Aradhana Foods and Juices Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6807/DEL/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0478 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Assessee Lawyers: PRIYA TANDON
• Keywords: Unexplained investment; Depreciation; Set aside
• Section: 192; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: A NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.6807/DEL./2015 ASSESSMENT YEAR: 2011-12 M/S. ARADHANA FOODS AND JUICES PVT. LTD.,(NOW MERGED WITH PEPSICO INDIA HOLDINGS PVT. LTD.), FLAT NO. 54, LOWER GROUND FLOOR, WORLD TRADE CENTER, BARAKHAMBA ROAD NEW DELHI VS. DCIT, CIRCLE-3(1), NEW DELHI PAN : AAACP1272G (APPELLANT) (RESPONDENT) AND ITA NO.2340/DEL./2011 ASSESSMENT YEAR: 2007-08 ITO, WARD-2(1), NEW DELHI VS. M/S. ARADHANA FOODS AND JUICES PVT. LTD., FLAT NO. 54, LOWER GROUND FLOOR, WORLD TRADE CENTER, BARAKHAMBA ROAD NEW DELHI PAN :AAA FCA4917L (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI DEEPAK CHOPRA, ADV. SHRI ANMOL ANAND, ADV. & MS. PRIYA TANDON, ADV. DEPARTMENT BY SHRI SATPAL GULATI, CIT(DR) 2 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 ORDER PER O.P. KANT, AM: THESE TWO APPEALS BY THE REVENUE AND THE ASSESSEE RESPECTIVELY, ARE DIRECTED AGAINST TWO SEPARATE ORD ERS DATED 21/02/2011 (FOR ASSESSMENT YEAR 2007-08 ) AND 01/10 /2015 (FOR ASSESSMENT YEAR 2011-12) PASSED BY THE LEARNED FIRS T APPELLATE AUTHORITY [IN SHORT THE LD. CIT(A)]. IN ASSESSMEN T YEAR 2007-08, THE ISSUE IN DISPUTE HAS BEEN REMITTED BACK BY THE HONBLE DELHI HIGH COURT FOR ADJUDICATING BY THE INCOME TAX APPEL LATE TRIBUNAL (IN SHORT THE TRIBUNAL). ITA NO. 2340/DEL./2011 2. FIRST, WE TAKE UP THE APPEAL OF THE REVENUE IN ASSE SSMENT YEAR 2007-08. THE GROUNDS RAISED BY THE REVENUE IN ASSESSMENT YEAR 2007-08 ARE REPRODUCED AS UNDER: 1. LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELE TING ADDITION OF RS.10,61,30,515/- ON A/C OF PURCHASES FROM RELATED PARTIES; RESTRICTING DISALLOWANCE OUT OF OPERATING EXPENSES FROM 30% (RS.8,72,60,100/- TO 10% (RS.2,90,86,700/-); DELETI NG ADDITION OF RS.2,45,00,000/- OUT OF UNVERIFIED EXPENSES IN FI XED ASSETS; AND RS.36,75,000/- OUT OF DEPRECIATION. THE ASSESSEE F AILED TO PRODUCE BOOKS OF ACCOUNTS AND ALSO SUPPORTING BILLS /VOUCHERS IN SUPPORT OF ITS CLAIMS. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT DURING T HE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS ENGAGED IN TH E BUSINESS OF DATE OF HEARING 21.12.2020 DATE OF PRONOUNCEMENT 23.12.2020 3 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 MANUFACTURING AND TRADING OF AERATED AND NON-AERATE D BEVERAGES PRODUCTS. FOR THE YEAR UNDER CONSIDERATION, THE ASS ESSEE FILED RETURN OF INCOME ON 27/10/2007 DECLARING LOSS OF 14,92,79,440/-. THE RETURN OF INCOME FILED BY THE A SSESSEE WAS SELECTED FOR A SCRUTINY AND STATUTORY NOTICES UNDER INCOME-TAX ACT, 1961 (IN SHORT THE ACT) WERE ISSUED AND COMP LIED WITH. DURING ASSESSMENT, THE ASSESSING OFFICER OBSERVED T HAT BOOKS OF ACCOUNTS WERE NOT PRODUCED BEFORE HIM. THE ASSESSIN G OFFICER IN ASSESSMENT ORDER PASSED ON 30/12/2009 MADE FOLLOWIN G DISALLOWANCES TO THE RETURNED LOSS: SL. NO. N ATURE OF DISALLOWANCE A MOUNT IN RS. 1. UNVERIFIED PURCHASES FROM RELATED PARTIES 10,61,30,515/ - 2. OPERATING EXPENSES 8 ,72,60,100 / - 3. PURCHASE OF UNVERIFIED FIXED ASSETS 2,45,00,000/- 4. DEPRECIATION CLAIMED ON UNVERIFIED FIXED ASSETS 36,75,000/- 3.1 THE LD. CIT(A) DELETED THE DISALLOWANCE OF UNVERIF IED PURCHASES FROM RELATED PARTIES (RS.10,61,30,515), D ISALLOWANCE OF PURCHASE OF UNVERIFIED FIXED ASSETS (RS.2,45,00,000 /-) AND DISALLOWANCE OF THE DEPRECIATION ON UNVERIFIED FIXE D ASSETS ( RS.36,75,000/-). IN RELATION TO DISALLOWANCE OF OPE RATING EXPENSES, HE REDUCED THE RATE OF DISALLOWANCE FROM 30%, WHICH WAS MADE BY THE ASSESSING OFFICER TO 10% OF THE TOT AL EXPENSES. AGGRIEVED, BOTH PARTIES FILED APPEAL BEFORE THE TRI BUNAL. THE TRIBUNAL WHILE HEARING BOTH THE APPEAL OF THE ASSES SEE (ITA NO. 2427/DEL./2011) AS WELL AS THE REVENUE (ITA NO. 2340/DEL./2011), IN ORDER DATED 05/06/2017 SET ASID E THE ORDER OF THE LD. CIT(A) AND THE ASSESSMENT ORDER AND REST ORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR MAK ING DE-NOVO 4 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 ASSESSMENT AS PER LAW, AFTER MAKING FURTHER VERIFICATION/ENQUIRY/INVESTIGATION ETC. IN ACCORDAN CE WITH LAW. AGAINST THE ORDER OF THE TRIBUNAL, THE ASSESSEE PRE FERRED APPEAL BEFORE THE HONBLE DELHI HIGH COURT. THE HONBLE DE LHI HIGH COURT UPHELD THE ORDER OF THE REMAND IN RESPECT OF THE DISALLOWANCE OF UNVERIFIED PURCHASES FROM RELATED P ARTIES AND OPERATING EXPENSES, HOWEVER, SET ASIDE THE ORDER OF THE TRIBUNAL ON THE QUESTION OF UNVERIFIED FIXED ASSETS AND DEPR ECIATION. THE RELEVANT FINDING OF THE HONBLE HIGH COURT IS REPRO DUCED AS UNDER: 14. WE FIND AND OBSERVE THAT THE TRIBUNAL HAS NOT SPECIFICALLY CONSIDERED AND DEALT WITH THE CONTENTION AND PLEAS RAISED BY THE APPELLANT/ASSESSEE WHILE REMANDING THE CASE ON THE TWO ASPECTS RELATING TO ADDITION TO FIXED ASSETS AND PURCHASES OF BOTTLES ETC. OBSERVATION OF THE TRIBUNAL THAT THE APPELLANT-ASSE SSEE HAD NOT PRODUCED BOOKS OF ACCOUNTS IS SERIOUSLY DISPUTED AN D CONTESTED BY THE APPELLANT-ASSESSEE. IT IS STATED AND CLAIMED TH AT THEY HAD PRODUCED BOOKS OF ACCOUNTS, EXCEPT BOOKS OF ACCOUNT S RELATING TO THE MANUFACTURING UNITS, WHICH COULD NOT BE PRODUCED DU E TO TELANGANA AGITATION. INVOICES AND DETAILS RELATING TO PURCHAS ES ETC. WERE PRODUCED. THE ISSUE WOULD BE WHETHER AND WHAT DOCUM ENTS AND PAPERS IN RESPECT OF THE PURCHASES WERE PRODUCED BE FORE THE ASSESSING OFFICER AS HELD BY THE COMMISSIONER OF IN COME TAX (APPEALS) OR THE FINDINGS AND OBSERVATIONS OF THE A SSESSING OFFICER WERE JUSTIFIED. 15. KEEPING IN VIEW THE AFORESAID POSITION AND AS T HE ISSUE AND THE CONTENTION RAISED BY THE APPELLANT-ASSESSEE HAS NOT BEEN SPECIFICALLY DEALT WITH AND EXAMINED BY THE TRIBUNA L, WE SET ASIDE THE IMPUGNED DIRECTION OF REMIT ON THE THIRD/FOURTH ASPECT TO THE ASSESSING OFFICER AND WOULD REQUIRE THE TRIBUNAL TO EXAMINE THE SAID CONTENTION AFRESH. WHILE EXAMINING THE SAID QU ESTION, THE PAPERS AND DOCUMENTS PRODUCED ON RECORD BY THE APPE LLANT- ASSESSEE BEFORE THE ASSESSING OFFICER WOULD BE EXAM INED AND CONSIDERED. WE MAKE IT CLEAR THAT IN CASE THE TRIBU NAL FEELS AND CONCLUDES THAT THEY CANNOT DECIDE THE QUESTION AND ISSUE IN ABSENCE OF DETAILS AND PARTICULARS, AN ORDER OF REMAND MAY BE PASSED. OUR AFORESAID DECISION WOULD EQUALLY APPLY TO THE QUEST ION OF CLAIM OF DEPRECIATION ON BOTTLES AND TETRA PACKS, WHICH WERE DISALLOWED BY THE ASSESSING OFFICER. 5 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 16. IN VIEW OF THE AFORESAID DISCUSSION, THE QUESTI ON OF LAW IS PARTLY ANSWERED IN FAVOUR OF THE APPELLANT-ASSESSEE AND PA RTLY ANSWERED IN FAVOUR OF THE RESPONDENT-REVENUE. WE UPHOLD THE ORDER OF REMAND PASSED BY THE TRIBUNAL IN RESPECT OF DISALLOWANCE O F UNVERIFIED PURCHASES FROM RELATED PARTIES. WE, HOWEVER, SET AS IDE THE ORDER OF THE TRIBUNAL REMANDING THE MATTER TO THE ASSESSING OFFICER ON THE QUESTION OF UNVERIFIED FIXED ASSETS AND DEPRECIATIO N. THE SAID ISSUE/QUESTION WOULD BE EXAMINED AFRESH AND IN CASE AND ONLY IF THE TRIBUNAL FINDS THAT THE SAID QUESTION CANNOT BE ANSWERED ON THE BASIS OF PAPERS AND DOCUMENTS FILED BEFORE THE ASSE SSING OFFICER, AN ORDER OF REMAND MAY BE PASSED. 4. WE FIND THAT THE HONBLE HIGH COURT HAS DIRECTED T HE TRIBUNAL TO EXAMINE THE CONTENTION OF THE ASSESSEE REGARDING DISALLOWANCE ON PURCHASE OF UNVERIFIED FIXED ASSETS AND DEPRECIATION THEREON. IT IS UNDISPUTED THAT NO BOOK S OF ACCOUNTS WERE PRODUCED BY THE ASSESSEE BEFORE EITHER THE ASS ESSING OFFICER OR BEFORE THE LEARNED CIT(A). REGARDING THE DISALLO WANCE OF UNVERIFIED FIXED ASSETS AND DEPRECIATION THEREON, T HE LD. ASSESSING OFFICER OBSERVED THAT PURCHASE OF BOTTLES AND TETRA PACKS OF RS.605,53,607/- WERE MADE DURING THE RELEV ANT ASSESSMENT YEAR. THE LEARNED ASSESSING OFFICER VIDE HIS NOTICE DATED 10/12/2009 ASKED THE ASSESSEE TO FURNISH DETA ILS OF VISICOOLERS/BOTTLES/TETRA PACK ETC. THE ASSESSEE FIL ED LETTER DATED 21/12/2009 AND SUBMITTED THAT VISICOOLERS WERE KEPT WITH THE RETAILERS/DEALERS SHOPS FOR KEEPING ASSESSEES PROD UCTS COOL IN ALL SEASONS. THE ASSESSEE PROVIDED DETAIL OF THE DISTRI BUTORS/DEALERS AND PROVIDED PURCHASE BILLS OF VISICOLLERS ON SAMPL E BASIS. IN VIEW OF THE SUBMISSION OF THE ASSESSEE, THE ASSESSING OF FICER MADE REMARK IN THE ASSESSMENT ORDER THAT NO DETAIL OF VIS ICOOLERS, BOTTLES AND TETRA PACKS WAS PROVIDED. HE CONCLUDED THAT SINCE BOOKS OF ACCOUNTS ALONG WITH BILLS AND VOUCHERS IN RESPECT OF THE 6 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 ADDITION TO THE ASSETS WERE NOT FURNISHED BEFORE HI M, SO HE MADE DISALLOWANCE OF 2,45,00,000/- OUT OF THE FIXED ASSETS ON ACCOUNT OF BEING UNVERIFIED EXPENSES AND ALSO DISALLOWED DE PRECIATION CLAIMED AT THE RATE OF THE 15% ON SAID AMOUNT OF UN VERIFIED FIXED ASSET, WHICH WAS WORKED OUT TO 36,75,000/-. THE LD. CIT(A), HOWEVER, IN VIEW OF THE SUBMISSION OF THE ASSESSEE BEFORE HIM DELETED THE DISALLOWANCE FOR UNVERIFIED FIXED ASSET S AND DEPRECIATION THEREON. ACCORDING TO THE LD. CIT(A), THE ASSESSEE HAS PROVIDED SPECIFIC LIST OF THE ADDITIONS MADE TO THE FIXED ASSETS THAT DULY SIGNED BY THE TAX AUDITOR ALONG WITH SAMP LE COPY OF THE INVOICES AND NAME AND ADDRESS OF THE PARTIES FROM W HOM ASSETS ABOVE 10 LAKHS WERE PURCHASED. THE LD. CIT(A) IS OF THE VIEW THAT EXHAUSTIVE AND DETAILED LIST OF THE INDIVIDUAL ASSET ADDED DURING THE YEAR UNDER CONSIDERATION WERE SUBMITTED BEFORE THE ASSESSING OFFICER, HOWEVER, NO SPECIFIC ASSETS HAD BEEN IDENTIFIED AND CHARACTERISED AS UNEXPLAINED INVESTMENT BY THE ASSESSING OFFICER AND THEREFORE ADDITION BEING ON AD HOC MANN ER, HE DELETED THE SAME. 5. BEFORE US, BOTH THE PARTIES APPEARED THROUGH VIDEOCONFERENCING FACILITY. THE ASSESSEE FILED A PA PER-BOOK AND ANOTHER DOCUMENTS ELECTRONICALLY. 6. FIRST OF ALL, THE LEARNED COUNSEL OF THE ASSESSEE REFERRED TO THE ASSESSMENT ORDER DATED 17/06/2019, AVAILABLE ON PAGE 38 AND 39 OF THE PAPER-BOOK, WHICH IS PASSED BY THE AS SESSING OFFICER UNDER SECTION 254/143(3) OF THE ACT IN COMP LIANCE TO THE DIRECTION OF THE TRIBUNAL IN ORDER DATED 05/06/2017 . HE SUBMITTED THAT THE ASSESSING OFFICER IN THE SAID OR DER HAS REFERRED TO THE ORDER OF THE HONBLE HIGH COURT (SU PRA) AND ALSO 7 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 CONSIDERED THE ISSUE OF UNVERIFIED FIXED ASSETS AND DEPRECIATION THEREON IN FAVOUR OF THE ASSESSEE AND THEREFORE NOW , THERE IS NO NEED TO ADJUDICATE THIS ISSUE BY THE TRIBUNAL. 7. ALTERNATIVELY, THE LEARNED COUNSEL OF THE ASSESSEE REFERRED TO PAPER-BOOK AND SUBMITTED THAT ON PAGE 185, LIST OF VISICOOLLERS ADDED DURING THE YEAR IS AVAILABLE AND ON PAGE 192 LIST OF BOTTLES AND SHELLS ADDED DURING THE YEAR IS AVAILABLE. HE R EFERRED TO ONE SAMPLE BILL OF VISICOOLER AVAILABLE ON PAGE 50 OF THE PAPER-BOOK. HE SUBMITTED THAT ENTIRE DETAILS OF LIST OF THE FIX ED ASSETS AVAILABLE IN REPORT OF TAX AUDITOR (IN FORM NO.3CD) WAS MADE AVAILABLE TO THE ASSESSING OFFICER AND, THEREFORE, THE LD. CIT(A ) IS JUSTIFIED IN DELETING THE ADDITION IN DISPUTE. 8. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT NO BILLS AND VOUCHERS WERE PRODUCED BEFORE THE ASSESSING OFF ICER IN VIEW OF THE ADMITTED POSITION THAT NO BOOKS OF ACCOUNTS WERE PRODUCED BEFORE HIM. HE SUBMITTED THAT FOR VERIFICATION OF T HE FIXED ASSETS ADDED DURING THE YEAR UNDER CONSIDERATION, EACH ENT RY OF ADDITION OF FIXED ASSETS PROVIDED IN FORM NO. 3CD NEED VERIF ICATION WITH THE RESPECTIVE BILL OF PURCHASE AND VOUCHER. THE LEARNE D DR SUBMITTED THAT MATTER IN DISPUTE FOR VERIFICATION M AY BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. 9. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD KEEPING IN VIEW THE DIRECTION OF THE HONBLE HIGH COURT. THE I SSUE IN DISPUTE IN THE INSTANT CASE IS VERIFICATION OF THE FIXED AS SETS ADDED DURING THE YEAR UNDER CONSIDERATION. AS REGARD TO FIRST CO NTENTION OF THE LEARNED COUNSEL THAT THE ASSESSING OFFICER IN ORDER DATED 17/06/2019 HAS ALREADY GIVEN EFFECT TO THE ORDER OF THE HONBLE 8 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 HIGH COURT IS NOT FOUND TO BE CORRECT. WE HAVE PERU SED THE SAID ORDER OF THE ASSESSING OFFICER AND FOUND THAT KEEPI NG IN VIEW OF THE ORDER OF THE HONBLE HIGH COURT , HE HAS ADJUDI CATED ONLY ON DIRECTION OF THE TRIBUNAL ON THE ISSUES, WHICH HAVE BEEN CONFIRMED BY THE HONBLE HIGH COURT. THE RELEVANT F INDING OF THE ASSESSING OFFICER IS REPRODUCED AS UNDER: KEEPING IN VIEW OF THE ABOVE AND CIRCUMSTANCES OF THE CASE, ON EXAMINATION OF BOOKS OF ACCOUNT RELEVANT TO OPERATI NG EXPENSES AND PURCHASES, NO ADVERSE INFERENCE HAS BEEN FOUND. HEN CE, ASSESSED ACCORDINGLY. 9.1 IN THE FACTS OF THE CASE, IT IS UNDISPUTED THAT BO OKS OF ACCOUNTS AND BILLS/VOUCHERS WERE NOT PRODUCED BEFOR E EITHER THE ASSESSING OFFICER OR THE LD. CIT(A). THE ASSESSEE H AS ONLY PRODUCED TAX AUDITOR REPORT IN FORM NO. 3CD WHICH C ONTAINS A LIST OF THE ITEMS OF FIXED ASSET ADDED DURING THE Y EAR ALONGWITH THE AMOUNT, THAT TOO IN RESPECT OF VISICOOLERS AND BOLL TES ONLY. BEFORE US, ALSO THE ASSESSEE HAS ONLY REFERRED TO FEW SAMP LE COPIES OF THE INVOICES FOR PURCHASE OF THE FIXED ASSETS AND NO CO MPLETE INVOICES HAVE BEEN PRODUCED. IN ABSENCE OF BILLS/INVOICES OR VOUCHERS FOR THE PURCHASE OF THE FIXED ASSETS, PURCHASE OF THOSE ASSETS CANNOT BE VERIFIED. FOR PROPER VERIFICATION, IT IS REQUIRE D THAT EACH ENTRY OF FIXED ASSETS ADDED NEED TO BE SEEN ALONG WITH THE R ELEVANT BILL/INVOICE OF PURCHASE, INSTALLATION, DELIVERY NO TE ETC. IN ABSENCE OF ANY SUCH DETAILS PRODUCED BEFORE US, WE ARE NOT IN POSITION TO VERIFY PURCHASE OF THE FIXED ASSETS AS DIRECTED BY THE HONBLE HIGH COURT. IN THE CIRCUMSTANCES, WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR EXAM INING AND VERIFYING IN VIEW OF OUR OBSERVATION ABOVE. 9 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 10. ACCORDINGLY, THE GROUND NO. 1 OF THE APPEAL TO THE EXTENT OF DISALLOWANCE OF UNVERIFIED FIXED ASSETS AND DISALLO WANCE OF THE DEPRECIATION THEREON IS ALLOWED FOR STATISTICAL PUR POSES. ITA NO. 6807/DEL./2015 11. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASS ESSMENT YEAR 2011-12. THE GROUNDS OF THE APPEAL ARE REPRODU CED AS UNDER: 1. THAT THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER DATED FEBRUARY 28, 2014 OF THE ASSESSING OFFI CER ASSESSING LOSS AT RS.504,100,040/- AS AGAINST LOSS OF RS.634 ,86,288/- RETURNED BY THE APPELLANT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) MERELY RELYING ON THE ORDER OF HIS PREDESSOR, HAS ERRED IN UPHOLDING THE AD-HOC DISALLOWANCE OF RS.12,121,000/- BEING TEN PE RCENT OF THE TOTAL OPERATING EXPENDITURE OF RS.1,201,2410,000/- MADE BY THE ASSESSING OFFICER ALLEGING THAT THE SAME TO BE UNRE ASONABLE AND EXCESSIVE WITHOUT BRINGING ANYTHING ON RECORD IN SU PPORT THEREOF, 3. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT(A), WHILE CONFIRMING THE DISALLOWANCE HAS F AILED TO APPRECIATE THAT THE APPELLANT HAD DULY PRODUCED BO OKS OF ACCOUNT/LEDGER IN SUPPORT OF EXPENDITURE INCURRED U NDER THE HEAD OPERATING EXPENSES AMOUNTING TO RS.12,121,000/-. 12. AT THE OUTSET, THE LEARNED DR SUBMITTED THAT IDENT ICAL ISSUE OF DISALLOWANCE OF OPERATING EXPENDITURE HAS BEEN R ESTORED BACK TO THE ASSESSING OFFICER BY THE TRIBUNAL IN AY 2007 -08 AS UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT, AND THERE FORE ISSUE IN DISPUTE IN THIS YEAR ALSO MAY BE RESTORED BACK TO T HE FILE OF THE ASSESSING OFFICER FOR DECIDING AFTER VERIFICATION. 13. THE LEARNED COUNSEL OF THE ASSESSEE, HOWEVER SUBMI TTED THAT IN THE YEAR UNDER CONSIDERATION FACTS ARE DIFF ERENT. HE SUBMITTED THAT IN THE ASSESSMENT YEAR 2007-08 IT IS ADMITTED POSITION THAT BOOKS OF ACCOUNTS AND BILLS AND VOUCH ERS WERE NOT 10 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 PRODUCED BEFORE THE ASSESSING OFFICER, HOWEVER IN T HE YEAR UNDER CONSIDERATION BOOKS OF ACCOUNTS IN RESPECT OF OPERA TING EXPENSES WERE DULY PRODUCED AND EXAMINED BY THE ASSESSING OF FICER AND THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED I N DISALLOWING 10% OF THE EXPENSES AS UNVERIFIED ON AD HOC BASIS WITHO UT POINTING OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNTS. HE SU BMITTED THAT THE LD. CIT(A) HAS UPHELD THE DISALLOWANCE IN VIEW OF THE PRECEDING YEARS ONLY WHERE NO BOOKS OF ACCOUNTS WE RE PRODUCED BEFORE THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE SHOU LD BE SUSTAINED ON AD HOC BASIS IN THE INSTANT ASSESSMENT YEAR. 14. WE HAVE HEARD BOTH THE PARTIES THROUGH VIDEOCONFER ENCING FACILITY AND PERUSED THE RELEVANT MATERIAL ON RECOR D. WE FIND THAT THE ASSESSING OFFICER IN THE YEAR UNDER CONSIDERATI ON HAS VERIFIED THE BOOKS OF ACCOUNTS PARTICULARLY IN RESPECT OF OP ERATING EXPENSES. THE RELEVANT PART OF THE ASSESSMENT ORDER IS REPRODUCED AS UNDER: 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASS ESSEE WAS SPECIFICALLY ASKED TO EXPLAIN WHY SHOULD NOT BOTTL ES AND SHELLS BE TREATED AS PLANT & MACHINERY, IN WHICH BLOCK OF ASS ETS CRATES WERE SHOWN IN THE DEPRECIATION CHART, RATE OF DEPRE CIATION CLAIMED THEREON ALONGWITH JUSTIFICATION THEREOF. ALSO ASSES SEE WAS REQUIRED TO PRODUCE BILLS OF OPERATING EXPENSES ALONGWITH LE DGER COPIES FOR VERIFICATION. ASSESSEE WAS FURTHER REQUIRED TO PROD UCE COMPLETE BOOKS OF ACCOUNT, BILLS AND VOUCHERS FOR VERIFICATI ON VIDE ORDER SHEET ENTRY DATED 21.02.2014. BOOKS OF ACCOUNT IN RESPECT OF OPERATING EXPENSES WERE PRODUCED ON 26.02.2014 AND WERE EXAMI NED. 15. AFTER VERIFICATION OF THE BOOKS OF ACCOUNTS IN RES PECT OF THE OPERATING EXPENSES, THE ASSESSING OFFICER MADE A OB SERVATION THAT DURING THE ENTIRE YEAR ONLY 22999024 CASES HAVE BEE N SOLD AND EXPENSES OF 120,12,10,000/- HAD BEEN DEBITED IN THE BOOKS OF 11 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 ACCOUNTS AND THEREFORE OPERATING EXPENSES CAME TO 52.23/- PER CASE. IN VIEW OF THIS OBSERVATION, HE ASKED THE ASS ESSEE AS WHY THE 10% OF THE OPERATING EXPENSES SHOULD NOT BE DIS ALLOWED. WHILE MAKING THE DISALLOWANCE, THE ASSESSING OFFICE R HAS FOLLOWED THE FINDING OF THE ASSESSING OFFICER IN ASSESSMENT YEAR 2009-10. HE HAS NOT POINTED OUT ANY OTHER DISCREPANCY IN THE BOOKS OF ACCOUNTS OR THE VOUCHERS . BEFORE THE ASSESSING OFF ICER THE ASSESSEE PROVIDED DETAILED EXPLANATION IN RESPECT O F THE EXPENSES COVERED UNDER THE OPERATING EXPENSES , HOWEVER , TH E LD. CIT(A) FOLLOWING THE FINDING OF HIS PREDECESSORS UPHELD TH E DISALLOWANCE OBSERVING AS UNDER: DECISION: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE A PPELLANT, OBSERVATION OF THE ASSESSING OFFICER AND THE DECISI ON TAKEN IN EARLIER YEARS A.Y. BY THE CIT(A). IT IS SEEN THAT IDENTICAL ISSUE WAS INVOLVED IN THE APPEAL OF A.Y. 2007-08 AND THE ASSESSING OFF ICER HAD MADE DISALLOWANCES OF THE OPERATING EXPENSES TO THE EXTE NT OF 30%. THE CIT(A) IN HER ORDER DATED 21.02.2011 IN APPEAL NO. 251/09-10 PARA 5 HAD ADJUDICATED THE ISSUE AFTER CONSIDERING THE S UBMISSION MADE BY THE APPELLANT AND OBSERVATIONS OF THE ASSESSING OFFICER. THE OPERATING PART OF HER DECISION IS REPRODUCED HEREUN DER: 5.4 HOWEVER, THE FINDING OF THE A.O. THAT THE ASSE SSEE'S OPERATION IS LIMITED TO ANDHRA AND DURING THE YEAR ONLY 51,08,482 CASES HAVE BEEN SOLD, AND THE OPERATING E XPENSES WHICH WORKS OUT TO RS.56.93 PER CASE IS EXCESSIVE C ANNOT BE OVERLOOKED. AS NONE OF THE OPERATING EXPENSES HAVE BEEN SUBJECTED TO VERIFICATION BECAUSE OF NON PRODUCTION OF BOOKS OF ACCOUNTS, THE A.O. WAS CORRECT IN MAKING THE DISALL OWANCE, BUT I FIND THE DISALLOWANCE OF 30% OF THE OPERATING EXPENSES TO BE EXCESSIVE. IN THE IMMEDIATELY SUCCEEDING YEAR , THE SAME A.O. AFTER EXAMINING THE BOOKS OF ACCOUNTS ON SAMPL E BASIS HAS LIMITED THE ADDITION TO 10% OF OPERATING EXPENS ES WHERE THE OPERATING EXPENSES WAS WORKED OUT TO RS.54.54/- PER CASE. AFTER CONSIDERATION OF THE CASE IN ITS ENTIRE TY AND THE RIVAL SUBMISSIONS, IT WOULD BE FAIR AND REASONABLE TO LIMIT THE DISALLOWANCE TO 10% OF THE OPERATING EXPENSES. ACCO RDINGLY, ADDITION TO THAT EXTENT IS UPHELD AND THE APPELLANT PARTLY SUCCEEDS IN THIS GROUND. 12 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 SUCH DISALLOWANCES HAVE ALSO BEEN CONFIRMED IN A.Y. 2008-09 AND 2009-10 BY THE CIT(A)-V. DURING THIS YEAR ALSO, THE EXPENSES PER CASE IS RS.52.23 PER CASE WHICH IS EXCESSIVE AND UN REASONABLE, THEREFORE, I SEE NO REASON TO DEVIATE FROM THE FIND INGS GIVEN BY CIT(A) IN A.Y. 2007-08, 2008-09 AND 2009-10 AND ACC ORDINGLY, THE DISALLOWANCE OF 10% OF OPERATING EXPENSES IS CONFIR MED AS SAME ARE UNREASONABLE AND EXCESSIVE. 16. WHILE DECIDING THE APPEAL HAVING ITA NO. 2340/DEL. /2011 FOR ASSESSMENT YEAR 2007-08, WE HAVE ALREADY OBSERV ED THAT NO BOOKS OF ACCOUNTS AND VOUCHERS WERE PRODUCED BEFORE THE ASSESSING OFFICER AND IN THOSE FACTS AND CIRCUMSTAN CES THE TRIBUNAL RESTORED THIS ISSUE BACK TO THE FILE OF TH E ASSESSING OFFICER. WHEREAS IN THE PRESENT ASSESSMENT YEAR, TH E ASSESSING OFFICER HAS DULY EXAMINED THE BOOKS OF ACCOUNTS PRO DUCED AND PARTICULARLY EXAMINED THE OPERATING EXPENSES (WHICH IS THE ISSUE- IN-DISPUTE BEFORE US). AFTER VERIFICATION OF OPERAT ING EXPENSES, HE HAS NOT POINTED OUT ANY DISCREPANCY IN THE EXPENSES CLAIMED OR IN THE VOUCHERS IN SUPPORT OF BILLS OF EXPENSES. WI THOUT POINTING OUT ANY SUCH DEFECT IN THE BOOKS OF ACCOUNT OR VOUC HERS RELATING TO OPERATING EXPENSES, THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING 10% OF THE EXPENSES ON AD-HOC BASIS BY WAY OF FOLLOWING EARLIER YEARS AND SIMPLY MENTIONING THAT EXPENSES BEING OF UNVERIFIED, UNREASONABLE AND EXCESSIVE, IS NOT J USTIFIED. THE ACTION OF THE LD. CIT(A) IN SIMPLY UPHOLDING THE FI NDING OF THE ASSESSING OFFICER FOLLOWING THE FINDING OF HIS PRED ECESSOR IN EARLIER YEARS, WITHOUT NOTICING THE CHANGE IN FACTS AND CIR CUMSTANCES IN THE YEAR UNDER CONSIDERATION, IS ALSO NOT JUSTIFIED . IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT WITHOU T POINTING OUT ANY DEFECTS IN THE BILLS AND VOUCHERS OF OPERATING EXPENSES, THE AD-HOC DISALLOWANCE AT THE RATE OF THE 10% OUT OF T HE OPERATING 13 ITA NO. 6807/DEL./2015 & ITA NO.2340/DEL./2011 EXPENSES CANNOT BE SUSTAINED. WE ALSO NOTE THAT IN ASSESSMENT YEAR 2007-08, THE ASSESSING OFFICER WHILE VERIFYING THE OPERATING EXPENSES IN COMPLIANCE TO THE DIRECTION OF THE TRIB UNAL, HAS NOT MADE ANY DISALLOWANCE AND ACCEPTED THE CLAIM OF THE ASSESSEE OF THE OPERATING EXPENSES. ACCORDINGLY, THE GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 17. IN THE RESULT, THE APPEAL OF THE REVENUE FOR ASSES SMENT YEAR 2007-08 IS ALLOWED FOR STATISTICAL PURPOSES, WHEREA S THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2011-12 IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2020. SD/- SD/- (SUCHITRA KAMBLE) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 RD DECEMBER, 2020. RK/- (D.T.D.S.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI