Delhi High Court
Addl. Cit vs Amtek Auto Ltd. on 3 March, 2004
Equivalent citations: (2004)88TTJ(DEL)11
ORDER
Smt. Diva Singh, J.M.:
Both these appeals have been filed by the revenue against separate orders dated 18-12-1998 and 6-4-1999, of Commissioner (Appeals), Faridabad, pertaining to 1995-96 and 1996-97 assessment years.
2. Both these appeals are being decided by a common order as issues raised therein are identical.
3. The grounds raised by the revenue in ITA No. 1100/Del/1999 read as under :
"On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in law in :
(i) treating the traveling expensos of Rs. 11, 26,606 as genuine business expenses especially when no evidence in support of purposes of visit was submitted at the time of assessment and the learned Commissioner (Appeals) has not given any reasons while deleting this addition.
(ii) deleting the disallowance of Rs. 3,76,000 on account of director scqry without appreciating the reasoning given by the assessing officer in the assessment order and without giving any reasons of his own for such deletion.
(iii) deleting the disallowance of Rs. 79,500 on account of legal and professional expenses especially when no proof regarding services rendered by Rajan Barry & Associate was furnished at the time of assessment proceedings and the Commissioner (Appeals) has also not given any reasoning for deletion of the addition made."
4. The relevant facts pertaining to ground No. 1 are that the assessing officer made an addition of Rs. 11,26,606 on account of following fact :
"2. Foreign traveling expenses The assessed has incurred expenditure of Rs. 11,26,606 on the foreign traveling of Mr. Arvind Dam to U.K., Korea and G. Khandpal to Japan. Page 11 of printed balance sheet in the tax audit report expenditure shown is duly on hotel and DA, while airfare of Sh. Arvind Dam is not included. Thus, only amount of Rs. 9,27,716 has been shown. Vide question No. 38 of the questionnaire the assessed was specifically requested to furnish details of foreign traveling along with copy of tour report submitted to the Reserve Bank of India after the visit. Even during the course of assessment proceedings on 23-9-1996, 27-6-1997 and again in 9-10-1997 and 12-12-1997, the assessed was requested to furnish names and addresses of the persons visiting the foreign countries, copies of their passports, purpose of traveling and evidence in support thereof, The assessed submitted a copy of technical assistance agreement with Aizen Co. Ltd. of Japan on 18-12-1996, signed in India. Other evidence as to which places Mr. Arvind Dam and Sh. G. Khandpal visited or even their copies of passports were produced. In fact, the assessed admitted that he was not in a position to furnish evidence in support of expenditure on foreign traveling. In the absence of any evidence of purpose of visit of these two persons to U.K., Korea and Japan, the entire expenditure of Rs. 11,26,606 is disallowed."
5. Before the Commissioner (Appeals), the following contentions were raised :
"Details of foreign traveling expenses are placed in the paper book and your Honour would kindly see that total traveling and conveyance expenses debited to P&L a/c were Rs. 19,61,160 out of which foreign traveling expenses were as under :
Amount (Rs.) Foreign traveling of M.D. & Mr. Khandpal, Sr. Executive.
9,24,748 Visit to USA and Russia of MD and Mr. V.K. Kansal :
3,84,622 (Included in the details of Unit-II i.e. 1,27,323 + 1,62,652 + 31,867 + 62,780) 13,09,370 But, out of above amount, a sum of Rs. 3,37,732 was not debited to P&L a/c but was capitalized. Therefore, net amount debited to P&L a/c on account of foreign traveling was Rs. 9,71,638 (Rs. 13,09,370 - Rs. 3,37,732). Therefore, first contention of the assessed is that when only a sum of Rs. 9,71,638 was claimed as expense, there cannot be disallowance of Rs. 11,26,606.
In fact, learned assessing officer has mis appreciated the information given at p. 11 of printed balance sheet which was information on the foreign currency used in foreign traveling given in the director's report. Learned assessing officer mistook this figure as if claimed as an expenditure which is not so. Therefore, learned assessing officer's order needs arithmetical correction to the extent of Rs. 1,54,968 (Rs. 11,26,606 - Rs. 9,71,638).
Learned assessing officer disallowed the foreign traveling expenses on the ground that the tour report to RBI was not submitted to him. It is respectfully submitted that necessity of such reports was discontinued with the liberalization in the foreign exchange section introduced in 1991 in Congress Government by Dr. Manmohan Singh. Therefore, to make disallowance on the basis of something which is not required as per law is unjustified and disallowance made may please be deleted,"
6. In these circumstances, the Commissioner (Appeals) came to the following finding
7. This is regarding disallowance out of foreign traveling expenses amounting to Rs. 11,26,606. The assessing officer is directed to recompute this item after correcting arithmetical error pointed out in the written submissions and treating the traveling expenses as genuine business expenses."
7. Aggrieved by this, the revenue is in appeal before us.
8. Learned Departmental Representative, Shri Ram Bilash Meena, appearing on behalf of the revenue, vehemently contended that he had no objection to the arithmetical error being corrected. However, the fact remains that no evidence was placed before the assessing officer and even if the arguments, of the assessed for a moment are considered, then no finding with regard to the genuineness has been given by the Commissioner (Appeals). Inviting specific attention to the assessment order, it was contended that the assessed was directed vide question No. 38 of the questionnaire to furnish details regarding foreign traveling and copy of the tour report. The assessing officer has specifically directed the assessed to furnish names and addresses of the persons visiting the foreign countries along with their copies of passports, purpose of traveling in support thereof. Thus, why it could not placed before the assessing officer was questioned.
9. The learned authorised representative, on the other hand, apart from heavily relying upon the submissions made before the Commissioner (Appeals) which have been reproduced by him in pp. 4 and 5 of the impugned order, invited attention to the appeal effect order dated 18-12-1998, wherein relief has been granted observing as under :
"(i) Foreign traveling expenses The assessing officer has made disallowance of Rs. 11,26,606 under this head. The learned Commissioner (Appeals) has directed to recompute it after going through the arithmetical error, and deleted the addition. The assessed has now filed all the details and evidences of foreign traveling expenses. The assessed accordingly gets a relief of Rs. 11,26,606."
10. Inviting attention to various pages of the paper book appended from pp. 1 to 26, it was contended that most of these evidences were placed before the assessing officer. However, some of them were placed before the Commissioner (Appeals).
11. Having heard the rival submissions and perused the material placed on our files, we are of the view that although the assessing officer in the appeal effect order dated 18-12-1998, gives a finding that assessed has now filed the details and evidences of foreign travel expenses, however, it is seen that the Commissioner (Appeals) had only restored the issue pertaining to the arithmetic error pointed out in the written submissions and had directed that the traveling expenses be treated as genuine business expenses. In these circumstances, the finding of the assessing officer that he has examined the documents is only pertaining to the arithmetical error as no direction with regard to the fact that the genuineness may be examined was given by the Commissioner (Appeals). In these circumstances, after perusing the submissions made before the Commissioner (Appeals) and considering the finding arrived at by him, we are of the view that issue of genuineness of the expenditure has not been examined or addressed. We have seen that the assessed has sought to rely upon pp. 1 to 26 in support of the contention that the traveling expenses have been rightly deleted by the Commissioner (Appeals) after examining the material. It is seen that some of the evidences as per the certificate appended in the paper book were not placed before the assessing officer and it is seen that learned Commissioner (Appeals) has not discussed these at all. In these circumstances, we are of the view that it would be appropriate to restore the issue back to the file of the learned Commissioner (Appeals) with the direction to decide the ground after taking into consideration the submissions made on behalf of the assessed and if need be, obtaining a remand report from the assessing officer. Accordingly, the ground raised is restored to the file of the Commissioner (Appeals) with the above direction to be disposed in accordance with law after giving the assessed an opportunity of being heard.
12. The facts pertaining to ground No. 2 wherein the assessing officer makes a disallowance of Rs. 3,76,000 observing as under :
"3. During the year the directors' remuneration has been increased to Rs. 11.94 lakhs as against last year of 4.16 lakhs. Vide order sheet dated 27-6-1997, the assessed was specifically requested to furnish reasons for increase in salary of directors from Rs. 13,000 per month to Rs, 72,000 per month, i.e., increase of more than five times. The assessed submitted vide letter dated l5-10-1996, that turnover of the company has increased from 313.8 lakhs in 1990-91 to 1057.98 lakhs in 1993-94. The Managing Director, Sh. Arvind Dam, was appointed with effect from 1-7-1991, on a remuneration of Rs. 13,000 per month and commission of 1 per cent of the net profit of the company. Since then, there has been no revision in his remuneration irrespective of the fact that there was increase in net profit by 83.75 times. The present remuneration is very less as compared to prevailing pay package in the industries. Due to increase in the profits, turnover and good performance of the company the managing persons of the company needed to be rewarded, The assessed further pleaded that due to increase in work load, need was felt to revise the remuneration of managing director up to 5 per cent of the net profits in accordance with notification of the Government of India GSR No. 48(E), dated 1-2-1994. Since the company has sufficient profits the remuneration was fixed in accordance with the said notification. The assessed's argument is not acceptable. Even though turnover of the company has increased the assessed had not been able to justify the increase from Rs. 13,000 per month to Rs. 72,000 per month with effect from 1-10-1994. Increase should be reasonable vis-a-vis production as compared to last year. The grant of five-fold increase is unjust at the cost of shareholders, particularly when assessed is having profit. In the case of M/s Omex Auto Ltd., another concern functioning in Gurgaon salary of two directors was, Rs. 3,12,000 per annum besides commission and it was only with effect from 1-4-1995, the salary of Managing Director was fixed at Rs. 30,000 per month while tile turnover of the company had reached Rs. 3,456.79 lakhs. In the case of the assessed, turnover is only Rs. 1,569.79 lakhs that is 60 per cent of the turnover of M/s Omex Auto Ltd. Accordingly, salary of each director is restricted to Rs. 25,000 per .............. resulting in addition of Rs. 47,000 per month under s. 40A(2)(a) of the Act, being excessive and unreasonable. Total disallowance works out to Rs. 3,76,000 for the two directors."
13. Aggrieved by this, in appeal before the Commissioner (Appeals), the following submissions were made :
"Learned assessing officer has disallowed a sum of Rs. 13,76,000 out of directors' remunerations by allowing remuneration equal to Rs. 50,000 per month for both the directors and disallowing Rs. 47,000 per month. But how learned assessing officer has arrived at the figure of Rs. 3,76,000 is not clear from the order. Facts of the case is that an aggregate remuneration of Rs. 11,94,428 was paid to M.D. and E.D., the details of which are as under :
Amount M.D. Rs. 6,23,943 E.D. Rs. 5,70,485 Rs. 11,94,428 But, in P&L a/c, only a sum of Rs. 7,73,428 was debited which is clear from Schedule 10 of the balance sheet. In fact, a sum of Rs. 4,21,000 was capitalized in Unit-II and was not claimed as revenue expenses.
Therefore, the first contention of the assessed is that when assessed itself claimed deduction of Rs. 7,75,428 in its P&L a/c on account of directors' remunerations and Rs. 50,000 per month is allowed, the disallowance cannot exceed Rs. 1,73,428 (7,73,428 - 6,00,000). Therefore, even as per the working of learned assessing officer, disallowance of Rs. 3,76,000 was incorrect.
Now, coming to the merits of the case, it is respectfully submitted that assessed is a limited company in which public is substantially interested. It has got number of shareholders. Any increase in salary of the directors has not only got to be approved from the Board but also from the shareholders in the Annual General Meeting which is clear from Annual Report of 1993-94 and copy of form and resolutions submitted to RoC. Therefore, no motive can be attributed. Not only this, remuneration of the directors has got to be in terms of Sch. XIII to the Companies Act and power to increase remuneration within the limit of Sch. XIII has been delegated by law to the shareholders. Hitherto before, this power was vested in the Company Law Board which is now substituted in the shareholders within the four corners of Sch. XIII of the Companies Act. Since the remuneration paid to the directors was within the limits prescribed in Sch. XIII and approved by the supreme body of the shareholders, no disallowance can be made out of the remuneration. Approval of the shareholders stands on the identical footing and has similar force that of erstwhile power of Company Law Board. In the yester-years, Hon'ble Courts in the undernoted decisions have held that the directors remuneration if approved by Company Law Board cannot be disallowed. Therefore, following that ratio impugned disallowance may please be deleted.
(i) CIT v. Shn Ram Pistons & Rings Ltd. (1990) 181 ITR 230 (Del).
(ii) Trinity Pharmaceuticals (India) (P) Ltd. v. CIT (1994) 206 ITR 431 (Ker).
(iii) CIT v. Atmaprakash Aishiram Batra (1994) 75 Taxman 394, 398 (Bom).
(iv) CIT v. Mehta Electrosteel Ltd. (1995) 126 Taxation 76, 79-80 (Del).
"It is further submitted that these directors started drawing remuneration from l-7-1991 and their remuneration remained static over the years. When assessed- company started faring well, the shareholders increased the remuneration, a detailed note on which is placed in the paper book. Therefore, there was no case for disallowance out of directors remuneration.
Regarding contention of learned assessing officer regarding directors of M/s Omex Auto 12 Ltd., it is submitted that the facts of this case were not confronted to the assessed and, therefore, assessed is not in position to assail this case. Moreover, facts of this case may be different and there may be material difference between the extent of responsibilities and hierarchy. In fact, there cannot be any thumb rule for it.
Therefore, disallowance of Rs. 3,76,000 made in a highly subjective manner may please be deleted."
14. The issue was decided by the learned Commissioner (Appeals) observing as under :
"Disallowance out of directors' remuneration amounting to Rs. 13,76,000. Respectfully following the ratio given by the Hon'ble High Courts, this addition is hereby deleted."
15. Aggrieved by this, the revenue is in appeal before us.
16. It was contended by the learned Departmental Representative that substantial increase in the salary, almost 5 times, has been claimed by the assessed. No specific reason has been advanced. It. is not the case that the assessed's turnover has increased or profit has increased over five times. It was vehemently contended by him that how have the directors justified the steep enhancement in their remunerations. If they were so capable, then why should they have been receiving a salary which was much below their intelligence and capability and if they were getting the legitimate salary in the earlier years, then how has their capability or intelligence enhanced to that extent that remunerations paid to them increase suddenly five times. Inviting attention to Khan Carpets v. CIT (2003) 262 ITR 325 (All), it was contended that no specific circumstance justifying the enhancement has been considered. It was contended that it is a company whose shares are quoted and public is substantially interested. Thus, simply getting the approval of the company board by itself does not justify the factum of increase.
17. On behalf of the assessed, on the other hand, reliance was placed upon the impugned order. Attention was invited to the submissions made by the assessed before the Commissioner (Appeals) recorded at pp. 6 and 7 of the impugned order. It was contended that the assessed had claimed Rs. 7,73,428. The assessing officer has allowed about Rs. 50,000 for both the directors. Thus, Rs. 6,00,000 already stood allowed, the disallowance at most could be Rs. 47,000 per month for both the directors.
18. It was further contended that once it has been accepted in the past, how the increase can be questioned. Inviting attention to Oxan Auto, it was contended that the basis was never confronted to the assessed and, as such, should be disregarded.
19. Having heard the rival submissions and perused the material available on record, it is seen that the aspect being of recurrent nature requires to be considered with facts on record. The sudden increase in the salaries of directors on account of improved performance needs to be co-related with the salaries earned by other employees during the period. The aspect whether the performance improved solely due to the contributions of the directors also needs to be seen. It is also seen that even the assessing officer has made the disallowance without going into specific facts since the argument advanced on behalf of the assessed shows that at best, the disallowance could be limited to only a fraction of the sum. Accordingly, in the interests of justice and looking at the nature of the disallowance, the issue is restored to the file of the assessing officer with the direction to adjudicate upon the issue de novo after giving the assessed all opportunity of being heard.
20. The facts pertaining to ground No. 3 wherein an addition of Rs. 79,50 has been made by the assessing officer are as under:
"6. Under the head legal and professional expenses the assessed has incurred expenditure of Rs. 79,500 on account of payment to Rajan Berry & Associates for some audit work. The assessed was specifically requested to furnish evidence of services rendered by Rajan Berry & Associates. The assessed stated that it was engaged for some internal work. The assessed was specifically asked to produce audit report prepared by Rajan Berry & Associates, vide order sheet dated 9-7-1997. Despite request made the assessed did not produce such audit report. The assessed submitted only a copy of bill dated 5-5-1995, for the period 1-10-1994 to 31-3-1995 @ Rs. 6,000 per month. In the absence of any evidence of services rendered the entire expenditure of Rs. 79,500 is disallowed."
21. In appeal before the first appellate authority, the following submissions were made:
"Learned assessing officer has disallowed a sum of Rs. 79,500 paid to chartered accountants M/s Raja Beri & Associates being the amount of fee paid to them for concurrent audit.
The details of legal/professional charges are enclosed in the paper book which would show that an aggregate sum of Rs. 79,500 was paid to M/s Rajan Berry & Associates, chartered accountants, by way of their fee for carrying out audit. A copy of bills of M/s Rajan Berry & Associates was also submitted which has been taken note of by learned assessing officer also in the order. M/s Rajan Berry & Associates were appointed as concurrent auditors at the instance of IFCI, a term-lending institution which is clear from the copy of letter dated 25-9-1991, of IFCI.
It is a matter of common practice that term-lending institution stipulates that some concurrent auditors appointed by them will do concurrent audit. Since assessed- company has also taken loan from IFCI, M/s Rajan Berry & Associates was appointed concurrent auditors.
Therefore, in the light of the above facts and evidence placed in the paper books, impugned expenses may please be allowed.
It is not out of place to submit that there was no audit report prepared by them nor it is necessary to prepare audit report in all cases. The job of the concurrent auditors is to audit the accounts of every day on day-to-day basis and get the errors rectified then and there on the spot. Therefore, the disallowance of the expense on the sole ground that audit report was not produced has got no substance and disallowance may therefore, please be deleted."
22. Considering this, the addition made was deleted with the following finding :
"Disallowance out of legal and professional charges amounting to Rs. 79,500. Considering the arguments of the appellant, this disallowance is deleted."
23. Aggrieved by this, the revenue is in appeal before us.
24. Learned Departmental Representative placed reliance upon the assessment order. Reliance has also been placed upon 73 ITR 63 (SC) (sic) and Lachminarayan Madan Lal v. CIT (1972) 86 ITR 439 (SC).
25. Learned authorized representative, on the other hand, placed reliance upon the impugned order and submissions made before the Commissioner (Appeals) reiterated by him. Apart from that, reliance was also placed upon various pages of the paper book. Specific attention was invited to p. 40 which is issued by IFCI to the assessed-company that the said chartered accountants had been appointed as the internal auditors of the . assessed-company from 1991-92 assessment year onwards.
26. Having heard the rival submissions and perused the material available on record, we are of the view that in the peculiar facts and circumstances of the case, the ground raised by the revenue deserves to be rejected. It is seen that the case of the assessed is that no audit report was prepared by the said firm and in fact they were appointed by the bankers, i.e., IFCI, to look into the internal audits and rectify any mistake as and when it occurs. Since this is an on going process and bill raised from the said firm has also been placed on record before the tax authorities, accordingly, the ground raised is rejected.
27. In the result, the appeal filed by the revenue is partly allowed for statistical purposes.
28. In ITA 2925, the grounds raised by the revenue read as under :
"On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in law in :
1. allowing relief of Rs. 2,00,000 + Rs. 50,228 + Rs. 10,000 + Rs. 71,229 on account of foreign traveling regarding Unit-I.
2. deleting the disallowance of Rs. 2,56,659 on account of foreign traveling regarding Unit-II.
3. deleting the disallowance of Rs. 8,32,752 made under section 40A(2)(4) on account of remuneration to directors.
4. restricting the disallowance to 1/8th from 1/5th of expenditure of Rs. 1,08,723 on account of telephone expenses.
5. restricting the disallowance to 1/8th of only M.D.'s car expenses out of total disallowances of Rs. 2,49,854.
6. deleting the disallowance of Rs. 19,525 + Rs. 25,000 on account of office expenditure.
7. deleting the addition of Rs. 15,55,570 + Rs. 11,89,058 on account of depreciation on newly installed machinery.
8. deleting the disallowances of Rs. 3,83,100 on account of legal and professional expenses.
9. deleting the interest charged under sections 234B and 234C.
without appreciating the findings of the assessing officer discussed in detail in the assessment order and without assigning any reasons simply relying upon the submission of the assessed."
29. The facts pertaining to ground Nos. 1 and 2 are as under :
"4. A sum of Rs. 32,63,899 is claimed in the P&L a/c under the head 'traveling and conveyance expenses'. In the tax audit report filed with the return there is no mention about foreign travel and the annexure vide which disallowance as per r. 6D is made is also not attached with the report. However, details filed during the course of assessment proceedings show that a sum of Rs. 9,38,340 is incurred on foreign traveling through Unit-I of the assessed- company and a sum of Rs. 2,55,659 is incurred on foreign traveling - through Unit-II of the assessed-coinpany. A further breakup of these expenses shows that in Unit-I, the expenditure on foreign traveling is incurred on directors Sh. Arvind Dham, Sh. W.L. Dham, Sh. Sanjay Chhabra, besides Sh. A.K. Mehta, Sh. A.K. Sayal, Sh. Shin and Sh. Prabhakaran. As regards the foreign travel of Sh. Arvind Dham the purpose of his foreign visit to Britain, Italy and Muscot is explained to be the exploration of export markets abroad. The same is the case with Bangkok and Japan visit of Sh. Arvind Dham. However, as regards the visit of Sh. A.K. Mehta and Sh. A.K. Sayal to Bangkok, the explanation given is that they went abroad to get technical know-how for flywheel, ring gear. How Sh. Mehta and Sh. Sayal were related to the assessed- company is, however, not clear from the details filed nor do their names appear in the other details relating to inland traveling, etc., filed by the assessed. In the circumstances the relevance of these people and the foreign trips undertaken by them to the business of the assessed- company is not known. The expenditure of Rs. 57,520 claimed on account of their visit is, therefore, not allowed as business expenditure. The same is the case with the Bangkok visit of Sh. Shin. The expenditure of Rs. 30,866 claimed in his name is also not allowed. Moreover, the expenditure on account of foreign visit of Sh. A.K. Mehta, Sh. Sayal and Sh. Shin is claimed in respect of their air tickets only without any accompanying expenditure on their hotel stay, etc. abroad. The assessed did not explain how and from where the expenditure on their stay abroad was met. Similarly, in respect of the foreign trips of Sh. Arvind Dham and Sh. Sanjay Chhabra and Sh. Prabhakaran to Muscat and Tokyo, only the expenditure on air ticket is claimed without any corresponding expenditure on boarding and lodging abroad. In the case of Sh. Arvind Dham the source of expenditure on boarding and lodging in Italy is also not informed although expenditure on account of air ticket to Italy is claimed at Rs. 50,228. In the absence of any such details and evidences as regards the source of expenditure on boatding and lodging abroad the same is estimated at Rs. 2,00,000 in the case of Italy, Muscat, Tokyo visits of Sh. Arvind Dham, Sh. Sanjay Chhabra and Sh. Prabhakaran, and added back -towards the taxable income of the assessed- company as expenditure met out of unexplained sources. In the case of Sh. W.C. Dham, a sum of Rs. 71,229 is claimed on account of foreign currency purchased for his travel to Dubai. However, there is no claim in respect of expenditure on the air ticket for his travel to Dubai. The same is estimated Rs. 10,000 and in the absence of any evidence as regards its source the said sum of Rs. 10,000'is also added as unexplained expenditure of the assessed- company. Further, since the purpose of visit to Dubai is not informed the sum of Rs. 71,229 claimed on account of foreign currency purchased is also disallowed.
4.1 The total disallowance out of foreign traveling expenses claimed through Unit-I thus comes to Rs. 4,06,843 (Rs. 57,520 + Rs. 30,866 + Rs. 2,00,000 + Rs. 71,229 + Rs. 10,000 + Rs. 50,228).
4.2 So far as expenditure on foreign travel through Unit-II is concerned, the same, as per the details filed, is incurred on the foreign trip of Sh. V.K. Kansal, Chief Executive of the company to Muscat, Hongkong, Seoul, etc. The purpose of his visit is, however, not informed. It was also not clarified if the visits were wholly and exclusively for the purpose of assessed's order of the last year, a sum of Rs. 2,56,659 claimed on foreign travel in Unit-II is also disallowed."
30. In appeal before the Commissioner (Appeals), the submissions made were as under :
"(a&b) First, it is submitted that Mr. Mehta and Mr. Syal were employees of the assessed- company and Mr. Shin was co-ordinator and it is very strange on the part of the assessing officer to record that they were not related to the assessed- company merely on the ground that their names did not figure at the domestic traveling list. They did not undertake any traveling in India hence there was no question of their names being included in that list. As submitted above, they were related to the company as employees and co-ordinator, visits undertaken by them were meant for assessed's business. Hence, expense on their traveling and disallowed for Rs. 57,520 and Rs. 30,866 may please be allowed. No query whatsoever on their relationship with company was asked by the learned assessing officer during the assessment proceedings.
(c) Further, addition has been made for Rs. 2,00,000 on estimate as according to learned assessing officer there was no boarding and lodging expenses of Mr. Dham, Mr. Chhabra and Mr. Prabhakaran.
It is submitted that nothing was asked or confronted by learned assessing officer on this score. However, it is submitted that expense on such account was met by the hosts and, therefore, no expenses were incurred by the assessed- company on boarding and lodging. Since no expense was incurred, th&e was no question of such expenses being shown by the assessed- company. Therefore, to make addition on presumptuous ground is totally incorrect.
Moreover, even if it is assumed though denied that such expense was met out of undisclosed source then learned assessing officer was duty bound to allow the expenditure as business expenditure. Addition is made under section 69C but when it comes to allowance of the expenditure, expenditure is clearly allowable as was held in Sharma Associates v. CIT (1995) 55 ITD 171 (Pune) (TM).
(d) Air ticket expense of Rs. 50,228 on Italy tour was also disallowed for the reason mentioned in (c) above. Since logic of assessing officer regarding boarding and lodging expenses at Italy is countered in (c) above, air ticket expense of Rs. 50,228 disallowed becomes allowable.
(e&f) Mr. W.I. Dham visited Dubai in connection with the exploration of export market. Since nothing was asked by learned assessing officer, there was no occasion for the assessed to explain the talks at Dubai and Middle East have started yielding result in the form of orders received from UAE. Since the ticket was sent by the post there was no expenditure incurred by the assessed- company on that. It is not disputed by learned assessing officer that visit to Dubai was not undertaken. What has been disputed is the purpose and that too for the reason that learned assessing officer was not aware of the reason. In any case, expense cannot be disallowed.
It is not out of place to submit that no opportunity was given by learned assessing officer to explain on the points for which disallowances/additions were made as is evident from the plain reading of the assessment order. Moreover, in assessment year 1995-96 disallowances out of the foreign traveling expenses were deleted in appeal by your goodself."
31. Considering the same, the Commissioner (Appeals) decided the issue as under :
"7. I have considered the submissions made by the learned counsel and have perused the assessment order. The contention of revenue regarding Mr. Mehta, Mr. Syal and Mr. Shin cannot be taken as correct merely on the ground that their names did not appear in the details of domestic traveling, It is not necessary that all the employees of the company must necessarily undertake domestic traveling. Mr. Mehta and Mr. Syal were employees of the company and Mr. Shin was the co-ordinator. Therefore, the disallowances of Rs. 57,520 and Rs. 30,866 on the traveling of Mr. Mehta, Mr. Syal and Mr. Shin are very much expenditure of the assessed- company.
Addition of Rs. 2 lacs made an estimate due to boarding and lodging expenses of Mr. Dharn, Mr. Chhabra and Mr. Prabhakaran is purely ad hoc and based on conjectures. The boarding and lodging was incurred by the hosts and, therefore, there was no such expenditure incurred by the assessed. Therefore, addition based on presumption is deleted.
Moreover, even if it is assumed that such expense was met out of undisclosed source, still the expenditure is allowable since the factum of expenditure has been accepted by the assessing officer on that reasoning also, addition is liable to be deleted.
Air ticket expenses of Rs. 50,228 have been disallowed for the same reason as was assigned when ad hoc addition of Rs. 2 lacs was made. By following the same logic the disallowance of Rs. 50,228 is deleted.
"So far as Dubai expenses of Rs. 10,000 and Rs. 71,229 are concerned, it has been explained that Mr. Dham visited Dubai regarding exploration of export market. Since, the purpose is very much business purpose, I do not see any reason for upholding the disallowances and the disallowances of Rs. 10,000 and Rs. 71,229 are deleted. Thus, total disallowance agitated under this ground is deleted.
Before I part with my decision on this ground, it is mentioned that disallowance was made out of foreign traveling expenses in assessment year 1995-96 also which was deleted by me in my order for that year."
32. Before us, the revenue is not challenging the additions of Rs. 57,520 and Rs. 30,866, and confining its appeal only to the additions of Rs. 2,71,229, Rs. 10,000 and Rs. 50,228 with respect to Unit-I and Rs. 2,56,659 with respect to unit-II.
33. The learned Departmental Representative relying upon the assessment order contended that no details with respect to the expenditure claimed have been made before the assessing officer. Inviting attention to p. 2 of the assessment order, it was emphasized that in the tax audit report, there is no mention about foreign travel and the annexure vide which disallowance as per rule 6D made is also not attached with the report. Accordingly, the contention was that in these circumstances, the additions made could not have been deleted without looking into the specific reasons and basis for making the disallowance. It was also questioned by him that how Mehta and Syal are related to the assessed-concern. Accordingly, the contention was that the impugned order deserves to be set aside and addition made by the assessing officer deserves to be upheld.
34. Learned authorized representative, apart from relying upon the submissions made before the Commissioner (Appeals), placed reliance upon the findings given by him. Reliance was also placed upon pp. 1 to 5 of the paper book justifying the expenses incurred on foreign travel.
35. Having heard the rival submissions and perused the material placed on our files, we are in agreement with learned Commissioner (Appeals) inasmuch as simply because Mr. Syal, Mr. Shin and Mr. Mehta did not appear in domestic traveling this by itself should not have been sufficient reason in disallowing their expenses. It is necessary to see whether Mr. Syal/Mr. Mehta and Mr. Shin were employees/coordinator of the company. It is seen that the assessed- company had claimed Rs. 32,63,899 under the head traveling and conveyance expenses. The assessing officer observing that the tax audit report filed with the return does not mention foreign travel and the annexure vide which disallowance as per rule 6D was considered. Thus, in the absence of these, he proceeded to make disallowances of Rs. 4,06,843 and Rs. 2,56,659... Accordingly, after taking into consideration the various facts and circumstances and the specific observation of the assessing officer, we are of the view that in the circumstances, it would be appropriate to restore the issue back to the file of the Commissioner (Appeals). It is pertinent to observe that the Commissioner (Appeals) has relied upon his own order for 1995-96 assessment year which too has been restored back by us in the earlier part of this order. Accordingly, the said ground too is restored to the file of the Commissioner (Appeals) to decide the same in accordance with law after giving the assessed an opportunity of being heard. The assessed is directed to place on record the disallowance worked by it as per rule 6D and any other material in support of its claim.
36. The facts pertaining to ground No. 3 are that the assessing officer made disallowance of Rs. 8,32,752 observing as under :
"5. A sum of Rs. 17,92,762 is claimed on account of directors' remunerations and perquisites under the head of "Adnin., selling and other expenses" in the P&L a/c. Further, as per the details filed during the course of assessment proceedings the directors' remunerations are paid as under :
Sh. Arvind Dham M.D. Rs. 8,83,649 Sh. W.L. Dham, Ex-Director Rs. 9,09,113 In the immediately preceding year, the directors' remunerations and perquisites were claimed at Rs. 11,94,000. Thus, there is an increase of about 6 lakhs in the directors' remunerations and perquisites as compared to last year. In the assessment order of last year a detailed discussion was made on this point and it was found that the assessed-company was not able to justify the increase from Rs. 13,000 per month in assessment year 1994-95 to Rs. 72,000 per month in the assessment year 1995-96 and accordingly the salary of each director was restricted to Rs. 25,000 per month. In the year under consideration as seen from the above, the salaries of the MD and Executive Director have been further increased to Rs. 73,637 and Rs. 75,759 per month, respectively. The assessed has not given any reasons for this revision in the remunerations and perquisites of the directors. In the absence of any justification and valid reasons for increase as also for the detailed reasons given in the assessment order of last year, the salary of each director is restricted to Rs. 40,000 per month keeping in view the salary allowed at Rs. 25,000 per month in preceding year. Accordingly, the balance sum of Rs. 8,32,752 (Rs. 73,637 - Rs. 40,000 = Rs. 33,637 x 12 = 4,03,644 + Rs. 75,759 - Rs. 40,000 - Rs. 35,759 x 12 = Rs. 4,29,108) in the case of managing director and in the case of executive director is disallowed collectively. A total disallowance of Rs. 8,32,752 is, therefore, made under section 40A(2)(a) of Income Tax Act, 1961."
37. Before the Commissioner (Appeals), the submissions made were as under :
"3.6 learned assessing officer has disallowed an aggregate sum of Rs. 8,32,752 out of directors' remunerations paid to MD and ED on the ground that it was excessive under section 40A(2)(b). Learned assessing officer has restricted the remuneration @ Rs. 40,000 p.m. It is respectfully submitted that learned assessing officer has grossly erred in making disallowance out of directors' remunerations under section 40A(2). assessed is a public limited company and the remunerations to directors can be paid subject to the limits laid down under Sch. XIII. Remuneration was paid in consonance of the provisions contained in Sch. XIII and was not increased during the year. In fact, last year increase was effect from mid of the year and a portion of remuneration was capitalized. That is why, there appears to be a wide gap between the remuneration paid last year and this year. Otherwise, remuneration paid per month is identical to what was increased last year.
In fact, identical disallowance was made in assessment year 1995-96 which was deleted on appeal by your goodself. Arguments of the assessed given in assessment year 1995-96 may please be treated to have been addressed here also.
It is not out of place to submit that no opportunity whatsoever was given to the assessed before making impugned disallowance and therefore, also the disallowance is misconceived."
38. The Commissioner (Appeals) proceeded to dispose of the issue at p. 18 para 9 as under :
"9. I have considered the submissions of the assessed and find that no opportunity whatsoever was given to the assessed to explain. In fact, this issue is covered by my appellate order for assessment year 1995-96, and following that the disallowance of Rs. 8,32,752 is-hereby deleted."
39. Aggrieved by this, the revenue is in appeal before us.
40. The learned Departmental Representative, apart from relying heavily upon the arguments advanced, with respect to identical ground raised in 1995-96 assessment year, contended that if the learned Commissioner (Appeals) was of the view that no opportunity was given to the assessed to explain the increase in remuneration, then he could have restored the issue and given the assessed an opportunity but there was no reason or basis for deleting the addition.
41. Learned authorized representative, on the other hand, relying upon the impugned order and submissions made before the Commissioner (Appeals), reiterated the submissions advanced in identical ground raised by the revenue in 1995-96 assessment year.
42. Having heard the rival submissions and taken note of the fact that it has been advanced by the assessed that no opportunity was afforded to it by the assessing officer before the disallowance was made by him which fact has found favor with the learned Commissioner (Appeals) and observing that in 1995-96 assessment year this ground has been restored by us back to the file of the Commissioner (Appeals), we are of the view that it would be appropriate in the circumstances to restore this ground too back to the file of the Commissioner (Appeals) with the direction to decide the same in accordance with law by way of a speaking order after giving the assessed an opportunity of being heard.
43. With respect to ground Nos. 4 and 5, the learned departmental Representative places reliance upon the assessment order. Learned authorized representative, on the other hand, relies upon Dy. CIT v. Haryana Oxygen Ltd. (2001) 76 ITD 32 (Del).
44. Having considered the submissions and perused the material placed, on record, we are of the view that in the peculiar facts and circumstances of the case, taking into consideration the decision relied upon, the grounds raised by the revenue deserve to be rejected.
45. The facts pertaining to ground No. 6 are as under :
"9. A sum of Rs. 8,84,704 is claimed under the head 'office and factory expenses' in the P&L a/c. While details are given (except a monthly break up) in respect of such expenses incurred through Unit-I, the details filed in respect of Unit-II show that a sum of Rs. 19,595 is claimed on account of wood purchased for table and cabin. Since the expenditure is incurred to acquire an asset of enduring nature, namely, namely table and cabin which are fixed assets, the said expenditure is capital in nature and hence not allowed as revenue expenditure. However, depreciation at the rate of 10 per cent is allowed on the said expenditure of capital nature. So far as factory and office expenditure incurred through Unit-I are concerned, since no details as regards the nature of these expenses are furnished except a monthly break up of the expenses, it is not possible to verify the exact nature of these expenses. In the circumstances, a sum of Rs. 25,000 is disallowed by estimate out of the expenses claimed under this head in Unit-I."
46. In appeal before the Commissioner (Appeals), the submissions made were as under :
"Learned assessing officer has treated Rs. 44,595 out of office and factory expenses as capital expenditure and has allowed depreciation of Rs. 1,959 and thus net addition has been made for Rs. 42,636.
Insofar as addition of Rs. 25,000 is concerned the disallowance is purely ad hoc and without any basis. No opportunity was given by learned assessing officer before making disallowance and, therefore, ad hoc addition of Rs. 25,000 is liable to be deleted.
Insofar as other part of Rs. 19,525 is concerned it is submitted that expense was on cabin which is made of wooden and which is purely temporary in character. As per IT Rules, depreciation rates on temporary wooden structure in any case is 100 per cent Therefore, even if impugned sum of Rs. 19,525 is treated as capital expense, depreciation of 100 per cent may please be allowed.
47. Considering this, the Commissioner (Appeals) proceeded to delete as under :
"13. Regarding disallowance of Rs. 25,000, 1 am in agreement with the learned counsel that disallowance is purely ad hoc and is not sustainable, and is hereby deleted.
Regarding other part of Rs. 19,525 is concerned, it is noticed that the expenditure was on temporarily wooden structure which is eligible for 100 per cent depreciation. Therefore, 100 per cent depreciation is directed to be allowed.
48. The learned Departmental Representative invited attention to the assessment order and contended that the wood purchased for table and cabin for which disallowance of Rs. 19,595 has been made, the assessed has acquired an asset of enduring nature. With respect of the addition to the extent of Rs. 25,000 made referring to the assessment order, it was contended that no details regarding the details of nature expenses through Unit-I had been furnished. As such, the assessing officer was very much within his rights to make an ad hoc disallowance on account of a total expenditure of Rs. 8,84,704... made under the head office and factory expenses since it was not possible for him to verify the exact nature of these expenses.
49. The learned authorized representative, on the other hand, contended that expenditure incurred was for a temporary wooden partition and table and chair. As such, it has rightly been deleted by the Commissioner (Appeals).
50. Having heard the rival submissions and perused the material on record, we are of the view that in the peculiar facts and circumstances of the case, the learned Commissioner (Appeals) was not justified in deleting the addition in a casual manner. No doubt, ad hoc disallowance has been made by the assessing officer. However, they have been made purely on account of the fact that the claim of Rs. 8,84,704 under the head office and factory expenses was made by the assessed. Unless and until necessary supporting evidence is placed before him, it is not possible to decide the nature of the expenditure. No doubt, temporary wooden partition under the Act is to be granted 100 per cent depreciation, in certain circumstances, however, wood purchased for table, etc., will not fall in that category. Similarly, with respect to Unit-I, it is seen that the details with regard to the expenses were not furnished. As such, the question of verifying their nature does not arise. However, looking into the arguments on behalf of the assessed that the assessing officer did not confront the assessed, accordingly, we are of the view that this issue too should be restored back to the file of the Commissioner (Appeals) for adjudication. Needless to say that the Commissioner (Appeals) will afford an opportunity of being heard to the assessed and decide the issue by way of a speaking order in accordance with law.
51. The facts pertaining to ground No. 7 are as under :
"10. From the depreciation chart filed with the return, it is noticed that assessed has claimed depreciation on additions to plant and machinery as under :
Block-II Opening Balance Additions Total Depreciation claimed (Rs.) (Rs.) (Rs.) (Rs.)
(a)
(b)
(a)+(b) Plant and Machinery 7,38,51,644 6,89,14,298 14,27,65,942 3,41,73,172 Block-III Plant and Machinery 22,48,965 1,13,42,683 1,35,91,648 1,35,91,648 The assessed was asked to furnish details of additions to plant and machinery. From the details filed with letter dated 6-10-1998, it is noticed that assessed has made additions to plant and machinery to the tune of Rs. 3,92,87,636 in Unit-I. A scrutiny of the vouchers filed along with these details in respect of new machinery purchased, however, revealed that the date of removal of plant and machinery from the factory from where purchases are made is very near to the date of commissioning of that machinery in that factory premises of the assessed as shown in the said details. As e.g. SPN hole milling and gun reaming machine worth Rs. 44,72,640 (net of excise) dispatched from Madras on 10-9- 1995, is shown as commissioned on 25-9-1995. Similarly, a vertical honing machine worth Rs. 57,11,982 dispatched from Bangalore on 20-9-1995, is shown as commissioned on 25-9- 1995. Again, it is noticed that a gun drilling machine worth Rs. 22,69,943 (net of excise) dispatched from Bangalore on 24-9- 1995, is shown as commissioned on 29-9-1995. It is unbelievable that such a huge and expensive machinery dispatched from Bangalore as well as Madras could arrive at the assessed's premises and could also be installed and commissioned in a short period of 5 days. The assessed did not furnish any documentary evidence in support of the transportation of the said machinery nor any evidence furnished in respect of installation or commissioning of these machines on the dates as claimed by the assessed. The assessed was specifically asked vide para 8(iii) of this office letter dated 14-10-1998, to furnish evidence about installation and commissioning of these machines. It was also pointed out to the assessed in the said letter that a heavy machinery like the one mentioned above would take a minimum of 8-10 days to reach the factory premises of the assessed from the supplier's premises located thousands of kilometers away in Madras and Bangalore. In the circumstances, how could the machinery be finally commissioned on the dates at a gap of 4 to 5 days after removal from the supplier's premises as claimed by the assessed. Moreover, no reply was given by the assessed on these queries. There was also no evidence of any foundation work done or any new electric connection taken by the assessed before undertaking the installation of the new machinery as claimed. A sophisticated machinery of such a high value would need atleast some ground work, preparation and counselling by some expert before installation and commissioning. But no such evidence was furnished in respect of the services of any technician or engineer, etc., engaged for the purposes of installation and commissioning of machines. In view of these facts, the assessed's contentions about installation and commissioning of machines within five to ten days of purchase from places as far as in Madras and Bangalore could not be accepted and hence assessed's claim for depreciation .on these machineries @ 25 per cent on the basis of the alleged use for more than 180 days is not allowed, and the same is restricted to the 50 per cent of the claim. The depreciation claimed by the assessed on the said three machines is to the tune of,Rs. 31,11,141 (the cost of SPN hole milling and gun reaming machine, Rs. 44,72,640, vertical honing machine Rs. 57,11,982 and gun drilling machine Rs. 22,59,943 aggregating to Rs. 1,24,44,565, and depreciation Co) 25 per cent works out to Rs. 31,11,141 out of which Rs. 15,55,570 is disallowed.
(i) Further, as is obvious from the above narration of facts, the assessed has deliberately made a wrongful claim of depreciation by claiming that machineries dispatched from places as far as in Madras and Bangalore on 10-9- 1995 and 24-9- 1995, have been installed and commissioned on 25-9- 1995 and 29-9- 1995, respectively, and thereby reduced its taxable income. Hence, penalty proceedings under section 271(1)(c) are also initiated for concealment of income and furnishing of inaccurate particulars thereof.
(ii) Similarly, from the details of additions to plant and machinery in Unit-II, it is noticed that assessed has capitalized a 600 tonnes press worth Rs. 95,12,464 on 15-1-1996. Details of cost of the same press valued at Rs. 95,12,464 have also been filed Along with purchase vouchers in respect of each of the item comprised therein. However, on a scrutiny of the said details and vouchers, it is noticed that the major components of the press worth Rs. 20,77,464 and Rs. 57,95,081 forming part of the total cost of Rs. 95,12,464 are imported by the assessed vide two separate bills of entry dated 10-9-1995. The said two components have been transported to the premises of the assessed on 26-9- 1995. There is not other evidence as to when the said two major components reached the premises of the assessed from the port of import, how and by whom the same were installed and whether the services of any qualified person or a technical were availed for the purposes of installation and commissioning or not. In the absence of any evidence whatsoever regarding the installation and commissioning of the machinery, the depreciation claimed by the assessed on the said 'Press' is also not allowed. Accordingly, depreciation @ 12.5 per cent on the said machinery worth Rs. 95,12,464 amounting to Rs. 11,89,058 is disallowed. Penalty proceedings under section 271(1)(c) are initiated on this account too."
52. In appeal before the first appellate authority, the arguments advanced were as under
"3.11 learned assessing officer has disallowed depreciation to the extent of 50 per cent on these machines by holding that these machines were installed after 1-10-1995, and have therefore, allowed depreciation for loss than 180 days. Accordingly, disallowance was made to the extent of Rs. 15,55,570.
It is respectfully submitted that the inferences now drawn in the assessment order were not made known to the assessed during the course of assessment proceedings and no opportunity was provided before making impugned disallowances.
SPN hole milling and gun reaming machine was very much installed and commissioned well before 3-10-1995, as is clear from the evidences enclosed. Similarly vertical honing machine and gun drilling machine were also installed and commissioned well before the deadline date of 3-10-1995. The necessary evidences are enclosed in the paper book.
The belief of learned assessing officer that such machineries could not been installed and commissioned within short time is without any basis and is just surmises and conjecture. It is incorrect to mention that evidence of installation and commissioning was asked. What was asked was the explanation on this aspect which was duly submitted. It was explained that these machines are advance machines and do not require any comprehensive working for installation. But, assessed's plea was rejected without any legal basis, which is clear from the evidences enclosed.
Therefore, it is prayed that wrong disallowance of assessed's claim of depreciation to the extent of Rs. 15,55,570 may please be allowed in view of evidences of installation before 3-10-1995.
3.12 learned assessing officer has disallowed depreciation of Rs. 11,89,058 claimed on 1,600 tonnes press of Rs. 95,12,464 on the ground that evidence of commissioning and evidence of installation were not submitted.
It is respectfully submitted that details of purchase of 1,600 tonnes press were submitted to learned assessing officer together with copies of all bills, two components of Rs, 20,77,994 and Rs, 57,95,081 as referred in the order were received by the assessed well before the close of the year and the impugned press was commissioned on 15-1-1996. Copies of freight bills of these two components were submitted to learned assessing officer and are enclosed in the paper book. Two Russian engineers came to India to help in commissioning of the press whose bills of lodging are also enclosed in the paper book and details of such expenses were given to learned assessing officer in the total details.
Therefore, the contention of the learned assessing officer without appreciating the facts on record is unjustified and depreciation disallowed may please be deleted."
53. Considering the same, the issue was decided as under :
"14. 1 have deliberated the submissions made by the assessed, by the learned counsel and the assessing officer, and have gone through the assessment order. It is pertinent to note that a copy of written submissions and paper book filed by the assessed were forwarded to assessing officer in his report has relied upon the assessment order.
From the evidences filed in the paper book it is clear that volt hole milling and gun reaming SPM was commissioned on 25-9- 1995. Vertical honing machine was also installed and commissioned on 25-9- i995, as is clear from the evidences enclosed in the paper book. Similarly, gun drilling machine arrived with assessed- company on 28-9- 1995 and installed on 29-9- 1995. These facts clearly emerge out from the copy of minutes of the meeting held between the assessed and technical representatives of the suppliers of themachine.
As per section 32, if plant and machinery has been used for more than 180 days, depreciation is to be allowed in full. In other words, if the plant and machinery started working on or before 3rd October of the financial year, it can be said that machinery has been worked for less than 180 days. Therefore, the disallowance of depreciation of Rs. 15,55,570 is hereby deleted.
15. From the facts and evidences placed in the paper book, I find that 1,600 tonnes press was commissioned on 15-1-1996. The two components of Rs. 20,77,994 and Rs. 57,95,181 were received well before the close of the year. Copies of freight bills of these two components were placed before the assessing officer. Two Russian engineers came to India to help in commissioning the press whose bill of lodging is placed in the paper book. In such circumstances. I do not have any option but to accept the contention of the assessed that 1,600 tonnes press was installed on 16-1-1996 and used for the business. The assessed is entitled to claim depreciation of Rs. 11,89,058, and the assessing officer is directed to delete the said disallowance."
54. Aggrieved by this, the revenue is in appeal before us. Learned Departmental Representative relying upon the assessment order contended that no documentary evidence in support of the transportation of the said machinery nor any evidence with respect to installation or commissioning of these was placed by the assessed before the assessing officer. Inviting attention to p. 6 of the assessment order, it was contended that the assessed was specifically asked vide para 8 (iii) of assessing officer's letter dated 14-10-1998, to furnish evidence about installation and commissioning of these machines. Referring to the same, it was further contended that how could a machinery located thousands of kilometers in Madras and Bangalore have reached and also been commissioned. It was further contended that this fact has not been replied to by the assessed since the assessing officer has categorically put the assessed to notice and required him to explain. Accordingly, it was contended that the assessing officer had no alternative than to make a disallowance of Rs. 15,55,575.
55. Similarly, with respect to disallowance of Rs. 11,89,058, necessary evidence of the two major components reaching the assessed's premises from the port of import has not been furnished. It was further contended that despite the specific query of the assessing officer, how and by whom they were installed, whether any services of qualifying nature or a technical person were availed of for the purposes of installation and commissioning was not addressed. It was vehemently contended that the assessed was bound to answer the said queries as the assessing officer required the assessed to file necessary evidence. As such, in the circumstances, learned Commissioner (Appeals) was not justified in deleting the additions in the face of such categoric observations in a cursory manner.
56. Learned authorized representative, on the other hand, relied upon the submissions made before the Commissioner (Appeals) as well as the finding arrived at by him. It was further contended by him that the machinery was installed before 2nd October, and not on 30th September, and 2nd October also would qualify for depreciation as the condition of requisite number of days for availing of the depreciation would be met. It was further contended that the machinery is of a sophisticated nature and does not require much installation time.
57. Having heard the rival submissions and perused the material on record, we are of the view that in the peculiar facts and circumstances of the case, it would be appropriate to restore the issue to the file of the Commissioner (Appeals) with observation to specifically address the reasons discussed by the assessing officer for making the disallowance, the specific notice to which the assessed was put to has not been addressed by the Commissioner (Appeals) in the impugned order. Accordingly, the issue is to be decided afresh after giving the assessed an opportunity of being heard by way of a speaking order in accordance with law.
58. In the result, both the appeals filed by the revenue are partly allowed for statistical purposes.