The ACIT, Circle-5,, Ahmedabad v. Rajesh Malleables Ltd.,, Ahmedabad

ITA 1900/AHD/2007 | 2003-2004
Pronouncement Date: 29-03-2010 | Result: Allowed

Appeal Details

RSA Number 190020514 RSA 2007
Assessee PAN AABCR0270K
Bench Ahmedabad
Appeal Number ITA 1900/AHD/2007
Duration Of Justice 2 year(s) 10 month(s) 22 day(s)
Appellant The ACIT, Circle-5,, Ahmedabad
Respondent Rajesh Malleables Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-03-2010
Date Of Final Hearing 29-03-2010
Next Hearing Date 29-03-2010
Assessment Year 2003-2004
Appeal Filed On 07-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI N.S. SAINI ACCOUNTANT MEMBER DATE OF HEARING: 29.03.10 DRAFTED ON:29.03.10 ITA NO.1900/AHD/2007 ASSESSMENT YEAR : 2003-2004 ASST. C.I.T. CIRCLE-5 C.U.SHAH COLLEGE BUILDING 2 ND FLOOR AHMEDABAD. VS. RAJESH MALLEABLES LTD. 4 G.I.D.C. ESTATE PHASE-I VATVA AHMEDABAD. PAN/GIR NO. : AABCR 0270K (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI N.S.DAYAN CIT DR RESPONDENT BY: SHRI S.N.DOVETIA O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XI AHMEDABAD DATED 19.02.2007 BY TAKING THE FOLLOWING GROUNDS OF APPEAL. 1. THE LD. COMMISSIONER OF INCOME TAX (A) - XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O F RS.4 48 03 196/-ON ACCOUNT OF UNSECURED LOANS UNDER SECTION 68 OF THE INCOME TAX ACT 1961. 2. THE LD. COMMISSIONER OF INCOME TAX (A) - XI AHM EDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O N ACCOUNT OF UNSECURED LOANS BY ADMITTING ADDITIONAL EVIDENCE IN THE PARA 4.2 OF THE APPELLATE ORDER IN CONTRAVENTION OF RULE 46A(3) OF THE INCOME - TAX RULES 1962. 3. THE LD. COMMISSIONER OF INCOME TAX (A) - XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O F RS. 11 23 686/-ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES. - 2 - 4. THE LD. COMMISSIONER OF INCOME TAX (A) - XI AHMEDA BAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O F RS.2 21 082/- ON ACCOUNT OF DISALLOWANCE OF TRAVELLING EXPENSES. 5. THE LD. COMMISSIONER OF INCOME TAX (A) - XI AHMEDA BAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O F RS.10 32 342/-ON ACCOUNT OF DISALLOWANCE OF DEDUCTION OF PF AND ESI COLLECTED FROM THE EMPLOYEES PAID AFTER DUE DATES. 6. THE LD. COMMISSI ONER OF INCOME TAX (A) - XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS I N ALLOWING DEDUCTION OF PAYMENT OF PF AND ESI MADE AFTER DUE D ATE BY NOT ACCEPTING THE DECISION OF THE HON'BLE MADRAS HIGH C OURT IN THE CASE OF CJT VS MDRAS RADIATORS AND PRESSINGS LIMITED 183 CT R 322 (MAD.) (2003). 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX (A) -XI AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 8. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) - XI } AHMEDABAD MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DECIDED THE ABOVE ISSUES AS UNDER:- THIS APPEAL IS DIRECTED AGAINST THE ORDER UNDER SE CTION 143(3) OF THE I.T.ACT 1961 DATED 17-02-2006 PASSED BY THE A.C. I.T. CIRCLE-5 AHMEDABAD DETERMINING THE APPELLANT'S TOTAL INCOME AT RS.NIL AFTER CONSIDERING THE UNABSORBED DEPRECIATION AND BUSINES S LOSS OF EARLIER YEARS TO THE EXTENT OF INCOME AVAILABLE. WHILE FINA LIZING THE ASSESSMENT THE ASSESSING OFFICER HAS MADE CERTAIN ADDITIONS TO THE INCOME DECLARED BY THE APPELLANT. AGGRIEVED OF THE SAID ORDER THE APPELLANT IS IN APPEAL BEFORE THE UNDERSIGNED. IN RESPONSE TO NOTICE OF HE ARING SHRI SANJAY R. SHAH C. A. APPEARED FOR THE APPELLANT AND THE CAS E WAS DISCUSSED WITH HIM. 2. IT IS SEEN FROM THE RECORD THAT THE ASSESSMENT O RDER IN QUESTION WAS RECEIVED BY THE APPELLANT ON 16-03-2006. ACCORD ING TO THE PROVISIONS OF INCOME-TAX ACT 1961 THE APPELLANT W AS REQUIRED TO FILE AN APPEAL WITHIN ONE MONTH FROM THE DATE OF RECEIPT OF THE SAID ORDER. HOWEVER THE APPEAL WAS FILED BY THE APPELLANT ONLY ON 12-5-2006 WHICH IS LATE BY 24 DAYS. IN THIS REGARD THE APPELL ANT HAS FILED LETTER ALONG WITH THE APPEAL MEMO WHEREIN IT IS SUBMITTED BY TIE APPELLANT AS UNDER:- - 3 - 'THE MATTERS RELATING TO THE ACCOUNTS AND TAXATION IS BEING LOOKED AFTER BY THE FINANCE AND ACCOUNTS MANAGER OF OUR GROUP COMPANY (M/S. RAJESH MALLEABLES LTD) MR. HITESH C. PATEL WHO FELL ILL ON 10 TH APRIL AND IS ON LEAVE SINCE THEN UNDERGOING MEDICAL TREATMENT. SINCE THE ENTIRE RECORD RELATING TO THE ASSESSMENT AS WELL AS THE ASSESSMENT ORDER WERE WIT H HIM NOBODY ELSE KNEW ABOUT THE LIMITATION WHICH WAS EXP IRING ON 17- 04-2006. IT WAS ONLY THEREAFTER WHEN OUR TAX CONSULTANTS MA DE ENQUIRY IN THE LAST WEEK OF APRIL 2006 AS TO WHETHER WE HAVE RECEIVED ASSESSMENT ORDER OR NOT WE STATED LOOKING FOR THE S AME AND FOUND THE ASSESSMENT ORDER FROM THE RECORDS OF MR. HITESH C. PATEL. HAVING COME TO KNOW OF THE FACT THAT LIMITATION HAS ALREADY EXPIRED WE IMMEDIATELY TOOK THE STEP TO FILE THE A PPEAL AND THE SAME IS FILED TO-DAY I.E. ON 11 TH MAY 2006. . LOOKING TO THE ABOVE FACTS WE REQUEST YOUR HONOUR TO KINDLY CONSIDER THE ABOVE CAUSE AS A REASONABLE CAUSE CON DONE THE DELAY IN FILING THE APPEAL AND ADMIT THE SAME FOR A DJUDICATION. 2.1. OVER AND ABOVE DURING THE COURSE OF APPEAL PR OCEEDINGS IT IS SUBMITTED BY THE A. R. OF THE APPELLANT THAT MR.HIT ESH PATEL WAS LOOKING AFTER THE APPELLANT'S GROUP CONCERN M/S. RAMPION EY ETECH PVT. LTD. WHEREIN ALSO DUE TO SAME REASONS THERE WAS A DELAY IN FILING THE APPEAL. IT IS SEEN THAT THE SAID APPEAL WAS DECIDED BY ME O N 22-12-2006 WHEREIN ON IDENTICAL GROUNDS THE DELAY WAS CONDONED AND THE APPEAL WAS ADMITTED. THEREFORE THE APPEAL IN QUESTION IS ALSO ADMITTED ACCORDINGLY. 3. DURING THE COURSE OF APPEAL PROCEEDINGS OBJECTI NG TO THE A.O'S ACTION THE A. R. HAS FILED WRITTEN SUBMISSIONS WHE REIN HE HAS RAISED SEVERAL GROUNDS OF APPEAL AND CLAIMED RELIEF. THE S AME ARE DISCUSSED IN THE SUCCEEDING PARAGRAPHS. 3. THE GROUND NO. 1 TO 3 OF APPEAL ARE DIRECTED AGA INST THE INVOCATION OF THE PROVISIONS OF SECTION 144 AND NOT GR ANTING PROPER OPPORTUNITY. THIS GROUNDS OF APPEAL ARE GENERAL IN NATURE AND DOES NOT CALL FOR ANY SPECIFIC COMMENTS. 4. THE FOURTH GROUND OF APPEAL IS DIRECTED AGAINST THE ADDITION OF RS. 4 48 03 196/- UNDER SECTION 68 OF THE I. T. ACT 19 61. ACCORDING TO THE ASSESSING OFFICER THE APPELLANT HAS FAILED TO SUBS TANTIATE ITS CLAIM WITH - 4 - REGARD TO UNSECURED LOANS. THEREFORE AFTER DISCUSS ING THE ISSUE AT LENGTH IN THE ASSESSMENT ORDER THE A. O. HAS MADE ADDITION OF RS.4 48 03 196/- BY INVOKING THE PROVISIONS OF SEC TION 68 OF THE ACT. 4.1. OBJECTING TO THE A.O'S ACTION IN THE WRITTEN SUBMISSIONS IT IS SUBMITTED BY THE A. R. OF THE APPELLANT AS UNDER :- 'THE ID. AO HAS ADDED THIS ENTIRE SUM OF RS.4 48 03 196/- WHICH IS OUTSTANDING AMOUNT IN THE SCHEDULE OF UNSECURED LOA NS ON THE GROUND THAT THE APPELLANT HAS NOT GIVEN CONFIRMATION WITH COPIES OF ACCOUNTS COMPLETE POSTAL ADDRESS ARID P. A. NO. OF THE DEPO SITORS/CREDITORS. IT IS SUBMITTED THAT THESE LOANS WERE PROCURED NOT DURING THE YEAR BUT IN THE EARLIER YEARS AND THEY ARE OUTSTANDING SINCE LONG. FOR YOUR HONOUR'S READY REFERENCE WE ENCLOSE HEREWITH COPIES OF THE ANNUAL AUDITED ACCOUNTS OF THE COMPANY AT PAGE NOS. 5 TO 35 WHERE IN 'ON PAGE NO. 14 THE DETAILS UNSECURED LOANS ARE AVAILABLE. COMPARIN G THE FIGURES OF THE EARLIER YEAR WITH THE CURRENT YEAR YOU WOULD FIND THAT THERE IS AN INCREASE OF RS.1 87 06 975/- IN THE TOTAL AMOUNT OF LOAN AS AT 31-03- 2003 AS COMPARED TO AMOUNTS AS ON 31-03-2002. THE E NTIRE INCREASE IS DUE TO A NEW LOAN OF RS.2 CRORES RECEIVED DURING TH E YEAR FROM THE ASSOCIATE CONCERN OF THE APPELLANT M/S. RAMPION EYE TECH PVT. LTD. THE APPELLANT IN THIS REGARD ATTACHED HEREWITH AT PAGE NOS. 96 TO 98 THE COMPARATIVE DETAILS OF OUTSTANDING LOANS OF BOTH TH E YEAR TO BEAR THIS FACT OUT. SINCE RAMPIOAN EYETECH IS ALSO ASSESSED B Y THE SAME ASSESSING OFFICER WHO IS ASSESSING APPELLANT AND TH E FACT OF THEIR ADVANCING RS. 2 CRORES TO THE APPELLANT IS ALREADY TAKEN COGNIZANCE OF IN THE ASSESSMENT ORDER OF RAMPION EYETECH U/S. 143 (3) ( A COPY OF WHICH IS ATTACHED (PAGES 110 TO 117 RELEVANT PAGE N O.114) THE SAID LOAN CANNOT BE CONSIDERED TO BE UNEXPLAINED. THE SA ME THEREFORE CANNOT BE SUBJECT MATTER OF ADDITION U/S.68. SIMILARLY THE REST OF THE LOANS ARE NOT RECEIVED DU RING THE YEAR UNDER CONSIDERATION AS COULD BE SEEN FROM DETAILS ON PAGE NOS. 96 TO 98. THEREFORE FOLLOWING THE RATIO OF KAMATAKA HIGH COU RT IN SRIDEV ENTERPRISE'S CASE (193 ITR 165) THE SAME CANNOT BE ADDED U/S.68 FOR THE YEAR UNDER CONSIDERATION. THE SAME INFORMATION WAS ALSO THERE IN THE TAX AUDIT REPORT AT PAGE NOS.62 TO 65 (COPIES O F CONFIRMATIONS OF OTHER DEPOSITORS ARE ATTACHED AT PAGE NOS. 93 TO 95 WHICH COULD NOT BE GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. MAY WE FURTHER MENTION THAT THE ASSESSMENT FOR A. Y . 2002-03 WAS ALSO A SCRUTINY ASSESSMENT WHEREIN NO SUCH ADDITION U/S .68 HAS BEEN MADE IN RESPECT OF THESE LOANS (COPY OF THE ASSESSMENT ORDER FOR A. Y. 2002- 03 PASSED U/S. 143(3) AND ALSO U/S. 143(3) R. W. S. 147 ARE ATTACHED HEREWITH FOR YOUR READY REFERENCE (PAGE NOS. 85 TO 87 & 88 TO 89). - 5 - 4.1.2. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF TH E CASE AND ALSO RELYING UPON THE ABOVE DECISION IT IS SUBMITTED BY THE A. R. OF THE APPELLANT THAT THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED AND PLEADED TO DELETE THE ADDITION MADE BY HER UNDER SE CTION 68 OF THE ACT 4.2. THE SUBMISSIONS OF THE A. R. OF THE APPELLANT HAVE BEEN PERUSED. THE DETAILS PRODUCED BEFORE ME BY THE A. R. AS WEL L AS DECISIONS RELIED UPON BY HIM AND THE OBSERVATIONS OF THE ASSESSING O FFICER IN THE ASSESSMENT ORDER HAVE ALSO BEEN EXAMINED. 4.2.1. ON CAREFULLY PERUSAL OF THE FACTS AND CIRCUM STANCES OF THE CASE I FIND THAT THE ENTIRE ADDITION MADE BY THE A.O. ON A CCOUNT OF UNEXPLAINED CASH CREDITS IS NOT RECEIVED BY THE APPELLANT DURIN G THE YEAR UNDER CONSIDERATION . IT IS SEEN THAT ONLY AN AMOUNT OF R S. 2 CRORES IS RECEIVED BY THE APPELLANT AS NEW LOAN WHICH IS FROM THE ASS OCIATE CONCERN OF THE APPELLANT NAMELY M/S. RAMPION EYETECH PVT. LTD. THE ASSOCIATE CONCERN IS ALSO ASSESSED TO TAX BY THE SAME ASSESSI NG OFFICER. THE APPELLANT HAS ALSO GIVEN DETAILS WITH REGARD TO OTH ER DEPOSITORS. THIS SHOWS THAT THE APPELLANT HAS DISCHARGED ITS ONUS WI TH REGARD TO THE NEW LOAN AS WELL AS OLD ONE RECEIVED FROM THE ASSOCIATE CONCERN AND OTHER PARTIES. 4.2.2. THEREFORE HAVING CONSIDERED THE FACTS AND C IRCUMSTANCES OF THE CASE AND ALSO FOLLOWING THE DECISION OF KARNATAKA H IGH COURT IN CASE OF SRIDEV ENTERPRISE (193 ITR 165) I AM OF THE VIEW T HAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ADDITION ON ACCO UNT OF UNSECURED LOAN U/S.68 OF THE ACT. THE ADDITION MADE BY THE A. 0. A MOUNTING TO RS.4 48 03 196/- IS THEREFORE DELETED. 5. THE FIFTH GROUND OF APPEAL IS DIRECTED AGAINST T HE DISALLOWANCE OF RS.11 23 686/- OUT OF INTEREST. IT IS SEEN THAT IN VIEW OF THE FINDINGS GIVEN IN THE APPELLANT'S OWN CASE FOR A. Y. 2002-03 THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS.11 23 686/- U/S. 36(1)( III) OF THE I. T. ACT 1961. 5.1. IT IS THE CONTENTION OF THE A. R. THAT THE APP ELLANT HAD ORIGINALLY GIVEN ADVANCES TO ITS SUBSIDIARY COMPANY M/S.RAMPRA SAD TRADING & INVESTMENT (P) LTD FOR BUSINESS PURPOSES AS THE SAI D SUBSIDIARY WAS WORKING AS DISTRIBUTORS FOR THE APPELLANT. ACCORDIN G TO THE A. R. SINCE THE SAID ADVANCES WERE FOR THE BUSINESS PURPOSE NO DISALLOWANCE U/S.36(1)(III) CAN BE MADE. IN SUPPORT OF THIS CONT ENTION THE A. R. HAS RELIED UPON THE DECISION IN CASE OF S. A. BUILDERS VS. CIT 288 ITR (SC) AND PLEADED TO DELETE THE ADDITION MADE BY THE ASSE SSING OFFICER. - 6 - 5.2. THE SUBMISSIONS OF THE A. R. OF THE APPELLANT HAVE BEEN PERUSED THE DECISIONS REFERRED AS ABOVE WHICH IS RELIED U PON BY THE A. R. AND THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASS ESSMENT ORDER HAVE ALSO BEEN EXAMINED. IN THE WRITTEN SUBMISSIONS IT IS SUBMITTED BY THE A. R. OF THE APPELLANT AS UNDER:- 'THE ID. AO HAS DISALLOWED THIS AMOUNT OF INTEREST ON THE GROUND THAT THE APPELLANT HAS ADVANCED A SUM OF RS.47 91 240/- TO ITS SUBSIDIARY COMPANY M/S. RAMPRASAD TRADING & INVESTM ENT (PVT) LTD. INTEREST FREE AND ON THE OTHER HANDS IT HAS BEEN P AYING INTEREST ON THE BORROWED FUNDS. SHE FURTHER OBSERVES IN THE ASSESSM ENT ORDER THAT IN THE EARLIER YEAR 2002-03 SIMILAR ISSUE WAS RAISED AND- AN INTEREST OF RS. 16.789/- WAS ADDED BY DISALLOWING INTEREST U/S. 36( 1)(III). THE LD. AO HAS DISALLOWED THIS AMOUNT ON THE GROUND THAT THE APPELLANT HAS FAILED TO PROVE NEXUS OF INTEREST FREE ADVANCES WITH INTEREST FREE FUNDS AND THEREFORE AN AMOUNT EQUAL TO 15% AS INTE REST ON A SUM OF RS. 74 91 240/- WHICH COMES TO RS. 11 23 686/- HAS BEEN DISALLOWED. YOUR APPELLANT SUBMITS THAT THESE ADVANCES WERE ORI GINALLY GIVEN IN A.Y. 1997-98 FOR BUSINESS PURPOSE SINCE THE SUBSID IARY WAS WORKING AS DISTRIBUTORS FOR THE APPELLANT (PAGE 86 BEING ASSES SMENT ORDER FOR A. Y 2002-03). SINCE THE SAID ADVANCE WAS FOR THE BUSINE SS PURPOSE NO DISALLOWANCE U/S. 36(I)(III) BE MADE FOLLOWING THE LATEST SUPREME COURT'S DECISION IN CASE OF S. A. BUILDERS VS. CIT 288 ITR 1.' 5.2.1. THEREFORE IN THE LIGHT OF ABOVE IT IS ARGU ED THAT THE ADVANCES GIVEN IS ONLY TO THE SUBSIDIARY COMPANY OF THE APPE LLANT WHICH CAN BE VERY WELL SAID FOR BUSINESS PURPOSE HENCE NO PRES UMPTIVE INTEREST CAN BE DISALLOWED. 5.2.2. AFTER GOING THROUGH THE FACTS AND CIRCUMSTAN CES OF THE CASE I AM OF THE VIEW THAT NO INTEREST CAN BE DISALLOWED ON A CCOUNT OF LENDING ADVANCES TO SUBSIDIARY COMPANY AS THE SUBSIDIARY CO MPANY HAS BEEN WORKING AS DISTRIBUTORS TO THE APPELLANT COMPANY T HEREFORE THE APPELLANT IS HAVING BUSINESS INTEREST. THEREFORE A DDITION MADE AT RS.11.23.686/- IS DELETED. 6. THE SIXTH GROUND OF APPEAL IS DIRECTED AGAINST D ISALLOWANCE OF RS.2 21 082/- ON ACCOUNT OF FOREIGN TRAVELING EXPEN SES. ACCORDING TO THE ASSESSING OFFICER THE APPELLANT HAS FAILED TO PROVE THE GENUINENESS OF THE EXPENSES THAT THE SAME ARE INCURRED WHOLLY A ND EXCLUSIVELY FOR BUSINESS PURPOSE. THEREFORE AFTER DISCUSSING THE IS SUE AT LENGTH IN THE - 7 - ASSESSMENT ORDER THE A.O. HAS DISALLOWED THE SUM O F RS.2 21 082/- AND ADDED TO THE TOTAL INCOME DECLARED BY THE APPELLANT . 6.1. IN THE WRITTEN SUBMISSIONS IT IS SUBMITTED BY THE A. R. OF THE APPELLANT AS UNDER :- '5.1. THE ID. AO HAS DISCUSSED THIS ISSUE IN PARA 3 OF THE ASSESSMENT ORDER WHERE SHE HAS DISALLOWED AN AMOUN T OF RS.2 21 082/- IN RESPECT OF FOREIGN TRAVELING EXPEN SES INCURRED BY THE APPELLANT ON THE GROUND THAT REQUIRED DETAILS AND DOCUMENTARY EVIDENCES WERE NOT SUBMITTED TO ES TABLISH GENIALNESS OF SUCH EXPENSES AND THE PURPOSE OF SUCH EXPENSES. 5.2. YOUR APPELLANT IN THIS REGARD SUBMITS THAT DET AILS OF FOREIGN TRAVELING EXPENSES WERE ALREADY SUBMITTED WITH LETT ER DATED 20- 01-2006 (PAGE NOS. 90 TO 92). 5.3. YOUR APPELLANT IN THIS REGARD FURTHER FURNISHE D HEREWITH THE REQUIRED VOUCHERS AS WELL AS THE DOCUMENTARY EVIDEN CES ABOUT THE FACTUM OF FOREIGN TRAVELING EXPENSES HAVING BEE N INCURRED DURING THE YEAR (PAGE NOS. 99 TO 109) YOUR APPELLANT SUBMIT THAT THE ABOVE INFORMATION/EV IDENCES ARE FRESH EVIDENCES WHICH COULD NOT BE FURNISHED TO THE LEARNED AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE REASONS MENTIONED IN THE ISSUE RELATING TO ORDER U/S.144 OF THE ACT. THE SAME MAY PLEASE BE ADMITTED UNDER RULE 46A OF THE I NCOME-TAX RULES: 6.2. THE SUBMISSIONS OF THE A. R. OF THE APPELLANT HAVE BEEN PERUSED. THE DETAILS PRODUCED BEFORE ME BY THE A. R. AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAVE ALSO BEEN EXAMINED. 6.2.1. IT IS SEEN THAT THE AO HAD TO RESORT TO THIS ADDITION IN VIEW OF THE FACT THAT THE APPELLANT DID NOT FURNISH THE INFORMA TIONS IN SUPPORT OF THE EXPENSES CLAIMED PARTICULARLY WITH REGARD TO FOREIG N TRAVEL AND ALSO NOT PROVED THAT THE SAID EXPENSES WERE MEANT FOR BU SINESS PURPOSE ONLY. 6.2.2. DURING THE COURSE OF APPEAL PROCEEDINGS COP Y OF INVOICES FROM TRAVEL AGENCY AND OTHER DETAILS HAVE BEEN FURNISHED . HOWEVER THESE DOCUMENTS THEMSELVES DO NOT SPEAK ABOUT THE PURPOSE OF THE VISITS AND ALSO CANNOT BE ASCERTAINED THAT THE ENTIRE EXPENDIT URE CLAIMED HAS BEEN SPENT FOR BUSINESS PURPOSE EXCLUSIVELY. 6.2.3. FURTHER AS IT IS SEEN FROM THE NATURE OF AP PELLANT'S BUSINESS THERE COULD BE A POSSIBILITY OF HAVING FOREIGN TRAV EL FOR BUSINESS PURPOSE AND THEREBY SOME EXPENSES RELATED TO SAID F OREIGN TRAVEL. - 8 - HOWEVER IN VIEW OF NO ELABORATIVE EXPLANATION TO P IN POINT THAT THE ENTIRE EXPENDITURE IS FOR A BUSINESS PURPOSE I AM INCLINED TO RETAIN 50% OF THE DISALLOWANCE MADE BY THE A. O. ACCORDING LY OUT OF ADDITION OF RS.2.21.082/- ONLY RS.1 10 541 IS GIVEN AS RELI ED AND THE BALANCE ADDITION IS CONFIRMED. THEREFORE THIS GROUND OF APP EAL IS PARTLY ALLOWED. 7. THE SEVENTH GROUND IN THIS APPEAL IS DIRECTED AG AINST THE DISALLOWANCE OF RS.10 41 768/- ON ACCOUNT OF LATE P AYMENT OF P.F. AND E.S.I. ACCORDING TO THE ASSESSING OFFICER THE APPE LLANT HAS PAID ABOVE AMOUNT TO THE RESPECTIVE ACCOUNTS AFTER THE DUE D ATE AS PER THE PF & ESI ACT. THEREFORE THE A. 0. AFTER DISCUSSING THE ISSUE AT LENGTH IN THE ASSESSMENT ORDER HAS DISALLOWED THE SUM OF RS.10 41 768/- AND ADDED TO THE TOTAL INCOME OF THE APPELLANT COMPANY UNDER SECTION 43B OF THE I. T. ACT. 7.1. IT IS THE CONTENTION OF THE A. R. THAT AFTER T HE DELETION OF SECOND PROVISO TO SECTION 43B THE DISALLOWANCE MADE BY TH E ASSESSING OFFICER IS NOT WARRANTED. IT IS SUBMITTED BY THE A. R. THAT THE APPELLANT HAS MADE THE ABOVE PAYMENTS BEFORE THE DUE DATE OF FILI NG RETURN OF INCOME AND THEREFORE NOTHING SHOULD BE DISALLOWED. IN SUP PORT OF THE APPELLANT'S CONTENTION THE A. R. HAS ALSO UPON THE FOLLOWING DECISIONS :- I. ADDL. CIT VS. VESTAS.RRB INDIA LTD. (DELHI ITAT) 92 ITD 1. (II) SMARTCHEM TECHNOLOGIES P. LTD. VS. ITO 97 TTJ 818 (ITAT AHMEDABAD). 7.1.2. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF TH E CASE AND ALSO RELYING UPON THE ABOVE DECISIONS IT IS SUBMITTED B Y THE A. R. THAT THE DISALLOWANCE MADE BY THE A.O. IS NOT JUSTIFIED AND PLEADED TO DELETE THE ADDITION MADE BY A.O. 7.2. THE SUBMISSIONS OF THE A. R. OF THE APPELLANT HAVE BEEN PERUSED. THE DECISIONS REFERRED AS ABOVE WHICH ARE RELIED UPON BY THE A. R. AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN TH E ASSESSMENT ORDER HAVE ALSO BEEN PERUSED. 7.2.1. THE AHMEDABAD ITAT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF DY. CIT VS. SHRI VALLABH GL ASS WORKS LTD. (2002) 76 TTJ 652 AFTER HAVING DISCUSSED THE LEGAL POSITION IN THIS MATTER. REGARDING THE CONTRARY VIEW TAKEN IN HITECH INDIA PVT. LTD. VS. UNION OF INDIA (1997) 227 ITR 446 (AP) AND CIT VS. SOUTH INDIA CORPN. LTD. (2000)242 ITR 114 (KER) THE HON. TRIBU NAL IN PARA 21 TO 23 HAS DISCUSSED AS UNDER:- - 9 - '21. THE FACTS DISCUSSED ABOVE CLEARLY INDICATE THA T CONTRARY VIEW TAKEN BY THE HON'BLE ANDHRA PRADESH COURT IN T HE CASE OF HITECH INDIA (P) LTD. (SUPRA) AND HON'BLE KERALA HI GH COURT IN THE CASE OF SOUTH INDIA CORPORATION LTD. (SUPRA) DI D NOT HAVE THE BENEFIT OF CONSIDERING THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF ALLIED MOTORS (P) LTD. (SUPRA). THE HON 'BLE ANDHRA PRADESH HIGH COURT AND THE HON'BLE KERALA HIGH COUR T ALSO DID NOT EXAMINE THE LEGISLATIVE HISTORY OF VARIOUS AMENDMENTS MADE IN S.43B FROM TIME TO TIME MORE PARTICULARLY IT DID NOT EXAMINE THE IMPACT OF OMISSION OF THE WORDS 'DURING THE PREVIOUS YEAR' USED IN SECOND PROVISO UNTIL ITS OMI SSION W.E.F. 1 ST APRIL 1989.' 22. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF LAKHANPAL NATIONAL LTD..(SUPRA) HAS CLEARLY HELD TH AT IN VIEW OF SPECIFIC LANGUAGE OF SECTION DEDUCTION OF THE AMOUNT AS MENTIONED IN ELS. (A) AND (B) OF S. 43B S HALL BE ALLOWED IN THE PREVIOUS YEAR IN WHICH THE SAME IS P AID. THERE IS NO SCOPE FOR ANY DOUBT THAT SUCH SUM CAN B E ALLOWED BY WAY OF DEDUCTION WHILE COMPUTING THE INC OME IN THE PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY THE ASSESSEE. SUCH A CLEAR MEANING OF S. 43B IS SEL F- EVIDENT FROM A PLAIN READING OF THE PROVISIONS CONT AINED IN S. 43B. SEC. 43B OPENS WITH A NON OBSTINATE CLAU SE WHICH MEANS THAT S. 43B WILL HAVE OVERRIDING EFFECT OVER THE OTHER PROVISIONS CONTAINED IN I.T. ACT. IT CLEA RLY LAYS DOWN THAT DEDUCTION IN RESPECT OF ANY TAX OR DUTY OR IN RESPECT OF ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PF ETC. SHAL L BE ALLOWED ONLY IN COMPUTING THE INCOME THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY-PAID BY HIM. THE INTE NTION IS MADE MORE SPECIFIC THAT IT WOULD BE SO IRRESPECT IVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUC H SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM. THUS IN A CASE WHERE THE ASSESSEE HAS MAINTAINED ITS A CCOUNTS ON MERCANTILE BASIS THE DEDUCTIONS IN RESPECT OF SU CH SUMS WILL BE ALLOWED ONLY IN THE YEAR IN WHICH SUCH SUM IS ACTUALLY PAID AND NOT IN THE YEAR OF ACCRUAL OF LIA BILITY TO PAY SUCH AMOUNT. THE EXPLN. 1 TO S. 43B FURTHER FOR TIFIES THE SAME VIEW. IT PROVIDES THAT WHERE DEDUCTION IN RESPECT OF ANY SUM REFERRED TO IN CL. (A) OR (B) OF S. 43B IS ALLOWED IN COMPUTING THE INCOME OF THE PREVIOUS YEAR RELATI NG TO ASSTT. YR. 1983-84 OR ANY EARLIER ASSESSMENT YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE - 10 - ASSESSES THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH THE SAME IS ACTUALLY PAID BY HIM. THE EXPLANATION INSER TED WITH A VIEW TO OBVIATE DOUBLE DEDUCTIONS IN RESPECT OF SAME AMOUNT ALSO CLEARLY INDICATES THAT IF THE LIAB ILITY TOWARDS PF PERTAINING TO ASSTT. YR. 1983-84 OR ANY EARLIER ASSESSMENT YEAR WAS SNOT ALLOWED AS DEDUCTION IN TH E YEAR WHEN SUCH LIABILITY WAS INCURRED OR HAD ACCRUE D THE ASSESSEE SHALL BE ENTITLED TO GET DEDUCTION IN RESP ECT OF SUCH SUM IN THE YEAR IN WHICH SUCH SUM HAS ACTUALLY BEEN PAID BY HIM IN VIEW OF CLEAR LANGUAGE OF THE MAIN PROVISIONS OF S. 43B. THE FINDINGS GIVEN BY THE HON 'BLE GUJARAT HIGH COURT IN THE CASE OF LAKHANPAL NATIONA L LTD..(SUPRA) HOLD GOOD EVEN AFTER INSERTION OF TWO PROVISIONS TO S. 43B. THE SECOND PROVISO TO S. '43B NOWHERE SPECIFICALLY PROVIDES THAT THIS WOULD OVERR IDE THE MAIN PROVISIONS OF S. 43B WHICH PROVIDES THAT DEDUC TION IN RESPECT OF ANY TAX DUTY OR ANY SUM PAYABLE BY T HE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO A NY PF ETC. WILL BE ALLOWED IN COMPUTING THE INCOME OF THA T PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. 23. THE HON'BLE SUPREME COURT IN THE CASE OF ALLIED MOTORS (P) LTD. (SUPRA) HAS LAID DOWN THE MANNER IN WHICH S. 43B SHOULD BE INTERPRETED AND HOW LEGISLAT IVE INTENT SHOULD BE ASCERTAINED FOR MAKING RATIONAL AN D REALISTIC INTERPRETATION AND WHILE DOING SO THE HO N'BLE SUPREME COURT HAS REJECTED THE LITERAL INTERPRETATI ON MADE BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF SANGHI MOTORS VS. UNION OF INDIA (1991) 91 CTR (DEL ) 15 : (1991) 187 ITR 703 (DEL). THE HON'BLE SUPREME COU RT HAS APPROVED THE JUDGEMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CHANDULAL VENIC HAND (SUPRA) AND ALSO THE JUDGEMENT OF THE HON'BLE CALCU TTA HIGH COURT IN THE CASE OF CIT VS. JAGANNATH STEEL C ORPN. (SUPRA). THE HON'BLE SUPREME COURT HAS CLEARLY OBSE RVED THAT THE PROVISO TO S. 43B WAS REMEDIAL IN NATURE DESIGNED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE ASSESSEE. THE HON'B LE APEX COURT FOLLOWING ITS EARLIER DECISION IN THE CA SE OF GOODYEAR INDIA LTD. VS. STATE OF HARYANA (1991) 188 ITR 402 (SC) HELD THAT RULE OF REASONABLE CONSTRUCTION MUST BE APPLIED WHILE CONSTRUING A STATUTE. LITERAL CONS TRUCTION SHOULD BE AVOIDED IF IT DEFEATS THE MANIFEST OBJECT AND - 11 - PURPOSE OF THE ACT. THEY ALSO REFERRED TO THEIR JUD GEMENT IN THE CASE OF R. B. JODHA MAL KUTHIALA VS. CIT (19 71) 82 ITR 570 (SC) WHILE APPLYING RULE OF REASONABLE INTERPRETATION IN RELATION TO FIRST PROVISO TO S. 4 3B. IT WAS OBSERVED THAT A PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE P ROVISION WORKABLE A PROVISO WHICH SUPPLIES AN OBVIOUS OMISS ION IN THE SECTION AND IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SECTION A REASONABLE INTERPRETATION REQ UIRES TO BE TREATED AS RETROSPECTIVE IN OPERATION SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO THE SECTI ON AS A WHOLE. THE HON'BLE SUPREME COURT FURTHER OBSERVED T HAT THE GUJARAT HIGH COURT IN CHANDULAL VENICHAND (SUPR A) HAS HELD THAT THE AMENDMENT BY WAY OF INTRODUCING F IRST PROVISO TO S. 43B IS CURATIVE AND EXPLANATORY AND H ENCE RETROSPECTIVE.' 7.2.2. THE AHMEDABAD ITAT IN THE ABOVE CASE HAS FOL LOWED THE DECISIONS IN THE CASE OF ALLIED MOTORS PVT. LTD. (1 997) 224 ITR 677 (SC) AND GUJARAT HIGH COURT DECISIONS IN LAKHANPAL NATIO NAL LTD. VS. ITO (1986) 162 ITR 240 (GUJ) AND CHANDULAI VENICHAND (1 994) 209 ITR 7 (GUJ). AND HAS COME TO THE FOLLOWING CONCLUSION:- 'THE DEDUCTION IN RESPECT OF PF CONTRIBUTION ETC. AS CONTEMPLATED IN S. 43B(B) PAID DURING THE PREVIOUS YEAR IS CLEARLY ALLOWABLE IN THE YEAR WHEN SUCH SUM IS ACTU ALLY PAID BY VIRTUE OF PLAIN LANGUAGE OF THE MAIN PROVIS ION OF S 43B. THE PROVISION TO S. 43B CANNOT OVERRIDE THE MAIN PROVISION SO AS TO DENY DEDUCTION IN RESPECT OF SUC H SUMS ACTUALLY PAID IN THE RELEVANT PREVIOUS YEAR. SUCH A VIEW IS CLEARLY SUPPORTED BY THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ALLIED MOTORS (P) LTD. (SUPRA) AND THE JUDGEMENTS OF THE' HON'BLE GUJARAT HIGH COURT IN THE CASES OF LAKHANPAL NATIONAL LTD. AND CHANDULAL VENICHAND (SUPRA)' 7.2.3. HAVING CONSIDERED THE FACTS OF THE CASE AND FOLLOWI NG THE DECISIONS REFERRED AS ABOVE AND ALSO FOLLOWING TH E DECISION OF THE AHMEDABAD I.T.A.T. IN THE ABOVE MENTIONED CASE THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE PAYMENTS MADE TO PF AND ES I ON THE BASIS OF ACTUAL PAYMENT DURING THE RELEVANT PREVIOUS YEAR RE LEVANT TO ASSESSMENT YEAR SUBJECT TO VERIFICATION THIS GROUN D OF APPEAL IS ALLOWED. 8. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. - 12 - 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. WE FIND THAT IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER PASSED ORDER UNDER SECTION 144 OF THE ACT ON 17.02.2006 AS THE ASSESSEE DID NOT FILE THE NECESSARY DETAILS AS REQUIRED BY THE LEARNED ASSESSING OFFICER IN SPITE OF HAVING BEEN ALLOWED SUFFICIENT OPPORTUNITY FOR DOING THE SAME. THE LEAR NED ASSESSING OFFICER FRAMED THE ASSESSMENT BY MAKING THE FOLLOWING DISAL LOWANCES AND ADDITIONS. 1. ADDITION UNDER SECTION 68 OF THE ACT ON ACCOUNT OF UNSECURED LOAN RS.4 48 03 196/-. 2. DISALLOWANCE OF INTEREST EXPENDITURE IN RELATION TO INTEREST FREE LOANS ADVANCED BY THE ASSESSEE RS.11 23 686/-. 3. DISALLOWANCE OF FOREIGN TRAVEL EXPENSES OF RS.2 21 082/-. 4. DISALLOWANCE OF PF AND ESI EXPENDITURE NOT PAID WITHIN DUE DATE RS.10 41 768/-. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. WE FIND THAT THE ASSESSMENT CAME TO BE MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 144 OF THE ACT AS IN SPITE OF SUFFICIENT OPPORTUNIT IES ALLOWED TO THE ASSESSEE THE ASSESSEE DID NOT FILE THE DETAILS AND EVIDENCES REQUIRED BY THE LEARNED ASSESSING OFFICER FOR MAKING THE ASSESSMENT. THEREF ORE THE LEARNED ASSESSING OFFICER MADE THE ASSESSMENT MAKING THE AD DITIONS STATED ABOVE. 5. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) THE ASSESSEE FILED DETAILS AND EVIDENCES AND THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) ACCEPTING THE SAME DELETED THE ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER. 6. WE OBSERVE FROM THE ORDER OF THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS) THAT THE ASSESSEE WHILE FILING THE DET AILS AND EVIDENCES BEFORE - 13 - HIM ALSO MADE A PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCES AS QUOTED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN PARA 6.1 OF HIS ORDER WHICH READS AS FOLLOWS. YOUR APPELLANT SUBMIT THAT THE ABOVE INFORMATION/E VIDENCES ARE FRESH EVIDENCES WHICH COULD NOT BE FURNISHED TO THE LEARNED AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE REASONS MENTIONED IN THE ISSUE RELATING TO ORDER U/S.144 OF THE ACT. THE SAME MAY PLEASE BE ADMITTED UNDER RULE 46A OF THE I NCOME-TAX RULES: 7. THE BENCH ENQUIRED FROM THE LEARNED AUTHORISED R EPRESENTATIVE OF THE ASSESSEE WHETHER THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) HAD PASSED ANY ORDER BEFORE ACCEPTING THE ADDITIONAL EV IDENCES FILED BEFORE HIM AND WHETHER THE SAME WAS CONFRONTED TO THE LEARNED ASSESSING OFFICER BEFORE ACCEPTING THE SAME. THE LEARNED AUTHORISED REPRESEN TATIVE OF THE ASSESSEE SUBMITTED THAT THIS HAS NOT BEEN DONE BY THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS). HE VERY FAIRLY CONCEDED THAT THERE WA S VIOLATION OF RULE 46A OF THE INCOME TAX RULES 1962 BY THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS) IN NOT CONFRONTING THE LEARNED ASSESSI NG OFFICER WITH THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE AND THER EFORE THE MATTER BE RESTORED BACK TO THE FILE OF THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) TO DECIDE THE APPEAL OF THE ASSESSEE AFRESH AFTER ALLO WING OPPORTUNITY TO THE LEARNED ASSESSING OFFICER TO MAKE HIS SUBMISSIONS O N THE ADDITIONAL EVIDENCES FILED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO AGREED WITH THE SUBMISSIONS MADE BY THE LEARNED AUTHORISED REPRESENTATIVE OF TH E ASSESSEE. WE THEREFORE SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND REMAND THE MATTER BACK TO HIS FILE TO RE-ADJUDICATE THE APPEAL OF THE ASSESSEE AFTER CONFRONTING THE LEARNED ASSESSING OFFICER WIT H ALL THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE HIM WITHIN T HREE MONTHS FROM THE DATE OF THIS ORDER. THUS THE APPEAL OF THE REVENUE IS A LLOWED FOR STATISTICAL PURPOSES. - 14 - 8. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING IN THE PRESENCE OF THE PARTIES ON 29.03.2010. SD/- SD/- (BHAVNESH SAINI) ( N.S . SAINI ) JUDICIAL MEMBER ACCOUN TANT MEMBER AHMEDABAD; DATED 29/03/2010 PARAS # COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS) 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD