M/s. Tesla Transformers Ltd., Bhopal v. The Asstt. Commissioner of Income Tax 3(1), Bhopal

CO 2/IND/2011 | 2007-2008
Pronouncement Date: 29-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 222723 RSA 2011
Assessee PAN AABCT1005C
Bench Indore
Appeal Number CO 2/IND/2011
Duration Of Justice 10 month(s) 25 day(s)
Appellant M/s. Tesla Transformers Ltd., Bhopal
Respondent The Asstt. Commissioner of Income Tax 3(1), Bhopal
Appeal Type Cross Objection
Pronouncement Date 29-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 29-11-2011
Assessment Year 2007-2008
Appeal Filed On 03-01-2011
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.618/IND/2010 A.Y. 2007-08 ACIT-3(1) BHOPAL ... APPELLANT VS M/S. TESLA TRANSFORMERS LTD. BHOPAL PAN AABCT 1005 C ... RESPONDENT CO NO.2/IND/2011 (ARISING OUT OF ITA NO.618/IND/2010) A.Y. 2007-08 M/S. TESLA TRANSFORMERS LTD. BHOPAL PAN AABCT 1005 C ... APPELLANT VS ACIT-3(1) BHOPAL ... RESPONDENT AND 2 CO NO.1/IND/2011 (ARISING OUT OF ITA NO.617/IND/2010) A.Y. 2006-07 M/S. TESLA TRANSFORMERS LTD. BHOPAL PAN AABCT 1005 C ... APPELLANT VS ACIT-3(1) BHOPAL ... RESPONDENT REVENUE BY : SHRI ARUN DEWAN SR. DR RESPONDENT BY : SHRI ANIL KHABYA CA DATE OF HEARING : 21.11.2011 DATE OF PRONOUNCEMENT : 29.11.2011 O R D E R PER JOGINDER SINGH THIS IS AN APPEAL BY THE REVENUE AND CROSS OBJECTI ONS BY THE ASSESSEE CHALLENGING THE ORDERS OF LEARNED COMM ISSIONER OF INCOME TAX (APPEALS)-II BHOPAL. IN ITA NO.618/IND/2010 (AY: 2007-08) THE FOLLOWIN G GROUNDS HAVE BEEN RAISED BY THE REVENUE: 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. FIRST APPELLATE AUTHORITY ERRED IN: - 1. DELETING THE DISALLOWANCE OF RS.23 67 542/- MADE BY THE ASSESSING OFFICER OUT OF BANK COMMISSION EXPENSES. 2. RESTRICTING THE ADDITION TO RS.1 85 804/- OUT OF TOTAL ADDITION OF RS.5 15 804/- MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF JOB CHARGES. 3. DELETING THE DISALLOWANCE OF RS.1 50 000/- OUT O F LABOUR CHARGES AND WAGES HOLDING THAT SUCH LUMP-SUM DISALLOWANCE MADE ON ESTIMATE BASIS CANNOT BE SUSTAINED. 4. DELETING THE DISALLOWANCE OF RS.2 LACS OUT OF SA LES COMMISSION HOLDING THAT SUCH LUMP-SUM DISALLOWANCE MADE ON ESTIMATE BASIS CANNOT BE SUSTAINED. 5. DELETING THE DISALLOWANCE OF RS.1 35 840/- OUT O F TRAVELLING EXPENSE OF DIRECTORS. IN THE CROSS-OBJECTION NO.2/IND/2011 (AY: 2007-08) THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 4 1. THAT THE LD. CIT(A) ERRED IN MAINTAINING DISALL OWANCE OF RS.1 85 804/- ON ACCOUNT OF JOB WORK CHARGES PAI D TO SHRI RAJENDRA PATIL. 2. THAT THE LD. CIT(A) ERRED IN MAINTAINING DISALLO WANCE OF RS.1 54 160/- OUT OF VARIOUS PAYMENTS DESCRIBED AS PENAL PAYMENTS WITHOUT VERIFYING NATURE OF SUCH PAYMENTS. IN THE CROSS-OBJECTION NO.1/IND/2011 (AY: 2006-07) THE FOLLOWING GROUND HAS BEEN RAISED BY THE ASSESSEE: THAT THE LD. CIT(A) ERRED IN MAINTAINING ACTION O F THE ASSESSING OFFICER IN MAKING ADDITION OF RS.1 L AC ON ACCOUNT OF ALLEGED CASH RECEIPTS FROM M/S. NAVEEN NAVYUVAK GRIH NIRMAN SAHAKARI SAMITI. 2. THE FIRST GROUND RAISED BY THE REVENUE PERTAINS TO DELETING THE DISALLOWANCE OF RS. 23 67 542/- OUT OF BANK COM MISSION EXPENSES. THE CRUX OF ARGUMENTS ON BEHALF OF THE R EVENUE IS THAT THE LEARNED FIRST APPELLATE AUTHORITY WRONGLY DELETED THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER. ON THE 5 OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE D EFENDED THE IMPUGNED ORDER. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON FILE. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACT URE AND DISTRIBUTION OF POWER TRANSFORMERS. THE ASSESSEE IS ALSO ENGAGED IN THE BUSINESS OF UNDERTAKING ELECTRICAL I NSTALLATION AND SUB-STATION PROJECT WORKS. THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND THE SAME WERE SUBMITTED BEFORE THE ASSESSING OFFICER. THE LEARNED ASSESSING OFFICER EXAMINED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE CLAIMED TO HA VE PAID COMMISSION TO VARIOUS PERSONS FOR ACQUIRING AND EXE CUTING BUSINESS CONTRACTS AND ALSO FOR PURSUING VARIOUS CU STOMERS FOR PAYMENTS. THE PAYMENTS OF COMMISSION WERE ALSO NOT DOUBTED BY THE LEARNED ASSESSING OFFICER. THE ASSE SSEE WAS REQUIRED TO PROVIDE PERFORMANCE TO VARIOUS CUSTOMER S FOR SATISFACTORY FUNCTIONING OF EQUIPMENT SUPPLIED UNDE R VARIOUS CONTRACTS OF SUPPLY OF EQUIPMENT AND THEIR ERECTION . AS PER THE ASSESSEE THE BANK CHARGES PAID TO VARIOUS BANKS BE COMES 6 DUE AS PAYABLE AS AND WHEN THE GUARANTEE IS ISSUED. THE ASSESSEE DEBITED RS. 59 18 785/- AS BANK GUARAN TEE. THE LEARNED ASSESSING OFFICER WAS OF THE VIEW THAT THE BANK GUARANTEE CHARGES WERE PAID FOR THE PERIOD BEYOND F INANCIAL YEAR 2006-07 THEREFORE THESE ARE ALLOWABLE ONLY F OR THE PERIOD PERTAINING TO ASSESSMENT YEAR 2007-08 THEREFORE H E CALCULATED THAT RS.23 67 542/- PERTAINS TO THE PERI OD OTHER THAN 2006-07 HENCE DISALLOWED AND ADDED BACK TO THE IN COME OF THE ASSESSEE. ON APPEAL IT WAS FOUND BY THE LEARN ED LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT THESE EXP ENSES WERE INCURRED AND WERE PAID TO THE BANK FOR OPENING PERFORMANCE GUARANTEE WHICH IS NECESSARILY REQUIRED TO BE GIVEN TO THE CUSTOMERS IN ACCORDANCE WITH PURCHASE CONTRACT FOR SATISFACTORY PERFORMANCE OF EQUIPMENT SUPPLIED UNDER PURCHASE CONTRACT AND IN TURN THE CUSTOMERS CAN INV OKE THESE GUARANTEES ANYTIME DURING THE PERIOD OF VALIDITY WI THOUT ANY REFERENCE TO THE ASSESSEE. EVEN OTHERWISE WE FURT HER FIND THAT THESE WERE CRYSTALISED DURING THE YEAR CONSEQUENTL Y IT IS A REVENUE EXPENDITURE WHICH WAS INCURRED WHOLLY AND E XCLUSIVELY 7 FOR THE PURPOSES OF BUSINESS ESPECIALLY WHEN THE A SSESSEE COMPANY OBTAINED BUSINESS CONTRACTS ONLY ON GIVING SUCH BANK GUARANTEE WHICH IS PRE-REQUISITE FOR SMOOTH RUNNING OF BUSINESS THEREFORE THE COMMISSION PAID ON SUCH GU ARANTEE IS A REVENUE EXPENDITURE. IF SUCH GUARANTEE IS NOT GI VEN THEN THE DESIRED PURCHASE CONTRACTS MAY NOT BE OBTAINED CON SEQUENTLY THE PAYMENT OF BANK COMMISSION IS INEXTRICABLY CONN ECTED TO THE INCOME EARNING ACTIVITY OF THE ASSESSEE THEREF ORE WE FIND NO INFIRMITY IN THE IMPUGNED ORDER AND CONFIRM THE SAME. 3. THE NEXT GROUND PERTAINS TO RESTRICTING THE ADDI TION TO RS.1 85 804/- OUT OF THE TOTAL ADDITION OF RS.5 15 804/- MADE ON ACCOUNT OF JOB CHARGES. THE LEARNED SR. DR DEFENDE D THE ADDITION MADE BY THE ASSESSING OFFICER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE IMPUGNED ORD ER. 3.1 ON PERUSAL OF RECORD AND AFTER HEARING THE RIVA L SUBMISSIONS WE FIND THAT THE ASSESSEE ENGAGED SHRI RAJENDRA PATIL PROPRIETOR M/S ALPHA CONSTRUCTION ENGG. & CO NTRACTORS (IN FINANCIAL YEAR 2005-06) FOR ITS PROJECT WORK AND CL AIMED TO HAVE 8 MADE ADVANCE PAYMENT OF RS.4 25 804/- TO HIM OUT O F THE TOTAL CONTRACT AMOUNT OF RS. 5 69 000/- (DURING THE FINAN CIAL 2006- 07). THE ASSESSEE FURTHER PAID RS.90 000/- TO THE SAID CONTRACTOR THUS THE TOTAL SUM OF RS.5 15 804/- WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT IN FINANCIAL YEAR 2006- 07. THE STATEMENT OF SHRI RAJENDRA PATIL WAS RECORDED BY TH E DEPARTMENT WHO CATEGORICALLY ADMITTED THAT HE RECEI VED RS. 2 40 000/- DURING THE FINANCIAL YEAR 2005-06 FROM T HE ASSESSEE. THE LEARNED ASSESSING OFFICER THUS ALLOWED THE PAYM ENT OF RS. 2 40 000/- AND MADE DISALLOWANCE OF THE REMAINING A MOUNT OF RS.3 29 000/-. THE CLAIM OF THE ASSESSEE IS THAT TH E ENTIRE AMOUNT OF RS. 4 25 804/- WAS SHOWN AS ADVANCE PAYME NT AND NOTHING WAS CHARGED OUT OF IT TO THE PROFIT AND LOS S ACCOUNT. THE WORK WAS COMPLETED AND BILLS WERE RAISED AND SE TTLED IN ASSESSMENT YEAR 2007-08 AND THE ENTIRE AMOUNT WAS D EBITED IN THE PROFIT AND LOSS ACCOUNT FOR THE ASSESSMENT Y EAR 2007-08 AND NO AMOUNT WAS CHARGED TO PROFIT AND LOSS ACCOUN T IN THE ASSESSMENT YEAR 2006-07. ADMITTEDLY THE ASSESSING OFFICER ALLOWED THE PAYMENT OF R. 2 40 000/- WHICH WAS PAID THROUGH 9 CHEQUE DURING THE ASSESSMENT YEAR 2005-06 AND IN TH IS YEAR FURTHER SUM OF RS. 90 000/- WAS PAID THROUGH CHEQUE CONSEQUENTLY THE TOTAL AMOUNT PAID THROUGH CHEQUE C OMES TO RS. 3 30 000/- OUT OF THE TOTAL PAYMENT OF RS.5 15 804/- CLAIMED BY THE ASSESSEE THEREFORE WE FIND NO INFI RMITY IN THE STAND OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) IN ALLOWING THE PAYMENT MADE THROUGH CHEQUE. ON THIS I SSUE THE STAND OF THE LD. CIT(A) IS AFFIRMED. 4. THE NEXT GROUND PERTAINS TO DELETING THE LUMP SU M DISALLOWANCE OF RS.1 50 000/- OUT OF LABOUR CHARGES AND WAGES ON ESTIMATE BASIS. ON PERUSAL OF RECORD AND AFTER H EARING THE RIVAL SUBMISSIONS ADMITTEDLY THE ASSESSEE IS A LIM ITED COMPANY AND SINCE THE ASSESSING OFFICER HAS ACCEPTE D THE BOOKS RESULTS THEREFORE WITHOUT PIN POINTING ANY DEFECT IN THE SAME NO LUMB SUM DISALLOWANCE ON AD HOC BASIS CAN BE MADE THAT TOO ON ESTIMATE BASIS CONSEQUENTLY THE STAND OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS AFF IRMED. 10 5. THE REVENUE IS ALSO AGGRIEVED BY THE ORDER OF LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) WHEREIN THE DISALLOWANCE OF RS. 2 LACS OUT OF SALES COMMISSION WAS DELETED. THE LEARNED SR. DR DEFENDED THE ASSESSMEN T ORDER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SUPPOR TED THE IMPUGNED ORDER. ON PERUSAL OF RECORD AND AFTER HEA RING THE RIVAL SUBMISSION ADMITTEDLY THE ASSESSEE COMPANY W AS MAINTAINING ITS ACCOUNTS IN DAY TO DAY COURSE OF BU SINESS WHICH ARE SUPPORTED BY THE VOUCHERS AND BILLS. THE AD HOC DISALLOWANCE OUT OF SALE COMMISSION HAS BEEN MADE W ITHOUT INDICATING THAT IT WAS AN BOGUS EXPENDITURE ESPECIA LLY WHEN TAX HAS BEEN DEDUCTED AT SOURCE ON SUCH PAYMENT OF COMM ISSION IN ACCORDANCE WITH THE PROVISIONS OF SECTION 194H O F THE ACT AND THE ACCOUNTS ARE AUDITED ONE THEREFORE WE FIN D NO INFIRMITY ON THIS ISSUE IN THE IMPUGNED ORDER. 6. THE LAST GROUND PERTAINS TO THE AMOUNT OF RS. 1 35 840/- OUT OF TRAVELLING EXPENSES OF THE DIRECTORS. ON PER USAL OF RECORD AND AFTER HEARING THE RIVAL SUBMISSIONS WE FIND TH AT THE ADDITION WAS MADE BY THE LEARNED ASSESSING OFFICER ON THE 11 GROUND THAT NO EVIDENCE WAS PRODUCED BY THE ASSESSE E TO PROVE THAT THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES. THE STAND OF THE ASSESSEE BEFORE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) IS AS UNDER :- THE APPELLANT IS ENGAGED IN THE BUSINESS OF EXPOR T OF TRANSFORMERS. FOR THIS PURPOSE THE DIRECTORS AND OTHER TECHNICAL STAFF IS REQUIRED TO VISIT VARIOUS CUSTOMERS IN FOREIGN COUNTRY. THE EXPORT T URNOVER OF THE COMPANY FOR FINANCIAL YEAR 2006-07 WAS RS. 3.10 CRO RES FOR F.Y. 2007-08 WAS RS.8.40 CRORES AND RS. 35.65 CRORES FOR F.Y. 20 08-09. THE TRAVELLING EXPENSES OF RS. 1 35 840/- HAVE BEEN INCURRED BY DI RECTOR SHRI JAIDEEP JAIN IN CONNECTION WITH SECURING EXPORT ORDER FROM M/SM.I. POWER LIMITED OF AUSTRALIA. COPY OF THEIR ORDER DT. 12.01.2007 IS ENCLOSED. THE TRAVELLING EXPENSES HAVE BEEN INCURRED FOR THE PURP OSE OF BUSINESS AND THEY ARE ALLOWABLE DEDUCTION. THE DISALLOWANCE MADE BY THE A.O. IS UNWARRANTED AND DESERVES TO BE SET ASIDE. IN THE LIGHT OF THE ABOVE ASSERTION MADE BY THE ASS ESSEE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HELD A S UNDER:- I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE SUBMISSIONS GIVEN BY THE LD. AR. THE TRAVELLING EXPENSES HAVE BEEN INCURRED BY THE DIRECTOR OF THE COMPANY FOR SEEKING EXPORT ORDE R FROM AUSTRALIA. THUS IN MY CONSIDERED VIEW THE TRAVELLING EXPENSE S OF THE DIRECTOR ARE FOR THE PURPOSE OF BUSINESS ONLY AND THE DISALL OWANCE OF RS. 1 35 840/- IS UNCALLED FOR AND CANNOT BE SUSTAINED. THIS GROUND IS THEREFORE ALLOWED IN FAVOUR OF THE APPELLANT. 6.1 IF THE FACTS MENTIONED IN THE ASSESSMENT ORDER SUBMISSIONS OF THE ASSESSEE AND THE LEARNED SR. DR CONCLUSION DRAWN IN THE IMPUGNED ORDER ARE ANALYSED WE FIND THAT THERE IS A FINDING IN THE ASSESSMENT ORDER THA T VIDE ENTRY DATED 25.8.2009 THE ASSESSEE WAS SPECIFICALLY ASKED TO SUBMIT 12 THE DETAILS OF TRAVELLING OF DIRECTORS WITH EVIDENC E. THE ASSESSEE FILED THE SUBMISSIONS. THE ASSESSEE DID NO T FILE DETAILS. HOWEVER FROM THE SUBMISSIONS OF THE ASS ESSEE DATED 8.9.2009 IT WAS FOUND BY THE ASSESSING OFFICER THAT ON 10.1.2007 THE ASSESSEE INCURRED RS. 68 770/- FOR PU RCHASING AIR TICKET AND RS. 67 070/- FOR OBTAINING DOLLARS 1 900 FOR SHRI JAIDEEP JAIN THE DIRECTOR OF THE ASSESSEE COMPANY TO MEET OUT THE OVERHEAD EXPENSES ABROAD. THE LEARNED ASSESSING OFFICER MADE THE DISALLOWANCE ON THE PLEA THAT NO EVIDENCE WAS FURNISHED THAT THE TRIP WAS FOR BUSINESS PURPOSES THEREFORE HE ADDED RS. 1 35 840/- TO THE INCOME OF THE ASSESSEE. IN VIEW OF THESE FACTS SINCE THE EXPENSES WERE INCURRED ON AI R TICKET AND OBTAINING DOLLARS THEREFORE IN VIEW OF THE HUGE T URNOVER AND ESPECIALLY WHEN THE TURNOVER IS INCREASING YEAR AFT ER YEAR NO DISALLOWANCE IS PERMISSIBLE UNDER THE FACTS OF THE PRESENT APPEALS THE STAND OF LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) IS AFFIRMED. FINALLY THE APPEAL OF THE REVENUE IS HAVING NO MER IT THEREFORE DISMISSED. 13 7. THE ONLY GROUND RAISED IN CO NO. 1/IND/2011 IS T HAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN MAINTAINING THE ADDITION OF RS. 1 LAC ON ACCOUNT OF ALLEGED CASH RECEIPTS FROM M/S NAVEEN NAVYUVAK GRAH NIRMAN SAHKARI SAMITI. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASS ESSEE IS THAT THE CASH RECEIPT WAS NOT ACCOUNTED FOR WHEREAS THE LEARNED SR. DR DEFENDED THE ADDITION. 7.1 ON PERUSAL OF RECORD AND AFTER HEARING THE RIVA L SUBMISSIONS WE FIND THAT THE LEARNED ASSESSING OFF ICER NOTICED THAT ONE OF THE CUSTOMERS OF THE ASSESSEE CLAIMED P AYMENT OF RS.1 LAC IN CASH FOR PURCHASE OF TRANSFORMER. THE STAND OF THE ASSESSEE IS THAT THE ASSESSEE RECEIVED A SUM OF RS. 3 23 905/- FROM NAVEEN NAVYUVAK GRAH NIRMAN SAMITI ON ACCOUNT OF SALE OF TRANSFORMER. HOWEVER NO SUCH CASH RECEIPT WAS FOUND DURING THE COURSE OF SEARCH. EVEN OTHERWISE THE AS SESSEE VIDE LETTER DATED 28.11.2008 HAS DENIED TO HAVE RECEIVED ANY SUM OTHER THAN RS. 3 23 905/- FROM THAT CUSTOMER BY CLA IMING THAT THE ENTRIES MADE BY THIRD PARTY IN THEIR BOOKS ARE NOT BINDING ON THE ASSESSEE. IT IS FURTHER SEEN THAT NO EVIDENCE W HATSOEVER 14 WAS FILED BEFORE THE ASSESSING OFFICER OR BEFORE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) AND ALSO BEFOR E US TO SUBSTANTIATE THE CLAIM CONSEQUENTLY THERE IS NO M ERIT IN THE GROUND RAISED BY THE ASSESSEE THEREFORE THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 8. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION (CO NO. 2/IND/2011) WHEREIN FIRST GROUND PERTAINS TO CONFIR MING THE DISALLOWANCE OF RS.1 85 804/- ON ACCOUNT OF JOB CH ARGES PAID TO SHRI RAJINDER PATIL. THE CRUX OF ARGUMENTS ON B EHALF OF THE ASSESSEE IS THAT IS THAT ONLY CHEQUE PAYMENT WAS A LLOWED AND SINCE BILLS WERE NOT DOUBTED THEREFORE THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN MAINT AINING THE DISALLOWANCE. ON THE OTHER HAND THE LEARNED S R. DR STRONGLY DEFENDED THE IMPUGNED ORDER ON THE GROUND THAT THERE IS NO PROOF OF PAYMENT OF CASH AND SUCH A HUGE AMOU NT IS NOT PERMISSIBLE TO BE PAID IN CASH. 8.1 ON PERUSAL OF RECORD AND AFTER HEARING THE RIVA L SUBMISSIONS WE FIND THAT THE ASSESSEE CHARGED THE AMOUNT OF 15 RS. 5 15 804/- TO THE PROFIT AND LOSS ACCOUNT WHERE AS SHRI RAJINDER PATIL ON OATH TENDERED THAT HE ONLY RECEIV ED RS.2 40 000/- AND FURTHER RS. 90 000/- THROUGH CHEQ UE THUS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (O N APPEAL) CONFIRMED THE DISALLOWANCE OF REMAINING AMO UNT. IT IS FURTHER SEEN THAT NEITHER THE ASSESSEE PROVED WITH EVIDENCE THAT ANY FURTHER PAYMENT WAS MADE TO SHRI RAJINDER PATIL NOR SUCH ADMISSION WAS MADE BY HIM DURING RECORDING OF HIS STATEMENT THEREFORE THERE IS NO JUSTIFICATION IN THE CLAIM OF THE ASSESSEE CONSEQUENTLY THIS GROUND OF THE ASSESSEE IS HAVING NO MERIT THEREFORE DISMISSED. 9. THE NEXT GROUND PERTAINS TO MAINTAINING DISALLOW ANCE OF RS.1 54 160/- OUT OF VARIOUS PAYMENTS DESCRIBED AS PENAL PAYMENTS. THE STAND OF THE ASSESSEE IS THAT THE DIS ALLOWANCE WAS MADE WITHOUT VERIFYING THE NATURE OF SUCH PAYME NTS. A PLEA WAS ALSO RAISED THAT OUT OF THE TOTAL AMOUNT T HE COMPENSATION PORTION CAN BE ALLOWED AND ONLY 6% WHI CH IS OF THE NATURE OF PENALTY CAN BE DISALLOWED. ON THE OT HER HAND THE LEARNED SR. DR DEFENDED THE DISALLOWANCE BY SUB MITTING 16 THAT EVEN OTHERWISE THE PENAL PAYMENTS ARE NOT ALLO WABLE EXPENSES. 9.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON FILE. THE ASSESSEE COMPA NY CLAIMED TO HAVE PAID THE AMOUNT OF RS. 3 08 320/- AS PENALT Y UNDER THE VAT ACT ESIC ACT AND PROFESSIONAL TAX ACT. OUT OF THE PENALTY THE ASSESSEE ITSELF ADDED BACK 50% OF THE S AME I.E. RS. 1 54 160/- AND REMAINING 50% WAS CLAIMED AS ALL OWABLE EXPENDITURE. THE STAND OF THE ASSESSEE IS THAT THE NATURE OF PENALTY WAS NOT ANALYSED BY THE ASSESSING OFFICER W HEREAS THE STAND OF THE ASSESSING OFFICER AS WELL AS OF THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) IS THAT IT WAS THE DUTY OF THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. THE PENA LTIES WERE LEVIED FOR CONTRAVENTION/INFRINGEMENT OF RESPECTIVE LAWS/RULES. BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO THE NATURE OF THESE EXPENSES/PENALTIES ETC. WAS NO T EXPLAINED THEREFORE IT WOULD NOT BE PROPER TO ADJUDICATE THE ISSUE WITHOUT AFFORDING OPPORTUNITY TO THE ASSESSING OFFICER THE REFORE THIS ISSUE IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO 17 EXAMINE THE NATURE OF THESE EXPENSES/PENALTIES AND TO DECIDE THE ISSUE IN ACCORDANCE WITH FOR WHICH DUE OPPORTUN ITY OF BEING HEARD BE PROVIDED TO THE ASSESSEE. THE ASSESSEE IS AT LIBERTY TO FURNISH EVIDENCE IF ANY TO SUBSTANTIATE ITS CL AIM THEREFORE THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. FINALLY THE APPEAL OF THE REVENUE IS DISMISSED CO NO. 1/IND/2011 IS DISMISSED AND CO NO. 2/IND/2011 IS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER 2011. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29.11.2011 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR GU ARD FILE DN/- 18