The D.C.I.T, Hoshiarpur V. Sh. Sonalika Agro Industrial Corpn, Hoshiarpur

ITA 425/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5754 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 02-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINAY MALHOTRA
• Keywords: Maximum Marginal Rate; Deemed dividend; Assessment record
• Section: 2(22)(e); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO.425(ASR)/2010 ASSESSMENT YEAR:2007-08 PAN :AADFS1107M THE DY.COMMR. OF INCOME-TAX, VS. SH. SONALIKA AGRO INDUSTRIAL CORPN. HOSHIARPUR CIRCLE, HOSHIARPUR. HOSHIARPUR. (APPELLANT) (RESPONDENT) I.T.A. NO.429(ASR)/2010 ASSESSMENT YEAR: 2007-08 SH. SONALIKA AGRO INDUSTRIES CORPN. VS.THE ADDL. CO MMR. OF INCOME-TAX, HOSHIARPUR. HOSHIARPUR RANGE, HOSHIARPUR. DEPARTMENT BY: SH. TARSEM LAL, DR ASSESSEE BY: SH. VINAY MALHOTRA, CA ORDER PER MEHAR SINGH, AM, THESE ARE THE CROSS APPEALS ONE BY THE REVENUE A ND ANOTHER BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A), JALANDHAR, DATED 30.08.2010, PASSED UNDER SECTION 250(6) OF THE INCO ME-TAX ACT, 1961 (HEREINAFTER REFERRED TO IN SHORT THE ACT) FOR TH E ASSESSMENT YEAR 2007-08. 2. FIRST, WE WILL DEAL WITH THE APPEAL OF THE REVEN UE, WHERE THE ONLY EFFECTIVE GROUND RAISED, IS AS UNDER: 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A), HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.2,26,37,389/- MADE ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961. 1.1. WHILE ALLOWING THE ABOVE RELIEF, THE LD. CIT(A ), HAS FAILED TO APPRECIATE THAT AS PER CBDTS CIRCULAR NO.495 DATED 22.4.1987 DEEMED DIVIDEND HAD TO BE TAXED IN THE HANDS OF THE CONCERN I.E. PAYEE AS THE MEMBERS OF PARTNERS I.E. SH. A.S. MITT AL HAD SUBSTANTIAL INTEREST OF SHAREHOLDING OF 51% IN THE CLOSELY HELD COMPANY. 3. THE BRIEF FACTS OF THE CASE, AS CULLED OUT, FROM THE RELEVANT RECORDS ARE THAT THE ASSESSE FIRM DERIVES INCOME THE BUSINESS OF MANUFACTURING AND SALE OF AGRICULTURE IMPLEMENTS AND TRADING OF DIESEL EN GINES AND OTHER AGRICULTURE IMPLEMENTS. BESIDES THE ASSESSEE FIRM E NJOYS INCOME FROM RENT AND INTEREST. DURING THE ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO FURNISH COPY OF ACCOUNTS OF SISTER CONCERNS. THE ASSESSEE SUBMITTED DETAILS REGARDING SISTER CONCERNS AND CONTENDED THAT THE P ROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT APPLICABLE AS THE ASS ESSEE-FIRM HAD NOT TAKEN ANY LOAN/ADVANCE FROM M/S. ITL, WHICH WAS OTHERWISE COVERED UNDER THIS PROVISIONS. IT WAS CONTENDED THAT THE TRANSACTIONS WITH M/S. ITL AND THE ASSESSEE FIRM WERE OF PURCHASE AND SALE. THE AO BEI NG NOT SATISFIED WITH THE EXPLANATION NOTED THAT THE ACCOUNT OF THE ASSESSEE FIRM IN THE BOOKS OF M/S. INTERNATIONAL TRACTORS LTD (ITL) SHOWED A DEBIT BAL ANCE OF RS.2,26,37,389/- ON 31.3.2007 AND THE DEBIT BALANCES STARTED FROM 1. 8.2006 AND CONTINUED UNINTERRUPTEDLY TILL THE CLOSE OF THE FINANCIAL YEA R. HE ALSO NOTED THAT SH. A.S. MITTAL, HAVING 51% SHARE IN THE ASSESSEE-FIRM, HELD 15.98% SHAES IN M/S. ITL WHICH WAS MORE THAN 10% VOTING POWER REQUI RED AS PER SECTION 2(22)(E) . HE ALSO NOTED THAT M/S. ITL WHICH HAD ACCUMULATED PROFIT & LOSS OF MORE THAN RS. 3 CRORES AS ON 31.3.2007. THE AO C ONFRONTED THIS TO THE 3 ASSESSEE DURING ASSESSMENT PROCEEDINGS PURSUANT TO WHICH THE ASSESSEE SUBMITTED THAT THE TRANSACTIONS WERE OF SALE/PURCHA SE. THE AO BY REFERRING TO THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, H ELD THAT THESE PROVISIONS WERE REQUIRED TO BE STRICTLY CONSTRUED. THE AO WAS ALSO OF THE OPINION THAT FOR THE PAYMENTS TO BE COVERED U/S 2(22)(E), THESE NEED NOT BE IN THE NATURE OF LOANS/ADVANCES, BUT COULD ALSO RELATE TO THE PAY MENT TOWARDS THE PERSONAL LIABILITIES OF THE SHAREHOLDERS. THE AO NOTED THAT THERE WERE NOT SALE AND PURCHASE ENTRIES IN THE ACCOUNT OF THE ASSESSEE WIT H ITL AND THE TRANSACTIONS WERE MAINLY UNDER THE HEAD PENALTY CHARGES, VISA CH ARGES, AIR TICKET CHARGES, TELEPHONE EXPENSES CHARGES ETC. THE AO, WAS OF THE VIEW THAT PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE ATTRACTED TO THE CA SE OF THE ASSESSEE. THEREFORE, HE TREATED A SUM OF RS. 2,26,37,389/- AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. 4. BEING AGGRIEVED WITH THE ORDER OF THE AO, THE AS SESSEE WENT IN APPEAL BEFORE THE LD. CIT(A), WHO DELETED THE ADDITION BY HOLDING THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT APPLICABLE. NOW AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEA L BEFORE US. 5. THE LD. DR, STRONGLY RELIED ON THE ORDER OF TH E ASSESSING OFFICER. HE HAS ALSO FILED WRITTEN SUBMISSIONS DATED 17.06.2 011, WHICH ARE PLACED ON RECORD. 5.1. WE HAVE CAREFULLY PERUSED THE WRITTEN SUBMISSI ONS OF THE LD. DR, AND FOUND THAT THE SAME ARE NOT APPLICABLE TO THE F ACT SITUATION OF THE PRESENT CASE. THE LD. DR, HAS MISREAD AND MISQUOTED THE RAT IO OF THE DECISION OF THE SPECIAL BENCH OF ITAT, MUMBAI, IN THE CASE OF BHAUM IK COLOUR P. LTD. IN ITA NO.5030/MUM/2004 FOR THE ASSESSMENT YEAR 1997-9 8. HE HAS OMITTED TO READ THE ENTIRE DECISION OF THE CASE, WHEREIN T HE TRUE RATION APPLICABLE TO 4 THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS ALSO B EEN RECORDED BY THE SPECIAL BENCH, WHICH IS DISCUSSED AND REPRODUCED HE REINAFTER. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, STRONGLY RELIED ON THE ORDER OF THE CIT(A) AND REITERATED THE SUBMISSI ONS MADE BEFORE HIM. HE PLACED RELIANCE ON THE DECISION OF SPECIAL BENCH, I TAT, MUMBAI, IN THE CASE OF BHAUMIK COLOUR P. LTD. IN ITA NO.5030/MUM/2004 F OR THE ASSESSMENT YEAR 1997-98. 7. HAVING HEARD THE RIVAL CONTENTIONS, WE ARE OF TH E CONSIDERED OPINION THAT THE DECISION OF THE SPECIAL BENCH OF I.T.A.T. MUMBAI BENCH IN THE CASE OF BHAUMIK COLOUR P. LTD., PASSED IN ITA NO.5030/ MUM/2004 FOR THE ASSESSMENT YEAR 1997-98, COVERS THE FACT SITUATION OF THE PRESENT CASE. IN THE SAID DECISION OF THE SPECIAL BENCH OF ITAT, MUMBAI BENCH, DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS . HOTEL HILLTOP (2008) 217 CTR (RAJ.) 527, HAS BEEN FOLLOWED, WHEREAS DECI SION IN THE CASE OF DY. CIT VS. NIKKO TECHNOLOGIES (P) LTD., IN ITA NO.4077 /MUM/2022, DATED 30 TH DEC., 2005, OVER- RULED. THE RELEVANT AND OPERATI VE PART OF THE DECISION OF THE SPECIAL BENCH OF ITAT, MUMBAI IS REPRODUCED HEREUNDER FOR THE PURPOSE OF PROPER APPRECIATION OF THE TRUE RATIO OF THE SAME: DIVIDEND DEEMED DIVIDEND UNDER SECTION 2(22)(E) - LOAN TO SHAREHOLDER VIS--VIS CONCERN IN WHICH SHAREHOLDER IS MEMBER OR PARTNER DEEMED DIVIDEND CAN BE ASSESSED ONLY IN T HE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY A ND NOT IN THE HANDS OF THE BORROWING CONCERN IN WHICH SUCH SHAREH OLDER IS MEMBER OR PARTNER HAVING SUBSTANTIAL INTEREST INTENSION B EHIND THE PROVISIONS OF SECTION 2(22) (E) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDER DEEMING PROVISION AS IT APPLIES TO TH E CASE OF LOANS OR ADVANCES BY A COMPANY TO A CONCERN IN WHICH ITS SHA REHOLDER HAS SUBSTANTIAL INTEREST IS BASED ON THE PRESUMPTION T HAT THE LOAN OR ADVANCES WOULD ULTIMATELY BE MADE AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY GIVING THE LOAN OR ADVANCE CBDT CIRCU LAR NO.495 DATED 22 ND SEPT., 1987 TO THE EXTENT NOT BENEVOLENT IS NOT B INDING 5 PROVISIONS OF SUB-CL. (III) OF S. 2(22)(E) ALLOWING SET OFF OF DEEMED DIVIDEND IN THE HANDS OF SHAREHOLDER ALSO CONTEMPLA TES ASSESSMENT OF DEEMED DIVIDEND IN THE HANDS OF SHAREHOLDER ONLY. HELD : DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER. THE PROVISIONS OF S. 2(22)(E) DO NOT SPELL OUT AS TO WHETHER THE INCOME HAS TO BE TAXED IN THE HANDS OF THE SHAREHOLDER OR THE CONCERN (NON-SHAREHOLDER). THE P ROVISIONS ARE AMBIGUOUS. IT IS, THEREFORE, NECESSARY TO EXAMINE T HE INTENTION BEHIND ENACTING THE PROVISIONS OF SECTION2(22)(E) IS THAT CLOSELY HELD COMPANIES (I.E. COMPANIES IN WHICH PUBLIC ARE NOT S UBSTANTIALLY INTERESTED), WHICH ARE CONTROLLED BY A GROUP OF MEM BERS, EVEN THOUGH THE COMPANY HAS ACCUMULATED PROFITS WOULD NOT DISTR IBUTE SUCH PROFIT AS DIVIDEND BECAUSE IF SO DISTRIBUTED THE DIVIDEND INCOME WOULD BECOME TAXABLE IN THE HANDS OF THE SHAREHOLDERS. IN STEAD OF DISTRIBUTING ACCUMULATED PROFITS AS DIVIDEND, COMPA NIES DISTRIBUTE THEM AS LOAN OR ADVANCES TO SHAREHOLDERS OR TO CONC ERN IN WHICH SUCH SHAREHOLDERS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SUCH SHAREHOLDE R. IN SUCH AN EVENT, BY THE DEEMING PROVISIONS, SUCH PAYMENT BY THE COMP ANY IS TREATED AS DIVIDEND. THE INTENTION BEHIND THE PROVISIONS OF S ECTION 2(22)(E) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDER. THE DEEMI NG PROVISION AS IT APPLIES TO THE CASE OF LOANS OR ADVANCES BY A COMPA NY TO A CONCERN IN WHICH ITS SHAREHOLDER HAS SUBSTANTIAL INTEREST IS B ASED ON THE PRESUMPTION THAT THE LOAN OR ADVANCES WOULD ULTIMAT ELY BE MADE AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY GIVING THE LOAN OR ADVANCE. THE INTENTION OF THE LEGISLATURE IS THEREF ORE TO TAX DIVIDEND ONLY IN THE HANDS OF THE SHAREHOLDER AND NOT N THE HANDS OF THE CONCERN. THE BASIS OF BRINGING IN THE AMENDMENT TO S. 2(22)(E) BY THE FINANCE ACT, 1987, W.E.F. IST APRIL, 1988 IS TO EN SURE THAT PERSONS WHO CONTROL THE AFFAIRS OF A COMPANY AS WELL AS THAT OF A FIRM CAN HAVE THE PAYMENT MADE TO A CONCERN FROM THE COMPANY AND THE PERSON WHO CAN CONTROL THE AFFAIRS OF THE CONCERN CAN DRAW THE SAME FROM THE CONCERN INSTEAD OF THE COMPANY DIRECTLY MAKING PAYM ENT TO THE SHAREHOLDER AS DIVIDEND. THE SOURCE OF POWER TO CON TROL THE AFFAIRS OF THE COMPANY AND THE CONCERN IS THE BASIS ON WHICH T HESE PROVISIONS HAVE BEEN MADE. IT IS THEREFORE PROPER TO CONSTRUE THOSE PROVISIONS AS CONTEMPLATING A CHARGE TO TAX IN THE HANDS OF THE S HAREHOLDER AND NOT IN THE HANDS OF A NON-SHAREHOLDER VIZ CONCERN .. A LOAN OR ADVANCE RECEIVED BY A CONCERN IS NOT IN THE NATURE OF INCOM E. IN OTHER WORDS, 6 THERE IS A DEEMED ACCRUAL OF INCOME EVEN UNDER SECT ION 5(1)(B) IN THE HANDS OF THE SHAREHOLDER ONLY AND NOT IN THE HANDS OF THE PAYEE VIZ NON-SHAREHOLDER (CONCERN). SECTION 5(1)(A) CONTEMPL ATES THAT THE RECEIPT OR DEEMED RECEIPT SHOULD BE IN THE NATURE O F INCOME. THEREFORE, THE DEEMING FICTION CAN BE APPLIED ONLY IN THE HANDS OF THE SHAREHOLDER AND NOT THE NON-SHAREHOLDER VIZ., THE C ONCERN. CBDT CIRCULAR NO.495 DATED 22 ND SEPT., 1987, TO THE EXTENT NOT BENEVOLENT IS NOT BINDING. IN THE EVEN OF THE PAYMENT OF LOAN OR ADVANCE BY A COMPANY TO A CONCERN BEING TREATED AS DIVIDEND AND TAXED IN THE HANDS OF THE CONCERN THEN, THE BENEFIT OF SET OFF A S PER SECTION 2(22)(E)(III) CANNOT BE ALLOWED TO THE CONCERN, BEC AUSE THE CONCERN CAN NEVER RECEIVE DIVIDEND FROM THE COMPANY WHICH I S ONLY PAID TO THE SHAREHOLDER, WHO HAS SUBSTANTIAL INTEREST IN THE CO NCERN. THE PROVISIONS OF SUB-CL.(III) OF S. 2(22)(E) ALSO THER EFORE CONTEMPLATE DEEMED DIVIDEND BEING TAXED IN THE HANDS OF A SHARE HOLDER ONLY CIT VS. HOTEL HILLTOP (2008) 217 CTR (RAJ) 527 FOLLOWED; DY. CIT VS. NIKKO TECHNOLOGIES (I) (P) LTD. [ ITA NO.4077/MUM/2 002, DT. 30 TH DEC., 2005] OVERRULED. CONCLUSION: DEEMED DIVIDEND CAN BE ASSESSED ONLY I N THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF THE BORROWING CONCERN IN WHICH SUCH SHAREH OLDER IS MEMBER OR PARTNER HAVING SUBSTANTIAL INTEREST. 7.1 A BARE PERUSAL OF THE TRUE RATIO REVEALS THAT T HE WRITTEN SUBMISSIONS FILED BY THE LD. DR DO NOT SUPPORT HIS CONTENTION . THE RATIO OF THE DECISION OF THE SPECIAL BENCH, ITAT, MUMBAI, IN THE CASE OF BHAUMIK COLOUR P. LTD., (SUPRA), IS UNAMBIGUOUS AND CLEAR, WHEREBY IT HAS BEEN CLEARLY HELD AFTER DETAILED DISCUSSION THAT IT IS PROPER TO CONS TRUE THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND AMENDMENT BROUGHT BY THE FINANCE ACT, 1987, W.E.F. 1.4.1988 THAT A LOAN OR ADVANCE RECEIVED BY A CONCERN IS NOT IN THE NATURE OF INCOME. IN OTHER WORDS, THERE IS DEEMED A CCRUAL OF INCOME UNDER SECTION 5(1)(B) IN THE CASE OF SHAREHOLDER ONLY AND NOT IN THE HANDS OF PAYEE VIZ NON-SHAREHOLDER (CONCERN). 7 7.2. THE RELEVANT EXPLANATION 3 FOR THE PURPOSE OF THIS CLAUSE IS REPRODUCED HEREUNDER: (A) CONCERN MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY; 7.3. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF TH E CONSIDERED OPINION THAT THE DECISION OF THE SPECIAL BENCH OF ITAT, MU MBAI BENCH, IN THE CASE OF BHAUMIK COLOUR P. LTD., (SUPRA), IS SQUARELY APP LICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. CONSEQUENTLY, FO LLOWING THE SAID DECISION, AS ALSO FOLLOWING THE DECISION OF THIS BE NCH IN THE CASE OF DCIT, CIR.1, JALANDHAR VS. THE MERCHANTS, JALANDHAR, IN I TA NO.331(ASR)/2209 DATED 26.8.2009, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THIS APPEAL OF THE REVENU E IS DISMISSED. 9. NOW, WE TURN TO DEAL WITH APPEAL FILED BY THE AS SESSEE IN ITA NO.429(ASR)/2010 FOR THE A.Y. 2007-08, WHERE FOLLOW ING GROUNDS ARE RAISED: 1. THAT THE LD. CIT(A), HAS ERRED IN CONFIRMING TH E ADHOC ADDITION OF RS.2,53,009/- OUT OF VARIOUS EXPENSES WITHOUT AP PRECIATING THE FACTS OF THE CASE AND LEGAL POSITION AS PER THE PROVISIONS OF INCOME-TAX ACT. 2. THAT THE APPELLATE REQUEST FOR LEAVE TO ADD OR A MEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OFF. 10. GROUND NO.2 IS GENERAL NATURE, HENCE, NEEDS NO ADJUDICATION. IN GROUND NO. 1, THE ASSESSEE CONTENDED THAT THE LD. CIT(A), ERRED IN CONFIRMING THE AD-HOC ADDITION OF RS.2,53,009/- OUT OF VARIOUS EXPENSES WITHOUT APPRECIATING THE FACTS OF THE CASE. THE FAC TS RELATING TO THIS GROUND ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE AO WHILE VERIFYING VOUCHERS FOR EXPENSES CLAIMED UNDER DIFFERENT HEADS FOUND TH AT SOME OF VOUCHERS WERE SELF MADE. HE WAS OF THE OPINION THAT PART OF THE EXPENSES WERE 8 POSSIBLE UNVOUCHED AND HELD 1/10 TH OF THE EXPENSES AS UNSUPPORTED BY VOUCHERS. THE AO, THEREFORE, DISALLOWED RS.2,53,00 9/- OUT OF THE EXPENSES CLAIMED UNDER VARIOUS HEAD IN THE P & L A/C WHICH T OTALED RS.25,30,098/-. ON APPEAL, THE LD. CIT(A), CONFIRMED THE ADDITION M ADE BY THE A.O. NOW AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS BENCH. 11. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE LD. COUNSEL FOR THE ASSESSEE, PLEADED THAT ALL THE EXPENSES WERE INCURR ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND DID NOT HAVE ANY EL EMENT OF EXPENDITURE OF CAPITAL OR PERSONAL NATURE AND REQUESTED THAT THE A DDITION SO MADE MAY BE DELETED. 12. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 13. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE RI VAL SUBMISSIONS, FACTS OF THE CASE AND RELEVANT MATERIAL PLACED ON RECORD, INCLUDING THE ORDERS OF THE AUTHORITIES BELOW. A CAREFUL PERUSAL OF THE IMP UGNED APPELLATE ORDER DATED 30.08.2010, CLEARLY REVEALS THAT THE LD. CIT( A), HAS CONSIDERED AND ADJUDICATED THE ISSUE, IN QUESTION, AFTER APPRECIAT ION OF THE EVIDENCES AND MATERIAL ON RECORD, AS ALSO THE LEGAL AND FACTUAL POSITION OF THE CASE. NEEDLESS TO SAY THAT THE IMPUGNED APPELLATE ORDER I S WELL-REASONED AND BASED ON THE COGENT AND CREDIBLE MATERIAL AND FACTS OF THE CASE. HOWEVER, IT WOULD PERTINENT TO REPRODUCE RELEVANT PART OF THE FINDINGS OF THE CIT(A), FOR THE PURPOSE OF PROPER APPRECIATION OF THE SAME: 5. I HAVE CONSIDERED THE RIVAL CONTENTIONS. A PERU SAL OF THE ASSESSMENT RECORD SHOWS THAT ON 10.12.2009 THE LD. AR FOR THE APPELLANT PRODUCED BOOKS OF ACCOUNTS ALONG WITH BIL LS AND VOUCHERS 9 WHICH WERE TEST CHECKED BY THE A.O. THE AO HAS NOT ED THAT SOME OF THE VOUCHERS WERE SELF PREPARED AND HE HAS FURTHER NOTED THAT 1/10 TH OF THESE EXPENSES WERE DISALLOWED AS UNVOUCHED. THE LD . AR FOR THE APPELLANT HAS SIGNED THE ORDER SHEET AND THERE IS N OTHING ON RECORD TO SHOW THAT HE OBJECTED BEFORE THE AO, EITHER ON THAT DATE OR SUBSEQUENTLY, TO THE PROPOSED DISALLOWANCE. EVEN AT THIS STAGE THE APPELLANT HAS NOT STATED THAT ANY OBJECTION TO THE NOTINGS MADE BY THE AO WAS MADE DURING THE ASSESSMENT PROCEEDINGS. THE NOTINGS ARE IN TWO PORTION. THE FIRST PORTION REFERS TO FACTUAL FI NDINGS THAT THERE WERE SELF MADE VOUCHERS IN RESPECT OF CERTAIN EXPENSE HE ADS. THE SECOND PORTION OF THE NOTING IS THAT 1/10 TH OF THE EXPENSES UNDER CERTAIN HEADS WAS BEING DISALLOWED AS UNVOICED . SINCE THE LD. AR FOR THE APPELLANT DID NOT OBJECT TO THE FACTUAL FINDING IN THE FIRST PORTION OF THE NOTING I.E. EXPENDITURE HAVING BEEN DEBITED ON SELF MADE V OUCHERS, I DO NOT THINK THAT THE ASSESSEE CAN RAISE A PLEA AT THIS ST AGE THAT ALL THE EXPENSES UNDER THE DIFFERENT HEADS WERE FULLY VOUC HED. WHEN EXPENSES ARE SUPPORTED ONLY THROUGH INTERNAL VOUCH ERS, WITHOUT ANY EXTERNAL SUPPORTING BILLS/VOUCHERS, THEY CANNOT BE FULLY VERIFIED AND UNDER THE CIRCUMSTANCES AN ADHOC DISALLOWANCE OUT O F THE EXPENSES COULD BE MADE BY THE AO. IF THE APPELLANT HAD ANY O BJECTION TO THE AOS OBSERVATIONS ABOUT CERTAIN EXPENSES BEING NOT PROPERLY VOUCHED, HE COULD HAVE BROUGHT THIS FACT TO THE NO TICE OF THAT AO THEN AND THERE ITSELF. BY NOT OBJECTING TO THE NOTING MA DE BY THE A.O., THE LD. AR CONVEYED HIS ACCEPTANCE AT LEAST OF THE FACT THAT CERTAIN EXPENSES WERE NOT FULLY SUPPORTED BY EXTERNAL VOUC HERS. I AM ALSO OF THE OPINION FROM THE NOTINGS ON THE ORDER SHEET DAT ED 10.12.2009 THAT THE LD. AR DID NOT OBJECT TO THE PROPOSED DISALLOWA NCE, WHICH WAS A SPECIFICALLY MENTIONED BY THE AO ON THE ORDER SHEET , BUT RATHER THAN HE HAD TACITLY AGREED TO THE PROPOSED DISALLOWANCE. ONCE THE ASSESSEE HAD AGREED TO A DISALLOWANCE ON FACTS, HE CANNOT BE SAID TO BE AGGRIEVED BY THE ORDER OF THE AO AND NO APPEAL LIE S AGAINST THE ACTION OF THE AO UNLESS THE ASSESSEE IS AGGRIEVED BY THE A OS ORDER. I AM, THEREFORE, OF THE OPINION, BASED ON THE FACTUAL FIN DING AND THE NO OBJECTION OF THE APPELLANT TO THE PROPOSED DISALLOW ANCE IN THE ORDER SHEET NOTING DATED 10.12.2009, THAT THE ASSESSEE WA S NOT AGGRIEVED BY THE AOS ACTION AND CANNOT CONTEST THE SAME AT THIS STAGE. THE CONTENTION THAT FBT HAD BEEN PAID IN RESPECT OF CER TAIN EXPENSES ALSO DOES NOT HELP THE APPELLANT SINCE SECTION 37 OF THE ACT, REQUIRES THE ASSESSEE TO SHOW THAT THE EXPENDITURE CLAIMED AS D EDUCTION WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND MERLY 10 PAYING FBT IN RESPECT OF EXPENSE DOES NOT DISCHARGE THIS ONUS IF THE EXPENSE IS NOT PROPERLY SUPPORTED BY EXTERNAL VOUCH ERS. 5.1. THE DECISION OF THE CIT(A) IN THE APPELLANTS CASE FOR ASSTT. YEAR 2005-06 IN APPEAL NO.458/07-08/CIT(A)/JAL DATED 8.2 .2010 WERE ON DIFFERENT FACTS AS THE AO HAD NOT CONTENDED THAT TH E ASSESSEE HAD NO OBJECTION TO THE DISALLOWANCE. EVEN IN THAT APPELLA TE ORDER, THE CIT(A) HAS UPHELD THE PART OF THE DISALLOWANCE WHICH WERE NOTED BY THE AO TO HAVE BEEN SUPPORTED ONLY THROUGH SELF DRAWN VOU CHERS. THE DECISION OF THE CIT(A) IN ASSTT. YEAR 2005-06 (SUPR A), BEING ON DIFFERENT FACTS, DOES NOT ASSIST THE APPELLANTS CA SE. GROUND NO.2 OF APPEAL IS, THEREFORE, REJECTED. 13.1. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REA SON TO INTERFERE WITH THE FINDINGS OF THE CIT(A), AND THE SAME ARE UPHELD. A CCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. 14. IN THE RESULT, THE APPEALS OF THE REVENUE AS WELL AS OF THE ASSESSE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 17TH JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 17TH JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. SONALIKE AGRO INDUSRIES, CORPN. H OSHIARPUR. 2. THE ADDL. CIT, HOSHIARPUR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ASR. TRUE COPY BY ORDER 11 (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.