S.D. ENTERPRISES, MUMBAI V. M/s. DCIT CIR. - 18(1), MUMBAI

ITA 1558/MUM/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4294 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 18-10-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 04-03-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Opportunity of being heard; Competent authority
• Section: 80HHC; 133A; 133(6)

Judgement Text

1 ITA NOS 2340 & 1558/MUM/2008 I II IN THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH E EE E MUMBAI MUMBAI MUMBAI MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI D K AGARWAL, JM & SHRI D K AGARWAL, JM & SHRI D K AGARWAL, JM & SHRI D K AGARWAL, JM & SHRI SHRI SHRI SHRI R R R R K PANDA, AM K PANDA, AM K PANDA, AM K PANDA, AM ITA NOS. 2340/MUM/2008 ITA NOS. 2340/MUM/2008 ITA NOS. 2340/MUM/2008 ITA NOS. 2340/MUM/2008 (ASSESSMENT YEAR 2003-04 ) THE DY. COMMR OF INCOME TAX CIR. 18(1), MUMBAI VS S D ENTERPRISES 459 A/2 SHAH & NAHAR INDS. ESTATE DHANRAJ MILL COMPOUND S J MARG LOWER PAREL (WEST),MUMBAI (APPELLANT) (RESPONDENT) ITA NOS. 1558/MUM/2008 ITA NOS. 1558/MUM/2008 ITA NOS. 1558/MUM/2008 ITA NOS. 1558/MUM/2008 (ASSESSMENT YEAR 2003-04 ) S D ENTERPRISES 459 A/2 SHAH & NAHAR INDS. ESTATE DHANRAJ MILL COMPOUND S J MARG LOWER PAREL (WEST),MUMBAI VS THE DY. COMMR OF INCOME TAX CIR. 18(1), MUMBAI (APPELLANT) (RESPONDENT) PAN AAKFS5740H PAN AAKFS5740H PAN AAKFS5740H PAN AAKFS5740H ASSESSEE BY: SHRI JAYANT R BHATT REVENUE BY: SHRI HEMANT LAL O OO O R RR R D DD D E EE E R RR R PER PER PER PER R RR R K PANDA K PANDA K PANDA K PANDA: :: : THESE ARE CROSS APPEALS THE FIRST ONE BY THE REVEN UE AND THE OTHER ONE BY THE ASSESSEE AND ARE DIRECTED AGAINST THE ORDER DAT ED 1.1.2008 OF THE CIT(A)- XVIII, MUMBAI RELATING TO ASSESSMENT YEAR 2003-04. FOR THE SAKE OF CONVENIENCE THESE ARE HEARD TOGETHER AND ARE BEING DISPOSE OF B Y THIS COMMON ORDER. IT ITIT ITA NOS. 2340/MUM/2008 (BY THE REVENUE A NOS. 2340/MUM/2008 (BY THE REVENUE A NOS. 2340/MUM/2008 (BY THE REVENUE A NOS. 2340/MUM/2008 (BY THE REVENUE ) )) ) 2 GROUNDS OF APPEAL NOS.(I) 2 & 3 BY THE REVENUE, B EING GENERAL IN NATURE, ARE DISMISSED. 3 GROUNDS OF APPEAL NO(II) BY THE REVENUE READS AS UNDER: 2 ITA NOS 2340 & 1558/MUM/2008 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE L D CIT(A) ERRED IN DELETING THE ADDITION OF ` 3,27,066/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO RECONCILE THE AMOUNT OF ABOVE DI FFERENCE IN PURCHASES DURING THE ASSESSMENT PROCEEDINGS. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DISALLOWED AN AMOUNT OF ` 3,27,066/- BEING THE OF DIFFERENCE IN ACCOUNT BETW EEN THE ASSESSEE AND M/S MUKTI METALS PVT LTD. THIS ADDITION WAS MA DE ON THE BASIS OF INFORMATION CALLED FOR U/S 133(6) OF THE I T ACT WHEREBY THE DI FFERENCE TO THIS EXTENT WAS NOTICED BY THE ASSESSING OFFICER. 2.2 BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE AS SESSEE HAD MADE PURCHASES FROM M/S MUKTI METALS PVT LTD AT ` 38,94,378/- FOR THE ACCOUNTING YEAR 2002-03WHICH INCLUDES PURCHASES MADE VIDE BILL NO.380 FOR ` 3,27,066/-. THESE GOODS WERE FOUND TO BE DEFECTIVE AND THE SAID BILL WAS THEREFORE NOT ACCEPTED. THE SUPPLIER WAS ASKED TO RECTIFY THE DEF ECTS. AFTER HAVING REMOVED THE DEFECTS POINTED OUT BY THE ASSESSEE, THE SUPPLI ER COMPANY RETENDERED THE GOODS IN THE MONTH OF APRIL 2002. AS A CONSEQUENCE OF THIS THE SAID BILL WAS ACCOUNTED FOR IN THE FINANCIAL YEAR 2002-03. HOWEV ER, THE SUPPLIER ACCOUNTED FOR THE SAID BILL IN FY 2001-02 FOR WHICH THE DISCR EPANCY AROSE. 3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, THE CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS FROM THE SIDE OF THE APPELLANT AND FIND THAT THE APPELLANT HAD PROVIDED ALL THESE DETAILS TO THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCE EDINGS. THE APPELLANT HAS SHOWN THE PHOTOCOPIES OF THE SUBMISSIONS PLACED BEFORE THE ASSESSING OFFICER. THE LEDGER ACCOUNT OF THE SUPPLI ER AS WELL AS THAT OF THE APPELLANT HAS BEEN SHOWN TO THE UNDERSIGNED CONFIRM ING THE ABOVE PROPOSITION. CONSIDERING THAT I OBSERVE THAT THIS I S A MERE DIFFERENCE IN ACCOUNT ON ACCOUNT OF JUSTIFIABLE SHIFTING OF A PUR CHASE BILL ENTRY FROM ONE YEAR TO THE ANOTHER YEAR DUE TO CERTAIN TIME LAG PE RTAINS REMOVAL OF THE DEFECTS IN THE GOODS. I THER4EFORE, FIND NO JUSTIFI CATION IN THIS ADDITION AND DELETE THE SAME. 4 WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH SIDES AND PERUSED THE ORDER OF THE ASSESSING OFFICER AND CIT(A). THE LD DR COUL D NOT CONTROVERT THE FACTUAL FINDINGS GIVEN BY THE CIT(A). IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO 3 ITA NOS 2340 & 1558/MUM/2008 OUR NOTICE BY THE LD DR AGAINST THE FACTUAL FINDIN GS GIVEN BY THE CIT(A), WE DO NOT FIND ANY INFIRMITY IN HIS ORDER. ACCORDINGLY, T HE SAME IS UPHELD. GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 5 GROUNDS OF APPEAL NO.(III) BY THE REVENUE READS A S UNDER: III) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80HHC ON THE TOTAL EXPORT SALE WITHOUT APPRECIATING THE FACT THAT THE SALE OF ` 1,04,30,176/- WAS REALISED ON 21.12.2003 WHICH IS BEYOND THE STIP ULATED TIME AS THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE FOR DETENTI ON OF TIME TO REMIT FOREIGN EXCHANGE TO INDIA WITHIN PRESCRIBED TIME. 5.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE ASSESSMENT PROCEEDINGS NOTED THAT AS AGAINST THE E XPORT TURNOVER OF ` 50,58,57,573/- THE ASSESSEE REALISED AN AMOUNT OF ` 1,04,30,176/- ON 21.12.2003 I.E. BEYOND SIX MONTHS OF THE PRESCRIBED TIME. ACCORDING TO THE ASSESSING OFFICER, IN THE ABSENCE OF PRODUCTION OF ANY EVIDENCE TO SHOW THAT THE COMPETENT AUTHORITY HAS GRANTED PERMISSION, THE LAT E REALISATION OF EXPORT SALES CANNOT BE CONSIDERED FOR EXPORT TURNOVER FOR THE PU RPOSE OF DEDUCTION U/S 80HHC. 5.2 BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE SA ID EXPORT REALIZATIONS WERE RECEIVED BY 5.6.2003, WHICH WAS WITHIN THE PRESC RIBED TIME AS PER R B I GUIDELINES. 5.3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE , THE CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE AR ON THIS AND FIND THAT THE AR HAS SUPPORTED HIS CONTENTIONS BY ENCLOS ING BILL WISE STATEMENT TOGETHER WITH BANK REALISATION CERTIFICATE. ALL THE SE CLEARLY SHOW THAT AS PER THE RECORD THE DATE OF REALISATION IN RESPECT O F THE OUTSTANDING BILL IS ON OR BEFORE 5.6.2003 AND NOT 21.12.2003 AS ERRONEO USLY POINTED OUT BY THE ASSESSING OFFICER. IN VIEW OF THIS CLEAR POSITI ON FROM THE RECORD OF THE APPELLANT AND INDEPENDENT RECORD OF THE BANK, THERE IS NO CASE FOR ANY DISALLOWANCE UNDER THIS HEAD. THE AO IS THEREFORE D IRECTED T ALLOW THIS DEDUCTION/S 80HHC BY INCLUDING THIS AMOUNT INTO THE ELIGIBLE TURNOVER. 4 ITA NOS 2340 & 1558/MUM/2008 6 AFTER HEARING BOTH SIDES, WE DO NOT FIND ANY INFI RMITY IN THE FINDINGS OF THE CIT(A). THE CIT(A), ON VERIFICATION OF THE BILL AS GIVEN BY THE ASSESSEE HELD THAT ASSESSING OFFICER HAS ERRONEOUSLY POINTED OUT THE DATE AS 21.12.2003 WHEREAS THE ASSESSEE HAS REALISED THE AMOUNT BY 5.6.2003. I N VIEW OF THE CATEGORICAL FINDINGS GIVEN BY THE CIT(A) AND IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 7 GROUNDS OF APPEAL NO.IV) BY THE REVENUE READS AS UNDER: IV) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE SCRAP SALE OF ` .35,17,754/- AS A PART OF TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION /S 80HHC WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER RI GHTLY CONSIDERED THAT THERE WAS NO DIRECT NEXUS BETWEEN THE INCOME RECEI VED AND THE EXPORT ACTIVITIES. 6.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN SALE OF SCRAP OF ` 35,17,754/- AND INCLUDED THE SAME IN THE TOTAL TURNOVER AND BUSINESS PROFITS. ACCORDING TO THE ASSESSING OFFICER FOR THE PURPOSE OF DEDUCTION U/S 80HHC, THERE SHOULD BE DIR ECT NEXUS BETWEEN THE INCOME RECEIVED AND THE EXPORT ACTIVITY. SINCE THER E IS NO DIRECT NEXUS BETWEEN THE SCRAP SALE AND THE EXPORT ACTIVITY, HE EXCLUDED THIS SALE OF SCRAP OF ` 35,17,754/- FROM THE BUSINESS PROFITS FOR THE PUR POSE OF COMPUTING DEDUCTION U/S 80HHC OF THE I T ACT. 6.2 IN APPEAL, THE CIT(A) FOLLOWING THE DECISION O F THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SYMTEX FASHIONS LTD VS ACIT REPORTED IN 92 ITD 535 DIRECTED THE ASSESSING OFFICER TO TREAT THE SCRAP S ALE AS PART OF THE TOTAL TURNOVER. 6.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE RE VENUE IS IN APPEAL HERE BEFORE US. 7 AFTER HEARING BOTH THE SIDES, WE ARE OF THE CONS IDERED OPINION THAT THIS ISSUE STANDS DECIDED IN FAVOUR OF THE REVENUE BY T HE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ASIAN STAR CO VS ACIT REPORTED IN 326 ITR 56. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A ) AND RESTORE THAT OF THE ASSESSING OFFICER. THIS GROUND BY THE REVENUE IS AC CORDINGLY ALLOWED. 8 GROUNDS OF APPEAL NO (V) BY THE REVENUE READS AS UNDER: 5 ITA NOS 2340 & 1558/MUM/2008 V) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF ` 2 CRORES OUT OF AGENCY COMMISSION OF ` . 10,43,81,002/- WITHOUT APPRECIATING THE FACT THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO PRODUCE THE PAR TY WISE DETAILS OF AGENCY COMMISSION HAVING BEEN INCURRED WHOLLY AND E XCLUSIVELY FOR BUSINESS PURPOSE. 8.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSE E FIRM HAS CLAIMED AGENCY COMMISSION OF ` 1043,81,002/- AS AGAINST ` 3,93,76,553/- IN THE PRECEDING YEAR. THE ASSESSING OFFICER ASKED THE ASSESSEE TO F URNISH FULL DETAILS ALONG WITH THE NAME AND ADDRESSES OF THE PARTIES TO WHOM THE A GENCY COMMISSION WAS PAID AND THE SERVICES RENDERED BY THE SAID PARTIES. HE ALSO ASKED THE ASSESSEE TO JUSTIFY THE ABNORMAL RISE IN THE SAID EXPENDITUR E. SINCE THE ASSESSEE COULD NOT PRODUCE ANY DETAILS IN THIS REGARD TO JUSTIFY THE G ENUINENESS OF THE EXPENDITURE, THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF ` 2CRORES ON ADHOC BASIS. 8.2 BEFORE THE CIT(A), IT WAS SUBMITTED THAT ALL TH E DETAILS CALLED FOR BY THE ASSESSING OFFICER WERE DULY SUBMITTED. THE ASSESSEE ALSO FILED COPY OF THE AGREEMENT, WHICH WAS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE CIT(A) FORWARDED THE DOCUMENTS TO THE ASSESSING OFFICER. THE ASSESSING OFFICER INFORMED THAT SURVEY ACTION U/S 133A OF THE I T ACT WAS CARRIED OUT ON THE BUSINESS PREMISES OF THE ASSESSEE ON 29.9.2006 AND IN THE COURSE OF THE SURVEY THE ASSESSEE WAS SPECIFICALLY ASKED TO FURNISH THE EVIDENCE REGARDING PAYMENT OF AGENCY COMMISSION. THE ASSESSING OFFICER FURTHER INFORMED IN THE SAID LETTER THAT NO DOCUMENTARY EVIDENCE WAS PRODUCED BY THE PA RTNER WITH REGARD TO THE CLAIM OF AGENCY COMMISSION EXPENSES EITHER DURING T HE COURSE OF SURVEY OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. NO SU CH EVIDENCE WAS ALSO TRACEABLE IN THE BUSINESS PREMISES DURING THE COURS E OF SURVEY. 8.3 ON THE BASIS OF THE REPORT FROM THE ASSESSING O FFICER, THE CIT(A) ISSUED ENHANCEMENT NOTICE U/S 251(1)(A) OF THE I T ACT TO THE ASSESSEE HOLDING THAT THE ASSESSING OFFICER INSTEAD OF DISALLOWING THE WHOLE AMOUNT HAD DELETED ONLY ` 2 CRORES. THE ASSESSEE IN RESPONSE TO THE SAID ENHANCEMENT NOTICE FILED DETAILED SUBMISSIONS BEFORE THE CIT(A), BASED ON WH ICH HE DELETED THE ENTIRE ADDITION BY HOLDING AS UNDER: 6 ITA NOS 2340 & 1558/MUM/2008 7.3 I HAVE CAREFULLY CONSIDERED THE ISSUE ARISING OUT F THE ABOVE SUBMISSIONS AND NOTICE U/S 251(1)(A). IN THE COURS E OF THE HEARING THE ASSESSING OFFICER S.H.B INAMDAR ATTENDED ON 15.11.0 7. IN THAT HEARING THE APPELLANT HAD STRESSED THAT THE COPY OF AGREEMENT, NAMES AND ADDRESS OF THE RECIPIENTS OF THE COMMISSION INCLUDING DETAILS OF SERVICES WERE PROVIDED TO THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE FORWARDING LETTER DULY STAMPED BY THE DEPARTMENT AND SIGNED BY THE ASSESSING OFFICER WAS SHOWN DURING HA T HEARING. THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE THIS CLAI M. AFTERWARD ANOTHER HEARING WAS HELD ON 26.11.07 WHICH WAS ATTENDED BY THE LD A.R SHRI DEEPAK AGARWAL, MANAGING DIRECTOR AND THE ASSESSING OFFICER. THE ASSESSING OFFICER CONTENTED IN WRITING THAT THE LET TER IN QUESTION WAS NOT AVAILABLE IN THE RECORD. THIS LETTER DATED 28.2.200 6 IS DULY ACKNOWLEDGED BY THE AO. 28.2.06 AND IS DULY STAMPED BY THE DEPAR TMENT. AS PER THE CONTENTS OF THIS FORWARDING LETTER, THE APPELLANT A PPEARS TO HAVE DULY SUBMITTED THE COPY OF AGENCY COMMISSION AGREEMENT, CONTRACT WITH OVERSEAS BUYERS ETC. THE AR MAINTAINS THAT THROUGH THIS DOCUMENT THAT ALL THE INFORMATION AS CALLED FOR BY THE AO IN THE COUR SE OF ASSESSMENT PROCEEDINGS WAS DULY SUBMITTED I.E. NAMES/ADDRESS, AGREEMENTS IN QUESTION AND THAT NATURE DETAILS OF SERVICES RENDER ED BY THE SAID PARTIES ARE ALL DULY MENTIONED IN THE AGENCY AGREEMENTS. OT HER NECESSARY DETAILS IN RESPECT OF THIS ENTIRE SUBMISSIONS WERE ALSO FUR NISHED VIDE THAT LETTER. 7.4 THE SAID LETTER BEARS THE SIGNATURE OF THE ASSE SSING OFFICER WHO PASSED THE ASSESSMENT ORDER I.E. SHRI N K V MENON. IN THE COURSE OF APPELLANT PROCEEDINGS, MY ATTENTION WAS ALSO INVITE D TO THE FACT THAT FORM NO.1AND ITS ANNEXURES WERE ALSO SUBMITTED TO THE AS SESSING OFFICER THROUGH SAME FORWARDING LETTER I.E. THE ABOVE SAID LETTER DATED 28.2.06. THE INFORMATION AS PER FORM NO.1 AND ANNEXURE HAS B EEN DULY UTILISED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER (PAGE 2 PARA 6). IN THE COURSE OF THE HEARING DATED 26.11.07 IT WAS POINTED OUT BY THE LD AR AND THE MANAGING PARTNER THAT THIS INFORMATION OF LATE REALISATION WAS NOT MADE AVAILABLE THROUGH ANY OTHER COMMUNICATION EXCE PT THAT OF LETTER DATED 28.2.06. THIS HEARING WAS CONCLUDED WITH THE OBSERVATION THAT THE OBJECTIONS IN RESPECT OF THE ABOVE LETTER DATED28.2 .06 CAN BE COMMUNICATED TO THE UNDERSIGNED ON OR BEFORE 3.12.0 7 BY ANY PARTY. NO OBJECTION IN THIS REGARD WERE RECEIVED TILL THE FIN ALISATION OF THIS ORDER. 7.5 IT IS ALSO OBSERVED THAT THE SUBSEQUENT SURVEY PROCEEDINGS CANNOT BE UTILIZED FOR MAKING ANY FURTHER ENQUIRES ON THE ISSUE ALREADY CONCLUDED BY THE AO PERTAINING TO THE PAYMENT OF AGENCY COMMI SSION. I THEREFORE, AGREE THAT ANY EVIDENCE/ENHANCEMENT ON THE BASIS OF ACTION UNDER SURVEY U/S 133A IS NOT AS PER LAW. IN VIEW OF THE ABOVE DI SCUSSION, I HOLD THAT THE APPELLANT IS VERY MUCH IN THE POSSESSION OF THE DOC UMENTARY EVIDENCE THAT ALL THE REQUIRED INFORMATION HAD BEEN DULY SUB MITTED BEFORE THE AO IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. FURTHER T HE APPELLANT WAS NOT GIVEN OPPORTUNITY EVEN TO HAVE THE PHOTOCOPIES OF THE DOCUMENTS TAKEN 7 ITA NOS 2340 & 1558/MUM/2008 BY THE DEPARTMENT IN SURVEY U/S 133A. THE ASSESSING OFFICER HAD POINTED OUT THAT THE SURVEY TEAM HAD TAKEN AWAY ONLY THE PH OTOCOPIES OF THE DOCUMENTS LENT THIS CLAIM IS NOT BORNE OUT BY THE A CTUAL INVENTORY OF DOCUMENTS/FILES DRAWN AT THE TIME OF SURVEY. TAKING ALL THE ARGUMENTS INTO CONSIDERATION AS ABOVE, I HOLD THAT THE REQUISITE I NFORMATION COVERING THIS ISSUE HAD BEEN DULY SUBMITTED TO THE ASSESSING OFFI CER. THUS, THE QUESTION OF ENHANCEMENT AND THE QUESTION OF DISALLOWANCE OF ` . 2 CRORES DOES NOT SURVIVE. IN OTHER WORDS, NOT TO SPEAK OF ANY ENHANC EMENT EVEN THE DISALLOWANCE OF ` 2 CROES MADE BY THE ASSESSING OFFICER. UNDER THIS HEAD CANNOT BE SUSTAINED. THIS GROUND OF APPEAL IS THERE FORE ALLOWED AND ENHANCEMENT NOTICE IS VACATED. 8.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE RE VENUE IS IN APPEAL HERE BEFORE US. 9 WE HAVE HEARD THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. ON GOING THROUGH THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE CIT(A), WE FIND ALTHOUGH THE ASSESSEE HAS GIVEN DETAILS OF DATE WIS E AND INVOICE WISE, THE AMOUNT OF AGENCY COMMISSION; HOWEVER, THE NATURE O F SERVICES RENDERED BY THE RECIPIENT FOR THE PURPOSE OF BUSINESS REMAIN UNVERI FIED ESPECIALLY WHEN THERE IS A HUGE JUMP IN THE EXPENDITURE DURING THE YEAR AS COM PARED TO THE PRECEDING YEAR. MERELY BECAUSE THE PAYMENTS HAVE BEEN MADE B Y CHEQUE TO FOREIGN PARTY FOR WHICH RBI PERMISSION OBTAINED, THE SAME CANNOT BE ALLOWED AS BUSINESS EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAS TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER THAT THE OTHER PARTY HAS RENDERED SERVICES TO THE ASSESSEE WHICH IS FOR THE PURPOSE OF BUSINESS. THE CIT(A) APPEARS TO HAVE COMPLETELY IGNORED THIS ASPECT. WE, THEREFORE, IN THE INTEREST OF JUSTICE, DEEM IT PROPER TO RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WIT H A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EV IDENCE TO HIS SATISFACTION REGARDING THE GENUINENESS OF THE CLAIM. NEEDLESS T O SAY THE ASSESSING OFFICER SHALL GIVE ADEQUATE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW. THIS GROUND RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. ITA NOS. 1558/MUM/2008 ITA NOS. 1558/MUM/2008 ITA NOS. 1558/MUM/2008 ITA NOS. 1558/MUM/2008 ( BY THE ASSESSEE) ( BY THE ASSESSEE) ( BY THE ASSESSEE) ( BY THE ASSESSEE) 10 THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITS APPEAL ARE AS UNDER: 8 ITA NOS 2340 & 1558/MUM/2008 I) ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A )HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ADVERTISEMENT EXPEN SES AMOUNTING TO ` . 29,65,625/- OUT OF THE ADVERTISEMENT EXPENSES ON ADHOC BASIS BEING 50% F TOTAL SUCH EXPENSES CLAIMED BY TH E COMPANY UNDER THIS HEAD. II) THE LD CIT(A) HAS ERRED IN NOT APPRECIATING THE FAC T THAT THE APPELLANT HAD PROVIDED ALL THE DETAILS OF SUCH EXPE NSES DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 10.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE AS SESSEE HAS CLAIMED ADVERTISEMENT EXPENSES OF ` 59,31,250/- AGAINST ` 29,97,232/- IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSI NG OFFICER ASKED THE ASSESSEE TO FURNISH COMPLETE DETAILS I.E NAME AND A DDRESSES OF THE PARTIES AND NATURE OF SERVICE RENDERED BY THEM. IN RESPONSE TO THE SAME, THE ASSESSEE HAS SIMPLY FURNISHED COPY OF DEBIT NOTE DATED 12.3.2003 OF LIBERTY HOUSE, P O BOX 17989, DUBAI, UAE WHEREIN IT WAS STATED THAT US $ 1,25,000 EQUIVALENT TO ` 59,31,250/- WAS DEBITED TO ASSESSEES ACCOUNT BEIN G ADVERTISEMENT AND PUBLICITY EXPENSES INCURRED FOR THE PERIOD OCT 2002 TO MARCH 2003. FROM THE REMITTANCE CERTIFICATE ISSUED BY THE STATE BANK OF INDIA, OVERSEAS BRANCH, MUMBAI BRANCH, THE ASSESSING OFFICER NOTED THAT THE PAYMENT HAS BEEN MADE TO LIBERTY HOUSE, DUBAI DURING THE PERIOD DEC 2003 TO FEB 2004 I.E. AFTER THE GAP OF ONE YEAR. THE ASSESSING OFFICER ALSO ASKED THE A SSESSEE TO SUBMIT THE ADVERTISEMENT DETAILS OF DATE WISE ADVERTISEMENT BI LLS RAISED BY LIBERTY HOUSE, DUBAI. IN THE ABSENCE OF PRODUCTION OF THE SAME AN D ANY EVIDENCE TO PROVE THE GENUINENESS OF THE ADVERTISEMENT EXPENDITURE CLAIM ED, THE ASSESSING OFFICER DISALLOWED 50% OF THE EXPENSES OF ` . 29,65,625/-. 10.2 IN APPEAL, THE CIT(A), UPHELD THE ACTION OF TH E ASSESSING OFFICER BY HOLDING AS UNDER: I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS MADE BY THE LD AR IN THE COURSE OF THE APPELLATE PROCEEDINGS (PAGE 3,4 & 5 OF THE WRITTEN SUBMISSIONS. ALL THESE SUBMISSIONS DO NOT ANY WAY C ONTRADICT THE FINDINGS OF THE AO THAT DAY TO DAY ADVERTISEMENT BILLS WERE NOT SUBMITTED. THIS IMPLIES THAT THE INITIAL ONUS OF ESTABLISHING THE G ENUINENESS OF THE EXPENDITURE HAS NOT BEEN DISCHARGED BY THE APPELLAN T. EVEN IN THE COURSE OF APPELLATE PROCEEDINGS, NO SUCH DOCUMENT WAS FURN ISHED. IN VIEW OF THIS I FIND THAT THE ADDITION MADE BY THE AO IS ON CORRE CT FOOTING. THE ADDITION OF ` 29,65,625/- IS THEREFORE CONFIRMED. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US. 9 ITA NOS 2340 & 1558/MUM/2008 11 WE HAVE HEARD THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. IT IS THE SUBMISSION OF THE LD COUNSEL F OR THE ASSESSEE THAT ALL THE DETAILS WERE DULY FILED BEFORE THE ASSESSING OFFICE R AND THE CIT(A) WHICH WERE OVERLOOKED BY THEM. HE REFERRED TO VARIOUS DOCUMENT S OF PAPER BOOK TO SUBSTANTIATE THAT FULL DETAILS WERE FILED. IN OUR OPINION, MERE MAKING OF PAYMENT BY CHEQUE, AFTER THE PERMISSION OF THE SBI/RBI DOES NOT PROVE THE GENUINENESS OF THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN OUR OPINION, SBI/RBI CANNOT SUBSTITUTE INCOME TAX D EPARTMENT FOR ACCEPTING GENUINENESS OF THE CLAIM AS BUSINESS EXPENDITURE. THE ASSESSEE HAS TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF T HE ASSESSING OFFICER THAT THE EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 11.1 CONSIDERING THE TOTALITY OF THE FACTS, WE, IN THE INTEREST OF JUSTICE, DEEM IT PROPER TO RESTORE THIS ISSUE BACK TO THE FILE OF TH E ASSESSING OFFICER WITH THE DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSES SEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION REGARDING GENUINENESS OF SUCH EXPENDITURE. THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW. WE HOLD AND DIRECT ACCORDINGLY. THE ABOVE TWO GROUNDS RAISED BY THE ASSESSEE ARE ACCORD INGLY ALLOWED FOR STATISTICAL PURPOSE. 12 GROUNDS OF APPEAL NO.3 OF THE ASSESSEE READS AS UNDER: THE LD CIT(A) HAS ERRED IN NOT ALLOWING DEDUCTION/ S 80HHC ON SALE OF DEPB LICENSES AS ALSO ON SALE OF SCRAP. 12.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ASSE SSEE DURING THE YEAR HAS CREDITED DEPB SALE OF ` 8,50,49,706/- UNDER THE HEAD OTHER INCOME IN THE P&L ACCOUNT AND INCLUDED THE SAME IN THE BUSINESS PROF ITS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION/S 80HHC. THE ASSESSING OFF ICER DISALLOWED SUCH CLAIM OF THE ASSESSEE AND TAXED THE SAME U/S 28(IV) OF TH E I T ACT, WHICH WAS UPHELD BY THE CIT(A). 13 WE FIND THIS ISSUE STANDS COVERED AGAINST THE AS SESSEE BY THE DECISION OFF THE JURISDICTIONAL HIGH IN THE CASE OF CIT VS KALPA TARU COLURS & CHEMICALS LTD REPORTED IN 233 CTR 313 WHEREIN IT HAS BEEN HELD TH AT THE ENTIRE AMOUNT OF 10 ITA NOS 2340 & 1558/MUM/2008 DEPB IS PROFIT FOR THE PURPOSE OF SEC. 8HHC R.W.S 28(IIII)(D) OF THE ACT. THIS GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY DISMIS SED. 14 IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 22 ND DAY OF OCT 2010. SD/- SD/- ( (( ( D K AGARWAL D K AGARWAL D K AGARWAL D K AGARWAL ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 22 ND OCT 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI