ACIT, New Delhi V. Smt Chimes Holding, New Delhi

ITA 3419/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69318 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y KAKKAR
• Keywords: Business expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI) BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 3419 / DEL/ 2012 (ASSESSMENT YEAR 2007-08 ) ACIT, CIRCLE 24(1), VS. M/S. CHIMES HOLDING, NEW DELHI 56, CHIMES, SULTANPUR FARMS, NEW DELHI PAN : AABFU9631J (APPELLANTS) (RESPONDENTS) ASSESSEE BY : MS. Y KAKKAR, SR. DR DEPARTMENT BY: SHRI RAHUL KHARE, ADV. ORDER PER U B S BEDI, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) XI, NEW DELHI DATED 02.04.2012 RELEVANT TO A SSESSMENT YEAR 2007- 08 WHEREBY, THROUGH ONE EFFECTIVE GROUND, DELETION OF DISALLOWANCE OF EXPENSES AMOUNTING TO RS.90,34,484/- AGAINST THE TO TAL EXPENSES OF RS.98,55,807/- CLAIMED BY THE ASSESSEE HAS BEEN CHA LLENGED. 2. THE FACTS INDICATE THAT THE ASSESSEE IS A FIRM I N WHICH M/S. K. R. SECURITIES PVT. LTD. AND SHRI UDAI PUNJ ARE THE PAR TNERS HAVING PROFIT SHARING RATIO OF 10% AND 90% RESPECTIVELY. AS PER TAX AUDI T REPORT, THE BUSINESS OF THE ASSESSEE IS CONSULTANCY. THIS IS THE FIRST YEA R OF THE ASSESSEES BUSINESS. I.T.A. NOS.3419 /DEL/2012 2 RETURN OF INCOME IN THIS CASE WAS FILED BY THE ASSE SSEE ON 28.10.2007 DECLARING A TOTAL INCOME OF RS. NIL WHICH WAS PRO CESSED U/S 143(1) AND SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS FIXED UP FOR SCRUTINY. AS PER THE ASSESSMENT ORDER U/S 143(3), THE A.O. STATED AS UND ER: ON PERUSAL OF P&L ACCOUNT IT IS NOTICED THAT THE AP PELLANT HAS SHOWN NET LOSS OF RS.83,18,433/- CLAIMING EXPENDITURE OF RS.98,55,801/- AGAINST THE TOTAL RECEIPT OF RS.15,37,368/-. IT IS ALSO NOT ICED THAT THE PAYMENT WAS RECEIVED FOR FIRST TIME IN THE LAST WEEK OF MARCH, 07, BUT THE EXPENSES HAVE BEEN BOOKED SINCE VERY BEGINNING OF THE FY UNDER CO NSIDERATION. ON GOING THROUGH THE P&L ACCOUNT IT IS FOUND THAT THE APPELL ANT HAS SHOWN MOST OF THE EXPENSES UNDER THE HEADS SALARY AND CONSULTANCY CHARGES WHICH ARE SHOWN AT RS.51,25,438/- AND RS.29,61,787/- RESPECTI VELY. FROM THE DETAILS OF CONSULTANCY CHARGES AS FILED BY THE APPELLANT IT IS NOTICED THAT THE PAYMENTS UNDER THIS HEAD WERE MADE TO DIFFERENT PAR TIES, BUT ANY INCOME RECEIVED OR RECEIVABLE FROM THE CONCERNED PARTIES H AS NOT BEEN SHOWN. IN THIS CONNECTION THE APPELLANT VIDE THIS OFFICE LETT ER DATED 07/12/09 WAS REQUIRED TO EXPLAIN AND JUSTIFY THE BUSINESS PURPOS E OF PAYMENT TO EACH PARTY SEPARATELY. IT IS ALSO REQUIRED AS TO WHETHER ANY INCOME WAS RECEIVED IN SUBSEQUENT YEAR FROM THE PARTIES TO WHOM CONSULT ANCY CHARGES PAID FOR CERTAIN CONTRACT/PROJECT. SIMILARLY, THE APPELLANT WAS ASKED TO PROVE THE BUSINESS NEXUS OF ALL OTHER EXPENSES BOOKED UNDER T HE DIFFERENT HEADS AND DEBITED TO THE P&L ACCOUNT. IN RESPONSE TO THE ABOVE QUERIES THE APPELLANT VIDE ITS REPLY DATED 10/12/09 HAS SUBMITTED THAT THE FIRM WAS CONSTITUTED ON 01/0 3/06 WITH THE PURPOSE OF RUNNING BUSINESS OF MANAGEMENT AND CONSULTANCY SERV ICES. THE PRIME MOTIVE TO SET UP THIS VENTURE TO PROVIDE WOULD CLAS S PROFESSIONAL SERVICE TO MID LEVEL OR LOW LEVEL COMPANY WHO CANNOT AFFORD TO HIGHER FULL TIME PROFESSIONAL WHICH MAY BE BEYOND THEIR BUDGET. KEEP ING THIS INTENTION AND PRIME OBJECT INTO CONSIDERATION THE FIRM HAD APPOIN TED FEW PROFESSIONAL AND HIGHEST PAID EMPLOYEE. ONE OF THE OBJECT IS TO DO D UE DILIGENCE OF NEW VENTURE FOR WHICH ASSESSEE HAS APPOINTED FEW CONSUL TANT AND PAID PROFESSIONAL CHARGES FOR DOING MARKET SURVEY, STUDY SITE VISIT ETC. A PERUSAL OF DETAILS AVAILABLE ON RECORD SHOWS THAT APART FROM MAKING HUGE PAYMENT TO ITS EMPLOYEES, THE APPELLANT HAS MADE PA YMENTS UNDER THE HEAD I.T.A. NOS.3419 /DEL/2012 3 CONSULTANCY CHARGES FOR VARIOUS PROJECTS/WORKS. KEE PING IN VIEW THE FACT THE APPELLANT WAS REQUIRED TO FURNISH THE PROJECT WISE DETAILS AND TO EXPLAIN THE REASONS OF NOT SHOWING ANY INCOME RECEIVED OR RECEI VABLE ON ACCOUNT OF THESE PROJECTS. SIMILARLY THE APPELLANT WAS REQUIRE D TO FURNISH THE DETAILS OF PERFORMANCE OF HIGHLY PAY SALARIED EMPLOYEES WHO CO ULD NOT GENERATE ANY INCOME DURING THE WHOLE YEAR FOR THE FIRM. IN PLACE OF PROVING BUSINESS NEXUS OF EXPENSES CLAIMED BY FURNISHING SUPPORTING DETAILS AND DOCUMENTS, IF ANY THE APPELLANT HAS FURNISHED MEANINGLESS AND IRRELEVANT SUBMISSION DIVERTING THE FOCUS FROM THE MAIN ISSUE I.E. THE NE XUS BETWEEN EXPENDITURE CLAIMED AND BUSINESS PURPOSE. NOTHING HAS BEEN FURN ISHED TO PROVE THAT THESE EXPENSES WERE CLAIMED IN CONNECTION WITH THE BUSINESS OF THE APPELLANT IN THE ABSENCE OF PROPER REPLY TO THE QUERIES RAISE D DURING THE ASSTT PROCEEDINGS, THE RATIONALITY OF THE EXPENSES CLAIME D IS NOT ESTABLISHED. THE APPELLANT HAS SHOWN NOMINAL INCOME IN THE LAST WEEK OF MARCH, 07 WHICH APPEARS TO HAVE BEEN SHOWN WITH THE MOTIVE TO CLAIM THE EXPENSES FOR THE WHOLE YEAR. IT WAS SPECIFICALLY REQUIRED TO FUR NISH THE DETAILS OF EXPENSES PERTAINING TO THE INCOME SHOWN IN THE LAST WEEK OF MARCH, 07 BUT THE APPELLANT HAS FURNISHED NO DETAILS IN THIS REGARD. IN VIEW OF THE ABOVE FACTS, IT IS PROVED THAT THE E XPENSES CLAIMED BY THE APPELLANT DO NOT PERTAIN TO THE BUSINESS OF THE APP ELLANT. ACCORDINGLY I HOLD THAT 1/12TH OF THE TOTAL EXPENSES CLAIMED DURING TH E YEAR IS ALLOWABLE HOLDING THAT THE APPELLANT HAS MADE SOME EFFORTS TO EARN INCOME DURING THE MONTH OF MARCH, 07 ONLY AND THE REST OF THE EXPENSE S I.E. 11/12 RELATING TO 11 MONTHS OF THE YEAR ARE DISALLOWED BECAUSE THERE IS NO EVIDENCE TO PROVE THAT THESE EXPENSES WERE INCURRED OR CLAIMED IN CON NECTION WITH MAKING EFFORTS TO RUN THE BUSINESS OF THE APPELLANT. ACCOR DINGLY II/12TH OF TOTAL EXPENSES ARE DISALLOWED. 3. THE ASSESSEE TOOK UP THE MATTER IN APPEAL AND CH ALLENGED THE ACTION OF THE A.O. IN MAKING THE ASSESSMENT AT A TOTAL INCOME OF RS.7,16,050/-, AGAINST DECLARED INCOME AT NIL. THE ASSESSEE HAS FURTHER CHALLENGED A.O.S ACTION IN DISALLOWING THE EXPENSES AMOUNTING TO RS.90,34,4 84/-. THE SUBMISSIONS I.T.A. NOS.3419 /DEL/2012 4 OF THE ASSESSEE ALONG WITH THE CASE LAW CITED WAS N OTED BY LD. CIT(A) IN HIS ORDER AS UNDER:- THE APPELLANT HAS FURTHER SUBMITTED AS UNDER:- 'THE FIRM M/S CHIMES HOLDINGS WAS FORMED ON 2/03/20 06 AND THE BUSINESS WAS COMMENCED ON 1/03/2006 WITH THE FOLLOW ING MAIN OBJECTIVE:- 'PROVIDING MANAGEMENT MENTORING AND CONSULTANCY SER VICES FOR ESTABLISHMENT OF NEW PROJECTS AND TO PROVIDE ADVISO RY SERVICES FOR EFFECTIVE ADMINISTRATION, ORGANIZATION , DEVELOPMEN T AND IMPROVEMENT OF THE NEW AND EXISTING BUSINESS.' THE FIRST ACCOUNTING YEAR WAS CLOSED ON 31/3/2007 A ND RETURN DECLARING A NET LOSS OF RS (-) 83,18,433 WAS FILED. ( COPY OF AUDITED PROFIT & LOSS ACCOUNT ALONG WITH BALANCE SHEET IS E NCLOSED).DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BOOKS OF ACCO UNTS ALONG WITH VOUCHERS WERE PRODUCED, COMPLETE DETAILS OF EXPENSE S WERE FILED VIDE OUR LETTER DATED 26/08/2009, 21/10/2009, 27/11/2009 ,10/12/2009 AND 21/12/2009 INCLUDING THE EXPLANATIONS AND EVIDENCES AS ASKED FOR. THE ACIT WHILE PASSING THE ORDER HAD DISALLOWED THE EXPENSES ON FOLLOWING GROUNDS:- THAT ASSESSEE HAS SHOWN NOMINAL INCOME IN THE MONTH OF MARCH 2007 WITH A MOTIVE TO CLAIM EXPENSES FOR THE WHOLE YEAR. THAT THE EXPENSES CLAIMED DO NOT PERTAIN TO THE BUS INESS OF THE ASSESSEE. THAT HE HAD ALLOWED ONLY 1/12 OF THE EXPENSES WITH AN ERRONEOUS REASONING THAT ASSESSEE HAD ONLY MADE EFFORT IN ONE MONTH TO EARN INCOME HENCE EXPENSES FOR 11 MONTHS ARE DISALLOWED. THE ORDER PASSED BY ACIT IS NOT ONLY ILLEGAL BUT AL SO AGAINST THE F ACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS OF THE CAS E IS AS UNDER:- THE PRIME MOTIVE TO SET UP THIS VENTURE IS TO PROVI DE WORLD CLASS PROFESSIONAL SERVICE TO MID LEVEL OR LOW LEVEL COMP ANY WHO CAN NOT AFFORD TO HIRE FULL TIME PROFESSIONAL WHICH MAY BE BEYOND THEIR I.T.A. NOS.3419 /DEL/2012 5 BUDGET. FURTHER BESIDE ESTABLISHING EXPERT PROFESSI ONAL SERVICES MANAGEMENT TEAM, THE FIRM HAS ALSO STARTED DIVERSIF YING/ STARTED DOING DUE DILIGENCE OF VARIOUS BUSINESS MODELS AND AVENUES SO THAT ADVICE CAN BE GIVEN TO CLIENTS FOR SETTING UP OF NE W BUSINESS VENTURE, SPECIALLY WHAT TYPE OF BUSINESS VENTURE, PLACE WHER E TO SET UP AND OTHER RELATED MATTERS. II) THAT KEEPING THIS INTENTION AND PRIME OBJECT I NTO CONSIDERATION THE FIRM UNDER THE LEADERSHIP OF MR UDAY PUNJ, HAD APPOINTED FEW PROFESSIONAL ON THEIR PAY ROLL WHO ARE NOT ONLY WEL L VERSED IN THEIR FIELD BUT ALSO HAD VAST EXPERIENCE. ( LIST OF EMPLO YEES WERE FILED ALONG WITH OUR LETTER DATED 27/11/2009. FROM THE ENCLOSED LIST YOUR GOOD- SELF WILL OBSERVE THAT THE HIGHEST PAID EMPLOYEE IS MR. SANJAY DIWEDI WHO IS CHARTERED ACCOUNTANT FROM UK AND HAD A VAST EXPERIENCE OF ALMOST 25 YEARS. HE WAS WORKING AS THE 0 OF M/S. SP ECTRANET LTD (A PUNJLLOYD-GROUP OF COMPANY) BEFORE HE HAD JOINED TH IS CONCERN. SECONDLY MR SAMEER KACHRU IS A HOTEL MANAGEMENT EXP ERT AND-AFTER LEAVING HIS LUCRATIVE JOB HAD TAKEN UP THIS ASSIGNM ENT. THE OTHER KEY EXECUTIVES WERE APPOINTED ARE EXPERT IN THE RESPECT IVE FIELD WHICH CAN BE VERIFIED FROM THE DETAILS OF EMPLOYEES FILED ALO NG WITH OUR LETTER DATED 27/11/2009. III) FURTHER AS INFORMED ABOVE, ONE OF THE OBJECT I S TO DO DUE DILIGENCE OF NEW VENTURES FOR WHICH ASSESSEE HAD AP POINTED FEW CONSULTANTS AND PAID PROFESSIONAL CHARGES FOR DOING MARKET SURVEY, STUDY SITE VISITS ETC. AND DETAIL OF WHICH WERE FIL ED ALONG WITH OUR LETTER DATED 27/11/2009. IV) FURTHER THIS FOR INFORMATION AND ACCEPTED FACT THAT WHENEVER ANY NEW VENTURE IS SET UP, IT IS NOT POSSIBLE TO EA RN INCOME FROM DAY ONE. IN FACT IN THIS COMPETITIVE WORLD, ONE HAS TO PROVE ITS CREDENTIALS IN THE RESPECTIVE FIELD BEFORE ANY ASSIGNMENT IS OB TAINED. V) FURTHER AS PER THE STATUTORY PROVISION OF THE AC T, ANY EXPENSE WHICH IS INCURRED FOR THE PURPOSE OF BUSINESS IS ALLOWED AS BUSINESS EXPENDITURE. IN THE ASSESSMENT ORDER LD. ACIT IS U NABLE TO PROVE THAT EXPENSES INCURRED ARE NOT FOR THE PURPOSE OF BUSINE SS. IN FACTS BY APPLYING THE FORMULA OF 1/12 WHILE ALLOWING THE EXP ENSES SHOWS THAT ACIT HAD INVENTED A FORMULA (REASON BEST KNOWN TO H IM), BASED OF SURMISES AND CONJUNCTURES THAT BECAUSE IN THE EARLI ER MONTHS, NO INCOME HAS BEEN EARNED HENCE FOR THOSE MONTHS, EXPE NSES SHALL NOT BE ALLOWED. I.T.A. NOS.3419 /DEL/2012 6 VI) THE ALLOWANCE/DISALLOWANCE UNDER THE I. T. ACT, 1961 DOES NOT WORK LIKE THIS. IN THE CASE OF NEWLY SET UP BUSINE SS, ALL EXPENDITURE (NOT IN THE NATURE OF CAPITAL EXPENDITURE), IF SPEN D FOR BUSINESS ARE ALLOWED, IRRESPECTIVE OF THE FACT THAT WHETHER REVE NUE IS EARNED IN THE START OF THE YEAR OR AT THE END OF THE YEAR. VII) THE LD. ACIT GOT CONFUSED WITH THE COMMENCEMEN T OF BUSINESS AND SETTING UP OF BUSINESS. AS PER ACIT, THE COMME NCEMENT OF BUSINESS HAS TAKEN PLACE IN MARCH 2007 HENCE ALL E XPENSES BEFORE MARCH 2007 IS DISALLOWED. THE CONTENTION OF THE A CIT IS ABSOLUTELY INCORRECT AND FOR THIS PROPOSITION OF LAW WE RELY O N FOLLOWING JUDGEMENTS:- A) CIT VS FRANCO TOSI INGTEGNERIA 241 ISTDR 268 (MA D.) B) WESTERN INDIA VEGETABLE PRODUCTS LTD. VS CIT 26 ITR 151 (BOM.) C) CIT VS WESTERN INDIA SEA FOOD (P) LTD. 107 CTR 1 06: 199 ITR 177 (GUJ.) D) CIT VS ESPN SOFTWARE INDIA (P) LTD. 218 CTR 427 E) CIT VS HUGHES ESCORTS COMMUNICATIONS LTD. 213 CT RR 45 ( DEL.) F) CIT VS SAURASTRA CEMENT & CHEMICAL INDUSTRIES LT D. 91 ITSR 170 (GUJ.) G) CIT VS RALLIWOLF LTD. 121 ITR 262 (BOM.) H) CIT VS L G ELECTRONICS (INDIA) LTD. 149 TAXMAN 1 66 (DEL.). 4. LD. CIT(A), WHILE CONSIDERING THE PLEAS RAISED, HAS ACCEPTED THE APPEAL OF THE ASSESSEE BY CONCLUDING TO DELETE THE IMPUGNED ADDITION MADE BY THE A.O., FROM BOTTOM OF PAGE 4 TO PAGE 5 AS UND ER: AFTER CONSIDERING THE ASSTT ORDER THE SUBMISSIONS OF THE APPELLANT AND OTHER DOCUMENTS ON RECORD, I SHALL NOW TAKE UP THE VARIOUS GROUNDS OF APPEAL. THE TWO GROUNDS OF APPELLANT DEAL WITH THE SAME ISS UE I.E. DISALLOWANCE OF EXPENSES OF RS.90,34,484/-. THESE EXPENSES WERE DISALLOWED BY THE A.O. ON THE GROUND THAT THE EXPEN SES CLAIMED DID NOT PERTAIN TO THE BUSINESS OF THE APPELLANT. ALL THESE EXPENSES RELATING TO 11 MONTHS OF THE YEAR WERE DISALLOWED O N THE GROUND THAT I.T.A. NOS.3419 /DEL/2012 7 THERE WAS NO EVIDENCE TO PROVE THAT THESE EXPENSE W ERE INCURRED AND CLAIMED IN CONNECTION WITH EFFORTS TO RUN THE BUSIN ESS. THE APPELLANT BEFORE ME HAS SUBMITTED THAT THE FIRM M/S CHIMES HOLDING WAS FORMED ON 02/03/06 AND THE BUSINESS COM MENCED ON 01/03/06;,....IN THIS REGARD I HAVE SEEN THE COPY O F THE PARTNERSHIP DEED FURNISHED BY THE APPELLANT WHICH WAS ALSO PROD UCED BEFORE THE AO. THE PARTNERSHIP WAS FORMED ON 02/03/06 AND BUSI NESS COMMENCED ON 01/03/06. THE APPELLANT SUBMITTED THAT EXPENSES IN THE INITIA L MONTHS OF THE NEW BUSINESS WERE INCURRED. THE BUSINESS HAD COMMENCED ON 01/04/06 AND EXPENSES WERE INCURRED IN HIRING PERSONNEL, PAY ING SALARY ETC. THE APPELLANT PRODUCED THE SALARY DETAILS, DETAILS OF TDS DEDUCTED AND DETAILS OF OTHER MAJOR EXPENSES BEFORE ME. THE AO IN THE ORDER HAS NOWHERE DOUBTED THE FACT TH AT EXPENSES WERE NOT INCURRED. THE AG HAS NOT GIVEN A FINDING THAT T HE EXPENSES CLAIMED WERE BOGUS. THE AO HAS ONLY STATED THAT THE APPELLANT COULD NOT PROVE THE NEXUS BETWEEN EXPENDITURE CLAIMED AND BUSINESS PURPOSE. FROM THE DETAILS SUBMITTED AND FROM THE ASSERTIONS OF THE APPELLANT, I FIND THAT THE BUSINESS OF THE APPELLANT HAD COMMENC ED DURING THE YEAR. THE APPELLANT HAD INCURRED EXPENDITURE UNDER VARIOUS HEADS WHICH WERE INCURRED IN THE REGULAR COURSE OF BUSINE SS. THE EXPENDITURE INCURRED IS THEREFORE ALLOWABLE IN FULL TO THE APPELLANT HAVING BEEN INCURRED IN THE REGULAR COURSE OF BUSIN ESS. THE ADDITION OF RS.90,34,484/- IS DELETED. GROUND NO.1 & 2 ARE R ULED IN FAVOUR OF THE APPELLANT. AS A RESULT. THE APPEAL OF THE APPELLANT IS ALLOWED . 5. AGGRIEVED BY THIS ORDER OF LD. CIT(A), THE DEPAR TMENT HAS COME UP IN APPEAL AND THE LD. D.R., WHILE RELYING UPON THE ORD ER OF THE A.O. HAS PLEADED FOR SETTING ASIDE THE ORDER OF LD. CIT(A) A ND RESTORING THAT OF THE A.O. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE H AS MISERABLY FAILED TO ESTABLISH THAT HUGE EXPENDITURE WAS INCURRED FOR TH E PURPOSE OF BUSINESS. THE FIRM WAS CONSTITUTED ON 02.03.2006, HOWEVER, BU SINESS DID NOT START ON I.T.A. NOS.3419 /DEL/2012 8 01.03.2006. MOREOVER, GENUINENESS OF SUCH EXPENDIT URE HAS NOT BEEN EXPLAINED, NEXUS HAS NOT BEEN ESTABLISHED AND DUE D ILIGENCE IS ALSO MISSING AND SINCE THERE IS NO CONSULTANCY AGREEMENT, THEREF ORE, THE A.O. WAS JUSTIFIED IN MAKING THE IMPUGNED ADDITION AND LD. C IT(A) IS UNJUSTIFIED IN DELETING THE SAME. HIS ORDER IS ALSO CRYPTIC ONE A S POINTS RAISED BY THE A.O. HAD NOT BEEN DISCUSSED APPROPRIATELY, THE NATURE & TYPE OF BUSINESS OF THE ASSESSEE HAS ALSO NOT BEEN PROVED, THEREFORE, THE EXPENDITURE TO THE EXTENT DISALLOWED, WHICH COULD NOT BE ALLOWED. AS SUCH IT WAS PLEADED FOR RESTORING THE ORDER OF THE A.O. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PARTNERSHIP DEED DATED 02.03.2006 WAS EFFECTIVE FROM 01.03.2006 AND IT WAS A CASE WHERE HIGHLY QUALIFIED PERSON WERE ENGAGED AS THE BUSINESS OF TH E ASSESSEE WAS THAT OF CONSULTANCY IN WHICH THREE VERY WELL QUALIFIED AND EXPERIENCED PERSONS WERE ENGAGED AND HIGH SALARY WAS PAID. SINCE THE INCOME WAS RECEIVED IN ONE MONTH AND THE EXPENSES WERE FOR 12 MONTHS, THE A.O. WITHOUT CONSIDERING ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , HAS JUST ALLOWED EXPENSES FOR ONE MONTH OUT OF THE TOTAL EXPENDITURE INCURRED FOR 12 MONTHS AND IF SOME BUSINESS COULD NOT BE PROCURED, IT CANNOT BE S AID THAT HIGHLY SKILLED EMPLOYEES ENGAGED BY THE ASSESSEE SHOULD NOT BE PAI D AS THEY DID NOT DO ANY WORK FOR THE ASSESSEE. IT IS NOT A CASE OF PRE-OPE RATIVE EXPENSES, AS BOOKS OF ACCOUNTS WERE DULY MAINTAINED AND PRODUCED BEFORE T HE A.O. AS WELL AS BEFORE LD. CIT(A) WHEN IT WAS THE VERY FIRST YEAR O F BUSINESS. LD. COUNSEL FOR THE ASSESSEE, RELYING UPON THE DECISION IN THE CASE OF CIT VS MODI RUBBER LTD., 247 ITR 303 (DEL.) AND IN THE CASE OF CIT VS L G ELECTRONICS (I) LTD. 282 ITR 545 (DEL.), HAS SUBMITTED THAT THE RE IS A DIFFERENCE BETWEEN I.T.A. NOS.3419 /DEL/2012 9 SETTING UP OF BUSINESS AND COMMENCEMENT OF BUSINESS AND IN THIS CASE BUSINESS COMMENCED FROM THE BEGINNING AND TAKING SU PPORT FORM THE PROVISO TO SECTION 3, IT WAS CONTENDED THAT PERIOD BEGINNING WITH THE DATE OF SETTING UP OF BUSINESS WHEN IT ACTUALLY COMMENCED. THE A.O. HAS NOT DOUBTED THE GENUINENESS OF EXPENDITURE NOR IT HAS B EEN ESTABLISHED THAT THESE ARE BOGUS. IF FOR ANY REASON, EXPECTED CONSULTANCY BUSINESS COULD NOT BE PROCURED, IT CANNOT BE SAID THAT THE ASSESSEE HAS N OT INCURRED SUCH EXPENDITURE, WHILE LAYING STRESS ON THE PLEA THAT W ITHOUT ESTABLISHING THAT SUCH EXPENSES HAD NOT BEEN INCURRED BY THE ASSESSEE , THE A.O. COULD NOT MAKE ANY DISALLOWANCE AND LD. CIT(A) IS FULLY JUSTI FIED IN ALLOWING THE CLAIM OF THE ASSESSEE AND IT WAS THUS PRAYED FOR CO NFIRMATION OF THE IMPUGNED ORDER OF LD. CIT(A). 7. LD. D.R., IN ORDER TO COUNTER THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FAILED TO GIVE REASONS FOR NOT PROCURING CONSULTANCY BUSINESS AND SPENDING SUCH A HUGE AMOUN T AND MOREOVER EXPENDITURE HAS BEEN DISALLOWED U/S 37(1), SECTION 3(1) HAS NO APPLICATION AS CONTENDED BY THE LD. A.R. OF THE ASSESSEE. NO D ETAILS WERE SUBMITTED BEFORE THE A.O. RELYING UPON THE DECISION IN THE C ASE OF SCHNEIDER ELECTRIC INDIA LTD. VS CIT 304 ITR 360 AND IN THE CASE OF DC IT VS MCDOWELL & CO. LTD. (KAR) 291 ITR 107, IT WAS PLEADED BY THE LD. D .R. TO REVERSE THE ORDER OF LD. CIT(A) AND RESTORING THAT OF THE A.O. 8. LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOSED TH E PLEA OF THE LD. D.R. THAT NO DETAILS WERE SUBMITTED BY THE ASSESSEE WHER EAS THE ASSESSEE VIDE LETTER DATED 21.12.2009, IN RESPONSE TO THE A.O.S LETTER DATED 11.12.2009, HAS MADE MENTION OF THE QUESTIONNAIRE DATED 07.12.2 009 AND GAVE DETAILED I.T.A. NOS.3419 /DEL/2012 10 REPLY WHICH COULD NOT BE REBUTTED BY THE REVENUE AN D BY FILING COPY OF THE SAID LETTER, IT WAS SUBMITTED THAT LD. CIT(A) HAS G IVEN APPROPRIATE AND JUSTIFIABLE REASONS TO DELETE THE IMPUGNED ADDITION , THUS IT WAS PLEADED FOR CONFIRMATION OF THE ORDER OF LD. CIT(A). 9. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MAT ERIAL ON RECORD, CASE LAW CITED BY RIVAL SIDE AND FIND THAT LD. CIT(A) HA S CONSIDERED EACH AND EVERY ASPECT OF THE MATTER AND PASSED A VERY ELABOR ATE AND REASONED ORDER. THE CONCLUSION AS DRAWN AND IS REPRODUCED IN EARLIE R PART OF THIS ORDER GIVES ADEQUATE BASIS. NEITHER ANY INFIRMITY NOR ANY FLAW HAS BEEN NOTICED IN SUCH CONCLUSION AS DRAWN BY LD. CIT(A) NOR ANY CONVINCIN G REASON HAS BEEN GIVEN TO TAKE A DIFFERENT VIEW. THEREFORE, CONSIDE RING THE ENTIRETY OF THE FACTS, CIRCUMSTANCES AND MATERIAL ON RECORD AND WHI LE CONCURRING WITH CONCLUSION AND FINDING OF LD. CIT(A), WE UPHOLD HIS ORDER AND DISMISS THE APPEAL OF THE REVENUE BEING DEVOID OF ANY MERIT. 10. IN THE RESULT, APPEAL OF THE REVENUE GETS DISMI SSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEP., 2013. SD./- SD./- (T. S. KAPOOR) (U.B.S.BEDI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH SEP., 2013 SP. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XXV, NEW DELHI AR, ITAT, 5. CIT(ITAT), NEW DELHI NEW DELHI