Green fields, New Delhi v. DCIT Circle-24 (1), New Delhi

ITA 2654/DEL/2008 | 2005-2006
Pronouncement Date: 18-11-2011 | Result: Dismissed

Appeal Details

RSA Number 265420114 RSA 2008
Assessee PAN AAAFG5634L
Bench Delhi
Appeal Number ITA 2654/DEL/2008
Duration Of Justice 3 year(s) 3 month(s) 10 day(s)
Appellant Green fields, New Delhi
Respondent DCIT Circle-24 (1), New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 18-11-2011
Date Of Final Hearing 03-11-2011
Next Hearing Date 03-11-2011
Assessment Year 2005-2006
Appeal Filed On 07-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI C.L. SETHI JM & SHRI A.N. PAHUJA AM ITA NO.2654/DEL/2008 ASSESSMENT YEAR:2004-05 M/S GREENFIELDS A-21 GREEN PARK AUROBINDO MARG NEW DELHI [PAN:AAAFG 5634 L] V/S . DEPUTY CIT CIRCLE 24(1) NEW DELHI ITA NO.2776/DEL/2008 ASSESSMENT YEAR:2004-05 DEPUTY CIT CIRCLE 24(1) NEW DELHI V/S . M/S GREENFIELDS A-21 GREEN PARK AUROBINDO MARG NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI K. SAMPATH AR REVENUE BY SHRI SALIL MISHRA DR DATE OF HEARING 03-11-2011 DATE OF PRONOUNCEMENT 18-11-2011 O R D E R A.N.PAHUJA:- THESE CROSS APPEALS- ONE FILED BY THE REVENUE ON 26 TH AUGUST 2008 AND THE OTHER BY THE ASSESSEE ON 7 TH AUGUST 2008 AGAINST AN ORDER DATED 3 RD JUNE 2008 OF THE LEARNED CIT(A)-XXIII NEW DELHI RAISE THE FOLLOWING GROUNDS:- ITA NO.2654/DEL/2008[ASSESSEE] 1. THAT THE ORDER IS BAD IN LAW AND ON FACTS. 2. THAT THE AUTHORITIES BELOW HAS GROSSLY ERRED IN DISALLOWING THE CLAIM U/S 80 O. 3. THAT THE DEDUCTION U/S 80 O SHOULD HAVE BEEN ALL OWED IN FULL. I.T.A. NO S.2654&2776/D/2008 2 4. THAT THE ASSESSEE IS PROVIDING THE DESIGNS OF TE XTILES AND HANDICRAFTS PRODUCTS TO OVERSEAS IMPORTER WHICH TH E OVERSEAS IMPORTER HAD USED IN DECIDING THEIR BUYING AND GETTING THE MERCHANDISES OF SUCH DESIGNS MANUFACTUR ED BY THE EXPORTER (OTHER THAN THE APPELLANT) FOR DIRECT SHIPMENT TO THEM. 5. REMUNERATION EARNED IN CONVERTIBLE FOREIGN EXCHA NGE AND BROUGHT IN INDIA BY WAY OF ROYALTY FOR DESIGNING C HARGES I.E. COMMISSION AT CERTAIN PER CENT OF THE IMPORT VALUE OF THE MERCHANDISES OF ASSESSEES DESIGN ARE ELIGIBLE INCO ME DEDUCTIBLE U/S 80 O. 6. THAT THE INITIATION OF PENALTY PROCEEDINGS U/S 2 71(1)(C) IS BAD AND WRONG. THE APPELLANT CRAVES LEAVE TO ADDUCE ALTER A MEND WITHDRAW ANY OF THE FOREGOING GROUNDS OF APPEAL AT THE TIME OF HEARING.. ITA NO.2776/DEL/2008[REVENUE] 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N DELETING THE DISALLOWANCE OF ` ` 5 66 147 AND ` ` 32 77 156 MADE OUT OF FOREIGN TRAVEL EXPENSES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGN ORING THE FACT THAT DURING THE ASSESSMENT PROCEEDINGS THE ASS ESSEE HAD FAILED TO PRODUCE ANY EVIDENCE TO PROVE THAT TH E EXPENSES WERE MADE WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE ORDER OF THE CIT(A) IS ERRONEOUS AND CONTRARY TO FACTS AN D LAW. 4 .THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AM END ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. ADVERTING FIRST TO GROUND NOS. 1 & 2 IN THE AP PEAL OF THE REVENUE FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECL ARING INCOME OF ` `30 33 890/- FILED ON 1.11.2004 BY THE ASSESSEE AFTER BEING P ROCESSED ON 30.6.2005 U/S 143(1) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REF ERRED TO AS THE ACT) WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER (A.O. IN SHORT) NOTICED I.T.A. NO S.2654&2776/D/2008 3 THAT THE ASSESSEE CLAIMED FOREIGN TRAVEL EXPENSES O F ` ` 49 92 753/-. IN RESPONSE TO A SHOWCAUSE NOTICE THE ASSESSEE REPLIED THAT TH EY WERE WORKING FOR THE FOREIGN PARTIES AND GENERATE THEIR INTEREST IN BUSI NESS WITH INDIA. HOWEVER THE AO NOTICED THAT THE ASSESSEE RECEIVED ONLY COMMISSI ON FROM THE FOREIGN PARTIES NAMELY M/S ZODEX USA TRADIM FRANCE AND AUTOM COMP ANY USA. TO A QUERY BY THE AO REGARDING EXPENDITURE OF ` ` 4 97 695/- IN RELATION TO VISIT TO SRILANKA WITH WHOM THE ASSESSEE DID NOT HAVE ANY BU SINESS RELATIONS NOR RECEIVED ANY COMMISSION THE ASSESSEE DID NOT SUBMI T ANY CORRESPONDENCE IN RELATION TO MEETINGS CONFERENCE SEMINARS OR OTHER CORROBORATIVE EVIDENCE THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. LIKEWISE IN RESPECT OF F AMILY TOURS TO SOUTH AFRICA KENYA AND DUBAI BETWEEN 23 RD DECEMBER 2003 TO 31 ST DECEMBER 2003 THE ASSESSEE DID NOT FURNISH ANY SUCH EVIDENCE. ACCORD INGLY THE AO CONCLUDED THAT WHOLE FAMILY VISIT TO OVERSEAS IN PEAK HOLIDAY SEAS ON REVEALED THAT IT WAS A PRIVATE TRIP THEREBEING NO JUSTIFICATION THAT THE EXPENDITURE WAS FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. AS REGARDS VISIT TO T HAILAND IN RELATION TO EXPENSES OF ` ` 4 10 827/- THE AO OBSERVED THAT THE ASSESSEE PURCH ASED PERSONAL ITEMS LIKE KING POWDER FROM A DUTY FREE SH OP BESIDES PURCHASING SILK CLOTH IN HUGE QUANTITY. SIMILARLY IN RESPECT OF FA MILY TOUR TO GERMANY ITALY & SINGAPORE THE AO OBSERVED THAT THE ASSESSEE DID NO T GENERATE ANY FOREIGN REMITTANCE WITH HUGE EXPENDITURE OF ` ` 22 99 059/-. IN THE ABSENCE OF ANY EVIDENCE REGARDING PURPOSE OF THE VISIT ABROAD T HE AO DISALLOWED AN AMOUNT OF ` ` 32 77 156/- BESIDES 1/3 RD OF THE EXPENDITURE OF ` ` 17 15 596/- ON THE REST OF THE TOURS INCURRED IN GERMANY INTER ALIA ON THE GROU ND THAT THE RELEVANT VOUCHERS REVEALED THAT SOME OF THE EXPENSES WERE PERSONAL IN NATURE. 3. ON APPEAL THE ASSESSEE SUBMITTED DETAILED ITINE RARY OF VARIOUS TRIPS ALONG WITH WRITTEN SUBMISSIONS AND RELEVANT DOCUMENTS PL ACED ON PAGE 125 TO 339 OF THE PB. SINCE THE FINDINGS OF THE AO WERE AT VARI ANCE WITH THE WRITTEN I.T.A. NO S.2654&2776/D/2008 4 SUBMISSIONS FILED BY THE ASSESSEE THE LD. CIT(A) R EMANDED THE MATTER TO THE AO VIDE LETTER DATED 19 TH MARCH 2008. AFTER CONSIDERING THE REMAND REPORT D ATED 11.04.2008 THE LEARNED CIT(A) CONCLUDED AS UNDER:- RIVAL CONTENTION HAS CAREFULLY BEEN CONSIDERED. AF TER CONSIDERING THE RIVAL SUBMISSION I HAVE NOTICED THAT THE ASSESSING OFFICE R HAS NOT REFUTED THE FACTS IN HIS REMAND REPLY LETTER DATED 11.4.2008 AS SUBMITTE D BY THE LD. AR OF THE APPELLANT IN THE COURSE OF APPELLATE PROCEEDINGS. I N FACT THE BUSINESS OF THE ASSESSEE IS AS SUCH WHERE ITS PRODUCTS BEING HANDIC RAFTS TEXTILES AND TEXTILE MADE UPS OF HERITAGE ORIENTATION FIND MARKET IN PLA CES OF TOURISM AS THESE PLACES ARE VISITED BY THE TOURISTS FROM ALL OVER THE WORLD . THEREFORE TRAVEL TO SUCH PLACES BY THE PARTNERS AND THE EMPLOYEES OF THE FIRM IS TH E NEED OF THE BUSINESS TO UPDATE THEIR KNOWLEDGE CONCERNING THE ONGOING TREND DEMANDS FASHION ETC. THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THESE PL ACES HAVE BEEN VISITED BY THE WHOLE FAMILY IS OUT OF PLACE BECAUSE IT HAS BEEN NO TICED THAT ALL THE FAMILY MEMBERS ACTIVELY INVOLVED IN CARRYING THE BUSINESS AS PARTNERS OF THE FIRM. EACH ONE OF THE FAMILY MEMBER IS IN REGULAR TOUCH WITH T HE OVERSEAS BUYERS AND THE SUPPLIERS AND EVERYONE IS ON REGULAR AND FREQUENT T RIPS TO OVERSEAS. MOREOVER THESE FOREIGN TRIPS HAVE ALSO BEEN UNDERTAKEN BY TH E FOUR EMPLOYEES ALSO. THE ANOTHER OBSERVATIONS OF THE ASSESSING OFFICER IN RE SPECT OF THESE EXPENSES AS HUGE EXPENSES HAS ALSO BEEN FOUND FAR FROM SATISFAC TORY AND CONVINCING BECAUSE SIMILAR TYPE OF EXPENSES BOTH IN TERMS OF Q UANTITY AND QUALITY WERE CLAIMED IN THE PRECEDING AND SUCCEEDING YEARS ALSO AND WERE ALLOWED BY HIM AFTER DUE SCRUTINY. THE DETAILS OF THE ITINERARY HA VE ALSO BEEN SUBMITTED BY THE LD. AR OF THE APPELLANT WHICH WERE FORWARDED TO THE ASS ESSING OFFICER VIDE MY REMAND LETTER AND ALL THESE DETAILS HAVE NOT BEEN R EFUTED BY THE ASSESSING OFFICER IN HIS REMAND RELY LETTER. CONSIDERING THE TOTALITY OF ALL FACTS AND CIRCUMSTANCES AND AFTER NOTICING THAT THE FULL AMOU NT OF TRAVEL EXPENSES INCURRED BY THE APPELLANT EVEN IN THE SUCCEEDING ASSESSMENT YEAR 2005-06 HAS ALSO BEEN ALLOWED BY THE ASSESSING OFFICER ON SIMILAR FACTS I DO NOT FIND ANY SIGNIFICANT REASON TO UPHOLD THE FINDINGS OF THE ASSESSING OFFI CER IN HIS ASSESSMENT ORDER. THEREFORE THE ADDITION MADE BY THE ASSESSING OFFICE R AT RS.5 66 147/- AND RS.32 77 156/- OUT OF FOREIGN TRAVEL EXPENSES ARE D IRECTED TO BE DELETED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LEARNED CIT(A).THE LD. DR WHILE CARRYING US THROUGH THE IMPUGNED ORDER SUBMITTED THAT THE AO WHILE PERUSING THE DETAILS OF THE ASSESSEE HAS SPECIFICALLY OBSERVED THAT CERTAIN EXPENDITURE VOUCHERS REVEALED PERSONAL EXPENDITURE BY THE PERSONS VISITING ABROAD. THE LD. CIT(A) WITHOUT TA KING COGNIZANCE OF SUCH PERSONAL EXPENDITURE AND WITHOUT REFERRING TO VOUCH ERS DETAILING PERSONAL EXPENDITURE DELETED THE ENTIRE DISALLOWANCE ON THE GROUND THAT THE EXPENDITURE I.T.A. NO S.2654&2776/D/2008 5 WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. ON THE OTHER HAND THE LD. AR ON BEHALF OF THE ASSESSEE WHILE IN VITING OUR ATTENTION TO THE DETAILS OF FOREIGN TRAVELING AND COMMISSION EARNED IN THE PRECEDING AND SUCCEEDING YEARS CONTENDED THAT EVEN WHEN ASSESSMEN T FOR THE ASSESSMENT YEARS 1998-99 AND 2005-06 WERE COMPLETED U/S 143(3) OF THE ACT NO SUCH DISALLOWANCE WAS MADE. TO A QUERY BY THE BENCH THE LD. AR DID NOT DENY THAT PERSONAL EXPENDITURE WAS INCURRED DURING THE VISIT OF PARTNERS OF THE FIRM ABROAD WHILE DETAILED BREAK OF SUCH EXPENDITURE DESPITE S PECIFIC REQUEST WAS NOT PLACED BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY ALL THE PARTNERS OF THE FIRM WHO ARE FAMILY MEMBERS AND SOME OF THE STAFF MEMBERS HAVE UNDER TAKEN FOREIGN VISITS A ND INCURRED TOTAL EXPENDITURE OF ` 49 92 754/-.OF THESE THE AO WHILE DISALLOWING EXPE NDITURE OF ` 32 77 156+5 66 147/- OBSERVED INTER ALIA THAT C ERTAIN VOUCHERS FOR EXPENDITURE REVEALED PERSONAL EXPENDITURE INCURRED BY THE PARTNERS. THE LD. CIT(A) WITHOUT RECORDING HIS SPECIFIC FINDINGS ON THIS ASPECT ALLOWED THE CLAIM AS SUCH ON THE GROUND THAT THE ENTIRE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE AND NO SUCH DISALLOWANCE WAS MADE IN THE PRECEDING OR SUCCEEDIN G YEARS. ONE OF THE REQUIREMENTS OF THE PROVISIONS U/S 37 OF THE ACT I S THAT THE EXPENDITURE MUST HAVE BEEN LAID OUT WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS. THE HONBLE SUPREME COURT IN CASE OF CIT V. CHANDULAL KESHAVLAL & CO. [1960] 38 ITR 601 HAVE POINTED OUT THAT IT IS FOR THE ASSESS EE WHO CLAIMS DEDUCTION OF THE EXPENDITURE TO SATISFY THE DEPARTMENT FOR WHICH PUR POSE THE AMOUNT IS SPENT. THOUGH THE ASSESSEE NARRATED BROAD DETAILS OF EXPEN SES PLACED ON PAGE NO.125 TO 159 OF THE PB THE BREAK UP OF EXPENSES INCURRED BY EACH OF THE PERSONS DURING THEIR STAY ABROAD HAS NOT BEEN FURNISHED DE SPITE SPECIFIC REQUEST NOR THE LD. AR DENIED INCURRENCE OF PERSONAL EXPENDITURE BY THE PARTNERS DURING THEIR VISIT ABROAD. IN SUCH A SITUATION CONSIDERING THE TOTALI TY OF FACTS AND CIRCUMSTANCES OF THE INSTANT CASE AND IN THE ABSENCE OF DETAILED BRE AK UP OF EXPENSES INCURRED BY I.T.A. NO S.2654&2776/D/2008 6 THE PARTNERS DURING THEIR VISIT ABROAD ESPECIALLY WHEN INCURRENCE OF PERSONAL EXPENDITURE BY THE PARTNERS HAS NOT BEEN DENIED BY THE LEARNED AR OF THE ASSESSEE WE CONSIDER IT FAIR AND APPROPRIATE TO A TTRIBUTE AN ESTIMATED AMOUNT OF ` ` 4 00 000/- TOWARDS PERSONAL EXPENDITURE INCURRED BY THE PARTNERS ABROAD. ACCORDINGLY THE AO IS DIRECTED TO RESTRICT THE DI SALLOWANCE TO ` ` 4 LACS INSTEAD OF ` ` 38 43 303/- MADE BY HIM. CONSEQUENTLY GROUND NOS.1 & 2 IN THE APPEAL ARE ALLOWED TO THAT EXTENT. 6. NOW ADVERTING TO THE GROUND NOS. 2 TO 5 RELATI NG TO CLAIM FOR DEDUCTION U/S 80O IN THE APPEAL OF THE ASSESSEE THE AO IN TH E LIGHT OF FINDINGS OF THE LD. CIT(A) IN THE AY 1998-99 DISALLOWED THE CLAIM FOR D EDUCTION OF ` ` 2 50 186/- U/S 80 O OF THE ACT ON THE GROUND THAT THE ASSESSEE WA S NOT ENGAGED IN DESIGNING OF INDIAN HANDICRAFTS AND MERCHANDISE AT ALL AND IN FACT THE ASSESSEE WAS ENGAGED IN PROVIDING TECHNICAL/PROFESSIONAL CONSULT ANCY TO THE FOREIGN PRINCIPALS SO AS TO ENABLE THEM TO FORM THEIR BUYING STRATEGY. 7. ON APPEAL THE LEARNED CIT(A) UPHELD THE FINDIN GS OF THE AO FOLLOWING THE FINDINGS OF HIS PREDECESSOR IN THE AY 1998-99.. 8. THE ASSESSEE IS NOW IN APPEAL BEFORE US IN GR OUND NOS. 2 TO 5 AGAINST THE AFORESAID FINDINGS OF LEARNED CIT(A). AT THE OUT SE T BOTH THE PARTIES AGREED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION DATED 12 TH SEPTEMBER 2008 OF THE THIRD MEMBER READ WITH ORDER DATED 20 TH NOVEMBER 2008 IN I.T.A. NO.888/D/2005 FOR THE ASSESSMENT YEAR 1998-99 IN T HE ASSESSEES OWN CASE. ACCORDINGLY THE LD. AR PLEADED THAT ISSUE MAY BE D ECIDED IN THE LIGHT OF THE SAID DECISION. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE THIRD MEMBER IN HIS DECISION DATED 12 TH SEPTEMBER 2008 WHILE I.T.A. NO S.2654&2776/D/2008 7 AGREEING WITH THE VIEW OF THE AM UPHELD THE DISALL OWANCE OF DEDUCTION U/S 80 O IN I.T.A. NO.888/D/2005 FOR THE AY 1998-99IN THE FO LLOWING TERMS- 14. 1 HAVE CON S I DE RE D TH E RIVAL S U B M ISS I O N S AND A LS O P E RUS ED T H E R EL EV AN T MAT ERI AL ON RE CORD . THERE I S NO D I SPU T E A BOUT TH E FACT T H A T C ER T A IN SERVICES WERE REND E RED B Y TH E AS S E SSE E F I R M TO M / S Z O D AX FOR CONSIDERATION AND TH E SAID CONSIDERATION WAS RE CEI VED B Y IT THRO UGH P ROPER BANKI N G CHAN N E L . T HE Q U E S TIO N HOWEV E R IS W HETH ER TH E SAID S E R V I C E S RE ND E RE D BY THE A SSESSEE WE R E F OR M A KING TH E D E S IGNS AVA IL A BLE FOR U SE B Y T HE F OREI GN E NTERPR I SE AS C L A IMED B Y IT S O AS TO MA K E IT ENTI T L ED F O R DE DUC T ION U / S 8 0-0 . IN OR D E R T O S UPPORT A ND S U BS T A NTI A T E I T S CLAIM TH E ASSESSEE HAS H E AVILY RELIED ON THE DOCU MENT AR Y E VID E N C E IN T HE F ORM O F CE RTIFICATES I SS UED BY TH E 18 INDIAN MANUFACTURERS W HO HA D A C T UALL Y SUPPLIE D T H E GO O DS T O TH E F OREI G N ENTERP R I SE A S PER THE DESIGNS OF THE AS S ESSE E A S WELL AS T HE CO NFIRM A TION OF M /S ZODA X ABOUT U SE OF D E SI G NS OF THE ASSESSEE FIRM . 15. T HE COP I ES OF TH E CER T IF IC A T ES IS S UED B Y TH E INDIAN MANUFACTU RE RS ARE PLACE D IN T HE PAPE R B OOK OF TH E ASSE S SE E AT PAGE 60 TO 78 A ND A PERU S AL OF THE SA ME SHOW T HAT T HE MA T E R IA L CO NT E NT S OF TH E S AID C E RTIFICATE S O BTAIN E D BY THE ASS ESS EE SU BS EQ U ENTLY IN TH E YE A R 2001 F R OM DI F FERENT MANUFA C TURERS L OC A TED A T D I FF E REN T PLACES IN INDI A ARE TH E S AM E AT L EAS T T O TH E EX T E NT OF FIR S T THR EE PA RAGRAPH S WH IC H RE A D AS UNDE R :- 'T HI S I S T O C ERT IFY TH A T M/ S GREEN F IEL D H AS FR OM TIME TO TIM E GOT SAMPLES D EV EL O P E D FR O M US U S ING THEIR OWN D ES I GNS & UNDER THE GUID A NCE AND SUP E R V I S ION O F T HE IR M E RCHANDI S ING S T AFF FOR ON W ARD S UBMI S SION TO THEIR O VE R SEAS CLI EN T S F O R S UCH SAMPLING . TH EY PROVIDED U S W IT H CU T TING S STI T CH I N G / NETTIN G PATTERN S A L O N G W IT H D E SIGNS / SKETCH E S A P A R T F R OM S WA TC H ES/ SAMP L ES OF FABRICS TO BE U SED CO L OUR SPEC I F I C ATI O N S ETC. OF DR A WINGS / METAL / M A T E RI A L CO MB INA TIO N D ET A I L S/ P A N TONE CO L O UR CH I P S AS T HE CA S E R EQU IR E D . S UCH FI N IS H ED DE S IGN S FO R G IF TWA R E HOME F U RN I SH IN GS AND RE ADYM A DE GA RM E NT S ETC . WE R E MARKE D W I T H TH E IR OWN ST Y LE N UMBE R S/ REFERENCES. T HIS DEVE L OPMEN T AL WORK WA S GE NERA L L Y CA R RIE D OUT BY US U ND E R THE C A SE OF GREEN FI EL D 'S OVE R SEAS C L IE NTS WHO TH E N PLACE D D I R E C T O RD E RS ON U S FOR E XP ORT TO T H EM AT O UR OWN PRICE S WHICH WE PRE - WORKE D AT TH E SAMP L I N G STAGE IT SE L F IN CONSU LT AT ION W I TH M/S G R EE N FI ELDS . WE CER TI FY THA T DU R ING TH E FIN ANCIA L YEA R 1997 -98 WE I.T.A. NO S.2654&2776/D/2008 8 DEV EL O P ED THE F O LLOWING SAM PL ES M A RKED WITH THEI R STYLE/MARKS NU MB ER S .' 16. IT IS NOT ONLY SURPRISING BUT ALSO SHOCKING TO NOTE THAT AN EXACTLY IDENTICAL LANGUAGE AS ABOVE HAS BEEN USED BY ALL TH E DIFFERENT MANUFACTURERS SITUATED AT DIFFERENT PLACES AND KEEP ING IN VIEW THIS POSITION AS WELL AS THE FACT THAT MOST OF THE CERTI FICATES CONTAINED A SAME DATE I.E. 24.02.2001 IT CAN LEAD TO THE ONLY CONCLUSION THAT THE CERTIFICATES WERE OBTAINED BY THE ASSESSEE FROM THE INTERESTED PARTIES WITH A SPECIFIC MOTIVE TO SUPPORT AND SUBST ANTIATE ITS CLAIM FOR DEDUCTION U/S 80 O. THIS BEING SO AND KEEPING IN VIEW THE INCONSISTENCIES NOTICED THEREIN WITH THE CONTEMPORA NEOUS EVIDENCE AS WELL AS THE ABSENCE OF ANY CORROBORATIVE EVIDENC E I AM OF THE VIEW THAT NO MUCH EVIDENTIARY VALUE CAN BE ASSIGNED TO THE SAID CERTIFICATES AND IT CANNOT BE TREATED AS A RELIABLE EVIDENCE TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80 O. IF AT ALL THE SAMPLES WERE DESIGNED BY THE ASSESSEE FIRM AND THE SAME HAD GOT DEVELOPED BY THEM FROM THE INDIAN MANUFACTURERS AS STATED IN THE CERTIFICATES THERE SHOULD HAVE BEEN SOME CORROBORA TIVE EVIDENCE IN THE FORM OF CORRESPONDENCE OR COMMUNICATION BETWEEN THE ASSESSEE AND THE SAID INDIAN MANUFACTURERS AND IN T HE ABSENCE OF THE SAME I FIND IT DIFFICULT TO ACCEPT THE CLAIM O F THE ASSESSEE RELYING ON THE CERTIFICATES STATED TO BE ISSUED BY THE INDIAN MANUFACTURERS SUBSEQUENTLY WHICH CONTAINED CERTAIN ANOMALIES AS DISCUSSED ABOVE. 17. A COP Y O F TH E C ONF I R MATION LETTER / CE R T I F I CATE ISS U ED BY M/ S Z O D AX IS PL A CE D AT P AGE 5 9 OF THE A S SE SS E E' S PAPE R BOOK A ND T H E L A NGUAG E U SE D T HE R EI N SU C H AS 'T HIS IS TO CERTIFY TH A T OUR CO M PA N Y H AVE REMI T T E D T O M/ S GRE ENFIE L D FOR TH E DE S IGN S OF TEXT I LE S AN D HANDCRAFTED PRODUCTS M ADE AVAILABLE TO USE WHI C H WE RE US ED I N THE MANUFACTURE OF O UR O RDERS FRO M TH E A S IAN M A RK E T S ' W HI C H ENTIREL Y' T A L L IE S WI TH T HE L A N G UA GE U S ED IN SECTIO N 80 - 0 C L EAR L Y S HOW S T H E ANX I E T Y OF TH E AS S ESSEE T O S P E C I F IC A LL Y IN C LUDE M A KE -BE LIE VE STATE M ENT S I N THE S AI D DOCUME N T O B TAINE D SU BSEQ UEN TL Y AS AN A FT ER- TH O U GH T I N O R DE R TO JU S TIFY IT S C L AI M F O R DE D UCTION U LS 8 0 -O . IT I S PERTI NE NT T O N OT E HER E TH AT S U C H L A NGUA G E W HI LE DESC RI B IN G T H E S E R V IC E S R E NDE R ED B Y TH E AS S E S S EE F IR M W A S EXPRESSL Y AND S P EC I F I CA LL Y US ED FO R T H E FIR S T TIME WHEREA S THE SER V ICE S R E ND E R ED BY THE ASSESSEE W ERE DE SC RIBED I N ENT I RE L Y D I FF ERE NT M A N NE R I N O TH E R D OCU M EN T S WHIC H CO N STITUTE D CON T EMPO R A N EO U S EV IDENC E. F O R IN S T A NC E IN IT S B OOKS O F ACCOU NT TH E AS S E S SEE FIRM H AD S H O WN TH E A M O UNT IN Q U E STION RECEI V ED FROM M / S ZODAX U ND ER TH E HEAD 'C O M MI SSION IN FO R E IGN C U RR ENCY' . SI MIL A RL Y IN ALL T HE FOR E IGN E X CHANGE I N W AR D CERTIFIC ATE S I S S U E D BY TH E BA NK T H E A M OU NT R E CEI V ED FROM M/ S Z ODA X W AS S T AT ED T O B E I.T.A. NO S.2654&2776/D/2008 9 REC E I V ED ON ACCO UNT OF ' PROFE S S ION A L C HAR GE S ' . IT IS NO DOUBT TRUE THAT THE SAID CONFIRM AT I ON HA V I N G BEEN I SS U ED BY A P RIVATE PART Y AND PRODUCED BY T HE ASSE SS EE IN ORIGINA L IT W AS NOT REQ UI RED T O BE AUTH E NTIC A T E D A S PE R TH E PROVISIONS O F SECTI ON 3 OF DIP L OMAT I C AND C O N S ULAR OFF I CE R S ( O ATH S A ND F EE S) ACT 1948. H OWEVER IT IS A LS O TRU E T HA T T H E RE WAS N O CONTEMPO R A N EOU S EV I DE N CE T O E S T A BL ISH TH A T TH ERE WAS A N Y A GRE E M ENT OR A RRA N GEMENT B E T WEE N T HE ASSE SS EE FIRM A N D M/ S ZODAX ABOUT THE DEVELOPM ENT OF D ESIGN BY THE A SSE S S E E FIRM FO R THE SAID P A R T Y AN D U S E O F SU C H D E S IG N B Y THE SA I D PARTY OU TSIDE I NDI A . I F AT A LL THERE WAS SUC H AN ARR ANGE MENT OR AGREEMENT ACTUALLY IN E X ISTENC E IT IS H IGHLY IMPR OBAB L E THAT TH E R E WAS NO CONTEMPORANEOUS EVIDENCE IN THE FORM OF AN Y C ORRESPOND E NC E OR OT HE R COMMUNICAT I ON TO E S TA B L ISH T H E SAME . MO REOVER IT WAS T H E FIR S T Y E AR O F THE BU S INESS OF T HE ASSESSEE F IRM AND I T WAS TO T ALLY UNACCEPTABLE THAT A F OR E I GN E NTERPRIS E S UCH AS M /S ZO D AX WOULD HAV E ENTERED INTO A N Y A RRANGEMENT/AGR EE MENT FOR U SE O F DE SI GN OF TH E ASS ESSEE F IRM W ITH OU T T HER E B EIN G A N Y WR ITT E N D OC U M ENT OR CORR E SP O N D E N CE S T IP U L A T IN G T H E T E RMS A ND C O ND I TION S O F S U C H ARRANGEMENT . ALT H O U GH TH E P R OV ISI ON S O F SEC T I O N 8 0 -O D O NO T E N V I S A GE EXI S TE N C E OF A N Y PROPRIET A R Y RI G H T S O F T H E ASSES S EE I N TH E D ES I G N S S O A S TO EN ABLE IT TO C LAIM UND E R TH A T PROVISION AN D E VEN T H E REGIS TRA T I O N OF DE S I G N S UND E R TH E RELE V A N T AC T I S N O T A PRE- R E QUI S ITE FOR CLAIMIN G T HE SAI D D E DU CTION T H E R E H AS T O BE SOME EVID E N CE T O ESTAB LI S H TH A T TH E DESIGNS U SE O F W H IC H FE T CH E D R ECEI P T S O F `RS.2 7 9 1 769 / - F R O M TH E F O R E I GN ENTE R PR I SE W ERE ACTUALL Y DE VEL OPE D A ND OW N E D B Y TH E ASS E S S E E A ND I N T H E ABSE N CE OF TH E SAM E IT IS DIFFICULT TO A CC EPT T HE CLAI M O F TH E A SSE S S EE O F HAV ING O W N ED S U C H D ES IGN S AND H AV IN G EARNED SUCH SU BS TANT I A L RECE I PTS F R O M A FO R EIGN E NTE RPRI SE FO R A L L OW ING U SE THEREO F . 18 I N IT S W R I TTE N S U B M I SS IO N S FI L E D BEFO R E T H E A SSE S S IN G O FFI C ER DATED 2.3 . 2 00 2 ( C OP Y PLA C E D AT PA GES 11 T O 1 8 OF T H E A S SES S EE ' S P APER B OO K) . TH E DE SIGN S WERE R E F ERRED T O AS ' C OM M ER C I ALLY DEVE L OPED S AMPL E S' AND T H E A M O U NT R E CE I VE D F R OM THE FO R EIG N EN TE RPR I S E S WAS ST ATE D T O BE F O R TH E SE R V I CE S R E N DE R E D IN CO N NE C T ION W I TH SU C H SAMPL ES . EV E N I F I T I S AS SUM ED F OR T HE S AKE O F A R G UMENT TH A T S U C H SE R V I C E S WER E INDEE D RENDER E D I T I S D I F FI C UL T TO A C CE PT THA T T H E S AME WO ULD A M O UNT T O A L L OW IN G U S E OF DE S I G N OF THE A SS ES SEE FIRM T O THE F O R EI G N E N T E R P R I S E O UT S I D E IN D I A AS E NV I SAGED IN SEC T I O N 80 -O. I N THE S A ID SUBM I S S I O N S T HE N A TUR E OF S E R V I C E S R E ND E RED B Y IT WAS A G AIN E X PL AI N ED O N B E HALF OF THE ASSES S E E B Y ST ATI N G TH A T WI T H I TS V AS T K NOWL E D G E A ND E X P E R IENCE IN T H E FI ELD OF TEXTIL E MAD E U P S TH E A S SESS EE F IRM HAD S T A RT ED AS S I S TING T HE FO R EIG N EN TE RPRIS E S I N S E L E C T ING THE MERCH AN DI SE T O BE BRO U GH T F R O M T H E I NDIAN S U BCO N T IN ENT W ITH TH EI R O W N S K IL L / EX P E RIENCE/KN OWLED GE . I.T.A. NO S.2654&2776/D/2008 10 TH E NATURE SO EX P L A I NED B Y TH E A S SESSEE O F ' T HE SE R VIC E S R E ND E R ED B Y IT IS A LTO GE TH E R D IF FE R E NT A ND IN CON SI S TEN T W IT H I T S C LAIM T HA T IT WA S A CASE O F A LL OW IN G T H E F O REI G N ENT ERP R I SE T O U SE ITS D E S IG N O UT S I D E IN D I A . IN T HE S A I D S UBMI SS IO N S IT WA S F UR T H E R STATED ON BEH A L F OF TH E ASSE S S EE FI RM T HA T THE D ESIG NS DEVE LO P E D BY IT AND ALLO WE D TO BE US E D B Y TH E FOR E IGN ENTERPR I SE O U T S I DE I NDI A WE RE ITS EXC LU SI V E PROP E R T Y A ND T HE SA ME W AS MAD E AVAIL A BLE T O THE FO RE I GN E N T E R P RI S E FOR IT S U S E OUT S IDE INDI A . I F AT A LL TH E DESIGNS WERE TO BE REM AINE D AS EXCL U S I VE P ROPE RTY OF THE ASSESSEE FIRM AS CLA I MED IT IS QUITE SURPRISI N G THAT THER E WA S NO SUC H STI P UL A T I ON A G REED BETWEEN THE ASSESSEE FIRM AND THE FOREIGN ENTERPRISE EIT H ER IN THE FO RM O F AN A G R E EM E NT OR OTH E R W IS E . IN I TS O W N IN T ER E S T TH E A S SESSEE FIRM T HEN OU G H T T O HAV E P UT S U C H R E S TRICTI V E CON DI T I O N O N THE F OREIGN E N TERP R I S E TO PROTECT ITS E X C LUSI VE RIG H T WHICH W A S NOT D O N E . I N THE NO RM A L CIRCUM S T A N CE IT WOULD HAVE AT L E A ST G OT REG I S T E RED TH E SAID DESI G NS TO EN S URE IT S PROPRI E TARY RIGHT O V ER THE SAI D DESIGNS IN O R DER T O E N S U R E T H A T IT R E MA IN ED I TS EX C LU S I V E PROP E RT Y W HICH W AS N O T D O NE. 19. I T I S C L A IME D ON BEHALF OF TH E AS SESSEE FIRM TH A T ONE OF IT S P A R TN ERS MRS . MONI CA KHUB CH A N D WAS ALREA DY IN THE S IMILAR TYPE O F BUSINE S S A N D HE R C L A IM FO R DEDU C TION U / S 8 0-O WA S DU L Y A LL OWE D B Y TH E DEPA RT M ENT . A PE R U SA L O F TH E COPY OF P A RTNER S H I P DEE D P L ACE D AT P A GES 37 TO 4 4 O F TH E ASS E SS EE' S P APE R B OOK. HOW EVER SHO W S T H AT T H E SAID P A R TNE R WA S S T ATED TO B E ALRE A D Y IN THE BUSINES S O F RENDERING OF PROFES SI O N A L AN D TEC HN I CA L / COMMERCIA L ASS I S T A N CE I NF ORM A TIO N K NO WL ED GE E X PERIENCE AND SKILL R E LATING T O ALL FA C ET S OF IMPORT S ( I N C LUDIN G THE FACILI TI E S O F QUA L IT Y CO NTRO L I N SPECT I ON L I A I S O N ET C. ET C . ) T O TH E O VE RS E AS PRIN C IPAL S F O R THEIR USE OUT S IDE INDI A. THERE WAS N O REFEREN C E TO AN Y A CT IV ITY O F DEVE L OP M E NT OF D E S IGN C AR R IED ON B Y TH E S AI D PART N E R FO R OVERSEA S P A R T Y O R T H E ALLOWI N G O F S U C H DE S I G N S BY H E R T O THE F O R E I GN E N TERP RI SE FO R U SE O UTSIDE I ND I A. A CO P Y O F THE AS S ESSMEN T OR DER O F MR . R A NJIT KHUBCHAND WHO AG A I N W AS STATE D T O BE IN ' THE S IMILA R LINE O F BU S I N ES S PRI OR T O JOI N I N G T HE PAR TN E R SHIP F I RM I S PLACED AT PAGES 16 9 TO 1 71 OF TH E A S SESS E E' S P APER B O O K. A P E RU S AL OF THE SAM E S HO W S THAT IN THE SAID ORDER P AS SED U /S 143( 3 ) FOR A Y 1992-93 THE S AID PARTNER WAS S TATED TO B E DERIVING C O MMISSION IN COM E FROM T HE FO LL OW IN G AC TI VI TIE S: - ( I) AS BU YI NG AGE NT TO THE OV ER S EAS IM PO RTER S A N D R E ND E RING CONSULTATION S ERVIC ES TO TH E IN D IAN E X PORTER S IN I NDIA . ( II ) R E ND E RIN G TECHNICAL / P R OFESSIO N A L SER V I CES TO FOREIGN E N TE RPRI SES. I.T.A. NO S.2654&2776/D/2008 11 20 . I N R ESPEC T OF THE INCOM E EARNED BY SHRI RANJIT KHUBCHAN D FROM THE A FO RE S AID ACTIVI T I E S DEDUC TI ON U /S 80 -O WAS A LLOWED T O HIM AS CO V ER E D BY THE S AID PROVISI O NS ' AS STOOD A T T H E R E LEVANT TIME . T H E R E WAS HOWEVER. NO MENTI O N O R EVEN A NY INDICATION IN TH E SA ID AS SES S M E NT ORDER ABOUT SH R I R A N JI T KH U BCHA N D BEING ENGAGED I N D EVE L OPMEN T OF ANY DES IGN S OR MAK IN G ANY DESIGN AVA IL AB L E TO TH E F O REI G N ENTERPR I S E FOR US E OUT S ID E INDI A . SIM IL A R L Y IN HIS ASS E SSMENT ORDE R PAS S E D FOR A Y 1 997-98 U /S 143 ( 3 ) S HRI RAN JIT KHU BC HAN D WA S AGAIN STATED TO BE E N GAGED IN THE B USINESS O F ASS I S TING THE O VERSE AS IM P ORT E RS AS W E LL A S INDIAN EXPORTER S . THERE IS THU S NO EVIDE NCE TO SU P P OR T A ND SUBSTANTIATE T HE C L AIM OF T HE AS S E SSEE F I R M T H A T AN Y OF I TS P A RTNERS WAS EN G A G ED IN T HE B U S IN ESS O F DE VELO PM ENT O F DESIGNS A N D A L L OWING U SE T HE R EOF TO F O R EIGN EN T ERP R ISE OUTSID E INDIA. O N T HE OTHER HAND T HE A C TI V IT IES CA R RI E D ON B Y THEM PRIOR TO TH E JOI N I NG O F TH E ASSES S EE FI RM WERE DI F F ERE NT AN D THERE IS NO EVID E NCE TO SHO W THAT ANY IN C O ME WA S E A RNED BY T H E M F R O M TH E ACT I V I T Y OF ALL OW IN G U S E O F A N Y D ES I G N B Y A FOREIG N ENTERPRISE OU TS I D E INDIA . 21 . A S A LR EA D Y M ENTIONED IT WAS TH E F IR S T Y E A R OF TH E B U SI N E SS OF THE A S S ESSE E F I RM AND IF AT A L L AN Y DE S I G N S WE R E DE VEL O P E D B Y IT O N I T S OW N AND THE SAME W ER E S U P PL IED T O A FO R E I GN E N TE RPRI S E DEALIN G WITH I T FO R T HE FIRST TIME FOR TH E IR USE OUTSI D E INDI A RETAI NIN G TH E EX C LU S I V E RI G HT OF THE SA ID D E SI G N W I TH TH E A S S ESSEE FIRM BOTH T HE PA R TI E S S H O ULD H AV E A PP R O P RIATE L Y IN S IST E D F O R R E DU C I NG I N W RITIN G THE TER M S AND CONDITION S O F SU CH ARRANG EM E NT BETWEEN TH E M . EVE N I F THERE I S N O L EGA L R E QUIREMENT OF H AV I N G SUC H A RRANG E M E N T F ORM A L I ZE D IN TH E FO RM OF AG RE E M EN T IN W R I TI NG TH E RE SHOU LD H AVE BEEN AT LEAST S O M E C O MMUN IC A TI O N O R CO RR ES P O N DENC E E X C H A N G E D BETWEEN TH ESE T W O SID ES I N DICA T I N G S UCH T E RM S A ND C O N D I T IO N S A G R EED UP ON B Y A ND BETWEEN TH E M . T H E R E I S H O WEV ER N O S U C H CO N TE M P OR A NE O U S EV IDENCE P R O DU CED BY TH E A SSESSEE ON R E C O RD DESP I T E HA V IN G A F F O R D ED SUFFICI E N T OPPO RTUNIT Y . THE ON L Y E V I D E N C E PRODUCE D B Y I T IS T HE CON F IR M AT I O N CER T IFICA T E OB T AI NE D S UB S E Q UENT L Y FROM M / S Z ODAX AS W E L L A S F R OM INDI A N M A NUF ACT U RE RS . 22. TH E SA MPLES O F VA RI O U S P R OD UC T S WE R E C LAIMED T O B E FORWARDED B Y TH E A SS E SS EE FIRM TO M/S Z OD AX FR EE OF CO S T A ND THI S C L AIM I S S UPP O RT E D B Y INVO I CES C O PIE S O F WHI C H ARE P L ACED A T P AG ES 8 3 T O 1 36 O F TH E AS SE S SEES PAPER B O O K. A PER U SA L O F T H E SAID I N V OIC E S HO WEV E R S H OWS TH AT T H E RE I S N O M E N T I O N WHAT S OE V E R TO S HOW T HAT T HE S AMPL ES WE R E PR E P A RE D AS P E R TH E D E S I G NS OF THE A SS E SSEE AND THE SAM E WERE SENT T O M /S ZO DA X FOR THEI R A PPR O V A L I.T.A. NO S.2654&2776/D/2008 12 A ND F O R FU R THER P LAC EMENT OF O RD E RS WITH T H E INDIAN MANUF A CTURER S WHIC H W OULD AM O UNT TO ALLOWIN G O F U S E OF DESIGNS OF THE ASSES S EE FI R M BY THE SA I D FORE IGN EN T ER PR I S E OU T S I DE IN DIA . EVE N S O M E O F TH E PH O T OG RAPH S O F DIFFERENT PRODU C T S PL AC E D I N THE PA PE R BOO K O F TH E A S S ESSEE AR E NOT SUFFI C I EN T TO ESTABLISH THAT T HE DE SI GNS FOR THE S AID PRODUC T S WE RE DEV ELOP ED BY T H E AS SE S SEE F I RM F OR T HEIR U S E BYM/S ZOD A X O U T S IDE I NDIA . THE S AI D EV I DE N CE IN M Y OPIN IO N WAS M E R EL Y SUFFICIENT TO SHOW THAT SOME PR O DU CT SAMP LE S WERE CO LL EC T ED AND SENT B Y TH E AS SES SEE F IR M T O M / S ZOD A X FOR TH E IR APP ROVAL A ND FOR PL ACEMENT OF ORDERS WI T H THE C ON CE RNED INDI AN M A NUFA C TURERS. TH IS IN F ERE NC E ABO UT THE EX ACT NATURE OF T H E SE R V I CES R E ND E R E D BY T HE ASSESSEE FIR M TO M/ S Z ODAX GETS F ORTIFI ED BY THE FA C T T H A T SIM IL AR SE R V I CES H A D B EE N REND E R E D B Y THE P A RTN E RS OF TH E ASSESS EE FI RM EARLIER T O T H E IR JOININ G T HE SA ID FIRM. E V E N TH E N O M E N C L A TUR E U S ED BY TH E A SS ESS E E FIRM I N ITS BO OKS OF ACCOU NT A S W E LL AS B Y T H E BAN K I N THE F O R E IGN EXC H A NG E I NWA RD R E MITTAN CE CERTIFI CA T E S F U RTHER SUPPO R TS THIS CONC L USION . THE D ES CRIPTION G I V E N IN T HE INVOICES OF F R EE SAMP L E S SEN T TO M/ I S Z O D AX AND T H E PH OT OGRAP HS OF S OME OF SUCH PRO DU CT S PL ACE D IN TH E PAP E R B OOK OF T HE ASSESSEE A L SO SH O WS THAT A WI D E ' R ANG E O F SAMPL ES WAS SEN T BY TH E A SSESSE E F I RM T O M/S Z O DAX . FO R A PP ROV AL IN C LU D I NG ME T AL ITEMS ' GL A SS ITEMS ARTISTI C HANDIC R AFTS TOWE L H A N GER B AS K E T S O AP DISH F L OWE R VAS E PICTURE FR A M E LANTE RNS AN D C ANDLE STAND . GOING B Y THIS VA R IE D RAN GE OF SA M P L ES SE NT B Y T H E A SSESSEE T O M / S ZODA X F O R A PP R O VA L IT IS DIFFICULT TO UNDERSTA N D H OW I T WA S POSSIBLE F OR THE ASSESSEE TO D EV E LOP DES I G N S F O R S UC H V ARI E D P RO DUCTS WITHOUT T H E REQUIRED INFRASTRUC TU RE AND W I THOUT IN CURRIN G A N Y S U BST A NTIAL EXP E NDIT URE . ON T H E O T HE R H AND T HE EXPE NDITURE O F A BO UT R S .2 0 000 / - C L A IME D T O BE I N C URR ED BY TH E ASSESSEE FIRM ON A CCO U NT OF SA MPLE AN D PH OTO GR A PH Y FURTHE R SUPPORTS THE VIEW THAT THE ASSESSEE FIRM WAS IN THE BUSINESS OF COLLE CTIN G S AMPL ES AND REMI T T IN G T H E SA I D SA M P L ES A S W E L L AS P HO T O GR AP H S T H E R EOF TO M/ S ZODAX FOR A PPR O VAL AND ITS ACT I VI TY W A S LIMI T E D TO PROVIDING O F S U C H SERVICE S WHIC H WAS IN CON SO NANCE WITH THE CO N TEMPO R A N EO U S E VI D ENCE AVA IL ABLE ON R ECORD A S D I SCUSS ED A BOVE . 2 3 . I N THE CASE OF MR S . SHE I LA ANI L P AUL ( S UPR A) RE L IED U PO N B Y THE ASSESSEE T H E FACTS INVOLVE D WE R E E NTIRE LY D IFFE R E NT F R O M TH E F ACTS O F T HE PRE SE NT CA S E IN AS MUCH AS IT WAS NOT IN DI S PU TE I N TH AT C ASE THA T T H E AS SES SEE H A D CAR R IED ON THE BUSINESS OF CR EA TING D E SI GN ON MA N-M ADE AS WE LL AS SYN T HETIC F AB R I C S W ITH THE H E L P O F DE SI G N E RS A ND SU C H DESIGNS WERE SOL D TO THE FOREIGN CUSTOMERS O N T HE OTHER H AN D T HE AS S ESS E E IN TH E PR E S E NT HAS BEEN DENIE D T HE DE DUCTION U/S 8 0-O O N THE GR O UND TH AT I T HA S NOT B EE N ABLE TO ESTA BLI S H T HAT THE D ES IGNS H A D B EE N D EVE L OPED BY I T AS C L A IMED AND TH A T THE SA ME I.T.A. NO S.2654&2776/D/2008 13 WERE A L L OWE D TO B E USED B Y THE FO REI G N ENT E RP RISES. 24. IN THE CASE OF CIT VS. DURGA PRASAD MORE 82 I TR 541 HONBLE SUPREME COURT HAS HELD THAT IN A CASE WHERE A PARTY RELIED ON SELF-SERVING RECITALS IN THE DOCUMENTS IT WAS FOR THAT PARTY TO ESTABLISH THE TRUTH OF THOSE RECITALS AND THE TAXIN G AUTHORITIES WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF SUCH RECITALS. IF THE RECITALS WERE FOUN D TO BE MAKE-BELIEVE STATEMENTS MADE IN ORDER TO EVADE TAX THE CORRECTN ESS OF SUCH RECITALS IN THE DOCUMENTS CAN BE REJECTED. IN A CAS E A PARTY WHO RELIES ON RECITALS ON A DEED HAS TO ESTABLISH THE T RUTH OF THOSE RECITALS OTHERWISE IT WILL BE VERY EASY TO MAKE SEL F SERVING STATEMENTS AND DOCUMENTS EITHER EXECUTED OR TAKEN B Y A PARTY AND RELY ON THOSE RECITALS IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX IS TO HAVE SOME RECITALS MADE IN A DOCUMENT EIT HER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL B E LEFT WIDE OPEN TO EVADE TAX. THE TAXING AUTHORITIES ARE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM . THEY ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUMENTS. SC IENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TASTE THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREFORE. THE COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEN: B Y APPLYING THE TEST OF HUMAN PROBABILITIES. IN THE CASE OF SUMATI DAYAL VS. CIT -- 214 LTR 801 THE CLAIM OF THE ASSESSEE OF HAVING WON THE AMOUNT IN QUESTION FROM RACE WAS NOT ACCEPTED AS GENUINE BY THE MAJORITY OPINION AFTER CONSIDERING THE SURROUNDING CIRCUMSTA NCES AND APPLYING THE TEST OF HUMAN PROBABILITIES. THE CHAIR MAN OF THE SETTLEMENT COMMISSION IN HIS DISSENTING ORDER HOWE VER ACCEPTED THE SAID CLAIM BY LAYING GREAT EMPHASIS ON THE FACT THAT THE ASSESSEE HAD PRODUCED EVIDENCE IN SUPPORT OF THE CR EDITS IN THE FORM OF CERTIFICATES FROM THE RACING CLUBS GIVING P ARTICULARS OF THE CROSSED CHEQUES FOR PAYMENT OF THE AMOUNTS FOR WINN ING OF JACKPOTS ETC. THEREBY REJECTING THE CONTENTION REGA RDING LACK OF EXPERTISE OF THE ASSESSEE IN THE FIELD. THIS APPROA CH OF THE CHAIRMAN OF THE SETTLEMENT COMMISSION WAS BRANDED B Y THE HON'BLE SUPREME COURT AS A SUPERFICIAL ONE AND THE MAJORITY OPINION WAS UPHELD BY THEIR LORDSHIPS KEEPING IN VI EW THAT IT WAS BASED ON CONSIDERATION OF THE SURROUNDING CIRCUMSTA NCES AND APPLICATION OF THE TEST OF HUMAN PROBABILITIES. 25. IF THE FACTS OF THE PRESENT CASE AS DISCUSSED ABOVE ARE CONSIDERED IN THE LIGHT OF PROPOSITION PROPOUNDED B Y THE HON'BLE SUPREME COURT IN THE CASE OF DURGA PRASAD MORE (SUP RA) AND IN THE CASE OF SUMATI DAYAL (SUPRA) I FIND THAT THE C LAIM OF THE ASSESSEE OF HAVING DEVELOPED THE DESIGNS AND ALLOWE D THE SAME TO I.T.A. NO S.2654&2776/D/2008 14 BE USED BY A FOREIGN ENTERPRISE ABROAD WAS BASED ON THE DOCUMENTARY EVIDENCE WHICH CONTAINED SELF-SERVING R ECITALS THAT WERE NOTHING MORE THAN MAKE-BELIEVE STATEMENTS IN O RDER TO JUSTIFY THE SAID CLAIM. ON THE OTHER HAND IF ALL THE SURROUNDI NG FACTS AS DISCUSSED ABOVE ARE TAKEN INTO ACCOUNT AND THE TEST OF HUMAN PROBABILITIES IS APPLIED IT REASONABLY LEADS TO A CONCLUSION THAT THE CLAIM OF THE ASSESSEE OF HAVING DEVELOPED THE DESIGNS AND ALLOWED THE SAI D DESIGNS TO BE USED BY A FOREIGN ENTERPRISE OUTSIDE INDIA WAS NOT ACCEPTABLE AND IT WAS THUS NOT ENTITLED FOR DEDUCTION U/S 80-O.I THEREFORE ANSWER THE QUESTION IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAIN ST THE ASSESSEE. ACCORDINGLY 1 CONCUR WITH THE VIEW EXPRESSED BY TH E LEARNED ACCOUNTANT MEMBER THIS MATTER WILL NOW GO BEFORE THE DIVISION BENCH FOR PASSING THE APPROPRIATE ORDER AS PER THE MAJORITY DECISION. 10. INDISPUTABLY THE FACTS AND CIRCUMSTANCES OBTA INING IN THE ASSESSMENT YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FACTS A ND CIRCUMSTANCES PREVAILING IN THE AY 1998-99 AND THE HONBLE JURISDICTIONAL HIGH COURT HAVE DISMISSED THE ASSESSEES APPEAL IN THAT YEAR THEREBEING NO SUBS TANTIAL QUESTION OF LAW ARISING OUT OF THE AFORESAID ORDER OF THE ITAT. THEREFORE FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN I.T.A. NO.88 8/D/2005 FOR THE AY 1998-99 WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S 80 O OF THE ACT. CONS EQUENTLY GROUND NOS.2 TO 5 IN THE APPEAL OF THE ASSESSEE ARE DISMISSED. 11. GROUND NO. 1 IN THE APPEAL OF THE ASSESSEE BEI NG GENERAL IN NATURE & GROUND NO.6 RELATING TO INITIATION OF PENALTY PROC EEDINGS U/S 271(1)(C) OF THE ACT WERE NOT PRESSED BEFORE US BY THE LD. AR ON BEHALF OF THE ASSESSEE. GROUND NO. 3 IN THE APPEAL OF THE REVENUE BEING GENERAL IN NAT URE NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US DOES NOT REQUIRE ANY SE PARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF RESIDUARY GROUND NO.4 IN THE APPEAL OF THE REVENUE AND THE RESIDUARY GROUND IN THE APPEAL OF THE ASSESSEE ALL THESE GROUNDS ARE DISMISSED. 12. NO OTHER ARGUMENT OR PLEA WAS MADE BEFORE US. . I.T.A. NO S.2654&2776/D/2008 15 13. IN RESULT APPEAL OF THE ASSESSEE IS DISMISSED WHILE THAT OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (C.L. SETHI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. M/S M/S GREENFIELDS A-21 GREEN PARK AUROBINDO MARG NEW DELHI. 2. DY. CIT CIRCLE 24(1) NEW DELHI. 3. CIT (APPEALS)-XXIII NEW DELHI 4. THE CIT CONCERNED. 5. THE DR ITAT C BENCH NEW DELHI 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT DELHI