M/s Amit Industries, Pilibhit V. Income Tax Officer-2(4), Pilibhit

ITA 693/LKW/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6022 (ITAT-LUCKNOW)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 02-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: YASHVENDRA SINGH
• Keywords: Principle of natural justice; Rule of consistency; Notional interest; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 693/LKW/2017 ASSESSMENT YEAR: 2013 - 14 M/S AMIT INDUSTRIES GOLA ROAD BILSANDA, DIS TT. PILIBHIT V. INCOME TAX OFFICER 2(4) PILIBHIT T AN /PAN : AACFA9335N (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI SHUBHAM RASTOGI, C.A. RESPONDENT BY: SHRI YASHVENDRA SINGH, D.R. DATE OF HEARING: 25 07 201 8 DATE OF PRONOUNCEMENT: 27 07 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A), BAREILLY DATED 17/8/2017 ON THE FOLLOWING GROUNDS OF APPEAL: - ( 1) THE LD . C.I.T. (A), BAREILLY ERRED ON FACTS AND IN LAW IN CONFIR MING THE DISALLOWANCE OF COMMISSION RS. 3,00, 000 / - PAID TO MR. SADIIN AGARWAL AND ASHISH KUMAR AS BOTH ARE PERSON SPECIFIED U/S 40A(2 ) (B) OF I. T. ACT, WITHOUT APPRECIATING THAT COMMISSION WAS PAID AS PER BUSINESS NEED ON A COMPETITIVE RATES TOWARDS PURCHA SE OF PADDY. (1.1) THE LD . C.I.T. (A) DID NOT APPRECIATED THAT LD. A. 0. HAS RIOT DOUBTED THE IDENTITY, PAYMENTS AND BUSINESS NEEDS AND OTHER RELATED DETAILS PRODUCED / SUBMITTED, HOWEVER, DISALLOWED THE SAME ON TECHNICAL REASONS. ITA NO. 693/LKW/2017 PAGE 2 OF 11 (2) THE LD. C.I.T. (A) ERRED ON - FACTS AND IN LAW IN CONFIRMING ADDITION OF RS. 5,44,252 / - BEING NOTIONAL INTEREST COMPUTED ON AMOUNT RECEIVABLE FROM M/S S. L. AGARWAL & SONS, WITHOUT APPRECIATING THAT SAID FIRM IS OUR TRADE DEBTOR, AS SALES AND PURCHASES WERE MADE WITH THI S FIRM IN EARLIER YEAR, DURING THE YEAR AND IN SUBSEQUENT YEAR. NO ADDITION HAS BEEN MADE BY LD. A. 0. ON THE SAME SETS OF FACTS IN SUBSEQUENT YEARS. (2.2) THE LD. C.I.T. (A) DID NOT APPRECIATED THE EVIDENCES, BEING COPY OF ACCOUNTS AND RELATED DETAILS F ILED, WHERE, IT IS EVIDENT THAT M/S S. L. AGARWAL & SONS IS HAVING TRADING LICENCE IN MANDI SAMITI AND REGISTERED WITH COMMERCIAL DEPARTMENT AND DURING THE YEAR PURCHASES AND SALES WERE MADE. THE LD, A. 0. ALSO ACCEPTED THESE TRADING TRANSACTIONS DURING TH E YEAR AND IN SUBSEQUENT YEARS, (3) THE LD. C.I.T. (A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.2,00,000/ - BEING SUBSIDY RECEIVED TOWARDS COST OF NEW MACHINERY OF RICE MILL NAMELY 'DEHUSKER & RICE WH I TENE R ' AS PER STATE GOVERNMENT SCH EME. (3.1) THE LD. C.I.T, (A), DID NOT APPRECIATE THAT ASSESSEE HAS RIGHTLY SHOWN IT IN ACCOUNTS AS 'CURRENT LIABILITY' BECAUSE AS PER STATE GOVT. RULES SUBSIDY HAS TO BE REFUNDED, IF UNIT IS CLOSED WITHIN FIVE YEARS FROM THE RECEIPT OF SUBSIDY. (3.2) T HAT AS PER SEC. 43(1 ) EXPLANATION 10 - 'SUBSIDY TOWARDS COST OF MACHINERY IS DEDUCTIBLE FROM THE COST OF MACHINERY' ACCORDINGLY THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE. (4) THE LD. C.I.T. (A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE AD - HOC DISALLOWANCE RS,66,540/ - BEING 10% OF WAGES, GENERATOR EXPENSES, MACHINERY EXPENSES, MISCELLANEOUS EXPENSES WITHOUT POINTING OUT ANY SPECIFIC INSTANCE OF DISALLOWANCES AND WITHOUT APPRECIATING THAT NO DISALLOWANCE ITA NO. 693/LKW/2017 PAGE 3 OF 11 SHOULD BE MADE LO THIS REGARD, AS THE BOOKS OF ACCOUNTS ARE DULY AUDITED. (5) THE ADDITION UPHELD / CONFIRMED BY LD. C.I.T. (A) ARE HIGHLY EXCESSIVE, CONTRARY TO THE FACTS, LAW AND PRINCIPLE OF NATURAL JUSTICE AND WITHOUT PROVIDING SUFFICIENT TIME AND OPPORTUNITY TO HAVE ITS SAY ON THE RE ASONS RELIED UPON BY HIM. 2 . THE FACTS WITH REGARD TO GROUNDS NO.1 AND 1.1 ARE THAT THE ASSESSEE FIRM IS RUNNING RICE INDUSTRY AND HAS TO PURCHASE PADDY FROM THE FARMERS AT MANDI. FOR PURCHASING OF PADDY, IT IS VERY IMPORTANT TO PHYSICALLY INSPECT AND ASCERTA IN THE QUALITY OF PADDY, SINCE ON THE BASIS OF THE PADDY, THE QUALITY OF MANUFACTURED RICE DEPENDS. ASSESSEE IS REGULARLY PURCHASING PART OF THE PADDY THROUGH ITS BROKER SHRI ASHISH KUMAR & SACHIN KUMAR AGARWAL. BOTH OF THE BROKERS HAVE GOOD EXPERIENCE IN ASCERTAINING THE QUALITY OF PADDY AT VERY COMPETITIVE RATE. WITH THE HELP OF THESE BROKERS, ASSESSEE FIRM WAS ABLE TO PURCHASE GOOD QUALITY OF PADDY AND WITH THIS PADDY PRODUCED GOOD QUALITY OF RICE AND ACHIEVED HIGHER TURNOVER IN VERY COMPETITIVE MARKET CONDITION. IN LIEU OF PURCHASE OF PADDY THROUGH THESE BROKERS, ASSESSEE FIRM HAS PAID RS.5/ - PER QUINTAL AS COMMISSION . IT IS WORTH TO MENTION HERE , AS STATED BY THE ASSESSEE , THAT EVEN IN ASSESSMENT YEARS 2012 - 13 AND 2009 - 10 THE ORDERS PASSED UNDER SEC TION 143(3) OF THE ACT , COMMISSION PAID WAS ACCEPTED BY THE DEPARTMENT . THE RELEVANT DETAILS OF THESE ASSESSMENT ORDERS HAVE BEEN ANNEXED AT PAGES 10 TO 16 OF THE PAPER BOOK , FOR ASSESSMENT YEAR 2012 - 13 AND AT PAGES 17 TO 22 OF THE PAPER BOOK FOR ASSESSME NT YEAR 2009 - 10. 3 . DURING THE YEAR , ASSESSEE HAD PURCHASED TOTAL PADDY WEIGHING 69032.35 QUINTAL OUT OF WHICH THEY HAVE PURCHASED 41320.00 QUINTAL THROUGH BROKER ASHISH KUMAR AND 20399.00 QUINTAL THROUGH MR. SACHIN KUMAR AGARWAL AND REST QUANTITY OF 7313.3 5 QUINTAL THROUGH OWN ITA NO. 693/LKW/2017 PAGE 4 OF 11 RESOURCES. PURCHASE OF GOOD QUALITY OF PADDY BY THE ASSESSEE TO MANUFACTURE GOOD QUALITY OF RICE AND ACHIEVE HIGHER TURNOVER IN COMPETITIVE MARKET CONDITION CAN ALL BE ATTRIBUTED TO THE SERVICES RENDERED BY THESE BROKERS IN ACQUIRING GOOD PADDY. A SSESSEE HAS SUBMITTED COPY OF AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR ASSESSMENT YEAR 2013 - 14 WHICH ARE PLACED AT PAGES 23 TO 27 OF THE PAPER BOOK. COP IES OF BILLS RAISED BY SACHIN KUMAR AGARWAL AND ASHISH KUMAR ALONG WITH THE D ETAILED WORKING OF PURCHASES OF PADDY GIVING DATE OF PURCHASE, NAME OF THE SELLERS, QUANTITY PURCHASE AND AMOUNT OF COMMISSION ARE PLACED AT PAGES 28 TO 51 OF THE PAPER BOOK. THESE PAYMENTS HAVE BEEN MADE THROUGH CHEQUE AND DUE T.D.S. HAS BEEN DEDUCTED. L D. C.I.T. (A) HAS ACCEPTED THESE FACTS, HOWEVER, CONFIRMED THE ADDITION SOLELY ON THE OBSERVATION THAT THE ASSESSEE HAS PROCURED MORE THAN 50% OF PADDY WHERE NO COMMISSION HAS BEEN PAID. IT IS THE SUBMISSION OF THE ASSESSEE THAT FACTS AS IS REVEALED FROM THE DETAILS FILED IN THE PAPER BOOK ONLY 10.50% PADDY HAS BEEN DIRECTLY PURCHASED AND REST OF THE PADDY HAS BEEN PURCHASED WITH THE HELP OF THESE BROKERS. ASSESSING OFFICER AND LD. C.I.T. (A) COULD HAVE UNDERTAKEN TO CONDUCT INDEPENDENT ENQUIRY REGARDING PROCUREMENT OF PADDY. LD. CIT(A) HAS ALSO NOT DEALT WITH PRACTICAL ASPECT OF INVOLVING BROKERS FOR PURCHASING OF PADDY FROM MARKET SO THAT THEY WOULD YIELD GOOD QUALITY OF RICE. 4 . WE HAVE PERUSED THE CASE RECORDS, HEARD THE RIVAL CONTENTIONS AND WE FIND THA T ON THIS ISSUE THE REVENUE HAS ACCEPTED THE POSITION OF THE ASSESSEE AND HAVE ALLOWED COMMISSION FOR ASSESSMENT YEARS 2009 - 10 AND 2012 - 13, THE DETAILS OF WHICH HAVE BEEN FILED IN THE PAPER BOOK BEFORE US. LD. D.R. CONCEDED TO THIS FACT. FURTHERMORE, WE OBSERVE THAT IN THE NATURE OF BUSINESS OF THE ASSESSEE THIS BECOMES PERTINENT TO TAKE ASSISTANCE OF BROKERS WHILE GIVING THEM COMMISSION WHO WOULD BE ABLE TO ASCERTAIN GOOD QUALITY OF PADDY. ENTIRE BUSINESS TURNOVER ITA NO. 693/LKW/2017 PAGE 5 OF 11 DEPENDS UPON SUCH PURCHASE OF PADDY. N EEDLESS TO SAY THAT IF GOOD PADDY IS NOT PURCHASED, THAT WOULDNT PRODUCE GOOD QUALITY RICE, WHICH IN TURN WOULD AFFECT THE TURNOVER OF THE ASSESSEES BUSINESS. THEREFORE, THE SERVICES OF THESE BROKERS AND COMMISSION PAID ARE NOTHING BUT BUSINESS EXPENDIT URE. WE ALSO NOTE FROM RECORDS THAT OUT OF TOTAL PADDY PURCHASED DURING THE YEAR I.E. 6903.35 QUINTALS, MAXIMUM PURCHASES HAVE BEEN DONE THROUGH BROKERS AND THIS FACT WAS ALSO NOT DENIED BY THE LD. D.R. AT THE TIME OF HEARING BEFORE. LD. A.R. OF THE ASSE SSEE RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HIND NIHON PROTEINS PVT. LTD., 91 TAXMANN.COM 43 WHEREIN THE HON'BLE COURT UPHELD THE DECISION OF THE TRIBUNAL DELETING THE ADDITION OF COMMISSION WITH THE FINDING THAT AS SESSEE HAD BEEN PAYING COMMISSION TO AGENTS REGULARLY YEAR - AFTER - YEAR AND IT WAS NOT DOUBTED BY THE REVENUE AND THE SAME WAS ACCEPTED. COMMISSION PAYMENTS WERE DULY REFLECTED IN THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND THEY HAVE PAID TAX THEREON. IN THE INSTANT CASE OF THE ASSESSEE, PAYMENTS OF COMMISSION HAVE BEEN MADE THROUGH CHEQUE AND DUE TDS HAS BEEN DEDUCTED. THERE IS NO LOSS TO THE REVENUE. IN THIS VIEW OF THE MATTER, WE HOLD THAT DISALLOWANCE OF COMMISSION IS PERVERSE AND BAD IN LAW AND L IABLE TO BE DELETED. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT DELETION OF ADDITION ON ACCOUNT OF COMMISSION AND ALLOW GROUNDS NO.1 AND 1.1 OF THE GROUNDS OF APPEAL OF THE ASSESSEE. 5 . WITH REGARD TO GROUNDS NO.2 AND 2.2, AT THE TIME OF HEARING BEFORE US LD. A.R. OF THE ASSESSEE SUBMITTED THAT THEY HAVE BEEN PURCHASING AND SELLING FOOD GRAINS WITH M/S S.IL. AGARWAL & SONS WHICH IS A TRADING CONCERN HOLDING LICENCE OF MANDI SAMITI AND REGISTERED WITH COMMERCIAL TAX DEPARTMEN T. FOR THE LAST MA N Y YEARS ASSESSEE HAVE BEEN PURCHASING AND SELLING FOOD GRAINS AS PER BUSINESS DEALING WITH ITA NO. 693/LKW/2017 PAGE 6 OF 11 THIS FIRM. ASSESSEE HAS ENCLOSED COPY OF LEDGER ACCOUNT OF THE ABOVE STATED FIRM FOR A. Y. 2012 - 13, A. Y. 2013 - 14 AND A. Y. 2014 - 15. T HESE DETAIL S ARE PLACED AT PAGE S 52 TO 55 OF THE PAPER BOOK FILED BEFORE US . THE LD. A.R. OF THE ASSESSEE, THEREFORE, SUBMITTED THAT THE OUTSTANDING AMOUNT CANNOT BE HELD AS ADVANCE FOR NON - BUSINESS PURPOS E AND NOTIONAL DISALLOWANCE OF I NTEREST CANNOT BE MADE. THE LD. A.R. OF THE ASSESSEE FURTHER SUBMITTED THAT FOR ASSESSMENT YEARS 2009 - 10, 2012 - 13 AND 2014 - 15 WHEREIN ASSESSMENT S HAVE BEEN MADE U/S 143(3) OF I. T. ACT AND HAVING SIMILAR FACTS AND CIRCUMSTANCES AS PREVAILING IN THE RELEVANT YEAR, SINCE IN THOSE YEARS NO DISALLOWANCE WAS MADE ON NOTIONAL INTEREST, THE SAME SHOULD BE FOLLOWED ON THE GROUND OF CONSISTENCY. 6 . LD. D.R. SUBMITTED THAT PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME TAX ACT AND HENCE EACH ASSESSMENT YEAR IS SEPARATE AND TAX IS PAID SEPA RATELY, THEREFORE , THIS YEAR HAS TO BE SEEN FROM THE FACTS AND CIRCUMSTANCES INVOLVED IN THIS YEAR AND HE SUPPORTED THE FINDINGS OF THE SUBORDINATE AUTHORITIES. 7 . WE HAVE PERUSED THE CASE RECORDS, HEARD THE RIVAL CONTENTIONS AND WE FIND THAT THE SETTLED POSI TION OF LAW IS THAT PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME TAX ACT. HOWEVER, IT HAS BEEN EVOLVED BY VARIOUS DECISIONS OF THE APEX COURT , WHICH IS BY NOW A SETTLED POSITION , THAT IF THE FACTS AND CIRCUMSTANCES OF ONE YEAR IS SIMILAR TO THE OTHER, THEN ASSESSING OFFICER CANNOT TAKE A DIFFERENT VIEW WHICH HE HAS ALREADY TAKEN FOR THE PREVIOUS YEAR. THIS IS ON THE BASIS OF RULE OF CONSISTENCY. IN THE PRESENT SCENARIO, LD. D.R. CONCEDED TO THE FACT THAT IN THE ASSESSMENT MADE UNDER SECTION 143 (3) OF THE ACT FOR ASSESSMENT YEAR 2009 - 10, 2012 - 13 AND 2014 - 15 SUCH NOTIONAL INTEREST HAS NOT BEEN MADE AND IT HAS BEEN TREATED AS BUSINESS ADVANCE WHICH ITA NO. 693/LKW/2017 PAGE 7 OF 11 IS WITHIN THE REGULAR COURSE OF TRANSACTION. WE HAVE PERUSED THE LEDGER ACCOUNT OF M/S S. L. AGARWAL & SONS WHICH ARE PLACED AT PAGES 52 TO 55 OF THE PAPER BOOK AND WE FIND THAT ALL THE ENTRIES PERTAINS TO REGULAR TRANSACTIONS OF PURCHASE AND SALES OF PADDY BUSINESS. THERE IS NO NON - BUSINESS ADVANCE AS ALLEGED BY THE REVENUE. WE ARE OF THE CONSIDERED V IEW THAT ON THE FACTS AND CIRCUMSTANCES COMING OUT FROM RECORD, NO ADDITION CAN BE MADE ON THE GROUND OF NOTIONAL INTEREST IN THE CASE OF THE ASSESSEE. HENCE WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT DELETI O N OF THE SAME. ACCORDIN GLY, GROUNDS NO.2 AND 2.2 ARE ALLOWED. 8 . FACTS PERTAIN ING TO GROUNDS NO.3, 3.1 AND 3.2 ARE THAT THE LD. CIT(A) HAS DELETED THE ADDITION OF RS.2 LAKHS BEING SUBSIDY RECEIVED TOWARDS COST OF NEW MACHINERY OF RICE MILL NAMELY 'DEHUSKER AND RICE WHITENER' BY THE STATE GOVERNMENT AS PER THE SCHEME OF THE STATE GOVERNMENT. IN THE COURSE OF PROCEEDINGS BEFORE LOWER AUTHORITIES, ASSESSEE HAD TRIED TO EXPLAIN THAT STATE GOVERNMENT HAS ALLOWED A SUBSIDY OF RS.2,00,000/ - DISBURSED THROUGH GENERAL MANAGER, ZILA UDYOG KEN DRA TOWARDS COST OF PURCHASE OF MACHINERY USED FOR GRAIN CLEANING, MILLING AND SORTING. THE COST OF NEW MACHINERY WAS RS.11,17,869/ - PURCHASED AS PER SCHEME IN A. Y. 2012 - 13 THROUGH BANK TERM LOAN. THESE DETAILS HAVE BEEN ANNEXED IN THE PAPER BOOK AT PAGES 59 TO 71 OF THE PAPER BOOK. LD. A.R. OF THE ASSESSEE SUBMITTED THAT SUBSIDY TERMS INCLUDED THAT ASSESSEE FIRM HAS TO GIVE UNDERTAKING THAT UNIT WILL CONTINUE ITS PRODUCTION FOR 5 YEARS FROM THE DATE OF DISBURSEMENT OF SUBSIDY, FAILING WHICH SUBSIDY DISBU RSED WILL BE RECOVERED BY THE STATE GOVERNMENT. COPY OF AGREEMENT IS ALSO ANNEXED AT PAGES 72 & 73 OF THE PAPER BOOK. THE INDUSTRIES DEPARTMENT HAS RELEASED THE SUBSIDY AMOUNT OF RS. 2,00,00/ - ON 09.05.2012 WHICH WAS SHOWN AS LIABILITY IN THE BALANCE SHEE T BECAUSE AS PER TERMS OF ITA NO. 693/LKW/2017 PAGE 8 OF 11 AGREEMENT RIGHT OF TREATING IT AS SUBSIDY WILL ONLY ARISE AFTER THE COMPLETION OF FIVE YEARS OF RUNNING OF UNIT. T HUS, IT IS A CAPITAL SUBSIDY TOWARDS THE COST OF MACHINERY AS PER SCHEME OF THE GOVERNMENT. 9 . THE LD. D.R., ON THE OT HER HAND, SUBMITTED BEFORE US THAT IT IS CORRECTLY TREATED AS REVENUE EXPENDITURE SINCE EFFECT OF SUBSIDY IS IMMEDIATE AND SINCE IT IS A MACHINE FOR MANUFACTURE OF RICE, BENEFIT IS ALSO IMMEDIATE IN NATURE AND LOOKING INTO IMMEDIATE RESULT OF SUBSIDY, IT I S FAIRLY TREATED AS REVENUE EXPENDITURE. 10 . WE HAVE PERUSED THE CASE RECORDS, HEARD THE RIVAL CONTENTIONS AND WE FIND THAT THERE IS NO DOUBT ON THE FACT THAT SUBSIDY RECEIVED BY THE ASSESSEE IS A GOVERNMENT SUBSIDY AND AS PER GOVERNMENT AGREEMENT THERE IS A C ONDITION SPECIFIED IN ORDER TO ENJOY THE SUBSIDY WHICH IS THEREIN IN THE AGREEMENT WITH THE GOVERNMENT ITSELF. IT ALSO COMES OUT FROM RECORD THAT REAL BENEFIT OF THE SUBSIDY TOWARDS COST OF THE SAID MACHINERY WOULD ACTUALLY ACCRUE TO THE ASSESSEE ONLY AFT ER COMPLETION OF THE TERMS AND CONDITIONS IN THE SCHEME OF THE GOVERNMENT I.E. AFTER COMPLETION OF FIVE YEARS OF RUNNING THE UNIT. IT IS A MATTER OF COMMON KNOWLEDGE THAT SUBSIDIES ARE INCENTIVE S GIVEN BY THE GOVERNMENT TO THE ENTREPRENEURS IN ORDER TO GE NERATE INDUSTRIAL GROWTH AND EMPLOYMENT. IT IS MORE OF A LONG TERM EFFECT AND THAT IS THE REASON WHY CONDITION HAS BEEN SET FORTH IN THE AGREEMENT THAT UNIT HAS TO RUN FOR FIVE YEARS IN ORDER TO ENJOY THE SUBSIDY. THE SUBSIDY BENEFIT DOES NOT DEVOLVE UPO N ASSESSEE IMMEDIATELY AS SUBMITTED BY THE LD. D.R. W E TAKE GUIDANCE FROM THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. CHAPHALKAR BROTHERS PUNE [2017] 88 TAXMANN.COM 178 (SC) WHEREIN THE APEX COURT HAS CONSIDERED ITS OWN DECISION IN THE C ASE OF SAHNEY STEEL & PRESS WORKS LTD. VS. CIT [1997] 94 TAXMAN 368/228 ITR 253 (SC) AND CIT VS. PONNI SUGARS & CHEMICALS LTD. [2008] ITA NO. 693/LKW/2017 PAGE 9 OF 11 174 TAXMAN 87/306 ITR 392 (SC) WHEREIN IT HAS BEEN HELD THAT OBJECT OF GRANTING SUBSIDY WAS THAT PE OPLE SHOULD COME FORWAR D FOR DOING BUSINESS OF CERTAIN TYPE AND SUCH SUBSIDY WOULD GO TOWARDS HELPING INDUSTRY SETUP SUCH AS HIGHLY CAPITAL INTENSIVE INDUSTRIAL UNIT. THE APEX COURT OBSERVES THAT ARGUMENT OF THE REVENUE THAT GRANTING OF SUBSIDY IS TO ACHIEVE A MINIMUM OBJECT AN D NOT LARGER OBJECT IS, THEREFORE, NOT CORRECT. THE APEX COURT IN THE CASE OF CHAPHALKAR BROTHERS (SUPRA) ALSO ANALYSED THE DECISION OF HON'BLE JAMMU & KASHMIR HIGH COURT IN THE CASE OF SHRI BALAJI ALLOYS VS. C.I.T. (2011) 333 I.T.R. 335 WHEREIN IT IS OBS ERVED THAT SUBSIDY IS ISSUED TO ACHIEVE TWIN OBJECTS OF ACCELERATI ON OF INDUSTRIAL DEVELOPMENT AND GENERATION OF EMPLOYMENT , THEREFORE, HON'BLE JAMMU & KASHMIR HIGH COURT HELD THAT IT IS OBVIOUS THAT THE INCENTIVES ARE CAPITAL IN NATURE AND NOT REVENUE. I N VIEW OF OUR AFORESAID OBSERVATIONS AND DISCUSSIONS, WE DIRECT DELETION OF ADDITION ON THE GROUND OF SUBSIDY AND ALLOW THESE GROUNDS OF APPEAL OF THE ASSESSEE. 11 . WITH REGARD TO GROUND NO.4, ASSESSING OFFICER HAS MADE ADDITION OF RS.66,540/ - ON THE GROUND OF NON - PRODUCTION OF VOUCHERS OF WAGES, GENERATOR EXPENSES, MACHINERY EXPENSES AND MISCELLANEOUS EXPENSES BY ESTIMATE @ 10% OF THE TOTAL EXPENSES CLAIMED AT RS.6,65,440/ - . LD. CIT(A) ON THIS ISSUE HAS HELD THAT ASSESSING OFFICER HAS SPECIFICALLY MENTIONED T HAT ALL THE EXPENSES ARE NOT SUPPORTED BY BILLS AND VOUCHERS AND EVEN AT THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) ALSO NO PROOF WAS FURNISHED BY THE ASSESSEE. THEREFORE, LD. CIT(A) CONFIRMED THESE DISALLOWANCES MADE BY THE ASSESSING OFFICER. 12 . AT THE TIME OF HEARING BEFORE US, LD. A.R. OF THE ASSESSEE SUBMITTED THAT DISALLOWANCES MADE ON ESTIMATE BASIS ARE ON HIGHER SIDE AND THAT THE ASSESSING OFFICER HAS NOT SPECIFICALLY POINTED OUT THE REASON ITA NO. 693/LKW/2017 PAGE 10 OF 11 FOR MAKING ADDITION, AND THEREFORE, IT IS IN THE NATURE O F AD - HOC DISALLOWANCE. IN SUPPORT OF HIS CONTENTION, THE LD. A.R. OF THE ASSESSEE RELIED UPON THE DECISION OF THE CO - ORDINATE BENCH, ITAT LUCKNOW IN ITA NO.48/LKW/2013 FOR ASSESSMENT YEAR 2007 - 08 IN THE CASE OF M/S RAKESH KUMAR RAMESH CHANDRA CHEMICALS PV T. LTD. VS. DCIT. 13 . WE FIND THAT THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE ARE SUBSTANTIALLY DIFFERENT FROM THAT REFERRED TO BY THE LD. A.R. OF THE ASSESSEE. WE ALSO FIND FROM RECORD THAT ASSESSEE HAS NEITHER PRODUCED ANY BILLS AND VOUCHERS OR SUPP ORTING EVIDENCES RELATING TO SALARY, WAGES, GENERATOR EXPENSES, MACHINERY EXPENSES, MISCELLANEOUS EXPENSES NEITHER BEFORE ASSESSING OFFICER NOR BEFORE LD. CIT(A). IN OUR HUMBLE UNDERSTANDING , WHEN WE ARE ADJUDICATING UPON ANY ISSUE , FIRST IS THE FACTS AND CIRCUMSTANCES INVOLVED IN THAT ISSUE AND THEN COMES LEGAL PARAMETERS. HERE THE FACTS ITSELF SHOWS THAT ASSESSEE HAS NOT COME OUT WITH ANY DEFENSE TO SUPPORT HIS CASE BEFORE THE SUBORDINATE AUTHORITIES. IN THIS VIEW OF THE MATTER, WE UPHOLD THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE AND SUSTAIN THE ADDITION ON THIS GROUND. HENCE, GROUND NO . 4 IS DISMISSED. 14 . GROUND NO.5 IS GENERAL IN NATURE WHICH DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 15 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN COURT ON 27 / 0 7 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH JU LY , 201 8 JJ: 2507 ITA NO. 693/LKW/2017 PAGE 11 OF 11 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR