ITO, Jaipur V. BHARAT METAL FABRICATORS, Jaipur

ITA 307/JPR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5443 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 30-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Keywords: Rejection of books of accounts; Retrospective amendment

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO.307/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 INCOME TAX OFFICER, WARD 4(2), JAIPUR CUKE VS. M/S BHARAT METAL FABRICATORS, B-202, ROAD NO.9, VKI AREA, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABFB 2990 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO.147/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S BHARAT METAL FABRICATORS, B-202, ROAD NO.9, VKI AREA, JAIPUR CUKE VS. INCOME TAX OFFICER, WARD 4(2), JAIPUR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 29.01.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 18/02/2016 VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE CROSS APPEALS FILED BY THE REVENUE AND T HE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, JAIPUR DATED 23.01.2015 WHEREIN THE RESPECTIVE GROUNDS OF APPEAL ARE AS FOLLOWS: ITA NO. 307/JP/15 & 147/JP/15 ITO, WARD 4(2), JAIPUR VS. BHARAT METAL FABRICATORS . 2 ITA NO. 307/JP/15 (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 13 ,08,650/- MADE BY THE AO BY DISALLOWING 1% OF MATERIAL COST OF RS. 13,08, 64,948/-. (2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OU T OF LABOUR CHARGES UP TO 10% AGAINST 50% (I.E. RS. 5,27,788/- AGAINST RS. 26,38,943/)-. (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 21 ,204/- MADE ON ACCOUNT OF PERSONAL EXPENSES (RESTRICTED TO 10% AS AGAINST 20% OF THE CAR RUNNING AND MAINTENANCE EXPENSES AS WELL AS TELEPHO NE EXPENSES). ITA NO. 147/JP/15 (1) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CO NFIRMING THE ACTION OF AO IN REJECTING THE BOOKS OF ACCOUNT BY APPLYING THE PROVISIONS OF SECTION 145(3). (1.1) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CO NFIRMING THE DISALLOWANCE OF RS.5,27,789/- OUT OF LABOUR CHARGES CLAIMED BY THE ASSESSEE (2) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CO NFIRMING THE DISALLOWANCE OF RS. 62,370/- ON ACCOUNT OF INTEREST PAID ON LOAN TAKEN FROM NBFC BY APPLYING PROVISIONS OF SEC. 40(A)(IA) 2. REGARDING GROUND NO. 1 & 2 OF THE REVENUE, AND G ROUND NO. 1 & 1.1 OF THE ASSESSEE, THE BRIEF FACTS OF THE CASE ARE TH AT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FABRICATION WORK OF BUS BODIES. DURING THE YEAR THE ASSESSEE HAS DECLARED GROSS PROFIT OF RS. 156.12 LA CS ON TURNOVER OF RS. 1773.60 LACS GIVING A G.P. RATE OF 8.80% AS AGAINST G.P. RATE OF 8.61% ON TURNOVER OF RS. 182.78 LACS IN A.Y. 2010-11 AND 8.4 2% ON TURNOVER OF RS. 1321.94 LACS IN A.Y. 2009-10. ITA NO. 307/JP/15 & 147/JP/15 ITO, WARD 4(2), JAIPUR VS. BHARAT METAL FABRICATORS . 3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT LABOUR CHARGES HAVE BEEN PAID IN THE NAME OF 260 SMALL CON TRACTORS. ALL OF THESE WERE PAID BELOW RS. 20,000/- DURING THE YEAR, IN CA SH. HENCE LABOUR CHARGES ARE NOT VERIFIABLE. FURTHER, NO Q-TALLY OR STOCK REGISTER WAS NOT MAINTAINED BY THE ASSESSEE AND THE STOCK WAS TAKEN ON ESTIMATE BASIS BY PARTNERS. THE AO AFTER CONSIDERING THE REPLY OF THE ASSESSEE INVOKED SECTION 145(3) AND REJECTED THE BOOKS OF ACCOUNTS BY HOLDING AS UNDER:- (I) IN THE ABSENCE OF QUANTITATIVE DETAILS IT CANNO T BE ASCERTAINED WHETHER THE GOODS MENTIONED IN THE PURCHASE BILLS W ERE ACTUALLY RECEIVED OR NOT AND THE GOODS NOT CONSUMED ARE TAKE N IN THE CLOSING STOCK OR NOT. CLOSING STOCK IS CONSIDERED AS PER TH E ESTIMATE OF THE PARTNERS. (II) OUT OF THE TOTAL LABOUR CHARGES OF RS.1.07,64, 790/-, TDS HAS BEEN DEDUCTED ON EXPENSES OF RS. 54,86,903/- ONLY. THE BALANCE PAYMENT OF RS. 52,77,887/- ARE IN CASH ON THE BASIS OF THE SELF MADE VOUCHERS AND THEREFORE GENUINENESS OF SUCH EXPENSES REMAINED TO BE PROVED. (III) IN THE FABRICATION/MANUFACTURING PROCESS OF B US BODIES RAW MATERIAL LIKE IRON SHEET, ANGLES, ALUMINIUM CHANNELS, SECTIO NS ARE CUT, FOLDED, WELDED AND PRESSED AS PER THE DESIGN. IN THIS PROC ESS, SCRAP OF 5% TO 8% ARE GENERATED. THE ASSESSEE HAS SHOWN SOME SCRAP SALE BUT QUANTITY OF SCRAP PRODUCED, SOLD OR LYING IN STOCK IS NOT KNOWN AS RELEVANT DETAILS HAVE NOT BEEN MAINTAINED BY THE AS SESSEE. (IV) THE RESULTS OF THE PRECEDING YEARS ARE NOT SUB JECTED TO VERIFICATION AND THEREFORE NOT MUCH WEIGHTAGE CAN BE GIVEN TO TH OSE RESULTS. IN VIEW OF ABOVE, AO DISALLOWED 1% OF THE MATERIAL EXPENSES OF RS 13,08,650 AND 50% OF THE LABOUR CHARGES OF RS 26,38,943. 2.1 THE LD. CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNTS. HOWEVER, CONSIDERING THAT G.P. IS PROGRESSIVE AND BETTER THA N IN THE PRECEDING YEAR, THE DISALLOWANCE OF MATERIAL COST WAS DELETED. FURTHER , CONSIDERING THAT LABOUR EXPENSES IS NOT FULLY VERIFIABLE BUT AT THE SAME TI ME, RATIO OF LABOUR EXPENSES TO ITA NO. 307/JP/15 & 147/JP/15 ITO, WARD 4(2), JAIPUR VS. BHARAT METAL FABRICATORS . 4 TURNOVER HAS DECREASED AS COMPARE TO THE PREVIOUS YEAR, HE RESTRICTED THE DISALLOWANCE OUT OF LABOUR EXPENSES TO 10%. 2.2 THE LD. AR VIDE HIS WRITTEN SUBMISSION STATED T HAT THE ASSESSEE HAS MAINTAINED DAY TO DAY BOOKS OF ACCOUNTS. THE SAME IS SUBJECT TO AUDIT. THERE IS NO QUALIFICATION BY THE AUDITOR ON THE ACCOUNTS OF THE ASSESSEE. THE AO HAS ALSO NOT POINTED OUT ANY INSTANCE OF PURCHASE OR FABRICA TION CHARGES OR EXPENSE WHICH IS NOT VERIFIABLE, HE ONLY MADE GENERAL OBSERVATIO NS IN REJECTING THE BOOKS OF ACCOUNTS WITHOUT CONSIDERING THE FACT THAT ASSESSEE IS NOT ENGAGED IN TRADING OR MANUFACTURING ACTIVITY BUT IS ENGAGED IN THE FABRIC ATION WORK WHERE NUMBER OF ITEMS HAVING VARIED SIZE AND TYPES ARE USED FOR WHI CH MAINTENANCE OF THE STOCK REGISTER IS NOT FEASIBLE. ALL PURCHASE, FABRICATIO N CHARGES RECEIVED AND THE VARIOUS EXPENDITURE INCURRED ARE FULLY VERIFIABLE WITH SUPP ORTING BILLS/VOUCHERS OR DOCUMENTS. THE BOOKS CANT BE REJECTED ONLY ON THE GROUND THAT DAY TO DAY STOCK REGISTER IS NOT MAINTAINED OR THAT PAYMENT ARE MADE IN CASH. NO SPECIFIC DEFECT IS FOUND IN THE BOOKS OF ACCOUNTS BY THE LOWER AUTHORI TIES. IN THESE CIRCUMSTANCES, THE REJECTION OF THE BOOKS OF ACCOUNTS IS UNJUSTIFIED . RELIANCE IN THIS CONNECTION IS PLACED ON THE FOLLOWING CASES:- MALANI RAMJIVAN JAGANNATH VS. ACIT 316 ITR 120 (RAJ) . ASHOKE REFRACTORIES P. LTD. VS. CIT 279ITR 457(CAL) CIT VS. JACKONS HOUSE 98 TAXMAN 385 (DELHI) CIT VS. JAS JACK ELEGANCE EXPORT 324 ITR 95/233 CTR 398 (DEL)(2010) CIT VS. SMT. POONAM RANI 326 ITR 223 (DEL) (2010) CIT VS. IM OVERSES 315 ITR 185 (PUNJ & HAR) REGARDING DISALLOWANCE OF 1% OF THE MATERIAL COST, IT WAS SUBMITTED THAT THE PURCHASE OF THE MATERIAL IS FULLY SUPPORTED BY THE PURCHASE BILLS. AO HAS NOT SPECIFIED ANY SPECIFIC PURCHASES WHICH IS NOT VERIF IABLE. HENCE ADHOC DISALLOWANCE OF 1% OF THE MATERIAL COST IS UNJUSTIFIED AND RIGHT LY DELETED BY THE LD. CIT(A) CONSIDERING THAT MATERIAL CONSUMPTION AS PERCENTAGE OF FABRICATION CHARGES/SALES HAS DECLINED FROM 76.60% TO 71.15%, THE ASSESSEE HA S DECLARED SALE OF SCRAP FOR THE YEAR AT RS. 10,41,665/- AS AGAINST RS. 1,78,89 0 DECLARED IN THE LAST YEAR AND THERE IS NO BASIS WITH AO TO PRESUME THAT 5% TO 8% OF THE MATERIAL IS GENERATED BY WAY OF SCRAP. THEREFORE, THE FINDINGS OF CIT(A) ON THIS ISSUE MAY BE UPHELD BY DISMISSING THE GROUND OF THE DEPARTMENT. ITA NO. 307/JP/15 & 147/JP/15 ITO, WARD 4(2), JAIPUR VS. BHARAT METAL FABRICATORS . 5 REGARDING DISALLOWANCE OF 50% OF THE LABOUR CHARGE S OF RS. 52,77,887/- WHICH IS PAID IN CASH ON THE BASIS OF SELF MADE VOUCHERS, I T WAS SUBMITTED BY THE LD AR THAT ONLY BECAUSE PAYMENTS ARE MADE ON THE BASIS OF SELF MADE VOUCHERS CANNOT BE A REASON FOR MAKING ADHOC DISALLOWANCE OUT OF THE LAB OUR EXPENSES. EVEN IN A.Y. 2006-07 WHERE THE ASSESSMENT WAS COMPLETED U/S 143( 3) BUT TRADING ADDITION WAS MADE BY APPLYING THE G.P. RATE OF 15% AS AGAINST 7. 54% DECLARED BY THE ASSESSEE BY OBSERVING THAT THE LABOUR PAYMENTS ARE MADE IN C ASH, THE CIT(A) DELETED THE ENTIRE ADDITION AS G.P. RATE DECLARED WAS BETTER AN D THE HONBLE ITAT VIDE ITS ORDER DATED 21.08.2009 UPHELD THE FINDING OF THE CIT(A). IN THE YEAR UNDER CONSIDERATION, THE LABOUR COST AS PERCENTAGE OF FAB RICATION CHARGES/SALES IS 6.06% AS COMPARED TO 11.18% IN THE PRECEDING YEAR. THUS THEN THE OVERALL LABOUR COST HAS DECLINED AS COMPARED TO EARLIER YEARS AND THE G .P. RATE IS ALSO BETTER AS PER THE TABLE GIVEN BELOW, THERE IS NO REASONABLE BASIS WIT H CIT(A) TO CONFIRM 10% OF THE EXPENDITURE ON LABOUR INCURRED IN CASH. PARTICULARS A.Y. 2011-12 A.Y. 2010-11 SALES 1773,60,980 182,78,664 GROSS PROFIT 1,56,12,358 15,74,354 GROSS PROFIT RATE 8.80% 8.61% MATERIAL CONSUMED BY ADJUSTING FINISHED STOCK 12,61,98,400 1,40,01,061 LABOUR COST 10764790 2044740 MATERIAL CONSUMED AS % OF SALES 71.15% 76.60% LABOUR COST AS % OF SALES 6.06% 11.18% IT IS A SETTLED LAW THAT, NO TRADING ADDITION OR FO R THAT MATTER DISALLOWANCE OUT OF TRADING EXPENSES SHOULD BE MADE IF THE RESULT DECLA RED IS BETTER AS COMPARED TO THE RESULT DECLARED IN EARLIER YEAR. RELIANCE IN TH IS CONNECTION IS PLACED ON THE FOLLOWING CASES:- CIT VS. VAIBHAV GEMS LTD. (2014) 112 DTR 84 (RAJ) ( HC) CIT VS. GUPTA K.N. CONSTRUCTION COM. (2015)116 DTR 377 (RAJ)(HC) CIT VS. INANI MARBLES PVT. LTD. 316 ITR 125 (RAJ.)(H C) KANSARA BERINGS P. LTD. VS. ACIT 270 ITR 235 (RAJ.) ITO VS. HITESH KUMAR PANCHORI 113 TTJ 357 (JOD.) ADDL. CIT VS. LAKHANI SHOES LIMITED 34 TAX WORLD 32 (JP) ITA NO. 307/JP/15 & 147/JP/15 ITO, WARD 4(2), JAIPUR VS. BHARAT METAL FABRICATORS . 6 2.3 WE HAVE GONE THROUGH THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. DURING THE YEAR UNDER CONSIDE RATION, THE APPELLANT HAS REPORTED A TURNOVER OF RS 1773.60 LACS AND DISCLOSE D GROSS PROFIT OF RS 156.12 LACS. THE MATERIAL COST HAS BEEN SHOWN AT RS 1308.64 LACS AND MATERIAL CONSUMPTION HAS BEEN SHOWN AT RS 1261.98 LACS. FURTHER, LABOUR COST HAS BEEN SHOWN AT 107.64 LACS. IN THIS BACKGROUND, THE AO HAS REJECTE D THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT AND HAS DISALLOWED 1% OF MATERIAL COST AND 50% OF LABOUR COST. THE FIRST QUESTION THAT ARISES FOR CO NSIDERATION IS THAT IF THE AO WAS SO CONVINCED THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT WERE NOT CORRECT AND NOT RELIABLE TO SHOW THE TRUE AND CORRE CT AFFAIRS OF THE BUSINESS UNDERTAKEN BY THE APPELLANT, WHAT IS THE BASIS FOR ESTIMATING 1% OF MATERIAL COST AND 50% OF LABOUR COST. AS PER AO, NO Q-TALLY OR ST OCK REGISTER WAS MAINTAINED BY THE ASSESSEE AND IN THE ABSENCE OF QUANTITATIVE DET AILS, IT CANNOT BE ASCERTAINED WHETHER THE GOODS MENTIONED IN THE PURCHASE BILLS W ERE ACTUALLY RECEIVED OR NOT AND THE GOODS NOT CONSUMED ARE TAKEN IN THE CLOSING STOCK OR NOT. CLOSING STOCK IS CONSIDERED AS PER THE ESTIMATE OF THE PARTNERS. GIV EN THIS REASONING, THE AO HAS DISALLOWED ONLY 1% OF THE MATERIAL COST EFFECTIVELY CONVINCED THAT 99% OF THE MATERIAL COST IS GENUINE AND REASONABLE. SIMILARLY, 50% OF LABOUR COST HAS BEEN DISALLOWED. THE AO OBSERVED THAT OUT OF THE TOTAL LABOUR CHARGES OF RS.1.07,64,790/-, TDS HAS BEEN DEDUCTED ON EXPENSES OF RS. 54,86,903/- ONLY AND THE BALANCE PAYMENT OF RS. 52,77,887/- ARE PAID IN CASH ON THE BASIS OF THE SELF MADE VOUCHERS AND THEREFORE GENUINENESS OF SUCH EXP ENSES REMAINED TO BE PROVED. HE ACCORDINGLY DISALLOWED 50% OF RS 52,77,8 87. THE QUESTION IS WHERE THE WHOLE OF THE EXPENSES OF RS. 52,77,887/- WERE N OT VERIFIABLE, WHAT IS THE BASIS FOR 50% DISALLOWANCE. THIS SHOWS CLEARLY THE ARBIT RARINESS AND LACK OF RATIONAL AND LOGICAL APPROACH AND THINKING ON PART OF AO. IN TH E EYE OF LAW, THERE IS NO BASIS FOR SUCH ARBITRARINESS AND ADHOC DISALLOWANCES. ON THIS ACCOUNT ITSELF, THE WHOLE OF THE MATERIAL AND LABOUR ADDITIONS COULD BE DELET ED. HAVING SAID THAT, LETS LOOK AT THE OBSERVATIONS AND FINDING OF THE LD CIT(A). T HE LD CIT(A) HAS LOOKED AT THE MATTER FROM A MACRO PERSPECTIVE AND MENTIONED THAT G.P IS PROGRESSIVE AND BETTER THAN LAST YEARS. THE DISALLOWANCE OF 1% OF MATERIAL EXPENSES HAS BEEN HELD BY HIM TO BE WITHOUT ANY CONCRETE BASIS. AS F AR AS DISALLOWANCE OF LABOUR EXPENSES, THE LD CIT(A) HAS LOOKED AT THE LABOUR CO ST AS A PERCENTAGE OF TURNOVER WHICH HAS DECLINED FROM 11.18% TO 6.06% DURING THE YEAR UNDER CONSIDERATION AND HAS RESTRICTED THE DISALLOWANCE TO 10% OF LABOU R COST. IN OUR VIEW, ONCE THE G.P HAS BEEN ACCEPTED AS PROGRESSIVE AND NOT DISPUT ED BY THE REVENUE OR BY THE ITA NO. 307/JP/15 & 147/JP/15 ITO, WARD 4(2), JAIPUR VS. BHARAT METAL FABRICATORS . 7 LD CIT(A) AND THE FACT THAT THE LABOUR COST HAS DEC REASED AS A PERCENTAGE OF SALES, THUS SHOWING EFFICIENCY AND PRODUCTIVITY, ADHOC DIS ALLOWANCE OF LABOUR COST CANNOT BE SUSTAINED. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE C ASE, THE DISALLOWANCE OF LABOUR AND MATERIAL COST IS HEREBY DELETED. HAVING SAID T HAT, THE GROUND RELATING TO REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) BECOMES AC ADEMIC AND HENCE, THE SAME IS NOT BEING ADJUDICATED UPON. THE GROUNDS OF REVEN UE AND ASSESSEE ARE DISPOSED OFF ACCORDINGLY. 3. REGARDING GROUND NO.3 OF THE REVENUES APPEAL, T HE AO OBSERVED THAT THE ASSESSEE HAS DEBITED RS. 1,02,500/- ON ACCOUNT OF C AR RUNNING AND MAINTENANCE AND RS. 1,09,539/- ON ACCOUNT OF TELEPHONE EXPENSES . THE AO OBSERVED THAT NO LOG BOOK IN RESPECT OF CAR AND NO CALL REGISTER IN RESPECT OF TELEPHONE HAD BEEN MAINTAINED. AS SUCH THE USE OF CAR AND TELEPHONE E XCLUSIVELY FOR BUSINESS PURPOSES COULD NOT BE ASCERTAINED. CONSIDERING THE NATURE OF THESE EXPENSES, PERSONAL USE OF SAME COULD NOT BE RULED OUT OR DENI ED. ACCORDINGLY HE DISALLOWED 20% OUT OF THE ABOVE EXPENSES I.E. RS. 42,408/- (20 % OF RS. 1,02,500/- + RS. 1,09,539/-. THE CIT(A) CONSIDERING THE RATIO OF TH ESE EXPENSES TO THE TURNOVER AND THE FACT THAT PERSONAL USE CANNOT BE RULED OUT, RES TRICTED THE DISALLOWANCE TO 10% ON ACCOUNT OF PERSONAL USE. 3.1 THE LD AR SUBMITTED THAT CAR IS USED BY THE ASS ESSEE AS WELL AS STAFF EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. EXPENS ES ARE REASONABLE CONSIDERING THE TURNOVER OF THE ASSESSEE. MAINTENANCE OF LOG BO OK IS NOT PRACTICALLY POSSIBLE. SIMILARLY THE TELEPHONE EXPENSES COMPRISES OF EXPEN SES ON TELEPHONE AT OFFICE, REIMBURSEMENT OF TELEPHONE EXPENSES TO THE STAFF AN D EXPENSES ON THE MOBILES PHONES USED BY THE ASSESSEE EXCLUSIVELY FOR THE PUR POSE OF THE BUSINESS. THE EXPENSES ARE REASONABLE CONSIDERING THE TURNOVER OF THE ASSESSEE. MAINTENANCE OF CALL REGISTER AND LOG BOOK IS PRACTICALLY NOT PO SSIBLE. CONSIDERING THESE FACT, THE CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO 1 0% OF THE EXPENSES. 3.2 WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS, THE ORDER OF THE LD CIT(A). CONSIDERING THE EXPLANATION OF THE ASSESSEE THAT MA INTENANCE OF CALL REGISTER AND LOG BOOK IS PRACTICALLY NOT POSSIBLE WHICH WE FIND REASONABLE, WE DONT BELIEVE THAT THERE IS A NEED FOR US TO INTERFERE WITH THE ORDER OF THE LD CIT(A). HENCE, GROUND NO. 3 OF THE REVENUE IS DISMISSED. ITA NO. 307/JP/15 & 147/JP/15 ITO, WARD 4(2), JAIPUR VS. BHARAT METAL FABRICATORS . 8 4. REGARDING GROUND NO.2 OF THE ASSESSEES APPEAL, IT IS NOTED THAT THE ASSESSEE HAD INCURRED INTEREST EXPENSES ON LOANS TA KEN FROM VARIOUS NON BANKING FINANCE COMPANIES NAMELY, RELIANCE CAPITAL LTD, GE COUNTRYWIDE CUSTOMER FINANCE LTD, AND INDIABULLS FINANCIAL SERVICES TOTA LING TO RS. 62,370/- . THE AO OBSERVED THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON THE SAME AND THEREFORE, HE DISALLOWED RS.62,370/- U/S 40(A)(IA) OF THE ACT. TH E LD CIT(A) CONFIRMED THE DISALLOWANCE BY DISTINGUISHING THE DECISION OF ALL AHABAD HIGH COURT IN CASE OF VECTOR SHIPPING SERVICES PVT. LTD. 4.1 DURING THE COURSE OF HEARING, THE LD. AR SUBMI TTED THAT THE ASSESSEE HAS PAID THE WHOLE OF THE INTEREST DURING THE RELEVANT FINANCIAL YEAR AND THERE WAS NO AMOUNT WHICH WAS OUTSTANDING AT THE YEAR END. THE LD. AR FURTHER SUBMITTED THAT GIVEN THAT THERE IS NO AMOUNT OUTSTANDING AT THE YE AR END, PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE. IN SUPPOR T, THE LD. AR RELIED UPON THE DECISION OF SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORT VS. ACIT 16 ITR (TRIB.)1 AND ALSO MENTIONED THAT THE JAIPUR BE NCH OF THE ITAT HAS CONSISTENTLY TAKEN THE VIEW IN THE PAST THAT WHER E THE AMOUNT IS PAID DURING THE YEAR, THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT A PPLICABLE. REFERENCE WAS DRAWN TO THE DECISION OF GIRDHARILAL BARGOTI ITA NO.757/ JP/12 A.Y.2009-10 ORDER DATED 10.04.2015 AND AMIT KAUSHIK VS. ITO, ITA NO.45/JP/ 2014 A.Y. 2009-10 ORDER DATED 06.11.2015. IT IS FURTHER SUBMITTED THAT AL L THREE NBFCS TO WHICH THE ASSESSEE HAS PAID INTEREST ARE LARGE COMPANIES AND ASSESSED TO TAX AND THEREFORE PRESUMPTION CAN BE DRAWN THAT THESE COMPANIES HAVE INCLUDED INTEREST RECEIVED IN THEIR RESPECTIVE INCOME, TAX RETURN AND PAID TAX THEREON. IN LIGHT OF SETTLED LAW THAT SECOND PROVISO TO SECTION 40(A)(IA) INSERT ED W.E.F. 01.04.2013 HAS RETROSPECTIVE EFFECT AS HELD IN DELHI HIGH COURTS DECISION IN CASE OF CIT V. ANSAL LAND MARK TOWNSHIP PT. LTD. (2015)124 DTR 185, THE BENEFIT OF SECOND PROVISO TO SECTION 40(A)(IA) SHOULD BE ALLOWED TO THE ASSESSEE . 4.2 THE LD. DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE CASE OF AMIT KAUSHIK VS. ITO (SUPR A), WE HAVE ALREADY TAKEN A VIEW THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLIC ABLE WHERE THE AMOUNT HAS BEEN DULY PAID DURING THE YEAR AND NO AMOUNT IS OUTSTAND ING AT THE YEAR END. THE RELEVANT OBSERVATIONS ARE REPRODUCED AS UNDER:- WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. ON SPECIFIC QUERY FROM THE BENCH, IT WAS ITA NO. 307/JP/15 & 147/JP/15 ITO, WARD 4(2), JAIPUR VS. BHARAT METAL FABRICATORS . 9 INFORMED THAT THERE IS NO DECISION OF THE HONBLE R AJASTHAN HIGH COURT ON THE SUBJECT MATTER. FURTHER, IT IS NOTED THAT THE DIFFE RENT HONBLE HIGH COURTS HAVE TAKEN DIFFERENT VIEW IN THE MATTER AND THE COORDINA TE BENCH IN THE CASE OF ACIT VS. GIRDHRILAL BARGOTI (SUPRA) HAS FOLLOWED THE V IEW FAVOURABLE TO THE ASSESSEE. THEREFORE BY RESPECTFULLY FOLLOWING COORDINATE BEN CH DECISION IN THE CASE OF ACIT VS. GIRDHARILAL BARGOTI (SUPRA) WE ARE OF THE VIEW THAT THE DISALLOWANCE OF COMMISSION AND RENT U/S 40(A)(IA) OF THE ACT DOES N OT STAND AS THE SAME HAS BEEN DULY PAID DURING THE YEAR AND IT IS NOT OUTSTANDIN G AT THE YEAR END. THEREFORE, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. FOLLOWING OUR EARLIER DECISION IN CASE OF AMIT KAUS HIK VS. ITO, THE DISALLOWANCE OF INTEREST EXPENSES OF RS. 62,370/- U/S 40(A)(IA) PAI D TO THE NBFC COMPANIES ARE DELETED. HENCE THE GROUND NO. 2 TAKEN BY THE ASSESS EE IS ALLOWED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 /02/2016 SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) VIKRAM S INGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 18 / 02 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- ITO. WARD 4(2), JAIPUR 2. THE RESPONDENT- M/S BHARAT METAL FABRICATORS, JAIPUR 3. THE CIT(A)-II, JAIPUR 4. THE CIT-II, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO 307/JP/15 & 147/JP/15) VKNS'KKUQL BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 307/JP/15 & 147/JP/15 ITO, WARD 4(2), JAIPUR VS. BHARAT METAL FABRICATORS . 10 SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 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 ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER - 9 DATE OF DISPATCH OF THE ORDER