ACIT, New Delhi V. M/s. Precision Pipes and Profiles Co. Ltd., New Delhi

ITA 4258/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65623 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 06-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRINCILLA SINCITT
• Assessee Lawyers: RANO JAIN SHRI V MOHAN
• Keywords: Rule of consistency

Judgement Text

ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.4257/DEL/2012 ASSESSMENT YEAR : 2006-07 I.T.A.NO.4258/DEL/2012 ASSESSMENT YEAR : 2008-09 ASSTT.COMMISSIONER OF INCOME TAX, VS PRECISION PIPES & PROFILES CO.LTD. CENTRAL CIRCLE-3, 4561, DEPUTY GANJ, NEW DELHI. SADAR BAZAR, NEW DELHI-110006 (PAN: AAACP5144P) (APPELLANT) (RESPONDENT) APPELLANT BY: MS PRINCILLA SINCITT, SR. DR RESPONDENT BY : MS RANO JAIN, SHRI V. MOHAN O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINS T THE ORDER OF COMMISSIONER OF INCOME TAX(A)-II, NEW DELHI DATED 1 0.05.2012 FOR AY 2006-07 AND 2008-09 RESPECTIVELY. THE ONLY GROUND IN ITA NO. 4257/D/2012 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION O F ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 2 RS.25,20,552/- MADE BY THE ASSESSING OFFICER BY WAY OF DISALLOWANCE OF PAYMENT OF ROYALTY. 2. THE GROUNDS OF APPEAL IN ITA NO. 4258/D/2012 REA D AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITI ON OF RS.22,90,697/- MADE BY THE ASSESSING OFFICER BY WAY OF DISALLOWANCE OF PAYMENT OF ROYALTY. 2. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS O N THE CASE IN DELETING THE ADDITION OF RS.5,85,033/- MADE ON ACCOUNT OF DISALLOWANCE OF CAR EXPENSES, ADVERTISEM ENT EXPENSES AND SALES PROMOTION EXPENSES. 3. THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER O F COMMISSIONER OF INCOME TAX(A) WHICH DELETED THE ADDITION MADE BY TH E ASSESSING OFFICER BY WAY OF DISALLOWANCE OF PAYMENT OF ROYALTY OF RS.25, 20,552/- IN AY 2006-07 AND ADDITION OF RS.22,90,697 FOR AY 2008-09. IN TH E APPEAL PERTAINING TO AY 2008-09, THE REVENUE IS ALSO AGGRIEVED BY THE IM PUGNED ORDER OF COMMISSIONER OF INCOME TAX(A)-II WHICH DELETED THE ADDITION OF RS.5,85,033/- MADE ON ACCOUNT OF DISALLOWANCE OF CA R EXPENSES, ADVERTISEMENT EXPENSES AND SALES PROMOTION EXPENSES MADE BY THE ASSESSING OFFICER. 4. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND CAREFULLY PERUSED THE RECORD BEFORE US IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF M ANUFACTURING OF PVC ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 3 PROFILES AND IT ENTERED INTO AN AGREEMENT WITH M/S TOKAI KOGYO CO. LTD., JAPAN TO PROCURE TECHNICAL ASSISTANCE RELATING TO K NOW-HOW, TRAINING, EDUCATION AND UPGRADATION OF TECHNOLOGY USED BY THE ASSESSEE COMPANY. AN AGREEMENT WAS EXECUTED ON 1.11.2000 AND THE SAME WA S EFFECTIVE UPTO 31.10.2005. IT WAS THE SPECIFIC TERM OF THE AGREEM ENT THAT AFTER EXPIRY OF AGREEMENT, THE ASSESSEE WOULD NOT BE ENTITLED TO US E THE TECHNOLOGY. UNDER THE TERMS OF AGREEMENT, THE ASSESSEE WAS REQUIRED T O PAY ROYALTY COMPUTED AT THE RATE OF 2% OF NET EX-FACTORY SALE PRICE FOR FIV E YEARS FROM THE DATE OF COMMERCIAL PRODUCTION. THE ASSESSING OFFICER DISAL LOWED 25% OF SUCH ROYALTY PAYMENT HOLDING THE SAME AS CAPITAL IN NATU RE. THE COMMISSIONER OF INCOME TAX(A) DELETED THE DISALLOWANCE BY OBSERVING THAT IN TERMS OF THE AGREEMENT, THE ASSESSEE COMPANY WAS NOT DERIVING AN Y BENEFIT OF ENDURING NATURE. NOW, THE REVENUE IS IN APPEAL BEFORE US AG AINST THE IMPUGNED ORDER OF COMMISSIONER OF INCOME TAX(A). GROUND NO. 1 IN BOTH THE APPEALS 5. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY WAY OF DI SALLOWANCE OF 25% PAYMENT OF ROYALTY. THE ASSESSEES REPRESENTATIVE VEHEMENTLY CONTENDED THE ABOVE SUBMISSIONS AND SUBMITTED A COPY OF THE JUDGM ENT DATED 30.4.2010 OF ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 4 ITAT DELHI F BENCH IN ASSESSEE OWN CASE IN ITA NO .374/DEL/2009 FOR AY 2005-06 (IMMEDIATELY PRECEDING TO THE ASSESSMENT YE AR UNDER CONSIDERATION IN THESE APPEALS). THE AR SUBMITTED THAT THE COMMI SSIONER OF INCOME TAX(A) DELETED THE ADDITION MADE BY THE ASSESSING O FFICER IN AY 2005-06, THEREFORE, IN THE ABSENCE OF ANY OTHER SUBSTANTIAL EVIDENCE OR CIRCUMSTANCE, PRINCIPLE OF CONSISTENCY SHOULD BE FOLLOWED. HE SU PPORTED THE IMPUGNED ORDER AND REQUESTED THAT THIS APPEAL IS DEVOID OF M ERITS AS THE ISSUE IS COVERED BY THE ABOVE JUDGMENT OF ITAT F BENCH. 6. THE OPERATIVE PARA OF JUDGMENT OF ITAT F BENCH IN ITA NO. 374/DEL/2009 IS BEING REPRODUCED AS UNDER:- WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE TERMS AND CONDITIONS OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE. WE FOUND THAT ASSESSE E WAS REQUIRED TO PAY ANNUALLY ROYALTY AT THE RATE OF 2% OF THE ITEMS MANUFACTURED UNDER THIS AGREEMENT AND SOLD DURING THE TERM OF THE SAID AGREEMENT. SUCH ROYALTY TO BE COMPUTED ON HALF YEARLY BASIS. AS THE ROYALTY PAYME NT IS DETERMINED ANNUALLY ON THE BASIS OF QUANTITY AND VA LUE OF PRODUCTION, THE EXPENDITURE SO INCURRED BY THE ASSE SSEE IS ESSENTIALLY RECURRING AND REVENUE IN NATURE. HOWEVE R, THE AO HAS TREATED 25% OF SUCH PAYMENT AS CAPITAL I N NATURE. THE EXPENDITURE SO CLAIMED IS CHARGED ON TH E PRODUCTS MANUFACTURED BY THE ASSESSEE COMPANY AND T HE SAME IS NOT INCURRED FOR ACQUIRING A PROCESS OR DES IGN OR TECHNOLOGY WHICH CAN BE UTILIZED BY THE ASSESSEE FO R YEARS TO COME SO AS TO CATEGORIZE SUCH EXPENDITURE, AS CAPITAL IN NATURE. NOTHING WAS BROUGHT ON RECORD BY THE LEARNED DR TO CONTROVERT THE FINDINGS OF THE CIT(A) RECORDED AT PAGES 5 & 6 OF APPELLATE ORDER. WE THER EFORE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 5 FOR ALLOWING THE ENTIRE PAYMENT OF ROYALTY AS REVEN UE EXPENDITURE. 7. IN VIEW OF ABOVE, WE OBSERVE THAT IN EARLIER JUD GEMENT OF TRIBUNAL IN ASSESSEES OWN CASE, IT HAS BEEN OBSERVED THAT THE ASSESSEE WAS REQUIRED TO PAY ROYALTY @2% OF THE ITEMS MANUFACTURED AND SOLD UNDER THE AGREEMENT. SUCH ROYALTY PAYMENT WAS DETERMINED ON THE BASIS OF QUANTITY AND VALUE OF THE PRODUCTION. THEREFORE, THE EXPENDITURE INCURRE D BY THE ASSESSEE COMPANY WAS ESSENTIALLY OF RECURRING AND REVENUE IN NATURE. WE ALSO OBSERVE THAT THE ASSESSING OFFICER TREATED 25% OF S UCH PAYMENT AS CAPITAL IN NATURE BUT THESE FINDINGS ARE NOT JUSTIFIED AS THE ASSESSEE COMPANY WAS NOT DERIVING ANY BENEFIT OF ENDURING NATURE. ACCORDING LY, WE HOLD THAT THE EXPENDITURE OF ROYALTY SO CLAIMED BY THE ASSESSEE C OMPANY ON THE PRODUCTS MANUFACTURED BY IT WAS RELATED AND COMPUTED AT 2% O F NET EX FACTORY SALE PRICE ON HALF YEARLY BASIS UNDER THE AGREEMENT. AD MITTEDLY, THE ASSESSEE COMPANY DID NOT MAKE PAYMENT OF ROYALTY FOR ACQUIRI NG PROCESS OR DESIGN OR TECHNOLOGY WHICH CAN BE UTILIZED BY THE ASSESSEE IN THE YEARS TO COME AND THE ASSESSEE COMPANY WAS NOT DERIVING ANY BENEFIT O F ENDURING NATURE. ACCORDINGLY, SUCH EXPENDITURE DOES NOT FALL IN THE AMBIT OF CAPITAL IN NATURE. WE ALSO OBSERVE THAT THE LD. DR HAS NOT BROUGHT ANY SUBSTANTIAL CAUSE TO ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 6 CONTROVERT THE FINDINGS OF THE COMMISSIONER OF INCO ME TAX(A) RECORDED IN THE IMPUGNED ORDER IN THIS REGARD. 8. ACCORDINGLY, WE HOLD THAT GROUND NO. 1 IN BOTH T HE APPEALS ARE SQUARELY COVERED BY THE JUDGMENT OF ITAT F BENCH IN ITA NO.374/D/2009 FOR AY 2005-06 IN ASSESSEES OWN CASE AND WE HAVE NO REASON TO TAKE A DIFFERENT VIEW. THEREFORE, GROUND NO. 1 OF BOTH THE APPEALS IS DISMISSED. GROUND NO.2 IN ITA NO.4258 9. ON EXAMINATION OF BOOKS OF ACCOUNTS AND SUPPORTI NG VOUCHERS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPAN Y CLAIMED RS.31,53,808/- AS MOTOR CAR EXPENSES AND RS. 26,96, 532/- AS ADVERTISEMENT AND SALES PROMOTION EXPENSES. THE DR FURTHER SUBMI TTED THAT THE ASSESSING OFFICER, AFTER CAREFUL CONSIDERATION OF FACTS, RIGH TLY HELD THAT THE PERSONAL NATURE OF EXPENSES UNDER ABOVE TWO HEADS WAS NOT RU LED OUT AND, THEREFORE, HE MADE ESTIMATED DISALLOWANCE OF 10% AMOUNTING TO RS.5,85,033/- ON ACCOUNT OF EXPENSES INCURRED UNDER THESE HEADS. HE FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) DELETED THE ABOVE ADDITION WITH THE OBSERVATION THAT IF NO ADVERSE REPORTING IN THE AUD IT REPORT REGARDING PERSONAL USE OF ANY BUSINESS ASSET BY THE APPELLANT AND WHER E THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC EXPENSES WHICH MAD E HIM BELIEVE THAT ANY ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 7 EXPENDITURE INCURRED BY THE APPELLANT WAS FOR SOME PERSONAL BENEFIT OF ANY DIRECTOR OR EMPLOYEE, THEN THE DISALLOWANCE ON ESTI MATED BASIS BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. THE DR SUBMI TTED THAT THE COMMISSIONER OF INCOME TAX(A) GROSSLY ERRED IN HOLD ING THAT THE APPELLANT COMPANY WAS HAVING A SEPARATE LEGAL ENTITY, THUS NO EXPENDITURE CAN BE CONSIDERED AS PERSONAL IN NATURE. 10. REPLYING TO THE ABOVE SUBMISSIONS, THE ASSESSEE S REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER MADE THIS DISA LLOWANCE ONLY ON THE BASIS OF SURMISES AND CONJECTURES BECAUSE THE ASSES SING OFFICER HAS NOT POINTED OUT ANY SPECIFIC INSTANCE WHICH COULD SUPPO RT HIS BELIEF THAT ANY EXPENDITURE INCURRED BY THE APPELLANT PERTAINING TO THE MOTOR CAR EXPENSES, ADVERTISEMENT EXPENSES AND SALES PROMOTION EXPENSES WAS FOR SOME PERSONAL BENEFIT OF ANY DIRECTOR OR EMPLOYEE OF THE COMPANY. THE AR SUPPORTED THE IMPUGNED ORDER AND RELIED ON THE JUDGMENT OF ITAT, DELHI BENCH IN THE CASE OF ACIT VS AMTEK AUTO LTD. 112 TTJ 455 AND JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. CO. L TD. VS. CIT 253 ITR 749 (GUJ). 11. AFTER CAREFUL CONSIDERATION OF ARGUMENTS OF BOT H THE PARTIES IN THIS REGARD AND CAREFUL PERUSAL OF IMPUGNED ORDER AND AS SESSMENT ORDER, WE OBSERVE THAT THE ASSESSING OFFICER MADE THE DISALLO WANCE OF 10% ON THE ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 8 EXPENDITURE INCURRED BY THE ASSESSEE ON MOTOR CAR, ADVERTISEMENT AND SALES PROMOTION WITH THE FOLLOWING OBSERVATIONS:- ON EXAMINATION OF THE BOOKS OF ACCOUNT AND SUPPORT ING VOUCHERS, IT IS SEEN THAT THE ASSESSEE HAS CLAIMED THE FOLLOWING EXPENSES:- (I) MOTOR CAR EXPENSES - 10% OF RS.3 1.53.808/- DIS ALLOWED: RS.3.15.380/- (II) ADVERTISEMENT & SALES PROMOTION - -10% OF RS.26.96.532/- DISALLOWED: RS.2.69,653/- ------------------ RS.5,82,033/- ------------------ THE PERSONAL NATURE OF EXPENSES UNDER THESE HEADS I S NOT RULED OUT AND. THEREFORE, THE ESTIMATED DISALLOWANCE ON A CCOUNT OF EXPENSES INCURRED UNDER THESE HEADS IS MADE. 12. THE OBSERVATIONS AND FINDINGS OF LD. COMMISSION ER OF INCOME TAX(A) IN THIS REGARD ARE AS UNDER:- 7. GROUND NO.5 IS REGARDING THE DISALLOWANCE OF MOTOR CAR EXPENSES, ADVERTISEMENT AND SALES PROMOTI ON EXPENSES. THE ASSESSING OFFICER CONTENDED THAT THE PERSONAL NATURE OF THESE EXPENSES CANNOT BE RULED O UT AND THEREFORE, THE DISALLOWANCE OF 10% OF THESE EXPENSE S IS MADE. DURING THE COURSE OF HEARING BEFORE ME THE APPELLANT HAS FILED WRITTEN SUBMISSIONS CHALLENGING THE SAME ISSUE. THE AR OF THE APPELLANT SUBMITTED AS UN DER:- 'THE A.O. HAS MADE AN ADHOC DISALLOWANCE OF RS. 5,85,0331- ON ACCOUNT OF MOTOR CAR, ADVERTISING & SELLING EXPENSES. THE SAID DISALLOWANCE HAS BEEN MA DE IN MOST ADHOC MANNER. ASSESSEE IS A COMPANY MAINTAININ G REGULAR BOOKS OF ACCOUNTS WHICH ARE SUBJECT TO AUDI T AS IS EVIDENT FROM THE AUDITED BALANCE SHEET AND PROFIT A ND LOSS ACCOUNT FILED WITH THE RETURN OF INCOME.' THE EXPEN SES DEBITED ARE FULLY VOUCHED AND DULY RECORDED IN THE BOOKS ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 9 OF ACCOUNTS. ACCORDINGLY, A. 0 WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE. YOUR HONOR WILL APPRECIATE THAT THE DISALLOWANCE HA S BEEN MADE BY THE ID. AO IN A VERY ARBITRARY MANNER. HE H AS SIMPLY STATED THAT THE PERSONAL USE CANNOT BE RULED OUT. THE COMPANY BEING A SEPARATE LEGAL ENTITY, EXPENDIT URE INCURRED ON EMPLOYEES AND DIRECTORS IS AN EXPENDITU RE INCURRED FOR THE PURPOSE OF THE BUSINESS AND THE SA ME NEED TO BE DELETED. WHAT TO TALK ABOUT THE EXPENDITURE I N THE PRESENT CASE ON ACCOUNT OF MOTOR CAR, ADVERTISING A ND SELLING EXPENSES WHICH HAS BEEN INCURRED EXCLUSIVEL Y FOR THE BUSINESS OF THE APPELLANT COMPANY. IN THIS REGARD YOUR HONOUR'S ATTENTION IS DRAWN TO THE DECISION OF SAYAJI IRON & ENGG. CO. LTD. VS. CIT 25 3 ITR 749 WHEREIN IT WAS HELD THAT FOR THE PURPOSE OF A COMPANY NO EXPENDITURE SHALL BE DEEMED TO BE IN THE NATURE OF PERSONAL EXPENDITURE AS THE COMPANY IS A SEPARATE L EGAL ENTITY. THE ACTION OF THE AO CLEARLY DEPICTS THE EXTENT OF GUESS WORK DONE BY HIM. PROBABLY HE HAS PASSED THE ASSESS MENT ORDER WITHOUT LOOKING INTO THE RETURN OF INCOME AND BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FILED BEF ORE HIM U/S 139(1) BY THE APPELLANT. IT IS THUS HE HAS FAIL ED TO APPRECIATE THE FACT THAT THE BOOKS OF ACCOUNTS OF T HE ASSESSEE ARE AUDITED BY A CHARTERED ACCOUNTANT AND THERE IS NO ADVERSE FINDING OF SUCH KIND BY THE AUDITOR I N ITS REPORT. YOUR HONOUR A COPY OF AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT IS PLACED FOR YOUR KIND REF ERENCE IN THE PAPER BOOK. A PERUSAL OF THE SAME WILL REVEAL T HAT THE ASSESSEE HAS DULY RECORDED ALL THE TRANSACTIONS IN ITS BOOKS OF ACCOUNTS. THE ASSESSEE IS UNABLE TO UNDERSTAND T HE STATE OF MIND OF THE ID. AO IN WHICH HE HAS MADE THE SAID ADDITION. IT IS PRAYED BEFORE YOU TO KINDLY DELETE IT AS THE SAME IS WITHOUT ANY BASIS AND WITHOUT BRINGING ANY CORROBORATIVE EVIDENCE AGAINST THE ASSESSEE. ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 10 IT IS SURPRISING TO NOTE THAT THE ID. AO HAS NOT WR ITTEN ANYTHING EXCEPT WRITING THAT THE PERSONAL USE CANNO T BE RULED OUT. HE HAS NOT BROUGHT FORWARD EVEN AN IOTA OF FACT OR INFIRMITY IN THE BOOKS OF ACCOUNTS/ DETAILS PROD UCED BEFORE HIM. THUS HIS ACTION OF MAKING A DISALLOWANC E WITHOUT ANY CORROBORATIVE EVIDENCE IN THIS RESPECT IS BAD IN LAW AND AGAINST THE FACTS OF THE CASE. YOUR HONOUR, IT IS PRAYED TO KINDLY DELETE THE DISA LLOWANCE MADE BY THE ID. AO WHICH IS COMPLETELY BASED ON HIS WHIMS AND FANCIES AND VOID IN LAW. IN THIS RESPECT YOUR ATTENTION IS DRAWN TO THE JUDGMENT IN THE CASE OF L AKE PALACE HOTELS MOTELS PVT. LTD. VS DCIT ITAT JODHPUR BENCH ITA NO. 421 AND 4841JP/1993 DATED 1FT' JULY, 2001 CLEARLY STATES: 'AD HOC DISALLOWANCE OF MISCELLANEO US EXPENSES WHICH WAS MADE ON ACCOUNT OF NON-AVAILABIL ITY OF COMPLETE DETAILS OF UNVERIFIABLE NATURE AND ELEMENT OF NON- BUSINESS PURPOSE INVOLVED IN THE SAID EXPENSES WAS DELETED ON THE GROUND THAT THE LOWER AUTHORITIES HAD NOT GI VEN ANY FINDING IN SUPPORT OF THE DISALLOWANCE NOR POINTED OUT ANY SPECIFIC INSTANCE TO JUSTIFY THE DISALLOWANCE. ' IN THE CASE OF ACIT VS. AMTEK AUTO LTD. 112 TTJ 455 (DEL) IT WAS SPECIFICALLY HELD THAT BEFORE MAKING AN ADHO C DISALLOWANCE THE ASSESSING OFFICER HAS TO BRING FOR WARD SOME PROOF THAT THE EXPENDITURE WAS NOT INCURRED FO R THE BUSINESS OF THE ASSESSEE. YOUR HONOUR IT IS ONCE AGAIN IMPORTANT TO MENTION T HAT THE BOOKS OF THE APPELLANT HAVE BEEN AUDITED BY A CHART ERED ACCOUNTANT WHO HAS THOROUGHLY CHECKED THE SAME BEFO RE GIVING HIS OPINION ON THE GENUINENESS OF THE SAME. THE ID. AO HAS TRIED TO UNSETTLE THE FACT THAT THE EXPENSES HAVE BEEN GENUINELY CLAIMED BY THE APPELLANT. SINCE THE SAID ACTION IS WITHOUT ANY CORROBORATIVE EVIDENCE THE SA ME IF LIABLE TO BE DETERRED. ' 8. I HAVE CONSIDERED THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS FILED BY THE AR AS WELL AS THE FACTS OF THE CASE AND THE POSITION OF LAW. IT IS SEEN THAT THE APPELL ANT IS A ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 11 LIMITED COMPANY. THE ACCOUNTS ARE AUDITED ON REGULA R BASIS BY THE CHARTERED ACCOUNTANT. THERE IF NO ADVE RSE REPORTING IN THE AUDIT REPORT REGARDING PERSONAL US E OF ANY BUSINESS ASSET BY THE APPELLANT. THE ASSESSING OFFI CER HAS MADE THE DISALLOWANCE ON ESTIMATED BASIS. HE HAS NO T POINTED OUT ANY SPECIFIC INSTANCE WHICH MADE HIM BE LIEVE THAT ANY EXPENDITURE INCURRED BY THE APPELLANT WAS FOR SOME PERSONAL BENEFIT OF ANY DIRECTOR OR EMPLOYEE. ASSESSING OFFICER HAS ALSO NOT HIGHLIGHTED ANY DEFE CT IN ANY VOUCHER/ACCOUNTING ENTRY DONE BY THE APPELLANT. FUR THER THE APPELLANT IS A COMPANY HAVING SEPARATE LEGAL EN TITY AND THUS NO EXPENDITURE CAN BE CONSIDERED AS PERSON AL IN NATURE. THE VARIOUS CASE LAWS QUOTED BY THE APPELLA NT ARE APPLICABLE TO THE FACTS OF THE CASE OF THE APPELLAN T. THUS THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DIS ALLOWANCE OF RS. 5,85,033/-. THE APPELLANT SUCCEEDS IN THIS GROUND OF APPEAL AND THE SAME IS ALLOWED. 13. IN VIEW OF ABOVE, AT THE OUTSET BOTH THE PARTIE S ADMITTED THAT THERE WAS NO DISALLOWANCE BY THE ASSESSING OFFICER RELATED TO MOTOR CAR, ADVERTISEMENT AND SALES PROMOTION EXPENSES IN THE EARLIER ASSESSM ENT YEAR. ON BARE READING OF THE ASSESSMENT ORDER, WE ARE INCLINED TO OBSERVE THAT THE ASSESSING OFFICER MERELY HELD THAT THE PERSONAL NAT URE OF EXPENSES UNDER THESE HEADS CANNOT BE RULED OUT, THEREFORE, HE MADE ESTIMATED DISALLOWANCE OF 10% ON ACCOUNT OF EXPENSES INCURRED IN THIS REGA RD. THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE OR OBSERVATION THAT THE PARTICULAR PART OF THIS EXPENDITURE WAS INCURRED TO EXTEND PERSONAL BENEFIT TO ANY DIRECTOR OR EMPLOYEE OF THE COMPANY. THIS POINT HAS NOT BEEN D ISPUTED BY THE LD. DR THAT THE ACCOUNTS OF THE ASSESSEE COMPANY ARE CONTI NUOUSLY AUDITED BY THE ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 12 CHARTERED ACCOUNTANT AND THERE IS NO ADVERSE REPORT ING IN THE AUDIT REPORT REGARDING ANY PERSONAL USE OF ANY BUSINESS ASSET BY THE DIRECTOR OR EMPLOYEE OF THE COMPANY. THEREFORE, WE FINALLY HOLD THAT TH E ASSESSING OFFICER MADE DISALLOWANCE ON ESTIMATED BASIS BUT HE DID NOT BRIN G ANY MATERIAL TO POINT OUT ANY SPECIFIC INSTANCE AS THE BASIS OF BELIEF TH AT ANY EXPENDITURE INCURRED BY APPELLANT COMPANY ON MOTOR CAR, AUDIT AND SALES PROMOTION WAS DONE FOR THE PERSONAL BENEFIT OF ANY DIRECTOR OR EMPLOYEE. THEREFORE, WE HAVE NO REASON TO INTERFERE WITH THE IMPUGNED ORDER OF LD. COMMISSIONER OF INCOME TAX(A) IN THIS REGARD. 14. AT THIS POINT, WE TAKE NOTE OF JUDGMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. CO. LTD. V S. CIT (SUPRA) WHEREIN IT WAS HELD THAT FOR THE PURPOSE OF COMPANY, NO EXPEND ITURE SHALL BE DEEMED TO BE IN THE NATURE OF PERSONAL EXPENDITURE AS THE COM PANY HAS A SEPARATE LEGAL ENTITY. IN THE CASE IN HAND, THE ACTION OF THE ASS ESSING OFFICER CLEARLY DEPICTS THE EXTENT OF GUESSWORK AND WE HAVE NO HESI TATION TO HOLD THAT THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER WITHO UT LOOKING INTO THE RETURN OF INCOME, BALANCE SHEET AND PROFIT & LOSS A CCOUNT FILED BY THE APPELLANT. 15. ACCORDINGLY, GROUND NO. 2 IN ITA NO. 4258/DEL/2 012 IS ALSO DISMISSED. ITA NO.4257 & 4258/D/2012 ASSTT. YEAR: 2006-07 & 2008-09 13 16. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.10.2012. SD/- SD/- (G.D. AGRAWAL) (CHANDRA MOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 12TH OCTOBER, 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR