M/s. Nabros, Ahmedabad V. The ACIT., Circle-9, Ahmedabad

ITA 10/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0422 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-10-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 02-01-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K TIWARI SENIOR
• Assessee Lawyers: M G PATEL
• Keywords: Depreciation; Diversion of income; Avoidance of tax; Assessment record; Unabsorbed depreciation; Capital expenditure; Set aside
• Section: 133(6); 15

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' [BEFORE SHRI R V EASWAR VICE-PRESIDENT] [AND SHRI P K BANSAL ACCOUNTANT MEMBER] ITA NO.10/AHD/2006 (ASSESSMENT YEAR: 2002-03) M/S NABROS, 7, PARSHWANATH CHAMBERS, 3 RD FLOOR, ASHRAM ROAD, AHMEDABAD V/S THE ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-9, AHMEDABAD (APPELLANT) (RESPONDENT) ITA NO.267/AHD/2006 (ASSESSMENT YEAR: 2002-03) THE INCOME-TAX OFFICER, WARD-9(4), AHMEDABAD V/S M/S NABROS, 7, PARSHWANATH CHAMBERS, 3 RD FLOOR, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI M G PATEL, AR RESPONDENT BY:- SHRI A K TIWARI, SENIOR DR O R D E R PER P K BANSAL (ACCOUNTANT MEMBER) : THESE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORDER OF THE COMMISSION ER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD [THE CIT(A) FO R SHORT], DATED 21-11-2005, FOR ASSESSMENT YEAR (AY) 2002-03. THE GROUNDS RAISED BY BOTH THE PARTIES ARE AS UNDER:- 2 BY THE ASSESSEE : 1 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XV , AHMEDABAD HAS ERRED IN LAW AND ON THE FACTS BY CONF IRMING THE ADDITIONS TO THE EXTENT OF RS.15,66,133/- MADE BY THE LEARNED ASSESSING OFFICER ON THE GROUND THAT THE APPELLANT HAS DIVERTED ITS SAID INCOME BY ADOPTING COLOURFUL DEVICES WITH A VI EW TO AVOID TAX LIABILITY FOR WHICH JUDGMENT OF THE HON'BLE SUPREME COURT OF INDIA IN CASE OF MC DOWELL & CO VS. ITO (154 ITR 148) IS APPLICABLE. 2 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XV , AHMEDABAD HAS ERRED IN LAW AND ON THE FACTS BY CONF IRMING THE ADDITION OF RS.8,03,600/- MADE BY THE LEARNED ASSES SING OFFICER ON THE GROUND THAT THE CLAIM OF THE APPELLANT FOR E XPENDITURE OF PURCHASE OF TYRES TO THAT EXTENT IS NOT ALLOWABLE. BY THE REVENUE : 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RED UCING ADDITION OF RS.15,03,885/- OUT OF TOTAL ADDITION OF RS.30,70 ,018/- MADE BY THE AO ON ACCOUNT OF DIVERSION OF PROFIT. 2 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RED UCING THE DISALLOWANCE TO RS.8,79,100/- OUT OF TOTAL DISALLOW ANCE OF RS.18,82,700/- MADE BY THE AO ON ACCOUNT OF TYRE PU RCHASES. 2 GROUND NO.1 IN THE ASSESSEES APPEAL AND GROUND NO.1 IN THE REVENUES APPEAL RELATES TO THE ADDITIO N ON ACCOUNT OF DIVERSION OF PROFIT. THE BRIEF FACTS IN RELATION TO THESE GROUNDS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CARRYIN G ON BUSINESS OF TRANSPORTATION. THE ASSESSEE HAS TAKEN THE SUB CONT RACT FROM M/S NABROS TRANSPORT (P) LTD. [NTPL FOR SHORT]. THE A SSESSEE HAD SUPPLIED VEHICLES ON HIRE TO NTPL WHICH IS ITS SIST ER CONCERN. THE ASSESSEE HAD CARRIED OUT SIX DIFFERENT JOBS BY USING DIFFERENT TYPES OF VEHICLES OWNED BY THE ASSESSEE AS WELL AS BY NTPL. THE AO FOUND THAT IN RESPECT OF WORK DONE FOR TRANSPORT ATION FROM KANDER TO KEVADIA, TOTAL VEHICLES USED WERE 14 OUT OF WHICH SIX 3 VEHICLES WERE BELONGING TO THE ASSESSEE AND 8 VEHIC LES BELONGED TO NTPL AND THE TOTAL FREIGHT RECEIVED BY NTPL WAS OF RS.39,69,000/- AND FREIGHT RECEIVED PER VEHICLE WAS RS.2,83,500/- AND AFTER DEDUCTING 20% COMMISSION TH E AMOUNT PAYABLE TO THE ASSESSEE FOR 6 VEHICLES OF THE ASSES SEE WAS CALCULATED AT RS.13,60,800/- WHEREAS THE ASSESSEE H AD ACCOUNTED ONLY RS.8,60,000/-. THEREFORE, THE AO CONCLUDED THA T THE ASSESSEE HAD SHOWN FREIGHT RECEIPTS LESS TO THE TUN E OF RS.5,00,800/-. THEREFORE, THE DIFFERENCE AMOUNT WAS ADDED BY THE AO TO THE INCOME OF THE ASSESSEE. SIMILARLY THE WORK DONE FOR TRANSPORTATION FROM MUMBAI TO BHOPAL, THE AO FO UND THAT THE ASSESSEE SHOULD HAVE SHOWN FREIGHT RECEIPT OF RS.5, 59,413/- WHEREAS THE ASSESSEE HAS SHOWN RS.6,00,000/-. IN RE SPECT OF TRANSPORTATION WORK IN BHAVNAGAR LOCAL THE AO CONSI DERED THAT ONLY ONE VEHICLE OF THE ASSESSEE WAS USED AND AFTER DEDUCTING 20% COMMISSION FROM AVERAGE FREIGHT RECEIVED PER VE HICLE, HE WORKED OUT NET FREIGHT RECEIPT PER VEHICLE AS RS.96 ,000/ WHEREAS THE ASSESSEE HAS SHOWN RS.50,000/-. THEREFORE, THE DIFFERENCE AMOUNT OF RS.46,000/- WAS CALCULATED AS THE SHORT R ECEIPT OF FREIGHT SHOWN BY THE ASSESSEE. IN RESPECT OF JOB OF TRANSPORT FROM BHOPAL TO MUMBAI, THE AO WORKED OUT RS.12,05,054/- AS THE FREIGHT THAT SHOULD HAVE BEEN SHOWN AS RECEIPT BY T HE ASSESSEE FOR USE OF TWO OF ITS VEHICLES WHEREAS THE ASSESSEE HAD SHOWN RS.10,00,000/-. SO IT HAS SHOWN FREIGHT RECEIPT LES S TO THE TUNE OF RS.2,05,054/-. IN RESPECT OF JOB OF TRANSPORT FROM POWAI TO DURGAPUR, THE AO CONSIDERED THAT THE ASSESSEE HAD R ECEIVED FREIGHT RECEIPT FOR ITS THREE VEHICLES UTILIZED BY NTPL AT THE RATE OF RS.6,73,059/- PER VEHICLE AMOUNTING TO RS.20,19, 177/- WHEREAS THE ASSESSEE HAD SHOWN FREIGHT RECEIPT TO T HE TUNE OF RS.12,00,000/-. SO THERE IS A SHORT FREIGHT RECEIPT OF 4 RS.8,19,177/-. IN RESPECT OF JOB OF TRANSPORT FROM AHMEDABAD TO KASHINAGAR, THE AO OBSERVED THAT THE ASSESSEE SHOUL D HAVE SHOWN FREIGHT RECEIPT OF RS.23,58,400/- FOR ITS TWO VEHICLES USED, WHEREAS IT HAS SHOWN ONLY RS.9,00,000/-. THEREFORE, THE AO ADDED THE DIFFERENCE AMOUNT OF RS.14,58,400/- AS DI VERSION OF FREIGHT RECEIPT WHICH HAS NOT BEEN SHOWN BY THE ASS ESSEE. THUS, RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MC DOWELL AND CO. LTD. VS. CTO THE AO MADE ADDITION OF RS.30,70,018/- TO THE TOTAL INCOME OF THE ASSESSEE CONSISTING OF ABOVE SIX ITEMS AS THE SAID AMOUNT OF INCOME HAS BE EN DIVERTED TO SISTER CONCERN BY THE ASSESSEE WITH A VIEW TO AV OID PAYMENT OF TAX. 3 THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE ASSESSEE ARGUED THE CASE IN D ETAILS. THE CIT(A) HAS DEALT WITH THE ISSUE IN GREAT DETAILS AS UNDER: 3. THE SECOND GROUND OF APPEAL IS AGAINST ADDITIO N OF RS.30,70,018/- ON THE GROUND OF DIVERSION OF INCOME BY ADOPTING A COLOURFUL DEVICE. THIS HAS BEEN DISCUSSED BY THE AS SESSING OFFICER IN PARA 16 OF THE ASSESSMENT ORDER. THE APPELLANT HAS TAKEN THE SUB CONTRACT FROM M/S. NABROS TRANSPORT (P) LTD. (HEREI NAFTER REFERRED AS NTPL). THE APPELLANT HAD SUPPLIED VEHICLES ON HIRE TO NTPL WHICH IS ITS SISTER CONCERN. THE APPELLANT HAD CARRIED OUT S IX DIFFERENT JOBS BY USING DIFFERENT TYPES OF VEHICLES OWNED BY THE APPE LLANT AS WELL AS BY NTPL. THE ASSESSING OFFICER FOUND THAT IN RESPECT O F WORK DONE FOR TRANSPORTATION FROM KANDER TO KEVADIA, TOTAL VEHICL ES USED WERE 14 OUT OF WHICH SIX VEHICLES WERE BELONGING TO THE APP ELLANT AND 8 VEHICLES BELONGED TO NTPL AND THE TOTAL FREIGHT REC EIVED BY NTPL WAS OF RS.39,69,000/- AND FREIGHT RECEIVED PER VEHI CLE WAS RS.2,83,500/- AND AFTER DEDUCTING 20% COMMISSION TH E AMOUNT PAYABLE TO THE APPELLANT FOR 6 VEHICLES OF THE APPE LLANT WAS CALCULATED AT RS.13,60,800/- WHEREAS THE APPELLANT HAD ACCOUNT ED ONLY RS.8,60,000/-. THEREFORE, THE ASSESSING OFFICER CON CLUDED THAT THE APPELLANT HAD CONCLUDED THAT THE APPELLANT HAD SHOW N FREIGHT RECEIPTS LESS TO THE TUNE OF RS.5,00,800/-. THEREFORE, THE D IFFERENCE AMOUNT WAS 5 ADDED BY THE ASSESSING OFFICER TO THE INCOME OF THE APPELLANT. SIMILARLY THE WORK DONE FOR TRANSPORTATION FROM MUM BAI TO BHOPAL, THE ASSESSING OFFICER FOUND THAT THE APPELLANT SHOU LD HAVE SHOWN FREIGHT RECEIPT OF RS.5,59,413/- WHEREAS THE APPELL ANT HAS SHOWN RS.6,00,000/-. IN RESPECT OF TRANSPORTATION WORK IN BHAVNAGAR LOCAL THE ASSESSING OFFICER CONSIDERED THAT ONLY ONE VEHI CLE OF THE APPELLANT WAS USED AND AFTER DEDUCTING 20% COMMISSION FROM AV ERAGE FREIGHT RECEIVED PER VEHICLE , HE WORKED OUT NET FREIGHT RE CEIPT PER VEHICLE AS RS.96,000/- WHEREAS THE APPELLANT HAS SHOWN RS.50.0 00/-THEREFORE, THE DIFFERENCE AMOUNT OF RS.46,000/- WAS CALCULATED AS THE SHORT RECEIPT OF FREIGHT SHOWN BY THE APPELLANT. IN RESPE CT OF JOB OF TRANSPORT FROM BHOPAL TO MUMBAI, THE ASSESSING OFFICER WORKED OUT RS.12.05,054/- AS THE FREIGHT THAT SHOULD HAVE BEEN SHOWN AS RECEIPT BY THE APPELLANT FOR USE OF TWO OF ITS VEHICLES WHE REAS THE APPELLANT HAD SHOWN RS.10,00,000/-. SO IT HAS SHOWN FREIGHT R ECEIPT LESS TO THE TUNE OF RS.2,05,054/-. IN RESPECT OF JOB OF TRANSPO RT FROM POWAI TO DURGAPUR, THE ASSESSING OFFICER CONSIDERED THAT THE APPELLANT HAD RECEIVED FREIGHT RECEIPT FOR ITS THREE VEHICLES UTI LIZED BY NTPL AT THE RATE OF RS.6,73,059/- PER VEHICLE AMOUNTING TO RS.2 0,19,177/- WHEREAS THE APPELLANT HAD SHOWN FREIGHT RECEIPT TO THE TUNE OF RS.12,00,000/-. SO THERE IS A SHORT FREIGHT RECEIPT OF RS.8,19,177/ -. IN RESPECT OF JOB OF TRANSPORT FROM AHMEDABAD TO KASHINAGAR , THE ASSESS ING OFFICER OBSERVED THAT THE APPELLANT SHOULD HAVE SHOWN FREIG HT RECEIPT OF RS.23,58,400/- FOR ITS TWO VEHICLES USED, WHEREAS IT HAS SHOWN ONLY RS.9,00,000/-. THEREFORE, THE ASSESSING OFFICER ADD ED THE DIFFERENCE AMOUNT OF RS.14,58,400/- AS DIVERSION OF FREIGHT RE CEIPT WHICH HAS NOT BEEN SHOWN BY THE APPELLANT. THUS, RELYING ON THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF MC DOWELL AND CO. LTD. VS. CTO THE ASSESSING OFFICER MADE ADDITION OF RS.30,70,018/- T O THE TOTAL INCOME OF THE APPELLANT CONSISTING OF ABOVE SIX ITEMS AS T HE SAID AMOUNT OF INCOME HAS BEEN DIVERTED TO SISTER CONCERN BY THE A PPELLANT WITH A VIEW TO AVOID PAYMENT OF TAX. 3.1 DISPUTING THE SAID ADDITION, THE AUTHORIZED REP RESENTATIVE OF THE APPELLANT SUBMITTED THAT IN RESPONSE TO SHOW CA USE NOTICE ISSUED BY THE ASSESSING OFFICER TO EXPLAIN AS TO WHY PAYME NTS OF RS.30,70,018/- MADE TO SISTER CONCERN M/S. NTPL WHI CH ARE COVERED U/S. 40A(2)(B) OF THE ACT SHOULD NOT BE CONSIDERED AS DIVERSION OF INCOME WITH A VIEW TO AVOID PAYMENT OF TAX AND BE A DDED TO THE INCOME OF THE APPELLANT, THE APPELLANT HAD FURNISHE D FULL DETAILS IN RESPECT OF WORK CARRIED OUT BY NTPL AND PAYMENTS MA DE BY NTPL TO THE APPELLANT. THE AUTHORIZED REPRESENTATIVE HAS AL SO FILED A STATEMENT IN THE PAPER BOOK GIVING DETAILS OF FREIG HT RECEIVED BY THE APPELLANT FROM DIFFERENT PARTIES FOR SIX DIFFERENT JOBS CARRIED OUT 6 THROUGH NTPL USING DIFFERENT TYPE OF VEHICLES OWNED BY THE APPELLANT AS WELL AS BY NTPL. THE AUTHORIZED REPRESENTATIVE S UBMITTED THAT FOR CARRYING OUT THESE SIX JOB WORKS UNDER CONSIDERATIO N, FOLLOWING THREE TYPES OF VEHICLES HAVE BEEN UTILIZED. (I) LOW BED TRAILER UNITS WITH PRIME MOVER OF 80 MT . CAPACITY. (II)TRAILER UNITS WITH HYDRAULIC AXLE EXTENDABLE UP TO REQUIRED LIMITS TO BE ATTACHED WITH THE SEPARATE PRIME MOVER. (III)PRIME MOVERS OF 420 HP, 380 HIP AND 350 HP CAP ACITIES. THE AUTHORIZED REPRESENTATIVE SUBMITTED AS UNDER. THE ASSESSING OFFICER HAS ERRONEOUSLY MISINTERPRET ED THE FACTS IN EACH OF THE SIX INSTANCES CONSIDERED IN THE ASSE SSMENT ORDER AS EXPLAINED HEREUNDER: '(A) IN THE FIRST INSTANCE FOR JOB OF TRANSPORT FRO M KANDLA TO KEVADIA, THE ASSESSING OFFICER HAS ASSUMED THAT IN RESPECT OF 14 VEHICLES UTILIZED THERE IS AVERAGE NET FREIGHT R ECEIPT, AFTER DEDUCTING 20% COMMISSION THEREFROM, PER VEHICLE IS RS.2,26,800/-. THUS, AT THE VERY OUTSET THE LEARNED ASSESSING OFFICER HAS WRONGLY ASSUMED THAT ALL THE 14 VEHICLE S USED ARE OF SIMILAR KIND. HOWEVER, IN FACT AS CAN BE SEEN FROM THE STATEMENT ENCLOSED, 6 VEHICLES BELONGING TO THE APPELLANT ARE LOW BED TRAILER UNITS WITH PRIME MOVER OF 80 MT. CAPACITY. WHEREAS OUT OF REMAINING 8 VEHICLES BELONGING TO NTPL ITSEL F, ONE VEHICLE IS THE PRIME MOVER OF 420 HP CAPACITY, 3 LO W BED TRAILER UNITS WITH PRIME MOVER AND 4 TRAILER UNITS WITH HYDRAULIC AXLE EXTENDABLE UPTO REQUIRED LIMITS TO B E ATTACHED WITH THE SEPARATE PRIME MOVER. THE APPELLANT THEREF ORE SUBMITS THAT IN THIS CASE, COMPUTATION OF AVERAGE F REIGHT RECEIPT PER VEHICLE BY SIMPLY DIVIDING TOTAL RECEIPT BY NUM BER OF VEHICLES IS ABSOLUTELY ERRONEOUS. THE APPELLANT FURTHER SUBMITS THAT THE LEARNED ASSE SSING OFFICER HAS ON THE BASIS OF SUCH ESTIMATED AVERAGE FREIGHT RECEIPT PER VEHICLE FURTHER ASSUMED THAT THE APPELL ANT SHOULD HAVE RECEIVED FREIGHT RECEIPT ON ITS 6 VEHICLES UTI LIZED BY NTPL AT THE RATE OF RS.2,26,800/- PER VEHICLE, AMOUNTING TO RS.13,60,8007- AGAINST ACTUAL FREIGHT RECEIPT SHOWN BY THE APPELLANT AT RS.8,60,000/- AND THEREFORE THE APPELL ANT HAS SHOWN ITS FREIGHT RECEIPTS LESS BY RS.5,00,800/-. 7 THE APPELLANT THEREFORE SUBMITS THAT ON THE BASIS O F SUCH ESTIMATED AND ASSUMED WORKING OF FREIGHT RECEIPT TH E LEARNED ASSESSING OFFICER HAS MADE ADDITION FOR INCOME WHIC H THE APPELLANT SHOULD HAVE EARNED, BUT IN FACT THE APPEL LANT HAS ACTUALLY NOT EARNED SUCH INCOME AT ALL. THUS THE AD DITION IS IN NATURE OF NOTIONAL INCOME, WHICH IS TOTALLY ILLEGAL AND BAD AT LAW. (B)IN THE SECOND INSTANCE FOR JOB OF TRANSPORT FROM MUMBAI TO BHOPAL, THE ASSESSING OFFICER HAS ASSUMED THAT IN R ESPECT OF 4 VEHICLES UTILIZED THERE IS AVERAGE NET FREIGHT RECE IPT, AFTER DEDUCTING 20% COMMISSION THEREFROM, PER VEHICLE IS RS.1,86,471/-. THUS AT THE VERY OUTSET THE LEARNED ASSESSING OFFIC ER HAS WRONGLY ASSUMED THAT 4 VEHICLES OF SIMILAR KIND HAV E BEEN USED FOR THIS WORK. HOWEVER IN FACT AS CAN BE SEEN FROM THE STATEMENT ENCLOSED, ONLY 3 VEHICLES HAVE BEEN USED OUT OF WHICH 2 VEHICLES BELONGING TO THE APPELLANT ARE TRA ILER UNITS WITH HYDRAULIC AXLE EXTENDABLE UPTO REQUIRED LIMITS TO BE ATTACHED WITH THE SEPARATE PRIME MOVER AND 1 VEHICL E BELONGING TO NTPL IS 380 HP PRIME MOVER. THE APPELL ANT THEREFORE SUBMITS THAT IN THIS CASE, COMPUTATION OF AVERAGE FREIGHT RECEIPT PER VEHICLE BY SIMPLY DIVIDING TOTA L RECEIPT BY NUMBER OF VEHICLES IS ABSOLUTELY ERRONEOUS. THE APPELLANT FURTHER SUBMITS THAT THE LEARNED ASSE SSING OFFICER HAS ON THE BASIS OF SUCH ESTIMATED AVERAGE FREIGHT RECEIPT PER VEHICLE FURTHER ASSUMED THAT THE APPELL ANT SHOULD HAVE RECEIVED FREIGHT RECEIPT ON ITS 3 VEHICLES UTI LIZED BY NTPL AT THE RATE OF RS.1,86,471/- PER VEHICLE, AMOUNTING TO RS.5,59.413/- AGAINST ACTUAL FREIGHT RECEIPT SHOWN BY THE APPELLANT AT RS.6,00,000/-, WHICH IS ACTUALLY MORE THAN COMPUTED BY THE LEARNED ASSESSING OFFICER. HOWEVER, THE LEARNED ASSESSING OFFICER HAS CONSIDERED DIFFERENCE OF RS.40,587/- FOR THE PURPOSE OF MAKING ADDITION, WHI CH IS ABSOLUTELY UNWARRANTED AND ILLEGAL. THE APPELLANT THEREFORE SUBMITS THAT ON THE BASIS O F SUCH ESTIMATED AND ASSUMED WORKING OF FREIGHT RECEIPT TH E LEARNED ASSESSING OFFICER HAS MADE ADDITION FOR INCOME WHIC H THE APPELLANT SHOULD HAVE EARNED, BUT IN FACT THE APPEL LANT HAS ACTUALLY NOT EARNED SUCH INCOME AT ALL. THUS THE AD DITION IS IN 8 NATURE OF NOTIONAL INCOME, WHICH IS TOTALLY ILLEGAL AND BAD AT LAW. (C) IN THE THIRD INSTANCE FOR JOB OF LOCAL TRANSPOR T IN BHAVNAGAR CITY AREA, THE ASSESSING OFFICER HAS ASSUMED THAT I N RESPECT OF 1 VEHICLE UTILIZED THERE IS AVERAGE NET FREIGHT RECEI PT, AFTER DEDUCTING 20% COMMISSION THEREFROM, PER VEHICLE IS RS.96,000/-. THUS AT THE VERY OUTSET THE LEARNED AS SESSING OFFICER HAS WRONGLY ASSUMED THAT ONLY 1 VEHICLE HAS BEEN USED FOR THIS WORK. HOWEVER IN FACT AS CAN BE SEEN FROM THE STATEMENT ENCLOSED, 2 VEHICLES HAVE BEEN USED OUT O F WHICH 1 VEHICLE BELONGING TO THE APPELLANT IS LOW BED TRAIL ER UNITS WITH PRIME MOVER OF 80 MT. CAPACITY WHICH WAS USED FOR ONLY ONE MONTH BY NTPL AS AGAINST TWO MONTHS PERIOD OF N TPL VEHICLES AND FOR THAT LUMPSUM AMOUNT OF RS.50,000/- WAS PAID TO THE APPELLANT. THE APPELLANT THEREFORE SUBMITS T HAT IN THIS CASE ALSO COMPUTATION OF AVERAGE FREIGHT RECEIPT PE R VEHICLE BY SIMPLY DIVIDING TOTAL RECEIPT BY NUMBER OF VEHICLES USED AND THAT TO ON BASIS OF INCORRECT DATA IS ABSOLUTELY ER RONEOUS. THE APPELLANT THEREFORE SUBMITS THAT ON THE BASIS O F SUCH ESTIMATED AND ASSUMED WORKING OF FREIGHT RECEIPT TH E LEARNED ASSESSING OFFICER HAS MADE ADDITION FOR INCOME WHIC H THE APPELLANT SHOULD HAVE EARNED, BUT IN FACT THE APPEL LANT HAS ACTUALLY NOT EARNED SUCH INCOME AT ALL. THUS THE AD DITION IS IN NATURE OF NOTIONAL INCOME, WHICH IS TOTALLY ILLEGAL AND BAD AT LAW. (D) IN THE FOURTH INSTANCE FOR JOB OF TRANSPORT FRO M BHOPAL TO MUMBAI, THE ASSESSING OFFICER HAS ASSUMED THAT IN R ESPECT OF 2 VEHICLES UTILIZED THERE IS AVERAGE NET FREIGHT RECE IPT, AFTER DEDUCTING 20% COMMISSION THEREFROM, PER VEHICLE IS RS.6,02,527/-. THUS, AT THE VERY OUTSET THE LEARNED ASSESSING OFFICER HAS WRONGLY ASSUMED THAT ALL THE 4 VEHICLES USED ARE OF SIMILAR KIND. HOWEVER IN FACT AS CAN BE SEEN FROM T HE STATEMENT ENCLOSED, 2 VEHICLES BELONGING TO THE APPELLANT ARE TRAILER UNITS WITH HYDRAULIC AXLE EXTENDABLE UPTO REQUIRED LIMITS TO BE ATTACHED WITH THE SEPARATE PRIME MOVER AND REMAININ G ONE VEHICLE BELONGING TO NTPL IS THE PRIME MOVER OF 420 HP CAPACITY. THE APPELLANT THEREFORE SUBMITS THAT IN T HIS CASE, COMPUTATION OF AVERAGE FREIGHT RECEIPT PER VEHICLE BY SIMPLY DIVIDING TOTAL RECEIPT BY NUMBER OF VEHICLES IS ABS OLUTELY ERRONEOUS. 9 THE APPELLANT FURTHER SUBMITS THAT THE LEARNED ASSE SSING OFFICER HAS ON THE BASIS OF SUCH ESTIMATED AVERAGE FREIGHT RECEIPT PER VEHICLE FURTHER ASSUMED THAT THE APPELL ANT SHOULD HAVE RECEIVED FREIGHT RECEIPT ON ITS 2 VEHICLES UTI LIZED BY NTPL AT THE RATE OF RS.6,02,527/- PER VEHICLE, AMOUNTING TO RS.12,05,054/- AGAINST ACTUAL FREIGHT RECEIPT SHOWN BY THE APPELLANT AT RS.10,00,000/- AND THEREFORE THE APPEL LANT HAS SHOWN ITS FRIGHT RECEIPTS LESS BY RS.2,05,054/-. THE APPELLANT THEREFORE SUBMITS THAT ON THE BASIS O F SUCH ESTIMATED AND ASSUMED WORKING OF FREIGHT RECEIPT TH E LEARNED ASSESSING OFFICER HAS MADE ADDITION FOR INCOME WHIC H THE APPELLANT SHOULD HAVE EARNED, BUT IN FACT THE APPEL LANT HAS ACTUALLY NOT EARNED SUCH INCOME AT ALL. THUS THE AD DITION IS IN NATURE OF NOTIONAL INCOME, WHICH IS TOTALLY ILLEGAL AND BAD AT LAW. (E) IN THE FIFTH INSTANCE FOR JOB OF TRANSPORT FROM POWAI TO DURGAPUR, THE ASSESSING OFFICER HAS ASSUMED THAT IN RESPECT OF 4 VEHICLES UTILIZED THERE IS AVERAGE NET FREIGHT RE CEIPT, AFTER DEDUCTING 20% COMMISSION THEREFROM, PER VEHICLE IS RS.6,73,059/-. THUS, AT THE VERY OUTSET THE LEARNED ASSESSING OFFICER HAS WRONGLY ASSUMED THAT ALL THE 4 VEHICLES USED ARE OF SIMILAR KIND. HOWEVER IN FACT AS CAN BE SEEN FROM T HE STATEMENT ENCLOSED, 2 VEHICLES BELONGING TO THE APPELLANT ARE TRAILER UNITS WITH HYDRAULIC AXLE EXTENDABLE UPTO REQUIRED LIMITS TO BE ATTACHED WITH THE SEPARATE PRIME MOVER AND REMAININ G 2 VEHICLES BELONGING TO NTPL ARE PRIME MOVERS OF 420 HP AND 350 HP CAPACITY. THE APPELLANT THEREFORE SUBMITS TH AT IN THIS CASE, COMPUTATION OF AVERAGE FREIGHT RECEIPT PER VE HICLE BY SIMPLY DIVIDING TOTAL RECEIPT BY NUMBER OF VEHICLES IS ABSOLUTELY ERRONEOUS. THE APPELLANT FURTHER SUBMITS THAT THE LEARNED ASSE SSING OFFICER HAS ON THE BASIS OF SUCH ESTIMATED AVERAGE FREIGHT RECEIPT PER VEHICLE FURTHER ASSUMED THAT THE APPELL ANT SHOULD HAVE RECEIVED FREIGHT RECEIPT ON ITS 3 VEHICLES UTI LIZED BY NTPL AT THE RATE OF 6,73,059/- PER VEHICLE, AMOUNTING TO RS.20,19,177/- AGAINST ACTUAL FREIGHT RECEIPT SHOWN BY THE APPELLANT AT RS.12,00,000/- AND THEREFORE THE APPEL LANT HAS SHOWN ITS FREIGHT RECEIPTS LESS BY RS.8,19,177/-. T HE APPELLANT THEREFORE SUBMITS THAT ON THE BASIS OF SUCH ESTIMAT ED AND ASSUMED WORKING OF FREIGHT RECEIPT THE LEARNED ASSE SSING OFFICER HAS MADE ADDITION FOR INCOME WHICH THE APPE LLANT 10 SHOULD HAVE EARNED, BUT IN FACT THE APPELLANT HAS A CTUALLY NOT EARNED SUCH INCOME AT ALL. THUS THE ADDITION IS IN NATURE OF NOTIONAL INCOME, WHICH IS TOTALLY ILLEGAL AND BAD A T LAW. (F) IN THE LAST SIXTH INSTANCE FOR JOB OF TRANSPORT FROM AHMEDABAD TO KASHIPUR, THE ASSESSING OFFICER HAS AS SUMED THAT IN RESPECT OF ONLY 2 VEHICLES UTILIZED THERE I S AVERAGE NET FREIGHT RECEIPT, AFTER DEDUCTING 20% COMMISSION THE REFROM, PER VEHICLE IS RS.11,79,200/-. THUS, AT THE VERY OUTSET THE LEARNED ASSESSING OFFICER HAS WRONGLY ASSUMED THAT BOTH THE VEHICLES USED ARE OF SIMILAR KIND. HOWEVER IN FACT AS CAN BE SEEN FROM THE STATEMENT ENCLOSED, OUT OF 6 VEHICLES UTILIZED FOR THIS WORK, 2 VEHICLES BELONGING TO THE APPELLANT ARE TRAILER U NITS WITH HYDRAULIC AXLE EXTENDABLE UPTO REQUIRED LIMITS TO B E ATTACHED WITH THE SEPARATE PRIME MOVER AND OUT OF REMAINING 4 VEHICLES BELONGING TO NTPL, ONE VEHICLE IS THE PRIME MOVER O F 420 HP CAPACITY AND 3 VEHICLES ARE TRAILER UNITS WITH HYDR AULIC AXLE EXTENDABLE UPTO REQUIRED LIMITS TO BE ATTACHED WITH THE SEPARATE PRIME MOVER. THE APPELLANT THEREFORE SUBMITS THAT I N THIS CASE, COMPUTATION OF AVERAGE FREIGHT RECEIPT PER VEHICLE BY SIMPLY DIVIDING TOTAL RECEIPT BY NUMBER OF VEHICLES IS ABS OLUTELY ERRONEOUS. THE APPELLANT FURTHER SUBMITS THAT THE LEARNED ASSE SSING OFFICER HAS ON THE BASIS OF SUCH ESTIMATED AVERAGE FREIGHT RECEIPT PER VEHICLE FURTHER ASSUMED THAT THE APPELL ANT SHOULD HAVE RECEIVED FREIGHT RECEIPT ON ITS 2 VEHICLES UTI LIZED BY NTPL AT THE RATE OF RS.11,79,200/- PER VEHICLE, AMOUNTIN G TO RS.23,58,400/- AGAINST ACTUAL FREIGHT RECEIPT SHOWN BY THE APPELLANT AT RS.9,00,000/- AND THEREFORE THE APPELL ANT HAS SHOWN ITS FREIGHT RECEIPTS LESS BY RS.14,58,400/-. THE APPELLANT THEREFORE SUBMITS THAT ON THE BASIS O F SUCH ESTIMATED AND ASSUMED WORKING OF FREIGHT RECEIPT TH E LEARNED ASSESSING OFFICER HAS MADE ADDITION FOR ME WHICH TH E APPELLANT SHOULD HAVE EARNED, BUT IN FACT THE APPEL LANT HAS ACTUALLY NOT EARNED SUCH INCOME AT ALL. THUS THE AD DITION IS IN NATURE OF NOTIONAL INCOME, WHICH ILLEGAL AND BAD AT LAW. 5.3 THE APPELLANT SUBMITS FURTHER THAT, AS EXPLAINE D ABOVE, THE LEARNED ASSESSING OFFICER HAS CALCULATED ON BAS IS OF MERE ASSUMPTIONS THE EXCESS PAYMENTS MADE BY THE APPELLA NT TO NTPL AND WHILE DOING SO, THE LEARNED ASSESSING OFFI CER HAS TOTALLY IGNORED ALL THE RELEVANT FACTORS SUCH AS NA TURE OF WORK 11 CARRIED OUT, TYPE OF VEHICLES UTILIZED FOR THE WORK AS WELL AS OTHER FACTORS SUCH AS ROUTE, TIME LIMIT FOR COMPLET ION, PERIOD OF UTILIZATION OF VEHICLES ETC. AS SUCH, CONSIDERING T HE REQUIREMENTS OF VEHICLES FOR MATERIAL TO BE TRANSPO RTED, OFTEN REQUIRED CAPACITY AND TYPE OF VEHICLES, AS AVAILABL E FROM SISTER CONCERNS ARE ALSO UTILIZED AND THEREFORE, FREIGHT C HARGES ARE BEING PAID TO SISTER CONCERN FOR SUCH WORK AT REASO NABLE RATES. HOWEVER, THE LEARNED ASSESSING OFFICER HAS ON THE B ASIS OF IN FORMATIONS SUPPLIED BY THE APPELLANT AS WELL AS INF ORMATIONS COLLECTED BY HIM DIRECTLY FROM NTPL, ON BASIS OF SU RMISES AND ASSUMPTIONS, DRAWN INFERENCES TO WORK OUT THAT EXCE SSIVE PAYMENTS HAVE BEEN MADE TO NTPL AND HE HAS DRAWN FU RTHER INFERENCES MERELY ON THE BASIS OF ASSUMPTIONS AND S URMISES THAT ALLEGED EXCESS PAYMENTS HAVE BEEN MADE WITH A VIEW TO DIVERT INCOME FOR AVOIDING TAC LIABILITY BY ADOPTING COLOU RFUL DEVICE AND, THEREFORE, IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT, THE CASE OF MC DOWELL & CO. LTD. V. CTO (154 ITR 148), THE PAYMENT OF RS.30,70,018/- BY THE APPELLAN T TO NTPL IS TO BE ADDED IN THE INCOME OF THE APPELLANT. 5.4 THE APPELLANT HOWEVER SUBMITS THAT IT IS ABSOLU TELY CLEAR FROM ABOVE SUBMISSIONS THAT THE ADDITION MADE BY TH E LEARNED ASSESSING OFFICER IS BASED MERELY ASSUMPTION AND SU RMISES AS WELL AS ESTIMATED CALCULATION MADE ON THE BASIS OF INCORRECT DATA. FURTHER THE SAME IS ALSO NOT SUPPORTED BY ANY EVIDENCE OR MATERIAL BROUGHT ON RECORD BY THE LEARNED ASSESSING OFFICER. AS SUCH THE ADDITION IS IN NATURE OF NOTIONAL INCOM E WHICH IN FACT HAS NOT BEEN EARNED BY THE APPELLANT AND NO AD DITION CAN BE MADE FOR SUCH NOTIONAL INCOME. THIS VIEW IS DULY SUPPORTED BY THE FOLLOWING JUDGEMENTS: (I) CIT V. A RAMAN AND CO. [67 ITR 11 (SC)] (II)UNION OF INDIA & ANS. V. AZADI BACHAO ANDOLAN & ANS.[263 ITR 706 (SC)]. 4. AFTER CONSIDERING THE ABOVE SUBMISSIONS, THE CI T(A) OBSERVED AS UNDER:- 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHO RIZED REPRESENTATIVE CAREFULLY AND HAVE ALSO GONE THROUGH THE DETAILS FILED BY THE AUTHORIZED REPRESENTATIVE. 12 I) IT IS FOUND THAT IN RESPECT OF FIRST JOB OF TRAN SPORT FROM KANDLA TO KEVADIA, THE AUTHORIZED REPRESENTATIVE HAS SUBMI TTED THAT 6 VEHICLES BELONGING TO THE APPELLANT ARE DIFFERENT F ROM THE VEHICLES OF M/S. NTPL WHICH WERE USED FOR THIS JOB EXCEPT FOR 3 LOW BED TRAILER UNITS WITH PRIME MOVER. THE CONTENTION OF THE AUTHO RIZED REPRESENTATIVE THAT THE METHOD OF AVERAGING CANNOT BE FOLLOWED TO CALCULATE THE FREIGHT RECEIPT AND TO CONCLUDE THAT THE APPELLANT HAS SHOWN MUCH LESS FREIGHT RECEIPT IS NOT ACCEPTED AS THE VARIATIONS IN THE TONNAGE CAPACITY OF THE VEHICLE ARE MARGINAL BE ING VARIATION FROM 80 MT TO 115 MT AND THE APPELLANT HAS NOT EXPLAINED WHETHER THERE WAS DIFFERENCE IN OPERATING EXPENSES, MILEAGE OR DI ESEL CONSUMPTION FOR THESE VEHICLES WHICH WOULD HAVE CAUSED RECEIPT OF HIGHER FREIGHT CHARGES FOR VEHICLES WITH MORE TONNAGE RESULTING IN LESS THAN AVERAGE FREIGHT RECEIPT BY VEHICLES BELONGING TO APPELLANT. IT IS FOUND FROM THE ASSESSMENT RECORDS OF THE APPELLANT WHEREIN THE APP ELLANT HAD FILED COPY OF RETURN OF INCOME OF NTPL, THAT THE COMPANY NTPL HAD PROFIT OF RS.16.13 LAKHS FOR A.Y.2002-03 AND AFTER SET OFF OF UNABSORBED DEPRECIATION OF A.Y. 1998-99 THE RETURNED INCOME WA S NIL AND THE COMPANY HAD STILL FOLLOWING UNABSORBED DEPRECIATION TO BE SET OFF; A.Y. AMOUNT OF UNABSORBED DEPRECIATION (RS. IN LAKHS) 1998-99 4.28 1999-00 35.31 2000-01 23.63 2001-02 26.42 THUS IT IS NOTICED THAT THE APPELLANT HAS DIVERTED MORE OF FREIGHT RECEIPTS TO ITS SISTER CONCERN NTPL WHICH DID NOT H AVE TAX LIABILITY. THE APPELLANT WAS ASKED BY THE ASSESSING OFFICER VI DE LETTER DATED 14.3.2005 AS UNDER, YOU HAVE EXECUTED WORK IN THE CAPACITY OF SUB CONT RACTOR FOR YOUR SISTER CONCERN AND M/S. NABROS TRANSPORT (P) L TD. ALLOWING THEM TO EARN ABNORMAL MARGIN IN COMPARISON TO PROFIT EARNED BY YOU IN GETTING WORK DONE THROUGH OUTSIDE PARTIES AND SISTER CONCERN. IT IS A CLEAR CUT CASE OF ADOPTION OF COLORFUL DEVICE FOR AVOIDANCE OF TAX. PLEASE GIVE WORKING OF THE SAME AS PER YOUR UNDERSTANDING IN CASE OF SISTER CONCERNS AND NABROS TRANSPORT (P) LTD WHERE THE INCOME IS NIL OR NEGATI VE OR THERE IS CLAIM OF CARRIED FORWARD LOSS / DEPRECIATION. IN RESPONSE TO THE SAID LETTER THE APPELLANT FILED A REPLY DATED 18/3/2005 WHEREIN IT REPLIED AS UNDER; 13 AS REGARDS WORK EXECUTED IN THE CAPACITY OF SUB CO NTRACTOR FOR SISTER CONCERNS, WE STATE THAT WE HAVE RECEIVED REA SONABLE AMOUNT OF TRANSPORTATION CHARGES FOR SUPPLYING OUR VEHICLES TO COMPLETE THEIR JOB, FROM OUR SISTER CONCERNS, THERE IS NO CASE OF ALLOWING THEM TO EARN NORMAL MARGIN OF PROFIT. THE APPELLANT HAD NOT REPLIED BEFORE THE ASSESSING OFFICER THAT THE VEHICLES BELONGING TO THE NTPL AND THE APPELLANT AR E DIFFERENT, WHEREAS AS AT THE TIME OF APPEAL HEARING THE APPELL ANT HAS RAISED THIS CONTENTION. HOWEVER, THE SAID CONTENTION IS NOT ACC EPTED AS IT HAS NOT BEEN PROVED BY THE APPELLANT THAT THE VEHICLES BELO NGING TO NTPL HAD THE CAPABILITY OF EARNING HIGHER FREIGHT RECEIPT AS COMPARED TO THE VEHICLES BELONGING TO THE APPELLANT. MOREOVER IT IS WITHIN THE KNOWLEDGE OF THE APPELLANT AS TO HOW THE VEHICLES B ELONGING TO NTPL HAVE CAPACITY OF EARNING HIGHER FREIGHT RECEIPT THA N THE VEHICLES BELONGING TO THE APPELLANT, WHICH HAS NOT BEEN EXPL AINED PROPERLY. THE DECISION OF UNION OF INDIA VS. AZADI BACHAO AND OLAN 263 ITR 706 (SUPREME COURT) CITED BY THE AUTHORIZED REPRESE NTATIVE IS ON DIFFERENT FACTS AND ALTHOUGH THE DECISION OF MC DOW EL & CO. HAS BEEN REFERRED TO THEREIN ACCORDING TO ME , THE RATIO OF THE LATTER DECISION HAS NOT BEEN OVERRULED . THE ACCOUNTING OF HIGHER A ND MORE THAN AVERAGE FREIGHT RECEIPT IN THE HANDS OF A COMPANY R ETURNING LOSS AND HAVING NO TAX LIABILITY THAN THE FREIGHT RECEIPT IN THE HANDS OF THE APPELLANT IS NOT SUPPORTED BY ANY REASONING AND IT DEFIES LOGIC AND IT IS A COLOURFUL DEVICE. IT IS ALSO NOTICED [HAT THE ASSESSING OFFICER HAS REDUCED 20% AS COMMISSION TO CALCULATE THE SHORTFAL L OF RECEIPT BY THE APPELLANT AS COMPARED TO FREIGHT RECEIPT SHOWN BY T HE MAIN CONTRACTOR NTPL AND 20% AS THE COMMISSION RETAINED BY THE MAIN CONTRACTOR WHICH IS MORE THAN REASONABLE RATE OF CO MMISSION AS NORMALLY THE COMMISSION WOULD BE 7 TO 10%. THUS THE WORKING OF THE ASSESSING OFFICER IS ON LOWER SIDE. IN VIEW OF THE ABOVE FACTS, I AGREE WITH THE FINDING OF THE ASSESSING OFFICER THAT THE APPELLANT HAS DIVERTED MORE FREIGHT RECEIPT TO NTPL TO REDUCE ITS TAX LIABILITY AS THAT COMPANY HAD NO TAX LIABILITY . IN VIEW OF THE ABOVE FACTS THE ADDITION OF RS.5,00,800/- IS HELD TO BE JUSTIFIED AND THE SA ME IS CONFIRMED. II) AS REGARDS JOB OF TRANSPORT FROM MUMBAI TO BHOP AL, THE TOTAL VEHICLES USED BY THE APPELLANT WERE THREE OUT OF WH ICH 2 VEHICLES ARE OWNED BY THE APPELLANT AND ONE VEHICLE BY NTPL. THE REFORE, THE ASSESSING OFFICERS WORKING BY CONSIDERING USE OF 4 VEHICLES IS NOT CORRECT. THE AVERAGING OF FREIGHT RECEIPT MADE BY T HE ASSESSING OFFICER IS HELD TO BE JUSTIFIED FOR REASONS DISCUSS ED IN PREVIOUS PARA .IF THE AVERAGING OF RECEIPTS OF RS.9,32,358/- IS MADE FOR THREE VEHICLES, 14 THE FREIGHT RECEIPT PER VEHICLE COMES TO RS.3,10,78 6/- AND FOR THE TWO VEHICLES OF THE APPELLANT IT COMES TO RS.6,21,572/- AND AFTER DEDUCTION OF 20% OF COMMISSION , THE NET FREIGHT RECEIPT COME S TO RS.4.97,257/-, WHEREAS THE APPELLANT HAS ACCOUNTED RECEIPTS OF RS. 6,00,000/- THUS THE APPELLANT HAS RECEIVED MORE FL-EIGHT RECEIPTS. THUS , THE ADDITION OF RS.40,587/- IS FOUND TO BE NOT PROPER, HENCE THE SA ME IS DELETED. III) IN RESPECT OF JOB OF LOCAL TRANSPORT IN BHAVNA GAR CITY, THE TOTAL VEHICLES USED WERE TWO I.E. ONE OF THE APPELLANT AN D ONE OF NTPL. SO IF THE AVERAGING IS DONE, FOR THE TOTAL FREIGHT REC EIPT OF RS.1,20,000/- FOR TWO VEHICLES, FOR ONE VEHICLE OF THE APPELLANT IT COMES TO RS.60,000/- AND AFTER DEDUCTING 20% COMMISSION, IT SHOULD BE RS.48,000/- WHEREAS THE APPELLANT HAS SHOWN INCOME OF RS.50,000/- WHICH IS JUSTIFIED. THEREFORE NO ADDITION IS REQUIR ED, HENCE THE ADDITION OF RS.46,000/- IS DELETED. V) AS REGARDS JOB OF TRANSPORT FROM BHOPAL TO MUMBA I, THE TOTAL VEHICLES USED ARE 3 - TWO OWNED BY THE APPELLANT AN D ONE OWNED 1Y M/S. NTPL. SO IF THE AVERAGING OF THE TOTAL FREIGHT RECEIPT OF RS.15,06,318/- IS DONE AS IN PREVIOUS PARA, FOR THE TWO VEHICLES OF THE APPELLANT IT COMES TO RS.10,04,212/- AND AFTER DEDU CTING 20% COMMISSION, THE NET FREIGHT RECEIPT COMES TO RS.8,0 3,369/- WHEREAS THE APPELLANT HAS SHOWN INCOME OF RS.10,00,000/-. S O THERE IS NO SHORT FALL IN RESPECT OF FREIGHT RECEIPT FROM THIS JOB. T HEREFORE, NO ADDITION IS REQUIRED, HENCE THE ADDITION OF RS.2,05,054/- IS DE LETED. V) IN RESPECT OF JOB OF TRANSPORT FROM POWAI TO DUR GAPUR, TOTAL FOUR VEHICLES WERE USED - TWO BELONGING TO THE APPE LLANT AND 2 BELONGING TO M/S. NTPL AND TOTAL FREIGHT RECEIPT RE CEIVED ON THESE FOUR VEHICLES ARE RS.25,27,972/- AND THEN FOR THE V EHICLES OF THE APPELLANT IT COMES TO RS.12,63,986/- AND AFTER DEDU CTING 20% COMMISSION, THE NET FREIGHT RECEIPT COMES TO RS.10, 11,188/- WHEREAS THE APPELLANT HAS SHOWN FREIGHT RECEIPT OF RS. 12 L ACS. SO THERE IS NO SHORT FALL IN RESPECT OF FREIGHT RECEIPT FROM THIS JOB. THEREFORE, NO ADDITION IS REQUIRED, HENCE THE ADDITION OF RS.8,19 ,177/- IS DELETED. VI) AS REGARDS JOB OF TRANSPORT FROM MUMBAI TO KASH IPUR, REPORTED AS FROM AHMEDABAD TO KASHINAGAR BY THE ASSESSING OF FICER, THE TOTAL VEHICLES USED WERE SIX INCLUDING TWO VEHICLES BELON GED TO THE APPELLANT. SO IF THE AVERAGING OF THE TOTAL FREIGHT RECEIPT IS DONE THE FREIGHT RECEIPTS OF THE APPELLANT WOULD BE 1/3 OF THE TOTAL FREIGHT RECEIPT OF RS.73,70,000/- IS RS.24,56,666/- AND AFT ER DEDUCTING 20% COMMISSION THE APPELLANT SHOULD HAVE RECEIVED FREIG HT TO THE TUNE OF RS.19,65,333/-, WHEREAS THE APPELLANT HAS SHOWN REC EIPT OF RS.9 LACS. 15 SO THE SHORT FALL IS OF RS.10,65,333/- AS AGAINST R S.14,58,4001- CALCULATED BY THE ASSESSING OFFICER . IT IS FOUND T HAT THE COMPANY NTPL HAS ACCUMULATED LOSSES AND HAS NO TAX LIABILIT Y THEREFORE THE APPELLANT HAS DIVERTED MORE FREIGHT RECEIPT TO NTPL TO REDUCE ITS TAX LIABILITY. THEREFORE THE ASSESSING OFFICER HAS RIGH TLY MADE THE ADDITION. IN VIEW OF THE ABOVE FACTS THE ADDITION M ADE IN RESPECT OF THIS WORK TO THE TUNE OF RS.10,65,333/- IS HELD TO BE JUSTIFIED AND THE ADDITION OF RS.14,58,400/- MADE BY THE ASSESSING OF FICER IS REDUCED TO RS.10,65,333/-. THUS THE ADDITION MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE REDUCED TO RS.15,66,133/- (RS.5,00,800/- PLUS RS.10 ,65,333/-) AS AGAINST ADDITION OF RS.30,70,018/-. THE APPELLANT G ETS RELIEF OF RS.15,03,885/- . 5 BOTH THE PARTIES HAVE COME IN APPEAL AGAINST THE ORDER OF THE CIT(A). THE ASSESSEE HAS CHALLENGED THE CONF IRMATION OF THE ADDITION OF RS.15,66,133/- IN ITS APPEAL ITA NO .10/AHD/2006 WHILE THE REVENUE HAS CHALLENGED THE DELETION OF TH E ADDITION OF RS.15,03,885/- IN THEIR APPEAL ITA NO.267/AHD/2006. THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFORE T HE CIT(A). 4 THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE AO. 5.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO GO NE THROUGH THE ORDER OF THE AUTHORITIES BELOW. 5.2 WE NOTED THAT IN FACT THE TOTAL VEHICLES EMPLO YED FOR THE JOB WORK WERE 15 AND NOT 14 AS OBSERVED BY THE AO, OUT OF WHICH 6 VEHICLES BELONGED TO M/S NABROS I.E. ASSESS EE AND 9 (NINE) VEHICLES BELONGED TO NTPL. NO DOUBT, THE TOT AL FREIGHT RECEIPT BY NTPL IS RS.39,69,000/-. THE AO WORKED OU T THE AVERAGE FREIGHT RECEIPT PER VEHICLE AND ON THAT BAS IS CALCULATED THE RECEIPT OF 6 (SIX) VEHICLES WHAT OUGHT TO HAVE BEEN RECEIVED 16 BY M/S NABROS, THE ASSESSEE AMOUNTING TO RS.13,60,8 00/- AND ON THAT BASIS SINCE THE ASSESSEE ACCOUNTED FOR RS.8,60 ,000/- MADE THE ADDITION OF RS.5,00,800/- WHICH WAS CONFIRMED B Y THE CIT(A). WE HAVE GONE THROUGH THE DETAILS OF THE VE HICLES AND THE LIST OF ITEMS WHICH HAVE BEEN TRANSPORTED BY TH E ASSESSEE FROM KANDLA TO KEVADIA AS GIVEN AT PAGES 4 & 5. TH E ACTUAL RECEIPT OF FREIGHT BY NTPL IN RESPECT OF 6 VEHICLES BELONGING TO M/S NABROS IS RS.7,25,000/- AND NOT RS.13,60,800/- AS HAS BEEN ASSUMED BY THE AO. THE ASSESSEE HAS RECEIVED THE S UM OF RS.8,60,000/- AGAINST THE ACTUAL FREIGHT RECEIPT BY NTPL AT RS.7,25,000/-. ON THIS BASIS, WE ARE OF THE VIEW T HAT NO ADDITION CAN BE MADE AS THE ASSESSEE HAS NOT RECEIVED THE FR EIGHT MUCH MORE THAN WHAT HAS BEEN ACTUALLY RECEIVED BY NTPL. WE, THEREFORE, DELETE THE ADDITION OF RS.5,00,800/-. 5.3 THE SECOND ADDITION MADE BY THE AO RELATES TO 3 (THREE) VEHICLES EMPLOYED BY THE ASSESSEE FROM MUMB AI TO BHOPAL. THE AO WAS OF THE VIEW THAT NTPL HAS RECEI VED THE SUM OF RS.9,32,358/- FOR THESE VEHICLES AND THE ASS ESSEE HAS RECEIVED FREIGHT OF RS.6,00,000/-. WE NOTED THAT T HE AO HIMSELF HAS WORKED OUT THAT THE ASSESSEE SHOULD HAVE RECEIV ED FREIGHT AT RS.5,59,413/-. WE, THEREFORE, DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.40,587/-. 5.4 AS REGARDS THE THIRD ADDITION, WE NOTED, THE A SSESSEE HAS RECEIVED FREIGHT FOR BHAVNAGAR TO LOCAL TRANSPO RTATION AMOUNTING TO RS.50,000/- IN RESPECT OF ONE VEHICLE WHILE AS PER THE AO TOTAL FREIGHT RECEIPT BY NTPL WAS RS.1,20,00 0/-. WE NOTED THE AO HAS WORKED OUT THE FREIGHT IN RESPECT OF ONE VEHICLE AT RS.48,000/- WHILE THE ASSESSEE HAS ACTUALLY RECE IVED 17 RS.50,000/- FROM NTPL. WE ARE, THEREFORE, OF THE VI EW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT( A) DELETING THE ADDITION OF RS.46,000/- IN THIS REGARD. 5.5 THE FOURTH ADDITION, WE NOTED, IS MADE BY THE AO IN RESPECT OF 2 (TWO) VEHICLES EMPLOYED BY THE ASSESSE E FOR BHOPAL TO MUMBAI. THE TOTAL RECEIPT BY THE NTPL IS RS.15,0 6,318/-. THE ASSESSEE HAS RECEIVED FREIGHT FOR THE 2 (TWO) VEHIC LES AT RS.10,00,000/-. THE TOTAL VEHICLES EMPLOYED WERE 3 (THREE). THE AO HAS WORKED OUT THE RECEIPT AFTER REDUCING THE CO MMISSION FOR THE 2 (TWO) VEHICLES AT RS.7,95,370/- WHILE THE ASS ESSEE HAS ACTUALLY RECEIVED THE SUM OF RS.10,00,000/-, THEREF ORE, IN OUR OPINION, THE CIT(A) HAS RIGHTLY DELETED THE ADDITIO N OF RS.2,05,054/-. 5.6 SO FAR AS THE VEHICLES EMPLOYED FROM POWAI TO DURGAPUR ARE CONCERNED, WE NOTED, THERE ARE 3 (THRE E) VEHICLES; 2 (TWO) BELONGED TO THE ASSESSEE. THE TOTAL RECEIPT I S RS.25,23,000/- FOR THE 3 (THREE) VEHICLES AND AFTER THE COMMISSION THE RECEIPT EVEN AS PER THE AO FOR THE 2 (TWO) VEHICLES OUGHT TO BE RS.13,45,600/- AGAINST WHICH T HE ASSESSEE HAS RECEIVED THE SUM OF RS.12,00,000/- THE AO MADE THE ADDITION OF RS.8,19,177/-. WE AGREE WITH THE CONTEN TION OF THE LEARNED AR THAT ALL THE VEHICLES ARE NOT OF SIMILAR KIND. THE VEHICLES OF THE ASSESSEE ARE TRAILER UNITS WITH HYD RAULIC AXLE EXTENDABLE UPTO REQUIRED LIMITS TO BE ATTACHED WITH THE SEPARATE PRIME MOVER AND, THEREFORE, THE AO WAS NOT CORRECT TO WORK OUT THE AVERAGE RECEIPT PER VEHICLE. EVEN OTHERWISE THE RE IS NO EVIDENCE BEING BROUGHT ON RECORD WHICH MAY PROVE TH AT NTPL HAS ACTUALLY RECEIVED RS.13,45,600/- IN RESPECT OF 2 (TWO) 18 VEHICLES EMPLOYED BY THE ASSESSEE. THE ADDITION HAS BEEN MADE MERELY ON ESTIMATE BASIS. WE ACCORDINGLY CONFIRM TH E ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.8,19,177/-. 5.7 THE LAST ADDITION MADE BY THE AO RELATES TO TH E VEHICLES EMPLOYED FROM MUMBAI TO KASHIPUR. OUT OF 9 (NINE) VEHICLES EMPLOYED, 2 (TWO) BELONGED TO THE ASSESSEE . THE TOTAL RECEIPT IN RESPECT OF 9 (NINE) VEHICLES IS RS.56,00 ,000/-. THE ASSESSEE HAS RECEIVED RS.9,00,000/- IN RESPECT OF 2 (TWO) VEHICLES. THE AO MADE THE ADDITION OF RS.14,58,400/ - WHILE THE CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF RS.1 0,65,333/-. EVEN IF THE BASIS OF THE AO IS EMPLOYED, THE RECEIP T FOR THE TWO VEHICLES AFTER THE COMMISSION WILL BE RS.9,96,000/- WHILE THE ASSESSEE HAS RECEIVED THE SUM OF RS.9,00,000/-. IN THIS CASE ALSO WE NOTED THAT THE AO HAS MADE THE ADDITION ON THE B ASIS OF ESTIMATE AND PRESUMING AS IF ALL THE VEHICLES ARE O F SAME CATEGORIES. FROM THE DETAILS VERIFIED BY THE ASSESS EE, WE VERIFIED THAT THE VEHICLES EMPLOYED BY THE ASSESSEE ARE HAVI NG NET WRITTEN DOWN VALUE OF RS.12,349/- AND RS.32.16 AS ON 31-3-0 2. NTPL HAS RAISED A BILL OF RS.73,79,000/- WHICH INCLUDES RS.56,00,000/- TOWARDS THE TRANSPORT COST, RS.15,00,000/- AS RECTI FICATION AND REPAIR COST, RS.2,70,000/- AS BONUS. AGAINST THIS B ILL, LARSON & TOUBRO LIMITED RAISED A BILL OF RS.25,50,000/- TOWA RDS RECTIFICATION CHARGES OF PLATFORM OF NTPL. THUS ACT UAL RECEIPT BY NTPL IS ONLY RS.48,20,000/- AGAINST RS.56,00,000/- TAKEN BY THE AO. IF THE SAID RECEIPT IS TAKEN AFTER REDUCING THE COMMISSION AT THE RATE OF 20%, THE ACTUAL RECEIPT BY NTPL FOR THE 2 (TWO) VEHICLES BELONGING TO THE ASSESSEE WILL BE IN ANY C ASE LESS THAN RS.9,00,000/-. WE, THEREFORE, DELETE THE ADDITION A S SUSTAINED BY THE CIT(A) AMOUNTING TO RS.10,65,333/-. EVEN OTHERW ISE ALSO, IN 19 OUR OPINION, NO ADDITION CAN BE SUSTAINED IF IT HAS BEEN MADE MERELY ON PRESUMPTION, ASSUMPTION WITHOUT BRINGING THE EVIDENCE ON RECORD THAT THE ACTUAL AMOUNT EARNED BY THE ASSESSEE IS MUCH MORE. THUS, GROUND NO.1 OF ASSESSEES APPEA L IS ALLOWED WHILE GROUND NO.1 IN THE REVENUES APPEAL STANDS DI SMISSED. 6 GROUND NO.2 IN THE ASSESSEES APPEAL AND GROUND NO.2 IN THE REVENUES APPEAL RELATES TO THE DISALLO WANCE OF RS.16,82,700/- BEING TYRES PURCHASED FROM M/S CELIT E TYRE CORPORATION. THE ASSESSEE CLAIMED TO HAVE PURCHASED TYRES AND TUBES FROM M/S CELITE CORPORATION BARODA AND MUMBAI . THE ASSESSING OFFICER ISSUED LETTER U/S. 133(6) OF THE ACT CALLING FOR INFORMATION WHICH WAS RECEIVED BACK FROM THE POSTAL AUTHORITIES WITH THE REMARK CLOSED. THEREAFTER A CONFIRMATION WAS RECEIVED FROM M/S. CELITE TYRE CORPORATION, BARODA CONFIRMIN G THE SALE OF TYRES TO THE ASSESSEE EXCEPT ONE BILL DATED 30.7 .2001 AMOUNTING TO RS.2,34.000/- IT WAS CLAIMED BY M/S. C ELITE CORPORATION THAT THE DELIVERY HAS BEEN MADE ON INVO ICE ITSELF. THEREAFTER THE ASSESSING OFFICER POINTED OUT TO THE ASSESSEE SAYING THAT MOST OF THE SALE HILLS ISSUED BY M/S CE LITE CORPORATION DID NOT CONTAIN DESCRIPTION OF DELIVERY CHALLAN AND DATE AND IN SOME OF THE BILLS MODE OF SHIPMENT WAS NOT MENTIONED. IN NUMBER OF BILLS THERE IS NO REFERENCE OF CUSTOMER ORDER NUMBER THERE IS NO REFERENCE OF MANUFACTURER S NAME, DATE OF MANUFACTURE AND DISTINCTIVE NUMBERS OF TYRE /TUB E / FLAP. THEREFORE, THE ASSESSING OFFICER ASKED THE APPELLAN T TO PRODUCE THE PARTY CELITE TYRE CORPORATION ALONG WITH SPECIF IED INFORMATION TO ESTABLISH GENUINENESS OF TRANSACTION S. THEREAFTER THE ASSESSEE REPLIED THAT THE APPELLANT HAD RIGHTLY CLAIMED THE EXPENSES OF TYRE, TUBE PURCHASES AND AS REGARDS BIL L NO.190 DATED 20 30.7.2001 AMOUNTING TO RS.2,34,000/-, IT WAS STATED THAT THE ENTRY FOR THIS PARTICULAR TRANSACTION WAS DIRECTLY MADE WHEN PAYMENT WAS MADE. HENCE THIS ENTRY WAS NOT REFLECTE D IN THE ACCOUNT OF M/S. CELITE TYRE CORPORATION. THE ASSESS EE HAD TAKEN THE DELIVERY OF TYRES AT VARIOUS PLACES AS THE ASSE SSEE HAD OFFICES AT AHMEDABAD, BARODA, MUMBAI AND YARD AT SHERTHA (K ALOL). HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE E XPLANATION OF THE ASSESSEE SAYING THAT THE ASSESSEE IS NOT HAVING FACILITY TO TAKE DELIVERY OF TYRES AT BHIWANDI, IT NEITHER MAINTAINE D ANY OFFICE OR AGENT THERE NOR ANY OF ITS VEHICLE AT THAT POINT OF TIME WAS AT BHIWANDI, FURTHER THE ASSESSE FAILED TO PRODUCE THE PROOF OF TAKING DELIVERY AT VARIOUS PLACES BY PRODUCING THE PERSON WHO HAS TAKEN DELIVERY AT THE PLACES. THE DETAILS LIKE NAME OF THE MANUFACTURER AND DISTINCTIVE NO. OF EACH TYRE PURCH ASED FROM M/S. CELITE TYRE CORPORATION WERE NOT FURNISHED BY THE ASSESSEE NOR BY MIS. CELITE TYRE CORPORATION. FURTHER, THE A SSESSEE HAS NOT MAINTAINED STOCK REGISTER FOR TYRES SHOWING ENT RIES REGARDING PURCHASE, DELIVERY IN STOCK REGISTER AND THERE WAS NO PROOF OF DELIVERY AT THE VARIOUS PLACES AND SALE OF 30 TYRES ON 30.7.2001 @ RS.7,800/- HAS NOT BEEN CONFIRMED BY M/S. CELITE TYRE CORPORATION AND FURTHER THE LETTER ADDRESSED TO CEL ITE TYRE CORPORATION, MUMBAI WAS RECEIVED BACK FROM POSTAL A UTHORITIES. IN VIEW OF THE ABOVE FACTS, THE ASSESSING OFFICER M ADE DISALLOWANCE REJECTING THE CLAIM OF THE ASSESSEE OF PURCHASE OF TYRES OF RS.16,82,700/- FROM M/S CELITE TYRE CORPOR ATION. 7 WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT( A) HAS DEALT WITH THE ISSUE AS UNDER:- 4.1 DISPUTING THE SAID DISALLOWANCE, THE AUTHORIZE D REPRESENTATIVE OF THE APPELLANT SUBMITTED THAT THE SAID PARTY HAS FURNISHED COMPLETE 21 DETAILS REGARDING THE TRANSACTIONS WITH THE APPELLA NT SUCH AS COPIES OF INVOICES, DULY CONFIRMED COPY OF ACCOUNT WITH PA NO ., COPIES OF BANK STATEMENTS ETC. SHOWING RECEIPT OF PAYMENTS MADE BY THE APPELLANT THROUGH CHEQUES AS WELL AS THE EXTRACTS FROM ITS ST OCK LEDGER SHOWING PURCHASES OF TYRES MADE BY IT FROM REPUTED SUPPLIER S LIKE CEAT TYRES AND SALES EFLECTED TO THE APPELLANT. THE AUTHORZED REPRESENTATIVE FURTHER SUBMITTED THAT IN VIEW OF THE EVIDENCES FUR NISHED BY WAY OF PURCHASE BILLS, ITS PAYMENTS BY CHEQUES THROUGH BAN K AS WELL AS THE INFORMATION AND EXPLANATION SUPPLIED BY THE APPELLA NT TO THE ASSESSING OFFICER AS WELL AS IN VIEW OF THE INFORMA TION COLLECTED FROM THE SAID PARTY DIRECTLY BY THE ASSESSING OFFICER, T HE ENTIRE EXPENDITURE FOR TYRE PURCHASE HAS BEEN FULLY AND SATISFACTORY E XPLAINED BY THE APPELLANT. EXCEPT FOR ONE ENTRY OF RS.2,34,000/- TH E INFORMATION SUPPLIED BY THE APPELLANT WAS FULLY IN AGREEMENT WI TH THE INFORMATIONS COLLECTED DIRECTLY FROM THE PARTY. HOWEVER, IN RESP ECT OF SAID ENTRY OF RS.2,34,000/-, THE APPELLANT EXPLAINED THAT THE SAI D PURCHASE HAS BEEN DIRECTLY DEBITED TO THE EXPENSES ACCOUNT ON PAYMENT BY CREDITING BANK ACCOUNT INSTEAD OF CREDITING TO THE PARTY AND DEBIT ING DIRECTLY TO THE EXPENSES ACCOUNT. AS SUCH, THE SAID ENTRY WAS NOT R EFLECTED IN CORRESPONDING ACCOUNT OF THE PARTY. THUS, THE ENTIR E PURCHASES OF TYRES STAND PROVED AND FULLY EXPLAINED. THE AUTHORI ZED REPRESENTATIVE SUBMITTED THAT ASSESSING OFFICER HAS NOT ACCEPTED T HE EXPLANATIONS OF THE APPELLANT AND HAS ALSO NOT BELIEVED THE INFORMA TIONS AND EXPLANATIONS DIRECTLY COLLECTED BY THE SAID PARTY A ND ON THE CONTRARY, WITHOUT BRINGING ON RECORD ANY MATERIAL OR EVIDENCE TO PROVE THAT ENTIRE TRANSACTIONS WITH THE SAID PARTY ARE UNEXPLA INED, HELD THAT ENTIRE CLAIM FOR PURCHASES OF TYRES OF RS.16,82,700 /- FROM M/S. CELITE TYRE CORPORATION IS NOT ALLOWABLE ON SIMPLE GROUND THAT THE APPELLANT HAS NOT MAINTAINED QUANTITATIVE RECORDS FOR TYRES. THE AUTHORIZED REPRESENTATIVE SUBMITTED THAT NO SUCH QUANTITY RECO RDS ARE NORMALLY MAINTAINED FOR TYRES AND TYRES ARE USUALLY PURCHASE D AS AND WHEN NECESSITY ARISES. IN VIEW OF THE ABOVE, THE AUTHORI ZED REPRESENTATIVE SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER IS ABSOLUTELY ILLEGAL AND BAD IN LAW AND THE ADDITION SHOULD BE DELETED. 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHOR IZED REPRESENTATIVE CAREFULLY HAVE ALSO GONE THROUGH THE DETAILS FILED BY THE AUTHORIZED REPRESENTATIVE. THE APPELLANT HAS GI VEN THE NUMBER OF VEHICLES OWNED BY IT AS PER PAGE 46 AND 47 OF BOOK AND AS PER PAGE 23 I.E. SCHEDULE TO FIXED ASSETS, THE APPELLANT HAS GOT 19 TRAILERS. AS PER PAGE 27 OF THE PAPER BOOK THE TOTAL EXPENDITURE ON TYRES AND TUBES IS OF RS.21,77,755/-. AS PER PAGE 174 OF THE PAPER BOOK THE APPELLANT FURNISHED A LETTER FROM M/S. CELITE TYRE CORPORATIO N ADDRESSED TO THE ASSESSING OFFICER GIVING THE COPY OF THE STOCK REGI STER, PAN NO. OF 22 MR. KAMLESH MEHTA, PROPRIETOR OF THE FIRM M/S. CCLI TE TYRE CORPORATION AND COPIES OF INVOICES AND LEDGER ACCOU NT OF THE APPELLANT AND COPY OF STOCK LEDGER AS PER PAGES 1 8 2 TO 1 95 OF THE PAPER BOOK. THE PAYMENTS HAVE BEEN MADE BY CHEQUES. DURING THE COURSE OF APPEAL HEARING THEAUTHORIZED REPRESENTAT IVE WAS ASKED TO GIVE DETAILS OF NUMBER OF TYRES PURCHASED IN THE PR ECEDING TWO YEARS AND THE AUTHORIZED REPRESENTATIVE HAS SUBMITTED THA T FOR THE YEAR ENDING 31-3-2000 THE NUMBER OF TYRES PURCHASED WAS 162 AND THE COST OF EXPENDITURE WAS RS.14,50,250/ WHEREAS IN YEAR EN DING 31-3-2001 IN TOTAL 118 TYRES WERE PURCHASED AND THE EXPENDITU RE WAS RS.8,48,400/-. IN YEAR ENDING 31-3-2002 I.E. THE YE AR IN APPEAL, THE TOTAL TYRES USED ARE 271 AND THE EXPENDITURE IS OF RS.21,77,755/-. THE DETAILS OF TRAILERS WITH REGISTRATION NUMBERS HAVE BEEN SUBMITTED WHICH SHOWS THAT IN TOTAL 19 TRAILERS WERE THERE DU RING THE YEAR IN APPEAL AND THE TOTAL NUMBER OF TYRES AT ONE TIME ON THESE TRAILERS ARE 470 OUT OF WHICH THE APPELLANT HAS REPLACED 271 TYR ES WHICH COMES TO NEARLY 57% OF THE TOTAL TYRES DURING THE YEAR. M/S CELITE TYRE CORPORATION HAS RELIED TO THE AO VIDE LETTER DATED 28-2-2005 GIVING COPY OF LEDGER ACCOUNT OF THE APPELLANT ALONG WITH THE BANK STATEMENT WHEREIN THE PAYMENT RECEIVED FROM THE APPELLANT HAS BEEN MENTIONED. THE INVOICE NO.190 DATED 30-7-2001 FOR RS.2,34,000/ - WHICH THE APPELLANT HAS SHOWN AS PURCHASE HAS NOT BEEN SHOWN BY THE SAID PARTY IN THE LEDGER COPY OF ACCOUNT. THE AUTHORIZED REPRESENTATIVE HAS IN RESPECT OF SAID ENTRY OF RS.2.34,000/-, EXPL AINED THAT THE SAID PURCHASE HAS BEEN DIRECTLY DEBITED TO THE EXPENSES ACCOUNT ON PAYMENT BY CREDITING BANK ACCOUNT INSTEAD OF CREDIT ING TO THE PARTY AND DEBITING DIRECTLY TO THE EXPENSES ACCOUNT, AND SO THE SAID ENTRY WAS NOT REFLECTED IN CORRESPONDING ACCOUNT OF THE P ARTY. THIS CONTENTION OF THE AUTHORIZED REPRESENTATIVE IS NOT CORRECT AS I FIND THAT INVOICE NO.450A DATED 15-1-2002 ISSUED BY M/S CELITE TYRE CORPORATION FOR WHICH PAYMENT HAS BEEN MADE AGAINST DELIVERY, HAS BEEN ACCOUNTED BY THE SAID PARTY. SO THE CONTENTION OF THE AUTHORIZED REPRESENTATIVE THAT BILL OF RS.2,34,000/- WAS AGAIN ST DELIVERY AND HENCE THE SAME WAS NOT ACCOUNTED BY M/S CELITE TYRE CORPORATION IS NOT ACCEPTABLE. FURTHER IT IS FOUND THAT SAID SALE OF TYRES BY THE ABOVE PARTY HAS NOT BEEN REFLECTED IN THE STOCK LEDGER OF M/S CELITE TYRE CORPORATION SUBMITTED BY THE SAID PARTY BEFORE THE AO ALONG WITH THE LETTER DATED 28-2-2005. IN FACT COPY OF STOCK LEDGE R HAS BEEN GIVEN FOR THE PERIOD FROM 1-7-2001 TO 6-7-2001 AND THEREAFTER FROM 30-9-2001 TO 15-1-2002. THUS FOR THE RELEVANT PERIOD THE COPY OF STOCK LEDGER HAS NOT BEEN GIVEN. AS PER THE COPY OF INVOICE SUBM ITTED BY THE AUTHORIZED REPRESENTATIVE, THE SAID AMOUNT OF RS.2, 34,000/- HAS BEEN PAID BY CHEQUE DATED 7-9-2001 ALTHOUGH THE INVOICE WAS DATED 30-7- 2001, SO THE PARTYS ACCOUNT MUST HAVE BEEN CREDITE D BY THE BILL 23 AMOUNT AND LATER ON PAYMENT THE SAME WOULD HAVE BEE N REDUCED, BUT FROM THE LEDGER ACCOUNT FILED BY THE PARTY IT IS FO UND THAT NO SUCH CREDIT HAS BEEN MADE IN THAT ACCOUNT AND FURTHER TH E BANK STATEMENT SUBMITTED BY M/S CELITE TYRE CORPORATION DOES NOT S HOW THE PAYMENT OF CHEQUES ON 7-9-2001 BY THE APPELLANT. IN VIEW OF THE ABOVE FACTS IT IS FOUND THAT THE APPELLANT HAS CLAIMED EXCESS PURC HASE AND REPLACEMENT OF TYRES AND MOREOVER THE PURCHASE OF T YRES OF RS.2,34,000/- BY BILL DATED 30-7-2001 HAS NOT BEEN CONFIRMED BY THE SUPPLIER I.E. M/S CELITE TYRE CORPORATION. IN VIEW OF THE ABOVE FACTS AND FURTHER AS THE APPELLANT HAS NOT JUSTIFIED CONS UMPTION OF HIGHER NUMBER OF TYRES FOR THE YEAR IN APPEAL, THE PURCHAS E OF TYRES IN EXCESS OF 271 I.E. CONSIDERING THE NUMBER OF TYRES REPLACE D IN THE EARLIER YEARS OF 162 I.E. 100 TYRES IS DISALLOWED AS EXCESS EXPENDITURE CLAIMED. THUS THE DISALLOWANCE IS SUSTAINED TO THE TUNE OF 100 TYRES PURCHASED IN THE PROPORTION OF 100 / 271 OF THE TOT AL EXPENDITURE ON TYRES AND TUBES OF RS.21,77,755/ WHICH COMES TO RS. 8,03,600/-. ACCORDINGLY THE DISALLOWANCE OF RS.8,03,600/- IS CO NFIRMED AS AGAINST DISALLOWANCE OF RS.16,82,700/- AND THE APPELLANT GE TS RELIEF OF RS.8,79,100/-. 8 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. WE NOTED THAT THE DISALLOWANCE HAS BEEN MADE AND SUSTAINED BY THE CIT(A) ALTHOUGH CONTRARY MERELY ON THE BASIS OF SURMISES AND CONJECTURES WITHOUT BRING ING ANY MATERIAL OR EVIDENCE ON RECORD THAT THE ASSESSEE HA S NOT ACTUALLY INCURRED THIS EXPENDITURE. THE ASSESSEE HAS EVEN PU RCHASED THE TYRES FOR RS.2,34,000/- VIDE BILL NO.190. THE PAYME NT HAS BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES WHICH HAVE BEEN DULY CREDITED IN THE ACCOUNT OF M/S CELITE TYRE CORPORAT ION. MERELY THE ASSESSEE HAS DIRECTLY DEBITED THE EXPENDITURE A CCOUNT CREDITING THE BANK ACCOUNT WITHOUT CREDIT THE ACCOU NT OF M/S CELITE TYRE CORPORATION, IN OUR OPINION, A GENUINE EXPENDITURE INCURRED BY THE ASSESSEE CAN NOT BE CONVERTED INTO A NON-GENUINE EXPENDITURE. WE HAVE GONE THROUGH PAGES 107 TO 111 OF THE PAPER BOOK AND WE NOTED THAT NUMBER OF TYRES OWNED BY THE ASSESSEE REMAINED AT 470 WHILE THE CONSUMPTION OF T YRES HAS 24 INCREASED AS COMPARED TO THE EARLIER YEAR. THE ASSE SSEE HAS GIVEN THE NAMES OF THE PARTIES ALONG WITH THE DATES OF BI LLS, BILL NUMBERS, ACCOUNTS AND THE NUMBER OF TYRES, TUBES PU RCHASED WHICH TOTALS AROUND 271. THE AO COULD NOT POINT OU T ANY PARTICULAR BILL WHICH IS NOT GENUINE. THE INCURRENC E OF AN EXPENDITURE, IF THE PERSON IS HAVING THE INCOME FRO M FREIGHT RECEIPT ON THE PURCHASE OF TYRES, IS A NECESSARY EX PENDITURE TO BE INCURRED FOR THE PURPOSE OF BUSINESS. THIS EXPENDIT URE CANNOT BE REGARDED TO BE THE PERSONAL OR CAPITAL EXPENDITURE. IN OUR OPINION, EVEN THE CIT(A) WAS NOT CORRECT IN ALLOWIN G PART OF THE EXPENDITURE MERELY ON THE BASIS OF THE EXPENSES INC URRED IN THE PRECEDING ASSESSMENT YEAR. ONCE THE ASSESSEE HAS GI VEN ALL THE NECESSARY DETAILS IN RESPECT OF EXPENDITURE INCURRE D BY HIM, THE ONUS GETS SHIFTED ON THE REVENUE TO PROVE THAT THE EXPENDITURE IS NOT GENUINE. IN OUR OPINION, THE DISALLOWANCE CANNO T BE SUSTAINED MERELY ON THE BASIS OF PRESUMPTION AND ASSUMPTION. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND D ELETE THE DISALLOWANCE MADE BY THE AO IN TOTO. THUS, GROUND N O.2 TAKEN BY THE ASSESSEE IS ALLOWED WHILE GROUND NO.2 TAKEN BY THE REVENUE STANDS DISMISSED. 9 IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED WHILE THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20-11-2009 SD/- SD/- (R V EASWAR) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 20-11-2009 25 COPY OF THE ORDER FORWARDED TO : 1. M/S NABROS, 7, PARSHWANATH CHAMBERS, 3 RD FLOOR, ASHRAM ROAD, AHMEDABAD 2. THE ACIT, CIRCLE-9, AHMEDABAD 3. THE CIT CONCERNED 4. THE CIT(A)-XV AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY.R/AR, ITAT, AHMEDABAD