M/s. Perfect Polymech, Petlad V. The ACIT.,Circle-3, Baroda

ITA 3193/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1382 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 16-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Keywords: Depreciation; Deemed to accrue or arise in india; Fair market value; Corroborative evidences
• Section: 143(3); 142(1); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI, JM, & SHRI MANISH BORAD, AM. ITA NO.3193 /AHD/2011 ASST. YEAR: 2008-09 M/S PERFECT POLYMESH C/O R.R. PATEL & CO., SIYO CHOWK, DHARMAJ, PETLAD. VS. ACIT, CIRCLE-3, BARODA. APPELLANT RESPONDENT PAN AAJFP 0033F APPELLANT BY SHRI SUNIL TALATI, AR RESPONDENT BY SHRI VILAS V. SHINDE, SR.DR DATE OF HEARING: 2.6.2016 DATE OF PRONOUNCEMENT: 15/6/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-I, BARODA, DATED 19.9.2011 IN APPEAL NO.CAB- I/159/10-11 PASSED AGAINST ORDER U/S 143(3) OF IT ACT, 1961 (IN SHORT THE ACT) FOR ASST. YEAR 2008-09 FRAMED ON 22/12/2010 BY ACIT, CI RCLE-3, BARODA. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF MANUFACTURING & PROCESSING OF PLASTIC NET. RETURN O F INCOME FOR ASST. YEAR 2008-09 WAS FILED ON 10.10.2008 DECLARING TOTA L INCOME AT RS.32,71,727/-. RETURN WAS PROCESSED U/S 143(1) OF THE ACT AND LATER ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 2 ON CASE WAS SELECTED FOR SCRUTINY ASSESSMENT THROUG H CASS AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 14.8.200 9 & NOTICE U/S 142(1) OF THE ACT WAS ISSUED ON 8.3.2010 AND DULY S ERVED ON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS LD. ASSESSING OFFICER WHILE EXAMINING THE SUNDRY CREDIT ORS OUTSTANDING AS ON 31.3.2008 OBSERVED THAT IN A FEW CASES NO CON FIRMATION AND NECESSARY DETAILS WERE FURNISHED TO PROVE THE GENUI NENESS OF THE OUTSTANDING AMOUNT AND IN SOME CASES THE CLOSING BA LANCES WERE NOT FULLY VERIFIABLE WITH THE CONFIRMATIONS RECEIVED FR OM THE PARTIES. LD. AO OBSERVED THAT TRAVELLING EXPENSES WERE BOOKED FO R FOREIGN TRIP WITHOUT PLACING NECESSARY SUPPORTING, EXCESS REMUNE RATION PAID TO MRS. URVASHI DESAI AND UNVERIFIABLE COMMISSION EXPE NSES PAID TO MR. GIRISH DESAI. ACCORDINGLY, ASSESSMENT WAS FRAME D AT AN ASSESSED INCOME OF RS.68,08,167/- AFTER MAKING FOLL OWING ADDITIONS :- I) ADDITION U/S 41(1) FOR UNVERIFIABLE SUNDRY CREDITORS - RS..7,82,725/- II) ADDITION U/S 41(1) FOR UNRECONCILED BALANCES OF SUNDRY CREDITORS- RS.7,12,219/- III) UNEXPLAINED FOREIGN TRAVEL EXPENSES- RS.1,98, 758/- IV) EXCESSIVE REMUNERATION PAID TO MRS. URVASHI DESAI - RS.12,00,000/- V) UNEXPLAINED COMMISSION EXPENSES PAID TO MR. GIRISH DESAI - RS.6,42,738/- ------------------------ RS.35,36,440/- 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) AND GOT PART RELIEF TO THE EXTENT THAT ADDITION OF RS.3,90, 395/- WAS DELETED U/S ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 3 41(1) OF THE ACT TOWARDS SUNDRY CREDITORS NAMELY- R .A.IMPEX AT RS.2,40,073/- AND SAI AGENCIES AT RS.1,50,322/- FOR THE REASON THAT REGULAR BUSINESS TRANSACTIONS WERE BEING CARRIED OU T WITH THESE PARTIES IN THE YEARS BEYOND ASST. YEAR 2008-09 AND CONFIRMED THE REMAINING ADDITION BY OBSERVING AS UNDER :- 2.2 I HAVE CONSIDERED THE MATTER. IT HAS BEEN HELD BY VARIOUS HIGH COURTS/TRIBUNALS THAT - MERELY BECAUSE THE LIABILIT Y WAS OUTSTANDING IN ASSESSEE'S BOOKS FOR SEVERAL YEARS, IT IS NOT A CAS E TO INVOKE SEC. 41(1). FURTHER, AS HELD BY ITAT AHMEDABAD IN THE CASE OF B HAVESH, PRINTS P LTD (2011) 46 SOT 268, ONUS WAS ON REVENUE TO SHOW THAT ASSESSEE HAD OBTAINED ANY BENEFIT BY WAY OF REMISSION DURING CURRENT YEAR BEFORE SEC. 41(1) COULD BE INVOKED AND AO'S INQUIRY THAT CERTAI N PARTIES WERE NOT TRACEABLE DID NOT MEAN THAT THERE WAS REMISSION OR CESSATION OF LIABILITY U/S 41(1). COPIES OF LEDGER ACCOUNTS OF P ARTIES FOR THE SUBSEQUENT YEARS, FILED BY THE APPELLANT ALSO SHOW THAT TRANSACTIONS WITH THE PARTIES CONTINUED IN YEARS BEYOND FY 07-08 . THUS, THE LIABILITY IN RESPECT OF PARTIES R A IMPEX (ADDITION OF RS.2,4 0,073/-) AND SAI AGENCIES (ADDITION OF RS.1,50,322) CANNOT BE SAID T O HAVE BEEN CEASED MERELY DUE TO NO RESPONSE BY THEM TO NOTICE U/S 1 33(6). HOWEVER, IN RESPECT OF FORTUNE TRADE LINK, APPELLANT ITSELF W ROTE OFF THE OUTSTANDING BALANCE IN AY 2010-11. IN THE LEDGER ACCOUNT OF FORTUNE TRADE LINK, THERE IS NO TRANSACTION AFTER 1.4.2007- AND THE ACCOUNT WAS CLOSED ON 31.3.2010. FOLLOWING THE DECISION OF MY I D. PREDECESSOR IN APPELLANT'S CASE IN AY 07-08 ON SIMILAR FACTS FOR A FURUDAR METAL, ADDITION M RESPECT OF FORTUNE TRADE UNR OF RS.3,92, ,330/- IS HELD TO BE JUSTIFIED IN AY 08-09. IN RESPECT OF OM LOGISTICS (ADDITION OF RS.4,976), BHAVNA ENGINEERS (ADDITION OF RS.3,41,76 7/-), TODAY'S TRADERS (ADDITION OF RS.30,000/-), PERFECT COLOURA NT P LTD (ADDITION OF RS.517/-), SHREENATH POLYPLAST P LTD (ADDITION OF R S*3,22,100/-) AND BARODA INDUSTRIAL POLYMERS (ADDITION OF RS.12,859/- ), THE ADDITION MADE IS OF UNRECONCILED AMOUNT. IN RESPECT OF THESE PARTIES, DIFFERENCE WAS ACCEPTED BY APPELLANT'S ACCOUNTANT DURING ASSES SMENT PROCEEDINGS. APPELLANT'S SUBMISSION BEFORE ME THAT IT WAS AN ACCOUNTING ERROR CANNOT BE ACCEPTED SINCE APPELLANT FAILED TO RECONCILE THE DIFFERENCE. ALTHOUGH APPELLANT IN THE GROUND OF APPEAL HAD ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 4 MENTIONED THE FIGURE OF ADDITION UNDER SEC. 41(1) AT RS.16,93,702/-, ACTUAL ADDITION U/S 41(1) COMES TO RS.14,94,944 ONLY. ACCORDINGLY, ADDITION IS DELETED TO THE EXTENT OF R S.3,90,395/- AND IS CONFIRMED TO THE EXTENT OF RS.11,04,549/-. 4. NOW ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. GROUND NO.1 THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER U/ S 143(3) OF IT ACT & PARTLY CONFIRMED BY FIRST APPELLATE AUTHOR ITY IS BAD IN LAW AND DESERVES TO BE UNCALLED FOR. THIS GROUND IS GENERAL IN NATURE, HENCE NEEDS NO AD JUDICATION. 5. GROUND NO. 2. THE ASSESSING OFFICER AS WELL AS FIRST APPELLATE AU THORITY HAS ERRED IN LAW & ON FACTS IN MAKING & CONFIRMING RESP ECTIVELY ADDITION OF RS.11,04,549/- U/S 41(1) OF IT ACT & SA ME DESERVES TO BE DELETED. 6. THE LD. AR SUBMITTED THAT DURING THE COURSE OF A SSESSMENT PROCEEDINGS TOTAL ADDITION MADE U/S 41(1) OF THE AC T STOOD AT RS.14,94,944/- OUT OF WHICH RS.7,82,725/- WERE RELA TED TO THREE PARTIES, CLOSING BALANCES OF WHICH REMAINED UNVERIF IABLE AND THE REMAINING AMOUNT OF RS.7,12,219/- RELATING TO SIX P ARTIES OF WHICH THERE WERE DIFFERENCE IN THE CLOSING BALANCES AS AP PEARING IN THE BOOKS OF APPELLANT AND THE CONFIRMATION RECEIVED. O UT OF THE TOTAL ADDITION MADE BY LD. ASSESSING OFFICER AT RS.14,94, 944/- LD. CIT(A) HAS ALREADY DELETED ADDITION OF RS.3,90,395/- AND A S FAR AS REMAINING ADDITION IS CONCERNED IN MOST OF THE CASES APPELLAN T HAS HIMSELF WRITTEN OFF THE BALANCE OF SUNDRY CREDITORS IN ASST . YEAR 2010-11 AND ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 5 ASST. YEAR 2011-12 BY WAY OF OFFERING IT TO TAX AND THE REMAINING ARE RELATING TO OM LOGISTICS AT RS.4,976/- PERFECT COLO URANTS P. LTD. AT RS.517/- AND BARODA INDUSTRIAL POLYMERS AT RS.12,85 9/- WHICH ARE VERY SMALL AMOUNTS RELATING TO DIFFERENCE BETWEEN T HE CLOSING BALANCES IN THE BOOKS OF BOTH THE PARTIES AND ARE I N NORMAL COURSE OF BUSINESS SUBJECT TO RECONCILIATION AND CERTAINLY DO NOT CALL FOR ANY ADDITION U/S 41(1) OF THE ACT. LD. AR ALSO REFERRED AND RELIED ON THE JUDGMENT OF HON. JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA IN TAX APPEAL NO.588 OF 20 13 DATED 4/2/2014. 7. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE JUDGMENT RELIED ON B Y THE LD. AR. THROUGH THIS GROUND ASSESSEE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) CONFIRMING OF ADDITION OF RS. 11,04,549/- U/ S 41(1) OF THE ACT. FROM GOING THROUGH THE RECORDS, WE OBSERVE THAT THE LD. CIT(A) SUSTAINED ADDITION OF RS. 11,04,549/- U/S 41(1) OF THE ACT RELATING TO FOLLOWING PARTIES :- NAME OF THE PARTY AMOUNT (RS) REMARKS FORTUNE TRADELINK 3,92,330/- PARTY NOT RECEIVED. OM LOGISTICS 4,976/- DIFFERENCE DUE TO RECONCILIATION, BHAVNA ENGINEERING WORKS 3,41,767/- -DO- TODAYS TRADERS 30,000/- -DO- ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 6 PERFECT COLOURANTS 517/- -DO- SHREENATH POLYPLAST PVT. LTD. 3,,22,100/- -DO- BARODA INDUSTRIAL POLYMERS 12,859/- -DO- TOTAL 11,04,549/- 9. WE FURTHER OBSERVE THAT PROVISIONS OF SEC.41(1) OF THE ACT READS AS UNDER :- 41. [ (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MA DE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILIT Y INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBS EQUENTLY DURING ANY PREVIOUS YEAR, ( A ) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR E XPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSI ON OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENE FIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFE SSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREV IOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR ( B ) THE SUCCESSOR IN BUSINESS HAS OBTAINED, WHETHER I N CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF WHICH LOSS OR EXPENDITURE WAS INCURRED BY THE FIRST-MENTIONED PERSON OR SOME BENEFIT IN RESPECT O F THE TRADING LIABILITY REFERRED TO IN CLAUSE ( A ) BY WAY OF REMISSION OR CESSATION THEREOF, THE AMO UNT OBTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRU ING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSI NESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR. [ EXPLANATION 1. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSI ON 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUDE THE REMISSION O R CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE ( A ) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE ( B ) OF THAT SUB-SECTION BY WAY OF WRITING OFF SUCH LI ABILITY IN HIS ACCOUNTS.] [ EXPLANATION 2 ].FOR THE PURPOSES OF THIS SUB-SECTION, 'SUCCESSOR IN BUSINESS' MEANS, ( I ) WHERE THERE HAS BEEN AN AMALGAMATION OF A COMPANY WITH ANOTHER COMPANY, THE AMALGAMATED COMPANY; ( II ) WHERE THE FIRST-MENTIONED PERSON IS SUCCEEDED BY ANY OTHER PERSON IN THAT BUSINESS OR PROFESSION, THE OTHER PERSON; ( III ) WHERE A FIRM CARRYING ON A BUSINESS OR PROFESSION IS SUCCEEDED BY ANOTHER FIRM, THE OTHER FIRM;] [( IV ) WHERE THERE HAS BEEN A DEMERGER, THE RESULTING CO MPANY.] [(2) WHERE ANY BUILDING, MACHINERY, PLANT OR FURNI TURE, ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 7 ( A ) WHICH IS OWNED BY THE ASSESSEE; ( B ) IN RESPECT OF WHICH DEPRECIATION IS CLAIMED UNDER CLAUSE ( I ) OF SUB-SECTION (1) OF SECTION 32 ; AND ( C ) WHICH WAS OR HAS BEEN USED FOR THE PURPOSES OF BU SINESS, IS SOLD, DISCARDED, DEMOLISHED OR DESTROYED AND THE MONEYS PAYABLE IN RESPECT OF SUCH BUILDING, MACHINERY, PLANT OR FURNITURE, AS THE CAS E MAY BE, TOGETHER WITH THE AMOUNT OF SCRAP VALUE, IF ANY, EXCEEDS THE WRITTEN DOWN VALUE , SO MUCH OF THE EXCESS AS DOES NOT EXCEED THE DIFFERENCE BETWEEN THE ACTUAL COST AND T HE WRITTEN DOWN VALUE SHALL BE CHARGEABLE TO INCOME-TAX AS INCOME OF THE BUSINESS OF THE PREVIOUS YEAR IN WHICH THE MONEYS PAYABLE FOR THE BUILDING, MACHINERY, PLANT O R FURNITURE BECAME DUE. EXPLANATION. WHERE THE MONEYS PAYABLE IN RESPECT OF THE BUILDING , MACHINERY, PLANT OR FURNITURE REFERRED TO IN THIS SUB-SECTION BECOME DU E IN A PREVIOUS YEAR IN WHICH THE BUSINESS FOR THE PURPOSE OF WHICH THE BUILDING, MAC HINERY, PLANT OR FURNITURE WAS BEING USED IS NO LONGER IN EXISTENCE, THE PROVISION OF TH IS SUB-SECTION SHALL APPLY AS IF THE BUSINESS IS IN EXISTENCE IN THAT PREVIOUS YEAR.] 10. WE FURTHER OBSERVE THAT LD. AR HAS REFERRED AND RELIED ON THE JUDGMENT OF HON. JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA (SUPRA) IN WHICH THE TAX A PPEAL OF THE REVENUE WAS DISMISSED BY THE HON.BLE COURT BY OBSER VING AS UNDER:- WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL. SECTION 41(1) OF THE ACT AS DISCUSSED IN THE ABOVE THREE DECISIONS WOULD APPLY IN A CASE WHERE THERE HAS BEEN REMISSION OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSID ERATION SUBJECT TO THE CONDITIONS CONTAINED IN THE PAGE 5 OF 6 HTTP://WWW.ITATONLINE. ORG O/TAXAP/588/2013 ORDER STATUTE BEING FULFILLED. ADDITIONALLY, SUCH CESSATI ON OR REMISSION HAS TO BE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE PRESENT CASE, BOTH ELEMENTS ARE MISSING. THERE WAS NOTHING ON REC ORD TO SUGGEST THERE WAS REMISSION OR CESSATION OF LIABILITY THAT TOO DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08 WHICH WAS THE YEAR UNDER CONSIDERATION. IT IS UNDOUBTEDLY A CURIOUS CASE. EVEN THE LIABILITY ITSELF SEEMS UNDER SERIOUS DOUBT. THE ASSESSING OFFICER UNDERTOOK THE EXERCISE TO VERIFY THE RECORDS OF THE SO CALLED CRE DITORS. MANY OF THEM WERE NOT FOUND AT ALL IN THE GIVEN ADDRESS. SOME OF THEM STATED THAT THEY HAD NO DEALING WITH THE ASSESSEE. IN ONE OR TWO CASES, THE RESPONSE WAS THAT THEY HAD NO DEALING WITH THE ASSESSEE NOR DID THEY KNOW HIM. OF COURSE, THESE INQUIRIES WERE MADE EX PARTE AND IN THAT VIEW OF THE MATTER, THE ASSESSEE WOULD BE ALLOWED TO CONTEST SU CH FINDINGS. NEVERTHELESS, EVEN IF SUCH FACTS WERE ESTABLISHED THROUGH BI-PARTE INQUIRIES, THE LIABILITY AS IT STANDS PERHAPS HOLDS THAT THERE WAS NO CESSATION OR REMISSION OF LIABILI TY AND THAT THEREFORE, THE AMOUNT IN QUESTION CANNOT BE ADDED BACK AS A DEEMED INCOME UN DER SECTION 41(C) F THE ACT. THIS IS ONE OF THE STRANGE CASES WHERE EVEN IF THE DEBT ITS ELF IS FOUND TO BE NON-GENUINE FROM THE VERY INCEPTION, AT LEAST IN TERMS OF SECTION 41(1) OF THE ACT THERE IS NO CURE FOR IT. BE THAT ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 8 AS IT MAY, INSOFAR AS THE ORDERS OF THE REVENUE AUT HORITIES ARE CONCERNED, THE TRIBUNAL NOT HAVING MADE ANY ERROR, THIS TAX APPEAL IS DISMISSED . 11. WE FURTHER OBSERVE THAT FROM GOING THROUGH THE PROVISIONS OF SECTION 41(1) OF THE ACT AND THE JUDGMENT OF HON. J URISDICTIONAL HIGH COURT REFERRED ABOVE, IN CONSONANCE WITH THE FACTS OF THE CASE WE FIND THAT IN THE BALANCES OF THE FOLLOWING SUNDRY C REDITORS HAVE BEEN WRITTEN OFF IN THE YEARS AHEAD TO ASST. YEAR 2007-0 8 AND OFFERED TO TAX :- 1. FORTUNE TRADELINKS RS.3,92,330/- 2. TODAYS TRADERS RS. 30,000/- 3. BHAVNA ENGINEERS RS.3,41,767/- -------- ------------------ R S.7,64,097/- FURTHER IN THE CASE OF SHREENATH POLYPLAST WHEREIN ADDITION HAS BEEN CONFIRMED AT RS.3,22,100/- ON GOING THROUGH THE LED GER ACCOUNT FROM F.Y. 2006-07 TO F.Y.2011-12 WE OBSERVE THAT APPELLA NT HAS ENTERED INTO BUSINESS TRANSACTION REGULARLY THROUGHOUT THIS PERIOD AND THE DETAILS OF WHICH ARE AVAILABLE AT PAGES 36 -65 OF T HE PAPER BOOK AND FROM GOING THROUGH THE SAME WE ARE OF THE CONSIDERE D OPINION THAT THERE CANNOT BE ANY ADDITION U/S 41(1) OF THE ACT F OR SUCH A PARTY WITH WHOM REGULAR BUSINESS TRANSACTIONS HAVE BEEN MADE A ND THE DIFFERENCE, IF ANY, AT THE TIME OF FRAMING ASSESSME NT ORDER WAS MAINLY DUE TO LACK OF PROPER RECONCILIATION. 12. WE FURTHER OBSERVE THAT IN THE CASE OF REMAININ G PARTIES I.E. OM LOGISTICS AT RS.4,976/-, PERFECT COLOURANTS AT RS.5 17/- AND BARODA ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 9 INDUSTRIAL POLYMERS AAT RS.12,859/- ARE SMALL AMOUN TS WHICH ARE ATTRIBUTABLE TO NON-RECONCILIATION OF THE BALANCES AND ENTRIES OF BOTH THE PARTIES AND CERTAINLY DO NOT CALL FOR ANY ADDIT ION U/S 41(1) OF THE ACT. 13. WE ARE, THEREFORE, OF THE VIEW THAT OUT OF THE TOTAL SUSTAINED ADDITION OF RS.11,04,549/- A SUM OF RS.7,64,079/- H AS BEEN OFFERED TO TAX IN ASST. YEAR 2010-11 AND ASST. YEAR 2011-12 AN D THE REMAINING AMOUNT AT RS.3,40,452/- ARE RELATING TO PARTIES HAV ING REGULAR BUSINESS TRANSACTIONS WITH THEM AND THE IMPUGNED AM OUNTS ARE ONLY DUE TO NON-RECONCILIATION IN THE BOOKS OF BOTH THE PARTIES BUT IN NONE OF THE IMPUGNED SUNDRY CREDITORS ANY ADDITION U/S 4 1(1) IS CALLED FOR. WE, THEREFORE, DELETE THIS ADDITION OF RS.11,04,549 /- MADE U/S 41(1) OF THE ACT. THIS GROUND IS ALLOWED. 14. GROUND NO.3 THE ASSESSING OFFICER AS WELL AS FIRST APPELLATE AU THORITY HAS ERRED IN LAW & ON FACTS IN MAKING & CONFIRMING RESP ECTIVELY ADDITION OF TRAVELLING EXPENSES OF RS.1,98,758/- & SAME DESERVES TO BE DELETED. 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT SUM OF RS.1,98,758/- HAS BEEN BOOKED AS FOREIGN TRAVEL EXPENDITURE FOR THE TRIP OF A PERSO N FROM MANAGEMENT TO DUBAI BUT HE WAS NOT CONVINCED WITH THE REPLY AB OUT THE BASIS OF THIS FOREIGN TRIP AND DISALLOWED THE SAME AT THE TI ME OF FRAMING ASSESSMENT ORDER. IN APPEAL BEFORE LD. CIT(A) THIS ADDITION WAS CONFIRMED BY LD. CIT(A) BY OBSERVING AS UNDER :- ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 10 3.2 I HAVE CONSIDERED THE MATTER. ONUS WAS ON THE A PPELLANT TO PROVE THAT THE EXPENSE ON FOREIGN TRAVEL WAS INCURRED WHO LLY AND EXCLUSIVELY FOR ITS BUSINESS. APPELLANT COULD NOT FILE ANY EVID ENCE OF WHATSOEVER KIND TO PROVE THAT THE VISIT TO DUBAI TO MEET ONE P ARTY WAS FOR THE PURPOSE OF BUSINESS. A BUSINESS VISIT COULD BE TO M EET JUST ONE PARTY OR THE BUSINESS DEAL MAY NOT MATERIALIZE EVEN AFTER TH E MEETING, HOWEVER, EVIDENCE THAT THE MEETING WAS FOR THE PURPOSE OF BU SINESS WAS REQUIRED TO SUBSTANTIATE THE CIAIM, WHICH WAS NOT FILED, DIS ALLOWANCE OF RS,L,98*758/- IS CONFIRMED. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 16. LD. AR SUBMITTED THAT COMPLETE DETAILS OF FOREI GN TRAVEL TO DUBAI WERE PLACED BEFORE LD. ASSESSING OFFICER, SHO WING THE NAME OF THE PERSON AND THE TENURE OF HIS VISIT WHICH WAS M ADE TO EXPLORE BUSINESS OPPORTUNITIES FOR THE ASSESSEE FIRM AND NO OTHER FAMILY MEMBER ACCOMPANIED THE PERSON WHO TRAVELLED TO DUBA I WHICH PROVES THAT THERE WAS NO PERSONAL USE INVOLVED IN THIS FOREIGN TRIP. LD. AR FURTHER SUBMITTED THAT LD. ASSESSING OFFICER FAILED TO APPRECIATE THAT THE ASSESSEE FIRM IS HAVING HUGE TU RNOVER AND INCOME OF RS.32,71,727/- WAS OFFERED TO TAX IN THE RETURN OF INCOME FILED AND THERE CANNOT BE ANY INTENTION OF THE ASSESSEE TO EV ADE TAX BY CLAIMING EXCESSIVE EXPENDITURE IN THE FORM OF FOREI GN TRAVEL EXPENDITURE WHICH WAS INCURRED EXCLUSIVELY FOR EXPL ORING THE BUSINESS OPPORTUNITY OF THE ASSESSEE FIRM. 17. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 11 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE HAS CHALLEN GED THE ACTION OF LD. CIT(A) CONFIRMING ADDITION OF EXPENSES OF RS .1,98,758/- ON ACCOUNT FOREIGN TRAVEL. FROM GOING THROUGH THE RECO RDS AND SUBMISSIONS OF THE LD. AR WE OBSERVE THAT THERE IS NO DISPUTE FROM THE SIDE OF REVENUE TO THIS EFFECT THAT DETAILS OF THE PERSON, SUPPORTING EVIDENCES TOWARDS THE EXPENDITURE INCURR ED AND TENURE OF FOREIGN TRAVEL WERE PLACED ON RECORD DURING THE COU RSE OF ASSESSMENT PROCEEDINGS ITSELF AND NO DEFECT IN THE SAME HAS BE EN OBSERVED BY LD. ASSESSING OFFICER. WE FURTHER OBSERVE THAT THIS TRIP WAS UNDERTAKEN BY A PERSON FROM AMONGST THE MANAGEMENT AND WAS NOT ACCOMPANIED WITH HIS FAMILY MEMBERS TO THIS TRIP. W E ALSO OBSERVE THAT ASSESSEE FIRM IS HAVING HUGE TURNOVER AND HAS SHOWN TOTAL INCOME AT RS.32,71,727/- IN THE RETURN OF INCOME FI LED AND NO MAJOR DEFECT HAS BEEN POINTED OUT IN THE BOOKS AND AUDITE D FINANCIAL STATEMENT BECAUSE NORMALLY DURING THE COURSE OF AUD IT CONDUCTED BY THE AUDIT FIRM VARIOUS EXPENSES ARE TEST CHECK WITH THE SUPPORTINGS AVAILABLE AND IF ANYTHING IS FOUND OTHERWISE THE SA ME IS REPORTED IN THE AUDIT REPORT AND THERE IS NO SUCH NEGATIVE OBSE RVATION IN THE CASE OF ASSESSEE. 19. WE ARE, THEREFORE, OF THE VIEW THAT THE ASSESSI NG OFFICER SHOULD NOT HAVE EMBARKED UPON THE EXPENDITURE JUST BECAUSE IT IS A FOREIGN TRAVEL EXPENDITURE , AS A PRUDENT BUSINESS MAN HAS ALWAYS TO LOOK FOR BETTER AND PROSPEROUS MARKET TO SUCCESSFULLY RUN IT S BUSINESS IN THE HIGHLY COMPETITIVE MARKET AND IN THIS PROCESS ONE H AS TO TAKE UP CALL TO FIND BEST BUSINESS OPPORTUNITY. THERE MAY BE A S ITUATION WHERE A ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 12 BUSINESSMAN DOES NOT HAVE A CONFIRMED SOURCE OF GET TING AN ORDER BUSINESS DEAL BUT JUST IN ORDER TO FEEL THE INTERNA TIONAL MARKET VISITS ARE MADE TO EXPLORE BUSINESS OPPORTUNITIES SO AS TO SELL THE GOODS IN THE OVERSEAS MARKET OR TO MAKE PURCHASE, AT REDUCED RATES IF THE DOMESTIC RATES ARE HIGHER. IN THESE CIRCUMSTANCES A ND LOOKING TO THE FACT ABOUT THE TURNOVER AND THE INCOME OFFERED IN A ND NO MAJOR DEFECT FOUND IN THE BOOKS OF ACCOUNT, NO DISALLOWANCE WAS CALLED FOR ON THE PART OF THE ASSESSING OFFICER TOWARDS THE FOREIGN T RAVEL EXPENDITURE AT RS. 1,98,758/-. WE DELETE THE SAME. THIS GROUND OF THE ASSESSEE IS ALLOWED. 20. GROUND NO.4 THE ASSESSING OFFICER AS WELL AS FIRST APPELLATE AU THORITY HAS ERRED IN LAW & ON FACTS IN MAKING & CONFIRMING RESP ECTIVELY ADDITION OF REMUNERATION EXPENSES OF RS.12,00,000/- TO SMT. URVASHI DESAI BY INVOKING 40A(2) OF IT ACT AND SAME DESERVES TO BE DELETED. 21. ADDITION OF RS.12,00,000/- WAS MADE BY LD. ASSE SSING OFFICER TOWARDS EXCESSIVE REMUNERATION PAID TO MRS. URVASHI DESAI FOR HIS OBSERVATION THAT REMUNERATION PAID AT RS.1,50,000/- PER MONTH WAS EXCESSIVE AND ALLOWED RS.50,000/- PER MONTH AS GENU INE EXPENDITURE AND DISALLOWED THE REMAINING AMOUNT OF RS.12,00,000/- CALCULATED @ RS.1,00,000/- PER MONTH. LD. CIT(A) CO NFIRMED THE ACTION OF ASSESSING OFFICER ON THE BASIS OF DECISIO N OF HIS PREDECESSOR FOR ASST. YEAR 2007-08 BY OBSERVING AS UNDER :- 4.2 I HAVE CONSIDERED FACTS OF THE CASE AND APPELLA NT'S SUBMISSIONS WHICH ARE IDENTICAL TO AY 2007-08, WHERE CIT(A)-I, BARODA, MY ID. PREDECESSOR IN CAB-I/215/09-10 THROUGH ORDER DT, 9. 11.2010 HELD THAT ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 13 FOR THE SERVICES PROVIDED BY SMT. URVASHI DESAI, REMUNERATION OF RS.50,000/- P.M. ONLY WAS FAIR AND REASONABLE AND B ALANCE AMOUNT WAS TO BE DISALLOWED. I AM IN AGREEMENT WITH MY ID. PREDEC ESSOR'S DECISION ON THIS ISSUE AND CONFIRM THE DISALLOWANCE OF RS.12,00 ,000/- BY THE AO OUT OF REMUNERATION PAID TO SMT. URVASHI DESAI IN AY 2008- 09. 22. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 23. LD. AR SUBMITTED THAT MRS. URVASHI DESAI WAS EN GAGED WITH THE ASSESSEE COMPANY IN DESIGNING/IMPLEMENTATION AN D INSTALLATION OF PLASTIC MACHINERY, DYES, DYE-HEAD AND THE MAINTE NANCE. SHE HAS EXTENSIVE KNOWLEDGE OF MANUFACTURING VARIOUS TYPES OF PLASTIC PRODUCTS. MRS. URVASHI DESAI IS BACHELOR OF ENGINEE RING IN CHEMICAL FROM SHRI DHARAMSINH DESAI INSTITUTE OF TECHNOLOGY, NADIAD, IN 1973 AND HAS WORKED WITH GMM LTD., VALLABH VIDYANAGAR, F ROM 1973-76, UNIT ENGINEER, BARODA, AS SENIOR ENGINEER FROM 1976 -87, TOPTECH INDUSTRIES, SAMYALA AS GENERAL MANAGER FROM 1987-90 AND FROM 1990 ONWARDS AS DIRECTOR, URVITECH ENG. PVT. LTD. A ND URVIFLEX PVT. LTD. AND AS PRESENT IS PROVIDING TECHNICAL INFORMAT ION/ASSISTANCE IN DESIGN AND DRAWING OF MACHINERY AND IMPROVEMENTS PE RTAINING TO CONTRACTED PLASTIC PRODUCTS. LD. AR FURTHER SUBMITT ED THAT REMUNERATION UPTO THE EXTENT OF RS.50,000/- HAS ALR EADY BEEN CONSIDERED AS GENUINE BY LD. ASSESSING OFFICER AND THE ONLY REASON FOR DISALLOWANCE OF RS.12 LACS WAS THAT LD. ASSESSI NG OFFICER WAS OF AN OPINION THAT THIS AMOUNT HAS BEEN EXCESSIVELY CL AIMED AND THE REAL VALUE OF THE WORK DONE SHOULD NOT BE IN EXCESS OF RS.50,000/- PER MONTH. ASSESSING OFFICER FAILED TO APPRECIATE T HAT MRS. URVASHI DESAI IS COMING IN THE TAX BRACKET OF MAXIMUM MARGI NAL RATE AND HAS SHOWN TOTAL INCOME AT RS.17,88,231/- OUT OF WHICH M OST OF THE PORTION ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 14 WAS TAXABLE @ 30% WHICH MEANS THAT THERE HAS BEEN N OT MUCH OF LOSS TO THE REVENUE AND NOR THERE HAS BEEN SPECIAL BENEFIT TO THE ASSESSEE FIRM FOR CLAIMING SUCH EXCESSIVE EXPENDITU RE AND, THEREFORE, NO ADDITION IS CALLED FOR BY WAY OF DISA LLOWANCE OF THE EXPENDITURE OF THE REMUNERATION PAID TO MRS. URVASH I DESAI. 24. LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIE S. 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE IS AGGRIEVE D WITH THE ACTION OF LD. CIT(A) FOR CONFIRMING DISALLOWANCE OF REMUNE RATION EXPENDITURE OF RS.12 LAS TO MRS. URVASHI DESAI BY INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT. FROM GOING THROUGH THE S UBMISSIONS OF LD. AR WE OBSERVE THAT MRS. URVASHI DESAI IS B.E. (CHEM ICAL) PASSED IN 1973 AND HAS WORKED WITH VARIOUS COMPANIES 1973 ONW ARDS AND THEREAFTER SHE IS PROVIDING TECHNICAL INFORMATION/A SSISTANCE IN DESIGN AND DRAWING OF MACHINERY AND IMPROVEMENTS PERTAININ G TO CONTRACTED PLASTIC PRODUCTS. 26. WE FURTHER OBSERVE THAT THERE IS NO DISPUTE TO THE FACT THAT THE TECHNICAL QUALIFICATION AND EXPERTISE OF MRS. URVAS HI DESAI WHO IS A CHEMICAL ENGINEER. THE ONLY REASON FOR DISALLOWANCE EMANATES FROM THE OBSERVATION OF LD. ASSESSING OFFICER THAT TYPE OF WORK IN SERVICE MRS. URVASHI DESAI IS PROVIDING, REMUNERATION PAYAB LE FOR THE SAME SHOULD NOT EXCEED RS.50,000/- PER MONTH. FROM GOING THROUGH THIS OBSERVATION OF LD. ASSESSING OFFICER, WE FIND THAT TO THE EXTENT OF RS.50,000/- PER MONTH REMUNERATION, LD. ASSESSING O FFICER HAS NO ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 15 OBJECTION AND HAS SATISFIED HIMSELF WITH ALL THE BA SIC CRITERIA AND CONDITIONS NECESSARY FOR THE GENUINENESS OF THE EXP ENDITURE. NOW LOOKING TO THIS ASPECT THAT MRS. URVASHI DESAI BEIN G A RELATIVE OF ONE OF THE PARTNERS OF THE ASSESSEE FIRM, THERE WAS A R EASON FOR PAYING EXCESS REMUNERATION TO SUCH PERSON COVERED U/S 40A( 2) OF THE ACT AS RELATIVE THEN IN SUCH A SITUATION LD. ASSESSING OFF ICER SHOULD HAVE FOCUSED UPON TWO BASIC POINTS FIRSTLY WHETHER THIS EXCESS PAYMENT HAS GIVEN SOME BENEFIT OF PAYING LESS TAXES ON THE INCOME BY CLAIMING EXCESSIVE EXPENDITURE AND SECONDLY ARE THE SE EXPENSES EXCESSIVE OR UNREASONABLE IN REGARD TO THE FAIR MAR KET VALUE OF THE SERVICES OR FACILITIES FOR WHICH PAYMENT IS MADE? T HESE TWO ASPECTS GET THEIR ORIGINATION FROM THE PROVISIONS OF SECTIO N 40A(2)(A) OF THE ACT WHICH READS AS UNDER :- SECTION 40A(2) (2)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE ( B) OF THIS SUB-SECTION, AND THE [ASSESSING] OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCE SSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILIT IES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF T HE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITU RE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. 27. NOW GOING THROUGH THE ABOVE PROVISIONS AND LOOK ING FOR ITS APPLICABILITY ON THE IMPUGNED PAYMENT MADE TO MRS. URVASHI DESAI WE ARE OF THE VIEW THAT LD. ASSESSING OFFICER HAS F AILED TO BRING ON RECORD ANY COMPARISON OF SUCH TYPE OF SERVICES PAYA BLE IN ORDER TO PROVE THE IMPUGNED PAYMENT BEING EXCESSIVE OR UNREA SONABLE EVEN ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 16 WHEN OUT OF THE TOTAL MONTHLY REMUNERATION OF RS.1, 50,000/- PER MONTH CLAIMED BY ASSESSEE LD. ASSESSING OFFICER HAS ALLOWED THE CLAIM OF RS.50,000/- PER MONTH AND HAS NOT PUT FORT H ANY WORKING OR SUPPORTING EVIDENCES FOR THE UNREASONABILITY OF THE EXCESSIVE EXPENSES IN REGARD TO THE CLAIM. WE FURTHER OBSERVE THAT LD. ASSESSING OFFICER HAS BEEN UNABLE TO PROVE THAT WHE THER THE ASSESSEE HAS DERIVED ANY BENEFIT BY CLAIMING THIS E XPENDITURE IN THE GIVEN SITUATION WHEN BOTH THE ASSESSEE AND THE SPEC IFIED PERSON (MRS. URVASHI DESAI) ARE COMING IN THE HIGHER TAX B RACKET. 28. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT EXPERTISE OF THE PROFESSIONAL GETS PERFECTED AND POLISHED DAY BY DAY OUT OF HIS/HER EXPERIENCE THROUGHOUT ITS PROFESSIONAL CAREER AND T HE WORTH OF THIS EXPERIENCE GETS APPRECIATED MORE AND MORE SO MUCH S O THAT HE/SHE CANNOT BE PUT AT PAR WITH THE FRESH PROFESSIONAL HA VING SAME DEGREE BUT NO EXPERIENCE. THIS EXPERIENCE AND EXPERTISE MA KES A PROFESSIONAL DESIRABLE FOR BEING PAID HIGHER REMUNE RATION/FEES AND THE SAME SITUATION IS THERE IN THE CASE OF ASSESSEE IN WHICH HIGHER AMOUNT OF REMUNERATION IS BEING PAID TO A B.E. (CHE MICAL), MRS. URVASHI DESAI HAVING EXPERIENCE MORE THAN 33 YEARS, AND THEREFORE, IN ABSENCE OF ANY SPECIFIC WORKING NO DISALLOWANCE WAS CALLED FOR BY LD. ASSESSING OFFICER TOWARDS EXCESS REMUNERATION P AID AT RS.12 LACS. WE DELETE THE SAME. THIS GROUND OF ASSESSEE I S ALSO ALLOWED. 29. GROUND NO.5 THE ASSESSING OFFICER AS WELL AS FIRST APPELLATE AU THORITY HAS ERRED IN LAW & ON FACTS IN MAKING & CONFIRMING RESP ECTIVELY ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 17 ADDITION OF PAYMENT OF COMMISSION RS.6,42,738/- TO SHRI GIRISH DESAI BY INVOKING 40A(2) OF IT ACT & SAME DESERVES TO BE DELETED. 30. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT A SUM OF RS.6,42,738/- HAS BE EN CLAIMED AS COMMISSION EXPENDITURE DUE TO BE PAID TO GIRISH DES AI BEING A PERSON COVERED U/S 40A(2)(B) OF THE ACT AS A RELATE D PARTY TO THE EXTENT THAT SHRI GIRISH DESAI IS RELATED PARTY WAS NOT REFLECTED IN THE AUDIT REPORT, WHICH MEANS THAT CORRECT INFORMATION ABOUT THE RELATIVE WAS NOT PROVIDED TO THE AUDITOR OF THE FIRM. LD. AS SESSING OFFICER FURTHER OBSERVED THAT MR. GIRISH DESAI IS 75 YEARS OLD PERSON AND SIMILAR TYPE OF PAYMENT OF COMMISSION WAS MADE DURI NG ASST. YEAR 2007-08 ALSO AND DURING THE COURSE OF ASSESSMENT PR OCEEDINGS IN ASST. YEAR 2007-08 STATEMENT ON OATH WAS TAKEN FROM MR. GIRISH DESAI AND AT THAT TIME HE WAS NOT ABLE TO REMEMBER THE NAMES OF THE PARTIES THROUGH WHICH COMMISSION WAS EFFECTED AND N OR WAS HE ABLE TO THROW LIGHT ON THE TYPE OF COMMISSION EARNED BY HIM. IN VIEW OF THIS OBSERVATION, COMMISSION EXPENSES OF RS. 6,42,738/- WAS DISALLOWED AND ADDED BACK TO THE INCOME OF ASSESSEE. APPEAL AG AINST THIS ADDITION BEFORE LD. CIT(A) COULD NOT BRING ANY RELI EF AS LD. CIT(A) FOLLOWED THE DECISION OF HIS PREDECESSOR FOR ASST. YEAR 2007-08 AND CONFIRMED THE DISALLOWANCE BY OBSERVING AS UNDER :- 5,1 I HAVE CONSIDERED THE MATTER. FACTS OF THE CASE AND APPELLANT'S SUBMISSIONS ARE IDENTICAL TO AY 2007-08 IN AY 2008- 09. FOLLOWING MY ID. PREDECESSOR, CIT(A)-I, BARODA'S DECISION ON THIS IS SUE IN APPELLANT'S CASE IN AY 2007-08, DISALLOWANCE OF RS.6,42,738/- IS CON FIRRNECI. 31 AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 18 32. LD. AR WAS NOT ABLE TO CONTROVERT THE OBSERVATI ON OF LD. ASSESSING OFFICER MADE IN HIS ASSESSMENT ORDER BUT SUBMITTED THAT THIS AMOUNT OF RS.6,42,738/- WAS PAID AS COMMISSION AND TDS AT THE APPLICABLE RATES WAS DEDUCTED. 33. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 34. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE IS AGGRIEVE D WITH THE ACTION OF LD. CIT(A) CONFIRMING THE DISALLOWANCE OF COMMIS SION EXPENDITURE OF RS. 6,42,738/-. FROM GOING THROUGH THE AVAILABLE RECORDS, WE OBSERVE THAT THE AMOUNT OF RS. 6,42,738/- HAS BEEN MADE TO MR. GIRISH DESAI, AGED 75 YEARS AND A RELATED PARTY COV ERED U/S 40A(2)(B) OF THE ACT. WE FURTHER OBSERVE THAT SIMIL AR TYPE OF ADDITION WAS MADE IN ASST. YEAR 2007-08 AND MR. GIRISH DESAI WAS UNABLE TO PUT FORWARD ANY PROPER INFORMATION EVIDENCING HIS I NVOLVEMENT IN THE PROCESSING OF EARNING COMMISSION AND GENERATION OF BUSINESS. WE ALSO OBSERVE THAT ASSESSEE HAS HIMSELF STATED IN TH E STATEMENT OF FACTS THAT MR. GIRISH DESAI HAS LEFT HIS WORK AND S TAYING AT HOME WHOLE DAY DUE TO HIS OLD AGE AND HIS MEMORY POWER M IGHT HAVE BECOME WEAK. IN SUCH A SITUATION WHEN PAYMENT IS BE ING MADE TO A PERSON TOWARDS COMMISSION WHICH IS IN REGARD TO EFF ECTING SALES OF THE ASSESSEE WHICH INVOLVES BOOKING OF ORDERS, REGU LAR CHECK TO THE ASPECT OF DELIVERY OF GOODS TO THE BUYERS AND REGUL AR PAYMENT AGAINST SALES SO MADE AND AFTER PROVIDING ALL THESE SERVICES ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 19 COMMISSION IS RECEIVED FOR EFFECTING SUCH SALES. LO OKING TO THE FACTS OF THE CASE AND THE OLD AGE OF MR. GIRISH DESAI HIS ILLNESS, WE ARE OF THE VIEW THAT ASSESSEE HAS BEEN UNABLE TO JUSTIFY T HE REASONABLENESS OF THE COMMISSION AMOUNT OF RS.6,42,738/- AND IT SE EMS THAT BENEFIT IN THE FORM OF CLAIMING TAX BENEFIT ON THIS PAYMENT OF EXPENDITURE HAS BEEN SOUGHT AFTER BY THE ASSESSEE AND MERELY DEDUCT ION OF TDS CANNOT CERTIFY THE REASONABLENESS OF EXPENDITURE. T HEREFORE, WE ARE OF THE VIEW THAT ASSESSEE HAS BEEN UNABLE TO PROVE THE REASONABLENESS AND GENUINENESS OF THE COMMISSION EX PENDITURE OF RS.6,42,738/- PAID TO GIRISH DESAI AND, THEREFORE, LD. ASSESSING OFFICER HAS RIGHTLY MADE THE DISALLOWANCE. WE CONFI RM THE SAME. ACCORDINGLY, THIS GROUND OF ASSESSEE IS DISMISSED. 33. GROUND NO.6 IS GENERAL IN NATURE, WHICH NEEDS N O ADJUDICATION. 34. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2016 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 15/6/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 3193/AHD/2011 ASST. YEAR 2008-09 20 1. DATE OF DICTATION: 14/06/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 15/06/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 16/6/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: