ACIT, New Delhi V. M/s. Deepali Design & Exhibits (P) Ltd., New Delhi

ITA 1710/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1232 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 26-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Depreciation; Business expenditure; Search and seizure; Principle of natural justice; Additional evidence; TDS
• Section: 143(3); 142(1); 234B; 133(6); 37(1); 132

Judgement Text

1 ITA NO. 1710/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 1710/DEL/20 15 (A.Y 2011-12) ACIT CENTRAL CIRCLE-17, ROOM NO. 356, ARA CENTRE, E-2, JHANDEWALAN NEW DELHI (APPELLANT) VS DEEPALI DESIGN & EXHIBITS (P) LTD. 34, NORTH AVENUE ROAD NEW DELHI AABCD5680K (RESPONDENT) I.T.A. NO. 1827/D EL/2015 (A.Y 2011-12) DEEPALI DESIGN & EXHIBITS (P) LTD. 34, NORTH AVENUE ROAD PUNJABI BAGH NEW DELHI AABCD5680K (APPELLANT) VS DCIT CENTRAL CIRCLE-8 NEW DELHI (RESPONDENT) S.A NO. 9 13/DEL/2018 (ARISING OUT OF I.T.A. NO. 1827/DEL/2015 (A.Y 2011 -12) DEEPALI DESIGN & EXHIBITS (P) LTD. 34, NORTH AVENUE ROAD PUNJABI BAGH NEW DELHI AABCD5680K (APPELLANT) VS ACIT CENTRAL CIRCLE-17 NEW DELHI (RESPONDENT) APPELLANT BY SH. SALIL KAPOOR, ADV SMT. PALLAVI SAIGAL, SH. SUMIT LAL CHANDANI RESPONDENT BY MS. NIDHI SRIVASTAVA, CIT DR, SMT. ASHIA NEB, SR. DRS DATE OF HEARING 09.01.2019 DATE OF PRONOUNCEMENT 14.03.2019 2 ITA NO. 1710/DEL/2015 ORDER PER SUCHITRA KAMBLE, JM THESE TWO APPEALS ARE FILED BY THE REVENUE AS WELL AS THE ASSESSEE AGAINST THE ORDER DATED 26/12/2014 PASSED BY CIT(A) -XXVII, NEW DELHI FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- I.T.A. NO. 1710/DEL/2015 (REVENUES APPEAL) 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN LAW AND ON FACTS IN DELETING RS. 15,50,903/- DISALLOWED BY THE AO ON ACCOUNT OF INTEREST AND PENALTY ON SERVICE TAX. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON FACTS IN DELETING RS.6,488/- DISALLOWED BY THE AO O N ACCOUNT OF DISALLOWANCE OF ADDITIONAL SERVICE TAX. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON FACTS IN DELETING RS.79,084/- DISALLOWED BY THE ASS ESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF AMOUNT DEBITED UNDER THE HEAD S HORT AND EXCESS. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON FACTS IN DELETING RS.76,92,840/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF UNEXPLAINED EXPENDITURE. 5. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION TO RS.3,68,580/- (BEING 1/10 LH OF RS.36,85,792/-) FROM RS.7,37,158/- (BEING 1 /5 TH OF RS.36,85,792/-) MADE BY THE AO ON ACCOUNT OF EXPENSES CLAIMED IN P&L ACCOUN T. 6. (A) THE ORDER OF THE CIT (A) IS ERRONEOUS AND NOT TENABLE IN LAW AND ON FACTS, (B) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3 ITA NO. 1710/DEL/2015 I.T.A. NO. 1827/DEL/2015 (ASSESSEES APPEAL) 1. THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) [IN S HORT CIT(A)] ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITIO N OF RS.6,99,24,861 MADE BY THE ASSESSING OFFICER, BEING THE ALLEGED AMOUNT OF CONTRACT REVENUE RECEIVABLE FROM M/S. PICO DEEPALI OVERLAYS CONSORTI UM, NOT DECLARED AS INCOME BY THE APPELLANT. 1.1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT AP PRECIATING THAT IN THE ABSENCE OF VESTED RIGHT BEING ACCRUING IN FAVOUR OF THE APPELLANT TO RECEIVE THE AFORESAID CONTRACT AMOUNT, THERE WAS NO QUESTION OF RECOGNIZING THE SAME AS PART OF ITS TAXABLE INCOME. 1.2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT AP PRECIATING THAT THE APPELLANT ALTERNATIVELY CLAIMED THAT THERE WAS NO B AR IN RECOGNIZING INCOME IN RESPECT OF A NEW LINE OF BUSINESS ON CASH BASIS. 1.3. THAT THE CIT(A) FURTHER ERRED IN NOT APPRECIATING T HAT SINCE THERE WAS HARDLY ANY PROBABILITY OF VERY RECOVERY/ REALIZATIO N OF THE AFORESAID AMOUNT AND THEREFORE, TAXATION OF THE AFORESAID AMOUNT TAN TAMOUNT TO TAXABLE OF NOTIONAL AMOUNT AS INCOME. 1.4. WITHOUT PREJUDICE, THAT THE CIT(A) ALSO FAILED TO A PPRECIATE EVEN IF THE AFORESAID AMOUNT OF RS.6,99,24,861, NOT RECOGNIZED IN THE BOOKS, WERE TO BE TAXED AS INCOME, THEN, EQUIVALENT AMOUNT OUGHT TO B E ALLOWED AS DEDUCTION UNDER SECTION 36(L)(VII) OF THE INCOME TAX ACT, 196 1 (THE ACT). 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE ADDITION OF RS.27,72,354 MADE BY THE ASSESSING OFFICER, BEING T HE ALLEGED AMOUNT OF CONTRACT REVENUE RECEIVABLE BY THE APPELLANT FROM C ENTRAL PUBLIC WORKS DEPARTMENT (CPWD). 2.1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT AP PRECIATING THAT THE APPELLANT HAD FOLLOWED A CONSISTENT METHOD OF RECOG NIZING INCOME FROM THE AFORESAID CONTRACT, WHICH WAS ALWAYS ACCEPTED BY TH E REVENUE DEPARTMENT IN THE PAST ASSESSMENT YEARS. 2.2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT AP PRECIATING THAT THE ENTIRE 4 ITA NO. 1710/DEL/2015 EXERCISE OF SEEKING TO DISTURB THE YEAR OF TAXABILI TY OF INCOME FROM THE AFORESAID CONTRACT, WHICH WAS OFFERED TO TAX IN THE SUBSEQUENT ASSESSMENT YEAR(S), WAS REVENUE NEUTRAL. 3. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING AN AMOUNT OF RS. 1 5,50,000 INCURRED BY THE APPELLANT ON ACCOUNT OF BUSINESS PROMOTION. 3.1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN HOLDIN G THAT THE AFORESAID BUSINESS PROMOTION EXPENDITURE WAS NOT ALLOWABLE AS DEDUCTION SINCE THE APPELLANT WAS NOT CARRYING ON ANY ACTIVITY RELATING TO CWG, 2010. 4. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING NOTIONAL ADDITION OF RS.3,35,58,732 ON ACCOUNT OF INCOME FROM ALLEGED SA LE OF SCRAP. 4.1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE AFORESAID ADDITION, WITHOUT APPRECIATING THAT THE ASSESSING O FFICER HAD FAILED TO BRING ON RECORD ANY EVIDENCE TO PROVE THAT THE APPELLANT HAD RECEIVED ANY AMOUNT IN EXCESS OF THE DECLARED VALUE OF SCRAP. 4.2. THAT THE GIT(A) ERRED ON FACTS AND IN LAW IN DISREG ARDING THE CONTEMPORANEOUS DOCUMENTARY EVIDENCES FILED BY THE APPELLANT, SUPPORTING THE ACTUAL VALUE OF SCRAP SOLD IN THE ASSESSMENT YE AR UNDER CONSIDERATION. 5. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE DISALLOWANCE OF RS.62,33,080 ON ACCOUNT OF HIRE CHARGES PAID BY THE APPELLANT. 5.1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT AD MITTING ADDITIONAL DOCUMENTS/EVIDENCES FILED DURING THE COURSE OF APPE LLATE PROCEEDINGS, WHICH WERE EXTREMELY CRITICAL FOR JUDICIOUS DISPOSAL OF T HE APPEAL. 5.2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN AFFIRM ING THE ACTION OF THE ASSESSING OFFICER IN CONDUCTING AND RELYING UPON EX -PARTE ENQUIRES UNDER SECTION 133(6) OF THE ACT. 5.3. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT AP PRECIATING THAT THE AFORESAID HIRE CHARGES WERE PAID BY THE APPELLANT O N A REGULAR BASIS, WHICH WAS CONSISTENTLY ALLOWED AS A DEDUCTIBLE EXPENSE IN THE PAST ASSESSMENT YEARS. 6. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING THE AD-HOC 5 ITA NO. 1710/DEL/2015 DISALLOWANCE TO THE EXTENT OF RS.3,68,579 (I.E., 1/ 10 TH OF RS.36,85,792) MADE BY THE ASSESSING OFFICER ON ACCOUNT OF VARIOUS EXPE NSES INCURRED BY THE APPELLANT IN THE REGULAR COURSE OF BUSINESS. 7. THAT THE CIT(A) ERRED IN CONFIRMING LEVY OF INTE REST UNDER SECTIONS 234B AND 234D OF THE ACT. 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF PROVIDING TEMPORARY INFRASTRUCTURE FACI LITY FOR EVENTS AND EXHIBITIONS. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE IT ACT, 1961 WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 19.10.2010. THE ASSESSEE COMPANY BELONGED TO M/S PICO DEEPALI OVERL AYS CONSORTIUM GROUP. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.2,03,93,170/- ON 25.10.2011. THE CASE OF THE ASS ESSEE WAS TAKEN UP FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) ALONG WI TH A DETAILED QUESTIONNAIRE WERE ISSUED AND SERVED UPON THE ASSESSEE. IN RESPON SE TO THE NOTICES ISSUED, THE AR OF THE ASSESSEE ATTENDED THE ASSESSMENT PROC EEDINGS FROM TIME TO TIME AND FILED THE REQUIRED DETAILS AND INFORMATION. THE REUPON, THE ASSESSMENT WAS COMPETED IN TERMS OF ORDER U/S 143(3) OF THE IT ACT , 1961 DATED 21.03.2013 AT A TOTAL INCOME OF RS. 13,84,78,070/- AS AGAINST THE RETURNED INCOME OF RS.2,03,93,170/- WHEREIN IN THE ASSESSING OFFICER M ADE THE FOLLOWING ADDITIONS: 1. ADDITION ON ACCOUNT OF INTEREST ON LATE PAYMENT O/TDS RS.71,993/- 2. ADDITION ON ACCOUNT OF INTEREST AND PENALTY ON SERVICE TAX RS.15,50,903/- 3. ADDITION ON ACCOUNT OF ADDITIONAL SALE TAX DEBI TED TO P&L ACCOUNT RS.6,488/- 4. ADDITION ON ACCOUNT OF DISALLOWANCE OF SHORT AND EXCESS RECOVERIES DEBITED TO P&L ACCOUNT RS.79,084/- 5. ADDITION ON ACCOUNT OF DISALLOWANCE OF DONATION RS.1,40,550/- 6. ADDITION ON ACCOUNT OF LOW DECLARATION CONTRACT AMOUNT RS.6,99,24,861/- 7. ADDITION ON ACCOUNT OF LOW DECLARATION CONTRACT AMOUNT RS.27,72,354/- 8. ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE RS.76,92,840/- 9. ADDITION ON ACCOUNT OF DISALLOWANCE OF BUSINESS PROMOTION RS.15,50,000/- EXPENSES 10. ADDITION ON ACCOUNT OF SCRAP SALE OF ELECTRICAL ITEMS RS.1,42,48,577/- 6 ITA NO. 1710/DEL/2015 11. ADDITION ON ACCOUNT OF SCRAP SALE ALUMINIUM, C ARPETS, FLOORINGS AND AWNINGS, IRON RODS AND SHEETS AND TENTING MATERIAL FABRIC RS.1,91,90,514/- 12. ADDITION ON ACCOUNT OF DISALLOWANCE OF CAPITAL EXPENSES RS.1,19,90,514/- 13. ADDITION ON ACCOUNT OF 1/5 TH DISALLOWANCE OUT OF EXPENSES RS.7,37,158/- 14. ADDITION ON ACCOUNT OF DISALLOWANCE OF HIRE CH ARGES RS. 62,33,080/- 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL O F THE ASSESSEE. 5. FIRSTLY WE ARE TAKING UP THE REVENUES APPEAL. T HE LD. DR IN RESPECT OF REVENUES APPEAL SUBMITTED THAT THERE ARE 5 GROUNDS AGITATED BY THE REVENUE IN THE PRESENT APPEAL. THE ASSESSEE DEBITED AN AMO UNT OF RS.15,50,903/- AS INTEREST ON LATE PAYMENT OF SERVICE TAX UNDER THE H EAD INTEREST WHICH IS GROUND NO. 1 OF REVENUES APPEAL. THE LD. DR SUBMI TTED THAT THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE SAID CLAIM AS IT I S THE DUTY OF THE ASSESSEE TO DEPOSIT THE SERVICE TAX DEDUCTED WITHIN THE TIME AL LOWED AS PER THE PROVISION OF THE INCOME TAX ACT. THE LD. DR FURTHER SUBMITTED T HAT THE CIT(A) DELETED THIS AMOUNT ON THE SOLE GROUND THAT INTEREST CHARGE FOR DELETED PAYMENT OF SALES TAX DOES NOT HAVE THE CORRECT OF PENALTY FOR AN OFF ENCE AND HENCE ALLOWABLE AS DEDUCTION AS ITS IS MERELY COMPENSATION FOR MONEY W ITHHELD. 6. THE LD. AR SUBMITTED THAT THE CIT(A) HAS RIGHTLY DELETED THIS ADDITION AS THE SERVICE TAX IS A PERMISSIBLE DEDUCTION AND THE INTEREST PAYMENT OF LATE DEPOSIT OF THE SAME IS ALSO A PERMISSIBLE DEDUCTION AND THUS RIGHTLY ALLOWED BY THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD AS UNDER:- 9. I HAVE CONSIDERED THE FACTS OF THE CASE AND WRI TTEN SUBMISSIONS OF THE APPELLANT. WHENEVER ANY STATUTORY IMPOST IS PAI D BY THE APPELLANT BY WAY OF DAMAGES OR PENALTY OR INTEREST, NOTWITHSTANDING THE NOMENCLATURE OF IMPOST AS GIVEN BY STATUTE, ONE HAS TO FIND OUT AS TO WHETHER IT IS 7 ITA NO. 1710/DEL/2015 COMPENSATORY OR PENAL IN NATURE. IF SUCH IMPOST IS FOUND TO BE OF COMPOSITE NATURE, THE SAID IMPOST HAS TO BE BIFURCATED INTO T WO COMPONENTS AND GIVE DEDUCTION TO THAT COMPONENT WHICH IS COMPENSATORY I N NATURE AND REJECT THE DEDUCTION TO THAT COMPONENT WHICH IS PENAL IN NATUR E. INTEREST CHARGED FOR DELAYED PAYMENT TO SALE TAX DOES NOT HAVE THE CHARA CTER OF PENALTY FOR AN OFFENCE AND HENCE ALLOWABLE AS DEDUCTION AS IT IS M ERELY COMPENSATION FOR MONEY WITH HELD. THEREFORE, IN THE INSTANT CASE, TH E PAYMENT OF INTEREST ON LATE DEPOSIT OF SERVICE TAX WITH THE GOVERNMENT ACC OUNT WAS COMPENSATORY IN NATURE AND HAS THE SAME CHARACTER AS THAT OF SERVIC E TAX. SINCE THE SERVICE TAX IS PERMISSIBLE DEDUCTION, THE INTEREST PAID FOR LATE DEPOSIT OF THE SAME IS ALSO A PERMISSIBLE DEDUCTION AND SHOULD BE ALLOWED IN THE SAME MANNER. RELIANCE IN THIS RESPECT IS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAHALAXMI SUGAR MILLS CO. V. C IT (1980) 123 ITR 429. CONSIDERING THESE FACTS, THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER WAS UNJUSTIFIED AND CANNOT BE SUSTAINED. AC CORDINGLY, THE ADDITION OF RS. 15,50,903/- MADE BY THE ASSESSING OFFICER ON AC COUNT OF DISALLOWANCE OF INTEREST PAID ON SERVICE TAX IS DELETED. THE PAYMENT OF INTEREST ON LATE DEPOSIT OF SERVICE TAX WITH THE GOVERNMENT ACCOUNT WAS COMPENSATORY IN NATURE AND A S THE SAME CHARACTER I.E. OF SERVICE TAX. THIS ASPECT WAS RIGHTLY TAKEN INTO ACCOUNT BY THE CIT(A) IN ITS FINDING. SINCE, THE SERVICE TAX IS PERMISSIBLE DEDUCTION THE INTEREST PAID FOR LATE DEPOSIT OF THE SAME IS ALSO A PERMISSIBLE DEDU CTION AND SHOULD BE ALLOWED IN THE SAME MANNER. GROUND NO. 1 OF REVENUES APPE AL IS DISMISSED. 8. AS RELATES GROUND NO. 2 RELATING TO THE ADDITION OF RS.6,488/- ON ACCOUNT OF DISALLOWANCE OF ADDITIONAL SERVICE TAX. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE CIT(A) ERRED IN DELETING THIS ADDITION. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE AMOUNT OF SERVICE TAX PAID BY THE ASSES SEE WAS NOT IN THE NATURE OF 8 ITA NO. 1710/DEL/2015 PENALTY BUT REPRESENTED THE TAX WHICH WAS NOT COLLE CTED BY THE ASSESSEE FROM ITS CUSTOMERS AND WAS PAID OUT OF ITS OWN DEBITED A ND WAS THUS ALLOWABLE U/S 37(1) OF THE INCOME TAX ACT, 1961. THE AMOUNT WAS EXPANDED BY THE ASSESSEE DURING THE COURSE OF ITS BUSINESS AND IT WAS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES. THE EXPENSES CANNOT BE SAID THA T THE SAME WAS NOT RELATED TO BUSINESS OF THE ASSESSEE AS IT WAS THE D UTY OF THE ASSESSEE TO DEDUCT SERVICE TAX WHILE PROVIDING SERVICE TO THE CUSTOMER S. THEREFORE, IT COMES UNDER THE PURVIEW OF BUSINESS EXPENSES AND HENCE IS RIGHT LY DELETED BY THE CIT (A). GROUND NO. 2 OF REVENUES APPEAL IS DISMISSED. 10. AS RELATED TO GROUND NO. 3 RELATING TO ADDITION OF RS. 79,084/- ON ACCOUNT OF DISALLOWANCE OF THE AMOUNT DEBITED UNDER THE HEAD SHORT AND EXCESS. THE LD. DR SUBMITTED THAT THE ASSESSING OF FICER HAS RIGHTLY MADE ADDITION AS THE EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT TO BALANCE THE DEBITED AND CREDITED AS THE EXPENSES NOT RELATED TO THE BUSINESS OF THE ASSESSEE AND, THEREFORE, NOT ALLOWABLE AS PER THE P ROVISIONS OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER HAS OBSERVED THA T THERE WAS NO EXPLANATION ON THE NATURE OF EXPENSES GIVEN BY THE ASSESSEE DUR ING THE ASSESSMENT PROCEEDINGS. 11. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AMOUNTS DEBITED UNDER THIS HEAD REPRES ENTED THE PITY DIFFERENCE IN THE BALANCES OF THE DEBTORS EITHER ON ACCOUNT OF RO UNDING OFF THE BALANCES OR UNDER RECOVERY OF SUCH AMOUNT FROM DEBTORS WHICH WE RE ALLOWABLE AS BUSINESS EXPENDITURE U/S 36(1)(VII) OF THE INCOME TAX ACT, 1 961. THUS, THE CIT(A) RIGHTLY DELETED THIS ADDITION. GROUND NO. 3 OF REVENUES A PPEAL IS DISMISSED. 13. AS RELATES TO GROUND NO. 4 RELATING TO DELETION OF RS.76,92,840/- ON ACCOUNT OF DISALLOWANCE OF UNEXPLAINED EXPENDITURE. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER AFTER ANALYSIS OF THE E VIDENCE GATHERED DURING THE 9 ITA NO. 1710/DEL/2015 COURSE OF SURVEY COME TO THE CONCLUSION THAT THE PU RCHASE OF DISPOSAL FROM M/S GARG ROAD LINES IS BOGUS. THE ASSESSING OFFICE R HAS RIGHTLY HELD HA THE ASSESSEE HAS ONLY PROVIDED THE ESTIMATE OF THE DISP OSAL CONSUMED WHICH IS NOT TO OVER RIGHT THE FACTS MENTIONED IN THE ASSESSMENT ORDER. THUS, THE CIT(A) ERRED IN DELETING THIS ADDITION. 14. THE LD. AR SUBMITTED THAT THE CIT(A) HAS VERIFI ED ALL THE DETAILS AND AFTER VERIFYING THE EVIDENCE HAS DELETED THIS ADDITION RI GHTLY. THUS, THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE BEFORE THE ASSESSING OFFICER FILED COMPLETE BILL VISE DETAILS ALONG WITH COPIES OF INVOICES RECEIVED FROM THE FAC TORY AT THE TIME OF DELIVERY OF DIESEL AS WELL AS FILED CONFIRMED COPY OF ITS LEDGE R ACCOUNT IN THE BOOKS OF M/S GARG ROAD LINES ALONG WITH COPY OF BANK STATEMENT/D ULY REFLECT THE PAYMENTS MADE BY THE ASSESSEE ON VARIOUS DATES OF M/S GARG R OAD LINES FOR SUPPLY OF DIESELS. ALL THESE RELEVANT EVIDENCES WERE IGNORED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDING. THE CIT(A) HAS R IGHTLY TAKEN INTO ACCOUNT ALL THE DETAILS FILED BY THE ASSESSEE BEFORE THE AS SESSING OFFICER AND AFTER VERIFYING THE SAME ARRIVED AT THE RIGHT CONCLUSION THAT THE CLAIM OF THE ASSESSEE IS RIGHT AS THE PURCHASE OF DIESEL FROM THE SAID PA RTY WAS GENUINE. THE ASSESSEE HAS SATISFIED ALL THE THREE ELEMENTS OF GE NUINENESS CREDITWORTHINESS AND IDENTITY OF THE PARTIES, AS PER THE PROVISIONS OF THE INCOME TAX ACT. THEREFORE, THERE IS NO NEED TO INTERFERE WITH THE F INDINGS OF THE CIT(A). GROUND NO. 4 OF THE REVENUES APPEAL IS DISMISSED. 16. AS REGARDS GROUND NO. 5 OF THE REVENUES APPEAL RELATING TO RESTRICTING THE ADDITION OF RS.3,68,580/- (BEING 1/10 TH OF RS. 36,85,792/-) FROM RS. 7, 37,158/- (BEING 1/5 TH OF RS. 36,85,792/-) MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENSES CLAIMED IN PROFIT AND LOSS ACCO UNT. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY MADE 1/5 TH ADDITION ON ACCOUNT OF EXPENSES CLAIM BEING PROFIT AND LOSS ACCOUNT. THE LD. DR FURTHER SUBMITTED 10 ITA NO. 1710/DEL/2015 THAT THE ASSESSEE COULD NOT PROVIDE THE NAME AND AD DRESS OF THE PERSON TO WHOM CASH PAYMENTS WERE MADE DURING THE ASSESSMENT PROCEEDINGS. THEREFORE, THE ASSESSING OFFICER RIGHTLY HELD THAT THE CLAIM OF THE ASSESSEE THAT THE ABOVE EXPENSES INCURRED FULLY AND WHOLLY FOR TH E PURPOSES OF ITS BUSINESS IS NOT CORRECT. 17. THE LD. AR SUBMITTED THAT THE ASSESSEE ALSO HAS CHALLENGED THIS ADDITION AS THE SAME IS AN AD-HOC DISALLOWANCE AND THERE IS NO BASIS ON WHICH THE CIT(A) RESTRICTED THE DISALLOWANCE TO 1/10 TH OF THE TOTAL MOTOR CAR EXPENSES INCLUDING DEPRECIATION AND TELEPHONE EXPENSES CLAIM ED BY THE ASSESSEE. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD AS UNDER:- 34. I HAVE CONSIDERED THE FACTS OF THE CASE AND WR ITTEN SUBMISSIONS OF THE APPELLANT AND FIND THAT THE ASSESSING OFFICER M ADE THE IMPUGNED DISALLOWANCE ON THE GROUND THAT THE EXPENSES BOOKED UNDER THE ABOVE HEADS WERE NOT FULLY AND EXCLUSIVELY INCURRED FOR THE BUS INESS OF THE APPELLANT. IT IS WELL SETTLED THAT WHENEVER AN APPELLANT CLAIMS AN E XPENDITURE TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS, THE ONUS IS O N THE APPELLANT TO PROVE THE GENUINENESS OF THE EXPENSES. FOR THIS PURPOSE, THE APPELLANT WAS BOUND TO PRODUCE THE LOG BOOK FOR RUNNING OF THE CAR AND THE DETAILS OF THE TELEPHONE CALLS. IN THE INSTANT CASE, I FIND THAT THE APPELLA NT FAILED TO DO SO. THE APPELLANT DID NOT MAINTAIN ANY LOG BOOK FOR RUNNING OF THE MOTOR CAR AND DETAILS OF TELEPHONE CALLS. IT IS A FACT OF LIFE TH AT PEOPLE OWNING THE ASSETS LIKE MOTOR CAR AND TELEPHONE FOR BUSINESS PURPOSE USE TH EM FOR THE PERSONAL PURPOSES AS WELL. THE APPELLANT COULD HAVE MAINTAIN ED SOME RECORD TO PROVE THAT THERE WAS NOT PERSONAL USE OF THE MOTOR CAR AN D THE TELEPHONE. THE APPELLANT FAILED TO PRODUCE ANY SUCH EVIDENCE TO SU BSTANTIATE THAT THE ASSETS IN QUESTION WERE USED FOR BUSINESS PURPOSE ONLY. IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING A PO RTION OF THE MOTOR CAR EXPENSES AND TELEPHONE EXPENSES TOWARDS THE PERSONA L USE OF THE APPELLANT. 11 ITA NO. 1710/DEL/2015 HOWEVER, CONSIDERING THE FACTS OF THE CASE, THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER AT 1/5 TH APPEARS TO BE ON THE HIGHER SIDE. THEREFORE, CONSIDERING THESE FACTS OF THE CASE, I RESTRICT THE DISALLOWANCE TO 1/10 TH OF THE TOTAL MOTOR CAR EXPENSES INCLUDING DEPRECIATION AND TELEPHONE EXPENSES CLAIMED BY THE APPELLANT. HENCE, THE ASSESSING OFFI CER IS DIRECTED TO MODIFY THE DISALLOWANCE ACCORDINGLY, WHILE GIVING EFFECT T O THIS ORDER. THE CIT(A) HAS RIGHTLY OBSERVED THAT THE ASSESSEE FAIL TO PRODUCE EVIDENCE TO SUBSTANTIATE THE ASSETS IN QUESTIONS WERE EXCLUS IVELY USE FOR BUSINESS PURPOSE ONLY. THERE WAS NO EXPLANATION GIVEN TO CA SH AS WELL BUT AFTER CONSIDERING THE OVERALL EFFECT. THE CIT(A) HAS RIG HTLY DISALLOWED 1/10 TH OF THE TOTAL MOTOR CAR EXPENSES INCLUDING DEPRECIATION AN D TELEPHONE EXPENSES CLAIM BY THE ASSESSEE. HENCE, GROUND NO. 5 OF THE REVENUE S APPEAL IS DISMISSED AS WELL AS GROUND NO. 6 OF THE ASSESSEES APPEAL IS DI SMISSED. 19. NOW WE ARE TAKING UP THE ASSESSEES APPEAL. AS REGARDS TO GROUND NO. 1 RELATING TO LOW DECLARATION OF CONTRACT AMOUNT IN T HE CONTRACT WITH M/S PICO DEEPALI OVERLAYS CONSORTIUM GROUP AMOUNTING TO RS. 6,99,24,861/-, THE LD. AR SUBMITTED THAT IN RESPECT OF M/S DEEPALI DESIGN & EXHIBITS PRIVATE LIMITED (DDEPL) WAS A PART OF THE CONSORTIUM KNOWN AS 'PICO DEEPALI OVERLAYS CONSORTIUM WHICH WAS FORMED BY AN AGREEMENT DATED 19.12.2009 FOR THE PURPOSE OF OBTAINING CONTRACT FROM ORGANIZING COMMI TTEE - COMMON WEALTH GAMES 2010. HOWEVER, ON 01.06.2010 AN ADDENDUM AGR EEMENT WAS ENTERED BETWEEN SAME PARTIES AND IT WAS AGREED THAT DDEPL W ILL HAVE INDEPENDENT SCOPE OF WORK AND WILL EXECUTE THE SAME ON ITS OWN. IT WAS ALSO AGREED THAT PROFIT/LOSS IN RESPECT OF SCOPE OF WORK OF DDEPL WI LL BE RESPONSIBILITY OF DDEPL. IT WAS PROVIDED IN THE ADDENDUM AGREEMENT DA TED 01.06.2010 AS WELL AS IN THE ORIGINAL AGREEMENT THAT THE ASSESSEE ENTI TLEMENT TO RECEIVE THE PAYMENT WAS DEPENDENT UPON THE RECEIPT OF THE PAYME NT BY CONSORTIUM FROM OCCWG 2010 BY PICO DEEPALI OVERLAYS CONSORTIUM (FOR SHORT PICO CONSORTIUM). [CLAUSE 2.3 OF THE ADDENDUM AGREEMENT DATED 01.06.2010 12 ITA NO. 1710/DEL/2015 CLAUSE 2.1(3), CLAUSE 2.4(2) AND CLAUSE 3.3 OF THE ADDENDUM AGREEMENT DATED 01.06.2010]. AS THE CONSORTIUM WAS AN INTERMEDIARY BETWEEN THE ASSESSEE AND THE OCCWG- 2010, THE PAYMENT OF MONEY TO THE AS SESSEE WAS CONTINGENT ON THE RECEIPT OF MONEY BY THE PICO CONSORTIUM FROM THE OCCWG-2010 AND THE ASSESSEE POSSESSED NO POWER/AUTHORITY TO DEAL W ITH THE OCCWG-2010 UNDER THE ADDENDUM AGREEMENT. PRIOR TO THE RECEIPT OF THE MONEY BY THE CONSORTIUM IN ITS BANK ACCOUNT NO LEGAL RIGHT VESTE D WITH ANY OF THE CONSTITUENT MEMBER TO CLAIM OR RECEIVE AMOUNT TOWAR DS THE WORK EXECUTED BY THE RESPECTED MEMBERS IN RELATION TO ITS PART OF AL LOCATED WORK BY ALL THE CONSTITUENT MEMBERS COLLECTIVELY. IT IS THUS CLEAR THAT UNDER NO CIRCUMSTANCES THE CONSTITUENT MEMBERS HAVE THE RIGHT TO CLAIM THE AMOUNT FROM THE CONSORTIUM UNLESS THE AMOUNT ACTUALLY REACHES THE B ANK ACCOUNT OF THE CONSORTIUM AFTER RECEIVING THE SAME FROM OCCWG. DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD UNDERTAKEN A NEW AN D DISTINCT LINE OF BUSINESS ACTIVITY AND IT WAS FOR THE FIRST TIME THAT IT HAD NOT ONLY VENTURED INTO THE BUSINESS OF OVERLAYING OF CABLES FOR ELECTRIFICATIO N BUT ALSO FUNCTIONED AS A SUB- CONTRACTOR. THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION HAS ENTERED IN ITS BOOKS OF ACCOUNTS ONLY THOSE PAYMENTS DURING THE YE AR UNDER REFERENCE WHICH WERE RECEIVED BY IT. IN REGARD TO THE REMAINING AMO UNT PAYABLE, THE ASSESSEE WROTE NUMEROUS LETTERS TO THE CONSORTIUM ASKING THE M TO RENDER THE ACCOUNTS FOR THE ASCERTAINMENT OF THE QUANTUM OF AMOUNTS REC EIVED BY THE CONSORTIUM AGAINST THE WORK EXECUTED BY THE ASSESSEE. HOWEVER, THE CONSORTIUM DID NOT RENDER ANY ACCOUNTS TO THE ASSESSEE. THE ASSESSEE A LSO WROTE A NUMBER OF LETTERS TO THE OCCWG-2010 TO ASCERTAIN THE AMOUNT P AID TO THE CONSORTIUM IN RELATION TO THE WORK EXECUTED BY THE ASSESSEE. THER EAFTER THE ASSESSEE INSTITUTED A SUIT IN THE HONBLE HIGH COURT OF DELH I AGAINST THE CONSORTIUM FOR THE RENDITION OF ACCOUNTS OF THE CONSORTIUM AND FOR THE RECOVERY OF RS. 6,99,24,861 /- AS PER THE CONTRACT WITH THE CONSORT IUM. PURSUANT TO THE ABOVEMENTIONED SUIT FILED, ASSESSEE WAS GRANTED A P RELIMINARY DECREE IN THE MONEY SUIT FOR RS. 4,19,05,956/- WITH INTEREST AT 9 % PER ANNUM VIDE ORDER DATED 18.07.2017 PASSED BY THE HONBLE HIGH COURT O F DELHI (THE CLAIMED 13 ITA NO. 1710/DEL/2015 AMOUNT WAS RS. 6,99,24,861/-). THEREAFTER, ASSESSEE COMPANY RECEIVED RS. 4,19,05,956 DURING F.Y. 2017-18 WHICH WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS IT INCOME FOR AY 2018-19 . COPY OF INCOME TAX RETURN, COMPUTATION OF INCOME, BALANCE SHEET, PROFI T & LOSS ACCOUNT ALONG WITH LEDGER ACCOUNT FOR AY 2018-19 AS WELL AS PARTY WISE DETAILS OF HIRE CHARGES WAS SUBMITTED BEFORE THE ASSESSING OFFICER. WHILE PASSI NG THE ASSESSMENT ORDER DATED 21.03.2013, THE AO OBSERVED THAT BY FILING THE SUIT AS WELL AS BY RAISING BILLS AND RENDERING SERVICES AGAINST THE CONSORTIUM , THE ASSESSEE HAD CLAIMED A RIGHT TO RECEIVE THE INCOME. THE AO MADE THE ADDI TION ON THE BASIS THAT THE ASSESSEE BY FILING A SUIT FOR RECOVERY IN DELHI HIG H COURT, RECOGNIZES THAT THE SAID AMOUNT WAS DUE TO THE ASSESSEE. THUS, THE AO M ADE AN ADDITION OF RS. RS. 6,99,24,861/- TO THE INCOME OF THE ASSESSEE. TH E CIT (A) UPHELD THE ORDER OF THE AO AND HELD THAT THE ASSESSEE HAD A VESTED R IGHT TO RECEIVE THE INCOME FOR ITS SERVICES WHICH ACCRUED TO IT DURING THE FIN ANCIAL YEAR RELEVANT TO ASSESSMENT YEAR (AY) UNDER CONSIDERATION. 20. THE LD. AR SUBMITTED THAT THERE WAS NO DIRECT I NTERACTION BETWEEN THE ASSESSEE AND OCCWG-2010. THE LD. AR SUBMITTED THAT AS PER ADDENDUM AGREEMENT DATED 01.06.2010 THAT THE ASSESSEE ENTITL EMENT TO RECEIVE THE PAYMENT WAS DEPENDENT UPON THE RECEIPT OF THE PAYME NT BY CONSORTIUM FROM OCCWG 2010 BY PICO DEEPALI OVERLAYS CONSORTIUM (FOR SHORT PICO CONSORTIUM). CLAUSE 2.3 OF THE ADDENDUM AGREEMENT DATED 01.06.2010 CLEARLY PROVIDES FOR THE PAYMENT TERMS. THE AGREEMENT STATE S THAT PAYMENT TO THE ASSESSEE SHALL BE SUBJECT TO PAYMENT BEING RECEIVED BY THE JV WITH RESPECT TO THE SAME. REFERENCE HEREIN IS ALSO DRAWN TO CLAUSE 2.1(3), CLAUSE 2.4(2) AND CLAUSE 3.3 OF THE ADDENDUM AGREEMENT DATED 01.06.20 10] BY THE LD. AR. THEREFORE, THE LD. AR SUBMITTED THAT THE ASSESSEE H AD NO DIRECT DEALING WITH OCCWG-2010, IT WAS ONLY AFTER THE CONSORTIUM RECEIV E MONEY, WILL THE SAME BE GIVEN TO THE ASSESSEE. PICO CONSORTIUM DENIED ITS L IABILITY TO PAY THE ASSESSEE. THE LD. AR SUBMITTED THAT DURING THE PROCEEDINGS OF THE SUIT FILED BEFORE THE HONBLE DELHI HIGH COURT BY THE ASSESSEE AGAINST PI CO DEEPALI OVERLAYS 14 ITA NO. 1710/DEL/2015 CONSORTIUM, PICO DEEPALI OVERLAYS CONSORTIUM VIDE W RITTEN STATEMENT FILED ON 16.10.2017 AND DENIED THAT THE TOTAL AMOUNT DUE TO THE ASSESSEE AMOUNTS TO RS. 6,99,24,861/-. ON THE CONTRARY, PICO DEEPALI OV ERLAYS CONSORTIUM HAS CATEGORICALLY STATED THAT THEY HAVE PAID A SUM OF R S. 2 CR OVER AND ABOVE WHAT WAS ACTUALLY TO BE PAID. IN THE INSTANCE, AS PICO D EEPALI OVERLAYS CONSORTIUM DENIED ITS LIABILITY TO PAY, NO INCOME COULD HAVE A CCRUED TO THE ASSESSEE. THERE EXISTS NO CORRESPONDING LIABILITY IS ADMITTED BY TH E OTHER PARTY TO PAY THE AMOUNT. THE LD. AR SUBMITTED THAT NO ENFORCEABLE LE GAL RIGHT HAS ARISEN IN FAVOUR OF ASSESSEE AGAINST THE CONSORTIUM NOR THERE WAS ANY CORRESPONDING LIABILITY DURING THE YEAR UNDER CONSIDERATION. INCO ME ACCRUES TO THE ASSESSEE AND BECOME INCLUDIBLE IN HIS HANDS WHEN THE LEGAL R IGHT TO RECEIVE THE SAME VESTS WITH THE ASSESSEE WHEREBY THE PAYER OF THE IN COME BECOME LAWFUL DEBTOR OF THE ASSESSEE. THE HONBLE SUPREME COURT IN THE CASE OF CIT V. EXC EL INDUSTRIES LTD. [2013] 358 ITR 295/219 HAS EVEN HELD THAT AN INCOME ACCRUES WHEN IT BECOMES DUE BUT IT MUST ALSO BE ACCOMPANIED BY A CORRESPONDING LIABILITY OF THE OTHER PARTY TO PAY THE AMOUNT. ONL Y THEN IT CAN BE SAID THAT FOR THE PURPOSES OF TAXABILITY SAID INCOME IS NOT HYPOT HETICAL AND IT HAS REALLY ACCRUED TO THE ASSESSEE. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BALBIR SINGH MAINI [2017] 398 ITR 531 (SC) HAVE OBSERVED THAT THE INCOME ACCRUES WHEN IT BECOMES DUE BUT IT MUST ALSO BE ACC OMPANIED BY A CORRESPONDING LIABILITY OF THE OTHER PARTY TO PAY T HE AMOUNT. ONLY THEN IT BE SAID THAT THE PURPOSED OF TAXABILITY THAT THE INCOM E IS NOT HYPOTHETICAL AND IT HAS REALLY ACCRUED TO THE ASSESSEE. THE LD. AR RELI ED UPON THE FOLLOWING DECISIONS:- S.NO. JUDGMENT CITATION 1 CIT(A) VS. SHOORJI VALLABHDAS & CO. (PAGE NO. 19-21 OF CLC) [1962] 46 ITR 144 )S.C) 2 CIT(A) VS. MAT HULAL BALDEO PRASAD [1961]42 ITR 517 (ALL.) THE LD. AR FURTHER SUBMITTED THAT RELIANCE PLACED O N MORVI INDUSTRIES LTD. 15 ITA NO. 1710/DEL/2015 BY THE AO IS MISPLACED. THE LD. AR FURTHER SUBMITTE D THAT THE AO WHILE PASSING THE ASSESSMENT ORDER DATED 21.03.2013, HAS RELIED ON THE JUDGMENT OF MORVI INDUSTRIES LTD. VS. CIT (1971) 82 ITR 835 (SC). HOWEVER, A SUBSEQUENT JUDGMENT OF THE SUPREME COURT IN THE C ASE OF CIT VS. EXCEL INDUSTRIES LTD. [2013] 358 ITR 295 (SC) AFTER DISCU SSING THE JUDGMENT OF MORVI INDUSTRIES LTD. HAS HELD THAT INCOME ACCRUES WHEN IT BECOMES DUE BUT IT MUST ALSO BE ACCOMPANIED BY A CORRESPONDING LIABILITY OF THE OTHER PARTY TO PAY THE AMOUNT. MERE FILING OF THE SUIT FO R RECOVERY WILL NOT IN LAW MAKE IT AN INCOME WHICH HAS ACCRUED. AO WHILE PASSING THE ASSESSMENT ORDER DATED 21.03.2013 AND CIT(A) WHILE PASSING THE APPELLATE ORDER DATED 26.12.2014 OBSERVED THAT BY FILING THE SUIT AGAINST THE CONSORTIUM THE ASSESSEE HAD CLAIMED A RIGHT TO RECEIVE THE INCOME. IT IS SUBMITTED THAT THE OBSERVATION MADE BY AO AND CIT(A) IS AGAINST THE SE TTLED LEGAL POSITION. BOTH THE LOWER AUTHORITIES HAVE IGNORED THE FACT TH AT PICO CONSORTIUM HAD DENIED THE LIABILITY OF 6.99CR AND OTHER RATHER SAI D THAT THEY HAVE PAID 2CR MORE THAN WHAT IS DUE TO THE ASSESSEE. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BURLOP COMMERCIAL (P.) LTD. HAS CLEARLY HELD THAT FILING OF A SUIT FOR RECOVERY, WILL NOT IN LAW MAKE IT AN INCOME WHICH HAS ACCRUED TO BE YEAR IN QUESTION. SIMILAR OBSERVATIONS HAVE BEEN MADE IN THE FOLLOWING JUDGMENT:- S.NO. PARTICULARS CITATION 1 CIT(A) VS. KERALA STATE DRUGS & PHARMACEUTICALS LTD. [1991]59 TAXMAN 515 (KER) 2 HOPE (INDIA) LTD. VS. CIT(A) [1999]238 ITR 740 (CAL) 3 NATIONAL HANDLOOM DEVELOPMENT CORPN. LTD. VS. DCIT [2004] 266 ITR 647 (ALLAHABAD) 4. ITO VS. PRAKASH ROAD LINES CORPN ITA NO. 2070 OF 1988 (CAL) 21. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS UPON RECEIVING THE AMOUNT DURING AY 2018-19 HAS PAID THE TAX THEREON AND HAS DISCLOSED THE SAME IN THE 16 ITA NO. 1710/DEL/2015 RETURN OF INCOME FOR AY 2018-19. THE ONLY DISPUTE I S IN REGARD TO THE SUBJECT ASSESSMENT YEAR IN WHICH TAX IS PAYABLE. HOWEVER, T HIS STAND OF THE REVENUE NEEDS TO BE CONSIDERED WITH THE FACT THAT IN THE SU CCEEDING ASSESSMENT YEAR, THE RETURN OF INCOME FILED BY THE ASSESSEE (IN WHIC H THE AMOUNTS FORMING A PART OF THE PRESENT ADDITION WERE OFFERED TO TAX) TAX ST ANDS ALREADY PAID. THE LD. AR SUBMITTED THAT ASSESSEE WAS GRANTED A PART DECREE I N THE MONEY SUIT FOR RS. 4,19,05,956/- WITH INTEREST AT 9 PERCENT PER ANNUM (THE CLAIMED AMOUNT WAS RS. 6,99,24,861/-). THE SAID JUDGMENT AND DECREE WA S PARTLY EXECUTED ON 08.03.2018 PURSUANT TO WHICH ASSESSEE COMPANY HAS R ECEIVED RS. 6,60,02,809/-. THE LD. AR SUBMITTED THAT ASSESSEE C OMPANY HAS DISCLOSED THE SAID RECEIPT IN THE INCOME TAX RETURN FOR AY 2018-1 9 AND PAID TAX THEREON. THE LD. AR ALSO SUBMITTED THAT AS PER ACCOUNTING STANDA RD 9 ON REVENUE RECOGNITION ISSUED BY THE ICAI, THE MAIN PRINCIPLE INTER ALIA STATES ... IF AT THE TIME OF RAISING OF ANY CLAIM IT IS UNREASONABLE TO EXPECT ULTIMATE COLLECTION, REVENUE RECOGNITION SHOULD BE POSTPONED. THEREFOR E, THE LD. AR SUBMITTED THAT THE REVENUE CANNOT BE PERMITTED TO TAX THE SAM E INCOME TWICE. THE LD. AR RELIED UPON THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF CIT VS. M/S EXCEL INDUSTRIES LTD. [2013] 358 ITR 295/219. T HE LD. AR FURTHER SUBMITTED THAT ASSESSEE WAS PRIMARILY INVOLVED IN T HE BUSINESS OF ERECTION OF TEMPORARY STRUCTURES ON RENTAL BASIS TO VARIOUS COR PORATE/GOVERNMENT AGENCIES. FURTHER, THIS LINE OF BUSINESS WAS CARRIE D ON BY THE ASSESSEE IN THE FORM OF MAIN SUPPLIER I.E. AS A PRINCIPAL AND THE O RDER FROM THE BUSINESS WERE RECEIVED BY THE ASSESSEE IN THE CAPACITY OF A PRINC IPAL FROM VARIOUS GOVERNMENT AGENCIES/CORPORATE. ADVERTING TO THE ADDENDUM EXECU TED ON 10 JUNE 2010, THERE WERE SUBSTANTIAL CHANGES COMPARED TO CERTAIN TERMS AND CONDITIONS OF THE ORIGINAL CONSORTIUM AGREEMENT DATED 9 JANUARY 2 009. DURING THE YEAR UNDER CONSIDERATION THE EXECUTION OF THE WORK AS LA ID DOWN IN THE APPENDIX 2 TO THE ADDENDUM WAS PREDOMINANTLY A NEW ACTIVITY AN D THAT TO BEING IN THE CAPACITY OF THE SUB-CONTRACTOR BEING FIRST TIME. TH E TERMS OF THE ADDENDUM CLEARLY DEMONSTRATES THAT THE STATUS OF THE ASSESSE E WAS CONSIDERABLY DOWNSIZED TO A STATUS OF SUBCONTRACTOR IN THE CONSO RTIUM. ASSESSEE HAD NEVER 17 ITA NO. 1710/DEL/2015 EXECUTED SUCH CONTRACT IN THE PAST. IT IS FURTHER S UBMITTED THAT THE RECEIPT OF THE DUES BY THE ASSESSEE WAS QUITE CUMBERSOME AND W HOLLY DEPENDABLE ON THE RECEIPT BY THE CONSORTIUM FROM OCCWG 2010. IN THESE CIRCUMSTANCES, AS A PRUDENT APPROACH THE ASSESSEE COMPANY THOUGHT IT IS WISE TO ENTER ONLY PAYMENTS DURING THE YEAR UNDER REFERENCE WHICH WERE RECEIVED BY IT. THE APPROACH OF THE ASSESSEE IN RESPECT OF THE NEW LINE OF BUSINESS UNDERTAKEN BY ASSESSEE NAMELY, ACTING AS A SUB-CONTRACTOR IN DIFF ERENT BUSINESS IS JUSTIFIED UNDER THE PROVISION OF INCOME TAX ACT. IT IS IMPORT ANT TO REFER TO THE JUDGMENT IN THE CASE CIT VS EAET SUNDARJAN [1975] 99 ITR 226 (MAD) WHEREIN IT WAS OBSERVED THAT THE ASSESSEE MAY EMPLOY DIFFERENT MET HOD OF ACCOUNTING FOR DIFFERENT TYPES OF BUSINESS. ACCORDINGLY, AS PER CL AUSE 1 OF SECTION 145, THE ASSESSEE HAD FOLLOWED CASH SYSTEM OF ACCOUNTING FOR CWG RELATED PROJECTS AND MERCANTILE SYSTEM OF ACCOUNTING FOR REST OF THE REG ULAR BUSINESS. THE AFORESAID TWO METHOD OF ACCOUNTING FOR DIFFERENT TYPES BUSINE SS HAS BEEN FOLLOWED IN SUCCEEDING YEARS. FURTHER, WITHOUT PREJUDICE, IT IS PREROGATIVE OF THE ASSESSEE TO CHOOSE A METHOD OF ACCOUNTING FOR A PARTICULAR B USINESS. RELIANCE IS PLACED ON THE JUDGMENT OF MARUTI SECURITIES LTD. VS. ACIT (ITA NO. 468/HYD/2009) THE TRIBUNAL IN THE SAID CASE HAS HELD THAT WHERE T HE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, IT IS ONLY ACCRUAL OF INCOME THAT IS CHARGEABLE TO TAX. WHEN CERTAIN UNCERTAINTIES EXIST REGARDING DETERMINATION OF AMOUNT OR IS COLLECTABILITY, REVENUE SHALL NOT TREAT IT AS AC CRUED UNTIL COLLECTION. STRICTLY, WITHOUT PREJUDICE TO THE ABOVE SUBMISSION, THE LD. AR SUBMITTED THAT ENTIRE CONTRACT VALUE IS TREATED AS INCOME UNDER THE MERCA NTILE SYSTEM, THEN THE AMOUNT OF RS. 6.99 NOT RECOVERABLE UNDER THE CURREN T DISPUTES AND EXIGENCIES (WHICH IS PENDING BEFORE JUDICIAL FORUM) COULD BE T REATED AS BAD DEBT UNDER SECTION 36(1)(VII) OF THE ACT. THE CASH SYSTEM ADOP TED FOR CWG PROJECT IS CASH NEUTRAL AND NOT DETRIMENTAL TO THE REVENUE. THE LD. AR FURTHER SUBMITTED THAT ASSESSEE COMPANY HAS UPON RECEIVING THE AMOUNT DURI NG AY 2018-19 HAS PAID THE TAX THEREON AND HAS DISCLOSED THE SAME IN THE R ETURN OF INCOME FOR AY 2018-19. 18 ITA NO. 1710/DEL/2015 22. IN THE ASSESSMENT ORDER DATED 2 MARCH 2013 AND APPELLATE ORDER PASSED BY COMMISSIONER OF INCOME TAX APPEAL DATED 26 DECEM BER 2014, THE LD. AR POINTED OUT THAT DEEPALI DESIGN & EXHIBITS HAS RAIS ED BILLS TO M/S PICO DEEPALI OVERLAYS CONSORTIUM. THE LD. AR FURTHER SUB MITTED THAT BILLS WERE ISSUED ONLY FOR THE AMOUNT WHICH IS RECEIVED AND AC COUNTED FOR. BILL WERE NOT RAISED FOR RS. 6,99,24,861/- FOR WHICH THE ADDITION IS MADE BY ASSESSING OFFICER. THIS FACT WAS NEVER SUBMITTED BEFORE THE L OWER AUTHORITIES NOR THERE EXIST ANY EVIDENCE THAT BILLS ARE RAISED BY DEEPALI DESIGN & EXHIBITS IN THIS REGARD DURING THE YEAR UNDER CONSIDERATION AND IN S UBSEQUENT YEARS. THE FACT RECORDED BY THE AUTHORITIES IS INCORRECT, CONTRARY TO RECORD AND IS PURELY BASED ON SURMISES AND PRESUMPTIONS. FURTHER, WITHOUT PREJ UDICE, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS ACTED ARBI TRARILY WITHOUT APPLYING HIS MIND IN MAKING ADDITION IN CONTRAVENTION TO THE PRO VISION OF SECTION 145. THE BOOKS OF ACCOUNT HAVE BEEN DULY ACCEPTED AS IT IS. HENCE, THE ADDITION COULD NOT HAVE BEEN MADE. 23. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE REVENUE NEVER DISPUTED THE FACT THAT PRIOR TO THE RECEIPT OF THE MONEY BY THE CONSORTIUM IN ITS BANK ACCOUNT NO LEGAL RIGHT VESTED WITH ANY OF THE CONSTITUENT MEMBER TO CLAIM OR RECEIVE AMOUNT TOWARDS THE WORK EXECUTED BY THE RESPECTED MEMBERS IN RELAT ION TO ITS PART OF ALLOCATED WORK BY ALL THE CONSTITUENT MEMBERS COLLECTIVELY. T HUS, IT IS CLEAR THAT UNDER NO CIRCUMSTANCES THE CONSTITUENT MEMBERS HAVE THE RIGH T TO CLAIM THE AMOUNT FROM THE CONSORTIUM UNLESS THE AMOUNT ACTUALLY REAC HES THE BANK ACCOUNT OF THE CONSORTIUM AFTER RECEIVING THE SAME FROM OCCWG. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD UNDERTAKEN A NEW AN D DISTINCT LINE OF BUSINESS ACTIVITY AND IT WAS FOR THE FIRST TIME THAT IT HAD NOT ONLY VENTURED INTO THE BUSINESS OF OVERLAYING OF CABLES FOR ELECTRIFICATIO N BUT ALSO FUNCTIONED AS A SUB- 19 ITA NO. 1710/DEL/2015 CONTRACTOR. THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION HAS ENTERED IN ITS BOOKS OF ACCOUNTS ONLY THOSE PAYMENTS DURING THE YE AR UNDER REFERENCE WHICH WERE RECEIVED BY IT. IN REGARD TO THE REMAINING AMO UNT PAYABLE, THE ASSESSEE WROTE NUMEROUS LETTERS TO THE CONSORTIUM ASKING THE M TO RENDER THE ACCOUNTS FOR THE ASCERTAINMENT OF THE QUANTUM OF AMOUNTS REC EIVED BY THE CONSORTIUM AGAINST THE WORK EXECUTED BY THE ASSESSEE. HOWEVER, THE CONSORTIUM DID NOT RENDER ANY ACCOUNTS TO THE ASSESSEE. THE ASSESSEE A LSO WROTE A NUMBER OF LETTERS TO THE OCCWG-2010 TO ASCERTAIN THE AMOUNT P AID TO THE CONSORTIUM IN RELATION TO THE WORK EXECUTED BY THE ASSESSEE. THER EAFTER THE ASSESSEE INSTITUTED A SUIT IN THE HONBLE HIGH COURT OF DELH I AGAINST THE CONSORTIUM FOR THE RENDITION OF ACCOUNTS OF THE CONSORTIUM AND FOR THE RECOVERY OF RS. 6,99,24,861 /- AS PER THE CONTRACT WITH THE CONSORT IUM. PURSUANT TO THE ABOVEMENTIONED SUIT FILED, ASSESSEE WAS GRANTED A P RELIMINARY DECREE IN THE MONEY SUIT FOR RS. 4,19,05,956/- WITH INTEREST AT 9 % PER ANNUM VIDE ORDER DATED 18.07.2017 PASSED BY THE HONBLE HIGH COURT O F DELHI (THE CLAIMED AMOUNT WAS RS. 6,99,24,861/-). THEREAFTER, ASSESSEE COMPANY RECEIVED RS. 4,19,05,956 DURING F.Y. 2017-18 WHICH WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS IT INCOME FOR AY 2018-19 . FROM THE RECORDS AND THE AGREEMENTS IT CAN BE SEEN THAT THESE FACTS NARRATED BY THE ASSESSEE ARE CORRECT AND REVENUE COULD NOT POINT OUT THE NEW FACTS IN TH E PRESENT CASE. THE HONBLE SUPREME COURT IN THE CASE OF CIT V. EXCEL INDUSTRIE S LTD. [2013] 358 ITR 295/219 HAS EVEN HELD THAT AN INCOME ACCRUES WHEN IT BECOMES DUE BUT IT MUST ALSO BE ACCOMPANIED BY A CORRESPONDING LIABILI TY OF THE OTHER PARTY TO PAY THE AMOUNT. ONLY THEN IT CAN BE SAID THAT FOR THE P URPOSES OF TAXABILITY SAID INCOME IS NOT HYPOTHETICAL AND IT HAS REALLY ACCRUE D TO THE ASSESSEE. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BALBIR SINGH MAINI [2017] 398 ITR 531 (SC) HAVE OBSERVED THAT THE INCOME ACCRUES WHEN IT BECOM ES DUE BUT IT MUST ALSO BE ACCOMPANIED BY A CORRESPONDING LIAB ILITY OF THE OTHER PARTY TO PAY THE AMOUNT. ONLY THEN IT BE SAID THAT THE PURPO SED OF TAXABILITY THAT THE INCOME IS NOT HYPOTHETICAL AND IT HAS REALLY ACCRUE D TO THE ASSESSEE. MERE FILING OF THE SUIT FOR RECOVERY WILL NOT IN LAW MAKE IT AN INCOME WHICH HAS ACCRUED. 20 ITA NO. 1710/DEL/2015 AO WHILE PASSING THE ASSESSMENT ORDER DATED 21.03.2 013 AND CIT(A) WHILE PASSING THE APPELLATE ORDER DATED 26.12.2014 OBSERV ED THAT BY FILING THE SUIT AGAINST THE CONSORTIUM THE ASSESSEE HAD CLAIMED A R IGHT TO RECEIVE THE INCOME. THIS FINDINGS OF THE REVENUE AUTHORITIES ARE CONTRA RY TO THE DECISION OF THE HONBLE APEX COURT IN CASE OF EXCEL INDUSTRIES (SUP RA). THUS, GROUND NO. 1 OF THE ASSESSEES APPEAL IS ALLOWED. 25. AS REGARDS TO GROUND NO. 2 RELATING TO ADDITION OF RS. 27,72,354/- IN RESPECT OF LOW DECLARATION OF CONTRACT AMOUNT IN TH E CONTRACT WITH CENTRAL PUBLIC WORKS DEPARTMENT (CPWD), THE LD. AR SUBMITTE D THAT THE ASSESSEE WAS AWARDED CERTAIN CONTRACTS BY THE CENTRAL PUBLIC WOR DS DEPARTMENT ('CPWD') REGARDING A PROJECT RELATED TO CWG-2010. THE ENGINE ERS IN CHARGE OF THE PROJECT FOLLOWED THE PRACTICE OF MAINTAINING A MEAS UREMENT BOOK (MB) AND ALL ASSESSMENTS ARE DONE ON THE BASIS OF THE ENTRIES AN D NOT THE INVOICES OF THE CONTRACTORS. IT IS ON THE BASIS OF THE MB, A RUNNIN G ACCOUNT BILL SUMMARY (R/A BILL) WAS PREPARED BY THE CPWD PERSONNEL FOR RELEA SE OF MILESTONE CONTRACT VALUE TO THE CONTRACT AS PER THE PERCENTAGE OF WORK COMPLETED BY THE CONTRACTORS. NO PAYMENT BY THE CPWD WERE RELEASED E ITHER IN ADVANCE OR BEFORE THE WORK IS EXECUTED. THE TENTH R/A BILL DAT ED 13.11.2011 WAS APPROVED IN THE AY 2012-13. AS PER THIS R/A BILL, A N AMOUNT OF RS. 27,72,354/-WAS CREDITED AS INCOME DURING THE SUBSEQ UENT YEAR I.E. AY 2012- 13 BY FOLLOWING THE CONSISTENT METHOD OF ACCOUNTING . TAKING INTO ACCOUNT THAT: THE ASSESSMENT WAS DONE AS PER THE MB, THE PAYMENTS WERE RELEASED ON THE BASIS OF THE R/A BILLS, AND THE AMOUNT PAYABLE TO THE ASSESSEE WAS ASCERTAINED AS PER THE PERCENTAGE OF WORK COMPLETED THE LD. AR SUBMITTED THAT THE ASSESSEE COULD ONLY D ETERMINE THE EXACT AMOUNT PAYABLE TO IT WHEN THE R/A BILLS WERE PROVID ED TO IT TO, IN TURN, INCLUDE IT AS INCOME IN ITS BOOKS OF ACCOUNTS. AS PER ACCOU NTING STANDARD 9 ON REVENUE RECOGNITION ISSUED BY THE ICAI, PARA 11 OF THE MAIN PRINCIPLE INTER-ALIA 21 ITA NO. 1710/DEL/2015 STATES IF AT THE TIME OF RAISING OF ANY CLAIM IT IS UNREASONABLE TO EXPECT ULTIMATE COLLECTION, REVENUE RECOGNITION SHOULD BE POSTPONED . THE LD. AR FURTHER SUBMITTED THAT THE PAYMENT (RS. 27,72,354/-) FOR TH E WORK DONE IN THE CONTRACTS WITH CPWD WAS MADE THROUGH THE TENTH RA B ILL DATED 13.11.2011. THUS, THE ASSESSEE INCLUDED THE INCOME IN ITS BOOKS OF ACCOUNTS AS INCOME CREDITED FOR THE AY 2012-13. THE AO, BASED ON THE F ACT THAT THE ASSESSEE FOLLOWED THE MERCANTILE SYSTEM OF ACCOUNTING, USED THE SAME APPROACH WHICH WAS TAKEN BY HIM TO MAKE ADDITION ON THE BASIS OF T HE INCOME ARISING OUT OF THE CONTRACT WITH THE CONSORTIUM AND CONCLUDED THAT THE AMOUNT OF RS. 27,72,354/- WOULD BE RECOGNIZED IN THE ASSESSEES B OOKS OF ACCOUNTS IN THE AY 2011-12. THUS, THE AO MADE AN ADDITION OF RS. 27,72 ,354/- TO THE INCOME OF THE ASSESSEE. THE CIT (A) ALSO UPHELD THE ADDITION MADE BY THE AO DEPLOYING THE SAME REASONING IT REFERRED TO IN RESPECT TO THE LOW DECLARATION OF THE CONTRACT AMOUNT IN THE CONTRACT WITH THE CONSORTIUM . THEREFORE, THE ASSESSEE SUBMITS THAT THE REVENUE CANNOT BE PERMITTED TO TAX THE SAME INCOME TWICE. THE LD. AR RELIED UPON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF CIT VS. M/S EXCEL INDUSTRIES LTD. [2013] 358 ITR 29 5/219. ADDITION IN THIS REGARD IN AY 2011-12 WOULD BE ABSOLUTELY ARBITRARY AND UNREASONABLE AS THE AMOUNT ITSELF WAS UNCERTAIN IN THE FINANCIAL YEAR 2 010-11 AND IT WILL ALSO RESULT IN DOUBLE TAXATION. 26. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). FURTHER, THE LD. DR SUBMITTED THE INCOME-TA X ACT PERMITS TWO METHODS OF ACCOUNTING - MERCANTILE (ACCRUAL) AND CASH. UNDE R THE MERCANTILE METHOD, INCOME AND EXPENSES ARE ACCOUNTED AS AND WHEN THE R IGHT TO RECEIVE OR THE RIGHT TO PAY ARISES. UNDER THE CASH METHOD, INCOME AND EXPENSES ARE ACCOUNTED ON ACTUAL RECEIPT OR PAYMENT. THE INCOME TAX CLEARLY LAYS DOWN THE SCOPE OF TOTAL INCOME WHICH INCLUDES BOTH-INCOME RE CEIVED AS WELL INCOME ACCRUED. FROM A CONJOINT READING OF SECTION 5 AND S ECTION 145(1) IT IS AMPLY CLEAR THAT THE ASSESSEE IS BOUND TO FOLLOW EITHER T HE CASH SYSTEM OR MERCANTILE SYSTEM OF ACCOUNTING. IN FACT, ITAT DELHI BENCH IN THE CASE OF KC KAILASH 22 ITA NO. 1710/DEL/2015 ASSOCIATES IN ITA 2399/DEL/2010 FOR A.Y PROHIBITS T HE-USE OF A MIXED SYSTEM OF ACCOUNTING (FROM 1997-98 ONWARDS). THE ASSESSE F OLLOWS A MERCANTILE SYSTEM OF ACCOUNTING WHERE REVENUE AND COST ARE RECOGNIZED AS THEY ARE INCURRED. HERE, A RIGHT TO RECEIVE AROSE IN THE HANDS OF THE ASSESSE WHEN THE ASSESSEE CONCERN SIGNED AN AGREEMENT WITH CONSORTIUM OF CWG FOR PROVIDING ELECTRICAL SUPPORT FOR OPENING AND CLOSING CEREMONY OF COMMON WEALTH GAMES. THE APEX COURT IN THE CASE OF CIT(A) VS. A. GAJAPATHY NAIDU [EQUIVALENT CITATIONS: 1964 SCR (7) 767] DISCUSSED THIS ISSUE AT LENGTH AN D ALSO DISCUSSED THE CASE OF COMMISSIONER OF INCOME TAX V. VAZIR SULTAN & SONS, [1959] SUPP. 2 S.C. R., 375. THE APEX COURT ORDER ALSO DISCUSSED THE CASE O F S. D. SASSOON AND CO. LTD. VS. COMMISSIONER OF INCOME-TAX, BOMBAY CITY, [ 1955] 1 S. C. R 313, THAT FOLLOWED ROGERS PYATT SHELLAC & CO. V. SECRETARY OF STATE (1925) I.L.R 52 CAL 1. THE CALCUTTA HIGH COURT IN THE CASE OF CIT(A) VS. S IMPLEX CONCRETE PILES INDIA (P) LTD. 179 ITR 8. ACCOUNTING STANDARDS LAID DOWN BY ICAI ALSO LAYS DOWN THAT WHEN THE REALIZATION OF INCOME IS VIRTUALLY CERTAIN - THEN THE RELATED ASSET IS NOT A CONTINGENT ASSET AND ITS RECOGNITION IS APPROPRIA TE. HERE AGAIN WHAT IS TRUE FOR RECOGNITION OF A PAYMENT IS ALSO TRUE FOR RECOG NITION OF INCOME UNDER MERCANTILE SYSTEM OF ACCOUNTING. IN THE CASE OF CIT (A) VS. SHRIMATI SINGARI BAI IN ANOTHER CASE ON A SIMILAR ISSUE THE MATTER WAS D ECIDED IN FAVOUR OF REVENUE IN THE CASE OF DELHI TRANSCO LTD. IN ITA NO 2483/DE L/2013 FOR AY 2005-06. SUBMISSIONS REGARDING PROVISIONS OF SECTION 145(2), SECTION 5 OF INCOME TAX ACT, CASE LAWS ON MERCANTILE METHOD OF ACCOUNTING A ND ACCOUNTING PRINCIPLES REGARDING RECOGNITION OF REVENUE. THE LD. DR SUBMIT TED THAT THESE SUBMISSIONS OF THE REVENUE MAY BE CONSIDERED ALONG WITH ORAL SU BMISSIONS IN THIS REGARD AND THE GROUNDS OF APPEAL RAISED BY ASSESSE MAY BE DISMISSED. 27. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. DR SUBMITTED THAT THE ASSESSE FOLLOWS A MERCANTILE SYSTEM OF ACCOUNTING WHERE REVENUE AND C OST ARE RECOGNIZED AS AND WHEN THEY ARE INCURRED. HERE, A RIGHT TO RECEIVE AR OSE IN THE HANDS OF THE ASSESSE WHEN THE ASSESSEE CONCERN SIGNED AN AGREEME NT WITH CONSORTIUM OF 23 ITA NO. 1710/DEL/2015 CWG FOR PROVIDING ELECTRICAL SUPPORT FOR OPENING AN D CLOSING CEREMONY OF COMMON WEALTH GAMES. BUT THE FACTS ARE THAT THE ASS ESSEE COULD ONLY DETERMINE THE EXACT AMOUNT PAYABLE TO IT WHEN THE R /A BILLS WERE PROVIDED TO IT TO, IN TURN, INCLUDE IT AS INCOME IN ITS BOOKS O F ACCOUNTS. AS PER ACCOUNTING STANDARD 9 ON REVENUE RECOGNITION ISSUED BY THE ICA I, PARA 11 OF THE MAIN PRINCIPLE INTER-ALIA STATES IF AT THE TIME OF RAISI NG OF ANY CLAIM IT IS UNREASONABLE TO EXPECT ULTIMATE COLLECTION, REVENUE RECOGNITION SHOULD BE POSTPONED. THE PAYMENT (RS. 27,72,354/-) FOR THE W ORK DONE IN THE CONTRACTS WITH CPWD WAS MADE THROUGH THE TENTH RA BILL DATED 13.11.2011. THUS, THE ASSESSEE INCLUDED THE INCOME IN ITS BOOKS OF ACCOUN TS AS INCOME CREDITED FOR THE AY 2012-13. THUS, THE ASSESSEE HAS POSTPONED TH E REVENUE RECOGNITION DUE TO THE REASON THAT THE EXACT AMOUNT PAYABLE WAS NOT DETERMINED AND THE EXPECTED TIME FOR RECEIVING PAYMENT WAS ALSO NOT DE FINITE. THEREFORE, GROUND NO. 2 OF THE ASSESSEES APPEAL IS ALLOWED. 28. AS REGARDS TO GROUND NO. 3 IN RESPECT OF DISALL OWANCE OF BUSINESS PROMOTION EXPENSES (ADDITION OF RS. 15,50,000/-) -, THE LD. AR SUBMITTED THAT THE ASSESSEE DEBITED ITS P & L ACCOUNT BY RS. 15,50 ,000/-ON ACCOUNT OF BUSINESS PROMOTION EXPENSES DURING THE YEAR. ASSESS EE HAS EXECUTED THE WORK CONTRACT OF MORE THAN 40 CRORE AS A CONSORTIUM PART NER AS WELL AS INDEPENDENT CONTRACTOR FOR CPWD. THE CWG PROJECT WAS ONE OF THE MOST PRESTIGIOUS EVENTS AND ALSO ONE OF THE MAJOR ACHIEVEMENTS OF THE ASSES SEE COMPANY. IT WAS A SHOWCASE FOR ITS FUTURE CONTRACTS, DEMONSTRATION PI ECE OF PROSPECTIVE CLIENTS, BUSINESS ASSOCIATES, AND PRIDE MOMENT FOR ITS STAFF . ACCORDINGLY, THE ASSESSEE IN ORDER TO DEMONSTRATE, ITS EXECUTION AND WORK CAP ABILITIES AND ALSO TO REWARD/INCENTIVIZE ITS STAFF WHO WORKED RELENTLESSL Y FOR EXECUTION OF SUCH WORK CONTRACT, HAD PURCHASED THE CWG TICKETS AND INCURRE D SUCH EXPENDITURE. THE ASSESSEE PROVIDED TICKETS OF THE OPENING CEREMONY T O BOTH THE CUSTOMERS AND THE EMPLOYEES. THE EXPENDITURE INCURRED WAS BONA-FI DE. THE LEDGER ACCOUNT FOR THE SAID EXPENSES SHOWED THAT THE AMOUNT WAS INCURR ED FOR THE PURCHASE OF OPENING CEREMONY TICKETS OF THE CWG-2010. THE AO DE CIDED THAT ASSESSEE 24 ITA NO. 1710/DEL/2015 FAILED TO ESTABLISH THAT THE BUSINESS PURPOSE IN IN CURRING THE SAID EXPENSES. THUS, THE AO MADE AN ADDITION OF RS. 15,50,000/- IN THE INCOME OF THE ASSESSEE. THE CIT (A) UPHELD THE ADDITION MADE BY A SSESSING OFFICER. IT IS THEREFORE, SUBMITTED THAT THE AFORESAID BUSINESS EX PENSES WERE INCURRED BY THE ASSESSEE IN THE NORMAL COURSE OF ITS BUSINESS, WHIC H ARE ALLOWABLE DEDUCTION UNDER SECTION 37(1) OF THE ACT. THE EXPENDITURE WAS NECESSARY FOR CARRYING ON THE BUSINESS MORE EFFICIENTLY AND FOR ALL FUTURE BU SINESS OPPORTUNITIES. IN THAT VIEW OF THE MATTER, THE AFORESAID EXPENSES ARE ALLO WABLE AS DEDUCTION. IT IS ALSO HUMBLY SUBMITTED THAT THE CONTRACT WAS STILL IN EXI STENCE EVEN AFTER THE OPENING CEREMONY CONCLUDED AS THE CONTRACT OF THE A SSESSEE INCLUDED BOTH THE OPENING AS WELL AS CLOSING CEREMONY. IN THE BELOW M ENTIONED CASE IT WAS OBSERVED THAT INCURRING OF BUSINESS PROMOTION/ PUBL ICITY EXPENDITURE WHEREIN THE EXPENDITURE HAS BEEN INCURRED DURING THE EXISTE NCE OF A RUNNING BUSINESS IS ALLOWABLE AS REVENUE DEDUCTION:- HINDUSTAN COMMERCIAL BANK LTD, IN RE: 21 ITR 353 (A LL.) PRAGA TOOLS LTD. V. CIT: (1980) 123 ITR 773 (AP) CIT V. SAKTHI SOYAS LTD.: 283 ITR 194 (MAD.) ACIT V. DELHI CLOTH & GENERAL MILLS CO. LTD.: 144 ITR 275 CIT V. S.L.M. MANEKLAL INDUSTRIES LTD. : 107 ITR 133 CIT V. ESCORTS EMPLOYEES ANCILLARIES LTD. : 224 ITR 28 SCM MANEKLAL INDUSTRIES LTD. V. ITO: 17ITD 515 THE ASSESSING OFFICER FAILED TO APPRECIATE THAT IT IS SETTLED LAW THAT THE ASSESSING OFFICER CANNOT PUT HIMSELF IN THE ARMCHAI R OF A BUSINESSMAN TO DECIDE THE JUSTIFICATION OF INCURRING OR NOT INCURR ING ANY PARTICULAR EXPENDITURE. SO LONG AS THE EXPENDITURE INCURRED IS FOR BUSINESS PURPOSES, THE SAME IS ALLOWABLE AS BUSINESS DEDUCTION. THE LD. AR RELIED UPON THE FOLLOWING DECISION: CIT V. DALMIA CEMENT (P.) LTD: 254 ITR 377 (DEL.) CIT V. BHARTI TELEVENTURES LTD: 331 ITR 502 (DEL.) D & H SECHERON ELECTRODES PVT. LTD. VS. CIT: 149 IT R 400 (MP). 25 ITA NO. 1710/DEL/2015 29. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 30. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE PROVIDED TICKETS OF THE OPENING CEREMONY TO BOTH THE CUSTOMERS AND THE EMPLOYEES. THE EXPENDITU RE INCURRED WAS BONA- FIDE. THE LEDGER ACCOUNT FOR THE SAID EXPENSES SHOW ED THAT THE AMOUNT WAS INCURRED FOR THE PURCHASE OF OPENING CEREMONY TICKE TS OF THE CWG-2010. THE AO DECIDED THAT ASSESSEE FAILED TO ESTABLISH THAT T HE BUSINESS PURPOSE IN INCURRING THE SAID EXPENSES. THUS, THE AO MADE AN A DDITION OF RS. 15,50,000/- IN THE INCOME OF THE ASSESSEE. THE CIT (A) UPHELD T HE ADDITION MADE BY ASSESSING OFFICER. BUT WHILE DETERMINING THIS ADDIT ION THE ASSESSING OFFICER AS WELL AS CIT(A) HAS NOT LOOKED INTO THE ASPECT OF TH E BUSINESS PURPOSE INVOLVED IN THE SAME. BY PROVIDING THE TICKETS TO THE CUSTOM ERS AND THE EMPLOYEES, THE ASSESSEE PROMOTED ITS BUSINESS AND HAS EARNED A REP UTATION THAT IT IS INVOLVED IN THE BIG EVENTS SUCH CWG-2010. THIS MAY NOT YIELD THE IMMEDIATE BUSINESS BUT IT IMPACTS THE BUSINESS PROSPECTS OF THE ASSESS EE FOR SUCH LARGE FUTURE EVENTS. THUS, THE ASSESSING OFFICER AS WELL AS CIT( A) WAS NOT CORRECT IN DISALLOWING THE SAID EXPENSES. GROUND NO. 3 IS ALLO WED. 31. AS REGARDS TO GROUND NO. 4, RELATING TO ADDITIO N ON ACCOUNT OF SCRAP SALE OF RS. 3,35,58,732/- (RS. 1,42,48,577/-, RS. 1,91,9 0,514/- AND 1,19,641), THE LD. AR SUBMITTED THAT ASSESSING OFFICER MADE THIS A DDITION ON ESTIMATED BASIS ON ACCOUNT OF ASSUMED RESIDENTIAL VALUE OF THE ITEM S. DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS CLAIMED EXPENDITURE ON P URCHASE OF THE ABOVE ITEMS AND SAME WAS DULY RECORDED IN PROFIT AND LOSS ACCOUNT. THE SAID MATERIAL WAS UTILIZED IN EXECUTING THE CONTRACTUAL WORK FOR CWG 2010 AT VARIOUS SITES. THE MATERIAL WAS PRIMARILY USED AS RAW MATERIAL THR OUGHOUT IN THE PROCESS OF ERECTING, CONSTRUCTING, INSTALLING/RENOVATING THE S TRUCTURES AND FITTINGS. HENCE, THE ORIGINAL FORM OF RAW MATERIALS PURCHASED UNDERW ENT COMPLETE/SUBSTANTIAL CHANGE IN ITS FORM AND SIZE AS IT WAS CUT/MODIFIED/ ALTERED AS PER THE 26 ITA NO. 1710/DEL/2015 REQUIREMENTS OF THE STRUCTURE/WORK. ASSESSING OFFIC ER MADE THE ABOVEMENTIONED ADDITION ON THE GROUND THAT THE PURC HASE MADE BY ASSESSEE OF SEVERAL ITEMS WERE OF SUCH NATURE THAT EITHER THEY HAVE MULTIPLE USE OR HAVE SUBSTANTIAL RESALE VALUE. ASSESSING OFFICER ARRIVED AT THE MINIMUM RESALE/ SCRAP VALUE OF THE ABOVE ITEMS AND MADE THE IMPUGNE D ADDITION WITHOUT PROVIDING ANY BASIS OF ADDITION NOR CONFRONTING THE DOCUMENTS ON THE BASIS OF WHICH ADDITION IS MADE. ASSESSING OFFICER HAS NOT F OUND IOTA OF EVIDENCE TO ESTABLISH THAT THE SCRAP WAS SOLD FOR A VALUE OTHER WISE AS RECORDED IN THE BOOKS OF ACCOUNTS. ASSESSING OFFICER HAS MADE ADDITION ON ESTIMATED BASIS WITHOUT EVEN REJECTING THE BOOKS OF ACCOUNT. IN THE RELEVAN T ASSESSMENT YEAR, THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS. 13,90,54,86 3/- CRORES ON PURCHASE OF ELECTRICAL ITEMS. TOTAL AMOUNT OF SCRAP SALE CREDIT ED TO THE P/L A/C BY THE ASSESSEE AMOUNTS TO RS. 4,97,16,660/- CRORES. THE A O ESTIMATED SCRAP SALES TO BE 46% OF THE TOTAL EXPENDITURE ON PURCHASE OF ELEC TRICAL CABLE I.E. 46% OF 13,90,54,863 CRORES WHICH EQUALS TO RS. 6,39,65,237 CRORES. THE TOTAL ADDITION ON THE BASIS SALE OF ELECTRICAL CABLE AMOUNTS TO RS . 6,39,65,237 CRORES - RS. 4,97,16,660/- CRORES (AS SHOWN BY THE ASSESSEE) = R S. 1,42,48,577 CRORES. WITH RESPECT TO THE ADDITION MADE IN RESPECT TO ELECTRIC AL ITEMS, THE LD. AR SUBMITTED THAT THE ASSESSEE VIDE LETTER DATED 11.03 .2013 FILED BEFORE THE AO HAD GIVEN THE LEDGER ACCOUNTS OF THE PARTIES TO WHO M COPPER CABLES WERE SOLD. THE SAID COPPER CABLES WERE SOLD M/S TRISMAEE ENTER PRISES AND M/S ARSHI INTERNATIONAL INDIA. COPY OF LEDGER ACCOUNTS OF M/S TRISMAEE ENTERPRISES AND M/S ARSHI INTERNATIONAL INDIA ALONG WITH INVOICES O F DEEPALI DESIGNS & EXHIBITS P. LTD. HAD ALSO BEEN FILED BEFORE THE AO. THE AO WITH REGARD TO ALUMINIUM ESTIMATED THE VALUE OF SCRAP SALES TO BE 50% OF THE EXPENDITURE ON PURCHASE I.E. RS. 2,43,83,070/-. THE AO OBSERVED THAT ALUMIN IUM FETCHES AN AMOUNT OF 50-60% OF THE ACTUAL VALUE. ADDITION IN THIS REGARD WAS MADE OF RS. 1,22,62,622/- CRORES. THE AO WITH REGARD TO FLOORIN G, CARPETS & AWNING TENTING MATERIAL ESTIMATED THE VALUE OF SCRAP SALES TO BE 30% OF THE TOTAL EXPENDITURE ON PURCHASE BY THE ASSESSEE I.E RS. 38, 69,249/-. THE AO OBSERVED THAT THESE AMOUNTS CANNOT BE WHOLLY CONSUMABLE AND MADE AN ADDITION OF RS. 27 ITA NO. 1710/DEL/2015 11,60,774/- LACS. THE AO WITH REGARD TO PURCHASE OF PIPES, IRON SHEETS, & OTHER MISC ITEMS ESTIMATED THE VALUE OF SCRAP TO BE 60% O F THE EXPENDITURE ON PURCHASE BY THE ASSESSEE I.E. RS. 44,36,002/- WHICH AMOUNTED TO RS. 26,61,601/-. THE AO WITH REGARD TO TENTING MATERIA L FABRIC ESTIMATED THE VALUE OF SCRAP TO BE 50% OF THE EXPENDITURE ON PURC HASE BY THE ASSESEE I.E RS. 1,16,34,835/- AND MADE AN ADDITION OF RS. RS. 58,17 ,417/-. AS THESE ELECTRICAL ITEMS WERE OF A CAPITAL NATURE, THEIR RE SIDUAL VALUE WAS DETERMINED TO BE 46% LIKE THE OTHER ELECTRICAL ITEMS. THUS, THE T OTAL ADDITION BY THE AO ON THE BASIS OF THE SCRAP VALUE OF ALL THE AFOREMENTIONED WAS OF RS. 3,35,58,732/-. ON APPEAL, THE CIT (A) AGREED WITH THE REASONING OF TH E AO AND CONFIRMED THE ADDITION MADE BY THE AO. IT IS HUMBLY SUBMITTED TH AT SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CONDUCTED AT THE B USINESS/RESIDENTIAL PREMISES OF THE ASSESSEE ON 19.10.2010. HOWEVER, NO DOCUMENTS WERE FOUND DURING THE SEARCH WITH RESPECT TO SCRAP SALES. THER EFORE, THERE WAS NOTHING ON RECORD TO SHOW THAT SALES OF SCRAP OUTSIDE THE BOOK S OF ACCOUNTS WERE MADE. IN THIS REGARD, WE SUBMIT THAT THE AO HAS NOT FOUND EV EN IOTA OF EVIDENCE TO ESTABLISH THAT THE SCRAP WAS SOLD FOR A VALUE OTHER WISE AS RECORDED IN THE BOOKS OF ACCOUNTS. ALSO, NO REASON HAS BEEN GIVEN FOR NOT ACCEPTING THE VALUE RECORDED IN THE BOOKS FOR SCRAP SALE. THAT THERE WA S NO EVIDENCE THAT ANY SALE OF SCRAP, OVER AND ABOVE WHAT WAS SHOWN BY THE ASSE SSEE, WAS EVER MADE BY THE COMPANY AND SUCH SALE COULD NOT BE PRESUMED IN ABSENCE OF ANY EVIDENCE OF SALE OF SCRAP OUTSIDE BOOKS. HENCE, THE ORDER IS NON-SPEAKING ORDER. THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: (I) PANDIT BROS. V. CIT 26 ITR 159 (PUNI.) (II) BOMBAY CYCLE STORES CO. LTD. V. CIT 33 ITR 13 (BOM.) (III) R.B. BANSILAL ABIRCHAND SPG. & WVG. MILLS V. CIT 75 ITR 260 (BOM.) (IV) INTERNATIONAL FOREST CO. V. CIT 101 ITR 721 (J &K); (V) MALANI RAMJIVAN JAGANNATH V . ASSTT. CIT (2007) 207 CTR (RAJ.) 19. 32. THE LD. AR SUBMITTED THAT ON ONE HAND HE HAS AC CEPTED THE BOOKS OF 28 ITA NO. 1710/DEL/2015 ACCOUNTS AND ON THE OTHER HAND HE HAS MADE ADDITION S ON ESTIMATED BASIS DISREGARDING THE ACTUAL SALES; HENCE, ANY ADDITION ON ESTIMATED BASIS WITHOUT REJECTION OF BOOKS IS NOT JUSTIFIED. THE LD. AR SUB MITTED THAT THE EXPENDITURE INCURRED ON PURCHASE OF THE ABOVE ITEMS WAS DULY RE CORDED IN THE P&L ACCOUNT. THE SAID MATERIAL WAS UTILIZED IN EXECUTIN G THE CONTRACTUAL WORK FOR CWG 2010 AT VARIOUS SITES. THIS MATERIAL WAS PRIMAR ILY USED AS A RAW MATERIAL/ THROUGHPUT IN THE PROCESS OF ERECTING, CO NSTRUCTING, INSTALLING/ RENOVATING THE STRUCTURES AND FITTINGS. HENCE, THE ORIGINAL FORM OF RAW MATERIALS PURCHASED UNDERWENT COMPLETE/ SUBSTANTIAL CHANGE IN ITS FORM AND SIZE AS IT WAS CUT/MODIFIED/ALTERED AS PER THE REQU IREMENT OF THE STRUCTURE/WORK. THE PERCENTAGE OF RESIDUAL VALUE ME NTIONED IN THE ASSESSMENT ORDER IS CAPABLE OF DEVIATION DUE TO HOST OF/ACTORS INCLUDING LESSER REALIZATION, MORE WEAR & TEAR, DETERIORATED QUALITY OF THE FINAL , RECOVERIES PILFERAGE IN THE PROCESS ETC. FURTHER, THE LD. AR SUBMITTED THAT THE RESIDUAL PERCENTAGE, IS A SUBJECTIVE PHENOMENON AND CANNOT BE CONSIDERED AS W ATERTIGHT OR INFALLIBLE MATHEMATICAL CALCULATION. FINAL SALVAGE DEPENDS UPO N THE NATURE OF EACH TYPE OF MATERIAL AND FACTUAL MATRIX OF THE WORK BEING EX ECUTED. THE CONTRACT WAS AWARDED TO ASSESSEE TO LIGHT UP THE JAWAHAR LAL NEH RU STADIUM COVERING EACH NOOK & CORNER OF THE STADIUM DURING CWG 2010. FOR T HIS, APART FROM ELECTRIC CABLES A LOT OF HARDWARE ITEMS, EARTH WIRES, SWITCH , PANELS, MCB'S WERE USED. THESE ITEMS WERE PRIMARILY OF NATURE, THAT ONCE INS TALLED, IT LOSES ITS UTILITY VALUE AND CAN ONLY BE SOLD AS SCRAP AFTER DISMANTLI NG. ALSO, THE SCRAP OF ELECTRICAL FITTING, ITEMS AND ACCESSORIES MAJORLY C OMPRISES OF PLASTIC MATERIAL AND METAL RESIDUE, WHICH HAS LITTLE REALIZABLE VALU E. THE LD. AR RELIED UPON THE JUDGMENT OF THE ITAT, DELHI IN THE CASE OF ACIT VS. M/S SIKKA PAPERS LTD. (ITA NO. 899/D/2012) WHEREIN IT HAS BEEN HELD THAT ADDIT ION IN RELATION TO SALE OF SCRAP WOULD NOT SUSTAIN WITHOUT POINTING OUT ANY DI SCREPANCY IN BILLS AND CONSUMPTIONS AS WELL AS ESTIMATION OF SCRAP VALUE. THE ITAT, AHMEDABAD IN THE CASE OF DCIT VS. HEAVY METAL & TUBES (ITA NO. 294/AHD/2010) HAS HELD THAT THE ASSESSEE HAD GIVEN ALL THE DETAILS FOR GEN ERATION OF SCRAP AND PARTIES TO WHICH THE SCRAP WAS SOLD. AND IN ABSENCE OF ANY ENQUIRY BY THE AO, THE 29 ITA NO. 1710/DEL/2015 ADDITION ON SALE OF SCRAP ON ESTIMATE BASIS WITHOUT PINPOINTING ANY DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE SUS TAINED. FURTHER, THE ITAT, DELHI IN THE CASE OF ACIT VS. M/S RICHA & COMPANY (ITA NO. 3502 & 3503/DEL/09) HAS ALSO HELD THAT ADHOC ADDITION ON S ALE OF SCRAP WITHOUT ANYTHING TO SHOW THAT THE SALE OF SCRAP WAS OUTSIDE THE BOOKS OF ACCOUNTS AND ANY INFORMATION HAD BEEN SUPPRESSED BY THE ASSESSEE , IN ABSENCE OF ANY CORROBORATIVE PIECE OF EVIDENCE THE ADDITION IS LIA BLE TO BE DELETED. 33. WITHOUT PREJUDICE CWG PROJECT WORK WAS PECULIAR AND FIRST OF ITS KIND UNDERTAKEN BY THE ASSESSEE. THOUGH PRIMARILY ITEMS LIKE GENERATOR SETS, ELECTRIC CABLES' ETC, WERE SUPPLIED IN JAWAHAR LAL NEHRU STADIUM, NUMBERS OF OTHER ITEMS WERE ALSO SUPPLIED AT VARIOUS GAMES - V ENUES SITUATED IN DIFFERENT PARTS OF THE CITY. IT IS A KNOWN FACT THAT IMMEDIAT ELY AFTER THE CONCLUSION OF THE GAMES, THERE WAS A LOT HUE AND CRY IN THE PUBLIC AN D MEDIA. SEVERAL GOVERNMENT AGENCIES INITIATED INVESTIGATION/ PROBE ON THE CONDUCT OF OCCWG- 2010, VENDORS/SUPPLIERS AND CONTRACTORS ASSOCIATED WITH THE CONDUCT OF THE GAMES. THIS SUDDEN DEVELOPMENT IMMEDIATELY AFTER TH E CONCLUSION OF THE GAMES HEAVILY IMPACTED THE WORK OF DISMANTLING AND RECOVERY OF INSTALLED MATERIAL FROM VARIOUS SITES AND SUBSTANTIAL TIME WA S SPENT IN ATTENDING TO VARIOUS GOVERNMENT AGENCIES INVOLVED IN PROBE. THUS , AT THIS JUNCTURE THE- ASPECT OF THE RECOVERY OF THE ENTIRE MATERIAL/SUPPL IES MADE BY THE ASSESSEE COMPANY WAS SUPERSEDED BY THE ACTION OF FACING THE ABOVE SAID VARIOUS AUTHORITIES FOR A LENGTH OF TIME HAS RESULTED INTO SHORT RECOVERY OF MATERIAL FROM SITE. 34. WITHOUT PREJUDICE TO THE ABOVE, MOST OF THE MAT ERIAL UTILIZED IN THE WORK IS IN THE NATURE OF CONSUMABLES LIKE NAILS, SCREWS, FEVICOL, ETC WHICH HAS NO SCRAPE VALUE. AFTER THE COMPLETION OF THE CWG EVENT , THE STRUCTURES WERE DISMANTLED/ BROKEN AND THE REMNANT WAS COLLECTED IN THE BEST POSSIBLE MANNER IN A VERY SHORT TIME FRAME AND UNDER TIGHT S CHEDULE, SO THAT SOME SALVAGE VALUE COULD BE REALIZED OUT OF THE SAID RES IDUAL SCRAP. THE EXTRACTED 30 ITA NO. 1710/DEL/2015 RESIDUAL MATERIAL SUBSTANTIALLY LOST ITS USABLE COM MERCIAL VALUE AND THUS COULD ONLY BE SOLD ON WEIGHT BASIS IN ITS RESPECTIVE CATE GORY LIKE METAL, PLASTIC, PAPER, FABRIC, ETC. THE REALIZED VALUE OF SCRAP HAS ALSO BEEN DULY CREDITED TO THE P & L ACCOUNT. IN THIS REGARD, THE LD. AR SUBMITTED A LETTER DATED 09.03.2013 BEFORE THE AO WHEREBY THE ASSESSEE HAS CLEARLY PROV IDED THAT THE RESIDUAL VALUE OF OTHER ITEMS WAS VERY LESS AS COMPARED TO T HE RESIDUAL VALUE AS ESTIMATED BY THE AO DUE TO THE REASONS SET OUT IN T HE ASSESSMENT ORDER IN RESPECT OF EACH ITEM. INSPITE OF ALL THESE ODDS AND SPECIAL CIRCUMSTANCES MENTIONED ABOVE, THE ASSESSEE COMPANY WAS ABLE TO S ELL, WHATEVER QUANTITY IT COULD RECOVER IN RESPECT OF THE USED MATERIAL, AT T HE BEST OF ITS ABILITY IN THESE STRESSFUL CIRCUMSTANCES AND WAS ABLE TO FETCH RS. 5 CRORES WHICH HAS BEEN DULY ENTERED IN THE BOOKS OF ACCOUNTS. THE LD. AR SUBMIT TED THAT COPIES OF NAMES OF THE PARTIES TO WHOM SCRAP MATERIAL WAS SOLD WERE GI VEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 11.03.2013 AS MENTIONED ABOVE. THE LD. AR FURTHER SUBMITTED THAT THE AO WHILE MAKING T HE ADDITION ON ACCOUNT SCARP SALE STATED THAT THE SAME WAS DUE TO MARKET V ALUE. HOWEVER, COPY OF SUCH MARKET REPORT IS NOT AVAILABLE WITH THE ASSESS EE NEITHER HAS THE AO REPRODUCED A COPY OF THE SAME WHILE PASSING THE ASS ESSMENT ORDER. THE MARKET ENQUIRES CONDUCTED BY THE AO WERE NEVER CONF RONTED TO THE ASSESSEE. THE AO HAS NOT CONDUCTED ANY FURTHER ENQUIRY ON HIS OWN, THEREFORE, THE ADDITION MADE ON ACCOUNT OF SCARP SALE CANNOT SUSTA IN. 35. AS REGARDS THE ADDITION MADE BY AO ON THE BASI S OF DEEMED RESIDUAL VALUE, THE LD. AR SUBMIT THAT HIS ACTION IS GROSSLY UNJUSTIFIED. THE AO HAS MADE THE ADDITION ON ESTIMATED BASIS WHEREAS THE AC TUAL REALIZED VALUE OF SCRAP WAS RECORDED IN THE BOOKS. 36. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 37. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. ASSESSING OFFICER MADE THE ABO VEMENTIONED ADDITION ON 31 ITA NO. 1710/DEL/2015 THE GROUND THAT THE PURCHASE MADE BY ASSESSEE OF SE VERAL ITEMS WERE OF SUCH NATURE THAT EITHER THEY HAVE MULTIPLE USE OR HAVE S UBSTANTIAL RESALE VALUE. ASSESSING OFFICER ARRIVED AT THE MINIMUM RESALE/ SC RAP VALUE OF THE ABOVE ITEMS AND MADE THE IMPUGNED ADDITION WITHOUT PROVID ING ANY BASIS OF ADDITION NOR CONFRONTING THE DOCUMENTS ON THE BASIS OF WHICH ADDITION IS MADE. ASSESSING OFFICER HAS NOT FOUND IOTA OF EVIDENCE TO ESTABLISH THAT THE SCRAP WAS SOLD FOR A VALUE OTHERWISE AS RECORDED IN THE BOOKS OF ACCOUNTS. ASSESSING OFFICER HAS MADE ADDITION ON ESTIMATED BASIS WITHOU T EVEN REJECTING THE BOOKS OF ACCOUNT. IN THE RELEVANT ASSESSMENT YEAR, THE AS SESSEE HAS CLAIMED EXPENDITURE OF RS. 13,90,54,863/- CRORES ON PURCHAS E OF ELECTRICAL ITEMS. TOTAL AMOUNT OF SCRAP SALE CREDITED TO THE P/L A/C BY THE ASSESSEE AMOUNTS TO RS. 4,97,16,660/- CRORES. THE AO ESTIMATED SCRAP SALES TO BE 46% OF THE TOTAL EXPENDITURE ON PURCHASE OF ELECTRICAL CABLE I.E. 46 % OF 13,90,54,863 CRORES WHICH EQUALS TO RS. 6,39,65,237 CRORES. THE TOTAL A DDITION ON THE BASIS SALE OF ELECTRICAL CABLE AMOUNTS TO RS. 6,39,65,237 CRORES - RS. 4,97,16,660/- CRORES (AS SHOWN BY THE ASSESSEE) = RS. 1,42,48,577 CRORES . WITH RESPECT TO THE ADDITION MADE IN RESPECT TO ELECTRICAL ITEMS, THE A SSESSEE VIDE LETTER DATED 11.03.2013 FILED BEFORE THE AO HAD GIVEN THE LEDGER ACCOUNTS OF THE PARTIES TO WHOM COPPER CABLES WERE SOLD. THE SAID COPPER CABLE S WERE SOLD M/S TRISMAEE ENTERPRISES AND M/S ARSHI INTERNATIONAL INDIA. COPY OF LEDGER ACCOUNTS OF M/S TRISMAEE ENTERPRISES AND M/S ARSHI INTERNATIONAL IN DIA ALONG WITH INVOICES OF DEEPALI DESIGNS & EXHIBITS P. LTD. HAD ALSO BEEN FI LED BEFORE THE AO. THE AO WITH REGARD TO ALUMINIUM ESTIMATED THE VALUE OF SCR AP SALES TO BE 50% OF THE EXPENDITURE ON PURCHASE I.E. RS. 2,43,83,070/-. THE AO OBSERVED THAT ALUMINIUM FETCHES AN AMOUNT OF 50-60% OF THE ACTUAL VALUE. ADDITION IN THIS REGARD WAS MADE OF RS. 1,22,62,622/- CRORES. THE AO WITH REGARD TO FLOORING, CARPETS & AWNING TENTING MATERIAL ESTIMATED THE VAL UE OF SCRAP SALES TO BE 30% OF THE TOTAL EXPENDITURE ON PURCHASE BY THE ASS ESSEE I.E RS. 38,69,249/-. THE AO OBSERVED THAT THESE AMOUNTS CANNOT BE WHOLLY CONSUMABLE AND MADE AN ADDITION OF RS. 11,60,774/- LACS. THE AO WITH RE GARD TO PURCHASE OF PIPES, IRON SHEETS, & OTHER MISC ITEMS ESTIMATED THE VALUE OF SCRAP TO BE 60% OF THE 32 ITA NO. 1710/DEL/2015 EXPENDITURE ON PURCHASE BY THE ASSESSEE I.E. RS. 44 ,36,002/- WHICH AMOUNTED TO RS. 26,61,601/-. THE AO WITH REGARD TO TENTING MATERIAL FABRIC ESTIMATED THE VALUE OF SCRAP TO BE 50% OF THE EXPENDITURE ON PURCHASE BY THE ASSESEE I.E RS. 1,16,34,835/- AND MADE AN ADDITION OF RS. RS. 5 8,17,417/-. AS THESE ELECTRICAL ITEMS WERE OF A CAPITAL NATURE, THEIR RE SIDUAL VALUE WAS DETERMINED TO BE 46% LIKE THE OTHER ELECTRICAL ITEMS. THUS, THE T OTAL ADDITION BY THE AO ON THE BASIS OF THE SCRAP VALUE OF ALL THE AFOREMENTIONED WAS OF RS. 3,35,58,732/-. THIS ENTIRE ADDITION THOUGH BASED ON EVIDENCE PRODU CED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER HAS NOT TAKEN INTO ACCOUNT ALL THE RELEVANT EVIDENCE WHILE DETERMINING THE ADDITION ON THE SCRAP SALE. BESIDES THAT THE ASSESSING OFFICER HAS NOT GI VEN ANY BASIS AS TO ESTIMATION OF THESE SALE OF SCRAP. THUS, THE REASON ING TO ARRIVE AT THIS ADDITION IS NOT PROPERLY GIVEN BY THE ASSESSING OFFICER. THE CIT(A) ALSO FAILED TO DO THE SAME. THEREFORE, IT WILL BE APPROPRIATE THAT THE RE MAND BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AND AFTER VERIFYING A LL THE EVIDENCES PRODUCED BY THE ASSESSEE TAKE A COGENT VIEW AND GIVE A PROPER R EASON AS TO WHETHER THIS ADDITION SUSTAINS OR NOT. NEEDLESS TO SAY, THE ASSE SSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. GROUND NO. 4 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 38. AS REGARDS TO GROUND NO. 5 IN RESPECT OF DISALL OWANCE OF HIRE CHARGES TO THE EXTENT OF RS. 62,33,080, THE LD. AR SUBMITTED T HAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS GOT THE STAGE FABRI CATION WORK DONE AGGREGATING TO RS. 62,33,080/- FOR VARIOUS VENUES. IN THIS REGARD PAYMENT WAS MADE TO M/S ARUN KHULLAR & CO. FOR THE VARIOUS WORK S EXECUTED BY M/S ARUN KHULLAR & CO. THE SAME EXPENSES WERE CLAIMED BY THE ASSESSEE IN THE P & L ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDING S, NOTICE U/S 133(6) OF THE ACT WAS ISSUED TO M/S ARUN KHULLAR & CO. HOWEVE R, BECAUSE OF CHANGE IN THE ADDRESS OF M/S ARUN KHULLAR & CO. AND THE ENTIR E SHIFTING PROCESS, NOTICE ISSUED WAS RETURNED BACK UNDELIVERED. IN LIGHT OF T HE SAME, ASSESSING OFFICER DOUBTED THE GENUINENESS OF THE TRANSACTION UNDERTAK EN BETWEEN ASSESSEE AND 33 ITA NO. 1710/DEL/2015 M/S ARUN KHULLAR & CO. NO FURTHER OPPORTUNITY WAS P ROVIDED BY AO TO PROVE THE GENUINENESS OF THE TRANSACTION UNDERTAKEN. THE AO PASSED AN ASSESSMENT ORDER MAKING ADDITION ON ACCOUNT OF UNEXPLAINED PUR CHASE/ SALE WITH RESPECT TO HIRE CHARGES PAID TO KHULLAR & CO. DURING THE C OURSE OF APPELLATE PROCEEDINGS BEFORE CIT(A), ASSESSEE COMPANY SUBMITT ED THE FOLLOWING DOCUMENTS: DECLARATION OF M/S ARUN KHULLAR & CO. CERTIFYING I TS PRESENT ADDRESS AS 22/5 CH CHATUR SINGH FARM, JOUNAPUR VIL LAGE (NEAR BHAWANI NURSERY), P.O. MEHRAULI, NEW DELHI, COPY OF PAN CARD OF MR. ARUN KHULLAR PROPRIETOR OF M/S ARUN KHULLAR & CO., . COPY OF THE ITR AND COMPUTATION FOR THE CONCERNED YEAR, BALANCE SHEET AND P & L ACCOUNT COPY OF INVOICES ISSUED TO THE ASSESSEE COMPANY FO R THE FY 2010- 11, CONFIRMATION OF ACCOUNT COPY, AND, COPY OF BANK STATEMENT DULY REFLECTING THE TRANSAC TIONS. AN APPLICATION UNDER RULE 46A OF THE INCOME TAX RUL ES, 1962, WAS FILED BEFORE THE CIT(A) SINCE THE ASSESSEE WAS PREVENTED BY THE SUFFICIENT CAUSE FROM PRODUCING THE ABOVEMENTIONED DOCUMENTS BEFORE THE A SSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. IN HIS REMAND REPORT, THE A SSESSING OFFICER REQUESTED FOR NON-ADMISSION OF ADDITIONAL EVIDENCE ADDUCED BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE AND THE DOCUMENT S SUBMITTED UNDER THE SAID RULE. CIT(A) REJECTED THE APPLICATION UNDER RULE 46 A OF THE INCOME TAX RULES, 1962, WITHOUT COMMENTING ON THE ABOVEMENTIONED DOCU MENTS SUBMITTED TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINES S OF THE TRANSACTION. THE CIT(A) HAS FAILED TO APPRECIATE THAT M/S ARUN KHULL AR & CO. IS A REGULAR SERVICE PROVIDER TO THE ASSESSEE. ARUN KHULLAR & CO. PROVID ES SERVICES IN RELATION TO STAGE SET-UP AND DESIGN, ETC. FOR THE VARIOUS EVENT S HANDLED BY THE ASSESSEE IN THE NORMAL COURSE OF BUSINESS. IN THIS REGARD RELIA NCE IS PLACED ON THE DECISION 34 ITA NO. 1710/DEL/2015 OF THE TRIBUNAL IN THE CASE DHANNA RAM GARG V. INCOME-TAX OFFICER, WARD 25(1), NEW DELHI (ITA NO. 2216/D/2011). THE ASSESSE E SUBMITTED LEDGER ACCOUNTS FOR AY 2009-10 TO 2014-15. IT IS PERTINENT TO NOTE THAT SUCH LEDGER ACCOUNTS WERE ALSO SUBMITTED DURING THE COURSE OF A SSESSMENT PROCEEDINGS WHICH WERE DULY ACCEPTED BY THE ASSESSING OFFICER I N THE SUBSEQUENT YEAR WHEREIN THE IDENTITY, GENUINENESS AND CREDITWORTHIN ESS OF THE TRANSACTION WAS ACCEPTED BY THE DEPARTMENT. THAT WITH RESPECT TO T HE NON-DELIVERY OF NOTICE U/S 133(6) OF THE ACT TO M/S ARUN KHULLAR & CO., IT IS SUBMITTED THAT THE ADDRESS OF M/S ARUN KHULLAR & CO. AT THE TIME OF TH E DELIVERY OF NOTICE WAS IN THE PROCESS OF SHIFTING TO ITS NEW ADDRESS. UPON TH E RETURN OF THE UNDELIVERED NOTICE, THE AO NEITHER MADE AN EFFORT TO ISSUE NOTI CE/SUMMONS AT THE OLD ADDRESS OF M/S ARUN KHULLAR AND CO. NOR DID HE RESE ND THE NOTICE AT THE NEW ADDRESS OF THE COMPANY. IT IS FURTHER THAT THE AO N EVER CONFRONTED THE ASSESSEE THAT THE NOTICES U/S 133(6) WAS NOT DELIVE RED TO M/S ARUN KHULLAR & CO. THE ASSESSEE DURING THE APPEAL PROCEEDINGS BEFO RE CIT(A) HAS SUBMITTED THAT THE ASSESSEE WAS NEVER ASKED TO PRODUCE THE MR . ARUN KHULLAR BY THE AO AND IF AN OPPORTUNITY WOULD HAVE BEEN GIVEN, THE AS SESSEE WOULD HAVE PRODUCED MR. ARUN KHULLAR OR HIS REPRESENTATIVES. I T IS SUBMITTED THAT THE AO COMMITTED A BREACH OF THE PRINCIPLES OF NATURAL JUS TICE BY NOT ALLOWING THE ASSESSEE COMPANY TO PRODUCE THE MR. ARUN KHULLAR PR OPRIETOR OF M/S ARUN KHULLAR & CO. 39. WITHOUT PREJUDICE TO THE AFOREMENTIONED, IN THE ABSENCE OF ANY INCRIMINATING MATERIAL JEOPARDIZING ON RECORD THAT WOULD JEOPARDIZE THE GENUINENESS OF THE TRANSACTION, THE AO DISALLOWED T HE GENUINENESS OF THE TRANSACTION MERELY OF THE BASIS OF THE FACT THAT TH E PARTY TRANSACTED WITH WAS NOT PRODUCED. NO OTHER SUPPORTING OR CIRCUMSTANTIAL EVIDENCE AVAILABLE TO THE AO WAS CONSIDERED NEITHER BY HIM NOR BY THE CIT (A) IN APPEAL. THE LD. AR RELIED UPON THE DECISION OF THE BOMBAY HIGH COURT I N THE CASE OF COMMISSIONER OF INCOME TAX-1, MUMBAI V. NIKUNJ EXIM P ENTERPRISES (P.) LTD. 35 ITA NO. 1710/DEL/2015 [2013] 216 TAXMANN.COM 171 (BOMBAY). 40. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 41. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. AN APPLICATION UNDER RULE 46A OF THE INCOME TAX RULES, 1962, WAS FILED BEFORE THE CIT(A) SINCE THE ASSESSE E WAS PREVENTED BY THE SUFFICIENT CAUSE FROM PRODUCING THE ABOVEMENTIONED DOCUMENTS BEFORE THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. IN HIS REMAND REPORT, THE ASSESSING OFFICER REQUESTED FOR NON-ADMISSION OF AD DITIONAL EVIDENCE ADDUCED BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF T HE CASE AND THE DOCUMENTS SUBMITTED UNDER THE SAID RULE. CIT(A) REJECTED THE APPLICATION UNDER RULE 46A OF THE INCOME TAX RULES, 1962, WITHOUT COMMENTING O N THE ABOVEMENTIONED DOCUMENTS SUBMITTED TO PROVE THE IDENTITY, GENUINEN ESS AND CREDITWORTHINESS OF THE TRANSACTION. THUS, IT WILL BE APPROPRIATE TO REMAND BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AND AFTER TAKING COGN IZANCE OF THE DOCUMENTS IN THE FORM OF ADDITIONAL EVIDENCE, THE ASSESSING OFFI CER SHOULD DECIDE THIS CLAIM ACCORDINGLY. NEEDLESS TO SAY THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. GROUND NO. 5 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 42. AS REGARDS TO GROUND NO. 6 IN RESPECT OF GENERA L DISALLOWANCE OF RS. 3,68,579, THE LD. AR SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS CLAIMED FOLLOWING EXPENDITURE IN RESPE CT OF ITS BUSINESS ACTIVITIES: I. MOTOR VEHICLE RUNNING -RS. 14,53,527/- II. TELEPHONE EXPENSES -RS. 18,07,586/- III. DEPRECIATION (ON CARS) - RS. 4,24,679/- THE AO, ON THE PERUSAL OF THE LEDGER ACCOUNT, OBSER VED THAT THE ABOVE EXPENSES HAVE NOT BEEN INCURRED FULLY AND WHOLLY FOR THE PUR POSE OF BUSINESS. THE EXPENDITURE CLAIMED BY THE ASSESSEE HAS BEEN DISALL OWED ON AD HOC BASIS 36 ITA NO. 1710/DEL/2015 DISREGARDING THE ACTUAL AUDITED BOOKS OF ACCOUNTS A ND RECORD PRODUCED TO SUBSTANTIATE THE ABOVE TRANSACTION. THE AO DISALLOW ED 1/5TH OF THE EXPENSES WHICH CAME TO RS. 7,37,158/- (1/5 OF 36,85,792/-). CIT(A) UPHELD THE ADDITION MADE BY THE AO, HOWEVER, IT FOUND THAT THE DISALLOW ANCE MADE BY THE AO AT 1/5TH WAS HIGH AND IT RESTRICTED THE DISALLOWANCE T O 1/10TH OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE I.E. RS. 3,68,5 79/-. THE LD. AR SUBMITTED THAT THE A.O WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT FOR AY 2012-13 DISALLOWED 1/5 TH OF TELEPHONE EXPENSES, REPAIR & MAINTENANCE OF MOTOR VEHICLE & DEPRECIATION EXPENSES ETC. HOWEVER, THE CIT (A) U/S 250(6) OF THE ACT WHILE PASSING AN ORDER FOR AY 2012-13 AFTER EXAMINING THE BOOK OF ACCOUNTS AND THE ENTIRE VOUCHER PRODUCED BY THE ASS ESSEE, DELETED THE ADDITION IN THIS REGARD. IT IS NOTEWORTHY THE DEPARTMENT HAS ACCEPTED THE STAND OF CIT(A) AND NO APPEAL IS MADE IN THIS REGARD. THE LD. AR FU RTHER SUBMITTED THAT THE AO WHILE PASSING AN ORDER U/S 143(3) FOR AY 2013- 1 4 HAS NOT MADE ANY ADDITION IN THIS REGARD. THEREFORE, THE AO IN SUBSE QUENT YEARS HAS ACCEPTED THE STANCE OF THE ASSESSEE AND HAS NOT MADE ANY ADDITIO N. THE LD. AR RELIED UPON THE JUDGMENT OF HONBLE GUJRAT HIGH COURT IN THE CA SE OF SAYAJI IRON & ENGG. CO. VS. CIT [2002] 253 ITR 749 (GUJARAT) WHEREIN IT HAS BEEN HELD THAT NO DISALLOWANCE OF CAR EXPENSES CAN BE MADE IN THE HAN DS OF THE ASSESSEE- COMPANY ON ACCOUNT OF PERSONAL USE OF CARS BY DIREC TORS. THE ITAT, DELHI IN THE CASE OF DCIT VS. SOPHISTICATED MARBLES AND GRAN ITE INDUSTRIES [2010] 3 ITR(T) 220 (DELHI) HAVE BEEN HELD DISALLOWANCES OF CAR EXPENSES ON ACC OUNT OF BEING PERSONAL IN NATURE CANNOT BE MERELY BASED ON ESTIMATE BASIS OR AD HOC BASIS. SIMILAR OBSERVATION WITH RESPECT TO TELEPHON E EXPENSES HAS BEEN MADE IN THE JUDGMENT OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. S.S.P (P.) LTD. [2011] 14 TAXMANN.COM 87 (PUNJ. & HAR.) AS REGARDS THE ADDITION MADE BY AO WE SUBMIT THAT HIS ACTION IS GR OSSLY UNJUSTIFIED. 43. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF CIT(A). 37 ITA NO. 1710/DEL/2015 44. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS GROUND IS DECIDED WHILE D ECIDING THE APPEAL FILED BY THE REVENUE IN RESPECT OF GROUND NO. 5. THUS, GROUN D NO. 6 IS DISMISSED. 45. SINCE WE ARE DECIDING THE APPEALS, THE STAY APP LICATION DOES NOT SURVIVE, HENCE DISMISSED. 46. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED A ND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH MARCH, 2019 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 14 /03/2019 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 38 ITA NO. 1710/DEL/2015 DATE OF DICTATION 17.01.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17. 01.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 4 .0 3 .2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 4 .0 3 .2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 4 .0 3 .2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK