M/S. IFC DESPATCH (I) P. LTD, Mumbai V. THE ITO WD 8(2)(3), Mumbai

ITA 2914/MUM/2004

• Counselvise Citation: 291419914 RSA 2004
• Duration Of Justice: 7 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 02-06-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 21-04-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Loose papers; Principle of natural justice; Opportunity of cross examination; Period of limitation; Onus to prove; Reason to believe
• Section: 148; 143(3)

Judgement Text

1 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H MUMBAI H MUMBAI H MUMBAI H BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI J SUDHAKAR REDDY J SUDHAKAR REDDY J SUDHAKAR REDDY J SUDHAKAR REDDY, AM , AM , AM , AM & SHRI & SHRI & SHRI & SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO ITA NO ITA NO ITA NO. 2914/MUM/04 (ASST YEAR 1996 . 2914/MUM/04 (ASST YEAR 1996 . 2914/MUM/04 (ASST YEAR 1996 . 2914/MUM/04 (ASST YEAR 1996- -- -97) 97) 97) 97) ITA NO ITA NO ITA NO ITA NO. 1913/MUM/04 (ASST YEAR 1997 . 1913/MUM/04 (ASST YEAR 1997 . 1913/MUM/04 (ASST YEAR 1997 . 1913/MUM/04 (ASST YEAR 1997- -- -98) 98) 98) 98) ITA NO ITA NO ITA NO ITA NO. 2915/MUM/04 (ASST YEAR 19 . 2915/MUM/04 (ASST YEAR 19 . 2915/MUM/04 (ASST YEAR 19 . 2915/MUM/04 (ASST YEAR 1998 9898 98- -- -9 99 99 99 9) )) ) & && & ITA NO ITA NO ITA NO ITA NO. 2027/MUM/ . 2027/MUM/ . 2027/MUM/ . 2027/MUM/06 0606 06 (ASST YEAR 1997 (ASST YEAR 1997 (ASST YEAR 1997 (ASST YEAR 1997- -- -98) 98) 98) 98) M/S IFC DESPATCH (I) LTD 22 ADESHWAR ARCADE ANDHERI KURLA ROAD ANDHERI (E) MUMBAI 93 VS THE INCOME TAX OFFICER WARD 8(2)(3), MUMBAI ( (( ( APPELLANT APPELLANT APPELLANT APPELLANT ) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAACI1096H AAACI1096H AAACI1096H AAACI1096H A SSESSEE BY SHRI M SUBRAMANIAN REVENUE BY SHRI M R KUBAL PER PER PER PER VIJAY VIJAY VIJAY VIJAY PAL RAO PAL RAO PAL RAO PAL RAO, , , , JM JMJM JM THESE FOUR APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE RESPECTIVE ORDERS OF THE CIT(A). THE APPEAL IN ITA NOS.2914,1913 & 2195/MUM/2004 ARE AROSE FROM THE REGULAR REASSESSM ENT AND ASSESSMENTS FOR THE AYS 1996-97,1997-98 AND 1998-99 RESPECTIVELY. THE APPEAL IN ITA NO.2027/MUM/06 AROSE FROM THE PENALTY ORDER PASSED U/S 271(1)( C) OF THE ACT FOR THE ASSESSMENT YEAR 1997-98. 2 FOR THE ASSESSMENT YEAR 1996-97, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ASSESSMENT ORDER DATED 31.3.2002 PASSED U/S 143(3) R.W.S 147 OF THE I T ACT, 1961 IS INVALID AND BAD IN LAW. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CITA ERRED IN CONFIRMING THE ADDITION OF RS. 5 LACS MADE ON ACCOUNT OF ALLEGED COMMISSION RECEIVED. 2 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) 3 THE ASSESSEE COMPANY IS IN THE BUSINESS OF A WHO LESALE COURIER SERVICE AND USED TO BUY TICKETS THROUGHOUT THE YEAR AS REPR ESENTATIVE CALLED ON BOARD COURIER (OBC). 4 GROUND NO1 REGARDING THE VALIDITY OF THE REOPENIN G OF THE ASSESSMENT. 4.1 THE ORIGINAL RETURN WAS FILED ON 30.11.2006 AN D THE ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 12.3.1998. TH E ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S 148 ON 31.3.2000 ON THE BASIS OF THE INFORMATION GATHERED BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMEN T PROCEEDINGS FOR THE ASSESSMENT YEAR 1997-98 THAT THE ASSESSEE HAD RECEI VED CASH DISCOUNT FROM M/S KRISHNA TRAVELS OUT OF THE EXPENDITURE INCURRED AN D CLAIMED AS DEDUCTION ON ACCOUNT OF TICKETING. 4.2 THE REASSESSMENT WAS COMPLETED BY MAKING AN ADD ITION OF RS. 5 LACS ON ACCOUNT OF CASH COMMISSION FROM M/S KRISHNA TRAVELS VIDE ORDER DATED 1.3.2002. THE ASSESSEE CHALLENGED THE REASSESSMENT ORDER BEFO RE THE CIT(A) AND RAISED OBJECTION OF VALIDITY OF THE REOPENING OF THE ASSES SMENT. THE CIT(A) REJECTED THE GROUND OF THE ASSESSEE REGARDING REOPENING OF THE A SSESSMENT VIDE IMPUGNED ORDER. 4.3 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT THERE IS NO REASON WITHIN THE MEANING OF SEC. 147 WARRANTING THE ISSUE OF NOTICE U/S 148. THE ASSESSING OFFICER REOPENED THE ASSESSMENT ON THE BA SIS OF THE STATEMENT OF 3 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) PROPRIETOR OF M/S KRISHNA TRAVELS RECORDED DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 1997-98; THEREFORE, THE REO PENING OF THE ASSESSMENT IS BASED ON ALLEGED CONFESSION MADE BY A THIRD PERSON AND THE ASSESSING OFFICER HAS NOT MADE ANY INDEPENDENT ENQUIRY ABOUT THE CRED IBILITY OF THE STATEMENT MADE BY THE THIRD PARTY. THEREFORE, THERE IS NO NEE D TO BELIEVE THAT THE INCOME, IN THE CASE, HAS ESCAPED ASSESSMENT. THE NOTICE WA S ISSUED MERELY ON SUSPICION, WHICH CANNOT BE SAID TO BE A BELIEF. MOREOVER, THERE WAS NO RECORD OR MATERIAL WITH THE ASSESSING OFFICER IN SUPPORT O F THE ALLEGED STATEMENT OF MR DARPAN MANIAR, THE PROPRIETOR OF M/S KRISHNA TRAVE LS. HENCE, LD AR URGED THAT REOPENING IS NULL AND VOID AND CONSEQUENTLY THE REA SSESSMENT BE QUASHED. 4.4 PER CONTRA, THE LD DR HAS SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 1997-98 STATEMENTS OF SHRI DARPAN MANIAR MS FLEUR DSOUZA, THE ACCOUNTANT AND SHRI PRADEEP REGA, THE DIRECTOR OF THE COMPANY WERE RECORDED AND THE COPIES OF ALL THE STA TEMENTS WERE GIVEN TO THE ASSESSEE. IN HIS STATEMENT, SHRI DARPAN MANIAR, THE PROPRIETOR OF M/S KRISHNA TRAVELS ADMITTED THAT HE HAS PAID COMMISSION TO TH E ASSESSEE OF RS. 5 LACS FOR THE ASSESSMENT YEAR 1996-97 AND RS. 23,50,000/- FO R THE ASSESSMENT YEAR 1997-98. THEREFORE, THE ASSESSING OFFICER WAS HAVI NG REASONS TO BELIEVE THAT THE INCOME ASSESSABLE BEING THE COMMISSION RECEIVED BY THE ASSESSEE IN CASH HAS ESCAPED ASSESSMENT. ACCORDINGLY, THE LD DR HAS SUBM ITTED THAT WHEN THE ASSESSING OFFICER HAS A REASON TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT BECAUSE THE ASSESSEE HAS NOT OFF ERED THE SAME TO TAX AND EVEN NOT RECORDED IN THE BOOKS OF ACCOUNT, THE ACTI ON OF THE ASSESSING OFFICER IS VALID AND JUSTIFIED. HE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 4 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) 5 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE TO THE FAC T THAT THE REOPENING OF THE ASSESSMENT IS WITHIN 4 YEARS; THEREFORE, THE CASE O F THE ASSESSEE FALLS UNDER THE MAIN PROVISIONS OF SEC. 147 AND NOT HIT BY THE PROV ISIONS OF SEC. 147. THE REASONS FOR FORMING AN OPINION TO THE SATISFACTION OF THE ASSESSING OFFICER THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT IS BASICALLY THE STATEMENTS OF SHRI DARPAN MANIAR, THE PROPRIETOR OF KRISHNA TRAVELS RECORDED DURING THE ASSESSMENT PROCEEDINGS FOR 1997-98 WHERE BY HE HAS DISCLOSED AND ADMITTED THAT THE COMMISSION WAS PASSED ON TO THE A SSESSEE ON ACCOUNT OF TICKETS PURCHASED BY THE ASSESSEE FROM M/S KRISHNA TRAVELS DURING THE FINANCIAL YEAR 1995-96 AND 1996-97 AND 1997-98. MR DARPAN MAN IAR ALSO PRODUCED SOME BANK STATEMENTS AS WELL AS SOME PAPER NOTES ON THIS ACCOUNT TO SHOW THAT THE COLLECTIONS AND PAYMENTS OF COMMISSION TOOK PLACE. THE ASSESSING OFFICER, ON THE BASIS OF THE STATEMENTS AND RECORDS PRODUCED BY MR DARPAN MANIAR , THE PROP. M/S KRISHNA TRAVELS; STATEMENT OF THE ACCOUNT ANT MS FLEUR DSOUZA AND THE STATEMENT OF MR PRADEEP REGA, DIRECTOR OF THE COMPA NY REOPENED THE ASSESSMENT FOR THE ASSESSMENT YEAR 1996-97. 5.1 IT IS SETTLED PROPOSITION OF LAW THAT WHERE TH E ASSESSING OFFICER HAS A REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSES SMENT AND THAT BELIEF OF THE ASSESSING OFFICER IS BASED ON SOME MATERIAL OR INFO RMATION CAME TO HIS KNOWLEDGE AFTER THE COMPLETION OF THE ASSESSMENT TH EN THE CONDITION FOR REOPENING OF THE ASSESSMENT U/S 147 IS SATISFIED. 5 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) 5.2 IN THE CASE IN HAND, THERE IS NO DOUBT THAT THE ALLEGED COMMISSION RECEIVED BY THE ASSESSEE DID NOT FIND PLACE IN THE RECORDS BECAUSE IT WAS ALLEGEDLY RECEIVED BY THE ASSESSEE OUT OF BOOKS AND IN CASH. THEREFORE, WHEN THE ASSESSING OFFICER, AFTER RECORDING THE STATEME NTS OF THE PROPRIETOR OF M/S KRISHNA TRAVELS AND THE DIRECTOR OF THE ASSESSEE CO MPANY, PRIMA FACIE WAS OF THE VIEW THAT THE ASSESSEE RECEIVED COMMISSION INCO ME IN CASH WHICH WAS NOT OFFERED TO TAX AND MOREOVER, WHEN THE ADDITION ON A CCOUNT OF COMMISSION RECEIVED WAS MADE FOR THE ASSESSMENT YEAR 1997-98, IN OUR OPINION, THE ASSESSING OFFICER WAS HAVING SUFFICIENT REASONS TO BELIEVE AND TO SATISFY HIMSELF THAT THE INCOME ASSESSABLE TO TAX AS ESCAPED ASSESS MENT. AT THE STATE OF ISSUE OF NOTICE WHAT IS REQUIRED IS SOME RELEVANT MATERIA L ON THE BASIS OF WHICH A REASONABLE PERSON COULD FRAME A REQUISITE BELIEF. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY, QUA, THIS ISSUE OF REOPENING OF THE ASSESSMENT. 6 NEXT ISSUE IS REGARDING THE COMMISSION RECEIVED B Y THE ASSESSEE, WHICH IS COMMON IN ALL THE YEARS FOR THE AYS 1996-97, 1997- 98 AND 1998-99. 7 THE ASSESSEE COMPANY, FOR THE PURPOSE OF COURIER BUSINESS USED TO BOOK AIR TICKETS THROUGH AIRLINES AGENT/TRAVELS. THE AS SESSING OFFICER SUMMONED ONE MR DARPAN MANIAR, PROPRIETOR OF M/S KRISHNA TRAVELS WITH WHOM THE ASSESSEE COMPANY USED TO BOOK TICKETS AS WELL AS COURIER TO VERIFY THE DISCOUNT RECEIVED BY THE ASSESSEE ON SUCH BOOKINGS OF AIR TICKETS AND COURIER SERVICES. IN THE STATEMENT MR DARPAN MANIAR STATED THAT BEING A TRAV EL AGENT, HE WAS GETTING COMMISSION FROM VARIOUS AIRLINES IN THE RANGE OF 8 TO 19% DEPEND UPON THE AIRLINES. HE HAS FURTHER STATED THAT HE KEPT 1% C OMMISSION RECEIVED FROM THE 6 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) AIRLINES AND THE REMAINING COMMISSION PASSED ON TO THE CUSTOMERS. ACCORDINGLY, HE HAS STATED THAT HE PAID THE ASSESSEE RS. 5 LACS DURING THE FINANCIAL YE AR 1995-97(ASSESSMENT YEAR 1996-97); RS. 23,50,000/- D URING THE FINANCIAL YEAR 1996-97 (ASSESSMENT YEAR 1997-98) AND ALSO PAID COM MISSION FOR FINANCIAL YEAR 1997-98(ASSESSMENT YEAR 1998-98) BUT NO EXACT AMOUN T WAS MENTIONED. HOWEVER, HE HAS STATED THAT THOSE DETAILS WILL BE S UBMITTED WITHIN FIVE DAYS. HE HAS ALSO PRODUCED BANK STATEMENTS TO SHOW THAT HE H AS WITHDRAWN CASH AND SOME PAPERS IN WHICH SOME CALCULATIONS WAS MADE IN THE HANDWRITING OF HIS FATHER AND CONFIRMED BY MS FLEUR DSOUZA, ACCOUNTAN T OF THE ASSESSEE COMPANY. THUS, ON THE BASIS OF THE STATEMENTS, COPY OF THE B ANK ACCOUNT OF M/S KRISHNA TRAVELS AND SOME LOOSE PAPERS, THE ASSESSING OFFICE R MADE THE ADDITION OF RS..5 LACS FOR THE ASSESSMENT YEAR 1996-97 AND RS. 23,50,000/- FOR THE ASSESSMENT YEAR 1997-98 AND RS. 1,16,343/- FOR THE ASSESSMENT YEAR 1998-99. THE ASSESSEE CHALLENGED THE ADDITIONS MADE BY THE A SSESSING OFFICER BEFORE THE CIT(A), WHO HAS CONFIRMED THE ACTION OF THE ASSESSI NG OFFICER. 8 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT ADDITIONS WERE MADE ON THE BASIS OF THE STATEMENT OF MR MANIAR, AL LEGED PROPRIETOR OF M/S KRISHNA TRAVELS, WHO WAS DOING TICKETING FOR THE AS SESSEE, BETWEEN MAY 95 TO OCT 96. THE SAID STATEMENT OF KRISHNA TRAVELS RECO RDED ON 12.10.99 LACKS CREDIBILITY AND THE CLAIMS MADE BY THE KRISHNA TRAV ELS ARE ONLY WILD ALLEGATIONS WITHOUT ANY SUBSTANCE AND MADE OUT OF VENGEANCE, WH ICH CAN BE APPRECIATED FROM THE FOLLOWING AMONGST OTHER FACTS: I) THE KRISHNA TRAVELS WAS A TRAVEL AGENT. THE ASSE SSEE, A COURIER COMPANY, WAS USING SERVICES OF THE KRISHNA TRAVELS FOR BOOKING OF AIR TICKETS FOR THE YEAR TILL OCT 1996) AND FOR NEXT YE AR FOR LATTER PART THE 7 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) ASSESSEE USED ANOTHER TRAVEL AGENT. NO SUCH ALLEGAT IONS HAVE BEEN MADE IN RESPECT OF OTHER AGENT, WHO WAS GIVING SAME SERV ICES AS THE KRISHNA TRAVEL. II) REFERRING TO THE ANSWER TO QUESTION NO.4 IN THE STATEMENT RECORDED OF THE KRISHNA TRAVELS, DURING THE ASSESSMENT PROCEEDI NGS FOR AY 1997-98, THE KRISHNA TRAVELS HAS STATED A COMPLETE LIE THAT HE WAS DEALING WITH SO MANY AIRLINES THE KRISHNA TRAVELS WAS NOT AN IATA AGENT AND THEREFORE, COULD NEVER HAVE DEALT WITH ANY AIRLINES. THIS IT IS ENOUGH TO LOSE THE CREDIBILITY OF THE STATEMENT. III) ADMITTEDLY, HE WAS NOT DEALING WITH AIRLINES D IRECTLY, OBVIOUSLY, HE WAS BUYING TICKETS AS SUBAGENT OF SOME IATA AGENT. THER EFORE, HE WAS GETTING SHARE IN COMMISSION PAYABLE BY AIRLINES, TO IATA AG ENT. A SHARE IN COMMISSION, HE GOT FROM IATA AGENT, DEPENDED ON HIS POSITION AS SUB AGENT IN THE CHAIN OF AGENTS AS WELL AS PAYMENT TER MS. IV) IT CAN BE FURTHER SEEN THAT NO ACTION WAS INITI ATED AGAINST THE KRISHNA TRAVELS, AND THEREFORE, THE ASSESSING OFFICER HAS F AILED TO ESTABLISH EARNING CAPACITY OF THE KRISHNA TRAVELS. IN THE ABS ENCE OF SUCH FINDING REGARDING PAYING CAPACITY OF KRISHNA TRAVEL, THE OR AL CLAIM OF KRISHNA TRAVELS HAVING PAID COMMISSION OF RS. 5 LACS IN 199 5-96 AND RS. 23,50,000/- IN 1996-97 HAS NO EVIDENTIAL VALUE. IT HAS NOT BEEN PROVED, BEYOND DOUBT, THAT THE KRISHNA TRAVELS HAS ACTUALLY REALISED OR EARNED SO MUCH COMMISSION FROM THE SAID BUSINESS TO ENABLE HI M TO PASS IT ON TO THE ASSESSEE, DURING THE SAID PERIOD. THEREFORE, SUCH A STATEMENT WITHOUT ESTABLISHING THE EARNING CAPACITY OF THE KRISHNA TR AVELS CANNOT BE CONSTRUED AS MATERIAL PROOF. 8.1 HE HAS FURTHER SUBMITTED THAT THE ALLEGED COMMI SSION HAS NOT BEEN SHOWN BY M/S KRISHNA TRAVELS IN THE BOOKS OF ACCOUNT. IN THE ABSENCE OF ANY RECORD TO SHOW THAT THE PAYMENT OF THE ALLEGED COMMISSION TO THE ASSESSEE, THE STATEMENT OF THE THIRD PERSON CANNOT BE A BASIS FOR SUCH AN ADDITION THAT TOO WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE FOR C ROSS EXAMINATION OF THE SAME. HE HAS FURTHER SUBMITTED THAT WHEN THE ASSESSEE STO PPED BUSINESS WITH M/S KRISHNA TRAVELS AFTER OCT 1996 THEN THERE IS NO QUE STION OF PAYMENT OR RECEIPT OF ALLEGED COMMISSION. HE HAS FURTHER POINTED OUT THA T THE DOCUMENT RELIED UPON BY THE ASSESSEE ARE ONLY PHOTOCOPIES AND THE ORIGIN ALS WERE NOT BROUGHT ON 8 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) RECORD; THEREFORE, THESE DOCUMENTS HAVING NO EVIDEN TIAL VALUE. THE ASSESSEE AS WELL AS M/S KRISHNA TRAVELS IS MAINTAINING REGULAR BOOKS OF ACCOUNT. THE BOOKS OF ACCOUNT OF M/S KRISHNA TRAVELS WERE SUBJECTED TO TAX AUDIT U/S 44AB; THEREFORE, WHEN THIS ALLEGED COMMISSION AMOUNTS ARE NOT PART OF THE BOOKS OF ACCOUNT THEN WITHOUT ANY CORROBORATIVE EVIDENCE, TH E STATEMENT OF A THIRD PARTY CANNOT BE RELIED UPON. EVEN THE FAX COPIES PRODUCED BY MR DARPAN MANIAR OF KRISHNA TRAVELS CANNOT BE TREATED AS BOOKS OF ACCO UNT OR EVIDENCE BECAUSE THE SAME IS DUMP DOCUMENTS NOT EXPLAINING ANYTHING, EX CEPT THE SOME FIGURE WRITTEN ON IT. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MOOSA S MADHA & AZAM S MADHA REPORTED IN 89 ITR 65(SC). EVEN THE ALLEGED LOOSE PAPER IS IN TWO DIFFERENT HANDWRI TINGS AND THEREFORE, THE SAME CANNOT BE TREATED AS ADMISSIBLE EVIDENCE AGAINST TH E ASSESSEE. THE BANK STATEMENT OF M/S KRISHNA TRAVELS SHOWS WITHDRAWAL O F CASH; BUT THAT DOES NOT PROVE ANY EFFECT OF PAYMENT OF COMMISSION TO THE AS SESSEE. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT IT IS BECAUSE OF THE FA LSE COMPLAINT BY MR DARPAN MANIAR OF M/S KRISHNA TRAVELS WHEN THE ASSESSEE STO PPED DOING BUSINESS WITH HIM. THE STATEMENT CANNOT BE USED AGAINST THE ASS ESSEE WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE FOR CROSS EXAMINATION. HE FURTHER CONTENDED THAT EVEN M/S KRISHNA TRAVELS IS NOT A IATA AGENT; THERE FORE, HE HAS NOT FURNISHED ANY PROOF OF GETTING COMMISSION FROM AIRLINES. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT EVEN OTHERWISE THE STATEMENTS ARE IN VALID BECAUSE NO OATH WAS ADMINISTERED, THE STATEMENTS RELIED BY THE ASSESSIN G OFFICER HAVE NO EVIDENTIAL VALUE AS THE SAME WAS RECORDED WITHOUT ADMINISTERIN G OATH. HE HAS FURTHER SUBMITTED THAT THE DIRECTOR OF THE ASSESSEE COMPANY MR PRADEEP REGE HAD CLEARLY EXPLAINED IN HIS STATEMENT THAT NO SUCH COM MISSION WAS RECEIVED BY THE 9 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) ASSESSEE AND THE ASSESSEE STOPPED DOING BUSINESS WI TH M/S KRISHNA TRAVELS IN OCT 1996. 8.2 THE LD DR, ON THE OTHER HAND, SUBMITTED THAT TH E ASSESSEE WAS GIVEN DUE OPPORTUNITY TO CROSS EXAMINE MR DARPAN MANIAR, THE PROPRIETOR OF M/S KRISHNA TRAVEL; BUT THE ASSESSEE DID NOT CROSS EXAMINE. H E HAS POINTED OUT THAT THE ASSESSEE DID NOT DEMAND CROSS EXAMINE MR DARPAN MA NIAR AS STATED TO RESERVE THE RIGHT TO CROSS EXAMINE BUT NEVER ASKED AND CLA IMED CROSS EXAMINATION DURING THE ASSESSMENT PROCEEDING. THEREFORE, THE AS SESSEE CANNOT TAKE A PLEA THAT THE ASSESSEE WAS NOT GIVEN OPPORTUNITY FOR CRO SS EXAMINATION. HE HAS RELIED UPON THE ORDER OF AUTHORITIES BELOW. 9 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. IT APPEARS THAT SHRI DARPAN MAN IAR, HAS MADE SOME REPRESENTATION AGAINST THE ASSESSEE TO THE ASSESSIN G OFFICER AND HAS SENT SOME DOCUMENTS THROUGH FAX AND ON THE BASIS OF THOSE DOC UMENTS, THE ASSESSING OFFICER RECORDED HIS STATEMENT. IN HIS STATEMENT, THOUGH HE HAS STATED THAT HE HAS PAID COMMISSION OF RS. 5 LACS DURING AY 1996- 97 AND RS. 23.50 LACS DURING THE AY 1997-98 AND ASSURED TO GIVE THE DETAILS FOR THE REMAINING COMMISSION PAID IN THE AY 1998-99; HOWEVER, IT IS AN UNDISPU TED FACT THAT WHATEVER DOCUMENTS HE HAS PRODUCED WERE THE FAX COPIES WHIC H SHOW ONLY WITHDRAWAL OF CASH FROM THE BANK AND ONE LOOSE PAPER HAVING SOME FIGURES, WHICH HE CLAIMED REPRESENTING COMMISSION PAID TO THE ASSESSEE. THE BANK STATEMENT OF M/S KRISHNA TRAVELS SHOWS WITHDRAWAL OF CASH; BUT IT DO ES NOT SHOW THE PURPOSE OF WITHDRAWAL OF THE CASH. SHRI DARPAN MANIAR, THOUGH ALLEGED IN THE STATEMENT 10 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) THAT HE HAS SHARED WITH ASSESSEE THE COMMISSION RE CEIVED FROM THE AIRLINES; BUT THERE IS NOTHING IN HIS BOOKS OF ACCOUNT TO SHOW SU CH RECEIPTS AND PAYMENTS OF COMMISSION. WHEN THERE IS NO RECEIPT OR PAYMENT OF COMMISSION, AS ALLEGED BY SHRI DARPAN MANIAR IS RECORDED IN THE BOOKS OF ACC OUNT OR IN THE SAID DOCUMENTS, WHICH CAN BE ADMITTED AS VALID EVIDENCE THE STATEMENT MADE BY SHRI DARPAN MANIAR, IN THE ABSENCE OF ANY CORROBORA TIVE EVIDENCE, CANNOT BE ACCEPTED AGAINST THE ASSESSEE. EVEN THE DOCUMENTS, WHICH WERE RELIED BY THE ASSESSING OFFICER, ARE ONLY FAX COPIES; THEREFORE, WITHOUT VERIFICATION AND COMPARISON OF THE SAID DOCUMENTS WITH THE ORIGINAL, THE SAME CANNOT BE TREATED AS ADMISSIBLE EVIDENCE. THE ASSESSING OFFICER HAS NOT SUMMONED THE RECORDS TO PROVE THE SAID PHOTOCOPIES. THOUGH THE ASSESSEE DID NOT CROSS EXAMINE SHRI DARPAN MANIAR, DESPITE OPPORTUNITIES GIVEN BY THE A SSESSING OFFICER ; HOWEVER, WHEN THE STATEMENT ITSELF IS NOT BASED ON ANY MATER IAL OR OTHER EVIDENCE IN THE FORM OF BOOKS OF ACCOUNT, RECEIPTS, BILLS OR OTHER ADMISSIBLE EVIDENCE, THEN, THE STATEMENT OF THE THIRD PARTY AGAINST THE ASSESSEE C ANNOT BE THE BASIS FOR SUCH AN ADDITION. FURTHER, WHEN M/S KRISHNA TRAVELS ITSELF HAS NOT RECORDED SUCH RECEIPTS AND PAYMENTS OF THE COMMISSION IN ITS BOOKS OF ACCO UNT, THEN, THE STATEMENT WHICH IS CONTRARY TO THE RECORD OF THE STATEMENT MA KER CANNOT BE ACCEPTED IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE. ACCORDI NGLY, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AS SESSING OFFICER FOR THE ALLEGED COMMISSION RECEIVED BY THE ASSESSEE IS NOT SUSTAINABLE ON THE BASIS OF THE STATEMENT, WHICH IS CONTRARY TO THE RECORD OF T HE STATEMENT MAKER. WE, THEREFORE, DELETE THE ADDITION MADE ON ACCOUNT OF A LLEGED COMMISSION RECEIVED BY THE ASSESSEE FOR ALL THE THREE YEARS. 11 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) 10 FOR THE AY 1997-98, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ASSESSMENT ORDER DATED 22.3.2000 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 IS INVALID AND BAD LAW. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW,, THE LD CIT(A) ERRED IN PARTLY CONFIRMING THE ASSESSMENT OR DER WHICH BY ITSELF IS INVALID AND BAD IN LAW. III ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW,, THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 23,5 0,000/ MADE ON ACCOUNT OF ALLEGED COMMISSION RECEIVED. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW,, THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS. 4,61,931/- OUT OF TRAVELLING EXPENSES. V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW,, THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF EX PENSES OUT OF MOTOR CAR EXPENSES OF RS. 50,000/- AS BEING PERSONAL EXPENSES OF THE DIRECTORS. VI) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW,, THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF TELE PHONE EXPENSE OF RS. 25,000/- BEING IN NATURE OF PERSONAL EXPENSES OF TH E DIRECTOR. VII) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW,, THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 7,86 4/ BEING DIFFERENCE . 11 GROUND NOS 1 & 2 REGARDING THE VALID OF THE ASSE SSMENT. 11.1 THE LD AR OF THE ASSESSEE HAS STRONGLY CONTEND ED THAT THE NOTICE U/S 143(2) WAS ISSUED ON 16.8.1999 WHICH IS BEYOND THE PERIOD OF LIMITATION PRESCRIBED UNDER THE LAW. HE HAS SUBMITTED THAT TH E ASSESSEE HAS FILED THE RETURN OF INCOME ON 1.12.1997 AND THE NOTICE U/S 14 3(2) REQUIRED TO BE SERVED ON THE ASSESSEE WITHIN PERIOD OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FURNISHED. THUS, THE LD AR HAS SUBM ITTED THAT THE NOTICE ISSUED ON 16.8.1999 BEYOND THE PERIOD PRESCRIBED UNDER 143 (2) AS EXISTED AT THE RELEVANT POINT OF TIME. HE HAS REFERRED PAGE 28 O F THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE WAS SERVED WITH THE NOT ICE DATED 16.8.1999; 12 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) THEREFORE, THE ASSESSING OFFICER HAD NO JURISDICTIO N TO PASS THE ASSESSMENT ORDER AND THE SAME IS INVALID AND LIABLE TO BE QUASHED. HE HAS RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS EQBAL SINGH SINDHANA REPORTED IN 304 ITR 177. 11.2 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THA T PRIOR TO NOTICE DATED 16.8.1999, A NOTICE U/S 143(2) DATED 10.9.98 WAS S ENT TO THE ASSESSEE THROUGH REGISTERED POST ON 15.9.98, WHICH IS WELL WITHIN T HE PERIOD OF LIMITATION PROVIDED UNDER THE PROVISO TO SEC. 143(2). HE HAS PRODUCED THE RECORDS CONTAINING NOTICE DATED 10,9,98 AND PROOF OF SENDING THE SAME THROUGH REGISTERED POST. COPY OF THE NOTICE DATED 10.9,98 AND THE POSTAL RECEIPT WER E FILED. HE HAS RELIED UPON THE DECISIONS OF THE HONBLE DELHI HIGH COURT IN TH E CASE OF CIT V YAMU INDUSTRIES LTD REPORTED IN 306 ITR 309, IN THE CASE OF CIT VS MADHSY FILMS P LTD REPORTED IN CIT 301 ITR 69 AND IN THE CASE OF CIT VS VINS OVE RSEAS INDIA LTD REPORTED IN 305 ITR 320. 12 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. THE CONTENTION OF THE LD AR OF THE ASSESSEE IS THAT NO NOTICE U/S 143(2) WAS SERVED WITHIN THE PERIOD OF LIMITATI ON PRESCRIBED UNDER THE LAW AND THE ASSESSEE SERVED WITH THE NOTICE DATED 16.8. 99, WHICH IS CLEARLY BEYOND THE PERIOD OF LIMITATION; THEREFORE, THE ASSESSMENT IS BAD IN LAW. WE HAVE SEEN THE ORIGINAL RECORDS PRODUCED BY THE LD DR IN WHICH AN OFFICIAL COPY OF NOTICE DATED 10.9.98 ALONG WITH POSTAL RECEIPT FOR SENDING THE SAID NOTICE THROUGH REGISTERED POST ON 15.9.99 HAS BEEN PLACED. WHEN T HE NOTICE DATED 10.9.98 WAS SENT AT THE CORRECT ADDRESS OF THE ASSESSEE BY REGI STERED POST ON 15.9.98 AND THE 13 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) SAME HAS NOT RECEIVED BACK UNDELIVERED, THEN, IT WO ULD BE A PROPER SERVICE OF THE SAID NOTICE ON THE ASSESSEE. 12.1 THE ASSESSEE HAS HOT DISPUTED THE CORRECTNESS OF THE ADDRESS AS WRITTEN ON THE NOTICE AND SENT THROUGH REGISTERED POST. THE REFORE, IN THE ABSENCE OF ANY OBJECTION RAISED BY THE ASSESSEE DURING THE ASSESSM ENT PROCEEDINGS AND EVEN BEFORE THE CIT(A) THAT THE ASSESSEE HAS NOT BEEN SE RVED WITH THE NOTICE U/S 143(2), THE ISSUE RAISED BEFORE US, IS WITHOUT ANY SUBSTANCE. 12.2 THE GROUND RAISED BY THE ASSESSEE BEFORE THE CIT(A) IS ONLY REGARDING VALIDLY OF THE ASSESSMENT ORDER AND NO SPECIFIC A LLEGATION OR OBJECTION WAS RAISED REGARDING NON RECEIPT OF THE NOTICE U/S 143 (2) WITHIN THE PERIOD OF LIMITATION. THEREFORE, WHEN THE ASSESSEE ALLOWED TH E ASSESSMENT U/S 143(3) WITHOUT RAISING ANY OBJECTION OR SERVICE OF NOTICE THEN THE ASSESSEE CANNOT BE PERMITTED TO RAISE THIS OBJECTION AT A LATER STAGE UNLESS AND UNTIL THE ASSESSEE ESTABLISHES FROM THE RECORDS THAT THE SAID NOTICE W AS NOT AT ALL SENT AND SERVED UPON THE ASSESSEE WITHIN THE PERIOD OF LIMITATION. 13 THE HONBLE DELHI HIGH COURT IN THE CASE OF YAMU INDUSTRIES LTD (SUPRA); IN THE CASE OF MADHSY FILMS P LTD (SUPRA) AND IN THE CASE OF VINS OVERSEAS INDIA LTD (SUPRA) HELD THAT IF NOTICE IS SENT BY REGISTE RED POST AT THE CORRECT ADDRESS OF THE ASSESSEE AND THE SAME WAS NOT RECEIVED BACK UNDELIVERED, THAN AS PER THE GENERAL CLAUSES ACT, PRESUMPTION OF PROPER SER VICE OF NOTICE TO BE IN FAVOUR OF THE REVENUE 14 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) 14 THE ASSESSEE, RIGHT FROM THE ASSESSMENT PROCEEDI NGS TILL THE FILING OF THE APPEAL BEFORE US HAS NOT COME OUT WITH THE CASE THA T THE ASSESSEE HAS NOT RECEIVED ANY NOTICE U/S 143(2) PRIOR TO THE NOTICE DATED 16.8.1999. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE HOLD THAT THE NOTICE, ISSUED U/S 143(2) ON 10.9.1998, THROUGH REGISTERED POST, AT THE CORRECT ADDRESS OF THE ASSESSEE AND NOT RECEIVED BACK UNDELIVERED, IS DEEMED AS PROPER AND EFFECTIVE SERVICE ON THE ASSESSEE WITHIN THE PERIOD OF LIMITATION. ACCORDINGLY, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 15 GROUND NO.3 REGARDING THE ADDITION OF RS. 23,50, 000/- ON ACCOUNT OF ALLEGED COMMISSION RECEIVED BY THE ASSESSEE. 16 WE HAVE ALREADY ADJUDICATED THIS COMMON ISSUE I N FAVOUR OF THE ASSESSEE IN THE FOREGOING PARAGRAPH. 17 GROUND NO.4 IS REGARDING DISALLOWANCE OF RS.4,61 ,931/- 17.1 THE ASSESSEE HAS INCURRED FOREIGN TRAVEL EXPEN SES OF RS. 8,61,931/- THE ASSESSING OFFICER OBSERVED THAT THE AUDITED ACCOU NTS OF THE ASSESSEE COMPANY DOES NOT SHOW ANY DETAILS OF FOREIGN TRAVEL. ACCORD INGLY, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF FOREIGN TRAVEL UNDERTAKEN BY THE COMPANY SUCH AS PURPOSE OF EACH TRAVEL, PLACE OF VISIT, NAME OF PE RSON VISITED ETC. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSES SEE AND ACCORDINGLY, DISALLOWED THE EXPENSES PERTAINING TO FOREIGN TRAVE L. 17.2 ON APPEAL, THE CIT(A) GAVE RELIEF OF RS. 4 LAC S AND CONFIRM THE DISALLOWANCE TO THE EXTENT OF RS. 4,61,931/-. 15 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) 17 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITT ED THAT THE EXPENDITURE CONSISTS OF ONLY ON THE AIR FARE INCURRED ON THE T RAVELLING OF THE DIRECTOR, STAFF AND AUDITORS FROM MUMBAI TO OVERSEAS FOR SETTLEMENT OF ACCOUNTS, DRAFTING AND SINGING OF THE AGREEMENTS OF FOREIGN AGENTS/REPRESE NTATIVES. SINCE SOMETIMES BAGS ARE MISPLACED IN TRANSIT AND THE CLIENTS FILED CLAIMS FOR LOSS OF BAGS IN FOREIGN COUNTRY WHICH THE COMPANY HAD TO DEFEND. T HEREFORE, THE VISITS TO FOREIGN COUNTRY WERE WITH RESPECT TO THE SETTLEMENT OF THE CLAIMS AND TO DEFEND THE COMPANY. HE HAS FURTHER POINTED OUT THAT BOOK S WERE IMPOUNDED BY THE DEPARTMENT THEREFORE, THE ASSESSEE COULD NOT FURNIS H THE ENTIRE DETAILS BEFORE THE ASSESSING OFFICER, HE HAS RELIED UPON THE DEC ISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJIRON & ENGG CO VS CI T REPORTED IN 253 ITR 749 AND SUBMITTED THAT IN THE CASE OF THE COMPANY, THE EXPENDITURE CANNOT BE DISALLOWED ON ACCOUNT OF PERSONAL USE OR PERSONAL A CCOUNT, EVEN THE EXPENDITURE HAS BEEN DELETED ON ADHOC BASIS. 17.1 THE LD DR ON THE OTHER HAND HAS SUBMITTED THAT WHEN THE ASSESSEE HAS CLAIMED THE FOREIGN TRAVEL EXPENSES THEN THE ONUS C AST ON THE ASSESSEE TO ESTABLISH THE CLAIM BY PRODUCING THE RELEVANT EVIDE NCE AND RECORDS IN SUPPORT OF THE CLAIM. SINCE THE ASSESSEE HAS FAILED TO SUBSTAN TIATE ITS CLAIM BY PRODUCING THE RELEVANT RECORDS, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS JUSTIFIED. HOWEVER, THE CIT(A) HAS ALREADY GIVEN SUBSTANTIAL R ELIEF TO THE ASSESSEE. HE RELIED UPON HIS ORDER. 18 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERU SED THE RELEVANT MATERIAL ON RECORD. THE CIT(A) RECORDED HIS FINDIN G IN PARA 21 & 22 AS UNDER: 16 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) 21. THE SUBMISSIONS MADE BY THE APPELLANTS REPRES ENTATIVE HAS BEEN CONSIDERED. IN SO FAR AS THE TRAVELLING EXPENS ES DETAIL ARE CONCERNED THIS COMPRISE OF TWO PORTIONS ON AMOUNTIN G TO RS. 1,39,202/- IN RESPECT OF WHICH BOTH THE DATES OF IN VOICE AS WELL AS THE DATES OF TRAVELLING FALL IN THE EARLIER ACCOUNTING YEARS. THEREFORE, THE EXPENDITURE IN THIS RESPECT CANNOT BE SAID TO BE EX PENDITURE LIABLE FOR DEDUCTION IN THE YEAR UNDER CONSIDERATION. THE AUDITORS HAVE NOT CERTIFIED THESE EXPENSES AS PRIOR YEAR EXPENSES IN THE AUDIT REPORT. THIS CLAIM HAS BEEN MADE FOR THE FIRST TIME DURING THE COURSE OF APPEAL. THE PROPOSE FOR UNDERTAKING JOURNEY GIVEN I S RATHER TOO GENERAL AND VAGUE TO HELD THAT THE ENTIRE EXPENDITU RE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT COMPANY. 22 IN REGARD TO THE BALANCE SUM OF RS. 7,17,600/ ON E ITEM COMPRISES OF A SUM OF RS. 84,143/- FOR WHICH NO DET AILS HAS BEEN FURNISHED. IN RESPECT OF THE BALANCE CLAIM AS WELL , THE PURPOSE OF VISIT OTHER THAN THOSE OF COURIERS HAS BEEN GIVEN W HICH IS TOO GENERAL IN NATURE WITHOUT ANY SUPPORT OR CORROBORATIVE EVID ENCE. IN THE CIRCUMSTANCES, APART FROM RS. 1,39,202/- THAT CLEAR LY PERTAIN TO THE EARLIER ACCOUNTING YEAR EVEN OUT OF THE BALANCE AMO UNT OF RS. 7,17,600/- THERE IS A CASE FOR DISALLOWANCE OF MAJO R PORTION OF THE EXPENDITURE. HENCE, OUT OF THE TOTAL DISALLOWANCE O F RS. 8,61,931/- WHILE THE DISALLOWANCE TO THE EXTENT OF RS. 4 LACS IS RETAINED THE BALANCE AMOUNT DISALLOWED IS DELETED. 19 FROM THE ABOVE FINDINGS OF THE LD CIT(A), IT IS APPARENT THAT THE ASSESSEE DID NOT FURNISH THE DETAILS AND CORROBORATIVE EVIDE NCE IN SUPPORT OF ITS CLAIM AND THE EXPLANATION FURNISHED BY THE ASSESSEE WAS FOUND WAS TOO GENERAL IN NATURE. WHEN THE ASSESSEE HAS FAILED TO ESTABLISH ITS CLAIM BY PRODUCING THE RELEVANT EVIDENCE IN ITS SUPPORT, THEN THE ASSESSEE HAS FAIL ED TO DISCHARGE ITS PRIMARY ONUS TO PROVE THE CLAIM OF EXPENDITURE INCURRED. TH EREFORE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD CIT(A) W HO HAS DELETED RS. 4 LACS AND SUSTAIN THE REMAINING DISALLOWANCE, WHICH IN OUR CO NSIDERED OPINION IS PROPER AND JUSTIFIED KEEPING IN VIEW OF THE FACTS AND CIRC UMSTANCES OF THE CASE. 17 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) 20 GROUND NOS. 5 & 6 REGARDING THE DISALLOWANCE OF EXPENDITURE OF MOTOR CAR EXPENSES AND TELEPHONE ON ACCOUNT OF PERSONAL USE. 21 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT THE CASE OF SAYAJIRON & ENGG CO (SUPRA), WE DO NOT FIND ANY JUSTIFICATION IN DISALLOWING THE MOTOR CAR AND TELEPHONE ON ACCOUNT OF PERSONAL USE OF THE DIRECTORS. ACCORDINGLY, THE DISALLOWANCE ON ACCOUN T OF MOTOR CAR AND TELEPHONE EXPENSES ARE DELETED. 22 NEXT GROUND REGARDING DISALLOWANCE OF RS. 7864/- BEING DIFFERENCE OF RECONCILIATION. 23 WE HAVE HEARD THE LD AR AND THE LD DR AND CONSID ERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER FOUND THA T THERE IS SOME DIFFERENCE IN THE BALANCE SHEET TO THE EXTENT OF RS. 7862/-. THE ASSESSEE EXPRESSED ITS DIFFICULTIES IN RECONCILING THE AMOUNT; THEREFORE, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 7862/- ON ACCOUNT OF THE DIFFERENCE . THE CIT(A) CONFIRMED THE SAME WHEN THE ASSESSEE FAILED TO RECONCILE THE SAME . 24 BEFORE US, THE ONLY ARGUMENT ADVANCED BY THE ASS ESSEE IS THAT SINCE THE BOOKS OF ACCOUNT WERE WITH THE AUDITORS AND IN THE ABSENCE OF THE BOOKS THE ASSESSEE WAS UNABLE TO FURNISH THE SAME BEFORE THE ASSESSING OFFICER. 18 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) 25 WE DO NOT AGREE WITH THE CONTENTION OF THE LD AR `BECAUSE THE ASSESSEE COULD HAVE INSPECTED THE BOOKS AND ALSO OBTAIN THE RELEVANT RECORDS. EVEN OTHERWISE, NO MATERIAL/RECORDS HAVE BEEN PRODUCED B EFORE US IN THIS REGARD TO RECONCILE THE DIFFERENCE. THEREFORE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) IN DISALLOWING THE ADDITION ON THIS ACCOUNT. ITA NO. 2915/MUM/2004 ( ITA NO. 2915/MUM/2004 ( ITA NO. 2915/MUM/2004 ( ITA NO. 2915/MUM/2004 (ASSESSMENT YEAR 1998 ASSESSMENT YEAR 1998 ASSESSMENT YEAR 1998 ASSESSMENT YEAR 1998- -- -99 9999 99) )) ) 25 THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) IS JUSTIFIED DIN CONFIRMING THE ADDITION OF RS. 1,16,342/- ON ACCOUNT OF ALLEGE D COMMISSION RECEIVED BY THE ASSESSEE. 26 SIMILAR ISSUE HAS ALREADY BEEN CONSIDERED AND AD JUDICATED BY US IN THE EARLIER PART OF THE ORDER. ACCORDINGLY, THE ADDIT ION IS DELETED FOR THE YEAR UNDER CONSIDERATION ALSO. ITA NO. ITA NO. ITA NO. ITA NO.20 2020 202 22 27 77 7/MUM/2006 (ASSESSMENT YEAR 1997 /MUM/2006 (ASSESSMENT YEAR 1997 /MUM/2006 (ASSESSMENT YEAR 1997 /MUM/2006 (ASSESSMENT YEAR 1997- -- -98) 98) 98) 98) 27 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: I) THE LD ASSESSING OFFICER ERRED ON THE FACTS AND IN LAW IN LEVYING PENALTY U/S 271(1)( C) OF THE ACT AND FURTHER CIT(A) ERRED IN CONFIRMING THE SAID PENALTY FOR THE YEAR. II) THE ORDER OF PENALTY U/S 271(1) ( C) IS BAD IN LAW AB-INITIO AS THE PENALTY ORDER IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE A ND HAS BEEN PASSED WITHOUT GIVING SUFFICIENT OPPORTUNITY OF BEING HEAR D OR WITHOUT GIVING OPPORTUNITY OF CROSS EXAMINATION OF WITNESS AT ANY POINT OF TIME. 19 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) III) THE LD CIT(A) ERRED ON THE FACTS AND IN LAW IN CONFIRMING THE PENALTY, WHEN THE QUANTUM APPEAL IS PENDING BEFORE THE HONB LE ITAT FOR THE SAME YEAR, WHICH IS THE FINAL FACT FINDING AUTHORITY. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE PENALTY US/ 271(1) (C) IS NOT SUSTAINABLE. THEREFORE, ORDER OF PENALTY IS BAD IN LAW AND IS LIABLE TO BE CANCELLED. 28 THE ONLY ISSUE IN THIS APEPAL IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY MADE U/S 271(1) ( C) OF THE ACT AGAINST THE DISALLOWANCE AND ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 27,72,816/- 30 WE HAVE HEARD THE LD AR AND THE LD DR AND PERUSE D THE RELEVANT MATERIAL ON RECORD. OUT OF THIS TOTAL DISALLOWANCE, RS. 23, 50,000/- PERTAINS TO THE ALLEGED COMMISSION RECEIVED BY THE ASSESSEE. THE CIT(A) CO NFIRMED THE PENALTY ONLY IN RESPECT OF RS. 23,50,000/- REGARDING THE ALLEGED C OMMISSION RECEIVED BY THE ASSESSEE. IN THE QUANTUM APPEAL, WE HAVE DELETED T HE SAID ADDITION. THEREFORE, THE PENALTY ON THE SAID ADDITION IS NOT SUSTAINABLE AND THE SAME IS LIABLE TO BE DELETED. 31 IN THE RESULT, THE APPEALS IN ITA NO.2914/MUM/20 04(AY 1996-97) & IN ITA NO. 1913/MUM/2004 (AY 1997-98) ARE PARTLY ALLOWED W HEREAS THE APPEALS IN ITA NO.2915/MUM/2004( AY 1998-99 ) AND THE APPEAL IN ITA NO.2027/M/2006 (AY 1997-98) ARE ALLOWED. ORDER PRONOUNCED ON THE 29 TH , DAY OF JUNE 2011. SD/- SD- ( (( ( J SUDHAKAR REDDY J SUDHAKAR REDDY J SUDHAKAR REDDY J SUDHAKAR REDDY ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 29 TH , JUNE 2011 RAJ* 20 ITA NO. 2914/MUM/04 (ASST YEAR 1996-97) ITA NO. 1913/MUM/04 (ASST YEAR 1997-98) ITA NO. 2915/MUM/04 (ASST YEAR 1998-99) ITA NO. 2027/MUM/06 (ASST YEAR 1997-98) COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI