Asst. Commissioner of Income tax Cir. 1(1), Panaji V. Shri Ivan Singh., Panaji

ITA 20/PAN/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6699 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-05-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONAL L SONKAVDE LD
• Assessee Lawyers: DR P DANIEL
• Keywords: Business expenditure; Principle of natural justice; Period of limitation; Commercial expediency; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 2 0/PNJ/201 4 : (ASST. YEAR : 20 1 0 - 11 ) ASST. COMMISSIONER OF INCOME TAX CIRCLE - 1(1), PANAJI, GOA. (APPELLANT) VS. SHRI IVAN SINGH S - 6, GROUND FLOOR, THE LANDSCAPE GROUND, BEHIND MAHALAXMI TEMPLE, PANAJI, GOA (RESPONDENT) PAN : AVTPS4888C ASSESSEE BY : DR. P. DANIEL , ADV. REVENUE BY : SMT. SONAL L. SONKAVDE , LD. DR DATE OF HEARING : 0 3 /0 4 /2014 DATE OF PRONOUNCEMENT : 09 /05/2014 O R D E R PER P.K. BANSAL 1. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), PANAJI DT. 28.10.2013 FOR A.Y 2010 - 11 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 2 . ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) GROSSLY ERRED IN NOT CONSIDERING THE FACT THAT UNPAID SUNDRY CREDITOR IN THE CASE OF M/S. VASAVI TRAVELS THAT REMAINED OUT STANDING IN THE BOOKS OF THE ASSESSEE AND MERELY HOLDING THAT THE ASSESSEE HAD WRITTEN OFF THIS AMOUNT SUBSEQUENTLY WITHOUT MAKING ANY VERIFICATION OF THE FACTS. 3 . THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS.45,59,627/ - MADE ON ACCOUNT OF NO N - GENUINE BUSINESS EXPENSES PAID TO SHALINI ENTERPRISES ON THE GROUND THAT PAYMENT WAS TOWARDS CONSULTANCY CHARGES ON ORAL CONTRACT WHICH THE ASSESSEE COULD NOT PROVE WITH MATERIAL FACTS. 4. THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF LABO UR CHARGES TO ONLY 10% OF THE TOTAL UNVERIFIABLE LABOUR CHARGES, WHEREAS THE ADDITION MADE IS SPECIFIC IN NATURE THIS YEAR. 2 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) 5. THE LD. CIT(A) HAS ERRED IN DELETING THE ENTIRE ADDITION ON ACCOUNT OF DISALLOWANCE OF SITE DEVELOPMENT EXPENSES OUT OF TOTAL SITE DEVELOPMENT EXPENSES OF RS.78.86 LAKHS AN AMOUNT OF RS.11,37,761/ - IS NOT VERIFIABLE IN THE BOOKS AND HENCE DISALLOWED. 6. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS.44,96,024/ - MADE ON ACCOUNT OF DISALLOWANCE OF CLOSING STOCK WHEN THE ASSESSEE DID NOT MAINTAIN ANY STOCK REGISTER NOR PRODUCED ANY EVIDENCE TO THE ASSESSING OFFICER. 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 3. GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITION MADE BY CIT(A) IN RESPEC T OF SUM OF RS. 5 LACS OF M/S. VASAVI TRAVELS. THE FACTS RELATING TO THIS GROUND ARE THAT THE AO WHILE MAKING ASSESSMENT NOTED THAT A SUM OF RS. 5 LACS ALONGWITH OTHER CREDITORS REMAINED OUTSTANDING FROM A.Y 2009 - 10 EVEN IN F.Y 2012 - 13, THEREFORE, INVOKED THE PROVISIONS OF SEC. 41(1) AS THERE WAS NO TRANSACTION WITH THESE CREDITORS DURING THE YEAR AND MADE THE ADDITION OF RS.32,62,290/ - WHICH INCLUDES SUM OF RS. 5 LACS TOWARDS M/S. VASAVI TRAVELS. THE MATTER WENT TO CIT(A). CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: 5.4 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE A.O MADE THE ADDITION MAINLY BECAUSE THESE WERE MORE THAN 4 YEARS OLD BALANCES AND THE ASSESSEE DID NOT HAVE A SINGLE TRANSACTION WITH THESE PARTIES IN MANY YEARS. THESE PARTIES DID NOT MAKE ANY EFFORTS TO RECOVER THE MONEY DUE TO THEM AND THEREFORE, THE A.O REACHED A CONCLUSION THAT THE LIABILITY TO PAY BACK HAS CEASED TO EXIST AND HE MADE ADDITIO N U/S 41(1) OF THE I.T. ACT. FOR TAKING THIS VIEW, THE A.O RELIED ON THE DECISION OF ITAT, DELHI IN THE CASE OF DISTINCTIVE PROPERTIES AND LEASING LTD. VS. ITO, REPORTED IN 1 SOT - 460. IN THIS CASE A PERSON HAD BOOKED A FLAT WITH THE ASSESSEE. THE PERSON DIED WITHOUT LEAVING ANY LEGAL HEIR. THE A.O SAID THAT IN ABSENCE OF ANY LEGAL HEIR THE LIABILITY TO PAY BACK HAD CEASED TO EXIST AND MADE THE ADDITION U/S 41(1). ON APPEAL, THE HON'BLE ITAT CONFIRMED THE ACTION OF THE A.O. HOWEVER, IN THE INSTANT CASE , THE FACTS ARE ENTIRELY DIFFERENT AND A.O.S RELIANCE ON THE ABOVE DECISION IS MISPLACED. THE APPELLANT HAS PLACED RELIANCE ON THE APEX COURT DECISION IN THE CASE OF CIT V/S SUGANLI SUGAR WORKS (P) LTD. REPORTED IN ( 1999) 236 ITR 518(SC). IN THIS CASE, THE HON'BLE APEX COURT HELD THAT THE OBTAINING BY AN ASSESSEE OF A BENEFIT BY VIRTUE OF REMISSION OR CASSATION IS THE SINE 3 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) QUA NON FOR THE APPLICATION OF THIS SECTION [41(1)]. THE MERE FACT THAT THE ASSESSEE HAS MADE AN ENTRY OF TRANSFER IN HIS ACCOUNTS UNILATERALLY WILL NOT ENABLE THE DEPARTMENT TO SAY THAT SECTION 41(1) WOULD APPLY AND THE AMOUNT SHOULD BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THE PRINCIPLE THAT EXPIRY OF THE PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT COULD NOT EX TINGUISH THE DEBT BUT IT WOULD ONLY PREVENT THE CREDITOR FROM ENFORCING THE DEBT, HAS BEEN WELL SETTLED. IF THAT PRINCIPLE IS APPLIED, IT IS CLEAR THAT MERE ENTRY IN THE BOOKS OF ACCOUNTS OF THE DEBTOR MADE UNILATERALLY WITHOUT ANY ACT ON THE PART OF THE CREDITOR WILL NOT ENABLE THE DEBTOR TO SAY THAT THE LIABILITY HAS COME TO AN END. APART FROM THAT, THAT WILL NOT BY ITSELF CONFER ANY BENEFIT ON THE DEBTOR AS CONTEMPLATED BY THE SECTION. THIS DECISION WAS RE - AFFIRMED BY THE HON'BLE APEX COURT IN ITS DE CISION IN THE CASE OF CCIT, COCHIN V/S. KESARIA TEA COMPANY LTD. REPORTED IN (2002)254 ITR 434(SC). THE APPELLANT HAS ALSO PLACED RELIANCE ON THE DECISION IN THE CASES OF CIT V/S NITIN S. GARG, 2012 - TIOL - 294(GUJ) AND DCIT V/S ALIDHARA TEXPRO ENG. PVT. LTD . (2011) 43 SOT 1. THUS, IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE A.O WAS NOT JUSTIFIED IN DECIDING THAT THE LIABILITY TO PAY HAD CEASED TO EXIST, IN ABSENCE OF CONFIRMATION OF INTENT BY BOTH THE DEBTOR AND THE CREDITOR. ALSO, THE APPELLANT HAD HIMSELF WRITTEN - OFF/BACK THESE AMOUNTS AS ON 31.03.2013 AND DISCLOSED IT AS INCOME. THUS, IN VIEW OF APEX COURTS DECISION IN THE ABOVE DISCUSSED CASES, IN MY OPINION, THE A.O WAS NOT JUSTIFIED IN MAKING ADDITION U/S 41(1) AMOUNTING TO RS.32,62,290/ - AND HE IS D IRECTED TO DELETE THE ADDITION. THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. THE REVENUE HAS COME IN APPEAL BEFORE US IN RESPECT OF UNPAID SUNDRY CREDITORS OF M/S. VASAVI TRAVELS AMOUNTING TO RS. 5 LACS. 3.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. IN OUR OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A). THERE WERE IN ALL, THREE CREDITORS WHICH WERE OUTSTANDING. THE FACTS IN RESPECT OF EACH OF THE CREDITORS ARE THE SAME. THE ASSESSEE MADE THE ADDITION IN RESPECT OF ALL THE THREE CREDITORS. WHEN THE MATTER WENT BEFORE CIT(A), CIT(A) DELETED THE ADDITION. THE REVENUE HAS COME IN APPEAL ONLY IN RESPECT OF ONE CREDITOR I.E. M/S. VASAVI TRAVELS WHILE DID NOT CHALL ENGE THE ACTION OF CIT(A) DELETING THE ADDITION MADE U/S 41(1) BY THE AO IN RESPECT OF THE OTHER TWO CREDITORS. ON THIS BASIS ITSELF, THE GROUND TAKEN BY THE REVENUE DOES NOT HAVE ANY LEGS TO STAND. IN OUR OPINION, U/S 41(1) THE ONUS IS ON THE REVENUE TO PROVE THAT THE ASSESSEE HAS DERIVED BENEFIT BY VIRTUE OF REMISSION OR CESSATION OF A LIABILITY IN RESPECT OF 4 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) WHICH THE ASSESSEE HAS EARLIER CLAIMED DEDUCTION IN HIS BOOKS OF ACCOUNTS. THE LIABILITY DOES NOT GET CEASED OR EXTINGUISHED MERELY ON THE BASIS THAT THE PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT HAS EXPIRED FOR TAKING ANY ACTION FOR RECOVERY OF THE AMOUNT BY THE CREDITOR AND THE CREDITOR WILL GET PREVENTED FROM ENFORCING THE DEBT AGAINST THE DEBTOR. EVEN THIS WILL NOT CONFER ANY BE NEFIT ON THE DEBTOR AS HAS BEEN RE - AFFIRMED BY THE HON'BLE APEX COURT IN THE CASE OF CCIT, COCHIN VS. KESARIA TEA COMPANY LTD., 254 ITR 434 (SC) . WE, THEREFORE, CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION OF OUTSTANDING LIABILITY IN RESPECT OF M/S. VASAVI TRAVELS. THUS, THIS GROUND STANDS DISMISSED. 4. GROUND NO. 3 RELATES TO THE ADDITION OF RS.45,59,627/ - MADE ON ACCOUNT OF NON - GENUINE BUSINESS EXPENSES PAID TO SHALINI ENTERPRISES . 4.1 THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE AO NOT ED THAT THE ASSESSEE FIRM, M/S. WARRIOR MINERALS HAS DEBITED A SUM OF RS.45,59,627/ - AS CONSULTANCY CHARGES TO M/S. SHALINI ENTERPRISES. THE TOTAL AMOUNT OF THE TRANSACTION WITH M/S. SHALINI ENTERPRISES AS PER THE BOOKS OF THE ASSESSEE WAS RS.40,98,864/ - . THE AO AFTER NOTING THE DISCREPAN CIES IN THE DETAILS SUBMITTED BY M/S. SHALINI ENTERPRISES, RECEIVED IN RESPONSE TO THE NOTICE U/S 133(6), WITH THE DETAILS FILED BY THE ASSESSEE, ISSUED A SHOW CAUSE TO THE ASSESSEE WHICH WAS COMPLIED BY THE ASSESSEE BY E XPLAINING THAT THEY ARE PAID CONSULTANCY CHARGES FOR INSPECTION FOR GRADING, BLENDING, PLANNING OF PLOT AND LOGISTICS MANAGEMENT OF IRON ORE WHEREAS M/S. SHALINI ENTERPRISES TOOK IT AS PROFESSIONAL FEES. THE DIFFERENCE IS THAT OF NOMENCLATURE. THE ASSESS EE PRODUCED SHRI ZOIVANT PAI CANO, PROPRIETOR OF M/S. SHALINI ENTERPRISES. STATEMENT OF SHRI ZOIVANT CANO WAS RECORDED. THE AO WAS NOT SATISFIED AND DISALLOWED THE SUM OF RS.45,59,627/ - TREATING IT TO BE THE PAYMENT MADE FOR SHAM TRANSACTION. THE ASSESS EE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) AFTER GOING THROUGH THE SUBMISSION OF THE ASSESSEE AS WELL AS THE STATEMENT RECORDED BY THE AO OF SHRI 5 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) ZOIVANT CANO TOOK THE VIEW THAT THE ADDITION MADE BY THE AO WAS NOT BASED ON PROPER APPRECIATION OF THE FACT S AND THE GENUINENESS OF THE TRANSACTION HAS BEEN PROVED BEYOND DOUBT BY OBSERVING AS UNDER : 6.4 I HAVE GONE THROUGH THE STATEMENT OF MR. ZOIVANT CANO, CONCLUSION DRAWN BY THE A.O AND SUBMISSION MADE BY THE APPELLANT. IN THIS CASE, THE APPELLANT HAS MADE PAYMENT THROUGH CHEQUE, HAS DEDUCTED TDS AS APPLICABLE, HAS PRODUCED THE PERSON BEFORE THE A.O. FOR EXAMINATION. THE A.O. RECORDED THE STATEMENT OF SHRI ZOIVANT CANO ON OATH. IN THE STATEMENT, MR. CANO CONFIRMED HAVING RECEIVED HIS CONSULTANCY CHARGES. HE HAS ALSO FILED RETURN OF INCOME, WHEREIN HE HAS DISCLOSED THIS RECEIPT AS HIS INCOME. HE ALSO PRODUCED COPY OF HIS BANK STATEMENT FOR VERIFIC ATION, WHEREIN HE HAS UTILIZED HIS MONEY FOR HIMSELF AND HIS FAMILY MEMBERS. THE AOS OBSERVATION THAT SINCE THERE WAS NO WRITTEN CONTRACT BETWEEN THE ASSESSEE AND MR. ZOIVANT THEREFORE THE TRANSACTION IS A NON - GENUINE TRANSACTION, IN MY OPINION, IS AN IN CORRECT CONCLUSION. THE ASSESSEE HAS PROVED BEYOND DOUBT THE GENUINENESS OF THE TRANSACTION TO THE EXTENT POSSIBLE. IN VIEW OF THE ABOVE REFERRED FACTS, THE ADDITION OF RS.45,59,627/ - IS DELETED AND THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 4. 2 THE LD. DR EVEN THOUGH VEHEMENTLY CONTENDED BEFORE US AND RELIED ON THE ORDER OF THE AO, BUT COULD NOT PRODUCE ANY COGENT MATERIAL OR EVIDENCE WHICH MAY PROVE THAT THE FINDING GIVEN BY THE CIT(A) ABOUT THE GENUINENESS OF THE TRANSACTION IS INCORRECT AND ARE NOT BASED ON THE EVIDENCES PRODUCED BY THE ASSESSEE DURING THE COURSE OF THE HEARING BEFORE THE AO AS WELL AS BEFORE THE CIT(A). IT IS AN UNDISPUTED FACT THAT THE PAYMENT HAS BEEN THROUGH CHEQUE AND TDS HAS BEEN DEDUCTED. STATEMENT OF SHRI ZOIVANT CA NO WAS ALSO RECORDED ON OATH AND HE HAS DULY CONFIRMED THAT HE HAS RECEIVED CONSULTANCY CHARGES. THE AGREEMENT NEED NOT BE IN WRITING. THE SITUS OF THE SERVICES RENDERED MUST BE PROVED. THE FIRM, M/S. SHALINI ENTERPRISES IS DULY REGISTERED WITH THE SALE S TAX DEPT. AND DEALING WITH CONTRACT CONSULTANCY. THE PROPRIETOR OF THE FIRM IS A PRODUCTION ENGINEER AND HAD EXPERIENCE IN MINING FIELD. HE HAS WORKED AS ENGINEER IN PELL E TI Z ING PLANT OF MANDOVI PELLETS LTD. AS SHIFT INCHARGE. HE HAS ALSO WORKED AS MA NAGER OF IRON ORE BENEFICATION PLANT IN V.S. DEMPO & CO. PVT. LTD. HE ALSO STARTED A PARTNERSHIP FIRM PROVIDING SCREENING AND CRUSHING 6 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) SERVICES FOR IRON ORE UNDER THE NAME AND STYLE OF M/S. P&R SCREENERS & CRUSHERS. UNDER THESE FACTS AND CIRCUMSTANCES, I N OUR OPINION, THE GROUND TAKEN BY THE REVENUE DOES NOT HAVE ANY MERIT AND IS NOT A FIT GROUND WHICH WARRANTS OUR INTERFERENCE. WE, THEREFORE, CONFIRM THE ORDER OF CIT(A). 5. GROUND NO. 4 RELATES TO RESTRICTING THE DISALLOWANCE OF LABOUR CHARGES TO ONLY 10% OF UNVERIFIABLE LABOUR CHARGES. THE FACTS RELATING TO THIS GROUND ARE THAT THE AO NOTED THAT IN THE BOOKS OF M/S. ACTION GROUP ASSOCIATES, LABOUR CHARGES OF RS.11,14,000/ - WAS RECORDED WHILE A SUM OF RS.1,29,48,215/ - WAS DEBITED AS BUSINESS EXPENSES IN THE BOOKS OF M/S. WARRIOR MINERALS. THE AO NOTED THE DEFECTS IN THE PAYMENT VOUCHER SUBMITTED FOR VERIFICATION AND ULTIMATELY, HE DISALLOWED LABOUR CHARGES OF RS.1,18,11,076/ - AS UNVERIFIABLE EXPENSES. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). C IT(A) NOTED THAT UNDER SIMILAR CIRCUMSTANCES DISALLOWANCE WAS RESTRICTED DURING THE A.Y 2009 - 10 IN THE CASE OF THE ASSESSEE BY THE INCOME TAX APPELLATE TRIBUNAL @ 10% OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE. CIT(A), THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT DIRECTED THE AO TO DISALLOW 10% OF THE TOTAL LABOUR CHARGES OF RS. 1,40,62,215/ - AMOUNTING TO RS.14,06,222/ - . 5.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. IT IS NOT DENIED BY THE LD. DR THAT DURING THE A.Y 2009 - 19 UNDER SIMILAR FACTS, DISALLOWANCE WAS RESTRICTED TO 10% OF THE TOTAL LABOUR CHARGES. IN VIEW OF THIS, IN OUR VIEW NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT( A) RESTRICTING THE DISALLOWANCE TO 10% OF THE LABOUR CHARGES AS JUDICIAL DISCIPLINE DEMANDS THAT THE DECISION OF THE EARLIER YEAR IN THE CASE OF THE ASSESSEE BY THE ITAT HAS TO BE FOLLOWED. NO DISTINGUISHING FACT WAS BROUGHT TO OUR KNOWLEDGE BY THE LD. DR EVEN THOUGH HE VEHEMENTLY ARGUED. WE, ACCORDINGLY CONFIRM THE ORDER OF CIT(A) ON THIS GROUND. THUS, THIS GROUND STANDS DISMISSED. 7 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) 6. GROUND NO. 5 RELATES TO DELETION ON ACCOUNT OF DISALLOWANCE OF SITE DEVELOPMENT EXPENSES. THE FACTS RELATING TO THIS GROUND ARE THAT THE AO NOTED THAT DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE CLAIMED A SUM OF RS. 78,85,907/ - UNDER THE HEAD SITE DEVELOPMENT EX PENSES IN THE PROFIT & LOSS ACCOUNT BELONGING TO M/S. WARRIOR MINERALS, THE PROPRIETORSHIP CONCERN OF THE ASSESSEE. THE DETAILS CONSISTS OF THE FOLLOWING : 1. SHRI KAMESHWARI TRADE LINK RS.44,95,362/ - 2. P&R SCREENERS & CRUSHERS RS.22,52,784/ - 3. LABOUR CHARG ES RS.11,37,761/ - THE AO NOTED THE DEFECTS IN THE VOUCHERS AND ACCORDINGLY, HE ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE. THE AO ALSO NOTED THAT THESE EXPENSES HAVE BEEN INCURRED ON DEVELOPING GOICHEMOLE SITE LOCATED AT DARBANDORA VILLAGE. THE LEAS E AGREEMENT OF THE SITE WAS EXECUTED BETWEEN THE OWNERS OF THE PLOT AND M/S. ACTION GROUP ASSOCIATES AND THE EXPENSES HA VE BEEN INCURRED ON THE SITE TAKEN ON LEASE FOR 5 YEARS. THEREFORE, THE EXPENDITURE WOULD RESULT IN ENDURING BENEFIT TO THE ASSESSEE . THE AO ALSO TOOK THE VIEW IN RESPECT OF LABOUR EXPENSES THAT THEY ARE NOT VERIFIABLE AND ULTIMATELY, HE DISALLOWED SUM OF RS.78,85,907/ - . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND CONTENDED THAT UNDER NO CIRCUMSTANCES THE SITE DEVELOPMENT EXPEN SES BE TREATED AS CAPITAL EXPENDITURE. SINCE THE LEASE WAS FOR A PERIOD OF 5 YEARS, THEREFORE, NO ENDURING BENEFIT CAN BE RECEIVED BY THE ASSESSEE . RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ALLIED METAL PRODUCTS VS. CIT, 137 ITR 689 (P&H) IN WHICH THE HON'BLE COURT TOOK THE VIEW THAT EXPENSES INCURRED FOR REPAIRS TO BUSINESS PREMISES BY THE ASSESSEE, A TENANT, WOULD BE ALLOWABLE IRRESPECTIVE OF ANY AGREEMENT TO THE EFFECT WITH THE LESSOR U/S 30(A)(I) AS WELL AS SEC. 37. RELIANCE WAS ALSO PLACED ON THE DECISION OF CIT VS. KUSUM P RODUCTS LTD., 175 ITR 557 FOR THE PROPOSITION WHERE THE LESSEE OF A FACTORY IN FULFILMENT OF HIS OBLIGATION TO MAINTAIN MACHINERY AND PLANT AND 8 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) DELIVER IT IN GOOD CONDITION, INCU RRED EXPENSES IN REPAIRING OR REPLACING THE MACHINERY OR PLANT, IT WOULD BE DEDUCTIBLE AS REPAIRS AND IS A REVENUE EXPENDITURE. RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS ALSO : I) CIT VS. LAXMI TALKIES, 275 ITR 125 (GUJ.) II) CIT VS. DR. A.M. SINGHAVI , 302 ITR 26 (RAJ.) III) CIT VS. MADRAS AUTO SERVICES ( P. ) LTD., 233 ITR 468 (SC) CIT(A) ULTIMATELY DELETED THE ADDITION BY OBSERVING AS UNDER : 9.4.2 IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW WERE NOT CORRECT IN HOLD ING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS CAPITAL EXPENDITURE. WE, ACCORDINGLY, SET ASIDE THE ORDER OF CIT(A) AND DELETE THE DISALLOWANCE. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED. RESPECTFULLY FOLLOWING THE ORDER OF THE HON. ITAT, THE A.O IS DIRECTED TO ALLOW SITE DEVELOPMENT EXPENSES AS REVENUE EXPENSES AND ACCORDINGLY, THIS GROUND OF APPE AL OF THE APPELLANT IS ALLOWED. 6.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHOR ITIES BELOW. SINCE THE ISSUE INVOLVED IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL, AS HAS BEEN OBSERVED BY CIT(A) IN PARA 9.4.2 OF THE EARLIER YEAR IN THE CASE OF THE ASSESSEE IN ITA NO. 75/PNJ/2012 FOR A.Y 2009 - 10 , WE DO NO T FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF CIT(A) IN DELETING THE SAID ADDITION. WE NOTED, THE ITAT IN ITS ORDER DT. 17.5.2013 WHILE DELETING A SIMILAR ADDITION OBSERVED AS UNDER : 3.4 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOO KING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT IT IS AN ADMITTED FACT ON THE RECORD THAT THE ASSESSEE HAS TAKEN THE LAND ON LEASE FOR 5 YEARS. THE LEASE AGREEMENT DT. 2.2.2008 IS IN THE PAPER BOOK AT PG. 103 TO 105. THE LEASE EXPIRED ON 1. 2.2013 AND IT WAS HANDED BACK TO THE LESSOR. THE ASSESSEE HAS SUBMITTED LETTER AND LESSORS AFFIDAVIT THAT THE LAND HAS BEEN HANDED BACK TO THE LESSOR. THE ONLY DISPUTE REMAINS BEFORE US IS WHETHER THE EXPENSES INCURRED BY THE ASSESSEE FOR MAKING THE LAN D IN WORKABLE CONDITION IS CAPITAL OR REVENUE. WE FIND THAT CIT(A) IN HIS ORDER HAS HELD 9 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) THAT IT IS NOT IN DISPUTE FROM A.O, REMAND REPORT AND WRITTEN SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE IS CARRYING OUT BUSINESS ACTIVITIES ON THE PREMISES TAKEN B Y HIM ON LEASE. IN VIEW OF THE FINDINGS OF THE AUTHORITIES BELOW, THERE IS NO DISPUTE THAT THE LAND TAKEN BY THE ASSESSEE ON LEASE WAS FOR BUSINESS PURPOSE. THE LEASE WAS FOR 5 YEARS AND AFTER THE EXPIRY OF THE 5 YEARS, ASSESSEE HAS HANDED OVER THE POSSE SSION OF THE LAND TO THE LESSOR. THE LAND TAKEN FOR THE BUSINESS PURPOSE WAS NOT IN USABLE CONDITION AND THE ASSESSEE HAD TO INCUR EXPENDITURE FOR LEVELLING APPROACH ROAD ETC. FOR MAKING THE LAND IN WORKABLE CONDITION FOR STORAGE OF IRON ORE. THE EXPENDI TURE AS SUCH AS BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND DURING THE COURSE OF THE BUSINESS. THE EXPENSES WERE NOT PERSONAL EXPENDITURE OF THE ASSESSEE. THE HONBLE BOMBAY HIGH COURT IN CIT VS. HOECHST PHARMACEUTICALS, 113 ITR 877 HAS CLEARLY LAID DO WN THAT SHORT PERIOD OF 5 YEARS CANNOT BE SAID TO BE LONG PERIOD AND THAT THE ASSESSEE COULD BE SAID TO HAVE ACQUIRED OR BROUGHT INTO EXISTENCE AN ADVANTAGE OF AN ENDURING CHARACTER. SIMILARLY, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TALATHI AND PANTHAKY ASSOCIATES P. LTD., 343 ITR 309 TOOK THE VIEW THAT THE ASSESSEE, TENANT IN A PREMISES CONTRIBUTED FOR THE RECONSTRUCTION OF THE PREMISES IN LIEU OF CONTINUING AS TENANT AT THE SAME RENT, THE EXPENDITURE SO INCURRED BY THE ASSESSEE WERE NOT HEL D TO BE EXPENDITURE OF CAPITAL NATURE. IN OUR OPINION, NO ENDURING BENEFIT HAS BEEN DERIVED BY THE ASSESSEE BY INCURRING THE EXPENDITURE FOR SITE DEVELOPMENT AS WITHOUT INCURRING THESE EXPENSES, THE ASSESSEE WOULD NOT HAVE BEEN ABLE TO CARRY ON ITS BUSINE SS. THE EXPENDITURE, IN FACT, WAS NECESSARY AND THE COMMERCIAL EXPEDIENCY DEMANDS SUCH EXPENDITURE TO BE INCURRED. THE FACT THAT THE ASSESSEE HAS HANDED OVER THE POSSESSION OF THE LAND AFTER THE EXPIRY OF 5 YEARS ITSELF PROVES THAT THE ASSESSEE HAS NOT D ERIVED ANY ENDURING BENEFIT OUT OF THIS. THE EXPENDITURE SO INCURRED, IN OUR OPINION, CANNOT BE REGARDED TO BE A CAPITAL EXPENDITURE. WE HAVE ALSO GONE THROUGH THE DECISIONS OF BALLIMAL NAVAL KISHORE VS. COMMISSION OF INCOME TAX, 224 ITR 414. IN THIS DE CISION, WE NOTED THAT THE ISSUE RELATES TO WHETHER THE EXPENDITURE INCURRED ON EXTENSIVE REPAIRS TO THE STRUCTURE OF THE CINEMA BUILDING IS CURRENT REPAIRS OR NOT. WHILE INTERPRETING THE WORD CURRENT REPAIRS, THE HONBLE SUPREME COURT HELD THAT CURRENT REPAIRS MEANS EXPENDITURE ON BUILDING, MACHINERY, PLANT OR FURNITURE WHICH IS NOT FOR THE PURPOSE OF RENOVATION OR RESTORATION BUT WHICH IS ONLY FOR THE PURPOSE OF PRESERVING OR MAINTAINING AN ALREADY EXISTING ASSET AND WHICH DOES NOT BRING A NEW ASSET INT O EXISTENCE OR DOES NOT GIVE TO THE ASSESSEE A NEW AND DIFFERENT ADVANTAGE. THE QUESTION WHETHER THE EXPENDITURE IS REVENUE EXPENDITURE OR CAPITAL EXPENDITURE WAS NOT BEFORE THE HONBLE SUPREME COURT. EVEN THE EXPENDITURE DOES NOT RELATE TO THE DEVELOPME NT OF THE LAND FOR FACILITATING THE BUSINESS. THIS DECISION, IN OUR OPINION, IS NOT APPLICABLE TO THE FACTS OF THE CASE. 3.5 IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW WERE NOT CORRECT IN HOLDING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS CAPITAL EXPENDITURE. WE, ACCORDINGLY, SET ASIDE THE ORDER OF CIT(A) AND DELETE THE DISALLOWANC E. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED. 10 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL, WE DISMISS THE GROUND TAKEN BY THE REVENUE. 7. THE LAST GROUND RELATES TO DELETION OF THE ADDITION AMOUNTING TO RS.44,96,024/ - ON ACCOUNT OF DISAL LOWANCE OF CLOSING STOCK. THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE AO TOOK THE VIEW THAT THE IRON ORE AS ON 31.3.2010 REPRES ENTED THE LAST PURCHASE IN THE YEAR UNDER CONSIDERATION AND THEREFORE THE RATE/TON ADOPTED BY THE ASSESSEE TO DETERMINE THE VALUE OF CLOSING STOCK WAS INCONSISTENT WITH THE PURCHASE PRICE. SHOW CAUSE NOTICE WAS SENT TO THE ASSESSEE. THE ASSESSEE SUBMITTED THE WORKING OF THE VALUATION BUT THE AO WAS NOT SATISFIED AND RE - VALUED THE STOCK IN THE FOLLOWING MANNER AND MADE TH E ADDITION OF RS.44,96,024/ - . PARTY PURCHASE QUANTITY PURCHASE PRICE SALE QUANTITY SALE PRICE BALANCE (QUANTITY MT) INTER TRANSFER 31000 341.28 31000 MMPL 25636.35 930.82 56636.35 GNG EXPORTS 53510 1214.5 3126.35 AHILIABIA SARDESSAI 4936 2100 8062.35 PHULCHAND EXPORTS 7071 1818.54 991.35 VALUE OF CLOSING STOCK RS.20,81,835 (991.35 MT @ RS.2100/ - ) TABLE SHOWING CLOSING STOCK VALUE OF ACTION GROUP ASSOCIATES PARTY PURCHASE QUANTITY PURCHASE PRICE SALE QUANTITY SALE PRICE BALANCE (QUANTITY MT) OPENING STOCK 51795.27 341.28 51795.27 MMPL 2436.89 9335 49358.38 G.N. AGARWAL 2524.04 1431.8 51882.42 INTER TRANSFER 31000 341.28 20882.42 KARISHMA EXPORTS 8772.88 825 29655.30 CLOSING STOCK ORE PURCHASED FROM G.N. AGARWAL 2524.04MT @1431.8 OF RS.3613920 ORE PURCHASED FROM KARISHMA EXPORTS 8772.88 MT @ 825 OF RS.7237628 11 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) ORE REMAINING FROM OPENING STOCK AFTER SALES TO MMPL AND INTER STOCK TRANSFER 18358.38 MT @ 341.28 OF RS.6255450 TOTAL VALUE OF CLOSING STOCK RS.1,71,06,998/ - TOTAL VALUE OF CLOSING STOCK AS PER ASSESSEE = RS.1,46,92,809 TOTAL VALUE OF CLOSING STOCK AS COMPUTED ABOVE = RS.1,91,88,833 DIFFERENCE IN THE VALUE OF CLOSING STOCK = RS.44,96,024 THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF RS.18,07,817/ - BY HOLDING AS UNDER : 11.4 SINCE THE APPELLANT COMPLAINED OF VIOLATION OF NATURAL JUSTICE, THE LEARNED COUNSEL WAS ALLOWED OPPORTUNITY TO PUT ACROSS THEIR CONTENTION ON THE ISSUE OF VALUATION OF CLOSING STOCK. THE ASSESSEE FURNISHED THE CHART SHOWING THE METHOD EMPLOYED BY THE ASSESSEE FOR VALUING THE CLOSING STOCK. THE LEARNED COUNSEL OF THE APPELLANT WA S SHOWN THE DEFECT IN THEIR METHOD OF VALUATION AND HE ACCEPTED THE SAME. AT THE SAME TI ME, HE ALSO OBJECTED TO THE VALUATION DONE BY THE A.O., WHEREIN THE A.O. APPLIED THE HIGHEST RATE ON ENTIRE CLOSING STOCK. THE OBJECTION OF THE LEARNED COUNSEL WAS FOUND TO BE CORRECT. THEREFORE, THE OPENING STOCK, PURCHASES AND SALES WERE ANALYSED. IN THE CASE OF AGA, IT WAS SEEN THAT OUT OF PURCHASES FROM M/S G.N. AGARWAL ONLY 2465 MT WERE SOLD AND BALANCE WERE LYING IN THE CLOSING STOCK. THOUGH THE PURCHASES WERE MADE @ RS.1431.80, THIS STOCK WAS VALUED BY THE ASSESSEE @ RS.3 4 1.28/ - . THEREFORE APPLY ING PURCHASE PRICE OF RS. 1431.80, THE UNDER VALUATION IS WORKED OUT AT RS.64,310/ - . SIMILARLY, ON VERIFYING WM, IT IS FOUND THAT CLOSING STOCK WAS OUT OF PURCHASES FROM M/S. AHILIABAI SARDESAI WHICH WAS VALUED @ 341.28 IN PLACE OF PURCHASE PRICE OF RS.210 0/ - . THUS, THE CLOSING STOCK HAS BEEN UNDERVALUED BY AN AMOUNT OF RS.17,43,507/ - . TOTAL UNDERVALUATION IS WORKED OUT AT (64,310/ - + 17,43,507/ - ) RS.18,07,817/ - . ADDITION TO THE EXTENT OF RS.18,07,817/ - IS CONFIRMED AND BALANCE IS DELETED. THIS WORKING HAS BEEN ACCEPTED BY THE LEARNED AR OF THE APPELLANT. THE A.O. TO GIVE BENEFIT IN OPENING STOCK IN THE SUBSEQUENT YEAR. 7.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE ASSESSEE HAS SEGREGATED THE STOCK T O WHAT EXTENT IT BELONGED TO A PARTICULAR SUPPLIER AND HAS VALUED THE SAME ON THAT BASIS. CIT(A) HAS DULY VERIFIED THE SAME AND NOTED SOME MISTAKE IN THE WORKIN G OF THE ASSESSEE. THE STOCK WAS ACCORDINGLY RE - VALUED. THIS METHOD HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE LD. DR. IN VIEW OF THIS FACT, WE CONFIRM THE ORDER OF 12 ITA NO. 20/PNJ/2014 (ASST. YEAR : 2010 - 11) CIT( A) SUSTAINING THE ADDITION TO THE EXTENT OF RS.18,07,817/ - OUT OF RS.44,96,024/ - . THE GROUND TAKEN BY THE REVENUE, IN OUR OPINION, IS ALSO MISCONCEIVED AS CIT(A) HAS NOT DELETED THE SUM OF RS. 44,96,024/ - . HE HAS SUSTAINED THE ADDITION TO THE EXTENT OF R S.18,07,817/ - OUT OF SUM OF RS.44,96,024/ - AGAINST WHICH THE ASSESSEE HAS NOT COME IN APPEAL. WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE METHOD OF VALUATION WHICH HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE REVENUE IN THE EAR LIER YEARS. WE, THEREFORE, CONFIRM THE ORDER OF CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 0 9 .05.2014. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 0 9 .05. 201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER