ACIT, New Delhi V. M/s Modipon Ltd., Ghaziabad

ITA 2944/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82178 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKER
• Assessee Lawyers: SANTOSH KR AGGARWAL
• Keywords: Depreciation; Opportunity of being heard; Additional evidence; Unabsorbed depreciation; Revenue expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI A.T. VARKEY : JUDICIAL MEMBER ITA NO. 2735/DEL/2011 A.Y. 2007-O8 M/S MODIPON LTD., VS. ACIT, CIRCLE 5(1), MODINAGAR-201204. NEW DELHI. AND ITA NO. 2944/DEL/2011 A.Y. 2007-O8 ACIT, CIRCLE 5(1), VS. M/S MODIPON LTD., NEW DELHI. MODINAGAR-201204. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI SANTOSH KR. AGGARWAL AD V. DEPARTMENT BY : SHRI J.P. CHANDRAKER SR. DR DATE OF HEARING : 27-11-2014 DATE OF ORDER : 05-12-2014. O R D E R PER S.V. MEHROTRA, A.M:- THESE CROSS APPEAL, PREFERRED BY THE ASSESSEE AS W ELL AS THE DEPARTMENT, ARE DIRECTED AGAINST THE ORDER OF CIT( APPEALS)-VIII, NEW DELHI DATED 25-03-2011 IN APPEAL NO. 81/09-10 FOR A.Y. 20 07-08. 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE RELE VANT YEAR THE ASSESSEE COMPANY CONTINUED TO REMAIN ENGAGED MAINLY IN THE M ANUFACTURE OF NYLON AND POLYESTER FILAMENT YARD IN ITS FIBER DIVISION A T MODINAGAR, UP AND AGRICULTURAL AND INDUSTRIAL CHEMICALS IN ITS CHEMIC ALS DIVISION AT THANE, 2 ITA NO.2735/D/11 & 2944/D/11 MAHARASTRA. THE CHEMICAL DIVISION WAS DEMERGED IN THE MONTH OF OCTOBER 2006. THE ASSESSEE COMPANY HAD FILED RETURN OF INCO ME DECLARING LOSS OF RS. 39,87,99,807/-, WHICH WAS SUBSEQUENTLY REVISED TO A LOSS OF RS. 34,32,24,545/-. THE ASSESSMENT WAS COMPLETED AT A T OTAL LOSS OF RS. 30,33,10,849/- AS UNDER: RETURNED LOSS (-) RS. 34,32,24,545 ADD.: PRIOR PERIOD EXPENSES RS. 18,38,776 DISALLOWANCE FOR LATE PAYMENT OF EMPLOYEE CONTRIBUTION TO PF & ESI RS. 1,02,82,474 DISALLOWANCE OF EXPENSES U/S 14A RS. 1,62,00 0 DISALLOWANCE U/S 40(1)(IA) RS. 2,65,22,476 DISALLOWANCE OF WRITTEN OFF STORE & RS. 10,77 ,960 SPARES & LOSS ON SALE OF STORES RS. 30,010 RS. 3,99,13,696 ASSESSED LOSS: (-) RS. 30,33,10,849 2. LD. CIT(A) PARTLY ALLOWED THE ASSESSEES APPEAL. BEING AGGRIEVED, WITH THE ORDER OF LD. CIT(A) BOTH THE ASSESSEE AND THE DEPARTMENT ARE IN APPEAL BEFORE US. ASSESSEES APPEAL (ITA NO. 2735/DEL/2011) : 3. FOLLOWING GROUNDS ARE RAISED: 1. THAT THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, NEW DELHI DATED 25-03-2011, IS WRON G ON FACTS AND BAD IN LAW; 2. THAT THE COMMISSIONER (APPEALS) ERRED IN UPHOLDI NG THE DISALLOWANCE OF RS. 1,62,000/- UNDER SECTION 14A OF THE ACT. HE FAILED TO APPRECIATE THAT NO EXPENDITURE WAS INCURR ED IN RELATION TO THE INCOME BY WAY OF DIVIDEND AND AS SU CH NO EXPENDITURE WAS TO BE DEDUCTED UNDER SECTION 14A OF THE ACT. 3. THAT THE COMMISSIONER (APPEALS) ERRED IN UPHOLDI NG THE DISALLOWANCE OF EXPENSES OF RS. 2,24,58,448/- INCUR RED FOR THE PURPOSES OF THE BUSINESS IN THE ASSESSMENT YEAR UND ER REFERENCE IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT; 3 ITA NO.2735/D/11 & 2944/D/11 4. THAT THE COMMISSIONER (APPEALS) ERRED IN NOT ALL OWING DEDUCTION OF RS. 65,22,316/- BEING THE AGGREGATE OF VARIOUS EXPENSES INCURRED FOR THE PURPOSES OF THE BUSINESS IN THE PRECEDING ASSESSMENT YEAR IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT; 5. THAT THE APPELLANT IS ENTITLED TO DEPRECIATION O N THE COST (RS. 6,63,14,246/-) OR WRITTEN DOWN VALUE OF TECHNI CAL DATA; 6. THAT THE APPELLANT IS ENTITLED TO CARRY FORWARD FOR BEING SET OFF OF IN THE SUBSEQUENT YEARS THE BUSINESS LOS S AND UNABSORBED DEPRECIATION; 7. THAT THE A CONCLUSION AND INFERENCES OF THE ASSE SSING OFFICER AND/ OR COMMISSIONER (APPEALS) ARE BASED ON SUSPICIONS, CONJECTURES, SURMISES AND EXTRANEOUS AN D IRRELEVANT CONSIDERATIONS; 8. THAT THE RELIEFS PRAYED MAY KINDLY BE ALLOWED A ND THE ORDERS OF THE ASSESSING OFFICER AND/ OR COMMISSIONE R (APPEALS) MAY KINDLY BE QUASHED, SET ASIDE, ANNULLED OR MODIF IED; 9. THAT THE AFORESAID GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER AND THE APPELLANT CRAVES LE AVE TO VARY, ALTER, AMEND OR ADD TO THE AFORESAID GROUNDS OF APP EAL BEFORE OR AT THE TIME OF HEARING OF THE ABOVE APPEAL. 4. GROUND NO. 1 IS GENERAL IN NATURE AND REQUIRES NO ADJUDICATION. 5. APROPOS GROUND NO.2, REGARDING DISALLOWANCE OF R S. 1,62,000/- U/S 14A, BRIEF FACTS ARE THAT ASSESSEE COMPANY HAD EARN ED TAX FREE DIVIDEND INCOME OF RS. 2,17,740/-. THE AO APPLYING RULE 8D D ETERMINED DISALLOWANCE AT RS. 1,62,000/-, WHICH WAS CONFIRMED BY LD. CIT(A). 5.1. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT IN AY 2006- 07 THE TRIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF AO TO DECIDE THE ISSUE 4 ITA NO.2735/D/11 & 2944/D/11 AFRESH IN ACCORDANCE WITH THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT 347 ITR 272 (DEL.). 5.2. LD. DR RELIED ON THE ORDER OF LD. CIT(A). 5.3. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. WE FIND THAT FOR AY 2006-07, IN ASSESSEES OWN CASE, THE TRIBUNAL VIDE ORDER DATED 28-6-2013 I N ITA NO. 1056/DEL/2011, HAS SET ASIDE THE ISSUE TO THE FILE OF AO, OBSERVING AS UNDER: 6. WE FURTHER FIND THAT BEFORE LD. CIT(A), THE ASS ESSEE HAD FILED ADDITIONAL EVIDENCE ON THE GROUND THAT NO DET AILS REGARDING VARIOUS ITEMS WERE CALLED FOR IN THE ASSE SSMENT PROCEEDINGS BUT THE ADDITIONS/ DISALLOWANCES HAD BE EN MADE BY AO ALLEGING NON-FURNISHING OF REQUISITE DETAILS/ EV IDENCE. LD. CIT(A) HAD CALLED FOR A REMAND REPORT AS PER PROVIS IONS OF RULE 46A(3) OF INCOME TAX RULES, 1962 FROM AO ON TH E DOCUMENTS SOUGHT TO BE FILED AS ADDITIONAL EVIDENCE . THE AO, HOWEVER, SIMPLY OBJECTED TO THE ADMISSION OF ADDITI ONAL EVIDENCE ON THE GROUND THAT AMPLE OPPORTUNITIES WER E GIVEN TO THE ASSESSEE. THUS, EVEN AFTER GETTING AN OPPORTUNI TY TO EXAMINE THE EVIDENCE, THE AO DID NOT EXAMINE THE EVIDENCE. UNDER SUCH CIRCUMSTANCES, WE ARE SATISFIED THAT THE MATTER NEE DS TO BE RESTORED BACK TO THE FILE OF AO FOR PASSING THE ASS ESSMENT ORDER DE NOVO AFTER AFFORDING REASONABLE OPPORTUNITY OF B EING HEARD TO ASSESSEE. 5.4. CONSISTENT WITH OUR FINDINGS FOR A.Y. 2006-07, WE RESTORE THIS ISSUE TO THE FILE OF AO FOR DECISION AFRESH, IN ACCORDANCE W ITH LAW, AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 6. APROPOS GROUND NOS. 3 & 4, REGARDING DISALLOWAN CE OF EXPENSES AMOUNTING TO RS. 2,24,58,448/- U/S 40(A)(IA), BRIEF FACTS ARE THAT A TDS SURVEY WAS CONDUCTED ON THE ASSESSEE COMPANY ON 10- 3-2008 BY THE ITO(TDS & SURVEY), GHAZIABAD AND VIDE LETTER DATED 18-3-2008 HE HAD INFORMED THE AO THAT THE ASSESSEE COMPANY HAD MADE TDS UNDER VARIOUS 5 ITA NO.2735/D/11 & 2944/D/11 HEADS BUT THE SAME WAS NOT DEPOSITED INTO CENTRAL G OVT. ACCOUNT IN RESPECTIVE YEARS. THE DETAILS WERE AS UNDER: SECTION OF THE ACT HEAD TDS AMOUNT DISALLOWABLE EXPENSES 194H(CO) COMMISSION & BROKERAGE 9,42,456 1,65,248 21,67,99,572 29,45,529 194J(CO & NON CO.) PROFESSIONAL 1,33,461 16,016 23,78,984 2,85,490 194I(CO & NON CO) RENT 1,34,869 40,800 6,01,020 1,81,818 194A(CO. NON CO.) INTEREST 7,47,255 33,30,013 TOTAL DISALLOWABLE 2,65,22,476 6.1. IN TERMS OF SECTION 40(A)(IA), THE AO DISALLOW ED THE ENTIRE AMOUNT. 6.2. THE ASSESSEE HAD SUBMITTED FOLLOWING DETAILS B EFORE THE LD. CIT(A) IN THIS REGARD: SNO EXPENDITU RE (RS.) TDS AMOUNT MONTH OF DEDUCTION DATE OF DEPOSIT 1. 2601257 150562 MARCH 07 JUNE-OCT. 07 2. 1476088 82562 OCT-DEC 06 BEFORE 31-3- 07 3. 1583217 182445 JAN-FEB 07 BEFORE 15- 11-07 4. 20875231 762141 MARCH 07 AFTER 15-11- 07 BETWEEN MARCH 08 TO JUNE 09 26535793 2177710 6.3. THE ASSESSEE HAD ALSO RELIED ON THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. VS. CIT 293 ITR 226, WHEREIN IN VIEW OF CIRCULAR NO. 275/201/95 -IT(B), DATED 29-1- 1997, IT WAS HELD THAT IF ASSESSEE HAD PAID INTERES T U/S 201(1A) OF THE ACT 6 ITA NO.2735/D/11 & 2944/D/11 AND THE DEDUCTEE HAD ALSO PAID DUE TAX ON THE AMOUN T IN QUESTION, NO DISALLOWANCE WAS TO BE MADE U/S 40(A)(IA) OF THE AC T. LD. CIT(A) AFTER CONSIDERING THE PROVISIONS OF SECTION 40(A)(IA), AL ONG WITH THE DATES OF DEPOSITS OF TDS WITH THE GOVT. OF INDIA, DIRECTED T HE AO TO ALLOW RELIEF OF RS. 26,01,257/- AND RS. 14,78,018/- AFTER DUE VERIF ICATION OF THE FACT THAT TDS MADE ON THESE AMOUNTS WAS DEPOSITED BEFORE THE DUE DATE OF FILING OF RETURN AND 31-3-2007 RESPECTIVELY. AS REGARDS OTHER TWO PAYMENTS OF RS. 1583217/- AND RS. 20875231/-, HE OBSERVED THAT AS SESSEE ITSELF HAD ADMITTED THAT THE TDS MADE ON THESE AMOUNTS WAS NOT DEPOSITED TO THE GOVERNMENT ACCOUNT EVEN UP TO THE DATE OF FILING OF RETURN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CIT(A), THEREFORE, SU STAINED THESE TWO ADDITIONS. AS REGARDS THE ASSESSEES PLEA ON THE BA SIS OF HONBLE SUPREME COURT DECISION IN THE CASE OF HINDUSTAN COCA COLA B EVERAGES (P) LTD. (SUPRA), THE LD. CIT(A) OBSERVED THAT NO EVIDENCE WAS FILED BEFORE HIM THAT THE TAX DUE ON THE PAYMENTS OF RS. 1583217/- AND 20 875231/- WAS PAID BY THE DEDUCTEE NOR ANY EVIDENCE REGARDING PAYMENT OF INTEREST BY THE ASSESSEE COMPANY /S 201(1A) OF THE ACT WAS FILED. 6.4. LD. CIT(A) FURTHER OBSERVED THAT IN THE COURS E OF APPELLANT PROCEEDINGS THE ASSESSEE HAD RAISED ADDITIONAL GROU ND, SEEKING DIRECTION TO THE AO TO ALLOW EXPENSES OF RS. 6552316/-, WHICH WE RE DISALLOWED IN A.Y. 2006-07 BECAUSE TDS THEREON WAS NOT DEPOSITED BEFOR E THE END OF THE FINANCIAL YEAR 2005-06. THE ASSESSEES CONTENTION W AS THAT TDS IN RELATION TO THIS AMOUNT WAS DEPOSITED BY ASSESSEE COMPANY DU RING THE PERIOD JULY TO OCTOBER 2007 AND, THEREFORE, THE SAME HAD TO BE ALL OWED. IN THIS REGARD LD. CIT(A) DISMISSED THE ASSESSEES ADDITIONAL GROUND, INTER ALIA, OBSERVING THAT IF ASSESSEE COMPANY HAD MADE PAYMENT OF TDS DURING THE FINANCIAL YEAR 7 ITA NO.2735/D/11 & 2944/D/11 2007-08, THEN THE NECESSARY CLAIM WILL HAVE TO BE M ADE BEFORE THE AO IN AY 2008-09 AND NO CLAIM COULD BE ENTERED IN THE ASS ESSMENT YEAR UNDER CONSIDERATION. 6.5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN AY 2006-07 ALSO CIT(A) HAD GIVEN SIMILAR FINDING WITHOUT CONSIDERIN G THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NA RESH KUMAR 362 ITR 256 (DEL.) AND THE SECOND PROVISO TO SECTION 40(A)( IA). LD. COUNSEL FURTHER REFERRED TO PAGES 31 TO 45 OF THE PB, WHEREIN DETAI LS OF PAYMENTS MADE WITH REFERENCE TO VARIOUS AMOUNTS IS CONTAINED AND POINT ED OUT THAT LD. CIT(A) HAS NOT PROPERLY CONSIDERED THE ISSUE. LD. COUNSEL ALSO RELIED ON THE DECISION OF TRIBUNAL IN THE CASE OF ITO V. DR. JAID EEP KUMAR SHARMA (2014) 34 ITR (TRIB) 565 (DEL.) 6.7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE HONBLE DELHI H IGH COURT IN THE CASE OF NARESH KUMAR (SUPRA), HAS HELD THAT AMENDMENT TO SE CTION 40(A)(IA) BY THE FINANCE ACT 2010 IS RETROSPECTIVE IN NATURE. THE HO NBLE HIGH COURT, INTER ALIA, OBSERVED IN PARA 26 AS UNDER: 26. PRINCIPLE OF MATCHING WHICH IS DISTURBED BY S ECTION 40(A)(IA) OF THE ACT, MAY NOT MATERIALLY BE OF CONS EQUENCE TO THE REVENUE WHEN THE TAX RATES ARE STABLE AND UNIFO RM OR IN CASES OF BIG ASSESSEES HAVING SUBSTANTIAL TURNOVER AND EQUALLY HUGE EXPENSES AS THEY HAVE NECESSARY CUSHION TO ABS ORB THE EFFECT. HOWEVER, MARGINAL AND MEDIUM TAXPAYERS, WH O WORK AT LOW G.P. RATE AND WHEN EXPENDITURE WHICH BECOMES SU BJECT MATTER OF AN ORDER UNDER SECTION 40(A)(IA) IS SUBST ANTIAL, CAN SUFFER SEVERE ADVERSE CONSEQUENCES AS IS APPARENT F ROM THE CASE OF NARESH KUMAR. TRANSFERRING OR SHIFTING EXP ENSES TO A SUBSEQUENT YEAR, IN SUCH CASES, WILL NOT WIPE OFF T HE ADVERSE EFFECT AND THE FINANCIAL STRESS. NEVERTHELESS THE SECTION 40(A)(IA) HAS TO BE GIVEN FULL PLAY KEEPING IN MIND THE OBJECT AND PURPOSE BEHIND THE SECTION. AT THE SAME TIME, THE 8 ITA NO.2735/D/11 & 2944/D/11 PROVISION CAN BE AND SHOULD BE INTERPRETED LIBERALL Y AND EQUITABLE SO THAT AN ASSESSEE SHOULD NOT SUFFER UNI NTENDED AND DELETERIOUS CONSEQUENCES BEYOND WHAT THE OBJECT AND PURPOSE OF THE PROVISION MANDATES. CASE OF NARESH KUMAR IS NOT ONE OF RARE CASES, BUT ONE OF SEVERAL CASES AS WE FIND THA T SECTION 40(A)(IA) IS INVOKED IN LARGE NUMBER OF CASES. 6.8. LD. CIT(A) HAS NOT CONSIDERED THE ISSUE IN THE LIGHT OF AFOREMENTIONED DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND T HE TRIBUNAL. THEREFORE, THE ISSUE IN QUESTION IS RESTORED BACK TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF AFOREMENTIONED DECISIONS. 7. GROUND NO. 5 IS NOT PRESSED. HENCE THE SAME STAN DS DISMISSED BEING NOT PRESSED. 8. APROPOS GROUND NO. 6, THE AO IS DIRECTED TO CONS IDER THE CARRY FORWARD OF BUSINESS LOSS AND UNABSORBED DEPRECIATIO N AS PER LAW. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. DEPARTMENTS APPEAL (AY 2944/DEL/2011) : 10. FOLLOWING GROUNDS ARE RAISED: 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRONE OUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(APPEALS), HAS ERRED IN DELETIN G THE ADDITION OF RS. 18,13,776/- MADE ON ACCOUNT OF PRIO R PERIOD EXPENSES 2.1. THE LEARNED CIT(A) IGNORED THE FINDING RECORD ED BY THE AO AND THE FACT THAT THE ASSESSEE IS MAINTAINING ME RCANTILE SYSTEM OF ACCOUNTING AND EXPENSES OF THE YEAR ONLY ALLOWABLE AS REVENUE EXPENDITURE OF THE YEAR. 9 ITA NO.2735/D/11 & 2944/D/11 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(APPEALS), HAS ERRED IN RESTRIC TING THE ADDITION U/S 40(A)(IA) OF THE ACT TO RS. 2,24,58,4 48/- AS AGAINST RS. 2,65,22,476/- MADE BY THE AO. 3.1. THE LD.CIT(A) IGNORED THE FINDING RECORDED BY THE AO AND THE FACT THAT THE ASSESSEE EITHER DID NOT DEPOS IT THE TDS WITH GOVT. ACCOUNT OR DEPOSITED THE SAME AFTER THE DUE DATE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(APPEALS), HAS ERRED IN DELETIN G THE ADDITION OF RS. 30,010/- AND RS. 10,77,960/- MADE O N ACCOUNT OF LOSS ON SALE OF STORES AND STORE/ SPARES WRITTEN OF F RESPECTIVELY. 4.1. THE LD. CIT(A) IGNORED THE FINDING RECORDED BY THE AO AND THE FACT THAT THE EXPENSES IN QUESTION ARE NOT REVENUE IN NATURE AND ARE NOT ALLOWABLE AS REVENUE EXPENDITURE . 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF T HE HEARING. 11. GROUND NO. 1 IS GENERAL AND REQUIRES NO ADJUDIC ATION. 12. APROPOS GROUND NOS. 2 AND 2.1, RELATING TO PRI OR PERIOD EXPENSES, BRIEF FACTS ARE THAT FROM THE P&L A/C, IT WAS NOTI CED THAT ASSESSEE HAD CLAIMED PRIOR PERIOD EXPENSES OF RS. 18,13,776/-. T HE AO REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THESE EXPENSES BE NOT DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE COMPANY. I N RESPONSE, THE ASSESSEES SUBMISSION WAS THAT THESE EXPENSES COULD NOT BE BOOKED IN THE RESPECTIVE YEAR TO WHICH THEY RELATE, AS, INTER ALI A, THE BILLS/ SUPPORTING DOCUMENTS FOR THE SAME HAD NOT BEEN RECEIVED IN TIM E, THEREFORE, NO SEPARATE DEDUCTION/ DISALLOWANCE WAS CALLED FOR ON THAT ACCO UNT. AFTER CONSIDERING THE ASSESSEES REPLY, THE AO DID NOT ACCEPT THE SAM E, INTER ALIA, OBSERVING THAT NO EVIDENCE HAD BEEN GIVEN TO PROVE THAT THE A FOREMENTIONED EXPENSES HAD ACTUALLY BEEN INCURRED DURING THE YEAR. 10 ITA NO.2735/D/11 & 2944/D/11 12.1. BEFORE LD. CIT(A) IT WAS, INTER ALIA, POINTED OUT THAT THE EXPENSES IN THE ABSENCE OF NECESSARY BILLS AND VOUCHERS, COULD NOT BE PROPERLY ESTIMATED AND FURTHER IT WAS POINTED OUT THAT THE WHOLE EXERC ISE WOULD BE TAX NEUTRAL BECAUSE OF THE COMPUTED LOSS WAS RS. 30,33,10,843/- . LD. CIT(A), ACCORDINGLY, DELETED THE ADDITION, INTER ALIA, OBSE RVING THAT IF THIS DISALLOWANCE IS TO BE SUSTAINED, THEN THE EXPENSES OF RS. 22,47,129/- PERTAINING TO THE YEAR UNDER CONSIDERATION BUT CLAI MED IN THE SUBSEQUENT ASSESSMENT YEAR WOULD HAVE TO BE ALLOWED ON ACCRUAL BASIS. AGGRIEVED, DEPARTMENT IS IN APPEAL BEFORE US. 12.2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT B ILLS FOR THE EXPENSES IN QUESTION WERE EITHER RECEIVED OR SETTLED DURING THE YEAR. THESE EXPENSES WERE ALSO PAID DURING THE YEAR IN QUESTION. HE SUBM ITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE ASSES SEE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR AY 2004-05 REPORTED AS CIT V. MODIPON LTD. 334 ITR 102 (DEL.). LD. COUNSEL ALSO SUBMITTED THAT IN AY 2006-07 THE CIT(A) DECIDED THE ISSUE AGAINST THE ASSESSEE IGNORING THE ORDER OF THE ITAT DATED 5-2-2 010 FOR AY 2004-05, WHICH WAS UPHELD BY THE HONBLE HIGH COURT. THE TRI BUNAL, VIDE ORDER DATED 28-6-2013 IN ITAT NO. 1056/DEL/2011 IN ASSES SEES CASE FOR AY 2006-07 HAS SET ASIDE THE ISSUE TO THE FILE OF AO. 12.3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. HONBLE DELHI HIGH COURT IN ASSESSEES O WN CASE HAS OBSERVED AS UNDER: EVEN WHEN THE ASSESSEE WAS FOLLOWING THE MERCANT ILE SYSTEM OF ACCOUNTING, THE EXPLANATION FURNISHED BY THE ASSESSEE WAS THAT THE EXPENSES WERE NOT BOOKED DUE TO NON-RE CEIPT OF DETAILS, INFORMATION THEREOF ON TIME, WHICH WAS BEY OND THE CONTROL OF THE ASSESSEE. IT WAS ALSO EXPLAINED THAT THESE 11 ITA NO.2735/D/11 & 2944/D/11 EXPENSES TO THE TUNE OF RS. 41.95 LAKHS WERE MARGIN AL AS COMPARED TO THE ENORMOUS SIZE OF THE ASSESSEE COMPA NY. IT WAS ALSO EXPLAINED THAT AS PER THE ACCOUNTING POLICY, F OLLOWED BY THE ASSESSEE, SUCH EXPENSES WERE BOOKED IN THE YEAR IN WHICH THEY WERE SETTLED FOR PAYMENT. THE TRIBUNAL WENT IN TO THE DETAILS OF EACH AND EVERY SUCH EXPENSE AND RECORDED THE FINDING OF FACT THAT ALL THESE EXPENSES WERE SETTLED DURING THIS YEAR. IT WAS ALSO RECORDED THAT MORE THAN 50 PER CENT OF EXP ENSES COULD BE CLAIMED ONLY ON ACTUAL PAYMENT, AS THEY WERE COV ERED UNDER SECTION 43B(D) OF THE INCOME-TAX ACT 1961. THE ASSE SSEE ALSO INFORMED THAT EVEN IN THE EARLIER YEAR, THE ASSESSE E HAD SHOWN POSITIVE INCOME AND PAID TAX THEREON. THEREFORE THE RE WAS NO LOSS OF REVENUE. HAD THIS EXPENSE BEEN ALLOWED IN T HE PREVIOUS YEAR, THE ASSESSEE WOULD HAVE PAID LESS TAX. THERE WAS NO NECESSITY TO INTERFERE WITH THE ORDER OF THE TRIBU NAL. 12.4. THEREFORE, NO INTERFERENCE IS CALLED FOR WITH THE ORDER OF LD. CIT(A), AS THE SAME IS IN CONFORMITY WITH THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT.. 13. APROPOS GROUND NO. 3 & 3.1 RELATING TO ADDITION U/S 40(A)(IA), FOR THE REASONS GIVEN BY US WHILE ADJUDICATING ASSESSEES A PPEAL, THIS ISSUE IS RESTORED TO THE FILE OF AO WITH SAME DIRECTIONS. 14. APROPOS GROUND NO. 4 & 4.1, RELATING TO ADDITIO N ON ACCOUNT OF LOSS ON SALE OF STORES AND STORE/SPARES WRITTEN OFF , THE A O NOTICED THAT THE ASSESSEE IN ITS P&L A/C HAD WRITTEN OFF RS. 10,77,960/- ON A CCOUNT OF STORES AND SPARES AND CLAIMED RS. 30,010/- ON SALE OF STORES AND AT THE SAME DIME DEPRECIATION ON MACHINERY SPARES WAS CLAIMED AT RS. 1,15,142/-. THE AO DISALLOWED THE CLAIM. IN APPEAL, THE CIT(A) DELETED THE ADDITION. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 14.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) IN DELETING THE IMPUGNED ADDITION HAS FOLLOWED 12 ITA NO.2735/D/11 & 2944/D/11 ITS OWN ORDER FOR AY 2006-07. THE ORDER OF THE CIT( A) FOR AY 2006-07, ON THE ISSUE IN QUESTION, HAS SINCE BEEN SET ASIDE BY THE ITAT VIDE ITS ORDER DATED 28-6-2013 (SUPRA), TO THE FILE OF AO FOR DECI SION AFRESH. THEREFORE, FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO THE MA TTER IS RESTORED TO THE FILE OF AO FOR DECISION AFRESH, IN ACCORDANCE WITH LAW. 15. GROUND NO. 5 IS GENERAL IN NATURE AND REQUIRES NO ADJUDICATION. 16. IN THE RESULT, BOTH THE APPEALS, FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN OPEN COURT ON 05-12-2014. SD/- SD/- ( A.T. VARKEY ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 05-12-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR