M/S Jagran Prakshan Ltd., Kanpur V. DCIT-4, Kanpur

ITA 245/LKW/2011

• Counselvise Citation: 24523714 RSA 2011
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 05-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S K GARG SHRI P K KAPOOR
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Commercial expediency; Revised return
• Section: 14A; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.245/LKW/2011 ASSESSMENT YEAR:2004 - 2005 JAGRAN PRAKASHAN LTD., 2, SARVODAYA NAGAR , KANPUR. PAN:AAACJ3404A VS. A.C.I.T., RANGE - 4, KANPUR. (APPELLANT) (RESPONDENT) ITA NO.246/LKW/2011 ASSESSMENT YEAR:2004 - 2005 DY. C.I.T. - 6, KANPUR. VS. JAGRAN PRAKASHAN LTD., 2, SARVODAYA NAGAR , KANPUR. PAN:AAACJ3404A (APPELLANT) (RESPONDENT) ITA NO.151/LKW/2011 ASSESSMENT YEAR:2006 - 2007 DY. C.I.T. - 6, KANPUR. VS. JAGRAN PRAKASHAN LTD., 2, SARVODAYA NAGAR , KANPUR. PAN:AAACJ3404A (APPELLANT) (RESPONDENT) ITA NO.126/LKW/2011 ASSESSMENT YEAR:2006 - 2007 JAGRAN PRAKASHAN LTD., 2, SARVODAYA NAGAR , KANPUR. PAN:AAACJ3404A VS. DY. C.I.T. - 6, KANPUR. (APPELLANT) (RESPONDENT) 2 C.O.NO.12/LKW/2011 (IN ITA NO.151/LKW/2011) ASSESSMENT YEAR:2006 - 2007 JAGRAN PRAKASHAN LTD., 2, SARVODAYA NAGAR , KANPUR. PAN:AAACJ3404A VS. ADDL. C.I.T. - 6, KANPUR. ( OBJECTOR ) (RESPONDENT) ITA NO.530/LKW/2012 ASSESSMENT YEAR:2007 - 2008 JAGRAN PRAKASHAN LTD., 2, SARVODAYA NAGAR , KANPUR. PAN:AAACJ3404A VS. JT. C.I.T. - 6, KANPUR. (APPELLANT) (RESPONDENT) ITA NO.571/LKW/2012 ASSESSMENT YEAR:2007 - 2008 A.C.I.T. - 6, KANPUR. VS. JAGRAN PRAKASHAN LTD., 2, SARVODAYA NAGAR , KANPUR. PAN:AAACJ3404A (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. K. GARG, ADVOCATE SHRI P. K. KAPOOR, C.A. REVENUE BY SHRI MANOJ KUMAR GUPTA, CIT, D.R. DATE OF HEARING 07/01/2014 DATE OF PRONOUNCEMENT 0 6 /03/2014 O R D E R PER A. K. GARODIA, A.M. OUT OF THIS BUNCH OF SIX APPEALS AND ONE CROSS OBJECTION, THERE ARE SIX CROSS APPEALS FOR T HREE ASSESSMENT YEARS I.E. ASSESSMENT YEAR 2004 - 05 , 2006 07 AND 200 7 - 0 8 AND THERE IS ONE CROSS OBJECTION FILED BY THE ASSESSEE IN ASSESSMENT YEAR 2006 - 07. ALL THE APPEALS AND CROSS OBJECTION WERE HEARD 3 TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE CROSS APPEALS F ILED BY THE ASSESSEE AND THE REVENUE FOR ASSESSMENT YEAR 2004 - 05 I.E. I.T.A. NO.245/LKW/2011 AND 246/LKW/2011 BECAUSE THE ISSUE INVOLVED ARE INTER - CONNECTED. 3. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. 1. BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT PAYMENTS OF; (RS.) (I) REPAIRS & MAINTENANCE (OTHERS) 6,07,904 (II) INSURANCE PREMIA (PAID ON THE LIVES OF THE DIRECTORS) 2,01,090 (III) E LECTRICITY EXPENSES PAID FOR ELECTRIC C ONSUMPTION AT THE RESIDENCE OF DIRECTORS 7,61,573 REPRESENTED 'PERSONAL EXPENDITURE', NOT ALLOWABLE AS SUCH IN THE ASSESSMENT OF THE 'APPELLANT'. 2. BECAUSE THE EXPENSES UNDER VARIOUS HEADS (AS HAD BEEN CLAIMED AS DEDUCTION UNDER VARIOUS HEADS) HAD BEEN INCURRED BY THE 'APPELLANT' IN ITS CHARACTER AS A BUSINESS MAN AND THAT TOO DURING THE COURSE OF CARRYING ON OF ITS BUSINESS AND ACCORDINGLY NO PART OF THE SAME COULD HAVE BEEN DISALLOWED BY HOLDING THE SAME WAS ATTRIBUTABLE TO THE 'PERSONAL EXPENDITURE OF THE DIRECTORS'. 3. BECAUSE EXPENSES ON 'RUNNING AND MAINTENANCE OF VEHICLES' AND 'DEPRECIATION' THEREOF (OUT OF WHICH DISALLOWANCE OF RS.6,07,904 HAS BEEN MADE) RELATED TO THE 'USER' FOR THE PURPOSES OF BUSINESS OF THE APPELLANT AND DISALLOWANCE MADE/SUSTAINED BY THE A UTHORITIES BELOW ON THIS SCORE, IS WHOLLY ERRONEOUS. 4. BECAUSE LOOKING TO THE BUSINESS EXIGENCIES, THE DIRECTORS ARE REQUIRED TO MAINTAIN OFFICE AT THEIR RESIDENCES ALSO AND THE PAYMENTS MADE FOR ELECTRICITY EXPENSES WERE LIABLE TO BE TREATED AS EXPENSE S INCURRED B Y THE 'APPELLANT' DURING THE COURSE OF CARRYING ON OF ITS BUSINESS. 4 5. BECAUSE IN ANY CASE PAYMENTS UNDER THE HEAD 'INSURANCE PREMIA' AS ALSO 'ELECTRICITY EXPENSES' (FOR THE RESIDENCES OF THE DIRECTORS) HAD BEEN MADE IN PURSUANCE OF RESOLUTIO N PASSED IN THE ANNUAL GENERAL BODY MEETING OF THE 'APPELLANT' COMPANY AND THE SAME COULD NOT HAVE BEEN TREATED TO BE THE PERSONAL EXPENSES AND DISALLOWED AS SUCH IN THE ASSESSMENT. 6. BECAUSE THE 'APPELLANT' BEING A 'BODY CORPORATE', THERE COULD NOT HAVE BEEN ANY PERSONAL EXPENSES AS SUCH, AND IN ANY CASE THE PAYMENTS AS AFORESAID, HAVING BEEN MADE IN LIEU OF VALUABLE SERVICES RENDERED BY THE DIRECTORS, THE SAME WERE THE 'OUTGOINGS' INTIMATELY CONNECTED WITH THE CARRYING ON OF BUSINESS AND NO PART OF THE SAME COULD HAVE BEEN DISALLOWED EITHER ON FACTS OR IN LAW. 7. BECAUSE IN ANY CASE THE DISALLOWANCES OUT OF VARIOUS HEADS OF EXPENSES AS UPHELD BY THE 'CIT(A)' ARE HIGHLY EXCESSIVE. 8. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 4. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THAT THE LD COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF TELEPHONE EXPENSES AMOUNTING TO RS.3,00,000/ - AND TRAVELING EXPENSES OF RS.2,47,255/ - WITHOUT APPRECIATING THE FACTS THAT THE POSSIBILITY OF NON BUSINESS USE UNDER THESE WHICH CANNOT BE RULED OUT AS ALSO THE ASSESSEE HAD NOT PREFERRED APPEAL AGAINST THE DISALLOWANCES MADE UNDER THESE HEADS IN EARLIER ASSE SSMENT YEAR. 2. THAT THE LD COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.12,45,952/ - OUT OF REPAIRS AND MAINTENANCE OF BUILDING WITHOUT APPRECIATING THE FACTS AND EXAMINING THE NATURE OF EXPEN SES AS THE A.O. HAD ALSO ALLOWED DEPRECIATION TREATING IT CAPITAL INVESTMENT IN THE BUILDING. 3. THAT THE LD COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.10,00,000/ - ON ACCOUNT OF ENHANCED PAY MENT OF RENT 5 WITHOUT APPRECIATING THE FACTS THAT THE PAYMENT WAS RECOVERED U/S 40A(2)(B) OF THE I.T. ACT. 4. THAT THE LD COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.6,19,447/ - ON ACCOUNT OF C IRCULATION & ADVT. PROM. EXPENSES WITHOUT APPRECIATING THE FACTS THAT THE DISALLOWANCE IS MADE IN RESPECT OF EXPENSES WHEREOF BUSINESS EXPEDIENCY COULD NOT BE SUSTAINED. 5. THAT THE ORDER OF LD COMMISSIONER OF INCOME TAX (A) - I, KANPUR BEING ERRONEOUS IN L AW AND ON THE FACTS DESERVES TO BE VACATED AND THAT THE ORDER OF ASSESSING OFFICER BE RESTORED. 6. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE AND/OR ADD ANY FRESH GROUND AS AND WHEN IT IS CONSIDERED NECESSARY TO DO SO. 5. BRIEF FACTS OF THE CASE ARE THAT THE FOLLOWING EXPENSES WERE DISALLOWED BY THE ASSESSING OFFICER: ( A ) OUT OF TELEPHONE EXPENSES 3,00,000.00 ( B ) OUT OF TRAVELLING EXPENSES 2,47,255.00 ( C ) OUT OF REPAIRS & MAINTENANCE EXPENSES (OTHERS) 6,07 ,904.00 ( D ) OUT OF REPAIRS & MAINTENANCE BUILDING 12,45,952.00 ( E ) OUT OF RENT EXPENSES 10,00,000.00 ( F ) OUT OF CIRCULATION & ADVT. PROM. E XPENSES 6,19,447.00 ( G ) OUT OF POWER & FUEL EXPENSES 7,61,573.00 ( H ) OUT OF INSURANCE EXPENSES 2,01,090.00 5.1 OUT OF THE ABOVE EXPENSES, THE CIT(A) DELETED THE DISALLOWANCE AT SL. NO. (A), (B), (D), (E) & (F) FOR WHICH THE REVENUE IS IN APPEAL AND CIT(A) CONFIRMED THE REMAINING DISALLOWANCES OF EXPENSES AT SL.NO. (C), (G) & (H) FOR WHI CH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A) FOR THE ISSUES RAISED IN THE APPEAL OF THE REVENUE. REGARDING THE ISSUES RAIS ED IN ASSESSEES APPEAL, HE SUBMITTED THAT AS PER THE JUDGMENT OF HON'BLE GUJARAT 6 HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON AND ENGG. CO. VS COMMISSIONER OF INCOME - TAX [2002] 253 ITR 749 (GUJ) , NO DISALLOWANCE IS CALLED FOR ON THE BASIS OF PERSONAL US E OF ELECTRICITY ETC. BY THE DIRECTORS. HE ALSO PLACED RELIANCE ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF ALLAHABAD MILLING CO. (P.) LTD. IN I.T.A. NO.1925/ALLD/90, COPY OF WHICH IS AVAILABLE FROM PAGES 87 TO 99 OF THE PAPER BOOK. 7. WE HAVE CONSI DERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENT S CITED BY LEARNED A.R. OF THE ASSESSEE. FIRST WE DEAL WITH THE DISALLOWANCE DELETED BY CIT(A). 7.1 FIRST ITEM IS DISALLOWANCE OF RS.3,00,000/ - UNDER THE HEAD TELEPHON E EXPENSES. IN VIEW OF THE DECISION OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON AND ENGG. CO. (SUPRA), NO DISALLOWANCE IS CALLED FOR IN THE HANDS OF THE ASSESSEE COMPANY ON ACCOUNT OF USE OF TELEPHONE BY THE DIRECTORS ALTHOUGH THE SA ME MAY BE CONSIDERED AS A PERQUISITE IN THE HANDS OF THE CONCERNED DIRECTOR BECAUSE THE TELEPHONE EVEN IF INSTALLED AT THE RESIDENCE OF THE DIRECTOR CAN BE USED FOR BOTH, OFFICIAL AND PERSONAL PURPOSES . HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. 7.2 THE SECOND ISSUE IS REGARDING DELETION OF DISALLOWANCE OF RS.2,47,255/ - UNDER THE HEAD TRAVELLING EXPENSES. REGARDING THIS ITEM ALSO, WE ARE OF THE CONSIDERED OPINION THAT AS PER THE SAME JUDGMENT RENDERED IN THE CAS E OF SAYAJI IRON AND ENGG. CO. (SUPRA), NO DISALLOWANCE IS CALLED FOR IN THE HANDS OF THE ASSESSEE COMPANY ON ALLEGED PERSONAL USE OF SOME EXPENSES BY THE DIRECTORS ALTHOUGH THE SAME CAN BE CONSIDERED IN THE HANDS OF THE CONCERNED DIRECTORS AS PERQUISITE. ON THIS ASPECT ALSO , WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). 7 7.3 THE THIRD ITEM IS REGARDING DELETION OF DISALLOWANCE OF RS.12,45,952/ - OUT OF REPAIRS & MAINTENANCE OF BUILDING. THIS DISALLOWANCE WAS DELETED BY CIT(A) AS PER PARA 8(C) OF HIS ORD ER IN WHICH HE HAS NOTED THAT THIS DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF HIS DOUBT THAT THE PAYMENT OF THIS AMOUNT TO M/S EXPLORER ASSOCIATES IS CAPITAL IN NATURE BUT THE ASSESSING OFFICER HAS NOT GIVEN ANY SPECIFIC AND DEFINITE FI NDING THAT IT WAS AN EXPENDITURE ON CAPITAL ACCOUNT. HE HAS ALSO NOTED THAT VARIOUS CASE LAWS IN RESPECT OF REPAIRS AND MAINTENANCE SHOW THAT THE ADDITION/ALTERATION MADE TO AN ASSET WHICH IS BEING USED IN THE BUSINESS, IS ALLOWABLE AS CURRENT REPAIRS. T HE CIT(A) HAS FOLLOWED THE JUDGMENT OF HON'BLE UTTARAKHAND HIGH COURT RENDERED IN THE CASE OF CIT VS. HOTEL CONTROL PVT. LTD. REPORTED IN [2004] 266 ITR 109 (UTTAR). 8. LEARNED D.R. OF THE REVENUE COU LD NOT CONTROVERT THIS FINDING O F CIT(A) AND COULD NOT SHOW THAT HOW THIS JUDGMENT IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE AND, THEREFORE, ON THIS ISSUE ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LEARNED CIT(A). 9. THE NEXT ITEM IS THE DELETION OF DISALLOWANCE MADE BY THE ASSESSIN G OFFICER OF RS. 10 ,00,000/ - ON ACCOUNT OF ENHANCED PAYMENT OF RENT. THIS DISALLOWANCE WAS DELETED BY CIT(A) AS PER PARA 8(D) OF HIS ORDER IN WHICH HE HAS CATEGORICALLY NOTED THAT THE RATE OF RENT PAID BY THE ASSESSEE IS LESS THAN THE RENT PAID BY THE BANK IN SAME VICINITY. ON THE BASIS OF THIS FACT, THE CIT(A) HAS GIVEN A FINDING THAT THE REFERENCE OF SECTION 40A(2)(B) OF THE ACT IS TOTALLY MISPLACED UNDER THESE CIRCUMSTANCES. 10. LEARNED D.R. OF THE REVENUE COULD NOT CONTROVERT THIS FINDING OF LEARNED C IT(A) AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE ALSO. 8 11. THE NEXT ISSUE IS REGARDING DELETION OF DISALLOWANCE OF RS.6,19,447/ - MADE BY THE ASSESSING OFFICER OUT OF ADVERTISEMENT & PROMOTION EXPENSES ON ESTIMATE BASIS. THIS DISALLOWANCE WAS DELETED BY CIT(A) AS PER PARA 8(E) OF HIS ORDER WHEREIN HE HAS NOTED THAT THE EXPENDITURE RELATES TO BUSINESS PURPOSES AND THE BOOKS OF ACCOUNT ARE AUDITED U/S 44AB AND IT IS ALSO NOT A CASE WHERE PERSONAL EXPENDITURE IS MADE ON THIS ACCO UNT. HE HAS ALSO GIVEN A FINDING THAT THE ADDITION WAS MADE WITHOUT ANY BASIS AND ALSO WITHOUT POINTING OUT ANY DISCREPANCY. ON THE BASIS OF THESE FACTS, IT IS OBSERVED BY CIT(A) THAT THIS ADDITION IS UNCALLED FOR BECAUSE BOOKS OF ACCOUNT, BILLS AND VOUC HERS ARE PRODUCED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT AND ONUS FOR CLAIMING THE EXPENDITURE HAS BEEN DISCHARGED BY THE ASSESSEE. 12. LEARNED D.R. OF THE REVENUE COULD NOT CONTROVERT THIS SPECIFIC FINDING OF CIT(A) . HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE ALSO. 13. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 14. NOW WE DEAL WITH THE THREE ISSUES RAISED BY THE ASSESSEE IN ITS APPEAL. 15. THE FIRST ISSUE IS REGARDING CONFIRMATION OF DISALLOWANCE OF RS.6,07,904/ - MADE BY THE ASSESSING OFFICER OUT OF REPAIRS & MAINTENANCE EXPENSES (OTHERS). IT IS NOTED BY CIT(A) IN PARA 8(B) OF HIS ORDER THAT THE ASSESSING OFFICER HAS NOTED THAT THE EXPENDITURE CLAIMED UNDER THIS HEAD PERTAINED TO THE PURCHASE OF PETROL/DIESEL WHICH WAS CLAIMED TO HAVE BEEN CONSUMED IN THE RUNNING OF VEHICLE INCLUDING THE VEHICLES USED BY THE DIRECTORS AS ALSO THE REPAIRS AND MAINTENANCE THEREOF. HE HAS FURTHER NOTED THAT THE DISALLOWANCE HAS BEEN MADE FOR PERSONAL USE OF VEHICLE BY THE DIRECTORS. IN OUR CONSIDERED OPINION, AS PER THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON AND ENGG. CO. (SUPRA), NO DISALLOWANCE IS CALLED FOR ON THE BASIS OF ALLEGED PERSONAL USE OF VEHICLE BY THE 9 DIRECTORS ALTHOU GH THE SAME MAY BE CONSIDERED AS A PERQUISITE IN THE HANDS OF THE CONCERNED DIRECTOR. HENCE, WE DELETE THIS DISALLOWANCE. 16. THE SECOND ISSUED RAISED BY THE ASSESSEE IS CONFIRMING THE DISALLOWANCE OF RS.2,01,090/ - MADE BY THE ASSESSING OFFICER IN RESPECT OF INSURANCE PREMIUM PAID ON THE LIFE OF THE DIRECTORS. ON THIS ISSUE, IT IS OBSERVED BY CIT(A) IN PARA 8(G) OF HIS ORDER THA T THIS DISALLOWANCE WAS AS PER THE TAX AUDIT REPORT AND NO SPECIFIC REPLY HAS BEEN MADE ON THIS ISSUE IN THE SUBMISSION DATED 28/10/2010. REGARDING THIS ISSUE, A QUERY WAS RAISED BY THE BENCH WHETHER THIS PAYMENT OF INSURANCE PREMIUM ON BEHALF OF THE DIRE CTORS HAS BEEN INCLUDED IN THE PERQUISITE VALUE OF THE DIRECTORS AND IN REPLY , IT WAS SUBMITTED THAT COPY OF FORM - 16 ISSUED BY THE COMPANY OF THE DIRECTORS IS AVAILABLE ON PAGE S 50 TO 82 . WHILE GOING THROUGH THESE FORMS, IT WAS SEEN THAT COPY OF FORM 12BA IS ALSO AVAILABLE, WHICH IS A STATEMENT SHOWING PARTICULARS OF PERQUISITES ETC. AS PER RULE 26A. IT WAS ALSO SEEN THAT VALUE OF THE PERQUISITE ON ACCOUNT OF INSURANCE PREMIUM IS NOT INCLUDED IN THE SAME BECAUSE THE ONLY PERQUISITE SHOWN BY THE ASSESSEE IS REGARDING ACCOMMODATION AND CAR PROVIDED TO THE DIRECTORS. REGARDING THE USE OF TELEPHONE AND VEHICLE BY THE DIRECTORS, IT IS UNDERSTANDABLE THAT THE THERE IS NO CLEAR BASIS TO QUANTIFY THE SAME BECAUSE THE VEHICLE AND TELEPHONE EVEN IF INSTALLED AT T HE RESIDENCE OF THE DIRECTOR CAN BE USED FOR BOTH PURPOSES I.E. OFFICIAL AND PERSONAL AND THEREFORE IT MAY NOT BE POSSIBLE FOR THE ASSESSEE TO INCLUDE THE PERQUISITE VALUE FOR THE SAME IN FORM 12BA BUT INSURANCE PREMIUM HAS BEEN PAID SEPARATELY BY THE ASSE SSEE AND THEREFORE, THE SAME HAS TO BE ADDED IN THE PERQUISITES OF THE CONCERNED DIRECTOR IF THE SAME IS CLAIMED BY THE ASSESSEE AS A PERQUISITE IN THE HANDS OF THE CONCERNED DIRECTOR BUT THIS WAS NOT DONE BY THE ASSESSEE COMPANY. A DMITTEDLY , THE BENEFIT OUT OF INSURANCE PREMIUM WILL ACCRUE TO THE DIRECTOR OF THE ASSESSEE COMPANY AND NOT TO THE ASSESSEE COMPANY. IT IS ALSO TRUE THAT THE LIABILITY WAS OF THE CONCERNED DIRECTOR TO PAY INSURANCE PREMIUM ON HIS LIFE AND, THEREFORE, IT IS 10 NOT A BUSINESS EXPEND ITURE OF THE ASSESSEE COMPANY PARTICULARLY WHEN THE ASSESSEE DOES NOT CONSIDER IT AS A PERQUISITE IN THE HANDS OF THE CONCERNED DIRECTOR . WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. THIS DISALLOWANCE IS CONFIRMED. 17. THE LAST ITEM OF EXPENSES DISPUTED BY THE ASSESSEE IS THE CONFIRMING THE DISALLOWANCE OF RS.7,61,573/ - OUT OF ELECTRICITY EXPENSES FOR ELECTRIC CONSUMPTION AT THE RESIDENCE OF THE DIRECTORS. ON THIS ISSUE ALSO, WE FIND THAT THE SAME LOGIC AS IN RESPECT OF INS URANCE PREMIUM IS APPLICABLE BECAUSE ELECTRICITY CHARGES ARE SPECIFICALLY PAID AT THE RESIDENCE OF A SPECIFIC DIRECTOR AND THEREFORE, VALUE OF THE SAME SHOULD BE ADDED BY THE ASSESSEE COMPANY I N THE PERQUISITE OF THE CONCERNED DIRECTOR BUT THIS WAS NOT DON E BY THE ASSESSEE COMPANY AND HENCE, IT IS APPARENT THAT THE ASSESSEE COMPANY HAS NOT TREATED THE SAME AS PERQUISITE IN THE HANDS OF THE CONCERNED DIRECTOR AND WHEN SAME WAS NOT DONE, IT CANNOT BE CONSIDERED AS A BUSINESS EXPENDITURE OF THE ASSESSEE COMPAN Y BECAUSE THE ASSESSEE COMPANY IS NOT GETTING ANY BENEFIT FR OM THIS PAYMENT OF ELECTRICITY AND THEREFORE, ON THIS ISSUE ALSO , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER CIT(A). THIS DISALLOWANCE IS ALSO CONFIRMED. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 18. NOW WE TAKE UP THE CROSS APPEAL AND CROSS OBJECTION FOR ASSESSMENT YEAR 2006 - 2007. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2006 - 07 I.E. I.T.A. NO.126/LKW/2011 ARE AS UNDER: 1. BECAUSE THE ' CIT (A)' HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT CLAIM FOR ADDITIONAL DEDUCTION OF RS.19,79,80,771 / - AS HAD BEEN MADE UNDER SECTION 35D, IN TERMS OF LETTER DATED 27.11.2008 FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, COULD NO T BE ENTERTAINED IN VIEW OF THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT REPORTED IN (2006) 284 ITR 323. 11 2. BECAUSE 'CIT(A)' HAS FURTHER ERRED IN LAW AND ON FACTS IN HOLDING THAT : (A) THE 'APPELLANT'S' CLAIM FOR DEDUCTION OF SUM OF RS.19,79,80,771 / - CANNOT BE SAID TO BE REFERABLE TO THE 'CAPITAL EMPLOYED' AS ENVISAGED IN SECTION 35D(3); AND (B) AT ANY RATE AND WITHOUT PREJUDICE TO (A) AS AFORESAID THE CAPITAL EMPLOYED COULD AT THE BEST BE CALCULATED AT RS.10 .39 CRORES WHICH WAS THE FACE VALUE OF THE SHARES ISSUED UNDER INITIAL PUBLIC OFFER (IPO) AND ACCORDINGLY A SUM OF RS.50.20 LACS (BEING 5% OF RS.10.39 CRORES) COULD ALONE AT BEST, BE HELD TO BE AVAILABLE FOR AMORTIZATION IN FIVE YEARS. 3. BECAUSE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT FEE PAID TO REGISTRAR OF COMPANIES FOR INCREASING 'AUTHORIZED CAPITAL' WAS NOT AVAILABLE FOR AMORTIZATION UNDER SECTION 35D OF THE ACT AND IN REJECTING THE ' APPELLANT'S' CLAIM IN THIS RESPECT. 4. BECAUSE 'CI T(A)' HAS ERRED IN LAW AND ON FACTS IN UPHOLDING A DISALLOWANCE TO THE EXTENT OF RS.2.00 LACS (OUT OF DISALLOWANCE OF RS.48,13,034 / - AS HAD BEEN MADE IN THE ASSESSMENT OUT OF ADMINISTRATIVE EXPENSES, BY INVOKING THE PROVISION OF SECTION 14A ON THE GROUND T HAT 'THERE WOULD BE DEFINITELY SOME ELEMENT OF ADMINISTRATIVE EXPENSES INVOLVED IN EARNING SUCH TAX FREE INCOME. 5. BECAUSE DUE SET OFF OF LOSSES BROUGHT FORWARD FROM EARLIER YEARS SHOULD HAVE BEEN ALLOWED. 6. BECAUSE THE ORDER APPEALED AGAINST IS CONTRA RY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 19. THE GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION ARE ALSO REPRODUCED AS UNDER: 1. BECAUSE DISALLOWANCE OF RS. 2 LAKHS OUT OF ADMINISTRATIVE EXPENSES, AS HAS BEEN SUSTAINED ON ESTIMATE BASIS, WAS BEYOND THE SCOPE OF APPEAL PREFERRED BY THE ASSESSEE, BEFORE THE LEARNED CIT(A) - II, KANPUR. 12 2. BECAUSE IN ANY CASE, THERE BEING NO MATERIAL ON RECORD WHICH COULD GO TO SHOW THAT THE ASSESSEE/RESPONDENT HAD INCURRED ANY EXPENDITURE ON EARNING E XEMPTED INCOME, NO DISALLOWANCE COULD HAVE BEEN MADE/SUSTAINED. 20. THE GROUNDS RAISED BY THE REVENUE ITS APPEAL FOR ASSESSMENT YEAR 2006 - 07 I.E. I.T.A. NO.151/LKW/2011 ARE AS UNDER: 1. THAT THE LD COMMISSIONER OF INCOME TAX(A) HAS ERRED IN LAW ON FACTS IN DELETING THE ADDITION OF RS. 46,13,034/ - [RS. 48,13,034/ - ( - ) RS.2,00,000/ - ] MADE BY THE ASSESSING OFFICER U/S 14A OF THE I.T. ACT, 1961 ON THE GROUND THAT THE IPO ISSUED FOR THE AMOUNT SUBSCRIPTION IN THE MONTH OF JANUARY/FEBRUARY,2006 AND THE AMOUNT R ECEIVED WAS KEPT WITH ASSESSEE AND IT WAS NOT INVESTED IN MUTUAL FUNDS AND SHARES. 2. THAT THE ORDER OF LD COMMISSIONER OF INCOME TAX (A) - I, KANPUR BEING ERRONEOUS IN LAW AND ON THE FACTS DESERVES TO BE VACATED AND THAT THE ORDER OF ASSESSING OFFICER BE RESTORED. 3. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE AND/OR ADD ANY FRESH GROUND AS AND WHEN IT IS CONSIDERED NECESSARY TO DO SO. 20.1 FROM THE ABOVE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL AND CROSS OBJECTION AND BY THE REVENUE, WE FIND THAT ONLY TWO ISSUES ARE INVOLVED. FIRST ISSUE IS REGARDING DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.48,13,034/ - OUT OF ADMINISTRATIVE EXPENSES BY INVOKING THE PROVISIONS OF SECTION 14A OUT OF WHICH CIT(A) HAS DELETED THE DISALLOWANCE TO THE EXTENT OF RS.46,13,034/ - AND CONFIRMED THE DISALLOWANCE OF RS.2,00,000/ - . THE REVENUE IS IN APPEAL FOR THE DISALLOWANCE DELETED BY CIT(A) AND THE ASSESSEE IS IN APPEAL FOR THE PART DISALLOWANCE OF RS.2,00,000/ - CONFIRMED B Y CIT(A) AND IN THE CROSS OBJECTION ALSO , THE SAME ISSUE IS RAISED BY THE ASSESSEE. 21. ON THIS ISSUE, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT RULE 8D IS 13 NOT APPLICABLE IN THI S YEAR AND THE ESTIMATE MADE BY CIT(A) OF RS.2,00,000/ - IS WITHOUT ANY BASIS. REGARDING THE PART DISALLOWANCE DELETED BY CIT(A), HE PLACED RELIANCE ON THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT COPY OF THE WRITTEN SUBMISSIONS OF THE ASSESSEE FILED BEFOR E THE CIT(A) DATED 30/08/2010 IS AVAILABLE ON PAGE NO. 16 TO 28 AND THE SAME DATED 05/10/2010 IS AVAILABLE ON PAGE NO. 26 TO 29 OF THE PAPER BOOK. HE ALSO PLACED RELIANCE ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF RAJ KUMAR JAIN VS. ACIT [1994] 208 ITR (AT) 22 (ALL). 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS BY NOW A SETTLED POSITION OF LAW THAT PROVISIONS OF RULE 8D ARE NOT APPLICABLE PRIOR TO ASSESSMENT YEAR 2008 - 09 AND SINCE THE ASSESSMENT YEAR INVOLVED IS 2006 - 2007, RULE 8D IS NOT APPLICABLE IN THE PRESENT CASE. AS PER THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE , IT WAS HELD THAT IN SPITE OF THIS THAT RULE 8D IS NOT APPLICABLE PRIOR TO AY 2008 09, REASONABLE DISALLOWANCE SHOULD BE MADE BY THE ASSESSING OFFICER. SINCE THE ASSESSING OFFICER MADE THE DISALLOWANCE BY INVOKING THE PROVISIONS OF RULE 8D, WE FEEL IT PROPER THAT THIS ISSUE SHOULD GO TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION IN THE LIGHT OF THIS JUDGMENT OF HON'BLE BOMBAY HIGH COURT (SUPRA). WE ORDER ACCORDINGLY. 23. THE SECOND ISSUE INVOLVED IS REGARDING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS. 19,79,80,771/ - U/S 35D. THIS CLAIM WAS MADE BY THE ASSESSEE BY WAY OF LETTER DATED 27/11/2008 FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME WAS NOT ENTERTAINED BY THE ASSESSING OFFICER AS PER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS COMMIS SIONER OF INCOME - TAX [2006] 284 ITR 323 (SC) . 14 24. THE LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR A DECISION ON MERIT ON THIS ISSUE. 25. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THIS IS BY NOW A SETTLED POSITION OF LAW AS HAS BEEN STATED BY HON'BLE APEX COURT ITSELF IN THIS VERY CASE THAT EVEN IF THE CLAIM WAS MADE BY THE ASSESSEE WITHOUT FILING REVISED RET URN OF INCOME, THE ASSESSING OFFICER CANNOT CONSIDER THE CLAIM BUT THE SAME MAY BE CONSIDERED BY CIT(A) OR BY THE TRIBUNAL. HENCE, WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF THE ASSES SING OFFICER FOR DECISION ON MERIT. HENCE, WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND RESTORE THE ENTIRE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECISION AS PER LAW AFTER PROVIDING ADEQUATE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 27. IN THE RESULT, THE APPEAL OF THE ASSESSEE AND REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE STAND ALLOWED PARTLY FOR STATISTICAL PURPOSES. 2 8 . NOW WE TAKE UP THE CROSS APPEALS OF THE ASSESSEE AND THE REVENUE FOR ASSESSMENT YEAR 2 007 - 08. 29. IN ITS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE NOTICE UNDER SECTION 143(2) HAVING NOT BEEN ISSUED WITH REFERENCE TO THE SUCCESSIVE REVISED 'RETURNS' FILED BY THE APPELLANT, ENTIRE 'VARIATION' BETWEEN THE ' RETURNED INCOME' AND ' ASSESSED INCOME' AS MADE/SUSTAINED BY THE AUTHORITIES BELOW, AS PER PARTICULARS GIVEN BELOW: - 15 SI. NO. DISALLOWANCES MADE ADDITIONS MADE/ SUSTAINED BY JT. C I T IN TERMS OF ASSESSMENT ORDER DATED 31.12.2009 (RS.) BY CIT(A) AS PER APPELLATE ORDER DATED 16.08.2012 (RS.) (A) OUT OF BUILDING REPAIRS AND MAINTENANCE EXPENSES. 2,08,997 2,08,997 (B) OUT OF POWER & FUEL EXPENSES . 8,91,543 8,91,543 (C) PREMIUM PAID TO NEW INDIA ASSURANCE COMPANY FOR ACCIDENT POLICY & MEDICLAIM POLICY FOR EMPLOYEE/ DIRECTORS. 2,16,499 2,16,499 (D) OUT OF 'OTHER EXPENSES' 5,00,000 1,00,000 (E) OUT OF MEMBERSHIP FEE. 76,342 (F) DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D. 52,32,539 2,00,000 IS VITIATED AND THE SAME IS LIABLE TO BE QUASHED. 2. BECAUSE IN ANY CASE, THERE IS AN APPARENT 'DISHARMONY' BETWEEN THE 'INCOME - TAX AUTHORITY' ISSUING NOTICE UNDER SECTION 143(2) AND THE 'INCOME - TAX AUTHORITY' PASSING THE ASSESSMENT ORDER AND OWING TO SUCH A 'DISHARMONY', THE ASSESSMENT ORDER DATED 31.12.200 9 AS ALSO THE 'VARIATION' BETWEEN THE 'RETURNED INCOME (FINALLY REVISED)' AND 'ASSESSED INCOME' (AS PER PARTICULARS GIVEN IN GROUND NO. 1 HEREINFORE) IS WHOLLY WITHOUT JURISDICTION AND ACCORDINGLY DESERVED TO BE HELD AND DECLARED AS VOID AB - INITIO. 3. BE CAUSE THE JT. CIT BEING NOT VALIDLY VESTED WITH THE JURISDICTION OF THE ASSESSING OFFICER IN THE INSTANT CASE, THE ASSESSMENT ORDER ITSELF IS ILLEGAL AS BEING WITHOUT JURISDICTION AND THE CIT(A), ON A DUE CONSIDERATION OF THIS ASPECT, HIMSELF SHOULD HAVE D ECLARED THE ASSESSMENT ORDER DATED 31.12.2009 TO BE NULL AND VOID, SO AS TO HAVE THE EFFECT OF DELETING VARIOUS 'DISALLOWANCES' AS MADE IN THE ASSESSMENT AS PER PARTICULARS GIVEN IN GROUND NO. 1 ABOVE, IN TOTO. 16 WITHOUT PREJUDICE TO THE AFORESAID 4. BECAUSE, WHILE UPHOLDING THE DISALLOWANCE OUT OF 'POWER AND FUEL EXPENSES' AT RS.8,91,543/ - , THE CIT(A) HAS FAILED TO APPRECIATE AND CONSIDER IN RIGHT PERSPECTIVE THAT (A) THE APPELLANT IS A BODY CORPORATE IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED AND THE RE COULD NOT HAVE BEEN ANY 'PERSONAL EXPENSE' ATTRIBUTABLE TO IT; (B) THE EXPENSES UNDER THE HEAD 'POWER AND FUEL' AS ATTRIBUTABLE TO THE DIRECTORS' RESIDENCES HAD BEEN INCURRED IN PURSUANCE OF VERY TERMS AND CONDITIONS OF THE APPOINTMENT OF DIRECTORS AS APPRO VED IN THE ANNUAL GENERAL MEETING OF THE COMPANY, AS PER WHICH THEY HAVE BEEN PERFORMING THEIR RESPECTIVE DUTIES AS DIRECTORS; (C) IN ANY CASE THE DIRECTORS' HAVE BEEN PERFORMING THEIR OFFICIAL DUTIES ALSO FROM THEIR RESPECTIVE RESIDENCES AND WHOLE OF SUCH EXP ENSES WERE FOR THE BENEFIT OF THE APPELLANT COMPANY AND FOR THE BUSINESS CARRIED ON BY IT; (D) THE CUMULATIVE EFFECT OF (A), (B) & (C) ABOVE WAS THAT THE PAYMENTS IN QUESTION WERE INCURRED ON CONSIDERATIONS OF COMMERCIAL EXPEDIENCE; AND ACCORDINGLY, NO PART O F THE EXPENSES CLAIMED BY THE APPELLANT COMPANY COULD HAVE BEEN DISALLOWED. 4. BECAUSE, WHILE UPHOLDING DISALLOWANCE OF PREMIA PAID ON PERSONAL ACCIDENT AND MEDICLAIM POLICIES OF THE DIRECTORS/EMPLOYEES, CIT(A) HAS FAILED TO APPRECIATE AND MISSED TO NOTE THAT : (A) SUCH PREMIA WERE PAID IN PURSUANCE OF TERMS AND CONDITIONS OF THE APPOINTMENT OF THE PERSONS CONCERNED, DULY APPROVED BY THE APPELLANT COMPANY; (B) THE PAYMENTS IN QUESTION, IN ANY CASE, HAD BEEN MADE BY THE APPELLANT COMPANY/ IN ORDER TO COVER ITS LIAB ILITY TO MEET ITS OBLIGATION TOWARDS ITS EMPLOYEES/DIRECTORS; (C) T HE PAYMENTS WERE GOVERNED SOLELY BY CONSIDERATIONS OF COMMERCIAL EXPEDIENCY; AND (D) AND ACCORDINGLY WHOLE OF THE PAYMENTS MADE BY THE APPELLANT WERE LIABLE TO BE ALLOWED AS LEGITIMATE BUSINESS EXP ENDITURE INCURRED BY THE APPELLANT DURING THE COURSE OF CARRYING ON OF ITS BUSINESS. 17 5. BECAUSE EXPENSES CLAIMED BY THE APPELLANT UNDER VARIOUS HEADS OF EXPENDITURE INCLUDING 'OTHER EXPENSES' WERE FULLY VERIFIABLE AND DISALLOWANCE OF RS.1.00 LAC AS SUSTA INED BY CIT(A) OUT OF ADHOC DISALLOWANCE OF RS.5.00 LACS (AS MADE IN THE ASSESSMENT) IS WHOLLY ARBITRARY AND IN ANY CASE MUCH TOO HIGH AND EXCESSIVE. 6. BECAUSE CIT(A) HAS ERRED IN LAW IN UPHOLDING THE APPLICABILITY OF SECTION 14A OF THE ACT, IN THE CASE OF THE APPELLANT AND IN SUSTAINING A DISALLOWANCE TO THE EXTENT OF RS.2.00 LACS (OUT OF DISALLOWANCE OF RS.52,32,539/ - AS HAD BEEN MADE IN THE ASSESSMENT). 7. BECAUSE NO EXPENDITURE WAS INCURRED BY THE APPELLANT, WHICH COULD BE SAID TO BE ATTRIBUTABLE TO THE 'TAX FREE INCOME' EARNED BY THE APPELLANT AND ADHOC DISALLOWANCE OUT OF 'EXPENSES' AS HAS BEEN SUSTAINED BY THE CIT(A) AT RS.2.00 LACS IS WHOLLY ERRONEOUS. 8. BECAUSE THE CIT(A) WHILE ESTIMATING THE ELEMENT OF DISALLOWANCE OF RS.2.00 LACS OUT OF EXPE NSES, HAS FAILED TO APPRECIATE THAT EXPENDITURE INCURRED BY THE APPELLANT WAS ATTRIBUTABLE, WHOLLY AND EXCLUSIVELY TO THE BUSINESS CARRIED ON BY IT, INCOME WHEREFROM WAS TAXABLE AND ACCORDINGLY NO DISALLOWANCE WAS CALLED FOR, EVEN BY INVOKING THE PROVISION S OF SECTION 14A OF THE ACT. 9. BECAUSE THE ORDER APPEALED AGAINST IS .CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 30. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.4,00,000/ - OUT OF TOTAL DISALLOWANCE OF RS.5,00,000/ - MADE AGAINST EXPENSES OF RS. RS.3,43,47,064/ - WITHOUT APPRECIATING THE FACT THAT EXPENSES NOT SUPPORTED BY BILLS AND VOUCHERS WERE NOT O PEN FOR VERIFICATION. THE LEARNED CIT(A) RESTRICTED THE ADDITION UPTO RS.1,00,000/ - WHEREAS ADDITION OF RS.5,00,000/ MADE BY THE AO WAS REASONABLE WHEN SEEN AGAINST THE AMOUNT CLAIMED AS EXPENDITURE. 18 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.50,32,539/ - MADE U/S 14A IN VIEW OF THE DECISION RENDERED IN THE CASE OF GODREJ & BOYCE THAT RULE 8D WOULD BE APPLICABLE FOR THE A.Y, 2008 - 09 WITHOUT APPRECIATING THE FACT THAT RUL E 14A WAS ALREADY IN EXISTENCE AND RULE 8D WAS MERELY INTRODUCED TO CLARIFY THE MODE OF CALCULATION OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME. THE CIT(A) HIMSELF HAS DIRECTED THE AO TO LIMIT THE DISALLOWANCE U/S 14 - A OF THE ACT UPTO RS.2,00,000/ - . 3. THAT ON BOTH GROUNDS 1 AND 2 THE LD. CIT(A) WAS IN AGREEMENT WITH THE REASONING OF THE A.O. AND HAS ONLY RESTRICTED DISALLOWANCE TO A FIGURE LOWER THAN THAT ADOPTED BY THE A.O. THE L D. CIT (A) HAS DONE THIS WITHOUT THE BENEFIT OF ANY ADDITIONAL EVIDENC E BEING LED BEFORE HIM OR ANY REMAND REPORT FROM THE A.O. THE ORDER OF THE LEARNED CIT(A) IS, THEREFORE, ERRONEOUS AND DESERVES TO B E SET ASIDE. 4. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL OR TAKE ADDITIONAL GROUND DURING DIE PENDENCY OF THIS APPEAL. 3 1 . REGARDING THE FIRST THREE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL, WE FIND THAT THESE GROUNDS ARE TECHNICAL GROUNDS REGARDING VALIDITY OF THE ASSESSMENT PROCEEDINGS BUT NO SUCH GROUND WAS RAISED BY THE ASSESSEE BEFORE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAD RAISED ONLY FOUR GROUNDS REGARDING MERIT OF VARIOUS ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFICER. HENCE, THESE TECHNICAL ISSUES CANNOT BE RAISED BY THE ASSESSEE BEFORE US BY WAY OF REGULAR GROUND BECAUSE THIS ISSUE IS NOT ARISING OUT OF THE ORDER OF CIT(A). HOWEVER, IT BEING A LEGAL ISSU E, THE SAME COULD HAVE BEEN RAISED BY THE ASSESSEE BEFORE US BY WAY OF ADDITIONAL GROUND BUT THE ASSESSEE HAS NOT DONE SO. MOREOVER, THE ONLY OBJECTION OF THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS NOT ISSUED NOTICE U/S 143(2) OF THE ACT WITH REFERENC E TO THE SUCCESSIVE REVISED RETURN FILED BY THE ASSESSEE . THE LEARNED 19 AR OF THE ASSESSEE HAS NOT RAISED ANY ARGUMENT DURING THE COURSE OF HEARING BEFORE US ON THIS ISSUE AND LEARNED A.R. OF THE ASSESSEE HAS SIMPLY SUBMITTED HIS ARGUMENTS ON MERIT O F VARIOU S ISSUES RAISED IN THIS APPEALS AND IT WAS AGREED THAT THESE ISSUES ARE IDENTICAL TO VARIOUS ISSUES RAISED BY BOTH THE SIDES IN PRECEDING TWO YEARS, WHICH WERE HEARD TOGETHER I.E. ASSESSMENT YEAR 200 4 - 200 5 AND 200 6 - 200 7 AND THEREFORE, THE SAME CAN BE DECI DED ON SIMILAR LINES. HENCE, FROM THIS CONDUCT OF LEARNED A.R. OF THE ASSESSEE , IT COMES OUT THAT HE HAS NOTHING TO ARGUE ON THIS LEGAL ISSUE BEFORE US BUT STILL WE DECIDE THIS ISSUE AS PER THE LEGAL POSITION. IN OUR CONSIDERED OPINION, A REVISED RETURN FURNISHED U/S 139 (5) OF THE IT ACT IS NOTHING BUT RECTIFICATION OF THE EARLIER RETURN SUBMITTED U/S 139 (1). IF THAT IS NOT SO, A PERSON CAN FILE REVISED RETURN ONLY ONCE TO RECTIFY THE RETURN FILED BY HIM U/S 139 (1) BECAUSE FILING ANY SUBSEQUENT REVISED RETURN WILL BE A RECTIFICATION OF REVISED RETURN FILED U/S 1 39 (5) BUT AS PER SECTION 139 (5), ONLY A RETURN FILED U/S 139 (1) CAN BE RECTIFIED AND THERE IS NO MENTION THAT A REVISED RETURN FILED U/S 139 (5) CAN ALSO BE REVISED. HENCE, IF THE CLAIM OF THE ASSESSEE IS ACCEPTED THAT SEPARATE NOTICE IS REQUIRED TO BE ISSUED U/S 143 (2) AFTER FILING OF EACH REVISED RETURN, IT WILL AMOUNT TO ACCEPTING THE SECOND AND SUBSEQUENT REVISED RETURNS ARE NOT RECTIFYING THE ORIGINAL RETURN AND IN THAT CASE, SUCH SECOND AND SUBSEQUENT REVISED RETURNS ARE TO BE HELD TO BE INVALID AND IN THAT CASE ALSO, THERE WILL NOT BE ANY NEED TO ISSUE ANY FRESH NOTICE U/S 143 (2). AS PER THIS DISCUSSION, IN OUR CONSIDERED OPINION, IF A VALID NOTICE U/S 143 (2) IS ISSUED, THEN THERE IS NO NEED TO ISSUE A FRESH NOTICE U/S 143 (2) FOR THIS REASON ALONE THAT A REVISED RETURN HAS BEEN FILED BY THE ASSESSEE AFTER THE ISSU E OF NOTICE U/S 143 (2). IN THE PRESENT CASE, THIS IS NOT THE CASE OF THE ASSESSEE THAT NO VALID NOTICE U/S 143 (2) WAS ISS UED AND HENCE, WE DO NOT FIND ANY MERIT IN THESE LEGAL GROUNDS AND, THEREFORE, GROUND NO. 1,2&3 ARE REJECTED. 3 2 . NOW WE DECIDE THE MERITS OF VARIOUS ISSUE S RAISED BY BOTH THE SIDES. 20 3 3 . AS PER GROUND NO. 4, THE ASSESSEE IS DISPUTING THE CONFIRMATION OF DISALLOWANCE OF RS.8,91,543/ - MADE BY THE ASSESSING OFFICER OUT OF POWER AND FUEL EXPENSES. THIS ISSUE IS SIMILAR TO THE DISALLOWANCE OF RS.7,61,473/ - MADE BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2004 - 05. THIS ISSUE HAS BEEN DECIDED BY US AS PER PAR A 17 OF THIS TRIBUNAL ORDER AND THE DISALLOWANCE WAS CONFIRMED IN THAT YEAR. ACCORDINGLY, IN THE PRESENT YEAR ALSO, THIS DISALLOWANCE IS CONFIRMED AND GROUND NO. 4 IS REJECTED. 3 4 . AS PER GROUND NO. 4(A), THE ASSESSEE IS DISPUTING THE CONFIRMING THE DIS ALLOWANCE OF PREMIUM PAID BY THE ASSESSEE COMPANY ON PERSONAL ACCIDENT AND MEDICLAIM POLICIES OF THE DIRECTORS/EMPLOYEES. THIS ISSUE IS IDENTICAL WITH THE ISSUE RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2004 - 05 REGARDING CONFIRMING OF THE DISALLOWANCE OF RS.2,01,090/ - MADE BY THE ASSESSING OFFICER IN RESPECT OF INSURANCE PREMIUM PAID ON THE LIFE OF THE DIRECTORS. THIS ISSUE HAS BEEN DECIDED BY US AS PER PARA 16 OF THE TRIBUNAL ORDER AND THE SAME DISALLOWANCE WAS CONFIRMED IN THAT YEAR. ACCORDINGLY, ON TH E SAME LINE, IN THE PRESENT YEAR ALSO, THIS DISALLOWANCE IS CONFIRMED. GROUND NO. 4(A) IS REJECTED. 3 5 . THE NEXT ISSUE RAISED BY THE ASSESSEE IS INTERCONNECTED WITH GROUND NO. 1 RAISED BY THE REVENUE. IN FACT , THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.5,00,000/ - OUT OF EXPENSES OF RS.343.47 LACS. THE LEARNED CIT(A) UPHELD THE DISALLOWANCE TO THE EXTENT OF RS.1,00,000/ - ONLY AND DELETED THE BALANCE DISALLOWANCE OF RS.4,00,000/ - . NOW THE REVENUE IS IN APPEAL FOR THE DISALLOWANCE DELETED BY CIT(A) OF RS.4,00,000/ - AND THE ASSESSEE IS IN APPEAL FOR THE DISALLOWANCE CONFIRMED BY CIT(A) OF RS.1,00,000/ - . WE FIND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER THE FOLLOWING PARA ON PAGE 4 OF HIS ORDER: FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS CLEAR THAT THIS AMOUNT HAS BEEN DISALLOWED BY THE AO ON ESTIMATED BASIS WITHOUT MENTIONING ANY SPECIFIC ITEM WHICH SHOULD BE DISALLOWED. 21 AS SUCH, I AGREE WITH THE SUBMISSION OF THE ASSESSEE AND FIND THE DISA LLOWANCE TO BE ON HIGHER SIDE. I DIRECT THE AO TO RESTRICT THIS DISALLOWANCE TO RS.1,00,000/ - ONLY. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 3 6 . WE FIND THAT CIT(A) HAS STATED IN THE ABOVE PARA THAT THE AMOUNT HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON ESTIMATED BASIS WITHOUT MENTIONING ANY SPECIFIC ITEM WHICH SHOULD BE DISALLOWED. HAVING OBSERVED SO, IT WAS NOT JUSTIFIED ON HIS PART TO CONFIRM A PART DISALLOWANCE OF RS.1,00,000/ - AS HAS BEEN DONE BY HIM. WE, THEREFORE, DELETE THE SAME. THUS, GROU ND NO. 5 OF THE ASSESSEE IS ALLOWED AND GROUND NO. 1 OF THE REVENUE IS REJECTED. 3 7 . THE NEXT ISSUE RAISED BY BOTH THE SIDES IS INTER - CONNECTED REGARDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT OF RS.52,32,539/ - OUT OF WHICH CIT( A) HAS SUSTAINED THE DISALLOWANCE OF RS.2,00,000/ - AND DELETED THE BALANCE DISALLOWANCE. 3 8 . ON THIS ISSUE, WE HAVE DECIDED IN ASSESSMENT YEAR 2006 - 07 THAT ALTHOUGH RULE 8D IS NOT APPLICABLE PRIOR TO ASSESSMENT YEAR 2008 - 09 BUT STILL , REASONABLE DISALLOWANCE HAS TO BE MADE AND ISSUE WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION IN THE LIGHT OF THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GODREJ & BOYCE CO. (SUPRA). ACCORDINGLY, IN THE P RESENT YEAR ALSO, THE ORDER OF CIT(A) IS SET ASIDE ON THIS ISSUE AND THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION IN THE LIGHT OF THE ABOVE DECISION OF HON'BLE BOMBAY HIGH COURT. THUS, GROUND NO. 6,7&8 OF THE ASSESSEE AN D GROUND NO. 2 OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 3 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES. 22 40 . IN THE COMBINED RESULT, FOR AY 2004 05, THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED AND FOR AY 2006 07 AND 2007 08 , THE APPEAL S OF THE ASSESSEE AND REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE STAND ALLOWED PARTLY FOR STATISTICAL PURPOSES . (ORDER WA S PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 6 / 03 /2014 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. DR, ITAT, LUCKNOW