MR CHANDMAL K SHAH, MUMBAI V. THE ITO 19(2)(1), MUMBAI

ITA 355/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4037 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI , ! ! ! ! '! !, $ BEFORE SHRI SANJAY ARORA, A. M. AND SHRI VIJAY PAL RAO, J. M. ./ I.T.A. NO. 355/MUM/2011 ( ' ( !)( ' ( !)( ' ( !)( ' ( !)( / / / / ASSESSMENT YEAR: 2006-07) CHANDMAL K. SHAH R. SANGHVI & CO., C.A. 104, RIZVI CHAMBERS-2, JAIN MANDIR MARG, OFF HILL ROAD, BANDRA (W), MUMBAI-400 050 ' ' ' ' / VS. ITO 19(2)(1) PIRAMAL CHAMBERS, 3 RD FLOOR, LOWER PAREL, MUMBAI-400 012 * ./ + ./ PAN/GIR NO. AAEPS 1403 R ( *, / APPELLANT ) : ( -.*, / RESPONDENT ) *, / / APPELLANT BY : SHRI RAJESH SANGHVI -.*, 0 / / RESPONDENT BY : SHRI RAJARSHI DWIVEDY '! 0 12 / // / DATE OF HEARING : 24.06.2013 3) 0 12 / DATE OF PRONOUNCEMENT : 26.07.2013 4 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-30, MUMBAI (CIT(A) FOR SH ORT) DATED 05.10.2010, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2006-07 VIDE ORDER DATED 26.12.2008. 2 ITA NO. 355/MUM/2011 (A.Y. 2006-07) CHANDMAL K. SHAH VS. ITO 2. THE APPEAL RAISES AS MANY AS NINE GROUNDS OF APP EAL, WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST GROUND IMPUGNS THE CONFIRMATION OF THE ADDITION IN RESPECT OF CREDITS IN THE SUM OF RS.33,96,131/- U/S.68 OF THE ACT AS U NEXPLAINED CREDITS. TOWARD VERIFYING THE DISCLOSURE OF PURCHASES AND SALES BY THE ASSESS EE, NOTICES U/S.133(6) OF THE ACT WERE ISSUED BY THE A.O. ON A TEST CHECK BASIS TO PARTIES , LISTED AS UNDER, AND WHICH WERE RECEIVED BACK FROM THE POSTAL AUTHORITIES AS UNSER VED: SR. NO. NAME OF THE PARTY 1. M/S. NAKODA PROCESS 2. M/S. RAHUL TEXTILES 3. SHRI BALRAM BASAK 4. SHRI MONTA MOHAN SHAH 5. M/S. MANIBHADRA UDHYOG 6. M/S. PANIGRAHI BROS. 7. M/S. SUMAN SAREE CENTRE 8. M/S. ORISSA SAREE CENTRE (BERHAMPUR) (DIFF. IN CONFIRMATIONS) IN VIEW THEREOF, THE CREDITS REFLECTED AS SALES IN THE ASSESSEES ACCOUNTS WERE ASSESSED AS INCOME U/S.68 ON ACCOUNT OF BEING UNEXP LAINED AS TO THE NATURE AND SOURCE OF THE CREDIT. THE MATTER HAVING NOT BEEN CONFRONTED T O THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, THE LD. CIT(A) REMANDED THE MATTER BAC K TO THE FILE OF THE ASSESSING OFFICER (A.O.) VIDE HIS ORDER DATED 06.08.2010. THE FINDING S BY THE A.O. PER THE REMAND REPORT IN THE MATTER ARE REPRODUCED AT PARA 2.3 (PGS.3 AND 4) OF THE IMPUGNED ORDER. THE ASSESSEE HAVING CLEARLY FAILED TO FURNISH ANY DIRECT EVIDENC E IN RESPECT OF THE SALES FROM THE BUYERS IN THE REMAND PROCEEDINGS, THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE SALE TRANSACTIONS AND, ACCORDINGLY, THE ADDITION STOOD C ONFIRMED. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3.1 BEFORE US, THE LD. AR WOULD TAKE US THROUGH THE RELEVANT EVIDENCES FILED BY THE ASSESSEE IN SUPPORT OF THE RELEVANT TRANSACTIONS AS REFLECTED PER ITS ACCOUNTS. TAKING EXAMPLE OF ONE OF THE CUSTOMERS, M/S. RAHUL TEXTILE , GUWAHATI (ASSAM), THE CONFIRMATORY LETTER AND STATEMENT OF ACCOUNT OF WHI CH APPEARS AT PGS.35& 36 OF THE 3 ITA NO. 355/MUM/2011 (A.Y. 2006-07) CHANDMAL K. SHAH VS. ITO ASSESSEES PAPER-BOOK (PB). THE LD. AR HAS DOUBTED THE SALE ON THE BASIS THAT THE ASSESSEE HAS DRAWN NUMBER OF BILLS, VIZ. BILL NOS. 922, 923, 924, 926 & 927, FOR THE SAME DATE, I.E. 13.10.2005, AND FOR THE SAME AMOUNT, I.E ., 644558. EVEN THE LORRY RECEIPT (LR) NO. FOR THE SAID BILLS IS THE SAME, I.E., 24940. HOW COULD THAT, HE ASSEVERATED, BE A REASON FOR DOUBTING THE SALES ? EVEN SO, IT IS FOR THE REVENUE TO, HAVING ENTERTA INED DOUBT IN THE MATTER, TO PROBE THE MATTER FURTHER, LEADING TO DEF INITE FINDINGS, AND COULD NOT INVOKE SECTION 68, MAKING AN ADDITION IN RESPECT THEREOF, ON THE BASIS OF A MERE DOUBT. THE SECOND OBJECTION, AGAIN WITH REFERENCE TO THE SAME BUYER, IS THAT WHILE THE ASSESSEE CLAIMS TO HAVE NO DIRECT INTERFACE WITH TH E BUYER; THE GOODS BEING SUPPLIED THROUGH THE AGENCY OF INTERMEDIARIES, THE BILL (AT PB PG.73) SHOWS THE SALES TO BE DIRECT. THIS INFERENCE, AGAIN NOT CONFRONTED TO THE ASSESSE E BY THE A.O., IS INCORRECT INASMUCH AS THE WORD DIRECT IN THE INVOICE, AS EVIDENT THERE- FROM, IS IN RESPECT OF THE DOCUMENTS, BEING WRITTEN AGAINST THE COLUMN STATING DOCUMENTS THROUGH. AS SUCH, IT IS THE DOCUMENTS THAT HAVE BEEN SENT DIRECTLY TO THE BUYER , WHILE THE AGENTS NAME, I.E., M/S. BHAVNA TEX AGENCY, CLEARLY APPEARS AGAINST THE COLU MN QUA THE AGENTS NAME IN THE INVOICE. THE MATTER IS EVEN OTHERWISE PATENT, AND T HE FACTS HAVE BEEN LOOKED AT IN A MYOPIC MANNER BY THE AUTHORITIES BELOW. AS REGARDS LACK OF DIRECT EVIDENCES, WHICH HAS BEEN STATED BY THE LD. CIT(A) AS THE REASON FOR CON FIRMING THE ADDITION, HE WOULD TAKE US TO PGS.43-44 OF THE ASSESSEES PAPER-BOOK, BEING TH E DECLARATION FILED WITH THE INSURER COMPANY IN RESPECT OF THE TRANSIT INSURANCES POLICY TAKEN BY IT. THE RELEVANT BILLS, I.E., OF M/S. RAHUL TEXTILES, ALSO FIND SPECIFICATION THERE- UNDER. IN FACT, THE ENTIRE SET OF EVIDENCES IN RESPECT OF THE IMPUGNED TRANSACTIONS, AND WHICH STAND NOT ADVERSELY COMMENTED UPON BY EITHER OF THE AUTHORITIES BELOW, STANDS COMPILED AT PGS.31-87 OF THE PAPER-BOOK. ON BEING QUESTIONED WITH REFERENCE TO A NY OTHER DIRECT EVIDENCE IN RESPECT OF THE SALES INVOLVING THE TRANSFER OF GOODS FROM PALI -MARWAR, RAJASTHAN, THE PLACE OF THE ASSESSEES WORKS, TO A NORTH-EASTERN STATE AS ASSAM , ACROSS SEVERAL STATES, VIZ. SALES-TAX, FREIGHT, ETC., IT WAS EXPLAINED BY THE LD. AR THAT THE ASSESSEES PRODUCTS, I.E., PRINTED DYED CLOTH, DOES NOT ATTRACT ANY SALES-TAX, SO THAT NO D ECLARATION IN ITS RESPECT ACCOMPANIES THE SALE DOCUMENTS. AS REGARDS FREIGHT, THE SAME STANDS DEBITED IN THE ASSESSEES ACCOUNTS, 4 ITA NO. 355/MUM/2011 (A.Y. 2006-07) CHANDMAL K. SHAH VS. ITO AND FOR WHICH HE WOULD TAKE US THROUGH THE ASSESSEE S ANNUAL ACCOUNTS FOR THE RELEVANT YEAR PLACED AT PGS.9-10 OF THE PAPER-BOOK, WITH THE MANUFACTURING ACCOUNT BEARING THE DEBIT FOR RS.3,23,569/- QUA TRANSPORT EXPENSES (PB PG.9). ON ANOTHER QUERY BY THE BENCH WITH REGARD TO THERE BEING NO CLAIM OF COMMISSION, EVEN AS THE ASSESSEE CLAIMS THAT THE SALES ENTAIL BROKERS, HE WOULD REFER TO THE BROKERA GE EXPENDITURE, INCURRED AND CLAIMED IN THE SUM OF RS.3,45,406/-, PER THE ASSESSEES PROFIT AND LOSS ACCOUNT (PB PG.10). 3.2 THE LD. DR WOULD, ON THE OTHER HAND, RELY ON TH E ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE ARE AFRAID TO SAY THAT WE ARE AT A COMPLETE LOSS TO UNDERSTAND TH E REVENUES CASE. THE CREDITS BEING CONSIDERED AS UNEXPLAINED HAVE ALREADY BEEN ACCOUNT ED FOR AS A REVENUE RECEIPT IN THE ASSESSEES ACCOUNTS. THAT IS, THE SAME STANDS ALREA DY ACCOUNTED FOR AS INCOME. HOW COULD THEN, EVEN ASSUMING THE INABILITY OF THE ASSESSEE T O EXHIBIT DIRECT EVIDENCE OF SALE, OR OF THE PERSON ON WHOM THE BILL IS RAISED AS BEING THE BUYER OF GOODS (AS STATED IN THE RELEVANT SALE BILLS), COULD THE SAME BE AGAIN ASSES SED AS INCOME ? THE SAME HAVING BEEN ALREADY REFLECTED AS INCOME, ALL THAT THE REVENUE, UPON MAKING OUT A CASE IN ITS RESPECT, IF AT ALL, COULD HOLD IS THAT NO GOODS HAVING BEEN ACT UALLY SOLD, DISALLOW THE CORRESPONDING PURCHASES, WHICH IS NOT THE CASE. RATHER, THE ONLY BASIS FOR THE IMPUGNED ADDITION THAT WE OBSERVE IS THE ABSENCE OF DIRECT EVIDENCE FURNISH ED IN SUPPORT OF THE SALES. IN THIS REGARD, THE ASSESSEE IN FACT MAINTAINING THE SAME S ET OF ACCOUNTS AND RECORDS, FOLLOWING THE SAME BUSINESS PRACTICES, FOR ITS ENTIRE SALES, WHICH AGGREGATE TO RS.2.49 CRORES FOR THE CURRENT YEAR, HOW WE WONDER COULD THE REVENUE IMPUG N ONLY A PART OF THE SALES. IT IS NOT THE REVENUES CASE THAT THE ASSESSEE HAS EITHER FOL LOWED A DIFFERENT PRACTICE OR NOT MAINTAINED THE RECORDS, I.E., TO ITS SATISFACTION, ESTABLISHING THE GENUINENESS OF THE SALE TRANSACTIONS ONLY IN RESPECT OF THE TRANSACTIONS BE ING ASSAILED BY IT. FURTHER ON, WE FIND LITTLE MERIT IN THE REVENUES CLAIM OF THE TRANSACT IONS BEING NOT SUITABLY EVIDENCED. AS CLARIFIED, THE SALES ARE MADE, AS IS A PRACTICE IN THE TRADE, THROUGH THE AGENTS, WHO NOT ONLY BOOK THE ORDERS BUT ARE ALSO RESPONSIBLE FOR THE CO LLECTION OF THE PAYMENTS FROM THE CUSTOMERS. THERE IS NOTHING ON RECORD WHICH DISCRED ITS THE ASSESSEES SAID CLAIM, FOR THE 5 ITA NO. 355/MUM/2011 (A.Y. 2006-07) CHANDMAL K. SHAH VS. ITO REVENUE TO DRAW ANY ADVERSE INFERENCE IN THE MATTER . THE CONFIRMATION FROM THE BROKERS HAS BEEN OBTAINED AND PLACED ON RECORD. THE TRANSAC TIONS ARE FURTHER SUPPORTED BY DIRECT EVIDENCES IN THE FORM OF INCURRING OF EXPENDITURE O N FREIGHT AND DECLARATION TO THE INSURANCE COMPANY/S IN RESPECT OF THE OPEN TRANSIT INSURANCE PURCHASED BY THE ASSESSEE. WE, THEREFORE, FIND NO MERIT IN THE REVENUES CASE AND, ACCORDINGLY, DIRECT THE DELETION OF THE IMPUGNED ADDITION, ALLOWING THE ASSESSEES GROU ND NO.1. 5.1 THE ASSESSEES SECOND GROUND IS IN RESPECT OF T HE PURCHASE TRANSACTIONS LISTED SUPRA QUA PARTIES TO WHOM NOTICES U/S.133(6) REMAINED UN-RESP ONDED. THE LD. AR CLAIMING THE CASES OF BOTH THE PARTIES QUA THE SAME BEING IDENTICAL, I.E., AS IN RESPECT OF T HE SALE TRANSACTIONS, IT WAS POINTED OUT BY THE BENCH DURIN G HEARING AS HOW COULD THAT BE? THIS IS FOR THE SIMPLE REASON THAT WHILE THE BUYERS WERE LO CATED IN THE NORTH EAST STATES, THE PURCHASES HAVE BEEN MADE ONLY FROM THE LOCAL PARTIE S, SO THAT THE ASSESSEE COULD NOT HAVE CLAIM TO HAVE NO INTERACTION OR BEING UNKNOWN TO TH E PURCHASERS. ON THIS, IT WAS EXPLAINED BY THE LD. AR THAT, IN FACT, WHAT IS BEIN G STATED BY THE REVENUE AS PURCHASES, ARE IN FACT PROCESSING CHARGES, WHICH STAND INCUR RED AND CLAIMED BY IT IN THE SUM OF RS.83.87 LACS (PB PG. 9). HE WOULD THEN TAKE US TO THE ENTIRE SET OF DOCUMENTS SPREAD OVER PGS.93 TO 115 OF THE ASSESSEES PAPER-BOOK. TH E LEDGER ACCOUNTS OF THE PARTIES UNDER REFERENCE HAVE BEEN DULY CONFIRMED BY THEM, ALSO ST ATING THEIR ADDRESSES AND PAN (PB PGS.93-95). THE PAYMENTS TO THEM HAVE BEEN BY ACCOU NT PAYEE CHEQUES, SO THAT COMPLETE IDENTIFICATION IN THE MATTER IS POSSIBLE AND DEMONS TRATED. IN FACT, THE ASSESSEE OBTAINS THE SIGNATURE OF THE PAYEE AT THE TIME OF THE DELIVERY OF THE CHEQUE TO THE CREDITOR, AND FOR WHICH HE WOULD TAKE US TO PGS.107 TO 115 OF THE PAP ER-BOOK. 5.2 THE LD. DR, ON THE OTHER HAND, AGAIN RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. THE BASIS FOR THE DISALLOWANCE, SINCE CONFIRMED, FOR THIS DISALLOWANCE, PER THE IMPUGNED ORDER, IS THE ABSENCE OF DIRECT EVIDENCE C OUPLED WITH THE FINDINGS AS PER THE REMAND REPORT. IT IS THIS PERHAPS THAT LED THE LD. AR TO STATE, WHILE ARGUING THE ASSESSEES CASE, OF THE FACTS AND CIRCUMSTANCES OF THIS DISALL OWANCE BEING IDENTICAL TO THAT IN RESPECT 6 ITA NO. 355/MUM/2011 (A.Y. 2006-07) CHANDMAL K. SHAH VS. ITO OF THE SALES. THE RELEVANT PART OF THE REMAND REPOR T STANDS REPORTED AT PARA 3.2 OF THE IMPUGNED ORDER; THE DISALLOWANCE BEING IN RESPECT O F TWO PARTIES. THE LD. AR DURING THE COURSE OF THE HEARING HAS TAKEN US THROUGH THE RELE VANT DOCUMENTS IN RESPECT OF BOTH THESE PARTIES, AND TOWARD WHICH WE OBSERVE NO ADVERSE COM MENT. IN FACT, THE ADDITION HAS BEEN MADE U/S.69C, EVEN AS THE RELEVANT EXPENDITURE STAN DS DULY DEBITED IN THE ASSESSEES ACCOUNTS. WE ARE COMPLETELY UNABLE TO FATHOM ANY SU BSTANCE IN THE REVENUES CASE IN VIEW OF THE SUBSTANTIAL EVIDENCE LED BY THE ASSESSE E DURING THE REMAND PROCEEDINGS, AND ON WHICH, AS OBSERVED EARLIER, NO ADVERSE OBSERVATI ONS OR FINDINGS HAVE BEEN MADE BY THE AUTHORITIES BELOW. THE REVENUES CASE IS COMPLETELY WITHOUT MERIT, AND WE ACCORDINGLY HAVE NO HESITATION IN DELETING THE IMPUGNED DISALLO WANCE. WE DECIDE ACCORDINGLY. 7. THE THIRD GROUND BY THE ASSESSEE AGITATES THE DI SALLOWANCE OF INTEREST EXPENDITURE AT RS.4,69,281/-. THE SAME STOOD DISALLOWED BY THE A.O. IN VIEW OF THE SAME HAVING BEEN PAID TO THE FAMILY MEMBERS, INVOKING SECTION 40A(2) (A). FURTHER STATING THAT IN THE ABSENCE OF THE DETAILS FILED, THE LOAN UTILIZATION IS TREATED AS FOR NON BUSINESS PURPOSES. THE SAME STOOD CONFIRMED ON THE SAME BASIS, SO THAT THE ASSESSEE IS IN SECOND APPEAL. 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. EVEN AS CONTENDED BY THE LD. AR DURING HEARING, EVEN TO GATHER THE RE ASONS INFORMING THE DECISION OF THE REVENUE IS A DIFFICULT EXERCISE, GIVEN THE AMBIGUIT Y ATTENDING THEIR ORDERS AND THE CRYPTIC LANGUAGE USED. IF THE RELEVANT DETAILS ARE NOT FILE D, HOW COULD IT BE ASCERTAINED THAT THE INTEREST TO THAT EXTENT OUT OF THE TOTAL INTEREST O F RS.10,50,719/- IS IN RESPECT OF LOANS EXTENDED BY THE FAMILY MEMBERS FALLING U/S.40A(2)(B ) ? IN FACT, THE RELEVANT DETAILS STAND REPRODUCED AT PARA 4.2 OF THE IMPUGNED ORDER. AS RE GARDS THE CLAIM OF NON UTILIZATION OF THE LOANS FOR BUSINESS PURPOSES, WHICH FORMS THE BA SIS FOR THE SAME BEING INFERRED AS FOR NON BUSINESS PURPOSES, THE LD. AR WOULD TAKE US TO THE ASSESSEES BALANCE-SHEET, PLACED AT PG.11 OF THE PAPER-BOOK. THE ENTIRE SOURCES OF CAPI TAL, INCLUDING BY WAY OF BORROWINGS, IS CLEARLY INVESTED IN BUSINESS ASSETS, THE DETAIL OF WHICH IS STATED ON THE FACE OF THE BALANCE- SHEET ITSELF, WITH THE FURTHER DETAILS BEING LISTED IN THE ANNEXURES THERETO. WE ARE COMPLETELY UNABLE TO UNDERSTAND THE BASIS OF THE RE VENUES CASE; THERE BEING NOTHING ON 7 ITA NO. 355/MUM/2011 (A.Y. 2006-07) CHANDMAL K. SHAH VS. ITO RECORD TO SUGGEST THAT THE LOANS FROM THE RELATIVES , WHICH ARE AT RS.105.94 LACS (AS AT THE YEAR-END, OF WHICH FOR RS.67.23 LACS ARE FROM THOSE SPECIFIED U/S. 40A(2)(B)), HAVE BEEN UTILIZED FOR NON-BUSINESS PURPOSES. THE DISALLOWANC E IS WITHOUT MERIT, SO THAT WE DIRECT ITS DELETION. WE DECIDE ACCORDINGLY. 9. THE FOURTH GROUND IS IN RESPECT OF DISALLOWANCE OF PROCESSING CHARGES AT RS.4,99,665/-. THIS DISALLOWANCE IS AGAIN SHORN OF ALL CLARITY OF PURPOSE. THE ASSESSEES CLAIM QUA THIS EXPENDITURE FOR THE YEAR, AT RS.83.88 LACS, W AS FOUND TO BE OUTSTANDING AS AT THE YEAR-END AT RS.49,96,651/-. THE INDIVIDUAL L EDGER ACCOUNTS OF THE PROCESSORS HAVING BEEN OSTENSIBLY NOT FILED, 10% THEREOF, WORKING TO THE IMPUGNED AMOUNT STOOD DISALLOWED BY THE A.O. THE SAME FOUND FAVOUR WITH T HE LD. CIT(A) ON THE BASIS OF PROCESSING CHARGES IN RESPECT OF TWO PARTIES, I.E., MANIBHADRA UDHYOG AND NAKODA PROCESSES, HAVING BEEN HELD BY HIM AS BEING UNPROVE D. WE ARE AT LOSS OF WORDS TO EXPRESS THE MANNER IN WHICH THE REVENUE AUTHORITIES HAVE PROCEEDED TO FRAME THE ASSESSMENT AND REVIEW THE SAME IN APPELLATE PROCEED INGS. FIRSTLY, WE HAVE ALREADY DISCUSSED THE COMPLETE SUBMISSION OF ACCOUNTS IN RE SPECT OF THE TWO PARTIES AFORESAID, CLAIM IN RESPECT OF WHICH STOOD IMPUGNED BY THE REV ENUE, WHILE DISCUSSING THE ASSESSEES GROUND NO.2 AT PARAS 5.1 TO 6 ABOVE. HOW EVER, EVEN IF THAT BE SO, DISALLOWANCE TO THAT EXTENT HAVING BEEN ALREADY CONFIRMED BY THE FIRST APPELLATE AUTHORITY, NO FURTHER DISALLOWANCE QUA THE BALANCE OUTSTANDING IN THE ACCOUNT OF THE RELE VANT PARTIES WOULD ARISE. FURTHER ON, WHAT IS THE BASIS OF THE DISALLO WANCE, WHICH IS BASED ON THE AMOUNT OUTSTANDING, AT 10% THEREOF. IF THE REVENUE IS OF T HE VIEW THAT THE SAME IS NOT AN ALLOWABLE EXPENDITURE, THE ENTIRE OF IT WOULD STAND TO BE DISALLOWED. IN SUM, WE FIND THE DISALLOWANCE AS WHOLLY WITHOUT MERIT, AND DIRECT IT S DELETION. WE DECIDE ACCORDINGLY, ALLOWING THE ASSESSEES GROUND NO.4. 10. THE DISALLOWANCES EFFECTED BEING ASSAILED BY TH E ASSESSEE PER GROUND NOS. 5 & 6 ARE EQUALLY INCOMPREHENSIBLE; THERE BEING NO SEMBLA NCE OR EVEN PRETENCE OF REASONABILITY, BY NOT EVEN STATING THE REASON FOR W HICH THE DISALLOWANCE/S STANDS MADE, WHICH IS IN RESPECT OF TELEPHONE AND TRAVELLING EXP ENSES AT 25% OF THE AMOUNT INCURRED IN 8 ITA NO. 355/MUM/2011 (A.Y. 2006-07) CHANDMAL K. SHAH VS. ITO THEIR RESPECT, I.E., AT RS.75,426/- AND RS.65,834/- , ON THE TWO EXPENSES RESPECTIVELY. ALL THE AO SAYS IS THAT THE SAME HAVING BEEN INCURRED, 1/4 TH THEREOF IS ADDED. SURPRISINGLY, THIS PASSES THE APPELLATE MUSTER; THE APPELLATE ORD ER BEING EQUALLY UNINFORMED, EVEN AS HE RESTRICTED THE DISALLOWANCE TO 20%, WITHOUT STATING EITHER THE REASON/S FOR DISALLOWANCE IN THE FIRST PLACE, OR ITS RESTRICTION BY HIM. THE LD. AR WOULD FIRST TAKE US TO THE REQUISITION BY THE A.O., SO AS TO SHOW THAT DETAILS IN RESPECT OF THE RELEVANT EXPENSES WERE NOT CALLED FOR DURING THE ASSESSMENT PROCEEDINGS. FURTHER, THA T THE RELEVANT DETAILS AS WELL AS THE EVIDENCES IN RESPECT OF THE TWO EXPENSES STAND FILE D AT PGS.184-189 (TELEPHONE EXPENSES) AND PGS.190-192 (TRAVELLING EXPENSES), I.E., BEFORE THE A.O. DURING THE REMAND PROCEEDINGS. WE HAVE ALREADY EXPRESSED OUR ANGUISH AT THE MANNER IN WHICH THE DISALLOWANCE/S HAS BEEN AFFECTED, BEING SHORN OF AL L THE REASONS. THE DISALLOWANCES ARE, THEREFORE, DIRECTED FOR DELETION. WE DECIDE ACCORDI NGLY, ALLOWING THE ASSESSEES RELEVANT GROUNDS. 11. GROUND NO.7 IS IN RESPECT OF DISALLOWANCE OF BR OKERAGE EXPENSES, CLAIMED IN THE SUM OF RS.3,45,406/-, WHICH STOOD DISALLOWED AT 10% BY THE A.O., WITH THE LD. CIT(A) RESTRICTING IT TO 5%. THE RELEVANT DETAILS HAVE BEE N FILED BEFORE THE A.O. IN THE REMAND PROCEEDINGS (PB PGS.193-211), QUA WHICH NO ADVERSE OBSERVATION OR FINDING STANDS ISSUED BY THE A.O. WE, THEREFORE FIND NO MERIT IN T HE DISALLOWANCE; THE IMPUGNED ORDER BEING EQUALLY SANS ANY REASON FOR SUSTAINING THE DISALLOWANCE IN PART . WE DECIDE ACCORDINGLY, DELETING THE SAME. 12. VIDE GROUND NO. 8, THE ASSESSEE IMPUGNS, LIKEWI SE, THE DISALLOWANCE, RESTRICTED TO 5% OF THE TOTAL TRANSPORT EXPENDITURE OF RS.3,23,56 9/-, I.E., AS AGAINST 10% BY THE A.O. BOTH THE DISALLOWANCE AS WELL AS ITS PART SUSTENANC E BY THE FIRST APPELLATE AUTHORITY, DO NOT BEAR ANY SEMBLANCE OF REASONABILITY, BEING SANS ANY REASON FOR THE SAME. THE DETAILS AND EVIDENCES IN RESPECT OF THE RELEVANT EXPENDITURE ST AND FURNISHED BY THE ASSESSEE DURING THE REMAND PROCEEDINGS, PLACED AT PGS.212-214 OF IT S PAPER-BOOK, AND TOWARD WHICH NO ADVERSE OBSERVATION OR FINDING STANDS ISSUED AT ANY STAGE. UNDER THE CIRCUMSTANCES, WE DELETE THE DISALLOWANCE, FINDING IT AS WITHOUT MERI T. WE DECIDE ACCORDINGLY. 9 ITA NO. 355/MUM/2011 (A.Y. 2006-07) CHANDMAL K. SHAH VS. ITO 13. THE NINTH AND THE LAST GROUND OF THE ASSESSEES APPEAL IS IN RESPECT OF DISALLOWANCE QUA DISCOUNT AND REBATE EXPENSES INCURRED AND CLAIMED AT RS.7,57,753/-, RESTRICTED TO 5% BY THE LD. CIT(A), AS AGAINST 10% BY THE A.O., MADE OSTENSIBLY FOR WANT OF DETAILS. THE RELEVANT DETAILS AND EVIDENCES FURNISHED BY THE ASS ESSEE DURING THE REMAND PROCEEDINGS ARE PLACED AT PGS.215-225 OF THE PAPER-BOOK. IN FAC T, THERE IS NO QUESTION OF THE RELEVANT DETAILS BEING NOT FURNISHED. EVEN IF THE ASSESSING AUTHORITY HAD ONLY BOTHERED TO EXAMINE THE ACCOUNTS OF THE BUYERS, IT WOULD STAND CLARIFIE D THAT THE SAID CHARGES REPRESENT THE SHORT FALL IN THE PAYMENT RECEIVED BY THE ASSESSEE THERE-FROM, AND WHICH, THEREFORE, STANDS ACCOUNTED FOR IN THEIR RESPECTIVE ACCOUNTS, SO AS T O BALANCE THE SAME. IT WAS EXPLAINED BY THE LD. AR THAT THE PAYMENTS IN THE ASSESSEES TRAD E GENERALLY BEAR A CREDIT PERIOD OF AROUND THREE MONTHS, SO THAT THE PAYMENTS, WHERE MA DE EARLIER THERETO, ARE AT A LESSER AMOUNT, WHILE EVEN IF MADE WITHIN THE SAID PERIOD A RE DEDUCTED TO AS MUCH AS 5% BY THE BUYERS. WE FIND THE TOTAL EXPENDITURE TO AMOUNT TO 3% OF THE TOTAL SALES. IN FACT, NO EXERCISE IN THE MATTER HAVING BEEN DONE BY THE REVE NUE, THE DISALLOWANCE MERITS DELETION AT THE VERY THRESHOLD. WE, ACCORDINGLY, HAVE NO HES ITATION IN DIRECTING THE SAME. WE DECIDE ACCORDINGLY. 14. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . 5 16 ' (51 0 !71 0 1 89 ORDER PRONOUNCED IN THE OPEN COURT ON JULY 26, 2013 4 0 3) :'6 9 26 , 2013 0 ? SD/- SD/- (VIJAY PAL RAO) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; :' DATED : 26.07.2013 !.'. ./ ROSHANI , SR. PS 10 ITA NO. 355/MUM/2011 (A.Y. 2006-07) CHANDMAL K. SHAH VS. ITO 4 0 -1' @')1 4 0 -1' @')1 4 0 -1' @')1 4 0 -1' @')1/ COPY OF THE ORDER FORWARDED TO : 1. *, / THE APPELLANT 2. -.*, / THE RESPONDENT 3. A ( ) / THE CIT(A) 4. A / CIT CONCERNED 5. '!D? -1' , , / DR, ITAT, MUMBAI 6. ?E( F / GUARD FILE 4' 4' 4' 4' / BY ORDER, G GG G/ // / 8 8 8 8 (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI