LORD CHLORO ALKALI LTD., Jaipur V. ADD.CIT, Jaipur

ITA 813/JPR/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4913 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Keywords: Gross profit estimation; Income from undisclosed sources; Question of law; Corroborative evidences; Commercial expediency
• Section: 143(3); 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 813/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 1998-99 M/S LORDS CHLORO ALKALI LIMITED, SPA-460, M.I.A, ALWAR. CUKE VS. JCIT(A), SPL RANGE, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: M-1/JCIT/A/SPL.R.ALWAR VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RES PONDENT VK;DJ VIHY LA- @ ITA NO. 812/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 1998-99 ACIT, CIRCLE-1, ALWAR. CUKE VS. M/S MODI ALKALIES & CHEMICALS LTD. (NOW KNOWN AS LORDS CHLORO ALKALI LTD.), SP-460, MATSYA INDUSTRIAL AREA, ALWAR (RAJ) LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: M-1/JCIT/A/SPL.R.ALWAR VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI B.K. GUPTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 21/09/2016 MN?KKS'K .KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 17/11/2016 ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 2 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M.: BOTH THE CROSS APPEALS, ONE BY THE ASSESSEE AND AN OTHER BY THE DEPARTMENT ARISE AGAINST THE ORDER DATED 30/09/2014 PASSED BY THE LD CIT(A), ALWAR FOR THE A.Y. 1998-99. THE EFFECTIVE G ROUNDS OF BOTH THE APPEALS ARE AS UNDER:- GROUNDS OF ASSESSEES APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE AD HOC TRADING ADDITION OF RS.20,00,000/- ON AC COUNT OF DECREASE IN THE G.P. RATE AS COMPARED TO THE LAST Y EAR. HE HAS FURTHER ERRED IN CONFIRMING THE ADDITION EVEN W HEN THE AO IN REMAND REPORT HAS ACCEPTED THE REASONS FOR DE CLINE IN G.P. RATE. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE AD HOC DISALLOWANCE OF RS.2,50,000/- OUT OF FOR EIGN TRAVELLING EXPENSES. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.75,000/- OUT OF MOTOR CAR RU NNING EXPENSES. HE HAS FURTHER ERRED IN CONFIRMING THE DISALLOWANCE EVEN WHEN THE AO IN THE REMAND REPORT HAS ACCEPTED THAT THE EXPENSES ARE SUPPORTED BY BILLS A ND VOUCHERS INCLUDING THE HAND- MADE VOUCHERS. 4. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.78,00,000/- U/S 68 BY TREATING T HE SHARE APPLICATION MONEY PENDING ALLOTMENT AS UNEXPLAINED. 5. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE AD HOC DISALLOWANCE OF RS.3,00,000/- OUT OF REP AIR AND ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 3 MAINTENANCE EXPENSES. HE HAS FURTHER ERRED IN CONFI RMING THE ADDITION EVEN WHEN THE AO IN REMAND PROCEEDINGS HAS VERIFIED THE BILLS/ VOUCHERS AND HAS NOT FOUND ANY DEFECT. 6. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.70,000/- OUT OF ADVERTISEMEN T AND PUBLICITY EXPENSES. 7. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.4,24,27,000/- ON ACCOUNT OF ALLE GED RECEIPT OF OWN MONEY AS INCOME OF THE ASSESSEE ON T HE BASIS OF CUSTOM AND CENTRAL EXCISE ORDER PASSED AGAINST T HE ASSESSEE IN EARLIER YEARS. HE HAS FURTHER ERRED IN CONFIRMING THE ADDITION EVEN WHEN THE AO IN REMAND REPORT HAS ACCEPTED THAT DURING THE YEAR NEITHER ANY SALE OUT OF BOOKS WAS FOUND NOR EXCISE DEPARTMENT HAS MADE OUT ANY CA SE AGAINST THE ASSESSEE. 8. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.2,71,000/- MADE BY AO ON ACC OUNT OF DIFFERENCE IN THE RATE OF INTEREST AT WHICH INTERES T IS RECEIVED FROM BANK ON FDR AND AT WHICH INTEREST IS PAID ON F IXED DEPOSITS TAKEN FROM PUBLIC. HE HAS FURTHER ERRED IN CONFIRMING THE ADDITION EVEN WHEN THE AO IN REMAND REPORT HAS ACCEPTED THAT INTEREST PAID ON FIXED DEPOSIT TA KEN FROM PUBLIC IS FOR THE PURPOSE OF BUSINESS. 9. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE AD HOC ADDITION OF RS.2,00,000/- ON ACCOUNT OF PERQUISITES TO EMPLOYEES. HE HAS FURTHER ERRED IN C ONFIRMING THE ADDITION EVEN WHEN THE AO IN REMAND REPORT HAS ACCEPTED THAT THE PERQUISITE VALUE HAS BEEN CONSIDE RED IN THE HANDS OF THE EMPLOYEES. 10. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE AD HOC DISALLOWANCE OF RS.25,00,000/- MADE BY A O OUT OF INTEREST PAYMENT. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 4 GROUNDS IN REVENUES APPEAL:- 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN RESTRICTING THE TRADING ADDITION OF RS. 93, 70,000/- TO RS. 20,00,000/- MADE BY THE AO ON A/C LOW GP RATE. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN DELETING THE DISALLOWANCE OF RS. 10,00,000/ - MADE BY THE AO ON A/C OF TRAVELLING EXPENSES. 3. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF RS. 5,00,00 0/- TO RS. 2,50,000/- MADE BY THE AO ON A/C OF FOREIGN TRAVELL ING EXPENSES. 4. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF RS. 5,00,00 0/- TO RS. 75,000/- MADE BY THE AO ON A/C OF VEHICLE RUNNING EXPENSES. 5. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF RS. 25,00,0 00/- TO RS. 3,00,000/- MADE BY THE AO ON A/C OF REPAIR & MAINTE NANCE EXPENSES. 6. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF RS. 5,00,00 0/- TO RS. 70,000/- MADE BY THE AO ON A/C OF ADVERTISEMENT & P UBLICITY EXPENSES. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 5 7. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF RS. 20,00,0 00/- TO RS. 2,00,000/- MADE BY THE AO ON A/C OF PERQUISITES TO EMPLOYEES. 8. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN DELETING THE DISALLOWANCE OF RS. 60,00,000/ - MADE BY THE AO ON A/C OF INTEREST ON DEPOSITS WITH RSEB. 9. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN DELETING THE DISALLOWANCE OF RS. 50,00,000/ - MADE BY THE AO ON A/C OF VALUATION OF STORES & SPARES. 2. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURING AND SALE OF VARIOUS CHEMICALS LIKE CAUSTIC SODA LIME, CAUSTIC SODA FLAKES, CSS SBB ETC. IT FILED THE RETU RN DECLARING NIL TAXABLE INCOME ON 27/11/1998 AND THE ASSESSMENT PROCEEDINGS WERE COMPLETED AND ORDER U/S 143(3) WAS THEREAFTER PASSED ON 31/01 /2001. 3. GROUND NO. 1 OF THE ASSESSEES APPEAL AS WELL AS THE REVENUES APPEAL IS AGAINST THE ORDER OF LD CIT(A) IN CONFIRM ING THE AD HOC TRADING ADDITION OF RS.20,00,000/- ON ACCOUNT OF DECREASE I N THE G.P. RATE AS COMPARED TO THE LAST YEAR AND RESTRICTING THE TRADI NG ADDITION OF RS. 93,70,000/- TO RS. 20,00,000/- MADE BY THE AO ON A/ C OF LOW GP RATE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACT URING AND SALE OF THE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 6 VARIOUS CHEMICALS LIKE CAUSTIC SODA LIME, CAUSTIC S ODA FLAKE, LIQUID CHLORINE, STABLE BLEACHING POWDER ETC. THE ASSESSEE HAS DECLARED G.P. RATE OF 28.95% ON SALES OF RS. 13118.94 LACS AS COM PARED TO G.P. RATE OF 41.52% ON SALES OF RS. 14574.40 LACS IN THE PREVIOU S YEAR. IN ASSESSMENT PROCEEDINGS, THE A.O. FOUND THAT THE ASSESSEE HAS N OT PRODUCED ANY VOUCHER IN SUPPORT OF HIS CLAIM THAT SALE PRICE HAS DECREASE IN COMPARISON TO LAST YEAR AND HAS ALSO NOT FILED DETAILS OF CONS UMPTION OF POWER, RAW MATERIAL & FINISHED GOODS. ACCORDINGLY, HE MADE THE TRADING ADDITION OF RS. 93,70,000/- BY APPLYING G.P. RATE OF 35%. DURIN G THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD CIT(A), THE MAT TER WAS REMANDED TO AO FOR GIVING FRESH OPPORTUNITY TO THE APPELLANT TO PRODUCE THE BOOKS OF ACCOUNT AND TO FURNISH REMAND REPORT AFTER EXAMININ G THE SAME. DURING THE COURSE OF REMAND PROCEEDINGS, DURING THE COURSE OF HEARING ON 17.06.2014, THE A.R. HAS PRODUCED CASH-BOOK, LEDGER , PURCHASE BILLS, STOCK REGISTER, CONSUMPTION OF POWER BILL, RAW MATE RIAL AND FINISHED GOODS DETAILS AND SUBMITTED ITS REPLY WHICH IS AS U NDER:- A) THE ASSESSEE IS MAINTAINING DAY TO DAY BOOKS O F ACCOUNTS ALONG WITH THE STOCK REGISTER. THE COMPLETE QUANTIT ATIVE DETAILS ARE GIVEN AT ANNEXURE 13 & 14 OF THE TAX AUDIT REPORT. (P.B.4 4-45). ALL THE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 7 PURCHASE AND SALES ARE FULLY VOUCHED AND VERIFIABLE AND SUBMITTED THE MAIN REASONS FOR DECLINE IN THE G.P. RATE WHICH ARE AS UNDER:- I) DECREASE IN THE AVERAGE SALE RATE OF CAUSTIC SO DA:- THE MAJOR SALE OF THE ASSESSEE IS OF CAUSTIC SODA . DURING THE YEAR AVERAGE SALE PRICE OF THE CAUSTIC SODA HAS DEC REASED TO RS.12076/- PER MT AS AGAINST AVERAGE SALE RATE OF LAST YEAR AT RS. 15085/- PER MT. THE SALE OF CAUSTIC SODA COMPRISES APPROXIMATELY 64 % OF THE TOTAL SALE. STATEMENT INDICATING WORKING OF THE AVERAGE SALE RA TE OF CURRENT YEAR AS WELL AS LAST YEAR IS AT P.B.59. IN ASSESSMENT PROCE EDING, THE AO NEVER REQUIRED THE ASSESSEE TO PRODUCE ANY DETAIL IN SUPP ORT OF THE DECLINE IN THE SALE RATE AS COMPARED TO THE LAST YEAR BUT SUMM ARILY OBSERVED THAT IN THE ASSESSMENT ORDER THAT VOUCHERS WERE NOT PRODUCE D FOR VERIFICATION. THE SAMPLE BILLS FOR BOTH THE YEARS IN SUPPORT OF T HE DECLINE IN SALE PRICE AS COMPARED TO THE LAST YEARS ARE PRODUCED. THEREFO RE THE DECLINE IN THE SALE RATE IS FULLY VERIFIABLE. II. INCREASE IN THE COST OF RAW MATERIAL USED IN P RODUCTION:- THE MAIN RAW MATERIAL USED IN THE PRODUCTION IS S ALT. THE AVERAGE PURCHASE PRICE OF THE SALT HAS INCREASED TO RS.872/-PER MT AS AGAINST LAST YEAR AVERAGE PURCHASE PRICE OF RS.792/ - PER MT. STATEMENT ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 8 INDICATING WORKING OF THE AVERAGE PURCHASE RATE OF CURRENT YEAR AS WELL AS LAST YEAR IS AT P.B.60-61. III. INCREASE IN THE COST OF POWER:- DURING THE YEAR THE COST OF THE POWER HAS BEEN IN CREASED IN TERMS OF UNIT RATE. THE COST OF THE POWER HAS INCRE ASED FROM AVERAGE RATE OF POWER OF RS.2.87 PER KWH IN LAST YEAR TO RS.3.22 PER KWH THIS YEAR. THIS FACT IS ALSO EVIDENT FROM THE FORM A OF THE BA LANCE SHEET. (P.B.62- 63) THE AO FINALLY STATED IN HIS REMAND REPORT THAT THE DECREASE IN SALE RATE OF CAUSTIC SODA AND INCREASE IN THE PO WER COST AND RAW MATERIAL COST IS VERIFIED AS SUBMITTED BY THE ASSES SEE. 4. THE LD CIT(A) AFTER TAKING INTO CONSIDERATION TH E APPELLANTS SUBMISSION AND THE REMAND REPORT OF THE AO, RESTRIC TED THE TRADING ADDITION BY GIVING THE FOLLOWING FINDINGS:- I HAVE CAREFULLY EXAMINED THE MATERIAL PLACED ON R ECORD AND FIND THAT THE REASONS STATED BY THE APPELLANT FOR D ECLINE IN THE GROSS PROFIT RATE HAVE BEEN BROADLY ACCEPTED BY THE A.O. IN THE COURSE OF REMAND PROCEEDINGS. THEREFORE, I HOLD THA T IT WOULD JUST AND FAIR TO RESTRICT THE TRADING ADDITION TO R S. 20,00,000/- ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 9 OUT OF THE TOTAL TRADING ADDITION OF RS. 93.70 LACS MADE BY THE A.O. 5. NOW THE ASSESSEE AS WELL AS THE REVENUE ARE IN A PPEAL BEFORE US. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE A O IN THE REMAND REPORT HAS ACCEPTED THE EXPLANATION OF THE ASSESSEE REGARDING DECLINE IN G.P. RATE. STILL THE CIT(A) HELD THAT THOUGH THE RE ASONS STATED BY THE APPELLANT FOR DECLINE IN G.P. RATE HAVE BEEN BROADL Y ACCEPTED BY THE AO, IT WOULD BE JUST AND FAIR TO RESTRICT THE TRADITION ADDITION TO RS.20 LACS. THUS, CIT(A) WITHOUT GIVING ANY SPECIFIC FINDING/BA SIS CONFIRMED THE PART ADDITION WHICH IS UNJUSTIFIED. PER CONTRA, THE LD C IT DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. WHER E THE REASONS FOR THE DECLINE IN THE G.P RATE HAS BEEN ACCEPTED BY THE AO AS WELL AS BY THE LD CIT(A), WE DO NOT SEE ANY JUSTIFIABLE REASON TO UPH ELD THE TRADING ADDITIONS MADE BY THE AO ON ACCOUNT OF LOW G.P RATE . THE BASIS OF ADOPTING 35% G.P RATE BY THE AO AND HOW THE SAME HA S BEEN DERIVED AT - WHETHER BASED ON ASSESSEES PAST HISTORY OR SIMIL AR LINE OF BUSINESS IS NOT CLEAR. SIMILARLY, THE BASIS OF UPHOLDING THE A D-HOC ADDITION OF RS 20,00,000 BY THE LD CIT(A) IS EQUALLY NOT CLEAR ESPECIALLY WHEN THE LD ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 10 CIT(A) WAS SATISFIED WITH THE EXPLANATION OF THE AS SESSEE REGARDING THE FALL IN G.P RATE. GIVEN THAT THE ASSESSEE HAS GIVE N A JUSTIFIABLE EXPLANATION WITH SUPPORTING NUMBERS TO CORROBORATE ITS EXPLANATION FOR THE FALL IN G. P RATE, WE DELETE THE TRADING ADDITI ON OF RS 93.70 LACS AS MADE BY THE AO. HENCE, GROUND NO. 1 OF ASSESSEE IS ALLOWED AND GROUND NO. 1 OF REVENUE IS DISMISSED. 7. THE 2 ND GROUND OF THE REVENUES APPEAL IS AGAINST DELETING THE DISALLOWANCE OF RS. 10,00,000/- MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF TRAVELLING EXPENSES. THE ASSESSEE DEBITE D A SUM OF RS. 1,10,88,388/- UNDER THE HEAD TRAVELLING EXPENSES. I N ASSESSMENT PROCEEDING, THE ASSESSEE FILED THE DETAILS OF THE T RAVELLING EXPENSES. THE AO OBSERVED THAT THE EXPENSES UNDER THIS HEAD INCLU DES SUM OF RS. 33,55,590/- UNDER THE HEAD CONVEYANCE EXPENSES AND RS. 33,39,722/- UNDER THE HEAD TRAVELLING EXPENSES. THE ASSESSEE HA S FAILED TO PRODUCE VOUCHERS EXCEEDING RS. 10,000/- FOR VERIFICATION. A CCORDINGLY, A.O. MADE DISALLOWANCE OF RS. 10,00,000/- ON ESTIMATION BASIS FOR WANT OF ADEQUATE EVIDENCES. DURING THE COURSE OF REMAND PROCEEDINGS, THE A.R. HAS PRODUCED TRAVELLING EXPENSES BILLS, AND VOUCHERS TO WARDS THE CLAIM MADE FOR DELETION OF TRAVELLING EXPENSES AND SUBMITTED I TS REPLY TO THE AO. THE AO IN HIS REMAND REPORT STATED THAT TRAVELLING EXP ENSES AND CONVEYANCE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 11 EXPENSES AS CLAIMED BY THE ASSESSEE HAS BEEN CHECKE D ON TEST BASIS WITH THE SUPPORTING VOUCHERS, BILLS AS SUBMITTED/PRODUCE D BY THE ASSESSEE. 8. THE LD CIT(A) AFTER TAKING INTO CONSIDERATION TH E REMAND REPORT DELETED THE DISALLOWANCE BY HOLDING THAT THE ASSESSING OFFICER HAS EXAMINED THE VOUCHERS FOR TRAVELLING EXPENSES ON TE ST-CHECK BASIS IN THE COURSE OF REMAND PROCEEDINGS AND HAS NOT POINTED OU T ANY DEFECTS IN THE SAME. 9. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD C IT DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 10. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS SU BMITTED THAT THE AO IN THE REMAND PROCEEDINGS HAS EXAMINED THE VOUCHERS /BILLS OF TRAVELLING EXPENSES SUBMITTED BY THE ASSESSEE ON TEST CHECK BA SIS. ACCORDINGLY, THE LD CIT(A) BY HOLDING THAT AO HAS NOT FOUND ANY DEFE CTS IN THE VOUCHERS, RIGHTLY DELETED THE ADDITION MADE BY THE AO. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE BILLS/VOUCHERS FOR TRAVELLING EXPENSES HAVE BEEN EXAMINED BY THE AO AN D IN ABSENCE OF ANY SPECIFIC DEFECT POINTED OUT BY THE AO, THE AD HOC A DDITION OF RS 10 LACS ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 12 CANNOT BE SUSTAINED IN EYE OF LAW. THE REVENUES G ROUND NO. 2 IS THUS DISMISSED. 12. THE GROUND NO. 2 OF THE ASSESSEES APPEAL AND G ROUND NO. 3 OF THE REVENUES APPEAL IS AGAINST CONFIRMING THE AD HOC D ISALLOWANCE OF RS. 2,50,000/- OUT OF FOREIGN TRAVELLING EXPENSES AND R ESTRICTING THE DISALLOWANCE OF RS. 5,00,000/- TO RS. 2,50,000/- MA DE BY THE ASSESSING OFFICER ON FOREIGN TRAVELLING EXPENSES. IN ITS REMA ND REPORT, THE AO STATED THAT THE ASSESSEE HAS SUBMITTED DETAILS OF FOREIGN TRAVEL EXPENSES WITH VOUCHERS OF TOUR REPORTS. IT IS FOUND THAT VIS IT BY C.E.O. FOR OTHER PROJECTS AND SOME CASES BUSINESS PURPOSE OF VISIT A RE NOT JUSTIFIED. 13. THE LD CIT(A), THEREAFTER RESTRICTED THE ADDITI ON FROM RS. 5,00,000/- TO RS. 2,50,000/- BY HOLDING THAT THE APPELLANT HAS STATED THAT AO HAS NOT POINTED OUT ANY SPECIFIC VISIT WHICH IS - FOR PERSONAL PURPOSE AND THEREFORE THE DISALLOWANCE OF RS. 5 LACS UNDER THIS HEAD ON ACCOUNT OF FOREIGN TRAVELLING IS UNJUSTIFIED. CONSIDERING T HE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) FOUND THAT THERE ARE CERTAIN DEFICIENCIES WHICH WERE NOTICED BY THE AO IN THE COURSE OF EXAMINATION OF BILLS AND VOUCHERS, REPORTS ETC. AT THE STAGE OF REMAND PROCE EDINGS. ACCORDINGLY, IT ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 13 WOULD BE FAIR TO RESTRICT THE DISALLOWANCE TO RS. 2 ,50,000 OUT OF THE TOTAL DISALLOWANCE OF RS. 5,00,000 UNDER THIS HEAD. 14. NOW THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE AO IN THE REMAND REPORT AFTER GOING THROUGH THE DETAILS OF FOREIGN T RAVEL EXPENSES AND VOUCHERS OF TOUR REPORTS SUBMITTED BY ASSESSEE HELD THAT THE VISIT BY CEO IS FOR OTHER PROJECTS AND IN SOME CASE VISIT FOR BU SINESS PURPOSE ARE NOT JUSTIFIED. THE LD. CIT(A) BY HOLDING THAT THERE ARE CERTAIN DEFICIENCIES WHICH WERE NOTICED BY THE AO IN THE COURSE OF EXAMI NATION OF BILLS AND VOUCHERS, REPORTS, ETC. AT THE STAGE OF REMAND PROC EEDINGS, CONFIRMED THE DISALLOWANCE TO RS.2.5 LACS. IT IS SUBMITTED TH AT BOTH THE LOWER AUTHORITIES HAS NOT SPECIFIED ANY VISIT/EXPENSES WH ICH IS NOT FOR BUSINESS PURPOSE AND THUS THE DISALLOWANCE SO CONFIRMED IS U NJUSTIFIED AND BE DELETED. 15. AT THE OUTSET, THE LD CIT DR HAS VEHEMENTLY SUP PORTED THE ORDER OF THE ASSESSING OFFICER. 16. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE ASSESSEE HAS SUBMITTED DETAILS OF FOREIGN TRAVEL AND TOUR REPORT S TO THE AO IN THE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 14 ORIGINAL PROCEEDINGS AS WELL AS DURING THE COURSE O F REMAND PROCEEDINGS. ONCE THE ADEQUATE MATERIAL EVIDENCE IS ON RECORD, T HE OBSERVATION OF THE AO DOESNT INSPIRE CONFIDENCE AT ALL WHERE HE SAYS THAT VISITS OF THE CEO FOR SOME OTHER PROJECTS AND BUSINESS PURPOSES OF SO ME VISITS ARE NOT JUSTIFIED. WHERE THE ASSESSEE HAS GIVEN ADEQUATE SUPPORTIVE DOCUMENTATION IN SUPPORT OF THE FOREIGN TRAVEL IN T ERMS OF BILLS AND TOUR REPORT CONTAINING TRAVEL DATES, PURPOSE ETC, WE DON T SEE ANY JUSTIFIABLE REASON TO SUSTAIN THE AD HOC ADDITION ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. IT IS NOT THE CASE OF THE REVENUE THAT SO ME NON-EMPLOYEES OR RELATIVES OF THE DIRECTORS, ETC VISITED OVERSEAS. FURTHER, THE NECESSITY OF FOREIGN TRAVEL IS A BUSINESS DECISION WHICH SHOULD BE BEST LEFT TO THE ASSESSEE COMPANY UNLESS THERE ARE SOME SUBSTANTIAL CORROBORATIVE EVIDENCE TO PROVE OTHERWISE. THE GROUND NO. 2 OF THE ASSESSEE IS THUS ALLOWED AND GROUND NO. 3 OF REVENUE IS DISMISSED. 17. THE 3 RD GROUND OF THE ASSESSEE AND 4 TH GROUND OF THE REVENUE ARE AGAINST CONFIRMING THE DISALLOWANCE OF RS. 75,000/- OUT OF MOTOR CAR RUNNING EXPENSES AND RESTRICTING THE DISALLOWANCE O F RS. 5,00,000/- TO RS. 75,000/- MADE BY THE ASSESSING OFFICER ON ACCOU NT OF VEHICLE RUNNING EXPENSES. THE AO IN ITS REMAND REPORT STATED THAT MOTOR CAR EXPENSES ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 15 VERIFIED WITH THE BILLS & VOUCHERS SUBMITTED/ PRODU CED BY THE ASSESSEE. WE FOUND HANDMADE VOUCHERS ALSO AS OUT RS. 1.00 LAC S. 18. THE LD CIT(A), AFTER CONSIDERING THE ASSESSEES SUBMISSION AND REMAND REPORT, RESTRICTED THE ADDITION FROM RS. 5,0 0,000/- TO RS. 75,000/- BY HOLDING THAT THE AO HAS IN THE COURSE OF REMAND PROCEEDINGS, VERIFIED THE CLAIM OF THESE EXPENSES ON TEST-CHECK BASIS AND HAS STATED THAT SELF MADE VOUCHERS FOR EXPENSES OF ABOUT RS. 1 LAC HAVE BEEN DEBITED UNDER THIS HEAD. CONSIDERING THE MATERIAL AVAILABLE ON RE CORD, HE FOUND THAT IT WOULD BE FAIR AND JUST TO RESTRICT THE DISALLOWANCE TO RS. 75,000 ON THIS ACCOUNT OUT OF THE TOTAL DISALLOWANCE OF RS. 5 LACS . 19. NOW THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEALS BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE AO IN THE COURSE OF REMAND PROCEEDINGS VERIFIED THE CLAIM OF THESE EXPE NSES ON TEST CHECK BASIS AND FOUND THAT EXPENSES TO EXTENT OF RS.1 LAC S ARE SUPPORTED BY HANDMADE VOUCHERS. ACCORDINGLY, CIT(A) CONFIRMED TH E DISALLOWANCE TO RS.75,000/-. IT IS SUBMITTED THAT EVEN HANDMADE VOU CHERS IS A SUPPORTING EVIDENCE FOR INCURRING THE EXPENDITURE. THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN THESE VOUCHERS AND THUS, THE DISALLO WANCE SO CONFIRMED BE DELETED. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 16 20. AT THE OUTSET, THE LD CIT DR HAS VEHEMENTLY SUP PORTED THE ORDER OF THE ASSESSING OFFICER. 21. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. NO S PECIFIC DISCREPANCY HAS BEEN POINTED BY THE AO IN THE BILLS/VOUCHERS SUBMIT TED BY THE ASSESSEE. IT IS NOT THE POSITION OF THE REVENUE THAT THE EXPE NSES CLAIMED ARE BOGUS IN NATURE OR NOT INCURRED FOR THE PURPOSES OF THE B USINESS. THE ADHOC DISALLOWANCE CANNOT THEREFORE BE SUSTAINED IN EYE O F LAW. GROUND NO. 3 OF THE ASSESSEES APPEAL IS ALLOWED AND GROUND NO. 4 OF REVENUES APPEAL IS DISMISSED. 22. THE 4 TH GROUND OF THE ASSESSEES APPEAL IS AGAINST CONFIRM ING THE ADDITION OF RS. 78,00,000/- UNDER SECTION 68 OF THE ACT BY TREATING THE SHARE APPLICATION MONEY PENDING ALLOTMENT AS UNEXPL AINED. THE AO OBSERVED THAT THE ASSESSEE HAS RECEIVED SHARE APPLI CATION MONEY OF RS.78,00,000/- DURING THE YEAR AND THE ASSESSEE WAS ASKED TO FILE THE CONFIRMATION OF SHARE APPLICATION MONEY BUT NO SUCH CONFIRMATION WAS FILED. ACCORDINGLY HE TREATED IT AS UNEXPLAINED INC OME OF THE ASSESSEE AND MADE ADDITION OF RS.78,00,000/- BY APPLYING THE PROVISIONS OF SECTION 68. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE MATTER WAS ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 17 REMANDED TO THE AO AND THE AO IN HIS REMAND REPORT STATED THAT THE ASSESSEE HAD PRODUCED DETAILS OF PARTIES FROM WHOM SHARE APPLICATION MONEY WAS RECEIVED. HOWEVER, THE CONFIRMATION FROM PARTIES ARE NOT SUBMITTED. 23. DURING THE COURSE OF HEARING, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE SHARE APPLICATION MONEY WAS RECE IVED FROM THE MODI GROUP OF COMPANIES WHO WERE EXISTING PROMOTERS OF T HE COMPANY. IN SUBSEQUENT YEARS, SHARES HAVE BEEN ALLOTTED TO THEM . THE PAYMENT WAS RECEIVED BY ACCOUNT PAYEE CHEQUE. THE ASSESSEE HAS FILED THE COMPLETE DETAILS OF THE SHARE APPLICANT LIKE NAME ADDRESS AN D PAN NUMBER. THIS FACT HAS BEEN ACCEPTED BY THE AO IN THE REMAND REPO RT. THE AO HAS CONFIRMED THE ADDITION ONLY BECAUSE CONFIRMATION WA S NOT FILED. EVEN AFTER SUBMITTING THE DETAILS, THE LOWER AUTHORITIES HAVE NOT MADE ANY ENQUIRY FROM THESE PARTIES BY ISSUING NOTICE U/S 13 1/133(6). THUS, THE ASSESSEE HAS DISCHARGED ITS ONUS AND NO DISALLOWANC E IS CALLED FOR. FURTHER, REGARDING LD CIT(A)S OBSERVATION THAT NO SHARE APPLICANTS COULD BE PRODUCED BEFORE THE AO AND NO EVIDENCE IN THE FO RM OF COPY OF THEIR BANK ACCOUNTS COULD BE FILED BY THE APPELLANT EVEN IN THE COURSE OF REMAND PROCEEDINGS, THE LD AR HAS SUBMITTED THAT TH E MATTER RELATES TO AY 1998-99 AND THE OWNERSHIP/MANAGEMENT OF THE ASSE SSEE COMPANY ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 18 HAS SINCE CHANGED HANDS LONG BACK AND IT IS PRACTIC ALLY DIFFICULT TO EXPECT THE ASSESSEE COMPANY TO PRODUCE THE ORIGINAL PROMOT ERS OR ASK FOR THEIR BANK STATEMENTS WHO HAVE SOLD THEIR SHARES LONG BAC K. AT THE OUTSET, THE LD. CIT DR HAS VEHEMENTLY SUPPO RTED THE ORDERS OF THE LOWER AUTHORITIES. 24. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN O RDER TO APPRECIATE THE RIVAL CONTENTIONS, WE REFER TO THE PROVISIONS OF SE CTION 68 WHICH READS AS UNDER: WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 25. SECTION 68 OF THE ACT HAS RECEIVED THE ATTENTIO N OF THE HONBLE SUPREME COURT AND ALMOST ALL THE HIGH COURTS IN NUM EROUS CASES. IT HAS BEEN ALMOST UNANIMOUSLY HELD THAT THE INITIAL BURDE N UNDER THIS SECTION IS ON THE ASSESSEE AND THE SAID BURDEN IS DISCHARGED B Y THE ASSESSEE ONLY WHEN THE ASSESSEE PROVES THREE THINGS TO THE SATISF ACTION OF THE AO, VIZ., ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 19 IDENTITY OF THE CREDITOR, CAPACITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION. 26. WE KNOW REFER TO THE JUDGMENT OF HONBLE DELHI HIGH COURT RELIED UPON BY THE LD AR IN THE CASE OF CIT VS. LOVELY EXP ORTS PVT. LTD. 299 ITR 268 (DELHI) AND SLP AGAINST THE SAID DECISION WHICH WAS SUBSEQUENTLY DISMISSED BY THE HONBLE SUPREME COURT. THE HONBL E DELHI HIGH COURT HELD THAT THE TRIBUNAL HAD CATEGORICALLY HELD THAT THE ASSESSEE HAS DISCHARGED ITS ONUS OF PROVING THE IDENTITY OF THE SHARE SUBSCRIBERS. HAD ANY SUSPICION STILL REMAINED IN THE MIND OF AO, HE COULD HAVE INITIATED COERCIVE PROCESS BUT THIS COURSE OF ACTION HAD NO T BEEN ADOPTED. THE DELETION OF THE ADDITIONS WAS JUSTIFIED. FURTHER, R ELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT ARE AS UNDER: 18: IN THIS ANALYSIS, A DISTILLATION OF THE PRECE DENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SEC TION 68 OF THE INCOME-TAX ACT. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/ SUBSCRIBER; (2) T HE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE C HANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF T HE CREDITOR/SUBSCRIBER; (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISH ED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS RE GISTER, ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 20 SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, E TC., IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATI ON BY THE ASSESSEE. (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES; (6) THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSA CTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WIT HOUT MORE, AGAINST THE ASSESSEE; AND (7) THE ASSESSING OFFICER IS DUTY- BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACT ION AND THE VERACITY OF THE REPUDIATION. 27. A SPECIAL LEAVE PETITION FILED BY THE REVENUE C HALLENGING THE ORDER OF THE DELHI HIGH COURT IN THE CASE OF LOVELY EXPOR TS PVT. LTD. WAS SUBSEQUENTLY DISMISSED BY THE HONBLE SUPREME COURT IN LIMINE REPORTED IN CIT VS LOVELY EXPORTS PVT. LTD. (2009) 319 ITR ( ST.) 5 (SC) WHICH READS AS FOLLOWS:- WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FO R THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEI VED BY THE ASSESSEE-COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, W HOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSES SMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WI TH THE IMPUGNED JUDGMENT. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 21 28. THE HONBLE JURISDICTIONAL HIGH COURT IN CASE O F CIT VS. SHREE BARKHA SYNTHETICS LTD 270 ITR 477 (RAJ) HAS HELD TH AT THE TRIBUNAL HAD REACHED ITS CONCLUSION ABOUT THE NON-INCLUSION OF THE SHARE APPLICATION MONEY IN RESPECT OF SIX COMPANIES AND NINE INDIVI DUAL INVESTORS, IN THE ASSESSEES INCOME, BASED ON EVIDENCE. THE ASSESSEE HAD DISCHARGED ITS INITIAL BURDEN AND FURTHER ENQUIRY HAD NOT BEEN PU RSUED BY THE REVENUE. THE FINDINGS OF THE TRIBUNAL COULD NOT BE SAID TO B E PERVERSE. THUS, IT COULD NOT BE SAID THAT ANY SUBSTANTIAL QUESTION OF LAW AROSE FROM THE ORDER OF THE TRIBUNAL. 29. THE HONBLE JURISDICTIONAL HIGH COURT IN CASE O F IN CASE OF FIRST POINT FINANCE LTD 286 ITR 477 (RAJ) FOLLOWING THE E ARLIER DECISION IN CASE OF SHREE BARKHA SYNTHETICS LTD (SUPRA) HELD THAT I T WAS NOT DENIED THAT ALL THE SHAREHOLDER/ SHARE APPLICANTS WERE GENUINEL Y EXISTING PERSONS. IT WAS ALSO NOT DENIED THAT EACH OF THEM WAS AN INCOME TAX ASSESSEE AND COPIES OF THE RETURN OF THEIR INCOME WERE ALSO PLAC ED BEFORE THE A.O. THERE WAS NO PRESUMPTION THAT THE ASSESSEE WAS THE BENAMI OWNER OF THE INVESTMENT MADE BY THE EXISTING PERSONS. THE TR IBUNAL WAS JUSTIFIED IN DELETING THE ADDITION. 30. ON GOING THROUGH THE ABOVE REFERRED JUDGMENTS O F HONBLE SUPREME COURT AND THE HONBLE HIGH COURTS, IT IS EX PLICIT THAT THE INITIAL ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 22 ONUS UNDER SECTION 68 OF THE ACT CAN BE SAID TO HAV E BEEN DISCHARGED ONLY WHEN THE ASSESSEE PROVES EXISTENCE/IDENTITY OF THE SUBSCRIBER, CAPACITY/CREDITWORTHINESS OF THE SUBSCRIBER AND THE GENUINENESS OF TRANSACTION TO THE SATISFACTION OF THE AO. ALL THE THREE CONSTITUENTS ARE REQUIRED TO BE CUMULATIVELY SATISFIED. IF ONE OR MO RE OF THEM IS ABSENT, THEN THE AO CAN LAWFULLY MAKE ADDITION. ONCE THE INITIAL ONUS IS SATISFIED BY THE ASSESSEE, THE ONUS SHIFTS ON THE REVENUE AND WHERE IT IS NOT SATISFIED WITH THE ASSESSEES EXPLANATION, IT CAN T HEN CARRY OUT FURTHER ENQUIRY IN THE MATTER. 31. NOW LETS EXAMINE THE ABOVE LEGAL PROPOSITION I N THE CONTEXT OF FACTS BEFORE US. IN THE INSTANT CASE, THE AO OBSER VED THAT IN THE PRINTED BALANCE SHEET OF THE ASSESSEE COMPANY, SHARE APPLI CATION MONEY PENDING ALLOTMENT IS SHOWN AT RS.78,00,000/-. THE ASSESSEE WAS ASKED TO FILE THE CONFIRMATION OF SHARE APPLICATION MONEY BUT NO SUCH CONFIRMATION WAS FILED AS REQUIRED UNDER SECTION 68 OF THE ACT. HENCE, THE SHARE APPLICATION MONEY OF RS 78,00,000 WAS TREATED AS UNEXPLAINED U/S 68 AND THE SAME WAS ADDED TO THE INCOME OF THE ASSE SSEE. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE MATTER WAS REM ANDED TO THE AO AND THE AO IN HIS REMAND REPORT STATED THAT THE ASSESS EE HAD PRODUCED DETAILS OF PARTIES FROM WHOM SHARE APPLICATION MONE Y WAS RECEIVED. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 23 HOWEVER, THE CONFIRMATION FROM PARTIES ARE NOT SUBM ITTED. THE LD CIT(A) HAD CONFIRMED THE ADDITION BY HOLDING THAT NO SHARE APPLICANTS COULD BE PRODUCED BEFORE THE AO EVEN IN THE COURSE OF REMAND PROCEEDINGS TO PROVE THE IDENTITY OF THE SHARE APPLICANT. FURTHER, NO EVIDENCE IN THE FORM OF COPY OF THEIR BANK ACCOUNT COULD BE FILED BY THE APPELLANT TO SUBSTANTIATE THE CREDITWORTHINESS OF THE APPLICANTS . ALSO NO OTHER EVIDENCE HAS BEEN FILED BY THE APPELLANT IN SUPPORT OF THE SOURCES OF THEIR INCOMES. ACCORDINGLY, THE LD CIT(A) HELD THAT APPEL LANT HAS NOT BEEN ABLE TO DISCHARGE THE ONUS WHICH LAY UPON HIM UNDER THE PROVISIONS OF SECTION 68 OF THE IT ACT. THE LD AR OF THE ASSESSEE HAS SU BMITTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED FROM THE MODI GROUP OF COMPANIES WHO WERE EXISTING PROMOTERS OF THE COMPANY. IN SUBSEQUE NT YEARS, SHARES HAVE BEEN ALLOTTED TO THEM. THE PAYMENT WAS RECEIVE D BY ACCOUNT PAYEE CHEQUE. THE ASSESSEE HAS FILED THE COMPLETE DETAILS OF THE SHARE APPLICANT LIKE NAME ADDRESS AND PAN NUMBER AND THIS FACT HAS BEEN ACCEPTED BY THE AO IN THE REMAND REPORT. FURTHER, R EGARDING LD CIT(A)S OBSERVATION THAT NO SHARE APPLICANTS COULD BE PRODU CED BEFORE THE AO AND NO EVIDENCE IN THE FORM OF COPY OF THEIR BANK A CCOUNT COULD BE FILED BY THE APPELLANT EVEN IN THE COURSE OF REMAND PROCE EDINGS, THE LD AR HAS SUBMITTED THAT THE MATTER RELATES TO AY 1998-99 AND THE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 24 OWNERSHIP/MANAGEMENT OF THE ASSESSEE COMPANY HAS SI NCE CHANGED HANDS LONG BACK AND IT IS PRACTICALLY DIFFICULT TO EXPECT THE ASSESSEE COMPANY TO PRODUCE THE ORIGINAL PROMOTERS OR ASK FO R THEIR BANK STATEMENTS WHO HAVE SOLD THEIR SHARES LONG BACK. 32. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE MA TTER. IT IS NOTED THAT THE ASSESSEE WAS CARRYING ON BUSINESS FOR PAST MANY YEARS AND DURING THE YEAR UNDER CONSIDERATION, SHARE APPLICAT ION MONEY HAS BEEN RECEIVED TOWARDS SUBSCRIPTION OF THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE SHARE APPLICATION MONEY HAS BEEN RECE IVED FROM THE EXISTING PROMOTER GROUP OF COMPANIES AND NOT FROM A NY THIRD PERSON/ENTITY. THE PROMOTER GROUP OF COMPANIES HAD INVESTED IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY IN THE PAST A ND THEIR CREDIT WORTHINESS IS WELL ESTABLISHED AND ACCEPTED BY THE REVENUE IN THE PAST. IT IS NOT THE CASE OF THE REVENUE THAT THE SHAREHOL DERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED THE COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES. FU RTHER, THE SHARE APPLICATION MONEY HAS BEEN RECEIVED THROUGH NORMAL BANKING CHANNELS AND SUBSEQUENTLY SHARES HAVE BEEN ALLOTTED. ONCE THE IDENTITY AND CREDIT WORTHINESS OF THE SUBSCRIBERS IS ESTABLISHED AND GENUINENESS OF TRANSACTION IS NOT DOUBTED, MERE NON-FILING OF THE CONFIRMATION CANNOT BE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 25 HELD SUFFICIENT ENOUGH TO ATTRACT THE PROVISIONS OF SECTION 68 OF THE ACT. IN THE PECULIAR FACTS OF THE PRESENT CASE, WHERE TH E SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM THE EXISTING SHAREHOLD ERS AND THE NECESSARY PARTICULARS IN TERMS OF NAME, ADDRESS AND PAN NUMBER HAVE BEEN FURNISHED TO THE AO, THE AO COULD HAVE CARRIED OUT FURTHER VERIFICATION/ENQUIRY WHERE HE IS NOT SATISFIED WITH THE ASSESSEES EXPLANATION. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE AO HAS CARRIED OUT ANY FURTHER ENQUIRY AFTER RECEIVING THE NECESSARY DETAILS. THEREFORE, IN THE ENTIRETY OF FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LIGHT OF JUDICIAL AUTHORITIES QUOTED SUPRA, WE DELE TE THE ADDITION MADE UNDER SECTION 68 OF THE ACT. GROUND NO. 4 OF ASSES SEES APPEAL IS THUS, ALLOWED. 33. THE 5TH GROUND OF THE ASSESSEES APPEAL AS WELL AS GROUND NO. 5 OF THE REVENUES APPEAL IS AGAINST CONFIRMING THE ADHO C DISALLOWANCE OF RS. 3,00,000/- OUT OF REPAIR AND MAINTENANCE EXPENSES A ND RESTRICTING THE DISALLOWANCE OF RS. 25,00,000/- TO RS. 3,00,000/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF REPAIR AND MAINTENANCE EXPENS ES. DURING THE COURSE OF REMAND PROCEEDINGS, THE A.R. HAS PRODUCED REPAIR AND MAINTENANCE BILLS AND SUPPORTING VOUCHERS AND THE A O IN HIS REMAND REPORT STATED THAT WE HAVE VERIFIED BILLS / VOUCHE RS ON TEST BASIS RELATED ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 26 TO REPAIR & MAINTENANCE EXPENSES. THE ASSESSEE HAS SUBMITTED THE VOUCHERS & SUPPORTING DOCUMENTS WHICH WERE INDICATE D AS NOT PRODUCED IN THE ASSESSMENT ORDER. THE LD. CIT(A) THEREAFTER RESTRICTED THE DISALLOWA NCE FROM RS. 25,00,000/- TO RS. 3,00,000/- BY HOLDING THAT T HE APPELLANT HAS STATED THAT AO HAS VERIFIED THE SUPPORTING VOUCHERS FOR TH E EXPENSES CLAIMED AND HAS NOT MADE ANY ADVERSE COMMENTS. CONSIDERING THE EVIDENCE PLACED ON RECORD AND THE FACT THAT AO HAS VERIFIED THESE EXPENSES ON TEST-CHECK BASIS, HE HELD THAT IT WOULD BE JUST AND FAIR TO RESTRICT THE DISALLOWANCE UNDER THIS HEAD TO RS. 3 LACS OUT OF T HE TOTAL DISALLOWANCE OF RS. 25 LACS. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE A O IN THE REMAND PROCEEDINGS HAS VERIFIED THE VOUCHERS/BILLS SUBMITT ED BY THE ASSESSEE ON TEST CHECK BASIS AND HAS NOT FOUND ANY DEFECT THERE IN. HOWEVER, THE CIT(A) WITHOUT GIVING ANY SPECIFIC FINDING/ BASIS C ONFIRMED THE DISALLOWANCE TO RS.3 LACS WHICH IS UNJUSTIFIED. AT THE OUTSET, THE LD CIT DR HAS RELIED ON THE ORD ER OF THE ASSESSING OFFICER. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 27 34. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. WHER E THE AO HAS VERIFIED THE VOUCHERS/BILLS SUBMITTED BY THE ASSESSEE ON TES T CHECK BASIS AND HAS NOT FOUND ANY DEFECT THEREIN, WE SEE NO JUSTIFIABLE REASON TO SUSTAIN THE DISALLOWANCE. THE GROUND NO. 5 OF ASSESSEES APPEA L IS ALLOWED AND GROUND NO. 5 OF REVENUES APPEAL IS DISMISSED. 35. THE 6 TH GROUND OF THE ASSESSEES APPEAL AND 6 TH GROUND OF THE REVENUES APPEAL ARE AGAINST RESTRICTING THE ADVERT ISEMENT AND PUBLICITY EXPENSES TO RS.70,000/- OUT OF TOTAL DISALLOWANCE O F RS.5,00,000/- AND CONFIRMING DISALLOWANCE OF RS.70,000/- OUT OF THE A DVERTISEMENT AND PUBLICITY EXPENSES. THE ASSESSEE HAS DEBITED A SUM OF RS. 45,93,941/- UNDER THE HEAD RENT, RATES, TAXES AND ADVERTISEMENT AND PUBLICITY. THE AO OBSERVED THAT THE VOUCHERS PRODUCED BY THE ASSES SEE IN ASSESSMENT PROCEEDING WERE NOT FOUND FULLY VERIFIABLE. ACCORDI NGLY, A.O. MADE LUMP SUM DISALLOWANCE OF RS. 5 LACS. DURING THE COURSE OF REMAND PROCEEDINGS, THE A.R. HAS PRODUCED ADVERTISING AND PUBLICITY EXPENSES BILLS AND VOUCHE RS AND SUBMITTED BEFORE THE AO THAT THE EXPENDITURE ON ADVERTISEMENT AND PUBLICITY IS MAINLY IN RESPECT OF PUBLICATION IN THE NEWS PAPER DULY SUPPORTED BY THE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 28 NEWS PAPER CUTTING. THUS THE EXPENSES UNDER THIS HE AD ARE FULLY VERIFIABLE. AO HAS NOT POINTED OUT ANY SPECIFIC DEF ECT IN THE VOUCHERS AND THEREFORE THE LUMP SUM DISALLOWANCE MADE BY HIM IS UNJUSTIFIED. IN ITS REMAND REPORT, THE AO STATED THAT THE ASSESSEE HAS SUBMITTED LEDGER ACCOUNT OF ADVERTISEMENT, RENT, AND RATES & TAXES E XPENSE ACCOUNT. WE HAVE CHECKED THE VOUCHERS ON TEST BASIS BUT FOUND E XPENSES OF ADVERTISEMENT & PUBLICITY UNSUPPORTED WITH MODE OF ADVERTISEMENT. THE LD. CIT(A) THEREAFTER RESTRICTED THE DISALLOWA NCE FROM RS. 5.00 LACS TO RS. 70,000/- BY HOLDING THAT AFTER CONSIDER ING THE MATERIAL AVAILABLE ON RECORD, THE AO HAS TEST CHECK THE VOUC HERS FOR CLAIM OF EXPENSES ON THIS ACCOUNT AND POINTED OUT CERTAIN DE FECTS AS REGARDS THE CLAIM OF EXPENSES OF RS. 6,89,655 UNDER THE HEAD AD VERTISEMENT AND PUBLICITY ARE CONCERNED. THEREFORE, THE LD. CIT(A) HELD THAT IT WOULD BE FAIR TO RESTRICT THE DISALLOWANCE TO RS. 70,000 ON THIS ACCOUNT AS AGAINST THE TOTAL DISALLOWANCE OF RS. 5 LACS UNDER THIS HEA D. THE LD AR OF THE ASSESSEE SUBMITTED THAT THE AO IN THE REMAND REPORT HELD THAT THE EXPENSES ON ADVERTISEMENT & PU BLICITY ARE UNSUPPORTED AS TO THE MODE OF ADVERTISEMENT. THE LD . CIT(A) CONFIRMED THE DISALLOWANCE TO RS.70,000/- BY HOLDING THAT THE AO HAS TEST CHECK THE EXPENSES AND HAS POINTED OUT CERTAIN DEFECTS. IT IS SUBMITTED THAT ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 29 EXPENDITURE WERE INCURRED IN RESPECT OF PUBLICATION IN THE NEWSPAPERS WHICH IS DULY SUPPORTED BY NEWS PAPER CUTTING. BOTH THE LOWER AUTHORITIES HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE VOUC HERS/BILLS AND THUS, THE DISALLOWANCE SO CONFIRMED BE DELETED. AT THE OUTSET, THE LD CIT DR HAS VEHEMENTLY SUPPOR TED THE ORDER OF THE ASSESSING OFFICER. 36. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT I S THE CONTENTION OF THE LD AR THAT EXPENDITURE WAS INCURRED IN RESPECT OF P UBLICATION IN THE NEWSPAPERS WHICH IS DULY SUPPORTED BY NEWS PAPER CU TTING. HOWEVER, THERE IS NO SUCH FINDING BY THE LOWER AUTHORITIES. THE MATTER IS ACCORDINGLY SET-ASIDE TO THE FILE OF THE AO TO EXAM INE THE SAME A FRESH. GROUND NO. OF 6 OF ASSESSEES APPEAL AS WELL AS GRO UND NO. 6 OF REVENUES APPEAL IS THUS ALLOWED FOR STATISTICAL PURPOSES. 37. THE 7 TH GROUND OF THE ASSESSEES APPEAL IS AGAINST CONFIRM ING THE ADDITION OF RS. 4,24,27,000/- ON ACCOUNT OF ALLEGED RECEIPT OF ON- MONEY AS INCOME OF THE ASSESSEE ON THE BASIS OF CUSTOM AN D CENTRAL EXCISE ORDER PASSED AGAINST THE ASSESSEE IN EARLIER YEARS. THE A.O. OBSERVED THAT IN THE SEARCH CONDUCTED BY CENTRAL EXCISE DEPA RTMENT ON 27-08- ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 30 1996 AND THE CONSEQUENT ORDER PASSED BY COMMISSIONE R OF CENTRAL EXCISE DATED 8-12-1998 IT WAS FOUND THAT ASSESSEE W AS COLLECTING AMOUNT IN CASH FROM CUSTOMERS OF LIQUID CHLORIDE OVER AND ABOVE THE INVOICE VALUE. THIS MATTER HAS BEEN DISCUSSED IN A.Y. 1996- 97 & 1997-98 AND AN ADDITION OF RS.533.24 LACS AND RS.180.95 LACS WAS M ADE RESPECTIVELY. DURING THE COURSE OF REMAND PROCEEDINGS, THE A.R. H AS SUBMITTED ITS REPLY WHICH IS AS UNDER: - 1. A.O. HAS FAILED TO APPRECIATE THAT THE ORDER OF THE CUSTOM AND CENTRAL EXCISE WAS NOT FINAL ORDER AND NO ADDIT ION COULD BE MADE ON THE BASIS OF SUCH AN ORDER IN THE HANDS OF THE ASSE SSEE. 2. A.O. HAS FAILED TO APPRECIATE THAT THE STATEME NT OF SHRI. ASHOK KUMAR, AN EMPLOYEE OF THE ASSESSEE COMPANY, W AS EXTRACTED UNDER DURESS AND THE SAME COULD NOT BE MADE THE BAS IS OF ADDITION OF SUCH A HUGE AMOUNT OF RS. 4,24,27,000/-. 3. ADDITION OF RS. 4,24,27,000/- IS NOT LEGALLY SU STAINABLE AND THE SAME MAY BE DELETED. THE A.O. OBSERVED THAT IN THE SEARCH CONDUCTED BY CENTRAL EXCISE DEPARTMENT ON 27-08-199 6 AND THE CONSEQUENT ORDER PASSED BY COMMISSIONER OF CENTRAL EXCISE DATED 08.12.1998 IT WAS FOUND THAT ASSESSEE WAS COLLECTIN G AMOUNT IN CASH ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 31 FROM CUSTOMERS OF LIQUID CHLORIDE OVER AND ABOVE TH E INVOICE VALUE. THIS MATTER HAS BEEN DISCUSSED IN A.Y. 1996-97 & 1997-98 AND AN ADDITION OF RS. 533.24 LACS AND RS. 180.95 LACS WAS MADE. HE PR ESUMED THAT THIS PRACTICE MUST BY EXISTING IN THE YEAR UNDER CONSIDE RATION ALSO AND THEREFORE HE MADE ADDITION OF RS. 424.27 LACS ON PR OPORTIONATE BASIS WITH REFERENCE TO THE TURNOVER AND THE ADDITION MADE IN A.Y. 1996-97. IT MAY BE NOTED THAT THE ENTIRE ADDITION IS MADE O N ASSUMPTIONS AND PRESUMPTIONS. THERE IS NO EVIDENCE THAT ASSESSE E HAS CHARGED ANY CASH AMOUNT OVER AND ABOVE THE INVOICE VALUE DURING THE YEAR UNDER CONSIDERATION NOR THE AO HAS BROUGHT ANY EVIDENCE I N THIS REGARD. ONLY BECAUSE ADDITION ON THIS ACCOUNT WAS MADE IN EARLIE R YEARS, IT CANT BE PRESUMED THAT IN ALL THE SUBSEQUENT YEARS SUCH PRAC TICE WOULD HAVE CONTINUED. EVEN THE EXCISE DEPARTMENT HAS NOT MADE ANY SUCH CHARGE FOR THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE THE ADDITION MADE BY THE AO I S BASELESS AND BE DELETED. THE AO IN HIS REMAND REPORT HAS STATED AS FOLLOWS: THE ADDITION OF RS. 424.27 LAC WAS BASED ON THE INFORMATION RECEIVE D FROM CENTRAL EXCISE DEPARTMENT AS PER SEARCH CONDUCTED BY THEM I N THE F.Y. 1996-97. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 32 NO SUCH INFORMATION FOR THE A.Y. 1998-99 IS AVAILAB LE ON RECORD. THEREFORE A LETTER WAS WRITTEN TO THE CENTRAL EXCIS E DEPARTMENT IN THIS MATTER BY THIS OFFICE LETTER NO. 377 DATED 24.06.20 14. IN THIS REGARD THE CENTRAL EXCISE DEPARTMENT SUBMITTED ON 15.07.2014 B Y LETTER NO. 447, THE INFORMATION IS AS UNDER THERE WAS NO SUCH CASE OF UNDER VALUATION BOOKED AGAINST M/S MODI ALKALIES AND CHEMICALS LIMI TED, SP-460, M.I.A., ALWAR REGARDING FINANCIAL YEAR 1997-98 AND THEREAFT ER, SO FAR. 38. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO HAD C ONFIRMED THE ADDITION OF RS. 4,24,27,000/- MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER:- 12.7 DURING THE COURSE OF APPELLATE PROCEEDINGS, T HE AO HAS MADE ENQUIRIES WITH THE CENTRAL EXCISE AND CUSTOMS DEPARTMENT AND A REPLY HAS BEEN OBTAINED, AS STATED IN THE REMAND REPORT THAT THERE WAS NO SUCH CASE OF UNDER VALUATION BOOKED AGAINST M/S MODI ALKALIES AND CHEM ICALS LIMITED, SP-460, M.I.A., ALWAR REGARDING FINANCIAL YEAR 1997-98 AND THEREAFTER, SO FAR. HOWEVER, IT IS FOU ND THAT ADDITION HAS BEEN MADE IN THE CASE OF THE APPELLANT ON THE BASIS OF STATEMENT OF AN EMPLOYEE RECORDED BY THE CUSTOMS AND CENTRAL EXCISE DEPARTMENT WHEREIN IT WA S STATED THAT THE COMPANY IS RECEIVING SALE CONSIDERA TION FROM THE CUSTOMERS OVER AND ABOVE THE INVOICE VALUE IN ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 33 CASH. THIS ADDITION HAS BEEN MADE IN THE HANDS OF T HE APPELLANT IN EARLIER YEARS AS WELL. THEREFORE, I HO LD THAT THE REPLY RECEIVED BY THE AO IN THE COURSE OF REMAND PROCEEDINGS DOES NOT COVER THIS ISSUE. FURTHER, THE APPELLANT HAS ALSO FAILED TO FURNISH ANY MATERIAL O N THIS ISSUE WHICH COULD CONTROVERT THE EVIDENCE AVAILABLE ON RECORD. ACCORDINGLY, I CONFIRM THE ADDITION OF RS. 4,24,27,000/- MADE BY THE AO UNDER THIS HEAD. 39. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD . AR OF THE ASSESSEE HAS SUBMITTED THAT THE AO IN THE REMAND RE PORT HAS ACCEPTED THAT DURING THE YEAR NEITHER ANY SALE OUT OF BOOKS WAS FOUND NOR EXCISE DEPARTMENT HAS MADE OUT ANY CASE AGAINST THE ASSESS EE. THE LETTER OF THE CENTRAL EXCISE DEPARTMENT WHEREIN IT WAS STATED THAT THERE WAS NO SUCH CASE OF UNDER VALUATION BOOKED AGAINST THE ASS ESSEE DURING THE YEAR UNDER CONSIDERATION WAS ALSO FILED. STILL CIT(A) CO NFIRMED THE DISALLOWANCE ON THE BASIS OF STATEMENT OF AN EMPLOY EE RECORDED BY THE CEC DEPARTMENT WHEREIN IT WAS STATED THAT THE COMPA NY IS RECEIVING SALE CONSIDERATION FROM THE CUSTOMER OVER AND ABOVE THE INVOICE VALUE IN CASH IGNORING THAT SUCH STATEMENT IS NOT RELATED TO THE YEAR UNDER CONSIDERATION AND ON THE GROUND THAT ADDITION HAS B EEN MADE IN THE EARLIER YEARS AS WELL. HENCE, ADDITION CONFIRMED BY CIT(A) IS UNJUSTIFIED AND BE DELETED. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 34 40. AT THE OUTSET, THE LD CIT DR HAS VEHEMENTLY SUP PORTED THE ORDERS OF THE LOWER AUTHORITIES. 41. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. FOR A Y 1996-97, SIMILAR ISSUE HAS BEEN DEALT BY THE COORDINATE BENCH IN ITA 382 & 420/JP/2011 DATED 19.08.2016 WHEREIN IT WAS HELD AS UNDER: WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LD. AR HAS CONFIRMED THAT THE MATTER BEFORE CESTAT IS STILL PE NDING FOR ADJUDICATION AND HE HAS GIVEN AN ASSURANCE THAT AS SOON AS THE ORDER IS PRONOUNCED BY CESTAT AND A COPY IS MADE AV AILABLE TO THE ASSESSEE, THE ASSESSEE SHALL FORTHWITH SHARE A COPY OF THE CESTAT ORDER WITH THE AO WITHOUT ANY UNDUE DELA Y. IN LIGHT OF THAT, WE CONFIRM THE ORDER OF THE LD. CIT( A) AND SET- ASIDE THE MATTER TO THE FILE OF THE AO TO DECIDE TH E SAME AFRESH AS PER LAW AFTER TAKING INTO CONSIDERATION T HE DECISION OF CESTAT. FURTHER WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) TO ALLOW THE CLAIM OF THE ASSESSEE T OWARDS PAYMENTS OF EXCISE DUTY OF RS. 60 LACS, CLAIMED TO BE PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, SUBJECT TO DUE VERIFICATION BY THE AO. 42. IN THE INSTANT CASE, THE AO HAS PLACED HIS REL IANCE ON THE FINDINGS IN THE ASSESSMENT ORDER FOR AY 1996-97 AND GIVEN TH AT THE COORDINATE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 35 BENCH HAS ALREADY TAKEN A VIEW IN THE MATTER REFERR ED SUPRA, WE DO NOT SEE ANY REASON FOR US TO DEVIATE FROM THE SAID VIEW TAKEN BY THE COORDINATE BENCH. NOTHING HAS BEEN BROUGHT TO THE N OTICE OF THE BENCH IN RESPECT OF WHETHER CESTAT ORDER HAS BEEN PRONOUN CED OR NOT SINCE THE DATE OF PASSING OF ORDER BY THE COORDINATE BENC H IN AUGUST 2016. ONCE THE CESAT ORDER IS PRONOUNCED, THE NATURE OF I MPLICATIONS AS WELL AS THE YEARS INVOLVED WOULD BE CLEAR AND THE REVENU E AS WELL AS THE ASSESSEE WOULD BE IN A BETTER POSITION TO PUT FOREW ORD THEIR RESPECTIVE CONTENTIONS. HENCE, THE FINDINGS AND DIRECTIONS CON TAINED IN COORDINATE BENCH DECISION FOR AY 1996-97 SHALL APPLY MUTATIS M UTANDIS TO THE IMPUNGED ASSESSMENT YEAR AS WELL. HENCE, GROUND N O. 7 OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 43. THE 8 TH GROUND OF THE ASSESSEES APPEAL IS AGAINST CONFIRM ING THE DISALLOWANCE OF RS. 2,71,000/- MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF DIFFERENCE IN THE RATE OF INTEREST. THE ASSESSE E HAS DEPOSITED A SUM OF RS. 98.36 LACS WITH THE BANK IN FDR AGAINST THE MAR GIN MONEY. ON THESE FDR IT IS RECEIVING INTEREST @9.30%. AS AGAINST THI S, THE ASSESSEE HAS PAID INTEREST @ 14% TO 15% ON THE FIXED DEPOSIT OBT AINED FROM PUBLIC. THE AO THEREFORE, OBSERVED THAT THE RATE OF INTERES T PAYMENT IS HIGHER AS COMPARED TO THE INTEREST RECEIVED ON MARGIN MONEY A ND THEREFORE HE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 36 WORKED OUT THE EXCESS INTEREST PAID AT RS. 2,71,000 /- AND MADE DISALLOWANCE OF THE SAME. DURING THE COURSE OF REMA ND PROCEEDINGS, THE A.R. HAS SUBMITTED ITS REPLY AS UNDER: - 1. AT THE OUTSET WE MAY POINT OUT THAT THE AO HAS COMPARED THE RATE OF INTEREST ON FDR KEPT AS MARGIN MONEY WI TH THE RATE OF INTEREST PAID ON THE FIXED DEPOSIT TAKEN FROM PUBLI C WHICH IS INCORRECT. THIS IS NOT THE CASE OF THE AO THAT ASSESSEE RAISED THE FIXED DEPOSIT FROM PUBLIC FOR EARNING INTEREST INCOME BY DEPOSITING IT IN THE BANK. THE DEPOSIT RAISED FROM THE PUBLIC WAS FOR BUSINESS EXP EDIENCY AND THEREFORE NO PART OF THE INTEREST PAID CAN BE DISALLOWED IN V IEW OF THE DECISION OF SUPREME COURT IN CASE OF S.A. BUILDERS 288 1TR 1. 2. WE MAY FURTHER POINT OUT THAT THE FDR WERE KEPT IN THE BANK AS MARGIN MONEY TO GIVE THE BANK GUARANTEE TO RSEB ON WHICH INTEREST WAS PAID BY BANK TO THE ASSESSEE @9.60% P.A.. AS AG AINST THIS, THE FIXED DEPOSIT TAKEN FROM THE PUBLIC IS AT THE INTEREST RA TE OF 14% TO 15% (WRONGLY MENTIONED BY THE AO AT 21.62%) AS IS EVIDE NT FROM COPY OF FEW FIXED DEPOSIT RECEIPT PLACED AT P.B.245-249. THESE TWO INTEREST RATE, THEREFORE CANT BE COMPARED FOR MAKING THE DISALLOW ANCE. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 37 THE AO IN HIS REMAND REPORT STATED THAT THE ASSES SEE HAS GIVEN MARGIN MONEY DEPOSIT TO BANKS (PNB AND SBI) FOR GET TING BANK GUARANTEE AND LETTER OF CREDIT AS IT APPEARS FROM T HE ACCOUNT COPY SUBMITTED BY THE ASSESSEE. THE BANK GUARANTEE AND L ETTER OF CREDIT ARE FOR THE PURPOSE OF THE BUSINESS AND HAS BEEN TEST C HECKED. THE LD. CIT(A) HOWEVER CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING THAT THE AO HAS STATED IN THE REMAND REPORT THAT THE FACT OF DEPOSITS HAVING BEEN MADE BY THE A PPELLANT WITH THE BANKS ARE FOR THE PURPOSES OF BUSINESS. HOWEVER, HE FOUND THAT AN INSPECTION BY THE DEPARTMENT OF COMPANY AFFAIRS HAD ALSO REVEALED CERTAIN IRREGULARITIES ON THE ISSUE OF INTEREST PAY MENTS. BASED ON THIS FINDINGS ADDITION HAVE BEEN MADE BY THE AO IN THE E ARLIER YEARS AS WELL. THEREFORE, HE UPHELD THE ACTION OF THE AO FOR MAKIN G DISALLOWANCE OF RS. 2,71,000 ON ACCOUNT OF INTEREST RATE DIFFERENTIAL A ND CONFIRM THE SAME. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE A O IN THE REMAND REPORT HAS ACCEPTED THAT ASSESSEE HAS GIVEN MARGIN MONEY DEPOSIT TO BANKS FOR GETTING BANK GUARANTEE AND LETTER OF CRED IT WHICH IS FOR THE PURPOSE OF BUSINESS. STILL THE CIT(A) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT INSPECTION BY THE DEPARTMENT OF COMPANY AFFAIRS HAD ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 38 REVEALED CERTAIN IRREGULARITIES ON THE ISSUE OF INT EREST PAYMENT WITHOUT SPECIFYING THE SAME. HENCE, DISALLOWANCE CONFIRMED BY CIT(A) IS UNJUSTIFIED AND BE DELETED. AT THE OUTSET, THE LD CIT DR HAS VEHEMENTLY SUPPOR TED THE ORDERS OF THE LOWER AUTHORITIES. 44. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT I S NOT IN DISPUTE THAT THE FIXED DEPOSITS WERE PLACED WITH BANKS AS MARGIN MON EY TO AVAIL THE FACILITY OF BANK GUARANTEE WHICH THE APPELLANT REQU IRES FOR THE PURPOSES OF ITS BUSINESS. THE PURPOSE OF FIXED DEPOSIT WAS T HUS NOT FOR THE PURPOSES OF EARNING INTEREST INCOME BUT TO SECURE B ANK GUARANTEE FOR THE PURPOSES OF BUSINESS. AT THE SAME TIME, NOTHING HA S BEEN BROUGHT ON RECORD TO THE ATTENTION OF THE BENCH BY EITHER OF T HE PARTIES TO DETERMINE WHAT KIND OF IRREGULARITIES HAD BEEN REVEALED BY TH E DEPARTMENT OF COMPANY AFFAIRS IN MATTER OF INTEREST PAYMENT THE BASIS FOR SUSTAINING THE DISALLOWANCE BY THE LD CIT(A). IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE THEREFORE REMAND THE MATTER BACK TO THE FILE OF THE AO TO EXAMINE THE DETAILS OF ENQUIRY CONDUCTED BY DEPARTMENT OF COMPA NY AFFAIRS AND HOW ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 39 THE SAME IS RELEVANT FOR THE TRANSACTION UNDER CONS IDERATION. GROUND NO. 8 OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL P URPOSES. 45. GROUND NO. 9 OF THE ASSESSEES APPEAL AND GROUN D NO. 7 OF THE REVENUES APPEAL ARE AGAINST RESTRICTING THE EXPENS ES MADE ON ACCOUNT OF PERQUISITES TO EMPLOYEES TO RS.2,00,000/- OUT OF TO TAL DISALLOWANCE OF RS.20,00,000/- AND CONFIRMING DISALLOWANCE OF RS.2, 00,000/- OUT OF PERQUISITES TO EMPLOYEES. THE AO OBSERVED THAT PERU SAL OF THE FORM NO. 16 FILED IN RESPECT OF SHRI K.N. MODI, CHAIRMAN AND M.D. REVEALS THAT PERQUISITE AMOUNTING TO RS.83,280/- HAS BEEN SHOWN PAID AND THE SAME HAS BEEN RECOVERED BY THE COMPANY. THE ASSESSEE WAS ASKED TO EXPLAIN THE ACCOUNTABILITY OF THE PERQUISITE RECOVERED AND PRODUCE THE PROOF OF THE SAME BUT THE SAME WAS NOT PRODUCED IN RESPECT O F ALL THE EMPLOYEES EXCEPT ONE. ACCORDINGLY, THE AO MADE ADDITION OF RS . 20 LACS. DURING THE COURSE OF REMAND PROCEEDINGS, DURING THE COURSE OF HEARING ON 17.06.2014, THE A.R. HAS PRODUCED T.D.S. RETURN , D ETAIL OF FORM NO 16 AND SUBMITTED ITS REPLY WHICH IS AS UNDER: - 1. THE AO OBSERVED THAT PERUSAL OF THE FORM NO. 16 FILED IN RESPECT OF SHRI K. N. MODI, CHAIRMAN AND M.D. REVEA LS THAT PERQUISITE AMOUNTING TO RS.83,280/- HAS BEEN SHOWN PAID AND TH E SAME HAS BEEN ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 40 RECOVERED BY THE COMPANY. THE ASSESSEE WAS ASKED TO EXPLAIN THE ACCOUNTABILITY OF THE PERQUISITE RECOVERED AND PROD UCE THE PROOF OF THE SAME BUT THE SAME WAS NOT PRODUCED. ACCORDINGLY, TH E AO ESTIMATED THE PERQUISITE OF ALL THE EMPLOYEES AT RS.20 LACS AND M ADE ADDITION FOR THE SAME. 2. WE MAY POINT OUT THAT SHRI K.N.MODI WAS CHAIRMA N AND MANAGING DIRECTOR OF THE COMPANY. THE COMPANY HAS R ECOVERED CERTAIN AMOUNT AGAINST THE PERQUISITE PROVIDED TO HIM FOR U SE OF HOUSE, CAR, WATER AND ELECTRICITY AND FURNITURE. THIS RECOVERY IS MADE DIRECTLY FROM THE SALARY OF EACH MONTH AND THE AMOUNT DEDUCTED FR OM SALARY IS CREDITED TO THE RESPECTIVE EXPENDITURE ACCOUNT. HEN CE THE RECOVERY MADE IS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. 3. SO FAR AS FACILITIES PROVIDED TO OTHER EMPLOYEE S ARE CONCERNED, THE COMPANY IS PROVIDING VARIOUS FACILIT IES TO THE EMPLOYEES AS PER THE RULES OF THE COMPANY. THESE FACILITIES P ROVIDED ARE PART AND PARCEL OF THE SALARY PACKAGE OF THE EMPLOYEE AND TH E SAME IS EXPENDITURE OF THE COMPANY. IF ANY RECOVERY IS MADE THE SAME IS CREDITED TO THE RESPECTIVE EXPENDITURE. THE AO HAS ALSO NOT BROUGHT ANY EVIDENCE TO ESTABLISH THAT CORRECT VALUE OF THE PERQUISITE P ROVIDED TO THE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 41 EMPLOYEES AND RECOVERED FROM SAME HAS NOT BEEN CONS IDERED IN FORM NO. 16 ISSUED TO THEM. IN VIEW OF THE ABOVE FACTS, THE ADDITION OF RS.20 LACS MADE BY THE AO IS UNCALLED FOR AND BE DELETED. THE AO IN HIS REMAND REPORT STATED THAT THE ASSES SEE HAS FILED TDS RETURN AND FORM 16 OF THEIR EMPLOYEES AT ALWAR. ON OUR TEST CHECKS, WE HAVE NOTED PERQUISITE VALUE OF CAR, HOUSE ACCOMM ODATION, LTA ETC. HAS BEEN TAKEN INTO ACCOUNT WHILE CALCULATING THE T AX OF THE EMPLOYEES. THE LD. CIT(A) HAD RESTRICTED THE DISALLOWANCE FRO M RS. 20,00,000/- TO RS. 2,00,000/- BY HOLDING THAT THE A PPELLANT HAS FILED DETAILS IN RESPECT OF THE EMPLOYEES IN THE COURSE O F APPELLATE PROCEEDINGS AND EXPLAIN THAT VALUE OF THESE PERQUISITES IS DULY ACCOUNTED FOR IN THE HANDS OF EMPLOYEES. THESE DETAILS ALONGWITH FORM NO . 16 OF EMPLOYEES WAS TEST CHECKED BY THE AO IN THE COURSE OF REMAND PROCEEDINGS. THE AO HAS NOT GIVEN ANY ADVERSE COMMENTS ON THIS ISSUE . AT THE SAME TIME, AS THE AO HAS FAILED TO GIVE A FINDING WITH REGARD TO THE DETAILS OF PERQUISITES AND SALARY PAYMENTS TO SH. K. N. MODI, THEREFORE, THE LD. CIT(A) HELD THAT IT WOULD BE FAIR TO RESTRICT THE D ISALLOWANCE UNDER THIS HEAD TO RS. 2 LACS. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 42 THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE A O IN THE REMAND REPORT HAS VERIFIED THE TDS RETURN AND FORM 16 OF A LL THE EMPLOYEES AND SUBMITTED THAT THE PERQUISITE VALUE HAS BEEN CONSID ERED IN THE HANDS OF THE EMPLOYEES. HOWEVER, CIT(A) WITHOUT GIVING ANY S PECIFIC FINDING CONFIRMED THE ADDITION TO RS.2 LACS WHICH IS UNJUST IFIED. THE CIT DR HAS SUPPORTED THE ORDER OF THE ASSESSIN G OFFICER. 46. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AO HAS MADE THE DISALLOWANCE STATING THAT IN ABSENCE OF COMPLETE DE TAILS, IT IS NOT POSSIBLE FOR HIM TO ARRIVE AT CORRECT VALUE OF PERQUISITES P ROVIDED TO EMPLOYEES AND HENCE, HE MADE AN ADHOC DISALLOWANCE OF RS 20 L ACS. THE QUESTION THAT ARISES FOR CONSIDERATION IS HOW THE VALUATION OF PERQUISITE IN THE HANDS OF THE EMPLOYEES WILL DETERMINE THE ALLOWABIL ITY OF EXPENDITURE INCURRED BY THE ASSESSEE ON PROVISION OF SUCH PERQU ISITES TO ITS EMPLOYEES. THE VALUATION OF PERQUISITES HAS BEEN D EFINED UNDER SECTION 17 OF THE ACT AND THE SAME IS RELEVANT FOR THE PURP OSES OF DETERMINING THE TAXABILITY IN THE HANDS OF THE EMPLOYEES. WHER E THERE IS ANY RECOVERY BY THE EMPLOYER FROM THE EMPLOYEES, THE SA ME IS ADJUSTED WHILE DETERMINING THE VALUE OF THE PERQUISITE IN TH E HANDS OF THE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 43 EMPLOYEES. THE VALUATION OF PERQUISITE IS THUS RELE VANT FOR DETERMINING THE TAXABILITY IN THE HANDS OF THE EMPLOYEE AND NOT FOR THE PURPOSES OF ALLOWABILITY OF EXPENDITURE WHICH HAS BEEN INCURRED IN PROVISION OF SUCH PERQUISITE BY THE EMPLOYER. IN THE HANDS OF THE EM PLOYER, WHAT IS RELEVANT TO DETERMINE IS WHETHER THE EXPENDITURE IN CURRED BY THE EMPLOYER IN PROVISION OF VARIOUS PERQUISITE IS AS P ER THE TERMS OF EMPLOYMENT AND OTHER RELATED CONTRACTUAL ARRANGEMEN TS ENTERED INTO WITH THE RESPECTIVE EMPLOYEE OR NOT AND AS PER THE EMPLOYMENT POLICY OF THE ASSESSEE COMPANY. IN THE INSTANT CASE, IT IS N OT THE CASE OF REVENUE THAT THE EXPENDITURE ON PERQUISITE HAS BEEN INCURRE D BY THE ASSESSEE WHICH IS NOT SUPPORTED BY THE EMPLOYMENT CONTRACT O F THE RESPECTIVE EMPLOYEES OR NOT IN ACCORDANCE WITH THE EMPLOYMENT POLICY. FURTHER, THE NECESSARY DETAILS IN RESPECT OF PERQUISITE PROV IDED TO SHRI K. N. MODI WERE PROVIDED IN THE ASSESSMENT PROCEEDINGS AS APPA RENT FROM THE ASSESSMENT ORDER ITSELF AND IN RESPECT OF ALL THE E MPLOYEES DURING THE REMAND PROCEEDINGS. WE THEREFORE DO NOT AGREE WITH THE FINDINGS OF THE LD CIT(A) IN THIS REGARD. THE GROUND NO. 9 OF ASSE SSEES APPEAL IS ALLOWED AND GROUND NO. 7 OF REVENUES APPEAL IS DIS MISSED. 47. THE GROUND NO. 10 OF THE ASSESSEES APPEAL IS A GAINST CONFIRMING THE AD HOC DISALLOWANCE OF RS. 25,00,000/- MADE BY THE ASSESSING OFFICER ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 44 OUT OF INTEREST PAYMENT. THE AO OBSERVED THAT THE D EPARTMENT OF COMPANIES AFFAIRS MADE AN INSPECTION U/S 209A. FROM THE REPORT IT WAS REVEALED THAT COMPANY HAS EITHER CHARGED LOWER INTE REST RATE OR GAVE INTEREST FREE LOANS. THIS MATTER WAS ALSO DISCUSSED IN A.Y. 1996-97 & 1997-98 WHEREIN ALSO DISALLOWANCE HAS BEEN MADE. HE FURTHER OBSERVED THAT THE ASSESSEE HAS CHARGED INTEREST ON MARGIN MO NEY @ 9.30% WHEREAS THE INTEREST IS PAID @ 16.82% ON INTEREST O N TERM LOAN, 21.62% ON INTEREST ON FIXED DEPOSITS AND 14.36% ON INTERES T TO BANK. CONSIDERING ALL THESE FACTS HE MADE DISALLOWANCE OF RS. 25 LACS. DURING THE COURSE OF REMAND PROCEEDINGS, THE ASSESS EE SUBMITTED FOLLOWING SUBMISSION BEFORE THE AO: 1. THE AO OBSERVED THAT THE DEPARTMENT OF COMPANIES AFFAIRS MADE AN INSPECTION U/S 209A. FROM THE REPORT IT WAS REVEALED THAT COMPANY HAS EITHER CHARGED LOWER INTEREST RATE OR G AVE INTEREST FREE LOANS. THIS MATTER WAS ALSO DISCUSSED IN A.Y. 1996- 97 & 1997-98 WHEREIN ALSO DISALLOWANCE HAS BEEN MADE. HE FURTHER OBSERVE D THAT THE ASSESSEE HAS CHARGED INTEREST ON MARGIN MONEY @ 9.30% WHEREA S THE INTEREST IS PAID @ 16.82% ON INTEREST ON TERM LOAN, 21 62% ON I NTEREST ON FIXED ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 45 DEPOSITS AND 14.36% ON INTEREST TO BANK. CONSIDERIN G ALL THESE FACTS HE MADE DISALLOWANCE OF RS.25 LACS. 2. AT THE OUTSET WE MAY POINT OUT THAT THE FACT OF THE YEAR UNDER CONSIDERATION IS DIFFERENT THAN THE A.Y. 1996 -97 AND THEREFORE BASED ON THE DISALLOWANCE MADE IN A.Y. 1996-97, NO DISALLOWANCE CAN BE MADE IN THE YEAR UNDER CONSIDERATION. 3. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE H AS DECLARED INTEREST INCOME OF RS. 1,04,62,088/- AND PAID INTER EST OF RS. 12,45,57,497/-. THE DETAILS OF THE INTEREST PAID IS AS UNDER:- PARTICULARS OF LOAN INTEREST PAID INTEREST ON TERM LOAN TO THE BANKS 8,58,75,976/- INTEREST PAID TO BANK ON WORKING CAPITAL 78,59,621/- INTEREST PAID TO RSEB FOR DELAYED PAYMENT 2,98,74,021/- INTEREST PAID ON FIXED DEPOSIT 4,75,735/- INTEREST PAID TO OTHERS 13,72,144/- AFTER EXCLUDING THE INTEREST PAID ON TERM LOAN, WOR KING CAPITAL AND TO RSEB, THE INTEREST EXPENDITURE ON FIXED DEPOSIT AND TO OTHERS IS ONLY RS. 18,47,879/-. THE INTEREST PAID TO BANK AND RSEB IS FOR COMMERCIAL EXPEDIENCY AND THE FUND HAS BEEN USED FOR THE PURPO SE FOR WHICH THE LOAN HAS BEEN TAKEN FROM THE BANK. THERE IS NO REPO RT OF THE COMPANY AFFAIRS FOR THE YEAR UNDER CONSIDERATION WHEREIN IT IS ALLEGED THAT ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 46 ASSESSEE HAS CHARGED LOWER RATE OF INTEREST OR GAVE INTEREST FREE LOANS OUT OF THE BORROWED FUNDS TAKEN AT A HIGHER RATE. I N THESE FACTS, THE AD HOC DISALLOWANCE OF INTEREST OF RS.25,00,000/- MADE BY THE AO IS UNJUSTIFIED AND BE DELETED. AFTER GOING THROUGH THE ASSESSEES SUBMISSION, THE AO IN HIS REMAND REPORT STATED THAT THE ASSESSEE HAS PRODUCED BOOKS OF ACCOUNT BUT DETAILS OF ICD AND JUSTIFICATION ETC. NOT YET PRODU CED BY THE ASSESSEE. THE LD. CIT(A) THEREAFTER CONFIRMED THE ADDITION B Y HOLDING THAT THE APPELLANT HAS STATED THAT THESE DEFICIENCIES PE RTAIN TO THE EARLIER PERIOD AND NO OBSERVATION RELATES TO THE CURRENT YE AR. HOWEVER, IN THE COURSE OF REMAND PROCEEDINGS, SUFFICIENT EVIDENCE C OULD NOT BE PRODUCED BEFORE THE AO ON THIS ISSUE. ACCORDINGLY, AO HAS MA DE ADVERSE REMARKS ON THIS ISSUE IN THE REPORT. THE APPELLANT HAS IN T HE CROSS REPLY FAILED TO FILE ANY FURTHER EVIDENCE ON THIS ISSUE AND HAS MER ELY REITERATED THE SUBMISSIONS FILED EARLIER. IN VIEW OF THESE FACTS, THE LD. CIT(A) HELD THAT APPELLANT HAS FAILED TO DISCHARGE THE DUTY WHICH LA Y UPON HIM AND CONFIRM THE ADDITION OF RS. 25 LACS MADE BY THE AO ON THIS GROUND. DURING THE COURSE OF HEARING, THE LD AR OF THE ASS ESSEE HAS SUBMITTED THAT THE AO IN THE REMAND REPORT STATED T HAT ASSESSEE HAS ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 47 PRODUCED BOOKS OF ACCOUNTS BUT DETAILS OF ICD WERE NOT PRODUCED BY THE ASSESSEE. IT IS SUBMITTED THAT THE INTEREST PAID ON ICD IS ONLY RS.13,72,144/-.THE ICD ARE USED FOR PURPOSE OF BUSI NESS. THERE IS NO FRESH ICD. IT IS COMING FROM LAST YEAR. THE DISALLO WANCE MADE IN AY 1996-97 WAS DELETED BY THE HONBLE ITAT IN ITA NO.3 87/JP/1 DATED 19.08.2016. THE LOWER AUTHORITIES HAVE NOT BROUGHT OUT ANY EVIDENCE ON RECORD TO SHOW THAT FUNDS HAS BEEN UTILISED FOR THE PURPOSE OTHER THAN BUSINESS. HENCE, THE DISALLOWANCE CONFIRMED BE DELE TED. THE CIT DR HAS SUPPORTED THE ORDER OF THE LOWER AU THORITIES. 48. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT I S SUBMITTED BY THE LD AR THAT THE INTEREST PAID ON ICD IS ONLY RS.13,72,144/ - AND THERE IS NO FRESH ICD AND IT IS COMING FROM LAST YEAR WHERE THE DISAL LOWANCE MADE IN AY 1996-97 WAS DELETED BY THE HONBLE ITAT IN ITA NO.3 87/JP/1 DATED 19.08.2016. THE MATTER IS SET-ASIDE TO THE FILE OF THE AO TO EXAMINE THE ABOVE SAID CONTENTION OF THE ASSESSEE AND WHERE THE SAME IS FOUND TO BE CORRECT, THE AO IS DIRECTED TO ALLOW THE NECESSARY RELIEF TO THE ASSESSEE FOLLOWING THE ORDER PASSED BY THE COORDINATE BENCH FOR AY 1996-97. THE GROUND NO. 10 IS THUS ALLOWED FOR STATISTICAL PURPO SES. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 48 49. THE 8 TH GROUND OF THE REVENUES APPEAL IS AGAINST THE ACTI ON OF LD CIT(A) IN DELETING THE DISALLOWANCE OF RS. 60,00,00 0/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST ON DEPOSIT S WITH RSEB. THE ASSESSEE HAS PROVIDED SECURITY DEPOSIT OF RS. 499.4 8 LACE WITH THE JAIPUR DISCOM (RSEB). THE AO OBSERVED IN ASSESSMENT PROCEE DINGS THAT THE ASSESSEE HAS FILED THE DETAILS OF THE SECURITY DEPO SIT ONLY AND NOTHING HAS BEEN EXPLAINED ABOUT THE INTEREST. FURTHER EVEN ON SPECIFIC POINTING OUT THROUGH ORDER SHEET ENTRY DATED 25.01.2001, POSITIO N REGARDING CHARGEABILITY OF INTEREST HAS NOT BEEN MADE CLEAR. ACCORDINGLY, A.O. COMPUTED THE INTEREST ON SECURITY DEPOSIT AT RS. 60 ,00,000/- AT THE RATE OF 12% AND MADE ADDITION FOR THE SAME. DURING THE COURSE OF REMAND PROCEEDINGS, THE A.R. HAS FURNISHED A CERTIFICATE FROM JVVNL AND COPY OF THEIR OFFICES O RDER CONFIRMING THAT THE INTEREST IS PAYABLE FROM 2004 ONWARDS AND SUBMITTED ITS REPLY WHICH IS AS UNDER: - 1. THE ASSESSEE HAS PROVIDED SECURITY DEPOSIT OF RS.499.48 LACS WITH THE JAIPUR DISCOM (RSEB). THE AO OBSERVED THAT IN ASSESSMENT PROCEEDING, THE ASSESSEE HAS FILED THE DETAILS OF T HE SECURITY DEPOSIT ONLY AND NOTHING HAS BEEN EXPLAINED ABOUT THE INTEREST. FURTHER EVEN ON ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 49 SPECIFIC POINTING OUT THROUGH ORDER SHEET ENTRY DAT ED 25-01-2001, POSITION REGARDING CHARGEABILITY OF INTEREST HAS NO T BEEN MADE CLEAR. ACCORDINGLY, HE ESTIMATED THE INTEREST ON SECURITY DEPOSIT AT RS.60,00,000/- AND MADE ADDITION FOR THE SAME. 2. WE MAY POINT OUT THAT THERE WAS NO CONDITION T HAT ELECTRICITY COMPANY WOULD PAY INTEREST ON THE SECUR ITY DEPOSIT. IN FACT PRIOR TO INTRODUCTION OF THE ELECTRICITY ACT 2003 T HERE WAS NO PROVISION FOR PAYMENT OF THE INTEREST ON SECURITY DEPOSIT BY THE ELECTRICITY COMPANIES. SECTION 47(4) OF THE ELECTRICITY ACT 2003 ONLY PROV IDED THAT THE ELECTRICITY COMPANY WOULD PAY THE INTEREST TO THE CONSUMERS ON THE SECURITY DEPOSIT TAKEN BY IT. THEREAFTER THE JVVNL FOR THE FIRST TIM E MADE ORDERS FOR PAYMENT OF INTEREST ON THE SECURITY DEPOSIT W.E.F. 13-08-2004 @ 6% P.A. COPY OF THE RELEVANT DOCUMENT IN THIS RESPECT ARE A T P.B.254-259A. FROM THESE DOCUMENTS, IT IS EVIDENT THAT DURING TH E YEAR UNDER CONSIDERATION, NO INTEREST IS PAYABLE BY THE ELECTR ICITY COMPANY ON THE SECURITY DEPOSIT. ACCORDINGLY THE ADDITION OF RS.60 ,00,000/- MADE BY THE AO ON NOTIONAL BASIS IS UNCALLED FOR AND BE DELETED . THE AO THEREAFTER IN HIS REMAND REPORT HAS STATED THAT THE ASSESSEE HAS SUBMITTED A LETTER FROM JVVNL, M.I.A., ALWAR BEARING NO. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 50 2594 THAT NO INTEREST WAS PAID BY JVVNL ON SECURITY AMOUNT DEPOSITED IN F.Y. 1997-98. THE SAME WAS ALLOWED TO BE PAID BY JV VNL W.E.F. 13.08.2004 PER ANNUM. THE LD. CIT(A) THEREAFTER DELETED THE ADDITION MAD E BY THE ASSESSING OFFICER BY HOLDING THAT THESE FACTS HAVE BEEN CONFIRMED BY THE AO IN THE COURSE OF REMAND PROCEEDINGS AND ACCORDIN GLY, HE HELD THAT THERE IS NO JUSTIFICATION IN THE ACTION OF THE AO I N MAKING AN ADDITION OF INTEREST INCOME ON ESTIMATED BASIS. THEREFORE, THE ADDITION OF RS. 60 LACS MADE BY THE AO WAS DELETED. THE LD CIT DR HAS SUPPORTED THE ORDER OF THE ASSE SSING OFFICER. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS SUBMI TTED THAT THE PROVISION FOR PAYMENT OF INTEREST BY STATE ELECTRIC ITY BOARDS ON SECURITY DEPOSITS OF THE CUSTOMERS WAS INSERTED BY THE ELECT RICITY ACT, 2003. AS A RESULT OF THIS PROVISION, INTEREST IS BEING RECEIVE D BY THE APPELLANT FROM JVVNL, W.E.F 13.08.2004. THIS FACT HAS BEEN ACCEPTE D BY THE AO IN THE REMAND REPORT AND THUS, CIT(A) HAS RIGHTLY DELETED THE ADDITION. 50. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AO HAS STATED CLEARLY ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 51 IN HIS REMAND REPORT THAT THE ASSESSEE HAS SUBMITT ED A LETTER FROM JVVNL, M.I.A., ALWAR BEARING NO. 2594 THAT NO INTER EST WAS PAID BY JVVNL ON SECURITY AMOUNT DEPOSITED IN F.Y. 1997-98. THE SAME WAS ALLOWED TO BE PAID BY JVVNL W.E.F. 13.08.2004 PER A NNUM. ONCE THERE IS A CLEAR FINDING OF FACT GIVEN BY AO THAT NO INTERES T WAS PAYABLE BY JVVNL OR RECEIVABLE BY THE ASSESSEE FOR THE YEAR UNDER CO NSIDERATION AND LD CIT(A) HAS ALSO TAKEN COGNIZANCE OF THE SAME, WE AR E UNABLE TO UNDERSTAND WHAT PREJUDICE IS CAUSED TO THE REVENUE. THE PROVISION FOR PAYMENT OF INTEREST BY STATE ELECTRICITY BOARDS ON SECURITY DEPOSITS OF THE CUSTOMERS WAS INSERTED BY THE ELECTRICITY ACT, 2003 AND INTEREST IS BEING RECEIVED BY THE APPELLANT FROM JVVNL, W.E.F 13.08.2 004. IN ABSENCE OF ANY SPECIFIC PROVISION IN THE ELECTRICITY ACT, 2003 WHICH GOVERNS THE TERMS OF ARRANGEMENT BETWEEN THE ASSESSEE AND JVVNL, THE IMPUTED INTEREST CANNOT BE SAID TO HAVE ACCRUED TO THE ASSESSEE COMP ANY. WE ACCORDINGLY DONOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) IN DELETING THE DISALLOWANCE OF IMPUTED INTEREST OF RS 60 LACS. THE REVENUES GROUND NO. 8 IS THUS DISMISSED. 51. THE 9 RD GROUND OF THE REVENUES APPEAL IS AGAINST DELETING THE DISALLOWANCE OF RS. 50,00,000/- MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF VALUATION OF STORES AND SPARES. THE ASSE SSEE HAS SHOWN THE ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 52 VALUATION OF THE STORES AND SPARES AT RS. 498.77 LA CS AS ON 31.03.1998 AS PER SCHEDULE G OF THE PRINTED BALANCE SHEET. THE AO OBSERVED THAT IN ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO F ILE THE DETAILS OF THE VALUATION OF THE STORES AND SPARES BUT NEITHER SUCH DETAILS WERE FILED NOR ANY VOUCHERS IN SUPPORT OF THE VALUATION WAS FILED AND THEREFORE HE PRESUMED THAT IT IS NOT POSSIBLE TO ASCERTAIN THE B ASIS OF THE VALUATION AND GENUINENESS OF THE SAME. ACCORDINGLY, HE MADE A LUMP SUM ADDITION OF RS. 50 LACS. DURING THE COURSE OF REMAND PROCEED INGS, THE A.R. HAS FURNISHED STORE LEDGER AND SUBMITTED HIS REPLY WHIC H IS AS UNDER: - 1. THE ASSESSEE HAS SHOWN THE VALUATION OF THE STO RES AND SPARES AT RS.498.77 LACS AS ON 31-03-1998 AS PER SC HEDULE G OF THE PRINTED BALANCE SHEET. THE AO OBSERVED THAT IN ASSE SSMENT PROCEEDING, THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF THE V ALUATION OF THE STORES AND SPARES BUT NEITHER SUCH DETAILS WERE FILED NOR ANY VOUCHERS IN SUPPORT OF THE VALUATION WAS FILED AND THEREFORE HE PRESUMED THAT IT IS NOT POSSIBLE TO ASCERTAIN THE BASIS OF THE VALUATIO N AND GENUINENESS OF THE SAME. ACCORDINGLY, HE MADE A LUMP SUM ADDITION OF RS.50 LACS. 2. WE MAY POINT OUT THAT IN ASSESSMENT PROCEEDING THE ASSESSEE VIDE LETTER DATED 23-10- 2010 EXPLAINED TH AT THE METHOD OF ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 53 INVENTORY VALUATION IS MENTIONED AT POINT NO.5 OF T HE ACCOUNTING POLICY. AS PER THIS THE ASSESSEE IS REGULARLY VALUING THE C LOSING STOCK OF STORES AND SPARES AT COST. THE ASSESSEE IS MAINTAINING DAY TO DAY STOCK REGISTER IN THE COMPUTER SYSTEM AND STOCK IS ACCORDINGLY VAL UED AT COST AS PER THE SOFTWARE ITSELF. SAMPLE COPY OF THE STORES LEDGER G ENERATED FROM THE COMPUTER ARE PLACED AT P.B. 260-272. FROM THE STORE S LEDGER IT CAN BE NOTED THAT THE STORES AND SPARES ARE CORRECTLY VALU ED BY THE SYSTEM. IN A.Y. 1999-2000, THE VALUE OF THE CLOSING STOCK OF S TORES AND SPARES AS ON 31/3/1998 HAS BEEN CONSIDERED AS OPENING STOCK OF S TORES AND SPARES. IF THE VALUE OF THE CLOSING STOCK OF STORES AND SPARES IS INCREASED IN THE YEAR UNDER CONSIDERATION THAN DIRECTION BE GIVEN TO INCREASE THE VALUE OF THE OPENING STOCK AS ON 01-04-1998. AS A RESULT THE RE WILL BE NO IMPACT ON THE OVERALL INCOME OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS, THE LUMP SUM ADDITION OF RS.50 LACS MADE BY THE AO IS UNCALLED FOR AND BE DELETED. THE AO HAS THEREAFTER STATED IN HIS REMAND REPORT THAT THE ASSESSEE HAS PRODUCED STORE LEDGER AND TEST CHECKIN G WE HAVE OBSERVED THAT THE VALUATION OF STORES SPARES HAS BEEN DONE AT COST. THE LD CIT DR HAS SUPPORTED THE ORDER OF THE ASSESS ING OFFICER. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 54 AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT THE AO HAS VERIFIED THE STOCK REGISTER OF STORES AND SPARES WI TH RELEVANT VOUCHERS ON TEST CHECK BASIS IN THE COURSE OF REMAND PROCEEDING S AND SUBMITTED THAT STOCK OF STORES AND SPARES HAS BEEN VALUED AT COST. THUS, CIT(A) HAS RIGHTLY DELETED THE ADDITION. 52. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING T HAT THE APPELLANT HAS STATED THAT THE CLOSING STOCK OF STORES AND SPARES IS VALUED AT COST AND HAS FILED COMPLETE DETAILS OF THE COMPUTERIZED COPY OF THE STOCK LEDGER. THE AO HAS VERIFIED THE STOCK REGISTER OF STORES AN D SPARES WITH RELEVANT VOUCHERS ON TEST CHECK BASIS IN THE COURSE OF REMAN D PROCEEDINGS AND GIVEN HIS FINDING THAT STOCK OF STORES AND SPARES H AS BEEN VALUED AT COST. IN VIEW OF THESE FACTS, THE LD CIT(A) HAS DELETED T HE ADDITION OF RS. 50 LACS MADE BY THE AO. WHERE THE STOCK HAS BEEN VALU ED BY THE ASSESSEE AS PER ACCEPTED ACCOUNTING POLICY AT COST AND THE S AME HAS BEEN VERIFIED BY THE AO TO BE IN CONSONANCE WITH THE SAID POLICY, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) IN CONFIRMI NG THE DISALLOWANCE OF SUCH ADDITION. THE GROUND NO. 9 OF REVENUE IS THUS DISMISSED. ITA 813 & 812/JP/2014_ M/S LORD CHLORO AKLALI LTD. VS JCIT (A) 55 53. IN THE RESULT, THE ASSESSEES APPEAL AS WELL AS REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17/11/201 6 SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 17TH NOVEMBER, 2016 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S LORD CHLORO ALKALI LIMITED, ALWA R. 2. IZR;FKHZ@ THE RESPONDENT- THE JCIT(A),SPL RANGE/ACIT, CIRCLE- 1, ALWAR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 813 & 812/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR