Epitome Components Ltd., Ahmednagar V. DCIT Ahmednagar Circle, Ahmednagar

ITA 1464/PUN/2010

• Counselvise Citation: 146424514 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: C D UPASANI
• Keywords: Opportunity of being heard; Bad and doubtful debts; Corroborative evidences

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDER KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1464/PN/2010 (ASSTT.YEAR : 2006-07) EPITOME COMPONENTS LTD., G-17, MIDC, AHMEDNAGAR .. APPELLANT PAN NO. AAACE 5491L VS. DCIT, AHMEDNAGAR CIRCLE, AHMEDNAGAR .. RESPONDENT APPELLANT BY : SRI C.D. UPASANI RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 11-06-2012 DATE OF PRONOUNCEMENT : 14 -06-2012 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 20-09- 2010 OF THE CIT(A)-I, PUNE RELATING TO THE ASSESSME NT YEAR 2006-07. 2. IN GROUNDS OF APPEAL NO. 1 THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS. 1 LAKH MAD E BY THE AO ON ACCOUNT OF YIELD (WASTAGE). 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF PRINTED CIRCUIT BOARDS . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO FURNISH COMPARISON OF CONSUMPTION OF RAW MATERIAL AND PRODUCTION OF LAST TWO YEARS. FROM THE DETAILS FURNISHED BY THE ASSESSEE THE AO OBSERVED THAT CONS UMPTION IN TERMS OF VALUE DURING THE YEAR IS MORE THAN THE IMMEDIATE PREVIOUS ASSESSMENT YEAR. THE AO 2 THEREFORE ASKED THE ASSESSEE TO EXPLAIN THE HIGHER WASTAGE WHICH WAS THE APPARENT CAUSE OF LOWER YIELD. IN RESPONSE TO THE SAME, IT WAS EXPLAINED BY THE ASSESSEE THAT THE PRINTED CIRCUIT BOARDS ARE TECHNICAL PRODUCTS A ND ARE MANUFACTURED AS PER THE REQUIREMENTS OF THE BUYERS. THEY VARY ACCORDING TO THE SPECIFICATIONS GIVEN RESULTING INTO VARIATION IN YIELD OR WASTAGE WITHIN A RANGE. IN SUPPORT OF THE SAME RG-1 REGISTER WAS PRODUCED. MONTH-WISE TABLE OF WA STAGE WAS EXAMINED BY THE AO WHO NOTED THAT THERE WAS NO UNIFORMITY IN THE PA TTERN OF LOSSES AND THE ASSESSEE COULD NOT EXPLAIN THE SAME. THE AO FURTHE R NOTED THAT DAY-TO-DAY RECORDS ARE NOT MAINTAINED TO SHOW BATCH-WISE GENERATION OF COPPER WASTE WHICH IS ONE OF THE MOST IMPORTANT RAW MATERIAL USED. HE FURTHER N OTED THAT THERE IS NO SUPPORTING EVIDENCE IN THE FORM OF WEIGH SLIP SHOWING CONSUMPT ION OF COPPER CLAD LAMINATES AND GENERATION OF WASTE FROM THE SHEETS AS PER RG-1 REGISTER. THEREFORE, THE EXPLANATION SUBMITTED BY THE ASSESSEE TO EXPLAIN HI GHER WASTAGE OF COPPER SHEETS WAS NOT ACCEPTED BY THE AO AS CONVINCING FOR WHICH HE MADE AN ADHOC ADDITION OF RS. 3 LAKHS FOR SUPPRESSED PRODUCTION. 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSE SSEE HAS GIVEN QUANTITATIVE DETAILS AS PER ANNEXURE-9 OF THE AUDIT REPORT. THE YIELD FOR THE CURRENT ASSESSMENT YEAR WAS SHOWN AT 84.51% AS AGAINST THE YIELD OF 83 .51% IN THE PRECEEDING ASSESSMENT YEAR WHICH WAS GIVEN TO THE AO DURING TH E COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 15-12-2008. AFTER CON SIDERING THE WORK IN PROGRESS A REVISED STATEMENT WAS FILED BEFORE THE CIT(A) ACCOR DING TO WHICH THE YIELD FOR THE IMPUGNED ASSESSMENT YEAR WAS 85.76% AS AGAINST 86.1 8% IN THE PRECEEDING YEAR. ACCORDINGLY IT WAS SUBMITTED THAT ALTHOUGH THERE IS A MINOR FALL IN THE YIELD FOR THE IMPUGNED ASSESSMENT YEAR, HOWEVER, THIS FALL IN YIE LD IS DUE TO VARIOUS FACTORS AND CANNOT BE A GROUND FOR MAKING THE ADDITION. IT WAS SUBMITTED THAT IN VIEW OF THE HIGHER WASTE AND LOWER PRODUCTION THE ASSESSEE HAS TO MODULATE/REVISE AND ADOPT 3 THE WORKING TO SUIT CUSTOMERS REQUIREMENT. FOR BR INGING THOSE CHANGES ALSO SOME TRIAL AND ERRORS ARE REQUIRED INITIALLY WHICH RESUL TS IN WASTAGE DEPENDING ON THE NUMBER OF TIMES THE CHANGES ARE TO BE BROUGHT IN. IT WAS SUBMITTED THAT INTERRUPTION IN POWER SUPPLY IS ALSO ONE OF THE REA SON FOR WASTAGE AS THE BATCH IN PROGRESS AT THE TIME OF INTERRUPTION OF POWER GETS AFFECTED. THE VARIOUS STAGES THROUGH WHICH THE PRODUCTION TAKES PLACE WAS EXPLAI NED TO THE CIT(A) AND IT WAS ARGUED THAT WASTAGE TAKES PLACE AT DIFFERENT STAGES OF THE PROCESS, I.E., SAWING OF COPPER CLAD LAMINATES FOR MAKING DIFFERENT SIZES OF PCBS, REJECTION OF PCBS DUE TO DAMAGE DURING HANDLING, ETCHING, PUNCHING AND DR ILLING ETC. ACCORDINGLY IT WAS SUBMITTED THAT THE ADDITION MADE BY THE AO SHOULD B E DELETED. 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LEARNED CIT(A) SUSTAINED RS. 1 LAKH OUT OF RS. 3 LAKHS BY THE AO B Y HOLDING AS UNDER : I HAVE CAREFULLY CONSIDERED THE FACTS AS ARE EMAN ATING FROM THE DISCUSSIONS MADE BY THE ASSESSING OFFICER IN THE AS SESSMENT ORDER AND THE SUBMISSIONS MADE DURING APPEAL AND EVEN BEFORE ASSE SSING OFFICER. FROM THE ABOVE THERE CANNOT BE ANY DISPUTE TO THE FACT T HAT THE MANUFACTURING PROCESS INVOLVED IS SUCH WHICH CAN RESULT IN VARIAT ION OF YIELD. THE ASSESSEE HAS DEMONSTRATED CLEARLY THAT THE PCBS MANUFACTURED BY THEM FOR DIFFERENT CLIENTS VARY IN DETAILS. THE PRIMARY RAW MATERIALS FOR MAKING PCBS ARE COPPER CLAD LAMINATES AND CUPRIC CHLORIDE ETC. THE COPPER CLAD LAMINATES WHICH ARE OF DEFINITE SIZE ARE CUT INTO PIECES AS P ER THE REQUIREMENTS OF THE PCBS TO BE MANUFACTURED DEPENDING ON THE ORDERS REC EIVED AND THEREFORE, THE WASTAGE GENERATED ON CUTTING OF LARGE COPPER CL AD LAMINATES INTO SMALLER PIECES OF PCBS HAS TO DIFFER. THE VARIATION OR THE SHORTAGE IN YIELD POINTED OUT BY THE ASSESSING OFFICER IS NOT VERY SIGNIFICAN T. THE ADDITION MADE IS ALSO BASED ON ADHOC ESTIMATION. HOWEVER, THE DEFEC T POINTED OUT BY THE ASSESSING OFFICER IN RESPECT OF MAINTENANCE OF RECO RDS AT DIFFERENT STAGE OF MANUFACTURING, IS IN MY OPINION A RELEVANT ISSUE BA SED ON WHICH THE CONTENTION OF THE ASSESSING OFFICER THAT THE GENERA TION OF WASTAGE BEING CLAIMED IS UNVERIFIABLE, LOOKS WORTHY OF CONSIDERAT ION. THE FINDING OF THE 4 ASSESSING OFFICER THAT THE RECORDS WERE FOUND NOT M AINTAINED IN A MANNER WHICH COULD BE VERIFIED TO EXAMINE THE CO-RELATION BETWEEN THE WASTAGE AND THE SIZE OF THE PCBS UNDER MANUFACTURE FOR DIFFEREN T BATCHES, NEEDS TO BE CONSIDERED. IN VIEW OF THE ABOVE, I FIND THAT THE ASSESSING OFFICER HAS A POINT WHICH NEEDS CONSIDERATION. EVEN IF, THEORETI CALLY THE CONTENTION OF THE APPELLANT THAT THE YIELD WOULD CHANGE DEPENDING ON THE SPECIFICATIONS OF PCBS IS FOUND CORRECT, THE APPELLANT HAS TO MAINTAI N ITS RECORD IN A MANNER WHICH COULD SATISFY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, I FIND THAT THE ASSESSING OFFICER HAS A GROUND TO RESORT TO EST IMATE DISALLOWANCE OUT OF THE VALUE OF LOWER YIELD CLAIMED IN THIS YEAR. THE ADDITION HAS BEEN MADE AT RS. 3,00,000/- ON ESTIMATE BASIS. ON CONSIDERATION OF TOTALITY OF THE FACTS AND CIRCUMSTANCES AVAILABLE, I FIND THAT THE ESTIMA TION IS ON THE HIGHER SIDE AS THE FALL IN YIELD IS NOT VERY SIGNIFICANT. IN MY CONSIDERED OPINION, THE DISALLOWANCE CAN BE RESTRICTED TO RS. 1,00,000/-. THE ASSESSEE THEREFORE, GETS PART RELIEF AND THIS GROUND OF APPEAL IS HELD PARTLY ALLOWED. 5.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO MADE THE ADDITION DUE TO VARIATION IN THE YIELD AND HIGHER WASTAGE AS COMPARED TO THE PRECEEDING ASSESS MENT YEAR AND MADE ADHOC ADDITION OF RS. 3 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. WE FIND ON THE BASIS OF THE VARIOUS ARGUMENTS ADVANCED BY THE ASSESSEE THE LEARNED CIT(A) SUSTAINED ADDITION OF RS. 1 LAKH ALTHOUGH HE HAS OBSERVED THA T THE ASSESSEE HAS DEMONSTRATED CLEARLY THAT THE PCBS MANUFACTURED BY THEM FOR DIFF ERENT CLIENTS VARY IN DETAILS, THE ADDITION MADE BY THE AO IS ON ADHOC BASIS AND THE V ARIATION OR THE SHORTAGE IN YIELD POINTED OUT BY THE AO IS NOT VERY SIGNIFICANT . STILL HE HAS SUSTAINED ADDITION TO THE TUNE OF RS. 1.00 LAKH ON THE GROUND THAT THE AO HAS A POINT WHICH NEEDS CONSIDERATION. WE FIND THE SUBMISSION OF THE LEARN ED COUNSEL FOR THE ASSESSEE THAT NO SUCH ADDITION WAS MADE IN THE PAST COULD NOT BE CONTROVERTED BY THE LEARNED 5 D.R. FROM THE VARIOUS DETAILS FURNISHED BY THE ASS ESSEE BEFORE THE AO AND THE CIT(A) AS WELL AS BEFORE US WE ARE OF THE OPINION T HAT THERE IS BOUND TO BE GENERATION OF WASTAGE ON CUTTING OF LARGE COPPER CL AD LAMINATES INTO SMALLER PIECES OF PCBS WHICH ARE OF DIFFERENT SIZES ACCORDING TO T HE REQUIREMENTS OF THE CUSTOMERS. SINCE THE MANUFACTURING PROCESS INVOLVE S SOME WASTAGE AND SINCE NO ADDITIONS/DISALLOWANCE WERE MADE IN THE PAST ON ACC OUNT OF SUCH LOW YIELD AND SINCE THE ADDITION HAS BEEN MADE ON THE BASIS OF PR ESUMPTIONS, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT NO DISALLOWANCE ON THIS ACCOUNT IS CALLED FOR. WE ACCORDINGLY SET-ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION. THIS GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWE D. 7. IN GROUND OF APPEAL NO. 2 THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 1 LAKH ON ACCOUNT OF CARRIAGE INWARD/OUTWARD. 8. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE HAS DEBITED RS. 59,13,485/- AS CARRIAGE INWARD/OUTWARD. THE AO WHILE EXAMINING TH E DETAILS FOUND THAT SOME OF THE EXPENSES ARE NOT FULLY SUPPORTED WITH PROPER E VIDENCES AND VOUCHERS SINCE CERTAIN VOUCHERS ARE OF SELF MADE. IN ABSENCE OF S ATISFACTORY EXPLANATION GIVEN BY THE ASSESSEE REGARDING THE SELF MADE VOUCHERS THE A O DISALLOWED AN AMOUNT OF RS. 1 LAKH ON ADHOC BASIS. 9. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ALLE GATION OF THE AO THAT VOUCHERS ARE SELF MADE IS NOT TRUE. IT WAS SUBMITT ED THAT PAYMENTS HAVE BEEN MADE TO THE PARTIES WHO HAVE SUBMITTED BILLS FOR THE WOR K DONE AND DETAILS WERE SUBMITTED TO THE AO AS PER LETTER DATED 26-08-2008. 6 10. HOWEVER, THE LEARNED CIT(A) WAS NOT CONVINCED W ITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ADDITION MA DE BY THE AO. WHILE DOING SO HE NOTED THAT ALTHOUGH THE ASSESSEE HAS SUBMITTE D DETAILS IN RESPECT OF VARIOUS EXPENSE HEADS AS WELL AS LIST OF DEPOSITS CLOSING S TOCK ETC. HOWEVER, NEITHER THE DETAILS IN RESPECT OF CARRIAGE INWARD/OUTWARD WAS S UBMITTED NOR ANY EVIDENCE WAS PRODUCED OR CLAIM MADE ABOUT THE GENUINENESS OF SEL F MADE VOUCHERS QUESTIONED BY THE AO. HE FURTHER NOTED THAT THE DISALLOWANCE OF RS. 1 LAKH OUT OF THE TOTAL EXPENSES OF RS. 66.48 LAKHS IS SLIGHTLY MORE THAN 1 % WHICH IS REASONABLE. HE ACCORDINGLY UPHELD THE ADDITION MADE BY THE AO. AG GRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. THE FINDING GIVEN BY THE LEARNED CIT(A) THAT AS PER TH E LETTER DATED 26-08-2008 ADDRESSED TO THE AO, (A COPY OF WHICH WAS SUBMITTED DURING THE COURSE OF APPEAL PROCEEDINGS) NEITHER THE DETAILS IN RESPECT OF CARR IAGE INWARD/OUTWARD WAS SUBMITTED NOR ANY EVIDENCE WAS PRODUCED OR CLAIM MA DE ABOUT THE GENUINUITY OF SELF MADE VOUCHERS QUESTIONED BY THE ASSESSING OFFI CER COULD NOT BE CONTROVERTED BY THE LEARNED COUNSEL FOR THE ASSESSEE. UNDER THES E CIRCUMSTANCES THE QUESTION OF EXISTENCE OF CERTAIN SELF MADE VOUCHERS CANNOT BE R ULED OUT. HOWEVER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE DISALLOWANCE OF RS. 1 LAKH APPEARS TO BE ON THE HIGHER SIDE. WE, THEREFORE, RESTRICT SUCH DISALLOW ANCE TO RS. 50,000/- . THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 7 12. IN GROUND OF APPEAL NO. 3 THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS . 1 LAKH MADE BY THE AO ON ACCOUNT OF PROCESSING CHARGES. 13. AFTER HEARING BOTH THE SIDES, WE FIND OUT OF RS . 25,42,059/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF PROCESSING CHARGES THE AO DI SALLOWED AN AMOUNT OF RS. 1 LAKH ON AHOC BASIS ON THE GROUND THAT CERTAIN VOUCH ERS IN RESPECT OF SUCH EXPENSES ARE SELF MADE. IN APPEAL, THE LEARNED CIT(A) RESTR ICTED SUCH DISALLOWANCE TO RS. 30,000/-. ALTHOUGH THE ASSESSEE HAS TAKEN THE GROU ND FOR RS. 1 LAKH BEING DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LE ARNED CIT(A) WE FIND THE LEARNED CIT(A) HAS RESTRICTED SUCH DISALLOWANCE TO RS. 30,000/-. WHILE DOING SO, HE HAS HELD THAT THE ASSESSEE HAS NOT MADE SUFFICIE NT ATTEMPT TO SATISFY THE AO. HOWEVER, THE ADDITION MADE ON ESTIMATE BASIS BEING FOUND ON THE HIGHER SIDE HE RESTRICTED SUCH DISALLOWANCE TO RS. 30,000/-. THE ORDER OF THE CIT(A) SUSTAINING RS. 30,000/- UNDER THE FACTS AND CIRCUMSTANCES OF T HE CASE IN OUR OPINION IS JUST AND PROPER AND DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY THE SAME IS UPHELD. THIS GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY D ISMISSED. 14. IN GROUND OF APPEAL NO. 4 THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS. 7,25,931/- AS BAD DEBT BY THE AO. 15. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE HAS CLAIMED BAD DEBT OF RS. 15,50,970/- ON ACCOUNT OF 3 PARTIES THE DETAILS OF WHICH ARE AS UNDER : S.NO. NAME OF CUSTOMERS ADDRESS AMOUNT 1 BIGESTO FOODS PVT. LTD. E-29, SITE B, SURAJPURE, INDUSTRIAL AREA, DIST G.B. NAGAR, NOIDA 825039.00 2 VIDEOCON INDUSTRIES LTD. 14KM, STONE, AURANGABAD,PAITHAR ROAD, CHITEGAON,AURANGABAD-4311005 550098.00 3 HOTLILNE ELECTRONICS LTD. PLOT NO.8A, UDYOG VIHAR, PART-I & II, NOIDA, G.B. NAGAR, NOIDA (JP) 175833.75 TOTAL 1550970.75 8 16. ON BEING QUESTIONED BY THE AO IT WAS SUBMITTED THAT THE AMOUNT OF RS. 8,25,039/- IN THE NAME OF BIGESTO FOODS PVT. LTD., HAS BEEN RECOVERED IN THE SUBSEQUENT YEAR AND OFFERED FOR TAXATION IN THE ASS ESSMENT YEAR 2008-09. THEREFORE, THE AO DID NOT MAKE ANY ADDITION ON THIS AMOUNT. HOWEVER, AS REGARDS THE OTHER 2 PARTIES WHICH HAS BEEN CLAIMED AS BAD D EBT THE AO REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT FOR CLAIMING SUCH D EDUCTION THE ASSESSEE HAS TO PROVE THAT ; I) THE TRANSACTION HAS BEEN OUT OF ROUTINE BUSINESS II) THE TRANSACTION HAD BEEN OFFERED FOR THE PURPOS E OF COMPUTATION OF INCOME IN THE EARLIER YEARS. III) SUFFICIENT RECOVERY STEPS HAVE BEEN TAKEN. IV) RECOVERY STEPS TAKEN HAVE PROVED TO BE FUT ILE. V) THERE IS NO POSSIBILITY OF RECOVERY IN THE NEAR FUTURE. 17. SINCE IN THE INSTANT CASE THE ASSESSEE HAS NOT TAKEN ANY STEPS TO RECOVER THE BAD DEBTS THE AO DISALLOWED THE CLAIM OF BAD DEBT T O THE EXTENT OF RS. 7,25,931/-. IN APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITION M ADE BY THE AO. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN AP PEAL BEFORE US. 18. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO DISALLOWED THE CLAIM OF B AD DEBT TO THE EXTENT OF RS. 7,25,931/- ON THE GROUND THAT THE ASSESSEE HAD NOT TAKEN ANY STEPS TO RECOVER THE BAD DEBTS. WE FIND THE LEARNED CIT(A) UPHELD THE D ISALLOWANCE MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAS ONLY SUBMITTED THE DETAILS OF LEDGER AND WAS UNABLE TO ESTABLISH BEFORE THE AO THAT AN HONEST DE CISION HAS BEEN MADE FOR WRITING OFF BAD DEBTS. DURING THE COURSE OF HEARIN G BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE ARE REALLY NO T BAD DEBTS BUT VARIOUS OUTSTANDINGS ON ACCOUNT OF SALES WHICH SHOULD HAVE BEEN REVERSED. IT WAS ALSO ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT IN THE INTEREST OF JUSTICE THE 9 MATTER SHOULD BE RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. SINCE THE ARGUMENTS ADVANCED BY THE LEARNED COUNSEL FOR THE A SSESSEE AT THE TIME OF HEARING BEFORE US IS CONTRARY TO FACTS BROUGHT ON RECORD BY THE AO AS WELL AS THE CIT(A), WE, THEREFORE, IN THE INTEREST OF JUSTICE, DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRE SH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE ASSESSEE IS ACCORD INGLY ALLOWED FOR STATISTICAL PURPOSES. 19. IN GROUND OF APPEAL NO. 5 THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 4 LAKH S MADE BY THE AO ON ACCOUNT OF STIPEND TO TRAINEES. 20. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS DEBI TED AN AMOUNT OF RS. 62,62,933/- AS STIPEND TO TRAINEES. THE AO ASKED T HE ASSESSEE TO FURNISH THE DETAILS OF TRAINING IMPARTED TO THESE EMPLOYEES BY GIVING T HE NAMES OF THE INSTITUTES THROUGH WHICH THE TRAINING HAS BEEN GIVEN, NATURE O F TRAINING, NAME AND DETAILS OF TRAINING, VENUE OF TRAINING ETC. INSPITE OF ASKING FOR THE SPECIFIC DETAILS THE ASSESSEE STATED THAT NO OUTSIDE AGENCY WAS ENGAGED FOR GIVING THE TRAINING. IT WAS SUBMITTED THAT THE TRAINING WAS GIVEN AT THE FACTOR Y PREMISES BY THE SENIOR MEMBER OF THE FACTORY. NO SPECIFIC AGENDA OF THE TRAINING WAS SUBMITTED EXCEPT COPIES OF THE APPLICATION SEEKING AN EMPLOYMENT. FROM THE VA RIOUS DETAILS GIVEN BY THE ASSESSEE THE AO NOTED THAT NO STATISTICAL DATA, NO DATES OF TRAINING, NO AGENDA OF THE TRAINING, NO VENUE OF THE TRAINING ARE SUBMITTED. THE REPLY GIVEN BY THE ASSESSEE IS A GENERAL STATEMENT. THEREFORE, ACCORDING TO THE A O THERE IS NO JUSTIFICATION FOR PAYMENT MADE AS STIPEND TO THE TRAINEES. ACCORDI NG TO HIM STIPEND IS NOTHING 10 BUT SALARY/WAGES PAYMENT MADE BY THE ASSESSEE TO TH E WORKERS. HE OBSERVED THAT IF STIPEND IS CLUBBED WITH MANUFACTURING WAGES/SALA RY, THERE APPEARS TO BE EXCESSIVE PAYMENT. REJECTING THE VARIOUS EXPLANATI ONS GIVEN BY THE ASSESSEE THE AO MADE ADHOC DISALLOWANCE OF RS. 4 LAKHS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 21. IN APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITI ON MADE BY THE AO BY HOLDING AS UNDER : I HAVE CAREFULLY CONSIDERED THE ISSUE IN APPEAL AS IS EMANATING FROM THE ASSESSMENT ORDER AS WELL AS FROM THE SUBMISSIONS OF THE APPELLANT. THE APPELLANT HAS CLAIMED AN EXPENDITURE OF RS. 62,62,9 33/- AS STIPEND TO TRAINEES. SUCH A HUGE EXPENDITURE ON COMPARISON TO THE OPERATIONS OF THE APPELLANT LOOKS SUSPICIOUS. HOWEVER, THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MEANINGFUL EVIDENCE WHICH COULD ESTAB LISH THAT THE EXPENDITURE IS BOGUS. HE HAS MERELY RELIED ON THE QUERIES MADE BY HIM REGARDING THE NATURE AND EXCESSIVENESS OF THE EXPEN SE AND REPLIES RECEIVED ON THE JUSTIFICATION OF THE EXPENDITURE BY THE APPE LLANT, FOR HOLDING THAT THE EXPENSE IS EXCESSIVE IN NATURE AND THEREFORE, RS. 4 ,00,000/- IS DISALLOWED AND ADDED BACK. THE ADDITION IS UNDOUBTEDLY ON EST IMATE AND ADHOC BASIS. THIS THROWS A PROBLEM FOR PROPER ADJUDICATION IN TH E FACTS AND CIRCUMSTANCES OF THE CASE WHICH IS REQUIRED TO BE H ANDLED. ON PROPER EXAMINATION, I AM ALSO OF THE VIEW THAT SUCH A HUGE EXPENDITURE UNDER THE HEAD STIPEND DOESNT LOOK JUSTIFIED BUT WHETHER T HE SAME IS BOGUS OR NOT AND IT YES, TO WHAT EXTENT CANNOT BE DECIDED ON THE AVAILABLE MATERIAL. IT IS OBSERVED THAT THE ASSESSING OFFICER HAS DISALLOWED RS. 4,00,000/- OUT OF THE TOTAL EXPENDITURE OF RS. 62,62,933/-, WHICH IS APPR OXIMATELY 6% ONLY. IN VIEW OF THE FACT THAT THE ASSESSING OFFICER HAS MAD E A TOKEN ADDITION ONLY ON THE FACTS FOUND THAT THE EXPENDITURE IS EXCESSIVE A ND DIS-PROPORTIONATE TO THE ACTIVITIES OF THE APPELLANT AND THE RELEVANT JUSTIF ICATION WERE NOT FORTHCOMING, THE ADDITION IS SUSTAINED. THE APPEAL IS THEREFORE, DISMISSED. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE FIND ALTHOUGH THE CIT(A) HAS OBSERVED THAT THE ADDITION IS ON ESTIMATE AND ADHOC BASIS STILL HE HAS SUSTAINED THE ADDITION MADE BY THE AO ON THE 11 GROUND THAT SUCH HUGE EXPENDITURE UNDER THE HEAD S TIPEND DOES NOT LOOK JUSTIFIED. HE FURTHER HELD THAT WHETHER THE SAME IS BOGUS OR N OT AND IF YES TO WHAT EXTENT CANNOT BE DECIDED ON THE AVAILABLE MATERIAL. HAVIN G OBSERVED SO HE UPHELD THE DISALLOWANCE MADE BY THE AO ON THE GROUND THAT THE SAME IS APPROXIMATELY 6% OF THE TOTAL EXPENDITURE OF RS. 62,62,933/-. IN OUR O PINION MERELY BECAUSE THE DISALLOWANCE IS A SMALL PERCENTAGE OF THE TOTAL EX PENDITURE CANNOT BE A GROUND FOR SUSTAINING THE ADDITION. IF THE CLAIM IS BOGUS, TH E ENTIRE AMOUNT HAS TO BE DISALLOWED AND IF NOT BOGUS THE WHOLE AMOUNT SHOULD BE ALLOWED AS DEDUCTION BUT NO ADHOC ADDITION CAN BE MADE ON THE BASIS OF PRESU MPTIONS AND SURMISES. IN THIS VIEW OF THE MATTER, THE ORDER OF THE CIT(A) SUSTAIN ING THE DISALLOWANCE OF STIPEND IN OUR OPINION IS NOT JUSTIFIED. THE SAME IS ACCOR DINGLY DIRECTED TO BE DELETED. THIS GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY A LLOWED. 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE 2012. SD/- SD/- (SHAILENDER KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED THE 14 TH JUNE 2012 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT CONCERNED 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE 12