Sri Shankerial, Sec'bad, Hyderabad V. DCIT, Central Circle-5, Hyderabad

ITA 1797/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66094 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 19-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHANI RAJU
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained cash credit; Rejection of books of accounts; Capital asset; Business income; Search and seizure; Opportunity of being heard
• Section: 143(3); 2(14); 133A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1796 & 1797/HYD/2011 ASSESSMENT YEARS : 2006-07 & 2009-10 SRI SHANKERLAL, SECUNDERABAD. .... APPELLANT VS. DY. CIT, CC-5, HYDERABAD. RESPONDENT APPELLANT BY : SHRI K.A. SAI PRASAD RESPONDENT BY : SHRI PHANI RAJU DATE OF HEARING : 06-06-2012 DATE OF PRONOUNCEMENT : 03-08-2012 ORDER PER SAKTIJIT DEY, J.M.: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS OF CIT (A)-VII, HYDERABAD A ND THEY PERTAIN TO THE ASSESSMENT YEARS 2006-07 AND 2009-10 . SINCE COMMON ISSUES ARE INVOLVED AND ASSESSEE IS ALSO COM MON IN THESE APPEALS, THESE ARE CLUBBED TOGETHER AND DISPO SED OF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. ITA NO.1796/HYD/11- ASST. YEAR 2006-07 : 2. THE ONLY DISPUTE IN THE PRESENT APPEAL IS ADDITI ON OF AN AMOUNT OF RS.1,25,000/- AS UNEXPLAINED CREDITS. BR IEFLY THE FACTS ARE THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME F ROM HIS PROPRIETARY BUSINESS M/S MODI PEARLS. CONSEQUENT U PON A SEARCH AND SEIZURE OPERATION CONDUCTED IN CASE OF M/S SRI KRISHNA JEWELLERY MART & OTHERS A NOTICE U/S 153C OF THE AC T WAS ISSUED TO THE ASSESSEE. IN COURSE OF ASSESSMENT PROCEEDING S THE AO ON VERIFICATION OF THE CAPITAL ACCOUNT FOUND THAT AN A MOUNT OF RS.1,25,000/- HAS BEEN CREDITED IN ASSESSEES CAPIT AL ACCOUNT IN M/S MODI PEARLS. THE ASSESSEE EXPLAINED THAT THE A MOUNT OF RS.1,25,000/- WAS WITHDRAWN FROM THE SAVING BANK A /C WITH CANARA BANK. THE AO ADDED HE AMOUNT OF RS.1,25,000 /- TO THE TOTAL INCOME OBSERVING THAT THE ASSESSEE IN SPITE O F AVAILING OPPORTUNITY DID NOT PRODUCE ANY EVIDENCE, NOT EVEN THE BANK STATEMENT TO PROVE THE DEPOSIT IN THE CAPITAL A/C. 3. THE ASSESSEE CHALLENGED THE ADDITION BY FILING A N APPEAL BEFORE THE CIT (A). THE CIT (A) ALSO SUSTAINED THE ADDITION N THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO PRODUCE AN Y VALID EVIDENCE. 4. THE LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD WITHDRAWN AN AMOUNT OF RS.1,25,000/- FROM HIS PPF D EPOSITS MADE FROM EARLIER SAVINGS WHICH WAS DEPOSITED IN T HE SAVINGS BANK ACCOUNT WITH CANARA BANK. THIS AMOUNT WAS WI THDRAWN FROM THE SAVINGS BANK ACCOUNT AND BROUGHT TO HIS CA PITAL A/C WITH M/S MODI PEARLS. IN SUPPORT OF SUCH CONTENTION, TH E LD. AR BROUGHT TO OUR NOTICE COPY OF THE BANK STATEMENT. 3 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. 5 LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER PASSED BY THE CIT (A). 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS SEEN FROM THE ORDERS OF THE REVEN UE AUTHORITIES THAT THE ADDITION HAS BEEN MADE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE SUBSTANTIATING T HE SOURCE OF DEPOSITS IN THE CAPITAL ACCOUNT. WE FIND FROM THE COPY OF THE BANK STATEMENT THAT AN AMOUNT OF RS.1,25,000/- WAS DEPOSITED IN THE SAVINGS BANK ACCOUNT WHICH WAS SUBSEQUENTLY WIT HDRAWN. THE LD. AR HAD SUBMITTED BEFORE US THAT THIS AMOU NT WAS FROM THE PPF DEPOSITS MADE FROM EARLIER SAVINGS. CONSID ERING THE SUBMISSIONS MADE BY THE LD. AR WE ARE OF THE VIEW T HAT THE ASSESSEE SHOULD BE GIVEN ANOTHER OPPORTUNITY TO EXP LAIN THE SOURCE OF RS.1,25,000 DEPOSITED IN THE CAPITAL ACCO UNT. WE THEREFORE RESTORE THE MATTER BACK TO THE FILE OF TH E AO ON THIS ISSUE FOR VERIFYING ASSESSEES CLAIM. IF THE ASSES SEE PRODUCES PROPER EVIDENCE EXPLAINING THE SOURCE OF THE DEPOSI T OF RS.1,25,000 NO ADDITION CAN BE MADE OF THE SAID AMO UNT. THE AO SHALL AFFORD A REASONABLE OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. ITA 1797/HYD/2011- ASST. YEAR 2009-10: - 7. THE SOLE ISSUE ARISING IN THE PRESENT APPEAL IS ADDITION OF AN AMOUNT OF RS.3,70,000/- TO THE TOTAL INCOME AS UNEX PLAINED CREDITS. 8. FACTS OF THE ISSUE ARE, WHILE VERIFYING THE CAPI TAL ACCOUNT OF THE ASSESSEE IN COURSE OF THE ASSESSMENT PROCEEDING THE AO FOUND AN AMOUNT OF RS.3,70.000 DEPOSITED IN CASH. THE AO ADDED THIS AMOUNT BY OBSERVING THAT THE ASSESSEE HAS FAIL ED TO PRODUCE 4 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. ANY EVIDENCE IN EXPLAINING THE SAID DEPOSIT. THE CIT (A) ALSO SUSTAINED SUCH ADDITION IN THE FIRST APPEAL PROCEED ING. 9. THE LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD WITHDRAWN AN AMOUNT OF RS.3,70,000/- FROM M/S MODI PEARLS ON 29-4-2008 AND RETURNED J BACK THE AMOUNT OF RS.2,7 0,000/- ON 5-5-2008 AND RS.1,00,000/- ON 6-6-2008. IN THIS RE SPECT, THE ASSESSEE ALSO PRODUCED THE ASSESSEES CAPITAL A/C W ITH M/S MODI PEARLS. 10. THE LEARNED DR SUPPORTED THE ORDERS OF THE REVE NUE AUTHORITIES. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE MATERIALS ON RECORD. IT IS SEEN FROM THE CAPITAL A CCOUNT OF THE ASSESSEE THAT AN AMOUNT OF RS.3,70,000-00 WAS WITHD RAWN BY THE ASSESSEE ON 29-4-2008. THE ASSESSEE HAD DEPOSITED CASH OF RS.270000 ON 5-6-2008 AND RS.1,00,000/- ON 6-6-2008 . CONSIDERING HE SUBMISSIONS MADE, WE THINK IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR VERIFYING THE SHARE. IF THE ASSESSEE PRODUCES ADEQUATE EVIDENCE IN SUPPORT OF I TS CLAIM THEN NO ADDITION CAN BE MADE. THE AO SHALL AFFORD A REA SONABLE OPPORTUNITY OF BEING HEARD BEFORE COMPLETING THE PR OCEEDING. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 3 - 8-2012. SD/- SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 3 RD AUGUST, 2012. 5 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. COPY TO:- 1) C/O CH PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, STREET NO.1, ASHOKNAGAR, HYDERABA D. 2) DCIT, CC-5, HYDERABAD. 3) THE CIT (A)-VII, HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 6 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. ITA NO.189/HYD/2011 XX. BRIEFLY THE FACTS ARE THE ASSESSEE IS AN HUF DE RIVING INCOME FROM AGRICULTURE. A SURVEY WAS CONDUCTED IN CASE OF SRI SURAKSHITA HOMES U/S 133A ON 4-9-2008 AS A RES ULT OF WHICH INFORMATION CAME TO THE DEPARTMENT THAT THE ASSESSEE HAD SOLD 20 GUNTAS OF LAND ON 2-3-2007 AT BAIRAGUDA VILLAGE OF KONDUKUR MANDAL, RR DISTRICT FO R CONSIDERATION OF RS.33,49,500/-. THE ASSESSEE FIL ED ITS RETURN OF INCOME DECLARING THE TOTAL INCOME AT NIL CLAIMING THE SHORT TERM CAPITAL GAIN ARISING FROM SALE OF LA ND AS EXEMPT SINCE THE LAND BEING AN AGRICULTURAL LAND IS NOT A CAPITAL ASSET. IN COURSE FO ASSESSMENT PROCEEDING U/S 143(3) READ WITH SECTION 147 THE AO REJECTED THE AS SESSEES CLAIM BY OBSERVING THAT HYDERABAD CITY IS UNDER GRE ATER HYDERABAD MUNICIPAL CORPORATION (GHMC). THEREFORE, T HE SURROUNDING 60 KMS WILL AUTOMATICALLY BECOME URBAN LAND THOUGH IT IS AGRICULTURAL LAND. THE AO FURTHER OBSE RVED THAT THE PARTNER OF SRI SURAKSHITA HOMES IN HIS DEPOSITI ON HAD STATED THAT THE LAND WAS PURCHASED AT RS.62 LAKHS P ER ACRE BUT WAS REGISTERED AT RS.18 LAKHS PER ACRE. ACCORD ING TO THE ASSESSING OFFICER UNLESS THE LAND WAS SITUATED WITH IN THE MUNICIPAL LIMITS IT WOULD NOT HAVE SOLD AT A COST O F RS.62 LAKHS PER ACRE. IT WAS FURTHER OBSERVED BY THE AO T HAT THE 7 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. PURCHASES HAD PURCHASED THE LAND WITH AN INTENTION TO DEVELOP THE LAND FOR CONSTRUCTION PURPOSES BY WAY O F PLOTTING. ON THE AFORESAID CONSIDERATION THE AO HE LD THAT THE LAND SOLD BY THE ASSESSEE BEING URBAN LAND THE EXEMPTION CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BY FILING AN APPEAL BEFORE THE CIT (A). BEFORE THE CIT (A) THE ASSESSEE CONTENDED THAT LEMOOR VILLAGE WHERE THE ASSESSEES LAND WAS SITUATED WAS INCLUDED WITHIN THE GHMC AS PER H MDA ACT, 2008 WITH EFFECT FROM 24-8- 2008 WHERE AS THE ASSESSEE HAD SOLD THE LAND VIDE SALE DEED EXECUTED IN MARCH, 2007 I.E. BEFORE INCLUSION OF THE AREA IN GHMC. IT WAS A LSO CONTENDED BEFORE THE CIT (A) THAT THE TOTAL POPULAT ION OF LEMOOR VILLAGE WAS ONLY 4769 AND THE VILLAGE IS ONL Y A PANCHAYAT AND NOT A MUNICIPALITY. THE ASSESSEE ALS O CONTENDED THAT TO WHAT PURPOSE, THE PURCHASER WILL PUT THE LAND, IS IRRELEVANT. WHAT IS IMPORTANT IS WHETHER ON THE DATE OF SALE THE LAND WAS AGRICULTURAL LAND OR NOT. THE CIT (A) AFTER CONSIDERING ALL THESE FACTORS HELD THAT T HE LAND SOLD BY THE ASSESSEE WAS AGRICULTURAL LAND AND THEREFORE THE EXEMPTION CLAIMED U/S 2(14) (III) BY THE ASSESSEE H AS TO BE ALLOWED. XX. THE LD. DR SUBMITTED BEFORE US THAT THE ASSESSE E COULD NOT PROVE THAT HE LAND WAS USED FOR AGRICULTURE AT THE TIME OF SALE. IT WAS FURTHER SUBMITTED THAT THE RATE AT WHICH THE 8 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. LAND WAS SOLD BY THE ASSESSEE WAS APPLICABLE TO NON AGRICULTURAL LANDS. THE LAND WAS SOLD ON A PER SQU ARE YARD BASIS AND NOT ON ACREAGE BASIS. THE LD. DR RELIES UPON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF SHARIFABUBI MOHD. IBRAHIM VS. CIT (204 ITR 631) SUBM ITTED THAT APPLYING THE GUIDELINES OF THE HONBLE SUPREME COURT THE LAND CANNOT BE SAID TO BE AGRICULTURAL LAND. XX. THE LD. AR SUBMITTED THAT THE LAND WAS RECORDED IN THE REVENUE RECORDS AS AGRICULTURAL LAND. THE ASSESSEE ALSO CARRIED ON AGRICULTURAL OPERATION ON THE SAID LAND AFTAER PURCHASING IT AND HAS FILED RETURN OF INCOME SHOWIN G AGRICULTURAL INCOME. THE LD. AR ALSO REFERRED TO TH E CERTIFICATE OF THE TEHSILDAR IN THIS REGARD. THE LD . AR CONTENDED THAT LAND HAS BEEN RECORDED AS AGRICULTUR AL LAND IN THE PATTADAR PASS BOOK ALSO. XX. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS A FACT THAT THE LAND SO LD BY THE ASSESSEE HAS BEEN RECORDED AS AGRICULTURAL LAND IN THE REVENUE RECORDS. IT IS ALSO A FACT THAT THE VILLAGE WHERE THE LAND WAS SITUATED WAS INCLUDED WITHIN THE LIMIT OF GHMC AFTER EXECUTION OF THE SALE DEED. HOWEVER, THESE B Y ITSELF CANNOT BE A FACTOR TO DECIDE THE NATURE OF THE LAND AS AGRICULTURAL LAND. AS HAS BEEN HELD BY THE HONBLE SUPREME 9 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. COURT IN CASE OF SHARIFABUBI MOHD. IBRAHIMS CASE ( SUPRA) VARIOUS FACTORS HAVE TO BE CUMULATIVELY CONSIDERED TO DECIDE THE NATURE OF A PARTICULAR LAND AS AGRICULTU RAL LAND. AFTER GOING THROUGH THE ORDER OF THE CIT (A) AS WE LL AS THE AO, IT IS CLEAR THAT THEY HAVE NO CONSIDERED ALL TH ESE ASPECTS WHILE COMING TO THEIR RESPECTIVE CONCLUSIONS. IN T HE AFORESAID FACTUAL SITUATION, WE CONSIDER IT APPROP RIATE TO RESTORE THE MATTER BACK TO THE FILE OF THE AO WHO SHALL MAKE NECESSARY ENQUIRY TO FIND OUT THE TRUE NATURE OF THE LAND SOLD BY THE ASSESSEE KEEPING IN MIND THE GUIDE LINES OF THE HONBLE SUPREME COURT IN THE CASE OF SHARIFABUB I MOHD. IBRAHIMS CASE (SUPRA). THE AO SHALL AFFORD A REAS ONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE COMPLETING THE PROCEEDING. XX. IN THE RESULT, THE APPEAL XXXXXXX IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA 125 OF 2011 AND CO NO.88 OF 2012 10 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. APPEAL FILED BY THE REVENUE. THE REVENUE RAISED TH E FOLLOWING EFFECTIVE GROUNDS BEFORE US:- // GROUNDS 1 AND 2// BRIEFLY THE FACTS ARE THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF RUNNING A RESTAURANT. THE ASSESSEE FILED ITS RET URN FOR THE ASSESSMENT YEAR UNDER DISPUTE DECLARING AN INCOME O F RS.13,65,315. IN THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSEE SUBMITTED ITS BOOKS OF ACCOUNTS WITH VOUCH ERS BANK STATEMENTS ETC., FOR VERIFICATION OF THE AO. THE A O FOUND FROM THE P & L A/C THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.1,64,92,813 TOWARDS PURCHASES AGAINST AN ADMI TTED SALES TURNOVER OF RS.2,45,86,179/-. THE AO WHEN AS KED THE ASSESSEE TO SUBMIT THE BILLS AND VOUCHERS IN SUPPOR T OF PURCHASES OF CHICKEN .......... ETC., THE ASSESSEE SUBMITTED THAT AS THE PURCHASES OF THESE ITEMS ARE MADE BY S OME TIME VENDORS, NO REGULAR BILLS ARE NOT AVAILABLE. SIMIL ARLY, SO FAR AS SALES ARE CONCERNED, THE ASSESSEE SUBMITTED THAT NUMBER OF ITEMS SOLD EVERY DAY IS COUNTED AND SALES ARE RECORDED. THE AO OBSERVING THAT THE ACCOUNTS OF THE ASSESSEE ARE NOT FULLY SUPPORTED BY PROPER BILLS AND VOUCHERS. THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE TREATED AS CORRE CT AND COMPLETE AND ARE NOT RELIABLE TO ARRIVE AT A CORREC T INCOME. THEREFORE, HE REJECTED THE BOOKS OF ACCOUNTS BY APP LYING THE PROVISIONS OF SECTION 145(3). THE AO FOUND THAT TH E GROSS PROFIT DECLARED BY THE ASSESSEE ON THE ADMITTED SAL ES COMES TO 31.15%. THE AO COMPLETED THE ASSESSMENT BY ESTI MATING THE GROSS PROFIT AT THE RATE OF 40% ON THE SALES AD MITTED BY THE ASSESSEE AND ADDED THE DIFFERENTIAL INCOME OF RS.21,84,024/-. THE AO FURTHER DISALLOWED AN AMOUN T OF RS.1,05,722/- U/S 40(A)(IA) OF THE ACT. THE ASSESSE E BEING AGGRIEVED OF THE ADDITIONS MADE TO HIS TOTAL INCOM E, FILED AN APPEAL BEFORE THE CIT (A). 11 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. XX. BEFORE THE CIT (A), THE ASSESSEE CONTENDED THAT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2006-07, IDE NTICAL ISSUE WAS DECIDED BY THE CIT (A) WHEREIN THE CIT (A ) HELD THAT THE ESTIMATION OF PROFIT AT 40% IS NOT SUSTAIN ABLE AND ACCEPTED THE PROFIT DECLARED BY THE ASSESSEE AT 31% OF THE TOTAL TURNOVER. THE CIT (A) FOLLOWING HIS EARLIER O RDER PASSED IN THE ASSESSMENT YEAR 2006-07 ALLOWED THE APPEAL O F THE ASSESSEE BY HOLDING THAT ESTIMATION OF GROSS PROFIT AT THE RATE OF 40% ON TOTAL SALES IS NOT SUSTAINABLE. XX. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT FOR THE ASSESS MENT YEAR 2006-07, THE REVENUE CHALLENGED THE ORDER OF THE CI T (A) BEFORE THE ITAT IN ITA NO.1126/HYD/2010. THE ITAT WHILE DECIDING THE APPEAL DIRECTED THE AO TO ESTIMATE THE GP AT 35% INSTEAD OF 40% MADE BY HIM. FOR THE SAKE OF CLA RITY, THE OPERATIVE PORTION OF THE ORDER PASSED BY THE IT AT DATED 19-11-2010 IS EXTRACTED HEREUNDER:- // PARA -4 // FOLLOWING THE RATIO OF THE AFORESAID ORDER, WE DIRE CT THE AO TO ESTIMATE THE PROFIT AT THE RATE OF 35% ON TOTA L TURNOVER. XX. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS ALLOWED IN PART. // IN CROSS OBJECTION, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF EXPENDITURE OF RS.1,05,722/- PAID B Y THE ASSESSEE TO M/S KHAN & SONS TOWARDS ADVERTISING CHA RGES BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE AO WHILE COMPLETING THE ASSESSMENT, DISALLOWED HE 12 ITA NOS. 1796 & 1797/HYD/2011 SHANKERLAL, SECUNDERABAD.. AFORESAID CLAIM OF EXPENDITURE ON THE GROUND THAT T HE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE WHILE MAKIN G PAYMENT OF RS.1,05,722/-. IT IS SEEN FROM THE ASSE SSMENT ORDER THAT HTE AO HAS ADMITTED THE FACTS THAT THE A MOUNT JOF RS.1,05,722/- WAS PAID AND NOT PAYABLE ON THE DATE OF BALANCE-SHEET. WE THEREFORE FOLLOWING THE ORDER OF THE ITAT, SPECIAL BENCH IN THE CASE OF MERLINXXXXXXXXXXXXXXXXXXXXXXXXXX , WE HOLD THAT EXPENDITURE CLAIMED JTOWARDS PAYMENT OF RS.1,05,722 /- CANNOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT. HENC E, THE GROUND RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIO N IS ALLOWED. //. IN THE RESULT, THE APPEAL FILED BY TAHE REVENU E IS ALLOWED IN PART WHILE JCROSS OBJECTGION FILED BY HT HE ASSESSEE IS ALLOWED.