ACIT, New Delhi V. M/s. Guptajee & Company, Delhi

ITA 5168/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4807 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 17-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL GOYAL
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Additional evidence; Corroborative evidences; Onus to prove; TDS
• Section: 50C; 142(1); 40(a)(ia); 143(1); 143(2); 40a(ia); 13; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 5168/DEL/2015 AY: 2011-12 ACIT, CIRCLE 47(1), ROOM NO. 107, DRUM SHAPE BUILDING, I.P. ESTATE, NEW DELHI VS. GUPTAJEE & COMPANY, 1831, BHAGIRATH PALACE, DELHI 110 006 (PAN: AAAFG1846Q) (APPELLANT) (RESPONDENT) AND C.O. NO. 7/DEL/2016 (ITA NO. 5168/DEL/2015) AY: 2011-12 GUPTAJEE & COMPANY, 1831, BHAGIRATH PALACE, DELHI 110 006 (PAN: AAAFG1846Q) VS. ACIT, CIRCLE 47(1), ROOM NO. 107, DRUM SHAPE BUILDING, I.P. ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) AND I.T.A. NO. 4761/DEL/2015 AY: 2011-12 GUPTAJEE & COMPANY, 1831, BHAGIRATH PALACE, DELHI 110 006 (PAN: AAAFG1846Q) VS. JCIT, RANGE-29, DRUM SHAPE BUILDING, I.P. ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RAJ KUMAR GUPTA, CA; SH. SUMIT GOYAL & SH. SUNIL GOYAL, CA DEPARTMENT BY : SH. R.K. GUPTA, ADDL. CIT(DR) 2 ORDER PER H.S. SIDHU, JM REVENUE HAS FILED AN APPEAL AND ASSESSEE HAS FILE D THE CROSS OBJECTION AND AN APPEAL AGAINST THE IMPUGNED ORDER DATED 09 .06.2015 PASSED BY THE LD. CIT(A)-16, NEW DELHI RELATING TO ASSESSMENT Y EAR 2011-12. SINCE THESE APPEALS AND CROSS OBJECTION ARE RELATED TO SAME ASS ESSMENT YEAR, HENCE, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE, BY FIRST DEALING WITH REVE NUES APPEAL. 2. THE GROUNDS RAISED IN REVENUES APPEAL NO. 5168/ DEL/2015 (AY 2011- 12) READ AS UNDER:- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY A O OF RS. 21,13,44,015/- BY OBSERVING THAT THE PROPERTY COMES IN CATEGORY TYPE-1 I.E. FOR AGRICULTURAL / RESIDENTIAL NOT FOR COMMERCIAL TYPE-3. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 89,75,917/- (OUT OF RS. 95,75,917/- ) MADE BY THE AO ON PACKING EXPENSES. THESE EXPENSES WERE IN CURRED IN CASH AND ALSO VIOLATING THE PROVISION OF SECTIO N 40(A)(IA) OF THE ACT. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 9,66,284/- (OUT OF RS. 10,66,284) M ADE BY THE AO ON LOADING AND UNLOADING, CARTAGE OUTWARD ET C. THESE EXPENSES WERE INCURRED IN CASH WITHOUT ANY DOCUMENTARY EVIDENCE. 3 4. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. THE GROUNDS RAISED IN ASSESSEES CROSS OBJECTION NO. 7/DEL/2016 (AY 2011-12) READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND THE LEGAL POSITION, THE LD. CIT(A) HAS ERRED IN HOL DING THAT THE PROVISIONS OF SECTION 50C ARE APPLICABLE IN THE CASE OF APPELLANT FIRM WHEN A) THE PROPERTY FALLS IN EXTENDED LAL DORA. B) THE PROPERTY FALLS IN NON CONFIRMING CLUSTERS OF INDUSTRIAL CONCENTRATION. 2. THAT THE APPELLANT CRAVES TO ADD/ ALTER/ DELETE/ AMEND ANY GROUND(S) OF APPEAL BEFORE OR AT THE TIME OF HEARIN G. 4. THE GROUNDS RAISED IN ASSESSEES APPEAL NO. 4761 /DEL/2015 (AY 2011- 12) READ AS UNDER:- 1. THAT THE IMPUGNED ORDER OF CIT(A)-16, NEW DELHI IS BAD IN LAW AND WRONG ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LEGAL POSITION. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND THE LEGAL POSITION, THE LD. CIT(A) HAS ERRED IN C ONFIRMING THE DISALLOWANCE OF PACKING EXPENSES TO THE EXTENT OF RS. 6,00,000/- ON ADHOC BASIS. 4 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND THE LEGAL POSITION, THE LD. CIT(A) HAS ERRED IN CON FIRMING THE DISALLOWANCE OF LOADING AND UNLOADING, CARTAGE OUTW ARDS, GENERAL EXPENSES, STAFF WELFARE, BUSINESS PROMOTION AND PRINTING AND STATIONERY TO THE EXTENT OF RS. 1,00,0 00/- ON ADHOC BASIS. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND THE LEGAL POSITION, THE LD. CIT(A) HAS ERRED IN CO NFIRMING THE DISALLOWANCE OF 1/10 TH OF TELEPHONE EXPENSES AND CONVEYANCE EXPENSES AMOUNTING TO RS. 81,818/- FOR A LLEGED PERSONAL USE. 5. THAT THE APPELLANT, CRAVES, LEAVE TO ADD/ ALTER/ DELETE/ AMEND ANY GROUND(S) OF APPEAL BEFORE OR AT THE TIME OF HEARING. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIELD ITS RETURN OF INCOME ELECTRONICALLY ON 07.09.2011 DECLARING TOTAL INC OME OF RS. 16,68,42,068/-. AFTER PROCESSING THE CASE U/S. 143(1) OF THE I.T. A CT, 1961 WAS SELECTED FOR SCRUTINY BY REASON OF MANUAL SELECTION PROCESS AF TER TAKING APPROVAL OF THE CHIEF COMMISSIONER OF INCOME TAX-VI. THEREAFTER STA TUTORY NOTICES U/S. 143(2) OF THE ACT AND 142(1) WERE ISSUED TO THE ASSESSEE. IN RESPONSE THERETO, THE AR OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS AND FURNISHED THE REQUISITE DETAILS. AFTER CONSIDERING THE SAME, AO P ASSED ASSESSMENT ORDER DATED 27.3.2014 DETERMINING TOTAL INCOME AT RS. 39, 89,10,068/- AS AGAINST RETURNED INCOME OF RS. 16,68,42,034/- AND MADE VARI OUS ADDITIONS. AGAINST THE ASSESSMENT ORDER DATED 27.3.2014, ASSESSEE APPEALED BEFORE THE LD. CIT(A) WHO VIDE HIS IMPUGNED ORDER DATED 09.06.2015 HAS PA RTLY ALLOWED THE APPEAL 5 OF THE ASSESSEE. AGGRIEVED WITH THE IMPUGNED ORDER , REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING, LD. DR RELIED UPON ORDE R PASSED BY THE AO AND THE REITERATED THE CONTENTION RAISED IN THE GROUNDS OF APPEAL OF THE REVENUE AND REQUESTED THAT APPEAL OF THE REVENUE MAY BE ALL OWED. 7. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE R ELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSE D A WELL REASONED ORDER ON THE BASIS OF THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN ACCORDANCE WITH PROVISIONS OF LAW. THEREFORE, THE APPEAL FILED BY THE REVENUE MAY BE DISMISSED. IN SUPPORT OF HIS CONTENTION, HE FILED A PAPER BOOK CONTAINING PAGES 1-70, TO SUBSTANTIATE ITS CASE AND ALSO FILED THE COPY OF BRIEF SYNOPSIS. 8. WE HAVE HEARD BOTH THE PARTIES ESPECIALLY THE OR DERS OF THE AUTHORITIES BELOW ALONGWITH THE PAPER BOOK AS WELL AS BRIEF SYN OPSIS FILED BY THE LD. COUNSEL FOR THE ASSESSEE. WE HAVE GONE THROUGH THE IMPUGNED ORDER OF THE LD. CIT(A) AND FOUND THAT LD. CIT(A) HAS ELABORATE LY DISCUSSED THE ISSUES IN DISPUTE AND DECIDED THE SAME FROM PAGE NO. 18 TO 31 OF THE IMPUGNED ORDER, WHICH ARE REPRODUCED AS UNDER:- 4.00 FINDINGS & DECISIONS:- THE APPELLANT INTRODUCED CERTAIN EVIDENCE DURING AP PELLATE PROCEEDINGS. THE SAME WAS FORWARDED TO THE AO FOR HIS COMMENTS. THE AO CONSIDERED THE ADDITIONAL EVIDENCE U/S 46A OF IT RULES 1962 AND DI D NOT OBJECT TO THEIR ADMISSION. HENCE THE ADDITIONAL EVIDENCE ARE TAKEN ON RECORD BY ME FOR ADJUDICATION PURPOSES. 6 4.01 I WENT THROUGH THE SUBMISSIONS OF THE APPELLA NT AS WELL AS OF THE AO ALONGWITH VARIOUS DOCUMENTS AND REMAND REPORTS F URNISHED BY THE AO. THERE WERE ESSENTIALLY TWIN DISPUTES. THE FIRST ONE WAS THAT AS PER THE APPELLANT SEC. 50 C WAS NOT APPLICABLE. THEREFORE, DEEMED SALE VALUE COULD NOT BE APPLIED. AFTER CONSIDERING THE CONTENTIONS OF THE APPELLANT, AS ELABORATED ABOVE UNDER PARA 3 SUPRA, I AM NOT INCLINED TO AGREE WITH IT. SEC. 50 C (1) AS AMENDED W.E.F. 01.10.2009 'BY THE FINANCE (NO.2) AC T, 2009, CAME TO HAVE THE WORD 'ASSESSABLE'. PRIOR TO IT THE ONLY W ORDS IN THE SAID SECTION WERE AS 'VALUE ADOPTED OR ASSESSED'. THE WORD 'ASSE SSABLE' WAS DEFINED IN EXPLN. 2 TO SEC. 50 C ACCORDING TO WHICH THE EXP RESSION 'ASSESSABLE' MEANT THE PRICE WHICH THE STAMP VALUATION AUTHORITY WOULD CHARGE, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE ADOPTED OR ASSESSED, IF IT WERE REFERRED TO SUCH AUTHORITY FOR THE PURPOSES OF PAYMENT OF STAMP DUTY . IT IMPLIED THAT EVEN IF THE PROPERTY WAS NOT REGISTERED OR NOT ASSESSED TO STAMP VALUATION AUTHORITIES, IT WAS COVERED U/S. 50 C FOR VALUATIO N PURPOSES SUPPOSING THAT THE SAID PROPERTY HAD BEEN REFERRED TO THE STA MP VALUATION AUTHORITY FOR THE PURPOSES OF PAYMENT OF STAMP DUTY . HENCE, THIS CONTENTION OF THE APPELLANT STANDS REJECTED. CONSEQ UENTLY, THE CONTENTION OF THE APPELLANT THAT WHERE THE PROPERTY COULD NOT BE REGISTERED DUE TO ANY REASON (HERE BEING IN EXTENDE D LAL-DOORA) THE TRANSACTION IN RELATION THERETO WAS OUTSIDE THE SCO PE OF SEC. 50 C STANDS REJECTED. 4.02 THE SECOND ISSUE, WAS AS TO IN WHICH CATEGORY WHETHER 'G' OR 'H', THE SAID PROPERTY LAY. AS PER THE AO, IT WAS IN 'G' CATEGORY WHILE AS PER 7 THE APPELLANT IT WAS IN 'H' CATEGORY. THE APPELLANT FURNISHED THE COPY OF PRINTOUTS FROM THE MCD AUTHENTIC WEBSITE FOR HOUSE TAX PURPOSES. AS PER THE SAID WEBSITE, THE AREA OF SAMAYPUR VILLAGE (URB AN) FELL IN 'H' CATEGORY AND SHAMAYPUR VILLAGE IN 'G' CATEGORY. 4.03THE APPELLANT WHILE FILING THE PRINT OUTS FROM THE MCD'S AUTHENTICATED WEBSITE ALSO POINTED OUT THAT AS PER THE SAID WEBSITE, THERE WERE TWO DIFFERENT AREAS, (1) 'SHARNAVPUR VIL LAGE' IN IIG' CATEGORY AND (2) 'SARNAVPUR VILLAGE (URBAN)' IN ((H' CATEGOR Y. IT WAS CLAIMED BY THE APPELLANT THAT IF IT WAS A CASE OF PRINTING ERR OR THEN WHY SHAMAYPUR VILLAGE AND SAMAYPUR VILLAGE WOULD BE SHOWN SEPARAT ELY AT TWO PLACES ON THE SAME WEBSITE. THE APPELLANT IN THIS REGARD A LSO FILED A LETTER DTD. 23.05.2015 TO MCO ON 26.05.2015 FOR CLARIFYING THIS ISSUE AS WELL AS SOME MORE ISSUES ARISING OUT OF LETTER DTD. 21.05.2 015 ISSUED BY NOMC, BUT IT DID NOT MEET WITH SUCCESS. 4.04 THE ABOVE CONFLICT WAS CAREFULLY STUDIED BY ME . BASICALLY THE QUARREL BETWEEN THE AO AND THE APPELLANT WAS OVER THE TREAT MENT OF THE 'LAL DORA LAND' IN QUESTION. ACCORDING TO THE AO, IT WAS IN 'G' CATEGORY WHILE AS PER THE APPELLANT IT WAS IN 'H' CATEGORY. THE MATTER WAS EXAMINED BY ME. I HAVE NO HESITATION IN - SIDING WITH THE AO THAT THE LAND IN QUESTION FELL IN 'G' CATEGORY. THE 'STAMP LAW IN DELHI' AUTHORED BY SHRI K.K.GUPTA CLEARLY DEPICTED THE L AND OF THE APPELLANT IN 'G' CATEGORY. THAT BEING SO, THE CONTENTION OF THE APPELLANT THAT THE LAND IN QUESTION FELL IN 'H' CATEGORY IS HELD BY ME TO B E INCORRECT. 8 AS FAR AS THE APPLICATION OF THE MULTIPLICATIVE FAC TOR IS CONCERNED, THE AO APPLIED THE MULTIPLICATIVE FACTOR OF 3 AS AGAINST 1 AS CANVASSED BY THE APPELLANT. THE ABOVE DISPUTE WAS GONE INTO BY ME. I AM OF THE FIRM VIEW THAT THE AD WAS COMPLETELY MISCONCEIVED IN APPLYING THE MULTIPLICAT IVE FACTOR OF '3' ON THE BASIS OF THE FACT THAT THE APPELLANT WAS DISCOVERED BY IT TO BE MISUSING THE AGRICULTURAL LANDS OWNED BY IT FOR OTHER THAN AGRIC ULTURAL PURPOSES FOR WHICH NO PERMISSION OR SANCTION OF OR NOTICE TO THE APPROPRI ATE AUTHORITY WAS GIVEN BY THE APPELLANT. UNTIL AND UNLESS BY THE DELEGATED OR SUBORDINATE LEGISLATION SUCH MISUSE OF LANDS WAS SUBJECTED TO SUITABLE LEVY BY T HE DELHI GOVERNMENT, THE MULTIPLICATIVE FACTOR WAS TO BE TAKEN AS APPLICABLE FOR THE LANDS AS APPEARING IN THE REVENUE RECORDS OF THE STATE GOVERNMENT. SO LON G AS THE REVENUE RECORDS HELD THE LANDS OF THE APPELLANT AS AGRICULTURAL, TH ERE COULD BE NO DISPUTE ABOUT THE CHARACTER OF THE LAND, WHICH IN THE INSTANT CAS E WAS AGRICULTURAL. AS A COROLLARY OF THE ABOVE THE MULTIPLICATIVE FACT OR IN THE CASE AT HAND WOULD BE THE ONE WHICH WAS PRESCRIBED BY THE DELHI GOVERN MENT FOR PERMISSIBLE/ SANCTIONED USE OF LANDS EITHER AS AGRICULTURAL OR R ESIDENTIAL OR INDUSTRIAL OR COMMERCIAL. SO LONG AS THE LEGISLATION WAS NOT IN P LACE TO COVER SITUATIONS OF ABUSE OF LANDS AS ABOVE, THE PREVALENT LAW WAS TO B E APPLIED WITHOUT ANY EXTRAPOLATION AND PERMUTATIONS AND COMBINATIONS. AN Y DEPARTURE THEREFROM WOULD TANTAMOUNT TO ADDING OR SUBTRACTING WORDS FRO M THE STATUTE. IN SUCH A SCENARIO I AM OF THE CONSIDERED VIEW THA T THE MULTIPLICATIVE FACTOR PRESCRIBED FOR AGRICULTURAL / RESIDENTIAL LANDS WAS APPLICABLE. IN THE ABOVE BACKDROP, IT IS HELD BY ME THAT THE MULTIPLICATIVE FACTOR OF '3' APPLIED BY THE AO WAS MISDIRECTED AS THE SAME WAS DONE BY THE AO ON T HE BASIS OF THE FACTOR OF ABUSE OF THE LAND BY THE APPELLANT WHICH WAS NOT EN VISAGED BY THE DELHI 9 GOVERNMENT WHILE LAYING DOWN THE DIFFERENT MULTIPLI CATIVE FACTORS AS 1,2 AND 3 FOR 'PERMISSIBLE' USES OF LANDS. SINCE SUCH A SITUA TION WAS NOT ENVISAGED BY THE DELHI STAMP RULES, THE FACTOR OF 3 IS HELD TO BE INVALID. ACCORDINGLY THE AO SHALL WORK OUT THE VALUE OF THE LAND BY APPLYING THE FACTOR OF '1' THE APPELLANT GETS RELIEF OF THE CONSEQUENTI AL REDUCTION RESULTING FROM THE DECREASE IN THE MULTIPLICATIVE FACTOR FROM 3 TO 1. ACCORDINGLY THE GROUND NO. 2 IS PARTLY ALLOWED IN THE REMAND REPORT (RR FOR SHORT), THE AO HAD ASK ED FOR ENHANCEMENT BY APPLYING CATEGORY 'F' INSTEAD OF CATEGORY 'G' AS AP PLIED IN THE ASSTT. ORDER. THIS ISSUE OF CATEGORY HAS BEEN DEALT WITH IN DETAI L ABOVE HOLDING THAT CATEGORY 'G' IS ATTRACTED IN THE INSTANT CASE. THE AO IN RR ALSO PROPOSED THAT STCG SHOULD BE CHAR GED ON SALE OF BUILDING PORTION ON THE GROUND THAT THE DEPRECIATION WAS CLA IMED, WHICH BROUGHT INTO PLAY SEC 50. THE APPELLANT FILED THE COPY OF DEPREC IATION CHART CLAIMING THAT NO DEPRECIATION WAS CHARGED ON THE BUILDING EVER IN TH E PAST. THIS FACT WAS APPARENT FROM THE DEPRECIATION CHART ALSO. SINCE, T HE DEPRECIATION WAS NOT CHARGED, THEREFORE, STCG ON SALE OF BUILDING PORTIO N WAS NOT LEGAL. IN RESULT THE PRAYER OF AO FOR ENHANCEMENT STANDS REJECTED. 4.06 THE AO IN RR HAS ALSO SUGGESTED THAT THE APPRO PRIATE AMOUNT SHOULD BE DISALLOWED U/S. 14 A ALSO. THE APPELLANT SUBMITTED PER CONTRA THAT THIS PROPOSITION WAS MIS-CONCEIVED AS THE ISSUED TAKEN U P BY AO WAS NOT IN APPEAL. ON MERITS, IT WAS SUBMITTED THAT VIDE ASSTT. ORDE R SHEET ENTRY DTD. 16.09.2013, THE AO RAISED THE ISSUE OF DISALLOWANCE U/S. 14 A W HICH WAS ADDRESSED WIDE LETTER DTD. 13.01.2014. COPY OF THE ORDER SHEET WAS FILED AT PG. NO. 32 AND REPLY DTD. L3.01.2014 TO AO HAS BEEN FILED AT PG. 33-34. THE APPELLANT ALSO SUBMITTED 10 THAT NO SATISFACTION FOR DISALLOWANCE U/S. 14 A WAS RECORDED AS MANDATED U/S. 14 A (2) IN THE ABSENCE OF WHICH NO DISALLOWANCE CO ULD BE MADE. 4.07 THE ABOVE CONTENTIONS WERE CAREFULLY EXAMINED . WITHOUT GOING INTO THE LEGAL ASPECT AS TO WHETHER THIS ISSUE COULD BE RAIS ED IN THIS APPEAL BY THE AO ALTHOUGH IT WAS NOT THE SUBJECT MATTER OF APPEAL, I FIND THAT VIDE ORDER SHEET DTD. 16.09.20L3, THIS ISSUE WAS RAISED. IT WAS REPL IED TO BY THE APPELLANT VIDE LETTER DTD. L3.01.2014 ALSO DURING ASSESSMENT PROCE EDINGS. THE AO DID NOT ELECT TO MAKE ANY DISALLOWANCE U/S. 14 A. HENCE, THIS ISS UE NOW AGAIN CANNOT BE RAISED BY THE AO IN THESE APPEAL PROCEEDINGS, MORE SO WHEN THE AO WAS SATISFIED DURING ASSTT. PROCEEDINGS WITH THE REPLY FURNISHED TO HIM BY THE APPELLANT. IN RESULT THIS CONTENTION OF THE AO STAN DS REJECTED. GROUND NO. 3:- AS REGARDS DISALLOWANCE OF 100% PACKING EXPENSES OF RS.95,75,917/-THE SOLITARY REASON ASCRIBED BY THE AO FOR DISALLOWING THE ENTIRE EXPENSES OF RS. 95,75,917/- WAS THAT THE APPELLANT WAS GUILTY OF V IOLATING THE PROVISIONS OF SEC. 40A(IA) OF THE ACT. IN THIS REGARD THE APPELLANT WA S OBSERVED TO HAVE DISCHARGED INITIAL BURDEN OF PROOF DURING THE ASSESSMENT PROCE EDINGS BY EXPLAINING TO THE AO AS TO HOW THE ENTIRE TRANSACTIONS WERE NOT AFFEC TED UNDER A CONTRACT. IT WAS CLARIFIED WITH THE HELP OF BILLS AND VOUCHERS THAT THE SAID PAYMENTS DID NOT BEAR THE FEATURES OF A CONTRACTUAL PAYMENTS. THE SU BMISSIONS OF APPELLANT ARE AS UNDER:- G. N. 3 (SUBMISSIONS DTD. 16.03.2015) DISALLOWANCE OF 100% PACKING EXPENSES OF '.95,75,91 7/- U/S.40(A)(IA) 'THIS ISSUE HAS BEEN DISCUSSED AN PG. 9, PARA - 2 O F THE ASSTT. ORDER. 11 THE ASSESSEE HAS BEEN DEALING INTO ELECTRICAL GOODS . PACKING EXPENSES OF RS. 95,75,917/- HAVE BEEN INCURRED DURING THE YEAR FOR PACKING MATERIAL REQUIRED FOR SALE OF PRODUCTS. THE AO HAS BEEN OF THE OPINI ON THAT THESE PACKING EXPENSES ARE PAID TO PACKERS IS IN THE NATURE OF PA YMENT TO CONTRACTORS, THEREFORE COVERED U/S. 194 C. SINCE, NO TDS HAVE BE EN DEDUCTED, THEREFORE, THE AD HAS INVOKED SEC. 40 (A) (IA) AND DISALLOWED THE WHOLE EXPENSES. FURTHER, THE AD HAS ALSO HELD THAT THESE EXPENSES ARE INCURRED I N CASH AND ARE SUPPORTED BY SELF MADE INTERNAL VOUCHERS RENDERING THEM UN-VERIF IABLE. FURTHER, THE AD HAS HELD THAT THE ASSESSEE IS MERELY PROVIDING CARRYING AND FORWARDING SERVICES (C & F AGENT), THEREFORE, THE CLAIM IS NOT SUSTAINABLE. ALL THE FINDINGS OF THE AO ARE UN-SUSTAINABLE IN LAW AS WELL AS ON FACTS FOR THE F OLLOWING SUBMISSIONS. A. THE AO COULD NOT UNDERSTOOD THE NATURE OF THESE EXPENSES. HE MIS- UNDERSTOOD THESE EXPENSES AS 'PAYMENT TO CONTRACTOR S SUB - CONTRACTORS'. THE NATURE OF THESE EXPENSES IS EXPLAINED NOW. THE ASSESSEE SELLS ELECTRICAL GOODS IN WHOLE SALE. FOR SALE, THE MATERIAL NEEDS T O BE PACKED. THE PACKING MATERIAL CONSISTS OF WOODEN BOXES, TIN PATTI TO TIE UP THE WOODEN BOXES FROM 4 SIDES AND GRASS 1 SOFT MATERIAL TO BE PUT INSIDE TH E WOODEN BOXES TO SAVE THE MATERIAL FROM BEING DAMAGED DURING TRANSPORTATION. IN THE MARKET, WHERE THE ASSESSEE OPERATES, THE SELLERS OF THESE WOODEN MATE RIAL ARE AVAILABLE PLENTIFUL OF ALL THE TIMES. THEY SELL THIS PACKING MATERIAL T O THE ASSESSEE AS WELL AS TO OTHER CLIENTS. THESE ARE VERY PETTY, UN-ORGANISED S TRAY PERSONS WITHOUT ANY ESTABLISHMENTS WHO KEEP ON MOVING IN THE MARKET FOR SEARCH OF NEEDED PERSONS OF SUCH PACKING MATERIAL. AT TIMES, AS A CO URTESY AND ON REQUEST, THEY HELP IN PACKING THE SALES MATERIAL IF THE PACKING M ATERIAL IS BUYOUT FROM THEM. NO SEPARATE PACKING CHARGES ARE CHARGED AS WELL AS PAID TO THEM. TO THEM, THE PAYMENT IS MADE ONLY FOR PURCHASE OF SUCH PACKING M ATERIAL. IT IS THE COST OF THIS PACKING MATERIAL WHICH IS CLAIMED AT RS. 95,75 ,917/-. HENCE, IT IS A CASE OF 12 OUTRIGHT PURCHASE OF PACKING MATERIAL AND NOT A CAS E OF PAYMENT TO CONTRACTOR /SUB-CONTRACTOR. IN THIS REGARD, FOLLOWING DOCUMENTS ARE ATTACHED :- COPY OF SAMPLE PACKING EXPENSES VOUCHERS FOR RS.3 245/-, RS. 3082, RS. 2874, 1540/-. 1,540/- . MIONTHWISE DETAILS OF PACKING EXPENSES. NOW FROM THE NARRATION ON THESE VOUCHERS ALSO, IT I S VERY CLEAR THAT THE PAYMENT IS FOR PURCHASE OF PACKING MATERIAL ONLY. B. THAT THE NATURE OF PACKING EXPENSES HAS BEEN SIM ILAR IN THE EARLIER YEARS. NEVER EVER IN THE PAST ANY DISALLOWANCE ON THIS GRO UND OR ON ANY OTHER GROUND HAS BEEN MADE OUT OF PACKING EXPENSES. C. THAT ONE OF THE CONTENTION OF THE AO HAS BEEN TH AT THE ASSESSEE IS A C & F AGENT. IN THIS REGARD, IT IS REALLY NOT UNDERSTAN DABLE AS TO HOW IN THE CASE OF C & F AGENT, THE PACKING EXPENSES BECOMES NOT ALLOWAB LE. THE SALES ARE MADE OF THE ITEMS AS REQUIRED BY THE CLIENTS. IT CONSISTS O F N NO. OF ITEMS IN N NO. OF QUANTITIES WHICH DIFFERS FROM CLIENT TO CLIENT. HEN CE, FOR SALES, THE PACKING IS A MUST FOR THE ITEMS IN THE QUANTITIES AS REQUISITION ED BY A PARTICULAR CLIENT. THE AO HAS NOT GIVEN ANY BASIS FOR DOUBTING THESE EXPEN SES IN THE CASE OF C & F AGENT. THE NATURE OF BUSINESS HAS BEEN SIMILAR IN T HE PAST. THE NATURE OF THESE EXPENSES IS ALSO SIMILAR AS IN THE PAST. NO DISALLO WANCE HAS EVER BEEN MADE. THUS, THERE IS NO REASON FOR TAKING A DEPARTED VIEW IN THIS YEAR WITHOUT ANY VALID REASON AND BASIS. D. THAT ANOTHER CONTENTION OF THE AO HAS BEEN THAT THESE EXPENSES ARE INCURRED IN CASH AND SUPPORTED BY SELF MADE INTERNA L VOUCHERS RENDERING THEM 13 UN - VERIFIABLE. THIS FINDING OF THE AO IS GROSSLY ERRONEOUS AND WITHOUT ANY BASIS. THESE PACKING MATERIAL SELLERS ARE STRAY MOV ING PERSONS WITHOUT ANY ESTABLISHMENT AT ALL. THEY WORK IN A MOST UNORGANIS ED MANNER. THEY KEEP ON MOVING IN THE MARKET, WHEREVER THEY GET A CUSTOMER, SELL THEIR PRODUCT AND EARN THEIR LIVELIHOOD ON DAY TO DAY BASIS ONLY. THE Y ARE IN THE NATURE OF DAILY EARNERS AND DAILY SPENDERS OUT OF THEIR DAILY EARNI NGS. THESE VENDORS DO NOT HAVE ANY BUSINESS WORKING NAME AND ANY BUSINESS WOR KING ADDRESS. WHENEVER THE PURCHASES ARE MADE FROM THEM, THEY PUT ON THEIR SIGNATURES AT THE END OF THE VOUCHER ACKNOWLEDGING THE SALE AND RECEIPT OF P AYMENT AS PER THE VOUCHER. THIS PRACTICE IS THROUGHOUT PREVALENT IN THE ELECTR ICAL MARKET INCLUDING BHAGIRATH PLACE WHICH IS THE BIGGEST ELECTRICAL MAR KET OF ASIA AND THE MAIN WORKING PLACE OF ASSESSEE ALSO. THESE PERSONS ALSO DO NOT MAINTAIN ANY BANK ACCOUNT. THESE PERSONS WORK ONLY AGAINST CASH RECEI PTS AND DO NOT SELL AGAINST ANY CHEQUE PAYMENT. COPIES OF FEW SAMPLE SUCH VOUCH ERS ARE ALREADY ATTACHED IN THE PAPER BOOK. THESE ARE THE ONLY PAYMENT EVIDE NCES WHICH CAN BE HELD BY ANY ASSESSEE FOR SUCH TYPE OF PURCHASES. THE SIMILAR PRACTICE AND TH E SIMILAR VOUCHERS HAS BEEN THERE IN THE PAST AND HAVE ALWAYS BEEN ACCEPTED. IN THIS REGARD,IT IS FURTHER SUBMITTED THAT THERE IS NO DISPUTE THAT THE VOUCHER S EXIST FOR ALL SUCH PAYMENTS. IT IS ALSO NOT OUT OF PLACE TO MENTION THAT SUCH CA SH PAYMENTS ARE NOT PROHIBITED UNDER THE I. T. ACT., INCLUDING SEC. 40 A (3). IT IS FURTHER SUBMITTED THAT IF THE PAYMENT IS NOT MADE IN CASH AND INSISTE D UPON FOR CHEQUE PAYMENT AND FURTHER INSISTED UPON FOR PRINTED BILLS OF SUCH PACKING MATERIAL SELLERS, THEN IT WAS NOT POSSIBLE TO GET THE PACKING MATERIAL AND CONSEQUENTLY NO SALE COULD HAD BEEN EFFECTED. THESE EXPENSES ARE QUITE COMPARA TIVE TO EARLIER YEARS. IN VIEW OF ABOVE, DISALLOWANCES IS UNJUSTIFIED. ' 14 AS AGAINST THE ABOVE THE AO DID NOT COME UP WITH ANY CONTRARY EVIDENCE, WHEN THE ONUS SHIFTED ON HIM, TO DEMONSTRATE THAT T HE IN CONSONANCE WITH THE EVIDENCE AND FACTS UNEARTHED BY HIM LIKE THE AGREEM ENTS ETC. THE CLAIM OF THE AO WAS OBVIOUSLY BASED ON HIS WHIMS AND FANCIES WHE N HE INFERRED FROM THE GIVEN FACTS THAT THERE WAS A CONTRACTUAL RELATIONSH IP BETWEEN THE APPELLANT AND THE PARTIES WHO RENDERED THE PACKING SERVICES T O THE APPELLANT. THERE WAS NO EVIDENCE BROUGHT ON RECORD U/S. 131 POINTING TO INVOLVEMENT OF THE LABOUR CONTRACTORS. IN SUCH CIRCUMSTANCES THE IRRESISTIBLE CONCLUSION IS THAT THE AO COULD NOT PROPERLY APPRECIATE THE FACTS AND ARRIVED AT AN ERRONEOUS CONCLUSION BY OVERSTRETCHING THE EVIDENCE PRODUCED BEFORE HIM BY THE APPELLANT. NONETHELESS THE FACT CANNOT BE DISPUTED THAT THE PA YMENTS IN CASH INVARIABLY GIVE RISE TO SCOPES FOR INFLATION OF EXPENDITURE AN D THAT THERE WAS INFLATION OF THE EXPENDITURE IN QUESTION WAS NOT FORCEFULLY DENI ED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS ALSO. THEREFORE I AM OF T HE CONSIDERED VIEW THAT THE ENTIRE CASH EXPENSES OF THE IMPUGNED AMOUNT WERE NO T FREE FROM STAINS AS THE APPELLANT DID NOT HAVE SUPPORTING EVIDENCE OF EACH AND EVERY ITEM MENTIONED IN THE BILLS AND VOUCHERS. SUCH BEING THE REASON TH E ADDITION OF RS. SIX LACS RS.6.00 LACS IS SUSTAINED OUT OF THE ABOVE ADDITION . GROUND NO. 4 CONCERNING ADHOC DISALLOWANCE OF RS.10,66,284/- BEI NG 1I10TH OUT OF EXPENSES ON LOADING AND UNLOADING, CARTAGE OUTWARD, GENERAL EXPENSES, STAFF WELFARE, BUSINESS PROMOTION AND PRINTING AND STATIONERY THE APPELLANT'S SUBMISSIONS WERE CAREFULLY EXAMINED BY ME. THE APPELLANT SUBMIT TED AS UNDER: GROUND NO. 4 (SUBMISSIONS DTD. 16.03.2015) AD - HOC DISALLOWANCE OF RS. 10,66,284/- BEING 1I10 TH OUT OF EXPENSE 15 ON LOADING AND UNLOADING, CARTAGE OUTWARD, GENERAL EXPENSES, STAFF WELFARE, BUSINESS PROMOTION AND PRINTING AND STATIONERY 'THIS ISSUE HAS BEEN DISCUSSED ON PG. 9, PARA - 3 O F THE ASSTT. ORDER. THE AO IDENTIFIED FROM THE P & LAIC. THE FOLLOWING EXPENSE S AS UNDER :- LOADING AND UNLOADING EXPENSE 40,53,036/- CARTAGE OUTWARD 56,26,049/- ~ GENERAL EXPENSES 1,71,4311- STAFF WELFARE 2,43,415/- BUSINESS PROMOTION 50,842/- PRINTING AND STATIONERY 5,18,069/- TOTAL 1,06,62,842/- - THE AO DISALLOWED ON AD - HOC BASIS 10% FOR THE TWI N REASONS. ONE THAT BILLS AND VOUCHERS HAVE NOT BEEN SUBMITTED. TWO, THE ASSE SSEE IS C & F AGENT OF ELECTRICAL GOODS MANUFACTURED BY HAVELL;S. SO THE F INDINGS AND THE BASIS ARE UN - SUSTAINABLE FOR THE FOLLOWING SUBMISSIONS. A. THE FINDINGS THAT BILLS AND VOUCHERS HAVE NOT BE EN SUBMITTED IS NOT CORRECT. THE ASSESSEE MAINTAINS ALL BILLS AND VOUCH ERS. THE SAME CAN BE PRODUCED BEFORE YOUR GOODSELF ALSO, IF DESIRED. THE ACCOUNTS ARE AUDITED WITH A CLEAN REPORT. THERE IS NO QUALIFICATION IN A UDIT REPORT REGARDING NON - MAINTENANCE AND NON - PRODUCTIONS OF VOUCHERS DURING AUDIT. THE ASSESSEE IS RUN ONLY BY THE STAFF. IN THAT SITUATIO N, IT IS NOT POSSIBLE TO INCUR AND BOOK ANY SUCH EXPENSES WHICH IS NOT SUPPO RTED BY VOUCHER / 16 EVIDENCE. HENCE. THE DISALLOWANCE ON THE GROUND OF NON - SUBMISSION OF BILLS AND VOUCHERS IS UN - SUSTAINABLE. B. THE EXPENSES ARE COMPARATIVE TO EARLIER YEAR AS UNDER :- A. Y. 2010 2011 A.Y.2011 - 2012 LOADING AND UNLOADING EXPENSE 34,14,448/- 40,53 ,036/- - CARTAGE OUTWARD 48,69,274/- 56,26,049/- GENERAL EXPENSES 1,75,268/- 1,71,431/- STAFF WELFARE 2,47,401/- 2,43,415/- BUSINESS PROMOTION 54,255/- 50,842/- PRINTING AND STATIONERY 3,93,908/- 5,18,069/- ALL EXPENSES ARE FULLY VOUCHED. THE NOMINAL VARIAT ION IS FOR VARIOUS REASONS. THIS INCLUDES NORMAL ESCALATION IN COST FROM LAST Y EAR, CARTAGE DEPENDS UPON THE NO. OF TIMES THE CARTAGE EVENT TOOK PLACE, STAF F WELFARE DEPENDS ON NO. OF PERSONS AND LOADING AND UNLOADING COST ALSO DEPENDS UPON THE NO. OF TIMES THE LOADING AND UNLOADING HAD TO BE DONE AT THE TIME OF RECEIPT AND DISPATCH OF GOODS ETC. ETC. THUS, THE NORMAL VARIATION CANNOT B E VIEWED ADVERSELY. NO EXPENSES UNDER THESE HEADS HAVE BEEN DISALLOWED EVE R IN THE PAST. C. THAT FURTHER THERE IS NO BASIS FOR 10% DISALLOW ANCE. ANY DISALLOWANCE WITHOUT ANY BASIS IS NOT SUSTAINABLE IN LAW. ' LOADING AND UNLOADING EXPENSE 40,53,036/- CARTAGE OUTWARD 56,26,049/-- GENERAL EXPENSES 1,71,431/- 17 STAFF WELFARE 2,43,415/- BUSINESS PROMOTION 50,842/- PRINTING AND STATIONERY 5,18,069/- TOTAL 1,06,62,842/- - THE AO DISALLOWED ON ADHOC BASIS 10%FOR THE TWIN REASONS. ONE, THAT BILLS AND VOUCHERS HAVE NOT BEEN SUBMITTED TWO, THE ASSESSEE IS C & F AGENT OF ELECTRICAL GOODS MANUFACTURED BY HAVELL'S. THE FINDINGS AND TH E BASIS ARE UN - SUSTAINABLE FOR THE FOLLOWING SUBMISSIONS. D. THE FINDINGS THAT BILLS AND VOUCHERS HAVE NOT BE EN SUBMITTED IS NOT CORRECT. THE ASSESSEE MAINTAINS ALL BILLS AND VOUCHERS. THE SAME CAN BE PRODUCED BEFORE YOUR GOODSELF ALSO, IF DESIRED THE ACCOUNTS ARE AUD ITED WITH A CLEAN REPORT. THERE IS NO QUALIFICATION IN AUDIT REPORT REGARDING NON - MAINTENANCE AND NON - PRODUCTIONS OF VOUCHERS DURING AUDIT. THE ASSESSEE IS RUN ONLY BY THE STAFF. IN THAT SITUATION, IT IS NOT POSSIBLE TO INCUR AND BOO K ANY SUCH EXPENSES WHICH IS NOT SUPPORTED BY VOUCHER / EVIDENCE. HENCE, THE DIS ALLOWANCE ON THE GROUND OF NON - SUBMISSION OF BILLS AND VOUCHERS IS UN - SUST AINABLE. E. THE EXPENSES ARE COMPARATIVE TO EARLIER YEAR AS UNDER:- A. Y. 2010 2011 A.Y.2011 - 2012 LOADING AND UNLOADING EXPENSE 34,14,448/- 40,53 ,036/- - CARTAGE OUTWARD 48,69,274/- 56,26,049/- GENERAL EXPENSES 1,75,268/- 1,71,431/- STAFF WELFARE 2,47,401/- 2,43,415/- 18 BUSINESS PROMOTION 54,255/- 50,842/- PRINTING AND STATIONERY 3,93,908/- 5,18,069/- ALL EXPENSES ARE FULLY VOUCHED. THE NOMINAL VARIATI ON IS FOR VARIOUS REASONS. THIS INCLUDES NORMAL ESCALATION IN COST FROM LAST Y EAR, CARTAGE DEPENDS UPON THE NO. OF TIMES THE CARTAGE EVENT TOOK PLACE, STAF F WELFARE DEPENDS ON NO. OF PERSONS AND LOADING AND UNLOADING COST ALSO DEPENDS UPON THE NO. OF TIMES THE LOADING AND UNLOADING HAD TO BE DONE AT THE TIME OF RECEIPT AND DISPATCH OF GOODS ETC. ETC. THUS, THE NORMAL VARIATION CANNOT B E VIEWED ADVERSELY. NO EXPENSES UNDER THESE HEADS HAVE BEEN DISALLOWED EVE R IN THE PAST. F. THAT FURTHER THERE IS NO BASIS FOR 10% DISALLOWA NCE. ANY DISALLOWANCE WITHOUT ANY BASIS IS NOT SUSTAINABLE IN LAW. THE FACT CANNOT BE DISPUTED' THAT THE PAYMENTS IN C ASH INVARIABLY GIVE RISE TO SCOPES FOR INFLATION OF EXPENDITURE AND THAT THERE WAS INFLATION OF THE EXPENDITURE IN THE CASE IN QUESTION WAS NOT FORCEFU LLY DENIED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS ALSO. THEREFORE I AM OF THE CONSIDERED VIEW THAT THE ENTIRE CASH EXPENSES IN RELATION TO THE AB OVE ITEMS WERE NOT FULLY SUPPORTED BY MATERIALS HAVING EVIDENTIARY APPELLA NT DID NOT HAVE SUPPORTING EVIDENCE OF EACH AND EVERY ITEM MENTIONED IN THE B ILLS AND VOUCHERS. SUCH BEING THE REASON THE ADDITION OF RS. ONE LAC/RS. 1. 00 LACS IS SUSTAINED OUT OF THE ABOVE ADDITION. 5.1 AFTER HEARING BOTH THE PARTIES AND PERUSING THE ORDERS PASSED BY THE REVENUE AUTHORITIES, ESPECIALLY THE IMPUGNED ORDER DATED 09.6.2015 OF THE LD. CIT(A), AS REPRODUCED ABOVE, WE ARE OF THE CONSIDER ED VIEW THAT LD. CIT(A) HAS DECIDED THE ISSUES AND DELETED THE ADDITIONS, AFTE R ELABORATELY DISCUSSING THE DETAILED EVIDENCES. THEREFORE, WE ARE FULLY AGRE E WITH THE FINDINGS OF THE LD. 19 CIT(A) PASSED IN HIS IMPUGNED ORDER AND WE ARE OF T HE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORD ER PASSED BY THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE FINDINGS OF THE LD. CIT( A) ON THE ISSUES IN DISPUTE AND ACCORDINGLY REJECT THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 7. AS REGARDS ASSESSEE CROSS OBJECTION AS WELL AS A SSESSEES APPEAL ARE CONCERNED, SINCE WE HAVE DISMISSED THE APPEAL OF TH E REVENUE BY UPHOLDING THE ORDER OF THE LD. CIT(A), AS AFORESAID, THE ASSE SSEES CROSS OBJECTION AS WELL AS APPEAL HAVE BECOME INFRUCTUOUS, HENCE, THE SAME ARE DISMISSED AS SUCH. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED AND THE ASSESSEES CROSS OBJECTION AND ASSESSEES APPEAL ALSO STAND DISMISSE D. ORDER PRONOUNCED ON 24.02.2020. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER SRB DATE: 24.02.2020 COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES