Panama Petrochem Ltd., Ankleshwar. V. The ACIT., Bharuch Circle, Bharuch.

ITA 1347/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0324 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-08-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 25-05-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ANIL R SHAH
• Keywords: Question of law; Set aside
• Section: 43B; 143(3); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.1347/AHD/2006 ASSESSMENT YEAR:2001-02 DATE OF HEARING:31.8.09 DRAFTED:17.9.09 PANAMA PETROCHEM LTD, PLOT NO.3303, GIDC ESTATE, ANKLESHWAR PAN NO.AABCP1856D V/S . ACIT, BHARUCH CIRCLE, BHARUCH (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI ANIL R SHAH, AR RESPONDENT BY:- SHRI MAHESH KUMAR, SR. DR. O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XIX, AHMEDABAD IN APPEAL NO. C IT(A)-XIX/CAB/VI-166/05-06 DATED 06-03-2006. THE ASSESSMENT WAS FRAMED BY THE ACIT, BHARUCH CIRCLE, BHARUCH U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 08-03-2004 FOR THE ASSESSMENT YEAR 2001-02. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION OF MODVAT CREDIT INCLUDING IN THE CLOSING STOCK BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS AMOUNTING TO RS.9,01,065/-. 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE AS WE LL AS LD. DR FAIRLY STATED THAT THIS ISSUE IS SQUARELY COVERED BY THE PROVISIONS OF SECTION 145A OF THE ACT AS INTRODUCED BY THE FINANCE ACT, 1998 WITH EFFECT FRO M 1-4-1999 AND THE CIT(A) ITA NO.1347/AHD/2006 A.Y. 2001-02 PANAMA PETROCHEM LTD. V. ACIT BHARUCH CIR. PAGE 2 FOLLOWING THE SAME HAS RIGHTLY DIRECTED ADDED IN TH E INCOME OF THE ASSESSEE OF MODVAT CREDIT BY HOLDING THAT THE ALLOWABILITY OF E XCISE DUTY NOT PAID DURING THE FINANCIAL YEAR DOES NOT ARISE. THE CIT(A) VIDE PARA-5.3 OF HIS APPELLATE ORDER HELD AS UNDER:- 5.3 THE CASE LAWS ON WHICH THE APPELLANT RELIED AR E PERTAINING TO THE CASES BEFORE THE NEW SECTION 145A WAS INSERTED. THEREFORE , THESE CASE LAWS ARE NOT HELPFUL TO THE APPELLANT. IN VIEW OF THE DECISI ON OF SUPREME COURT (SUPRA), I DO NOT AGREE WITH THE DECISION OF CIT(A) IN IMMEDIA TELY PRECEDING YEAR WHEREIN HE HAD ALLOWED MODVAT CREDIT ON THE GROUND THAT THE SAME WAS PAID BY THE APPELLANT BEFORE THE FILING OF IT RETUR N. SECTION 145A HAS BEEN INSERTED BY FINANCE ACT, 1998 W.E.F. 1/4/1999 WHICH IS REPRODUCED AS UNDER:- 145A: NOTWITHSTANDING ANYTHING TO THE CONTRARY CON TAINED IN SECTION 145, THE VALUATION OF PURCHASE AND SALE OF GOODS AN D INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE- (A) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REG ULARLY EMPLOYED BY THE ASSESSEE; AND (B) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY T AX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INCU RRED B THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOC ATION AND CONDITION AS ON THE DATE OF VALUATION. IN FACT, THIS NEW PROVISION HAS BEEN BROUGHT WITH A N INTENTION TO END THE DISPUTE OF MODVAT CREDIT. THE APPELLANT WAS REQUIRE D TO ADJUST MODVAT CREDIT FOR VALUATION OF CLOSING STOCK. HOWEVER, IT FAILED TO DO SO. THE ASSESSING OFFICER HAS CORRECTLY MADE THE ADDITION. I DO NOT U NDERSTAND HOW THE EARLIER CIT(APPEALS) HAS ALLOWED THE MODVAT CREDIT ON ACTUA L PAYMENT BASIS U/S.43B WHILE THE EXCISE DUTY WAS CRYSTALLIZED IN S UBSEQUENT YEAR. ON THE LAST DAY OF THE FINANCIAL YEAR I.E. 31/3/2001 THE EXCISE DUTY, IF ANY, REQUIRED TO BE ADJUSTED AGAINST MODVAT CREDIT HAS NOT BEEN CRYSTAL LIZED. THEREFORE, QUESTION OF ALLOWABILITY OF ANY TAX DUTY NOT PAID D URING THE FINANCIAL YEAR, DOES NOT ARISE. RELIANCE IS ALSO PLACED ON THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BERGER PAINTS (INDIA) LTD. (NO1) RE PORTED IN 254 ITR 498. I, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE ASSESSING OFFICER HAS CORRECTLY MADE ADDITION IN VIEW OF SECTION 145A OF THE INCOME TAX ACT AND ACCORDINGLY, THE SAME IS CONFIRMED. IN VIEW OF THE ABOVE FACTS, AS DISCUSSED BY CIT(A) WE FIND NO INFIRMITY IN THE SAME AND ACCORDINGLY WE CONFIRM THE ORDER OF CIT(A) ON T HIS ISSUE. HOWEVER, WE ACCEPT THE ALTERNATIVE PLEA OF THE ASSESSEE AND ACCORDINGL Y THE DIRECTIONS ARE TO THE AO THAT THE ASSESSING OFFICER WILL GIVE CONSEQUENTIAL EFFEC T BY INCREASING THE OPENING STOCK FOR ASSESSMENT YEAR 2002-03 TO THE EXTENT OF RS.9,0 1,065/-. THIS ISSUE OF THE ASSESSEES APPEAL IS DISMISSED. ITA NO.1347/AHD/2006 A.Y. 2001-02 PANAMA PETROCHEM LTD. V. ACIT BHARUCH CIR. PAGE 3 4. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) IN PARTLY CONFIRMING THE CREDIT CARD EXPENSE S AT 50%. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE FAIRLY STATED THAT IN ASSE SSEES OWN CASE IN ASSESSMENT YEAR 2000-01 IN ITA NO.1187AHD/2004 DATED 04-04-2008 HAS RESTRICTED THE DISALLOWANCE AT 1/4 TH OF THE TOTAL EXPENSES AND ACCORDINGLY HE STATED TH AT THIS ISSUE IS COVERED PARTLY IN FAVOUR OF THE ASSESSEE. THE L D. DR HAS ALSO NOT OBJECTED IN FOLLOWING THE TRIBUNALS ORDER. WE FIND THAT THE T RIBUNAL HAS DISCUSSED THIS ISSUE IN PARA-8 AS UNDER:- 8. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIO NS AND GOING THROUGH THE RECORDS AS WELL AS THE ORDER OF THE TAX AUTHORITIES AS WELL AS CASE LAW RELIED ON BY THE ASSESSEE, WE ARE OF THE OPINION THAT NO INTE RFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A) SO FAR AS THIS DISALLOWANCE IS CONCERNED. THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS. FOR THAT PURPOSE THE ASSESSEE HAS TO S UBMIT THE NECESSARY EVIDENCES AND RECORD. THIS IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT FILED ANY COMPLETE DETAILS SO FAR THESE EXPENSES ARE CONC ERNED ABOUT THE PERSONS CONCERNED ON WHOM THE EXPENSES HAVE BEEN INCURRED A ND THE PURPOSE OF WHICH THESE EXPENSES HAVE BEEN INCURRED ON THESE PE RSONS. IN THE ABSENCE OF ANY SUCH DETAILS AND EVIDENCES, IN OUR OPINION, THE ASSESSEE HAS NOT DISCHARGED HIS ONUS AND THEREFORE THE TAX AUTHORITI ES WERE MUCH MORE THAN REASONABLE AND JUSTIFIED IN RESTRICTING THE DISALLO WANCE ONLY TO THE EXTENT OF 1/4 TH OF THE TOTAL EXPENSES. WE ACCORDINGLY CONFIRM THE DISALLOWANCE. THUS, THIS GROUND STANDS DISMISSED. WE FIND THAT THIS ISSUE IS COVERED PARTLY IN FAVOUR OF THE ASSESSEE, IN ASSESSEES OWN CASE IN EARLIER YEAR, RESPECTFULLY FOLLOWING THE TR IBUNALS DECISION, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE AT 1/4 TH . ACCORDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. 5. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF ESI, PF U/S.43B OF T HE ACT. 6. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS OF THE CASE WE FIND THAT THE DATES IN RESPECT OF ESI AND PF ARE NO T AVAILABLE ON THE RECORDS OF THE LOWER AUTHORITIES AND ACCORDINGLY THE SAME IS SET A SIDE TO THE FILE OF THE AO, TO DECIDE AFTER CONSIDERING THE ITAT AHMEDABAD A BEN CH DECISION IN THE CASE OF ITO V. SAKET PROJECT LTD. IN APPEAL NO.1990-1991/AHD/2006 DATED 30-06-2009, WHEREIN THE TRIBUNAL HAS HELD AS UNDER:- ITA NO.1347/AHD/2006 A.Y. 2001-02 PANAMA PETROCHEM LTD. V. ACIT BHARUCH CIR. PAGE 4 5. AFTER HEARING THE LD. DR AND GOING THROUGH THE C ASE RECORDS, WE FIND THAT PF LIABILITY FOR EARLIER YEAR WAS PAID IN VIEW OF THE ORDER OF THE PF AUTHORITIES VIDE DATED 26-08-2001. SINCE THE LIABILITY HAS BEEN DETERMIN ED BY THE PF AUTHORITIES IN THE RELEVANT YEAR AND THE COM PANY HAS PAID THE SAID AMOUNT IN PURSUANCE OF THE ORDER OF THE PF AUTHORIT IES, THE SAME IS ALLOWABLE U/S.43B OF THE ACT. EVEN OTHERWISE, THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISIO N OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. P.M. ELECTRONICS LTD. ( 2008) 220 CTR 635 (DEL), WHEREIN THE HON'BLE DELHI HIGH COURT HAS DISCUSSED IN PARA-4 AS UNDER:- 4. ON 27 TH NOV., 1998 THE ASSESSEE HAD FILED A RETURN OF INCO ME DECLARING A LOSS OF RS.8,92,888. ON 11 TH MAY, 1999 THE RETURN WAS PROCESSED UNDER S. 143(1)(A) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. ACCORDINGLY, A NOTICE DT. 27 TH SEPT., 1999 UNDER S. 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE NOTICE A ND ON EXAMINATION OF THE DETAILS SUBMITTED BY THE ASSESSEE WITH RESPECT TO P ROVIDENT FUND PAYMENTS MADE BOTH ON ACCOUNT OF EMPLOYERS AND EMPLOYEES S HARE REVEALED THAT PAYMENTS IN THE SUM OF RS.17,94,042 WERE LATE AS PE R THE PROVISIONS OF S. 36(1)(VA) R.W S. 2(24)(X) AND S. 43B. CONSEQUENTLY , THE AO DISALLOWED THE DEDUCTION AND ADDED A SUM OF RS.17,94,042 TOWARDS E PF CONTRIBUTION. AND SUBSEQUENTLY DECIDE THIS ISSUE IN PARA-10 TO 14 OF HON'BLE DELHI HIGH COURT, WHICH READ AS UNDER:- 10. IN VIEW OF THE ABOVE, IT IS QUITE EVIDENT THAT THE SPECIAL LEAVE PETITION WAS DISMISSED BY A SPEAKING ORDER AND WHILE DOING SO TH E SUPREME COURT HAD NOTICED THE FACT THAT THE MATTER IN APPEAL BEFORE I T PERTAINS TO A PERIOD PRIOR TO THE AMENDMENT BROUGHT ABOUT IN S. 43B OF THE ACT. T HE AFORESAID POSITION AS REGARDS THE STATE OF THE LAW FOR A PERIOD PRIOR TO THE AMENDMENT TO S. 43B HAS BEEN NOTICED BY A DIVISION BENCH OF THIS COURT IN D HARMENDRA SHARMA (SUPRA). APPLYING THE RATIO OF THE DECISION OF THE SUPREME COURT IN VINAY CEMENT (SUPRA) A DIVISION BENCH OF THIS COURT DISMI SSED THE APPEALS OF THE REVENUE. IN THE PASSING WE MAY ALSO NOTE THAT A DIV ISION BENCH OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. NEXUS COMP UTER (P) LTD. BY A JUDGMENT DT. 19 TH AUG., 2008, PASSED IN TAX CASE (APPEAL) NO.1192/20 08 [REPORTED AT (2008) 219 CTR (MAD.) 54 ED.] DISCUS SED THE IMPACT OF BOTH THE DISMISSAL OF THE SPECIAL LEAVE PETITION IN THE CASE OF GEORGE WILLIAMSON (ASSAM) LTD. (SUPRA) AND VINAY CEMENT (SUPRA) AS WE LL AS A CONTRARY VIEW OF THE DIVISION BENCH OF ITS OWN COURT IN SYNERGY FIN ANCIAL EXCHANGE (SUPRA). THE DIVISION BENCH OF THE MADRAS HIGH COURT HAS EXP LAINED THE EFFECT OF THE DISMISSAL OF A SPECIAL LEAVE PETITION BY A SPEAKING ORDER BY RELYING UPON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF KUNHA YAMMED & ORS.VS. STATE OF KERALA & ANR. (2000) 162 CTR (SC) 97: 119 STC 505 AT P. 526 IN PARA 40 AND NOTED THE FOLLOWING OBSERVATIONS : IF THE ORDER REFUSING LEAVE TO APPEAL IS A SPEAKIN G ORDER, I.E., GIVES REASONS FOR REFUSING THE GRANT OF LEAVE, THEN THE O RDER HAS TWO IMPLICATIONS. FIRSTLY, THE STATEMENT OF LAW CONTAIN ED IN THE ORDER IS A DECLARATION OF LAW BY THE SUPREME COURT WITHIN THE MEANING OF ART. 141 OF THE CONSTITUTION. SECONDLY, OTHER THAN THE DECLA RATION OF LAW, ITA NO.1347/AHD/2006 A.Y. 2001-02 PANAMA PETROCHEM LTD. V. ACIT BHARUCH CIR. PAGE 5 WHATEVER IS STATED IN THE ORDER ARE THE FINDINGS RE CORDED BY THE SUPREME COURT WHICH WOULD BIND THE PARTIES THERETO AND ALSO THE COURT. TRIBUNAL OR AUTHORITY IN ANY PROCEEDINGS SUB SEQUENT THERETO BY WAY OF JUDICIAL DISCIPLINE, THE SUPREME COURT BEING THE APEX COURT OF THE COUNTRY. BUT, THIS DOES NOT AMOUNT TO SAYING TH AT THE ORDER OF THE COURT. TRIBUNAL OR AUTHORITY BELOW HAS STOOD MERGED IN THE ORDER OF THE SUPREME COURT REJECTING SPECIAL LEAVE PETITION OR T HAT THE ORDER OF THE SUPREME COURT IS THE ONLY ORDER BINDING AS RES JUDI CATA IN SUBSEQUENT PROCEEDINGS BETWEEN THE PARTIES. 11. UPON NOTING THE OBSERVATIONS OF THE SUPREME COU RT IN KUNHAYAMMED & ORS. (SUPRA) THE DIVISION BENCH OF THE MADRAS HIGH COURT IN THE CASE OF NEXUS COMPUTER (P) LTD. (SUPRA) CAME TO THE CONCLUS ION THAT THE VIEW TAKEN BY THE SUPREME COURT IN VINAY CEMENT (SUPRA) WOUL D BIND THE HIGH COURT AS IT WAS LAW DECLARED BY THE SUPREME COURT UNDER ART. 141 OF THE CONSTITUTION. 12. WE ARE IN RESPECTFUL AGREEMENT WITH THE REASONI NG OF THE MADRAS HIGH COURT IN NEXUS COMPUTER (P) LTD. (SUPRA). JUDICIAL DISCIPLINE REQUIRES US TO FOLLOW THE VIEW OF THE SUPREME COURT IN VINAY CEMEN T (SUPRA) AS ALSO THE VIEW OF THE DIVISION BENCH OF THIS COURT IN I DHARM ENDRA SHARMA (SUPRA). 13. IN THESE CIRCUMSTANCES, WE RESPECTFULLY DISAGRE E WITH THE APPROACH ADOPTED BY A DIVISION BENCH OF THE BOMBAY HIGH COUR T IN PAMWI TISSUES LTD. (SUPRA). 14. IN THESE CIRCUMSTANCES INDICATED ABOVE, WE ARE OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDER ATION IN THE PRESENT APPEAL. THE APPEAL IS, THUS, DISMISSED. 6. WE FIND THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF P.M. ELECTRONICS LTD. (SUPRA) HAS DECIDED THIS ISSUE OF PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AFTER CONSIDERI NG THE DECISION OF HON'BLE APEX COURT IN THE CASE OF VINAY CEMENT (SUPRA) AND ALSO DISTINGUISHED THE CASE LAW REFERRED BY THE LD. DR OF BOMBAY HIGH COUR T IN PAMWI TISSUES LTD. (SUPRA). ACCORDINGLY, FOLLOWING DELHI HIGH COURT I N P.M. ELECTRONICS LTD. (SUPRA), WE ALLOW THE CLAIM OF THE ASSESSEE. ACCOR DINGLY THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 7. COMING TO SECOND ISSUE IN THIS APPEAL OF THE ASS ESSEE, WHICH IS AS REGARDS TO EMPLOYEES STATE INSURANCE AMOUNTING TO R S.15,797/-. WE FIND THAT THE LOWER AUTHORITIES HAVE RECORDED A FINDING THAT THE PAYMENT OF RS.15,797/- RELATING TO EMPLOYEES CONTRIBUTION OF E SI IS MADE AFTER DUE DATE SPECIFIED IN EXPLANATION TO SECTION 36(1)(VA) OF TH E ACT AND ACCORDINGLY THE SAME WAS DISALLOWED. BUT BOTH THE AUTHORITIES BELO W HAVE RECORDED A FINDING THAT THIS WAS PAID BEFORE THE DUE DATE OF FILING OF RETURN BY THE ASSESSEE. IT IS SEEN THAT THIS ISSUE IS ALSO COVERED BY THE DECISIO N OF HONBLE DELHI HIGH COURT IN THE CASE OF P.M. ELECTRONICS LTD. (SUPRA). RESPECTFULLY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT, WE ALLOW BOTH THE CLAIM OF THE ASSESSEE. ITA NO.1347/AHD/2006 A.Y. 2001-02 PANAMA PETROCHEM LTD. V. ACIT BHARUCH CIR. PAGE 6 7. IN VIEW OF THE ABOVE, WE DIRECT THE ASSESSING OF FICER TO DECIDE IN TERMS OF THIS TRIBUNALS ORDER IN THE CASE OF SAKET PROJECT LTD. (SUPRA). THIS ISSUE OF THE ASSESSEES APPEAL IS SET ASIDE TO THE FILE OF THE A O AND ALLOWED FOR STATISTICAL PURPOSES. 8. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF EXCESSIVE PAYMENT U/S.40A(2) (B) OF THE ACT AMOUNTING TO RS.2.75 LAKHS. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CIT(A) AND THE AO HAVE DISCUSSED THE FACTS THAT THE ASSESSEE HAS MADE FIRST TIME PAYMENT FOR FACTORY RENT OF RS.7,50,000/- AND RS.6,00,000/- FOR TRANSPORTATION CHARGES. HE FA ILED TO ESTABLISH THE REASONABLENESS OF THE PAYMENTS MADE TO THE ASSOCIAT E CONCERNS. ACCORDING TO THE LOWER AUTHORITIES, THE COPY OF AGREEMENT ENTERED IN TO BETWEEN THE COMPANY AND THE ASSOCIATE CONCERNS SUBMITTED WAS MERELY SELF SERVIN G EVIDENCE AND NOTHING ELSE. IN VIEW OF THESE FACTS, THE AO DISALLOWED 20% OF SUCH EXPENSES U/S.40A(2)(B) TREATING IT AS EXCESSIVE AND UNREASONABLE AND CIT(A) CONFIRM ED THE ADDITION BY GIVING FOLLOWING FINDINGS IN PARA-11.3 OF HIS APPELLATE ORDER:- 11.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE APPELLANT. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. IT IS A FACT THA T THE APPELLANT HAS MADE PAYMENT TO ASSOCIATE CONCERNS WHICH ARE COVERED U/S .40A(20(B) OF THE INCOME TAX ACT. EXCEPT FURNISHING THE COPIES OF AGR EEMENT, NO OTHER DOCUMENT OR EVIDENCE WAS PRODUCED BEFORE THE ASSESS ING OFFICER. AS PER THE ASSESSING OFFICER, THE ASSESSEE FAILED TO PROVE THE REASONABLENESS OF THE PAYMENTS AND SERVICES OBTAINED FOR SUCH PAYMENT. BE FORE ME, THE AUTHORIZED REPRESENTATIVE HAS PUT UP THE SAME FACTS, WHICH WER E EXPLAINED TO THE ASSESSING OFFICER. WITHOUT ESTABLISHING THE REASONA BLENESS OF THE PAYMENTS, I AM UNABLE TO AGREE WITH THE SUBMISSIONS GIVEN BY TH E AUTHORIZED REPRESENTATIVE. THE APPELLANT HAS NOT DISPUTED THAT THE PAYMENTS WERE MADE FIRST TIME TO THE ASSOCIATE CONCERNS AND THE SAME I S COVERED BY THE PROVISION OF SECTION 40A(2(B) OF THE INCOME TAX ACT. IN VIEW OF THE FACTS NARRATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, I DECLIN E TO INTERFERE WITH THE ACTION OF THE ASSESSING OFFICER AND ACCORDINGLY, DI SALLOWANCES MADE BY THE ASSESSING OFFICER ARE FOUND REASONABLE AND ARE CONF IRMED. WE FIND THAT THE ASSESSEE BEFORE THE LOWER AUTHORIT IES AND EVEN NOW BEFORE US FAILED TO EXPLAIN THE REASONABLENESS OF THE PAYMENTS VIS- -VIS SERVICES OBTAINED FOR SUCH ITA NO.1347/AHD/2006 A.Y. 2001-02 PANAMA PETROCHEM LTD. V. ACIT BHARUCH CIR. PAGE 7 PAYMENTS. THE ASSESSEE IS UNABLE TO SUBMIT ANY EVI DENCE THAT THE PAYMENT MADE IS REASONABLE IN TERMS OF PROVISIONS OF SECTION 40A (2)(B) OF THE ACT AND IN COMMENSURATE WITH THE BUSINESS EXPEDIENCY. IN VIEW OF THE ABOVE FACTS, WE CANNOT INTERFERE IN THE FINDINGS OF CIT(A) AND THIS ISSUE OF THE ASSESSEES APPEAL IS DISMISSED. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 09/10/2009 SD/- SD/- (D.C.AGRAWAL) (MAHAV IR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED :09/10/2009 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XIX, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD