Sh. J.K. Malhar, New Delhi V. DCIT, New Delhi

MA 252/DEL/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7194 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 18-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Depreciation; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER I.T. A. NO.252/DEL/2010 ASSESSMENT YEAR : 2006-07 SH. RAJESH KUMAR PASRICHA, ASSTT. COMMISSIONER OF INCOME-TAX, FLAT NO.102, A-13, VS. CIRCLE 23(1), NEW DELHI. KAILASH COLONY, NEW DELHI. PAN: AAMPP3063B (APPELLANT) (RESPONDENT ) APPELLANT BY: SHRI R.S. SINGHVI, CA RESPONDENT BY: SMT. PRATIMA KAUSHIK, SR. DR. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 1 6.11.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN THE MATTER OF AN ASSESSMENT MADE UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT) FOR THE ASSESSMENT YEAR 2006-07. 2. GROUND NO.1 IS DIRECTED AGAINST THE CIT(A)S ORD ER IN CONFIRMING THE DISALLOWANCE OF COMMISSION TO THE EXTENT OF RS.26,4 2,636/- CLAIMED AS DEDUCTION BY THE ASSESSEE. 3. THE ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN OF INCOME ON 31.10.2006 DECLARING TOTAL INCOME AT RS.23,05,381/-. THE RETU RN WAS SELECTED FOR 2 SCRUTINY. AFTER HEARING THE ASSESSEE, THE AO COMPL ETED THE ASSESSMENT UNDER SEC. 143(3) DATED 28.11.2008. 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND BY THE AO THAT THE ASSESSEE HAD SHOWN COMMISSION EXPENSES OF RS.26 ,42,636/- IN THE PROFIT AND LOSS ACCOUNT OF M/S. VORTEX SYSTEM, A PROPRIETA RY CONCERN OF THE ASSESSEE. THE AO VIDE ORDER-SHEET ENTRY DATED 16.0 9.2008 ASKED THE ASSESSEE TO FURNISH CHALLANS OF TDS ON COMMISSION P AID. IN HIS REPLY DATED 17.10.2008, THE ASSESSEE SUBMITTED THAT THE COMMISS ION WAS PAID TO THE OVERSEAS AGENTS TOWARDS PROCUREMENT OF EXPORT ORDER S FROM OVERSEAS CLIENTS, AGAINST WHICH THE ASSESSEE HAD SUPPLIED MATERIALS D URING THE YEAR UNDER CONSIDERATION. IT WAS FURTHER SUBMITTED THAT SINCE SERVICES WERE PROVIDED ABROAD BY OVERSEAS AGENTS, NO TDS WAS DEDUCTED AS T HE OVERSEAS AGENTS HAD NO PE IN INDIA. IT WAS FURTHER SUBMITTED BY THE AS SESSEE BEFORE THE AO THAT THE REMITTANCE OF COMMISSION WERE MADE TO THE AGENT S STRICTLY AS PER GUIDELINES OF THE RESERVE BANK OF INDIA. FROM THE DETAILS OF COMMISSION FURNISHED BY THE ASSESSEE, IT WAS NOTICED BY THE AO THAT THE COMMISSION WAS PAID TO ONLY ONE PARTY, NAMELY MS. RAKHI ARORA, WHO WAS STAY IN DUBAI. THE AO ALSO NOTED THAT THE COMMISSION PAYABLE FOR F .Y. 2004-05 AND 2005- 06, WERE STILL REMAINING OUTSTANDING AS A LIABILITY IN THE BALANCE-SHEET. THE AO THEREFORE, ASKED THE ASSESSEE TO GIVE CONFIRMATI ON ALONG WITH THE PROOF 3 OF COMMISSION PAID VIDE ORDER-SHEET ENTRY DATED 31. 10.2008. IN A REPLY, DATED 10.11.2008, THE ASSESSEE SUBMITTED BANK STATE MENT OF M/S. VORTEX SYSTEM INDICATING THAT THE PAYMENT WAS LATER MADE T O MS. RAKHI ARORA. THE ASSESSEE ALSO SUBMITTED A COPY OF AGREEMENT MADE ON LETTER-HEAD OF M/S. VORTEX SYSTEM. HOWEVER, THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO BY GIVING THE FOLLOWING REASONS:- (I) WRITTEN AGREEMENT WAS SIGNED ONLY BY THE ASSESSEE A ND NOT BY THE OTHER PARTY. HOWEVER, LATER, ANOTHER COPY OF AGREE MENT SIGNED BY BOTH THE PARTIES WAS SUBMITTED BUT IT DOES NOT PROV E THE IDENTITY OF ANY PERSON BY THE NAME OF MS. RAKHI ARORA. (II) THERE IS NO PROOF FROM THE WRITTEN AGREEMENT THAT I T IS A GENUINE AGREEMENT. THE AGREEMENT WAS ON THE LETTER-HEAD OF THE ASSESSEE AND CAN BE MADE AT ANY TIME AND IT IS NOT A REGISTE RED ONE. (III) PAYMENT FROM BANK DOES NOT SHOW ITS TRUE NATURE AND NO EVIDENCE WAS PRODUCED IN RELATION TO WHEN THE PAYMENT WAS MA DE. (IV) DESPITE SEVERAL OPPORTUNITIES GIVE, NO PROOF WAS GI VEN IN RESPECT OF EXACT NATURE OF WORK PERFORMED BY MS. RAKHI AROR A. (V) NO JUSTIFICATION WAS GIVEN FOR KEEPING THE EXPENSES PAYABLE FOR F.Y. 2004-05 AND 2005-06 OUTSTANDING AND IT WAS NOT UNDERSTOOD AS TO WHY A PERSON DOING WORK FOR OTHER PERSON WAS NOT DEMANDING THE PAYMENT FOR TWO YEARS. (VI) IT WAS HIGHLY UNLIKELY THAT THE RESIDENT OF DUBAI W AS WORKING AS A COMMISSION AGENT FOR SALES IN USA AND EUROPE. (VII) NO INVOICE SHOWING COMMISSION TO BE PAID AT 10% WER E PRODUCED. 4 5. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LEARNED CIT(A). 6. BEFORE THE LEARNED CIT(A), THE LEARNED COUNSEL F OR THE ASSESSEE INVITED THE ATTENTION OF THE LEARNED CIT(A) TO VARI OUS CLAUSES OF THE AGREEMENT WHEREBY THE AGENT WAS AUTHORIZED TO CANVA SS ORDERS FOR SALES OF CASTINGS RESTRICTED TO THE ENQUIRIES ORIGINATING FR OM USA OR FROM THEIR CORRESPONDING RESPECTIVE OFFICES IN UAE, AND THE DE STINATION OF THE GOODS WOULD BE USA ONLY. THE AGENT WAS REQUIRED TO KEEP THE ASSESSEE INFORMED FROM TIME TO TIME OF THE BUSINESS POTENTIAL IN GENE RAL AND DEVELOPMENT WITH REGARD TO SPECIFIC ENQUIRIES AND FOLLOW UP THE QUOT ATIONS SUBMITTED BY THE VORTEX IN RESPECT OF SUCH ENQUIRIES. BESIDES THIS, VARIOUS OTHER CLAUSES OF THE AGREEMENT WERE REFERRED TO AND IT WAS EXPLAINED THAT THE COMMISSION WAS PAID THROUGH BANKING CHANNELS WITH THE APPROVAL FRO M RESERVE BANK OF INDIA. THE ASSESSEE ALSO CLARIFIED BEFORE THE LEAR NED CIT(A) THAT COPY OF WRITTEN AGREEMENT SIGNED BY BOTH THE PARTIES WAS AL SO FURNISHED TO THE AO AS SO NOTED BY THE AO HIMSELF IN HIS ORDER. IT WAS FU RTHER SUBMITTED THAT THE OBSERVATION OF THE AO THAT THE AGREEMENT WAS NOT GE NUINE, WAS MERELY BASED ON SURMISES AND CONJECTURES. A WRITTEN SUBMI SSION WAS FILED BY THE ASSESSEE BEFORE THE LEARNED CIT(A), WHICH HAS BEEN REPRODUCED BY THE LEARNED CIT(A) IN PARA 4 AT PAGES 4 TO 10 OF HIS OR DER. 5 7. ON PERUSAL OF THE ANNEXURES FILED ALONG WITH THE WRITTEN SUBMISSIONS BEFORE THE LEARNED CIT(A), IT WAS OBSERVED BY THE L EARNED CIT(A) THAT CONFIRMATION DATED 5.09.2009 FROM M/S. WAUKESHA FOU NDRY INC., TO WHOM GOODS WERE SUPPLIED BY THE ASSESSEE, WAS FILED. TH E CONFIRMATION WAS GIVEN TO ESTABLISH THAT THE ORDERS WERE PLACED BY THE SAI D CONCERN DUE TO EFFORTS OF MS. RAKHI ARORA. SINCE THIS CONFIRMATION FROM M/S. WAUKESHA FOUNDRY INC. WAS A FRESH EVIDENCE, THE MATTER WAS REFERRED BY THE LEARNED CIT(A) TO THE AO UNDER RULE 46A(1) OF THE INCOME-TAX RULES VI DE HIS LETTER DATED 10.09.2009. THE AO VIDE LETTER NO.498 DATED 17.09. 2009, STRONGLY OPPOSED THE ADMISSION OF THE FRESH EVIDENCE, AND SUBMITTED HIS REMAND REPORT, WHICH HAS BEEN REPRODUCED BY THE LEARNED CIT(A) IN PARA 5 OF HIS ORDER. 8. A COPY OF THE AOS REMAND REPORT WAS GIVEN TO TH E ASSESSEE. THE ASSESSEE THEN SUBMITTED HIS REJOINDER BEFORE THE LE ARNED CIT(A), WHICH HAS BEEN EXTRACTED BY THE LEARNED CIT(A) IN PARA 6 OF H IS ORDER. 9. AFTER CONSIDERING THE ASSESSEES SUBMISSION, AO S REMAND REPORT AND ASSESSEES REJOINDER, THE LEARNED CIT(A) CONSIDERED IT NECESSARY TO FIRST ADJUDICATE AS TO WHETHER THE ADDITIONAL EVIDENCE FI LED BY THE ASSESSEE SHOULD BE ADMITTED UNDER RULE 46A OF THE INCOME-TAX RULES. THE LEARNED CIT(A) HAS FOUND THAT DURING THE ASSESSMENT PROCEEDINGS, T HE AO DID NOT MAKE ANY 6 REQUISITION OF CONFIRMATION FROM THE VENDEE, WHICH HAS BEEN PRODUCED BY THE ASSESSEE AT THE APPELLATE STAGE. SINCE NO SUCH CONFIRMATION WAS REQUISITIONED BY THE AO, THE LEARNED CIT(A) ADMITTE D THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE FOR THE DISPOSAL OF THE APPEAL AFTER FOLLOWING THE DECISION OF DELHI BENCH OF APPELLATE TRIBUNAL I N THE CASE OF HLS ASIA LTD. VS. DCIT (2009) 19 DTR (DEL)(TRIB) 146, NOTWIT HSTANDING THE OBJECTION RAISED BY THE AO. 10. AFTER ADMITTING THE ADDITIONAL EVIDENCE IN THE FORM OF A CONFIRMATION LETTER FROM THE VENDEE, THE LEARNED CIT(A) ADJUDICA TED THE MATTER ON MERIT. ON PERUSAL OF MATERIAL ON RECORD, THE LEARNED CIT(A ) GAVE A FINDING THAT THE ASSESSEE HAD CLAIMED THE EXPENSES OF COMMISSION OF RS.26,42,636/- PAID TO ONE SMT. RAKHI ARORA, HAVING HER OFFICE AT FLAT NO. 107, ALDURRAH BLD, KARAM, DUBAI FOR ALLEGED SERVICES RENDERED BASED ON A WRITTEN AGREEMENT. THE LEARNED CIT(A) ALSO FOUND THAT THE ASSESSEE HAD FILED THE LEDGER ACCOUNT OF COMMISSION EXPENSES AS REFLECTED IN HIS BOOKS, W HICH WAS 10% OF THE INVOICE VALUE. THE LEARNED CIT(A) FURTHER OBSERVED THAT IT WAS WITHOUT DOUBT THAT THE COMMISSION WAS PAID TO THE SAID MRS. RAKHI ARORA, IN THE F.Y. 2006-07 FROM THE EEFXC ACCOUNT OF M/S. VORTEX SYSTE MS, A PROPRIETARY CONCERN OF THE ASSESSEE, MAINTAINED WITH BANK OF BA RODA, IBB, NEW DELHI. AFTER GIVING AFORESAID FINDING, THE LEARNED CIT(A) PROCEEDED TO EXAMINE THE 7 AGREEMENT SIGNED BETWEEN THE ASSESSEE AND MRS. RAKH I ARORA AND ON PERUSAL OF THE SAME, IT WAS FOUND BY HIM THAT THE SAID AGRE EMENT WAS SIGNED FOR CANVASSING ORDERS AND PROMOTING SALES OF CASTINGS A ND MACHINE PARTS IN USA ON BEHALF OF THE ASSESSEE. IN THE AGREEMENT, IT WA S STATED THAT MRS. RAKHI ARORA WAS ONLY AUTHORIZED TO CANVAS ORDERS FOR ENQU IRIES ORIGINATING FROM USA OR FROM THE CORRESPONDING RESPECTIVE OFFICES IN UAE, AND MRS. RAKHI ARORA WOULD APPRISE THE ASSESSEE WITH REGARD TO THE BUSINESS POTENTIAL IN GENERAL AND DEVELOPMENT WITH REGARD TO THE ENQUIRIE S AND WAS ALSO MANDATED TO FOLLOW-UP ON THE QUOTATIONS SUBMITTED BY THE ASS ESSEE. MRS. RAKHI ARORA WAS REQUIRED TO FOLLOW-UP WITH THE CUSTOMERS REGARD ING THE PAYMENT OF BILLS AND SHE WAS TO KEEP THE ASSESSEE INFORMED ABOUT THE REQUIREMENTS OF CUSTOMERS FROM TIME TO TIME. THE COMMISSION WAS TO BE PAID ON QUARTERLY BASIS FOR THE INVOICES FOR WHICH THE PAYMENTS WERE RECEIVED BY THE ASSESSEE. THE LEARNED CIT(A) FURTHER NOTED THAT DURING THE CO URSE OF APPELLATE HEARING, A CONFIRMATION FROM M/S. WAUKESHA FOUNDRY INC., DAT ED 5.09.2009 WAS FILED, WHICH WAS ADMITTED UNDER RULE 46A OF THE IN COME-TAX RULES. THIS CONFIRMATION GIVEN BY M/S. WAUKESHA FOUNDRY INC. WA S SIGNED BY ONE SHRI VIJAY TALWAR, DIRECTOR (PROCESS IMPROVEMENTS) AND H AS ITS OFFICE AT 1300 LINCOLN AVENUE WAUKESHA, USA. 8 11. THE LEARNED CIT(A) THEN OBSERVED THAT HE WAS IN AGREEMENT WITH THE ASSESSEE THAT THE REVENUE CANNOT SIT IN THE ARM-CHA IR OF THE BUSINESSMAN AND DECIDE BY ITSELF THE WAY A BUSINESS IS TO BE CARRIE D ON BY THE BUSINESSMAN. IN THIS RESPECT, HE RELIED UPON THE DECISION OF JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DALMIA CEMENT (B) LTD. (2002) 254 I TR 377 AND DECISION OF HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS LT D. VS. CIT (2007) 288 ITR 1 (SC). 12. HOWEVER, THE LEARNED CIT(A) HAS TAKEN A VIEW TH AT FOR THE PURPOSE OF ADJUDICATING THE ISSUE OF ALLEGED PAYMENT OF COMMIS SION TO MRS. RAKHI ARORA, LOCATED IN DUBAI, IT HAS TO BE PROVED THAT T HERE WAS SERVICE RENDERED BY HER. IN THIS RESPECT, THE LEARNED CIT(A) STATED THAT ONLY EVIDENCE SUBMITTED BY THE ASSESSEE WAS A CONFIRMATION FROM M /S. WAUKESHA FOUNDRY INC., WHICH IS DATED 5.09.2009, I.E. MUCH AFTER FRA MING OF THE ASSESSMENT ORDER. THE LEARNED CIT(A) THEN OBSERVED THAT HE HA D ELUCIDATED SOME OF THE SALIENT FEATURES OF THE AGREEMENT BETWEEN THE ASSES SEE AND THE SAID MRS. RAKHI ARORA BUT THE ASSESSEE HAD FILED NO EVIDENCE TO PROVE THAT THE SAID MRS. RAKHI ARORA HAD EVER MADE ENQUIRIES WITH ANY O F THE PROSPECTIVE CUSTOMERS IN THE UNITED STATE OF AMERICA. THE LEAR NED CIT(A) FURTHER OBSERVED THAT IF THAT WAS THERE, A COPY OF THE SAME COULD HAVE BEEN PRODUCED BEFORE THE AO, WHICH WOULD HAVE SUFFICIENTLY PROVED THAT INDEED SERVICE HAD 9 BEEN RENDERED. THE LEARNED CIT(A) FURTHER OBSERVED THAT THESE ENQUIRIES COULD HAVE BEEN ON TELEPHONE OR IN THE FORM OF E-MA IL OR BY PERSONAL VISITS OF SAID MS. ARORA. THE LEARNED CIT(A) THEREFORE, C ONCLUDED THAT EXCEPT CONFIRMATION FILED BY M/S. WAUKESHA FOUNDRY INC. DA TED 5.09.2009, THERE WAS NOTHING ON RECORD THAT MS. RAKHI ARORA HAD INDE ED RENDERED SERVICES TO THE ASSESSEE WHICH WOULD JUSTIFY PAYMENT OF COMMISS ION AND THERE WAS NOT EVEN A CONFIRMATION FROM MS. RAKHI ARORA. THE LEAR NED CIT(A) FURTHER STATED THAT THERE WAS NO IOTA OF EVIDENCE TO PROVE THE IDENTITY OF THE SAID MS. RAKHI ARORA. HE, THEREFORE, CONFIRMED THE AOS ACT ION IN DISALLOWING THE ASSESSEES CLAIM OF PAYMENT OF COMMISSION PAID TO R AKHI ARORA DURING THE YEAR UNDER CONSIDERATION. 13. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. 14. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL VARIOUS PAP ERS AND DOCUMENTS PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. 15. THE ISSUE INVOLVED IN THIS GROUND IS AS TO WHET HER THE PAYMENT OF COMMISSION OF RS.26,42,636/- IS ALLOWABLE AS BUSINE SS DEDUCTION WHILE COMPUTING THE ASSESSEES INCOME FROM PROFIT AND GAI NS OF BUSINESS OR PROFESSION. 10 16. THE ASSESSEE IS AN INDIVIDUAL AND IS A PROPRIET OR OF M/S. VORTEX SYSTEM, ENGAGED IN THE BUSINESS OF MANUFACTURING AN D EXPORT OF STEEL CASTINGS AND MACHINE PARTS, AS A MERCHANT EXPORTER. IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT THE ENTIRE EXPORT SALE HAS BEEN M ADE TO M/S. WAUKESHA IRO FOUNDRY INC. USA AGAINST THE EXPORT ORDERS OBTAINED FROM THIS PARTY THROUGH THE ASSESSEES ALLEGED AGENT MRS. RAKHI ARORA, TO W HOM COMMISSION WAS PAID, WHICH WAS CLAIMED AS DEDUCTION. IN SUPPORT O F THE ASSESSEES CLAIM THAT EXPORT ORDERS WERE OBTAINED THROUGH MRS. RAKHI ARORA, THE ASSESSEE HAD PRODUCED A COPY OF WRITTEN AGREEMENT BEFORE THE AO. IN THE ASSESSMENT ORDER, THE AO HAS STATED THAT THE WRITTEN AGREEMENT FURNISHED BY THE ASSESSEE WAS SIGNED ONLY BY THE ASSESSEE AND NOT BY THE OTHE R PARTY, BUT AT THE SAME TIME, THE AO FURTHER STATED IN THE SAME PARA THAT, HOWEVER, LATER ON, ANOTHER COPY OF AGREEMENT SIGNED BY BOTH THE PARTIES, WAS S UBMITTED. THE LEARNED CIT(A) HAD GONE THROUGH THE SAID AGREEMENT SIGNED B ETWEEN TWO PARTIES AND HAS NOTED THE VARIOUS TERMS AND CONDITIONS OF THIS AGREEMENT IN HIS ORDER. HOWEVER, IN THE REMAND REPORT DATED 17.09.2009, THE AO HAS DISPUTED THE ASSESSEES CONTENTION THAT COPY OF AGREEMENT SIGNED BY BOTH THE PARTIES WAS PRODUCED BEFORE HIM. THE AO IN HIS REMAND REPORT H AS STATED THAT ON 20.11.2008, THE ASSESSEE SUBMITTED PHOTO COPIES OF APPOINTMENT LETTER ALLEGEDLY ISSUED BY HIM TO MRS. RAKHI ARORA AND THE SAID APPOINTMENT LETTER 11 WAS NOT SIGNED BY MRS. RAKHI ARORA IN TOKEN OF HAVI NG ACCEPTED THE TERMS AND CONDITIONS. THE ASSESSEES ARGUMENT THAT COPY OF WRITTEN AGREEMENT SIGNED BY BOTH THE PARTIES WAS DULY PLACED ON RECOR D AND THE SAME WAS CONSIDERED BY THE AO IN HIS ASSESSMENT ORDER ITSELF , WAS CLAIMED TO BE FACTUALLY INCORRECT BY THE AO IN HIS REMAND REPORT. THE DENIAL OF THE AO THAT THE ASSESSEE HAD NOT PRODUCED A COPY OF WRITTE N AGREEMENT SIGNED BY BOTH THE PARTIES, IS NOT FACTUALLY CORRECT INASMUCH AS THE AO HIMSELF IN THE ASSESSMENT ORDER WHILE GIVING GROUNDS FOR NOT ACCEP TING THE ASSESSEES CONTENTION, HAS CLEARLY MENTIONED THAT HOWEVER, LAT ER, ANOTHER COPY OF AGREEMENT SIGNED BY BOTH THE PARTIES WAS SUBMITTED. IN THE LIGHT OF THESE FACTS, WE THEREFORE, AGREE WITH THE LEARNED COUNSEL FOR THE ASSESSEE THAT COPY OF AGREEMENT SIGNED BY BOTH THE PARTIES, WAS PLACED BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(A). 17. WE HAVE GONE THROUGH THE COPY OF AGREEMENT BETW EEN THE ASSESSEE AND MRS. RAKHI ARORA. THIS AGREEMENT IS IN THE FOR M OF APPOINTMENT LETTER ISSUED BY THE ASSESSEE TO MRS. RAKHI ARORA, CONTAIN ING THEREIN TERMS AND CONDITIONS FOR MAKING ARRANGEMENT WITH MRS. RAKHI A RORA FOR CANVASSING ORDER AND PROMOTING ORDERS FOR SALES OF CASTINGS AN D MACHINE PARTS IN USA. MRS. RAKHI ARORA THEN ACCEPTED THE TERMS AND CONDIT IONS OF THE APPOINTMENT AS AGENT AND PUT HER SIGNATURE AT THE BOTTOM OF THE LETTER IN TOKEN OF 12 ACCEPTANCE THEREOF. BY WAY OF THIS LETTER, MRS. RA KHI ARORA WAS AUTHORIZED TO CANVAS ORDERS FOR THE SALES OF CASTINGS, FOR AND ON BEHALF OF THE ASSESSEE RESTRICTING TO THE ENQUIRIES ORIGINATING FROM USA O R FROM THE CORRESPONDING RESPECTIVE OFFICES IN UAE AND WITH THE CONDITION TH AT THE DESTINATION OF GOODS WILL BE USA ONLY. IT IS PROVIDED THEREIN THA T MRS. RAKHI ARORA WILL EXERCISE HER BEST ENDEAVOUR TO PROCURE ORDERS FOR S ALE OF CASTINGS AND SHALL KEEP THE ASSESSEE INFORMED FROM TIME TO TIME OF THE BUSINESS POTENTIAL IN GENERAL AND DEVELOPMENT WITH REGARD TO THE SPECIFIC ENQUIRIES AND WILL FOLLOW UP FOR THE QUOTATIONS SUBMITTED BY THE ASSES SEE IN RESPECT OF SUCH ENQUIRIES. MRS. RAKHI ARORA WAS ALSO REQUIRED TO F OLLOW UP WITH THE CUSTOMERS REGARDING PAYMENT OF BILLS RAISED BY THE ASSESSEE TO THE CUSTOMERS IN USA. SHE WAS TO ENSURE THAT THE CUSTOMERS SEND THE ASSESSEE CERTAIN INFORMATION FOR THE PURPOSE OF CASTING BUSINESS NAM ELY, RELEVANT DRAWINGS, DETAILS REGARDING THE CUSTOMERS REQUIREMENTS OF CA STING AND COMPETITIVE PRICES AND DELIVERY. MRS. RAKHI ARORA WAS REQUIRED TO RENDER THE SERVICES AS AN INDEPENDENT CONTRACT, SUBJECT TO THE PRICE AND G ENERAL BUSINESS PROCEDURES FOLLOWED BY THE ASSESSEE. LIKEWISE, VARIOUS OTHER CONDITIONS WERE GIVEN INCLUDING THE PAYMENT OF COMMISSION @ 10% OF THE IN VOICE VALUE EXCLUSIVE OF ANY TAXES AS MAY BE ENFORCED AT THE RELEVANT POI NT OF TIME. IT WAS ALSO PROVIDED IN THE AGREEMENT THAT THE COMMISSION WILL BE CALCULATED ON 13 QUARTERLY BASIS FOR THE INVOICES FOR WHICH THE PAYM ENT WAS RECEIVED BY THE ASSESSEE AND THE SAME WILL BE REMITTED FROM THE ASS ESSEES CURRENT/EEFC ACCOUNT TO THE BANK ACCOUNT OF MRS. RAKHI ARORA DIR ECTLY, AS PER THE RULES OF RESERVE BANK OF INDIA. IN THE AGREEMENT, IT WAS AL SO PROVIDED THAT MRS. RAKHI ARORA WILL NOT REPRESENT OTHER COMPANIES MANU FACTURING CASTINGS ETC. WHATSOEVER AND/OR CANVAS ORDERS FOR THE SALE OF CAS TINGS WITHOUT INFORMING THE ASSESSEE IN ADVANCE ABOUT THE SAME. THESE ARE THE MAIN TERMS AND CONDITIONS, AMONGST OTHERS, INCORPORATED IN THE LET TER OF APPOINTMENT ISSUED BY THE ASSESSEE TO MRS. RAKHI ARORA. AS ALREADY OB SERVED ABOVE, THE AGREEMENT BETWEEN THE ASSESSEE AND MRS. RAKHI ARORA IS IN THE FORM OF A LETTER OF APPOINTMENT AND IS NOT RELATED TO ANY TRA NSACTION REGARDING IMMOVABLE PROPERTIES, THE QUESTION OF THE SAME BEIN G REGISTERED IS NOT NECESSARY. 18. BEFORE THE AO, THE ASSESSEE FURNISHED A COPY OF ACCOUNT OF COMMISSION VIDE LETTER DATED 31.10.2008. THE ASSES SEE VIDE HIS REPLY DATED 10.11.2008 SUBMITTED BEFORE THE AO THAT THE COMMISS ION PAYABLE FOR F.Y. 2004-05 AND 2005-06, TO MRS. RAKHI ARORA WAS PAID I N F.Y. 2006-07 FROM EEFC ACCOUNT OF THE ASSESSEES PROPRIETOR-SHIP CONC ERN MAINTAINED WITH BANK OF BARODA. A TYPED COPY OF THE BANK ACCOUNT M AINTAINED BY THE ASSESSEE IN HIS BOOKS WAS ALSO FURNISHED. THE ASSE SSEE ALSO FURNISHED DETAILS 14 OF COMMISSION PAYABLE AND PAYMENT MADE. IN THE BAN K STATEMENT, THE ASSESSEE HIGHLIGHTED FOUR ENTRIES RELATING TO THE P AYMENT OF COMMISSION TO MRS. RAKHI ARORA. HOWEVER, THE AO HAS STATED THAT THE ASSESSEE HAS PRODUCED TYPED COPY OF BANK ACCOUNT HIGHLIGHTING FO UR ENTRIES BUT HAS FAILED TO FURNISH A COPY OF BANK STATEMENT AUTHENTICATED B Y THE BANK AND CONFIRMATION OF THE ALLEGED RECEIPT OF THE COMMISSI ON BY MRS. RAKHI ARORA. WE HAVE GONE THROUGH THE AUDITED STATEMENT OF ACCOU NT FOR THE F.Y. 2004-05 AND 2005-06, WHICH HAS BEEN FILED BEFORE US. IN T HE F.Y. 2005-06, WHICH IS UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN EXPORT SALES OF RS.2,62,06,282/- M/S. WAUKESHA IRO FOUNDRY INC. AND M/S. WAUKESHA CE RAMAL INC. AGAINST WHICH COMMISSION OF RS.26,42,363/- HAS BEEN PAID TO MRS. RAKHI ARORA. TOTAL COMMISSION PAID BY THE ASSESSEE TO MRS. RAKHI ARORA DURING THE F.Y. 2006-07 IS SHOWN AT RS.34,53,259/-. FROM THE DETAI LS OF COMMISSION PAYABLE AND PAYMENT MADE, IT IS SEEN THAT THE ASSES SEE HAS MADE THE FOLLOWING FOUR PAYMENTS TO MRS. RAKHI ARORA:- DATE PAYMENT IN US$ PAYMENT IN RS. 8.09.2006 10000 4,59,100 19.09.2006 12246 5,62,214 28.11.2006 50000 22,25,500 17.01.2007 4673.88 2,06,445/- TOTAL 76,919.88 34,53,259/- 15 THE AFORESAID FOUR ITEMS OF PAYMENT ARE HIGHLIGHTED IN THE BANK ACCOUNT SUBMITTED BY THE ASSESSEE BEFORE THE AO. HOWEVER, THE AO HAS STATED THAT BANK STATEMENT AUTHENTICATED BY THE BANK, HAS NOT B EEN PRODUCED BEFORE HIM. HOWEVER, ON THE OTHER HAND, THE LEARNED CIT(A) HAS HELD IN PARA 9 OF HIS ORDER THAT IT IS WITHOUT DOUBT THAT THE COMMISSION WAS PAID TO MRS. RAKHI ARORA IN F.Y. 2006-07 FROM THE EEFC ACCOUNT OF M/S. VORTEX SYSTEM, PROPRIETARY CONCERN OF THE ASSESSEE MAINTAINED WITH BANK OF BARODA, 1BB, NEW DELHI. IN THE COURSE OF HEARING BEFORE US FORE IGN BILLS, TRANSACTION ADVICE DATED 8.9.2006, 19.9.2006, 28.11.2006 AND 17 .01.2006 ISSUED BY BANK OF BARODA, 1BB, NEW DELHI, TRANSFERRING US$ 10 ,000, 12,246, 50,000 & 4673.88 FROM THE ASSESSEES ACCOUNT TO THE ACCOUN T OF MRS. RAKHI ARORA (AE) WERE POINTED OUT. THESE FOREIGN BILLS, TRANSA CTION ADVICE SHOW THAT THE AMOUNT MENTIONED THEREIN HAS BEEN TRANSFERRED T O THE ACCOUNT OF MRS. RAKHI ARORA (AE). A FINDING HAS BEEN GIVEN BY THE LEARNED CIT(A) THAT THE COMMISSION WAS PAID TO MRS. RAKHI ARORA FROM EEFC A CCOUNT OF M/S. VORTEX SYSTEMS (PROPRIETARY CONCERN OF THE ASSESSE E) MAINTAINED WITH BANK OF BARODA, 1BB, NEW DELHI. IN THE LIGHT OF THE FIN DING GIVEN BY THE LEARNED CIT(A) AND THE DOCUMENTS AND PAPERS PRODUCED BEFORE US, WE ARE IN AGREEMENT WITH THE FINDING GIVEN BY THE LEARNED CIT (A) THAT THE COMMISSION WAS PAID TO MRS. RAKHI ARORA IN F.Y. 2006-07 FROM E EFC ACCOUNT OF M/S. 16 VORTEX SYSTEMS (PROPRIETARY CONCERN OF THE ASSESSEE ) MAINTAINED WITH BANK OF BARODA, 1BB, NEW DELHI. THUS, IT HAS BEEN ESTAB LISHED BY THE ASSESSEE THAT PAYMENT OF COMMISSION HAS ACTUALLY BEEN MADE B Y THE ASSESSEE TO MRS. RAKHI ARORA THROUGH BANKING CHANNELS AS PER BANKING RULES IN F.Y. 2006-07. 19. NOW, WE HAVE TO DECIDE WHETHER MRS. RAKHI ARORA HAD ACTUALLY RENDERED SERVICES TO THE ASSESSEE BY CANVASSING ORD ERS AND PROMOTING SALES OF CASTINGS AND MACHINE PARTS IN USA FOR AND ON BEH ALF OF THE ASSESSEE. IN THIS CONNECTION, THE ASSESSEE FURNISHED A CONFIRMAT ION FROM M/S. WAUKESHA FOUNDRY INC. DATED 5.09.2009 BEFORE THE LEARNED CIT (A), WHICH WAS ADMITTED FOR CONSIDERATION. THE AFORESAID CERTIFIC ATE GIVEN BY M/S. WAUKESHA FOUNDRY INC. STATES THAT THEY HAD PLACED V ARIOUS ORDERS ON ASSESSEES FIRM FOR THE SUPPLY OF ROUGH/MACHINE CAS TINGS INCLUDING STANDARD STEEL CASTINGS FROM THE YEAR 2004 ONWARDS THROUGH T HE EFFORTS OF MRS. RAKHI ARORA. THE LEARNED CIT(A) HAS CONSIDERED THIS CONF IRMATION GIVEN BY M/S. WAUKESHA FOUNDRY INC. AS WELL VARIOUS TERMS AND CON DITIONS OF THE AGREEMENT BETWEEN THE ASSESSEE AND MRS. RAKHI ARORA . HOWEVER, THE CIT(A) HAS STATED THAT THE ASSESSEE HA FILED NO EVI DENCE TO PROVE THAT MRS. RAKHI ARORA HAS EVER MADE ENQUIRIES WITH ANY OF THE PROSPECTIVE CUSTOMERS IN USA AND IF THAT WAS DONE, A COPY OF THE SAME COU LD HAVE BEEN PRODUCED BEFORE THE AO, WHICH WOULD HAVE SUFFICIENTLY PROVED THAT THE SERVICES HAVE 17 ACTUALLY BEEN RENDERED. THE CIT(A) FURTHER OBSERVE D THAT THESE ENQUIRIES COULD HAVE BEEN MADE ON TELEPHONES OR IN THE FORM O F E-MAIL OR BY PERSONAL VISIT BY MRS. RAKHI ARORA. IN THE ABSENCE OF THESE DOCUMENTS AND ANY OTHER EVIDENCE, THE LEARNED CIT(A) HAS TAKEN A VIEW THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT MRS. RAKHI ARORA HAD RENDERED SE RVICES, WHICH WOULD JUSTIFY PAYMENT OF COMMISSION. THE LEARNED CIT(A) FURTHER OBSERVED THAT IDENTITY OF MRS. RAKHI ARORA IS NOT ESTABLISHED. I N THE LIGHT OF THE AFORESAID OBSERVATIONS MADE BY THE LEARNED CIT(A) ABOUT CORRE SPONDENCE EITHER BY TELEPHONE OR E-MAIL BETWEEN MRS. RAKHI ARORA AND CU STOMERS, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PRODUCED BEFORE US VOL UMINOUS PAPERS CONTAINING FOLLOWING FRESH DETAILS:- (I) AFFIDAVIT AND COPY OF PASS PORT OF MRS. RAKHI ARORA AND COPIES OF PURCHASE ORDERS. (II) DETAILS OF DEBIT NOTES FROM MRS. RAKHI ARORA IN RES PECT OF CLAIM OF COMMISSION AND DETAILS OF PAYMENT OF COMMISSION. D ETAILS OF PAYMENT RECEIVED FROM M/S. WAUKESHA IRO FOUNDRY INC . USA. (III) DETAILS OF E-MAIL COMMUNICATION REGARDING INVOICES AND QUALITY OF GOODS, BETWEEN M/S. VORTEX SYSTEMS, M/S. WAUKESHA I RO FOUNDRY INC., USA AND MRS. RAKHI ARORA. (IV) COPY OF INVOICES BY THE ASSESSEE FIRM TO M/S. WAUKE SHA IRO FOUNDRY INC. USA. 20. WHILE RELYING UPON ON THESE ADDITIONAL EVIDENCE S FILED BEFORE US, THE ASSESSEE MADE A REQUEST TO ADMIT THEM IN TERMS OF R ULE 29 OF THE INCOME-TAX APPELLATE TRIBUNAL RULES AS THESE DOCUMENTS HAVE DI RECT BEARING TO THE ISSUE UNDER ADJUDICATION. THE ASSESSEE FURTHER STATED TH AT SINCE NEITHER THE AO NOR 18 THE CIT(A) HAS CALLED FOR SUCH INFORMATION NOR THE ASSESSEE HAD ANY REASONABLE OPPORTUNITY TO PRODUCE THE SAME EITHER A T THE ASSESSMENT STAGE OR AT APPELLATE STAGE, AND THESE DOCUMENTS HAVE SINCE BEEN COLLECTED TO FURTHER ESTABLISH THE ASSESSEES CASE, THESE ADDITIONAL DOC UMENTS WERE REQUESTED TO BE ADMITTED FOR CONSIDERATION. IN THIS RESPECT, TH E LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THIRD MEMBER O F ITAT IN THE CASE OF MASCON GLOBAL LTD. VS. ACIT (2010) 37 SOT 202 (CHEN NAI)(TM). 21. IN THE CASE OF MASCON GLOBAL LTD. (SUPRA), THE ITAT THIRD MEMBER HAS TAKEN A VIEW THAT RULE 29 OF THE INCOME-TAX (AP PELLATE TRIBUNAL), 1963 PERMITS THE TRIBUNAL TO ADMIT THE ADDITIONAL EVIDEN CE FOR ANY SUBSTANTIAL CAUSE, AND THE INTENTION BEHIND THE RULE IS THAT SU BSTANTIAL JUSTICE SHOULD BE DONE AND THE INTEREST OF JUSTICE SHOULD BE THE OVER -RIDING CONSIDERATION. IN THIS CASE, THE TRIBUNAL FURTHER OBSERVED THAT SINCE THE MATTER WAS REMANDED BACK TO THE CIT TO EXAMINE THE VERACITY OF THE ADDI TIONAL PAPERS OR DOCUMENTS, IT PROVIDED AN ADEQUATE SAFEGUARD TO PRO TECT THE INTEREST OF THE REVENUE. THE HONBLE TRIBUNAL HAD ALSO TAKEN A VIE W THAT IT WOULD BE OPEN TO THE TRIBUNAL TO ADMIT ADDITIONAL EVIDENCE WHEN I T IS PRODUCED IN COURT AND AN ORAL APPLICATION IS MADE IN A FIT CASE, DEPE NDING ON THE CIRCUMSTANCES. THERE IS NOT ANY HARD AND FAST RULE IN THIS BEHALF AND IT SHOULD BE LEFT TO THE DISCRETION OF THE BENCH. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE 19 ASSESSEE HAD PRODUCED THE COPY OF AGREEMENT AND THE DETAILS OF THE PAYMENT BEFORE THE AO. THE DETAILS OF COMMISSION PAID AND PAYABLE WAS ALSO FURNISHED. THE DETAILS OF SALES MADE BY THE ASSESS EE TO OVERSEAS CUSTOMERS WERE ALSO AVAILABLE ON RECORD. THE ASSESSEE HAD SU BSEQUENTLY PRODUCED A CONFIRMATION LETTER FROM M/S. WAUKESHA IRO FOUNDRY INC. BEFORE THE LEARNED CIT(A), WHICH WAS ADMITTED FOR CONSIDERATION AT THE APPELLATE STAGE. THE DETAILS OF INVOICES ISSUES BY THE ASSESSEE TO M/S. WAUKESHA IRO FOUNDRY INC. AND DETAILS OF PAYMENT RECEIVED FROM M/S. WAUKESHA IRO FOUNDRY INC. AND THE COPY OF THE PURCHASE ORDER BY M/S. WAUKESHA IRO FOUNDRY INC. ARE PART OF THE ASSESSEES RECORD, AND THE RELEVANT ENTRY IN RESPECT THEREOF HAVE BEEN MADE IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS NOW COLLECTED THE VARIOUS E- MAIL COMMUNICATION MADE BETWEEN THE PARTIES FROM TI ME TO TIME AND FILED BEFORE US FOR CONSIDERATION TO FURTHER PROVE THE AS SESSEES CLAIM. SINCE THESE E-MAIL COMMUNICATIONS GO TO THE ROOT OF THE ISSUE R EGARDING ACTIVITIES OR SERVICES RENDERED BY MRS. RAKHI ARORA, WE ARE INCLI NED TO ADMIT THESE EVIDENCES FOR CONSIDERATION SO THAT THE ISSUE WHETH ER MRS. RAKHI ARORA HAD ACTUALLY RENDERED ANY SERVICES TO THE ASSESSEE, CAN BE DECIDED IN ITS RIGHT AND CORRECT PERSPECTIVE. HOWEVER, THE VERACITY AND GEN UINENESS OF THESE E-MAIL COMMUNICATIONS AND OTHER DOCUMENTS, NOW FILED BEFOR E US, HAVE NEVER BEEN EXAMINED AND VERIFIED BY THE AO AS THE AO HAS NO OC CASION TO EXAMINE AND 20 VERIFY THE SAME. WE, THEREFORE, RESTORE THE ISSUE REGARDING FACTUM OF SERVICES ALLEGED TO HAVE BEEN RENDERED BY MRS. RAKH I ARORA BACK TO THE FILE OF THE AO FOR HIS FRESH ADJUDICATION, AFTER EXAMINI NG ALL THE EVIDENCES, DOCUMENTS AND PAPERS, THAT HAVE NOW BEEN FILED BY T HE ASSESSEE BEFORE US, IN COURSE OF WHICH HE SHALL PROVIDE REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE SHALL PRODUCE ALL THESE DETAILS AND EVIDENCES BEFORE THE AO FOR HIS EXAMINATION AND VERIFICATION. WE ORDER ACCORDINGLY. THUS, GROUND NO.1 RAISED BY THE ASSESSEE IS RESTORE D BACK TO THE FILE OF THE AO FOR HIS FRESH ADJUDICATION. 22. GROUND NOS.2 & 3 ARE REGARDING DISALLOWANCE OF RS.27,000/- ON ACCOUNT OF BAD DEBT IN RESPECT OF M/S. GUJARAT PREC ISION CAST PVT. LTD. IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAD SHOWN BAD D EBTS AND REBATE AND DISCOUNT TO THE TUNE OF RS.5,58,583/- COVERING FOLL OWING TWO ITEMS:- (I) RS.5,31,583/- BAD DEBT IN RESPECT OF M/S. GERCORE TECHNICAL SERVICES. (II) RS.27,000/- BAD DEBT IN RESPECT OF GUJARAT PRECISIO N CAST PVT. LTD. ON PERUSAL OF COPY OF ACCOUNT OF M/S. GUJARAT PRECI SION CAST PVT. LTD., IT WAS FOUND BY THE AO THAT THE AFORESAID CONCERN WAS NEVER A DEBTOR BUT INSTEAD A PAYMENT OF RS.27,000/- WAS MADE TO THIS P ARTY ON 20.10.2005, WHICH WAS WRITTEN OFF AS BAD DEBT ON 31.03.2006. T HE AO HAS, THEREFORE, TAKEN A VIEW THAT PRIME MOST CONDITION FOR WRITING OFF BAD DEBT IS THAT IT 21 MUST BE A DEBT, WHICH HAS GONE BAD, IS NOT ESTABLIS HED. HE, THEREFORE, DISALLOWED THE ASSESSEES CLAIM OF BAD DEBT OF RS.2 7,000/-. 23. ON AN APPEAL, THE LEARNED CIT(A) CONFIRMED THE AOS ACTION BY OBSERVING THAT THE ASSESSEE HAS NOT BEEN ABLE TO PR OVE THAT THE DEBT HAS BECOME BAD AND THE SAME HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 25. THE ASSESSEES WRITTEN SUBMISSION BEFORE THE LE ARNED CIT(A) HAVE BEEN REPRODUCED BY THE LEARNED CIT(A) IN PARA 20 OF HIS ORDER, WHERE THE ASSESSEE HAS CONTENDED THAT CLAIM OF RS.27,000/- WA S MADE BY THE ASSESSEE AS A BUSINESS LOSS IN TERMS OF PROVISION OF SEC. 29 OF THE ACT AS PAYMENT MADE TO M/S. GUJARAT PRECISION CAST PVT. LTD. FOR E XECUTION OF SOME JOB, WHICH WAS NOT FOUND SUITABLE TO CUSTOMERS AND THE S AME WAS REJECTED AND THUS, THE AMOUNT WAS NOT REALIZABLE. HOWEVER, THIS ASPECT OF THE MATTER HAS NOT BEEN EXAMINED EITHER BY THE AO OR BY THE LEARNE D CIT(A). WE, THEREFORE, RESTORE THIS MATTER BACK TO THE FILE OF THE AO FOR HIS FRESH ADJUDICATION, AFTER PROVIDING REASONABLE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. 26. GROUND NO.4 IS DIRECTED AGAINST THE CIT(A)S OR DER IN CONFIRMING THE FOLLOWING DISALLOWANCE OF EXPENSES:- A. CONVEYANCE EXPENSES RS.10,141/- B. COMMUNICATION EXPENSES RS.17,101/- 22 C. VEHICLE RUNNING AND MAINTENANCE EXPENSES RS.20, 351/- D. DEPRECIATION EXPENSES RS. 3,146/- 27. IN THE ASSESSMENT ORDER, OUT OF THE CONVEYANCE EXPENSES OF RS.1,01,042/-, COMMUNICATION EXPENSES OF RS.1,71,00 3/-, VEHICLE RUNNING AND MAINTENANCE EXPENSES OF RS.2,03,507/- AND DEPRE CIATION ON VEHICLES OF RS.31,461/-, THE AO DISALLOWED 10% THEREOF WITH A V IEW TO PLUG ANY LEAKAGE OF REVENUE AS HE WAS OF THE OPINION THAT PERSONAL E LEMENT IN ALL THESE EXPENSES CANNOT BE RULED OUT. THE LEARNED CIT(A) H AS CONFIRMED THE AOS ACTION. 28. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS AN INDIVIDUAL AND IS NOT A CORPORAT E ENTITY. THE ASSESSEE HAS INCURRED EXPENSES ON CONVEYANCE, COMMUNICATION, VEH ICLE RUNNING AND MAINTENANCE AND DEPRECIATION ON VEHICLES. THERE IS EVERY PROBABILITY THAT VEHICLES ARE ALSO USED BY THE ASSESSEE FOR HIS PERS ONAL PURPOSES. HOWEVER, THERE IS NO BASIS GIVEN BY THE A.O. TO DISALLOW THE EXPENSES @ 10%, WITHOUT POINTING OUT ANY ITEM OF EXPENSES, WHICH IS PURELY OF PERSONAL IN NATURE. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, WE RESTRICT THE DISALLOWANCE TO 5% OF THE TOTAL EXPENS ES. THE AO SHALL MODIFY THE ASSESSMENT ORDER ACCORDINGLY. 29. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED TO BE ALLOWED PARTLY FOR A STATISTICAL PURPOSE. 30. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 25 TH OCTOBER, 2011. SD/- SD/- (B.C. MEENA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH OCTOBER, 2011. 23 ITA NO.252/DEL/2010 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.