Continental Carbon India Ltd., New Delhi V. DCIT, New Delhi

ITA 2858/DEL/2011

• Counselvise Citation: 285820114 RSA 2011
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 02-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA
• Assessee Lawyers: VED JAINMS RANO JAINV MOHAN
• Keywords: Additional evidence
• Section: 68; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B DELHI) BEFORE SHRI A.D. JAIN AND SHRI A.N. PAHUJA ITA NO. 2858(DEL)2011 ASSESSMENT YEAR: 2004-05 CONTINENTAL CARBON INDIA LTD. DY.COMMISS IONER OF INCOME TAX, F-40, PART I, NDSE, NEW DELHI. V. CIRCLE 3(1), N EW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VED JAIN/MS.RANO JAIN/V.MOHAN , CA RESPONDENT BY: SHRI KRISHNA, CIT/DR ORDER PER A.D. JAIN, J.M. THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004- 05, TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE OR DER PASSED BY THE LEARNED CIT(A) IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT DE LETING THE ADDITION OF ` 3,78,80,442/- IN RESPECT OF SUNDRY CR EDITORS MADE BY THE AO MERELY ON THE GROUND THAT THE ASSESSEE HA S FAILED TO FILE CONFIRMATION OF THESE CREDITORS. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N ITA NO. 2858(DE L)2011 2 REJECTING THE CONTENTION OF THE APPELLANT THAT THE ASSESSEE HAVING FILED DETAILS OF THE SUNDRY CREDITO RS ALONG WITH EVIDENCES IN THE FORM OF PURCHASE BILLS, ETC. THE AO WAS NOT JUSTIFIED IN MAKING ADDITION IN RESPECT OF SUNDRY CREDITORS BY INVOKING PROVISIONS OF SECTION 68 OF THE ACT. 3(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT DE LETING THE ADDITION OF ` 1,57,68,376/- IN RESPECT OF THE CREDI TORS FOR WHICH BALANCE CONFIRMATION WERE FILED AND ACCEPTED BY HER. (II) THAT THE DIRECTION GIVEN BY THE CIT(A) TO THE AO TO ALLOW CREDIT OF THE SAME IF THE BALANCE TALLY WITH THE BALANCES IN THE BALANCE SHEET IS LEGALLY WRONG AND UNTENABLE IN THE EYE OF THE LAW. (III) THAT THE DIRECTIONS GIVEN ARE OTHERWISE WRONG AS A DIFFERENCE IN THE BALANCES WITH THE CREDITORS DOES NOT MEAN THE TOTAL AMOUNT/CREDIT IS WRONG. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ADDITION OF ` 2,16,92,162/- MADE BY AO ON ACCOUNT O F SUNDRY CREDITORS. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN SUSTAINING TH E ABOVE SAID ADDITION DESPITE THE APPELLANT BRINGING ALL MATERIA L AND EVIDENCES ON RECORD TO PROVE THE IDENTITY, CREDITWO RTHINESS AND GENUINENESS OF THE TRANSACTION WITHOUT POINTING OUT ANY DEFECT IN THE SAME. (III) THAT THE ABOVE SAID ADDITION HAS BEEN MADE IG NORING THE FACT THAT THE AMOUNT REPRESENTS THE TRADE CREDITORS BEIN G PART OF THE BOOKS OF ACCOUNTS OF THE APPELLANT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN WRONGLY REJEC TING THE CONFIRMATION FILED BY THE ASSESSEE IN FOLLOWING CAS ES : ITA NO. 2858(DE L)2011 3 I) EASTERN COATING & SERVICES (P) LTD. : ` 6,83,156 /- II) EASTERN TAR (P) LTD. : ` 13,02,474/- III) PREMIER STEELS : ` 08,19,344/- IV) DICO CARBON & MANUFACTURING CO. LTD. ` 32,25,81 1/- V) LLOYD INSULATING LTD. ` 10,11,936/- VI) JANATA ROADLINES : `23,83,412/- ----------------------- `94,26,133/- 6(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING TH E DISALLOWANCE OF AN AMOUNT OF ` 3,66,078/- MADE ON A CCOUNT OF CLUB EXPENDITURE. (II) THAT THE ABOVE SAID DISALLOWANCE HAS BEEN CONF IRMED DESPITE THE ASSESSEE BRINGING ALL MATERIAL AND EVIDENCES ON REC ORD TO PROVE THAT THE SAME HAVE BEEN INCURRED WHOLLY AND EXCLUSI VELY FOR THE PURPOSES OF BUSINESS. 2. GROUND NO. 1 IS GENERAL. 3. GROUND NOS. 2 TO 5 CHALLENGE THE ACTION OF THE LD. CIT(A) IN NOT DELETING THE ENTIRE ADDITION OF ` 3,74,60,538/- [WRONGLY MENTIONED AS ` 3,78,80,442 IN GROUND NO. 2 (I)] IN RESPECT OF SUND RY CREDITORS. THE AO OBSERVED THAT THE ASSESSEE HAD NOT PROVIDED CONFIRM ATIONS FROM THE SUNDRY CREDITORS. THE AO COMPUTED THE DISALLOWAN CE AS FOLLOWS:- TOTAL SUNDRY CREDITORS AS SHOWN IN BALANCE SHEET AS AT 31.03.2004 23,33,59,268 LESS: CONFIRMATIONS FILED BY THE ASSESSEE 18,00,98,287 BALANCE CREDITORS 5,32,60,981 LESS: CREDITORS ALREADY ADDED 1,58,00,443 ITA NO. 2858(DE L)2011 4 BACK IN AY 2003-04 BALANCE CREDITORS DISALLOWED FOR NON RECEIPT OF CONFIRMATIONS 3,74,60,538 4. BEFORE THE LD. CIT(A), AN APPLICATION FOR ADDITI ONAL EVIDENCE WAS FILED BY THE ASSESSEE, WHICH WAS ALLOWED. THE LD. CIT(A) DIRECTED THE AO TO DELETE THE ADDITION OF ` 1,57,68,376/- ON ACCOUNT OF CREDITORS OF CONFIRMATIONS TALLIED, BUT ADDITION OF ` 2 , 16,92,162/- ON ACCOUNT OF SUNDRY CREDITORS WAS CONFIRMED, HOLDING THAT CONFIR MATIONS HAD NOT BEEN FILED BY THE ASSESSEE. 5. CHALLENGING THE AFORESAID ACTION OF THE LD. CIT( A), BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT(A) ERRED IN NOT DELETING THE ENTIRE ADDITION OF ` 3,74,60,538/-; THAT THE CONTENTION OF THE ASSESSEE TO THE EFFECT THAT THE AO WAS NOT J USTIFIED IN MAKING THE ADDITION BECAUSE THE ASSESSEE HAD FILED THE DETAILS OF THE SUNDRY CREDITORS ALONG WITH EVIDENCE IN THE FORM OF PURCHASE BILLS, ETC., HAS WRONGLY BEEN REJECTED BY THE LD. CIT(A); THAT THE LD. CIT(A) ERR ED IN NOT DELETING THE ADDITION OF ` 1,57,68,376/- IN RESPECT OF THE CREDITORS, FOR WHIC H, THE BALANCE CONFIRMATIONS WERE FILED BEFORE THE LD. CIT (A), WHO ACCEPTED THE SAME; THAT THE DIRECTION GIVEN BY THE LD. CIT(A) TO THE AO TO ALLOW CREDIT IF THE BALANCE TALLIES WITH THE BALANCE IN THE BALA NCE SHEET, IS ITA NO. 2858(DE L)2011 5 UNSUSTAINABLE IN THE EYE OF LAW; THAT THE LD. CIT(A ), WHILE ISSUING SUCH DIRECTIONS, HAS FAILED TO APPRECIATE THAT THE DIFFE RENCE IN THE BALANCES WITH THE CREDITORS WOULD NOT MEAN THAT THE TOTAL AMOUNT/ CREDIT IS WRONG; THAT WHILE WRONGLY CONFIRMING THE ADDITION OF ` 2,16,92,162/- ON ACCOUNT OF SUNDRY CREDITORS, THE LD. CIT(A) HAS FAILED TO CONS IDER THAT THE ASSESSEE HAD FURNISHED ALL MATERIAL EVIDENCE TO PROVE THE ID ENTITY AND CREDIT WORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTION; THAT MOREOVER, IT HAS WRONGLY BEEN IGNORED THAT THE SAID AMOUNT REPRESENTED TRADE CREDITORS BEING PART OF THE BOOKS OF ACCOUNT OF THE ASSESSEE; AND THAT THE LD. CIT(A) ERRED IN REJECTING THE CONFIRMATIONS FILED BY THE ASSESSEE WITH REGARD TO EASTERN COATING & SERVICES PVT. LTD. , EASTERN TAR PRIVATE LIMITED, PREMIER STEELS, DICO CARBON & RIBON MFG. C O. (P)LTD., LLOYDS INSULATIONS (I)LTD., JANTA ROAD LINES. ATTENTION HAS BEEN DRAWN TO THE RELEVANT PAGES OF THE ASSESSEES PAPER BOOK, WHICH WE SHALL CONSIDER PRESENTLY. IT HAS ALSO BEEN STATED THAT FOR THE IM MEDIATELY PRECEDING ASSESSMENT YEAR AND TWO SUBSEQUENT YEARS, ON THE SA ME FACTS, THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE T RIBUNAL. COPIES OF THE ORDER DATED 31.10.2011 PASSED BY THE DELHI BENCH OF THE TRIBUNAL IN ITA NOS. 5269 TO 5279(DEL)10 FOR ASSESSMENT YEARS 2003- 04, 2005-06 AND 2006-07 HAVE BEEN FILED. IT HAS BEEN CONTENDED THA T THE LD. CIT(A) HAS ITA NO. 2858(DE L)2011 6 ALSO FAILED TO TAKE INTO CONSIDERATION THE SETTLED POSITION THAT TRADE CREDITORS STAND ON A DIFFERENT FOOTING FROM CASH CR EDITORS, AS HELD BY THE DELHI BENCH OF THE TRIBUNAL IN ITA NO. 1995(DEL)201 1, DCIT V. DIVINE INTERNATIONAL AND ITA NO. 1493(DEL)2011, M/S. DIVIN E INTERNATIONAL V. DCIT, VIDE ORDER DATED 30.9.2011 (COPY PLACED ON RE CORD). FURTHER, RELIANCE IS SOUGHT TO BE PLACED ON CIT V. PANCHAM DASS JAIN, WHEREIN, IT WAS HELD, INTER ALIA, THAT WHERE THE AO HAD ACCEPTE D THE PURCHASES, SALES AND TRADING RESULTS DISCLOSED BY THE ASSESSEE AND I T HAD BEEN FOUND THAT THE AMOUNTS INVOLVED REPRESENTED THE PURCHASES MADE BY THE ASSESSEE ON CREDIT, THE PROVISIONS OF SECTION 68 OF THE ACT COU LD NOT GET ATTRACTED AND THERE DID NOT ARISE ANY QUESTION OF ADDITION U/S 68 OF THE ACT. 6. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT SO FAR AS REGARDS EASTERN COATING & SERVICES PVT. LTD., EASTERN TAR PRIVATE L IMITED, PREMIER STEELS AND DICO CARBON & RIBON MFG. CO.(P) LTD., THE ASSES SEE HAD ONLY FURNISHED AN E-MAIL ALONG WITH RECONCILIATION STAT EMENT SENT BY THE OFFICIALS OF THE ASSESSEE COMPANY AND IT WAS RIGHTL Y REJECTED BY THE LD. CIT(A) HAS NOT BEEN A CONFIRMATION OF THE CREDITORS; THAT REGARDING LLOYDS INSULATIONS, THE ASSESSEE HAD FILED BALANCE CONFIRMATION AS NIL AND THE RECONCILIATION FILED WAS NOT SUPPORTED BY ANY E VIDENCE; THAT THE ITA NO. 2858(DE L)2011 7 ADDITION IN THIS REGARD WAS, THEREFORE, ALSO JUSTIF IED; THAT APROPOS JANTA ROAD LINES, THE AMOUNT RECEIVED BY THE ASSESSEE WAS OF ` 23,83,412/-, WHEREAS, THE ASSESSEE FILED CONFIRMATION OF ` 26,22,032/-; THAT THE RECONCILIATION IN THIS REGARD WAS ALSO NOT SUPPORTE D BY EVIDENCE, AND SO, THE CONFIRMATION OF THE ADDITION IS JUSTIFIED; THAT FOR RAMSONS ASSOCIATES, THE AMOUNT RECEIVED BY THE ASSESSEE FROM WHICH PART Y WAS OF ` 89,83,227/-, THE CONFIRMATION FILED WAS OF ` 89,80,861/- AND THE DIFFERENCE OF ` 2,366/- HAD BEEN EXPLAINED TO BE THE AMOUNT OF SHOR TAGE NOT CONSIDERED BY RAMSONS; THAT THE LD. CIT(A) CAN NOT AT ALL BE SAID TO HAVE ERRED IN DIRECTING THE AO TO VERIFY THE TALLY WITH THE BALANCES AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE; THA T CONCERNING D.S. TRANSPORT CORPORATION, DELHI GWALIOR FREIGHT CARRIE R, NAGPUR INDORE ROADWAYS, TRANSPORT CORP. OF INDIA LTD. AND PACE CA RRIERS PVT. LTD. ALSO, THE LD. CIT(A) ISSUED SIMILAR DIRECTIONS TO THE AO AND IT HAS NOT BEEN SHOWN AS TO HOW SUCH DIRECTIONS WERE WRONGLY ISSUED ; THAT EVIDENTLY, THE ASSESSEE REMAINED UNABLE TO DISCHARGE ITS ONUS U/S 68 OF THE ACT; AND THAT DESPITE ADEQUATE OPPORTUNITY HAVING BEEN PROVIDED T O THE ASSESSEE, THE ASSESSEE FAILED TO DISCHARGE ITS SAID ONUS. ITA NO. 2858(DE L)2011 8 7. WE HAVE HEARD THE PARTIES ON THIS ISSUE AND HAVE CONSIDERED THE MATERIAL ON RECORD. THE ASSESSEE MANUFACTURES CAR BON BLACK. DURING THE YEAR, IT MADE A TOTAL SALE OF ` 1,24,26,09,931/-. SALES AND PURCHASES WERE MADE ON CREDIT, WHICH REMAINS UNDISPUTED. TH ERE WERE DEBTORS OF ` 45,57,25,639/- AND CREDITORS OF ` 32,03,44,048/-. THE DETAILS OF THE CREDITORS WERE PROVIDED BY THE ASSESSEE TO THE AO, AS REQUIRED . THE ADDITION MADE BY THE AO WAS OF ` 3,74,60,538/-. THE CREDITORS SHOWN IN THE BALANCE SHEET BY THE ASSESSEE WERE OF ` 23,33,59,268/-. THE ASSESSEE FILED CONFIRMATIONS WITH REGARD TO THE AMOUNT OF ` 18,00,98,287/-. THE REMAINING AMOUNT CAME TO ` 5,32,60,981/-. THE AMOUNT OF ` 1,58,00,443/- REPRESENTING ADDITION OF CREDITORS MA DE IN ASSESSMENT YEAR 2003-04, WAS REDUCED, ARRIVING AT THE SAID FIGURE O F ` 3,74,60,538/-. SIGNIFICANTLY, THE TRADING RESULTS SHOWN BY THE ASS ESSEE WERE NOT TOUCHED BY THE AO, THEREBY ACCEPTING THE PURCHASES MADE, WH ICH WERE DULY ACCOUNTED FOR. 8. BEFORE THE LD. CIT(A), THE ASSESSEE FILED AN APP LICATION FOR ADDITIONAL EVIDENCE, WHICH WAS ACCEPTED. THE LD. CIT(A) DIRECTED THE AO TO DELETE THE ADDITION OF ` 1,57,68,376/- CONCERNING CREDITORS WITH REGARD TO WHOM CONFIRMATIONS HAD BEEN FILED BY THE ASSESSEE BEFORE THE ITA NO. 2858(DE L)2011 9 LD. CIT(A) AND WERE ACCEPTED BY HER. THE LD. CIT(A) CONFIRMED THE BALANCE ADDITION OF ` 2, 16,92,162/- REGARDING SUNDRY CREDITORS, FROM WHOM, CONFIRMATIONS WERE NOT FILED BY THE ASSESSEE. REGARDING EASTERN COATING & SERVICES PVT. LTD., EASTERN TAR PRIVATE L IMITED, PREMIER STEELS, DICO CARBON & RIBON MFG. CO.(P)LTD., LLOYDS INSULATIONS (I)LTD. AND JANTA ROAD LINES, EVEN THOUGH THE ASSESSEE FILE D CONFIRMATIONS, THE LD. CIT(A) CONFIRMED THE ADDITIONS. IT IS SEEN TH AT THE ASSESSEE FILED ALL THE RELEVANT EVIDENCES WITH REGARD TO THESE PARTIES , DULY ESTABLISHING THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. LEDGER ACCOUNTS FOR THE YEAR UNDER CONSIDERATION AND THE SUBSEQUENT YEAR WERE FILED. THE BANK ACCOUNT OF T HE ASSESSEE AND THE LEDGER ACCOUNTS MADE IT EVIDENT THAT IT WAS BY CHEQ UE THAT EVEN THE PAYMENTS TO THE CREDITORS HAVE BEEN MADE. THE BOO KS OF ACCOUNT OF THE ASSESSEE WERE NEVER REJECTED. SALES AND PURCHASES MADE BY THE ASSESSEE AND THE TRADING RESULTS SHOWN BY THE ASSESSEE WERE ACCEPTED. THAT BEING SO, THERE WAS NO WARRANT TO CONCLUDE THAT THE BALAN CES APPEARING IN THE ACCOUNTS REPRESENTED THE UNACCOUNTED MONEY OF THE A SSESSEE, SINCE IN THE FACE OF THE ACCOUNTS, SALES AND PURCHASES MADE AND TRADING RESULTS DECLARED STOOD ACCEPTED. ITA NO. 2858(DE L)2011 10 9. MOREOVER, FOR ASSESSMENT YEARS 2003-04, 2005-06 AND 2006-07, THIS VERY ISSUE, UNDER SIMILAR CIRCUMSTANCES STANDS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, OBSERVING, INTE R ALIA, AS FOLLOWS:- 17. IT REMAINS AN ADMITTED POSITION THAT THE TRADI NG RESULTS HAVE BEEN ACCEPTED AND THERE IS NO DISPUTE ON THE T RADING RESULTS AS ON DATE. ALSO, NEITHER THE SALES, NOR THE PURCH ASES MADE BY THE ASSESSEE ARE NOT IN DISPUTE. THE DISPUTE IS LI MITED TO THE VERIFICATION OF THE CREDITORS OUTSTANDING AS ON 31 ST MARCH, 2001. THE EXPLANATION OF THE ASSESSEE IS THAT IN VIEW OF THE RECORD HAVING BEEN DESTROYED IN THE FIRE, IT IS NOT IN A P OSITION TO GET THESE OUTSTANDING CREDITORS VERIFIED AND THAT THESE WERE OF PETTY KARIGARS ENGAGED IN DOING WORK FOR THE ASSESSEE PER TAINING TO A VERY OLD PERIOD. 18. IT IS ALSO IMPORTANT TO NOTE THAT AS PER THE BA LANCE SHEET AS ON 31 ST MARCH, 2001 THE ASSESSEE HAS AN OUTSTANDING LIABIL ITY OF SUNDRY CREDITORS OF RS. 37,99,907/- AND AT THE SAME TIME, IT HAS ADVANCES TO THE SUPPLIERS OF RS. 24,45,951/-, SUNDR Y DEBTORS OF RS. 19,37,520/- AND CLOSING STOCK OF RS. 39,25,000/ -. THIS CLEARLY DEMONSTRATES THAT ON THE ONE HAND THE ASSESSEE HAS LIABILITY TOWARDS THESE CREDITORS AND ON THE OTHER HAND IT HA S ASSETS IN THE FORM OF ADVANCES TO SUPPLIERS, DEBTORS, STOCK, ETC. HAD THESE CREDITORS BEING NOT GENUINE, THE ASSESSEE COULD HAV E SQUARED UP OR NOT SHOWN THESE ADVANCES TO SUPPLIERS, ETC. ACC ORDINGLY, THE OVERALL CIRCUMSTANCES ALSO DO NOT SUGGEST THAT ANY ADVERSE INFERENCE SHOULD BE DRAWN AGAINST THE ASSESSEE. FU RTHER, AS PER THE PROVISIONS OF SEC. 68 OF THE ACT, IT IS NOT MAN DATORY THAT IN CASE THE ASSESSEE FAILS TO SATISFY THE AO ABOUT THE OUTSTANDING CREDITS, THE SAME ARE MANDATORILY REQUIRED TO BE AD DED AS INCOME OF THE ASSESSEE. SECTION 68 GIVES DISCRETION TO TH E AO, AS CAN BE SEEN FROM ITS PROVISIONS, WHICH READ AS UNDER: - 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION ITA NO. 2858(DE L)2011 11 OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 19. THIS VIEW HAS ALSO BEEN UPHELD BY THE HONBLE S UPREME COURT IN THE CASE OF CIT VS. SMT. P.K. NOORJAHAN (1999) 237 ITR 570 (SC). THE AO HAS TO TAKE INTO ACCOUNT THE OVERALL FACTS. ACCORDINGLY, IN THE CASE OF THE ASSESSEE THE OVERAL L FACTS NEED TO BE CONSIDERED. THE AMOUNT OUTSTANDING BEING CREDIT ON ACCOUNT OF PURCHASES WHICH HAVE BEEN EXPORTED BY THE ASSESS EE, IT IS NOT MANDATORY THAT IN THE ABSENCE OF VERIFICATION OF TH E CREDITORS, THE SAME NEED TO BE ADDED STATUTORILY. 20. IN THE CASE OF THE ASSESSEE THESE CREDITORS REP RESENT THE OUTSTANDING AMOUNT ON ACCOUNT OF THE PURCHASES. TH ERE CAN BE THREE ALTERNATIVE ALLEGATIONS AGAINST THE ASSESSEE. ONE CAN BE THAT THESE CREDITS REPRESENT THE CREDIT FOR EARLIER YEARS. IF THAT BE THE CASE, NO ADDITION CAN BE MADE IN THIS YEAR UNDE R SECTION 68 OF THE ACT. THE SECOND ALLEGATION CAN BE THAT THESE C REDITS REPRESENT THE PURCHASES FOR WHICH PAYMENTS HAVE BEE N MADE BY THE ASSESSEE DURING THE YEAR ITSELF. IF THIS IS SO , THE ONUS WILL BE ON THE DEPARTMENT TO ESTABLISH THAT ASSESSEE HAS MA DE PAYMENT TO THESE CREDITORS. THIS IS NOT EVEN THE ALLEGATION O F THE AO, MUCH LESS HIS CASE AGAINST THE ASSESSEE. THE THIRD ALLE GATION CAN BE THAT THESE CREDITS DO NOT REPRESENT THE PURCHASES W HICH HAVE BEEN MADE BY THE ASSESSEE. THE IMPLICATION OF THIS WILL BE THAT THE PURCHASES DEBITED IN THE TRADING ACCOUNT ARE NOT GE NUINE TO THAT EXTENT AND ACCORDINGLY, THAT THE TRADING ACCOUNT IS NOT CORRECT. HOWEVER, ON GOING THROUGH THE ASSESSMENT ORDER, THE CIT(A)S ORDER AND THE ORDER PASSED BY THE ITAT IN THE EARLI ER ROUND, IT IS EVIDENT THAT THE TRADING RESULTS HAVE BEEN ACCEPTED . DESPITE THIS, FOR THE SAKE OF ANALYSIS, IF IT IS CONSIDERED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE CREDITORS AN D CONSEQUENTLY, THE PURCHASES TO THAT EXTENT ARE NOT GENUINE, THEN THE DECLARED GROSS PROFIT OF RS. 32,16,564/- WILL GET FURTHER EN HANCED BY RS. 37,99,907/-, I.E., A GP OF RS. 70,16,471/- ON A TOT AL TURNOVER OF RS. 2,51,55,930/- GIVING AN EXORBITANT GROSS PROFIT RATE OF 27.89%, WHICH IS NOT THE CASE. IT IS ALSO IMPORTAN T TO NOTE THAT THE ASSESSEE IS IN THE BUSINESS OF EXPORTS AND ITS ENTIRE INCOME IS ITA NO. 2858(DE L)2011 12 EXEMPT. THERE IS, AS SUCH, NO REASON FOR THE ASSES SEE TO SUPPRESS THE PROFIT AS ITS INCOME. 21. TAKING INTO CONSIDERATION THE ABOVE FACTS OF TH E ASSESSEE, IT IS A FIT CASE NOT TO MAKE ANY ADDITION BY INVOKING THE DEEMING FICTION OF SECTION 68 IN RESPECT OF THE SUNDRY CRED ITORS, DESPITE THE FACT THAT THE ASSESSEE COULD NOT SUPPLY THE ADDRESS ES OF THESE CREDITORS. ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, INCLUDING THAT OF DESTRUCTION OF BOOKS OF ACCOUNTS, OLD PERIO D, PETTY KARIGARS, ADVANCES TO THE SUPPLIERS, DEBTORS AND TH E CLOSING STOCK, AND PARTICULARLY THE FACT THAT ALL THESE CRE DITORS HAVE BEEN PAID OFF IN THE SUBSEQUENT YEAR AND THE RETURN FOR THAT YEAR HAS BEEN ACCEPTED BY THE DEPARTMENT CLEARLY SHOW THAT I N THE CASE OF THE ASSESSEE IT IS NOT NECESSARY TO ADD THESE CREDI TORS. 10. BEFORE US, AT PAGES 37 TO 40 OF THE ASSESSEES PAPER BOOK (APB FOR SHORT), THE ASSESSEE HAS PLACED A COPY O F THE QUESTIONNAIRE DATED 26.5.06 ISSUED BY THE AO, ASKING THE ASSESSEE TO, INTER ALIA, GIVE DETAILS OF SUNDRY CREDITORS ALONG WITH COMPLETE ADD RESSES FOR THE LAST THREE YEARS BALANCES ALONG WITH CONFIRMATIONS ABOVE ` 5,00,000/- (AT APB 37, ITEM 10). APB 41 TO 43 CONTAINS THE ASSESSEE S REPLY DATED 6.7.06. THE ASSESSEE HAS GIVEN DETAILS OF THE TOP 15 PURCHA SE PARTIES WITH NAME, COMPLETE ADDRESS, GROSS AMOUNT AND PAN NUMBER, AS C ONTAINED AT PAGE 43. APB 46 TO 55 IS A COMPLETE LIST OF ALL THE CR EDITORS OF THE ASSESSEE FOR THE LAST THREE YEARS, DETAILING THE NAMES, ADDR ESSES, PAN NUMBER AND BALANCE FOR EACH OF THE YEARS. APB 81 TO 82 IS A C OPY OF THE ASSESSEES WRITTEN SUBMISSION DATED 14.2.09 FILED BEFORE THE C IT(A). THIS IS THE ITA NO. 2858(DE L)2011 13 ASSESSEES APPLICATION FOR ADMISSION OF FRESH EVIDE NCE, WHICH WAS ACCEPTED BY THE LD. CIT(A). THE CONFIRMATIONS ALO NG WITH RECONCILIATION FILED BEFORE THE LD. CIT(A) ARE WITH REGARD TO THE FOLLOWING 12 PARTIES:- 1. COPY OF ACKNOWLEDGEMENT OF RETURN WITH COMPUTATION. 2. COPY OF AUDIT REPORT WITH AUDITED BALANCE SHEET. 3. COPY OF QUESTIONNAIRE DT. 26.5.06 ISSUED BY ACIT 4. COPY OF REPLY DTD. 6.7.06 ALONGWITH LIST OF MAJOR SUPPLIERS FILED WITH THE ACIT 5. COPY OF REPLY DTD. 24.8.2006 FILED WITH THE ACIT 6. COMPLETE LIST OF CREDITORS WITH NAME, ADDRESS FOR THREE YEARS. 7. COPY OF LETTER DTD. 22.11.2006 FILED WITH THE ACIT 8. COPY OF BALANCE CONFIRMATIONS FILED WITH THE AO 9. COPY OF WRITTEN SUBMISSION DTD. 14.2.09 FILED BEFOR E CIT(A) CONFIRMATION WITH RECONCILIATION I. EASTERN COATING & SERVICES PVT. LTD. II. DS TRANSPORT CORP. III. LLOYD INSULATION (I) LTD. & RECONCILIATION IV. DELHI GWALIOR FREIGHT CARRIERS V. M/S NAGPUR INDORE ROADWAYS VI. TRANSPORT CORP. OF INDIA LTD. VII. PACE CARRIERS PVT. LTD. VIII. JANTA ROADLINES & RECONCILIATION ITA NO. 2858(DE L)2011 14 IX. EASTERN TAR PVT. LTD. X. UP BOMBAY ROAD CARRIER XI. RAM SONS ASSO. (P) LTD. XII. PREMIER STEELS XIII. DICO CARBON AND RIBON MANUFACTURING CO. P. LTD. 10. COPY OF REMAND REPORT DT. 21.09.10 11. COPY OF REJOINDER FILED BEFORE CIT(A) DT. 3.11.10 W ITH (I) DETAILS OF CLUB EXPENDITURE (II) COPIES OF BILLS OF CLUB EXPENDITURE 12. COPY OF REJOINDER FILED BEFORE CIT(A) DT. 23.12 .10 ALONG WITH ANNEXURES. 11. COPIES THEREOF ARE TO BE FOUND AT PAGES 83 TO 1 04. IT IS SEEN THAT AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSES SEE, THE LD. CIT(A) DID NOT TAKE INTO CONSIDERATION THE CASE OF U.P. BOMBAY ROAD CAREERS, THE CONFIRMATION AND RECONCILIATION WITH REGARD TO WHIC H PARTY ARE AT APB 97 AND 155, RESPECTIVELY. 12. APROPOS RAMSON ASSOCIATES, D.S. TRANSPORT, DELH I GWALIOR FREIGHT CARRIER, NAGPUR INDORE ROADWAYS, TRANSPORT CORP. OF INDIA LTD. AND PACE CARRIERS PVT. LTD., THE LD. CIT(A)S ORDER DOES NOT EVINCE HER NOT BEING SATISFIED WITH THE EVIDENCE FILED BY THE ASSESSEE BEFORE HER. STILL, SHE PREFERRED TO REFER THE MATTER BACK TO TH E AO, DIRECTING THE AO TO ITA NO. 2858(DE L)2011 15 VERIFY THE BALANCES QUA THESE PARTIES WITH THE BALA NCES AS APPEARING IN THE ASSESSEES BALANCE SHEET. IN EFFECT, OUT OF THE SU M OF ` 22 CRORES, CONFIRMATIONS REGARDING THE SUM OF ` 18 CRORES WERE BEFORE THE LD. CIT(A). THE ADDITION WAS FOR ` 3.7 CRORES AND CONFIRMATIONS WITH REGARD TO ` 2.92 CRORES WERE FILED BEFORE THE LD. CIT(A) AND DU E EXPLANATION WAS GIVEN. THE REMAINING ` 82 LAKHS IS A SUM REPRESENTING SMALL PARTIES, WHEREAS THE AO HAD ASKED THE ASSESSEE TO GIVE DETAI LS ABOUT THE PARTIES, THE RECEIPT FROM WHOM WAS OF MORE THAN ` 5,00,000/-/ THE DETAIL REGARDING CREDITORS HAVING REGULAR TRADING TRANSACT IONS WITH THE ASSESSEE FOR THE LAST THREE YEARS, AS CONTAINED AT APB 46 TO 55. THE PURCHASE AND SALES WERE NOT DOUBTED BY THE AO. EVEN THEN, NO Q UERY IN THIS REGARD WAS CARRIED OUT BY THE AO, SHOWING HIS SATISFACTION . 13. PANCHAM DASS JAIN(SUPRA), IT IS SEEN, DIRECTL Y SUPPORTS THE CASE OF THE ASSESSEE INASMUCH AS IT HAS BEEN HELD THEREI N THAT WHERE THE AO HAS ACCEPTED THE PURCHASE AND SALES MADE BY THE ASS ESSEE AND ALSO THE TRADING RESULTS DISCLOSED AND THE CREDITORS INVOLVE D REPRESENTED THE PURCHASES MADE BY THE ASSESSEE ON CREDIT, THERE WAS NO OCCASION TO MAKE ADDITION U/S 68 OF THE ACT, THE PROVISIONS OF THE S AID SECTION NOT BEING ATTRACTED. ITA NO. 2858(DE L)2011 16 14. IN YFC PROJECTS (P) LTD. V. DCIT, 134 TTJ 167 (DEL), IT WAS HELD THAT WHERE NO DEFECT WAS POINTED OUT IN THE BO OKS OF ACCOUNT OF THE ASSESSEE, MERELY SINCE CONFIRMATION FROM TWO SUPPLI ERS HAD NOT BEEN FILED, IT COULD NOT BE CONCLUDED THAT THE ASSESSEE HAD NOT RECEIVED THE GOODS AND IT WAS THE ASSESSEES UNACCOUNTED MONEY W HICH WAS SHOWN AS CREDIT BALANCE IN THE SHAPE OF SUNDRY CREDITORS. 15. ACIT V. HAR SINGAR GUTKHA (P)LTD., 9 DTR 604( TRIB.) REITERATES THE POSITION THAT THE AMOUNTS REPRESENTI NG PURCHASES MADE ON CREDIT DO NOT ATTRACT THE PROVISIONS OF SECTION 68 OF THE I.T. ACT. LIKEWISE, IN JCIT V.MATHURA DASS ASHOK KUMAR, 101 TTJ (ALL)810, IT HAS BEEN HELD THAT WHERE THE PURCHASES HAVE BEEN AC CEPTED AS GENUINE, THE BALANCE REMAINING OUTSTANDING WAS AGAINST AT TH E END OF THE YEAR CANNOT BE TREATED AS BOGUS LIABILITY AND NO ADDITIO N CAN BE MADE. 16. THE LAST BUT NOT THE LEAST, THE LD. CIT(A), IT IS SEEN, HAD SOUGHT TO PLACE RELIANCE ON UPLAKSH METAL INDUSTRIES V. CIT , 177 TAXMAN 298(P&H) TO HOLD THAT DESPITE OPPORTUNITY BEING PRO VIDED, THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE OUTSTAND ING CREDIT BALANCES. HOWEVER, IN THAT CASE, THE ASSESSEE HAD NOT FURNISH ED COMPLETE ADDRESSES OF THE TRADE CREDITORS/CONSIGNERS, WHEREAS IN THE P RESENT CASE, THE ASSESSEE HAS FURNISHED COMPLETE DETAILS ABOUT THE CREDITORS. THE ORDER OF THE ITA NO. 2858(DE L)2011 17 TRIBUNAL IN UPLAKSH METAL INDUSTRIES V. CIT(SUPR A) WAS NOT INTERFERED WITH BY THE HONBLE HIGH COURT, SINCE THE HONBLE H IGH COURT HELD THAT THE ISSUE RAISED WAS IN THE REALM OF APPRECIATION O F EVIDENCE. TOO, THE FACTS IN UPLAKSH METAL INDUSTRIES(SUPRA), ARE NO T AT ALL AT PARITY WITH THOSE IN THE PRESENT CASE. THEREIN, THE ASSESSEE HAD BEEN HELD NOT TO HAVE PROVIDED THE COMPLETE ADDRESSES OF EITHER THE TRADE CREDITORS OR CONSIGNERS, RENDERING THE VERIFICATION OF THE TRANS ACTIONS IMPOSSIBLE. ON THE OTHER HAND, IN THE CASE BEFORE US, UNDISPUTEDLY , THE ASSESSEE HAS PROVIDED COMPLETE DETAILS OF THE CREDITORS INCLUDIN G NAMES AND ADDRESSES. THE DISALLOWANCE WAS MADE ON THE GROUND THAT EITHER THE ASSESSEE DID NOT FILE THE CONFIRMATIONS OR THAT THE CONFIRMATIONS FI LED WERE NOT ACCEPTABLE TO THE AO. 17. SO FAR AS REGARDS THE CONFIRMATIONS FILED BY TH E ASSESSEE BEFORE THE LD. CIT(A), IN THE CASES OF SEVEN CREDITORS, TH E CONFIRMATIONS WERE REJECTED, HOLDING THEM TO BE MERELY E-MAILS ALONG W ITH RECONCILIATION STATEMENT GIVEN BY THE ASSESSEE COMPANY. THE LD. CIT(A) ACCEPTED THE CONFIRMATIONS IN SIX OTHER CASES. STILL, RATHER T HAN DELETING THE ADDITIONS, THE LD. CIT(A) DEEMED IT APPROPRIATE TO REMIT THE M ATTER TO THE AO TO ALLOW CREDIT AFTER VERIFICATION. ITA NO. 2858(DE L)2011 18 18. CONCERNING THE REJECTION OF SEVEN CONFIRMATION S BY THE LD. CIT(A) BY OBSERVING THAT THEY WERE ONLY E-MAILS, WE FIND THAT THIS IS NOT A GOOD REASON TO REJECT THE CONFIRMATIONS. IT IS S EEN THAT AS POINTED OUT, THE CONFIRMATIONS WERE FORWARDED IN RESPONSE TO TH E REQUEST OF THE ASSESSEE COMPANY IN THIS REGARD. FOR INSTANCE, IN THE CASE OF EASTERN COATINGS AND SERVICES PVT. LTD., THE COPY OF CONFIR MATION IS AT APB 83. NOW, THIS WAS SENT BY ONE MR. ROHAN K. MEHTA OF EAS TERN COATINGS AND SERVICES PVT. LTD., FROM HIS E-MAIL [e-mail] , IN RESPONSE TO THE REQUEST MADE BY MR. S. RANA OF THE ASSESSEE COMPANY IN THIS REGARD. SO, THE E-MAIL STANDS EXPLAINED . THEN, ALONG WITH THE CONFIRMATION, THE ASSESSEE ALSO FILED A RECONCILIAT ION, MENTIONING THEREIN THAT THE BALANCE AS PER EASTERN COATINGS AND SERVIC ES PVT. LTD. WAS OF ` 10,34,215/-, AS AGAINST CREDIT OF ` 6,83,156/-, AS APPEARING IN THE ASSESSEES BOOKS. THE DIFFERENCE OF ` 2,51,059/- WAS ON ACCOUNT OF INVOICE NO. 361 DATED 29.3.04, NOT CREDITED BY THE ASSESSEE FOR THE REASON THAT THE GOODS WERE RECEIVED AFTER THE CLOSE OF THE YEAR. AS SUCH, FIRSTLY, THE CREDIT SHOWN BY THE ASSESSEE COMPANY IS LESS THAN THE DEBIT CLAIMED AS PER THE CONFIRMATION. THEN, AS NOTED, THE DIFF ERENCE ON ACCOUNT OF NON-CREDIT OF THE AMOUNT OF THE INVOICE STANDS MENT IONED BY THE CREDITOR IN THE CONFIRMATION ITSELF. THEREFORE, THE LD. CI T(A) HAS ERRED IN ITA NO. 2858(DE L)2011 19 REJECTING THE RECONCILIATION STATEMENT FOR THE MERE REASON THAT IT HAD BEEN SIGNED BY THE OFFICIAL OF THE ASSESSEE COMPANY. T HIS REASON, BY ITSELF, CANNOT AND DOES NOT LEAD TO THE CONCLUSION OF THE C REDITOR BEING NON- GENUINE, WHEN THE FACTS, AS CONSIDERED ABOVE, DO NO T POINT TO ANY SUCH INFIRMITY. 19. THE ABOVE DISCUSSED SITUATION PERVADES ALL THE OTHER CASES ALSO. IN ALL CASES, THE CONFIRMATIONS AS WELL AS RECONCI LIATIONS WERE FILED. THE LD. CIT(A), HOWEVER, WRONGLY REJECTED THE RECONCILI ATIONS FOR THE ONLY REASON OF THEIR HAVING BEEN SIGNED BY THE OFFICIAL OF THE ASSESSEE COMPANY, WITHOUT ATTEMPTING TO ASCERTAIN AS TO WHET HER ON MERITS, THE RECONCILIATIONS WERE CORRECT OR NOT. 20. FURTHER, IT HAS NOT BEEN SHOWN THAT THE EXPLANA TION GIVEN IN THE RECONCILIATION WAS NOT A PLAUSIBLE EXPLANATION, AS PER THE NORMAL COURSE IN WHICH THE BUSINESS IS CONDUCTED. IN THE REMAND PROCEEDINGS ALSO, THE ASSESSEE HAD AGAIN CLARIFIED EACH OF THE TRANSACTIO NS BY WAY OF THE REJOINDER FILED. 21. AS SUCH, THE LD. CIT(A) WAS INCORRECT IN UPHOLD ING THE ADDITION MADE, WHILE REJECTING THE CONFIRMATIONS FILED BY TH E ASSESSEE. 22. IN SO FAR AS REGARDS THE REMAINING CREDITORS, T HE ASSESSEE, IN RESPONSE TO THE AOS QUERY REQUIRING THE ASSESSEE T O FURNISH THE DETAILS OF ITA NO. 2858(DE L)2011 20 THE SUNDRY CREDITORS WITH COMPLETE ADDRESSES AND CO NFIRMATIONS CONCERNING THE TRANSACTIONS OF ABOVE ` 5,00,000/- (AOS LETTER DATED 26.5.06, COPY AT APB 37), SUBMITTED COMPLETE DETAIL S OF THE SUNDRY CREDITORS FOR THE YEAR UNDER CONSIDERATION, AS ALSO FOR THE PRECEDING TWO ASSESSMENT YEARS. THESE DETAILS WERE FILED VIDE T HE ASSESSEES LETTER DATED 24.8.06 (COPY AT APB 44). UNDISPUTEDLY, THE RE IS A COMPLETE TALLY BETWEEN THE LIST OF ` 23,33,59,268/- AND THE TOTAL CREDITORS OUTSTANDING AS ON 31.3.04. THIS BEING THE CASE, THE LD. CIT(A) E RRONEOUSLY UPHELD THE ADDITION CONCERNING THE REMAINING PARTIES ALSO. T O REITERATE, IT IS PATENT ON RECORD THAT THE ASSESSEE HAS PROVIDED ALL THE DETAILS OF ITS CREDITORS INCLUDING THEIR COMPLETE ADDRESSES AND NO DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE POINTED OUT BY THE AO. THE T RADING RESULTS AND BOOKS OF ACCOUNT OF THE ASSESSEE WERE ACCEPTED. T HE ASSESSEE HAD SUCCESSFULLY PROVED THE IDENTITY AND CREDIT WORTHIN ESS OF ITS CREDITORS AND THE GENUINENESS OF ITS TRANSACTIONS. THE CREDITOR S REPRESENTING THE AMOUNT INVOLVED FORMED PART OF THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE COMPLETE EVIDENCE FILED BY THE ASSESSEE HAS NOT BEEN DISLODGED. THE ASSESSEE HAD, THUS, AMPLY DISCHARGED ITS ONUS U /S 68 OF THE I.T. ACT. ITA NO. 2858(DE L)2011 21 23. IN VIEW OF THE ABOVE, THE ORDER OF THE LD. CIT( A) ON THIS ISSUE CANNOT SUSTAIN AND IT IS CANCELLED. GROUND NOS. 2 TO 5 RAISED BY THE ASSESSEE ARE ACCEPTED. 24. GROUND NO. 6 CHALLENGES THE CONFIRMATION OF DIS ALLOWANCE OF ` 3,66,078/- MADE ON ACCOUNT OF CLUB EXPENDITURE. T HIS AMOUNT REPRESENTS PAYMENT MADE BY THE ASSESSEE TO TAJ HOTEL. THE AO MADE THE DISALLOWANCE SINCE ACCORDING TO HIM, NO DETAILS WER E FURNISHED. THE LD. CIT(A) CONFIRMED THE ADDITION FOR NON-FURNISHING OF DOCUMENTARY EVIDENCE DURING THE FIRST APPELLATE PROCEEDINGS ALS O. THE LD. CIT(A) FURTHER OBSERVED THAT WHEREAS THE ANNUAL MEMBERSHIP FEE OF TAJ HOTEL WAS ` 35,000/-, THE ASSESSEE HAD CLAIMED IT TO BE OF ` 1,23,000/-. 25. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT(A) HAS WRONGLY OBSERVED THAT THE AO HAD MADE THE ADDITION DUE TO NO EVIDENCE HAVING BEEN FILED. ATTENTION H AS BEEN DRAWN TO APB 111. APB 110 TO 115 IS A COPY OF THE ASSESSEES R EJOINDER TO THE AOS REMAND REPORT DATED 21.9.10 (COPY AT APB 105 TO 109 ) FILED BEFORE THE LD. CIT(A). THIS REJOINDER CONTAINS THE DETAILS OF CLUB EXPENDITURE (APB 117 TO 144). IT HAS BEEN POINTED OUT THAT THEREFOR E, COMPLETE DETAILS REGARDING THE PAYMENT IN THE SHAPE OF THE BILLS OF THE CLUB EXPENDITURE WERE FURNISHED DULY BEFORE THE LD. CIT(A), BUT THE LD. CIT(A) FAILED TO ITA NO. 2858(DE L)2011 22 TAKE THE SAME UNDER CONSIDERATION; THAT IN THE REJO INDER (APB 111) IT WAS SPECIFICALLY SUBMITTED THAT THE SAME EXPENDITURE, I .E., ` 3,37,424/- WAS INCURRED IN F.Y. 2002-03, I.E., ASSESSMENT YEAR 200 3-04, AND WAS ALLOWED, WHEREAS ON SIMILAR FACTS, IN THE YEAR UNDE R CONSIDERATION, THE CLUB EXPENSES HAD BEEN DISALLOWED. IT HAS BEEN FU RTHER CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT IN THE TRIBUN AL ORDER DATED 31.10.11(COPY PLACED ON RECORD) THESE EXPENSES HAVE BEEN ALLOWED, FOR ASSESSMENT YEAR 2005-06. 26. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY REL IED ON THE IMPUGNED ORDER IN THIS REGARD. 27. QUA THIS ISSUE, IT IS SEEN THAT, IN THE REJOIND ER (SUPRA), FILED BY THE ASSESSEE BEFORE THE LD. CIT(A), THE ASSESSEE HAS SP ECIFICALLY CONTENDED AS UNDER:- WITH REGARD TO THE ABOVE MENTIONED DISALLOWANCE, W E WOULD LIKE TO BRING TO YOUR NOTICE THE FACT THAT OU T OF THE TOTAL EXPENDITURE OF ` 366,078/-, ` 123,000/- WAS I NCURRED BY THE COMPANY ON PAYING FOR MEMBERSHIP OF THE CHAMBER AT TAJ MAHAL HOTEL, MANSINGH ROAD, NEW DELHI. AT THE CHAMBER FACILITY IS BEING PROVIDED FO R MEMBER COMPANIES TO INVITE THEIR GUESTS OR CLIENTS TO HOLD MEETING. THE MEMBERSHIP HAS BEEN TAKEN BY THE COMPANY IN THE YEAR MARCH 2001 WITH INITIATION CORPORATE FEE OF RS. 440,000/- PLUS ANNUAL MEMBERSH IP FEE OF ` 35,000/-. THE FEE IS WHOLLY AN EXCLUSIVELY PAID FOR BUSINESS PURPOSES ONLY. FURTHER THE BALANCE AMOUNT OF ` ITA NO. 2858(DE L)2011 23 243,078/- WAS INCURRED BY THE COMPANY ON ENTERTAINI NG ITS GUESTS, CUSTOMERS, ETC. DURING THE MEETINGS AND WHOLE AMOUNT WAS PAID TO TAJ MAHAL HOTEL, NEW DELHI AND N OT FOR AVAILING ANY CLUB FACILITY. FURTHER WE WOULD LIKE TO BRING TO YOUR NOTICE THAT THE SAME EXPENDITURE (`337,424/-) WHICH WAS INCURRED I N THE PREVIOUS FY 2002-03 WAS ALLOWED BY HIS PREDECESSOR BUT THIS YEAR IT HAS BEEN DISALLOWED. COPIES OF BILLS ARE ENCLOSED FOR YOUR PERUSAL IN TH IS REGARD. 28. THE ASSESSEES CASE, THEREFORE, IS THAT THE PAY MENT OF ` 1,23,000/- WAS MADE FOR THE MEMBERSHIP OF THE CHAMBER AT TAJ M AHAL HOTEL. THE CHAMBER WAS FOR THE ASSESSEE COMPANY, AS A MEMBER T O INVITE ITS GUESTS OR CLIENTS TO HOLD MEETINGS. THE MEMBERSHIP WAS I NITIALLY GRANTED FOR 5 YEARS IN MARCH 2001 WITH INITIAL CORPORATE FEE OF ` 4,40,000/- PLUS (+) ANNUAL MEMBERSHIP FEE OF ` 35,000/-/ FURTHER, AN AMOUNT OF ` 2,43,078/- WAS INCURRED BY THE ASSESSEE COMPANY ON ENTERTAINMENT OF ITS GUESTS AND CUSTOMERS DURING THE MEETINGS HELD. IT WAS SPECIFICALLY STATED THAT THIS AMOUNT WAS NOT FOR AVAILING ANY CLUB FACI LITY. THE LD. CIT(A) HAS TAKEN NEITHER THIS SUBMISSION OF THE ASSESSEE I NTO CONSIDERATION, NOR THE COPIES OF THE BILLS FILED ALONG WITH IT. A SI MILAR EXPENDITURE OF ` 3,37,424/- WAS INVOLVED IN ASSESSMENT YEAR 2003-04, WHICH IS STATED TO HAVE BEEN ALLOWED BY THE AO, UNDER SIMILAR FACTS AN D CIRCUMSTANCES. ITA NO. 2858(DE L)2011 24 29. FOR ASSESSMENT YEAR 2005-06, A SIMILAR DISALLOW ANCE OF ` 1,23,000/- WAS MADE, WHICH WAS DELETED BY THE TRIBU NAL, HOLDING THAT THE AMOUNT WAS INCURRED BY THE ASSESSEE FOR BUSINESS PU RPOSES AND WAS SUPPORTED BY PROPER VOUCHERS. IN THE PRESENT CASE ALSO, AS SEEN, A PROPER EXPLANATION HAS BEEN FILED EXPLAINING THE DOUBT OF THE CIT(A) WITH REGARD TO THE SUPPOSED DIFFERENCE BETWEEN MEMBERSH IP FEE BEING ` 35,000/- AND THE ASSESSEE CLAIMING IT TO BE OF ` 1,23,000/-. BESIDES, ALL THE DETAILS WERE FILED BEFORE THE LOWER AUTHORITIES . 30. IN VIEW OF THE ABOVE, THE GRIEVANCE OF THE ASSE SSEE IN THIS REGARD ALSO IS FOUND TO BE JUSTIFIED. ACCORDINGLY, CIT(A )S ORDER ON THIS ISSUE IS ALSO CANCELLED, ACCEPTING GROUND NO.6. 31. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.02.2012. SD/- SD/- (A.N. PAHUJA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: .02.2012 *RM COPY FORWARDED TO: 1. APPELLANT ITA NO. 2858(DE L)2011 25 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ASSISTANT REGISTRAR