P.J. GORADIA, A.M. Against order dt. 1st June, 1984 passed by Commissioner (A), Rajkot in his appeal No. CIT/R/232/83-84 grounds taken are as follows. ld. CIT (Appeals ) has erred in law and on facts in allowing guest houses expenses of Rs. 17,782. ld. CIT (A) has erred in law and on facts in allowing excise duty refund of Rs. of 2,39,240. ld. CIT (A) has erred in allowing Extra Shift allowance of Rs. 23,974 on Kilns. assessee is Public Limited industrial company engaged in manufacture of Sanitarywares. It is regularly assessed to tax. assessment was completed under s. 143 r/w s. 144B of Act. claim of assessee in respect of deficit in guest house expenses of Rs. 17,782 was disallowed by ITO on ground that expenditure was hit by provisions of s. 37 as expenditure was more or less entertainment s expenditure. Besides, same was not also allowable as guest house expenditure. On appeal, disallowance was deleted on basis of decision of Tribunal regarding guest house expenditure. ld. departmental representative read details from records with him and submitted that in view of Expln. 5 to s. 37 expenditure was required to be disallowed. order of Tribunal was not material because of explanation. In our opinion, proper course is to set aside division of Commissioner (A) on this ground because we find that he has not properly dealt with issue involved on basis of provisions contained in s. 37(4) and also sub-s. (5) inserted with retrospective effect from 1st April, 1979 is also required to be considered in context of details of expenses claimed under head 'guest house expenses deficit. He therefore, shall redecide issue on basis of details of expenditure claimed by way of deficit in guest house expenses after giving reasonable opportunity to assessee. second ground is in respect of refund of excise duty received by assessee on settlement with Central Excise authorities. system followed by assessee in respect of excise duty payments by assessee and recoveries from customers is that as per past practice, on raising necessary invoice to customer amount of excise duty i s separately recovered as shown in invoice and this amount is separately credited in books of accounts. This amount is not offered for taxation as same is not taken to profit and loss account on basis that it is treated as amount payable to excise Department. When payments are made either earlier to recovery or later on by way of excise duty, payments are made usually in round sums, they are debited to this very account called 'excise duty expenses account' and consequently no deduction is claimed from income because these payments are also not debited to Profit and loss account. It is case of assessee that in case eventually whenever any refunds of excise duty payment is received, may be for various reasons such refunds are refunded to representative stockists from whom recoveries were made. Accordingly, in books of accounts for various assessment years there exists on account called 'Central Excise refund account' wherein refunds are credited and payment made therefrom are debited. In such circumstances, there is no question of amount being taxed in hands of assessee. However, ITO taxed refund by way of Central Excise duty on ground that distribution of amount of this refund to stockists is done at later stage, distribution will amount to application of income etc. On appeal, vide para 14 of order CIT (A) after going into various factual aspects of receipt etc. and stand of assessee and considering letter dt. 26th Dec., 1982 which was accompanied by various statements in respect of payments made to stockists with names, dates, etc. out of Central excise refund receipts, came to conclusion that no addition was required to be sustained. At time of hearing ld. departmental representative reading relevant pages from orders of ITO as also CIT (A) submitted that ratio of decision in case of J.K. Synthetics Ltd. vs. ITO 1976 CTR (All) 250: (1975) 105 ITR 865 (All) at page 880 was applicable. Again, excise duty separately shown in invoice should have formed part of sales turnover and accordingly credited to sales account but instead assessee had credited same to excise duty amount separately and therefore, assessee had tempered with profit and loss account and this was not permissible as per Central Excise Law. Therefore, Central Excise duty was part and parcel of sale price and drawing analogy from case of J.K. Synthetics Ltd. vs. ITO (supra) it was submitted that provisions of s. 41(1) were attracted. Regarding observation of CIT (A) that part of amount related to earlier assessment year for which no addition was made it was commented that step shall be taken. On query from Bench as to what contained in letter dt. 26th Dec., 1982 nothing could be explained by ld. departmental representative. After ld. representative for Department had made his submissions, w e had again asked him to place before us copy of letter dt. 26th Dec., 1982 of assessee addressed to ITO. He, however, was frank enough to state that in absence of records/copy he was not in position to place copy of said letter. Then we enquired of ld. counsel for assessee whether he would be in position to place before us copy of said letter. ld. counsel for assessee stated that copy of said letter forms part of paper book containing 119 pages of course all of copies of papers given at low level. In this connection, he stated that he had not filed paper book at beginning of hearing of appeal, as of late, it was his experience that ld. representative for Department object to filing of such paper book in appeals filed by Revenue. However, since letter was very material in deciding point at issue, we requested ld. counsel for assessee to file paper book. At this stage, ld. departmental representative kly objected to taking paper book on record after he had made his submissions. As said letter was not fresh evidence inasmuch as ITO himself referred to it in para 5 of assessment order, we did not think it proper to adjourn hearing. At this stage, learned representative of Department made certain remarks objecting to our going through said letter and appeal to be decided in absence thereof etc., which need not be recorded here. Suffice it to say that he should have restrained himself from making such remarks. Perhaps this type of unpleasant situation could be avoided if proper care is taken by concerned officials to see that records are made available to Departmental Representatives before hearing of appeals. This would enable them to study facts, grasp real issues and prepare paper book wherever necessary. After going through relevant letter it was submitted that letter written to ITO was also accompanied by relevant copies of central excise refund account in which payments made to various stockists together with places were mentioned and it was also stated that now no amount was pending with assessee on account of such refund remaining payable to stockists. Supporting observations of CIT (A) that ITO did not mention anything regarding detailed statement etc. it was stated that right from beginning approach was misdirected. Strong objection was also taken to observations made by ld. departmental representatives regarding submission that assessee was tempering with profit & Loss account when in fact case of assessee, past or future, did not warrant such comment. On going through order of authorities below and copy of latter dt. 26th Dec., 1982 referred to by CIT (A) copy of which is submitted by ld. counsel we find that there is no justification to interfere with decision taken by Commissioner (A). We would also like to mention that case relied upon by ld. departmental representative viz. J.K. Synthetics Ltd. (supra) was in respect of claim in respect of excise duty or deduction of same and which was allowed and subsequently required to be considered on basis of cessation of liability. Therefore, same would not be applicable to present case. plea that excise duty should have formed part of sale price and required to be credited to sales account also does not hold good in context of practice followed by assessee regarding payments of such excise duty and system having been followed from year to year besides submission being irrelevant. third ground is in respect of extra shift allowance and it was submitted by ld. departmental representative that appeal was filed only to keep matter alive. We, therefore, do not see any reason to interfere with decision taken by Commissioner (A). To extent as above, order passed by Commissioner (A) is modified and Commissioner (A) as also ITO are directed to pass appropriate orders. In result appeal is allowed in part. *** INCOME TAX OFFICER v. KHODIYAR POTTERY WORKS LIMITED