DCIT, Chandigarh V. M/s Winsome Textiles Inds. Ltd., Chandigarh

ITA 722/CHANDI/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77111 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 02-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B M KHANNA
• Assessee Lawyers: MANJIT SINGH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.722 /CHD/2010 ASSESSMENT YEAR : 2006-07 THE D.C.I.T., VS. WINSOME TEXTILES INDS.LTD., CIRCLE 4(1) SCO 144-145, SECTOR 34, CHANDIGARH. CHANDIGARH. PAN: AAACW1910G ITA NO.704 /CHD/2011 ASSESSMENT YEAR : 2007-08 ITA NO.1191 /CHD/2013 ASSESSMENT YEAR : 2008-09 THE A.C.I.T., VS. WINSOME TEXTILES INDS.LTD., CIRCLE 4(1) SCO 191-192, SECTOR 34, CHANDIGARH. CHANDIGARH. PAN: AAACW1910G & ITA NO.1192 /CHD/2013 ASSESSMENT YEAR : 2010-11 THE D.C.I.T., VS. WINSOME TEXTILES INDS.LTD., CIRCLE 4(1) SCO 191-192, SECTOR 34, CHANDIGARH. CHANDIGARH. PAN: AAACW1910G (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI TEJ MOHAN SINGH & B.M.KHANNA RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 20.05.2014 DATE OF PRONOUNCEMENT : 06.06.2014 2 O R D E R PER SUSHMA CHOWLA, J.M. : THESE FOUR APPEALS FILED BY THE REVENUE ARE AGAINS T THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS), CHANDIGARH DATED 29.3.2010, 13.5.2011, 17.10.2013 AND 17.10.2013 RES PECTIVELY RELATING TO ASSESSMENT YEARS 2006-07, 2007-08, 2008-09 AND 2010 -11 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF INCOME TAX ACT , 1961 (IN SHORT THE ACT). 2. THIS BUNCH OF APPEALS RELATING TO THE SAME ASS ESSEE ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DIS POSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE REVENUE IN ITA NO.722/CHD/2010 HAS RAISED FO LLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. C1T(A) HAS ERRED IN ALLOWING APPEAL OF THE AS SESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 450610/- MADE BY THE AS PER THE PROVISIONS OF ACT DISALLOWING PRIOR PERIOD EXPENSES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 3080405/- MAD E BY THE A.O. U/S 40(A)(IA) OF THE I.T. ACT WHEREAS THE A.O. HAS MADE ADDITION AS PER THE PROVISIONS OF THE ACT AND CBDT CIRCULAR NO. 715 DATED 08/08/1995. 4 IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND A NY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OFF. 4. THE GROUND NO.1 RAISED BY THE REVENUE IS GENERAL IN NATURE AND THE SAME IS DISMISSED 3 5. THE GROUND NO.2 RAISED BY THE REVENUE IS AGAINST DELETION OF ADDITION OF RS.4,50,610/- ON ACCOUNT OF DISALLOWANC E OF PRIOR PRIOD EXPENSES. 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF COTTON YA RN. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DEBITED P RIOR PERIOD EXPENSES OF RS.60,93,077/- TO THE PROFIT & LOSS ACC OUNT. HOWEVER, IN THE COMPUTATION OF INCOME THE ASSESSEE HAD ADDED BACK SUM OF RS.56,42,467/-. THE EXPLANATION OF THE ASSESSEE BEF ORE THE ASSESSING OFFICER WAS THAT DURING THE YEAR HAD SHOW N CERTAIN INCOME PERTAINING TO PRIOR PERIOD AND THE SAME WAS SET OFF AGAINST THE EXPENSES AND THE BALANCE AMOUNT OF RS.56,42,467 /- WAS ADDED BACK. SINCE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE ASSESSING OFFICER HAD OBSERVED THAT THIS ASPECT COULD NOT BE ACCEPTED AND THE ASSESSEE COULD CLAIM SUCH EXPENDITURE FOR EARLIER YEAR IN THE ASSESSMENT TO W HICH IT PERTAINED. THUS BALANCE SUM OF RS.4,50,670/- WAS NOT ALLOWED A S BEING NOT RELATABLE TO THE YEAR UNDER CONSIDERATION. 7. THE CIT (APPEALS) NOTED THAT THE ASSESSEE FROM I TS INCEPTION WAS FOLLOWING THE SAID PRACTICE OF ACCOUNTING AND I TS PREVIOUS YEARS EXPENSES AND INCOME AND SIMILARLY NET PRIOR PERIOD EXPENSES HAVE BEEN ALLOWED WHILE COMPLETING ASSESSMENT FOR A SSESSMENT YEAR 2004-05 VIDE ORDER PASSED UNDER SECTION 143(3) OF T HE ACT. THE CIT (APPEALS) THUS DELETED THE ADDITION OF RS.4,50, 610/-. 8. S/SHRI TEJ MOHAN SINGH AND B.M.KHANNA APPEARED F OR THE ASSESSEE AND SHRI MANJIT SINGH, DR APPEARED ON BEHA LF OF THE REVENUE AND PUT FORWARD THEIR CONTENTIONS. 4 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS ADMITTEDLY FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING DURING THE YEAR UNDER CONSIDERATION. TH E ASSESSEE HAD DEBITED SUM OF RS.60,93,077/- TO ITS PROFIT & LOSS ACCOUNT ON ACCOUNT OF PRIOR PERIOD EXPENSES. ADMITTEDLY THE A SSESSEE IN THE COMPUTATION OF INCOME HAD ADDED BACK THE PRIOR PERI OD EXPENSES BUT ONLY TO THE EXTENT OF RS.56,42,467/-. THE BALA NCE SUM OF RS.4,50,610/- WAS CLAIMED TO BE THE INCOME PERTAINI NG TO PRIOR PERIOD WHICH WAS ADJUSTED AGAINST PRIOR PERIOD EXPE NSES AND THE NET WAS ADDED BACK TO COMPUTE TAXABLE INCOME FOR THE YE AR UNDER APPEAL. THE LEARNED A.R. FOR THE ASSESSEE WAS ASK ED TO EXPLAIN THE NATURE OF THE PERIOD EXPENSES AND HE FAILED TO EXPL AIN THE SAME. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES WHERE T HE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, PRIOR PE RIOD EXPENSES CANNOT BE ALLOWED IN THE HANDS OF THE ASSESSEE AND THE SAID EXPENDITURE COULD ONLY BE CLAIMED IN THE RESPECTIVE YEARS TO WHICH IT PERTAINED. THE ASSESSEE HAD ALREADY ADDED BACK SUM OF RS.56,42,467/- AND THE BALANCE SUM OF RS.4,50,610/- IS ALSO TO BE DISALLOWED IN THE HANDS OF THE ASSESSEE AS NOT BEIN G RELATABLE TO THE YEAR UNDER CONSIDERATION. THE GROUND OF APPEAL NO. 2 RAISED BY THE REVENUE IS THUS ALLOWED. 10. THE ISSUE IN GROUND NO.3 RAISED BY THE REVENUE IS AGAINST DELETION OF ADDITION OF RS.30,80,405/-. 11. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD MADE CERTAIN PAYMENTS TO M/S KAMAL COTTON, SHREE BH AGWATI COTTON TRADERS & M/S SUGAN CHAND BHUARAMAL & SONS O N ACCOUNT OF VARIOUS ITEMS AS TABULATED AT APGE 5 OF THE ASSE SSMENT ORDER. THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFIC ER WAS THAT NO 5 TAX WAS DEDUCTED AT SOURCE ON SUCH PAYMENTS AS THES E WERE IN THE NATURE OF REIMBURSEMENT. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE ON THE AMOUNT OF RS.21,66,498/- PAID TO M/S KAMAL COTTON, RS.5,98,721 TO SHREE BHAGWATI COTTON TRADERS AND RS.3,15,186/- TO M/S SUGAN CHAND BHUARAMAL & SONS, TOTALING RS.30,80,405/-, TH E PROVISIONS OF SECTION 40(A)(IA) OF THE ACT PROVIDED THAT THE S AID SUM WAS NOT ALLOWABLE AS DEDUCTION. 12. THE CIT (APPEALS) PERUSED THE DETAILED NATURE O F EXPENSES WHICH HAD BEEN CLAIMED TO BE REIMBURSED BY THE ASSE SSEE TO M/S KAMAL COTTON, SHREE BHAGWATI COTTON TRADERS & M/S S UGAN CHAND BHUARAMAL & SONS TOTALING RS.30,80,405/- AND ON THE PERUSAL OF THE RECEIPTS, INVOICES AND BILLS HE FOUND THAT EITHER T HE TDS WAS NOT PAYABLE ON THE SAID PAYMENTS BY VIRTUE OF THE SAME BEING EXEMPT, FOR EXAMPLE INTEREST PAYMENTS TO BANK OR RENT PAYME NTS TO GOVERNMENT OR THE PAYMENTS WERE BELOW THE PRESCRIBE D LIMITS FOR DEDUCTION OF TAX AT SOURCE. THE CIT (APPEALS) RELY ING UPON THE RATIO LAID DOWN ON SHRI.PARTAP HOON VS. ADDL.CIT, R ANGE-1, CHANDIGARH IN ITA NO.536/CHD/2009 WHEREIN THE ISSUE OF REIMBURSEMENT OF FREIGHT CHARGES BY THAT COMPANY TO M/S HERO HONDA AROSE BEFORE THE TRIBUNAL AND IT WAS HELD THA T WHERE THE ASSESSEE HAD MADE PAYMENTS TOWARDS REIMBURSEMENT TO CERTAIN CHARGES/PAYMENTS, NO TDS WAS DEDUCTIBLE ON SUCH PAY MENTS. FURTHER IN ANY CASE THE PARTIES TO WHOM REIMBURSEME NT HAD BEEN MADE HAD NOT VIOLATED ANY TDS PROVISIONS WITH REGAR D TO PAYMENTS ON BEHALF OF THE ASSESSEE AND CONSEQUENTLY NO ADDIT ION OF RS.30,80,405/- WAS WARRANTED. 6 13. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDER OF THE ASSESSING OFFICER. 14. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIAN CE ON THE ORDER OF THE CIT (APPEALS). 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA D MADE CERTAIN PAYMENTS TO DIFFERENT ENTITIES ON ACCOUNT OF VARIOU S EXPENDITURE WHICH HAVE BEEN MET BY THE SAID COMPANY AND THE ASS ESSEE WAS REIMBURSING THE SAME TO THE SAID ENTITY. THE NATUR E OF THE EXPENSES REFLECTED RENT BEING PAID TO VARIOUS PARTIES AND BA NK INTEREST BEING PAID TO ICICI BANK BEING REIMBURSED. ADMITTEDLY T HERE ARE OTHER PAYMENTS ALSO ON ACCOUNT OF VARIOUS OTHER REASONS. THE CIT (APPEALS) HAD TABULATED THE DETAILS OF SAID EXPENDI TURE UNDER PARA 18 OF THE APPELLATE ORDER WHICH ARE AS UNDER: POINT NO. PARTICULARS AMOUNT KAMAL COTTON TRADERS PVT. LTD. 1 BANK INTEREST CHARGES BY ICICI RS.1 2950 11.00 BANK 2 GODOWN RENT PAID TO DIFFERENT OWNERS (UNDER ICICI BANK) AND AMOUNT DOESN'T EXCEED THE PRESCRIBED LIMIT FOR DEDUCTION FOR TDS RS. 268052.00 3 EXPENSES PAID TO DIFFERENT PERSONS AND AMOUNT DOESN'T EXCEEDS THE PRESCRIBED LIMIT OF DEDUCTED FROM TDS A) LORRY FREIGHT RS.337825.00 B) CARRYING CHARGES RS. 117876.00 C) STACKING CHARGES RS. 64625.00 D) LOADING EXPENSES RS. 62056.00 E) OTHER MISC. EXP. RS. 21053.00 TOTAL _ RS. 2166498.0 0 7 SHREE BHAGWATI COTTON TRADERS 1 GODOWN RENT PAID TO A) HARYANA WAREHOUSING CORP. RS. 154 739.00 B) CENTRAL WAREHOUSING CORP. RS. 9644.00 TOTAL RS. 194383.00 2 TRUCK FREIGHT PAID TO DIFFERENT PERSONS AND AMOUNT DOESN'T EXCEED THE PRESCRIBED LIMIT OF DEDUCTED FOR T DS RS. 308000.00 3 EXP.PAID TO DIFFERENT PERSONS AND AMOUNT DOESN'T EXCEED THE PRESCRIBED LIMIT OF DEDUCTION FOR ID'S RS. 10268.00 TELEPHONE EXPENSES RS. 3001.00 TEXI CHARGES RS. 3695.00 COURIER EXPENSES RS. 32330.00 TELEPHONE EXPENSES RS, 2344.00 MISC. EXPENSES RS. 51638.00 TOTAL RS. 598721. 00 SUGUN CHAND BHUARAMAL & SONS 1 EXP. REIMBURSED TO ICICI BANK RS. 3 151 86.00 GRAND TODAL RS.3080405.00 16. THE PERUSAL OF THE SAID DETAILS REFLECTS THAT C ERTAIN EXPENDITURE BEING INCURRED BY THE ASSESSEE BY WAY O F PAYMENTS TO DIFFERENT PERSONS DID NOT EXCEED THE PRESCRIBED LIM ITS FOR DEDUCTION OF TAX AT SOURCE. THE CIT (APPEALS) VIDE PARA 19 H AD GIVEN FINDING THAT HE HAD PERUSED RECEIPTS, INVOICES AND BILLS TO EXAMINE THE APPLICABILITY OF TDS PROVISIONS TO THESE PAYMENTS A ND ON VERIFICATION HE FOUND THAT EITHER TDS WAS NOT PAYAB LE ON THESE PAYMENTS BY VIRTUE OF THESE BEING EXEMPT OR THE PAY MENTS WERE BELOW THE PRESCRIBED LIMITS FOR DEDUCTION OF TDS. IN VIEW OF THE CLEAR CUT FINDING OF THE CIT (APPEALS) AND IN THE A BSENCE OF ANY CONTRARY PLEADINGS MADE BY THE LEARNED D.R. FOR THE REVENUE WE FIND NOT MERIT IN THE SAID DISALLOWANCE. ANOTHER SET OF PAYMENTS ARE ON ACCOUNT OF REIMBURSEMENT OF EXPENSES, WHICH AGAIN DO NOT ATTRACT TDS PROVISIONS AND THERE WAS NO MERIT IN AN Y DISALLOWANCE. 17. THE CIT (APPEALS) HAD PERUSED THE DETAILS OF VA RIOUS PAYMENTS MADE BY THE ASSESSEE AND HAD ALSO TABULATE D THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE TOTALING R S.30,80,405/- 8 AND IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIR CUMSTANCES AND IN VIEW OF THE FINDINGS OF THE CIT (APPEALS) VIDE PARA S 18 AND 19 AND ALSO BECAUSE OF THE RATIO LAID DOWN BY THE TRIBUNAL IN SH.PARTAP HOON VS. ADDL.CIT (SUPRA) WE UPHOLD THE ORDER OF TH E CIT (APPEALS). THE RELEVANT FINDING OF THE TRIBUNAL HA VE BEEN REPRODUCED B Y THE CIT (APPEALS) UNDER PARA 30 AT P AGES 7 AND 8 OF THE APPELLATE ORDER AND THE SAME ARE NOT BEING REPR ODUCED FOR THE SAKE OF BREVITY. WE FURTHER FIND THAT SIMILAR ISS UE HAS BEEN RAISED BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT IN C IT(TDS), CHANDIGARH VS. ASSISTANT MANAGER (ACCOUNTS), FOOD C ORPORATION OF INDIA (PAY OFFICE), JAGADHRI IN ITA NO.407 OF 2008 DATE OF DECISION 21.8.2008 AND BEFORE THE CHANDIGARH BENCH OF THE TR IBUNAL IN M/S RANA WINES (L-1), HO KLIN AREA, NANGAL VS. ADDL.CIT, R-1 , CHANDIGARH IN ITA NO.599/CHD/2011 DATE OF DECISION 17.10.2011 A ND IN M/S YAMUNA OILS VS. DCIT IN ITA NO.1435/CHD/2010 ORDER DATED 16.4.2013 18. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WHERE THE ASSESSEE HAD REIMBURSED THE EXPENDITURE TO VARIOUS PARTIES, PART OF WHICH WERE AMENABLE TO TAX DEDUCTION AT SOURCE AND OTHER EXPENDITURE PAID BY THE ASSESSEE TO DIFFERENT PERSO NS UNDER SEVERAL HEADS, DID NOT EXCEED THE PRESCRIBED LIMITS FOR DED UCTION OF TAX AT SOURCE, THERE IS NO MERIT IN THE SAID DISALLOWANCE. IN THE ENTIRETY OF THE SAME WE UPHOLD THE ORDER OF THE CIT (APPEALS ) AND GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 19. THE REVENUE IN ITA NO.704/CHD/2011 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSE SSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 9 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF 9, 23,220/- BY INVOKING THE PROVISION OF SECTION 40(A) (IA) FOR NON DEDUCTI ON OF TAX AT SOURCE. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OFF. 20. THE REVENUE IN ITA NO.1191/CHD/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOU T APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.18 ,74,478/- MADE U/S 40(A)(IA) IN RESPECT OF HANDLING CHARGES PAID TO PERSONS THOUGH AS REIMBURSEMENT WITHOUT APPRECIATING THE FACT THAT TH EY ARE INDEPENDENT CONTRACTOR. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OFF. 21. IN ITA NO.704/CHD/2011 & ITA NO.1191/CHD/2013 T HE REVENUE IS AGGRIEVED BY DELETION OF ADDITION OF RS. 9,23,220/- AND RS.18,74,478/- RESPECTIVELY. THE SAID ADDITIONS WE RE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON DEDUCTION OF TA X OUT OF CERTAIN PAYMENTS BEING MADE TO DIFFERENT ENTITIES BY INVOKI NG THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE IS SUE INVOLVED IS IDENTICAL TO THE ISSUE RAISED IN ASSESSMENT YEAR 20 06-07. WE HAVE ALREADY ADJUDICATED THE SAID ISSUE IN ITA NO.722/CH D/2010 VIDE GROUND NO.3 AND FOLLOWING THE SAME PARITY OF REASON ING WE FIND NO MERIT IN THE GROUNDS OF APPEAL NOS.2 RAISED BY THE REVENUE IN ASSESSMENT YEARS 2007-08 AND 2008-09 AND THE SAME A RE DISMISSED. 22. IN ITA NO.1192/CHD/2013 THE REVENUE HAS RAISED FOLLOWING EFFECTIVE GROUNDS OF APPEAL:: 10 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ORDER PASSED BY THE CIT(A) IS PERVERSE AS THE DISALLOWANC E OF RS.20,77,44I/ OUT OF EXPENSES CLAIMED UNDER THE HEAD 'POWER & FUE LS' HAS BEEN DELETED BY GIVING A FINDING WHICH IS WITHOUT ANY EVIDENCE W HEREAS THE SAID DISALLOWANCES WERE MADE BY THE AO AFTER COMPARIN G THE CLAIM OF THE ASSESSEE FOR THREE YEARS AND RECORDING A FINDING OF EXCESSIVE CLAIM AND OF DISCREPANCIES FOUND IN THE BILLS AND VOUCHERS ON PH YSICAL VERIFICATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF EXPENDIT URE AMOUNTING TO RS. 20,77,411/- WITHOUT EXAMINING/GETTING EXAMINED THE PLEA OF ASSESSEE WHEREAS THE AO HAS MADE THE DISALLOWANCES ON THE B ASIS OF COMPARISON OF EXPENSES CLAIMED BY THE ASSESSEE FOR PRECEDING Y EARS AND RECORDING A FINDING OF EXCESSIVE CLAIM AND SPECIFIC FINDING OF CERTAIN DISCREPANCIES IN THE BILLS AND VOUCHERS DURING PHYSICAL VERIFICATION OF THE SAME 23. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT WHILE COMPLETING THE ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSI DERATION THE ASSESSING OFFICER NOTED THAT THE EXPENDITURE ON POW ER AND FUEL TO THE TUNE OF RS.20.77 CRORES WAS EXCESSIVE WHEN COMP ARED TO EARLIER YEARS. THE ASSESSEE WAS ASKED TO PRODUCE THE BILLS AND VOUCHERS IN RESPECT OF THE SAID EXPENDITURE. THE PLEA OF THE A SSESSEE BEFORE THE ASSESSING OFFICER WAS THAT IN THE NATURE OF BUSINES S CARRIED ON BY THE ASSESSEE I.E. MANUFACTURING OF TEXTILES WAS ENE RGY INTENSIVE AND SUCH EXPENDITURE WAS BOUND TO BE HIGH. THE ASSESSI NG OFFICER OBSERVED THAT THE CONTENTION OF THE ASSESSEE SEEMS REASONABLE. HOWEVER, TEST CHECK OF BILLS AND VOUCHERS PRODUCED SHOWS SOME DISCREPANCIES. THEREFORE, 1% OF THE EXPENDITURE I.E . RS.20,77,411/- WAS ADDED BACK IN THE INCOME OF THE ASSESSEE. 11 24. THE CIT (APPEALS) DELETED THE ADDITION AS THE A SSESSING OFFICER HAD NOT POINTED OUT ANY SPECIFIC DISCREPANC Y OF ANY UNVOUCHED EXPENDITURE AND HAD MADE ADHOC DISALLOWAN CE WITHOUT COGENT REASON. 25. THE LEARNED D.R. FOR THE REVENUE DURING THE COU RSE OF HEARING WAS ASKED TO EXPLAIN THE NATURE OF DISCREPANCY WHIC H RESULTED IN THE DISALLOWANCE OF 1% IN THE EXPENDITURE IN THE HA NDS OF THE ASSESSEE. HOWEVER, THE LEARNED D.R. FOR THE REVENU E FAILED TO MEET THE SAME. 26. THE PLEA OF THE LEARNED A.R. FOR THE ASSESSEE W AS THAT AN ADHOC DISALLOWANCE WAS MADE IN THE HANDS OF THE ASS ESSEE WHICH IS NOT WARRANTED SPECIALLY WHEN ALL THE BILLS AND VOUC HERS WERE PRODUCED BEFORE THE ASSESSING OFFICER. 27. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS CARRYING ON THE BUSINESS OF MANUFAC TURING OF TEXTILES AND DURING THE YEAR HAD INCURRED EXPENDITU RE ON POWER AND FUEL OF RS.20.77 CRORES. ADMITTEDLY THE ASSESSEE H AD PRODUCED BILLS AND VOUCHERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFIC ER WAS THAT IN THE NATURE OF BUSINESS CARRIED ON BY IT BEING ENERG Y INTENSIVE, THE EXPENSES WERE ON HIGHER SIDE. THE ASSESSING OFFICE R HAS ACCEPTED THE PLEA OF THE ASSESSEE. HOWEVER, AN ADHOC DISALL OWANCE OF 1% OF THE TOTAL EXPENDITURE WAS MADE BY THE ASSESSING OFF ICER. HOWEVER, THE ASSESSING OFFICER HAS FAILED TO POINT OUT ANY D ISCREPANCY IN THE BILLS AND VOUCHERS PRODUCED BY THE ASSESSEE AND IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES WE FIND NO MERIT IN THE SAI D ADHOC DISALLOWANCE MADE BY THE ASSESSING OFFICER. UPHOLD ING THE ORDER 12 OF THE CIT (APPEALS) WE DISMISS GROUND NOS.2 AND 3 RAISED BY THE REVENUE. 28. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.722/CHD/2010 IS PARTLY ALLOWED AND THE APPEALS OF THE REVENUE IN IT A NO.704/CHD/2011, ITA NOS.1191 &1192/CHD/2013 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF JUNE, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6 TH JUNE, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH