The ITO, Ward-8(2), Ahmedabad V. Suzuki Suitings Pvt.Ltd., Ahmedabad

ITA 296/AHD/2009

• Counselvise Citation: 29620514 RSA 2009
• Duration Of Justice: 3 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 30-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R AVARASI SRDR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.296 &1325/AHD/2009 ASSESSMENT YEARS: 2005-06 & 2006-07 INCOME TAX OFFICER, WARD-8(2), AHMEDABAD V/S . SUZUKI SUITINGS PVT. LTD., 72, SHREEJI CLLOTH MARKET, O/S. RAIPAUR, AHMEDABAD PAN NO.AACCS1008H (APPELLANT) .. (RESPONDENT) /BY ASSESSEE NONE /BY REVENUE MS. R AVARASI, SR-DR /DATE OF HEARING 03-04-2012 /DATE OF PRONOUNCEMENT 18-05-2012 O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THESE TWO APPEALS OF THE REVENUE ARE DIRECTED AGAI NST DIFFERENT ORDERS OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XVI, AH MEDABAD DATED 28-11- 2008 AND 23-02-2009 FOR THE ASSESSMENT YEARS 2005-0 6 AND 2006-07. SINCE THE COMMON ISSUES WITH ARE INVOLVED EXCEPT THE CHAN GE OF THE FIGURES IN THESE APPEALS. THEY WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. NONE APPEARED O N BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE. THEREFORE, THE APPEALS W ERE TAKEN UP FOR HEARING IN THE ABSENCE OF ASSESSEE. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. ITA NO.296/AHD/2009 (A.Y. 2005-06) 1. THE LD. CIT(A)XIV, AHMEDABAD ERRED IN LAW AND O N FACTS IN LOOKING TO THE FACTS OF THE CASE. ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 2 (I) THE C.I.T.(A) OUGHT TO HAVE UPHELD THE DECISION OF THE ASSESSING OFFICER IN MAKING ADDITIONS ON ACCOUNT OF INTEREST EXPENSES OF RS.3,02,663/- (II) THE C.I.T.(A) OUGHT TO HAVE UPHELD THE DECISIO N OF THE ASSESSING OFFICER IN MAKING ADDITIONS ON ACCOUNT OF DEPRECIAT ION ON CAR OF RS.1,02,400/- (III) THE C.I.T.(A) OUGHT TO HAVE UPHELD THE DECISI ON OF THE ASSESSING OFFICER IN MAKING ADDITIONS ON ACCOUNT OF PROCESSIN G AND OTHER EXPENSES OF RS.3,34,312/- (IV) THE C.I.T.(A) OUGHT TO HAVE UPHELD THE DECISIO N OF THE ASSESSING OFFICER IN MAKING ADDITIONS ON ACCOUNT OF KEYMAN IN SURANCE PREMIUM OF RS.2,13,829/-. (V) THE C.I.T.(A) OUGHT TO HAVE UPHELD THE DECISION OF THE ASSESSING OFFICER IN MAKING ADDITIONS ON ACCOUNT OF SALARY PA ID TO SMT. BIMLADEVI OF RS.1,62,500/- (VI) THE C.I.T.(A) OUGHT TO HAVE UPHELD THE DECISIO N OF THE ASSESSING OFFICER IN MAKING ADDITIONS ON ACCOUNT OF REJECTION OF BOOKS AND DISALLOWANCE OF RS.9,60,000/- (VII) THE C.I.T.(A) OUGHT TO HAVE UPHELD THE DECISI ON OF THE ASSESSING OFFICER IN MAKING ADDITIONS ON ACCOUNT OF TRAVELING EXPENSES OF RS.2,10,252/-. 2. THE BRIEF FACTS, GIVING RISE TO THE PRESENT APPE AL ARE THAT ASSESSEE FILED RETURN OF INCOME ON 31-10-2005 DECLARING TOTAL OF R S.4,58,230/- AND SAME WAS PROCESSED U/S. 143(1) OF THE INCOME-TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT). THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GREY CLOTHS. SUBSEQUENTLY, THE CASE WAS PICKED UP FOR SC RUTINY AND A NOTICE U/S. 143(2) OF THE ACT WAS SERVED UPON THE ASSESSEE. IT IS RECORDED BY THE ASSESSING OFFICER THAT IN RESPONSE TO THE SAID NOTI CE SHRI SHREYANSH SHAH, CA AND LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, SHRI RAJESH CHAUDHARY AND EMPLOYEE OF THE ASSESSEE-COMPANY ATTENDED THE A SSESSMENT PROCEEDINGS FROM-TIME-TO-TIME AND PRODUCED VARIOUS DETAILS AS CALLED FOR. IT IS ALSO RECORDED BY THE AO THAT THE EVIDENCE SO PRODUC ED WERE VERIFIED AND KEPT ON RECORD. THE AO RECORDED THAT THE ASSESSEE WAS RE QUESTED TO PRODUCE THE BOOKS, LEDGER CASH BOOK ALONG WITH VOUCHERS SO THAT THE GENUINENESS OF THE EXPENSES COULD BE VERIFIED. IT IS RECORDED BY THE A O THAT EXCEPT THREE LEDGERS NOTHING ELSE WAS PRODUCED. IT IS OBSERVED BY THE AO THAT A NOTICE WAS ISSUED AND DULY SERVED ON THE ASSESSEE AND HEARING WAS FIX ED ON 17-12-2007, ON ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 3 THIS DATE ALSO NEITHER BOOKS NOR VOUCHERS WERE PROD UCED. THE AO IN THE AFORESAID CIRCUMSTANCES REJECTED THE BOOKS OF ACCOU NT U/S 145(3) OF THE ACT AND PROCEEDED TO PASS BEST JUDGMENT ASSESSMENT U/S. 144 OF THE ACT. THE AO OBSERVED THAT THE ASSESSEE HAS FAILED TO PROVE ITS ACCOUNTS AS COMPLETED AND CORRECT. IT WAS OBSERVED THAT NOT PRODUCING THE VOU CHERS AND BOOKS, THE GENUINENESS COULD NOT BE PROVED. IT WAS ALSO OBSERV ED THERE WAS REDUCTION OF GROSS PROFIT (GP), AO IN SUCH CIRCUMSTANCES DISALLO WED 20% OF THE FOLLOWING EXPENSES:- (A) STORE CONSUMED RS. 9,23,753/- (B) CARRIAGE OUTWARD RS.17,70,623/- CUTTING PACKING, FOLDING EXPENSES RS.20,35,623/- TOTAL RS.47,29,999/- APART FROM THIS, THE ASSESSING OFFICER ALSO DISALLO WED INTEREST EXPENSES OF RS.3,02,663/-, THE DEPRECIATION CLAIMED ON CAR TO T HE TUNE OF RS.1,02,400/-, THE EXPENDITURE OF RS.3,34,312/- ON ACCOUNT OF PROC ESSING FEE AND STAMP FEE ETC., A SUM OF RS.2,54,886/- AS CLAIMED BY THE ASSE SSEE OF INSURANCE PREMIUM OF KEYMAN INSURANCE, DISALLOWANCE U/S.40A(I A) OF THE ACT TO THE TUNE OF RS.12,53,776/-AND THE AO ALSO DISALLOWED SALARY PAID TO SMT. BIMLADEVI PARASRAMPUNA TO THE TUNE OF RS.1,62,500/-. THUS, TO TAL DISALLOWANCE MADE BY THE AO WAS AT RS.35,80,789/- AND ASSESSED INCOME AT RS.40,50,673/-. THE ASSESSEE FEELING AGGRIEVED BY THIS ORDER OF ASSESSI NG OFFICER CARRIED THE MATTER BEFORE LD. CIT(A) BY WAY OF APPEAL. 3. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS DEL ETED THE DISALLOWANCE MADE ON ACCOUNT OF, DISALLOWANCE OF 20% OF EXPENSES FOR SHOWING LESS GP. LD. CIT(A), ALSO HELD THAT REJECTION OF BOOKS OF AC COUNT WAS NOT JUSTIFIED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER, L D. CIT(A) DELETED THE DISALLOWANCE OF INTEREST EXPENSES AS WELL AS DEPREC IATION CLAIMED ON CAR. THUS, LD. CIT(A) PARTLY ALLOWED THE APPEAL OF ASSES SEE. AGAINST THIS ORDER OF LD. CIT(A), REVENUE IS IN APPEAL BEFORE US. ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 4 4. THE FIRST ISSUE IN THIS APPEAL IS WITH REGARD TO DELETION OF DISALLOWANCE OF INTEREST EXPENSES OF RS.3,02,663/-. LD. DEPARTMENTA L REPRESENTATIVE ARGUED THAT THE DELETION OF DISALLOWANCES MADE ON ACCOUNT OF INTEREST EXPENSES ARE NOT JUSTIFIED. SHE ALSO SUBMITTED WRITTEN SUBMISSIO NS, WHICH ARE REPRODUCED AS UNDER:- THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD AD VANCED INTEREST FREE FUNDS TO M/S NEXGEN AND M/S. SUDARSHAN SYNTHETICS. IN PARA 1.3, PAGE 2 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER ( AO') HAS BROUGHT ON RECORD THAT THE ADVANCE WAS GIVEN TO M/S. NEXGEN IN A.Y. 2001-02 AND NOT ONCE HAVE THE GOODS BEEN SUPPLIED BY THE SAID P ARTY. THOUGH THE ASSESSEE SUBMITTED THAT RECOVERY SUIT HAS BEEN INIT IATED FOR RECOVERY OF THE SAID ADVANCE, THE ASSESSEE FAILED TO FURNISH AN Y DOCUMENTARY EVIDENCED FOR THE SAME. 1.2 IN THE CASE OF M/S. SUDHARSHAN SYNTHETICS, THE ASSESSING OFFICER, IN PAGE 2 OF THE ASSESSMENT ORDER, HAS BROUGHT ON RECO RD THAT NO GOODS WERE ACTUALLY SUPPLIED BY THE SAID PARTY TO THE ASS ESSEE EITHER IN THE YEAR UNDER CONSIDERATION OR IN THE NEXT YEAR. THE A SSESSING OFFICER HAS CATEGORICALLY MENTIONED IN THE ASSESSMENT ORDER THA T, ON VERIFICATION OF THE ITS ACCOUNT FOR THE CURRENT YEAR, IT IS VERY CLEAR THAT DURING THE YEAR, NO GOODS HAVE BEEN PURC HASED. ADVANCES HAVE BEEN GIVEN FROM 12-04-2004 TO FEBRUAR Y 2005. REPAYMENT IS ALSO RECEIVED DURING THE YEAR. IN THE NEXT YEAR, GOODS HAVE BEEN PURCHASED BUT PAYMENT HAS BEEN MADE BILL TO BILL. SO, THERE IS NO LINK WITH CURRENT YEAR ADVANC E. IN THE NEXT YEAR ON 31/03/2006, ONLY CLOSING AMOUNT IS ADJUSTED AGAI NST THE LOAN AMOUNT; 1.3 THIS CLEARLY SHOWS THAT THE SAID ADVANCES ARE N OT IN THE NATURE OF TRADE ADVANCES BUT WAS A LOAN/ADVANCE GIVEN TO THE SAID PARTIES FOR WHICH NO INTEREST WAS CHARGED BY THE ASSESSEE. 1.4 IN VIEW OF THE ABOVE FACTS, THE LD. CIT(A) OUGH T TO HAVE UPHELD THE DECISION OF THE ASSESSING OFFICER IN MAKING ADDITIO NS ON ACCOUNT OF INTEREST EXPENSES OF RS.3,062,663/-. THEREFORE, THE ORDER OF THE AO NEEDS TO BE RESTORED AND THE ADDITION MADE ON ACCOU NT OF INTEREST EXPENSES OF RS.3,062,663/- NEEDS TO BE CONFIRMED. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE, HOWEVER , WRITTEN SUBMISSION ARE ON RECORD. THE SUBMISSIONS OF THE ASSESSEE ARE THAT THE ASSESSING OFFICER MADE ADDITION OF INTEREST OF RS.3,02,663/- @ 15% ON ADVANCE OF ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 5 RS.20,17,755/-, ON THE GROUND THAT THERE IS DIVERSI ON OF BUSINESS PROFIT WITHOUT CHARGING ANY INTEREST. IT IS SUBMITTED THAT A SUM O F RS.7,23,200/- WAS PAID TO M/S. NEXGEN AND RS. 12,94,555/- TO M/S. SUDARSHAN S YNTHETICS. THE ASSESSEE RELIED UPON ON WRITTEN SUBMISSION MADE BEF ORE LD. CIT(A). THE ASSESSEE SUBMITTED THAT LD. CIT(A) HAS RIGHTLY TREA TED THE ADVANCES AS GIVEN FOR BUSINESS PURPOSES. IT IS SUBMITTED THAT IN CASE OF M/S. NEXGEN ADVANCE WAS GIVEN IN A.Y. 2001-02 FOR THE SUPPLY OF MATERIA L BUT THE PARTY DID NOT SUPPLY THE SAME. A RECOVERY SUIT WAS FILED AGAINST THE PARTY AND SAME IS PENDING FOR ADJUDICATION AND IN CASE OF M/S.SUDARSH AN SYNTHETICS COPY OF ACCOUNT SUBSEQUENT YEAR WAS FURNISHED TO AO VIDE LE TTER DATED 26-11-2007 FROM WHICH IT IS CLEAR THAT GREY CLOTH HAS BEEN PUR CHASED FROM THE PARTY AGAINST THE ADVANCE GIVEN. IT IS ALSO SUBMITTED BY THE ASSESSEE-COMPANY THAT IT WAS HAVING SUFFICIENT INTEREST FREE FUND IN THE FORM OF INTER COMPANY LOANS IN RESPECT OF WHICH NO INTEREST WAS PAID. THE ASSE SSEE RELIED UPON THE FOLLOWING CASE LAWS:- 1) ALMONA INVESTMENT 7 MARKETING PVT. LTD. V. ITO 2) CIT V. RELIANCE UTILITIES & POWER LTD. (2009) 18 DTR 1 (BOM) 3) TORRENT FINANCIERS V. ACIT (2001) 73 TTJ 624 (AH D) 4) ITO V. AJAY TEXTILE STORES (1997) 95 TAXMAN 164 (AHD) 5) OSWAL INDUSTRIES V. ACIT (2000) 109 TAXMAN 164 ( AHD) 5) GUJARAT NARMADA VALLEY FERTILIZER CO. LTD. V. DC IT (2000) 108 TAXMAN 213 (AHD) 6. WE HAVE HEARD THE LD. DR, PERUSED WRITTEN SUBMIS SIONS OF THE RESPECTIVE PARTIES AND MATERIALS AVAILABLE ON RECOR D. LD. CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE AND THE RELEVANT C ONTENTS OF THIS ORDER ARE REPRODUCED HEREINBELOW:- 3.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUB MISSIONS AS ADVANCED ALONG WITH THE JUDICIAL DECISI ONS, AS RELIED UPON BY HIM. THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDITED UNDER TAX AUDIT AND COMPANIES ACT AND THE A.O HAS NOT FOUND A NY DISCREPANCY FROM THE BOOKS OF ACCOUNTS. IT IS THE CONTENTION OF THE A.R THAT BOOKS WERE PRODUCED BEFORE THE A.O, THOUGH THE A.O HAS RE PORTED THAT ONLY PART BOOKS WERE PRODUCED. FROM THEE PERUSAL OF THE ASSESSMENT ORDER IT IS ALSO CLEAR THAT VARIOUS DISALLOWANCES MADE BY THE A.O ARE BASED ON THE DETAILS, INFORMATION AND BOOKS OF ACCOUNTS PROD UCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IT IS ONLY A L UMPSUM ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 6 DISALLOWANCE OF 20% HAS BEEN MADE OUT OF EXPENSES U NDER THE HEADS OF STORES, CARRIAGE TRANSPORT, CUTTING AND PACKING EXPENSES BY THE A.O AND NO DEFECTS HAVE BEEN POINTED OUT BY THE A.O WHI LE DISALLOWING THE SAID LUMPSUM AMOUNT OF 20%. THEREFORE, IN THE FACTS OF THE CASE AND RELYING ON THE CASE LAWS, I HOLD THAT THE A.O HAS N O MATERIAL TO REJECT THE BOOKS OF ACCOUNTS, HENCE THIS GROUND IS ALLOWED IN FAVOUR OF THE APPELLANT. FROM THE ABOVE ORDER, IT IS EVIDENT THAT LD. CIT(A) HAS GIVEN A FINDING OF FACT THAT THE ADVANCES WERE GIVEN FOR BUSINESS PURPOSES. LD. DR COULD NOT PLACE ANYTHING CONTRARY ON RECORD. THE FACT THAT ASSESSEE WAS HAVING SUFFICIENT FUNDS IS NOT REBUTTED AS WELL AS THE FACT THAT ASSE SSEE WAS HAVING BUSINESS RELATIONSHIP WITH THE PARTIES IS ALSO NOT CONTROVER TED BY THE REVENUE. IN VIEW OF THE FACT THAT REVENUE COULD NOT PLACE ON RECORD ANYTHING CONTRARY TO THE FINDING OF LD. CIT(A), HENCE, WE FIND NO INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A). THEREFORE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 7. NEXT GROUND RELATES TO THE DELETION OF ADDITION MADE ON ACCOUNT OF DEPRECIATION OF CAR AMOUNTING TO RS.1,,02,400/-. LD . DR SUBMITTED THAT LD. CIT(A) ERRED IN DELETION OF DISALLOWANCE MADE ON AC COUNT OF DEPRECIATION ON CAR. LD. DR SUBMITTED THAT THE ASSESSING OFFICER HA D RELIED ON THE DECISION OF ITAT IN THE CASE OF ACIT V. UNITED MOTOR TRANSPORT SERVICE ASSOCIATION (1991) 190 ITR 13. IT IS SUBMITTED BY THE LD. DR TH AT LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF AO AND MAKE ON ACCOUNT OF DEPRE CIATION ON CAR OF RS.1,02,400/-. ON THE CONTRARY, WRITTEN SUBMISSION OF THE ASSESSEE IS THAT AO MADE THE ADDITION BECAUSE CAR WAS NOT REGISTERED IN THE NAME OF ASSESSEE- COMPANY BUT IN THE NAME OF DIRECTOR. SINCE THE CAR IS NOT OWNED BY THE ASSESSEE-COMPANY AO WORKED OUT THE DEPRECIATION AND MADE ADDITION. IT IS SUBMITTED BY THE ASSESSEE THE PAYMENT FOR PURCHASE MADE BY THE ASSESSEE- COMPANY THE CAR WHOLLY AND EXCLUSIVELY USED FOR THE BUSINESS PURPOSES AND THE CAR IN QUESTION IS SHOWN IN THE BALANCE-SHEET O F THE ASSESSEE-COMPANY AS ASSET. THE ASSESSEE-COMPANY RELIED UPON THE FOLLOWI NG CASE LAWS:- 1) MYSORE MINERALS LTD. V. CIT 239 ITR 775 (SC) 2) CIT V. BASTI SUGAR MILS CO. LTD. 257 ITR 88 (DE L) 3) CIT V. MOHD BUX SHOKAT ALI 118 TAXMAN 712 (RAJ) ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 7 4) ACIT V. DILIP SINGH SARDARSINGH BAGGA 201 ITR 9 95 (BOM) LD. CIT(A) OBSERVED THAT SINCE THE VEHICLE HAS BEEN PURCHASED OUT OF THE FUNDS OF THE ASSESSEE-COMPANY AND THE SAME HAS BEEN USED ENTIRELY FOR ITS BUSINESS, THE DISALLOWANCE OF DEPRECIATION ON SUCH VEHICLE IS NOT JUSTIFIED ON THE BASIS THAT THE REGISTRATION OF SUCH VEHICLE WAS DONE IN THE NAME OF DIRECTOR BUT NOT IN THE NAME OF ASSESSEE-COMPANY. 8. WE ARE IN AGREEMENT WITH THE VIEW EXPRESSED BY L D. CIT(A) AND MORE PARTICULARLY IN VIEW OF THE RATIO LAID BY THE HONB LE APEX COURT IN MYSORE MILLS V. CIT 239 ITR 775 (SC). THE JUDGMENT AS RELIED BY THE RE VENUE IS DISTINGUISHABLE, AS IN THE PRESENT CASE, CAR IS PUR CHASED OUT OF THE FUNDS OF COMPANY AND USED FOR THE BUSINESS OF COMPANY AND US ED FOR THE BUSINESS OF THE COMPANY. THE COMPANY HAS SHOWN THE CAR IN THE B LOCK OF ASSETS IN ITS BOOKS OF ACCOUNT. THEREFORE RESPECTFULLY FOLLOWING RATIO LAID BY THE HONBLE APEX COURT IN THE CASE OF MYSORE MILLS (SUPRA) THE GROUND OF REVENUES APPEAL IS DISMISSED. 9. NEXT GROUND RELATES TO PROCESS AND OTHER EXPENSE S OF RS.3,34,312/-. THE SUBMISSION OF LD. DR IS THAT THE ASSESSEE CLAIM ED PROCESSING FEE PAID TO HDFC OF RS.2.50 LAKH IN PAGE-7 OF THE ASSESSMENT OR DER. THE ASSESSING OFFICER HAS CATEGORICALLY BROUGHT ON RECORD THAT TH E SAID EXPENSES HAVE BEEN INCURRED FOR OBTAINING A LOAN AND THAT THE BENEFIT OF THE SAME WILL BE RECEIVABLE OVER A NUMBER OF YEARS. THEREFORE, THE AO HAS ALLOW ED 1/5 TH OF THE PROCESSING FEES AND HAS DISALLOWED THE BALANCE AMOUNT OF RS.3, 34,312/-. IN VIEW OF THE ABOVE FACTS, THE LD. CIT(A) OUGHT TO HAVE UPHELD TH E DECISION OF THE AO IN MAKING ADDITIONS ON ACCOUNT OF PROCESSING AND OTHER EXPENSES OF RS.3,34,312/-. THEREFORE, THE ORDER OF THE AO NEEDS TO BE RESTORED AND THE ADDITION MADE ON ACCOUNT OF PROCESSING AND OTHER EX PENSES OF RS.3,34,312/- NEEDS TO BE CONFIRMED. ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 8 10. ON THE CONTRARY, THE SUBMISSION OF THE ASSESSEE IS THAT THE ASSESSING OFFICER DISALLOWED THE ADDITION THAT THESE ARE CHAR GES IN THE NATURE OF CAPITAL EXPENDITURE AND THE BENEFIT OF IT WILL BE RECEIVABL E OVER NUMBER OF YEARS. THE PROCESSING FEE OF RS.2.50 LAKH AND STAMP FEE OF RS. 1,67,890/- AGGREGATING TO RS.4.17,890/- OUT OF WHICH 1/5 TH IS ALLOWED AND BALANCE OF RS.3,34,312/- IS DISALLOWED BY AO. IT IS SUBMITTED BY ASSESSEE THAT THE AFORESAID EXPENSES HAVE BEEN INCURRED FOR OBTAINING WORKING CAPITAL OF THE ASSESSEE AND SAME IS USED FOR DAY-TO-DAY BUSINESS AND THERE WAS NO ENDUR ING BENEFIT. THE EXPENSES HAVE BEEN ALLOWED IN EARLIER YEARS AND REV ENUE HAS ACCEPTED THE SAME. THIS FACT WAS DULY COMMUNICATED TO AO ALONG W ITH DOCUMENTARY PROOFS, VIDE LETTER DATED 14-12-2007. 11. WE FIND THAT LD. CIT(A) HAS OBSERVED THAT HE WA S AGREED WITH THE CONTENTION OF THE ASSESSEE THAT THE EXPENSE OF PROC ESSING CHARGE AND STAMP FEE WERE INCURRED IN RELATION TO WORKING CAPITAL OF THE ASSESSEE-COMPANY AND SAME WAS USED BY THE ASSESSEE FOR DAY-TO-DAY BUSINE SS AND THERE WAS NO ENDURING BENEFIT. HENCE, SAME SHOULD BE ALLOWED AS REVENUE EXPENDITURE. THEREFORE, THERE IS A CATEGORICAL FINDING OF FACT B Y THE LD. CIT(A) IN RESPECT OF EXPENSES INCURRED IN THE WORKING CAPITAL TO BE USED FOR DAY-TO-DAY BUSINESS OF THE ASSESSEE. IN VIEW OF THE FACT THAT EXPENSES WER E INCURRED ON ACCOUNT OF C.C. LIMIT AND USED FOR DAY-TO-DAY BUSINESS OF THE ASSESSEE BUT NOT AS FOR OBTAINING ENDURING BENEFIT. IN VIEW OF THIS FACT, W E DO NOT FIND ANY INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A). THIS GROUND OF REVE NUES APPEAL IS DISMISSED. 12. NEXT GROUND RELATES TO THE DISALLOWANCE KEYMAN INSURANCE PREMIUM OF RS.2,13,829/-. LD. DR SUBMITTED THAT ASSESSING OFFI CER HAS ENUMERATED POLICY TAKEN BY THE ASSESSEE AND THE REASONS ON THE KEYMAN POLICY. IT IS SUBMITTED BY THE LD. DR THAT AO HAS BROUGHT ON RECORD THAT PO LICIES WERE NOT KEYMAN INSURANCE POLICY BUT WERE ENDOWMENT POLICY, JEEVANS HRI POLICY OR WHOLE LIFE PARTICIPATING PLAN. IT IS SUBMITTED THAT THE AO HAS BROUGHT ON RECORD THAT IN NONE OF THE CASES, THE ASSESSEE IS THE PROPOSER OF THE POLICY. IT IS SUBMITTED ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 9 THAT THE DIRECTORS ARE THE PROPOSERS OF THE POLICIE S. IT IS ALSO POINTED OUT THAT SHRI BIHARILAL PARASRAMPURA, WHO IS NOT A WORKING D IRECTOR AND THEREFORE IS NOT A KEYMAN. SIMILARLY WHOLE LIFE PARTICIPATING PLAN W AS IN THE NAME OF SMT. BIMLADEVI WHO IS ALSO NOT A KEYMAN. ON THE CONTRARY , THE ASSESSEE SUBMITTED THAT THE AO DISALLOWED THAT THE POLICIES ARE NOT KE YMAN AND REASONS FOR SUCH DISALLOWANCE ARE STATED TO BE THAT THE ASSESSEE-COM PANY IS NOT PROPOSERS BECAUSE THE MATURITY WILL GO TO THE DIRECTOR INSTEA D OF ASSESSEE-COMPANY. THE POLICY NO. 834445842 IS TAKEN IN THE NAME OF BIHARI LAL PARASRAMPURIA WHO IS NOT WORKING DIRECTOR AND WHOLE LIFE PARTICIPATION P LAN IS TAKEN IN THE NAME OF SMT. BIMLADEVI WHO IS NOT KEYMAN. IT IS SUBMITTED T HAT ALL THE POLICIES WERE ISSUED IN THE NAME OF ASSESSEE EXCEPT POLICY IN THE NAME OF B L.PARASRAMPURIA. IT IS SUBMITTED THAT NECESSARY CER TIFICATE ARE ENCLOSED IN SUPPORT OF THE CONTENTION THAT THE POLICIES ARE KEY MAN POLICY. LD. CIT(A) HAS CATEGORICALLY RETURNED A FINDING THAT OUT OF THE FO UR POLICY CONSIDERED FOR THE ASSESSEE FOR DISALLOWANCE. IT IS SEEN THAT TWO POLI CIES ISSUED BY MAX NEWYORK LIFE INSURANCE CO. NO.834434392 ISSUED BY LIC ARE K EYMAN POLICY AS PER CERTIFICATES ISSUED BY MAX NEWYORK LIFE AND LIC AT PAGE 85 OF THE PAPER BOOK OF THE ASSESSEE AND THE PROPOSERS IS ASSESSEE-COMPA NY IN THE CASE OF 3 POLICY. HENCE, LD. CIT(A) ALLOWED THE PREMIUM PAID IN RESPECT OF THESE POLICIES. HOWEVER, THE PREMIUM PAID FOR THE POLICY NO.834445842 OF LIC PERTAINING TO SHRI B.L PARASRAMPURIA OF RS.41,057/- WAS CONFIRMED BY THE LD. CIT(A). 13. WE FIND THAT LD. CIT(A) HAS GIVEN A FINDING OF FACT THAT OUT OF 4 POLICIES AS PER CERTIFICATE ISSUED BY THE CONCERNED COMPANY 3 ARE KEYMAN POLICY. IN VIEW OF THE FACT THAT LD. CIT(A) HAS GIVEN A FINDIN G OF FACT AND SAME HAS NOT BEEN REBUTTED WITH THE CONTRARY EVIDENCE. HENCE, WE DO NOT FIND ANY INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A) AND SAME IS CON FIRMED. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 14. NEXT GROUND RELATES TO DELETION OF ADDITION MAD E ON ACCOUNT OF SALARY PAID TO SMT. BIMLADEVI OF RS.1,62,500/-. THE CONTE NTION OF THE REVENUE IS ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 10 THAT ASSESSING OFFICER IN PAGE-12 OF HIS ASSESSMENT ORDER HAS BROUGHT ON RECORD THAT ASSESSEE WAS REQUESTED TO PRODUCE SMT. BIMALADEVI FOR CROSS- EXAMINATION AND PROVE THE GENUINENESS OF THE EXPENS E SINCE ASSESSEE FAILED TO PRODUCE SMT. BIMALADEVI FOR VERIFICATION AND FAI LED TO DISCHARGE ONUS OF PROVING THE EXPENSE. THE SAID PAYMENT OF REMUNERATI ON WAS DISALLOWED. IT IS SUBMITTED IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THIS CASE LD. CIT(A) OUGHT TO HAVE UPHELD THE DECISION OF THE AO IN MAKING ADD ITION ON ACCOUNT OF SALARY PAID TO SMT. BIMLADEVI OF RS.1,62,500/-. ON THE CON TRARY, IT IS THE SUBMISSION OF THE ASSESSEE THAT AO DISALLOWED THE SALARY ON GR OUND THAT ASSESSEE- COMPANY FAILED TO PRODUCE SMT BIMALADEVI FOR CROSS- EXAMINATION BEFORE AO AND THEREFORE THE GENUINENESS OF THE EXPENSE WAS NO T PROVED. IT WAS SUBMITTED THAT SMT. BIMALADEVI WAS A WORKING DIRECT OR SINCE LAST 20 YEARS AND WAS HANDLING ADMINISTRATIVE WORK. IT WAS SUBMITTED THAT SALARY PAID TO HER IS JUSTIFIED AND REASONABLE AND NOT EXCESSIVE. THEREFO RE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION ON THE GROUND THAT AO HAS NOT ESTABLISHED THAT PAYMENT MADE EXCESSIVE AND REASONABLE BY MAKING A COMPARISO N WITH THE PREVAILING MARKET VALUE OF SERVICE. IT WAS SUBMITTED THAT AO C OULD NOT BRING ANY EVIDENCE/DETAIL ON RECORD WHICH COULD ESTABLISH THA T THE PAYMENT IS EXCESSIVE REMUNERATION. THE LD. CIT(A) HAS RIGHTLY ALLOWED TH E SAME AND RELIED ON THE JUDGMENT OF ALLAHABAD HIGH COURT IN THE CASE OF ABBAS WAZIR (P) LTD. V CIT (2003) 133 TAXMAN 702 (ALL). IT IS OBSERVED BY LD. CIT(A) THAT SMT. BIMLADEVI PARSAMPURIA HAS BEEN IN SERVICE OF THE ASSESSEE-COM PANY FOR MORE THAN 20 YEARS AND HAD BEEN DOING THE ADMINISTRATIVE WORK AS A DIRECTOR. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT FOR DISALLOWANCE THE SALARY TO AN EMPLOYEE, THE AO HAS TO ESTABLISH THAT PAYMENT WAS MADE ARE EXCESSIVE AND UNREASONABLE BUT MAKING A COMPARISON WITH THE PREVAILING MARKET VALUE OF THE SERVICE. IT IS OBSERVED BY LD. CIT(A) THAT THERE WAS NO DOUBT THAT SMT. BIMLADEVI PARASAMPURIA WAS ON THE P AY ROLL OF THE ASSESSEE- COMPANY AND IT WAS UP TO THE ASSESSEE TO DECIDE THE SALARY OF ANY EMPLOYEE CONSIDERING THE JOB PROFILE ETC. ADMITTEDLY, THE FA CTUM OF WORKING AS DIRECTOR OF SMT. BIMLADEVI PARASAMPURIA IS NOT REFUTED BY THE R EVENUE. IT IS ALSO NOT A ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 11 CASE WHERE THE AO HAS RETURNED A FINDING THAT THE S ALARY MADE TO SMT. BIMLADEVI IS EXCESSIVE AND UNREASONABLE AS COMPARE TO PREVAILING MARKET VALUE OF SERVICE. IN VIEW OF THIS, WE DO NOT FIND A NY INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A) AND SAME IS CONFIRMED. THIS GR OUND OF REVENUES APPEAL IS DISMISSED. 15. NEXT GROUND HAS TAKEN BY REVENUE IS AGAINST THE DELETION OF RS.9.60 LAKH MADE ON ACCOUNT OF REJECTION OF BOOKS. WE FIND THAT NO GROUND HAS BEEN RAISED BY REVENUE AGAINST THE ORDER OF LD. CIT(A), WHEREBY HE HAS HELD THAT ASSESSING OFFICER HAS NO MATERIAL TO REJECT THE BOO KS OF ACCOUNT. IN VIEW OF THE FINDING OF FACT THAT AS RERETURNED BY LD. CIT(A) TH AT AO HAS NO MATERIAL TO REJECT THE BOOKS HAS NOT BEEN CHALLENGED BY THE REV ENUE. IN VIEW OF THIS MATTER, THE ADDITION MADE ON THIS ACCOUNT CANNOT BE ACCEPTED. WE DO NOT FIND ANY INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A). THIS GROUND OF REVENUES APPEAL IS DISMISSED. 16. NEXT GROUND RELATES TO TRAVELING EXPENSES OF RS .2,10,252/-. IT IS SUBMITTED BY LD. DR THAT ASSESSING OFFICER BROUGHT ON RECORD THAT ASSESSEE FAILED TO FURNISH ANY DETAILS REGARDING TRAVELING E XPENSES OF RS.2,10,252/- WHICH WAS SPECIFICALLY CALLED FOR. IT IS SUBMITTED BY DR THAT AO DISALLOWED THE SAID AMOUNT AS THE GENUINENESS OF THE SAME WAS NOT PROVED BY THE ASSESSEE. ON THE CONTRARY, LD. AR SUBMITTED THAT EX PENSES OF SMT. BHAVNABEN PARASRAMPURIA WAS INCURRED FOR THE TRIP T O MUMBAI AND KOLKATA FOR BUSINESS PURPOSES AND TRIP WAS UNDERTAKEN TO MEET T HE SALES PARTIES AND ADDRESS THEIR GRIEVANCES TO ENSURE THE CONSISTENT B USINESS WITH THE SAID PARTIES AND THEREFORE EXCLUSIVELY FOR BUSINESS PURP OSES. THE EXPENSE OF SHRI ARUN PARASRAMPURIA WAS ALSO INCURRED FOR SIMILAR PU RPOSES AS HE WAS HANDLING ENTIRE MARKETING FINANCE AND ADMINISTRATIV E FUNCTIONS OF THE COMPANY. 17. WE FIND THAT LD. CIT(A) HAS GIVEN A FINDING IN PARA-12.2 OF HIS ORDER WHICH REPRODUCED AS UNDER:- ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 12 12.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT THE EXPENSES ON TRAV ELING IN THE CASES OF BOTH SMT. BHAVNABEN PRASARAMPURIA AND SHRI ARUN PARASARA MPURIA HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF APPELLANT, AS THE TIPS WERE UNDERTAKEN TO BOMBAY & CALCUTTA FOR MEETING THE CLI ENTS ETC., AND BOTH WERE WORKING AS DIRECTORS OF THE COMPANY AND HANDLING TH E ADMINISTRATION, FINANCE, MARKETING ETC. IT APPEARS THAT THE A.O WHILE MAKING DISALLOWANCE DID NOT VERIFY THE DETAILS FURNISHED IN RESPECT OF THE TRAV ELING EXPENSES AND HE DID NOT BRING ANY CONCRETE EVIDENCE/MATERIALS TO PROVE THAT THE EXPENSES ON TRAVELING WERE INCURRED FOR NON-BUSINESS PURPOSES. I, THEREFO RE, DIRECT THE A.O TO ALLOW THESE EXPENSES INCURRED ON TRAVELING. IN VIEW OF THE FACT THAT REVENUE COULD NOT ESTABLIS H THAT THE PERSONS WERE NOT ENGAGED FOR THE WORK OF THE ASSESSEE-COMPANY, ON TH E CONTRARY, THERE IS A FINDING OF FACT THAT SMT. BHAVNABEN PRASARAMPURIA A ND SHRI ARUN PARASARAMPURIA HAVE BEEN HANDLING THE ADMINISTRATIV E AND OFFICE WORK OF THE ASSESSEE-COMPANY. IN THE COURSE OF EMPLOYEE BOTH HA VE BEEN TRAVELED VARIOUS PLACES INCLUDING BOMBAY AND KOLKATA. IN VIE W OF THIS MATTER, THE EXPENSES HAVE CLAIMED ARE REASONABLE. THEREFORE WE DO NOT FIND ANY INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A) AND SAME IS CON FIRMED. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 18. IN THE RESULT, REVENUES APPEAL IS DISMISSED. COMING TO ITA NO.1325/AHD.2009 FOR A.Y. 2006-07. 19. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF CLAIM OF INTEREST EXPENSES OF RS.1, 08,480/- 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION ON CAR OF RS.61,440/- 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF KEYMAN INSURANCE PREMIUM OF RS.2,85 ,100/- 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF CLAIM FOR SALARY PAID TO SMT. BIMLA PARASAMPURIA OF RS.1,50,000/-. 20. THE FIRST GROUND RELATES TO DISALLOWANCE OF INT EREST EXPENSES. THE FACT ARE IDENTICAL AS IN ITA NO.296/AHD/2009 AND WE HAVE ALREADY DISCUSSED IN ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 13 PARA-4 TO 6. THEREFORE, OUR DECISION IN ITA NO.296/ AHD/2009 THIS GROUND OF REVENUES APPEAL IS DISMISSED. 21. NEXT GROUND RELATES TO DEPRECIATION ON CAR. THE FACT ARE IDENTICAL AS IN ITA NO.296/AHD/2009 AND WE HAVE ALREADY DISCUSSED I N PARA -7 OF THIS ORDER, HENCE THIS GROUND OF REVENUES APPEAL IS DISMISSED. 22. NEXT GROUND RELATES TO DISALLOWANCE OF KEYMAN I NSURANCE PREMIUM. THE FACT ARE IDENTICAL AS IN ITA NO.296/AHD/2009 AN D WE HAVE ALREADY DISCUSSED IN PARA-11 & 12 OF THIS ORDER. HENCE, THI S GROUND OF REVENUES APPEAL IS DISMISSED. 23. NEXT GROUND RELATES TO DISALLOWANCE OF SALARY P AID TO SMT. BIMLA PRASAMPURIA. THE FACT ARE IDENTICAL AS IN ITA NO. 2 96/AHD/2009 AND WE HAVE ALREADY DISCUSSED IN PARA-13 OF THIS. HENCE, THIS G ROUND OF REVENUES APPEAL IS DISMISSED. 24. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 25. IN COMBINE RESULT, BOTH THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP - 18/05/2012 '#$ % & ' ' ' ' ())*+, ())*+, ())*+, ())*+, '-+ '-+ '-+ '-+ / COPY OF ORDER FORWARDED TO:- 1. ',/* 01 / APPELLANT 2. (2301 / RESPONDENT 3. %)5 3 36 / CONCERNED CIT 4. 3 36- ',/* / CIT (A) 5. +8 9/3 ()))5, 3 ',/*/3 ')5, '#$ % / DR, ITAT, AHMEDABAD 6. 9 <= > ?* / GUARD FILE. ITA NO.296 & 1325/AHD/2009 A.YS. 05-06 & 06-07 ITO WD-8(2) ABD V. SUZUKI SUITINGS PVT. LTD. PAGE 14 BY ORDER/ ' , /TRUE COPY/ @,/# 3 , / 3 ',/*/3 ')5, '#$ % & STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 14/05 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 15/05 4) DATE OF CORRECTION 16/05, 16/05 5) DATE OF FURTHER CORRECTION -- 6) DATE OF INITIAL SIGN BY MEMBERS 17/05 7) ORDER UPLOADED ON 18/05 8) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 18/05