Dy. CIT Cen Cir 1[2] Pune., Pune V. Venkateswara Hatcheries P. Ltd, Pune

ITA 742/PUN/2012

• Counselvise Citation: 74224514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 13-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L VERMA
• Keywords: Gift; Depreciation; Business expenditure; Income from undisclosed sources; Search and seizure; Loose papers; Corroborative evidences; Block assessment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA NO. 742 TO 745/PN/2012 (ASSESSMENT YEAR: 2003-04 TO 2006-07) DY. CIT CENT. CIR. 1(2) PUNE APPELLANT VS. VENKATESHWARA HATCHERIES P. LTD. VENKATESHWARA HOUSE S.NO. 114/A/2 PUNE SINHAGAD ROAD, PUNE-411 030 PAN AAACV 7247 H RESPONDENT ITA NO. 753 TO 755/PN/2012 (ASSESSMENT YEAR: 2003-04 TO 2005-06) VENKATESHWARA HATCHERIES P. LTD. VENKATESHWARA HOUSE S.NO. 114/A/2 PUNE SINHAGAD ROAD, PUNE-411 030 PAN AAACV 7247 H APPELLANT VS. DY. CIT CENT. CIR. 1(2) PUNE RESPONDENT ASSESSEE BY: SHRI NIKHIL PATHAK DEPARTMENT BY: SMT. M.L . VERMA DATE OF HEARING : 16.07.2013 DATE OF ORDER : 24.07.2013 ORDER PER BENCH THESE CROSS APPEALS PERTAINING TO THE SAME ASSESSE E RAISE SIMILAR ISSUES AND ALSO ARISING OUT OF RESPECTIVE O RDERS OF THE CIT(A) (CENTRAL), PUNE DATED 27-12-2011 FOR A.Y. 2003-04 T O 2005-06 AND ALSO THE APPEAL OF THE REVENUE DIRECTED AGAINST THE ORDER OF THE CIT(A) CENTRAL . PUNE DATED 27-12-2011 FOR A.Y. 200 6-07 WERE HEARD TOGETHER AND THE SAME ARE BEING DISPOSED OF B Y THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS ENGAGED IN POULTRY BUSINESS. TH ERE WAS A SEARCH ON THE ASSESSEE ON 22-10-2008. IN THE COURS E OF SEARCH, EVIDENCES WERE FOUND THAT THE ASSESSEE-COMPANY HAD NOT FULLY ACCOUNTED THE CULL SALES IN RESPECT OF BROILER BIRD S. IN POULTRY BUSINESS, CULL SALES IS IN RESPECT OF TWO TYPES OF BIRDS BROILER AND LAYER. THE BROILER BIRD HAS LOT OF RESALE VALUE WH ILE THE LAYER BIRD IS VERY OLD AND DOES NOT HAVE MATERIAL RESALE VALUE . IN THE COURSE OF SEARCH, EVIDENCES WERE FOUND FOR A.Y. 2007-08 TO 20 09-10 THAT THE CASH COMPONENT COLLECTED BY THE ASSESSEE IS IN RESP ECT OF THE BROILER BIRDS ONLY AND NOT IN RESPECT OF LAYER BIRDS. THE SEIZED PAPERS INDICATED THAT THE ASSESSEE HAD RECEIVED CASH ON AC COUNT OF CULL SALES AND THIS FACT WAS ACCEPTED BY THE ASSESSEE IN THE COURSE OF SEARCH. IN RESPONSE TO QUERY IN THIS REGARD, THE A SSESSEE ADMITTED UNACCOUNTED INCOME RECEIVED ON ACCOUNT OF CULL SALE S AND OFFERED THE SAME TO TAX IN THE RETURNS FILED FOR A.Y. 2007- 08 TO 2009-10. BUT AT THE SAME TIME, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT NO EVIDENCE WAS FOUND OF ANY UNACCOUNTED INCOM E GENERATED ON CULL SALES FOR A.Y. 2003-04 TO 2006-07. THIS FA CT COULD ALSO NOT BE DISPUTED BY REVENUE. HENCE IN THE ABSENCE OF AN Y EVIDENCE OF ANY UNACCOUNTED INCOME GENERATED ON CULL SALES, THE ASSESSEE COMPANY DID NOT OFFER ANY INCOME TO TAX FOR A.Y. 20 03-04 TO 2006- 07. 2.1. THE ASSESSING OFFICER HAS NOT ACCEPTED THE STA ND OF THE ASSESSEE. ACCORDING TO HIM, THE ASSESSEE MUST HAVE CARRIED OUT SIMILAR PRACTICE IN THE EARLIER YEARS AS WELL AND H ENCE, ON THE BASIS OF THE EVIDENCES GATHERED FOR A.Y. 2007-08 TO 2009- 10, THE ASSESSING OFFICER EXTRAPOLATED THE CULL SALES FOR T HE EARLIER FOUR YEARS AND MADE ADDITIONS AS DETAILED ON PAGE 10 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS PRESUMED THAT THE ASSESSEE MUST HAVE RECEIVED UNACCOUNTED CASH ON CULL SALES IN THE EARLIER YEARS AND ACCORDINGLY, HAS MADE THE ADDITION FOR A.Y. 200 3-04 TO 2006- 07. 2.2. THE MATTER WAS CARRIED IN APPEAL BEFORE THE FI RST APPELLATE AUTHORITY. THE STAND OF THE ASSESSEE HAS BEEN THAT THE ADDITION IN QUESTION IS NOT JUSTIFIED AS THERE WAS NO DISPUTE T HAT NO EVIDENCE WAS FOUND OF UNACCOUNTED CULL SALES IN THE EARLIER YEARS. THE EVIDENCE OF CASH RECEIVED WAS FOUND FOR A.Y. 2007-0 8 TO 2009-10. THE ASSESSING OFFICER HIMSELF HAS STATED THAT THE A SSESSEE HAS OFFERED RS. 40 LAKHS AS ITS UNDISCLOSED INCOME ON A CCOUNT OF CULL SALES FOR A.Y. 2006-07. THE AMOUNT OF RS. 40 LAKHS OFFERED BY THE ASSESSEE FOR A.Y. 2006-07 WAS ON ACCOUNT OF CASH RE CEIVED FROM DEBTORS AND NOT ON ACCOUNT OF CASH RECEIVED ON SALE OF CULLED BIRDS WHICH WAS NOT ACCOUNTED FOR, WAS THE STAND OF THE A SSESSEE BEFORE THE CIT(A). HOWEVER, IT WAS SUBMITTED BEFORE THE C IT(A) THAT NO EVIDENCE WAS FOUND FOR A.Y. 2003-04 TO 2006-07 OF A NY UNACCOUNTED INCOME GENERATED ON CULL SALES. 2.3. IT WAS STATED BEFORE THE CIT(A) THAT EVIDENCE OF ONE YEAR COULD NOT BE UTILISED FOR MAKING ADDITION IN THE OTHER YE AR. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE. HE OBSERV ED THAT THE ASSESSING OFFICER HAS ATTEMPTED TO EXTRAPOLATE THE RECEIPTS ON ACCOUNT OF CULL SALES ON THE BASIS OF INCRIMINATING EVIDENCE FOUND FOR A.Y. 2007-08 TO 2009-10. IN THIS REGARD, THE C IT(A) REFERRING TO THE JUDGMENT OF THE TRIBUNAL IN THE CASE OF ASSTT. CIT CENTRAL CIR. AURANGABAD VS RAMDEO OIL INDUSTRIES PVT. LTD. (ITA NO. 1375 TO 1378/PN/2007 FOR A.Y. 1999-00 AND 2000-01 TO 2002-0 3 DATED 22-6-2009 HELD THAT SUCH EXTRAPOLATION IS NOT JUSTI FIED AND HENCE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE REVENUE, IN TER ALIA, SUBMITTING THAT THE CIT(A) WAS NOT JUSTIFIED IN DEL ETING THE ADDITION OF RS. 79.56 LAKHS MADE ON ACCOUNT OF UNACCOUNTED I NCOME FROM CULL SALES IN A.Y. 2003-04. IT WAS ALSO SUBMITTED ON BEHALF OF THE REVENUE THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETI NG THE ADDITION MADE ON ACCOUNT OF UNACCOUNTED INCOME FROM CULL SAL ES IGNORING THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF H.M. ESUFALI H. M. ABDULALI, 246 ITR 761 (BOM) WHICH IS APPLICABLE TO THE FACTS OF THE CASE. ON THE OTHER HAND, THE LEAR NED AUTHORISED REPRESENTATIVE SUPPORTED THE ORDER OF THE CIT(A). 2.4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ADDITION HAS B EEN MADE ON PRESUMPTIONS AND SURMISES THAT THE ASSESSEE MIGHT H AVE RECEIVED ANY AMOUNT OVER AND ABOVE THE AMOUNT NOTED IN THE B OOKS FOR A.Y.2003-04 TO 2006-07. ACCORDINGLY IN THE ABSENCE OF ANY EVIDENCE FOR THESE FOUR YEARS, THE ADDITION IS NOT JUSTIFIED . IT WAS ALSO SUBMITTED THAT NO INCOME CAN BE ESTIMATED FOR THE A BOVE YEARS ON THE BASIS OF EVIDENCE FOUND FOR ONE PARTICULAR YEAR ESPECIALLY WHEN NO INCRIMINATING EVIDENCE WAS FOUND FOR THE YEARS U NDER CONSIDERATION. THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. RAMDEO OIL INDUSTRIES (SUPRA) HAS DEALT WITH SIMILA R ISSUE. IN THE SAID CASE, A DIARY WAS SEIZED WHEREIN CERTAIN DISPA TCHES OF GOODS HAVE BEEN RECORDED RELATING TO THE PERIOD OF 1-5-20 04 TO 22-9-2004. ON VERIFICATION, IT WAS FOUND THAT ONLY PART OF THE TRANSACTIONS OF DISPATCHES WAS RECORDED IN THE BOOKS OF THE ASSESSE E. THE ASSESSING OFFICER CALCULATED THE AVERAGE MONTHLY UN ACCOUNTED TURNOVER AND COMPARED IT WITH THE MONTHLY TURNOVER AS RECORDED IN THE BOOKS OF ACCOUNTS AND THEREAFTER ARRIVED AT THE PERCENTAGE OF 22% WHICH ACCORDING TO HIM WAS THE UNRECORDED TURNO VER VIS--VIS TOTAL RECORDED TURNOVER. ON THIS BASIS, THE ASSESS ING OFFICER WORKED OUT AND MADE ADDITION IN RESPECT OF THE GROS S PROFIT ON UNRECORDED SALES AS FOLLOWS:- A.Y. RECORDED SALES UNRECORDED SALES GP % @ GP ON UNRECORDED SALES 1999 - 00 44,98,13,265 9,89,58,918 2.59 25,63,035 2000 - 01 35,68,15,127 8,06,55,328 3.82 30,81,033 2001 - 02 32,07,02,949 7,05,54,648 4.22 29,63,395 2002 - 03 33,65,20,799 7,40,34,5 75 5.14 38,05,377 IN APPEAL, THE CIT(A) DELETED THE ADDITION WHICH W AS UPHELD BY THE TRIBUNAL ON THE REASONING THAT THE AFORESAID EX TRAPOLATION OF TURNOVER WAS NOT BASED UPON OR SUPPORTED BY ANY INC RIMINATING MATERIAL FOR THE YEARS UNDER CONSIDERATION EVEN THO UGH THE REVENUE HAD UNDERTAKEN THE EXTREME STEP OF SEARCH AT THE PR EMISES OF THE ASSESSEE. 2.4.1. WE FIND THAT IN THE CASE OF DCIT VS. ROYAL M ARWAR TOBACCO PRODUCT (P) LTD. (2009) 120 TTJ (AHD) 387 T HE TRIBUNAL HELD AS UNDER:- HELD: THE UNDISPUTED FACTS OF THE CASE ARE THAT D URING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS NO EVIDENC E AND/OR MATERIAL INDICATING ANY SUPPRESSED SALES MADE BY TH E ASSESSEE DURING THE A.Y. 2000-01, 2001-02, 2002-03 AND 2003-04 WAS FOUND. NO MATERIAL WAS ALSO FOUND TO I NDICATE THAT THERE WAS A SUPPRESSED PRODUCTION IN THE AFORE SAID ASSESSMENT YEARS THE A.O FINDING THAT MATERIAL SEI ZED RELATING TO THE AY. 2004-05 IN THE ABOVE SEARCH INDICATING S UPPRESSED PRODUCTION AND SALES EXISTED IN THE A.Y. 2004-05, O N THE BASIS OF THIS, HE PRESUMED THAT THERE MIGHT HAVE BEEN SUP PRESSED PRODUCTION AND SALES IN THE A.Y. 2001-01 TO 2003-04 ALSO. HENCE, HE TAKING THE CONSUMPTION OF ELECTRICITY AS BASIS AND ON THE FURTHER ASSUMPTION AND PRESUMPTION ARRIVED A T SOME SUPPRESSED PRODUCTION AND SALES FOR THE SAID ASSESS MENT YEARS. IT IS NOT IN DISPUTE THAT NO DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED FOR THE AFORESAID YEARS WAS FOUN D. IN ABSENCE OF ANY MATERIAL BEING FOUND DURING THE SEAR CH RELEVANT TO THE AFORESAID ASSESSMENT YEARS, CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE FOR THESE YEARS ONLY ON THE BASIS OF ASSUMPTION AND SURMISES. 2.4.2. WE FIND THAT JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M.M. SALES AGENCIES (2005) 97 TTJ (JAIPUR) 575 HELD THAT THE SALES ARE TO BE ESTIMATED ONLY FOR THE YEAR FOR WHICH INFORMATION OR DOCUMENT HAS BEEN FOUND OR SEIZED FOR A PART OF THE ACCOUNTING PERIOD AND NOT FOR THE PERIOD FOR WHICH NO INFORMAT ION IS AVAILABLE ON THE BASIS OF SEIZED RECORD. 2.4.3. WE ALSO FIND THAT HYDERABAD BENCH OF THE TR IBUNAL IN THE CASE OF ACIT VS. AMBICA FOOD INDUSTRIES LTD (20 07) 110 TTJ (HYD) 680 HELD THAT THE ADDITION OF NOTIONAL INCOM E COULD NOT BE MADE IN THE BLOCK ASSESSMENT ON THE ASSUMPTION THAT SINCE THERE WAS SUPPRESSION OF TURNOVER IN A SPECIFIC PERIOD TH ERE WAS SUPPRESSION OF TURNOVER/INCOME IN THE EARLIER YEARS AND SUBSEQUENT YEARS/PERIOD ALSO. ONCE THERE WAS NO S UPPRESSION OF TURNOVER OR UNACCOUNTED BUSINESS IN EARLIER YEARS, THERE WAS NO QUESTION OF MAKING ANY ADDITION ON ACCOUNT OF INVES TMENT FOR RUNNING UNACCOUNTED BUSINESS IN EARLIER YEARS. SIMI LARLY, WE FIND THAT THE HONBLE ORISSA HIGH COURT IN THE CASE OF S TATE OF ORISSA VS. J.P. SIKIRIA 67 STC 101 (ORISSA) HELD THAT EVIDENCE OF ONE YEAR CANNOT BE UTILISED FOR MAKING AN ADDITION IN ANOTHE R YEAR. 2.4.4. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF H.C. CHANDNA P. LTD. VS. DCIT 91 TTJ (DEL) 243 HELD THAT EVEN UNDER THE AMENDED PROVISIONS OF SEC. 158B(B) RETROSPECTIV ELY W.E.F. 1-7- 1995, IT HAS BEEN PROVIDED THAT ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION MUST REPRESENT WHOLLY OR PARTLY INCOME WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DI SCLOSED IN THE ABSENCE OF WHICH, TRADING RESULTS OF EARLIER YEARS DISCLOSED BY THE ASSESSEE CANNOT BE DISTURBED. THE RATIO OF SUPREME COURT DECISION IN THE CASE OF H. ESUFALI H.M. ABDULALI (90 ITR 271 ) IS NOT APPLICABLE TO THE PRESENT CASE. IN H. ESUFALI H.M. ABDULALI (SUPRA) THE FACTS WERE THAT THE ASSESSEE WAS A DEALER IN IR ON AND STEEL. THERE WAS AN INSPECTION OF THE FLYING SQUAD OF THE SALES-TAX DEPARTMENT AND THEY FOUND A B ILL BOOK FOR THE PERI OD 1-9-1960 TO 19-9-1960. IT WAS FOUND BY THEM THAT AS PER THE SA ID BILL BOOK, THE ASSESSEE HAD EFFECTED SALES OF RS. 31,178/- FOR THA T PERIOD AND WHICH WERE NOT ENTERED IN THE BOOKS. ON THE BASIS OF THE UNACCOUNTED SALES MADE BY THE ASSESSEE FOR 19 DAYS, THE SALES-TAX OFFICER ESTIMATED THE TURNOVER FOR THE BALANCE PERI OD OF THAT YEAR. THE ASSESSEE OBJECTED TO THIS ESTIMATION OF THE TUR NOVER FOR THE BALANCE PERIOD OF THE SAME YEAR PROVIDED IT IS BASE D ON RATIONAL BASIS. THUS, IN THE CASE BEFORE THE HONBLE SUPREM E COURT THE TURNOVER WAS ESTIMATED FOR THE SAME YEAR SO IT WAS NOT A CASE THAT ON THE BASIS OF EVIDENCE FOUND FOR ONE YEAR, THE TU RNOVER OF OTHER YEARS COULD BE ESTIMATED. ACCORDINGLY, THE RATIO O F THE ESUFALI (SUPRA) IS NOT APPLICABLE TO THE FACTS OF PRESENT C ASE BECAUSE THERE WAS NO EVIDENCE FOUND DURING SEARCH THAT THE ASSESS EE HAD RECEIVED UNACCOUNTED CULL SALES IN FINANCIAL YEAR 2002-03, 2 003-04, 2004- 05, 2005-06 AND 2006-07. THEREFORE, THERE WAS NO RE ASON TO EXTRAPOLATE AND ESTIMATE THE UNACCOUNTED CULL SALES FOR THE ABOVE YEARS ON THE BASIS OF EVIDENCE FOUND FOR FINANCIAL YEAR 2007-08 AND 2008-09. THE ASSESSING OFFICER HAS ALSO RELIED ON T HE DECISION OF THE TRIBUNAL PUNE BENCH IN THE CASE OF KHOPADE KISANRAO MANIKRAO (74 SITD 25 (TM). ACCORDING TO THE ASSESSING OFFICER, IN SAID CASE IT HAS BEEN HELD THAT THE ASSESSING OFFICER CAN ESTIMA TE THE UNDISCLOSED INCOME OF THE ASSESSEE BY PLACING RELIA NCE ON THE EVIDENCE FOUND IN THE COURSE OF SEARCH. THE FACTS OF THE CASE REFERRED BY THE ASSESSING OFFICER ARE DISTINGUISHAB LE. IN THE CASE OF KHOPADE KISANRAO MANIKRAO (SUPRA), THE EVIDENCE WAS FOUND THAT THE ASSESSEE HAD TAKEN ON MONEY ON SALE OF PLOTS. THE EVIDENCE WAS FOUND FOR ALL THE YEARS FALLING WITHIN THE BLOC K PERIOD. THUS THE ISSUE AROSE THAT ON THE BASIS OF EVIDENCE FOUND FOR SALE OF CERTAIN PLOTS, CAN THE ASSESSING OFFICER ESTIMATE T HE INCOME IN RESPECT OF OTHER PLOTS FOR WHICH NO EVIDENCE WAS FO UND. THE THIRD MEMBER HELD THAT THE EVIDENCE WAS FOUND THAT THE AS SESSEE WAS TAKING THE ON MONEY FOR SALE OF PLOTS FOR THE VARIO US YEARS OF THE BLOCK PERIOD AND HENCE, THE ASSESSING OFFICER COULD ESTIMATE THE ON MONEY IN RESPECT OF SALE OF OTHER PLOTS EVEN THOUGH THE EVIDENCE WAS NOT FOUND. HENCE AGAINST THE DISTINGUISHING FA CTOR, THE EVIDENCE WAS FOUND FOR ALL THE YEARS AND NOT SOME O F THE YEARS AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ESTIMATING THE UNACCOUNTED INCOME FOR THE OTHER YEARS IN THIS CASE . IN THE CASE OF KHOPADE KISANRAO MANIKRAO (SUPRA), THE ISSUE WAS WH ETHER EVIDENCE OF ONE YEAR CAN BE USED FOR MAKING AN ADDI TION IN THE OTHER YEAR WAS NOT RAISED SIMPLY BECAUSE CERTAIN EV IDENCE WAS FOUND FOR EACH OF THE YEARS. IN VIEW OF OUR ABOVE DISCUSSION, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN APPLYING THE RATIO IN THE CASE OF KHOPADE KISANRAO MANIKRAO (SUPRA). IN THE CIRCU MSTANCES, THEREFORE, THE CIT(A) WAS JUSTIFIED IN DELETING THE IMPUGNED ADDITION, WHICH NEEDS NO INTERFERENCE FROM OUR HAND . WE UPHOLD THE SAME. THIS WILL TAKE CARE OF SIMILAR ISSUE RAIS ED IN REVENUES APPEAL FOR A.Y. 2004-05 TO 2006-07 WHICH HAS BEEN D ECIDED IN FAVOUR OF ASSESSEE. 3. THE NEXT ISSUE IS REGARDING ADDITION OF RS. 7,53 ,000/- MADE ON ACCOUNT OF PARTY EXPENSES FOR A.Y. 2003-04, RS. 12, 71,000- FOR A.Y. 2004-05, RS. 17,87,000/- FOR A.Y. 2005-06 AND RS. 1 6,57,000/- FOR A.Y. 2006-07. THE ASSESSEE CELEBRATES THE NIGHT OF 31 ST DECEMBER OF EACH YEAR. THE ASSESSEE HOSTS A LAVISH PARTY FOR I TS BUSINESS ASSOCIATES AND GUESTS. THE EXPENDITURE ON ABOVE PA RTIES IS CLAIMED AS BUSINESS EXPENDITURE AND THE SAME HAS BEEN ALLOW ED BY THE ASSESSING OFFICER. HOWEVER, DURING THE COURSE OF S EARCH, EVIDENCE WAS FOUND THAT THE ASSESSEE HAD INCURRED SOME UNACC OUNTED CASH EXPENDITURE FOR F.Y. 2006-07. ON THE BASIS OF THE EVIDENCE FOUND FOR F.Y. 2006-07, THE ASSESSING OFFICER PRESUMED TH AT SIMILAR UNACCOUNTED CASH EXPENDITURE MUST HAVE BEEN INCURRE D FOR THE OTHER YEARS AND ACCORDINGLY, ESTIMATED THE CASH EXP ENDITURE @ 20% OF THE ACCOUNTED EXPENDITURE AND MADE AN ADDITION. 3.1. THE MATTER WAS CARRIED IN APPEAL BEFORE THE FI RST APPELLATE AUTHORITY. THE ASSESSEE OBJECTED TO THE ADDITION M ADE ON THE SAME LINES THAT THE EVIDENCE OF ONE YEAR CANNOT BE UTILI SED FOR MAKING ADDITION IN OTHER YEARS. CONSIDERING THE FA7CTS, T HE CIT(A) FOLLOWING SAME REASONING AS DETAILED IN PARA 2 OF THIS ORDER WITH REGARDS TO ADDITION BY WAY OF EXTRAPOLATION HAS DELETED THE AD DITIONS IN ALL THESE YEARS ON THE SAME REASONING. SAME HAS BEEN O PPOSED ON BEHALF OF THE REVENUE WITH SAME REASONING WHILE ASS ESSEE HAS SUPPORTED THE ORDER OF THE CIT(A). 3.2. WE HAVE DISCUSSED AND DECIDED THE ISSUE IN FAV OUR OF ASSESSEE WITH REGARDS TO ADDITION ON ACCOUNT OF CULL SALES V IDE PARA 2 OF THIS ORDER. THE ADDITION ON ACCOUNT OF CULL SALES WERE MADE IN ABSENCE OF EVIDENCE WITH REGARDS TO UNACCOUNTED CULL SALES IN ABOVE SAID YEARS AND THE SAME WERE DELETED BY THE CIT(A) BY HO LDING THAT IN ABSENCE OF ANY EVIDENCE FOR THE YEARS UNDER CONSIDE RATION, NO ADDITIONS ARE JUSTIFIED. SAME HAS BEEN UPHELD BY US . FOLLOWING THE SAME REASONINGS, THE ADDITION ON ACCOUNT OF PARTY E XPENSES IN ABSENCE OF EVIDENCE FOR THE YEAR UNDER CONSIDERATIO N WAS NOT JUSTIFIED AND THE CIT(A) HAS RIGHTLY DELETED THE SA ME. THIS REASONED FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OU R SIDE. WE UPHOLD THE SAME. THIS TAKES CARE OF THE ISSUE RAISED BY WA Y OF REVENUES APPEAL CAPTIONED ABOVE. 4. NOW, WE SHALL DEAL WITH ASSESSEES APPEALS IN IT A NO. 753/PN/2012 TO 755/PN/2012 FOR A.Y. 2003-04 TO 2005 -06 RAISING COMMON GROUNDS. FOR THE SAKE OF BREVITY, THE GROUN DS OF APPEAL FOR A.Y. 2003-04 ARE REPRODUCED HEREUNDER: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADD ITION TO THE EXTENT OF RS. 63,50,000/- BEING 5% OF RS. 1277.65 L AKHS BEING EXPENDITURE INCURRED ON ENTERTAINMENT, SALES PROMOT ION, CONVEYANCE, TRAVELLING, CAR RUNNING AND REPAIRS/DEP RECIATION, TELEPHONE, AIRCRAFT EXPENSES AND GIFTS AS PERSONAL/ NON- BUSINESS EXPENDITURE. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E EXPENDITURE OF RS. 1277.65 LAKHS INCURRED ON ENTERT AINMENT, SALES PROMOTION, CONVEYANCE, TRAVELLING, CAR RUNNIN G AND REPAIRS/DEPRECIATION, TELEPHONE, AIRCRAFT EXPENSES AND GIFTS WAS PURELY FOR THE PURPOSES OF THE BUSINESS AND HEN CE THERE WAS NO REASON TO DISALLOW THE SAME. 3, THE EARNED CIT(A) ERRED IN NOT APPRECIATING THA T NO SUCH ADDITION COULD BE MADE IN THE CASE OF A COMPANY AND HENCE THE DISALLOWANCE OF RS. 63,50,000/- MAY KINDLY BE D ELETED. 4.1. THE ASSESSING OFFICER HAS STATED THAT IN THE C OURSE OF SEARCH CERTAIN EVIDENCES WERE FOUND WHICH INDICATED THAT E XPENSES WERE INCURRED FOR NON-BUSINESS PURPOSES AND THE SAME WER E DEBITED IN THE BOOKS OF THE ASSESSEE. ACCORDINGLY, THE ASSES SING OFFICER DISALLOWED 10% OF VARIOUS EXPENSES AS GIVEN ON PAGE 24 OF THE ASSESSMENT ORDER. KEEPING IN LINE FOR A.Y. 2003-04 TO 2005-06 THAT 10% OF THE EXPENSES AS MENTIONED IN THE EARLIER PAR AGRAPHS, THE ASSESSING OFFICER ESTIMATED AND HELD TO BE FOR PERS ONAL PURPOSES AND NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THEREFORE, HE DISALLOWED 10% OF THE SAID EXPENSES A ND ADDED BACK TO THE TOTAL INCOME FOR A.Y. 2003-04 TO 2005-06 AS UNDER: A.Y. 2003-04 RS. 1,27,00,000/- A.Y. 2004-05 RS. 1,25,00,000/- A.Y. 2005-06 RS. 1,21,00,000/- 4.2. IN APPEAL, THE CIT(A) GAVE PART RELIEF AND RES TRICTED THE DISALLOWANCE TO 5% OF THE TOTAL EXPENSES AS AGAINST 10% MADE BY THE ASSESSING OFFICER VY HOLDING AS UNDER:- 3.4 I HAVE GONE THROUGH THE GROUNDS AND HAVE ALSO CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT CO MPANY AND OTHER MATERIAL AVAILABLE ON RECORD. A CAREFUL C ONSIDERATION OF THE CASE IN TOTALITY REVEALS THAT THE AO'S ACTIO N IN ADDING RS. 1,27,00,000/- FOR ASSESSMENT YEAR 2003-04 BEING 10% OF THE EXPENSES INCURRED ON ENTERTAINMENT, SALES PROMOTION , CONVEYANCE & TRAVELLING, CAR REPAIRS AND DEPRECIATI ON, TELEPHONE, AIRCRAFT EXPENSES AND GIFTS IS EXCESSIVE FOR THE FOLLOWING REASONS : THE A. O. HAS MADE THE ABOVE DISALLOWANCE ON THE REASONING THAT, THE APPELLANT COMPANY HAS IN THE SUBSEQUENT YEARS VIZ. ASSESSMENT YEAR 2006-07 ONWAR DS PAID FRINGE BENEFIT TAX ON THE ABOVE EXPENSES, WHIL E FOR ASSESSMENT YEAR 2003-04 TO 2005-06 FBT WAS NOT IN EXISTENCE. HE HAS HELD THAT THE INTENTION OF LEGISL ATURE IN BRINGING FBT WAS TO TAX THE PERSONAL COMPONENT OF S UCH EXPENDITURE AND SINCE THERE WAS NO FBT FOR ASSESSME NT YEARS 2003-04 TO 2005-06, IT IS NECESSARY TO MAKE T HE ABOVE DISALLOWANCE @10% OF THE SAID EXPENSES WHICH ARE IN THE SUBSEQUENT YEARS SUBJECTED TO FBT. HOWEVER, THE AO HAS NOT BROUGHT ON RECORD ANY SPECIFIC INSTANCE OF THESE EXPENSES BEING INCURRED NOT FOR THE PURPOSES OF BUSINESS. THE APPELLANT HAD SUBMITTED THAT, SCRUTINY ORDERS U /S 143(3) WAS PASSED IN THE APPELLANT COMPANY'S CASE F OR THIS YEAH-AND NO SUCH DISALLOWANCE WAS MADE BY THE A. O. IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IT WAS C LAIMED THAT, THE A. O. CANNOT MAKE ADDITIONS ON ISSUES WHI CH ARE ALREADY SETTLED AND TAKEN INTO ACCOUNT WHILE COMPLETING THE ORIGINAL ASSESSMENT U/S 143(3) IN TH E ABSENCE OF ANY INCRIMINATING MATERIAL FOUND AS A RE SULT OF SEARCH. I FIND CONSIDERABLE FORCE IN THIS ARGUME NT OF THE APPELLANT. IT WAS CLAIMED THAT THE VARIOUS LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH CONTAINED NOTINGS REGARDING EXPENDITURE ON ACCOUNT OF CONVEYANCE, HOTELS, VEHIC LES, TRAVEL AND ENTERTAINMENT ETC. WHICH ARE DULY RECORD ED IN THE BOOKS OF ACCOUNTS. THE AO HAS ALSO ACCEPTED THI S FACT IN THE ASSESSMENT ORDER. IT WAS CLAIMED THAT STATUT ORY AUDITORS AND THE TAX AUDITORS, IN THEIR CARO REPORT AND TAX AUDIT REPORT, HAD REPORTED THAT NO PERSONAL EXPENSES HAVE BEEN CHARGED TO REVENUE ACCOUNT, OTHE R THAN THOSE PAYABLE UNDER CONTRACTUAL OBLIGATION OR IN ACCORDANCE WITH GENERALLY ACCEPTED BUSINESS PRACTIC ES. THIS CLEARLY INDICATES THAT NO INSTANCE OF UNRECORD ED EXPENDITURE HAS BEEN BROUGHT ON RECORD BY THE AO. FURTHER, NO INSTANCE OF ANY PERSONAL EXPENDITURE HA S ALSO BEEN BROUGHT ON RECORD BY THE AO, I ALSO FIND FORCE IN THE SUBMISSION OF THE APPELLAN T THAT IS HAVING A TURNOVER OF RS. 367 CRORES DURING THE YEAR AND HAS VARIOUS UNITS ACROSS THE COUNTRY. FURTHER, THE APPELLANT COMPANY EXPORTS ARE AROUND RS. 42 CRORES DURING THE YEAR AND ARE THE LARGEST COMPANY IN INDI A IN ITS LINE OF BUSINESS. MOST OF THE SALES PROMOTION, ENTERTAINMENT, TRAVEL AND CONVEYANCE EXPENSES, CAR REPAIRS AND DEPRECIATION, TELEPHONE, GIFTS ETC ARE INCURRED BY THE EMPLOYEES FOR THE BUSINESS PURPOSES AND THE EXPENDITURE INCURRED BY THE DIRECTORS IS NOT EVEN 2 0% OF THE TOTAL EXPENDITURE UNDER THE ABOVE HEADS. IN VIE W OF ABOVE, THE DISALLOWANCE MADE IS EXCESSIVE AND NEEDS TO BE REDUCED. 3.4 A FURTHER CAREFUL CONSIDERATION OF THE MATERIAL AVAILABLE ON RECORD IN TOTALITY REVEALS THAT A CERT AIN ELEMENT OF PERSONAL NATURE IN THE ABOVE EXPENSES CA NNOT BE RULED OUT AS THESE EXPENSES HAVE CERTAIN INTRINS IC ELEMENT OF PERSONAL NATURE. FURTHER, THE APPELLANT COULD NOT PRODUCE LOG BOOKS FOR VEHICLES / HELICOPTERS. SIMILARLY, IN SOME CASES, IT COULD NOT GIVE REASONS FOR EXPENDITURE ON HOTELS AND HOW IT WAS RELATED TO THE BUSINESS. THEREFORE, PERSONAL ELEMENT OUT OF THE AB OVE EXPENSES NEEDS TO BE DISALLOWED. IN MY CONSIDERED V IEW, 5% OF THESE EXPENSES MAY BE CONSIDERED AS INCURRED FOR THE PERSONAL PURPOSES. THEREFORE, THE INTEREST OF J USTICE WILL BE SERVED IF THE DISALLOWANCE IS RESTRICTED TO 5% OF THE TOTAL EXPENSES WHICH WORKS OUT TO RS. 63,50,000/-. THUS THE APPELLANT COMPANY GETS A NET RELIEF OF RS. 63,50,000/- IN RESPECT OF THIS GROUND OF APPEAL AND THE A. O. IS DIRECTED TO RESTRICT THE DISALLOWANCE TO R S. 63,50,000/- AS AGAINST RS. 1,27,00,000/- MADE IN TH E ORDER U/S 143(3) R.W.S. 153A. 3.5 THUS THE APPELLANT IS ALLOWED PART RELIEF IN RESPECT OF GROUND NO. 10.1 TO 1 0.4. 3.6 AS THE GROUNDS, THE FACTS, THE SUBMISSIONS AND OTHER MATERIALS IN RESPECT OF A.Y.2004-05 AND 2005-06 ARE IDENTICAL IN SUBSTANCE WITH THOSE OF A.Y.2003-04, T HE DISCUSSION IN PARA 3 TO 3.5 IS EQUALLY APPLICABLE F OR A.Y.2004-05 AND 2005-06. THUS THE APPELLANT GETS A RELIEF OF RS.62, 50,000/- AND RS.60, 50,000/- IN A.Y.2004-05 AND 2005-06 RESPECTIVELY. 4.3 AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE US. 4.4 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE MADE IS NOT JUSTIFIED SINCE IN THE CAS E OF A COMPANY NO SUCH DISALLOWANCE ON ACCOUNT OF EXPENDITURE INCURRE D FOR PERSONAL PURPOSES CAN BE MADE. FOR THIS PROPOSITION HE RELI ED ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF NASIK BREEDING AND RESEARCH FARM LTD. VS. DCIT REPORTED IN 77 ITD 581 AND THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IR ON AND ENGINEERING CO. VS. ITO REPORTED IN 253 ITR 749. WITHOUT PREJU DICE TO THE ABOVE HE SUBMITTED THAT SINCE THE DISALLOWANCE MADE IS VERY HIGH THE SAME MAY KINDLY BE REDUCED SINCE IN THE SCRUTINY ORDERS PASS ED U/S.143(3) EARLIER FOR THIS YEAR NO SUCH DISALLOWANCE IS MADE BY THE A SSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS. 4.5 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBM ITTED THAT AS AGAINST THE DISALLOWANCE OF 10% THE LD.CIT(A) HAS ALREADY R EDUCED THE SAME TO 15% OF THE TOTAL EXPENSES. THEREFORE, THE SAME BEIN G VERY REASONABLE NO FURTHER RELIEF SHOULD BE GRANTED. 4.6 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASS ESSING OFFICER DISALLOWED 10% OF THE EXPENSES ON ADHOC BASIS ON TH E GROUND THAT THE ASSESSEE WAS UNABLE TO EXPLAIN OR GIVE CONCRETE EVI DENCE THAT ALL THE EXPENSES REFERRED TO IN THE TABLE WERE INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THAT THERE WAS NO ELEME NT OF PERSONAL USE OR EXPENDITURE THEREIN. WE FIND IN THE ORIGINAL AS SESSMENT FRAMED U/S.143(3) OF THE ACT NO SUCH DISALLOWANCE WAS MADE . ALTHOUGH IN VIEW OF THE DECISIONS CITED BY THE LD. COUNSEL FOR THE A SSESSEE NO DISALLOWANCE ON ACCOUNT OF PERSONAL EXPENDITURE CAN BE MADE IN T HE HANDS OF A COMPANY, THE FACT REMAINS THAT THE ASSESSEE WAS UNA BLE TO PRODUCE THE FULL SUPPORTING EVIDENCES TO SUBSTANTIATE THAT THE EXPENDITURE INCURRED WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSI NESS. THEREFORE, THE ENTIRE EXPENDITURE CANNOT BE ALLOWED IN FULL UNDER THE FACTS AND CIRCUMSTANCES OF THIS CASE. AT THE SAME TIME, THE DISALLOWANCE @5% OF THE TOTAL EXPENSES SUSTAINED BY THE CIT(A) IN OUR O PINION APPEARS TO BE ON THE HIGHER SIDE. CONSIDERING THE TOTALITY OF TH E FACTS OF THE CASE DISALLOWANCE OF RS.15 LAKHS FOR A.Y. 2003-04, RS. 1 7 LAKHS FOR A.Y. 2004- 05 AND RS.18 LAKHS FOR A.Y. 2005-06 IN OUR OPINION WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. THE GROU NDS RAISED BY THE ASSESSEE IN THE ABOVE YEARS ARE ACCORDINGLY PARTLY ALLOWED. 5. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE ARE DISMISSED AND THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 24 TH JULY 2013. SD/- SD/- (R.K.PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 24 TH JULY 2013 ANKAM COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A) CENTRAL PUNE 4) THE CIT- CENTRAL PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE