M/S ASHOKA INDUSTRIES, Jaipur V. ADD. CIT, Jaipur

ITA 896/JPR/2011

• Counselvise Citation: 89623114 RSA 2011
• Duration Of Justice: 2 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 24-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Opportunity of being heard; Bad and doubtful debts
• Section: 37(1); 37; 68

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NOS. 896 & 912/JP/2011 ASSTT. YEARS- 2007-08 & 2008-09 PAN NO. AACFA 2935 N M/S ASHOKA INDUSTRIES, THE ADDL. C.I.T. F-143, ROAD NO. 7, VRS. RANGE-7, JAIPUR. BINDAYAKA INDUSTRIAL AREA, JAIPUR. (APPELLANT) (RESPONDENT) I.T.A. NOS. 1101/JP/2011 ASSTT. YEAR- 2008-09 PAN NO. AACFA 2935 N THE A.C.I.T. VS. M/S ASHOKA INDUSTRIES, CIRCLE-7, JAIPUR. F-143, ROAD NO. 7, BINDAYAKA INDUSTRIAL AREA, JAIPUR. (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI MANISH AGARWAL. DEPARTMENT BY :- SHRI RAJESH OJHA. DATE OF HEARING : 08/09/2014 DATE OF PRONOUNCEMENT : 19/09/2014 O R D E R PER: T.R. MEENA, A.M. THESE ARE THE APPEALS FILED BY THE ASSESSEE AND CRO SS APPEAL FILED BY THE REVENUE AGAINST THE ORDERS DATED 09/09/2011 AND 21/09/2011 OF THE LEARNED CIT(A)-III, JAIPUR FOR THE A.YS. 2007-08 AND 2008-09. ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 2 THE EFFECTIVE GROUNDS OF APPEALS ARE AS UNDER:- GROUNDS OF ITA NO. 896/JP/2011 FOR A.Y. 2007-08 (AS SESSEE) 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE ADDITIONS OF RS. 11,85,000/- U/S 68 OF THE INCOME TAX ACT, 196 1, TREATING THE SAME AS UNEXPLAINED CASH CREDIT, ARBIT RARILY. 1.1 THAT THE LEARNED CIT(A) HAS FURTHER ERRED IN HOLD ING THE UNSECURED LOANS OF RS. 11,85,000/- AS UNEXPLAINED, INGENUINE BY COMPLETELY IGNORING THE EVIDENCE ADDUC ED AND SUBMISSIONS MADE, THUS THE ADDITIONS AS MADE DESERV ES TO BE DELETED IN TOTO. 2. THAT THE APPELLANT CRAVES AS RIGHT TO ADD, DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT TH E TIME OF HEARING OF APPEAL. GROUNDS OF ITA NO. 912/JP/2011 FOR A.Y. 2008-09 (A SSESSEE) 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE A DDITIONS OF RS. 4,01,488/- U/S 68 OF THE INCOME TAX ACT, 1961 , TREATING THE SAME AS UNEXPLAINED CASH CREDIT, ARBIT RARILY. 1.1 THAT THE LEARNED CIT(A) HAS FURTHER ERRED IN HOLD ING THE UNSECURED LOANS OF RS. 04,01,488/- AS UNEXPLAINED, IN GENUINE BY COMPLETELY IGNORING THE EVIDENCE ADDUCED AND SUBMISSIONS MADE, THUS THE ADDITIONS AS MADE DESERV ES TO BE DELETED IN TOTO. 2. THAT THE APPELLANT CRAVES AS RIGHT TO ADD, DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT TH E TIME OF HEARING OF APPEAL. ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 3 GROUNDS OF ITA NO. 1101/JP/2011 FOR A.Y. 2008-09 (R EVENUE) (I) THE CIT(A) HAS PASSED A PERVERSE ORDER IN DELETI NG THE DISALLOWANCE OF STATED COMMISSION EXPENSES OF RS. 8,99,426/- IGNORING THE FACTS AND CIRCUMSTANCES OF THE CONTRARY. (II) THE CIT(A) HAS ALLOWED THE PAYMENT OF COMMISSION STATED MADE TO VINOD CHAGED & SONS (HUF), AMOUNTING TO RS. 74,801/- AND RS. 2,51,680/- EVEN WHILE CONFIRMING TH E ADDITION UNDER SEC. 68 OF THE ACT STATED LOAN OF RS . 1 LAKH AND INTEREST OF RS. 13,562/- FOR THE STATED LOAN FR OM THIS HUF. (III) THE CIT(A) HAS PASSED A PERVERSE ORDER IN ACCEP TING THE COMMISSION PAYMENT OF RS. 1,34,452/- TO SH. YOGESH KR. AGARWAL FOR LIAISON WORK WITH M/S JSEB EVEN WHEN M/S JS EB HAD IMPOSED SUBSTANTIAL CHARGES FOR LATE DELIVERY O F GOODS. (IV) THE CIT(A) HAS PASSED A PERVERSE ORDER IN ALLOWIN G THE COMMISSION EXPENSES OF RS. 2,55,966/- TO K.D. MUNDR A HUF FOR ITS STATED LIAISONING WITH NMDC EVEN WHEN NMDC H AD IMPOSED SUBSTANTIAL CHARGES FOR LATE DELIVERY OF GO ODS. (V) THE CIT(A) HAS PASSED A PERVERSE ORDER IN ALLOWING THE COMMISSION EXPENSES OF RS. 1,71,952/- TO NARSING TIM BER STORE FOR ITS STATED LIAISONING WITH NMDC EVEN WHEN NMDC HAD IMPOSED SUBSTANTIAL CHARGES FOR LATE DELIVERY O F GOODS. (VI) THE CIT(A) HAS OVERLOOKED THE FACT THAT THE ASSE SSEE IN SUBMISSIONS BEFORE THE CIT HAD STATED TIMELY DELIVER Y OF SUPPLIES AS PRE-CONDITION FOR PAYMENT OF COMMISSION AGENT, YET HAD ALLOWED PAYMENTS OF STATED COMMISSION EVEN O N NON-FULFILLMENT OF THIS CONDITION. ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 4 (VII) THE CIT(A) HAS OVERLOOKED THE FACT THAT THE CLA IM OF EXPENDITURE ON ACCOUNT OF LATE DELIVERY CHARGES IN CONTRACTS THROUGH COMMISSION AGENTS WAS CONTRADICTORY TO THE C LAIM OF COMMISSION PAYMENT FOR SERVICES RENDERED INCLUDI NG TIMELY DELIVERY. (VIII) THE CIT(A) HAS ERRED IN DELETING THE DISALLOWA NCE OF RS. 19,27,269/- ON ACCOUNT OF CHARGES LEVIED FOR LATE D ELIVERY OF GOODS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. (IX) THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANC E OF RS. 2.75 LAKHS EVEN WHEN THE CONDITIONS SPECIFIED IN SE CTION 36(1)(VII) OF THE ACT WERE NOT FULFILLED THE EVIDENC E OF WRITING OFF, NOT ON RECORD. (X) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, WITHDRAW OR INSERT ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. THE SOLE GROUND OF THE ASSESSEES APPEALS IN BOTH THE ASSESSMENT YEAR I.E. 2007-08 AND 2008-09 IS AGAINST CONFIRMING THE ADDITION OF RS. 11,85,000/- AND RS. 4,01,488/- U/S 68 OF THE INCOME TAX ACT, 196 1 ( HEREINAFTER REFERRED AS THE ACT). THE ASSESSEE IS ENGAGED IN BUSINESS OF MANUFACTURING AND TRADING OF CABLES. THE ASSESSEE FILED RETURNED INCOME AT RS. 64,61,507/- DURING THE YEAR UNDER CONSIDERATION ON TOTAL SALE OF RS. 23,38 ,57,020/-. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD TA KEN FOLLOWING LOANS FROM DIFFERENT CREDITORS: ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 5 IN A.Y. 2007-08 SL. NO. NAME DATE AMOUNT 1 SMT. SHANKUNTALA DEOPURA 23/05/2006 1,00,000 2 SHRI RAM DAYAL MALPANI 18/05/2006 50,000/- 3 SHRI BHARAT KHARD 05/07/2006 1,00,000/- 4 SHRI BHAGIRATH KABRA 06/07/2006 1,00,000/- 5 SHRI NAVRATAN JHANWAR 23/05/2006 1,00,000/- 6 SMT. SITA AGARWAL 23/05/2006 1,00,000/- 7 SHRI RAJESH SHARMA 04/07/2006 1,00,000/- 8 SMT. HEMLATA MALPANI 11/05/2006 1,00,000/- 9 SMT. SHIMLA AGARWAL 01/05/2006 1,00,000/- 10 SHRI KAMAL SINGH CHAJER (HUF) 13/06/2006 1,00,00 0/- 11 SHRI AMAR SINGH CHAJER (HUF) 13/06/2006 1,00,000 /- 12 SHRI RAM GOPAL AGARWAL (HUF) 17/05/2006 2,00,000/ - IN A.Y. 2008-09 S. NO. NAME AMOUNT CASH DEPOSITED DATE OF DEPOSIT DATE OF ISSUE OF CHEQUE 1. CHARU CHHAJED 2 LAKH 1 LAKH 09/08/2007 11/08/2007 2. BINOD CHHAJED & SONS HUF 4 LAKHS 1 LAKH 09/08/2007 09/08/2007 & 13/08/2007 5000 13/08/2007 3. DEEPSHIKHA CHAJED 3 LAKH 90000 21/08/2007 23/08/2007 40000 23/08/2007 4. NATHMAL DHARIWAL HUF 2 LAKH 30000 27/09/2007 3/10/2007 TOTAL 11 LAKHS 365000 THE LEARNED ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITORS, GENUINENESS OF THE TRANSACTIONS AND CRED ITWORTHINESS OF THE CREDITORS. THE APPELLANT FURNISHED THE CONFIRMATION OF ALL CASH CREDITORS, WHICH ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 6 WERE APPEARING OR SQUARED UP LOANS DURING THE YEAR U NDER CONSIDERATION BEFORE THE ASSESSING OFFICER. IT WAS HELD THAT THE C ASH WAS DEPOSITED IN THE BANK ACCOUNT OF PARTY IMMEDIATELY BEFORE ISSUANCE O F CHEQUE TO THE ASSESSEE FIRM IN FORM OF UNSECURED LOANS. THE CASH CREDITORS HAD DECLARED MEAGRE AMOUNT OF INCOME IN THEIR RESPECTIVE INCOME TAX RET URNS. NO TDS HAD BEEN DEDUCTED ON THE INTEREST PAID IN CASE OF THREE PART IES BUT THE ASSESSEE HAD TAKEN 15G FORM FROM THE ABOVE THREE CASH CREDITORS. DURING THE YEAR UNDER CONSIDERATION IN EIGHT CASES, LOANS HAD BEEN SQUARE D UP. THE LEARNED ASSESSING OFFICER CONCLUDED THAT IN CASE OF THIRTEE N CASH CREDITORS ON TOTAL LOAN OF RS. 11,85,000/- CREDITWORTHINESS OF THE CREDITORS HAD NOT BEEN ESTABLISHED. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE CASH INTRODUCED IN THE BANK ACCOUNT WAS FROM KNOWN SOURCES OF THE CAS H CREDITORS AND ALSO CASH IN HAND OF THESE PARTIES, WHO HAD ISSUED THE CH EQUES TO THE APPELLANT. THE LEARNED ASSESSING OFFICER WAS NOT SATISFIED WITH T HE REPLY FURNISHED BY THE APPELLANT ON CREDITWORTHINESS AND HELD THAT THERE WAS NO SUBSTANTIAL TRANSACTIONS IN THE CASH CREDITORS BANK ACCOUNT EX CEPT FOR THESE ENTRIES, HAD VERY LOW REGULAR BALANCE. THEREFORE, HE MADE ADDITION OF RS. 11,85,000/- U/S 68 OF THE ACT IN A.Y. 2007-08. THE SIMILAR FINDING WAS GIVEN BY THE ASSESSING OFFICER IN A.Y. 2008-09. FURTHER THE LEARNED ASSESS ING OFFICER HAD FOUND THAT CHARU CHHAJED, A PERSON SPECIFIED U/S 40A(2)(V) OF THE ACT. THE ADDITION OF ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 7 RS. 4,01,487/- WAS MADE U/S 68 OF THE ACT IN A.Y. 20 08-09 BY THE ASSESSING OFFICER. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A ), WHO HAD CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING THAT MERE FILING OF CONFIRMATION OF CASH CREDITOR IS NOT SUFFICIENT TO DISCHARGE THE OBLIGATION LIES U/S 68 OF THE IT ACT RELYING UPON THE DECISION IN TH E CASE OF RAJSHREE SYNTHETICS (P) LTD. 256 ITR 331 (RAJ.) AND ARAVALI TR ADING CO. 220 CTR 622 (RAJ.). THE LOAN TRANSACTIONS WERE RECEIVED THROUGH B ANKING CHANNEL, DOES NOT MAKE SUCH TRANSACTION SACROSANCT RELIED UPON THE DE CISION IN THE CASE OF NEMI CHAND KOTHARI 264 ITR 254 (GOHATI). THE GENUINENESS O F THE TRANSACTION IS TO BE PROVED BY THE ASSESSEE ONLY WITH EVIDENCES AND IT SHOULD BE TRUSTWORTHY TO THE ASSESSING OFFICER. IT IS FURTHER OBSERVED THAT CREDITORS WERE VALUING THE RETURN OF INCOME BUT EITHER THEIR INCOME WAS BELOW TA XABLE OR MEAGRE INCOME HAD BEEN SHOWN. THEREFORE, THEIR CAPACITY TO ADVANCE THE LOANS WAS NOT PROVED IN DESIRED MANNER. THE CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CASH CREDITORS HAD AFFECTED THE GENUINENESS OF THE TRANSACTIONS. THE APPELLANT HAS NOT TO PROVE THE SOURCE OF THE SOURCE BUT ASPEC T OF THE CREDITWORTHINESS IS TO BE LOOKED INTO BY THE ASSESSING OFFICER CONSIDER ING THE CIRCUMSTANCES OF THE EVIDENCES. HE RELIED UPON THE DECISION OF THE HONB LE DELHI HIGH COURT IN THE ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 8 CASE OF ASHOKA MAHINDRU AND SONS (HUF) 173 TAXMAN 17 8 AND HELD THAT SIMPLE DOCUMENTARY EVIDENCE LIKE CONFIRMATION ETC. ARE NOT ADEQUATE TO PROVE THE CAPACITY AS WELL AS GENUINENESS ASPECTS OF ALL T HE FOUR CASH CREDITORS. HE FURTHER RELIED UPON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SOMANATH MAINI 306 ITR 414 (P&H). FINALLY, H E CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT TH E APPELLANT HAD NOT PROVED THE CAPACITY OF THE CASH CREDITORS AND GENUI NENESS OF THE TRANSACTIONS IN A.Y. 2007-08. SIMILAR FINDING WAS GIVEN FOR A.Y. 2008-09 BY THE LEARNED CIT(A) AND CONFIRMED THE ADDITION OF RS. 4,01,488/-. 4. NOW THE ASSESSEE IS IN APPEALS BEFORE US. 5. THE LEARNED A.R. FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS FILED CONFIRMATION ALONGWITH PAN NUMBER OF THE 13 CASH CRE DITORS IN A.Y. 2007-08. THE TOTAL LOAN WAS TAKEN BY THE ASSESSEE AT RS. 19,50 ,000/- BUT THE LEARNED ASSESSING OFFICER MADE ADDITION OF RS. 11,85,000/-. IT IS ARGUED THAT THE ASSESSEE HAS FURNISHED THE DETAILED CHART BEFORE TH E ASSESSING OFFICER AND ALL DETAILS OF CASH CREDITORS I.E. WHETHER SQUARED UP AC COUNT, COMPUTATION OF INCOME, COPY OF BANK ACCOUNT, COPY OF BALANCE SHEET AND COPY OF RETURN WAS FILED BEFORE THE ASSESSING OFFICER. IT IS EVIDENT F ROM THE CHART THAT IN EIGHT CASES, THE LOAN HAS BEEN REFUNDED BACK DURING THE Y EAR UNDER CONSIDERATION THROUGH ACCOUNT PAYEE CHEQUES AND IN FIVE CASES, TH E LOAN WAS REMAINED WITH ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 9 THE ASSESSEE. IN ALL CASES, THE COMPUTATION OF INCO ME HAS BEEN FILED BEFORE THE LEARNED ASSESSING OFFICER. SIMILARLY, THE OTHER EVIDENCE I.E. COPY OF BANK ACCOUNT, COPY OF BALANCE SHEET AND COPY OF RETURN O F INCOME WAS FILED BEFORE THE LEARNED ASSESSING OFFICER EXCEPT FEW CASES. THE C ASH CREDITORS ARE ASSESSED TO TAX AND HAVE SUFFICIENT FUND TO ADVANCE THE LOANS. THE LOANS WERE RECEIVED THROUGH BANKING CHANNELS. THE LEARNED ASS ESSING OFFICER PARTLY ACCEPTED THESE CASH CREDITORS GENUINE FOR RS. 7,65, 000/- BUT NOT ACCEPTED GENUINE LOAN FOR THE SAME CASH CREDITORS OF RS. 11, 85,000/-. THE LEARNED ASSESSING OFFICERS FINDING IS CONTRADICTORY. THE SO URCE OF CASH DEPOSITED IN THE BANK ACCOUNT HAD BEEN ACCEPTED EVEN THEN THE ASSESS EE IS NOT REQUIRED TO PROVE THE SOURCE OF SOURCE OF THE FUND. THE BURDEN L AY UPON THE ASSESSEE STOOD DISCHARGED AND ONUS HAS BEEN SHIFTED UPON THE REVENUE WHO HAD DOUBTED THE CREDITS FOR THE SOLE REASON THAT THERE WAS CASH DEPOSIT IMMEDIATELY BEFORE THE CHEQUE OF LOAN ISSUED TO THE ASSESSEE. THE LEARNED ASSESSING OFFICER ONLY DOUBTED THE TRANSACTION AND PRESUMED THAT THE CASH WAS FLOWN FROM THE ASSESSEE BUT THERE IS NO MATERIAL BEFORE THE LEARNED ASSESSING OFFICER. THE LEARNED ASSESSING OFFICER HA D NOT EXAMINED ANY CASH CREDITORS BEFORE HE DOUBTED THE GENUINENESS OF THE TRANSACTIONS. FURTHER DURING THE COURSE OF APPELLATE PROCEEDINGS FOR ESTA BLISHING THE AVAILABILITY OF CASH IN THE HANDS OF EACH INDIVIDUAL LOANER AS ON T HE OPENING DAY OF THE YEAR ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 10 I.E. ON 31/3/2006 OUT OF WHICH CASH WAS DEPOSITED IN THE BANK ACCOUNT. COPIES OF PERSONAL CAPITAL ACCOUNT AND BALANCE SHEE T AS ON 31/3/2006 OF MOST OF THE PARTIES WERE SUBMITTED, WHICH ARE ALSO ENCLOS ED IN PAPER BOOK BEFORE YOUR HONOUR. THE LEARNED CIT(A) HAD ALSO IGNORED THE FACT THAT ALL THE CREDITORS HAVE DECLARED GROSS TOTAL INCOME RANGING BETWEEN RS. 91,000/- TO 1,70,000/- AND LOAN ADVANCED TO THE ASSESSEE WAS BET WEEN RS. 50,000/- TO RS. 1,00,000/-. THE CASH CREDITORS ALSO FILED THE RE TURN IN PAST AND THEY HAVE SUFFICIENT FUND OUT OF THE INCOME DECLARED IN THE P AST, WHICH HAS NOT BEEN DOUBTED BY BOTH THE LOWER AUTHORITIES. IT IS FURTHER ARGUED THAT NONE OF THE PARTY WAS RELATED TO THE ASSESSEE IN ANY MANNER. THE APPELLANT HEAVILY RELIED UPON THE VARIOUS CASE LAWS BEFORE THE LEARNED CIT(A) BUT THE SAME WERE SUMMARILY REJECTED BY HIM BY OBSERVING THAT THEY AR E NOT APPLICABLE. THE ASSESSEE DEDUCTED TDS WHERE IT IS APPLICABLE AND DEP OSITED IN THE EXCHEQUER OF THE GOVERNMENT. HE FURTHER RELIED THE DECISION I N CASE OF ARAVALI TRADING CO. VS. ITO 187 TAXMAN 338 (RAJ.), 57 ITR 532 (SC) P. SEETHARAMAMMA AND 87 ITR 349 (SC) DAULAT RAM RAWATMULL. HE HAS FILED TH E CONFIRMATION IN FORM OF AFFIDAVIT. HE HAS ALSO RELIED ON THE FOLLOWING CA SE LAWS: (I) CIT VS. HEERALA CHAGAN LAL 257 ITR 281 (RAJ.) (II) BALBIR SINGH TOMAR (DR.) VS. ACIT (RAJ. HC) 20 TW 546. (III) SHEON NARAIN MOHARILAL VS ACIT 24 TW 318 (ITA T, JAIPUR) ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 11 (IV) SIDEWAY INVESTMENT PVT. LTD. VS. DCIT 24 TW 146 (ITAT JAIPUR). (V) PRADEEP KUMAR HIMMATRAMKA VS. ITO 27 TW 393 (IT AT JAIPUR). (VI) 128 TTJ 708 SHANTI KUMAR CHORDIA VS. ASSTT. CI T (JP A). (VII) CIT VS. KISHORI LAL CONSTRUCTION LTD. (2010) 5 TAXMANN 60 (DELHI) SIMILAR ARGUMENTS WERE GIVEN FOR A.Y. 2008-09. 6. AT THE OUTSET, THE LEARNED D.R. SUPPORTED THE OR DER OF THE LEARNED CIT(A) AND ARGUED THAT THE GENUINENESS OF THE TRANSA CTIONS AND CREDITWORTHINESS OF THE CASH CREDITORS HAD NOT BEEN PROVED BY THE APPELLANT AS THE CASH WAS DEPOSITED IN THE BANK ACCOUNT IMMEDIATE LY BEFORE ISSUING THE CHEQUE TO THE APPELLANT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE APPELLANT HAS FILED CONFIRMATION, PAN NUMBER, DETAILS OF LOAN WHETHER SQUARED UP OR NOT, C OPY OF COMPUTATION OF INCOME, COPY OF BANK ACCOUNT, COPY OF BALANCE SHEET AND COPY OF RETURN IN MOST OF THE CASE. THE LEARNED ASSESSING OFFICER PART LY ACCEPTED THE CASH CREDITORS GENUINE AND PARTLY NON-GENUINE, BECAUSE O NLY THE CASH WAS DEPOSITED IN THE BANK ACCOUNT BUT IT IS EVIDENT THA T CASH CREDITORS WAS REGULARLY FILING THE INCOME TAX RETURN IN PAST AS WE LL AS IN SUBSEQUENT YEARS. THE COPY OF BALANCE SHEET SHOWS THAT THEY HAVE ADVAN CED THE LOAN TO THE ASSESSEE IN FIVE CASES. THE ASSESSEE REFUNDED THE LO AN IN EIGHT CASES THROUGH ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 12 ACCOUNT PAYEE CHEQUES, WHICH HAS BEEN CREDITED IN T HE CREDITORS ACCOUNT. IN REMAINING CASES, THE LOAN WAS REFUNDED IN SUBSEQUENT YEAR THROUGH ACCOUNT PAYEE CHEQUES AND THE CASH CREDITORS HAS ACCEPTED A ND EXPLAINED SOURCE OF CASH THROUGH HIS PAST SAVINGS OR CASH IN HAND. THERE FORE, THE ASSESSEE HAS DISCHARGED HIS ONUS AND SHIFTED BURDEN ON THE REVEN UE TO PROVE THE OTHERWISE. THE LEARNED ASSESSING OFFICER HAD NOT EXA MINED ANY CASH CREDITORS PERSONALLY, THEREFORE, HE IS NOT DISCHARGED HIS ONU S AS CONTEMPLATED IN SECTION 68 OF THE ACT. HE SIMPLY PRESUMED THAT CASH DEPOSIT ED IN THE BANK ACCOUNT OF THE CASH CREDITORS IS UNDISCLOSED INCOME OF THE APP ELLANT WITHOUT BRINGING CORROBORATIVE AGAINST THE ASSESSEE. THE CASE LAWS REL IED UPON BY THE ASSESSEE ARE SQUARELY APPLICABLE. THE ASSESSEE IS NOT REQUIRE D TO PROVE THE SOURCE OF THE SOURCE, THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED TO CONFIRM THE ADDITION. ACCORDING LY, WE DELETE THE ADDITION IN BOTH THE ASSESSMENT YEARS. 8. GROUNDS NO (I) TO (VII) OF THE REVENUES APPEAL ARE AGAINST THE COMMISSION EXPENSES PAID TO VARIOUS PERSONS. THE ASS ESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DEBITED COMMISSION IN THE NAM E OF VARIOUS PERSONS ON WHICH HE GAVE REASONABLE OPPORTUNITY OF BEING HEARD, WHICH WAS AVAILED BY THE ASSESSEE VIDE LETTER DATED 24/12/2010. THE ASSES SEES REPLY HAS BEEN REPRODUCED BY THE LEARNED ASSESSING OFFICER AT PAGE S 6 TO 8 OF THE ASSESSMENT ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 13 ORDER. AFTER CONSIDERING THE ASSESSEES REPLY, IT H AS HELD THAT THE EXPLANATION FILED BY THE ASSESSEE IS GENERAL IN NATURE. IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT THE SAID COMMISSION WAS PAID ON SERVIC ES RENDERED RELATING TO OBTAINING OF THE TENDER FORM, SUBMISSION OF TENDER DOCUMENTS, PURSUING WITH DEPARTMENT, POSITION OF TENDER PROCESS, ATTENDING M EETINGS RELATING TO TENDERING ETC.. HOWEVER, NO EVIDENCE TO PROVE THAT THESE SAID COMMISSIONS AGENTS HAD ACTUALLY PROVIDED THE SERVICES FOR WHICH ASSESSEE OUGHT TO HAVE PAID COMMISSION TO THESE PERSONS WAS FILED. NO BASIS OF QUANTIFICATION OF THE COMMISSION PAYMENT IS STATED BY THE ASSESSEE. ANY P AYMENT MADE FOR PROCURING ORDERS FROM GOVERNMENT AGENCIES IS NOT AL LOWABLE UNDER EXPLANATION TO 37(1) OF THE ACT. THUS, HE DISALLOWED TOTAL COMMISSION OF RS. 8,99,426/- PAID TO K.D. MUNDRA HUF, SHRI NARSING TIM BER & ELECTRIC STORE, BINOD CHHAJED & SONS HUF, SHRI YOGESH KUMAR AGARWAL AND SHRI LALIT MISHRA. 9. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASS ESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT (A), WHO HAD ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UN DER:- 3.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS O F THE A.O. AND THE DEFENSE PUT FORTH BY THE LEARNED A.R. IN THIS REGAR D. THE RECORDS SUGGEST THE A.O. HAS MADE THE ADDITION, I.R.O. COMM ISSION PAYMENT OF RS. 8,88,851/-, MAINLY ON TWO ACCOUNTS I. E. SUCH PAYMENTS WERE MADE TO THE AGENTS FOR PROCURING ORDER S FROM ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 14 GOVT. AGENCIES, WHICH IS NOT PERMISSIBLE EXPENDITUR E U/S 37(1) OF THE ACT, AS SUCH. SECONDLY, THE APPELLANT HAS ALSO FAILED TO PROVE ANY DOCUMENTARY EVIDENCES TO SUPPORT ITS CLAIM THAT IN FACT SERVICES WERE RENDERED BY SUCH AGENTS. HOWEVER, THE L EARNED A.R. HAS ARGUED THAT TO SUBSTANTIATE THEIR CLAIM TH EY HAVE SUBMITTED NAME, ADDRESS AND CONFIRMATIONS OF SUCH A GENTS. HE ALSO SUBMITTED THAT THE AGENTS WERE ALSO ASSESSED TO TAX AND THE COMMISSION PAYMENTS WERE MADE THROUGH CHEQUES ONLY AND THEY WERE ALSO NOT RELATED TO THE APPELLANT IN ANY MANNER . TO JUSTIFY THE NEED OF APPOINTING SUCH AGENTS, WHICH IS REGULAR FEATURE IN THE PAST ALSO, IT WAS STATED THAT THE SERVICES THERE OF WERE REQUIRED FOR PRETENDER AND POST-TENDER WORKS OF THE CONTRACTS OBTAINED FROM DIFFERENT GOVT. AGENCIES, SITUATED FO R OF FROM THE BUSINESS PLACE OF THE APPELLANT. IN VIEW OF THE ABOVE FACTUAL POSITION, I AM INCLINE D TO ACCEPT THE LEARNED ARS CONTENTIONS THAT THEY HAVE FULFILLED T HEIR LEGAL OBLIGATION TO SUPPORT THE COMMISSION PAYMENT, UNDER THE GIVEN CIRCUMSTANCES. IN THIS REGARD, IT IS FOUND THAT THE APPELLANT HAD SUBMITTED NECESSARY DOCUMENTARY EVIDENCES SUCH AS N AME, ADDRESSES AND CONFIRMATION OF THE COMMISSION AGENTS , NEED AND NATURE OF SERVICES RENDERED BY THEM WITH REGARDS TO THE REQUIREMENT OF THE BUSINESS OF THE APPELLANT. IT WAS FURTHER OBSERVED THAT NOT ONLY THE AGENTS ARE ASSESSED TO T AX, BUT THE TDS WERE ALSO DEDUCTED ON THE IMPUGNED PAYMENTS MADE TO THEM. ACCORDINGLY, THE BASIC ONUS, AS LIES ON THE A PPELLANT, WAS FOUND DISCHARGED. HOWEVER, ON THE OTHER HAND, IT IS FOUND THAT ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 15 THE A.O. HAS NOT GATHERED ANY INFORMATION/EVIDENCES TO SUPPORT HIS STAND AND MERELY RAISED CERTAIN SUSPICIONS, I.R .O., THE CLAIM MADE BY THE APPELLANT IN THIS REGARD, ON SUPERFICIA L GROUNDS. HERE IT IS FELT THAT ONCE THE BASIC ONUS HAS BEEN FOUND FULFILLED BY THE APPELLANT, THEN THE OBLIGATION WAS ON THE A.O. TO CO NSIDER THE CONCLUDED OTHERWISE WITH NECESSARY SUPPORTING EVIDENC ES. IT IS A SETTLED LAW THAT THE ONUS, UNDER IT ACT, SHIFTS FROM ONE PARTY TO ANOTHER, ONCE THE FORMER HAS FULFILLED HIS PRIMARY OBLIGATION, CASTS UPON HIM, UNDER THE ACT. UNDER SIMILAR SITUATION, T HE KERALA HIGH COURT IN THE CASE OF TEEKOY RUBBER (INDIA) LTD. 117 CTR 284 (KER) HAS OPINED THAT IF THE REVENUE INTENDS TO ASS UME ANYTHING CONTRARY TO ANY FACTS AND CLAIMS OF THE APPELLANT, THEN THE BURDEN IS ON THE REVENUE TO PROVE SO AND NOT ON THE APPELL ANT TO PROVE OTHERWISE IN THIS REGARD. UNDER THE GIVEN CIRCUMSTAN CES IT IS FELT THAT THE A.O. HAS FAILED TO DO THE NEEDFUL IN THIS REGARD. SIMILARLY, THE A.O.S PRIMARY OBJECTION I.E. THE CO MMISSION PAYMENT IS NOT A PERMISSIBLE ACTIVITY TOWARDS OBTAIN ING BUSINESS FROM THE GOVT. DEPARTMENTS, IS ALSO FOUND NOT A VAL ID CONTENTION AS SUCH, FOR THE REASONS THAT IN THE INSTANT CASE, THE PAYMENT TO AGENTS MADE TOWARDS VARIOUS ASSIGNMENTS RELATED TO T HE PRE AND POST TENDER WORKS, AS DISCUSSED ABOVE. THE HONBLE DE LHI HIGH COURT IN THE CASE OF NESTOR PHARMACEUTICALS (P) LTD . HAS UPHELD THE COMMISSION PAID TO AGENTS I.R.O. THE ORDERS PRO CURED FROM THE GOVT. DEPARTMENT, IF SUCH CLAIM WAS OTHERWISE FOUND I N ORDER. THE ANOTHER OBJECTION OF THE A.O. OF NON FURNISHING THE DOCUMENTARY EVIDENCES, I.R.O., OF SERVICES RENDERED BY THE AGENT, ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 16 IT IS FELT THAT IN THE ERA OF FASTER TELECOMMUNICAT ION METHODS AND EMAIL ETC. THE ABOVE ASPECTS HAVE BECOME REDUNDANT AND IRRELEVANT AS SUCH. THUS, IN THE LIGHT OF ABOVE FACT S AND LEGAL POSITIONS, THE A.O.S MAIN OBJECTIONS, TO DISALLOW T HE COMMISSION PAYMENT, ARE FOUND DEVOID OF ANY MERIT, PER SE. MOR EOVER, THE APPELLANTS ABOVE CLAIM WAS ALSO FOUND ALLOWABLE U/S 37(1) OF THE ACT, FOR THE REASONS THAT EVEN IN THE PAST SUCH PRA CTICES OF EMPLOYING THE COMMISSION AGENT WAS FOUND FOLLOWED BY THE APPELLANT. IN THE LIGHT OF THE ABOVE LEGAL AND FACTUAL POSITIO N, IT IS INFERRED THAT THE APPELLANT HAS DISCHARGED ITS LEGAL OBLIGAT ION U/S 37(1) OF THE ACT, I.R.O. OF THE COMMISSION PAYMENT OF RS. 8, 99,426/- WITH NECESSARY DOCUMENTARY EVIDENCES. ON THE OTHER HAND, IT IS FOUND THAT THE A.O. HAS DISALLOWED THE ABOVE CLAIM, MERELY ON SUSPICION AND WITHOUT SUBSTANTIATING HIS STAND WITH ANY COGENT EVIDENCES IN THIS REGARD. ACCORDINGLY, THE ADDITION OF RS. 8,99, 426/- MADE TOWARDS COMMISSION PAYMENTS, IS HEREBY DELETED. CONS EQUENTLY, THIS GROUND OF APPEAL IS ALLOWED. 10. NOW THE REVENUE IS IN APPEAL BEFORE US. 11. IT IS ARGUED BY THE LEARNED D.R. THAT THE GENUI NENESS OF THIS COMMISSION HAS NOT BEEN ESTABLISHED WITH EVIDENCE WHETHER THE RE CIPIENT OF COMMISSION HAS RENDERED ANY SERVICE FOR GETTING THIS COMMISSIO N. THE ASSESSEE IS MANUFACTURER AND TRADER OF CABLES AND GOODS HAD BEE N SUPPLIED TO VARIOUS GOVERNMENT UNDERTAKINGS ON WHICH COMMISSIONS HAVE BE EN CLAIMED SUCH AS ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 17 NDMC, JHARKHAND STATE ELECTRICITY BOARD AND RAYCHEM RPG LTD. WHERE NO MIDDLE MAN IS REQUIRED TO GET ORDERS. THEREFORE, HE PRAYED TO REVERSE THE ORDER OF THE LEARNED CIT(A). 12. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSE E SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND SUBMITTED THAT THE LEARNED C IT(A) HAS EXAMINED THIS ISSUE THOROUGHLY ON PAGES 8 TO 12 OF HIS ORDER. THE APPELLANT HAD SUBMITTED ALL THE EVIDENCES BEFORE THE LEARNED CIT(A), WHICH WE RE SUBMITTED BEFORE THE ASSESSING OFFICER ALSO. THIS COMMISSION WAS ALSO ALLO WED BY THE ASSESSING OFFICER IN PAST AND ALSO IN SUBSEQUENT YEAR. THUS, H E PRAYED TO CONFIRM THE ORDER OF THE LEARNED CIT(A). 13. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LEARNED CIT(A) HAS CONSIDERED THIS ISSUE IN DETAIL ON PAGES 10 TO 12 OF HIS ORDER AND HELD T HAT COMMISSION AGENT RENDERED SERVICES IN FORM OF PRE TENDER SERVICE AND POST TENDER SERVICE, PRE DISPATCH SERVICE, POST DISPATCH SERVICE AND FOLLOW U P FOR REALIZATION. THE LEARNED ASSESSING OFFICER ALLOWED THIS COMMISSION PA YMENT IN PRECEDING YEAR AS WELL AS SUBSEQUENT YEAR. THE TDS ON COMMISSION PAY MENT HAD BEEN DEDUCTED, THEREFORE, WE DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDER OF THE LEARNED CIT(A), THEREFORE GROUNDS NO. (I) TO (VII) OF THE REVENUES APPEAL ARE DISMISSED. ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 18 14. GROUND NO. (VIII) OF THE REVENUES APPEAL IS AG AINST DELETING THE DISALLOWANCE OF RS. 19,27,279/- ON ACCOUNT OF CHARGE S LEVIED FOR THE LATE DELIVERY OF GOODS. THE ASSESSEE CLAIMED LATE DELIVER Y CHARGES IN CASE OF NDMC (BACHELI), NDMC (KIRANDAL), RAYCHEM RPG LTD., J.S.E .B., AJMER VIDHYUT VITRARAN NIGAM LTD. AT RS. 19,27,279/-. THE LEARNED ASSESSING OFFICER HELD THAT DELIVERY CHARGES CLAIM OF RS. 7,04,087/- IS NOT VER IFIABLE, RS. 30,332/- RS. 7,10,986/- CLAIMED EXCESS DELIVERY CHARGES AND RS. 11,85,282/- HAS NOT FINALIZED IN THE YEAR 2008-09. THUS, HE MADE ADDITI ON OF RS. 19,27,279/-. 15. BEING AGGRIEVED BY THE ORDER OF THE LEARNED A. O., THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A), WHO HAD ALLO WED THE APPEAL IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF TH E A.O. AND THE COUNTER ARGUMENTS EXTENDED BY THE LEARNED AR, VIZ. THE ISSUE UNDER CONSIDERATION. THE A.O. HAS DISALLOWED THE CLAI M OF LATE DELIVERY CHARGES OF RS. 19,27,269/- OUT OF TOTAL CL AIM OF RS. 34,91,655/- MADE IN THIS REGARD, FOR THE REASONS TH AT THE EITHER RELEVANT DETAILS WERE NOT MADE AVAILABLE OR THE CLAI MS WERE RELATED TO SUBSEQUENT PERIOD OTHER THAN THE UNDER C ONSIDERATION. ON THE OTHER HAND, THE LEARNED AR HAS CLAIMED THAT THE LATE DELIVERY CHARGES PAID TO GOVT. UNDERTAKINGS LIKES N MDC, AVVNL, JSEB ETC. FROM WHOM THE RELEVANT INFORMATION COULD NOT BE GATHERED. HOWEVER, THE OTHER SUPPORTING DOCUMENTS LI KE COPY OF ACCOUNTS AND DETAILS OF PAYMENT RECEIVED AFTER DEDU CTION OF SUCH ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 19 CHARGED FURNISHED IN THIS REGARD. REGARDING OTHER S UCH DEDUCTIONS MADE BY M/S RAYCHEM (RS. 5,01,093/-) AND BY AVVNL ( RS. 11,85,282), IT WAS SUBMITTED THAT ABOVE DEDUCTIONS WE RE MADE FROM THE PAYMENT RECEIVED DURING THE CURRENT YEAR O NLY AND CLAIMED ACCORDINGLY. HOWEVER, THIS ASPECT HAS BEEN C ONFIRMED THROUGH A COMMUNICATION RECEIVED FROM THE ABOVE UND ERTAKING IN SUBSEQUENTLY YEAR. FROM THE ABOVE DISCUSSION, THE UNDISPUTED FACT IS T HAT THE APPELLANT HAS SUBMITTED BASIC DETAILS AND INFORMATI ON, I.R.O., THE DEDUCTION OF LATE DELIVERY CHARGES CLAIMED BY ITS C LIENTS. SIMILARLY, IT IS ALSO EVIDENT THAT THE DEDUCTION HAS BEEN MADE OUT OF THE PAYMENTS RECEIVED DURING THE RELEVANT PERIOD ONLY, THUS, THE SAME ARE FOUND RELATABLE TO THE TRANSACTION OF THE YEAR UNDER CONSIDERATION AS SUCH. THE COMMUNICATION DATED 27/11 /2008 ENTERED IN BETWEEN DIFFERENT OFFICIALS OF AVVNL, CON FIRMING THE DEDUCTION TOWARDS DELAY IN DELIVERY IN SUPPLY OF MAT ERIAL OF THE APPELLANT, WAS IN FACT AN INTERNAL CORRESPONDENCE ON LY, WHICH HAS CONFIRMED THE ACTUAL STATE OF AFFAIRS OF THE ACCOUN TING POSITION OF THE ISSUE UNDER CONSIDERATION AND NOTHING TO DO WITH THE ASPECT OF ACTUAL PERIOD OF SUCH TRANSACTIONS. ACCORDINGLY, IN MY CONSIDERED VIEW THE A.O. HAS WRONGLY ASSUMED SUCH INT ERNAL CORRESPONDENCE OF AVVNL AS A BASE TO ARRIVE AT THE CONCLUSION THAT CLAIM OF RS. 11,96,851/- BELONGS TO SUBSEQUENT PERIOD. SINCE THE RELEVANT PAYMENTS FROM AVVNL WERE RECEIVED DURI NG THE PERIOD UNDER CONSIDERATION, (THE FACT WHICH HAS NOT BEEN DISPUTED BY THE A.O. ALSO. IN THE NATURAL COROLLARY THEREOF, IT IS QUITE ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 20 OBVIOUS THAT ANY DEDUCTION/SUBTRACTION OUT OF SUCH PAYMENT HAS TO BE INCORPORATED AND CLAIMED IN THE SAME ACCOUNTI NG PERIOD ONLY. IN OTHER WORDS, IRRESPECTIVE OF OTHER FACTS, S INCE THE DEDUCTION TOWARDS LATE DELIVERY CHARGES WERE MADE OUT OF THE PAYMENT OF THE CURRENT YEAR, THEREFORE, THE CLAIM I N THIS REGARD IS ALSO CRYSTALLIZED IN THE RELEVANT PERIOD OF SUCH PA YMENTS ONLY. IN THIS REGARD, THE DECISION OF HONBLE MADRAS HIGH CO URT DELIVERED IN THE CASE OF KARBON INDUSTRIES PVT. LTD. (259 ITR 373), AS ALSO RELIED UPON BY THE APPELLANT AND DISCUSSED HEREINAB OVE, IS QUITE RELEVANT AND APPLICABLE IN THE PRESENT CASE ALSO. A CCORDINGLY, I FIND NO INFIRMITY IN THE CLAIM OF LATE DELIVERY CHA RGES MADE BY THE APPELLANT IN THIS REGARD. 16. NOW THE REVENUE IS IN APPEAL BEFORE US. 17. IT IS ARGUED BY THE LEARNED DR THAT IT IS A PEN ALTY, WHICH IS NOT ALLOWABLE UNDER THE I.T. ACT, THUS HE PRAYED TO REVERSE THE OR DER OF THE LEARNED CIT(A). 18. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSE E CONTENDED THAT THIS IS A CONTRACTUAL OBLIGATION ON THE PART OF THE ASSESSEE. THIS AMOUNT HAS BEEN DEBITED BY THE PURCHASER PARTY (GOVERNMENT AGENCIES ) DUE TO LATE SUPPLY OF THE GOODS FROM THE ASSESSEES RECEIPT DIRECTLY. THE ASSESSEE GOT REDUCED RECEIPT AGAINST THE SALE BILL RAISED TO THESE PARTI ES. THEREFORE, IT IS THE EXPENSES OF THE BUSINESS, WHICH IS ALLOWABLE U/S 37 OF THE ACT. 19. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. NATURE OF THIS EX PENSE IS NOT PLENARY BUT ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 21 LIABILITY ARISES ON ACCOUNT OF CONTRACT MADE BETWEEN BOTH THE PARTIES. IF THE GOODS HAVE NOT BEEN SUPPLIED WITHIN THE PRESCRIBED T IME OF CONTRACT, IT IS RESULTANT FACTOR OF THAT CONTRACT, WHICH IS ALLOWABLE U/S 37 OF THE ACT AS WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS PURPOSES. THUS , WE DISMISS THE REVENUES APPEAL ON THIS GROUND. 20. GROUND NO. IX OF THE REVENUES APPEAL IS AGAINS T DELETING THE DISALLOWANCE OF RS. 2,75,000/-. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD WRITTEN OF RS. 1,17,420/- ON ACCOUNT OF EARNEST MONEY DEPOSIT AND RS. 1,57,750/- ON ACCOUNT OF SECURITY DEPOSIT. THE ASSES SING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD, WHICH WAS AVAI LED BY THE ASSESSEE VIDE ITS LETTER DATED 14/12/2010. IT HAD BEEN SUBMI TTED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE FIRM IS ENGAGED IN MANUFA CTURING AND SUPPLY OF CABLES TO STATE ELECTRICITY COMPANY/POWER AND OTHER GOVERNMENT DEPARTMENTS AND PSU, WHO MAKES DEDUCTIONS ON ACCOUNT OF VARIOUS REASONS SUCH AS QUALITY, DELIVERY SCHEDULE, VERIFICATION OF MATERIA L. THE ASSESSEE MADE EFFORTS TO RECOVER THIS AMOUNT FROM THESE GOVERNMENT AGENCI ES BUT HAD NOT RECOVERED SO FAR. THE ASSESSEE HAS WRITTEN OF THESE A MOUNTS AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT U/S 36(1)(VII) OF THE ACT. AFTER CONSIDERING THE ASSESSEES REPLY, THE ASSESSING OFFICER OBSERVED TH AT THE ASSESSEE HAS NOT ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 22 ABLE TO FULFILL THE CONDITION THAT LAID DOWN U/S 36 (2) OF SECTION 1 OF THE ACT. THUS, HE MADE THE ADDITION OF RS. 2,75,170/-. 21. BEING AGGRIEVED BY THE ORDER OF THE LEARNED AS SESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT (A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 4.3 I HAVE CAREFULLY EXAMINED THE RIVAL STANDS OF THE A.O. AND THE LEARNED AR, AS DISCUSSED ABOVE. THE MAIN REASON OF T HE A.O. TOWARDS DISALLOWING THE BAD DEBTS CLAIM, I.R.O., THE DEPOSIT MADE WITH APPELLANTS CLIENTS, IS THAT SUCH SECURITY DEPO SITS WERE NOT PART OF THEIR INCOME, THEREFORE, THE SAME CANNOT BE CONSIDERED AS BAD DEBTS IN THE CURRENT YEAR. HOWEVER, THE LEARNED AR, CONTENDED THAT THE IMPUGNED DEPOSITS/EARNEST MONEY WERE MADE OUT OF THE PAST INCOME OF THE APPELLANT, THEREFORE, THE SAME ARE ELIGIBLE FOR THE DEDUCTION U/S 36(1)(VII) OF THE AC T. CONSIDERING THE FACT THAT THE TRANSACTIONS UNDER CONSIDERATION ARE OF THE NATURE OF EARNEST MONEY/SECURITY DEPOSITS ETC., WHICH HAVE BEE N EXTENDED DURING THE NORMAL COURSE OF BUSINESS ACTIVITIES, TH EREFORE, THE SAME ARE HELD AS DEPOSITS OF BUSINESS/REVENUE NATUR E. I AM ALSO AGREED WITH THE LEARNED ARS SUBMISSION THAT SUCH D EPOSITS ARE PART OF CUMULATIVE PROFITS OF THE PAST OF THE APPEL LANT. ONCE THE ABOVE FACTUAL POSITIONS ARE ESTABLISHED, THEN, IT I S TO BE SEEN THAT WHETHER THE APPELLANT HAS FULFILLED THE OTHER CONDIT ION OF SEC. 36(1)(VII) OF THE ACT OR NOT. IN THE LIGHT OF THE D ECISION OF HON'BLE SUPREME COURT GIVEN IN THE CASE OF M/S T.R.F. LTD. (230 CTR 14), NOW IT IS A SETTLED LAW I.E. TO CLAIM THE BAD DEBTS, THE ASSESSEE IS ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 23 ONLY REQUIRED TO CLAIM SUCH TRANSACTION AS BAD DEBT S, IN HIS BOOKS OF ACCOUNT ONLY. SINCE THE APPELLANT HAS CLAIM THE ABOVE DEPOSITS AS IN THE BOOKS OF ACCOUNT, THUS IN MY CONSIDERED V IEW THEY ARE ENTITLED TO CLAIM SUCH WRITTEN OFF EARNEST MONEY/SEC URITY DEPOSITS OF RS. 275170/- AS BAD DEBTS U/S 36(1)(VII) OF THE ACT. ACCORDINGLY, THE ADDITION OF RS. 275170/- MADE BY T HE A.O. IS DELETED. CONSEQUENTLY, THIS GROUND OF APPEAL IS ALL OWED. 22. NOW THE REVENUE IS APPEAL BEFORE US. 23. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER AND ARGUED THAT THE APPELLANT HAD NOT PROVED THAT THESE SECURITY DEPOSITS HAVE BEEN DISCLOSED BY THE ASSESS EE AS INCOME IN THE PAST, THUS, IT IS NOT ALLOWABLE. 24. AT THE OUTSET, THE LEARNED AR FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND ARGUED THAT THE HON'BLE SUPR EME COURTS ORDER IN THE CASE OF M/S TRF LTD. 232 ITR 397 IS SQUARELY APPLICAB LE, OTHERWISE ALSO IT IS A BUSINESS LOSS WHICH IS ALLOWABLE U/S 37 OF THE ACT. 25. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE ASSESSEE SUPPL IED THE GOODS TO VARIOUS GOVERNMENT AGENCIES AS PER TERMS AND CONDITIONS OF THE CONTRACT. THE ASSESSEE HAS TO PAY EARNEST MONEY OR SECURITY WITH T HE AGENCIES. WHEN THERE ARE SOME DIFFERENCES ON ACCOUNT OF SPECIFICATION ME NTIONED IN THE CONTRACT, THE PURCHASER COMPANY FORFEIT AND DO NOT REFUND THE SE DEPOSITS. THE ASSESSEE ITA 896, 912 & 1101/JP/2011 ASHOKA INDUSTRIES VS.ADDL.CIT 24 HAS CLAIMED THESE FORFEITED AMOUNT AS BAD DEBTS U/S 36(1)(VII) OF THE ACT. THE RECEIPTS FROM THESE AGENCIES HAS BEEN SHOWN AS INCOM E. THESE DEPOSITS HAVE DIRECT NEXUS WITH INCOME CREDITED IN P&L ACCOUNT IN TOTAL RECEIPTS. THE LEARNED DR HAS NOT CONTROVERTED THE FINDINGS GIVEN BY THE L EARNED CIT(A) ON THIS ISSUE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IT IS ALLOWABLE EXPENSES AS BAD DEBT, ACCORDINGLY, WE CONFIRM THE ORDER OF TH E LEARNED CIT(A) AND DISMISS THE REVENUES APPEAL ON THIS GROUND. 26. IN THE RESULT, THE ASSESSEES APPEALS ARE ALLOWE D IN BOTH THE ASSESSMENT YEARS AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/09/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 19 TH SEPTEMBER, 2014 * RANJAN COPY FORWARDED TO :- 1. M/S ASHOKA INDUSTRIES, JAIPUR. 2. THE ADDL. CIT, RANGE-7/ACIT, CIRCLE-7, JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NOS. 896, 912 & 1101/JP/2011) BY ORDER, AR ITAT JAIPUR.