Satish Gujral, V. Addl CIT Range -32,

ITA 3397/DEL/2007

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6937 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 11-02-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 24-07-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIM A BERNWAL SRDR
• Keywords: Charitable institution; Principle of natural justice; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENCH, NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER, A ND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 3397/DEL/2007 ASSESSMENT YEAR : 2003-04 SHRI SATISH GUJRAL VS. THE ADDL. C.I.T , 16, FEROZE GANDHI ROAD RANGE - 32 LAJPAT NAGAR III, NEW DELHI NEW DELHI. (PAN: AAJPG 8028 R) I.T.A. NO. 2932/DEL/2007 ASSESSMENT YEAR : 2003-04 THE ADDL. C.I.T VS. SHRI SATISH GUJRAL RANGE - 32 16, FEROZE GANDHI ROAD NEW DELHI LAJPAT NAGAR 111, NEW DELHI. (PAN: AAJPG 8028 R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.P. RASTOGI, ADV DEPARTMENT BY : MS. ANIM A BERNWAL, SR-DR DATE OF FINAL HEARING : 02.06.2016 DATE OF PRONOUNCEMENT : 22.07.2016 O R D E R PER CHANDRA MOHAN GARG, J.M. THE ABOVE CAPTIONED CROSS APPEALS BY THE ASSESSEE AS WELL AS THE REVENUE HAVE BEEN DIRECTED AGAINST THE ORDER OF CIT (A)-XXVI, NEW DELHI DATED 30.03.2007 IN APPEAL NO. 129/06-07 FOR ASSESSMENT YEAR 2003-04. 2 ITA NOS. 2932 & 3397/DEL/2007 REVENUES APPEAL IN ITA NO. 2932/DEL/2007 2. CONSOLIDATED REVISED GROUNDS RAISED IN REVENUES APPEAL I.E. I.T.A. NO. 2932/DEL/2007 READ AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 20,70,000/- BEING WORK IN PROGRESS AS DURING AS SESSMENT PROCEEDING, THE ASSESSEE FURNISHED PHOTO F THE SEMI FINISHED SCULPTURE WHICH WAS FINISHED IN THE NEXT YEAR AND I NSTALLED AT THE SITE OF POWER GRID CORPN. 2. THE LD. CIT(A) HAS ERRED IN DELETING ADDITIO N OF RS. 49,03,200/- BEING THE ESTIMATED COST OF 13 PAINTING S WHICH COULD NOT BE SOLD AT NEW YORK EXHIBITION AND THE AS SESSEE DID NOT REFLECT THEM EITHER IN THE SALES OR IN THE CLOS ING STOCK. 3. THE C1T(A) HAS ERRED IN ACCEPTING FRESH EVIDEN CE FROM THE ASSESSEE IN VIOLATION OF RULE 46A OF THE INCOME TAX RULES. 4. THE LD. CIT(A) HAS ERRED IN DELETING BOGUS P AYMENT OF RS. 1,56,010/- WITHOUT APPRECIATING THE FACT THAT T HE SAID SHRI RAMESH JENA HAS CLEARLY DENIED IN HIS RECORDED STATEMENT THAT HE HAD NEVER RENDERED ANY SERVICE TO THE ASSESSEE TO RECEIVE THE PAYMENT. 5. THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 1,50,000/- SHOWN AS PAID TO HIS WIFE IGNORING THE F ACT THAT THE ASSESSEE DID NOT PROVE RENDERING OF ANY SERVICE S BY HER. 3 ITA NOS. 2932 & 3397/DEL/2007 6. THE LD. CIT(A) HAS ERRED IN ALLOWING FULL CLA IM OF ASSESSEE AMOUNTING TO RS. 1,09,92,953/- U/S 80RR IG NORING THE FACT THAT THE ASSESSEE HAD FILED NECESSARY CERT IFICATES IN FORM 10 H ONLY IN RESPECT OF RS. 19,98,700/-. 7. THE CIT(A) HAS ERRED BY ALLOWING DEDUCTION U/ S 80U NOT APPRECIATING THAT EACH ASSESSMENT YEAR IS SEPARATE AND MEDICAL CERTIFICATE AS REQUIRED TO BE FILED EVERY Y EAR. 8. THE LD. CIT(A) HAS ERRED IN REDUCING THE ADDIT ION OF RS. 10,53,450/- ON ACCOUNT OF ESTIMATED VALUE OF STOCKS OF DRAWING AND STUDIO MATERIAL TO RS. 5 LACS. 9. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F HEARING OF THE APPEAL. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSEE IS AN ARTIST WHO DERIVES INCOME FROM MAKIN G AND SELLING PAINTINGS AND SCULPTURE ETC. THE ASSESSEE FILED HI S RETURN OF INCOME DECLARING AN INCOME OF RS. 1,06,18,392/- WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 [FOR SHORT, 'THE ACT']. ACCORDING TO THE AUDIT REPORT FILED WITH THE RETURN OF INCOME, T HE ASSESSEE FOLLOWED THE METHOD OF ACCOUNTING IN THE PREVIOUS Y EAR RELEVANT TO THE A.Y UNDER CONSIDERATION WHICH WAS PROFESSIONAL/ ARTISTIC INCOME ON RECEIPT. THE ASSESSEE ACCOUNTS FOR HIS PROFESSIO NAL RECEIPTS AS AN 4 ITA NOS. 2932 & 3397/DEL/2007 ARTIST ON RECEIPT BASIS. NO VALUE WAS BEING ASSIGNED F OR THEIR STOCKS AS ON THE DATE OF THE BALANCE SHEET FOR THE DRAWING AND STUDIO MATERIALS AND THE PAINTINGS ETC UNDER PREPARATION O R COMPLETED BUT HELD BY HIM. THIS METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, HAS BEEN ACCEPTED BY THE DEPARTMENT FOR THE PAST MANY D ECADES. THE LEARNED AO HAS IN THIS YEAR EQUATED THE PROFESSIONA L WITH A NORMAL BUSINESS MAN AND ADDED TO INCOME FOR RAW MATERIALS, WORK IN PROGRESS AND UNSOLD PAINTINGS ON PRESUMPTIONS AND S URMISES. THE ASSESSEE WHO HAS PERMANENT PHYSICAL DISABILITY OF H EARING AND SPEECH AND WAS BEING ALLOWED DEDUCTION U/S 80U FOR MANY DE CADES. THE LEARNED AO HAS ALLOWED THIS DEDUCTION ALSO. THE ASS ESSEE WHO HAS PARTICIPATED IN AN EXHIBITION CUM SALE ORGANIZED IN USA BY LIVING MEDIA LTD. THE RECEIPTS /PROCEEDS FROM THE EXHIBITI ON WERE BROUGHT INTO INDIA, IN CONVERTIBLE FOREIGN EXCHANGE ON BEHA LF OF THE ASSESSEE BY LIVING MEDIA LTD., ON BEHALF OF THE ASSESSEE AND WERE DULY SUPPORTED BY FIRCS. THE AO HAS DENIED THE DEDUCTION U/S 80RR ON SUCH RECEIPTS BROUGHT IN INDIA AND HAS ALSO DISALLO WED PAYMENTS TO ONE MR. RAMESH JENA BY PRODUCING A STATEMENT RECORD ED BY THE DEPARTMENT WHEREIN HE DENIED EVEN KNOWING THE ASSES SEE. THE ASSESSEE PRODUCED PHOTOGRAPHS OF THAT PERSON WORKIN G ALONG WITH THE ASSESSEE, BANK STATEMENT OF THE ASSESSEE SHOWING PA YMENTS TO HIM 5 ITA NOS. 2932 & 3397/DEL/2007 BY CHEQUES AS WELL AS HIS BANK ACCOUNT NUMBER. FURT HER THE AO WAS REQUESTED TO PRODUCE HIM FOR CROSS EXAMINATION FOR ANSWERING AS TO HOW HIS SIGNATURES AND BILLS BEARING HIS SIGNATURES WERE WITH THE ASSESSEE AS WELL AS HIS HAVING COLLECTED CHEQUES FR OM HIM. THE DEPARTMENT HAS NOT PRODUCED HIM FOR CROSS-EXAMINATI ON, BUT DISALLOWED PAYMENTS TO HIM ON THE BASIS OF HIS STAT EMENT. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE L D. CIT(A) WHO GRANTED PART RELIEF TO THE ASSESSEE. NOW THE ASSES SEE IS IN APPEAL AGITATING THE PART RELIEF GRANTED BY THE LD. CIT(A) WHEREAS THE REVENUE IS IN APPEAL AGAINST THE DELETION OF ADDITI ONS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE RELEVANT MATERIAL ON RECORD. 5. THE FIRST ISSUE IS WITH REGARD TO THE DELETION OF ADDITION OF RS. 20,70,000/- BEING WORK IN PROGRESS. THE AO OBSERVED THAT THE ASSESSEE HAD SOLD A 15 FEET SCULPTURE TO POWER GRID CORPORAT ION AT RS. 46,00,000/-. THE ASSESSEE HAD STATED THAT THE PAYME NTS WERE RECEIVED ON DATES WHICH FELL UNDER THE A.Y 2004-05 AND NOT I N A.Y 2003-04 WHICH IS THE YEAR UNDER CONSIDERATION. BILL OF SHRI RAMESH JENA WAS DATED 30.3.2004. THE ASSESSEES ASSERTION WAS THAT THE PAYMENTS OF RS. 7,16,720/- TO SHRI RAMESH JENA WERE RELEVANT TO A.Y 2004-05 AND 6 ITA NOS. 2932 & 3397/DEL/2007 NOT 2003-04. NOT SATISFIED WITH THE EXPLANATION TE NDERED BY THE ASSESSEE, THE AO MADE ADDITION OF RS. 20,70,000/-. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A) WHO G RANTED RELIEF TO THE ASSESSEE. NOW THE REVENUE IS IN FURTHER APPEAL BEFO RE THE TRIBUNAL AGAINST THE RELIEF GRANTED TO THE ASSESSEE. 6. THE LD. DR STRENUOUSLY CONTENDED THAT THE LD. CI T(A) GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY REASONABLE AND J USTIFIED REASONING. THEREFORE, THE IMPUGNED ORDER MAY BE SET ASIDE BY R ESTORING THAT OF THE AO ON THIS ISSUE. 7. REPLYING TO THE ABOVE, THE LD. AR REITERATED ITS SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT PAY MENTS RECEIVED WERE RELATING TO A.Y 2004-05 AND NOT 2003-04 WHICH IS THE A.Y UNDER CONSIDERATION. THE LD. AR SUBMITTED THAT THE AO WA S NOT RIGHT IN COMING TO THE CONCLUSION THAT SINCE THE SCULPTURE W AS INSTALLED IN MAY 2003, THE WORK IN PROGRESS RELATED TO MARCH 2003. 8. ON CAREFUL CONSIDERATION OF THE ABOVE RIVAL SUBM ISSIONS, WE NOTE THAT THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSES SEE WITH THE FOLLOWING CONCLUSION AND FINDINGS: FROM THE FACTS OF THE CASE, IT IS SEEN THAT THE WO RK WAS DISCUSSED IN MAY 2003 AND SUBSEQUENTLY COMMISSIONED VIDE 7 ITA NOS. 2932 & 3397/DEL/2007 LETTER OF JULY 2003. THEREFORE, TO VALUE THE INCOM PLETE SCULPTURE ON THE BASIS OF THE ESTIMATED MARKET VALU E IS NOT CORRECT. ON THE ONE HAND, THE AO HAS ESTIMATED THE COST AT 10% OF THE MARKET VALUE WHICH COMES TO RS. 2,30,000/- E VEN IF THE MARKET RATE IS APPLIED. THEREFORE, THE WORK IN PRO GRESS COULD AT THE MOST BE ESTIMATED, IF AT ALL, AT RS. 2,30,00 0/- AND NOT RS. 20,70,000/- REPRESENTING THE PROFIT/INCOME WHICH WA S YET TO BE EARNED BY THE ASSESSEE AS ON THAT DATE. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE RELEVANT MATERIAL ON RECORD. WE ARE IN AGREEMENT WI TH THE FINDINGS OF THE LD. CIT(A) THAT THE A.O WAS NOT CORRECT IN HOLD ING THAT THE 50% OF THE ESTIMATED VALUE OF RS. 23 LAKHS IS TAKEN AS WOR K IN PROGRESS NOT SHOWN BY THE ASSESSEE. WE MAY POINT OUT THAT DURIN G THE EARLIER A.Y, THE DEPARTMENT ACCEPTED A FACTUAL POSITION THAT THE ASSESSEE DID NOT SHOW ANY WORK IN PROGRESS ON THE DATE OF THE BALANC E SHEET FOR THE DRAWING AND STUDIO MATERIAL AND THE PAINTING ETC UN DER PREPARATION OR COMPLETED. HENCE THE ISSUE OF WORK IN PROGRESS CAN NOT BE RAISED WITHOUT ANY SUSTAINABLE BASIS. THE LD. CIT(A), AFT ER PROPERLY ANALYZING THE FACTS OF THE CASE, RIGHTLY HELD THAT EVEN IF MA RKET RATE IS APPLIED, THEN ALSO AS PER BASIS OF ESTIMATED COST @ 10% OF T HE MARKET VALUE OF THE WORK IN PROGRESS, AT THE BEST, CAN BE ESTIMATED TO RS. 2,30,000/- AND NOT RS. 20,70,000/-. IN VIEW OF THE ABOVE FACT UAL POSITION AND STAND OF THE A.O IN PREVIOUS A.YS THE CONCLUSION OF THE LD. CIT(A) 8 ITA NOS. 2932 & 3397/DEL/2007 CORRECT AND WE HAVE NO REASON TO INTERFERE WITH THE SAME. ACCORDINGLY, GROUND NO. 1 OF THE REVENUE IS DISMISS ED. 10. SECOND GROUND IS WITH REGARD TO THE 13 PAINTING S WHICH COULD NOT BE SOLD AT NEW YORK EXHIBITION AND THE ASSESSEE DID NOT REFLECT THEM EITHER IN THE SALES OR IN THE CLOSING STOCK. 11. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT DUR ING THE YEAR UNDER CONSIDERATION, ART TODAY - A DIVISION OF LIVING MED IA INDIA PVT. LTD., ARRANGED AN EXHIBITION AT NEW YORK OF THE PAINTINGS ETC OF THE ASSESSEE. AS PER THE CONTRACT DATED 14 TH JUNE THE TOTAL NUMBER OF PAINTINGS WHICH WERE HANDED OVER TO ART TODAY WAS 2 6. AS PER THE CONTRACT, THE ART TODAY WAS TO ARRANGE: (A) PLACE OF DISPLAY OF THE PAINTINGS. (B) PUBLICITY AND ADVERTISEMENT AT HIS OWN COST. (C) MEET THE COST OF AIR-CONDITIONING, ELECTRICITY, LIG HTING, DISPLAY, SECURITY AND LITERATURE ETC. (D) ART TODAY HAD TO ARRANGE TRANSPORTATION OF PAINTIN GS TO NEW YORK AFTER COMPLETING THE FORMALITIES ON BEHALF OF THE ASSESSEE: (I) NOC FROM ARCHEOLOGICAL SURVEY OF INDIA TO ENSURE T HAT THEY ARE NOT ANTIQUE; (II) FERA/FEMA REGULATIONS AND FURNISHING OF UNDERTAKIN G TO BRING THE FOREIGN EXCHANGE ON BEHALF OF THE ASSESSE E TO INDIA FOR THE PAINTINGS SOLD. 9 ITA NOS. 2932 & 3397/DEL/2007 (III) ARRANGE CUSTOM CLEARANCE IN INDIA AS WELL AS USA I N RESPECT OF THE PAINTINGS. (IV) ARRANGE PACKING, FORWARDING AND INSURANCE OF THE PAINTINGS. THE SHARING OF SALE PROCEEDS OF PAINTINGS HAD TO BE MADE IN THE MANNER MENTIONED IN SCHEDULE ATTACHED TO THE AGREEM ENT. AS PER SCHEDULE, THE ASSESSEE WAS ENTITLED FOR THE ARTIST PRICE MENTIONED IN FRONT OF EACH PAINTING, WHEREAS THE DIFFERENCE BETW EEN THE ARTISTS PRICE AND SUGGESTED SALE PRICE WAS TO BE RETAINED B Y ART TODAY AS ITS SHARE. OUT OF 26 PAINTINGS SENT TO NEW YORK, ONLY 19 PAINTINGS COULD BE SOLD AND THE ASSESSEE HAD RECEIVED RS.44,80,000/ - AS HIS SHARE AND HAD CLAIMED THE DEDUCTION U/S 80RR OF THE ACT THERE ON. THE REMAINING UNSOLD SEVEN PAINTINGS WERE BROUGHT BACK TO INDIA. THE AO FROM SAME WEBSITE OBTAINED INFORMATION OF THE PAINT INGS DISPLAYED. ON THE BASIS OF SUCH INFORMATION, THE AO ALLEGED TH AT THE ASSESSEE HAD DISPLAYED 24 PAINTINGS AND OUT OF THEM 11 PAINTINGS WERE SOLD AND 13 PAINTINGS REMAINED UNSOLD. THE AO FURTHER ALLEGED T HAT SUCH 11 PAINTINGS WERE SOLD FOR $92,500 AND BY APPLYING THE CONVERSION RATE OF RS.48, THE PROCEEDS WORK OUT TO RS.44,40,000 APPROX IMATELY WHICH ALMOST TALLIED WITH THE RECEIPTS SHOWN BY THE ASSES SEE AT RS.44,80,000 RECEIVED BY ART TODAY LIVING MEDIA. IN THE EARLIER PART OF THE ORDER, THE AO ALLEGED THAT THE ASSESSEE IS A COMMERCIAL AR TIST AND HE REACHED 10 ITA NOS. 2932 & 3397/DEL/2007 THE PINNACLE OF HIS CAREER AND ALREADY DEVELOPED A STYLE AND HIS PAINTINGS ARE ASSEMBLY TYPE PRODUCTION. HENCE WHATE VER THE PAINTINGS REMAINED THERE, THE SAME SHOULD BE SHOWN AS CLOSING STOCK OF THE YEAR AND THEN OBSERVED THAT THE COST OF PAPER, COLOR AND INK WOULD BE ABOUT 10% OF THE PRICE OF PAINTINGS. ON THE BASIS OF SUCH INFERENCE, THE AO ALLEGED THAT BECAUSE UNSOLD 13 PAINTINGS HAV E NOT BEEN BROUGHT BACK TO INDIA AND NOT SHOWING PART OF CLOSI NG STOCK, HENCE HE PRESUMED THAT THE ASSESSEE HAS SOLD THE PAINTINGS O UTSIDE THE BOOKS OF ACCOUNT. HE VALUED THE PAINTINGS AT GROSS PRICE AT $1,13,500 AND BY MULTIPLYING THE CONVERSION RATE OF RS.48.67, THE GR OSS PRICE WAS WORKED OUT AT RS.54,48,000/- AND OUT OF THAT AFTER ALLOWING THE EXPENDITURE OF 10% FOR THIS STOCK, THE AO WORKED OU T THE BALANCE FIGURE AT RS.49,03,200/- AND TREATED THE SAME AS S ALE OUTSIDE THE BOOKS OF ACCOUNT. 12. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE T HE LD. CIT(A) AND CONTENDED THAT HE WAS AN ARTIST BY PROFESSION AND H AD BEEN A REGULAR INCOME-TAX ASSESSEE FOR MORE THAN 40 YEARS. THE ASS ESSEE ACCOUNTS HIS PROFESSIONAL RECEIPT AS AN ARTIST ON RECEIPT BASIS. IN OTHER WORDS, AS AND WHEN ANY PAINTING IS SOLD, THE WHOLE PROCEED IS ACCOUNTED AS PROFESSIONAL RECEIPT AND THIS METHOD OF ACCOUNTING HAS ALWAYS BEEN ACCEPTED BY THE DEPARTMENT IN THE PAST AS WELL AS I N SUBSEQUENT 11 ITA NOS. 2932 & 3397/DEL/2007 YEARS. IN THIS ISOLATED YEAR, THE AO HAS STATED THA T THE PROFESSIONAL ACCOUNTING SHOULD ALSO BE ON SAME LINES AS THAT OF NORMAL BUSINESSMAN AND ACCORDINGLY THE UNSOLD STOCK OF PAINTINGS AND W ORK IN PROGRESS OF INCOMPLETE PAINTINGS AND SCULPTURES BE ALSO SHOWN A S CLOSING STOCK. THE ASSESSEE OBJECTED TO SUCH OBSERVATION OF AO AND STATED THAT: (I) ARTIST, PLAYWRIGHT, AUTHOR, POET, MUSICIAN AND SIMI LAR PROFESSIONALS ARE CREATIVE AND INTELLECTUAL PERSONS WHEN THEY DO THEIR WORK, IT IS DONE OUT OF INSPIRATION AND CREAT IVE URGE. (II) A WORK CREATED BY ARTIST MAY BE WELL APPRECIATED BY THE PUBLIC OR MAY RECEIVE A LUKEWARM RESPONSE ON PAINTING OF SOME SIZE ON THE SAME MEDIUM CAN FETCH HIM BOUTIQUES OR BRICKBATS. S OMETIMES THE WORK OF AN ARTIST IS NOT APPRECIATED IN HIS LIF ETIME BUT APPRECIATED POSTHUMOUSLY (MONALISA PAINTING OF LEON ARDO DEVINCI IS THE EXAMPLE THEREOF). (III) CREATIVE WORK OF AN ARTIST, AUTHOR, PLAYWRIGHT OR POET CANNOT BE EQUATED AND COMPARED WITH THE GOODS PRODUCED BY A MANUFACTURER OR BUSINESSMAN. (IV) FOR ARTIST, THE PAPERS, CANVAS, INK, CLOTH, STONE E TC. ARE ONLY THE MEDIUM OF CREATION AND EXPRESSION OF HIS URGE. 12 ITA NOS. 2932 & 3397/DEL/2007 (V) THE VOLUME OF PAPERS, INK, CANVAS ETC. CONSUMED BY THE ARTIST CANNOT DETERMINE THE COST OF ANY PAINTING BECAUSE A N ARTIST CAN START PAINTING ON A CANVAS FOR DAYS TOGETHER AND CA N DESTROY IT OR SCRAP IT ALTOGETHER IF IT DOES NOT COME OUT AS PER HIS CREATIVE CONCEPT. AN ARTIST CAN MIX NUMBER OF COLORS AND CAN WASH THEM OF IN DRAIN IF THEY DO NOT MATCH WITH SHADE AS PER HIS CREATIVE CONCEPT. (VI) NEITHER IN PAST NOR IN SUBSEQUENT YEARS, THE ASSESS EE HAS EVER SHOWN THE CLOSING STOCK OF PAINTINGS AND ON THE CON TRARY AS AND WHEN ANY PAINTING IS SOLD, THE SAME WAS TREATED AS PROFESSIONAL RECEIPT. FROM THE RELEVANT OPERATIVE PART OF THE ORDER OF TH E LD. CIT(A), WE OBSERVE THAT HE GRANTED RELIEF TO THE ASSESSEE BY O BSERVING AS FOLLOWS: THEREFORE, AFTER CONSIDERING THE SUBMISSIONS OF TH E APPELLANT AND THE CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE AOS ACTION IN HOLDING THAT THE CLOSING STOCK I S NOT PROPERLY VALUED AND THE APPELLANT HAD SOLD SOME PAI NTINGS OUTSIDE THE BOOKS ADOPTED BY OF ACCOUNT IS NOT COR RECT AND CANNOT BE UPHELD. THE VERY METHOD THE AO TO ARRIVE AT THE VALUE OF CLOSING STOCK AND THE VALUE OF SALES MADE OUTSIDE THE BOOKS OF ACCOUNT BY APPLYING A UNIFORM RATE WHICH H AS BEEN CULLED BY THE AO FROM A WEBSITE AND INTERNET AND DE DUCTING AN ESTIMATED EXPENDITURE OF 10% FROM THE ABOVE FIGU RE TO 13 ITA NOS. 2932 & 3397/DEL/2007 ARRIVE AT THE NET UNDISCLOSED INCOME OF THE APPELLA NT IS HELD TO BE FAULTY AND IS HELD TO BE ARRIVED AT ON THE BA SIS OF INCORRECT APPRECIATION OF THE FACTS AND CIRCUMSTANC ES. IT IS FURTHER OBSERVED THAT THE METHOD OF ACCOUNTING FOLL OWED BY THE APPELLANT WHEREIN SALE PROCEEDS ARE RECORDED AS AND WHEN THE SALE MATERIALIZED IS UPHELD TO BE CORRECT. THE AO DID NOT HAVE SUFFICIENT REASONS TO HOLD THAT THE AP PELLANTS METHOD OF ACCOUNTING WAS INCORRECT. THE APPLICATION OF THE CASE OF BRITISH PAINTS LTD TO THE CASE OF THE APPEL LANT IS HELD TO BE INADEQUATE AND ERRONEOUS ON THE GROUND THAT O NE CAN ONLY LIKES CAN BE COMPARED WITH THE LIKES. SINCE TH E RESPECTIVE FACTS OF THE TWO CASES [BRITISH PAINTS L TD AND THAT OF THE APPELLANT] ARE DIFFERENT AND ARE IN FACT, MI LES APART, THE SAME CANNOT BE EQUATED. THE TWO COULD NOT HAVE BEEN POSSIBLY COMPARED. THEREFORE, THE IMAGINARY THESIS CONSTRUCTED BY THE AO ON THE BASIS OF CERTAIN INFOR MATION ON THE INTERNET IS NOT FOUND TO BE SUFFICIENT GROUNDS FOR ARRIVING AT THE CONCLUSION THAT THE APPELLANT WAS ENGAGED IN SALES OUTSIDE THE BOOKS OF ACCOUNTS AND A WRONG METHOD OF ACCOUNTING WAS FOLLOWED. . THE VERY FOUNDATION UPON WHICH THE AO HAS BUILT THE SHAKY EDIFICE OF UNDISCLOSED I NCOME IS FOUND TO BE WEAK. HENCE IT IS HELD THAT THE SAME DE SERVES TO BE DEMOLISHED. THE ADDITION MADE ON THIS ACCOUNT IS DIRECTED TO BE DELETED. 13. AS REGARDS RELIANCE OF AO ON THE WEBSITE INFORM ATION WITH REGARD TO PAINTING DISPLAYED IN NEW YORK, THE ASSESSEE STA TED THAT SUCH INFORMATION IS NOT CORRECT AND CANNOT BE RELIED UPO N WHEN SUFFICIENT 14 ITA NOS. 2932 & 3397/DEL/2007 CONTRARY MATERIAL IS AVAILABLE ON RECORD. AS PER R ECORDS 26 PAINTINGS WERE DISPATCHED AFTER OBTAINING NOC FROM ARCHEOLOGI CAL SURVEY OF INDIA. AS PER RECORDS 19 PAINTINGS WERE SOLD AND T HE SALE PROCEEDS OF SUCH PAINTINGS WERE BROUGHT TO INDIA BY LIVING MEDI A ON BEHALF OF THE ASSESSEE AS PER FIRC. THE REMAINING SEVEN UNSOLD PA INTINGS WERE BROUGHT BACK BY LIVING MEDIA AND HANDED OVER TO THE ASSESSEE. 14. OUT OF SUCH SALE PROCEEDS, THE ASSESSEE HAD REC EIVED RS.44,80,000 [AS HIS AGREED SHARE] AS ADMITTED BY T HE AO, AS HIS SHARE AND HAD CLAIMED THE DEDUCTION U/S 80RR OF THE ACT. THE ASSESSEE, THEREFORE, CONCLUDED THAT THE ASSUMPTION OF THE AO THAT THE FIGURE OF UNSOLD PAINTINGS AT 13 [IT IS ACTUALLY SEVEN] IS WR ONG. IN THE ABSENCE OF ANY EVIDENCE, THAT SUCH PAINTINGS HAVE BEEN SOLD OU T OF THE BOOKS OF ACCOUNT IS WRONG. THE LD. AR POINTED OUT THAT ACTU ALLY THE ASSESSEE SENT 26 PAINTINGS AND NOT 24 AS WRONGLY NOTED BY TH E A.O AND AFTER SALE OF 19 PAINTINGS, 7 PAINTINGS WERE BROUGHT BACK TO INDIA AND HANDED OVER TO THE ASSESSEE BY LIVING MEDIA. THE L D. AR POINTED OUT THAT WHEN THE ASSESSEE IS ENTITLED FOR DEDUCTION U/ S 80RR OF THE ACT IN RESPECT OF PROFESSIONAL INCOME EARNED AS AN ARTIST THEN HE IS NOT REQUIRED TO HIDE SALE OF PAINTING. WHEN WE LOGICA LLY ANALYZE THE FACTS OF THE CASE ON THE TOUCHSTONE OF THE PROVISIONS OF THE ACT, AT THE VERY 15 ITA NOS. 2932 & 3397/DEL/2007 OUTSET, WE NOTE THAT THE A.O PROCEEDED TO MAKE ADD ITION BY ALLEGING SALE OF PAINTINGS SENT ABROAD AND SOLD OUTSIDE THE BOOKS OF ACCOUNTS BUT HE IGNORED THE VERY FACT THAT WHEN THE INCOME O F THE ASSESSEE FROM ABROAD IS ENTITLED FOR DEDUCTION U/S 80RR OF T HE ACT, THEN WHY THE ASSESSEE WOULD HIDE ITS INCOME FROM ABROAD ON S ALE OF PAINTINGS. AFTER EVALUATION OF THE ALLEGATIONS OF THE A.O AND EXPLANATION OF THE ASSESSEE, THE LD. CIT(A) RIGHTLY HELD THAT THE IMPU GNED FIGURE TO ARRIVE AT THE UNDISCLOSED INCOME OF THE ASSESSEE IS FAULTY AND THE SAME WAS ARRIVED AT ON THE BASIS OF CORRECT APPRECIATION OF FACTS AND CIRCUMSTANCES. AS WE HAVE ALREADY OBSERVED THAT TH E METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, WHEREIN SALE P ROCEEDS IS RECORDED AS AND WHEN SALE IS MATERIALIZED HAS BEEN ACCEPTED BY THE REVENUE IN THE EARLIER A.YS AND THE PRESENT CASE OF THE A.O DID NOT HAVE SUFFICIENT REASONS TO HOLD THAT THE ASSESSEES METHOD OF ACCOUNTING IS INCORRECT OR DIFFERENT FROM THE EARLI ER A.YS. THEREFORE, WE ALSO OBSERVE THAT THE ADDITION MADE BY THE A.O O N THE BASIS OF INCORRECT FACTS CANNOT BE HELD A SUSTAINABLE. THE IMAGINARY FACTS LEADING TO THE IMPUGNED ADDITION ARE NOT BASED ON C ORRECT FACTS BUT THE SAME ARE BASED ON THE INFORMATION ON THE INTERN ET WHICH CANNOT BE RELIED FOR ESTABLISHING ALLEGATION OF SALE OUTSI DE BOOKS OF ACCOUNT. 16 ITA NOS. 2932 & 3397/DEL/2007 15. ON THE CONTRARY THERE WAS SUFFICIENT EVIDENCE TO ESTABLISH THAT LIVING MEDIA HAD BROUGHT BACK TO INDIA THE UNSOLD S EVEN PAINTINGS AND RETURNED THEM TO THE ASSESSEE. AS PER THE METHOD O F ACCOUNTING FOLLOWED CONSISTENTLY IN THE PAST AS WELL AS IN THE SUBSEQUENT YEARS, AS WELL AS ACCEPTED BY THE DEPARTMENT, NO CLOSING STOC K HAD EVER BEEN TAKEN INTO ACCOUNT AND THE PROFESSIONAL RECEIPTS HA D BEEN SHOWN AS AND WHEN ANY PAINTINGS WERE SOLD. THIS METHOD OF AC COUNTING HAS BEEN CONSISTENTLY FOLLOWED. 16. AFTER CONSIDERING THE ABOVE ELABORATE SUBMIS SIONS OF THE ASSESSEE, THE CIT (A) WAS SATISFIED WITH THE CONTEN TIONS OF THE ASSESSEE AND HELD AS UNDER: (I) THE NORMAL PROCESS OF MANUFACTURE CANNOT BE APPLIED TO THE CREATIVE PROCESS OF AN ARTIST. (II) THE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT I S A REASONABLE AND CORRECT METHOD AND NEED NOT BE DISTURBED. (III) AS FAR AS PAINTINGS SENT FOR DISPLAY AT NEW YORK, T HE INFORMATION OBTAINED FROM WEBSITE WAS NOT AUTHENTIC. (IV) THE ASSESSEE PROVIDED CONVINCING EVIDENCE ABOUT THE TOTAL NUMBER OF PAINTINGS DISPATCHED. (V) OUT OF 26 PAINTINGS, ONLY 19 PAINTINGS WERE SOLD AN D THE ART TODAY OF LIVING MEDIA HAS DULY CERTIFIED THE PAYMENT OF A SSESSEES SHARE THEREIN ABOUT WHICH NECESSARY EVIDENCE AVAILABLE ON RECORD. (VI) THE ASSESSEE PROVIDED CONVINCING EVIDENCE RELATING TO THE ART TODAY AND ALSO RELATING TO THE UNSOLD PAINTINGS WHI CH HAVE BEEN SENT BACK TO INDIA. 17 ITA NOS. 2932 & 3397/DEL/2007 (VII) ONCE HAVING HELD THAT THE METHOD OF ACCOUNTING OF T HE APPELLANT IS THAT PROFESSIONAL FEE WAS RECORDED ONLY AS AND WHEN SALE PRICES OF PAINTINGS IS RECEIVED, THE AOS ACTION OF ESTIMATIN G THE VALUE OF PAINTINGS ALLEGED TO HAVE BEEN SOLD OUTSIDE THE BOO KS OF ACCOUNT WITHOUT CORROBORATING EVIDENCE CANNOT BE UPHELD. TH IS METHOD OF ACCOUNTING HAS BEEN CONSISTENTLY FOLLOWED BY THE AS SESSEE. THE VALUATION OF PAINTINGS ON A FIXED PRICE IS ALSO NOT CORRECT AND IT IS NOT CORRECT TO ADOPT THE SUGGESTED PRICE OF THE PAI NTINGS BECAUSE THERE CAN BE MANY DIFFERENT SITUATIONS WITH REGARD TO VALUATION OF PAINTINGS. (VIII) THE AO HAS NOT MADE OUT A CASE THAT THE ASSESSEE HA S NOT RECORDED THE SALE PROCEEDS IN THE BOOKS OF ACCOUNT EVEN AFTER THE SALE HAS BEEN MADE. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PE RUSED THE RELEVANT MATERIAL ON RECORD. BEFORE US ALSO THE RIV AL REPRESENTATIVE HAVE REITERATED THEIR CONTENTIONS AS MADE BEFORE TH E AUTHORITIES BELOW. WE FIND FORCE IN THE CONTENTION OF THE LD. A R THAT THE ASSESSEE IS AN ARTIST BY PROFESSION AND THE PROFESSIONAL REC EIPTS ARE DECLARED AND OFFERED AS AND WHEN ANY PAINTING IS SOLD. THIS METHOD OF ACCOUNTING HAS CONSISTENTLY BEEN FOLLOWED BY THE AS SESSEE IN EARLIER YEAR AND ALSO IN SUBSEQUENT YEARS. ASSESSMENT YEAR 2006-07 HAS ALSO BEEN COMPLETED U/S 143(3) OF THE ACT AND NO ADDITIO N HAS BEEN MADE ON ACCOUNT OF CLOSING STOCK. THE LD. AR HAS RELIED ON THE VARIOUS DECISIONS IN SUPPORT OF HIS CONTENTION INCLUDING TH E DECISION IN 193 ITR 321 (SC), RADHA SOAMI SATSANG VS. CIT 220 CTR 105 ( SC), CIT VS. J.K. CHARITABLE TRUST 264 ITR 276 (DEL), CIT VS. ARJ SEC URITY PRINTERS 113 ITD 624 (DEL - T.M.), DCIT VS. JINDAL PHOTO FILMS 3 04 ITR (AT) 76 18 ITA NOS. 2932 & 3397/DEL/2007 (MUM), IRB INFRASTRUCTURE LTD. VS. ITO. WE ALSO FIN D THAT THE LD. CIT(A) HAS HELD THAT ONCE HAVING HELD THAT THE METHOD OF A CCOUNTING OF THE APPELLANT IS THAT PROFESSIONAL FEE WAS RECORDED ONL Y AS AND WHEN SALE PRICES OF PAINTINGS IS RECEIVED, THE AOS ACTION OF ESTIMATING THE VALUE OF PAINTINGS ALLEGED TO HAVE BEEN SOLD OUTSIDE THE BOOKS OF ACCOUNT WITHOUT CORROBORATING EVIDENCE CANNOT BE UPHELD, WH ICH IS CORRECT AND JUSTIFIED. THE LD. CIT(A) HAS CATEGORICALLY HE LD THAT THE ASSESSEE PROVIDED CONVINCING EVIDENCE RELATING TO THE ART TO DAY AND ALSO RELATING TO THE UNSOLD PAINTINGS WHICH HAVE BEEN SE NT BACK TO INDIA. IN VIEW OF THE ABOVE SUBMISSIONS AND FINDING OF THE LD. CIT(A), WE DECLINE TO INTERFERE WITH THE JUST AND PROPER CONCL USION ARRIVED AT BY THE LD. CIT(A) WHICH WE UPHOLD AND DISMISS GROUND N O. 2 RAISED BY THE REVENUE. 18. THE THIRD GROUND RELATES TO THE CIT(A)S ACCEPT ANCE OF FRESH EVIDENCE FROM THE ASSESSEE IN VIOLATION OF RULE 46A OF THE INCOME TAX RULES. THE LD. DR STRONGLY AGITATED THE LD. CIT(A) S ACTION IN ACCEPTING FRESH EVIDENCE. 19. PER CONTRA, THE LD. AR SUBMITTED THAT THERE I S NO VIOLATION OF RULE 46A OF THE I.T. RULES, 1962 BY THE LD. CIT(A) AS TH E ADDITIONAL EVIDENCE HAS NOT BEEN CONSIDERED AND THE SAME IS NOT A BASIS FOR GRANTING RELIEF TO THE ASSESSEE ON ANY GROUNDS. 19 ITA NOS. 2932 & 3397/DEL/2007 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PE RUSED THE RELEVANT MATERIAL ON RECORD. FROM THE RELEVANT OPE RATIVE PART OF THE IMPUGNED FIRST APPELLATE ORDER AS REPRODUCED ABOVE, WE OBSERVE THAT THE LD. CIT(A) HAS NOT GRANTED RELIEF ON THE BASIS OF SO CALLED ADDITIONAL EVIDENCE. THE ASSESSEE SUBMITTED ADDITI ONAL EVIDENCE ALONGIWTH LETTER DATED 19.1.2007 BUT INFORMATION R EGARDING SALES AND REMITTANCES WHICH FORM BASIS OF RELIEF BY THE LD. C IT(A) WAS ALREADY ON THE RECORD OF THE A.O. THE LD. COUNSEL OF THE REVE NUE COULD NOT CONTROVERT THIS FACT THAT FOR GRANTING RELIEF THE P APERS SUBMITTED AS ADDITIONAL EVIDENCE HAVE NOT BEEN CONSIDERED HENCE THERE WAS NO VIOLATION OF RULE 46A OF THE ACT. THUS WE ARE INCL INED TO HOLD THAT GROUND NO. 3 OF THE REVENUE IS NOT SUSTAINABLE IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS MERELY BECAUSE SOM E ADDITIONAL EVIDENCE WERE SUBMITTED BY THE ASSESSEE DURING THE FIRST APPELLATE PROCEEDINGS, WHICH WAS NOT CONSIDERED FOR GRANTING RELIEF TO THE ASSESSEE VIOLATION OF RULE 46A CANNOT BE ALLEGED AG AINST THE IMPUGNED ORDER. THUS GROUND NO. 3 BEING DEVOID OF MERITS ST ANDS DISMISSED. 21. WITH REGARD TO THE 4 TH GROUND, THE LD. DR CONTENDED THAT LD. CIT(A) WAS NOT JUSTIFIED IN DELETING BOGUS PAYMENT OF RS. 1,56,010/- WITHOUT APPRECIATING THE FACT THAT THE SAID SHRI RA MESH JENA HAS CLEARLY DENIED, IN HIS RECORDED STATEMENT THAT HE H AD NEVER RENDERED 20 ITA NOS. 2932 & 3397/DEL/2007 ANY SERVICE TO THE ASSESSEE TO RECEIVE THE PAYMENT. 22. PER CONTRA, THE LD. AR SUBMITTED THAT THE AO RE LIED ON THE REPORT OF ITO BALASORE DATED 9 TH FEBRUARY 2005 AND DISALLOWED THE PAYMENTS MADE TO RAMESH JENA ON THE GROUND THAT THE ASSESSEE FAILED TO FILE DETAILS OF BANK ACCOUNT IN WHICH THE PAYMENT WAS CR EDITED. THE CIT (A) ACCEPTED THE CLAIM OF THE ASSESSEE AND DELETED THE DISALLOWANCE MADE BY THE AO. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. AR REITERATED HIS SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T AND AO HAS ABDICATED HIS POWER TO ITO BALASORE AND HAS NOT MAD E ANY ENQUIRY ON HIS OWN WHICH IS NOT PERMISSIBLE UNDER LAW. IN THI S CONNECTION, THE LD. AR RELIED ON THE DECISIONS IN THE CASE OF 144 ITR 225-237 (SC), CIT VS. MAHINDRA & MAHINDRA PVT. LTD., 74 ITR 115 (PATNA), ELPHINSTONE PICTURE PALACE VS. UOI. THE LD. AR VEHEMENTLY SUBMITTED THA T ENQUIRY BY ITO BALASORE WAS MADE BEHIND THE ASSESSEE WHICH CANNOT BE USED AGAINST THE ASSESSEE IN THE ABSENCE OF CROSS- EXAMINATION. THE LD. AR RELIED ON THE JUDGMENTS OF THE HON'BLE SUPREME COURT REPORTED IN 125 ITR 713 (SC), AND THE HON'BLE HIGH COURT OF DELHI IN THE CA SE OF KISHAN CHAND 21 ITA NOS. 2932 & 3397/DEL/2007 CHELA RAM 306 ITR 27 (DEL). WE FIND FORCE IN THE S UBMISSION OF SHRI RAMESH JENA HAS NOT ASSISTED THE ASSESSEE, HOW HE G OT PASSES FROM THE OFFICE OF POWER GRID CORPORATION. FROM THE PERUSAL OF THE RELEVANT OPERATIVE PART, WE FIND THAT THE LD. CIT(A) HAS OBS ERVED THAT THE AO OBTAINED STATEMENT FROM SHRI RAMESH JENA STATING TH AT HE NEVER DID ANY WORK FOR THE ASSESSEE, THEN HOW COME SHRI RAME SH JENA OBTAINED PAYMENTS THROUGH CHEQUES FROM THE BANK ACCOUNT OF T HE ASSESSEE TO HIS OWN ACCOUNT IF HE DID NOT DO ANY WORK FOR THE A SSESSEE? THIS REMAINED UNANSWERED BY THE AO. THE AO HAD ALSO NOT PRODUCED HIS OWN WITNESS, WHEN THE ASSESSEE DEMANDED THAT HE MAY BE PRODUCED BEFORE HIM FOR CROSS EXAMINATION. LASTLY, WE FIND FORCE IN THE CONTENTION OF THE LD. AR THAT IF SHRI RAMESH JENA D ID NOT WORK FOR THE ASSESSEE, THEN HOW HE COULD GET TEMPORARY PASSES TO WORK IN THE OFFICE OF POWER GRID CORPN LTD TO WORK ON THE SCULP TURE. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) HOLDING THE PAYMENT MADE HAS BEEN GENUINELY MADE TO SHRI RAMESH JENA. THEREFORE, FINDING NO MERIT IN THE GROUND RAISED BY THE REVENU E, WE HOLD THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO AMOUNTING TO RS. 1,56,010/-. GROUND NO. 4 STANDS DISMISSED. 22 ITA NOS. 2932 & 3397/DEL/2007 24. IN GROUND NO. 5, THE LD. DR HAS ARGUED THAT THE LD. CIT(A) WAS NOT CORRECT IN DELETING THE ADDITION OF RS. 1,50,00 0/- MADE BY THE AO SHOWN AS PAID BY THE ASSESSEE TO HIS WIFE. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT SHOWN ANY PROOF OF HIS WIFE SM T. KIRAN GUJRAL AS HAVING RENDERING ANY SERVICES FOR WHICH PAYMENT WAS MADE TO HER. 25. PER CONTRA, THE LD. AR SUBMITTED THAT SMT. KIRA N GUJRAL, WIFE OF THE ASSESSEE WAS AN ARTIST AND HAVING DIPLOMA IN FI RE ARTS FROM COLLEGE OF ARTS, DELHI. ASSESSEE HAS AN IMPAIRED HEARING A ND SPEECH PROBLEM. MRS. GUJRAL SPENDS CONSIDERABLE TIME IN ASSISTING T HE ASSESSEE TO COMMUNICATE WITH HIS CLIENTS AND EXPLAIN THE EXPRES SION OF PAINTING. HER PROFESSIONAL QUALIFICATION HAS HELPED A LOT IN THE PROCESS OF DIALOGUE AND COMMUNICATION. IN RECOGNITION OF HER C ONTRIBUTION TO THE PROFESSION OF THE ASSESSEE, HE HAS PAID HER RS 1,50 ,000/- AS REMUNERATION. THE LD. AR FURTHER SUBMITTED THAT MR S. KIRAN GUJRAL IS LIABLE TO TAX AT HIGHEST SLAB RATE AS HER INCOME FR OM OTHER ACTIVITIES AND SOURCES ITSELF AND THUS THERE IS NO QUESTION OF ANY LOSS TO THE REVENUE ON THE REMUNERATION PAID TO HER. HOWEVER, T HE AO DISALLOWED THE SAME U/S 64(1 )(II) OF THE ACT WHICH IS NOT SUS TAINABLE. 26. SATISFIED WITH THE EXPLANATION TENDERED BY THE ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION OF RS. 1.50,000/- AGAIN ST WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 23 ITA NOS. 2932 & 3397/DEL/2007 27. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PE RUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT MRS. KIRA N GUJRAL POSSESSES PROFESSIONAL QUALIFICATION IN THE FIELD OF ART AND PAINTINGS AND HAS EXPERIENCE OF MORE THAN 40 YEARS. SHE HAD PASSED TH E DIPLOMA IN FINE ARTS IN THE YEAR 1957. WE FURTHER FIND THAT FOR TE CHNICAL/PROFESSIONAL QUALIFICATION AS CONTEMPLATED U/S 64(1)(II) OF THE ACT, THERE IS NO NEED TO HAVE ANY DEGREE FROM ANY UNIVERSITY AND IF A PER SON HAS SUFFICIENT EXPERIENCE, THEN IT AMOUNTS TO PROFESSIONAL QUALIFI CATION AND NO DISALLOWANCE CAN BE MADE. THE LD. AR HAS RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF BATA KALYANI VS. CIT REPORTED AT 154 ITR 59 (AP) AND ITA NO. 1342/ DEL/95 DATED 12.2.01-DCIT VS. SMT. NEELAM. IN THAT VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE FINDING OF THE LD. CIT(A) AND DECL INE TO INTERFERE WITH THE SAME. GROUND NO. 5 OF THE REVENUE STANDS DISMI SSED. 28. VIDE GROUND NO. 6, THE LD. DR VEHEMENTLY AGITAT ED THE LD. CIT(A)S ACTION IN ALLOWING FULL CLAIM OF ASSESSEE AMOUNTING TO RS. 1,09,92,953/- U/S 80RR OF THE ACT IGNORING THE FACT THAT THE ASSESSEE HAD FILED NECESSARY CERTIFICATES IN FORM 10H ONLY I N RESPECT OF RS. 19,98,700/-. 24 ITA NOS. 2932 & 3397/DEL/2007 29. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE CLAIMED DEDUCTION U/S 80RR OF THE ACT ON THE FOLLOWING REMI TTANCES: (I) AMOUNT RECEIVED THROUGH ART TODAY OF LIVING MEDIA INDIA PVT.LTD. IN RESPECT OF SALE PROCEEDS O F PAINTINGS EXHIBITED AT NEW YORK RS.44,80,000 (II) RECEIPTS OF $93,381 FROM GOVT, OF MAURITIUS RS.45,44,853 30. AS FAR AS ITEM NO. (I) IS CONCERNED, THE AO HAS DISALLOWED THE CLAIM ON THE GROUND THAT IN FIRC, THE NAME OF BENEF ICIARY IS LIVING MEDIA AND NOT SATISH GUJRAL. AS FAR AS ITEM NO. (II ), IS CONCERNED, THE AO DISALLOWED THE CLAIM THAT NO BANK CERTIFICATE HA S BEEN FILED. ADMISSION LETTER FROM THE HIGH COMMISSION / GOVT, O F MAURITIUS OF IS NOT SUFFICIENT. CIT (APPEALS) ALLOWED THE DEDUCTION AND HELD THAT THE AO DISALLOWED THE DEDUCTION ON TECHNICAL GROUNDS. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PE RUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSES SEE HAS CONTENDED THAT AS REGARDS AMOUNT RECEIVED IN RESPECT OF PAINT INGS SOLD AT NEW YORK, THE PAINTINGS WERE SOLD THROUGH LIVING MEDIA WHO ALSO UNDERTOOK TO BRING THE SALE PROCEEDS ON BEHALF OF ASSESSEE. THE FURTHER CONTENTION OF THE ASSESSEE THAT TO CLAIM DEDUCTION U/S 80RR, OF THE ACT IT IS NOT NECESSARY THAT SUCH RECEIPT SHOULD BE BROUGHT INTO INDIA BY THE ASSESSEE HIMSELF BUT AS PER SECTION IT WILL BE SUFFICIENT THAT 25 ITA NOS. 2932 & 3397/DEL/2007 RECEIPTS MAY BE BROUGHT INTO INDIA BY OTHER AGENCY ON BEHALF OF THE ASSESSEE, AS LAID DOWN BY SECTION 80RR OF THE ACT, HAS NOT BEEN REBUTTED BY THE REVENUE. THE DEPARTMENT HAS NOT BRO UGHT ANY EVIDENCE TO DISREGARD THE CONTENTION OF THE LD. AR. ACCORDINGLY, FINDING NO INFIRMITY IN THE FINDING OF THE LD. CIT( A), WE DISMISS GROUND NO. 6 RAISED BY THE DEPARTMENT. 32. GROUND NO. 7 IS WITH REGARD TO THE ACTION OF TH E LD. CIT(A) IN ALLOWING DEDUCTION U/S 80U OF THE ACT. 33. BRIEFLY STATED, THE FACTS AS EMERGING FROM THE ASSESSMENT ORDER OF THE AO IS THAT THE ASSESSEE HAS CLAIMED DE DUCTION U/S 80U OF THE ACT ON ACCOUNT OF PERMANENT PHYSICAL DISABIL ITY. AS PER THE PROVISIONS OF THE ACT, FOR CLAIMING SUCH DEDUCTION THE ASSESSEE HAS TO FILE A CERTIFICATE IN THE PRESCRIBED FORMAT ALON G WITH THE RETURN. ASSESSEE HAS NOT FILED THE SAME. TO UPHOLD THE PRIN CIPLES OF NATURAL JUSTICE SEVERAL OPPORTUNITIES WERE ACCORDED TO THE ASSESSEE VIDE LETTER DATED 30-01-2006 AND NOTE SHEET ENTRIES ON V ARIOUS DATES TO FILE CERTIFICATE U/S 80U(2) OF THE ACT. THE SAME WA S NOT DONE. EVEN UNDER THIS SECTION THE MANDATORY REQUIREMENT IS THA T THE ASSESSEE HAS TO FILE THE CERTIFICATE ALONG WITH THE RETURN. IN RESPONSE, THE ASSESSEE STATED VIDE HIS LETTER DATED 24.2.06 THAT SINCE 1971-72 HE IS BEING GRANTED THE DEDUCTION, HOWEVER, THE RELEVANT PAPERS MAY 26 ITA NOS. 2932 & 3397/DEL/2007 HAVE GOT DESTROYED WHILE WEEDING OUT THE TIME BARRE D RECORDS. THE ASSESSEE HAS FINALLY MENTIONED THAT HE SHOULD BE GR ANTED THE DEDUCTION PERMANENTLY, IT NEED NOT BE REVIEWED EACH YEAR. THIS SUBMISSION/ARGUMENT OF THE ASSESSEE WAS NOT ACCEPTE D BY THE AO SINCE IT IS THE REQUIREMENT UNDER THE LAW OF THE LA ND THAT THE SPECIFIED DISABILITY SHOULD EXIST IN THE YEAR IN WH ICH IT HAS BEEN CLAIMED, THE SAME SHOULD BE CERTIFIED BY A QUALIFIE D DOCTOR TO BE SO, AND THE SAID CERTIFICATE SHOULD BE FILED ALONG WITH THE RETURN OF INCOME. THE AO DECLINED TO GIVE DEDUCTION AGAINST T HE PROVISIONS OF THE ACT. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BE FORE THE LD. CIT(A) WHO HELD AS UNDER: THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONSIDE RED. IT IS SEEN THAT THE DEDUCTION HAS BEEN STATEDLY GRANTED S INCE 1971- 1972 BY THE DEPARTMENT. IT IS NOT IN DOUBT THAT THE APPELLANT SUFFERS FROM THE IMPAIRMENT OF HEARING. THEREFORE, SINCE SUCH BENEFIT HAS BEEN ALLOWED TO THE APPELLANT IN EARLIE R DECADES AND THE IMPAIRMENT IS REPORTEDLY IRREVERSIBLE, THE DISA LLOWANCE SHOULD NOT HAVE BEEN MADE ON A MERE GROUND OF TECHNICALITY . HENCE THE AO IS DIRECTED TO ALLOW THE DEDUCTION CLAIMED U/S 8 0U OF THE ACT. 34. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PE RUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSES SEE HAS CLAIMED DEDUCTION U/S 80U OF THE ACT ON ACCOUNT OF PERMANEN T PHYSICAL DISABILITY. BUT AS PER THE PROVISIONS OF THE ACT, F OR CLAIMING SUCH DEDUCTION THE ASSESSEE HAS TO FILE A CERTIFICATE IN THE PRESCRIBED 27 ITA NOS. 2932 & 3397/DEL/2007 FORMAT ALONG WITH THE RETURN, WHICH THE ASSESSEE HA S NOT FILED. SEVERAL OPPORTUNITIES WERE ACCORDED TO THE ASSESSEE VIDE LETTER DATED 30-01-2006 AND NOTE SHEET ENTRIES ON VARIOUS DATES TO FILE CERTIFICATE U/S 80U(2) OF THE ACT. THE ASSESSEE, V IDE HIS LETTER DATED 24.2.06 STATED THAT SINCE 1971-72 HE IS BEING GRANTED THE DEDUCTION, HOWEVER, THE RELEVANT PAPERS MAY HAVE GO T DESTROYED WHILE WEEDING OUT THE TIME BARRED RECORDS. THE ASSE SSEE MENTIONED THAT HE SHOULD BE GRANTED THE DEDUCTION P ERMANENTLY, IT NEED NOT BE REVIEWED EACH YEAR. WE FIND THAT THE LD . CIT(A) HAS DIRECTED THE AO TO ALLOW DEDUCTION IN VIEW OF THE F ACT THAT THERE IS NO DOUBT THAT THE ASSESSEE IS SUFFERING FROM PERMAN ENT IMPAIRMENT OF HEARING, WHICH IS IRREVERSIBLE AND DISALLOWANCE CANNOT BE MADE ON THE GROUND OF MERE TECHNICALITY. ACCORDINGLY, W E FIND SUBSTANCE IN THE FINDING OF THE LD. CIT(A) AND DIRECT THE AO TO ALLOW DEDUCTION U/S 80U OF THE ACT AS CLAIMED BY THE ASSESSEE. GRO UND NO. 7 STANDS DISMISSED. GROUND NO. 8 OF THE REVENUE AND GROUND NOS. 1 AND 2 OF THE ASSESSEE. 35. LAST GROUND NO. 8 IS WITH REGARD TO REDUCTION I N ESTIMATED VALUE OF STOCKS OF DRAWING AND STUDIO MATERIAL FROM RS. 10,53,450/- TO RS. 5 LAKHS. IN THE GROUND NOS. 1 AND 2, THE ASS ESSEE HAS 28 ITA NOS. 2932 & 3397/DEL/2007 CHALLENGED THE UPHOLDING ADDITION TO THE EXTENT OF RS. 5 LAKHS. 36. BRIEF FACTS RELATING TO THESE CROSS GROUNDS AR E THAT THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERV ED THAT THE ASSESSEE HAD NEITHER SHOWN ANY CLOSING STOCK OR WOR K IN PROGRESS IN HIS BOOKS NOR HAS HE ANY RECORD OF THE PAINTING MAD E BY HIM DURING THE YEAR. HE FURTHER OBSERVED THAT A PAINTER OF TH E CALIBER AND STANDING OF SHRI SATISH GUJRAL, EACH PAINTING IS ID ENTIFIED BY A NAME, PARTICULAR SIZE, CANVAS ON WHICH PAINTED, THE TYPE OF PAINT USED, THE SERIES OF WHICH IT IS PART AND THE YEAR I N WHICH IT IS MADE. THEREFORE, THE AO CAME TO THE CONCLUSION THAT THE A UDITORS CERTIFICATE THAT THE ASSESSEE IS AN ARTIST HENCE NO STOCK RECORD IS MAINTAINED IS NOT ACCEPTABLE SINCE THE CASH BASIS O F ACCOUNTING DOES NOT GIVE THE RIGHT TO MAINTAIN A STOCK RECORD. ACCORDINGLY, THE AO REJECTED THE METHOD OF ACCOUNTING OF THE ASS ESSEE BY FOLLOWING THE DECISION IN THE CASE OF BRITISH PAINT S OF THE HON'BLE SUPREME COURT AND MADE THE ADDITION OF RS. 10,53,45 0/-. AGGRIEVED, THE DEPARTMENT WENT IN APPEAL BEFORE THE LD. CIT(A) WHO REDUCED THE ADDITION TO RS. 5 LAKHS. FURTHER A GGRIEVED, THE REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 29 ITA NOS. 2932 & 3397/DEL/2007 37. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PE RUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE AO OB SERVED THAT THE ASSESSEE INCURRED A TOTAL SUM OF RS. 38.72 LAKHS ON DRAWING AND STUDIO MATERIALS DURING THE YEAR UNDER CONSIDERATIO N AGAINST WHICH PROFESSIONAL RECEIPTS OF RS. 171.09 LAKHS HAVE BEEN SHOWN. IT IS NOTICED THAT THE RAW MATERIAL OF THE ASSESSEE COMPR ISES OF BLANK CANVASSES, OILS, AND ACRYLIC COLORS, BRUSHES, PELLE TS ETC. THE AO MADE AN ADDITION OF RS. 10,63,485/- AS ESTIMATED VA LUE OF STOCK OF RAW MATERIAL. THE LD. CIT(A) HOWEVER, AGREED THAT THE ASSESSEE HAS NOT SHOWN ANY VALUE OF THE CLOSING STOCK OF RAW MATERIAL AND HENCE THE AO WAS CORRECT IN HOLDING THAT AT THE END OF THE YEAR THE ASSESSEE MUST HAVE SOME LEFT OVER CLOSING STOCK OF STUDIO MATERIAL AND OTHER RELATED MATERIALS. THE LD. CIT(A) FURTHE R HELD THAT THE ADDITION MADE BY THE AO WOULD AMOUNT TO EVALUATING THE STOCK OF PAPER AND PENS IN THE CASE OF A POET IS A MISPLACE D COMPARISON BECAUSE THE NATURE OF THE CREATIVE WORK OF AN AUTHO R/WRITER/POET USING ONLY A PEN AND PENCIL IS DIFFERENT FROM THAT OF A PAINTING ARTIST. IN THE ABSENCE OF AMYL MATERIAL INFORMATIO N ON RECORD EXCEPT THE AMOUNT SPENT OF PURCHASE OF RAW MATERIAL INPUTS, THE AO HAS APPLIED HER MIND ON THE RIGHT TRACT AND ESTI MATED THE VALUE OF STOCK OF DRAWING AND STUDIO MATERIAL AT THE END OF THE YEAR TO 30 ITA NOS. 2932 & 3397/DEL/2007 THE BEST OF HER JUDGMENT. ACCORDINGLY, THE LD. CIT (A) KEEPING IN MIND THE ADDITION MADE BY THE AO TO BE EXCESSIVE, F ELT THAT AN ADDITION OF RS. 5 LAKHS WOULD BE SUFFICIENT TO COVE R THE ESTIMATED COST OF SUCH INPUT MATERIAL. 38. AFTER CONSIDERING THE RIVAL SUBMISSIONS, AND PE RUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ACTIO N OF BOTH THE AUTHORITIES BELOW ARE NOT CORRECT AND JUSTIFIED. AD DITION MADE ON THE BASIS OF CONJECTURES AND SURMISES CANNOT SURVIV E. WE DO NOT AGREE WITH THE AOS ACTION IN MAKING THE ADDITION A ND THE LD. CIT(A)S ACTION IN REDUCING THE SAME TO RS. 5 LAKHS WITHOUT ANY CONCRETE MATERIAL ON RECORD TO DO SO. IT IS NOT CL EAR AS TO HOW AND WHY SUCH ADDITION WAS MADE AND PART RELIEF GIVEN TO THE ASSESSEE ON SUCH ESTIMATED BASIS. IT IS RELEVANT TO NOTE THA T THE LD. COUNSEL OF THE REVENUE HAS NOT DISPUTED THIS FACT THAT NO ADDITION ON THIS COUNT HAS BEEN MADE IN THE EARLIER AND SUBSEQUENT A SSESSMENTS ON THIS ISSUE. WE MAY ALSO POINT OUT THAT IF ADDITION IS BEING MADE TOWARDS ESTIMATED VALUE OF CLOSING STOCK THEN THE S AME SHOULD BE REDUCED BY ESTIMATING OPENING STOCK WHICH CERTAINLY WAS BROUGHT FORWARD FROM EARLIER A.Y AND WHEN A METHOD OF ACCO UNTING IS BEING FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE REVENU E DURING THE EARLIER AND SUBSEQUENT A.Y WITHOUT ALLEGING THE SAM E AS INCORRECT 31 ITA NOS. 2932 & 3397/DEL/2007 THEN NO ADDITION CAN BE MADE ON THE ESTIMATION OF V ALUE OF RAW MATERIAL. THE BASIS ACCOUNTING PRINCIPLE CANNOT BE FLOUTED BY MAKING ADDITION ON THE BASIS OF ESTIMATION OF CLOSI NG STOCK OF RAW MATERIAL, WHICH ARE BRUSHES, PAINTS, CANVASS ETC IN THE CASE OF PRESENT ARTIST ASSESSEE, WITHOUT GIVING ANY ATTENTI ON TO THE FACT THAT THERE WAS NO OPENING STOCK BROUGHT FORWARD SHO WN BY THE ASSESSEE IN THE BALANCE SHEET AND WITHOUT GIVING CR EDIT OF THE SAME ESTIMATED THE VALUE OF CLOSING STOCK CANNOT BE ADDE D TO THE INCOME OF THE ASSESSEE ON THE BASIS OF SURMISES AND CONJEC TURES. CONSEQUENTLY, CONCLUSION OF THE AUTHORITIES BELOW V IZ. THE ACTION OF THE A.O MAKING THE ADDITION ON ESTIMATION OF VALUE OF CLOSING STOCK AND CONCLUSION OF THE LD. CIT(A) RESTRICTING THE SA ME TO RS. 5 LAKHS BEING WITHOUT ANY BASIS CANNOT BE HELD AS SUSTAINAB LE. ACCORDINGLY, FINDING NO MERITS IN THE GROUND RAISED BY THE REVEN UE, WE DISMISS THIS GROUND OF APPEAL RAISED BY THE REVENUE AND GRO UND NOS. 1 AND 2 OF THE ASSESSEE ARE ALLOWED AND THE A.O IS DIRECT ED TO DELETE THE ENTIRE ADDITION. 39. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ASSESSEES APPEAL IN ITA NO. 3397/DEL/2007 40. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 32 ITA NOS. 2932 & 3397/DEL/2007 1. THE LD. CIT(A) SHOULD HAVE DELETED THE WHOLE OF THE ADDITION ON ACCOUNT OF STOCK [IN CASE OF AN ARTIST] ONCE IT HAS BEEN HELD THAT THE REGULARLY FOLLOWED AND ACCEPTED METHOD OF ACCOUNTING CANNOT BE DISTURBED. 2. THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDIT ION ON ACCOUNT OF STOCK TO THE EXTENT OF RS. 5 LAKHS DISTU RBING THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE APPE LLANT. 3. THE LD. CIT(A) HAS ERRED IN SUSTAINING THE AMOUN T OF SALARIES PAYABLE OUT OF SUNDRY LIABILITIES. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJU DICE TO EACH OTHER. 41. WHILE DISPOSING OF GROUND NO. 8 OF REVENUE, WE HAVE DEALT WITH THIS ISSUE AND DISMISSED THE GROUND RAISED BY THE R EVENUE AND GROUND NOS 1 AND 2 F THE ASSESSEE HAVE BEEN ALLOWED IN THE FINAL CONCLUSION AS RECORDED IN THE EARLIER PART OF THIS ORDER. 42. THE LAST GROUND NO. 3 RAISED BY THE ASSESSEE IS WITH REGARD TO THE SUSTENANCE OF THE AMOUNT OF SALARIES PAYABLE OUT OF SUNDRY LIABILITIES. 43. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT THE METHOD OF ACCOUNTING ACCORDING TO THE AUDIT REP ORT WAS CASH BASIS. HOWEVER, THE BALANCE SHEET INDICATES THAT SUNDRY LI ABILITIES TO THE TUNE OF RS. 1,00,159.88 WAS APPEARING WITH REFERENCE TO VARIOUS EXPENSES. 33 ITA NOS. 2932 & 3397/DEL/2007 THE AO HELD THAT UNDER THE METHOD OF ACCOUNTING, SU CH EXPENSES COULD NOT BE ALLOWED. WHEN THE ASSESSEE DID NOT RESPOND TO THE AOS QUERY IN THIS REGARD, HE MADE AN ADDITION OF RS. 1,00,159 .88 AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE AND ALSO INITIAT ED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. WHEN THE AGG RIEVED ASSESSEE WENT IN APPEAL, THE LD. CIT(A) HELD THAT THE PROFES SIONAL INCOME OF THE APPELLANT IS BEING ACCOUNTED FOR ON RECEIPT BASIS A ND THE ASSESSEE HAS PROVIDED FOR REGULAR EXPENSES LIKE SALARIES, TELEPH ONE AND ELECTRICITY ON MERCANTILE BASIS. AFTER CONSIDERING THE NATURE OF EXPENSES, THE LD. CIT(A) HELD THAT THE EXPENSES WERE PERIODIC BILLS A ND ALLOWED THE BILLS RELATING TO TELEPHONE AND ELECTRICITY BUT UPHELD TH E ACTION OF THE AO ON ACCOUNT OF SALARIES PAID. THE AGGRIEVED ASSESSEE H AS CHALLENGED THE ACTION OF THE A.O AND THE LD. CIT(A) IN GROUND NO. 3. 44. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PE RUSED THE RELEVANT MATERIAL ON RECORD. THE A.O MADE ADDITION BY OBSERVING IN PARA III AT PAGE 4 OF THE ASSESSMENT ORDER AS FOLLO WS: METHOD OF ACCOUNTING ACCORDING TO THE AUDIT REPORT IS CASH BASIS. HOWEVER, BALANCE SHEET INDICATES THAT SUNDRY LIABILITIES TO THE TUNE OF RS. 1,00,159.88 (RS. 1,05,559/- -TDS PA YABLE 5400/-) IS APPEARING WITH REFERENCE TO VARIOUS EXPENSES. UN DER THE CASH METHOD OF ACCOUNTING SUCH EXPENSES CANNOT BE ALLOWE D. ASSESSEE WHEN ASKED ABOUT THIS AND WAS GIVEN AN OPP ORTUNITY 34 ITA NOS. 2932 & 3397/DEL/2007 CHOSE TO REMAIN SILENT ON THIS ISSUE. HENCE ADDITIO N ON ACCOUNT OF THIS POINT TO THE TUNE OF RS. 1,00,159.88 IS BEI NG MADE TO THE INCOME OF THE ASSESSEE. 45. FROM THE RELEVANT OPERATIVE PART OF THE ORDER O F THE LD. CIT(A) WE NOTE THAT THE FIRST APPELLATE AUTHORITY GRANTED PAR T RELIEF TO THE ASSESSEE AND UPHELD THE ACTION OF THE A.O TO THE EX TENT OF LIABILITY SHOWN ON ACCOUNT OF SALARIES BY OBSERVING AS FOLLOW S: THE ABOVE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONSIDERED. IT HAS BEEN SEEN THAT ALTHOUGH THE PROFESSIONAL INC OME OF THE APPELLANT IS BEING ACCOUNTED FOR ON RECEIPT BASIS, THE APPELLANT HAS PROVIDED FOR REGULAR EXPENSES LIKE SALARIES, TE LEPHONE AND ELECTRICITY ON MERCANTILE BASIS. AFTER CONSIDERING THE NATURE OF THE EXPENSES, WHICH ARE PERIODIC BILLS AND OTHER RE LEVANT FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE LIAB ILITIES RELATING TO TELEPHONE AND ELECTRICITY BILLS ARE TO BE ALLOWED. THE LIABILITY SHOWN ON ACCOUNT OF SALARIES IS NOT ALLOWED AND THE ACTION OF THE A.O IS UPHELD TO THAT EXTENT. 46. ON CAREFUL AND VIGILANT PERUSAL OF THE ABOVE IN THE LIGHT OF THE FACTS OF THE ISSUE, THE LD. CIT(A) WAS CORRECT IN H OLDING THAT THE NATURE OF EXPENSES WHICH ARE PERIODIC BILLS THE LIABILITIE S RELATING TO TELEPHONE AND ELECTRICITY BILLS ARE ALLOWABLE. THE LD. COUNSEL COULD NOT CONTROVERT THE CONTENTION OF THE LD. CIT(A) THA T THE LIABILITY SHOWN ON ACCOUNT OF SALARIES IS NOT ALLOWABLE AS IT WAS N OT CRYSTALLISED AND 35 ITA NOS. 2932 & 3397/DEL/2007 PAID DURING THE YEAR I.E. FINANCIAL PERIOD 2002-03. THUS WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE IMPUG NED ORDER ON THIS ISSUE AND HENCE WE UPHOLD THE SAME. CONSEQUENTLY, GROUND NO. 3 OF THE ASSESSEE IS DISMISSED. 47. TO SUM UP, IN THE RESULT, THE APPEAL OF THE ASS ESSEE IS PARTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 22. 07.2015. SD/- SD/- (O.P. KANT) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 ND JULY, 2016 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REG ISTRAR ITAT, NEW DELHI