THE DY CIT 3(2), MUMBAI v. M/S. MORGAN CONSTRUCTION CO. (INDIA) PVT. LTD, MUMBAI

ITA 4180/MUM/2008 | 2004-2005
Pronouncement Date: 19-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 418019914 RSA 2008
Bench Mumbai
Appeal Number ITA 4180/MUM/2008
Duration Of Justice 2 year(s) 7 month(s) 7 day(s)
Appellant THE DY CIT 3(2), MUMBAI
Respondent M/S. MORGAN CONSTRUCTION CO. (INDIA) PVT. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 19-01-2011
Date Of Final Hearing 05-01-2011
Next Hearing Date 05-01-2011
Assessment Year 2004-2005
Appeal Filed On 12-06-2008
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI BEFORE SHRI D.MANMOHAN (VP) AND SHRI RAJENDRA SING H(AM) ITA NO.5156/M/2007 ASSESSMENT YEAR 2003-04 M/S.MORGAN CONSTRUCTION CO. (INDIA) PVT.LTD. THE IT O WARD 3(2)(2) PLOT NO.A-490 ROAD U AAYAKAR BHAVAN M.K.ROA D OPP. DGP WINDSOR CHURCHGATE MUMBAI 400 020. WAGLE INDUSTRIAL ESTATE THANE 400 604. PAN : AAAC 6828 M APPELLANT RESPONDENT ITA NO.5298/M/2007 ASSESSMENT YEAR 2003-04 ITA NO.4180/M/2008 ASSESSMENT YEAR 2004-05 THE DY.CIT 3(2) M/S. MORGAN CONSTRUCTION CO.. ROOM NO.608 6 TH FLOOR THANE AAYAKAR BHAVAN MUMBAI 20 APPELLANT RESPONDENT ASSESSEE BY : SHRI NITESH JOSHI REVENUE BY : SHRI R.S.SRIVASTAVA O R D E R PER RAJENDRA SINGH (AM) THESE CROSS APPEALS FOR THE ASSESSMENT YEAR 2003-0 4 AND THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004-05 ARE DIRECTE D AGAINST ORDERS DATED 23.5.2007 AND 23.8.2008 OF CIT(A). AS THERE IS SOME COMMON ISSUE INVOLVED THESE APPEALS WHICH WERE HEARD TOGETHER ARE BEING D ISPOSED OFF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2 2. WE FIRST TAKE UP THE APPEALS FOR ASSESSMENT YEAR 2003-04 IN ITA NOS.5156/M/2007 AND 5298/M/2007 . THE DISPUTE RAISED IN THESE APPEALS RELATE TO ADDITION ON ACCOUNT OF DISALLOWANCE OUT O F FOREIGN TRAVEL EXPENDITURE LOCAL TRAVEL AND CONVEYANCE AND ON ACCOUNT OF EMPLO YEES CONTRIBUTION TO PROVIDENT FUND. 2.1 WE FIRST TAKE UP THE DISPUTE IN RELATION TO DIS ALLOWANCE OF FOREIGN TRAVEL EXPENDITURE WHICH IS COMMON IN BOTH THE APPEALS. TH E ASSESSEE FOR THE RELEVANT YEAR HAD CLAIMED EXPENDITURE OF RS.51 63 8 67/- ON ACCOUNT OF TRAVELING AND CONVEYANCE WHICH INCLUDED A SUM OF RS .27 99 201 ON ACCOUNT OF FOREIGN TRAVELING. THE AO VIDE NOTICE UNDER SECTION 142(1) DATED 6.10.2005 HAD ASKED FOR DETAILS OF FOREIGN TRAVEL EXPENSES COPIE S OF AIR TICKET AND COPIES OF PASSPORT ETC. THE ASSESSEE DID NOT SUBMIT COMPLETE DETAILS. THE AO THEREFORE VIDE LETTER DATED 23.2.2006 AGAIN ASKED THE ASSESSE E TO FILE COMPLETE DETAILS IN A GIVEN FORMAT ALONG WITH BILLS AND VOUCHERS AND AL SO ASKED TO FURNISH THE COPIES OF PASSPORT OF THE PERSONS WHO HAD TRAVELLED ABROAD. THE ASSESSEE FILED ONLY THE LIST OF EXPENSES IN THE REQUISITE FORMAT B UT DID NOT FURNISH THE DOCUMENTARY EVIDENCE SUCH AS COPIES OF PASSPORT AND PRIMARY EVIDENCE LIKE BILLS AND VOUCHERS. THE AO ALSO POINTED OUT DISCREP ANCY IN THE TOTAL FOREIGN TRAVEL EXPENSES SUBMITTED BY THE ASSESSEE VIDE LETT ER DATED 24.1.2006 AT RS.26 06 254/- WHEREAS THE DETAILS FILED BY LETTER DATED 27.3.2006 SHOWED THE TOTAL EXPENSES AT RS.27 99 201/-. THE ASSESSEE EXPL AINED THE SAME DUE TO INADVERTENT MISTAKE. THE AO OBSERVED THAT IN SPITE OF SUFFICIENT OPPORTUNITIES THE ASSESSEE DID NOT SUBMIT THE EVIDENCE SUCH AS BI LLS AND VOUCHERS PASSPORTS COPIES OF AIR TICKETS BILLS IN RESPECT OF BOARDING AND LODGING OVERSEAS LETTERS/ COMMUNICATION FROM THE FOREIGN PARTIES TO WHOM THE ASSESSEE HAD CONTACTED FOR THE PURPOSE OF BUSINESS ETC. DESPITE SPECIFIC R EQUISITION MADE. AO THEREFORE 3 HELD THAT THE CLAIM OF FOREIGN TRAVEL EXPENDITURE W AS NOT GENUINE AND ACCORDINGLY DISALLOWED THE ENTIRE CLAIM. 2.2 THE ASSESSEE DISPUTED THE DECISION OF THE AO AN D SUBMITTED BEFORE CIT(A) THAT THE AO HAD ISSUED NOTICES UNDER SECTION 142(2)/142(1) DATED 11.10.2004 6.10.2005 AND 18.11.2005 IN WHICH CERTA IN DETAILS HAD BEEN ASKED FOR. THE QUERY RELATING TO THE PASSPORT WAS RAISED FOR THE FIRST TIME IN THE NOTICE DATED 6.10.2005 WHICH WAS REPEATED AGAIN IN THE NOT ICE DATED 18.11.2005. THEREAFTER THE AO WAS TRANSFERRED AND THE PRESENT A O DID NOT RAISE ANY QUERY REGARDING THE PASSPORT. EVEN NOTICE DATED 22.3.2006 WHICH REQUIRED THE ASSESSEE TO FILE CERTAIN DETAILS AND EVIDENCE ON 27 .3.2006 DID NOT MAKE ANY MENTION OF PASSPORT COPIES. AS REGARDS THE DISCREPA NCY IN THE QUANTUM OF EXPENSES THE ASSESSEE VIDE LETTER FILED BEFORE THE AO ON 27.3.2006 HAD EXPLAINED THAT THE DISCREPANCY WAS BECAUSE OF THE F ACT THAT THE TRAVELING EXPENSES AMOUNTING TO RS.1 92 946/- RELATING TO THE PROJECT ACCOUNT WERE INADVERTENTLY OMITTED TO BE ATTACHED. IN REGARD TO BILLS AND VOUCHERS THE ASSESSEE VIDE LETTER DATED 5.12.2006 SUBMITTED BEFO RE THE CIT(A) THAT THESE WERE DESTROYED IN HEAVY RAINS ON 26.7.2005 AS THE B ILLS AND VOUCHERS HAD BEEN KEPT IN THE GODOWN AT BHIWANDI WHICH WAS FLOODED. T HE ASSESSEE FILED COPY OF LETTER DATED 4.8.2005 ISSUED BY THE GRAMPANCHAYAT K ALHER CERTIFIYING THAT GODOWN OF THE APPELLANT WAS SITUATED IN THE LIMITS OF KALHER VILLAGE WHICH HAS SUBMERGED IN WATER BY 7 TO 10 FEET ON 26.7.2005. A COPY OF PANCHANAMA SIGNED BY NARPOLI POLICE STATION ALSO MENTIONED THE SPOILAGE OF CERTAIN DOCUMENTS/ PAPERS KEPT BY THE ASSESSEE INSIDE THE D RAWER OF THE TABLE IN THE GODOOWN. THE ASSESSEE HOWEVER SUBMITTED THE COPIES OF CREDIT NOTES ISSUED BY M/S. MYSTIC TRAVELS PVT. LTD. REGARDING THE PURCHAS E OF TICKETS FOR THE FOREIGN VISIT. THE ASSESSEE EXPLAINED THAT DUE TO SPOILAGE OF DOCUMENTS THE ASSESSEE 4 COULD NOT PRODUCE THE BILLS AND VOUCHERS. THE ASSES SEE REQUESTED FOR ADMITTING THE CREDIT NOTE ISSUED BY M/S. MYSTIC TRAVELS PVT. LTD. AND THE COPIES OF THE PASSPORTS OF THE OFFICIALS TRAVELING ABROAD AS ADDI TIONAL EVIDENCE ON THE GROUND THERE WAS SUFFICIENT CAUSE FOR THE ASSESSEE FOR NOT PRODUCING THE SAME BEFORE THE AO. 2.3 CIT(A) FORWARDED THE ADDITIONAL EVIDENCES SUBMI TTED BY THE ASSESSEE TO THE AO FOR HIS COMMENTS IN VIEW OF THE PROVISIONS O F RULE 46A(3). THE AO SUBMITTED REPORT VIDE LETTER DATED 27.3.2007 IN WHI CH THE FOLLOWING POINTS WERE MADE. (I) THE ASSESSEE HAD BEEN ASKED TO FURNISH EVIDENCE SUC H AS COPIES OF BILLS AND VOUCHERS PASSPORT ANY INVITATION/ CO MMUNICATION FROM THE FOREIGN PARTY REGARDING FOREIGN VISIT ETC. WHICH WAS NOT SUBMITTED DESPITE AMPLE OPPORTUNITIES PROVIDED. (II) THE ASSESSEE NEVER MADE ANY CLAIM REGARDING LOSS OF BILLS AND VOUCHERS IN THE FLOODS DURING ASSESSMENT PROCEEDING S AND SUCH PLEA HAS BEEN TAKEN ONLY DURING THE APPELLATE PROCE EDINGS. IN CASE THE BILLS AND VOUCHERS ETC WERE DESTROYED IN F LOODS THE ASSESSEE MUST HAVE BEEN AWARE OF IT AND IT WAS STRA NGE THE ASSESSEE NEVER RAISED THIS PLEA DURING THE ASSESSME NT PROCEEDINGS WHICH CONTINUED OVER A LONG PERIOD OF TIME. (III) THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS HAD SUBMITTED THE COPIES OF ALL THE BILLS IN RESPECT OF EXPORT SA LES INVOICES OF FIXED ASSETS COPY OF SALES TAX RETURN ETC. AND ONL Y THE BILLS AND VOUCHERS AND OTHER EVIDENCE IN RESPECT OF TRAVELING EXPENSES HAD 5 NOT BEEN GIVEN. IT WAS THEREFORE DIFFICULT TO ACCEP T THE CLAIM OF LOSS OF DOCUMENTS IN FLOODS WHICH WAS ONLY AN AFTER THOUGHT. (IV) A PERUSAL OF THE PANCHNAMA SHOWED THAT AS PER THE I NFORMANT DOCUMENTS SUCH AS PURCHASE/SALE REGISTER/ BILLS/ R ECEIPTS STOCK REGISTER DAILY PRODUCTION BOOKS AND SEVERAL OTHER ITEMS WERE REPORTED TO HAVE DESTROYED IN THE FLOODS. HOWEVER A S PER THE PANCHNAMA SIGNED BY THE NARPOLI POLICE STATION ONLY THREE COMPUTERS ONE STABILIZER AND PAPER/ DOCUMENTS KEPT INSIDE SMALL DRAWER OF A TABLE WERE DESTROYED. IT WAS VERY DIFFI CULT TO BE CONVINCED THAT LARGE AND VOLUMINOUS DOCUMENTS REPOR TED BY THE INFORMANT COULD BE KEPT INSIDE THE DRAWER OF THE TA BLE. THERE WAS ALSO NO EVIDENCE TO SHOW THAT THE SAID DOCUMENTS WE RE ACTUALLY KEPT IN THE TABLE. IT WAS THUS DIFFICULT TO ACCEPT THE CLAIM OF THE ASSESSEE THAT THE DOCUMENTS WERE DESTROYED IN FLOOD S. (V) THE BOOKS OF ACCOUNTS WERE REQUIRED TO BE KEPT AT T HE REGISTERED OFFICE AND THEREFORE THERE WAS NO POSSIBILITY OF TH E SAME BEING KEPT IN THE GODOWN. (VI) THE ONUS WAS ON THE ASSESSEE TO PROVE THAT THE EXPE NSES ON TRAVELING WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. EVEN IF THE CREDIT NOTES OF THE TRAVEL AG ENT AND THE COPIES OF PASSPORT WERE ACCEPTED AS ADDITIONAL EVID ENCE THESE DID NOT ESTABLISH THAT THE EXPENSES WERE INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 2.4 CIT(A) ON PERUSAL OF RECORDS AND AFTER CONSIDER ING THE REMAND REPORT OBSERVED THAT THE AO WITH THE NOTICE DATED 6.10.2005 UNDER SECTION 6 142(1) HAD ENCLOSED THE QUESTIONNAIRE AND THE QUERY RAISED AS PER ITEM NO.36 WAS AS UNDER : PLEASE PROVIDE THE DETAILS OF TRAVEL & CONVEYANCE EXPENSES: ALSO PLEASE FILE DETAILS OF FOREIGN TRAVEL EXPENSES BY PROVIDING THE NAMES OF THE PERSONS TRAVELLED THEIR DESIGNATION IN THE COMPANY PLACE OF TRAVEL DURATION OF TOUR PURPOSE OF TOUR AMOUNT O F EXPENDITURE. (ENCLOSE COPY OF PASSPORT OF THESE PERSONS.) 2.5 THE CIT(A) NOTED THAT THE AO AGAIN VIDE LETTER DATED 3.1.2006 ASKED THE ASSESSEE TO FILE THE DETAILS AND EVIDENCE REQUISITI ONED. BUT THE ASSESSEE FILED THE DETAILS ONLY PARTLY AND DID NOT FILE THE COPIES OF PASSPORT AND SUPPORTING EVIDENCE IN RESPECT OF FOREIGN TRAVEL. THE AO FINAL LY ASKED THE ASSESSEE VIDE LETTER DATED 22.3.2006 TO FURNISH COMPLETE DOCUMENT ARY EVIDENCE AND ALL RELATED DETAILS AND PAPERS IN RESPECT OF FOREIGN TR AVELING. BUT THE SAME WAS NOT FILED. THE ASSESSEE FILED THE COPIES OF CREDIT NOTE S OF THE TRAVEL AGENT REGARDING PURCHASE OF TICKET AND COPIES OF THE PASSPORTS ONLY DURING THE APPELLATE PROCEEDINGS. THE ASSESSEE CLAIMED ONLY DURING THE A PPELLATE PROCEEDINGS THAT THE SUPPORTING EVIDENCES WERE DESTROYED IN FLOODS O N 26.7.2005. NO SUCH CLAIM HAD BEEN MADE BEFORE THE AO. NOR ANY SUCH CLAIM WAS MADE IN THE STATEMENT OF FACTS FILED IN THE MEMORANDUM OF APPEAL BEFORE T HE CIT(A). THE CIT(A) THEREFORE DID NOT FIND THE CLAIM OF LOSS OF BILLS A ND VOUCHERS AND DOCUMENTS IN FLOODS AS ACCEPTABLE. THE CLAIM OF THE ASSESSEE TH AT THE AO NEVER REQUIRED THE ASSESSEE TO PRODUCE DOCUMENTARY EVIDENCE IN THE FOR M OF BILLS AND VOUCHERS COPIES OF AIR TICKET COPIES OF PASSPORT ETC WAS AG AINST THE FACTS ON RECORD. CIT(A) ALSO OBSERVED THAT ADDITIONAL EVIDENCES UNDE R CLAUSE (B) OF RULE 46(1) COULD BE ADMITTED ONLY WHEN THE ASSESSEE WAS PREVEN TED BY SUFFICIENT CAUSE 7 FROM PRODUCING THE SAME BEFORE THE AO. IN THIS CASE THE AO HAD ASKED THE ASSESSEE TO PRODUCE THE COPIES OF PASSPORTS VIDE NO TICE DATED 6.10.2005 WHICH WAS ABOUT SIX MONTHS BEFORE THE ASSESSMENT WAS COMP LETED. THE ASSESSEE WAS ALSO SPECIFICALLY ASKED TO FURNISH DOCUMENTARY EVID ENCES SUCH AS RELEVANT BILLS AND VOUCHERS VIDE NOTICE DATED 22.3.2006. THE ASSES SEE NEVER TOOK THE PLEA OF THE DOCUMENTS BEING LOST IN FLOODS BEFORE THE AO. C IT(A) THEREFORE HELD THAT THE ASSESSEE HAD NOT BEEN PREVENTED BY SUFFICIENT C AUSE FROM PRODUCING THE EVIDENCE BEFORE THE AO AND HE THEREFORE DID NOT ADM IT THE ADDITIONAL EVIDENCE IN THE FORM OF COPIES OF PASSPORTS AND THE COPIES O F CREDIT NOTES OF THE TRAVEL AGENT. 2.6 CIT(A) HOWEVER OBSERVED THAT ENTIRE EXPENDITUR E COULD NOT BE DISALLOWED AS THE ASSESSEE WHO WAS ENGAGED IN PROJE CT MANAGEMENT ACTIVITIES SUCH AS SETTING UP OF STEEL MILLS AND RUNNING OF VA RIOUS ENGINEERING SERVICES TO ITS CLIENTS MOST OF WHICH WERE LOCATED OUTSIDE INDI A WAS REQUIRED TO INCUR SOME EXPENDITURE ON FOREIGN TRAVEL. IN THE ABSENCE OF PR OPER SUPPORTING EVIDENCES THE EXPENSES HAD TO BE ESTIMATED. CIT(A) PLACED REL IANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF MADRAS IN CASE OF SUDARSHAN E STATE PVT. LTD. VS STATE OF TAMIL NADU (211 ITR 273) AND ON THE JUDGMENT OF HON BLE HIGH COURT OF RAJASTHAN IN CASE OF CIT VS NARENDRA MOHAN PALIMAL (271 ITR 347) IN WHICH IT WAS HELD THAT IN THE ABSENCE OF BILLS AND VOUCHERS THE AO HAD NO OPTION THAN TO ESTIMATE THE EXPENSES. CIT(A) ALSO OBSERVED THAT AL MOST ENTIRE FOREIGN TRAVEL EXPENDITURE HAD BEEN INCURRED BY THE ASSESSEE THROU GH M/S.MYSTIC TRAVEL PVT. LTD. WHICH WAS ONE OF THE SISTER CONCERNS OF THE AS SESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE CIT(A) ESTIMATED THE EXPENDITURE WHICH COULD BE REASONABLY CLAIMED TO BE INCURRED ON FOREIGN TRA VEL AT 50% OF THE CLAIM AND ACCORDINGLY CONFIRMED THE DISALLOWANCE OF RS.13 99 201/-. AGGRIEVED BY THE 8 SAID DECISION BOTH THE PARTIES ARE IN APPEAL. THE A SSESSEE HAS DISPUTED THE DECISION OF CIT(A) IN NOT ALLOWING THE EXPENSES FUL LY WHEREAS THE REVENUE IS AGGRIEVED WITH THE RELIEF ALLOWED BY CIT(A). 2.7 BEFORE US THE LEARNED AR FOR THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT THE DOCUMENTARY EVIDENCES SUCH AS BILLS AND VOUCHERS COULD NOT BE PRODUCED BEFORE THE AO AS THE SAME WERE DESTROYED IN FLOODS. IT WAS POINTED OUT THAT THE AO IN THE NOTIC E DATED 6.10.2005 HAD NOT ASKED FOR PRODUCTION OF BILLS AND VOUCHERS AS WAS C LEAR FROM THE QUESTIONNAIRE PLACED AT PAGE 32/33 OF THE PAPER BOOK. IT WAS ALSO POINTED OUT THAT ONLY VIDE LETTER DATED 22.3.2006 WHICH WAS SERVED ON THE ASSE SSEE ON 23.3.2006 THE AO HAD ASKED FOR DOCUMENTARY EVIDENCE OF FOREIGN TRAVE LING ALONG WITH ALL RELATED BILLS AND VOUCHERS. THE ASSESSEE HAD THEREFORE NO S UFFICIENT TIME AS THE ASSESSMENT ORDER HAD BEEN PASSED ON 27.3.2006 THE D ATE WHEN THE DETAILS AND EVIDENCES WERE REQUIRED TO BE FILED. IT WAS ALSO SU BMITTED THAT THE VERY FACT THAT THE CIT(A) HAD ASKED THE AO TO SUBMIT REMAND R EPORT IN RESPECT OF ADDITIONAL EVIDENCE SHOWED THAT HE HAD ALREADY ADMI TTED ADDITIONAL EVIDENCE AND THEREFORE NOT CONSIDERING THE SAME WAS NOT CORR ECT. THE FULL DETAILS OF TRAVELING EXPENSES HAD BEEN GIVEN FROM THE LEDGER A CCOUNT WHICH WAS AVAILABLE ON THE COMPUTER. HOWEVER THE PRIMARY EVIDENCE FOR T HE REASONS STATED EARLIER COULD NOT BE GIVEN. 2.8 THE LEARNED AR FOR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXECUTING TURN KEY PROJE CTS SUPPLYING ROLLING MILLS SPARES PERTAINING TO THE STEEL INDUSTRIES AND RUNNI NG OF CONSULTANCY SERVICES. THE ASSESSEE WAS DEALING IN HIGHLY SOPHISTICATED IT EMS. ONCE THE ENQUIRY CULMINATED INTO A SALE ORDER TECHNICAL TEAM VISITE D THE CONCERNED CLIENTS AND 9 HAD TO MAKE CONSIDERABLE TALK/DISCUSSION IN ORDER T O UNDERSTAND THE SPECIFIC DIMENSION OF THE SPARES REQUIRED SO AS TO MANUFACTU RE THESE ITEMS. EVEN DURING THE MANUFACTURING THE EMPLOYEES OF THE ASSES SEE WERE REQUIRED TO FREQUENTLY VISIT THE VENDORS PREMISES IN INDIA AND ABROAD TO ENSURE THAT MANUFACTURING WAS DONE AS PER THE AGREED SPECIFICAT IONS. THE INSTALLATION AND COMMISSIONING OF THE PLANT WAS ALSO A HIGHLY SPECIA LIZED JOB WHICH REQUIRED SKILLED AND EXPERIENCED TECHNICIANS/ ENGINEERS WHO HAD TO REMAIN PHYSICALLY PRESENT AT THE PLANT FOR SOME TIME. EVEN AFTER DELI VERY OF SPARE PARTS THE TECHNICAL TEAM WAS REQUIRED TO BE IN TOUCH WITH THE CUSTOMER. THEREFORE CONSIDERABLE TRAVELING WAS REQUIRED IN THE BUSINESS OF THE ASSESSEE AND THE EXPENDITURE CLAIMED WAS NOT ABNORMAL. IT WAS ALSO S TATED THAT THE BOOKS OF ACCOUNT WERE AUDITED. 2.9 THE LEARNED AR FURTHER POINTED OUT THAT THE FOR EIGN TRAVEL EXPENDITURE HAD BEEN ALLOWED BY THE DEPARTMENT IN THE EARLIER Y EAR AS WELL AS IN THE SUBSEQUENT YEARS AND SOME OF THE ASSESSMENTS HAD BE EN MADE AFTER SCRUTINY UNDER SECTION 143(3) OF THE I.T.ACT. THE DETAILS IN THIS REGARD WERE SUBMITTED AS UNDER : A.Y FOREIGN TRAVELING EXPENSES LOCAL TRAVELING EXPENSES TOTAL AMOUNT CLAIMED TOTAL AMOUNT ALLOWED ORDER U/S 1997-98 289914 10874 300788 300788 143(1) 1998-99 687250 1243666 1930916 1930916 143(3) 1999-00 2374381 707317 3081698 3081698 143(1) 2000-01 1717964 827535 2545499 2545499 143(1) 2001-02 3413550 1090706 4504256 4504256 143(3) 2002-03 2741733 2115578 4857311 4857311 143(1) 2003-04 2799201 2364666 5163867 2.10 IT WAS POINTED OUT THAT IN ASSESSMENT YEAR 200 1-02 HIGHER EXPENDITURE ON FOREIGN TRAVEL HAD BEEN ALLOWED WHEN THE TURNOVE R WAS LOWER WHEREAS IN THE IMPUGNED YEAR THE EXPENDITURE CLAIMED WAS LESS WHEN THE TURNOVER WAS HIGH AT RS.12.55 CRORES. IT WAS ACCORDINGLY URGED THAT T HE CLAIM OF THE ASSESSEE 10 SHOULD BE ALLOWED. FINALLY IT WAS ALSO ARGUED THAT THE ISSUE MAY BE DECIDED ON THE BASIS OF SUBMISSIONS MADE AND MATERIAL AVAILABL E ON RECORD INCLUDING THE ADDITIONAL EVIDENCES FILED BEFORE CIT(A) AND THAT H E WAS NOT PLEADING FOR RESTORING THE MATTER TO AO/CIT(A) FOR FRESH OPPORTU NITY. 2.11 THE LEARNED DR ON THE OTHER HAND STRONGLY SUPP ORTED THE ORDER OF AO. IT WAS ARGUED THAT ONLY THE OCCURRING OF FLOODS WAS ES TABLISHED BUT NOT THE DESTRUCTION OF THE DOCUMENTS. IT WAS POINTED OUT TH AT IT WAS STRANGE THAT ONLY SELECTED DOCUMENT WHICH WERE CRUCIAL FOR THE INCOME -TAX ASSESSMENT WERE DESTROYED AND NOT OTHERS. THE ASSESSEE HAD ALSO NO T TAKEN ANY PLEA OF LOSS OF DOCUMENTS IN FLOODS BEFORE AO AND THEREFORE IT WAS ONLY AN AFTERTHOUGHT. IT WAS ALSO SUBMITTED THAT BOOKS OF ACCOUNTS WERE REQU IRED TO BE KEPT AT THE REGISTERED OFFICE WHICH WAS AT COLABA AND NOT IN TH E GODOWN. IN THE ABSENCE OF SUPPORTING EVIDENCE THE FOREIGN TRAVEL EXPENDITURE HAD BEEN RIGHTLY DISALLOWED BY THE AO. IT WAS ALSO SUBMITTED THAT MOST OF THE S ALES WERE ADMITTEDLY THROUGH THE SISTER CONCERN AND THEREFORE ONLY LIMIT ED EXPENDITURE WAS REQUIRED TO BE INCURRED BY THE ASSESSEE ON TRAVELING. ON THI S GROUND ALSO THE CLAIM OF EXPENDITURE COULD NOT BE JUSTIFIED. HE PLACED RELIA NCE ON THE FINDINGS GIVEN BY THE AO. THE LEARNED DR ALSO POINTED OUT THAT IN THE ABSENCE OF DETAILS AND EVIDENCE IT COULD NOT BE ASCERTAINED AS TO HOW MUC H EXPENDITURE WAS ON BUSINESS AND HOW MUCH PERSONAL IN NATURE EVEN IF FO REIGN TRAVELING HAD TAKEN PLACE. 2.12 IN REPLY THE LEARNED AR FOR THE ASSESSEE STAT ED THAT UNDER SECTION 209 OF THE COMPANIES ACT ONLY THE BOOKS OF ACCOUNTS WER E REQUIRED TO BE KEPT AT THE REGISTERED OFFICE AND NOT THE BILLS AND VOUCHER S. THERE WAS THUS NO VIOLATION OF THE COMPANIES ACT. THE BILLS AND VOUCH ERS WERE KEPT IN THE GODOWN 11 WHICH HAD BEEN FLOODED. THE CLAIM OF THE ASSESSEE C ONSIDERING THE PAST RECORD HAD TO BE ALLOWED. AS REGARDS THE ARGUMENTS OF THE LEARNED DR THAT PERSONAL EXPENSES COULD NOT BE ALLOWED THE LEARNED AR POINT ED OUT THAT THERE WAS NO MENTION OF PERSONAL EXPENSES ON TRAVEL BY THE AO OR CIT(A) AND THEREFORE THE ARGUMENT WAS WITHOUT ANY MERIT. 2.13 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE OF FOREIGN TRAVEL EXPENSES OF RS.27 99 201/- CLAIMED BY THE ASSESSEE. IT IS A SET TLED LEGAL POSITION THAT FOR CLAIMING ANY DEDUCTION ON ACCOUNT OF ANY EXPENDITUR E BURDEN IS ON THE ASSESSEE TO ESTABLISH THAT THE EXPENDITURE HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESS EE IN THIS CASE FILED ONLY DETAILS OF EXPENDITURE BUT THE EVIDENCE IN THE FORM OF BILLS AND VOUCHERS AND OTHER DOCUMENTS SUCH AS COPIES OF TICKETS AND PASSP ORTS WERE NOT PRODUCED. THE CLAIM OF THE ASSESSEE IS THAT BILLS AND VOUCHER S AND OTHER ORIGINAL DOCUMENTS WHICH WERE KEPT IN A GODOWN AT BHIWANDI W ERE LOST IN FLOOD THAT OCCURRED ON 26.7.2005. THE ASSESSEE FILED CERTIFICA TE FROM THE GRAM PANCHAYAT REGARDING THE FLOODS AT BHIWANDI WHERE GODOWN OF TH E ASSESSEE WAS SITUATED. THE ASSESSEE ALSO FILED COPY OF PANCHNAMA SIGNED BY THE POLICE OFFICER OF NARPOLI POLICE STATION MENTIONING SPOILAGE OF CERTA IN DOCUMENTS/ PAPERS. BOTH AO AND CIT(A) HAVE NOT ACCEPTED THE CLAIM OF THE AS SESSEE THAT BILLS AND VOUCHERS AND DOCUMENTS WERE LOST IN FLOODS. IT HAS BEEN NOTED BY THEM THAT THE PANCHANAMA MENTIONED THE SPOILAGE OF DOCUMENT K EPT INSIDE THE DRAWER OF THE TABLE IN THE GODOWN AND IT WAS DIFFICULT TO BEL IEVE THAT SUCH VOLUMINOUS DOCUMENT COULD BE KEPT IN THE DRAWER OF THE TABLE. MOREOVER IT HAS ALSO NOTED THAT THE ASSESSEE HAD FILED COPIES OF BILLS IN RESP ECT OF EXPORT SALES INVOICES OF FIXED ASSETS AND OTHER VOUCHERS ETC. BUT ONLY THE B ILLS AND VOUCHERS AND 12 DOCUMENTS RELATING TO THE TRAVELING WERE STATED TO BE LOST WHICH WAS UNBELIEVABLE. THE ASSESSEE ALSO MADE NO CLAIM REGAR DING BILLS AND VOUCHERS IN FLOODS AT THE TIME OF ASSESSMENT PROCEEDINGS NOR AN Y SUCH CLAIM HAS BEEN MADE IN THE STATEMENT OF FACTS FILED BEFORE THE CIT (A). 2.14 THE LEARNED AR FOR THE ASSESSEE HAS SUBMITTED THAT BILLS AND VOUCHERS WERE SPECIFICALLY ASKED FOR ONLY ON 22.3.2006 TO BE PRODUCED ON 27.3.2006 AND DUE TO SHORTAGE OF TIME THE ASSESSEE HAD NOT MENTIO NED THE LOSS OF DOCUMENTS IN THE FLOODS. WE DO NOT FIND ANY MERIT IN THE PLEA OF THE ASSESSEE. THE NON AVAILABILITY OF BILLS AND VOUCHERS WOULD HAVE DEFIN ITELY GONE AGAINST THE ASSESSEE AND THEREFORE WE DO NOT FIND ANY VALID REA SON FOR THE ASSESSEE NOT TO MENTION THIS VITAL FACT ON THE DATE OF HEARING ON 2 7.3.2006 AS NOT MUCH TIME AND EFFORT WAS REQUIRED FOR MAKING SUCH PLEA BEFORE THE AO. MOREOVER EVEN IF THE ASSESSEE FAILED TO MENTION THIS FACT BEFORE THE AO THE ASSESSEE COULD INCORPORATE THE SAME IN THE STATEMENT OF FACTS FILE D BEFORE THE CIT(A) WHICH WAS ALSO NOT DONE. CONSIDERING THE ENTIRETY OF FACT S AND CIRCUMSTANCES AS MENTIONED ABOVE AND BROUGHT ON RECORD BY THE AUTHOR ITIES BELOW WE ARE CONVINCED THAT THE CLAIM THAT BILLS AND VOUCHERS AN D OTHER DOCUMENTS WERE LOST IN FLOODS IS NOT ESTABLISHED. THERE IS NO DIRECT EV IDENCE OF LOSS OF THESE DOCUMENTS AND THE VARIOUS FACTS AND CIRCUMSTANCES M ENTIONED ABOUT DO NOT SUPPORT THE CASE OF THE ASSESSEE. WE THEREFORE AGRE E WITH THE FINDING OF THE AUTHORITIES BELOW THAT THE CLAIM OF THE ASSESSEE TH AT BILLS AND VOUCHERS WERE LOST IN FLOODS IS NOT ESTABLISHED. 2.15 THE ASSESSEE PRODUCED ADDITIONAL EVIDENCE BEFO RE THE CIT(A) IN THE FORM OF CREDIT NOTES ISSUED BY M/S. MYSTIC TRAVELS PVT. LTD. REGARDING THE FOREIGN TRAVELING AND ALSO COPIES OF THE PASSPORTS OF THE O FFICIALS MAKING THE FOREIGN 13 TRIPS. IT MAY BE NOTED THAT M/S. MYSTIC TRAVELS PVT . LTD. IS A SISTER CONCERN OF THE ASSESSEE. CIT(A) HAS NOT ADMITTED THESE ADDITIO NAL EVIDENCES ON THE GROUND THAT THERE WAS NO SUFFICIENT CAUSE FOR NOT F ILING THE SAME BEFORE THE AO. IT HAS BEEN NOTED BY THE CIT(A) THAT THE AO HAD CAL LED FOR THE COPIES OF PASSPORT VIDE LETTER DATED 6.10.2005. THOUGH THE OF FICER ORIGINALLY CALLING THE COPIES OF PASSPORTS WAS SUBSEQUENTLY TRANSFERRED T HIS COULD NOT BE A GROUND FOR THE ASSESSEE TO TAKE THE PLEA THAT SUFFICIENT T IME HAD NOT BEEN GIVEN. AS REGARDS THE CREDIT NOTES ISSUED BY THE SISTER CONCE RN THERE WAS NO REASON FOR NOT PRODUCING THE SAME. CIT(A) HAS THEREFORE NOT AD MITTED THE ADDITIONAL EVIDENCE. THE LEARNED AR FOR THE ASSESSEE ARGUED TH AT THE VERY FACT THAT CIT(A) CALLED FOR REMAND REPORT FROM THE AO ON THE ADDITIONAL EVIDENCE SHOWED THAT HE HAD ADMITTED THE SAME BECAUSE REPORT CAN BE CALLED FOR FROM THE AO ONLY AFTER ADMITTING THE ADDITIONAL EVIDENCE. WE AR E UNABLE TO ACCEPT SUCH ARGUMENTS. THERE IS NO REQUIREMENT IN THE RULE 46A THAT REMAND REPORT CAN BE CALLED ONLY AFTER ADMITTING THE ADDITIONAL EVIDENCE . THE RULE MAKES IT CLEAR THAT ADDITIONAL EVIDENCE CAN BE ADMITTED ONLY AFTER RECO RDING REASONS FOR ADMISSION IN THE WRITING AND AFTER ADMITTING THE ADDITIONAL EVIDENCE CANNOT BE USED WITHOUT GIVING REASONABLE OPPORTUNITY TO THE AO TO EXAMINE THE EVIDENCE AND TO PRODUCE FURTHER EVIDENCE IN REBUTTAL OF SUCH EVI DENCE. CIT(A) HAS NOT ADMITTED THE EVIDENCE. IN FACT HE HAS GIVEN REASONS FOR NOT ADMITTING THE EVIDENCE. IN SUCH A SITUATION IT CANNOT BE HELD THA T CIT(A) HAD ADMITTED THE EVIDENCE ONLY ON THE GROUND THAT HE HAD CALLED FOR A REPORT FROM THE AO. 2.16 CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT SEE ANY MAJOR INFIRMITY IN THE ORDER OF CIT(A) IN NOT ADMIT TING THE ADDITIONAL EVIDENCE PARTICULARLY WHEN SUCH EVIDENCES EVEN IF ADMITTED D OES NOT ESTABLISH THAT THE FOREIGN TRAVEL EXPENDITURE HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE 14 PURPOSE OF BUSINESS. THE COPIES OF PASSPORTS CAN ON LY SHOW THAT PERSONS HAD VISITED ABROAD BUT THESE DO NOT ESTABLISH THAT THE VISITS HAVE BEEN UNDERTAKEN FOR THE PURPOSE OF BUSINESS. SIMILARLY THE COPIES O F CREDIT NOTES ISSUED BY TRAVEL AGENT DOES NOT ESTABLISH THAT THE TRAVEL HAD ACTUAL LY BEEN TAKEN OR THE EXPENDITURE HAD BEEN ACTUALLY INCURRED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAD NOT PRODUCED BILLS A ND VOUCHERS IN RESPECT OF BOARDING AND LODGING OVERSEAS NOR ANY LETTER/COMMUN ICATION HAD BEEN FILED FROM THE FOREIGN PARTIES SHOWING THAT THE PERSONS V ISITING ABROAD HAD ACTUALLY WORKED FOR THE PURPOSE OF BUSINESS. THE AO HAS GIVE N A CLEAR FINDING ON THIS WHICH HAS NOT BEEN CONTROVERTED. THE ASSESSEE HAS CLAIMED THAT THE EMPLOYEES HAD TO FREQUENTLY VISIT ABROAD TO ENSURE THAT THE PRODUCT MANUFACTURED WERE AS PER SPECIFICATIONS AND THEY HA D ALSO TO ASSOCIATE WITH INSTALLATION AND COMMISSIONING OF PLANT AND OTHER S PECIALIZED WORK. THE ASSESSEE COULD HAVE PRODUCED THE LETTER FROM THE FO REIGN CONCERN SHOWING VISIT BY THE OFFICIALS OF THE COMPANY FOR THE PURPOSE OF BUSINESS. NO SUCH EVIDENCE HAS BEEN FILED BEFORE THE LOWER AUTHORITIES OR EVEN BEFORE US. THE FACT THAT BOOKS OF ACCOUNT WERE AUDITED IS ALSO OF NO HELP TO THE ASSESSEE AS THE AUDITORS DO NOT INQUIRE INTO THE GENUINENESS OF VOUCHERS OR ABOUT THE FACT WHETHER THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS. THERE IS THUS NO PROPER EVIDENCE TO ESTAB LISH THAT FOREIGN TRAVEL HAD BEEN UNDERTAKEN AND EVEN IF UNDERTAKEN THE SAME HAD BEEN DONE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN SUCH A SITUATION WHEN THERE IS NO PROPER EVIDENCE AVAILABLE THE EXPENDITURE HAS TO BE ESTIMATED BASED ON THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PAST REC ORD OF THE ASSESSEE. 2.17 CONSIDERING THE NATURE OF BUSINESS OF THE ASSE SSEE SOME EXPENDITURE ON FOREIGN TRAVEL IS INEVITABLE WHICH HAS BEEN ACCEPTE D EVEN BY CIT(A). THE 15 QUESTION IS ONLY OF ESTIMATE. IT IS A SETTLED LEGAL POSITION THAT WHEN PROPER EVIDENCE IS NOT AVAILABLE EXPENDITURE/INCOME CAN BE DETERMINED ON ESTIMATE AFTER GIVING REASONABLE BASIS. IN THIS CASE CIT(A) HAS ALLOWED THE FOREIGN TRAVEL EXPENDITURE AT 50% BUT NO BASIS FOR SUCH ESTIMATE H AS BEEN GIVEN. IN OUR VIEW THE FOREIGN TRAVEL EXPENDITURE HAS TO BE LINKED TO THE INCOME ARISING FROM THE FOREIGN CONCERNS AS THE PERSONS VISITING ABROAD ARE CLAIMED TO HAVE WORKED CLOSELY WITH THOSE CONCERNS. IT IS POSSIBLE THAT SO ME INCOME RELATING TO THIS YEAR MAY HAVE BEEN RECEIVED NEXT YEAR BUT IT WILL B E OFFSET BY THE INCOME RECEIVED DURING THE YEAR RELATING TO THE WORK DONE IN THE PRECEDING YEAR AND ON THE WHOLE THE TRAVELING EXPENDITURE WHICH IS CLAIME D TO BE CLOSELY LINKED TO THE BUSINESS ACTIVITY WILL BE RELATABLE TO THE INCOME E ARNED DURING THE YEAR. THE ASSESSEE HAS FILED THE COPY OF AUDITED ACCOUNTS FRO M WHICH FIGURES OF GROSS RECEIPTS OF BUSINESS FOREIGN INCOME AS WELL AS FOR EIGN TRAVEL EXPENDITURE IS AVAILABLE FOR THE PERIOD FROM ASSESSMENT YEAR 2002- 03 TO 2004-05. THE FOREIGN EXCHANGE INCOME FROM EXPORTS OF GOODS IN ASSESSMENT YEAR 2003-04 WAS RS.4.02 CRORES COMPARED TO RS.6.93 CRORES IN ASSESS MENT YEAR 2002-03. SIMILARLY FOREIGN EXCHANGE INCOME FROM SERVICES ABR OAD DURING ASSESSMENT YEAR 2003-04 WAS RS.43.47 LACS COMPARED TO RS.26.98 LACS IN ASSESSMENT YEAR 2002-03. THUS THE FOREIGN EXCHANGE INCOME DURING TH E YEAR HAS STEEPLY DECLINED COMPARED TO ASSESSMENT YEAR 2002-03. HOWEV ER THE FOREIGN TRAVEL EXPENDITURE HAS SLIGHTLY GONE UPTO RS.27 99 201/- C OMPARED TO RS.27 41 733/- IN ASSESSMENT YEAR 2002-03. THE FOREIGN TRAVEL EXPE NDITURE IF COMPUTED IN THE SAME RATIO AS IN THE LAST YEAR COMES TO RS.16 94 54 3/-. HOWEVER CONSIDERING THAT THE EXPENDITURE MAY NOT FALL EXACTLY IN THE RA TIO OF GROSS RECEIPTS ABROAD AFTER MAKING ALLOWANCE FOR COST ESCALATION THE FOR EIGN TRAVEL EXPENDITURE THIS YEAR CAN BE REASONABLY ALLOWED AT RS.20 00 000/-. W E THEREFORE ALLOW EXPENDITURE OF RS.20 00 000/- AND ALLOW THE GROUND OF THE ASSESSEE PARTLY. 16 3. THE SECOND DISPUTE IS REGARDING DISALLOWANCE OUT OF LOCAL TRAVELING AND CONVEYANCE. THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.23 64 666/- ON LOCAL TRAVELING AND CONVEYANCE. THE AO HAD ASKED FOR DETA ILS AND SUPPORTING EVIDENCES. THE ASSESSEE HOWEVER COULD NOT PRODUCE S UPPORTING BILLS AND VOUCHERS. THE AO HAD ALSO RAISED THE QUERY AS TO WH ETHER THE PERSONS WHO HAD UNDERTAKEN THE TRAVELING WERE EMPLOYED WITH ANY OTH ER CONCERN OR NOT ON WHICH NO SUBMISSION WAS MADE BY THE ASSESSEE. AS PE R THE AO THIS ALSO INDICATED THAT THE EXPENSES MAY NOT HAVE BEEN ACTUA LLY INCURRED BY THE ASSESSEE FOR ITS BUSINESS. THE AO ALSO NOTED THAT M OST OF SALES HAD BEEN EFFECTED THROUGH THE SISTER CONCERN M/S. PRADMAN EN GINEERING AGENCY PVT. LTD. AND THEREFORE ONLY LIMITED EXPENSES WERE REQUIRED T O BE INCURRED BY THE ASSESSEE. MOREOVER SINCE THE EXPENDITURE WAS NOT SU PPORTED BY CORROBORATIVE EVIDENCE THE AO DISALLOWED 50% OF THE CLAIM AMOUNTI NG TO RS.11 82 333/-. IN APPEAL THE ASSESSEE SUBMITTED THAT DISALLOWANCE OF 50% OF EXPENDITURE WAS BASED ON PURE CONJECTURES. THE ASSESSEE HAD FILED D ETAILS AS WELL AS PURPOSE OF EXPENDITURE. THE EXPENDITURE CLAIMED HAD NOTHING TO DO WITH THE PROCUREMENT OF BUSINESS THROUGH M/S. PRADMAN ENGINEERING AGENCY PVT. LTD. WHO WAS BEING PAID COMMISSION @ 3.5% FOR PROCUREMENT OF BUSINESS. CIT(A) WAS HOWEVER NOT CONVINCED BY THE ARGUMENT. CONSIDERING THE FACT THA T MOST OF SALES WERE MADE THROUGH M/S. PRADMAN ENGINEERING AGENCY PV.T LTD. A ND THERE WERE NO SUPPORTING EVIDENCE CIT(A) CONFIRMED THE DISALLOWA NCE @ 50% AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . 3.1 BEFORE US THE LEARNED AR REITERATES THE SAME SU BMISSION AS MADE IN CASE OF FOREIGN TRAVEL EXPENDITURE AND ARGUED THAT BILLS AND VOUCHERS COULD NOT BE PRODUCED BECAUSE THE SAME WERE DESTROYED IN FLOO DS. IT WAS ALSO SUBMITTED 17 THAT M/S.PRADMAN ENGINEERING AGENCY PVT. LTD. WAS O NLY RESPONSIBLE FOR PROCURING ORDERS AND EXPENDITURE ON TRAVELING AND C ONVEYANCE WAS REQUIRED TO BE INCURRED BY THE ASSESSEE IN CONNECTION WITH THE BUSINESS CONSIDERING THE NATURE OF BUSINESS AS ARGUED IN CASE OF FOREIGN TRA VELING EXPENSES. 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE OU T OF LOCAL TRAVELING AND CONVEYANCE. THE ASSESSEE HAS CLAIMED THE EXPENDITUR E OF RS.23 64 666/-. THERE IS NO DISPUTE THAT BILLS AND VOUCHERS RELATIN G TO SUCH EXPENDITURE ARE NOT AVAILABLE. THE EXPENDITURE HAS THEREFORE TO BE CONS IDERED ON ESTIMATE CONSIDERING ALL THE RELEVANT FACTORS. THE AUTHORITI ES BELOW HAVE NOTED THAT MOST OF THE SALES HAVE BEEN AFFECTED THROUGH THE SISTER CONCERN OF THE ASSESSEE VIZ M/S. PRADMAN ENGINEERING AGENCY PVT. LTD. AND ACCOR DINGLY HAVE ALLOWED ONLY 50% OF THE EXPENDITURE. THE CASE OF THE ASSESSEE IS THAT M/S.PRADMAN ENGINEERING AGENCY PVT. LTD. WAS BEING PAID COMMISS ION @ 3.5% ONLY FOR PROCURING ORDERS AND NOT FOR ANY OTHER ACTIVITY ON BEHALF OF THE ASSESSEE. SUCH CLAIM HAS MADE EVEN BEFORE THE CIT(A). THE REVENUE HAS NOT PRODUCED ANY MATERIAL TO CONTROVERT THE CLAIM THAT THE SISTER CO NCERN WAS ONLY PROCURING ORDERS AND EXPENDITURE ON TRAVELING AND CONVEYANCE IN CONNECTION WITH THE BUSINESS HAD BEEN INCURRED BY THE ASSESSEE. THEREFO RE THE CLAIM THAT THE SISTER CONCERN WAS ONLY PROCURING ORDERS HAS TO BE ACCEPTE D. HOWEVER SINCE PROPER EVIDENCE IN RESPECT OF INCURRING OF EXPENDITURE IS NOT AVAILABLE THE ALLOWABILITY OF EXPENDITURE HAS TO BE CONSIDERED ON ESTIMATE TAK ING INTO ACCOUNT ALL THE RELEVANT FACTORS. WE FIND THAT IN THE IMMEDIATE PRO CEEDING YEAR I.E. A.Y.2002- 03 GROSS INCOME OF THE ASSESSEE WAS RS.12.23 CRORES AND AFTER EXCLUDING THE FOREIGN EXCHANGE INCOME OF RS.7.20 CRORES THE GROS S INCOME FROM THE DOMESTIC OPERATION WAS ABOUT RS.5 CRORES. THE EXPEN DITURE ON LOCAL TRAVEL AND 18 CONVEYANCE IN ASSESSMENT YEAR 2002-03 WAS RS.21 15 578/-. IN THE PRESENT ASSESSMENT YEAR I.E. 2003-04 THE GROSS RECEIPT OF R S.12.27 CRORES AND AFTER EXCLUDING THE FOREIGN EXCHANGE INCOME OF RS.4.45 CR ORES THE DOMESTIC INCOME IS ABOUT RS.8 CRORES WHICH IS SUBSTANTIALLY HIGHER THAN THE CORRESPONDING FIGURE FOR IMMEDIATE PRECEDING YEAR. THUS THE ASSESSEE HA S CLAIMED EXPENDITURE ON TRAVELING AND CONVEYANCE OF RS.23 64 666/- ON GROSS DOMESTIC RECEIPT OF RS.8 CRORE COMPARED TO EXPENDITURE OF RS.21 15 578/- ON DOMESTIC RECEIPT OF ONLY RS.5 CRORE IN THE IMMEDIATE PRECEDING YEAR. THE CLA IM IS THUS REASONABLE AND NO DISALLOWANCE IS CALLED FOR. THE ORDER OF CIT(A) ON THIS POINT IS SET ASIDE AND THE ADDITION MADE IS DELETED. 4. THE THIRD DISPUTE WHICH IS RELEVANT ONLY TO THE APPEAL OF THE ASSESSEE IS REGARDING ADDITION UNDER SECTION 43B OF THE INCOME- TAX ACT ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND. THE AO N OTED THAT THE ASSESSEE HAD DEPOSITED CONTRIBUTIONS TO THE PROVIDENT FUND BY BO TH THE EMPLOYEES AND EMPLOYERS AS PER DETAILS GIVEN BELOW : MONTH EMPLOYEES CONTRIBUTION EMPLOYERS CONTRIBUTION DATE OF PAYMENT AUG.02 2646 3001 23.9.2002 SEPT.02 2679 3039 18.10.2002 DEC.02 3165 3590 16.1.2003 MAR.03 3070 3483 18.4.2003 TOTAL 11560 13113 4.1 THE AO NOTED THAT EMPLOYEES CONTRIBUTION WAS R EQUIRED TO BE DEPOSITED WITHIN THE DUE DATE AND IN CASE OF DEFAULT THE SAME WAS REQUIRED TO BE TREATED AS INCOME UNDER SECTION 2(24)(X) R.W.S.36(1)(VA). A CCORDINGLY HE ADDED A SUM OF RS.11 560/- TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL CIT(A) AGREED WITH THE AO THAT EMPLOYEES CONTRIBUTION DEPOSITED BEYOND DUE DATE HAD TO BE TREATED AS INCOME OF THE ASSESSEE. CIT(A) PLACED RE LIANCE ON THE DECISION OF 19 MUMBAI BENCH OF TRIBUNAL IN CASE OF I.M.P. POWER LT D. VS ITO (107 TTJ 522) AND THE DECISION IN CASE OF DCIT VS GANDHAR OIL REF INERY (I) LTD. (2006) (104 TTJ 630). AGGRIEVED BY THE SAID DECISION THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 4.2 BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMI TTED THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT O F HONBLE HIGH COURT OF DELHI IN CASE OF CIT VS AIMIL LTD. (321 ITR 508) IN WHICH HONBLE HIGH COURT FOLLOWING THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF CIT VS VINAY CEMENT (213 CTR 268) HAVE HELD THAT EVEN EMPLOYEES CONTRIBUTION TO PROVIDENT FUND IS COVERED BY THE AMENDED PROVISIONS OF SECTION 43B AS PER WHICH THE CLAIM HAS TO BE ALLOWED IN CASE THE DEPOS IT HAD BEEN MADE BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME FOR THE RELEVANT YEAR. IT WAS ALSO SUBMITTED THAT THERE WERE SEVERAL DECISIONS OF THE TRIBUNAL IN WHICH THE DECISION OF THE DELHI HIGH COURT (SUPRA) HAS BEEN F OLLOWED. THE LEARNED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF AUT HORITIES BELOW. 4.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING THE ADDITION ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND. UNDER TH E PROVISIONS OF SECTION 36(1)(VA) EMPLOYEES CONTRIBUTION TO PROVIDENT FUN D IF NOT DEPOSITED WITHIN THE DUE DATE WHICH IS THE 15 TH DAY OF THE FOLLOWING MONTH IS REQUIRED TO BE TREAT ED AS INCOME OF THE ASSESSEE. A FURTHER GRACE PERIOD O F FIVE DAYS HAS BEEN ALLOWED UNDER THE INTERNAL INSTRUCTIONS OF THE AUTHORITIES UNDER THE STATUTE. THERE HAVE BEEN DIVERGENT VIEWS ON THE ISSUE WHETHER EMPLOYEE S CONTRIBUTION TO PROVIDENT FUND WILL BE COVERED BY THE PROVISIONS OF SECTION 43B OR NOT. IN CASE IT IS TREATED AS COVERED UNDER SECTION 43B THE CLA IM AS PER THE AMENDED 20 PROVISIONS OF SECTION 43B APPLICABLE FROM ASSESSMEN T YEAR 2003-04 HAS TO BE ALLOWED IF THE AMOUNT IS DEPOSITED BEFORE THE DUE D ATE OF FILING THE RETURN OF INCOME. THERE ARE DECISIONS OF THE TRIBUNAL HOLDING THAT EMPLOYEES CONTRIBUTION TO PROVIDENT FUND IS NOT COVERED BY THE SECTION 43B AND IN CASE DEPOSIT IS NOT MADE WITHIN THE GRACE PERIOD WHICH IS THE 20 TH DAY OF THE FOLLOWING MONTH THE AMOUNT HAS TO BE TREATED AS INCOME OF THE ASSESSEE. HOWEVER RECENTLY THE HONBLE HIGH COURT OF DELHI IN CASE OF CIT VS AIMIL LTD. (SUPRA) FOLLOWING THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF CIT VS VINAY CEMENT LTD (SUPRA) HAVE TAKEN THE VIEW THAT EMPLOYEES CONTRIB UTION TO PROVIDENT FUND WILL BE COVERED BY SECTION 43B AND NO ADDITION CAN BE MA DE IN CASE THE CONTRIBUTION IS DEPOSITED BEFORE THE DUE DATE OF FI LING OF THE RETURN OF INCOME. THE LEARNED AR FOR THE ASSESSEE HAS RELIED ON THE S AID JUDGMENT. NO CONTRARY JUDGMENT OF ANY HIGH COURT OR APEX COURT HAS BEEN B ROUGHT TO OUR NOTICE ON THIS ISSUE. THEREFORE RESPECTFULLY FOLLOWING THE JU DGMENT OF HONBLE HIGH COURT OF DELHI IN CASE OF CIT VS AIMIL LTD. (SUPRA) WE SE T ASIDE THE ORDER OF CIT(A) AND ALLOWED THE CLAIM OF THE ASSESSEE AS DEPOSIT HA D BEEN MADE BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. 5. THE APPEAL OF THE REVENUE IN ITA NO.4180/M/2008 FOR ASSESSMENT YEAR 2004-05 . THE ONLY DISPUTE RAISED BY THE REVENUE IN THIS AP PEAL IS REGARDING DELETION OF ADDITION MADE BY AO ON ACCOUN T OF DISALLOWANCE OF TRAVELING EXPENSES. THE ASSESSEE HAD CLAIMED TOTAL EXPENDITURE OF RS.1 05 65 801/- UNDER THE HEAD TRAVELING AND CONV EYANCE WHICH INCLUDED A SUM OF RS.70 79 020/- ON ACCOUNT OF FOREIGN TRAVELI NG EXPENSES. THE FACTS RELATING TO THE DISALLOWANCE OF SUCH EXPENSES ARE I DENTICAL TO THOSE IN CASE OF ASSESSMENT YEAR 2003-04 WHICH WE HAVE ALREADY DEALT WITH AND THE ONLY DIFFERENCE BEING THAT IN THIS YEAR DURING THE ASSES SMENT PROCEEDINGS ITSELF THE 21 ASSESSEE SUBMITTED THAT ORIGINAL BILLS AND VOUCHERS AND OTHER DOCUMENTS RELATING TO THE TRAVELING EXPENSES HAD BEEN DESTROY ED IN THE FLOODS ON 26.7.2005. THE AO DURING THE ASSESSMENT PROCEEDINGS HAD ASKED THE ASSESSEE TO FILE COMPLETE DETAILS OF FOREIGN TRAVEL EXPENSES GIVING THE NAME OF THE PERSONS TRAVELLED DESTINATIONS OF TRAVELING EXPEN DITURE INVOLVED ETC. THE AO ALSO ASKED FOR COPIES OF THE PASSPORTS AS WELL AS B ILLS AND VOUCHERS INCLUDING THE BILLS IN RESPECT OF OVERSEAS BOARDING AND LODGI NG LETTERS/COMMUNICATION FROM THE FOREIGN PARTIES WHOM THE ASSESSEE HAD CONT ACTED FOR THE PURPOSE OF BUSINESS OR IN CONNECTION WITH FOREIGN VISITS ETC. THE ASSESSEE DID NOT FILE THE VARIOUS EVIDENCES/ DOCUMENTS CALLED FOR ON THE GROU ND THAT THE SAME WERE DESTROYED IN THE FLOODS. 5.1 THE ASSESSEE HOWEVER AS IN ASSESSMENT YEAR 2 003-04 FILED COPIES OF CREDIT NOTES FROM TRAVEL AGENT AS WELL AS COPIES OF PANCHANAMA REGARDING THE FLOOD IN THE AREA. AO HOWEVER DID NOT BELIEVE THE P LEA OF DAMAGE OF DOCUMENTS IN FLOODS AS THE ASSESSEE HAD PRODUCED ALL DETAILS RELATING TO PURCHASE AND SALES STOCK ETC. INCLUDING SALE BILLS AND GENERAL VOUCHER S AND IT WAS UNBELIEVABLE THAT ONLY THE BILLS AND DOCUMENTS RELATING TO TRAVELING AND CONVEYANCE WERE LOST. AO NOTED FROM THE DETAILS GIVEN BY THE ASSESSEE THA T THE COLUMNS RELATING TO TRAVEL DESTINATIONS WERE BLANK AT MANY PLACES. THE ASSESSEE COULD NOT FILE EVEN COPIES OF PASSPORTS AND AIR TICKETS. AO ALSO NOTED THAT THE MAJOR SALES OF THE ASSESSEE WERE EFFECTED THROUGH THE SISTER CONCERN M /S. PRADMA ENGINEERING AGENCY PVT. LTD. TO WHOM THE ASSESSEE WAS PAYING CO MMISSION @ 3.5%. OUT OF TOTAL SALES OF RS.17.40 CRORES DURING THE YEAR THE SALES WORTH RS.13.81 CRORES HAD BEEN DONE THROUGH THE SISTER CONCERN WHICH INDI CATED THAT NOT MUCH EFFORTS WERE NEEDED BY THE ASSESSEE THROUGH TRAVELING AND C ONVEYANCE FOR GETTING BUSINESS. IN ANY CASE THE AO FURTHER OBSERVED THAT FOREIGN TRAVEL EXPENSES 22 WERE NOT SUPPORTED BY PROPER EVIDENCE. AO THEREFORE HELD THAT FOREIGN TRAVEL EXPENSES WERE NOT GENUINE AND THUS HELD THEM INADMI SSIBLE. IN REGARD TO LOCAL TRAVELING AND CONVEYANCE EXPENSES AO OBSERVED THAT THOUGH THE ASSESSEE GAVE THE LIST OF EXPENSES THE SUPPORTING EVIDENCES HAD NOT BEEN FILED. THE ASSESSEE WAS ALSO SILENT ON THE QUERY OF THE AO WHE THER THE PERSONS WHO HAD UNDERTAKEN THE TRAVELING WERE EMPLOYED WITH ANY OTH ER CONCERN OR NOT. HOWEVER THE AO OBSERVED THAT SOME TRAVELING EXPENSE S MAY HAVE INCURRED. HE ESTIMATED SUCH EXPENSES AT RS.10 56 580/-. THUS THE AO DISALLOWED THE ENTIRE FOREIGN TRAVEL EXPENSES AND OUT OF LOCAL TRAVELING AND CONVEYANCE HE ALLOWED THE CLAIM ONLY AT RS.10 56 580/-. 5.2 IN APPEAL CIT(A) AFTER HEARING THE ASSESSEE AN D ON PERUSAL OF RECORDS HELD THAT THE PLEA OF DESTRUCTION OF RECORDS IN FLO ODS HAD TO BE ACCEPTED. THEREFORE HE OBSERVED THAT THE ASSESSEE COULD NOT B E EXPECTED TO FILE THE PRIMARY EVIDENCE REGARDING TRAVELING EXPENSES AND T HAT THE ALLOWABILITY HAD TO BE DECIDED ON PROPER ANALYSIS OF FACTS OF THE CASE. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXECUTI NG TURN KEY PROJECTS SUPPLYING ROLLING MILLS SPARES PERTAINING TO THE ST EEL INDUSTRIES AND RUNNING OF CONSULTANCY SERVICES. THE ASSESSEE WAS DEALING IN H IGHLY SOPHISTICATED ITEMS AND PROVIDING HIGHLY SPECIALIZED JOB IN CONNECTION WITH INSTALLATION AND COMMISSIONING OF PLANT. FREQUENT TRAVELING WAS THER EFORE REQUIRED FOR ATTENDING TO THE VARIOUS TECHNICAL NEEDS OF THE CLIENTS FOR DISCUSSION WITH THE CLIENTS ETC. AS REGARDS THE SALES THROUGH SISTER CONCERN CIT(A) OBSERVED THAT THE LATTER WAS ONLY PROCURING ORDER AND IT DID NOT HELP REDUCE THE EXPENDITURE ON TRAVELING AND CONVEYANCE. AS REGARDS THE QUERY OF THE AO THAT THE ASSESSEE DID NOT REPLY AS TO WHETHER THE PERSONS TRAVELING WERE EMPLOYED W ITH SOME OTHER CONCERN CIT(A) OBSERVED THAT EVEN IF SOME ONE WAS EMPLOYED WITH OTHER CONCERN 23 EXPENDITURE HAD TO BE ALLOWED IF TRAVELING WAS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. WITH REGARD TO NON SUBMISSION OF EVEN THE COPIES OF PASSPORTS CIT(A) WAS SATISFIED WITH THE PLEA OF THE ASSESSEE THAT THE QUERY WAS RAISED ONLY IN NOVEMBER 2006 AND THEREFORE FOR OBTAINING C OPIES WHICH INVOLVED TIME CONSUMING PROCESS SUFFICIENT TIME WAS NOT AVAILABLE AND THAT COPIES OF PASSPORTS HAD BEEN SUBMITTED IN CONNECTION WITH THE EARLIER ASSESSMENT YEARS. CIT(A) OBSERVED THAT IN HIS OPINION NON SUBMISSION OF COPIES OF PASSPORTS COULD NOT BE GROUND FOR MAKING DISALLOWANCE. THE ASSESSEE HAD GIVEN DETAILS OF TRAVEL AND AO COULD HAVE VERIFIED WHETHER PERSONS H AD TRAVELED OR NOT BUT NO SUCH VERIFICATION WAS MADE. MOREOVER CIT(A) FURTHER OBSERVED THAT THE PRIMARY EVIDENCES BEING LOST IN FLOOD ALLOWABILITY OF THE C LAIM HAD TO BE DECIDED ON THE BASIS OF BUSINESS REQUIREMENT OF THE ASSESSEE. HE N OTED TOTAL TURNOVER OF THE ASSESSEE DURING THE YEAR WAS RS.15.30 CRORES AND IN ADDITION THE ASSESSEE HAD EARNED PROFESSIONAL FEES OF RS.49 54 405/- GIVING T HE TOTAL FIGURE OF RECEIPTS AT RS.15.80 CRORES. TOTAL TRAVELING EXPENDITURE OF RS. 1 05 65 801/- WAS 6.68% OF THE TOTAL RECEIPTS. THEREFORE CONSIDERING THE NATUR E OF BUSINESS WHICH REQUIRED EXTENSIVE TRAVELING THE CLAIM OF EXPENDITURE WAS JU STIFIED. HE THEREFORE ALLOWED THE EXPENDITURE FULLY AND DELETED THE ADDITION MADE BY THE AO. AGGRIEVED BY THE SAID DECISION THE REVENUE IS IN APPEAL BEFORE T HE TRIBUNAL. 5.3 BEFORE US THE LEARNED AR FOR THE ASSESSEE REITE RATED THE SAME SUBMISSIONS IN RESPECT OF EXPENDITURE ON TRAVELING AND CONVEYANCE INCLUDING FOREIGN TRAVELING AS IN CASE OF A.Y.2003-04. THE LE ARNED DR ALSO SUPPORTED THE ORDER OF AO ON THE SAME REASONING AS DONE IN ASSESS MENT YEAR 2003-04. 5.4 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE OF TRAVELING AND CONVEYANCE 24 EXPENSES. THE ASSESSEE HAD CLAIMED TOTAL EXPENDITUR E OF RS.1 05 65 801/- WHICH CONSISTED OF FOREIGN TRAVELING EXPENDITURE OF RS.70 79 020/- AND LOCAL TRAVELING AND CONVEYANCE EXPENDITURE OF RS.34 86 78 1/-. THERE IS NO DISPUTE THAT BILLS AND VOUCHERS AND OTHER DOCUMENTS SUCH AS COPIES OF AIR TICKETS IN RESPECT OF TRAVELING AND CONVEYANCE EXPENSES INCLUD ING THE FOREIGN TRAVELING ARE NOT AVAILABLE. THE ASSESSEE HAS CLAIMED THAT TH E SAME WERE LOST IN FLOOD WHICH HAS NOT BEEN ACCEPTED BY THE AO. THE ASSESSEE COULD ALSO NOT PRODUCE THE COPIES OF PASSPORTS OF THE OFFICIALS BEFORE THE AO. THE AO HAD THEREFORE DISALLOWED THE ENTIRE FOREIGN TRAVELING EXPENDITURE AND IN RESPECT OF LOCAL TRAVELING AND CONVEYANCE HE HAS ALLOWED ONLY A SUM OF RS.10 56 580/-. CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSE ABOUT LOSS OF BILLS AND VOUCHERS AND OTHER DOCUMENTS IN FLOODS. WE HAVE ALREADY CONSIDER ED THIS ISSUE WHILE DEALING WITH THE APPEAL FOR ASSESSMENT YEAR 2003-04 AND UPH ELD THE VIEW OF THE AO THAT THE CLAIM OF THE ASSESSEE THAT THE BILLS AND V OUCHERS AND DOCUMENTS WERE LOST IN FLOOD IS NOT ESTABLISHED. IN THIS YEAR THE ASSESSEE HAD ALSO NOT PRODUCED THE COPIES OF PASSPORTS WHICH WAS DONE IN A.Y.2003- 04 ATLEAST BEFORE THE CIT(A). IT HAS BEEN SUBMITTED THAT COPIES OF PASSPO RTS HAD BEEN FILED IN EARLIER YEARS BUT IT HAS NOT BEEN EXPLAINED AS TO HOW COPIE S OF PASSPORTS FILED IN EARLIER YEARS CONTAINED THE ENTRIES FOR THE CURRENT YEAR. T HE CREDIT NOTE ISSUED BY THE TRAVEL AGENT WHO IS THE SISTER CONCERN OF THE ASSES SEE DOES NOT ESTABLISH THE TRAVEL HAD ACTUALLY BEEN UNDERTAKEN. IN ANY CASE A S WE HAVE HELD EARLIER INCURRING OF EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CANNOT BE ESTABLISHED ONLY ON THE BASIS OF COPIES O F PASSPORTS AND COPIES OF CREDIT NOTES OF THE TRAVEL AGENT WHICH IS THE SISTE R CONCERN OF THE ASSESSEE. 5.5 THE CLAIM OF FOREIGN OR LOCAL TRAVEL IS THUS NO T SUPPORTED BY PROPER EVIDENCE AND EVEN IF TRAVELING HAD BEEN UNDERTAKEN THERE IS NO PROPER 25 EVIDENCE TO SHOW THE SAME HAD BEEN DONE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN CASE OFFICIALS HAD REALLY WORKED ABROAD OR LOCALLY IN CONNECTION WITH VARIOUS PROJECTS OR OTHER SPECIALIZ ED WORK BEING EXECUTED BY THE ASSESSEE THE ASSESSEE COULD HAVE EASILY PRODUCE D CERTIFICATES FROM THOSE CONCERNS REGARDING THE TRAVELING AND VISIT BY THE O FFICIALS WHICH HAD NOT BEEN DONE. BILLS AND VOUCHERS FOR OVERSEAS BOARDING AND LODGING HAVE ALSO NOT BEEN PRODUCED. THESE FINDING OF AO HAVE NOT BEEN CONTROV ERTED BEFORE US. HOWEVER CONSIDERING THE NATURE OF BUSINESS SOME EXPENDITUR E ON TRAVELING AND CONVEYANCE AS HELD EARLIER IS INEVITABLE WHICH HAS TO BE ESTIMATED CONSIDERING THE NATURE OF BUSINESS AND MATERIAL ON RECORD. CIT( A) HAS HELD THAT GROSS RECEIPTS OF BUSINESS INCLUDING THE FOREIGN EXCHANGE INCOME FOR THIS YEAR WAS RS.15.80 CRORES AND THE TOTAL TRAVELING EXPENDITURE OF RS.1 05 65 801/- CAME TO 6.68% OF THE TOTAL RECEIPTS WHICH THE CIT(A) HAS FOUND REASONABLE. 5.6 WE ARE UNABLE TO ACCEPT THE ORDER OF CIT(A) AS THE SAME IS WITHOUT ANY BASIS. IN OUR VIEW AS HELD EARLIER IN A.Y.2003-04 T HE FOREIGN TRAVEL EXPENDITURE HAS TO BE CORRELATED TO THE FOREIGN EXCHANGE INCOME AND LOCAL EXPENDITURE WITH RESPECT TO LOCAL INCOME AS SEPARATE DETAILS ARE AVA ILABLE. THE LEARNED AR WHEN QUERIED ABOUT THE INCOME FROM FOREIGN OPERATIONS RE FERRED TO THE DETAILS AVAILABLE IN THE AUDITED ACCOUNTS PLACED ON RECORD. WE FIND THAT THE TOTAL FOREIGN TRAVELING EXPENDITURE THIS YEAR WAS RS.70 7 9 020/- WHEN THE TOTAL FOREIGN EXCHANGE INCOME WAS RS.2.45 CORES CONSISTIN G OF INCOME FROM THE EXPORT OF GOODS OF RS.2.11 CRORES AND FOREIGN EXCHA NGE INCOME FROM SERVICES OF RS.20.34 LACS. COMPARED TO THAT THE TOTAL FOREIG N EXCHANGE INCOME FROM EXPORT OF GOODS AND SERVICES IN THE IMMEDIATE PREVI OUS ASSESSMENT YEAR I.E A.Y.2002-03 WAS RS.4.45 CRORES WHEN THE FOREIGN TRA VELING EXPENDITURE CLAIMED WAS ONLY RS.27 99 201/-. THIS YEAR WHEN FO REIGN EXCHANGE INCOME 26 HAS ALMOST REDUCED TO HALF COMPARED TO IMMEDIATE PR ECEDING YEAR EXPENDITURE HAS INCREASED TO ABOUT 2 TIMES. IN THE IMMEDIATE PRECEDING YEAR I.E. A.Y.2003-04 WE HAVE ALLOWED THE FOREIGN TRAVEL EXPE NDITURE AT RS.20 00 000/-. THE EXPENDITURE THIS YEAR HAS TO BE SUBSTANTIALLY L OWER AS THE FOREIGN INCOME HAS DECLINED SUBSTANTIALLY. IN OUR VIEW IT WOULD BE REASONABLE TO ESTIMATE FOREIGN TRAVEL EXPENDITURE THIS YEAR AT RS.15 00 00 0/-. WE ACCORDINGLY ALLOW THE FOREIGN TRAVEL EXPENDITURE THIS YEAR AT RS.15 0 0 000/-. AS REGARDS THE DOMESTIC TRAVELING AND CONVEYANCE THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS.34 86 781/- COMPARED TO RS.23 64 666/- IN THE IM MEDIATE PRECEDING YEAR. THE GROSS RECEIPTS OF BUSINESS THIS YEAR ARE RS.17. 40 CRORES AND AFTER EXCLUDING FOREIGN INCOME OF RS.2.45 CRORES THE DOMESTIC RECE IPTS ARE AT ABOUT RS.15.00 CRORE COMPARED TO RS.8.00 CRORES IN THE IMMEDIATE P RECEDING YEAR. THUS THE DOMESTIC RECEIPTS HAVE ALMOST DOUBLED. CONSIDERING THE ABOVE SITUATION THE CLAIM OF EXPENDITURE ON DOMESTIC TRAVEL AND CONVEYA NCE IS REASONABLE AND NO DISALLOWANCE IS CALLED FOR. THE CLAIM IS THEREFORE ALLOWED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE FOR A.Y R.2003-04 IS PARTLY ALLOWED. THE APPEAL OF THE REVENUE IN A.Y.2003-04 I S DISMISSED WHEREAS THAT IN A.Y.2004-05 IS PARTLY ALLOWED. 7. THE ORDER WAS PRONOUNCED IN OPEN COURT ON 19.01. 2011. SD/- SD/- ( D. MANMOHAN) (RAJENDR A SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATE : 19.01.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 27 3. THE CIT(A) MUMBAI CONCERNED 4. THE CIT MUMBAI CITY CONCERNED 5. THE DR B BENCH ITAT MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ALK