M/s. Aaren Exports, Jalandhar V. The Deputy Commissioner of Income tax, Jalandhar

ITA 212/ASR/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95026 (ITAT-AMRITSAR)
• Duration Of Justice: 5 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: J S BHASIN
• Keywords: Gross profit estimation; Rejection of books of accounts; Business expenditure; Rule of consistency; Corroborative evidences; Assessment record; Commercial expediency
• Section: 40A(3); 10(10D); 80IB; 145; 37; 144; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S. KAPOOR, HONBLE ACCOUNTANT MEMBER I.T.A. NO. 212 (ASR)/2010 ASSESSMENT YEAR: 2006-07 PAN: AABFA4534A M/S AAREN EXPORTS B-17, FOCAL POINT EXTN. JALANDHAR. VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, RANGE-II, JALANDHAR. (APPELLANT) (RESPONDENT) I.T.A. NO. 300 (ASR)/2010 ASSESSMENT YEAR: 2006-07 PAN: AABFA4534A THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-II, JALANDHAR. VS. M/S AAREN EXPORTS, B-17, FOCAL POINT EXTN., JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.S. BHASIN (ADV.) RESPONDENT BY: SMT. RATINDER KAUR (DR) DATE OF HEARING: 21.09.2015 DATE OF PRONOUNCE MENT: 30.09.2015 ORDER PER T. S. KAPOOR (AM): THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS W ELL AS BY REVENUE AGAINST THE ORDER DATED 22.03.2010, PASSED BY THE L EARNED CIT(A), JALANDHAR. 2. THE FOLLOWING GROUNDS HAS BEEN RAISED BY ASSESSE E IN ITA NO.212/ASR/2010 FOR ASST. YEAR 2006-07. (I) THE LEARNED CIT(A), JALANDHAR HAS ERRED IN CON FIRMING AN ADDITION OF RS.7,50,000/- OUT OF ADDITION OF RS.25,40,000/- MAD E BY THE LEARNED A.O 2. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 BY INVOKING PROVISIONS OF SECTION 145 (3), WITHOUT ISSUE OF SHOW CAUSE NOTICE IN TERMS OF FIRST PROVISO TO SECTION 144(1). (II) THE LEARNED CIT(A), JALANDHAR HAS ERRED IN CON FIRMING AN ADDITION OF RS.7,50,000/- OUT OF ADDITION OF RS.25,40,000/- MAD E ON ACCOUNT OF ALLEGED IMPROPER AND UNCOMPLETED MAINTENANCE OF ACC OUNTS. (III) THAT AFTER HAVING UPHELD THE REJECTIONS OF BO OK RESULTS AS DONE BY THE LEARNED A.O., THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING FURTHER DISALLOWANCE/ADDITIONS AS MADE BY THE LEARNED A.O. (IV) THE LEARNED CIT(A), JALANDHAR HAS ERRED IN CON FIRMING THE FOLLOWING DISALLOWANCE OUT OF EXPENSES OF RS.13,31, 030/- UNDER THE HEAD FOREIGN TRAVELING EXPENSES MADE BY ASSESSING OFFICE R. SR. NO. PARTICULAR S TOTAL EXPENSES CLAIMED DISALLOWANCE MADE BY A.O DISALLOWANC E CONFIRMED IN APPEAL. 1. TICKER VISA EXPENSES OF PARTNER BEING FOR NON BUSINESS PURPOSE RS.4,96,808/- RS.74,520/- I.E. 15% NIL 2. FOREIGN CURRENCY EXPENSES BEING UNVOCHED /WITHOUT SUPPORTIN G BILLS AND ALSO BEING FOR NON BUSINESS PURPOSES. RS.31,41,265/- RS.12,56,510/- I.E. 40% 25% OF 31,41,265/- I.E. RS.7,85,316 /- (V) THE LEARNED CIT (A), JALANDHAR HAS ERRED IN CON FIRMING THE DISALLOWANCE OF RS.17,00,000/- BEING EXPENDITURE ON KEYMAN INSURANCE POLICY. 3. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 (VI) THE LEARNED CIT(A), JALANDHAR HAS ERRED IN CON FIRMING THE DISALLOWANCE OF RS.1,50,000/- OUT OF SALARY AND LAB OUR WELFARE EXPENSES. (VII) THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE A.OS ACTION OF REJECTION OF APPELLANTS CLAIM U/S 80IB. (VIII). THE IMPUGNED ORDERS OF THE AUTHORITIES BELO W ARE AGAINST LAW AND FACTS OF THE CASE. 3. THE FOLLOWING GROUNDS HAS BEEN RAISED BY THE DEP ARTMENT IN ITA NO.300(ASR)/2010 FOR A.Y.2006-07. (I) THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW IN REDUCING THE ADD ITION OF RS.25,40,000/- TO RS.7,50,000/- MADE ON ACCOUNT OF IMPROPER AND INCOMPLETE MAINTENANCE OF ACCOUNTS. (I. A) WHILE DOING SO THE LEARNED CIT(A) HAS NOT GI VEN ANY SPECIFIC REASON FOR REDUCING THE ADDITION. IN FACT THE AO HA S CLEARLY HELD THAT THE ENTIRE LIST OF CLOSING STOCK IS MERELY A FABRIC ATION WHICH HAS BEEN CONCOCTED TO SUBSTANTIATE A PARTICULAR VALUE OF CLO SING STOCK THAT HAS BEEN ADOPTED SO AS TO ARRIVE AT A CONSTANT GROSS PR OFIT PERCENTAGE. THE ENTIRE ACCOUNTS ARE G.P. BASED. IN VIEW OF THE DEFI CIENCIES NOTED IN THE ACCOUNTS OF THE ASSESSEE, THEREFORE, AND TAKING INT O ACCOUNT THE ENTIRELY OF THE CIRCUMSTANCES, AN ADDITION OF RS.20,00,000/- IS MADE TO THE GROSS PROFIT RETURNED BY THE ASSESSEE FIRM. BECAUSE OF NO N-MAINTENANCE OF PROPER VOUCHERS AND SUPPORTING EVIDENCES IN ASPECT OF WAGES & LABOUR CHARGES, A FURTHER ADDITION OF RS.5,40,000/- IS MAD E TO THE GROSS PROFIT RETURNED, WHICH IS 5% OF THE TOTAL EXPENSES CLAIMED UNDER THESE HEADS. THEREFORE, THE AO HAS GIVEN COMPLETE FACTS AND COMP ARABLE CASES TO SUBSTANTIATE THE ADDITION IN THE ASSESSMENT ORDER. THE HONBLE SUPREME COURT IN THE CASE OF S.N. CHETTIAR VERSUS CIT 38 IT R 579 HAS HELD THAT IN THE ABSENCE OF VOUCHERS AND QUANTITATIVE TALLY OF S TOCK THE BOOKS CAN BE REJECTED AND THE PROFITS CAN BE ESTIMATED. 4. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 (II.) THAT, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED CIT(A) HAS ERRED IN REDUCING THE DISALLOWAN CE ON FOREIGN EXCHANGE EXPENDITURE FROM 40% TO 25%. (II.A) WHILE DOING SO THE CIT(A) HAS FAILED TO APPR ECIATE THE FACTS THAT THE A.O HAD MADE THE DISALLOWANCE OF RS.13,31,030/- ON ACCOUNT OF UNVERIFIABLE FOREIGN TRAVELING EXPENSES AFTER BRING ING ON RECORD THE COMPLETE FACTS OF THE CASE. RELIANCE IS PLACED ON T HE DECISION OF JURISDICTIONAL ITAT IN THE CASE OF ACIT VS. ARCHIE INTERNATIONAL ITA NO.458(ASR)/2004 FOR THE ASST. YEAR 2001-02 WHEREIN 40% OF EXPENSES ON FOREIGN TRAVEL WERE HELD TO BE NOT ALLOWABLE. (III) THAT, IT IS PRAYED THAT THE ORDER OF THE LEAR NED CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. (IV) THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD O R AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OFF. 4. THE BRIEF FACTS AS NOTED IN ASSESSMENT ORDER ARE THAT ASSESSEE IS A MANUFACTURER AND EXPORTER OF GARDEN TOOLS, HAND TOO LS ETC. AND IS ALSO TRADING IN CERTAIN ITEMS LIKE PVC RESIN ETC. THE CASE OF TH E ASSESSEE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS, THE A. O REQUIRED THE ASSESSEE TO PRODUCE STOCK REGISTER WHICH THE ASSESSEE STATED TH AT IN VIEW OF THE NUMBER OF ITEMS INVOLVED AS RAW MATERIAL IN THE MANUFACTURING PROCESS, IT WAS NOT POSSIBLE TO MAINTAIN THE STOCK REGISTER. THE ASSESS EE WAS THEN REQUIRED TO FURNISH THE BREAKUP OF FINISHED GOODS, SEMI FINISHE D GOODS, AND CONSUMABLE STORES AND WAS ALSO REQUIRED TO SUBMIT THE BASIS OF VALUATION OF STOCKS. IN THE COURSE OF SAID VERIFICATION AND EXAMINATION OF BOOK S OF ACCOUNT VIS--VIS BILLS PRODUCED OF VARIOUS ITEMS OF RAW MATERIAL, THE ASSE SSING OFFICER OBSERVED A NUMBER OF DISCREPANCIES IN THE QUANTITY AND VALUATI ON THEREOF. ONE OF THE 5. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 MAJOR DISCREPANCY OBSERVED BY THE ASSESSING OFFICER WAS IN RESPECT OF AN ITEM CALLED UNIVERSAL BRACKET THE QUANTITY OF WHICH NU MBERS AT 1,72,302/- WAS VALUED AT RS.10 PER PIECE IN THE OPENING STOCK WHER EAS THE SAME QUANTITY WAS VALUED IN THE CLOSING STOCK AT RS.4 PER PIECE. THE ASSESSING OFFICER FURTHER NOTED SIMILAR DISCREPANCIES IN OTHER ITEMS ALSO AND THEREFORE, THE ASSESSING OFFICER HELD THAT THE LIST OF CLOSING STOCK FURNISH ED BY ASSESSEE WAS TOTALLY BASED ON ESTIMATES, AND WAS NEITHER COMPLETE NOR AC CURATE. THE ASSESSING OFFICER FURTHER COMPARED GROSS PROFIT RATIO DECLARE D BY ASSESSEE IN PREVIOUS THREE YEARS BY EXCLUDING EXPORT INCENTIVES. FROM TH E ANALYSIS THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD IN FACT DECLARED LOWER GROSS PROFIT AS COMPARED TO EARLIER YEARS. THE ASSESSING OFFICER FU RTHER OBSERVED THAT THE EXPENSES INCURRED BY ASSESSEE ON ACCOUNT OF WAGES A ND LABOUR CHARGES WERE INCURRED IN CASH AND WERE SUPPORTED BY ONLY SELF MA DE VOUCHERS. THE ASSESSING OFFICER ALSO COMPARED THE GROSS PROFIT RA TIO DECLARED BY TWO PARTIES WHO WERE INVOLVED IN SIMILAR KIND OF ACTIVITIES AND WHO HAD DECLARED BETTER GROSS PROFIT RATIO AND THEREFORE, KEEPING IN VIEW A LL THE FACTS AND CIRCUMSTANCES THE BOOKS OF ACCOUNT OF ASSESSEE WERE REJECTED AND ADDITION OF RS.25.40 LAC WAS MADE TO THE GROSS PROFIT OF ASSESSEE. 5. THE ASSESSING OFFICER FURTHER OBSERVED THAT ASSE SSEE HAD CLAIMED AN EXPENDITURE TO TUNE OF RS. 37,15,584/- ON ACCOUNT O F FOREIGN TRAVELING EXPENSES OUT OF WHICH RS.77,511/- WERE EXPENSES PERTAINING T O FOREIGN TRAVELING OF MARKETING EXECUTIVES, AND THE BALANCE AMOUNT OF RS. 36,38,073/- REPRESENTED THE DIRECTORS FOREIGN TRAVELING EXPENSES. THE ASSES SING OFFICER FURTHER OBSERVED 6. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 THAT OUT OF SAID AMOUNT OF RS.36,38,073/-, RS.31.41 ,265/- WERE INCURRED ON THE PURCHASE OF FOREIGN CURRENCY AND THE BALANCE AM OUNT OF RS.4,96,808/- PERTAINED TO TICKETS AND VISA CHARGES ETC. THEREFOR E, THE ASSESSEE WAS ASKED TO PROVIDE DETAILS AND SUPPORTING EVIDENCES REGARDING THE DURATION OF TOUR, PURPOSE OF THE VISIT, AND THE DETAILS OF EXPENDITUR E INCURRED ON TICKETS, BOARDING AND LODGING ETC. ON THE BASIS OF SUBMISSIO NS MADE BY ASSESSEE THE ASSESSING OFFICER HELD THAT ALL OF THE EXPENSES OF RS.31,41,265/- SPENT IN FOREIGN EXCHANGE WERE IN CASH AND WERE NOT SUPPORTE D BY THIRD PARTY BILLS. THE ASSESSING OFFICER AFTER ANALYZING OF EXPENSES HELD THAT THERE WAS ELEMENT OF PERSONAL EXPENDITURE ON THESE TOURS AND THEREFORE, HE HELD THE ASSESSEE HAD FAILED TO PROVE THAT EXPENDITURE WAS WHOLLY AND EXC LUSIVELY FOR THE PURPOSES OF BUSINESS AND THEREFORE, HE DISALLOWED 40% OF EXPENS ES OF FOREIGN CURRENCY, AND 15% OF TICKET AND VISA EXPENSES MAKING IN ALL ADDIT IONS OF RS.13, 31,030/-. 6. THE ASSESSING OFFICER ALSO DISALLOWED OF CLAIM O F RS.17 LAC WHICH THE ASSESSEE HAD CLAIMED AS INSURANCE PREMIUM PAID FOR KEYMAN INSURANCE POLICY OF SH. DEEPK AGGARWAL, PARTNER OF THE FIRM. THE ASSESSING OFFICER FURTHER HELD THAT WAGES LABOUR CHARGES SALARY AND LABOUR WE LFARE EXPENSES WERE PAID BY ASSESSEE IN CASH AND WERE SUPPORTED BY ONLY SELF MADE VOUCHERS AND THEREFORE THE ASSESSING OFFICER MADE A DISALLOWANCE OF RS.1,50,000/- REPRESENTING APPROXIMATELY 10% OF THE TOTAL EXPENSE S UNDER THIS HEAD. 7. THE ASSESSING OFFICER FURTHER OBSERVED THAT ASSE SSEE HAD CLAIMED DEDUCTION 80IB. THE ASSESSING OFFICER HELD THAT EXP ORT INCENTIVES, DUTY DRAW 7. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 BACK, INTEREST ON FDR, INTEREST ON OTHER DEPOSITS C ANNOT BE TREATED AS PROFIT DERIVED FROM ELIGIBLE BUSINESS FOR THE PURPOSES OF SECTION 80IB AND THEREFORE, HE DISALLOWED DEDUCTION UNDER SECTION 80IB TO THE E XTENT OF RS.1,64,198/-. 8. AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE CI T(A) AND FILED VARIOUS SUBMISSIONS. THE LEARNED CIT(A) AFTER GOING THROUGH THE MATERIAL ON RECORD AND SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPE AL BY RECORDING HIS FINDING ON VARIOUS ADDITIONS AS UNDER: ADDITION TO GROSS PROFIT 1.6 I HAVE CONSIDERED THE RIVAL CONTENTIONS CAREF ULLY. THE APPELLANTS CONTENTION IS THAT THE BOOKS OF ACCOUNTS COULD NOT BE REJECTED MERELY FOR ABSENCE OF STOCK RECORD IS SUPPORTED BY THE DECISIO N IN THE CASES OF PANDIT BROS. VS. CIT (SUPRA) AS WELL AS IN THE CASE OF CIT VS. OM OVERSEAS 173 TAXMAN 185 (P&H). IN THE CASE OF PUNJAB TRADING CO. VS. CI T (SUPRA) RELIED UPON BY THE AO, IN ADDITION TO THE FACT THAT THE ASSESSEE WAS N OT MAINTAINING STOCK REGISTER, IT WAS FOUND THAT THE YIELD OF GINNED COTTON SHOWN BY THE ASSESSEE COULD NOT POSSIBLY BE CORRECT. THIS WAS ONE OF THE REASONS WH Y THE HONBLE HIGH COURT UPHELD THE ADDITION MADE BY THE A.O. IT IS NOT DOUB T TRUE THAT KEEPING OF STOCK REGISTER IS OF GREAT HELP IN DETERMINING WHETHER TH E ACCOUNTS OF THE ASSESSEE ARE CORRECT OR COMPLETE. HOWEVER, UNLESS THERE IS SOMET HING MORE TO SHOW THAT THE ENTIRES IN THE BOOKS OF ACCOUNTS WERE NOT CORRECT O R COMPLETE, AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. OM OVERSEAS (SUPRA), FOR THE MERE ABSENCE OF STOCK REGISTER, THE AO CANN OT REJECT THE BOOK OF RESULTS OF THE ASSESSEE. 1.7 HOWEVER, IN THE PRESENT CASE, IT IS CLEAR THAT THE COMPLETE DETAILS OF OPENING AND CLOSING STOCK OF CONSUMABLES AND SEMI F INISHED GOODS WERE NOT FURNISHED BEFORE THE A.O. THE APPELLANTS CONTENTIO N THAT THE DETAILS BEING VOLUMINOUS WERE NOT MAINTAINED CANNOT TAKE AWAY FRO M ITS RESPONSIBILITY TO 8. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 SHOW THAT CLOSING STOCK AND OPENING STOCK WERE CORR ECTLY VALUED. BOTH THE OPENING AND CLOSING STOCK GO INTO THE PREPARATION O F THE TRADING ACCOUNT OF THE ASSESSEE, WHICH IN TURN DETERMINES THE INCOME OF TH E ASSESSEE. THE ASSESSEE HAS CONCEDED THAT EVEN THE LIST OF THESE ITEMS COUL D NOT BE PREPARED AND ONLY AN ESTIMATE WAS MADE. THE ADMISSION BY THE APPELLAN T SUPPORTS THE AOS CONTENTION THAT THE STOCK OF THE ASSESSEE WAS VALUE D, AT LEAST TO SOME EXTENT, ON ESTIMATE WITHOUT PHYSICAL MEASUREMENT. AS POINTED O UT BY THE AO, THE FACT THAT SUCH A SYSTEM HAS BEEN FOLLOWED EVEN IN THE PAST CA NNOT TAKE AWAY FROM THE A.O THE RIGHT TO DETERMINE THE CORRECT INCOME OF TH E ASSESSEE. IT IS ALSO NOTEWORTHY THAT THE ASSESSEE HAS BEEN SHOWING ALMOS T THE SAME GP RATE FOR THE PAST THREE YEARS. IT HAS BEEN CONTENDED THAT THE VA LUATION OF UNIVERSAL BRACKET AS ON 31.03.2006 WAS INADVERTENTLY TAKEN AT HIGHER FIGURE, WHICH HAD NOW BEEN CORRECTED TO THE CORRECT FIGURE. THIS SUPPORTS THE AOS CONCLUSION THAT THE VALUE OF CLOSING STOCK ADOPTED BY THE ASSESSEE IS TO ENSU RE A CONSTANT GP RATE IN ITS ANNUAL INCOME TAX RETURNS, WHICH HAVE NO RELATION W ITH ACTUAL INCOME OF THE ASSESSEE. IT IS INCOME TAX RETURNS, WHICH HAVE NO R ELATION WITH ACTUAL INCOME OF THE ASSESSEE. IT IS DIFFICULT TO BELIEVE THAT THE A SSESSEE, WHILE VALUING EACH ITEM OF FINISH PRODUCT AT SALE PRICE LESS GP RATE, WOULD VALUE UNIVERSAL BRACKETS AT HIGH RATE OF RS.10/- PER PC FOR THE PURPOSE OF VALU ATION. IT IS ALSO SEEN THAT THE AOS OBSERVATION THAT MANY PAYMENT VOUCHERS FOR PAY MENT OF WAGES AND LABOUR CHARGES WERE NOT SUPPORTED BY SIGNATURES OF THE PAR TIES CONCERNED. IN THIS REGARD THE APPELLANT CONTENDED THAT IT WAS MAINTAIN ING WAGES REGISTER. HOWEVER, ONLY THE MAINTENANCE OF WAGES REGISTER WIT HOUT PROPER EVIDENCE OF PAYMENT MADE TO THE PERSONS CONCERNED, WILL NOT JUS TIFY THE EXPENDITURE IN ITS ENTIRETY. IN VIEW OF THE DEFICIENCY IN RESPECT OF P AYMENT OF WAGES AND LABOUR CHARGES AS WELL AS THE ABSENCE OF PARTICULARS OF SE MI FINISHED GOODS AND CONSUMABLES IN THE OPENING AND CLOSING STOCK AND TH E INCORRECT MANNER OF VALUING THE CLOSING STOCK OF FINISHED GOODS. I AM O F THE OPINION THAT THE AOS OBSERVATIONS THAT BOOKS OF ACCOUNTS WERE NOT CORREC T OR COMPLETE, IS CORRECT. THE REJECTION OF BOOKS RESULTS BY THE AO IS, THEREF ORE, UPHELD. 1.8 THE APPELLANT HAS CONTENDED THAT A PROPER SHOW CAUSE FOR ESTIMATING THE INCOME WAS NOT GIVEN. IT IS SEEN THAT THE AO MA DE KNOWN HER INTENTION OF REJECTION OF BOOK RESULTS BASED ON THE DISCREPANCIE S NOTED BY HER AND POINTED TO 9. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 THE APPELLANT. THE ASSESSMENT RECORDS ALSO SHOWS TH AT IN THE HEARING HELD ON 5.12.2008, THE LEARNED AR FOR THE APPELLANT SUBMITT ED THAT HE HAD NOTHING FURTHER TO STATE IN THE MATTER OF THE DISCREPANCIES POINTED OUT BY THE A.O. UNDER THE CIRCUMSTANCES, I AM OF THE VIEW THAT THE AO WAS JUSTIFIED IN MAKING AN ESTIMATED ADDITION TO THE TRADING ACCOUNT AFTER REJ ECTING THE BOOK RESULTS. THE AO HAS MADE AN ADDITION RS.25,40,000/- TO THE TRADI NG ACCOUNT ON ACCOUNT OF THE VARIOUS DEFICIENCIES POINTED OUT BY HER AFTER R EJECTING THE BOOKS RESULTS. THIS AMOUNTS TO A LITTLE LESS THAN 1% ADDITION TO T HE GP RATE. IT IS, THEREFORE, SEEN THAT THE AO HAS NOT DISPUTED THE APPELLANTS C ONTENTION THAT THE ITEM UNIVERSAL BRACKET SHOULD BE VALUED AT THE RATE OF RS.4 PER PC BASED ON THE SALE PRICE OF THE ITEM BOTH IN FINANCIAL YEAR 2004- 05 AND 2005-06. THE AOS OBJECTION IS THAT THE PROFIT OF THE YEAR HAS BEEN D EPRESSED BY MORE THAN RS.10 LACKS ON ACCOUNT OF THE LOWER VALUATION OF THIS ITE M FORM THE VALUE SHOWN IN THE OPENING STOCK. THE AOS CONTENTION IS CERTAINLY VER Y RELEVANT. THE ACCEPTED METHOD OF VALUATION OF CLOSING STOCK IS EITHER AT C OST OR AT MARKET PRICE, WHICHEVER IS LOWER. THE APPELLANT HAS APPARENTLY VA LUED CERTAIN STOCK AT MORE THAN THE COST OR THE MARKET PRICE AS ON 31-03-2005, BUT HAS REDUCED THE VALUATION OF THIS ITEM TO THE ACCEPTED METHOD AS ON 31-03-2006. THE NET EFFECT IS THAT THE INCOME FOR THE YEAR ENDED 31-03-2005 HA S GONE UP BY MORE THAN RS.10 LACKS AND HAS BEEN DEPRESSED BY THE SAME AMOU NT IN THE FINANCIALYEAR 2005-06. NOW, NORMALLY THE VALUE OF BOTH THE OPENIN G AND CLOSING STOCK SHOULD BE TAKEN AT THE CORRECT RATES TO ARRIVE AT CORRECT INCOME OF THE ASSESSEE. THIS WOULD, HOWEVER, IN THE PRESENT CASE, REQUIRE REVALU ATION OF THE OPENING STOCK AS ON 31-3-2005 WHICH WOULD, IN TURN, INVOLVE RECOMPUT ING THE INCOME FOR ASSESSMENT YEAR 2005-06. IN THE CASE OF V.K.J. BUIL DERS AND CONTRACTORS (P) LTD. VS. CIT 228 CTR (SC) 143, THE HONBLE APEX COU RT HAVE HELD THAT THE CLOSING STOCK OF ONE YEAR HAD NECESSARILY TO BE THE OPENING STOCK OF THE ASSESSEE OF THE SUBSEQUENT YEAR. SINCE THE VALUE OF CLOSING STOCK AS ON 31-3-2005 HAS BEEN ACCEPTED, THE SAME HAS TO BE TAKEN THE VALUE O F OPENING STOCK AS ON 1-4- 2005. THE RATE OF RS.4 PER PC APPLIED BY THE APPELL ANT FOR VALUING THE CLOSING STOCK HAS NOT BEEN SHOWN BY THE AO TO BE INCORRECT AS PER THE NORMAL SYSTEM OF VALUING THE STOCK. UNDER THE CIRCUMSTANCES, I AM OF THE OPINION THAT THE HIGHER VALUE ADOPTED ON 31-3-2005 HAS ONLY RESULTED IN SHI FTING THE INCOME OF ASST. 10. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 YEARS 2006-07 TO THE INCOME OF ASST. YEAR 2005-06 A ND SHOULD NOT CALL FOR ANY ADDITION TO THE INCOME OF THE ASSESSEE IN THE PRESE NT YEAR. 1.9 THE APPELLANTS CONTENTION THAT TWO COMPARABLE CASES HAD BEEN QUOTED BY THE AO WITHOUT CONFRONTING IT WITH THE SAME IS N OT MATERIAL, SINCE THE AO HAS NOT USED THOSE RATES FOR COMPUTING THE INCOME O F THE ASSESSEE. NEVERTHELESS, IN VIEW OF THE FACT THAT THE VALUATIO N OF PART OF CLOSING AND OPENING STOCK IS ABSOLUTELY UNVERIFIABLE, AND PART OF THE EXPENDITURE ON WAGES/LABOUR CHARGES IS NOT BACKED BY PROPER VOUCHE RS, THE TRADING RESULTS OF THE ASSESSEE ARE NOT FULLY VERIFIABLE AND CANNOT BE ACCEPTED AS CORRECT. THESE FACTS, WHEN JUXTAPOSED WITH THE ABSENCE OF THE CONS UMPTION AND PRODUCTION REGISTER, SHOW THAT THE ACCOUNTS OF THE ASSESSEE AR E NOT RELIABLE. FIGURES OF YIELD AND WASTAGE IN THE PRODUCTION PROCESS ARE ALSO NOT AVAILABLE. THE GP RATE HAS BEEN MAINTAINED CONSTANT, AT LEAST, BY ADJUSTING TH E VALUE OF CLOSING STOCK. THESE ATTEMPTS AT MAINTAINING CONSTANT GP RATE INDI CATE AN EFFORT ON THE PART OF APPELLANT NOT TO REFLECT THE CORRECT STATE OF ITS T RADING RESULTS. UNDER THE CIRCUMSTANCES, CONSIDERING THE DEFECTS IN THE WAGES /LABOUR ACCOUNT AND THE UNVERIFIABILITY OF VALUATION OF PART OF THE STOCK, AN ADDITION OF RS.7.50 LACS IS SUSTAINED OUT OF THE ADDITION OF RS.25,40,000/- MAD E BY THE AO. GROUND NO.1 OF APPEAL IS PARTLY ALLOWED. 9. REGARDING DISALLOWANCE OUT OF FOREIGN TRAV ELING EXPENSES. I HAVE CONSIDERED THE RIVAL CONTENTION CAREFULLY, THE APPELLANTS CONTENTION THAT NO DISALLOWANCE COULD BE MADE OUT OF FOREIGN TRAVEL EXPENDITURE AS IT WAS SUBJECT TO FRINGE BENEFIT TAX IS NOT ACCEPTED. PAYM ENT OF FBT DOES NOT GIVE A LICENSE TO CLAIM DEDUCTION OF EXPENDITURE WHICH IS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE APPELLANTS CONTENTION THAT THE EXPENDITURE ON THE PARTNERS FAMILY MEMBERS WAS BORNE ENTIRELY BY THEIR RELATIVES LIVING ABROAD DOES NOT SOUND CONVINCING AND IS AGAINST NORMAL HUM AN PROBABILITY. THE PARTNERS OF THE ASSESSEE ARE FAIRLY WELL TO DO BY L OCAL STANDARDS AND, NORMALLY, WOULD NOT BE DEPENDENT ON THEIR RELATIVES FOR EVERY SMALL THING, EVEN IF IT IS ACCEPTED THAT FAMILY MEMBERS STAYED WITH THE RELATI VES ALL THE TIME DURING THE FOREIGN TRAVEL. THIS ALSO HAS TO BE VIEWED IN THE C ONTEXT OF FACT THAT NO PARTICULARS AND NO BILLS/VOUCHERS OF ACTUAL UTILIZA TION OF FOREIGN CURRENCY BY THE 11. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 PARTNERS ON FOREIGN TOURS HAS BEEN FURNISHED. THE C ONTENTION THAT IT WAS IMPRACTICAL TO MAINTAIN ALL THE BILLS/VOUCHERS ON F OREIGN TOUR IS TOO SIMPLE AN EXPLANATION CONSIDERING THE AMOUNT OF FOREIGN CURRE NCY SPENT BY THE ASSESSEE AND THE NEED, FOR PURPOSE OF INCOME TAX, TO GIVE SU PPORTING EVIDENCE IN RESPECT OF CLAIM OF EXPENDITURE. THE HONBLE JURISDICTIONAL ITAT HAVE UPHELD DISALLOWANCE OF VARYING PERCENTAGES OF FOREIGN CURR ENCY EXPENDITURE DEPENDING UPON FACTS OF THE CASE. IN THE CASE OF ACIT VS. ARC HIES INTERNATIONAL ITA NO. 458 (ASR)/2004 RELIED UPON BY THE AO, THE HONBLE ITAT HAVE UPHELD THE DISALLOWANCE OF 40% OF THE FOREIGN CURRENCY EXPENDI TURE WHEREIN SOME OTHE DECISIONS RELIED UPON BY THE APPELLANT LOWER DISALL OWANCE HAD BEEN UPHELD. THE DECISIONS RELIED UPON BY THE APPELLANT ARE NOT OF T HE HONBLE JURISDICTIONAL ITAT. DISALLOWANCE OF EXPENDITURE ON ESTIMATE BASIS IS ESSENTIALLY A MATTER OF FACT AND NO HARD AND FAST RULE CAN BE LAID DOWN. I AGREE WITH THE AO THAT, CONSIDERING THE QUANTUM OF THE EXPENDITURE; THE FAC T THAT THE FAMILY MEMBERS TRAVELED WITH PARTNER OF ASSESSEE FIRM; THE FACT TH AT NO FOREIGN EXCHANGE WAS STATED TO HAVE BEEN USED FOR THE EXPENDITURE IN RES PECT OF FAMILY MEMBERS OF THE PARTNER; AND THE FACT THAT NO BILLS/VOUCHERS IN RESPECT OF UTILIZATION OF FOREIGN EXCHANGES HAVE BEEN FURNISHED/PRODUCED, DIS ALLOWANCE OUT OF FOREIGN EXCHANGE EXPENDITURE CLAIMED BY THE ASSESSEE FIRM I S CALLED FOR. IN THE FACTS OF THE CASE, I WOULD ESTIMATE SUCH EXPENDITURE AT 25% OF THE FOREIGN EXCHANGE UTILIZED BY THE PARTNERS IN PLACE OF 40% ESTIMATED BY THE AO. HOWEVER, IN RESPECT OF THE TICKET/VISA EXPENSES OF THE PARTNER, SINCE THE PARTNER HAD GONE ABROAD ADMITTED FOR BUSINESS PURPOSES, THE DISALLOW ANCE OF 15% OUT OF THESE EXPENSES IS NOT CALLED FOR AND IS DIRECTED TO BE DE LETED. THE AO IS DIRECTED TO COMPUTE THE DISALLOWANCE ACCORDINGLY, GROUND NO.2 O F APPEAL IS PARTLY ALLOWED. 10. DISALLOWANCE OF INSURANCE PREMIUM REGARDING KEYMAN INSURANCE POLICY, THE LEARNED CIT( A) HAS DISALLOWED THE CLAIM OF ASSESSEE IN RESPECT OF KEYMAN INSURANC E POLICY BY FOLLOWING HIS EARLIER ORDER IN ITA NO.516 IN THE CASE OF AMBIKA O VERSEAS & OTHERS FOR ASST. 12. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 YEAR 2006-07. THE DETAILED FINDINGS ARE RECORDED IN PARA 3.3 TO 3.13 OF HIS ORDER. 11. DISALLOWANCE ON ACCOUNT OF CERTAIN EXPENSES. 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT CAREFULLY. THE APPELLANTS CONTENTION THAT THERE WAS HARDLY ANY UN SIGNED VOUCHER IS NOT ACCEPTED, SINCE IN THE ORDER SHEET NOTING DATED 5-1 2.2008 THE A.O HAS NOTED AS UNDER: IT WAS SAID THAT WAGES, LABOUR CHARGES, SALARY AN D LABOUR WELFARE ARE PAID MAINLY IN CASH AND ARE NOT ENTIRELY VERIFIABLE BEING SUPPORTED ONLY BY SELF MADE VOUCHERS, WHICH ARE NOT EVEN PROPERLY SIGNED. THE AFORESAID ORDER SHEET NOTING HAS BEEN SIGNED BY THE ASSESSEES COUNSEL SH. BRIJ AGGARWAL, CA WHO ATTENDED THE ASSESSMENT PROCE EDINGS. NO FURTHER CLARIFICATION ON THIS ISSUE WAS SUBMITTED BEFORE TH E A.O ON THE NEXT DATE OF HEARING I.E. 8-12-2008. HENCE, THE AOS CONTENTION, THAT THE AFORESAID EXPENSES WERE THROUGH CASH AND THROUGH SELF PAID VOUCHERS MA NY OF WHICH WERE NOT SIGNED PROPERLY, HAS BEEN ACCEPTED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. 4.4 THE APPELLANTS CONTENTION THAT AFTER REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATING THE INCOME, NO FURTHER ADDITION COULD BE MADE IS ALSO NOT ACCEPTED. AMONG THE DECISIONS OF THE HONBLE JURISDICTIONAL H IGH COURT REIED UPON BY THE APPELLANT, IN THE CASE REPORTED IN 296 ITR 324 THE AO HAD ESTIMATED THE GP BY ADOPTING THE GP RATE OF PROCEEDING YEAR. HE ALSO PR OPOSED TO DISALLOW U/S 40A(3) CASH PAYMENTS FOR PURCHASE OF GOODS SINCE EV IDENCE HAD BEEN FOUND DURING THE COURSE OF SEARCH THAT THE ASSESSEE WAS M AKING UNACCOUNTED PURCHASES IN CASH. IT WAS UNDER THESE CIRCUMSTANCES THAT THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT ONCE GP HAD BEE N ESTIMATED, NO FURTHER ADDITION WAS REQUIRED TO BE MADE U/S 40A(3). THE DI SALLOWANCE IN THIS CASE WAS PROPOSED TO BE MADE IN RESPECT OF PURCHASE OF GOODS WHICH FOUND PART OF TRADING ACCOUNT ON WHICH THE GP RATE WAS APPLIED BY THE AO. IN THE CASE REPORTED IN 302 ITR 246, THE HONBLE JURISDICTIONAL HIGH COURT UPHELD THE VIEW 13. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 OF THE ITAT THAT IN THE FACTS OF THE CASE NO SEPARA TE ADDITION IN RESPECT OF CASH CREDITS WAS WARRANTED AFTER THE WARRANTED AFTER THE BOOK RESULTS HAD BEEN REJECTED. THE FACTS IN THESE CASES ARE THUS DIFFERE NT THAN IN THE CASE OF THE PRESENT APPELLANT. THE AO HAS REJECTED THE BOOK RES ULTS IN RESPECT OF TRADING ACCOUNT AND HAS ESTIMATED THE GROSS PROFIT. SHE HAS NOT ESTIMATED THE NET PROFIT OF THE ASSESSEE ON THE FACTS OF THIS CASE. HENCE, I AM OF THE OPINION THAT SPECIFIC ADDITION/DISALLOWANCES COULD BE MADE IN RESPECT OF EXPENSES NOT COVERED BY TRADING/MANUFACTURING ACCOUNT OF THE ASSESSEE. 4.5 CONSIDERING THE FACTS NOTED BY THE AO, THE DISA LLOWANCE OF RS.1,50,000/- OUT OF SALARY AND LABOUR WELFARE EXPENDITURE IS UPH ELD. THE GROUND NO.4 OF APPEAL IS REJECTED 12. DISALLOWANCE UNDER SECTION 80IB. 5.1 THE AO HAS HELD THAT THE ASSESSEE WAS NOT EN TITLED TO DEDUCTION U/S 80IB SINCE AFTER EXCLUDING THE EXPORT INCENTIVES, DUTY DRAWBACK AND INTEREST THERE WAS NO INCOME ON WHICH DEDUCTION U/S 80IB COULD BE ALLOWED. THE APPELLANT HAS IN ITS SUBMISSIONS REFERRED TO THE SUBMISSIONS MADE IN EARLIER APPELLANT PROCEEDINGS. THE ISSUE IS NO LONGER RES INTEGRA IN VIEW OF THE RECENT DECISION OF HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. CIT 317 218 IN WHICH IT HAD BEEN HELD THAT DEDUCTION U/S 80IB WAS NOT ALLOWABLE IN RESPECT OF DEPB, DUTY DRAW BACK AND OTHER EXPORT INCENTIVES. THE DISALLOW ANCE U/S 80IB IS UPHELD. GROUND NO.5 OF APPEAL IS REJECTED. 13. AGGRIEVED BOTH THE PARTIES ARE IN APPEAL BEFORE US. THE LEARNED AR FIRST TOOK UP THE APPEAL OF THE ASSESSEE AND INVITED OUR ATTENTION TO THE GROUNDS OF APPEAL. THE LEARNED AR INVITED OUR ATTENTION TO THE FACTS OF THE CASE AND SUBMITTED THAT LEARNED CIT(A) HAS RESTRICTED THE AD DITION ON ACCOUNT OF GROSS PROFIT TO THE EXTENT OF RS.7,50,000/- AS AGAINST TH E ADDITION MADE BY A.O TO THE EXTENT OF RS.25,40,000/-. THE LEARNED AR SUBMITTED THAT THE ADDITION TO THE GROSS PROFIT WAS MADE BY ASSESSING OFFICER ON ACCOU NT OF NON MAINTENANCE OF 14. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 STOCK REGISTERS WHICH WAS NOT WARRANTED BY LAW AS H ELD BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. OM OV ERSEAS 173 TAXMAN 185 AND IN THE CASE OF PANDIT BROS. VS. CIT. THE LEARNED AR SUBMITTED THAT HONBLE COURT HAS HELD THAT NON MAINTENANCE OF STOCK REGIST ER CANNOT BE THE BASIS FOR REJECTION OF BOOKS RESULTS OF THE ASSESSEE. THE LEA RNED AR FURTHER SUBMITTED THAT GROSS PROFIT DECLARED BY THE ASSESSEE WAS CONS ISTENT AS COMPARED TO EARLIER THREE YEARS AND THEREFORE, ASSESSING OFFICE R SHOULD HAVE ACCEPTED THE AUDITED RESULTS AS DECLARED BY THE ASSESSEE. REGARD ING SPECIFIC MENTION OF AN ITEM NAMED UNIVERSAL BRACKET BY ASSESSING OFFICER , THE LEARNED AR SUBMITTED THAT IN FACT THERE WAS NO LOSS TO REVENUE AS THE AS SESSEE HAD DECLARED HIGHER VALUATION IN EARLIER YEAR, THEREFORE, HAD PAID EXCE SS TAXES ON INFLATED PROFITS. HE FURTHER SUBMITTED THAT ASSESSEE HAD TO VALUE ITS ST OCK AT COST OR MARKET PRICE WHICH EVER IS LOWER AND THEREFORE, THERE IS NO WRON G IN VALUING SUCH AN ITEM AT COST PRICE WHICH BY MISTAKE IN EARLIER YEAR WAS VAL UED AT A HIGHER RATE. HE SUBMITTED THAT EVIDENCE OF COST PRICE WAS FILED WIT H THE AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT THE RESULTS OF THE TWO PARTI ES RELIED UPON BY ASSESSING OFFICER IN MAKING ADDITION ON ACCOUNT OF G.P RATE W ERE NOT CONFRONTED TO THE ASSESSEE. AS REGARDS ADDITION ON ACCOUNT OF PAYMENT OF LABOUR AND WAGES, THE LEARNED AR SUBMITTED THAT COMPLETE REGISTER OF WAGE S WAS PRODUCED AND THEREFORE, THE ADDITIONS SUSTAINED BY LEANER CIT(A) WAS NOT JUSTIFIED. 14. ARGUING UPON GROUND NO.4, THE LEARNED AR SUBMIT TED THAT LEANED CIT(A) HAD UPHELD THE DISALLOWANCE ON FOREIGN CURRENCY EXP ENSES TO THE EXTENT OF 25% AS AGAINST THE 40% MADE BY ASSESSING OFFICER. THE L EARNED AR SUBMITTED THAT 15. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 IN THE CASE OF ASSESSEE ITSELF IN ASST. YEAR 2005-0 6, THE HONBLE TRIBUNAL IN ITA NO.83 WAS PLEASED TO RESTRICT SIMILAR DISALLOWANCE TO THE EXTENT OF 10% AND IN THIS RESPECT FILED A COPY OF THE SAID TRIBUNAL ORDE R. 15. ARGUING UPON GROUND NO. 5 REGARDING KEYMAN INSU RANCE POLICY, THE LEARNED AR SUBMITTED THAT SIMILAR MATTER HAS BEEN D ECIDED IN THE CASE OF M/S AMBIKA OVERSEAS WHICH HAS BEEN DECIDED IN FAVOUR OF ASSESSEE VIDE TRIBUNAL ORDER DATED 31 ST AUGUST, 2015 AND THEREFORE, THE GROUND NO.5 NEEDS TO BE ALLOWED. 16. AS REGARDS GROUND NO. 6, THE LEARNED AR SUBMITT ED THAT THE ADDITION SUSTAINED BY LEARNED CIT IS ARBITRARILY AND EXCESSI VE AND THEREFORE NEEDS TO BE ALLOWED WITHOUT PREJUDICE TO THE ABOVE ARGUMENTS. W ITHOUT PREJUDICE TO THE ABOVE ARGUMENTS THE LEARNED AR SUBMITTED THAT ONCE PROFITS WERE ESTIMATED AFTER REJECTION OF BOOKS OF ACCOUNTS, NO FURTHER AD DITION ON ACCOUNT OF EXPENSES WAS WARRANTED. 17. GROUND NO.7 REGARDING CLAIM UNDER SECTION 80IB WAS NOT PRESSED. 18. THE LEARNED DR, ON THE OTHER HAND, AS REGARDS A DDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF G.P RATE INVITED OU R ATTENTION TO THE ASSESSMENT ORDER AND SUBMITTED THAT ASSESSING OFFIC ER HAD NOTED VARIOUS DISCREPANCIES FOR WHICH THE ASSESSEE WAS UNABLE TO SUBMIT EXPLANATIONS AND THEREFORE, ASSESSING OFFICER HAD RIGHTLY REJECTED T HE BOOKS OF ACCOUNT AND HAD RIGHTLY MADE THE ADDITION ON THE BASIS G.P RATES DE CLARED BY OTHER TWO 16. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 ASSESSEES WHO WERE INVOLVED IN THE SAME LINE OF BUS INESS ACTIVITY AND THEREFORE, SHE STRONGLY RELIED UPON THE ORDER OF ASSESSING OFF ICER. AS REGARDS THE DISALLOWANCE ON ACCOUNT ON FOREIGN TRADING EXPENSES , THE LEARNED DR SUBMITTED THAT ASSESSEE WAS NOT HAVING BILLS FOR EX PENSES INCURRED IN FOREIGN EXCHANGE AND THEREFORE ASSESSING OFFICER HAD PASSED A DETAILED ORDER AND THEREFORE, ACTION OF THE LEARNED CIT IN RESTRICTING THE DISALLOWANCE TO 25% WAS NOT JUSTIFIED. AS REGARDS DISALLOWANCE ON ACCOUNT OF KEYMAN INSURANCE POLICY AND DISALLOWANCE OF OTHER EXPENSES, LEARNED DR PLAC ED HER RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 19. ARGUING UPON THE REVENUES APPEAL THE LEARNED D R SUBMITTED THAT THE LEARNED CIT(A) HAS WRONGLY ALLOWED PART RELIEF TO T HE ASSESSEE AND REITERATED HER ARGUMENTS AS WAS TAKEN BY HER IN ASSESSES APPE AL SO FAR AS RELATES TO ADDITION ON ACCOUNT OF G.P RATE AND DISALLOWANCE OF FOREIGN TRAVELING EXPENSES. THE LEARNED AR ON THE OTHER HAND, WHILE RESPONDING TO REVENUES APPEAL REITERATED HIS ARGUMENTS AS MADE IN THE APPEAL OF A SSESSEE. 20. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. AS THESE ARE CROSS APPEALS AND SO ME GROUNDS OF ASSESSEES APPEAL & REVENUES APPEAL ARE COMMON AND CAN BE DEC IDED SIMULTANEOUSLY. GROUND NO. 1& 2 IN ASSESSEES APPEAL ARE REGARDING CONFIRMATION OF PART ADDITION ON ACCOUNT OF GROSS PROFIT AND GROUND NO.1 OF REVENUES APPEAL IS AGAINST PART RELIEF ALLOWED TO ASSESSEE, THEREFORE, OUR ADJUDICATION ON THE ISSUE OF ADDITION TO GROSS PROFIT WILL DISPOSE OFF GROUND NO.1 & 2 OF ASSESSEES APPEAL 17. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 AND GROUND NO.1 IN REVENUES APPEAL. WE FIND THAT A SSESSEE HAD NOT MAINTAINED COMPLETE BOOKS OF ACCOUNT AND VOUCHERS. THE ASSESSING OFFICER HAD POINTED OUT VARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNT AND CALCULATION OF OPENING AND CLOSING STOCKS. THE ARGUMENT OF LEAR NED AR THE MERE ABSENCE OF STOCK REGISTER CANNOT LEAD TO REJECTION OF BOOKS OF ACCOUNTS IS THOUGH CORRECT BUT HERE IS A CASE WHERE NOT ONLY STOCK REGISTER WA S NOT MAINTAINED BUT THERE WERE VARIOUS DISCREPANCIES IN THE VALUATION OF OPEN ING AND CLOSING STOCK AND MOREOVER THE ASSESSING OFFICER HAS CLEARLY HELD THA T GROSS PROFIT DECLARED BY ASSESSEE IN THE PRESENT YEAR WAS LOWER AS COMPARED TO EARLIER YEARS. MOREOVER, THE ASSESSING OFFICER HAS ALSO COMPARED GROSS PROFI T RATIO OF TWO PARTIES FOR THE SAME YEAR, WHO WERE ALSO ENGAGED IN THE SIMILAR TYP E OF ACTIVITIES. THEREFORE, WE DO NOT FIND MERIT IN THE ARGUMENTS OF LEARNED AR REGARDING FURTHER RELIEF. AS REGARDS GROUND NO. 1 TAKEN BY ASSESSEE THAT NO S HOW CAUSE NOTICE WAS ISSUED IN TERMS OF PROVISIONS OF SECTION 144(1), WE FIND THAT ASSESSMENT WAS NOT COMPLETED U/S 144 AND THEREFORE, NO NOTICE WAS REQUIRED TO BE ISSUED U/S 144. THE LEARNED CIT(A) HAS VERY REASONABLY DEALT WITH ISSUE AND HAS ALLOWED APPROPRIATE RELIEF TO THE ASSESSEE AND THEREFORE, W E DO NOT INTEND TO INTERFERE WITH HIS FINDINGS. IN VIEW OF THE ABOVE GROUND NO. 1 & 2 OF THE ASSESSEES APPEAL AND GROUND NO. 1 OF REVENUES APPEAL ARE DIS MISSED. 21. GROUND NO. 3 TAKEN BY THE ASSESSEE IS TO THE FA CT THAT WHERE THE PROFITS ARE ESTIMATED, THE REVENUE AUTHORITIES CANNOT FURTH ER MAKE ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENSES. WE FIND THAT S UCH A SCENARIO OF NOT MAKING ANY FURTHER ADDITIONS ARISES ONLY IN THOSE C ASES WHERE THE NET PROFITS 18. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 ARE ESTIMATED WHEREAS HERE IS A CASE WHERE ADDITION HAS BEEN MADE TO THE GROSS PROFITS, THEREFORE, THE REVENUE AUTHORITIES W ERE JUSTIFIED IN MAKING VARIOUS OTHER ADDITIONS ON ACCOUNT OF DISALLOWANCE OF EXPENSE. IN VIEW OF ABOVE, GROUND NO.3 OF ASSESSEES APPEAL IS DISMISSE D. 22. GROUND NO. 4 OF ASSESSEES APPEAL AND GROUND NO.2 OF REVENUES APPEAL ARE ON THE SAME ISSUE OF DISALLOWANCE ON ACCOUNT OF FOREIGN EXCHANGE EXPENDITURE. THE REVENUE IS AGGRIEVED AS LEARNED CI T(A) HAD REDUCED THE DEDUCTION FROM 40% TO 25% WHEREAS THE ASSESSEE IS A GGRIEVED AS LEARNED CIT(A) HAS UPHELD THE ADDITION TO THE EXTENT OF 25% IN RESPECT OF FOREIGN CURRENCY EXPENSES. 23. WE FIND THAT IN ITA NO.83 FOR ASST. YEAR 2005-0 6 IN THE CASE OF ASSESSEE ITSELF, THE HONBLE TRIBUNAL VIDE ORDER DATED 25 TH SEPTEMBER,2009 HAD CONFIRMED THE ORDER OF CIT(A) IN RESTRICTING THE DI SALLOWANCE OF FOREIGN TRAVELING EXPENSES TO THE EXTENT OF 10%. THE FINDINGS OF TRIB UNAL ARE CONTAINED IN PARA 9 TO 9.1 OF THE SAID ORDER. WE FIND THAT THE HONBLE TRIBUNAL HAD REDUCED THE DISALLOWANCE OF FOREIGN TRAVELING EXPENSES IN THE C ASE OF EMPLOYEES OF ASSESSEE TO 10% WHEREAS IN THE CASE OF EXPENSES INCURRED BY PARTNERS, THE TRIBUNAL HAD CONFIRMED THE DISALLOWANCE TO THE EXTENT OF 10% AS UPHELD BY LEARNED CIT(A). RESPECTFULLY FOLLOWING THE ABOVE TRIBUNAL ORDER IN THE CASE OF ASSESSEE ITSELF, WE RESTRICT THE DISALLOWANCES OUT OF FOREIGN TOUR E XPENSES TO 10%. IN VIEW OF ABOVE GROUND NO.4 OF ASSESSEES APPEAL IS PARTLY AL LOWED WHEREAS GROUND NO.2 OF REVENUES APPEAL IS DISMISSED. 19. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 24. AS REGARDS GROUND NO.5 TAKEN BY ASSESSEE IN RES PECT OF DISALLOWANCE OF KEYMAN INSURANCE PREMIUM AMOUNTING TO RS.17 LACS, W E FIND THAT THE LEARNED CIT(A) HAD MADE DISALLOWANCE BY FOLLOWING HIS ORDER IN THE CASE OF AMBIKA OVEARSES. WE FIND THAT THE CASE OF AMBIKA OVERSEAS HAS BEEN DEALT WITH VIDE CONSOLIDATED TRIBUNAL ORDER DATED 31.08.2015 IN IT A NO. 45 (ASR)/2010 AND ITA NO.700(ASR)/2013 FOR ASST. YEARS 2006-07 & 2007 -08 RESPECTIVELY, WHERE THE HONBLE TRIBUNAL HAD ALLOWED THE RELIEF TO THE ASSESSEE ON ACCOUNT OF PAYMENT OF KEYMAN INSURANCE POLICY. THE RELEVANT FI NDINGS AS RECORDED BY HONBLE TRIBUNAL ARE CONTAINED IN PARA 8 TO 20 WHI CH ARE REPRODUCED BELOW. 8. LET US NOW COME BACK TO THE CORE ISSUE BEFORE U S. THE SHORT QUESTION THAT WE HAVE TO REALLY ADJUDICATE IS AS TO WHETHER THE PREMIUM OF RS 1,49,99,922 PAID ON THE KEYMAN INSURANCE POLICIE S CAN BE ALLOWED ON THE FACTS OF THIS CASE. AS TO WHAT CONSTITUTES KEY MAN INSURANCE POLICY, WE FIND GUIDANCE FROM THE EXPLANATION BELOW SECTION 10 (10D), AS IT STOOD AT THE RELEVANT POINT OF TIME, WHICH DEFINED THE KEYMA N INSURANCE POLICY AS FOLLOWS: FOR THE PURPOSES OF THIS CLAUSE, 'KEYMAN INSURANCE POLICY' MEANS A LIFE INSURANCE POLICY TAKEN BY A PERSON ON THE LIFE OF ANOTHER PERSON WHO IS OR WAS THE EMPLOYEE OF THE FI RST- MENTIONED PERSON OR IS OR WAS CONNECTED IN ANY MANN ER WHATSOEVER WITH THE BUSINESS OF THE FIRST-MENTIONED PERSON 9. VIDE FINANCE ACT 2013, THE FOLLOWING WORDS HAVE BEEN ADDED TO THIS DEFINITION- AND INCLUDES SUCH POLICY WHICH HAS BEEN ASSIGNED TO A PERSON, AT ANY TIME DURING THE TERM O F THE POLICY, WITH OR WITHOUT ANY CONSIDERATION . 10. ALL THAT IS REQUIRED FOR AN INSURANCE POLICY TO MEET THE REQUIREMENTS OF SECTION 10(10D), THEREFORE, HAS TO BE (A) IT SHOULD BE A LIFE INSURANCE POLICY; (B) IT SHOULD BE TAKEN BY THE ASSESSEE ON THE LIFE OF ANOTHER PERSON WHO IS, OR WAS, AN EMPLO YEE OF THE ASSESSEE OR IS RELATED TO THE BUSINESS OF THE ASSES SEE IS ANY MANNER. 20. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 11. DEALING WITH BOTH THE LIMBS OF THE ABOVE REQUIR EMENST, A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF S HRI NIDHI CORPORATION (SUPRA), HAS OBSERVED AS FOLLOWS: IT APPEARS THAT AFTER THE ASSESSEE HAS PURCHASED TH ESE POLICIES, IRDA CAME UP WITH CIRCULAR DATED 27TH APRIL 2005 TH AT PARTNERSHIP INSURANCE IN THE NAME OF PARTNER WILL NOT BE COVERE D UNDER KEYMAN INSURANCE BUT AS A TERM INSURANCE COVER. THUS, SUCH IRDA CIRCULAR CANNOT BE ADVERSELY VIEWED IN CASE OF THE ASSESSEE AS WHEN THE ASSESSEE HAS TAKEN THE POLICY UNDER KEYMAN INSURANC E SCHEME FROM TWO REPUTED INSURANCE COMPANIES THERE WAS NO S UCH REGULATION. THE OTHER OBJECTIONS OF THE REVENUE ARE THAT THE DEDUCTION OF THE PREMIUM UNDER KEYMAN INSURANCE CAN NOT BE ALLOWED IN THE CASE OF PARTNERSHIP FIRM, IS NOT TEN ABLE IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N B.N. EXPORTS (SUPRA), WHEREIN, IT HAS BEEN HELD THAT IF THE KEYM AN INSURANCE POLICY IS OBTAINED ON A LIFE OF A PARTNER, TO SAFEG UARD THE FIRM AGAINST A DISRUPTION OF BUSINESS, THEN THE PAYMENT FOR PREM IUM ON SUCH POLICY IS LIABLE FOR DEDUCTION AS BUSINESS EXPENDIT URE. THUS, EVEN IF A KEYMAN INSURANCE HAS BEEN TAKEN IN THE NAME OF A PARTNER BY THE PARTNERSHIP FIRM, THEN ALSO THE DEDUCTION HA S TO BE ALLOWED ON THE PAYMENT OF PREMIUM . THE OTHER MAIN OBJECTIONS OF THE LEARNED COMMISSIONER (APPEALS) HAS BEEN THAT FIRSTLY, THESE ARE NOT INSURANCE POLICY AS SUCH BUT ARE MAINLY FOR CAPITAL APPRECIATION UNDER THE INVESTMENT SCHEME AND SECOND LY, THE ASSESSEE HAS NOT RECEIVED THE MATURITY SUM BUT IT H AS BEEN ASSIGNED TO THE PARTNERS, THEREFORE, THE ASSESSEE C ANNOT BE GIVEN DEDUCTION FOR ANY PREMIUM PAID. INSOFAR AS THE FIRS T OBJECTION OF THE LEARNED COMMISSIONER (APPEALS) IS CONCERNED, WE DEC LINED TO AGREE WITH THIS CONCLUSION, BECAUSE ONCE THE ASSESSEE HAS BOUGHT A POLICY UNDER A LIFE INSURANCE SCHEME, THEN WHETHER THE INSURANCE COMPANY IS MAKING INVESTMENT IN MUTUAL FU NDS FOR CAPITAL APPRECIATION OR UNDER ANY OTHER INVESTMENT SCHEME, WILL NOT MAKE ANY MATERIAL DIFFERENCE. (EMPHASIS, BY UNDERLINING, SUPPLIED BY US) 12. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS S O EXPRESSED BY OUR DISTINGUISHED COLLEAGUES. AS LONG AS A POLI CY IS AN INSURANCE POLICY, WHETHER IT INVOLVES A CAPITAL APPRECIATION OR IS UNDER ANY OTHER INVESTMENT SCHEME, IT MEETS THE TESTS LAID DO WN UNDER SECTION 10(10D). 21. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 13. THE REQUIREMENT OF PURE INSURANCE POLICY IS SOM ETHING WHICH IS NOT LAID DOWN BY THE STATUTE. YET, IT IS THIS WHICH HAS BEEN INFERRED BY THE AUTHORITIES BELOW. 14. EVEN IF SUCH AN INFERENCE IS DESIRABLE, AS LONG AS IT DOES NOT EMERGE FROM THE PLAIN WORDS OF THE STATUTE, IT CANN OT BE OPEN TO SUPPLY THE SAME. THE CONCEPTS OF TERM POLICY, PURE LIFE POLICY AND THE IRDA GUIDELINES FIND NO MENTION IN THE STATUTORY PR OVISIONS. BUT EVEN IF THESE CONCEPTS OUGHT TO BE INCORPORATED IN THIS STATUTORY PROVISION OF THE INCOME TAX ACT TO MAKE IT MORE MEANINGFUL AN D WORKABLE, IT CANNOT BE OPEN TO ANY JUDICIAL FORUM TO SUPPLY THES E OMISSIONS. RELYING UPON HONBLE SUPREME COURTS JUDGMENT IN TH E CASE OF TARULATA SHYAM VS CIT [(1977) 108 ITR 245 (SC)], A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF TATA TEA LIMITED VS JCIT [(2003) 87 ITD 351 (CAL)] , HAS EXPLAINED THIS PRINCIPLE AS FOLLOWS: 8. CASUS OMISSUS, WHICH BROADLY REFERS TO THE PRINC IPLE THAT A MATTER WHICH HAS NOT BEEN PROVIDED IN THE ST ATUTE BUT SHOULD HAVE BEEN THERE, CANNOT BE SUPPLIED BY U S, AS, TO DO SO WILL BE CLEARLY BEYOND THE CALL AND SCOPE OF OUR DUTY WHICH IS ONLY TO INTERPRET THE LAW AS IT EXIST S. HONBLE SUPREME COURT, IN THE CASE OF SMT. TARULATA SHYAM VS. CIT 1977 CTR (SC) 275 : (1977) 108 ITR 34 5 (SC) AT P 356 HAS OBSERVED : 'WE HAVE GIVEN ANXIOUS THOUGHT TO THE PERSUASIVE ARGUMENTS..... (WHICH) IF ACCEPTED, WILL CERTAINLY SOFTEN THE RIGOUR OF THIS EXTREMELY DRASTIC PROVISION AND BRING IT MORE IN CONFORMITY WITH LOGIC AND EQUITY. BUT TH E LANGUAGE OF SECTIONS........ IS CLEAR AND UNAMBIGUO US. THERE IS NO SCOPE FOR IMPORTING INTO THE STATUTE TH E WORDS WHICH ARE NOT THERE. SUCH INTERPRETATION WOUL D BE, NOT TO CONSTRUE, BUT TO AMEND THE STATUTE. EVEN IF THERE BE A CASUS OMISSUS, THE DEFECT CAN BE REMEDIED ONLY BY LEGISLATION AND NOT BY JUDICIAL INTERPRETATION..... .TO US, THERE APPEARS NO JUSTIFICATION TO DEPART FROM NORMA L RULE OF CONSTRUCTION ACCORDING TO WHICH THE INTENTION OF LEGISLATURE IS PRIMARILY TO BE GATHERED FROM THE WO RDS USED IN THE STATUTE. IT WILL BE WELL TO RECALL THE WORDS OF ROWLATT. J. IN CAPE BRANDY SYNDICATE VS. IRC (1921) 1 KB 64 (KB) AT P. 71, THAT : '........... IN A TAXING A CT ONE HAS TO LOOK AT MERELY WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE REA D IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE 22. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 LANGUAGE USED.' ONCE IT IS SHOWN THAT THE CASE OF T HE ASSESSEE COMES WITHIN THE LETTER OF LAW, HE MUST BE TAXED, HOWEVER GREAT THE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND TO BE.' EVEN IN THE CASE OF CIT VS. NATIONAL TAJ TRADERS (S UPRA), RELIED UPON BY THE ASSESSEE, THEIR LORDSHIPS OF HON BLE SUPREME COURT HAVE REFERRED TO, WITH APPROVAL, MAXW ELL ON INTERPRETATION OF STATUTES OBSERVATION THAT 'A CASE NOT PROVIDED FOR IN A STATUTE IS NOT TO BE DEALT WI TH MERELY BECAUSE THERE SEEMS NO GOOD REASON WHY IT SH OULD HAVE BEEN OMITTED, AND THAT THE OMISSION APPEARS IN CONSEQUENCE TO HAVE BEEN UNINTENTIONAL'. THEIR LORD SHIPS THEN OBSERVED THAT 'IN OTHER WORDS, UNDER THE FIRST PRINCIPLE, A CASUS OMISSUS CANNOT BE SUPPLIED BY TH E COURT EXCEPT WHEN REASON FOR IT IS FOUND TO BE IN T HE FOUR CORNERS OF THE STATUTE ITSELF BUT AT THE SAME TIME A CASUS OMISSUS SHOULD NOT BE READILY INFERRED AND FOR THAT PURPOSE ALL THE PARTS OF A STATUTE OR SECTION MUST BE CONSTRUED TOGETHER AND EVERY CLAUSE OF A SECTION SH OULD BE CONSTRUED WITH REFERENCE TO THE CONTEXT AND OTHE R CLAUSES THEREOF SO THAT THE CONSTRUCTION TO BE PUT ON A PARTICULAR PROVISION MAKES A CONSISTENT ENACTMENT O F THE WHOLE STATUTE'. 15. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT T HAT THE IRDA GUIDELINES, NO MATTER HOW RELEVANT AS THESE GUIDELI NES MAY BE, HAVE NO ROLE TO PLAY IN THE INTERPRETATION OF THE STATUT ORY PROVISIONS. IRDA IS A BODY CONTROLLING THE INSURANCE COMPANIES AND I TS GUIDANCE IS RELEVANT ON HOW THE INSURANCE COMPANIES SHOULD COND UCT THEIR BUSINESS. BEYOND THIS LIMITED ROLE, THESE GUIDELINE S DO NOT AFFECT HOW THE PROVISIONS OF THE INCOME TAX ACT ARE TO BE CONSTRUED. WHENEVER THE PROVISIONS OF THE OTHER STATUTUTES ARE TO BE TAKEN INTO ACCOUNT, FOR INTERPRETING THE PROVISIONS OF THE INC OME TAX ACT, THE INCOME TAX ACT SPECIFICALLY PROVIDES SO, SUCH AS IN THE CASE OF EXPLANATION 2 TO SECTION 2 (42A) WHICH PROVIDES THA T THE EXPRESSION 'SECURITY' SHALL HAVE THE MEANING ASSIGN ED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956 )]. IT CANNOT, THEREFORE, BE OPEN TO US TO TURN TO THE GUIDELINES OF THE IRDA TO INTERPRET THE PROV ISIONS OF THE INCOME TAX ACT, 1961. IN THIS VIEW OF THE MATTER, LEARNED ASSESSING OFFICERS OBSERVATIONS TO THE EFFECT THAT, THAT THE POLICY TAKEN IS KEYMAN AS PER DEFINITION GIVEN IN THE INCOME TAX ACT, I.E. PO LICY TAKEN BY A PERSON ON THE LIFE OF ANOTHER PERSON AND ALSO FULFILLING THE TERMS 23. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 AND CONDITIONS LAID DOWN BY IRDA IN THIS REGARD , NECESSITY AND EXPEDIENCY OF THE PERSON BEING KEYMAN AND THE POLIC Y TAKEN FOR THE BENEFIT OF THE ASSESSEE FIRM (EMPHASIS, BY UNDERLING, SUPPLIED BY THE AO) ARE DEVOID OF ANY LEGALLY SUSTAINABLE MERI TS. THE FULFILMENT OF IRDA TERMS AND CONDITIONS IS WHOLLY ALIEN TO THE PR ESENT CONTEXT. AS FOR THE POLICY BEING TAKEN FOR THE BENEFIT OF THE ASSESSEE FIRM, AS LONG AS IT IS FOR THE PURPOSE OF TAKING AN INSURANCE POLICY ON THE LI FE OF A PERSON WHO IS RELATED TO THE FIRM, THE SAME CANNOT BE CALLED INTO QUESTION EITHER. WE HAVE ALSO NOTED THAT THE AUTHORITIES BELOW HAVE PAID A L OT OF EMPHASIS ON THE CONTENTION THAT THE INSURANCE POLICIES IN QUESTION WERE NOT TERMED AS KEYMAN INSURANCE POLICIES BUT NOTHING TURNS ON THAT ASPECT, EVEN IF THAT BE SO, EITHER. THE KEYMAN INSURANCE POLICY IS A DEFINE D CONCEPT AND AS LONG AS IT MEETS THE REQUIREMENTS OF THIS DEFINITION, TH E TERMINOLOGY GIVEN BY THE INSURERS HAVE NO RELEVANCE FOR THE PURPOSES OF THE INCOME TAX ACT. ALL THAT IS NECESSARY IS THAT IT SHOULD BE A LIFE INSURANCE POLICY, WHETHER PURE LIFE INSURANCE POLICY OR NOT- AS SUCH CRITERION IS NOT S ET OUT ANYWHERE IN THE STATURE, AND IT SHOULD BE TAKEN ON THE LIFE OF A PE RSON WHO IS, OR HAS BEEN, AN EMPLOYEE OF THE ASSESSEE OR ANY OTHER PERSON WHO IS OR WAS CONNECTED IN ANY MANNER WHATSOEVER WITH THE BUSINESS OF THE A SSESSEE. THESE CONDITIONS ARE CLEARLY SATISFIED ON THE FACTS OF TH E CASE BEFORE US. 16. A LOT OF EMPHASIS HAS BEEN PLACED BY THE AUTHOR ITIES BELOW ON THE CIRCULARS ISSUED BY THE IRDA. IT MAY, THEREFORE, B E APPROPRIATE TO BRIEFLY DEAL WITH THE IRDA AND THE IMPACT OF THE CIRCULARS ISSUED BY THE IRDA. IRDA, I.E. INSURANCE REGULATORY AND DEVELOPMENT AUT HORITY, IS SET UP UNDER THE INSURANCE REGULATORY AND DEVELOPMENT ACT 1999. SECTION 14 OF THE INSURANCE REGULATORY AND DEVELOPMENT ACT, 1999, DESCRIBES THE DUTIES, POWERS AND FUNCTIONS OF THE IRDA AS FOLLOWS : 14. DUTIES, POWERS AND FUNCTIONS OF AUTHORITY. (1) SUBJECT TO THE PROVISIONS OF THIS ACT AND ANY O THER LAW FOR THE TIME BEING IN FORCE, THE AUTHORITY SHALL HAVE THE DUTY T O REGULATE, PROMOTE AND ENSURE ORDERLY GROWTH OF THE INSURANCE BUSINESS AND RE-INSURANCE BUSINESS. (2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROV ISIONS CONTAINED IN SUB-SECTION (1), THE POWERS AND FUNCTIONS OF THE AU THORITY SHALL INCLUDE, - (A) ISSUE TO THE APPLICANT A CERTIFICATE OF REGIST RATION, RENEW, MODIFY, WITHDRAW, SUSPEND OR CANCEL SUCH REGISTRATION; (B) PROTECTION OF THE INTERESTS OF THE POLICY HOLD ERS IN MATTERS CONCERNING ASSIGNING OF POLICY, NOMINATION BY POLIC Y HOLDERS, INSURABLE INTEREST, SETTLEMENT OF INSURANCE CLAIM, SURRENDER VALUE OF POLICY AND OTHER TERMS AND CONDITIONS OF CONTRACTS OF INSURANCE; (C) SPECIFYING REQUISITE QUALIFICATIONS, CODE OF C ONDUCT AND PRACTICAL TRAINING FOR INTERMEDIARY OR INSURANCE INTERMEDIARI ES AND AGENTS; 24. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 (D) SPECIFYING THE CODE OF CONDUCT FOR SURVEYORS A ND LOSS ASSESSORS; (E) PROMOTING EFFICIENCY IN THE CONDUCT OF INSURAN CE BUSINESS; (F) PROMOTING AND REGULATING PROFESSIONAL ORGANISA TIONS CONNECTED WITH THE INSURANCE AND RE-INSURANCE BUSINESS; (G) LEVYING FEES AND OTHER CHARGES FOR CARRYING OU T THE PURPOSES OF THIS ACT; (H) CALLING FOR INFORMATION FROM, UNDERTAKING INSP ECTION OF, CONDUCTING ENQUIRIES AND INVESTIGATIONS INCLUDING AUDIT OF THE INSURERS, INTERMEDIARIES, INSURANCE INTERMEDIARIES AND OTHER ORGANISATIONS CO NNECTED WITH THE INSURANCE BUSINESS; (I) CONTROL AND REGULATION OF THE RATES, ADVANTAGE S, TERMS AND CONDITIONS THAT MAY BE OFFERED BY INSURERS IN RESPE CT OF GENERAL INSURANCE BUSINESS NOT SO CONTROLLED AND REGULATED BY THE TAR IFF ADVISORY COMMITTEE UNDER SECTION 64U OF THE INSURANCE ACT, 1938 (4 OF 1938); (J) SPECIFYING THE FORM AND MANNER IN WHICH BOOKS OF ACCOUNT SHALL BE MAINTAINED AND STATEMENT OF ACCOUNTS SHALL BE RE NDERED BY INSURERS AND OTHER INSURANCE INTERMEDIARIES; (K) REGULATING INVESTMENT OF FUNDS BY INSURANCE CO MPANIES; (L) REGULATING MAINTENANCE OF MARGIN OF SOLVENCY; (M) ADJUDICATION OF DISPUTES BETWEEN INSURERS AND INTERMEDIARIES OR INSURANCE INTERMEDIARIES; (N) SUPERVISING THE FUNCTIONING OF THE TARIFF ADVI SORY COMMITTEE; (O) SPECIFYING THE PERCENTAGE OF PREMIUM INCOME OF THE INSURER TO FINANCE SCHEMES FOR PROMOTING AND REGULATING PROFES SIONAL ORGANISATIONS REFERRED TO IN CLAUSE (F); (P) SPECIFYING THE PERCENTAGE OF LIFE INSURANCE BU SINESS AND GENERAL INSURANCE BUSINESS TO BE UNDERTAKEN BY THE INSURER IN THE RURAL OR SOCIAL SECTOR; AND (Q) EXERCISING SUCH OTHER POWERS AS MAY BE PRESCRI BED. 17. CLEARLY, THEREFORE, IRDA IS PRIMARILY TO REGUL ATE, PROMOTE AND ENSURE ORDERLY GROWTH OF THE INSURANCE BUSINESS AND RE-INSURANCE BUSINESS. IN DOING SO, AS EVIDENT FROM SECTION 14( 2)(A) TO (Q) ABOVE, IT REGULATES THE CONDUCT OF THE SERVICE PROVIDERS I N THE BUSINESS OF THE INSURANCE. IT DOES NOT, AND CANNOT, REGULATE TH E CONDUCT OF THE POLICY HOLDERS. AS IN SECTION 14(2)(B), IF AT ALL I T HAS ANYTHING TO DO WITH THE POLICYHOLDERS, IT IS PROTECTION OF INTERES T OF THE POLICYHOLDERS. IT IS IN THIS BACKGROUND THAT WE HAVE TO SEE THE CI RCULARS ISSUED BY THE IRDA. IN THE CIRCULAR DATED 27 TH APRIL, 2005, THE IRDA STATES AS FOLLOWS: THE AUTHORITY IS AWARE THAT SOME OF THE ABERRATIONS HAVE TAKEN PLACE IN THE MONTH OF MARCH 2005 IN THE MATTE R OF SALE OF KEYMAN INSURANCE . 25. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 WE SHALL CONDUCT A DETAILED EXAMINATION OF THE POLI CIES MARKETED IN MARCH 2005 AND SHALL COME UP WITH DETAI LED GUIDELINES ON THE SALE OF KEYMAN INSURANCE AT THE A PPROPRIATE TIME. IN THE MEANTIME, IT HAS BEEN DECIDED THAT ONL Y TERM INSURANCE POLICY WILL HENCEFORTH BE ISSUED AS KEYM AN INSURANCE COVER . YOUR COMPANY IS REQUESTED TO ENSURE THAT YOUR COMPA NY FOLLOWS THIS CIRCULAR TILL FRESH GUIDELINES ARE ISS UED. 18. A PLAIN LOOK AT THE ABOVE CIRCULAR SHOWS THAT I T DEALS WITH ABERRATIONS IN SALE OF KEYMAN INSURANCE POLICIES AN D IT IS WAS A DIRECTION TO THE INSURANCE COMPANIES THAT EFFECT 27 TH APRIL 2005 ONLY TERM INSURANCE POLICIES SHOULD BE ISSUED AS KEYMAN INSURANCE COVER. THAT IS BETWEEN THE REGULATORY AUTHORITY AND THE IN SURANCE COMPANIES AS TO WHAT SHOULD BE ALLOWED TO BE MARKET ED AS KEYMAN INSURANCE COVER. HOWEVER, IT DOES NOT ALTER THE REQ UIREMENTS OF SECTION 10(10D) WHICH IS FOR LIFE INSURANCE POLICY . WHAT CAN BE SOLD AS A LIFE INSURANCE POLICY TAKEN BY A BUSINESS EN TITY FOR ITS EMPLOYEE, FORMER EMPLOYEE OR ANY OTHER PERSON IMPOR TANT FOR BUSINESS OF SUCH AN ENTITY IS BETWEEN THE INSURANCE REGULATOR AND INSURANCE SERVICE PROVIDER. HOWEVER, ONCE IT HAS BE EN SOLD AS A LIFE INSURANCE POLICY ON THE KEYMAN TO THE BUSINESS, AS LONG AS IT IS IN THE NATURE OF LIFE INSURANCE POLICY, WHETHER PURE L IFE COVER OR TERM COVER OR A GROWTH OR GUARANTEED RETURN POLICY, IT I S ELIGIBLE FOR COVERAGE OF SECTION 10(10D). IT IS NOT OPEN TO US T O INFER THE WORDS WHICH ARE NOT THERE ON THE STATUTE AND THEN PROCEED TO GIVE LIFE AND EFFECT TO THE SAME. WE HAD DETAILED DISCUSSIONS ABO UT THIS ASPECT OF THE MATTER IN PARAGRAPH NUMBERS 10 TO 15 ABOVE, AND , AS WE HAVE HELD THERE, SUCH AN EXERCISE IS NOT PERMISSIBLE UND ER THE SCHEME OF THE ACT. 19. WHAT IRDA REGULATES IS ISSUANCE OF LIFE INSURAN CE POLICIES BY THE INSURANCE COMPANIES TO THE POLICYHOLDERS ON THE LIVES OF ITS EMPLOYEES, FORMER EMPLOYEES AND KEY PERSONNEL BUT O NCE SUCH A POLICY IS ISSUED IT CANNOT BUT BE TREATED AS A KEY MAN INSURANCE COVER AS IT ESSENTIALLY MEETS THE REQUIREMENT OF S ECTION 10(10D) BECAUSE IT IS A A LIFE INSURANCE POLICY TAKEN BY A PERSON ON THE LIFE OF ANOTHER PERSON WHO IS OR WAS THE EMPLOYEE O F THE FIRST- MENTIONED PERSON OR IS OR WAS CONNECTED IN ANY MANN ER WHATSOEVER WITH THE BUSINESS OF THE FIRST-MENTIONED PERSON. THE MANDATE OF SECTION 10(10D) DOES NOT PUT ANY FUR THER TESTS, NOR CAN WE INFER THE SAME. 26. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 20. THE ASSESSING OFFICER HAS QUESTIONED COMMERCIAL EXPEDIENCY OF TAKING THE KEYMAN INSURANCE POLICIES ON THE SHOR T GROUNDS THAT (A) THE FALL IN TURNOVER, APPARENTLY ACCORDING TO THE A SSESSING OFFICER, SHOWS THAT THERE WAS NO COMMERCIAL BENEFIT FROM TAKING TH E KEYMAN INSURANCE COVER; (B) THE INSURANCE POLICY WAS TAKEN FOR THE B ENEFIT OF THE PARTNER RATHER THAN THE FIRM; AND (C) NO NECESSITY OR EXPED IENCY OF THE PERSON BEING KEYMAN AND THE POLICY BEING TAKEN FOR THE BENEFIT O F THE FIRM WAS ESTABLISHED. WHEN BENEFIT OF POLICY WAS ASSIGNED TO THE INSURED, THE POLICY CANNOT BE SAID TO BE FOR THE BENEFIT OF THE ASSESSE E FIRM. WE SEE NO MERITS IN THESE OBJECTIONS TO THE COMMERCIAL EXPEDIENCY. A S FOR THE FALL IN TURNOVER, THE BENEFIT OF AN EXPENDITURE CANNOT BE, BY ANY STRETCH OF LOGIC, RELEVANT TO DETERMINE ITS COMMERCIAL EXPEDIENCY, AN D, IN ANY CASE. SUCH A BENEFIT OF HINDSIGHT CANNOT BE AVAILABLE AT THE POI NT OF TIME WHEN BUSINESS DECISIONS ARE MADE; MORE OFTEN THAN NOT, THESE ARE THE TOOLS OF POST MORTEM OF EVENTS, RATHER THAN INPUTS FOR THE DECISION MAKI NG. AS FOR THE OTHER ISSUES RAISED BY THE ASSESSING OFFICER AS SUCH, WE MAY REFER TO THE FOLLOWING OBSERVATIONS MADE, IN THIS CONTEXT, BY HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS RAJAN NANDA ETC. [(2012) 349 ITR 8 (DEL)] : 25. AFTER GIVING OUR DUE AND THOUGHTFUL CONSIDERATI ON TO THE SUBMISSIONS OF THE PARTIES OF BOTH SIDES, WE FEEL T HAT THE ASSESSEE HAS BEEN ABLE TO MAKE OUT A CASE IN ITS FA VOUR AND ORDER OF THE TRIBUNAL DOES NOT CALL FOR ANY INTERFE RENCE. WE ARE PERSUADED BY THE FOLLOWING REASONS IN SUPPORT O F THIS VIEW OF OURS: (I) THE DEPARTMENT HAS ITSELF ALLOWED THE EXPENDITU RE INCURRED ON THE PREMIUM PAID FOR KEYMAN INSURANCE P OLICIES IN PREVIOUS YEARS AS BUSINESS EXPENDITURE UNDER SEC TION 37 OF THE ACT. RIGHT FROM 1991-92 UPTO 1993-94 AND THEREA FTER EVEN IN RESPECT OF ASSESSMENT YEAR 1997-98, THE EXP ENDITURE WAS ALLOWED. THOUGH THEREAFTER, THE EXPENDITURE WAS DISALLOWED, BUT AGAIN THE CLAIM WAS ACCEPTED FOR TH E ASSESSMENT YEARS 2001-02 AND 2002-03. PRINCIPLE OF CONSISTENCY WOULD, THEREFORE, BY APPLICABLE IN SUCH A CASE. (II) THE TRIBUNAL HAS RIGHTLY REFERRED TO AND RELIE D UPON THE CBDT'S CIRCULAR DATED 18.2.1998. THIS CIRCULAR IS B INDING ON THE INCOME TAX DEPARTMENT, WHICH CATEGORICALLY STIP ULATES THAT PREMIUM ON KEYMAN POLICY SHOULD BE ALLOWED AS BUSINESS EXPENSES. THE ASSESSEE WOULD, NATURALLY, T AKE INTO CONSIDERATION SUCH CLARIFICATIONS ISSUED BY THE CBD T AND WOULD ACT ON THE BASIS THEREOF. WHEN THE ASSESSEE W AS GIVEN THE IMPRESSION, BY MEANS OF THE AFORESAID CIRCULAR, THAT IF EXPENDITURE IS INCURRED ON THE KEYMAN POLICY, IT WO ULD BE 27. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 TREATED AS BUSINESS EXPENDITURE . THERE IS NO REASON FOR THE DEPARTMENT TO DEVIATE THEREFROM WHEN IT COMES TO TH E ASSESSMENT. (III) THE NATURE OF EXPENDITURE INCURRED ON KEYMAN INSURANCE POLICY HAS EVEN BEEN JUDICIALLY CONSIDERED AND BOMB AY HIGH COURT HAS HELD IN B.N. EXPORTS (SUPRA) THAT THIS EX PENDITURE IS TO BE ALLOWED AS BUSINESS EXPENDITURE, IN THE FOLLO WING WORDS: 'THE EFFECT OF SECTION 10(10D) IS THAT MONIES WHICH ARE RECEIVED UNDER A LIFE INSURANCE POLICY ARE NOT INCL UDED IN THE COMPUTATION OF THE TOTAL INCOME OF A PERSON FOR A P REVIOUS YEAR. HOWEVER, ANY SUM RECEIVED UNDER A KEYMAN INSU RANCE POLICY IS TO BE RECKONED WHILE COMPUTING THE TOTAL INCOME. FOR THAT PURPOSE, A KEYMAN INSURANCE POLICY MEANS A LIFE INSURANCE POLICY TAKEN BY A PERSON ON THE LIFE OF A NOTHER PERSON WHO IS OR WAS IN EMPLOYMENT AS WELL AS ON A PERSON ON WHO IS OR WAS CONNECTED IN ANY MANNER WHATSOEVER WITH THE BUSINESS OF THE SUBSCRIBER. THE WORDS 'IS OR WA S CONNECTED IN ANY MANNER WHATSOEVER WITH THE BUSINES S OF THE SUBSCRIBER' ARE WIDER THAN WHAT WOULD BE SUBSUMED U NDER A CONTRACT OF EMPLOYMENT . THE LATTER PART MAKES IT CLEAR THAT A KEYMAN INSURANCE POLICY FOR THE PURPOSES OF CLAUSE (10D) IS NOT CONFINED TO A SITUATION WHERE THERE IS A CONTRA CT OF EMPLOYMENT. CLAUSE (10D) RELATES TO THE TREATMENT F OR THE PURPOSE OF TAXATION OF MONEYS RECEIVED UNDER AN INS URANCE POLICY. IN THIS APPEAL, THE COURT HAS TO DETERMINE THE QUESTION OF EXPENDITURE INCURRED TOWARDS THE PAYMENT OF INSU RANCE PREMIUM ON A KEYMAN INSURANCE POLICY. THE CIRCULAR WHICH HAS BEEN ISSUED BY THE CENTRAL BOARD OF DIRECT TAXE S CLARIFIES THE POSITION BY STIPULATING THAT THE PREMIUM PAID F OR A KEYMAN INSURANCE POLICY IS ALLOWABLE AS BUSINESS EXPENDITURE. IN THE PRESENT CASE, ON THE QUESTION W HETHER THE PREMIUM WHICH WAS PAID BY THE FIRM COULD HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE, THERE IS A FINDING OF FACT BY THE TRIBUNAL THAT THE FIRM HAD NOT TAKEN INSURANCE FOR THE PERSONAL BENEFIT OF THE PARTNER, BUT FOR THE BENEFI T OF THE FIRM, IN ORDER TO PROTECT ITSELF AGAINST THE SET BACK THA T MAY BE CAUSED ON ACCOUNT OF THE DEATH OF A PARTNER. THE OB JECT AND PURPOSE OF A KEYMAN INSURANCE POLICY IS TO PROTECT THE BUSINESS AGAINST A FINANCIAL SET BACK WHICH MAY OCC UR, AS A RESULT OF A PREMATURE DEATH, TO THE BUSINESS OR PRO FESSIONAL ORGANIZATION. THERE IS NO RATIONAL BASIS TO CONFINE THE ALLOWABILITY OF THE EXPENDITURE INCURRED ON THE PRE MIUM PAID 28. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 TOWARDS SUCH A POLICY ONLY TO A SITUATION WHERE THE POLICY IS IN RESPECT OF THE LIFE OF AN EMPLOYEE. A KEYMAN INS URANCE POLICY IS OBTAINED ON THE LIFE OF A PARTNER TO SAFE GUARD THE FIRM AGAINST A DISRUPTION OF THE BUSINESS THAT MAY RESULT DUE TO THE PREMATURE DEATH OF A PARTNER. THEREFORE, THE EXPENDITURE WHICH IS LAID OUT FOR THE PAYMENT OF PR EMIUM ON SUCH A POLICY IS INCURRED WHOLLY AND EXCLUSIVELY FO R THE PURPOSES OF BUSINESS .' (IV) THE ARGUMENT OF MR. N.P. SAHNI, LEARNED COUNSE L FOR THE REVENUE THAT TAKING SUCH KEYMAN INSURANCE POLICY EV ERY YEAR AND THEREAFTER ASSIGNING THE SAME TO THE BENEF ICIARIES MAY BE TREATED AS COLOURABLE DEVICE, MAY NOT BE COR RECT. THOUGH THIS ARGUMENT APPEARS TO BE ATTRACTIVE WHEN WE LOOK INTO THE FACT THAT THE ASSESSEE HAD BEEN TAKING THE POLICIES AND THEREAFTER ASSIGNING THE SAME YEAR AFTER YEAR I N FAVOUR OF THE BENEFICIARIES, WHAT CANNOT BE IGNORED THAT T HIS COURSE OF ACTION IS PERMITTED BY THE DEPARTMENT ITSELF AS STATED IN CBDT'S CIRCULAR DATED 18.2.1998. (V) THE EXPENDITURE INCURRED HAS TO BE TESTED ON TH E TOUCHSTONE OF SECTION 37 OF THE ACT AND TO SEE AS T O WHETHER SUCH EXPENDITURE IS PERMISSIBLE OR NOT. NO DOUBT, T HE OBJECT OF A KEYMAN INSURANCE POLICY IS TO ENABLE BUSINESS ORGANIZATIONS TO INSURE THE LIFE OF A KEYMAN IN ORD ER TO PROTECT THE BUSINESS AGAINST THE FINANCIAL LOSS WHI CH MAY OCCUR IN THE LIKELY EVENTUALITY OF PREMATURE DEATH. SUCH AN EXPENDITURE IS TREATED AS BUSINESS EXPENDITURE BY T HE DEPARTMENT ITSELF AND RECOGNIZED AS SUCH IN CIRCULA R DATED 18.2.1998. THE EXPENDITURE IS TO BE SEEN AT THE TIM E IT IS INCURRED. MERELY BECAUSE THE POLICY WAS ASSIGNED AF TER SOMETIME WOULD NOT MEAN THAT THE EXPENDITURE INCURR ED IN THE FIRST INSTANCE WOULD LOSE THE FLAVOUR OF IT BEI NG BUSINESS EXPENDITURE' . (VI) ONCE THE LEGAL PROVISIONS AND THE OUTLOOK OF D EPARTMENT ITSELF BASED ON SUCH LEGAL PROVISIONS PERMIT THE AS SESSEE TO HAVE THE TAX PLANNING OF THIS NATURE, AND THE COURS E OF ACTION TAKEN BY THE ASSESSEE IS PERMISSIBLE UNDER LAW, THE ARGUMENT OF COLOURABLE DEVICE CANNOT BE ADVANCED BY THE REVE NUE. WHEN EXPENDITURE OF THIS NATURE IS TREATED BUSINES S EXPENDITURE' PER SE BY THE DEPARTMENT ITSELF, THERE CANNOT BE ANY QUESTION OF RAISING THE ISSUE OF WANT OF BUSINE SS EXPEDIENCY. THE LEARNED COUNSEL FOR THE RESPONDENT IS RIGHT IN HIS SUBMISSION THAT THE DEPARTMENT COULD NOT SIT ON THE 29. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 ARMCHAIR OF THE ASSESSEE AND DECIDE AS TO WHETHER I T WAS APPROPRIATE ON BUSINESS EXPEDIENCY FOR THE ASSESSEE TO INCUR SUCH AN EXPENDITURE OR NOT. IF THE TRANSACTION IS O THERWISE VALID IN LAW AND IS A PART OF TAX PLANNING, MERELY BECAUSE IT HAS RESULTED IN REDUCTION OF TAX, SUCH EXPENDITURE CANNOT BE IGNORED RAISING THE ISSUE OF UNDERLYING MOTIVE OF E NTERING INTO THIS TYPE OF TRANSACTION . VARIOUS JUDGMENTS CITED BY THE LEARNED COUNSEL FOR THE RESPONDENTS CLEARLY GET ATT RACTED TO THIS COURT. (EMPHASIS, BY UNDERLINING, SUPPLIED BY US) 21. RESPECTFULLY FOLLOWING THE ESTEEMED VIEWS OF HONBL E DELHI HIGH COURT, WE REJECT THE STAND OF THE AUTHORITIES BELOW ON THIS ASPECT OF THE MATTER AS WELL. AS FOR THE STATEMENT MADE B Y THE EMPLOYEES OF THE INSURANCE COMPANIES, NOTHING TURNS ON THESE STATEMENTS. WHAT CONSTITUTES A KEYMAN INSURANCE POL ICY UNDER SECTION 10(10D) IS NOT DEPENDENT ON WHAT IS IT TREA TED EVEN BY THE INSURER; AS LONG AS THE ASSESSEE IS ALLOWED TO TAKE LIFE INSURANCE POLICY ON ITS KEYMEN, AS HAVE BEEN UNDISPUTEDLY TAK EN IN THIS CASE, THE SAME SATISFIES THE REQUIREMENT OF SECTION 10(10D). IN VIEW OF THESE DETAILED DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF TH E ASSESSEE AND DELETE THE IMPUGNED DISALLOWANCE OF RS.1,49,99,922. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. WE FIND THAT FACTS & CIRCUMSTANCES OF GROUND NO.5 I N THE PRESENT APPEAL ARE SIMILAR, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE TRIBUNAL ORDERS, WE ALLOW GROUND NO.5. 25. NOW COMING TO GROUND NO.6 RELATING TO CONFIRMAT ION OF DISALLOWANCE OF RS.1,50,000 OUT OF SALARY, LABOUR WELFARE EXPENSES. WE FIND THAT THE DISALLOWANCE MADE BY ASSESSING OFFICER AND CONFIRME D BY LEARNED CIT(A) IS REASONABLE KEEPING IN VIEW THAT BOOKS OF ACCOUNT WE RE REJECTED AND THE BILLS/ VOUCHERS WERE SELF MADE AND PAYMENTS WERE MADE IN C ASH ON THE BASIS OF SELF MADE VOUCHERS. THE DISALLOWANCE REPRESENTS ABOUT 10 % OF THE TOTAL AMOUNT OF 30. ITA NOS. 212 & 300(ASR)/2010 ASST . YEAR 2006-07 UNVERIFIABLE EXPENSES WHICH IS REASONABLE AND IN VI EW OF THIS WE DISMISS GROUND NO.6. 26. GROUND NO.7 HAS NOT BEEN PRESSED BY ASSESSEE AN D IN VIEW OF GROUND NO.7 IS DISMISSED AS NOT PRESSED. 27. GROUND NO.8 & 9 ARE GENERAL AND DO NOT REQUI RE ANY ADJUDICATION. 28. IN VIEW OF THE ABOVE, THE APPEAL FILED B Y REVENUE IS DISMISSED WHEREAS THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND PARTLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 0 TH SEPTEMBER, 2015. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 30.09. 2015 /PK/ PS. COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.