DCIT, New Delhi V. M/s. Fibcom India Ltd., New Delhi

ITA 2101/DEL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2855 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KESANG Y SHIRPA
• Assessee Lawyers: RAJESH ARORA
• Keywords: Capital asset; Depreciation; Business expenditure; Opportunity of being heard; Additional evidence; Royalty expenses; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B, NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER I.T.A. NOS.2101 & 2649/DEL/2012 (ASSESSMENT YEARS 2007-08 & 2008-09) DCIT, CIRCLE 11(1), VS. FIBCOM INDIA LTD., NEW DELHI LGF-84, WORLD TRADE CENTRE, BARAKHAMBA LANE, NEW DELHI-01 GIR / PAN :AAACF2237P (APPELLANT) (RESPONDENT) APPELLANT BY : MS. KESANG Y SHIRPA, SR. DR RESPONDENT BY : SH. RAJESH ARORA, CA DATE OF HEARING: : 29.10.2015 DATE OF PRONOUNCEMENT: 20.01.2016 ORDER PER KULDIP SINGH, JM: BOTH THE AFORESAID APPEALS ARE BEING DISPOSED OF B Y WAY OF CONSOLIDATED ORDER AS COMMON QUESTION IS RAISED BEF ORE THE TRIBUNAL FOR ADJUDICATION. 2. THE APPELLANT, DCIT, CIRCLE 11(1), NEW DELHI (HE REINAFTER REFERRED TO AS THE REVENUE), BY FILING THE PRESENT APPEALS , SOUGHT TO SET ASIDE THE IMPUGNED ORDERS DATED 24.02.2012 AND 26.03.2012 PAS SED BY LD. CIT(A) XIII, NEW DELHI QUA THE ASSESSMENT YEARS 2006-07 AN D 2007-08 ON THE GROUNDS INTER ALIA THAT: 2 I.T.A.NOS.2101 & 2649/DEL/2012 A. I.T.A.NO. 2101/DL/2012 (ASSESSMENT YEAR 2007-08): 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .1,77,878/- MADE ON ACCOUNT OF DISALLOWANCE OF ROYALTY EXPENSES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, TH LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.3,4 8,000/- MADE ON ACCOUNT OF DISALLOWANCE OF RETAINER SHIP FEE PAID T O SH. O.P. SHARMA. B. I.T.A.NO. 2649/DEL/2012 (ASSESSMENT YEAR 2008-09): 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 36 ,90,062/- MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES OF ROYALTY B EING TREATED AS CAPITAL IN NATURE. . 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 12 ,07,103/- MADE ON ACCOUNT DISALLOWANCE OF SOFTWARE EXPENSES. 3. ON THE FACTS AND CIRCUMSTANCE OF-THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 4, 24,461/- MADE ON ACCOUNT OF DISALLOWANCE OF EXHIBITION EXPENSES. 4. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 57 ,19,835/- MADE ON ACCOUNT OF DISALLOWANCE OF PROFESSIONAL EXPENSES . 5. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2, 66,667/- MADE ON ACCOUNT OF DISALLOWANCE OF PAYMENT OF STAMP DUTY. 6. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2, 20,77,354/- MADE ON ACCOUNT OF DIFFERENCE IN RECEIPTS SHOWN IN P&L A /C AND SHOWN IN THE SUBMISSION OF ASSESSEE. 3. BRIEFLY STATED, THE FACTS OF THESE CASES ARE INT ER ALIA THAT THE ASSESSEE COMPANY IS INTO THE BUSINESS OF MANUFACTURING, MARK ETING AND SELLING THE 3 I.T.A.NOS.2101 & 2649/DEL/2012 FIBER OPTIC TRANSMISSION SYSTEM AND ACCESS PRODUCTS . THE ASSESSEE COMPANY CLAIMED EXPENDITURE OF RS.49,20,082/- AND R S.2,36,15,837/- ON ACCOUNT OF ROYALTY PAYMENT ON PERCENTAGE BASIS DURI NG THE ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY. THE ASSESS ING OFFICER FOUND THAT THE PAYMENTS MADE BY THE ASSESSEE ON ACCOUNT O F ROYALTY PAYMENT IN THE NATURE OF ENDURING ADVANTAGE AND FINDING THE EX PLANATION RENDERED BY THE ASSESSEE NOT SUSTAINABLE, DISALLOWED 75% OF RO YALTY PAYMENT SUBJECT TO DEPRECIATION @ 25% AMOUNT INVOLVED. 4. DURING THE ASSESSMENT YEAR 2007-08, ASSESSEE CLA IMED DEDUCTION OF RETAINERSHIP EXPENSES TO THE TUNE OF RS.3,48,000 /- PAID TO SHRI O.P. SHARMA AS RETAINERSHIP FEE ON MONTHLY BASIS WHICH H AS BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT NO DETA IL HAS BEEN SUBMITTED SHOWING DEDUCTION OF ANY TDS ON THE SAID PAYMENT. 5. DURING THE ASSESSMENT YEAR 2007-08, THE ASSESSEE CLAIMED AN AMOUNT OF RS.13,73,063/- RELATING TO SOFTWARE PURCH ASES AND REPAIR AND MAINTENANCE, WHICH IS FOUND TO BE OF ENDURING BENEF IT TO THE ASSESSEE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER CONSI DERING THE EXPENDITURE BEING CAPITAL IN NATURE, ALLOWED DEPRECIATION TO TH E TUNE OF 25% TO THE ASSESSEE AND MADE ADDITION OF THE REMAINING EXPENDI TURE TO THE TUNE OF RS.12,07,103/-. SIMILARLY ASSESSEE CLAIMED THE DED UCTION OF EXPENSE OF RS.4,24,461/- ON ACCOUNT OF EXHIBITION EXPENSES WHI CH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT THE ASSESSEE HAS SPECIFICALLY FAILED TO JUSTIFY THE PROVISIONS SO MA DE FOR SUCH EXPENSE. ASSESSEE ALSO CLAIMED DEDUCTION OF EXPENDITURE OF R S.57,19,835/- DISALLOWED ON ACCOUNT OF PROFESSIONAL EXPENDITURE H AVING BEEN PAID AS CONSULTANCY FEE TO A FIRM NAMELY RENOIR GRP. ASSES SING OFFICER FINDING 4 I.T.A.NOS.2101 & 2649/DEL/2012 THE EXPLANATION MADE BY THE ASSESSEE TO JUSTIFY THE CLAIM AS REVENUE EXPENDITURE AND ALL THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS NOT TENABLE, MADE ADDITION OF RS.57,19 ,835/- TO THE INCOME OF THE ASSESSEE. 6. DURING ASSESSMENT YEAR 2007-08 ASSESSEE HAS ALSO CLAIMED DEDUCTION OF RS.2,66,667/- ON ACCOUNT OF PAYMENT OF STAMP DUTY WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE PAYMENT OF STAMP DUTY HAS BEEN PAID AS ONETIME PAYM ENT FOR THE RENEWAL OF LEASE DEED WHICH IS FOR THE PERIOD OF THREE YEAR S LIABLE TO BE RENEWED AFTER EVERY THREE YEARS. SIMILARLY, ASSESSING OFFI CER MADE ADDITION OF RS.2,20,77,354/- ON ACCOUNT OF DIFFERENCE IN RECEIP T SHOWN IN P & L ACCOUNT AND CLAIMED IN THE SUBMISSIONS OF THE ASSE SSEE AS NO EXPLANATION TO RECONCILE THE ACCOUNTS HAS BEEN FILED BY THE ASS ESSEE. 7. THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A ) WHO HAS ALLOWED BOTH THE AFORESAID APPEALS. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEAL. 8. GROUND NO.1 OF I.T.A.NO.2649/DEL/2012 (ASSESSMENT Y EAR 2007-08) AND GROUND NO.1 OF I.T.A.NO.2101/DEL/2012 (ASSESSMENT YEAR 2008-09): LD. D.R. CHALLENGING THE IMPUGNED ORDER DISALLOWING THE ROYALTY PAID BY THE ASSESSEE TO THE TUNE OF 75% RELIED UPON THE ORDER PASSED BY ASSESSING OFFICER. HOWEVER, ON THE OTHER HAND, LD. A.R. TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. D.R. RELIED UPON THE AGREEMENT DATED 10.03.2006 FOR TRANSFER OF KNOW-HOW, TECHNICAL DOCU MENTATION AND LICENSING RIGHTS UNDER WHICH PAYMENT OF ROYALTY HAS BEEN MADE AND ALSO RELIED UPON THE ORDER PASSED BY ITAT DELHI BENCH VIDE ITS ORDER I.T.A. 5 I.T.A.NOS.2101 & 2649/DEL/2012 NO. 471/DEL/2010 DATED 26.08.2011 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06. 8.1 UNDISPUTEDLY, THE ASSESSEE MADE ROYALTY PAYMENT TO THE TUNE OF RS.49,20,082/- FOR ASSESSMENT YEAR 2007-08 AND RS.2 ,36,15,837/- FOR ASSESSMENT YEAR 2008-09 RESPECTIVELY IN TERMS OF AG REEMENT DATED 09.08.2002 SUBSEQUENTLY REPLACED BY ANOTHER AGREEME NT DATED 10.03.2006 LYING AT PAGE 90 OF THE PAPER BOOK ENTERED INTO WIT H TELLABS DENMARK A/S FOR TRANSFER OF KNOWHOW, TECHNICAL DOCUMENTATION NE W DELHI LICENSING RIGHTS ON PAYMENT OF ROYALTY @ 5% FOR DOMESTIC SALE AND @ 8% ON EXPORT PRODUCT SOLD BY THE ASSESSEE COMPANY. 8.2 ROYALTY PAYMENT HAS BEEN MADE BY THE ASSESSEE A S PER CATEGORIC CLAUSE 9.6.1 IN THE AGREEMENT DATED 10.03.2006 @ 5% FOR DOMESTIC SALE AND @ 8% ON EXPORT PRODUCT SOLD BY THE COMPANY FOR TRANSFER OF KNOWHOW, TECHNICAL DOCUMENTATION AND LICENSING RIGH TS BY TELLABS. 8.3 IDENTICAL ISSUE HAS COME UP BEFORE ITAT DELHI BENCH B NEW DELHI IN APPEAL NO.4172 AND 4894/DEL/2010 IN ASSESSEES OWN CASE QUA THE ASSESSMENT YEARS 2004-05 AND 2005-06 WHICH HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE COORDINATE BENCH AFFIR MED THE FINDINGS RETURNED BY LD. CIT(A) AS HELD IN PARA 6 OF THE OR DER: 6. WE HAVE HEARD BOTH THE SIDES. THE ROYALTY EXPE NSES INCURRED BY THE ASSESSEE WERE AS PER THE TERMS OF AGREEMENT DATED 09.08.2002. AS PER THIS AGREEMENT, ONETIME PAYMENT FOR ACQUIRING KNOW-HOW HAS BEEN SEPARATELY PAID WHICH HAS BEEN CA PITALIZED AND IT HAS NOT BEEN CHARGED TO REVENUE ACCOUNT. IN TER MS OF CLAUSE 9.1 OF THE SAID AGREEMENT A SEPARATE FEE HAS BEEN PRESC RIBED IN CONSIDERATION OF THE TRANSFER OF TECHNICAL KOW-HOW, TECHNICAL DOCUMENTATION LICENSING RIGHTS GRANTED UNDER THIS A GREEMENT AND 6 I.T.A.NOS.2101 & 2649/DEL/2012 FOR THE SAME, A NON-REFUNDABLE AMOUNT HAS BEEN PAID BY THE ASSESSEE. AS PER CLAUSE 9.6.1 OF THE AGREEMENT, THE ASSESSEE HAS TO PAY ROYALTY @ 5% FOR DOMESTIC SALES AND 8% FOR THE EXPORT SALES. SINCE, THERE WAS NO EXPORT DURING THE YEAR, THE ASS ESSEE HAD PAID ROYALTY @ 5% OF THE DOMESTIC SALES AND THE CALCULAT ION BAS BEEN MADE AS PER THE AGREEMENT, WHICH IS NOT IN DISPUTE. THE PAYMENT HAD BEEN MADE DURING THE RUNNING OF' THE BUSINESS. THESE EXPENSES WERE RECURRING AND BASED ON THE PERCENTAGE OF SALES . THE NON- REFUNDABLE ONE TIME WAS SEPARATELY MADE AND THE SAM E WAS CAPITALIZED. BY INCURRING THIS EXPENSE, THE ASSESS EE BAD NOT ACQUIRED ANY ASSET OF ENDURING BENEFIT. IN THE CASE OF SOUTHERN SWITCHGEAR LIMITED, THE EXPENDITURE WAS COMPOSITE O F RECURRING AND NON-RECURRING EXPENDITURE. IN THE ABSENCE OF SE GREGATION, 25% WAS TREATED AS CAPITAL BUT IN ASSESSEE'S CASE, SUCH SEGREGATION WAS ALREADY MADE. KEEPING ALL THESE FACTS IN VIEW, WE F IND NO FAULT IN THE ORDER OF CIT(APPEALS) AND WE SUSTAIN THE SAME O N THIS ISSUE. ACCORDINGLY, GROUND NO. 20FTHE REVENUE'S APPEAL IS DISMISSED. 8.4 NOW ADVERTING TO THE CASE AT HAND WHEN THIS IDE NTICAL ISSUE FIRSTLY COME UP BEFORE THE ASSESSING OFFICER HE HAS RELIED UPON THE JUDGMENT PASSED BY HON'BLE SUPREME COURT IN CASE CITED AS SOUTHERN SWITCHGEAR LTD. VS CIT 232 ITR 359 AND HELD THAT THE ROYALTY PAYMENT AS CAPITAL EXPENDITURE SIMPLY ON THE GROUND THAT THE PAYMENT O F ROYALTY IS IN THE NATURE OF ENDURING ADVANTAGE TO THE ASSESSEE. FOR READY REFERENCE, RELEVANT PORTION OF THE JUDGEMENT CITED AS SOUTHERN SWITCHGEAR LTD. (SUPRA) IS REPRODUCED BELOW: CAPITAL OR REVENUE EXPENDITURE-COLLABORATION AGSREEMENT-GRANT OF TECHNICAL AID FOR SETTING UP FACTORY AND RIGHT TO SELL PRODUCTS-FOREIGN COMPANY AGREEING NOT TO MANUFACTURE SIMILAR PRODUCTS IN INDIA OR GIVE RIGHTS FOR MANUFACTURE TO OTHES EXCLUSIVE AND ENDURING ADVANTAGE- PORTION OF TEHCNICAL AID FEE AND ROYALTY DISALLOWED DISALLWOANCE JUSSTIFIED 7 I.T.A.NOS.2101 & 2649/DEL/2012 8.5 ON THE OTHER HAND, LD. CIT(A) HAS THRASHED THE MATTER THREADBARE AND ALLOWED THE ROYALTY PAYMENT AS REVENUE EXPENDIT URE BY RELYING UPON THE JUDGEMENT BY ITAT DELHI BENCH B NEW DELHI IN APPEAL NO.4172 AND 4894/DEL/2010 (SUPRA) IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06. MOREOVER, WHEN ROYALTY PAYMENT HAS BEEN MADE BY THE ASSESSEE COMPANY ON RECURRING BASIS DUR ING THE NORMAL COURSE OF BUSINESS IN TERMS OF PERCENTAGE, IT HAS N OT ACQUIRED ANY ASSET OF ENDURING BENEFIT, WHEREAS IN SOUTHERN SWITCHGEARS L TD. (SUPRA), THE EXPENDITURE WAS CAPITAL AND NON RECURRING IN NATURE AND DISTINGUISHABLE FROM THIS CASE AND THE SAID CASE HAS BEEN WRONGLY R ELIED UPON BY THE ASSESSING OFFICER. SO, WE FIND NO GROUND TO INTERF ERE IN THE FINDINGS RETURNED BY LD. CIT(A). HENCE, GROUND NO.1 OF APP EAL FOR ASSESSMENT YEAR 2006-07 AND GROUND NO.2 OF APPEAL FOR ASSESSME NT YEAR 2008-09 ARE DETERMINED AGAINST THE REVENUE. 9. GROUND NO.2 OF I.T.A. NO. 2101/DEL/2012 (ASSESSMENT YEAR 2008-09): LD. D.R. CHALLENGING THE IMPUGNED ORDER CONTENDED INTER ALIA THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .3,48,000/- MADE BY THE ASSESSING OFFICER FOR DISALLOWANCE MADE ON ACCOUNT OF RETAINER SHIP FEE PAID TO SHRI O.P. SHARMA ON THE GROUND OF NON DEDUC TION OF TDS WITHOUT CALLING FOR ANY DOCUMENT NOR ANY REMAND REPORT HAS BEEN SOUGHT FROM THE ASSESSING OFFICER; THAT LD. CIT(A) HAS MERELY DELE TED THE ADDITION ON THE BASIS OF FORM 16A FURNISHED BY THE ASSESSEE. 9.1 PERUSAL OF THE FINDINGS RETURNED BY LD. CIT(A), GO TO PROVE THAT THE FORM 16A FURNISHED BY THE ASSESSEE, HAS BEEN TAKEN AT ITS FACE VALUE WITHOUT MAKING ANY VERIFICATION AND WITHOUT CALLING ANY REMAND REPORT 8 I.T.A.NOS.2101 & 2649/DEL/2012 FROM THE ASSESSING OFFICER. LD. CIT(A) HAS NOT RET URNED THE FINDINGS IF THE TDS SAID TO HAVE BEEN DEDUCTED BY THE ASSESSEE COMPANY, HAS BEEN PAID TO THE REVENUE AUTHORITIES OR NOT. WE ARE OF THE CONSIDERED VIEW THAT THE MATTER IS REQUIRED TO BE RESTORED TO THE A SSESSING OFFICER TO VERIFY THE DEDUCTION AND PAYMENT OF TDS AS ALLEGED BY THE ASSESSEE AND TO DECIDE DE NOVO. SO, GROUND NO.2 IS DETERMINED IN F AVOUR OF REVENUE FOR STATISTICAL PURPOSES. I.T.A.NO. 2649/DEL/2012 (ASSESSMENT YEAR 2007-08): 10. GROUND NO.2 LD. D.R. CHALLENGING THE IMPUGNED ORDER CONTENDED THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON THE BA SIS OF DOCUMENTS TAKEN ON RECORD DURING APPELLATE PROCEEDINGS WITHOUT GIVI NG ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER. 10.1 UNDISPUTEDLY, THE ASSESSING OFFICER HAS MADE T HE ADDITION REGARDING EXPENDITURE OF RS.7,08,000/- ON THE GROUN D THAT NO DETAILS HAS BEEN FILED FOR SUCH EXPENDITURE. HOWEVER, LD. CIT( A), DURING APPELLATE PROCEEDINGS, BY TAKING THE CONTENTION OF THE ASSESS ING OFFICER AT FACE VALUE THAT THEY HAVE PRODUCED THE BILLS OF SOFTWARE EXPENSES BEFORE THE ASSESSING OFFICER WHO HAS DISALLOWED THE SAME WITHO UT VERIFYING THE BILLS, ENTERTAINED THE COPIES OF BILLS DURING APPEL LATE PROCEEDINGS WITHOUT GETTING THE SAME VERIFIED BY THE ASSESSING OFFICER, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER IS REQUIRED TO BE R ESTORED TO THE LD. CIT(A) TO DECIDE AFRESH AFTER PROVIDING AN OPPORTUN ITY OF BEING HEARD TO THE ASSESSING OFFICER. SO, GROUND NO.2 IS DETERMIN ED IN FAVOUR OF REVENUE FOR STATISTICAL PURPOSES. 9 I.T.A.NOS.2101 & 2649/DEL/2012 11. GROUND NO.3: CHALLENGING THE IMPUGNED ORDER QUA THIS GROUND, LD . D.R. RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER AND VEHEMENTLY CONTENDED THAT LD. CIT(A) AFTER ENTERTAINING THE EVIDENCE ON HIS OWN, DELETED THE ADDITION WITHOUT GIVING ANY OPPORTUNITY OF BEING HE ARD TO THE ASSESSING OFFICER. A BARE PERUSAL OF THE ORDER PASSED BY LD. CIT(A), GOES TO PROVE THAT ON THE BASIS OF DOCUMENTS PRODUCED BEFORE LD. CIT(A) BY THE ASSESSEE DURING APPELLATE PROCEEDINGS, LD. CIT(A) C AME TO THE CONCLUSION THAT ASSESSEE TOOK PART IN CONVERGENCE 2007 EXHIBIT ION BY SETTING UP AN EXHIBITION FOR ITS PRODUCTS AND INCURRED RS.9,63,48 1/-. NO DOUBT, DETAILS OF SUCH EXPENSE WERE FILED BEFORE THE ASSESSING OFF ICER ALONG WITH BILL DATED 04.04.2007 FOR RS.4,71,912/- WHICH HAS BEEN C ONSIDERED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2008-09. LD. CIT(A) HAS TAKEN THE AFORESAID BILL INTO EVIDENCE MERELY ON TH E GROUND THAT ASSESSEE HAD NOT RECEIVED THE SAID BILL TILL 3.103.2007 AND AS SUCH, THE SAME WAS DEBITED AS OUTSTANDING EXPENDITURE ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE. LD. CIT (A) ALSO TAKEN ON RECORD FORM 16A FOR DEDUCTION OF TDS REGARDING THE PAYMENT MADE TO M/S. EXHIBITION INDIA PVT. LTD. AND M/S. LIPI ASSOC IATES WHO HAVE DEPOSITED IN THE GOVERNMENT ACCOUNT ON 04.04.2007 A ND 30.05.2007 AND THEREBY DELETED THE ADDITION. FROM THE FINDINGS RE TURNED BY LD. CIT(A), WHEN IT HAS APPARENTLY BECOME CLEAR THAT LD. CIT(A) ENTERTAINED THE EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE DURING A PPELLATE PROCEEDING WITHOUT PROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER AND WITHOUT CALLING ANY REMAND REPORT, WITHOUT GETTING THE ADDITIONAL EVIDENCE TAKEN ON RECORD, VERIFIED BY THE ASSESSING OFFICER, THE LD. CIT(A) WAS NOT 10 I.T.A.NOS.2101 & 2649/DEL/2012 JUSTIFIED IN DELETING THE ADDITION. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER IS REQUIRED TO BE RESTORED TO THE L D. CIT(A) TO DECIDE AFRESH AFTER PROVIDING AN OPPORTUNITY OF BEING HEAR D TO THE ASSESSING OFFICER. 12. GROUND NO.4: LD. D.R. AGAIN CONTENDED THAT LD. CIT(A) AGAIN ERR ED IN DELETING THE AMOUNT OF RS.57,19,835/- DISALLOWED BY THE ASSE SSING OFFICER AS PROFESSIONAL EXPENSES ON THE BASIS OF EVIDENCE TAKE N ON RECORD AT THE BACK OF ASSESSING OFFICER. ASSESSING OFFICER DISALLOWED THE EXPENSES ON THE GROUND THAT THE COPY OF AGREEMENT WAS NOT FILED AND ONLY ONE BILL WAS BROUGHT ON RECORD AND THUS FAILED TO EXPLAIN THE NA TURE OF SERVICES RENDERED. HOWEVER, LD. CIT(A) ON THE BASIS OF TDS CERTIFICATE BROUGHT ON RECORD DURING APPELLATE PROCEEDINGS DECIDED WITH OUT AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER BY HOLDING THAT THE PAYMENT TO RENOIR CONSULTANCY INDIA PVT. LTD. HAS B EEN MADE BY THE ASSESSEE FOR CONSULTANCY SERVICES CARRIED DURING TH E YEAR UNDER CONSIDERATION. WHEN THE LD. CIT(A) HAS DECIDED THI S ISSUE BY TAKING THE DOCUMENTS ON RECORD DURING APPELLATE PROCEEDINGS WI THOUT AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER , IS REQUIRED TO BE RESTORED TO LD. CIT(A) TO DECIDE AFRESH AFTER PROVI DING OPPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER. 13. GROUND NO.5: TO CHALLENGE THIS GROUND, LD. D.R. AGAIN RELIED UP ON THE ORDER PASSED BY THE ASSESSING OFFICER. HOWEVER, ON THE O THER HAND, THE ASSESSEE CLAIMED TO HAVE PAID RS.4,00,000/- AS PER LEDGER ACCOUNT COPY OF 11 I.T.A.NOS.2101 & 2649/DEL/2012 WHICH IS LYING AT PAGE 173 OF THE PAPER BOOK REGARD ING THE LEASE OF PROPERTY SITUATED AT 77A, SECTOR 18, GURGAON. THE ASSESSING OFFICER DISALLOWED 2/3 RD OF THE SAID EXPENDITURE ON THE GROUND THAT THE SAI D EXPENDITURE SHOULD BE AMORTIZED FOR A PERIOD OF THR EE YEARS SINCE THE SAID PAYMENT WAS A ONETIME PAYMENT FOR RENEWAL OF LEASE DEED WHICH WAS FOR A PERIOD OF THREE YEARS. HOWEVER, LD. CIT(A) DELET ED THIS ADDITION BY TREATING THE SAME AS BUSINESS EXPENDITURE. 13.1 WE ARE OF THE CONSIDERED VIEW THAT WHEN THE AS SESSING OFFICER HAS NOT DISPUTED THE PAYMENT ADMITTEDLY MADE BY THE ASS ESSEE ON ACCOUNT OF RENEWAL OF REGISTRATION OF LEASE DEED AND HAS ALSO NOT DRAWN ANY CONCLUSION THAT BY MAKING SUCH EXPENDITURE, HE HAS ACQUIRED SOME CAPITAL ASSET OF ENDURING NATURE, THE SAME ARE REQUIRED TO BE ALLOWED. MOREOVER, THERE IS NO MATERIAL ON RECORD TO SHOW THAT SUCH EX PENSES COULD HAVE BEEN DEFERRED BY THE ASSESSEE FOR THE SUBSEQUENT YEAR. SO, WE FIND NO GROUND TO INTERFERE INTO THE FINDINGS RETURNED BY LD. CIT(A) AND HENCE, THIS GROUND IS DETERMINED AGAINST THE REVENUE HOWEVER SUBJECT T O THE CONDITION THAT THE ASSESSING OFFICER HAS TO VERIFY THE ACTUAL PAYM ENT OF LEASE AMOUNT TO THE LESSOR. 14. GROUND NO.6: THE ASSESSING OFFICER, ON THE BASIS OF SCRUTINY OF P & L ACCOUNT AND RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YE AR, NOTICED DIFFERENCE OF RS.2,20,77,354/- BECAUSE THE ASSESSEE VIDE HIS W RITTEN SUBMISSIONS SHOWN TOTAL RECEIPT INCLUDING SALES, SERVICE INCOME AND OTHER INCOME AT RS.61,01,27,974/- BUT IN THE RETURN OF INCOME FOR T HE RELEVANT ASSESSMENT YEAR SUCH RECEIPT HAS BEEN SHOWN AT RS.58,80,50,620 /-, ON FAILURE OF 12 I.T.A.NOS.2101 & 2649/DEL/2012 ASSESSEE TO JUSTIFY AND RECONCILE THE DIFFERENCE, M ADE AN ADDITION OF RS.2,20,77,354/-. 14.1 PERUSAL OF THE FINDINGS RETURNED BY LD. CIT(A) GO TO PROVE THAT LD. CIT(A) HAS ACCEPTED THE EVIDENCE RELIED UPON BY THE ASSESSEE TO PROVE THE EXCISE DUTY COMPONENT OF RS.3,28,70,843/-, WHICH WA S SHOWN AS PART OF THE TOTAL SALE. BUT AT THE SAME TIME, IT IS APPARE NTLY CLEAR FROM THE ORDER OF LD. CIT(A) THAT NO RECONCILIATION STATEMENT HAS BEE N FILED BY THE ASSESSEE BEFORE LD. CIT(A) RATHER HIS CONTENTION HAS BEEN TA KEN ON THE FACE VALUE, THAT TOO AT THE BACK OF THE ASSESSING OFFICER. SO, WE ARE OF THE CONSIDERED VIEW THAT TO RECONCILE THE DIFFERENCE OF RS.2,20,77 ,354/- BETWEEN THE INCOME SHOWN BY THE ASSESSEE IN THE P & L ACCOUNT A ND RETURN OF INCOME AND ENTIRE RECORD RELIED UPON BY THE ASSESSEE AND A CCEPTED BY LD. CIT(A) THE SAME IS REQUIRED TO BE VERIFIED BY THE ASSESSIN G OFFICER. SO, IN THE GIVEN CIRCUMSTANCES, LD. CIT(A) HAS ERRED IN ACCEPT ING THE MATERIAL RELIED UPON BY THE ASSESSEE AT THE BACK OF ASSESSING OFFIC ER. SO, THE MATTER IS REQUIRED TO BE RESTORED TO LD. CIT(A) TO DECIDE AFR ESH AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO THE PARTIES. 15. IN VIEW, WHAT HAS BEEN DISCUSSED ABOVE, BOTH TH E APPEALS OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES . 16. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JAN., 2016. SD./- SD./- (N. K. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 20.01.2016 SP. 13 I.T.A.NOS.2101 & 2649/DEL/2012 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 14,15/1 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 15,18,18/1 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 20/1/16 SR . PS/PS 6 KEPT FOR PRONOUNCEMENT 20/1 SR. PS/PS 7 FILE SENT TO BENCH CLERK 20/1 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER