DCIT, Varanasi V. M/s Puneet Automobiles (P) Ltd., Varanasi

ITA 143/ALLD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63390 (ITAT-ALLAHABAD)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANDEEP CHAUHAN
• Assessee Lawyers: ARVIND SHUKLA; O P SHUKLA
• Keywords: Business income; Business expenditure; Principle of natural justice; Commercial expediency; Capital expenditure
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.143/A/2012 ASSESSMENT YEAR: 2009-10 DY. COMMISSIONER OF INCOME TAX, VS. M/S. PUNEET AUT OMOBILES PVT. LTD., CIRCLE-3, VARANASI. G.T. ROAD, MARHIA, PARAO, VARANASI. (PAN : AADCP 3460 F). APPELLANT BY : SHRI SANDEEP CHAUHAN, CIT D.R. RESPONDENTS BY : SHRI ARVIND SHUKLA & SHRI O.P. SHUKLA, ADVOCATES DATE OF HEARING : 08.11.2012 DATE OF PRONOUNCEMENT : 13.12.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 12.03.2012 PASSED BY THE LD. CIT(A), VARANASI FOR THE ASSESSME NT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.88,41,072/ - BEING REBATE AND DISCOUNT IGNORING THE FACT THAT NO EVIDENCE IN RESP ECT OF GENUINENESS OF THESE EXPENSES WAS FURNISHED BY THE ASSESSEE DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. ITA NO.143/A/2012 AYS. 2009-10 2 2. WITHOUT PREJUDICE TO GROUND NO.1 ABOVE THE ADDIT ION OF REBATE AND DISCOUNT AMOUNTING TO RS.88,41,072/- DEBITED IN PROFIT AND LOSS ACCOUNT WAS DELETED IGNORING THE FACT THAT AFORESAI D REBATE AND DISCOUNT WAS NOT SHOWN AND DEBITED IN THE SALE BILL S OF THE ASSESSEE BESIDES THE SEPARATE BOGUS VOUCHERS OF THESE EXPENS ES PREPARED BY THE ASSESSEE STANDS SHAM TRANSACTION. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.2,10,81 4/- BEING TDS DEDUCTED ON THE RECEIPT OF INFRASTRUCTURE INCOME OF RS.20,93,179/- AND SHOWING INCOME OF RS.18,82,365/- IN PLACE OF RS.20, 93,179/- BY HOLDING SUM OF RS.2,10,814/- HAS BEEN SHOWN ON THE ASSET SIDE OF BALANCE SHEET. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF VARIOUS EX PENSES OF RS.2,47,000/- IGNORING THE FACTS MENTIONED IN ASSES SMENT ORDER THESE EXPENSES ARE NOT VERIFIABLE. 5. WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITIONS AND ALLOWING ASSESSEES APPEAL IGNORING THE PROVISIONS OF SECTION 250(6) OF THE I. T. ACT. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE ORDER PASSED BY LD. CIT(A) IS ON PERVERSE FACTS SO THE ORDER OF LD. CIT (A) MAY KINDLY BE REVERSED AND ORDER OF THE A.O. MAY KINDLY BE CONFIR MED. 7. CRAVES FOR LEAVE TO RAISE ANY GROUNDS OF APPEAL THAT MAY BE TAKEN AT THE TIME OF HEARING. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE TOTAL SALES AND OTHER RECEIPTS WERE AT RS.106,96,55,543/- AGAINST WHICH G.P. SHOWN AT RS.4,69,01,170/-. THE A.O. NOTED THAT THE ASSESSEE HAS SUBMITTED THAT ALL THE PURCHASES AND SALES ARE DONE UNDER THE SUPERVISION OF PRICING PRINCIPLE AND POLICY OF TATA MOTORS. PURCHASES AND SALES OF VEHICLES AND STOCK WERE MAINTAINED ITA NO.143/A/2012 AYS. 2009-10 3 PROPERLY. ON VERIFICATION OF ACCOUNTS OF THE ASSES SEE, THE A.O. NOTICED THAT THE REBATE AND DISCOUNT DEBITED IN PROFIT & LOSS ACCOUN T WAS RS.88,41,072/-. ON EXAMINATION OF SALE BILLS OF THE VEHICLES, THE A.O. NOTICED THAT THE DISCOUNT IS NOT FOUND DEDUCTED FROM THE BILLS. ON FURTHER EXAMINAT ION IT IS SEEN THAT THE ASSESSEE HAS MADE INTERNAL SELF-MADE VOUCHERS FOR REBATE AND DISCOUNT IN EACH CASE, WHERE REBATE AND DISCOUNT SHOWN TO HAVE BEEN MADE. THE S AID VOUCHER BEARING THE SIGNATURE OF COMPANYS OFFICIALS BUT NOWHERE SIGNAT URE OF PERSON (TO WHOM REBATE AND DISCOUNT SHOWN TO HAVE BEEN MADE) IS APPEARING ON THE VOUCHER. 4. GROUND NOS.1 & 2 PERTAIN TO ADDITION OF RS.88,41 ,072/-. THE A.O. MADE THE ADDITION OF RS.88,41,072/- AS UNDER :- (PAGE NOS.2 & 3) 8. THE REBATE AND DISCOUNT IS CLAIMED BY THE ASSES SEE FOR PURPOSE OF REDUCING PROFIT OF THE COMPANY. I HAVE CONSIDER ED THE SUBMISSION MADE BY ASSESSEE, FACT OF THE CASE AND I AM OF THE VIEW THAT IN LIGHT OF ABOVE DISCUSSION THE REBATE AND DISCOUNT IS NOT ALL OWABLE. THE FACT IS AGAIN SUMMARIZED AS UNDER THAT WHY REBATE AND DISCO UNT IS NOT ALLOWABLE. I) THE REBATE AND DISCOUNT WAS NOT ALLOWED IN THE S ALE BILL WHICH WAS ISSUED AT THE TIME OF SAIL OF THE VEHICLE . (II) SELF MADE VOUCHER AS PREPARED BY THE COMPANY I NTERNALLY NOT BEARING SIGNATURE OF CUSTOMER TO WHOM REBATE AND DI SCOUNT ALLOWED. SO, IT CAN NOT BE SAID THAT THE AMOUNT WA S VIRTUALLY PASSED ON TO THE CUSTOMER. III) VEHICLE OF TATA MOTOR ARE SOLD TO BE DEALERS A T PRICE FIX FROM THE COMPANY AND COMPANY DOES NOT ALLOW TO ITS DEALE R TO GIVE ANY REBATE AND DISCOUNT TO THE CUSTOMER ON THE FIX PRICE. ITA NO.143/A/2012 AYS. 2009-10 4 IV) THE TATA MOTOR APPOINT IT DEALER SEPARATELY FOR SPECIFIC AREAS AND DEALER ARE BOUND TO PERFORM ITS ACTIVITY OF SAL E OF VEHICLE WITHIN THE AREA ONLY AND ANY ENCROACHMENT IN ANY OT HER DEALERS AREA VIEWED BY THE COMPANY SERIOUSLY. SO, SUBMISSION OF THE ASSESSEE THAT TO FACE THE COMPETITION REBATE AND DISCOUNT IS GIVEN ARE NOT CORRECT. (V) IN FIELD ENQUIRY, THE PAYMENT OF REBATE AND DIS COUNT TO CUSTOMER NOT FOUND ESTABLISHED. 9. IT IS ONUS ON THE PART OF THE ASSESSEE TO ESTABL ISH THE EXPENSES CLAIMED IN THE BOOKS OF THE ASSESSEE AND ALSO IN RE SPECT OF CLAIM OF REBATE AND DISCOUNT. NO DOCUMENT, WITH THE ASSESSE E SUPPORTING THE VIEW THAT REBATE AND DISCOUNT WAS PAID TO ANY CUSTO MER, AS EVIDENCE PREPARED BY THE ASSESSEE IS THE INTERNAL DOCUMENT A ND THAT IS NOT SUPPORTED BY THE EVIDENCE OF THIRD PARTY (THE PURCH ASER). IT CAN BE SEEN THAT THE ONUS CAST ON ASSESSEE IS NOT DISCHARG ED. AS DISCUSSED ABOVE REBATE AND DISCOUNT CLAIM OF RS. 88,41,072/- DEBITED IN P & L ACCOUNT IS DISALLOWED. ACCORDINGL Y ADDITION OF RS.88,41,072/- MADE IN THE INCOME OF THE ASSESSEE. 5. THE CIT(A) DELETED THE ADDITIONS AFTER CONSIDERI NG DETAILED SUBMISSIONS MADE BY THE ASSESSEE. THE ASSESSEE FURNISHED PARA- WISE EXPLANATIONS IN RESPECT OF OBJECTION OF THE A.O. THE CIT(A) NOTED THE EXPLANA TION OF THE ASSESSEE AT PAGE NOS.8 TO 29 OF HIS ORDER. THE CIT(A) HELD AS UNDER :- (PARAGRAPH NO.5, PAGE NOS.32 & 33) 5. AS EVIDENT FROM THE ASSESSMENT ORDER AND AS DIS CUSSED ABOVE, THE ASSESSING OFFICER HAS MADE DISALLOWANCE UNDER T HE HEAD REBATE AND DISCOUNT ON SALE OF VEHICLE OF RS.88,41,072/-. I HAVE GONE THROUGH THE SUBMISSION OF THE ASSESSEE AND PERUSED THE CASE RECORDS AND OBSERVED THAT THE APPELLANT HAS GIVEN REBATE AN D DISCOUNT ON VEHICLE SALE TO THE CUSTOMER AS PER THE SCHEME OF T ATA MOTORS OFFERED FROM TIME TO TIME. IT IS OBSERVED THAT THE DISCOUN T GIVEN TO THE ITA NO.143/A/2012 AYS. 2009-10 5 CUSTOMER AFTER PRIOR APPROVAL OF THE MANAGEMENT AND SIGNED BY THE SALES TEAM MANAGER ON BEHALF OF THE PURCHASER FOR W HICH COPY OF APPROVAL SHEET IS GIVING ALONG WITH BILLS TO THE CU STOMERS. I FURTHER FIND FORCE IN THE SUBMISSION OF APPELLANT AUTHORIZE D REPRESENTATIVE THAT THE APPELLANT HAS NOT GIVEN ANY CASH DISCOUNT TO THE PURCHASER, ONLY THE DISCOUNT AMOUNT ADJUSTED FROM INSURANCE AN D OTHER CHARGES AS PER DISCOUNT SCHEME OF TATA MOTORS AND THE SAID DISCOUNT IN THE PERSONAL LEDGER OF THE PURCHASER IN THE COMPANY ACC OUNT. THE COMPANY HAS MAINTAINED SALE INVOICE, DELIVERY ORDER S AND CUSTOMER LEDGER IN SUPPORT OF THE DOCUMENT FOR EXISTING SALE S AND PARTIES ACCOUNT AND PAYMENT VOUCHER APPROVAL SHEET. THE RE BATE AND DISCOUNT HAS BEEN PROPERLY ENTERED AND ADJUSTED IN THE CUSTOMER A/C. I CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELL ANTS AUTHORIZED REPRESENTATIVE THAT THE ASSESSING OFFICE R HAS MADE INQUIRY THROUGH ITI ON SAMPLE BASIS TO SIX PURCHASERS OUT O F THE 1433 PURCHASES BUT NONE OF THE PURCHASER WERE DECLINED T HAT THEY HAVE NOT RECEIVED ANY DISCOUNT. BUT THE ASSESSING OFFICER H AS NOT BROUGHT ANY MATERIAL ON RECORD THAT THE REBATE AND DISCOUNT HAS NOT BEEN GIVEN TO 1433 PURCHASES. IN VIEW OF ABOVE FACTUAL POSITION DISALLOWANCE MADE UNDER THE HEAD REBATE AND DISCOUNT OF RS.88,41,072/- IS HEREB Y DELETED. 6. THE LD. AUTHORISED REPRESENTATIVE REITERATED THE SUBMISSIONS WHICH WERE MADE BEFORE THE CIT(A) WHICH ARE AS UNDER :- B) IT IS HEREBY SUBMITTED THAT, THE COMPANY HAS MA INTAINED ALL THE RECORDS REGARDING THE REBATE AND DISCOUNT AND INTER EACH DISCOUNT IN THE PERSONAL LEDGER OF THE COMPANY WHIC H COPY OF THE SAID LEDGER HAS ALREADY SUBMITTED BEFORE THE AS SESSING OFFICER DURING THE COURSE OF HEARING OF THE CASE. C) THAT, THE ASSESSEE COMPANY HAS NOT PROVIDED ANY CASH DISCOUNT TO THE CUSTOMERS ONLY THE DISCOUNT AMOUNT HAS ADJUS TED FROM THE BILLS OF THE CUSTOMER REGARDING THE INSURANCE T EMPORARY PERMIT AND OTHER ACCESSORIES OF THE VEHICLES AS PER THE SCHEME OF THE TATA MOTORS IT IS HEREBY SUBMITTED HEREBY TH E TATA ITA NO.143/A/2012 AYS. 2009-10 6 MOTORS HAS ANNOUNCED EACH AND EVERY MONTH DISCOUNT AND REBATE PROVIDED TO THE CUSTOMER ON THE VEHICLE. D) THAT, THE COMPANY HAS MAINTAINED SALE INVOICE, D ELIVERY ORDER, DELIVERY CHALLAN, AND COPY OF CUSTOMER LEDGER ACCOU NT IN SUPPORT OF THE DOCUMENT FOR EXECUTING SALE AND PART Y ACCOUNTS. THE APPELLANT WOULD LIKE TO DRAW YOUR KIND ATTENTIO N THAT DURING THE COURSE OF HEARING OF THE CASE THE APPELL ANT HAS ALREADY SUBMITTED COMPLETE BOOKS OF ACCOUNT LEDGER, GENERAL, CASH BOOK BILL BOOK, CREDIT AND CASH SALE INVOICE, PAYMENT VOUCHER APPROVAL SHEET OF DISCOUNT ETC., AND ASSESS ING OFFICER HAS ALREADY ACCEPTED THESE FACTS AND GIVEN REMARKS THAT THE APPELLANT HAS MAINTAINED THE PROPER BOOK OF ACCOUNT S AND STOCK PROPERLY IN THE PAGE NO.1 OF THE A.O.S ORDER. F) THAT, THE PRACTICES IN THE BUSINESS IS THAT THE CUSTOMER GENERALLY CALCULATED THE COST ON THE BASIS OF PURCH ASES PRICE + FINANCE CHARGES + OTHER CHARGES + INSURANCE CHARGES ETC. AT MOST OF THE CUSTOMER PREVAIL FROM TRUCK OWNERS FRAT ERNITY TO WHOM THE RELEVANT OF THE DOCUMENTS DOES NOT HAVE TH E SAME SIGNIFICANCE AS ANY OTHER NORMAL CUSTOMER, HENCE TH E APPELLANT COMPANY ARE FORCED TO UPDATE AND INFORMED THE DISCO UNT HAS BEEN OFFERED VIDE REDUCTION IN CHARGES (BY CREDIT T HEIR ACCOUNT) WHICH CAN VERIFIED FROM THE PARTY ACCOUNT. G) THAT, IT IS HEREBY SUBMITTED THAT THE DISCOUNT A ND REBATE IS MATTER OF COMMERCIAL EXIGENCY AND THE SAME IS USED BY THE MANAGEMENT IN THE BEST POSSIBLE MANNER TO RUN THE B USINESS, WHICH DEPENDS UPON THE MARKET CONDITION AND DEPENDI NG UPON THE NEED TO GIVE DISCOUNT TO ATTRACT THE CUSTOMER. HENCE TO OFFER THE DISCOUNT ON THE BILLS IN THE NATURE OF TH E BUSINESS IN WHICH APPELLANT COMPANY IS WORKING IS BEYOND THE RE ALMS OF PRACTICAL POSSIBILITY AND FEASIBILITY. IT IS SELLI NG TOOLS THAT HAS TO BE USED WITH UTMOST CARE BY THE MANAGEMENT OF TH E COMPANY ARE IT BACK LASH CAN ERODE THE VERY PERFORMED FOR W HICH IT IS BEEN USED I.E. PROMOTING SALE AND THERE BY REVENUE. THE APPELLANT COMPANY HAVING REGARD TO THE FACTS THAT A MOUNT ARE PAID THROUGH THE LEDGER, IN RESPECT OF SPECIFIC TRA NSACTION I.E. SALE OF VEHICLE AND, IN THE NORMAL COURSE OF BUSINE SS, THE EXPENDITURE INCURRED BY THE COMPANY CLEARLY MEETS T HE TEST OF ELIGIBLE DEDUCTION. ITA NO.143/A/2012 AYS. 2009-10 7 A) THAT THE LEARNED ASSESSING OFFICER HAS DISALLOWE D THE DISCOUNT AND REBATE TO THE CUSTOMER ON WHICH NO SIGNATURE HA S BEEN TAKEN OF THE CUSTOMER. IT IS HEREBY SUBMITTED THAT , THE APPELLANT COMPANY HAS OFFERED THE REBATE AND DISCOUNT TO THE CUSTOMER OVER THE YEAR AS PER THE SCHEME ANNOUNCED BY THE TA TA MOTORS FROM TIME TO TIME, A COPY OF THE SAID SCHEME SUBMIT TED BEFORE THE A.O. B) THAT THE APPELLANT COMPANY HAS EMPLOYED THERE EM PLOYEE (SALE TEAM) WHO HAS APPROACHED TO THE CUSTOMER AND DISCUS SED OFFER OF THE DISCOUNT ON SALE VEHICLE AS PER THE SCHEME A S NEGOTIATED THE COST OF VEHICLE. GENERALLY THE APPELLANT COMPA NY HAS OFFERED THE SAME THROUGH DELIVERY ORDER AND ADJUSTE D FOR THE SAME IN THE LEDGER ACCOUNTS. SUBSEQUENTLY, ON PERS ISTENCE OR NEGOTIATIONS, THE DISCOUNT/REBATE IS FURTHER ENHANC ED AND APPROVED BY THE DIRECTORS AND THE SAME IS REGARD ON THE DISCOUNT APPROVAL SHEETS DUTY SIGNED BY THE SALES T EAMS ON BEHALF OF THE CUSTOMER. C) THAT THE APPROVAL SHEET OF REBATE AND DISCOUNT I S ALSO THE PART OF THE SALE BILL ON WHICH SALE INVOICE HAS ISSUED T O THE CUSTOMER. AND COMPANY HAS ALSO MAINTAINED THE SALE INVOICE, D ELIVERY ORDER, DELIVERY CHALLAN AND COPY OF CUSTOMER LEDGER ACCOUNT IN SUPPORT OF THE DOCUMENT FOR EXECUTING FOR SALE AND PARTY ACCOUNT. D) THAT THE DISCOUNT APPROVAL SHEET HAS ALREADY SIG NED BY THE SALES MANGER ON BEHALF OF THE CUSTOMER. IT IS NOT ONLY A INTERNAL RECORDS OF THE COMPANY AND ONLY A SELF MADE VOUCHER , BUT IT IS A APPROVED DISCOUNT SHEET ON WHICH THE CUSTOMER HAS T AKEN THE DISCOUNT AND REBATE. IT IS HEREBY SUBMITTED THAT T HE ONE COPY OF DISCOUNT APPROVAL SHEET HAS ALREADY GIVEN TO THE CU STOMER ALONG WITH SALE INVOICE AND THE CUSTOMER HAS VERIFI ED THE SALE AND HAS SATISFIED THAT HE HAS TAKEN DISCOUNT/REBATE ON THEIR VEHICLES HENCE IT IS IN SIGNIFICANCE TO SAY THAT, T HE COMPANY HAS MADE SELF MADE VOUCHER AND ON THE BASIS OF ITS THE DISCOUNT COULD NOT BE DISALLOWED. IT IS NOT A IN SIGNIFICAN CE MISTAKE BUT IT IS A POLICY MATTER OF THE COMPANY. THE COMPANY HAS GIVEN THE REBATE/DISCOUNT ONLY TO ADJUSTMENT OF SCHEME AN D HAS NOT GIVEN CASH DISCOUNT TO ANY CUSTOMERS. ITA NO.143/A/2012 AYS. 2009-10 8 B) THAT THE OBJECTION OF THE A.O. IS THAT, PRICE OF THE VEHICLE IS FIXED AND TATA MOTORS HAS NOT ALLOWED ANY DEALERS T O GIVE DISCOUNT TO THE CUSTOMER. THIS ARGUMENTS OF THE A. O. IS FULLY VAGUE AND UNLAWFUL ALL THE DEALERS HAS ALLOWED THE REBATE AND DISCOUNT TO ITS CUSTOMERS. THIS PRACTICES HAS BEEN ADOPTED OVER THE YEAR BY ASSESSING COMPANY FOR OFFERING REBATE A ND DISCOUNT IS THAT THE SAME IS FIRST OFFERED THROUGH VERBAL DI SCUSSION WHEN THE CUSTOMER WALK IN OR IS APPROACHED BY THE SALES TEAMS. IT IS ONLY WHEN THE VEHICLE IS FINALIZED BY THE CUSTOMER THAT, THE DISCOUNT AND REBATE IS FULLY DISCUSSED/NEGOTIATED A ND OFFERED THE SAME THROUGH DELIVERY ORDER WHICH HAS BEEN APPR OVED BY THE MANAGING DIRECTOR OF THE COMPANY AND SIGNED BY THE SALES TEAMS ON BEHALF OF THE CUSTOMERS. THE REBATE AND D ISCOUNT IS A MATTER OF COMMERCIAL EXPEDIENCY AND SAME IS USED BY THE MANAGEMENT IN THE BEST POSSIBLE MANNER TO RUN THE B USINESS. 7. AS REGARDS FIELD ENQUIRY, THE SUBMISSIONS OF THE ASSESSEE ARE AS UNDER :- (PAGE NOS.15 & 16 CIT(A)). I) IT IS HEREBY OBSERVED THAT, LEARNED ASSESSING O FFICER HIMSELF MENTIONED IN HIS ORDER THAT, AT FIRST INSTANCE NO P URCHASER WAS IN A POSITION TO TELL WHETHER REBATE AND DISCOUNT R ECEIVED BY THEM, THREE PURCHASER DID NOT FILLED ANY REPLY TILL THE DATE OF ORDER AND ONE CUSTOMER M/S A.B.S. ROW LAND SCHOOL, P.K. SINGH SHIVPUR BY-PASS, VARANASI HAS SUBMITTED THAT THE PURCHASES AMOUNT SPENT BY THE SCHOOL WAS MORE THAN SALE AMOUNT INCLUDING ETC. SHOWN BY THE COMPANY. NONE O F THE PURCHASER WHERE DECLINED THAT THEY HAVE NOT RECEIVE D ANY REBATE AND DISCOUNT FROM PUNEET AUTO MOBILES PVT. L TD. NEITHER DECLINED THE PURCHASES OF VEHICLES. THE LE ARNED INCOME TAX INSPECTOR HAS GONE TO THE HOUSE OF THE C USTOMER AND REQUIRED ORAL ENQUIRY FROM THE CUSTOMER REGARDING T HE PURCHASE OF VEHICLE FROM PUNEET AUTO MOBILES PVT. L TD. AND REBATE AND DISCOUNT THEREON. IT IS HEREBY PERTINEN T TO MENTIONED OUT OF THE SIX PURCHASERS, THREE PURCHASE R HAS GIVEN POSITIVE REPLY AND THREE PURCHASERS HAS NOT GIVEN A NY REPLY TO THE ASSESSING OFFICER. AND THEY HAVE NEVER DENIED THAT THEY HAVE NOT RECEIVED REBATE AND DISCOUNT FROM PUNEET A UTO MOBILES PVT. LTD. AND THE LEARNED ASSESSING OFFICER HAS NOT BROUGHT A SINGLE INSTANCE ON RECORD THAT THE REBATE AND ITA NO.143/A/2012 AYS. 2009-10 9 DISCOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT HAS NOT GIVEN BY THE APPELLANT. THE LEARNED ASSESSING OFFICER SELEC TED SAMPLE SIZE OF SIX FOR FILLED INQUIRY WITHOUT ANY RATIONAL NOT BASED ON SCIENTIFIC/STATISTICAL SELECTION, HENCE DRAWING ANY INFERENCE THERE OFF WILL BE BASED ON PRIVATE OPINION AND AGAI NST NATURAL JUSTICES. II) THAT, THE LEARNED ASSESSING OFFICER HAS DISALLO WED THE REBATE AND DISCOUNT ONLY ON THE BASIS OF AN ENQUIRY MADE B Y THE ITI. IT IS RESPECTFULLY SUBMITTED THAT THE LEARNED ASSESSIN G OFFICER HAS MADE INQUIRY THROUGH RTI ONLY FOR SIX PURCHASER OUT OF THE NO. OF VEHICLE SOLD TO 1433 DURING THE YEAR AND NONE OF THE PURCHASER AND DENIED THE REBATE AND DISCOUNT HAS NO T RECEIVED, THOUGH THE APPELLANT COMPANY HAS SUBMITTED THE SALE INVOICE APPROVAL SHEET, LEDGER ACCOUNTS WHETHER THE DISCOUN T IS MENTIONED BUT THE LEARNED ASSESSING OFFICER WITHOUT INSIGNIFICANT MISTAKE HAD DISALLOWED THE ALL THE RE BATE AND DISCOUNT AND AMOUNT OF RS.88,41,072/- 8. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED UPON THE ORDER OF A.O. 9. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE CASE OF THE A.O. IS THAT DISCOUNT WAS NOT DEDUC TED FROM SALE MEMO OF VEHICLES. THE VOUCHERS OF DISCOUNT ARE SELF-MADE VOUCHERS. O N FIELD ENQUIRIES FROM SIX CUSTOMERS, FACTS OF PAYMENT OF REBATE AND DISCOUNT WERE NOT ESTABLISHED. THE A.O. NOTED THAT THERE IS NO JUSTIFICATION IN GIVING DISC OUNT. THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE FOR THE PURPOSE OF BUSINESS AND IN ACCORDANCE WITH COMMERCIAL EXPEDIENCIES. UNDER THE FACTS AND CIRCUMSTANCES WHETHER THE ACTION OF THE A.O. IS JUSTIFIED IN DISA LLOWANCE OF COMMISSION AND ITA NO.143/A/2012 AYS. 2009-10 10 DISCOUNT EXPENSES. BUSINESS EXPENDITURES INCURRED F OR THE PURPOSE OF BUSINESS ARE ALLOWABLE UNDER SECTION 37 OF THE ACT. THE SAID SEC TION 37 READS AS UNDER :- GENERAL. 37. (1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF T HE NATURE DESCRIBED IN SECTIONS 30 TO 36 [***] AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION'. [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PUR POSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFES SION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE.] (2) [* * *] (2B) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTION (1), NO ALLOWANCE SHALL BE MADE IN RESPECT OF EXPENDITURE INCURRED BY AN ASSESSEE ON ADVERTISEMENT IN ANY SOUVENIR, BROCHURE, TRACT, PAM PHLET OR THE LIKE PUBLISHED BY A POLITICAL PARTY.] 10. TO APPRECIATE THE SCHEME OF THE ACT IN RESPECT OF ALLOWABILITY OF EXPENDITURES, WE WOULD LIKE TO REFER CERTAIN JUDGME NTS WHEREIN CERTAIN PRINCIPLES HAVE BEEN DECIDED IN THIS REGARD. THESE JUDGMENTS A RE AS UNDER :- 10.1 CIT VS. TRANSPORT CORPORATION OF INDIA LIMITED, 256 ITR 701 (AP) -- (PAGE 705, 706 AND 707 )'37. GENERAL.--(1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EX PENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALL OWED IN COMPUTING ITA NO.143/A/2012 AYS. 2009-10 11 THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND G AINS OF BUSINESS OR PROFESSION'. EXPLANATION.--FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PUR POSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFES SION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE.' IN ORDER TO CLAIM DEDUCTION OF EXPENDITURE UNDER SE CTION 37(1) OF THE ACT, AT THE RELEVANT POINT OF TIME AND IN THE LIGHT OF THE JUDGMENTS IN INDIAN MOLASSES CO. P. LTD. V. CIT [1959] 37 ITR 66 (SC); CIT V. INDIAN MOLASSES CO. (P) LTD. [1970] 78 ITR 474 (SC); SASSOON J. DAVID AND CO. P. LTD. V. CIT [1979] 118 ITR 261 (SC); MADHAV PRASAD JATIA V. CIT [1979] 118 ITR 200 (SC); CIT V. BALLARPUR INDUSTRIES LTD. [1976] 119 ITR 817 (BOM); CIT V. NAVSARI COTTON AND SILK MILLS LTD. [1982] 135 ITR 546 (GUJ) AND CHENAB FOREST CO. V. CIT [1974] 96 ITR 568 (J&K), THE FOLLOWING CONDITIONS SHOULD BE SATISFIE D; (I) THE EXPENDITURE IN QUESTION SHOULD NOT BE OF TH E NATURE DESCRIBED UNDER THE SPECIFIC PROVISIONS OF SECTIONS 30 TO 36 AND 80VV (SECTION 80VV WAS OMITTED WITH EFFECT FROM APRIL 1, 1986); ( II) THE EXPENDITURE SHOULD NOT BE OF THE NATURE OF CAPITAL EXPENDITURE ; (III) IT SHOULD NOT BE A PERSONAL EXPENDITURE; AND (IV) THE EXPENDITURE SHOULD HAVE BEEN LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. IT IS THUS CLEAR THAT COND ITIONS AT (I), (II) AND (III) ABOVE ARE NEGATIVE CONDITIONS WHEREAS THE CON DITION AT (IV) ABOVE IS A POSITIVE CONDITION. IF THE EXPENDITURE SATISFI ES THE NEGATIVE CONDITIONS, IT HAS TO SATISFY THE POSITIVE CONDITIO N IN ORDER TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 37(1) OF THE A CT. THUS, SECTION 37(1) ALLOWS DEDUCTION OF ANY 'EXPENDITURE' SUBJECT TO CONDITIONS NOTICED ABOVE. IN INDIAN MOLASSES CO.'S CASE [1959] 37 ITR 66 , THE SUPREME COURT POINTED OUT THAT THE WORD 'EXPENDITUR E' IS EQUAL TO 'EXPENSE' AND 'EXPENSE' IS MONEY LAID OUT BY CALCUL ATION AND INTENTION. BUT THE IDEA OF 'SPENDING' IN THE SENSE OF 'PAYING OUT OR AWAY' MONEY IS THE PRIMARY MEANING AND IT IS WITH T HIS MEANING THAT ONE IS CONCERNED. 'EXPENDITURE' IS THUS WHAT IS 'PA ID OUT OR AWAY' AND IS SOMETHING WHICH IS GONE IRRETRIEVABLY. THE A PEX COURT IN CIT V. NAINITAL BANK LTD. [1966] 62 ITR 638 HELD THAT IN ITS NORMAL MEANING, THE EXPRESSION 'EXPENDITURE' DENOTES 'SPENDING' OR 'PAYING OUT OR AWAY', I.E., SOMETHING THAT GOES OUT OF THE COFFERS OF THE ASSESSEE. A MERE LIABILITY TO SATISFY AN OBLIGATION BY AN ASSES SEE IS UNDOUBTEDLY NOT 'EXPENDITURE'; IT IS ONLY WHEN HE SATISFIES THE OBLIGATION BY ITA NO.143/A/2012 AYS. 2009-10 12 DELIVERY OF CASH OR PROPERTY OR BY THE SETTLEMENT O F ACCOUNTS, THAT THERE IS EXPENDITURE. THE BURDEN OF PROVING THAT A PARTICULAR EXPENDITURE HAS BEEN LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS SO THAT THE ASSESSEE MAY BE ENTITLED TO CLAIM DEDUCTIO N IS ON THE ASSESSEE. THIS POSITION IS WELL SETTLED BY THE JUDGMENTS OF T HE APEX COURT IN CIT V. CALCUTTA AGENCY LTD. [1951] 19 ITR 191 AND CIT V. IMPERIAL CHEMICAL INDUSTRIES (INDIA) (P.) LTD. [1969] 74 ITR 17 . THE MERE OBJECT OF INCURRING EXPENDITURE IS NOT DECISIVE WHE THER IT IS OF A CAPITAL NATURE OR REVENUE NATURE. THEREFORE, THE ON US IS ON THE ASSESSEE TO PROVE, INTER ALIA, THAT THE ITEM OF EXP ENDITURE IN QUESTION FOR ADMISSIBILITY TO DEDUCTION IS NOT IN THE NATURE OF CAPITAL EXPENDITURE. FURTHER, MERE PAYMENT BY ITSELF WOULD NOT ENTITLE THE ASSESSEE TO DEDUCTION OF THE SAID EXPENDITURE UNLES S THE SAME WAS PROVED TO BE PAID FOR COMMERCIAL CONSIDERATIONS. TH E ONUS OF PROOF IS ALWAYS UPON THE ASSESSEE. IT CANNOT BE SAID THAT EV EN IF THE TAXPAYER DOES NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE CLA IM FOR DEDUCTION, THE ASSESSING OFFICER HIMSELF INDEPENDENTLY IS TO C OLLECT EVIDENCE AND DECIDE THAT THE DEDUCTION CLAIMED IS BASELESS HAVIN G REGARD TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE, AS THE T RIBUNAL SEEMS TO THINK IN THE PRESENT CASE. IT IS FOR THE TAXPAYER T O ESTABLISH BY EVIDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. BUT, AS H ELD BY THE SUPREME COURT IN CIT V. C. PARAKH AND CO. (INDIA) LTD. [195 6] 29 ITR 661 WHETHER AN ASSESSEE IS ENTITLED TO A PARTICULAR DED UCTION OR NOT WILL DEPEND ON THE PROVISION OF LAW RELATING THERETO, AN D NOT ON THE VIEW WHICH HE MIGHT TAKE OF HIS RIGHTS. AT THE SAME TIME , THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT THERE ARE FACTS IN EXIST ENCE WHICH ENTITLE IT TO A DEDUCTION AND IT IS FOR THE ASSESSEE TO ADDUCE NE CESSARY EVIDENCE IN THIS REGARD. THEREFORE, IF THE ASSESSEE FAILS TO PL ACE SUFFICIENT MATERIAL, HE IS NOT ENTITLED TO CLAIM THIS ALLOWANCE UNDER SE CTION 37(1) OF THE ACT. IN CIT V. CHANDRAVILAS HOTEL [1987] 164 ITR 102 (GUJ), IT IS HELD THAT IF THE EXPENDITURE IS DOUBTED BY THE ASSESSING AUTHORITY, IT IS THE DUTY OF THE ASSESSEE TO PROVE BY LEADING EVIDENCE T HAT THE EXPENDITURE WAS IN FACT, INCURRED. 10.2 NEWTONE STUDIOS LTD. VS. COMMISSIONER OF I NCOME-TAX [1955] 28 ITR 378 (MAD.) THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS A P RIVATE LIMITED COMPANY OWNING A STUDIO AND ENGAGED IN THE PRODUCTION OF MO TION PICTURES. THERE WERE SIX ITA NO.143/A/2012 AYS. 2009-10 13 SHAREHOLDERS. THE MANAGING DIRECTOR AND THE THREE TECHNICIANS WERE REMUNERATED BY PAYMENTS OF WHAT WERE CALLED HONORARIA, WHICH RE ALLY MEANT SALARIES AND ALSO BY PAYMENTS OF COMMISSION ON A FIXED PERCENTAGE BAS IS. IN ADDITION EACH OF THEM GOT A CAR ALLOWANCE, AND WHEN THE PROFITS JUSTIFIED IT PAYMENT OF A MONTH'S SALARY AS BONUS. IN 1944 AND 1945 WHAT WAS PAID AS HONORARIA , THAT WAS, SALARY, TO THOSE FOUR AMOUNTED TO RS. 18,000/- A YEAR. THEIR SCALE OF SALARIES WAS REVISED FOR 1946 BY A RESOLUTION PASSED BY THE SHAREHOLDERS ON 30-03 -1946, AND THE TOTAL CAME TO RS.59,100/- FOR 1946. THE GENUINENESS OF THE PAYME NT OF THAT AMOUNT OF RS.59,100 WAS NEVER IN DISPUTE. THE ASSESSEE CLAIM ED THAT PAYMENT AS A DEDUCTION UNDER SECTION 10(2)(XV) OF THE 1922 ACT. THE ITO L IMITED THE ADMISSIBLE DEDUCTION TO AN AMOUNT NOT EXCEEDING TWICE THE AMOU NT ALLOWED IN EACH OF THE PRECEDING YEARS AND DISALLOWED THE BALANCE. THE DI SALLOWANCE WAS UPHELD BY THE AAC AS WELL AS THE TRIBUNAL. THE HONBLE MADRAS HI GH COURT WHILE DECIDING THE MATTER OBSERVED WHETHER ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE THE DISALLOWANCE OF A SUM OF RS. 23,100 OUT OF THE EXPE NSES INCURRED BY THE ASSESSEE FOR PAYMENT OF REMUNERATION TO THE MANAGING DIRECTO R AND THE OTHER TECHNICIAN DIRECTORS IS PERMISSIBLE UNDER THE PROVISIONS OF SE CTION 10(2)(XV) OF THE INCOME- TAX ACT. THE COURT REFERRED CERTAIN EARLIER JUDGM ENTS WHICH ARE AS UNDER :- IN EASTERN INVESTMENTS LTD. V. COMMISSIONER OF INC OME-TAX, WEST BENGAL [1951] 20 ITR 1 , THE SUPREME COURT REFERRED TO SECTION 12(2) OF T HE ACT, WHICH PROVIDES FOR THE DEDUCTION OF AN EXPENDITURE INCURRED SOLELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME, PROFITS O R GAINS AND SUMMARISED THE PRINCIPLES TO BE KEPT IN VIEW : ITA NO.143/A/2012 AYS. 2009-10 14 (1) THOUGH THE QUESTION MUST BE DECIDED ON THE FACT S OF EACH CASE, THE FINAL CONCLUSION IS ONE OF LAW. (2) IT IS NOT NECESSARY TO SHOW THAT THE EXPENDITU RE WAS A PROFITABLE ONE OR THAT IN FACT ANY PROFIT WAS EARNED. (3) IT IS ENOUGH TO SHOW THAT THE MONEY WAS EXPENDE D NOT OF NECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE BENEFIT TO THE TRADE, BUT VOLUNTARILY AND ON THE GROUND OF COMMERCIAL EXPEDIENCY, AND IN ORDER INDIRECTLY TO FACILITATE THE CARRYING ON OF THE BUSINESS. (4) BEYOND THAT, NO HARD AND FAST RULE CAN BE LAID DOWN TO EXPLAIN WHAT IS MEANT BY THE WORD SOLELY. IN RAYALOO IYER AND SONS V. COMMISSIONER OF INCOME- TAX, MADRAS [1954] 26 ITR 265 , A BENCH OF THIS COURT HELD THAT THE PRINCIPLES LA ID DOWN BY THE SUPREME COURT WITH REFERENCE TO SECTION 12(2) OF TH E ACT SHOULD ALSO BE APPLIED IN DECIDING UNDER SECTION 10(2)(XV) WHETHER THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND THE COURT POINTED OUT THAT THE TEST PR ESCRIBED BY SECTION 10(2)(XV) OF THE ACT INCLUDED THAT OF COMMERCIAL EX PEDIENCY. AT PAGE 292 THE LEARNED JUDGES POINTED OUT: IN APPLYING THE TEST OF COMMERCIAL EXPEDIENCY TO D ETERMINE WHETHER THE EXPENDITURE IS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF THE BUSINESS, THE REASONABLENESS OF THE EXPENDITURE SHO ULD BE CONSIDERED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT FROM T HE POINT OF VIEW OF OUTSIDERS INCLUDING THE INCOME-TAX OFFICER. IT WAS THE SAME PRINCIPLE TO WHICH LORD WRIGHT REFE RRED IN CRADDOCK V. ZEVO FINANCE COMPANY LTD. [1946] 27 TC 267 AT 290: THE TRANSACTION HERE BEING A PERFECTLY STRAIGHTFOR WARD AND HONEST BARGAIN BETWEEN THE TWO COMPANIES, IT SEEMS TO ME THAT, IF THE PRESENT CLAIM WERE UPHELD, IT WOULD AMOUNT TO A PRECEDENT ENABLING THE REVENUE TO REVISE EVERY SUCH BARGAIN AND TO DEFEAT WHAT THE PARTIES HAD AGR EED ON. THE REVENUE IN A CASE UNDER SCHEDULE D HAS NO POWER TO EXAMINE WHAT THEY THINK WAS REASONABLE OR TO SAY WHAT EXPENDITURE WAS NECESSARY . THE COURT HELD AS UNDER:- ITA NO.143/A/2012 AYS. 2009-10 15 UNDER OUR TAXING SYSTEM, IT IS FOR THE ASSESSEE TO CONDUCT HIS BUSINESS, AND IN HIS WISDOM OR OTHERWISE TO FIX THE REMUNERATION TO HIS STAFF. THE INCOME-TAX ACT DOES NOT CLOTHE THE T AXING AUTHORITY WITH ANY POWER OR JURISDICTION TO DETERMINE THE REASONAB LENESS OF THE AMOUNT SO FIXED AND PAID BY THE ASSESSEE. THE ONLY TEST FOR THE DEDUCTIBILITY OF SUCH REMUNERATION IS WHETHER THE E XPENDITURE HAS BEEN INCURRED SOLELY AND EXCLUSIVELY FOR THE PURPOS E OF THE BUSINESS. IF THE REALITY OF THE PAYMENT IS CHALLENGED OR IS IN D ISPUTE DIFFERENT CONSIDERATIONS ARISE : SO ALSO IN CASES WHERE THE T AX AUTHORITIES ARE ABLE TO POINT TO SOME CONSIDERATION OTHER THAN THE PURPOSE OF THE BUSINESS AS ACCOUNTING FOR ANY PORTION OF THE PAYME NT MADE. IN SUCH CASES, OF COURSE, SUCH PORTION OF THE AMOUNT CLAIME D, WHICH IS EITHER NOT HELD TO HAVE BEEN PAID OR IS HELD TO HAVE BEEN PAID FOR REASONS OTHER THAN BUSINESS EXPEDIENCY, COULD AND SHOULD BE DISALLOWED ; BUT THE REASON FOR THE DISALLOWANCE IS BECAUSE EITHER T HE PORTION DISALLOWED IS NOT PAID, OR BECAUSE THE EXPENDITURE IS NOT SOLELY AND EXCLUSIVELY FOR THE BUSINESS, AND NOT ON THE GROUND THAT IN THE OPINION OF THE INCOME-TAX OFFICER OR OTHER TAXING AUTHORITY THE REMUNERATION IS 'UNREASONABLY' HIGHEITHER BECAUSE THE EMPLOYEE DOES NOT, IN THE AUTHORITY'S OPINION, DESERVE SO MUCH, OR BECAUSE TH E ASSESSEE COULD HAVE SECURED OTHER EMPLOYEES ON MORE FAVOURABLE TER MS. THE ASSESSEE CERTAINLY SATISFIED THE THIRD OF THE T ESTS POSTULATED BY THEIR LORDSHIPS IN THE EASTERN INVESTMENT'S CASE (S UPRA), THAT THE MONEY WAS EXPENDED 'NOT OF NECESSITY AND WITH A VIE W TO DIRECT AND IMMEDIATE BENEFIT TO THE TRADE BUT VOLUNTARILY AND ON THE GROUND OF COMMERCIAL EXPEDIENCY, AND IN ORDER TO FACILITATE T HE CARRYING ON OF THE BUSINESS.' EVEN NECESSITY FOR THE EXPENDITURE D OES NOT ENTER THIS TEST. THE QUESTION REFERRED TO US IS ANSWERED IN THE NEGA TIVE AND IN FAVOUR OF THE ASSESSEE 11. IN THE LIGHT OF ABOVE BACKGROUND OF DISCUSSIONS , IF WE CONSIDER THE FACTS OF THE CASE UNDER CONSIDERATION, WE NOTICED THAT THE D ISCOUNT AND REBATE GIVEN BY THE ASSESSEE IS IN ACCORDANCE WITH COMMERCIAL EXPEDIENC Y AND FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAS DISCHARGED THE BURDEN T O PROVE THE ONUS IN RESPECT OF ITA NO.143/A/2012 AYS. 2009-10 16 ALLOWABILITY OF COMMISSION AND DISCOUNT. THE ASSESS EE HAS EXPLAINED IN DETAIL THE WAY OF CONDUCTING BUSINESS WHERE SUCH DISCOUNT IS I N ACCORDANCE WITH COMMERCIAL EXPEDIENCIES AND FOR THE PURPOSE OF BUSINESS. THE A SSESSEE PRODUCED BOOKS OF ACCOUNT, OTHER MATERIAL AND AUDIT REPORTS ETC. BEFO RE THE A.O. IN SUPPORT OF THE CLAIM. THE A.O. MERELY ON THE BASIS OF SURMISES AN D PRESUMPTION DISALLOWED THE CLAIM OF THE ASSESSEE. WE FIND THAT THE CIT (A), A FTER CONSIDERING ALL THESE ASPECTS, DELETED THE ADDITION. THE REVENUE HAS FAILED TO PO INT OUT ANY CONTRARY MATERIAL TO THE FINDING OF THE CIT(A). IN THE LIGHT OF THE FAC T, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), THEREFORE, THE ORDER OF CIT(A) IS CONFIRMED ON THE ISSUE. 12. THE THIRD GROUND OF APPEAL PERTAINS TO ADDITION OF RS.2,10,814/-. THE A.O. MADE THE ADDITION AS UNDER :- (PARAGRAPH NO.10, PAG E NO.3) 10. THE ASSESSEE HAS SHOWN INFRASTRUCTURE INCOME O F RS.18,82,365/. ON EXAMINATION OF DETAILS IT IS FOUND THAT THE AMOU NT WAS PAYMENT TO THE COMPANY AFTER DEDUCTING INCOME TAX RS.2,10,814/ -. IN VIEW OF THE FACT THE GROSS RECEIPT ON INFRASTRUCTURE INCOME IS RS.20,93,179/- (RS.18,82,365/- + RS.2,10,814/-). THE ASSESSEE SHO ULD HAVE SHOWN INFRASTRUCTURE INCOME AT RS.20,93,179/- INSTEAD OF RS.18,82,365/-. SO, INFRASTRUCTURE INCOME OF THE ASSESSEE AS DECLARED I S ENHANCED BY RS.2,10,814/-. 13. THE CIT(A) HAS DELETED THE ADDITION AS UNDER :- (PARAGRAPH NO.6, PAGE NO.33) 6. AS REGARD THE ADDITION MADE BY THE ASSESSING OF FICER UNDER THE HEAD INFRASTRUCTURE INCOME OF RS.2,10,814 /-, I HAVE GONE THROUGH THE APPELLANTS SUBMISSION AND OBSERVE D THE APPELLANT COMPANY HAS RECEIVED INSURANCE COMMISSION FROM ITA NO.143/A/2012 AYS. 2009-10 17 INSURANCE COMPANY AN AMOUNT OF RS.18,82,365/- OUT O F TAX DEDUCTION AT SOURCE RS.2,10,814/- AND DISCLOSED IN THE COMPANYS BALANCE SHEET. THE AMOUNT OF TDS OF RS.2 ,10,814/- REFLECTED IN THE ASSETS SIDE OF BALANCE SHEET OF TH E COMPANY HENCE DISALLOWANCE IS UNCALLED FOR AND ARBITRARY. IN VIEW OF THE ABOVE THE ADDITION MADE BY THE ASSESSING OFFICE R ON ABOVE ACCOUNT IS HEREBY DELETED. 14. WE HAVE HEARD THE LD. REPRESENTATIVES OF PARTIE S AND RECORDS PERUSED. THE ADMITTED FACTS OF THE ISSUE ARE THAT THE ASSESSEE R ECEIVED INSURANCE COMMISSION FROM ORIENTAL BANK OF COMMERCE, NEW DELHI, NEW INDI A INSURANCE COMPANY REGARDING VEHICLE INSURANCE. TOTAL RECEIPT WAS RS. 20,93,179/- OUT OF WHICH TDS OF RS.2,10,814/- WAS MADE. THE A.O. FOUND THAT THE GR OSS AMOUNT OF RS.20,93,179/- SHOULD HAVE BEEN SHOWN AS INCOME INSTEAD OF RS.18,8 2,365/-. THE SUBMISSIONS OF THE ASSESSEE THAT TDS AMOUNT OF RS.2,10,814/- HAS B EEN SHOWN IN BALANCE SHEET ON ASSET SIDE. IT IS NOT CLEAR FROM THE RECORD THAT W HERE IS ITS CREDIT ENTRY. IN PRINCIPLE, WE ARE OF THE VIEW THAT GROSS AMOUNT OF INCOME IS S UBJECT TO TAX. SINCE FACTS OF THE ISSUE REQUIRED VERIFICATION, WE THEREFORE, SEND BAC K THIS ISSUE TO THE FILE OF A.O. TO VERIFY THE FACTS AND DECIDE THE ISSUE IN ACCORDANCE WITH ACCOUNTING PRINCIPLE AND LAW AFTER PROVIDING OPPORTUNITY OF HEARING TO THE A SSESSEE. 15. THE FOURTH GROUND PERTAINS TO ADDITION OF RS.2, 47,000/-. THE A.O. DISALLOWED OUT OF FOLLOWING EXPENSES AS EXPENSES AR E UNVERIFIABLE: - (PAGE NO.30 (CIT(A)) ITA NO.143/A/2012 AYS. 2009-10 18 SL. NO. PARTICULAR AMOUNT DEBITED TO THE P&L ACCOUNT DISALLOWANCE/AD DITION MADE BY L.A.O. 1 DEEPAWALI EXPS. 292249.00 25000.00 2 GENERAL EXPS. 90270.00 7000.00 3 GENERATOR EXPS. 846608.00 50000.00 4 OFFICER EXPS. 884005.00 30000.00 5 POOJA EXPS. 188841.00 25000.00 6 REPAIR & MAINT. 1316345.00 60000.00 7 TRAVELLING & CONVEY. 1838032.00 50000.00 16. THE CIT(A) DELETED THE ADDITION AS UNDER :- ( P ARAGRAPH NO.7, PAGE NOS.33 & 34) 7. I HAVE THROUGH THE FACTS OF THE CASE, SUBMISSIO NS OF THE ASSESSEE AND REASON GIVEN BY THE ASSESSING OFFICER IN THE AS SESSMENT ORDER FOR INVOKING ADDITION ON THE HEADS DEEPAWALI EXPENSES, GENERAL EXPENSES, GENERATOR EXPENSES, OFFICER EXPENSES, POO JA EXPENSES, REPAIR & MAINTENANCE AND TRAVELLING & CONVEYANCE. IT IS NOTICED THAT DISALLOWANCES MENTIONED ABOVE HAVE BEEN MADE O N AD-HOC AND LUMP SUMP BASIS WITHOUT ASSIGNING ANY JUSTIFICATION OR REASONING. IT OBSERVED THAT THE ASSESSING OFFICER HAS MADE DISALL OWANCE MERELY ON THE GROUND MAINTAINED THAT BEING NOT FULLY VERIFIAB LE BUT ON OTHER HAND THE ASSESSING OFFICER HAS MENTIONED IN HIS ORD ER BOOKS OF ACCOUNT HAS BEEN MAINTAINED PROPERLY. THIS WORKING OF THE ASSESSING OFFICER ONLY SHOWS THAT THE DISALLOWANCES HAVE BEEN MADE CAPRICIOUSLY WITHOUT PROPERLY MEASURING ACTUAL EXTE NT OF UNVERIFIABLITY. THE CASE CLEARLY GETS HIT BY THE D ECISION IN THE CASE OF M/S CHANDRA CONFECTIONARY P. LTD. REPORTED IN 2003( 2) MTC 1022, WHEREIN IT HAS BEEN HELD BY THE HONBLE ITAT BENCH, LUCKNOW THAT SUCH AD-HOC DISALLOWANCES, WITHOUT ASSIGNING ANY RE ASONS AND WITHOUT POINTING OUT ANY DEFECT, ARE UNJUSTIFIABLE. IN VIEW OF ABOVE FACTUAL POSITION, THE DISALLOWANCES MENTIONED IN AB OVE ARE HEREBY DELETED. 17. WE HAVE HEARD THE LD. REPRESENTATIVE OF THE PAR TIES. THE AD-HOC DISALLOWANCE MADE BY THE A.O. HAS BEEN DELETED BY T HE CIT(A) FOLLOWING A ITA NO.143/A/2012 AYS. 2009-10 19 DECISION OF I.T.A.T., LUCKNOW BENCH. THE REVENUE H AS FAILED TO DISTINGUISH THE FACTS OF THE ORDER FOLLOWED BY THE CIT(A) AND THE F ACTS OF THE CASE UNDER CONSIDERATION. FOLLOWING THE DETAILED DISCUSSIONS MADE IN PARAGRAPH NOS.9, 10 & 11 OF THIS ORDER, TO MAINTAIN CONSISTENCY, WE ALSO FOLLOW THE ORDER OF I.T.A.T., LUCKNOW BENCH IN THE CASE OF CHANDRA CONFECTIONARY PVT. LTD. (SUPRA) AND IN THE LIGHT OF THE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). THE ORDER OF CIT(A) ON THE ISSUE IS CONFIRMED. 18. AS REGARDS GROUND NO.5, THE CIT(A) HAS IGNORED PROVISIONS OF SECTION 250(6). WE FIND THAT THE ORDER OF CIT(A) IS IN ACC ORDANCE WITH SECTION 250(6) OF THE ACT. THE CIT(A) CONSIDERED A.O.S POINT-WISE O BJECTION AND ASSESSEES SUBMISSIONS BEFORE GIVING HIS CONCLUSION. WE, THER EFORE, DO NOT FIND SUBSTANCE IN THIS GROUND OF APPEAL RAISED BY THE REVENUE. THERE FORE, THE SAME IS REJECTED. 19. GROUND NOS.6 & 7 ARE GENERAL IN NATURE. 20. IN THE RESULT, APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* ITA NO.143/A/2012 AYS. 2009-10 20 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ALLAHABAD BENCH, ALLAHABAD 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, ALLAHABAD TRUE COPY