Shri Manoj Kumar Gupta, Jaipur V. ITO, WARD 5(2), JAIPUR

ITA 307/JPR/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3275 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 02-11-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M L BORAD; DHIRAJ BORAD
• Keywords: Business income; Depreciation; Business expenditure; Corroborative evidences; Capital expenditure
• Section: 40A(3); 37(1); 44AB; 13; 22; 68; 37

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES B JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 307/JP/2020 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2012-13 SH. MANOJ KUMAR GUPTA, PROP. GUPTA COMPUTERS, B-23, GOVIND MARG, ADARSH NAGAR, JAIPUR CUKE VS. ITO, WARD-5(2), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ADFPG5504K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. M L. BORAD (ADV.) & SH. D HIRAJ BORAD (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. MONISHA CHOUDHARY (ADDL. CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 08/02/2021 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 04/05/2021 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, JAIPUR DATED 26.07.2019 WHEREIN THE ASSES SEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER THE LAW THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A) IS NOT MAINTAINABLE AND LIABLE TO BE CANCELLED. 2. THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THA T IN THIS CASE BOOKS OF ACCOUNTS WERE NOT REJECTED BY THE AO AND T HE LEARNED CIT(A) FURTHER FAILED TO APPRECIATE THAT WITHOUT RE JECTION OF BOOKS OF ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 2 ACCOUNTS NO DISALLOWANCE OF BUSINESS EXPENSES COULD HAVE BEEN SUSTAINED. 3. THAT THE LEARNED COMMISSIONER (APPEALS) ERRED IN SUSTAINING DISALLOWANCE OF RS. 10,94,370/- WITH REGARD TO SIKK IM MANIPAL UNIVERSITY (SMU) ADMISSION EXPENSES (WHICH INTER AL IA INCLUDE DISCOUNT AND REFERRAL BONUS GIVEN TO THE STUDENTS, WAIVER OF LATE FEES ETC), WHICH SUSTAINING OF DISALLOWANCE OF RS. 10,94,370/- IS MOST ARBITRARY, UNJUST, UNTENABLE IN FACT AND IN LA W AND IN THE ALTERNATIVE EXCESSIVE W.R.T FACTS AND CIRCUMSTANCES OF THE CASE. 4. THAT THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF RS. 87,687/- BEING 50% OF TOTAL DIS ALLOWANCE OF EXPENSES OF RS. 1,75,374/- (OUT OF COMPUTER INSTALL ATION EXPENSES AT RS. 35,000/- PLUS OUT OF CASH PAYMENTS OF RS. 3,61, 500/- MADE TO VARIOUS PERSONS IN REGARD TO EXPENSES INCURRED ON V ISITING FACULTIES AT RS. 90,375/- PLUS OUT OF VEHICLE RUNNING & MAINT ENANCE AND DEPRECIATION AT RS. 30,000/- PLUS OUT OF TELEPHONE/ MOBILE EXPENSES AT RS. 20,000/-) MADE BY THE AO, WHICH CONFIRMATION OF DISALLOWANCE OF RS. 87,687/- IS MOST ARBITRARY, UNJ UST AND IN THE ALTERNATIVE EXCESSIVE W.R.T FACTS AND CIRCUMSTANCES OF THE CASE. 2. AT THE OUTSET, IT IS NOTED THAT THERE IS DELAY I N FILING THE PRESENT APPEAL. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE ASSESSEE ON RECEIPT OF THE ORDER FROM THE LD. CIT(A) IN MONTH OF AUGUST , 2019 HAS INSTRUCTED HIS COUNSEL TO FILE THE APPEAL BEFORE THE TRIBUNAL AND THE FILING FEES OF RS. 10,000/- WAS ALSO DEPOSITED ON 13.09.2019 WITHI N STATUTORY TIME LIMIT OF 60 DAYS FROM THE DATE OF RECEIPT OF ORDER OF THE LD. CIT(A) AND THEREAFTER, THE ASSESSEE WAS UNDER IMPRESSION THAT THE APPEAL WOULD HAVE BEEN FILED WITHIN STIPULATED TIME LIMIT. SUBSEQUENT LY, THERE HAS BEEN A CHANGE IN THE COUNSEL AND THE NEW COUNSEL ON HIS AP POINTMENT AFTER ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 3 EXAMINATION OF THE ASSESSEES APPEAL DOCUMENTATION FOUND THAT APPEAL FOR THE IMPUGNED ASSESSMENT YEAR HAS NOT BEEN FILED, A FACT WHICH HAS BEEN CONFIRMED BY THE EARLIER COUNSEL. IT WAS SUBMITTED THAT THERE IS NO DENYING THE FACT THAT THERE HAS BEEN A DELAY IN FIL ING THE PRESENT APPEAL, HOWEVER, SUCH A DELAY HAS HAPPENED ON ACCOUNT OF MI STAKE ON PART OF THE EARLIER COUNSEL IN TAKING NECESSARY ACTION AND THE ASSESSEE CANNOT BE PENALIZED FOR FAULT ON PART OF THE COUNSEL. IT WAS ACCORDINGLY SUBMITTED THAT THE DELAY MAY BE CONDONED AND THE APPEAL MAY B E ADMITTED FOR NECESSARY ADJUDICATION ON MERITS. 3. THE LD. DR HAS HOWEVER OPPOSED THE ASSESSEES PR AYER FOR CONDONING THE DELAY AND SUBMITTED THAT THERE HAS BE EN A SUBSTANTIAL DELAY IN FILING THE PRESENT APPEAL AND THE ASSESSEE HAS F AILED TO EXPLAIN THE SAME. 4. HEARD BOTH THE PARTIES AND PURSUED MATERIAL AVAI LABLE ON RECORD INCLUDING THE AFFIDAVIT SUBMITTED BY THE ASSESSEE. THE SUBSTANTIAL JUSTICE SHOULD PREVAIL OVER THE PROCEDURAL OR TECHNICAL ASP ECTS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHERE THERE HAS BEEN A D ELAY ADMITTEDLY ON ACCOUNT OF COUNSELS FAULT, THE ASSESSEE CANNOT BE PENALIZED BY TAKING AWAY HIS LAWFUL RIGHT TO CHALLENGE THE ORDER OF THE LOWER AUTHORITIES. THEREFORE, THE DELAY IS HEREBY CONDONED AND THE APP EAL IS ADMITTED FOR ADJUDICATION ON MERITS. 5. ON MERITS, THE LD. AR RAISED VARIOUS CONTENTIONS AND RELIED ON THE WRITTEN SUBMISSIONS WHICH READ AS UNDER:- GROUND OF APPEAL NO. 1 ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 4 1. THAT THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE RELAVANT ASSESSMENT ORDER PASSED BY THE A.O. WAS VITIATED AN D BAD AND NOT MAINTAINABLE IN FACT AND IN LAW BECAUSE IT WAS PASS ED BY THE AO WITHOUT MAKING ANY INQUIRIES. 2. THAT THE LEARNED CIT(A) FAILED TO TAKE INTO CONSIDE RATIONS THE FACT THAT THE ASSESSEE DULY DISCHARGED ITS BURDEN OF PRO OF BY PROVIDING BASIC DETAILS BEFORE THE A.O. WHICH HE ASKED THE ASSESSEE TO PRODUCE IN THE COURSE OF ASSESSMENT PROCEEDINGS. GROUND OF APPEAL NO. 2 1. THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE REGULARLY MAINTAINED BOOKS OF ACCOUNT CONSISTING OF CASH BOOK, LEDGER, STOCK REGISTER, PURCHASE/SALE INVOICES AND VOUCHERS FOR EXPENSES DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER APPEAL AND THE SAME WERE PRODUCED BEFORE HIM. 2. THAT THE BOOKS OF ACCOUNTS ARE DULY AUDITED BY A CH ARTERED ACCOUNTANT AND TAX AUDIT REPORT U/S. 44AB STOOD ALR EADY FILED BEFORE THE A.O. 3. THAT NEITHER THE A.O. NOR THE LEARNED CIT(A) HAS GI VEN A SINGLE FINDING THAT SUCH AND SUCH EXPENDITURE BOOKED BY TH E ASSESSEE IS FALSE OR FABRICATED OR NOT INCURRED FOR BUSINESS PURPOSES.MO REOVER BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED. 4. THAT IT IS SETTLED PRINCIPLE OF LAW THAT NO ADDITIO N UNDER THE HEAD BUSINESS INCOME CAN BE MADE WITHOUT REJECTING BOOKS OF ACCOUNTS. GROUNDS OF APPEAL NO. 3,4&5 ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 5 1. ALL THESE THREE GROUNDS OF APPEAL ARE IN REGARD TO FULL OR PART DISALLOWANCE OUT OF VARIOUS EXPENSES, NAMELY SMU AD MISSION EXPENSES (GROUND OF APPEAL NO. 3), COMPUTER INSTALLATION EXP ., VISITING FACULTIES EXP., VEHICLE RUNNING, MAINTENANCE AND DEPRECIATION , TELEPHONE/MOBILE EXP. (GROUND OF APPEAL NO. 4), STAFF MEMBERS BIRTHD AY CELEBRATION (GROUND OF APPEAL NO. 5). 2. THAT IN ABOVE REGARD IT IS RESPECTFULLY SUBMITTE D THAT ANY EXPENDITURE NOT SPECIFICALLY COVERED BY SECTIONS 3 0 TO 36 IS DEDUCTABLE U/S. 37. AN ANALYSIS OF SECTION 37(1) SHOWS THAT AN Y EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIO NS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSO NAL EXPENSES OF THE ASSESSEE) LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION. RELEVANT CASE LAWS OF HONBLE APEX COURT IN REGARD TO ABOVE SUBMISSIONS FORM PART OF LIST OF JUDICIAL PRONOUNCEMENTS ANNEXE D HEREWITH. 3. ON ANALYZING THE ISSUE OF PART OR FULL DISALLOWA NCE OUT OF VARIOUS EXPENSES IN THE FACTS OF THE PRESENT CASE THE HONB LE TRIBUNAL WILL VERY KINDLY SEE THAT NONE OF THE ABOVE CONDITIONS IS BRE ACHED IN THIS CASE. A VERY BRIEF DESCRIPTION/EXPLANATION IN REGARD TO ABO VE MENTIONED 3 GROUNDS OF APPEAL BEARING NO.3,4, & 5 ARE AS UNDER:- A. SMU ADMISSION EXPENSES (GROUND OF APPEAL NO. 3) A. DURING THE YEAR UNDER CONSIDERATION THE APPELLAN T WAS RUNNING A DISTANCE EDUCATION PROGRAM CENTRE OF SMU (FULL NAME - SIKKIM MANIPAL UNIVERSITY) WHEREIN THE APPELLANT WAS PROVIDING DIS TANCE PROGRAMS IN IT AND MANAGEMENT. B. THE APPELLANT DECLARED RECEIPTS FROM THIS DISTAN CE EDUCATION PROGRAM CENTRE AT RS. 65,53,723/- IN ITS AUDITED P& L ACCOUNT AND CLAIMED ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 6 RS. 11,47,370/- AGAINST THE ABOVE SAID RECEIPT AS A DMISSION EXPENSES (WHICH INCLUDES DISCOUNT, REFERRAL BONUS, WAIVER OF LATE FEES ETC. GIVEN TO THE STUDENTS. C. HERE THE ASSESSEE VERY HUMBLY SUBMITS THAT THERE IS A VERY COMPETITIVE MARKET IN THE FIELD OF DISTANCE EDUCATI ON PROGRAM AND FOR GETTING MAXIMUM NUMBER OF STUDENTS, THE ASSESSEE HA D TO TAKE ALL POSSIBLE BUSINESS DECISIONS WHICH NOT ONLY INCLUDED GIVING ADVERTISEMENTS AND ONLINE MARKETING BUT ALSO HAVE TO OFFER DISCOUN T TO STUDENTS AND ALSO TO GIVE INCENTIVE TO EXISTING STUDENTS FOR BRINGING THEIR FRIENDS FOR NEW ADMISSIONS. AS REGARDS AOS OBSERVATION IN THE COUR SE OF ASSESSMENT PROCEEDINGS THAT WHY THE AMOUNT WAS MOSTLY PAID IN CASH AND NOT BY CHEQUE IN THIS REGARD IT IS SUBMITTED THAT SMU (SIK KIM MANIPAL UNIVERSITY) DOESNT ACCEPT FEES IN CASH. IN SUCH A SITUATION WH ERE MOST OF THE STUDENTS BRING A DEMAND DRAFT PREPARED IN THE NAME OF SMU FROM THEIR PARENTS FOR PAYMENT OF FEES AND THEN THEY GO TO DIF FERENT CENTRES BARGAINING FOR MORE DISCOUNTS. SINCE DD FOR THE FEE S STANDS ALREADY MADE THE ASSESSEE IS FORCED TO RETURN THE AMOUNT OF DISC OUNT TO THE STUDENT IN CASH. AS MOST OF THE STUDENTS DONT HAVE BANK ACCOU NT AND MANY OF THEM ALSO DONT LIKE TO GIVE THE AMOUNT OF DISCOUNT BACK TO THEIR PARENTS WHO ARRANGED FEES FOR THEIR EDUCATION THE ASSESSEE IS C OMPELLED TO PAY THE STUDENTS THE AMOUNT OF DISCOUNT IN CASH AND SUCH AM OUNT OF DISCOUNT IS DEBITED BY ASSESSEE IN HIS BOOKS OF ACCOUNTS UNDER THE HEAD SMU ADMISSIONS EXPENSES. AS THE AMOUNT PAID TO EACH STU DENT VARIED BETWEEN 1000 TO 5000, NO INFRINGEMENT OF PROVISIONS OF SECT ION 40A(3) WAS MADE BY THE ASSESSEE BECAUSE THE PAYMENT WAS BELOW THE T HEN. D. THE ASSESSEE WOULD ALSO LIKE TO SUBMIT THAT DURI NG F.Y. 2009-10 (RELEVANT TO A.Y. 2010-11) THE TOTAL FEES COLLECTIO N UNDER THE HEAD DISTANCE EDUCATION PROGRAM WAS OF RS. 6,63,174/-. I N F.Y. 2010-11 (RELEVANT TO A.Y. 2011-12) THE FEE COLLECTION FOR D ISTANCE EDUCATION ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 7 PROGRAM WAS RS. 17,74,171/-. DURING THESE TWO YEARS THE ASSESSEE WAS NOT OFFERING AGGRESSIVE DISCOUNT AND INCENTIVES TO STUDENTS. AFTER TWO YEARS OF LOW BUSINESS, THE ASSESSEE MADE EXTENSIVE INQUIRIES FOR ITS LOW COLLECTION AS COMPARED TO SIMILAR SMU CENTRES IN JA IPUR. AFTER EXTENSIVE RESEARCH AND FEEDBACK OF OTHER SMU CENTRES, HE CAME TO KNOW THAT MOST OF THE BUSINESS IS BEING DONE BY OTHER CENTRES BY I NVOLVING THE EXISTING STUDENTS BY OFFERING INCENTIVES FOR BRINGING NEW ST UDENTS AND BY OFFERING DISCOUNTS TO NEW ADMISSIONS AT THE TIME OF THEIR AD MISSION. IN F.Y 2011-12 I.E. YEAR UNDER APPEAL THE ASSESSEE MADE THE SAME A PPROACH AS FOLLOWED BY MOST OF THE OTHER CENTRES AND AS A RESULT HIS CO LLECTION OF FEES OF DISTANCE EDUCATION PROGRAM FROM SMU IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2012-13 I.E. YEAR UNDER APPEAL SHOT UP TO RS. 65,53,723/- FROM RS. 17,74,171/- IN F.Y. 2010-11. SUCH AN INCREASE IN SM U INCOME AT RS. 47,79,552/- (SMU INCOME IN F.Y. 2011-12 RS. 65,53,7 23/- MINUS SMU INCOME IN F.Y. 2010-11 AT RS. 17,74,171/-) IN THE Y EAR UNDER APPEAL AS COMPARED TO THE IMMEDIATELY PRECEDING ASSESSMENT YE AR COULD NOT HAVE BEEN ACHIEVED WITHOUT INCURRING BUSINESS RELATED EX PENSES LIKE SMU ADMISSION EXPENSES OF RS. 11,47,370/-. MOREOVER THE SMU ADMISSION EXPENSES OF RS. 11,47,370/- ARE EVEN BELOW 20% OF T OTAL SMU INCOME OF RS. 65,53,723/- UNDER THIS HEAD OF INCOME. E. IN THE YEAR UNDER APPEAL THE APPELLANT WAS RECEI VING A FIXED PERCENTAGE OF INCOME FROM SIKKIM MANIPAL UNIVERSITY FOR EVERY STUDENT REGISTRATION AND THE APPELLANT ASSESSEE WAS DISTRIB UTING A PART OF THAT INCOME TO REGISTER MORE AND MORE STUDENTS BY OFFERI NG DISCOUNT AND REFERRAL SCHEMES ETC. HERE IT MAY BE SUBMITTED THAT THIS IS A GENERAL BUSINESS TECHNIQUE TO ENHANCE THE BUSINESS AND IS A DOPTED BY EVERY TYPE OF BUSINESS LIKE INSURANCE COMMISSION. F. THE ABOVE MODUS OPERANDI MAY ALSO BE TERMED AS A N ADVANCE VERSION OF ADVERTISEMENT WHEREIN DIRECT BENEFIT IS GIVEN TO THE CLIENT BY ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 8 AVOIDING HEAVY EXPENDITURE ON ADVERTISEMENT THROUGH PRINT MEDIA AND/OR OTHER MEANS OF MASS COMMUNICATION LIKE TV, RADIO ET C. THIS DIRECT BENEFIT IS GIVEN TO THE CLIENTS BY GIVING THEM DISCOUNTS, R EFERRAL SCHEMES, CASH BACKS, REWARD POINTS AND WAIVER OF LATE FEES ETC. I N OTHER WORDS THIS IS SIMPLY AN ADVERTISEMENT THROUGH MOUTH PUBLICITY. G. THE DISCOUNT AND REFERRAL AMOUNT WAS GIVEN BETWEEN THE RANGES OF RS. 1000/- TO RS. 5000/- DEPENDING UPON THE PAYMENT OF FEES RECOVERED FROM THE STUDENTS. SOMETIMES STUDENTS DEPOSITED LOW ER AMOUNT TOWARDS THERE ADMISSION FEES BY DEDUCTING THE DISCOUNT AMOU NT SUO-MOTO AND IN SUCH CASES APPELLANT HAD TO DEPOSIT THE FULL AMOUNT OF FEES TO THE SIKKIM MANIPAL UNIVERSITY. SOMETIMES THE APPELLANT HAD TO RETURN THE DISCOUNT AND/OR REFERRAL AMOUNT TO THE DISCOUNT CLAIMERS AFT ER RECEIVING THE INCOME FROM THE SIKKIM MANIPAL UNIVERSITY. H. IT WILL NOT BE OUT OF PLACE TO MENTION THAT WHIL E DISALLOWING THE SMU ADMISSION EXPENSES RELIANCE HAS BEEN PLACED BY LOWE R AUTHORITIES ON FOLLOWING JUDGMENTS OF HONBLE SUPREME COURT. IT IS RESPECTFULLY SUBMITTED THAT IN VIEW OF UNDER MENTIONED REASONS ALL THESE T HREE CASES ARE NOT AT ALL APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANT ASSESSEES CASE:- S.NO CASE NAME REASONS OF NON APPLICABILITY OF THESE S.C.CASES 1. SUMATIDAYAL VS. CIT 214 ITR 801 THIS CASE IS UNDER SECTION 68 OF THE IT ACT. 2. C. VASANTAL& CO. 45 ITR 206 (SC) THIS CASE IS RELATED TO APPLICABILITY OF EVIDENCE ACT IN RELATION TO PROCEEDINGS UNDER THE IT ACT 3. CHATURBHUJPANAUJ AIR 1969 255 (SC) THIS CASE IS RELATED TO LAND ACQUISITION ACT PASSED ON 23/07/1968 ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 9 I. THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE APPELLANT SUBMITTED THE LIST OF ALL THE STUDENTS AND PERSONS TO WHOM DISCOUNTS AND REFERRAL AMOUNT ETC. WAS PAID. IT FORMS PART OF THE PAPER BOOK AT PAGES 24 TO 40. B. EXPENSES UNDER THE HEAD COMPUTER INSTALLATION, V ISITING FACULTIES, VEHICLE RUNNING AND MAINTENANCE AND DEPRECIATION, T ELEPHONE/MOBILE (GROUND OF APPEAL NO. 4) 1. THIS GROUND OF APPEAL IS AGAINST SUSTENANCE BY T HE LEARNED CIT(A) OF 50% AMOUNT OUT OF TOTAL DISALLOWANCES MADE BY TH E A.O. IN ASSESSMENT IN REGARD TO THE ABOVE MENTIONED EXPENSES. 2. A CHART GIVING PARTICULARS OF NATURE OF EXPENSES, T OTAL AMOUNT OF EXPENSES INCURRED BY ASSESSEE, DISALLOWANCE MADE BY THE A.O. AND DISALLOWANCE SUSTAINED BY THE CIT(A) IS AS UNDER:- . NATURE OF EXPENDITURE TOTAL AMOUNT OF EXPENDITURE DISALLOWANCE MADE BY THE A.O. DISALLOWANCE SUSTAINED BY THE CIT(A) COMPUTER INSTALLATION EXPENSES 3,86,352/- 35,000/- 17,500/- EXPENSES PAID IN CASH OUT OF TOTAL EXPENSES OF RS. 4,00,100/- INCURRED ON VISITING FACULTIES 3,61,500/- 90,375/- 45,187/- VEHICLE RUNNING AND MAINTENANCE AND DEPRECIATION EXPENSES OF RS. 4,22,780/- (DIESEL EXPENSES RS. 1,19,248/- PLUS INSURANCE RS. 22,803/- PLUS VEHICLE MAINTENANCE EXPENSES RS. 74,872/- PLUS INTEREST ON CAR LOAN RS. 53,539/- PLUS DEPRECIATION ON VEHICLES 4,22,780/- 30,000/- 15,000/- ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 10 RS. 1,52,318/-). TELEPHONE/MOBILE EXPENSES 1,92,015/- 20,000/- 10,000/- THE HUMBLE APPELLANT CRAVES LEAVE TO SUBMIT A VERY BRIEF EXPLANATION IN REGARD TO ABOVEMENTIONED EXPENSES AS UNDER:- I. DISALLOWANCE OUT OF COMPUTER INSTALLATION EXPENSES: A. THESE EXPENSES OF RS.3,86,352 WERE INCURRED BY THE ASSESSEE ON ACCOUNT OF AMC (ANNUAL MAINTENANCE CHARGE ) OF COMP UTERS INSTALLED IN THE BUSINESS PREMISES OF ASSESSEE. B. TOTAL EXPENDITURE OF AMC & IMC IS RS.5,20,86 5 (AMC RS. 3,86,352 + IMC RS.1,34,513). AS AGAINST THIS THE RECEIPTS UN DER THIS HEAD OF AMC/IMC ARE OF RS.14,09,067. II. DISALLOWANCE OUT OF VISITING FACULTY EXPENSES A. THAT THE APPELLANT ASSESSEE IS RUNNING A DISTANC E EDUCATION CENTRE OF SIKKIM MANIPAL UNIVERSITY (SMU). DURING THE YEAR UNDER CONSIDERATION APPELLANT INCURRED AN EXPENDITURE OF RS. 4,00,100/- IN RELATION TO PAYMENT TO VARIOUS PERSONS (I.E. VISITING FACULTIES) FOR TE ACHING TO STUDENTS OF THE APPELLANT ASSESSEE AND ALSO RESOLVING THE QUERIES A ND SUBJECT RELATED PROBLEMS OF SUCH STUDENTS. B. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSE SSEE FURNISHED A DETAILED LIST OF THE VISITING FACULTIES(I.E. EXPERT S OF A PARTICULAR SUBJECT) CONTAINING THE PARTICULARS LIKE DATE OF THEIR VISIT , NAME AND COMPLETE POSTAL ADDRESS OF THE VISITING FACULTY AND THE AMOUNT PAID TO EACH OF THEM AGGREGATING TO RS. 4,00,100/-. C. IN THE YEAR UNDER APPEAL THE APPELLANT ASSESSEE CALLED AS MANY AS 26 VISITING FACULTIES AND TOTAL PAYMENT OF RS.4,00, 100 WAS MADE TO THEM. BY NO CANON OF LAW SUCH A SMALL PAYMENT TO 26 VISIT ING FACULTIES AGAINST AN INCOME OF SMU AT RS.65,53,723 CAN BE TERMED AS U NJUSTIFIED ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 11 III. DISALLOWANCE OUT OF VEHICLE RUNNING AND MAIN TENANCE AND DEPRECIATION EXPENSES OF RS. 4,22,780/- A. THE A.O. MADE DISALLOWANCE OF RS. 30,000/- ON ADHOC BASIS OUT OF ABOVE MENTIONED EXPENSES MAINLY FOR THE REASON THAT PERSONAL USE OF VEHICLES BY THE ASSESSEE AND HIS FAMILY MEMBERS CAN NOT BE DENIED AND THE ASSESSEE HAS NOT MAINTAINED LOG BOOK. B. IN ABOVE REGARD IT IS RESPECTFULLY SUBMITTED THAT T HE HONBLE APEX COURT HAS IN VERY MANY CASES HELD THAT THERE MUST B E SOMETHING MORE THAN THE BARE SUSPICION TO SUPPORT AN ASSESSMENT. B UT IN ASSESSEES CASE THERE IS NOT AN IOTA OF EVIDENCE OF DISALLOWABLE NA TURE OF EXPENDITURE NOR IS THERE ANY EXPENDITURE WHICH IS OF DISALLOWABLE N ATURE I.E. IN THE NATURE OF PERSONAL EXPENDITURE OR CAPITAL EXPENDITURE AS M ENTIONED IN SECTION 37. C. MORE OVER DEPRECIATION IS A STATUTORY ALLOWANCE AND THERE CANNOT BE ANY DISALLOWANCE OUT OF SUCH A STATUTORY ALLOWANCE/ DEDUCTION IV. DISALLOWANCE OUT OF TELEPHONE EXPENSES A. THESE EXPENSES INCLUDE MOBILE EXPENSES OF THE AS SESSEE AND HIS WIFE, WHO IS ALSO WORKING AS BUSINESS MANAGER OF TH E ASSESSEES SOLE PROPRIETORY CONCERN, NAMELY, GUPTA COMPUTERS. THE E XPENSES ON MOBILE ARE PRIMARILY RELATED TO THE BUSINESS. B. THE BALANCE EXPENSES UNDER THE HEAD TELEPHONE EX PENSES ARE RELATED TO PHONES AND MOBILES USED IN THE OFFICE PR EMISES BY THE STAFF FOR FOLLOWING OF ENQUIRES, DEALING WITH CUSTOMERS AND S ERVICE CALLS ETC. C. EXPENSES INCURRED ON BIRTHDAY CELEBRATION OF ST AFF MEMBERS (GOA NO. 5) 1. THE HUMAN RESOURCE IS VERY IMPORTANT IN EVERY BUSIN ESS. IT IS ALSO AN UNDISPUTED FACT THAT HAPPINESS AND EFFICIENCY OF EMPLOYEES OF AN ESTABLISHMENT IS A KEY TO GOOD HEALTH OF THE BUSINE SS. KEEPING IN VIEW THIS ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 12 UNIVERSAL TRUTH BUSINESSMEN ALWAYS TRY TO KEEP HIS EMPLOYEES HAPPY AND EFFICIENT. 2. KEEPING IN VIEW THE ABOVE PROPOSITION THE APPELLANT ASSESSEE INCURRED AN EXPENDITURE OF RS. 36,270/- IN THE WHOL E YEAR TOWARDS BIRTHDAY CELEBRATION OF HIS STAFF MEMBERS AND DEBIT ED IT IN P&L ACCOUNT UNDER THE HEAD, BIRTHDAY CELEBRATION EXPENSES. TH ESE EXPENSES ARE NOTHING BUT STAFF WELFARE EXPENSES AND IT IS PRAYED THAT THIS DISALLOWANCE SHOULD BE DELETED. 3. IT IS FURTHER SUBMITTED THAT THE A.O. AS WELL AS THE LEARNED CIT(A) FAILED TO NOTE THAT ALL THESE EXPENSES ARE INCIDENT AL TO AND DIRECTLY RELATED TO THE BUSINESS AND AS SUCH ARE ALLOWABLE EXPENDITU RE. IN THIS REGARD THE ASSESSEES RESPECTFUL SUBMISSIONS ARE AS UNDER: I. ALL THE ABOVE REFERRED EXPENSES HAVE BEEN INCURRED IN THE COURSE OF CARRYING ON OF REGULAR BUSINESS ACTIVITIES. IT IS N OT THE CASE OF THE LEARNED A.O. THAT THESE EXPENSES ARE NOT RELATED TO THE CAR RYING ON OF REGULAR BUSINESS ACTIVITIES. II. THAT ALL SUPPORTING EVIDENCE IN THE FORM OF INVOICE S AND VOUCHERS WERE PRODUCED BEFORE THE A.O. IN THE COURSE OF ASSE SSMENT PROCEEDINGS III. THAT THE LEARNED A.O. HAS NOT PIN POINTED ANY SPECI FIC DEFECTS IN THE BOOKS OF ACCOUNTS INCLUDING BILLS AND VOUCHERS. SO MUCH SO THE TRADING RECEIPTS DECLARED BY THE ASSESSEE HAVE BEEN ACCEPTE D AS IT IS BY THE A.O. HIMSELF. IV. THAT THE LEARNED A.O. HAS ALSO NOT FOUND ANY FLAW I N THE NATURE OF EXPENSES NOR IN SUPPORTING EVIDENCE PRODUCED BY THE ASSESSEE. V. THAT DISALLOWANCE OF EXPENSES HAVE BEEN MADE ON ADH OC BASIS WITHOUT POINTING OUT ANY SPECIFIC INSTANCE OF NON-M AINTENANCE OF VOUCHER BY THE ASSESSEE OR DISALLOWABLE NATURE OF EXPENDITU RE . ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 13 VI. THAT THE A.O. HAS CATEGORICALLY MENTIONED THE FACT OF EXAMINATION OF BOOKS OF ACCOUNTS INCLUDING BILLS AND VOUCHERS MAIN TAINED BY THE ASSESSEE IN THE LAST PARA OF PAGE. 1 AND STARTING LINES IN P AGE 2 OF THE RELEVANT ASSESSMENT ORDER AND NO ADVERSE OBSERVATION HAS BEE N MADE BY HIM IN RESPECT OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. VII. IT IS RESPECTFULLY SUBMITTED THAT IT IS WELL SETTLE D LAW THAT NO DISALLOWANCE OF EXPENSES CAN BE MADE ON ADHOC BASIS WITHOUT POINTING OUT ANY SPECIFIC DEFECT OR INSTANCE OF NON-MAINTENA NCE OF VOUCHERS. FURTHER, THE DISALLOWANCE ALSO CANT BE MADE MERELY ON THE GROUND THAT PAYMENT HAS BEEN MADE IN CASH UNLESS THE PARTIES TO WHOM PAYMENT IS MADE ARE NOT GENUINE. THE HONBLE BENCH WILL VERY K INDLY FIND THAT NO DOUBT REGARDING GENUINENITY OF THE PARTIES HAS BEEN RAISED BY THE LOWER AUTHORITIES. VIII. THAT THERE IS A CONSENSUS OF JUDICIAL OPINION THAT AN EXPENDITURE NECESSARY FOR EARNING AN INCOME IS AN ALLOWABLE EXP ENDITURE. IX. THAT THE ASSESSEE HAS FURNISHED FULL DETAILS OF THE EXPENSES. X. THAT IT IS VERY RESPECTFULLY SUBMITTED THAT EVERY E XPENDITURE INCURRED BY THE ASSESSEE IS BACKED BY SUPPORTING EVIDENCE IN THE NATURE OF BILL AND VOUCHER. THE A.O. HAS NOT POINTED OUT A SINGLE ITEM OF INADMISSIBLE NATURE NOR HAS HE POINTED OUT THAT IT IS NOT BACKED BY SUP PORTING EVIDENCE NOR HAS HE POINTED OUT THAT SUCH AND SUCH EXPENDITURE I S NOT INCURRED IN THE COURSE OF REGULAR BUSINESS ACTIVITY NOR HAS HE PIN POINTED THAT SUCH AND SUCH EXPENDITURE IS OF CAPITAL NATURE OR OF PERSONA L NATURE NOR HAS HE POINTED OUT THAT SUCH AND SUCH EXPENDITURE IS NOT I NCIDENTAL TO BUSINESS. AT THE SAME TIME THE ASSESSEE HAS FURNISHED DAY TO DAY DETAILS OF ALL THE EXPENSES. 5. THAT, IN THE CASE OF APPELLANT ASSESSEE HIMSELF IN ASSESSMENT YEAR 2005-06 THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN ITA NO. 133/JP/2020 FOR A.Y. 2005-06 IN THE CASE OF MANOJ KUMAR GUPTA V S. THE ITO, WARD ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 14 5(2), JAIPUR VIDE ORDER DATED 23/11/2020 HELD THAT THE ACTION OF THE LD. CIT(A) IN SUSTAINING 50% OF THE DISALLOWANCES MADE BY THE ASSESSING OFFICER THAT TOO ON ADHOC BASIS IS NOT JUSTIFIED AN D ACCORDINGLY, DELETED THE SAME( RELEVANT OBSERVATION MADE IN PARA 14 AT PAGE -9). 6. THAT IT IS SUBMITTED THAT IN VIEW OF ABOVE FACTS AN D LEGAL POSITION THE DISALLOWANCES SUSTAINED BY THE LEARNED CIT[A] MAY B E CANCELLED AND IN THE ALTERNATIVE IT IS RESPECTFULLY SUBMITTED THAT T HE SAME MAY BE SUBSTANTIALLY REDUCED. 6. PER CONTRA, THE LD DR RELIED ON THE FINDING OF T HE LOWER AUTHORITIES AND OUR REFERENCE WAS DRAWN TO THE FINDINGS OF ASSE SSING OFFICER WHICH READ AS UNDER: 1. DISALLOWANCE OUT OF SMU ADMISSION EXPENSES: THE ASSESSEE RUNS A DISTANCE EDUCATION CENTRE OF S IKKIM MANIPAL UNIVERSITY (CALLED AS SMU) WHEREIN THE ASSESSEE PRO VIDES DISTANCE PROGRAMS IN IT AND MANAGEMENT. IN THE P&L A/C, THE ASSESSEE HAS SHOWN INCOME FROM SMU AMOUNTING TO RS. 65,53,723/-. AGAINST THE ABOVE EXP ENSES, THE ASSESSEE HAS CLAIMED SMU ADMISSION EXPENSES OF RS. 11,47,370/-. THESE EXPENSES WERE CLAIMED ON ACCOUNT OF DISCOUNT & REFERRAL AMOUNT PAID TO VARIOUS STUDENTS DURING THE YEAR UND ER CONSIDERATION. DURING THE ASSESSMENT PROCEEDINGS, VIDE NOTE SHEET DATED 31.12.2014, THE ASSESSEE WAS ASKED TO PRODUCE STUDE NTS TO WHOM DISCOUNT & REFERRAL AMOUNT PAID ON ACCOUNT OF ADMIS SION IN SMU. ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 15 IN COMPLIANCE, THE ASSESSEE DID NOT PRODUCE THE ST UDENTS FOR EXAMINATION. HE HAD SUBMITTED ONLY AFFIDAVIT IN TOT AL FOUR CASES WITHOUT THEIR PRODUCTION. LATER ON, VIDE THIS OFFICE LETTER DATED 16.02.2015 , THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY CLAIM OF SMU ADMI SSION EXPENSES OF RS.11,47,370/- SHOULD NOT BE DISALLOWED U/S 37 O F THE INCOME-TAX ACT, 1961. IN REPLY, VIDE HIS LETTER DATED 23.02.20 15, THE ASSESSEE SUBMITTED THAT IN THE SMU ADMISSION EXPENSES OF RS. 11,47,370/- , RS. 10,08,185/- HAS BEEN SHOWN AS PAID CASH TOWARDS DIS COUNTS AND INCENTIVES. OUT OF THIS RS. 40,000/- IS TOWARDS PUR CHASE OF MATERIAL FOR MARKETING, RS. 9,33,185/- HAS BEEN BOOKED AS DISCOU NTS AND RS. 35,000/- HAS BEEN BOOKED AS INCENTIVES. HE FURTHER SUBMITTED THAT DISTANCE EDUCATION IS A VERY COMPETITIVE MARKET AND FOR GETTING BUSINESS ALL POSSIBLE BUSINESS DECISION WHICH NOT O NLY INCLUDE GIVING ADVERTISEMENTS AND ONLINE MARKETING BUT ALSO HAVE T O OFFER DISCOUNTS TO STUDENTS AS WELL AS INCENTIVES TO EXISTING STUDE NTS FOR BRINGING THEIR FRIENDS FOR NEW ADMISSION. THE REPLY OF THE ASSESSEE IS NOT ACCEPTABLE DUE TO THE FOLLOWING REASONS:- I) DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE STUDENTS FOR EXAMINATION VIDE NOTE SHEET EN TRY DATED 31.12.2014 BUT ASSESSEE DID NOT PRODUCE THE STUDENT S TO WHOM DISCOUNT & REFERRAL AMOUNT PAID. II) THE ASSESSEE PAID DISCOUNT & REFERRAL AMOUNT IN CAS H. III) DISCOUNT AND REFERRAL AMOUNT PAID TO STUDENT IS UNU SUAL PRACTICE IN THE BUSINESS. ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 16 IV) THE ASSESSEE DID NOT PRODUCE SUFFICIENT EVIDENCE TO VERIFYING THE ABOVE EXPENSES. V) IT IS A WELL SETTLED LAW THAT STRICT RULES OF EVIDE NCE DO NOT APPLY TO I.T. ACTS AND THE REAL TEST WITH REGARD TO GENUINEN ESS OF TRANSACTIONS IS 'PREPONDERANCE OF PROBABILITIES' AN D NOT 'BEYOND REASONABLE DOUBT'. RELIANCE IS PLACED ON, CHATURBHU J PANAUJ AIR 1969 (SC) 255, SUMATI DAYAL V/S CIT, 214 ITR 801 (S C), C. VASANT LAL & CO, 45 ITR 206 (SC). IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, I DISALLOW A SUM OF RS. 11,07,370/- (RS. 11,47,370 RS. 40,00 0) WHICH ARE CLAIMED ON A/C OF DISCOUNT AND REFERRAL AMOUNT PAID TO STUD ENT TREATING INGENUINE U/S 37 OF THE INCOME-TAX ACT, 1961 IN VIEW OF DECIS ION OF DECISION OF HONBLE SUPREME COURT IN CASES OF CHATURBHUJ PANAUJ AIR 1969 (SC) 255, SUMATI DAYAL V/S CIT, 214 ITR 801 (SC), C. VASANT L AL & CO., 45 ITR 206 (SC). 7. FURTHER, OUR REFERENCE WAS DRAWN TO THE FINDING S OF THE LD CIT(A) AND SUBMITTED THAT THE LD CIT(A) HAS ALREADY ALLOWE D PARTIAL RELIEF TO THE ASSESSEE AND NO FURTHER RELIEF IS WARRANTED IN THE INSTANT CASE IN ABSENCE OF NECESSARY SUBSTANTIATION. THE RELEVANT FINDINGS OF THE LD CIT(A) READ AS UNDER: 2.3 GROUND NO. 01 TO 08 ARE BEING TAKEN UP TOGETHE R WHICH ARE INTERRELATED. I HAVE PERUSED THE FACTS OF THE CASE , THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. IT IS SEEN TH AT APPELLANT CLAIMED SIKKIM MANIPAL UNIVERSITY (SMU) ADMISSION EXPENSES OF RS. 11,47,340/-OUT OF WHICH THE ASSESSING OFFICER DISAL LOWED RS. 11,07,370/- AS PAYMENT WAS MADE IN CASH AND NONE OF THE RECIPIENT ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 17 OF PAYMENT OF REFERRAL FEE/DISCOUNT CLAIMED WERE PR ODUCED FOR VERIFICATION. ON PERUSAL OF OVERALL FACTS, I FIND THAT ENTIRE PAY MENT OF DISCOUNT/REFERRAL FOR IS MADE IN CASH TO THE STUDENT. APPELLANT HAS N OT FILED SUPPORTING EVIDENCE TO PROVE THE SAME EXCEPT FOUR AFFIDAVITS. THE ABSENCE OF VERIFICATION OF PAYMENT, THE GENUINE NESS OF EXPENSES CANNOT BE ACCEPTED. THEREFORE, ACTION OF ASSESSING OFFICER IN MAKING DISALLOWANCE OUT OF SIKKIM MANIPAL UNIVERSITY (SMU) DISCOUNT IS UPHELD. HOWEVER, CREDIT FOR THE PERSON WHOSE AFFIDA VITS WERE FILED COULD BE ALLOWED WHICH COMES TO RS. 13,000/- AND BA LANCE IS UPHELD. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 2.3.1 SO FAR AS DISALLOWANCE OUT OF COMPUTER INS TALLATION VISITING FACULTY, VEHICLE RUNNING, PHONE EXPENSES ARE CONCER NED, THE SAME IS EXCESSIVE, THEREFORE THE SAME IS RESTRICTED TO 50% OF THE DISALLOWANCE MADE WHICH WORKS OUT TO RS. 87,687/-. REGARDING DIS ALLOWANCE OF RS.36,270/- OUT OF BIRTHDAY EXPENSES, THIS IS A PER SONAL EXPENSE AND THEREFORE ASSESSING OFFICER CORRECTLY DISALLOWED TH E SAME. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, THE ISSUE UNDER CONSI DERATION RELATES TO CLAIM OF SMU ADMISSION EXPENSES. THE ASSESSEE HAS EXPLAI NED THAT THE NATURE OF THESE EXPENSES ARE DISCOUNT, REFERRAL BONUS, WAI VER OF LATE FEES ETC GIVEN TO EXISTING AND NEW STUDENTS TO INCREASE ENRO LLMENT FOR VARIOUS COURSES/PROGAMMES OF SIKKIM MANIPAL UNIVERSITY THRO UGH THE DISTANT EDUCATION CENTRE WHICH IS BEING RUN BY HIM. IN RES PONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE AO, THE ASSESSEE HAS SUB MITTED THAT DISTANT EDUCATION IS A COMPETITIVE MARKET AND AS A RESULT, HE HAS TO OFFER ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 18 DISCOUNTS TO STUDENTS AS WELL AS INCENTIVES TO EXIS TING STUDENTS FOR BRINGING THEIR FRIENDS FOR NEW ADMISSIONS. FURTHER, THE AO A SKED THE ASSESSEE TO PRODUCE THE STUDENTS FOR EXAMINATION AND IN RESPONS E, NONE OF THE STUDENTS WERE PRODUCED FOR EXAMINATION AND AFFIDAVI TS OF FOUR STUDENTS WERE SUBMITTED. THE AO HAS RECORDED A FINDING THAT OFFERING DISCOUNT AND REFERRAL BONUS IS AN UNUSUAL PRACTICE IN THE LINE O F DISTANT EDUCATION CENTRE BEING RUN BY THE ASSESSEE, ALL THESE EXPENSES HAVE BEEN PAID IN CASH, NONE OF THE STUDENTS WERE PRODUCED FOR VERIFICATION AND HE HAS RAISED A QUESTION MARK ON GENUINENESS OF THESE EXPENSES SO C LAIMED BY THE ASSESSEE. 9. IN THIS REGARD, WE NOTE THAT THE ASSESSEE UNDER AN ARRANGEMENT WITH SIKKIM MANIPAL UNIVERSITY IS RUNNING THE DISTA NT EDUCATION CENTRE AND HAS THUS BEEN AUTHORIZED TO RUN SUCH A CENTRE. THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE ACT OF THE ASSESSE E AS SO CLAIMED IN FORM OF OFFERING THE DISCOUNT, REFERRAL BONUS, ETC TO TH E STUDENTS IS AUTHORIZED BY SIKKIM MANIPAL UNIVERSITY AND IN ACCORDANCE WITH THE TERMS OF THE ENGAGEMENT PURSUANT TO WHICH THE DISTANT EDUCATION CENTRE IS BEING RUN BY THE ASSESSEE AND IN THE ALTERNATE, ARE THERE ANY DISABILITY OBLIGATIONS CAST ON THE ASSESSEE IN OFFERING SUCH DISCOUNTS. W HERE IT IS DETERMINED THAT SUCH A PRACTICE IS AUTHORIZED BY SIKKIM MANIPA L UNIVERSITY AND/OR THE ASSESSEE IS FREE TO OFFER SUCH DISCOUNTS, REFERRAL ETC, THE SECOND QUESTION THAT ARISES FOR CONSIDERATION IS NEXUS OF SUCH EXPE NDITURE WITH THE ACTUAL ADMISSION OF STUDENTS TO VARIOUS COURSES/PROGRAMMES DURING THE YEAR THROUGH THE ASSESSEE DISTANT EDUCATION CENTRE AND D ETAILS THEREOF AND HOW THE CORRESPONDING REVENUES ARE DETERMINED AND RECOR DED. 10. IN THE INSTANT CASE, WE FIND THAT ALL THAT HAS BEEN SUBMITTED BY THE ASSESSEE TO THIS EFFECT IS A LEDGER ACCOUNT OF SMU ADMISSION EXPENSES AND ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 19 AFFIDAVIT OF FOUR STUDENTS WHICH TO OUR MIND IS NOT SUFFICIENT ENOUGH IN SUPPORT OF THE CLAIM OF THE EXPENSES. AS WE HAVE N OTED ABOVE, THERE ARE MATTERS WHICH NEEDS TO BE EXAMINED IN DETAIL AND RE LEVANT FACTS BROUGHT ON RECORD. THEREFORE, WE ARE OF THE CONSIDERED VIE W THAT IT WOULD BE JUST AND APPROPRIATE THAT THE MATTER IS SET-ASIDE TO THE FILE OF THE AO TO EXAMINE THE SAME A FRESH AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. IN THE RESULT, THE GROUND OF APPEAL NO. 3 IS ALLOWED FOR STATISTICAL PURPOSES. 11. REGARDING DISALLOWANCE OF COMPUTER AMC EXPENSES , THE AO HAS DISALLOWED THE SAME FOR THE REASON THAT NO PROPER V OUCHERS HAVE BEEN MAINTAINED AND EXPENSES HAVE BEEN INCURRED IN CASH. THEREFORE, THE REASON FOR DISALLOWANCE IS NOT MAINTENANCE OF PROPE R VOUCHERS COUPLED WITH THE FACT THAT PAYMENT HAS BEEN MADE IN CASH AN D IN VIEW OF THE SAME, THE EXPENSES SO CLAIMED BY THE ASSESSEE HAVE NOT BEEN SUBSTANTIATED. EVEN BEFORE THE LD CIT(A) OR DURING THE PRESENT PROCEEDINGS, NOTHING HAS BEEN BROUGHT ON RECORD IN SUPPORT OF SAID CLAIM OF EXPENSES IN FORM OF TERMS OF AMC ARRANGEMENT/CON TRACT AND THE INVOICES/BILLS RAISED BY THE VENDOR TOWARDS THE AMC . INSPITE OF THE SAME, WE FIND THAT THE AO HAS BEEN REASONABLE ENOUGH IN D ISALLOWING A SUM OF RS 35,000/- ONLY OUT OF TOTAL EXPENSES OF RS 3,86,3 52/- AND WHICH HAS ALREADY BEEN RESTRICTED TO RS 17,500/- BY THE LD CI T(A). THEREFORE, WE DONOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LOW ER AUTHORITIES AND THE DISALLOWANCE SO MADE AND SUSTAINED BY THE LD CIT(A) IS HEREBY CONFIRMED. 12. REGARDING DISALLOWANCE OF VISITING FACULTY E XPENSES, THE ASSESSEE HAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE HAS EMPLOYED AS MANY AS 26 VISITING FACULTY MEMBERS FOR TEACHING AND RESOLVING SUBJECT RELATED PROBLEMS OF THE STUDENTS AND HAS PAID A SMALL ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 20 SUM OF RS 4,00,100/- TO THEM AS AGAINST REVENUES OF RS 65,53,723/- OFFERED TO TAX. IT HAS BEEN FURTHER SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS, COMPLETE DETAILS IN TER MS OF NAME, ADDRESS OF THE VISITING FACULTY MEMBERS, DATE OF THEIR VISI T AND AMOUNT PAID TO RESPECTIVE FACULTY MEMBERS HAVE BEEN SUBMITTED BY T HE ASSESSEE AND WHERE THE AO HAS FAILED TO TAKE ANY FURTHER ACTION, THE ASSESSEE CANNOT BE BURDENED WITH DISALLOWANCE OF EXPENSES SO CLAIMED. WE ALSO NOTE THAT DURING THE APPELLATE PROCEEDINGS BEFORE THE LD CIT( A), THE ASSESSEE HAS SUBMITTED THAT HE IS RUNNING THE DISTANCE EDUCATION CENTRE OF SIKKIM MANIPAL UNIVERSITY AND HAS RECEIVED CERTAIN AMOUNT FOR FACULTY ARRANGEMENT AND DURING THE YEAR UNDER CONSIDERATION , HAS INCURRED AN AMOUNT OF RS 4,00,100/- ON ACCOUNT OF ARRANGEMENT O F 26 FACULTY MEMBERS FOR RESOLVING THE DOUBTS OF THE STUDENTS WH ICH IS NOT A HUGE AMOUNT AS COMPARED TO AMOUNT RECEIVED FROM THE UNIV ERSITY. THE CASE OF THE REVENUE HOWEVER IS THAT DURING THE ASSESSMENT P ROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE VISITING FACULTY MEMB ERS FOR VERIFICATION, HOWEVER, THE ASSESSEE HAS PRODUCED ONLY ONE FACULTY MEMBER AND HAS FAILED TO PRODUCE ANY OF OTHER PERSONS FOR VERIFICA TION. FURTHER, OUT OF TOTAL CLAIM OF RS 4,00,100/- TOWARDS VISITING FACUL TY EXPENSES, AN AMOUNT OF RS 3,61,500/- HAS BEEN PAID IN CASH. IN SUCH CI RCUMSTANCES, THE AO HAS RIGHTLY DISALLOWED 25% OF CASH EXPENSES AMOUNTI NG TO RS 90,375/- IN ABSENCE OF PROPER VERIFICATION WHICH ON APPEAL HAS ALREADY BEEN RESTRICTED TO RS 45,187/- BY THE LD CIT(A) AND NO FURTHER RELI EF IS WARRANTED. 13. IN OUR VIEW, THE QUANTUM OF EXPENDITURE SO CLAI MED VIS--VIS RECEIPTS OFFERED TO TAX COULD BE A STARTING POINT F OR EXAMINATION, HOWEVER, THE SAME BY ITSELF CANNOT BE A SOLE DETERMINATIVE O F CLAIM OF THE EXPENDITURE AND THEREFORE, MERELY BECAUSE THE QUANT UM OF EXPENDITURE, AS PER ASSESSEES OWN YARDSTICK IS SMALL, THE SAME CANNOT BE A BASIS FOR ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 21 ALLOWABILITY OF THE EXPENDITURE SO CLAIMED. IN OUR VIEW, WHAT IS MORE RELEVANT FOR THE ASSESSEE TO SUBSTANTIATE AND FOR T HE AO TO EXAMINE IS WHETHER AS MANY AS 26 FACULTY MEMBERS WERE ACTUALLY BEEN EMPLOYED AS SO CLAIMED DURING THE YEAR UNDER CONSIDERATION, THE COURSES/SUBJECT MATTER IN RESPECT OF WHICH THEY WERE EMPLOYED, HOW MUCH AMOUNT WAS RECEIVED FROM THE UNIVERSITY TOWARDS SUCH FACULTY A RRANGEMENT AND WHETHER THE AMOUNT PAID TO THEM IS COMMENSURATE WIT H TIME AND ASSISTANCE PROVIDED BY THEM TO THE STUDENTS. HOWEV ER, THERE IS NOTHING ON RECORD WHICH HAS BEEN SUBMITTED BY THE ASSESSEE TO SUBSTANTIATE HIS CLAIM AND CONSEQUENTLY, NO FINDING OF THE AO IN THI S REGARD. 14. HAVING SAID THAT, IF WE LOOK AT THE SPECIFIC RE ASONS AS SO SPECIFIED IN THE ASSESSMENT ORDER AS TO WHY THE AO HAS DISALLOWE D THE FACULTY EXPENSES, THE SAME IS ON ACCOUNT OF NON-PRODUCTION OF THESE FACULTY MEMBERS FOR EXAMINATION BEFORE HIM AND THE FACT THA T THE AMOUNT HAS BEEN PAID TO THEM IN CASH. NO DOUBT, WHERE THE FAC ULTY MEMBERS ARE REGULARLY EMPLOYED BY THE ASSESSEE, THE ONUS IS CLE ARLY ON THE HIGHER SIDE ON THE ASSESSEE AND WHERE THE AO WISHES TO CALL FOR THESE PERSONS FOR VERIFICATION, THE ASSESSEE IS EXPECTED TO REACH OUT TO HIS FACULTY MEMBERS AND TAKE NECESSARY STEPS TO ENSURE THEIR PRESENCE A ND ATTENDANCE BEFORE THE AO FOR NECESSARY EXAMINATION SUBJECT OF COURSE TO ACADEMIC AND MERELY SUBMITTING A LIST AND PARTICULARS OF FACULTY MEMBERS CANNOT BE SAID TO DISCHARGE THE PRIMARY ONUS CAST ON THE ASSESSEE. WE FIND THAT THE AO HAS CALLED FOR THE FACULTY MEMBERS TO APPEAR BEFORE HIM FOR EXAMINATION AND THE ASSESSEE WAS ABLE TO PRODUCE ONLY ONE FACUL TY MEMBER OUT OF 26 MEMBERS AND NO REASONS ARE AVAILABLE ON RECORD AS T O WHY OTHER FACULTY MEMBERS COULDNT BE PRODUCED FOR NECESSARY EXAMINAT ION BEFORE THE AO. ONE MAY ARGUE THAT THE AO NEED TO BE REASONABLE IN HIS APPROACH IN TERMS OF CALLING FEW OF THE FACULTY MEMBERS INITIAL LY AND WHERE THE NEED ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 22 ARISES, TO CALL FOR OTHER MEMBERS. AT THE SAME TIME , A FACULTY MEMBER COULDNT BE REPRESENTATIVE OF 26 FACULTY MEMBERS AN D THE ASSESSEE COULD HAVE ENSURED PRESENCE OF FEW MORE FACULTY MEMBERS T O GIVE CREDENCE TO HIS CLAIM AND THE AO COULD HAVE BEEN REQUESTED TO E XAMINE THEM AND ONLY IN A SITUATION, WHERE THE AO IS NOT FULLY SATI SFIED, OTHER FACULTY MEMBERS COULD HAVE BEEN ASKED FOR APPEAR OR IN THE ALTERNATIVE, ANY OTHER CREDIBLE VERIFIABLE DOCUMENTATION IN TERMS OF THEIR ENGAGEMENT WITH THE ASSESSEE AS PART OF HIS DISTANT LEARNING CENTRE COULD HAVE BEEN SUBMITTED TO THE SATISFACTION OF THE AO, HOWEVER, W E FIND THAT THERE IS NOTHING ON RECORD. IN SUCH FACTS AND CIRCUMSTANCES OF THE CASE, WHERE THE AO HAS ONLY DISALLOWED A SUM OF RS 90,375/- OUT OF RS 400,100/- AND WHICH HAS FURTHER BEEN RESTRICTED TO RS 45,187/- BY THE LD CIT(A), WE FIND THAT THE AUTHORITIES BELOW HAVE BEEN MORE THAN REAS ONABLE IN THEIR APPROACH AND KEEPING THE ENTIRETY OF FACTS AND CIRC UMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT SUCH FINDINGS ARE JUST AND PROPER AND WE ARE NOT INCLINED TO INTERFERE WITH THE SAID FINDINGS. THE ADDITION SO MADE AND CONFIRMED BY THE LD CIT(A) AMOUNTING TO RS 45,187/- IS ACCORDINGLY CONFIRMED. 15. REGARDING DISALLOWANCE OF VEHICLE RUNNING AND MAINTENANCE EXPENSES, THE CASE OF THE REVENUE IS THAT THE EXPEN SES HAVE BEEN INCURRED IN CASH AND NO LOGBOOK HAS BEEN MAINTAINED AND PERSONAL USE OF THE VEHICLES BY THE ASSESSEE AND HIS FAMILY MEMBERS CANNOT BE DENIED AND A SUM OF RS 30,000/- OUT OF TOTAL EXPENSES CLAI MED BY THE ASSESSEE AMOUNTING TO RS 4,22,780/- HAS BEEN DISALLOWED BY T HE AO. IN HIS SUBMISSIONS, THE ASSESSEE HAS SUBMITTED THAT IT IS MERELY ON SUSPICION THAT THE VEHICLES HAVE BEEN USED FOR PERSONAL PURPOSES, THE DISALLOWANCE HAS BEEN MADE BY THE AO AND FURTHER, DEPRECIATION IS A STATUTORY ALLOWANCE U/S 32(1) AND THERE CANNOT BE ANY DISALLOWANCE OUT OF SUCH STATUTORY ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 23 ALLOWANCE. IT IS NO DOUBT TRUE THAT MERE SUSPICION CANNOT BE A BASIS FOR DISALLOWANCE, HOWEVER, WHERE THE AO HAS ASKED THE A SSESSEE TO SUBSTANTIATE HIS CLAIM BY PRODUCING THE VEHICLE LOG BOOK AND WHERE THE ASSESSEE FAILED TO PRODUCE THE SAME OR ANY OTHER DO CUMENT, THE FINDINGS OF THE AO CANNOT BE TERMED AS BASED ON MERE SUSPICI ON BUT ARE IN FORM OF DEFINITIVE FINDING THAT THE VEHICLES HAVE NOT BEEN USED EXCLUSIVELY FOR BUSINESS PURPOSES IN ABSENCE OF NECESSARY SUBSTANTI ATION BY THE ASSESSEE. REGARDING CLAIM OF DEPRECIATION U/S 32(1), NO DOUBT IT IS A STATUTORY ALLOWANCE AND EVEN IN CASES, WHERE THE ASSESSEE HAS NOT CLAIMED, THERE IS A STATUTORY RECOGNITION THAT THE AO SHOULD ALLOW TH E SAME. AT THE SAME TIME, THE PROVISIONS OF SECTION 32(1) ARE SUBJECT T O PROVISIONS OF SECTION 38(2) WHEREIN IT HAS BEEN PROVIDED THAT WHERE THE P LANT AND MACHINERY (WHICH INCLUDES VEHICLES) ARE NOT USED EXCLUSIVELY FOR THE PURPOSES OF BUSINESS, THE AO IS EMPOWERED TO RESTRICT THE DEPRE CIATION TO A FAIR PROPORTIONATE PART THEREOF HAVING REGARD TO USE OF SUCH PLANT AND MACHINERY FOR THE PURPOSES OF BUSINESS. THEREFORE, IN THE INSTANT CASE, WHERE THE AO HAS RECORDED A FINDING THAT THE VEHICL ES HAVE NOT BEEN USED EXCLUSIVELY FOR THE PURPOSES OF BUSINESS, A FINDING WHICH REMAIN UNREBUTTED BEFORE US, AND HAS DETERMINED AND RESTRI CTED THE DEPRECIATION CLAIM, WE DONOT SEE ANY INFIRMITY IN THE SAID FINDI NGS OF THE AO. ON APPEAL, WE FIND THAT THE LD CIT(A) HAS HELD THE QUA NTUM OF DISALLOWANCE TO BE EXCESSIVE AND HAS ALREADY RESTRICTED THE SAME TO RS 15,000/- AND IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE THE REFORE ARE NOT INCLINED TO INTERFERE WITH THE SAID FINDINGS AND THE SAME AR E HEREBY CONFIRMED. 16. IN THE RESULT, THE GROUND NO. 4 OF ASSESSEES APPEAL IS DISMISSED. 17. REGARDING BIRTHDAY CELEBRATION EXPENSES WHICH A RE UNDISPUTEDLY INCURRED ON BIRTHDAY CELEBRATION OF VARIOUS STAFF M EMBERS EMPLOYED BY THE ITA NO. 307/JP/2020 SH. MANOJ KUMAR GUPTA, JAIPUR VS. ITO, JAIPUR 24 ASSESSEE, THE SAME ARE IN NATURE OF STAFF WELFARE E XPENSES AND CANNOT BE TERMED AS PERSONAL EXPENSES AND ARE THUS ALLOWABLE EXPENSES. THE DISALLOWANCE OF RS 36,270/- IS THUS DIRECTED TO BE DELETED. IN THE RESULT, THE GROUND NO. 5 OF ASSESSEES APPEAL IS ALLOWED. 18. GROUND NO. 1 IS GENERAL IN NATURE AND DOESNT REQUIRE ANY SEPARATE ADJUDICATION. FURTHER, THERE IS NO LEGAL BASIS TO HOLD THAT THE SPECIFIC EXPENSES CANNOT BE DISALLOWED IN ABSENCE OF REJECTI ON OF BOOKS OF ACCOUNTS, THEREFORE, GROUND NO. 2 IS DISMISSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 04/05/2021. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04/05/2021 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SH. MANOJ KUMAR GUPTA, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-5(2), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 307/JP/2020} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR