M/s. Shruti Fasterners Ltd, New Delhi V. DCIT, New Delhi

ITA 4810/DEL/2009

• Counselvise Citation: 481020114 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 21-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROHIT GARG
• Assessee Lawyers: O P SAPRA
• Keywords: Additional evidence
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI K.D.RANJAN, ACCOUNTANT MEMBER ITA NO: 4810/DEL/2009 A.Y. : 2006-2007 M/S SHRUTI FASTENERS LTD. VS. DCIT, CIRCLE 8(1) 1666 B, 1 ST FLOOR NEW DELHI GOVINDPURI EXTENSION KALKAJI NEW DELHI 110 019 I.T.A. NO. 670/DEL/2010 A.Y. : 2006-2007 DCIT, CIRCLE 8(1) VS. M/S SHRUTI FASTENERS LTD. NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SH.O.P.SAPRA, ADV. RESPONDENT BY : SH.ROHIT GARG, D.R. O R D E R PER DIVA SINGH, J.M. THESE ARE CROSS APPEALS FILED BY THE REVENUE AND T HE ASSESSEE AGAINST THE DT. 1 ST NOVEMBER,2011 OF CIT(A)-XI FOR A.Y. 2006-07 WHERE IN THE SOLE ISSUE AGITATED BY THE ASSESSEE IS THE ADDI TION OF RS.26,03,000/- MAINTAINED BY CIT(A) ON THE BASIS OF 2% OF THE TU RNOVER WHICH IS STATED TO BE ARBITRARY AND UNJUST. JUXTAPOSED TO THE SAID GROUND THE DEPARTMENT ALSO IN ITS APPEAL AGITATES THE ISSUE T HAT THE CIT(A) WAS NOT WARRANTED IN REDUCING THE ADDITION MADE BY THE A.O. AMOUNTING RS.50 LAKHS. 2 2. THE RELEVANT FACTS QUA THE ISSUE ARE THAT THE A SSESSEE WHO WAS ENGAGED IN THE BUSINESS OF TRADING OF ZIP FASTENER S AND BUTTONS ETC. RETURNED AN INCOME OF RS. 19,05,540/-. THE A. O. BEING OF THE VIEW THAT THERE WAS FALL IN GROSS PROFIT WHEN COMPARED T O LAST YEAR FROM 9.93% TO 8.72% REQUIRED THE ASSESSEE TO EXPLAIN TH E SAME. ACCORDINGLY HE REQUIRED THE ASSESSEE TO EXPLAIN THE DETAILS OF INVENTORY OF OPENING STOCK AND CLOSING STOCK. ON CONSIDERING THE REPLY HE CONCLUDED THAT THE ASSESSEE WAS NOT MAINTAINING ANY STOCK REGISTER AS SUCH THE RESULTS REFLECTED IN THE P&L ACCOUNT WERE HELD TO BE NOT A UTHENTIC ON ACCOUNT OF THIS FACT THAT THESE DETAILS WERE NOT PROVIDED TO T HE AUDITORS. AS SUCH THE TRADING RESULTS OF ASSESSEE WERE NOT ACCEPTED, AND ADDITION OF RS.50 LAKHS WAS MADE. 3. THE ASSESSEE CONTESTED THE ISSUE BEFORE THE FIR ST APPELLATE AUTHORITY. THE SUBMISSIONS FILED VIDE ITS LETTER DT. 27.10.2009 ARE FOUND REPRODUCED IN THE IMPUGNED ORDER IN PARA 2.1. THE SAME IS REPRODUCED FOR READY REFERENCE:- FURTHER MORE WHILE COMPUTING GP, THE LD.AO HAS NOT CONSIDERED THE MISC. INCOME. THE MISC. INCOME WAS DERIVED AS COMMISSION ON DIRECT SALE FROM THE PRINCIPAL, PASSED ON TO THE CU STOMER AS DISCOUNT ON SALE. AS THE AMOUNT WAS REDUCED FROM S ALE AND GP IS NOTHING BUT RATIO OF GROSS PROFIT TO SALE HENCE IGN ORING THE FIGURE WOULD RESULT IN ERRONEOUS DATA AS PRECISELY BEING D ONE IN THE INSTANT CASE. THE ACTUAL GP FOR THE PERIOD UNDER C ONSIDERATION WAS 11.37% (A.Y. 2006-07) IN COMPARISON TO 10.82% ( AY 2005-06). IT WAS ADMITTED THAT INADVERTENT ERROR WAS CREPT IN THE SUBMISSION OF THE APPELLANT DT. 22.10.2008, NEVERTHELESS IN RE ALITY THERE WAS NO DECREASE IN GP RATIO AS HELD BY THE LD.A.O. THE RELIANCE IS PLACED ON SH KELLER & CO.LTD. VS DCIT(1994) 49 TTJ 262 (BOM). 3 IT IS A FACT THAT AUDITOR HAS GIVEN A QUALIFYING ST ATEMENT IN ITEM NO.28 OF TAR BUT AS SURVEY TOOK PLACE IN THE CASE O F THE APPELLANT ON 7.9.2006, INSPITE OF REPEATED REQUESTS NO COPIES OF SUCH DOCUMENT WAS EVER FORWARDED TO THE APPELLANT AND TH E SAME COULD BE JUSTIFIED BY THE FACT THAT THE APPELLANT HAS FIL ED AN AFFIDAVIT ON 5.12.2008 BEFORE THE A.O. DURING THE ASSESSMENT PRO CEEDINGS. FURTHER IT IS AN ADHOC ADDITION WITHOUT ASSIGNING A NY REASON AND IS LIABLE TO BE DELETED. 3.1. CONSIDERING THE FACT THAT THE STOCK REGISTER W AS NOT BEING MAINTAINED, THE ACTION OF THE A.O. IN REJECTING THE TRADING RESULTS WAS UPHELD. THE ADDITION MADE WAS SUSTAINED TO THE EXT ENT OF RS. 26,02,000/- OBSERVING AS UNDER. 2.4. IN LIGHT OF ABOVE DISCUSSION THE ACTION OF TH E AO IN REJECTING THE TRADING RESULT OF THE APPELLANT IS SU STAINED. HOWEVER IT HAS BEEN SEEN THAT THE A.O. HAS ADDED RS.50,00,000/- UNDER THE ABOVE HEAD WITHOUT ASSIGNI NG ANY PARTICULAR REASON. ACCORDING TO THE AOS CALCULATI ON, THE ADDITION COMES TO 3.8% OF THE TURN OVER. ALTHOUGH THE ACTION OF THE AO IS SUSTAINED BUT ADDITION UNDER THIS HEAD IS RESTRICTED TO 2.0% OF THE TURN OVER I.E. RS.26,03,0 00/- (TO THE NEAREST THOUSAND). 4. AGGRIEVED BY THIS BOTH THE ASSESSEE AND THE DE PARTMENT ARE IN APPEAL BEFORE US. 5. LD.A.R. CONTENDED THAT THE OBSERVATION OF THE A. O. THAT THERE WAS NO JUSTIFICATION FOR FALL IN G.P. COUPLED WITH TH E FACT THAT THE ASSESSEE WAS NOT COOPERATIVE WAS NOT CORRECT AND WOULD BE BO RNE OUT FROM THE COPY OF THE ASSESSMENT PROCEEDINGS AND THE LETTERS ADDRESSED TO THE A.O. NAMELY 15.10.2008 COPY OF WHICH IS PLACED AT PAGES 46, 47 ALONG WITH ANNEXURES THEREIN, COPIES OF WHICH ARE PLACED AT 48 TO 58 OF THE PAPER BOOK. SIMILARLY LETTER DT. 7.11.2008 COPY PLACED A T PAGE 78 ALONG WITH ANNEXURES, LETTER DT. 24.11.2008 AT PAGE 79 ALONG W ITH LIST OF MONTHLY 4 SALES AND PURCHASES AT PAGES 80 TO 84 ALONG WITH DE TAILS OF PURCHASES AND SALES OF MORE THAN RS.1 LAKH WITH COMPLETE ADD RESSES OF THE PARTIES PLACED AT PAGES 85 TO 101 OF THE PAPER BOOK. ATTEN TION TO ORDER SHEET ENTRIES DT. 26.12.2007, 20.12.2007, 16.12.2007, 23. 12.2007 AND 30 TH DECEMBER,2008 WAS INVITED. ON THE BASIS OF ABOVE E VIDENCES IT WAS SUBMITTED THAT ON EACH OF THESE OCCASIONS ASSESSEE WAS PRODUCING ITS BOOKS OF ACCOUNTS AND FULLY COOPERATING WITH THE DE PARTMENT AS SUCH INFERENCES AGAINST THE ASSESSEE ON ACCOUNT OF NON-C O-OPERATION ARE CONTRARY TO THE RECORD. 5.1. IT WAS STATED THAT ASSESSEES BOOKS OF ACCOUN TS CONSISTED OF CASH BOOK, PURCHASE REGISTER, SALES REGISTER, PURCHASE I NVOICES, SALES MEMO AND THE BANK ACCOUNTS OF THESE WERE PRODUCED AND TH ERE WAS NO DEFECT AND ALMOST ALL THE PURCHASES AND SALES WERE THROUGH BANKING CHANNELS. IT WAS ARGUED THAT NO EFFORT WAS MADE BY THE A.O. TO SHOW AS TO HOW INFLATION IN PURCHASES OR EXPENSES COULD HAVE OCCU RRED AND CLAIMED IN THE P&L A/C. IT WAS ARGUED THAT THESE WERE ALSO DULY SUPPORTED BY INVOICES/VOUCHERS. IT WAS CONTENDED THAT NO CASE H AS BEEN MADE OUT THAT THERE WAS ANY SUPPRESSION IN THE TURNOVER. I N FACT THE SALES DECLARED BY THE ASSESSEE IT WAS ARGUED HAVE BEEN AC CEPTED. IN REGARD TO THE DOUBT ENTERTAINED BY THE A.O. THAT TRADING RESU LTS COULD NOT BE ACCEPTED AS THERE WAS A FALL IN G.P. RATE, IT WAS A RGUED THAT AS PER THE FACTS AVAILABLE ON RECORD IT WOULD BE SEEN THAT THE TRADING RESULTS ARE 5 COMPARABLY BETTER. OUR ATTENTION WAS INVITED TO T HE FOLLOWING CHART ATTACHED AS ANNEXURE B TO THE PAPER BOOK FILED:- A.Y.S 2002-03 2003-04 2004-05 2005-06 2006-07 SALES 9,54,06,027 9,99,24,471 12,14,69,664 13,02,14,487 12,95,08,389 GROSS PROFIT 88,86,190 1,00,72,52 1,21,14,090 1,40,76,753 1,47,8 8,151 GP RATE 9.31% 10.08% 9.97% 10.81% 11.36% 5.2. ON THE BASIS OF THE ABOVE ASSAILING THE ACTIO N OF THE CIT(A) IN NOT DELETING THE ENTIRE ADDITION AND SUSTAINING THE SAM E IN AN ADHOC MANNER IT WAS HIS SUBMISSION THAT IT WAS CONTRARY TO THE SETTLED LEGAL PRINCIPLES AS HELD BY P&H HIGH COURT IN THE CASE OF JHANDUMAL TARACHAND RICE MILLS VS CIT, 73 ITR 192. IT WAS ARGUED THAT NO DEFECTS HAVE BEEN POINTED OUT IN THE DETAILS OF OPENING AND CLOSING STOCK SUBMITTED WHICH WERE DULY FILED BEFORE THE AUTHORITIES AS IN THE E ARLIER YEARS. AS SUCH THE OBSERVATION OF THE CIT(A) THAT THE ASSESSEE HAS NOT FILED DETAILS OF OPENING AND CLOSING STOCK IS NOT BORNE OUT FROM REC ORD. IT WAS VEHEMENTLY ARGUED THAT THE TAX AUDITOR HAS NEVER M ENTIONED THAT THE ASSESSEE HAD NOT BROUGHT CLOSING STOCK INTO TRADING ACCOUNT AS WOULD BE EVIDENT FROM SCHEDULE 6 TO THE BALANCE SHEET PLACED AT PAGE 21 OF THE PAPER BOOK. IT WAS SUBMITTED THAT ALL ALONG THE ASSESSEE HAS BEEN MAINTAINING ITS ACCOUNTS IN A SIMILAR MANNER SUPPOR TED BY PURCHASE INVOICES AND SALES MEMOS AND VOUCHERS FOR EXPENDITU RE AND THESE TRADING RESULTS HAVE BEEN ACCEPTED IN THE PAST. IT WAS ARGUED THAT TAKING THIS FACT IN COGNIZANCE THE CIT(A) HAS COME TO THE CONCLUSION THAT THE A.O. HAS ADDED RS.50 LAKHS UNDER THE ABOVE HEAD WIT HOUT ASSIGNING ANY 6 PARTICULAR REASON. IT WAS ARGUED THAT HAVING THUS COME TO THE ABOVE CONCLUSION CIT(A) SHOULD HAVE DELETED THE ADDITION IN ITS ENTIRETY AND THERE WAS NO OCCASION FOR HIM TO SUSTAIN IT @ 2% OF THE DECLARED TURNOVER. 5.3. IT WAS HIS ARGUMENT THAT EVEN IF THE ACCOUN T BOOKS ARE REJECTED FOR WANT OF MAINTENANCE OF STOCK REGISTER EVEN THEN NO ADDITION IS CALLED FOR IF THE DECLARED RESULT AND GROSS PROFIT RATE IS BET TER AS COMPARED TO PRECEDING YEARS. IT WAS ARGUED THAT THE TURNOVER I S ALMOST THE SAME AS DECLARED AND ACCEPTED IN 2005-06 A.Y. AND IS MUCH B ETTER AS DECLARED AND ACCEPTED IN 2002-03, 2003-04 AND 2004-05 A.YRS. RELYING UPON THE FOLLOWING CASE LAW IT WAS HIS SUBMISSION THAT IT IS SETTLED LAW THAT EVEN IF BOOKS OF ACCOUNTS ARE REJECTED, NO ADDITION IS CALL ED FOR IF DECLARED SALES ARE ACCEPTED AND G.P. RATE SHOWN IS HIGHER. RELIAN CE WAS PLACED UPON SREEDHARA PANICKER VS ITO, 7 TTJ 573(COCHIN) IN OR DER DATED 11.10.99 IN ITA 2669/DEL/91 & C.O. 63/DEL/93 IN THE CASE OF ACIT VS. M/S PANCHI PETHA STORES (ATTACHED ALONG WITH ANNEXURE C ). SPECIFIC ATTENTION WAS INVITED TO PAGE 13 OF THE SAID ORDER FOR THE FO LLOWING PROPOSITION. (I) WE AGREE WITH THIS FINDING THAT EVEN THOUGH T ECHNICALLY PROVISION OF SECTION 145(2) ARE ATTRACTED IN THIS C ASE, YET NO ADDITION COULD HAVE BEEN MADE BY THE A.O. THE DECLARED RESUL TS BEING BETTER BOTH IN TERMS OF SALE AS ALSO IN TERMS OF GROSS PRO FIT. (II) DEPARTMENTAL REFERENCE APPLICATION U/S 256(1) HAVING BEEN REJECTED, THE REVENUE FILED REFERENCE APPLICATION U /S 256(2) RAISING THE ABOVE SPECIFIC QUESTION BUT THE HONBLE ALLAHAB AD HIGH COURT VIDE ORDER DT. 5.10.99 REJECTED THE SAME. RELIANCE WAS ALSO PLACED ON ORDER DT. 20.6.2000 IN ITA 6472/DEL/93 FOR THE A.Y. 1991-92 C BENCH, ITAT, NEW DELHI IN THE CA SE OF M/S NOVELTY 7 SAREE CENTRE (COPY OF WHICH IS PLACED IN THE COMPUT ATION FILED). RELIANCE WAS ALSO PLACED ON CIT VS. GOTAN LIME KHANJI UDHYOG , RAJASTHAN HIGH COURT; (2001) 169 CTR318, R.B.JESSARAM FATECHAND (S UGAR DEPT.) VS CIT (BOMBAY HIGH COURT) 75 ITR 33; JHANDU MAL TARA CHAN D RICE MILLS VS CIT(A) (P&H HIGH COURT) 73 ITR 192; MYSORE HIGH COU RT IN VIJAY TRADERS VS CIT, 74 ITR 279; C ARUMUGA SWAMI NADAR VS CIT 42 ITR 237 (MADRAS HIGH COURT); RB BANSI LAL ABIR CHAND SPINNING & WEA VING MILLS VS CIT (BOMBAY) 75 ITR 260; INTERNATIONAL FOREST CO. VS. C IT (MP HIGH COURT) 101 ITR 721 (M.P.). 6. LD.D.R. ON THE OTHER HAND HEAVILY RELYING UPON T HE ASSESSMENT ORDER CONTENDED THAT THE ADDITION MADE BY THE AO SH OULD BE RESTORED AND THE IMPUGNED ORDER SHOULD BE SET ASIDE. AS SUC H IT WAS CONTENDED THE OCCASION TO CONSIDER FURTHER RELIEF DOES NOT AR ISE. IT WAS ALSO HIS ARGUMENT THAT WHEN THERE IS A FINDING ON RECORD BY THE A.O. THAT THERE IS A FALL IN G.P. THEN THE ARGUMENT OF ASSESSEE THAT T HE G.P. HAS GONE UP SHOULD NOT BE CONSIDERED AT THIS STAGE AND THE ISS UE SHOULD BE RESTORED BACK TO THE A.O. 7. IN REPLY THE LD.A.R. CONTENDED THAT IT IS WRONG TO SAY THAT THE ARGUMENT IS MADE FOR THE FIRST TIME BEFORE THE TRIB UNAL AS IT IS EVIDENT FROM THE IMPUGNED ORDER ITSELF WHERE THE ASSESSEES SUBMISSIONS ARE EXTRACTED THAT THIS FACT WAS ARGUED BEFORE THE CIT( A) WHICH HAS BEEN CONSIDERED FAVOURABLY BY HIM AS PARTIAL RELIEF HAS BEEN GIVEN AND THE FACTS HAVE NOT BEEN ASSAILED BY THE DEPARTMENT. 8 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE SAID SUBM ISSION NAMELY IMPROVEMENT IN GROSS PROFIT WAS ADVANCED BEFORE THE CIT(A) ALSO AND AS IS BORNE OUT FROM PARA 2.1 OF THE IMPUGNED ORDER. THE FACT THAT SALES OF THE ASSESSEE HAVE NOT BEEN DISPUTED IS A MATTER ON RECORD. IT IS FURTHER SEEN THAT THE OBSERVATION OF THE A.O. THAT THE ASSE SSEE WAS NOT COOPERATING IS ALSO NOT BORNE OUT FROM THE RECORD. THE FACT THAT THE GROSS PROFIT RATE HAS BEEN IMPROVED HAS NOT BEEN DEMOLISH ED BY THE DEPARTMENT. IN THE FACE OF THE AFOREMENTIONED FACTS AND CIRCUMSTANCES THE DEPARTMENTS PLEA THAT THE ISSUE SHOULD BE REST ORED HAS NO MERIT. CONSIDERING THE SETTLED LEGAL PRINCIPLES IN SUPPORT OF WHICH VARIOUS ORDERS OF CO-ORDINATE BENCHES AND JUDGEMENTS HAVE B EEN RELIED UPON BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE CIT(A) HA VING COME TO THE FINDING THAT THE ADDITION WAS MADE BY THE A.O. WITH OUT ASSIGNING ANY REASON SHOULD HAVE DELETED THE ENTIRE ADDITION. N O MATERIAL HAS BEEN BROUGHT ON RECORD BY THE CIT(A) TO RESORT TO MAINTA INING ADHOC ADDITION @ 2%. ACCORDINGLY FOR THE REASONS GIVEN HEREINABOV E GROUND 1 OF THE DEPARTMENT IS DISMISSED AND GROUND NO.1 AND 2 OF TH E ASSESSEE IS ALLOWED. 9. VIDE GROUND NO.2 OF THE REVENUE IT IS SEEN THAT CHALLENGE IS POSED TO THE ACTION OF THE CIT(A) IN DELETING THE ADDITI ON MADE ON ACCOUNT OF TRAVELING EXPENSES. A PERUSAL OF THE RECORD SHOWS THAT THE ASSESSEE 9 CLAIMED TRAVELING EXPENSES TO THE TUNE OF RS.14,60, 049/- WHICH CLAIM WAS REDUCED BY THE A.O. OBSERVING AS UNDER: - THE ASSESSEE COMPANY HAS CLAIMED TRAVELING EXPENSE S AMOUNTING TO RS.14,60,049/-. IT WAS REQUIRED OF TH E ASSESSEE TO JUSTIFY THESE EXPENSES BY WAY OF FILING DETAILS OF JOURNEYS UNDERTAKEN, NAMES OF THE PERSON S WHO HAD UNDERTAKEN THESE JOURNEYS, DESTINATIONS VISITED, PERIOD OF STAY, FOREIGN EXCHANGE, IF ANY, OBTAINED, ADDRESSES WHERE THE PERSONS STAYED ETC. ALL THESE DETAILS WERE REQUIRED TO BE BACKED UP BY DOCUMENTARY EVIDENCE IN THE FORM OF COPIES OF AIR/R AIL TICKETS, COPIES OF HOTEL BILLS, EVIDENCE OF FOREIGN EXCHANGE IF ANY, ACQUIRED ETC. THERE ARE NO SUCH D ETAILS AND EVIDENCES ON RECORD. ACCORDINGLY 50% OF THE EXPENSES CLAIMED UNDER THIS HEAD ARE DISALLOWED, WHICH COMES TO RS. 7,30,025/-. 10. AGGRIEVED BY THIS THE ASSESSEE WENT IN APPEAL B EFORE THE CIT(A) CONTENDING ON THE ISSUE AS UNDER. 4. REGARDING DISALLOWANCE OF RS.7,30,025/- ON TRA VELING:- THE LD.A.R.STATED : THE TRAVELING EXPENSES OF RS.14,60,049/- INCLUDES THE EXPENSE OF SHRI RAVINDER SINGHAL, THE THEN M.D. OF RS.8,72,400/- WHICH WAS INCURRED TO PURCHASE FOREIG N EXCHANGE FOR US $20,000/-, EQUIVALENT TO RS.8,72,40 0/-. SHRI SINGHAL MADE FIVE VISITS TO HONG KONG AND SINGAPORE . IN NONE OF THE TOURS NO MEMBERS OF THE FAMILY OR MEMBERS OF THE STAFF ACCOMPANIED HIM. EACH TIME THE MD TRAVELED TO SING APORE AND HONG KONG HE HAD TO SJTAY ABOUT FIVE TO SIX DAYS IN A HOTEL BEFITTING TO THE STANDARD OF OTHER DELEGATE MEMBERS . SINGAPORE OFFICE OF YKK CONTROLS INDIAN OPERATION AND IN HONG KONG YKK HAS A REGIONAL OFFICE. 11. CONSIDERING THE EXPLANATION THE CIT(A) HELD THA T THE EXPENSES INCURRED BY THE M.D. WERE WHOLLY AND EXCLUSIVELY I NCURRED FOR THE PURPOSE OF BUSINESS AS SUCH DISALLOWANCE MADE OF 50 % OF THE CLAIMED EXPENSES WAS HELD TO BE HAVING BEEN MADE WITHOUT AS SIGNING ANY REASONS, WAS DELETED. 10 11.1. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BE FORE THE TRIBUNAL. 11.2. LD.D.R. RELIED UPON THE ASSESSMENT ORDER. 12. IN REPLY THE LD.A.R. STATED THAT ALL THE TRAVEL ING EXPENSES ARE SUPPORTED BY VOUCHERS AND WERE PRODUCED BEFORE THE A.O. AND AGAIN BEFORE THE CIT(A). APART FROM RELYING UPON THE IMP UGNED ORDER AND WRITTEN SUBMISSIONS PLACED IN THE SYNOPSIS OF THE A RGUMENTS MADE BEFORE THE BENCH, RELIANCE WAS ALSO PLACED ON THE P APER BOOK PLACED BEFORE THE BENCH. SPECIFIC ATTENTION WAS INVITED T O PAGES 1 AND 2 OF THE PAPER BOOK FILED BEFORE THE CIT(A) DATED 29.10.200 9 AND ANOTHER SET OF SUBMISSIONS DATED 27.10.09 PLACED AT PAGES 8 TO 10 OF THE PAPER BOOK AGAIN BEFORE THE CIT(A). INVITING ATTENTION TO THE SAME IT WAS SUBMITTED THAT THE ASSESSEE HAD EXPLAINED THE TOTAL TRAVELING EXPENDITURE BREAK UP WAS AS UNDER. FOREIGN TRAVELING RS.12,35,144/- DOMESTIC TRAVELING RS. 37,979/- CONVEYANCE EXPENSES RS. 1,86,926/- 13. IN REGARD TO THE SAME IT WAS SUBMITTED THAT THE TRAVELING EXPENSES OF RS.14,60,049/- ARE FULLY ADDRESSED IN THESE LETT ERS WHICH WERE DULY SUPPORTED BY EVIDENCES. IT WAS REITERATED THAT THE TRAVELING WAS DONE ONLY FOR THE BUSINESS PURPOSES AND ON NONE OF THE V ISITS THE FAMILY MEMBERS TRAVELLED. IT WAS CLARIFIED THAT SINGAPORE OFFICE OF YKK CONTROLS THE INDIAN OPERATIONS AND THE REGIONAL OFFICE OF YK K WAS IN HONG KONG AS SUCH THE JOURNEYS UNDERTAKEN NECESSARILY WERE FOR B USINESS PURPOSES. APART FROM THAT TRADE FAIRS IN CHINA AND HONGKONG H AD ALSO BEEN 11 PARTICIPATED. HENCE, THE VISITS FOR STAYING IN TOU CH WITH LATEST TRENDS AND EFFORTS TO PROCURE ORDERS ETC. WERE NECESSARY FOR B USINESS PURPOSES. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION O F THE SAME, WE ARE OF THE VIEW THAT THE FINDING ARRIVED AT BY THE CIT(A) DESERVES TO BE CONFIRMED. IT IS SEEN THAT THE ASSESSEE HAS CANVAS SED THAT THE TRAVEL OF SHRI RAVINDER SINGHAL, M.D. WAS FOR BUSINESS PURPOS ES TO HONG KONG WHICH WAS THE REGIONAL OFFICE OF ASIA REGION AND TO SINGAPORE WHICH CONTROLLED THE INDIAN OPERATIONS AND ALSO TO CHINA TO ATTEND TRADE FAIRS ETC. DOCUMENTARY EVIDENCES IN THIS REGARD HAVE BEE N PERUSED BY THE CIT(A) WHICH HAVE NOT BEEN REBUTTED BY THE DEPARTME NT. THE CASUAL MANNER IN WHICH THE DISALLOWANCE IN AN ADHOC MANNER HAS BEEN MADE HAS BEEN CONSIDERED BY THE CIT(A). IN THE FACTS AS THEY STAND NOTHING HAS BEEN BROUGHT ON RECORD SO AS TO CONTEND THAT THE FI NDING DESERVES TO BE UPSET. BEING SATISFIED WITH THE REASONING AND THE FINDING IN THE FACTS AS THEY STAND GROUND NO.2 OF THE DEPARTMENT IS DISMISS ED. 15. IN THE THIRD ISSUE AGITATED BY THE REVENUE TH E FACTS ARE FOUND REPRODUCED AT PAGE 5 OF THE ASSESSMENT ORDER WHEREI N ADDITION OF RS.5,35,215/- HAS BEEN MADE WITH THE FOLLOWING OBS ERVATIONS. SIMILARLY A DISALLOWANCE OF RS.5,35,215/- IS MADE OUT OF REPAIR AND MAINTENANCE EXPENSES DUE TO LACK OF DETAILS AND EVIDENCES. 16. IN APPEAL BEFORE THE CIT(A) HE HAS HELD AS UNDE R. THERE IS NO EVIDENCE ON RECORD THAT SUCH DETAILS O F REPAIRS AND MAINTENANCE WERE NOT PRODUCED BEFORE THE A.O. THE APPELLANT 12 HAS MAINTAINED REPAIRS AND MAINTENANCE ACCOUNT ON E ACH HEAD AND THERE IS NO EVIDENCE ON RECORD BEFORE AO TO NUL LIFY SUCH CLAIM AS ADDUCED BY THE APPELLANT. IN ABSENCE OF ANY MAT ERIAL ON RECORD SUCH ESTIMATED DISALLOWANCE IS HEREBY ORDERE D TO BE DELETED. 17. THE LD.D.R. RELIED UPON THE ASSESSMENT ORDER AN D THE LD.A.R. ON THE OTHER HAND APART FROM RELYING UPON THE IMPUGNED ORDER PLACED FURTHER RELIANCE UPON THE WRITTEN SUBMISSIONS PLACED BEFORE THE CIT(A) AT PAGES 5 TO 10 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHO W THAT IT HAS BEEN CLAIMED BY THE ASSESSEE THAT IN THE COURSE OF ASSES SMENT PROCEEDINGS DETAILS OF MAJOR EXPENSES WERE SUBMITTED VIDE LETTE R DT.27 TH OCTOBER,2008 PERTAINING TO: - ADVERTISEMENT AND PUBLICITY; DIWALI EXPENSES; LEGAL AND PROFESSIONAL; PRINTING AND STATIONERY; REPAIRS & MAINTENANCE IT WAS CONTENDED THAT THEREAFTER THE AO HAS NEVER A SKED FOR ANY FURTHER DETAILS OF ANY OTHER EXPENDITURE ACCOUNT DESPITE OF THE FACT THERE WAS A SERIES OF HEARINGS THEREAFTER. IT WAS REITERATED T HAT THE BOOKS OF ACCOUNTS WERE DULY PRODUCED BEFORE THE A.O. TO HIS COMPLETE SATISFACTION WHICH COMPRISED OF ALL LEDGER ACCOUNTS OF ALL EXPENSES. THEREAFTER THE A.O. HAS NOT GIVEN ANY OPPORTUNITY TO EXPLAIN WHY THE EXPEND ITURE AS CLAIMED SHOULD NOT BE DISALLOWED. IT WAS ARGUED THAT THE S AID DISALLOWANCE CAME AS A SURPRISE TO THE ASSESSEE. ACCORDINGLY THE ASS ESSEE AGAIN FURNISHED LEDGER ACCOUNT OF ALL RELEVANT EXPENSE ACCOUNTS NAM ELY TRAVELING AND CONVEYANCE, REPAIRS AND MAINTENANCE ALONG WITH S UPPORTING VOUCHERS 13 AND BILLS ATTACHED AS ANNEXURES (AS PER PAGES 59 TO 81, AND 82 TO 95 OF THE PAPER BOOK BEFORE THE CIT(A). AS PER THE SUBMI SSIONS IT WAS CLAIMED THAT NO SPECIFIC ITEM OF DISALLOWANCE HAS BEEN POIN TED OUT BY THE A.O. AND THE DISALLOWANCE HAS BEEN MADE IN AN ADHOC MANN ER. THE ASSESSMENT ORDER WAS ASSAILED ON THE GROUND OF HAVI NG BEEN PASSED IN A CASUAL AND AN ADHOC MANNER CONTRARY TO FACTS. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME WE FIND THAT THE FINDING OF THE CIT(A) HAS NOT BEEN REBUTTED ON FACTS. IN THE FACTS AS THEY STAND WE FIND NO GOOD REASON TO INTERFERE WITH THE FINDING ARRIVED AT IN THE IMPUGNED ORDER. BEING SATISFIED BY THE REAS ONING AND THE FINDING GROUND NO.3 OF THE REVENUE IS DISMISSED. 19. THE NEXT ISSUE ADDRESSED BY THE DEPARTMENT VID E GROUND NO.4 IS THEGRIEVANCE POSED TO THE ACTION OF THE CIT(A) IN ACCEPTING THE EVIDENCE IN CONTRAVENTION TO RULE 46A RESULTING IN THE DELET ION OF THE ADDITION OF RS. 14,22,319/- MADE BY AO U/S 68 OF THE ACT. 20. RELEVANT FACTS ARE FOUND RECORDED AT PAGE 4 OF THE ASSESSMENT ORDER. DURING THE YEAR THE ASSESSEE COMPANY HAS RAISED UN SECURED LOANS FROM DIRECTORS/ SHARE HOLDERS/ RELATED PRIVAT E LIMITED COMPANIES AMOUNTING TO RS.14,22,319/-. VIDE QUESTI ONNAIRE MENTIONED ABOVE, AS PER POINT NO.17, THE ASSESSEE W AS REQUIRED TO FILE CONFIRMATIONS OF THE PERSONS GIVIN G THE UNSECURED LOAN AND THEIR COPIES OF BANK PASS BOOK/STATEMENT. FOR THE REASONS BEST KNOWN TO THE ASSESSEE COMPANY, NEITHER ANY CONFIRMATION HAS BEEN FILED NO R ANY BANK PASS BOOK HAS BEEN FILED. THE ONUS IS UPON TH E ASSESSEE IS TO EXPLAIN WITH DOCUMENTARY EVIDENCE OF ANY 14 CREDIT IN ITS BOOKS OF ACCOUNTS. THIS HAS NOT BEEN DONE. ACCORDINGLY, I AM LEFT WITH NO ALTERNATIVE TO TREAT THIS AMOUNT OF RS. 14,22,3129/- AS INCOME OF THE ASSESSEE COMPA NY FROM UNDISCLOSED SOURCES U/S 68 OF THE ACT. AN ADDITION OF RS.14,22,319/- IS THEREFORE MADE TO THE ASSESSEES INCOME. WITHOUT PREJUDICE TO THE ABOVE, DISCUSSION, IT IS OBSERVED THAT OUT OF THE SAID AMOUNT OF RS.14,22,31 9/- RECEIVED BY THE ASSESSEE COMPANY AS UNSECURED LOAN, AN AMOUNT OF RS.8,11,886/- FROM THE SAID AMOUNT OF RS.14,22,319/- IS SEEN TO BE RECEIVED FROM PRIVATE LIMITED COMPANIES WHICH ARE RELATED TO THE ASSESSEE COMPANY . THEREFORE THIS AMOUNT OF RS.8,11,886/- IS OTHERWISE ALSO TO BE TREATED AS THE INCOME OF THE ASSESSEE COMPANY U/S 2 (22)(E) OF THE I.T.ACT. HOWEVER, NO SEPARATE ADDITION ON THIS ACCOUNT IS BEING MADE SINCE AN OVER ALL ADDITION OF RS.14,22,3 19/- HAS ALREADY BEEN MADE. 21. AGGRIEVED BY THIS THE ASSESSEE WENT IN APPEAL. 22. BEFORE THE CIT(A) IT WAS CONTENDED THAT THE AM OUNT OF ADDITION IN THIS HEAD IN FACT CONSISTS OF TWO PORTIONS. OUT OF THE ENTIRE AMOUNT OF RS.14,22,319/-, RS.11,46,287/- ACCRUED AS INTEREST ON THE LOAN WHICH WAS TAKEN IN THE EARLIER YEARS. AS AN EXAMPLE IT W AS ILLUSTRATED THAT IN THE CASE OF EXTREME HOLDING P.LTD. THE OPENING BALA NCE AS ON 1.4.2005 RS.40,36,632/- AND ONLY INTEREST OF 3,57,887/- WAS PAID DURING THE YEAR. AS PER PARA 3.1. OF THE IMPUGNED ORDER FOLL OWING SUBMISSIONS WERE ALSO ADVANCED:- 3.1. WHEN THE A.O. HAS NOT CHALLENGED THE ORIGINAL LOAN ADVANCED IN THE RESPECTIVE A.Y. HE HAS NO CASE TO D ISALLOW THE INTEREST ON IT BY INVOKING SECTION 68 NOW. THE SAM E IS THE FACT IN 8 SUCH PARTIES TOTALING RS.11,46,287/-. THE BALANCE PERTAINS TO SMT.ASHA SINGHAL (RS.2,51,032/-) WHO WAS THE DIRECT OR OF THE APPELLANT COMPANY. SMT.ASHA HAS DULY FIELD RETURN FOR THE RELEVANT PERIOD WITH ACIT 8(1) AGAINST PAN AAQPS 79 19A. SMT.ASHA WAS ENTITLED FOR SALARY OF RS.3,60,000/- O UT OF WHICH, PART AMOUNT WAS PAID TO HER AND BALANCE AMOUNT WAS TRANSFERRED TO LOAN AMOUNT. SIMILARLY AN AMOUNT WA S TAKEN FROM MS SHRUTI SINGHAL (RS.25,000/-) WHO IS THE DAUGHTER OF DIRECTOR 15 OF THE APPELLANT COMPANY. MS SHRUTI HAS DULY FILED RETURN FOR THE RELEVANT PERIOD WITH ITO, WARD 47(2) AGAINST PAN AA TPS1359M. COPY OF THE BANK STATEMENT WAS ALSO ENCLOSED AND NO ADDITION IS WARRANTED ON THIS HEAD. 23. CONSIDERING THE ABOVE EXPLANATION, THE CIT(A) DECIDED THE ISSUE AS UNDER:- 3.2. I HAVE CAREFULLY GONE THROUGH THE RIVAL SUBMI SSIONS. IT IS A FACT THAT ENTIRE AMOUNT OF RS.11,46,287/- WAS THE ACCRUED INTEREST OF THE LOAN WHICH WAS TAKEN IN EARLIER YEA RS. THERE IS NO JUSTIFICATION TO ;DISALLOW THE SAME WITHOUT DISPROV ING THE AUTHENTICITY OF LOAN WHEN INTRODUCED IN THE RESPECT IVE FINANCIAL YEAR. I AGREE WITH THE SUBMISSION OF THE APPELLANT THAT THIS AMOUNT DOES NOT WARRANT TO BE DISALLOWED. FURTHER THE AMOUNT ADVANCED BY SMT.ASHA SINGHAL AND MS.SHRUTI COULD NO T BE DISPROVED BY THE A.O. IN AS MUCH AS IDENTITY, CREDI T WORTHINESS AND GENUINENESS OF THE TRANSACTION WERE PROVED IN B OTH THE CASES. HENCE THE ENTIRE DISALLOWANCES ARE ORDERED TO BE DE LETED. FURTHER THERE WERE NO ;SHARE HOLDING MORE THAN 10% OF VOTIN G POWER IN THE APPELLANT COMPANY AND HENCE INVOKING OF SECTION 2(2 2)(E) WAS NOT CORRECT. 24. LD.D.R. RELIES UPON THE ASSESSMENT ORDER. THE A.R. OF THE ASSESSEE ON THE OTHER HAND RELYING UPON THE IMPUGNED ORDER C ONTENDED THAT THE DEPARTMENT HAS FAILED TO POINT OUT AS TO WHAT WAS T HE ADDITIONAL EVIDENCE AS ADMITTEDLY THESE WERE ACCRUED INTEREST ON THE LO ANS TAKEN BY THE ASSESSEE IN THE EARLIER YEARS. IT WAS ARGUED THAT THE LOANS IN THE EARLIER YEARS STAND ACCEPTED IN REGARD TO LOAN ADVANCED TO SMT.ASHA IT WAS SUBMITTED THAT SHE IS THE WIFE OF THE M.D. WHOSE P AN DETAILS ARE AVAILABLE ON RECORD AND WHO IS ASSESSED TO TAX AND HAS BEEN DULY FILING HER RETURN. SIMILARLY MS.SHRUTHI IS THE DAUGHTER O F THE M.D. WHO ALSO DULY FILED HER RETURN AND PAN NUMBER. THE DETAILS OF THE UNSECURED LOANS IT WAS SUBMITTED ARE PLACED AT PAGE 56 OF THE PAPER BOOK WHICH ARE DULY PLACED AT PAGES 57 TO 77 OF THE PAPER BOOK AND ALL OF THESE ARE 16 ASSESSED TO TAX AND HAD GIVEN THEIR PAN NUMBERS IN THEIR CONFIRMATORY LETTERS. IT WAS CONTENDED THAT THERE WAS NO OCCASI ON TO APPLY S.2(22)(E) BY AO HOWEVER IT WAS FAIRLY CONCEDED THAT THE DEPAR TMENT HAS NOT APPEALED AGAINST THE SAID OBSERVATIONS OF CIT(A). HOWEVER WHAT WAS THE FRESH EVIDENCE IT WAS ARGUED HAS NOT BEEN SET OUT E ITHER IN THE GROUND NOR IN THE ARGUMENTS ADVANCED BY THE SR.D.R., AS TO WHAT FRESH EVIDENCE HAD BEEN FILED OR HAS BEEN CONSIDERED IS NOT STATED . 25. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME, WE ARE OF THE VIEW THAT THE CIT(A)S FINDING DESERVES TO BE U PHELD. IN THE FACTS AS THEY STAND NO FAULT WITH THE SAID FINDING HAS BEEN POINTED BY THE SR.D.R. NO ARGUMENTS HAVE BEEN MADE IN SUPPORT OF THE GROUND MOVED AS TO ADDRESS WHAT IS THE FRESH EVIDENCE WHICH THE CIT(A) HAS ENTERTAINED. THE PAST HISTORY OF LOANS TAKEN BY TH E ASSESSEE IS NECESSARILY AVAILABLE TO THE A.O. THE LOANS COMING FROM EARLIER YEARS CANNOT BE SAID TO BE A FRESH EVIDENCE BEFORE THE CI T(A). THE FACT THAT THE AMOUNTS PERTAINED TO THE INTEREST PORTION THEREON I S A FACT AVAILABLE IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY SINCE TH E DEPARTMENT HAS NOT BEEN ABLE TO POINT OUT ANY FRESH EVIDENCE ENTERTAIN ED BY THE CIT(A) CONTRARY TO RULE 46A(3) THE DEPARTMENTAL GROUND IS DISMISSED. 26. IN THE RESULT THE DEPARTMENTS APPEAL IS DISMIS SED AND THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH,2012. SD/- SD/- (K.D. RANJAN) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16TH MARCH, 2012 17 *MANGA /KAVITA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR 6.GUARD FILE BY ORDER DY. REGISTRAR