ACIT, New Delhi V. M/s Green Wood Exports Global (P) Ltd., New Delhi

ITA 77/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58442 (ITAT-DELHI)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I S GILLDR
• Assessee Lawyers: SUNIL JAINAR
• Section: 69C; 40A(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI R.P. TOLANI, JM & SHRI A.N. PAHUJA, AM ITA NO.77/DEL/2011 ASSESSMENT YEAR:2007-08 A.C.I.T.,CIRCLE-12(1), NEW DELHI V/S . M/S GREEN WOOD EXPORTS GLOBAL (P) LTD., B-14, CHIRAG ENCLAVE, NEW DELHI (APPELLANT) (RESPONDENT) [PAN NO.: AAACG 9110 E] ITA NO.94/DEL/2011 ASSESSMENT YEAR:2007-08 M/S GREEN WOOD EXPORTS GLOBAL (P) LTD., B-14, CHIRAG ENCLAVE, NEW DELHI V/S . D.C.I.T., CIRCLE-12(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI SUNIL JAIN,AR REVENUE BY SHRI R.I.S. GILL,DR DATE OF HEARING 04-01-2012 DATE OF PRONOUNCEMENT 06-01-2012 O R D E R A.N.PAHUJA:- THESE CROSS APPEALS FILED ON 06.01.2011 BY THE REVE NUE AND ON 07.01.2011 BY THE ASSESSEE, AGAINST AN ORDER DATED 14.10.2010 OF THE LD. CIT(A)-XXVI, NEW DELHI FOR THE AY 2007-08, RAISE TH E FOLLOWING GROUNDS:- I.T.A. NO.77/D/2011[REVENUE] 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE LD. CIT(A) IS ERRONEOUS, P ERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION OF ITA NOS.77&94/DEL./2011 2 ` ` 8,36,270/- OUT OF TOTAL ADDITION OF ` `41,81,345/- MADE BY THE AO ON ACCOUNT OF UNVERIFIABLE, UNVOUCHED CASH PURCHASES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION OF ` `2,00,42,284/- MADE BY THE AO ON ACCOUNT OF REJECTI ON OF BOOKS OF ACCOUNT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION OF ` 7,99,960/- MADE BY THE AO ON ACCOUNT OF NON-BUSINES S EXPENSE MADE BY THE DIRECTOR OF THE ASSESSEE COMPAN Y. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION OF ` 7,50,000/- MADE BY THE AO ON ACCOUNT OF PURCHASE OF AGRICULTURAL LAND. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION OF ` ` 1,02,104 (` ` 82,274 + ` `19,740) MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENSES INCURRED ON TELEPHON E AND BUSINESS PROMOTION. 7. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AM END ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HE ARING. I.T.A. NO. NO.94/D/2011[ASSESSEE] 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) XXVI HAS ERRED IN UPHOLDING THE DISALLOWANCE OF ` ` 33,45,075/- BEING 20% OF THE ENTIRE CASH PURCHASES MADE BY THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 40A(3). 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) XXVI HAS ERRED IN UPHOLDING THE DISALLOWANCE OF ` `2,50,000/- MADE BY THE LEARNED ASSESSING OFFICER BEING THE EXPENSES INCURRED BY TH E APPELLANT ON VEHICLE RUNNING & MAINTENANCE. ITA NOS.77&94/DEL./2011 3 2. ADVERTING FIRST TO GROUND NOS.2 & 3 IN THE APPE AL OF THE REVENUE AND GROUND NO.1 IN THE APPEAL OF THE ASSESSEE , FAC TS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF ` ` 17,05,193/-FILED ON 31.07.2007 BY THE ASSESSEE, EXPORTING HUMAN HAIR, AFTER BEING PRO CESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF AUDIT REPORT, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE PURCHASED HUMAN HAIR IN CASH FREQUENTLY AND PAYMENT FOR EACH TRANSACTION WAS LESS THAN ` `20,000/- EACH WHILE ALL PURCHASES EXCEEDING ` ``20,000/- WERE THROUGH ACCOUNT PAYEE CHEQUES. TO A QUERY BY THE AO, SEEKING REASONS FOR SUCH CASH PURCHASES WHEN B ANK FACILITIES WERE AVAILABLE, THE ASSESSEE REPLIED THAT THEY WERE WITH IN THEIR RIGHTS TO KEEP THE PURCHASES BELOW THE PRESCRIBED LIMIT TO AVOID THE V IOLATION. INTER ALIA, THE ASSESSEE RELIED UPON THE DECISION IN THE CASE OF CI T VS. KKSK LEATHER PROCESSORS PVT. LTD. (2007) 292 ITR 669.HOWEVER, TH E AO REJECTED THE CONTENTIONS OF THE ASSESSEE ON THE GROUND THAT THE SAID DECISION WAS NOT APPLICABLE IN THE INSTANT CASE. MOREOVER, THE SO CA LLED PURCHASE REGISTER COMPRISING PHOTO COPIES OF RECEIPTS OF THE PURCHASE S MADE IN CASH, WERE MERELY SELF GENERATED VOUCHERS, HAVING NO SALE TAX OR VAT NUMBER NOR ANY PREPRINTED RECEIPT NUMBER. EVEN THE NAMES OF THE PERSONS ,ACC EPTING PAYMENTS AND SIGNATURES WERE MISSING ON THESE VOUCHERS. ACCORDIN GLY, WHILE REFERRING TO DECISIONS IN GIRDHARLAL GOENKA VS. CIT (1989) 179 ITR 122 (CALCUTTA) AND LATE SMT. JYOTHI CHELLARAM VS. CIT (1988) 173 ITR 358 (A P) AND REPLY OF THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR, THE AO D ISALLOWED 25% OF THE CASH PURCHASES OF ` `1,67,25,379/-, RESULTING IN DISALLOWANCE OF ` 41,81,345/-.. BESIDES, THE AO ADDED 25% OF THE PURCHASES OF ` `8,01,69,134/- MADE BY CHEQUES WHILE REJECTING THE BOOK RESULTS, THE ASSES SEE HAVING FAILED TO FURNISH A SATISFACTORY REPLY REGARDING VALUATION OF STOCK OF HUMAN HAIR OR THEIR QUALITY . 3. ON APPEAL, THE LEARNED CIT(A) WHILE FOLLOWING THE DECISION OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2006-07 RESTRIC TED THE DISALLOWANCE TO 20% ITA NOS.77&94/DEL./2011 4 OF THE CASH PURCHASES IN TERMS OF PROVISIONS OF SEC TION 40A(3) OF THE ACT, HOLDING AS UNDER: 4.3 ON THIS ISSUE IN THE PRECEDING YEAR, THE CIT(A )-15, NEW DELHI VIDE HIS ORDER IN THE ASSESSEES CASE IN APPE AL NO.332/08-09 DATED 24.9.2010 HAS UPHELD THE DISALLO WANCE MADE BY THE ASSESSING OFFICER. THE CIT(A) HAS OBSE RVED THAT THE CASH PURCHASES WERE MADE IN A MANNER TO MANIPULATE AND CIRCUMVENT THE MANDATE OF THE PROVIS ION OF SECTION 40A(3). HE ALSO HELD THAT THE APPELLANT HA S NOT DISCHARGED ITS LIABILITY IN PROVING THE PURCHASES AS GENUINE AS NO DETAILS OF THE VENDORS FROM WHOM THE PURCHASE S HAVE BEEN MADE ARE AVAILABLE. A FINDING HAS BEEN RECORD ED THAT IN ASSESSMENT YEAR 2006-07, AS THE CASH PURCHASES W ERE NOT VERIFIABLE, THE DISALLOWANCE OF CASH PURCHASES @20% WAS SUSTAINABLE AS AGAINST 25% APPLIED BY ASSESSING OFFICER. ON THIS ISSUE, THE FACTS OF THE PRESENT Y EAR I.E. ASSESSMENT YEAR 2007-08 ARE IDENTICAL TO THAT OF AS SESSMENT YEAR 2006-07. I AM IN AGREEMENT WITH THE CIT(A)S FINDING FOR ASSESSMENT YEAR 2006-07, IT IS HELD THAT THE PR OVISIONS OF SECTION 40A(3) ARE APPLICABLE ON THESE TRANSACTIONS . THEREFORE, I CONFIRM THE DISALLOWANCE MADE OUT OF T HE CASH PURCHASES OF HAIR TO THE EXTENT OF 20% OF ` `1,67,25,379/-. THIS WILL RESULT IN CONFIRMATION OF DISALLOWANCE OF ` `33,45,075/-. THE APPELLANT GETS A RELIEF OF ` `8,36,270/- ON THIS ISSUE. 3.1 AS REGARDS DISALLOWANCE OF 25% OF THE PURCHAS ES THROUGH CHEQUES, THE LD. CIT(A) DELETED THE DISALLOWANCE, THERE BEING NO DEF ICIENCY IN THE BOOKS OF ACCOUNT. THE RELEVANT FINDINGS OF THE LEARNED CIT( A) ARE AS UNDER:- 5.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEA RNED COUNSEL AS WELL AS THE FACTS ON RECORD. THOUGH IN THE SUBMISS IONS MADE, THE LEARNED COUNSEL HAS STATED THAT THE ASSESSING OFFIC ER HAS DISALLOWED ` `20042284, IT IS SEEN THAT THE ASSESSING OFFICER HA S ACTUALLY MADE AN ADDITION OF ` ` 20042284. THOUGH THERE APPEARS TO BE SOME LACK OF CLARITY IN THE ASSESSING OFFICERS ORDER ON THIS ISSUE, IT IS NONETHELESS CLEAR THAT APPARENTLY THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE METHOD OF VALUATION OF T HE CLOSING STOCK. IT ALSO APPEARS THAT HE MAY HAVE BEEN DISSATISFIED WITH THE SALES SHOWN AS WELL THE PURCHASES. AFTER SUMMARILY REJEC TING THE BOOKS OF ACCOUNT, HE HAS MADE AN ADDITION OF ` ` 20042284 BEING 25% OF THE WHOLESALE PROCUREMENT OF HAIR AT ` ` 80169134. IT IS INFERABLE THAT THE ADDITION HAS BEEN MADE TO THE VALUE OF THE CLOSING STOCK. ITA NOS.77&94/DEL./2011 5 IN MY VIEW THE ACTION OF THE ASSESSING OFFICER CANN OT BE UPHELD. THOUGH HE HAS STATED THAT THE BOOKS OF ACCOUNT ARE REJECTED AND HAS INVOKED SECTION 145(2), HOWEVE R, NO DEFICIENCIES IN THE BOOKS OF ACCOUNT HAVE BEEN POIN TED OUT. NO DISCREPANCY HAS BEEN POINTED OUT IN THE STOCK RE GISTER. THE GOODS/COMMODITY IS OF SUCH NATURE THAT IN TERM OF QUALITY/THINNESS/COLOUR/LENGTH/STRENGTH ETC. IT IS TO BE SEGREGATED, WASHED AND THEN PROCESSED. THIS ENTAIL S MIXING UP GOODS (HAIR) PURCHASED. IN SUCH CIRCUMST ANCES THE WEIGHTED AVERAGE METHOD OF VALUATION IS POSSIBL Y THE MOST VIABLE METHOD AVAILABLE TO THE ASSESSEE. IN T HE ABSENCE OF ANY SPECIFIC DEFICIENCIES IN THE BOOKS O F ACCOUNT, I HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. AS THE ADDITION OF ` `2,00,42,284/- IS FOUND TO BE WITHOUT ANY SUBSTANCE, IT IS ACCORDINGL Y DELETED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST RELIEF OF ` ` 8,36,270/- AND ` `2,00,42,284/- GIVEN BY THE LD. CIT(A) WHILE THE ASSESSEE IS IN APPEAL FOR UPHOLDING THE DISALLOWANCE TO THE EXTENT OF ` ` ` 33,45,075/-.AT THE OUTSET, THE LD. AR ON BEHALF OF THE ASSESSEE WHILE INVITING OUR ATTENTION TO DECISION DATED 11.3.2011 OF THE ITAT IN THE ASSESSE ES OWN CASE IN I.T.A. NOS.5198 & 5559/D/2010 FOR ASSESSMENT YEAR 2006-07 SUBMITTED THAT THE AFORESAID ISSUES ARE SQUARELY COVERED BY THE SAID DECISION. ACCORDINGLY, HE PLEADED THAT THESE ISSUES MAY BE DECIDED IN THE L IGHT OF THE SAID DECISION. THE LD. DR ,ON THE OTHER HAND, RELIED UPON THE FINDINGS OF THE AO. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISION OF THE ITAT. W E FIND THAT WHILE ADJUDICATING AN IDENTICAL ISSUE, A CO-ORDINATE BENCH IN THEIR DE CISION DATED 11.3.2011 FOR THE AY 2006-07 CONCLUDED AS UNDER:- 4.2 WE MAY NOW CONSIDER THE FACTS OF OUR CASE IN T HE LIGHT OF AFORESAID DECISIONS. THE FACTS IN THE CASE OF ALOO SUPPLY COMPANY ARE DIFFERENT BECAUSE EACH PAYMENT MADE TO THE PAYEE WAS LESS THAN ` ` 2,500/-. THE QUESTION HERE IS NOT ONLY IN REGARD TO THE APPLICABILITY OF THE PROVISION CON TAINED IN SECTION 40A(3) BUT ALSO ABOUT GENUINENESS OF THE CA SH PURCHASES, RAISED BY THE REVENUE IN GROUND NO.2 OF THE APPEAL. THE FINDING OF THE ASSESSING OFFICER IS AL SO TO THE EFFECT THAT THE PURCHASES ARE NOT VERIFIABLE AND TH E ASSESSEE ITA NOS.77&94/DEL./2011 6 HAS USED THE DEVICE OF INTRODUCING CASH PAYMENT OF LESS THAN ` `20,000/-. THE FACTS OF THE CASE OF SURANA TRADERS ARE ALSO DIFFERENT. IN THAT CASE, THE ASSESSEE HAD MAI NTAINED QUANTITATIVE DETAILS. IN THE CASE BEFORE US, QUANT ITATIVE DETAILS CANNOT BE ACCEPTED TO BE TRUE AND CORRECT B ECAUSE INTERNALLY PREPARED PURCHASE MEMOS ARE NOT RELIABLE AT ALL IN ABSENCE OF NAME, ADDRESS AND SIGNATURE OF THE VENDO RS. WHAT IS SURPRISING IS THAT EVEN SIGNATURE OR THUMB IMPRESSION HAS NOT BEEN TAKEN ON ANY MEMO, WHICH LE ADS TO THE CONCLUSION THAT SOME OR ALL OF THEM HAVE BEEN P REPARED BY THE ASSESSEE AT ITS CONVENIENCE. THEREFORE, THE SE MEMOS CANNOT BE ACCEPTED TO BE CORRECT IN RESPECT O F QUANTITATIVE DETAILS MAINTAINED BY THE ASSESSEE. T HE DECISION IN THE CASE OF BAL KRISHAN JAGDISH CHAND I S ALSO DISTINGUISHABLE BECAUSE THE ADMITTED FACT WAS THAT EACH PAYMENT WAS OF AN AMOUNT LESSER THAN ` `2,500/-. IN THIS CASE, THE FINDING IS THAT PREPARATION OF INTERNAL M EMOS OF AMOUNTS LESSER THAN ` `20,000/- IS A DEVICE AS THE PURCHASES IN A DAY WERE OF ABOUT ` ` 60,000/-. LOOKING TO ALL THESE FACTS, WE ARE OF THE VIEW THAT THE INTERNAL MEMOS PREPARED BY THE ASSESSEE TO SUPPORT THE PURCHASES AND QUANTITATIVE DETAILS ARE NOT RELIABLE. THEREFORE, WHILE COMPLETE VERIFI CATION EXISTS IN RESPECT OF PURCHASES, PAYMENT FOR WHICH IS MADE BY ACCOUNT PAYEE CHEQUE/DRAFT, SUCH A CONCLUSION CANNO T BE ARRIVED AT IN RESPECT OF CASH PURCHASES. THUS, THE BOOKS OF ACCOUNT ARE NOT COMPLETE AND CORRECT. IN SUCH A SI TUATION, THERE WOULD BE NO ALTERNATIVE BUT TO ESTIMATE THE P URCHASES MADE BY THE ASSESSEE. THE ASSESSEE HAS ALSO NOT FUR NISHED ANY DETAIL COMPARING THE COST PER KG. IN RESPECT OF CASH PURCHASES AND PURCHASES MADE BY PAYMENT OF ACCOUNT PAYEE CHEQUES OR DRAFTS. THEREFORE, THE DISALLOWAN CE MADE BY THE LEARNED CIT(A) HAS TO BE CONSIDERED IN THE O VERALL SITUATION THAT THE BOOKS ARE NOT RELIABLE. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS RIGH T IN DISALLOWING 20% OF THE AMOUNT INVOLVED IN CASH PURC HASES, ALBEIT ON SOMEWHAT DIFFERENT LINE OF REASONING. IN SO FAR AS CHEQUE PURCHASES ARE CONCERNED, COMPLETE DETAILS HA VE BEEN SUBMITTED, WHICH HAVE BEEN VERIFIED BY THE ASS ESSING OFFICER IN THE REMAND PROCEEDINGS. THEREFORE, THER E IS NO REASON TO DISALLOW ANY PART OF THE CHEQUE PURCHASES AGGREGATING TO ` ` 8,50,20,222/-. 5.1 IN THE YEAR UNDER CONSIDERATION, INDISPUTA BLY, THE FACTS AND CIRCUMSTANCES ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES IN THE A Y 2006-07,AS POINTED OUT BY THE LD. CIT(A).IN THIS YEAR ALSO, THE ASSESSEE PREP ARED INTERNAL MEMOS TO ITA NOS.77&94/DEL./2011 7 SUPPORT THE PURCHASES AND QUANTITATIVE DETAILS ARE NOT RELIABLE. WHILE COMPLETE VERIFICATION EXISTS IN RESPECT OF PURCHASES, PAYMEN T FOR WHICH IS MADE BY ACCOUNT PAYEE CHEQUE/DRAFT, SUCH A CONCLUSION CANNOT BE ARR IVED AT IN RESPECT OF CASH PURCHASES. THUS, THE FINDINGS OF THE LD. CIT(A) TH AT NO DEFICIENCIES HAVE BEEN POINTED OUT IN THE BOOKS OF ACCOUNT IS NOT CORRECT . APPARENTLY, BOOKS OR ACCOUNTS ARE NOT CORRECT AND COMPLETE. IN SUCH A SITUATION, THERE WOULD BE NO ALTERNATIVE BUT TO ESTIMATE THE PURCHASES MADE BY THE ASSESSEE. THE ASSESSEE HAS ALSO NOT FURNISHED ANY DETAILS COMPARING THE COST PER KG. IN RESPECT OF CASH PURCHASES AND PURCHASES MADE BY PAYMENT OF ACCOUNT PAYEE CHEQ UES OR DRAFTS. THEREFORE, AS CONCLUDED BY THE ITAT IN THE PRECEDIN G ASSESSMENT YEAR, THE DISALLOWANCE MADE BY THE LEARNED CIT(A) HAS TO BE C ONSIDERED IN THE OVERALL SITUATION THAT THE BOOKS ARE NOT RELIABLE. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS RIGHT IN DISALLOWING 20 % OF THE AMOUNT INVOLVED IN CASH PURCHASES, ALBEIT ON SOMEWHAT DIFFERENT LINE O F REASONING. IN SO FAR AS CHEQUE PURCHASES ARE CONCERNED, IN THE LIGHT OF AF ORESAID VIEW TAKEN BY A CO- ORDINATE BENCH ON IDENTICAL FACTS IN THE PRECEDING YEAR, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF LEARNED CIT(A). IN VIE W THEREOF, ESPECIALLY WHEN NEITHER THE REVENUE NOR THE LEARNED AR ON BEHALF OF THE ASS ESSEE PLACED BEFORE US ANY MATERIAL CONTROVERTING THE AFORESAID FINDINGS OF TH E LD. CIT(A), WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NOS.2 & 3 OF THE A PPEAL OF THE REVENUE AND GROUND NO.1 IN THE APPEAL OF THE ASSESSEE ARE DISMI SSED. 6. GROUND NO.4 IN THE APPEAL OF THE REVENUE RELATE S TO ADDITION OF ` `7,99,960/- ON ACCOUNT OF PURCHASES FROM DIRECTOR O F THE ASSESSEE COMPANY. THE AO NOTICED DURING THE COURSE OF ASSESSMENT PROC EEDINGS THAT THE ASSESSEE PURCHASED HUMAN HAIR FROM ONE OF THE DIRECTOR, MR. RISHI SOOD. WHILE REFERRING TO SUBMISSIONS OF THE SAID DIRECTOR THAT THE ASSESS EE PURCHASED HUMAN HAIR FROM SWEEPERS AND SCAVENGERS AND THEY WERE UNORGANIZED , THE AO OBSERVED THAT THIS WAS NOTHING BUT A GARB THROUGH WHICH THE FUNDS HAD BEEN TRANSFERRED TO THE ACCOUNT OF ONE OF THE DIRECTOR, SHRI RISHI SOOD SO AS TO CREATE HIS CAPITAL. ITA NOS.77&94/DEL./2011 8 ACCORDINGLY, WHILE DOUBTING THE GENUINENESS OF THES E PURCHASES, THE AO DISALLOWED THE AFORESAID AMOUNT OF ` ` 7,99,960/-. 7. ON APPEAL, THE LEARNED CIT(A) DELETED THE DISAL LOWANCE IN THE FOLLOWING TERMS:- 6.2 IN SUPPORT OF THE GROUND OF APPEAL, THE LEARNE D COUNSEL HAS STATED THAT THE PURCHASE IS DULY ACCOUNTED FOR IN T HE BOOKS OF ACCOUNT, THAT THE PURCHASES HAVE BEEN ACCOUNTED FOR IN THE STOCK LEDGER AND THAT THE PURCHASES IS DULY SUPPORT ED BY BILLS. IN THE COURSE OF THE APPELLATE PROCEEDINGS, THE LEARNED COUNSEL WAS REQUIRED TO STATE WHETHER SHRI RISHI SO OD IS ENGAGED IN THE BUSINESS OF TRADING IN HUMAN HAIR, W HETHER SIMILAR TRANSACTION HAVE BEEN DONE BY HIM FOR OTHER PARTIES IN THIS YEAR. IN RESPONSE TO THESE QUERIES IT WAS EXPLAINED THAT IN ASSESSMENT YEAR 2007-08, SHRI RISHI SOOD HA S DONE RETAIL TRADING IN HAIR FOR ` `9,90,000/-, OUT OF WHICH SALES OF ` ` 7,99,000/- HAVE BEEN MADE TO BE APPELLANT COMPANY. ON THE TRADING OF `9,90,000/- HE HAS SHOWN INCOME @35% AT ` ` 3,46,500/- U/S 44AF. HIS PAN IS AAOPS 3092 C. 6.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D COUNSEL AS WELL AS THE FACTS ON RECORD. THE SOLE REASONING OF THE ASSESSING OFFICER FOR TREATING THE PAYMENT AS SHAM PURCHASE AND MADE FOR OTHER EXTRANEOUS CONSIDERATI ON IS OBSERVATION THAT PURCHASES ARE MADE FROM SWEEPERS & SCAVENGES. IT IS SEEN THAT THE COMPANY HAS MADE PURCHASES FROM SH. R. SOOD ON 7.4.2006 FOR ` `98,500/-, ON 21.05.2006 FOR ` `1,22,000/-, ON 21.06.2006 FOR ` 5,29,460/-, AND ON 20.11.2006 FOR ` ` 50,000/-. THE PURCHASES ARE MADE BY CHEQUES AND HAVE BEEN DULY ENTERED IN THE STOCK REGISTER A FACT NOT CONTROVERTED BY THE ASSESSING OFFICER. THE SUBMISSION OF THE APPELLANT THAT THE AVERAGE PURCHA SES PRICE PAID TO SHRI RISHI SOOD AT ` ` 2806 PER KG. AS AGAINST TOTAL AVERAGE PURCHASE PRICE OF ` ` 3133 PER KG. HAS ALSO NOT BEEN ADDRESSED ADVERSELY BY THE ASSESSING OFFICER. IN V IEW OF THESE EVIDENCES AVAILABLE ON RECORD, THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER IS BASED PURELY ON SURMISE S AND CONJECTURES. THE APPELLANT HAS DISCHARGED ITS ONUS U/S 37 OF THE I.T. ACT FOR CLAIMING THE AMOUNT AS GENUINE PUR CHASES. THE ADDITION MADE BY THE ASSESSING OFFICER IS ACCOR DINGLY DELETED. ITA NOS.77&94/DEL./2011 9 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR SUPPORTED TH E ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS IN THE IMPUGNED ORDER. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE LEARNED CIT(A) DELETED THE A DDITION ON THE GROUND THAT PAYMENT FOR THESE PURCHASES WERE MADE BY CHEQUES AN D ALL THE PURCHASES WERE ENTERED IN THE STOCK REGISTER. THE AVERAGE PURCHAS E PRICE PAID TO SHRI RISHI SOOD FOR THESE PURCHASES WAS ` `2806/- PER KG. AS AGAINST OVERALL AVERAGE PURCHASE PRICE OF ` ` 3233 PER KG. THE SAID DIRECTOR IS ASSESSED TO TAX AND PURCHASES MADE IN THE PRECEDING YEARS ARE STATED TO HAVE BEEN ACCEPTED BY THE AO. IN THE LIGHT OF THESE UNDISPUTED FINDINGS OF THE LD. CIT(A),ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED T O INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.4 IN THE APPEAL O F THE REVENUE IS DISMISSED. 10.. GROUND NO.5 RELATES TO ADDITION OF ` ` 7,50,000/- ON ACCOUNT OF PURCHASE OF AGRICULTURE LAND. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN THE BUSINESS EXPEDIEN CY FOR PURCHASE OF AGRICULTURAL LAND FOR ` `7,50,000/-. SINCE THE ASSESSEE DID NOT OFFER ANY SATISFACTORY EXPLANATION NOR EXPLAINED SOURCE OF PA YMENT, THE AO ADDED THE AMOUNT OF ` ` 7,50,000/- U/S 69C OF THE ACT. 11. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDI TION HOLDING AS UNDER:- 7. GROUND NO.4 RELATES TO ADDITION OF ` ` 7,50,000/- ON ACCOUNT OF PURCHASE OF AGRICULTURAL LAND. THE ASSESSING OFFIC ER HAS OBSERVED THAT FOR THE PERIOD ENDING 31.3.2007, THE ASSESSEE HAS SHOWN PURCHASE OF AGRICULTURAL LAND FOR ` ` 7,50,000/- IN THE SCHEDULE OF FIXED ASSETS. THE ASSESSING OFFICE R FURTHER OBSERVED THAT AS THE ASSESSEE HAD FAILED TO EXPLAIN THE BUSINESS EXPEDIENCY FOR WHICH THE LAND WAS PURCHASE D AND FAILED TO EXPLAIN THE SOURCE OF PAYMENT OF LAND, TH E PURCHASE OF LAND WAS LIABLE TO BE ADDED AS UNEXPLAINED INVES TMENT U/S ITA NOS.77&94/DEL./2011 10 69C OF THE INCOME-TAX ACT. AGAINST THE ADDITION MA DE THE LEARNED COUNSEL HAS DRAWN MY ATTENTION TO THE FOLLO WING:- THAT THE PURCHASE OF LAND IS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AS WELL AS THE BALANCE SHEET AS ON 31.3. 2007. THE PAYMENT HAS BEEN MADE THROUGH THE BANK ACCOUNT OF THE ASSESSEE AND IN SUPPORT OF THE GENUINENESS OF T HE PAYMENT, THE APPELLANT FILED A COPY OF THE PURCHASE DEED, COPY OF THE BANK DRAFT AND BANK STATEMENT. 7.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D COUNSEL AS WELL AS THE FACTS ON RECORD. AS THE PURCHASE OF LA ND IS REFLECTED IN THE BALANCE SHEET AS ON 31.3.2007 AT A VALUE OF ` ` 7,50,000/-, THERE IS NO JUSTIFICATION FOR TREATING THE INVESTMENT AS UNEXPLAINED. THE APPELLANT HAS FILED A COPY OF THE SALE DEED AND THE BANK STATEMENT, WHICH SHOW S AVAILABILITY OF BALANCE OF ` ` 7,53,973/- ON THE DATE OF ISSUE OF CHEQUE NO.943388 FOR ` `7,52,250/-. AS THE SOURCE OF INVESTMENT IS DULY EXPLAINED THE ADDITION OF ` `7,50,000/- IS DELETED. 12. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR SUPPORTED TH E ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS IN THE IMPUGNED ORDER. 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY THE INVESTMENT OF ` ` `7,50,000/- IN THE AGRICULTURAL LAND IS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND CONSEQUEN TLY IN THE BALANCE SHEET AS ON 31.3.2007 WHILE THE PAYMENT WAS ALSO MADE THROUG H THE BANK ACCOUNT OF THE ASSESSEE. IN THESE CIRCUMSTANCES, WE DO NOT FIND A NY JUSTIFICATION FOR TREATING THE INVESTMENT AS UNEXPLAINED. IN THE ABSENCE OF ANY B ASIS, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A). THERE FORE, GROUND NO.5 IN THE APPEAL OF REVENUE IS DISMISSED. 14.. GROUND NO.6 IN THE APPEAL OF REVENUE RELATES TO DISALLOWANCE OUT OF 25% OF THE TELEPHONE EXPENSES AND BUSINESS PROMO TION EXPENSES WHILE GROUND NO.2 IN THE APPEAL OF THE ASSESSEE RELATES T O DISALLOWANCE OF ` `2,50,000/- OUT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES. THE AO NOTICED THAT THE ASSESSEE DID NOT REFLECT ANY EXPENDITURE UNDER THE HEAD VEHICLE RUNNING AND ITA NOS.77&94/DEL./2011 11 MAINTENANCE EXPENSES IN THE PROFIT AND LOSS ACCOUN T WHILE EXPENDITURE OF ` ``2,36,988/- WAS INCURRED IN THE PRECEDING ASSESSME NT YEAR. ACCORDINGLY, THE AO PRESUMED THAT THE ASSESSEE MUST HAVE INCURRED VE HICLE RUNNING AND MAINTENANCE EXPENSES IN THE YEAR UNDER CONSIDERATIO N AND DISALLOWED AN AMOUNT OF ` ` `2,50,000/-. BESIDES THE AO DISALLOWED 25% OF THE E XPENDITURE OUT OF TELEPHONE EXPENSES AND BUSINESS PROMOTION EXPENS ES . 15. ON APPEAL, THE LEARNED CIT(A) FOLLOWING THE FI NDINGS OF HIS PREDECESSOR IN ORDER DATED 26 TH SEPTEMBER, 2010 FOR THE PRECEDING ASSESSMENT YEAR UPHELD THE DISALLOWANCE ON ACCOUNT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES WHILE DELETING THE DISALLOWANCE OF 25% OF THE TELEPHONE EXPENSES AND BUSINESS PROMOTION EXPENSES. 16. THE REVENUE IS NOW IN APPEAL BEFORE US AGAIN ST THE DELETION OF DISALLOWANCE ON ACCOUNT OF TELEPHONE AND BUSINESS P ROMOTION EXPENSES WHILE THE ASSESSEE IS IN APPEAL FOR UPHOLDING OF DISALLOW ANCE ON ACCOUNT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES. THE LD.AR WHILE I NVITING OUR ATTENTION TO THE AFORESAID DECISION DATED 11.03.2011 OF THE ITAT IN THE ASSESSEES OWN CASE FOR PRECEDING ASSESSMENT YEAR CONTENDED THAT SIMILA R DISALLOWANCES WERE DELETED IN THE PRECEDING ASSESSMENT YEAR. ON THE OT HER HAND, LEARNED DR SUPPORTED THE FINDINGS OF THE AO. 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISION OF ITAT . A CO- ORDINATE BENCH WHILE ADJUDICATING IDENTICAL ISSUES IN THE PRECEDING YE AR CONCLUDED IN THEIR DECISION DATED 11.3.2011 AS UNDER: 6. THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IN THE IMPUGNED ORDER, IT IS MENTIONED THAT NO CASE HAS BEEN MADE O UT THAT ANY OF THE EXPENDITURE FOR RUNNING OF THE VEHICLES IS UN-V OUCHED. HOWEVER, THE LEARNED CIT(A) UPHELD 20% DISALLOWANCE OUT OF VEHICLE RUNNING AND MAINTENANCE EXPENDITURE BY MENT IONING THAT THE MOTOR-CAR WAS NOT PURCHASED FOR THE PURPOSE OF BUSINESS AND IT WAS FOR PERSONAL USE OF THE DIRECTOR. THEREFORE, T HE DISALLOWANCE WAS UPHELD. THE ASSESSEE RELIED ON THE DECISION OF HONBLE ITA NOS.77&94/DEL./2011 12 GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENG G. COMPANY VS. CIT, (2002) 253 ITR 749, IN WHICH IT WAS HELD THAT IF ANY BENEFIT IS GRANTED TO THE DIRECTORS, THE SAME IS TAXABLE IN TH EIR HAND AS PERQUISITE. THUS, THE EXPENDITURE IN SO FAR AS ASS ESSEE IS CONCERNED, HAS BEEN INCURRED FOR THE PURPOSE OF BUS INESS. RELYING ON THIS JUDGMENT, THE DISALLOWANCE MADE BY THE LEAR NED CIT(A) IS DELETED AND GROUND NO.3 IN THE APPEAL OF THE ASSESS EE IS ALLOWED. 7. GROUND NO.3 IN THE APPEAL OF THE REVENUE IS THAT THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF `96,283/-, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENSES INCURRED O N TELEPHONE AND BUSINESS PROMOTION. THE SITUATION IS MORE OR L ESS THE SAME AS IN RESPECT OF DISALLOWANCE FROM VEHICLE RUNNING AND MAINTENANCE EXPENSES. IN SO FAR AS THE COMPANY IS CONCERNED, T HE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS. REL YING ON OUR ARGUMENTS IN RESPECT OF THAT GROUND, IT IS HELD THA T THE LEARNED CIT(A) RIGHTLY DELETED THE DISALLOWANCE. 18. IN THE LIGHT OF VIEW TAKEN BY THE CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEAR, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY CONTRARY DECISION NOR ANY MATE RIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER WHILE FACTS AND CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FACTS AND CI RCUMSTANCES IN THE PRECEDING ASSESSMENT YEAR, WE HAVE NO ALTERNATIVE BUT TO ALL OW GROUND NO.2 IN THE APPEAL OF THE ASSESSEE AND DISMISS GROUND NO.6 IN THE APPE AL OF THE REVENUE. 19.. GROUND NO.1 IN THE APPEAL OF THE REVENUE BEIN G GENERAL IN NATURE NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US ON T HIS GROUND, DOES NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITION AL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.7 IN THEI R APPEAL, BOTH THESE GROUNDS ARE DISMISSED. 20. NO OTHER SUBMISSION OR ARGUMENT WAS MADE BEFO RE US. ITA NOS.77&94/DEL./2011 13 21.. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED WHILE THAT OF THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (R.P. TOLANI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. A.C.I.T., CIRCLE-12 (1), NEW DELHI. 2. M/S GREEN WOOD EXPORTS GLOBAL (P) LTD., B-14, CH IRAG ENCLAVE, NEW DELHI. 3. CIT(A)-XXVI, NEW DELHI. 4. CIT CONCERNED. 5. DR, ITAT,C BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT