Jyoti Ltd., Baroda V. The Dy.CIT., Circle-1(1), Baroda

ITA 1966/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8982 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 09-09-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 12-08-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: J P SHAH
• Keywords: Search and seizure; Opportunity of being heard; Retrospective amendment; Additional evidence; Capital expenditure; Set aside
• Section: 133(6); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND A.N. PAHUJA, ACCOUNTANT MEMBER) ITA NO.1966/AHD/2005 [ASSTT.YEAR : 2001-2002] JYOTI LIMITED PO: CHEMICAL INDUSTRIES NANUBHAI AMIN MARG VADODARA. VS. DCIT, CIR.1 BARODA. ASSESSEE BY : SHRI J.P. SHAH REVENUE BY : SHRI C.K.MISHRA O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THIS APPEAL BY THE ASSESSEE RELATES TO THE AY 2001-02. THE ASSESSEE IS A COMPAN Y ENGAGED IN THE MANUFACTURE OF ELECTRICAL MACHINERY. THE APPEAL ARI SES OUT OF THE ASSESSMENT ORDER PASSED ON 31-3-2004 U/S.143(3) OF THE INCOME TAX ACT. 2. THE FIRST GROUND IS DIRECTED AGAINST THE DISALLO WANCE OF THE WRITE-OFF OF THE AMOUNT OF RS.49,73,000. THE AMOUNT WAS GIVEN TO NIMA LIMITED, A SUBSIDIARY COMPANY, AS LOANS AND ADVANCES. WHEN A SKED TO JUSTIFY THE CLAIM, THE ASSESSEE STATED THAT IT HAD ACQUIRED THE SHARES OF NIMA LIMITED WHICH WAS ENGAGED IN THE MANUFACTURE OF ELECTRICAL FANS OF AL L TYPES, COOLANTS, PUMPS AND SMALL MOTORS FOR DOMESTIC USE, THAT THE ACQUISITION WAS TO DIVERSIFY INTO CONSUMER ELECTRICAL GOODS, THAT IT WAS A PURE BUSIN ESS DECISION, THAT LATER NIMA FELL INTO BAD WAYS AND WAS CLOSED AND HAD TO APPROA CH THE BIFR AND THAT THE ADVANCE WAS WRITTEN OFF IN THE ASSESSEES BOOKS FOR THE YEAR UNDER APPEAL AND THAT IN THESE CIRCUMSTANCES IT CONSTITUTED A PROPER DEDUCTION IN THE COMPUTATION OF ITS PROFITS. 3. THE ASSESSING OFFICER WAS NOT CONVINCED. HE HELD THAT IT WAS A CAPITAL EXPENDITURE NOT ALLOWABLE U/S.37(1) AND DISALLOWED THE CLAIM. INCIDENTALLY HE PAGE - 2 ITA NO.1966/AHD/2005 -2- ALSO OBSERVED THAT THE CLAIM WAS NOT ALLOWABLE AS A BAD DEBT U/S 36(1)(VII) READ WITH SEC.36(2). 4. THE CIT(A) ON APPEAL HELD THAT THE AMOUNT ADVANC ED TO NIMA LTD. WAS NOT A TRADING ADVANCE GIVEN IN CONNECTION WITH JOB WORK TO NIMA LTD AS CLAIMED BEFORE HIM AND WAS PURELY CAPITAL IN NATURE . HE THEREFORE SUSTAINED THE DISALLOWANCE, AGREEING WITH THE ASSESSING OFFICER. 5. IN THE FURTHER APPEAL BEFORE US, IT WAS POINTED OUT THAT NOTE (XI) IN THE AUDITORS REPORT ON THE ACCOUNTS OF NIMA LTD. FOR T HE YEAR ENDED 31-3-2001 STATED THAT THE COMPANY BECAME SICK AND WAS DECLARE D AS SUCH UNDER THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 AND HAS BEEN REFERRED TO THE BIFR AND IT WAS ALSO POINTED OUT THAT THE AMOUN T WAS ACTUALLY WRITTEN OFF IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AS DOU BTFUL ADVANCES GIVEN TO SUBSIDIARY. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN CIT V EQUITORIAL PVT LTD. (1974) TAX.37(3) -83 WHERE IT WAS HELD THAT WHERE THE ASSESSEE ADVANCED MONIES TO A PERSON WITH WHOM IT HAD EXCLUSIVE BUSINESS DEALINGS, AND IF PART OF THE MONIES BECAME BAD, THE CLAIM WAS ALLOWABLE NOT AS BAD DEBT BUT AS BUSINESS LOSS U/S. 28. OUR ATTENTION WAS ALSO DRAWN TO A CALCUTTA HIGH COURT DECISION IN TURNER M ORRISON & CO. LTD V CIT (2000) 245 ITR 724 IN WHICH MONIES ADVANCED TO SUBS IDIARY COMPANY WAS HELD ALLOWABLE AS BAD DEBT U/S.36 WHEN IT BECAME IM POSSIBLE TO RECOVER THEM. THE LEARNED DR ON THE OTHER HAND CONTENDED THAT IT IS A CAPITAL LOSS NOT ALLOWABLE IN THE COMPUTATION OF THE PROFITS OF THE BUSINESS EVEN U/S.28. 6. ON A CAREFUL CONSIDERATION OF THE MATTER WE ARE OF THE VIEW THAT IT SHOULD RECEIVE FRESH CONSIDERATION AT THE HANDS OF THE ASS ESSING OFFICER FOR THE REASON THAT THE CIT(A) HAS IN PASSING REFERRED TO THE SUB MISSION OF THE ASSESSEE THAT THE ADVANCE WAS GRANTED TO NIMA LIMITED FROM TIME T O TIME TO ENABLE IT TO CARRY OUT THE JOB WORK THAT WAS ASSIGNED TO IT BY T HE ASSESSEE. THE SUBMISSION PAGE - 3 ITA NO.1966/AHD/2005 -3- OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE AMOU NT COULD NOT BE RETURNED BY THE NIMA LIMITED AND IT COULD ALSO NOT EXECUTE THE JOB WORK. THESE SUBMISSIONS HAVE BEEN REFERRED TO AT PARA-5.1 OF TH E IMPUGNED ORDER OF THE CIT(A). THOUGH THE CIT(A) HAS REFERRED TO THE SUBM ISSION, IN DISMISSING THE ASSESSEES APPEAL ON THIS POINT, HE HAS NOT EXAMINE D THE CORRECTNESS OF THE SAME AND HAS PROCEEDED ON THE BASIS THAT THE AMOUNT REPR ESENTED AN INVESTMENT MADE BY THE ASSESSEE WITH INTENTION TO ACQUIRE NIMA LTD. IF THE SUBMISSION OF THE ASSESSEE THAT THE AMOUNT WAS ADVANCED IN ORDER TO E NABLE NIMA LTD. TO EXECUTE THE JOB WORK, WHICH WOULD BE ADJUSTED AGAINST THE A MOUNT PAYABLE FOR CARRYING OUT THE JOB WORK, IS CORRECT ON FACTS THE ADVANCE W OULD BE IN THE COURSE OF THE BUSINESS OF THE ASSESSEE AND THE WRITE-OFF WOULD BE ON REVENUE ACCOUNT. SINCE THIS ASPECT OF THE MATTER HAS NOT BEEN EXAMINED BY THE DEPARTMENTAL AUTHORITIES AND SINCE IT IS VITAL IN ARRIVING AT A DECISION AS TO WHETHER THE LOSS IS ON CAPITAL ACCOUNT OR REVENUE ACCOUNT, WE SET ASIDE THE ORDERS OF THE INCOME TAX AUTHORITIES ON THIS POINT AND RESTORE THE SAME TO T HE FILE OF THE AO TO ENABLE HIM TO GIVE A FINDING ON THE POINT AND DECIDE THE MATTE R IN ACCORDANCE WITH LAW AND AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE FIRST GROUND IS DISPOSED OF ACCORDINGLY. 7. THE SECOND GROUND WHICH IS THE ONLY OTHER GROUND IN THE APPEAL IS DIRECTED AGAINST THE DISALLOWANCE OF THE LIAISON CH ARGES CLAIMED TO BE COMMISSION PAYMENTS, MADE TO THE FOLLOWING ENTITIES : I) VIJAYLAXMI EXPORT : RS.29,88,543/- II) SKJ MARKETING SERVICES : RS. 5,93,114/- III) HYDROCOM ENGINEERS : RS. 6,89,000/- IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASS ESSEE WAS REQUESTED TO FURNISH THE ADDRESSES OF THE PARTIES AND NOTICES UN DER SECTION 133(6) WERE ALSO ISSUED TO THEM BY THE AO. IN RESPONSE, HYDROCOM EN GINEERS STATED THAT THEY PAGE - 4 ITA NO.1966/AHD/2005 -4- DID NOT RECEIVE ANY COMMISSION AND THE NOTICES SENT TO THE OTHER TWO ENTITIES WERE RETURNED BY THE POSTAL AUTHORITIES AS THE ADDR ESSES WERE FOUND TO BE INCORRECT. THEREUPON THE AO CALLED UPON THE ASSESS EE TO JUSTIFY THE COMMISSION PAID. ON THE GROUND THAT THERE WAS NO R EPLY FROM THE ASSESSEE, THE AGGREGATE COMMISSION PAYMENT OF RS.42,70,657/- WAS DISALLOWED AND ADDED BACK TO THE INCOME. THE ASSESSEES APPEAL BEFORE T HE CIT(A) ALSO FAILED. IN THE COURSE OF THE PROCEEDINGS BEFORE HIM, THE ASSES SEE SOUGHT TO INTRODUCE THE CONFIRMATION DATED 30-3-2004 OF M/S.VIJAYLAXMI EXPO RTS AS ADDITIONAL EVIDENCE IN TERMS OF RULE 46A OF THE IT RULES WHICH WAS FORWARDED TO THE AO FOR COMMENTS. IN HIS COMMENTS THE AO STATED THAT THE CONFIRMATION WAS DOUBTFUL IN TERMS OF ITS GENUINENESS BECAUSE WHEN T HE NOTICES SENT BY THE AO COULD NOT BE SERVED ON THE SAID FIRM, IT WAS STRANG E THAT THERE WAS A RESPONSE FROM THAT FIRM. THE COMMENTS OF THE AO WERE PLACED BEFORE THE ASSESSEE BUT NO EXPLANATION WAS ADDUCED BY THE ASSESSEE. IN THI S BACKGROUND THE CIT(A) CONFIRMED THE DISALLOWANCE OF THE COMMISSION. TO B E MORE SPECIFIC, HIS FINDING WAS THAT M/S.VIJAYLAXMI EXPORTS AND SKJ MAR KETING SERVICES DID NOT CONFIRM THE RECEIPT OF THE COMMISSION AND M/S.HYDRO COM ENGINEERS HAVE STATED THAT NO SUCH COMMISSION WAS RECEIVED BY THEM . ON THESE FINDINGS, THE CIT(A) UPHELD THE DISALLOWANCE. 8. IN THE FURTHER APPEAL BEFORE US, IT IS STATED ON BEHALF OF THE ASSESSEE THAT SO FAR AS VIJAYLAXMI EXPORTS IS CONCERNED THE CLAIM IS RESTRICTED TO RS.21,19,207/-, WHICH IS THE AMOUNT CONFIRMED BY TH AT FIRM VIDE LETTER DATED 30-3-2004. IT IS ARGUED ON THE BASIS OF THE PAPERS COMPILED IN THE PAPER BOOK THAT THE PAYMENTS MADE TO ALL THE THREE ENTITIES WE RE BY CHEQUES, THAT THEY WERE ACCOUNTED FOR BY THE RECIPIENTS AND THAT THERE IS N O PERSONAL RELATIONSHIP BETWEEN THE ASSESSEE AND THOSE FIRMS, THE RELATIONS HIP BEING PURELY RELATING TO THE BUSINESS. IT IS SUBMITTED THAT THE PAYMENTS WE RE MADE IN CONSIDERATION OF THE SERVICES RENDERED BY THE PAYEES IN CONNECTION W ITH REALISATION OF THE DUES PAGE - 5 ITA NO.1966/AHD/2005 -5- FROM THE VARIOUS PROJECTS UNDERTAKEN IN THE STATE O F ANDHRA PRADESH AND HARYANA AND THAT THEY WERE ALLOWABLE AS BUSINESS EX PENDITURE. IT IS ALSO CONTENDED THAT THERE IS NO ILLEGALITY INVOLVED IN M AKING THE PAYMENTS AND THEREFORE THEY ARE ALLOWABLE AS DEDUCTION IN COMPUT ING THE INCOME FROM BUSINESS. 9. TO A QUERY FROM US, AS TO WHETHER THERE WAS ANY WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE AFORESAID THREE FIRMS REGARDING RENDERING OF SERVICES AND PAYMENT OF COMMISSION, THE LEARNED COU NSEL FOR THE ASSESSEE ANSWERED IN THE NEGATIVE BUT SUBMITTED ON THE BASIS OF ORDER OF THE TRIBUNAL IN SMT.SATINDERJIT KAUR VS. ITO, 52 TTJ 388 THAT A WRI TTEN AGREEMENT WAS NOT NECESSARY AND ALSO SUBMITTED ON THE BASIS OF THE OR DER OF THE TRIBUNAL BHARAT BIJLEE LTD. VS. DCIT, 71 ITD 412 THAT CONFIRMATIONS FROM THE PAYEES FOR RECEIPT OF COMMISSION FROM THE ASSESSEE WAS SUFFICI ENT EVIDENCE ON THE BASIS OF WHICH IT CAN BE ALLOWED AS A DEDUCTION. OUR ATTENT ION WAS ALSO DRAWN TO THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN DCIT VS. SU PER TANNERY (INDIA) LTD., 189 TAXATION 466 AND THAT OF THE DELHI HIGH C OURT IN CIT VS. GENESIS COMMET PVT. LTD., 163 TAXMAN 482 IN WHICH IT WAS HE LD THAT THE AMOUNT PAID FOR REALISING MONIES FROM THE GOVERNMENT WAS ALLOWA BLE AS DEDUCTION UNDER SECTION 37(1) IN COMPUTING THE BUSINESS PROFITS. I T WAS REITERATED THAT THE EVIDENCE ADDUCED BY THE ASSESSEE DOES NOT JUSTIFY T HE REFUSAL OF THE CLAIM BY THE INCOME TAX AUTHORITIES. 10. THE LEARNED SR.DR ON THE OTHER HAND SUBMITTED T HAT THE VERY EXISTENCE OF VIJAYLAXMI EXPORTS WAS IN DOUBT AND IT WAS QUITE UNUSUAL THAT THE LETTER ISSUED BY THE AO TO THAT FIRM UNDER SECTION 133(6) WAS NOT RECEIVED BY IT, BUT IT WAS SOMEHOW REPLIED TO BY THE FIRM BY LETTER DAT ED 30-3-2004 IN WHICH RECEIPT OF COMMISSION TO THE EXTENT OF RS.21,19,204 /- WAS ACCEPTED. HE FURTHER SUBMITTED THAT IN ALL THE THREE CASES, THOUGH THE P AYMENTS WERE MADE BY CHEQUES ONE FIRM VIZ. HYDROCOM ENGINEERS DENIED THE RECEIPT OF THE PAGE - 6 ITA NO.1966/AHD/2005 -6- COMMISSION WHICH ALSO THREW CONSIDERABLE DOUBT ON T HE GENUINENESS OF THE ASSESSEES CLAIM. HE SUBMITTED THAT IN ANY CASE TH ERE WAS NOTHING ON RECORD TO SHOW THE NATURE AND KIND OF SERVICES SAID TO HAVE B EEN RENDERED BY THE THREE FIRMS. HE POINTED OUT THAT UNLESS THE ASSESSEE HAS PROVED THAT THE COMMISSION PAYMENT WAS MADE FOR SERVICES RENDERED AND THAT SUC H SERVICES WERE REQUIRED FOR THE PURPOSES OF THE ASSESSEES BUSINESS, THE PA YMENT CANNOT BE ALLOWED AS A DEDUCTION AS EXPENDITURE LAID OUT OR INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. IN ADDITION, STRONG RELIA NCE WAS PLACED ON THE FINDINGS OF THE CIT(A) IN PARA-6.5 OF HIS ORDER. 11. ON A CAREFUL CONSIDERATION OF THE RIVAL CONTENT IONS, WE ARE AFRAID THAT THE ASSESSEES CLAIM CANNOT BE ALLOWED. SO FAR AS VIJA YLAXMI EXPORTS IS CONCERNED, AS RIGHTLY POINTED OUT ON BEHALF OF THE DEPARTMENT, THE LETTER WRITTEN BY THE AO UNDER SECTION 133(6) WAS NOT SERVED ON THE SAID FIR M. HOWEVER, THE SAID FIRM HAD RESPONDED BY LETTER DATED 30-3-2004 AND CONFIRM ED THAT IT RECEIVED A SUM OF RS.21,19,204/- FROM THE ASSESSEE TOWARDS THE LI AISONING SERVICE RENDERED ON ACCOUNT OF THEIR CONTRACT WITH M/S.AMOGHA POWER PRO JECT, SECUNDERABAD. THE PAPER BOOK ALSO CONTAINS THE DETAILS OF THE CRE DIT NOTES ISSUED BY THE ASSESSEE, THE NATURE OF SERVICE RENDERED AND THE CO NTRACT WITH REFERENCE TO WHICH THE COMMISSION WAS PAID, THE AMOUNT OF COMMIS SION AND THE RATE THEREOF. THE CREDIT NOTES COMPILED WITH THE PAPER BOOK, COMPILED FROM PAGES 5 TO 19 SHOW THAT THE COMMISSION WAS PAID AT THE RATE OF 10.5% OF THE PAYMENTS RECEIVED BY THE ASSESSEE FROM THE AMOGHA POWER PROJ ECTS PVT. LTD. AND IN THESE CREDIT NOTES THE PAYMENT WAS DESCRIBED AS OVE RRIDING COMMISSION FOR LIAISONING SERVICES. AS REGARDS SKJ MARKETING SERV ICES, SIMILAR DETAILS HAVE BEEN COMPILED IN THE PAPER BOOK FROM PAGES 20 TO 33 . HOWEVER, IN THIS CASE IT IS SEEN THAT THE COMMISSION HAS BEEN PAID AT THE RA TE OF 5% ON THE AMOUNT RECEIVED FROM M/S.MANIHASMA POWER PROJECTS LTD. IN THE CASE OF HYDROCOM ENGINEERS THE RELEVANT DETAILS ARE CONTAINED AT PAG ES 34 TO 45 AND THEY SHOW PAGE - 7 ITA NO.1966/AHD/2005 -7- THAT THE PAYMENTS HAVE BEEN MADE FOR LIAISONING WIT H CESPO, UPSEB, CHIBRO, MCD, DELH, HARYANA VIDHUT PRASARAN NIGAM LT D., ETC. THE RATE OF COMMISSION IS NOT MENTIONED IN THE CREDIT NOTES BUT IT IS SEEN THAT THE COMMISSION HAS BEEN PAID TO CESPO ETC. FOR COLLECTI ON OF RS.50 LAKHS. AS REGARDS THE PAYMENT MADE WITH REFERENCE TO HARRYANA VIDHYUT PRASARAN LTD., IT SEEN FROM THE PAGE 37 OF THE PAPER BOOK THAT THE CO MMISSION WAS PAID WITH REFERENCE TO ORDERS FOR SUPPLY OF 11KV.18.4KA PANEL BOARD AND FOR SUPPLY OF 11KV.14 PANEL BOARD AND 12 PANEL BOARD. PAGE 39 WHI CH IS A COPY OF THE SANCTION NOTE FOR SALE EXPENSES SHOWS THAT THE COMM ISSION IS TO BE PAID AT THE RATE OF 3.5% OF THE VALUE OF THE ORDER PLACED BY HV PNL, HARYANNA. IN THIS SANCTION NOTE, COL.12 AT PAGE 40 REFERS TO DISQUAL IFICATION OF L1 BIDDER AND PROCUREMENT OF ORDER AT OUR PRICE. HYDROCOM ENGIN EERS HAVE HOWEVER DENIED THE RECEIPT OF COMMISSION BY LETTER DATED 12-3-2004 ADDRESSED TO THE AO, A COPY OF WHICH IS AT PAGE 35 OF THE PAPER BOOK. 12. THE EVIDENCE REFERRED TO IN THE PRECEDING PARAG RAPH DOES NOT SHOW THE PRECISE NATURE OF THE SERVICES RENDERED BY THE PAYE ES SO AS TO JUSTIFY THE CLAIM FOR DEDUCTION. MERE MENTION OF LIAISON SERVICES DOES NOT SUFFICIENTLY INDICATE THE NATURE OF THE SERVICES ALLEGEDLY RENDERED BY TH E PAYEES; NOT ONLY THAT, THE REFERENCE TO LIAISON SERVICES IS QUITE VAGUE AND LEAVES IT TO THE IMAGINATION AS TO WHAT KIND OF SERVICES WERE UNDER CONTEMPLATION. IN THE CASE OF HYDROCOM ENGINEERS THE SERVICES RENDERED, AS DESCRIBED IN TH E SANCTION NOTE ALSO SUFFERS FROM THE SAME INFIRMITY OR WEAKNESS. IT MAY BE TRU E THAT A WRITTEN AGREEMENT BETWEEN THE PARTIES IS NOT THE SINE QUA NON FOR PAY MENT OF THE COMMISSION BUT IT IS NECESSARY FOR THE ASSESSEE TO PROVE BY OTHER EVIDENCE AS TO WHAT EXACTLY WAS THE NATURE OF THE SERVICES RENDERED BY THE PAYE ES SO AS TO JUSTIFY THE CLAIM FOR DEDUCTION. IN THE PRESENT CASE, THERE IS PRECI OUS LITTLE EVIDENCE TO THROW LIGHT ON THIS ASPECT. THE NATURE OF THE LIAISON SE RVICES ALLEGEDLY RENDERED BY VIJAYLAXMI EXPORTS AND SKJ MARKETING SERVICES IS NO T KNOWN. SO IS THE CASE PAGE - 8 ITA NO.1966/AHD/2005 -8- WITH THE HYDROCOM ENGINEERS, WHO, BESIDES DENYING T HE RECEIPT OF COMMISSION, HAVE ALSO NOT MADE IT CLEAR AS TO WHAT SERVICES THEY RENDERED FOR PROCUREMENT OF THE ORDER FROM HVPNL, HARYANA AND WH AT THEY DID TO DISQUALIFY THE L1.BIDDER SO THAT THE ORDERS ARE PLA CED WITH THE ASSESSEE. THE VERY FACT THAT THE NATURE OF THE SERVICES HAS BEEN WITHHELD OR HAS BEEN ALLOWED TO REMAIN VAGUE SHOWS THAT THESE SERVICES MAY NOT B E OF SUCH NATURE AS TO BE ALLOWED UNDER SECTION 37(1) OF THE ACT. IT MAY ALS O BE NOTED THAT AFTER THE INSERTION OF THE EXPLANATION BELOW THE ABOVE SECTIO N WITH RETROSPECTIVE EFFECT FROM 1-4-1962 THE BURDEN IS MORE ON THE ASSESSEE IN THE SENSE THAT IT IS ALSO NECESSARY FOR HIM TO SHOW THAT THE PURPOSE FOR WHIC H THE EXPENDITURE WAS INCURRED IS NOT AN OFFENCE OR NOT PROHIBITED BY LAW . IN CASE THE ASSESSEE DOES NOT COME FORTH WITH ALL THE DETAILS RELATING TO THE NATURE OF THE SERVICES RENDERED BY THE PAYEES OF THE COMMISSION, HE RUNS THE RISK O F AN INFERENCE BEING DRAWN AGAINST HIM THAT THE PURPOSE FOR WHICH THE COMMISSI ON WAS PAID MIGHT BE AN OFFENCE OR SOMETHING WHICH IS PROHIBITED BY LAW. A T LEAST TO WARD OFF SUCH AN INFERENCE, IT IS ESSENTIAL, WHERE DEDUCTION IS CLAI MED IN RESPECT OF PAYMENTS WHICH ARE VAGUELY DESCRIBED AS LIAISON CHARGES OR F OR THE PURPOSE OF PROCURING ORDERS OR FOR DISQUALIFYING THE COMPETITORS, THAT T HE ASSESSEE MAKES A CLEAN BREAST OF THE NATURE OF THE SERVICES FOR WHICH THE PAYMENTS WERE MADE. THIS IS ADDITION TO THE WELL SETTLED RULE THAT WHERE AN ASS ESSEE CLAIMS DEDUCTION OF AN EXPENSE, THE BURDEN IS ON HIM TO ADDUCE ALL THE EVI DENCE TO JUSTIFY THE CLAIM. WE ARE AFRAID THAT IN THE PRESENT CASE THE ASSESSEE HAS NOT DISCHARGED THE BURDEN. THE MERE FACT THAT THE COMMISSION WAS PAID BY CHEQUES AND THEY WERE ALSO CONFIRMED BY THE PAYEES CANNOT BIND THE AO TO HOLD THAT THE PAYMENT WAS MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND IT IS STILL OPEN TO HIM TO CONSIDER THE RELEVANT FACTORS AND DETERMI NE FOR HIMSELF WHETHER THE COMMISSION PAID IS PROPERLY DEDUCTIBLE UNDER SECTIO N 37. PAGE - 9 ITA NO.1966/AHD/2005 -9- 13. FOR THE ABOVE REASONS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT MADE OUT A CASE FOR ALLOWANCE OF THE COMMISSION PAYMENT OF RS.42,70,657/- AS THE DEDUCTION. THE GROUND IS DISMISSED. 14. THE OTHER TWO GROUNDS ARE GENERAL AND REQUIRE N O DECISION BUT FOR STATISTICAL PURPOSE. 15. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 18 TH SEPTEMBER, 2009. SD/- SD/- (A.N. PAHUJA) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 18-09-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD