SHRI RADHA MOHAN MAHESHWARI, Jaipur V. DCIT, Jaipur

ITA 991/JPR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59553 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Keywords: Income from undisclosed sources; Document seized; Question of law; Revised return; Documents seized
• Section: 143(3); 153A; 131; 145; 263; 132

Judgement Text

1 ITA 991(4)-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI SANJAY ARORA ) ITA NO. 991 & 992/JP/2011 ASSTT. YEAR : 2006-07 & 07-08. RADHA MOHAN MAHESHWARI, VS. THE DCIT, CENTRAL CIR CLE-3, PROP. M/S. R. A. GEMS, JAIPUR. 301-302, GURUKRIPA BUILDING, CHOURA RASTA, JAIPUR. ITA NO. 1056 & 1057/JP/2011 ASSTT. YEAR : 2006-07 & 07-08. THE JCIT (OSD), VS. SH. RADHA MOHAN MAHESHWARI, CENTRAL CIRCLE-3, PROP. M/S. R.A. GEMS, 301-302 , JAIPUR. GURU KRIPA BUILDING, TELIPADA, CHOURA RASTA, JAIPUR. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI P.C. PARWAL DEPARTMENT BY : SHRI SUBHASH CHANDRA DATE OF HEARING : 02.03.2012. DATE OF PRONOUNCEMENT : 15.03.2012. ORDER DATED : 15/03/2012. PER BENCH : THESE ARE FOUR CROSS APPEALS TWO EACH BY ASSESSEE AND DEPARTMENT AGAINST THE ORDERS OF LD. CIT (A) RELATING TO ASSESSMENT YEARS 2006-07 AND 2007-08. 2. IN THE DEPARTMENTS APPEAL THE ONLY ISSUE IS AGA INST DELETING THE ADDITION OF RS. 11,51,573/- AND RS. 26,26,165/- FOR ASSESSMENT YEAR S 2006-07 AND 07-08 RESPECTIVELY. 2 3. THE LD. COUNSEL OF THE ASSESSEE STATED THAT THIS ISSUE IS COVERED BY THE ORDER OF TRIBUNAL FOR THE ASSESSMENT YEAR 2008-09, COPY OF W HICH IS PLACED AT PAGES 17-40 OF THE PAPER BOOK. 4. ON THE OTHER HAND, THE LD. CIT D/R FAIRLY STATED THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL WHILE DISPOSING THE APPEAL FOR ASSESSM ENT YEAR 2008-09. HOWEVER, HE PLACED RELIANCE ON THE ORDER OF AO. 5. AFTER CONSIDERING THE ORDERS OF THE AO, LD. CIT (A) AND TRIBUNAL, WE FIND THAT IDENTICAL ISSUE WAS INVOLVED FOR ASSESSMENT YEARS 2 002-03, 03-04, 04-05 AND 08-09. THE AO MADE ADDITION FOR ACCRUED INTEREST ON DEBTORS. T HE LD. CIT (A) CONFIRMED THE ADDITION MADE BY AO FOR THESE YEARS AND ON SECOND APPEAL BEF ORE TRIBUNAL, THE ADDITION MADE ON ACCRUED INTEREST ON DEBTORS WAS DELETED BY THE TRIB UNAL. THE APPEAL OF THE ASSESSEE WAS DISPOSED OFF IN ITA NOS. 1302, 1303 & 1304/JP/2010 FOR ASSESSMENT YEARS 2002-03, 05- 06 AND 2008-09 VIDE ORDER DATED 14.7.2011. RELEVAN T FINDING OF THE TRIBUNAL ARE RECORDED IN PARA 2.11 TO 2.15 AT PAGES 10 TO 18 WHI CH ARE REPRODUCED HERE AS UNDER :- 2.11 WE HAVE HEARD BOTH THE PARTIES. THE ONLY DISPU TE BEFORE US IS AS TO WHETHER INTEREST IS TO BE CONSIDERED AS ACCRUED ON THE BASIS OF MENTIONING OF RATE OF INTEREST ON THE SLIP S FOUND DURING THE COURSE OF SEARCH. IT IS TRUE THAT THE ASSESSEE IS MAINTAINING THE MERCANTILE SYSTEM OF ACCOUNTING. HOWEVER, SECTI ON 145 CANNOT OVERRIDE SECTION 5 OF THE ACT. SECTION 5 IS CHARGING SECTION AND IN CASE THE INCOME HAS NOT ACCRUED THEN THE SAME CANNOT BE TAXED U/S 145 OF THE ACT. THERE ARE OUTST ANDING DEBTORS FOR MORE THAN 05 YEARS. THE ADVANCE INTERES T REALIZED IS UTILIZED FOR MAKING FURTHER ADVANCE AND THAT STANDS INCLUDED IN 3 THE QUANTUM OF DEBTORS. THE HON'BLE BOMBAY HIGH CO URT IN THE CASE OF FGP LTD. VS. CIT, 326 ITR 444 HAD AN O CCASION TO CONSIDER AS TO WHETHER THE DISPUTED ROYALTY CAN BE CONSIDERED TO HAVE ACCRUED. THE HON'BLE HIGH COURT FOLLOWING THE DECISION OF HON'BLE APEX COURT IN THE CASE OF GODHRA ELECTRI CITY CO. LTD. VS. CIT, 225 ITR 746 HELD THAT THERE IS NO REA L ACCRUAL OF INCOME. IT WILL BE USEFUL TO REPRODUCE THE FOLLOWIN G PARA FROM THIS DECISION THE APEX COURT IN GODHARA ELECTRICITY CO. LTD. (SUPRA) HAS LAID DOWN THE TEST OF ASSESS INCOME IN THE HANDS OF AN ASSESSE. THE ASSESSEE THEREIN WAS ALSO FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND HAD MADE ENTRIES IN THE BOOKS REGARDING ELECTRICAL CHAR GES FOR THE SUPPLY MADE TO THE CONSUMERS, HOWEVER NO REAL INCOME HAD ACCRUED TO THE ASSESSEE COMPANY. THE TRIBUNAL HAD HELD THAT IT REPRESENTED HYPOTHETICAL INCOME AND THE AO WAS NOT RIGHT IN ASSESSING IT TO TAX. BE FORE THE SUPREME COURT, IT WAS URGED THAT EVEN IN CASE OF MERCANTILE SYSTEM OF ACCOUNTING TAX CAN ONLY BE IMPOSED IF THERE IS REAL INCOME AND INCOME TAX CANN OT BE IMPOSED ON HYPOTHETICAL INCOME. THE COURT HELD EVEN IN MERCANTILE SYSTEM WHAT HAS TO BE SEEN IS WHETHER IN COME CAN BE SAID TO HAVE REALLY ACCRUED TO THE ASSESSEE COMPANY. THE COURT REFERRED TO THE JUDGMENT OF THE COURT IN H.M. KAHIPAREKH & CO. LTD. VS. CIT (1960), 39 IT R 706 (BOM.) WHICH VIEW WAS APPROVED BY THE SUPREME COURT IN CIT VS. BIRLA GWALIOR (P) LTD. 1973 CTR (S C) 4 349: (1973) 89 ITR 266 (SC). WHAT CAN THEREFORE, BE ASSESSED IS REAL INCOME AS INCOME-TAX IS A TAX ON I NCOME. THE TEST THEREFORE, BEFORE INCOME CAN BE TAX IS WHE THER THERE IS REAL ACCRUAL OF INCOME. IN OUR OPINION, TH E RATIO OF THAT JUDGEMENT FULLY APPLIES TO THE FACTS OF THE PRESENT CASE. 2.12 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE CIT VS. VTC LEASING FINANCE LTD. 215 CTR 51 HAD AN OCCA SION TO CONSIDER THE FOLLOWING QUESTION OF LAW. (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED TRIBUNAL WAS JUSTI FIED IN DELETING THE ADDITION OF RS. 17,35,958/- ON ACCOUN T OF INCOME FROM LEASE RENT MADE BY THE AO AND AS UPHELD BY THE LD. CIT(A) SPECIALLY WHEN THE ASSESSEE WAS MAINTAINING BOOKS OF ACCOUNTS ON MERCANTILE METHOD AS PROVIDED U/S 145 OF THE ACT? 2.13 HON'BLE JURISDICTIONAL HIGH COURT THEREAFTER D ECIDE THE ABOVE REFERRED QUESTION OF LAW AFTER OBSERVING AS U NDER:- 5. SO FAR AS THE FIRST QUESTION IS CONCERNED, OF COURSE, IT HAS COME THAT THE ASSESSEE WAS MAINTAINING BOOKS OF ACCOUNTS BY BOTH MANNERS VIZ . BY RECEIPT BASIS, AN D ON MERCANTILE BASIS AS WELL, INASMUCH AS, WITH RESPECT TO ACCRUAL OF LEASE INCOME, MERCANTILE SYSTEM WAS ADOP TED. HOWEVER, FOR LEASE AND HIRE INCOME, THE RECEIPT BAS IS WAS ADOPTED.. TRUE IT ALSO IS THAT BY VIRTUE OF SECTION 145 AS AMENDED, THE INCOME CHARGEABLE UNDER THE HEAD PROF ITS AND GAINS OF BUSINESS OR PROFESSION OR INCOME FRO M 5 OTHER SOURCES IS SUBJECT TO PROVISIONS OF SUB-SECT ION (2), TO BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING, REGULARLY EMPLOYED BY THE ASSESSEE. EARLIER THE PROVISION WAS THAT SUCH I NCOME WAS TO BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. IN T HE PRESENT CASE, THE LD. TRIBUNAL HAS FOUND THAT THIS UNDISPUTED AND SETTLED PRINCIPLE OF FISCAL LAW, THA T ONLY THE REAL INCOME IS TO BE TAXED AND THAT THE SAME IN COME CANNOT BE TAXED TWICE. IT WAS ALSO TAKEN TO BE SETT LED PRINCIPLE OF LAW, THAT REALITIES OF LIFE HAVE TO BE CONSIDERED WHILE ARRIVING AT THE TAXABLE INCOME. IT WAS NOTICED THAT AMENDMENT IN IN SECTION 145 HAS BEEN CARRIED OUT WITH THE SOLE AIM OF CHECKING THE ESCAP EMENT OF INCOME, WHICH OCCURRED DUE TO HETEROGENEOUS SYST EM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THEN IT WAS FOUND AS A FACT THAT THE ASSESSEE HAS BEEN FOLLOWIN G THE SAME SYSTEM AND HAS ALSO THE SAME SYSTEM IN THE IMMEDIATELY PRECEDING YEARS, AND THE SAME HAD BEEN ACCEPTED BY THE DEPARTMENT. WITH THIS IT HAS BEEN F OUND THAT IN PARA 10 THAT FOR THE PURPOSE OF SHOWING THE INCOME OF LEASE RENT, THE ASSESSEE HAD BEEN FOLLOWI NG THE RECEIPT BASIS AS ACCOUNTING, EVEN THOUGH OTHERWISE HE WAS FOLLOWING THE MERCANTILE SYSTEM. THEN THE REALI TIES OF LIFE WERE CONSIDERED ABOUT THERE BEING DEFAULT I N PAYMENT AND DISPUTES AND SOMETIMES THE HIRER REFUSE D TO MAKE PAYMENT. THEN VARIOUS JUDGMENTS HAD BEEN 6 CONSIDERED, AND IT WAS AGAIN CONSIDERED, BUT THE RE AL INCOME IS TO BE CONSIDERED WITH REFERENCE TO COMMER CIAL AND BUSINESS REALITIES OF THE SITUATION, AND NOT ME RELY WITH REFERENCE TO ENTRIES MADE IN THE BOOKS OF ACCO UNTS. THEN JUDGEMENT OF HON'BLE SUPREME COURT IN ANDHRA BANK LTD. VS. CIT, (1997) 140 CTR (SC) 344 : (1997) 225 ITR 447 (SC) WAS FOLLOWED, WHEREIN IT WAS HELD THAT THERE CANNOT BE A TAX IF NO INCOME RESULTED, DESPIT E THE ENTRY IN THE BOOK KEEPING. THEREFORE, IT WAS FOUND THAT TO ARRIVE AT A REAL INCOME IN THE CASE IN HAND, THE AC CRUAL BASIS CANNOT BE A JUSTIFIED ONE. THEN POSSIBILITY O F DOUBLE TAXATION WAS ALSO CONSIDERED, AND THUS THE GROUND R AISED BY THE ASSESSEE WAS ACCEPTED. 6. IN OUR VIEW, SO FAR AS THE LEGAL PROPOSITION PROPOUNDED, AND CONSIDERED BY LD. TRIBUNAL ARE CONCERNED, THEY ARE NOT IN DISPUTE, MORESO, WHEN TH E TRIBUNAL HAS PROCEEDED ON THE BASIS OF JUDGEMENT OF HON'BLE SUPREME COUT IN ANDHRA BANK LTD. CSE. THEREFORE, IT REMAINS ONLY A QUESTION OF FACT, AS T O WHETHER ANY INCOME WAS DERIVED BY THE ASSESSEE IN T HE RELEVANT PERIOD, SO AS TO BE ABLE TO TAX, AND THE L D. TRIBUNAL HAS CONSIDERED, THAT TAX LIABILITY CANNOT BE ATTRACTED MERELY ON THE BASIS OF ENTRIES IN THE BOO K KEEPING UNLESS INCOME IS ACCRUED. THUS, IN SUBSTANC E THE FINDING OF FACT, IS TO BE EFFECT, THAT THE ASSESSEE DID NOT EARN THE INCOME, WHICH HAS BEEN DELETED BY THE TRIB UNAL BY THE IMPUGNED ORDER. IN THAT VIEW OF THE MATTER, THE 7 QUESTION NO. 1 AS FRAMED, IS ANSWERED ACCORDINGLY, AND IT IS HELD THAT THE CONCLUSION OF THE TRIBUNAL WAS COR RECT. 2.14 THE HON'BLE PUNJAB & HARYANA HIGH COURT IN TH E CASE OF CIT VS. FEROZPUR FINANCE (P) LTD. 124 ITR 619 HELD THAT UNLESS INCOME IS ACCRUED, THERE SHOULD BE NO TAX L IABILITY AND THAT EVEN IN MERCANTILE SYSTEM OF ACCOUNTING AN AS SESSEE COULD FORGO THE WHOLE OR PART OF A DEBT WHICH WAS IRRECOV ERABLE AND THE SAME COULD NOT BE ADDED TO THE INCOME OF THE AS SESSEE. IT IS ILLUSORY TO TAKE CREDIT FOR INTEREST WHERE PRE-COND ITION IS DOUBTFUL OF RECOVERY. THE HON'BLE PUNJAB & HARYANA HIGH COURT REFERRED TO THE DECISION OF HON'BLE APEX COUR T IN THE CASE OF IN THE CASE OF SHORRJI VALLABHDAS & CO. 46 ITR 144. THE HON'BLE APEX COURT IN THAT CASE DISMISSED THE APPE AL OF THE DEPARTMENT AGAINST THE DECISION OF THE HON'BLE PUNJ AB & HARYANA HIGH COURT REPORTED IN 144 ITR 50 (ST). IT WILL BE USEFUL TO REPRODUCE RELEVANT PORTION OF ACCOUNTING STANDARD AS-9 9 EFFECT OF UNCERTAINTIES ON REVENUE RECOGNITIO N 9.1 RECOGNITION OF REVENUE REQUIRES THAT REVENUE I S MEASURABLE AND THAT AT THE TIME OF SALE OF THE REND ERING OF THE SERVICE IT WOULD NOT BE UNREASONABLE TO EXPECT ULTIMATE COLLECTION. 9.2 WHERE THE ABILITY TO ASSESS THE ULTIMATE COLLEC TION WITH REASONABLE CERTAINTY IS LACKING AT THE TIME OF RAISING ANY CLAIM, E.G. FOR ESCALATION OF PRICE, EXPORT INC ENTIVES, INTEREST ETC. REVENUE RECOGNITION IS POSTPONED TO T HE 8 EXTENT OF UNCERTAINLY INVOLVED IN SUCH CASES, IT MA Y BE APPROPRIATE TO RECOGNIZE REVENUE ONLY WHEN IT IS REASONABLY CERTAIN THE ULTIMATE COLLECTION WILL BE MADE. WHERE THERE IS NO UNCERTAINTY AS TO THE ULTIMATE COLLECTION, REVENUE IS RECOGNIZED AT THE TIME OF SA LE OR RENDERING OF SERVICE EVEN THOUGH PAYMENTS ARE MADE BY INSTALMENTS. 9.3 WHEN THE UNCERTAINTY RELATING TO COLLECTABILITY ARISES SUBSEQUENT TO THE TIME OF SALE OR THE RENDER ING OF THE SERVICE, IT IS MORE APPROPRIATE TO MAKE A SEPAR ATE PROVISION TO REFLECT THE UNCERTAINTY RATHER THAN TO ADJUST THE AMOUNT OF REVENUE ORIGINALLY RECORDED. 9.4 AN ESSENTIAL CRITERION FOR THE RECOGNITION OF REVENUE IS THAT THE CONSIDERATION RECEIVABLE FOR TH E SALE OF GOODS, THE RENDERING OF THE SERVICE OR FROM THE USE OF OTHERS OF ENTERPRISE RESOURCES IS REASONABLY DETERM INABLE. WHEN SUCH CONSIDERATION IS NOT DETERMINABLE WITHIN REASONABLE LIMITS, THE RECOGNITION OF REVENUE IS POSTPONED. 9.5 WHEN RECOGNITION OF REVENUE IS POSTPONED DUE TO THE EFFECT OF UNCERTAINTIES, IT IS CONSIDERED AS RE VENUE OF THE PERIOD IN WHICH IT IS PROPERLY RECOGNIZED. 2.15 IF WE APPLY THE ABOVE REFERRED PORTION OF ACCO UNTING STANDARD AS-9, THEN IT IS CLEAR THAT IN THE INSTANT CASE THERE ARE DEBTORS WHERE PRINCIPLE IS DOUBTFUL. IT IS ALSO NOT ASCERTAINABLE FROM ANY SEIZED DOCUMENTS THAT THE ASSESSEE HAS REC EIVED THE 9 INTEREST THOUGH THE ASSESSEE ADMITTED THAT HE HAS R ECEIVED THE ADVANCE INTEREST ONLY FOR 2/3 MONTHS. THE CONTENTIO N OF THE ASSESSEE IS THAT THE INTEREST IS MENTIONED IN THE A PPROVAL MEMO SO THAT THE DEBTOR SHOULD BE UNDER PRESSURE TO REPA Y THE AMOUNT AS EARLY AS POSSIBLE. IN CASE INTEREST IS REALIZED THEN THE SAME IS USED FOR MAKING ADVANCE AND RECEIPT OF INTEREST IS ACCRUING AS AND WHEN THE DEBT IS REALIZED. THE ASSESSEE IS BASI CALLY EARNING FROM THE TRADING OF ROUGH STONES I.E. KHARAR AND TH E EARNING OF THE INTEREST IS INCIDENTAL. THE TAXABILITY ON THE BASIS OF THE REAL INCOME THEORY HAS BEEN CONSIDERED IN THE FOLLOWING CASE LAWS : 1. CIT VS. FAL INDUSTRIES LTD. , 314 ITR 47 (MAD.) 2. CIT VS. CITY UNION BANK LTD. (MAD.) 3. CIT VS. FEDERAL BANK LTD., (KER.) 4. CIT VS. BIRLA GWALIOR (P) LTD., 89 ITR 266 (SC) 5. RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD. VS. DCI T (ITA NO. 28/JP/2010 DATED 20-08-2010) 6. MADAN LAL JAIN VS. ACIT,(ITA NO. 198.JP/2005), ITAT JAIPUR (COPY OF AVAILABLE IN PAPER BOOK) WHEN WE ARE RELYING ON SOME PART OF THE STATEMENT O F ASSESSEE AS CORRECT THEN WE MUST APPRECIATE THAT AS SESSEE HAS GIVEN A TRUE STATE OF AFFAIR. MENTION OF INTEREST W AS TO HAVE PRESSURE ON DEBTORS TO REPAY. HENCE REALIZATION OF INTEREST IS NOT CERTAIN. IT IS THEREFORE, HELD THAT THE INTEREST IS TO BE TAXED AT THE TIME WHEN THE SAME ACCRUES TO THE ASSESSEE AT THE T IME OF REALIZATION OF DEBT. SUCH REALIZATION STANDS INCLUD ED IN THE AMOUNT OF DEBTORS AND HENCE NO FURTHER ADDITION IS REQUIRED TO BE MADE. AFTER THE DATE OF SEARCH, THE DEBTORS HAVE NOT PAID THE INTEREST AS PER CONTENTION OF THE ASSESSEE AND THER E IS NO ADVERSE 10 MATERIAL TO SUGGEST THAT INTEREST HAS BEEN REALIZED ALONGWITH REALIZATION OF DEBT. WE THEREFORE, FEEL THAT THE LD . CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF INTERES T TO THE EXTENT OF RS. 32,39,690/-. THUS GROUND NO. 1 O THE ASSESSE E IS ALLOWED AND GROUND NO. 1 OF THE REVENUE IS DISMISSED. 6. SINCE FACTS ARE IDENTICAL AND LD. CIT D/R HAS FA IRLY ACCEPTED THE FACTS ARE IDENTICAL AND ISSUE IS COVERED BY THE ORDER OF TRIBUNAL, HOWE VER, HE PLACED RELIANCE ON THE ORDER OF THE AO, THEREFORE, WE CONFIRM THE ORDER OF LD. CIT (A) FOR THESE TWO YEARS WHO HAS DELETED THE ADDITION ON ACCOUNT OF ACCRUED INTEREST ON DEBTORS BY FOLLOWING THE ORDER OF TRIBUNAL FOR ASSESSMENT YEAR 2008-09 AND FOR OTHER ASSESSMENT YEARS. THE GROUND OF THE DEPARTMENT, THEREFORE, FAILS. 7. NOW WE WILL TAKE UP THE APPEALS OF THE ASSESSEE. 8. FIRST ISSUE IN APPEAL OF THE ASSESSEE IS AGAINST HOLDING THAT THE ASSESSED INCOME OF THE ASSESSEE CANNOT BE TAKEN AT A FIGURE LOWER THAN THE RETURNED INCOME AND THEREBY DIRECTING THE AO TO ADOPT THE ADDITIONAL INCOME OFF ERED IN THE RETURN AT RS. 1 CRORE WHICH WAS SUBJECT TO FINALIZATION OF ASSESSMENT BY DEPART MENT AS AGAINST ADDITIONAL INCOME OF RS. 68,44,000/- DETERMINED ON THE BASIS OF SEIZED M ATERIAL. THIS ISSUE IS FOR ASSESSMENT YEAR 2006-07 AND SIMILARLY THE ASSESSEE IS OBJECTIN G IN ADOPTING THE RETURNED INCOME OF RS. 3 CRORES INSTEAD OF ADDITIONAL INCOME AT RS. 2, 95,39,000/- DETERMINED ON THE BASIS OF SEIZED MATERIAL FOR ASSESSMENT YEAR 2007-08. 9. BRIEF FACTS IN RESPECT TO THESE ISSUES ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN PRECIOUS AND SEMI PRECIOUS STONES IN THE NAME & STYLE OF M/S R.A. GEMS. SEARCH U/S 132 WAS CARRIED OUT AT THE BUSINESS PREM ISES OF THE ASSESSEE ON 21.06.2007. 11 ASSESSEE IN HIS STATEMENT DT. 22.06.2007 U/S 132(4) EXPLAINED THE NATURE OF ACTIVITIES CARRIED ON BY HIM. THEREAFTER, HE OFFERED INCOME OF RS. 5 CRORE ON ACCOUNT OF UNDISCLOSED INCOME ON THE BASIS OF VARIOUS ANNEXURE WHICH WAS S TATED TO BE INVESTED IN THE FORM OF DEBTORS AND CASH FOUND. 9.1. STATEMENT OF ASSESSEE WAS AGAIN RECORDED U/S 1 31 ON 17-7-07 BY ADIT IN WHICH EXPLANATION WAS ASKED ABOUT VARIOUS ANNEXURE SEIZED IN THE COURSE OF SEARCH. THEREAFTER, ASSESSEE INCREASED THE SURRENDERED AMOUNT TO RS. 6 CRORES. ASSESSEE AFTER OBTAINING COPIES OF THE SEIZED DOCUMENTS AND ANALYZING THE SA ME FOUND THAT THE PAPERS PERTAIN TO PERIOD JAN 06 TO THE DATE OF SEARCH JUNE 2007 I.E. A.Y. 06-07 TO A.Y. 08-09. AS PER THESE PAPERS THE AMOUNT OF DEBTORS WAS WORKED OUT AT RS. 4.25 CRORE AND CONSIDERING THE CASH SEIZED AT RS. 26 LACS, THE UNDISCLOSED INCOME WAS W ORKED OUT AT RS. 4.51 CRORE. HOWEVER, CONSIDERING THE STATEMENT U/S 132(4) WHERE INCOME W AS OFFERED AT RS. 5 CRORE, ASSESSEE INCLUDED ADDITIONAL INCOME OF RS. 5 CRORE IN HIS RE TURNS FOR A.Y. 2006-07 TO 2008-09 WITH A REQUEST THAT IF LATER ON THE DEPARTMENT ASSESS TH E INCOME IN ANY OTHER YEAR, INCOME TO THAT EXTENT BE REDUCED FROM THE INCOME OFFERED BY T HE ASSESSEE IN THE RETURN. COPY OF NOTES TO RETURN FILED WITH RETURN U/S 153A. 9.2. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSES SEE AFTER DETAILED ANALYSIS OF VARIOUS PAPERS WORKED OUT THE INCOME BOTH ON GENERA TION BASIS AND ON INVESTMENT BASIS. ON GENERATION BASIS, PROFIT WAS WORKED OUT AT RS. 4 .49 CRORES AND ON INVESTMENT BASIS AT RS. 4.59 CRORES AS AGAINST RS. 5 CRORE OFFERED BY T HE ASSESSEE. YEAR-WISE SPLIT OF SAID AMOUNT WAS ALSO SUBMITTED VIDE LETTER DATED 2-9-09 . THE SUMMARIZED POSITION OF INCOME SO WORKED OUT IS TABULATED BELOW:- 12 RS. IN LACS A.Y. UNACCOUNTED TURNOVER PROFIT ON TRADING DEBTORS (NET)/ CASH INCOME OFFERED BY THE ASSESSEE 02-03 - - 23 - 04-05 - - 9 - 05-06 - - 42.25 - 06-07 5475 68.44 66.15 100 07-08 23631 295.39 282.99 300 08-09 6814 85.17 10 +26 100 TOTAL 35920 449.00 459.39 500 9.3. AO ACCEPTED THE ABOVE WORKING OF THE PROFIT AN D INVESTMENT IN DEBTORS/CASH. HOWEVER, HE ASSESSED THE INCOME YEAR WISE. THUS, IN THE YEAR WHERE THERE IS NO EVIDENCE OF GENERATION OF INCOME BUT EVIDENCE AVAILABLE FOR INVESTMENT IN DEBTORS, ADDITION WAS MADE FOR THE DEBTORS. IN THE YEARS, WHERE BOTH EVID ENCE OF GENERATION OF INCOME AND INVESTMENT IN DEBTORS EXIST, HIGHER OF THE TWO WAS CONSIDERED AS INCOME BUT IF THE INCOME DISCLOSED BY THE ASSESSEE IS MORE THAN THE SAID AMO UNT, HE ADOPTED THE AMOUNT DISCLOSED BY THE ASSESSEE AS INCOME IN THAT YEAR. HE ALSO WOR KED OUT INTEREST ON THE DEBTORS AND ASSUMED THAT THE SAME IS REALIZED ON YEAR TO YEAR B ASIS. SUMMARILY, THE AO ASSESSED THE INCOME OF THE ASSESSEE IN THE VARIOUS ASSESSMENT YE ARS IN THE FOLLOWING MANNER:- A.Y. PROFIT FROM UNDISCLOSED TRADING ACCRUED INTEREST ON DEBTORS TOTAL INCOME FROM TRADING AND INTEREST NET INVESTMENT IN DEBTORS / CASH INCOME OFFERED BY THE ASSESSEE INCOME ASSESSED BY AO 02-03 - 86,940 86,940 23,00,000 - 23,00,000 03-04 - 1,91,287 1,91,287 - 1,91,287 04-05 - 2,47,834 2,47,834 9,00,000 - 9,00,000 05-06 - 4,44,474 4,44,474 42,25,000 - 42,25,000 06-07 68,44,000 11,51,573 79,95,573 66,15,000 100,00,000 100,00,000 07-08 295,39,000 26,26,165 321,65,165 282,99,411 300,00,0 00 321,65,165 08-09 85,17,000 50,36,637 135,53,637 10,00,000 + 26,00,000 (CASH) 100,00,000 135,53,637 TOTAL 449,00,000 97,84,910 5,46,84,910 459,39,411 5 00,00,000 633,35,089 13 9.4. THE APPEALS FOR A.Y. 02-03, 05-06 & 08-09 WAS FIRST DECIDED BY CIT(A) VIDE ORDER DT. 27.09.2010. IN THIS ORDER, ADDITION ON AC COUNT OF ACCRUED INTEREST ON DEBTORS MADE BY THE AO WAS CONFIRMED. HOWEVER, HONBLE ITAT VIDE ITS ORDER DT. 14.07.2011 (PB 17-40 DELETED THE SAME AS PER DETAILED DISCUSS ION IN PARA 2.11 TO 2.15(PB 26-34) 10. AFTER THE ORDER OF HONBLE ITAT, APPEALS FOR TH E YEAR UNDER CONSIDERATION WAS DECIDED BY CIT(A), WHERE HE DELETED THE ADDITION OF ACCRUED INTEREST ON DEBTORS. HOWEVER, IT HELD THAT ASSESSED INCOME OF THE ASSESSEE CANNOT BE TAKEN AT A FIGURE LOWER THAN THE RETURNED INCOME. IN DOING SO, HE GAVE THE FOLLOWING FINDINGS:- (PAGE 10-12 OF THE ORDER, PARA 2.9 TO 2.11) 2.9 I HAVE CONSIDERED THE ARGUMENTS OF THE AR OF T HE APPELLANT AND PERUSED THE ASSESSMENT ORDER/CIT (A) ORDER /ITAT ORDER AND RELE VANT RECORDS. THE ISSUE OF ADDITION FOR ACCRUED INTEREST ON DEBTORS HAS ALR EADY BEEN DECIDED BY ME IN FAVOUR OF THE APPELLANT IN ITA NO. 194 & 195/09-10 FOR A.Y. 2003-04 & 2004-05 CONSIDERING THE FACT THAT HONBLE ITAT IN A PPEAL ORDER FOR A.Y. 2008-09 HAS DELETED THE ADDITION OF ACCRUED INTERES T CONFIRMED BY ME. FOR THE REASON GIVEN IN THAT APPEAL ORDER IN ITA NO. 194 & 195/09-10 FOR A.Y. 2003- 04 AND A.Y. 2004-05 PARTICULARLY RESPECTFULLY FOLLO WING THE ORDER OF HONBLE ITAT IN A.Y. 2008-09 WHEREIN HONBLE ITAT DELETED T HE ADDITION, THE INTEREST INCOME OF RS. 11,51,573/- SO INCLUDED BY T HE AO IN A.Y. 2006-07 WHILE COMPUTING THE TOTAL INCOME AT RS. 79.95 LACS IS EXCLUDED, THOUGH THE SAME IS NOT GOING TO FINALLY AFFECT THE INCOME ASSE SSED WHICH IS TAKEN BY THE AO AT RS. 1 CRORE, WHICH IS SHOWN BY THE APPELLANT ITSELF IN THE RETURN OF INCOME. SIMILARLY ACCRUED INTEREST OF RS. 26,26,165 /- SO INCLUDED BY THE AO IN THE A.Y. 2007-08 , WHILE COMPUTING TOTAL UNACCOUNTE D INCOME AT RS. 3,21,65,165/- IS HEREBY EXCLUDED, BUT THE TOTAL INC OME IS RESTRICTED TO RS. 3 CRORES AS DECLARED BY THE ASSESSEE, GIVING A RELIEF OF RS. 21,65,165/-. 2.10 AS REGARDS ANOTHER ISSUE OF REDUCING THE INCOM E TO THE AMOUNT AS WORKED BY THE AO, IGNORING THE ADDITIONAL INCOME DECLARED IN THE RETURN, I HAVE CONSIDERED THE ARGUMENT OF THE APPELLANT AND PERUSE D THE DETAILS AVAILABLE ON RECORD. IT IS UNDISPUTED THAT DURING THE COURSE OF SEARCH THE APPELLANT HAS OFFERED RS. 5CRORES AS HIS ADDITIONAL INCOME IN THE STATEMENT RECORDED U/S 132(4). THEREAFTER, GOING THROUGH THE SEIZED DOCUME NTS AND OTHER RELEVANT DETAILS THE APPELLANT FILED THE RETURN OF INCOME OF DIFFERENT YEARS IN RESPONSE TO NOTICE U/S 153A ON 27-12-2007 FOR A.Y. 2006-07 DECL ARING ADDITIONAL INCOME OF RS. 1CRORE. SIMILARLY, RETURN FOR A.Y. 2007-08 W AS FILED U/S 153A DECLARING 14 ADDITIONAL INCOME OF RS. 3 CRORES. OBVIOUSLY THE AP PELLANT HAS FILED THESE RETURNS AFTER CONSIDERING THE DOCUMENTS FOUND AND/O R SEIZED DURING THE COURSE OF SEARCH AND OTHER RELEVANT MATERIAL. ACCORDINGLY THE CLAIM OF APPELLANT SO MADE THAT AS THE UNACCOUNTED INCOME DETECTED BY THE AO IS LESS, THE RETURN INCOME SO SHOWN MAY BE REDUCED, IS NOT ACCEPTABLE. THE AR OF THE APPELLANT HAD REFERRED TO THE CBDT CIRCULAR NO. 14 DATED 11-0 4-1955. HOWEVER, THIS CIRCULAR IS NOT RELEVANT TO THE ISSUE UNDER CONSIDE RATION. THE CIRCULAR TALKS ABOUT RELIEF OR REFUND NOT SO CLAIMED BECAUSE OF IG NORANCE OF THE ASSESSEE. IN FACT THIS IS NOT THE SITUATION IN THE APPELLANT CAS E. THE FACTS OF THE CASE OF S. NAGRAJ V. STATE OF KARNATAKA 4 SCC 595 REFERRED BY THE AR, ARE DIFFERENT AND, ACCORDINGLY DECISION IS NOT APPLICABLE IN THE PRESE NT CASE. OTHER CASE LAWS REFERRED BY THE AR ALSO DISTINGUISHABLE ON FACTS AN D ACCORDINGLY ARE NOT APPLICABLE IN THE INSTANT CASE. THEREAFTER, CIT (A) BY REFERRING TO THE PROVISIONS OF SECTION 143(2) HELD THAT PURPOSE OF ISSUE OF NOTICE U/S 143(2) IS TO ENSURE THAT ASSESS EE HAS NOT UNDERSTATED THE INCOME OR HAS NOT CLAIM EXCESSIVE LOSS. THEREFORE, ASSESSMENT PAS SED U/S 143(3) IS FOR ASSESSING THE INCOME AT A FIGURE HIGHER THAN THE RETURNED INCOME & IT CANNOT BE AT A FIGURE LOWER THAN THE INCOME SHOWN BY THE ASSESSEE IN THE RETURN. HE ALSO RELIED ON THE DECISION OF SUPREME COURT IN GOETZ INDIA LTD. VS. CIT 284 ITR 323 TO HE LD THAT DEDUCTION SOUGHT TO BE CLAIMED BY THE ASSESSEE BY FILING THE LETTER BEFORE THE AO IS NOT ENTERTAINABLE OTHERWISE THAN BY FILING A REVISED RETURN & THEREFORE NOTES F ILED WITH THE RETURN CANNOT BE ENTERTAINED. 11. THE LD. COUNSEL OF THE ASSESSEE REITERATED HIS CONTENTION RAISED BEFORE LOWER AUTHORITIES. ATTENTION OF THE BENCH WAS DRAWN ON W RITTEN SUBMISSIONS, COPY OF WHICH IS PLACED ON RECORD. RELIANCE IS PLACED ON VARIOUS CA SE LAWS MENTIONED IN THE WRITTEN SUBMISSION. WRITTEN SUBMISSIONS WERE EXPLAINED ALS O BY LD. A/R DURING THE HEARING OF APPELLATE PROCEEDINGS. 12. ON THE OTHER HAND, THE LD. D/R PLACED RELIANCE ON THE ORDER OF LD. CIT (A). IT WAS FURTHER SUBMITTED THAT THIS ISSUE WAS ALSO INVOLVED IN ASSESSMENT YEAR 2008-09 AND 15 TRIBUNAL HAS INDIRECTLY CONFIRMED THE SURRENDERED A MOUNT BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT INCOME OF A PARTICULAR YEAR CANNOT B E ADJUSTED IN ANY OTHER YEAR AS THERE IS NO PROVISION UNDER THE I.T. ACT. 13. IN REPLY, THE LD. COUNSEL OF THE ASSESSEE STATE D THAT THIS ISSUE WAS NOT INVOLVED FOR ASSESSMENT YEAR 2008-09 AS THE INCOME DETERMINED FO R A.Y. 2008-09 WAS MORE THAN THE INCOME OF RS. 1 CRORE OFFERED BY THE ASSESSEE. THER EFORE, THERE WAS NO QUESTION OF ADJUSTMENT OF ADDITIONAL INCOME AGAINST ANY OTHER A DDITIONAL INCOME DETERMINED BY THE AO OR BY THE ASSESSEE HIMSELF. MOREOVER, THE OBSER VATIONS OF THE TRIBUNAL ARE IN FAVOUR OF THE ASSESSEE. RELEVANT PORTION OF OBSERVATION O F THE TRIBUNAL WAS READ ALSO. 14. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. THE LD. COUNSEL OF THE ASSESSEE HAS FILED DETAILED WRITTEN SUBMISSI ONS AND IT WILL BE USEFUL TO MAKE THOSE SUBMISSIONS AS PART OF THIS ORDER. THEREFORE, THE S UBMISSIONS MADE BY LD. COUNSEL OF THE ASSESSEE ARE REPRODUCED HERE AS UNDER :- 1. THE ISSUE INVOLVED IN THIS GROUND IS WHETHER A O IS OBLIGED TO ASSESS THE INCOME OF THE ASSESSEE AT THE INCOME DECLARED I N THE RETURN EVEN WHEN THE ACTUAL INCOME IS LESS THAN THE DECLARED INCOME. IN THE PRESENT CASE, ASSESSEE DECLARED INCOME AT RS. 1 CRORE & RS. 3 CRORES ON TE NTATIVE BASIS FOR A.Y. 06-07 & 07-08 RESPECTIVELY WITH A RESERVATION THAT IF INCOM E IS ASSESSED IN SOME OTHER YEAR THE SAME BE ADJUSTED AGAINST THE INCOME OFFERED IN THAT YEAR (PB 14) . IT MAY BE NOTED THAT AO HAS ASSESSED ADDITIONAL INCOME OF RS. 74.25 LACS (23+9+42.25) IN A.Y. 02-03, 04-05 & 05-06 AGAINST NIL ADDITIONAL IN COME DECLARED BY ASSESSEE. ONCE THE SAME IS ASSESSED, THE ADJUSTMENT HAS TO BE ALLOWED WHERE ASSESSEE HAS OFFERED EXCESS ADDITIONAL INCOME MORE PARTICULARLY CONSIDERING THE RESERVATION 16 MADE BY WAY OF NOTES TO THE RETURN. THE INCOME FOR THESE YEARS I.E. A.Y. 06-07 &07-08 WORKED OUT BY THE AO EXCLUDING INTEREST IS O NLY RS. 68,44,000/- & RS. 2,95,39,000/- RESPECTIVELY. THEREFORE, INCOME FOR A .Y. 06-07 & 07-08 IS TO BE ASSESSED ONLY AT RS. 68,44,000/- & RS. 2,95,39,000/ - RESPECTIVELY AND NOT RS. 1 CRORE & RS. 3 CRORES DECLARED IN THE RETURN PARTICU LARLY WHEN AO HAS ASSESSED THE INCOME IN EARLIER YEARS. 2. IT IS A SETTLED LAW THAT AN ADMISSION OR AN ACQ UIESCENCE ON PART OF ASSESSEE CANNOT BE FOUNDATION OF ASSESSMENT. IT IS ALWAYS OPEN TO ASSESSEE TO DEMONSTRATE AND SATISFY THAT PARTICULAR INCOME IS N OT TAXABLE IN HIS HANDS. IN THIS CASE ASSESSEE HAS BROUGHT MATERIAL ON RECORD THAT I NCOME OF RS. 1 CRORE & RS. 3 CRORES OFFERED BY HIM IS ON TENTATIVE BASIS AND THE CORRECT INCOME FROM PROFIT IN TRADING WAS WORKED OUT AT RS. 68,44,000/- & RS. 2,9 5,39,000/- RESPECTIVELY FOR A.Y. 06-07 & 07-08 WHICH IS ACCEPTED BY THE AO AND THEREFORE, AO CANNOT SUBSTITUTE THIS ACTUAL INCOME WITH THE TENTATIVE IN COME OFFERED BY THE ASSESSEE IN THE RETURN. 3. RELIANCE IN THIS CONNECTION IS PLACED ON THE FOLLO WING CASES:- SUSHIL KUMAR DAS VS. ITO 11 ITR 17 (KOL) (TRIB.) THE MOOT QUESTIONS ARISING OUT OF THIS APPEAL IS WH ETHER THE INCOME DETERMINED BY THE ASSESSING OFFICER ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE CAN BE A FIGURE LOWER THAN THE INCOME RETURNED BY THE ASSESS EE. IT IS WELL SETTLED THAT THE PRINCIPAL FOR DETERMINING THE TAXABLE INCOME OF THE ASSESSEE UNDER THE IT ACT SHOULD BE WITHIN THE PURVIEW OF THE LAW IN FORCE. I F THE TAXABLE INCOME DETERMINED BY THE AO IS NOT IN ACCORDANCE WITH SUCH PRINCIPLE IT IS OPEN TO THE ASSESSEE TO CONTEND THE SAME BEFORE THE HIGHER AUTHORITIES TO F OLLOW THE CORRECT APPLICATION OF LAW TO DETERMINE THE ACTUAL TAXABLE INCOME OF THE A SSESSEE. IN OUR CONSIDERED VIEW, THE LOWER AUTHORITIES ARE NOT EXPECTED, TO SA Y THAT MERELY BECAUSE THE ASSESSEE HAS RETURNED INCOME WHICH IS HIGHER THAN T HE INCOME DETERMINED IN ACCORDANCE WITH LEGAL PRINCIPALS SUCH RETURNED INCO ME CAN BE TREATED AS LAWFULLY 17 ASSESSED. AN ASSESSEE IS LIABLE TO PAY TAX ONLY UPO N THE TAXABLE INCOME. THE LAW IMPOSED BY THE AO TO ASSESS THE INCOME ACCORDING TO LAW AND DETERMINED THE TAX PAYABLE THEREON. IN DOING SO, THE AO CANNOT ASSESS THE INCOME OF THE ASSESSEE AN AMOUNT WHICH IS NOT TAXABLE AS PER LAW THOUGH SHOWN BY THE ASSESSEE IN THE RETURN. IT IS ALWAYS OPEN TO THE ASSESSEE TO TAKE A PLEA THAT THE TAXABLE INCOME THOUGH SHOWN AS INCOME IS NOT TAXABLE UNDER THE LAW BEFORE THE HIGHER AUTHORITIES. CIT(A) WITHOUT GOING INTO MERIT OF THE CASE HELD TH AT CIT(A) IS NOT HAVING ANY POWER TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE AT THE APPELLATE STAGE, WHICH IS NOT CORRECT. CIT VS BAKELITE HYLAM LTD. (1999) 237 ITR 392 (AP) THE ASSESSEE-COMPANY FILED ITS RETURN FOR THE ASSES SMENT YEAR 1989-90 ON DECEMBER 29, 1989, SHOWING A NET INCOME OF RS. 2,32 ,41,730/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1)(A) OF THE INCOME-TAX ACT, 1961, ACCEPTING THE RETURNED INCOME AND AN INTIMATION TO THAT EFFECT WA S ISSUED TO THE ASSESSEE- COMPANY ON JUNE 11, 1990, WHICH RESULTED IN A REFUN D OF AN AMOUNT OF RS. 1,08,00,894/-. SUBSEQUENTLY THE CASE OF THE ASSESSE E-COMPANY WAS TAKEN UP FOR SCRUTINY UNDER SECTION 143(3) OF THE ACT ON MARCH 2 7, 1992. THE ASSESSING OFFICER DETERMINED THE TAXABLE INCOME AT RS. 1,76,6 2,580/- WHICH RESULTED IN A FURTHER REFUND OF RS. 44,82,929. THE COMMISSIONER O F INCOME-TAX INITIATED REVISIONAL PROCEEDINGS UNDER SECTION 263 OF THE ACT . BY AN ORDER DATED MARCH 17, 1993, PASSED U/S 263, CIT DIRECTED THE ASSESSING OF FICER TO MODIFY THE ASSESSMENT ORDER IN SUCH A WAY THAT THE INCOME DETE RMINED WOULD NOT BE LESS THAN THE RETURNED INCOME AND NO REFUND SHALL ARISE THERE BY. THE TRIBUNAL ALLOWED THE APPEAL FILED BY THE ASSESSEE AND SET ASIDE THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE ACT. IN REFEREN CE FILED BY THE DEPARTMENT, HIGH COURT HELD THAT AMENDMENT CANNOT BE READ TO ME AN THAT THE LEGISLATURE HAS WITHDRAWN THE POWERS OF THE ASSESSING AUTHORITY TO GRANT REFUND TO THE ASSESSEE IN APPROPRIATE CASES. THE PROVISIONS UNDER SUB-SECTION (3) OF SECTION 143 OF THE ACT CANNOT BE READ IN ISOLATION. ON READING OF CLAUSE ( B) OF SUB-SECTION (4) OF SECTION 143 OF THE ACT, IT IS CLEAR THAT ON AN ASSESSMENT M ADE UNDER SECTION 143(1)(A) OF THE ACT, AND SUCH ASSESSMENT RESULTS IN A REFUND, I F SUCH REFUND EXCEEDS THE AMOUNT REFUNDABLE ON REGULAR ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT, THE WHOLE OR THE EXCESS AMOUNT SO REFUNDED SHALL BE DEEMED TO BE THE TAX PAYABLE BY THE ASSESSEE. THE COURT, THEREFORE, HELD THAT TH E ASSESSING AUTHORITY WAS ENTITLED TO DETERMINE THE QUANTUM OF REFUND ALSO IN A REGULAR ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT. GUJARAT GAS CO. LTD. VS JCIT (2000) 245 ITR 84 (GUJ ) THE PETITIONER HAS FILED RETURN ON NOVEMBER 30, 199 6, SHOWING TAXABLE INCOME OF RS. 5,13,86,320/-. THE RETURN WAS PROCESSED UNDER S ECTION 143(1)(A) AFTER MAKING SOME PRIMA FACIE ADJUSTMENT ON OCTOBER 7, 1997. SUB SEQUENTLY, IN AN ASSESSMENT MADE U/S 143(3) OF ACT VIDE ORDER DT. 31.03.1999, A O HELD THAT THOUGH THE TOTAL INCOME OF THE ASSESSEE WAS RS. 2,11,81,620/-, THE A SSESSEE WAS LIABLE TO TAX ON THE 18 TOTAL INCOME OF RS. 5,13,86,320/- ON THE GROUND THA T IN ACCORDANCE WITH CIRCULAR NO. 549 DT. 31.10.1989, ASSESSED INCOME SHALL NOT B E LESS THAN RETURNED INCOME. THE ASSESSEE FILED ON WRIT PETITION CHALLENGING THE ORDER OF ASSESSMENT DATED MARCH 31 ST 1999 PASSED BY THE AO. THE DEPARTMENT TOOK A PRELI MINARY OBJECTION THAT AS THERE WAS ALTERNATIVE REMEDY PROVIDED BY WA Y OF APPEAL UNDER THE ACT, WRIT WAS NOT MAINTAINABLE. TO THIS, THE COURT HELD THAT IT IS CLEAR THAT ORDINARILY WHEN AN ALTERNATIVE REMEDY IS PROVIDED, THE HIGH CO URT SHOULD NOT EXERCISE JURISDICTION BUT IT DOES NOT MEAN THAT WHEN THE ORD ER PASSED BY THE AUTHORITY AS BAD OR ILLEGAL THE COURT CANNOT EXERCISE THE JURISD ICTION. THE REMEDY MUST NOT BE ONLY ALTERNATIVE BUT IT MUST BE EFFICACIOUS ALSO. I N THE INSTANT CASE, THE AO HAD NOT PASSED THE ORDER INDEPENDENTLY BUT IN FACT THE JURI SDICTION WAS EXERCISED BY THE CBDT BY ISSUING A CIRCULAR AND THEREFORE, THE ORDER WAS WITHOUT JURISDICTION. THE COURT SET ASIDE THE ASSESSMENT ORDER AND DIRECTED T HE AO TO MAKE THE ASSESSMENT ORDER WITHOUT KEEPING IN MIND THE CIRCULAR WHICH HE HAD REFERRED TO IN THE ASSESSMENT ORDER. MAYANK PODDAR (HUF) V. WEALTH TAX OFFICER 181 CTR 3 62/262 ITR 633 (CAL) IT HELD THAT A PROPERTY WHICH IS NOT OTHERWISE TAXA BLE CANT BECOME TAXABLE BECAUSE OF MISUNDERSTANDING OR WRONG UNDERSTANDING OF LAW BY THE ASSESSEE OR BECAUSE OF HIS ADMISSION OR MISAPPREHENSION. RAJESH RASIK LAL SHAH VS DCIT 35 DTR 388 (AT-MUM.) IT WAS HELD THAT EVEN THOUGH THERE IS MISTAKE ON PA RT OF ASSESSEE IN OFFERING CAPITAL GAINS, WHICH IS NOT TAXABLE UNDER THE ACT, BUT IN R ESPECT OF WHICH, ALL THE DETAILS INCLUDING THE DETAIL OF STT PAID WAS SHOWN IN THE R ETURN OF INCOME, THE SAME SHOULD HAVE BEEN EXCLUDED BY THE AO AS THE ENTIRE I NFORMATION WAS AVAILABLE ON RECORD AND IT SHOULD NOT COME UNDER THE TECHNICALIT IES OF NOT FILING THE REVISED RETURN. SUPREME COURT IN CASE OF S. NAGARAJ VS. STATE OF KA RNATAKA SUPPL. (4) SCC 595 EXPLAINED AS UNDER: JUSTICE IS A VIRTUE WHICH TRANSCENDS ALL BARRIERS. NEITHER THE RULES OF PROCEDURE NOR TECHNICALITIES OF LAW CAN STAND IN ITS WAY. THE ORDER OF THE COURT SHOULD NOT BE PREJUDICIAL TO ANY ONE. RULE OF STARE DECISIONS IS ADHERED TO FOR CONSISTENCY BUT IT IS NOT AS INFLEXIBLE AS ADMINISTRATIVE LAW AS IN PU BLIC LAW. EVEN THE LAW BENDS BEFORE JUSTICE. ENTIRE CONCEPT OF WRIT JURISDICTION EXERCISED BY THE HIGHER COURTS IS FOUNDED ON EQUITY AND FAIRNESS. IF THE COURT FIND T HAT THE ORDER WAS PASSED UNDER A MISTAKE AND IT WOULD NOT HAVE EXERCISED THE JURISDI CTION BUT FOR THE ERRONEOUS ASSUMPTION WHICH IN FACT DID NOT EXIST AND ITS PERP ETRATION SHALL RESULT IN MISCARRIAGE OF JUSTICE, THEN IT CANNOT ON ANY PRINC IPLE BE PRECLUDED FRO RECTIFYING THE ERROR. MISTAKE IS ACCEPTED AS VALID REASON TO R ECALL AN ORDER. DIFFERENCE LIES IN THE NATURE OF MISTAKE AND SCOPE OF RECTIFICATION, D EPENDING ON IF IT IS OF FACT OR 19 LAW. BUT THE ROOT FROM WHICH THE POWER FLOWS IS THE ANXIETY TO AVOID INJUSTICES. IT IS EITHER STATUTORY OR INHERENT. THE LATTER IS AVAI LABLE WHERE THE MISTAKE IS OF THE COURT. IN ADMINISTRATIVE LAW, THE SCOPE IS STILL WI DER. TECHNICALITIES APART IF THE COURT IS SATISFIED OF THE INJUSTICE THEN IT IS ITS CONSTITUTIONAL AND LEGAL OBLIGATION TO SET IT RIGHT BY RECALLING ITS ORDER. CBDT IN CIRCULAR NO. 14(XL-35) OF 1955 DT. 11.04.19 55 HAS ALSO CLARIFIED THE ROLE OF THE TAX OFFICER IN ASSISTING THE TAX PA YERS IN FOLLOWING WORDS:- 3. OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANT AGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIE S TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIM ING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICA TE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, B ENEFIT THE DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH, THEREFORE, THE RESPONSIBI LITY FOR CLAIMING REFUNDS AND RELIEFS RESTS WITH ASSESSEE ON WHOM IT IS IMPOSED B Y LAW, OFFICERS SHOULD:- (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLA IM FOR SOME REASON OR OTHER; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS T O THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED FOR CLAIMING REFUNDS AND RELIEFS. 4. THE LD. CIT(A) HAS INCORRECTLY INTERPRETED SECTI ON 143(2) TO HELD THAT ONCE SUCH NOTICE IS ISSUED, ASSESSMENT U/S 143(3) C ANNOT BE MADE AT AN INCOME LOWER THAN THE RETURNED INCOME. HE IGNORED THE FACT THAT U/S 143(3)(II), AO IS TO MAKE THE ASSESSMENT OF THE TOTAL INCOME & TO DETERM INE THE SUM PAYABLE BY HIM OR REFUND OF ANY AMOUNT DUE TO HIM ON THE BASIS OF THE ASSESSMENT. A SUM CAN BE REFUNDED TO THE ASSESSEE U/S 143(3) ONLY IN A CASE WHERE INCOME IS ASSESSED AT LOWER THAN RETUNED INCOME. FURTHER, CIT(A) HAS NOT REBUTTED THE DECISION OF ANDHRA PRADESH & GUJARAT HIGH COURT STATED SUPRA. R ELIANCE PLACED BY HIM ON CASE OF GOETZ INDIA LTD. IS ALSO MISPLACED AS IT RE LATES TO ALLOWING A CLAIM OF DEDUCTION WITHOUT FILING REVISED RETURN & NOT WITH REFERENCE TO ASSESSMENT OF CORRECT INCOME. FURTHER, IN THIS DECISION IT IS SPE CIFICALLY CLARIFIED THAT THIS 20 RESTRICTION IS NOT APPLICABLE IF THE ISSUE IS RAISE D BEFORE THE APPELLATE AUTHORITY. THEREFORE, THE FINDING GIVEN BY CIT(A) IN THIS CONN ECTION IS INCORRECT. IN VIEW OF ABOVE, AO BE DIRECTED TO ASSESS THE INCO ME OF ASSESSEE ON ACTUAL BASIS AND NOT AT A TENTATIVE INCOME DECLARED IN THE RETURN. 15. AFTER GOING THROUGH THE WRITTEN SUBMISSIONS AND THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THERE IS A WEIGHT IN THE CONTEN TION OF THE LD. A/R OF THE ASSESSEE. IT IS SEEN THAT TOTAL INCOME FROM TRADING AND INTEREST WA S COMPUTED BY THE AO AT RS. 5,46,84,910/-. THIS INCOME WAS COMPUTED BY THE AO F OR ASSESSMENT YEARS 2002-03 TO 08- 09. AFTER EXCLUDING THE ACCRUED INTEREST ON DEBTOR S DETERMINED BY AO AT RS. 97,84,910/-, THE NET INVESTMENT IN DEBTORS WAS IN SHAPE OF CASH REMAINS AT RS. 4,59,39,411/-. AGAINST THIS INCOME, THE ASSESSEE HAS OFFERED AN AMOUNT OF RS. 5 CRORE. FINALLY ADDITIONAL ASSESSED INCOME EXCLUDING ACCRUED INTEREST ON DEBTO RS WHICH HAS BEEN ACCEPTED BY THE ASSESSEE YEAR-WISE IS AS UNDER :- ASSESSMENT YEAR ADDITIONAL INCOME FINALLY ASSESSED/ ASSESSABLE. 02-03 23,00,000/- 03-04 NIL 04-05 9,00,000/- 05-06 42,25,000/- 06-07 68,44,000/- 07-08 2,95,39,000/- 08-09 85,17,000/- 5,23,25,000/- THE ASSESSEE IS NOT OBJECTING IN ASSESSING THE ADDI TIONAL INCOME WHICH IS OVER AND ABOVE THE RETURN FILED ORIGINALLY FOR ASSESSMENT YEAR AT RS. 23 LACS, FOR A.Y. 2004-05 AT RS. 9 LACS, FOR A.Y. 2005-06 AT RS. 42.25 LACS BUT THE AS SESSEE IS OBJECTING IN ADOPTING THE INCOME AT RS. 1 CRORE FOR A.Y. 2006-07 AGAINST DETE RMINED INCOME ON THE BASIS OF SEIZED 21 MATERIAL AT RS. 68,44,000/- AND RS. 3 CRORES AGAINS T DETERMINED INCOME ON THE BASIS OF SEIZED RECORD AT RS. 2,95,39,000/-. IF THE CONTENT ION OF THE DEPARTMENT IS ACCEPTED THAT WILL TANTAMOUNT TO DOUBLE ADDITION. THE ASSESSEE H AS FILED A LETTER ALONG WITH RETURN STATING THEREIN THAT THE INCOME OF RS. 5 CRORE FOR THREE YEARS I.E. A.Y. 2006-07 TO 08-09 ARE OFFERED TENTATIVELY AND IF THE ADDITIONAL INCOM E IS ASSESSED IN ANY OTHER YEAR THEN ADJUSTMENT OF THE SAME AMOUNT SHOULD BE GIVEN AGAIN ST THE OFFERED ADDITIONAL INCOME. RELEVANT PARA 7 OF THE WRITTEN NOTES FILED ALONG WI TH THE RETURN ARE AS UNDER :- IN VIEW OF ABOVE THE UNDISCLOSED INCOME OF THE A SSESSEE WORKS OUT TO RS. 4.51 CRORES APPROX. WHICH CONSIST OF DEBTORS OF RS. 4.25 CRORE AS PER SLIPS AND CASH SEIZED OF RS. 26 LACS. IN THE ORIGIN AL STATEMENTS RECORDED DURING 132(4) THE ASSESSEE SURRENDERED RS. 5 CRORE AS UNDISCLOSED INCOME WHICH WAS ENHANCED TO RS. 6 CRORE IN THE LATER STAT EMENTS RECORDED ON 17.7.07. AT THAT TIME THERE WAS NEITHER THE COPY OF PAPERS SEIZED WAS PROVIDED NOR ANY WORKING WAS DONE. THUS THE ENHANCE MENT OF SURRENDER BY FURTHER 1 CRORE HAS NO BASIS. AFTER OBTAINING TH E COPY OF SEIZED PAPERS AND THE STATEMENTS THE ASSESSEE TRIED TO RECONCILE THE WORKING WITH THE SURRENDER MADE BY HIM. ON SUCH EXERCISE IT IS NOTI CED THAT THE SURRENDER MADE BY HIM IS WITHOUT WORKING AND HAS NO BASIS. NO W ON WORKING THE UNDISCLOSED INCOME WORKS OUT TO RS. 4.51 CRORES AS MENTIONED ABOVE. STILL TO HONOUR THE COMMITMENT AND TO BUY PEACE AND TO END THE LITIGATION WITH THE DEPARTMENT THE ASSESSEE IS OFFERING RS. 5 CRORE AS HIS UNDISCLOSED INCOME. THIS INCOME IS BEING OFFERED TENTATIVELY IN THE 3 YEARS VIZ. A.Y. 2006-07, 2007-08 AND 2008-09. IF THE DEPARTMENT LAT ER ON ASSESS INCOME IN ANY OTHER YEARS THEN THE CORRESPONDING INCOME BE REDUCED FROM THESE YEARS AS THIS BIFURCATION OF INCOME IS PURELY ARBIT RARY AND TENTATIVE WHICH IS SUBJECT TO FINALIZATION OF ASSESSMENT BY THE DEP ARTMENT. THE ASSESSEE ALSO REQUESTS THAT THE INCOME OFFERED WAS SURRENDER ED BY HIM DURING COURSE OF SEARCH PROCEEDINGS, HENCE NO PENALTY BE L EVIED ON HIM IN VIEW 22 OF PROVISIONS OF SECTION 271AAA AND EXPLANATION 5A TO SECTION 271(1)(C). 16. NOW THE AO AND LD. CIT (A) THOUGH THEY ACCEPTED THAT FINALLY DETERMINED INCOME FOR A.Y. 2006-07 AND 07-08 IS RS. 68,44,000/- AND R S. 2,95,39,000/-, HOWEVER, THEY ARE TAKING THE FIGURE OF INCOME AT RS. 1 CRORE AND RS. 3 CRORES AS OFFERED BY THE ASSESSEE IN THE RETURN FILED UNDER SECTION 153A BY OBSERVING TH AT INCOME CANNOT BE ASSESSED LESS THAN THE INCOME DECLARED IN THE RETURN. THE LD. CIT (A) HAS PLACED RELIANCE ON THE DECISION OF HONBLE APEX COURT IN CASE OF GOETZ INDIA LTD., 284 ITR 323 (SC). THE LD. CIT (A) HAS ALSO OBSERVED IN HIS ORDER THAT ISSUING OF NOTICE U NDER SECTION 143(2) IS TO ENSURE THAT ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT CLAIMED EXCESSIVE LOSS. THEREFORE, ASSESSMENT PASSED UNDER SECTION 143(3) IS ASSESSING THE INCOME AT A FIGURE HIGHER THAN THE RETURNED INCOME AND IT CANNOT BE AT A FIGURE LOWER THAN THE INCOME SHOWN BY ASSESSEE IN THE RETURN. WE ARE NOT SATISFIED WITH THE OBSERVAT ION OF LD. CIT (A) BECAUSE LD. CIT (A) HAS NOT TAKEN INTO CONSIDERATION THE PROVISIONS OF SECTION 143(3)(II) OF THE ACT. IN VIEW OF THE PROVISIONS OF SECTION 143(3)(II), THE AO HAS TO MAKE ASSESSMENT OF THE TOTAL INCOME AND TO DETERMINE THE SUM PAYABLE BY HIM OR REFUND O F ANY AMOUNT DUE TO HIM ON THE BASIS OF ASSESSMENT. A SUM CAN BE REFUNDED TO THE ASSESS EE UNDER SECTION 143(3) ONLY IN A CASE WHERE INCOME IS ASSESSED AT LOWER THAN RETURNED INC OME. OTHER-WISE, THERE IS NO; QUESTION OF MAKING ANY REFUND. THEREFORE, PROVISIONS OF SEC TION 143(2) ARE TO BE READ WITH THE PROVISIONS OF SECTION 143(3)(II) AND NOT IN ISOLATI ON. REGARDING THE DECISION OF HONBLE APEX COURT IN CASE OF GOETZ INDIA LTD (SUPRA), IN T HIS DECISION ITSELF IT IS PROVIDED THAT ANY ASSESSEE CAN AGITATE ANY INCOME ASSESSED BY THE AO BEFORE APPELLATE AUTHORITY. THEREFORE, IF ASSESSEE HAS NOT FILED ANY REVISED RE TURN THEN THE CLAIM OF THE ASSESSEE 23 CANNOT BE BRUSHED ASIDE SIMPLY ON THE REASON THAT T HE REVISED RETURN WAS TO BE FILED BEFORE AO. 17. EVEN OTHER-WISE, IN THE CASE IN HAND, THE ASSES SEE HAS ANNEXED A NOTE WITH THE RETURN BY WHICH IT WAS STATED IF BY ANY REASON THE DEPARTMENT LATER ON ASSESS INCOME IN ANY OTHER YEARS THEN THE CORRESPONDING INCOME BE RE DUCED FROM THESE YEARS AS THIS BIFURCATION OF INCOME IS PURELY ARBITRARY AND TENTA TIVE WHICH IS SUBJECT TO FINALIZATION OF ASSESSMENT BY THE DEPARTMENT. THIS SPECIFIC NOTE C ANNOT BE IGNORED. IF THIS TYPE OF NOTE WAS NOT THERE, THEN ALSO THE CLAIM OF ASSESSEE IS A LLOWABLE BECAUSE THE SAME ADDITIONAL INCOME IS ASSESSED BY THE AO IN OTHER YEARS I.E. 20 02-03, 04-05 AND 08-09. THE INCOME DETERMINED BY THE AO HIMSELF ON THE BASIS OF SEIZED MATERIAL FOR THESE TWO YEARS IS LESS THEN INCOME OFFERED BY THE ASSESSEE. THEREFORE, ACT UAL INCOME ASSESSABLE IN A PARTICULAR YEAR HAS TO BE TAKEN AND NOT THE INCOME SHOWN ON ES TIMATE BASIS OR TENTATIVE BASIS. ONCE A FIGURE IS DETERMINED, THEN THAT FIGURE HAS TO BE TAKEN ALONE AND NOT ANY OTHER INCOME WHETHER IT WAS OFFERED BY ASSESSEE OR ADDED BY AO. IF THE CONTENTION OF THE DEPARTMENT IS ACCEPTED THAT THE INCOME CANNOT BE REDUCED FROM THE INCOME OFFERED IN THE RETURN, THEN THIS WILL BE TANTAMOUNT TO DOUBLE ADDITION AS THE S AME ADDITIONAL INCOME HAS BEEN ASSESSED IN OTHER YEARS. THIS IS ALSO NOT THE CASE OF THE DEPARTMENT THAT ASSESSEE IS SEEKING ANY RELIEF AS THE ADDITIONAL INCOME DETERMI NED BY ASSESSEE HIMSELF AND ACCEPTED BY THE AO IS MORE THAN THE AMOUNT OF RS. 5 CRORES O FFERED BY THE ASSESSEE. THE DETAILS OF ADDITIONAL INCOME ARRIVED AT BY ASSESSEE AND ACCEPT ED BY THE DEPARTMENT IS TABULATED SOMEWHERE ABOVE IN THIS ORDER. 18. VARIOUS CASE LAWS RELIED UPON BY ASSESSEE THROU GH HIS WRITTEN SUBMISSIONS HAVE BEEN REPRODUCED SOMEWHERE ABOVE IN THIS ORDER, RATI O OF THESE DECISIONS ARE ALSO 24 REPRODUCED WHILE REPRODUCING THE WRITTEN SUBMISSION S OF LD. COUNSEL OF THE ASSESSEE FILED. THEREFORE, WE ARE NOT INCLINED TO REPEAT THO SE CASE LAWS ONCE AGAIN AND ALL THOSE CASE LAWS ARE IN HELP TO THE ASSESSEES CASE DIRECT LY OR INDIRECTLY. EVEN BOARDS CIRCULAR ISSUED BY DEPARTMENT IN THE YEAR OF 1955 DATED 11.4 .1955 ARE IN SUPPORT OF THE CASE OF THE ASSESSEE THOUGH INDIRECTLY. CONTENTS OF BOARD CIRCU LAR IS ALSO REPRODUCED SOMEWHERE ABOVE IN THIS ORDER. IN VIEW OF THESE FACTS AND CI RCUMSTANCES AND IN VIEW OF THE DETAILED EXPLANATION FILED ON BEHALF OF THE ASSESSEE, WHICH IN OUR CONSIDERED VIEW, WE DIRECT THE AO TO ADOPT THE FINALLY DETERMINED INCOME AT RS. 68 ,44,000/- AGAINST RS. 1 CRORE FOR A.Y. 2006-07 AND AT RS. 2,95,39,000/- AGAINST RS. 3 CROR E FOR A.Y. 2007-08 ADOPTED BY THE AO WHICH IS CONFIRMED BY LD. CIT (A). THIS GROUND OF THE ASSESSEE IS ALLOWED FOR BOTH THE YEARS. 19. SECOND ISSUE IN APPEAL OF THE ASSESSEE IS AGAIN ST CONFIRMING THE ADDITION OF RS. 4,812/- AND RS. 14,894/- ON ACCOUNT OF GENERAL EXPE NSES AND TRAVELING EXPENSES FOR A.Y. 2006-07 AND SIMILARLY GENERAL EXPENSES ADDITION AT RS. 4,730/- AND TRAVELING EXPENSES AT RS. 16,076/- FOR A.Y. 2007-08 RESPECTIVELY. 20. THE BRIEF FACTS IN THIS REGARD ARE THAT ASSESS EE CLAIMED GENERAL EXPENSES OF RS. 32,081/- & RS. 31,530/- & TRAVELLING EXPENSES OF RS . 99,296/- & RS. 1,07,172/- FOR A.Y. 06-07 & 07-08 RESPECTIVELY. AO DISALLOWED 20% I.E. RS. 6,416/- & RS. 6,306/- OUT OF GENERAL EXPENSES & RS. 19,880/- & RS. 21,434/- OUT OF TRAVELLING EXPENSES FOR A.Y. 06-07 & 07-08 RESPECTIVELY. THE LD. CIT (A) RESTRICTED T HE SAME TO 15% BY GIVING FOLLOWING FINDINGS AS PER PAGE 13-14 PARA 3.3 OF THE ORDER:- I HAVE CONSIDERED THE FACTS OF THE CASE. IT IS AN ADMITTED FACT THAT LOG BOOK OF THE VEHICLE AND CALL REGISTER OF THE TELEPHONE I S NOT MAINTAINED. USE OF THESE FACILITIES FOR PERSONAL USE CANT BE DENIED. MOREOV ER GENERAL EXPENSES AND 25 TRAVELLING EXPENSES ARE NOT FULLY VOUCHED. IN A.Y. 2002-03 IN APPEAL NO. 199/09- 10 DATED 27-09-2010, I HAVE DELETED THE DISALLOWANC E OUT OF TELEPHONE EXPENSES CONSIDERING THE DISALLOWANCE ALREADY MADE BY THE AP PELLANT AND CONFIRMED THE DISALLOWANCE OF 15% OF GENERAL EXPENSES AND TRAVELL ING EXPENSES. FOLLOWING THE SAME, DISALLOWANCE OUT OF TELEPHONE EXPENSES IN THE PRESENT CASE IS DELETED AND THE DISALLOWANCE OUT OF GENERAL EXPENSES AND TRAVEL LING EXPENSES IS RESTRICTED TO 15% WHICH COMES TO RS. 4,812/- AND RS. 14,894/- RES PECTIVELY IN A.Y. 2006-07 AND RS. 4,730/- & RS.16,076/- RESPECTIVELY IN A.Y. 2007-08 AND THE SAME IS CONFIRMED TO THE AFORESAID EXTENT. 21. IT WAS SUBMITTED BY LD. A/R THAT GENERAL EXPENS ES CONSIST OF DAY TO DAY OFFICE EXPENSES, CLEANING, TEA, REFRESHMENT EXPENSES ETC. THESE EXPENSES ARE INCURRED IN NORMAL COURSE OF BUSINESS OF THE ASSESSEE. NONE OF THE EXP ENSES ARE OF PERSONAL NATURE. THE AO OBSERVED THAT MANUAL VOUCHERS HAVE BEEN PREPARED WI THOUT SIGNATURE OF RECIPIENT. HOWEVER THE LOWER AUTHORITIES HAVE NOT POINTED OUT ANY SPECIFIC INSTANCE OF THE SAME. ALL EXPENSES ARE PROPERLY VOUCHED AND SIGNED. THE QUANT UM OF TOTAL EXPENSES IS ALSO VERY LOW REASONABLE. THE BUSINESS EXPEDIENCY OF THESE EX PENSES IS OTHERWISE PROVED. HENCE THE DISALLOWANCE CONFIRMED BY CIT (A) BE DELETED. 21.1. TRAVELLING EXPENSES HAS BEEN INCURRED IN CONN ECTION WITH VISIT MADE TO BOMBAY, DELHI & BANKONG FOR THE PURPOSE OF BUSINESS BY ASSE SSEE. PAYMENT IS MADE TO THE TRAVEL AGENT BY CHEQUE. EXPENDITURE IS IN RESPECT OF TICKE T AND FOREIGN CURRENCY ONLY HAS BEEN CLAIMED. HENCE NO DISALLOWANCE IS WARRANTED FROM TR AVELLING EXPENSES & THUS DISALLOWANCE CONFIRMED BY CIT(A) BE DELETED. 21.2. RELIANCE HAS ALSO BEEN PLACED ON VARIOUS CASE LAW REPORTED IN 66 DTR 57, 199 TAXMAN 181 (DEL.) AND 2010 TIOL 146 ITAT. 22. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THE EXPENSES DISALLOWED AND CONFIRMED BY LD. CIT (A) ARE ON HIGHER SIDE. WE ARE OF THE VIEW THAT IF GENERAL EXPENSES IS SUST AINED AT RS. 2500/- EACH FOR BOTH THE 26 YEARS AND TRAVELING EXPENSES AT RS. 7500/- EACH FOR BOTH THE YEARS THAT WILL MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. 23. IN THE RESULT, APPEALS OF THE DEPARTMENT ARE DI SMISSED AND APPEALS OF THE ASSESSEE ARE ALLOWED IN PART. 24. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 .3.2012. SD/- SD/- ( SANJAY ARORA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/ COPY FORWARDED TO :- SHRI RADHA MOHAN MAHESHWARI, JAIPUR. THE DCIT, CENTRAL CIRCLE-3, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 991(4)/JP/2011) BY ORDER, AR ITAT JAIPUR.