Hotel Oasis (Surat) Pvt. Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 2339/AHD/2009

• Counselvise Citation: 233920514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.2339 / AHD/2009 (ASSESSMENT YEAR 2996097) HOTEL OASIS PVT. LTD., NEAR VAISHALI CINEMA, VARACHHA ROAD, SURAT VS. DCIT, CIRCLE 1, SURAT PAN/GIR NO. : AAACH5864Q (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI RAMESH MALPANI, AR, RESPONDENT BY: SHRI SAMIR TEKRIWAL, DR DATE OF HEARING: 12.12.2011 DATE OF PRONOUNCEMENT: 16.12.2011 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) I, SURAT DATED 14.07.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. GROUND NO.1 READS AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, H ONBLE CIT HAS ERRED IN UPHOLDING A DISALLOWANCE OF RS.10,87,465/- BEING 50% OF REPAIRS & MAINTENANCE EXPENSES. 3. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. IN PARA 3.2 OF THE ASSESSMENT ORDER THAT ASSESSEE WAS ASKED TO SUB STANTIATE ITS CLAIM REGARDING VARIOUS EXPENDITURE. IN REPLY, IT WAS S UBMITTED BY THE ASSESSEE BEFORE THE A.O. THAT BILLS/VOUCHES ETC., WERE NOT A VAILABLE WITH THE ASSESSEE AS THE SAME HAD BEEN DESTROYED IN THE FLOO D IN AUG 2006 IN THE OFFICE OF THE THEN AUDITORS SHRI K C GAJJAR. THE A .O. FURTHER NOTED THAT THE EXPENSES TOWARDS REPAIR & MAINTENANCE HAD GONE UP CONSIDERABLY, I.T.A.NO.2339 /AHD/2009 2 AND THEREFORE, INSPECTOR OF THE A.O. OFFICE WAS DIR ECTED TO VERIFY THE REPAIR & MAINTENANCE IN THE HOTEL. HE FURTHER NOTE D THAT IN THE REPORT OF THE INSPECTOR, IT WAS SUBMITTED THAT NO MAJOR REPAI R & MAINTENANCE HAD BEEN CARRIED OUT EXCEPT FOR SOME PAINTING AFTER THE FLOOD IN AUG 2006. HE ALSO REPORTED THAT HOTEL DOES NOT SHOW ANY SIGN OF ANY MAJOR REPAIR & MAINTENANCE IN THE RECENT PAST. THE A.O. FURTHER N OTED ON PAGE 4 OF THE ASSESSMENT ORDER THAT WITH REGARD TO INCREASE IN RE PAIR & MAINTENANCE EXPENDITURE, FOLLOWING SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE HIM: IN REGARD TO THE EXPENSES OF REPAIRS AND MAINTENAN CE WE WOULD LIKE TO INFORM YOU SIR, THAT OUR'S IS A HUGE BUILDI NG COMPLEX AFFRONT SIDE BUILDING WITH BASEMENT + 3 FLOORS, MIDDLE SIDE BUILDING WITH BASEMENT + 4 FLOORS AND BACK SIDE BUILDING WITH 4 F LOORS. AS YOU ARE AWARE SIR AND AS EXPLAINED EARLIER BY US THE HO TEL PREMISES ARE NOT OPERATED FROM A CONSIDERABLE PERIOD OF TIME. AS THE BUILDING OF THE HOTEL WAS LYING IDOL IT WAS AFFECTED BY WHITE A NTS AND HEAVY DAMAGE WAS CAUSED TO THE STRUCTURE OF THE BUILDING. IN ORDER TO SAVE THE BUILDING PREMISES THE PEST CONTROL WAS APP LIED FOR ENTIRE ALL THE 3 BUILDINGS MORE OVER SOME REPAIRING WORK L IKE WATER PROOFING , PLUMBERING, DRAINAGE LINE REPAIRING AND COLOUR WORK WAS ALSO UNDERTAKEN AFTER APPLICATION OF PEST CONTROL I N THE HOTEL PREMISES. IN ORDER TO SAVE THE BUILDING FROM FURTHE R DAMAGE HEAVY EXPENDITURE WAS INCURRED BY US ON PEST CONTROL AS W ELL AS REPAIRS AND MAINTENANCE. IT IS UNFORTUNATE ON OUR PART THAT WE ARE UNABLE TO SHOW YOU THE BILLS / VOUCHERS OF THE EXPENDITURE IN CURRED BY US ON REPAIRS AND MAINTENANCE AS THE BILLS / VOUCHERS WER E WASHED AWAY IN FLOOD. THE TRUTH OF OUR ARGUMENTS IS EVIDENT FRO M THE FACTS SIR, THAT IN THE PREVIOUS YEAR, I.E. ASSESSMENT YEAR 200 5-06, AS NO SUCH HEAVY WORK ON REPAIRS AND MAINTENANCE WAS CARRIED O UT THE EXPENDITURE ON REPAIRS AND MAINTENANCE WERE LIMITED TO RS. 1,66,475/-ONLY. IN REGARD TO PHYSICAL VISIT OF THE INSPECTOR OF THE DEPARTMENT WE WOULD LIKE TO INFORM YOU SIR, THAT TH E VISIT OF THE INSPECTOR IS AFTER NEARLY THREE YEARS AND THEREFORE WHATEVER WORK WAS CARRIED OUT DURING THE ACCOUNTING YEAR 2005-06 CAN NOT BE SEEN AFTER SUCH A LONG PERIOD OF 3 YEARS WHICH HAS LED THE INSPECTOR TO REPORT NEGATIVELY ON THE REPAIRS AND MAINTENANCE CARRIED OUT BY US. I.T.A.NO.2339 /AHD/2009 3 WE ONCE AGAIN DRAW YOUR ATTENTION SIR THAT OUR BOOK S OF ACCOUNTS ALONG WITH VOUCHERS / BILLS ARE AUDITED BY OUR AUDI TORS U/S 44 AB OF THE INCOME TAX ACT 1961 AND THEREFORE THERE IS N OTHING WRONG TO RELY ON THE AUDITORS/T\PORT WHICH HAS NO ADVERSE REMARKS REGARDING NON PRODUCTION OF BILLS / VOUCHERS 4. THEREAFTER, THE A.O. DECIDED THE ISSUE ON THE BA SIS THAT AS PER THE REPORT OF THE INSPECTOR, THERE WAS NOTHING SIGNIFIC ANT TO SUGGEST THAT REPAIRS & MAINTENANCE HAD BEEN CARRIED OUT AT SUCH A LARGE SCALE TO COST RS.21,74,930/- AND THE ASSESSEE COULD NOT SUBMIT TH E BILLS AND VOUCHERS TO SUPPORT ITS CLAIM, AND SOUGHT REFUSE UNDER THE EXCU SE OF THE FLOOD. HE ALSO SAYS THAT THE SITUATION BECOMES AGGRAVATING IN ABSENCE OF THE BILLS AND VOUCHERS AND THE ASSESSEE FAILED TO PRODUCE EVE N LEDGER ETC. THEREAFTER, THE A.O. HELD THAT SINCE THE EXPENSE RE GARDING REPAIRS & MAINTENANCE ARE UNVERIFIABLE, HE IS OF THE CONSIDER ED OPINION THAT DISALLOWANCE OF 50% OF THE EXPENDITURE CLAIMED WILL MEET THE ENDS OF JUSTICE AND ON THIS BASIS, HE MADE DISALLOWANCE OF RS.10,87,465/- OUT OF TOTAL REPAIR & MAINTENANCE EXPENSES OF RS.21,74,930 /-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD . CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. IT WAS SUBMITTED BY THE LD. A.R. BEFORE US THAT THE ONLY BASIS OF DISALLOWANCE MADE BY THE A.O. IS THAT THE ASSESSEE COULD NOT PRODUCE BILLS & VOUCHES BUT THE ASSESSEE HAS SHOWN THE REAS ONABLE CAUSE FOR HIS INABILITY TO PRODUCE THE BILLS & VOUCHES AS THE SAM E WERE DESTROYED IN THE FLOOD IN THE MONTH OF AUG 2006. IT WAS SUBMITTED T HAT ALL THE BOOKS OF ACCOUNTS AND BILLS & VOUCHES WERE LYING WITH THE TH EN AUDITORS AND BEFORE THE FLOOD, CHECKING WORK WAS COMPLETED BY THE AUDIT ORS AND THE FINAL ACCOUNTS AND THE AUDIT REPORT WERE READY IN THE COM PUTER OF THE AUDITORS AND AT THE TIME OF FLOOD, THE AUDITORS COULD TAKE O UT THE COMPUTER TO A HIGHER FLOOR AND HENCE, THE FINAL ACCOUNTS AND AUDI T REPORT WERE SALVED BUT THE MANUAL BOOKS OF ACCOUNT AND BILLS & VOUCHES ETC, WERE DESTROYED I.T.A.NO.2339 /AHD/2009 4 IN THE FLOOD. HE ALSO SUBMITTED THAT AFTER THE FLO OD WAS OVER, THE AUDIT REPORT WAS SIGNED BY THE AUDITORS ON 05.09.2006, CO PY OF WHICH IS AVAILABLE ON PAGES 22-48 OF THE PAPER BOOK AND AS P ER THE AUDITORS REPORT, THERE IS NO QUALIFICATION GIVEN BY THE AUDITORS BEC AUSE ALL THE BILLS & VOUCHES ERE MADE AVAILABLE TO THE AUDITORS. HE DR AWN OUR ATTENTION TO PAGE 43 OF THE PAPER BOOK AS PER WHICH, REPAIR & MA INTENANCE EXPENDITURE WAS RS.21,74,930/- IN THE PRESENT YEAR AS AGAINST RS.1,66,475/- IN THE PRECEDING YEAR. IT WAS SUBMIT TED THAT EVEN THE A.O. HAS ALLOWED DEDUCTION TO THE EXTENT OF RS.10,87,465 /- AND HENCE, THIS IS NOT THE CASE OF THE A.O. THAT HIGHER EXPENDITURE ON ACCOUNT OF REPAIR & MAINTENANCE WAS NOT INCURRED DURING THIS YEAR. REG ARDING INSPECTORS REPORT, IT WAS SUBMITTED THAT THE VISIT OF THE INSP ECTOR WAS IN THE MONTH OF DECEMBER 2008 WHEREAS, THE REPAIR WORK WAS CARRIED OUT IN THE FINANCIAL YEAR 2005-06 AND HENCE, THE VISIT OF THE INSPECTOR WAS ALMOST AFTER THREE YEARS OF REPAIR WORK AND THAT TOO AFTER THE FLOOD A ND THEREFORE, THE REPAIR WORK CARRIED OUT BY THE ASSESSEE IN THE FINANCIAL Y EAR 2005-06 WAS NOT VISIBLE WHEN THE INSPECTOR MADE THE INSPECTION IN T HE MONTH OF DECEMBER 2008. IT WAS HIS SUBMISSION THAT UNDER THESE FACTS , NO PART OF EXPENSES CLAIMED BY THE ASSESSEE SHOULD BE DISALLOWED. 6. AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDERS O F AUTHORITIES BELOW. HE ALSO SUBMITTED THAT THERE IS NO EVIDENCE REGARDI NG THIS THAT THE BILLS AND VOUCHERS ETC. WERE DESTROYED IN THE FLOOD BECAU SE THERE IS NO AFFIDAVIT OR EVIDENCE IN THE FORM OF FIR ETC. AND THERE IS NO MENTION IN THE TAX AUDIT REPORT THAT BILLS & VOUCHES WERE DESTROYED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT NO DOUBT THE EXPENDITURE UNDER THE HEAD REPAIR S & MAINTENANCE HAS RISEN FROM RS.1,66,475/- IN THE PRECEDING YEAR TO R S.21,74,930/- IN THE PRESENT YEAR BUT REGARDING REPAIR & MAINTENANCE EXP ENDITURE, IT CANNOT BE I.T.A.NO.2339 /AHD/2009 5 SAID THAT THE SAME HAS TO BE AT PAR IN ALL THE YEAR S OR INCREASE THEREIN SHOULD BE PROPORTIONATE TO INCREASE IN THE TURNOVER OF THE ASSESSEE COMPANY. REGARDING REPAIR WORK CARRIED OUT BY THE ASSESSEE IN THE PRESENT YEAR, IT WAS SUBMITTED BY THE ASSESSEE BEFO RE THE A.O. THAT THE HOTEL BUILDING WAS EFFECTED WITH WHITE ANTS AND HEA VY DAMAGE WAS CAUSED TO THE STRUCTURE OF THE BUILDING. IN ORDER TO SAVE THE BUILDING PREMISES, THE PEST CONTROL WAS APPLIED FOR IN THE E NTIRE BUILDING. MOREOVER, SOME REPAIR WORK LIKE WATER PROOFING, PLU MBING, DRAINAGE LINE REPAIRING AND COLOUR WORK WAS ALSO UNDERTAKEN AFTER APPLICATION OF PEST CONTROL IN THE HOTEL PREMISES AND THIS WAS DONE IN ORDER TO SAVE THE HOTEL BUILDING FROM FURTHER DAMAGE. THE A.O. HAS ALSO AL LOWED THE DEDUCTION TO THE ASSESSEE ON THIS ACCOUNT TO THE EXTENT OF RS .10,87,465/- IN SPITE OF REPORT OF THE INSPECTOR THAT NO REPAIR WORK IS VISI BLE. THIS GOES TO SHOW THAT THE A.O. WAS ALSO SATISFIED THAT REPAIR WORK W AS CARRIED OUT BY THE ASSESSEE AND THE ASSESSEE WAS NOT IN A POSITION TO PRODUCE THE BILLS & VOUCHES BECAUSE OF THE DAMAGE OF THE BILLS & VOUCHE RS IN THE FLOOD. ONCE THIS IS ACCEPTED, IN OUR CONSIDERED OPINION, T HERE IS NO VALID BASIS TO HOLD THAT ONLY 50% OF THE EXPENDITURE IS TO BE ALLO WED FOR WANT OF VERIFICATION. WE, THEREFORE, HOLD THAT HE DISALLOW ANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) IS NOT JUSTIFIED IN THE FACTS & CIRCUMSTANCES OF THE PRESENT CASE BECAUSE THE REASO N FOR NON PRODUCTION OF BILLS & VOUCHERS ARE SUCH, ON WHICH, THERE IS NO CONTROL OF THE ASSESSEE AND, THEREFORE, FOR THIS REASON THAT BILLS & VOUCHE S COULD NOT BE PRODUCED BY THE ASSESSEE, DISALLOWANCE CANNOT BE MADE OF THE REPAIRING EXPENDITURE PARTICULARLY WHEN AS AGAINST EXPENDITUR E OF RS.1,66,475/- INCURRED BY THE ASSESSEE IN THE PRECEDING YEAR, THE A.O. HIMSELF ALLOWED DEDUCTION TO THE ASSESSEE TO THE EXTENT OF RS.10.87 ,465/- AND HENCE, THE A.O. HAS ALSO ACCEPTED THAT MUCH HIGHER EXPENDITURE ON ACCOUNT OF REPAIR & MAINTENANCE WAS INCURRED BY THE ASSESSEE IN THE P RESENT YEAR. I.T.A.NO.2339 /AHD/2009 6 RELIANCE WAS PLACED ON THE TRIBUNAL DECISION RENDER ED IN THE CASE OF EAGLE SYNTHETICS P. LTD. VS ITO IN I.T.A.NO. 3561/AHD/200 8 DATED 12.02.2010 AND IT WAS SUBMITTED THAT COPY OF THIS TRIBUNAL DEC ISION IS AVAILABLE ON PAGED 52-62 OF THE PAPER BOOK AND IN THAT CASE ALSO , ASSESSEE COULD NOT PRODUCE VOUCHERS AND BOOKS ETC AND IT WAS CLAIMED T HAT THE SAME WERE DESTROYED IN THE FLOOD IN SURAT IN THE SAME MONTH. IT WAS SUBMITTED THAT IN THAT CASE, IT WAS HELD BY THE TRIBUNAL IN THAT C ASE THAT SINCE, THE ASSESSEES CONTENTION ABOUT LOSS OF BOOKS OF ACCOUN T/RECORDS IN THE FLOOD IS ACCEPTED THEN THE ASSESSMENT HAS TO BE FRAMED ON THE BASIS OF AUDITED FINANCIAL STATEMENT AS PER LAW LAID DOWN BY THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS JAY ENGG. WORKS 113 ITR 389. THEREFORE, THE DISALLOWANCE IS DELETED. GROUND NO.1 OF THE ASSESS EE IS ALLOWED. 8. GROUND NO.2 OF THE APPEAL IS AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, H ONBLE CIT(A) HAS ERRED IN UPHOLDING A DISALLOWANCE OF RS.21,40,5 12/- U/S 40A(3) OF THE ACT BY PRESUMING THE MONTHLY TOTALS OF THE E XPENSE UNDER VARIOUS HEADS TO THE CASH EXPENSES IN CONTRAVENTION OF SECTION 40A(3). 9. THE BRIEF FACTS REGARDING THIS ASPECT ARE NOTED BY THE A.O. IN PARA 3.1 AND THE FINDINGS IN THIS REGARD ARE GIVEN BY HI M IN PARA 3.5 OF THE ASSESSMENT ORDER, WHICH PARAS ARE REPRODUCED BELOW: 3. DISALLOWANCE OF EXPENSES 3.1. THE ASSESSEE HAS CLAIMED THE FOLLOWING EXPENSE S IN THE PROFIT AND LOSS ACCOUNT WHICH HAVE BEEN INCURRED IN CASH: S.N. IN RS. 1 LOADING & UNLOADING EXP 13,88,739/- 2 MISC. EXP. 8,59,014/- 3 ELECTRIC REPAIRING 2,45,750/- 4 STATIONERY & PRINTING 3,80,800/- 5 SUNDRY EXP. 6,95,406/- 6 TRANSPORT EXP. 35,40,850/- 7 WAGES & SALARIES 35,92,000/- 1,07,02,559/- I.T.A.NO.2339 /AHD/2009 7 AS MENTIONED ABOVE, THE ENTIRE PAYMENT OF RS.1,07,0 2,559/- TOWARDS EXPENDITURE WERE MADE IN CASH AND ON PERUSA L OF THE LEDGER ACCOUNT OF THE EXPENDITURES, MOST OF THE PAY MENTS ARE MORE THAN RS.20,000. IN SOME CASES, WHICH CONSTITUTE ON LY MINOR PORTION OF THE WHOLE PAYMENT, THE ASSESSEE HAS ALSO TRIED TO VIOLATE THE PROVISIONS OF SEC. 40A(3) OF THE ACT BY SPLITTI NG UP THE CASH PAYMENT AND SHOWING THE SAME TO BE MADE IN THE AMOU NT LESS THAN RS.20,000/- ON THE SAME DAY. IN VIEW OF THE ABOVE F ACTS AND CIRCUMSTANCES OF THE CASE, IT IS CRYSTAL CLEAR THAT THE ASSESSEE HAS CLEARLY VIOLATED THE PROVISIONS OF SEC.40A(3) , HEN CE, THE PROVISION OF SEC. 40/A(3) IS CLEARLY ATTRACTED IN THIS CASE A ND, THEREFORE, A SUM OF RS. 21,40,5127- BEING ,20% OF CASH PAYMENT OF RS . 1,07,02,5597- IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271 (1) (C) OF TH E ACT ARE BEING INITIATED, FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. (ADDITION OF RS.21,40,513 ) 10. THE A.O. MADE DISALLOWANCE OF 20% OF SUCH CASH EXPENDITURE BY INVOKING THE PROVISION OF SECTION 40A(3) AND IN THI S MANNER, HE MADE DISALLOWANCE OF RS.21,40,513/-. BEING AGGRIEVED, T HE ASSESSEE CARRIED THE MATTER IN APPEAL BUT WITHOUT SUCCESS AND NOW, THE A SSESSEE IS IN FURTHER APPEAL BEFORE US. 11. IT WAS SUBMITTED BY THE LD. A.R. THAT THE ASSES SEE WAS MAINTAINING MANUAL PETTY CASH BOOK IN WHICH DAY TO DAY CASH EXP ENDITURE WAS RECORDED AND MONTHLY ENTRY WAS MADE IN THE COMPUTER IZED CASH BOOK. IT WAS SUBMITTED THAT SUCH COPY OF LEDGER ACCOUNTS AS PER COMPUTERIZED BOOK IS AVAILABLE ON PAGE 15-21 OF THE PAPER BOOK, AS PER WHICH, MONTHLY ENTRY IS ON 30.04.2005 FOR APRIL, ON 30.05.2005 FOR MAY AND ON 29.06.2005 FOR JUNE 2005 AND IN THE LIKE MANNER. I T WAS SUBMITTED THAT ALTHOUGH THE COMPUTERIZED LEDGER WAS SAVED FROM THE FLOOD BUT THE MANUAL PETTY CASH BOOK COULD NOT BE SAVED AND HENCE , THE ASSESSEE IS NOT IN A POSITION TO SUBSTANTIATE THIS CONTENTION BY PR ODUCING DAY TO DAY PETTY CASH BOOK AND DAY TO DAY PETTY CASH VOUCHERS TO SHO W THAT INDIVIDUAL CASH EXPENDITURE WAS NOT ABOVE RS.20,000/- AND THE DISALLOWANCE IS MADE I.T.A.NO.2339 /AHD/2009 8 BY THE A.O. ON THIS BASIS OF MONTHLY CASH LEDGER AN D, THEREFORE, THIS IS NOT JUSTIFIED. RELIANCE WAS PLACED BY HIM ON THE TRIBU NAL DECISION RENDERED IN THE CASE OF NEW NARAIN BUILDERS VS ITO 43 TTJ 50 8 (AHD.) AND ASSESSEE HAS SUBMITTED A COPY OF THIS TRIBUNAL DECI SION WHICH IS PLACED ON PAGED 63-66 OF THE PAPER BOOK. 12. AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. HE ALSO SUBMITTED THAT THE JUDGEMENT CITED BY THE A SSESSEE IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE ACTS ARE DIFFERENT. THE ASSESSEE COULD NOT FURNISH COPY OF THE BOOKS OF ACCOUNT AND LEDGER ALSO AND HENCE, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. C IT(A) ON THIS ISSUE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT FOR ALL THE EXPENSES, THE ENTRIES REGARDING CA SH PAYMENTS ARE MADE ON THE SAME DAY OF EACH MONTH AND HENCE, IT HAS TO BE ACCEPTED THAT THIS IS NOT AN ENTRY OF EACH PAYMENT BUT ENTRY OF CASH EXPE NDITURE INCURRED BY THE ASSESSEE DURING THE PARTICULAR MONTH FOR VARIOU S EXPENSES. AS PER THE PROVISIONS OF SECTION 40A(3), DISALLOWANCE HAS TO B E MADE IF THE AGGREGATE OF PAYMENT MADE TO A PERSON IN A DAY, OTH ERWISE BY A/C PAYEE CHEQUE OR A/C PAYEE DRAFT EXCEEDS RS.20,000/- AND H ENCE, NO DISALLOWANCE CAN BE MADE UDDER THIS SECTION WITHOUT SHOWING THAT CASH PAYMENT TO A PARTICULAR PERSON ON A SINGLE DAY IS MORE THAN RS.2 0,000/-. IN THE PRESENT CASE, THIS IS NOT POSSIBLE TO BE EXAMINED AS TO WHE THER ANY PART OF SUCH MONTHLY CASH EXPENSE UNDER EACH HEAD WAS INCLUDING ANY AMOUNT FOR WHICH CASH PAYMENT IN EXCESS OF RS.20,000/- WAS MAD E TO A SINGLE PERSON IN A SINGLE DAY BECAUSE THE PETTY CASH BOOK AND PET TY CASH VOUCHES ARE NOT AVAILABLE AS THE SAME WERE DESTROYED IN THE FLO OD. FOR DECIDING THIS ASPECT, TAX AUDIT REPORT IS RELEVANT AND IN THE TAX AUDIT REPORT ON PAGE 25 OF THE PAPER BOOK, IT IS REPORTED BY THE AUDITORS T HAT THE AMOUNT INELIGIBLE U/S 40A(3) IS NIL. LD. CIT(A) HAS DECIDED THIS ISS UE AGAINST HE ASSESSEE I.T.A.NO.2339 /AHD/2009 9 ON THIS BASIS THAT THE TAX AUDIT REPORT IS NOT RELI ABLE BECAUSE THE FLOOD TOOK PLACE IN THE MONTH OF AUGUST 2006 IN SURAT WHEREAS TAX AUDIT REPORT IS DATED 5.9.2006 AND HENCE, EITHER THE BOOKS OF ACCOU NT WERE NOT AVAILABLE WHEN THE TAX AUDIT WAS DONE BY THE AUDITORS IN SEP 2006 OR IT WAS AVAILABLE AND NOT DESTROYED IN THE FLOOD BUT THE AS SESSEE IS NOT PRODUCING THE SAME BEFORE THE DEPARTMENT FOR THE REASONS BES T KNOWN TO THE ASSESSEE. WE DO NOT FIND ANY FORCE IN THIS CONTENT ION OF THE CIT(A) BECAUSE WE KNOW THAT IT TAKES TIME TO COMPLETE THE AUDIT AND AFTER CARRYING OUT THE CHECKING WORK OF THE BOOKS WITH TH E SUPPORTING BILLS AND VOUCHERS MUCH TIME IS CONSUMED IN FINALIZING THE RE PORT AFTER FINDING VARIOUS ISSUES WHICH ARISES IN THE COURSE OF SUCH C HECKING OF BOOKS ETC. AND HENCE, THERE IS NO REASON TO DOUBT THIS CONTENT ION OF THE ASSESSEE THAT BEFORE THE FLOOD IN THE MONTH OF AUG 2006, BOOKS OF ACCOUNTS AND SUPPORTING BILLS AND VOUCHERS WERE EXAMINED BY THE AUDITORS AND THE AUDIT REPORT WAS ALSO ALMOST READY WHEN THE FLOOD T OOK PLACE AND THEREFORE, IT WAS SIGNED ON 05.09.2006.. MERELY BE CAUSE THE AUDIT REPORT WAS SIGNED ON 05.09.2006, IT CANNOT BE SAID THAT TH E BOOKS ETC. WERE ALSO EXAMINED IN SEP 2006. EXAMINATION OF BOOKS AND VOU CHERS ALONG WITH SUPPORTING BILLS FOR AN YEAR CANNOT TAKE PLACE IN A SINGLE DAY AND HENCE, IT IS MORE REASONABLE THAT THE SAME WAS EXAMINED BEFOR E THE FLOOD AND THE TAX AUDIT REPORT WAS ALMOST PREPARED BUT IT WAS FIN ALIZED AND SIGNED ON 05.09.2006 AND SINCE IN THE TAX AUDIT REPORT, IT IS MENTIONED THAT THERE IS NO ITEM TO BE DISALLOWED U/S 40A(3), THE SAME HAS T O BE ACCEPTED PARTICULARLY WHEN THE ASSESSEE IS PREVENTED BY NATU RAL CALAMITY FROM PRODUCING BOOKS AND VOUCHERS ETC. THE TRIBUNAL ORD ER IN THE CASE OF EAGLE SYNTHETICS P. LTD. (SUPRA) IS ALSO SUPPORTING THE CASE OF THE ASSESSEE BECAUSE IT WAS HELD BY THE TRIBUNAL IN THAT CASE TH AT ONCE THE ASSESSEES CONTENTION ABOUT LOSS OF BOOKS/RECORDS IN THE FLOOD IS ACCEPTED THEN THE ASSESSMENT HAS TO BE FRAMED ON THE BASIS OF AUDITED FINANCIAL STATEMENT AS I.T.A.NO.2339 /AHD/2009 10 PER LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT I N THE CASE OF JAY ENGINEERING WORKS (SUPRA). THEREFORE, IN THE PRESE NT CASE ALSO, FOR DECIDING THIS ASPECT AS TO WHETHER THERE WAS ANY CA SH EXPENDITURE WHICH IS INADMISSIBLE U/S 40A(3), WE HAVE TO TAKE GUIDANC E OF THE TAX AUDIT REPORT AND AS PER THE SAME, THE AMOUNT OF SUCH INAD MISSIBLE EXPENDITURE IS RS. NIL AND THEREFORE, WE HOLD THAT NO DISALLO WANCE IS CALLED FOR U/S 40A(3) OF THE ACT IN THE PRESENT CASE IN VIEW OF AB OVE DISCUSSION. THEREFORE, DISALLOWANCE IS DELETED. GROUND NO.2 IS ALLOWED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS AL LOWED. 15. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUAMR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 12/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13/12.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.15/12 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 16/12/2011 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.16/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 16/12/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..