RHP Cables & Indust. Ltd.,, Ahmedabad v. The Income tax Officer, Ward-5(1),, Ahmedabad

ITA 2294/AHD/2007 | 2003-2004
Pronouncement Date: 25-03-2011 | Result: Dismissed

Appeal Details

RSA Number 229420514 RSA 2007
Assessee PAN AABCR3416R
Bench Ahmedabad
Appeal Number ITA 2294/AHD/2007
Duration Of Justice 3 year(s) 9 month(s) 24 day(s)
Appellant RHP Cables & Indust. Ltd.,, Ahmedabad
Respondent The Income tax Officer, Ward-5(1),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 25-03-2011
Date Of Final Hearing 17-03-2011
Next Hearing Date 17-03-2011
Assessment Year 2003-2004
Appeal Filed On 31-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D. C. AGRAWAL AM) ITA NO.2294/AHD/2007 A. Y.: 2003-04 RHP CABLES & INDUSTRIES LTD. GTCI HOUSE B/S RATNAM BUILDING OFF. C. G. ROAD AHMEDABAD VS THE INCOME TAX OFFICER WARD-5 (1) AHMEDABAD PA NO. AABCR 3416 R (APPELLANT) (RESPONDENT) ITA NO.2624 AND 3553/AHD/2007 A.Y.: 2003-04 AND 2001-02 THE D. C. I. T. CIRCLE-5 AHMEDABAD 2 ND FLOOR C. U. SHAH BUILDING ASHRAM ROAD AHMEDABAD VS RHP CABLES & INDUSTRIES LTD. GTCI HOUSE B/S RATNAM BUILDING OFF. C. G. ROAD AHMEDABAD PA NO. AABCR 3416 R (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI SHELLEY JINDAL CIT DR ASSESSEE BY SMT. ARTI SHAH AR O R D E R PER BHAVNESH SAINI: THIS ORDER SHALL DISPOSE OF ALL THE ABOVE APPEALS RELATING TO THE SAME ASSESSEE. 2. ON THE LAST DATE OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE INTIMATED THAT THE ASSESSEE COMPANY HAS GO NE UNDER LIQUIDATION. THEREFORE NOTICE BE SENT TO THE OFFIC IAL LIQUIDATOR ALSO. ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 2 ACCORDINGLY NOTICE WAS ALSO ISSUED TO THE OFFICIAL LIQUIDATOR THROUGH REGISTERED POST WHICH WAS ALSO SERVED. HOWEVER NON E APPEARED ON BEHALF OF THE OFFICIAL LIQUIDATOR. THE LEARNED COUN SEL FOR THE ASSESSEE HOWEVER ON THE DATE OF HEARING SUBMITTED THAT THE PETITION FOR LIQUIDATION IS PENDING BEFORE THE HONBLE HIGH COURT; THEREFORE SHE WOULD ARGUE THE APPEAL ON BEHALF OF THE ASSESSE E. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. ITA NO.2294/AHD/2007:AY 2003-04 ITA NO.2624/AHD/2007: AY 2003-04 4. BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)- XI AHMEDABAD DATE 09-04-2004 FOR A SSESSMENT YEAR 2003-04. 5. IN THE APPEAL OF THE ASSESSEE THE ASSESSEE RAIS ED ONLY ONE GROUND CHALLENGING THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.9 52 12 000/- IN RESPECT OF EXCE SS BOOK STOCK WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION. TH E AO NOTED THAT THE ASSESSEE HAS SHOWN THE PRIOR YEARS ADJUSTMENT OF RS .952.12 LACS BEING A LOSS OF EARLIER YEARS DUE TO REFINING THE V ALUATION OF CLOSING STOCK ETC. AS PER NOTE NO.1 GIVEN BELOW THE ANNUAL ACCOUNTS. THUS LOSS AS CLAIMED BY THE ASSESSEE WAS FOUND AN ARTIFI CIAL AND NOTIONAL AS THE ASSESSEE ITSELF HAD ADMITTED THE FAILURE TO ACCOUNT FOR THE CORRECT POSITION OF THE OPENING STOCK CONSUMPTION OF RAW MATERIALS ETC. IN THE NOTE. IT WAS ALSO SEEN THAT THERE IS NO PROVISION IN THE INCOME TAX ACT TO ALLOW SUCH ADJUSTMENT IN ANY SUBS EQUENT YEAR. ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 3 THE ASSESSEE EXPLAINED THAT THE PRACTICE OF VALUING CLOSING STOCK WAS DISPENSED WITH FROM THIS YEAR AND NEW OF METHODOLOG Y BASED ON THE RECOMMENDATION OF THE COST ACCOUNTANT WHO HAS R EPORTED THAT NEGATIVE VARIANCE HAS ARISEN DUE TO AN INADVERTENT ERROR COMMITTED BY THE ASSESSEE COMPANY IN SELECTION OF ESTIMATES I N COMPUTING CONSUMPTION OF RAW MATERIAL. IT WAS ALSO REPORTED T HAT THE ASSESSEE COMPANY HAS BEEN BOOKING THE RAW MATERIAL CONSUMPTI ON IN THE PROFIT & LOSS ACCOUNT WHICH WAS MUCH LOWER THAN THE ACTUAL CONSUMPTION NORMS. THE ASSESSEE THEREFORE PLEADED THAT IT HAD WRITTEN OFF STOCK WORTH RS.952.12 LACS WHICH WAS DUE TO GENUINE TECHN ICAL MISTAKE. THE AUDIT REPORT WAS ALSO REFERRED TO TO SHOW THAT EFFECT IS GIVEN IN THE CURRENT YEAR. THE AO THEREFORE NOTED THAT THE ASSESSEE HAS CLAIMED THAT DUE TO CONTROL OVER CONSUMPTION OF VAR IOUS RAW MATERIAL IN THE PRODUCTION AND WRONG VARIATION OF CONSUMPTIO N IN THE PROCESS - ESTIMATE THE REAL COST OF CLOSING STOCK WHICH WAS W RITTEN OFF INCOME DISCLOSED ON THAT ACCOUNT. HOWEVER THE ASSESSEE HA S NOT FURNISHED THE REASONS FOR DOING SO AND NO EXACT DETAILS OF WR ITING OFF THIS AMOUNT AND THE BASIS HAS BEEN FILED. NO SUCH ADJUST MENT IS PROVIDED BY THE BOARD. THE ASSESSEE COMPANY MAINTAINED CONSU MPTION OF RAW MATERIAL WITH LARGE NUMBER OF WORKERS/LABOURERS AND SUFFICIENT STAFF WAS ENGAGED FOR CONTROLLING THE MECHANISM AND TO MAKE PERFECT INVENTORY OF CONSUMABLES AND CLOSING STOCK. IN THE ABSENCE OF ANY MATERIAL ON RECORD AND THAT THE DETAILS OF CLOSING STOCK HAVE ALREADY BEEN REPORTED TO VARIOUS GOVERNMENT DEPARTMENTS AND BANKS FROM WHERE LOANS HAVE BEEN OBTAINED IN RESPECTIVE YEARS EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR OF THE AO. THE AO ALSO NOTED THAT THERE IS A CHANGE IN THE METHOD OF VALUATION OF CLO SING STOCK IN THE ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 4 ASSESSMENT YEAR UNDER APPEAL AS COMPARED TO EARLIER YEARS AND ACCORDINGLY CLAIM OF THE ASSESSEE WAS HELD TO BE AR TIFICIAL LOSS AND ADDITION WAS MADE. IT WAS SUBMITTED BEFORE THE LEAR NED CIT(A) THAT REASONS WERE EXPLAINED FOR WRITING OF THE STOCK. WH EN THE PRODUCTION WAS AT PEAK IT WAS NOT POSSIBLE TO HAVE PHYSICAL A CCOUNT OF THE CLOSING STOCK AND VALUING THE SAME. IT WAS NOT FEAS IBLE TO CALCULATE EXACT CONSUMPTION FOR EACH OF THE 40 VARIANTS. THE MANAGEMENT PRACTICED THE METHOD OF BOOKING CONSUMPTIONS ON STA NDARD BASIS. THE WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCE D IN THE APPELLATE ORDER. IT WAS SUBMITTED THAT IT WAS THE M AIN YEAR WHEN THE MANAGEMENT VISUALIZED THE VARIATION BETWEEN THE PHY SICAL STOCK AND THE BOOK STOCK. THE SUBMISSIONS MADE BEFORE THE AO WERE ALSO REITERATED. THE LEARNED CIT(A) CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE AND THE MATERIAL ON RECORD NOTED THAT IT C OULD BE SEEN THAT THE ASSESSEE HAS MODIFIED THE DISCLOSURE OF CLOSING STOCK FROM RS.1055.64 LACS TO RS.103.52 LACS. THE REASON GIVE N BY THE ASSESSEE IS THAT IN THE PAST THERE USED TO BE LARGE VOLUME OF RAW MATERIALS AND STOCK IN PROCESS THEREFORE THE SAME WAS NOT VALUED CORRECTLY WHICH HAD RESULTED IN HIGHER DISCLOSURE O F CLOSING STOCK. IT WAS FURTHER SEEN THAT THE ASSESSEE HAS REVISED THE CLOSING STOCK PLEADING THAT IN THE PAST THERE WAS SUBSTANTIAL VOL UME OF PRODUCTION ACTIVITIES UP TO THE LAST YEAR. THEREFORE IT WAS N OT PRACTICALLY POSSIBLE TO MEASURE THE STOCK PHYSICALLY. THE LEARNED CIT(A) ALSO NOTED THAT THE ASSESSEE PLEADED THAT THE ACTUAL VARIATION WAS REVIEWED BY TECHNICAL STAFF. THE LEARNED CIT(A) ON CONSIDERATIO N OF THE SUBMISSION OF THE ASSESSEE NOTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM THAT IT HAS DISCLOSE D HEAVY CLOSING STOCK ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 5 IN THE PAST WHICH REQUIRE MODIFICATION NOW. THE LEA RNED CIT(A) ALSO NOTED THAT IT IS NOT UNDERSTOOD HOW THE ASSESSEE CA N CLAIM THAT IN THE PAST IT HAD NO PROPER MANUFACTURING ACCOUNT RAW MA TERIAL ACCOUNT AND CLOSING STOCK ACCOUNT. THE LEARNED CIT(A) THER EFORE NOTED THAT THE CLAIM OF THE ASSESSEE IS WITHOUT ANY BASIS AND ADDITION WAS ACCORDINGLY CONFIRMED. THE APPEAL OF THE ASSESSEE W AS DISMISSED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT TAX WAS PAID ON THE SAME SOCK IN THE EARLIER YEAR. THEREFOR E ADDITION IS CLEARLY UNJUSTIFIED. 7. ON THE OTHER HAND THE LEARNED DR SUBMITTED THAT THE ASSESSEE DID NOT FILE ANY DETAILS OR EVIDENCE TO JUSTIFY THE WRITE OFF OF THE CLOSING STOCK IN THE ASSESSMENT YEAR UNDER APPEAL. THEREFOR E ADDITION IS CLEARLY JUSTIFIED AND THERE IS NO MERIT IN THE APPE AL OF THE ASSESSEE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS CLAIMED PRIOR YEARS ADJUSTMENT BY REFINING THE VALUATION OF CLOSING STO CK. THE ASSESSEE CLAIMED THAT THE COST ACCOUNTANT HAS REPORTED NEGAT IVE VARIANCE HAS ARISEN DUE TO INADVERTENT ERROR COMMITTED BY THE AS SESSEE COMPANY IN COMPUTING THE CONSUMPTION OF RAW MATERIAL BECAUS E IN THE PROFIT & LOSS ACCOUNT THE COMPANY HAS BEEN BOOKING THE RAW MATERIAL CONSUMPTION WHICH WAS MUCH LOWER THAN THE ACTUAL CO NSUMPTION NORMS. THE OPINION OF THE COST ACCOUNTANT WAS NOT B ASED ON ANY EVIDENCE OR MATERIAL. THE ASSESSEE MERELY ON THE BA SIS OF THE COST ACCOUNTANT AND THE TAX AUDIT REPORT WRITTEN OFF STO CK IN THE BOOKS OF ACCOUNT WITHOUT MAKING CORRESPONDING PROVISION IN T HE ACCOUNTS OF ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 6 THE EARLIER YEARS BECAUSE IN CASE THE STOCK IS RE DUCED IN THE YEAR UNDER APPEAL IT WOULD HAVE EFFECT ON THE OTHER YEA RS ACCOUNTS ALSO. NO REASONS HAVE BEEN GIVEN AS TO WHY THE ASSESSEE H AS WRITTEN OFF THE STOCK WHICH WAS NOT PROVIDED BY ANY OF THE GUID ELINES PROVIDED BY THE CBDT. IN THE EARLIER YEAR ALSO AND IN THE AS SESSMENT YEAR UNDER APPEAL THE ASSESSEE HAS ACCOUNTED FOR THE STO CK AND THE SAME HAVE BEEN REPORTED TO THE VARIOUS GOVERNMENT AGENCI ES INCLUDING THE BANKS FROM WHERE LOANS HAVE BEEN OBTAINED. THE ASSE SSEE HAS NOT EXPLAINED THAT DESPITE ENGAGING SUFFICIENT STAFF FO R CONTROLLING THE MECHANISM FOR MAKING THE PERIODIC INVENTORY OF THE CONSUMABLES AND THE CLOSING STOCK HOW SUDDENLY CHANGED THE METHOD/ SYSTEM MERELY ON THE ADVICE OF THE COST ACCOUNTANT. THE AS SESSEE HAS NOT GIVEN ANY DEFINITE AND COGENT REASONS FOR WRITING O FF THE CLOSING STOCK IN ORDER TO CLAIM HUGE DEDUCTION. IN THE ABSENCE OF ANY ADEQUATE EVIDENCE AND MATERIAL ON RECORD THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT ARGUMENTS OF THE ASSESSEE HAVE NO BASI S FOR DELETING THE ADDITION. THE CLAIM OF THE ASSESSEE IS THUS NOT SUB STANTIATED THROUGH ANY MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE MERELY STATED THAT TAX IS PAID ON THE STOCK IN THE EARLIER YEAR THEREFORE ADDITION BE DELETED. NO DOCUMENT OR MATERIAL HAS BE EN POINTED OUT IN SUPPORT OF THE CONTENTION FOR DELETING THE ADDITION . CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED ABOVE AND IN THE ABSE NCE OF ANY EVIDENCE OR MATERIAL POINTED OUT BY THE LEARNED COU NSEL FOR THE ASSESSEE WE DO NOT FIND IT TO BE PROPER TO INTERFE RE WITH THE ORDER OF THE LEARNED CIT(A). WE CONFIRM HIS FINDINGS AND DIS MISS THIS GROUND OF APPEAL OF THE ASSESSEE. ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 7 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.2294/AHD/2007IS DISMISSED. 10. IN THE DEPARTMENTAL APPEAL ON GROUND NO.1 THE REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.11 44 533 /- ON ACCOUNT OF PROCUREMENT CHARGES. THE AO DISCUSSED THIS ISSUE IN PARA 5 OF THE ASSESSMENT ORDER AND STATED THAT GOODS ARE PURCHASE D FROM SISTER CONCERN AND THEREFORE THERE WAS NO NECESSITY TO C HARGE THE PROCUREMENT CHARGES TO THE COST OF THE PURCHASES AN D ACCORDINGLY HELD THAT THERE IS NO JUSTIFICATION FOR INCURRING S UCH PROCUREMENT CHARGES. THE ADDITION WAS ACCORDINGLY MADE. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT CONTRA ACCOUNTS ALONG WITH COMPLETE DETAILS WERE FILED. PROCUREMENT CHARGES ARE IN THE NATURE OF FINANCE COST FOR THE PURCHASE OF GOODS. THE PARENTAL COMPANY OF THE ASSESSEE IS IN THE SIMILAR LINE OF BUSINESS AND SOMETIMES GOODS AR E PURCHASED FROM THEM IN CASE OF NEED. SIMILARLY GOODS ARE SOLD TO THEM. ACCORDINGLY ON PURCHASES OF THE GOODS FROM PARENT COMPANY SEPAR ATE DEBIT NOTES ARE ISSUED ON PROCUREMENT CHARGES INCURRED BY THEM AND WHEN SIMILARLY GOODS ARE SOLD TO THEM THE ASSESSEE IS I SSUING DEBIT NOTES TO THEM CREDITING PROCUREMENT CHARGES. IT WAS SUBMI TTED THAT DURING THE YEAR UNDER CONSIDERATION TOTAL PROCUREMENT CHAR GES RECEIVED BY THE ASSESSEE IS OF RS.37 87 190/- WHEREAS PROCUREME NT CHARGES PAID BY THE ASSESSEE IN A SUM OF RS.26 42 657/- AND THE NET OF THE SAME OF RS.11 44 533/- IS SHOWN AS INCOME AND OFFERED FO R TAXATION. IT WAS SUBMITTED THAT IT AMOUNTS TO DOUBLE ADDITION. THE L EARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE DELETED THE ADDITION AND ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 8 HELD THAT THE ASSESSEE HAS OFFERED THE EXCESS AMOUN T AS INCOME FOR TAXATION PURPOSE THEREFORE ADDITION IS CLEARLY UN JUSTIFIED. 11. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND IT TO BE PROPER TO INTERFERE IN THE ORDER OF THE LEARNED CIT (A). THE ASSESSEE EXPLAINED THE REASONS FOR PAYMENT OF PROCUREMENT CH ARGES AND THE RECEIPT OF THE PROCUREMENT CHARGES WHICH ARE CONNEC TED WITH THE BUSINESS NEED OF THE ASSESSEE. IN THE YEAR UNDER CO NSIDERATION THE ASSESSEE HAS RECEIVED HIGHER PROCUREMENT CHARGES AS AGAINST THE PAYMENT OF PROCUREMENT CHARGES THEREFORE NET OF T HE SAME WAS OFFERED FOR TAXATION. THE AO MADE THE ADDITION OF T HE NET AMOUNT WHICH WAS OFFERED FOR TAXATION BY THE ASSESSEE. IT WOULD AMOUNT TO DOUBLE TAXATION. THE LEARNED CIT(A) ON PROPER APPRE CIATION OF THE FACTS AND MATERIAL ON RECORD RIGHTLY DELETED THE AD DITION. GROUND NO.1 OF THE APPEAL OF THE REVENUE IS DISMISSED. 12. ON GROUND NO.2 THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.15.98 LACS ON ACCOUNT OF DISALLOWANC E OUT OF LIQUIDATED DAMAGES. IT IS STATED BY THE AO THAT THE ASSESSEE D ID NOT EXERCISE PROPER CONTROL OVER THE MANUFACTURING PROCESS AND L IQUIDATED DAMAGES ARE ATTRIBUTABLE TO THE NEGLIGENCE ON THE P ART OF THE MANAGEMENT AND ACCORDINGLY 10% OF THE LIQUIDATED DA MAGES PAID BY THE ASSESSEE TO BSNL AND MTNL WAS DISALLOWED. IT WA S SUBMITTED BEFORE THE LEARNED CIT(A) THAT DETAILED NOTE ON LIQ UIDATED DAMAGES ARE FILED. THE ASSESSEE WAS SUPPLYING CABLES TO BSN L AND MTNL AS PER TERMS OF THE TENDER. AS PER TERMS OF THE TENDER IF THE ASSESSEE FAILS TO DELIVER THE GOODS ON TIME THE ASSESSEE WA S REQUIRED TO PAY ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 9 LIQUIDATED DAMAGES. THE PROCEDURE FOR PAYMENT OF SU CH LIQUIDATED DAMAGES IS THAT WHILE MAKING THE PAYMENT BSNL AND M TNL DEDUCTED THE LIQUIDATED DAMAGES WHILE ISSUING CHEQU ES FOR THE REMAINING AMOUNT. IT WAS SUBMITTED THAT IT WAS BUSI NESS EXPENDITURE WHICH SHOULD HAVE BEEN ALLOWED AS DEDUCTION. THE AS SESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT OF THE CONTENTION INCLUDING THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS SOHANLAL KUNWAR & SONS 164 ITR 129 IN WHICH IT WAS HELD THAT THE COMPENSATION PAID BY THE ASSESSEE FOR BREACH OF CON TRACT WITHOUT UNDERTAKING ANY BUSINESS ACTIVITY WAS A BUS INESS LOSS AND THAT EXPENDITURE INCURRED BY WAY OF DAMAGES WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WHICH THE ASSESSEE WAS CARRYING ON THAT THE LOSS AROSE IN TH E COURSE OF BUSINESS AND THAT THE DAMAGES WERE PAID IN THE INTE REST OF BUSINESS FOR COMMERCIAL EXIGENCY. THEREFORE DAMAGE S PAID FOR BREACH OF CONTRACT WERE AN ALLOWABLE DEDUCTION U/S 37(1) OF THE ACT. THE DECISION OF THE HONBLE DELHI HIGH COURT IN TH E CASE OF CIT VS NATIONAL STEEL AND GENERAL MILLS (P) LTD. 18 8 ITR 571 WAS ALSO RELIED UPON IN WHICH IT WAS HELD THAT SINCE THE TRANSACTION WAS A BUSINESS TRANSACTION A CLAIM FOR DAMAGES ARISING THERE FROM COULD ONLY BE REGARDED AS INCIDENTAL TO THE CARRYIN G ON OF BUSINESS AND THE DAMAGES PAID BY THE ASSESSEE WAS A LLOWABLE AS DEDUCTION. THE LEARNED CIT(A) CONSIDERING THE ABOVE NOTED THAT SINCE THE ASSESSEE COULD NOT FULFILL CONTRACTU AL OBLIGATIONS IN SUPPLYING THE FINISHED GOODS TO THE PARTIES THEREF ORE DAMAGES WERE PAID ON ACCOUNT OF BUSINESS AND ACCORDINGLY ADDIT ION WAS DELETED. ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 10 13. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE D O NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE ASSESSEE IN THE NATURE OF ITS BUSINESS WAS SUPPOSED TO SUPPLY GOODS TO BSNL AND MTNL AND IN CASE OF ANY DELAY IN SUPPLYING THE MATE RIAL; LIQUIDATED DAMAGES WERE PAID FOR BREACH OF CONTRACTUAL OBLIGAT ION. THEREFORE LIQUIDATED DAMAGES PAID WERE DIRECTLY CONNECTED WIT H THE BUSINESS ACTIVITY OF THE ASSESSEE. THE AO MERELY MADE AD HOC DISALLOWANCE OF 10% OUT OF TOTAL LIQUIDATED DAMAGES ONLY ON PRESUMP TION. THUS GENUINENESS OF THE CLAIM OF THE ASSESSEE WAS NOT DI SPUTED. THE LEARNED CIT(A) ON PROPER APPRECIATION OF THE FACTS RIGHTLY DELETED THE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE IS D ISMISSED. 14. ON GROUND NO.3 REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.3 03 191/- ON ACCOUNT OF DISALLOWANCE OF FUEL AN D OIL CHARGES. THE AO NOTED THAT EXPENDITURE HAS BEEN INCURRED FOR THE MONTHS OF APRIL TO AUGUST 2002 AND THEREAFTER NO FURTHER EXPENDITU RE HAS BEEN INCURRED THEREFORE IT IS HAWALA ENTRY AND ADDITIO N WAS MADE. THE ASSESSEE SUBMITTED THE DETAILS EVIDENCES BEFORE THE LEARNED CIT(A) AND SUBMITTED THAT COMPLETE DETAILS WERE FILED BEFO RE THE AO AND THE AO WITHOUT CALLING FOR FURTHER EXPLANATION OF THE A SSESSEE MADE THE ADDITION. THE ABOVE CONSUMABLES ITEMS ARE REQUIRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. THEREFORE ADDITIO N IS UNJUSTIFIED. THE LEARNED CIT(A) CONSIDERING THE EVIDENCES AND MA TERIAL ON RECORD NOTED THAT THE AO MADE THE ADDITION MERELY ON PRESU MPTION AND HIS FINDINGS HAVE NO BASIS. ADDITION WAS ACCORDINGLY DE LETED. ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 11 15. ON CONSIDERATION OF THE ABOVE FINDINGS WE ARE OF THE VIEW THE ADDITION IS CLEARLY UNJUSTIFIED. THE AO MADE AD HOC ADDITION WITHOUT GIVING ANY JUST REASONS. THE LEARNED CIT(A) ON PROP ER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD RIGHTLY DELETED TH E ADDITION. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 16. IN THE RESULT DEPARTMENTAL APPEAL IN ITA NO.26 24/AHD/2007 IS DISMISSED. 17. IN THE RESULT BOTH THE CROSS APPEALS ARE DISMI SSED. ITA NO.3553/AHD/2007: AY: 2001-02 18. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XI AHMEDABAD DATED 27-6-2007 FOR AS SESSMENT YEAR 2001-02 CHALLENGING THE DELETION OF ADDITION OF RS .52 71 000/- ON ACCOUNT OF DISALLOWANCE OF LIQUIDATED DAMAGES. THE LEARNED CIT(A) FOUND THAT THE ISSUE IS SAME AS IS CONSIDERED IN TH E ASSESSMENT YEAR 2003-04. HE FOLLOWED THE ORDER OF THE LEARNED CIT(A ) DATED 09-04-2007 FOR ASSESSMENT YEAR 2003-04 AND DELETED AND ADDITION AND ALLOWED THE APPEAL OF THE ASSESSEE. 19. THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES SUBMITTED THAT THE ISSUE IS SAME AS IS CONSIDERED IN ASSESSMENT YE AR 2003-04 ON GROUND NO.2 AND SUBMITTED THAT ORDER IN THAT CASE M AY BE FOLLOWED. 20. ON CONSIDERATION OF THE SUBMISSIONS OF THE PART IES WE FIND THAT THE ISSUE IS SAME AS IS CONSIDERED IN ASSESSMENT YE AR 2003-04. THE LEARNED CIT(A) DELETED THE ADDITION FOLLOWING THE A PPELLATE ORDER FOR ITA NO.2249 2624 AND 3553/AHD/2007 RHP CABLES & INDUSTRIES LTD. AHMEDABAD 12 ASSESSMENT YEAR 2003-04 IN WHICH WE HAVE DISMISSED THE DEPARTMENTAL APPEAL ABOVE. BY FOLLOWING THE SAME RE ASONS FOR DECISION WE DISMISS THIS GROUND OF APPEAL OF THE R EVENUE. 21. IN THE RESULT DEPARTMENTAL APPEAL IN ITA NO.35 53/AHD/2007 FAILS AND IS DISMISSED. 22. IN THE RESULT THE APPEAL OF THE ASSESSEE AND T HE DEPARTMENTAL APPEALS ALL ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-03-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 25 -03-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD