ACIT, New Delhi V. M/s. VLCC (India) Pvt. Ltd., New Delhi

ITA 4516/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65871 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 28-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 10-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS SHUMANA SEN
• Keywords: Depreciation; Business expenditure; Additional evidence; Reasonable cause; Revenue expenditure; Capital expenditure

Judgement Text

ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER I.T.A.NO.4516/DEL/2011 ASSESSMENT YEAR : 2005-06 ACIT, VS VLCC (INDIA) PVT. LTD., CIRCLE 17(1), M-14 , COMMERCIAL COMPLEX, NEW DELHI. GREAT ER KAILASH-II, NEW DELHI 110048 (PAN: AABCV5507D) (APPELLANT) (RESPONDENT) APPELLANT BY: MRS. SHUMANA SEN, SR.DR RESPONDENT BY : SHRI VINOD BIN DAL, MRS. SWEETY KOTHARI O R D E R PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX(A)-XIX, NEW DELHI DATED 25.07.2011 FOR AY 2005-06. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS 40,75,143/- MADE BY THE AO UNDER THE HEAD 'BRAND VALUE'. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) HAS ERRED IN ENTERTAINING AD DITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TAX RULES AND ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 2 IGNORING THE OBJECTIONS OF THE AO SUBMITTED IN THE REMAND REPORT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS.16,64,599/- MADE BY THE AO ON ACCOUNT OF CASH BA LANCE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.66,25,9151- MADE BY THE AO OUT O F BUSINESS PROMOTION EXPENDITURE AS THE ASSESSEE COMP ANY FAILED TO SUBSTANTIATE ITS CLAIM OF EXPENSES. 5. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF APPEAL. 3. BRIEF FACTS OF THE CASE GIVING RISE TO THIS APPE AL ARE THAT THE ASSESSEE FILED THE RETURN DECLARING INCOME OF RS.1,11,329/- AND THE SAME WAS SELECTED FOR SCRUTINY. CONSEQUENTLY, NOTICE U/S 143(2) OF T HE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) WAS SERVED ON THE COMPANY. THE ASSESSING OFFICER FINALIZED THE ASSESSMENT WITH A TOTAL TAXABLE INCOM E OF RS.21,71,830 BY MAKING SOME ADDITIONS AND DISALLOWANCES. THE ASSES SEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A) WHICH WAS PARTLY ALLOWED. NOW, THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) ON THE ABOVE MENTIONE D GROUND. ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 3 GROUND NO.2 4. APROPOS GROUND NO.2, LD. DR SUBMITTED THAT THE C OMMISSIONER OF INCOME TAX(A) ERRED IN ENTERTAINING AND CONSIDERING ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE UNDER RULE 46A OF THE INC OME TAX RULES 1962 IGNORING THE OBJECTIONS OF THE ASSESSING OFFICER SU BMITTED IN THE REMAND REPORT. THE COUNSEL FOR THE ASSESSEE BEFORE US CON TENDED THAT THERE IS NO VIOLATION OF RULE 46A OF THE RULES AS THE LD. COMMI SSIONER OF INCOME TAX(A) CALLED THE REMAND REPORT FROM THE ASSESSING OFFICER AND THEN IT WAS ADMITTED AND CONSIDERED. 5. AFTER CAREFUL CONSIDERATION OF THE ABOVE SUBMISS IONS AND PERUSAL OF THE RECORD, WE OBSERVE THAT THE COMMISSIONER OF INC OME TAX(A) CALLED A REMAND REPORT FROM THE ASSESSING OFFICER IN REGARD TO THE PETITION OF THE ASSESSEE DATED 04.02.2009 UNDER RULE 46A OF THE RUL ES FOR ADMISSION OF CERTAIN BILLS/DOCUMENTS FOR THE EXPENDITURE CLAIMED . ON PERUSAL OF APPLICATION FILED BY THE ASSESSEE UNDER RULE 46A AV AILABLE ON PAGE 64 AND 65 OF THE PAPER BOOK, WE OBSERVE THAT IN PARA 1, TH E ASSESSEE SUBMITTED THAT THE ASSESSEE COULD NOT FILE THE RELEVANT EVIDENCE B EFORE THE ASSESSING OFFICER DUE TO REASONABLE CAUSE BEYOND THE CONTROL OF THE A SSESSEE. THEREFORE, THE SAME MAY BE ADMITTED AND CONSIDERED AS ADDITIONAL E VIDENCE. FROM THE IMPUGNED ORDER PARA 3, WE OBSERVE THAT THE COMMISSI ONER OF INCOME ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 4 TAX(A) CONSIDERED THE REMAND REPORT DATED 29.3.2011 , OBJECTIONS OF THE ASSESSING OFFICER THEREIN AND REJOINDER OF THE ASSE SSEE DATED 07.06.2011 BEFORE ADMISSION AND CONSIDERATION OF ADDITIONAL EV IDENCE. ON PERUSAL OF REMAND REPORT (PAPER BOOK PAGE 66/67 ) IT REVEALS THAT THE ASSESSING OFFICER CONTENDED THE ADMISSION OF AD DITIONAL EVIDENCE BUT HE DID NOT EXAMINE AND VERIFY THE ADDITIONAL EVIDENCE AS REQUIRED BY RULE 46A(3) OF THE RULES. IN VIEW OF JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT VS MANISH BUILD W ELL (P) LTD. 245 CTR 397 (DELHI) WHEREIN THEIR LORDSHIPS HELD THAT WHENEVER THE ASS ESSEE WHO IS IN APPEAL, INVOKES RULE 46A, IT IS INCUMBENT UPON CIT(A) TO COMPLY WITH THE REQUIREMENTS OF THE RULE. THE RELEVANT OP ERATIVE PARA IS RESPECTFULLY REPRODUCED AS UNDER:- 24. IN THE PRESENT CASE, THE CIT (A) HAS OBSERVED THAT THE ADDITIONAL EVIDENCE SHOULD BE ADMITTED BECAUSE THE ASSESSEE WAS PREVENTED BY ADDUCING ITA NO.928/2011 PAGE 28 O F 31 THEM BEFORE THE ASSESSING OFFICER. THIS OBSERVATION TAKES CARE OF CLAUSE (C) OF SUB-RULE (1) OF RULE 46A. THE OBSE RVATION OF THE CIT (A) ALSO TAKES CARE OF SUB-RULE (2) UNDER W HICH HE IS REQUIRED TO RECORD HIS REASONS FOR ADMITTING THE AD DITIONAL EVIDENCE. THUS, THE REQUIREMENT OF SUB-RULES (1) AN D (2) OF RULE 46A HAVE BEEN COMPLIED WITH. HOWEVER, SUB-RULE (3) WHICH INTERDICTS THE CIT (A) FROM TAKING INTO ACCOU NT ANY EVIDENCE PRODUCED FOR THE FIRST TIME BEFORE HIM UNL ESS THE ASSESSING OFFICER HAS HAD A REASONABLE OPPORTUNITY OF EXAMINING THE EVIDENCE AND REBUT THE SAME, HAS NOT BEEN COMPLIED WITH. THERE IS NOTHING IN THE ORDER OF THE CIT (A) TO SHOW THAT THE ASSESSING OFFICER WAS CONFRONTED WITH THE CONFIRMATION LETTERS RECEIVED BY THE ASSESSEE FROM THE ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 5 CUSTOMERS WHO PAID THE AMOUNTS BY CHEQUES AND ASKED FOR COMMENTS. THUS, THE END RESULT HAS BEEN THAT ADDITI ONAL EVIDENCE WAS ADMITTED AND ACCEPTED AS GENUINE WITHO UT THE ASSESSING OFFICER FURNISHING HIS COMMENTS AND WITHO UT VERIFICATION. SINCE THIS IS AN INDISPENSABLE REQUIR EMENT, WE ARE OF THE VIEW THAT THE TRIBUNAL OUGHT TO HAVE RES TORED THE MATTER TO THE CIT (A) WITH THE DIRECTION TO HIM TO COMPLY WITH SUB-RULE (3) OF RULE 46A. IN OUR OPINION AND WITH R ESPECT, THE ERROR COMMITTED BY THE TRIBUNAL IS THAT IT PROCEEDE D TO MIX UP THE POWERS OF THE CIT (A) UNDER SUB- ITA NO.928/201 1 PAGE 29 OF 31 SECTION (4) OF SECTION 250 WITH THE POWERS VESTED IN HIM UNDER RULE 46A. THE TRIBUNAL SEEMS TO HAVE OVER LOOKED SUB-RULE(4) OF RULE 46A WHICH ITSELF TAKES NOTE OF THE DISTINCTION BETWEEN THE POWERS CONFERRED BY THE CIT (A) UNDER THE STATUTE WHILE DISPOSING OF THE ASSESSEE'S APPEAL AND THE POWERS CONFERRED UPON HIM UNDER RULE 46A. THE T RIBUNAL ERRED IN ITS INTERPRETATION OF THE PROVISIONS OF RU LE 46A VIS-- VIS SECTION 250(4). ITS VIEW THAT SINCE IN ANY CASE THE CIT (A), BY VIRTUE OF HIS CONTERMINOUS POWERS OVER THE ASSES SMENT ORDER, WAS EMPOWERED TO CALL FOR ANY DOCUMENT OR MA KE ANY FURTHER ENQUIRY AS HE THINKS FIT, THERE WAS NO VIOL ATION OF RULE 46A IS ERRONEOUS. THE TRIBUNAL APPEARS TO HAVE NOT APPRECIATED THE DISTINCTION BETWEEN THE TWO PROVISI ONS. IF THE VIEW OF THE TRIBUNAL IS ACCEPTED, IT WOULD MAKE RUL E 46A OTIOSE AND IT WOULD OPEN UP THE POSSIBILITY OF THE ASSESSEES' CONTENDING THAT ANY ADDITIONAL EVIDENCE SOUGHT TO B E INTRODUCED BY THEM BEFORE THE CIT (A) CANNOT BE SUB JECTED TO THE CONDITIONS PRESCRIBED IN RULE 46A BECAUSE IN AN Y CASE THE CIT (A) IS VESTED WITH CONTERMINOUS POWERS OVER THE ASSESSMENT ORDERS OR POWERS OF INDEPENDENT ENQUIRY UNDER SUB-SECTION (4) OF SECTION 250. THAT IS A CONSEQUEN CE WHICH CANNOT AT ALL BE COUNTENANCED FOR THE ABOVE REASON, WE ARE OF THE OPINION THAT T HIS ISSUE DESERVES TO BE RESTORED TO THE FILE OF THE CIT(A) FOR COMPLIANC E OF RULE 46A(3). GROUND NO.2 OF THE REVENUE IS DECIDED IN FAVOUR OF THE REV ENUE. ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 6 GROUND NO.1 6. APROPOS GROUND NO.1, THE DR SUBMITTED THAT THE ASSESSING OFFICER AFTER DETAILED DISCUSSION AND CAREFUL CONSIDERATION OF THE EVIDENCE AND SUBMISSIONS OF THE ASSESSEE RIGHTLY HELD THAT THE E XPENSES INCURRED OUTSIDE THE BOOKS OF ACCOUNTS WERE NOT FOR THE PURPOSE OR I N CONNECTION WITH THE BUSINESS. HE FURTHER SUBMITTED THAT THE COMMISSION ER OF INCOME TAX(A) REDUCED THIS ADDITION WITHOUT ANY JUSTIFIED REASON. 7. ON CAREFUL PERUSAL OF THE IMPUGNED ORDER, INTER ALIA, ASSESSMENT ORDER AND PERUSAL OF THE RECORD, WE OBSERVE THAT THE CIT( A) DECIDED THIS ISSUE WITH THE FOLLOWING OBSERVATIONS:- 8.1 VLCC INDIA LTD. IS THE OWNER OF 'VLCC BRAND' A ND HAS GOT ALL THE VLCC LOGOS REGISTERED WITH TRADE MA RK REGISTRY. THE MAIN SOURCE OF INCOME OF THE COMPANY IS ROYALTY RECEIVED FROM VLCC HEALTH CARE LIMITED FOR USING ITS BRAND FOR RUNNING BEAUTY AND SLIMMING CENTERS. 8.2 THE ASSESSEE HAS TO PROMOTE AND MAINTAIN ITS BR AND SO THAT ROYALTY INCOME EARNED FROM THE BRAND NAME CAN BE MAXIMIZED. THE COMPANY HAS TO INCUR CERTAIN EXPENSE S FOR CARRYING OUT DAY-TO-DAY BUSINESS BESIDES SOME OTHER EXPENSES, WHICH DIRECTLY HELP IN BUILDING THE, BRAN D NAME. THESE EXPENSES INCLUDE ORGANIZING EVENTS, TRAVELING , ADVERTISEMENT ETC. THAT HELPS IN MAKING THE BRAND K NOWN TO THE MASSES. 8.3 AS THESE EXPENSES HELP IN BRAND BUILDING, WHICH IS A REGULAR PROCESS AND BENEFITS OF THE SAME ACCRUE TO THE ASSESSEE FOR MORE THAN ONE YEAR, THE SAME ARE CAPIT AL IN NATURE. THUS SUCH TYPE OF EXPENSES WHICH DIRECTLY R ELATED TO BRAND BUILDING WERE CAPITALIZED AND DEPRECIATION WA S ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 7 CHARGED ON THEM @25% AS THE SAID EXPENSES WERE INCU RRED TO CREATE A BRAND NAME WHICH IS THE MAIN ASSET OF T HE COMPANY. THE DEPRECIATION WAS CHARGED @ 25% WHICH I S A RESIDUAL CATEGORY AND INCLUDES ALL THE OTHER ASSETS ON WHICH DEPRECIATION IS CHARGEABLE IF THE SAME IN NOT INCLU DED IN ANY CATEGORY OF SPECIFIED RATES. 8.4 THE AO OBSERVED THAT THE APPELLANT COULD PRODUC E BILLS FOR RS. 1,24,04,721 AGAINST THE CAPITALIZED EXPENDI TURE OF RS. 1,64,79,864. THE AO FURTHER OBSERVED THAT RS. 5 5,10,000 BEING THE PAYMENT MADE TO SET INDIA LTD. FOR WHICH BILL IS PRODUCED IS ELIGIBLE FOR DEPRECIATION. 8.5 THE AO WORKED OUT DISALLOWANCE OF RS. 40,75,143 AS UNDER: BILLS PRODUCED .... 1,24,04,721 LESS: CAPITAL EXPENDITURE ELIGIBLE FOR DEPN OUT OF THE ABOVE 55,10,000 BALANCE EXPENDITURE FOR WHICH BILLS ARE AVAILABLE . 68,94,721 TOTAL CAPITAL EXPENDITURE .. 1,64,79,864 LESS: CAPITAL EXPENDITURE ELIGIBLE FOR DEPN ... 55,10,000 BALANCE EXPENDITURE .. 1,09,69,864 LESS: BILLS PRODUCED . 68,94,721 DISALLOWANCE MADE . 40,75,143 8.6 IN THE COURSE OF THESE PROCEEDINGS THE AR FURTH ER BROUGHT ON RECORD EVIDENCE FOR EXPENDITURE OF RS. 1 6,09,348 WHICH IS ADMITTED. HENCE THE EXPENDITURE FOR WHICH NO EVIDENCE IS PRODUCED STANDS AT RS. 24,65,795 (40,75 ,143- 16,09,348). 8.7 THE AR CONTENDED THAT THE AO CANNOT ADD THE AMOUNT FOR WANT OF BILLS SINCE THE EXPENDITURE WAS ACCOUNT ED FOR AND AT BEST DEPRECIATION CANNOT BE ALLOWED. I AM IN AGR EEMENT WITH THE CONTENTION OF THE ASSESSEE SINCE THE AMOUN T IS RECORDED IN THE BOOKS. THE AO IS HEREBY DIRECTED TO DELETE THE ADDITION OF RS. 40,75,143. ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 8 8.8 THERE IS NO SERIOUS OBJECTION FROM THE AO FOR T REATING THE SAID EXPENDITURE AS CAPITAL EXPENDITURE AS HE HIMSE LF ALLOWED DEPRECIATION ON RS. 55,10,000. HENCE THE AO IS HERE BY DIRECTED TO DISALLOW DEPRECIATION ON THE AMOUNT OF RS. 24,65 ,795 FOR WHICH NO EVIDENCE IS PRODUCED. ACCORDINGLY, GROUND NO. 1 IS ALLOWED AND GROUND NO. 2 IS PARTLY ALLOWED. 8. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CL AIMED AS ADDITION IN FIXED ASSETS (BRAND VALUE OF RS. 1,24,04,721). THE ASSESSING OFFICER FURTHER NOTED THAT EXCEPT THE DEBIT NOTE OF SET INDIA LTD. AMOUNTING TO RS.55,10,000, ALL OTHER EXPENSES HAVE NOTHING TO DO WITH THE ACCR ETION IN BRAND VALUE AND SINCE THE BRAND VALUE IS AN INTANGIBLE ASSET, ITS V ALUE CANNOT BE INCREASED BY ADDING EXPENSES THAT WERE NOT INCURRED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF OR IN CONNECTION WITH BUSINESS. THE ASS ESSING OFFICER CONSIDERED THE EXPENSES OF RS.55,10,000 FOR CAPITAL IZATION AND HE ALSO HELD THAT ALL OTHER EXPENSES HAVE NO BEARING ON THE ACCR ETION VALUE OF THE BRAND AND BALANCE EXPENSES OF RS.40,75,143 WERE DISALLOWE D. 9. THE COMMISSIONER OF INCOME TAX(A) OBSERVED THAT THE ASSESSEE SUBMITTED ADDITIONAL EVIDENCE PERTAINING TO EXPENDI TURE OF RS.16,09,348 AND HE GRANTED RELIEF TO THE ASSESSEE BY ALLOWING THE S AME AS EXPENDITURE INCURRED FOR THE BUSINESS. THE COMMISSIONER OF INC OME TAX(A) DIRECTED THE ASSESSING OFFICER TO DISALLOW DEPRECIATION ON THE A MOUNT OF RS.24,65,795. ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 9 BUT THE ASSESSING OFFICER DID NOT ALLOW ANY DEPRECI ATION ON DISPUTED AMOUNT OF EXPENDITURE AND HE DISALLOWED THE PART OF EXPEND ITURE OF RS.40,75,143/- FOR WHICH THE ASSESSEE-APPELLANT COULD NOT PRODUCE BILLS BEFORE THE ASSESSING OFFICER. SINCE WE HAVE OBSERVED THAT THE CIT(A) CONSIDERED THE ADDITIONAL EVIDENCE WITHOUT FOLLOWING THE PROCEDURE AS STIPULATED IN RULE 4CA(3) OF THE RULES AND WE HAVE RESTORED THIS ISSUE TO THE FILE OF CIT(A) FOR NECESSARY COMPLIANCE BY ALLOWING GROUND NO.2 IN FAV OUR OF THE REVENUE, THEREFORE THE ISSUE OF VERIFICATION OF BILLS OF RS. 16,09,348/- ALSO DESERVES TO BE RESTORED TO THE FILE OF THE CIT(A). 10. BEFORE WE PART WITH THE FINDINGS OF GROUND NO.1 , WE ALSO OBSERVE THAT IN PARA 8.6, 8.7 AND 8.8, THE LD. CIT(A) HAS GIVEN CONTRADICTORY FINDINGS. IN PARA 8.6, HE HELD THAT THE EXPENDITURE FOR WHICH NO EVIDENCE WAS PRODUCED STOOD AT RS.24,65,795/- AND HE ALLOWED THE EXPENDIT URE OF RS.16,09,348 FOR WHICH ADDITIONAL EVIDENCE WAS ADMITTED. IN PARA 8. 7 THE CIT(A) HELD THAT SINCE THE AMOUNT IS RECORDED IN THE BOOKS OF ACCOUN TS AND THE BEST DEPRECIATION CANNOT BE ALLOWED AND DIRECTED THE ASS ESSING OFFICER TO DELETE THE ENTIRE ADDITION OF RS.40,75,143. FURTHER, IN P ARA 8.8, HE ALLOWED THE ASSESSING OFFICER TO DISALLOW THE DEPRECIATION ON T HE AMOUNT OF RS.24,65,795 FOR WHICH NO EVIDENCE WAS PRODUCED BUT WE ARE UNABLE TO SEE ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 10 ANY FINDING THAT THE SAME WAS ALLOWED BY THE ASSESS ING OFFICER EITHER AS CAPITAL OR AS REVENUE EXPENDITURE. 11. IN VIEW OF ABOVE, THE FINDINGS OF THE CIT(A) AR E SELF-CONTRADICTORY AND NOT SUSTAINABLE. ACCORDINGLY, WE ARE OF THE OP INION THAT GROUND NO.1, INTER ALIA, GROUND NO.2 PERTAINING TO CONSIDERATION OF ADDITIONAL EVIDENCE RELATED TO THE VERIFICATION OF BILLS OF RSA.16,09,3 48 IS RESTORED TO THE FILE OF CIT(A). GROUND NO.1 IS ALSO DECIDED IN THE MANNER AS INDICATED ABOVE. GROUND NO.3 12. APROPOS GROUND NO.3, THE ASSESSING OFFICER ON P ERUSAL OF BALANCE SHEET NOTED THAT THERE WAS CASH BALANCE OF RS.11,64 ,599. IN RESPONSE TO THE NOTICES AND QUESTIONNAIRE, THE ASSESSEE VIDE LETTER DATED 20.12.2007 EXPLAINED THAT WITHDRAWAL OF CASH AND CASH BALANCE AT THE END OF THE YEAR WAS FOR VARIOUS EXPENSES AND COMMITMENTS. SUBSEQUE NTLY, IN REPLY DATED 24.12.2007, THE ASSESSEE EXPLAINED THAT THE WITHDRA WAL OF CASH AND CASH BALANCE AT THE END OF THE YEAR WAS FOR GIVING ADVAN CE FOR PURCHASE OF PROPERTY WHICH WAS DECIDED TO BUY BY THE MANAGEMENT AND CANCELLED SUBSEQUENTLY. IN THE THIRD REPLY ON THE SAME ISSUE DATED 28.12.2007, THE ASSESSEE EXPLAINED THAT THE WITHDRAWAL OF CASH AND CASH BALANCE AT THE END OF YEAR WAS MADE FOR ROUTINE EXPENSES FOR THE BUSINESS ACTIVITY OF THE COMPANY INCLUDING PAYMENT OF SALARY AND PAYMENTS FOR JUNIOR STAFF. THE ASSESSING ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 11 OFFICER HELD THAT THE ASSESSEE CHANGED ITS STAND IN ITS REPLY AS THE ASSESSEE DOES NOT HAVE ANY EVIDENCE TO SUPPORT THE CLAIM. T HE ASSESSING OFFICER FINALLY HELD THAT THE ASSESSEE HAS FAILED TO FURNIS H SATISFACTORY EXPLANATION AND ALSO FAILED TO FILE RELEVANT EVIDENCE AND THE A MOUNT OF WITHDRAWAL DURING THE FINANCIAL YEAR WAS CONSIDERED AS ASSESSEES UNE XPLAINED EXPENDITURE WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. 13. IN THE IMPUGNED ORDER, THE CIT(A) CONSIDERED TH E OBSERVATIONS AND FINDINGS OF THE ASSESSING OFFICER WITH DETAILED WRI TTEN SUBMISSIONS OF THE ASSESSEE. THE CIT(A) HELD THAT THE APPELLANT ASSES SEE HAS MAINTAINED BOOKS OF ACCOUNTS WHICH WERE ALSO CONSIDERED BY THE ASSES SING OFFICER. THE CIT(A) HELD THAT THERE WAS NO TRACE OF EVIDENCE TO SHOWS THAT THE CASH WITHDRAWN FROM THE BANK HAS BEEN UTILIZED FOR EITHE R INCURRING ANY EXPENDITURE OR ACQUIRING ANY ASSET WHICH WERE NOT R ECORDED IN THE BOOKS AND HE DELETED THE ADDITION WITH AN OBSERVATION THAT TH E ADDITION MERELY BASED ON SUSPICION CANNOT BE UPHELD. 14. ON CAREFUL CONSIDERATION OF THE FINDINGS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS BEFORE US, WE OBSERVE THAT THE DR D ID NOT DISPUTE THE FACT THAT DURING THE YEAR UNDER CONSIDERATION, THE TOTAL WITHDRAWAL OF CASH FROM THE BANK WAS OF RS.16,24,747 AND OPENING CASH BALAN CE AT THE BEGINNING OF THE YEAR WAS RS. 1,70,856 AND THE CLOSING CASH BALA NCE AT THE END OF THE YEAR ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 12 WAS RS.11,64,598. IN THIS SITUATION WE DECLINE TO APPROVE THE FINDING OF THE ASSESSING OFFICER THAT THE AMOUNT OF CASH WITHDRAWA LS DURING THE FINANCIAL YEAR BE CONSIDERED AS ASSESSEES UNEXPLAINED EXPEND ITURE WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. AS THE ASSESSIN G OFFICER HAS OBSERVED CASH WITHDRAWALS DURING THE YEAR, AT THE SAME TIME, THE FACT SHOULD ALSO BE CONSIDERED THAT A MAJOR AMOUNT OF CASH WITHDRAWALS HAS BEEN FOUND AS CASH BALANCE AT THE END OF THE YEAR. 15. ACCORDINGLY, WE ARE OF THE OPINION THAT THE FIN DINGS OF THE CIT(A) ARE SUSTAINABLE AND WE HAVE NO REASON TO INTERFERE WITH THE SAME. 16. FINALLY, GROUND NO.3 OF THE REVENUE DESERVES TO BE DISMISSED AND WE DISMISS THE SAME. GROUND NO.4 17. APROPOS GROUND NO.4, FROM THE PERUSAL OF P&L AC COUNT, THE ASSESSING OFFICER NOTICED THAT TOTAL EXPENSES OF RS.41,24,804 AND RS.13,18,401 HAVE BEEN DEBITED UNDER THE HEAD ADMINISTRATIVE EXPENSE S AND SALARIES & AMENITIES RESPECTIVELY. BEFORE THE ASSESSING OFFI CER, THE ASSESSEE ALSO CLAIMED EXPENSES AMOUNTING TO RS.5,90,059 AS TRAVE LING EXPENSES AND EXPENSES OF RS.20,78,998 UNDER THE HEAD BUSINESS P ROMOTION EXPENSES. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASS ESSEE FAILED TO PRODUCE EVEN A SINGLE BILL VOUCHER TO JUSTIFY THE FACT THAT SUCH EXPENSES WERE ACTUALLY ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 13 INCURRED IN CONNECTION OR FOR THE PURPOSE OF BUSINE SS CARRIED BY THE ASSESSEE. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESS EE COULD NOT EVEN FURNISH DETAIL OF OTHER EXPENSES AND SUPPORTING BILLS AND V OUCHERS. AFTER DETAILED DISCUSSION, THE ASSESSING OFFICER HELD THAT OUT OF TOTAL EXPENSES CLAIMED, RS.24,91,829 IS ALLOWED AS BUSINESS EXPENDITURE AND THE BALANCE AMOUNT OF RS.66,25,915 WAS DISALLOWED AND ADDED TO THE TOTAL TAXABLE INCOME OF THE ASSESSEE. 18. IN THE IMPUGNED ORDER, THE CIT(A) FOLLOWED THE APPELLATE ORDER FOR AY 2003-04 AND RESTRICTED THE DISALLOWANCE OF 10% O F THE EXPENDITURE INCURRED ON BUSINESS PROMOTION. THE DR DID NOT DIS PUTE THE FACT THAT THE EXPENDITURE AS CLAIMED BY THE ASSESSEE WAS ALLOWED IN THE AY 2003-04 AND IN THE APPELLATE ORDER DATED 23.08.2006, THE DISALL OWANCE WAS RESTRICTED TO 10% OF THE EXPENSES INCURRED ON BUSINESS PROMOTION. IN VIEW OF ABOVE, WE HAVE NO REASON TO INTERFERE WITH THE FINDINGS OF TH E CIT(A). ACCORDINGLY, WE ARE OF THE OPINION THAT GROUND NO.4 IS DEVOID OF MERITS AND DESERVES TO BE DISMISSED AND WE DISMISS THE SAME. GROUND NO.5 19. THIS GROUND IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION AND WE DISMISS THE SAME. ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 14 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS POSED OF AND WE TREAT IT AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23.11.2012. SD/- SD/- ( SHAMIM YAHYA ) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 23RD NOVEMBER, 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR ITA NO.4516/DEL/2011 ASSTT.YEAR: 2005-06 15