PTC Industries Limited, Lucknow V. Addl. CIT, Lucknow

ITA 84/LKW/2011

• Counselvise Citation: 8423714 RSA 2011
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 05-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-02-2011
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Assessee Lawyers: K P TANDON

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A : LUCKNOW BEFORE SHRI H. L. KARWA, HONBLE VICE PRESIDENT AND SHRI N. K. SAINI, ACCOUNTANT MEMBER I.T.A. NO.84/LKW/11 ASSESSMENT YEAR:2005-2006 M/S PTC INDUSTRIES LIMITED, VS. ADDL. C. I. T., MALVIYA NAGAR, AISHBAGH, RANGE-V, LUCKNOW. LUCKNOW. PAN:AABCP4377K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. P. TANDON, ADVOCATE RESPONDENT BY: SHRI P. K. BAJAJ, D. R. ORDER PER N. K. SAINI: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 18/11/2010 OF CIT(A)-II, LUCKNOW RELEVANT TO ASSESS MENT YEAR 2005-2006. FIRST GROUND OF THIS APPEAL READS AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT (A) WAS NOT JUSTIFIED IN CONFORMING THE ADDITION OF EXCISE DUTY PAYABLE AMOUNTING TO ` 1,60,361/- IN VALUATION OF CLOSING STOCK OF FINISHE D GOODS. 2. THE FACTS RELATED TO THIS ISSUE, IN BRIEF, ARE T HAT THE ASSESSEE FILED THE RETURN OF INCOME ON 20/10/2005 DECLARING TOTAL INCO ME OF ` 90,83,020/- WHICH WAS PROCESSED ON 22/08/2006. LATER ON THE CA SE WAS SELECTED FOR 2 SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS VALUED THE IN VENTORY AT NET OF MODVAT/CENVAT AND HAD SUBMITTED THE COMPUTATION U/S 145A OF THE I.T. ACT AS PER ANNEXURE-B OF TAX AUDIT REPORT AND CALCULATED THE NET EFFECT ON INCOME AT ` 1,60,360.85. THE ASSESSING OFFICER ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE BUT NO REASON HAS BEEN GIVEN IN THE ASSESSMENT ORDER DATED 28/12/2007. SIMPLY THE ADDI TION WAS MADE IN THE VALUATION OF THE CLOSING STOCK. 3. THE ASSESSEE CARRIED THE MATTER TO LEARNED CIT(A ) AND CHALLENGED THE ADDITION. THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LEARNED CIT (A) ARE REPRODUCED VERBATIM AS UNDER: (I). THE EXCISE DUTY IS NOT PAYABLE ON THE VALUATI ON OF CLOSING STOCK OF FINISHED GOODS KEPT IN BONDED PREM ISES AS WELL AS THE CLOSING STOCK NOT CLEARED FROM THE F ACTORY. (II) THE ACCEPTED PRINCIPLES OF ACCOUNTING AND SETT LED LEGAL POSITION ARE THAT THE CLOSING STOCK HAS TO BE VALUE D AT COST PRICE OR MARKET PRICE AT THE OPTION OF ASSESSE E. THE CENTRAL EXCISE WHICH IS AN INDIRECT TAX WAS NOT PAR T OF MANUFACTURING COST AND THEREFORE IT WAS NOT ADDED T O THE CLOSING STOCK. (III) THE CENTRAL EXCISE WHICH HAS BEEN ADDED BY TH E ASSESSING OFFICER HAD ENHANCED THE VALUE OF THE CLO SING STOCK AND THEREFORE CORRESPONDING DEDUCTION HAS TO BE ALLOWED ON THE FIRST DAY OF THE NEXT ACCOUNTING YEA R RESULTING IN REDUCING THE PROFIT OF NEXT YEAR. 3 (IV) WITH RESPECT TO THE OPINION OF THE CHARTERED A CCOUNTANT IT IS SUBMITTED THAT THE ISSUE MAY BE DECIDED ACCOR DING TO THE PROVISION OF LAW. 3.1 THE LEARNED CIT (A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: 3.1 I HAVE CONSIDERED THE SUBMISSIONS OF APPELLAN T AND FACTS OF CASE. AT THE OUTSET, THE OPINION GIVEN BY THE CHARTERED ACCOUNTANT IN HIS TAX AUDIT REPORT IS AN EXPERT OPI NION AND WHICH IS ALSO FOUND TO BE CORRECT. MOREOVER, IN APP ELLANT'S CASE, THE ELEMENT OF EXCISE DUTY SHOULD BE INCLUDED IN THE VALUATION OF FINISHED GOODS. BESIDES, THE APPELLANT HAS ALSO NOT SHOWN ANY EVIDENCE IN SUPPORT OF HIS CONTENTION THAT THE FINISHED GOODS ARE LYING KEPT IN BONDED WAREHOUSE/P REMISES. THE ELEMENT OF EXCISE DUTY REQUIRED TO BE ADDED WHI LE VALUING OF THE FINISHED GOODS. UNDER THESE FACTS AND CIRCUM STANCES, THE FINDING OF THE ASSESSING OFFICER IS FOUND CORRE CT AND JUSTIFIED. HENCE, THE GROUND OF APPEAL FAILS AND T HE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY CONFIRMED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMI TTED THAT THE GOODS WERE KEPT IN THE BONDED WAREHOUSE THEREFORE, THE EX CISE DUTY WAS NOT TO BE ADDED WHILE VALUING THE CLOSING STOCK. THE RELIA NCE WAS PLACED ON THE DECISION OF THE ITAT, ALLAHABAD BENCH IN THE CASE O F SHYAM BIRI WORKS LTD. VS. ACIT [2007] 108 ITD 489 (ALL). 4 5. IN HIS RIVAL SUBMISSIONS THE LEARNED D. R. STRON GLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN TH E PRESENT CASE, NOTHING IS BROUGHT ON RECORD BY THE DEPARTMENT TO CONTROVERT T HIS CONTENTION OF THE ASSESSEE THAT THE GOODS WERE KEPT IN BONDED WAREHOU SE. A SIMILAR ISSUE HAS BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF INCOME TAX OFFICER-VI(1) VS. SINGHAL PAINTS (P) LTD. IN I. T.A. NO.769/LKW/10 FOR THE ASSESSMENT YEAR 2001-2002 VIDE ORDER DATED 25/03/20 11 AND THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 6 TO 6.4 OF THE SA ID ORDER, WHICH READ AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE IT IS NOT IN DISPUTE THAT THE ASSESSEE , WHILE VALUING THE CLOSING STOCK IN RESPECT OF THE GOODS L YING IN BONDED WAREHOUSE, HAS NOT INCLUDED THE EXCISE DUTY. HOWEVER, IN RESPECT OF THE STOCK, WHICH WAS WITHDRA WN FROM THE FACTORY PREMISES AND LYING IN BRANCH GODOWNS AT LUDHIANA AND JAIPUR, THE EXCISE DUTY WAS INCLUDED. THIS FAC T HAS ALSO BEEN MENTIONED BY THE ASSESSING OFFICER IN ASSESSME NT ORDER DATED 17/11/2006. NOW THE CONTROVERSY TO BE RESOLV ED IS AS TO WHETHER THE EXCISE DUTY PAYABLE WAS TO BE INCLUD ED IN THE CLOSING STOCK OF FINISHED GOODS LYING IN THE BONDED WAREHOUSE OF THE ASSESSEE. IN SUCH TYPE OF CASES, IT IS WELL SETTLED THAT THE LIABILITY TO PAY THE EXCISE DUTY ARISES ON ACCO UNT OF MANUFACTURING OF GOODS, HOWEVER, THE DUTY IS PAYABL E ONLY AT THE TIME OF WITHDRAWAL FROM THE BONDED WAREHOUSE. IN THE 5 PRESET CASE, THE STOCK IN QUESTION WAS NOT WITHDRAW N FROM THE BONDED WAREHOUSE, SO THERE WAS NO QUESTION OF ADDIN G THE LIABILITY OF THE EXCISE DUTY PAYABLE TO THE COST OF THE CLOSING STOCK BECAUSE NO EXCISE DUTY WAS PAID. THIS VIEW I S FORTIFIED BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN TH E CASE OF M/S SHYAM BIRI WORKS VS. ACIT 108 ITD 489 (SUPRA), WHEREIN IT HAS BEEN HELD AS UNDER: THEREFORE, THE ASSESSEE WAS NOT REQUIRED TO MAKE T HE PAYMENT OF EXCISE DUTY ON THE GOODS KEPT IN THE BOUNDED WAREHOUSE UNTIL THOSE WERE REMOVED THEREFROM. THUS, WHILE VALUING THE CLOSING STOCK OF THE GOODS KEPT IN THE BOUNDED PREMISES, EXCISE DUTY NOT PAID WAS NOT LIABLE TO BE INCLUDED IN THE CLOSING S TOCK. THUS, THE COMMISSIONER WAS NOT JUSTIFIED IN HOLDING THAT EXCISE DUTY PAYABLE WAS TO BE INCLUDED IN THE VALUA TION OF CLOSING STOCK IN THE BOUNDED WAREHOUSE. SINCE TH ERE WAS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER ON THIS ACCOUNT, ORDER OF THE ASSESSING OFFICER WAS NO T ERRONEOUS INSOFAR AS IT WAS NOT PREJUDICIAL TO THE INTEREST OF REVENUE. ALL THE FACTS WERE AVAILABLE ON RECORD OF THE ASSESSING OFFICER AND, THEREFORE, THERE WAS NO CASE OF CARRYING OUT ANY ENQUIRY FOR TAKING A DECISION AS T O WHETHER EXCISE DUTY WAS INCLUDED IN THE VALUATION O F STOCK OR NOT. IN FACT, THE COMMISSIONER HAD HELD TH E LEGAL VIEW AND THERE WAS NO DIRECTION AS TO COLLECT SOME MORE FACTS. THE LEGAL VIEW HELD BY THE COMMISSIONER WAS NOT CORRECT AND, THEREFORE, CANCELLATION OF THE ASSESSMENT ORDER BY HIM WAS NOT PROPER. THEREFORE, THE IMPUGNED ORDER WAS TO BE CANCELLED. 6.1 THIS VIEW IS ALSO IN CONSONANCE WITH THE JUDGME NT OF HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME-TAX VS INDIA PISTONS LTD. [2010] 320 ITR 25 7 (MAD) WHERE IT HAS BEEN HELD AS UNDER: THAT THE IMPORTED MATERIALS WERE NOT CLEARED BY TH E ASSESSEE AND WERE KEPT IN THE BONDED WAREHOUSE. LIKEWISE, THE MANUFACTURED GOODS WERE ALSO NOT 6 CLEARED FROM THE FACTORY OF THE ASSESSEE AND THEY W ERE STILL AVAILABLE IN THE FACTORY. THEREFORE, THE EXCI SE DUTY AND CUSTOMS DUTY LIABILITY WAS NOT TO BE INCLUDED I N VALUATION OF CLOSING STOCK. 6.2 AS REGARDS TO THE JUDGMENT OF HON'BLE SUPREME C OURT RELIED BY THE LEARNED D. R. IN THE CASE OF COMMISSI ONER OF INCOME-TAX VS BRITISH PAINTS INDIA LTD. 188 ITR 44 (SC) IS CONCERNED, THE FACTS OF THAT CASE ARE DISTINGUISHAB LE FROM THE FACTS OF THE PRESENT CASE BECAUSE IN THE SAID CASE, IT HAS BEEN HELD THAT ANY SYSTEM OF ACCOUNTING WHICH EXCLUDED, FOR THE VALUATION OF STOCK-IN-TRADE, ALL COSTS OTHER THAN T HE COST OF RAW MATERIALS FOR THE GOODS-IN-PROCESS AND FINISHED PRO DUCTS, WAS LIKELY TO RESULT IN A DISTORTED PICTURE OF THE TRUE STATE OF THE BUSINESS FOR THE PURPOSE OF COMPUTING THE CHARGEABL E INCOME. SUCH A SYSTEM MIGHT PRODUCE A COMPARATIVELY LOWER V ALUATION OF THE OPENING STOCK AND THE CLOSING STOCK, THUS SH OWING A COMPARATIVELY LOW DIFFERENCE BETWEEN THE TWO. IN A PERIOD OF RISING TURNOVER AND RISING PRICES, SUCH A SYSTEM WA S APT TO DIMINISH THE ASSESSMENT OF TAXABLE PROFIT OF A YEAR . THE PROFIT OF ONE YEAR WAS LIKELY TO BE SHIFTED TO ANOTHER YEA R WHICH WOULD BE AN INCORRECT METHOD OF COMPUTING PROFITS. EACH YEAR BEING A SELF-CONTAINED UNIT, AND THE TAXES OF A PAR TICULAR YEAR BEING PAYABLE WITH REFERENCE TO THE INCOME OF THAT YEAR, AS COMPUTED IN TERMS OF THE ACT, THE METHOD ADOPTED BY THE RESPONDENT WAS FOUND TO BE SUCH THAT INCOME COULD N OT PROPERLY BE DEDUCED THEREFROM. IT WAS, THEREFORE, N OT ONLY THE RIGHT BUT THE DUTY OF THE INCOME-TAX OFFICER TO ACT IN EXERCISE OF HIS STATUTORY POWER FOR DETERMINING WHAT, IN HIS OP INION, WOULD BE THE CORRECT INCOME. IN THE SAID CASE OF CIT VS. BRITISH PAINTS (INDIA) LTD., AS THE ASSESSEE DID NOT INCLUD E THE OVERHEAD EXPENSES WHILE VALUING THE CLOSING STOCK A ND THE ASSESSING OFFICER ADDED THE OVERHEAD EXPENDITURE TO THE VALUE OF THE CLOSING STOCK. THE APPELLATE ASSISTANT COMMISSIONER CONFIRMED THAT ORDER WHICH WAS FURTHER CONFIRMED BY THE ITAT. HOWEVER, THE HON'BLE HIGH C OURT ON A REFERENCE, REVERSED THE DECISION OF THE TRIBUNAL. THE SAID DECISION OF THE HON'BLE HIGH COURT WAS REVERSED BY THE HON'BLE SUPREME COURT. THEREFORE, IN THE SAID CASE THE FACTS INVOLVED WERE DIFFERENT FROM THE ASSESSEES CASE BE CAUSE IN 7 THAT CASE THE OVERHEAD EXPENDITURE WERE NOT INCLUDE D WHILE VALUING THE CLOSING STOCK BUT IN THE PRESENT CASE, THE FACTS ARE ALTOGETHER DIFFERENT BECAUSE THE ASSESSING OFFICER INCLUDED EXCISE DUTY WHICH WAS TO BE PAID ONLY ON WITHDRAWAL OF THE STOCK FROM THE BONDED WAREHOUSE. THEREFORE, SINCE THE GOODS WERE KEPT IN THE BONDED WAREHOUSE, THE EXCISE DUTY WAS NOT TO BE INCLUDED. AS REGARDS TO THE JUDGMEN T OF HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME-TAX VS ENGLISH ELECTRIC CO. OF INDIA LTD. 2 43 ITR 512 (MAD) RELIED BY THE LEARNED D. R. IS CONCERNED, THA T CASE IS OF NO HELP TO THE DEPARTMENT, RATHER SUPPORTS THE CASE OF THE ASSESSEE, THE SAID JUDGMENT HAS ALSO BEEN CONSIDERE D BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISSIO NER OF INCOME-TAX VS INDIA PISTONS LTD. [2010] 320 ITR 257 (MAD) AND THEIR LORDSHIPS, VIDE PARA 7 OF THE SAID JUDGME NT, OBSERVED AS UNDER: THE ISSUE CAME UP BEFORE THIS COURT IN THE CASE OF CIT V. ENGLISH ELECTRIC CO. OF INDIA LTD. REPORTED IN [2000] 243 ITR 512 ( MAD), WHEREIN THIS COURT, WHILE REJECTING THE SUBMISSION OF THE LEARNED COUNSEL FOR THE REVEN UE, HELD THAT THE LIABILITY FOR PAYMENT OF EXCISE DUTY ARISES AT THE POINT OF MANUFACTURE AND, THEREFORE, THAT LI ABILITY GOES TO INCREASE THE VALUE OF STOCK AWAITING SALE. BY OBSERVING THAT THE ARGUMENT PROCEEDED ON A MISCONCEPTION HELD THAT THE STOCK WHICH THE ASSESSE E HAS AT THE END OF THE FINANCIAL YEAR IS REQUIRED T O BE VALUED AT COST MEANING THEREBY ALL THE COSTS INCURR ED BY THE ASSESSEE FOR THE PURPOSE OF MANUFACTURING TH E GOODS INCLUDING THE OVERHEADS OR AT MARKET PRICE A T THE OPTION OF THE ASSESSEE ; THAT THE LIABILITY FOR PA YMENT OF EXCISE DUTY IS INCURRED BY THE ASSESSEE WHEN THE PROCESS OF MANUFACTURE WAS COMPLETE IN RELATION TO THAT EXCISABLE ITEM ; THAT LIABILITY OF THE ASSESSEE WA S A LIABILITY THAT WAS SHOWN IN THE EXCISE DUTY ACCOUNT MAINTAINED BY THE ASSESSEE, ALL PAYMENTS AND LIABIL ITY SO INCURRED TOWARDS SUCH DUTY ARE BEING EXHIBITED SEPARATELY AS AMOUNTS PAID AS EXCISE DUTY OR AS LI ABILITY INCURRED FOR PAYMENT OF EXCISE DUTY. THE COURT FURT HER OBSERVED THAT IF THE ARGUMENT OF THE REVENUE WAS 8 ACCEPTED, THE RESULT WOULD BE ANOMALOUS, THAT THE LIABILITY FOR PAYMENT OF DUTY WOULD THEN BE REGARDE D AS PART OF THE ASSETS HELD BY THE ASSESSEE IN THE FORM OF THE HIGHER VALUE ASSIGNED TO THE CLOSING STOCK ; TH AT THE LIABILITY CANNOT BE CONVERTED INTO AN ASSET IN THA T MANNER. THE SAME ANALOGY WOULD EQUALLY BE APPLICABL E TO THE CUSTOMS DUTY PAYABLE IN RESPECT OF THE GOOD S WHICH ARE UNDER BOND. 6.3 FROM THE ABOVE OBSERVATIONS IT IS CLEAR THAT TH E LIABILITY FOR PAYMENT OF EXCISE DUTY WAS NOT TO BE INCLUDED W HILE VALUING THE CLOSING STOCK KEPT UNDER BOND. IN THE AFORESAID REFERRED TO CASE OF COMMISSIONER OF INCOME-TAX V. I NDIA PISTONS LTD. 320 ITR 257 THE FACTS INVOLVED ARE SIM ILAR TO THE FACTS OF THE ASSESSEES CASE WHICH IS CLEAR FROM TH E OBSERVATION GIVEN AT PAGES NO. 261 AND 262 WHICH RE AD AS UNDER: IN RESPECT OF MANUFACTURED GOODS, THE GOODS ARE MANUFACTURED AND CLEARED FROM THE FACTORY BY PAYING THE EXCISE DUTY. BUT, HERE IN THE CASE ON HAND, TH E IMPORTED GOODS ARE YET TO BE CLEARED FROM THE CUST OMS AND THEY STILL REMAIN IN THE BONDED WAREHOUSE AND T HE MANUFACTURED GOODS ARE ALSO VERY MUCH AVAILABLE WIT HIN THE ASSESSEE'S FACTORY AND THEY ARE NOT CLEARED BY PAYMENT OF EXCISE DUTY. 6.4 WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND THE MATERIAL ON RECORD ALONG WITH THE VARIOUS JUDIC IAL PRONOUNCEMENTS DISCUSSED HEREIN ABOVE, ARE OF THE V IEW THAT THE LEARNED CIT (A) CORRECTLY APPRECIATED THE FACTS AND RENDERED THE DECISION, WHICH IS UNEXCEPTIONABLE. W E, THEREFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDING OF THE LEARNED CIT (A). ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 7. SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF INCOME TAX OFFICER-VI(1) VS. SINGHAL PA INTS (P) LTD. (SUPRA), SO 9 RESPECTFULLY FOLLOWING OUR EARLIER ORDER DATED 25/0 3/2001 IN I.T.A. NO.769/LKW/10 FOR THE ASSESSMENT YEAR 2001-2002, TH E ISSUE IS DECIDED IN FAVOUR OF ASSESSEE AND THE ADDITION MADE BY THE ASS ESSING OFFICER AND CONFIRMED BY THE LEARNED CIT (A) IS DELETED. 8. THE NEXT ISSUE, VIDE GROUND NO. 2, RELATES TO TH E ADDITION ON ACCOUNT OF DISALLOWANCE OF ` 20,000/- OUT OF CONVEYANCE AND CARTAGE. 9. THE FACTS RELATED TO THIS ISSUE, IN BRIEF, ARE T HAT THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE CLAIMED ` 3,92,800/- ON ACCOUNT OF CONVEYANCE AND CARTAGE EXP ENSES AND HAD PRODUCED SELF-MADE VOUCHERS. THE ASSESSING OFF ICER MADE THE DISALLOWANCE OF ` 20,000/- FOR WANT OF VERIFICATION AND ADDED THE SAM E TO THE INCOME OF THE ASSESSEE. 10. THE ASSESSEE CARRIED THE MATTER TO LEARNED CIT( A) AND SUBMITTED THAT THE DISALLOWANCE WAS NOT JUSTIFIED AND THAT TH E ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS. THE LEARNED CIT (A) HOW EVER, CONFIRMED THE DISALLOWANCE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN T HE PRESENT CASE, IT IS 10 NOTICED THAT THE ASSESSING OFFICER, WHILE MAKING TH E ABOVE ADDITION, HAS NOT POINTED OUT ANY SPECIFIC INSTANCE WHERE THE EXP ENSES INCURRED BY THE ASSESSEE WERE NOT RELATED TO THE BUSINESS ACTIVITY. SIMILARLY, THE LEARNED CIT (A), WHILE CONFIRMING THE ACTION OF THE ASSESSI NG OFFICER, HAS NOT GIVEN ANY COGENT REASON. HE SIMPLY STATED AS UNDER: AFTER CONSIDERATION, THE FINDING OF THE ASSESSING OFFICER IS FOUND CORRECT AND JUSTIFIED. 11.1 FROM THE ABOVE OBSERVATION OF THE LEARNED CIT (A), IT IS CLEAR THAT HE HAS NOT GIVEN ANY REASON FOR CONFIRMING THE ACTION OF THE ASSESSING OFFICER WHO HAS MADE AD HOC DISALLOWANCE WITHOUT POINTING O UT ANY INSTANCE OF THE EXPENSES WHICH WERE NOT RELATED TO THE BUSINESS ACTIVITY OF THE ASSESSEE. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS, DELETE THIS ADDITION. 12. IN THE RESULT, THE APPEAL IS ALLOWED. (THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 06/0 4/2011) SD/. SD/. ( H. L. KARWA ) (N. K. SAINI) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 06/04/2011 *SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR