ACIT, New Delhi v. Shri Anil Nath, New Delhi

ITA 3805/DEL/2013 | 2009-2010
Pronouncement Date: 31-07-2015 | Result: Partly Allowed

Appeal Details

RSA Number 380520114 RSA 2013
Assessee PAN AAAPN0881A
Bench Delhi
Appeal Number ITA 3805/DEL/2013
Duration Of Justice 2 year(s) 1 month(s) 17 day(s)
Appellant ACIT, New Delhi
Respondent Shri Anil Nath, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 31-07-2015
Date Of Final Hearing 06-05-2015
Next Hearing Date 06-05-2015
Assessment Year 2009-2010
Appeal Filed On 13-06-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI R.S. SYAL ACCOUNTANT MEMBER AND SHRI A.T. VARKEY JUDICIAL MEMBER ITA NO.3805/DEL./2013 (ASSESSMENT YEAR : 2007-08) ACIT CIRCLE -33(1) VS. SHRI ANIL NATH NEW DELHI. 302 SATYAM CINEMA BUILDING RANJIT NAGAR NEW DELHI 110 008. (PAN : AAAPN0881A) (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. Y. KAKKAR DR REVENUE BY : SHRI P N MONGA ADVOCATE AND SHRI MANU MONGA DATE OF HEARING : 06.05.2015 DATE OF PRONOUNCEMENT : 31.07.2015 O R D E R PER A.T. VARKEY JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 05.3.2013 PASSED BY THE LD. CIT(A)-XXVI NEW DELHI PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL:- 2 ITA NO.3805/DEL./2013 2 1. THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.6 04 805/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF DISALLOWANCES OF BAD DEBTS. 2 THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2 44 850/- MADE ON ACCOUNT OF SUNDRY CREDITORS W ITHOUT APPRECIATING THAT IN ABSENCE OF PROPER CONFIRMATION GENUINENESS OF THE CREDITOR IS NOT ESTABLISHED. 3 THE CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 18 36 524/- MADE BY THE AO ON ACCOUNT OF PROPORTIONATE DISALLOW ANCE OF COMMISSION EXPENSES. 4. THE CIT(A) HAS ERRED IN DELETING ADDITION OF RS .41 600/- MADE BY THE AO ON ACCOUNT OF CONTRAVENTION OF PROVI SIONS OF SECTION 40A(3). 5. THE CIT(A) HAS ERRED IN DELETING ADDITION OF RS .11 10 028/- MADE BY THE AO OUT OF SALARY EXPENSES. 6. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N OF RS.51 707/- MADE BY THE AO ON ACCOUNT OF NEGATIVE C ASH BALANCE. 7. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEN D ANY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F THE APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE AN INDIVIDUAL IS THE PROPRIETOR OF TWO CONCERNS NAMELY M/S. OVERSEAS ASS OCIATES AND M/S. DYECHEM SALES CORPORATION. M/S. OVERSEAS ASSOCIATES IS ENGA GED IN THE BUSINESS OF TRADING IN SURGICAL INSTRUMENTS WHEREAS M/S. DYECH EM SALES CORPORATION IS ENGAGED IN THE ACTIVITIES OF PROCURING ORDERS ON BE HALF OF MANUFACTURES OF 3 ITA NO.3805/DEL./2013 3 CHEMICALS ON COMMISSION BASIS. THE ASSESSEE FILED H IS RETURN OF INCOME ON 29.9.2009 DECLARING A TOTAL INCOME OF RS.1 66 60 73 0/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. IN COMPLIANCE TO THE STATU TORY NOTICES SERVED ON THE ASSESSEE BOOKS OF ACCOUNTS WERE CALLED FOR AND WER E VERIFIED ON TEST CHECK BASIS AND THE ASSESSMENT WAS COMPLETED IN TERMS OF ORDER U/S 143(3) OF THE ACT 1961 (HEREINAFTER THE ACT) AT AN INCOME OF RS.2 0 2 33 088/- AS AGAINST THE RETURNED INCOME OF RS.1 66 60 730/- AND MADE VARIOU S ADDITIONS VIDE ORDER DATED 28.12.2011. 4. AGAINST THE AFORESAID ORDER OF THE ASSESSING OFF ICER ASSESSEE APPEALED BEFORE THE LD. CIT(A) WHO VIDE HIS IMPUGNED ORDER DATED 5.3.2013 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. NOW THE REVENUE IS IN APPEAL BEFORE US. 6. LD. DR RELIED UPON THE ORDER OF THE AO. 7. ON THE CONTRARY LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND DEFENDED THE SAME AND DOES NOT WANT US TO INTERFERE IN THE SAME. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E RECORDS. WITH REGARD TO GROUND NO. 1 REGARDING DELETION OF ADDITION OF RS. 6 04 805/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCES OF BAD DEBTS IS CONCERN ED WE FIND THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER NOTICED THAT THE 4 ITA NO.3805/DEL./2013 4 ASSESSEE HAD DEBITED A SUM OF RS.9.23 LAKHS AS BAD DEBTS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SHOW WHETHER ALL THE CONDITIO NS FOR ALLOWABILITY OF BAD DEBTS AS PER THE PROVISIONS OF SECTION 36(2) AND 36 (1)(VII) OF THE ACT WERE FULFILLED. PURSUANT TO THE SAID QUERY OF THE AO TH E ASSESSEE VIDE LETTER DATED 19.12.2011 FILED THE DETAILS OF THE PARTIES IN WHOS E ACCOUNTS THE AMOUNTS WERE WRITTEN OFF. ON PERUSAL OF THE DETAILS THE ASSESSI NG OFFICER NOTICED THAT IN THE CASE OF THE THREE PARTIES GIVEN BELOW THE ASSESSEE COULD NOT DEMONSTRATE AS TO HOW AND WHERE THE FOLLOWING AMOUNTS CLAIMED AS BAD DEBTS WERE TAKEN BILL- WISE INTO ACCOUNT IN COMPUTING ASSESSABLE INCOME :- S.NO. NAME OF THE PARTY AMOUNT 1. AJIT HOSPITAL RS. 9 083/- 2. AESCULAP RS. 1 27 722/- 3. GOPAL SURGICAL RS. 4 68 000/- RS. 6 04 805/- ACCORDINGLY THE ASSESSING OFFICER DISALLOWED AN AM OUNT OF RS.6 04 805/- THE AGGREGATE OF THE THREE AFORESAID AMOUNTS U/S 36(2) OF THE ACT AND ADDED TO THE INCOME OF THE ASSESSEE. DURING THE APPELLATE PROCE EDING THE LD. CIT(A) ON PERUSAL OF THE MATERIAL ON RECORD NOTICED THAT IN RESPONSE TO THE QUERY RELATING TO BAD DEBTS AMOUNTING TO RS.9 23 393/- APPEARING I N THE P&L ACCOUNT THE ASSESSEE HAD FILED ALL THE DETAILS OF PARTIES AND A LSO HIS EXPLANATIONS VIDE LETTERS DATED 8.12.2011 AND 15.12.2011. IT WAS OBSERVED BY THE LD. CIT(A) THAT AFTER TAKING ON RECORD THE DETAILS AND EXPLANATION FILED BY THE ASSESSEE THE ASSESSING 5 ITA NO.3805/DEL./2013 5 OFFICER DID NOT RAISE ANY FURTHER CLARIFICATION OR ENQUIRY REGARDING THESE THREE PARTIES WHOSE ACCOUNTS WERE SQUARED UP BY WRITING O FF THE AMOUNTS OUTSTANDING AGAINST THEIR NAMES. FROM THE FACTS ON RECORD LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD A LONG BUSINESS RELATIONS WITH THESE P ARTIES AND THEY WERE NOT ONLY OLD BUT VALUABLE CUSTOMERS/SUPPLIERS OF THE ASSESSE E WHO GIVEN SIGNIFICANT BUSINESS TO THE ASSESSEE. THE LD. CIT (A) TAKES NOT E THAT THE AMOUNTS WRITTEN OFF IN THE CASE OF AJIT HOSPITAL AND GOPAL SURGICAL WERE IN RESPECT OF SALES MADE BY THE ASSESSEE TO THESE PARTIES. WHEREAS IN THE C ASE OF AESCULAP THE AMOUNT REPRESENTED THE EXCESS PAYMENT MADE BY THE ASSESSEE TO FOREIGN SUPPLIER. THE ASSESSEE HAD FILED DETAILS OF BAD DEBTS WRITTEN OFF WITH COPIES OF ACCOUNTS OF DEBTORS OF THE AMOUNTS WRITTEN OFF STATING THAT THE Y WERE BUSINESS TRANSACTIONS AND WE HAVE PERUSED THE SAME WHICH IS PLACED IN PAG ES 1 TO 19 OF THE PAPER BOOK AND FINDS THAT THE EXPLANATION OF THE ASSESSEE IS CORROBORATED BY THE DOCUMENTS PLACED ON RECORD. HAVING CONSIDERED ALL THE FACTS OF THE CASE WE FIND THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE IMPUGNED DISALLOWANCE AS THE AMOUNTS IN QUESTION WERE WRITT EN OFF BY THE ASSESSEE IN ACCORDANCE TO SECTION 36(2) AND 36(1)(VII) OF THE A CT. ACCORDINGLY THE ADDITION OF RS.6 04 805/- MADE BY THE ASSESSING OFFICER WAS RIGHTLY DELETED BY THE LD. CIT(A) WHICH DOES NOT NEED ANY INTERFERENCE FROM O UR PART HENCE WE UPHOLD THE SAME BY DISMISSING THE GROUND NO.1 RAISED BY TH E REVENUE. 6 ITA NO.3805/DEL./2013 6 8.1 APROPOS GROUND 2 REGARDING THE DELETION OF AD DITION OF RS.2 44 850/- MADE ON ACCOUNT OF SUNDRY CREDITORS. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED THE ASSESS EE TO FILE CONFIRMATION PERTAINING LOAN AMOUNT OF RS.2 44 850/- APPEARING A S SUNDRY CREDITOR IN THE NAME OF SH. AMITABH MENDIRATTA. THE ASSESSING OFFIC ER OBSERVED THAT THE ASSESSEE MERELY STATED THAT THE AMOUNT IN QUESTION DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION BUT DID NOT FURNISH THE CONFIRM ATION OF THE CREDITOR. THEREFORE THE ASSESSING OFFICER TREATED THIS SUNDR Y CREDITOR AS NOT GENUINE AND ACCORDINGLY ADDED THIS AMOUNT TO THE INCOME OF THE ASSESSEE BY HOLDING IT AS BOGUS. DURING THE APPELLATE PROCEEDINGS THE LD. C IT(A) HAS OBSERVED THAT THE ASSESSING OFFICER REFERRED TO ONLY A PART OF THE RE PLY FILED BY THE ASSESSEE DATED 15.12.2011 IN THE COURSE OF THE ASSESSMENT PROCEEDI NGS. THE CONTENTS OF THE LETTER OF THE ASSESSEE DATED 15.12.2011 IS REPRODUC ED :- 'YOUR SHOW CAUSE NOTICE IN REGARD TO SUBMISSION OF CONFIRMATION OF AMOUNT DUE TO MR. AMITABH MENDIRATA AMOUNTING TO RS.2 44 850/- SHOWN UNDER THE HEAD EXPENSES PAYABLE . IT IS SUBMITTED THAT THE AMOUNT PERTAINS TO THE PER IOD 2007-08 AND NOT PERTAIN TO THE YEAR UNDER REFERENCE MR. AMITAB H MENDIRATTA WHO WAS ASSOCIATED AS RETAINER UP TO THE PERIOD MAR CH 2008 AND LEFT W.E.F 01 ST APRIL 2008 WITHOUT GETTING THE FINAL DUES WHICH WE RE SUBJECTED TO RECONCILIATION BY THE PROPRIETOR. THE DUE TDS ON THE AMOUNT WAS DEPOSITED AFTER DEDUCTION. THE AMOUNT IS STILL PAYABLE AND WILL BE PAID IMMEDIATELY THE MOMENT THE CLAIM I S MADE. MR. 7 ITA NO.3805/DEL./2013 7 AMITABH MENDIRATTA WHO AT PRESENT IS SETTLED ABROAD AND HENCE THE CONFIRMATION IN REGARD TO THE AMOUNT COULD NOT BE O BTAINED.' WE FIND THAT THE COPY OF THE ACCOUNT OF AMITABH MEN DIRATTA FOR THE PERIOD FROM 01.04.2005 TO 31.03.2008 (PAGE 22 OF PAPER BOOK) CL EARLY REFLECTS RS.2 44 850/- AS DUE FOR PAYMENT TO AMITABH MENDIRATTA (CLOSING B ALANCE). PAGE 23 OF THE PAPER BOOK IS THE LEDGER ACCOUNT OF AMITABH MENDIRA TTA FOR THE PERIOD 01.04.2008 TO 01.03.2009 AND IT SHOWS THE SAME AMOU NT AS OPENING BALANCE. AND PAGE 24 OF PAPER BOOK SHOWS LEDGER ACCOUNT OF A MITABH MENDIRATTA WHICH REFLECTS OPENING BALANCE AS RS.2 44 850/-. WE ALSO NOTE THAT FROM A PERUSAL OF PAGE 20 REVEALS THAT SHRI AMITABH MENDIRATTA HAD BE EN PAID AN AMOUNT OF RS.5 93 633/- FOR RETAINERSHIP IN THE FY 2005-06 AN D RS.6 14 700/- FOR FY 2006-07; AND FOR FY 2007-08 HE WAS PAID RS.3 91 780 /- AND RS.2 44 850/- WAS DUE FOR HIM (PAGE 22 OF PAPER BOOK). THUS THE AO S FINDING THAT THIS AMOUNT DUE TO AMITABH MENDIRATTA IS BOGUS HAVE TO FAIL IN THE LIGHT OF THE AFORESAID EVIDENCES ON RECORD. A PERUSAL OF THE ABOVE LETTER OF ASSESSEE SHOWS THAT AMITABH MENDIRATTA WAS A RETAINER OF THE ASSESSEE WHO LEFT THE INSTITUTION ON 31.03.2008 AND WENT ABROAD. THE AMOUNT SHOWN AS SU NDRY CREDITOR BY THE ASSESSEE IS THE AMOUNT DUE TO SAID AMITABH MENDIRAT TA. JUST BECAUSE THE ASSESSEE COULD NOT GIVE THE CONFIRMATION ABOUT THE SAID AMOUNT WHICH IS DUE FOR AMITABH MENDIRATTA DOES NOT MEAN THAT IT IS A BOGUS ENTRY MADE BY THE ASSESSEE. WE FIND THAT THE AO MIS-DIRECTED HIMSELF BY NOT GOI NG THROUGH THE ENTIRE 8 ITA NO.3805/DEL./2013 8 EXPLANATION GIVEN BY THE ASSESSEE IN RESPECT TO HIS EXPLANATION IN RESPECT TO THE SUNDRY CREDITOR AS OBSERVED BY THE LD. CIT (A). TH EREFORE CONSIDERING THE FACTS OF THE CASE LD CIT(A) HAS CONCLUDED THAT THAT THER E IS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO MAKE THE IMPUGNED ADDITION. AC CORDINGLY HE DELETED THE ADDITION OF RS. 2 44 850/- WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART HENCE WE UPHOLD THE SAME AND DISMISS THE GROUND N O. 2 RAISED BY THE REVENUE. 8.2 APROPOS GROUND 3 IS REGARDING THE DELETION OF ADDITION OF RS.18 36 524/- MADE BY THE AO ON ACCOUNT OF PROPORT IONATE DISALLOWANCE OF COMMISSION EXPENSES IS CONCERNED WE FIND THAT IN T HE COURSE OF ASSESSMENT PROCEEDINGS ON PERUSAL OF THE AUDIT REPORT THE ASS ESSING OFFICER NOTICED THAT THOUGH THE ASSESSEE MAINTAINED HIS ACCOUNTS ON MERC ANTILE BASIS INCOME FROM COMMISSION WAS PARTLY ACCOUNTED FOR ON RECEIPT BASI S WHICH WAS ACCORDING TO AO EVIDENT FROM THE COMMISSION EARNED IN THE ACCOU NT OF M/S. OVERSEAS ASSOCIATES WHICH CLEARLY SHOWED CREDIT ENTRIES OF R S.25 33 952/- DATED 05.0.2008 RS.40 48 271/- DATED 27.01.2009 AGGREGA TING TO RS.65 82 239/-. THE ASSESSING OFFICER OBSERVED THAT THIS KIND OF ACCOUN TING TREATMENT HAD THE EFFECT OF SUPPRESSING TAXABLE INCOME WHILE CORRESPONDING C OMMISSION EXPENSES PAID TO THE SUB DEALERS WERE CLAIMED ON MERCANTILE BASIS . ACCORDINGLY THE ASSESSING OFFICER VIDE ORDER SHEET ENTRY DATED 19.11.2011 ASK ED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE CORRESPONDING COMMISSION EXPENS ES BE NOT PROPORTIONALLY 9 ITA NO.3805/DEL./2013 9 DISALLOWED BECAUSE COMMISSION INCOME WAS PARTLY ACC OUNTED FOR ON RECEIPT BASIS WHEN ACCOUNTS WERE MAINTAINED ON MERCANTILE BASIS. ACCORDING TO THE ASSESSING OFFICER VIDE REPLY DATED 8.12.2011 THE ASSESSEE HAD ACCEPTED THAT THE SAID AMOUNTS WERE ACCOUNTED FOR ON RECEIPT BASI S AND STATED THAT THE SAME WERE FROM OVERSEAS PARTIES AND THAT NO COMMISSION W AS DUE FROM THE OVERSEAS PARTIES AS ON 31.3.2009. THE ASSESSING OFFICER OBSE RVED THAT THIS REPLY OF THE APPELLANT WAS IMMATERIAL. THE ASSESSING OFFICER OBS ERVED THAT THE COMMISSION EARNED IN THE ACCOUNT OF M/S. OVERSEAS ASSOCIATES C LEARLY SHOWED THAT THE SAID AMOUNTS OF COMMISSION INCOME WERE CREDITED ON RECEI PT BASIS AND NOT WHEN DUE. ACCORDINGLY THE ASSESSING OFFICER WORKED OUT PROPORTIONATE COMMISSION EXPENSES AND DISALLOWED AN AMOUNT OF RS.18 36 524/- OUT OF COMMISSION EXPENSES AND ADDED THE SAME TO THE INCOME OF THE AS SESSEE. WE FIND THAT THE LD. CIT(A) HAS PERUSED THE REPLY OF THE ASSESSEE DA TED 8.12.2011 WHICH HAS BEEN REFERRED BY THE ASSESSING OFFICER IN HIS ORDER . ON PERUSAL OF THE SAID REPLY OF THE ASSESSEE SHE FINDS THAT THE BOOKS OF ACCOUN TS WERE MAINTAINED ON MERCANTILE BASIS IN RESPECT OF INCOMES AND EXPENDIT URE; AND ANY COMMISSION DUE FROM THE PARTIES AND ANY COMMISSION DUE TO SUB- DEALERS HAVE BEEN ACCOUNTED FOR ON ACCRUAL BASIS. THE LD. CIT (A) TOO K NOTE OF THE FACT THAT THE ASSESSEE HAD FULLY EXPLAINED THE ACCOUNTING OF THE IMPUGNED COMMISSION INCOME. ACCORDING TO THE LD. CIT (A) THE ASSESSING OFFICER HAD FAILED TO APPRECIATE THE CORRECT FACTUAL POSITION. THE LD. CI T (A) HAS TAKEN NOTE THAT THE ASSESSEE HAD ACCOUNTED FOR THESE TWO AMOUNTS IN HIS BOOKS OF ACCOUNT SINCE 10 ITA NO.3805/DEL./2013 10 THESE HAD BEEN ACTUALLY RECEIVED DURING THE RELEVAN T YEAR. THE LD. CIT (A) HAS OBSERVED IN RESPECT TO COMMISSION EXPENSES WERE CON CERNED THEY HAD BEEN PAID TO THE ASSESSEE'S AGENTS IN INDIA WHO HAD REND ERED SERVICES TO THE ASSESSEE. THE LD. CIT (A) HAS MADE A FINDING THAT THE PAYMENT S OF COMMISSIONS WERE MADE AFTER DEDUCTING CORRESPONDING TDS AS PER LAW. IN THE SAID FACTS AND CIRCUMSTANCES LD. CIT (A) HELD THAT THERE WAS NO J USTIFICATION FOR MAKING ANY PROPORTIONATE DISALLOWANCE OUT OF COMMISSION EXPENS ES. WE HAVE GONE THROUGH THE BANK STATEMENT OF THE ASSESSEE I.E. OF M/S. OVE RSEAS ASSOCIATES WITH CORPORATION BANK FOR THE PERIOD FROM 01.04.2008 TO 26.08.2008 AND 24.01.2008 TO 03.02.2009 WHICH IS PLACED AT PAGE 25 26 PB A ND COPY OF COMMISSION EARNED ACCOUNT IN THE BOOKS OF THE ASSESSEE (M/S. O VERSEAS ASSOCIATES) FOR THE PERIOD 01.04.2008 TO 31.03.2009 PB PAGE 27 & 28 A ND COPY OF THE LETTER DATED 05.12.2011 FROM SORING GERMANY FOR PAYMENT OF COMM ISSION AT PAGE 29 PB AND COPY OF COMMISSION PAID ACCOUNT FOR THE PERIOD 01.04.2008 TO 31.03.2009 AT PAGE 30 -31 PB AND FINDS NO INFIRMITY IN THE FIN DINGS OF THE LD. CIT (A). THEREFORE SHE HAS RIGHTLY DELETED THE ADDITION OF RS.18 36 524/- MADE BY THE ASSESSING OFFICER OUT OF COMMISSION EXPENSES. IN TH E LIGHT OF THE EVIDENCE ON RECORD WE DO NOT SEE ANY REASON TO INTERFERE WITH IT; HENCE WE UPHOLD THE SAME AND DISMISS THE GROUND NO. 3 RAISED BY THE REVENUE. 8.3 APROPOS GROUND 4 IS RELATING TO DELETION OF AD DITION OF RS.41 600/- MADE BY THE AO ON ACCOUNT OF CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF THE 11 ITA NO.3805/DEL./2013 11 ACT IS CONCERNED WE FIND THAT IN THE ASSESSMEN T PROCEEDINGS ON EXAMINATION OF THE CASH BOOK OF M/S OVERSEAS ASSOCIATES THE A O NOTICED THAT THE ASSESSEE HAD MADE PAYMENT OF RS.41 600/- IN CASH WITHOUT DED UCTING TDS WHICH WAS SO LIABLE TO BE DISALLOWED U/S. 40A(3) OF THE ACT. TH EREFORE THE AO ASKED THE ASSESSEE TO SHOW CAUSE TO WHY THIS PAYMENT BE NOT D ISALLOWED U/S. 40A(3) OF THE ACT. THE AO OBSERVED THAT THE ASSESSEE HAD MADE ON LY SUBMISSIONS IN RESPECT OF PAYMENT OF RS. 41 600/- FOR PURCHASE OF GIFTS FO R BUSINESS PROMOTION SO IT WAS NOT ACCEPTABLE. THE AO OBSERVES THAT SINCE THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE TO PROVE THAT THESE PAYMENTS DID NOT F ALL WITHIN ANY OF THE EXCEPTIONS OF RULE 6DD THERE WAS A CONTRAVENTION TO THE PROVISIONS LAID DOWN IN SECTION 40A(3) OF THE ACT. THEREFORE HE DISALL OWED THE AMOUNT OF RS. 41 600/-. HOWEVER WE FIND THAT LD. CIT(A) FOUND F AULT WITH THE AO FOR NOT GIVING ANY REASON AS TO HOW THIS PAYMENT CONTRAVENE D SECTION 40A (3) FOR PURCHASE OF GIFTS; AND NOT A SINGLE PAYMENT AND HA S DELETED THE ADDITION OF RS.41 600/- RELYING UPON THE ASSESSEES LETTER DAT ED 8.12.2011 IN RESPECT OF THIS PAYMENT STATING THAT THE PAYMENT WAS MADE TO AN UNK NOWN LOCAL SHOP KEEPER AND IT WAS FOR PURCHASE OF GIFTS FOR OVERSEAS BUSIN ESS ASSOCIATES AS THERE WAS NO OTHER ALTERNATIVE BUT TO PAY IN CASH. LD. CIT(A) C ONSIDERING THE PRACTICAL PROBLEM WITH THE LOCAL AND SMALL TIME SHOPKEEPERS JUSTIFIED THE CASH PAYMENT FOR PURCHASE OF GIFT AND SHE DELETED THE ADDITION. IN OUR OPINION THE VIEW ADOPTED BY THE LD. CIT(A) IS NOT CORRECT BECAUSE SH E WAS DOUBTING WHETHER THE GIFT PURCHASE BY ASSESSEE WAS FOR A SINGLE TRANSACT ION ON A GIVEN DAY. WE FIND 12 ITA NO.3805/DEL./2013 12 ON PERUSAL OF PAGE 95 OF PB SALE BILL OF GIFT FOR RS.41 600/- DATED 08.08.2008 WHICH WAS PAID IN CASH SO IS IN CONTRAVENTION OF S ECTION 40A(3) OF THE ACT. THEREFORE WE FIND THAT THE AO HAS DISALLOWED THE A MOUNT OF RS. 41 600/- ON VALID GROUND. IN OUR VIEW THE AO RIGHTLY HELD THAT SINCE THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE TO PROVE THAT THESE PAYMENTS D ID NOT FALL WITHIN ANY OF THE EXCEPTIONS OF RULE 6DD THERE WAS A CONTRAVENTION T O THE PROVISIONS LAID DOWN IN SECTION 40A(3) AS STATED BEFORE. THEREFORE IN O UR OPINION THE ADDITION MADE BY THE AO AMOUNTING TO RS. 41 600/- NEEDS TO BE UPH ELD ACCORDINGLY WE UPHOLD THE ACTION OF THE AO ON THIS ACCOUNT AND ALL OW THE GROUND NO. 4 RAISED BY THE REVENUE. 8.4 APROPOS GROUND 5 RELATING TO DELETION OF ADDITI ON OF RS. 11 10 028/- MADE BY THE AO OUT OF SALARY EXPENSES IS CONCERNED WE FIND THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS VIDE ORDER SHEET ENTRY DATE D 29.11.2011 THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE THE DETAILS IN R ESPECT OF SALARY EXPENSES AMOUNTING TO RS.18 88 656/- WITH NECESSARY EVIDENCE . SINCE THE APPELLANT DID FURNISH EVIDENCE IN RESPECT OF SALARY EXPENSES VID E ORDER SHEET ENTRY DATED 12.12.2011 THE ASSESSING OFFICER ISSUED A SHOW CAU SE TO THE APPELLANT AS TO WHY THE SALARY EXPENSES BE NOT DISALLOWED IN THE AB SENCE OF EVIDENCE. THE APPELLANT IN HIS REPLY DATED 15.12.2011 FILED BEFOR E THE ASSESSING OFFICER HAD SUBMITTED AS UNDER: 13 ITA NO.3805/DEL./2013 13 ' IT IS SUBMITTED THAT THE SALARY REGISTER WHICH WA S BEING MAINTAINED ON MONTHLY BASIS FOR PAYMENT OF SALARIES FOR THE YEAR UNDER REFERENCE IS NOT TRACEABLE AT PRESENT. IN SUP PORT OF WHICH WE ARE SUBMITTING HEREWITH THE COPIES OF THE APPOINTME NT LETTERS ALONG WITH THE DETAILS OF PAYMENTS MADE TO EMPLOYEES ON M ONTHLY BASIS GIVING THE COMPLETE DETAILS OF THE CHEQUE NO. DATES AND BANK AND ALSO SALARIES PAID IN CASH TO FEW OF JUNIOR EMPLOYE ES AS WELL AS PAYMENT ON ACCOUNT OF BONUS AND EX-GRATIA. THAT MOS T OF THE PAYMENTS TOWARDS SALARIES PAID ARE THROUGH PAYEES A CCOUNT CHEQUES WHICH CAN BE VERIFIED WITH THE BANK STATEMENT SUBMI TTED. WE HOPE THE ENCLOSED DETAILS WILL SATISFY YOU IN RE GARD TO BE PAYMENT MADE ON ACCOUNT OF SALARIES/EX-GRATIA/BONUS IN THE YEAR UNDER REFERENCE.' ON PERUSAL OF THE ASSESSEES REPLY THE ASSESSING O FFICER NOTED THAT THE AGGREGATE SALARY ISSUED BY THE ASSESSEE THROUGH CHE QUES WORKED OUT TO RS.15 16 256/- AS AGAINST RS.18 88 656/- DEBITED TO THE P&L ACCOUNT. THEREFORE VIDE ORDER SHEET ENTRY DATED 16.12.2011 THE ASSESS ING OFFICER AGAIN ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE SALARY NOT PAI D THROUGH CHEQUES IN RESPECT OF WHICH NO EVIDENCE IN THE FORM OF SALARY REGISTER /VOUCHER IS FILED BE NOT DISALLOWED. ON PERUSAL OF THE DETAILS FILED THE A SSESSING OFFICER FOUND THAT SALARY AGGREGATING TO RS. 7 82 628/- WAS PAID IN CA SH WHICH ACCORDING TO HIM WAS LIABLE TO BE DISALLOWED. THEREFORE THE ASSESSI NG OFFICER DISALLOWED AN AMOUNT OF RS.11 10 020/- (I.E. RS.7 82 628/- PAID I N CASH AND THE DIFFERENCE THAT WORKED OUT AMOUNTING TO RS.3 27 400/- (I.E. 18 88 6 56 - 15 61 256) WAS ADDED 14 ITA NO.3805/DEL./2013 14 TO THE INCOME OF THE ASSESSEE. WE FIND THAT THE LD. CIT(A) HAS OBSERVED THAT ASSESSING OFFICER HAD NOT MADE OUT OF CASE FOR MAKI NG THE IMPUGNED DISALLOWANCE AND THAT THE ASSESSING OFFICER HAD MAD E VAGUE OBSERVATION TO DISALLOW A MAJOR PART OF THE SALARY DEBITED TO THE P&L A/C. ACCORDING TO THE LD CIT(A) THE ASSESSING OFFICER HAD ALSO WRONGLY WORKE D OUT THE DIFFERENCE OF RS.3 27 400/-. THE LD CIT(A) NOTES THAT THE ASSESSI NG OFFICER HAD NOT TAKEN INTO ACCOUNT THE NAMES OF ALL THE EMPLOYEES WHILE R EPRODUCING THE NAMES IN PARA 9 OF HIS ORDER. ACCORDING TO LD CIT(A) THE ASS ESSING OFFICER DID NOT GIVE ANY CLEAR FINDING OR REASONS FOR MAKING SUCH A DISA LLOWANCE NOR BROUGHT ANY ADVERSE MATERIAL ON RECORD. IN THE ABSENCE OF ANY S UCH ADVERSE MATERIAL LD. CIT(A) OBSERVED THAT THERE IS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO MAKE SUCH AN IMPUGNED ADDITION. IN THE INSTANT CASE WE FIND THAT THE AO HAS REPRODUCED A CHART PRESENTED BY THE ASSESSEE IN PAG E 5 & 6 OF HIS ORDER. FROM A PERUSAL OF THE SAID CHART WE FIND THAT OUT OF 14 E MPLOYEES TO WHOM THE ASSESSEE CLAIMS TO HAVE PAID THE SALARY ONLY 3 WERE NOT GIV EN SALARY BY CHEQUE. OTHER 11 EMPLOYEES WERE PAID BY ACCOUNT PAY CHEQUE AND CASH. THE ASSESSEE HAD PRODUCED THE APPOINTMENT LETTERS OF THE SAID EMPLOY EES AND CONFIRMATION FROM THEM THAT THEY HAVE RECEIVED THE SAID SALARY AS CLA IMED BY THE ASSESSEE. WE WERE TAKEN THROUGH PAGE 37-94 (PB) WERE THE MONTH W ISE CHART SHOWING DETAILS OF SALARY PAID TO EMPLOYEES OF THE ASSESSEE FOR THE PERIOD FROM 1.04.2008 TO 31.03.2009 ALONG WITH CONFIRMATION AND APPOINTMENT LETTER OF THE EMPLOYEE ARE ON RECORD. IN THE LIGHT OF THE SAID EVIDENCES MERE LY BECAUSE FEW EMPLOYEES 15 ITA NO.3805/DEL./2013 15 HAVE BEEN PAID SALARY AS CASH CANNOT JUSTIFY DISALL OWANCE UNLESS THE AO IS ABLE TO BRING ANY ADVERSE MATERIAL TO SUGGEST THAT THE C LAIM OF SALARY INCURRED BY THE ASSESSEE IS BOGUS. SO THE LD CIT(A) RIGHTY DELETED THE ADDITION OF RS. RS.11 10 028/- WHICH DOES NOT NEED ANY INTERFERENC E ON OUR PART HENCE WE UPHOLD THE SAME BY DISMISSING THE GROUND NO. 5 RAIS ED BY THE REVENUE. 8.5 APROPOS GROUND NO. 6 RELATING TO DELETION OF T HE ADDITION OF RS. 51 707/- MADE BY THE AO ON ACCOUNT OF NEGATIVE CASH BALANCE IS CONCERNED WE FIND THAT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS ON EXA MINATION OF THE CASH BOOK VIS-A-VIS BANK ACCOUNT STATEMENTS THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAD SHOWN A WITHDRAWAL FROM CORPORATION BA NK AMOUNTING TO RS.67 000/- DATED 28.2.2009 WHEN ACTUALLY AS PER T HE BANK STATEMENT THE WITHDRAWAL WAS ON 2.3.2009. THEREFORE THE ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE WAS TRYING TO MASK HIS NEGATIVE CASH BALAN CE WITH FALSE ENTRIES. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAD SHOWN A WITHDRAWAL FROM CORPORATION BANK ON 2.3.2009 AMOUNTING TO RS.25 000 /- WHEREAS ACTUALLY AS PER BANK STATEMENT THE WITHDRAWAL WAS ON 3.3.2009. ACCORDINGLY THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE NEGATIVE CASH BALANCE DUE TO CASH WITHDRAWAL SHOWN IN CASH BOOK EARLIER THAN THE ACTU AL WITHDRAWALS MADE FROM THE BANKS AS PER BANK STATEMENT BE NOT ADDED TO HI S INCOME. VIDE REPLY DATED 8.12.2011 THE ASSESSEE SUBMITTED THAT ENTRIES WERE MADE WHEN CHEQUES WERE ISSUED. THIS WAS OBSERVED BY THE ASSESSING OFFICER AS THE ASSESSEES ATTEMPT TO 16 ITA NO.3805/DEL./2013 16 MISGUIDE AND IN HIS OPINION THE CASH WAS TO BE DEB ITED WHEN ACTUALLY IT CAME IN TO CASH BOOK AND THE ENSUING NEGATIVE CASH BALANCES DUE TO FALSIFICATION OF ENTRIES WERE LIABLE TO BE ADDED TO THE INCOME OF TH E APPELLANT. THEREFORE THE ASSESSING OFFICER WORKED OUT THE ENSUING NEGATIVE B ALANCES AS UNDER: DATE OPENING BALANCE CASH BOOK DEBITED ON THE DAY BY CASH BOOK CREDITED ON THE DAY BY RESULTANT DAILY BALANCE 28.2.2009 DEBIT BALANCE RS. 4293/- NIL RS. 46 600/ - (SALARY AND IMPREST EXPENSES) NEGATIVE BALANCE RS. 41 707/- 1.3.2009 NIL NIL RS. 10000/ - (IMPREST EXPENSES) NEGATIVE BALANCE RS. 10 000+41 707=51 707/- 2.3.2009 NIL ACTUAL BANK WITHDRAWAL RS. 67 200/- NIL DEBIT BALANCE RS. 67 200/- 3.3.2009 ACTUAL BANK WITHDRAWAL RS. 25 000 RS. 20/- DEBIT BALANCE RS. 92 200/- HENCE THE ASSESSING OFFICER WORKED OUT THE NEGATIV E BALANCE AS AGGREGATING TO (RS.41 707 + RS.10 000) RS.51 707/- AND ADDED TO TH E INCOME OF THE ASSESSEE. LD. CIT(A) DELETED THE ADDITION OF RS.51 707/- BY R ELYING ON A LETTER OF ASSESSEE DATED 8.12.2011 WHEREIN SHE OBSERVED THAT AO DID NO T APPRECIATE THE CONTENTS OF LETTER PROPERLY AND FAILED TO COMPREHEND THAT W HAT WAS DONE WAS ONLY A BOOK ENTRY FOR BOTH CREDITS AND DEBITS. ACCORDING T O LD CIT(A) THE DISBURSEMENT OF RS.46 600/- WAS ONLY MADE ON 2.3.20 09 WHEN THE CHEQUE WAS ENCASHED. REGARDING THE AMOUNT OF RS.10 000/- THE LD CIT(A) WAS OF THE OPINION THAT IT WAS EXPLAINED BY THE ASSESSEE THAT SINCE 1.3.2009 BEING SUNDAY 17 ITA NO.3805/DEL./2013 17 AND SINCE THE CASH WAS URGENTLY REQUIRED FOR EXPENS E THE SAME WAS PROVIDED BY THE ASSESSEE FROM HIS OWN POCKET THEREFORE LD. C IT(A) HAS DELETED THE ADDITION OF RS. 51 707/- ON THIS ACCOUNT. HAVING CONSIDERED THE ABOVE FACTUAL MATRIX WE ARE OF THE OPINION THAT THE FINDING OF CIT(A) CANNO T BE COUNTENANCED. THE UNDISPUTED POSITION IS THAT THERE WAS NEGATIVE CASH BALANCE ON 01 NOVEMBER 2009 OF RS. 51 707/-. THE BASIS OF CIT (A) THAT EXP ENDITURE INCURRED AS PER CASH BOOK OF RS. 4 600/- WAS NOT ACTUALLY EXPENDED ON 28 /FEB/2009 IS UNSUPPORTED BY ANY MATERIAL. IT IS AN AFTERTHOUGHT OF THE ASSES SEE AS CASH BOOK HAS BEEN MAINTAINED AND PRODUCED IN THE COURSE OF THE PROCEE DINGS. AS REGARDS THE EXPLANATION OF RS. 10 000/- THAT THE SAME WAS INCUR RED OUT OF OWN SOURCES DOES NOT DESERVE ANY MERIT AS IT IS A MORE SELF SERVING EXPLANATION WITHOUT ANY BASIS. WE THEREFORE REVERSE THE CONCLUSION OF CIT(A) AND U PHOLD THE ACTION OF AO IN BRINGING TO TAX A SUM OF RS. 57 707/- AS UNEXPLAINE D INCOME OF THE ASSESSEE. HENCE WE CONFIRM THE ACTION OF THE AO ON THIS ADDI TION AND ALLOW GROUND NO. 6 FILED BY THE REVENUE. 9. IN THE RESULT THE REVENUES APPEAL IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/07/2015. SD/- (R.S. SYAL) (A.T. VARKEY) ACCOUTNANT MEMBER ACCOUNTANT MEMBER DATED THE 31 DAY OF JULY 2015 TS 18 ITA NO.3805/DEL./2013 18 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVI NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.