY THE DEPARTMENT. THIS JUDGEMENT HAS BEEN RELIED UPON FO R THE PROPOSITION THAT REMUNERATION PAID TO THE MANAGING DIRECTOR OF RS. 2 LACS WAS JUSTIFIABLE AND COULD NOT BE DISALLOWED. 27. AFTER HAVING PERUSED THE ORDERS OF THE ITAT ON I DENTICAL ISSUE AND DETAILS OF EXPENSES FURNISHED BY THE ASSESSEE, WE ARE OF THE B ELIEF THAT ADHOC DISALLOWANCES ARE NOT SUSTAINABLE AND WE DELETE THE SAME. HENCE T HE ASSESSEE GETS RELIEF OF RS. 1 LAC ON ACCOUNT OF FOREIGN TRAVEL EXPENSES, RS. 30 L ACS ON ACCOUNT OF REPAIR & MAINTENANCE EXPENSES, RS. 2 LACS ON ACCOUNT OF REMU NERATION PAID TO MD, RS. 2.5 LACS ON ACCOUNT OF MISCELLANEOUS EXPENSE AND RS. 1 L AC ON ACCOUNT OF REPAIR AND MAINTENANCE ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 35 28. WE FURTHER FIND THAT SAME GROUNDS OF APPEAL CHAL LENGING ADHOC DISALLOWANCE HAVE BEEN RAISED IN APPEALS OF OTHER ASSESSMENT YEA RS DETAILS AS PER THE FOLLOWING DETAILS:- NATURE OF GROUND AY 1999-00 AY 2000-01 AY 2001-02 AY 2002-03 FOREIGN TRAVELLING RS 1,00,000 (GROUND NO.5 ASSESSEES APPEAL) (PAGE NO. 493) RS 50,000 (GROUND NO.5 ASSESSEES APPEAL) (PAGES 705 TO 729) REPAIR AND MAINTENANCE RS 40,00,000 (GROUND NO. 6 ASSESSEES APPEAL) (DETAIL AT PAGES 494 TO 563) RS 40,00,000 (GROUND NO. 6- ASSESSEES APPEAL) (PAGES 730 TO 807) RS 40,00,000 (GROUND NO. 3- DEPT APPEAL) (PAGES 976 TO 1069) RS 40,00,000 (GROUND NO. 2- DEPT APPEAL) (PAGES 1269 TO 1354) MDS REMUNERATION RS 2,00,000 (GROUND NO. 7 ASSESSEES APPEAL) (DETAIL AT PAGES 564 TO 576) RS 2,00,000 (GROUND NO. 7 ASSESSEES APPEAL) (DETAIL AT PAGES 808 TO 827) --- RS 2,50,000 (GROUND NO. 3- DEPT APPEAL) (DETAIL AT PAGES 1355 TO 1410) VEHICLE REPAIR AND MAINTENANCE RS 75,000 (GROUND NO. 8 ASSESSEES APPEAL) (DETAIL AT PAGES 577 TO 642) RS 60,000 (GROUND NO. 8 ASSESSEES APPEAL) (DETAIL AT PAGES 833 TO 911) --- --- MISC EXPENSE RS 6,00,000 (GROUND NO. 3 ASSESSEES APPEAL) (DETAIL AT PAGES 486 TO 488) RS 3,15,000 (GROUND NO. 3 ASSESSEES APPEAL) (DETAIL AT PAGES 828 TO 832) ---- ---- LEGAL EXPENSES --- --- RS 8,50,000 (GROUND NO. 4- DEPT APPEAL) RS 7,50,000 (GROUND NO. 4- DEPT APPEAL) ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 36 (DETAIL AT PAGES 1070 TO 1095) (DETAIL AT PAGES 1411 TO 1435) FACTORY, OFFICE AND MAINTENANCE RS 1,50,000 (GROUND NO. 2- DEPT APPEAL) (DETAIL AT PAGES 927 TO 971) 29. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS GIVEN ABOVE IN AY 1998-99, GROUNDS RAISED BY THE ASSESSEE IN APPEAL ARE ALLOWE D AND GROUNDS RAISED BY THE DEPARTMENT ARE DISMISSED. 30. APROPOS GROUND NO. 10 INVOLVES IN AY 1998-99 RELATING TO ADDITION OF RS. 5,15,000/- RECEIVED FROM M/S. PIONEER ENGINEERING WO RKS. THE AO HAS OBSERVED THAT THIS AMOUNT REPRESENTS BALANCE DUE FROM M/S. P IONEER ENGINEERING WORKS AS ON 01.04.1997 AND HAS BEEN RECEIVED FROM THE SAID COMP ANY. LD. COUNSEL OF THE ASSESSEE STATED THAT THIS ISSUE IS ALSO COVERED AND HAS BEEN DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE FOR A.Y. 1996-97 VIDE ITA N O. 3036/D/10 DATED 14.09.2013. FOR THE SAKE OF CONVENIENCE, THE RELEVAN T PORTION OF THE ORDER OF THE E ITAT ON THIS ISSUE IS REPRODUCED HEREUNDER:- AY 1996-97 51. WE HAVE HEARD BOTH THE SIDES. WE HAVE CONSIDERED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AFTER CONSIDERING ALL THE RELEVANT MATERIAL, WE FIND THAT THE ADDITION OF RS.20 CRORES IS PRIMARILY MADE ON THE GROUND THAT FIVE PARTIES WERE BOGUS AND THAT THE PAYMENTS BY CH EQUES HAVE BEEN MADE TO THEM BESIDE THE SALE OF RAW MATERIAL. MOST OF TH E PAYMENTS MADE TO THESE PARTIES HAVE BEEN RECEIVED BACK DURING THE YE AR, UNDER CONSIDERATION. WE FIND THAT THE TRANSACTIONS RELATI NG TO FOUR PARTIES SHOWS THERE IS A PEAK DEBIT IN THE BOOKS OF THE ASSESSEE RATHER THAN THE PEAK CREDIT. IN OUR CONSIDERED VIEW, THERE CAN BE NO ADD ITION ON ACCOUNT OF PEAK DEBIT BECAUSE IT REPRESENTS AMOUNT ADVANCED THROUGH BOOKS OF ACCOUNT TO A ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 37 PARTICULAR PARTY. HOW THE ADVANCE MADE TO THE PARTI ES THROUGH ACCOUNT PAYEE CHEQUES FROM THE BOOKS OF ACCOUNT OF THE ASSE SSE CAN BE ADDED AS INCOME OF THE ASSESSEE. THE ADDITION U/S 68 OF THE ACT DEALS WITH THE PEAK CREDIT. THE CREDIT IN THE ACCOUNTS REPRESENTS THE A DVANCE DURING THE YEAR UNDER CONSIDERATION. THE FIAT ALSO DEALT SUCH ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1993-94 WHEREIN THE ITAT HAS HELD AS UNDER: ON PERUSAL OF THE COPY OF THE ACCOUNT OF M/S SAHIB ENGINEERING WORKS IN THE BOOKS OF THE ASSESSEE AT P AGE-102, WE FIND THAT THE AO HAS ADDED TOTAL DEBIT ON ACCOUN T OF SALES UP TO 24 SEPTEMBER 1992 TOTALING TO RS. 1,48,74,249/-; THESE ARE DEBITS IN THE BOOKS OF THE ASSESSEE AND THE AO HAS NOT MADE ANY ADDITION ON ACCOUNT OF THE AMOUNTS PURPORT EDLY RECEIVED FROM HANK ACCOUNT NO.448 OF M/S. SAHIB ENGI NEERING WORKS. WHAT IS ADDED AS INCOME IS THE AMOUNT OF PEA K DEBIT BEING VALUE OF GOODS SOLD BY THE ASSESSEE TO M/S SA HIB ENGINEERING WORKS RATHER THAN THE PEAK CREDIT ADDIT ION U/S 68 IS NOT TO BE MADE IN RESPECT OF PEAK OF DEBIT ENTRI ES. THE MONEY TRAIL LEADS TO THE SAID THREE LEASING COMPANI ES M/S KOTAK MAHINDRA FINANCE LTD., SRF FINANCE LTD AND TI MES GUARANTEE FINANCE LTD AND THERE IS NO EVIDENCE TO E STABLISH THAT THE SAID MONEYS REMITTED BY M/S KOTAK MAHINDRA FINANCE LTD., SRF FINANCE LTD AND TIMES GUARANTEE FINANCE L TD WERE THE ASSESSEES FUNDS. UNDER THESE CIRCUMSTANCES, THE ADDITION OF RS. 1,48,74,249/- IS DELETED. ONCE THE ADVANCE MADE TO A PARTY AND THE SAME AMOUN T WAS RECEIVED BACK THEN THERE CANNOT BE ANY ADDITION FOR ESCAPEMENT OF INCOME. AT THE MOST, THE INTEREST MAY BE DISALLOWED IF THE ADVANCES WERE MADE FOR NON BUSINESS PURPOSES. THIS HAS NOT BEEN DONE BY THE ASSESSING O FFICER AND WE HAVE NO POWER TO DO IT. WITHOUT GOING DEEP INTO THE ACCOUNT S MERELY STATING THAT ACCOUNTS WERE BENAMI OF THE ASSESSEE IS NOT JUSTIFI ED. MOREOVER, THE ITAT IN ASSESSEES OWN CASE HAD HELD THAT FIVE PARTIES A RE GENUINE AND THE ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 38 ASSESSING OFFICER IN REMAND REPORT HAS ALREADY TREA TED THESE PARTIES AS GENUINE. THUS, ALLEGATIONS HOWSOEVER STRONG BUT THE SE CANNOT TAKE PLACE OF EVIDENCE. THE ASSESSING OFFICER HAS FAILED TO DISCH ARGE THE ONUS WITH REGARD TO ESTABLISHING THE FACT REGARDING THE BENAMI OF TH ESE SOURCES OF THE ASSESSEE. THE ASSESSING OFFICER COULD HAVE ENQUIRED REGARDING THE PERSON WHO HAS INTRODUCED THE ACCOUNTS FROM THE ACCOUNT OP ENING FORM AND THE NECESSARY ENQUIRIES COULD HAVE BEEN MADE FROM THE B ANKS BUT NOTHING OF SUCH TYPE HAS BEEN DONE BY THE ASSESSING OFFICER. M ERELY STATING THAT THE CHEQUES HAVE BEEN ISSUED TO THE PARTIES AND RECEIVE D BACK DURING THE YEAR UNDER CONSIDERATION CANNOT BE A BASIS FOR MAKING SU CH HUGE ADDITION OF RS.20 CRORES. ADDITION CAN BE MADE ONLY IF THERE IS AN ESCAPEMENT OR EVASION OF INCOME. THE ADDITION MADE FOR LEASE RENT PAID TO THESE PARTIES HAS BEEN DELETED IN VARIOUS YEARS. THE EXISTENCE OF THE ASSETS HAS BEEN ESTABLISHED. LEASE RENT PAID ON THE LEASE ASSETS HA S BEEN FOUND ALLOWABLE. IN THESE CIRCUMSTANCES, WE FIND NO FAULT IN THE ORD ER OF THE CIT (A) AND WE SUSTAIN THE SAME ON THIS ISSUE. THIS GROUND OF REVE NUES APPEAL IS DISMISSED. 31. AFTER PERUSING THE AFORESAID FINDINGS OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR, WE ARE OF THE CONSIDE RED VIEW THAT THIS ISSUE IS SQUARELY COVERED BY THE AFORESAID DECISION, THEREFO RE, RESPECTFULLY FOLLOW THE TRIBUNALS ORDERS, AS AFORESAID, WE DELETE THIS A DDITION OF RS. 5,15,000/- AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 32. GROUND OF APPEAL NOS. 11 & 12 OF AY 1998-99 AND GR OUND OF APPEAL NO. 9 OF AY 1999-2000 AND AY 2000-01 RELATING TO RECORDING OF SATISFACTION FOR INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. IN OUR CONSIDERED OPINION, THIS GROUND IS PREMATURE AND GENERAL IN NATURE, HENCE, N EED NOT BE ADJUDICATED. 33. IN THE RESULT, THE ASSESSEES APPEAL NO. 1290/DE L/2012 (AY 1998-99) IS ALLOWED FOR STATISTICAL PURPOSES; APPEAL NO. 1291/DE L/2012 (AY 1999-2000) & 1292/DEL/2012 (AY 2001-02) ARE ALLOWED AND BOTH THE REV ENUES APPEAL BEING ITA NO. 4545 & 4546/DEL/2012 (AYRS. 2001-02 & 2002-03) STAN D DISMISSED. ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 39 ASSESSEES CO NO. 100/DEL/2010 (2001-02) 34. THE GROUNDS RAISED IN THE ASSESSEES CROSS OBJ ECTION READ AS UNDER:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS), ROHTAK [BRIEF LY 'THE CIT(A)'] ERRED IN UPHOLDING DISALLOWANCE OF RS.50,O OO/- OUT OF GENERAL EXPENSES DEBITED UNDER THE HEAD MISCELLANEO US EXPENSES ALLEGEDLY FOR THE REASON THAT ELEMENT OF PERSONAL U SE CANNOT BE RULED OUT. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.4,50, OOO/- OUT OF STAFF WELFARE EXPENSES ALLEGEDLY FOR THE REASON THA T EXPENSES WERE ENTERTAINMENT IN NATURE. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF RS.20 ,OOO/- OUT OF FOREIGN TRAVEL EXPENSES BEING THE EXPENDITURE INCUR RED ON FOOD AND STAY WHILE ON FOREIGN TOUR. THAT THE APPELLANT/ CROSS OBJECTOR CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE GROUND EITHER AT OR BEFORE THE H EARING OF THE APPEAL. ASSESSEES CO NO. 101/DEL/2010 (2002-03) 35. THE GROUNDS RAISED IN THE ASSESSEES CROSS OBJ ECTION READ AS UNDER:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS), ROHTAK [BRIEF LY 'THE CIT(A)'] ERRED IN UPHOLDING DISALLOWANCE OF . RS.50 ,OOO/- OUT OF GENERAL EXPENSES DEBITED UNDER THE HEAD MISCELLA NEOUS ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 40 EXPENSES ALLEGEDLY FOR THE REASON THAT ELEMENT OF P ERSONAL USE CANNOT BE RULED OUT. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.4 ,80,OOO/-- OUT OF STAFF WELFARE EXPENSES ALLEGEDLY FOR THE REA SON THAT EXPENSES WERE ENTERTAINMENT IN NATURE. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF RS.70,OOO/- OUT OF FOREIGN TRAVEL EXPENSES BEING TH E EXPENDITURE INCURRED ON FOOD AND STAY WHILE ON-FORE IGN TOUR. 4. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DISALLOWING RS.75,652/- OUT OF GIFT AND PRESENTS. 5. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE RS.3 4,100/- OUT OF ADVERTISEMENT EXPENSES. THAT THE APPELLANT / CROSS OBJECTOR CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE GROUND EITHER AT OR BEFORE THE HEARING OF THE APPEAL. 36. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS, WE FIND THAT THE AO HAS MADE THE ADDITIONS ON THE BASIS THAT REQUISITE AND NECESSARY VOUCHERS EVIDENCING THE EXPENSES INCURRED WERE NOT PRODUCED BY THE ASSESSEE AND THEREFORE, THE LD. CIT(A) HAS UPHELD THE ADDITI ONS IN DISPUTE. IN OUR CONSIDERED OPINION, LD. CIT(A)S ACTION IN CONFIRM ING THE ADDITIONS IN DISPUTE IS JUSTIFIED AND REASONABLE, THEREFORE, WE DISMISS BO TH THE CROSS OBJECTIONS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS AY 2000-2001 AN D AY 2001-02. 37. IN THE RESULT, ASSESSEES APPEAL NO. 1290/DEL/2012 (AY 1998-99) IS ALLOWED FOR STATISTICAL PURPOSES; APPEAL NO. 1291/DE L/2012 (AY 1999-2000) & ITA NOS.1290-1292/DEL/2006 & ITA NOS. 4545-4546/DEL/2009 & CO NOS. 100-101/DEL/2010 41 1292/DEL/2012 (AY 2000-01) ARE ALLOWED AND BOTH THE REVE NUES APPEAL BEING ITA NO. 4545 & 4546/DEL/2012 (AYRS. 2001-02 & 2002-03) S TAND DISMISSED AND ASSESSEES CROSS OBJECTIONS BEING 100/DEL/2010 (AY 2001-02) AND 101/DEL/2010 (AY 2002-03) STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/07/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 18/7/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES