DATA INFOSYS LIMITED, Alwar V. DCIT, Alwar

ITA 58/JPR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2106 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Business income; Opportunity of being heard; Earning of tax free income; Additional evidence; Question of law; Bad and doubtful debts; Onus to prove; Revenue expenditure
• Section: 145; 37

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 58/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2008-2009 M/S DATA INFOSYS LTD. PLOT NO.20,21,22, OLD INDUSTRIAL AREA, ALWAR (RAJ.) CUKE VS. DCIT (HQRS.), ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACD 5376 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPO NDENT VK;DJ VIHY LA- @ ITA NO. 137/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2008-2009 THE ACIT, CIRCLE-2, ALWAR CUKE VS. M/S DATA INFOSYS LTD. PLOT NO.20,21,22, OLD INDUSTRIAL AREA, ALWAR (RAJ.) LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACD 5376 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI R.A.VERMA (ADDL. CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 07/03/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 09/05/2017 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 2 THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER PASSED BY THE LD CIT(A), ALWAR D ATED 04.12.2013 FOR A.Y. 2008-09. THE EFFECTIVE GROUNDS OF APPEAL ARE A S UNDER:- GROUND OF ASSESSEES APPEAL:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING NOT ALLOWING THE BUSINESS LOSS OF RS.66,91,250/- CLAIME D ON ACCOUNT OF SHORT/EXCESS RECOVERY, RECOVERED BY AXIS BANK LTD. AND ICICI BANK LTD. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF RS.25,000/- OUT OF PLANT RUNNING EX PENSES. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF RS.6,96,964/- ON ACCOUNT OF SHORTAG E OF SOYABEAN. 4. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING ADDITION OF RS.45,13,161/- OF ALLEGED INFLATED PURC HASES THROUGH DEBIT NOTE OF RATE DIFFERENCE. 5. THE LD. CIT(A) HAS ERRED ON FACTS IN LAW IN CONF IRMING ADDITION OF RS.9,49,097/- ON ACCOUNT OF INFLATED PURCHASE THROU GH DEBIT NOTE OF LABOUR CHARGES. GROUND OF REVENUES APPEAL:- 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), ALWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.7,69,315/- MADE BY AO ON A/C OF DEFERRED REVENUE EXPENDITURE EVEN WHEN THE CLAIM WAS COVERED IN TERM S OF PROVISIONS OF SECTION 35D. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF RS.75,000/- TO RS.2 5,000/- MADE BY THE AO ON ACCOUNT OF PLANT RUNNING AND MAINTENANCE EXPE NSES. ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 3 3. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE DISALLOWANCE OF RS.15,37,360/- MADE BY AO ON A/ C OF EXCESS CLAIM OF EXEMPTION U/S 10A. 4. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.20,25,856/- MADE BY AO ON A/C PURCHASE/CONSUMPTION OF PACKING MATERIAL. 2. IN RESPECT OF GROUND NO. 1 OF ASSESSEES APPEAL, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER, ON PERU SAL OF DETAILS OF ADMINISTRATIVE EXPENSES DEBITED IN THE P&L ACCOUNT BY THE ASSESSEE COMPANY, NOTICED THAT A SUM OF RS. 54,74,250/- HAS BEEN CLAIMED UNDER THE HEAD SHORT AND EXCESS RECOVERY ACCOUNT. THE ASSESSEE WAS WAS ASKED TO FURNISH COMPLETE DETAILS IN THIS REGAR D AND TO EXPLAIN THE NATURE AND ALLOWABILITY OF THIS CLAIM OF RS. 54,74, 250. IN RESPONSE, THE ASSESSEE STATED THAT THE ASSESSEE COMPANY HAS CLAIM ED THE DEDUCTION OF RS. 54,74,250 IN RESPECT OF THE AMOUNT OF RECOVE RY MADE BY THE AXIS BANK LIMITED AND ICICI BANK. HE FILED A COPY OF LEG AL NOTICE DATED 08.11.2007 OF THE AXIS BANK, WHICH READS AS UNDER: WE, AXIS BANK LTD. (FORMERLY NAME AS UTI BANK LTD. ), A BANKING COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND CARRYING ON THE BANKING BUSINESS UNDER THE BANKING REGULATION A CT, 1949 AND HAVING ITS REGISTERED OFFICE AT AHMEDABAD AND ITS C ENTRAL OFFICE AT 131, MAKER TOWERS F CUFFE PARADE, COLABA, MUMBAI- 4000 05, DO ISSUE THIS LEGAL NOTICE AS UNDER. OUR RETAIL BANKING DEPT., IN CONSULTATION WITH OUT JAIPUR BRANCH HAS BROUGHT THE FOLLOWING TO OUR INFORMATION AND ISSUIN G A LEGAL NOTICE FOR RECOVERY OF OUTSTANDING DUES OF RS. 1.16 CRORES, PA YABLE BY YOUR ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 4 COMPANY TO THE BANK. THESE AMOUNTS REPRESENT THE DU ES OF INTERNET PAYMENT GATEWAY TRANSACTION OF YOUR COMPANY. YOU HAVE REPRESENTED TO OUT BANK THAT YOU ARE AN IT SOLUTIONS PROVIDER TO THE M/S RAJASTHAN TOURISM DEVELOPMENT CORPORATIO N (RTDC). YOU HAVE SOUGHT THE AXIS BANKS INTERNET PAYMENT GATEWA Y FACILITY TO PROCESS TRANSACTIONS FOR/ON BEHALF OF RTDC. AS PER THE LETTER DATED 19.09.2003 GIVEN BY OUR OF M/S RTDC, YOU ARE AUTHOR IZED TO ACT ON RTDCS BEHALF FOR INTERNET BASED BOOKINGS OF RTDCS RESORTS AND HOLIDAY PACKAGES THROUGH RTDC WEBSITE. THEREAFTER, YOU WERE ACTIVATED ON THE PAYMENT GATEWAY FACILITY ON 29 DEC. 2006 AND ACCORD INGLY AN AGREEMENT DATE 11 DEC 2006 IS SIGNED TO THAT EFFECT BY AND BETWEEN YOUR COMPANY AND THE BANK. THE TERMS AND CONDITIONS OF THE SAID AGREEMENT IS BINDING ON YOUR COMPANY AND ENFORCEABL E IN A COURT OF LAW. THE DETAILS OF FINANCIAL TRANSACTION DONE BY YOUR C OMPANY IS AS UNDER. YOUR COMPANY HAVE, TILL DATE, PROCESSED A TOTAL BUS INESS VOLUME OF RS. 47,663,725.00 THROUGH THE BANKS IPG. THE TABLE BELOW CONTAINS THE SUMMARY OF BUSINESS SE TTLED BY YOUR COMPANY SINCE INCEPTION TILL 14TH JUNE 2007. MONTH NO. OF TXNS AMOUNT, INR JAN-07 1,313 5,012,619.00 FEB-07 1,138 3,207,281.00 MAR-07 1,458 4,179,847.00 APR-07 1,271 5,136,029.00 MAY-07 1,953 17,064,239.00 JUNE-07 (1ST TO 14TH ) 1,343 13,063,710.00 TOTAL 8,476 47,663,725.00 THE BANK EXAMINING THE DETAILS REALIZED THAT THE VO LUMES COMING IN WERE ABNORMAL. A LARGE NUMBER OF CHARGE BACKS ALSO STARTED COMING IN FOR CARD ACCOUNT MISUSE REASON. AS AT 03 OCTOBER 2007, A TOTAL OF ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 5 1,569 NUMBER OF CHARGE BACKS WERE RECEIVED AGGREGAT ING TO AN AMOUNT OF ABOUT RS. 1,81,84,405.51. THEREUPON THE ACQUIRING BUSINESS WITH YOUR COMPANY WAS SUSPENDED PENDING SCRUTINY, FROM 14TH JUNE 2007. THE IPG AGREEMENT WITH OUR COMPANY LTD. HAD BEEN EX ECUTED WITH THE BANK TO ALLOW THE PROCESSING OF TRANSACTIONS FOR AN ON BEHALF OF RTDS (ACCORDING TO BASIC DOCUMENTATION GIVEN BY YOUR COM PANY AT THE TIME OF APPLYING FOR THE IPG), OUR BANKS INTERNAL ANALYSIS AND INVESTIGATIONS AT RB DEPT. REVEALED THAT WITHOUT THE BANKS EXPRESS CONSENT, YOUR COMPA NY WERE ALSO SELLING ITS OWN PRODUCTS I.E. INTERNET TELEPHONY CA RDS THROUGH THE IPG, THOUGH THE BANK WAS LED BY OUR COMPANY INTO BELIEV ING THAT THE IPG WOULD BE USED FOR MAKING RTDCS HOLIDAY RESORTS BO OKING. APPARENTLY, CUSTOMERS OF YOUR COMPANY USED MANY COM PROMISED CREDIT CARD NUMBERS TO PROCURE INTERNET TELEPHONY CARDS. T HESE INTERNET TELEPHONY CARDS PROCURED THROUGH YOUR COMPANY WEBSI TE WERE EXHAUSTED AND THE LEGITIMATE CARDHOLDERS RAISED CHA RGEBACKS/ DISPUTES UPON RECEIVING THEIR CARD STATEMENTS, WHEREIN THEY WERE BILLED FOR THESE WRONGFUL TRANSACTIONS. IT IS ALSO EVIDENT THAT YOUR COMPANY DID NOT TAKE A DEQUATE PRECAUTIONS AND EFFORTS TO ASCERTAIN THE CREDENTIALS AND IDENTI TY OF THEIR INTERNET CUSTOMERS AND WERE EVIDENTLY INTERESTED ONLY IN MAS S MARKETING OF THESE INTERNET TELEPHONY CARDS. THUS YOUR COMPANY H AS AIDED AND ABETTED THESE TRANSACTIONS THROUGH NEGLIGENCE AND C ARELESS ATTITUDE. THE CARD NUMBERS USED BY YOUR COMPANY CUSTOMERS OBV IOUSLY BELONGED TO OTHER INDIVIDUALS. THE RESPECTIVE CARD ISSUING BANKS APPROVED THESE TRANSACTIONS. WHEN THESE TRANSACTION S WERE BILLED TO THE ORIGINALS CARDHOLDERS, THEY DISPUTED THE SAME AS PE R THE RECOURSE AVAILABLE TO THEM. ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 6 IT MAY BE NOTED THAT IN CARD-NOT-PRESENT (CNP) SCEN ARIO SUCH AS MAIL ORDERS OR INTERNET TRANSACTIONS, MERE APPROVAL OF T RANSACTIONS BY THE ISSUING BANK DOES NOT CONSTITUTE THE ACCEPTANCE OF THE SAME BY THE CARDHOLDER. IT IS THE MERCHANTS I.E., YOUR COMPANY S PRIMARY RESPONSIBILITY TO ENSURE THAT THEY ARE DEALING WITH GENUINE CARDHOLDER/S ALONE. IN THE AFORESAID FACTS AND CIRCUMSTANCES, IT IS CON TENDED THAT- A) THE TOTAL BUSINESS SETTLED BY OUR COMPANY SINCE INCEPTION TILL 14 JUNE07: RS. 4.76 CRORES. B) THE BUSINESS BY YOUR COMPANY ON BEHALF OF RTDC I S: RS. 2.25 CRORES APPROXIMATELY. C) TOTAL AMOUNT SUSPECTED FRAUD IS: RS. 2.51 CRORES (C=A-B ABOVE) D) TOTAL CHARGEBACK RECEIVED AS AT 03 OCTOBER 2007: RS. 1.83 CRORES, E) AMOUNT RECOVERED SO FAR BY THE BANK FROM YOUR CO MPANY: RS. 66.91 LAKHS. F) AMOUNT PAYABLE TO THE BANK FROM YOUR COMPANY: RS . 1.16 CRORES. AS A RESULT OF THIS, OUR BANK THROUGH ITS VARIOUS O FFICIALS, REPEATEDLY CALLED UPON YOU TO REGULARIZE YOUR ACCOUNT FROM TIM E TO TIME. HOWEVER, IN SPITE OF THE REPEATED REQUEST, YOUR COMPANY FAI LED AND NEGLECTED TO PAY THE AMOUNT OVERDUE TO THE BANK, EVEN THOUGH AT EVERY POINT YOU GAVE ASSURANCE AND PROMISES TO DO SO. IN VIEW OF TH E DEFAULTS AND BREACH OF CONTRACTS COMMITTED BY YOUR COMPANY, OUR BANK HEREBY DEMANDS THE OUTSTANDING DUES OF RS. 1.16 CRORES PAY ABLE BY OUR COMPANY TO THE BANK. BY THIS NOTICE, WE HEREBY DO AND CALL UPON YOU TO P AY FORTHWITH PAY AN AGGREGATE SUM OF RS. 1.16 CRORES WITH SEVEN DAYS FR OM THE DATE OF RECEIPT OF THIS NOTICE, FALLING WHICH WE SHALL BE C ONSTRAINED TO INITIATE NECESSARY RECOVERY/LEGAL PROCEEDING AGAINST YOUR CO MPANY, WHICH WILL BE ENTIRELY AT YOUR RISKS, COSTS AND CONSEQUENCES, WHICH PLEASE NOTE. THE ASSESSEE WAS SPECIFICALLY REQUIRED TO FURNISH T HE COMPLETE DETAILS OF THESE TRANSACTIONS WITH AXIS BANK AND ICICI BANK AN D THE WORKING OF ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 7 SHORT RECOVERY OF RS. 54,74,250 AS CLAIMED. THE ASS ESSEE WAS ALSO REQUIRED TO PRODUCE COMPLETE BOOKS OF ACCOUNTS FOR VERIFICATION AND STATE THE PRESENT POSITION OF THE LEGAL DISPUTE. FU RTHER, THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHETHER ANY CLAIM/SUI T WAS FILED AGAINST RTDC OR ANY OTHER PARTY. THE ASSESSEE WAS ALSO REQU ESTED TO PROVE THE ALLOWABILITY OF THE CLAIM. IN THIS REGARD, THE ASS ESSEE HAS SUBMITTED A WRITTEN REPLY ON 29.12.2010 STATING AS UNDER: THE SAID CLAIM OF DEDUCTION OF RS. 54,74,250 IS ON ACCOUNT OF THE SERVICES RENDERED BY THE ASSESSEE COMPANY TO THE RT DC (RANTHAMBORE NATIONAL PARK). IN LIEU OF RENDERING THE SERVICES T HE ASSESSEE COMPANY IS GETTING THE COMMISSION. THE ASSESSEE COMPANY IS COLLECTING THE BOOKING AMOUNT FROM THE CUSTOMERS WHOSOEVER INTENDS TO VISIT RANTHAMBORE NATIONAL PARK AND REMITTED IT BACK TO R TDC, SINCE THE RANTHAMBORE NATIONAL PARK WAS UNDER ITS AEGIS. ALL THE ABOVE TRANSACTION IS TRANSACTED THROUGH AXIS BANK AND THE CUSTOMERS ARE MAKING THE PAYMENTS THROUGH CREDIT CARDS. IN THE FI NANCIAL YEAR 2007- 2008, DUE TO GURJAR AGITATION AND ON ACCOUNT OF HON BLE RAJASTHAN HIGH COURTS ORDER, THE MOVEMENT OF THE VISITORS TO RANT HAMBORE NATIONAL PARK WAS SUSPENDED FOR A SHORT WHILE AND THE CUSTOM ERS WITHDRAW THEIR MONEY BACK FROM THEIR CREDIT CARD SERVICE BANK AND THE CREDIT CARD SERVICE BANK RECOVERED THE AMOUNT FROM AXIS BANK AN D ICICI BANK. BOTH THE BANKERS IN TURN DEBITED THE REFUND AMOUNT TO THE EXTENT OF AVAILABLE AMOUNT IN THE ACCOUNT OF THE ASSESSEE COM PANY. THE ASSESSEE COMPANY, AFTER DEDUCTING THE COMMISSION EARNED OF R S. 12,17,000 ON SUCH SERVICES, A NET AMOUNT OF RS. 54,74,250 HAS BE EN CLAIMED AS DEDUCTION (RS. 66,91,00-12,17,000). IN SUPPORT OF T HE CLAIM WE ARE FILING A COPY OF LEGAL NOTICE SHEDDING THE LIGHT ON THE RECOVERY OF AMOUNT BY THE BANKERS AND THE REPLY GIVEN BY THE CO MPANY. THE ASSESSEE COMPANY IS HAVING THE REGULAR BUSINESS TRA NSACTION WITH THE RTDC AND ALSO WITH A FEAR OF LOSING THE BUSINESS OR CHANCES OF GETTING BLACK LIST BY THEM, THE CLAIM FOR THE SAID RECOVERY COULD NOT BE MADE FROM THEM. THE ASSESSEE COMPANY HAS LODGED THE CLAI M AND ENTANGLED ON LEGAL FRONT WITH THE BANKERS FOR THE RECOVERY OF AMOUNT AND ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 8 WHENEVER THE SAID AMOUNT ARE RECOVERED THE SAME WIL L BE CONSIDERED AS AN INCOME. THE AO CONSIDERED THE FACTS OF THE CASE MENTIONED I N THE LEGAL NOTICE OF AXIS BANK AND ALSO PERUSED THE REPLY OF THE ASSESSE E DATED 23.11.2007 TO THE LEGAL NOTICE DATED 08.11.2007 AND STATED THA T THE SAID LEGAL NOTICE AND REPLY SHOWS THAT THE ASSESSEE HAS NOT AC CEPTED THE CLAIMS OF AXIS BANK IN THIS REGARD. AS PER THE ASSESSEE IT HA S LODGED THE CLAIM AND ENTANGLED ON LEGAL FRONT WITH THE BANKERS FOR R ECOVERY OF THE AMOUNT. HOWEVER NO DOCUMENTARY EVIDENCE IN THIS REG ARD HAS BEEN FILED. THE ASSESSEE HAS ALSO NOT FILED THE COMPLETE DETAILS IN THIS REGARD & HAS NOT DISCLOSED FULL FACTS. AFTER THE QUERY ON THE ABOVE POINTS THE ASSESSEE HAS ALSO NOT PRODUCED THE ACCOUNT BOOKS. T HEREFORE, THE FACTS ARE NOT FULLY CRYSTALLIZED AND ARE NOT VERIFIABLE. THE ASSESSEE WAS REQUIRED TO FURNISH PRESENT STATUS OF THE ASSESSEE S CASE. THE NECESSARY DETAILS WERE NOT PRODUCED. LOOKING TO THE FACTS OF THE CASE IT CANNOT BE SAID THAT THE AMOUNT OF RS. 66,91,000 (RS. 54,74,25 0+12,17,000=RS. 66,91,250) CLAIMED TO HAVE BEEN RECOVERED BY THE B ANK WAS CRYSTALLIZED. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE HAS DEBITED NET AMOUNT OF RS. 54,74,250 IN THE P&L ACCO UNT AND COMMISSION RECEIPTS OF RS. 12,17,000 IN THE TRADING ACCOUNT. IT IS EVIDENT THAT THE ASSESSEE HAS PREMATURELY CLAIMED T HESE EXPENSES. SINCE THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM , THE EXPENSES TO THE TUNE OF RS. 66,91,250 WERE DISALLOWED AND ADDED TO INCOME OF THE ASSESSEE COMPANY. 2.1 ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLO WANCE OF RS. 66,91,250 MADE BY THE AO AND HIS RELEVANT FINDINGS ARE AS UNDER:- 5.8 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE IN THIS REGARD AND FIND THAT THIS CLAIM MADE BY THE BANK AGAINST T HE APPELLANT HAS ARISEN DUE TO THE FOLLOWING REASONS: (A) THE APPELLANT CARRIED OUT THE BUSINESS OF SALE OF INTERNET TELEPHONY CARDS, THE ACTIVITY FOR WHICH IT WAS NOT AUTHORIZED TO DO SO. AS PER THE TERMS OF THE AGREEMENT, IT WAS ENGAG ED TO MAKE BOOKINGS FOR AND ON BEHALF OF RTDC. ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 9 (B) THE SAID ACTIVITY BECOMES ILLEGAL, ULTRA-VIRES AND AS OUTSIDE THE PURVIEW OF THE SCOPE OF THE CONTRACT ENTERED IN TO IN THIS BEHALF. 5.9. IN VIEW OF THE ABOVE DISCUSSION, I UPHOLD THE ACTION OF THE AO IN MAKING THE DISALLOWANCE UNDER THIS HEAD ON AC COUNT OF THE FOLLOWING REASONS: (I) THE LIABILITY ON ACCOUNT OF CLAIM MADE HAS NOT STILL CRYSTALLIZED AND THUS IS AT BEST ONLY A CONTIGENT L IABILITY. THE ACCOUNTING PRINCIPLES MANDATE A DISCLOSURE WITH REG ARD TO THE SAME IN THE BOOKS OF ACCOUNT AS PER SCHEDULE-VI OF THE COMPANIES ACT IS CONCERNED. IT HAS NOT BEEN ACCEPTE D BY THE APPELLANT ALSO AND IS BEING VEHEMENTLY CONTESTED. (II) NO DEDUCTION UNDER THE INCOME TAX ACT IS PERMI SSIBLE AS REGARDS A CONTIGENT LIABILITY IS CONCERNED. (III) THE AMOUNT PAYABLE BY THE APPELLANT, IF ANY IS ON ACCOUNT OF CONTRAVENTION OF CONTRACTUAL OBLIGATIONS AND TH EREFORE IS IN THE NATURE OF A PENAL LIABILITY FOR WHICH NO DEDUCTION COULD BE CLAIMED UNDER THE PROVISIONS OF THE IT ACT. (IV) THE SAID EXPENDITURE IS ALSO NOT ALLOWABLE AS A DEDUCTION U/S 37 OF THE IT ACT. FURTHER, I DO NOT AGREE WITH THE REMAND REPORT OF THE AO WHEREIN IT IS STATED THAT AS REGARDS CLAIMED MADE B Y THE COMPANY FOR BAD DEBTS OF COMMISSION INCOME TO THE TUNE OF R S. 12,17,000/- MAY BE ALLOWED. ON THE OTHER HAND IN TH E SAME REMAND REPORT THE AO HAS PROPOSED FOR DISALLOWANCE OF RS. 66,91,250. IN RESPONSE TO THE QUERY IN THE COURSE O F APPELLATE PROCEEDINGS REGARDING THE PRESENT STATUS OF THE CL AIM, IT WAS INFORMED THAT IT IS STILL PENDING BEFORE THE COURTS AT THE ADMISSION STAGE AND HAS NOT BEEN ADMITTED TILL TODAY. ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 10 5.10. CONSIDERING THE MATERIAL AVAILABLE ON RECORD AND REASONS GIVEN ABOVE, I CONFIRM THE DISALLOWANCE OF RS. 66,9 1,250 MADE BY THE AO UNDER THIS HEAD. 2.2 DURING THE COURSE OF HEARING, THE LD AR SUBMITT ED THAT THE ISSUE WHICH ARISE FOR CONSIDERATION IS WHETHER THE LOSS I NCURRED BY THE ASSESSEE IS ON ACCOUNT OF CONTRAVENTION OF CONTRACT UAL OBLIGATION AND THUS A PENAL LIABILITY NOT ALLOWABLE UNDER THE ACT AND WHETHER THE AMOUNT OF RS.66,91,250/- RECOVERED BY AXIS BANK FRO M THE ASSESSEE IS A CRYSTALLISED LIABILITY OR A CONTINGENT LIABILITY. 2.3 IT WAS SUBMITTED THAT THE ASSESSEE IN COURSE OF ITS BUSINESS HAS ENTERED INTO INTERNET GATEWAY MERCHANT AGREEMENT DT . 11.12.2006 WITH AXIS BANK WHEREBY THE ASSESSEE WAS ALLOWED TO CONDU CT BUYING AND SELLING ACTIVITIES FROM ITS WEBSITE AND RECOVER CRE DIT/DEBIT CARDS PAYMENTS FOR THE SAME OVER THE INTERNET. THEREFORE, AS PER THIS AGREEMENT THERE WAS NO RESTRICTION THAT ASSESSEE WO ULD ONLY RECEIVE THE PAYMENT OF THE CUSTOMER IS RESPECT OF TRANSACTI ON WITH RTDC. THEREFORE, FINDING OF THE LD. CIT(A) THAT THE ASSES SEE ALSO CARRIED OUT TRANSACTION OF INTERNET TELEPHONIC CARDS THROUGH TH IS PAYMENT GATEWAY AND THUS THAT THE ACTIVITY BECOME ILLEGAL, ULTRA VI RUS AND OUTSIDE THE SCOPE OF THE CONTRACT AND IS A PENAL LIABILITY IS I NCORRECT AND ON THIS ACCOUNT, THE CLAIM OF DEDUCTION OF THE AMOUNT RECOV ERED BY THE BANK CANNOT BE DISALLOWED. IT WAS FURTHER SUBMITTED THAT THE ANOTHER CONTENTIO N OF THE LOWER AUTHORITIES THAT THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE ON ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 11 ACCOUNT OF RECOVERY OF RS.66,91,250/- BY THE BANK I S PREMATURE AND CONTINGENT IS ALSO INCORRECT. THIS IS BECAUSE AS PE R THE LEGAL NOTICE DT. 08.11.2007 SEND BY THE BANK, IT DEMANDED RS.1.83 CR ORES FROM THE ASSESSEE AND SINCE RS.66.91 LACS WAS ALREADY RECOVE RED, THE LEGAL NOTICE WAS ISSUED FOR RS.1.16 CRORES. IN COURSE OF APPELLATE HEARING, ASSESSEE FILED ORDER OF MUMBAI DEBT RECOVERY TRIBUN AL DT. 25.08.2009 WHEREBY THE ASSESSEE WAS HELD TO BE LIABLE TO MAKE PAYMENT OF RS.1.22 CRORES TO THE BANK. THEREAFTER, ON MISCELLANEOUS AP PLICATION FILED BY THE ASSESSEE, THE ORDER DT.25.08.2009 WAS RECALLED AND VIDE ORDER DT. 24.03.2010, ASSESSEE WAS REQUIRED TO DEPOSIT A SUM OF RS.20 LACS ON OR BEFORE 31.03.2010. ALL THESE FACTS SHOWS THAT AS ON 31.03.2008 THE LIABILITY OF THE ASSESSEE WAS CERTAIN. AS RS.66.91 LACS IS ALREADY RECOVERED BY THE BANK AND THE LIABILITY IS CERTAIN ,THOUGH IT DISPUTED THE FURTHER CLAIM OF RS.1.16 CRORES MADE BY THE BANK IN THE LEGAL NOTICE, THE ASSESSEE AS A MATTER OF PRUDENCE RIGHTLY CLAIMED TH E AMOUNT OF RS.66.91 LACS IN THE P&L A/C WHICH IS ALLOWABLE AS A BUSINESS LOSS. THE SUPREME COURT IN CASE OF DR. T.A. QURESHI VS. CIT 287 ITR 547 HAS HELD THAT BUSINESS LOSS ARE ALLOWABLE ON ORDINARY C OMMERCIAL PRINCIPLES IN COMPUTING PROFIT AND THEREFORE THE HEROINE SEIZE D AND CONFISTICATED AS A PART OF STOCK IN TRADE OF ASSESSEE HAS TO BE A LLOWED AS A BUSINESS LOSS. THEREFORE, THE FINDINGS OF THE CIT(A) THAT TH E CLAIM IS NOT CRYSTALLISED AND IS A CONTINGENT LIABILITY IS BY DR AWING INCORRECT INFERENCE FROM THE FACTS ON RECORD. IT WAS FURTHER SUBMITTED THAT OTHERWISE ALSO, ASSES SEE ON SUCH TRANSACTION HAS EARNED COMMISSION OF RS.12.17 LACS WHICH IS OFFERED FOR TAX. THEREFORE, IF IN COURSE OF SUCH BUSINESS, THE BANK HAS RECOVERED ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 12 RS.66.91 LACS FROM THE ASSESSEE, IT IS ALLOWABLE AS BAD DEBT U/S 36(1)(VII), ONCE THE AMOUNT IS WRITTEN OFF IN THE B OOKS OF ACCOUNTS. FOR THIS RELIANCE IS PLACED ON THE DECISION OF BOMBAY H IGH COURT IN CASE OF CIT VS. SHREYAS S. MORAKHIA 342 ITR 285 WHERE ASSESSEE, A SHARE BROKER, ENGAGED IN THE TRANSACTIONS OF SALE & PURCH ASE OF SHARES FOR HIS CLIENTS CLAIMED DEDUCTION BY WAY OF BAD DEBTS U/S 3 6(1)(VII) R.W.S. 36(2) OF IT ACT IN RESPECT OF AMOUNT WHICH COULD NO T BE RECOVERED FROM ITS CLIENTS. THE SAME WAS DISALLOWED BY THE AO. IT WAS HELD THAT DEDUCTION ON ACCOUNT OF BAD DEBT CAN BE ALLOWED ONL Y WHERE SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMP UTING THE INCOME OF THE ASSESSEE. IN PRESENT CASE, THE DEBT COMPRISES, INTER ALIA, OF THE VALUE OF THE SHARES TRANSACTED & THE BROKERAGE PAYA BLE BY THE CLIENT ON WHOSE BEHALF THE TRANSACTION TAKES PLACE. SINCE, TH E BROKERAGE FROM THE TRANSACTION OF PURCHASE OF SHARES HAS BEEN TAXED IN THE HANDS OF THE ASSESSEE AS BUSINESS INCOME, IT IS EVIDENT THAT WIT HIN THE MEANING OF SEC. 36(2)(I), DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE & THEREFORE AS SESSEE IS ENTITLED TO DEDUCTION U/S 36(1)(VII). 2.4 THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THERE IS A DISPUTE WHICH HAS ARISEN BETWEEN THE ASSESSEE COMPANY AND AXIS BANK IN TERMS OF COMPLIAN CE TO THE TERMS AND CONDITIONS OF INTERNET GATEWAY MERCHANT AGREEME NT DATED 11.12.2006. AXIS BANK HAS ISSUED A LEGAL NOTICE DA TED 8.11.2007 FOR RECOVERY OF RS 1.16 CRORES AND THEREAFTER A PETITIO N HAS BEEN FILED ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 13 BEFORE THE DEBT RECOVERY TRIBUNAL FOR RS 1.22 CRORE S WITH INTEREST, WHICH IS PENDING ADJUDICATION. IN THE SAID LEGAL N OTICE, AXIS BANK HAS ALSO STATED THAT TOTAL CHARGEBACK RECEIVED AS AT 3 OCTOBER 1.83 CRORES (GROSS LIABILITY) AND AFTER ADJUSTING RS 66.91 LACS SO FAR RECOVERED BY THE BANK FROM THE ASSESSEE COMPANY, NET LIABILITY OF RS 1.16 CRORES WAS DEMANDED. THE ASSESSEE COMPANY HAS DISPUTED THE SA ID NET LIABILITY OF RS 1.16 CRORES BEFORE THE DRT. IT HAS ALSO FILED A CIVIL SUIT BEING NO. 38 OF 2008 (EARLIER NO. 1049 OF 2007) AGAINST THE AXIS BANK BEFORE THE CIVIL JUDGE (JUNIOR DIVISION) OF JAIPUR CITY (EAST) FOR R ECOVERY OF RS 67.12 LACS WHICH HAS ALREADY BEEN RECOVERED FROM ASSESSEE COMPANY BY THE BANK. THOUGH THERE IS MINOR DIFFERENCE BETWEEN TH E TWO AMOUNTS OF RS 67.12 LACS AND RS 66.91 LACS, IT SEEMS LIKELY TH AT IT RELATES TO THE SAME AMOUNT OF RS 66.91 LACS WHICH HAS BEEN RECOVER ED BY THE BANK FROM THE ASSESSEE COMPANY AS MENTIONED IN THE LEGAL NOTICE. OVERALL, THE FACTS THAT HAVE EMERGED ARE THAT THE SUBJECT DI SPUTE HAS BEEN PENDING ADJUDICATION BEFORE THE DEBT RECOVERY TRIBU NAL AS WELL AS BEFORE THE CIVIL COURTS AND THE WHOLE OF THE LIABIL ITY OF THE ASSESSEE COMPANY EITHER TOWARDS RS 66.91 LACS WHICH HAS ALRE ADY BEEN RECOVERED OR THE BALANCE SUM OF RS 1.22 CRORES HAS NOT ACCEPTED BY THE ASSESSEE COMPANY AND HAS NOT ATTAINED FINALITY. 2.6 IN THE ABOVE FACTUAL MATRIX, THE ISSUE BEFORE U S RELATES TO CLAIM OF RS 66.91 LACS MADE BY THE ASSESSEE COMPANY AS AN AL LOWABLE EXPENDITURE FOR TAX PURPOSES. THE LD AR HAS CONTEN DED THAT AS ON 31.03.2008 THE LIABILITY OF THE ASSESSEE WAS CERTAI N. AS RS.66.91 LACS IS ALREADY RECOVERED BY THE BANK AND THE LIABILITY IS CERTAIN, THOUGH IT DISPUTED THE FURTHER CLAIM OF RS.1.16 CRORES MADE B Y THE BANK IN THE ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 14 LEGAL NOTICE, THE ASSESSEE AS A MATTER OF PRUDENCE RIGHTLY CLAIMED THE AMOUNT OF RS.66.91 LACS IN THE P&L A/C WHICH IS ALL OWABLE AS A BUSINESS LOSS. 2.7 THE LAW IN THIS REGARD IS WELL SETTLED THAT FOR CLAIMING AN EXPENDITURE ARISING OUT OF AN CONTRACTUAL OBLIGATIO N, THE LIABILITY TO PAY SUCH SUM SHOULD CRYSTALLISED, IN TERMS OF THE SAID CONTRACTUAL OBLIGATION, DURING THE RELEVANT PERIOD. IN OTHER WORDS, THERE SHOULD BE A LIABILITY EXISTING DURING THE RELEVANT PERIOD AND WHERE THE L IABILITY ITSELF IS IN DOUBT OR HAS NOT BEEN ACCEPTED AND CHALLENGED AS IN THE INSTANT CASE, AND THE OUTCOME OF WHICH IS UNCERTAIN, SUCH LIABILI TIES CANNOT BE SUBJECT MATTER OF DEDUCTION. MERELY PUTTING ASIDE THE MONE Y OR PROVIDING FOR THE SAME IN THE FINANCIAL STATEMENT OR AS IN THE IN STANT CASE, MERE RECOVERY OF THE SAID MONEY IS NOT SUFFICIENT ENOUGH TO CLAIM THE DEDUCTION. THE FACT REMAINS THAT THE ASSESSEE COMP ANY HAS NOT ACCEPTED ITS LIABILITY AT FIRST PLACE AND THE LIABI LITY IS NOT CERTAIN. THE SAID NON-ACCEPTANCE OF THE LIABILITY IS NOT JUST IN RESPECT OF SUM OF RS 1.22 CRORES WHICH IS PENDING ADJUDICATION BEFORE TH E DEBT RECOVERY TRIBUNAL BUT ALSO IN RESPECT OF RECOVERY OF RS 66.9 1 LACS WHICH HAS BEEN CHALLENGED BY THE ASSESSEE COMPANY IN THE CIVIL COU RT. THEREFORE, WE ARE UNABLE TO AGREE TO THE CONTENTIONS RAISED BY TH E LD AR. AT THE SAME TIME, THE ASSESSEE COMPANY WOULD BE AT LIBERTY TO C LAIM THE SAID AMOUNT IN THE SUBSEQUENT PERIOD ONCE IT HAS ACCEPTE D ITS LIABILITY AND THE LIABILITY THUS BECOMES CERTAIN THOUGH IT HAS BE EN RECOVERED IN THE INSTANT YEAR. ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 15 2.8 WE NOW REFER TO THE ANOTHER CONTENTION OF THE LD AR THAT THE ASSESSEE ON SUCH TRANSACTIONS HAS EARNED COMMISSION OF RS.12.17 LACS WHICH IS OFFERED FOR TAX. THEREFORE, IF IN COURSE O F SUCH BUSINESS TRANSACTIONS, THE BANK HAS RECOVERED RS.66.91 LACS FROM THE ASSESSEE, IT IS ALLOWABLE AS BAD DEBT U/S 36(1)(VII), ONCE THE A MOUNT IS WRITTEN OFF IN THE BOOKS OF ACCOUNTS. FOR THIS RELIANCE IS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN CASE OF CIT VS. SHREYAS S. MORAKHIA (SUPRA). 2.9 BEFORE THE LD CIT(A), IT WAS SUBMITTED BY THE A SSESSEE COMPANY THAT RS 66.91 LACS REPRESENTS THE REALISATION OF TH E PROCEEDS FROM ITS ACTIVITY WHEREUPON THE ASSESSEE COMPANY HAS EARNED THE COMMISSION OF RS 12.17 LACS, THUS THE SAID RECOVERED AMOUNT IS IN THE NATURE OF SALES PROCEEDS AND WRITTEN OFF AMOUNT IS IN THE NAT URE OF BAD DEBT. THE AO IN HIS REMAND REPORT HAS AGREED WITH THE ASSESSE ES CONTENTION TO THE EXTENT OF RS 12.17 LACS AND STATED THAT THIS AM OUNT OF RS 12.17 LACS IS ON ACCOUNT OF SERVICES RENDERED BY THE ASSESSEE COMPANY TO THE AXIS BANK AND HAS SUBSEQUENTLY BEEN WRITTEN OFF IN THE B OOKS OF ACCOUNTS TREATING THE SAME AS BAD DEBT AND THUS ALLOWABLE U/ S 36(1)(VII) OF THE ACT. 2.10 TO APPRECIATE THE CONTENTIONS RAISED BY THE LD AR, IT WOULD BE RELEVANT TO REFER TO THE PROVISIONS OF SECTION 36(1 )(VII) AND SECTION 36(2) OF THE ACT WHICH READS AS UNDER: 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CL AUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN CO MPUTING THE INCOME REFERRED TO IN SECTION 28: (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERAB LE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR: ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 16 PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH CLAUSE (V IIA) APPLIES, THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DEBT O R PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART TH EREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE: PROVIDED FURTHER THAT WHERE THE AMOUNT OF SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR P ART THEREOF BECOMES IRRECOVERABLE OR OF AN EARLIER PREVIOUS YEAR ON THE BASIS OF INCOME COMPUTATION AND DISCLOSURE STANDARDS NOTIFIED UNDER SUB-SECTION (2) OF SECTION 145 WITHOUT RECORDING THE SAME IN THE ACCOU NTS, THEN, SUCH DEBT OR PART THEREOF SHALL BE ALLOWED IN THE PREVIOUS YEAR IN WHICH SUCH DEBT OR PART THEREOF BECOMES IRRECOVERABLE AND IT SHALL BE DEEME D THAT SUCH DEBT OR PART THEREOF HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN TH E ACCOUNTS FOR THE PURPOSES OF THIS CLAUSE. EXPLANATION 1.FOR THE PURPOSES OF THIS CLAUSE, ANY BAD DEBT OR PART THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE IN TH E ACCOUNTS OF THE ASSESSEE; EXPLANATION 2.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT FOR THE PURPOSES OF THE PROVISO TO CLAUSE (VII) OF THIS SUB -SECTION AND CLAUSE (V) OF SUB-SECTION (2), THE ACCOUNT REFERRED TO THEREIN SH ALL BE ONLY ONE ACCOUNT IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS UND ER CLAUSE (VIIA) AND SUCH ACCOUNT SHALL RELATE TO ALL TYPES OF ADVANCES, INCL UDING ADVANCES MADE BY RURAL BRANCHES; (2) IN MAKING ANY DEDUCTION FOR A BAD DEBT OR PART THEREOF, THE FOLLOWING PROVISIONS SHALL APPLY (I) NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUC H DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR P ART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, OR REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY-LENDING WHICH I S CARRIED ON BY THE ASSESSEE; (II) IF THE AMOUNT ULTIMATELY RECOVERED ON ANY SUC H DEBT OR PART OF DEBT IS LESS THAN THE DIFFERENCE BETWEEN THE DEBT OR PART A ND THE AMOUNT SO DEDUCTED, THE DEFICIENCY SHALL BE DEDUCTIBLE IN THE PREVIOUS YEAR IN WHICH THE ULTIMATE RECOVERY IS MADE; ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 17 (III) ANY SUCH DEBT OR PART OF DEBT MAY BE DEDUCTED IF IT HAS ALREADY BEEN WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF AN EARLIER PREVIOUS YEAR (BEING A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COM MENCING ON THE 1ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR), BU T THE ASSESSING OFFICER HAD NOT ALLOWED IT TO BE DEDUCTED ON THE GROUND THAT IT HAD NOT BEEN ESTABLISHED TO HAVE BECOME A BAD DEBT IN THAT YEAR; (IV) WHERE ANY SUCH DEBT OR PART OF DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE PREVIOUS YEAR (BEING A PREVIOUS YEA R RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR) AND THE ASSESSING OFFICER IS SATIS FIED THAT SUCH DEBT OR PART BECAME A BAD DEBT IN ANY EARLIER PREVIOUS YEAR NOT FALLING BEYOND A PERIOD OF FOUR PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVI OUS YEAR IN WHICH SUCH DEBT OR PART IS WRITTEN OFF, THE PROVISIONS OF SUB- SECTION (6) OF SECTION 155 SHALL APPLY; (V) WHERE SUCH DEBT OR PART OF DEBT RELATES TO ADV ANCES MADE BY AN ASSESSEE TO WHICH CLAUSE (VIIA) OF SUB-SECTION (1) APPLIES, NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS THE ASSESSEE HAS DEBITED THE AMOUNT OF SUCH DEBT OR PART OF DEBT IN THAT PREVIOUS YEAR TO THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE. 2.11 ON PERUSAL OF ABOVE PROVISIONS, WHAT IS REQUIR ED TO BE EXAMINED IS FIRSTLY, THERE SHOULD BE A DEBT DUE WHICH HAS BE COME BAD. SECONDLY, THE AMOUNT OF SUCH BAD DEBT OR PART THEREOF IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR T HE PREVIOUS YEAR. THIRDLY, SUCH DEBT OR PART THEREOF HAS BEEN TAKEN I NTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOU S YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR. 2.12 IN THE CONTEXT OF THE AFORESAID THIRD CONDITIO N, THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. SHREYAS S. MORAKHIA (SUPRA) 342 ITR 285 HAS BEEN BROUGHT TO THE NOTICE OF THE BENCH. IN THAT CASE, THE FACTS OF THE CASE WERE THAT THE ASSE SSEE WAS A SHARE ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 18 BROKER. THE ASSESSEE CLAIMED A DEDUCTION OF RS. 28. 24 LACS REPRESENTING AN AMOUNT DUE TO HIM BY HIS CLIENTS ON ACCOUNT OF T RANSACTIONS OF SHARES EFFECTED BY THE ASSESSEE ON THEIR BEHALF. TH E ASSESSEE CLAIMED THAT THE AMOUNT HAD BECOME IRRECOVERABLE. THE AMOUN T WAS CLAIMED AS A DEDUCTION AFTER HAVING BEEN WRITTEN OFF AS IRRECO VERABLE FROM THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER DISALLOWED THE DEDUCTION HOLDING THAT THE BUSINESS IN RESPECT OF WHICH THE D EBTS HAD ARISEN HAD CEASED TO EXIST IN THE YEAR UNDER CONSIDERATION AND ALSO ON THE GROUND THAT NO ACTION WAS TAKEN AGAINST THE CLIENTS TO REC OVER THE AMOUNTS DUE FROM THEM. IN APPEAL, THE COMMISSIONER (APPEALS) HE LD THAT THOUGH THE ASSESSEE HAD SOLD THE MEMBERSHIP CARD OF THE MUMBAI STOCK EXCHANGE, HE CONTINUED TO CARRY ON BROKING BUSINESS AS A SUB BROKER AND HENCE THE BUSINESS OF THE ASSESSEE HAD NOT CEASED TO EXIS T BUT CONTINUED DURING THE YEAR UNDER CONSIDERATION. THE COMMISSION ER HELD THAT THE FAILURE OF THE ASSESSEE TO INITIATE RECOVERY PROCEE DINGS COULD NOT BE A GROUND FOR DENYING A CLAIM FOR BAD DEBTS UNDER SECT ION 36(1)(VII). THE CLAIM OF THE ASSESSEE WAS ACCORDINGLY ALLOWED. AN A PPEAL WAS FILED BY THE REVENUE BEFORE THE INCOME TAX APPELLATE TRIBUNA L; THE CONTENTION OF THE REVENUE BEING THAT SINCE THE ASSESSEE HAD CR EDITED ONLY THE AMOUNT OF THE BROKERAGE TO THE PROFIT AND LOSS ACCO UNT, THE AMOUNT OF BAD DEBTS CLAIMED WAS NOT TAKEN INTO ACCOUNT IN COM PUTING THE TOTAL INCOME OF THE RELEVANT PREVIOUS YEAR OR OF ANY EARL IER PREVIOUS YEAR. HENCE ACCORDING TO THE REVENUE THE CONDITION STIPUL ATED IN SECTION 36(2) WAS NOT SATISFIED AND THE ASSESSEE WAS NOT EN TITLED TO CLAIM A DEDUCTION IN RESPECT OF THE BAD DEBTS UNDER SECTION 36(1)(VII). ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 19 IN THE ABOVE FACTUAL MATRIX, THE QUESTION OF LAW RE FERRED FOR CONSIDERATION BEFORE THE HONBLE HIGH COURT WAS AS UNDER: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSEE, WHO IS A SHARE BROKER, IS ENTITLED TO DED UCTION BY WAY OF BAD DEBTS UNDER SECTION 36(1)(VII) READ WITH SECTIO N 36(2) OF THE INCOME TAX ACT, 1961 IN RESPECT OF THE AMOUNT WHICH COULD NOT BE RECOVERED FROM ITS CLIENTS IN RESPECT OF TRANSACTIO NS EFFECTED BY HIM ON BEHALF OF HIS CLIENTS APART FROM THE COMMISSION EARNED BY HIM. THE HONBLE HIGH COURT THEREAFTER LAID DOWN THE FOL LOWING LEGAL PROPOSITION: 10. THE REQUIREMENT WHICH HAS BEEN IMPOSED BY PARL IAMENT IN SECTION 36(2)(I) IS THAT A DEDUCTION ON ACCOUNT OF A BAD DE BT CAN BE ALLOWED ONLY WHERE SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOU S YEAR IN WHICH THE AMOUNT OF THE DEBT IS WRITTEN OFF. THE ASSESSEE IS A STOCK BROKER WHO ENGAGES IN TRANSACTIONS OF SALE AND PURCHASE OF SHA RES FOR HIS CLIENTS. THE BILL RAISED ON THE CLIENT REFLECTS THE RATE, QU ANTITY AND TOTAL VALUE OF THE SHARES TRANSACTED AS WELL AS THE BROKERAGE, APA RT FROM THE SECURITY TRANSACTION TAX AND THE SERVICE TAX. THE BROKERAGE FROM THE TRANSACTION OF THE PURCHASE OF SHARES HAS BEEN TAXE D IN THE HANDS OF THE ASSESSEE AS ITS BUSINESS INCOME. ONCE THAT IS S O, IT IS EVIDENT THAT WITHIN THE MEANING OF SECTION 36(2)(I) THE DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE. THE DEBT COMPRISES, INTER ALIA, OF THE VALUE OF THE SHA RES TRANSACTED AND THE BROKERAGE PAYABLE BY THE CLIENT ON WHOSE BEHALF THE TRANSACTION TAKES PLACE. THE BROKERAGE AS WELL AS THE VALUE OF THE SH ARES CONSTITUTE A PART OF THE DEBT DUE TO THE ASSESSEE SINCE BOTH ARISE OU T OF THE SAME ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 20 TRANSACTION. THE TEST IS WHETHER THE DEBT OR PART T HEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSE E. THE ANSWER TO THAT TEST HAS TO BE IN THE AFFIRMATIVE. THAT BEING THE POSITION, THE REQUIREMENTS OF SECTION 36(2)(I) ARE DULY FULFILLED . 14. THE VALUE OF THE SHARES TRANSACTED BY THE ASSE SSEE AS A STOCK BROKER ON BEHALF OF ITS CLIENT IS AS MUCH A PART OF THE DEBT AS IS THE BROKERAGE WHICH IS CHARGED BY THE ASSESSEE ON THE T RANSACTION. THE BROKERAGE HAVING BEEN CREDITED TO THE PROFIT AND LO SS ACCOUNT OF THE ASSESSEE, IT IS EVIDENT THAT A PART OF THE DEBT IS TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE. THE FACT THAT THE LIABILITY TO PAY THE BROKERAGE MAY ARISE, AS CONTENDED BY THE REVENU E, AT A POINT IN TIME ANTERIOR TO THE LIABILITY TO PAY THE VALUE OF THE SHARES TRANSACTED WOULD NOT MAKE ANY MATERIAL DIFFERENCE TO THE POSIT ION. BOTH CONSTITUTE A PART OF THE DEBT WHICH ARISES FROM THE VERY SAME TRANSACTION INVOLVING THE SALE OR AS THE CASE MAY BE PURCHASE OF SHARES. SINCE BOTH FORM A COMPONENT PART OF THE DEBT, THE REQUIREMENTS OF SEC TION 36(2)(I) ARE FULFILLED WHERE A PART THEREOF IS TAKEN INTO ACCOUN T IN COMPUTING THE INCOME OF THE ASSESSEE. BEFORE CONCLUDING, WE AGAIN TAKE NOTE OF THE FACT T HAT IN PARAGRAPH 31 OF ITS IMPUGNED DECISION THE TRIBUNAL HAS LEFT THE ISSUE AS REGARDS THE VALUE OF THE SHARES WHICH REMAIN IN THE HANDS OF TH E ASSESSEE WHICH HAS TO BE ADJUSTED AGAINST THE AMOUNT RECEIVABLE FR OM THE CLIENT TO BE DETERMINED BEFORE THE REGULAR BENCH OF THE TRIBUNAL FOLLOWING THE VIEW OF THE SPECIAL BENCH. THE VIEW WHICH HAS BEEN TAKEN BY THE SPECIAL BENCH IS, WITH RESPECT, IN ACCORDANCE WITH LAW. WE ACCORDINGLY DISPOSE ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 21 OF THE APPEAL BY ANSWERING THE QUESTION OF LAW AS F ORMULATED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. 2.13 IN LIGHT OF ABOVE LEGAL FRAMEWORK, LETS EXAM INE THE FACTS OF THE INSTANT CASE. IN THE PRESENT CASE, THERE IS FINDIN G OF FACT BY THE AO IN HIS REMAND REPORT THAT THE AMOUNT OF RS 12.17 LACS IS ON ACCOUNT OF SERVICES RENDERED BY THE ASSESSEE COMPANY TO THE AX IS BANK AND HAS SUBSEQUENTLY BEEN WRITTEN OFF IN THE BOOKS OF ACCOU NTS TREATING THE SAME AS BAD DEBT. THE SAID AMOUNT OF RS 12.17 LACS IS THUS CLEARLY A DEBT DUE FROM ITS CUSTOMERS AND THE FACT THAT THE S AME HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS IS ALLOWABLE U /S 36(1)(VII) OF THE ACT AND TO THIS EXTENT, WE AGREE WITH THE LD AR AND THE CLAIM OF THE ASSESSEE COMPANY IS HEREBY ALLOWED. 2.14 AS FAR AS THE REMAINING AMOUNT OF RS 54.74 LAC S IS CONCERNED, AS WE HAVE NOTED ABOVE, IT WAS SUBMITTED BY THE ASSESS EE COMPANY BEFORE THE LD CIT(A) THAT RS 66.91 LACS (WHICH INCL UDES RS 54.74 LACS) REPRESENTS THE REALISATION OF THE PROCEEDS FROM ITS ACTIVITY WHEREUPON THE ASSESSEE COMPANY HAS EARNED THE COMMISSION OF R S 12.17 LACS, THUS THE SAID RECOVERED AMOUNT IS IN THE NATURE OF SALES PROCEEDS AND WRITTEN OFF AMOUNT IS IN THE NATURE OF BAD DEBT. TH ERE IS A DIFFERENCE BETWEEN THE AMOUNT IN THE NATURE OF SALE PROCEEDS A ND THE AMOUNT ACTUALLY PERTAINING TO SALE PROCEEDS. WHAT IS RELE VANT TO DETERMINE IS THAT THE AMOUNT SHOULD EITHER RELATES TO SERVICES R ENDERED BY THE ASSESSEE COMPANY IN FORM OF COMMISSION OR IT SHOULD RELATES TO AMOUNT WHICH COULD NOT BE RECOVERED FROM ITS CLIENTS (BEIN G DISPUTED BY THE LATTER) IN RESPECT OF TRANSACTIONS EFFECTED BY THE ASSESSEE COMPANY ON ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 22 BEHALF OF ITS CLIENTS AND IN RELATION TO SUCH TRANS ACTIONS, THE COMMISSION INCOME HAS ACCRUED TO THE ASSESSEE COMPANY. THERE H AS TO BE A LINKAGE BETWEEN THE COMMISSION INCOME TAKEN TO THE PROFIT/LOSS ACCOUNT AND THE AMOUNT OF DEBT WHICH IS WRITTEN OFF AS IRRE COVERABLE AND IN THAT SCENARIO, THE TEST OF WHETHER THE DEBT OR PART THER EOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSE E CAN BE SAID TO HAVE BEEN SATISFIED. THEREFORE, IT IS NOT SUFFICIE NT THAT IN COURSE OF SUCH BUSINESS, WHERE THE BANK HAS RECOVERED CERTAIN AMOU NT FROM THE ASSESSEE, IT IS ALLOWABLE AS BAD DEBT U/S 36(1)(VII ). THE EXACT NATURE OF RECOVERY DONE BY THE BANKS IS THEREFORE TO BE EXAMI NED. THE RECOVERY SHOULD RELATE TO TRANSACTION UNDERTAKEN BY THE ASSE SSEE COMPANY ON BEHALF OF ITS CLIENTS AND WHICH IS NOW BEEN DISPUTE D AND A CHARGE BACK IS CLAIMED BY THE RESPECTIVE CLIENTS THROUGH THE BA NK. FURTHER, IN EITHER CASE, THE AMOUNT HAS TO BE WRITTEN OFF AS IRRECOVER ABLE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEES COMPANY. THE TREATMENT AND ENTRIES PASSED IN THE BOOKS OF ACCOUNTS THUS BECOME EQUALLY RELEVA NT AND IT WOULD BE RELEVANT TO EXAMINE WHETHER THE ASSESSEE HAS DEBITE D THE AMOUNT OF DOUBTFUL DEBT TO THE PROFIT/LOSS ACCOUNT AND CREDIT S THE SUNDRY DEBTORS ACCOUNT. THERE IS NO FINDING RECORDED BY THE AO OR THE LD CIT(A) IN THIS REGARD. WE ACCORDINGLY SET ASIDE THE MATTER TO THE FILE OF THE AO FOR THE LIMITED PURPOSES OF VERIFYING THE EXACT NATURE OF R S 54.74 LACS AND THE ACCOUNTING TREATMENT THEREOF IN THE BOOKS OF ACCOUN TS OF THE ASSESSEE COMPANY IN LIGHT OF ABOVE DISCUSSIONS. IN THE RESU LT, THE GROUND NO. 1 OF THE ASSESSEE COMPANY IS ALLOWED FOR STATISTICAL PURPOSES. 3. NOW, COMING TO GROUND NO. 2 OF THE ASSESSEES AP PEAL AS WELL AS OF THE REVENUES APPEAL. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 23 ASSESSEE COMPANY INCURRED AN EXPENDITURE OF RS.15,9 9,923/- UNDER THE HEAD PLANT RUNNING & MAINTENANCE EXPENSES. THE AO HELD THAT IN AY 06-07, AGAINST EXPENDITURE OF RS.9,09,262/-, A DISA LLOWANCE OF RS.50,000/- WAS CONFIRMED IN THE FIRST APPEAL. ACCO RDINGLY, HE MADE DISALLOWANCE OF RS.75,000/-. ON APPEAL, THE LD. CIT (A) CONSIDERING THAT IN AY 2006-07, DISALLOWANCE OF RS.50,000/- WAS CONF IRMED OUT OF DISALLOWANCE OF RS.1,50,000/- (CORRECT AMOUNT RS.2 LACS) MADE BY THE AO, RESTRICTED THE DISALLOWANCE OF RS.75,000/- TO R S.25,000/-. NOW, BOTH THE PARTIES ARE IN APPEAL BEFORE US AGAINST TH E ORDER OF THE LD CIT(A). 3.1 DURING THE COURSE OF HEARING, THE LD AR SUBMITT ED THAT FROM THE LEDGER ACCOUNT PLACED AT PB 115-134, IT CAN BE NOTE D THAT EACH AND EVERY EXPENDITURE CLAIMED UNDER THIS HEAD IS SUPPOR TED BY PROPER DETAILS, BILLS AND VOUCHERS. NO SPECIFIC DEFECT IS POINTED OUT IN THE EXPENSES INCURRED BY THE ASSESSEE EITHER BY AO OR B Y THE CIT(A). THE ADHOC DISALLOWANCE, WITHOUT BASIS, IS UNJUSTIFIED A S HELD IN THE FOLLOWING CASES:- - ACIT VS. GANPATI ENTERPRISES LTD. 142 ITD 118 (DE LHI)(TRIB.) - CIT VS. ORACLE INDIA (P) LTD. 199 TAXMAN 181 (DEL ) (HC) (MAG.) - ARTHUR & ANDERSON & CO. VS. ACIT 2010-TIOL-416-IT AT-MUM. - SEASONS CATERING SERVICES (P) LTD. VS. DCIT 43 DT R 397 (DEL) (TRIB). 3.2 THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 3.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE DISALLOWANCE IS PURELY ADH OC IN NATURE WITHOUT HIGHLIGHTING ANY SPECIFIC DEFECT OR THE FACT THAT E XPENDITURE CLAIMED IS ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 24 BOGUS IS NATURE OR HAS NOT BEEN INCURRED FOR THE PU RPOSES FOR BUSINESS. THERE IS NO BASIS FOR ADHOC DISALLOWANCES IN THE EY E OF LAW. IN THE RESULT, THE DISALLOWANCE MADE BY THE AO IS DELETED. THE ASSESSEES GROUND NO. 2 IS ALLOWED AND THE REVENUES GROUND NO . 2 IS DISMISSED. 4. NOW COMING TO GROUND NO. 3 OF ASSESSEES APPEAL . BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CO NSIDERATION, THE AO OBSERVED THAT FROM 01.04.2007 TO 31.08.2007, ASSESS EE MADE PURCHASE OF 85,82,190 KG OF SOYABEAN WHICH IS SOLD AS SUCH A ND THEREFORE THERE IS NO SHORTAGE UPTO 31.08.2007. HOWEVER, IN THE MON TH OF SEPTEMBER 2007, THE ASSESSEE MADE PURCHASE OF 80,76,361 KG OF SOYABEAN AND SOLD 80,30,235 KG AND CLAIMED 46,126 KG AS SHORTAGE . HE FURTHER OBSERVED THAT SHORTAGE IS CLAIMED IN RESPECT OF PUR CHASES MADE ON 01.09.07 OF 3,19,431 KG OF WHICH 1,79,430 KG WAS SO LD ON THE SAME DATE AND 93,875 KG WAS SOLD ON 05.09.07. NO EVIDENC E IS FURNISHED FOR SUCH SHORTAGE ON PURCHASE OF A SINGLE DAY WITHIN A SHORT SPAN OF 4-5 DAYS. ACCORDINGLY, HE TREATED THE SHORTAGE AS UNACC OUNTED SALE AND MADE ADDITION OF RS.6,96,964/-. 4.2. ON APPEAL, THE LD CIT(A) HELD THAT DECISION OF PURCHASE AND SALE OF SOYABEAN IS TAKEN BY ADITYAS. THE ADITYAS RAISE T HE SALE INVOICE ON THE ASSESSEE ON THE DATE, WHEN IT DECIDES TO SALE THE S AME TO SOME OTHER PERSON. THEREAFTER, SALE INVOICE WOULD BE ISSUED BY THE ASSESSEE IN FAVOUR OF THE BUYER AND DELIVERY OF THE SAME WOULD BE MADE BY THE ADITYAS DIRECTLY BUT IT IS STRANGE THAT PURCHASE I NVOICE IN THE FAVOUR OF ASSESSEE WOULD BE OF THE SAME DATE OR A DAY BEFORE THE SALE BY THE ASSESSEE. IT MEANS THAT ASSESSEE HAS NOT MADE THE P URCHASES BEFORE ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 25 THE DATE OF SALE. IT IS ONLY THE ADITYA WHO REMAINS THE OWNER OF THE ITEM TILL THE DATE OF SALE BY HIM TO THE ASSESSEE. THERE FORE, THERE CANNOT BE ANY QUESTION OF SHORTAGE IN THE HANDS OF THE ASSESS EE. ACCORDINGLY, THE ADDITION ON ACCOUNT OF SHORTAGE IS CONFIRMED. THE R ELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER:- 9.5. I HAVE GONE THROUGH THE ASSESSMENT ORDER, REMA ND REPORT AND SUBMISSIONS MADE BY THE AR AND FIND THAT AO HAS MADE THE DISALLOWANCE OF RS.6,96,964 ON ACCOUNT OF SHORTAGE OF SOYABEAN STOCK AS A RESULT OF TRADING IN THE SOYABEAN. THE A PPELLANT HAD PRODUCED STOCK REGISTER FROM THIS ITEM, IN THE COUR SE OF ASSESSMENT PROCEEDING, TO SUBSTANTIATE THE SALE AND PURCHASE OF SOYABEAN MADE IN THE COURSE OF THIS YEAR. THE AO WH ILE EXAMINING THE STOCK REGISTER FOUND THAT LOSS ON ACC OUNT OF SHORTAGE OF STOCK OF 46126 KG OF SOYABEAN HAS BEEN CLAIMED BY THE APPELLANT. THE DETAILED WORKING FOR THIS HAS BE EN PRODUCED IN PARA 9.1 ABOVE. THE AO HAS GIVEN A FINDING THAT STO CK SHORTAGE WAS CLAIMED BY THE APPELLANT ONLY IN THE MONTH OF S EPTEMBER 2007 AND THE MAIN PURPOSE OF IT HAS BEEN TO SUPPRE SS THE REAL PROFITS MADE BY THE APPELLANT IN THE TRADING OF THI S ITEM. 9.6. THE APPELLANT HAS FILED ELABORATE SUBMISSION S TATING THAT CLAIM OF LOSS IS JUST 0.27% OF THE TOTAL QUANTITY O F SOYABEAN TRADED. IT IS ALSO STATED THAT THESE ITEMS ARE TRAD ED THROUGH THE ADTIYAS AND THE SALE AND PURCHASE OF SOYABEAN WAS M ADE BY THEM ON BEHALF OF THE COMPANY. THE APPELLANT HAS FU RTHER EXPLAINED ITS POSITION AND THE ACCOUNTING TREATMENT THROUGH ITS LETTER DATED 19-12-2010 ( FILED BEFORE THE AO AND H AS ALSO BEEN FILED IN THE APPELLATE PROCEEDING ( REPRODUCED ABOV E IN PARA 9.2). 9.7. BEFORE REACHING ANY CONCLUSION, A READING OF T HE FOLLOWING SUBMISSIONS FILED BY THE APPELLANT IS NECESSARY: ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 26 WHENEVER THE CONSTITUENTS FINDS THE MARKET CONDITI ONS FAVORABLE TO THEM, ON THEIR DIRECTIONS THE ADATIYA S RAISED THE SALE INVOICES UPON ITS CONSTITUENTS, WHO IN TURN FU RTHER SOLD THEM TO THEIR CUSTOMERS AND ASK THE ADATIYAS TO DELIVER THE GOODS DIRECTLY TO ITS CUSTOMERS. AT THE TIME OF DELIVERY OF THE GOODS BY THE ADATIYAS, THE ADATIYAS RAISES THE INVOICES A T THE PRICES PREVAILING AT THE TIME OF ITS PURCHASES IN FAVOUR O F ITS CONSTITUENTS AND THE CONSTITUENTS RAISES ITS SALE S INVOICES IN FAVOUR OF ITS CUSTOMERS. THIS IS EVIDENT FROM THE FACT THAT ON THE SAME DAY OF RAISING OF THE INVOICES OF PURCHASE AND SALES THERE ARE THE PRICE DIFFERENCE OF RUPEES 150 TO 200 PER Q TL., WHICH IS POSSIBLE ONLY UNDER THE CIRCUMSTANCES, WHEN THERE I S SUFFICIENT TIME LAG BETWEEN PURCHASE AND SALE. 9.8. A CAREFUL READING OF THE ABOVE, INDICATE THAT THE DECISION FOR PURCHASE AND SALE OF SOYABEAN IS TAKEN BY THE A DATIYAS DEPENDING UPON THE MARKET CONDITIONS. THIS PROPOSIT ION IS ACCEPTABLE AS A NORMAL BUSINESS PRACTICE. ADATIYAS RAISED THE SALE INVOICES UPON THE ASSESSEE COMPANY ON THE DATE , WHEN IT DECIDES TO SALE THE SAME ITEM TO SOME OTHER PERSON. THE SALE INVOICE WOULD BE THAN ISSUED BY THE APPELLANT COMPA NY IN FAVOUR OF THE BUYER OF ITEM AND THE DELIVERY OF THE SAME W OULD BE MADE BY THE ADATIYAS DIRECTLY. HOWEVER, WHAT IS STRANGE IN THE ABOVE SUBMISSION IS THAT THE PURCHASE INVOICE OF THE ITEM IN FAVOUR OF THE APPELLANT COMPANY WOULD BE OF THE SAME DATE OR A DAY BEFORE TO THE SALE OF THE SAME ITEM BY THE APPELLAN T COMPANY. IT MEANS THE APPELLANT COMPANY HAVE NOT PURCHASED THE ITEM BEFORE THE DATE OF SALE. IT IS ONLY THE ADATIYA WHO REMAINS THE OWNER OF THE SOYABEAN ITEM, TILL THE DATE OF SALE B Y HIM IN THE NAME OF APPELLANT COMPANY. THUS, THE QUESTION OF SH ORTAGE IN THE HANDS OF THE APPELLANT COMPANY DOES NOT ARISE. THEREFORE, THIS CLAIM OF SHORTAGE OF STOCK THOUGH APPEARING TO BE NEGLIGIBLE IN PERCENTAGE TERMS AS COMPARED TO THE TOTAL VOLUME OF STOCK, IS NOT ALLOWABLE AS LOSS. THIS FACT IS FURTHER SUBSTA NTIATED BY THE COPY OF STOCK REGISTER WHICH WAS EXAMINED BY THE AO AND ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 27 ENCLOSED AS AN ANNEXURE TO THE ORDER OF THE A.O. I AGREE WITH THE REASONING GIVEN BY THE AO THAT THIS AMOUNT HAS BEEN DEBITED IN THE MONTH OF SEPTEMBER WITH A VIEW TO SUPPRESS THE PROFIT EARNED BY THE APPELLANT. 9.9. IN VIEW OF THE ABOVE DISCUSSION, I CONFIRM THE DISALLOWANCE OF RS. 6,96,964 MADE ON ACCOUNT OF SHORTAGE OF SOYA BEAN STOCK. 4.3 DURING THE COURSE OF HEARING, THE LD AR SUBMITT ED THAT BOTH THE LOWER AUTHORITIES HAVE NOT PROPERLY APPRECIATED THE NATURE OF THE TRANSACTION. IN THE NORMAL COURSE OF BUSINESS, ASSE SSEE GIVE MARGIN MONEY TO THE ADITYAS AND DIRECT HIM TO PURCHASE TH E GOODS ON HIS BEHALF. THE GOODS ARE PURCHASED BY THE ADITYAS AND ARE KEPT IN HIS GODOWN. THEREAFTER, WHEN THE ASSESSEE SALES THE GOO DS CONSIDERING THE MARKET CONDITION, IT DIRECTS THE ADITYA TO DELIVER THE GOODS TO THE CUSTOMERS. AT THIS POINT OF TIME, THE ADITYA RAISES THE PURCHASES BILLS IN THE NAME OF THE ASSESSEE AT THE RATE AT WHICH THE G OODS WAS PURCHASED BY HIM AND RAISES SEPARATE DEBIT NOTE BY WAY OF RAT E DIFFERENCE TO COVER HIS COMMISSION, INTEREST COST, GODOWN RENT, LABOUR CHARGES AND OTHER EXPENSES. THE SHORTAGE IS DETERMINED AT THE TIME WH EN THE ENTIRE GOODS SO PURCHASED ARE SOLD. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS PURC HASED SOYABEAN THROUGH THE ADITYAS, M/S MUKESH KUMAR JAIN & BROS. , M/S MAHAVEER TRADING CO., SURENDRA TRADING CO. AND M/S JULANIYA BROS. DURING FY 2006-07 AND 2007-08. DURING THE YEAR, ASSESSEE PURC HASED 1,66,585.51 QTL. SOYABEAN (PB 165-167) AND SOLD 1,6 6,124.25 QTL. SOYABEAN (PB 168-182). THE ENTIRE PURCHASES WERE SO LD. ON SUCH SALE IT WAS FOUND THAT THERE IS SHORTAGE OF 461.26 QTL. THI S REPRESENTS 0.27% ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 28 OF TOTAL QUANTITY PURCHASED. THIS SHORTAGE IS NOT O F ONE DAY BUT OF THE PURCHASES MADE DURING THE YEAR BUT DETERMINED ONLY WHEN THE ENTIRE GOODS WERE SOLD. THEREFORE, IN THE STOCK SHEET WHIC H IS COMPILED AND SUBMITTED IN COURSE OF ASSESSMENT PROCEEDINGS AND M ADE AS ANNEXURE A OF THE ASSESSMENT ORDER (DPB 70-75), NO SHORTAGE IS SHOWN FROM APRIL TO AUGUST, 2007 BUT THE SHORTAGE IS SHOWN BET WEEN 01.09.2007 TO 28.09.2007 AT A FIXED PERCENTAGE OF THE RECEIPT QUA NTITY SO THAT THE ENTIRE SHORTAGE OF 461.26 QTL. IS REFLECTED IN THE MONTH OF SEPTEMBER, 2007 BY WHICH THE ENTIRE GOODS WERE SOLD. THUS, IT IS ONLY THE MANNER IN WHICH THE SHORTAGE IS SHOWN IN THE STOCK REGISTE R COMPILED AND SUBMITTED BEFORE THE AO AND NOT THAT THE SHORTAGE I S ONLY IN RESPECT OF THE RECEIPT SHOWN ON THAT DATE. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) HAS WR ONGLY OBSERVED THAT THE DECISION FOR PURCHASE AND SALE OF SOYABEAN IS T AKEN BY THE ADITYAS. ALL THESE DECISIONS ARE TAKEN BY THE ASSESSEE AND T HE ADITYAS ONLY EXECUTE THE SAME. THE SHORTAGE IN SUCH HUGE QUANTIT Y IS INEVITABLE. THE LD. CIT(A) HAS ACCEPTED THAT SHORTAGE IN PERCENTAGE TERMS IN ONLY NEGLIGIBLE BUT STILL HE CONFIRMED THE ADDITION WHIC H IS WITHOUT APPRECIATING THE FACTS PROPERLY. FURTHER THERE IS N EITHER ANY ALLEGATION NOR ANY EVIDENCE THAT THE SHORTAGE HAS BEEN SOLD OU T OF BOOKS OF ACCOUNTS. 4.4 THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 4.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS CLAIMED SHORT AGE OF 461.26 QTL. OF ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 29 SOYABEAN STOCK VALUED AT RS 6,96,964. IT IS THE AS SESSEES CASE THAT THE ADITYAS ARE PURCHASING AND SELLING SOYABEAN ON BEHALF OF THE ASSESSEE. THE SOYABEAN STOCK WAS KEPT WITH ADITYA S AND THE DELIVERY OF THE SAME TO THE ASSESSEES CUSTOMERS WERE MADE D IRECTLY FROM ADITYAS PREMISES/GODOWN. IN LIEU OF PURCHASING THE GOODS, THE ADITYAS ARE CHARGING THE COMMISSION AND OTHER EXPENSES LIKE LABOUR CHARGES, GODOWN RENT, INTEREST, ETC. THE ADITYAS ARE INVESTI NG THEIR OWN MONEY IN THE PURCHASES WITH RECEIPT OF MARGIN MONEY OF APPRO X 20% TO 25% FROM THE ASSESSEE. WHENEVER, THE ASSESSEE FINDS THE MARKET CONDITIONS FAVOURABLE TO THEM, ON ITS DIRECTION THE ADITYAS R AISES THE INVOICE ON THE ASSESSEE AND ASSESSEE IN TURN RAISE THE INVOICE ON THE CUSTOMERS TO WHOM GOODS ARE SOLD AND ASK ADITYAS TO DELIVER THE GOODS DIRECTLY TO THE CUSTOMERS. AT THE TIME OF DELIVERY OF GOODS BY THE ADITYAS, THE ADITYAS RAISES THE INVOICE ON THE ASSESSEE AT THE RATE AT WHICH GOODS WERE PURCHASED AND THE ASSESSEE RAISES ITS SALES IN VOICES IN FAVOUR OF ITS CUSTOMERS. THIS IS EVIDENT FROM THE FACT THAT O N THE SAME DAY OF RAISING OF THE INVOICES OF PURCHASES AND SALES, THE RE IS PRICE DIFFERENCE OF RS.150 TO 200 PER QTL. WHICH IS POSSIBLE ONLY UN DER CIRCUMSTANCES WHEN THERE IS SUFFICIENT TIME LAG BETWEEN PURCHASE AND SALE. WE FIND FORCE IN THE ARGUMENT OF THE LD AR. 4.6 PER CONTRA, THE CRUX OF THE ARGUMENTS OF THE RE VENUE IS THAT THE PURCHASE INVOICE OF THE GOODS IN FAVOUR OF THE APPE LLANT COMPANY IS OF THE SAME DATE OR A DAY BEFORE TO THE SALE OF THE SA ME ITEM BY THE APPELLANT COMPANY. IT MEANS THE APPELLANT COMPANY H AVE NOT PURCHASED THE ITEM BEFORE THE DATE OF SALE. IT IS O NLY THE ADITYA WHO REMAINS THE OWNER OF THE SOYABEAN ITEM, TILL THE DA TE OF SALE BY HIM IN ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 30 THE NAME OF APPELLANT COMPANY. THUS, THE QUESTION O F SHORTAGE IN THE HANDS OF THE APPELLANT COMPANY DOES NOT ARISE. THER EFORE, THIS CLAIM OF SHORTAGE OF STOCK THOUGH APPEARING TO BE NEGLIGIBLE IN PERCENTAGE TERMS AS COMPARED TO THE TOTAL VOLUME OF STOCK, IS NOT A LLOWABLE AS LOSS. 4.7 IN OUR VIEW, MERELY THE TIMING OF THE RAISING O F THE INVOICE IS NOT SUFFICIENT TO DETERMINE THE OWNERSHIP OVER THE GOOD S AND WHAT IS RELEVANT TO DETERMINE IS THE EXACT NATURE OF RELATI ONSHIP BETWEEN THE ASSESSEE AND ITS ADITYAS AND WHETHER THE LATTER ARE ACTING ON BEHALF OF THE FORMER OR ON THEIR OWN. FURTHER, THE GOODS ARE NOT TRANSPORTED TO ASSESSEES COMPANYS PREMISES (WHICH WOULD REQUIRE THE OWNERSHIP DOCUMENTS FOR CARRIAGE PURPOSES) AND ARE DELIVERED DIRECTLY TO THE CUSTOMERS FROM ADITYAS. AS NOTED ABOVE, THE ASSES SEE HAS SUBMITTED THAT THE ADITYAS ARE ACTING ON ITS BEHALF AS DEMONS TRATED THROUGH PLACING OF MARGIN MONEY WITH THEM, GIVING THEM INST RUCTIONS TO BUY AND DELIVER THE GOODS DIRECTLY TO THE CUSTOMERS AND THE FACT THAT THEY CHARGE COMMISSION AND OTHER EXPENSES FROM THE ASSES SEE COMPANY. THESE FACTS REMAIN UNCONTROVERTED BEFORE US. IN AN Y CASE, THE ASSESSEE COMPANY HAS DISCLOSED PROFITS ON THE SALE OF THE SOYABEAN IN ITS BOOKS OF ACCOUNTS. THE SHORTAGE OF SUCH STOCK WOULD THUS PERTAIN TO THE ASSESSEE COMPANY AND HAS BEEN RIGHTLY CLAIMED I N ITS HANDS. IN THE RESULT, THE ADDITION OF RS 6,96,964 ON ACCOUNT OF S HORTAGE OF SOYABEAN STOCK IS DELETED. THE GROUND NO. 3 OF THE ASSESSEE S APPEAL IS THUS ALLOWED. 5. NOW, COMING TO GROUND NO. 4 AND 5 OF THE ASSESSEES APPEAL. THE FACTS OF THE CASE ARE THAT THE AO OBSERVED FROM THE DETAILS OF PURCHASES ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 31 FROM MAHAVEER TRADING CO., KOTA AND MUKESH KUMAR JA IN & BROS., KOTA THAT PURCHASE OF SOYABEAN IS MADE FROM THESE TWO CO NCERNS BETWEEN 17.05.2007 TO 01.09.2007 AT A RATE RANGING FROM 139 1.09 PER QTL. TO 1391.92 PER QTL. BUT THEREAFTER BOTH THE PARTIES VI DE DEBIT NOTE DT. 31.12.2007 HAS INCREASED THE PURCHASE RATE TO 1471. 75 PER QTL. AND ACCORDINGLY RAISED DEBIT NOTE OF RS.17,00,119/- AND RS.28,13,042/- RESPECTIVELY AGGREGATING TO RS.45,13,161/-. NO DOCU MENTARY EVIDENCE OR ACCEPTABLE REASONS FOR INCREASING THE COST OF PU RCHASE AFTER 4-5 MONTHS OF PURCHASE IS FURNISHED. SIMILAR DEBIT NOTE OF RS.9,49,097/- IS OBTAINED FROM M/S JULANIYA BROS. ON ACCOUNT OF LABO UR CHARGES. THE ASSESSEE WAS REQUIRED TO PRODUCE THE ABOVE PARTIES FOR EXAMINATION. SUMMONS WAS ALSO ISSUED BUT NEITHER THE ASSESSEE PR ODUCED THEM NOR THEY ATTENDED FOR EXAMINATION. ACCORDINGLY, THE AO HELD THAT THESE DEBIT NOTES ARE OBTAINED TO REDUCE THE INCOME WITH AN INTENTION TO AVOID PROPER INCIDENCE OF TAX AND MADE ADDITION OF RS.45,13,161/- AND RS.9,49,097/- ON ACCOUNT OF INFLATION OF PURCHASES. 5.1 IN APPELLATE PROCEEDINGS, THE LD. CIT(A) CALLED FOR A REMAND REPORT. THEREAFTER, THE AO CONSIDERING THE AFFIDAVIT OF SH. CHANDRA PRAKASH JAIN, MANAGER OF M/S SH. MAHAVEER TRADING CO. AND M /S MUKESH KUMAR JAIN & BROS. SEND HIS REMAND REPORT DT. 07.05.2012 TO THE CIT(A) WHERE HE OBSERVED THAT THE AFFIDAVIT AND THE COPY OF STOC K REGISTER DO NOT SUPPORT THE ASSESSEES CONTENTION IN THE ABSENCE OF BOOKS OF ACCOUNTS OF THE PARTIES. THE LD. CIT(A) AFTER CONSIDERING T HE REMAND REPORT AND THE EXPLANATION OF THE ASSESSEE OBSERVED THAT NO EV IDENCE WAS PRODUCED BY THE ASSESSEE AS TO HOW AND ON WHAT BASI S THE RATE DIFFERENCE/DEBIT NOTES HAS BEEN ARRIVED AT/ ISSUED BY THE SELLER. ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 32 ACCORDINGLY, HE CONFIRMED THE ADDITION MADE BY THE AO. THE RELEVANT FINDINGS OF THE LD. CIT(A) IS AS UNDER:- 10.5. I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS MADE BY THE AR AND A COPY OF THE SAME W AS ALSO FORWARDED TO THE AO FOR FURNISHING A REMAND REPORT. THE AO HAS IN THE COURSE OF APPELLATE PROCEEDINGS ALSO EXAMINE D THE ADDITIONAL EVIDENCE FILED BY THE APPELLANT AND AFTE R GIVING AN OPPORTUNITY OF BEING HEARD FURNISHED A DETAILED REM AND REPORT. A COPY OF THE REMAND REPORT AND COMMENTS OF THE APPEL LANT THEREON HAVE BEEN REPRODUCED ABOVE. IT MAY BE RELEV ANT TO NOTE THAT AO HAD DURING THE COURSE OF EXAMINATION OF THE DETAILS WITH REGARD TO THE SALE AND PURCHASE OF SOYABEAN MADE BY THE ASSESSEE FOUND THAT TWO DEBIT NOTES FROM TWO PARTIE S HAVE BEEN BOOKED IN THE BOOKS OF ACCOUNTS DATED 31-12-2007 AM OUNTING TO RS.45,13,161. THESE TWO DEBIT NOTES WERE STATED TO BE ON ACCOUNT OF RATE DIFFERENCE OF PURCHASE OF SOYABEAN FROM RS.1391 TO RS.1471.75 PER QUINTAL. 10.6. FOR THE SAKE OF BREVITY, THE DETAILED ARGUMEN TS ARE NOT DISCUSSED HERE AS THESE HAVE BEEN ALREADY REPRODUCE D ABOVE. IT IS SURPRISING TO NOTE THAT THE APPELLANT HAS MADE P URCHASES FROM TWO PARTIES, WHO ARE PART OF THE SAME GROUP AS THE AFFIDAVIT OF AN ACCOUNTANT WHO IS COMMON FOR BOTH THE FIRM WAS FILE D IN THE COURSE OF PRESENT PROCEEDINGS. NO EVIDENCE WAS PROD UCED BEFORE THE AO OR IN THE PRESENT PROCEEDINGS AS TO HOW AND ON WHAT BASIS THIS RATE DIFFERENCE HAS BEEN ARRIVED AT. IT IS STRANGE TO NOTE THAT A PARTY WHO HAS BEEN PURCHASING SOYABEAN STO CK THROUGH THE ADATIYAS AND BOOKING THE SAME IN THE BOOKS OF A CCOUNTS WHEN THE ITEM IS PROPOSED TO BE SOLD BY THE ADATI YAS COULD AGREE FOR THE PAYMENT OF RATE DIFFERENCE AND THAT T OO OF ABOUT RS.80 PER QUINTAL. THE SALE AND PURCHASE INVOICE AR E EITHER ON THE SAME DATE OR ON CONSECUTIVE DATES. THUS, IT LEAVES NO SCOPE FOR SETTLEMENT OF PURCHASE PRICE AT A LATER DATE WHEN T HE ITEM HAS ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 33 ALREADY BEEN SOLD IN THE BOOKS OF ACCOUNTS. THE ON LY PURPOSE WHICH REMAINS TO ADJUST ARBITRARILY THE PURCHASE PR ICE AT A LATER DATE AND THAT TOO WITHOUT ANY RATIONAL EVIDENTIARY BASIS COULD BE TO AVOID THE PAYMENT OF TAXES BY SUPPRESSION OF REA L PROFITS. THE FACT THAT THESE ADJUSTMENTS HAVE ALREADY BEEN MADE IN THE BOOKS OF THE SELLER AT THEIR END AND SALES TAX HAS BEEN P AID THEREON WOULD CARRY LITTLE WEIGHT, WHEN THE VERY BASIS OF C ARRYING OUT THE TRANSACTION WITH LOGICAL EVIDENCE IS NOT PROVED. TH E APPELLANT HAS ALSO FAILED TO FILE ANY CORROBORATIVE EVIDENCE IN S UPPORT OF THE BASIS ON WHICH DEBIT NOTES WERE ISSUED BY THE SELLE R. THE APPELLANT HAS FAILED TO FILE ANY CORROBORATIVE EVID ENCE IN SUPPORT OF THE RATE MENTIONED EARLIER IN THE INVOICE OR IN SUPPORT OF THE RATE AGREED UPON LATER WITH THE PARTY. 10.7. IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT THE AO WAS JUSTIFIED IN MAKING DISALLOWANCE OF RS.45,13,161 ON ACCOUNT OF THE DEBIT NOTES ISSUES FOR ADJUSTMENT OF PURCHASE R ATES. 10.8 THE AO ALSO FOUND DURING THE COURSE OF EXAMINA TION OF BOOKS AND OTHER RECORDS THAT A DEBIT NOTE OF RS.9,4 9,097 HAS BEEN SHOWN IN THE BOOKS ON 03-11-2007. THE APPELLAN T HAS STATED THAT THIS DEBIT NOTE HAS BEEN ISSUED BY THE ASSESSEE IN THE NAME OF M/S JULANIA BROTHERS, KOTA ON ACCOUNT OF LA BOUR CHARGES PAID FOR PACKING SOYABEAN. THE APPELLANT HAS REITER ATED THE SUBMISSIONS MADE ABOVE BUT FAILED TO FILE ANY CONCR ETE EVIDENCE IN SUPPORT OF THE SAID TRANSACTIONS. THUS, I HOLD T HAT THE APPELLANT HAS FAILED TO DISCHARGE ITS DUTY TO FURNISH CREDIBL E EVIDENCE BEFORE THE AO AND ALSO IN THE COURSE OF APPELLATE PROCEEDI NGS AND TO PROVE THAT THE SAID EXPENDITURE WAS INCURRED FOR TH E PURPOSES OF THE BUSINESS. ACCORDINGLY, I CONFIRM THE DISALLOWAN CE OF RS.9,49,097 MADE BY THE AO UNDER THIS HEAD. 5.3 DURING THE COURSE OF HEARING, THE LD AR SUBMITT ED THAT THE ALLEGATION OF THE LOWER AUTHORITIES THAT ASSESSEE H AS ACCOUNTED FOR THE ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 34 DEBIT NOTES FOR RATE DIFFERENCE/ LABOUR CHARGES TO INFLATE THE PURCHASES AND THEREBY TO REDUCE THE PROFIT AND THAT NO EVIDEN CE FOR THE SAME IS FURNISHED IS FACTUALLY INCORRECT. THIS IS BECAUSE I N COURSE OF REMAND PROCEEDINGS, THE ASSESSEE PRODUCED SH. CHANDRA PRAK ASH JAIN, MANAGER OF M/S SH. MAHAVEER TRADING CO. AND M/S MUKESH KUMA R JAIN & BROS. KOTA ALONG WITH STOCK REGISTER. THE AO, HOWEVER, DI D NOT RECORD HIS STATEMENT. ACCORDINGLY, HIS AFFIDAVIT WAS FILED. IN THE AFFIDAVIT, SH. CHANDRA PRAKASH JAIN AT PARA 8, 9 & 10 CATEGORICALL Y STATED AS UNDER:- THAT AT THE TIME OF SALE, THE BILLS WERE RAISED AT THE PURCHASE PRICE BY US WITHOUT INCLUDING THEREIN THE GODOWN RE NT, INTEREST AND OTHER EXPENSES INADVERTENTLY, WHICH SHOULD HAVE BEE N INCLUDED THEREIN. THAT SUBSEQUENTLY, ON REALISING THE ABOVE SAID MISTAKE, DEBIT NOTES WERE RAISED BY BOTH THE ABOVE SAID PART IES UPON DATA INFOSYS LTD. FOR A SUM OF RS.17,00,119/- BY M/S MAH AVEER TRADING CO. ON 31.12.2007 AND FOR RS.28,13,042/- BY M/S MUK ESH KUMAR JAIN & BROS. ON 31.12.2007. COPY ENCLOSED. THAT THE ABOVE SAID PARTIES HAVE DEPOSITED THE VAT ON THE DIFFERENCE AM OUNT OF THE DEBIT NOTE AND HAVE INCLUDED THE ABOVE SAID AMOUNT IN THEIR INCOME IN BOOKS OF ACCOUNTS. IT WAS SUBMITTED THAT THIS AFFIDAVIT IS NOT CONTROV ERTED. THE AO SIMPLY STATED THAT IN THE ABSENCE OF BOOKS OF ACCOUNTS OF THE PARTIES, THE ASSESSEES CONTENTION IS NOT SUPPORTED BY AFFIDAVIT . HOWEVER, THE AO NEVER REQUIRED THE ASSESSEE OR SH. CHANDRA PRAKASH JAIN TO PRODUCE THE BOOKS OF ACCOUNTS OF THESE PARTIES. IN ANY CASE, TH E COPY OF ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S MUKESH KUMAR JAIN & BROS. AND M/S SH. MAHAVEER TRADING CO. FOR FY 2007-08 AND ALSO 20 06-07 WAS ALREADY ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 35 FILED BEFORE THE AO IN COURSE OF ASSESSMENT PROCEED INGS FROM WHICH IT IS EVIDENT THAT THESE PARTIES HAVE DEBITED THE ASSESSE E FOR THE AMOUNT OF DEBIT NOTE AND BOOKED THE INCOME. SIMILARLY DEBIT N OTE ISSUED BY M/S JULANIYA BROS. IS IN RESPECT OF THE EXPENSES INCURR ED BY THEM FOR STORING THE GOODS OF THE ASSESSEE ON WHICH TAX IS DEDUCTED AT SOURCE. THEREFORE, THE ALLEGATION OF THE LOWER AUTHORITIES THAT THE DEBIT NOTES WERE ACCOUNTED FOR TO REDUCE THE PROFIT IS ARBITRAR Y AND WITHOUT ANY BASIS. IT WAS FURTHER SUBMITTED THAT IN RESPECT OF THE OBS ERVATION OF THE CIT(A) THAT WHEN THE SALE AND PURCHASE INVOICE ARE EITHER ON THE SAME DATE OR ON CONSECUTIVE DATES, HOW THE ADITYAS COULD AGREE F OR THE PAYMENT OF RATE DIFFERENCE OF ABOUT RS.80 PER QTL. IN MAKING T HESE OBSERVATIONS, THE LD. CIT(A) HAS NOT APPRECIATED THE MANNER IN WH ICH THE ACCOUNTING IS MADE AS EXPLAINED IN GROUND NO.3 ABOVE. IN FACT THE ADITYAS PURCHASES THE GOODS FOR THE ASSESSEE FROM TIME TO T IME AS INSTRUCTED TO HIM, TRANSPORT THE SAME TO THEIR GODOWN, UNLOAD IT IN THE GODOWN, STORE THE SAME TILL THE GOODS ARE SOLD AND LOAD AND TRANS PORT TO THE CUSTOMERS TO WHOM THE ASSESSEE SALE THE GOODS. ALL THESE EXPENSES ARE INITIALLY BORNE BY THE ADITYAS AND AGAINST INCURRI NG SUCH EXPENSES THEY HAVE RAISED THE DEBIT NOTE SUBSEQUENTLY. THE ASSESS EE HAS NOT CLAIMED ANY OF THESE EXPENSES IN ITS BOOKS OF ACCOUNTS. FUR THER, IF THE CONTENTION OF THE LOWER AUTHORITIES IS ACCEPTED THE N HOW THE SOYABEAN WHICH IS PURCHASED ON A PARTICULAR DATE SAY FOR RS. 1,380 PER QTL. CAN BE SOLD ON THE SAME DATE AT THE RATE OF RS.1,540 PER Q TL. THIS ITSELF PROVES THAT PURCHASES WERE MADE FROM TIME TO TIME AND THE SAME WAS KEPT WITH ADITYAS TILL IT WAS SUBSEQUENTLY SOLD TO THE CUSTOMERS FOR WHICH ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 36 EXPENDITURE IS INCURRED BY THE ADITYAS AND FOR SUC H EXPENSES DEBIT NOTE IS RAISED BY THEM BY WAY OF RATE DIFFERENCE/ LABOUR CHARGES. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS MADE THE PURCHASES FROM MAHAVEER TRADING COMPANY, KOTA AND MUKESH KUMAR JAI N, KOTA IN EARLIER MONTHS FOR WHICH BILLS WERE RAISED BY THEM BETWEEN 17.05.07 TO 01.09.07 AT THE RATE RANGING FROM RS.1,391.09 PER Q TL. TO RS.1,391.92 PER QTL. AND EVEN AFTER THE DEBIT NOTE RAISED BY TH E PARTIES, THE PURCHASE RATE WORKS OUT TO AROUND RS.1,472 PER QTL. AS AGAINST THIS, THE RATE PREVAILING IN THE MONTH OF MAY TO AUGUST 2007 WAS RS.1,545 PER QTL. TO RS.1,549 PER QTL. AS EVIDENT FROM THE MARKE T DATA OBTAINED FROM THE SITE, COPY OF WHICH IS ENCLOSED. THIS SHOWS THA T THE ALLEGATION OF THE AO THAT ASSESSEE HAS OBTAINED THE DEBIT NOTE TO INF LATE THE PURCHASES IS WITHOUT ANY BASIS AND THEREFORE, ADDITION CONFIRMED ON ACCOUNT OF INFLATED PURCHASES TO DEBIT NOTE NEEDS TO BE DELETE D. IT WAS FURTHER SUBMITTED THAT IT IS A SETTLED LAW T HAT THE BURDEN TO PROVE THAT WHAT IS APPARENT IS NOT REAL IS ON THE PERSON WHO ALLEGES SO. IN THE PRESENT CASE IT IS THE ALLEGATION OF THE DEPARTMENT THAT ASSESSEE HAS INFLATED THE PURCHASES BY OBTAINING DEBIT NOTES. IN SUCH SITUATION, THE AO SHOULD BRING MATERIAL ON RECORD THAT ON THE DATE ON WHICH THE PURCHASES IS RECORDED BY ASSESSEE IN THE BOOKS OF A CCOUNTS/ THE DATE ON WHICH ADITYAS RAISED THE BILLS ON THE ASSESSEE, THE PURCHASE PRICE WAS LOWER THAN WHAT IS RECORDED IN THE BOOKS CONSID ERING THE DEBIT NOTE. NO EVIDENCE IN BROUGHT ON RECORD THAT EVEN AF TER SUCH DEBIT NOTE THE MARKET IS LOWER. HENCE, THE ALLEGATION OF AO IS WITHOUT ANY BASIS. FOR THIS RELIANCE IS PLACED ON THE FOLLOWING CASES: - ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 37 CIT VS. BEDI & CO. PVT. LTD. 230 ITR 580 (SC): IT WAS HELD THAT THE BURDEN OF SHOWING THAT THE APPARENT STATE OF AFFAIR S WAS NOT THE REAL ONE WAS VERY HEAVY ON THE DEPARTMENT. DAULAT RAM RAWATMULL 87 ITR 349 (SC): THE FACT THAT AN ASSESSEE WAS UNABLE TO SATISFY THE AUTHORITIES AS TO THE SOU RCE FROM WHICH THE DEPOSITOR DERIVED MONEY CANNOT BE USED AGAINST ASSE SSEE. THE ONUS OF PROVING THAT THE APPARENT WAS NOT REAL IS ON THE PA RTY WHO CLAIMS IT TO BE SO. FROM THE SIMPLE FACT THAT THE EXPLANATION RE GARDING THE SOURCE OF MONEY FURNISHED BY A, IN WHOSE NAME THE MONEY IS LY ING IN DEPOSIT, HAS BEEN FOUND FALSE, IT WOULD BE A REMOTE AND FAR- FETCHED CONCLUSION TO HOLD THAT MONEY BELONGS TO B. THERE WOULD BE IN SUCH A CASE NO DIRECT NEXUS BETWEEN THE FACTS FOUND AND THE CONCLU SION DRAWN THEREFROM. 5.4 THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 5.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE AO HAD DURING THE COURSE OF EXAMINATION OF THE DETAILS WITH REGARD TO THE SALE AND PURCHASE OF SOYABEAN MADE BY THE ASSESSEE FOUND THAT TWO DEBIT NOTES FROM TWO PA RTIES HAVE BEEN BOOKED IN THE BOOKS OF ACCOUNTS DATED 31-12-2007 AM OUNTING TO RS.45,13,161. THESE TWO DEBIT NOTES WERE STATED TO BE ON ACCOUNT OF RATE DIFFERENCE OF PURCHASE OF SOYABEAN FROM RS.139 1 TO RS.1471.75 PER QUINTAL. IN THE REMAND PROCEEDINGS, THROUGH THE AFFIDAVIT OF SH. CHANDRA PRAKASH JAIN, THE MANAGER OF THE TWO PARTIE S WHO SUPPLIED THE ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 38 SOYABEAN, IT WAS SUBMITTED THAT AT THE TIME OF SAL E, THE BILLS WERE RAISED AT THE PURCHASE PRICE WITHOUT INCLUDING THER EIN THE GODOWN RENT, INTEREST AND OTHER EXPENSES INADVERTENTLY, WHICH SH OULD HAVE BEEN INCLUDED THEREIN. THAT SUBSEQUENTLY, ON REALISING T HE ABOVE SAID MISTAKE, DEBIT NOTES WERE RAISED BY BOTH THE ABOVE SAID PARTIES UPON DATA INFOSYS LTD. FOR A SUM OF RS.17,00,119/- BY M/ S MAHAVEER TRADING CO. ON 31.12.2007 AND FOR RS.28,13,042/- BY M/S MUK ESH KUMAR JAIN & BROS. ON 31.12.2007. IT WAS FURTHER SUBMITTED THAT THE ABOVE SAID PARTIES HAVE DEPOSITED THE VAT ON THE DIFFERENCE AM OUNT OF THE DEBIT NOTE AND HAVE INCLUDED THE ABOVE SAID AMOUNT IN THE IR INCOME IN BOOKS OF ACCOUNTS. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS MADE THE PURCHASES FROM MAHAVEER TRADING COMPANY, KOTA AND M UKESH KUMAR JAIN, KOTA AT THE RATE RANGING FROM RS.1,391.09 PER QTL. TO RS.1,391.92 PER QTL. AND EVEN AFTER THE DEBIT NOTE RAISED BY TH E PARTIES, THE PURCHASE RATE WORKS OUT TO AROUND RS.1,472 PER QTL. AS AGAINST THIS, THE RATE PREVAILING IN THE MONTH OF MAY TO AUGUST 2007 WAS RS.1,545 PER QTL. TO RS.1,549 PER QTL. AS EVIDENT FROM THE MARKE T DATA. BASED ON THE SAME, IT WAS SUBMITTED THAT THE ALLEGATION OF THE AO THAT ASSESSEE HAS OBTAINED THE DEBIT NOTE TO INFLATE THE PURCHASES IS WITHOUT ANY BASIS. 5.6 THE LD CIT(A) HAS HOWEVER FOUND THE FACTUAL MAT RIX RELATING TO RAISING OF THE DEBIT NOTES STRANGE AND NOTED THAT A PARTY WHO HAS BEEN PURCHASING SOYABEAN STOCK THROUGH THE ADATIYAS AND BOOKING THE SAME IN THE BOOKS OF ACCOUNTS WHEN THE ITEM IS PROPOSED TO BE SOLD BY THE ADATIYA COULD AGREE FOR THE PAYMENT OF RATE DIFFERE NCE AND THAT TOO OF ABOUT RS.80 PER QUINTAL AT SUCH A LATER DATE. THE S ALE AND PURCHASE INVOICE ARE EITHER ON THE SAME DATE OR ON CONSECUTI VE DATES. THUS, IT ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 39 LEAVES NO SCOPE FOR SETTLEMENT OF PURCHASE PRICE AT A LATER DATE WHEN THE ITEM HAS ALREADY BEEN SOLD IN THE BOOKS OF ACCO UNTS. 5.7 AS NOTED ABOVE, THE ASSESSEE HAS SUBMITTED THAT THE DEBIT NOTES RELATES TO THE GODOWN RENT, INTEREST AND OTHER EXPE NSES WHICH ARE CLAIMED AS NOT RAISED EARLIER INADVERTENTLY BY THES E TWO CONCERNS AND NOW BEING RAISED AND ACCOUNTED FOR IN ITS BOOKS OF ACCOUNTS. IT IS FURTHER NOTED THAT THE ASSESSEE HAS EXISTING ARRANG EMENT WITH TWO CONCERNS FOR PURCHASING AND SALE OF SOYABEAN ON ITS BEHALF AND IN SUCH BACKGROUND, SIMILAR EXPENSES HAVE BEEN CLAIMED AND PAID BY THE ASSESSEE COMPANY IN THE PAST. THEREFORE, WHAT IS R ELEVANT TO DETERMINE IS WHETHER THERE IS ANY INCONSISTENCY IN THESE EXPENSES VIS-A- VIS EXPENSES INCURRED IN THE PAST. THERE IS NO FIN DING OF THE AO HIGHLIGHTING ANY SUCH INCONSISTENCY IN CLAIM OF SUC H EXPENSES. 5.8 FURTHER, SINCE THE ASSESSEE IS INVOLVED IN TRAD ING OF SOYABEAN, IT IS EXPECTED THAT IT WILL EARN A DECENT MARGIN ON IT S SALES. THE ASSESSEE HAS TRIED TO DEMONSTRATE BEFORE US THAT THE PURCHAS E PRICE AFTER INCLUDING THE DEBIT NOTES IS LESS THAN THE MARKET P RICE. IT IS FURTHER CLAIMED THAT THE SALE PRICE AFTER CONSIDERING THESE DEBIT NOTES IS ALSO HIGHER AND THERE IS ENOUGH MARGIN THAT HAS BEEN CLA IMED AND REPORTED BY THE ASSESSEE. IN THIS REGARD, IN OUR VIEW, EARN ING DECENT MARGINS IS A SUBJECTIVE TERM AND WHAT WOULD BE RELEVANT IS TO SEE HOW SUCH MARGINS ARE BENCH MARKED AGAINST THE RATES PREVAILI NG IN THE OPEN MARKET AND THEN ONLY SUCH A CONTENTION CAN BE ACCEP TED. WHAT IS THEREFORE RELEVANT TO DETERMINE IS THE COST OF PURC HASE OF SOYABEAN AFTER INCLUDING THESE DEBIT NOTES DURING THE SPECIF IED PERIOD, AND THE ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 40 SALE PRICE OF SOYABEAN SO PURCHASED AND SOLD ULTIMA TELY AND WHETHER BOTH THE PURCHASE AND SALE CORRESPOND TO THE RATES PREVAILING IN THE OPEN MARKET DURING THE RELEVANT PERIOD. FURTHER, SINCE BOTH THE PURCHASES AND SALES ARE ACCOUNTED FOR ALMOST ON THE SAME DAY AS CLAIMED BY THE ASSESSEE, WE DONOT THINK IT WILL RAI SE SUBSTANTIAL CHALLENGE TO THE ASSESSEE TO CORRELATE BOTH THE PUR CHASE AND THE SALES AND WHETHER THE SAME CORRESPOND TO MARKET RATES DUR ING THE SPECIFIED PERIOD. WHETHER THROUGH SUCH AN EXERCISE, IT CAN B E DETERMINED THAT THE MARGINS ARE REASONABLE VIS-A-VIS MARGINS EARNED ON THE SALES IN THE OPEN MARKET FACTORING IN THE SEASONAL MARKET CONDIT IONS, IT WOULD FURTHER PROVE THE BONAFIDE OF THESE DEBIT NOTES IN THE HANDS OF THE ASSESSEE COMPANY. 5.9 IN THE RESULT, WE DEEM IT FIT TO SET ASIDE THE MATTER TO THE FILE OF THE AO TO CARRY OUT THE NECESSARY VERIFICATION IN L IGHT OF ABOVE DIRECTIONS. IN THE RESULT, BOTH THE GROUNDS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. NOW, COMING TO GROUND NO. 1 OF THE REVENUES APP EAL, BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO OBSERVED THAT ASS ESSEE HAS CLAIMED DEFERRED REVENUE EXPENDITURE OF RS.7,69,315/- WHICH IS STATED TO BE COVERED BY THE DECISION OF LD CIT(A) IN AY 2006-07. THE AO HOWEVER, DISALLOWED THE SAME HOLDING THAT DEFERRED REVENUE E XPENDITURE IS ALLOWABLE U/S 35D AND THE ASSESSEE CLAIMS DO NOT FA LL IN THAT SECTION. FURTHER, THE DECISION OF CIT(A) IS CHALLENGED BEFOR E HONBLE ITAT. ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 41 6.1 THE LD. CIT(A) DELETED THE DISALLOWANCE HOLDING THAT ISSUE STANDS COVERED BY THE ORDER OF HIS PREDECESSOR FOR AY 2006 -07 AND HIS FINDINGS ARE AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL A S THE SUBMISSIONS MADE BY THE AR. THE APPELLANT HAS STATE D THAT THIS ISSUE STANDS COVERED BY THE ORDER OF MY LD. PREDECE SSOR IN THE CASE OF THE APPELLANT FOR A.Y. 2006-07 IN APPEAL NO . 302/2008-09 VIDE ORDER DATED 04-02-2010. SINCE THERE IS NO CHAN GE IN THE FACTS OF THIS CASE IN THE CURRENT YEAR, THE DISALLO WANCE OF RUPEES 769315.00 DESERVES TO BE ALLOWED. 6.2. DURING THE COURSE OF HEARING, THE LD AR SUBMIT TED THAT IN AY 2001-02, ASSESSEE INCURRED EXPENDITURE ON ADVERTISE MENT, CONSULTANCY CHARGES AND FOREIGN TRAVELLING EXPENSES OF RS.45,89 ,096/- WHICH INSTEAD OF CLAIMING IN THAT YEAR WAS DEFERRED AND ONLY 1/10 TH OF SUCH EXPENSES I.E. RS.4,58,910/- WAS CLAIMED IN THE P&L A/C. AGAI N IN AY 2002-03, ASSESSEE INCURRED EXPENDITURE ON ADVERTISEMENT AND CONSULTANCY OF RS.31,04,045/- WHICH INSTEAD OF CLAIMING THE EXPEND ITURE IN THAT YEAR WAS DEFERRED AND ONLY 1/10 TH OF SUCH EXPENSES I.E. RS.3,10,405/- WAS CLAIMED IN THE P&L A/C. ACCORDINGLY, IN ALL SUBSEQU ENT YEARS, RS.7,69,315/- (4,58,910+3,10,405) IS CLAIMED IN THE P&L A/C ON DEFERRED BASIS. THESE EXPENSES ARE NOT OF THE NATUR E FALLING UNDER SECTION 35D BUT ASSESSEE ON THE BASIS OF ITS ACCOUN TING POLICY DEFERRED THESE EXPENDITURES AND CLAIMED 1/10 TH OF THESE EXPENSES EACH YEAR. THEREFORE, THE EXPENSES OF RS.7,69,315/- CLAIMED ON DEFERRED BASIS IS RIGHTLY ALLOWED BY CIT(A). IT WAS FURTHER SUBMITTED THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION IN AY 2006-07 WHERE THE CIT(A) ALLOWED THE CLAIM IN VI EW OF ITS DECISION IN ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 42 AY 1998-99 WHERE 1/5 TH OF THE EXPENDITURE ON PRODUCT DEVELOPMENT WAS ALLOWED ON DEFERRED BASIS AND THE SAME IS UPHEL D BY HONBLE ITAT. HOWEVER, IN THE APPEAL FILED BY THE REVENUE AGAINST THAT ORDER, THE HONBLE ITAT VIDE ITS ORDER DT. 22.10.2010, IN THE ABSENCE OF THE ORDER OF ITAT FOR AY 1998-99 DT. 13.12.2002 RESTORED THE ISSUE TO THE FILE OF CIT(A). IT IS SUBMITTED THAT SIMILAR ISSUE CAME UP FOR CONS IDERATION IN CASE OF M/S VIJAY SOLVEX LTD. FOR AY 1995-96 WHERE PRODUCT DEVELOPMENT EXPENDITURE CLAIMED ON DEFERRED BASIS OVER THE PERI OD OF 5 YEARS WAS HELD ALLOWABLE IN VIEW OF THE DECISION OF SUPREME C OURT IN CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. C IT 225 ITR 802. IT IS NOT IN DISPUTE THAT IN ALL OTHER YEARS, THE D EFERRED REVENUE EXPENDITURE CLAIMED BY THE ASSESSEE HAS BEEN ALLOWE D AND THEREFORE IN VIEW OF THE DECISION IN CASE OF CIT VS. EXCEL INDUS TRIES LTD. 358 ITR 295, THE CLAIM OF THE ASSESSEE IS RIGHTLY ALLOWED B Y CIT(A). 6.3 THE LD. D/R HAS SUPPORTED THE ORDER OF THE AO A ND ALSO SUBMITTED THAT THE DEPARTMENT HAS NOT ACCEPTED THE ORDER OF THE LD CIT(A) FOR AY 2006-07 AND THE SAME HAS BEEN CHALLEN GED BEFORE THE HONBLE TRIBUNAL. 6.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE LD CIT(A) HAS RELIED ON T HE ORDER OF HIS PREDECESSOR FOR AY 2006-07 IN ALLOWING THE RELIEF T O THE ASSESSEE WHICH IS STATED TO BE CHALLENGED BEFORE THE TRIBUNAL. TH ERE IS NOTHING ON ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 43 RECORD TO THROW LIGHT ON THE STATUS OF THE APPEAL F ILED BEFORE THE TRIBUNAL FOR AY 2006-07. WE ACCORDINGLY SET ASIDE THE MATTER TO THE FILE OF THE AO TO CONSIDER AND DECIDE THE MATTER AFRESH. IN THE RESULT, THE GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOS ES. 7. NOW, COMING TO REVENUES GROUND OF APPEAL NO. 3 CHALLENGING THE ACTION OF THE LD CIT(A) IN DELETING THE DISALLOWANC E OF RS 15,37,860 MADE BY THE AO UNDER SECTION 10A OF THE ACT. BRIEF LY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED EXEMPTION U/S 10 A AT RS.1,07,32,784/- ON PROFITS OF EXPORT OF SOFTWARE F OR WHICH FORM NO.56F WAS FILED. THE AO OBSERVED THAT FOR WORKING OUT THE NET PROFIT OF THE SOFTWARE DIVISION, ASSESSEE HAS CLAIMED EXPENDITURE OF RS.35,38,030/- WHEREIN UNDER VARIOUS HEADS 10% OF TOTAL EXPENSES H AS BEEN ALLOCATED TOWARDS SOFTWARE EXPORT BUSINESS AND NO ALLOCATION IS MADE TOWARDS CERTAIN EXPENSES. NO SEPARATE BOOKS OF ACCOUNT OF C OMPUTER EXPORT BUSINESS ARE MAINTAINED. HE THEREFORE, HELD THAT AS SESSEE HAS INFLATED THE PROFITS OF THE SOFTWARE BUSINESS AND DIVERTED T HE EXPENSES RELATED TO THE SOFTWARE EXPORT BUSINESS TO ITS OTHER BUSINE SS AND ACCORDINGLY CONSIDERED 10% OF THE TOTAL EXPENSES OF RS.3,90,07, 697/- AS PER P&L A/C AS TABULATED AT PG 8 & 9 OF THE ORDER, I.E. RS. 39,00,770/- AS RELATABLE TO THE SOFTWARE EXPORT BUSINESS AS AGAINS T RS.23,40,074/- ALLOCATED BY THE ASSESSEE AND DISALLOWED THE CLAIM OF EXEMPTION U/S 10A BY RS.15,37,860/-. 7.1 ON APPEAL, THE LD. CIT(A) CONSIDERING THE JUDIC IAL DECISIONS FILED BY THE ASSESSEE AND ALSO CBDT CIRCULAR IN FORM OF I NSTRUCTION NO.1 OF 2013 HELD THAT EXPENSES SHOULD BE ALLOCATED IN THE RATIO OF TURNOVER ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 44 FROM THE EXPORT OF SOFTWARE BUSINESS TO THE TOTAL B USINESS TURNOVER AND ON THAT BASIS THE EXPENSES ALLOCATED BY THE ASSESSE E IS MORE IN COMPUTING THE PROFIT FROM SOFTWARE EXPORT BUSINESS. HE THEREFORE, DELETED THE ADDITION AND HIS FINDINGS ARE AS UNDER: - 8.8 I HAVE CONSIDERED THE DETAILED SUBMISSIONS MADE ALO NG WITH THE JUDICIAL CITATIONS FILE BY THE APPELLANT A ND ALSO THE CBDTS CIRCULAR (FAQS) ON THIS SUBJECT ISSUED IN THE FORM OF INSTRUCTION NO.1 OF 2013 (COPY FILED BY THE APPELLANT). I AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE EXPENSES COULD BE ALLOCATED IN THE RATIO OF TURNOVER FROM THE EXPORT OF SOFTWAR E BUSINESS TO THE TOTAL BUSINESS TURNOVER. THE EXPENSES ALLOCATED BY THE APPELLANT AGAINST THE TURNOVER FROM THE EXPORT OF S OFTWARE BUSINESS WORK OUT TO BE MORE THAN THE ALLOCATION PO SSIBLE IN THE RATIO OF TURNOVER. THUS, I DO NOT FIND ANY MERIT IN THE ARGUMENTS TAKEN BY THE AO WHILE MAKING THE DISALLOWANCE AND A CCORDINGLY DELETE THE ADDITION OF RS.15,37,860/- MADE UNDER TH IS HEAD. 7.2. DURING THE COURSE OF HEARING, THE LD AR SUBMIT TED THAT ASSESSEE MAINTAINS SEPARATE LEDGER OF SOFTWARE DIVISION WHIC H WAS SUBMITTED BEFORE THE AO. THE LAW DOES NOT ENVISAGE MAINTENANC E OF SEPARATE BOOKS OF ACCOUNTS AND THE CBDT IN CIRCULAR NO.1/201 3 DT. 17.01.2013 HAS ALSO CLARIFIED THAT THERE IS NO REQUIREMENT IN LAW TO MAINTAIN SEPARATE BOOKS OF ACCOUNTS IN RESPECT OF ELIGIBLE U NITS FOR CLAIMING TAX BENEFIT U/S 10A AND THEREFORE THE SAME CANNOT BE IN SISTED UPON. SO FAR AS ALLOCATION OF EXPENSES IS CONCERNED, THE ASSESSE E HAS TAKEN SAME ON ACTUAL BASIS WHEREIN CERTAIN EXPENSES HAS BEEN ALLO CATED AT 100%, SOME EXPENSES ARE ALLOCATED AT MORE THAN 10%, SOME EXPENSES ARE ALLOCATED LOWER THAN 10% AND SOME EXPENSES WHICH HA S NO RELATIONSHIP WITH THE EXPORT OF SOFTWARE ARE NOT ALLOCATED AT AL L. ON THIS BASIS, ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 45 ASSESSEE ALLOCATED EXPENSES OF RS.23,40,074/- FOR W ORKING OUT THE PROFIT FROM THE BUSINESS OF EXPORT OF SOFTWARE WHIC H IS ALSO CERTIFIED BY THE CHARTERED ACCOUNTANT IN FORM NO.56F. NO DISCREP ANCY IS FOUND BY THE AO IN SUCH ALLOCATION. OTHERWISE ALSO, ALLOCATI NG 10% OF THE EXPENSES AS DONE BY THE AO IS NOT CORRECT IN AS MUC H AS THE EXPENSES NEEDS TO BE ALLOCATED ON THE BASIS OF TOTAL TURNOVE R TO THE TURNOVER OF THE EXPORT OF SOFTWARE. THE RATIO OF EXPORT TURNOVE R TO TOTAL TURNOVER IS 4.60% AND ON THAT BASIS ALLOCABLE EXPENSES WOULD BE RS.17,94,354/- AS AGAINST RS.23,40,074/- ALREADY ALLOCATED BY THE ASS ESSEE. IN THESE CIRCUMSTANCES, THE LD. CIT(A) HAS RIGHTLY DELETED T HE DISALLOWANCE OF RS.15,37,860/- MADE BY THE AO IN THE CLAIM OF DEDUC TION U/S 10A. 7.3 THE LD. D/R HAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CLAIMED EXEMPTION U/ S 10A FOR RS.1,07,32,784/- ON PROFIT OF EXPORT OF SOFTWARE. ON PERUSAL OF STATEMENT OF PROFITS ON SOFTWARE BUSINESS, IT WAS F OUND THAT THE ASSESSEE HAS CLAIMED TOTAL EXPENDITURE OF RS. 35,89 ,030/- TO ARRIVE AT NET PROFIT OF RS. 1,08,92,154/-. WHILE EXAMINING T HESE EXPENSES, IT WAS FOUND THAT THE ASSESSEE HAS CLAIMED EXPENDITURE UND ER VARIOUS HEAD AT THE FLAT 10% OF TOTAL EXPENSES CLAIMED IN THE P&L A /C AND EVEN SOME OF THE EXPENSES DEBITED IN THE P&L A/C HAS NOT BEEN AC COUNTED FOR TO ARRIVE AT THE NET PROFIT FROM SOFTWARE EXPORT BUSIN ESS. DURING ASSESSMENT PROCEEDING, IT WAS ALSO NOTICED THAT THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR THE SOFTWA RE EXPORT BUSINESS FOR WHICH THE ASSESSEE WAS ENTITLED FOR DEDUCTION U /S 10A. THE AO ALSO OBSERVED THAT THE ASSESSEE HAS SHIFTED THE EXPENSES RELATED TO SOFTWARE EXPORT BUSINESS IN THE BUSINESS WHERE NO EXEMPTION IS AVAILABLE WITH ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 46 THE INTENTION TO ENHANCE THE EXEMPT INCOME AND REDU CE THE TAXABLE ONE. THEREFORE, THE AO DISALLOWED RS. 15,37,860/- ON ACCOUNT OF EXCESS EXEMPTION CLAIMED U/S 10A. 7.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO SPECIFIC FINDING G IVEN BY THE AO AS TO WHY THE THE BASIS OF ALLOCATION OF EXPENSES AS HAS BEEN DONE BY THE ASSESSEE COMPANY IS NOT ACCEPTABLE AND WHAT IS THE BASIS OF ALLOCATING 10% OF TOTAL EXPENSES TO SOFTWARE EXPORT DIVISION. FURTHER, THE LD CIT(A) HAS ALSO APPLIED THE TURNOVER RATIO TEST AND HAS FOUND THE EXPENSE ALLOCATION AS DONE BY THE ASSESSEE AS REASO NABLE. IN LIGHT OF THE SAME, WE DONOT SEE ANY MERIT IN DISTURBING THE EXPENSE ALLOCATION AS DONE BY THE ASSESSEE COMPANY. HENCE, WE CONFIRM THE ORDER OF THE LD CIT(A) IN THIS REGARD AND THE GROUND NO. 3 OF RE VENUES APPEAL IS DISMISSED. 8. NOW, COMING TO GROUND NO.4 OF THE REVENUES APPE AL CHALLENGING THE ACTION OF THE LD CIT(A) IN DELETING THE ADDITIO N OF RS 20,25,856 ON ACCOUNT OF PURCHASE/CONSUMPTION OF PACKING MATERIAL . 8.1 BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO O BSERVED THAT ASSESSEE HAS PURCHASED 1,46,260 BAGS OF SOYABEAN FR OM 01.04.2007 TO 13.09.2007. IT IS CLAIMED BY THE ASSESSEE THAT SOYA BEAN IS PURCHASED FROM KOTA, BHAWANI MANDI & RAMGANJ MANDI FOR WHICH BARDANA IS SUPPLIED BY THE ASSESSEE. HOWEVER, DURING THE PERIO D 01.04.2007 TO 13.09.2007, ONLY 19,353 BAGS OF BARDANA WAS PURCHAS ED. THEREAFTER, 1,61,500 BAGS (71,000+53,000+37,500) WAS PURCHASED BETWEEN ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 47 14.09.2007 TO 18.09.2007 OF WHICH 90,500 BAGS WERE PURCHASED FROM SISTER CONCERN OF THE ASSESSEE M/S VIJAY SOLVEX LTD . NO DOCUMENTARY EVIDENCE REGARDING TRANSPORTATION OF BARDANA PURCHA SED FROM M/S VIJAY SOLVEX LTD. TO KOTA, BHAWANI MANDI & RAMGANJ MANDI WAS FILED. THE ASSESSEE ALSO DID NOT PRODUCE THE PARTIES FROM WHOM BARDANA WAS PURCHASED FOR EXAMINATION. THEREFORE, THE AO HELD T HAT SOURCE OF CONSUMPTION OF 1,26,907 BAGS OF BARDANA (1,46,260-1 9,353) REMAINS UNEXPLAINED FOR WHICH HE MADE ADDITION OF RS.20,25, 856/-. 8.2. ON APPEAL, THE LD. CIT(A) HELD THAT THE QUANTU M OF PURCHASE AND SALE OF SOYABEAN HAS NOT BEEN DOUBTED BY THE AO AND THEREFORE REQUIREMENT OF BARDANA FOR PACKING CANNOT BE DENIED . THE EVIDENCE FURNISHED BY THE APPELLANT IS ALSO NOT DENIED BY TH E AO. HE THEREFORE, DELETED THE ADDITION MADE BY THE AO AND HIS FINDING S ARE AS UNDER:- 11.5 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS MADE BY THE AR AND FIND THAT AO HAD MAD E THE DISALLOWANCE OF RS.20,25,856/- ON ACCOUNT OF PURCHA SE OF BARDANA. AO HAD MADE THE ADDITION ON THE GROUND THAT THE APPELL ANT COULD NOT PROVE THE PURCHASES AND DID NOT PRODUCE THE PARTIES FOR V ERIFICATION OF THE SAME. THE APPELLANT HAS STATED THAT AT THE TIME OF PURCHASE OF SOYBEAN , THE ADATIYAS HAD SENT THEIR OWN BARDANA AND SUBSE QUENTLY THE SAME WAS DELIVERED BACK TO THEM AFTER PURCHASIN G THE STOCK OF BARDANA FROM M/S VIJAY SOLVEX LTD. THE STOCK OF BAR DANA PURCHASED BY M/S VIJAY SOLVEX LTD. WAS LYING AT KOTA AND THEREFO RE, THIS STOCK WAS DELIVERED TO THE ADATIYAS. THEREFORE, NO TRANSPORTA TION IS INVOLVED IN ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 48 THIS EXERCISE. COPY OF ACCOUNT AND CONFIRMATION HAS BEEN FILED FROM THE PARTIES ALONG-WITH EVIDENCE OF PAYMENT MADE. 11.6. THE EVIDENCE FILED BY THE APPELLANT WAS FORWA RDED TO THE AO FOR EXAMINATION AND THE AO IN REMAND REPORT HAS REITERA TED THE SUBMISSIONS/REASONING GIVEN EARLIER IN THE ORDER. I T IS STATED THAT M/S VIJAY SOLVEX LTD. COULD NOT PRODUCE DAY TO DAY STOC K REGISTER OF BARDANA AND ALSO THE CONSUMPTION DETAILS OF BARDANA COULD N OT BE FILED BY THE APPELLANT. 11.7. IT IS SEEN FROM THE ABOVE THAT THE PURCHASE A ND SALE OF SOYBEAN HAS BEEN MADE BY THE APPELLANT FROM THE ADATIYAS AT KOTA. THE REQUIREMENT OF BARDANA FOR PACKING CANNOT BE DENIED ONCE THE PURCHASE AND SALE TRANSACTIONS ARE NOT DOUBTED UPON BY THE AO. FURTHER, THE QUANTUM OF SALE AND PURCHASE OF SOYABE AN HAS NOT BEEN DOUBTED BY THE AO. THE EVIDENCE FURNISHED BY THE AP PELLANT HAVE NOT BEEN DENIED BY THE AO. 11.8 HAVING CONSIDERED THE MATERIAL AVAILABLE ON RE CORD, I DO NOT FIND ANY JUSTIFICATION AND ACCORDINGLY DELETE THE ADDITI ON OF RS.20,25,856 MADE BY THE AO UNDER THIS HEAD. 8.3. DURING THE COURSE OF HEARING, THE LD AR SUBMIT TED THAT AT THE TIME OF PURCHASE OF SOYABEAN, THE ADITYAS SEND THE SOYA BEAN IN THEIR OWN BARDANA AND SUBSEQUENT THERETO THE ASSESSEE PURCHAS ED THE BARDANA FROM M/S VIJAY SOLVEX LTD. AND DELIVERED TO ADITYA S. M/S VIJAY SOLVEX LTD. HAS ALREADY PURCHASED THE BARDANA WHICH WAS LY ING AT KOTA, ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 49 BHAWANI MANDI & RAMGANJ MANDI AND OUT OF THE SAID B ARDANA, ASSESSEE SUBSEQUENTLY REPLACED THE BARDANA IN WHICH SOYABEAN IS SUPPLIED BY THE ADITYAS. IN REMAND PROCEEDINGS, ASSESSEE HAS SUBMI TTED AFFIDAVIT OF SH. CHANDRA PRAKASH JAIN, MANAGER OF SH. MAHAVEER TRADI NG CO. AND M/S MUKESH KUMAR JAIN & BROS. (PB 150-151) FROM WHOM TH E SOYABEAN WAS PURCHASED WHERE HE ADMITTED THAT THEY SOLD THE SOYA BEAN SEED IN THE BARDANA LYING WITH THEM WHICH WAS SUBSEQUENTLY RECE IVED BY THEM FROM THE ASSESSEE. ASSESSEE ALSO FILED CONFIRMATION FROM M/S VIJAY SOLVEX LTD. TO THIS EFFECT. BOTH THE AFFIDAVIT AND THE CONFIRMATION REMAINED UNCONTROVERTED BY THE AO IN THE REMAND REP ORT. IN THESE FACTS, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDIT ION BY HOLDING THAT EVIDENCE FURNISHED BY THE ASSESSEE HAS NOT BEEN DEN IED BY THE AO. 8.4 THE LD. DR HAS ARGUED THE MATTER AND RELIED UPO N THE DECISION OF THE LOWER AUTHORITIES. 8.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE AO OBSERVED THAT THE ASSE SSEE HAS PURCHASED 1,46,260 BAGS OF SOYABEAN FROM VARIOUS PARTIES FROM 1.4.2007 TO 13.9.2007. AND AS ON 13.9.2007, THE ASSESSEE HAS I N STOCK 19,353 BAGS OF BARDANA (PACKING MATERIAL). THE QUESTION T HAT AROSE FOR CONSIDERATION WAS SOURCE OF CONSUMPTION OF 126,907 BAGS (146,260 - 19353) OF BARDANA FROM 1.4.2007 TO 13.9.2007. IT W AS ALSO OBSERVED THAT THERE IS A SUBSEQUENT PURCHASE OF BARDANA FROM M/S VIJAY SOLVEX OF 90,500 BAGS AND THERE IS NO EVIDENCE REGARDING T RANSPORTATION OF SUCH BARDANA FROM M/S VIJAY SOLVEX TO BHAWANI MANDI , RAMGANJ MANDI AND KOTA. AS NOTED BY THE LD CIT(A), THERE IS NO D ISPUTE REGARDING ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 50 PURCHASE AND SALE OF 146,260 BAGS OF SOYABEAN WHICH MEANS THAT 146,260 NOS. OF BARDANA WERE CONSUMED. REGARDING T HE PURCHASE OF SUCH BARDANA, THE ASSESSEE HAS CERTAIN STOCK IN HAN D AND THE BALANCE WAS PURCHASED FROM M/S VIJAY SOLVEX AND OTHERS. THE MODUS OPERANDI OF UTLISATION OF SUCH BARDANA AND REPLACEMENT OF TH E SAME WITH THE BARDANA INITIALLY BELONGING TO ADITYAS HAS ALSO BE EN EXPLAINED AND IN REMAND PROCEEDINGS, ASSESSEE HAS SUBMITTED AFFIDAVI T OF SH. CHANDRA PRAKASH JAIN, MANAGER OF SH. MAHAVEER TRADING CO. A ND M/S MUKESH KUMAR JAIN & BROS. THE STOCK OF BARDANA PURCHASED BY M/S VIJAY SOLVEX LTD. WAS LYING AT KOTA AND THEREFORE, THIS S TOCK WAS DELIVERED TO THE ADATIYAS WAS ALSO EXPLAINED ALONG WITH THE CONF IRMATION FROM M/S VIJAY SOLVEX LTD. TO THIS EFFECT. IN LIGHT OF ALL T HESE FACTS WHICH HAVE BEEN DULY CONSIDERED BY THE LD CIT(A), WE DONOT SEE ANY INFIRMITY IN HIS ORDER ON THIS ACCOUNT AND THE SAME IS HEREBY CONFIR MED. IN THE RESULT, REVENUES GROUND NO. 4 IS DISMISSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WELL A S THE APPEAL OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 09/05/2017 SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09/05/2017. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: ITA NO. 58 &137/JP/2014 M/S DATA INFOSYS LTD. VS.DCIT(HQRS.), ALWAR 51 1. VIHYKFKHZ@ THE APPELLANT- M/S DATE INFOSYS LTD. PLOT NO.20,21& 22, OLD INDUSTRIAL AREA,ALWAR (RAJ.) 2. IZR;FKHZ@ THE RESPONDENT- DCIT/ACIT ,CIRLE-2, ALWAR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 58&137/JP/2014} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR