Smt Aruna Sadh, New Delhi V. ACIT, New Delhi

ITA 778/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4035 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 03-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: H K LAL
• Keywords: Business income; Business expenditure
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 1008(DEL)2009 ASSESSMENT YEAR: 2004-05 ASSTT.COMMISSIONER OF INCOME TAX, SMT. ARUNA SADH, CIRCLE 22(1), NEW DELHI. V. PRO P. MILI INC. C-140, EAST OF KAILASH, N. DELHI. ITA NO. 778(DEL)2009 ASSESSMENT YEAR: 2004-05 SMT. ARUNA SADH, PROP. MILI INC. C-140, V. ASSTT.COMMISSIONER OF I. TAX, EAST OF KAILASH, N. DELHI. C IRCLE 22(1), NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI K.V.S.R. KRISHNA, CA ASSESSEE BY: SHR I H.K. LAL, SR. DR ORDER PER A.D. JAIN, J.M. THESE ARE CROSS APPEALS FOR ASSESSMENT YEAR 2004- 05. ITA NO. 1008(DEL)2009 HAS BEEN FILED BY THE DEPARTMENT, TAK ING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF ` 3,67,425/- MADE ON ACCOUNT OF DIFFERENCE IN EXPORT SALES. ITA NOS. 1008 & 778(DEL)09 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF ` 31,29,060/- MADE ON ACCOUNT OF DIFFERENCE IN EXPORT INCENTIVE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF ` 28,83,375/- MADE ON ACCOUNT OF UNCONFIRMED CREDITORS SHOWN AS A DVANCES FROM FOREIGN CUSTOMERS. 2. ITA NO. 778(DEL)2009 HAS BEEN FILED BY THE ASSES SEE, TAKING THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE CIT(A) CONFIRMING SOME DISALLO WANCES/ADDITIONS MADE BY AO IS BAD IN LAW AND AGAINST THE FACTS OF T HE CASE. 2. THE CIT(A) HAS WRONGLY UPHELD THE ADDITION OF ` 30,058/- ON ACCOUNT OF PROPERTY TAX PAID BY ASSESSEE FOR HER BU SINESS PREMISES WHICH NEEDS DELETION. 3. THE CIT(A) HAS WRONGLY UPHELD THE ADDITION OF ` 1,01,630/- BEING 75% OF THE EXPENDITURE ON REPAIR AND MAINTENANCE IN CURRED BY THE ASSESSEE FOR THE BUSINESS WHICH NEEDS DELETION. 4. THE CIT(A) HAS WRONGLY UPHELD THE ADDITION OF ` 52,801/- BEING 50% OF THE EXPENDITURE ELECTRICITY/POWER USED FOR B USINESS PURPOSES WHICH NEEDS DELETION. 5. THE CIT(A) HAS WRONGLY UPHELD THE ADDITION OF ` 89,140/- BEING 20% OF EXPENDITURE INCURRED ON INTERNAL TRAVELLING WHICH NEEDS DELETION. 6. THE CIT(A) HAS WRONGLY UPHELD THE ACTION OF THE AO TREATING THE INTEREST ON FDR AS INCOME FROM OTHER SOURCES AND NO T AS BUSINESS INCOME AND THEREBY REDUCING THE CLAIM OF ASSESSEE U /S 80HHC. ITA NOS. 1008 & 778(DEL)09 3 ITA NO. 1008(DEL)2009: 3. AS PER GROUND NO.1, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 3,67,425/- MADE ON ACCOUNT OF DIFFERENCE IN EXPORT SALES. 4. THE AO ASKED THE ASSESSEE TO SUBMIT THE DETAILS AND SALE LEDGERS TO SUPPORT THE EXPORT SALES OF GARMENTS. THE ASSESSE E SHOWED SALES (FOB) OF ` 4,97,06,618/-. THE AMOUNT SHOWN AS SUCH SALES IN THE PROFIT AND LOSS ACCOUNT WAS, HOWEVER, ` 4,93,39,193/-, GIVING A DIFFERENCE OF ` 3,67,425/-. THE AO ADDED THIS DIFFERENCE TO THE INCOME OF THE A SSESSEE, OBSERVING THAT NO JUSTIFICATION HAD BEEN FURNISHED FOR THE SAME. 5. THE LD. CIT(A) OBSERVED THAT THE DIFFERENCE IN T HE EXPORT SALES HAD BEEN ARRIVED AT BY THE AO BASICALLY ON ACCOUNT OF F OREIGN EXCHANGE FLUCTUATIONS AND EXCESS RECOVERY OF FREIGHT, WHICH ALLEGED DIFFERENCE HAD NEVER BEEN ASKED BY THE AO OF THE ASSESSEE, TO BE E XPLAINED; AND THAT THE AO HAD FAILED TO CONTROVERT THE EXPLANATION GIVEN B Y THE ASSESSEE. IN THE ENQUIRY CONDUCTED BY THE AO U/S 250(4) OF THE I.T. ACT, AS DIRECTED. THE LD. CIT(A), ACCORDINGLY, DELETED THE ADDITION. 6. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS C ONTENDED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION RIGHTLY M ADE BY THE AO; THAT BOOKS ITA NOS. 1008 & 778(DEL)09 4 OF ACCOUNT HAD NOT BEEN PRODUCED BY THE ASSESSEE BE FORE THE AO AND THE AO HAD CORRECTLY MADE THE ADDITION. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 8. IN THIS REGARD, IT IS SEEN, THAT IT IS ON RECORD THAT THE ASSESSEE HAD SUBMITTED A DETAILED CHART REGARDING THE EXPORT SAL ES, BEFORE THE AO, VIDE LETTER DATED 1.10.2006. THIS CHART CONTAINED DETAI LS LIKE, NAME OF THE BUYER, AMOUNT OF BILLS IN FOREIGN CURRENCY, FREIGHT, C/F V ALUE, EXCHANGE RATE PREVAILING AT THE RATE RAISING OF THE INVOICE, AMOU NT IN INDIAN CURRENCY, C&F VALUE, AWB NUMBER AND DATE, SHIP BILL NUMBER AND DB K, AS ALSO DEPB. FURTHER, VIDE LETTER DATED 16.11.2006, THE ASSESSEE SUBMITTED BEFORE THE AO, SALES REGISTER SHOWING NAMES OF THE BUYER, FOREIGN EXCHANGE AMOUNT, AND AMOUNT IN INDIAN CURRENCY. THE DETAILS OF SALES A ND INCENTIVES, AS SUBMITTED BY THE ASSESSEE, ARE AS FOLLOWS:- I) EXPORT SALE AS PER INVOICES (TAKING RATE OF FOREIGN ` EXCHANGE PREVAILING AT THE TIME OF RAISING INVOICE) 4,97,06,617.66 II) ADD: OCEAN FREIGHT LESS PAID(OUR INCOME) 1,48,524.48 4,98,55,142.14 II) LESS: DIFFERENCE IN FOREIGN EXCHANGE REALIZATION DUE TO CURRENCY FLUCTUATIONS 5,15,9 48.22 ACTUAL REALIZATION 4,93,39,193 .92* IV) DUTY DRAW BACK 3,78,190.26 ITA NOS. 1008 & 778(DEL)09 5 V) INCENTIVE 80,25,664.76 AS PER TRADING ACCOUNT 5,77,43,048.94 * ACTUAL FOB SALES. 9. AS PER THESE DETAILS, THERE IS NO DIFFERENCE IN THE SALE DECLARED BY THE ASSESSEE AND THE SALES REALIZATION. THE AO, WHIL E WORKING OUT THE ALLEGED DIFFERENCE OF ` 3,67,425/- BETWEEN THE FOB VALUE OF THE EXPORTS AND THE AMOUNT OF SALES AS PER THE DETAILS OF SALES AND INC ENTIVES, DID NOT ASK ANYTHING OF THE ASSESSEE AND DID NOT CONSIDER THAT THE BILLS WERE INVARIABLY RAISED IN US DOLLARS/EUROS. THE ENTRIES IN THE BO OKS OF ACCOUNT WERE MADE IN RUPEES, TAKING THE RATE OF EXCHANGE OF THE CURRE NCY, AS PREVAILING AT THE TIME OF RAISING THE INVOICE. THE AMOUNT DUE TO FO REIGN CURRENCY FLUCTUATIONS AND FREIGHT CHARGES DIFFERENCES IN INV OICES AND ACTUAL PAYMENT TO THE SHIPPING COMPANY, WERE NOT CONSIDERED BY THE AO WHILE MAKING THE ADDITION. THE MATTER WAS REMITTED BY THE CIT(A) T O THE AO TO MAKE AN ENQUIRY U/S 250(4) OF THE ACT. IN HIS REPORT, THE AO OBSERVED THAT THE EXPLANATION SUBMITTED BY THE ASSESSEE COULD NOT BE VERIFIED, AS IT WAS NOT SUPPORTED BY DOCUMENTARY EVIDENCE AND THE LEDGER AC COUNT HAD NOT BEEN SUBMITTED IN THE ASSESSMENT PROCEEDINGS. IN THE R EJOINDER TO THE AOS REPORT THE ASSESSEE SUBMITTED THAT THE AO HAD DE NIED AMPLE OPPORTUNITY TO ITA NOS. 1008 & 778(DEL)09 6 THE ASSESSEE TO EXPLAIN HER CASE; THAT THE EVIDENCE S WERE ALREADY ON RECORD; THAT THE AOS CONTENTION THAT THE ASSESSEE HAD NOT EXPLAINED THE DIFFERENCE WAS NOT CORRECT, AS THE ASSESSEE HAD NEVER BEEN CAL LED UPON TO DO SO; AND THAT IT WAS ONLY A WRONG APPRECIATION OF DATA ALREADY ON RECORD THAT RESULTED IN THE ADDITION MADE. 10. THE LD. CIT(A), WHILE DELETING THE ADDITION, DU LY TOOK INTO ACCOUNT THE ABOVE FACTS. NOW, IT REMAINS UNCONTROVERTED THAT I T WAS DUE TO FOREIGN EXCHANGE FLUCTUATION AND EXCESS RECOVERY OF FREIGHT , THAT THE DIFFERENCE IN EXPORT SALES, AS ARRIVED AT BY THE AO, CAME ABOUT. OTHERWISE, THERE IS NO DIFFERENCE BETWEEN THE SALES DECLARED BY THE ASSESS EE AND THE SALES REALIZATION. THE AO, NEITHER IN THE ORIGINAL ASS ESSMENT PROCEEDINGS, NOR ON REMAND OF THE MATTER BY THE CIT(A), PUT ANY QUESTIO N TO THE ASSESSEE. ON THE OTHER HAND, THE BILLS RAISED BY THE ASSESSEE, W HICH BILLS WERE RAISED IN US DOLLARS AND EUROS, WERE NOT TAKEN INTO ACCOUNT. A S AGAINST THESE BILLS, THE ENTRIES IN THE ASSESSEES BOOKS WERE MADE IN RUPEES , TAKING INTO CONSIDERATION, THE RATE OF EXCHANGE OF THE CURRENCY AS EXISTING WHEN THE INVOICES WERE RAISED. THE RESULTING DIFFERENCE BE TWEEN THE AMOUNTS MENTIONED IN THE INVOICES AND THE AMOUNT OF ACTUAL PAYMENT MADE, WAS WRONGLY NOT TAKEN INTO ACCOUNT BY THE AO. SO MUCH SO, EVEN WHEN THE MATTER WAS REMITTED TO THE AO BY THE CIT(A), THE AO DID NOT DEEM IT FIT TO ITA NOS. 1008 & 778(DEL)09 7 PUT ANY QUERY TO THE ASSESSEE. THOUGH ALL THE NEC ESSARY DETAILS REGARDING THE ASSESSEES CLAIM WERE ALREADY ON RECORD BEFOR E THE AO, THEY WERE NOT CONSIDERED BY THE AO, RESULTING INTO AN ORDER BASED ON COMPLETE NON- READING OF MATERIAL EVIDENCE DULY BROUGHT ON RECORD . 11. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY ERROR IN THE CIT(A)S ACTION OF DELETING THE ADDITION OF ` 3,67,425/-, WHICH DELETION HAS BEEN ORDERED BY PASSING A REASONED SPEAKING ORDER, AS DISCUSSED. GROUND NO.1 IS, ACCORDINGLY, REJECTED. 12. GROUND NO.2 STATES THAT THE LD. CIT(A) HAS ERRE D IN DELETING THE ADDITION OF ` 31,29,060/- MADE ON ACCOUNT OF DIFFERENCE IN EXPORT INCENTIVE. 13. THE AO OBSERVED THAT AS PER THE DETAILS FILED B Y THE ASSESSEE, THE AMOUNT OF EXPORT INCENTIVE WAS OF ` 39,22,567/-, WHEREAS THE AMOUNT OF TOTAL SALES AND INCENTIVES OF C&F VALUE OF EXPORTS, AS PE R THE ASSESSEES PROFIT AND LOSS ACCOUNT, WAS OF ` 5,77,43,049/- AND ` 5,69,49,452/-, RESPECTIVELY, AMOUNTING TO ` 7,93,507/-. THE AO ADDED THE RESULTANT DIFFERENC E OF ` 31,29,060/- TO THE INCOME OF THE ASSESSEE. 14. THE LD. CIT(A) DELETED THIS ADDITION. THIS HA S GIVEN RISE TO GROUND NO.2 TAKEN BY THE DEPARTMENT. ITA NOS. 1008 & 778(DEL)09 8 15. THE LD. DR HAS ARGUED THAT THE LD. CIT(A) HAS E RRED IN DELETING THE ADDITION OF ` 31,29,060/- MADE ON ACCOUNT OF DIFFERENCE IN EXPORT INCENTIVE. 16. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 17. THE ASSESSEE HAD FILED DETAILS BEFORE THE AO SH OWING INCENTIVE INCOME OF ` 80,25,664/-. THIS AMOUNT WAS INCLUSIVE OF THE AUD ITED AMOUNT OF ` 31,29,060/-. THE ASSESSEE HAD SHOWN THIS AMOUNT T O REPRESENT INCOME ON ACCOUNT OF INCENTIVES, RATHER THE AMOUNT OF ` 7,93,507/-, AS OBSERVED BY THE AO. AS PER THE ASSESSEE, THE AMOUNT OF ` 5,77,43,049/-, REPRESENTING TOTAL OF SALES AND INCENTIVES, WAS INCLUSIVE OF SAL ES AND INCENTIVE INCOME. THE MATTER WAS REMITTED TO THE AO BY THE LD. CIT(A ). IN HIS REPORT, THE AO REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER. THE LD. CIT(A) OBSERVED THAT ACCORDING TO THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE AO, THE AMOUNT OF ` 39,22,567/- REPRESENTED THE DUTY DRAW BACK RECEIVE D ON VARIOUS INVOICES RAISED BY THE ASSESSEE DURING THE YEAR. CREDIT OF ` 80,25,664/- HAD BEEN TAKEN IN THE PROFIT AND LOSS A CCOUNT ON ACCOUNT OF DUTY DRAW BACK, AS PER THE DETAILS OF SALES AND DUTY DRA W BACK SUBMITTED THE AMOUNT OF ` 80,25,664/- INCLUDED THE DUTY DRAW BACK OF THE YEAR UNDER ITA NOS. 1008 & 778(DEL)09 9 CONSIDERATION. IT ALSO RELATED TO THE DUTY DRAW B ACK RELATING TO THE PREVIOUS YEARS BUT RECEIVED DURING THE YEAR UNDER CONSIDERAT ION. THE AO DID NOT BRING FORTH ANY BASIS FOR WORKING OUT THE ALLEGED DIFFERENCE. DURING THE ASSESSMENT PROCEEDINGS, NO OPPORTUNITY WAS PROVIDED TO THE ASSESSEE TO EXPLAIN THE ALLEGED DISCREPANCY. PERTINENTLY, EVE N AS PER THE AO, THE INCENTIVE RECEIVED DURING THE YEAR AMOUNTED TO ` 39,22,570/- WHICH WAS ALSO THE FIGURE STATED BY THE ASSESSEE TO THE PRESE NT DUTY DRAW BACK RECEIVED ON THE INVOICES RAISED BY HER DURING THE YEAR. MO REOVER, WHEN THE EXPLANATION OFFERED BY THE ASSESSEE WAS PROVIDED BY THE CIT(A) TO THE AO FOR REBUTTAL, THE REMAND REPORT REMAINED SILENT WIT H REGARD THERETO. 18. IN VIEW OF THE ABOVE, FINDING NO MERIT IN GROUN D NO.2 RAISED BY THE DEPARTMENT, THE SAME IS REJECTED. 19. ACCORDING TO GROUND NO.3, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF ` 28,83,375/- MADE ON ACCOUNT OF UNCONFIRMED CREDITS SHOWN AS ADVANCE FROM FOREIGN CUSTOMERS. 20. THE AO OBSERVED THAT IN THE BALANCE SHEET OF M /S. MILI INC, AS ON 31.3.2004, THE ASSESSEE HAD SHOWN ADVANCE OF ` 28,83,375/- FROM FOREIGN CUSTOMERS. SINCE THE ASSESSEE HAD NOT FURNISHED A NY DETAILS WITH THE SAID RETURN OF INCOME, CONCERNING THE SAID ADVANCE, THE AO PUT THE ASSESSEE TO NOTICE, ASKING HER TO FURNISH LEDGER ACCOUNT FOR TH E FINANCIAL YEARS 2003-04 ITA NOS. 1008 & 778(DEL)09 10 AND 2004-05, CONCERNING OF PARTIES FROM WHOM THE AD VANCE HAD BEEN RECEIVED. THE AO OBSERVED THAT THESE DETAILS WERE STILL NOT FURNISHED AND IN THE ABSENCE THEREOF, THE GENUINENESS OF THE ADVANCE COULD NOT BE ASCERTAINED; THAT IT WAS NOT CLEAR WHETHER ANY GOOD S WERE SENT AGAINST THESE ADVANCES IN THE SUBSEQUENT YEAR; THAT SUCH GENUINEN ESS COULD BE VERIFIED ONLY FROM RELEVANT INWARD REMITTANCE ; AND THAT IN THE ABSENCE THEREOF, THE ADVANCES OF ` 28,83,375/- WERE BEING CONSIDERED AS UNEXPLAINED CA SH CREDITS AND WERE BEING DISALLOWED U/S 68 OF THE I.T. ACT. 21. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THIS DISALLOWANCE, LEADING TO GROUND NO.3 RAISED BY THE DEPARTMENT. 22. THE LD. DR HAS CONTENDED THAT THE LD. CIT(A) HA S ERRED IN DELETING THE ADDITION OF ` 28,83,375/-, RIGHTLY MADE BY THE AO ON ACCOUNT OF UNCONFIRMED CREDITS SHOWN AS ADVANCE FROM FOREIGN C USTOMERS. 23. THE LEARNED COUNSEL FOR THE ASSESSEE, PER CONTR A, HAS RELIED ON THE IMPUGNED ORDER. 24. IN THIS REGARD IT IS SEEN THAT THE ASSESSEE MAI NTAINED BEFORE THE LD. CIT(A) THAT A LIST CONTAINING THE NAMES OF THE PART Y WAS FILED BEFORE THE AO WITH THE FINAL ACCOUNT ATTACHED WITH THE RETURN OF INCOME; THAT THE STATEMENT OF ACCOUNT OF ALL THE PARTIES, TO WHOM THE SALES WE RE MADE, WAS DULY FILED BY THE ASSESSEE BEFORE THE AO VIDE LETTER DATED 1.10.2 006, WHICH WAS ITA NOS. 1008 & 778(DEL)09 11 ACKNOWLEDGED BY THE AO; THAT THIS STATEMENT GAVE TH E DETAILS OF THE ADVANCE RECEIVED FROM THE FOREIGN BUYERS; THAT DETAILS WER E ATTACHED WITH THE FINAL ACCOUNT FILED ALONG WITH THE RETURN OF INCOME; THAT IT WAS EXPLAINED THAT THE METHOD OF OPERATION OF THE BUSINESS OF THE ASSESSEE WAS MANY TIMES, ALONG WITH THE ORDER EITHER A PART OF THE PAYMENT OR THE PAYMENT IN FULL WAS RECEIVED IN ADVANCE; THAT THE ADVANCE OF ` 28,83,375/- AS ON 31.3.2004, REPRESENTED THE ADVANCES RECEIVED, AGAINST WHICH, T HE ORDERS WERE EXECUTED IN THE FOLLOWING YEAR; AND THAT VIDE LETTER DATED 1 .10.2006, BESIDES THE COPIES OF ACCOUNT OF THE PARTIES FROM WHOM ADVANCES WERE O UTSTANDING, DETAILS OF ALL THE PARTIES TO WHOM EXPORT SALES WERE MADE, WER E ATTACHED. IT WAS CONTENDED THAT THE AO HAD MADE ADDITION WITHOUT GOI NG THROUGH THE DETAILS OR THE COPIES OF ACCOUNT AS FILED, WITHOUT NOTICING THAT SUCH ADVANCES WERE INWARDS OUTSTANDING IN THE BOOKS OF THE ASSESSEE. IT WAS STATED THAT AS ON 31.3.2003, THE AMOUNT OUTSTANDING WAS OF ` 20,76,968/-. 25. THE AO REMITTED THE MATTER TO THE FILE OF THE A O. IN THE REMAND REPORT, THE AO STATED THAT THE ASSESSEE, DESPITE HA VING BEEN ASKED TO DO SO IN THE ASSESSMENT PROCEEDINGS, HAD FAILED TO FURNISH THE DETAILS OF FOREIGN INWARD REMITTANCE CERTIFICATE FOR WHICH THE ADVANC E HAD BEEN RECEIVED AND THE DETAILS OF THE GOODS SUPPLIED AGAINST THESE ADV ANCES; AND THAT EVEN AT THAT ITA NOS. 1008 & 778(DEL)09 12 STAGE, I.E., IN THE REMAND PROCEEDINGS, THE ASSESSE E HAD SENT THE UNSIGNED LEDGER AND INWARD REMITTANCE. 26. THE ASSESSEE, ON THE OTHER HAND, IN HER REJOIND ER, STATED THAT SHE HAD FILED SALES REGISTER VIDE LETTER DATED 16.11.2006, SHOWING THE NAME OF THE BUYER, FOREIGN EXCHANGE AMOUNT AND AMOUNT IN INDIAN CURRENCY; THAT VIDE LETTER DATED 1.10.2006(SUPRA), STATEMENT ON ACCOUN T OF ALL THE PARTIES TO WHOM SALES HAD BEEN MADE, WERE FILED; THAT THE LEDG ER ACCOUNT OF ALL THE PARTIES WERE ALSO FILED VIDE LETTER DATED 1.10.2006 ; THAT THE LEDGER ACCOUNTS WERE ACCOMPANIED BY A COVERING LETTER AND NO DEFECT HAVE BEEN POINTED OUT BY THE AO; THAT THE ADVANCES HAD BEEN RECEIVED FROM OLD FOREIGN CUSTOMERS; THAT THE DETAILS OF THESE ADVANCES WERE AVAILABLE I N THE BOOKS OF ACCOUNT AS FILED; THAT THE PARTIES HAD BEEN SUPPLIED THE GOODS IN THE NEXT YEAR; THAT THE ACCOUNTS WERE RUNNING ACCOUNTS; THAT APROPOS THE FO REIGN INWARD REMITTANCE CERTIFICATE, THE PARTIES WHO HAD GIVEN T HE ADVANCES WERE REGULAR PARTIES FOR THE LAST NUMBER OF YEARS, ALL REMITTANC ES HAVE BEEN RECEIVED IN THE BANK, COPIES OF BANK STATEMENT WITH REGARD TO WHICH HAD BEEN FILED, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED AND T HE QUESTION OF INWARD REMITTANCE CERTIFICATE WAS NEVER RAISED BY THE AO. 27. ALL THE ABOVE FACTS WERE DULY TAKEN INTO CONSID ERATION BY THE LD. CIT(A) WHILE DELETING THE ADDITION. THIS REMAINS UNCONTROVERTED. NOW, ITA NOS. 1008 & 778(DEL)09 13 WHEN IT IS UNDISPUTED THAT THE ADVANCES WERE OUTSTA NDING AT THE END OF EACH YEAR, THE AO, IN VIEW OF THE FACTS, WITHOUT ADVERTI NG TO THE DETAILS FILED BY THE ASSESSEE, WAS NOT JUSTIFIED IN MAKING THE ADDIT ION. THE ACTION OF THE LD. CIT(A), IN THIS REGARD WAS JUSTIFIED AND IS UPHELD. GROUND NO. 3 IS REJECTED. 28. CONSEQUENTLY, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ITA NO. 778(DEL)2009: 29. THIS IS ASSESSEES APPEAL FILED AS A CROSS APPE AL TO THE DEPARTMENT ITA NO. 1008(DEL)2009(SUPRA). 30. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSE SSEE HAS STATED AT THE BAR THAT GROUND NOS. 4&6 ARE NOT PRESSED. REJECTED AS NOT PRESSED. 31. GROUND NO.1 IS GENERAL. 32. AS PER GROUND NO.2, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF ` 30,058/- ON ACCOUNT OF PROPERTY TAX PAID BY THE ASS ESSEE FOR HER BUSINESS PREMISES. 33. THE ASSESSEE CLAIMED HOUSE TAX EXPENSES IN RESP ECT OF THE PREMISES AT 68, KAILASH HILLS, NEW DELHI. THE PREMISES WAS BE ING USED BY THE ASSESSEE, HER HUSBAND AND HER ONLY SON. THE AO OB SERVED THAT THIS EXPENSE WAS OF PURELY A PERSONAL NATURE, NOT RELATED TO THE BUSINESS OF THE ASSESSEE. THE CLAIM WAS DISALLOWED. ITA NOS. 1008 & 778(DEL)09 14 34. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. TH EREFORE, GROUND NO.2 HAS BEEN RAISED BY THE ASSESSEE. 35. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ` 30,058/- ON ACCOUNT OF PROPERTY TAX PAID BY THE ASSESSEE, WITHOUT CONSIDER ING THAT THE PREMISES WAS THE BUSINESS PREMISES OF THE ASSESSEE. 36. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRON G RELIANCE ON THE IMPUGNED ORDER. 37. BEFORE THE LD. CIT(A) THE ASSESSEE HAD CONTEND ED THAT SHE WAS RESIDING AT C-140, EAST OF KAILASH, NEW DELHI, ALON G WITH HER HUSBAND AND HER SON; THAT NO MEMBER OF THE ASSESSEE FAMILY, NOR THE ASSESSEE HERSELF, WAS RESIDING AT 68, FF, KAILASH HILLS, NEW DELHI; THAT WHICH PREMISES WAS USING EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS; THAT COPIES OF MUNICIPAL TAX PAID CLEARLY SHOWED THE ASSESSEE TO BE THE OWNE R OF THE PREMISES; AND THAT THE PAYMENTS HAD BEEN MADE BY CHEQUE AND WERE CLEARED FROM THE BANK ACCOUNT OF THE ASSESSEE. THE LD. CIT(A) REMITTED THE MATTER TO THE FILE OF THE AO. THE AO, IN HIS REMAND REPORT STATED THAT THE ADDITION HAD BEEN MADE SINCE THE PROPERTY AT 68, KAILASH HILLS WAS A RESID ENTIAL PROPERTY AND WAS BEING USED FOR THE PURPOSE OF THE RESIDENCE OF THE ASSESSEE AND THE MEMBERS OF THE FAMILY; THAT MERE PAYMENT OF HOUSE TAX DOES NOT PROVE THE PROPERTY TO ITA NOS. 1008 & 778(DEL)09 15 HAVE BEEN USED FOR BUSINESS PURPOSES AND THAT THE A SSESSEE HAD FAILED TO FURNISH ANY DOCUMENTARY EVIDENCE REGARDING THE USE OR OWNERSHIP OF THE PROPERTY. THE ASSESSEE, IN REJOINDER, CONTENDED T HAT THOUGH THE PROPERTY WAS RESIDENTIAL, IT WAS USED FOR THE BUSINESS OF TH E ASSESSEE; THAT HOUSE TAX PAID IS ALLOWABLE EXPENDITURE, WHETHER THE PREMISES IS RESIDENTIAL OR COMMERCIAL, IF IT IS USED FOR BUSINESS PURPOSES; TH AT 50% OF THE ELECTRICITY EXPENSES STAND DISALLOWED FOR THE PREMISES; THAT TH E ASSESSEE WAS RESIDING ELSEWHERE; THAT ALONG WITH THE LETTER DATED 1.10.2 006 FILED BY THE ASSESSEE BEFORE THE AO, THE ASSESSEE HAD FURNISHED A RECEIP T EVIDENCING PAYMENT BY CHEQUE TO THE MCD. 38. HERE, WE FIND THAT NO DIRECT EVIDENCE OF CARRY ING ON OF BUSINESS IN THE PROPERTY AT 68, FF, KAILASH HILLS, NEW DELHI WAS FU RNISHED BY THE ASSESSEE. THE AO IN THE ABSENCE OF SUCH EVIDENCE, WE FIND TH AT THE LD. CIT(A) WAS CORRECT IN CONFIRMING THE DISALLOWANCE OF ` 30,058/-. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS REJECTED. 39. AS PER GROUND NO.3, THE LD. CIT(A) ERRED IN UPH OLDING THE ADDITION OF ` 1,01,630/-, BEING 75% OF THE EXPENDITURE ON REPAIR AND MAINTENANCE INCURRED BY THE ASSESSEE FOR THE BUSINESS. THE AS SESSEE CLAIMED REPAIR AND MAINTENANCE EXPENSES OF ` 58,400/- AND MISC.EXPENSES OF ` 77,111/- TOTAL AMOUNTING TO ` 1,35,519/-. THE AO ADDED 75% THEREOF TO THE INCOM E OF THE ITA NOS. 1008 & 778(DEL)09 16 ASSESSEE. THE AO ASKED THE ASSESSEE TO FURNISH A COPY OF TOP THREE BILLS IN RESPECT OF REPAIR AND MAINTENANCE EXPENSES AND MISC .EXPENSES. THE ASSESSEE, HOWEVER, DID NOT FILE ANY BILL. THE AO OBSERVED THAT AS PER THE LEDGER ACCOUNT OF THESE EXPENSES, MOST OF THE EXPEN SES HAVE BEEN CLAIMED AS PAID IN CASH, WHEREAS IN THE NARRATION, NEITHER THE DETAILS OF THE EXPENSES, NOR ANY BILL NUMBER , HAD BEEN GIVEN. THE AO, AS SUCH , MADE ADDITION OF 75% OF THE EXPENSES CLAIMED AT ` 1,35,519/-, AMOUNTING TO ` 1,01,630/-, AS EXPENSES NOT RELATING TO BUSINESS AND UNVOUCHED. 40. THE LD. CIT(A) CONFIRMED THE ADDITION. 41. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT THE LD. CIT(A) HAS ERRED IN MAKING ADDITION OF ` 1,01,630/- BEING 75% OF THE EXPENDITURE ON REPAIR AND MAINTENANCE INCURRED BY THE ASSESSEE FOR HER BUSINESS. 42. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY REL IED ON THE IMPUGNED ORDER. 43. THE LD. CIT(A) REMITTED THIS MATTER ALSO TO THE FILE OF THE AO, ON THE ASSESSEES AVERMENT THAT THE AO HAD ADMITTED IN THE ASSESSMENT ORDER THAT THE LEDGER ACCOUNT OF BOTH THE EXPENSES HAD BEEN FI LED; THAT THE LEDGER ACCOUNT OF THE REPAIR AND MAINTENANCE EXPENSES SHOW ED THAT THERE WERE NUMEROUS CHEQUE PAYMENTS; THAT THE AO HAD GONE IN OBSERVING THAT THE LEDGER ACCOUNT DID NOT MENTION EITHER DETAILS OF BI LLS OR NAMES OF THE PARTIES; ITA NOS. 1008 & 778(DEL)09 17 THAT IN MANY CASES, BILL NUMBER AND PARTY NAMES WER E GIVEN; THAT THE EXPENSES WERE OF SUCH A NATURE THAT THERE COULD NOT BE PUCCA BILLS OF EACH ENTRY; THAT THE MISC.EXPENSES WERE RESIDUAL EXPENSE S IN NATURE; THAT EXPENDITURE NOT FALLING WHOLLY AND EXCLUSIVELY UNDE R ANY HEAD WAS BOOKED THEREUNDER; THAT EXPENSES ON BOTTLED WATER, ICE, DU STER FOR CLEANING AND EXPENSES OF LIKE NATURE WERE BOOKED; THAT THE NATUR E OF THESE EXPENSES WAS AS CALLED FOR PAYMENT ONLY IN CASH; AND THAT THESE EXPENSES WERE REASONABLE AS COMPARED WITH THE VOLUME OF ASSESSEES BUSINESS EXPENSES. 44. IN HIS REMAND REPORT, THE AO CONTENDED THAT THE ASSESSEE HAD NOT SUBMITTED ANY EVIDENCE TO VERIFY THE EXPENSES, EVE N AT THE REMAND STAGE. 45. IN HER REJOINDER, THE ASSESSEE SUBMITTED THAT T HE DETAILS AND VOUCHERS WERE PRODUCED AND COPY OF LEDGER ACCOUNT WAS FILED. 46. CONSIDERING THAT IT HAS NOT BEEN DENIED THAT TH E ASSESSEE HAD PRODUCED DETAILS AND VOUCHERS AND COPY OF LEDGER ACCOUNT AND THAT MISC.EXPENSES WERE OF A NATURE WHICH REQUIRED CASH PAYMENT, BESID ES THE FACT THAT THE LEDGER ACCOUNT SHOWED NUMEROUS CHEQUE PAYMENTS, WE DEEM IT PROPER TO RESTRICT THE DISALLOWANCE TO 25% OF THE CLAIM OF TO TAL EXPENSES OF ` 1,35,519/-. ACCORDINGLY, GROUND NO.3 IS PARTLY AC CEPTED. 47. AS PER GROUND NO.5, THE LD. CIT(A) HAS WRONGLY UPHELD THE ADDITION OF ` 89,140/- BEING 20% OF EXPENDITURE INCURRED ON INTE RNAL TRAVELLING. ITA NOS. 1008 & 778(DEL)09 18 48. WHILE DISALLOWING THE EXPENSES OF ` 8,06,523/- ON ACCOUNT OF TOUR AND TRAVELLING, THE AO OBSERVED THAT IN SPITE OF BEING ASKED TO DO SO, THE ASSESSEE DID NOT FURNISH EVEN A SINGLE BILL IN SUPP ORT OF THE EXPENSES CLAIMED; THAT SECTION 44 AA OF THE I.T. ACT MAKES I T MANDATORY FOR AN ASSESSEE TO KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS MAY ENABLE THE AO TO COMPUTE THE ASSESSEES TOTAL I NCOME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT; THAT IN THE ABSENCE OF DOCUMENTARY EVIDENCE, THE NATURE AND ALLOWABILITY OF THE EXPENSES COULD N OT BE ASCERTAINED; AND THAT HENCE, THE EXPENSES CLAIMED WAS BEING DISALLOWED AS EXPENSES NOT RELATING TO BUSINESS, UNVOUCHED AND PERSONAL IN NATURE. 49. THE LD. CIT(A) DISALLOWED 20% OF THE DOMESTIC T RAVELLING EXPENSES, AMOUNTING TO ` 89,140/-, AS HAVING NOT BEEN INCURRED WHOLLY AND E XCLUSIVELY FOR BUSINESS PURPOSES, SINCE RECEIPTS FROM ONLY SOM E OF THE EMPLOYEES HAD BEEN FURNISHED, WITHOUT SPECIFIC SUPPORTING VOUCHER S/BILLS. 50. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT THE LD. CIT(A) HAS WRONGLY UPHELD THE ADDITION OF ` 89,140/-, BEING 20% OF THE EXPENDITURE INCURRED ON INTERNAL TRAVELLING. 51. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY SUP PORTED THE IMPUGNED ORDER. ITA NOS. 1008 & 778(DEL)09 19 52. THE ASSESSEE HAS NOT BEEN ABLE TO DISLODGE THE FINDING OF THE LD. CIT(A), TO THE EFFECT THAT ONLY SOME RECEIPTS FROM SOME EMPLOYEES HAD BEEN FILED IN SUPPORT OF THE CLAIM AND THESE RECEIPTS AL SO WERE NOT SUPPORTED BY BILLS AND VOUCHERS/DETAILS. AS SUCH, FINDING NO E RROR THEREWITH, THE ACTION OF THE LD. CIT(A) IN DISALLOWING 20% OF THE DOMESTIC T RAVELLING EXPENSES, AMOUNTING TO ` 89,140/-, IS UPHELD. GROUND NO. 5 IS, ACCORDINGL Y, REJECTED. 53. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 54. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED, WHEREAS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, AS INDICA TED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.05.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 06.05.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY ITA NOS. 1008 & 778(DEL)09 20 BY ORDER DEPUTY REGISTRAR