The ITO, Ward-5(3), Ahmedabad V. Raj Carrying Cargo Pvt.Ltd., Ahmedabad

ITA 2490/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6596 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: A L THAKKAR
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.2490/AHD/2010 [ASSTT. YEAR : 2006-2007] AND ITA NO.4262/AHD/2007 [ASSTT. YEAR : 2005-2006] ITO, WARD-5(3) AHMEDABAD. VS. RAJ CARRYING CARGO P. LTD. 903, 4-5 SHAJANAND ESTATE O/S. RAIPUR GATE, NR. OLD LATI BAZAR, AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI H.P. MEENA ASSESSEE BY : SHRI A.L. THAKKAR O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THESE ARE TWO REVENUES APPEALS DIRECTED AGAINST THE ORDERS OF TH E COMMISSIONER OF INCOME TAX(APPEALS), AHMEDABAD ARISING OUT OF THE O RDERS OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF TH E INCOME TAX ACT, 1961. FOR THE SAKE OF CONVENIENCE, WE DISPOSE OF B OTH THE APPEALS BY THIS COMMON ORDER. 2. FIRST WE SHALL TAKE UP ITA NO.4262/AHD/2007. TH E GROUND NO.1 OF THE REVENUES APPEAL READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.3,76,000/- ON ACCOUNT OF DISALL OWANCE OF TRUCK HIRE CHARGES PAID TO RELATED PARTIES COVERED UNDER SECTION 40A(2)(B) OF THE IT ACT, 1961. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED DR THAT THE ASSESSEE HIRED TRUCKS FROM RELATIVES AT THE FIX ED RENT PER DAY. THAT THE ITA NO.4262/AHD/2007 AND 2490/AHD/2010 -2- ASSESSEE PAID RENT FOR WHOLE 365 DAYS. THE AO RIGH TLY HELD THAT THE TRUCKS WERE NEVER USED FOR 365 DAYS, THEREFORE HE A LLOWED THE RENT FOR 300 DAYS. HE FURTHER STATED THAT THE ASSESSEE PAID SA ME RENT FOR HEAVY TRUCK I.E. FOUR LIGHT COMMERCIAL VEHICLE (LCV) TRUCKS AND LIGHT TRUCK I.E. 1 LCV TRUCK AND 2 LCV TRUCK. THE AO ALLOWED RENT AT RS.5 00/- PER DAY IN RESPECT OF FOUR LCV TRUCKS BUT REDUCED THE SAME TO RS.350/- FOR TWO LCV TRUCKS AND RS.250/- ONE LCV TRUCK. THAT THE LEARNE D CIT(A) ALLOWED THE RELIEF WITHOUT PROPERLY EXAMINING THE FACTS OF THE ASSESSEES CASE. HE THEREFORE SUBMITTED THAT THE ORDER OF THE CIT(A) SH OULD BE REVERSED AND THAT OF THE AO SHOULD BE RESTORED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE CIT(A) ALLOWED THE RELIEF FOLLOWING HIS OWN ORDER FOR A.Y. 2004-2005. THAT IN A.Y.2004-05, THE REVENUE HAS ACCEPTED THE ORDER OF THE CIT(A). HE HAS SUBMITTED THAT THE COPY OF THE ABOVE ORDER OF CIT(A ) WHICH IS PLACED AT PAGE NO.35 TO 43 OF THE ASSESSEES PAPER BOOK. 5. ON MERIT, HE HAS STATED THAT WHEN THE ASSESSEE H IRED THE TRUCK FOR LONG PERIOD WHETHER SUCH TRUCK IS PLIED OR NOT, THE ASSESSEE HAS TO PAY HIRE CHARES FOR THE WHOLE PERIOD FOR WHICH TRUCK WAS HIR ED BECAUSE THE TRUCKS ALWAYS REMAINED IN THE POSSESSION OF THE ASSESSEE. WITH REGARD TO THE TYPE OF VEHICLES, IT IS STATED BY THE LEARNED COUNS EL THAT ENTIRE TRUCKS HIRED BY THE ASSESSEE ARE LIGHT COMMERCIAL VEHICLE (LCV). THE PRESUMPTION OF THE AO THAT FOUR LCV IS HEAVY VEHICLES AND TWO LCV/ ONE LCV ARE LIGHT COMMERCIAL VEHICLE IS INCORRECT. ALL THE VEHICLES HIRED BY THE ASSESSEE ARE LCVS AND ARE OF SIMILAR CAPACITY. THE NUMBERS, 4, 2 AND 1 ONLY DENOTE MODEL OF THE VEHICLES. HE THEREFORE SUBMITT ED THE ORDER OF THE CIT(A) SHOULD BE SUSTAINED. ITA NO.4262/AHD/2007 AND 2490/AHD/2010 -3- 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE CIT(A) HAS ALLOWED THE RELIEF WITH THE FOLLOWINGS FINDINGS: 4.2.1 IT IS SEEN THAT THE SIMILAR ISSUE WAS INVOL VED IN THE APPELLANTS OWN CASE FOR IMMEDIATE PROCEEDING ASSES SMENT YEAR I.E. FOR A.Y.2004-05. THE SAME WAS DECIDED BY THE UNDERSIGNED IN FAVOUR OF THE APPELLANT VIDE ORDER NO.CIT(A)-XI/265 /2006-07 DATED 02.07.2007. IT IS ALSO SEEN THAT THE FACTS F OR THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THAT OF A.Y.2004-05. THEREFORE, I AM OF THE OPINION THAT THE HIRE CHARGES PAYMENTS MADE TO DIRECTORS ARE REASONABLE, HENCE, NO DISALLOWANCE IS WARRANTED U/S.40A(2A)(B) OF THE IT ACT, 1961. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITION MADE BY HIM AT RS.3,76,000/-. THUS, THIS GROUND OF APPEAL IS ALLOWED. ADMITTEDLY, THE REVENUE HAS ACCEPTED THE ORDER OF T HE CIT(A) IN THE EARLIER YEAR. IN THE YEAR UNDER CONSIDERATION, THE CIT(A) HAS SIMPLY FOLLOWED HIS OWN ORDER FOR A.Y.2004-2005, WHICH IS ACCEPTED BY THE REVENUE. EVEN ON MERIT, WE DO NOT FIND ANY JUSTIFI CATION FOR SUSTAINING THE DISALLOWANCE. WHEN A VEHICLE IS HIRED FOR LONG PERIOD, THE ASSESSEE HAS TO PAY THE HIRE CHARGES ON THE BASIS OF PERIOD OF HIRING AND NOT ON THE BASIS OF ACTUAL USER. THEREFORE, THE FINDING OF TH E AO THAT THE ASSESSEE OUGHT TO HAVE PAID HIRE CHARGES ONLY FOR 300 DAYS A ND NOT 365 DAYS IS NOT CORRECT. SO FAR AS, THE CAPACITY OF VEHICLE IS CON CERNED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE A STATEMENT THAT THE CAPACITY OF THE VEHICLES HIRED BY THE ASSESSEE IS SIMILAR AND ALL T HE VEHICLES HIRED ARE LIGHT COMMERCIAL VEHICLES. NONE OF THE VEHICLES ARE HEAV Y VEHICLES. THIS STATEMENT OF THE LEARNED COUNSEL HAS NOT BEEN CONTR OVERTED BY THE REVENUE. IN THESE CIRCUMSTANCES, WE UPHOLD THE ORDE R OF THE CIT(A) ON THIS POINT AND REJECT GROUND NO.1 OF THE REVENUES APPEAL. 7. GROUND NO.2 OF THE REVENUES APPEAL READS AS UND ER: ITA NO.4262/AHD/2007 AND 2490/AHD/2010 -4- 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.9,68,363/- ON ACCOUNT OF DISALL OWANCE OF TRUCK DIESEL EXPENSES. 8. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND PE RUSED THE MATERIAL PLACED BEFORE US. THE AO HAS DISALLOWED 2 0% OUT OF TRUCK DIESEL EXPENSES ON THE GROUND THAT INCREASE IN THE TRUCK DIESEL EXPENSES WAS DISPROPORTIONATE TO INCREASE IN FREIGHT RECEIVE D AS COMPARED TO THE LAST YEAR. IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE CIT(A) THAT DURING THE YEAR UNDER CONSIDERATION, THE RATE OF DIESEL HA D INCREASED FOUR TIMES FROM RS.25.26 PER LITRE TO RS.30.31 PER LITRE. THU S, THERE WAS INCREASE OF ABOUT 20% IN THE BASIC FUEL CHARGES WHILE THE HIRE CHARES HAS NOT INCREASED IN PROPORTION TO THE INCREASE IN THE DIES EL RATE. IT WAS ALSO EXPLAINED THAT THE ASSESSEE HAS MAINTAINED COMPLETE DETAILS AND VOUCHERS IN RESPECT OF DIESEL EXPENSES AND THE AO HAS NOT PO INTED OUT ANY DEFECT OR MISTAKE IN THE BOOKS OF ACCOUNTS OR THE BILLS, VOUC HERS ETC. CONSIDERING ALL THE FACTS, THE CIT(A) ALLOWED THE RELIEF WITH T HE FOLLOWING FINDINGS: 5.2 THE SUBMISSIONS MADE BY THE AR OF THE APPELLAN T HAVE BEEN PERUSED. THE DECISIONS, REFERRED AS ABOVE, WHICH A RE RELIED UPON BY THE AR OF THE APPELLANT AND THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER HAVE ALSO BEEN EXAMINED. 5.2.1 IT IS SEEN THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT COMPANY ARE AUDITED BY TAX AUDITORS AND THEY HAVE N OT POINTED OUT ANY DEFECT IN RESPECT OF THE BOOKS OF ACCOUNTS MAIN TAINED BY THE APPELLANT COMPANY. THE AO HAS ALSO NOT POINTED OUT ANY MISTAKE/DEFECT IN THE BOOKS OF ACCOUNTS. FURTHER, WHILE MAKING THE HUGE DISALLOWANCE, THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE TO SHOW THAT THE EXPENSES INCURRED BY THE APPELLANT ARE BOGUS OR NOT INCURRED FOR BUSINESS PURPOSES. 5.2.2 THEREFORE, HAVING CONSIDERED THE FACTS AND CI RCUMSTANCES OF THE CASE, IN VIEW OF THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF CIT VS. DHANARAJAGIRJI RAU NARASINGH GI RIJI, 91 ITR ITA NO.4262/AHD/2007 AND 2490/AHD/2010 -5- 544(SC) AND THE DECISION IN THE CASE OF DCIT VS. SU RFACE FINISHING EQUIPMENT, 140 TAXMAN 43 (JODHPUR) (MAG) AND ALSO THE DECISION IN THE CASE OF HEMRAJ NEBHOMAL SONS VS . CIT, 278 ITR 345 (NP), I AM OF THE VIEW THAT THE AO IS NOT J USTIFIED IN MAKING DISALLOWANCE ON ACCOUNT OF TRUCK DIESEL EXPE NSES. THE ADDITION MADE BY THE AO AT RS.9,68,363/- IS THEREFO RE DELETED. 9. AFTER CONSIDERING HE ARGUMENTS OF BOTH THE SIDES AND THE FACTS OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). MERELY BECAUSE THERE WAS INCREASE IN THE DIESEL EXPENSES A S COMPARE TO THE LAST YEAR, WOULD NOT BE SUFFICIENT TO MAKE AD HOC DISALLOWANCE OUT OF TOTAL DIESEL EXPENSES. THE ASSESSEE HAS MAINTAINED REGUL AR BOOKS OF ACCOUNTS AND THE ENTIRE EXPENSES WERE FULLY VOUCHED AND VERI FIABLE. NO DEFECT THEREIN IS POINTED OUT BY THE AO. IN VIEW OF THE A BOVE, WE UPHOLD THE ORDER OF THE CIT(A) IN THIS REGARD AND REJECT GROUN D NO.2 OF THE REVENUES APPEAL. 10. GROUND NO.3 OF THE REVENUES APPEAL READS AS UN DER: THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION MADE OF RS.4,68,363/- ON ACCOUNT OF DISALL OWANCE OF TRUCK REPAIR EXPENSES. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE AO HAS DISCUSSED THIS ISSUE IN PARA -5 OF HIS ORDER. THE SAME IS REPRODUCED BELOW: 5. THE ASSESSEE CO. HAS DEBITED A TRUCK REPAIR EXP ENSES OF RS.7,26,618/- AS AGAINST RS.2,02,43/- OF PRECEDING YEAR. ON VERIFICATION OF THE TRUCK REPAIRS EXPENSES, IT IS S EEN THAT OUT OF TOTAL REPAIRS A SUM OF RS.4,68,473/- ARE EXPENDED TOWARDS THE REPAIRS OF TRUCK TAKEN ON RENT FROM THE ELATED PARTY AND EXPEN SES LIKE BODY BUILDING AND OTHER MAJOR REPAIRS WERE MADE WHICH GA VE UNDUE BENEFIT TO THE RELATED PARTIES AT THE COST OF THE A SSESSEE CO. UNDER THE COLOUR OF FULL PLANNING. IT IS ALSO SEEN THAT DURING THE YEAR UNDER CONSIDERATION, THE TOTAL FREIGHT RECEIPT IS I NCREASED BY ITA NO.4262/AHD/2007 AND 2490/AHD/2010 -6- APPROXIMATELY 25% WHEREAS TRUCK REPAIR EXPENSES ARE INCREASED BY 358%. CONSIDERING THE ABOVE, AND THE FACTS OF T HE CASE, A SUM OF RS.2,00,000/- IS DISALLOWED FROM THE TOTAL TRUCK REPAIRS EXPENSE AND ADDED TOT HE TOTAL INCOME OF THE ASSESSEE CO. F OR WANT OF SUPPORTING EVIDENCE. FROM THE ABOVE, IT IS EVIDENT THAT IN THE ORDER, TH E AO PROPOSED DISALLOWANCE OF RS.2 LAKHS OUT OF TRUCK REPAIR EXPE NSES. HOWEVER, WHILE MAKING THE COMPUTATION OF INCOME, HE DISALLOWED THE SUM OF RS.4,68,473/- . IN FACT THE SUM OF RS.4,68,473/- W AS THE REPAIR EXPENSES IN RESPECT OF TRUCK TAKEN ON HIRE. THE CIT(A) DELE TED THE ENTIRE DISALLOWANCE. 12. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SID ES AND FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE CIT(A). THE AO MADE THE AD HOC DISALLOWANCE OF RS.2 LAKHS MERELY ON THE GROUND THAT THERE WAS DISPROPORTIONATE INCREASE IN THE REPAIR EXPENSES AS COMPARED TO THE PROCEEDING YEAR. IN OUR OPINION , MERELY BECAUSE THE EXPENSES HAVE INCREASED IN COMPARISON TO THE EARLIE R YEAR, WOULD NOT SUFFICIENT TO DISALLOW THE EXPENSES. IF THE EXPENS ES IS MORE, THE AO OUGHT TO HAVE PROBED DEEP INTO THE MATTER AND SHOUL D HAVE FOUND OUT WHETHER THE EXPENDITURE IS GENUINE AND THE SAME IS INCURRED FOR THE PURPOSE OF BUSINESS OR NOT. THIS HAS NOT BEEN DONE BY THE AO. THE CIT(A) HAS RECORDED THE FINDINGS THAT THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS, WHICH IS DULY AUDITED. ENTIRE R EPAIR EXPENSES ARE DULY SUPPORTED BY THE BILLS AND VOUCHERS. NO DEFECT THE REIN IS POINTED OUT BY THE AO. THIS FINDING OF THE CIT(A) HAS NOT BEEN CO NTROVERTED BY THE REVENUE. WE THEREFORE DO NOT FIND ANY JUSTIFICATIO N TO INTERFERE WITH THE SAME. THE ORDER OF THE CIT(A) ON THIS POINT IS SUS TAINED AND GROUND NO.3 OF THE REVENUES APPEAL IS REJECTED. ITA NO.4262/AHD/2007 AND 2490/AHD/2010 -7- 13. GROUND NOS.4 AND 5 ARE AGAINST THE AD HOC DISALLOWANCES OF RS.75,000/- ON ACCOUNT OF OFFICE EXPENSES AND RS.50 ,000/- ON ACCOUNT OF DISALLOWANCE OF VEHICLE EXPENSES. 14. THE FACTS RELATING TO THESE GROUNDS ARE SIMILAR TO GROUND NO.3. THE AO MADE AD HOC DISALLOWANCE WITHOUT POINTING OU T ANY MISTAKE IN THE ACCOUNTS OF THE ASSESSEE OR WITHOUT POINTING OU T ANY EXPENDITURE OF DISALLOWABLE NATURE. THE CIT(A) HAS RECORDED THE F INDING THAT THE ASSESSEE HAS MAINTAINED COMPLETE DETAILS OF OFFICE EXPENSES AS WELL AS VEHICLE EXPENSES. THE ENTIRE EXPENDITURE IS DULY S UPPORTED BY THE BILLS AND VOUCHERS. NO DEFECTS THEREIN IS POINTED OUT BY THE AO. THIS FACT RECORDED BY THE CIT(A) HAS NOT BEEN CONTROVERTED BE FORE US. WE THEREFORE UPHOLD THE ORDER OF THE CIT(A) WITH REGAR D TO GROUND NO.4 AND 5 AND REJECT THESE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL. 15. GROUND NO.6 OF THE REVENUES APPEAL READS AS UN DER: 6. THE LD.CIT(A) HAS ERRED IN LAW AND ON ACTS IN D ELETING THE ADDITION MADE OF RS.1,16,754/- ON ACCOUNT OF DISALL OWANCE OF INTEREST RELATING TO INTEREST FREE ADVANCES. 16. THE AO DISALLOWED THE SUM OF RS.1,26,119/- ON T HE GROUND THAT THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCE AMOUNTING TO RS.10,61,407/-. ON APPEAL, THE CIT(A) HAS RECORDED THE FINDING THAT TH E ASSESSEE HAS SHARE CAPITAL OF RS.25 LAKHS AND RESERVE & SURPLUS OF RS. 38,39,967/-. THUS, INTEREST FREE FUND AVAILABLE WITH THE ASSESSEE IS M ORE THAN RS.63 LAKHS. THE INTEREST FREE ADVANCE GIVEN BY THE ASSESSEE WAS ONLY RS.10,61,047/-. HE THEREFORE DELETED THE DISALLOWANCE OF INTEREST. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ISSUE UNDER CONSIDERAT ION IS COVERED IN FAVOUR ITA NO.4262/AHD/2007 AND 2490/AHD/2010 -8- OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD., 313 ITR 340 (BOM), WHEREIN THEIR LORDSHIPS HELD AS UNDER: THE ASSESSEE CLAIMED DEDUCTION OF INTEREST ON BORR OWED CAPITAL. THE ASSESSING OFFICER RECORDED A FINDING THAT THE S UM OF RS. 213 CRORES WAS INVESTED OUT OF ITS OWN FUNDS AND RS.147 CRORES WAS INVESTED OUT OF BORROWED FUNDS. ACCORDINGLY HE DISA LLOWED INTEREST AMOUNTING TO RS.4.40 CRORES CALCULATED AT 12 PER CE NT. PER ANNUM FOR THREE MONTHS FROM JANUARY, 2000 TO MARCH, 2000. THE COMMISSIONER (APPEALS) FOUND THAT THE ASSESSEE HAD ENOUGH INTEREST-FREE FUNDS AT ITS DISPOSAL FOR INVESTMENT AND ACCORDINGLY DELETED THE ADDITION OF RS.4.40 CORES MADE BY THE A SSESSING OFFICER AND DIRECTED HIM TO ALLOW THE DEDUCTION UND ER SECTION 36(1)(III). THE ORDER OF THE COMMISSIONER (APPEALS) WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT : HELD, DISMISSING THE APPEAL, THAT IF THERE WERE FUN DS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AND/OR LOANS TAKEN, THE N A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE IN TEREST-FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INT EREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CA SE THIS PRESUMPTION WAS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL. THE INTEREST WAS DEDUCTIBLE. IN THE CASE ON HAND, ADMITTEDLY THE INTEREST FREE F UND AVAILABLE WITH THE ASSESSEE IS MUCH MORE THAN THE INTEREST FREE ADVANC E. THE AO HAS NOT POINTED OUT THAT THE BORROWED MONEY HAS BEEN UTILIS ED FOR GIVING INTEREST FREE ADVANCE. IN THE ABSENCE OF ANY NEXUS LAID DOW N BY THE REVENUE, THE RATIO OF THE ABOVE DECISION OF THE HONBLE BOMBAY H IGH COURT WOULD BE SQUARELY APPLICABLE. WE THEREFORE RESPECTFULLY FOL LOWING THE SAME, UPHOLD THE ORDER OF THE CIT(A) AND REJECT GROUND NO .6 OF THE REVENUES APPEAL. ITA NO.2490/AHD/2010 ITA NO.4262/AHD/2007 AND 2490/AHD/2010 -9- 18. THE FOLLOWING GROUNDS ARE RAISED IN THIS APPEAL . 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XXI, AHMEDAB AD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISAL LOWANCE OF RS.4,49,000/-MADE ON ACCOUNT OF EXCESS PAYMENT U/S.40A(2)(B). 2. THE LD. COMMISSIONER OF INCOME TAX (A)-XXI, AHMEDAB AD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISAL LOWANCE OF RS.10,34,810/-MADE ON ACCOUNT OF VARIOUS EXPENSES O F DIESEL & REPAIR EXPENSES. 3. THE LD. COMMISSIONER OF INCOME TAX (A)-XXI, AHMEDAB AD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISAL LOWANCE OF RA.1,07,350/- MADE U/S.40(A)(IA) ON ACCOUNT OF NON- DEDUCTION OF TAX ON TRUCK HIRE CHARGES. 19. WE FIND THAT GROUND NO.1 AND 2 ARE SIMILAR TO G ROUND NO.1 AND 2 OF THE APPEAL FOR A.Y.2005-2006. FOR THE DETAILED THEREIN, GROUND NO.1 AND 2 OF THE REVENUES APPEAL IS DISMISSED. 20. WITH REGARD TO GROUND NO.3, THE AO MADE DISALLO WANCE ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT THE TDS. THE CIT(A) DELETED THE DISALLOWANCE ON THE GROUND THAT SECTION 40(A)(I A) WAS NOT APPLICABLE IN RESPECT OF TRUCKS HIRED BY THE ASSESSEE. 21. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE AO HAS NOT SPECIFIED HOW THE ASSESSEES CASE FALLS WITHIN THE PURVIEW OF SECTION 40(A)(IA) OF THE ACT. AT THE SAME TIME, WE ALSO NOTICED THAT THE AO HAD M ADE INQUIRY IN THIS REGARD, BUT THE ASSESSEE FAILED TO FURNISH ANY EXPL ANATION BEFORE HIM. THE ASSESSEE FURNISHED THE EXPLANATION BEFORE THE CIT(A ) THAT ITS CASE DOES NOT FALL WITHIN THE AMBIT OF SECTION 40(A)(IA) WHIC H IS ACCEPTED BY THE CIT(A) WITHOUT CONFRONTING THE AO WITH THE SAME. IN OUR OPINION, THE MATTER NEEDS RE-EXAMINATION AT THE END OF THE AO. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) ON THIS POINT AND RESTORE T HE MATTER BACK TO THE ITA NO.4262/AHD/2007 AND 2490/AHD/2010 -10- FILE OF THE AO. WE ALSO DIRECT THE ASSESSEE TO FUR NISH HIS EXPLANATION BEFORE THE AO AND THEREAFTER, THE AO IS DIRECTED TO PASS SPEAKING ORDER IN THIS REGARD. 22. IN RESULT THE REVENUES APPEAL VIDE ITA NO.4262 /AHD/2007 IS DISMISSED AND ITA NO.2490/AHD/2010 IS DEEMED TO BE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 20 TH MAY, 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 20-05-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD