The ACIT, Circle-5,, Surat v. M/s. Jindal Exports, Surat

ITA 1764/AHD/2008 | 2005-2006
Pronouncement Date: 30-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 176420514 RSA 2008
Assessee PAN AACFJ0534G
Bench Ahmedabad
Appeal Number ITA 1764/AHD/2008
Duration Of Justice 2 year(s) 2 month(s) 11 day(s)
Appellant The ACIT, Circle-5,, Surat
Respondent M/s. Jindal Exports, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 30-07-2010
Assessment Year 2005-2006
Appeal Filed On 19-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABA D CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON'BLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 1764/AHD./2008 ASSESSMENT YEAR : 2005-2006 ASSISTANT COMMISSIONER OF INCOME TAX -VS.- M/S. JINDAL EXPORTS SURAT CIRCLE-5 SURAT (PAN : AACFJ 05 34 G) (APPELLANT) (RESPONDENT) & C.O. NO. 177/AHD/2008 (ARISING OUT OF I.T.A. NO. 1764/AHD/2008) ASSESSMENT YEAR : 2005-2006 M/S. JINDAL EXPORTS SURAT -VS.- ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-5 SURAT (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SHRI R.N. VEPARI DEPARTMENT BY : SMT. JYOTI LAXMI SR. D. R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON BY THE ASSESSEE ARE AGAINST THE ORDER DATED 24.03.2008 OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS)-III SURAT FOR THE ASSESSMENT YEAR 2005-06. 2. VARIOUS GROUNDS RAISED BY THE REVENUE IN ITS APP EAL ARE AS UNDER :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A.)-III SURAT HAS ERRED IN DELETING THE ADDITI ON OF RS.32 63 813/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLA INED PURCHASES. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A.)-III SURAT HAS ERRED IN DELETING THE DISALL OWANCE OF INTEREST EXPENSES OF RS.14 74 960/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF BORROWED FUNDS UTILIZED FOR MAKING INTEREST FREE AD VANCES. 2 ITA NO. 1764 & CO-177-AHD-2008 (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A.)-III SURAT HAS ERRED IN RESTRICTING THE LAB OUR CHARGES OF RS.25 000/- INSTEAD OF DISALLOWANCE OF RS.74 548/- MADE BY THE A.O. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A.)-III SURAT HAS ERRED IN RESTRICTING THE DIS ALLOWANCE OF TELEPHONE EXPENSES CAR RUNNING AND MAINTENANCE EXPENSES AT 1 /5 TH OF THE CLAIM INSTEAD OF 1/4 TH OF TOTAL CLAIM DISALLOWED BY THE ASSESSING OFFICER . (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A.)-III SURAT OUGHT TO HAVE UPHELD THE ORDER O F THE ASSESSING OFFICER. 2.1. VARIOUS GROUNDS RAISED BY THE ASSESSEE IN ITS C.O. ARE AS UNDER :- (I) DISALLOWANCE OF CAPITAL LOSS :- THE APPELLANT SUBMITS THAT ON THE FACTS AND CIRCUMS TANCES OF THE CASE IT IS ENTITLED TO DEDUCTION OF RS.65 130/- IN RESPECT OF LOSS INCURRED BY THE APPELLANT ON PURCHASE AND SALE OF EMBROIDERY MACHIN E. (II) LABOUR CHARGES :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT N OT TO HAVE SUSTAINED DISALLOWANCE OF RS.25 000/- OUT OF LABOUR CHARGES WHEN THE ENTIRE EXPENDITURE WAS SUPPORTED BY EVIDENCE. (III) DISALLOWANCE OUT OF TELEPHONE CONVEYANCE CA R RUNNING & MAINTENANCE :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS NOT JUSTIFI ED IN RETAINING 1/5 TH OF THE EXPENSES. (IV) MISCELLANEOUS :- THE RESPONDENT CRAVES LEAVE TO ADD ALTER OR VARY A NY OF THE GROUNDS OF APPEAL. 3. THE FACTS RELATING TO CONTROVERSY INVOLVED IN GR OUND NO. 1 OF REVENUES APPEAL ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF E XPORT OF ART SILK CLOTH. FOR THE ASSESSMENT YEAR UNDER APPEAL IT FILED THE RETURN OF INCOME DECLARI NG TOTAL INCOME OF RS.47 28 117/-. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER MADE THE AD DITION OF RS.32 63 813/- ON ACCOUNT OF UNEXPLAINED PURCHASES. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CLAIMED TO HAVE PURCHASED GREY CLOTH FROM VARIO US PARTIES. HE ISSUED NOTICED UNDER SECTION 133 OF THE ACT TO VARIOUS PARTIES BUT NOTICES ISSUE D TO M/S. BHAVESH TEXTILES AND M/S. 3 ITA NO. 1764 & CO-177-AHD-2008 RADHESHYAM FABN WERE RETURNED UNSERVED BY THE POSTA L AUTHORITY. THE ASSESSEE SUBMITTED THAT PAYMENTS TO THESE PARTIES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND MATERIALS WERE RECEIVED FROM THEM WHICH WAS SUBSEQUENTLY GIVEN TO THE PROCE SSING UNIT AND FINISHED CLOTH WAS SOLD. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE A SSESSEE HOLDING THAT THE CLAIM OF THE ASSESSEE WAS ON ACCOUNT OF BOGUS PURCHASES AND MADE THE ADDI TION OF RS.32 63 813/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) IT WAS SUBMITTED THAT GREY CLOTH WAS PURCHASED FROM BOTH THE AFORESA ID PARTIES WHICH WAS SUPPORTED BY RELEVANT VOUCHERS. THE CLOTH PURCHASED IS DULY RECORDED IN T HE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WERE AUDITED. THE PAYMENT OF THE SAME WAS GIVEN THR OUGH ACCOUNT PAYEE CHEQUE AND THE SAME WAS CREDITED IN THEIR BANK ACCOUNTS ONLY IN THE SAM E YEAR COPIES OF THE CHEQUE WERE OBTAINED FROM THE BANK FOR THE PURPOSE OF VERIFICATION. IT W AS ALSO SUBMITTED THAT THE ASSESSEE HAS MAINTAINED QUANTITATIVE RECORDS FOR ALL INWARD OR O UTWARD GOODS AND SOLD AFTER PROCESSING. TOTAL GOODS WORTH OF MORE THAN 12 CRORES WAS SOLD BY THE ASSESSEE IN THE RELEVANT PERIOD FOR WHICH PURCHASES WERE MADE FROM MORE THAN 300 PARTIES. THE GREY CLOTH WAS ALWAYS PURCHASED THROUGH AGENTS THEREFORE NO DIRECT CONNECTION WAS NECESSA RY WITH THE PARTIES OF PURCHASES. THE PAYMENTS WERE MADE IN THE SAME YEAR AND NO FURTHER PURCHASES WERE MADE IN THE SUBSEQUENT PERIOD THEREFORE THE ASSESSEE WAS NOT IN TOUCH WI TH THE AFORESAID TWO PARTIES. IT WAS SUBMITTED THAT THE GOODS RECEIVED FROM BOTH THE PARTIES WERE SENT TO PROCESS HOUSES FOR DYEING AND PRINTING AND AFTER THE PROCESS THE SAME WERE RETURNED TO TH E ASSESSEE UNDER THE VOUCHER OF PROCESS HOUSE AND ALL THESE ENTRIES WERE RECORDED IN THE DAY-TO-D AY STOCK REGISTER AND VERIFIABLE FROM THE PROCESS HOUSE. IT WAS FURTHER SUBMITTED THAT OUT OF 34 PARTIES WHO WERE ISSUED NOTICES UNDER SECTION 133(6) ONLY TWO REMAINED NOT COMPLIED WITH . FOR THIS RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS :- (I) CIT VS.- M.K. BROS. [52 CTR (GUJ.) 228]; (II) CIT VS.- S.M. OMER [107 CTR (CAL.) 272]; (III) BALAJI TEXTILE IND. P. LTD. VS.- ITO [49 I TD (BOM.) 177]. 5. AFTER CONSIDERING THE AFORESAID SUBMISSIONS IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADD ITION. THE REASONING GIVEN BY THE LEARNED 4 ITA NO. 1764 & CO-177-AHD-2008 COMMISSIONER OF INCOME TAX(APPEALS) IS CONTAINED IN PAGE 2 OF THE IMPUGNED ORDER WHICH READS AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS AND GONE THROUGH THE DETAILS. IT IS SEEN THAT THE APPELLANT HAD MAINTAINED QUANTITATIVE RECORDS OF ALL INWARD OR OUTWARD GOODS AND THE SAID PURCHASES ARE DULY RE FLECTED IN THE BOOKS OF ACCOUNTS. IT IS ALSO SEEN THAT THE A.O. HAS NOT POI NTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS AND HAS ALSO NOT INVOKED THE PROV ISIONS OF SECTION 145 OF THE IT ACT WHICH MEANS THAT THE BOOK RESULTS HAV E BEEN ACCEPTED. THAT BEING THE CASE THERE IS NO JUSTIFICATION FOR TREAT ING THE SAID PURCHASES AS BOGUS. FURTHER THE PAYMENTS TO THE PARTIES HAVE BE EN MADE BY ACCOUNT PAYEE CHEQUES WHICH ARE DULY DEBITED TO APPELLANTS BANK ACCOUNTS. I HAVE ALSO PERUSED THE VOUCHERS THROUGH WHICH THE RAW MAT ERIAL WAS SENT TO THE PROCESS HOUSE AND ITS RETURN FROM THE PROCESSING UN ITS. THEREFORE THE ACTION OF THE A.O. IN TREATING THE PURCHASE AS BOGU S IS NOT SUSTAINABLE AND ADDITION ON THIS ACCOUNT IS DIRECTED TO BE DELETED . 6. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER O F INCOME TAX(APPEALS) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING ON BEHALF OF REVENUE SM T. JYOTI LAXMI LD. SR. D.R. APPEARED AND CONTENDED THAT THE PERSON TO WHOM THE ASSESSEE HAD CLAIMED TO HAVE PURCHASED GOODS WERE NOT AVAILABLE. IT IS WELL SETTLED POSITION OF LAW THAT CLAIMS OF ANY DEDUCTION FOR THE PURPOSE OF COMPUTING INCOME UNDER THE HEAD PROFIT AND GAIN FR OM BUSINESS AND PROFESSION THE ONUS IS ON THE ASSESSEE TO PROVE THAT SUCH EXPENDITURE WAS INC URRED BY THE ASSESSEE. AS THE ASSESSEE FAILED TO PRODUCE THE PARTIES THE ASSESSING OFFICER HAS C ORRECTED DISALLOWED THE CLAIM OF THE ASSESSEE FOR THE DEDUCTION OF RS.32 63 813/- HOLDING THAT TH E PURCHASES CLAIMED TO HAVE BEEN MADE FROM THESE TWO PARTIES ARE BOGUS/ IN-GENUINE. THE LD. D .R. ACCORDINGLY SUBMITTED THAT THE ADDITION OF RS.32 63 813/- MADE BY THE ASSESSING OFFICER BE RES TORED. 8. ON THE OTHER HAND SHRI R.N. VEPARI LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS). 9. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE MA DE THE PURCHASES FROM 24 PARTIES. ALL THE PARTIES HAVE RESPONDED EXCEPT TWO PARTIES. GREY CLOTH WHICH WAS PURCHASED FROM THE AFORESAID TWO 5 ITA NO. 1764 & CO-177-AHD-2008 PARTIES IS ENTERED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. THE PAYMENT HAS BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE. IN THESE CIRCUMSTANCES WE AR E OF THE VIEW THAT THE ADDITION OF RS.32 63 813/- MADE BY THE ASSESSING OFFICER ON DOU BTS AND SUSPICION HAS RIGHTLY DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). WE TH EREFORE INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). RESULT ANTLY GROUND NO. 1 OF THE REVENUES APPEAL IS REJECTED. 10. THE FACTS RELATING TO CONTROVERSY INVOLVED IN G ROUND NO. 2 OF REVENUES APPEAL ARE THAT THE ASSESSEE MADE INTEREST FREE ADVANCES TO FIVE PA RTIES AND HAS ALSO ACCEPTED INTEREST FREE ADVANCES FROM ELEGANCE EXIT PVT. LTD. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PAID BANK INTEREST OF RS.24 77 175/-. THEREFORE HE TOOK THE VIEW THAT INTEREST-BEARING FUNDS WERE UTILIZED FOR MAKING THE INTEREST FREE ADVANCES TO S ISTER CONCERNS AND THEREFORE THE ASSESSING OFFICER DISALLOWED INTEREST EXPENSES ON ACCOUNT OF BORROWED FUNDS UTILIZED FOR MAKING INTEREST- FREE ADVANCES. 11. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) IT WAS CONTENDED THAT IN THE ASSESSMENT YEAR UNDER APPEAL INTEREST OF RS.24 77 175/- WAS PAID TO THE BANK RS.7 05 296/- WAS PAID TO PARTNERS AND RS.53 872/- WAS PAID TO OTHER PARTIES. THE WHOLE CREDIT WAS UTILIZED IN BUSINESS HENCE ASSESSEE ENTITLED FO R THE CLAIM OF INTEREST PAID. TWO SEPARATE FACILITIES WERE OBTAINED FROM THE BANK SPECIFICALLY FOR THE PURPOSE OF EXPORT BY WAY OF PACKING CREDIT AND BILL DISCOUNTING. PACKING CREDIT LIMIT W AS GIVEN AFTER OBTAINING SALES ORDER FOR EXPORT TO PURCHASE RAW MATERIAL RELEVANT TO SUCH EXPORT OR DERS AND SALES BILL OF EXPORT GOODS WERE DISCOUNTED FROM THE BANK AFTER DISPATCH AGAINST THE PAYMENT OF THE SAME. AS THE FACILITY WAS OBTAINED FOR THE SPECIFIC PURPOSE AND BANK MONITORE D THE UTILIZATION AND SAME WAS UTILIZED FOR SUCH PURPOSE HENCE COULD NOT BE TREATED AS USED F OR GIVING ADVANCES TO SISTER CONCERNS. MAJOR PORTION OF THE EXPENDITURE WAS INCURRED FOR THE CAR JOAN WHICH WAS UTILIZED TO PURCHASE THE CAR ITSELF HENCE CANNOT BE SAID TO BE UTILIZED FOR GIVING TO SISTER CONCERNS AND THERE FORE STANDS ALLOWABLE. SECURED LOAN INCREASED FROM 64.42 LAKHS TO 307.60 LAKHS WHEREAS UNSECURED LOANS REDUCED FROM 96.95 LAKHS TO 18.68 CREDITORS FOR GO ODS REDUCED FROM 94.64 LAKHS TO 8.32 IAKHS OTHER CREDITORS REDUCED FROM 201.01 TO 151.27 WHER EAS INTEREST FREE ADVANCES INCREASED BY 40 LAKHS IT WAS VERY CLEAR THAT MAJOR PORTION OF THE C REDITS WAS USED IN THE PURPOSE OF BUSINESS THE 6 ITA NO. 1764 & CO-177-AHD-2008 ID AR ALSO SUBMITTED THAT AMOUNT WAS CONTINUOUSLY G IVEN AND ACCEPTED BETWEEN THE APPELLANT AND SISTER CONCERNS FROM EARLIER YEARS AS PER THEIR REQUIREMENT AND AVAILABILITY OF FREE FUNDS TO MAINTAIN THE CREDIT AND IMAGE OF THE WHOLE GROUP FO R MAKING EARLIER PAYMENT TO THE CREDITORS BY USING OPTIMUM USE OF FUNDS THE APPELLANT PURCHASED READY GOODS FROM SISTER CONCERNS TO GET THE EXPORT ORDERS DISPATCHED IN THE GIVEN TIME AND TO E NABLE SISTER CONCERNS TO PREPARE THE REQUIRED DRESS MATERIAL IT WAS NECESSARY TO HELP THEM TO PU RCHASE RAW MATERIAL. THE ID AR ALSO RELIED ON THE FOLLOWING COURT DECISIONS:- CIT VS.- KANORIA INV. (P) LTD. 151 CTR (CAL) 160; UNITED AGENCIES VS. ITO 37 TTJ (AHD) 374; RAJMOTI INDUSTRIES VS. 1TO 51 TTJ (AHD) 355. 12. AFTER CONSIDERING THE AFORESAID SUBMISSIONS TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE DISALLOWANCE OF INTEREST F OR THE DETAILED REASONS GIVEN IN PARA 3 OF THE IMPUGNED ORDER WHICH READS AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS. IT IS SEEN THAT SECURED LOANS IN THE CASE OF THE APPELLANT HAS INCREASED FIVE TIMES WHEREAS UNSE CURED LOANS IS REDUCED FROM RS.96 LACS TO RS 18 LACS. SIMILARLY CREDITORS FOR GOODS AND OTHER CREDITORS HAVE ALSO GONE DOWN CONSIDERABLY. A MAJOR PORTION OF CREDIT WAS USED TOR THE PURPOSE OF BUSINESS IT IS ALSO SEEN TH AT THE AO HAS NOT PROVED ANY NEXUS BETWEEN THE LOANS AND THE INTEREST FREE ADVAN CES MADE BY THE APPELLANT. THE CAPITAL WAS BORROWED FOR BUSINESS PURPOSES AND IT IS IMMATERIAL AS TO HOW THE BORROWED CAPITAL WAS UTILIZED. THIS VIEW HAS BE EN HELD BY VARIOUS COURTS AND THEREFORE THE DISALLOWANCE MADE IS NOT SUSTAINA BLE AND IS DIRECTED TO BE DELETED. 13. BEFORE US THE LD. D.R. FOR THE REVENUE CONTEND ED THAT THE DECISION OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT ACCEPTAB LE AS THE ASSESSING OFFICER NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE CLAIM OF THE ASSESSEE THAT ADVANCES GIVEN AGAINST PURCHASES OF THE FINISHED GOODS IS CONTRARY TO THE FACTS AVAILABLE ON RECORD. IT WAS FOUND BY THE ASSESSING OFFICER THAT ALL THE TRANSACTIONS IN THE COPIES OF THESE PARTIES ARE PURELY FINANCIAL TRANSACTIONS AND TRANSACTIONS OF SALE OR PURCHASE I N THE COPIES OF ACCOUNT WERE NOT FOUND. SECONDLY THE ASSESSEE HAD NOT FURNISHED ANY FUND F LOW STATEMENT WITH THE HELP OF WHICH THE CLAIM OF THE ASSESSEE THAT NO INTEREST BEARING BORR OWED FUNDS WAS UTILIZED FOR MAKING THE INTEREST FREE ADVANCES COULD HAVE BEEN VERIFIED. SINCE THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) HAD NOT CONSIDERED THE FINDING OF THE ASSESSING OFFICER AND HAS RELIED UPON THE 7 ITA NO. 1764 & CO-177-AHD-2008 SUBMISSIONS OF THE ASSESSEE THE DISALLOWANCE OF IN TEREST OF RS.14 74 960/- MADE BY THE ASSESSING OFFICER BE RESTORED. 14. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSES SEE PRODUCED A CASH FLOW STATEMENT FOR THE YEAR ENDING 31 ST MARCH 2005 ON THE BASIS OF THIS HE POINTED OUT THAT OPENING CASH AND CASH EQUIVALENTS AS ON 1.4.2004 WAS RS.38 613 021/- AND FUNDS UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS WAS RS.38 487 676/-. ON THIS BA SIS HE SUBMITTED THAT NO DISALLOWANCE OUT OF INTEREST PAID TO BANK IS CALLED FOR BECAUSE THE ENT IRE BANK LOAN WAS UTILIZED FOR THE PURPOSE OF BUSINESS. AS AGAINST THIS THE LD. D.R. POINTED OUT THAT THIS CASH FLOW STATEMENT FILED BY THE ASSESSEE WAS NOT FILED BEFORE THE ASSESSING OFFICER THEREFORE IT SHOULD NOT BE ADMITTED. 15. RIVAL SUBMISSIONS WERE CONSIDERED. IT IS PERTIN ENT TO NOTE THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS DELETED THE DISALLOWANCE OF INTEREST OF RS.14 74 960/-. PRIMA FACIE IT APPEARS THAT CASH FLOW STATEMENT WHICH IS NOW F ILED BEFORE US WAS NOT FILED BEFORE THE ASSESSING OFFICER. WE THEREFORE SET ASIDE THE ORD ER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSEE SHOULD FURNISH THE CASH FLOW STATEMENT FOR THE YEAR ENDING 31.03.2005. THE ASSESSING OFFICER MAY VERIFY THE SAME AND RE-ADJUDICATE THE D ISALLOWANCE OF INTEREST OF RS.14 74 960/- AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 16. THE FACTS RELATING TO CONTROVERSY INVOLVED IN G ROUND NO. 3 OF REVENUES APPEAL AND GROUND NO. 2 OF ASSESSEES CROSS OBJECTION ARE THAT THE ASESEE HAS DEBITED A SUM OF RS.2 98 190/- UNDER THE HEAD LABOUR CHARGES WHIC H WERE CLAIMED TO HAVE BEEN PAID IN CASH ON SELF-MADE CASH PAYMENT VOUCHERS. THE ASSESSING OFFI CER DISALLOWED 25% OF EXPENSES DEBITED AMOUNTING TO RS.74 548/- AND ADDED TO THE TOTAL INC OME. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER GOING THROUGH THE DETAILS FOUND THAT THE CLAIM IS IN RESPECT OF PETTY LABOUR EXPENSES AND FOR OBVIOUS REASONS SUCH CLAIM WOULD N OT BE SUPPORTED BY CASH VOUCHERS WITHOUT ANY PRINTED BILLS. HOWEVER THE LEARNED COMMISSIONE R OF INCOME TAX(APPEALS) PRESUMED THAT INFLATION OF SUCH EXPENSES IS ALWAYS A POSSIBILITY A TOKEN DISALLOWANCE WOULD BE FAIR AND REASONABLE. THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS) ACCORDINGLY RESTRICTED THE DISALLOWANCE TO RS.25 000/-. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF INCOME 8 ITA NO. 1764 & CO-177-AHD-2008 TAX(APPEALS) THE REVENUE IS IN APPEAL AND ASSESSEE FILED THE CROSS OBJECTION BEFORE THE TRIBUNAL. 17. BEFORE US THE LD. D.R. POINTED OUT THAT THE DI SALLOWANCE OF RS.74 548/- WAS REASONABLE. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT EVEN THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE DELETED THE EN TIRE DISALLOWANCE. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT RESTRICTION OF DISALLOWANCE TO RS.25 000/- IS FAIR AND REASONABLE. RESULTANTLY GROUND NO. 3 OF THE REVENUES APPEAL AND GROUND NO. 2 OF ASSESSEES CROSS OBJECTI ON ARE DISMISSED. 18. GROUND NO. 4 OF REVENUES APPEAL AND GROUND NO. 3 OF ASSESSEES CROSS OBJECTIONS ARE AGAINST RETAINING 1/5 TH OF TELEPHONE/ CONVEYANCE AND CAR RUNNING AND MAINT ENANCE EXPENSES. 19. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. ACCORDING TO LD. D.R. 1/4 TH DISALLOWANCE OF TOTAL CLAIM MADE BY THE A.O. ON TH IS ACCOUNT IS FAIR AND REASONABLE WHEREAS THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS DISALLOWANCE BE RESTRICTED TO 1/6 TH . AFTER CONSIDERING THE REASONING GIVEN BY THE LEAR NED COMMISSIONER OF INCOME TAX(APPEALS) WE ARE OF THE VIEW THAT RESTRICTION O F DISALLOWANCE TO 1/5 TH OF TOTAL CLAIM IS FAIR AND REASONABLE THEREFORE GROUND NO. 4 OF REVENUES AP PEAL AND GROUND NO. 3 OF ASSESSEES CROSS OBJECTION ARE DISMISSED. 20. GROUND NO. 1 OF ASSESSEES CROSS OBJECTION WAS NOT PRESSED BY THE LD. COUNSEL OF THE ASSESSEE AT THE TIME OF HEARING. THEREFORE THE SAM E IS DISMISSED BEING NOT PRESSED. 21. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND CROSS OBJECTION BY THE ASSESSEE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 30.07.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 / 07 / 2010 9 ITA NO. 1764 & CO-177-AHD-2008 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD LAHA/SR.P.S.