M/S. EVEREST GEMS ( NOW ROSY BLUE INDIA P. LTD, Mumbai V. THE. ACIT RG16(3), Mumbai

ITA 3969/MUM/2004

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8246 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 08-11-2012
• Assessment Year: misc
• Appeal Filed On: 17-05-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIM KUMAR MODI
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Opportunity of being heard; Commercial expediency
• Section: 143(3); 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND , SHRI RAJENDRA, ACCOUNTANT MEMBER I.TA. NO. 3969/MUM/2004 ASSESSMENT YEAR 1987-88 EVEREST GEMS (NOW CONVERTED INTO ROSY BLUE INDIA PVT. LTD), MEHTA MAHAL, 7 TH FLOOR, 15 MATHEW ROAD, OPERA HOUSE, MUMBAI 400 004. PAN: AAAFE 0372 P VS. ASST. COMMISSIONER OF INCOME-TAX, RANGE 16(3), MATRUMANDIR, MUMBAI. ( / APPELLANT ) ( ! / RESPONDENT ) ' / APPELLANT BY : SHRI P.J. PARDIWALLA & SHRI NITESH JOSHI ! # ' /RESPONDENT BY : SHRI ASHIM KUMAR MODI $ # %& / DATE OF HEARING : 08-11-2012 '() # %& / DATE OF PRONOUNCEMENT : 16-11-2012 * / O R D E R PER RAJENDRA, AM THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER DT. 20-02-2004 PASSED BY THE CIT(A)-XVII, MUMBAI. FOLLOWING GROUNDS OF APPEAL H AVE BEEN RAISED BY THE APPELLANT. 1.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER DISALLOWING RS. 176,388/- OUT OF FINANCE BROKERAGE PAID. IT IS SUBMITTED THAT THE HONBLE INCOME TAX APPELLA TE TRIBUNAL VIDE ORDER REF NO. 8267/M/90 DATED 25TH OCTOBER 1999 HAS SET ASIDE THE MATTER TO THE ASSESS ING OFFICER WITH SPECIFIC OBSERVATIONS. THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) AND THE LEARNED ASSESSING I.TA. NO. 3969/MUM/2004 EVEREST GEMS (NOW CONVERTED INTO ROSY BLUE INDIA PVT. LTD), 2 OFFICER OUGHT TO HAVE DECIDED IN ACCORDANCE WITH TH E ORDER OF THE HONBLE TRIBUNAL. THE LEARNED ASSESSING OFFICER AND THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) HAD FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THA T THE APPELLANT HAD INCURRED THE SAID EXPENDITURE WHOLLY AND EXCLUSIVE FOR THE PURPOSES O F ITS BUSINESS AND THEREFORE THE SAME IS OUGHT TO BE ALLOWED AS DEDUCTION IN COMPUTING THE T OTAL INCOME OF THE APPELLANT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER DISALLOWING RS. 74,60,000/- BEING FINES PAID FOR CLEARING THE GOODS FROM THE CUSTOMS. IT IS SUBMITTED THAT THE HONBLE INCOME TAX APPELLA TE TRIBUNAL VIDE ORDER REF NO. 8267/M/90 DATED 25TH OCTOBER 1999 HAS SET ASIDE THE MATTER TO THE ASSESSING OFFICER WITH SPECIFIC OBSERVATIONS. THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) AND THE LEARNED ASSESSING OFFICER OUGHT TO HAVE DECIDED ON THE BASIS OF THE O RDER OF THE HONBLE TRIBUNAL. THE LEARNED ASSESSING OFFICER AND THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) HAD FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE. WITHOUT PREJUDICE TO THE ABOVE; A) IT IS SUBMITTED THAT THE APPELLANT HAD INCURRED THE SAID EXPENDITURE IN THE COURSE OF ITS BUSINESS AND IT WAS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AND THEREFORE THE SAME IS OUGHT TO BE ALLOWED AS DEDUCT ION IN COMPUTING THE TOTAL INCOME OF THE APPELLANT. B) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FURTHER ERRED IN HOLDING THAT REDEMPTION FINE PAID BY THE APPELLANT WAS NOTHING B UT A PENALTY FOR IMPORTING GOODS IN VIOLATION OF THE IMPORT LICENSES. C) THE LEARNED ASSESSING OFFICER AND THE LEARNED CO MMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPRECIATE THE CIRCUMSTANCES IN WHICH THE APPELLANT WAS MADE TO PAY THE FINE. THE FINE WAS PAID OUT OF COMMERCIAL EXPEDIENCY IN ORDER TO AVOID CONFISCATION OF THE GOODS. THE EXPENDITURE, THEREFORE, WAS INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSES OF BUSINESS OF THE APPELLANT. 3. THE LEARNED ASSESSING OFFICER ERRED IN GIVING RE LIEF OF RS. 885/- ONLY OUT OF STAFF WELFARE EXPENSES INSTEAD OF RS. 2,135/-. IT IS SUBMITTED THAT THE HONBLE INCOME TAX APPELLA TE TRIBUNAL VIDE ORDER NO. 8267/M/90 DATED 25 TH OCTOBER 1999 HAD DIRECTED TO TREAT ONLY RS. 2,135/- (25% OF RS. 8359/-)OUT OF STAFF WELFARE EXPENSES AS ENTERTAINMENT EXPENSES. THEREF ORE, AFTER CONSIDERING THE PROVISIONS OF SECTION 37(2A) OF THE ACT, NO DISALLOWANCE IS CALLE D FOR. THE LEARNED ASSESSING OFFICER OUGHT TO HAVE DELETED THE ENTIRE DISALLOWANCE OF RS. 2,13 5/-. IT IS FURTHER SUBMITTED THAT THE LEARNED COMMISSIO NER OF INCOME-TAX (APPEALS) OUGHT TO HAVE DELETED THE ADDITION MADE. 4. THE LEARNED ASSESSING OFFICER ERRED IN THE ADDIN G A SUM OF RS. 3,12,678/- TO THE APPELLANTS INCOME, BEING INTEREST ON UNSECURED LOANS TREATED A S NON-GENUINE IN EARLIER YEARS. IT IS SUBMITTED THAT THE SAID ADDITION AS MADE IN O RIGINAL ASSESSMENT, WAS DELETED BY THE FIRST APPELLATE AUTHORITY. THE HONBLE INCOME TAX APPELLATE TRIBUNAL WHILE ADJUDICATING THE DEPARTMENTAL APPEAL NO. ITA 8593/BOM/90 VIDE IT S ORDER DATED 25 TH OCTOBER 1999 HAD I.TA. NO. 3969/MUM/2004 EVEREST GEMS (NOW CONVERTED INTO ROSY BLUE INDIA PVT. LTD), 3 DIRECTED TO FOLLOW THE ORDERS FOR EARLIER YEARS. IT IS FURTHER SUBMITTED THAT THE ENTIRE LOANS, ON THE BASIS OF WHICH ADDITIONS ARE MADE, WERE HELD GE NUINE AND THEREFORE THERE IS NO REASON FOR THE LEANED ASSESSING OFFICER TO MAKE ADDITIONS/DISA LLOWANCE OF INTEREST PAID ON SUCH LOANS. IT IS FURTHER SUBMITTED THAT THE LEARNED COMMISSION ER OF INCOME-TAX (APPEALS) OUGHT TO HAVE DELETED THE ADDITION MADE. 5. THE LEARNED ASSESSING OFFICER ERRED IN ADDING A SUM OF RS. 1,10,960/- OUT OF MOTOR CAR EXPENSES INSTEAD OF CORRECT AMOUNT BEING RS. 42,259 /-. IT IS SUBMITTED THAT THE ORIGINAL DISALLOWANCE OF R S. 1,10,960/- WAS REDUCED TO RS.68,701/- BY THE FIRST APPELLATE AUTHORITY. THE HONBLE INCOME TAX APPELLATE TRIBUNAL WHILE ADJUDICATING THE DEPARTMENTAL APPEAL NO. ITA 8593/B OM/90 VIDE ITS ORDER DATED 25TH OCTOBER 1999 HAS RESTORED THE ORIGINAL DISALLOWANCE OF RS. 1,10,960/-. THE LEARNED ASSESSING OFFICER WHILE GIVING EFFECT TO THE ORDER OF THE ITA T OUGHT TO HAVE ADDED ONLY RS. 42,259/- (RS. 1,10,960/- MINUS RS. 68.70 1/-). IT IS FURTHER SUBMITTED THAT THE LEARNED COMMISSION ER OF INCOME-TAX (APPEALS) OUGHT TO HAVE DELETED THE ADDITION MADE. 6. THE APPELLANT RESERVES THE RIGHT TO ADD TO, ALTE R OR AMEND THE GROUNDS OF APPEAL. 2. IN THE CASE OF ASSESSEE-FIRM (NOW PRIVATE LTD., COM PANY), ORIGINAL ASSESSMENT WAS COMPLETED ON 28-03-1990 U/S. 143(3) OF THE INCO ME TAX ACT, 1961 (ACT) BY THE ASSESSING OFFICER (AO) DETERMINING TOTAL INCOME AT RS. 1.24 CRORES. AGGRIEVED BY THE ADDITIONS MADE BY THE AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA), WHO VIDE HIS ORDER DT. 31-08-1990, UPHELD/DELETED THE ADDITIONS MADE BY THE AO. ASSESSEE AS WELL AS THE AO FILED F URTHER APPEALS BEFORE THE ITAT. WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE, TR IBUNAL SET ASIDE THE ASSESSMENT ORDERS WITH REGARD TO DISALLOWANCE OF FINANCE BROKE RAGE (1.76 LAKHS) AND DIS-ALLOWANCE OF PENALTY IMPOSED BY CUSTOMS DEPARTM ENT AT RS. 74.6 LAKHS. 2.1 IN THE RE-ASSESSMENT PROCEEDINGS, AO ASKED THE ASSE SSEE TO EXPLAIN WHY THE FINANCE BROKERAGE PAID BEYOND 18-12-2006; WHEN THER E WAS NO LIABILITY TO PAY ANY BROKERAGE BEYOND THAT PARTICULAR DATE AS PER AGREEM ENT; SHOULD BE DISALLOWED. HE DIRECTED THE ASSESSEE TO PRODUCE EVIDENCE TO SHOW W HETHER ASSESSEE CONVEYED HIS DECISION TO PAY THE ADDITIONAL BROKERAGE TO M/S. A. R. CORPORATION AND THE EVIDENCE OF ACTUAL PAYMENT IN THE SUBSEQUENT YEAR WITH REGARD T O PAYMENT OF BROKERAGE. THE ASSESSEE FILED FOLLOWING DETAILS/INFORMATION BEFORE THE AO. I) CONFIRMATION OF ACCOUNTS FROM M/S. A.R. CORPORATION FOR THE PERIOD ENDED ON 31-03-88. II) CONFIRMATION THAT M/S. A.R. CORPORATION HAD RE CEIVED BROKERAGE OF RS. 2,70,352/- ON 09-01-88. III) PHOTO COPY OF THE BANK STATEMENT FOR THE RELE VANT PERIOD CONFIRMING THE AFORESAID PAYMENT TO M/S. A.R. CORPORATION. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AO HELD THAT EXPLANATION OFFERED BY THE ASSESSEE WAS NOT ACCEPTABLE, THAT THE ASSESS EE-FIRM HAD ADVANCED SUBSTANTIAL AMOUNT OF LOAN TO M/S. PATEL BISCUITWALLA AND ASSOC IATES @ 30%, THAT ASSESSEE HAD GIVEN FINANCE BROKERAGE @ 0.5% TO M/S. A.R. CORPORA TION, THAT FINANCE BROKERAGE I.TA. NO. 3969/MUM/2004 EVEREST GEMS (NOW CONVERTED INTO ROSY BLUE INDIA PVT. LTD), 4 WAS TO BE PAID % P.M. FOR A PERIOD OF 9 MONTHS, THAT PERIOD HAD COME TO AND ON 18- 12-1986, THAT THE LOAN ADVANCED BY THE ASSESSEE WAS REMAINED OUTSTANDING AND THE ASSESSEE-FIRM HAD DEBITED FURTHER BROKERAGE OF RS. 2.70 LAKHS DURING THE YEAR ENDING ON MARCH 1987, THAT ASSESSEE WAS NOT A PROFESSIONAL FIRM OF MONEY LENDERS, THAT IT COULD NOT BE CONSIDERED COMMERCIALLY EXPEDIENT TO C ONTINUE TO MAKE PAYMENT TO A FINANCE BROKER WHERE IT WAS NOT NECESSARY. HE DISA LLOWED THE BROKERAGE AMOUNTING TO RS. 1.76 LAKHS. 2.2. IN THE APPELLATE PROCEEDINGS, FAA HELD THAT FINDING S GIVEN BY THE TRIBUNAL IN THE MATTER UNDER CONSIDERATION WERE IN THE NATURE O F OBSERVATIONS AND NOT DIRECTIONS, THAT THE FINANCE BROKERAGE IN THE NATURE OF COMMISS ION COULD BE ALLOWED AS A DEDUCTION U/S. 37 OF THE ACT, THAT THERE WAS NOTHIN G TO SHOW THAT THE BROKER OR AGENT HAD RENDERED ANY SERVICES AT ALL TO THE ASSESSEE, T HAT BURDEN WAS ON THE ASSESSEE TO PROVE THAT THE EXISTENCE OF THE AGREEMENT AND GENUI NENESS OF THE AGREEMENT, THAT ASSESSEE HAD FAILED TO PROVE THE JUSTIFICATION FOR PAYMENT MADE TO THE BROKER, THAT SERVICES OF THE BROKER WAS LIMITED TO THE PERIOD OF 9 MONTHS ENDING ON 18-12-1986, THAT THE APPELLANT HAD TAKEN ADDITIONAL LIABILITY O F MAKING THE BROKERAGE PAYMENT VOLUNTARILY BEYOND 18-12-1986, THAT M/S. A.R. CORPO RATION HAD NOT RENDERED ANY SERVICES FOR THE PERIOD BEYOND 18 TH DECEMBER, THAT PAYMENT MADE ON ACCOUNT OF FINANCE BROKERAGE OF RS. 1.76 LAKHS WAS FOR EXTRA C OMMERCIAL CONSIDERATION. FINALLY, HE CONFIRMED THE ORDER OF THE AO. 3. BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT AO DID NOT FOLLOW THE DIRECTIONS OF THE ITAT, THAT PAYMENT WAS MADE T O THE BROKER IN JANUARY 1988, THAT THE ASSESSEE-COMPANY WAS EARNING INTEREST @ 30%, TH AT BROKERAGE WAS PAID @ % P.M. ONLY, THAT IT WAS PRUDENT BUSINESS DECISION TO MAKE THE PAYMENTS FOR BROKERAGE AS THE DEAL WAS NEGOTIATED THROUGH THE BROKER, THAT THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS PURPOSES. HE REFERRED TO PAGE NOS. 56 AND 59 OF THE PAPER BOOK. DEPARTMENTAL REPRESENTATIVE (DR) R ELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE AO AND THE FAA HAVE NOT CARRIED OUT THE DIRECTIONS OF THE TRIBUNAL. VID E ITS ORDER DT. 25-10-1999, TRIBUNAL HAD OBSERVED AS UNDER: WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS . IT IS NOT DISPUTED ON BEHALF OF THE ASSESSEE THAT UNDER THE AGREEMENT, THERE WAS NO LIA BILITY TO PAY FINANCE BROKERAGE BEYOND 18- 12-86. THE CLAIM IS FOUNDED ON THE PRINCIPLES OF C OMMERCIAL EXPEDIENCY. WE FIND THAT THE AMOUNT REPRESENTS A PROVISION MADE IN THE ACCOUNTS. ACTUAL PAYMENT DOES NOT APPEAR TO HAVE BEEN EFFECTED DURING THE RELEVANT ACCOUNTING P ERIOD. THE ASSESSEE HAS VOLUNTARILY UNDERTAKEN TO PAY ADDITIONAL BROKERAGE TO M/S. A.R. CORPORATION. IN VIEW OF THE HANDSOME RATE OF INTEREST EARNED ON THE ADVANCES TO PATEL BI SCUITWALLA WHICH ADVANCE WAS ARRANGED THROUGH A.R. CORPORATION. THERE IS NO EVIDENCE ON RECORD TO SHOW WHETHER THE ASSESSEE CONVEYED ITS DECISION TO PAY THE ADDITIONAL BROKERA GE TO A.R. CORPORATION. IF THAT HAD BEEN DONE, THAT WOULD BE AN INDICATION THAT THE ASSESSEE WAS EARNEST IN UNDERTAKING THE ADDITIONAL LIABILITY. MERELY PASSING AN ENTRY FOR ADDITIONAL LIABILITY IN THE ASSESSEES BOOKS IN THE ABSENCE OF ANY CONTRACTUAL OR STATUTORY COMPULSION MAY FORM THE BASIS OF A CLAIM FOR DEDUCTION, PROVIDED THAT THE DESIRE TO PAY THE ADDI TIONAL AMOUNT IS COMMUNICATED TO THE PERSON WHO WOULD BE BENEFITTED BY THE ENTRY. ANOTH ER INDICATION MAY BE A PAYMENT OF THE ADDITIONAL LIABILITY IN THE SUBSEQUENT YEARS TO A.R . CORPORATION. THERE IS NO MATERIAL ON RECORD TO INDICATE WHETHER THE ADDITIONAL LIABILITY UNDERTAKEN BY THE ASSESSEE VOLUNTARILY HAS I.TA. NO. 3969/MUM/2004 EVEREST GEMS (NOW CONVERTED INTO ROSY BLUE INDIA PVT. LTD), 5 BEEN DISCHARGED BY ACTUAL PAYMENT IN THE SUBSEQUENT YEARS. UNDER THE CIRCUMSTANCES, WE FIND IT DIFFICULT TO ADJUDICATE UPON THE CLAIM. WE THEREFORE, SET ASIDE THE ORDERS OF THE DEPARTMENTAL AUTHORITIES ON THIS POINT AND RESTORE THE MATTER TO THE FILE OF THE AO WHO WILL TAKE A FRESH DECISION IN THE LIGHT OF OUR AFORESAID OBSERVATIONS AND DIRECTIONS, AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD . WE DIRECT ACCORDINGLY AND ALLOW THE GROUND FOR STATISTICAL PURPOSES. AO WAS SPECIFICALLY DIRECTED TO VERIFY AS WHETHER THE ADDITIONAL LIABILITY UNDERTAKEN BY THE FIRM VOLUNTARILY HAD BEEN DISCHAR GED BY ACTUAL PAYMENT IN THE SUBSEQUENT YEARS. WE FIND THAT AO HAS NOT FINALISE D THE ASSESSMENT ORDER AS PER THE ABOVE DIRECTIONS. FROM THE PAPER BOOK, IT IS CLEAR THAT ASSESSEE HAD MADE PAYMENT TO A.R. CORPORATION. BANK STATEMENT SUBMITTED DURING T HE RE-ASSESSMENT PROCEEDINGS, CLEARLY ESTABLISHES THE FACT THAT A.R. CORPORATION HAD RECEIVED THE PAYMENT AND THUS LIABILITY UNDERTAKEN BY THE ASSESSEE-COMPANY HAD BE EN DISCHARGED. IN THESE CIRCUMSTANCES, WE DECIDED GROUND NO.1 IN FAVOUR OF THE ASSESSEE REVERSING THE DECISION OF THE FAA. 5. GROUND NO.2 PERTAINS TO DISALLOWANCE OF RS. 74.6 LA KHS REPRESENTING FINE PAID BY THE ASSESSEE FOR CLEARING GROUND FROM THE CUSTOM S AUTHORITIES. BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE, BY VIRTUE OF BEING AN EXPORTER, OBTAI NED ADDITIONAL LICENCES FOR IMPORT OF ITEMS SPECIFIED IN THE OPEN GENERAL LICENCE (OGL ). THE TOTAL VALUE OF THE GOODS IMPORTED UNDER THE ADDITIONAL LICENCES AGGREGATED T O RS. 6,85,67,650/-. THE DETAILS OF THE IMPORT WERE FILED AND FROM THESE DETAILS, THE A O NOTICED THAT THE CUSTOMS DEPARTMENT HAVE LEVIED A FINE/PENALTY ON THE ASSESS EE IN RESPECT OF CERTAIN IMPORTS, WHICH ARE MADE IN VIOLATION OF GOVT. REGULATION AND IMPORT POLICY. THE ASSESSEE HAD PAID THESE FINES AND HAD INCLUDED THE AMOUNT AS PAR T OF THE PURCHASE AMOUNT. AO CALLED UPON THE ASSESSEE TO SHOW HOW THE FINES/PENA LTIES WERE ALLOWABLE AS DEDUCTION IN THE COMPUTATION OF THE INCOME. AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE, AO HELD THE ASSESSEE HAD IMPORTED THE GOODS IN VIOL ATION OF THE IMPORT POLICY AND ANY PENALTY FINE LEVIED FOR BREACH OF LAW DURING THE CO URSE OF BUSINESS COULD NOT BE ALLOWED WHILE COMPUTING THE TAXABLE INCOME.FAA CONF IRMED THE ORDER OF THE AO. IN THE APPELLATE PROCEEDINGS, ITAT DISCUSSED THE CASE OF DIMEXON (68 ITD 10) AND FINALLY HELD AS UNDER: THE DATES ON WHICH THE LETTERS OF CREDIT WERE OPENE D BY THE ASSESSEE HAVE ALSO NOT BEEN MADE CLEAR. FURTHER, THE FACTS BROUGHT OUT BY THE AO IN PAGE 3 AND 4 OF THE ASSESSMENT ORDER SHOW THAT THE CUSTOMS AUTHORITIES HAVE TAKEN THE VI EW THAT THE IMPORTS MADE BY THE ASSESSEE WERE NOT COVERED BY THE SUPREME COURT JUDGMENT DATE D 15 TH MAY, 1986. THEREFORE, IT IS NOT CLEAR WHETHER IN THE ASSESSEES CASE, THE PRINCIPAL COLLECTOR OF CUSTOMS & CENTRAL EXCISE, BOMBAY AND TAKEN A DECISION TO PERMIT THE IMPORTS U NDER THE ADDITIONAL LICENSES. IN OUR OPINION, THOUGH PRIMA FACIE, THERE APPEARS TO BE SI MILARITY BETWEEN THE ASSESSEES CASE AND THE CASE OF DIMEXON (SUPRA) THERE ARE CERTAIN ADDIT IONAL FEATURES IN THE PRESENT CASE WHICH REQUIRE EXAMINATION IN JUXTAPOSITION WITH THE FACTS OF THE CASE OF DIMEXON. THE FACTS OF BOTH THE CASES HAVE TO BE ANALYSED IN DETAIL IN THE LIGH T OF THE ORDERS PASSED BY THE CUSTOMS AUTHORITIES AFTER THE JUDGMENT OF THE SUPREME COURT . SUCH ORDERS HAVE NOT BEEN BROUGHT ON RECORD. ALL THE FACTS AND THE RELEVANT ORDERS AND DATES INCLUDING DATES OF LCS HAVE TO BE BROUGHT ON RECORD AND ANALYSED WITH A VIEW TO FINDI NG OUT WHETHER THERE WAS A DECISION BY THE CUSTOMS AUTHORITIES, AS IN THE CASE OF DIMEXON, TO PERMIT THE IMPORT OF THE ITEMS UNDER THE ADDITIONAL LICENSES, EVEN AFTER THE SUPREME COURT U PHELD THE BAN ON THESE ITEMS IN THE PRESENT I.TA. NO. 3969/MUM/2004 EVEREST GEMS (NOW CONVERTED INTO ROSY BLUE INDIA PVT. LTD), 6 CASE. THIS EXERCISE HAS TO BE CARRIED OUT BY THE A O. IN OUR OPINION, UNLESS THIS IS DONE, IT IS NOT POSSIBLE TO TAKE A DECISION AS TO THE ILLEGALIT Y OR OTHERWISE OF THE IMPORT, ESPECIALLY WHEN OUR ATTENTION HAS BEEN DRAWN TO A SIMILAR CASE WHER E ORDER HAVE BEEN PASSED AFTER THE JUDGMENT OF THE SUPREME COURT AUTHORISING THE IMPOR T OF ITEMS, ON THE BASIS OF WHICH THE TRIBUNAL HAS ALLOWED DEDUCTION OF THE REDEMPTION FI NES. IN ORDER TO ENABLE THE AO TO CARRY OUT THIS EXERCISE, WE SET ASIDE THE ORDERS OF THE D EPARTMENTAL AUTHORITIES ON THIS POINT AND RESTORE THE ISSUE TO THE FILE OF THE AO WITH DIRECT IONS TO HIM TO RE-DECIDE THE ISSUE IN THE LIGHT OF OUR OBSERVATIONS AND DIRECTIONS AS ABOVE AND IN ACCORDANCE WITH LAW, AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 5.1. IN THE RE-ASSESSMENT PROCEEDINGS, AO AGAIN DISALLOW ED THE AMOUNT-IN-QUESTION AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. FAA UPHELD HIS ORDER. BEFORE US, AUTHORISED REPRESENTATIVE (AR) AND DEPARTMENTAL REP RESENTATIVE (DR) AGREED THAT MATTER NEEDS FURTHER VERIFICATION BY THE AO IN LIGH T OF THE DIRECTIONS ISSUED BY THE TRIBUNAL VIDE ITS ORDER DT. 25-10-1999. THEREFORE, IN THE INTEREST OF JUSTICE, MATTER IS RESTORED BACK TO THE FILE OF THE AO TO DECIDE THE I SSUE AFRESH KEEPING IN MIND THE DIRECTIONS OF THE ABOVE REFERRED ORDER OF THE TRIBU NAL. HE IS DIRECTED TO AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ASSESSEE SHOULD PRODUCE ALL THE EVIDENCES RELATED WITH THE DISPUTED IMPORT BEFORE T HE AO. GROUND NO.2 IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 6. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE MADE BY THE AO WITH REGARD TO STAFF WELFARE EXPENDITURE. TRIBUNAL VIDE ITS ORDER DT. 25-10-99 HAD DECIDED THE ISSUE AS UNDER: THE THIRD GROUND IS DIRECTED AGAINST THE DISALLOWA NCE OF A SUM OF RS.8,539/- AS ENTERTAINMENT EXPENSES OUT OF THE STAFF WELFARE EXP ENSES. THE DETAILS OF THE EXPENSES ARE GIVEN AT PAGE 5 OF THE ORDER OF THE CIT(A).CONSIDER ING THE FACTS, WE HOLD THAT 25% OF THE EXPENSES MAY BE ALLOWED AS ATTRIBUTABLE TO THE STAF F. DISALLOWANCE OF THE BALANCE IS CONFIRMED. THERE IS ANOTHER PART OF THE SAME GROUND NAMELY, TH E DISALLOWANCE OF RS. 13,090/-.AS PER THE DETAILS FILED BEFORE THE CIT(A) AND TAKEN NOTE OF B Y HIM IN PAGE 5 OF HIS ORDER, THE ENTIRE EXPENSES HAVE BEEN INCURRED AS REFRESHMENT TO STAFF . EXPENDITURE ON STAFF IS ALLOWABLE EVEN U/S. 37(2A) READ WITH EXPLANATION (2). WE, THEREFOR E, DIRECT THE AO TO ALLOW THE EXPENDITURE AS A DEDUCTION. THUS, THE THIRD GROUND IS PARTLY A LLOWED. 6.1. FROM THE ORDER OF THE FAA, IT IS FOUND THAT WHILE P ASSING THE FRESH ORDER, AO HAS NOT MENTIONED A SINGLE WORD ABOUT THE DIRECTION S OF THE TRIBUNAL. IN THE COMPUTATION OF INCOME, HE HAS MADE AN ADDITION UNDE R THE HEAD ENTERTAINMENT EXPENSES.BEFORE US, AR SUBMITTED THAT AS PER THE PR OVISIONS OF SEC. 37(2A), APPLICABLE AT THE RELEVANT TIME, AO SHOULD NOT HAVE MADE ANY DISALLOWANCE. AFTER CONSIDERING THE MATERIAL AVAILABLE ON FILE, WE DIRE CT THE AO TO PASS A FRESH SPEAKING ORDER WITH REGARD TO ENTERTAINMENT EXPENDITURE AFTE R CONSIDERING THE PROVISIONS OF SEC. 37(2A) OF THE ACT.ASSESSEE SHOULD BE HEARD BEFORE P ASSING THE ORDER. GROUND NO.3 IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 7. GROUND NO.4 IS ABOUT ADDITION OF RS. 3.12 LAKHS BEI NG INTEREST ON UN-SECURED LOAN TREATED AS NON-GENUINE IN EARLIER YEARS. ADDI TION MADE BY THE AO IN THE ORIGINAL ASSESSMENT WAS DELETED BY THE FAA. IN THE APPELLAT E PROCEEDINGS, BEFORE THE ITAT I.TA. NO. 3969/MUM/2004 EVEREST GEMS (NOW CONVERTED INTO ROSY BLUE INDIA PVT. LTD), 7 (ITA NO. 8593/BOM/90 DT. 25-10-99) IT WAS HELD BY T HE TRIBUNAL THAT ORDERS OF THE EARLIER YEARS SHOULD BE FOLLOWED. AO WHILE PASSING FRESH ORDER, DID NOT CONSIDER THE ORDER OF EARLIER YEARS, AS DIRECTED BY THE ITAT. 7.1. BEFORE US, AR AND DR AGREED THAT LOANS OF EARLIER Y EARS WERE TREATED GENUINE BY THE ITAT, THAT ADDITION MADE BY THE AO WAS NOT J USTIFIED. AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD, WE DECIDE GROUND NO.4 IN FAVOUR OF THE ASSESSEE. 8. LAST GROUND OF APPEAL IS WITH REGARD TO ADDITION OF RS. 1.10 LAKHS OUT OF MOTOR CAR EXPENSES. IN THE ORIGINAL ASSESSMENT PRO CEEDINGS, DISALLOWANCE OF RS. 1.10 LAKHS WAS REDUCED TO RS. 68,701/- BY THE FAA. AO PREFERRED AN APPEAL BEFORE THE TRIBUNAL. VIDE ITS ORDER DT. 25-10-1999 (SUPRA ), ITAT RESTORED THE DISALLOWANCE OF RS. 1.10 LAKHS. 8.1. AR SUBMITTED THAT WHILE GIVING EFFECT TO THE ORDER OF ITAT, AO SHOULD HAVE ADDED RS. 42,259/- (RS. 1,10,960 RS. 68,701/-), T HAT AO AGAIN DISALLOWED RS. 1.10 LAKHS. DR AGREED THAT IN THE RE-ASSESSMENT PROCEED INGS, DISALLOWANCE SHOULD HAVE BEEN RESTRICTED TO RS. 42,259/- ONLY. WE FIND THAT AO HAD NOT CARRIED OUT THE DIRECTIONS OF THE TRIBUNAL PROPERLY. GROUND NO.5 IS DECIDED IN FAVOUR OF TH E ASSESSEE RESTRICTING THE DISALLOWANCE AT RS. 42,259/- ON ACCOUNT OF MOTOR CAR EXPENSES. APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2012. SD/- SD/- ( . . / I.P. BANSAL ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI, +$ DATE: 16 TH NOVEMBER, 2012 TNMM * * * * # ## # %, %, %, %, -,)% -,)% -,)% -,)% / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE !,% % //TRUE COPY// *$ *$ *$ *$ / BY ORDER, . .. . / / / / / DY./ASSTT. REGISTRAR , / ITAT, MUMBAI