Shri Mukesh Bhimraj Gupta, Baroda v. The ACIT.,Circle-2(1),, Baroda

ITA 1218/AHD/2008 | 2003-2004
Pronouncement Date: 22-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 121820514 RSA 2008
Assessee PAN ACXPG1516C
Bench Ahmedabad
Appeal Number ITA 1218/AHD/2008
Duration Of Justice 3 year(s) 3 month(s) 15 day(s)
Appellant Shri Mukesh Bhimraj Gupta, Baroda
Respondent The ACIT.,Circle-2(1),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 22-07-2011
Date Of Final Hearing 05-07-2011
Next Hearing Date 05-07-2011
Assessment Year 2003-2004
Appeal Filed On 07-04-2008
Judgment Text
-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI T K SHARMA JUDICIAL MEMBER AND SHRI A MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NOS.1218 & 810/AHD/2008 (ASSESSMENT YEARS:-2003-04 & 2004-05) SHRI MUKESH BHIMRAJ GUPTA C/O M/S MUKESH ENGINEERS 28 SHIVDAS NAGAR MKARPURA BARODA V/S THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE- 2(1) BARODA PAN: ACXPG 1516 C [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI J P SHAH AR RESPONDENT BY:- SHRI G S SOORYAWANSHI DR O R D E R PER A MOHAN ALANKAMONY A.M: THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AN INDIVIDUAL AGAINST TWO SEP ARATE ORDERS DATED 27-11-2007 AND 21-12-2007 OF THE LEARNED COMM ISSIONER OF INCOME-TAX (APPEALS)-II BARODA [THE CIT(A)] F OR ASSESSMENT YEARS (AYS) 2004-05 & 2003-04 RESPECTIVE LY. 2 CERTAIN GROUNDS INVOLVED IN THESE TWO APPEALS ARE COMMON AND THEREFORE THE APPEALS HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THOUGH THE ASSESSEE HAS RAISED ELABORA TE GROUNDS THEY ARE BRIEFLY STATED AS FOLLOWS:- GROUNDS RAISED FOR AY 2003-04 ARE - 2 ITA NOS.810 & 12 18/AHD/2008 1. THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMIN G THE ACTION OF ASSESSING OFFICER TO ADD AND AMOUNT OF RS.3916425/- U/S. 43B BEING SALES TAX COLLECTED BY THE ASSESSEE DURING THE YEAR AND REMAINING UNPAID UNDER SALES TAX DEFERMENT SCHEME 2. THE LEARNED CIT (APPEALS) HAS ERRED IN TREATING A SUM OF RS. 95 700/- TOWARDS EQUIPMENT HIRE CHARGES CRYSTALLIZED AND PAI D IN FY 2002-03 AS PRIOR PERIOD EXPENSES. 3. THE LEARNED CIT(APPCA1S) HAS ERRED IN CONFIRMING THE A CTION OF THE AO IN DISALLOWING PURCHASES OF RS. 5 49 450/- FROM M/S GUPTA STEEL CORPORATION. 4. THE LEARNED CIT (APPEALS) HAS ERRED IN CONF IRMING THE ACTION OF THE AO IN DISALLOWING A SUM OF RS. 2 69 875/- OUT OF VA RIOUS EXPENSES ON THE GROUND THAT THE BILLS WERE NOT IN THE NAME OF T HE ASSESSEE. 5. THE LEARNED CIT(A) HAD ERRED IN CONFIRMING ADDIT ION OF RS. 90 438/- MADE ON ACCOUNT OF LATE PAYMENT OF PF. 6. THE LEARNED CIT(A) HAS ERRED IN DISALLOWING 1/6 ' 1 OUT OF TELEPHONE TRAVELLING & OFFICE EXPENSES. 7. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISAL LOWANCE OF DEPRECIATION ON ASSETS OF MUKESH ENGINEERS TO THE T UNE OF RS 256836/- 8. THE LEARNED CIT(A) HAS ERRED IN DENYING DEDUCTIO N U/S 80IB SINCE THE SAME WAS NOT CLAIMED IN THE ORIGINAL RETURN. ADDITIONAL GROUND RAISED FOR THE AY 2003-04- IN VIEW OF THE FACT THAT THE DEBIT NOTE OF SUZLON E NERGY LTD. DATED 31.03.2003 FOR RS.20 59 329/- WAS NOT ALLOWED IN AY 2004-05 FOR THE REASON THAT IT PERTAINS TO THE AY 2003-04. THE ASSE SSEE PRAYS THAT THE SAME BE ALLOWED IN AY 2003-04. WHEREAS GROUNDS RAISED FOR AY 2004-05 ARE - 1. LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING. T HE ACTION OF ASSESSING OFFICER TO ADD AN AMOUNT OF RS. 48 84 870 /- U/S. 43B BEING SALES TAX COLLECTED BY THE ASSESSEE DURING THE YEAR AND REMAINING UNPAID UNDER SALES TAX DEFERMENT SCHEME. 3 ITA NOS.810 & 12 18/AHD/2008 2. THE LEARNED CIT (APPEALS) HAS ERRED IN DISALLOWI NG A SUM OF RS. 2 00 000/- OUT OF FEES FOR SERVICES FEES PAID BY TH E ASSESSEE. 3. THE LEARNED CIT( APPEALS) HAS ERRED IN CONFIRMIN G THE ACTION OF THE AO IN NOT ALLOWING CLAIM OF RS. 20 59 329/- MADE BY THE ASSESSES DURING THE COURSE OF ASSESSMENT PROCEEDINGS RELATIN G TO DEBIT NOTES RAISED BY SUZLON ENERGY LIMITED 3 GROUND NO.1 FOR THESE TWO ASSESSMENT YEARS RELATES TO THE CONFIRMATION OF AN ADDITION OF RS.39 16 425/- AND R S.48 84 870/- U/S 43B OF THE INCOME-TAX ACT 1961 [HEREINAFTER RE FERRED TO AS THE ACT]. BRIEF FACTS RELATING TO AY 2003-04 ARE THAT ON VERIFICATION OF THE ACCOUNTS SUBMITTED WITH THE RET URN OF INCOME THE ASSESSING OFFICER [AO FOR SHORT] FOUND THAT I N THE BALANCE- SHEET OF M/S MUKESH ENGINEERING INDUSTRIES THE ASS ESSEE HAS SHOWN SALES TAX DEFERMENT OF RS.73 26 906/- WHICH W AS INCREASED DURING THE PREVIOUS YEAR BY AN AMOUNT OF RS.39 16 4 25/- INCLUDING CST OF RS.38 54 112/- AND GST OF RS.62 31 3/-. HOWEVER NO CERTIFICATE IN THE PRESCRIBED FORM FROM THE CONCERNED AUTHORITIES WAS ATTACHED WITH THE RETURN. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY HIS CLAIM SHOULD NOT BE DISALLOWED IN VIEW OF THE PROVISIONS OF SECTION 43B OF THE ACT. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE SALES TAX DEFERMENT LETTER OF THE SALES TAX DEPARTMENT WAS SU BMITTED BEFORE THE REVENUE. HOWEVER THE AO FOUND THE SAID S UBMISSION TO BE UNSATISFACTORY. ACCORDING TO THE AO THE ASSE SSEE OPTED FOR SALES TAX DEFERMENT SCHEME AND AS SUCH SALES TAX OF RS.39 16 425/- WAS COLLECTED DURING THE YEAR BUT NO T PAID BEFORE FILING OF THE RETURN. THE AO ALSO OBSERVED THAT AS PER SECTION 4 ITA NOS.810 & 12 18/AHD/2008 43B IF SALES TAX COLLECTED DURING THE PREVIOUS YEA R IS NOT PAID BEFORE DUE DATE FOR FILING OF RETURN AMOUNT COLLEC TED AS SALES TAX IS LIABLE TO BE ADDED TO THE RETURNED INCOME. IT IS UNDISPUTED FACT THAT THE SALES TAX COLLECTED UNDER DEFERMENT SCHEME CAN BE TREATED TO HAVE BEEN PAID IN VIEW OF DEEMING PROVIS IONS OF THE GUJARAT SALES TAX ACT. HOWEVER THE LD.AO HELD THAT SINCE THE ASSESSEE HAS FAILED TO SUBMIT THE REQUISITE CERTIFI CATE IN FORM D FROM THE SPECIFIED FINANCIAL INSTITUTION IN SUPPORT OF ITS CLAIM THE CLAIM OF UNPAID LIABILITY OF SALES TAX DEFERMEN T AMOUNTING TO RS.39 16 425/- CANNOT BE ALLOWED BY VIRTUE OF SECT ION 43B OF THE ACT FOR AY 2003-04. SIMILARLY THE AO DISALLOWE D THE CLAIM OF RS.48 84 870/- FOR AY 2004-05. 4 ON APPEAL THE LEARNED CIT(A) CONFIRMED THE ACTIO N OF THE AO FOR THE AY 2003-04 WITH THE FOLLOWING OBSERVATIO NS:- PAGE -10 ONWARDS PARA 6.2 FOR THE ASSESSMENT YEAR 2003-04 AND PAGE NO. 3 PARA 2.2 FOR THE ASSESSMENT YEAR 2004-05. THE RELEVANT EXTRACT FROM THE WRITTEN SUBMISSIONS IS REPRODUCED HERE BELOW: 'M/S. MUKESH ENGINEERING INDUSTRIES BEING A NEW IN DUSTRIAL UNDERTAKING ESTABLISHED IN A BACKWARD AREA IT HAS BEEN GRANTED THE BENEFIT OF SALES TAX DEFERMENT BY THE SALES TAX DEP ARTMENT. THEREBY THE PAYMENT OF SALES TAX COLLECTED BY THE ASSESSEE IS ALLOWED TO BE DEFERRED TO A LATER DATE. COPY OF THE DEFERMENT CER TIFICATE WAS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. THE RE LEVANT DOCUMENTS ARE ONCE AGAIN BEING SUBMITTED HEREWITH. THE AO HAS DISALLOWED THE ENTIRE AMOUNT OF SALES TA X COLLECTED DURING THE YEAR TO THE TUNE OF RS.39 16 425 TREATIN G THE SAME AS UNPAID W.R.T. SECTION 43B. THE AO HAS QUOTED THE GUJARAT S ALES TAX ACT WHEREBY APART FROM DEFERMENT CERTIFICATE THE AMOUN T SHOULD BE RAISED BY GIIC OR GSFC FOR THE TAX TO BE TREATED AS PAID. A CERTIFICATE IN FORM D WOULD INDICATE CONVERSION OF THE DEFERMEN T AMOUNT TO A 5 ITA NOS.810 & 12 18/AHD/2008 LOAN FROM THE ABOVE FINANCIAL INSTITUTIONS. THE DIS ALLOWANCE WAS MADE SINCE THE ASSESSEE COULD NOT SUBMIT THE ABOVE CERTI FICATE IN D-FORM DURING ASSESSMENT PROCEEDINGS. THIS DISALLOWANCE IS PURELY ON TECHNICAL GROUNDS FO R NON-SUBMISSION OF ONE DOCUMENT WHICH IN ITSELF DOES NOT CARRY ANY RELEVANCE. THE DEFERMENT HAS BEEN APPROVED BY THE SALES TAX AUTHOR ITIES PROOFS OF WHICH HAVE ALREADY BEEN SUBMITTED DURING THE ASSESS MENT PROCEEDINGS. THE ASSESSEE COLLECTS THE AMOUNT AND T HE SAME IS PRESENTED AS A LIABILITY IN HIS BOOKS. FURTHER THE CONVERSION OF DEFERMENT AMOUNT TO LOAN IS ONLY A PROCEDURAL REQUI REMENT. IN FACT THERE IS NO REAL LOAN ELEMENT FROM SPECIFIED FINANC IAL INSTITUTIONS. NO AMOUNT IS RECEIVED OR RAISED FROM THE FINANCIAL INS TITUTIONS OR PAID BY THEM TO SALES TAX DEPARTMENT. THE ASSESSEE COLLECTS THE TAX AND PAYS THE SAME AT THE END OF THE DEFERMENT PERIOD. EVEN T HE PAYMENT OF TAX AT THE END OF THE DEFERMENT PERIOD IS DONE ONLY TO THE SALES TAX DEPARTMENT ONLY AND NOT TO ANY FINANCIAL INSTITUTIO N. NEITHER THE DEFERMENT CERTIFICATE NOR THE SALES TAX DEPARTMENT REQUIRE THE ASSESSEE TO OBTAIN THE SAID D-FORM NOR IS THE ASSES SEE EVER INFORMED ANYTHING IN THIS REGARD. THE AO HAS CHOSEN A VERY STRICT READING OF THE LETT ER OF LAW WITHOUT CONSIDERING THE SPIRIT OF THE LAW. THE GUJARAT SALE S TAX LAW RELIED ON BY THE AO WAS ENACTED WAY BACK AND NO SUCH PROCEDUR E IS REQUIRED BY THE SALES TAX DEPARTMENT WHICH IS ACTUALLY GRANTING THE DEFERMENT. EVEN IN THE NEWLY ENACTED VAT LAW THERE IS NO SUCH REQUIREMENT. FURTHER THE DEFERMENT PERIOD IS SPREAD OVER A NUMB ER OF YEARS AND THE REQUIREMENT IS TO OBTAIN FORM D EVERY YEAR FOR THE AMOUNT COLLECTED DURING THE YEAR. NOW THE DEFERMENT IS GRANTED FOR A LUMP SUM AMOUNT ACROSS A VALIDITY PERIOD OF CERTAIN YEARS AND IMMED IATELY ON REACHING THE LUMP SUM AMOUNT OR COMPLETION OF VALIDITY WHIC HEVER IS EARLIER THE ASSESSEE MUST START REPAYING THE AMOUNT WHETHER D-FORM IS THERE OR NOT. AND IT IS NOT POSSIBLE FOR THE ASSESSEE TO DETERMINE HOW MUCH AMOUNT OF SALES TAX WILL BE COLLECTED IN ANY PARTIC ULAR YEAR AT LEAST NOT TILL THE END OF THE YEAR. AND CONSEQUENTLY IT IS IMPOSSIBLE AND IMPRACTICABLE TO OBTAIN FORM D EACH YEAR IN TIME. UNDER THESE CIRCUMSTANCES TREATMENT OF ENTIRE SALE S TAX COLLECTED DURING DEFERMENT AS INCOME OF ASSESSEE BASED ON A V ERY STRICT INTERPRETATION AND REQUIREMENT OF AN IRRELEVANT DOC UMENT DEFEATS THE ENTIRE PURPOSE OF LAW TO GRANT A BENEFIT TO ASSESSE E FOR ESTABLISHING A 6 ITA NOS.810 & 12 18/AHD/2008 UNIT IN A BACKWARD AREA. THE ENTIRE DISALLOWANCE IS AGAINST THE SPIRIT OF LAW AND MAY PLEASE BE DELETED. THE APPELLANT HAS RELIED ON THE FOLLOWING CASE LAWS : 1. MECSHOT BLASTING EQUIPMENTS VS. JCIT (2005) 95 T TJ (JD) 1106 2. UNIMED TECHNOLOGIES P. LTD. VS. DCIT (2000) 69 T TJ (AHD) 25 6.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNS EL AND FACTS OF THE CASE. ASSESSING OFFICER MADE ADDITION ON ACCOUN T OF SALES TAX DEFERMENT AS THE SAME WAS NOT FULFILLING THE CONDIT ION AS REQUIRED UNDER THE RELEVANT SALES TAX ACT. DURING THE YEAR APPELLANT CLAIMED SALES TAX DEFERRED AMOUNT OF RS.39 16 425/- HOWEVE R NO CERTIFICATE IN THE PRESCRIBED FORM FROM THE CONCERNED AUTHORITY WA S SUBMITTED NEITHER ALONG WITH THE RETURN NOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE ABSENCE OF REQUISITE CERTIFICAT E APPELLANT WAS ISSUED SHOW CAUSE NOTICE BY THE ASSESSING OFFICER. ASSESSING OFFICER QUOTED THE RELEVANT SALES TAX PROVISIONS AND AS PER THAT TWO CONDITIONS ARE REQUIRED TO BE FULFILLED U/S.436. ONE IS COMMIS SIONER OF INDUSTRIES OR AUTHORIZED OFFICER ISSUING THE CERTIFICATE ABOUT THE DEFERMENT AND THE OTHER IS TAX COLLECTED UNDER THE DEFERMENT SCHE ME SHOULD BE CONVERTED INTO LOAN BY THE FINANCIAL INSTITUTION. T HE SECOND CONDITION HAS NOT BEEN FULFILLED IN THIS CASE BECAUSE THE CON VERSION IS DONE IN THE FORM OF FORM D. AS PER BOARD'S CIRCULAR NO.674 DATE D 09.12.1993 AMOUNT OF SALES TAX COLLECTED UNDER DEFERMENT SHALL BE ALLOWED U/S.43B FROM THE INCOME OF PREVIOUS YEAR IN WHICH F INANCIAL INSTITUTIONS SPECIFIED THAT SALES TAX COLLECTED DUR ING THE YEAR UNDER DEFERMENT SCHEME HAS BEEN CONVERTED INTO LOAN. SINC E SUCH CERTIFICATE IS A MANDATORY REQUIREMENT FOR ALLOWABILITY OF DEDU CTION U/S.43B. APPELLANT WAS REQUIRED TO FURNISH THE SAME. HOWEVER NO SUCH CERTIFICATE WAS PRODUCED EVEN DURING THE APPELLATE PROCEEDING WHICH MEANS THAT THE APPELLANT'S SALES TAX DEFERMENT WAS NOT CONVERTED INTO THE LOAN EVEN UP TO THE END OF THE PREVIOUS YEAR AN D THEREFORE ASSESSING OFFICER CORRECTLY DISALLOWED THE SAME. IT IS WRONG ON THE PART OF THE APPELLANT THAT CERTI FICATE IS JUST A TECHNICAL FORMALITY AND IT IS PRACTICALLY NOT POSSI BLE TO GET IT. CERTIFICATE IS THE PROOF OF CONVERSION INTO LOAN WH ICH IS TREATED AS PAYMENT AND THE SAME IS ESSENTIAL REQUIREMENT. ALL OTHER ASSESSEE ARE FULFILLED THE REQUIREMENT. HENCE IT CANNOT BE SAID TO BE NOT POSSIBLE. APPELLANT SUBMITTED HON. ITAT AHMEDABAD'S DECISION IN THE CASE OF 7 ITA NOS.810 & 12 18/AHD/2008 UNI-TECH. PVT. LTD. 69 TTJ 25. ON GOING THROUGH TH E SAID DECISION IT IS FOUND THAT IN THAT CASE THE REQUIREMENT OF THE CIRCULAR AS WELL AS AMENDED PROVISIONS OF SALES TAX WAS FULFILLED AND T HE ADDITION WAS NOT WARRANTED. SINCE APPELLANT DID NOT FULFILL CONDITIO NS MENTIONED IN CIRCULAR AND THE RELEVANT ACT APPELLANT CANNOT CLA IM THE BENEFIT OF THE SAID DECISION. ANOTHER DECISION REFERRED BY THE APP ELLANT IS OF ITAT JODHPUR BENCH REPORTED IN 95 TTJ 116 IN THE CASE OF MECSHOT BLASTING EQUIPMENT VS JCIT THERE ALSO THE CONDITIONS OF CB DT CIRCULAR WERE FULFILLED AND THEREFORE THE SAME DOES NOT APPLY TO THE FACTS OF THE APPELLANT'S CASE. SINCE THE CONVERSION OF DEFERRED LIABILITY IS MANDA TORY REQUIREMENT FOR CONSIDERING THE SALES TAX DEFERMENT AS PAYMENT IT CANNOT BE PRESUMED THAT THE SAID HAS BEEN DONE. SINCE APPELLANT HAS NO T FURNISHED ANY DOCUMENT TO THIS EFFECT THE ONUS CAST ON THE APPEL LANT WAS NOT DISCHARGED AND THEREFORE APPELLANT WILL NOT GET THE BENEFIT U/S.43B READ WITH RELEVANT CIRCULAR AND AMENDED PROVISIONS. I THEREFORE CONFIRM THE ADDITION MADE BY THE AO ON THIS ISSUE. 5 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARN ED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(A). 6 THE LD.AR SHRI J.P.SHAH SUBMITTED THAT THE A SSESSEE WAS IN POSSESSION OF THE VALID SALES TAX DEFERMENT CERTIFI CATE FROM THE SALES TAX AUTHORITIES BUT HE HAD NOT OBTAINED THE C ERTIFICATE FOR CONVERSION OF LOAN BEFORE FILING OF THE RETURN OF I NCOME. SUCH CERTIFICATE OF LOAN IS ONLY A MERE FORMALITY AND TH E SPECIFIED FINANCIAL INSTITUTIONS ARE NOT INVOLVED IN ANY MANN ER. THE DEFERRED PAYMENT IS DIRECTLY PAID TO SALES TAX AUTH ORITIES AND NOT THROUGH ANY FINANCIAL INSTITUTIONS. LD.AR FURTH ER PRAYED THAT ADDITION BY WAY OF STRICT INTERPRETATION IS NOT WAR RANTED AS THESE LAWS WERE ENACTED TWENTY YEARS BACK. LD.AR FURTHER PRESENTED BEFORE THE BENCH THE REQUISITE FORM-D DATED 12/1/10 AND 8 ITA NOS.810 & 12 18/AHD/2008 EXPLAINED THAT THERE WAS A DELAY IN OBTAINING THE F ORM DUE TO GOVERNMENT PROCEDURES. LD. AR PRAYED THAT THE DELAY MAY BE CONDONED AND THE FORM NO.O-6655/12.1.10 MAY BE CONS IDERED AND RELIEF GRANTED. WE HAVE PERUSED THE COPY OF THE FORM D IN REGIONAL LANGUAGE FILED ALONG WITH THE ENGLISH TRAN SLATION. IN THE INTEREST OF JUSTICE WE DEEM IT FIT FOR THE MATTER T O BE REMANDED BACK TO THE FILE OF THE LD.AO FOR HIM TO VERIFY THE CERTIFICATE AND GRAND RELIEF TO THE APPELLANT IF THE CERTIFICATE IS FOUND TO BE IN ORDER. GROUND NO. 1 FOR BOTH THE ASSESSMENT YEARS ARE DISP OSED OF ACCORDINGLY. 8 GROUND NO.2 IN THE ASSESSEES APPEAL FOR AY 2003-04 RELATES TO CONFIRMATION OF AN ADDITION OF RS.95 700 /-. THE FACTS OF THE CASE ARE DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE ASSESSEE WAS ASKED TO GIVE DETAILED ACCOUNT OF CRAN E HIRING CHARGES IN THE CASE OF M/S MUKESH ENGINEERING INDUS TRIES ALONG WITH ALL BILLS VOUCHERS ETC. THE ASSESSEE SUBMITT ED THE SAME. ON GOING THROUGH RELEVANT BILLS AND VOUCHERS THE AO N OTED THAT IT BECAME CLEAR THAT SOME OF THE EXPENSES CLAIMED IN T HIS ACCOUNT PERTAIN TO THE EARLIER YEAR. THE AO OBSERVED THAT T HE ASSESSEE HAS CLAIMED PRIOR PERIOD EXPENSES OF RS.95 700/-. HE T HEREFORE HELD THAT PRIOR PERIOD EXPENSES ARE NOT ALLOWABLE AND DI SALLOWED THE SAME. 9 ON APPEAL THE LEARNED CIT(A) CONFIRMED THE ADDIT ION IN THE FOLLOWING MANNER:- 9 ITA NOS.810 & 12 18/AHD/2008 7.2 IT IS CONTENDED THAT THE ASSESSEE WAS USING W ELDING RECTIFIER AND OVEN ON HIRE FROM BHARTI ENTERPRISE SINCE JANUARY 2 001 AND THE RATE WAS NOT FIXED BY THE SAID PARTY NOR ANY INVOICE WAS RAISED. IT WAS NOT POSSIBLE FOR THE ASSESSEE TO MAKE AN EXACT PROVISIO N FOR THE AMOUNT OF HIRING CHARGES. THE AMOUNT WAS CRYSTALLISED ONLY DU RING MAY 2002 WHEN THE HIRED EQUIPMENT WAS RETURNED BEING NO LONG ER REQUIRED AND THE PARTY RAISED A CONSOLIDATED INVOICE FOR THE PER IOD FROM JANUARY 2001 TO MAY 2002 WHICH WAS THEN DULY ACCOUNTED. THU S THE LIABILITY CRYSTALLIZED ONLY DURING A.Y.2003-04 AND ALSO THE S AME HAD NOT BEEN ACCOUNTED OR CLAIMED IN ANY PRECEDING YEAR. 7.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNS EL AND FACTS OF THE CASE. THE EXPENSES RELATE TO HIRE CHARGES FOR E QUIPMENTS WHICH IS ALLOWABLE IN THE YEAR IN WHICH SUCH EQUIPMENTS WERE USED. AT THE TIME OF RETURNING THE EQUIPMENT OR MAKING THE PAYMENT S UCH EXPENSES ARE NOT ALLOWABLE IN MERCANTILE SYSTEM. ADMITTEDLY THE SE EXPENSES ARE RELATING TO EARLIER PERIOD THE SAME ARE NOT ALLOWA BLE FROM THIS YEAR'S PROFIT. WHETHER SUCH EXPENSES WERE CLAIMED IN EARLI ER YEAR'S OR NOT WILL NOT DECIDE THE ALLOWABILITY DURING THE CURRENT YEAR. APPELLANT'S ARGUMENTS OF CRYSTALLIZING THE EXPENSE DURING THE Y EAR IS ALSO NOT CORRECT SINCE THE CHARGES ARE DETERMINED AT THE TIM E OF TAKING EQUIPMENT ON HIRE. SUBSEQUENT ADJUSTMENTS OR VARIAT ION IN CHARGES MAY BE THERE BUT THAT WILL NOT CHANGE THE YEAR OF A LLOWABIIITY. CONSIDERING THE NATURE OF EXPENSE AND THE YEAR TO W HICH IT RELATES TO DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFI RMED. 10 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARN ED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(A). 11 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 12 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE FACTS OF THE CASE AND THE FOLLOWING FACTS EMANATE FROM THE ISSUE :- 10 ITA NOS.810 & 1 218/AHD/2008 A) THE ASSESSEE HAD OBTAINED ON HIRE WELDING RECTIFIER FROM BHARTI ENTERPRISES SINCE JANUARY 2001 ONWARDS TO MA Y 2002. B) THE RATES WERE NOT FINALIZED OR ANY INVOICE RAISED BY THE PARTY. C) THEREFORE THE EXACT PROVISION FOR HIRE CHARGES COUL D NOT BE PROVIDED. D) THE HIRE EQUIPMENTS WERE BEING RETURNED DURING THE ASSESSMENT YEAR 2003-04 AND THE RATES WERE FINALIZE D. ON PERUSING THE FACTS IT IS CRYSTAL CLEAR THAT THE EXPENDITURE SUBSTANTIALLY RELATE TO PRIOR PERIOD. IN MERCANTILE SYSTEM OF ACCOUNTING THE MATCHING CONCEPT HAS TO BE FOLLOWED. EVERY PREVIOUS YEAR SHOULD BE LOADED WITH THE EXPENDITURE PERTAINING TO THAT PERIOD WHICH SHALL BE MATCHED WITH THE INCOME OF THAT PERIOD. ANY PAYMENT FOR EXPENDITURE SHOULD BE FURTH ER APPORTIONED TO THE RELEVANT PERIOD. THEREFORE THE R EVENUE IS VERY MUCH WITHIN THEIR REALM TO DISALLOW THE EXPENDITURE FOR THE PRIOR PERIOD. HOWEVER THE ASSESSEE DESERVES TO BE ALLOWED DEDUCTION FOR THE HIRE CHARGES RELATED TO THE BROKEN PERIOD F ROM 1/4/2002 TO MAY 2002. GROUND NO.2 FOR THE ASSESSMENT YEAR 2003-04 IS ACCORDINGLY DISPOSED OFF. 13 GROUND NO.3 IN THE ASSESSEES APPEAL FOR AY 2003-04 RELATES TO CONFIRMATION OF DISALLOWANCE OF PURCHASE S OF RS.5 49 450/- FROM GUPTA STEEL CORPORATION. THE FAC TS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCE EDINGS THE ASSESSEE WAS ASKED TO GIVE THE DETAILS OF ALL THE P ERSONS FROM WHOM PURCHASES ABOVE RS.50 000/- WERE MADE. THE ASS ESSEE SUBMITTED THE LEDGER ACCOUNT OF ALL THESE PERSONS. ON VERIFICATION OF THE LEDGER ACCOUNT THE ASSESSEE WAS ASKED TO SU BMIT CONFIRMATION IN RESPECT OF M/S GUPTA STEEL CORPORAT ION WITH 11 ITA NOS.810 & 1 218/AHD/2008 PAN. THE AO NOTICED THAT THE ASSESSEE HAS MADE PURC HASES FROM M/S.GUPTA STEEL CORPORATION ON 02-04-2002 VIDE BILL NO.1904 & 1905 FOR RS.3 91 650/- AND RS.1 57 500/- RESPECTIVE LY TOTALING TO RS.5 49 450/- DURING THE YEAR. ACCORDING TO THE AO THE ASSESSEE HAS NOT SUBMITTED ANY CONFIRMATION FROM THIS PARTY WITH ITS PAN NOR HAS HE SUBMITTED ANY DETAILS OF PURCHASES MADE FROM THIS PARTY. THE PAYMENT TO THIS PARTY WAS MADE THROUGH T HE JOURNAL ENTRIES. THE ASSESSEE HAS EVEN NOT SUBMITTED PURCHA SE BILLS OR ANY OTHER PROOF REGARDING RECEIPT OF MATERIALS FROM GUPTA STEEL CORPORATION. THE AO ACCORDINGLY HELD THE PURCHASES TO BE BOGUS PURCHASES AND ADDED BACK THE AMOUNT OF RS.5 49 450/ -. 14 ON APPEAL THE LEARNED CIT(A) CONFIRMED THE ADDI TION WITH THE FOLLOWING OBSERVATIONS:- 8.3. IT IS CONTENDED BY THE COUNSEL THAT THE BILLS AND LR DATES FALL IN THE MONTH OF MARCH 2002 THE MATERIAL WAS RECEIVED BY THE ASSESSEE IN APRIL 2002 ONLY AND THEREFORE THE APPELLANT HAS RIG HTLY DEBITED THE SAME AS PURCHASE IN APRIL 2002 AND CLAIMED IT IN F. Y.2002-03. IT IS CONTENDED THAT THE QUANTITY RECORDS AND GP OF THE A SSESSEE HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AND THE DISALLOWA NCE IS MADE MERELY ON LACK OF EVIDENCE. PRESENTLY THE ASSESSEE DID NOT HAVE ANY DEALING WITH THE PARTY AND THEREFORE THE CONFIRMATI ON COULD NOT BE PRODUCED. 8.4. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNS EL FACTS OF THE CASE AND REMAND REPORT OF THE ASSESSING OFFICER. IN VIEW OF THE FACTS MENTIONED BY THE ASSESSING OFFICER IN REMAND REPORT IT IS CLEAR THAT THE PURCHASES CLAIMED BY THE APPELLANT ARE NOT FOR THIS YEAR. FURTHER NO CONFIRMATION FROM THE SUPPLIER COULD BE PRODUCED . IN THE ABSENCE OF THE EVIDENCE THAT THE PURCHASES WERE RELATING TO THIS YEAR THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFI RMED . 15 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARN ED COUNSEL FOR 12 ITA NOS.810 & 1 218/AHD/2008 THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(A). 16 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 17 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE FACTS OF THE CASE. ON PERUSING THE REMAND REPORT OF THE LD. AO T HE FOLLOWING FACTS EMERGES:- A) THE INVOICE NO. 1904 AND 1905 ARE DATED 13/03/02 AMOUNTING TO RS. 5 49 450/- IN AGGREGATE. B) THE GOODS WERE DELIVERED BY RAJASTAN TRANSPORT VIDE BILL NO.3005 AND 3006 DATED 13/3/02. C) THE ASSESSEE HAS BOOKED THE EXPENSES ON 2/4/02. THE ARGUMENT OF THE LD.AR WAS THAT THE ASSESSEE HAS BOOKED THESE BILLS AS HIS EXPENDITURE ON 2/4/02 BECAUSE TH E GOODS WERE RECEIVED BY THE ASSESSEE ON THAT DATE. PURCHASES AR E NORMALLY ACCOUNTED BY THE ASSESSEE ONLY AFTER THE GOODS ARE RECEIVED BY THE ASSESSEE AND VERIFIED TO BE IN ORDER. FURTHER I T MAKES NO DIFFERENCE IN THE PROFIT AND LOSS ACCOUNT OF THE AS SESSEE BECAUSE IF THE GOODS WERE ACCOUNTED IN ASSESSMENT YEAR 2002 -03 THE SAME WILL BE SHOWN AS CLOSING STOCK OF THAT ASSESSMENT Y EAR AND FOR THE SUBSEQUENT ASSESSMENT YEAR VIZ 2003-04 YEAR IT WILL BE REFLECTED AS OPENING STOCK AND WILL BE CHARGED TO T HE PROFIT AND LOSS ACCOUNT IF CONSUMED. THE LD. AR PLEADED THAT S INCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG IN EITHER WAY THE REVENUE WILL NOT BE AT A LOSS. WE FULLY END ORSE TO THE SUBMISSION OF THE LD.AR AND DELETE THE ADDITION MAD E BY THE LD.AO ON THIS COUNT. NEEDLESS TO MENTION THAT THE R EVENUE HAS 13 ITA NOS.810 & 1 218/AHD/2008 NOT DISPUTED BEFORE THE LD.CIT(A) THE EXISTENCE OF THE RELEVANT INVOICE AND THE TRANSACTION TO BE BOGUS. GROUND NO.3 OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 IS ACCORDI NGLY DISPOSED OFF. 18 GROUND NO. 4 IN THE ASSESSEES APPEAL FOR AY 2003-0 4 RELATES TO CONFIRMATION OF DISALLOWANCE OF RS.2 69 875/-. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF HEA RING BOOKS OF ACCOUNTS AS WELL AS BILLS AND VOUCHERS OF THE ASSES SEE WERE EXAMINED BY THE AO AND ON VERIFICATION THE AO FOUN D A NUMBER OF DISCREPANCIES AND THE ACCOUNTANT OF THE ASSESSEE ADMITTED IN RESPECT OF VARIOUS BOGUS EXPENDITURE / BILLS RECORD ED IN THE BOOKS OF ACCOUNTS DETAILS OF WHICH ARE AS UNDER WHEREIN I T WAS FOUND THAT:- SR. NO. EXPENDITURE HEADS DATE AMOUNT REMARKS 1 CONSUMABLE STORES 18-06-02 05-07-02 14-09-02 25-10-02 25-10-02 15-03-03 21 813 28 663 27 370 40 096 19 846 15 499 BILL NOT IN THE NAME OF THE A -DO- -DO- -DO- -DO- NO BILLS FURNISHED BY THE A 2 REPAIRS & MAINTENANCE (PLANT & MACHINERY) 16-07-02 25-05-02 12 592 18 215 BILL NOT IN THE NAME OF THE A -DO- 3 CRANE HIRE CHARGES 12-07-02 04-09-02 27-01-02 15-03-03 2 450 2 100 8 110 54 600 BILL NOT IN THE NAME OF THE A -DO- -DO- -DO- 4 SECURITY CHARGES MONTHLY 34 020 BILL NOT IN THE N AME OF A 5 FUEL CHARGES 08-06-02 16 544 NO BILL FURNISHED BY THE A TOTAL 3 01 918 ACCORDING TO THE AO THE ASSESSEE HAS DEBITED THESE EXPENSES IN THE P&L ACCOUNT UNDER THE VARIOUS HEADS AS MENTIONE D ABOVE. HOWEVER ON VERIFICATION OF THE LEDGER ACCOUNT IT W AS FOUND THAT 14 ITA NOS.810 & 1 218/AHD/2008 EITHER THE ASSESSEE COULD NOT PRODUCE BILLS / VOUCH ERS ETC. OR THAT THE BILLS ARE NOT IN THE NAME OF THE ASSESSEE. THES E FACTS HAVE BEEN ADMITTED BY THE ACCOUNTANT OF THE ASSESSEE AND THEREFORE THE AO DISALLOWED THE AMOUNT OF RS.3 01 918/- AS UN EXPLAINED EXPENDITURE. 19 ON APPEAL BEFORE THE LEARNED CIT(A) THE ASSESS EE CONTENDED THAT OUT OF RS.3 01 918/- BILLS WERE NOT AVAILABLE FOR RS.32 043/- AND FOR REMAINING RS.2 69 875/- BILLS W ERE NOT IN THE NAME OF THE ASSESSEE. THE LEARNED CIT(A) THEREFORE CONFIRMED THE DISALLOWANCE OF RS.2 69 875/- WITH THE FOLLOWIN G OBSERVATIONS:- 10.2. IT IS CONTENDED THAT THE ASSESSEE WAS EARLIE R CARRYING ON BUSINESS AT GIDC MAKARPURA VADODARA IN THE NAME OF MUKESH ENGINEERS AND KARJNA UNIT WAS ESTABLISHED IN THE NAME OF MUKESH E NGINEERING INDUSTRIES. THE SUPPLIERS DEALING WITH THE ASSESSEE SINCE MANY YEARS ERRONEOUSLY DID NOT CORRECTLY MENTION EITHER MUKESH ENGINEERING INDUSTRIES OR KARJAN IN SOME OF THEIR INVOICES. IT IS FURTHER CONTENDED THAT COPY OF BALANCE SHEET INDICATES AND IS EVEN AC CEPTED BY ASSESSING OFFICER IN A LATER PART IN THE ASSESSMENT ORDER THA T MUKESH ENGINEERS GIDC DID NOT CARRY ANY BUSINESS ACTIVITY. 10.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COU NSEL AND FACTS OF THE CASE. APPELLANT SUBMITTED THAT OUT OF RS.3 01 918/- BILLS WERE NOT AVAILABLE FOR RS.32 043/- AND FOR REMAININ G RS.2 69 875/- BILLS WERE NOT IN THE NAME OF APPELLANT. SINCE APPE LLANT'S OTHER PROPRIETARY CONCERN NAMELY MUKESH ENGINEERS MAKAR PURA WAS NOT FUNCTIONAL DURING THE YEAR MOST OF THE BILLS RECEI VED IN THE NAME OF THE CLOSED CONCERN ARE NOTHING BUT NON-BUSINESS EXP ENSES. SINCE THE ADDRESS OF THE APPELLANT'S CLOSED CONCERN WAS MENTI ONED IN SUCH BILLS AMOUNTING TO RS.2 69 875/- THE EXPENSES CLAIMED TH ROUGH SUCH BILLS ARE PRIMA-FACIE NOT GENUINE AND FOR THE PURPOSE OF BUSINESS. CONSIDERING THE SAME THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. 15 ITA NOS.810 & 1 218/AHD/2008 20 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARN ED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(A). 21 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 22 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE FACTS OF THE CASE. THE ASSESSEE IS AN INDIVIDUAL CONDUCTING BUSI NESS IN THE NAME OF MUKESH ENGINEERS AND LATTER ON CHANGED NAME TO MUKESH ENGINEERING INDUSTRIES. THIS ASPECT IS NOT D ISPUTED. IT APPEARS THAT THE LD.AO HAS DISALLOWED THESE BILLS S INCE THE BILLS DID NOT HAVE THE NAME OF MUKESH ENGINEERING INDUSTR IES BUT WERE IN THE ERSTWHILE NAME OF MUKESH ENGINEERS. THE ACTI ON OF THE LD. AO IS NOT JUSTIFIABLE. WHAT THE LD.AO HAS TO LOOK I NTO IS WHETHER THE ASSESSEE HAS INCURRED THIS EXPENDITURE? WHETHE R THE TRANSACTIONS ARE GENUINE?. WE DO NOT SEE ANY FINDIN G OF THIS NATURE PROBED BY THE REVENUE TO ARRIVE AT THIS DISA LLOWANCE. THEREFORE WE ARE OF THE OPINION THAT THE ASSESSEE S HOULD NOT BE DENIED THE ALLOWANCE OF THE EXPENDITURE DUE TO THIS UNJUST REASON OF THE REVENUE. HENCE WE DELETE THE ADDITION MADE O N THIS COUNT BY THE REVENUE. GROUND NO. 4 OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 IS ACCORDINGLY DISPOSED OFF . 23 GROUND NO.5 IN THE ASSESSEES APPEAL FOR AY 2003 -04 RELATES ADDITION OF RS.90 438/- ON ACCOUNT OF LATE PAYMENT OF PROVIDENT FUND [PF]. THE FACTS OF THE CASE ARE THAT ON 16 ITA NOS.810 & 1 218/AHD/2008 VERIFICATION OF DETAILS FILED WITH THE RETURN OF IN COME IN THE CASE OF M/S MUKESH ENGINEERING INDUSTRIES THE AO OBSERV ED THAT THE ASSESSEE HAD MADE DELAYED PAYMENT OF PF AS PER CHAR T GIVEN BY THE AO IN THE ASSESSMENT ORDER. THE AO ALSO OBSERVE D THAT THE ASSESSEE HAS MADE PAYMENT OF PF LATE I.E. AFTER THE DUE DATE. ACCORDING TO THE AO AS PER PROVISIONS OF SECTION 2 (24)(X) READ WITH SECTION 36(1)(VA) ANY SUM RECEIVED BY THE ASS ESSEE FROM HIS EMPLOYEES AS CONTRIBUTION TO ANY PF OR SO SUPER ANNUATION FUND OR ANY OTHER FUND FOR THE WELFARE OF SUCH EMPL OYEES IS REQUIRED TO BE TREATED AS INCOME OF THE ASSESSEE IF THE SAME IS NOT PAID BEFORE THE DUE DATE APPLICABLE TO THE RELEVANT FUNDS UNDER THEIR RESPECTIVE ACT RULE ORDER OR NOTIFICATION. FURTHER AS PER PROVISIONS OF SECTION 43B(B) NO DE DUCTION SHALL BE ALLOWED IN RESPECT OF ANY SUM PAYABLE BY THE ASS ESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FU ND OR SUPERANNUATION FUND OR GRATUITY FUND OR ANY OTHER F UND FOR THE WELFARE OF EMPLOYEES UNLESS SUCH SUM HAS ACTUALLY B EEN PAID BEFORE THE DUE DATE AS DISCUSSED ABOVE. AS PER THE PF ACT THE DUE DATE FOR PAYMENT OF PF CO NTRIBUTION IS WITHIN 15 DAYS FROM THE END OF THE LAST DAY OF THE CALENDAR MONTH IN WHICH THE CONTRIBUTIONS FALL DUE. THE AO OBSERVE D THAT FROM THE ABOVE FACTS IT IS CLEAR THAT THE DUE DATE FOR P AYMENT OF PF CONTRIBUTION IS 15 TH OF NEXT MONTH AND THERE IS GRACE PERIOD OF 5 DAYS PROVIDED BY THE ACT. ACCORDINGLY PAYMENT AMOU NTING TO RS.1 06 761 [34 843 + 34 968 + 36 950] IS NOT ALLOW ABLE AS DEDUCTION AS THE PAYMENT IS MADE AFTER THE DUE DATE . RELYING UPON THE DECISION OF THE KERALA HIGH COURT IN THE C ASE OF CIT VS. 17 ITA NOS.810 & 1 218/AHD/2008 SOUTH INDIA CORPORATION LTD. 242 ITR 114 WHEREIN I T HAS BEEN HELD THAT PAYMENT IS ALLOWABLE ONLY IF THE SAME WAS PAID BY THE RESPECTIVE DUE DATE THE AO HELD THAT RS.1 06 761/ - ON ACCOUNT OF UNPAID PF IS DISALLOWED U/S 36(1)(VA) READ WITH SECTION 43B OF THE ACT. THE AO NOTED THAT THE ASSESSEE HIMSELF HAS DISALLOWED SUM OF RS.16 323/- IN HIS COMPUTATION OF TOTAL INCO ME THEREFORE NET ADDITION OF RS.90 438/- [106761 16323] AND AD DED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 24 ON APPEAL THE LEARNED CIT(A) CONFIRMED THE ADDI TION WITH THE FOLLOWING OBSERVATIONS:- 11.1. AFTER VERIFICATION OF THE DETAILS THE ASSE SSING OFFICER FOUND THAT THE ASSESSEE HAS MADE PF PAYMENT OF RS.1 06 761/- AFTER THE DUE DATE. IT WAS ALSO AFTER THE GRACE PERIOD OF 5 DAYS PROVIDED UNDER THE ACT. AS THE ASSESSEE HAS FAILED TO PAY PF AMOUNT WITHIN THE PERIOD PROVIDED THE ASSESSING OFFICER DISALLOWED R S.1 06 761/-. THE ASSESSEE HIMSELF DISALLOWED RS.16 323/- IN COMPUTAT ION OF INCOME THEREFORE BALANCE AMOUNT OF RS.90 438/- IS ADDED TO THE RETURNED INCOME. 11.2. IT IS CONTENDED BY THE APPELLANT THAT THE ASS ESSING OFFICER OVERLOOKED THE FACT THAT IN CASE OF CONTRACTORS' EM PLOYEES THE BREAKUP OF EMPLOYEE AND EMPLOYER LIABILITIES WERE FOR THE P URPOSE OF PAYMENT CHALLANS ONLY. THE FACTUAL POSITION IS THAT NO AMOU NTS HAD BEEN RECOVERED FROM THE CONTRACTOR. THE ENTIRE LIABILITI ES WAS BORNE BY THE ASSESSEE ONLY. SINCE NO CONTRIBUTIONS WERE RECEIVED BY THE ASSESSEE FROM THE CONTRACTOR SECTION 2(24)(X) AND SECTION 3 6(1)(VA) WILL NOT APPLY. IT IS ALSO CONTENDED THAT ALL EMPLOYER CONTR IBUTIONS (OWN AND CONTRACTOR) BE ALLOWED U/S.43B SINCE ALL AMOUNTS PA ID OFF BEFORE DUE DATE U/S. 139(1) AND ALL EMPLOYEE CONTRIBUTIONS REL ATING TO CONTRACTORS' EMPLOYEES BE ALLOWED U/S.43B SINCE NO DUES RECOVERE D FROM THESE CONTRACTORS AND ALL AMOUNTS PAID OFF BEFORE D UE DATE U/S.139(1). 11.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUN SEL AND FACTS OF THE CASE. CONTRIBUTION OF EMPLOYER TO PROVIDENT FUN D OR GRATUITY IF NOT PAID WITHIN DUE DATE WERE DISALLOWABLE TILL A.Y 200 3-04. THE SECOND 18 ITA NOS.810 & 1 218/AHD/2008 PROVISO DEALING WITH SUCH DISALLOWANCE WAS OMITTED W.E.F. 1ST APRIL 2004 WHICH MEANS FROM A.Y.2004-05 ONWARDS THE EMPL OYER'S CONTRIBUTION IF PAID BEFORE THE DUE DATE OF FILIN G OF RETURN OF INCOME THE SAME IS ALLOWABLE U/S.43B. AS FAR AS A.Y.2003-0 4 IS CONCERNED OLD PROVISIONS APPLY AND ACCORDINGLY SINCE PAYMENTS WERE NOT MADE WITHIN DUE DATES (INCLUDING GRACE PERIOD OF FIVE DA YS) DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. THE CAS E LAWS REFERRED BY THE ASSESSING OFFICER ARE RELEVANT AND APPLICABLE T O THE FACTS OF THE APPELLANT'S CASE. AS REGARDS EMPLOYEE'S CONTRIBUTIO N DISALLOWANCE IS SUPPORTED BY THE CASE LAWS REFERRED BY THE ASSESSIN G OFFICER HENCE THE SAME IS ALSO CONFIRMED. 25 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARN ED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(A). THE LEARNED COUN SEL ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. [2009] 319 ITR 306 (SC) WHEREIN IT HAS BEEN HELD THE OMISSION OF THE SECOND PROVISO TO SECTION 43B OF THE INCOME-TAX ACT 1961 BY THE FINANCE ACT 2003 OPERATED RETR OSPECTIVELY WITH EFFECT FROM APRIL 1 1988 AND NOT PROSPECTIVELY FRO M APRIL 1 2004. EARLIER UNDER THE SECOND PROVISO TO SECTION 43B AS AMENDED BY THE FINANCE ACT 1989 ASSESSEES WERE ENTITLED TO DEDUC TION ONLY IF THE CONTRIBUTION STOOD CREDITED ON OR BEFORE THE DUE DA TE GIVEN IN THE PROVIDENT FUNDS ACT. THIS CREATED FURTHER DIFFICULT IES AND ON A REPRESENTATION MADE TO THE FINANCE MINISTRY ONE MOR E AMENDMENT WAS MADE BY THE FINANCE ACT 2003. THOUGH THIS AMEN DMENT WAS MADE APPLICABLE WITH EFFECT FROM APRIL 1 2004 THE AMENDMENT WAS CURATIVE IN NATURE AND APPLIED RETROSPECTIVELY WITH EFFECT APRIL 1 1988. WHEN A PROVISO IN A SECTION IS INSERTED TO REMEDY U NINTENDED CONSEQUENCES AND TO MAKE THE SECTION WORKABLE THE PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION THEREIN IS REQUIRED TO BE READ 19 ITA NOS.810 & 1 218/AHD/2008 RETROSPECTIVELY IN OPERATION PARTICULARLY TO GIVE EFFECT TO THE SECTION AS A WHOLE. ALLIED MOTORS P. LTD. V. CIT [1997] 224ITR 677 (SC) RELIED ON. IF STRICT CONSTRUCTION LEADS TO A RESULT NOT INTEND ED TO BE SUBSERVED BY THE OBJECT OF THE LEGISLATION AND IF ANOTHER CONST RUCTION IS POSSIBLE APART FROM THE LITERAL CONSTRUCTION THEN THAT CONS TRUCTION SHOULD BE PREFERRED. 26 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 27 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE FACTS OF THE CASE AND THE DECISION OF THE HONBLE APEX COURT CIT ED BY THE LD.AR. IT IS A SETTLED POSITION NOW THAT THAT THE E MPLOYERS AND EMPLOYEES CONTRIBUTION ON ACCOUNT OF PROVIDENT FUN D SHALL BE ALLOWABLE AS DEDUCTION IF THEY ARE PAID BEFORE THE DUE DATE OF FILING OF THE RETURN U/S.139 OF THE ACT. GROUND NO.5 FOR THE ASSESSMENT YEAR 2003-04 IS ACCORDINGLY DISPOSED OFF . 28 GROUND NO.6 IN THE ASSESSEE APPEAL FOR AY 2003- 04 RELATES TO DISALLOWANCE OF 1/6 TH OUT OF TELEPHONE TRAVELING AND OFFICE EXPENSES. THE AO FOUND THAT IN THE P&L ACCOUNT THE FOLLOWING EXPENSES HAVE BEEN DEBITED:- TRAVELING EXPENSES RS.1 30 751/- TELEPHONE EXPENSES RS.1 72 047/- VEHICLE EXPENSES RS. 91 577/- OFFICE EXPENSES RS. 42 917/- 20 ITA NOS.810 & 1 218/AHD/2008 THE AO FOUND THAT THE ASSESSEES PETTY EXPENSES WER E ALSO DEBITED IN THE TRAVELLING EXPENSE ACCOUNT WHICH IS NOT VERIFIABLE AND ALSO PERSONAL USE OUT OF THESE EXPENSES CANNOT BE RULED OUT. THE AO THEREFORE DISALLOWED 1/4 TH OUT OF THESE EXPENSES. IN RESPECT OF TELEPHONE EXPENSES IT WAS NOTICED TH AT THE EXPENSES INCLUDES RESIDENCE TELEPHONE BILL AND MOBILE BILL W HICH ARE USED BY THE ASSESSEE AND HIS FAMILY MEMBERS FOR THEIR PE RSONAL PURPOSES. THE ASSESSING OFFICER CONSIDERING USE OF PERSONAL PURPOSE DISALLOWED L/4TH OUT OF TOTAL EXPENSES. IN RESPECT OF VEHICLE RELATED EXPENSES IT WAS FOUN D THAT THESE EXPENSES INCLUDED SOME PERSONAL EXPENSES OF THE ASS ESSEE. THE VEHICLE WAS REGULARLY USED BY THE FAMILY MEMBERS FO R NON- BUSINESS PURPOSE. ASSESSING OFFICER DISALLOWED L/4T H OUT OF THESE EXPENSES. IN RESPECT OF OFFICE EXPENSES IT WAS FOUND THAT AL MOST ALL THE EXPENSES ARE INCURRED ON CASH BASIS WHICH ARE NOT F ULLY VERIFIABLE AND IN MANY CASES VOUCHERS WERE NOT SUPPORTED BY BI LL OR ANY OTHER EVIDENCES. IN THE ABSENCE OF DETAILS AND LOOK ING TO THE NATURE OF EXPENSE AND ALSO FOR WANT OF COMPLETE VER IFICATION OF THESE EXPENSES THE ASSESSING OFFICER DISALLOWED L/ 4TH OUT OF THIS EXPENSE. 29 ON APPEAL THE LEARNED CIT(A) RESTRICTED THE DIS ALLOWANCE TO 1/6 TH OF THESE EXPENSES WITH THE FOLLOWING OBSERVATIONS :- 16.2. IT IS CONTENDED THAT THE ACCOUNTS OF THE AS SESSEE ARE DULY AUDITED AND EXPENSES SUPPORTED BY VOUCHERS AND WITH OUT HIGHLIGHTING 21 ITA NOS.810 & 1 218/AHD/2008 ANY SPECIFIC DEFECT DISALLOWANCE OF L/4TH OF ENTIRE OFFICE EXPENSES IS HIGHLY UNREASONABLE. THE APPELLANT SUBMITTED THAT P ERSONAL ELEMENT CANNOT BE DENIED AND THE DISALLOWANCE BE RESTRICTED TO L/10TH OF THE EXPENSES INCURRED. IN RESPECT OF VEHICLE EXPENSES IT IS STATED THAT ASSESSEE ALREADY DISALLOWED L/4TH OF VEHICLE DEPREC IATION HIMSELF. 16.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE CO UNSEL AND FACTS OF THE CASE. ASSESSING OFFICER DISALLOWED L/4TH TRAVEL ING TELEPHONE VEHICLE AND OFFICE EXPENSES. THESE EXPENSES ARE CLA IMED TO BE FOR BUSINESS PURPOSE. HOWEVER ASSESSING OFFICER DISCUS SED IN HIS ASSESSMENT ORDER THAT APPELLANT FAILED TO SUBMIT TH E COMPLETE DETAILS FOR THESE EXPENSES TO PROVE THAT THESE WERE INCURRE D WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE PERSON AL USE OF TELEPHONE AND VEHICLE CANNOT BE DENIED. OFFICE EXPENSES WERE MOSTLY INCURRED IN CASH AND THESE ARE NOT VERIFIABLE IN MANY CASES. CO NSIDERING THE FACTS MENTIONED BY THE ASSESSING OFFICER I FIND THAT DISA LLOWANCE OF THESE EXPENSES ARE JUSTIFIED. HOWEVER L/4TH DISALLOWANCE MADE BY THE ASSESSING OFFICER APPEARS TO BE ON HIGHER SIDE AS F AR AS TRAVELING TELEPHONE AND OFFICE EXPENSES ARE CONCERNED. I THER EFORE RESTRICT THE DISALLOWANCE TO L/6TH OF THESE EXPENSES. THE ASSESS ING OFFICER WILL GIVE NECESSARY RELIEF ACCORDINGLY. AS REGARDS MOTOR CAR EXPENSES SINCE ASSESSEE HIMSELF CONSIDERED L/4TH DEPRECIATION FOR PERSONAL USE THE DISALLOWANCE OF EXPENSES MADE BY THE ASSESSING OFFI CER IS JUSTIFIED AND THE SAME IS CONFIRMED. 30 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARN ED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(A). 31 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 32 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AT THIS JUNCTURE WE DO NOT HAVE ANY RE ASON TO DRAW ADVERSE CONCLUSION ON THE WISDOM OF THE LD.CIT(A) T HEREFORE WE 22 ITA NOS.810 & 1 218/AHD/2008 UPHOLD THE ORDER OF THE LD.CIT(A) ON THESE ISSUES . GROUND NO.6 FOR THE ASSESSMENT YEAR 2003-04 IS ACCORDINGLY DISP OSED OFF. 33 GROUND NO.7 IN THE ASSESSEES APPEAL FOR AY 2003 -04 RELATES TO DEPRECIATION ON ASSETS OF MUKESH ENGINEE RS TO THE TUNE OF RS.2 56 836/-. THE FACTS OF THE CASE ARE THAT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED T O GIVE CERTAIN DETAILS OF M/S MUKESH ENGINEERS ANOTHER PROPRIETAR Y CONCERN OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT HIS MANUF ACTURING ACTIVITY WAS SHIFTED FROM GIDC MAKARPURA TO VILLAG E KARJAN. IT WAS FURTHER STATED BY THE ASSESSEE THAT DURING THE YEAR NO BUSINESS/MANUFACTURING ACTIVITY WAS CARRIED OUT FRO M THE FACTORY/BUSINESS PREMISES SITUATED AT GIDC MAKARPU RA BARODA AND MANUFACTURING WAS DONE ONLY FROM KARJAN UNIT. T HE FACTORY SHED AT GIDC MAKARPURA WITH MACHINERY AND OTHER INFRASTRUCTURE WAS GIVEN ON RENT TO ASSOCIATE/SISTE R CONCERN. THE AO OBSERVED THAT FROM THE DETAILS IT IS NOTICED THAT ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME IN THE CASE OF HI S PROPRIETARY CONCERN M/S. MUKESH ENGINEERS GIDC MAKARPURA BARO DA WHEREAS HE HAS CLAIMED DEPRECIATION ON FIXED ASSETS OF RS.2 56 836/- AND INTEREST (OTHERS) OF RS.10 06 463 /- IN THE TRADING/MANUFACTURING AND PROFIT & LOSS ACCOUNT. AS IT IS ADMITTED BY THE ASSESSEE THAT HE HAS NOT DONE ANY B USINESS ACTIVITY IN M/S. MUKESH ENGINEERS THEREFORE VIDE SH OW CAUSE NOTICE DATED 21.03.2006 THE ASSESSEE WAS ASKED WHY DEPRECIATION CLAIMED ON FIXED ASSETS AND INTEREST P AID SHOULD NOT BE DISALLOWED. 23 ITA NOS.810 & 1 218/AHD/2008 IN RESPONSE TO THIS SHOW CAUSE NOTICE ASSESSEE HAS SUBMITTED THAT: 6. DEPRECIATION ON SHED RENTED : SINCE THE OLD FAC TORY SHED AT GIDC IS GIVEN ON RENT DEPRECIATION CANNOT BE ALLOW ED. 7. AS FAR AS INTEREST IS CONCERNED: SINCE MUKESH EN GINEERING & MUKESH ENGINEERING INDUSTRIES IS OWNED BY SAME ASSE SSEE. THE FUND OF MUKESH ENGINEERING IS UTLISED FOR MUKESH EN GINEERING INDUSTRIES ONLY. THERE IS NO QUESTION OF DISALLOWING ANY AMOUNT OUT OF INTEREST. AFTER CONSIDERING THE AFORESAID SUBMISSIONS OF THE ASSESSEE THE AO CONCLUDED AS UNDER:- THE ABOVE REPLY OF THE ASSESSEE WAS CAREFULLY CONS IDERED. ON PERUSAL OF REPLY REGARDING DEPRECIATION ASSESSEE HIMSELF HA S ADMITTED THAT SINCE THE OLD FACTORY SHED AT GIDC IS GIVEN ON RENT DEPRECIATION CAN NOT BE ALLOWED. THUS IN VIEW OF THE SELF ADMISSION OF THE ASSESSEE AND AS THE ASSETS WERE NOT SUED IN THE BUSINESS OF M/S. MUKESH ENGINEERS DEPRECIATION OF RS 2 56 836/- CLAIMED ON FIXED ASSE TS IS NOT FOUND TO BE ALLOWABLE.' 34 ON APPEAL THE LEARNED CIT(A) HAS DECIDED THE IS SUE IN THE FOLLOWING MANNER:- 17.2. THE RELEVANT PORTION FROM THE REMAND REPORT IS REPRODUCED AS UNDER: 'REGARDING THE ISSUE OF INADMISSIBILITY OF DEPRECIA TION OF MUKESH ENGINEERS IT IS SUBMITTED NO BUSINESS ACTIVI TIES HAVE BEEN CARRIED OUT BY THE ASSESSEE AT THE FACTORY PRE MISES AT MAKARPURA DURING THE RELEVANT PERIOD. FURTHER INCO MPLIANCE TO SHOW CAUSE LETTER THE ASSESSEE HIMSELF HAS ADMITTED THAT SINCE OLD FACTORY SHED AT GIDC IS GIVEN ON RENT DEPRECIA TION CANNOT BE ALLOWED. THEREFORE KEEPING IN VIEW OF THE ASSES SEE'S OWN ADMISSION DEPRECIATION OF RS.2 56 836/-WAS RIGHTLY DISALLOWED BY THE THEN ASSESSING OFFICER.' 24 ITA NOS.810 & 1 218/AHD/2008 17.2 THE RELEVANT EXTRACT FROM THE WRITTEN SUBMISSIONS IS BELOW: 'THE DEPRECIATION AMOUNT OF RS.256836 CAN BE SUBDIV IDED AS UNDER: ASSETS DEPRECIATION (RS.) FACTORY SHED 54 898 MOTOR CARS & CRANE NOT LEASED BUT USED FOR BUSINESS PURPOSE 1 27 084 OTHER ASSETS LEASED OUT 74 853 -------------- 2 56 835 IT IS SUBMITTED THAT THE AO HAS OVERLOOKED THE FOLL OWING FACTS: > DEPRECIATION ON CARS AND CRANE WILL BE ALLOWABLE SINCE THEY HAVE BEEN USED FOR BUSINESS PURPOSE. OTHER EXPENDITURE ON THEE ASSETS VIZ. RUNNING AND MAINTEN ANCE HAVE ALREADY BEEN ALLOWED BY THE AO BARRING DISALLOWANCE FOR PERSONAL ELEMENT IN CAR EXPENSES. > RENT OF RS.1.5 LACS HAS BEEN RECEIVED LEASE OF OT HER ASSETS BY MUKESH ENGINEERS. SINCE RENT IS BEING RECEIVED F OR THESE ASSETS DEPRECIATION ON THE SAME HAS TO BE AL LOWED. TAX CAN ONLY BE ON REAL INCOME I.E. INCOME AFTER RE DUCING EXPENSES AND DEPRECIATION IS A LEGITIMATE EXPENDITU RE AVAILABLE AGAINST THE INCOME FROM THOSE ASSETS. 17.4. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUN SEL FACTS OF THE CASE AND REMAND REPORT OF THE ASSESSING OFFICER. SI NCE APPELLANT HIMSELF ADMITTED THAT THE DEPRECIATION ON ASSETS GI VEN ON RENT CANNOT BE CLAIMED THE DISALLOWANCE WAS MADE ON THE BASIS OF ASSESSEE'S ADMISSION. CONSIDERING THE SAME ADDITIONAL GROUND TAKEN BY THE APPELLANT IS REJECTED. 35 THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR REIT ERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). 25 ITA NOS.810 & 1 218/AHD/2008 36 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE FINDINGS RECORDED BY THE AO AND THE CIT(A). 37 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AND PERUSED THE MATERIALS ON RECORD. AT THE BEGGING OF THE ARGUMENTS LD.AR SUBMITTED THAT DURING THE SU BSEQUENT ASSESSMENT YEAR IE ASSESSMENT YEAR 2004-05 THE LD.C IT(A) VIDE ORDER DATED 27/11/2007 ON THE SAME ISSUE AT PARA NO . 7 HELD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ONLY FOR WANT OF AGREEMENT ETC. HOWEVER EVEN WHERE THERE IS NO A GREEMENT BUT RECEIPT IS SHOWN FROM THESE PARTIES IN THE P & L AC COUNT WHICH CLEARLY PROVES THAT THE ASSETS WERE GIVEN ON HIRE/R ENT. THE AGREEMENT IS NOT NECESSITY FOR ALLOWING DEPRECIATIO N OR CLAIM OF ANY EXPENDITURE WHEN PROFIT & LOSS CLEARLY SHOWS TH E RECEIPTS FROM THESE PARTIES BY WAY OF INCOME FROM RENT. THER E IS NO QUESTION OF DOUBTING WHETHER THESE ASSETS HAVE BEEN USED OR NOT OR ACTUALLY GIVEN ON RENT OR NOT. CONSIDERING THESE I ALLOW THE DEPRECIATION ON THE ASSETS INCOMES IN RESPECT OF W HICH HAVE BEEN DISCLOSED IN THE P & L ACCOUNT. THE ADDITION MADE B Y THE ASSESSING OFFICER IS THEREFORE DELETED. LD.AR ARGU ED THAT THE FACTS FOR THE RELEVANT ASSESSMENT YEAR WERE ALSO TH E SAME AS THAT OF THE SUBSEQUENT ASSESSMENT YEAR AND THEREFORE THE REVENUE WAS NOT RIGHT IN ITS REALM TO ARRIVE AT A CONTRARY DECI SION FOR TWO DIFFERENT CONSECUTIVE ASSESSMENT YEARS. AFTER PERUS ING THE FACTS OF THE CASE WE ARE ALSO OF THE OPINION THAT IF THE FACTS AND THE STATUTE ARE IDENTICAL FOR DIFFERENT ASSESSMENT YEAR S THE DECISION HAS ALSO TO BE THE SAME FOR BOTH THE ASSESSMENT YEA RS. THEREFORE FOR SUCH VERIFICATION WE REMIT THIS MATTER BACK TO THE FILE OF 26 ITA NOS.810 & 1 218/AHD/2008 THE LD. AO AND HEREBY DIRECT THE LD.AO TO PASS APPR OPRIATE ORDER AS PER MERIT AND LAW IN PARITY WITH OUR ABOVE OBSERVATION. GROUND NO.7 FOR THE ASSESSMENT YEAR 20 03-04 IS ACCORDINGLY DISPOSED OFF. 38 GROUND NO. 8 IN THE ASSESSEES APPEAL FOR AY 200 3-04 RELATES TO DEDUCTION U/S 80-IB OF THE ACT. THE LEAR NED CIT(A) HAS DISCUSSED THE ISSUE VIDE PARAS 18.1 TO 18.3 OF THE ORDER AS UNDER:- 18.1. THE RELEVANT PORTION FROM THE REMAND REPORT IS REPRODUCED AS UNDER: 'REGARDING THE ADMISSIBILITY OF DEDUCTION U/S.80IB OF THE ACT IT IS SUBMITTED THAT WHILE CLAIMING SUCH DEDUCTION THE ASSESSEE IS REQUIRED TO FURNISH A REPORT OF AUDIT IN THE PRESCR IBED FORM 10CCB ALONG WITH THE RETURN OF INCOME. THE ASSESSEE HAS FAILED TO FURNISH THE SAME AND THEREBY NOT SATISFIED THE M AIN CONDITION LAID DOWN FOR THE CLAIM OF THE DEDUCTION U/S.80IB O F THE ACT. FURTHER THE ASSESSEE'S CONTENTION THAT THE RETURN OF INCOME WAS A LOSS RETURN IS ALSO NOT TRUE AS THE RETURN FILED ON 1.12.03 WAS FILED DECLARING TOTAL INCOME AT RS.2 49 390/- IN WH ICH NO DEDUCTION U/S. 80IB OF THE ACT WAS CLAIMED BY THE A SSESSEE AND AS SUCH THERE IS NO QUESTION OF ITS ALLOWABILITY. E VEN AT THE STAGE OF ASSESSMENT PROCEEDINGS ALSO THE ASSESSEE HAS NO T COME FORWARD WITH SUCH CLAIM.' 17.2. IT IS CONTENDED THAT THE NEW UNIT AT KARJAN F ULFILLS ALL CONDITIONS FOR ALLOWABILITY OF DEDUCTION U/S.80IB. THE UNIT ES TABLISHED IN 2000- 2001 AND WAS NOT FORMED BY SPLITTING UP OR RECONSTR UCTION OF BUSINESS ALREADY IN EXISTENCE. IT WAS NOT FORMED BY TRANSFER OF MACHINERY OR PLANT. IT EMPLOYS MORE THAN 10 WORKERS. THE CLAIM W AS NOT PUT UP WITH THE ORIGINAL RETURN OF INCOME SINCE IT WAS A L OSS RETURN. THE ASSESSEE HAS ALSO SUBSTANTIAL BROUGHT FORWARD LOSSE S AND HE HAS NO WAY OF KNOWING THAT THE EFFECT OF THE ASSESSMENT. 27 ITA NOS.810 & 1 218/AHD/2008 17.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUN SEL FACTS OF THE CASE AND REMAND REPORT OF THE ASSESSING OFFICER. TH E CLAIM WAS NOT MADE AT ALL BEFORE THE ASSESSING OFFICER. EVEN IN E ARLIER YEAR SUCH CLAIM WAS NOT MADE. AUDIT REPORT REQUIRED FOR SUCH CLAIM WAS ALSO NOT SUBMITTED. THE FACT THAT APPELLANT FULFILLS ALL THE CONDITIONS REQUIRED FOR SUCH CLAIM CANNOT BE VERIFIED AT APPELLATE STAG E. FURTHER ASSESSING OFFICER FOUND THAT THE RETURN OF INCOME WAS POSITIV E AND ACCORDINGLY THE CLAIM U/S.80IB IF AT ALL COULD BE MADE BY THE APPELLANT IN THE RETURN OF INCOME. CONSIDERING ALL THESE FACTS I DO NOT FIND ANY REASON FOR ADMITTING ADDITIONAL GROUND WHICH WAS NOT RAIS ED AT ALL BEFORE THE ASSESSING OFFICER. IN ANY CASE THE INFORMATION AVA ILABLE ON RECORD ARE NOT SUFFICIENT TO DECIDE THE ADDITIONAL GROUND OF T HE APPEAL. ACCORDINGLY RESPECTFULLY FOLLOWING THE APEX COURT' S DECISION IN THE CASE OF NTPC REPORTED IN 229 ITR THIS ADDITIONAL G ROUND OF THE APPELLANT IS REJECTED. 39 THE ASSESSEE HAS COME IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARN ED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE ALL CONDITIONS FO R ALLOWABILITY OF DEDUCTION U/S 80IB ARE FULFILLED AND THE SAME HA S ALREADY BEEN ALLOWED FOR ALL SUBSEQUENT YEARS THE DENIAL SIMPL Y BECAUSE THE CLAIM WAS NOT PUT UP WHEN FOR ALL PURPOSE IT WAS NI L IS UNJUST. THE ASSESSEE COULD NOT HAVE KNOWN THAT HIS INCOME W ILL BECOME POSITIVE TILL THE DATE OF RECEIPT OF ASSESSMENT ORD ER AND CONSEQUENTLY HE COULD NOT MAKE A CLAIM. IT WAS ACCO RDINGLY PRAYED THAT DEDUCTION MAY BE GRANTED. 40 LD. AR SUBMITTED THAT THE NEW UNIT OF THE ASS ESSEE AT KARJAN FULFILLS ALL THE CONDITIONS FOR THE ALLOWABILITY OF DEDUCTION U/S.80IB OF THE ACT. THE ASSESSEE HAD NOT MADE THE CLAIM IN THE ORIGINAL RETURN OF INCOME SINCE IT WAS A LOSS RETUR N. FURTHER THE ASSESSEE HAD SUBSTANTIAL BROUGHT FORWARD LOSSES. ON LY DURING THE COURSE OF THE ASSESSMENT THE APPELLANT REALIZED THA T THERE WERE PROFITS TO THE EXTENT TO COVER BROUGHT FORWARD LOSS ES. DURING THE 28 ITA NOS.810 & 1 218/AHD/2008 SUBSEQUENT ASSESSMENT YEAR 2004-05 THE CLAIM OF DED UCTION U/S. 80IB HAS BEEN VERIFIED AND ALLOWED. THE LD.AR PRAYE D THAT IN THE PRESENT CIRCUMSTANCE THE ASSESSEE DESERVES THE DEDUCTION AND THE SAME MAY BE GRANTED. 41 THE LEARNED DR SUPPORTED THE ORDER OF THE REVENU E AND PRAYED THAT THE ADDITIONS MAY BE CONFIRMED. 42 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. IT IS EVIDENT FROM THE ABOVE ARGUMENTS THAT THE APPELLANT WAS UNDER A BONAFIDE BELIEF THAT HE HAS O NLY LOSSES AND THEREFORE RESTRAINED FROM CLAIMING THE DEDUCTION U/ S.80IB OF THE ACT. HOWEVER AT THE TIME OF ASSESSMENT HIS CORRECT POSITION WAS ARRIVED BY THE LD.AO WHEREIN HE HAD PROFITS TO BE A SSESSED AND NOT LOSSES. IN SUCH SITUATION IT IS THE PRIMARY DUT Y OF THE REVENUE TO ASSIST THE ASSESSEE TO CLAIM ALL ELIGIBLE DEDUCT IONS HE IS ENTITLED TO RATHER THAN SHYING AWAY ON FLIMSY GROUN DS. AFTER ALL THE ASSESSEE HAS TO BE TAXED ONLY AS PER THE PROVIS IONS OF LAW. THEREFORE WE REMIT THIS MATTER BACK TO THE FILE OF THE LD.AO FOR A PROPER EXAMINATION OF ALL THE FACTS OF THE CASE AND GRAND RELIEF U/S.80IB OF THE ACT IF THE ASSESSEE MEETS ALL THE E LIGIBLE CONDITIONS AS REQUIRED UNDER THE ACT. GROUND NO.8 FOR THE ASSESSMENT YEAR 2003-04 IS ACCORDINGLY DISPOSED OFF . 42 NOW COMING TO THE APPEAL FOR AY 2004-05 GROUND NO.2 RELATES TO DISALLOWANCE OF RS.2 00 000/- OUT OF FEE S FOR SERVICE PAID BY THE ASSESSEE. THE FACTS OF THE CASE ARE THA T ON VERIFICATION OF THE PROFIT AND LOSS ACCOUNT OF M/S. MUKESH ENGIN EERING INDUSTRIES IT WAS OBSERVED THAT THE ASSESSEE HAS CL AIMED EXPENSES 29 ITA NOS.810 & 1 218/AHD/2008 OF RS.5 00 000/- AS TECHNICAL SERVICES. THE ASSESSE E WAS ASKED TO GIVE THE DETAILS IN THIS REGARD. FROM THE LEDGER AC COUNT SUBMITTED BY THE ASSESSEE IT WAS FOUND THAT THE EXPENSES WAS INCURRED TOWARDS THE MARKETING SERVICES RENDERED FOR SECURIN G VARIOUS ORDERS THROUGH M/S.TECNO (RS.3 00 000/-) AND NAREND RA SHARMA (HUF) (RS 2 00 000/-). IT WAS FOUND IN CASE OF NARE NDRA SHARMA THAT THE EXPENSE WAS CLAIMED ON THE BASIS OF DEBIT NOTE ISSUED BY NARENDRA SHARMA (HUF). THE ASSESSEE WAS ASKED TO EX PLAIN THE PURPOSE AND PROOF OF PAYMENT MADE IN RESPECT OF MAR KETING SERVICE RENDERED BY NARENDRA SHARMA (HUF). SUBSEQUE NTLY THE ASSESSEE HAS SUBMITTED COPY OF DEBIT NOTE DATED 31/ 03/2004 RECEIVED FROM NARENDRA SHARMA (HUF). EXCEPT FOR THI S NOTHING ELSE WAS SUBMITTED BY THE ASSESSEE. THEREFORE THE L D.AO WAS OF THE OPINION THAT THESE EXPENSES ARE NOT GENUINE AND THE SAME WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE. 43 ON APPEAL THE LEARNED CIT(A) CONFIRMED THE ADDI TION WITH THE FOLLOWING OBSERVATIONS:- 4.2 IT IS CONTENDED THAT MR. NARENDRA SHARMA IS A B TECH IN ELECTRICAL ENGINEERING WITH AN EXPERIENCE OF OVER 2 0 YEARS AND HE HAS BEEN ASSOCIATED WITH THE ASSESSEE'S GROUP SINCE MOR E THAN 15 YEARS. MR. SHARMA HAD WORKED WITH MULTINATIONALS LIKE ABB AND CROMPTON GREAVES BEFORE AND HAS A WEALTH OF EXPERIENCE IN PR ODUCTION OF WIND MILL STRUCTURES GALVANIZING OF STRUCTURES PREPARI NG & DESIGNING THE MODEL STRUCTURES AS REQUIRED BY THE CUSTOMERS. HE A LSO LOOKS AFTER THE MARKETING FOR THE WHOLE GROUP AS WELL AS THE NECESS ARY QUALITY CONTROL. FURTHER HE IS NOT AN 'EMPLOYEE' OF THE CO NCERN AND CONSEQUENTLY REMUNERATION FOR SERVICES IS PAID AS C HARGES FOR TECHNICAL SERVICES AND/OR MARKETING SERVICES. IT IS ALSO CONTENDED THAT THE ASSESSEE HAS IN FACT PAID A TOTAL AMOUNT O F RS. 5 LACS AS TECHNICAL SERVICES; THE AMOUNT HAS BEEN SPLIT AS P AID TO TECHNO MARK 30 ITA NOS.810 & 1 218/AHD/2008 (PROP. NARENDRA SHARMA) RS. 3 LACS AND TO NARENDRA SHARMA (HUF) RS. 2 LACS. 4.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COU NSEL AND FACTS OF THE CASE. APPELLANT'S COUNSEL DID NOT SUBM IT ANY FRESH SUBMISSIONS OR EVIDENCE APART FROM WHAT WAS GIVEN D URING THE ASSESSMENT PROCEEDINGS. ASSESSING OFFICER DISALLOWE D CLAIM OF RS.2 LACS IN THE NAME OF TECHNICAL SERVICES. HOWEVER NO DETAILS REGARDING RENDERING OF SERVICES WERE FURNISHED. THE CLAIM WAS MADE IN THE NAME OF NARENDRA SHARMA (HUF) WHO RENDERED THE SERVICES ON BEHALF OF HUF AND WHAT KIND OF SERVICE RENDERED FOR WHICH THE PAYMENT WAS MADE. NOTHING WAS SUBMITTED BY THE APPELLANT. IN TH E ABSENCE OF ANY POSITIVE EVIDENCE FOR RENDERING OF SERVICE ADDITIO N IS CONFIRMED. 44 THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). 45 ON THE OTHER HAND THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 46 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE FIND THAT THE REVENUE HAS N OT DISPUTED THE SUBMISSION OF THE APPELLANT THAT RS. 3 00 000/- WAS PAID TO THE FIRM OF MR.NARENDER SHARMA VIZ.M/S.TECHNO AND T HE OTHER PART OF RS.2 00 000/- WAS PAID TO THE HUF OF MR.NAR ENDER SHARMA. IT IS QUITE POSSIBLE THAT FOR VARIOUS REASO NS MR.NARENDER SHARMA WOULD HAVE RECEIVED THE PAYMENT IN DIFFERENT NAMES TO MEET OUT HIS CONVENIENCE. WHEN THE REVENUE HAS NOT DOUBTED THE NATURE OF PAYMENT MADE TO THE FIRM OF MR.NARENDER S HARMA THEN THERE IS NO REASON FOR THE REVENUE TO DOUBT THE PAY MENTS MADE TO THE HUF OF MR.NARENDER SHARMA. TO WHOMSOEVER THE PA YMENT IS 31 ITA NOS.810 & 1 218/AHD/2008 MADE IT APPEARS THAT THE PAYMENT IS MADE FOR THE SE RVICE RENDERED BY MR.NARANDER SHARMA TO THE ASSESSEE. HOWEVER IN T HE INTEREST OF JUSTICE AND EQUITY THIS MATTER IS ALSO REMITTED BACK TO THE FILE OF THE LD.AO THEREBY GIVING ONE MORE OPPORTUNITY TO BOTH THE PARTIES TO SORT OUT THE ISSUE . GROUND NO.2 FOR THE ASSESSMENT YEAR 2004-05 IS DISPOSED OF ACCORDINGLY. 47 GROUND NO.3 IN THE ASSESSEES APPEAL FOR AY 2004 -05 AND THE ADDITIONAL GROUND FOR THE ASSESSMENT YEAR 2003- 04;RELATES TO DISALLOWANCE OF ADDITIONAL CLAIM OF RS.20 59 329/-. THE FACTS OF THE CASE AS DISCUSSED BY THE LEARNED CIT(A) IN HIS APPELLATE ORDER ARE AS UNDER:- 8.1. THE RELEVANT EXTRACT FROM THE WRITTEN SUBMISSI ONS IS REPRODUCED HERE BELOW: 'ASSESSEE SUPPLIES WINDMILL TOWER STRUCTURES TO SUZ LON ENERGY LTD. SUZLON ENERGY LTD. MADE CERTAIN DEDUCTI ON FROM THE INVOICES OF THE ASSESSEE RAISED DURING FY 2002-03 RELEVANT TO AY 2003-04. THE DEBIT NOTES WERE DATED 31ST MARCH 2003. HOWEVER THE ASSESSEE RECEIVED THE DEB IT NOTES IN OCTOBER 2003 ONLY AND HENCE ENTRY FOR DED UCTION OF THE AMOUNT WAS PASSED IN FY 2003-04 RELEVANT TO AY 2004-05. HOWEVER THE AUDITORS MENTIONED THE SAME A S PRIOR PERIOD EXPENSES DUE TO THE DATE OF THE DEBIT NOTES BEING 31.03.2003 CONSEQUENTLY THE SAME WAS DISALLO WED IN THE COMPUTATION BY THE TAX CONSULTANTS. CONSIDERING THE NATURE OF DEDUCTIONS AND THE CIRCUM STANCES INVOLVED IT WAS A CLEAR CASE OF LIABILITY HAVING CR YSTALLIZED IN AY 2004-05. CONSEQUENTLY THE EXPENSES WERE CLAI MED FOR ALLOWABILITY IN AY 2004-05 DURING THE ASSESSMEN T PROCEEDINGS VIDE LETTER DATED 19TH DECEMBER 2006. THEREAFTER DETAILED SUBMISSIONS WERE MADE AND FURTH ER DETAILS CALLED FOR FROM THE OFFICE OF THE AO WERE A LSO SUBMITTED. THE CALLING FOR AND PROVIDING OF INFORMA TION 32 ITA NOS.810 & 1 218/AHD/2008 HAS BEEN RECORDED IN THE ORDER SHEETS RECORDING T HE ASSESSMENT PROCEEDINGS. ALLOWABILITY OF THE CLAIM ON MERITS: FURTHERMORE WE ALSO SUBMIT HEREWITH THE COPIES OF THE DEBIT NOTES IN QUESTION AND EXPLANATIONS GIVEN AND CLAIMS MADE BEFORE THE AO AT VARIOUS TIMES DURING THE ASSE SSMENT PROCEEDINGS AS A CLAIM OF ALLOWANCE ON MERITS: SUZLON ENERGY LTD. HAD PLACED ORDER FOR GALVANIZING AND FABRICATION OF WIND MILL TOWER STRUCTURE PARTS AGAI NST WHICH STEEL COMPONENTS WERE SUPPLIED BY SUZLON I.E. FREE ISSUE MATERIAL. THE ARRANGEMENT AS PER THE ORDER WAS TO S UPPLY EQUIVALENT FINISHED WEIGHT IN KGS OF THE TOWER STRU CTURE PARTS AGAINST FREE ISSUE MATERIAL SUPPLIED BY SUZLO N. THE MODUS OPERAND/ IS THAT SINCE THE WORK IS HUGE A ND ONGOING FOR A LONG PERIOD OF TIME SUZLON KEEPS ON SUPPLYING THE STEEL MATERIAL FROM TIME TO TIME. ASS ESSEE MAINTAINS AND INWARD / OUTWARD DATA FOR STEEL SUPPL IED BY SUZLON. HOWEVER AN EXACT RECORD AS TO HOW MUCH MAT ERIAL WAS USED FOR WHICH TOWER IS IMPOSSIBLE TO MAINTAIN. IN ACTUAL PARLANCE WHEN WORK IS CONTINUOUSLY ONGOING EXACT CORRELATION BETWEEN MATERIAL ISSUED AND MATERIAL SU PPLIED IS DIFFICULT TO MAINTAIN. THERE CAN BE CASES WHERE MOR E MATERIAL THAN DETERMINED AS PER STANDARD NORMS WILL BE REQUIRED BY THE ASSESSEE IN COMPLETING THE JOB IN ANY CASE SUZLON MATERIAL IS KEPT SEPARATELY AND USED SEPARAT ELY. IT IS NOT CLUBBED WITH OTHER REGULAR PURCHASES OR REGULAR CONSUMPTION OF MATERIAL BY THE ASSESSEE. NOW THIS MATERIAL RECEIVED FROM SUZLON IS NEVER DEB ITED IN THE BOOKS OF THE ASSESSEE AS EXPENDITURE. ASSESSEE HAS ACTUALLY RAISED THE BILLS ONLY FOR EXECUTION OF ORD ER. AS PER ORDER CONDITIONS AFTER SUPPLY OF THE TOWER STRUCTU RE PARTS AND WEIGHMENT SUZLON WILL DETERMINE THE FULFILLMEN T OF THE SUPPLY-ISSUE NORMS. IN THE INSTANT CASE SUZLON HAS RAISED DEBIT NOTES UNDER DIFFERENT HEADS VIZ EXCESS FREE ISSUE MATERIAL UTILIZED DEFECT IN QUALITY REJECTION ETC . THE AMOUNTS HAVE BEEN DETERMINED SUO MOTO BY SUZLON ONL Y ON BASIS OF THEIR OWN CALCULATIONS AND THEY HAVE ACCOR DINGLY REDUCED OUR BILLS BY RAISING DEBIT NOTES. 33 ITA NOS.810 & 1 218/AHD/2008 THE EXACT QUANTUM OF SUCH DEDUCTIONS CAN BE DETERMI NED ONLY AFTER SUPPLY OF THE TOWER STRUCTURE PARTS AND WEIGHMENT AND CERTIFICATION BY SUZLON. AT THE END O F THE FINANCIAL YEAR IF THE DEBIT NOTES ARE NOT RECEIVED IT IS NOT POSSIBLE FOR THE ASSESSEE TO KNOW WHETHER ANY S UCH DEDUCTION WAS DUE OR WAS GOING TO BE MADE BY SUZLON . AS FAR AS THE ASSESSEE WAS CONCERNED IT HAS FULFILLED THE ORDER AS REQUIRED. IT IS ONLY AFTER RECEIPT OF THE DEBIT NOTES THAT THE ASSESSEE COME TO KNOW OF THE DEDUCTIONS MADE BY SUZLON. ON 31ST MARCH 2003 IT WAS NOT POSSIBLE FOR THE ASS ESSEE TO MAKE PROVISION FOR THE SAME SINCE HE WAS NOT AWARE AS TO WHAT AMOUNT IF ANY WILL BE DEBITED BY SUZLON. THE SAID NOTES WERE RECEIVED BY THE ASSESSEE IN THE SUBSEQUE NT YEAR ONLY. IN FACT THEY WERE RECEIVED IN OCTOBER 2003 ONLY. THE DATE OF PRINTING AT THE BOTTOM OF THE DETAILS ATTAC HED TO THE DEBIT NOTE ALSO SHOWS THAT THE SAME WERE PRINTED ON 04TH OCTOBER ONLY. THEREAFTER THE ONLY RECOURSE LEFT WIT H THE ASSESSEE WAS TO DEBIT THE SAME IN FY 2003-04 ONLY. UNDER THE CIRCUMSTANCES THE AMOUNT RELATING TO THE DEBIT NOTES INVOLVED IN THE TRANSACTION HAS CLEARLY CRYST ALLIZED FOR THE ASSESSEE IN THE CURRENT YEAR ONLY. IT WAS NOT P OSSIBLE TO MAKE A PROVISION OF THE SAME IN THE EARLIER YEAR AN D CONSEQUENTLY IT SHOULD BE ALLOWED IN THE CURRENT YE AR. THERE ARE PLENTY OF CASES WHERE SUCH EXPENSES HAVE BEEN A LLOWED IN THE YEAR IN WHICH THEY CRYSTALLIZED THOUGH THEY PERTAIN TO EARLIER YEAR. AMONGST VARIOUS CASES THE MATTER IS SQUARELY COVERED BY GUJARAT HIGH COURTS DECISION IN CASE OF SAURASHTRA CEMENT AND CHEMICALS VS. CIT 213 ITR 512 . DEDUCTIONS BEING IN NATURE OF BAD DEBTS: EVEN OTHERWISE THE BASIC EFFECT OF ISSUANCE OF THE DEBIT NOTES IS THE REDUCTION OF OUR BILLS. IT IS EFFECTIV ELY A REDUCTION OF SALES RECEIPTS I.E. DEBTORS. AS SUBMIT TED EARLIER THESE DEBIT NOTES WERE RECEIVED BY THE ASS ESSEE IN OCTOBER 2003 AT THE TIME WHEN AUDIT FOR FY 2002-03 HAD BEEN FINALIZED AND BOOKS HAD ALMOST BEEN CLOSED. TH EREFORE 34 ITA NOS.810 & 1 218/AHD/2008 THE ASSESSEE COULD NOT MAKE A PROVISION FOR SUCH RE DUCTION OF SUCH DEBTS. FURTHER TO SORT OUT SUCH REDUCTION IN DEBT BY WAY O F DEBIT NOTES THE ASSESSEE ALSO THOUGHT IT PROPER TO NEGOT IATE AND PURSUE THE PRINCIPAL SUZLON FOR NOT DEDUCTING THESE AMOUNTS. HOWEVER AS THE ASSESSEE HAD SUBSTANTIAL O RDERS OF THIS PRINCIPAL (APPROX. RS. 2000 LACS) IN THE SUBSE QUENT YEAR AND CONSIDERING THE FACT THAT THE DEBIT NOTES FORME D A MINIMAL FRACTION OF THE TOTAL VALUE OF BUSINESS WIT H THE PRINCIPALS THE ASSESSEE HAD TO ACCEPT THE DEBIT NO TES. ALL SAID AND DONE THE EFFECT OF CLAIMING THIS DEBI T NOTE AS EXPENSES IS NOTHING BUT WRITING OFF OF DEBTS IN NAM E OF SUZLON ENERGY LTD. HENCE IN SUBSTANCE THE CLAIMING OF EXPENSES THROUGH SUCH DEBIT NOTE IS A BAD DEBT WHIC H HAS WRONGLY BEEN GROUPED UNDER THE HEAD OF MATERIAL EXP ENSES. FURTHER SINCE THE MATERIAL RECEIVED FROM THE PRINC IPALS WAS NEVER ROUTED THROUGH THE BOOKS OF ACCOUNTS OF THE A SSESSEE SUCH DEBIT NOTES CAN IN NO WAY BE T ERMED AS 'PRIOR PERIOD EXPENDITURE' THE APPELLANT HAS RELIED ON THE FOLLOWING CASE LAWS : 1. CIT VS GIRISH BHAGWAT PRASAD (2002) 256 ITR 772 (GUJ) 2. SARANGPUR COTTON MFGS CO LTD V/S CIT (1983) 143 ITR 1166 (GUJ) 3. AJAR ENTRADE P. LTD V ACIT (2005) 2 SOT 511 (A HD) 4. ITO VS ANIL RASTOGI (MUM) 86 ITD 193 5. DY CIT VS. OMAN INTERNATIONAL BANK 6. SAOG / SPECTRUM BUSINESS SUPPORT LTD. VS DY. CIT (2006) 102 MUMBAI (SB) 207. 8.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUN SEL AND FACTS OF THE CASE. THIS GROUND WAS RAISED BY TH E APPELLANT DURING THE ASSESSMENT PROCEEDING. THIS RE LATES TO DEBIT NOTES RAISED BY SUZLON LTD. TO THE TUNE OF RS.20 59 329/- IN MARCH 2003. AUDITOR OF THE APPELL ANT CLASSIFIED TO THE SAME AS PRIOR PERIOD CLAIMS AND T HEREFORE THE SAME WAS NOT CLAIMED AS AN EXPENSE DURING THIS YEAR. NO SUCH CLAIM WAS MADE IN THE RETURN OF INCOME BASE D ON 35 ITA NOS.810 & 1 218/AHD/2008 AUDITOR'S AUDIT REPORT. HOWEVER DURING ASSESSMENT PROCEEDINGS APPELLANT RAISED THIS CLAIM. THE SAME WAS NOT DISCUSSED IN THE ASSESSMENT ORDER. APPELLANT MADE T HIS CLAIM BY WAY OF A LETTER TO THE ASSESSING OFFICER A COPY OF THE SAME WAS SUBMITTED SHOWING THAT THE CLAIM WAS M ADE AS LATER IN DEC. 2006. IN THE RETURN OF INCOME THE SAI D CLAIM SHOULD HAVE BEEN MADE BY REVISED RETURN U/S. 139(5) . SINCE THE APPELLANT HAS NOT FOLLOWED THE CORRECT PROCEDUR E ANY CLAIM RAISED IN THE ASSESSMENT PROCEEDINGS BY NOT F INDING ANY MISTAKE OR OMISSION ASSESSING OFFICER DID NOT DEAL THE SAME IN THE ASSESSMENT ORDER. ON GOING TO THE MERIT OF THE CLAIM IT IS NOTICED THAT DEBIT NOTES WERE ISSUED B Y SUZLON ON 31.03.2003. APPELLANT CLAIMED THAT IT RECEIVED T HE SAME IN THE MONTH OF OCT. 2004. THIS APPEARS TO BE QUITE UNREASONABLE. DEBIT NOTES RAISED FOR MARCH 2003 TH E SAME COULD HAVE BEEN SENT TO THE APPELLANT IN FEW DAYS. APPELLANT ALSO DID NOT SUBMIT ANY CERTIFICATE FROM SUZLON TO THE EFFECT THAT THE DEBIT NOTE RAISED BY IT WERE DISPATCHED VE RY LATE. WHEN AUDITOR OF THE APPELLANT AUDITED THE ACCOUNTS AND CLASSIFIED THIS AS PRIOR PERIOD THERE IS NO REASON FOR RAISING THE ISSUE SUBSEQUENTLY JUST ON THE BASIS OF THE CLA IM THAT APPELLANT RECEIVED DEBIT NOTE VERY LATE. IT APPEARS THAT SUCH BELATED CLAIM IS ONLY WITH A VIEW TO REDUCE THE INC OME IN CASE THE SAME IS INCREASED BY APPELLANT'S CLAIM ON ACCOUNT OF SALE TAX DEFERMENT. THE CLAIM MADE BY THE APPELLANT ON ACCOUNT OF SUZLO N IS DEFINITELY NOT WITH ANY SUPPORTING EVIDENCE THAT AP PELLANT DID NOT RECEIVE THE DEBIT NOT WITHIN TIME. WHEN SUZ LON REDUCED ITS LIABILITY TO THE APPELLANT OBVIOUSLY A PPELLANT SHOULD HAVE DONE THE SAME IN THAT YEAR. CLAIMING TH E SAME IN SUBSEQUENT YEAR DOES NOT MAKE ANY SENSE WHEN AUD ITOR HAS CLASSIFIED THE SAME PRIOR PERIOD. THE CORRECT A CTION COULD HAVE BEEN TO CLAIM IN A.Y.2003-04 TO WHICH SU CH CLAIM REALLY BELONGS. THE DECISION IN THE CASE OF S AURASTRA CEMENT & CHEMICAL REFERRED BY THE APPELLANT DOES NO T HELP SINCE THE LIABILITY GOT CRYSTALISED IN F.Y.2002-03 ITSELF. SINCE APPELLANT COULD NOT SUBMIT ANY EVIDENCE TO PR OVE THAT IT RECEIVED THE DEBIT NOTE MUCH LATER IT COULD NOT HAVE BEEN CLAIMED IN F.Y.2003-04 INCLUDING BY REVISION OF RET URN. IT IS AN AFTERTHOUGHT AND MUCH LATE IN THE DAY PARTIC ULARLY AFTER AUDITOR CERTIFIED THAT THIS IS A PRIOR PERIOD CLAIM. 36 ITA NOS.810 & 1 218/AHD/2008 WHEN AN EXPERT AUDITOR IS CERTIFYING SOME CLAIM AS PRIOR PERIOD THE SAME CANNOT BE SIMPLY CHANGED AS CURRENT YEAR'S CLAIM WITHOUT ANY MATERIAL OR EVIDENCE. I FOUND THE ASSESSEE'S CLAIM VERY CASUAL TYPE. IF SERIOUSNESS W OULD HAVE BEEN THERE THE APPELLANT WOULD HAVE REVISED THE RE TURN WITHIN TIME THE MOMENT IT CAME TO KNOW THAT THE EX PENSE WAS NOT PRIOR PERIOD. WHEN THE RETURN WAS FILED IN NOV. 2004 THE SAME SHOULD HAVE BEEN DONE AT LEAST WITHI N A YEAR. BY NOT DOING SO AND NOT SUBMITTING EVIDENCE T O PROVE THAT EXPENSES WERE RELATING TO CURRENT YEAR THIS G ROUND OF THE APPELLANT IS REJECTED. 48 THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). 49 THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHO RITIES BELOW. 50 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE APPELLANTS SUBMISSION WAS THAT ON 31 ST MARCH 2003 IT WAS NOT POSSIBLE FOR HIM TO MAKE PROVISION FOR THE IRRECOVERABLE DEBT BECAUSE THE DEBIT NOTE WAS NOT R ECEIVED BY HIM. M/S SUZLON BEING A PUBLIC COMPANY MADE THE NEC ESSARY CALCULATIONS AND RAISED THE DEBIT NOTE IN ITS ACCOU NTS ON 31/3/2003 HOWEVER THE SAME WAS COMMUNICATED TO THE ASSESSEE ON A LATER DATE AND THE ASSESSEE RECEIVED THE DEBIT NOTE IN THE MONTH OF OCTOBER 2004. SUBSEQUENTLY ON VERIFYING TH E CLAIM AND LOOKING AT THE SCOPE OF PROCURING MORE ORDERS FROM SUZLON THE 37 ITA NOS.810 & 1 218/AHD/2008 ASSESSEE DECIDED TO ACCEPT THE DEBIT NOTE RAISED BY SUZLON DURING THE PREVIOUS YEAR 2003-04. IT IS PERTINENT TO NOTE THAT THE ASSESSEE RECEIVED THE DEBIT NOTE DURING THE ASSESSM ENT YEAR 2004- 05 AND THE DECISION TO ACCEPT THE DEBIT NOTE WAS AL SO TAKEN AT THAT TIME. THEREFORE IT IS OBVIOUS THAT THIS LOSS ARISIN G DUE TO BAD DEBTS HAS CRYSTALLIZED IN THE ASSESSMENT YEAR 2004- 05. ON PERUSING THE FACTS OF THE CASE AND THE CASE LAWS RE FERRED BY THE APPELLANT AND THE RECENT DECISIONS OF THE APEX COUR T IT IS CLEAR THAT ONCE THE ASSESSEE WRITES OFF AN AMOUNT AS BAD DEBTS IN HIS BOOKS OF ACCOUNTS IT SHOULD BE ALLOWED AS A DEDUCTI ON. THE REVENUE CANNOT QUESTION THE VERACITY OF THE CLAIM O F THE ASSESSEE. HOWEVER IF THE AMOUNT IS REALIZED ON A LA TER DATE THE SAME WILL BE CONSIDERED AS THE INCOME OF THAT YEAR. WE HAVE RELIED UPON THE DECISION IN THE CASE T.R.F.LTD. V/S . CIT 323 ITR 397. IN THE LIGHT OF THE ABOVE WE ARE OF THE CONSID ERED VIEW THAT THE ADDITION MADE ON THIS COUNT DESERVES TO BE DELE TED. IT IS ORDERED ACCORDINGLY. GROUND NO.3 FOR THE ASSESSMENT YEAR 2004-05 AND THE ADDITIONAL GROUND RAISED BY THE APP ELLANT FOR THE ASSESSMENT YEAR 2003-04 IS DISPOSED OFF AS INDI CATED ABOVE. 38 ITA NOS.810 & 1 218/AHD/2008 51. IN THE RESULT THE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 ARE PARTLY ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT TODAY ON 22-07-2011 SD/- (T K SHARMA) JUDICIAL MEMBER SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER DATE : 22-07-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI MUKESH BHIMRAJ GUPTA C/O M/S MUKESH ENGINE ERS 28 SHIVDAS NAGAR MKARPURA BARODA 2. THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-2(1 ) BARODA 3. CIT CONCERNED 4. CIT(A)-II BARODA 5. DR ITAT AHMEDABAD BENCH-C AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD