M/S Lok Prakashan Ltd, Ahmedabad V. The Jtcit (Asstt) Sr-9, Ahmedabad

ITA 1394/AHD/2001

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0343 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-08-2009
• Assessment Year: misc
• Appeal Filed On: 20-06-2001
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLY JINDAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained expenditure; Business income; Capital receipt; Onus to prove; Capital expenditure; Set aside
• Section: 69C; 143(3); 41(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND A.N. PAHUJA, ACCOUNTANT MEMBER) ITA NO.1394/AHD/2001 [ASSTT.YEAR : 1987-88] THE LOK PRAKASHAN LTD. GUJARAT SAMACHAR BHAVAN KHANPUR, AHMEDABAD-1. VS. JCIT (ASSTT) SR-9, AHMEDABAD. ASSESSEE BY : SHRI S.N.SOPARKAR REVENUE BY : SHRI SHELLY JINDAL O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THIS APPEAL BY THE ASSESSEE PERTAINS THE ASSESSMENT YEAR 1987-88 AND ARISES OUT OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER ON 31-3-1997 UNDER SECTION 143(3) READ WITH SECTION 254 OF THE INCOME TAX ACT. THE ONLY EFFEC TIVE GROUND PROJECTED IN THE MEMORANDUM OF APPEAL IS THAT THE DEPARTMENTAL AUTHO RITIES ARE NOT JUSTIFIED IN MAKING AN ADDITION OF RS.42,83,376/- TO THE INCOME OF THE ASSESSEE UNDER SECTION 69C OF THE ACT. 2. THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF PUBLISHING THE GUJARATI NEWSPAPER GUJARAT SAMACHAR . IN THE ASSESSMENT ORIGINALLY MADE ON 28-3-1989 AN ADDITION OF RS.1,19 ,74,142/- HAD BEEN MADE AS INSURANCE CLAIM RECEIVED BY THE ASSESSEE. THE A DDITION WAS MADE UNDER SECTION 41(2) OF THE ACT. ON APPEAL THE CIT(A) DEL ETED THE ADDITION BY ORDER DATED 26-3-1990 AGAINST WHICH THE DEPARTMENT FILED AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL RESTORED THE MATTER TO THE AO VIDE ITS ORDER DATED 15-3- 1995 WITH THE FOLLOWING OBSERVATIONS: ON DUE CONSIDERATION OF SUBMISSIONS FROM BOTH SID ES AND MATERIALS AVAILABLE IN THE APPEAL RECORD, WE FIND IT JUST AND PROPER THAT MATTER SHOULD BE RECONSIDERED IN THE LIGHT OF THOSE ORIGIN AL DOCUMENTS ON THE BASIS OF WHICH THE ASSESSEE HAD LODGED ITS CLAIM BE FORE THE INSURANCE PAGE - 2 ITA NO.1394/AHD/2001 -2- COMPANY. IN FACT THE LEARNED COUNSEL ALSO AGREED T O THE EFFECT THAT TO MEET THE ENDS OF JUSTICE, THE MATTER SHOULD BE SENT BACK FOR RECONSIDERATION. SO REGARDING BEING HEARD TO THE E NTIRE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER O F CIT(A) ON THIS POINT ON THIS POINT AND REMAND BACK THE MATTER TO THE FIL E OF THE AO TO DO THE NEEDFUL AFTER GIVING REASONABLE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. IN THE FRESH ASSESSMENT PROCEEDINGS TO GIVE EFFECT TO THE ORDER OF THE TRIBUNAL, THE AO EXAMINED THE MATTER IN THE LIGHT OF THE DIRE CTIONS OF THE TRIBUNAL AND FINALLY MADE AN ADDITION OF RS.42,83,376/- BY INVOK ING SECTION 69C AS AMOUNT REQUIRED OUT OF INSURANCE CLAIM, FOR REPAIR OF DAMA GED MACHINERY OVER AND ABOVE ASSETS REFLECTED IN THE BOOKS. THE ADDITION HAVING BEEN CONFIRMED BY THE CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFOR E THE TRIBUNAL. 3. THE MAIN CONTENTION OF THE LEARNED COUNSEL FOR T HE ASSESSEE IS THAT THE AO HAS MERELY MADE AN ESTIMATE OF THE EXPENSES WHIC H ACCORDING TO HIM WERE ACTUALLY REQUIRED TO BE INCURRED BY THE ASSESSEE AN D DEDUCTING THE EXPENDITURE RECORDED IN THE BOOKS OF ACCOUNTS FROM THE ESTIMATE D FIGURE, HAS TREATED THE EXCESS AS UNRECORDED EXPENDITURE UNDER SECTION 69C. IT IS URGED THAT NO ADDITION CAN BE MADE ON THE ABOVE BASIS AND IT WAS INCUMBENT UPON THE AO TO FIRST ESTABLISH THE ACTUAL INCURRING OF THE EXPENDI TURE BEFORE INVOKING SECTION 69C AND MAKING AN ADDITION UNDER THAT SECTION. IT IS ARGUED THAT THE SECTION DOES NOT PERMIT ANY PRESUMPTION TO BE MADE BY THE A O AS TO THE QUANTUM OF THE EXPENDITURE. IT IS FURTHER ARGUED BY THE LEARN ED COUNSEL FOR THE ASSESSEE THAT THE CIT(A) HAS PLACED THE BURDEN WRONGLY ON THE ASS ESSEE BY IGNORING THE PRINCIPLE THAT THE APPARENT MUST BE TAKEN TO BE THE REAL AND IT IS FOR THE PERSON ALLEGING TO SHOW THAT THE APPARENT IS NOT THE REAL AND IN THE PRESENT CASE IT WAS FOR THE AO TO SHOW THAT THE ASSESSEE HAD ACTUALLY I NCURRED MORE EXPENDITURE ON THE REPAIRS OF THE MACHINERY THAN WHAT WAS RECORDED IN THE BOOKS OF ACCOUNT. RELIANCE WAS PLACED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF DAULATRAM RAWATMULL (87 ITR 349) IN WHICH THE ABOVE PRINCIPLE WAS APPLIED TO THE INCOME TAX MATTERS. IT WAS ALTERNATIVELY CO NTENDED THAT EVEN IF THE PAGE - 3 ITA NO.1394/AHD/2001 -3- ADDITION IS TO BE SUSTAINED, THE SAME SHOULD BE ALL OWED AS A DEDUCTION SINCE IT REPRESENTED EXPENDITURE INCURRED BY THE ASSESSEE IN THE COURSE OF THE BUSINESS. IT WAS IN THIS CONNECTION POINTED OUT THAT THE PROV ISO TO SECTION 69C INSERTED BY THE FINANCE NO.2 ACT, 1998 W.E.F. 1-4-1999 AND WHIC H PROHIBITED THE ALLOWANCE OF THE EXPENDITURE AS A DEDUCTION IN COMP UTING THE ASSESSEES INCOME WAS NOT RETROSPECTIVE IN NATURE AS HELD BY T HE HONBLE GUJARAT HIGH COURT IN KRISHNA TEXTILES VS. CIT, 310 ITR 227. 4. IN THE COURSE OF THE SUBMISSION, THE LEARNED COU NSEL FOR THE ASSESSEE DREW OUR ATTENTION TO SEVERAL PAGES IN THE PAPER BO OK WHICH WE SHALL REFER TO AT THE APPROPRIATE PLACE, AND ALSO TO ANNEXURES-A & B TO THE ASSESSMENT ORDER. 5. ON THE OTHER HAND, THE LEARNED CIT-DR SUBMITTED THAT THE AO HAS NOT RESORTED TO ANY PRESUMPTION OR ASSUMPTION WHILE INV OKING SECTION 69C. HE POINTED OUT THAT THE QUANTUM OF THE PAYMENT MADE BY THE INSURANCE COMPANY WAS A GOOD INDICATION OF THE EXPENDITURE REQUIRED T O BE INCURRED BEFORE THE ASSET WAS RESTORED TO ITS ORIGINAL CONDITION AND IT WAS OPEN TO THE AO TO RELY ON THIS FACT IN FORMING AN OPINION AS TO HOW MUCH IS R EQUIRED TO BE EXPENDED BY THE ASSESSEE. IF ON COMPARISON WITH THE AMOUNT A CTUALLY RECORDED AS EXPENDITURE IN THE BOOKS OF ACCOUNT, IT APPEARS TO THE AO THAT THE RECORDED EXPENDITURE WAS UNREASONABLY LOW, IT WAS OPEN TO HI M TO DRAW A REASONABLE INFERENCE THAT THE ASSESSEE MUST HAVE INCURRED A HI GHER EXPENDITURE AND IT WAS EQUALLY OPEN TO HIM TO INVOKE SECTION 69C ON THAT B ASIS. THE LEARNED CIT-DR ALSO POINTED OUT THAT THE ASSESSEE DID NOT LEAD ANY EVIDENCE TO PROVE THE MAGNITUDE OF THE EXPENDITURE AND IN THE ABSENCE OF ANY DATA ADDUCED FROM THE SIDE OF THE ASSESSEE, THE SURVEYORS REPORT WAS THE BEST EVIDENCE AVAILABLE TO THE AO ON THE BASIS OF WHICH AN ADDITION UNDER SECTION 69C COULD BE MADE. IN THIS CONNECTION, HE POINTED OUT THAT THE INSURANCE COMPANY DID NOT ALSO COOPERATE WITH THE REVENUE AUTHORITIES AND THEREFOR E THE AO HAD NO ALTERNATIVE EXCEPT TO PROCEED ON THE BASIS OF THE SURVEYORS RE PORT. HE DREW OUR ATTENTION PAGE - 4 ITA NO.1394/AHD/2001 -4- TO THE OBSERVATIONS OF THE AO AT PAGE 5 OF THE ASSE SSMENT ORDER IN THIS CONNECTION, WHERE THERE IS A REFERENCE TO THE NON-C OOPERATIVE ATTITUDE OF THE INSURANCE COMPANY. HE ACCORDINGLY STRONGLY URGED T HAT THE ADDITION WAS RIGHTLY MADE UNDER SECTION 69C. 6. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE R IVAL CONTENTIONS. THE TRIBUNAL IN THE ORIGINAL ROUND OF THE PROCEEDINGS H AD DIRECTED THE AO TO EXAMINE THE MATTER IN THE LIGHT OF THE DOCUMENTS ON THE BASIS OF WHICH THE ASSESSEE HAD LODGED ITS CLAIM BEFORE THE INSURANCE COMPANY. THE ASSESSEE SEEMS TO HAVE SUFFERED DAMAGE TO ITS PLANT AND MACH INERY, FURNITURE, BUILDING AND NEWSPRINT BY A FIRE IN ITS PREMISES DURING THE RIOTS WHICH TOOK PLACE ON 22- 4-1985 IN AHMEDABAD CITY. THE INSURANCE COMPANY GR ANTED A COMPENSATION OF RS.1,57,85,901/- DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL AND ANOTHER SUM OF RS.1,25,34,296/- IN THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1988-89. THE AMOUNTS WERE CREDITED TO THE PROFIT AND LOSS ACCOUNT IN SO FAR AS THEY RELATED TO THE DAMAGE TO THE NEWSPRINT AND FURNITURE AND THE BALANCE WAS CREDITED TO THE CAPITAL RESERVE ACCOUNT IN THE BALANCE SHEET AS IT RELATED TO THE BUILDING, PLANT AND MACHINERY ETC. IN MAKING THE FRESH ASSESSMENT, THE AO CALLED UPON THE ASSESSEE TO FURN ISH THE COPIES OF THE ORIGINAL DOCUMENTS, ON THE BASIS OF WHICH CLAIMS WE RE LODGED WITH THE INSURANCE COMPANY. THE ASSESSEE WAS HOWEVER ABLE TO PRODUCE ONLY TWO CERTIFICATES, ONE FROM THE SURVEYOR AND THE OTHER F ROM THE INSURANCE COMPANY. THE ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE ANY OTHER DOCUMENT ON THE GROUND THAT A SUBSEQUENT FIRE IN 1989 IN THE PREMIS ES OF THE ASSESSEE COMPANY DESTROYED THE RELEVANT FILE. IT WAS HOWEVER SUBMI TTED THAT THE DAMAGED MACHINERY WERE GOT REPAIRED AND THE REPAIR EXPENSES WERE DEBITED TO THE CAPITAL RESERVE ACCOUNT AND WERE NOT CLAIMED AS DEDUCTION S EPARATELY. THE AO, APPLYING THE JUDGMENT OF THE SUPREME COURT IN THE C ASE OF CIT VS. SIRPUR PAPER MILLS LTD. 112 ITR 776 WHICH WAS CITED BY THE ASSESSEE BEFORE HIM, HELD THAT WHERE THE COMPENSATION WAS RECEIVED IN RESPECT OF MACHINERY WHICH WAS PAGE - 5 ITA NO.1394/AHD/2001 -5- NOT FULLY DESTROYED BUT ONLY DAMAGED, THE NET SURPL US REMAINING AFTER MEETING THE REPAIR EXPENSES REPRESENTED CAPITAL RECEIPT. H AVING AGREED IN PRINCIPLE WITH THE CONTENTION OF THE ASSESSEE, THE AO HOWEVER OBSE RVED THAT IN ABSENCE OF THE RELEVANT DOCUMENTS FROM THE INSURANCE COMPANY RELAT ING TO THE LODGING OF THE CLAIM AND THE GRANT OF THE COMPENSATION, THE BEST E VIDENCE WOULD BE THE SURVEY REPORTS OF M/S.MEHTA & PADAMSEY PVT. LTD. WHO WERE APPOINTED BY THE INSURANCE COMPANY AND WHO HAD SUBMITTED THE REPORT AFTER ON THE SPOT INSPECTION FOR ASSESSING THE DAMAGE SUFFERED BY THE ASSESSEE. AFTER EXAMINING THE REPORT IN SOME DETAIL THE AO HELD THAT IT IS TH E RULE FOLLOWED BY THE INSURANCE COMPANY THAT THE INSURANCE CLAIM DOES NOT BECOME A SOURCE OF ENRICHMENT TO THE INSURED AND THEREFORE IT WAS NORM ALLY REASONABLE TO ACCEPT THAT ALMOST THE ENTIRE CLAIM RECEIVED BY THE ASSESS EE WOULD BE SPENT ON THE REPAIRS TO THE MACHINERY. EVEN IF A SURPLUS REMAIN S, IT WOULD BE VERY SMALL. HE THEREAFTER NOTICED THAT IN THE ACCOUNTS OF THE A SSESSEE FOR THE YEARS ENDED 31-3-1987 AND 31-3-1988 THE ASSESSEE HAD DEBITED RE PAIR EXPENSES OF RS.23,18,277/- AND RS.11,45,181/- AND THAT SUCH EXP ENSES WERE DEBITED DIRECTLY TO THE CAPITAL RESERVE ACCOUNT. HE FURTHER FOUND T HAT OUT OF THE ABOVE, A SUM OF RS.23,98,434/- WAS INCURRED IN RESPECT OF HARRIS N- 800 MACHINE WHICH LEFT A BALANCE OF ONLY RS.10.65 LAKHS AS REPAIR EXPENDITUR E FOR ALL THE OTHER MACHINES. THE AO ALSO REFERRED TO THE FACT THAT THE ASSESSEE COULD NOT ADDUCE ANY EVIDENCE SUCH AS THE PERSON WHO CARRIED OUT THE REP AIRS, BILLS ISSUED BY HIM, DETAILS SPECIFYING THE NATURE OF THE DAMAGE ETC. A S ALSO THE ABSENCE OF ANY EVIDENCE WITH THE ASSESSEE TO PROVE THAT THE AMOUNT OF REPAIR EXPENSES SHOWN IN THE BOOKS WAS SUFFICIENT TO REPAIR THE MACHINERY AND BRING THEM BACK TO WORKING CONDITION. 7. HAVING THUS FORMED AN OPINION THAT THE REPAIR EX PENSES DEBITED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT WERE PRIMA FACIE N OT SUFFICIENT TO REPAIR THE MACHINERY AND BRING THEM BACK TO WORKING CONDITION, THE AO CALLED UPON THE ASSESSEE TO SHOW CAUSE WHY THE ACTUAL REPAIR EXPENS ES INCURRED IN RESPECT OF PAGE - 6 ITA NO.1394/AHD/2001 -6- THE DAMAGED MACHINERY, OTHER THAN HARRIS N-800, SH OULD NOT BE ESTIMATED ON A REASONABLE BASIS TAKING INTO ACCOUNT THE SURVEYOR S REPORT. IT IS THEREFORE PROPOSED THAT THE REPAIR EXPENSES SO ESTIMATED (AFT ER ADJUSTMENT OF SUCH EXPENSES REFLECTED IN YOUR BOOKS) WOULD BE REDUCED FROM THE INSURANCE CLAIM RECEIVED AND ONLY THE BALANCE CLAIM SHALL BE TREATE D AS THE CAPITAL EXPENDITURE IN VIEW OF THE SUPREME COURT DECISION. THE ASSES SEE RESPONDED AND REITERATED ITS EARLIER SUBMISSIONS AND ALSO POINTED OUT THAT THE MACHINERY WHICH WAS GOT REPAIRED WAS STILL BEING USED IN THE ASSESS EES BUSINESS. 8. THE AO, ON CONSIDERATION OF THE ASSESSEES REPLY , OBSERVED THAT THE BURDEN TO PROVE THAT THE REPAIR EXPENSES REFLECTED IN THE BOOKS OF ACCOUNTS WERE SUFFICIENT TO CARRY OUT REPAIRS WAS UPON THE ASSESS EE AND SUCH BURDEN HAS NOT BEEN DISCHARGED. HE NOTED THAT THE SURVEYORS REPO RT ON WHICH HE WAS PLACING RELIANCE HAD BEEN PREPARED BY AN INDEPENDENT THIRD PARTY AND FORMED THE BASIS ON WHICH THE COMPENSATION WAS GRANTED BY THE INSURA NCE COMPANY AND THEREFORE HAD STRONG EVIDENTIARY VALUE WHILE TESTIN G THE REASONABLENESS OR THE CORRECTNESS OF THE EXPENSES DEBITED IN THE ASSESSEE S BOOKS. HE ALSO OBSERVED THAT IF ON THE BASIS OF SUCH EVIDENCE IT IS CONSIDE RED THAT THE EXPENSES DEBITED WERE NOT SUFFICIENT, A REASONABLE ESTIMATE HAS TO B E MADE. HE ACCORDINGLY MADE THE FOLLOWING ESTIMATES IN RESPECT OF THE REPA IRS TO THE MACHINERY: I) V-25 HARRIS OFFSET MACHINE RS.35,00,000/- II) LINOTRON 202 PHOTOSETTER RS. 5,00,000/- III) PLAMAG ROTARY PRINTING MACHINE RS. 7,00,000/- IV) OTHER MACHINES INCLUDING ELECTRICAL INSTALLATION RS. 5,28,000/- V) BUILDINGS RS. 1,20,400/- TOTAL RS.53,48,400/- FROM THE ABOVE FIGURE, THE EXPENSES OF RS.10,65,024 /- DEBITED IN THE BOOKS AND NOT CLAIMED AS DEDUCTION, HAVING BEEN DEBITED TO TH E CAPITAL RESERVE ACCOUNT, PAGE - 7 ITA NO.1394/AHD/2001 -7- WAS DEDUCTED AND THE BALANCE OF RS.42,83,376/- WAS TREATED AS EXPENDITURE ESTIMATED TO HAVE BEEN INCURRED BY THE ASSESSEE TOW ARDS REPAIRS, WHICH WAS TO BE ADDED UNDER SECTION 69C OF THE ACT. THE ADDITIO N WAS ACCORDINGLY MADE. 9. IT MAY BE NOTICED THAT THE BASIS OF THE ADDITION IS THE ESTIMATED AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE ON REPAIRS OF THE MACHINERY WHICH WAS NOT DEBITED TO THE BOOKS OF ACCOUNT OF THE ASSESSEE . THE QUESTION IS WHETHER SECTION 69C CAN BE INVOKED IN THESE CIRCUMSTANCES. THE SECTION REQUIRES IT AS A CONDITION FOR THE ADDITION THAT THE ASSESSEE HAS I NCURRED ANY EXPENDITURE WHICH EXPRESSION CAN ONLY REFER TO THE ACTUAL EXPEN DITURE FOUND TO HAVE BEEN INCURRED BY THE ASSESSEE. IT EXCLUDES ANY ESTIMATE D AMOUNT OF EXPENDITURE WHICH THE ASSESSEE IS SUPPOSED TO HAVE INCURRED AND NOT DEBITED IN THE BOOKS OF ACCOUNT, HOWEVER REASONABLE THE ESTIMATE MAY BE. IT IS TRUE THAT IN THE PRESENT CASE THE ASSESSEE WAS UNABLE TO ADDUCE ANY EVIDENCE ON THE BASIS OF WHICH THE INSURANCE COMPANY ACCEPTED ITS CLAIM AND PAID THE C OMPENSATION AMOUNT. IT IS ALSO TRUE THAT THE ASSESSEE HAD CLAIMED BEFORE THE AO THAT ITS BOOKS OF ACCOUNT AND FILES HAD BEEN DESTROYED IN THE FIRE IN THE YEA R 1989. HOWEVER IT WAS POSSIBLE FOR THE ASSESSEE TO CONTEND THAT THE REPAI R EXPENDITURE DEBITED IN ITS BOOKS OF ACCOUNT WAS ONLY RS.10,65,204/- AND THIS F IGURE HAS NOT BEEN DISPUTED BY THE AO AS THE FIGURE DEBITED IN THE BOOKS. THE VIEW TAKEN BY THE AO, AS HAS BEEN CLEARLY SPELT OUT BY HIM IN HIS SHOW CAUSE LET TER DATED 25-3-1997, REPRODUCED IN PAGES 9 TO 11 OF THE ASSESSMENT ORDER , IS THAT THE EXPENDITURE PRIMA FACIE APPEARED TO BE LOW CONSIDERING THE THRE E REPORTS OF THE SURVEYORS WHO HAD INSPECTED THE SITE AND THE MACHINERY IMMEDI ATELY AFTER THE FIRE IN ORDER TO ASSESSEE THE LOSS. ACCORDING TO THE AO CO NSIDERING THE SURVEYORS REPORT AND THE TECHNICAL REPORT MOST OF THE MACHINE S WERE SEVERELY DAMAGED IN THE FIRE AND THE REPAIR EXPENSES OF RS.10.65 LAKHS DEBITED IN THE ACCOUNTS DOES NOT APPEAR TO BE SUFFICIENT TO MEET THE REPAIRING C OST AND THAT IN THE ABSENCE OF ANY DIRECT EVIDENCE THE ONLY ALTERNATIVE IS TO MAK E AN ESTIMATE OF THE SAME CONSIDERING THE OBSERVATIONS MADE BY THE SURVEYORS AND THEIR TECHNICAL PAGE - 8 ITA NO.1394/AHD/2001 -8- CONSULTANTS AT THE TIME OF ON-THE-SPOT INSPECTION. THE QUOTED PORTIONS, DRAWN FROM THE SHOW CAUSE NOTICE DO INDICATE THAT THE AO WAS NOT ABLE TO SHOW THE EXACT EXPENDITURE INCURRED BY THE ASSESSEE AND PROC EEDED TO ESTIMATE THE SAME ON THE BASIS OF THE SURVEYORS REPORT AND THE REPOR T OF THE TECHNICAL CONSULTANTS. THIS PROCESS APPEARS TO US, WITH RESPECT, TO RUN CO UNTER TO THE EXPRESS LANGUAGE USED IN SECTION 69C. THE SECTION, IN OUR HUMBLE O PINION, DOES NOT APPEAR TO PERMIT THE AO TO DRAW INFERENCES OR MAKE ESTIMATES ABOUT THE AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE, WHICH HAS NOT BEEN RECORDED IN HIS BOOKS OF ACCOUNT. THERE SHOULD BE DIRECT EVIDENCE OF THE EXACT AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE WITHOUT RECORDING THE SAME IN HIS BOOKS OF ACCOUNT, IN WHICH CASE THE SECTION WOULD BE ATTRACTED, AND NOT OTHERWISE. SINCE IN THE PRESENT CASE SUCH DIRECT EVIDENCE IS LACKING, NOTWI THSTANDING THE PERSUASIVE ARGUMENTS PUT FORTH ON BEHALF OF THE DEPARTMENT, WE ARE UNABLE TO GIVE EFFECT TO ITS CONTENTIONS AND UPHOLD THE ORDERS OF THE DEPART MENTAL AUTHORITIES. 11. FOR THE ABOVE REASONS, WE DELETE THE ADDITION O F RS.42,83,376/- MADE UNDER SECTION 69C. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAD ALSO A LTERNATIVE PLEA TO THE EFFECT THAT EVEN IF THE ADDITION IS SUSTAINED, AN E QUAL AMOUNT SHOULD BE ALLOWED AS DEDUCTION AS REPAIR EXPENSES, THUS NEUTRALISING THE ADDITION. THIS ALTERNATIVE PLEA IS PROJECTED IN GROUND NO.7 AND SOME ORDERS OF THE TRIBUNAL INCLUDING THE AHMEDABAD BENCHES HAVE BEEN CITED. IN THE CASE OF RUBI BUILDERS VS. ITO, 63 TTJ 202, THE AHMEDABAD BENCH ACCEPTED SUCH A PLEA. A SIMILAR VIEW WAS TAKEN BY THE AHMEDABAD BENCH (THIRD MEMBER) IN THE CASE OF B AND BROTHERS ENGINEERING WORKS VS. DCIT, 84 ITD 243 (TM). THE P ROHIBITION INTRODUCED BY THE PROVISO INSERTED W.E.F. 1-4-1999, PROHIBITED DEDUCTION OF THE UNEXPLAINED EXPENDITURE NOT RECORDED IN THE BOOKS O F ACCOUNT AND IN RESPECT OF WHICH AN ADDITION UNDER THE MAIN SECTION IS MADE, W AS HELD TO BE PROSPECTIVE AND NOT RETROSPECTIVE BY THE JUDGMENT OF THE HONBL E GUJARAT HIGH COURT PAGE - 9 ITA NO.1394/AHD/2001 -9- KRISHNA TEXTILES (SUPRA). ACCORDINGLY, EVEN IF WE A RE WRONG IN HOLDING THAT NO ADDITION CAN BE MADE UNDER SECTION 69C ON THE BASIS OF AN ESTIMATE, HOWEVER REASONABLE IT MAY BE, STILL THE REPAIR EXPENDITURE BEING REVENUE IN NATURE AND HENCE DEDUCTIBLE HAS TO BE ALLOWED AS DEDUCTION IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE. THUS, THE ALTERNATIVE PLEA ALSO REQUIRES TO BE ACCEPTED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT 9 TH OCTOBER, 2009. SD/- SD/- (A.N. PAHUJA) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 05-10-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD