DCIT, Kanpur V. M/s. Anand Brushes (P) Ltd., Kanpur

ITA 713/LKW/2010

• Counselvise Citation: 71323714 RSA 2010
• Duration Of Justice: 3 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-07-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 02-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Keywords: Opportunity of being heard; Additional evidence; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 713/LKW/2010 ASSESSMENT YEAR: 2003 - 04 DY. CIT - 4 KANPUR V. M/S ANAND BRUSHES (P) LTD. 7 /58, TILAK NAGAR KANPUR PAN: AABCA4264E (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. ALOK MITRA, D.R. RESPONDENT BY: SHRI. RAKESH GARG, ADVOCATE DATE OF HEARING: 10 0 7 2014 DATE OF PRONOUNCEMENT: 05 0 9 2014 O R D E R PER SUNIL KUMAR YADAV: T HIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON FOLLOWING GROUNDS: - 1 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT (APPEALS) I, KANPUR HAS ERRED IN LAW IN DELETING THE ADDITION O F RS 20,00,000/ - WITHOUT APP RECIATING THE FACTS THAT THE AO HAD NOTED SERIOUS DEFECTS OF INCOMPLETENESS AND IN - CORRECTNESS OF BOOKS OF ACCOUNTS FOR INVOKING THE PROVISIONS OF SECTION U/S 145(3) OF THE I. T. ACT 1961. 2 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT (APPEALS) I, KANPUR HAS ERRED IN LAW IN DELETING THE ADDITION AS MADE BY THE AO UNDER THE HEAD FOREIGN TRAVELING EXPENSES WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE. 3 . THE LD. CIT(A) II, KANPUR HAS ERRED IN LAW - AND ON FACTS IN PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : DELETING THE ADDITION OF EXCESS INT EREST CLAIMED BY THE ASSESSEE U/S 40A(2)(B) OF THE I . T. ACT 1961 IGNORING THE PREVAILING MARKET/BANK RATE. 4 . THE LD. CIT(A) II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCES/ADDITION ON ACCOUNT OF TRADE DISCOUNT & BUSINESS PROMOTION IGNO RING THE EFFORTS OF VERIFICATION AS MADE BY THE AO. 5 . THAT THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR BEING ERRONEOUS, UNJUST AND BAD IN LAW AND ON FACTS DESERVES TO BE VACATED AND THAT THE ORDER OF THE ASSESSING OFFICER BE RESTORED . 2 . APROP OS GROUND NO.1, THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT THE VALUATION OF CLOSING STOCK AND CONSUMPTION OF RAW MATERIAL ARE NOT AS PER THE BOOKS OF ACCOUNT MAI NTAINED BY THE ASSESSEE. THEREFORE, A LETTER DATED 6.5.2005 HAS BEEN ISSUED TO THE ASSESSEE NARRATING THE FOLLOWING FACTS: - (1) IT HAS BEEN NOTICED FROM PARA 15 TO TAX AUDIT REPORT/COMPANY AUDIT REPORT THAT YOU HAVE ADOPTED THE METHOD OF VALUATION OF C LOSING STOCK AS FOLLOWS: - (A) STORES AND SPARES - AT COST (B) RAW MATERIAL AT COST WORK IN PROGRESS AT ESTIMATED COST (D) FINISHED GOODS AT SALE PRICE LESS MARGIN (1.2) HOWEVER, IT HAS BEEN NOTICED FROM THE DETAILS AVAILABLE WITH TAX AUDIT REPORT AND COMPANY AUDIT REPORT AND DETAILS FURNISHED BY YOU THAT THE METHOD OF VALUATION AS MENTIONED ABOVE HAS NOT BEEN PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : ADOPTED BY ASSESSEE COMPANY. A DETAIL WORKING OF RATE OF RAW MATERIAL ETC. IS REPRODUCED AS UNDER: - (A) RAW MATERIAL ( BRISTLES) DETAIL WEIGHT IN KG. VALUE IN RS. RATE PER KG. OPENING STOCK 9,431.868 1,26,07,355/ - 1336.68 PURCHASES 41,041.550 5,37,89,477/ - 1310.61 CONSUMPTION 36643.008 4,98,29,648/ - 1359.86 SALE - - - CLOSING STOCK 13830.410 1,65,67,184/ - 1197.88 (1.3) IT HAS FURTHER BEEN NOTICED THAT THE ASSESSEE HAS NOT DEBITED ANY EXPENSES IN P. & L. A/C RELATED TO PURCHASE OF RAW MATERIALS I.E. BRISTLES. IT IMPLIES THAT THE ABOVE AMOUNTS OF PURCHASES ARE INCLUSIVE OF INCIDENTAL CHARGE R ELATED TO PURCHASES. (1.4) IT IS SEEN FROM ABOVE DETAILS THAT THE RATE OF OPENING STOCK OF BRISTLES WAS RS.1336.68 PER KG. AND AVERAGE RATE OF PURCHASES OF RAW MATERIAL COMES TO RS.1310.61. IF THE OPENING STOCK IS ADDED TO PURCHASES THE AVERAGE RATE OF RAW MATERIALS COMES TO RS.1315.48 WHEREAS ASSESSEE HAS DECLARED RATE OF CONSUMPTION OF RAW MATERIAL AT RS.1359.86 WHICH IS VERY HIGH AND EXCESSIVE. IF AVERAGE RATE OF PURCHASE COST IS APPLIED, THERE EXCESSIVE CLAIM WILL BE AT RS.16,26,216.63. HERE IT IS PERTI NENT TO MENTION THAT THE G. P. HAS BEEN DECREASED FROM 17.11 TO 16.32. G.P. THE G.P. RATE IS CONSISTENTLY DECREASING. IF INFLATED COST OF CONSUMPTION I. E. RS.16,26,216.63 IS DEDUCTED FROM AMOUNT OF TOTAL CONSUMPTION THEN G.P. WOULD BE 18.84%. ASSESSEE HAS JUSTIFIED VIDE HAS REPLY DATED 02.03.2005 THAT 'MANUFACTURING RESULTS FOR LAST THREE YEARS ENCLOSED. WE HAVE ACHIEVED G. P. RATE OF 16.32% IN THIS YEAR IN COMPARISON TO G.P. RATE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : OF 17.11% IN IMMEDIATE PRECEDING YEAR. THE NOMINAL SHORTFALL IS DUE TO STAT IC RATE OF SELLING PRICE IN MARKET WHICH HAS NOT GONE UP DUE TO COMPETITIVE MARKET VIS A VIS TO INCREASE IN RAW MATERIAL PURCHASES. THE RAW MATERIAL CONSUMED HAS GONE UPTO 77.42% ON SALES RATION IN COMPARISON TO PRECEDING YEAR OF 75.93%,' (1.5) THE REPLY F ILED BY ASSESSEE HAS BEEN EXAMINED AND IT HAS BEEN FOUND, THAT ASSESSEE COMPANY HAS MADE TOTAL PURCHASES OF RAW, MATERIAL (BRISTELES) FROM PERSON SPECIFIED U/S 40A (2)(B). THEREFORE, THE GROUND THAT THE COST OF RAW MATERIALS HAS BEEN INCREASED IN BRISTLES IS NOT ACCEPTABLE AS PER DETAILS OF RATE OF RAW MATERIALS GIVEN IN ABOVE TABLE. FURTHER, THE AVERAGE RATE OF PURCHASE OF RAW MARTIAL IS AT 1310.68 WHEREAS ASSESSEE HAS ADOPTED RATE OF CONSUMPTION OF RAW MATERIAL AT 1359.86. THEREFORE, THE EXPLANATION FILED BY.ASSESSEE ON G.P. IS NOT ACCEPTABLE. (1.6) ASSESSEE HAS VALUED THE CLOSING STOCK OF RAW MATERIAL (BRISTLES) BY APPLYING RATE OF 1197.88 WHICH IS APPARENTLY LESS THAN PURCHASE RATE OF RAW MATERIAL I. E. 1310.61. ASSESSEE HAS ALSO FILED PHOTOCOPY OF SO ME PURCHASE BILLS SUCH AS BILL NO. 63 DATED 27.03.2002 ISSUED BY M/S ANAND PRIYAM ENTERPRISES AND BILL NO. 20 DATED 26.03.2002 ISSUED BY M/S ASHISH AND ANAND WHICH REVEALS THE RATE OF PURCHASE OF BRISTLES IS AT RS. 1400/ - PER KG. AS SUCH IT IS CLEAR THAT T HE ASSESSEE COMPANY HAS NOT APPLIED THE PURCHASE RATE OF BRISTLES (RAW MATERIAL) TO VALUE THE CLOSING STOCK. AS SUCH THE ASSESSEE HAS SUPPRESSED THE VALUE OF CLOSING STOCK BY RS.15,59,102/ - IF RATE OF PURCHASE COST AT RS.1310.61 IS APPLIED. (1.7) IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES YOU ARE REQUIRED TO EXPLAIN AS TO WHY THE METHOD OF VALUATION OF CLOSING STOCK ADOPTED BY YOU MAY NOT BE REJECTED AND THE RATE OF COST PRICE AS PER AUDIT REPORT WHICH IS BEING CONSISTENTLY FOLLOWED MAY NOT BE APPLIED.' 3 . IN RESPONSE TO THE SHOW CAUSE NOTICE, ASSESSEE HAS FILED REPLY STATING THEREIN THAT THE CONSUMPTION OF RAW MATERIAL INCLUDES NOT ONLY BRISTLES BUT INCLUDES OTHER MATERIAL S ALSO. IN RESPECT OF CLOSING STOCK OF PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : BRISTLES , THE STOCK LYING IN GODOWN FORMS PART O F STOCK PURCHASED IN PRECEDING LAST SIX MONTHS AND THE RATE TAKEN FOR VALUATION OF STOCK IS BASED ON FIFO BASIS AND VALUED ON COST PRICE OR MARKET PRICES WHICH EVER IS LOWER. WITH REGARD TO THE FALL IN G.P., IT WAS CONTENDED THAT THE RATE OF SALE PRICE HAS NOT BEEN INCREASED IN COMPARISON TO THE IMMEDIATELY PRECEDING YEAR THOUGH THE COST OF RAW MATERIAL WAS INCREASED. THE ASSESSING OFFICER HAS MADE EFFORTS FOR NECESSARY VERIFICATION OF THE BUYERS BY WRITING LETTERS WITH REGARD TO THE SALE PRICE, BUT THE LE TTERS WERE RECEIVED BACK UNSERVED. THE ASSESSING OFFICER HAS ALSO NOTICED THAT THE PURCHASES MADE BY THE ASSESSEE WERE ALSO COVERED UNDER SECTION 40A(2)(B) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') . THEREFORE, THE EXPLANATIONS O F THE ASSESSEE WITH REGARD TO THE INCREASE IN PURCHASE RATE WERE NOT ACCEPTABLE. 4 . THE ASSESSING OFFICER HAS ALSO NOTICED THAT OUT OF TOTAL PURCHASE OF RS.5,37,89,477/ - , ASSESSEE HAS MADE PURCHASE OF RS.5,08,41,955/ - FROM THE PARTIES COVERED UNDER SECTION 40A(2)(B) OF THE ACT. THE ASSESSEE WAS ASKED TO PRODUCE THESE PARTIES, BUT THEY WERE NOT PRODUCED AND THE COUNSEL FOR THE ASSESSEE APPEARED BUT COULD NOT PRODUCE PURCHASE BILLS AND VOUCHERS. BUT IT WAS STATED THAT THE PURCHASES OF BRISTLES WERE MADE DIRE CTLY FROM THE VENDORS IN THE MARKET AND THEY WERE UNABLE TO FURNISH THE ADDRESS OF SUCH VENDORS. IN THE LIGHT OF THESE FACTS, THE EXPLANATIONS FURNISHED BY THE ASSESSEE WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND HE ACCORDINGLY OBSERVED THAT ASSESSEE H AS INCREASED THE CONSUMPTION OF RAW MATERIAL BY A SUM OF RS.16,26,216/ - AND SUPPRESSED THE VALUE OF CLOSING STOCK BY A SUM OF RS.15,59,102/ - . HE ACCORDINGLY ESTIMATED THE SUPPRESSED VALUE BY WAY OF INFLATION OF CONSUMPTION OF RAW MATERIAL AND ALSO OF CLOS ING STOCK AT RS.20 LAKHS AND MADE ADDITION OF THE SAME. 5 . AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS MENTIONED AVERAGE CLOSING STOCK OF THE ASSESSEE, WHICH ITSELF IS INCORRECT. AVERAGE MEANS THE OVE R ALL AGGREGATE OF PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : THE PURCHASE PRICE DIVIDED BY THE QUANTITY - CUM - QUALITY OF THE STOCK LEFT. THE PURCHASE PRICE IS THE PRICE FOR THE LOT PURCHASED, BUT WHEN THE BRISTLES PURCHASED ARE SORTED OUT, THEN ONLY THE QUANTITY ACTUALLY FIT FOR CONSUMPTION IS CONSIDERED WORTH ACCOUNTING. THE COST OF PURCHASE DECLINES DEPENDING UPON THE QUANTITY WITH CONSUMPTION AND THE WASTE. THE ALLEGATION OF THE ASSESSING OFFICER THAT CLOSING STOCK HAS BEEN UNDERVALUED DOES NOT ARISE. IT WAS FURTHER CONTENDED THAT THE MANUFACTURING OF BRUSHES FROM BRISTLES INVOLVES MULTITIER ACTIVITY AND WASTAGE TAKEN PLACE AT EVERY STAGE. HAD IT BEEN A SIMPLE CASE OF TRADING, THEN PERHAPS THE ASSESSING OFFICER S VER SION MAY HAVE CARRIED SOME WEIGHT. THE ASSESSING OFFICER HAS ALSO PREPARE D A CHART OF CLOSING STOCK AND SUBMITTED BEFORE THE LD. CIT(A). HAVING CAREFULLY PERUSED THE EXPLANATION AND CHART, THE LD. CIT(A) HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND OBSERVED THAT THE SALES AND PURCHASES OF THE APPELLANT HAVE BEEN ACCEPTED BY THE ASSE SSING OFFICER AND NO DISCREPANCIES HAVE BEEN POINTED OUT IN RESPECT OF SUCH ACCOUNTS. THE LD. CIT(A) ACCORDINGLY DELETED THE ADDITION. 6 . AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS PR EPARED A CHART ON THE BASIS OF THE ACCOUNTS FURNISHED BY THE ASSESSEE AND WHATEVER CHART WAS PREPARED BY THE ASSESSEE JUSTIFYING THE VALUATION OF CLOSING STOCK WAS NEVER CONFRONTED TO THE ASSESSING OFFICER AND THE LD. CIT(A) HAS OUT RIGHTLY ACCEPTED THE SA ME AND DELETED THE ADDITION HAVING OBSERVED THAT SALES AND PURCHASES WERE ACCEPTED BY THE ASSESSING OFFICER AND NO DISCREPANCY HAS BEEN POINTED OUT; WHEREAS THE ASSESSING OFFICER HAS DOUBTED THE PURCHASE RATES, AS THE PURCHASES WERE MADE FROM THE PARTIES C OVERED UNDER SECTION 40A(2)(B) OF THE ACT. DESPITE OPPORTUNITIES AFFORDED TO THE ASSESSEE, THE CONCERNED PARTIES WERE NOT APPEARED NOR THEY HAVE FURNISHED THE DETAILS OF VENDORS FROM WHOM BRISTLES WERE PURCHASED. THE LD. CIT(A) , WHILE GRANTING RELIEF TO THE ASSESSEE , HAS PUT THE ENTIRE ONUS UPON THE ASSESSING OFFICER TO MAKE NECESSARY ENQUIRY FROM THE VENDORS PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 7 - : FROM WHOM THE BRISTLES WERE PURCHASED; WHEREAS THE ENTIRE ONUS WAS UPON THE ASSESSEE TO JUSTIFY THE PURCHASE RATES BY PRODUCING THE RELEVANT EVIDENC E. THE ASSESSING OFFICER HAS MADE DETAILED ENQUIRY WHILE WORKING OUT THE ENHANCED CONSUMPTION OF RAW MATERIAL AND SUPPRESSED THE VALUE OF CLOSING STOCK AND THEREAFTER ESTIMATED THE INCOME AT RS.20 LAKHS. 7 . THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HA ND, HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE LD. CIT(A). 8 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE CLOSING STOCK IN QUANTITY WAS ALMOST THE SAME IN BOTH THE WORKINGS. WITH REGARD TO THE OPENING STOCK, THE QUANTITY WAS THE SAME, BUT VALUATION WAS DIFFERENT ON ACCOUNT OF CHANGE IN RATES. SIMILAR IS THE POSITION WITH REGARD TO THE PURCHASE AND CONSUMPTION OF RAW MATERIALS. BEFORE THE LD. CIT(A), ASSESSEE HAS FURNISHED DIFFERE NT CHARTS SHOWING DIFFERENT VALUE OF OPENING STOCK, PURCHASES, CONSUMPTIONS AND CLOSING STOCK. BUT THE SAID CHART WAS NOT CONFRONTED TO THE ASSESSING OFFICER FOR OBTAINING HIS COMMENTS AND ALSO TO VERIFY FROM THE RECORD NOR DID THE LD. CIT(A) MENTION ANYW HERE IN HIS ORDER ON WHAT BASIS HE HAS ACCEPTED THE VALUATION OF CLOSING STOCK AS SHOWN BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS. THE FINDING OF THE LD. CIT(A) IS ALSO INCORRECT, AS THE ASSESSING OFFICER HAS DOUBTED THE PURCHASE RATES AN D ASKED THE ASSESSEE TO PRODUCE VENDORS , AS THEY ARE COVERED UNDER SECTION 40A(2)(B) OF THE ACT BUT NEITHER THE VENDORS WERE PRODUCED NOR THE PURCHASE BILLS AND VOUCHERS OF THE BRISTLES WERE PRODUCED BEFORE THE ASSESSING OFFICER; WHEREAS THE LD. CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE HAVING OBSERVED THAT THE ASSESSING OFFICER OUGHT TO HAVE MADE NECESSARY ENQUIRIES, AS THE DETAILS WERE FURNISHED BEFORE HIM. 9 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT(A), WE FIND THA T THE LD. CIT(A) HAS NOT PROPERLY EXAMINED THIS ISSUE AND HAS OUTRIGHTLY ACCEPTED THE CLAIM OF THE ASSESSEE WITHOUT PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 8 - : AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER WITH REGARD TO THE CHART VALUING THE CLOSING STOCK AT DIFFERENT RATES. WE ARE , THEREFORE, OF THE VIEW THAT THIS ISSUES REQUIRES A FRESH ADJUDICATION BY THE LD. CIT(A) AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER AS WELL AS THE ASSESSEE. THE LD. CIT(A) SHALL CALL REMAND REPORT FROM THE ASSESSING OFFICER WI TH REGARD TO THE CHART OF CLOSING STOCK PREPARED BY THE ASSESSEE IN THE LIGHT OF CHAR T PREPARED BY THE ASSESSING OFFICER AND THEREAFTER TO EXAMINE THE VERACITY OF BOTH THE CHARTS. ACCORDINGLY THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND THE MATTER IS REST ORED TO HIS FILE FOR RE - ADJUDICATION OF THE ISSUE AFRESH AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE PARTIES. 10 . APROPOS GROUND NO.2 , IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED FOREIGN TRAVEL EXPENSES, BUT THE SAME WAS DISALLOWED BY THE ASSESSING OFFIC ER IN THE ABSENCE OF EVIDENCE TO ESTABLISH THAT FOREIGN TRAVEL WAS CONDUCTED FOR THE PURPOSE OF BUSINESS. BEFORE THE ASSESSING OFFICER, ASSESSEE COULD NOT PLACE THE RELEVANT EVIDENCE BY WAY OF CORRESPONDENCE EXCHANGED WITH THE PARTIES IN CHINA. THE ASSES SING OFFICER HAS OBSERVED THAT WHATEVER ADDRESSES OF DIFFERENT PARTIES IN CHINA WERE FURNISHED, THEY WERE DOWNLOADED FROM THE INTERNET. 11 . AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS DELETED THE ADDITION HAVING OBS ERVED THAT ASSESSEE HAS VISITED DIFFERENT PARTIES AND HAS ATTENDED THE FAIR HELD IN THE MONTHS OF APRIL AND OCTOBER, 2002. WHILE ALLOWING THE CLAIM, THE LD. CIT(A) HAS ALSO PLACED RELIANCE UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF D ELHI CLOTH & GENERAL MILLS CO. LTD. VS. CIT, 158 ITR 64. 12 . AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE FOREIGN TRAVEL EXPENSES CAN ONLY BE ALLOWED IF IT IS ESTABLISHED THAT THE FOREIGN TRIP WAS UNDERTAKEN F OR THE BUSINESS EXIGENCY. NOTHING HAS BEEN PLACED ON RECORD THAT THE ASSESSEE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 9 - : HAS BUSINESS DEALINGS WITH THE PARTIES STATIONED IN CHINA. MOREOVER , NO EVIDENCE HAS BEEN FURNISHED THAT THE ASSESSEE HAS EVER EXPORTED ANY OF ITS ITEM TO CHINA. IF THE ASSESS EE HAS VISITED PARTIES IN CHINA, THERE MUST HAVE BEEN SOME CORRESPONDENCE EXCHANGED BY WAY OF EMAIL OR ANY OTHER MODE. BUT NOTHING WAS PRODUCED BEFORE THE LOWER AUTHORITIES TO ESTABLISH THAT THE FOREIGN TRIP WAS UNDERTAKEN FOR BUSINESS PURPOSES. ONLY ORA L STATEMENT WAS MADE AND DETAILS OF PARTIES WERE DOWNLOADED FROM THE INTER NET. THEREFORE, FOREIGN TRAVEL EXPENSES CANNOT BE ALLOWED. 13 . THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A) WITH THE SUBMISS ION THAT THE ASSESSEE HAS FURNISHED RELEVANT EVIDENCE TO ESTABLISH THAT THE FOREIGN TRIP WAS UNDERTAKEN FOR BUSINESS EXIGENCY. 14 . HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT A SPECIFIC QUE RY WAS RAISED FROM THE ASSESSEE WITH REGARD TO THE EVIDENCE TO ESTABLISH THAT THE FOREIGN TRIP WAS UNDERTAKEN FOR BUSINESS PURPOSES. THOUGH THE ASSESSEE HAS FURNISHED DETAILS OF FEW PARTIES TO WHOM HE CLAIMED TO HAVE VISITED, BUT THE DETAILS OF PARTIES WE RE DOWNLOADED FROM THE INTERNET. IF THE ASSESSEE H A S VISITED CERTAIN BUSINESS CONSTITUENTS OR THE PARTIES, THERE MUST HAVE BEEN SOME CORRESPONDENCE EXCHANGED WITH THE SAID PARTIES. MOREOVER, IF HE HAS ATTENDED ANY FAIR, THERE MUST BE SOME VOUCHERS OR EVI DENCE TO ESTABLISH THAT THE FAIR WAS HELD IN CHINA WHICH WAS ATTENDED BY THE ASSESSEE. UNLESS AND UNTIL TH E S E FACT S ARE PLACED ON RECORD, IT HAS BECOME VERY DIFFICULT TO BELIEVE THE VERSION OF THE ASSESSEE THAT FOREIGN TRIP WAS UNDERTAKEN FOR BUSINESS PUR POSES. WE ARE , HOWEVER, OF THE VIEW THAT IN THE INTEREST OF JUSTICE, LET THE MATTER AGAIN DECIDED BY THE LD. CIT(A) IN THE LIGHT OF EVIDENCE TO BE FURNISHED BY THE ASSESSEE TO ESTABLISH THAT THE FOREIGN TRIP WAS UNDERTAKEN BY HIM FOR BUSINESS PURPOSES. A CCORDINGLY, THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND THE MATTER IS RESTORED TO HIS FILE TO ADJUDICATE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 10 - : THE ISSUE AFRESH IN THE LIGHT OF EVIDENCE FILED BY THE ASSESSEE. IN CASE ADDITIONAL EVIDENCE IS FILED BEFORE THE LD. CIT(A), THE LD. CIT(A) SHOULD CO NFRONT THE SAME TO THE ASSESSING OFFICER IN ORDER TO HAVE HIS COMMENTS. 15 . APROPOS GROUND NO.3, IT IS NOTICED THAT THE ASSESSING OFFICER HAS DISALLOWED THE EXCESS INTEREST PAID TO THE PARTIES COVERED UNDER SECTION 40A(2)(B) OF THE ACT , HAVING OBSERVED THAT TH E PREVAILING RATES OF INTEREST ON UNSECURED LOAN WERE AT 12% TO 15%; WHEREAS THE ASSESSEE HAS PAID INTEREST RATE OF 18% TO THE CREDIT BALANCE OF THE PARTIES FROM WHOM BRISTLES WERE PURCHASED AND FALLING UNDER SECTION 40A(2)(B) OF THE ACT, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT EVEN INTEREST RATE @ 21% WAS CHARGED BY THE STANDARD CHARTERED BANK IN THE CASE OF OVERDRAFT. IT WAS FURTHER CONTENDED THAT INTEREST @ 18% WAS PAID ONLY TO THOSE PARTIES FROM WHOM BRISTLES WE RE PURCHASED. IT WAS ALSO SUBMITTED THAT ALL THE CREDITORS TO WHOM INTEREST @ 18% WERE PAID ARE ALSO ASSESSED TO TAX AT THE HIGHER RATE OF INCOME TAX AND THEREFORE THERE IS NO LOSS TO THE REVENUE. HE HAS ALSO PLACED RELIANCE UPON THE JUDGMENT IN THE CASE OF VOLTAS LTD. VS. CIT, 129 ITR 105. IT WAS FURTHER CONTENDED THAT THE AMOUNT OF CREDIT WAS PAID WITHOUT FURNISHING ANY SECURITY; WHEREAS FOR OBTAINING LOAN FROM THE BANK A PROPER SECURITY WAS REQUIRED TO BE FURNISHED. FINDING FORCE IN THE CONTENTIONS O F THE ASSESSEE, THE LD. CIT(A) HAS DELETED THE ADDITION. 16 . NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND HAS CHALLENGED THE PAYMENT OF INTEREST @ 18% , AS THE PREVAILING RATE OF INTEREST WAS AT 15%; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED R ELIANCE UPON THE ORDER OF THE LD. CIT(A) . 17 . H AVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE ASSESSEE HAS PAID INTEREST @ 18% TO THE PARTIES FROM WHOM BRISTLES WERE PURCHASED ON THEIR CREDIT BALANCE. THIS IS A COMMERCIAL UNDER STANDING AND THE ASSESSEE HAS PAID REASONABLE RATE OF INTEREST TO THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 11 - : PARTIES ON THEIR CREDIT BALANCE. IT CANNOT BE CALLED TO BE ON HIGHER SIDE, AS THE PREVAILING RATE OF INTEREST FROM BANK MAY BE 18%. MOREOVER, THIS INTEREST WAS PAID ON CREDIT BALANCE W HICH WAS SECURED BY THE ASSESSEE WITHOUT FURNISHING ANY SECURITY. WE, THEREFORE, FIND NO MERIT IN THIS GROUND OF THE REVENUE. ACCORDINGLY, WE DISMISS THE SAME AND CONFIRM THE ORDER OF THE LD. CIT(A). 18 . APROPOS GROUND NO.4, IT IS NOTICED THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS REQUIRED TO PRODUCE RELEVANT VOUCHERS AND DETAILS OF RS.9,18,839/ - ; RS.13,182/ - AND RS.11,020/ - SO THAT GENUINENESS OF THE PAYMENTS AND TRANSACTIONS MAY BE VERIFIED WITH THE ACCOUNTS OF THE PARTIES TO WHOM ATR (A NNUAL TURNOVER REBATE) WAS ALLOWED. ASSESSEE WAS UNABLE TO FURNISH THE DETAILS OF THESE AMOUNTS. HOWEVER, ASSESSEE HAS FILED THE COPIES OF ACCOUNTS OF M/S POWER SALES; M/S SRI DEVI ENTERPRISES; M/S VIJAY T RADERS AND SRI SAI SUDHA PAINTS AND HARDWARE APPE ARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ON VERIFICATION FROM THESE ACCOUNTS, IT HAS BEEN FOUND THAT ASSESSEE HAS NOT CREDIT ED ANY ATR IN THEIR RESPECTIVE ACCOUNTS. THE ASSESSING OFFICER FURTHER NOTICED THAT THERE IS NO OTHER LIABILITY IN THE BAL ANCE SHEET FOR PAYMENT. SINCE ASSESSEE WAS UNABLE TO FURNISH THE DETAILS AND JUSTIFY HIS CLAIM AND AS SUCH IT IS NO T VERIFIABLE WITH THE BOOKS OF ACCOUNT, THEREFORE, IT WAS DISALLOWED. 19 . AGAINST THE DISALLOWANCE, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ASSESSEE, HOWEVER, FURNISHED DETAILS BEFORE THE LD. CIT(A). THE LD. CIT(A) EXAMINED THE SAME AND FOUND THAT THE AMOUNTS W ERE APPEARING IN THE CONCERNED ACCOUNTS . THE LD. CIT(A) HAS ALSO NOTICED THAT THESE ACCOUNTS WERE FILED BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 2.3.2005 ADDRESSED TO THE ACIT - 4, KANPUR VIDE SL.NO.23(C). HAVING PROPERLY EXAMINED THE SAID PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 12 - : DETAILS, T HE LD. CIT(A) WAS CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND DELETED THE ADDITION. 20 . AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. BEFORE US THE REVENUE COULD NOT DEMONSTRATE THAT THE AFORESAID EXPLANATIONS WERE NOT FURNISHED BEFORE THE A SSESSING OFFICER; WHEREAS THE LD. CIT(A) HAS MADE A CATEGORICAL OBSERVATION THAT THE DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER, BUT IT WAS NO T EXAMINED BY HIM. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS EXAMINED THE DE TAILS FURNISHED BY THE ASSESSEE AND THE ENTRIES ARE APPEARING IN THE ACCOUNTS . HENCE, NO ADDITION I S CALLED FOR. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A). 21 . IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDE R WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENT I ONED ON THE CAPTION PAGE. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH SEPTEMBER, 2014 JJ: 2908 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )