E-Comm Opportunities Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-4, Ahmedabad

ITA 689/AHD/2010

• Counselvise Citation: 68920514 RSA 2010
• Duration Of Justice: 3 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 04-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: P P JAIN
• Keywords: Business income; Depreciation; Opportunity of being heard; Bad and doubtful debts; Revenue expenditure
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 689/AHD/2010 ASSESSMENT YEAR :2006-07 E-COMM OPPORTUNITIES P. LTD. 8 TH FLOOR, WHITE HOUSE, PANCHWATI, AMBAWADI, AHMEDABAD V/S . THE ASST. COMMISSIONER OF INCOME TAX CIRCLE-4, AHMEDABAD PAN NO. A A AC E7133R (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI P. P. JAIN, A.R. /BY RESPONDENT SHRI P. L. KUREEL, SR. D.R. /DATE OF HEARING 24.07.2013 /DATE OF PRONOUNCEMENT 27.09.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF CIT(A)-VIII, AHMEDABAD, DATED 27. 11.2009 FOR ASSESSMENT YEAR 2006-07. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.575000/- AS PER PARA 10 OF THE A SSESSMENT ORDER BEING LIABILITY PERTAINING TO SOFTWARE TECHNO LOGY PARK OF INDIA WITHOUT PROPERLY APPRECIATING THE FACTS OF TH E APPELLANT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.611590/- AS PER PARA 11 OF THE A SSESSMENT ORDER PERTAINING TO PURCHASE OF BAND WIDTH FROM EXA TT ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 2 TECHNOLOGY PVT. LTD. WITHOUT PROPERLY APPRECIATING THE FACTS OF THE APPELLANT. 3. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN GRANTING PARTIAL RELIEF AND UPHOLDING THE DISALLOWANCE OF RS .300000/- OUT OF RS.997041/- AS PER PARA 13 OF THE ASSESSMENT ORDER BEING PURCHASE OF CONSUMABLE WITHOUT PROPERLY APPRE CIATING THE FACTS OF THE APPELLANT. 4. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE FINDINGS OF ASSESSING OFFICER TREATING THE PURCHASE OF MACHINERY DURING THE YEAR AMOUNTING TO RS.1306817/- AS NOT GENUINE AND THEREBY WRONGLY DISALLOWING DEPRECIATIO N OF RS.326704/- AS PER PARA 13 OF THE ORDER WITHOUT PRO PERLY APPRECIATING THE FACTS AND IGNORING THE COGENT SUPP ORTING EVIDENCING THE PURCHASE OF MACHINERY. 5. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF BAD-DEBTS OF RS.20812/- AS PER PARA 14(B) OF THE ASSESSMENT ORDER BEING DEBIT AND CREDIT BALANCE S PERTAINING TO BUSINESS WRITTEN OFF / WRITTEN BACK B Y THE APPELLANT WITHOUT PROPERLY APPRECIATING THE FACTS A ND WRONGLY APPLYING THE DECISION OF DHALL ENTERPRISE AND ENGIN EERS P. LTD. TO THE FACTS OF THE APPELLANT. 6. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS I N UPHOLDING THE DISALLOWANCE OF RS.113494/- AS PER PARA 14 (C) OF T HE ORDER BEING TRAVELING EXPENSES WITHOUT PROPERLY APPRECIAT ING THE FACTS. 7. THE LD. CIT (A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.200000/- AS PER PA RA 15 OF THE ASSESSMENT ORDER BEING MISAPPROPRIATION OF CASH FOR ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 3 WHICH LEGAL ACTION HAS BEEN TAKEN BY THE APPELLANT AND IGNORING THE CRIMINAL COMPLAINT OF THE APPELLANT AN D DRAWING ERRONEOUS SUPPORT FROM THE DISALLOWANCE OF RS.10000 /- FOR STOLEN CASH IN A.Y. 01-02, WITHOUT PROPERLY APPRECI ATING THE FACTS AND CIRCUMSTANCES IN AS MUCH AS THAT THE SAID ADDITION FOR A.Y. 01-02 WAS DELETED BY THE CIT(A) AND THEREB Y DRAWING INCORRECT ANALOGY FOR JUSTIFYING DISALLOWANCE. 8. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ALLOWING CORRESPONDING DEDUCTION U/S.80IA ON THE POSITIVE IN COME ON ACCOUNT OF ADDITIONS SUSTAINED WHILE COMPUTING BUSI NESS INCOME FOR WHICH NECESSARY DISCLOSURE WAS MADE IN T HE RETURN OF INCOME AND DEDUCTION WAS NOT CLAIMED ON ACCOUNT OF LOSS. 2. THE FIRST GROUND OF APPEAL IS AGAINST UPHOLDING THE DISALLOWANCE OF RS.5,75,000/- BEING LIABILITY PERTAINING TO SOFTWAR E TECHNOLOGY PARK OF INDIA. THE A.O. OBSERVED THAT THE ASSESSEE HAD CLAIMED PAY MENT OF RS.5,75,000/- TO THE SOFTWARE TECHNOLOGY PARK OF INDIA, A GOVERNM ENT OF INDIA ENTERPRISE ON ACCOUNT OF BANDWIDTH CHARGES. THE A.O. GAVE REA SONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. THE ASSESSEE FILED A CO PY OF ORDER OF ARBITRAL TRIBUNAL. THE A.O. OBSERVED THAT IN LEDGER ACCOUNT , THE APPELLANT HAD MADE ENTRIES OF PURCHASES OF BANDWIDTH FROM VIDESH SANCH AR NIGAM LTD.AND EXATT TECHNOLOGIES PVT. LTD. THE ASSESSEE COMPANY HAD ENCLOSED A COPY OF ARBITRATION AWARD DATED 20 TH JULY 2006. ACCORDING TO THIS AWARD, THE CLAIM OF THE ASSESSEE COMPANY WAS NOT ONLY REJECTED BUT I T WAS DIRECTED TO MAKE PAYMENT OF RS.5,75,000/- BEING COUNTER CLAIM MADE B Y RESPONDENT SOFTWARE TECHNOLOGY PARK OF INDIA, GANDHINAGAR, A GOVERNMENT OF INDIA UNDERTAKING ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 4 WITHIN ONE MONTH FROM THE DATE OF AWARD. AS PER A. O., THIS LIABILITY HAD BEEN CRYSTALLIZED IN A.Y. 07-08 AND NOT IN 06-07. THUS, ASSESSEES CLAIM WAS REJECTED BY THE A.O. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD CONFIRMED THE ADDI TION BY OBSERVING AS UNDER: 6.2 I HAVE CONSIDERED THE FACTS AND SUBMISSION OF THE LD. A.R. CAREFULLY. THERE IS NO DISPUTE ABOUT THE FACT THAT THE LIABILITY TO MAKE PAYMENT OF RS.5,75,000/- FOR BANDWIDTH CHARGES DID ARISE AFTER THE CLOSING OF THE FINANCIAL YEAR UNDER REFER ENCE. THEREFORE, UNDER THESE CIRCUMSTANCES THERE IS NO JUSTIFICATION FOR CLAIMING SUCH EXPENSE FROM THE INCOME OF THE RELEVANT PERIOD. IN VIEW OF THIS, THE DISALLOWANCE MADE BY THE A.O. IS HEREBY CONFIRMED. 4. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT CONTENDED THAT THERE WAS A PAYMENT TO SOFTWARE TECH NOLOGY PARK OF INDIA OF RS. 5,75,000/- DUE TO AWARD OF ARBITER, THE ARBITRA TION WAS STARTED IN F.Y. 05- 06 ITSELF AND HEARING WAS GOING ON. THE ASSESSEE G ATHERED THAT ULTIMATE ANALYSIS IT HAS TO PAY IN PURSUANT TO AWARD TO THE SOFTWARE TECHNOLOGY PARK OF INDIA. THE AWARD WAS PASSED ON 20 TH JULY, 2006 AND ACCOUNTS WERE FINALIZED AND AUDITED ON 12 TH SEPTEMBER, 2006 I.E. AFTER THE DATE OF ORDER. AS PER ACCOUNTING STANDARD PRESCRIBED BY THE ICAI U/S. 145 OF THE IT ACT, THE ASSESSEE IS REQUIRED UNDER THE PRINCIPLE OF PRUDENC E TO ACCOUNT FOR ALL THE NON LIABILITY EVEN THOUGH THE SAID LIABILITY CANNOT BE ASCERTAINED WITH CERTAINTY. ACCORDINGLY, THE APPELLANT HAD DEBITED THE PAYMENT OF RS.5.75 LACS IN THE P&L ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 5 ACCOUNT AND CLAIMED AS THE EXPENDITURE. ALTERNATIV ELY, IT WAS ALSO ARGUED THAT THIS EXPENDITURE IS NOT ALLOWED IN THE YEAR UNDER C ONSIDERATION, THE SAME MAY BE ALLOWED IN THE YEAR 07-08. AT THE OUTSET, LD. SR. D.R. VEHEMENTLY RELIED UPON THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ARBITRATION AWARD WAS PASSED ON 20 TH JULY,2006. THEREAFTER, THE LIABILITY HAS BEEN CRYSTALLIZED AND PERTAINED TO A. Y. 07-08. THE GENUINENESS OF THE LIABILITY HAS NOT BEEN DOUBTED BY THE LOWER AUTHORITIES. THEREFORE, THE ADDITION CONFIRMED BY THE CIT(A) UNDER YEAR CONSIDE RATION IS UPHELD. HOWEVER, THIS CAN BE ALLOWED AS AN EXPENDITURE IN Y EAR 07-08 BY THE A.O. AT THE TIME OF APPEAL EFFECT ORDER. 6. THE SECOND GROUND OF APPEAL IS AGAINST UPHOLDING THE DISALLOWANCE OF RS. 6,11,590/- WITH REGARD TO PURCHASE OF BANDWIDTH FROM EXATT TECHNOLOGY PVT. LTD. DURING THE ASSESSMENT PROCEEDING, THE A. O. NOTED THAT THE APPELLANT HAD CLAIMED PURCHASE OF BANDWIDTH FROM VS NL AND EXATT TECHNOLOGIES PVT. LTD. IN ORDER TO VERIFY THE GENUI NENESS OF THE TRANSACTION WITH EXATT TECHNOLOGIES PVT. LTD., THE A.O. CARRIED OUT THE EXERCISE OF VERIFICATION BY ISSUING NOTICE U/S. 133(6) OF THE I T ACT ON THE ADDRESS GIVEN BY THE APPELLANT. HOWEVER, THAT NOTICE RETURNED BACK TO THE DEPARTMENT WITH REMARKS FROM THE POSTAL AUTHORITY LEFT. IN VIEW OF THIS, THE A.O. DIRECTED THE APPELLANT TO PROVE THE GENUINENESS OF SUCH PURCHASE FROM THE PARTIES IN RESPONSE TO SUCH QUERY MADE BY THE A.O. THE APPELL ANT FILE A COPY OF LEDGER ACCOUNT MAINTAINED IN ITS BOOKS OF ACCOUNT OF THAT PARTY AND CLAIMED THAT ALL ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 6 THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL ONLY . THE A.O., HOWEVER, DID NOT FIND THE STATEMENTS OF THE APPELLANT SATISF ACTORY AND TREATED THE PURCHASE FROM THAT PARTY AS NON GENUINE AND ADDED T HE AMOUNT OF RS.6,11,590/- TO THE INCOME OF THE APPELLANT. THE CIT(A) HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER: 7.4 I HAVE CONSIDERED THE FACTS AND SUBMISSION OF THE LD. A.R. CAREFULLY. THERE IS NO DISPUTE ABOUT THE FACT THAT THE CONFIRMATION ACCOUNT FROM THE PURCHASING PARTY WAS NOT FORTHCOMI NG DURING THE ASSESSMENT PROCEEDINGS EVEN THOUGH A NOTICE U/S 133 (6) OF THE ACT WAS ALSO ISSUED BY THE A.O. ON THE ADDRESS PROVIDED BY THE APPELLANT. THE A.O. ALSO GAVE OPPORTUNITY TO THE A PPELLANT TO SUBSTANTIATE ITS CLAIM ONCE THE DEPARTMENTS NOTICE WAS RECEIVED BACK UNSERVED TO THE ALLEGED PARTY ON THE GIVEN ADD RESS. IN THESE CIRCUMSTANCES, IT WAS INCUMBENT UPON THE APPELLANT TO PROVE GENUINENESS OF SUCH PURCHASES BY BRINGING NECESSARY CONFIRMATION AND OTHER DOCUMENTS ON RECORD. SINCE THE ONUS CAST UPON THE APPELLANT WAS NOT DISCHARGED PROPERLY THE A.O. WAS JUSTIFIED IN TREATING THE PURCHASES UNDER REFERENCE AS NON GENUI NE. IN VIEW OF THIS, THE ADDITION MADE BY THE A.O. IS HEREBY CONFI RMED AND THE GROUND OF THE APPELLANT AGAINST THE SAME IS HEREBY DISMISSED. 7. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT CONTENDED THAT DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAD PURCHASED BANDWIDTH COSTING 611590/- FOR WHICH PA YMENTS WERE MADE BY CHEQUE AND NO AMOUNT WAS OUTSTANDING AT THE CLOSE O F THE YEAR. THE LD. A.O. DISALLOWED THESE EXPENSES ONLY THE REASONS THAT NOT ICE ISSUED U/S. 133(6) COULD NOT BE SERVED BY THE POSTAL AUTHORITIES. THE APPELLANT HAD FILED COPY OF ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 7 LEDGER ACCOUNT OF THE SAID COMPANY. IN ITS BOOKS, THE PAYMENTS WERE MADE THROUGH CHEQUE FROM WHICH THE PAYMENT CAN BE VERIFI ED. THIS PURCHASE HAS RESULTED INTO SALE WHICH HAS NOT BEEN DISPUTED. HE FURTHER ARGUED THAT HE HAS DISCHARGED HIS ONUS AND BURDEN HAS BEEN SHIFTED ON THE A.O. TO REVERT THE SAME AND REQUESTED TO DELETE THE ADDITION. AT THE OUTSET, LD. SR. D.R. VEHEMENTLY RELIED UPON THE ORDER OF THE CIT(A) AND ARGUED THAT NOTICE ISSUED U/S. 133(6) HAD BEEN RETURNED BACK BY THE POSTAL AU THORITIES WITH REMARK LEFT. THEREAFTER, THE A.O. HAS AGAIN GIVEN REASO NABLE OPPORTUNITY TO ADDUCE THE EVIDENCES TO CLAIM THE EXPENSES AS GENUINE. BU T, HE SIMPLY FILED THE COPY OF ACCOUNT AND ARGUED THAT PAYMENTS WERE MADE THROU GH ACCOUNT PAYEE CHEQUE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT APPEARS THAT THESE PAYMENTS WERE MADE T O THE VSNL AND EXATT TECHNOLOGIES PVT. LTD. APPEARS TO BE PUBLIC LIMITED COMPANY. IN THE INTEREST OF JUSTICE, THIS ISSUE IS SET ASIDE TO THE A.O. AND DIRECTED TO VERIFY THE PAYMENTS FROM THE BANK ACCOUNT AND ASCERTAIN THE AC TUAL RECEIPTS OF THIS PAYMENT, ACCORDINGLY, TAKE DECISION AS PER LAW. 9. THE THIRD GROUND IS AGAINST GRANTING PARTIAL REL IEF AND UPHOLDING THE DISALLOWANCE OF RS. 3 LACS OUT OF RS. 997041/-. TH E PURCHASE OF CONSUMABLE AMOUNTING TO RS.9,97,041/-. DURING ASSESSMENT PROC EEDING, THE A.O. ASKED THE APPELLANT TO PROVE THE GENUINENESS TO THE PURCH ASE OF CONSUMABLE GOODS AMOUNTING TO RS.9,97,041/-. HE ISSUED SHOW CAUSE N OTICE TO THE APPELLANT VIDE LETTER DATED 14 TH AUGUST, 2008 AND INCLUDING THERE WITH THE DETAILS OF SUCH ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 8 EXPENSES AS PER ANNEXURE N OF THE LETTER. THESE DETAILS ARE MENTIONED BY THE A.O. IN PARA 12 OF THE ASSESSMENT ORDER. HE FU RTHER NOTED THAT THE APPELLANTS BUSINESS ACTIVITIES ARE TO PROVIDE I.T. ENABLED SERVICE, BPO SERVICE, BROADBAND, NET-WORK AND INTERNET SERVICE. HE OBSERVED THAT THE NETWORK AND OTHER ITEMS USED FOR TRANSMITTING THE S IGNALS WERE CAPITAL IN NATURE. THE A.O. ALSO OBSERVED THAT SIMILAR ISSUE HAD COME FOR CONSIDERATION IN A.Y. 2001-02 WHEN SUCH EXPENSES WERE CLAIMED BY THE APPELLANT FOR THE FIRST TIME. THESE EXPENSES WERE HELD BY THE A.O. I N THE A.Y. 01-02 IS CAPITAL IN NATURE AND ONLY 20% DEPRECIATION ON THEM WAS ALL OWED. THE A.OS. ACTION WAS UPHELD BY THE CIT(A) VIDE ORDER DATED 29.02.200 6, WHEREIN HE HAD SIMPLY MODIFIED THE ORDER OF A.O. DIRECTING TO ALLOW DEPRE CIATION @ 25% APPLICABLE TO PLANT AND MACHINERY. THE A.O. FURTHER NOTED THAT S INCE THE APPELLANT ON THE VERGE OF CLOSING IT BUSINESS AND ITS SALES PROCEEDS FROM INTERNET SERVICES WERE REDUCED TO 38%. HE CARRIED OUT THE ENQUIRIES WITH REGARD TO CLAIM OF EXPENSES IN NATURE OF REVENUE AND CAPITAL. AS A RE SULT OF THESE INQUIRIES, HE DETECTED DISCREPANCIES IN THE ACCOUNTS PERTAINING T O SEVEN PARTIES AS MENTIONED BY HIM ON PAGE 8 OF THE ASSESSMENT ORDER. HE NOTED THAT THE NOTICE ISSUED U/S. 133(6) TO EXATT TECHNOLOGY P. LT D. COULD NOT BE SERVED. FURTHER, THE INFORMATION RECEIVED FROM CRUX TECHNOL OGY, KRISHNA ENTERPRISES, AEGIS INFOSYS & JAYTRONICS WERE NOT MATCHING WITH T HE ACCOUNTS MAINTAINED BY THE APPELLANT. HE ACCORDINGLY GRANTED OPPORTUNI TY TO THE APPELLANT TO EXPLAIN ITS POSITION IN THIS REGARD. HE ALSO ASKED THE APPELLANT TO PRODUCE THE AUTHORIZED PERSONS FROM THESE PARTIES FOR VERIFICAT ION OF ACCOUNTS. SINCE, THE ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 9 APPELLANT DID NOT COMPLY WITH THE REQUIREMENTS OF T HE A.O., HE TREATED THE EXPENSES TO THE TUNE OF RS.9,97,041/- AS UNEXPLAINE D AND ADDED THE SAME IN THE INCOME OF THE ASSESSEE. 10. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE A SSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAS CONFIRMED THE ADDI TION OF RS. 3 LACS OUT OF DISALLOWANCE OF RS. 9,97,041/-. THE OPERATION PORT ION OF THE ORDER IS AS UNDER: 8.3 I HAVE CONSIDERED THE FACTS AND SUBMISSION OF THE LD. A.R. CAREFULLY. THERE IS NO DISPUTE ABOUT THE FACT THAT THE APPELLANTS VOLUME OF BUSINESS DURING THE RELEVANT PERIOD REDUC ED TO 38% AS COMPARED TO PRECEDING YEAR, YET IT CANNOT BE IMAGIN ED THAT IT COULD CARRY OUT WITHOUT INCURRING DAY TO DAY EXPENSES. M OST OF THE EXPENSES UNDER REFERENCE HAVE BEEN INCURRED TO FULF ILL THE DAY TO DAY REQUIREMENTS OF THE BUSINESS. SINCE, THE APPELLANT HAS NOT BROUGHT ON RECORD COMPLETE EVIDENCE IN SUPPORT OF SUCH EXPE NSES THEIR ALLOWABILITY IS TO BE DECIDED KEEPING IN VIEW THE S URROUNDING FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, AFTER CO NSIDERING THE TOTALITY OF THE FACTS IT WOULD MEET THE ENDS OF JUS TICE IF 30% OF SUCH EXPENSES ARE DISALLOWED. IN VIEW OF THIS, A SUM OF RS.3,00,000 OUT OF THE DISALLOWANCE OF RS.9,97,041/- IS HEREBY CONF IRMED. THE APPELLANT WILL GET RELIEF OF RS.6,97,041/- ACCORDIN GLY. 11. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT ARGUED THAT THE TOTAL MATERIAL COST WAS INCURRED DURING TH E YEAR AT RS.29,13,823/- AS AGAINST SALES OF 5250133/-. THIS MATERIAL COST OF BANDWIDTH RS.19,16,782/- AND RS.9,97,011/- COST OF CONSUMABLE. THE ASSESSEE COULD NOT PRODUCE THE PARTIES FOR VERIFICATION BEFORE THE A.O., BUT SOME OF THE ENTRIES HAD BEEN VERIFIED BY THE A.O. FROM THE BANK STATEMENT AS CON CLUSIVE EVIDENCE IN ITSELF. ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 10 AS PER REQUIREMENT OF THE A.O., THE APPELLANT HAD S UBMITTED ALL THE DETAILS OF CONSUMER SHOWING ITEM WISE PURCHASE WITH COPY OF LE DGER ACCOUNT AND BILLS OF MAJOR PURCHASE, WHICH WAS REPRODUCED BY THE CIT( A) ALSO IN HIS APPELLATE ORDER. THE ASSESSEE HAS RECONCILED THE ACCOUNT IN CASE OF M/S. AEGIS INFOSYS & COSMO TRADERS. THE A.O. REFERRED THE ASSESSMENT ORDER FOR A.Y. 2001-02, THERE IS NO RELEVANCY WITH THE ASSESSMENT FOR THE Y EAR 06-07 THAT WAS THE FIRST YEAR OF THE ASSESSEE COMPANY BUT LATER FIND IT HAS BEEN ALLOWED AS REVENUE EXPENDITURE. AT THE OUTSET, LD. SR. D.R. VEHEMENTL Y RELIED UPON THE ORDER OF THE CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE LD. A.O. ISSUED NOTICE TO THE VARIOUS P ARTIES, THERE WAS NO RESPONSE FROM THE SUPPLIER OF CONSUMABLE ITEM. THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES FOR VERIFICATION DURING THE COU RSE OF ASSESSMENT PROCEEDING, WHICH WERE NOT PRODUCED. LD. A.RS. AR GUMENT ON THIS POINT IS SIMILAR AS BEFORE THE CIT(A). NO NEW EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE. LD. A.O HAS DOUBTED THE GENUINENE SS OF THIS TRANSACTION. THEREFORE, IN THE INTEREST OF JUSTICE, THIS ISSUE I S SET ASIDE TO THE A.O. FOR DE NOVO AND DIRECTED TO GIVE REASONABLE OPPORTUNITY OF THE ASSESSEE AND TAKE DECISION AS PER LAW. 12. GROUND NO.4 IS AGAINST UPHOLDING THE FINDING OF THE ASSESSING OFFICER TREATING THE PURCHASE OF MACHINERY DURING THE YEAR AMOUNTING TO RS.13,06,817/- AS NOT GENUINE AND THEREBY DISALLOWE D DEPRECIATION OF RS.3,26,704/-. DURING THE ASSESSMENT PROCEEDING, T HE A.O. ASKED THE ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 11 APPELLANT TO PRODUCE SUPPLIER OF THE GOODS FOR CROS S VERIFICATION AS THERE WERE DISCREPANCIES EITHER IN THEIR ACCOUNTS OR THEIR CON FIRMATION WAS NOT FORTHCOMING. IN RESPONSE TO THE QUERIES RAISED BY THE A.O., THE APPELLANT FILED A REPLY EXPLAINING ITS POSITION. THESE REPLIES ARE DISCUSSED BY THE A.O. ON BOTTOM OF PAGE 9,10 & 11 OF THE ORDER. HE OBSERVED FROM THE REPLIES OF THE A.O. THAT NO NEW FACT WAS BROUGHT TO PROVE THE PURC HASES UNDER REFERENCE. HE FURTHER REFERRED TO THE INQUIRIES MADE BY HIM TH ROUGH HIS INSPECTOR DURING WHICH THE ANTECEDENTS OF KRISHNA ENTERPRISE AND CRU X TECHNOLOGY COULD NOT BE PROVED. HE ACCORDINGLY TREATED THE PURCHASE OF MACHINERY AMOUNTING TO RS. 13,06,817/- AS NOT BEEN PROVED AND DISALLOWED T HE DEPRECIATION ON THE SAME AT RS.3,26,704/- ACCORDINGLY. 13. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE A SSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD DISMISSED THE APPE AL BY OBSERVING AS UNDER: 9.2 I HAVE CONSIDERED THE FACTS AND SUBMISSION OF THE LD. A.R. CAREFULLY. IT IS SEEN THAT THE LD. A.R HAS REPEATE D THE ARGUMENTS WHICH WERE MADE BEFORE THE A.O. HOWEVER, HE HAS NO T ADDUCED ANYTHING ADDITIONAL TO PROVE THE GENUINENESS OF PUR CHASES UNDER REFERENCE SINCE, A.O. HAS REFERRED THE ENQUIRIES CA RRIED OUT BY HIM THROUGH HIS INSPECTOR AS A RESULT OF WHICH THE EXIS TENCE OF SOME OF THE PARTIES WAS IN DOUBT. THEREFORE, UNDER THESE C IRCUMSTANCES, I DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE A.O. IN VIEW OF THIS, THE DISALLOWANCE OF DEPRECIATION MADE BY HIM IS HEREBY CONFIRMED. ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 12 14. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT ARGUED THAT THESE WERE GENUINE PURCHASE. THE DETAILS OF P URCHASE HAVE BEEN SUBMITTED BEFORE THE A.O. AS WELL AS CIT(A). THE LD. COUNSEL ALSO ENCLOSED THE COPY OF REPLY TO THE A.O. ON THIS ISSUE ON PAGE NO.148 TO 149. THE COPY OF ALL BILLS AT PAGE NO.151 TO 158, WHICH SHOWS THAT A SSESSEE HAS PURCHASED THE PLANT AND MACHINERY FROM THESE PARTIES. THE APPELL ANT ALSO GOT VERIFIED ALL THESE PAYMENTS FROM THE BANK ACCOUNT AND PROVED THA T THESE EXPENSES ARE GENUINE AND REQUESTED TO DELETE THE ADDITION. AT T HE OUTSET, LD. SR. D.R. AGAIN RELIED UPON THE ORDER OF THE CIT(A). AFTER CONSIDE RING THE FACTS OF THE CASE, PROVIDING THE COPY OF PURCHASE BILL OF THE PLANT AN D MACHINERY ARE NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE ADDITION OF ASSETS DURING THE YEAR. THE APPELLANT HAD TO PROVE THE MODE OF PAYMENT AND WHICH WAS NOT VERIFIED BY BOTH THE LOWER AUTHORITIES FROM THE BANK ACCOUNT THAT THESE AMOUNTS DEBITED IN THE BANK ACCOUNT ACTUALLY CLEARED TO THE SE PARTIES AS ASSESSEE COULD NOT PRODUCE THESE PARTIES FOR VERIFICATION AT THE TIME OF ASSESSMENT ORDER. THEREFORE, IN THE INTEREST OF JUSTICE, THIS ISSUE IS SET ASIDE TO THE A.O. TO GIVE ONE MORE OPPORTUNITY TO PROVE THIS TRANSACTION GENUINE. ACCORDINGLY, WE SET ASIDE THIS GROUND OF APPEAL TO THE A.O. 15. GROUND NO.5 IS AGAINST UPHOLDING THE DISALLOWAN CE OF BAD DEBTS OF RS.20,812/-. THE A.O. OBSERVED THAT ASSESSEE HAD C LAIMED BAD DEBTS OF RS.20,812/- AND SUNDRY BALANCES WRITTEN OFF. THE A .O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE BUT NO SAT ISFACTORY EXPLANATION WAS GIVEN BEFORE HIM. THUS, HE MADE ADDITION OF RS.20, 812/-. THE LD. CIT(A) ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 13 CONFIRMED THIS ADDITION BY OBSERVING THE HONBLE GU JARAT HIGH COURT DECISION IN CASE OF DHALL ENTERPRISE AND ENGINEERS PVT. LTD. VS. CIT 29 5 ITR 481, AS CONDITION LAID DOWN BY THE HONBLE GUJARAT HIGH COU RT IN ABOVE CASE HAS NOT BEEN FULFILLED BY THE APPELLANT. THE ASSESSEE ARGU ED THAT THE POSITION ON BAD DEBT IS VERY CLEAR AND HONBLE SUPREME COURT IN CAS E OF TRF LTD. V CIT (2010) 323 ITR 397 (SC), LAW IS SETTLED AND ASSESSEE HAS WRITTEN OFF THIS BA D DEBT IN THE ACCOUNT ITSELF SUFFICIENT TO CLAIM BAD DEBT WHICH HAS BEEN DONE IN THE ACCOUNT. THUS, HE REQUESTED TO ALLOW THE BAD D EBT. AT THE OUTSET, LD. SR. D.R. RELIED UPON THE ORDER OF CIT(A). AFTER CONSID ERING THE FACTS OF THE CASE, THE BAD DEBTS HAD BEEN WRITTEN OFF BY THE APPELLANT IN THE BOOKS OF ACCOUNT U/S. 36(1)(VII) OF THE ACT AND IS ALLOWABLE DEDUCTI ON. THUS, THIS ADDITION IS CONFIRMED BY THE CIT(A), IS REVERSED. ACCORDINGLY, WE ALLOW THE APPEAL ON THIS GROUND. 16. GROUND NO.6 IS AGAINST UPHOLDING THE DISALLOWAN CE OF RS.1,13,494/- BEING TRAVELING EXPENSES. DURING THE RELEVANT PERI OD, THE APPELLANT CLAIMED TRAVELING EXPENSES TO THE TUNE OF RS.2,16,669/- OUT OF WHICH RS.1,13,494/- CONSISTED OF FOREIGN TRAVEL. THE A.O. GAVE REASONA BLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE BUT NO DETAILS IN RESPECT OF MR . AMIT AGRAWAL, WHO TRAVELLED FOREIGN, SUBMITTED BEFORE THE A.O. THUS, HE MADE ADDITION OF RS.1,13,494/-. THE CIT(A) ALSO CONFIRMED THE ADDIT ION AS APPELLANT DID NOT FILE THE DETAILS OF THE FOREIGN TRAVEL BEFORE HIM AND NO T EXPLAINED THE BUSINESS EXPEDIENCY. LD. COUNSEL FOR THE APPELLANT ARGUED T HAT THIS EXPENDITURE WAS ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 14 INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOS E AND FILED THE DETAILS AT PAGE NOS. 253 TO 256 OF THE PAPER BOOK. HE ARGUED THAT THE DIRECTOR OF THE COMPANY UNDERTOOK THE FOREIGN TRAVEL TO EXPLORE THE EXISTENCE AS WELL AS FUTURE POSSIBILITY OF BUSINESS. THERE IS NO NEED T O PROVE THAT THERE MUST BE SOME AGREEMENTS OR ANY BUSINESS LATER ON DONE WITH THE FOREIGN PARTIES. LD. SR. D.R. RELIED UPON THE ORDER OF CIT(A). THE DIRE CTOR OF COMPANY HAD UNDERTAKEN FOREIGN TRAVEL FOR THE BUSINESS PURPOSES AS CLAIMED BY THE ASSESSEE. HE SUBMITTED ALL THE DETAILS OF THE EXPE NDITURE BEFORE THE LOWER AUTHORITIES. THE HONBLE GUJARAT HIGH COURT IN CAS E OF AMBICA MILLS LIMITED VS. CIT, (1964) 54 ITR 167 (GUJ), HELD THAT IF THE EXPENDITURE INCURRED WITH A VIEW TO EARN GREATER PROFIT IS ALLOWABLE DEDUCTION. THEREFORE, IT IS ALLOWABLE EXPENDITURE. ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT(A). 17. GROUND NO.7 IS AGAINST UPHOLDING THE DISALLOWAN CE OF RS.2,00,000/- ON ACCOUNT OF MISAPPROPRIATION OF CASH FOR WHICH LEGAL ACTION HAS BEEN TAKEN BY THE APPELLANT. THE APPELLANT CLAIM RS. 2 LACS UNDE R THE THE HEAD MISAPPROPRIATION OF CASH FROM THE BANK ACCOUNT ALLE GEDLY MADE BY ONE OF ITS EMPLOYEES. THE A.O. NOTED THAT ON THE COMPLAINT MA DE BY THE APPELLANT WITH THE POLICE DEPARTMENT, THEY RECOVERED RS.1,22,000/- FROM THE POSSESSION OF THE ACCUSED EMPLOYEE. SINCE, NO CERTIFICATE FROM T HE POLICE DEPARTMENT WAS FILED BY THE APPELLANT BEFORE THE A.O., HE DISALLOW ED THE CLAIM ACCORDINGLY. LD. CIT(A) HELD THAT THE APPELLANT DID NOT FILE ANY CERTIFICATE FROM THE POLICE DEPARTMENT REGARDING NON RECOVERABILITY OF ALLEGED MISAPPROPRIATED AMOUNT BY ITS ONE OF THE EMPLOYEES. THEREFORE, UNDER THES E CIRCUMSTANCES, THE CLAIM ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 15 MADE BY THE APPELLANT FOR THE RELEVANT PERIOD WAS I MMATURED AND HAS RIGHTLY BEEN DISALLOWED BY THE A.O. FROM THE INCOME OF THE RELEVANT PERIOD. LD. COUNSEL ARGUED THAT THE FIR HAS BEEN LODGED WITH TH E POLICE DEPARTMENT. THE CRIMINAL CASE IS PENDING BEFORE THE COURT AND U NLESS MATTER IS DECIDED AND THE MONEY IS RECEIVED BY THE ASSESSEE THROUGH C OURT ORDER THE QUESTION OF DISALLOWANCE PENDING FINALIZATION OF CRIMINAL CA SE SHOULD NOT ARISE. HE ALSO SUBMITTED A COPY OF THE NEWSPAPER REPORT AND IT IS REVEALED THAT ACCUSED HAD GIVEN RS. 66,000/- & 55,000/- TO THE RELATIVE. THE IDENTICAL ISSUED WAS IN A.Y. 01-02, WHICH HAS BEEN ALLOWED BY THE CIT(A). HE HA S DRAWN OUR ATTENTION ON PAGE NOS. 256 TO 261 WHICH INCLUDES COPY OF FIR PAP ER CUTTING AND REQUESTED TO ALLOW THE APPEAL IN FAVOUR OF THE ASSESSEE. AT THE OUTSET, LD. SR. D.R. HEAVILY RELIED UPON THE ORDER OF THE CIT(A). AFTER CONSIDERING THE FACTS OF THE CASE AS REVEALED FROM THE COPY OF FIR THAT THERE WA S MISAPPROPRIATION OF FUND FOR RS. 2 LACS AND PLACED THE EVIDENCES ON RECORD. HE HAS ESTABLISHED THE MISAPPROPRIATION OF FUND BY THE EMPLOYEES. VARIOUS COURTS HAVE HELD THAT IT IS ALLOWABLE EXPENSES, ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT(A). 18. GROUND NO.8 IS AGAINST NOT ALLOWING CORRESPONDI NG DEDUCTION U/S. 80IA ON THE POSITIVE INCOME ON ACCOUNT OF ADDITIONS SUST AINED WHILE COMPUTING BUSINESS INCOME. THE A.O. DID NOT ALLOW THE 80I DE DUCTION ON ADDITION MADE BY HIM OF RS.28,29,661/-. LD. A.O. DID NOT GIVEN A NY FINDING ON IT. THE CIT(A) CONFIRMED THIS GROUND BY OBSERVING THAT THIS IS NOT DERIVED INCOME FROM THE MANUFACTURE ACTIVITY. THUS, HE CONFIRMED THE ADDIT ION. WE SET ASIDE THIS ITA NO. 689/AHD/10 A.Y. 06-07 PAGE 16 ISSUE TO THE A.O. AND DIRECTED HIM TO VERIFY THE CO NTENT OF THE ASSESSEE AND TAKE DECISION AS PER LAW. 19. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 27.09.2013 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;