The Income tax Officer, Jammu V. Sh Rajesh Kumar Gupta, Jammu

ITA 213/ASR/2013

• Counselvise Citation: 21320914 RSA 2013
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 08-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india; Corroborative evidences
• Section: 40A(3); 194C; 28; 144

Judgement Text

ITA NOS. 166 & 213(ASR)/2013 IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO166.(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :ADIPG5402B SHRI RAJESH KUMAR GUPTA VS. INCOME TAX OFFICER, PARTAPGARH MOHALLA, WARD 2(2), JAMMU. JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO213.(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :ADIPG5402B INCOME TAX OFFICER, VS. SHRI RAJESH KUMAR GUPTA WARD 2(2), PARTAPGARH MOHALLA, JAMMU. JAMMU. (APPELLANT) (RESPONDENT) ASSESSEE BY:NONE DEPARTMENT BY:SH.TARSEM LAL, DR DATE OF HEARING: 27/01/2014 DATE OF PRONOUNCEMENT:30/01/2014 ORDER PER BENCH ; THESE CROSS APPEALS OF THE ASSESSEE AND THE REVENU E ARISE FROM THE ORDER OF THE CIT(A), JAMMU, DATED 15.01.2013 FOR TH E ASSESSMENT YEAR 2009- 10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF AP PEAL: 2 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE THE LD. CIT(A) JAMMU HAS ERRED BOTH IN LAW AND ON F ACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE U/S 40(A)(IA) O F THE INCOME TAX ACT, 1961 AMOUNTING TO RS.13,31,646/- BEING THE PAYMENT MADE TO LABOUR CONTRACTOR. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE THE LD. CIT(A) JAMMU HAS ERRED BOTH IN LAW AND ON F ACTS OF THE CASE BY NOT APPRECIATING THE FACTS THAT THE EXPENS ES HAVE ACTUALLY BEEN PAID AND NOT KEPT PAYABLE AS ON THE D ATE OF BALANCE SHEET. 3. THAT THE APPELLANT CRAVES TO LEAVE TO ADD, AMEND , MODIFY , DELETE ANY OF THE GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJU DICE TO EACH OTHER. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCES MADE UNDER THE HEAD FREIGHT EXPENSES, LABOUR EXPENSES, TOUR AND TRAVEL LING EXPENSES, VEHICLE REPAIR AND MAINTENANCE, ENTERTAIN MENT, BUSINESS PROMOTION, FESTIVAL EXPENSES, SALARY, STAF F WELFARE AND TELEPHONE WHEN THE ASSESSEE HAS FAILED TO PROD UCE THE SUPPORTING EVIDENCE IN THE SHAPE OF BILLS AND THE E VIDENCE REGARDING INCURRING OF THESE EXPENSES FOR BUSINESS USE. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DELETING THE DISALLOWANCES MADE UNDER THE HEAD FREIGHT EXPENSES, LABOUR EXPENSES, TOUR AND TRAVEL LING EXPENSES, VEHICLE REPAIR AND MAINTENANCE, ENTERTAIN MENT, BUSINESS PROMOTION, FESTIVAL EXPENSES, SALARY, STAF F WELFARE AND TELEPHONE BY CLUBBING THE DISALLOWANCE MADE U/ S 40(A)(IA) TO THE RETURNED INCOME, TO ARRIVE AT A NE T PROFIT RATE WHEN THE DISALLOWANCE U/S 40(A)(IA) HAS BEEN INCORP ORATED IN THE ACT TO CURB THE MENACE OF BOGUS EXPENDITURE THR OUGH THE TDS PROVISIONS. THE ADDITION FOR VIOLATION OF THIS PROVISION IS TREATED AS DEEMED INCOME WHICH IS BY FICTION OF LAW IS NOT ORDINARILY THE REAL INCOME. WHEN IT COME TO NOTICE THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SE CTION 40(A) 3 (IA) THEN IT IS LIABLE FOR ADDITIONAL INCOME IRRESP ECTIVE OF THE FACT THAT WHAT IS THE TOTAL QUANTUM OF RECEIPT AND WHAT SHOULD HAVE BEEN THE REASONABLE PROFIT OUT OF IT. 3. THE APPLICANT CRAVES TO AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF VALID SERVICE OF NOTICE. THEREFORE, WE ARE PROCEEDING TO DECIDE THE CASE EX-PARTE AFTER HEARING THE LD. DR AND ON THE BASIS OF MATERIAL AVA ILABLE ON RECORD. 4. AS REGARDS THE APPEAL OF THE ASSESSEE IN ITA NO. 166(ASR)/2013, THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS D ECLARED INCOME AS A SALES FACILITATOR OF M/S. INDIA LTD AND SALES AGENT OF M/ S. INTERNATIONAL TRACTORS LIMITED.. DURING THE YEAR THE ASSESSEE HAS SHOWN TO TAL RECEIPTS AT RS.2,07,02,566/- ON WHICH NET PROFIT OF RS.4,80,883 /- HAS BEEN DECLARED. THE ASSESSEE HAS MADE PAYMET OF RS.15,18,543/- TO M /S.GHULAM QADIR DAR & SONS, CARRIAGE CONTRACTOR, GOODS SHED NORTHERN RA ILWAY UNDER THE HEAD LABAOUR CHARGES. HOWEVER, NO TAX HAS BEEN DEDUCTE D AT SOURCE ON THESE PAYMENTS AS PER PROVISIONS OF SECTION OF 194C OF TH E INCOME TAX ACT, 1961. ACCORDINGLY, THE ASSESSEE WAS ASKED TO EXPLAIN AND SHOW CAUSE AS TO WHY AN AMOUNT OF RS.15,18,543/- MAY NOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT AND ADDED BACK TO HIS INCOME. THE ASSESSEE FILED A WRIT TEN REPLY IN THIS OFFICE ON 15.12.2011 STATING AS UNDER: 4 THE PAYMENTS MADE TO GHULAM QADIR ARE PAYMENTS MADE TO INDIVIDUAL LABOURERS WHO ARE ENGAGED IN LOADING AND UNLOADING. WE HAVE CREATED THIS ACCOUNT AS HE WAS MAKING ALL THE PAYME NTS, HE IS NOT A CONTRACTOR. THE MUSTER ROLLS WERE PREPARED BY HIM A ND PAYMENT WAS MADE TO HIM. SO THE AMOUNT CANNOT BE DISALLOWED U/S 40(A )(IA). 4.1. THE AO AFTER CONSIDERING THE REPLY OF THE ASSESSEE OBSERVED THAT PAYMENTS WERE MADE TO INDIVIDUAL LABOURERS AND GHUL AM QADIR IS NOT A CONTRACTOR ARE NOT FACTUALLY CORRECT. THE ASSESSEE HAS HIMSELF SHOWN PAYMENTS TO M/S. GHULAM QADIR DAR & SONS UNDER THE HEAD LABOUR CHARGES AND AS PER INDEPENDENT CONFIRMATION RECEIV ED FROM M/S. GHULAM QADIR DAR & SONS HE IS A CARRIAGE CONTRACTOR AND A S SUCH ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S 194C OF THE ACT, WHICH WAS NOT DONE. 4.2. ACCORDINGLY, THE AO OBSERVED THAT THE ASSESSEE HAS MADE PAYMENTS OF RS.15,18,543/- TO M/S. GHULAM QADIR DAR & SONS, CAR RIAGE CONTRACTOR, GOODS, SHED, NORTHERN RAILWAY JAMMU WITHOUT DEDUCTI ON OF TDS AS WAS REQUIRED U/S 194C OF THE ACT. ACCORDINGLY, IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, EXPENDITURE TO THE E XTENT OF RS.15,18,543/-IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 4.3. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE S UBMISSIONS, WHICH WERE SENT TO THE AO FOR REPORT. AFTER TAKING REPOT OF TH E AO, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO WHICH FOR THE SAKE O F CONVENIENCE IS REPRODUCED AS UNDER: 5 4.1. GROUND NO. 1 & 2 IS RELATING TO DISALLOWANCE OF LABOUR CHARGES AMOUNTING TO RS.15,18,534/- U/S 40(A)(IA) ON ACCOUN T OF DEDUCTION OF TDS. THE APPELLANT HAS SUBMITTED THAT THE AO HAS IN ADVERTENTLY ADDED THE AMOUNT OF CHEQUES PAYMENTS REVERSED BY TH E BANK ON ACCOUNT OF DISHONOUR OF TWO CHQUE PAYMENTS AMOUNTIN G TO RS1,86,897/- WHILE MAKING THE ADDITION U/S 40(A)( IA) OF THE ACT. THE ACTUAL PAYMENT MADE TO GHULAM QADIR & SONS ON ACCOU NT OF LABOUR PAYMENTS WAS RS.13,31,646/-. THE APPELLANT HAS CITED JUDGMENT OF SPECIAL BENCH VISHAKHAPATNAM IN ITA NO.477(VIZ) OF 2008 DATED 29/03/2012 IN THE CASE OF MERILYN SHIPPING & TRANSAPORT VISHAKHAPATNAM. THE APPELLANT HAS ALSO CITED THE JURISDICTIONAL ITAT BENCH AMRITSAR IN ITA NO.13 6(ASR)/2012 IN FAVOUR OF THE ASSESSEE. IN THE ABOVE TWO JUDGMENTS IT HAS BEEN HELD THAT SECTION 40(A)(IA) MENTIONS THE WORD PAYABLE A ND THE SAID SECTION DOES NOT INCLUDE THE PAYMENT MADE TO THE PAYEE. THU S, NON DEDUCTION OF TDS ON AMOUNT PAYABLE CANA BE DISALLOWED AND NOT THE WHOLE AMOUNT WHICH IS PAID. IN THE SPECIAL BENCH JUDGMENT , IT HAS BEEN ANALYSED THAT THE LEGISLATURE HAVE DELIBERATELY TAK EN OUT THE EARLIER WORD I.E. CREDITED OR PAID FROM DRAFT FINANCE BIL L AND SUBSTITUTING PAYABLE WORD IN THE ACTUAL ENACTMENT THEREFORE, THE AMOUNT PAID ON WHICH TDS HAS NOT BEEN DEDUCTED IS OUT OF THE PURVI EW OF MISCHIEF OF SECTION 40(A)(IA) . THE APPELLANT HAS SUBMITTED TH AT HE HAS PAID RS.13,31,646/- ON ACCOUNT OF LABOUR CHARGES TO ONE MR. GULAM QADIR & SONS AND NOTHING IS OUTSTANDING AS ON 31.03.2009. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT A ND ON EXAMINATION OF THE RECORDS, IT IS OBSERVED THAT PAYMENT OF ONLY IS RS.13,31,646/- IN RESPECT OF LABOUR CHARGES WAS MADE ON GULAM QADIR & SONS CHQUES TOTALING RS.1,86,897/- WERE RETURNED UNPAID AND INC LUDED TWICE IN THE PAYMENTS BY AO. I HAVE CONSIDERED THE ARGUMENT OF APPELLANT. THE IN TENTION OF SECTION 40(A)(IA) IS TO MAKE COMPLIANCE OF TDS PROVISIONS W HILE MAKING PAYMENTS TO CONTRACTORS. IF THE AMOUNT PAID IS TAKE N OUT OF THE PURVIEW OF THIS SECTION THE BASIC INTENTION OF THIS SECTION IS DEFEATED. THE CONCERNING CASE LAW CITED BY THE APPELLANT OF S PECIAL BENCH VISHAKHAPATNAM IN ITA NO.477 OF 2008 DATED 29.03.2 012 IN THE CASE OF MERILYN SHIPPING & TRANSPORT VISHAKHAPATNAM AND ALSO ITAT AMRITSARS FINDING AS ABOVE WHEREIN IT HAS BEEN HEL D THAT ONLY PAYABLE AMOUNT AS ON 31 ST MARCH WILL FALL UNDER THE MISCHIEF OF 6 40(A)(IA) IS NO LONGER A GOOD LAW. THE OPERATION OF THE JUDGMENT OF SPECIAL BENCH IN MERILYN SHIPPING AND TRANSPORT CA SE HAS BEEN SUSPENDED BY THE HONBLE ANDHRA PRADESH HIGH COURT IN THEIR JUDGMENT DATED 08.10.2012. IN VIEW OF THE ABOVE, I AM OF THE VIEW THAT DISALLOWANCE OF RS.13,31,645/- HAS RIGHTLY BEEN MAD E AND IS THUS CONFIRMED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF THE WRITTE N SUBMISSIONS BEFORE THE LD. CIT(A), THE REMAND REPORT OF THE AO AVAILABLE AT PAGE 7 OF CIT(A)S ORDER AND THE ORDER OF THE AO, AT THE OUTSET, WE F IND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS PASSED A WELL-REAS ONED ORDER. THE AO HAS TAKEN INDEPENDENT CONFIRMATION FROM GHULAM QADIR D AR & SONS THAT HE IS A CARRIAGE CONTRACTOR AND THEREFORE, THE ARGUMENTS M ADE BEFORE BOTH THE AUTHORITIES BELOW AND EVEN IN THE REMAND PROCEEDING S DOES NOT HELP THE ASSESSEE TO PROVE THAT HE IS NOT A CONTRACTOR. IN T HE ABSENCE OF ANY EVIDENCE OR DOCUMENTS TO PROVE THAT GULAM QADIR DAR & SONS IS NOT A CARRIAGE CONTRACTOR, HOW THE CONTRACTOR MAKES PAYMENT TO HIS EMPLOYEES IS NONE OF THE CONCERN OF THE ASSESSEE. THEREFORE, THE ARGUMEN TS OF THE ASSESSEE BEFORE BOTH THE AUTHORITIES BELOW THAT THE PAYMENT HAS NO T BEEN MADE IN VIEW OF THE CONTRACT CANNOT BE ACCEPTED AND THE LD. CIT(A) HAS ACCORDINGLY PASSED A WELL REASONED ORDER. THEREFORE, THE ASSESSEE IS LIA BLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OF THE ACT. 7 6. AS REGARDS THE ARGUMENTS OF THE ASSESSEE THAT AL L THE PAYMENTS HAVE BEEN MADE DURING THE YEAR AND THEREFORE, THE PROVI SIONS OF SECTION40(A)(IA) OF THE ACT ARE NOT APPLICABLE ONLY TO THE EXPENSES REMAINS PAYABLE AS AT THE END OF THE YEAR DOES NOT STAND FIRSTLY, ON THE BASI S OF THE FINDINGS OF THE LD. CIT(A) AND SECONDLY IN VIEW OF OUR DECISION IN THE CASE OF ITO VS. MAHAVIR COTTON TRADERS IN ITA NO.326(ASR)/2010 AND C.O. NO .9(ASR)/2010 DATED 30.05.2013 FOR THE ASSESSMENT YEAR 2005-06. THE REL EVANT FINDINGS ON IDENTICAL ISSUES ARE REPRODUCED AS UNDER: 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. IT IS PERTINENT TO MENTION THAT THE ASSES SEE HAS FAILED TO ADDRESS ANY REBUTTAL OF WHATSOEVER KIND TO THE JUDG MENTS OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF DEYS MEDICA L (U.P.) PVT. LTD. , HONBLE MADRAS HIGH COURT IN THE CASE OF TUBE IN VESTMENTS OF INDIA LTD. AND ANOTHER VS. ACIT (SUPRA), HONBLE G UJARAT HIGH COURT IN THE CASE OF CIT-IV VS. SIKANDARKHAN N. TUNVAR ( SUPRA) AND HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (SUPRA), WHICH ARE THE DECISIONS ON THE I MPUGNED ISSUES AS RAISED. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPO N THE DECISION OF SPECIAL BENCH IN THE CASE OF CIT VS. MERILYN SHIPPI NG & TRANSPORTS (SUPRA) ONLY IN THIS REGARD BUT HAS NOT REBUTTED TH E SAID DECISIONS OF THE HONBLE HIGH COURTS MENTIONED HEREINABOVE. 15. SECONDLY, REGARDING RELIANCE PLACED ON THE DEC ISION OF COORDINATE BENCH OF HYDERABAD IN THE CASE OF TEJA C ONSTRUCTIONS VS. ACIT (SUPRA), WE ARE OF THE VIEW THAT THE ARGUMENTS HAVE NOT BEEN CONCLUDED TO THE LOGICAL END WHILE THE SAID ORDER W ITH GREATEST RESPECT OF THE ITAT IS DATED 23.10.2009 BEFORE THE CONSTI TUTIONAL VIRUS WERE UNDER CHALLENGE AS REVEALED THROUGH THE JUDGMENTS BEING BY THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF DEY S MEDICAL (U.P.) P LTD. (SUPRA) WHICH IS DATED 15.02.2008 AND JUDGM ENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS O F INDIA VS. ACIT (SUPRA) WHICH IS DATED 29.09.2009 AND DECISION OF I TAT, SPECIAL 8 BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS DATED 29.03.2012 WHEREBY AT THE TIME OF CASE DISPOSAL BEFORE US, WE HAVE THE BENEFIT OF ADDITIONAL JUDGMENT OF HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT- IV VS. SIKANDARKHAN N TUNVAR AND HONBLE CALCUTTA H IGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (SUP RA). THUS, WE ARE BOUND TO FOLLOW THE LAW PREVALENT AT THE RELEVANT D ATE AND TIME. EVEN OTHERWISE, CONTROVERSY RAISED STANDS ANSWERED AGAIN ST THE ASSESSEE AND THEREFORE THE DEPARTMENTAL APPEAL IS ALLOWED T O THAT EXTENT WHEREBY THE SAID ASPECT OF THE FINDINGS BY THE HON BLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. CRESCENT EXPORT SYN DICATE ARE REPRODUCED HEREIN BELOW WHICH ARE PERTINENT FINDING OF THE HONBLE HIGH COURT IN THE PRESENT CASE.: IN THE BACKDROP OF THESE SUBMISSIONS, HONBLE MAD RAS HIGH COURT UPHELD THE CONSTITUTIONAL VALIDITY OF THE PROVISIO NS OF SECTION 40(A)(IA) AND MADE VARIOUS OBSERVATIONS:- (I) HONBLE MADRAS HIGH COURT, INTER ALIA, NOTED THE OB SERVATIONS OF HONBLE SUPREME COURT IN THE CASE OF A.S.KRISHNA V. STATE OF MADRAS AIR 1957 SC 297 WHICH ARE AS UNDER:- IT WOULD BE QUITE AN ERRONEOUS APPROACH TO THE QUE STION TO VIEW SUCH A STATUTE NOT AS AN ORGANIC WHOLE, BUT AS A MERE COLLECTION OF SECTIONS THEN DISINTEGRATE IT INTO PA RTS, EXAMINE UNDER WHAT HEADS OF LEGISLATION THOSE PARTS WOULD S EVERALLY FALL, AND BY THAT PROCESS DETERMINE WHAT PORTIONS THEREOF ARE INTER VIRES AND WHAT ARE NOT. THUS, SECTION 40(A)(IA) COU LD NOT BE VIEWED INDEPENDENTLY AND HAD TO BE CONSIDERED ALONG WITH OTHER PROVISIONS. (II) THE PROVISIONS OF SECTION 40(A)(IA) WERE COMPARED W ITH THE PROVISIONS OF SECTION 201 OF THE INCOME TAX ACT AND , IT WAS, INTER ALIA, OBSERVED THAT AS FAR AS SECTION 201 IS CONCERNED THAT WOULD RELATE TO THE AMOUNT OF TAX THAT COULD BE DED UCTED BY WAY OF TDS. HOWEVER, AS FAR AS SECTION 40(A)(IA) IS CON CERNED, WHICH WOULD RESULT IN THE DISALLOWANCE OF WHOLE OF THE EXPENDITURE AND THEREBY THE ENTIRE SUM EXPENDED WOU LD ATTRACT THE LEVY OF TAX AT A PRESCRIBED RATE WITH ALL OTHER CONDITIONS SUCH AS SURCHARGE, ETC. 9 THUS, HONBLE MADRAS HIGH COURT HAS ALSO HELD IN PA RA 61 OF ITS JUDGMENT THAT WHOLE OF THE EXPENDITURE CLAIMED WITHOUT MAKING TDS IS TO BE DISALLOWED AND NOT ONLY PART OF THE EXPENDITURE. (III) THE FINANCE BILL NO.2 OF 2004 STATES THAT THE INSER TION OF CLAUSE (IA) IN CLAUSE (A) TO SECTION 40 OF THE ACT WAS WIT H A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISIONS. (IV) WHEN THE PROVISIONS AND PROCEDURES RELATING TO TDS ARE SCRUPULOUSLY APPLIED, FIRST AND FOREMOST IT ENSURES THE IDENTIFICATION OF THE PAYEES AND THEREBY NETWORK OF ASSESSEES GETS CONFIRMED. WHEN ONCE SUCH IDENTITY OF ASSESSEE S, WHO ARE IN RECEIPT OF THE INCOME CAN BE ASCERTAINED, IT WIL L ENABLE TAX COLLECTION MACHINERY TO BRING WITHIN ITS FOLD ALL S UCH PERSONS WHO ARE LIABLE TO COME WITHIN THE NETWORK OF TAXPAY ERS. THUS, IF IT IS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE IN RESPECT OF THOSE PAYMENTS WHICH HAVE BEEN PAID WITHOUT MAKING TDS AND AT THE END OF THE YEAR NO AM OUNT IS OUTSTANDING THEN THE VERY OBJECT OF IDENTIFICATION OF PAYEES WILL GET FRUSTRATED. (V) THE LEGISLATIVE INTENT OF THE INTRODUCTION OF SECTI ON 40(A)(IA) IS IN THE LARGER PERSPECTIVE OF AUGMENTING THE VERY TD S PROVISIONS THEMSELVES. IT IS NOT MERELY RELATED TO THE COLLECT ION OF TDS ONLY. (VI) THE INTENTION OF THE LEGISLATURE IS NOT TO TAX THE PAYER FOR ITS FAILURE TO DEDUCT THE TAX AT SOURCE. THE OBJECT OF INTRODUCTION OF SECTION 40(A)(I) AS WELL AS SECTION 40(A)(IA) IS TO ENSURE THAT ONE OF THE MODES OF RECOVERY AS PROVIDED IN CHAPTER XVI I-B IS SCRUPULOUSLY IMPLEMENTED WITHOUT ANY DEFAULT, IN OR DER TO AUGMENT THE SAID MODE OF RECOVERY. HONBLE MADRAS HIGH COURT, INTER ALIA, OBSERVED AT PARA 69 OF ITS JUDGMENT AS UNDER:- WITH THE PROVISO TO SECTION 40(A)(IA) THE DEDUCTIO N IN THE SUBSEQUENT YEAR BY RECTIFYING THE DEFAULT COMMITTED IN THE MATTER OF TDS IN THE PREVIOUS YEAR, A DEFAULTING AS SESSEE CANNOT BE HEARD TO SAY THAT IRRESPECTIVE OF THE DEL IBERATE DEFAULT COMMITTED BY IT IN IMPLEMENTING THE PROVISI ON RELATING 10 TO TDS, IT SHOULD BE HELD THAT A HIGHER TAX LIABILI TY IS MULCTED ON IT. HONBLE MADRAS HIGH COURT, INTER ALIA, OBSERVED IN PARA 83 OF ITS JUDGMENT AS UNDER:- AFTER ALL THE PROVISO HAS BEEN INSERTED IN ORDER T O ENSURE THAT EVEN A DEFAULTER IS NOT PUT TO SERIOUS PREJUDICE, I N AS MUCH AS, BY OPERATION OF THE SUBSTANTIVE PROVISION, THE EXPE NDITURE WHICH IS OTHERWISE ALLOWABLE AS A DEDUCTION IS DENIED ON THE GROUND THAT THE OBLIGATION OF TDS PROVISIONS IS VIOLATED. THE LAW MAKES WHILE IMPOSING SUCH A STRINGENT RESTRICTION W ANTED TO SIMULTANEOUSLY PROVIDE SCOPE FOR THE DEFAULTER TO G AIN THE DEDUCTION BY COMPLYING WITH THE TDS PROVISION AT A LATER PINT OF TIME. THUS, IMPLIEDLY HONBLE MADRAS HIGH COURT, HAS, INT ER ALIA, HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) WILL BE APPLICABLE WITH RESPECT TO ENTIRE EXPENDITURE. IT IS TRUE THA T SPECIFIC ISSUE REGARDING PAID, CREDITED AND PAYABLE HAS NOT BEEN CONSIDERED BUT FROM THE JUDGMENT IT IS EVIDENT THA T IF ASSESSEES CONTENTION IS ACCEPTED THEN THE VERY OBJECT OF INC ORPORATION OF SECTION 40(A)(IA) WOULD BE FRUSTRATED. 21. IN VIEW OF ABOVE DISCUSSION, WE ANSWER THE QUESTION AS UNDER:- THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME T AX ACT, 1961, ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH IS SHOWN AS PAYABLE ON THE DATE OF BALANCE-SHEET, BUT IT IS APPLICABLE TO SUCH EXPENDITURE, WHICH BECOME PAYABLE AT ANY TIME DURING THE RELEVANT PREV IOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR. IN THE RESULT THE QUESTION IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASS ESSEE. BEFORE DEALING WITH THE SUBMISSIONS OF THE LEARNED COUNSEL APPEARING FOR THE ASSESSEES IN BOTH THE APPEALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIEWS IN THE CASE O F MERILYN SHIPPING. WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORIT Y AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID CASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FACT THAT THE LEGISL ATURE HAS REPLACED THE EXPRESSION AMOUNTS CREDITED OR PAID WITH THE EXPRESSION PAYABLE IN THE FINAL ENACTMENT. 11 COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMEND MENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SOUGHT TO BE ACHIEVED BY AN AMENDMENT. THIS IS PRECISELY WHAT WAS DONE BY THE APEX COURT I N THE CASE OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAME OMPARISON BETWEEN THE DRAFT AND THE ENACTED LAW IS NOT PERMIS SIBLE. NOR CAN THE DRAFT OR THE BILL BE USED FOR THE PURPOSE OF REGULA TING THE MEANING AND PURPORT OF THE ENACTED LAW. IT IS THE FINALLY ENACT ED LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FELL INTO AN ERROR IN NOT REAL IZING THIS ASPECT OF THE MATTER. THE LEARNED TRIBUNAL HELD THAT WHERE LANGUAGE IS C LEAR THE INTENTION OF THE LEGISLATURE IS TO BE GATHERED FROM THE LANGUAGE USED. HAVING HELD SO, IT WAS NOT OPEN TO SEEK TO INTERPRE T THE SECTION ON THE BASIS OF ANY COMPARISON BETWEEN THE DRAFT AND THE S ECTION ACTUALLY ENACTED NOR WAS IT OPEN TO SPECULATE AS TO THE EFFE CT OF THE SO-CALLED REPRESENTATIONS MADE BY THE PROFESSIONAL BODIES. THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) O F THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE AND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESSEE UNDER TH E HEAD INCOME FROM BUSINESS AND PROFESSION IF THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES ARE DISALLOWED. HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND, T HEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER TO DISALLOW THE GENUIN E AND REASONABLE EXPENDITURE ON THE AMOUNTS OF EXPENDITURE ALREADY P AID? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? WE, AS SUCH, HAVE NO DOUBT IN OUR MIND THAT THE LEA RNED TRIBUNAL REALIZED THE MEANING AND PURPORT OF SECTIO N 40(A)(IA) CORRECTLY WHEN IT HELD THAT IN CASE OF OMISSION TO DEDUCT TAX EVEN THE GENUINE AND ADMISSIBLE EXPENSES ARE TO BE DISALLOWE D. BUT THEY SOUGHT TO REMOVE THE RIGOUR OF THE LAW BY HOLDING T HAT THE DISALLOWANCE SHALL BE RESTRICTED TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNAL BY MAJORITY DID WAS TO SUPPLY THE CASUS OMISSUS 12 WHICH WAS NOT PERMISSIBLE AND COULD ONLY HAVE BEEN DONE BY THE SUPREME COURT IN AN APPROPRIATE CASE. REFERENCE IN THIS REGARD MAY BE MADE TO THE JUDGMENT IN THE CASE OF BHUWALKA STE EL INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REPORTED IN 2010 ( 2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTIO N 2 (II) OF THE MATHADI ACT AS FOLLOWS:- UNPROTECTED WORKER MEANS A MANUAL WORKER WHO IS ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMENT. THE CONTENTION RAISED WITH REFERENCE TO WHAT WAS TH ERE IN THE BILL WAS REJECTED BY THE SUPREME COURT BY HOLDING A S FOLLOWS:- IT MUST, AT THIS JUNCTURE, BE NOTED THAT IN SPITE OF SECTION 2(11), WHICH INCLUDED THE WORDS BUT FOR THE PROVISIONS OF THIS ACT IS NOT ADEQUATELY PROTECTED BY LEGISLATION FOR WELFARE AND BENEFITS OF THE LABOUR FORCE IN THE STATE, THESE PRECISE WORDS WER E REMOVED BY THE LEGISLATURE AND THE DEFINITION WAS MADE LIMITED AS IT HAS BEEN FINALLY LEGISLATED UPON. IT IS TO BE NOTED THAT WHEN THE BI LL CAME TO BE PASSED AND RECEIVED THE ASSENT OF THE VICE- PRESIDENT ON 0 5-06-1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOVERNMENT GAZET TE EXTRAORDINARY, PART IV ON 13-06-1969, THE AFOREMENT IONED WORDS WERE OMITTED. THEREFORE, THIS WOULD BE A CLEAR POIN TER TO THE LEGISLATIVE INTENT THAT THE LEGISLATURE BEING CONSC IOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED WITH THE FACTUAL DATA, DELIBERATELY AVOIDED THOSE W ORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ IN THAT DEFINITIO N, THESE PRECISE WORDS, WHICH WERE CONSCIOUSLY AND DELIBERATELY OMIT TED FROM THE DEFINITION. THAT WOULD AMOUNT TO SUPPLYING THE CASU S OMISSUS AND WE DO NOT THINK THAT IT IS POSSIBLE, PARTICULARLY, IN THIS CASE. THE LAW OF SUPPLYING THE CASUS OMISSUS BY THE COURTS IS EXTREM ELY CLEAR AND SETTLED THAT THOUGH THIS COURT MAY SUPPLY THE CASUS OMISSUS, IT WOULD BE IN THE RAREST OF THE RARE CASE AND THUS SUPPLYIN G OF THIS CASUS OMISSUS WOULD BE EXTREMELY NECESSARY DUE TO THE INA DVERTENT OMISSION ON THE PART OF THE LEGISLATURE. BUT, THAT IS CERTAI NLY NOT THE CASE HERE. WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERP RETATION IS POSSIBLE. 13 THE KEY WORDS USED IN SECTION 40(A)(IA), ACCORDING TO US, ARE ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII B. IF THE QUESTION IS WHICH EXPENSES ARE SOUGHT TO BE DISALL OWED? THE ANSWER IS BOUND TO BE THOSE EXPENSES ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII B. ONCE THIS IS REALIZED NOTHING TURNS ON THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WORD PAYABLE AND NOT PAID OR CREDITED. UNLESS ANY AMOUNT IS PAYABL E, IT CAN NEITHER BE PAID NOR CREDITED. IF AN AMOUNT HAS NEITHER BEEN PA ID NOR CREDITED, THERE CAN BE NO OCCASION FOR CLAIMING ANY DEDUCTION . THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSC EPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOOKING AT THE DRA FT IT COULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS M ADE OR CREDITED IN FAVOUR OF A CONTRACTOR OR SUB-CONTRACTOR DIFFERENTL Y THAN THE PAYMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FE ES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES BECAUSE THE WORDS AMOUNTS CREDITED OR PAID WERE USED ONLY IN RELATION TO A C ONTRACTOR OR SUB- CONTRACTOR. THIS DIFFERENTIAL TREATMENT WAS NOT INT ENDED. THEREFORE, THE LEGISLATURE PROVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B PAYABLE ON ACCOUNT O F INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PR OFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES OR TO A CONTRACTOR O R SUB CONTRACTOR SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME OF AN ASSESSEE IN CASE HE HAS NOT DEDUCED, OR AFTER DEDUCTION HAS NOT PAID WITHIN THE SPECIFIED TIME. THE LANGUAGE USED BY THE LEGISLATUR E IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREAS THE LA NGUAGE USED IN THE BILL WAS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBM ISSION OF MR. BAGCHI AND MS. ROYCHOWDHURI. THERE CAN BE NO DE NIAL THAT THE PROVISION IN QUESTION IS HARSH. BUT THAT IS NO GROU ND TO READ THE SAME IN A MANNER WHICH WAS NOT INTENDED BY THE LEGISLATU RE. THIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISS ION OF MS. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECO ME EFFECTIVE FROM 1ST APRIL, 2013 SHOULD BE HELD TO HAVE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DATE CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON INDICATED ABOVE. THE LAW WAS DELIBERATELY MA DE HARSH TO SECURE COMPLIANCE OF THE PROVISIONS REQUIRING DEDUC TIONS OF TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. 14 FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OPI NION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SH IPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS ADV ANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEALT WITH AND REJECTE D. THE APPEAL IS, THUS, ALLOWED IN FAVOUR OF THE REVE NUE. 16. IT WOULD BE RELEVANT TO DEAL WITH THE ARGUMENT S OF THE LD. COUNSEL OF THE ASSESSEE WHICH WERE PRESSED REPEATED LY THAT THE PROVISIONS OF SECTION 28 STAND ALONE, GRANT THE ALLOWANCE TO THE ASSESSEE AND THIS CLAIM HAS BEEN MADE VALIDLY THU S ELIGIBLE FOR ALLOWANCE NEVERTHELESS NO DEDUCTION OF TAX MADE. I N THIS CONTEXT, WE REFER THAT THE SAID ARGUMENTS BY LD. AR ARE BEREF ET OF MERITS AND SUBSTANCE SINCE THE ACT HAS TO BE READ AS AN INTEG RATED CODE AND NOT TO THE CHOICE OF THE ASSESSEE BEING PICK AND CH OOSE TO THE PROVISIONS OF LAW SUITING THE REQUIREMENTS OF A LIT IGANT ANDS THE SIMILAR ARGUMENT HAS BEEN DEALT IN THE AFORESAID JU DGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (SUPRA) AND WHICH FINDINGS ARE WHILE NOTICING THE J UDGMENT OF HONBLE SUPREME COURT IN A.S. KRISHNA VS. STATE OF MADRAS REPORTED IN AIR 1957 SCC 297 (SUPRA). 17. THAT THE SAID ARGUMENT IS HEREBY REJECTED AND E VEN THE HONBLE SUPREME COURT IN THE CASE OF V.N. SHRIKHANDE (DR.) VS. ANITA SENA FERNANDES (2011) 1 SCC 53 AT PARA 22 WHILE NOTICING THE JUDGMENT IN THE CASE OF RBI V. PEERLESS GENERAL FINANCE & IN VESTMENT CO. LTD; (1987) 1SCC 450 AT PARA 33 WHERE IT HAS BEEN HELD A S UNDER: IN RBI VS. PEERLESS GENERAL FINANCE & INVESTMENT C O. LTD. CHENNAPA REDYY, J. REFERRED TO THE RULE OF CONTEXTU AL INTERPRETATION AND OBSERVED : (SCC P.450 PARA 33): 33. INTERPRETATION MUST DEPEND ON TH TEXT AND THE CONTEXT. THEY ARE THE BASES OF INTERPRETATION. ONE MAY WELL SAY IF TH E TEXT IS THE TEXTURE, CONTEXT IS WHAT GIVES THE COLOUR. NEITHER CAN BE IG NORED. BOTH ARE IMPORTANT. THAT INTERPRETATION IS BEST WHICH MAKES THE TEXTUAL INTERPRETATION MATCH THE CONTEXTUAL. A STATUTE IS B EST INTERPRETED WHEN WE KNOW WHY IT WAS ENACTED. WITH THIS KNOWLEDGE, TH E STATUTE MUST BE READ FIRST AS A WHOLE AND THEN SECTION BY SECTION, CLAUSE BY CLAUSE, PHRASE BY PHRASE AND WORD BY WORD. IF A STATUTE IS LOOKED AT, IN THE CONTEXT OF ITS ENACTMENT, WITH THE GLASSES OF THE S TATUTE MAKER, 15 PROVIDED BY SUCH CONTEXT, ITS SCHEME, THE SECTIONS, CLAUSES, PHRASES AND WORDS MAY TAKE COLOUR AND APPEAR DIFFERENT THA N WHEN THE STATUTE IS LOOKED AT WITHOUT THE GLASSES PROVIDED B Y THE CONTEXT. WITH THESE GLASSES, WE MUST LOOK AT THE ACT AS A WHOLE AND DISCOVER WHAT EACH SECTION, EACH CLAUSE, EACH PHRASE AND EACH WOR D IS MEANT AND DESIGNED TO SAY AS TO FIT INTO THE SCHEME OF THE EN TIRE ACT. NO PART OF A STATUTE AND NO WORD OF A STATUTE CAN BE CONSTRUED I N ISOLATION. 18. FURTHER, WE SHALL ADD THAT PROVISIONS OF SECTIO N 28 ARE CONFINED TO CHARGING OF INCOMES UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND IT IS MOST PERTINENT TO REFER TH AT THE PROVISIONS OF SECTION 29 REFERS TO THE METHODOLOGY OF COMPUTING T HE SAID CHARGE FOR COVERING THE PROVISION CONTAINED IN SECTION 30 TO 4 3D, WHEREIN THE SAID PROVISION U/S 40(A)(IA) IS INCLUSIVE THEREIN. AND IT IS EVEN OTHERWISE RELEVANT TO MENTION THAT THE PROVISIONS O F SECTION 40 OPEN WITH WORD NOTWITHSTANDING ANYTHING TO THE CONTRAR Y IN SECTION 30 TO 38 WHEREIN THE AMOUNTS NOT DEDUCTIBLE ARE REFERRED TO U/S 40(A)(IA). THE SAID PROVISION COMMENCE WITH NON-OBSTANTE CLAUS E AND REFER THE PROVISION U/S 30 TO 38 WITH WHERE INTO UNDER THE GE NERAL CLAIM OF THE EXPENSES, THE SAID ALLOWANCE NOT TO BE GRANTED, SPE CIFICALLY WHERE A SPECIAL PROVISION FOR DISALLOWANCE HAS BEEN EXTRACT ED UNDER THE STATUTE. 19. THEREFORE, IN VIEW OF OUR FINDINGS HEREINABOVE, GROUNDS RAISED BY THE ASSESSEE IN ITS C.O. HAVE NO MERIT AND THERE FORE, THE SAME ARE DISMISSED AND THE APPEAL OF THE REVENUE IS ALLOWED. 6.1. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN VIEW OF OUR DECISION IN THE CASE OF M/S. MAHAVIR COTTON TRADERS IN ITA NO.326(ASR)/20 10 (SUPRA) REPRODUCED HEREINABOVE. THUS, ALL THE GROUNDS OF THE ASSESSEE ARE DISMISSED. 16 7. NOW, WE TAKE UP APPEAL OF THE REVENUE IN ITA NO. 213(ASR)/2013 FOR THE ASSESSMENT YEAR 2009-10. THE BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSEE HAS MADE CASH PAYMENTS OF RS.11,74,593/- AS UNDER: DATE OF PAYMENT AMOUNT PAID IN CASH 31/05/2008 3,00,000 30/0/6/2008 1,50,000 30/09/2008 3,00,000 31/12/2008 2,00,000 28/02/2009 2,24,593 TOTAL 11,74,593/- ON SHOW CAUSE GIVEN, THE ASSESSEE SUBMITTED THAT PA YMENTS ARE MADE IN CASH BUT THE SAME DO NOT REPRESENT THE PAYMENTS MADE TO A SINGLE PERSON. THESE PAYMENTS ARE MADE TO DIFFERENT TRUCKS. THE AO AFT ER CONSIDERING THE REPLY OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED ANY SUPPORTING CHALLAN OR DOCUMENT IN SUPPORT OF HIS CONTENTION AN D COMPLETE BOOKS OF ACCOUNT ALONGWITH BILLS AND VOUCHERS WERE NOT PRODU CED. ONLY COMPUTERIZED COPY OF CASH BOOK AND LEDGER WERE PRODUCED WITHOUT ANY SUPPORTING EVIDENCE. AND ACCORDINGLY THE AO DISALLOWED THE SA ID PAYMENTS IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AMOUNTIN G TO RS.11,74,593/- AND ADDED TO THE INCOME OF THE ASSESSEE. ACCORDINGLY, T HE AO IN THE ABSENCE OF 17 ANY SUPPORTING EVIDENCE BEING PRODUCED BY THE ASSES SEE MADE A DISALLOWANCE ON ACCOUNT OF FREIGHT EXPENSES @ 10% OF THE EXPENSES CLAIMED, 5% OF THE LABOUR EXPENSES CLAIMED AND 10% OF VARIOUS EXPENSES ON ACCOUNT OF TOUR & TRAVELLING EXPENSES. ALSO, THE AO MADE DISALLOWANCE @ 20% IN THE ABSENCE OF ANY DOCUMENTS ON ACCOUNT O F VEHICLE REPAIR AND MAINTENANCE, ENTERTAINMENT, BUSINESS PROMOTION, FES TIVAL EXPENSES, SALARY, STAFF WELFARE AND TELEPHONE EXPENSES. 8. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE SU BMISSIONS WHICH WERE FORWARDED TO THE AO FOR REPORT, WHO SUBMITTED THE REMAND REPORT AND AFTER TAKING COMMENTS OF THE ASSESSEE, THE LD. CIT( A) DELETED THE ADDITIONS. THE RELEVANT PART IN PARA 4.2 AND 4.3 OF THE LD. CI T(A)S ORDER IS REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: 4.2. WHILE CONSIDERING GROUND N0.3, IT IS OBSERVED THAT THE AO HAS INVOKED SECTION 40A(3) ON PAYMENTS MADE TO LABOURER AS MENTIONED IN PAGE 3 PARA 3 O THE ASSESSMENT ORDER AND MADE DISAL LOWANCE AMOUNTING TO RS.11,74,593/-. THE APPELLANT SUBMITTE D THAT THE PAYMENTS WERE MADE TO THE INDIVIDUAL LABOURERS AND NO LABOURER HAS BEEN PAID AN AMOUNT EXCEEDING RS.20,000/- ON A SING LE DAY. THE AO IN HIS REMAND REPORT HAS VERIFIED THIS FACT WITH TH E BOOKS OF ACCOUNTS, DETAILS OF LABOUR PAYMENTS AND OTHER RELEVANT DOCUM ENTS AND CONFIRMED THAT CONTENTION OF THE APPELLANT APPEARS TO BE GENUINE. THEREFORE, THE DISALLOWANCE OF RS.11,74,593/- U/S 40(A) STANDS DELETED. 4.3. GROUND NOS. 4, 5, 6 & 7 RELATE TO ADHOC DISALL OWANCES MADE BY THE AO IN RESPECT OF FREIGHT EXPENSES AMOUNTING TO RS.8,85,086/-, LABOUR EXPENSES AMOUNTING TO RS.1,36,523/- , TOUR A ND TRAVELLING EXPENSES AMOUNTING TO RS.1,71,059/- AND RS.10,03,11 1/- ON ACCOUNT OF VEHICLE REPAIR AND MAINTENANCE, ENTERTAINMENT, BUSI NESS PROMOTION, 18 FESTIVAL EXPENSES, SALARY, STAFF WELFARE AND TELEPH ONE EXPENSES. THE APPELLANT CONTENDED THAT THE AO HAS MADE ADHOC ADDI TIONS WITHOUT POINTING OUT ANY SPECIFIC DEFECT NEITHER IN THE ASS ESSMENT ORDER NOR IN THE REMAND REPORT, HENCE, IT IS NOT JUSTIFIED AND NOT SUSTAINABLE IN THE EYES OF LAW. MOREOVER, IN RESPECT OF LABOUR EXPENSE S AND SALARY EXPENSES, THE AO HAVE SPECIFICALLY MENTIONED THAT H E HAS VERIFIED THE SAME AND REPORTED THAT THE CLAIM OF THE APPELLANT I S GENUINE. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT A ND FINDINGS OF THE AO, IT IS OBSERVED THAT IN THE REMAND PROCEEDINGS, THE AO HAS VERIFIED THE DOCUMENTS RELATED TO LABOUR AND SALARY EXPENSES AND FOUND THE SAME TO BE IN ORDER. THE AO HAS ARBITRARILY MADE AD HOC DISALLOWANCES UNDER VARIOUS HEADS OF EXPENSES. IF T HE AO WAS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS MAINTAINED BY THE APPELLANT, THE AO COULD HAVE MADE AN ASSESSMENT IN THE MANNER AS PRESCRIBED U/S 144 BY RESORTING TO SECTION 145(3) OF THE ACT AND WOULD HAVE APPLIED A REASONABLE NET PRO FIT RATE APPLICABLE TO THE TRADE IN WHICH THE APPELLANT OPER ATES. IT IS OBSERVED THAT THE TOTAL INCOME OF THE APPELLANT I.E. INCOME DECLARED BY THE APPELLANT IS TO RS.4,33,492/- AND ADDITIONS CONFIRM ED U/S 40(A)(IA) OF THE ACT AMOUNTING TO RS.13,31,646/- COMES TO A TOTA L OF RS.17,65,138/- WHICH IS 8.53% OF THE GROSS RECEIPTS. THE PROFIT AR RIVED AT IS THEREFORE BETTER THAN THE NET PROFIT RATE APPLIED FOR A TRANS PORT CONTRACTOR BY THE JURISDICTIONAL ITAT, AMRITSAR BENCH IN THE CASE OF ASSOCIATED CONTRACTORS VS. ITO, SRINAGAR (2010) 133 TTJ (ASR)( UO) 22 AT 4%. THE ADDITION ON ACCOUNT OF DISALLOWANCE U/S 40(A)(I A) TO THE RETURN INCOME TAKES THE PROFIT TO A REASONABLE LEVEL AT 8 .53% WHICH IS ACCEPTABLE FOR THIS LINE OF BUSINESS. THERE IS NO S COPE FOR ANY ADHOC ADDITIONS WITHOUT ANY BASIS. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITIONS MADE BY ADHOC DISALLOWANCES AS DISCU SSED SUPRA. THE APPELLANT GETS RELIEF OF RS.21,95,779/-. 9. AFTER HEARING THE LD. DR AND ON PERUSAL OF AOS ORDER AND LD. CIT(A)S ORDER AND THE SUBMISSIONS OF THE ASSESSEE BEFORE THE LD. CIT(A) AND THE REMAND REPORT OF THE A.O., WE ARE OF THE CO NSIDERED THE VIEW THAT THE LD. CIT(A) HAS PASSED A VERY DETAILED AND WELL REAS ONED ORDER, WHICH 19 REQUIRES NO INTERFERENCE AND THE SAME IS UPHELD. A CCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E AS WELL AS REVENUE IN ITA NO. 166(ASR)/2013 AND ITA NO. 213(ASR)/2013 AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JANUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30TH JANUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.RAJESH KUMAR GUPTA, JAMMU. 2. THE ITO WARD 2(2), JAMMU 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR