M/s Obulapuram Mining Co., Pvt. Ltd., Bellary V. DCIT, Bangalore

ITA 653/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0176 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 31-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR SIBICHEN K MATHEW CITIII
• Assessee Lawyers: MAYANK JAIN
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Cost of acquisition; Block assessment
• Section: 37(1); 131; 37

Judgement Text

ITA NO.653(B)/2015 IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K.GARODIA, ACCOUNANT MEMBER ITA NO.653(BANG) 2015 (ASSESSMENT YEAR : 2010-11) M/S OBULAPURAM MINING COMPANY PVT. LTD., ENNOBLE HOUSE, NO.6/4, RAGHAVACHARI ROAD, BELLARY DISTRICT -583 101 PAN NO.AAACO5753D APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), BANGALORE RESPONDENT ASSESSEE BY : SHRI MAYANK JAIN, ADVOCATE REVENUE BY : DR. SIBICHEN K.MATHEW, CIT-III DATE OF HEARING : 31-05-2016 DATE OF PRONOUNCEMENT : 2 9-07-2016 O R D E R PER SHRI A.K.GARODIA, AM THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-11, BANGALORE DATED 16-01-2015 FOR THE ASSESSMENT YEAR : 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER ; 1. THE ORDER OF THE LOWER AUTHORITIES I S CONTRARY TO LAW AND FACTS , THE EVIDENCES ON RECORD IN SO FAR AS THE ADDIT I ONS MADE BY THE LEARNED A O HAVE EVEN EN CONFIRMED BY THE LEARNED CIT(A} . 2.THE LEARNED CIT(A} HAS ERRED IN CONFIRMING THE ADDITION OF RS.168,69,93,902/- AS BOGUS ITA NO.653(B)/2015 TRANSPORTATION EXPENSES ON HEAR - SAY , SURMISES AND CONJECTURES WITHOUT EVEN AFFORDING AN OPPORTUNITY OF CROSS EXAMINAT I ON AND ON THE BASIS OF INFORMATION COLLECTED ON THE BACK OF THE APPELLANT WITHOUT EVEN SUPPLYING THE INFORMATION TO THE APPELLANT AND IGNORING THE APPELLANT'S SUBMISSIONS IN THIS REGARD. 3. THE LEARNED CIT(A} HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.220 , 89 , 67 , 632/ - ON THE ALLEGATIONS BASED ON SURM I SES AN D CONJECTURES , AND HEAR-SAY EVIDENCES TO THE EFFECT THAT 40 % OF THE BUS I N E SS IS I LLEGAL AND THEREFORE EXPLANATION (1) TO SECTION 37(1} I S ATTRACTED W I THOU T APPRECIATION THE FACT THAT THE SAID EXPLANATION I S CONCERNED W I TH THE NATURE OF EXPENDITURE AND NOT THAT OF BUSINESS , AND FURTHER THAT THE ISSUE WHETHER THE ALLEGATION OF THE ILLEGAL MINING IS TRU E OR NOT IS BEFORE THE COMPETENT COURT FOR A DECISION AND THEREFORE IT IS PREMATURE FOR THE LOWER AUTHORITIES TO DECIDE THIS ISSUE ON ASSUMPTIONS AND PRESUMPTIONS WHICH AMOUNTS TO ASSUMPTION OF THE JURISDICTION OF THE COMPETENT COURT . 4. THE LEARNED AUTHORITIES HAVE ERRED IN DISALLOWING RS.4,31,80,919/- UNDER THE HELICOPTER EXPENSES ON HEAR-SAY EVIDENCES AND RUMOURS AND GOSSIPS WITHOUT APPRECIATING THE FACT THAT THE LEARNED AO HAS NOT BROUGHT ON RECORD ANY EVIDENCES TO SUPPORT HIS CONCLUSION. 5. THE LEARNED AUTHORITIES HAVE ERRED IN DISALLOWING RS . 4 , 31 , 80 , 919/- RS.86,60 , 079/ - BEING ENTIRE SALE CONSIDERATION WITHOUT ITA NO.653(B)/2015 APPRECIATING THE FACT THAT INCOME-TAX IS ONLY A TAX ON INCOME AND NOT A TAX ON THE TURNOVER AND FURTHER THAT THE INCOME HAS NOT ACCRUED ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE APPELLANT . 6. THE APPELLAN T SEEKS Y OUR LEA V E TO ADD , ALTER , AMEND OR DELETE AN Y GROUNDS URGED AT THE T I M E OF HEAR I NG . 3. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT GROUND NO.1 IS GENERAL IN NATURE AND HENCE WE HOLD THAT NO ADJUDICATION IS CALLED FOR REGARDING GROUND NO.1 OF THE APPEAL. 4. REGARDING GROUND NO.2, IT WAS SUB MITTED BY THE LD. AR OF THE ASSESSEE THAT IT IS NOTED BY THE AO ON PAGE 15 OF T HE ASSESSMENT ORDER THAT THE ASSESSEE HAD MADE THE REQUEST FOR CROSS EX AMINATION OF THE TRANSPORTERS FROM WHOM STATEMENT U/S 131 HAS BEEN R ECORDED BUT IT IS NOT CONSIDERED NECESSARY BECAUSE THE ENTIRE EXPENDI TURE HAS BEEN PROVED TO BE BOGUS THROUGH INDEPENDENT EVIDENCE COL LECTED FROM TRANSPORT DEPARTMENT AND THE BANKS. HE SUBMITTED T HAT WHEN THE ASSESSEE HAS REQUESTED FOR CROSS EXAMINATION, THE S AME SHOULD HAVE BEEN ALLOWED AND WHEN THE SAME IS NOT ALLOWED THEN SUCH STATEMENT CANNOT BE RELIED UPON FOR MAKING ADDITION IN THE PR ESENT CASE. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CI T VS SMC SHARE BROKERS LTD., AS REPORTED IN 288 ITR 345 AND ALSO O N ANOTHER JUDGMENT OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CAS E OF CIT VS PRADEEP ITA NO.653(B)/2015 KUMAR GUPTA AS REPORTED IN 303 ITR 95. HE ALSO SUB MITTED THAT COPIES OF THESE JUDGMENTS ARE AVAILABLE ON PAGES - 31 TO 3 2 AND 33 TO 36 RESPECTIVELY. 5. ON THIS ISSUE LD. DR OF THE REVENUE SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THE ADDITION HAS BEEN MADE MAINLY ON THE BASIS OF SWORN STATEMENT U/S 131 OF MR.R.GANGADHAR, AS NOTED BY THE AO ON PAGE 1 1 & 12 OF THE ASSESSMENT ORDER. THEREAFTER, IT IS NOTED BY THE AO ON PAGE-11 & 12 OF THE ASSESSMENT ORDER THAT ENQUIRIES WERE MADE FROM VARIOUS BANKS SUCH AS .A) HDFC BANK, BELLARY, AXIS BANK, BELLARY , PRAGRITHI GRAMEENA BANK, BELLARY, KARNATAKA BANK, BELLARY, SB I BELLARY, SBM BELLARY AND ING VYSYA BANK, BELLARY. THEREAFTER, TH E AO HAS NOTED THAT FROM THE ANALYSIS OF VARIOUS DOCUMENTS OBTAINED FRO M THESE BANKS, IT IS SEEN THAT MOST OF THE BANK ACCOUNTS DO NOT HAVE THE DETAILS OF THE INTRODUCER AND THE ACCOUNTS ARE STATED AS OPENED ON MEETING THE ACCOUNT HOLDER ACROSS THE TABLE. IT IS ALSO NOTED THAT 17 BANK ACCOUNTS IN THE NAME OF 17 DIFFERENT TRANSPORT CONCERNS HAD BEEN OPENED ON THE SAME DAY WITH HDFC BANK-9 ACCOUNTS, ING VYSYA BANK- 4 ACCOUNTS AND PRAGRITHI GRAMEENA BANK-4 ACCOUNTS. IT IS ALSO NOTED BY THE AO THAT THE BANK ACCOUNT HOLDERS OF 10 ACCOUNTS HAVE S AME MOBILE NUMBERS. THE NEXT OBJECTION NOTED IS THAT BULK C HEQUE LEAVES WERE ISSUED TO ALL THE ACCOUNT HOLDERS. THE NEXT OBJECT ION NOTED BY THE AO IS THAT THERE WAS THIRD PARTY CHEQUES WHICH WERE IS SUED BY MOST OF THE ITA NO.653(B)/2015 ACCOUNT HOLDERS WHICH WERE WITHDRAWN IN CASH. THE NEXT OBJECTION OF THE AO IS THIS THAT COMMON NAMES ARE APPEARING ON T HE BACK SIDE OF THE CHEQUE LEAVES SHOWING THE NAME OF THE PERSONS W ITHDRAWING THE CASH AND SIX SUCH NAMES ARE NOTED BY THE AO ON PAGE -12 OF THE ASSESSMENT ORDER. IN OUR CONSIDERED OPINION, THESE OBJECTIONS OF THE AO ON THE BASIS OF ENQUIRY FROM VARIOUS BANKS CAN F ORM THE BASIS OF MAKING FURTHER ENQUIRY REGARDING THE GENUINENESS OF THE PAYMENTS. ON PAGE-12 OF THE ASSESSMENT ORDER, THE AO NOTED TH AT THE ASSESSEE WAS ASKED TO EXPLAIN BY LETTER DATED 13-02-2013 AND THE LETTER WAS SERVED ON THE AR OF THE ASSESSEE SHRI VASUDEV VITTA L LEJI ON 21-02- 2013. THEREAFTER, HE FURTHER NOTED THAT THE ASSESS EE HAD FURNISHED REPLY VIDE LETTER DATED 27-02-2013 AND THE RELEVANT EXTRACT OF THE REPLY WAS REPRODUCED BY THE AO ON PAGE-12 TO16 OF THE ASS ESSMENT ORDER. FOR THE SAKE OF READY REFERENCE, PARA 1.7 TO 1.10 O F THE ASSESSMENT ORDER ARE REPRODUCED HEREIN BELOW CONTAINING THE DI SCUSSION REGARDING SHOW CAUSE NOTICE, THE ASSESSEES REPLY AND THE REA SONS GIVEN BY THE AO FOR NOT ACCEPTING THE REPLY OF THE ASSESSEE AND THEREAFTER, THE FINAL DECISION OF THE AO FOR MAKING DISALLOWANCE OF RS.16 8.69 LAKHS. 1.7 SHOW CAUSE NOTICE: I N THE A B OVE CIRCUM STANCES , T HE ASSE SSEE WA S A S KED TO E X PL A I N , V IDE LE TT ER DATE D 1 3 . 02 . 20 1 3 AN D S ERV ED ON TH E AI R OF THE ASSESS EE SHRI V A SU D EV VI TTAL L E JI ON 2 1.02. 2 0 1 3 , WHY T H E AMOUNT C L A I MED AS T RANSPORTAT I ON E X PENSES AGA IN S T T H E N A ME S OF TH E ITA NO.653(B)/2015 ABOV E PARTIES S H O ULD NOT B E D I SA LL OWED A N D A DDE D B ACK T O IT S R ETUR N ED I NCOM E . 1.8 TH E ASS E S S EE F U RN I SHED RE PLY VI D E LETT E R DA TE D : 27 . 02 . 2013 F IL ED A T T HI S OFF IC E ON 25 / 03 / 20 1 3 . TH E RE L E V A NT E X T R ACT OF T HI S RE PLY I S RE P RODUC ED A S UNDER : ' I N T HE A B OV E LE TTE R , THE LEARNED D E P UTY C O MM ISS I ON E R HAS PROP O SED T O D I SALLO W TRANSPORTATION CHARGES PA I D TO 2 8 PARTIES IN ANANTHAPUR AND 10 P AR TIES IN P RODDUTUR . THE REASON GI V EN BY THE DEPUTY C OMMISSIONER IS TH AT ' THE A SSE S SING OFFICER HA S STATED THAT THE ABO V E SAID TRANSPORTERS ( W HOS E C A SES ARE BEING SC R UTIN I ZED B Y HIM ) HA V E NOT RENDERED ANY TRAN S P O RT A T IO N SE R V IC E S TO YOU DURING THE FINANCI AL Y EAR RELEVANT TO T HE ASSESSMENT Y EAR 2010 - 11 IN THE ABO V E LETTER THE LEARNED DCIT HAS F U RTHER STATED THAT ' THE I R ENQU I R I ES HA V E RE V EALED THAT THE ABO V E SA I D PARTIES NEV ER OW N ED A N Y TRA NS P OR TA TION VEHICLES . NEITHER WAS IT PROVED BY THEM THAT THE Y HAVE ENGAGED V EHI C L ES ON HIRE. LOCAL ENQUIRIES ABOUT THE PROPRIETORS OF THES E TRANSPORTAT I O N CO NC E RN SHO W ED THAT THEY ARE OF NO MEANS HA V ING N O BA C KGRO UN D AND E XPERIENCE IN THE TRANSPORTAT I ON BUSINESS . THE VEHICLE NUMBERS FURN I SH E D B Y S O ME O F T HE ABOVE SAID PARTIES IN SUPPORT OF THEIR CLAIM OF RENDERING TRANSPORTAT IO N SER VICES TO YOU WERE EITHER INCORRECT NUMBERS OR NOT R ELAT I NG TO GOO D S CA RRI E R S ' IN THIS CONNECTION W E R I GHT TO SUBM I T THAT , W E H A V E M A DE P A YM E NTS TO ALL TH E ABOVE PARTIES IN A/C PAYEE CHEQUE ONLY . TH E C HEQ U ES A RE ENC H AS ED BY TH EM THROUGH THEIR BANK ACCOUNTS . ITA NO.653(B)/2015 NOWHERE IN THE ABO V E LETTER IT IS STATED TH A T ' TH E CHEQUES ARE NOT ENCASHED BY THEM ' WHEN T HE PA Y ME N TS ARE GEN U IN E , TH E ASSESSEE I S ENGAGED IN THE BUSINESS OF E X TRACT I O N A N D T R AD IN G LN IRON O RE S , T HE LEARN E D DEPUTY COMMISSIONER HAS NE V ER STATE D TH A T T H E A SSE S S EE HAS N EVER EXPORTED SO MUCH QUANTITY OF IRON ORES , F OR TH E PURP O S E O F E XPO RT I N G , THE IRON ORES HAS TO BE TRANSPORTED FROM THE MINES TO THE P ORTS . SO I T WI LL B E NO T B E F AIR ON T HE PART OF DEPUT Y COMM I SSIONER TO D ISALLO W T HE E XPEN S E S ONL Y W H ERE THE SALE PROCEEDS AS RETURNED BY THE ASSESS EE ARE ACCEPT E D . THE TR A NSP O RTATION C HARGES INCURRED BY THE ASSESSEE DU R I N G TH E PRE V IOU S YE A R 2009- 1 0 RE LEV ANT T O A S SESSMENT Y E A R 2010- 11 ARE GENUIN E A ND ACTUALS . THES E E XP E NSES W HIC H H AV E BEEN CLA I ME D B Y THE ASSESSEE A RE W ELL SU PP O R TED B Y B I L LS , V OUC H E R S , L EDG E R E N TR I ES AND PAY ME NTS A R E MAD E T HR O UG H C HEQU E S D R A W N ON S C H E DULED BANKS . FURTHER , ON THE E NTI RE AMOU NT OF T H E T RANSPORTATI O N CHAR GE S I N C U RR ED B Y OMCPL , TA X H A S BEEN DEDUC T ED AND P A ID A T S O URCE ITS E LF AT APP LI CABLE R ATES UNDER PRO VI SIONS OF INCO M E T A X A C T . T H ERE I S N O NEED FOR THE TR A NSPORTER O W N A VEHICLE TO R U N THE T R ANSP OR T A T IO N C OMPA NY . T HE C O U R SE OF BUSINESS IN TRANSPORTATION ARE RUN ON TH E HIRING O F A VE HICL E B Y THI RD PARTY WHO IN FIRST TURN WILL HIRE A VEHICLE . AS WE HAVE FURNISHED THE DETAILS OF ALL THE TRANSPORT E RS , T HE ASSESS I N G O F FI C E RS OF THOSE PARTIES NEVER DENIED THE EXISTENCE ' OF THE PARTIES , THE DCIT MAY CALL FOR THE ITA NO.653(B)/2015 ACCOUNTS COPIES OF THE ABOVE PARTIES FROM THE BANKS AND THE DCIT MA Y SUMMON THE ABOVE TRANSPORTERS AND EXAM I NE THEM ON OATH . IN CASE AN Y OF T HE ABOVE PARTIES CLAIMS THAT THEY HA V E NOT RECE IV ED TH E A B O V E PA YMEN T S , TH E ASSESSEE MAY GIVEN AN OPPORTUNITY T O CROSS E X AM I NE THEM , W HIC H I S NECESSARY IN THE INTEREST OF NATURAL JUSTICE . ON THE ABOVE MENTIONED GROUND W E HEREB Y OBJE C T FOR TH E DISALLO WANCE OF T HE TRANSPORTATION CHARGES UNLESS THE . ASSESSEE IS G IV EN AN O PP ORTU NITY T O REBUTTING THE E V IDENCE IN THE CUSTODY OF THE LEARNED DEPUT Y C O MMI SSI ONER . 1.9 THE ASSESSEE'S REPLY IS CONSIDERED CAREFULLY AND I S NOT ACCEPTED F OR TH E F O LL OWING REASONS; THERE IS A SUBSTANTIAL INCREASE IN THE T RANSPORTATION EXPENSES CLAIMED DUR I NG TH E YEAR UNDER ASSESSMENT AS COMPARED WITH THE EARLIER YEARS , WH I CH IS N O T I N PROPORTION TO THE QUANTITY OF IRON ORE PRODUCED AND SOLD DURING TH I S Y EAR . THE ASSESSEE COULD NOT DISCHARGE ITS O N U S O F PR OV IN G T HE GENUINE NESS O F THE E XPENDITURE BY PRODUCING EVIDENCE TO SH O W THE ACTUAL RENDERING OF SER VICES . THOUGH THE ASSESSEE CLAIMED THAT THE E X PENDITURE IS SUPPORTED B Y BIL L S AN D VOUCHE R S , IT COULD NOT PRODUCE AN Y SUCH BI LL O R V O UCHE R . N O EV ID E NCE TO S HOW THAT TR A NSPORTAT I ON HAS BEEN CARR I ED OUT B Y SU CH P ART I ES W AS PRODUCE D . ON THE CONTRARY, THE ENQUIRIES CAUSED THROUGH THE ITA NO.653(B)/2015 AO F THE ALLEGED TRANSPORTERS REVEALED THE FOLLOWIN G; THE ALLEGED TRANSPORTERS ARE PEOPLE OF NO MEANS MOSTLY MASONS, VEGETABLE VENDORS, TV MECHANICS, FRUIT VENDORS ETC., BY PROFESSION. SUCH PERSONS DO NOT HAVE BACKGROUND OF TRANSPORTATION BUSINESS. THE ALLEGED TRANSPORTERS HAVE CLAIMED TO HAVE RENDERED TRANSPORTATION SERVICES ONLY TO THE GROUP OF COMPANIES IN WHICH SRI G JANARDHANA REDDY IS INTERESTED. THE ALLEGED TRANSPORTERS HAVE ADMITTED IN THE SWORN STATEMENTS RECORDED U/S 131 OF THE ACT, THAT THEY HAVE NOT RENDERED ANY TRANSPORTATION SERVICES TO THE ASSESSEE COMPANY. THEY HAVE CATEGORICALLY STATED THAT THEY HAVE NOT BEEN ENGAGED IN THE BUSINESS OF PROVIDING TRANSPORTATION SERVICES. THE ALLEGED TRANSPORTERS HAVE ADMITTED THAT NAMES WERE BEING UTILIZED BY THE ASSESSEE COMPANY FOR CLAIMING TRANSPORTATION EXPENDITURE. THEY HAVE ADMITTED THAT THEY CREATED TRANSPORTATION CONCERNS IN FICTITIOUS NAMES AND HAD OPENED BANK ACCOUNTS AND SIGNED BLANK CHEQUES AND GIVEN THE SAME TO SRI GANGADHAR , WHO IN TURN HAS ADMITTED THAT HE HAD DONE THE SAME AT THE INSTANCE OF SRI PHANI KISHORE, CA OF M/S OMCPL AND ITS SISTER CONCERNS. EXAMINATION OF THE BANK STATEMENTS OF THE ALLEGED TRANSPORTERS SHOWED THAT THE AMOUNT DEPOSITED IN CHEQUES RECEIVED FROM THE ASSESSEE COMPANY IS IMMEDIATELY WITHDRAWN IN CASH. CASH HAS BEEN WITHDRAWN FROM THE BANK ACCOUNTS MAINLY BY THE EMPLOYEES OF THE ASSESSEE COMPANY AND SRI ITA NO.653(B)/2015 GANGADHAR AND HIS EMPLOYEES, WHO IN TURN HAVE ADMITTED THAT SUCH CASH WAS HANDED OVER TO SRI PHANI KISHORE, CA OF THE ASSESSEE COMPANY AND ITS SISTER CONCERNS. EACH LEG OF THIS TRANSACTION HAS BEEN PROVED WITH EVIDENCE TO BE FALSE. I) IT HAS BEEN PROVED BY THE ADMISSION OF THE ALLEGED TRANSPORTERS THAT THEIR BUSINESS CONCERNS HAVE BEEN FLOATED ONLY AT THE BEHEST OF THE ASSESSE E. II) IT HAS BEEN PROVED BY THE ADMISSION OF THE ALLEGED TRANSPORTERS THAT THEY HAVE NEVER TRANSPORTED THE GOODS OF THE ASSESSEE COMPANY. III) IT HAS BEEN PROVED BY THE ADMISSION OF THE ALLEGED TRANSPORTERS THAT BANK ACCOUNTS HAVE BEEN OPENED BY SUCH CONCERNS ONLY AT THE BEHEST OF THE ASSESSEE. IV) IT HAS BEEN PROVED THAT THE CHEQUES GIVEN BY THE ASSESSEE TO THE TRANSPORT CONCERNS HAVE BEEN DEPOSITED IN THEIR BANK ACCOUNTS BY THE ASSESSEES EMPLOYEES AND SHRI GANGADHAR ALONGWITH THE CLERKS ACTING ON INSTRUCTIONS OF THE ASSESSEES CA. VI) IT HAS BEEN PROVED THAT THE ENTIRE MONEY DEPOSITED THROUGH CHEQUES INTO THE ALLEGED TRANSPORTERS BANK ACCOUNTS HAS BEEN WITHDRAWN BY THE ASSESSEES EMPLOYEES AND SHRI GANGADHAR ALONGWITH HIS CLERKS ACTING ON INSTRUCTIONS OF THE ASSESEES CA. VII) IT HAS BEEN PROVED BY THE ADMISSION OF THE ALLEGED TRANSPORTERS THAT THEIR BOOKS OF ACCOUNTS WERE WRITTEN WITH FICTITIOUS ENTRIES ONLY RECENTLY (ONE OR TWO MONTHS BEFORE THE DATE OF THIS ORDER) ITA NO.653(B)/2015 WHEN THEY WERE CALLED FOR VERIFICATION BY THE AO DURING SCRUTINY PROCEEDINGS VIII) IT HAS BEEN PROVED BY MAKING ENQUIRIES WITH THE ROAD TRANSPORT DEPARTMENT THAT THE LORRY NUMBERS SHOWN IN THE BOOKS OF ACCOUNTS PRODUCED BY SOME OF THE ALLEGED TRANSPORTERS ARE NON-EXISTEN T OR THAT THEY RELATE TO NON-GOODS CARRIERS, VIZ., SC HOOL BUS AMBULANCE, TWO WHEELERS ETC., IT BECOMES CLEAR THAT THE ASSESSEE COMPANY BY ADOPTING THE ABOVE MODUS OPERANDI HAS BOOKED BOGUS EXPENDITURE IN ITS FINANCIAL STATEMENTS WHICH WAS NOT INCURRED FOR THE PURPOSE OF ITS BUSINESS. THE ASSESEES REQUEST SEEKING CROSS EXAMINATION OF THE TRANSPORTERS FROM WHOM STATEMENT U/S 131 HAS BEEN RECORDED IS NOT CONSIDERED NECESSARY BECAUSE THE ENTIRE EXPENDITURE HAS BEEN PROVED TO BE BOGUS THROUGH INDEPENDENT EVIDENCE COLLECTED FROM TRANSPORT DEPARTMENT AND THE BANKS. THE AVERMENTS MADE BY THE ALLEGED TRANSPORTERS HAVE BEEN INDEPENDENTLY CORROBORATED WITH THESE EVIDENCES COLLECTED FROM THE BANKS AND THE TRANSPOR T DEPARTMENT. RELIANCE IS PLACED ON THE PRINCIPLES ENUNCIATED BY THE SUPREME COURT IN THIS REGARD. I THE RIGHT OF CROSS EXAMINATION IS NOT AN ABSOLUT E RIGHT (NATH INTERNATIONAL SALES VS UOI AIR 1992 (DEL.) 295). II. THE RIGHT OF HEARING DOESNT NECESSARILY INCLU DE RIGHT OF CROSS EXAMINATION (STATE OF J&K VS BAKSHI GULAM MOHAMMED AIR 1967 SC 122) . THE TRANSACTION WOULD NOT BECOME GENUINE JUST ITA NO.653(B)/2015 BECAUSE THE PAYMENTS HAVE BEEN ROUTED THROUGH BANK. RELIANCE IS PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF MADRASS DECISION IN THE CASE D OF PRECISION FINANCER REPORTED IN 208 ITR 465 WHEREIN IT WAS HELD THAT MERE PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT NOR WOULD IT MAKE A NON-GENUINE TRANSACTION GENUINE. 1.10. ON THE BASIS OF ABOVE DISCUSSION. THE TRANSPORTATION EXPENDITURE CLAIMED AGAINST THE NAME OF THE ABOVE PARTIES EXCLUDING M/S NARMADA TRANSPORT AMOUNTING TO RS.168.69,93.902 (RS.175,36,24,913 RS.6,66,31,011) IS DISALLOWED AND ADDED BACK TO THE ASSESSEES INCOME. 7. FROM THE ABOVE PARAS OF THE ASSESSMENT ORDER, IT IS SEEN THAT THE REASONS GIVEN BY THE AO IN PARA-1.9 REPRODUCED ABOVE FOR NOT ACCEPTING THE REPLY OF THE ASSESSEE ARE THAT THERE IS SUBSTANTIAL INCREASE IN THE TRANSPORTATION EXPENSES AS COMPARED WITH THE EARLIER YEARS WHICH IS NOT IN PROPORTION TO THE QUANTITY OF IRON ORE PRODUCED AND SOLD DURING THIS YEAR. SECOND REASON GIVEN BY THE AO IS THAT THE ASSESSEE COULD NOT PRODUCE EVIDENCE TO SHOW THE ACT UAL RENDERING OF SERVICES AND THEREAFTER, THE MAJOR DISCUSSION BY TH E AO IN THIS PARA IS REGARDING VARIOUS STATEMENTS GIVEN BY THE TRANSPOR TER IN THE STATEMENT RECORDED BY THE AO U/S 131 OF THE IT ACT AND THEREF ORE, IT IS SEEN THAT THE MAIN BASIS FOR THIS DISALLOWANCE IS STATEMENTS OF THE TRANSPORTERS OF WHOM THE ASSESSEE REQUESTED FOR CROSS EXAMINATION B UT THE SAME WAS NOT ALLOWED BY THE AO. NOW, UNDER THESE FACTS, WE EXAMINE THE ITA NO.653(B)/2015 APPLICABILITY OF VARIOUS JUDGMENTS CITED BY THE LD. AR OF THE ASSESSEE. FIRST JUDGMENT IS OF THE HONBLE DELHI HIGH COURT R ENDERED IN THE CASE OF CIT VS SMC SHARE BROKERS LTD., (SUPRA). IN THIS CASE, IT WAS HELD BY THE HONBLE DELHI HIGH COURT THAT IN THE ABSENCE OF THIRD PARTY BEING MADE AVAILABLE FOR CROSS EXAMINATION DESPITE REPEAT ED REQUESTS BY THE ASSESSEE, HIS STATEMENT COULD NOT BE RELIED UPON T O THE DETRIMENT OF THE ASSESSEE AND TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE BLOCK ASSESSMENT. 8. IN THE NEXT JUDGMENT OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS PRADEEP KUMAR GUPTA (SUPRA) A LSO, IT WAS HELD BY THE HONBLE DELHI HIGH COURT THAT IT WAS MANDATORY FOR THE REVENUE TO PRODUCE A FOR CROSS EXAMINATION BY THE ASSESSEE ON THE SPECIFIC DEMAND IN THIS REGARD AND THEREAFTER, IT WAS HELD T HAT THE VIOLATION OF THE REVENUE TO PRODUCE A FOR CROSS EXAMINATION BY T HE ASSESSEE ASSUMES FATAL CONSEQUENCES. HENCE, AS PER THESE T WO JUDGMENTS, FOR THIS REASON ALONE THAT THE REVENUE HAS NOT MADE AVA ILABLE THESE PERSONS FOR CROSS EXAMINATION OF THE ASSESSEE DESPI TE SUCH REQUEST BY THE ASSESSEE BEFORE THE AO, THESE STATEMENTS CANNOT BE USED AGAINST THE ASSESSEE AND WITHOUT TAKING HELP FROM THESE STA TEMENTS OF THE TRANSPORTERS, THE DISALLOWANCE MADE BY THE AO OUT O F TRANSPORTATION CHARGES IS NOT SUSTAINABLE AS PER THESE TWO JUDGMEN TS RELIED UPON BY THE LD. AR OF THE ASSESSEE AND NO CONTRADICTORY JUD GMENT OF THE HONBLE JURISDICTIONAL HIGH COURT OR APEX COURT OR OF ANY O THER HIGH COURTS COULD BE MADE AVAILABLE BEFORE US BY THE LD. DR OF THE REVENUE AND ITA NO.653(B)/2015 THEREFORE, RESPECTFULLY FOLLOWING THESE TWO JUDGMEN TS OF THE HONBLE DELHI HIGH COURT, WE HOLD THAT IN THE FACTS OF THE PRESENT CASE, THESE DISALLOWANCE OUT OF TRANSPORTATION ALLOWANCE IS NOT SUSTAINABLE. GROUND O.2 OF THE ASSESSEE IS ALLOWED. 9. REGARDING GROUND NO.3, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT COPY OF THE FIR IS AVAILABLE ON PAGE- 76 TO 84 OF THE PAPER BOOK AND THE COPY OF CHARGE SHEET IS AVAILABLE ON P AGE- 85 TO 184 OF THE PAPER BOOK. THEREAFTER, HE POINTED OUT THAT AS P ER THE CHARGE SHEET, IT IS SEEN THAT THE CHARGES ARE UNDER SEC.120-B, 379,409,411,420,427,447, AND 468OF IPC AND U/S 13(2 ) R/W/S13(1)(D) OF PC ACT,1988 AND THERE IS NO CHARGE OF ILLEGAL MI NING IN THE SAME CHARGE SHEET. THEREAFTER, HE HAS DRAWN OUR ATTENTI ON TO PAGE-16 OF THE ASSESSMENT ORDER AND IT WAS POINTED OUT THAT THE AO HAS STARTED IN PARA-2 OF THE ASSESSMENT ORDER UNDER THE HEADING ILLEGAL MINING THEREAFTER, THE AO HAS DISALLOWED 40% OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE BY INVOKING EXPLANATION TO 37(1) OF THE IT ACT, 1961. HE SUBMITTED THAT WHEN THERE IS NO CHARGE OF ILLEGA L MINING IN THE CHARGE SHEET THAN THE BASIS OF THE AOS ORDER DOES NOT EXIST AND THEREFORE, THIS DISALLOWANCE SHOULD BE DELETED ON T HIS ISSUE ALONE. THEREAFTER, HE SUBMITTED THAT COPY OF THE REPORT OF THREE MEMBER COMMITTEE IS AVAILABLE ON PAGES -48 TO 785 OF THE P APER BOOK AND IN PARTICULAR OUR ATTENTION WAS DRAWN TO PAGE-50 & 51 OF THE PAPER BOOK AND IT WAS POINT OUT THAT AS PER THIS REPORT, THERE ARE PROBLEMS IN FIXING THE BOUNDARY LEASES ONCE THE BOUNDARY LINE/STATIONS ARE DISTURBED. ITA NO.653(B)/2015 THEREAFTER, RELIANCE HAS BEEN PLACED ON THE FOLLOWI NG JUDICIAL PRONOUNCEMENTS A) CIT VS PIARA SINGH 124 ITR 40(SC) B) CIT VS S.C.KOTHARI 82 ITR 794 (SC) C) BADRIDAS DAGA VS CIT 34 ITR 10 (SC) 10. THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRS T OF ALL WE REPRODUCE THE RELEVANT PORTION OF REPORT OF THE THR EE MEMBER COMMITTEE ON IRREGULARITY IN IRON ORE MINING LEASES IN BELLAR Y AS AVAILABLE IN 50 & 51 OF THE PAPER BOOK. THE MINING LEASES LISTED FROM SL.NO.1 TO 4 ARE OLD LEASES WHICH HAVE BEEN RENEWED BY THE GOI. THE LEASES LISTED AT SL.NO.5 AND 6 ARE THE FRESH LEASES APPROVED BY THE GOI. COPIES OF THE GOI ORDERS/GOAP ORDERS ALONG WITH THE LEASE SKETCHES ARE GIVEN AT ANNEXURE-I TO ANNEXURE-6. 1. GENESIS OF THE PROBLEM IN IRON ORE MINING LEASES IN BELLARY RF OF ANANTHPUR DISTRICT. A. STATUS OF BOUNDARY DEMARCATION OF VARIOUS LEASES. I. THERE ARE FIVE INDIVIDUAL LEASES AS MENTIONED ABOVE FROM SL.NO.1 TO 5 ARE LOCATED AT ONE PLACE CLOSE TO EACH OTHER IN COMPARTMENT NO.695 OF BELLARY RF WHERE BOUNDARY DISPUTES HAVE ARISEN. II. ALL THE LEASES WERE SANCTIONED INDIVIDUAL LY IN DIFFERENT YEARS. FOR ALL THESE LEES IN INDIVIDUAL ITA NO.653(B)/2015 SURVEYED SKETCHES (WHETHER ORIGINAL LEASE OR RENEWAL LEASE), NO TIE LINE PARTICULARS WITH A KNOW N PERMANENT FEATURE WAS SHOWN EXCEPTING THE MARKING OF THE GTS STATION ON THE COMMON BOUNDARY OF Y.M.& SONS AND BIOP LEASES. IN THE ABSENCE OF TIE LINE PARTICULARS IN THE SKETCHES FOR ANY SURVEY STATION, ONCE THE BOUNDARY PILLARS ARE DISTURBED, IT IS VERY DIFFICULT TO DEMARCATE THE LE AVE BOUNDARY IN THE FIELD. III. EVEN IN THE DESCRIPTION OF BOUNDARIES AS GIVEN IN THE AGREEMENT OF ORIGINAL LEASES ENTERED B Y THE USER AGENCY WITH THE MINES AND GEOLOGY DEPARTMENT, THE BOUNDARIES ARE DESCRIBED GENERALLY AS THE VILLAGE BOUNDARY IN EASTERN OR WESTERN DIRECTION AND IN FEW CASES, THE EXISTING MINING LEASES ON NORTH OR SOUTH DIRECTION. IV. IT WAS ALSO VERIFIED AND OBSERVED THAT FOR SOME LEASES THE ORIGINAL SURVEY WAS CONDUCTED BY SHOWING INTERNAL ANGLES AND DISTANCES BUT IN OTHER LEASES ONLY CHAINAGE AND BEARINGS WERE SHOWN. THE BEARINGS TAKEN WITH COMPASS WOULD HAVE BEEN INFLUENCED BY THE MAGNETIC DEFECTIONS DUE TO IRON ORE ALL AROUND. V. AS THERE ARE MANY ACTIVELY WORKING SIMILAR IRON ORE MINING LEASE IN THE SAME RF ON THE OTHER SIDE OF THE STATE BOUNDARY IN KARNATAKA STATE, THE INTER-STATE BOUNDARY ALSO IS DISTURBED DUE TO MININ G ACTIVITY RESULTING IN CERTAIN DISPUTES BETWEEN THE MINING LEASE HELD ON EITHER SIDE OF THE STATE BOUNDARY ARE ARISING. ITA NO.653(B)/2015 THUS, THERE ARE PROBLEMS IN FIXING THE BOUNDARY LEASES ONCE THE BOUNDARY LINE/STATIONS ARE DISTURBED. 12. WE ALSO REPRODUCE EXPLANATION-1 TO SEC. -37 (1 ) OF THE IT ACT BECAUSE DISALLOWANCE WAS MADE BY THE AO BY INVOKING PROVISIONS OF THIS EXPLANATION. EXPLANATION-1 ..FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHI CH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. 13. FROM THE ABOVE EXPLANATION -1 TO SEC.37 (1) OF THE IT ACT, IT IS SEEN THAT IF ANY EXPENDITURE IS MADE BY THE ASSESSE E FOR ANY PURPOSE WHICH IS AN OFFENCE OR PROHIBITED BY LAW THEN IT IS NOT INCURRED FOR THE PURPOSE OF BUSINESS AND NO DEDUCTION OR ALLOWANCE C AN BE MADE IN RESPECT OF SUCH EXPENDITURE. IN THE PRESENT CASE, EVEN IF THIS ALLEGATION OF AO IS ACCEPTED THAT THE ASSESSEE IS DOING SOME I LLEGAL MINING AND THE PRODUCTION OF THE ASSESSEE TO THE EXTENT OF 40% OF PRODUCTION IS OUT OF ILLEGAL MINING, IN OUR CONSIDERED OPINION, EXPENSES INCURRED FOR SUCH PRODUCTION DOES NOT ATTRACT THE DISALLOWANCE UNDER EXPLANATION-1 TO SEC.37 (1) OF THE IT ACT BECAUSE, THE EXPENSES INCU RRED FOR MINING CANNOT BE CONSIDERED AS OFFENCE OR PROHIBITED BY LA W IN ITSELF AND THE ITA NO.653(B)/2015 ONLY OBJECTION CAN BE THAT SUCH MINING IS NOT IN AC CORDANCE WITH LAW AND FOR THAT VIOLATION BY THE ASSESSEE IF ANY, ACTI ON MAY BE TAKEN UNDER RELEVANT PROVISIONS OF LAW IF SUCH VIOLATION OF LAW IS PROVED BUT THIS CANNOT BE SAID THAT THE EXPENSES IS INCURRED FOR AN Y PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. THE EXPE NSES FOR MINING ITSELF IS NOT AN OFFENCE OR PROHIBITED BY LAW BECAUSE THE AO HIMSELF HAS ALLOWED DEDUCTION TO THE EXTENT OF 60% OF THE SAME EXPENSES. HENCE, SUCH EXPENSES CANNOT BE DISALLOWED AND IN OUR CONSI DERED OPINION, THIS DISPUTE CAN BE VIEWED FROM A DIFFERENT ANGLE ALSO. SUPPOSE A PERSON IS ENGAGED IN THE ACTIVITIES OF SMUGGLING, LEGAL ACTIO N CAN BE TAKEN AGAINST SUCH PERSON FOR CARRYING OUT SUCH ILLEGAL ACTIVITY BUT FOR TAXING THE INCOME FROM SMUGGLING IF ANY, IT CANNOT BE SAID THA T THE ENTIRE SALE PROCEEDS WILL BE TAXED WITHOUT ALLOWING ANY DEDUCTI ON IN RESPECT OF PURCHASE OF SMUGGLED GOODS. IN COMPUTING THE SAME INCOME FROM SMUGGLING OF GOODS, IF THE ASSESSEE HAS INCURRED SO ME EXPENSES FOR FACILITATING SUCH SMUGGLING THEN SUCH EXPENSES MAY BE DISALLOWED BUT NOT THE COST OF PURCHASE OF SMUGGLED GOODS. SIMILA RLY, IN THE PRESENT CASE, EVEN IF THE ASSESSEE IS HELD TO BE ENGAGED IN ILLEGAL MINING ACTIVITY AND THE ASSESSEE CLAIMS DEDUCTION IN RESPECT OF SOM E EXPENSES HAVING BEEN INCURRED BY ASSESSEE FOR CARRYING OUT ILLEGAL MINING ACTIVITY LIKE BRIBE OR ANY PENALTY IS IMPOSED FOR SUCH ILLEGAL MI NING THEN SUCH EXPENSES CAN BE DISALLOWED UNDER THE SAID EXPLANATI ON-1 TO SEC.37 (1) OF THE ACT BECAUSE SUCH EXPENSES ARE DEFINITELY COVERE D BY SUCH EXPLANATION-1 TO SEC.37 (1) OF THE ACT DUE TO THE R EASON THAT SUCH ITA NO.653(B)/2015 EXPENSES ARE FOR FACILITATING TO CARRY OUT ILLEGAL ACTIVITIES LIKE ILLEGAL MINING. BUT NORMAL MINING EXPENSES CANNOT BE HIT B Y THIS EXPLANATION, BECAUSE SUCH NORMAL MINING EXPENSES ARE NOT FOR THE PURPOSE OF AN OFFENCE OR FOR A PURPOSE PROHIBITED BY LAW. 14. IN THE PRESENT CASE, WE ARE NOT CONCERNED AS TO WHETHER HE ASSESSEE IS ENGAGED IN ILLEGAL MINING OR NOT BUT IN THE PRESENT CASE, BECAUSE THIS IS NOT THE CASE OF THE AO THAT ANY DED UCTION HAS BEEN CLAIMED BY THE ASSESSEE FOR FACILITATING TO CARRY O UT THE ILLEGAL MINING ALLEGED BY THE AO OR FOR ANY PENALTY IN RESPECT OF SUCH ILLEGAL MINING BECAUSE THE DISALLOWANCE HAS BEEN MADE BY THE AO TO THE EXTENT OF 40% OF THE TOTAL MINING EXPENSES AND SINCE 60% OF THE E XPENSES ARE ALLOWED BY THE AO, THE REMAINING 40% OF THE SAME EXPENSES C ANNOT BE CONSIDERED AS EXPENSES FOR THE PURPOSE OF OFFENCE O R UNLAWFUL PURPOSES. HENCE, THIS DISALLOWANCE IS NOT JUSTIFIED. 15. NOW WE EXAMINE THE APPLICABILITY OF VARIOUS JUD GMENTS CITED BY THE LD. AR OF THE ASSESSEE. THE FIRST JUDGMENT CITED BY HIM IS OF THE HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS P IARA SINGH(SUPRA). IN THIS CASE, IT WAS HELD THAT LOSS ARISING OF CONF ISCATION BY CUSTOMS AUTHORITIES IS DEDUCTIBLE FROM THE INCOME DERIVED F ROM SMUGGLING ACTIVITIES. HENCE, EXPENSES INCURRED IN COURSE OF AN ILLEGAL BUSINESS IS ALLOWABLE FOR COMPUTING INCOME FROM SUCH BUSINESS B UT THIS JUDGMENT IS PRIOR TO INTRODUCTION OF EXPLANATION -1 TO SEC.3 7 OF THE IT ACT AND THEREFORE, THIS JUDGMENT IS NOT RELEVANT IN RESPECT OF THOSE EXPENSES WHICH ARE HIT BY THIS EXPLANATION AND IN OUR CONSID ERED OPINION, THE ITA NO.653(B)/2015 NORMAL MINING EXPENSES ARE NOT HIT BY THIS EXPLANAT ION AND HENCE, THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THIS JUDGMENT SINCE THE EXPLANATION TO SECTION 37 (1) IS NOT ATTRACTED IN T HE FACTS OF THE PRESENT CASE. SIMILARLY, THE OTHER TWO JUDGMENTS OF WHICH RELIANCE HAS BEEN PLACED BY THE LD. AR OF THE ASSESSEE ARE ALSO FOR T HE PERIOD PRIOR TO INTRODUCTION OF EXPLANATION-1 TO SEC.37 (1) OF THE ACT, 1961 AND THEREFORE, AS PER THESE JUDGMENTS ALSO, THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE SINCE THE EXPLANATION TO SECTION 37 (1 ) IS NOT ATTRACTED IN THE FACTS OF THE PRESENT CASE. IN VIEW OF OUR ABOV E DISCUSSION, GROUND NO.3 OF THE ASSESSEE IS ALLOWED. 16. REGARDING GROUND NO.4, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT IT IS NOTED BY THE AO IN PARA-3.3 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT DISCHARGED ITS ONUS TO PR OVE THAT THE ENTIRE EXPENSES IN RESPECT OF REPAIRS AND MAINTENANCE AND DEPRECIATION ON HELICOPTER HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. THE AO HAS CONSIDERED THAT 50% OF SU CH EXPENSES IS FOR PERSON USE OF HELICOPTER BY THE DIRECTOR OF THE ASS ESSEE COMPANY AND HE MADE DISALLOWANCE OF 50% OF SUCH EXPENSES. HE SUBM ITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON & ENGG.CO. VS CIT AS REPORTED IN253 ITR 749. ITA NO.653(B)/2015 17. ON THIS ISSUE ALSO, LD. DR OF THE REVENUE SUPPO RTED THE ORDERS OF THE AUTHORITIES BELOW. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND FORCE IN THE SUBMISSION OF THE LD. AR OF THE ASSESSEE THAT T HIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONB LE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON & ENGG.CO .(SUPRA) WHEREIN IT WAS HELD BY THE HONBLE HIGH COURT THAT IN RESPECT OF EXPENDITURE INCURRED ON VEHICLES, TELEPHONE ETC., EVEN IF THER E IS ANY PERSONAL USE BY DIRECTOR/EMPLOYEE OF THE ASSESSEE COMPANY, ADDIT ION CAN BE MADE IN THE HANDS OF SUCH DIRECTOR/EMPLOYEE ON ACCOUNT OF P ERQUISITE VALUE OF SUCH PERSONAL USE BY CONCERNED PERSON BUT NO DISALL OWANCE CAN BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. RESPE CTFULLY FOLLOWING THIS JUDGMENT OF HONBLE GUJARAT HIGH COURT, THIS D ISALLOWANCE IS DELETED. HOWEVER, THE A.O. OF THE CONCERNED DIRECT OR IS AT LIBERTY TO MAKE ADDITION AS PER LAW IN THE HANDS OF THE CONCER NED DIRECTOR. ACCORDINGLY, GROUND NO.4 OF THE ASSESSEE IS ALSO AL LOWED. 19. REGARDING GROUND NO.5, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT THE AO HAS MADE ADDITION OF GROSS AMO UNT OF SALE PROCEEDS OF LAND WHICH WAS KEPT AS ADVANCE BY THE A SSESSEE IN ITS BALANCE SHEET AT THE END OF THE YEAR. HE SUBMITTE D THAT EVEN IF ADDITION IS MADE ON THIS ACCOUNT, THE SAME SHOULD BE OF NET AMOUNT AFTER ITA NO.653(B)/2015 ALLOWING DEDUCTION IN RESPECT OF COST OF ACQUISITIO N AS PER LAW AND FOR THIS PURPOSE, THE MATTER MAY BE RESTORED BACK TO TH E FILE OF THE AO. 20. THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE ALSO. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND FO RCE IN THE SUBMISSION OF THE LD. AR OF THE ASSESSEE BECAUSE WE FIND THAT THE AMOUNT OF RS.86,60,079/- FOR WHICH ADDITION HAS BEE N BY THE AO IS THE AMOUNT OF ASSESSEES SHARE IN THE SALE CONSIDERATIO N FOR SALE OF LAND AND HENCE, EVEN IF IT IS HELD THAT INCOME ON THIS ACCOU NT IS TO BE TAXED IN THE PRESENT YEAR, THE SAME CANNOT BE TO THE EXTENT OF G ROSS AMOUNT OF SALE PROCEEDS AND INCOME HAS TO BE ASSESSED AFTER ALLOWI NG DEDUCTION REGARDING COST OF ACQUISITION, IF ANY INCURRED BY T HE ASSESSEE BUT SINCE THERE IS NO DISCUSSION ON THIS ASPECT IN THE ORDERS OF THE AUTHORITIES BELOW, WE FEEL IT PROPER THAT THIS ISSUE SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR A FRESH DECISION IN THE LIGHT OF THE ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. WE ORDER ACCORDINGLY. THIS GROUND IS PARTLY ALLOWED FO R STATISTICAL PURPOSES ITA NO.653(B)/2015 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAN DS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV ) ( A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : 29.07.2016 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE 1. DATE OF DICTATION .. ITA NO.653(B)/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S. .. 4 DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 11 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER. 1 2 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF ORDER ITA NO.653(B)/2015 ITA NO.653(BANG)2015 27