M/s. J.V.S. Engineers, Baroda V. The ACIT., Circle-2, Baroda

ITA 809/AHD/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51112 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-12-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 20-02-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Additional evidence; Corroborative evidences; Revenue expenditure
• Section: 143(3)

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI MUKUL KR. SHRAWAT - JM & SHRI B P JAIN - AM ITA NO.809/AHD/2007 ITA NO.11/AHD/2011 (ASSESSMENT YEAR:-2003-04) M/S J V S ENGINEERS, A-1/33, GIDC ESTATE, BANK OF BARODA LANE, MAKARPURA, BARODA-390 010 V/S THE ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-2, BARODA PAN: AACFJ 6138 J [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI MANISH J SHAH, AR REVENUE BY:- SHRI SAMIR TEKRIWAL, SR. DR DATE OF HEARING:- 20-12-2011 DATE OF PRONOUNCEMENT:- 30-12-2011 O R D E R PER B P JAIN (AM) :- THESE TWO APPEALS ARISE FROM TWO DIFFERENT ORDERS OF LEARNED CIT(A)-II, BARODA DATED 16-01-2007 PASSED IN THE QUANTUM APPEAL WHEREAS THE ORDER IS D ATED 06-10- 2010 IN THE PENALTY CONFIRMED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2003-04. 2. FIRST OF ALL, WE TAKE UP THE QUANTUM APPEAL OF T HE ASSESSEE IN ITA NO.809/AHD/2007. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 2 [01] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN THE LAW THE ID. CIT (A)-II, BARODA WAS ERRED IN CONFIRMING THE DISALLOWANCE OF ENTIRE DEPRECIATION OF RS.3,51,313/ - ON NEW FACTORY SHED AND RS.1,55,985.00 ON WORK-IN-PROGRESS ON THE GROUND THAT FACTORY SHED WAS TRANSFERRED ON 24 TH APRIL, 2003 AND NOT PUT TO USE DURING THE YEAR. [0.2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN THE LAW THE ID. CIT (A)-II, BARODA WAS ERRED IN CONFIRMING THE VARIOUS DISALLOWANCE OFFICE EXPENSES AS UNDER. (I) FOR PURCHASE OF VALVES: WORTH RS.50.000.00: ON THE GROUND THAT APPELLANT HAS FAILED TO ESTABLISH PURCHASE OF VALVE S IN CASH. [II) FOR LABOUR CHARGES OF RS.32.500.00: ON THE GRO UND THAT SAME IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. (III) FOR BROKERAGE OF RS.30.000.00: ON THE GROUND THAT NO DETAIL OF PAYEE APPEARED ON THE VOUCHER. (IV) PAID TO V.M. SHAH RS.53.338.00: ON THE GROUND THAT APPELLANT WAS FAILED TO ESTABLISH THAT EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS. [03] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN THE LAW THE ID. CIT(A)-II, BARODA WAS ERRED IN CONFIRMING D ISALLOWANCE OF LABOUR EXPENSE OF RS.16,63,310 ON THE GROUND THA T APPELLANT HAS FAILED TO PRODUCE ANY EVIDENCE FOR EXPENSES INC URRED FOR THE LABOUR EXP. [04] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN THE LAW THE ID. CIT(A)-II, BARODA WAS ERRED IN CONFIRMING D ISALLOWANCE OF VARIOUS EXPENSES OF V. M, SHAH FOR RS.89,040 ON THE GROUND THAT APPELLANT HAS FAILED TO PRODUCE EVIDENCE REGAR DING EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS. [05] APPELLANT PRAYS YOUR HONOR TO DELETE THE VARIO US ADDITIONS CONFIRMED BY THE ID. CIT(A) OR TO GIVE APPROPRIATE RELIEF AS PERFECTS AND CIRCUMSTANCES OF THE CASE. 3 [06] THE APPELLANT PRAYS TO LEAVE, AMEND, AFTER OR CANCEL ANY GROUND OF APPEAL AT THE TIME OF HEARING. 3 AS REGARDS GROUND NO.1, THE LEARNED COUNSEL FOR T HE ASSESSEE, SHRI MANISH J SHAH DID NOT PRESS CONFIRMA TION OF DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.1,55,9 85/- ON WORK-IN-PROGRESS AND, THEREFORE, THE SAME IS DISMIS SED AS NOT PRESSED. 4. AS REGARDS CONFIRMATION OF DISALLOWANCE OF ENTIR E DEPRECIATION OF RS.3,51,313/- ON NEW FACTORY SHED, THE BRIEF FACTS AS EMANATING FROM AOS ORDER ARE REPRODUCED FOR THE SAKE OF CLARITY, AS UNDER:- THE ASSESSEE HAD PURCHASED A FACTORY SHED, THE PUR CHASE CONSIDERATION FOR HAS BEEN SHOWN AT RS.70,26,257/-. ON PERUSAL OF THE DOCUMENTS IN THIS REGARD, THE IN-OWING CAME TO LIGH T. THE ASSESSEE HAD MADE THE FOLLOWING PAYMENTS TOWARDS THE ACQUISITION OF THE PLOT AND SHED BEING PLOT NO. A-1, 33 AT G.I.D.C. MAKARPURA, BARODA. FACTORY SHED ACCOUNT JAYAGAURI FINANCE & INVESTMENT RS.50,31,000/- JAYAGAURI FINANCE & INVESTMENT RS.11,00,000/- TRANSFER FEES RS. 8,36,130/- NOC FROM GIDC RS. 2,790/- CEA, VUDA RS. 56,337/- ------------------ RS.70,26,257/- 4(I)(A)(I) IN THIS REGARD, THE ASSESSEE HAS FURNIS HED THE FOLLOWING:- (I) PROVISIONAL TRANSFER ORDER NO. GIDC/RM/BO/ALT/M R FROM GIDC DATED 4-3-2003 4 (II) AGREEMENT TO SELL DATED 18-12-2002 BETWEEN M/S . JAYAGAURI FINANCE & INVESTMENT (P) LTD VENDOR THE SAID PROPER TY AND THE PARTNERS OF JVS ENGINEERS. (III) OFFICE ORDER NO. GIDC/RM/VD/ALT/TFR DATED 2-4 -2003. (IV) DEED OF ASSIGNMENT REFLECTING DATE OF PURCHASE OF STAMP PAPER AS 17-4-2003, THE DOCUMENT ITSELF HAVING BEEN EXECU TED AND REGISTERED ON 21.4.2003. 4(I)(A)(II) AS PER THE ABOVE DOCUMENTS FURNISHED IN THE CONTEXT OF THE PURCHASE OF PLOT OF LAND ADMEASURING 5574.13 SQ UARE METERS ALONG WITH SHED AL-33, THE SAID PLOT OF LAND WAS ORIGINAL LY ALLOTTED TO M/S. JAYAGAURI FINANCE & INVESTMENT PVT. LTD IN MAKARPUR A INDUSTRIAL ESTATE. BY AGREEMENT FOR SALE DATED 18-12-2002, AN APPLICATION WAS MADE TO GIDC FOR TRANSFER OF THE SAID PLOT AND SHED IN FAVOUR OF JVS ENGINEERS. THE PROVISIONAL PERMISSION FOR TRANSFER HAD BEEN GIVEN BY THE CORPORATION AS PER LETTER DATED 4-3-2003. PURSU ANT TO THE OBTENTION OF REQUISITE PERMISSION FOR TRANSFER, SUPPLEMENTARY AGREEMENT HAS BEEN EXECUTED ON 21.4.2003. THIS DOCUMENT HAS BEEN REGISTERED ON 21-4-2003. AS PER THE OFFICE ORDER OF THE GIDC, THE PLOT / SHED STOOD TRANSFERRED IN THE NAME OF M/S. JVS ENGINEERS WITH EFFECT FROM 24.4.2003. IN VIEW OF THE ABOVE FACTS, THE ASSESSEE FIRM WAS REQUESTED TO EXPLAIN THAT OWING TO THE OWNERSHIP OF THE SAID PLOT AND SHED TAKEN BY THE ASSESSEE FIRM AFTER THE LAPSE OF THE FINANCI AL YEAR IN QUESTION, IT COULD NOT BE SAID THAT THE ASSESSEE WAS ENTITLED TO THE CLAIM OF DEPRECIATION OF AN AMOUNT OF RS.3,51,313/- ( RS.4,02,209/- - RS.50,896/-) FOR THE REASON THAT THE SAID CAPITAL A SSET WAS NEITHER OWNED BY THE ASSESSEE AS ON 31-3-2003 NOR WAS IT PU T TO USE BEFORE THE END OF THE PREVIOUS YEAR R. ANT TO ASSESSMENT YEAR 2003-04. 4(A)(III) IN RESPONSE, THE ASSESSEE FURNISHED THE S UBMISSION AS UNDER:- 'SINCE WE HAD A TREMENDOUS PRESSURE OF ORDER TO BE EXECUTED IN TIME, AND THERE WAS A POSSIBILITY OF INCURRING LIQU IDATED DAMAGES, IN CASE OF THE ORDERS WERE NOT EXECUTED AS PER THE SCHEDULE, WE HAD TO START PRODUCTION ACTIVITIES AT THE NEW BUSINESS PREMISES, EVEN ON PARTIALLY COMPLETION OF BUILDING CONSTRUCTION' 5 I HAVE CAREFULLY PERUSED THE SUBMISSIONS OF THE ASS ESSEE, BUT THE FACTS OF THE CASE AS APPRECIATED IN THE ABOVE REPRODUCTIO N OF THE SAME MILITATES AGAINST THE CLAIM OF THE ASSESSEE OF DEPR ECIATION IN THIS REGARD. THE FACT OF OWNERSHIP OF THE SAID SHED TRAN SFERRED TO THE ASSESSEE AFTER 31.3.2003, COUPLED WITH THE ASSESSEE 'S INABILITY TO SHOW THAT THE SAID ASSETS HAVE BEEN PUT TO USE OR READIE D FOR USE BY THE ASSESSEE BEFORE 31.3.2003 LEADS TO THE INFERENCE TH AT THE ASSESSEE'S CLAIM FOR DEPRECIATION FAILS. IN THE CIRCUMSTANCES, DEPRECIATION CLAIM OF THE ASSESSEE TO THE TUNE OF RS.3,51,313/- IS DIS ALLOWED. 5. THE LEARNED CIT(A) VIDE PARA 2.3 OF HIS ORDER OB SERVED THAT THE FACTORY SHED WAS TRANSFERRED IN THE NAME OF THE ASSESSEE WITH EFFECT FROM 24-04-2003, HAS NOT BEEN REBUTTED. THE SAID FINDING OF THE AO WAS BASED ON THE DOCUMENTS PRODUCED BY TH E ASSESSEE ITSELF DURING THE ASSESSMENT PROCEEDINGS. RELIANCE PLACED BEFORE THE LEARNED CIT(A) ON GIDC LETTER DATED 25-02-2003 WAS NOT BEFORE THE AO WHICH IS IN CONTRADICTION TO THE OFFI CE ORDER OF GIDC DATED 02-04-2003. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT MENTIONED BEFORE HIM ANYTHING ABOUT THE ORD ER OF GIDC DATED 02-04-2003. THE LEARNED CIT(A) CONCLUDED THE MATTER THAT IN FACT THE SAID FACTORY SHED WAS TRANSFERRED IN TH E NAME OF THE ASSESSEE WITH EFFECT FROM 24-04-2003 ONLY AND THE E LECTRICITY BILLS NOW RELIED UPON BY THE ASSESSEE ARE NOT IN TH E NAME OF THE ASSESSEE, THE DELIEVERY CHALLANS NOW RELIED UPON BY THE LEARNED COUNSEL ARE RAISED BY JVS ENGINEERS (SERVICE DIVISI ON) ON THE ASSESSEE FIRM WHICH ARE INTERNAL DOCUMENTS RAISED B Y THE ASSESSEE ON ITSELF AND THEY DO NOT HAVE ANY EVIDENTIARY VALU E. THE LEARNED CIT(A) THEREFORE UPHELD THE VIEWS OF THE AO. 6. MR. MANISH J SHAH INVITED OUR ATTENTION TO PAPER BOOK PAGES 13 TO 15 WHICH IS A COPY OF AGREEMENT TO SELL BETWEEN THE 6 VENDOR M/S JAYAGAURI FINANCE & INVESTMENT PVT. LTD. AND THE ASSESSEE WHICH IS DATED 18-12-2002 IN WHICH THE VEN DOR HAVING RECEIVED THE TOTAL AMOUNT OF RS.61,31,000/- ON 18-1 2-2002 AND THE VENDOR HAS LEFT THE ACTUAL POSSESSION OF THE SA ID PROPERTY AND HANDED OVER TO THE VENDEE WHO HAS TAKEN POSSESSION OF THE SAID PROPERTY AND IS IN THE LEGAL POSSESSION OF THE PROP ERTY. THE MUNICIPAL TAXES AND OTHER TAXES OF THE SAID PROPERT Y TILL 18-12- 2002 HAVE BEEN PAID. MR. SHAH INVITED OUR ATTENTIO N TO THE ELECTRICITY BILLS FOR THE MONTH OF MARCH, 2003 WHIC H ARE IN THE NAME OF THE VENDOR BUT ARE PAID BY THE ASSESSEE AND TO SUBSTANTIATE THE CLAIM, PLACED ON RECORD THE COPY O F ACCOUNT OF ABN AMARO BANK AT PAGE 17 OF THE PAPER BOOK THAT TH E PAYMENT OF ELECTRICITY BILLS FOR THE MONTH OF MARCH, 2003 H AVE BEEN MADE BY THE ASSESSEE. SIMILARLY, THE ASSESSEE HAS ALSO P AID THE ELECTRICITY BILLS FOR THE MONTH OF FEBRUARY, 2002 O UT OF ITS BANK ACCOUNT PLACED ON PAPER BOOK PAGE 69. OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 31 WHICH IS AN OFFICE ORDER BY G IDC, A GOVERNMENT OF GUJARAT UNDERTAKING, DATED 25-02-2003 WHERE IT HAS BEEN SPECIFICALLY MENTIONED THAT THE DEED OF AS SIGNMENT HAS BEEN REGISTERED BEFORE THE SUB-REGISTRAR, BARODA ON 25-02-2003. THE PROPERTY THEREFORE NOW STANDS TRANSFERRED IN TH E NAME OF JVS ENGINEERS WITH EFFECT FROM 25-02-2003. THE PROVISIO NAL TRANSFER ORDER OF GIDC IS ALSO PLACED ON RECORD ON PAPER BOO K PAGES 32 AND 32A WHICH IS DATED 04-03-2003 WHERE THE REQUEST OF TRANSFER IN THE NAME OF JVS ENGINEERS HAS BEEN APPROVED BY T HE SAID CORPORATION. AT PAGE 33 OF THE PAPER BOOK THERE IS AN OFFICE ORDER DATED 21-04-2003 WHERE IT HAS BEEN MENTIONED THAT SUPPLEMENTARY AGREEMENT HAS BEEN EXECUTED ON 21-04- 2003 7 BETWEEN THE SAID CORPORATION AND THE TRANSFEREE I.E ., THE ASSESSEE. MR. SHAH HAS ALSO INVITED OUR ATTENTION TO THE DELI VERY CHALLANS BY WHICH THE MACHINERY HAS BEEN TRANSFERRED FROM TH E OLD UNIT OF THE ASSESSEE TO THE PRESENT SHED / BUILDING WHICH A RE DATED 27 TH JANUARY TO MARCH, 2003 ON PAPER BOOK PAGES 22 TO 30 . HE FURTHER ARGUED THAT THE ASSESSEE IS THE OWNER OF THE SAID S HED AND THE SAME HAS BEEN PUT TO USE SINCE THE ASSESSEE HAD SHI FTED THE MACHINERY TO THE SAID PREMISES, HAS PAID THE ELECTR ICITY BILLS. ALL THESE EVIDENCES WERE AVAILABLE BEFORE THE LEARNED C IT(A) WHICH HAVE NOT BEEN APPRECIATED BY THE LEARNED CIT(A). TH E LEARNED COUNSEL, THEREFORE, PRAYED TO ALLOW DEPRECIATION DU RING THE YEAR, SINCE THE ASSESSEE HAS COMPLIED WITH THE REQUIREMEN TS AS LAID DOWN U/S 32(1) OF THE ACT. MR. SHAH RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MYSORE MIN ERALS LTD. VS. CIT 239 ITR 775 WHERE IT HAS BEEN HELD BY THE H ONBLE COURT THAT THE TERM OWNED AS OCCURRING IN SECTION 32(1) OF THE ACT MUST BE ASSIGNED A WIDER MEANING. ANYONE IN POSSESS ION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THER EFROM AND HAVING THE RIGHT TO USE AND OCCUPY THE PROPERTY AND / OR TO ENJOY ITS USUFRUCT IN HIS OWN RIGHT WOULD BE THE OWNER OF THE BUILDING THOUGH A FORMAL DEED OF TITLE MAY NOT HAVE BEEN EXE CUTED AND REGISTERED AS CONTEMPLATED BY THE TRANSFER OF PROPE RTY ACT, THE REGISTRATION ACT, ETC. THE EXPRESSION AS OCCURRING IN SECTION 32(1) OF THE ACT, MEANS THE PERSON WHO HAVING ACQUI RED POSSESSION OVER THE BUILDING IN HIS OWN RIGHT USES THE SAME FOR THE PURPOSES OF THE BUSINESS OR PROFESSION THOUGH A LEGAL TITLE HAS NOT BEEN CONVEYED TO HIM CONSISTENTLY WITH THE REQU IREMENTS OF 8 LAWS SUCH AS THE TRANSFER OF PROPERTY ACT AND THE R EGISTRATION ACT, ETC. THE SAID JUDGMENT OF THE HON'BLE SUPREME COURT IS DIRECTLY ON THE ISSUE AS IN THE PRESENT CASE AND TH EREFORE, THE LEARNED COUNSEL HEAVILY RELIED UPON THE SAID JUDGME NT OF THE HON'BLE SUPREME COURT TO SUBSTANTIATE HIS CLAIM. 7 ON THE OTHER HAND, THE LEARNED SENIOR DR APPEARIN G FOR THE REVENUE ARGUED THAT THE ASSESSEE HAS NOT REBUTTED T HAT THE FACTORY SHED HAS BEEN TRANSFERRED ON 24-04-2003 AS HELD BY THE AO IN HIS ORDER DATED 24-02-2006. THE GIDC LETTER DATED 25-02 -2003 WAS NOT BEFORE THE AO. THE ELECTRICITY BILLS ARE NOT IN THE NAME OF THE ASSESSEE. THE DELIVERY CHALLANS RAISED BY THE ASSES SEE ARE INTERNAL DOCUMENTS AND THEREFORE THEY CANNOT BE TAKEN ANY CO GNIZANCE. THE LEARNED SENIOR DR RELIED UPON THE DECISION OF T HREE JUDGES BENCH OF HON'BLE SUPREME COURT REPORTED IN [2001] 2 49 ITR 0214 (SC) IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORPORATION LTD. VS. CIT WHERE THE CASE OF MYSORE MINERALS LTD. VS. CIT (SUPRA) HAS ALSO BEEN REFERRED. IN THE SAID JUDGMEN T, THE HON'BLE SUPREME COURT HAS AFFIRMED THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORP ORATION LTD. VS. CIT [1997] 228 ITR 399 (MAD) DENYING THE DEPREC IATION IN THAT CASE SINCE THE ASSESSEE HAD NOT BECOME THE LEG AL OWNER OF THE MILLS. 8 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT T HE ASSESSEE HAD BROUGHT THE RELEVANT RECORD BEFORE THE LEARNED CIT( A) ALSO. THE RELEVANT RECORD I.E. THE OFFICE ORDER OF GIDC DATED 25-02-2003 9 WHERE IT HAS BEEN MENTIONED CLEARLY THAT THE LESSEE HAS PAID ALL THE DUES OF THE CORPORATION UPTO 2002-03. HE HAS AL SO PAID 10% TRANSFER FEES IN VALUE OF THE LAND AMOUNTING TO RS. 8,36,130/- VIDE D.D. NO.966993 DATED 15-02-2003. THE SUPPLEMEN TARY AGREEMENT HAS BEEN EXECUTED ON 25-02-2003 BETWEEN T HE CORPORATION HIRER AND TRANSFEREE. THE DEED OF ASSIG NMENT HAS BEEN REGISTERED BEFORE THE SUB-REGISTRAR, BARODA ON 25-02-2003. THE PLOT NOW THEREFORE STANDS TRANSFERRED IN THE NA ME OF JVS ENGINEERS WITH EFFECT FROM 25-02-2003. THE LEARNED CIT(A) HAS NOT TAKEN ANY COGNIZANCE OF THIS ORDER OF GIDC WHIC H IS DATED 25-02-2003. THE LEARNED CIT(A) SHOULD HAVE EXAMINED THE GENUINENESS OF THE SAID DOCUMENT WITHIN HIS CONCURR ENT JURISDICTION WHICH HAS NOT BEEN DONE AND WHICH HAS TOTALLY BEEN IGNORED. THE ASSESSEE HAS PAID THE ELECTRICITY BILL S OUT OF ITS BANK ACCOUNT, CANNOT BE IN DISPUTE SINCE THE COPY O F THE BILLS THOUGH IN THE NAME OF THE VENDOR BUT THE SAME HAVE BEEN PAID BY THE ASSESSEE OUT OF ITS BANK ACCOUNT. THE OLD MACHI NERY HAVING BEEN TRANSFERRED BY THE ASSESSEE FROM ITS OLD UNIT TO THE PRESENT UNIT, HAS ALSO BEEN DOUBTED BY THE LEARNED CIT(A) W ITHOUT ASSIGNING ANY COGENT REASONS. AS REGARDS THE OFFIC E ORDER OF GIDC AVAILABLE AT PAPER BOOK PAGE 33, SUPPLEMENTARY AGREEMENT HAS BEEN EXECUTED ON 21-04-2003, CANNOT CHANGE THE FACTS OF THE GIDC OFFICE ORDER DATED 25-02-2003 AVAILABLE AT PAG E-31. THE ASSESSEE IN THE PRESENT CASE HAVING TAKEN THE LEGAL POSSESSION, HAS BECOME THE LEGAL OWNER OF THE FACTORY SHED WHIC H HAS BEEN PUT TO USE AS THE ASSESSEE HAD PAID THE ELECTRICITY BILLS AND SHIFTED THE MACHINERY TO THE PRESENT PREMISES, CANN OT BE DOUBTED. 10 9 AS REGARDS RELIANCE ON THE JUDGMENT OF THE HON'BL E SUPREME COURT IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORP ORATION LTD. VS. CIT (SUPRA) BY THE LEARNED SENIOR DR, THE HON'B LE SUPREME COURT IN THE SAID THREE JUDGES BENCH, HAS NOT DISAP PROVED THE JUDGMENT OF THE TWO JUDGES BENCH IN THE CASE OF MYS ORE MINERALS LTD. (SUPRA). MOREOVER, THE ASSESSEE HAD BECOME THE LEGAL OWNER IN THE PRESENT CASE AND THEREFORE THE RATIO OF THE SAID JUDGMENT IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORPORATION L TD. VS. CIT (SUPRA) ALSO APPLY TO THIS CASE ALSO. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE LEARNED CI T(A) IS NOT JUSTIFIED IN DENYING THE DEPRECIATION OF RS.3,51,31 3/- TO THE ASSESSEE. THE SAME IS DIRECTED TO BE ALLOWED. THUS , GROUND NO.1 OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. 10 AS REGARDS GROUND NO.2(I), THE AO MADE A DISALLO WANCE OF RS.50,000/- ON ACCOUNT OF PURCHASE OF VALVES IN CAS H FOR WHICH NO SUPPORTING DOCUMENTS WHATSOEVER WERE PRODUCED BY THE ASSESSEE. 11 THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE A O VIDE PARA 3.3.1 OF THE ORDER. THE LEARNED CIT(A) HAS OBS ERVED THAT NO SUPPORTING DOCUMENTS WERE PRODUCED BY THE ASSESSEE EVEN BEFORE HIM AND EVEN THE ADDRESS OF THE PARTY VIZ. SHRI RAK ESH A MACHHI IS NOT AVAILABLE ON THE VOUCHER WHICH HAS BEEN PREP ARED BY THE ASSESSEE. THEREFORE, THE ASSESSEE HAS FAILED TO EST ABLISH THAT THE SAID VALVES HAD IN FACT BEEN PURCHASED FOR WHICH CA SH PAYMENT OF RS.50,000/- IS CLAIMED TO HAVE BEEN MADE. 11 12 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEE HAS NOT PRODUCED ANY SUPP ORTING EVIDENCE I.E. THE BILL AND NAME AND COMPLETE ADDRES S OF THE PARTY FROM WHOM THE SAID VALVES HAVE BEEN PURCHASED. THE PURCHASES OF THE VALVES HAVE BEEN DECLARED TO HAVE BEEN MADE IN CASH, OTHERWISE THAN BY BANKING CHANNELS. THERE IS NO EVI DENCE OR ANY EXPLANATION BEFORE ANY OF THE AUTHORITIES BELOW OR EVEN BEFORE US THAT THE ASSESSEE HAD ACTUALLY INCURRED SUCH EXPEND ITURE. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE FIND NO INF IRMITY IN THE ORDER OF THE LEARNED CIT(A) WHO HAS RIGHTLY CONFIRM ED THE ACTION OF THE AO. THUS, GROUND NO.2(I) IS DISMISSED. 13 AS REGARDS GROUND NO.2(II), THE BRIEF FACTS ARE THAT THE ASSESSEE HAS CLAIMED OFFICE EXPENSES BEING LOANS GI VEN TO VARIOUS PERSONS AS PER DETAILS BELOW:- SR. NO. DATE NAME OF PERSON TO WHOM LOAN IS GIVEN AMOUNT 1 NIL SHRI IRFAN RS.5,000/- 2 02-03-2003 SHRI CHOUDHARY RS.5,000/- 3 06-03-2003 SHRI RAKESH RS.5,000/- 4 13-03-2003 SHRI GOVIND RS.5,000/- 5 15-02-2003 SHRI DEVI DAS KAKA RS.5,000/- RS.25,000/- NO COGENT REASONS HAVE BEEN GIVEN BEFORE THE AO WIT H REGARD TO THE CLAIM OF REVENUE EXPENSES FOR THE LOANS GIVEN T O VARIOUS PERSONS. THE AO MADE A DISALLOWANCE OF THE SAID AMO UNT AND ADDED TO THE INCOME OF THE ASSESSEE. 14 THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE A O. 12 15 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO COGENT EXPLANATION BEFORE ANY OF THE AUTHORITIES BELOW WITH REGARD TO THE LOANS GIVEN TO VARIOUS PERSONS WHO ARE CLAIMED TO BE EMPLOYEES OR LABOURER S, TO BE REVENUE EXPENDITURE. NO CONFIRMATION FROM ANY OF TH E EMPLOYEES / LABOURERS HAS BEEN PLACED ON RECORD AND NO PURPOS E OF THE SAID PAYMENT TO THE SAID PERSON HAS BEEN PLACED ON RECOR D. IN THE ABSENCE OF ANY EXPLANATION BEFORE ANY OF THE AUTHOR ITIES BELOW OR EVEN BEFORE US, WE FIND NO INFIRMITY IN THE ORDER O F THE LEARNED CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE AO. THUS, GROUND NO.2(II) IS DISMISSED. 16 AS REGARDS GROUND NO.2(III) REGARDING THE DISALL OWANCE OF RS.30,000/- WHICH HAVE BEEN CLAIMED TO HAVE BEEN GI VEN TO ONE SHRI BHARATBHAI FOR NEW SHED PAID IN CASH, THE ASSE SSEE HAS NOT PRODUCED ANY DETAILS OF THE PAYEE AND NO RECEIPT / ACKNOWLEDGEMENT HAS BEEN PLACED ON RECORD. THE AO O BSERVED THAT THE ASSESSEE HAD FAILED TO EXPLAIN THE RELEVAN CE OF THE EXPENDITURE AS HAVING BEEN INCURRED WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, THE AO DISALL OWED THE SAID SUM OF RS.30,000/- AND ADDED TO THE INCOME OF THE A SSESSEE. 17 THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE A O. BEFORE THE LEARNED CIT(A) IT WAS ARGUED BY THE LEARNED COU NSEL THAT THE SAID AMOUNT HAS BEEN PAID AS BROKERAGE. 18 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE AMOUNT DECLARED TO HAVE BEEN PAID IN CASH 13 AMOUNTING TO RS.30,000/- TO ONE SHRI BHARATBHAI APP EARS TO BE A SIMPLE CLAIM OF THE EXPENDITURE IN THE ABSENCE OF A NY COGENT EXPLANATION, DETAILS, CONFIRMATION OR RECEIPT BY TH E PAYEE. THE ARGUMENT BEFORE THE LEARNED CIT(A) THAT THE SAID AM OUNT HAS BEEN PAID TOWARDS BROKERAGE, CANNOT BE SAID TO BE A COGENT EXPLANATION UNLESS SAME IS CORROBORATED BY ANY EVID ENCE AND NO COGENT EXPLANATION HAS BEEN PLACED ON RECORD BEFORE ANY OF THE AUTHORITIES BELOW OR EVEN BEFORE US. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) WH O HAS RIGHTLY CONFIRMED THE ACTION OF THE AO. THUS, GROUND NO.2(I II) IS DISMISSED. 19 AS REGARDS GROUND NO.2(IV), THE ASSESSEE HAS DEB ITED VEHICLE EXPENSES AND TELEPHONE EXPENSES IN ITS P&L ACCOUNT. THE AO HAVING REGARD TO THE PERSONAL USER ELEMENT, HAS MADE THE DISALLOWANCE AT 10% AFTER REDUCING THE EXPENSES INC URRED BY MR. V M SHAH AND ADDED TO THE INCOME OF THE ASSESSEE. 20 THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE A O. 21 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT WAS ARGUED BEFORE THE LEARNED CIT(A ) THAT THE TELEPHONES HAVE BEEN INSTALLED AT THE RESIDENCES OF THE PARTNERS AND ARE MAINLY USED FOR THE BUSINESS PURPOSE. THE L D. CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT USED THE TELEPHO NES WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. NO LOG BOOK HAS BEEN MAINTAINED FOR THE USE OF VEHICLES AND THEREFO RE THE PERSONAL ELEMENT CAN ALSO NOT BE DENIED IN RESPECT OF USE OF VEHICLES. IN THE CIRCUMSTANCES AND FACTS OF THE CAS E, WE FIND NO 14 INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) WHO HA S RIGHTLY CONFIRMED THE ACTION OF THE AO. THUS, GROUND NOS.2( I), (II), (III) AND (IV) OF THE ASSESSEES APPEAL ARE DISMISSED. 22 AS REGARDS GROUND NO.3, THE BRIEF FACTS AS ARISI NG FROM THE ORDER OF THE AO AT PAGES 6-7 AND PARA 4(I)(D) ARE R EPRODUCED FOR THE SAKE OF CLARITY, AS UNDER:- (4(I)(D) THE ASSESSEE HAD DEBITED A SUM OF RS.1,35 ,73,590.74 LABOUR PURCHASE AT SITE. THE ASSESSEE WAS REQUESTED TO PRODUCE ALL NECESSARY AND RELEVANT DETAILS TO FACILITATE THE VE RIFICATION OF THESE LABOUR CHARGES. ON SCRUTINY OF THE RECORDS IT WAS O BSERVED THAT IN RESPECT OF THE FOLLOWING EXPENDITURE RELATING TO LA BOUR PURCHASE AT VARIOUS SITES ENGAGED FOR DISPOSING JOB WORK FOR AN D ON BEHALF OF THE ONGC, THE ASSESSEE HAS ONLY MAINTAINED SELF-SERVING VOUCHERS. NO BILLS IN RESPECT OF THESE PAYMENTS / EXPENSES HAVE BEEN PLACED ON RECORD. THE ASSESSEE WAS AFFORDED OPPORTUNITY TO EX PLAIN THE SAID EXPENSES NOT ONLY IN THEIR RELEVANCE BUT ALSO IN TH EIR ACTUALLY INCURRING. THE ASSESSEE FIRM WAS REQUESTED TO PRODU CE THE BILLS. ALTERNATIVELY, IT WAS REQUESTED TO PRODUCE THESE PA RTIES ALONG WITH RELEVANT DOCUMENTS TO FACILITATE VERIFICATION OF TH ESE EXPENSES. THE ASSESSEE WAS UNABLE TO OFFER ANY GROUND ON RECORD E ITHER BY WAY OF DOCUMENTARY EVIDENCES OR BY WAY OF PRODUCTION OF TH ESE PARTIES FOR EXAMINATION AT THIS OFFICE. IN THE CIRCUMSTANCES, I T IS STATED THAT, THE REVENUE SHALL BE FOUND TO BE ON THE SIDE OF REASON AND LOGIC TO BROOK A PRESUMPTION THAT ALL THESE EXPENSES BOOKED BY THE A SSESSEE HAVE NOT AT ALL NO RELEVANCE TO ITS BUSINESS REQUIREMENTS AND T HAT THESE EXPENSES HAVE' BEEN BOOKED MERELY WITHOUT INCURRING ANY OF T HEM. ACCORDINGLY, A SUM OF RS.16,63,310/- IS INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF DISALLOWANCE OF THESE EXPENSES HELD TO BE IN THE NATURE OF FICTITIOUS EXPENDITURE. SR. NO. NAME OF THE PARTY AMOUNT DATE (I) M/S HAT KESH ENGINEERS RS.1,73,299 02-04-2002 (II) M/S KUAHSIK INDUSTRIES RS.2,08,200 06-05-2002 (III) M/S KAUSHIK INDUSTRIES RS.1,88,583 31-05-2002 (IV) M/S VIJAY HYDROTECH RS.1,81,681 29-06-2002 15 (V) M/S VIJAY HYDROTECH RS.1,36,795 02-08-2002 (VI) M/S HYDRAULIC EQUIP-SPACE RS.2,90,900 14-08-20 02 (VII) M/S HYDRAULIC EQUIP-SPACE RS.1,96,594 26-08-2 002 (VIII) M/S HAT KESH ENGINEERS RS.1,82,199 15-09-200 2 (IX) M/S HAT KESH ENGINEERS RS.1,05,059 30-09-2002 RS.16,63,310 PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE I NITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 23 THE LEARNED CIT(A) VIDE PARA 5.1 TO 5.3 OF HIS O RDER, CONFIRMED THE ACTION OF THE AO. 24 MR. MANISH J SHAH, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED A LETTER TO ADMIT ADDITIONAL EVIDENCES WH ICH ARE PLACED ON PAGES 38 TO 57B OF THE PAPER BOOK WHICH COULD NO T BE SUBMITTED BEFORE THE AUTHORITIES BELOW. THE SAID LE TTER, FOR THE SAKE OF CLARITY, IS REPRODUCED AS UNDER:- 1. PLEASE BE KIND ENOUGH TO ADMIT ADDITIONAL EVIDE NCE AT PAGES 38 TO 57B OF THE PAPER-BOOK WHICH COULD NOT BE FOUND A T OUR PRESENT PREMISES BECAUSE IT WAS STACKED IN OUR OLD PREMISES BEING 724-725, GIDC, MAKARPURA SHED OFFICE BY OUR EMPLOYEES. WE HA VE SHIFTED FROM THE ABOVE MENTIONED PREMISES TO A-133, BOB LAN D, MAKARPURA, BARODA-10 IN DECEMBER 2004. FOR THIS REASON THE ADD ITIONAL EVIDENCE NOW FILED, COULD BE FOUND OUT AFTER THE DECISION OF CIT(A) DATED 16.01.2007 FROM THE OLD PREMISES. 2. I SUBMIT THAT THE ABOVE DOCUMENTS WERE NOT AVAIL ABLE TO ASSESSEE, NOR ANYBODY HAD IDEA ABOUT THEM TILL THE DISPOSAL OF APPEAL BY CIT(A) ON 16.1.2007. THEY BECAME AVAILABLE TO AS SESSEE THEREAFTER AS STATED ABOVE. THIS ADDITIONAL EVIDENCE GOES TO T HE ROOT OF THE MATTER AND THEREFORE THE ASSESSEE PRAYS THAT THE SAME BE K INDLY ADMITTED IN THE INTEREST OF JUSTICE AND THE MATTER BE SENT BACK TO ASSESSING OFFICER, SO THAT HE GETS AN OPPORTUNITY TO REBUT THE SAME. 16 3. THE ASSESSEE PRAYS THAT FOR MORE EFFECTIVE AND F AIR DISPOSAL OF THIS POINT, THIS EVIDENCE BE KINDLY ADMITTED. 4. NEEDLESS TO SAY, FOR THIS ACT OF KINDNESS, THE A SSESSEE SHALL FOREVER PRAY AND REMAIN GRATEFUL. PLACE: BARODA M/S J V S ENGINEERS, DT: 12-3-2011 SD/- [PARTNER] 25 IT WAS ARGUED BY MR. SHAH THAT THESE DOCUMENTS C OULD NOT BE PRODUCED BEFORE THE AUTHORITIES BELOW SINCE THE ASSESSEE HAD SHIFTED ITS OFFICE FROM THE OLD PREMISES BEARING NO . 724/725, GIDC, MAKARPURA, BARODA TO THE PRESENT ONE AT A-1/3 3, BANK OF BARODA LANE, MAKARPURA, BARODA. THE SAID EVIDENCES WERE NOT FOUND AT THE PRESENT PREMISES WHICH HAVE BEEN FOUND LATER AND THEREFORE THEY ARE BEING SUBMITTED AS ADDITIONAL EV IDENCES AND PRAYED TO ADMIT THE SAME SINCE THESE ADDITIONAL EVI DENCES GO TO THE ROOT OF THE MATTER AND MATTER MAY BE SENT BACK TO THE FILE OF THE AO TO DECIDE THE MATTER AFTER PROVIDING AN OPPO RTUNITY TO THE ASSESSEE. 26 THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF PARI MANGALDAS GIRDHARDAS VS. CIT REPORTED IN (1977) 6 C TR (GUJ) 647 WHICH IS IN FAVOUR OF THE ASSESSEE TO ADMIT ADD ITIONAL EVIDENCE UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963. THE SAID JUDGMENT HAS BEEN PLACED ON R ECORD. 17 27 ON THE OTHER HAND, THE LEARNED SENIOR DR RAISED PRELIMINARY OBJECTION OF ADMITTING THE ADDITIONAL / FRESH EVIDE NCES BY THE TRIBUNAL. IN THE PRELIMINARY OBJECTION, THE LEARNED SENIOR DR VIDE HIS LETTER DATED 26-08-2010 HAS MENTIONED THAT THE SAID ADDITIONAL / FRESH EVIDENCES WERE NOT AVAILABLE BEF ORE ANY OF THE AUTHORITIES BELOW. THE SUBMISSION OF THE ASSESSEE C ANNOT BE ACCEPTED AS THE ASSESSEE ITSELF INCURRED EXPENDITUR E AND NOW IT CAN NOT PLEAD THAT IT HAD NO IDEA ABOUT THE SAME TI LL THE DISPOSAL OF THE APPEAL BY THE LEARNED CIT(A). IT IS NOT A CA SE THAT SUFFICIENT OPPORTUNITY WAS NOT GIVEN FOR PRODUCING THE EVIDENCES BY THE LOWER AUTHORITIES OR THERE IS NO EVIDENCE AD DUCED BEFORE THE ITAT AS TO WHY THOSE DOCUMENTS WERE NOT PRODUCE D BEFORE THE AO OR THE LEARNED CIT(A). THE LEARNED SENIOR DR RELIED UPON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. JAIPUR UDYOG LTD. 227 ITR 345 AND THE DECIS ION OF THE HONBLE HIGH COURT IN THE CASE OF NB SURTI FAMILY T RUST VS. CIT 288 ITR 523 TO SUBSTANTIATE HIS PRELIMINARY OBJECTI ON. HE, THEREFORE, PRAYED THAT THE ADDITIONAL / FRESH EVIDE NCES SHOULD NOT BE ADMITTED AT THIS STAGE WITHOUT SUFFICIENT CAUSE. 28 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS PRELIMINARY OBJECTION FOR A DMITTING THE ADDITIONAL / FRESH EVIDENCES BY THE LEARNED SENIOR DR THAT THE SAID DOCUMENTS WERE NOT AVAILABLE BEFORE ANY OF THE AUTHORITIES BELOW, THE LEARNED SENIOR DR RELIED UPON THE DECISI ON OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JAIPUR UDYOG LTD. (SUPRA). IN THE SAID JUDGMENT OF RAJASTHAN HIGH COU RT, IT HAS BEEN HELD THAT THE TRIBUNAL CAN REQUIRE ANY DOCUMEN T TO BE 18 PRODUCED OR ANY WITNESS TO BE EXAMINED. IT HAS BEEN FURTHER HELD THAT IN A PARTICULAR CASE WHERE EVIDENCE IS DIRECTE D TO BE ADDUCED BEFORE THE INCOME TAX AUTHORITIES, IT IS NOT EXPECT ED FROM THE TRIBUNAL TO ADJUDICATE THE MATTER ON MERITS. THE ON LY PROPER COURSE FOR IT WAS TO SEND THE CASE BACK TO THE IT A UTHORITIES FOR TAKING EVIDENCE ON RECORD AND PASS ORDER IN ACCORDA NCE WITH LAW. IN THE SAID CASE, THE MATTER HAS BEEN DECIDED ON ME RITS AND THE CASE WAS NOT MADE OUT THAT THE ASSESSEE WAS NOT GIV EN OPPORTUNITY TO PRODUCE THE EVIDENCE BEFORE THE AO. IT WAS FURTHER HELD THAT THE ASSESSEE HAD OPPORTUNITY TO ADDUCE EV IDENCE BEFORE THE TRIBUNAL AND NO SUCH EVIDENCE WAS PRODUCED. THE REFORE, THE TRIBUNAL WAS NOT JUSTIFIED TO PERMIT THE ASSESSEE T O PRODUCE FURTHER EVIDENCE AND SENT THE FILE BACK TO THE ITO FOR EXAMINATION OF THE EVIDENCE. THE SAID JUDGMENT OF T HE RAJASTHAN HIGH COURT CANNOT BE MADE APPLICABLE TO THE PRESENT CIRCUMSTANCES AND FACTS OF THE CASE SINCE IN THE PR ESENT CASE THE ASSESSEE HAS ADDUCED ADDITIONAL EVIDENCES WHICH COU LD NOT BE PRODUCED BEFORE THE AUTHORITIES BELOW WHEREAS IN TH E CASE OF JAIPUR UDYOG LTD. (SUPRA) THE ASSESSEE HAD NOT ADDU CED ANY EVIDENCE BEFORE THE TRIBUNAL AND THEREFORE IT WAS H ELD THAT THE TRIBUNAL WAS NOT JUSTIFIED TO PERMIT THE ASSESSEE T O PRODUCE FURTHER EVIDENCE AND TO SEND THE CASE BACK TO THE I TO FOR EXAMINATION OF EVIDENCE. 29 THE LEARNED SENIOR DR HAS ALSO RELIED UPON THE D ECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF N B S URTI FAMILY TRUST (SUPRA). IN THAT CASE, THE ASSESSEE REMAINED ABSENCE BEFORE THE AO AND DID NOT PRODUCE ANY EVIDENCE DESPITE BEI NG CALLED 19 UPON DO SO. THE SAID JUDGMENT OF THE HONBLE GUJARA T HIGH COURT CANNOT BE MADE APPLICABLE IN THE CIRCUMSTANCES AND FACTS OF THE CASE SINCE THE FACTS IN THE PRESENT CASE ARE QUITE DIFFERENT THAT THE ASSESSEE COULD NOT PRODUCE SUCH DOCUMENTS FOR CERTA IN REASONS AND WAS NOT ABSENT BEFORE ANY OF THE AUTHORITIES BE LOW. 30 THE LEARNED COUNSEL FOR THE ASSESSEE MR. SHAH HA S RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PARI MANGALDAS GIRDHARDHAS (SUPRA). THE RELEVANT PARAS OF THE SAID JUDGMENT IN PARAS 51 TO 53 IS REPRODUCED FOR T HE SAKE OF CLARITY AS UNDER:- 51. WE FIND THAT THERE IS FORCE IN THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE. THERE IS NOT MANNER OF DOUBT THAT THE ASSESSEE HAD NOT PRODUCED THE AGREEMENT IN QUESTION BEFORE THE LOWER AUTHORITIES AND THERE WAS, THEREFORE, A LACUNA IN THE RECORD. IT IS ONLY ON ACCOUNT OF SUCH DEFECT THAT THE QUESTION OF ALLOWING ADDITIONA L EVIDENCE AROSE AND THE ASSESSEE MOVED THE TRIBUNAL TO SUPPLY THE DEFEC T. THE OMISSION BY ITSELF AND WITHOUT MORE CANNOT BE DECISIVE BECAUSE IT IS ONLY ON ACCOUNT OF THE DEFECT ARISING OUT OF SUCH OMISSION THAT THE QUESTION OF RECEIVING AND ADMITTING ADDITIONAL EVIDENCE ARISES. THE TRIBUNAL WAS, THEREFORE, REQUIRED TO CONSIDER WHETHER IN THE INTE REST OF JUSTICE SOMETHING WHICH REMAINED OBSCURE WAS REQUIRED TO BE FILLED UP SO THAT IT COULD PRONOUNCE ITS ORDER IN A MORE SATISFACTORY MANNER. THE TRIBUNAL, HOWEVER, FAILED TO APPLY THE SAID TEST. I T APPEARS TO US, THEREFORE, THAT THE TRIBUNAL HAS FAILED TO EXERCISE ITS DISCRETION IN THE MATTER OF RECEPTION AND ADMISSION OF ADDITIONAL EVI DENCE IN THE LIGHT OF THE RELEVANT PERSPECTIVE. IT IS DIFFICULT TO PRE DICATE AS TO WHAT VIEW THE TRIBUNAL MIGHT HAVE TAKEN HAD IT APPROACHED THE QUESTION FROM THE CORRECT LEGAL ANGLE. IT IS EQUALLY DIFFICULT TO PRE DICATE AS TO WHAT EFFECT SUCH EVIDENCE, IF ADMITTED, MIGHT HAVE HAD ON THE U LTIMATE DECISION OF THE TRIBUNAL. 52. THE FOREGOING DISCUSSION WOULD REVEAL THAT THE TRIBUNAL HAS FAILED TO SUPPLY ITS MIND TO ONE MORE RELEVANT SUBS IDIARY TEST, NAMELY, AS TO UNDER WHAT CIRCUMSTANCES AND FOR WHAT PURPOSE S THE SALES OF SHARES WERE EFFECTED AND IT HAS ALSO FAILED TO FIND PRIMARY FACTS BEARING 20 ON THAT ASPECT OF THE CASE. AS EARLIER STATED, IT S UBSIDIARY TEST IS NOT NECESSARILY AN INDEPENDENT TEST. STILL, HOWEVER, IN THE PECULIAR CIRCUMSTANCES OF THIS CASE, AN INQUIRY IN THIS DIRE CTION WAS RELEVANT AND THE TRIBUNAL COULD NOT HAVE OMITTED TO APPLY IT S MIND TO THIS MATERIAL ASPECT. 53. THE TRIBUNAL, IN THE THIRD PLACE, FAILED TO CON SIDER A VERY IMPORTANT QUESTION IN THE TRUE LEGAL PERSPECTIVE, N AMELY, THE VOLUME, FREQUENCY, CONTINUITY AND REGULARITY OF TRANSACTION S OF PURCHASES AND SALES OF SHARES AND TO RECORD ESSENTIAL FINDINGS OF FACT HAVING A BEARING ON THE SAID ASPECT. THIS QUESTION WAS ALSO SPECIFIC ALLY PLACED FOR CONSIDERATION BEFORE THE TRIBUNAL ON BEHALF OF THE PARTIES AND STILL THE TRIBUNAL FAILED TO FIND BASIC FACTS AND TO RECORD A SPECIFIC FINDING WHETHER, HAVING REGARD TO THE VOLUME, FREQUENCY, CO NTINUITY REGULARITY, THE ASSESSEE COULD BE SAID TO BE CARRYI NG ON BUSINESS AS A DEALER IN SHARES. WE HAVE, WHILE NARRATING FACTS, G IVEN PARTICULARS WITH REGARD TO THE NATURE AND EXTENT OF THE ACTIVITY OF THE ASSESSEE OVER A PERIOD OF 22 YEARS IN THE FIELD OF PURCHASE AND SAL E OF SHARES. WE HAVE THERE POINTED OF THE TRIBUNAL ON THIS ASPECT OF THE CASE ARE CONFINED ONLY A NUMBER AND CLASS OF SHARES PURCHASED AND SOL D AND THE NAMES OF THE RESPECTIVE COMPANIES. THE TRIBUNAL FAILED TO RECORD ANY FINDING ON THE MAGNITUDE OF THE SHARES PURCHASED AND SOLD A ND THE RATIO BETWEEN THE PURCHASES AND SALES AND THE HOLDINGS. I T IS SIGNIFICANT TO NOTE THAT THOUGH THE TRIBUNAL SET OUT IN ITS ORDER THE RIVAL CONTENTIONS OF PARTIES ON THIS POINT WHICH CONTAINED CERTAIN FA CTUAL DATE AND THAT THOUGH IT MADE A SUMMARY OF THE TRANSACTIONS OF SAL E AND PURCHASE OF SHARES IN THE WHOLE PERIOD OF 22 YEARS, IT DID NOT RECORD A FINDING ON THE MAGNITUDE OF THE SHARES PURCHASED AND SOLD AND THE RATIO BETWEEN THE PURCHASES AND THE SALES AND THE HOLDINGS AND TH E NET GAIN OR LOSS MADE BY THE ASSESSEE ON SUCH TRANSACTIONS AND THE C OMMERCIAL NATURE OR OTHERWISE OF SUCH ACTIVITIES. THE TRIBUNAL, AS E ARLIER STATED, ALSO FAILED TO CONSIDER WHETHER THE PURCHASE OF RIGHT SH ARES WAS A PART OF THE BUSINESS ACTIVITY, IF ANY OF THE ASSESSEE AND, IF NOT, WHAT ITS EFFECT ON THIS ASPECT OF THE CASE WAS. THOUGH THE TRIBUNAL OBSERVED THAT EXCEPT FOR THE ACQUISITION OF SHARES FROM ITS PARTN ER IN S.Y. 2007, THE REST OF THE PURCHASES MADE BY THE ASSESSEE WERE ONL Y 'OCCASIONAL' AND THAT IN A NUMBER OF YEARS THERE WERE NOT PURCHASES AT ALL, FAILED TO SPECIFICALLY CONSIDER THE EFFECT OF THIS CIRCUMSTAN CE ON THE QUESTION OF REGULATING AND CONTINUITY OF OPERATIONS. SIMILARLY, THOUGH H THE TRIBUNAL FOUND THAT THERE WERE 'SUBSTANTIAL' SHARES OR DISPOSALS ONLY DURING TWO YEARS (ONE OF SUCH DISPOSAL BEING IN FAV OUR OF THE HEIRS OF THE DECEASED PARTNER WHICH CANNOT BE TERMED AS A SA LE), THE TRIBUNAL 21 FAILED TO CONSIDER THE EFFECT OF SUCH CIRCUMSTANCES IN JUDGING THE NATURE OF ACTIVITIES OF THE ASSESSEE. 31 IN THE PRESENT CASE, THE ASSESSEE HAD SUBMITTED THAT THE SAID BILLS COULD NOT BE SUBMITTED BEFORE THE AUTHORITIES BELOW FOR THE REASONS THAT THEY HAVE SHIFTED THE OFFICE FROM THE OLD PREMISES TO THE NEW ONE. THE SAID DOCUMENTS WERE NOT FOUND IN T HE NEW PREMISES AND WHEN THEY WERE FOUND, THE SAME WERE SU BMITTED AS ADDITIONAL EVIDENCES BEFORE THE TRIBUNAL. THE SAID DOCUMENTS ARE AVAILABLE AT PAGES 38 TO 57 OF THE PAPER BOOK. ON P ERUSAL OF THE SAID DOCUMENTS AT PAGES 38 TO 57 WITH SPECIFIC REFE RENCE TO THE COPY OF LEDGER ACCOUNT AVAILABLE AT PAGES 57A TO 59 , THERE IS NO DISPUTE THAT THE ASSESSEE HAD DECLARED THE SALES WI TH REGARD TO THE EXPENDITURE CLAIMED IN ADDITIONAL EVIDENCES. THE SA ID CLAIM OF THE EXPENDITURE IS NOT FRESH CLAIM BY THE ASSESSEE BUT THE SAME HAD BEEN CLAIMED BY THE ASSESSEE IN ITS RETURN OF I NCOME BUT THE ASSESSEE COULD NOT PRODUCE THE BILLS FOR THE REASON S MENTIONED HEREINABOVE. THEREFORE, HAVING CLAIMED THE INCOME O N ONE HAND AND NO EXPENDITURE IS GIVEN AS DEDUCTION AGAINST TH E SAID INCOME, WILL BE UNJUSTIFIED IN THE PRESENT CIRCUMSTANCES AN D FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT SUFFICIE NT OPPORTUNITY HAS NOT BEEN GIVEN TO THE ASSESSEE BY THE AUTHORITI ES BELOW. BUT, AT THE SAME TIME, THE ARGUMENTS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE, MR. SHAH AND THE FACTS ON RECORD, IT APPEARS THAT THE ASSESSEE HAD SUFFICIENT CAUSE FOR SUBMITTING THE SA ID BILLS AS EVIDENCES BEFORE THE AUTHORITIES BELOW. THEREFORE, IT WILL BE IN THE INTEREST OF JUSTICE, RELYING UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PARI MANGALDAS GI RDHARDAS (SUPRA), TO ADMIT THE ADDITIONAL EVIDENCES. THEREFO RE, IN THE 22 INTEREST OF JUSTICE, WE ADMIT THE ADDITIONAL EVIDEN CES PLACED ON RECORD BY THE ASSESSEE. 32 ON MERIT, THE ASSESSEE HAD CLAIMED TOTAL EXPENSE S OF RS.1,35,73,590/- AS LABOUR PURCHASES. THE ASSESSEE DID NOT PRODUCE THE BILLS IN RESPECT OF VARIOUS PAYMENTS ME NTIONED AT PAGES 6 AND 7 OF AOS ORDER. THE SAID EVIDENCES NOW HAVE BEEN PLACED ON RECORD AND HAVE BEEN ADMITTED AS ADDITION AL EVIDENCES HEREINABOVE. THE GENUINENESS OF THE SAID EXPENDITUR E HAVE NOT BEEN EXAMINED BY ANY OF THE AUTHORITIES BELOW. THER E IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS BEEN TAXE D ON THE INCOME EARNED FOR WHICH THE SAID EXPENDITURE HAS BEEN INCU RRED. THEREFORE, IT WILL BE IN THE INTEREST OF JUSTICE IF THE AO FINDS SUCH EXPENDITURE TO BE GENUINE, THEN, ALLOW THE SAME AGA INST THE INCOME OF THE ASSESSEE ALREADY CLAIMED. IN THE CIRC UMSTANCES AND FACTS OF THE CASE, WE RESTORE THE MATTER TO THE FIL E OF THE AO WHO WILL VERIFY THE GENUINENESS OF THE SAID EXPENDITURE AND DECIDE THE ISSUE AS DIRECTED ABOVE BUT BY AFFORDING AN OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. THUS, GROUND NO.3 OF THE ASS ESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 33 AS REGARDS GROUND NO.4, THE BRIEF FACTS AS PER A OS ORDER AT PAGES 7 AND 8, PARA 4(I)(E) ARE REPRODUCED AS UNDER FOR THE SAKE OF CLARITY:- 4.(I)(E) DISALLOWANCE OF EXPENSES PAID TO SHRI VIP UL M. SHAH . DURING THE COURSE OF THE PROCEEDINGS, IT WAS OBSERV ED WHILE PERUSING/ RELEVANT VOUCHERS OF TRAVELLING (INLAND AND OVERSEA S), TELEPHONE AND MOBILE EXPENSES AND PETROL EXPENSES THAT THE FOLLOW ING EXPENDITURE HAS BEEN INCURRED ON SHRI VIPUL SHAH. THE ASSESSEE WAS REQUESTED TO FURNISH EXPLANATION AGAINST THE PROPOSAL OF REVENUE TO DISALLOW THE 23 SAID EXPENDITURE ON THE GROUND THAT ITS RELEVANCE A ND VIPUL SHAH'S INVOLVEMENT IN THE BUSINESS OF THE ASSESSEE AND ITS EXPEDIENCY HAS NOT BEEN APPROPRIATELY ESTABLISHED. IT WAS STATED MEREL Y THAT THE SAID SHRI VIPUL M. SHAH WAS RUNNING ERRANDS FOR THE BUSINESS OF THE ASSESSEE. THIS HOWEVER, WAS NOT CORROBORATED BY THE ASSESSEE. IN THE CIRCUMSTANCES, THE SAID EXPENDITURE AS DETAILED BEL OW ARE DISALLOWED. (I) TRAVELLING EXPENSES RS.25,198/- (II) FOREIGN TRAVELLING EXPENSES RS.45,000/- (III) VEHICLE EXPENSES RS. 4,000/- (IV) TELEPHONE EXPENSES RS.14,842/- --------------- RS.89,040/- A SUM OF RS.89,040/- IS INCLUDED IN THE TOTAL INCO ME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT A RE INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 34 THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE A O VIDE PARA 6.1 TO 6.3 OF HIS ORDER. 35 MR. MANISH J SHAH, THE LEARNED COUNSEL FOR THE A SSESSEE INVITED OUR ATTENTION TO THE WRITTEN SUBMISSIONS PA GE-3 AT PAGE-6 AND ALSO TO THE ASSESSMENT ORDER FOR THE AY 2001-02 AT PAGES 61 AND 62 OF THE PAPER BOOK WHERE SIMILAR EXPENSES HAV E BEEN ALLOWED BY THE AO UNDER IDENTICAL FACTS AS IN THE P RESENT CASE. MR. SHAH HAS PLACED ON RECORD A COPY OF THE LEDGER ACCOUNT AT PAGES 58 TO 59 WITH REGARD TO THE EXPENDITURE CLAIM ED IN THE AY 2001-02 TO SHOW THE SIMILARITY, RATHER, IDENTICAL F ACTS OF THE PRESENT CASE WHERE THE EXPENSES HAVE BEEN CLAIMED A S PER THE COPY OF THE LEDGER AT PAPER BOOK PAGES 64 TO 68. 36 THE LEARNED SENIOR DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 24 37 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. ON PERUSAL OF THE COPY OF THE LEDGER F OR THE AY 2001-02 AND THE IMPUGNED ORDER, THE ASSESSEE HAD SU BMITTED THE DETAILS OF THE VISIT BY MR. V M SHAH, WHO IS STATED TO BE SON OF THE PARTNER AND NOW THE PARTNER OF THE FIRM. ON SIM ILAR SET OF FACTS AND CIRCUMSTANCES, THE DEPARTMENT HAS ALLOWED THE EXPENSES IN THE ASSESSMENT ORDER PASSED U/S 143(3) FOR THE A Y 2001-02, IS ALSO NOT UNDER DISPUTE. THE ASSESSEE HAVING SUBMITT ED THE DETAILS OF THE EXPENSES, AND THEREFORE, THE SAID EXPENDITUR E CANNOT BE DOUBTED NOT TO HAVE BEEN INCURRED WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF BUSINESS. THEREFORE, IN THE CIRCUMSTANCE S AND FACTS OF THE CASE, THE AO IS NOT JUSTIFIED IN DISALLOWING TH E SAME. THE ORDER OF THE LEARNED CIT(A) IS ACCORDINGLY REVERSED . THUS, GROUND NO.4 OF THE ASSESSEES APPEAL IS ALLOWED. 38 AS REGARDS GROUND NOS.5 AND 6, THE SAME ARE GENE RAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 39 IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.809/AHD/07 IS PARTLY ALLOWED. 40 NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE IN IT A NO.11/AHD/2011. THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS:- [01] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AS W ELL AS IN LAW THE ID. CIT(A)-II, BARODA WAS ERRED IN CONFIRMING THE P ENALTY U/S. 271(1)(C) ON OFFICE EXPENSES OF RS.1,66,083 ON THE GROUND THAT APPELLANT HAS FAILED TO PROVE GENUINENESS OF THE CL AIMED AND EXPENSES ARE NOT SUPPORTED BY DOCUMENTARY EVIDENCE EVEN THOUGH APPELLANT HAS GIVEN SUFFICIENT DOCUMENT AND SUPPORTING EVIDENCE WHICH WAS NOT CONSIDERED BY CIT(A)-II AND CONFIRMED 25 THE PENALTY OF OFFICE EXPENSES. APPELLANT PRAYS YOU R HONOR TO CANCEL THE PENALTY ON OFFICE EXPENSES [02] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AS W ELL AS IN LAW THE ID. CIT(A)-II, BARODA WAS ERRED IN LEVYING THE PENA LTY ON TRANSPORTATION EXPENSES OF RS.86,843 INSTEAD OF RS. 13,843/- EVEN THOUGH ACIT, CIR-2(1) HAS LEVIED THE PENALTY O N RS.13.843/- ON TRANSPORT EXPENSES. LD. CIT (A) HAS CONFIRMED THE PENALTY ON THE GROUND THAT THE CLAIM HAS NOT BE EN SUPPORTED BY EVIDENCE AND GENUINENESS OF THE CLAIM EVEN THOUG H APPELLANT HAS FILED NECESSARY EVIDENCE. [03] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AS W ELL AS IN LAW THE ID. CIT(A)-II, BARODA WAS ERRED IN CONFIRMING THE L EVY OF PENALTY ON LABOUR EXPENSES OF RS.16.63.310 ON THE G ROUND THAT GENUINENESS OF EXPENSES HAS NOT BEEN ESTABLISHED EV EN THOUGH APPELLANT HAS GIVEN NECESSARY DOCUMENTS WHICH ESTAB LISHED WITHOUT LABOUR EXPENSES WORK CANNOT BE DONE. SO, AP PELLANT PRAYS YOUR HONOR TO CANCEL THE PENALTY ON LABOUR EX PENSES. [04] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AS W ELL AS IN LAW THE ID. CIT(A)-II, BARODA WAS ERRED IN CONFIRMING THE P ENALTY U/S. 271(1)(C) ON THE DISALLOWANCE OF EXPENSES PAID TO V . M. SHAH FOR RS.89,040 ON THE GROUND THAT APPELLANT HAS FAIL ED TO DISCHARGE HIS ONUS EVEN THOUGH APPELLANT HAS FILED SUFFICIENT EVIDENCE WHICH IS NOT CONSIDERED BY CIT(A). APPELLA NT PRAY YOUR HONOR TO CANCEL THE PENALTY ON RS.89040 PAID T O V.M. SHAH. [05] THE APPELLANT PRAYS TO YOUR HONOR TO LEAVE, AM END, ALTER OR CANCEL ANY GROUND OF APPEAL AT THE TIME OF HEARING. RELIEF CLAIMED IN APPEAL (1) CANCEL THE PENALTY ON OFFICE EXPENSES OF RS.1,6 6,083/-. (2) CANCEL THE PENALTY ON TRANSPORT EXPENSES OF RS. 86,843/-. COPY OF RECTIFICATION APPLICATION U/S. 254 ATTACHED HEREWITH (3) CANCEL THE PENALTY ON LABOUR EXPENSES OF RS.16, 63,310/- 26 (4) CANCEL THE PENALTY ON THE DISALLOWANCE OF EXPEN SES PAID TO V. M. SHAH FOR RS.89.040/- (5) ANY OTHER RELIEF WHICH IS PERMISSIBLE AS PER TH E LAW AND FACTS AND CIRCUMSTANCE OF THE CASE. 41 THE BRIEF FACTS IN GROUND NO.1 ARE THAT THE ASSE SSEE HAD INCURRED OFFICE EXPENSES FOR WHICH THE ASSESSEE HAD NOT SUBMITTED ANY COGENT EXPLANATION BEFORE ANY OF THE AUTHORITIES BELOW AND, THEREFORE, THE SAID ADDITION WAS CONFIRM ED BY THE LEARNED CIT(A) AS WELL AS BY US HEREINABOVE. THE AO ACCORDINGLY LEVIED THE PENALTY WHICH WAS CONFIRMED BY THE LEARNED CIT(A). 42 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. DURING THE ASSESSMENT PROCEEDINGS AS W ELL AS DURING THE PENALTY PROCEEDINGS, THE ASSESSEE HAS NOT PRODU CED ANY COGENT EXPLANATION FOR THE CLAIM OF THE SAID EXPEND ITURE AND, THEREFORE, THE ASSESSEE HAS SUBMITTED INACCURATE PA RTICULARS OF INCOME WITH REGARD TO THE SAID CLAIM AND THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN LEV YING THE PENALTY U/S 271(1)(C) OF THE ACT. THUS, GROUND NO.1 OF THE ASSESSEES APPEAL IS DISMISSED. 43 AS REGARDS GROUND NO.2, THE AO HAS LEVIED PENALT Y ON THE TRANSPORTATION EXPENSES OF RS.86,843/-. THE ASSESSE E, AS A MATTER OF FACT, HAD CLAIMED RS.3,98,268/- AS TRANSPORTATIO N EXPENSES. THE ASSESSEE WAS UNABLE TO PRODUCE ANY DOCUMENTARY EVIDENCE WITH REGARD TO THE CLAIM OF RS.86,843/-. THE LEARNE D CIT(A) CONFIRMED THE ACTION OF THE AO WITH REGARD TO THE D ISALLOWANCE 27 OF RS.86,843/-. THIS MATTER WAS NOT AGITATED IN TH E QUANTUM APPEAL BEFORE THE TRIBUNAL AND THE AO LEVIED THE PE NALTY WHICH WAS CONFIRMED BY THE LEARNED CIT(A). 44 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. SINCE THE MATTER HAS NOT BEEN AGITATED BEFORE THE TRIBUNAL IN THE QUANTUM APPEAL, AND THEREFORE THE A SSESSEE IS PRESUMED TO HAVE ADMITTED THE DISALLOWANCE OF TRANS PORTATION CHARGES CLAIMED. AS REGARDS LEVY OF PENALTY, NO COG ENT EXPLANATION OR EVIDENCE HAS BEEN PRODUCED BEFORE AN Y OF THE AUTHORITIES BELOW EVEN IN PENALTY PROCEEDINGS AND T HEREFORE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LEARNED CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE AO. THUS, GROUND NO.2 OF THE ASSESSEES APPEAL IS DISMI SSED. 45 AS REGARDS GROUND NO.3 OF THE ASSESSEES APPEAL, THE AO HAS MADE A DISALLOWANCE OF RS.16,63,310/- ON ACCOUN T OF LABOUR CHARGES WHICH ACTION OF THE AO WAS CONFIRMED BY THE LEARNED CIT(A). 46 IN THE QUANTUM APPEAL, WE HAVE RESTORED THE MATT ER TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH WITH REGA RD TO THE GENUINENESS OF THE EXPENDITURE, THEREFORE, ACCORDIN GLY THIS MATTER IS ALSO RESTORED TO THE FILE OF THE AO WHO WILL DEC IDE THIS ISSUE ACCORDINGLY. THUS, GROUND NO.3 OF THE ASSESSEES A PPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 28 47 AS REGARDS GROUND NO.4 OF THE ASSESSEES APPEAL, THE AO MADE A DISALLOWANCE OF EXPENDITURE INCURRED BY MR. V M SHAH. THE ACTION OF THE AO WAS CONFIRMED BY THE LEARNED C IT(A). WE HAVE DIRECTED TO DELETE THE SAID ADDITION IN THE QU ANTUM APPEAL HEREINABOVE. THEREFORE, WHEN THERE IS NO ADDITION O N THE ASSESSEE, NO PENALTY U/S 271(1)(C) CAN BE LEVIED. T HEREFORE, THE PENALTY LEVIED IS DIRECTED TO BE DELETED. THUS, GRO UND NO.4 IS ALLOWED. 48 GROUND NO.5 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY ADJUDICATION. 49 THUS, THE APPEAL OF THE ASSESSEE IN ITA NO.11/AH D/2011 IS PARTLY ALLOWED. 50 IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 30-12-2011 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (B P JAIN) ACCOUNTANT MEMBER DATE : 30-12-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S J V S ENGINEERS, A-1/33, GIDC ESTATE, BANK O F BARODA LANE, MAKARPURA, BARODA-390 010 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -2, 29 BARODA 3. CIT CONCERNED 4. CIT(A)-II, BARODA 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD