The ITO, Ward-4(2), Ahmedabad V. Kanel Oil & Exports Ind.Ltd., Ahmedabad

ITA 2518/AHD/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9979 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-08-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 08-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLYJINDALDR
• Assessee Lawyers: TALATIAR
• Keywords: Business expenditure; Fair market value
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI BHAVNESH SAINI,JM & SHRI A.N. PAHUJA ,AM ) ITA.NOS.2518 AND 2519/AHD/2007 [ASSESSMENT YEAR : 2003-2004 ] ITO, WARD-4(2),1 ST FLOOR, ROOM NO. 105,NAVJIVAN TRUST BUILDING,NAVJIVAN PO, AHMEDABAD. VS. KANEL OIL & EXPORTS IND. LTD., 203, ABHIJEET,NEAR MITHAKHALI SIX ROADS,AHMEDABAD. [PAN:AAACK8389D] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHELLYJINDAL,DR ASSESSEE BY : SHRI S.H.TALATI,AR O R D E R A.N. PAHUJA: THESE TWO APPEALS BY THE REVENUE AGAINST TWO SEPA RATE ORDERS14.03.2007 AND 22.03.2007 OF THE LD. CIT(APP EALS)-VIII, AHMEDABAD, RAISE THE FOLLOWING GROUNDS: ITA NO.2518/AHD/2007(QUANTUM) 1. THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.78,98,926/- U/S. 40A(2)(B) OF TH E ACT, BEING PAYMENT MADE TO SISTER CONCERNS. 2. THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.8,11,657/- BEING THE KEYMAN INSU RANCE PREMIUM. 3. THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.8,99,74,208/- BEING THE INTEREST EXPENSES U/S. 43B OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C IT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED T O THE ABOVE EFFECT. ITA NO.2519/AHD/2007(PENALTY) 1) THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS OF T HE CASE IN CANCELLING THE PENALTY OF RS.3,62,66,661/- LEVIED U/S. 271(1)(C) O F THE I. T. ACT, 1961 ITA.NO.2518 AND 2519/AHD/2007 -2- AFTER HOLDING THAT NEITHER THE ASSESSEE WITHHELD TH E VITAL PARTICULARS OR FURNISHED INACCURATE PARTICULARS WITH CONSCIOUS INT ENTION TO AVOID TAX IGNORING THE FACT THAT THE SECOND APPEAL AGAINST TH E ADDITIONS DELETED IN QUANTUM APPEAL IS PENDING AND THE ASSESSEE COMPANY HAS FURNISHED INACCURATE PARTICULARS OF THEIR INCOME AND THE ASSE SSEE HAS FAILED TO PROVE THAT THERE WAS NO INTENTIONAL CONCEALMENT AND THE REVENUE NEED NOT PROVE THE ELEMENT OF MENS REA AS HELD IN THE C ASES OF A.M. SHAH & CO. VS. CIT 238 ITR 415 (GUJ) AND CIT VS. GATES FOA M ARID RUBBER COMPANY 91 ITR 467 ( KER), ADDL. CIT V/S. JEEVANLAL SHAH, 205 ITR 244(SC) ETC. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D.CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED T O THE ABOVE EFFECT. ITA NO.2518/AHD/2007(QUANTUM) 2. ADVERTING FIRST TO GROUND NO.1 IN THE QUANTUM AP PEAL, FACTS, IN BRIEF, AS PER THE RELEVANT ORDERS ARE THAT RETURN DECLARING LOSS OF RS.10,97,88,600/- FILED ON 30.11.2003 BY THE ASSESSEE, ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF EDIBLE AND NON-EDIBLE OIL, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT,1961[HEREINAFTER R EFERRED TO AS THE ACT] WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF A NOTICE U/ S 143(2) OF THE ACT ON 25-11- 2004. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE PURCHASED CASTOR SEEDS FROM ITS SISTER CON CERN VIZ. M/S.DEVIKA PROTEINS LTD. AT THE RATES MUCH HIGHER THAN THE RAT ES OF PURCHASES FROM THE OTHER PARTIES VIZ. ADANI EXPORTS LTD. & JAY SOMNATH TRADING CO. LTD.. THE RELEVANT DETAILS OF RATE OF PURCHASE, EXCESS PAYMEN T ETC. EXTRACTED BY THE AO IN THE ASSESSMENT ORDER ARE AS UNDER: MONTH PURCHASES FROM SISTER CONCERN (IN KG) AVERAGE RATE OF PER KG.[IN RS.] PURCHASE FROM OTHER PARTIES (IN KG) AVERAGE RATE PER KG.[IN RS.] EXCESS PAYMENT IN RUPEES. APRIL, 2002 556000 14 876090 12.5 8 7,89,520/- MAY, 2002 1528277 13.64 3757184 13.04 9,16,966/- JULY, 2002 1282379 13.30 2307098 12.9 2 4,87,304/- SEPT.,2002 8515129 14.50 288626 13.83 57,05,136/- TOTAL 78,98,926/- ITA.NO.2518 AND 2519/AHD/2007 -3- 2.1 TO A QUERY BY THE AO, THE ASSESSEE REPLIED B Y LETTER DATED 17.2.2006 THAT THE RATES OF PURCHASES FROM DEVIKA PROTEINS WE RE ONLY MARGINALLY HIGHER AND THAT TOO DUE TO THE FACT THAT THERE WAS CREDIT GIVEN BY THEM AS AGAINST THE OTHER SUPPLIERS. IT WAS EXPLAINED THAT THE PURCHAS ES FROM ADANI EXPORTS LTD. WERE SPECIFIC IN THE SENSE THAT CASTOR OIL MANUFAC TURED FROM SEEDS WAS SUPPLIED TO THEM ONLY. THUS, PURCHASES & SALES WER E MADE AT LOWER RATES FROM THEM VIS--VIS MARKET RATES . SINCE THE PURCH ASES FROM DEVIKA PROTEINS WERE IN BULK AND ON CREDIT, COMPARISON COULD NOT BE MADE WITH THE RATES OF OTHER SUPPLIERS. HOWEVER, THE AO DID NOT ACCEPT T HESE CONTENTIONS OF THE ASSESSEE ON THE GROUND THAT NO PRUDENT BUSINESSMAN WOULD PAY HIGHER RATES FOR BULK PURCHASES OF ANY PRODUCT. ACCORDINGLY, TH E AO ADDED AN AMOUNT OF RS.78,98,926/- IN TERMS OF PROVISIONS OF THE SEC. 40A(2)(A) OF THE ACT, ON THE BASIS OF COMPARISON OF AVERAGE RATES. 3. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON IN THE FOLLOWING TERMS: 3.3 I HAVE CONSIDERED THE REASONING GIVEN BY THE A O AS WELL AS THE VARIOUS EXPLANATIONS AND SUPPORTING PAPERS FURNISHE D IN THIS REGARD IT IS CLEAR FROM THE APPEAL PAPERS THAT THE PAYMENT TO SISTER CONCERN WAS ON A DIFFERENT CONSIDERATION THAN FROM PURCHASES FR OM THIRD PARTIES. HIGHER RATE WAS NOT ESTABLISHED IN ALL THE PURCHASE S AND THE RATE WAS EXTRACTED ONLY FOR 4 MONTHS. PRICE WOULD ALSO VARY DEPENDING ON THE QUALITY AND THEIR TERMS OF PAYMENT. IN THAT VIEW O F THE MATTER, I AM OF THE OPINION THAT COMPARISON OF AN AVERAGE RATE BASI S IS NOT JUSTIFIABLE WITHOUT CONSIDERING THE OTHER VITAL FACTORS LIKE QU ALITY, TERMS OF PAYMENT, CREDIT BALANCES AVAILABLE WITH THE APPELLA NT, ETC. TAKING AN OVER ALL VIEW OF THE FACTS AND CIRCUMSTANCES AND TH E APPELLANT HAVING INCURRED HUGE LOSSES IT CANNOT BE SAID THAT HIGHER AND UNREASONABLE PAYMENTS WERE MADE TO SISTER CONCERNS .ACCORDINGLY, THE DISALLOWANCE IN THIS REGARD IS DIRECTED TO BE DELETED. 4. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORES AID FINDINGS OF THE LEARNED CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE RELIED ON THE FINDINGS OF THE LD. CIT(A).IT WAS FURTHER CONTENDED THAT THE AO COMPARE D ONLY AVERAGE RATES WITHOUT MAKING ANY ATTEMPT TO ASCERTAIN THE QUALITY OR VARIETY OF THE PRODUCTS. WHILE INVITING OUR ATTENTION TO PAGE NOS. 5 AND 1 4 OF THE PAPER BOOK, THE LEARNED AR CONTENDED THAT THE AVERAGE RATE OF PURCH ASES FROM ADANI EXPORTS ITA.NO.2518 AND 2519/AHD/2007 -4- LTD. WAS RS.15.93 PER KG. WHILE FROM THE DEVIKA PRO TEINS LTD. IT WAS RS.14.30 PER KG. MOREOVER, THE COMPLETE DETAILS OF THE VARI ETIES OF CASTOR SEEDS WERE SUBMITTED BEFORE THE AO. THUS, THE AO WAS NOT JUS TIFIED IN INVOKING PROVISIONS OF SECTION 40A(2)(A) OF THE ACT., THE LD . AR ADDED. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY, THE RATES OF CASTOR SEEDS PURCHASED B Y THE ASSESSEE DEPEND UPON THEIR QUALITY AND THE TERMS OF PAYMENT. THE LD. CIT(A) DELETED THE DISALLOWANCE ON THE GROUND THAT THE BASIS OF AVE RAGE RATES ADOPTED BY THE AO WAS NOT JUSTIFIED WITHOUT CONSIDERING THE OTHER VITAL FACTORS LIKE QUALITY,TERMS OF PAYMENTS AND CREDIT FACILITIES ETC .. THERE IS NOTHING IN THE IMPUGNED ORDERS TO SUGGEST THAT PAYMENT TO THE SIS TER CONCERN FOR PURCHASES WAS EXCESSIVE OR UNREASONABLE KEEPING IN VIEW THEIR FAIR MARKET VALUE. IT IS WELL SETTLED THAT THE PRO VISIONS OF SECTION. 40A(2)(A) OF THE ACT CANNOT HAVE ANY APPLICATION, UNLESS IT IS FIRST CON CLUDED THAT THE EXPENDITURE WAS EXCESSIVE OR UNREASONABLE, AS HELD IN THE CASE OF UPPER INDIA STEEL MANUFACTURING AND ENGINEERING CO. PRIVATE LIMITED, 117 ITR 569(SC). IN THE CASE UNDER CONSIDERATION, THERE IS NO MATERI AL ON RECORD ON THIS ASPECT NOR THE AO EVEN CITED ANY COMPARABL E INSTANCES IN RESPECT OF THE FAIR MARKET VALUE OF THE GOODS PURCHASED FOR WH ICH THE PAYMENT HAD BEEN MADE, BEFORE CONCLUDING THAT EXPENDITURE WAS EXCE SSIVE OR UNREASONABLE. THE PRICE OF CASTOR SEEDS DEPENDS UPON A NUMBER OF FACTORS LIKE THEIR QUALITY, VARIETY AS ALSO ON THE TERMS OF PAYMENTS ETC. THE R ESORT TO PROVISIONS OF SEC. 40A(2)(A) OF THE ACT, MERELY ON THE BASIS OF A COM PARISON OF AVERAGE RATES OF PURCHASES WITHOUT CONSIDERING THE TERMS AND CONDITI ONS OF THE PURCHASES OR THE VARIETY AND QUALITY OF PRODUCTS, IS NOT JUSTIFI ED. IN VIEW THEREOF, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATE RIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.1 IS DISMISSED 6. GROUND NO.2 IN APPEAL RELATES TO DISALLOWANCE OF AN AMOUNT OF RS.8,11,657/- ON ACCOUNT OF PREMIUM PAID ON KEYMAN INSURANCE POLICY TAKEN IN THE NAMES OF TWO DIRECTORS VIZ. HITESH K. THAKKA R AND DHIREN K. THAKKAR. THE AO DISALLOWED THE AMOUNT ONLY BECAUSE THE ASSE SSEE WAS DECLARED A ITA.NO.2518 AND 2519/AHD/2007 -5- SICK INDUSTRIAL COMPANY BY THE BIFR ON 22.2.2002 AN D THEREFORE, THE SAID EXPENDITURE COULD NOT BE TREATED AS WHOLLY AND EXCL USIVELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. 7. ON APPEAL, THE LEARNED CIT(A) DELETED THE DISALL OWANCE ON THE GROUND THAT EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF THE BUSINESS, THE COMPANY BEING STILL IN EXISTENCE AND HAD NOT CLOSED DOWN. 8. THE REVENUE IS IN APPEAL AGAINST THE AFORESAID FINDINGS THE LEARNED CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE RELIED ON THE FINDINGS O F THE CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE AMOUNT OF RS.8,11,657/- WAS PAID ON ACCOUNT OF PREMIUM UNDER THE KEYMAN INSURANCE POLICY TAKEN IN THE NAMES OF TWO D IRECTORS VIZ. HITESH K. THAKKAR AND DHIREN K. THAKKAR . THE POLICY KNOWN AS 'KEYMAN INSURANCE POLICY' PROVIDES FOR AN INSURANCE POLICY TAKEN BY A BUSINESS ORGANIZATION ON THE LIFE OF IMPORTANT PERSONS IN THE ORGANIZATION, GENERALLY CALLED AS KEYMAN IN THE INSURANCE NOMENCLATURE. THE CIRCULAR NO. 762 DT. 18TH FEB., 1998 [(1998) 145 CTR (ST) 5], CLARIFIES THAT THE PREMIUM PAID ON THE KEYMAN INSURANCE POLICY IS ALLOWED AS BUSINESS EXPENDITURE . THIS CIRCULAR IS BINDING ON THE REVENUE AUTHORITIES. THEREFORE, WE ARE OF T HE OPINION THAT THE PREMIUM PAID BY THE ASSESSEE ON THE KEYMAN INSURANC E POLICY IS ALLOWABLE AS BUSINESS EXPENDITURE AND IT CAN NOT BE DISALLOWE D MERELY BECAUSE THE COMPANY HAD BEEN DECLARED A SICK INDUSTRIAL COMPANY BY THE BIFR. IN VIEW THEREOF AND THE REVENUE HAVING NOT PLACED ANY MATE RIAL BEFORE US IN ORDER TO CONTROVERT THE FINDINGS OF THE LEARNED CIT(A), WE D ECLINE TO INTERFERE. THEREFORE, GROUND NO.2 IN THE APPEAL IS ALSO DISMIS SED. 10. GROUND NO.3 RELATES TO THE DISALLOWANCE OF RS. 8,99,74,208/- ON ACCOUNT OF INTEREST ON CASH CREDIT FACILITIES, HAVI NG RECOURSE TO PROVISIONS OF SECTION 43B OF THE ACT. THE AO DISALLOWED THE AMOU NT SINCE THE ASSESSEE PAID INTEREST TO THE SCHEDULED BANK , INVOKING THE PROVISIONS OF CLAUSE (E) OF SECTION 43B OF THE ACT. ITA.NO.2518 AND 2519/AHD/2007 -6- 11. ON APPEAL, THE LEARNED CIT(A) DELETED THE D ISALLOWANCE ON THE GROUND THAT THE DISPUTED INTEREST WAS IN RESPECT OF THE LO ANS OTHER THAN TERM LOANS AND THE CLAUSE (E) INCORPORATING THE WORDS LOANS AND ADVANCES FROM BANK WAS NOT APPLICABLE FOR THE ASSESSMENT YEAR 2003-200 4. 12. THE REVENUE IS IN APPEAL AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE THE LEARNED COUNSEL ON BEHALF OF THE ASSESSEE RELIED ON THE FI NDINGS OF THE LD. CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE. WE FIND THAT THE PROVISIONS OF CLAUSE (E) OF SEC. 4 3B OF THE ACT AS ON 1.4.2003 READ AS UNDER: 43B. CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RES PECT OF- (E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY TERM LOAN FROM A SCHEDULED BANK IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN, OR THE WORDS TERM LOAN WERE REPLACED WITH LOAN AN D ADVANCES BY THE FINANCE ACT,2003 W.E.F 1.4.2004 ONLY . SINCE THE AF ORESAID AMOUNT OF INTEREST RELATED TO CASH CREDIT FACILITIES AND NOT TO THE TE RM LOANS, THEREFORE, THE LD. CIT(A) RIGHTLY DELETED THE DISALLOWANCE. THERE IS N O MATERIAL BEFORE US TO INDICATE THE SAID AMOUNT OF RS.8,99,74,208/- INCLUD ES INTEREST ON TERM LOAN ALSO. IN THESE CIRCUMSTANCES, WE HAVE NO ALTERNATIV E BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO. 3 IN THE APPEAL IS ALSO DISMISSED. ITA.NO.2518 AND 2519/AHD/2007 -7- ITA NO.2519/AHD/2007(PENALTY) 14. ADVERTING NOW TO PENALTY APPEAL, THE AO W HILE COMPLETING THE ASSESSMENT INITIATED PENALTY PROCEEDINGS U/S 271(1 )(C) OF THE ACT SINCE IN HIS OPINION, THE ASSESSEE FURNISHED INACCURATE PARTICUL ARS OF INCOME ON ACCOUNT OF FOLLOWING DISALLOWANCES: I) DISALLOWANCE U/S.40A(2)(A) RS. 78,98,926/- II) DISALLOWANCE OF KEYMAN INSURANCE PREMIUM RS. 8,11,657/- III) DISALLOWANCE OF INTEREST U/S.43B RS.8,99,74 ,208/- 15. IN RESPONSE TO A SHOW CAUSE NOTICE DATED 24.3.2 006 BEFORE LEVY OF PENALTY , THE ASSESSEE DID NOT SUBMIT ANY REPLY. DE SPITE ANOTHER OPPORTUNITY VIDE LETTER DATED 6.9.2006, THE ASSESSEE DID NOT FU RNISH ANY REPLY AND INSTEAD SOUGHT FURTHER TIME. HOWEVER, ON THE ADJOURNMENT D ATE, NONE APPEARED BEFORE THE AO NOR ANY REPLY WAS SUBMITTED. ACCORDI NGLY, THE AO CONCLUDED THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF THE AFORESAID DISALLOWANCES. THEREFORE, RELYING U PON DECISIONS IN BANARAS TEXTORIUM VS. CIT, 169 ITR 782(ALL); ZEEKOO SHOE FA CTORY VS. CIT, 127 ITR 837(ALL);MOTOR GENERAL FINANCE LTD. VS. CIT, 254 IT R 449 (DEL) AND JAMNADAS & CO. VS. CIT, 210 ITR 218 (GUJ), THE AO I MPOSED A PENALTY OF RS.3,62,66,661/- AT THE RATE OF 100% SOUGHT TO BE E VADED ON THE INCOME OF RS.9,86,84,791/-. 16. ON APPEAL, THE LEARNED CIT(A) CANCELLED THE PEN ALTY SINCE THE AFORESAID DISALLOWANCES HAD BEEN DELETED BY HIM IN THE QUANTUM ORDER DATED 14-3-2007. 17. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORES AID FINDINGS OF THE LEARNED CIT(A). 18. SINCE WE HAVE ALREADY UPHELD THE ORDE R OF THE LEARNED CIT(A) IN THE QUANTUM APPEAL, APPARENTLY THERE IS NO BASIS FO R IMPOSITION OF PENALTY . HONBLE SUPREME COURT IN THE CASE OF K.C.BUILDERS VS. ACIT,265 ITR 562(SC) HELD THAT ORDINARILY, PENALTY CANNOT STAND IF THE ASSESSMENT ITSELF IS SET ASIDE. WHERE AN ORDER OF ASSESSMENT OR REASSESS MENT ON THE BASIS OF ITA.NO.2518 AND 2519/AHD/2007 -8- WHICH PENALTY HAS BEEN LEVIED ON THE ASSESSEE, HAS ITSELF BEEN FINALLY SET ASIDE OR CANCELLED BY THE TRIBUNAL OR OTHERWISE, TH E PENALTY CANNOT STAND BY ITSELF AND THE SAME IS LIABLE TO BE CANCELLED. HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. R.DALMIA,(1992)107 TAXATION 107, HE LD THAT NO PENALTY SURVIVES AFTER DELETION OF ADDITIONS, FORMING THE B ASIS FOR THE LEVY OF PENALTY. SIMILAR VIEW WAS TAKEN IN ADDL. COMMISSIONER OF INC OME-TAX V. BADRI KASHI PRASAD (1993] 200 ITR 206 (ALL) AND PRABHAT OIL TRA DERS V. INCOME-TAX OFFICER (NO. 3) (1996) 218 ITR (A.T.) 39 (ITAT, AHMEDABAD), CITY DRY FISH COMPANY V. COMMISSIONER OF INCOME-TAX (1999) 238 ITR 63 (A. P.) , CIT VS. MOHD. BUX SOKAT ALI (2004) 265 ITR 326 (RAJ)AND ACIT VS. VIP INDUSTRIES (2009) 122 TTJ 289 (MUM). 18.1 SINCE THE VERY BASIS UPON WHICH THE PENALTY HAS BEEN IMPOSED DOES NOT EXIST IN VIEW OF OUR AFORESAID ORDER IN QUAN TUM APPEAL IN ITA NO.2518/AHD/2007 , WE ARE OF THE OPINION THAT PENA LTY LEVIED IN RELATION TO THE AFORESAID DISALLOWANCE DOES NOT SURVIVE AND THE IMPUGNED ORDER OF THE LD. CIT(A) IS , THEREFORE, UPHELD. WITH THESE OBSER VATIONS, GROUND NO.1 RAISED IN THIS APPEAL IS DISMISSED. 19. GROUND NOS. 4 & 5 IN QUANTUM APPEAL AND GRO UND NOS. 2 & 3 IN PENALTY APPEAL,BEING MERE PRAYER, DO NOT REQUIRE ANY SEPARA TE ADJUDICATION AND ARE, THEREFORE, DISMISSED. 20. IN THE RESULT, BOTH THESE APPEALS ARE DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 31ST AUGUST, 2010. SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A.N. PAHUJA) ACCOUNTANT MEMBER PLACE : AHMEDABAD DATE : 31-08-2010 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : ITO WARD-4(2),AHMEDABAD 3) : CIT(A) VIII,AHMEDABAD ITA.NO.2518 AND 2519/AHD/2007 -9- 4) : CIT CONCERNED 5) : DR,C BENCH,AHMEDABAD. BY ORDER DR/AR, ITAT, AHMEDABAD