ITO, Narnaul V. Sh. Basant Kumar, Haryana

ITA 4679/DEL/2012

• Counselvise Citation: 467920114 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: SALIL AGARWAL; SHILESH GUPTA
• Keywords: Rejection of books of accounts; Earning of tax free income
• Section: 145; 143(3); 14A

Judgement Text

I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI A BENCH, NEW DELHI [CORAM: PRAMOD KUMAR AM AND C M GARG JM] I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR: 2009-10 INCOME-TAX OFFICER .APPELLANT WARD-2, NARNAUL. VS. SH. BASANT KUMAR S/O SH. SHEO NARAIN, .RESPONDENT PROP. M/S GIRDHARI LAL BRIJ MOHAN, ANAJ MANDI, MAHENDERGARH (HARYANA). [PAN: ACZPK 3730 A] APPEARANCES BY: Y KAKKAR FOR THE APPELLANT SALIL AGARWAL & SHILESH GUPTA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING: 19 TH JANUARY, 2015 DATE OF PRONOUNCING THE ORDER: 31 ST MARCH, 2015 O R D E R PER PRAMOD KUMAR: 1. THIS APPEAL, FILED BY THE ASSESSING OFFICER, IS DIRECTED AGAINST THE ORDER DATED 18 TH JUNE, 2012, PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009-10. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSING OFF ICER HAS RAISED THE FOLLOWING GRIEVANCE : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.58,78,256/- MADE ON ACCOUNT OF SUPPRESSED RECEIP TS RELYING UPON THE SUBMISSION OF THE ASSESSEE THAT THE PAYMENT HAS BEE N MADE DIRECTLY TO THE I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 2 OF 11 539 RETAILERS BY THE COMPANY WHEREAS AS PER OLTAS I NFORMATION, 26AS DETAILS AND ALSO PER TDS FORM 16A THE AMOUNT HAS BE EN CREDITED TO THE ACCOUNT OF THE ASSESSEE BY THE COMPANY. FURTHER AS PER STATEMENT OF THE AUTHORIZED SIGNATORY OF THE COMPANY THERE IS NO REC ORD WITH THE COMPANY THAT THE PAYMENT HAS BEEN MADE DIRECTLY TO THE RETA ILERS. 3. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FROM RECORDS BEFORE US, ARE AS FOLLOWS. THE ASSESSEE BEFORE US IS ENGAGED IN THE B USINESS, INTER ALIA, AS DISTRIBUTOR OF VODAFONE ESSAR TELECOM PRODUCTS FOR THE DISTRICT OF MAHENDRAGARH (HARYANA). DURING THE COURSE OF SCRUTI NY ASSESSMENT PROCEEDINGS OF THIS ASSESSEE, THE ASSESSING OFFICER NOTED THAT WHILE AS PER 26AS DETAILS IN THE DATABASE OF REVENUE ADMINISTRATION, THE ASSESSEE HA S RECEIVED RS.81,09,955 FROM VODAFONE ESSAR DIGILINK LIMITED, THE ASSESSEE HAS ACCOUNTED FOR ONLY RS.22,31,197. A FURTHER PROBE INTO THIS DISCREPANCY REVEALED THAT, ACCORDING TO THE ASSESSEE, THE BALANCE AMOUNT OF RS.58,78,256 RE PRESENTED VARIOUS TOKENS AND COUPONS, REFERRED TO AS VODAFONE CURRENCY, WH ICH WAS DIRECTLY ISSUED TO THE RETAILERS. THE ASSESSING OFFICER, HOWEVER, NOTE D THAT THIS AMOUNT OF RS.58,78,256 WAS INCLUDED IN THE PAYMENTS REFERRED TO IN FORM NO. 16A, IN RESPECT OF WHICH TAXES ARE DEDUCTED AT SOURCE, AND THAT THE AOS REQUISITION DIRECTLY TO VODAFONE ESSAR DIGILINK LTD., ON WHETHE R THE AMOUNTS WERE PAID BY CHEQUE OR DRAFT, REMAINS UNANSWERED. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER MADE AN ADDITION OF RS.58,78,256 ON ACCOUNT OF, WHAT HE TERMED AS, SUPPRESSED RECEIPTS. WHILE DOING SO, HE ALSO OBSERV ED THAT IT IS UNBELIEVABLE THAT PAYMENTS WERE MADE (BY VODAFONE) IN VODAFONE CURRENCY AND TAX WAS DEDUCTED AND DEPOSITED IN INDIAN CURRENCY AND TH AT IF AT ALL IT IS ACCEPTED THAT THERE WERE NO PAYMENTS IN INDIAN CURRENCY, IT CANNO T BE SAID THAT INCOME DID NOT ACCRUE TO THE ASSESSEE BECAUSE, AS PER PROVISIO NS OF SECTION 2(24), AN I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 3 OF 11 INCOME INCLUDES ANY SUM OR MONEY IN CASH OR IN KIND , EITHER RECEIVED OR RECEIVABLE UNDER ANY HEAD OF INCOME. AGGRIEVED BY THE ADDITION OF RS.58,78,256 ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A), WHO DELETED THE ADDITION OBSERVING AS FOLLOWS : 6. I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. AS PER THE EVIDENCE AVAILABLE ON RECORD, M/S. VODAFONE MADE PAYMENT OF RS.58,78,256/- TO AROUND 539 RETAILERS IN THE JURIS DICTION OF THE ASSESSEE TOWARDS THE PROMOTIONAL SCHEME OF THE COMPANY. NO E VIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO THAT THE AMOUNT OF RS.5 8,78,256/- WAS EITHER RECEIVED OR RECEIVABLE BY THE ASSESSEE FROM M/S. VO DAFONE DURING THE YEAR UNDER CONSIDERATION. ON THE OTHER HAND, THE ENQUIRI ES MADE BY THE AO DURING THE ASSESSMENT PROCEEDINGS AND THE REMAND PROCEEDIN GS REVEAL THAT M/S VODAFONE MADE THE PAYMENT OF RS.58,78,256/- DIRECTL Y TO VARIOUS RETAILERS. THE ONLY BASIS FOR THE AO TO MAKE THE IMPUGNED ADDI TION WAS THE ENTRIES IN FORM 26AS. THE ENTRIES IN FORM 26AS GIVE PRIMA FACI E INDICATION TO THE AO REGARDING THE RECEIPTS WHICH HAVE BEEN SUBJECT TO T DS. THE AO HAS TO MAKE FURTHER ENQUIRIES AND BRING MATERIAL ON RECORD TO C ONCLUDE THAT THE ASSESSEE HAS IN FACT RECEIVED THE AMOUNTS STATED INFORM 26AS . THE EVIDENCE COLLECTED BY THE AO POINT TO THE FACT THAT THE AMOUNT OF RS.5 8,78,256/- HAS IN FACT BEEN RECEIVED BY THE RETAILERS AS PER THE PROMOTIONAL SC HEME OF M/S. VODAFONE WHILE MAKING THE PAYMENTS DIRECTLY TO THE RETAILERS HAS RESORTED TO DEDUCTION OF TDS IN THE HANDS OF THE ASSESSEE AS THEY WERE NO T HAVING THE PAN OF VARIOUS RETAILERS. IN VIEW OF THE ABOVE, THE ADDITI ON MADE BY THE AO OF RS.58,78,256/- IS DELETED AND THE GROUNDS OF APPEAL ARE ALLOWED. 4. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GIVEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. IT IS ONLY ELEMENTARY THAT INFORMATION AS PER DA TABASE OF THE REVENUE AUTHORITIES CANNOT BE, BY ITSELF, A LEGALLY SUSTAIN ABLE BASIS FOR ADDITION BEING MADE TO THE INCOME OF AN ASSESSEE AND THAT SUCH INP UTS ARE AT BEST STARTING POINTS FOR APPROPRIATE INQUIRIES. THERE IS NOTHING MORE THAN THESE INFORMATION I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 4 OF 11 INPUTS WHICH HAVE BEEN PUT AGAINST THE ASSESSEE. WE HAVE ALSO NOTED THAT, AS EVIDENT FROM AFFIDAVIT A COPY OF WHICH IS PLACED BE FORE US AT PAGE 26 OF THE PAPER BOOK, THE ASSESSEE HAS CATEGORICALLY STATED T HAT THE IMPUGNED AMOUNT OF RS.58,78,256 SHOWN IN FORM NO. 26AS WAS NEITHER REC EIVED BY ME NOR RECEIVABLE TO ME AND THAT THE ABOVE STATED AMOUNT OF RS.58,7 8,256/- WAS DIRECTLY PAID BY THE VODAFONE ESSAR DIGILINK LTD TO THE RETAILERS OF THE COMPANY, A COMPLETE LIST OF WHICH IS PROVIDED BY THE COMPANY AND PLACED ON F ILE. WE HAVE FURTHER NOTED THAT VIDE LETTER DATED 15.12.2011 (DULY ACKNOWLEDGE D BY THE OFFICE ON 23.12.2011 EVIDENCE PLACED ON RECORD AT PAGE 27 O F THE PAPER BOOK), VODAFONE DIGILINK LTD HAS GIVEN A COMPLETE BREAK UP OF RS.58 ,78,256 AND GIVEN DETAILS OF THE RETAILERS TO WHOM THE RELATED PAYMENTS HAVE BEE N MADE. THERE IS NO MATERIAL TO COME TO THE CONCLUSION THAT ASSESSEE EV ER RECEIVED ANY SUCH COUPONS OR PAYMENTS NOR THE SAME ARE REFLECTED IN HIS BOOKS OF ACCOUNTS OR BANK STATEMENTS. THE FACT THAT THESE PAYMENTS ARE MADE B Y COUPONS AND VOUCHERS ETC. CAN ALSO NOT BE PUT AGAINST THE ASSESSEE SINCE THE ASSESSEE NEVER RECEIVED THE SAME AND THERE IS NO EVIDENCE TO THE CONTRARY. APPARENTLY, ENTIRE CONFUSION HAS STARTED FROM THE FACT THAT, PERHAPS AS A MEASUR E OF ABUNDANT CAUTION, VODAFONE DEDUCTED TAX AT SOURCE IN RESPECT OF THE V OUCHERS ETC AND, FOR WHATEVER REASONS, STATED, THE NAME OF DISTRIBUTOR A S COLLECTIVE RECIPIENT OF ENTIRE SUM. ON THESE FACTS, IN OUR CONSIDERED VIEW, LEARNED CIT(A) WAS QUITE JUSTIFIED IN DELETING THE IMPUGNED ADDITION OF RS.5 8,78,256. WE APPROVE HIS CONCLUSIONS, AND DECLINE TO INTERFERE IN THE MATTER . 7. GROUND NO. 1 IS THUS DISMISSED. I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 5 OF 11 8. IN GROUND NO. 2, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE : 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.9,28,230 MADE ON ACCOUNT OF LOW G.P. ON THE GROU NDS THAT THE DISCREPANCIES IN THE STOCK REGISTER HAS BEEN ARRIVE D BEFORE APPRECIATING THE WAY OF STOCK REGISTER WHEREAS DISCREPANCIES IN THE STOCK REGISTER HAS BEEN ARRIVED AT AFTER DETAILED EXAMINATION AND BOOK VERS ION OF THE ASSESSEE HAS RIGHTLY BEEN REJECTED BY APPLYING THE PROVISIONS OF SECTION 145 OF THE ACT. 9. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT AS AGAINST GP RATE OF 1.90% IN IMMEDIATE LY PRECEDING ASSESSMENT YEAR, THE ASSESSEE HAS SHOWN ONLY 1.45% AS GROSS PR OFIT. WHEN THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE FALL IN GROSS PROFIT, HE SUBMITTED THAT HE IS MAINTAINING QUANTITATIVE AND QUALITATIVE STOCK TAL LY AND THE ENTIRE PURCHASES AND SALES ARE VOUCHED. THE ASSESSEE FURTHER POINTE D OUT THAT THE FALL IN GP IN TAX FREE GOODS ACCOUNT IS DUE TO THE REASON THAT TH ERE WAS A PHENOMENAL INCREASE IN SALES IN COMPARISON TO F.Y. 2007-08. H OWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THESE EXPLANATIONS. HE NOTED THAT THE ASSESSEE HAD NOT PRODUCED THE STOCK REGISTER THOUGH HE HAS GIVEN QUA NTITATIVE DETAILS. HE ALSO NOTED THAT IN ANY CASE TAX AUDITOR HAD STATED THAT THE ASSESSEE DID NOT MAINTAIN STOCK RECORDS. WHEN RECORDS WERE PRODUCED BEFORE TH E AO, HE NOTED THAT ONE OF THE PURCHASE BILLS WAS NOT ENTERED IN STOCK REGISTE R, THAT E-TOP-UPS BY THE VODAFONE WERE RAISED ON C SERIES BILLS WHEREAS AL L VODAFONE PRODUCT BILLING WAS DONE ON V SERIES BILLS. WITH THESE OBSERVATIO NS, HE REJECTED THE BOOKS OF ACCOUNTS AS UNRELIABLE AND ADOPTED THE GP RATE OF 1 .90%. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DELETED THIS ADDITION AND OBSERVED AS FOLLOWS : I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 6 OF 11 9. I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. COMPLETE BOOKS OF ACCOUNTS ALONGWITH STOCK REGISTER S WERE PRODUCED BEFORE THE AO, AS EVIDENT FROM THE NOTINGS IN THE ORDER SH EET. THIS IS ALSO EVIDENT FROM THE ANALYSIS MADE BY THE AO IN PARA 2 (III) OF THE ASSESSMENT ORDER. THE DISCREPANCIES REGARDING NON ENTRY OF 14 ITEMS PERTA INING TO THE MONTH OF OCT. 2008 HAS BEEN ARRIVED AT BY THE AO BEFORE APPRECIAT ING THE WAY THE STOCK REGISTER IS MAINTAINED BY THE ASSESSEE. THIS WAS EX PLAINED IN THE WRITTEN SUBMISSIONS BEFORE ME ALONG WITH THE STOCK REGISTER , WHICH HAVE BEEN FORWARDED TO THE AO. THE AO HAS NOT MADE ANY ADVER SE COMMENTS IN THIS REGARD IN THE REMAND REPORT. THE AO SIMILARLY MISDI RECTED HIMSELF REGARDING THE STOCK REGISTER FOR THE MONTH OF FEB. 2008 (NOT THE YEAR UNDER CONSIDERATION) WITHOUT CONFRONTING THE ASSESSEE AND APPRECIATING THE FACTS WHICH LED TO THE SHOWING OF NO PURCHASES/SALES IN T HE ENTIRE MONTH. ONE OF THE CRITERIA ON WHICH THE AO REJECTED THE BOOKS OF ACCOUNTS WAS THE COMMENT OF THE AUDITOR THAT NO QUANTITATIVE STOCK DETAILS A RE AVAILABLE WITH THE ASSESSEE. THE ASSESSEE EXPLAINED THAT THEY WERE NOT PRODUCED INADVERTENTLY BEFORE THE AUDITOR DUE TO IGNORANCE. WHEN THE STOCK REGISTERS WERE PRODUCED DURING THE ASSESSMENT PROCEEDINGS AND DURING THE RE MAND PROCEEDINGS, THE AO COULD NOT BRIG ANYTHING ON RECORD THAT THE STOCK REGISTERS ARE NOT RELIABLE. IN VIEW OF THE ABOVE, IT IS HELD THAT NO CASE HAS BEEN MADE OUT BY THE AO THAT THE BOOKS OF ACCOUNTS ARE NOT RELIABLE AND COMPLETE WARRANTING THE REJECTION. THE ADDITION MADE BY THE AO ON GP RATE B ASIS OF RS.9,28,230/- IS THEREFORE DELETED AND THE GROUND OF APPEAL IS ALLOWED. 10. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIE F SO GIVEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 11. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 12. WE HAVE NOTED THAT THE SPECIFIC DISCREPANCY POI NTED OUT BY THE AO HAS ALREADY BEEN EXPLAINED BY THE ASSESSEE AND THE ASSE SSING OFFICER HAS IN REMAND PROCEEDINGS, ACCEPTED THE EXPLANATION. THE STOCK RE CORDS WERE PRODUCED BEFORE THE AO AS WELL, AND, THEREFORE, AN ADVERSE REMARK B Y THE TAX AUDITOR CEASES TO BE MUCH RELEVANT ANY WAY. IN ANY CASE, THERE IS NOTHIN G TO SHOW INCORRECTNESS OF ACCOUNTS AND JUST BECAUSE GROSS PROFIT RATE THIS YE AR IS LOWER THE BOOKS OF I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 7 OF 11 ACCOUNTS CANNOT BE REJECTED. IN THESE CIRCUMSTANCES , THE CONCLUSIONS ARRIVED AT BY THE CIT(A) DO NOT REQUIRE TO BE INTERFERED WITH. WE APPROVE THE SAME AND DECLINE TO INTERFERE IN THE MATTER. 13. GROUND NO. 2 IS ALSO DISMISSED. 14. IN GROUND NO. 3, THE ASSESSING OFFICER HAS RAIS ED THE FOLLOWING GRIEVANCE : 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.16,31,500/- MADE ON ACCOUNT OF EXCESSIVE SALARY IN COMPARISON TO THE PRECEDING YEAR ON THE FINDINGS THAT THE ADDITION HA S BEEN MADE ON ESTIMATED BASIS WHEREAS THE ADDITION WAS MADE AFTER GIVING CO GENT REASONS IN THE ASSESSMENT ORDER. 15. SO FAR AS THIS DISALLOWANCE IS CONCERNED, THE R ELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTICED THAT THERE IS A SUBSTANTIAL INCREASE IN PAY MENT OF SALARIES BY THE ASSESSEE. AS AGAINST SALARY PAYMENT OF RS.5,65,500 IN THE IMMEDIATELY PRECEDING YEAR, SALARY PAID IN THE CURRENT YEAR WAS RS.17,70, 037. IN ADDITION, PAYMENTS OF RS.7,91,716 WERE MADE FOR VODAFONE EXCLAIM AND SCHE ME A/C AND RS.90,000 FOR SALES PROMOTION. THE EXPLANATION OF THE ASSESSEE TH AT ALL THESE PAYMENTS ARE PROPERLY VOUCHED AND SUPPORTED, THAT THERE IS A PHE NOMENAL INCREASE IN SALES AND THAT PAYMENT OF VODAFONE EXCLAIM AND SCHEME FOR RS.7,91,716 WAS MADE AS PER THE VODAFONE POLICY, WAS SIMPLY BRUSHED ASIDE. THE AO NOTED THAT WHILE SALE HAS GONE UP BY 64%, THE INCREASE IN SALARIES ETC IS BY 369%. HE THUS ALLOWED INCREASED IN SALARY ONLY ON PROPORTIONATE BASIS AND DISALLOWED REST OF THE CLAIM. IN APPEAL, HOWEVER, LEARNED CIT(A) REVERSED THE STA ND OF THE AO, DELETED THIS DISALLOWANCE, AND OBSERVED AS FOLLOWS : I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 8 OF 11 14. I HAVE CONSIDERED THE ISSUE AND THE SUBMISSION S MADE BY THE AR. THE ASSESSEE HAS PRODUCED SALARY REGISTER WHEREIN THE S IGNATURES OF EMPLOYEES ARE TAKEN. FURTHER, A LARGE NUMBER OF AFFIDAVITS OF THE EMPLOYEES HAVE BEEN FILED. THE AO HAS NOT DISPUTED THE EVIDENCE FURNISH ED BY THE ASSESSEE. IT IS WELL SETTLED LAW THAT THE FACTS STATED ON AFFIDAVIT CANNOT BE SIMPLY DISBELIEVED WITHOUT EXAMINING THE PERSON OR BRINGIN G ADVERSE MATERIAL ON RECORD. INSTEAD OF DOING SO, THE AO HAS RESORTED TO ESTIMATING THE GENUINE SALARY ON THE BASIS OF INCREASE IN TURNOVER AND YE ARLY INCREASE IN SALARY. THIS ACTION OF THE AO IS CLEARLY ARBITRARY AND WITHOUT A NY BASIS AND MERELY ON SURMISES AND CONJECTURES. I HAVE NOTED FROM THE COP Y OF LEDGER OF VODAFONE EXCLAIM & SCHEME A/C THAT THE ASSESSEE RECEIVED INC ENTIVES FROM M/S. VODAFONE OF RS.36,27,959/- OUT OF WHICH EXPENDITURE ON RENT AND SALARY ETC. ON BEHALF OF M/S. VODAFONE OF RS.13,96,762/- WAS IN CURRED AND THE BALANCE AMOUNT OF RS.22,31,197/- WAS TRANSFERRED TO THE P&L A/C. THE AO HAS PICKED UP SOME ENTRIES OF SALARIES FROM THIS A/C WITHOUT A PPRECIATING THE FACTS IN TOTALITY AND CAME TO ERRONEOUS ADVERSE CONCLUSION. SINCE NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO REGARDING THE EXCE SS CLAIM OF SALARY EXPENSES AND FURTHER AS THE IMPUGNED ADDITION HAS B EEN MADE PURELY ON ESTIMATE BASIS, THE DISALLOWANCE MADE BY THE AO IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 16. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIE F SO GIVEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 17. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 18. WE FIND THAT THERE IS NO DISPUTE THAT THE SALAR Y EXPENDITURE IS PROPERLY SUPPORTED BY NECESSARY EVIDENCES AND VOUCHERS, BUT YET THE AO HAD DISALLOWED A PART OF INCREASE IN SALARY BECAUSE IT WAS NOT PRO PORTIONATE TO INCREASE IN SALES. THIS APPROACH PROCEEDS ON FALLACIOUS ASSUMPTION THA T INCREASE IN AN EXPENSE MUST CORRESPOND TO INCREASE IN BENEFIT BY THAT INCR EASE IN EXPENSES. IT IS ONLY ELEMENTARY THAT RELATIONSHIP BETWEEN AN EXPENSE AND THE BENEFITS ARISING FROM SUCH AN EXPENSE CAN NEVER BE SO LINEAR AND STATIC. THE ALLOWANCE FOR DEDUCTION, I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 9 OF 11 IN ANY CASE, IS NOT DEPENDENT ON THE RESULT IT PROD UCES. AS LONG AS EXPENSES ARE SUPPORTED BY EVIDENCES AND THERE IS NOTHING TO EVEN CALL INTO QUESTION THE FACTUM OF EXPENSE HAVING BEEN INCURRED, THE DISALLO WANCE OF SUCH EXPENSES CANNOT BE MADE FOR THE REASON THAT EXPENSE IS EXCES SIVE. IN VIEW OF THESE DISCUSSION, AS ALSO APPROVING THE REASONING ADOPTED BY THE CIT(A), WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLIN E TO INTERFERE IN THE MATTER. 19. GROUND NO. 3 IS ALSO DISMISSED. 20. IN GROUND NO. 4, THE ASSESSING OFFICER HAS RAIS ED THE FOLLOWING GRIEVANCE : 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITIONS: (I). ON ACCOUNT OF DISALLOWANCE OF INTEREST RS.12,7 05/- U/S. 14A(1) OF THE I.T. ACT. (II). ON ACCOUNT OF DISALLOWANCE OF INTEREST RS.49, 846/- U/S 36(1)(III) OF THE I.T. ACT. (III). ON ACCOUNT OF 1/6 TH DISALLOWANCE OF EXPENSES OF RS.38,027/- OUT OF CAR/MOTOR CYCLE FOR PERSONAL USE. (IV). ON ACCOUNT OF 1/6 TH DISALLOWANCE OF EXPENSES OF RS.23,233/- OUT OF TELEPHONE EXPENSES FOR PERSONAL USE. (V). ON ACCOUNT OF 1/6 TH DISALLOWANCE OF EXPENSES OF RS.16,008/- OUT OF SHOP EXPENSES BEING NOT FULLY VOUCHED. (VI). ON ACCOUNT OF 1/6 TH DISALLOWANCE OF EXPENSES OF RS.70,676/- OUT OF SALES PROMOTION BEING NOT FULLY VOUCHED. (VII). ON ACCOUNT OF ADDITION OF RS.33,000/- FOR LO W HOUSE HOLD WITHDRAWALS. I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 10 OF 11 21. AS FAR AS THE ABOVE DISALLOWANCES ARE CONCERNED , IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT DISALLOWANCES UNDER ITEMS (II I) TO (VI) ARE MADE ON ESTIMATE BASIS, FOR PERSONAL USE, DISALLOWANCE UNDER ITEM (V II) IS MADE BY ESTIMATING PERSONAL EXPENSES AT RS.1,20,000 AS AGAINST LOWER D RAWINGS BY THE ASSESSEE, DISALLOWANCE UNDER ITEM (I) IS MADE ON ACCOUNT OF I NTEREST DISALLOWANCE U/S. 14A BY ASSUMING THAT LOANS WERE USED FOR GENERATING EXEMPT INCOME, AND DISALLOWANCE UNDER ITEM (II) WAS MADE ON ACCOUNT OF INTEREST RELATABLE FOR PERSONAL PLOT. IN APPEAL, HOWEVER, LEANED CIT(A) H ELD THAT DISALLOWANCE FOR PERSONAL USE CANNOT BE MADE ON MERE SUSPICION, THAT DRAWING OF THE ASSESSEE AND HIS WIFE, PUT TOGETHER, WERE FAR IN EXCESS OF T HE EXPENSES ESTIMATED BY THE AO, THAT NO PART OF INTEREST IS RELATABLE TO TAX FR EE INCOME OR PERSONAL PLOT AS THOSE INVESTMENTS WERE MADE IN EARLIER YEARS WHILE BORROWINGS ARE REUSED IN THIS YEAR. IT WAS IN THIS BACKDROP THAT THE IMPUGNE D DISALLOWANCES WERE DELETED AGGRIEVED BY WHICH, ASSESSING OFFICER IS IN APPEAL BEFORE US. 22. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 23. WE FIND THAT SO FAR AS DISALLOWANCE OF INTEREST U/S. 14A AND INTEREST FOR PERSONAL USE OF BORROWED FUNDS IS CONCERNED, CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT BORROWED FUNDS ARE NOT USED FOR ANY OF THESE PURPOSES. NO MATERIAL IS BROUGHT BEFORE US TO CONTROVERT THESE FINDINGS. ACCORDINGLY, WE SEE NO REASONS TO DISTURB CONCLUSION ARRIVED AT BY THE CIT (A) IN RESPECT OF THESE DISALLOWANCE. THE SAME IS THE POSITION WITH RESPECT TO ADDITION ON ACCOUNT OF LOW DRAWINGS. THE AO HAD ESTIMATED ANNUAL HOUSEHOLD EXPENSES AT RS.1,20,000 I.T.A. NO. 4679/DEL/2012 ASSESSMENT YEAR 2009-10 PAGE 11 OF 11 BUT THEN ADMITTEDLY DRAWINGS OF ASSESSEE AND HIS WI FE, PUT TOGETHER, ARE RS.1,58,000. NO ADDITION IS CALLED FOR IN RESPECT O F THIS ADDITION FOR LOW HOUSEHOLD DRAWINGS EITHER. SIMILARLY, DISALLOWANCES ON ACCOUNT OF SHOP EXPENSES, TELEPHONE EXPENSES, SALES PROMOTION EXPEN SES AND CAR EXPENSES ETC ARE PURELY ON ADHOC BASIS WITHOUT ANY SPECIFIC REAS ONS. LEARNED CIT(A) RIGHTLY DELETED THE SAME. WE APPROVE HIS ACTION ON THIS POI NT AS WELL, AND DECLINE TO INTERFERE IN THE MATTER. 24. GROUND NO. 3 IS ALSO DISMISSED. 25. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOU NCED IN THE OPEN COURT TODAY ON 31 ST MARCH, 2015. SD/- SD/- C M GARG PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 31 ST DAY OF MARCH, 2015 *AKS/- COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT /DEPUTY REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI