DCIT 4(3)(1), MUMBAI V. TRIBHOVANDAS BHIMJI ZAVERI, MUMBAI

ITA 2455/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7787 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2011-2012
• Appeal Filed On: 29-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Section: 143(3); 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ITA NO. 2 454 AND 2 455 / MUM/ 20 1 5 ( / ASSESSMENT YEAR: 20 10 - 11 AND 2011 - 12 ) DY. C OM MISSIONER OF I NCOME TAX, 4 ( 3 )(1) , AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 / VS. M/S TRIBHOVANDAS BHIMJI ZAVERI, 241/43, ZAVERI BAZAR, ZAVERI BAZAR ROAD, MUMBAI - 400002 ./ ./ PAN : AACCT7182P ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI T A KHAN /RESPONDENT BY : SHRI MANDAR VAIDYA / DATE OF HEARING : 25.1.2017 / DATE OF PRONOUNCEMENT : 17. 3 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: THESE ARE THE TWO APPEALS FILED BY THE REVENUE AGAINST THE TWO SEPARATE ORDERS DATED 9.2.2015 AND 1 1 .2.2015 PASSED BY THE LD.CIT(A) FOR THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 RESPECTIVELY. SINCE ISSUE INVOLVED IN THESE APPEAL S ARE COMMON, THEREFORE, FOR THE SAKE OF CONVENIENCE , THESE APPEALS WERE CLUBBED TOGETHER, HEARD TOGETHER AND ARE BEING DISPOSE OF BY THIS CONSOLIDATED ORDER. 2 ITA NO. 2 454 AND 2 455 / MUM/201 5 ITA NO.2 454 /MUM/2015 2. THIS APPEAL IS ARISING OUT OF THE ORDER PASSED BY THE LD.CIT(A) PASSED A GAINST THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT IN WHICH FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: 1 - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO DELETE THE ADDITION OF RS .1,10,70,831 - MADE BY THE AO U / S 80 IB OF I.T.ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS BOOKED MAJORITY OF ITS OTHER EXPENSES IN THE HEAD OFFICE ACCOUNT AND TO THAT EXTENT HAS SHOWN HIGHER ARTIFICIAL EXTRAORDINARY PROFITS IN THE HYDERABAD UNIT IN WHICH ASSESSEE HAS CLAIMED DEDUCTION UNDER 80LBOF THE ACT'. 2 - 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO DELETE THE SHOP INAUGURATION, EXHIBITION EXPENSES AND SALES PROMOTION EXPENSES O F RS. 24,99,481/ - DISALLOWED BY THE AO AT 10% OF THE TOTAL EXPENDITURE CLAIMED WHEN THE TRANSACTIONS OF CASH PAYMENTS RECORDED IN JOURNAL ENTRIES FORM CAN NOT BE VERIFIED FOR ITS GENUINENESS 3 . THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE DELETION O F ADDITION OF RS.1,10,70,831 / - BY CIT(A) AS MADE BY THE AO BY INVOKING THE PROVISIONS OF S . 80IB (13) OF I.T.ACT ON THE GROUND THAT THE ASSESSEE HAS SHOWN HIGHER ARTIFICIAL EXTRAORDINARY PROFITS IN THE HYDERABAD UNIT IN ORDER TO CLAIM HIGHER AMOUNT OF DE DUCTION. 4. FACTS OF THE CASE ARE THAT THE ASSESSEE HAS VARIOUS UNITS AS BRANCHES IN DIFFERENT LOCATIONS AND HAS CLAIMED DEDUCTION UNDER SECTION 80IB IN RESPECT OF T HE PROFITS OF THE HYDERABAD UNITS . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OB SERVED THAT THE PROFIT IN RESPECT OF 3 ITA NO. 2 454 AND 2 455 / MUM/201 5 HYDERABAD UNITS WAS MUCH HIGHER VIS - - VIS THE OTHER UNITS OF THE ASSESSEE IN TERMS OF PERCENTAGE OF TURNOVER. THE AO ISSUED NOTICE TO THE ASSESSEE AS TO WHY THE PROFIT IN RESPECT OF HYDERABAD UNIT SHOULD NOT BE RE - WO RKED AND RE - CALCULATED IN TERMS OF THE PROVISION OF SECTION 80IB(13) OF THE ACT BY APPLYING NET PROFIT RATIO OF THE ENTIRE BUSINESS OF T HE ASSESSEE WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 7.3.2013 BY FILING CHART SHOW ING THE EXPENSES HEA D - WISE AND BRANCH - WISE LISTING OUT VARIOUS ITEMS OF EXPENSE AND ALSO ALLOCAT ION OF PARTNERS REMUNERATION, INTEREST TO OTHERS, BANK INTEREST AND WORKING CAPITAL INTEREST. THE ASSESSEE ALSO SUBMITTED THAT ALL THE EXPENSES HAVE DULLY ALLOCATED TO THE RESP ECT IVE BRANCH ES AND THE ASSESSEE HAS NOT S HOWN LESSER EXPENSES IN ORDER TO CLAIM HIGHER DEDUCTION UNDER SECTION 80IB OF THE ACT. THE ASSESSEE ALSO FILED A CHART SHOWING BRANCH - WISE SALES AND GROSS PROFIT RATIO WHICH SHOWS THAT THE GROSS PROFIT RATIO O F HYDERABAD UNIT WAS 14.07% WHICH IS LESSER THAN THE 9 BRANCHES OF THE ASSESSEE . HOWEVER, THE AO WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE AND CAME TO THE CONCLUSION THAT THE ASSESSEE HAS SUPPRESSED THE EXPENSES IN RESPECT OF HYDERABAD UNIT AND ACCORDING LY RE - WORKED THE PROFIT AND RESTRICTED THE DEDUCTION U/S 80IB TO RS. RS. 63,92,644/ - IN PLACE OF RS. 1,74,63,475/ - CLAIMED BY THE ASSESSEE THEREBY MAKING AN ADDITION OF RS. RS.1,10,70,831/ - TO THE INCOME OF THE ASSESSEE . AGGRIEVED BY THE ORDER OF T HE AO, THE ASSESSEE FILED AN APPEAL 4 ITA NO. 2 454 AND 2 455 / MUM/201 5 BEFORE THE LD. CIT(A) WHO ALLOWED TH E APPEAL O F THE ASSESSEE AFTER CONSIDERING VARIOUS SUBMISSIONS RAISED BY OBSERVING AND HOLDING AS UNDER : 2.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER PASSED BY THE AO AND THE SUBMISSION MADE BY THE APPELLANT. IT IS SEEN THAT THE APPELLANT HAS CLAIMED DEDUCTI ON U/ S. 80IB IN RESPECT OF PROFITS OF HYDERABAD UNIT. THE DEDUCTION WAS CLAIMED BY THE APPELLA NT U/ S. 80LB ON BASIS OF AUDITED ACCOUNTS OF THE PRESENT Y EAR AND AS PER THE PROFIT OF THE SAID UNIT AS PER THE AUDITED P&L A/ C. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERV ED THAT NET PROFIT OF HYDERABAD UNIT WAS MORE AS COMPARED TO GLOBAL BUSINESS OF THE APPELLA NT HE ALSO OBSERVED THAT THE APPELLA NT HAS BOOKED MAJORITY OF ITS OTHER EXPENSES PERTAINING TO HYDERABAD UNIT IN THE HEAD OFFICE ACCOUNT. IN VIEW OF THIS, THE AO RECOMPUTED THE DEDUCTI ON U/ S. 80IB BY INVOKING THE PROVISIONS OF SECTION 80IB (13) AND DEDUCTION U/ S. 80IB ALLOWA BLE WAS COMPUTE D AT RS.63,92,644/ - AS AGAINST DEDUCTION OF RS.1,74,63,474/ - CLAIMED BY T HE APPELLANT. THE APPELLANT ON THE OTHER HAND CONTENDED THAT DEDUCTION U/S. 80IB HAS BE EN CLAIMED AS PER AUDITED P&L A/ C. THE APPELLANT ALSO CONTENDED THAT THE CLAIM HAS REGULA RLY BEEN MADE ON THE BASIS OF AUDITED ACCOUNTS RIGHT FROM 2002 - 03 AND NEVER IN THE PAST THE CLA IM WAS DENIED. 2.3 THE APPELLANT ALSO CONTENDED THAT GROSS PROFIT OF HYDERABAD UNIT WAS IN FACT LESS AS COMPARED TO NINE BRANCHES. IN VIEW OF THESE FACTS, THE APP ELLANT HAS CONTENDED THAT DEDUCTI ON U/ S. 80IB HAS RIGHTLY BEEN CLAIMED._ AFTER CONSIDERING ENTIRE MATERIAL AVAILABLE ON RECORD, IT IS SEEN THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUGGEST THAT THE APPELLANT HAS DELIBERATELY SHOWN HIGHER PROFI T BY DIVERTING THE EXPENSES OF UNIT TO HEAD OFFICE. NOT A SIN GLE INSTANCE OF SUCH EXPENSES PERTAINING TO BRANCH, WHICH AS PER THE AO, WAS DEBITED TO HE AD OFFICE ACCOUNT BROUGHT BY THE AO ON RECORD. IT IS, FURTHER SEEN THAT THE APPELLANT HAS SH OWN LESSER GR OSS PROFIT IN HYDERABAD UNIT AS COMPARED TO NINE OTHER BRANCHES. FURTHER, T HE PROFITABILITY OF BRANCHES DEPENDS ON VARIOUS FACTORS SUCH AS ITEM SOLD, TURN OVER, COST OF MAN POWER , EXPENDITURE INCURRED INCLUDING INTEREST ETC. THUS, ONE CANNOT ASSUME THAT PR OFIT OF ALL THE BRANCHES CAN BE THE SAME, I F THESE ARE CARRYING OUT THE SIMILAR BUSINESS. IT IS FURTHER SE EN THAT SIMILAR ISSUE WAS EXAMINED BY THE AO IN A.Y. 2009 - 10 ALSO AND NO ADDITION WAS MA DE AFTER CONSIDERING THE APPELLANT'S SUBMISSION IN A.Y. 2009 - 1 0, WHICH IS REPRODUCED BELOW : - 5 ITA NO. 2 454 AND 2 455 / MUM/201 5 ' 'COMPUTATION OF GROSS PROFIT RATIO OF HYD ERABAD, PUNCHGUTTA BRANCH VIA - S/VIA THE SAME IN RESPECT O[THE ORGANIZATION AS A WHOLE FOR THIS, WE ARE ENCLOSING HEREWITH ANNEXURE - XL, WHICH SHOWS THE GROSS PROFIT RATIO FOR THE ENTIRE COMPANY IN RESPECT OF EACH OF THE ITEMS SUCH AS DIAMOND, GOLD, J ADAU, SILVER, PLATINUM ETC. SIMILARLY, THE CHART ALSO SHOWS THE GROSS PROFIT RATIO IN RESPECT OF HYDERABAD, PUNCHGUITA BRANCH FOR EACH OF THE VERY SAME ITEMS WHICH ARE SHOWN FOR THE C OMPANY AS A WHOLE. YOU WILL KINDLY NOTICE FROM THIS CHART THAT GROSS PROFIT RATIO IS LOWER IN HYDERABAD BRANCH FOR DIAMOND AS WELL AS GOLD WHICH ARE THE MAIN TWO ITEMS. THE RATIO FOR THE DIAMOND IS 25.09 % AND FOR GOLD IT IS 9.70 % FOR THE COMPANY AS A W HOLE AND THE SAME RATIOS FOR HYDERABAD BRANCH ARE 21.17 % AND 9.33%. THUS, IN BOTH THE CASES, THE PROFIT IS LESS FOR HYDERABAD BRANCH THAN FOR THE COMPANY AS A WHOLE. SIMILAR IS THE POSITION WITH REGARD TO REMAINING OTHER ITEMS EXCEPT FOR SILVER AND PLAT INUM WHERE THE GP RATIO IS 12.26% AND 21.03% FOR THE COMPANY FOR THE COMPANY AS A WHOLE. THE SAME RATIOS FOR THE HYDERABAD BRANCH ARE 13.78% AND 22.48%. THUS, IN RESPECT OF BOTH THESE ITEMS GP RATIO IS MORE BY ABOUT 1 %. HOWEVER, YOU WILL FURTHER NOTICE IN RESPECT OF THESE TWO ITEMS THAT THE TURNOVER FOR THESE ITEMS IS COMPARATIVELY VERY LESS COMPARED TO DIAMOND AND GOLD WHICH ARE THE MAJOR ITEMS. (FIGURES FOR BRANCH - TURNOVER FOR DIAMOND RS.23.73 CRORES AND GOLD RS.73.09 CRORES AND FOR SILVER, IT IS 1.03 CR ORES AND PLATINUM IT IS ONLY 6.79 LACS). EVEN THE OVERALL PERCENTAGE OF THE TOTAL TURNOVER OF ALL THE ITEMS FOR THE COMPANY AS A WHOLE IS 13.54% AND FOR THE HYDERABAD, THE SAME IS 12.29%. THUS, THE PROFIT FOR HVDERABAD BRANCH IS THE NORMAL AND NOT HIGHER C OMPARED TO THE PROFIT RATIO OF THE COMPANY AS A WHOLE. (PLEASE SEE PAGE NO.1)' 2.4 IN VIEW OF THE FOREGOING, I AM OF THE OPINION THAT THE 1 \ 0 WAS NOT JUSTIFIED BY INVOKING PROVISIONS OF SECTION 80IB (13), PARTICULARLY IN LIGHT OF THE FACT THAT NO MATERIA L HAS BEEN B ROUGHT ON RECORD TO SUGGEST THAT THE APPELLANT SHOWED HIGHER PROFIT BY CLAIMING LESS EXPENDITURE OR BY FINDING ANY DEFECTS IN PROFIT AND LOSS ACCOUNT . OF THE UNIT. IN VIEW OF THE FOREGOING, THE CLAIM OF DEDUCTION U/ S. 80IB BY THE APPELLANT IS IN ORDER AND ACCORDINGLY, ADDITION MADE BY THE 6 ITA NO. 2 454 AND 2 455 / MUM/201 5 AO IS DIRECTED TO BE DELETED. THE GROUND OF APPEAL , IS THUS, TREATED AS ALLOWED. 5 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAW RELIED UPON BY THE ASSESSEE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002 - 03. THE LD. AR VEHEMENTLY SUBMITTED BEFORE US THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT IN RESPECT OF HYDERABAD UNIT AND ALL THE EXPENSES WERE F ULLY VOUCHED AND SUPPORTED WITH DOCUMENTARY EVIDENCES. THE LD. AR WHILE RELYING HEAVILY ON THE ORDER OF T HE CIT(A) SUBMITTED THAT THE FINDING S OF THE AO THAT THE PROFITS OF THE HYDERABAD UNITS WERE VERY HIGH AS COMPARED TO OTHER UNITS WERE FACTUALLY W RONG AS THE PROFIT OF THE HYDERABAD UNIT WAS 14.09% WHICH WAS AS COMPARED TO 9 OTHER BRANCHES OF T HE AS S ES S EE . BESIDES , THE AO DID NOT POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNT AND PROCEEDED TO INVOKE THE PROVISIONS OF SECTION 80IB (13) OF TH E ACT WHICH WAS WRONG AND AGAINST THE FACTS ON RECORDS BASED ON THE WRONG BELIEF THAT THE RATE OF NET PROFIT WAS HIGHER IN CASE OF HYDERABAD UNIT VIS - A - VIS OTHER UNITS OF THE ASSESSEE . THE LD. AR SUBMITTED THAT THE CASE OF THE ASSESSEE IN HAND WAS COVERED BY T HE TRIBUNAL IN ASSESSEES CASE FOR THE ASSESSMENT YEAR 2002 - 03 IN ITA NO.8316/MUM/2003 DATED 13.6.2007, WHEREIN THE SIMILAR QUESTION HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. FINALLY, THE LD.AR PRAYED BEFORE THE BENCH THAT IN VIEW OF T HE ORDER OF THE FAA BEING AS PER LAW AND 7 ITA NO. 2 454 AND 2 455 / MUM/201 5 PRECEDENCE ESPECIALLY THE EARLIER ORDER OF THE COORDINATE BENCH IN ASSESSEE S OWN CASE DESERVED TO UPHELD . THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF AO AND SUBMITTED THAT THE ORDER OF THE FAA SHOULD BE REVERSED AND THAT OF AO BE RESTORED. AFTE R CONSIDERING THE CONTENTION OF THE LD.DR AND ON PERUSAL OF THE RECORDS, WE FIND THAT THE AO HAS FAILED TO BROUGHT ANY MATERIAL ON RECORD TO PROVE HIS CONTENTIONS THAT THE PROFIT S OF HYDERABAD UNIT WERE EXCEPTIONALLY HIGHER THAN THE OTHER UNITS OF THE AS SESSEE WHERE THE PROFIT PERCENTAGE IS 14.09 WHICH WAS HIGHER AS COMPARED TO 9.3% OF THE OTHER UNITS OF THE ASSESSEE. THE ASSESSEE HAS ALSO FILED STATEMENT GIVING COMPARATIVE CHART OF ALL UNITS SHOWING THE INCOME AND VARIOUS ITEMS OF EXPENSE AND PROFIT FROM EACH UNIT/ BRANCH WITH ALL THE SU PPORTING DOCUMENTARY EVIDENCES BUT THE AO FAILED TO POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNT . WE ARE , THEREFORE, IN AGREEMENT WITH THE FAA WHO HA VE PASSED REASONED ORDER WHICH DOES NOT WARRANT ANY INTERFERENCE AT ALL. MOREOVER, THE CASE OF THE ASSESSEE IS SUPPORT ED BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002 - 03 (SUPRA) WHEREIN VIDE PARA 11 THE BENCH HAS HELD AS UNDER : 11. WE HAVE CONSIDERED THE SUBMISSIONS MADE B Y BOTH SIDES, MATERIAL ON RECORD AND ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, ASSESSEE HAS ESTABLISHED A NEW UNIT AT HYDERABAD. THE ASSESSEE IS IN THE BUSINESS OF JEWELLERY MANUFACTURING. THE PATTERN AND DESIGNS OF JEWELLERY CHANGE IN ACCORDANCE W ITH THE C USTOMERS CHOICES IN DIFFERENT REGIONS. THE ASSESSEE'S UNIT SITUATED AT HYDERABAD IS ACCORDINGLY GETTING IT'S MANUFACTURING OF JEWELLERY AT MUMBAI UNDER THE SUPERVISION AND CONTROL OF IT'S EMPLOYEES THROUGH THE HELP OF MUMBAI OFFICE. THUS, MERE INVOLVEMENT OF MUMBAI OFFICE CANNOT BE 8 ITA NO. 2 454 AND 2 455 / MUM/201 5 SO DOMINANT SO AS TO IGNORE IT IS ALSO NOT IN DISPUTE AT ASSESSEE'S UNIT IS MAINTAINING SEPARATE BOOKS OF ACCOUNT AND IT IS A PART OF THE SAME ASSESSEE, HENCE, INTERNAL ENTRIES MADE IN THE BOOKS OF ACCOUNTS OF HEAD OFFICE AND T HIS UNIT CAN NOT OVER - SHADOW THE NATURE OF OPERATIONS. WE ALSO F IND THAT THE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS OF PENWALT INDIA LTD. (SUPRA), HENCE, THE RATIO OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THAT CASE IS BINDING ON US . IT IS FURTHER NOTED THAT ALL OTHER CONDITIONS HAVE BEEN SATISFIED AND PARTICULARLY, THE ARTISANS ARE EXTERNAL PARTIES. IN THIS VIEW OF THE MATTER, WE HOLD THAT ASSESSEE IS ENTITLED TO THE DEDUCTION U/S. 80IB OF THE ACT IN 'RESPECT OF ITS HYDERABAD UNIT. ACCORDINGLY, THE ORDER OF LEARNED CIT(A) IS CONFIRMED. WE FURTHER HELD THAT THE ALTERNATE CONTENTION REGARDING GROSS PROFIT AND NET PROFIT SHOWN BY THE HYDERABAD UNIT IS ALSO NOT MAINTAINABLE BECAUSE IT DOES NOT EMERGE FROM THE ORDERS OF THE REVENUE AUTHO RITIES AND IT WILL REQUIRE FRESH INVESTIGATION INTO THE FACTS. THUS, THIS GROUND OF THE REVENUE ALSO FAILS. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 6 . THE FACTS OF THE INSTANT CASE ARE MATERIALLY SAME AS IN THE EARLIER YEARS . WE, THEREFORE, RESPECTFULLY FOLLOWING T HE DECISION OF T HE CO - ORDINATE BENCH OF THE TRIBUNAL , UPHOLD THE FINDING O F T HE FAA BY DISMISSING THE APPEAL OF THE REVENUE ON HIS GROUND. 7 . NOW, THE ISSUE RAISED IN THE SECOND GROUND OF APPEAL IS IN RESPECT OF DELETION OF DISALLOWANCE OF RS. 24,99,481/ - BEING 10% OF THE TOTAL EXPENDITURE CLAIMED ON SHOP INAUGURATION, EXHIBITION EXPENSES AND SALES PROMOTION EXPENSES . 8 . THE FACTS IN BRIEF ARE THA T THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED FR OM THE LEDGER ACCOUNT SUPPLIED BY THE ASSES SE E THAT THE ASSESSEE HAS INCURRED AN EXPENSE ON SHOP INAUGURATION, EXHIBITION 9 ITA NO. 2 454 AND 2 455 / MUM/201 5 EXPENSES AND SALES PROMOTION EXPENSES OF RS.3,46,024/ - , RS.1,68,51,537/ - AND RS.88,70,413/ - RESPECTIVELY WHICH W ERE ACCOUNTED FOR THROUGH JOURNAL ENTRIES AND ALL THESE WERE PAID IN CASH AND THEREFORE THESE PAYMENTS WERE NOT VERIFIABLE . THE AO DISALLOWED 10% OF THE TOTAL EXPENSES WITHOUT GIVING ANY COGENT REASON OR THE BASIS . THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSE RVING AND HOLDING AS UNDER: (IV) SHOP INAUGURATION, EXHIBITION EXPENSES AND SALES PROMOTION EXPENSES: - IT IS SEEN THAT THE AO HAS DISALLOWED AN AMOUNT OF RS.24,99,481/ - OUT OF RS.2,49,94,812/ - ON ADHOC BASIS. IT IS SEEN THAT THE AO HAS NOT POINTED OUT ANY PARTICULAR ITEM/DEFECTS IN RESPECT OF CLAIM OF EXPENDITURE MADE. THE AO HAD NOT ADDUCED ANY EVIDENCES TO SHOW THAT THESE EXPENSES WERE NOT INCURRED FOR APPELLANTS BUSINESS. IN VIEW OF THIS, DISALLOWANCE MADE BY THE AO MERELY ON ADHOC BASIS IS NOT J USTIFIED AND ACCORDINGLY, DIRECTED TO BE DELETED . 9 . WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE MATERIAL AVAILABLE BEFORE US INCLUDING THE IMPUGNED ORDER OF THE AUTHORITIES BELOW. AFTER HEARING THE RESPECTIVE PARTIES, WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE EXPENSES ON SHOP INAUGURATION, EXHIBITION EXPENSES AND SALES PROMOTION EXPENSES WERE BOOKED THROUGH JOURNAL ENTRIES AND PAYMENTS WERE MADE MOSTLY IN CASH WHICH COULD NOT BE VERIFIED BY T HE AO A ND MADE AN ADHOC DISALLOWANCE AT THE RATE OF 10 % OF THE TOTAL EXPENSES WITHOUT POINTING ANY DEFECT IN THE BOOKS OF THE ACCOUNT MAINTAINED BY THE ASSESSEE. THE LD. CIT(A) ON THE OTHER HAND, WHILE GIVING RELIEF TO THE ASSESSEE OBSERVE D THAT THE AO HAS 10 ITA NO. 2 454 AND 2 455 / MUM/201 5 FAILED TO BRING ANY MATERIALS ON RECORD OR PIN POINT ANY DEFECT OR DEFICIENCIES IN THE RECORDS OF THE ASSESSEE TO PROVE THE CASE AGAINST THE ASSESSEE AND ALSO THAT THE EXPENSES WERE NOT INCURRED FOR THE PURPOSES AS SHOWN BY THE ASSESSEE IN THE BOOKS OF A CCOUNT. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEWS THAT THERE SHOULD BE A REASONABLE DISALLOWANCE TO COVER ANY DEFECT AS ALL THE PAYMENTS WERE MADE IN CASH WHICH COULD NOT VERIFIED BY THE AO. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSU E AND MADE THE DISALLOWANCE @ 5% OF T HE TOTAL EXPENSES THEREBY ALLOWING THE GROUND OF THE REVENUE PARTLY. THE AO IS DIRECTED TO MAKE THE ADDITION OF RS. 12,49,740/ - . ITA NO.2455/MUM/2015 10. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE DELETION OF A DDITION OF RS.58,16,370/ - BY LD. CIT(A) AS MADE BY T HE AO BY RECALCULATING THE IMPUGNED DEDUCTION UNDER SECTION 80IB OF THE ACT BY HOLDING THAT T HE PROFIT WERE UNREASONABLE AS COMPARED TO THE PROFIT OF OTHER UNITS OF THE ASSESSEE . WE HAVE ALREADY DECID ED THE IDENTICAL ISSUE IN ITA NO.2454/MUM/2015 IN FAVOUR OF THE ASSESSEE. THEREFORE, OUR FINDINGS IN ITA NO.2454/MUM/2015 WOULD , MUTATIS MUTANDI , APPLY TO T HIS APPEAL AS WELL. ACCORDINGLY , REVENUES APPEAL STANDS DISMISSED. 11 ITA NO. 2 454 AND 2 455 / MUM/201 5 1 1 . IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YEAR 2010 - 11 IS PARTLY ALLOWED AND THAT OF FOR THE ASSESSMENT YEAR 2011 - 12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAR , 2017. S D SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 17. 3 . .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDE D TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI