Income Tax Officer-4(3), Lucknow V. M/s Lucknow Kanpur Goods Carriers Pvt. Ltd, Lucknow

ITA 295/LKW/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92211 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K R RASTOGI
• Section: 44AD; 40A(3); 68; 145; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.295/LKW/2015 ASSESSMENT YEAR:2010 - 2011 M/S LUCKNOW KANPUR GOODS CARRIERS PVT. LTD., 19, GURUDWARA ROAD, LUCKNOW. PAN:AABCL0341B VS INCOME TAX OFFICER - 4(3), LUCKNOW. (RESPONDENT) (APPELLANT) C.O.NO. 23 /LKW/201 5 (IN ITA NO.295/LKW/2015) ASSESSMENT YEAR:2010 - 2011 INCOME TAX OFFICER - 4(3), LUCKNOW. VS M/S LUCKNOW KANPUR GOODS CARRIERS PVT. LTD., 19, GURUDWARA ROAD, LUCKNOW. PAN:AABCL0341B (RESPONDENT) (OBJECTOR) SHRI AMIT NIGAM, D. R. REVENUE BY SHRI K. R. RASTOGI, C.A. ASSESSEE BY 17/06/2015 DATE OF HEARING 15 /07/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJECTION IS FILED BY THE ASSESSEE, WHICH ARE DIRECTED AGAINST THE ORDER OF CIT(A) - II, LUCKNOW DATED 23/12/2014 FOR ASSESSMENT YEAR 2010 - 2011. 2. GROUND NO. 1 OF REVENUES APPEAL AND THE ONLY GROUND RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION ARE INTER - CONNECTED, WHICH ARE AS UNDER: 2 GROUND NO. 1 OF REVENUES APPEAL: 1. THE COMMISSIONER OF INCOME - TAX (APPEAL) HAS ERRED IN LAW AND ON FACTS OF THE CASE BY APPLYING THE NET PROFIT RATE OF 7.5% ON THE GROSS RECEIPTS THEREBY ALLOWING THE RELIEF OF RS.32,59,715/ - OUT OF THE ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF LORRY HIRE CHARGES, SALARY TO DRIVERS, ADMINISTRATIVE EXPENSES AND LORRY FUEL RUNNING AND MAINTENANCE EXPENSES, WITHOUT APPREC IATING THE FACT THAT THE ASSESSEE DID NOT PRODUCE COMPLETE BILL AND VOUCHERS IN SUPPORT OF THE CLAIM SO MADE. GROUND RAISED BY ASSESSEE IN ITS CROSS OBJECTION: THAT THE NET PROFIT RATE OF 7.5% CONSIDERED BY LEARNED CIT(A) IS EXCESSIVE AND A LESSER PER CENTAGE SHOULD BE APPLIED. 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A) TO THE EXTENT RELIEF ALLOWED BY HIM AND ALSO SUBMITTED THAT THE ACTION OF THE LEARNED CIT (A) IN ADOPTING PROFIT RATE OF 7.5% OF GROSS RECEIPTS IS EXCESSIVE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION OF ENTIRE LORRY HIRE CHARGES REMAINING UNPAID AS ON 31/03/2010 OF RS.44,28,717/ - BUT WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A), HE HELD THAT IN THE FACTS OF THE PRESENT CASE, THE NET PROFIT OF THE ASSESSEE SHOULD BE ESTIMATED TO THE EXTENT OF 7.5% OF THE GROSS RECEIPTS. WE FIND THAT THIS ISSUE WAS DECIDED BY LEARNED CI T(A) AS PER PARA 8 TO 8.3 OF HIS ORDER, WHICH ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 8. I HAVE CONSIDERED THE MATTER AND EXAMINED THE DOCUMENTS / EVIDENCES FURNISHED BY THE APPELLANT. IN RESPECT OF TRANSPORTATION BUSINESS, THE APPELLANT HAS DISCLOSED NET PROFIT OF RS.5,71,879/ - @2.84% ON TURNOVER OF RS.2,00,74,600/ - . IT IS FOUND THAT THE APPE LLANT HAS CLAIMED PAYMENT TO LORRY HIRE CHARGES AGGREGATING TO RS.83,66,682/ - 3 IN THE PROFIT AND LOSS ACCOUNT OUT OF WHICH AMOUNT OF RS.44,14,929/ - HAS REMAINED OUTSTANDING AT THE END OF THE YEAR. THE ENTIRE OUTSTANDING LIABILITY HAS BEEN PAID IN THE MONTH S OF APRIL & MAY, 2010 IN THE SUBSEQUENT FINANCIAL YEAR. IT IS SEEN THAT THE A.O. HAS NOT CONDUCTED ANY ENQUIRIES FROM THE ALLEGED LORRY SUPPLIERS AND HAS PROCEEDED TO DISALLOW ENTIRE LORRY HIRE CHARGES PAYABLE OF RS.44,14,929/ - . 8.1 NOW IF THE DISALLOWANCE MADE BY THE A.O. IS TAKEN INTO ACCOUNT THE NET PROFIT RATE OF THE APPELLANT WILL GO UP TO 44.77% WHICH IS UNREALISTICALLY HIGHER THE CASE OF A TRANSPORT CONTRACTOR. HOWEVER, THE ARGUMENT OF THE A.O. THAT THE SMALL TIME LORRY SUPPLIERS CANNOT K EEP THE PAYMENTS PENDING FOR MORE THAN ONE YEAR IS PLAUSIBLE. THIS IS MORE SO WHEN THE APPELLANT HAS CLAIMED THAT ALL PAYMENTS TO LORRY SUPPLIERS, ARE AS ON WHEN BASIS AND IN CASH. FURTHER, THE APPELLANT IS ALSO NOT JUSTIFIED IN TAKING THE PLEA THAT HE IS NOT REQUIRED TO VERIFY THE ADDRESSES OF THE LORRY SUPPLIERS AS IT WAS NOT PRACTICALLY POSSIBLE TO DO SO. THIS ARGUMENT OF THE APPELLANT IS NOT FULLY TENABLE IN VIEW OF THE FACT THAT THE TRANSPORT CONTRACTS ARE BEING DONE FOR TOP CORPORATE CLIENTELE. THE LA W REQUIRES THAT IN RESPECT OF EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT THE PRIMARY ONUS IS ON THE APPELLANT TO PROVE THE GENUINENESS OF THE EXPENSES. IN THE CASE OF THE APPELLANT A LARGE PORTION OF LORRY HIRE CHARGES HAS BEEN SHOWN AS OUTSTANDING, W HICH ARE CLAIMED TO HAVE BEEN PAID OFF IN SUBSEQUENT YEAR BUT ALL IN CASH. HENCE THE GENUINENESS OF SUCH PAYMENTS REMAINED UNVERIFIABLE, IN ABSENCE OF COMPLETE IDENTITY AND CASH PAYMENTS. 8.2 HOWEVER THE APPELLANT'S ARGUMENT THAT ARBITRARY DISALLOWANCE O F 20% OUT OF LORRY HIRE CHARGES BY THE AO CANNOT BE JUSTIFIED, DESERVES MERIT AND IT IS ALSO AGAINST ANY QUASI JUDICIAL ACT BY THE ASSESSING OFFICER. THE AO IS ALSO DUTY BOUND TO ACT IN A MANNER WHICH SHOWS HIS APPLICATION OF MIND TO THE FACTS OF THE CASE. FURTHER NET PROFIT RATE OF 44.77% ASSESSED BY THE AO IS ALSO VERY HIGH IN THE CASE OF A TRANSPORT CONTRACTOR, WHERE THE NORMS HAVE BEEN FIXED UNDER THE ACT WHEN TURNOVER IS BELOW RS. 40 LAKH. IN VIEW OF THE DISCUSSIONS MADE ABOVE IT IS HELD THAT THE BEST OPTION AVAILABLE TO THE AO WAS TO REJECT THE BOOK RESULTS, SINCE HE COULD NOT HAVE SATISFIED HIMSELF ABOUT THE CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND THE ONLY ALTERNATIVE AVAILABLE WAS TO COMPLETE THE ASSESSMEN T IN THE MANNER PROVIDED UNDER SECTION 144 OF THE ACT IN VIEW OF 4 PROVISIONS OF SECTION 145(3) OF THE ACT IN THE CASE OF DHONDIRAM DALICHAND V. CIT, 81 ITR 609 [BOM.) THE HON'BLE HIGH COURT HAS HELD THAT WHILE EXERCISING THE ROWERS U/S 145 OF THE ACT IT IS NOT NECESSARY FOR REVENUE AUTHORITIES TO RECORD AFORESAID FINDINGS IN SPECIFIC WORDS BEFORE EXERCISING POWER, PARTICULARLY IN VIEW OF THE FACT THAT CIRCUMSTANCES OF CASE OTHERWISE JUSTIFIED INVOKING OF SAID POWER. 8.3 AFTER CONSIDERING ALL FACTS OF THIS CASE, I FIND THAT THE PROVISIONS OF SECTION 44AD OF THE ACT ESTIMATING THE PROFIT OF CONTRACTOR @ 8% OF THE TURNOVER ARE APPLICABLE FOR TRANSPORT CONTRACTOR ADOPTING THE PRESUMPTIVE SCHEME OF TAXATION AND THE SCOPE OF THE SECTION IS LIMITED TO TRANSPORT CO NTRACTORS WHOSE TURNOVER DOES NOT EXCEED RS.40LAKH. IN THE CASE OF THE APPELLANT THE GROSS RECEIPTS EXCEEDS RS.2.01 CRORE. HENCE, PROVISIONS OF 44AD ARE NOT APPLICABLE TO THE APPELLANT. SUCH VIEW HAS BEEN UPHELD BY THE PRIVY COUNCIL IN CIT V . LAXNINNARAM B ADRIDAS [193T 5 ITR 170 (PC) THEIR LORDSHIPS OF THE PRIVY COUNCIL OBSERVED AS FOLLOWS: 'THE OFFICER IS TO MAKE AN ASSESSMENT TO THE BEST OF HIS JUDGMENT AGAINST A PERSON WHO IS IN DEFAULT AS REGARDS SUPPLYING INFORMATION. HE MUST NOT ACT DISHONESTLY OR VI NDICTIVELY OR CAPRICIOUSLY BECAUSE HE MUST EXERCISE JUDGMENT IN THE MATTER. HE MUST MAKE WHAT HE HONESTLY BELIEVES TO BE FAIR ESTIMATE OF THE PROPER FIGURE OF ASSESSMENT, AND FOR THIS PURPOSE HE MUST, THEIR LORDSHIPS THINK, BE ABLE TO TAKE INTO CONSIDERATI ON LOCAL KNOWLEDGE AND REPUTE IN REGARD TO THE ASSESSEE'S CIRCUMSTANCES, AND HIS OWN KNOWLEDGE OF PREVIOUS RETURNS BY AND ASSESSMENTS OF THE ASSESSEE, AND ALL OTHER MATTERS WHICH HE THINK; WILL ASSIST HIM IN ARRIVING AT A FAIR AND PROPER ESTIMATE; AND THOU GH THERE MUST NECESSARILY BE GUESSWORK IN THE MATTER, IT MUST BE HONEST GUESSWORK IN THAT SENSE TOO, THE ASSESSMENT MUST BE TO SOME EXTENT ARBITRARY.' SINCE THE LAW RELATING TO 'BEST JUDGMENT ASSESSMENT' IS THE SAME BOTH IN THE CASE OF INCOME - TAX ASSESSME NT AND SALES TAX ASSESSMENT, THE FOLLOWING OBSERVATION IN RAGHUBAR MANDAL HARIHAR V. STATE OF BIHAR (1957) 8 STC 770,778 [SC), A CASE UNDER THE BHHAR SALES TAX ACT, WOULD BE MATERIAL: 'NO DOUBT IT IS TRUE THAT WHEN THE RETURNS AND THE BOOKS OF ACCOUNT ARE REJECTED, THE ASSESSING OFFICER MUST MAKE 5 AN ESTIMATE, AND TO THAT EXTENT HE MUST MAKE A GUESS; BUT - THE ESTIMATE MUST, BE RELATED SOME EVIDENCE OR MATERIAL AND IT MUST BE SOMETHING MORE THAN MERE SUSPICION . ' AGAIN IN STATE OF KERALA V. C. VELUKUTTY [1966 ] TO ITR 239 (SC), WHICH WAS A CASE UNDER THE TRAVANCORE - COCHIN GENERAL SALES TAX ACT, THE COURT OBSERVED: 'THE LIMITS OF THE POWER ARE IMPLICIT IN THE EXPRESSION 'BEST OF HIS JUDGMENT'. JUDGMENT IS A FACULTY TO DECIDE MATTERS WITH WISDOM TRULY AND LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY - CAPRICE OF A JUDGE, BUT ON SETTLED AND INVARIABLE PRINCIPLES OF JUSTICE. THOUGH THERE IS AN ELEMENT OF GUESSWORK IN A 'BEST JUDGMENT ASSESSMENT', IT SHALL NOT BE A WILD ONE, BUT SHALL HAVE A REASONABLE N EXUS TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF EACH CASE.' IT IS EVIDENT FROM ABOVE ESTABLISHED POSITION OF THE LAW THAT THE AUTHORITY MAKING A BEST JUDGMENT ASSESSMENT MUST MAKE AN HONEST AND FAIR ESTIMATE OF INCOME OF THE ASSESSEE AND SUCH ESTI MATE SHALL NOT BE CAPRICIOUS BUT SHOULD HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL, CIRCUMSTANCES OF THE CASE AND BUSINESS OF THE APPELLANT THE APPELLANT IN THE IMPUGNED ASSESSMENT YEAR HAS DECLARED NET PROFIT RATE OF 2.84% WHEREAS IN THE PRECEDING YEAR IT WAS 2.60% ONLY. HOWEVER, PAST HISTORY OF THE CASE OF THE APPELLANT CANNOT BE RELIED UPON AS RETURNS FILED FOR THE PRECEDING YEAR HAS NOT BEEN SUBJECT MATTER OF SCRUTINY. THE HON'BLE ITAT, LUCKNOW SMC BENCH IN ITA NO . 574/LUC/05 DATED 10.03.2006 IN THE CASE OF M/S GUPTA CONSTRUCTIONS HAS CONFIRMED THE ACTION OF AO IN ESTIMATING THE PROFIT AT @7% OF TOTAL TURNOVER. THE ITAT ALLAHABAD BENCH IN CASE OF RAJESH KUMAR SINGH, GORAKHPUR V. ITO IN ATA NO. 425/ALLD/2003 FOR AY 2000 - 01 DATED 25.06.2004 HAS UPHE LD THE APPLICATION OF NET PROFIT RATE OF 7.5%. IN THE CASE OF ACIT V. RAJ BROS, REPORTED IN 2009 (13) MTC 88 (TRIB.) BY THE APPELLANT THE HON'BLE ITAT, ALLAHABAD BENCH HAS DIRECTED TO THE AO TO APPLY NET PROFIT RATE OF 9.6% IN THE CASE OF A CONTRACTOR WHOS E TURNOVER IS RS. 10 CRORE. IN VIEW OF THE ABOVE DISCUSSIONS AND CONSIDERING THE FACT THAT THE TURNOVER OF THE APPELLANT IS RS.20074600/ - , I AM OF THE CONSIDERED OPINION THAT IT WOULD BE REASONABLE TO ESTIMATE THE PROFITS OF THE APPELLANT AT RS.15,05,595/ - @7.5%OF GROSS RECEIPTS OF RS.2,00,74,600/ - , ACCORDINGLY, OUT OF ADDITIONS 6 MADE OF RS.15,05,595/ - ADDITION TO THE EXTENT OF RS.9,33,716/ - IS CONFIRMED AFTER GIVING EFFECT OF RS.571879/ - NET PROFIT DECLARED IN RETURN OF INCOME IS HEREBY CONFIRMED. THE APPE LLANT THUS GETS A RELIEF OF RS.32,59,715 OUT OF THESE GROUNDS. 4.1 FROM THE ABOVE PARAS FROM THE ORDER OF LEARNED CIT(A), WE FIND THAT CIT(A) HAS REFERRED TO VARIOUS TRIBUNAL DECISIONS WHEREIN THE TRIBUNAL HAS APPROVED THE ADOPTION OF NET PROFIT RATE OF 7% O F TOTAL TURNOVER IN ONE CASE, 7.5% IN AN OTHER CASE AND 9.6% IN SOME OTHER CASE. IT HAS BEEN ACCEPTED THAT FACTS OF EACH CASE ARE DIFFERENT AND THEREFORE, DIRECTION OF CIT(A) TO ADOPT 7.5% IN THE PRESENT CASE IS REASONABLE IN THE FACTS OF THE PRESENT C ASE AND ALSO IN THE LIGHT OF THESE TRIBUNAL DECISION S REFERRED TO BY LEARNED CIT(A). IN THIS REGARD, IT IS ALSO VERY RELEVANT TO NOTICE THAT IT IS NOTED BY THE LEARNED CIT(A) IN PARA 8.1 OF HIS ORDER THAT IF THE DISALLOWANCE MADE BY THE A.O. IS TAKEN INTO ACCOUNT , THE NET PROFIT RATE OF THE ASSESSEE WILL GO UP TO 44.77% WHICH IS UNREALISTICALLY HIGHER IN THE CASE OF A TRANSPORT CONTRACTOR. HE HAS ALSO REFERRED TO THE PROVISIONS OF SECTION 44AD, WHICH ARE APPLICABLE IN CASE OF A TRANSPORT CONTRACTOR WHOSE TURNOVER IS LESS THAN RS.40 LAC AND IN THOSE CASES, NET PROFIT RATE OF 8% IS PRESCRIBED. IN THE PRESENT CASE, THE TURNOVER OF THE ASSESSEE EXCEEDS RS.2 CRORE AND THEREFORE, ADOPTION OF NET PROFIT RATE OF 7.5% IN THE FACTS OF THE PRESENT CASE IS REASONABLE IN VIEW OF THE FACT THAT THE ASSESSEE IS SHOWING A VERY HIGH AMOUNT OF OUTSTANDING UNPAID LORRY HIRE CHARGES, WHICH ARE PAID BY WAY OF CASH PAYMENT IN THE NEXT YEAR IN THE MONTH OF APRIL AND MAY 2010 AND THIS AMOUNT IS RS.44.14 LAC. HENCE, AFTER CONSIDER ING THE FACTS OF THE PRESENT CASE IN ITS TOTALITY AND VARIOUS TRIBUNAL DECISIONS REFERRED TO BY LEARNED CIT(A) IN HIS ORDER, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE HAS BEEN DECIDED IN PROPER PERSPECTIVE BY LEARNED CIT(A) AFTER CONSIDERING ALL ASP ECTS OF THE MATTER AND THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A). ACCORDINGLY, GROUND NO. 1 OF 7 THE REVENUES APPEAL AND GROUND NO. 1 OF CROSS OBJECTION OF THE ASSESSEE ARE REJECTED. 5. GROUND NO. 2 OF THE REVENUES APPEAL IS AS UNDER: 2. THE COMMISSIONER OF INCOME - TAX (APPEAL) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.46,47,454/ - MADE ON ACCOUNT OF UNEXPLAINED EXPENSES. 6. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT OUT OF THIS ADDITION OF RS.46,47,454/ - , THE MAJOR AMOUNT I S REGARDING LORRY HIRE CHARGES PAYABLE OF RS.44,14,929/ - . FOR SUCH HIGH AMOUNT OF UNPAID LORRY HIRE CHARGES, LEARNED CIT(A) HAS ALREADY DIRECTED THE ASSESSING OFFICER TO ADOPT 7.5% OF NET PROFIT RATE AND IN THIS MANNER , HE HAS ALREADY UPHELD ADDITION OF R S.9,33,716/ - . MOREOVER, THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.46,47,454/ - INCLUDES PROVISION FOR INCOME TAX RS.2,18,737/ - AND RS.13,788/ - ON ACCOUNT OF AUDIT FEES PAYABLE. WE FAIL TO UNDERSTAND THAT HOW THE PROVISION FOR INCOME TAX AND AUDIT F EES PAYABLE CAN BE ADDED BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. IN THIS REGARD, IT IS OBSERVED BY LEARNED CIT(A) IN PARA 10.2 OF HIS ORDER THAT THE RECKLESSNESS OF THE ASSESSING OFFICER CAN BE SEEN THAT EVEN HE HAS NOT VERIFIED THE BREAK - UP OF SUNDRY CREDITORS WHICH INCLUDED AUDITORS LIABILITY AND PROVISION FOR INCOME TAX AND HE HAS CONCLUDED THAT THIS SHOWS THAT NO APPLIC ATION OF MIND HAS BEEN MADE BY THE ASSESSING OFFICER AND ADDITION HAS BEEN MADE WITHOUT ANY SUBSTANCE. WE ARE OF THE CONSIDERED OPINION THAT IT IS VERY RIGHTLY OBSERVED BY LEARNED CIT(A) IN THE FACTS OF THE PRESENT CASE THAT THE ACTION OF THE ASSESSING OF FICER IS RECKLESS AND HE HAS NOT APPLIED HIS MIND BEFORE MAKING THIS ADDITION. IN OUR CONSIDERED OPINION, WHEN CIT(A) HAS 8 DIRECTED THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE OF 7.5% AND WE HAVE APPROVED THE SAME, SEPARATE ADDITION MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF UNPAID LIABILITY OF LORRY HIRE CHARGES IS NOT CALLED FOR. THE REMAINING TWO ADDITIONS U/S 68 OF RS.13,788/ - ON ACCOUNT OF AUDIT FEES PAYABLE AND RS.2,18,787/ - ON ACCOUNT OF PROVISION FOR INCOME TAX IS WITHOUT ANY BASIS AND THEREFOR E, ON THIS ENTIRE ISSUE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LEARNED CIT(A). THIS GROUND OF REVENUE IS REJECTED. 8. GROUND NO. 3 OF REVENUES APPEAL IS AS UNDER: 3. THE COMMISSIONER OF INCOME - TAX (APPEAL) HAS ERRED IN LAW AND ON FA CTS OF THE CASE IN DELETING THE ADDITION OF RS.85,700/ - MADE ON ACCOUNT OF DIFFERENCE BETWEEN THE EXPENSES OF SALARY CLAIMED AND ACTUAL PAYMENT MADE. 9. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUP PORTED THE ORDER OF LEARNED CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER BY MAKING AD HOC 20% DISALLOWANCE OUT OF SALARY TO STAFF OF RS.3,81,400/ - . THE SAME WAS DELETED BY LEARNED CIT(A) ON THE BASIS THAT AS HE HAS DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE PROFIT OF THE ASSESSEE BY APPLYING 7.5% NET PROFIT RATE OF GROSS RECEIPTS, AND HENCE, SEPARATE ADDITION OF THIS NATURE IS NOT CALLED FOR. W E FIND NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE AND THEREFORE, THIS GROUND IS ALSO REJECTED. 11. GROUND NO. 4 OF REVENUES APPEAL IS AS UNDER: 4. THE COMMISSIONER OF INCOME - TAX (APPEAL) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING TH E ADDITION OF RS.4,49,913/ - MADE ON ACCOUNT OF CASH PAYMENT ABOVE RS.20.000/ - WHICH WAS IN CONTRAVENTION OF PROVISIONS 9 CONTAINED IN SECTION 40A(3) OF THE INCOME TAX ACT, 1961. 12. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNE D A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT LEARNED CIT(A) HAS REFERRED TO A JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. BANWARI LAL BANSHIDHAR [1 998] 229 ITR 229 (ALL) WHEREIN IT WAS HELD THAT IF THE INCOME OF THE ASSESSEE IS ESTIMATED BY APPLYING NET PROFIT RATE, NO DISALLOWANCE CAN BE MADE WITH REGARD TO LORRY HIRE CHARGES U/S 40A(3) OF THE ACT. RESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE AL LAHABAD HIGH COURT, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 4 IS REJECTED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF ASSESSEE ARE DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN C OURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 /07/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR