ACIT Circle, V. Crystal Phosphastes Ltd, Sonepat

ITA 2619/DEL/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1298 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 04-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMIT GOVIL
• Assessee Lawyers: R P MALL
• Keywords: Gift; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: B NEW DELHI BEFORE SHRI D.R.SINGH, JM AND SHRI R.C.SHARMA, AM ITA NO. 2619/DEL/2008 A.Y. 2005-06 ACIT, VS. M/S CRYSTAL PHOSPHATES LTD. CIRCLE SONEPAT V&P.O. NATHPUR, DT.SONEPAT C.O. 94/DEL/2009 (IN ITA 2619/DEL/2080) A.Y. 2005-06 M/S CRYSTAL PHOSPHATES LTD. VS. ACIT, SONEPAT SONEPAT (APPELLANT) (RESPONDENT) APPELLANT BY : SH. AMIT GOVIL, D.R. RESPONDENT BY : SH. GAUTAM JAIN, C.A. & SH. RP MALL, ADV. O R D E R PER D.R. SINGH, JUDICIAL MEMBER THE APPEAL FILED BY THE REVENUE AND THE C.O. FILED BY THE ASSESSEE ARISING FROM THE ORDER OF CIT(A) IN APPEAL NO. 211/ /SPT/07-08 DATED 16.5.2008 WERE HEARD TOGETHER AND ARE BEI NG DISPOSED OFF THROUGH THIS SINGLE ORDER FOR THE SAKE OF CONVENIEN CE. 2 2. IN ITS APPEAL THE REVENUE HAS TAKEN FOLLOWING SE VEN EFFECTIVE GROUNDS. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,00,000/- ON ACCOUNT OF NON BUSINESS USE OF TELEPHONE AND FOR WHICH NO SUPPORTING VOUCHERS WERE PRODUCE D BY THE ASSESSEE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,00,000/- ON ACCOUNT OF EXPENDITURE RELATED TO THE PERSONAL USE OF CARS BY THE DIRECTORS AND THE STAFF OF THE ASSES SEE, AS THE ASSESSEE DID NOT MAINTAIN ANY LOG BOOKS FOR THESE E XPENSES. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 40,000/- ON ACCOUNT OF CONVEYANCE ALLOWANCE FOR WHICH NO SUP PORTING VOUCHERS WERE PRODUCED BY THE ASSESEE. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 2,00,000/- ON ACCOUNT OF EXPENDITURE ON SEMINAR AND CONFERENCE FOR WHICH COMPLETE SUPPORTING VOUCHERS WERE NOT PRO DUCED BY THE ASSESEE AND IT INCLUDED COSTLY GIFT ALSO. (V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO VE RIFY THE EXPENSES OF RS. 3,00,000/- ON ACCOUNT OF FREIGHT, C ASH, REBATE AND DISCOUNT ETC. 3 (VI) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION OF ESI AND PF AMOUNTING TO RS. 2,50,576/- WHICH IS CONTRARY TO S. 36(1)(VA) READ WITH SECTION 2(24)(XI) OF I.T.ACT. (VII) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,00,000/- OUT OF PURCHASE EXPENSES AND RS. 1,00,00 /- OUT OF SALARY EXPENSES FOR WHICH NO SUPPORTING VOUCHERS WE RE PRODUCED BY THE ASSESEE. 3. IN THE C.O. THE ASSESEE HAS TAKEN THE FOLLOWING THREE GROUNDS. 1. THAT THE LDCIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS. 91,287/- BEING 1. 5% OF THE TOTAL EXPENSES INCURRED UNDER THE HEAD VEHICLE RUNN ING EXPENSES WITHOUT ANY VALID AND PROPER BASIS AND, THAT TOO AR BITRARILY OUT OF THE ADHOC DISALLOWANCE MADE OF RS. 2,00,000/-. 2. THAT THE LDCIT(A) HAS FURTHER ERRED IN LAW AND, ON FACTS IN PARTLY UPHOLDING THE DISALLOWANCE OF CONVEYANCE EXP ENSES ON SUBJECTIVE AND IRRELEVANT CONSIDERATIONS. 3. THAT THE LDCIT(A) HAS ALSO ERRED IN DIRECTING TO EXAMINE THE CLAIM OF EXPENDITURE INCURRED ON FREIGHT, CASH DISC OUNT, REBATE AND, DISCOUNT, FILED ASSISTANT EXPENSES AND, FIELD DEVELOPMENT EXPENSES AFTER OBTAINING THE COMPLETE DETAILS ALONG WITH NAMES AND ADDRESSES AND EVIDENCES THEREOF. 4 4. FIRST WE SHALL DEAL WITH GROUND NO.1 & 2 OF THE APPEAL OF THE REVENUE AND GROUND NO. 1 OF THE C.O. OF THE ASSESEE RELATING TO THE ISSUE OF DISALLOWANCE ON ACCOUNT OF TELEPHONE EXPENSES AN D CONVEYANCE EXPENSES CLAIMED BY THE ASSESEE. 5. IN BRIEF, THE FACTS RELATING TO THE ISSUE INVOLV ED IN THE GROUND NO.1 OF THE APPEAL OF THE REVENUE ARE THAT THE ASSESSEE CLAIMED TOTAL DEDUCTION OF RS. 29,80,543/= ON ACCOUNT OF TELEPHONE EXPENSES . THE A.O. MADE ADHOC DISALLOWANCE OF RS. 1 LAKH OUT OF THE SAME T REATING THE SAME TO BE FOR PERSONAL USER AND NON BUSINESS USE OF THE MOBIL E PHONES. 6. ON APPEAL THE CIT(A) DELETED THE ENTIRE DISALLOW ANCE MADE BY THE A.O. ON ACCOUNT OF PERSONAL USER IN THE HANDS OF TH E COMPANY. 7. THE ASSESSEE SIMILARLY CLAIMED DEDUCTION ON ACCO UNT OF EXPENDITURE OF RS. 60,85,775/- INCURRED ON THE USE OF VEHICLES BY THE COMPANY. THE AO MADE ADHOC DISALLOWANCE OF RS. 2 L AKHS ON ACCOUNT OF NON BUSINESS AND PERSONAL USE OF THE CARS BY THE D IRECTORS OF THE ASSESSEE COMPANY AND ALSO BECAUSE NO LOG BOOK INDIC ATING THE DETAILS OF USE OF THE CARS WAS PRODUCED BEFORE THE A.O. HOWEV ER, ON APPEAL, THE CIT(A) RESTRICTED THE DISALLOWANCE TO 1.5% OF THE T OTAL EXPENSES I.E. APPROXIMATELY RS. 91,000/- AGAINST DISALLOWANCE OF 3% OF THE TOTAL EXPENSES MADE BY THE A.O., ON THE REASONING THAT TH E ASSESSEE HAD NOT 5 PRODUCED THE BOOKS OF ACCOUNTS AND GENUINENESS OF T HE EXPENSES CLAIMED COULD NOT BE VERIFIED. 8. THE LEGAL ISSUE REQUIRED TO BE DECIDED BY US IS WHETHER ANY DISALLOWANCE CAN BE MADE IN THE HANDS OF THE ASSESS EE COMPANY ON ACCOUNT OF NON BUSINESS AND PERSONAL USER OF THE TE LEPHONES AND CARS BY THE DIRECTORS/EMPLOYEES OF THE COMPANY. 9. AN IDENTICAL ISSUE CAME UP FOR CONSIDERATION IN FOLLOWING DECISIONS WHEREIN IT WAS HELD THAT NO DISALLOWANCE COULD BE MADE ON ACCOUNT OF PERSONAL USER OF TELEPHONES AND CARS IN THE HANDS O F A COMPANY. I. PAL PROPERTIES LTD. VS ITO, 79 ITD 464 (DEL) II. DCIT VS. HARYANA OXYGEN LTD. 76 ITD 32 (DEL) III. DINESH MILLS VS CIT, 254 ITR 673 (GUJ.) IV. SAYAJI IRON AND ENGINEERING CO. VS. CIT 253 CTR 749 (GUJ.) V. CLARIDGES HOTELS P.LTD. VS ACIT (DEL) VI. INTERSIL INDIA LTD. VS ACIT(BOM) 103 TTJ 345 VII. MARKWEL HOSE INDS P.LTD. (BOM) 98 TTJ 403 VIII. DCIT VS SARUP TANNERIES LTD. 121 TTJ 388 (ASR.) 10. RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE D ECISIONS (SUPRA), IT IS HELD THAT NO DISALLOWANCE OF EXPENDITURE COULD BE M ADE IN THE HANDS OF ASSESEE COMPANY FOR THE PERSONAL USE OF TELEPHONE A ND CARS CLAIMED BY THE ASSESSEE COMPANY. ACCORDINGLY, THE ISSUES INVO LVED IN THESE GROUNDS OF THE APPEALS ARE DECIDED IN FAVOUR OF THE ASSESSE E AND CONSEQUENT UPON 6 THE SAME, THE ORDER OF CIT(A) IN DELETING THE ADHOC DISALLOWANCE OF RS. 1 LAKH ON ACCOUNT OF EXPENDITURE CLAIMED ON TELEPHONE IS UPHELD AND THE ORDER OF CIT(A) IN RESTRICTING THE DISALLOWANCE TO THE EXTENT OF RS. 91,000/- AGAINST RS. 2 LAKHS MADE BY THE AO ON ACCO UNT OF EXPENDITURE INCURRED ON CARS IS SET ASIDE. CONSEQUENT UPON OUR FINDING GIVEN HEREIN ABOVE, GROUND NOS. 1 AND 2 OF THE APPEAL OF THE REV ENUE ARE REJECTED AND GROUND NO.2 OF THE C.O. OF THE ASSESSEE IS ALLOWED. 11. NOW, WE SHALL DEAL WITH GROUND NO.3 OF THE APPE AL OF THE REVENUE AND GROUND NO.2 OF THE C.O. OF THE ASSESSEE RELATIN G TO THE ISSUE OF CONVEYANCE ALLOWANCES PAID TO FIELD STAFF AS REIMBU RSEMENT OF CONVEYANCE EXPENDITURE INCURRED BY THEM. 12. ACCORDING TO THE ASSESSEE, THE ENTIRE EXPENDITU RE WAS FULLY VOUCHED AND NO DEFECT WAS POINTED OUT BY THE A.O. I N THE BOOKS OF ACCOUNTS OF THE ASSESSEE EXCEPT THAT THE VOUCHERS W ERE NOT PRODUCED. 13. THE A.O. ON ACCOUNT OF NON PRODUCTION OF THE VO UCHERS BY THE ASSESSEE MADE ADHOC DISALLOWANCE OF RS. 1 LAKH OUT OF TOTAL CONVEYANCE ALLOWANCE OF RS. 27,31,090/- CLAIMED BY THE ASSESSE E. 14. DURING THE COURSE OF APPELLATE PROCEEDINGS BEF ORE THE CIT(A) THE ASSESSEE REFERRING TO THE PREVIOUS ORDER OF CIT(A) PASSED FOR A.Y. 2004-05 7 SUBMITTED THAT ONLY ADDITION TO THE EXTENT OF RS. 30,000/- WAS SUSTAINED BY THE CIT(A) IN THAT A.Y., THEREFORE, THE ADHOC DI SALLOWANCE MADE BY THE A.O. WAS EXCESSIVE. 15. ON CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FOLLOWING THE ORDER PASSED FOR A.Y. 2004-05 THE CIT(A) DIRECTED T HE A.O. TO MAKE THE DISALLOWANCE IN SAME PROPORTION IN THE A.Y. UNDER C ONSIDERATION TOO. 16. NOW BOTH THE PARTIES ARE AGGRIEVED BY THE ORDE R OF CIT(A) UPHOLDING THE DISALLOWANCE PARTIALLY. 17. ON CONSIDERING THE SUBMISSIONS, OF BOTH THE PAR TIES, WE FIND THAT IT HAS NOT BEEN DISPUTED BY LDAR FOR THE ASESSEE THAT NEITHER BEFORE US NOR BEFORE THE TAX AUTHORITIES BELOW THE ASSESSEE PRODU CED ANY VOUCHERS FOR VERIFICATION OF THE CLAIM OF CONVEYANCE ALLOWANCE P AID TO THE FIELD STAFF. HENCE, IN OUR OPINION THE CIT(A) FOLLOWING THE PRIN CIPLE OF CONSISTENCY, HAS RIGHTFULLY DIRECTED THE A.O. TO MAKE/RESTRICT T HE DISALLOWANCE IN THE SAME PROPORTION AS DIRECTED BY HIM IN THE ORDER FOR THE PREVIOUS A.Y. ACCORDINGLY, THE ORDER OF CIT(A) IN THIS REGARD IS UPHELD AND GROUND NO.3 OF THE APPEAL OF THE REVENUE AND GROUND NO.2 OF THE C.O. FILED BY THE ASSESSEE ARE REJECTED. 8 18. NOW, WE SHALL DEAL WITH GROUND NO.4 OF THE APPE AL OF THE REVENUE RELATING TO THE ISSUE OF EXPENDITURE INCURRED BY TH E ASSESSEE ON SEMINAR AND CONFERENCES. 19. IN BRIEF, THE FACTS ARE THAT THE ASSESSEE CLAIM ED TOTAL EXPENDITURE OF RS. 1,23,61,295/- ON SEMINAR AND CONFERENCE. THE A .O. MADE ADHOC DISALLOWANCE OF RS. 2 LAKHS ON THE REASONING THAT T HE EXPENDITURE CLAIMED WAS EXCESSIVE IN COMPARISON TO THE EXPENDIT URE CLAIMED IN P.Y. AND APPEARS TO BE COMPLETELY NOT RELATED TO BUSIN ESS OF ASSESSEE COMPANY AND FURTHER BECAUSE COMPLETE SUPPORTING VO UCHERS WERE NOT PRODUCED BY THE ASSESSEE, WHICH ALSO INCLUDED COSTL Y GIFTS. 20. ON APPEAL THE ASSESSEE CONTENDED BEFORE THE CIT (A) THAT THE A.O. HAD NOT POINTED OUT ANY ITEM OF EXPENDITURE WHICH W AS NOT RELATED TO THE BUSINESS OF ASSESSEE COMPANY. FURTHER THAT THE EX PENDITURE INCURRED BY THE ASSESSEE IN THE YEAR WAS NOT EXCESSIVE BECAU SE IT WAS COMMENSURATE WITH THE BUSINESS OF THE ASSESEE. THA T IN THE A.Y. UNDER CONSIDERATION THE TURNOVER INCREASED TO RS. 125 CRO RES FROM 87 CRORES AND THE NET PROFIT RATE FROM 1.21% TO 1.99% AND, LA STLY, THAT ON SIMILAR FACTS THE CIT(A) IN THE P.Y. DELETED THE DISALLOWAN CE MADE BY THE A.O. AGAINST WHICH THE REVENUE DID NOT PREFER ANY APPEAL , MEANING THEREBY THAT THE DEPARTMENT ACCEPTED THE ORDER OF CIT(A). 9 21. KEEPING IN VIEW THE SUBMISSION OF THE ASSESSEE THE CIT(A) FOLLOWING THE ORDER PASSED IN PREVIOUS A.Y. DELETED THE DISAL LOWANCE MADE BY THE A.O. 22. THE FACTS SUBMITTED BY THE LDAR FOR THE ASSESSE E HAVE NOT BEEN CONTROVERTED BY THE LDDR FOR THE REVENUE BEFORE US. HENCE, IN OUR OPINION, KEEPING IN VIEW THE ENTIRE FACTS, THE CIT( A) IN ORDER TO MAINTAIN CONSISTENCY IN APPROACH RIGHTLY DELETED THE IMPUGNE D DISALLOWANCE MADE BY THE A.O. ACCORDINGLY, THE ORDER OF CIT(A) IN DE LETING THE ADHOC DISALLOWANCE OF RS. 2 LAKHS OUT OF SEMINAR AND CONF ERENCE EXPENSES IS UPHELD. THE GROUND NO.4 OF THE APPEAL OF THE REVENU E IS REJECTED. 23. NOW WE SHALL DEAL WITH GROUND NO.5 OF THE APPEA L OF THE REVENUE AND GROUND NO.3 OF THE C.O. OF THE ASSESSEE RELATIN G TO THE ISSUE OF EXPENDITURE INCURRED ON FREIGHT, CASH DISCOUNT, REB ATE ETC. 24. IN BRIEF THE FACTS RELATING TO THE ISSUE ARE TH AT THE ASSESSEE DID NOT PRODUCE COMPLETE BOOKS OF ACCOUNTS, RECORDS AND VOU CHERS ETC. HENCE ON ESTIMATE BASIS THE A.O. MADE THE ADHOC DISALLOWANCE OF RS. 3 LAKHS OUT OF TOTAL EXPENDITURE OF RS. 12,45,43,610/- CLAIMED BY THE ASSESSEE. 25. ON APPEAL, THE CIT(A) AFTER CONSIDERING THE SUB MISSIONS DIRECTED THE A.O. TO OBTAIN COMPLETE DETAILS OF AFORE MENTIO NED ITEMS AND EXAMINE 10 THE SAME AFRESH AND ALLOWED THE GROUND OF APPEAL TA KEN BY THE ASSESSEE FOR STATISTICAL PURPOSES WHILE OBSERVING AS UNDER. AS PER THE ASSESSMENT ORDER THE APPELLANT HAD SHOW N THE FOLLOWING EXPENSES: CASH DISCOUNT RS. 1,02,10,814/- , REBATE AND DISCOUNT RS. 9,26,96,629/-, FILED ASSISTANT EXP ENSES RS. 83,71,261/- AND FIELD DEVELOPMENT EXPENSES RS. 33,3 0,551/-. NO ATTEMPT APPEARS TO HAVE BEEN MADE TO EXAMINE THE SE EXPENSES AND THE BUSINESS NEXUS THEREOF, THIS IS IN SPITE OF THE FACT THESE ITEMS OF EXPENDITURE INVOLVED MAJOR PORT ION OF EXPENDITURE CLAIMED BY THE APPELLANT UNDER THE HEAD SELLING AND DISTRIBUTION EXPENSES IN SCHEDULE 17 OF THE BAL ANCE SHEET. ANOTHER ITEM OF EXPENDITURE CLAIMED UNDER THIS SCHE DULE IS SCHEME DISCOUNT INVOLVING A CLAIM OF RS. 1,06,48,28 3/-; THIS ITEM HAS NOT BEEN LOOKED INTO AT ALL BY THE A.O. T HE A.O. HAS BEEN SATISFIED BY DISALLOWING AN AMOUNT OF RS. 3,00 ,000/- AND THAT ALSO WITHOUT POINTING OUT ANY SINGLE ITEM OF E XPENDITURE WHICH HAS REMAINED UNVOUCHED OR UNEXPLAINED. THE DISALLOWANCE/ADDITION HAS BEEN MADE PURELY ON ADHOC BASIS. IN THE REMAND REPORT DATED 21.4.2004 THE AO HAS STA TED THAT THE ASSESSEE DID NOT SUBSTANTIATE ITS CONTENTION B Y PRODUCING COMPLETE BOOKS OF ACCOUNTS, RECORDS AND VOUCHERS ET C. THEREFORE A REASONABLE AMOUNT OF RS. 3,00,000/- ABO UT 0.24% OF TOTAL EXPENSES WAS DISALLOWED. THE CONTENTION O F THE 11 ASSESSEE MAY KINDLY BE REJECTED BECAUSE THE ASSESSE E DID NOT PRODUCE DOCUMENTARY EVIDENCE IN RESPECT OF THESE EX PENSES. EVEN IN ITS COMMENTS ON THE REMAND REPORT THE APPEL LANT HAS NOT GIVEN ANYTHING TO JUSTIFY HIS VERSION THAT THE ACTION OF THE A.O. IN DISALLOWING THIS AMOUNT WAS WRONG; IT HAS S IMPLY STATED THAT THE ENTIRE EXPENSES OF FREIGHT, DISCOUN T, REBATE ETC. WERE GIVEN TO THE DEALERS BY WAY OF TRANSFER ENTRIE S WHICH WERE SHOWN TO THE LDAO, THE APPELLANT HAS ALSO NOT OFFER ED TO PRODUCE BOOKS OF ACCOUNTS, RECORDS AND VOUCHERS ETC . BEFORE THE UNDERSIGNED INSPITE OF SPECIFIC ALLEGATION OF THE A O. IN THESE CIRCUMSTANCES THE UNDERSIGNED HAS NO ALTERNATIVE OT HER THAN DELETING THE ADDITION AND FOR DIRECTING THE EXAMINA TION OF THE CLAIM OF THE APPELLANT AFRESH. THE ADDITION OF RS. 3,00,000/- MADE BY THE AO IS THEREFORE DELETED. THE AO IS DIR ECTED TO OBTAIN COMPLETE DETAILS OF THE AFORESAID ITEMS PERT AINING TO SCHEDULE 17 ALONG WITH NAMES AND ADDRESSES AND THE BUSINESS NEXUS THEREOF AND EXAMINE THE SAME AFRESH. 26. ON CONSIDERING THE SUBMISSIONS OF BOTH THE PART IES, AS WELL AS THE UNCONTROVERTED FINDING OF FACT RECORDED IN THE ORDE R OF CIT(A), WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE DIRECTIONS ISSUED TO THE A.O. BY THE CIT(A) FOR RECONSIDERING THE MATTER AFRESH BECAUSE NEITHER BEFORE THE A.O. NOR BEFORE THE CIT(A) AND EVEN BEFORE THE A.O. DURING THE COURSE OF REMAND PROCEEDINGS THE ASSESSEE SIMPLY STATED THAT THE ENTIRE EXPENSES 12 ON FREIGHT, DISCOUNT, REBATE ETC. WAS GIVEN TO THE DEALERS BY WAY OF TRANSFER ENTRIES WERE ALLEGED TO BE SHOWN TO THE AO BUT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS, RECORDS AND VOU CHERS BEFORE THE CIT(A) DESPITE OF THE SAME HAVING BEEN NOT PRODUCED BEFORE THE AO. FOR THE REASONS STATED ABOVE THE ORDER OF CIT(A) DOES N OT CALL FOR ANY INTERFERENCE FROM OUR SIDE AND THE SAME IN THIS REG ARD IS UPHELD AND GROUND NO.5 OF THE APPEAL OF THE REVENUE AND GROUND NO.3 OF THE C.O. ARE REJECTED. 27. NOW WE SHALL DEAL WITH GROUND NO.6 OF THE REVEN UES APPEAL RELATING TO ISSUE OF LATE DEPOSIT OF EMPLOYEES CONT RIBUTION TOWARDS ESI & PF AMOUNTING TO RS. 2,50,576/-. 28. IN BRIEF THE FACTS ARE THAT THE A.O. MADE DISAL LOWANCE ON ACCOUNT OF LATE PAYMENT OF ESI & PF U/S 36(1)(VA) READ WITH S.2(24)(II) OF I.T.ACT. 29. ON APPEAL THE CIT(A) DELETED THE ADDITION MADE BY THE A.O. ON THE REASONING THAT THE AMOUNTS WERE DEPOSITED DURING TH E P.Y. RELEVANT TO A.Y. AND HENCE THE SAME WERE ALLOWABLE DEDUCTIONS. 30. WE FIND THAT THE ISSUE NOW STANDS COVERED IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN VIEW OF THE FO LLOWING JUDICIAL PRONOUNCEMENTS. 13 A) 313 ITR 161 (DEL) CIT VS PM ELECTRONICS B) 297 ITR 320(DEL) C) 313 ITR 1(ST) CIT VS VINAY CEMENT 31. IN THE CASES (SUPRA), IT WAS HELD THAT IN CASE THE PAYMENTS FOR ESI AND PF WERE MADE DURING THE P.Y. ITSELF NO DISALLOW ANCE COULD BE MADE, SINCE THE IMPUGNED ORDER OF CIT(A) IS IN CONFORMIT Y WITH THE DECISIONS (SUPRA), THE SAME DOES NOT CALL FOR ANY INTERFERENC E FROM OUR SIDE, AND THE SAME IS UPHELD. THE GROUND NO.6 OF THE APPEAL OF THE REVENUE IS REJECTED. 32. IN THE END WE SHALL DEAL WITH GROUND NO.7 OF TH E APPEAL OF THE REVENUE. 33. THE ASSESSEE CLAIMED A TOTAL SUM OF RS. 6,40,33 2/- ON ACCOUNT OF PURCHASE EXPENSES AND RS. 2,27,96,295/- OUT OF SALA RY EXPENSES. THE AO MADE ADHOC DISALLOWANCE OF RS. 1 LAKH EACH OUT O F THE SAID EXPENSES ON THE REASONING THAT NO SUPPORTING VOUCHERS WERE P RODUCED BY THE ASSESSEE. 34. AGGRIEVED THE ASSESSEE FILED AN APPEAL AND THE CIT(A) ON CONSIDERING THE SUBMISSIONS DELETED THE DISALLOWANC ES WHILE MAKING FOLLOWING OBSERVATIONS. 14 THE A.O. HAS NOT DENIED THAT THE EXPENDITURE WAS I NCURRED BY THE APPELLANT AS TO THE OTHER PURCHASE EXPENSES AND SIMILARLY THE DISALLOWANCE OF SALARY HAS BEEN MADE AT RS. 1,00,00 0/- ON LUMP SUM BASIS WITHOUT ANY BASIS. SUCH ADDITIONS AND DI SALLOWANCE ARE NOT CALLED FOR AND THAT ALSO ON ADHOC BASIS; AD DITION SHOULD NOT BE MADE FOR THE PURPOSE OF MAKING ADDITION. TH E A.R. OF THE APPELLANT HAS PRODUCED JUSTIFICATION IN RESPECT OF THE FOUR PARTIES MENTIONED IN THE ASSESSMENT ORDER PARA 11 AND HAS S UBMITTED THAT IT WAS PRODUCED BEFORE THE AO ALSO. THEREFORE THE DISALLOWANCE OF RS. 1,00,000/- IS DELETED AND SIMIL ARLY THE LUMP SUM DISALLOWANCE OF SALARY OF RS. 1,00,000/- IS DEL ETED. 35. BEFORE US LD.A.R. FOR THE ASSESSEE CONTENDED TH AT THE INCURRING AND, GENUINENESS OF EXPENDITURE IS NOT IN DISPUTE. THEREFORE, ASSUMPTION THAT, EXPENDITURE INCURRED IS EXCESSIVE IS BASED ON NO MATERIAL AND, IS OTHERWISE COMMENSURATE WITH THE BU SINESS OF ASSESSEE AS IN THE YEAR UNDER CONSIDERATION THE TURNOVER HAS INCREASED TO RS. 125 CRORES FROM RS.87 CRORES AND, N.P. TO 1.99% FROM 1. 21%. 36. THE SUBMISSIONS OF LD.A.R. COULD NOT BE CONTRO VERTED BY THE LD.D.R. FOR THE REVENUE AND THE LD.D.R. SIMPLY PLAC ED RELIANCE ON THE REASONING GIVEN IN THE ORDER OF AO IN MAKING THE IM PUGNED DISALLOWANCE. 15 37. ON CONSIDERING THE UNCONTROVERTED SUBMISSIONS O F LD.A.R. FOR THE ASSESSEE, WE ARE OF THE OPINION THAT IN THE CIRCUMS TANCES IN WHICH THE TURNOVER AND NET PROFIT RATE OF THE ASSESEE HAS INC REASED IN THE YEAR UNDER CONSIDERATION THE ADHOC DISALLOWANCE MADE BY THE A.O., SIMPLY BECAUSE THE EXPENDITURE WAS EXCESSIVE IN COMPARISON TO P.Y. AND BECAUSE NO SPECIFIC VOUCHER WAS ASKED BY THE A.O. T O JUSTIFY THE EXPENDITURE CALLING FOR THE DISALLOWANCE, THE ADHOC DISALLOWANCES MADE BY THE A.O. WERE NOT JUSTIFIED. THE CIT(A) IN HIS ORDER HAS RIGHTLY DELETED THE ADHOC DISALLOWANCE MADE IN THIS REGARD. THE OR DER OF CIT(A) IN THIS REGARD IS UPHELD AND GROUND NO.7 OF THE APPEAL OF T HE REVENUE IS REJECTED. 38. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE C.O. FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVE MBER,2009. (R.C. SHARMA) (D.R.SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: NOVEMBER, 2009 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CI T(A); 5.DR6.GUARD FILE BY ORDER DY. REGISTRAR // TR UE COPY //