ACIT, (OSD0 Range-1, V. New Prime Network (AOP),

ITA 909/DEL/2006

• Counselvise Citation: 90920114 RSA 2006
• Duration Of Justice: 6 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 24-09-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 20-03-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AROOP KR SINGH
• Assessee Lawyers: AMIT ARORA ARS
• Keywords: Gift; Depreciation; Loose papers; Reassessment proceedings
• Section: 40A(3); 133A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI E BENC H BEFORE SHRI I.C. SUDHIR , JM & SHRI A.N. PAHUJA, AM ITA NO.909/DEL.2006 & ITA NOS., 562 & 563/DEL/2009 ASSESSMENT YEARS: 2002-03 TO 04-05 ASSISTANT. CIT (OSD), RANGE-1,AAYAKAR BHAWAN,13-A,SUBHASH ROAD, DEHRADUN V/S . M/S NEW PRIME NETWORK[AOP], 11-A, RAJPUR ROAD, DEHRADUN [PAN : AAAAN 3463 H] (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI PIYUSH KAUSHIK & AMIT ARORA, ARS REVENUE BY SHRI AROOP KR. SINGH, DR DATE OF HEARING 24-09-2012 DATE OF PRONOUNCEMENT 28 -09-2012 O R D E R A.N.PAHUJA:- THESE THREE APPEALS FILED BY THE REVENUE ON 20.03. 2006 AGAINST AN ORDER DATED 12 TH JANUARY, 2006 FOR THE AY 2002-03 AND APPEALS FILED ON 13 TH FEBRUARY, 2009 AGAINST TWO SEPARATE ORDERS DATED 28 TH NOVEMBER, 2008 FOR THE AYS 2003-04 AND 2004-05 OF THE LEARNED CIT(A)-I, DE HRADUN, RAISE THE FOLLOWING GROUNDS:- I.T.A. NO.909/DEL./2006-AY 2002-03 1 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN DELETING THE DISALLOWANCE OF ` ` 39,600/- MADE ON ACCOUNT OF DIESEL AND OIL EXPENSES. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 2 2 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` `2,00,000/- OUT OF TOTAL DISALLOWANCE OF ` `2,26,554/- MADE UNDER THE HEAD DIWALI GIFTS. 3 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` ` 1,00,000/- MADE UNDER THE HEAD PROFESSIONAL FEE EXPENSES. . 4 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` `24,500/- MADE ON ACCOUNT OF VCD/CD RENT EXPENSES. 5 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` `1,50,820/- OUT OF DISALLOWANCE OF ` ` 1,80,820/- MADE UNDER THE HEAD TRAVELLING & CONVEYANCE. 6 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` `45,183/- MADE UNDER THE HEAD TELEPHONE EXPENSES. 7 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` `2,25,000/- MADE ON ACCOUNT OF DEPRECIATION ON CAR. 8 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` ` 13,70,500/- CLAIMED AS EXPENDITURE UNDER THE HEAD CABLE WIRE AND AMPLIFIER EXPENSES. 9 THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. I.T.A. NO.562/DEL./2009-AY 2003-04 1. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` `1,45,029/- OUT OF TOTAL DISALLOWANCE OF ` `2,02,504/- MADE UNDER THE HEAD OF DIWALI EXPENSES. 2. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` `50,000/- MADE UNDER THE HEAD OF PROFESSIONAL FEE EXPENSES. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 3 3. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` ` 86,515/- OUT OF TOTAL DISALLOWANCE OF ` `1,22,795/- MADE UNDER THE HEAD OF TRAVELLING & CONVEYANCE. 4. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE OF ` ` 20,228/- TO ` ` 12,070/- MADE UNDER THE HEAD OF TELEPHONE EXPENSES. 5. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` ` 1,87,150/- OUT OF TOTAL DISALLOWANCE OF ` ` 3,19,050/- MADE UNDER THE HEAD OF REPAIR AND MAINTENANCE OF CABLES. 6. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` ` 1,68,750/- MADE ON ACCOUNT OF DEPRECIATION ON CAR FOR PERSONAL USE BY THE MEMBERS OF THE AOP. 7. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` `9,58,310/- CLAIMED AS EXPENDITURE UNDER THE HEAD OF CABLE WIRE AND AMPLIFIER EXPENSES. 8. THAT THE LEARNED CIT(A)-I, DEHRADUN BE SET ASID E AND THAT OF THE ASSESSING OFFICER BE RESTORED. I.T.A. NO.563/DEL./2009-AY 2004-05 1. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` ` 71,160/- OUT OF TOTAL DISALLOWANCE OF ` `1,27,067/- MADE UNDER THE HEAD OF DIWALI EXPENSES. 2. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` ` 50,000/- MADE UNDER THE HEAD OF PROFESSIONAL FEE EXPENSES. 3. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF `88,80 0/- OUT OF TOTAL DISALLOWANCE OF ` ` 1,32,000 MADE UNDER THE HEAD OF TRAVELLING & CONVEYANCE. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 4 4. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` ` 5,92,584/- OUT OF TOTAL DISALLOWANCE OF ` ` 7,91,760/- MADE UNDER THE HEAD OF REPAIR AND MAINTENANCE OF CABLES. 5. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` ` 1,26,562/- MADE ON ACCOUNTS OF DEPRECIATION ON CAR FOR PERSONA L USE BY THE MEMBERS OF THE AOP. 6. THAT THE LEARNED CIT(A)-I, DEHRADUN HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ` 23,41,297/- CLAIMED AS EXPENDITURE UNDER THE HEAD OF CABLE-WIRE AND AMPLIFIER EXPENSES. 7. THAT THE LEARNED CIT(A)-I, DEHRADUN BE SET ASID E AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL FO R THE AY 2002-03, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT IN THIS CASE A SURVEY U/S 133A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE, EARLIER KNOWN AS FIRM, ON 01.09.2003 AND 02.09.2003.ON THE BASIS OF DOCUMENTS FOUND DURING T HE COURSE OF SURVEY, A NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSE E ON 28 TH OCTOBER, 2003 FOR THE AY 2002-03. IN RESPONSE, THE ASSESSEE FILED RE TURN DECLARING AN INCOME OF ` ` 28,71,009/- ON 4 TH FEBRUARY, 2005 AS AGAINST INCOME OF ` ` 1,02,474/- DECLARED IN THE RETURN FILED ON 22 ND JULY, 2002 IN THE STATUS OF FIRM. DURING THE COUR SE OF REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (A. O. IN SHORT) NOTICED THAT IN THE RETURN FILED IN THE STATUS OF FIRM, MRS. MANJU AGGARWAL, MRS. SANGEETA MALIK, MR. RAJESH NEGI, AND MR. SANJAY MITTAL WERE CLAIMED TO BE PATNERS, SHARING PROFITS IN THE FIRM IN THE RATIO OF 40:20:20:20 RES PECTIVELY. SMT. MANJU AGGARWAL AND SMT. SANGEETA MALIK, IN THEIR STATEMENTS ON OAT H RECORDED DURING THE COURSE OF SURVEY, CONFIRMED THAT THE BUSINESS OF T HE ASSESSEE WAS BEING ATTENDED TO BY THEIR HUSBANDS AND THEY MERELY SIGNE D THE PARTNERSHIP DEED ON BEING ASKED BY THEIR HUSBANDS. THE DOCUMENTS IMPOU NDED DURING THE COURSE OF SURVEY REVEALED THAT ONE SHRI PRASHANT KOCHAR WHO W AS GETTING 20% OF PROFITS ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 5 BEFORE THE PROFITS WERE BEING DISTRIBUTED AMONG OTH ERS. THE BALANCE 80% OF PROFIT WAS ALSO NOT BEING DISTRIBUTED IN THE RATIO SPECIFIED IN THE PARTNERSHIP DEED. IN THESE CIRCUMSTANCES, THE AO CONCLUDED THAT THE P ARTNERSHIP WAS NOT REAL, THE BUSINESS OF THE FIRM BEING NOT RUN AS PER THE CONST ITUTION PROVIDED IN THE PARTNERSHIP DEED. ACCORDINGLY, THE ASSESSMENT WAS MADE IN THE STATUS OF AOP ON THE BASIS OF RETURN FILED ON 4 TH FEBRUARY, 2005 AND SIGNED BY SHRI RAJESH NEGI IN THE STATUS OF AOP. AS PER PROFIT AND LOSS ACC OUNT, ANNEXED WITH THE SAID RETURN, THE AMOUNT OF CABLE SUBSCRIPTION WAS- ` ` 1,16,20,833/- AND ADVERTISING DISPLAY -` ` 15,82,500/- . TO A QUERY BY THE AO, SEEKING THE B ASIS FOR THESE AMOUNTS, THE ASSESSEE WHILE DRAWING ATTENTION OF TH E AO TO THE DOCUMENTS IMPOUNDED AS PER ANNEXURE A-22 & A-37 SUBMITTED THA T THESE DOCUMENTS CONTAINED SUMMARIZED DETAILS OF TOTAL INCOME AND EX PENDITURE THAT HAD BEEN INCURRED BY THE THEN ACCOUNTANT OF THE ASSESSEE AOP DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . ANNEXURE A-22 CONTAINED THE DETAILS FOR THE MONTHS OF APRIL, 2001 AND MAY, 2001 WHILE ANNEXURE A-37 CONTAINED PROFIT AND LOSS ACCOUNTS DRAWN UP ON DIFF ERENT DATES BY THE THEN ACCOUNTANT AND REFLECTED EXPENDITURE INCURRED BY TH E ACCOUNTANT DIRECTLY DURING THE PERIOD JUNE, 2001 TO MARCH, 2002. THE ASSESSE E POINTED OUT THAT THE PROFIT AND LOSS ACCOUNT DRAWN UP BY THE ACCOUNTANT PERTAIN ED TO JUNE AND JULY, 2001 AND THIS FACT WAS DISCOVERED SUBSEQUENT TO THE FILI NG OF RETURN WHEREIN FIGURES PERTAINING TO SAID PROFIT AND LOSS ACCOUNT WERE TAK EN TO BE FOR JULY, 2001 WHILE THE FIGURES FOR THE JUNE, 2001WERE ADOPTED FROM COM PUTERIZED BOOKS COMPILED BY THE ASSESSEE AND IMPOUNDED AS PER ANNEXURE A-10 AND A-11 (CASH BOOK AND LEDGER) OF THE PURPORTED FIRM. THUS, THE FIGURES FO R THE MONTH OF JULY,2001 WERE INFLATED. AFTER CONSIDERING THE REPLY OF THE ASSESS EE WITH REFERENCE TO DOCUMENTS IMPOUNDED AS PER ANNEXURES A-37 AND A-38, TOTAL RE CEIPTS ON ACCOUNT OF CABLE RENT AND ADVERTISEMENT DISPLAY WERE DETERMINED AT ` ` 1,07,92,888/- AND ` ` 15,24,500/- RESPECTIVELY. ON PERUSAL OF REVISED S TATEMENT OF RECEIPTS AND EXPENDITURE SUBMITTED BY THE ASSESSEE, THE AO NOTI CED THAT THE ASSESSEE CLAIMED EXPENDITURE OF ` 49,200 ON DIESEL AND OIL WHILE WHILE PAGE 4 & 8 OF ANNEXURE A-22 REVEALED EXPENDITURE OF ` 5000 & ` 4600 I.E.` ` 9,600/-ONLY. TO A ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 6 QUERY BY THE AO, THE ASSESSEE REPLIED THAT THE REMA INING EXPENSES WERE INCURRED BY MEMBERS OF THE AOP AND HAD BEEN RECORDE D ON ESTIMATE BASIS. HOWEVER, EXAMINATION OF PAGE -21 OF ANNEXURE A-38 R ELATING TO REPAIR AND MAINTENANCE REVEALED THAT DIESEL AND OIL EXPENSES W ERE DEBITED UNDER THE HEAD REPAIR AND MAINTENANCE ALSO. ACCORDINGLY, THE AO D ISALLOWED THE DIFFERENCE OF ` `39,600[49200-9600]. 3. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM IN T HE FOLLOWING TERMS:- 5. I HAVE GONE THROUGH THE ORDER OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE AR VERY CAREFULL Y. THE MONTHLY EXPENDITURE ON ACCOUNT OF DIESEL AND OIL COMES TO ` `4100/- AND ABOUT `136/- PER DAY. THE EXPENDITURE ON ACCOUNT O F DIESEL IS BOUND TO BE INCURRED IN EVERY MONTH DUE TO THE POWE R CUT. THE EXPENDITURE DEBITED IN THE SHEETS FOUND AT THE TIME OF SURVEY FOR THE MONTH OF APRIL AND MAY IS ` ` 5,000/- AND ` `4,600/- RESPECTIVELY, WHILE THE AVERAGE EXPENDITURE CLAIMED BY THE APPELL ANT ON ESTIMATE BASIS IS ` `4,100/-. THIS, IN MY OPINION, APPEARS TO BE QUITE REASONABLE. THE ASSESSING OFFICER WAS, THEREFORE, NOT RIGHT IN MAKING THE DISALLOWANCE. THE ADDITION OF ` ` 39,600/- IS ACCORDINGLY DELETED. 4.` THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, ON THE BASIS OF DOCUMENTS IMPO UNDED DURING THE COURSE OF SURVEY, THE ASSESSEE PREPARED ESTIMATED PROFIT AND LOSS ACCOUNT REFLECTING RECEIPTS TOWARDS CABLE RENT AND ADVERTISEMENT DISPL AY AND ALSO CLAIMED EXPENDITURE ON ESTIMATE BASIS. THE AO ALLOWED DEDU CTION FOR DIESEL EXPENSES ON THE BASIS OF DETAILS FOR THE MONTH OF APRIL AND MAY, 2001 REFLECTED ON PAGE 4 & 8 OF ANNEXURE A-22 WHILE THE ASSESSEE CLAIMED TOTAL AMOUNT OF ` ` 49,200/- FOR THE ENTIRE YEAR. ON APPEAL, THE LD. CIT(A) FOUND THE CL AIM REASONABLE, THE ASSESSEE HAVING CLAIMED EXPENDITURE OF ` ` 4,100/- PER MONTH ON AN AVERAGE. IN THE LIGHT OF ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 7 THESE FACTS AND CIRCUMSTANCES, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MAT TER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.1 IN THE APPEAL FOR THE AY 2002-03 IS DISMISSED. 6.. GROUND NO.2 IN THE APPEAL FOR THE AY 2002-03 AND GROUND NO.1 IN THE APPEALS FOR THE AYS. 2003-04 & 2004-05 RELATE TO DISALLOWANCE OUT OF DIWALI EXPENSES.. DURING THE COURSE OF REASSESSMEN T PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE CLAIMED AN AMOUNT OF ` `2,41,489.45 TOWARDS DIWALI EXPENSES. OUT OF THIS, EXPENDITURE OF ` ` 14,935/- HAD BEEN REFLECTED IN THE LEDGER AS PER ANNEXURE A-38. THE ASSESSEE CLAIMED THAT THE REMAINING AMOUNT OF ` `2,26,554.45 INCURRED TOWARDS PURCHASE OF SUIT LENG THS, WAS IN THE NATURE OF BUSINESS PROMOTION AND ALSO SUBMITTED THE RELEVANT BILLS. ACCORDINGLY, IT WAS CLAIMED THAT THE ENTIRE AMOUNT BE ALLOWED. HOWEVER , THE AO DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE ON THE GROUND THAT THE B ILLS FOR THE SUIT LENGTHS WERE NOT FOUND IN THE BUSINESS PREMISES OF THE ASSESSEE DURING THE COURSE OF SURVEY PROCEEDINGS. ACCORDINGLY, WHILE DOUBTING THE GENUI NENESS OF THESE BILLS FOR PURCHASE OF SUIT LENGTHS, THE AO DISALLOWED AN AMOU NT OF ` ` 2,26,554.45 IN THE AY 2002-03. 6.1 SIMILARLY IN THE AY 2003-04, THE AO NOTICED TH AT OUT OF CLAIM OF ` ` 5,45,739/- TOWARDS DIWALI EXPENSES, AN AMOUNT OF ` ` 23,235/-WAS REFLECTED IN THE LOOSE PAPERS AS PER ANNEXURE A-34 AND THE ASSE SSEE CLAIMED ` ` 5,22,504/- ON ACCOUNT OF EXPENSES TOWARDS PURCHASE OF SUIT LEN GTHS GIVEN TO CABLE OPERATORS. HOWEVER, THE AO DISALLOWED AN AMOUNT OF ` 1,22,504 ON THE GROUND THAT EXPENDITURE WAS PERSONAL IN NATURE WHILE THE ENTIRE EXPENDITURE HAVING BEEN INCURRED IN CASH , THE AO DISALLOWED 20% OF THE EXPENDITURE OF ` ` 4 LACS IN TERMS OF PROVISION OF SECTION 40A(3) OF THE ACT, RE SULTING IN TOTAL DISALLOWANCE OF ` 2,02,504/-.. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 8 6.2 LIKEWISE, IN THE AY 2004-05, THE ASSESSEE CLA IMED EXPENDITURE OF ` `5,08,247/- INCURRED IN CASH FOR PURCHASE OF SUIT LENGTHS WHILE THE AO DISALLOWED 25% OF THE EXPENDITURE, BEING PERSONAL I N NATURE. 7. ON APPEAL, THE LD. CIT(A) RESTRICTED THE DISALL OWANCE TO ` ` 26,554/- IN THE AY 2002-03 IN THE FOLLOWING TERMS:- I HAVE GONE THROUGH THE ORDER OF THE ASSESSING OFF ICER AND THE SUBMISSIONS OF THE AR VERY CAREFULLY. THE ORIGINAL CASH MEMOS HAVE ALSO BEEN PRODUCED BEFORE ME. IT IS A WELL KN OWN FACT THAT BUSINESSMAN DO GIVE SUCH GIFTS ON THE OCCASION OF D IWALI. HOWEVER, ONE CANNOT BE SURE THAT ALL THE SUIT LENGT HS PURCHASED HAVE BEEN DISTRIBUTED ONLY TO THE CABLE OPERATORS A ND/OR FOR THE PURPOSES OF BUSINESS. IT IS QUITE POSSIBLE THAT FE W SUIT LENGTHS MAY HAVE BEEN USED FOR THE PERSONAL USE OF MEMBERS OF T HE AOP. IT WILL, THEREFORE, BE FAIR AND REASONABLE, IN MY OPIN ION, TO ALLOW ONLY ` `2 LACS AS AGAINST ` `2,26,554/- CLAIMED BY THE APPELLANT. THE APPELLANT GETS RELIEF OF ` ` 2 LACS. 7.1 IN ASSESSMENT YEAR 2003-04, THE LD. CIT(A) REDU CED THE DISALLOWANCE TO THE EXTENT OF 11% OF THE EXPENDITURE OF ` `5,22,504/- IN THE FOLLOWING TERMS, WITHOUT RECORDING HIS FINDINGS ON DISALLOWANCE IN TERMS OF PROVISIONS OF SEC.40A(3) OF THE ACT :- THE ABOVE VERSION OF REVENUE AND THE LEARNED COUNS EL HAVE BEEN PERUSED.THE LD. COUNSEL HAS STATED THAT CONFIRMATIO N FROM THE CABLE OPERATORS I.E. RECIPIENTS OF GIFTS WERE ALSO FURNIS HED BEFORE THE ASSESSING OFFICER. THIS MADE INCUMBENT UPON THE AS SESSING OFFICER TO HOLD THEM FICTITIOUS IF HE WAS NOT SATIS FIED AS TO THEIR GENUINENESS. BUT HE HAS NOT DONE THAT. THE LEARNE D CIT(A) IN THE IMMEDIATELY PRECEDING YEAR UPHELD THE DISALLOWANCE TO THE EXTENT OF 11% OF THE CLAIM WHICH APPEARS TO BE REASONABLE. IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THIS YE AR ALSO THE ASSESSING OFFICER SHALL, THEREFORE, RESTRICT THE DI SALLOWANCE TO 11% OF ` ` 5,22,504/-. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 9 7.2 LIKEWISE, IN THE AY 2004-05, THE LD. CIT(A) RE STRICTED THE DISALLOWANCE TO `11% OF THE TOTAL EXPENDITURE OF ` 5,08,247/- IN THE FOLLOWING TERMS:- THE LEARNED COUNSEL HAS STATED THAT CONFIRMATIONS FROM THE CABLE OPERATORS I.E. RECIPIENTS OF GIFTS WERE ALSO FURNIS HED BEFORE THE ASSESSING OFFICER. IF THIS WAS TRUE, THIS MADE INC UMBENT UPON THE ASSESSING OFFICER TO HOLD THEM AS FICTITIOUS WITHOU T WHICH A CONFIRMATION CANNOT BE IGNORED. THIS HAS NOT BEEN DONE BY THE ASSESSING OFFICER. SINCE THE LEARNED CIT(A) IN THE IMMEDIATELY PRECEDING YEAR UPHELD THE DISALLOWANCE TO THE TUNE OF 11% OF THE CLAIM WHICH APPEARS TO BE VERY REASONABLE IN THE LI GHT OF THE FACTS AND CIRCUMSTANCES OF THIS CASE, IN THIS YEAR ALSO T HE ASSESSING OFFICER SHALL RESTRICT THE DISALLOWANCE TO 11% OF ` ` 5,08,247/-. 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDINGS OF THE LD. CI T(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE..AS IS APPARENT FROM THE AFORESAID FACTS, THE AO DISALLOWED THE EXPENDITURE INCURRED ON PROVIDING SUIT LENGTHS TO THE CABLE O PERATORS IN THE AY 2002-03 ON THE GROUND THAT THE BILLS FOR THESE WERE NOT FOUND DURING THE COURSE OF SURVEY AND IT WAS JUST AN AFTERTHOUGHT. ON APPEAL, THE LD. CI T(A) ON PERUSAL OF BILLS/ CASH MEMO REDUCED THE DISALLOWANCE BY ` `2 LACS IN THE AY 2002-03 AND RESTRICTED THE DISALLOWANCE TO 11% OF THE TOTAL EXPENDITURE OF IN THE AYS 2003-04 AND 2004-05. THOUGH, THE AO DISALLOWED 20% OF THE EXPENDITURE IN CURRED IN CASH IN THE AY 2003-04 IN TERMS OF PROVISIONS OF SECTION 40A(3) OF THE ACT, THE LD. CIT(A) DID NOT RECORD ANY FINDINGS ON THE SAID DISALLOWANCE AND I NSTEAD, RESTRICTED THE DISALLOWANCE TO 11% OF THE TOTAL EXPENDITURE. APP ARENTLY, THE IMPUGNED ORDER OF THE LD. CIT(A) FOR THE AY 2003-04 IS NOT A SPEAKING ORDER, HAVING NOT RECORDED SPECIFIC FINDINGS ON THE DISALLOWANCE U/S 40A(3) OF THE ACT. ACCORDINGLY, IN THE INTEREST OF FAIR PLAY AND JUSTICE, WE RESTORE THE M ATTER RELATING TO DISALLOWANCE IN THE AY 2003-04 TO THE FILE OF THE LD. CIT(A) WITH T HE DIRECTIONS TO ADJUDICATE THE ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 10 ISSUE OF DISALLOWANCE U/S 40A(3) OF THE ACT IN ACC ORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. AS REGARDS REMAINING DISALLOWANCE IN THE AY 2003-04 AS ALSO FOR DISALLOWANCE FOR THE AYS 200 2-03 & 2004-05, WE ARE OF THE OPINION THAT DISALLOWANCE @11% OF THE TOTAL EX PENDITURE MADE BY THE LD. CIT(A) IS REASONABLE. IN VIEW THEREOF, ESPECIALLY W HEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL, CONTROVERTING THE AF ORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.2 IN TH E APPEAL OF THE REVENUE FOR THE AY 2002-03 AND GROUND NO.1 IN THEIR APPEAL FOR THE AY 2004-05 ARE DISMISSED WHILE GROUND NO.1 IN THE APPEAL FOR THE AY 2003-04 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10.. GROUND NO.3 IN THE APPEAL FOR THE AY 2002-03 AND GROUND NO.2 IN THE APPEALS FOR THE AYS 2003-04 AND 2004-05 RELATE TO DISALLOWANCE OUT OF PROFESSIONAL FEE EXPENSES. DURING THE COURSE OF RE ASSESSMENT PROCEEDINGS FOR THE AY 2002-03, THE AO NOTICED THAT THE ASSESSEE CL AIMED AN AMOUNT OF ` ` 2,50,000/- ON ACCOUNT OF PROFESSIONAL FEE PAID TO M /S NANGIA & COMPANY ON ACCOUNT OF INSPECTION, PREPARATION, FILING AND ASSE SSMENT OF INCOME FOR THE YEAR UNDER CONSIDERATION. SINCE THE AMOUNT WAS EXCESSIV E AND UNREASONABLE, THE AO DISALLOWED AN AMOUNT OF ` ` 1 LAC IN THE AY 2002-03. 10.1 LIKEWISE, IN THE AYS 2003-04 AND 2004-05, THE AO DISALLOWED AN AMOUNT OF ` ` 50,000/- EACH OUT OF TOTAL CLAIM OF ` `2,50,000/-. 11. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOW ANCE IN THE AY 2002- 03 ON THE GROUND THAT IT WAS NOT FOR THE AO TO DECI DE AS TO HOW TO CONDUCT THE BUSINESS NOR ANY MATERIAL WAS BROUGHT ON RECORD BEF ORE HOLDING THE PAYMENT AS EXCESSIVE. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 11 11.1 SIMILARLY, IN THE AYS 2003-04 AND 2004-05, TH E LD. CIT(A) DELETED THE DISALLOWANCE, EXPENDITURE HAVING BEEN FOUND TO BE GENUINE IN TERMS OF THE AGREEMENT ENTERED INTO WITH M/S NANGIA & COMPANY. 12. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS, THE AO MADE AN ESTIMATED DISALLOWANCE OF PROFESSIONAL FEE WITHOUT DOUBTING T HE GENUINENESS OF THE EXPENDITURE IN THESE THREE ASSESSMENT YEARS SINCE T HE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL, CONTROVERTING THE AF ORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.3 IN TH E APPEAL OF THE REVENUE FOR THE AY 2002-03 AND GROUND NO.2 IN THEIR APPEALS FOR THE AYS 2003-04 & 2004-05 ARE DISMISSED . 14.. GROUND NO.4 IN THE APPEAL FOR THE AY 2002-03 RELATES TO DISALLOWANCE OF ` ` 24,500/- ON ACCOUNT OF VCD/CD RENTALS. THE AO NOTI CED THAT THE ASSESSEE CLAIMED AN AMOUNT OF ` ` 27,650/- ON ACCOUNT OF VCD EXPENDITURE. HOWEVER, ON PERUSAL OF ANNEXURES A-22 AND A-37, IT WAS FOUND THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF ` ` 5,150/- IN THE MONTHS OF APRIL AND MAY, 2001. TO A QUERY BY AO, THE ASSESSEE EXPLAINED THAT THE ASSESS EE TELECASTED TWO MOVIES ON TWO CHANNELS EVERYDAY BESIDES MOVIE SONGS. THE EXPENDITURE HAD BEEN PROVIDED ON ESTIMATE BASIS AS THESE PAYMENTS WERE M ADE DIRECTLY BY THE MEMBERS OF THE AOP. ACCORDINGLY, THE ASSESSEE PLEAD ED THAT NO DISALLOWANCE BE MADE. HOWEVER, THE AO REJECTED THE CLAIM AND DI SALLOWED AN AMOUNT OF ` ` 24,500/- ON THE GROUND THAT THE AMOUNT WAS UNVERIFI ABLE. 15. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM IN THE FOLLOWING TERMS:- ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 12 8. THE NEXT GROUND OF APPEAL IS THAT ASSESSING OF FICER HAS ERRED IN DISALLOWING A SUM OF ` `24,500/- INCURRED ON ACCOUNT OF VCD/CD RENT EXPENSES. THE APPELLANT CLAIMED EXPENS ES UNDER THIS HEAD OF ` ` 27,650/-. THE ASSESSING OFFICER NOTED THAT EXPENDITURE ON ACCOUNT OF VCD RENT WAS DEBITED IN T HE SEIZED BOOKS OF ACCOUNT AT ` ` 5,150/- FOR THE MONTH OF APRIL AND MAY, 2001. HE, HOWEVER, ALLOWED ONLY ` ` 3,150/-. LEARNED AR HAS OBJECTED TO THE DISALLOWANCE MADE. ACCORDING TO AR, IT IS COMM ON KNOWLEDGE THAT EVERYBODY HAVING CABLE CONNECTION GETS TO SEE AT LEAST 4 MOVIES A DAY. THESE MOVIES ARE HIRED ON RENT ON DA Y TO DAY BASIS AND TRANSMITTED ON THE CABLE CHANNEL. THE EXPENDIT URE ON ACCOUNT OF VCD RENT IS, THEREFORE, INCURRED ON DAY TO DAY B ASIS IN EVERY MONTH. THEREFORE, DEBIT OF THIS KIND OF EXPENDITUR E IN TWO MONTHS DOES NOT MEAN THAT NO EXPENDITURE WAS INCURRED IN T HE REMAINING 10 MONTHS. AS THE EXPENDITURE IN THE REMAINING MON THS WAS INCURRED BY THE MEMBERS OF THE AOP, THE SAME WAS NO T REFLECTED IN THE ACCOUNT PREPARED BY THE ACCOUNTANT. THE AMOUNT OF ` ` 27,650/- FOR THE ENTIRE YEAR, IN MY OPINION, IS QUITE REASON ABLE AND THE ASSESSING OFFICER WAS, THEREFORE, NOT RIGHT IN MAKI NG THE DISALLOWANCE. THE ADDITION OF ` ` 24,500/- IS ACCORDINGLY DELETED. 16. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A). 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE DISPLAYED MOVIES HIRED ON RENT ON DAY TO DAY BASIS AND TRANSMITTED ON CABLE CHANNEL. THE LD. CIT (A) FOUND THAT THOUGH THE EXPENDITURE WAS REFLECTED IN THE DOCUMENTS FOR THE MONTH OF APRIL AND MAY, 2001, FOR THE REMAINING MONTHS EXPENDITURE WAS DIRE CTLY INCURRED BY THE MEMBERS OF THE AOP AND WAS NOT REFLECTED IN THE ACC OUNT PREPARED BY THE ACCOUNTANT. ACCORDINGLY, THE LD.CIT(A) DELETED THE DISALLOWANCE, HOLDING THE EXPENDITURE REASONABLE. SINCE THE REVENUE HAVE NO T PLACED BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF T HE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.4 IN THE APPEAL OF THE REVENUE FOR ASSESS MENT YEAR 2002-03 IS DISMISSED. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 13 18. GROUND NO.5 IN THE APPEAL FOR THE AY 2002-03 AND GROUND NO.3 IN THE APPEALS FOR THE AYS 2003-04 AND 2004-05 RELATE TO DISALLOWANCE OUT OF TRAVELLING AND CONVEYANCE EXPENSES. DURING THE COU RSE OF REASSESSMENT PROCEEDINGS FOR THE AY 2002-03, THE AO NOTICED THAT THE ASSESSEE INCURRED AN EXPENDITURE OF ` `2,70,820/- ON TRAVELLING AND CONVEYANCE. SINCE TH E EXPENDITURE OF ` ` 22,500/- PER MONTH I.E., ` ` 7,500/- FOR THREE MEMBERS OF THE AOP HAD BEEN PROVIDED ON AN ESTIMATE BASIS ,WITHOUT ANY EVIDENC E IN THE IMPOUNDED DOCUMENTS ,THE AO WHILE ADMITTING THAT THE BUSINES S OF THE ASSESSEE COULD NOT BE RUN WITHOUT INCURRING EXPENSES UNDER THIS HEAD , ALLOWED AN AMOUNT OF ` 90,000 & DISALLOWED THE BALANCE AMOUNT IN THE AY 2002-03. 18.1 SIMILARLY, AN AMOUNT OF ` ` 1,22,795/- OUT OF EXPENDITURE OF ` ` 3,62,795/- IN THE AY 2003-04 AND ` `1,32,000/- OUT OF AN AMOUNT OF ` ` 4,32,000/- IN THE AY 2004- 05,WAS DISALLOWED 19. ON APPEAL IN THE AY 2002-03, THE LD. CIT(A) RE STRICTED THE DISALLOWANCE TO ` ` 30,000/- IN THE FOLLOWING TERMS:- I HAVE GONE THROUGH THE ORDER OF THE ASSESSING OFF ICER AND THE SUBMISSIONS OF THE AR VERY CAREFULLY. IT IS AN UND ISPUTED FACT THAT BUSINESS OF THIS MAGNITUDE CANNOT BE CARRIED OUT WI THOUT ANY EXPENDITURE UNDER THIS HEAD. THE TRAVELING EXPENSES ARE INCURRED FOR GOING TO PLACES FOR REPAIRING THE CABLE AND COL LECTION OF SUBSCRIPTION CHARGES ETC. THE NUMBER OF CABLE OPER ATORS TO WHOM APPELLANT IS TRANSMITTING THE SIGNAL IN MAY, 2001 W AS 71 AND THESE ARE LOCATED ALL ACROSS THE CITY OF DEHRADUN AND AS FAR AS PREM NAGAR AND DOIWALA. AT THE SAME TIME ONE CANNOT DEN Y THAT SOME EXPENSES DEBITED UNDER THIS HEAD MAY BE ON ACCOUNT OF PERSONAL TRAVELING OF THE MEMBERS OF THE AOP. I, THEREFORE, RESTRICT THE DISALLOWANCE TO ` `30,000/-. THE APPELLANTS RELIEF OF ` `1,50,820/-. 19.1. LIKEWISE, IN THE AYS 2003-04 AND 2004-05, T HE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 10% OF THE TOTAL EXPENDITURE TO MEET THE ENDS OF JUSTICE. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 14 20. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A). 21 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. AS IS APPARENT FROM THE FACTS FOUND BY THE A O, THE BUSINESS OF THE ASSESSEE COULD NOT BE RUN WITHOUT EXPENDITURE ON TR AVELLING AND CONVEYANCE, CABLE OPERATORS IN THE CITY BEING 71 IN MAY 2001,AS POINTED OUT BY THE LD. CIT(A) . THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO ` 30,000/- IN THE AY 2002-03 AND 10% OF THE TOTAL EXPENSES IN THE AYS 2003-04 AND 20 04-05 ON ESTIMATE BASIS. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES , WE FIND FINDINGS OF THE LD. CIT(A) REASONABLE. SINCE THE REVENUE HAVE NOT PLAC ED BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT (A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED T O INTERFERE. THEREFORE, GROUND NO.5 IN THE APPEAL FOR THE AY 2002-03 AND GROUND NO .3 IN THE APPEALS FOR AYS 2003-04 AND 2004-05 ARE DISMISSED. 22. GROUND NO.6 IN THE APPEAL FOR THE AY 2002-03 A ND GROUND NO.4 IN THE APPEAL FOR THE AY 2003-04 RELATE TO DISALLOWANC E OUT OF TELEPHONE EXPENSES. THE AO NOTICED DURING THE COURSE OF REASSESSMENT PR OCEEDINGS FOR THE AY 2002- 03 THAT THE ASSESSEE CLAIMED EXPENDITURE FOR LAND L INE AT OFFICE & MOBILE PHONES OF SMT. SANGEETA MALIK, SH. RAJESH NEGI AND SHRI PRADEEP AGGARWAL, MEMBERS OF THE AOP. TOTAL EXPENDITURE IN THE AY 200 2-03 IS DETAILED HEREUNDER:- 1. LAND LINE AT OFFICE ` 58,344 2, MOBILE BILL OF SMT. SANGEETA MALIK. ` 13,945 3. MOBILE BILL OF SH. RAJESH NEGI ` 27,065 4. MOBILE BILL OF SH. PRADEEP AGGARWAL. ` 72,334 (BEING 80% OF THE TOTAL BILL OF ` ` 90,468/-) ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 15 TOTAL: ` `1,71,728 22.1 TO A QUERY BY THE AO THE ASSESSEE REPLIED THA T SHRI RAJESH NEGI AND SMT. SANGEETA MALIK DID NOT HAVE ANY SOURCE OF INCOME, THEREFORE, ENTIRE EXPENSES ON MOBILES HAD BEEN CLAIMED WHILE 80% IN T HE CASE OF SHRI PRADEEP AGGARWAL. HOWEVER, THE AO WHILE NOT DOUBTING THE G ENUINENESS OF EXPENDITURE, RESTRICTED THE DISALLOWANCE TO ` ` 53,385/- ON THE GROUND THAT EXPENDITURE OF ` `5,000/- PER MONTH FOR MOBILE PHONES BESIDES LAND L INE AT OFFICE, WAS REASONABLE. 22.2 IN THE AY 2003-04, THE AO DISALLOWED AN AMOUN T OF ` ` 20,228/- OUT OF TOTAL CLAIM OF ` 1,10,228 ON THE GROUND THAT EXPENDITURE OF ` ` 7,500/- PER MONTH FOR MOBILE PHONES BESIDES LAND LINE AT OFFICE, WAS REASONABLE. 23 ON APPEAL IN THE AY 2002-03, THE LD. CIT(A) RED UCED THE DISALLOWANCE TO ` ` 8,202/- ,HOLDING 20% OF THE MOBILE EXPENSES OF SMT. SANGEETA MALIK & SHRI RAJESH NEGI FOR PERSONAL USE. 24 SIMILARLY, IN THE AY 2003-04, THE LD. CIT(A) RE DUCED THE DISALLOWANCE TO ` ` 12,070/-. 25 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A). 26 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY, THE MOBILE PHONES WERE USED, I NTER ALIA, FOR PERSONAL PURPOSES. SINCE PERSONAL USE OF MOBILE TELEPHONES B Y THE MEMBERS OF THE AOP AND THEIR FAMILY MEMBERS HAS NOT BEEN DENIED NOR IT WAS CLAIMED THAT THE SAID MEMBERS OR THEIR FAMILY MEMBERS HAD ANY INDEPENDEN T MOBILE TELEPHONES FOR PERSONAL USE, IN OUR OPINION DISALLOWANCE OF THE EXPENSES ON MOBILES , IN THE ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 16 LIGHT OF PROVISIONS OF SEC. 38(2) OF THE ACT, IS R EASONABLE . THEREFORE, GROUND NO. .6 IN THE APPEAL FOR THE AY 2002-03 AND GROUND NO.4 IN THE APPEAL FOR THE AY 2003-04 ARE DISMISSED. 27. GROUND NO.7 IN THE APPEAL FOR THE AY 2002-03 A ND GROUND NO.6 IN THE APPEAL FOR THE AY 2003-04 AS ALSO GROUND NO.5 IN THE APPEAL FOR THE AY2004- 05 RELATE TO DISALLOWANCE ON ACCOUNT OF DEPRECIATIO N ON CAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY2002-03, THE AO NO TICED THAT THE ASSESSEE CLAIMED DEPRECIATION OF ` ` 4,50,708.62 ON THE BASIS OF WRITTEN DOWN VALUE OF T HE FIXED ASSETS AS ON 01.04.2001 WHILE AN ADDITION ` ` 9 ,00,000/- WERE SHOWN ON ACCOUNT OF PURCHASE OF CAR. SINCE THE CAR WAS PURC HASED IN FEBRUARY, 2001 AND WAS NOT REFLECTED IN THE BALANCE SHEET FOR THE YEAR 2000-01, THE AO DISALLOWED DEPRECIATION OF ` ` 2,25,000/- ON THE GROUND THAT THE ASSESSEE ENHANCED THE EXPENDITURE BY CLAIMING DEPRECIATION ON CAR. 27.1 FOR SIMILAR REASONS, THE AO DISALLOWED THE CL AIM OF DEPRECIATION OF ` 1,68,750/- IN THE AY 2003-04 AND ` 1,26,562.50 IN THE AY 2004-05 . 28. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM IN THE AY 2002-03 IN THE FOLLOWING TERMS:- I HAVE GONE THROUGH THE ORDER OF THE ASSESSING OFF ICER AND THE SUBMISSIONS OF THE AR CAREFULLY. ONCE THE CAR IS U SED FOR BUSINESS PURPOSES BY THE MEMBERS OF THE AOP, THE AOP IS ENTI TLED TO DEPRECIATION. THE ASSESSING OFFICER WAS, THEREFORE , NOT RIGHT IN DISALLOWING THE DEPRECIATION. AS NO DEDUCTION HAS BEEN CLAIMED BY THE AOP ON ACCOUNT OF INSURANCE, INTEREST ON LOAN B ORROWED FROM URBAN CO-OPERATIVE BANK LTD. FOR PURCHASE OF CAR, N O DISALLOWANCE IS MADE ON ACCOUNT OF PERSONAL USE OF THE CAR, IF A NY. 28.1 LIKEWISE, IN THE AYS 2003-04 AND 2004-05, THE LD. CIT(A) ALLOWED THE CLAIM ON THE GROUND THAT CAR OWNED BY THE ASSE SSEE WAS USED FOR THEIR BUSINESS PURPOSES. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 17 29. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDINGS OF THE LD. CI T(A). 30. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. INDISPUTABLY, CAR OWNED BY THE ASSESSEE RE GISTERED IN APRIL,2001, WAS USED FOR THE PURPOSE OF ITS BUSINESS. IN THESE CIR CUMSTANCES, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO T AKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, NO.7 I N THE APPEAL FOR THE AY 2002-03; GROUND NO.6 IN THE APPEAL FOR THE AY 2003-04 AS AL SO GROUND NO.5 IN THE APPEAL FOR THE AY2004-05 ARE DISMISSED. 31.. GROUND NO.8 IN THE APPEAL FOR THE AY 2002-03 AND GROUND NO.7 IN THE APPEAL FOR THE AY 2003-04 AS ALSO IN GROUND NO. 6 IN THE APPEAL FOR THE AY2004-05 RELATE TO DISALLOWANCE OF CABLE WIRE AND AMPLIFIER EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 200 2-03, THE AO NOTICED THAT THE ASSESSEE CLAIMED EXPENSES OF ` `13,70,500/- UNDER THE HEAD CABLE WIRE AND AMPLIFIER EXPENSES, OUT OF WHICH ` ` 1,70,500/- WAS PAID TO SHRI MUKESH JAI SINGH AS REVEALED FROM PAGE 19 OF THE ANNEXURE A-37 AND R EST ALL WERE ON ACCOUNT OF LOAN IN DIFFERENT MONTHS. TO A QUERY BY THE AO, TH E ASSESSEE CLAIMED THAT THESE PAYMENTS AND LOAN TO SHRI MUKESH JAIN SINGH WERE TO WARDS REPLACEMENT OF CABLE WIRE AND AMPLIFIERS. HOWEVER, THE AO DID NOT ACCEPT THESE SUBMISSIONS ON THE GROUND THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CONTENTION AND ACCORDINGLY, THE ENTIRE AMOUNT OF ` ` 13,70,500/- WAS DISALLOWED. 31.1 SIMILARLY IN THE AY 2003-04, THE AO DISALLOWE D AN AMOUNT OF ` `10,89,800/- OUT OF CLAIM OF ` `20,89,800/- ON THE GROUND THAT ANNEXURE A-37 REVEALED ONLY AN AMOUNT OF ` ` 2,37,700/- INCLUDING ` ` 2 LACS AS PAYMENT OF LOAN. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 18 SINCE THE ASSESSEE FAILED TO SUBSTANTIATE THE ENTIR E CLAIM OF EXPENDITURE, THE AO DISALLOWED THE AMOUNT OF ` `10,89,800/- WHILE ALLOWING AN AMOUNT OF ` ` 10 LACS. 31.2 LIKEWISE IN THE AY 2004-05, THE AO ALLOWED AN AMOUNT OF ` ` 20 LACS OUT OF CLAIM OF ` ` 44,64,523/-, RESULTING IN DISALLOWANCE OF ` ` 24,64,523/-. 32. ON APPEAL IN THE AY 2002-03, THE LD. CIT(A) ALLOWED THE CLAIM IN THE FOLLOWING TERMS:- 12. THE NEXT GROUND OF APPEAL IS THAT ASSESSING O FFICER HAS ERRED IN DISALLOWING A SUM OF ` `13,70,500/- CLAIMED AS EXPENDITURE UNDER THE HEAD CABLE WIRE AND AMPLIFIER EXPENSES. ACCORDING TO ASSESSING OFFICER, APPELLANT CLAIMED ` ` 13,70,500/- AS EXPENSES, OUT OF WHICH ` `1,70,500/- HAVE BEEN SHOWN TO BE PAID TO MR. MUKESH JAI SINGH AS PER PAGE 19 OF ANNEXURE A-3 7. ACCORDING TO ASSESSING OFFICER, ASSESSEE WAS NOT ABLE TO SUBS TANTIATE THIS EXPENDITURE AND THE ENTIRE AMOUNT OF ` `13,70,500/- HAS BEEN DISALLOWED. LEARNED AR HAS VEHEMENTLY OBJECTED TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ACCORD ING TO AR, AMOUNTS WERE DEBITED IN THE P&L A/C PREPARED BY THE ACCOUNTANT AS PER DETAILS GIVEN BELOW:- S.N O. HEAD MONTH ANNE XURE AMT.[IN ` ] 1 MUKES H JAI SINGH JULY, 01 A-37 PAGE 20 1,70,500 2 TO LOAN JULYU, 01 A-37 PAGE 20 2,00,000 3. TO LOAN SEPT, 01 A-37 PAGE 21 2,10,000 4. TO LOAN SEPT,01 A-37 PAGE 26 2,10,000 5. TO LOAN NOV,01 A-37 PAGE 28 2,00,000 6. TO LOAN JAN02 A-37 PAGE 34 2,30,000 ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 19 7. TO LOAN MARCH0 2 A-37 PAGE 38 1,50,000 TOTAL 13,70,500 ACCORDINGLY TO AR, THESE EXPENSES ARE ON ACCOUNT OF CABLE WIRE, AMPLIFIER AND BOOSTER PURCHASES ON CREDIT FROM THE GREY MARKET. THE ACCOUNTANT WRONGLY MENTIONED THE HEAD IN THE P& L A/C AS LOAN. ACCORDING TO AR, IN THE BALANCE SHEET PREPAR ED AND FOUND AT THE TIME OF SURVEY, THERE IS NO LOAN OUTSTANDING OF SUCH A BIG AMOUNT AT ANY GIVEN TIME IN ANY OF THE BALANCE SHEE T SEIZED AND THEREFORE, QUESTION OF PAYMENT OF LOAN DOES NOT ARI SE. MOREOVER, PAYMENT ON ACCOUNT OF LOAN CAN BY NO STRETCH OF IMA GINATION APPEAR AS AN ITEM OF P&L A/C. FURTHER, NOWHERE IN THE P&L A/C FOUND AND SEIZED AT THE TIME OF SURVEY, THERE IS AN Y DEBIT IN ANY MONTH OF ANY AMOUNT ON ACCOUNT OF PURCHASE OF CABLE WIRE, BOOSTER AND AMPLIFIER EXCEPT PURCHASES OF CABLE WIRE EXCEPT OF ` `4,70,000/- IN THE MONTH OF APRIL, 2001 (ANNEXURE A-22 PAGE 7). THE LEARNED AR HAS VEHEMENTLY ARGUED THAT THIS KIND OF BUSINESS CANNOT BE RUN UNLESS CABLE WIFE, BOOSTERS AND AMPLIFIERS ARE REPL ACED TIME AND AGAIN. THE CABLE WIRES ARE BROKEN BY THE VEHICLES PASSING BY AND BY THE FAILING TREES AND THESE ARE ALSO STOLEN AND MANY A TIMES DAMAGED BY THE EMPLOYEES OF THE ELECTRICITY DEPARTM ENT. THE AMPLIFIERS ARE ALSO DAMAGED BY THE LIGHTENING, HIGH VOLTAGE ETC. THEREFORE, ACCORDING TO AR, JUST BECAUSE DESCRIPTIO N WRITTEN BY THE ACCOUNTANT WHO WAS NEW AND INEXPERIENCED SHOULD NOT LEAD THE ASSESSING OFFICER TO DISBELIEVE THE EXPLANATION OF THE ASSESSEE AND DISALLOW THE ENTIRE EXPENDITURE. I HAVE GONE THROUGH THE ORDER OF THE ASSESSING OFFI CER AND THE SUBMISSIONS OF THE AR VERY CAREFULLY. I AGREE WITH THE AR THAT THE BUSINESS OF TRANSMISSION AND DISTRIBUTION OF SATELL ITE CHANNELS CANNOT RUN SUCCESSFULLY UNLESS THE CABLE WIRES, BOO STERS AND AMPLIFIERS ARE MAINTAINED IN PROPER CONDITION. THE RECEIPTS OF THE APPELLANT DURING THE YEAR UNDER CONSIDERATION ARE ` 1.21 CRORES AGAINST WHICH THE EXPENDITURE CLAIMED UNDER THIS HE AD AND REPAIRS IS ` `22,16,000/- WHICH COMES TO 18% OF THE RECEIPTS. TH E NET PROFIT DECLARED BY THE APPELLANT IN THE RETURN FILED SUBSE QUENT TO THE SURVEY IS 19% WHICH SEEMS TO BE REASONABLE. EVEN O THERWISE, THE INCOME COMPUTED BY THE ASSESSING OFFICER AT ` `45.44 LACS ON RECEIPTS OF ` ` 1.21 CRORES GIVES NET PROFIT RATE OF 37.5% WHICH APPEARS TO ABNORMALLY HIGH. THE ASSESSING OFFICER WAS, THEREFORE, NOT RIGHT IN DISALLOWING THE EXPENDITURE. THE ADDI TION OF ` ` 13,70,500/- IS ACCORDINGLY DELETED. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 20 32.1 IN THE AY 2003-04 & 2004-05, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 5% OF THE TOTAL EXPENDITURE, RESULT ING IN DISALLOWANCE OF ` ` 1,04,490/- AND ` `1,23,226/- RESPECTIVELY. 33. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A). 34. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. WE FIND THAT PAGE 19 OF ANNEXURE A-37 REFLE CTED DETAILS OF ` ` 13,75,900/- AS MENTIONED IN PARA 12 OF THE IMPUGNED ORDER FOR T HE AY 2002-03. THE AMOUNT CLEARLY REFLECTED IS LOAN ON VARIOUS PAGES OF ANNEX URE A-37. BEFORE THE LD. CIT(A), THE ASSESSEE DENIED HAVING MADE ANY PAYMENT OF ANY LOAN ,AMOUNT HAVING NOT BEEN REFLECTED IN THE BALANCE SHEET. TH E LD. CIT(A) ON THE BASIS OF THE EXPENDITURE UNDER THIS HEAD & REPAIR AND THE N ET PROFIT ON THE TOTAL RECEIPTS DELETED THE DISALLOWANCE .IN THE AYS 2003-04 & 004- 05, ON IDENTICAL FACTS, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 5% OF THE TOT AL EXPENDITURE, THE AMOUNT HAVING BEEN DISALLOWED BY THE AO ON ESTIMATES. SINC E FACTS IN THESE THREE ASSESSMENT YEARS ARE IDENTICAL, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ENTIRE DISALLOWANCE .CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES IN THE CASE WHEN RECEIPTS AND EXPENDITURE ARE ESTIMATED ,DISALL OWANCE OF 5% OF THE EXPENDITURE IN THE AY 2002-03,WOULD MEET THE ENDS O F JUSTICE. WITH THESE DIRECTIONS, GROUND NO.8 IN THE APPEAL FOR THE AY 20 02-03 IS PARTLY ALLOWED WHILE GROUND NO.7 IN THE APPEAL FOR THE AY 2003-04 AS ALS O IN GROUND NO.6 IN THE APPEAL FOR THE AY2004-05 ARE DISMISSED. 35.. GROUND NO.5 IN THE APPEAL FOR THE AY 2003-04 AND GROUND NO.4 IN THE APPEAL FOR THE AY 2004-05 RELATE TO DISALLOWANC E OUT OF REPAIR AND MAINTENANCE OF CABLES. THE AO NOTICED ON PERUSAL OF PAGE 25, 27, 29,31,33,36, 40, 42, 45, 50 ,56 AND 60 OF ANNEXURE A-34 THAT THE SE PAGES CONTAINED DETAILS OF RECEIPT AND EXPENDITURE ON CASH BASIS. SINCE AN AM OUNT OF ` ` 58,000/- ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 21 COMPRISING ` ` 28,000/- IN MAY; ` ` 10,000/- IN SEPTEMBER, AND ` ` 10,000/- IN DECEMBER AS ALSO IN MARCH WAS SHOWN AS REPAIRS WHIL E IN THE STATEMENT OF INCOME AND EXPENDITURE, AN AMOUNT OF ` 13,19,050 WAS CLAIMED ON THE BASIS OF PERCENTAGE OF SALES. THE AO DISALLOWED AN AMOUNT O F ` `3,19,050/- IN THE AY2003-04 OUT OF CLAIM OF ` 13,19,050/- AND ` `7,91,760/- OUT OF CLAIM OF ` `19,91,760/- IN THE AY 2004-05 ON ESTIMATE BASIS. 36. ON APPEAL, THE LD. CIT(A) RESTRICTED THE DISALL OWANCE TO 10% OF THE TOTAL EXPENDITURE RESULTING IN DISALLOWANCE OF ` ` 1,31,900/- IN THE AY 2003-04 AND ` `1,99,176/- IN THE AY 2004-05. 37. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD.CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS OF THE LD. CIT(A). . 38. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. INDISPUTABLY, THE AO DISALLOWED AN ADHOC AMO UNT ON ESTIMATE BASIS OUT OF REPAIRS WHILE THE LD. CIT(A) FOUND DISALLOWANCE OF 10% AS REASONABLE. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTING THE AFORESAID FINDINGS OF T HE LD. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.5 IN THE APPEAL FOR THE AY 2003-04 AND GR OUND NO.4 IN THE APPEAL FOR THE AY 2004-05 ARE DISMISSED. 39. GROUND NO.9 IN THE APPEAL FOR THE AY 2002-0 3, GROUND NO.8 IN THE AY 2003-04 AND GROUND NO.7 IN THE APPEAL FOR THE AY 20 04-05 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AN D ARE , THEREFORE, DISMISSED. 40. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. ITA NO.909/DEL./2006 & ITA NOS.562 &563 DEL./2009 22 41. IN THE RESULT, APPEAL OF THE REVENUE FOR THE AYS 2002-03 & 2003-04 ARE PARTLY ALLOWED WHILE FOR THE AY 2004-05 IS DISMISSE D . SD/- SD/- (I.C. SUDHIR) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. ASSESSEE 2. ASSISTANT. CIT (OSD),RANGE-1,13-A,SUBHASH ROAD, DEHRADUN 3. CIT CONCERNED 4.CIT(A)-I, DEHRADUN 5. DR, ITAT, E BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT