The ITO, Ward-1, Patan V. M/s. Maan Travels, Patan

ITA 2216/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6860 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: PARMANAND KHATRI
• Keywords: Unexplained cash credit; Depreciation; Opportunity of being heard; Non-deduction of tax
• Section: 143(3); 14A; 194C; 68; 69; 12

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM AND A. MOHAN ALANKAMON Y, AM. INCOME-TAX OFFICER, WARD-1, PATAN. VS. M/S MOON TRAVELS, AT & PO ZILIYA, TAL. CHANASMA, DIST. PATAN. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI A. K. PATEL, SR.DR RESPONDENT BY:- SHRI PARMANAND KHATRI, AR DATE OF HEARING :24/11/2011 DATE OF PRONOUNCEMENT : 9.12.11. O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 17.04.2009 WHEREIN FOLLOWING GROUNDS H AVE BEEN RAISED :- (1) THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING TO AL LOW THE DEPRECIATION ON THE NEW VEHICLES OF RS.6,36,084/- M ADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 14A OF THE IT ACT, 1961. (2) THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE AD DITION OF RS.2,00,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT S U/S 68 OF THE IT ACT. ITA NO.2216/AHD/2009 ASST. YEAR :2006-07 ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 2 (3) THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE AD DITION OF RS.39,04,731/- MADE U/S 40A(IA) OF THE IT ACT. 2. THE FIRST GROUND RELATES TO DISALLOWANCE OF THE CLAIM OF DEPRECIATION TO THE EXTENT OF RS.6,37,084/-. THE FA CTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE B USINESS OF TRAVELS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION I .E. ASST. YEAR 2006-07 WAS FILED ON 31 ST DECEMBER, 2006 SHOWING THEREIN TOTAL INCOME OF RS.1,40,544/-. THE RETURN WAS ACCOMPANIED BY THE ST ATEMENT OF TOTAL INCOME, AUDIT REPORT, BALANCE SHEET, PROFIT AND LOS S ACCOUNT AND THEIR SCHEDULES. THE RETURN OF INCOME WAS PROCESSED U/S 1 43(1) BY ACCEPTING THE SAME. THE CASE WAS SELECTED FOR SCRUTINY ASSESS MENT BY ISSUING NOTICE U/S 143(2) ON 12 TH MARCH, 2007 AND THE ASSESSMENT WAS FINALIZED U/S 143(3) OF THE IT ACT. DURING THE ASSESSMENT PROCEED INGS ALL THE DETAILS CALLED FOR BY THE AO WERE SUBMITTED IN DUE COURSE A ND MORE OVER BOOKS OF ACCOUNTS OF THE ASSESSEE WERE ALSO CALLED BY THE LD. AO FOR VERIFICATION AND THE SAME WERE SUBMITTED AND HAD BEEN VERIFIED I N DETAIL BY THE AO. DURING THE YEAR UNDER APPEAL THE ASSESSEE FIRM HAD PURCHASED VEHICLES FOR ITS BUSINESS OF TRAVELS AND DETAILS LIKE RC BOOK, P URCHASE BILLS, DIESEL BILLS OF THE SAID VEHICLES WERE PRODUCED BEFORE THE AO BU T HE HAD DISALLOWED THE DEPRECIATION CLAIMED ON PURCHASE OF VEHICLES AM OUNTING TO RS.21,20,283/- @ 30% AND IT COMES TO RS.6,36,084/-. IN APPEAL, THE ASSESSEE BEFORE THE LD. CIT(A) FILED COPY OF VEHICL E PURCHASE BILLS, R.C. ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 3 BOOKS, INSURANCE RECEIPTS, LOAN REPAYMENT SCHEDULES OF BANK AND DIESEL EXPENSES BILLS OF THE SAID VEHICLES TO CLAIM THAT T HE VEHICLES HAD BEEN PURCHASED DURING THE YEAR, USED FOR THE PURPOSE OF BUSINESS DURING THE YEAR ITSELF AND HENCE IT WAS ENTITLED FOR DEPRECIAT ION. REFEFERENCE WAS ALSO MADE TO THE FACT THAT THE DEPRECIATION STOOD Q UANTIFIED IN THE AUDIT REPORT ALONG WITH THE BALANCE SHEET AND IT WAS ALSO STATED THAT ALL THESE DETAILS HAD BEEN PRODUCED BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS. 3. THE LD. CIT(A) ALLOWED THE DEPRECIATION AFTER CO NSIDERING THE CONTENTIONS OF THE AO AND THE SUBMISSIONS OF THE AS SESSEE BY OBSERVING AS UNDER:- 2.3 THE MATTER HAS BEEN GIVEN DUE CONSIDERATION. T HE TREATMENT GIVEN BY THE AO TO THE ISSUE IS UNJUSTIFIED. FROM THE PER USAL OF THE PAPERS FILED, IT IS SEEN THAT THE VEHICLES IN QUESTION HAVE BEEN PURCHASED THROUGH OUT THE YEAR AND THEY HAVE NOT NECESSARILY BEEN BOUGHT AT THE FAG END OF THE YEAR. WHILE ON ONE HAND THE AO HAS TAXED THE RECEIP TS ARISING OUT OF THE USE OF THESE VEHICLES, HIS STAND THAT DEPRECIATION IS NOT ALLOWABLE IN THE ABSENCE OF DETAILS FILED APPEARS CONTRADICTORY. THE RE IS NOTHING ON RECORD THAT THE AO HAS TRIED TO DISPROVE THE SAND OF THE A PPELLANT, WHICH WAS DULY SUPPORTED BY AUDIT REPORT THAT THE VEHICLES HA VE BEEN USED DURING THE YEAR. VIDE LETTER DATED 10/12/2008 THE APPELLAN T HAS FILED COPIES OF PURCHASE BILLS ETC. THE CASE IN QUESTION STOOD SELE CTED FOR SCRUTINY W.E.F. 12.03.2007 AND THEREFORE THE AO HAD AMPLE TIME TO C OLLECT INFORMATION, IF HE HAD ANY APPREHENSION, TO REBUT THE ASSESSEES ST AND. THE GROUND OF APPEAL IS THEREFORE ACCEPTED. THE AO IS DIRECTED TO ALLOW THE DEPRECIATION ON THE NEW VEHICLES PURCHASED DURING THE YEAR ALSO, WHICH COMES TO RS.6,35,082/-. ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 4 AGAINST THIS ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD. DR SUBMITTED THAT BEFORE THE AO THE ASSE SSEE FAILED TO FURNISH EVIDENCE IN RESPECT OF PURCHASE OF VEHICLE, PASSING THEREOF WITH RTO, DATE OF PUT TO USE OF THE SAID VEHICLE FOR BUS INESS PURPOSE. THEREFORE, HE HAD RESTRICTED THE DEPRECIATION TO TH E EXTENT OF 30% OF RS.21,20,283/- I.E. RS.6,36,084/- AND DISALLOWED TH E SAME. THE LD. CIT(A) IS NOT CORRECT IN DELETING THE ADDITION. 5. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE SUBMITTED THAT ALL THE DETAILS IN RESPECT OF THE VEHICLES REQUIRED BY THE AO ALONG WITH AUDIT REPORT, WERE SUBMITTED BY THE ASSESSEE. THE RECEIPT S ARISING OUT OF THE USE OF THE VEHICLES WERE TAXED BY THE AO. THE AO WAS NO T JUSTIFIED IN DISALLOWING THE CLAIM OF DEPRECIATION AND THE LD. C IT(A) HAS RIGHTLY DELETED THE DISALLOWANCE. HIS ORDER MAY KINDLY BE U PHELD. 6. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE FIRM HAS PURCHASE D THE VEHICLES FOR ITS BUSINESS PURPOSE AND DETAILS LIKE RC BOOKS, PURCHAS E BILLS, DIESEL BILLS OF THE SAID VEHICLES WERE PRODUCED BEFORE THE AO BUT H E DISALLOWED THE DEPRECIATION CLAIMED ON PURCHASE OF VEHICLES AMOUNT ING TO RS.21,20,283/- @ 30% WHICH COMES TO RS.6,36,084/-. THE LD. CIT(A) HAS ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 5 DIRECTED THE AO TO ALLOW DEPRECIATION BY OBSERVING THAT THE AO HAD TAXED THE RECEIPTS ARISING OUT OF THE USE OF THE VEHICLES AND HIS STAND THAT THE DEPRECIATION IS NOT ALLOWABLE IN THE ABSENCE OF DET AILS FILED APPEARS CONTRADICTORY. THE AO HAS NOT BROUGHT ANYTHING ON R ECORD TO HOLD THAT VEHICLES WERE NOT USED BY THE ASSESSEE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A)S ORDER DIRECTING THE AO TO ALL OW DEPRECIATION ON THE NEW VEHICLES PURCHASED DURING THE YEAR. THE ORDER P ASSED BY LD. CIT(A) IS HEREBY UPHELD. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. THE NEXT ISSUE IS REGARDING DELETION OF ADDITION OF RS.2,00,000/- BEING UNEXPLAINED CASH CREDITS. AS PER ASSESSMENT O RDER THE FOLLOWING THREE PARTNERS HAD INTRODUCED CAPITAL AS STATED AGA INST THEIR RESPECTIVE NAMES :- SL.NO. NAME OF PARTNER AMOUNT 1 JIVANBHAI R. DESAI 50,000/- 2 RAJUBHAI J. DESAI 50,000/- 3 LALBHAI M. DESAI R,00,000/- THE AO ASKED THE SOURCE OF INTRODUCTION OF CAPITAL. THE ASSESSEES REPLY IN THE CONTEXT HAS BEEN REPRODUCED IN THE ASSESSMEN T ORDER, AS PER WHICH THE PARTNERS LISTED AT SL.NO.1 & 2 HAD RECEIVED THI S AMOUNT CONSEQUENT TO SALE OF CASH CROP WHILE THE THIRD PARTNER SHRI LALB HAI DESAI, HAD RECEIVED THE AMOUNT BY CHEQUE AND HAD MADE THE PAYMENT TO TH E ASSESSEE BY CHEQUE. THE AO FOUND THE EXPLANATION AND EVIDENCE I NCOMPLETE AND ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 6 INSUFFICIENT. ACCORDING TO HIM THE PARTNERS DID NOT HAVE ENOUGH LAND HOLDING TO GENERATE THE CASH SURPLUS TO BE DEPOSITE D WITH THE FIRM. REGARDING THE PAYMENT THROUGH CHEQUE, THE AO STATED THAT NOTHING WAS MADE AVAILABLE AT THE ASSESSMENT STAGE IN SUPPORT O F THE CONTENTION. ACCORDINGLY, HE MADE THE ADDITION OF THE ENTIRE AMO UNT OF RS.2,00,000/-. 8. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHEREIN IT REITERATED THE SUBMISSIONS MADE BEFORE T HE AO. REFERENCE WAS ALSO MADE TO THE TRADING ACCOUNT FROM M/S MAAN PHAR MACEUTICALS (P) LTD. FROM WHERE THE ASSESSEE HAS TAKEN RS.1,00,000/- AND FORWARDED TO THE FIRM. IT WAS STATED THAT THE APS ASSUMPTION THAT T HE REQUISITE QUANTITY OF CROPS MAY NOT BE PUT TO USE ON THE GIVEN LAND WERE INCORRECT. THE TWO PARTNERS WHO GAVE THEIR SOURCES AS AGRICULTURAL INC OME WERE NOT ASSESSED TO TAX, THE THIRD WAS AN INCOME-TAX ASSESSEE. THE L D. CIT(A) STATED THAT ONCE THE LENDERS HAD BEEN IDENTIFIED AND THEY ACCEP TED THE FACTUM OF HAVING ADVANCED THE SUM, APPLICABILITY OF SECTION 6 9 GETS VERY RESTRICTIVE. IN THE CASE THE MONIES HAD BEEN INTRODUCED BY THE P ARTNERS WHO ARE OBVIOUSLY IDENTIFIED AND THE FACT OF THIS INTRODUCT ION STANDS ACCEPTED WHEN THE ASSESSEE HAD FILED ITS RETURN OF INCOME. T HE LENDERS WERE CLEARLY IDENTIFIABLE AND HAD ACCEPTED THE FACT OF LENDING. AS FAR AS THE CAPACITY TO LEND WAS CONCERNED, THE FACT OF PARTNERS RUNNING TH IS PRESENT PARTNERSHIP CONCERN WHICH HAD TURNOVER OF OVER RS.1.63 CRORES W OULD GO IN THEIR FAVOUR ONLY. THEREFORE THE ASSESSEE HAS DISCHARGED THE INITIAL ONUS. IF THE ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 7 AO WAS NOT SATISFIED HE COULD HAVE TAKEN APPROPRIAT E ACTION AGAINST THE INDIVIDUAL PARTNERS AND NOT THE FIRM. IN VIEW OF TH E ABOVE, THE LD. CIT(A) HAS DELETED THE IMPUGNED ADDITION OF RS.2,00,000/- MADE U/S 68. AGGRIEVED BY THIS ORDER OF LD. CIT(A), REVENUE IS I N APPEAL. 9. THE LD. DR SUBMITTED THAT THREE PARTNES BROUGHT IN CAPITAL OF RS.2,00,000/- DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE FAILED TO FURNISH ANY AUTHENTIC EVIDENCE IN TERMS OF IDENTITY, CAPACITY AND GENUINENESS OF TRAN SACTION. ONLY 7/12 EXTRACT INDICATING AGRICULTURAL LAND THE ASSESSEE C ROPPED 111.91 QUINTAL WHEAT AND 31.92 QUINTALS OF 3 TYPES OF PULSE (MAGUD AD & GUVAR). AGRICULTURAL PRODUCE DECLARED AND SOLD IN MARKET IS TOO EXCESSIVE AND UNREASONABLE. EXCEPT THIS THE ASSESSEE FAILED TO FU RNISH ANY EVIDENCE IN RESPECT OF NEW CAPITAL INTRODUCED BY THESE TWO PART NERS. IN RESPECT OF CAPITAL CONTRIBUTED BY SHRI LALBHAI M. DESAI OF RS. 1,00,000/- IT WAS STATED THAT COPY OF BANK PASS BOOK WAS ATTACHED HER EWITH AND AMOUNT RECEIVED FROM CHEQUE NO.20052 DATED 9.4.0(5) BUT NO THING WAS MADE AVAILABLE. IN ABSENCE OF ANY AUTHENTIC EVIDENCE IN TERMS OF IDENTITY, CAPACITY AND GENUINENESS OF TRANSACTION THE AO HELD THAT ASSESSEE FAILED TO FURNISH EVIDENCE IN SUPPORT OF NEW CAPITAL INTRO DUCED BY THREE PARTNERS OF RS.2,00,000/- AND THE AO HAD RIGHTLY REJECTED TH E CLAIM OF ASSESSEE. ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 8 THE LD. CT(A) HAS WRONGLY DELETED THE SAME. THEREFO RE, THE ORDER OF LD. CIT(A) MAY KINDLY BE SET ASIDE AND THAT OF THE AO B E RESTORED. 10. THE LD. COUNSEL OF THE ASSESSEE ON THE OTHER HA ND, SUBMITTED THAT THE TWO PARTNERS HAD INTRODUCED CAPITAL OF RS.50,00 0/- EACH FROM SALE OF CASH CROP WHILE THE THIRD PARTNER HAD RECEIVED AMOU NT AND MADE THE PAYMENT OF RS.1,00,000/- TO THE ASSESSEE BY CHEQUE. THE PARTNERS WERE IDENTIFIED. IF THERE WAS ANY DOUBT IN THE INTRODUCT ION OF CAPITAL BY THE PARTNERS, THE AO COULD HAVE INITIATED ACTION AGAINS T THE INDIVIDUAL PARTNERS WHICH WAS NOT DONE. LD. COUNSEL OF THE ASS ESSEE HAD RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. JAGDISH B.AGARWAL (2010) 45 DTR (GUJ) 197. THE ASSESSEE HAD DULY EXPLAINED THE INTRODUCTION OF CAPITAL AND THE AO WAS NOT JUST IFIED IN DISALLOWING THE CAPITAL INTRODUCED BY PARTNERS IN THE HANDS OF THE ASSESSEE FIRM. THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.2,00, 000/- MADE U/S 68. 11. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE RECORD. WE ARE OF THE OPINION THAT THE ISSUE BEFORE US IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES IN I.T. REF.NO.241/1993 DECIDED ON 6.7.2005 WHEREIN HONBLE GUJARAT HIGH COURT OBSERVED IN PARA -13 AS UNDER :- 13. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, IT IS APPARENT THAT THE ASSESSEE HAD FURNISHE D THE DETAILS WHICH WOULD DISCHARGE THE ONUS WHICH LAY ON THE ASS ESSEE. IT IS NOT ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 9 THE CASE OF THE REVENUE THAT THE PARTNERS OF THE AS SESSEE FIRM ARE FICTITIOUS. THE INCOME TAX OFFICER HAS NOT DISPUTED THAT THE CREDITS IN THE ACCOUNTS OF THE PARTNERS WERE NOT DEPOSITS F ROM THE PARTNERS. MOREOVER, IT IS AN ADMITTED POSITION THAT THIS WAS THE SECOND YEAR OF THE FIRM, AND THAT IT WAS RUNNING IN LOSS. IT IS TRUE THAT THE INCOME TAX OFFICER DID NOT ACCEPT THE EXPLANATION G IVEN ON BEHALF OF THE ASSESSEE IN RESPECT OF THE NEW DEPOSITS OR C ASH CREDITS IN THE ACCOUNTS OF THE PARTNERS. THE MERE NON-ACCEPTANCE O F THAT EXPLANATION DOES NOT, HOWEVER, PROVIDE MATERIAL FOR FINDING THAT THE SAID SUM REPRESENTED INCOME OF THE ASSESSEE FIR M,. AS HELD BY THE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSIONE R OF INCOME TAX ALLAHABAD VS. JAISWAL MOTOR FINANCE (SUPRA), IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THERE WERE PROFITS OF THE FIRM, THE AMOUNT CREDITED TO THE PARTNERS ACCOUNTS COULD NOT BE ASSESSED IN THE HANDS OF THE FIRM. ONCE THE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN, T HE INCOME TAX OFFICER IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATIO N IS NOT FOUND SATISFACTORY. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HO NBLE GUJARAT HIGH COURT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES IN I.T. REF.NO.241/1993 DECIDED ON 6.7.2005 WE DISMISS THE GROUND RAISED BY THE REVENUE. 12. THE LAST ISSUE IS REGARDING DELETION OF ADDITIO N OF RS.39,04,731/- MADE BY AO U/S 40(A)(IA) FOR NON-DEDUCTION OF TAX F ROM THE PAYMENTS MADE TO THE SUB-CONTRACTORS OF VEHICLE HIRED BY THE ASSESSEE. THE STAND OF THE ASSESSEE BEFORE AO WAS THAT IT HAD MADE PAYMENT TO ONLY PROCURE THE VEHICLE ON RENT, WITHOUT THE SERVICES OF THE DRIVER S, WHICH HAD BEEN PROVIDED BY THE ASSESSEE. THE AOS VIEW WAS THAT IT WAS NOT A PAYMENT OF RENT FOR THE NAKED VEHICLES BUT AMOUNTED TO A CO NTRACT FOR RUNNING OF THE VEHICLES COVERED U/S 194C FOR WHICH THE TDS SHO ULD HAVE BEEN ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 10 DEDUCTED. ACCORDINGLY, THE AO HAD MADE THE ADDITION OF RS.39,04,731/- U/S 40(A)(IA) OF THE IT ACT, 1961. 13. THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT( A) WHEREIN IT WAS STATED THAT MERE HIRING OF THE VEHICLES COULD NOT B E REGARDED AS CONTRACT FOR CARRYING OUT ANY WORK AND SUCH A SITUATION WAS EXISTING IN ANY CASE OF COMPOSITE CONTRACT INVOLVING VEHICLE HIRING AS WELL AS SERVICES OF DRIVER AND CONDUCTOR. IT WAS STATED THAT WHERE, HOWEVER, T HE ELEMENT OF LABOUR FOR SERVICES OF THE DRIVERS AND CONDUCTORS WERE NOT AVAILABLE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS. COPIES OF THE AGREEME NTS SIGNED WITH THE PARTIES TO WHOM THE RENT OF THE VEHICLES PAID WERE FILED AND IT WAS STATED THAT THE AGREEMENT CLEARLY STATED THAT ONLY RENT WA S TO BE PAID BY THE ASSESSEE TO THE PARTIES. IT WAS STATED THAT THE SAL ARY EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT WAS EXCLUSIVELY FOR THE SAL ARY EXPENSES OF THE DRIVERS AND THEY HAD BEEN USED AS AND WHEN REQUIRED . THE LD. AR ALSO REFERRED TO THE DETAILED BILLS OF DIESEL PURCHASES IN THE NAME OF THE ASSESSEE WHEREIN THE VARIOUS NUMBERS OF THE HIRED V EHICLES WERE MENTIONED TO SUPPORT THE CONTENTION THAT THE DIESEL FOR RUNNING OF THE VEHICLE HAD BEEN BROUGHT BY THE ASSESSEE AND NOT BY THE SAID CONTRACTORS. 14. THE LD. CIT(A) CONSIDERED ALL THE FACTS OF THE CASE, THE CONTENTION RAISED BY THE AO AND THE SUBMISSIONS OF THE ASSESSE E. HE DELETED THE ADDITION BY OBSERVING AS UNDER :- ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 11 5.2 THE ISSUE HAS BEEN GIVEN DUE CONSIDERATION. FR OM THE DETAILS FILED BY THE APPELLANT, IT CAN BE SEEN THAT A CASE HAS BE EN MADE THAT IT HAS HIRED ONLY VEHICLES WHERE THE REST OF THE ACTIVITIE S HAS BEEN DONE BY IT ONLY, NAMELY PROVIDING THE DRIVERS, PROVIDING THE D IESEL ETC. THIS HAS BEEN DONE WITH REFERENCE TO THE AGREEMENT AS WELL AS WIT H REFERENCE TO THE ENTRIES IN THE BOOKS OF ACCOUNTS. ALTHOUGH THE AO D OES NOT AGREE THAT IT IS A SITUATION OF HIRING NAKED VEHICLES BUT HE HAS NOT BROUGHT ANYTHING ON RECORD TO REJECT THE ASSESSEES EXPLANATION OR TO P ROVE THAT THIS IS A CASE OF ARRANGEMENT TO AVOID DEDUCTION OF TAX AT SOURCES . THE APPELLANT HAS SHOWN DEBIT OF RS.15,83,420/- IN ITS BOOKS TOWARDS THE SALARY OF THE DRIVERS FOR THE WHOLE YEAR, WHICH IS A SUBSTANTIAL AMOUNT OF SALARY. THE APPELLANT HAS ALSO SHOWN THE BILLS OF DIESEL WHICH BEAR THE NUMBER OF VEHICLES HIRED BY IT. AS AGAINST THAT THE AO HAS NE ITHER EXAMINED THE SUBCONTRACTORS NOR THE DRIVERS NOR THE MAIN PARTY W HICH HAD GIVEN THE CONTRACT OF TRANSPORTATION I.E. ONGC TO COME TO ANY CONCLUSION WHICH CAN BE TREATED CONTRARY TO THE ASSESSEES VERSION O F THE RELATIONSHIP BETWEEN IT AND ITS SUB-CONTRACTORS ON ONE HAND AND WITH ONGC ON THE OTHER HAND. IF THAT BE SO, THE ASSESSEES VERSION H AS TO BE ACCEPTED AND THE PAYMENTS FOR THE VEHICLES WOULD HAVE TO BE TREA TED AS RENTAL PAYMENT, WHICH WOULD NEITHER GET COVERED U/S 194C OR 194I (A S IT STOOD IN THIS ASSESSMENT YEAR). IN THAT SITUATION, ASSESSEE WOULD NOT BE UNDER ANY OBLIGATION TO DEDUCT TAX AT SOURCE AND THEREFORE SE CTION 40(A)(IA) WOULD NOT HAVE ANY APPLICABILITY. 5.2.1 THEREFORE, CONSIDERING ALL THE FACTS OF THE C ASE, I THINK, THE ADDITION OF RS.39,04,731/- IS NOT JUSTIFIED AND THE SAME IS DELETED. AGAINST THIS ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL. 15. BEFORE US THE LD. DR VEHEMENTLY SUBMITTED THAT ON SCRUTINY OF THE SUB-RATE COMMISSION INCOME AND EXPENSES IT WAS FOUN D BY THE AO THAT THE ASSESSEE HAD HIRED CERTAIN VEHICLES FROM THE VE HICLE OWNERS AND AGREEMENTS TO THAT EFFECT HAD ALSO BEEN EXECUTED ON PLAIN PAPERS. TEXT OF THE AGREEMENT ITSELF INDICATED THAT THE VEHICLES WE RE ACCEPTED AND PLIED ON SUB-CONTRACT BASIS; NO SUCH VEHICLE WAS RENTED B Y THE ASSESSEE. THE ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 12 RENT AMOUNT WAS ON MONTHLY BASIS AND IT DID VARY FR OM OWNER TO OWNER. ACCORDING TO AGREEMENT DRIVERS AND CONDUCTORS WERE TO BE PROVIDED BY THE ASSESSEE, BUT THE BOOKS OF ACCOUNTS DID NOT IND ICATE DEBIT OF DRIVERS/CONDUCTORS SALARY/BONUS/BHATHA ETC. IT PRO VED THAT THE SALARIES OF DRIVER/CONDUCTOR WERE BORNE BY THE VEHICLE OWNER . ALL OTHER EXPENSES LIKE DIESEL, OIL, REPAIRING RTO TAX AND OTHER GOVT. TAXES WERE TO BE BORNE BY THE OWNER. THESE EXPENSES WERE ALSO NOT BORNE BY THE ASSESSEE. LASTLY IN TERM OF PAYMENT, IT WAS CLEARLY MENTIONED THAT A FTER DEDUCTING 10% COMMISSION BALANCE WOULD HAVE TO BE PAID TO THE OWN ER. SINCE THIS IS NOT A PAYMENT OF RENT, IT AMOUNTED TO BE CONTRACT AMOUN T PAID TO THE OWNERS OF VEHICLE IN PURSUANT TO CONTRACT, WHICH ATTRACT P ROVISION OF SECTION 194C OF THE ACT ON AMOUNT OF RS.39,04,731/- IT WAS RIGHT LY DISALLOWED BY THE AO UNDER SECTION 40(A)(IA) OF THE ACT. THE LD. CIT( A) HAS WRONGLY DELETED THE ADDITION. 16. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUPPORTED THE ORDER OF LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE HIM. 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE AO MADE THE ADDITION OF RS.39,04,731/- U/S 40(A)(IA) FOR NO N-DEDUCTION OF TAX FROM THE PAYMENTS MADE TO THE OWNERS OF VEHICLES HIRED B Y THE ASSESSEE. THE ASSESSEES STAND WAS THAT IT HAD MADE PAYMENT TO ON LY PROCURE THE VEHICLE ON RENT, WITHOUT THE SERVICES OF THE DRIVERS, WHICH HAD BEEN PROVIDED BY ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 13 THE ASSESSEE, WHEREAS THE AOS VERSION WAS THAT IT WAS NOT A PAYMENT OF RENT FOR THE NAKED VEHICLES BUT AMOUNTED TO A CONTR ACT FOR RUNNING OF THE VEHICLES COVERED U/S 194C FOR WHICH TDS SHOULD HAVE BEEN DEDUCTED. THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY RELYING ON THE DETAILS AVAILABLE TO HIM OF SALARY PAID TO THE DRIVERS AND THE DIESEL CONSUMED BY THE ASSESSEE FOR RUNNING THE VEHICLES. IT APPEARS T HAT THESE DETAILS WERE NOT BEFORE THE AO OTHERWISE HE WOULD NOT HAVE GIVEN FOL LOWING FINDING IN HIS ASSESSMENT ORDER :- 4.5 ON SCRUTINY OF THE SUB-RATE COMMISSION INCOME AND EXPENSES IT IS FOUND THAT THE ASSESSEE HAS HIRED CERTAIN VEHICLE F ROM THE VEHICLE OWNERS AND AGREEMENTS TO THAT EFFECT HAVE ALSO BEEN EXECUT ED ON PLAIN PAPERS. TEXT OF THE AGREEMENT ITSELF INDICATES THAT THE VEH ICLES ARE ACCEPTED AND PLIED ON SUB-CONTRACT BASIS; NO SUCH VEHICLE IS REN TED BY THE ASSESSEE. BECAUSE THE RENT AMOUNT IS ON MONTHLY BASIS AND IT DOES VARIES FROM OWNER TO OWNER. ACCORDING TO AGREEMENT DRIVERS AND CONDUCTORS ARE TO BE PROVIDED BY THE ASSESSEE, BUT THE BOOKS OF ACCOU NTS DOES NOT INDICATE DEBIT OF DRIVERS/CONTRACTORS SALARY/BONUS/BHATHA ETC. IT PROVES THAT THE SALARY OF DRIVER/CONDUCTOR ARE BORNE BY THE VEH ICLE OWNER. ALL OTHER EXPENSES LIKE DIESEL, OL, REPAIRING RTO TAX AND OTH ER GOVT. TAXES ARE TO BE BORNE BY THE OWNER. THESE EXPENSES ARE ALSO NOT BOR NE BY THE ASSESSEE. LASTLY IN TERMS OF PAYMENT, IT IS CLEARLY MENTIONED THAT AFTER DEDUCTING 10% COMMISSION BALANCE WILL HAVE TO BE PAID TO THE OWNER. IN OUR CONSIDERED VIEW IT WILL MEET THE ENDS OF JUS TICE IF THE MATTER IS RESTORED BACK TO THE FILE OF AO FOR PROPER VERIFICA TION OF THE FACTS AND DECIDE THE ISSUE AFRESH AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER ACCORDINGLY. THIS G ROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2216/AHD/2009 ASST. YEAR 2006-07 14 18. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 9.12.11. SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 28/11/2011. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 5/12/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..