DCIT, Sonepat V. M/s Atlas Cycles (Haryana) Ltd., Sonepat

ITA 2490/DEL/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6732 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-05-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 13-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Business income; Depreciation; Business expenditure; Opportunity of being heard; Rule of consistency; Earning of tax free income; Additional evidence; Notional interest; Revenue expenditure; Capital expenditure
• Section: 40A(3); 143(3); 14A; 37(1)

Judgement Text

ATLAS CYCLES (HARYANA) SONEPAT PAGE 1 OF 70 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.-784/DEL/2010 ( ASSESSMENT YEAR: 2006-07) ATLAS CYCLES (HARYANA) LTD. ATLAS ROAD, INDUSTRIAL AREA SONEPAT. AABCA8412C VS ACIT SONEPAT CIRCLE HARYANA ITA NO.- 913/DEL/2010 ( ASSESSMENT YEAR: 2006-07) ACIT CIRCLE SONEPAT VS ATLAS CYCLES (HARYANA) LTD. ATLAS ROAD, INDUSTRIAL AREA SONEPAT. AABCA8412C ITA NOS.-2490 & 2491/DEL/2011 ( ASSESSMENT YEAR: 2003-04) DCIT SONEPAT CIRCLE SONEPAT VS ATLAS CYCLE (HARYANA) LTD. SONEPAT AABCA8412C ITA NO.-2489/DEL/2011 ( ASSESSMENT YEAR: 2006-07) DCIT SONEPAT CIRCLE SONEPAT VS ATLAS CYCLE (HARYANA) LTD. SONEPAT AABCA8412C ITA NO. 4049/DEL/2013 ( ASSESSMENT YEAR: 2008-09) DCIT SONEPAT CIRCLE SONEPAT VS ATLAS CYCLE (HARYANA) LTD. SONEPAT AABCA8412C ATLAS CYCLES (HARYANA) SONEPAT PAGE 2 OF 70 ITA NOS.-3472 & 3473/DEL/2011 ( ASSESSMENT YEARS: 2005-06 & 2008-09) ACIT SONEPAT CIRCLE SONEPAT VS ATLAS CYCLE (HARYANA) LTD. SONEPAT AABCA8412C ITA NO.-10/DEL/2011 ( ASSESSMENT YEAR: 2007-08) DCIT SONEPAT CIRCLE SONEPAT VS ATLAS CYCLE (HARYANA) LTD. SONEPAT AABCA8412C ITA NO.-2132/DEL/2012 ( ASSESSMENT YEAR: 2009-10) ACIT SONEPAT CIRCLE SONEPAT VS ATLAS CYCLE (HARYANA) LTD. SONEPAT AABCA8412C ITA NO.-4000/DEL/2013 ( ASSESSMENT YEAR: 2003-04) ACIT SONEPAT CIRCLE SONEPAT VS ATLAS CYCLE (HARYANA) LTD. SONEPAT AABCA8412C ASSESSEE BY SH. SALIL AGARWAL, CA SH. SHAILESH GUPTA, CA REVENUE BY SH. SARABJEET SINGH, DR DATE OF HEARING 02.05.2016 DATE OF PRONOUNCEMENT 29.07.2016 ATLAS CYCLES (HARYANA) SONEPAT PAGE 3 OF 70 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : ITA NO. 2490/DEL/2011 HAS BEEN PREFERRED BY TH E REVENUE FOR AY 2003-04, ITA NO. 2491/DEL/2011 HAS BEEN PREFERRED B Y THE REVENUE FOR AY 2004-05, ITA NO. 3472/DEL/2011 HAS ALSO BEEN PREFER RED BY THE REVENUE FOR AY 2005-06, ITA NO. 784/DEL/2010 HAS BEEN PREFERRED BY THE ASSESSEE, WHEREAS ITA 913/DEL/2010 IS THE CROSS APPEAL BY THE REVENUE FOR AY 2006- 07. ITA NO. 10/DEL/2011 HAS BEEN PREFERRED BY THE REVENUE FOR AY 2007- 08, ITA NO. 3473/DEL/2011 HAS BEEN PREFERRED BY THE REVENUE FOR AY 2008- 09, ITA 2132 HAS BEEN PREFERRED BY THE REVENUE FOR AY 2009-10 AND ITA 4000/D/2011 HAS AGAIN BEEN PREFERRED BY THE REVENUE FOR AY 2010-11. SINCE ALL THE APPEALS WERE HEARD TOGETHER, THEY ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. WE NOW TA KE UP THE APPEALS ONE BY ONE: ITA 2490/DEL/2011- AY 2003-04 2. IN THIS APPEAL THE SOLE ISSUE CONTESTED BY THE D EPARTMENT IS THE DELETION OF ADDITION OF RS. 16,795,247/- MADE BY THE AO BY D ISALLOWING THE NOTIONAL INTEREST PAID BY THE ASSESSEE ATTRIBUTABLE ON THE N ON INTEREST BEARING ADVANCES OF RS. 139,593,723/- TO SH. ARUN KAPOOR OUT OF INTE REST BEARING FUNDS. IT WAS ATLAS CYCLES (HARYANA) SONEPAT PAGE 4 OF 70 THE AOS CONTENTION THAT THE ASSESSEE COMPANY HAD G IVEN AN INTEREST FREE LOAN/ADVANCE TO SH. ARUN KAPOOR AMOUNTING TO RS. 80 ,075,724/- & RS. 59,518,000/-. THE AO WAS OF THE OPINION THAT SINCE THE ASSESSEE COMPANY HAD PAID INTEREST ON ITS BORROWED FUNDS AND NO INTE REST WAS CHARGED FROM SH. ARUN KAPOOR, THE INTEREST ATTRIBUTABLE ON THE LOAN GIVEN TO MR. KAPOOR WAS LIABLE TO BE DISALLOWED. IT WAS THE ASSESSEES CON TENTION THAT SH. ARUN KAPOOR HAD EMBEZZLED/MISAPPROPRIATED THE FUNDS OF T HE COMPANY AND A CASE WITH THE POLICE AUTHORITIES (FIRS) WAS ALSO LODGED AGAINST SH. ARUN KAPOOR. IT WAS ALSO SUBMITTED THAT THIS FACT HAS BEEN DULY VERIFIED BY THE LD. CIT (APPEALS), ROHTAK DURING THE APPELLATE PROCEEDINGS FOR AYS 2006-07 & 2007-08, WHEREIN THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE. HOWEVER, THE AO WAS OF THE OPINION THAT THE DEPARTMENT HAD NOT ACCEPTED THE ORDER OF THE LD. CIT (APPEALS) ON THIS ISSUE AND ACCORDINGLY AN ADDITION OF RS. 16,795,247/- WAS MADE. ON APPEAL, THE LD. CIT (APPEALS) REFERRED TO THE ORDER OF THE LD. CIT (APPEALS) FOR AY 2006-07 WHICH READS AS UNDER: IT CANNOT BE DENIED THAT THE AMOUNT HAS BEEN EMBEZ ZLED BY SH. ARUN KAPOOR AND THE APPELLANT HAS SHOWN THE AMOUNTS FICTITIOUSLY AS ADVANCES IN THE BALANCE SHEET. THE AMOUNTS HAVE BEEN SHOWN BECAUSE THE SAME CAN BE RECOVERED AT ANY STAGE SUBS EQUENTLY. THE ATLAS CYCLES (HARYANA) SONEPAT PAGE 5 OF 70 QUESTION OF CHARGING INTEREST OR FORGOING INTEREST DOES NOT ARISE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 ACCORDINGLY, FOLLOWING THE APPELLATE ORDER FOR AY 2006-07, THE ADDITION IN AY 2003-04 ON THIS ISSUE WAS DELETED. 2.2 THE LD. DR SUBMITTED THAT THE LD. CIT (APPEALS) HAS WRONGLY DELETED THIS AMOUNT AND PLACED RELIANCE ON THE ORDER OF THE AO ON THE ISSUE. 2.3 THE LD. AR SUBMITTED THAT THE AMOUNTS WERE NOT ADVANCES BUT PERTAIN TO AMOUNTS WITHDRAWN THROUGH EMBEZZLEMENT AND FRAUD CONDUCTED BY SH. ARUN KAPOOR AGAINST WHICH FIRS HAVE ALSO BEEN LODGE D. IT WAS SUBMITTED THAT SINCE THE ASSESSEE HAS NOT GIVEN THESE AMOUNTS OUT OF ITS OWN FREE WILL BUT THE SAME HAVE BEEN TAKEN THROUGH FRAUD, THE AO HAS BEEN WRONG IN CONCLUDING THAT SUCH AMOUNTS HAVE BEEN DIVERTED BY THE ASSESSEE FOR THE NON BUSINESS PURPOSES. IT WAS SUBMITTED THAT THE COMPA NY HAS TERMINATED THE SERVICES OF SH. ARUN KAPOOR AND LEGAL RECOURSE HAS BEEN TAKEN TO RESOLVE THE ISSUE. IT WAS ALSO SUBMITTED THAT THE COMPANY HAD SURPLUS FUNDS AMOUNTING TO RS. 105.94 AS ON 31 ST MARCH, 2002, THEREFORE, THE AOS CONCLUSION THAT INTEREST BEARING FUNDS HAVE BEEN UTILIZED IS ALSO F ACTUALLY INCORRECT. 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE RECORDS. ATLAS CYCLES (HARYANA) SONEPAT PAGE 6 OF 70 IT IS SEEN THAT THE LD. CIT (APPEALS) HAS EXAMINED THE ISSUE IN DETAIL IN HIS ORDER FOR AY 2006-07 AND HAS AGREED WITH THE AFORES AID CONTENTIONS OF THE ASSESSEE. THE COPIES OF FIRS HAVE ALSO BEEN PLACED ON RECORD AND THE CONTENTION OF THE ASSESSEE ABOUT HAVING SURPLUS FUN DS AS ON 31.03.2002 IS ALSO CORRECT. HENCE, WE FIND NO REASON TO INTERFER E WITH THE ORDER OF THE LD. CIT (APPEALS) AND UPHOLD THE SAME. 2.5 IN THE RESULT, THE APPEAL OF THE DEPARTMENT FOR AY 2003-04 IS DISMISSED. ITA NO. 2491/D/2011 AY 2004-05 3. IN THIS APPEAL THE DEPARTMENT HAS CONTESTED THE ACTION OF THE LD. CIT(APPEALS) ON TWO ISSUES VIZ. (I) DELETION OF ADD ITION OF RS. 16,143,877/- ON ACCOUNT OF NOTIONAL INTEREST ADDED TO THE INCOME OF THE ASSESSEE AND HELD AS ATTRIBUTABLE TO THE NON INTEREST BEARING ADVANCE OF RS. 134,532,307/- TO SH. ARUN KAPOOR. (II) DELETION OF ADDITION OF RS. 5,61 4,948/- MADE BY THE AO U/S 14A OF THE ACT. 3.1 IT IS SEEN THAT THE FIRST ISSUE IS IDENTICAL T O THE ISSUE RAISED BY THE DEPARTMENT IN AY 03-04. IN VIEW OF OUR FINDINGS AN D ADJUDICATION ON THE ISSUE IN AY 03-04, WE DISMISS THIS GROUND OF THE DE PARTMENTS APPEAL. ATLAS CYCLES (HARYANA) SONEPAT PAGE 7 OF 70 3.2 AS FAR AS THE DISALLOWANCE OF RS. 5,614,948/- U /S 14A IS CONCERNED, IT WAS THE CONTENTION OF THE ASSESSEE BEFORE THE AO TH AT THE PROVISIONS OF SEC. 14A DID NOT APPLY IN THE RELEVANT ASSTT YEAR AS NO EXEMPT INCOME HAD BEEN EARNED ON THE BONDS/INVESTMENTS. IT WAS THE ASSESS EES CONTENTION THAT THE INVESTMENTS IN MUTUAL FUNDS WERE MADE DURING AY 03- 04 AND THESE WERE MADE OUT OF THE FREE RESERVES OF THE COMPANY. THE COMPANY WAS HAVING FREE RESERVES AMOUNTING TO RS. 636,176,555/- AND FURTHER THERE WAS A DEPRECIATION RESERVE TO THE TUNE OF RS. 493,887,685/- MAKING A T OTAL OF RS. 1,130,064,240/- AS A TAX PAID FREE RESERVE AND FURTHER THE COMPANY HAD NOT TAKEN ANY SPECIFIC LOAN FOR THE PURPOSE OF MAKING THESE INVESTMENTS. HOWEVER, THE AO NOT ACCEPTING THE ASSESSEES CONTENTION CALCULATED THE INTEREST ATTRIBUTABLE TO SUCH INVESTMENT BY APPLYING THE RATE OF 12% AND ACCORDIN GLY ADDED A SUM OF RS. 5,614,948/- U/S 14A. THE LD. CIT (APPEALS) HOWEVER , DELETED THE ENTIRE ADDITION BY GIVING A SPECIFIC FINDING THAT THE ASSE SSEE HAD INTEREST FREE FUNDS OF RS. 116.26 CRORES AS ON THE DATE OF INVESTMENT, THE SECURED BORROWED FUNDS OF RS. 49.88 CRORES CONSISTED OF RS. 39.68 CRORES A S CASH LIMIT HAVING FIRST CHARGE ON STOCK, DEBTORS AND IMMOVABLE PROPERTIES A ND 10.20 CRORES AS TERM LOAN HAVING FIRST CHARGE ON THE IMMOVABLE ASSETS OF THE COMPANY. THUS, THE LD. CIT (APPEALS) CAME TO THE CONCLUSION THAT SECUR ED LOANS HAD NOT BEEN UTILIZED FOR THE IMPUGNED INVESTMENT IN THE MUTUAL FUND. THE LD. CIT ATLAS CYCLES (HARYANA) SONEPAT PAGE 8 OF 70 (APPEALS) HELD THAT THE AO COULD NOT ESTABLISH NEXU S BETWEEN THE INVESTMENTS IN MUTUAL FUNDS WITH THE INTEREST BEARING FUNDS NOR COULD THE AO ESTABLISH THAT THE EXPENDITURE WAS INCURRED DIRECTLY IN RELAT ION TO THE TAX EXEMPT INCOME. THE LD. CIT(APPEALS) FOLLOWING THE HONBLE PUNJAB & HARYANA HIGH COURT IN HERO CYCLES VS. CIT, 323 ITR 518 (P&H ) DELETED THE ENTIRE ADDITION. 3.2.1 THE DEPARTMENT COULD NOT CONTROVERT THE FINDI NGS OF THE LD. CIT (A) BEFORE US ON BOTH THE ISSUES. 3.2.2 IT IS SEEN THAT THIS ISSUE IS SQUARELY COVERED BY A JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME TAX V/S RELIANCE UTILITIES AND POWER LTD., REPORTED IN (200 9) 313 ITR 340 (BOM). THE FACTS OF THAT CASE WERE THAT THE ASSESSEE VIZ. M/S RELIANCE UTILITIES AND POWER LTD. HAD INVESTED CERTAIN AMOUNTS IN RELIANCE GAS L TD. AND RELIANCE STRATEGIC INVESTMENTS LTD. IT WAS THE CASE OF THE ASSESSEE TH AT THEY THEMSELVES WERE IN THE BUSINESS OF GENERATION OF POWER AND THEY HAD EARNED REGULAR BUSINESS INCOME THERE FROM. THE INVESTMENTS MADE BY THE ASSESSEE IN M/S RELIANCE GAS LTD. AND M/S RELIANCE STRATEGIC INVESTMENTS LTD. WERE DONE O UT OF THEIR OWN FUNDS AND WERE IN THE REGULAR COURSE OF BUSINESS AND THEREFOR E NO PART OF THE INTEREST COULD BE DISALLOWED. IT WAS ALSO POINTED OUT THAT THE ASS ESSEE HAD BORROWED RS.43.62 ATLAS CYCLES (HARYANA) SONEPAT PAGE 9 OF 70 CRORES BY WAY OF ISSUE OF DEBENTURES AND THE SAID A MOUNT WAS UTILISED AS CAPITAL EXPENDITURE AND INTER-CORPORATE DEPOSIT. IT WAS THE ASSESSEES SUBMISSION THAT NO PART OF THE INTEREST BEARING FUNDS (VIZ. ISSUE OF D EBENTURES) HAD GONE INTO MAKING INVESTMENTS IN THE SAID TWO COMPANIES. IT WA S POINTED OUT THAT THE INCOME FROM THE OPERATIONS OF THE ASSESSEE WAS RS.3 13.53 CRORES AND WITH THE AVAILABILITY OF OTHER INTEREST FREE FUNDS WITH THE ASSESSEE THE AMOUNT AVAILABLE FOR INVESTMENTS OUT OF ITS OWN FUNDS WERE TO THE TU NE OF RS.398.19 CRORES. IN VIEW THEREOF, IT WAS SUBMITTED THAT FROM THE ANALYS IS OF THE BALANCE-SHEET, THE ASSESSEE HAD ENOUGH INTEREST FREE FUNDS AT ITS DISP OSAL FOR MAKING THE INVESTMENTS. THE CIT (APPEALS) ON EXAMINING THE SAI D MATERIAL, AGREED WITH THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND DIRECTED HIM TO ALLOW THE SAM E UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. THE REVENUE BEING AGGRIEV ED BY THE ORDER PREFERRED AN APPEAL BEFORE THE ITAT WHO UPHELD THE ORDER OF T HE CIT (APPEALS) AND DISMISSED THE APPEAL OF THE REVENUE. FROM THE ORDER OF THE ITAT, THE REVENUE APPROACHED THE HONBLE HIGH COURT BY WAY OF AN APPE AL. AFTER EXAMINING THE ENTIRE FACTUAL MATRIX OF THE MATTER AND THE LAW ON THE SUBJECT, THE HONBLE HIGH COURT HELD AS UNDER:- IF THERE BE INTEREST-FREE FUNDS AVAILABLE TO AN AS SESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE AS SESSEE HAD ATLAS CYCLES (HARYANA) SONEPAT PAGE 10 OF 70 RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMEN TS WERE FROM THE INTEREST-FREE FUNDS AVAILABLE. IN OUR OPINION, THE SUPREME COURT IN EAST INDIA PHARMACEUTICAL WORKS LTD. V. CI T (1997) 224 ITR 627 HAD THE OCCASION TO CONSIDER THE DECISI ON OF THE CALCUTTA HIGH COURT IN WOOLCOMBERS OF INDIA LTD. (1 982) 134 ITR 219 WHERE A SIMILAR ISSUE HAD ARISEN. BEFORE TH E SUPREME COURT IT WAS ARGUED THAT IT SHOULD HAVE BEEN PRESUM ED THAT IN ESSENCE AND TRUE CHARACTER THE TAXES WERE PAID OUT OF THE PROFITS OF THE RELEVANT YEAR AND NOT OUT OF THE OVERDRAFT A CCOUNT FOR THE RUNNING OF THE BUSINESS AND IN THESE CIRCUMSTANCES THE APPELLANT WAS ENTITLED TO CLAIM THE DEDUCTIONS. THE SUPREME C OURT NOTED THAT THE ARGUMENT HAD CONSIDERABLE FORCE, BUT CONSI DERING THE FACT THAT THE CONTENTION HAD NOT BEEN ADVANCED EARL IER IT DID NOT REQUIRE TO BE ANSWERED. IT THEN NOTED THAT IN WOOLC OMBERS OF INDIA LTD.S CASE (1982) 134 ITR 219 THE CALCUTTA H IGH COURT HAD COME TO THE CONCLUSION THAT THE PROFITS WERE SU FFICIENT TO MEET THE ADVANCE TAX LIABILITY AND THE PROFITS WERE DEPOSITED IN THE OVER DRAFT ACCOUNT OF THE ASSESSEE AND IN SUCH A CASE IT SHOULD BE PRESUMED THAT THE TAXES WERE PAID OUT OF THE PROFITS OF THE YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR T HE RUNNING OF THE BUSINESS. IT NOTED THAT TO RAISE THE PRESUMPTIO N, THERE WAS SUFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE THE HIGH COURT. THE PRINCIPLE, THEREFORE, WO ULD BE THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST-FREE AND O VER DRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST-FREE FUNDS GENERATED OR ATLAS CYCLES (HARYANA) SONEPAT PAGE 11 OF 70 AVAILABLE WITH THE COMPANY IF THE INTEREST-FREE FUN DS WERE SUFFICIENT TO MEET THE INVESTMENT. IN THIS CASE THI S PRESUMPTION IS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE INCOME -TAX APPELLATE TRIBUNAL. 3.2.3 HENCE, ON THE FACTS OF THE CASE AND RESPECTF ULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE O F RELIANCE UTILITIES (SUPRA) WE CONFIRM THE ORDER OF THE LD. CIT (A) ON THIS ISSUE FOR AY 04-05. 3.3 IN THE FINAL RESULT, THE DEPARTMENTAL APPEAL F OR AY 04-05 IS DISMISSED. ITA NO. 3472/D/2011 AY 2005-06 4. IN THIS DEPARTMENTAL APPEAL, THE DEPARTMENT HAS RAISED THREE ISSUES VIZ. (I) DELETION OF DISALLOWANCE OF RS. 19,384,066/- MA DE BY THE AO U/S 14A OF THE ACT ON ACCOUNT OF INTEREST ATTRIBUTABLE TO INVE STMENTS IN MUTUAL FUNDS OUT OF BORROWED FUNDS; (II) DELETION OF ADDITION OF RS. 16,143,877/- ON ACCOUNT OF INTEREST ATTRIBUTABLE TO ALLEGED INTEREST FREE ADVA NCE OF RS. 134,532,307/- MADE TO SH. ARUN KAPOOR AND (III) DELETION OF ADDIT IONS MADE UNDER VARIOUS EXPENSES. 4.1 IT IS SEEN THAT GROUND NO. 2 PERTAINING TO ADDI TION ON ACCOUNT OF NOTIONAL INTEREST HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN DEPARTMENTAL ATLAS CYCLES (HARYANA) SONEPAT PAGE 12 OF 70 APPEAL NO. 2490/DEL/2011 FOR AY 2003-04 AND FOLLOWI NG THE SAME WE DISMISS THIS GROUND OF THE DEPARTMENTAL APPEAL. 4.2 AS FAR AS THE DISALLOWANCE OF RS. 19,384,066/- U/S 14A IS CONCERNED, IT IS SEEN THAT THE LD. CIT (APPEALS) HAS GIVEN A CATE GORICAL FINDING IN PARA 4.6 OF THE IMPUGNED ORDER THAT THE ASSESSEE HAD INTERES T FREE FUNDS AT ITS DISPOSAL AND NO LOANS COULD BE SAID TO HAVE BEEN UTILIZED FO R THE PURPOSE OF INVESTMENT IN MUTUAL FUNDS. THE LD. CIT (APPEALS) HAS ALSO RE LIED ON THE STATEMENT OF THE STATUTORY AUDITORS ATTACHED TO THE ACCOUNTS OF THE ASSESSEE FOR THIS PURPOSE. THE LD. CIT (APPEALS) HAS ALSO HELD THAT THE AO COU LD NOT ESTABLISH THE NEXUS BETWEEN THE INVESTMENT IN MUTUAL FUNDS AND THE SECU RED LOANS RAISED DURING THE YEAR. THE LD. CIT (A) ALSO HELD THAT THE AO CO ULD NOT ESTABLISH THAT ANY EXPENDITURE WAS INCURRED DIRECTLY IN RELATION TO EA RNING OF TAX EXEMPT INCOME. HENCE, RELYING ON THE RATIO LAID DOWN BY THE HONBL E HIGH COURT OF P&H IN THE CASE OF CIT VS. HERO CYCLES (SUPRA), THE DISALL OWANCE WAS DELETED. THE LD. DR COULD NOT BRING ANY FACT ON RECORD TO NEGATE THE FINDINGS AND OBSERVATIONS OF THE LD. CIT (A) ON THIS ISSUE. WE H AVE ALSO ADJUDICATED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN AY 04- 05, WHEREIN WE HAVE ALSO RELIED ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES (SUPRA). SINCE THE FACTS IN THIS YEAR ARE SIMILAR AS IN AY ATLAS CYCLES (HARYANA) SONEPAT PAGE 13 OF 70 04-05 AND THE LD. CIT (APPEALS) HAS ALSO RECORDED A SIMILAR FINDING ON FACTS, WE SEE NO REASON TO INTERFERE WITH THE SAME AND WE UPHOLD THE FINDINGS OF THE LD. CIT (A) ON THIS ISSUE AND DISMISS THIS GROUND O F APPEAL OF THE DEPARTMENT. 4.3 AS FAR AS THE THIRD GROUND IS CONSIDERED, IT IS SEEN THAT AO HAS MADE THE FOLLOWING DISALLOWANCES ON THE GROUND THAT THES E WERE INCURRED IN CASH AND REMAINED UN-VOUCHED: (I) REFRESHMENT RS. 30,269/- (II) BUSINESS PRESENTS RS. 28,400/- (III) WINE & BEER AND MISCELLANEOUS EXPENSES RS. 24,061 /- (IV) CLUB EXPENSES RS. 33,400/- (V) TRAVELLING EXPENSES RS. 148,277/- (VI) ADVERTISEMENT/SALES PROMOTION RS. 76,408/- (VII) FOREIGN TOURS RS. 222,230/- (VIII) OTHER REPAIRS RS. 45,154/- 4.3.1 THE LD. DR SUPPORTED THE FINDINGS OF THE AO A ND SUBMITTED THAT THESE ADDITIONS WERE RIGHTLY MADE. THE LD. AR SUPPORTED T HE IMPUGNED ORDER ON THE ISSUE. A PERUSAL OF THE IMPUGNED ORDER REVEALS THAT THE LD. CIT(APPEALS) HAS CATEGORICALLY DEALT WITH THIS ISSUE IN PARA 6.3 OF HIS ORDER, WHEREIN HE HAS ATLAS CYCLES (HARYANA) SONEPAT PAGE 14 OF 70 OPINED THAT THE TURNOVER OF THE ASSESSEE IS ABOUT R S. 500 CRORES AND ITS MANUFACTURING/ASSEMBLING FACILITIES ARE SPREAD ACRO SS MANY PLACES. IT IS THE LD. CIT (A)S OBSERVATION THAT CONSIDERING THE TURN OVER OF THE ASSESSEE AND THE CLAIM OF THE EXPENSES, THE DISALLOWANCES MADE B Y THE AO ARE VERY MEAGER. THE LD. CIT (APPEALS) HAS OPINED THAT HE A GREES WITH THE SUBMISSION OF THE ASSESSEE THAT MAINTENANCE OF PROPER VOUCHERS FOR PETTY EXPENSES IS NOT POSSIBLE AND THAT PRODUCING ALL THE VOUCHERS PROCUR ED FROM VARIOUS LOCATIONS BEFORE THE AO AFTER A LONG PERIOD IS IN ONEROUS TAS K. THE LD. CIT (A) ALSO HELD THAT NO COMMENTS HAVE BEEN MADE IN THE TAX AUD IT REPORT REGARDING THE GENUINENESS OF THE EXPENDITURE CLAIMS. HAVING PERU SED THE RECORDS AND ALSO THE REASONING ADOPTED BY THE LD. CIT (A) ON THIS IS SUE AS WELL AS THE FACT THAT THE LD. DR COULD NOT SUCCESSFULLY CONTROVERT THE OB SERVATIONS OF THE LD. CIT (A), WE FIND NO REASON TO DIFFER FROM THE CONCLUSIO N ARRIVED AT BY THE LD. CIT (APPEALS) AND WHILE UPHOLDING HIS FINDING ON THE IS SUE, WE DISMISS GROUND NO. 3 OF THE DEPARTMENTS APPEAL. 4.4 IN THE FINAL RESULT, THE DEPARTMENTS APPEAL FO R AY 05-06 IS DISMISSED. ITA NO. 784/DEL/2010 & ITA NO. 913/D/2010 AY 2006-0 7 5. AS FAR AS THE ASSESSEES APPEAL I.E. ITA NO. 784 IS CONCERNED, APART ATLAS CYCLES (HARYANA) SONEPAT PAGE 15 OF 70 FROM CONTESTING THE DISALLOWANCE U/S 14A IN GROUND NO. 1, (WHICH WILL BE DEALT ALONG WITH THE SIMILAR GROUND IN THE DEPARTME NTS APPEAL) THE ASSESSEE IN HIS APPEAL HAS CONTESTED THE UPHOLDING OF THE DI SALLOWANCE OF RS. 2 LAKHS OUT OF CONSULTANCY CHARGES IN GROUND NO. 2. A PERU SAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS GIVEN A FINDING THAT THE AR OF THE ASSESSEE WAS ASKED TO JUSTIFY THE CONSULTANCY CHARGES DEBITED IN CONSULTANCY ACCOUNT AND GIVE DETAILS OF CONSULTANCY SERVICES OBTAINED FROM THE PERSONS TO WHOM THE CONSULTANCY CHARGES WERE PAID. THE ASSESSEE CONTEN DED BEFORE THE AO THAT THE CONSULTANCY CHARGES WERE PAID TO THE EMPLOYEES WHO HAD RETIRED FROM THE COMPANY AND WERE REEMPLOYED ON PART- TIME BASIS. H OWEVER, NO DETAILS OF THE SERVICES OBTAINED FROM THESE EMPLOYEES HAVE BEE N FURNISHED BEFORE THE AO AND IT WAS INFORMED THAT THESE PERSONS PERFORMED THE JOB WHICH THEY HAD EARLIER PERFORMED DURING THEIR REGULAR EMPLOYMENT. HENCE, IN THE ABSENCE OF EVIDENCE, AN AMOUNT OF RS. 2 LAKHS WAS DISALLOWED O N AN ADHOC BASIS. THE LD. CIT (A) ALSO CONFIRMED THIS DISALLOWANCE BY HOL DING THAT ALTHOUGH THE ASSESSEE HAD SUBMITTED THE COPIES OF AGREEMENTS WIT H THE EX-EMPLOYEES DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASS ESSEE HAS NOT SUBMITTED ANY APPLICATION UNDER RULE 46A OF THE INCOME TAX RU LES FOR ADMISSION OF ADDITIONAL EVIDENCE AND HENCE, THE SAME IS NOT ADMI TTED AND THE ADDITION IS CONFIRMED. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTUAL MATRIX ON ATLAS CYCLES (HARYANA) SONEPAT PAGE 16 OF 70 THIS ISSUE, WE FIND THAT ALTHOUGH THE ASSESSEE COUL D NOT PROVIDE THE NECESSARY EVIDENCES DURING THE ASSESSMENT PROCEEDINGS, IT DID SUBMIT THE EVIDENCES BEFORE THE FIRST APPELLATE AUTHORITY. HOWEVER, THE SAME WAS NOT ACCEPTED. HENCE, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER DUE VERIFICATION OF THE EV IDENCES TO BE SUBMITTED BY THE ASSESSEE. THE AO SHALL AFFORD A PROPER OPPORTU NITY TO THE ASSESSEE FOR FURNISHING THESE EVIDENCES. IN THE RESULT, GROUND NO. 2 OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 5.1 GROUND NO. 3 OF THE ASSESSEES APPEAL PERTAINS TO DISALLOWANCE OF RS. 433,403/- OF EXPORT COMMISSION AND GROUND NO. 4 PER TAINS TO DISALLOWANCE OF RS. 231,227/- UNDER THE HEAD ADVERTISEMENT AND SAL ES PROMOTION EXPENSES. THE LD. AR SUBMITTED THAT GROUND NOS. 3 & 4 WERE NO T BEING PRESSED BEFORE THE TRIBUNAL. HENCE, GROUND NOS. 3 & 4 ARE DISMISS ED AS NOT PRESSED. 5.2 GROUND NO. 5 OF THE ASSESSEES APPEAL ASSAILS T HE ACTION OF THE LD. CIT (APPEALS) IN UPHOLDING THE DISALLOWANCE OF RS. 8,00 0/- UNDER THE SUB-HEAD SALES PROMOTION DEALER EXPENSES UNDER THE HEAD A DVERTISEMENT AND SALES PROMOTION EXPENSES. THE LD. AR DISPUTED THE FINDI NGS OF THE LD. CIT (A) WHEREAS THE LD. DR SUPPORTED THE IMPUGNED ACTION OF THE LD. CIT (A). A ATLAS CYCLES (HARYANA) SONEPAT PAGE 17 OF 70 PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS OPINED THAT ON 21/12/2005 THE ASSESSEE COMPANY HAD INCURRED CASH E XPENSES OF RS. 40,000/-. THE AO HELD THAT THIS WAS A VIOLATION OF THE PROVIS IONS OF SEC. 40A (3) AND RULE 6DD AND ACCORDINGLY, DISALLOWED RS. 8,000/- BE ING 20% OF THE CASH EXPENSES. THE LD. CIT (APPEALS) ALSO UPHELD THIS D ISALLOWANCE. IT IS SEEN THAT SECTION 40A(3) PROVIDES THAT WHERE THE ASSESSE E INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYME NTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAW N ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS RS. 20,000/- A DISALLOWAN CE SHALL BE MADE. HOWEVER, IT IS APPARENT FROM THE ASSESSMENT ORDER T HAT THIS DISALLOWANCE HAS BEEN MADE WITHOUT BRINGING OUT THE FACT ON RECORD A S TO WHETHER THESE CASH EXPENSES OF RS. 40,000/- PERTAINED TO ONE SINGLE PA YMENT OR COMPRISED OF A BUNDLE OF SMALL PAYMENTS MADE FOR DIFFERENT PURPOSE S. HENCE, IN ABSENCE OF ANY SPECIFIC RECORDING OF FACT BY THE AO, WE ARE UN ABLE TO UPHOLD THIS DISALLOWANCE AND SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) ON THIS ISSUE AND DIRECT THE AO TO DELETE THIS ADDITION. ACCORDINGLY , GROUND NO. 5 OF THE ASSESSEES APPEAL IS ALLOWED. 5.3 GROUND NO. 6 OF THE ASSESSEES APPEAL PERTAINS TO DISALLOWANCE OF RS. 59,792/- OUT OF COMMISSION EXPORT ACCOUNT AND GROUN D NO. 6 PERTAINS TO ATLAS CYCLES (HARYANA) SONEPAT PAGE 18 OF 70 DISALLOWANCE OF RS. 7,000/- ON ACCOUNT OF FINE PAID . THE LD. AR SUBMITTED THAT GROUND NOS. 6 & 7 WERE NOT BEING PRESSED. ACC ORDINGLY, GROUND NOS. 6 & 7 ARE DISMISSED AS NOT PRESSED. 5.4 GROUND NO. 8 OF THE ASSESSEES APPEAL CONTEST T HE DISALLOWANCE OF RS. 1 LAKH OUT OF CONSULTANCY FEES, GROUND NO. 9 CONTESTS DISALLOWANCE OF RS. 1,50,000/- OUT OF COMMISSION AND GROUND NO. 10 CONT ESTS DISALLOWANCE OF RS. 1 LAKH FROM CONSULTANCY CHARGES. THE LD. AR SUBMIT TED THAT THESE THREE DISALLOWANCES ARE EXCESSIVE, SUBJECTIVE AS WELL AS ADHOC . IT WAS SUBMITTED THAT THE AO DID NOT COMMENT ON THE MERITS OF THE AD DITIONAL EVIDENCES FILED BY THE ASSESSEE AND, THEREFORE, THE LD. CIT (A) SHO ULD HAVE ACCEPTED THE EVIDENCE AND ALLOWED THE DEDUCTION. IT WAS FURTHER SUBMITTED THAT THE NECESSARY BILLS AND VOUCHERS WERE FILED BEFORE THE LD. CIT (APPEALS) AND THE LD. CIT (APPEALS) HAD CALLED FOR A REMAND REPORT FR OM THE AO TO WHICH THE AO DID NOT RESPOND. THE LD. AR FURTHER SUBMITTED T HAT ONCE THE EXPENDITURE HAS BEEN INCURRED FOR BUSINESS PURPOSES, PROPERLY B ACKED BY VOUCHERS AND EVIDENCES, NO DISALLOWANCE CAN LEGALLY BE SUSTAINED BY THE LD. CIT (APPEALS). IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) DID NO T CARE TO LOOK AT THE DETAILS FILED AND THE NATURE OF EXPENSES INCURRED AND SIMPL Y UPHELD THE DISALLOWANCE WITHOUT GOING INTO THE NECESSARY INVESTIGATION. TH E LD. DR SUPPORTED THE ACTION OF THE LD. CIT (A) ON THIS ISSUE. HAVING CO NSIDERED ALL THE FACTS AS ATLAS CYCLES (HARYANA) SONEPAT PAGE 19 OF 70 WELL AS THE SUBMISSIONS OF THE LD. AR AND THE FINDI NGS OF THE LD. CIT (APPEALS) ON THIS ISSUE, WE ARE OF THE OPINION THAT THESE THREE DISALLOWANCES/ADDITIONS NEED RE-ADJUDICATION AND RE CONSIDERATION AFRESH. THE LD. CIT (APPEALS) HAS DISMISSED THE GROUNDS PERTAIN ING TO THESE THREE DISALLOWANCES IN A MOST CRYPTIC AND SUMMARY MANNER WITHOUT RECORDING ANY FINDING OR GIVING ANY REASONING FOR UPHOLDING THESE DISALLOWANCES. HENCE, WE DEEM IT A FIT MATTER FOR RESTORATION TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER ALLOWING THE ASSESSEE DUE OPPORT UNITY TO PRESENT THE RELEVANT DOCUMENTS AND EVIDENCES/EXPLANATIONS. IN THE RESULT, GROUND NOS. 8, 9 & 10 OF THE ASSESSEES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 5.5 GROUND NO. 11 BEING CONSEQUENTIAL IS NOT BEING ADJUDICATED UPON. 5.6 IN THE FINAL RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 5.7 IN ITA NO. 913/DEL/2010 FOR AY 06-07, THE DEPAR TMENT HAS CONTESTED THE ACTION OF THE LD. CIT (APPEALS) ON AS MANY AS 1 8 COUNTS. THEY ARE BEING TAKEN UP ONE BY ONE AS UNDER: 5.7.1 DELETION OF DISALLOWANCE OF RS. 9,948,023/ - U/S 14A BY RESTRICTING THE DISALLOWANCE FROM RS. 13,565,438/- TO RS. 3,617,415 /-. THIS GROUND IS COMMON BOTH TO THE ASSESSEES APPEAL AS WELL AS THE DEPARTMENTAL APPEAL. THE ASSESSEE HAS CHALLENGED THE UPHOLDING OF DISALLOWAN CE OF RS. 3,617,415/- IN ITS APPEAL, WHEREAS THE DEPARTMENT HAS CHALLENGED T HE DELETION OF RS. ATLAS CYCLES (HARYANA) SONEPAT PAGE 20 OF 70 9,948,023/-. THE AO MADE DISALLOWANCE U/S 14A OF TH E INCOME TAX ACT IN RESPECT OF SAHIBABAD UNIT ONLY AMOUNTING TO RS. 13, 565,438/- WHICH WAS RESTRICTED TO RS. 3,617,415/- UNDER RULE 8D BY THE LD. CIT (APPEALS). THE DEPARTMENT HAS OBJECTED TO RESTRICTION OF THIS DISA LLOWANCE AND IS GROUND NO. 1 OF THE DEPARTMENTAL APPEAL. IT WAS THE ASSESSEE S CONTENTION BEFORE THE AO THAT INVESTMENTS OF RS. 113,045,323/- WERE MADE OUT OF FREE RESOURCES OF THE COMPANY AMOUNTING TO RS. 673,570,626/- AND THAT THE RE WERE NO BORROWINGS BY THE COMPANY FOR INVESTMENTS AND THAT THE FUNDS W ERE BORROWED ONLY FOR WORKING CAPITAL AND FIXED ASSETS. IT WAS FURTHER SU BMITTED THAT DIVIDEND OF RS. 5,597,167/- WAS RECEIVED BY THE ASSESSEE COMPANY ON WHICH TAX HAD ALREADY BEEN BORNE BY THE PAYEE COMPANY AND HENCE NOTHING W AS TAXABLE IN THE HANDS OF THE ASSESSEE COMPANY. HOWEVER, THE AO WAS OF TH E OPINION THAT IF THE COMPANY WOULD NOT HAVE INVESTED RS. 113,045,323/- I N PURCHASE OF SHARES ETC., THE UNIT WOULD NOT HAVE BORROWED FUNDS TO THE EXTENT OF RS. 113,045,323/- AND HENCE THE BORROWINGS OF THE SAHIB ABAD UNIT AMOUNTING TO RS. 179,614,213/- WOULD HAVE BEEN REDUCED BY THAT A MOUNT. ACCORDINGLY INTEREST RATE OF 12% WAS APPLIED ON RS. 113,045,323 /- AND RS. 13,565,438/- WAS DISALLOWED. BEFORE THE LD. CIT(APPEALS), IT WA S THE ASSESSEES SUBMISSION THAT INVESTMENT IN DIVIDEND YIELDING MUT UAL FUNDS WAS MADE IN FY 2003-04 I.E. AY 2004-05 AND AUTHORIZED BY THE BO ARD OF DIRECTORS WHICH ATLAS CYCLES (HARYANA) SONEPAT PAGE 21 OF 70 CLEARLY SHOWS THAT SURPLUS FUNDS WERE AVAILABLE. I T WAS SUBMITTED THAT THE COMPANY HAD INTEREST FREE FUNDS AMOUNTING TO RS. 11 6.26 CRORES AVAILABLE WITH IT AND AN INVESTMENT OF RS. 12.99 CRORES ONLY WAS MADE IN MUTUAL FUNDS. IT WAS ALSO SUBMITTED BEFORE THE LD. CIT (APPEALS) THAT THE CARRY FORWARD BALANCES OF THESE INVESTMENTS IS RS. 113,045,323/-. IT WAS ALSO SUBMITTED BEFORE THE LD. CIT (APPEALS) THAT THE PURPOSE OF KE EPING SUCH INVESTMENTS WAS TO KEEP LIQUID MONEY FOR HUGE GOVERNMENT ORDERS AND THAT NO INTEREST EXPENDITURE COULD BE ASSUMED FOR THE PURPOSE OF DIS ALLOWANCE U/S 14A. HOWEVER, THE LD. CIT (APPEALS) REQUIRED THE ASSESSE E TO PROVIDE A WORKING OF DISALLOWANCE U/S 14A READ WITH RULE 8D ON WHICH THE COMMENTS OF THE AO WERE CALLED FOR AND ON WHICH THE AO DID NOT OFFER A NY COMMENTS. ACCORDINGLY, THE WORKING OF THE ASSESSEE WAS ACCEPT ED AND DISALLOWANCE U/S 14A READ WITH RULE 8D WAS RESTRICTED TO RS. 3,617,4 15/- BEING BASED ON THE THE WORKING PROVIDED BY THE ASSESSEE TO THE LD. CIT (APPEALS). THE LD. DR PLACED RELIANCE ON THE AOS ORDER IN RESPECT OF THI S ISSUE AND SUBMITTED THAT THE DISALLOWANCE HAD BEEN CORRECTLY MADE. IN RESPO NSE THE LD. AR SUBMITTED THAT THE INVESTMENT IN THE DIVIDEND YIELDING MUTUAL FUNDS WAS MADE IN FY 2003-04 DULY AUTHORIZED BY THE RESOLUTION OF THE BO ARD OF DIRECTORS AND THAT THE COMPANY HAD SURPLUS FUNDS AVAILABLE WITH IT TO THE TUNE OF RS. 116.26 CRORES OUT OF WHICH ONLY 12.99 CRORES WERE INVESTED IN MUTUAL FUNDS AND FRESH ATLAS CYCLES (HARYANA) SONEPAT PAGE 22 OF 70 INVESTMENT WAS MADE OUT OF THE SALE PROCEEDS OF PRI OR YEAR INVESTMENTS AND OUT OF DIVIDEND EARNED DURING THE YEAR. THE LD. AR SUBMITTED THAT WHEN THE INVESTMENT IS MADE OUT OF OWN FUNDS AND SURPLUS FUN DS, THEN NO DISALLOWANCE CAN BE MADE U/S 14A OF THE ACT AND FOR THIS PROPOSI TION HE PLACED RELIANCE ON THE FOLLOWING CASE LAWS: 1. CIT VS. WINSOME TEXTILE INDUSTRIES LTD. 319 ITR 204 (P&H); 2. CIT VS. METAL MAN AUTO PVT. LTD. 336 ITR 434 (P&H); 3. CIT VS. HERO CYCLES LTD. 323 ITR 518 (P&H); 4. CIT VS. ABHISHEK INDUSTRIES LTD. 231 TAXMAN 85 (P&H ); 5. CIT VS. GUJARAT NARMADA VALLEY FERTILIZERS COMPANY, 42 TAXMAN.COM 270 (GUJ.); 6. CIT VS. UTI BANK LTD. 32 TAXMAN.COM 370 (GUJ.); 7. TNT MOTORS LTD. VS. ACIT 154 ITD 306 (ITAT)(DEL.); 8. CIT VS. RELIANCE UTILITIES 313 ITR 340 (MUM.). 5.7.2 THE LD. AR ALSO SUBMITTED THAT THE PURPOSE OF KEEPING SUCH INVESTMENT WAS TO KEEP LIQUID MONEY FOR HUGE GOVT. ORDERS AND THAT NO INTEREST EXPENDITURE CAN BE ASSUMED FOR DISALLOWANCE U/S 14A IF SUCH INVESTMENTS WERE MADE FOR BUSINESS PURPOSES. RELIANCE WAS PLAC ED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENTAL STRUCTURAL ENGINEERS LTD. IN ITA NO. 605/2012 FOR THIS PROPOSI TION. THE LD. AR FURTHER SUBMITTED THAT THE LD. CIT(APPEALS) HAD ERRED IN AP PLYING RULE 8D TO AY 2006-07 AS RULE 8D WAS RETROSPECTIVE IN NATURE AND APPLICABLE ONLY FROM AY ATLAS CYCLES (HARYANA) SONEPAT PAGE 23 OF 70 2008-09 AND HENCE THE DISALLOWANCE UNDER RULE 8D WA S UNJUSTIFIED. FOR THIS PROPOSITION RELIANCE WAS PLACED ON THE FOLLOWING CA SE LAWS: 1. GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT 328 ITR 81 (BOM.); 2. MAXOPP INVESTMENT LTD. VS. CIT, 247 CTR 162 (DEL.). 5.7.3 IT WAS FURTHER SUBMITTED THAT THE AO HA D FAILED TO PROVE ANY NEXUS WITH INVESTMENTS AND INTEREST BEARING FUNDS AND FUR THER NO OBJECTIVE SATISFACTION HAS BEEN RECORDED BY THE AO AS TO HOW THE CLAIM OF THE ASSESSEE REGARDING NO DISALLOWANCE U/S 14A IS NOT CORRECT BE CAUSE SATISFACTION OF THE AO IS A PRE-REQUISITE FOR DISALLOWANCE U/S 14A. RE LIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS: 1. MAXOPP INVESTMENT LTD. VS. CIT 247 CTR 162 (DEL.); 2. CIT VS. JINDAL PHOTO LTD., ITA NO. 87/2012 (DEL.) ( HC); 3. CIT VS. TAIKISHA ENGINEERING LTD. 370 ITR 338 (DEL. ). 5.7.4 IT WAS FURTHER SUBMITTED THAT NO ADDIT ION WAS MADE ON THIS ACCOUNT IN ASSESSMENT U/S 143(3) FOR AY 2003-04 AND IN AY 2 004-05 THE DISALLOWANCES MADE U/S 14A WERE DELETED BY THE LD. CIT(APPEALS) AND, THEREFORE, FOLLOWING THE PRINCIPLES OF CONSISTENCY ALSO, NO DISALLOWANCE SHOULD HAVE BEEN MADE IN THIS YEAR UNDER APPEAL. 5.7.5 HAVING CONSIDERED THE RIVAL SUBMISSION S AND DOCUMENTS ON RECORD AND HAVING PERUSED THE IMPUGNED ORDER OF THE LD. CI T (A), IT IS SEEN THAT IT IS ATLAS CYCLES (HARYANA) SONEPAT PAGE 24 OF 70 THE ASSESSEES CONTENTION THAT THE ASSESSEE COMPANY HAD INTEREST FREE FUNDS AVAILABLE TO IT FOR INVESTING IN MUTUAL FUNDS. IT IS ALSO THE ASSESSEES CONTENTION THAT THE PURPOSE OF KEEPING SUCH INVESTM ENTS WAS TO KEEP LIQUID MONEY FOR HUGE GOVT. ORDERS AND THUS, NO INTEREST E XPENDITURE COULD BE DISALLOWED U/S 14A AS THE INVESTMENTS WERE MADE FOR BUSINESS PURPOSES. IT IS ALSO THE ASSESSEES CONTENTION THAT THE AO HAS FAIL ED TO PROVE ANY NEXUS BETWEEN THE INVESTMENTS AND THE LOANS TAKEN. THE A SSESSEE HAS ALSO DISPUTED THE RECORDING OF SATISFACTION BY THE AO FOR THE PUR POSE OF DISALLOWANCE U/S 14A. HOWEVER, THE LD. CIT(A) HAS REFERRED TO AND R EPRODUCED THE CALCULATION OF DISALLOWANCE U/S 14A PURPORTING TO HAVE BEEN SUB MITTED BY THE ASSESSEE ITSELF IN THE IMPUGNED ORDER IN WHICH IT IS ALLEGED THAT THE ASSESSEE HAS ITSELF ACCEPTED AN AMOUNT OF RS. 3,617,415/- FOR THE PURPO SE OF DISALLOWANCE U/S 14A. HOWEVER, THE ASSESSEE HAS CONTESTED THIS FIND ING OF THE LD. CIT (A) AND HAS SPECIFICALLY RAISED GROUND NO. 1 IN ITS APPEAL ON THE ISSUE. WE FIND THAT THERE IS AN APPARENT CONTRADICTION IN FACTS AS STAT ED BY THE ASSESSEE AND AS STATED BY THE LD. CIT (A) ON THIS ISSUE. HENCE, WE DEEM IT APPROPRIATE TO RESTORE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER GIVING THE ASSESSEE DUE OPPORTUNITY TO PRESENT ITS CASE. 5.7.6 IN THE RESULT, THE GROUND NO. 1 OF THE D EPARTMENTS APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ATLAS CYCLES (HARYANA) SONEPAT PAGE 25 OF 70 5.8 GROUND NO. 2 OF THE APPEAL CONTESTS TH E DELETION OF DISALLOWANCE OF RS. 65,103/- FROM CLUB EXPENSES. THE LD. DR SUPPOR TED THE ORDER OF THE AO WHEREAS THE LD. AR STRONGLY SUPPORTED THE FINDINGS OF THE LD. CIT (A) ON THE ISSUE. IT IS SEEN THAT THE AO HAS STATED THAT THE A SSESSEE HAD DEBITED A SUM OF RS. 190,914/- IN THE SAHIBABAD UNIT ACCOUNT ON A/C OF SUBSCRIPTION FEES WHICH WERE EXAMINED ON TEST CHECK BASIS AND GAVE A FINDING THAT RS. 65,103/- WERE NOT INCURRED IN CONNECTION WITH THE BUSINESS A CTIVITY OF THE ASSESSEE BUT RATHER WERE PERSONAL EXPENSES OF SH. JAI DEV KAPOOR . THE LD. CIT(A) DELETED THIS DISALLOWANCE BY HOLDING THAT THE ASSESSEE HAS PAID FRINGE BENEFIT TAX (FBT) ON THE ENTIRE AMOUNT OF RS. 65,103/- AND ON T HE PRINCIPLE OF EQUITY, NO AMOUNT CAN BE TAXED TWICE. CO-ORDINATE BENCH OF TH E DELHI ITAT HAS FOLLOWED THE DECISION RENDERED BY THE ITAT MUMBAI B ENCH IN SHRI HANSRAJ MATHURADAS VS. ITO (ITA NO. 2397/MUM/2010) IN THE CASE OF ACIT VS MICRO TURNERS IN ITA NO 4569/DEL/2011 AND HAS REPRO DUCED THE FINDING OF THE ITAT MUMBAI BENCH AS UNDER: 17. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNE D COUNSEL FOR THE ASSESSEE HAS TAKEN US THROUGH THE CBDT CIRCULAR NO. 8/2005 DATED 29-08-2005 GIVING EXPLANATORY NOTES ON THE ATLAS CYCLES (HARYANA) SONEPAT PAGE 26 OF 70 PROVISIONS RELATING TO FRINGE BENEFIT TAX AS INTROD UCED BY THE FINANCE ACT, 2005 AND INVITED OUR ATTENTION TO THE RELEVANT PORTION THEREOF TO EXPLAIN THE OBJECT BEHIND LEVYIN G FRINGE BENEFIT TAX. AS INDICATED IN THE SAID CIRCULAR, THE FRINGE BENEFIT TAX HAS BEEN INTRODUCED AS A SURROGATE TAX ON EMPLO YER WITH THE OBJECTS OF RESOLVING THE PROBLEMS IN TAXING SOME PERQUISITES/FRINGE BENEFITS IN THE HANDS OF THE EMP LOYEES IN TERMS OF SECTION 17. FURTHER, AS EXPLAINED IN PARA NO. 3. 2 OF THE CIRCULAR, THE SCOPE OF THE TERM 'FRINGE BENEFITS PR OVIDED' IS DEFINED IN SECTION 115WB(1) TO MEAN ANY CONSIDERATI ON FOR EMPLOYMENT PROVIDED BY WAY OF ANY PRIVILEGE, SERVIC E FACILITY OR AMENITY, DIRECTLY OR INDIRECTLY, PROVIDED BY AN EMP LOYER, WHETHER BY WAY OF REIMBURSEMENT OR OTHERWISE, TO HI S EMPLOYEES. MOREOVER, AS CLARIFIED IN THE SAID CIRCU LAR WHILE ANSWERING FREQUENTLY ASKED QUESTION NO. 15, FRINGE BENEFIT IS DEEMED TO HAVE BEEN PROVIDED IF THE EMPLOYER HAS IN CURRED EXPENSES FOR ANY OF THE PURPOSES REFERRED TO IN THE RELEVANT PROVISIONS AND THERE IS NO REQUIREMENT TO SEGREGATE SUCH EXPENSES BETWEEN THOSE INCURRED FOR OFFICIAL PURPOS ES AND PERSONAL PURPOSES. IT WAS FURTHER CLARIFIED WHILE A NSWERING QUESTION NO. 81 THAT WHEN EXPENDITURE ON RUNNING AN D MAINTENANCE OF MOTOR CARS IS LIABLE TO FRINGE BENEF IT TAX, THE EMPLOYEES WILL NOT BE LIABLE TO INCOME TAX ON THE P ERQUISITE VALUE OF MOTOR CAR PROVIDED BY THE EMPLOYER. AS RIG HTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, CIRCULAR NO 8/2005 DATED 29-08-2005 ISSUED BY THE BOARD EXPLAIN ING THE ATLAS CYCLES (HARYANA) SONEPAT PAGE 27 OF 70 PROVISIONS RELATING TO FRINGE BENEFIT TAX THUS MAKE S IT CLEAR THAT FRINGE BENEFIT TAX IS LEVIED ON THE EXPENSES INCURR ED BY THE EMPLOYER IRRESPECTIVE OF WHETHER THE SAME ARE INCUR RED FOR OFFICIAL OR PERSONAL PURPOSES. IN OUR OPINION, ONCE FRINGE BENEFIT TAX IS LEVIED ON SUCH EXPENSES AS HAS BEEN DONE IN THE PRESENT CASE, IT FOLLOWS THAT THE SAME ARE TREATED AS FRING E BENEFITS PROVIDED BY THE ASSESSEE AS EMPLOYER TO ITS EMPLOYE ES AND THE SAME HAVE TO BE APPROPRIATELY ALLOWED AS EXPENSES I NCURRED WHOLLY AND EXCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. IN THAT VIEW OF THE MATTER, WE DEL ETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(A) OUT OF CO NVEYANCE AND TELEPHONE EXPENSES AND ALLOW GROUND NO. 4 AND 5 OF THE ASSESSEES APPEAL. 5.8.1 IN THE PRESENT APPEAL, THE LD. DR HAS NOT DI SPUTED THE FACT THAT FBT HAS BEEN PAID ON THE IMPUGNED ADDITIONS AND THE LD. CIT (A) HAS ALSO GIVEN A CONCRETE FINDING ON THE ISSUE. HENCE, DRAWING STREN GTH FROM THE DECISION OF THE CO-ORDINATE BENCH OF ITAT DELHI IN ACIT VS MICR O TURNERS (SUPRA) WE FIND NO REASON TO INTERFERE WITH THE FINDING OF THE LD. CIT (A) ON THIS ISSUE AND ACCORDINGLY, UPHOLD THE ADJUDICATION BY THE LD. CIT (A). HENCE, GROUND NO. 2 OF THE DEPARTMENTS APPEAL IS DISMISSED. 5.9 GROUND NO. 3 PERTAINS TO THE DELETION OF ADDITI ON OF RS. 469,274/- ON ATLAS CYCLES (HARYANA) SONEPAT PAGE 28 OF 70 ACCOUNT OF ALLEGED PENAL EXPENDITURE. THE LD. DR R ELIED ON THE AOS ORDER WHILE THE LD. AR SUPPORTED THE FIRST APPELLATE ORDE R. IT IS SEEN THAT THE AO HAD NOTICED THAT THE ASSESSEE HAD DEBITED SALES TAX PENALTY AMOUNTING TO RS. 419,942/- AND SALES TAX PENALTY FEES AMOUNTING TO R S. 49,465/- TO THE P&L A/C AND CONSIDERING THE NATURE OF THESE EXPENSES BE ING PENAL IN NATURE, THESE EXPENSES WERE DISALLOWED. ON APPEAL THE LD. CIT (A PPEALS) GAVE A CATEGORICAL FINDING THAT OUT OF THE TOTAL AMOUNTS D ISALLOWED, ONLY RS. 533/- PERTAINED TO LATE FEE PENALTY AND THE BALANCE PERTA INED TO TAX AND INTEREST ON LATE DEPOSIT WHICH HAD WRONGLY BEEN SHOWN UNDER THE HEAD MISCELLANEOUS EXPENSES. IN VIEW OF THE SPECIFIC FINDING OF THE LD. CIT (A), WE FIND NO REASON TO INTERFERE WITH THE ADJUDICATION OF THE LD . CIT (A) ON THIS ISSUE. GROUND NO. 3 OF THE DEPARTMENTS APPEAL IS ACCORDIN GLY DISMISSED. 5.10 GROUND NO. 4 PERTAINS TO THE DELETION OF ADDI TION OF RS. 143,425/- AND RS. 14,281/- ALLEGED TO BE PERSONAL MARRIAGE GIFT E XPENSES OF THE DIRECTORS OF THE ASSESSEE. THE LD. DR PLACED RELIANCE ON THE AS SESSMENT ORDER WHEREAS THE LD. AR SUPPORTED THE CIT (A)S ORDER. IT IS SEE N THAT THE AO HAS GIVEN A FINDING THAT UNDER THE SUB HEAD MARRIAGE GIFT UNDE R MISCELLANEOUS EXPENSES EXPENSES AMOUNTING TO RS. 143,425/- HAVE BEEN MADE BY SH. M.R. AGRAWAL, SH. JAIDEV KAPOOR, SH. GAUTAM KAPOOR & MANY OTHER P ERSONS OF THE MANAGEMENT. THE AO HELD THAT THE MARRIAGE GIFTS WE RE MADE BY THE ATLAS CYCLES (HARYANA) SONEPAT PAGE 29 OF 70 INDIVIDUALS AND AS SUCH THEY WERE PERSONAL EXPENSES NOT RELATED TO THE BUSINESS OF THE COMPANY AND THEY WERE ACCORDINGLY D ISALLOWED. THE LD. CIT (A) HELD THAT SINCE THE ASSESSEE HAS ALREADY DECLAR ED THE AMOUNT AND PAID TAX UNDER FBT, THE DISALLOWANCE MERITED DELETION. CONSI DERING THE FACTUAL MATRIX AS WELL AS DRAWING STRENGTH FROM THE DECISION OF TH E CO-ORDINATE BENCH OF ITAT DELHI IN ACIT VS MICRO TURNERS (SUPRA), WE FIN D NO REASON TO DISTURB THIS FINDING OF THE LD. CIT (A) ON THIS ISSUE. IN T HE RESULT, GROUND NO. 4 OF THE DEPARTMENTS APPEAL IS DISMISSED. 5.11 GROUND NO. 5 CHALLENGES THE DELETION OF AD DITION OF RS. 53,403/- ALLEGED TO BE PERSONAL ADVERTISEMENT EXPENSES. THE LD. AR HAS SUBMITTED THAT THIS GROUND DOES NOT ORIGINATE EITHER FROM THE ORDE R OF THE AO OR FROM THE ORDER OF THE LD. CIT (A). ON LOOKING INTO THE CONT ENTION OF THE ASSESSEE, WE FIND THAT THE SUBMISSION OF THE ASSESSEE IS CORRECT AND WE ACCORDINGLY DISMISS THIS GROUND AS BEING IN FRUCTUOUS . GROUND NO. 5 OF THE DEPARTMENTS APPEAL IS ACCORDINGLY DISMISSED. 5.12 GROUND NO. 6 ASSAILS THE DELETION OF ADDITIO NS OF RS. 300,006/- AS ALLEGEDLY BEING PERSONAL EXPENSES OF THE DIRECTORS AND OFFICERS OF THE ASSESSEE UNDER STAFF AND WORKERS WELFARE EXPENSES . THE LD. DR SUPPORTED THE ASSESSMENT ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE AO HAD INITIALLY DISALLOW ED THESE AMOUNTS FOR NON ATLAS CYCLES (HARYANA) SONEPAT PAGE 30 OF 70 PRODUCTION OF BILLS AND VOUCHERS RELATED TO THIS EX PENDITURE. IN APPEAL, THE ASSESSEE SUBMITTED THE RELEVANT BILLS/VOUCHERS. T HE LD. CIT (A) CALLED FOR A REMAND REPORT OF THE AO BUT THE AO FAILED TO DO SO. THE LD. CIT (A) HELD THAT SINCE FBT HAD ALREADY BEEN PAID THESE AMOUNTS, THE ADDITION MERITED DELETION. WE ARE OF THE CONSIDERED OPINION THAT ON CE THE EXPENDITURE HAS BEEN INCURRED FOR BUSINESS PURPOSES AND FOR THE WEL FARE OF ITS EMPLOYEES AND THE EXPENDITURE IS PROPERLY EVIDENCED BY VOUCHERS/D OCUMENTS, NO DISALLOWANCE COULD HAVE BEEN MADE. IT IS ALSO A MA TTER OF RECORD THAT THE AO DID NOT OFFER HIS COMMENTS WHEN A REMAND REPORT ON THE ISSUE WAS REQUISITION FROM HIM. IT IS ALSO A MATTER OF RECORD THAT THE A SSESSEE HAS PAID FBT ON THE SAID AMOUNT. DRAWING OUR STRENGTH FROM THE DECISIO N OF THE CO-ORDINATE BENCH OF ITAT DELHI IN ACIT VS MICRO TURNERS (SUPRA ), WE UPHOLD THE FINDINGS OF THE LD. CIT (A) ON THIS ISSUE. GROUND NO. 6 OF THE DEPARTMENTS APPEAL IS DISMISSED. 5.13 GROUND NO. 7 CHALLENGES THE DELETION OF ADDIT IONS OF RS. 2727020/- AS ALLEGEDLY BEING PERSONAL EXPENSES OF THE DIRECTORS AND THEIR FAMILY MEMBERS, OFFICERS AND THEIR FAMILY MEMBERS UNDER THE HEAD T RAVELLING EXPENSES. THE LD. DR SUPPORTED THE ASSESSMENT ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). A PERUSAL OF THE ASSESSM ENT ORDER SHOWS THAT THESE ADDITIONS WERE MADE ON A PURELY ADHOC BASIS. IT WAS SUBMITTED THAT FBT HAS ATLAS CYCLES (HARYANA) SONEPAT PAGE 31 OF 70 BEEN PAID ON THESE EXPENSES AND ALL THESE EXPENSES WERE FOR THE PURPOSES OF BUSINESS. IT IS SEEN THAT THE AO DID NOT COMMENT O N THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE THE LD. CIT (A) AND HE NCE, IT COULD BE ASSUMED THAT THE AO ACCEPTED THE ASSESSEES CONTENTION. TH E LD. CIT (A) DELETED THE ADDITION ON THE GROUND THAT SINCE FBT HAD ALREADY B EEN PAID NO FURTHER DISALLOWANCE COULD BE MADE. DRAWING OUR STRENGTH FR OM THE DECISION OF THE CO-ORDINATE BENCH OF ITAT DELHI IN ACIT VS MICRO TU RNERS (SUPRA), WE FIND NO REASON TO INTERFERE WITH THE REASONING ADOPTED B Y THE LD. CIT (A) AND UPHOLD THE SAME. GROUND NO. 7 OF THE DEPARTMENTS A PPEAL IS DISMISSED. 5.14 GROUND NO. 8 CHALLENGES THE DELETIO N OF ADDITIONS OF RS. 260912/- ALLEGED TO BE NON-BUSINESS EXPENDITURE. THE LD. DR SUPPORTED THE AOS ORDER. IT IS SEEN THAT THESE EXPENDITURES WERE INC URRED FOR ADVERTISEMENTS DURING THE FOOTBALL MATCH FOR THE PURPOSE OF WELFAR E OF WIDOWS OF THE DECEASED EMPLOYEES OF THE ASSESSEE COMPANY. THE LD . AR SUBMITTED THAT THE ITAT HAD ALLOWED A SIMILAR EXPENDITURE IN ASSESSEE S OWN CASE FOR AY 1999- 2000, COPY OF WHICH HAS BEEN PLACED ON RECORD. IT WAS ALSO SUBMITTED THAT FBT HAD ALSO BEEN PAID ON THESE EXPENSES AND THE CO NTENTION OF THE AO THAT THE EXPENSES WERE INCURRED FOR NON BUSINESS PURPOSE S IS INCORRECT. IT WAS ALSO SUBMITTED THAT THE AO HAS NOT SUBMITTED THE REMAND REPORT SOUGHT BY THE LD. CIT (A) ON THIS ISSUE. THE LD. CIT (A) HELD THAT S INCE FBT HAD ALREADY BEEN ATLAS CYCLES (HARYANA) SONEPAT PAGE 32 OF 70 PAID, NO DISALLOWANCE WAS CALLED FOR. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND ALSO THE DECISIO N RENDERED BY THE COORDINATE BENCH OF THE ITAT IN ITA NO. 1863/DEL/20 03, WE ARE OF THE OPINION THAT THE MATTER STANDS COVERED BY THE SAID DECISION OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. WE ACCORDINGLY, FIND NO RE ASON TO INTERFERE ON THIS ISSUE AND UPHOLD THE VIEW TAKEN BY THE LD. CIT (A). GROUND NO. 8 OF THE DEPARTMENTS APPEAL IS DISMISSED. 5.15 GROUND NO. 9 CONTESTS THE DELETION OF ADDITIO NS OF RS. 429,312/- AS ALLEGEDLY BEING NON-BUSINESS EXPENDITURE. THE AO DISALLOWED A SUM OF RS. 429,312/- UNDER THE SUB HEAD ENTERTAINMENT, WINE A ND BEER UNDER THE HEAD MISCELLANEOUS EXPENSES ON THE GROUND THAT NO BILL S/VOUCHERS WERE PRODUCED AND THAT THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTANT IATE ITS CLAIM. THE LD. DR SUPPORTED THE AOS ORDER. IT WAS SUBMITTED BY THE LD. AR THAT THIS ISSUE IS COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2000-01. IT WAS FURTHER SUBMITTED THAT THE COPIES OF BILLS AND VOUCHERS WERE SUBMITTED DURING THE FIRST APPELL ATE PROCEEDINGS ON WHICH THE LD. CIT (A) HAD CALLED FOR COMMENTS FROM THE AO . HOWEVER, THE AO CHOSE NOT TO COMMENT ON THE ADDITIONAL EVIDENCES. IT WAS ALSO SUBMITTED THAT SINCE FBT WAS PAID ON THESE EXPENSES, NO FURTHER DI SALLOWANCE COULD BE MADE. THE LD. CIT (A) DELETED THE ENTIRE ADDITION ON THE GROUND THAT SINCE ATLAS CYCLES (HARYANA) SONEPAT PAGE 33 OF 70 FBT HAD BEEN PAID ON THESE EXPENSES; THE DISALLOWAN CE COULD NOT BE MADE. WE HAVE HEARD THE RIVAL SUBMISSIONS AS WELL AS PERU SED THE DECISION OF THE COORDINATE BENCH IN ITA NO. 4216/DEL/2003 FOR AY 20 00-01 IN ASSESSEES OWN CASE. WE FIND THAT THE ISSUE IS SQUARELY COVERE D BY THE SAID DECISION OF THE COORDINATE BENCH AND FOLLOWING THE PRINCIPLES O F CONSISTENCY, WE HOLD THAT IDENTICAL DISALLOWANCE ON IDENTICAL SET OF FAC TS CANNOT BE UPHELD. GROUND NO. 9 OF THE DEPARTMENTS APPEAL IS DISMISSED. 5.16 GROUND NO. 10 PERTAINS TO THE DELETION OF ADDI TIONS OF RS. 16,088,065/- BEING NOTIONAL INTEREST ATTRIBUTABLE T O ALLEGED LOAN/ADVANCE MADE TO SH. ARUN KAPOOR AND OTHER PARTIES. THIS ISSUE H AS ALREADY BEEN DEALT AT LENGTH BY US IN ITA NO. 2490/DEL/2011 FOR AY 2003-0 4 AND ON THE PRINCIPLE OF CONSISTENCY WE HOLD THAT THE LD. CIT (A) HAS COR RECTLY DELETED THE ADDITION. GROUND NO. 10 OF THE DEPARTMENTS APPEAL IS DISMISS ED. 5.17 GROUND NO. 11 CHALLENGES THE DELETION OF ADDIT ION OF RS. 661,100/- AS ALLEGEDLY BEING NON BUSINESS EXPENDITURE. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE L D. CIT (A). IT IS SEEN THAT THE AO HAS DISALLOWED THIS AMOUNT BECAUSE THE ASSES SEE DID NOT PRODUCE ANY VOUCHERS/BILLS. THE ASSESSEE CONTENDED THAT THE RE CORD OF THESE EXPENSES WAS MAINTAINED AT MALANPUR UNIT. HOWEVER, THE ASSESSEE SUBMITTED THE DETAILS OF THE EXPENDITURE BEFORE THE LD. CIT (A) AND ALSO SUB MITTED COPIES OF THE ATLAS CYCLES (HARYANA) SONEPAT PAGE 34 OF 70 VOUCHERS. THESE BILLS PERTAINED TO GIFTS GIVEN TO THE DEALERS OF THE ASSESSEE COMPANY. THE LD. CIT (A) CALLED FOR A REMAND REPOR T BUT THE AO DID NOT COMMENT ON THESE ADDITIONAL EVIDENCES. THE LD. CIT (A) HELD THAT SINCE FBT HAS BEEN PAID ON THESE EXPENSES, NO DISALLOWANCE WA S CALLED FOR. HAVING CONSIDERED THE RIVAL SUBMISSIONS WE ARE OF THE OPIN ION THAT SINCE FBT HAS BEEN PAID ON THESE AMOUNTS, THE LD. CIT (A) WAS COR RECT IN DELETING THE DISALLOWANCES. DRAWING OUR STRENGTH FROM THE DECIS ION OF THE CO-ORDINATE BENCH OF ITAT DELHI IN ACIT VS MICRO TURNERS (SUPRA ), WE FIND NO REASON TO INTERFERE WITH THE REASONING ADOPTED BY THE LD. CIT (A) AND UPHOLD THE SAME. GROUND NO. 11 OF THE DEPARTMENTS APPEAL IS DISMISS ED. 5.18 GROUND NO. 12 ASSAILS THE DELETION OF ADDITIO N OF RS. 4 LAKHS AS ALLEGEDLY BEING NON BUSINESS EXPENDITURE OUT OF DEA LERS ACCOUNT. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). THESE EXPENSES AGAIN PERTAIN TO MALANPUR UNIT AND THE DETAILS/EVIDENCES THEREOF COULD NOT BE PRODUCED BEF ORE THE AO DURING THE ASSESSMENT PROCEEDINGS. THE AO MADE AN ADHOC DISALLOWANCE OF RS. 4 LAKHS OUT OF TOTAL EXPENSES OF RS. 1,423,353/-AS BEING FO R NON BUSINESS PURPOSES. COPIES OF THE BILLS WERE HOWEVER, SUBMITTED BEFORE THE LD. CIT(A) AND THE AO DID NOT OFFER HIS COMMENTS ON THESE ADDITIONAL E VIDENCES WHEN SO CALLED UPON TO DO SO BY THE LD. CIT(A). THE LD. CIT (A) H ELD THAT SINCE FBT HAD ATLAS CYCLES (HARYANA) SONEPAT PAGE 35 OF 70 ALREADY BEEN PAID ON THESE EXPENSES, THE DISALLOWAN CE WAS UNCALLED FOR. HAVING CONSIDERED THE FACTUAL MATRIX AND THE FINDIN GS OF THE LD. CIT(A), WE ARE OF THE CONCERNED OPINION THAT THE LD. CIT(A) HA S CORRECTLY HELD THAT IF FBT HAD BEEN PAID THEN THE EXPENDITURE COULD NOT BE DIS ALLOWED A SECOND TIME. DRAWING OUR STRENGTH FROM THE DECISION OF THE CO-OR DINATE BENCH OF ITAT DELHI IN ACIT VS MICRO TURNERS (SUPRA), WE FIND NO REASON TO INTERFERE WITH THE REASONING ADOPTED BY THE LD. CIT (A) AND UPHOLD THE SAME. GROUND NO. 12 OF THE DEPARTMENTS APPEAL IS ACCORDINGLY DISMISSED . 5.19 GROUND NOS. 13 TO 16 AND18 CHALLENGE THE FOLLOWIN G DELETIONS: - ADDITION OF RS. 50,000/- ALLEGED TO BE NON BUSINESS EXPENDITURE OUT OF TAXES, FEES AND SUBSCRIPTIONS. - ADDITION OF RS. 50,000/- ALLEGED TO BE NON BUSINESS EXPENDITURE OUT OF ENTERTAINMENT ACCOUNT. - ADDITION OF RS. 123,000/- BEING UN-VOUCHED EXPENDIT URE OUT OF ADVERTISEMENT EXPENSES. - ADDITION OF RS. 110,051/- OUT OF BUSINESS PROMOTION EXPENSES; - ADDITION OF RS. 5 LAKHS BEING UN-VOUCHED EXPENDITUR E OUT OF MISCELLANEOUS ACCOUNT. 5.19.1 THE LD. DR SUPPORTED THE AOS ORDER WHILE T HE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT ALL T HESE ADDITIONS HAVE BEEN DELETED BY THE LD. CIT (A) ON THE GROUND THAT FBT H AS DULY BEEN PAID ON ATLAS CYCLES (HARYANA) SONEPAT PAGE 36 OF 70 THESE EXPENSES. THE ASSESSEE HAS ALSO SUBMITTED CO PIES OF RELEVANT BILLS AND VOUCHERS BEFORE THE LD. CIT (A) IN ALL THESE CASES AND IT IS ALSO A FACT ON RECORD THAT THE AO DID NOT OFFER HIS COMMENTS ON TH ESE ADDITIONAL EVIDENCES WHEN HE WAS SO REQUIRED BY THE LD. CIT (A). DRAWING OUR STRENGTH FROM THE DECISION OF THE CO-ORDINATE BENCH OF ITAT DELHI IN ACIT VS MICRO TURNERS (SUPRA), WE FIND NO REASON TO INTERFERE WITH THE RE ASONING ADOPTED BY THE LD. CIT (A) AND UPHOLD THE SAME. GROUND NOS. 13 TO 16 AND 18 OF THE DEPARTMENTS APPEAL ARE DISMISSED. 5.20 GROUND NO. 17 OF THE DEPARTMENTS APPEAL CHALL ENGES THE ADDITION OF RS. 150,000/- AS ALLEGEDLY BEING EXCESSIVE EXPENDIT URE ON HORTICULTURE. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SU PPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE AO HAS STATED THAT OUT OF THE TOTAL EXPENSES OF RS. 459,182/- UNDER THE SUB HEAD HORTICULTURE EXPE NSES, MOST OF THE EXPENSES HAVE BEEN INCURRED IN CASH AND ARE SHOWN A S PAID TO ONE SH. K.B. SHARMA FOR BIRD TREATMENT. THE AO HAS STATED THAT NO VOUCHERS AND BILLS HAVE BEEN FURNISHED AND ACCORDINGLY, A SUM OF RS. 1,50,0 00/- WAS DISALLOWED. THE LD. CIT (A) HAS HELD THAT THESE EXPENSES ARE TO BE ALLOWED AS THE AR HAS SUBMITTED THAT EVIDENCES ALONG WITH PHOTOGRAPH WERE DULY FURNISHED BEFORE THE AO. THE LD. CIT (A) HAS ALSO RECORDED THAT THE AO HAS IN HIS REMAND ATLAS CYCLES (HARYANA) SONEPAT PAGE 37 OF 70 REPORT STATED THAT THE SAME WAS ADDITIONAL EVIDENCE . HAVING CONSIDERED THE RIVAL SUBMISSIONS AND THE FINDINGS IN THE IMPUGNED ORDER, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT (A) HAS NOT DEA LT WITH THIS ISSUE IN AN APPROPRIATE MANNER. ON ONE HAND, HE HAS ACCEPTED T HE CONTENTION OF THE ASSESSEE THAT THE EVIDENCES WERE FURNISHED BEFORE T HE AO AND ON THE OTHER HAND, HE ALSO MENTIONS THE FACT THAT THE AO HAS MEN TIONED IN HIS REMAND REPORT THAT THESE WERE FRESH EVIDENCES. HENCE, IN THE INTEREST OF JUSTICE, WE RESTORE THE ISSUE TO THE FILE OF THE AO FOR FRESH A DJUDICATION AFTER GIVING ASSESSEE DUE OPPORTUNITY TO PRESENT ITS CASE. GROU ND NO. 17 IS ALLOWED FOR STATISTICAL PURPOSES. 5.21 IN THE FINAL RESULT, ITA NO. 913/DEL/2010 FIL ED BY THE DEPARTMENT FOR AY 06-07 IS PARTLY ALLOWED. ITA NO. 10/DEL/2011 AY 2007-08 6. THE FIRST GROUND OF THE DEPARTMENTAL APPEAL ASSA ILS THE DELETION OF ADDITION OF RS. 17,029,818/- U/S 14A OF THE ACT. TH E LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE AO HELD THAT ALTHOUGH THE ASSESSEE HA S CLAIMED THAT THE INVESTMENTS IN SHARES AND MUTUAL FUNDS WERE MADE OU T OF FREE RESERVES OF THE COMPANY, BUT IT COULD NOT BE ESTABLISHED THAT THE I NVESTMENT WAS MADE FROM ATLAS CYCLES (HARYANA) SONEPAT PAGE 38 OF 70 FREE RESERVES. THE AO ALSO HELD THAT HAD THE ASSES SEE NOT MADE INVESTMENTS, IT WOULD NOT HAVE BORROWED FUNDS. THE AO HELD THAT OUT OF THE TOTAL INTEREST DEBITED, RS. 17,029,818/- WAS ATTRIBUTABLE TO INVES TMENTS IN SHARES AND MUTUAL FUNDS AND WAS ACCORDINGLY DISALLOWED. THE L D. CIT (A) GAVE A SPECIFIC FINDING THAT THE AO COULD NOT ESTABLISH TH E NEXUS BETWEEN THE INVESTMENTS IN MUTUAL FUNDS AND THE LOANS TAKEN. T HE LD. CIT (A) ALSO NOTED THAT THE ASSESSEE HAD TAX PAID PROFITS OF RS. 50.95 CRORES IN THE CURRENT YEAR WHILE THE INVESTMENTS IN MUTUAL FUNDS WERE ONLY TO THE EXTENT OF RS. 17.26 CRORES. THE LD. CIT (A) ALSO RELIED ON THE DECISIO N OF HONBLE HIGH COURT OF P&H IN CIT VS. HERO CYCLES (SUPRA) AND DELETED THE DISALLOWANCE. 6.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE MATERIAL ON RECORD AND WE FIND THAT THE DEPARTMENT HAS NOT BEEN ABLE TO CONTROVERT THE SPECIFIC FINDING GIVEN BY THE LD. CI T (A) THAT THE ASSESSEE HAD SURPLUS FUND AVAILABLE WITH IT AND THAT IF THERE WA S ANY NEXUS BETWEEN THE INVESTMENTS AND THE LOANS TAKEN, THE SAME COULD NOT BE ESTABLISHED. THE HONBLE P&H HIGH COURT IN THE CASE OF CIT VS. HERO CYCLES (SUPRA) HAS OPINED IN PARA 2 OF THE JUDGMENT AS UNDER: MERELY BECAUSE THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE ON FUNDS BORROWED IN THE MAIN UNIT, LUD HIANA, ATLAS CYCLES (HARYANA) SONEPAT PAGE 39 OF 70 IT WOULD NOT IPSO-FACTO INVITE THE DISALLOWANCE U/S 14A, UNLESS THERE IS EVIDENCE TO SHOW THAT SUCH INTEREST BEARING FUNDS HAVE BEEN INVESTED IN THE INVESTMENTS WHICH H AVE GENERATED THE TAX EXEMPT DIVIDEND INCOME. AS NOT ED EARLIER, THERE IS NO NEXUS ESTABLISHED BY THE REVEN UE IN THIS REGARD AND, THEREFORE, ON A MERE PRESUMPTION, THE PROVISIONS OF SEC. 14A CANNOT BE APPLIED. THEIR LORDSHIPS HAVE FURTHER HELD AS UNDER IN PARA 4 OF THE JUDGMENT: WHETHER, IN A GIVEN SITUATION, ANY EXPENDITURE WAS INCURRED WHICH WAS TO BE DISALLOWED, IS A QUESTION OF FACT. THE CONTENTION OF THE REVENUE THAT DIRECTLY OR INDI RECTLY SOME EXPENDITURE IS ALWAYS INCURRED WHICH MUST BE DISALLOWED U/S 14A AND THE IMPACT OF EXPENDITURE SO INCURRED CANNOT BE ALLOWED TO BE SET OFF AGAINST TH E BUSINESS INCOME WHICH MAY NULLIFY THE MANDATE OF SE C. 14A, CANNOT BE ACCEPTED. DISALLOWANCE U/S 14A REQU IRES FINDING OF INCURRING OF EXPENDITURE WHERE IT IS FOU ND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWANCE U/S 14A CANNOT STAND. IN TH E PRESENT CASE FINDING ON THIS ASPECT, AGAINST THE RE VENUE, IS NOT SHOWN TO BE PERVERSE. CONSEQUENTLY, DISALLOWAN CE IS NOT PERMISSIBLE. 6.1.1 RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE P&H HIGH COURT IN CIT VS HERO CYCLES (SUPRA), WHICH IS ALSO THE JURISDICTIONAL ATLAS CYCLES (HARYANA) SONEPAT PAGE 40 OF 70 HIGH COURT FOR THE ASSESSEE AND ALSO KEEPING IN VIE W THE FACTUAL FINDING RECORDED BY THE LD. CIT (A) WHICH COULD NOT BE SUCC ESSFULLY CONTESTED BY THE DEPARTMENT, WE UPHOLD THE ACTION OF THE LD. CIT (A) ON THIS ISSUE. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 6.2 GROUND NO. 2 PERTAINS TO DELETION OF ADDITION OF RS. 16,088,065/- AS NOTIONAL INTEREST ATTRIBUTABLE TO NON INTEREST BEAR ING LOAN ADVANCED TO SH. ARUN KAPOOR BY THE ASSESSEE. THIS ISSUE HAS ALREAD Y BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY US IN ITA NO. 2490/DEL/2011 FOR AY 03-04 FOLLOWING WHICH WE UPHOLD THE ACTION OF THE LD. CIT(A) ON THI S ISSUE. GROUND NO. 2 IS ACCORDINGLY DISMISSED. 6.3 GROUND NO. 3 PERTAINS TO DELETION OF ADDITION O F RS. 300,543/- UNDER THE MARRIAGE GIFT EXPENSES, RS. 281,253/- OUT OF SU BSCRIPTION EXPENSES AND RS. 316,723/- OUT OF WORKERS AND STAFF WELFARE EXPE NSES. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT WHILE DELETING THESE ADDIT IONS, THE LD. CIT (A) HAS GIVEN A FINDING THAT FBT HAD BEEN PAID ON THESE EXP ENSES AND FOR THAT REASON, THE ADDITIONS WERE HELD AS LIABLE FOR DELETION. HE ALSO MENTIONED THAT HE HAS GIVEN A SIMILAR RELIEF TO THE ASSESSEE IN AY 06-07 AND HENCE THE DISALLOWANCE WAS DELETED. WE NOTE THAT IDENTICAL ISSUE HAD COME UP IN THE DEPARTMENTAL ATLAS CYCLES (HARYANA) SONEPAT PAGE 41 OF 70 APPEAL BEARING ITA NO. 913/DEL/2010 FOR AY 06-07 WH ICH WE HAVE DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMEN T WHEREIN WE HAVE RELIED ON THE DECISION OF THE CO-ORDINATE BENCH OF ITAT DE LHI IN ACIT VS MICRO TURNERS (SUPRA). FOLLOWING THE SAME, WE UPHOLD THE IMPUGNED ACTION OF THE LD. CIT (A) ON THIS ISSUE. GROUND NO. 3 IS ACCORDIN GLY DISMISSED. 6.4 GROUND NO. 4 PERTAINS TO DELETION OF ADDITION OF RS. 5 LACS OUT OF CONSULTANCY EXPENSES. THE LD. DR SUPPORTED THE AO S ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS S EEN THAT THE ASSESSEE HAD DEBITED RS. 1,671,580/- UNDER CONSULTANCY EXPENSES. DURING THE ASSESSMENT PROCEEDINGS IT WAS STATED THAT MOST OF THE PERSONS TO WHOM THE PAYMENTS WERE MADE WERE EX-EMPLOYEES OF THE COMPANY HAVING S PECIALIZATION IN THEIR FIELDS AND THAT THEIR SERVICES WERE ENGAGED AFTER T HEIR RETIREMENT. HOWEVER, THE AO WAS OF THE OPINION THAT THE ASSESSEE HAD FAI LED TO ESTABLISH THE DETAILS OF SERVICES OBTAINED FROM THEM AND AN ADHOC DISALLOWANCE OF RS. 5 LACS WAS MADE. THE LD.CIT(A) HELD THAT ADHOC DISALLOWANCE BY THE AO WITHOUT PROPER VERIFICATION AND INVESTIGATION WAS UNCALLED FOR AND THAT DISALLOWANCE OF A PORTION OF THE EXPENDITURE WITHOUT INVESTIGATION AN D BRINGING FACTS ON RECORD WAS NOT TO BE APPROVED. THE ADDITION WAS ACCORDING LY DELETED. IT IS SEEN THAT SIMILAR ISSUE WAS ALSO BEFORE US IN ITA NO. 784/DEL /2010 FOR AY 06- ATLAS CYCLES (HARYANA) SONEPAT PAGE 42 OF 70 07(WHICH WAS PREFERRED BY THE ASSESSEE), WHEREIN WE HAVE RESTORED THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER PROPER VERIFICATION. ON SIMILAR LINES WE RESTORE THIS ISSUE ALSO TO THE FIL E OF THE AO FOR FRESH ADJUDICATION AFTER GIVING THE ASSESSEE DUE OPPORTUN ITY OF BEING HEARD. GROUND NO. 4 OF THE DEPARTMENTS APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 6.5 GROUND NO. 5 CHALLENGES THE ACTION OF THE LD. C IT (A) IN DELETING THE ADDITION OF RS. 211,898/- INCURRED BY THE ASSESSEE ON ACCOUNT OF PUBLISHING THE PHOTO OF ITS FOUNDER SH. JANKIDAS KAPOOR ON HIS DEATH ANNIVERSARY. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SU PPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE AO HELD THAT THIS WAS A PURELY PERSONAL EXPENSE AND WAS HENCE NOT ALLOWABLE AS A BUSINESS E XPENDITURE. HOWEVER, THE LD. CIT (A) HELD THAT THE ISSUE WAS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2000-01 AND THE ADDITION WAS ACCORD INGLY DELETED. IT IS SEEN THAT THIS ISSUE/IDENTICAL ISSUE OF ADVERTISEME NT WAS NOT BEFORE THE COORDINATE BENCH OF THE TRIBUNAL IN AY 2000-01 AND HENCE THE LD. CIT (A) HAS ALLOWED THE ASSESSEES GROUND ON A WRONG APPREC IATION OF FACTS. HENCE WE HAVE NO OPTION BUT TO RESTORE THE ISSUE TO THE F ILE OF THE LD. CIT (A) FOR DE NOVO ADJUDICATION AFTER GIVING DUE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. ATLAS CYCLES (HARYANA) SONEPAT PAGE 43 OF 70 GROUND NO. 5 OF THE DEPARTMENTS APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 6.6 GROUND NO. 6 OF THE APPEAL CHALLENGES THE DELE TION OF DISALLOWANCE MADE BY CAPITALIZING 2/3 RD OF THE EXPENSES ON GLOW SIGN BOARDS. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE LD. CIT (A) HAS HELD T HAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ITAT IN ASSESSEES OWN CA SE FOR AY 1978-79 AND ACCORDINGLY, DELETED THE DISALLOWANCE. ALTHOUGH, T HE DECISION OF THE CO- ORDINATE BENCH OF THE ITAT RELIED UPON BY THE LD. C IT (A) IS NOT ON RECORD, WE DO FIND THAT THE ISSUE IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF CIT VS. LIBERTY GROUP MARKETING DIVISION 315 ITR 125 (P&H) WHEREIN THE HONBLE HIGH COURT HAS OPINED AS UNDER: AFTER CONSIDERING THE RIVAL SUBMISSIONS MADE BY LE ARNED COUNSEL FOR THE PARTIES, WE ARE OF THE OPINION THAT THE TRIBUNAL WAS RIGHT IN CONFIRMING THE ORDER OF THE CIT(A) AND TREATING THE EXPENDITURE INCURRED ON GLOW SIGN BOARDS AS OF REVE NUE NATURE. SEC. 37(1) OF THE ACT PROVIDES THAT 'ANY EXPENDITUR E (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SS. 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EX PENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALL OWED IN ATLAS CYCLES (HARYANA) SONEPAT PAGE 44 OF 70 COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION.' FOR CLAIMING DED UCTION UNDER THIS SECTION, ONE OF THE CONDITIONS IS THAT THE EXP ENDITURE SHOULD NOT BE IN THE NATURE OF CAPITAL EXPENDITURE. THE QU ESTION WHETHER A PARTICULAR EXPENDITURE INCURRED BY THE ASSESSEE I S OF CAPITAL OR REVENUE NATURE IS ALWAYS A COMPLEX AND INTRICATE IS SUE. SUCH A QUESTION HAS TO BE CONSIDERED AND ANSWERED IN THE F ACTS AND CIRCUMSTANCES OF EACH CASE. IN ASSAM BENGAL CEMENT CO. LTD. VS. CIT (1955) 27 ITR 34 (SC), IT WAS HELD THAT IF THE EXPENDITURE IS MADE FOR ACQUIRING OR BRINGING INTO EXISTENCE AN ASSET OR ADVANTAGE FOR THE ENDURING BENEFIT OF THE BUSINESS, IT IS PROPERLY ATTRIBUTABLE TO CAPITAL AND IS OF THE NATURE OF CAP ITAL EXPENDITURE. IF ON THE OTHER HAND IT IS MADE NOT FOR BRINGING IN TO EXISTENCE AN ASSET OR ADVANTAGE BUT FOR RUNNING THE BUSINESS OR WORKING IT WITH A VIEW TO PRODUCE THE PROFITS IT IS A REVENUE EXPENDITURE. IF ANY SUCH ASSET OR ADVANTAGE FOR THE ENDURING BENEFI T OF THE BUSINESS IS THUS ACQUIRED OR BROUGHT INTO EXISTENCE IT WOULD BE IMMATERIAL WHETHER THE SOURCE OF THE PAYMENT WAS TH E CAPITAL OR THE INCOME OF THE CONCERN OR WHETHER THE PAYMENT WA S MADE ONCE AND FOR ALL OR WAS MADE PERIODICALLY. THE AIM AND OBJECT OF THE EXPENDITURE WOULD DETERMINE THE CHARACTER OF TH E EXPENDITURE WHETHER IT IS A CAPITAL EXPENDITURE OR A REVENUE EXPENDITURE. IT WAS FURTHER HELD THAT THE EXPRESSIO NS ENDURING BENEFIT OR OF A PERMANENT CHARACTER WERE INTRODU CED TO MAKE IT CLEAR THAT THE ASSET OR THE RIGHT ACQUIRED MUST HAVE ENOUGH DURABILITY TO JUSTIFY ITS BEING TREATED AS A CAPITA L ASSET. IN ATLAS CYCLES (HARYANA) SONEPAT PAGE 45 OF 70 BOMBAY STEAM NAVIGATION CO. (1953) (P) LTD. VS. CIT (1965) 56 ITR 52 (SC), IT WAS OBSERVED THAT IF THE EXPENDITUR E IS SO RELATED TO THE CARRYING ON OR CONDUCT OF THE BUSINESS THAT IT MAY BE REGARDED AS AN INTEGRAL PART OF THE PROFIT-EARNING PROCESS, THEN SUCH EXPENDITURE IS TO BE TAKEN AS REVENUE EXPENSES . IN LAKSHMIJI SUGAR MILLS CO. (P) LTD. VS. CIT (1971) 8 2 ITR 376 (SC), IT WAS HELD THAT IF THE EXPENDITURE IS MADE N OT FOR THE PURPOSE OF BRINGING INTO EXISTENCE ANY ASSET OR ADV ANTAGE BUT FOR RUNNING THE BUSINESS OR WORKING IT WITH A VIEW TO P RODUCE THE PROFIT, IT IS A REVENUE EXPENDITURE. IT WAS HELD TH AT THE CRITERIA HAS TO BE APPLIED FROM THE BUSINESS POINT OF VIEW A ND ON A FAIR APPRECIATION OF THE WHOLE SITUATION. IN CIT VS. MAD RAS AUTO SERVICE (P) LTD. (1998) 148 CTR (SC) 398 : (1998) 2 33 ITR 468 (SC), IT WAS HELD AS UNDER : 'THE GENERAL PRINCIPLE S APPLICABLE IN DETERMINING WHETHER A PARTICULAR EXPENDITURE IS CAP ITAL OR REVENUE ARE AS FOLLOWS : (1) OUTLAY IS DEEMED TO BE CAPITAL WHEN IT IS MADE FOR THE INITIATION OF A BUSINESS, FOR EX TENSION OF A BUSINESS, OR FOR A SUBSTANTIAL REPLACEMENT OF EQUIP MENT; (2) EXPENDITURE MAY BE TREATED AS PROPERLY ATTRIBUTABLE TO CAPITAL WHEN IT IS MADE NOT ONLY ONCE AND FOR ALL, BUT WITH A VIEW TO BRINGING INTO EXISTENCE AN ASSET OR AN ADVANTAGE FO R THE ENDURING BENEFIT OF A TRADE. IF WHAT IS GOT RID OF BY A LUMP SUM PAYMENT IS AN ANNUAL BUSINESS EXPENSE CHARGEABLE AG AINST REVENUE, THE LUMP SUM PAYMENT SHOULD EQUALLY BE REG ARDED AS A BUSINESS EXPENSE, BUT IF THE LUMP SUM PAYMENT BRING S IN A CAPITAL ASSET, THEN THAT PUTS THE BUSINESS ON ANOTH ER FOOTING ATLAS CYCLES (HARYANA) SONEPAT PAGE 46 OF 70 ALTOGETHER; (3) WHETHER FOR THE PURPOSE OF THE EXPE NDITURE, ANY CAPITAL WAS WITHDRAWN, OR, IN OTHER WORDS, WHETHER THE OBJECT OF INCURRING THE EXPENDITURE WAS TO EMPLOY WHAT WAS TA KEN IN AS CAPITAL OF THE BUSINESS. AGAIN, IT IS TO BE SEEN WH ETHER THE EXPENDITURE INCURRED WAS PART OF THE FIXED CAPITAL OF THE BUSINESS OR PART OF ITS CIRCULATING CAPITAL.' CONSIDERING TH E ABOVE PRINCIPLE OF LAW, IN THE PRESENT CASE, IT IS TO BE SEEN AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE ON GLOW SI GN BOARDS WAS WITH A VIEW TO BRINGING INTO EXISTENCE AN ASSET OR AN ADVANTAGE FOR THE ENDURING BENEFIT OF THE BUSINESS. IN OUR OPINION, THE EXPENDITURE INCURRED BY THE ASSESSEE O N GLOW SIGN BOARDS DOES NOT BRING INTO EXISTENCE AN ASSET OR AD VANTAGE FOR THE ENDURING BENEFIT OF THE BUSINESS, WHICH IS ATTR IBUTABLE TO THE CAPITAL. THE GLOW SIGN BOARD IS NOT AN ASSET OF PER MANENT NATURE. IT HAS A SHORT LIFE. THE MATERIALS USED IN THE GLOW SIGN BOARDS DECAY WITH THE EFFECT OF WEATHER. THEREFORE, IT REQ UIRES FREQUENT REPLACEMENT. THE TRIBUNAL HAS ALSO RECORDED A FINDI NG THAT THE ASSESSEE HAS TO INCUR EXPENDITURE ON GLOW SIGN BOAR DS REGULARLY IN ALMOST EACH YEAR. THIS FACT ITSELF SHOWS THAT TH E ADVANTAGE ACCRUED FROM THE USE OF THE GLOW SIGN BOARDS IS NOT OF ENDURING NATURE. THUS, THE EXPENDITURE BY THE ASSESSEE ON TH ESE GLOW SIGN BOARDS DID NOT BRING INTO EXISTENCE ANY ASSET OR AD VANTAGE FOR THE ENDURING BENEFIT OF THE BUSINESS. THE ASSESSEE HAS SPENT THE EXPENDITURE ON THE GLOW SIGN BOARDS WITH AN OBJECT TO FACILITATE THE BUSINESS OPERATION AND NOT WITH AN OBJECT TO AC QUIRE ASSET OF ENDURING NATURE. THEREFORE, THE SAID EXPENDITURE WA S OF REVENUE ATLAS CYCLES (HARYANA) SONEPAT PAGE 47 OF 70 NATURE AND THE TRIBUNAL HAS RIGHTLY TREATED THE SAM E AS OF REVENUE NATURE. 6.6.1 CONSIDERING THE FACTUAL MATRIX OF THE CASE A ND RESPECTFULLY APPLYING THE RATIO OF JUDGMENT OF THE HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT VS LIBERTY GROUP MARKETING DIVISION (SU PRA), FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A). GR OUND NO. 6 IS ACCORDINGLY DISMISSED. 6.7 GROUND NO. 7 CHALLENGES THE IMPUGNED ACTION OF THE LD. CIT (A) IN DELETING ADDITION OF RS. 10 LACS ALLEGED TO BE PURE LY PERSONAL EXPENSES OF THE DIRECTORS, OFFICERS AND THEIR FAMILY MEMBERS UNDER THE HEAD TRAVELLING EXPENSES. THE LD. DR SUPPORTED THE AOS ORDER WHIL E THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE A O HAS OBSERVED THAT THE EXPENSES ON ACCOUNT OF FOREIGN TRAVEL OF THE PRESID ENT, VICE PRESIDENT AND JOINT PRESIDENT OF THE ASSESSEE COMPANY AMOUNTED TO RS. 3,078,432/-. IT WAS THE ASSESSEES CONTENTION THAT FOREIGN VISITS WERE UNDERTAKEN TO PROMOTE EXPORTS AND TO IMPORT RAW MATERIALS AND COMPONENTS. HOWEVER, THE AO WAS OF THE OPINION THAT THE ENTIRE FOREIGN TRAVEL EXPEN SES CANNOT BE SAID TO BE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES AND, T HEREFORE, DISALLOWED AN ADHOC AMOUNT OF RS. 10 LACS. THE LD. CIT (A) HELD THAT T HE AO HAS MADE AN ATLAS CYCLES (HARYANA) SONEPAT PAGE 48 OF 70 ADHOC DISALLOWANCE PURELY ON GUESS WORK AND ON SURMISES. THE LD. CIT (A) ALSO NOTED THAT FBT HAS BEEN DULY PAID ON THE EXPEN SES AND THE DISALLOWANCE MERITED DELETION. CONSIDERING THE FACTUAL MATRIX O F THE CASE AS WELL AS THE FACT THAT FBT HAS BEEN DULY PAID BY THE ASSESSEE ON THESE TRAVEL EXPENSES AND DRAWING SUPPORT FROM THE DECISION OF THE CO-ORDINAT E BENCH OF ITAT DELHI IN ACIT VS MICRO TURNERS (SUPRA), WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A). GROUND NO. 7 IS ACCOR DINGLY DISMISSED. 6.8 GROUND NO. 8 CHALLENGES THE ACTION OF THE LD. CIT (A) IN DELETING THE ADDITION OF RS. 110,351/- ALLEGED TO BE OF NON BUSI NESS IN NATURE. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE AO HAS MADE THIS DISAL LOWANCE OUT OF ENTERTAINMENT, WINE AND BEER EXPENSES ON THE GROUND THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM. THE LD. CIT (A) HELD T HAT SINCE THE ISSUE WAS SETTLED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE ITAT FOR AY 2000-01 AND ALSO BECAUSE FBT HAD DULY BEEN PAID ON THESE EXPENS ES, THE DISALLOWANCE MERITED DELETION. ON AN OVERALL VIEW OF THE FACTS AND ALSO THE DECISION OF THE COORDINATE BENCH OF THE ITAT IN THE ASSESSEES OWN CASE FOR AY 2000-01, WE FIND NO REASON TO INTERFERE WITH THE IMPUGNED ORDER ON THIS ISSUE. GROUND NO. 8 IS ACCORDINGLY DISMISSED. ATLAS CYCLES (HARYANA) SONEPAT PAGE 49 OF 70 6.9 IN THE FINAL RESULT, ITA NO. 10/DEL/2011 FOR A Y 07-08 IS PARTLY ALLOWED. ITA NO. 3473/DEL/2011 AY 08-09 7. GROUND NO. 1 PERTAINS TO DELETION OF ADDITION OF RS. 16,088,065/- ON ACCOUNT OF NOTIONAL INTEREST ATTRIBUTABLE TO ADVANC E MADE TO SH. ARUN KAPOOR. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. A R SUPPORTED THE ORDER OF THE LD. CIT (A). THIS ISSUE HAS ALREADY BEEN DE CIDED IN FAVOUR OF THE ASSESSEE IN ITA NO. 2490/DEL/2011 FOR AY 03-04 AND ALSO FOLLOWED IN AY 04-05, 06-07 AND 07-08. HENCE, GROUND NO. 1 IS DISM ISSED. 7.1 GROUND NO. 2 PERTAINS TO DELETION OF ADDITION O F RS. 137,180/- ON A/C OF MARRIAGE GIFT EXPENSES AND RS. 139,518/- UNDER S UBSCRIPTION EXPENSES. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SU PPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT IT WAS THE CONTENTION OF THE ASSESSEE THAT THESE AMOUNTS WERE PAID AS SHAGUN ON THE MARRIAGE CEREMONIES OF EMPLOYEES, DEALERS AND SUPPLIERS OF THE COMPANY AND THE COMPAN Y HAD TO NECESSARILY INCUR THESE EXPENSES BECAUSE OF ITS BUSINESS NECESS ITIES. IT WAS SUBMITTED THAT THE COMPANY HAS OVER 2000 EMPLOYEES AND MORE THAN 4 000 DEALERS AND AS SUCH THESE EXPENSES WERE IN THE NATURE OF BUSINESS EXPEDIENCY. THE LD. CIT ATLAS CYCLES (HARYANA) SONEPAT PAGE 50 OF 70 (A) DELETED THE DISALLOWANCE. SIMILARLY, A SUM OF RS.139,518/- WAS DISALLOWED OUT OF TOTAL EXPENSE OF RS. 256,401/- UN DER SUBSCRIPTION EXPENSES ON THE GROUND THAT THEY WERE PERSONAL IN NATURE. T HE LD. CIT (A) DELETED THIS ADDITION ALSO BY TAKING NOTE OF THE FACT THAT FBT W AS PAID ON THESE EXPENSES AND ALSO THAT OUT OF THE DISALLOWED EXPENSES RS. 50 ,000/- WAS TOWARDS SUBSCRIPTION TO CYCLE MANUFACTURERS ASSOCIATION WHI CH TOOK CARE OF THE COLLECTIVE INTEREST OF CYCLE MANUFACTURERS. THE BA LANCE EXPENDITURE PERTAINING TO REIMBURSEMENT OF CLUB MEMBERSHIP FEE TO THE TOP EXECUTIVES OF THE COMPANY WAS ALSO ALLOWED BY THE LD. CIT (A) AS BEING WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. HAVING CONSIDER ED THE FACTUAL MATRIX ON BOTH THESE ISSUES, WE NOTE THAT IDENTICAL ISSUE HAD COME UP IN THE DEPARTMENTAL APPEAL BEARING ITA NO. 913/DEL/2010 FO R AY 06-07 WHICH WE HAVE DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT WHEREIN WE HAVE RELIED ON THE DECISION OF THE CO-ORDINATE B ENCH OF ITAT DELHI IN ACIT VS MICRO TURNERS (SUPRA). FOLLOWING THE SAME, WE UPHOLD THE IMPUGNED ACTION OF THE LD. CIT (A) ON THIS ISSUE. S IMILARLY, AS FAR AS THE ISSUE OF SUBSCRIPTION EXPENSES IS CONCERNED THE DEPARTMEN T COULD NOT CONTROVERT THE FACT THAT FBT HAS BEEN PAID ON THESE EXPENSES AND N OR COULD COUNTER THE FINDING OF THE LD. CIT (A) THAT THESE EXPENSES WERE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. HENCE, WE FIND NO REASON TO INTERFERE ON THIS ISSUE AS ATLAS CYCLES (HARYANA) SONEPAT PAGE 51 OF 70 WELL. GROUND NO. 2 OF THE DEPARTMENTS APPEAL IS DI SMISSED. 7.2 GROUND NO. 3 CHALLENGES THE ACTION OF THE LD. CIT (A) IN DELETING THE ADDITION OF RS. 3 LACS UNDER CONSULTANCY EXPENSES A ND RS. 245,180/- INCURRED ON ADVERTISEMENT ON THE ANNIVERSARY OF LATE SH. JAN KIDAS KAPOOR THE FOUNDER OF THE COMPANY. THE LD. DR SUPPORTED THE AOS ORDE R WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE AO HAD DISALLOWED AN ADHOC SUM OF RS. 3 LACS OUT OF TOTAL CONSULTANCY EXPENSES OF RS. 1,372,027/- ON THE BASIS THAT THE ASSESSEE HAD FAIL ED TO ESTABLISH THE NATURE AND DETAILS OF SERVICES OBTAINED FROM THESE EX-EMPL OYEES OF THE COMPANY. THE LD. CIT (A) HAS STATED THAT HE RELIES ON THE DE CISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR AY 2000-01 IN ITA NO. 4216/ DEL/2003 ON AN IDENTICAL ISSUE WHILE DELETING THIS ADDITION. FURT HER, THE ISSUE OF ADVERTISEMENT ON THE ANNIVERSARY OF THE FOUNDER OF THE COMPANY WAS ALSO DECIDED IN ASSESSEES FAVOUR BY THE LD. CIT (A) BY RELYING ON THE DECISION OF THE ITAT FOR AY 2000-01. HOWEVER, WE FIND THAT THE LD. CIT (A) HAS ADJUDICATED THE ISSUES AT HAND WITHOUT GOING THROUG H THE ORDER OF THE ITAT FOR AY 2000-01 AS THESE ISSUES WERE NOT IN APPEAL B EFORE THE ITAT IN AY 2000-01 AT ALL. HENCE, WE HAVE NO OPTION BUT TO RE STORE BOTH THESE ADDITIONS TO THE FILE OF THE LD. CIT (A) FOR FRESH ADJUDICATI ON AFTER AFFORDING DUE ATLAS CYCLES (HARYANA) SONEPAT PAGE 52 OF 70 OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. GROUND NO. 3 IS ALLOWED FOR STATISTICAL PURPOSES. 7.3 GROUND NO. 4 PERTAINS TO DELETION OF ADDITION OF RS. 177,478/- ON A/C OF CAPITALIZATION OF GLOW SIGN BOARD EXPENSES. THI S ISSUE HAS ALREADY BEEN DECIDED BY US IN ITA NO. 10/DEL/2011 FOR AY 07-08 I N FAVOUR OF THE ASSESSEE AND FOLLOWING THE SAME WE UPHOLD THE FINDINGS OF TH E LD. CIT (A) IN THIS YEAR AS WELL. GROUND NO. 4 OF THE DEPARTMENTS APPEAL I S ACCORDINGLY DISMISSED. 7.4 GROUND NO. 5 PERTAINS TO DELETION OF RS. 5 LAC S OUT OF FOREIGN TRAVEL EXPENSES OF THE TOP MANAGEMENT OF THE COMPANY. THI S GROUND ALSO CHALLENGES DELETION OF ADDITION OF RS. 54,534/- UND ER THE HEAD ENTERTAINMENT, WINE AND BEER EXPENSES AND RS. 53,000/- UNDER PRIZ E AND REWARDS. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SUPPOR TED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE LD. CIT (A) HAS GIVEN A CATEGORICAL FINDING THAT AN ADHOC DISALLOWANCE OF RS. 5 LACS WAS MADE ON A/C OF FOREI GN TRAVEL EXPENSES WITHOUT POINTING OUT THE PARTICULAR TOURS WHICH HAV E NOT BEEN UNDERTAKEN FOR BUSINESS PURPOSES. THE LD. CIT (A) HAS ALSO NOTED THAT THE EXPORTS AND IMPORTS OF THE ASSESSEE COMPANY HAVE INCREASED OVER THE YEARS AND THAT THE AO RESORTED TO THE ADHOC DISALLOWANCE WITHOUT ANY BASIS. SIMILARLY, THE DISALLOWANCE FROM ENTERTAINMENT, WINE AND BEER EXPE NSES WAS INCURRED TO ATLAS CYCLES (HARYANA) SONEPAT PAGE 53 OF 70 ENTERTAIN THE CLIENTS, DEALERS AND BUSINESS ASSOCIA TES. IT IS SEEN THAT BOTH THE ISSUES OF FOREIGN TRAVEL EXPENSES AS WELL AS ENTERT AINMENT, WINE AND BEER EXPENSES ARE COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THE ITAT AN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS. THE CASE OF THE ASSESSEE GAINS A STRONGER FOOTING ALSO FROM THE FACT THAT FB T HAS BEEN DULY PAID ON THESE EXPENSES. DRAWING SUPPORT FROM THE DECISION O F THE CO-ORDINATE BENCH OF ITAT DELHI IN ACIT VS MICRO TURNERS (SUPRA), WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) ON THESE TWO ISSUES. AS FAR AS THE DISALLOWANCE OF RS. 53,000/- UNDER PRIZE AND RE WARDS IS CONCERNED, THE LD. CIT (A) HAS STATED IN THE IMPUGNED ORDER THAT THE A O HAS NOT GIVEN ANY FACTUAL FINDING REGARDING THE GENUINENESS OF THE PA YMENTS. THE LD. CIT (A) HAS NOTED THAT GIVING PRIZES AND REWARDS IS A POLIC Y OF THE COMPANY AND THE PRIZE MONEY IS INCLUDED IN THE SALARY OF THE EMPLOY EE ON WHICH TDS IS ALSO DULY DEDUCTED. CONSIDERING THE FINDING OF FACT REC ORDED BY THE LD. CIT (A) WHICH COULD NOT BE CONTROVERTED BY THE DEPARTMENT, WE FIND NO REASON TO INTERFERE ON THIS ISSUE AS WELL. GROUND NO. 5 OF T HE DEPARTMENTS APPEAL IS ACCORDINGLY DISMISSED. 7.5 GROUND NO. 6 PERTAINS TO DELETION OF ADDITION OF RS. 114,210/- UNDER SALES PROMOTION AND RS. 568,445/- UNDER THE HEAD R EPAIRS AND MAINTENANCE. ATLAS CYCLES (HARYANA) SONEPAT PAGE 54 OF 70 THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. A R SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE LD. CIT (A) HAS STATED THAT THE VOUCHER WISE DETAILS OF THE EXPENSES ON SALES PROMOTION WER E SUBMITTED BEFORE HIM. IT IS ALSO STATED THAT FBT HAD ALSO BEEN PAID ON TH ESE EXPENSES. SIMILARLY, THE ASSESSEE HAS FURNISHED VOUCHER WISE DETAILS FOR THE REPAIRS AND MAINTENANCE EXPENSES BEFORE THE LD. CIT (A). CONSIDERING THE D ETAILS SUBMITTED, THE LD. CIT (A) HAS ALLOWED THESE EXPENSES BY DELETING THE ADDITIONS. HOWEVER, WE FIND THAT THE LD. CIT (A) HAS NOT MENTIONED IN THE IMPUGNED ORDER AS TO WHETHER THE COMMENTS OF THE AO WERE INVITED ON THE ADDITIONAL EVIDENCES FILED BEFORE HIM. HENCE, IN THE INTEREST OF JUSTIC E, WE DEEM IT APPROPRIATE TO RESTORE THESE TWO ISSUES TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER VERIFYING THE EVIDENCES FURNISHED BY THE ASSESSEE A ND AFTER GIVING THE ASSESSEE A DUE OPPORTUNITY OF BEING HEARD. GROUND NO. 6 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7.6 IN THE FINAL RESULT, ITA NO. 3473/DEL/2011 FOR AY 08-09 IS PARTLY ALLOWED. ITA NO. 2132/DEL/2012 FOR AY 2009-10 8. GROUND NO. 1 PERTAINS TO DELETION OF ADDITION OF RS. 16,088,065/- ATLAS CYCLES (HARYANA) SONEPAT PAGE 55 OF 70 BEING NOTIONAL INTEREST ATTRIBUTABLE TO ADVANCE MAD E TO SH. ARUN KAPOOR. THIS ISSUE HAS ALREADY BEEN SETTLED IN FAVOUR OF TH E ASSESSEE AND AGAINST THE DEPARTMENT IN ITA NO. 2490/DEL/2011 FOR AY 03-04 AN D ALSO FOR SUBSEQUENT ASSESSMENT YEARS. HENCE, THIS GROUND IS DISMISSED. 8.1 GROUND NO. 2 PERTAINS TO DELETION OF ADDITION O F RS. 236,618/- UNDER MARRIAGE GIFT EXPENSES AND RS. 213,700/- UNDER SUBS CRIPTION EXPENSES. IT IS SEEN THAT THESE TWO ADDITIONS ARE IDENTICAL TO GROU ND NO. 2 OF THE DEPARTMENTS APPEAL IN ITA NO. 3473/DEL/2011 FOR AY 08-09 AND WH ICH HAVE BEEN HELD AGAINST THE DEPARTMENT. SINCE, THESE TWO ISSUES AR E IDENTICAL AS AFOREMENTIONED, FOLLOWING OUR ADJUDICATION ON THESE TWO ISSUES IN ITA NO. 3473/DEL/2011 FOR AY 08-09, WE DISMISS THIS GROUND ALSO. 8.2 GROUND NO. 3 CHALLENGES THE ACTION OF THE LD. C IT (A) IN DELETING THE ADDITION OF RS. 5 LACS UNDER CONSULTANCY EXPENSES A ND RS. 256,610/- UNDER ADVERTISEMENT EXPENSES INCURRED ON THE ANNIVERSARY OF THE LATE FOUNDER OF THE ASSESSEE COMPANY. THE LD. DR SUPPORTED THE AOS ORD ER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THESE TWO ISSUES ARE ALSO IDENTICAL TO GROUND NO. 3 OF THE DEPARTMENTS APPEAL IN ITA NO. 3473/DEL/2011 FOR AY 2008-09 AND WHICH HAVE BEEN RE STORED TO THE FILE OF THE LD. CIT (A) FOR FRESH ADJUDICATION. THE LD. CIT (A) HAS DECIDED THE ISSUE ATLAS CYCLES (HARYANA) SONEPAT PAGE 56 OF 70 IN FAVOUR OF THE ASSESSEE RELYING ON THE HIS DECISI ON FOR AY 08-09 BY RELYING ON WRONG SET OF FACTS AND HENCE WE HAVE NO OPTION B UT TO RESTORE THESE TWO ISSUES TO THE FILE OF THE LD. CIT (A) FOR FRESH ADJ UDICATION AFTER GIVING THE ASSESSEE DUE OPPORTUNITY OF BEING HEARD. GROUND NO. 3 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8.3 GROUND NO. 4 PERTAINS TO DELETION OF DISALLOWA NCE OF RS. 70,275/- ON ACCOUNT OF CAPITALIZATION OF GLOW SIGN BOARD EXPENS ES. THIS ISSUE HAS BEEN DECIDED AGAINST THE DEPARTMENT IN ITA NO. 3473/DEL/ 2011 FOR AY 08-09 AND ALSO IN ITA NO. 10/DEL/2011 FOR AY 2007-08 AND SINC E NO NEW FACTS HAVE BEEN ADDED TO THE FACTUAL MATRIX, WE DISMISS THIS GROUND IN THIS YEAR AS WELL. 8.4 GROUND NO. 5 PERTAINS TO DELETION OF ADDITION OF RS. 7 LACS OUT OF THE FOREIGN TRAVEL EXPENSES OF THE TOP MANAGEMENT OF TH E ASSESSEE COMPANY. THE GROUND ALSO CHALLENGES THE DELETION OF ADDITION OF RS. 58,382/- UNDER THE HEAD ENTERTAINMENT, WINE AND BEER EXPENSES. THE GROUN D ALSO CHALLENGES THE DELETION OF ADDITION OF RS. 72,350/- UNDER PRIZE AN D REWARDS EXPENSES. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SU PPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THIS GROUND IS IDENTIC AL TO GROUND NO. 5 IN THE DEPARTMENTS APPEAL IN ITA NO. 3473/DEL/2011 FOR AY 08-09 IN WHICH WE HAVE DISMISSED THE DEPARTMENTS GROUND. AS THE FAC TUAL MATRIX IS IDENTICAL IN ATLAS CYCLES (HARYANA) SONEPAT PAGE 57 OF 70 THIS YEAR AS WELL AND THE DEPARTMENT COULD NOT BRIN G ANY NEW FACT ON RECORD, WE DISMISS GROUND NO. 5 ON THE SAME REASONING AS AD OPTED BY US IN AY 08- 09. 8.5 GROUND NO. 6 CHALLENGES THE DELETION OF ADDITI ON OF RS. 544,893/- UNDER THE HEAD SALES PROMOTION EXPENSES. THE LD. DR SUP PORTED THE AOS ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THE LD. CIT (A) HAS RECORDED A FINDING THAT THE ASSESSE E HAS SUBMITTED VOUCHER WISE DETAILS OF THESE EXPENSES BEFORE HIM IN RESPE CT OF FOUR ITEMS TOTALING RS. 135,515/-. APART FROM THIS IT IS SEEN THAT THE AO HAS DISALLOWED AN AMOUNT OF RS. 409,378/- INCURRED ON PURCHASE OF SILVER ITEMS AS THE ASSESSEE COULD NOT EXPLAIN AS TO HOW THE EXPENDITURE IN THIS REGARD WA S INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. A PERUSAL OF TH E FINDING OF THE LD. CIT(A) ON THIS ISSUE SHOWS THAT THE ISSUE HAS BEEN DEALT B Y HIM IN A VERY CASUAL MANNER WITHOUT DISCUSSING THE SPECIFICS OF THE DISA LLOWANCE AND ALSO WITHOUT BRINGING ON RECORD AS TO WHETHER THE PROCEDURE AS L AID DOWN UNDER RULE 46A WAS FOLLOWED OR NOT. HENCE, IN THE INTEREST OF JUS TICE, WE DEEM IT A MATTER FIT TO BE RESTORED TO THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION AFTER GIVING THE ASSESSEE A DUE OPPORTUNITY OF BEING HEARD AND FURNI SHING THE RELEVANT DOCUMENTS AFTER DULY CALLING FOR A REMAND REPORT FR OM THE AO. GROUND NO. 6 ATLAS CYCLES (HARYANA) SONEPAT PAGE 58 OF 70 IS ALLOWED FOR STATISTICAL PURPOSES. 8.6 IN THE FINAL RESULT ITA NO. 2132/DEL/2012 FILE D BY THE DEPARTMENT IS PARTLY ALLOWED. ITA NO. 4000/DEL/2013 FOR AY 2010-11 9. GROUND NO. 1 PERTAINS TO DELETION OF ADDITION OF RS. 16,088,065/- BEING NOTIONAL INTEREST ATTRIBUTABLE TO ADVANCE MADE TO S H. ARUN KAPOOR. THIS ISSUE HAS ALREADY BEEN SETTLED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT IN ITA NO. 2490/DEL/2011 FOR AY 03-04 AND FOLLOWED IN SUBSEQUENT ASSESSMENT YEARS. HENCE, THIS GROUND IS DISMISSED. 9.1 GROUND NO. 2 PERTAINS TO DELETION OF ADDITION OF RS. 13,707/- UNDER MARRIAGE GIFT EXPENSES AND RS. 2,64,550/- UNDER SUB SCRIPTION EXPENSES. IT IS SEEN THAT THESE TWO ADDITIONS ARE IDENTICAL TO GROU ND NO. 2 OF THE DEPARTMENTS APPEAL IN ITA NO. 3473/DEL/2011 FOR AY 08-09 AND WH ICH HAVE BEEN HELD AGAINST THE DEPARTMENT. IDENTICAL ISSUES IN AY 09-1 0 WERE ALSO HELD IN FAVOUR OF THE ASSESSEE BY US. SINCE, THESE TWO ISSUES ARE IDENTICAL AS AFOREMENTIONED, FOLLOWING THE DECISION RENDERED IN ITA NO. 3473/DEL /2011 FOR AY 08-09 AND FOLLOWED IN AY 09-10 ON THESE ISSUES, WE DISMISS TH IS GROUND ALSO. ATLAS CYCLES (HARYANA) SONEPAT PAGE 59 OF 70 9.2 GROUND NO. 3 CHALLENGES THE ACTION OF THE LD. CIT (A) IN DELETING THE ADDITION OF RS. 3 LACS UNDER CONSULTANCY EXPENSES A ND RS. 2,25,600/- UNDER ADVERTISEMENT EXPENSES INCURRED ON THE ANNIVERSARY OF THE LATE FOUNDER OF THE ASSESSEE COMPANY. THE LD. DR SUPPORTED THE AOS ORD ER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). IT IS SEEN THAT THESE TWO ISSUES ARE ALSO IDENTICAL TO GROUND NO. 3 OF THE DEPARTMENTS APPEAL IN ITA NO. 3473/DEL/2011 FOR AY 2008-09 AND WHICH HAVE BEEN RE STORED TO THE FILE OF THE LD. CIT (A) FOR FRESH ADJUDICATION. THE LD. CIT (A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE RELYING ON THE HIS EARLIE R DECISIONS FOR AY 08-09 AND AY 09-10 BY RELYING ON WRONG SET OF FACTS AND HENCE WE HAVE NO OPTION BUT TO RESTORE THESE TWO ISSUES TO THE FILE OF THE LD. CIT (A) FOR FRESH ADJUDICATION AFTER GIVING THE ASSESSEE DUE OPPORTUNITY OF BEING HEARD. GROUND NO. 3 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9.3 GROUND NO. 4 PERTAINS TO DELETION OF DISALLOWA NCE OF RS. 1,49,606/- ON ACCOUNT OF CAPITALIZATION OF GLOW SIGN BOARD EXPENS ES. THIS ISSUE HAS ALSO BEEN DECIDED AGAINST THE DEPARTMENT IN ITA NO. 3473 /DEL/2011 FOR AY 08-09 AND ALSO FOLLOWED IN AY 09-10 AND ON THE PRINCIPLE OF CONSISTENCY WE DISMISS THIS GROUND IN THIS YEAR AS WELL. 9.4 GROUND NO. 5 PERTAINS TO DELETION OF ADDITION OF RS. 5 LACS OUT OF THE ATLAS CYCLES (HARYANA) SONEPAT PAGE 60 OF 70 FOREIGN TRAVEL EXPENSES OF THE TOP MANAGEMENT OF TH E ASSESSEE COMPANY. THE GROUND ALSO CHALLENGES THE DELETION OF ADDITION OF RS. 53,167/- UNDER THE HEAD ENTERTAINMENT, WINE AND BEER EXPENSES. THE GROUN D ALSO CHALLENGES THE DELETION OF ADDITION OF RS. 2,46,685/- UNDER PRIZE AND REWARDS EXPENSES. THIS GROUND IS AGAIN IDENTICAL TO GROUND NO. 5 IN THE DE PARTMENTS APPEAL IN ITA NO. 3473/DEL/2011 FOR AY 08-09 IN WHICH WE HAVE DIS MISSED THE DEPARTMENTS GROUND. IDENTICAL GROUNDS WERE ALSO I N APPEAL BEFORE US FOR AY 2009-10 WHICH WE HAVE DECIDED AGAINST THE DEPARTMEN T. AS THE FACTUAL MATRIX IS IDENTICAL IN THIS YEAR AS WELL AND THE DEPARTMEN T COULD NOT BRING ANY NEW FACT ON RECORD, WE DISMISS GROUND NO. 5 ON THE SAME REASONING AS ADOPTED BY US IN AY 08-09. 9.5 GROUND NO. 6 CHALLENGES THE DELETION OF ADDITIO N OF RS. 2,00,000/- UNDER THE HEAD SALES PROMOTION EXPENSES. THE LD. DR SUPPORTED THE AOS ORDER WHILE THE LD. AR SUPPORTED THE ORDER OF THE L D. CIT (A). THE LD. CIT (A) HAS RECORDED A FINDING THAT THE ASSESSEE HAS SU BMITTED VOUCHER WISE DETAILS OF THESE EXPENSES BEFORE HIM. A PERUSAL OF THE FINDING OF THE LD. CIT(A) ON THIS ISSUE SHOWS THAT THE ISSUE HAS BEEN DEALT BY HIM IN A VERY CASUAL MANNER WITHOUT DISCUSSING THE SPECIFICS OF T HE DISALLOWANCE AND ALSO WITHOUT BRINGING ON RECORD AS TO WHETHER THE PROCED URE AS LAID DOWN UNDER ATLAS CYCLES (HARYANA) SONEPAT PAGE 61 OF 70 RULE 46A WAS FOLLOWED OR NOT. HENCE, IN THE INTERE ST OF JUSTICE, WE DEEM IT A MATTER FIT TO BE RESTORED TO THE FILE OF THE CIT (A ) FOR FRESH ADJUDICATION AFTER GIVING THE ASSESSEE A DUE OPPORTUNITY OF BEING HEAR D AND FURNISHING THE RELEVANT DOCUMENTS AFTER DULY CALLING FOR A REMAND REPORT FROM THE AO. GROUND NO. 6 IS ALLOWED FOR STATISTICAL PURPOSES. 9.6 IN THE FINAL RESULT ITA NO. 4000/DEL/2013 IS P ARTLY ALLOWED. ITA NOS. 2489/DEL/2011 AY 2006-07 AND 4049/DEL/2013 AY 2008-09 10. BOTH THESE APPEALS HAVE BEEN PREFERRED BY THE DEPARTMENT AGAINST DELETION OF PENALTIES IMPOSED U/S 271(1)(C)OF THE A CT. FOR AY 2006-07, THE PENALTY IMPOSED WAS RS. 15,45,612/- ON THE SOLE ISS UE OF CONFIRMATION OF ADDITION OF RS. 36,17,415/- U/S 14A READ WITH RULE 8D BY THE LD. CIT (A). IN AY 08-09, THE PENALTY IMPOSED WAS RS. 18,27,443/- A ND WAS IMPOSED SUBSEQUENT TO THE CONFIRMATION OF DISALLOWANCE OF R S. 53,76,418/- U/S 14A READ WITH RULE 8D BY THE LD. CIT (A). FOR AY 2006-0 7, THE ASSESSEE AS WELL AS THE DEPARTMENT WAS IN APPEAL BEFORE US ON THE IS SUE OF QUANTUM OF DISALLOWANCE U/S 14A WHERE IN AY 2008-09, THE ASSES SEE HAS ACCEPTED THE QUANTUM OF DISALLOWANCE. 10.1 THE LD. AR SUBMITTED THAT SECTION 271 (1) (C) APPLIES WHERE THE ATLAS CYCLES (HARYANA) SONEPAT PAGE 62 OF 70 ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCO ME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE PRESENT APPEALS WE RE NOT A CASE OF CONCEALMENT OF THE INCOME. THE LD. AR FURTHER SUBMI TTED THAT AS REGARDS THE FURNISHING OF INACCURATE PARTICULARS, NO INFORMATIO N GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. THE WORDS INA CCURATE PARTICULARS MEAN THAT THE DETAILS SUPPLIED IN THE RETURN ARE NOT ACC URATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THE ABSENCE OF A FINDING BY THE AO THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF I NVITING PENALTY U/S 271 (1) (C). THE LD. AR RELIED ON THE DECISION OF HON'BLE S UPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. (SC) 32 2 ITR 158 [2010] WHEREIN ALSO THE PENALTY WAS FALLOUT OF DISALLOWANC E U/S 14A. 10.2 THE LD. DR SUPPORTED THE PENALTY ORDERS PASSE D BY THE AO. 10.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE AO LEVIED THE IMPUGNED PENALTIES ON THE GROUND THAT IT HAS FURNISHED WRONG PARTICULARS OF INCOME. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. (S UPRA) HAS HELD THAT A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. SUCH ATLAS CYCLES (HARYANA) SONEPAT PAGE 63 OF 70 CLAIM MADE IN THE RETURN CANNOT AMOUNT TO INACCURAT E PARTICULARS. THE RELEVANT PORTIONS OF THE JUDGMENT OF THE HON'BLE SU PREME COURT ARE REPRODUCED HEREUNDER:- '7. AS AGAINST THIS, LEARNED COUNSEL APPEARING ON B EHALF OF THE RESPONDENT POINTED OUT THAT THE LANGUAGE OF SECTION 271(L)(C) HAD TO BE STRICTLY CONSTRUED, THIS BEING A TAXING STATU TE AND MORE PARTICULARLY THE ONE PROVIDING FOR PENALTY. IT WAS POINTED OUT THAT UNLESS THE WORDING DIRECTLY COVERED THE ASSESSEE AN D THE FACT SITUATION HEREIN, THERE COULD NOT BE ANY PENALTY UN DER THE ACT. IT WAS POINTED OUT THAT THERE WAS NO CONCEALMENT OR AN Y INACCURATE PARTICULARS REGARDING THE INCOME WERE SUBMITTED IN THE RETURN. SECTION 271(L)(C) IS AS UNDER : 271. (1) IF THE ASSESSING OFFICER OR THE COMMISSIO NER (APPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME.' A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN OR DER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICU LARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. PRE SENT IS NOT THE CASE OF CONCEALMENT OF THE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. HOWEVER, THE LEARNED COUNSEL FOR RE VENUE ATLAS CYCLES (HARYANA) SONEPAT PAGE 64 OF 70 SUGGESTED THAT BY MAKING INCORRECT CLAIM FOR THE EX PENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PAR TICULARS OF THE INCOME. AS PER LAW LEXICON, THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENS E); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THERE FORE, THE WORD PARTICULARS' USED IN THE SECTION 271(L)(C) WOULD EM BRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFORMATION GI VEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESS EE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. T HE LEARNED COUNSEL ARGUED THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME'. WE DO NOT THINK THAT S UCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS AR E PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENA LTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENA LTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, M AKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS. IN CIT V. ATUL MOHAN BINDAL [2009] 9 SCC 589, WHERE THIS COURT WAS CONSIDERING THE SAME PROVISION, THE COURT OBSERVED THAT THE ASSESSING OFFICER HAS T O BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. TH IS COURT REFERRED TO ANOTHER DECISION OF THIS COURT IN UNION OF INDIA V. ATLAS CYCLES (HARYANA) SONEPAT PAGE 65 OF 70 DHARAMENDRA TEXTILE PROCESSORS [2008] 13 SCC 369, A S ALSO, THE DECISION IN UNION OF INDIA V. RAJASTHAN SPG. & WVG. MILLS [2009] 13 SCC 448 AND REITERATED IN PARA 13 THAT: '13. IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271 (1)( C), CONDITIONS STATED THEREIN MUST EXIST.' 8. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271(L)(C) MUST EXIST BEFOR E THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ON LY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTIC ULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACC URATE, THE LIABILITY WOULD ARISE. IN DILIP N. SHROFF V. JT. CI T [2007] 6 SCC 329, THIS COURT EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FURNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY U NDER SECTION 271(L)(C), MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD 'INACCURATE' SIGNIFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLA USE (HI) OF SECTION 271(1) PROVIDED FOR A DISCRETIONARY JURISDI CTION UPON THE ASSESSING AUTHORITY, INASMUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF SUCH CONCEALMENT OF PARTICULARS OF INCOME , BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM 'INACCURATE PARTICULARS' WAS NOT DEFINED ANYWH ERE IN THE ACT AND, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE F URNISHING ATLAS CYCLES (HARYANA) SONEPAT PAGE 66 OF 70 INACCURATE PARTICULARS. IT WAS FURTHER HELD THAT TH E ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPL ANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE FACTS RELATING TO TH E SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSE SSEE HAD FURNISHED THE PARTICULARS OF HIS INCOME. THE COURT ULTIMATELY WENT ON TO HOLD THAT THE ELEMENT OF MENS REA WAS ES SENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFFS CASE (SUPRA) WAS UPSET. IN DHARAMENDRA TEXT ILE PROCESSORS CASE (SUPRA), AFTER QUOTING FROM SECTIO N 271 EXTENSIVELY AND ALSO CONSIDERING SECTION 271(L)(C), THE COURT CAME TO THE CONCLUSION THAT SINCE SECTION 271(L)(C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR THE CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WH ILE FILING RETURN, THERE WAS NO NECESSITY OF MENS REA. THE COU RT WENT ON TO HOLD THAT THE OBJECTIVE BEHIND ENACTMENT OF SECT ION 271(L)(C) READ WITH EXPLANATIONS INDICATED WITH THE SAID SECT ION WAS FOR PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PEN ALTY WAS A CIVIL LIABILITY AND, THEREFORE, WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C OF THE ACT. THE BASIC REASON WHY DECISION IN DILIP N. SHROFFS CASE (SUPRA) WAS OVERRULED BY THIS COURT IN DHARAMENDRA TEXTILE PROC ESSORS CASE (SUPRA), WAS THAT ACCORDING TO THIS COURT THE EFFECT AND DIFFERENCE BETWEEN SECTION 271(L)(C) AND SECTION 27 6C OF THE ATLAS CYCLES (HARYANA) SONEPAT PAGE 67 OF 70 ACT WAS LOST SIGHT OF IN CASE OF DILIP N. SHROFF (S UPRA). HOWEVER, IT MUST BE POINTED OUT THAT IN DHARAMENDRA TEXTILE PROCESSORS. CASE (SUPRA), NO FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N. SHROFF S CAS E (SUPRA), WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS 'CONCEAL' AND 'INACCURATE'. IT WAS ONLY THE ULTIMATE INFERENC E IN DILIP N. SHROFFS CASE (SUPRA) TO THE EFFECT THAT MENS REA W AS AN ESSENTIAL INGREDIENT FOR THE PENALTY UNDER SECTION 271(L)(C) THAT THE DECISION IN DILIP N. SHROFFS CASE (SUPRA) WAS OVERRULED. 9. WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE M ENS REA. HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE P ARTICULARS. IN WEBSTERS DICTIONARY, THE WORD 'INACCURATE' HAS BEE N DEFINED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT.' WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PARTI CULARS' IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TR UTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING THAT, ANY DETAILS SUPPLIED BY THE A SSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR F ALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVIT ING THE PENALTY UNDER SECTION 271(L)(C) OF THE ACT. A MERE MAKING O F THE CLAIM, ATLAS CYCLES (HARYANA) SONEPAT PAGE 68 OF 70 WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOU NT TO THE INACCURATE PARTICULARS. 10. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF T HE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURT HER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFORE, REITERATED BEFORE US THA T THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT S INCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING T HAT THEY ARE INCORRECT; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITH ER OF THE TWO FORMS; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRA UDULENTLY; (II) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXA GGERATED AMOUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE T HE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEAL MENT OF PARTICULARS OF ONES INCOME AS WELL AS FURNISHING O F INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSE SSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WEL L AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUN D TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT IT S CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAI MED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NO T ACCEPTABLE ATLAS CYCLES (HARYANA) SONEPAT PAGE 69 OF 70 TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OP INION, ATTRACT THE PENALTY UNDER SECTION 271(L)(C). IF WE ACCEPT THE C ONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAI M MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY REASON, THE A SSESSEE WILL INVITE PENALTY UNDER SECTION 271(L)(C). THAT IS CLE ARLY NOT THE INTENDMENT OF THE LEGISLATURE. 11. IN THIS BEHALF THE OBSERVATIONS OF THIS COURT MADE IN SREE KRISHNA ELECTRICALS V. STATE OF TAMIL NADU [2009] 2 3 VST 249 AS REGARDS THE PENALTY ARE APPOSITE. IN THE AFOREMENTI ONED DECISION WHICH PERTAINED TO THE PENALTY PROCEEDINGS IN TAMIL NADU GENERAL SALES TAX ACT, THE COURT HAD FOUND THAT THE AUTHORITIES BELOW HAD FOUND THAT THERE WERE SOME INCORRECT STAT EMENTS MADE IN THE RETURN. HOWEVER, THE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNTS OF THE ASSESSEE. THIS COURT, THEREFORE, OB SERVED : 'SO FAR AS THE QUESTION OF PENALTY IS CONCERNED THE ITEMS WHICH WERE NOT INCLUDED IN THE TURNOVER WERE FOUND INCORPORATED IN THE APPELLANTS ACCOUNT BOOKS. WHER E CERTAIN ITEMS WHICH ARE NOT INCLUDED IN THE TURNOVE R ARE DISCLOSED IN THE DEALERS OWN ACCOUNT BOOKS AND THE ASSESSING AUTHORITIES INCLUDE THESE ITEMS IN THE DE ALERS TURNOVER DISALLOWING THE EXEMPTION, PENALTY CANNOT BE IMPOSED. THE PENALTY LEVIED STANDS SET ASIDE.' THE SITUATION IN THE PRESENT CASE IS STILL BETTER AS NO FAULT HAS BEEN FOUND WITH THE PARTICULARS SUBMITTED BY T HE ASSESSEE IN ITS RETURN. ATLAS CYCLES (HARYANA) SONEPAT PAGE 70 OF 70 10.4 ON THE FACTS OF THE CASE FOR BOTH THE YEAR S, IT IS OUR CONSIDERED OPINION THAT NO CASE CAN BE MADE OUT FOR FURNISHING INACCUR ATE PARTICULARS FOR BOTH THE YEARS UNDER APPEAL. RESPECTFULLY FOLLOWING THE DICT A OF THE HONBLE APEX COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA), WE FIND NO REASON TO DISTURB THE FINDINGS OF THE LD. CIT (A ) FOR BOTH THE YEARS UNDER APPEAL AND WE UPHOLD THE SAME. 10.5 IN THE RESULT ITA NOS. 2484/DEL/2011 AND 4 049/DEL/2013 PREFERRED BY THE DEPARTMENT ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29.07.2016 SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA ) VICE PRESIDENT JUDICIAL MEMBER DATED: 29.07.2016 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ATLAS CYCLES (HARYANA) SONEPAT PAGE 71 OF 70 ATLAS CYCLES (HARYANA) SONEPAT PAGE 72 OF 70 ITA NO. 2216/DEL/2013 ARCOTECH LTD. PAGE 73 OF