Rathi Bars Ltd., New Delhi V. DCIT, New Delhi

ITA 5613/DEL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7167 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 14-09-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 18-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R R MEENA
• Assessee Lawyers: GAUTAM JAIN ADV SHRI P K KAMAL
• Keywords: Reopening of assessment; Earning of tax free income; Non compliance; Reassessment proceedings
• Section: 143(3); 14A; 115JB; 37(1); 147; 148; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F, NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A. NO.5613, 5614, 5729/DEL/2013 (ASSESSMENT YEARS 2005-06, 2007-08 & 2010-11 RESPECTIVELY) RATHI BARS LTD., VS. DCIT, CIRCLE 15(1), A-14/7, MATHURA ROAD, NEW DELHI NEW DELHI-110 017 GIR / PAN : AAACR0737N I.T.A.NO. 6102/DEL/2013 (ASSESSMENT YEAR 2010-11) DCIT, CIRCLE 15(1), VS. RATHI BARS LTD., NEW DELHI A-24/7, MOHAN COOP INDL. ESTATE, MATHURA ROAD, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GAUTAM JAIN, ADV. SHRI P K KAMAL, ADV. RESPONDENT BY :SHRI R R MEENA, SR. DR DATE OF HEARING : 14.09.2016 DATE OF PRONOUNCEMENT: 19.09.2016 ORDER PER BEENA A. PILLAI, JM: AS THE ISSUES INVOLVED IN THESE ASSESSMENT YEARS A RE COMMON, WE ARE DISPOSING OF THESE APPEALS BY WAY OF A COMMON ORDER AS UNDER: A. I.T.A.NO. 5613/DEL/2013 (ASSESSMENT YEAR 2005- 06): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 16.08.2013 PASSED BY LD. CIT(A) XVIII, NEW 2 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 DELHI FOR THE ASSESSMENT YEAR 2005-06 ON THE FOLLOW ING GROUNDS OF APPEAL: 1. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE (I) THE IMPUGNED ORDER IS NOT ONLY BAD IN LAW AND N ATURE BUT IT ALSO WHIMSICAL HENCE IT IS LIABLE TO BE DELE TED. (II) THE LD.CIT(A)-XVIII GROSSLY ERRED IN ALLOWING THE REOPENING OF ASSESSMENT U/S 148 WHICH HAS ALREADY BEEN ASSESSED U/S 143(3) OF THE ACT. INVOKING THE PROVISIONS OF SECTION 14A R.W.R 8D RETROSPECTIVELY, WHICH IS NOT ALLOWED AS PER RULE AS WELL AS PER THE JUDIC IAL PRONOUNCEMENTS OF VARIOUS HIGH COURTS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-XVIII GROSSLY ERRED IN CONFIRMING THE AD DITION OF RS.3,13,151/- BY APPLYING THE PROVISIONS OF SEC 14A READ WITH RULE 8D. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: 2.1 THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30.10.2005 AT A BROOK PROFIT OF RS.34,82,212/- U/S 115JB OF THE ACT. THE RETURN WA S PROCESSED U/S 143(1) AND ALSO ASSESSED U/S 143(3) O F THE ACT AT A LOSS OF RS.1,06,94,499/-. 2.2 SUBSEQUENTLY, LD. A.O. ISSUED A NOTICE U/S 148 OF THE ACTION 30.03.2012 AFTER RECORDING THE REASONS F OR REOPENING AS UNDER: THE ASSESSEE HAS CLAIMED EXEMPT INCOME U/S 10(1) R.W.S 2(1) TO THE TUNE OF RS. 2,11,20,946/-. THE ASSESSEE HAS SHOWN IN THE P& L ACCOUNT DIVIDEND RECEIVED OF RS. 3.90 LACS. FURTHER, SALES TURNOVER HAS BEEN SHOWN AT RS.136.85 CRORES AGAINST WHICH EXPENDITURE OR RS. 132.77 CRS HAS BEEN CLAIMED. THE PROFIT BEFORE TAX IS SHOWN AT RS. 2.39 CRS. SINCE, THE 3 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 ASSESSEE HAS EARNED EXEMPT INCOME IN THE FORM DIVIDEND AND AGRICULTURAL INCOME AND HAS NOT DISALLOWED ANY EXPENDITURE ATTRIBUTABLE TOWARDS EARNING SUCH EXEMPT INCOME, AS PER THE PROVISIONS O F SECTION 14A DISALLOWANCES ARE APPLICABLE AND THE PROPORTIONATE EXPENSES CLAIMED NEEDS TO BE DISALLOWED WHICH IS HIGHER THAN RS.1 LAC. IN THE A.Y.2005-06 THE ASSESSEE HAS CLAIM ADMINISTRATIVE AND SELLING DISTRIBUTION EXPENSES OF RS.1.99 CRORE OUT OF WHICH SELLING AND DISTRIBUTION EXPENSES WORKS OU T TO RS. 57,84,993/-. HENCE THE COMMON ADMINISTRATIVE EXPENSE TO BE ALLOCATED FOR THE PURPOSE OF SECTION 14A DISALLOWANCE WORKS OUT TO RS. 1,41,49,223/-. FURTHE R THE ASSESSEE HAS INCURRED AN EXPENDITURE OF RS.85,96,385/- TOWARDS INTEREST. HENCE THE PROPORTIONATE ADMINISTRATIVE AND INTEREST EXPENSE ATTRIBUTABLE TO THE EXEMPT INCOME WORKS OUT TO RS.2,58,838/- AND RS.4,56,545/- RESPECTIVELY. FURTHER ASSESSEE HAS SHOWN INVESTMENT OF RS.2,16,62,957/- FOR YEAR ENDING 31.03.2005 AND RS.62,245/- FOR YEAR ENDING 31.03.2004. HENCE FURTHER DISALLOWANCE OF 0.5% OF THE AVERAGE INVESTMENT TO THE TONE OF RS.54,313/- 'ALSO NEEDS T O BE DISALLOWED U/S 14A. HENCE THE TOTAL DISALLOWANCE U/S 14A OF RS.54,313/- NEEDS TO BE DISALLOWED INTER - ALIA THE BOOK PROFIT U/S 115JB WILL ALSO INCREASED BY AN AMOUNT OF RS.7,69,696/-. THE ASSESSEE IN RESPONSE TO QUESTION VIDE ORDER SHE ET DATED 31.07.2007 AND AS SEEN IN THE RETURN OF INCOME, HAS NOT ATTACHED SEPARATE BALANCE SHEET, P& L ACCOUNT OR THE INCOME AND EXPENDITURE ACCOUNT WIT H RESPECT TO ITS AGRICULTURAL ACTIVITIES WHICH IS A S IZEABLE ACTIVITY. THE INVESTMENT MADE IN THE ABOVE HAS NOT BEEN DISCLOSED. THE ASSESSEE HAS MERELY TRIED AGREEMENTS REGARDING AGRICULTURE LAND. THE BASIS OF INCOME OR EXPENDITURE FOR THE YEAR AND INVESTMENT I N AGRICULTURE LAND AND THE END OF THE YEAR HAS NOT BE EN SUBMITTED AS CAN BE SEEN FROM ASSESSEE'S SUBMISSIONS DATED 27.07.2007, 10.10.2007, 23.10.2007 AND 26.10.2007. HENCE THERE HAS BEEN 4 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 NON COMPLIANCE BY THE ASSESSEE TO THE NOTICE U/S 142{/) OF IT ACT AS WELL. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIEV E THAT THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT TO THE EXTENT OF RS.7,69,696/-. I HAVE ALSO REASONS TO BEL IEVE THAT INCOME TO THE EXTENT OF RS.7,69,696/- HAS ESCAPED TO BE ASSESSED UNDER SECTION 115JB FOR THE YEAR UNDER CONSIDERATION I.E. A Y 2005-06. THERE HA S BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT IN THE A Y 2005-06. HENCE THE SAME IS TO BE BROUGHT TO TAX UNDER SECTION 147 OF THE INCOME T AX ACT. SANCTION FOR ISSUE OF NOTICE U/S 148 AS PRESCR IBED U/S 151, MAY KINDLY BE ACCORDED.' 2.3 PURSUANT TO THE REASONS BEING INTIMATED TO THE ASSESSEE, REPLY WAS FILED ON 2012.2012 WHEREIN, IT HAS BEEN SUBMITTED THAT THERE HAS BEEN NO FAILURE ON TH E PART OF THE ASSESSEE IN DISCLOSING FULL AND TRUE MATERIA L FACTS AND THAT NO DISALLOWANCE COULD BE MADE U/S 14A READ WITH RULE 8D. 2.4 LD. A.O. DISALLOWED 0.5% OF THE PROPORTIONATE EXPENDITURE AND THE PROPORTIONATE VALUE OF ADMINIST RATIVE EXPENSES. AGGRIEVED BY THE ORDER OF LD. A.O., ASSE SSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). 2.5 LD. CIT(A) CONFIRMED THE ACTION OF REOPENING AN D UPHELD THE ADDITIONS MADE BY L. A.O. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE U S NOW. 3. LD. A.R. SUBMITTED THAT LD. CIT(A) HAS NOT DISCU SSED THE ISSUE RELATING TO DISALLOWANCE U/S 14A MADE BY THE A.O., VIS--VIS THE DECISION OF THIS TRIBUNAL FOR T HE ASSESSMENT YEAR 2008-09 (SUPRA) IN ASSESSEES OWN C ASE. 5 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 HE ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS NO T APPLIED HIS MIND BEFORE INITIATION OF REASSESSMENT PROCEEDINGS AS TO WHETHER THERE IS FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULL AND TRUE MATERIAL FOR THE YEAR UNDER CONSIDERATION. 3.1 LD. A.R. SUBMITTED THAT THERE HAS BEEN NO INQUI RY RAISED, WHICH IS APPARENT FROM THE REASSESSMENT ORD ER PASSED BY LD. A.O. ON 30.01.2013. HE SUBMITTED THA T THERE WAS NO TANGIBLE RELEVANT MATERIAL THAT WAS BE FORE THE D. A.O. TO FORM AN OPINION THAT INCOME HAS ESCA PED ASSESSMENT. LD. A.R. FURTHER DEMONSTRATED VIDE PA PER BOOK PAGES 1-12, FILED BEFORE US THAT THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS RELATING TO THE INCOME AND INVESTMENT FOR THE PURPOSES OF ANY DISALLOWANCE U/S 14A OF THE ACT. HE SUBMITTED THAT LD. A.O. IN THE ORIGI NAL ASSESSMENT ORDER PASSED (PLACED AT PAGE 13 OF THE P APER BOOK), HAS ADMITTED TO THE FACT THAT THE ASSESSEE H AS FILED FULL DETAILS AS PER THE ORDER SHEET. 3.2 LD. A.R. SUBMITTED THAT THE REOPENING BEING BEY OND 4 YEARS AND THERE BEING NO FAILURE ON THE PART OF T HE ASSESSEE TO DISCLOSE FULL AND TRUE MATERIAL, PROVIS O (1) TO SECTION 147 OF THE ACT WOULD BE APPLICABLE TO THE F ACTS OF THE PRESENT CASE. 4. ON THE CONTRARY, LD. D.R. RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE PERUSED THE RECORDS PLACED BEFORE US AND THE ARGUMENTS ADVANCED BY BOTH THE SIDES. BOTH THE 6 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 ISSUES RELATE TO INVOKING OF REASSESSMENT PROCEEDIN GS ON THE GROUND OF SECTION 14A OF THE ACT BEYOND 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. FROM THE ORIG INAL ASSESSMENT ORDER PLACED AT PAGE 13 OF THE PAPER BOO K, IT APPEARS THAT THE ASSESSEE HAD FILED ALL NECESSARY D ETAILS AND MATERIAL FOR THE PURPOSE OF ARRIVING AT DISALLO WANCE U/S 14A OF THE ACT. THERE IS NO EVIDENCE FROM THE RECORDS PLACED BEFORE US THAT THE ASSESSEE HAS FAILED OR OM ITTED TO DISCLOSE THE MATERIAL / PRIMARY FACTS. THESE WERE EVERY MUCH AVAILABLE ON RECORD AND THE ASSESSING OFFICER HAD FAILED TO DRAW CORRECT LEGAL INFERENCE AT THE TIME OF ORIGINAL ASSESSMENT FROM THE SAID PRIMARY FACTS. THIS CANNO T BE HELD AS ERROR OR OMISSION ON THE PART OF THE ASSESS EE AND AS PER THE PROVISO (1) TO SECTION147 OF THE ACT AND REOPENING OF ASSESSMENT FOR THE YEAR UNDER CONSIDER ATION CANNOT BE SUSTAINED. 5.1 ACCORDINGLY AS THE LEGAL ISSUE RAISED BY THE AS SESSEE IN GROUND NO.1 HAS BEEN UPHELD, WE SET ASIDE THE OR DER OF LD. CIT(A) AND QUASH THE REASSESSMENT PROCEEDINGS INITIATED FOR THE YEAR UNDER CONSIDERATION. B. I.T.A.NO. 5614/DEL/2013 (ASSESSMENT YEAR 2007- 08): 6. THE PRESENT APPEAL ARISES OUT OF THE ORDER DATED 16.08.2013 PASSED BY LD. CIT(A) FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE 7 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 (I) THE IMPUGNED ORDER IS NOT ONLY BAD IN LAW AND NATURE BUT IT ALSO WHIMSICAL HENCE IT IS LIABLE TO BE DELETED. (II) THE LD.CIT(A)-XVIII GROSSLY ERRED IN ALLOWING THE REOPENING OF ASSESSMENT U/S 148 WHICH HAS ALREADY BEEN ASSESSED U/S 143(3) OF THE ACT. INVOKING THE PROVISIONS OF SECTION 14A R.W.R 80 RETROSPECTIVELY WHICH IS NOT ALLOWED AS PER RULE AS WELL AS PER THE JUDICIAL PRONOUNCEMENTS OF VARIOUS HIGH COURTS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-XVIII GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS.4,84,688/- BY APPLYING THE PROVISION S OF SEC 14A READ WITH RULE 8D. 6.1 AT THE OUTSET, LD. A.R. SUBMITTED THAT GROUND N O.1 RELATING TO VALIDITY OF REOPENING OF THE ASSESSMENT , IS NOT PRESSED. THEREFORE, TO DEAL WITH THE MERITS, THE BR IEF FACTS OF THE CASE ARE AS UNDER: 6.3 THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 30.10.2007 DECLARING TOTAL INCOME OF RS.48,28,710/- AND BOOK PROFIT U/S 115JB OF THE ACT TO THE TUNE OF RS.2,21,54,235/-. THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT AND ORIGINAL ASSESSMENT ORDER WAS PASSED U/S 143(3) OF THE ACTS ON 11.12.2009. THE ISSUE RELATE S TO THE DISALLOWANCE U/S 14A OF THE ACT FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD SHOWN IN THE P & L ACCOUNT, DIVIDEND BEING RECEIVED TO THE TUNE OF RS.30,43,724/-. IT HAD CLAIMED MAINTENANCE, SELLIN G AND ADMINISTRATIVE EXPENSES AMOUNTING TO RS.2.59 CRORES OUT OF WHICH SELLING AND DISTRIBUTION EXPENSES WORKED O UT TO RS.70,23,855/-. ASSESSEE HAD FURTHER INCURRED AN 8 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 EXPENDITURE OF RS.98,89,316/- TOWARDS INTEREST. LD . A.O. IN REASSESSMENT PROCEEDINGS, OBSERVED THAT SINCE TH E ASSESSEE HAS EARNED EXEMPT INCOME FROM DIVIDEND AND AGRICULTURE, AND HAS NOT DISALLOWED NAY EXPENSES TO WARDS EARNING OF SUCH INCOME AS PER THE PROVISIONS OF SEC TION 14A OF THE ACT, HE RECOMPUTED THE INCOME BY APPLYIN G RULE 8D AND ADDED RS.3,84,434/- ON ACCOUNT OF PROPORTIONATE ADMINISTRATIVE EXPENSES AND RS.1,00,3 45/- BEING 0.5% OF AVERAGE INVESTMENT FOLLOWING RULE 8D. 6.4 AGGRIEVED BY THE ORDER OF LD. A.O. ASSESSEE PRE FERRED APPEAL BEFORE LD. CIT(A). LD. CIT(A) UPHELD THE AD DITIONS MADE BY THE LD. A.O., AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US NOW. 6.5 LD. A.R. PLACED RELIANCE UPON THE DECISION OF T HIS TRIBUNAL FOR THE ASSESSMENT YEAR 2008-09 AND 2009-1 0 IN I.T.A.NO. 4223/DEL/2011 AND 2429/DEL/2015 PASSED ON 23.11.2002 AND 09.01.2015 RESPECTIVELY, WHEREIN THE TRIBUNAL HAD RESTRICTED THE DISALLOWANCE TO 0.5% OF THE EXPENDITURE FOR THE PURPOSES U/S 14A OF THE ACT. HE THUS SUBMITTED THAT DISALLOWANCE AS DIRECTED BY THIS TRI BUNAL, SHOULD BE APPLIED TO THE FACTS OF THE PRESENT CASE BEFORE US. 6.6 ON THE CONTRARY, LD. D.R. RELIED UPON THE ORDER S OF AUTHORITIES BELOW. 6.7 WE HAVE PERUSED ORDERS OF AUTHORITIES BELOW AND RECORDS PLACED BEFORE US AND THE ARGUMENTS ADVANCE BY BOTH THE PARTIES. IT IS NOT POSSIBLE THAT NO EXPEN DITURE WERE INCURRED TOWARDS EARNING THE EXEMPT INCOME AND IN 9 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 VIEW OF THE A.O., ON THE BASIS OF ORDER OF THIS TRI BUNAL IN ASSESSEES OWN CASE, FOR THE ASSESSMENT YEAR 2008-0 9 AND 2009-10 (SUPRA) PLACED AT PAGES 33-44 OF THE PA PER BOOK, WE DIRECT LD. A.O. TO CALCULATE THE DISALLOWA NCE ON THE BASIS OF 0.5% OF EXPENDITDURE. ACCORDINGLY, GR OUND NO.2 OF THE ASSESSEES APPEAL STANDS DISPOSED OFF. C. I.T.A.NO. 5729/DEL/2013 & 6102/DEL/2013 (ASSESSMENT YEAR 2010-11): CROSS APPEALS: 7. THESE CROSS APPEALS HAVE BEEN FILED BY THE ASSES SEE AND THE REVENUE AGAINST THE ORDER DATED 29.08,.2013 PASSED BY LD. CIT(A) XVIII, NEW DELHI FOR THE ASSES SMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS OF APPEAL: I.T.A.NO. 5729/DEL/2013 (ASSESSEES APPEAL): 1. THE LD.CIT(A)-XVIII HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,87,337/- ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES, WITHOUT APPRECIATING THE FACTS & CIRCUMSTANCES OF THE CASE. 2. THE LD.CIT(A)-XVIII HAS ERRED IN CONFIRMING THE ADDITION OF RS. 96,000/- ON ACCOUNT OF PAYMENT TO RELATED PERSON U/S 40A(2)(B) OF THE INCOME TAX ACT,1961, WITHOUT APPRECIATING THE FACTS & CIRCUMSTANCES OF PAYMENTS. I.T.A.NO. 6102/DEL/2013(REVENUES APPEAL): 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLO WANCE MADE UNDER THE HEAD OF 'FOREIGN TRAVELLING EXPENSES ' TO RS.1,87,337/- IGNORING THE FACT THAT THESE EXPEN SES CONTAIN THE EXPENSES OF PERSONAL NATURE. 2. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLO WANCE ON ACCOUNT OF EXCESSIVE PAYMENT TO RS.96,000/- 10 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 FAILING TO APPRECIATE THAT THE BURDEN OF PROVING TH E PAYMENT AS GENUINE IS ON ASSESSEE. 3. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLO WANCE U/ S 14A READ WITH RULE 8D IS NOT TO BE MADE ON THE PERCENTAGE BASIS OF ADMINISTRATIVE EXPENSES. 7.1 THE BRIEF FACTS OF THE CASE ARE AS UNDER: 7.2 THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 27.09.2010 AT NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 14(2) OF THE ACT WAS ISSUED. DURING ASSESSMENT PROCEEDINGS, LD. A.O. OBSERVED THAT THE ASSESSEE HA S INCURRED FOREIGN TRAVEL EXPENSE TO THE TUNE OF RS.15,21,802/- AND THE ASSESSEE HAS MADE EXCESSIVE PAYMENT BY WAY OF SALARY TO THE WIVES OF THE DIRECT ORS. HE ALSO MADE DISALLOWANCE U/S 14A OF THE ACT ON THE EX EMPT INCOME EARNED BY THE ASSESSEE. THE LD. A.O. ACCORD INGLY, MADE THE FOLLOWING DISALLOWANCES: A) FOREIGN TRAVEL EXPENSES RS.8,50,401/- B) EXCESSIVE PAYMENT MADE U/S 14A(2) RS.2,88,000/- C) DISALLOWANCE U/S 14A RS.43,56,622/- 7.3 AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). LD. CIT(A) HEL D THAT OUT OF TOTAL FOREIGN TRAVEL EXPENSES, ASSESSEE HAD EXPLAINED AN AMOUNT OF RS.8,50,401/- AND GAVE RELIE F TO THIS EXTENT. IN RESPECT OF BALANCE AMOUNT OF RS,3,74,674/-, LD. CIT(A) HELD, IT TO BE HAVING SOU RCE OF PERSONAL ELEMENT AND RESTRICTED THE DISALLOWANCE TO 50% OF SUCH AMOUNT BEING RS,1,87,337/-. IN RESPECT OF 11 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 DISALLOWANCE MADE TOWARDS EXCESSIVE PAYMENT OF SALA RY, LD. CIT(A) HELD THAT SMT. PUSHPA RAHI, BEING THE WI FE OF THE DIRECTOR, HELPED IN THE COMPANYS ADMINISTRATIV E WORK. HE CONSIDERED AN AMOUNT OF RS.40,000/- PER MONTH AS REASONABLE PAYMENT AS HER SALARY AND RESTRICTED THE SE EXPENSES TO RS.4.80 LACS PER ANNUM. IN RESPECT OF DISALLOWANCE U/S14A, LD. CIT(A) HELD THAT 0.5% OF RS.1,58,87,767/- BEING TAKEN AS ADMINISTRATIVE EXPE NSES WHICH COMES TO RS.79,739/- SHOULD BE THE AMOUNT OF DISALLOWANCE AS AGAINST DISALLOWANCE MADE BY LD. A. O. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE A S WELL AS ASSESSEE ARE IN APPEAL BEFORE US NOW. 7.4 WE SHALL FIRST DEAL WITH THE COMMON ISSUES RAIS ED IN THE APPEALS FILED BY THE REVENUE AS WELL AS ASSESSE E SIMULTANEOUSLY. GROUND NO.1 RAISED BY REVENUE AND ASSESSEE: 7.5 LD. D.R. PLACED RELIANCE UPON THE ORDERS PASSED BY LD. A.O. AND SUBMITTED THAT FOREIGN TRAVEL HAS BEEN UNDERTAKEN BY THE MEMBERS OF THE FAMILIES BY WAY OF HOLIDAY/LEISURE TRIP, AND NO SUCH EXPENSES HAVE BEE N INCURRED EXCLUSIVELY TOWARDS BUSINESS PURPOSES AS REQUIRED U/S 37(1) OF THE ACT. 7.6 ON THE CONTRARY, LD. A.R. SUBMITTED THAT BEFORE LD. CIT(A), ON 02.04.2012, THE ASSESSEE HAD FURNISHED F ULL DETAILS OF FOREIGN TRAVEL UNDERTAKEN BY THE DIRECTO RS AND THEIR RELATIVES INCLUDING DESTINATION, PURPOSE, DAT E OF RAVEL ALONG WITH RELEVANT DOCUMENTATION TO ESTABLISH THE BUSINESS PURPOSES. COPIES OF BILLS RELATING TO THE SE 12 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 EXPENSES WERE ALSO FURNISHED. HE SUBMITTED THAT QUALIFICATION AND DESIGNATION ALONG WITH JOB PROFIL E OF THE DIRECTORS AND THE RELATIVES OF THE DIRECTORS, WHO U NDERTOOK FOREIGN TRAVEL WERE ANALYZED BY LD. CIT(A), ARE AS UNDER: NAME OF DIRECTORS QUALIFICATION DESIGNATION JOB PROFILE REMARKS SH. K. K. RATHI B.SC. MANAGING DIRECTOR LEGAL & ADMINISTRATION - SH. ANUPAM RATHI B.TECH. WHOLE TIME DIRECTOR OPERATIONS & PURCHASE/SALE - SH. ANURAG RATHI B.COM. DIRECTOR PRODUCTION - SMT. PUSHPA RATHI MATRICULATE ADMINISTRATOR LOOKING AFTER ADMINISTRATION OF COMPANY W/O SHRO K. K. RATHI SMT. PARNEETA RATHI B.SC. OPERATIONS ASSISTANT OPERATION ASSISTANT W/O SJHRI ANUPAM RATHI SMT. NANDITA RATHI B.COM. PRODUCTION ASSISTANT PRODUCTION ASSISTANT W/O SHRI ANURAG RATHI 7.7 LD. A.R. FURTHER SUBMITTED THAT THE ASSESSING O FFICER HAS NOT DISPUTED THE SALARY BEING PAID TO THESE PER SONNEL FOR THE JOB PROFILE UNDERTAKEN BY THEM. HE SUBMITT ED THAT THE ASSESSEE COULD SUBSTANTIATE AND OBTAIN DOCUMENT ARY EVIDENCES ONLY TO THE EXTENT OF RS.8,50,401/-. HE, THEREFORE, PRAYED FOR THE TOTAL DISALLOWANCE BEING DELETED FOR THE YEAR UNDER CONSIDERATION IN RESPECT OF FORE IGN TRAVEL EXPENSES. 7.8 WE HAVE PERUSED ALL THE NECESSARY DETAILS ON RE CORD PLACED BEFORE US AND HEARD BOTH THE PARTIES. WE DO NOT FIND ANY INFIRMITY IN RESPECT OF THE FINDINGS OF LD . CIT(A) AND THEREFORE, UPHOLD THE SAME. IN VIEW OF ABOVE 13 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 DISCUSSION, GROUND NO.1 OF APPEAL FILED BY THE REVE NUE AS WELL AS THE ASSESSEE STAND DISMISSED. GROUND NO.2 OF APPEAL FILED BY REVENUE AND ASSESSEE : 8. IT RELATES TO THE DISALLOWANCE MADE U/S 40A(2)( B) OF THE ACT. LD. D.R. SUBMITTED THAT SMT. PUSHPA RATHI BEING MATRICULATE AND OLD LADY, COULD NOT BE OF ANY ASSI STANCE TO ANY ADMINISTRATIVE DUTIES OF THE ASSESSEE, HE TH EREFORE, SUBMITTED THAT THE PAYMENT MADE TO THESE PERSONNEL BEING SMT. PUSHPA RATHI @ RS.48,000/- PER MONTH IS HIGHLY EXCESSIVE AND CANNOT BE ALLOWED. HE PLACED HIS RELIANCE ON THE DISALLOWANCE MADE BY LD. A.O. 8.1 ON THE CONTRARY, LD. A.R. SUBMITTED THAT SMT. PUSHPA RATHI HAS BEEN INVOLVED IN THE FORMATION OF THE COMPANY AS A SHAREHOLDER W.E.F. 25.06.1993, BUT SHE HAS BEEN TAKING SALARY W.E.F. 2000-01. HE ALSO SUBMITT ED THAT SUCH PAYMENT MADE TO SMT. PUSHPA RATHI HAS NEVER BE EN DISPUTED IN ANY OF THE PREVIOUS YEARS. HE ALSO SUB MITTED THAT LD. CIT(A) HAS SUSTAINED DISALLOWANCE TO AN EX TENT OF RS.96,000/- ON AD-HOC BASIS. HE THUS PRAYED FOR TH E DISALLOWANCE BEING DELETED IN TOTO. 8.2 WE HAVE PERUSED THE DETAILS FILED BEFORE US AND THE ARGUMENTS ADVANCED BY BOTH THE PARTIES. LD. A.O. A ND LD. CIT(A) HAVE ADMITTED TO THE POSITION THAT THE S ALARY PAID TO SMT. PUSHPA RATHI IS ALMOST EQUAL TO THE SA LARY PAID TO THE OTHER STAFF MEMBERS. THUS, L. A.O. HAS FAILED TO ESTABLISH THE MAIN INGREDIENT TO INITIATE SECTIO N 40A, WHICH IS, EXPENDITURE BEING EXCESSIVE OR UNREASONAB LE. WE, THEREFORE, ARE NOT AGREEABLE TO THE AD-HOC 14 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 DISALLOWANCE SUSTAINED BY LD. CIT(A) WHEN CONSISTEN TLY IN THE PRECEDING YEARS, NO SUCH DISALLOWANCE HAS BEEN MADE BY THE LD. A.O. WE, ACCORDINGLY DELETE THE DISALLO WANCE RESTRICTED BY LD. CIT(A) ON THIS COUNT. IN THE RES ULT, GROUND RAISED BY THE REVENUE STAND DISMISSED AND GROUND RAISED BY THE ASSESSEE STAND ALLOWED. GROUND NO.3 OF REVENUES APPEAL: 9. IT IS IN RESPECT DISALLOWANCE OF EXPENSES U/S 14 A OF THE ACT. AS IN THIS ASSESSMENT YEAR, RULE 8D WOULD BE APPLICABLE. WE DIRECT THE A.O. TO CALCULATE THE DISALLOWANCE BEING 0.5% OF THE AVERAGE INVESTMENT. 9.1 IN THE RESULT, TWO GROUNDS RAISED BY THE REVENU E AND ONE GROUND RAISED BY ASSESSEE STAND DISMISSED, SECO ND GROUND RAISED BY ASSESSEE STANDS ALLOWED AND THIRD GROUND RAISED BY REVENUE STANDS PARTLY ALLOWED. 10. ACCORDINGLY, APPEAL FILED BY THE REVENUE STANDS DISMISSED AND APPEAL FILED BY THE ASSESSEE STANDS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH SEP., 2016. SD./- SD./- (R. S. SYAL) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 2016 SP. 15 I.T.A.NOS.5613,5614, 5729 & 6102./DEL/2013 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 19/9/16 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 19/9 SR. PS/PS 7 FILE SENT TO BENCH CLERK 19/9 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER