ACIT, Faridabad V. Sh. Raj Kumar, Faridabad

ITA 2785/DEL/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0054 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 07-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Corroborative evidences
• Section: 37(1); 37

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI J.S.REDDY, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO.4165/DEL/2009 (ASSESSMENT YEAR: 2006 - 0 7 ) ACIT CIRCLE - 1, BLOCK - I - B, CGO COMPLEX, NH - 24, FARIDABAD VS RAJ KUMAR PROP M/S. RAJ FURNITURE, 16/5, MATHURA ROAD, FARIDABAD (APPELLANT) (RESPONDENT) ITA NO.2785/DEL/2010 (ASSESSMENT YEAR: 2007 - 08) ACIT CIRCLE - 1, BLOCK - I - B, CGO COMPLEX, NH - 24, FARIDABAD VS RAJ KUMAR PROP M/S. RAJ FURNITURE, 16/5, MATHURA ROAD, FARIDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : VIKRAM SAHAY, SR. DR RESPONDENT BY : VIJAY GUPTA, CA DATE OF HEARING 07 .0 5 .2015 DATE OF PRONOUNCEMENT 22 . 05 .2015 ORDER PER A. T. VARKEY , JUDICIAL MEMBER THESE APPEAL S FILED BY THE REVENUE ARE AGAINST THE ORDER DATED 28.08.2009 OF THE LD CIT(A), FARIDABAD RELEVANT TO ASSESSMENT YEAR S 2006 - 07 AND 2007 - 2008 . PAGE 2 OF 13 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN APPEAL FOR THE AY 2006 - 07 ARE AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 10,00,000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PURCHASES AND VENDOR PURCHASES EVEN WHEN THE ASSESSEE HAD NO EVIDENCE TO SUPPOR T HIS CLAIM. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.6,33,432/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENSES UNDER THE HEAD FREIGHT & OCTROI, STAFF & WORKERS WELFARE, TRAVELING EXPENSES, DIWALI EXPENSES, TELEPHONE EXPENSES AND REPAIR & MAINTENANCE EVEN WHEN THE ASSESSEE HAD NO EVIDENCE TO SUPPORT HIS CLAIM THAT ALL THESE EXPENSES WERE INCURRED WHOLLY & EXCLUSIVELY FOR THE PURPOSE OF BU SINESS.' 3 . T HE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE PROPRIETOR OF M/S. RAJ FURNITURE, A CONTRACTOR WHO IS ENGAGED IN INTERIOR FURNISHING ON CONTRACT BASIS AND SALE OF FURNITURE. FOR THE YEAR IN QUESTION, HE FILED HIS RETURN OF INCOME AT RS .1,43,52,382/ - ON 31.10.2006, WHICH WAS PROCESSED AS SUCH U/S 143(1) OF THE INCOME TAX ACT, 1961 ( HEREIN AFTER THE ACT ) ON 31.03.2008. IN THE ASSESSMENT U/S 143(3), THE FINAL TAXABLE INCOME WAS DETERMINED AT RS.1,59,85,810/ - , IN WHICH CERTAIN DISALLOWANCES WERE MADE BY THE AO, WHICH WERE THE SUBJECT MATTER OF THE APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO ALLOW THE APPEAL IN FAVOR OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS BEFORE US. 4. APROPOS GROUND NO. 1 WHICH IS AGAINST DELETION OF DISALLOWANCE OF RS.10,00,000/ - UNDER THE HEAD PURCHASE AND VENDOR PURCHASES MADE BY THE AO. PAGE 3 OF 13 5. LD. DR SUBMITTED THAT AS PER THE P&L A/C OF THE ASSESSEE, AMOUNTS OF RS. 29,14,80,232/ - AND RS. 7,75,91,523/ - HAVE BEEN DEBITED UNDER THE HEAD PURCHASES & VENDOR PURCHASES RESPECTIVELY. THE ASSESSEE WAS ASKED BY THE AO TO FURNISH THE EVIDENCES OF THE ABOVE PURCHASES AND TO SHOW ITS GENUINENESS. IN RESPONSE THERETO, ASSES SEE HAS PRODUCED ONLY LEDGER ACCOUNT & CASH BOOK BUT NO VO UCHERS/BILLS WERE PRODUCED ON THE PLEA THAT ALL THE VOUCHERS HAVE BEEN DESTROYED IN A FIRE INCIDENT ON 23.09.2007. LD. DR POINTED OUT THAT THE AO WHILE GOING THROUGH THE PREVIOUS RECORD OF THE ASSESSEE FOUND THAT IN THE PRECEDING ASSESSMENT YEAR I.E. FOR A .Y 2005 - 06, AN ADDITION OF RS. 5,00,000 (FIVE LACS ) WAS MADE BY THE AO UNDER THIS HEAD BECAUSE OF THE FACT THAT ASSESSEE COULD NOT PRODUCE SUPPORTING EVI DENCES AND SURRENDERED THE SAID AMOUNT . SO ACCORDING TO THE LD. DR , THE AO RIGHTLY CONCLUDED THAT PLEA OF THE ASSESSEE REGARDING LOSS OF VOUCHERS IN FIRE INCIDENT MAY BE TRUE , BUT LOOKING AT THE TRACK RECORD OF THE ASSESSEE , IT SEEMS THAT ASSESSEE IS IN THE HABIT OF NOT KEEPING THE COMPLETE RECORDS OF EXPENSES/PURCHASES , SO THE AO DISALLOW ED A SUM OF RS. 1 O,OO,OOO/ - ( TEN LACS ) UNDER THIS HEAD , WHICH ACCORDING TO THE DR IS REASONABLE AND THE LD. CIT(A) ERRED IN DELETING THE SAME, SO HE PLEADS THAT THE IMPUGNED ORDER MAY BE REVERSED AND THE AO S ORDER BE UPHELD. 6. ON THE OTHER HAND, T HE LD AR SUBMIT TED THAT THE AO IN PARA - 1 OF HER ORDER EXAMINED THE GENUINENESS OF THE AMOUNTS OF RS.29,14,80,232/ - AND RS . 7,75,91,523/ - DEBITED UNDER THE HEAD PURCHASES AND VENDOR PURCHASES RESPECTIVELY. ACCORDING TO THE A.O., FOR THE VERIFICATION OF THESE AMOUNTS, THE PAGE 4 OF 13 ASSESSEE HAD PRODUCED ONLY LEDGER ACCOUNT AND CASH BOOK BUT NO VOUCHERS / BILLS WERE PRODUCED ON THE PLEA THAT THEY HAD BEEN LOST IN A FIRE INCIDENT OCCURRED IN THE PREMISES OF THE ASSESSEE ON 23.09.2007. TO PROVE THE GENUINENESS OF THE FIRE INCIDENT IN T HE ASSESSEE'S PREMISES, THE COPIES OF FIR, DOCUMENTS FROM FIRE STATION OFFICER, DOCUMENTS OF INSURANCE CLAIM FROM NATIONAL INSURANCE COMPANY LTD. , PAPER CUTTINGS FROM LEADING NEWSPAPERS WHERE NEWS OF FIRE INCIDENT ON 23.09.2007 WAS REPORTED ON 24.09.2007, WERE FURNISHED BEFORE THE AO FOR HER EXAMINATION. ALSO, IT WAS POINTED OUT THAT THE AO HERSELF MADE 'PROPER ENQUIRIES AND INVESTIGATION' UNDER THE PROVISIONS OF SECTION 131(1)(D) FROM THE ADDITIONAL DIRECTOR OF INCOME TAX, FARIDABAD (ADI, FBD) WHO CONDUCTED ENQUIRIES IN 10 SELECTED CASES AND ALSO ENQUIRES ON THE CREDITORS MENTIONED ON PAGE 3 OF THE IMPUGNED ASSESSMENT ORDER. HOWEVER, NO ADVERSE INFERENCES WERE DRAWN BY THE AO FROM THE EXTENT OF INVESTIGATION CONDUCTED BY HER. SO ACCORDING TO THE LD. AR , WHEN THERE WAS NOTHING AGAINST THE ASSESSEE, THE AO WENT THROUGH THE PREVIOUS RECORDS OF THE ASSESSEE AND NOTICED THAT IN THE PREVIOUS ASSESSMENT YEAR I.E. A.Y 2005 - 06, AN ADDITION OF RS. 5,00,000/ - WAS MADE BY THE AO UNDER THIS HEAD BECAUSE OF THE FACT THAT T HE ASSESSEE COULD NOT PRODUCE SUPPORTING EVIDENCES AND HAD SURRENDERED THE ABOVE AMOUNT . THEREFORE, THE AO ON THE BASIS OF THE PREVIOUS CONDUCT OF THE SURRENDER MADE AS AFORESTATED, SHE CONCLUDED THAT THE ASSESSEE WAS IN THE HABIT OF NOT KEEPING THE COMPL ETE RECORDS OF EXPENSES / PUR CHASES. AS A RESULT, SHE MADE A DISALLOWANCE OF RS. 10,00,000/ - UNDER THIS HEAD. PAGE 5 OF 13 6.1 THE LD AR SUBMITTED THAT THE AO MADE THE ADDITION PRIMARILY FOR NOT PRODUCING VOUCHERS WHICH WERE DESTROYED DURING THE ACCIDENTAL FIRE OCCURRED DUE TO NO FAULT OF THE ASSESSEE. THE ASSESSEE SUBMITTED THE PROOF OF FIRE AT HIS PREMISES BY FURNISHING NEWS PAPER CUTTINGS AND COPY OF FIR TO SUBSTANTIATE HIS CLAIM WHICH HAS BEEN ACCEPTED BY THE AO . ACCORDING TO LD. AR, T HE ASSESSEE'S GENUI NE INABILITY TO PRODUCE THE PURCHASE VOUCHER HAD BEEN GROSSLY IGNORED BY THE AO. ACCORDING TO THE LD. AR, T HE BOOKS OF ACCOUNTS WERE DULY AUDITED U/S 44AB OF THE ACT BY THE CHARTERED ACCOUNTANT. THE SECTION 131(D) HAD BEEN INVOKED BY THE ADI, FBD BY LETTE R NO.1838 DT 04.12.2008 TO FIND OUT THE GENUINENESS OF THE CREDITORS AND PURCHASE FROM THEM WHICH HAS BEEN COMPLETED AND THERE WAS NO DISCREPANCY FOUND. ACCORDING TO LD AR, THOUGH T HE AO REMARKED AS 'NO ADDITION IS REQUIRED UNDER THIS HEAD' IN HER ORDER AND WITHOUT REJECTING T HE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESS EE, HAS MADE ADDITION WHICH IS PER - SE, ARBITRAR Y AND IS PURELY ON ESTIMATE / GUESS WORK BASIS WITHOUT ANY LEGITIMATE BASIS OR REASON. 6.2 THE LD. AR POINTED OUT THAT THE NP RATE DECLA RED IN THIS INSTANT YEAR IS BETTER BEING AT 3. 16 PER CENT AS AGAINST 1.93 PER CENT IN THE IMMEDIATELY PR ECEDING YEAR. ACCORDING TO HIM, IT IS SETTLED POSITION OF LAW THAT EVEN WHEN THE BOOKS OF ACCOUNTS ARE REJECTED, ADDITION IS NOT AUTOMATIC, AND IF THE N P RATE DECLARED IN THE CURRENT YEAR IS BETTER THAN THE PAST YEAR, NO FURTHER ADDITION CAN BE JUSTIFIED MADE IN THE DECLARED RESULTS. ACCORDING TO HIM, AO CANNOT MAKE AN ASSESSMENT ON PURE GUESSWORK WITHOUT REFERENCE TO ANY MATERIAL EVIDENCE PAGE 6 OF 13 AS HAS BEEN DECIDED BY HON BLE SUPREME COURT IN THE CASE OF DHAKESWARI COTTON MILLS L TD VS CIT (1954) 26 ITR 775 (SC). 6.3 ACCORDING TO HIM, I N ORDER TO FIND OUT REAL PROFIT EARNED BY ASSESSEE , NEITHER THE AO CAN MAKE CRUDE GUESS NOR PROCEED ARBITRARILY BUT SHOULD ACT JUDICIALLY IN THE LIGHT OF RELEVANT MATERIAL AS HAS BEEN DECIDED IN THE CASE OF BAJRANGBALI ENGG CO (PVT.) L TD VS CIT (1967) 66 ITR 82 (CAL). SO ACCORDING TO THE LD. AR, THE LD. CIT(A) HAS CORRECTLY DELETED THE ADDITION, SO WE NEED NOT INTERFERE IN THE SAID ORDER OF THE LD. CIT(A). 6.4 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE RECORDS AND CASE LAWS CITED BEFORE US. WE FIND IN THE INSTANT CASE, THE AO HAD CONDUCTED ENQU IRIES U/S. 131(1 ) ( D) OF THE ACT AND AS PER THE AO S OWN FINDINGS NO A DDITION WAS REQUIR ED AFTER THE VERIFICATION OF THE FEW CREDITORS. MOREOVER, THE INCIDENT OF FIRE AT THE ASSESSEE S BUSINESS PREMISE HAS ALSO BEEN ACCEPTED BY THE AO, BECAUSE THE DOCUMENTS SUBMITTED IN SUPPORT OF SUCH ACCIDENT HAS NOT BEEN DISPUTED OR FOU ND FAULT WITH BY THE AO. YET WE FIND THAT THE AO HAS MADE THE DISALLOWANCE OF RS. 10,00,000/ - PURELY LOOKING INTO THE PAST HISTORY OF THE CASE AND THAT TOO, TWICE THE AMOUNT SURRENDERED IN T HE LAST YEAR. NEITHER THE AO HAS ADDUCED ANY MATERIAL, RATIONAL BASIS NOR ANY J USTIFICATION FOR THE DOUBLING THE ADDITION MADE DURING THE YEAR. WE FURTHER FIND THAT THE BUSINESS RESULTS OF THE ASSESSEE ARE CERTIFIED BY THE AUDITED ACCOUNTS BY THE AUDITORS, M/S VIMLA CHAND JAIN & CO., CHARTERED ACCOUNTANTS AS PER THE TAX AUDIT REPORT IN FORM NO. 3CB AND 3 CD DATED 28.10.2006. THESE AUDITED REPORTS CLEARLY REFLECT THAT PAGE 7 OF 13 ON OR BEFORE 28.10.2006, VOUCHERS / BILLS WERE AVAILABLE WITH THE ASSESSEE AND ON THE BASIS OF WHICH THE AUDIT OF THE ACCO UNTS WA S CONDUCTED AND REPORT IN FORM NO. 3CB & 3CD ALONGWITH THE RETURN OF INCOME WAS FILED ON 31.10.2006. BUT SINCE AN ACCIDENTAL FIRE HAPPENED ON 23.9.2007 I.E. AFTER THE AUDIT WAS CONDUCTED ON 28.10.2006, IT CAN BE SAFELY ASSUMED THAT THE AUDIT OR HAD PREPAR ED THE REPORT BASED ON THE VOUCHERS/ BILLS WITH THE ASSESSEE AND SO IT IS AUTHENTIC, SINCE THE SAID AUDIT REPORT HAVE NOT BEEN CHALLENGED BY THE AO AT ALL. THEREFORE, SIMPLY ON THE GROUND THAT IN PREVIOUS YEAR , THE ASSESSEE MADE SURRENDER CANNOT BE THE BASIS FOR DISALLOWANCE WHICH SMACKS OF ARBITRARINESS, WHICH IS THE SWORN ENEMY OF ARTICLE 14 OF THE CONSTITUTION AND THE LD. CIT(A) HAS RIGHTLY DELETED THE ADHOC DISALL OWANCES, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SA ME BY DISMISSING THE GROUND NO. 1 RAISED BY THE REVENUE. 7. APROPOS GROUND NO. 2 , REGARDING DELETING THE DISALLOWANCE OF RS. 6,33,432/ - OUT OF EXPENSES UNDER DIFFERENT HEADS. 8. LD. DR SUBMITTED THAT T HE AO IN PARA - 2 OF HER ORDER HAS MADE THE ADDITION , SINCE V OUCHERS WERE NOT PRODUCED BY THE ASSESSEE ON THE PLEA THAT IT WAS DESTROYED IN THE FIRE ACCIDENT . THE AO WHILE CONSIDERING THE EXPENSES CLAIMED BY THE ASSESSEE FOR FREIGHT AND OCTROI, STAFF AND WORKERS' WELFARE, TRAVELING EXPENSES, DIWALI EXPENSES, TELEPHONE EXPENSES AND REPAIR AND MAINTENANCE EXPENSES FOUND IT TO BE UNVERIFIABLE IN THE ABSENCE OF THE EVIDENCES TO SUBSTANTIATE IT. THEREFORE, 'TO PROTECT THE INTEREST OF THE REVENUE', PAGE 8 OF 13 SHE WORKED OUT THE DISALLOWANCE OUT OF THESE EXPENSES TO THE EXTENT MENTIONED AGAINST EACH HEAD IN THE IMPUGNED ASSESSMENT ORDER, BEING 'FAIR AND REASONABLE' TO THE ASSESSEE. THE TOTAL DISALLOWANCE THUS AMOUNTED TO RS.6,33,432/ - WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 9 . ON THE OTHER HAND, LD. AR RELIED UPON THE ORDER OF THE CIT(A) . 1 0 . WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE AND WE FIND THAT IN RESPECT OF THE ADDITION MADE BY THE AO OUT OF 'VENDOR PURCHASES AND OTHER PURCHASES', IDENTICAL CONCLUSIONS/APPROACH HAVE BEEN ADOPTED BY HER IN EFFECTING ADHOC DISALLOWANCES AS DONE IN GROUND NO. 1 (SUPRA) WHICH LD. CIT(A) DELETED AND WE HAVE CONFIRMED IT. WE FIND THAT THE AO HAS RESORTED TO ADHOC D ISALLOWANCE W ITHOUT BRI NGING OUT ANY SPECIFIC INSTANCES OF EXPENDITURE . IT WAS NOTICED BY THE LD. CIT(A) THAT IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR, THE DISALLOWANCES WERE EFFECTED BY THE AO OUT OF (I) TRAVELLING EXPENSES, (II) SALE PROMOTION AND ST AFF WELFARE EXPENSES AND (III) REPAIR & MAINTENANCE EXPENSES A ND NO DISALLOWANCE WAS EVER MADE OUT OF FREIGHT AND OCTROI HAS BEEN MADE BY THE AO IN THAT YEAR, S INCE NO DEFECTS WERE FOUND IN THE SAID CLAIM S . AND THE PREDECESSOR A.O. MADE A DISALLOWANCE TO THE EXTENT OF 1 / 10TH OUT OF STAFF AND WORKERS, WELFARE AND TRAVELLING EXPENSES ONLY , HOWEVER AO IN THE INSTANT YEAR HAS SIMPLY MADE ADHOC DISALLOWANCE IGNORING THE IMPROVED TURNOVER AND PROFITS OF THE YEAR UNDER CONSIDERATION WHICH IS ARBITRARY. THE LD. C IT(A) HAS NOTED THAT DIWALI EXPENSES ARE ALLOWABLE UNDER SECTION 37(1) OF THE ACT, IN VIEW OF TH E DECISIONS IN ACIT VS. ANIL ALUMS (P) LTD. PAGE 9 OF 13 (2005) 98 TTJ (ASR) 56 AND MR. MAYA J. DARYANI VS. I AC (1994) 50 TTJ (DEL) 510. TRAVELLING EXPENSES AR E DEDUCTIBLE UNDER SECTION 37(1) AS PER RATIO IN 5UNITA MINE CHEM. IND. VS IT O (2008) 14 TTJ (JD.) 98 AND GANESH FOUNDRY VS ACIT (2003) 78 TTJ (JD. ) 736. LD. CIT(A) OBSERVES THAT ALL THE DISALLOWANCES OUT OF EXPENSES LISTED HAVE BEEN MA DE WITHOUT ANY REAS ON, AND HENCE THE DISALLOWANCE WAS NOT WARRANTED IN VIEW OF TH E DECISIONS IN LAVRIDS KNUDSEN MASKINFABRIK (INDIA) LTD. VS. ADDL. CIT (200 6) 102 TTJ (PUNE) 882 AND 5AYAJI IRON & ENGG. CO. VS. CIT (2002) 253 ITR 74 9 (GUJ). MOREOVER, LD CIT(A) HAS RIGHTLY OBSERVED THAT DISAL LOWANCES OF ANY EXPENSE CLAIMED ON ESTIMATE BASI S WITHOUT PINPOINTING ANY DISCREPANCIES IN THE BOOKS OF ACCOUNT ARE NOT TENABLE AND THE LD. CIT(A) HAS RELIED ON THE JUDGMENTS VIZ. (I) ROGER ENTERPRISES LTD. VS. ITO (1995) 52TTJ(DEL) 198 & (II) MODI EXPORTS VS. ACIT (2008) 12 DTR - 1 (DEL TRIBUNAL) . 11. WE CONCUR WITH THE LD. CIT(A) THAT AO DISALLOWED EXPENDITURE UNDER THESE HEADS WITHOUT ANY MATERIAL OR REASONS BROUGHT ON RECORD, SO IT IS UNSUSTAINABLE IN THE EYES OF LAW. SO, WE ARE INCLINED TO CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE ALSO AND DISMISS THE GROUND NO. 2 RAISED BY THE REVENUE. 12 . IN THE RESULT, THE APPEAL NO. 4165/DEL/2009 FOR (AY 2006 - 07) STANDS DISMISSED. IN ITA NO.2785/DELHI/2010 (AY 2007 - 08) 13. THE FOLLOWING GROUND S HAVE BEEN RAISED BY THE REVENUE ASSAILING THE DECISION OF THE LD. CIT(A), FARIDABAD DATED 31.3.2010 FOR THE ASSTT. YEAR 2007 - 08. PAGE 10 OF 13 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 1 5 ,00,000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PURCHASES AND VENDOR PURCHASES DISREGARDING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY EVIDENCE FROM WHICH GENUINENESS OF PURCHASES COULD BE VERIFIED. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 8 , 26 , 378 / - MADE BY THE ASSESSING OFFICER UNDER THE VARIOUS HEADS OF EXPENDITURE EVEN THOUGH THE ASSESSEE HAD FAILED TO DISCHARGED THE ONUS THAT THE EXPEN DITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. 3. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 14. APROPOS GROUND NO.1, WHICH IS REGARDING DELETION OF DISALLOWANCE OF RS.15,00,000/ - UNDER THE HEAD PURCHASE AND VENDOR PURCHASES . SINCE THIS GROUND IS SIMILAR AND IDENTICAL IN NATURE AND THE FACTS AND CIRCUMSTANCES WHICH LED TO THE DISALLOWANCE ARE THE SAME, AS THAT OF GROUND NO. 1 RAISED IN ITA NO. 4165/DEL/2009 (A.Y. 2006 - 07) (SUPRA) , AND SINCE THE LD. DR COULD NOT POINT OUT ANY CHANGE IN FACTS AND CIRCUMSTANCES, WHICH COULD PERSUADE US TO TAKE A DIFFERENT VIEW, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THIS IS SUE AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 15. APROPOS GROUND NO. 2 REGARDING DELETION OF ADDITION OF RS. 8,26,378/ - MADE BY THE AO UNDER THE VARIOUS HEADS OF EXPENDITURE EVEN THOUGH THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE S OF BUSINESS. PAGE 11 OF 13 1 5 . 1 A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT T HE AO HAS DISALLOW ED THE EXPENSE UNDER FOLLOWING DIFFERENT HEAD S TO THE TUNE OF RS.9,07,350/ - AND ADDITION S MADE THEREOF. 1. STAFF AND WORKERS WELFARE RS.13,22,112/ - RS.2,64,422/ - (@1/ 5 TH ) 2. DIWALI EXPENSES RS.3,29,915/ - RS.1,64,957 (@50%) 3. TELEPHONE EXPENSES RS.7,46,199/ - RS.1,49,240/ - 4. CHARITY & DONATION RS.1,28,225/ - RS.1,28,225/ - (@100%) 5. VEHICLE MAINT. EXP. & DEP RS.7,17,206/ - RS.1,19,534/ - 6. EMPLOYEES CONTRIBUTION TO PF AND ESI RS.80,972/ - TOTAL RS.9,07,350/ - 1 5 . 2 ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER HAS DELETED ALL THE ADDITIONS MENTIONED AT SERIAL NO. 1 TO 3 & 5 TO 6 AND AFFIRMED THE ACTION OF THE AO DISALLOWING EXPENDITURE ON ACCOUNT OF CHARITY AND DONATION OF RS. 1,28,225/ - MENTIONED AT SERIAL NO. 4 I.E. RS. 9,07,350 RS. 1,28,225 = RS. 7,79,125/ - WAS DELETED BY THE LD. CIT(A). 15.3 AGAINST THE ABOVE ORDER OF THE LD. CIT(A), REVENUE HAS RAISED T HE GROUND NO. 2 BEFORE US, BUT WRONGLY MENTIONED THE AMOUNT OF DELETION OF ADDITION OF RS. 8,26,378/ - I.E. (RS. 9,07,350 RS. 80,972 ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF & ESI = RS. 8,26,378), HOWEVER, THE SAME WAS RS. 7,79,125/ - , AS STATED IN PAR A 15.2 OF HIS ORDER. THIS WRONG MENTIONING OF THE ADDITION AMOUNT IN THE REVENUE S APPEAL RAISED VIDE GROUND NO. 2 SHOWS THAT THE REVENUE HAS RAISED THE ADDITION OF RS. 1,28,225/ - AGAIN, WHICH HAS ALREADY BEEN UPHELD BY THE LD. CIT(A), HENCE, THE ISS UE RAISED AGAINST THE HEAD OF CHARITY AND DONATION OF RS. 1,28,225/ - HAS BECOME INFRUCTUOUS . FROM THE ABOVE, WE FIND THAT THE REVENUE PAGE 12 OF 13 HAS COME AGAINST THE FOLLOWING ADDITIONS ONLY WHICH COMES TO RS.6,98,153/ - IN LIEU OF WRONGLY MENTIONED ADDITION OF R S. 8,26,378/ - . 1. STAFF AND WORKERS WELFARE RS.13,22,112/ - RS.2,64,422/ - (@1/5 TH ) 2. DIWALI EXPENSES RS.3,29,915/ - RS.1,64,957 (@50%) 3. TELEPHONE EXPENSES RS.7,46,199/ - RS.1,49,240/ - 4. VEHICLE MAINT. EXP. & DEP RS.7,17,206/ - RS.1,19,534/ - TOTAL RS.6,98,153/ - 15. 4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE FIND THAT LD. CIT(A) HAS RIGHTLY OBSERVED THAT THE AO HAS MADE THE ADDITIONS PURELY ON THE BASIS OF PREVIOUS YEAR ASSESSMENT WITHOUT BRINGING ANY FRESH FACTS OR MATERIAL ON RECORD TO JUSTIFY ADHOC DISALLOWANCES OUT OF THE EXPENDITURE UNDER THE VARIOUS HEADS, EXCEPT THAT OF CHARITY AND DONATION WHICH IS NOT ALLOWABLE U/S. 37 OF THE ACT. HENCE, THE DISALLOWANCE OF RS. 1,28,225/ - WAS RIGHTLY UPHELD BY THE LD. CIT(A). AS FOR THE OTHER DISALLOWANCES ARE CONCERNED, ALL OF THEM ARE MADE WITHOUT ANY BASIS AND IT IS ARBITRARY EXERCISE OF POWER AGAINST THE ASSESSEE. THOSE EXPENSES WHICH WERE ALLOWED LAST YEAR IS ALLOWABLE THIS YEAR A LSO ULS 37(1), OF THE ACT, AND THE LD. CIT(A) RELIED ON THE DECISIONS IN LEVRIDS KNUDSON MASKINFABARIK (INDIA) PVT. LTD. VS ADDL. CIT (2006) 102 TTJ 882 (PUNE) AND SAYAJI IRON & ENGG. CO. VS CIT (2002) 253 ITR 749 (GUJ). WE FIND THAT THE LD. CIT(A) TOOK NOTE OF THE FACT THAT THE BOOKS OF ACCOUNTS HAVE BEEN DULY AUDITED AS PER THE PROVISIONS OF SECTION 44AB OF THE ACT AND THE A.O. HAS FAILED TO FIND ANY DISCREPANCY OR ANY DEFECT IN THE ACCOUNT BOOKS MAINTAINED BY HIM. THE LD. CIT(A) S HAS RIGHTLY OBSERVED THAT WITHOUT REJECTING THE AUDITED BOOKS OF ACCOUNTS, NO D ISALLOWANCES COULD BE FRAMED, AS HELD IN DIRECTOR OF INCOME TAX PAGE 13 OF 13 INTERNATIONAL TAXATION CIRCLE (I), DELHI VS BUMI HIWAY (M) SDN, BHD, (2008) 21 SOT 311 (DELHI TRIB) ; MLS MADNANI CONSTRUCTION CORP ORATION PVT. LTD. VS. CIT 2008 - TMI - 3142(GAU.) ; CIT VS. OM OVERSEAS, SHIV SAGAR 2008 - TMI - 3790 (P&H) . 16. IN VIEW OF ABOVE, WE FIND THAT ADHOC DISALLOWANCE WITHOUT REJECTING THE AUDITED BOOKS OF ACCOUNT AND WITHOUT POINTING OUT ANY DISCREPANCY IN TH E BOOKS, THE DISALLOWANCE OF EXPENDITURE ON ADHOC BASIS IS NOT VALID IN THE EYES OF LAW AND THE LD. CIT(A) HAS RIGHTLY DELETED THE IMPUGNED ADDITIONS, WHICH DOES NOT NE ED ANY INTERFERENCE ON OUR PART. HENCE , WE UPH O LD THE ACTION OF THE LD. CIT(A) ON THE ABOVE CITED ADDITIONS MENTIONED AT SERIAL NO. 1 TO 4 VIDE PARA NO. 15.3 OF THIS ORDER AND DISMISS THE GROUND NO. 2 RAISED BY THE REVENUE. IN THE RESULT, THE REVENUE S APPEAL NO. 2785/DEL/2010 (AY 2007 - 08) STAND DISMISSED. 17. IN THE RESULT, BOTH THE AP PEALS FILED BY THE REVENUE STAND DISMISSED. ORDER PRONOUNC ED IN THE OPEN COURT ON 22 - 5 - 2015. SD/ - SD/ - ( J. S. REDDY ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 / 05 / 2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI