ITO, Ward - 12(1), Kolkata, Kolkata V. M/s. Exult Logistics Pvt. Ltd., Kolkata

ITA 308/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75112 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2012
• Court: TRIBUNAL
• Department Lawyers: SADHAN BHATTACHARYA ACIT
• Assessee Lawyers: ARVIND AGARWAL
• Keywords: Depreciation; Fair market value
• Section: 143(3); 115JB

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' ' ' ' / I.T.A NO.308/KOL/2012 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICR, WD-12(1), KOLKATA VS. M/S. EXUL T LOGISTICS PVT. LTD. (PAN: AABCE4967C) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 31.03.2014 DATE OF PRONOUNCEMENT: 31.03.2014 FOR THE APPELLANT: SHRI SADHAN BHATTACHARYA, ACIT, SR. DR FOR THE RESPONDENT : SHRI ARVIND AGARWAL, ADVOCA TE / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XIX, KOLKATA IN APPEAL NO. 67/CIT(A)-XIX/ITO,WD.12(1)/KOL/11-12 DATED 28.11.20 11. ASSESSMENT WAS FRAMED BY ITO, WARD-12(1), KOLKATA U/S. 143(3) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DA TED 31.12.2009. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN ALLOWING LOSS IN RELATION TO LEASE RENTALS. FOR THIS, REVENUE HA S RAISED FOLLOWING GROUND NO.1: 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) IS CORRECT IN ALLOWING COLOURABLE AND EXCESSIVE LOSS OF RS.71, 62,609/- IN RELATION TO LOWER CLAIM OF LEASE RENT FORM A RELATED CONCERN. 3. BRIEFLY STATED FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHILE EXAMINING P&L ACCOUNT OF THE ASSESSEE, THE AO NOTED THAT THE ASSESSEE HAS EARNED INCOME FROM HANDLING AND CRANE CHARGES AT RS.1 CR. BUT ALS O CLAIMED LOSS ON ACCOUNT OF LEASE RENT RECEIVED ON HIRING OF VEHICLES AFTER ADJUSTMENT OF DEPRECIATION. THE AO NOTED LOSS CLAIMED AS UNDER: TOTAL RECEIPT ON ACCOUNT OF LEASE RENTAL FROM R S.88,29,409/- M/S. IDEAL MOVERS PVT. LIMITED : EXPENSES CLAIMED ON ACCOUNT OF DEPRECIATION (AS PER I.T.ACT,1961): RS.1,53,3 1,406/- INTEREST PAYMENT TO IDEAL MOVERS PVT. LTD. RS. 7 ,10,988/- RS.1,60,42,394/- LOSS INCURRED : RS. 71,62,609/- 2 ITA NO. 308/K/2012 M/S. EXULT LOGISTICS PVT. LTD, AY 2007-08 AO APPLIED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MC. DOWELL & CO. VS. CTO (1985) 154 ITR 148(SC) AND FINALLY, AO NOTED THAT WITH THIS VIEW OF THE MATTER, IT IS HELD THAT THE LOSS CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE HAS ACTUALLY BEEN AN ARRANGED LOSS CONSCIO USLY DESIGNED TO REDUCE THE TAXABLE PROFITS OF THE ASSESSEE TO THAT EXTENT AND BY SUCH ACTION THE ASSESSEE HAS TRIES TO DEPRIVE THE REVENUE OF TAXES WHICH WERE LEGITIMATELY DUE ON ITS TOTAL INCOME. THUS, TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE IN ENTIRETY, IT IS HELD THAT THE LOSS CLAIMED BY THE ASSESSEE HAS RESULTED OUT OF CONSCIO US AND DESIGNED MOVE BY THE ASSESSEE OF CHARGING LEASE RENTAL FROM IDEAL MOVERS AT A LOW ER RATE SO THAT IT GETS AWAY WITH PAYMENT OF PALTRY AMOUNT OF TAX ON ITS INCOME. WIT H THIS VIEW OF THE MATTER, THE LOSS OF RS.71,62,609/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IT IS FURTHER HELD THAT BY CLAIMING THE AFOREMENTIONED LOSS THE A SSESSEE FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND FOR THIS PENALTY PROC EEDINGS UNDER SECTION 271(1)(C) IS INITIATED. THE AO WITHOUT PREJUDICE TO THE CLAIM OF DISALLOWAN CE OF LOSS ALSO HELD THAT THE EXPENDITURE BY WAY OF INTEREST AND DEPRECIATION IS EXCESSIVE AND U NREASONABLE IN VIEW OF THE PROVISIONS OF SECTION 40(A)(2) OF THE ACT. FOR THIS, AO OBSERVED AS UNDER: WITHOUT PREJUDICE TO THE ABOVE, THE PROVISIONS OF S ECTION 40(A)(2)(A) HAVE ALSO MADE IT CLEAR THAT WHERE IN THE OPINION OF THE ASSESSING OF FICER, IT IS FOUND THAT ANY EXPENDITURE (HERE BY WAY OF INTEREST AND DEPRECIATION) IS EXCES SIVE OR UNREASONABLE HAVING REGARD TO THE INCOME IN RELATION TO WHICH SUCH EXPENSES ARE M ADE, THE SAME SHOULD BE DISALLOWED. THIS CASE ALSO FALLS SQUARELY IN THE AMBIT OF THE A FORESAID PROVISIONS INASMUCH AS THE EXPENDITURE CLAIMED IS ALMOST DOUBLE THE AMOUNT OF INCOME RECEIVED, WHICH IS DIRECTLY ATTRIBUTABLE TO SUCH INCOME. HENCE, IN ACCORDANCE WITH THE AFORESAID PROVISIONS TOO THE LOSS ARISING OUT OF SUCH EXCESSIVE EXPENDITURE SHO ULD BE DISALLOWED. AGGRIEVED ON BOTH COUNTS, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 4. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER DELETED THE DISALLOWANCE ELABORATELY DISCUSSING THE ISSUE AS UNDER: I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE BALANCE SHEET AND PROFIT & LOSS A/C OF THE APPELLANT COMPANY FOR THE YEAR ENDED ON 31/3/2007. ON PERUSA L OF PROFIT & LOSS A/C FOR THE YEAR UNDER CONSIDERATION, IT IS OBSERVED THAT THE APPELL ANT COMPANY HAS CREDITED A SUM OF RS.88,29,209/- ON ACCOUNT OF LEASE RENT UNDER THE H EAD OTHER INCOME. BESIDES THE LEASE RENT, THE APPELLANT COMPANY HAD ALSO EARNED I NCOME ON ACCOUNT OF HANDLING AND CRANE CHARGES AS WELL AS DEMURRAGE INCOME. ALL THES E INCOMES WERE CREDITED TO THE PROFIT & LOSS A/C. IT IS FURTHER OBSERVED THAT IN T HE IMMEDIATELY PRECEDING YEAR, THE APPELLANT-COMPANY HAD EARNED LEASE RENT OF RS.9,50, 000/-. IN ADDITION TO OTHER DIRECT EXPENSES, ADMINISTRATIVE EXPENSES AND INTEREST EXPE NSES, THE APPELLANT COMPANY HAD DEBITED SUM OF RS.61,40,714/- ON ACCOUNT OF DEPRECI ATION AND THE PROFIT AS PER PROFIT & LOSS A/C WAS DECLARED AT RS. 1,09,52,800/-. ON PERU SAL OF SCHEDULE OF FIXED ASSETS T IS OBSERVED THAT AS ON 1/4/2006, THE APPELLANT COMPANY WAS HAVING MOTOR LORRIES WHOSE WDV WAS RS.56 LAKH AND DURING THE YEAR UNDER CONSID ERATION THERE WAS ADDITION OF RS.6.93 CRORES. AS PER THE COMPANIES ACT, THE APPEL LANT COMPANY HAS CLAIMED DEPRECIATION IN THE BOOKS ON MOTOR LORRIES AT RS.61 ,24,876/-. HOWEVER, IN THE COMPUTATION OF INCOME THE APPELLANT HAD CLAIMED THE DEPRECIATION AS PROVIDED UNDER 3 ITA NO. 308/K/2012 M/S. EXULT LOGISTICS PVT. LTD, AY 2007-08 THE INCOME TAX ACT @ 30%. SINCE, THE APPELLANT HAD CLAIMED DEPRECIATION AS PROVIDED UNDER THE LAW, IT RESULTED INTO LOSS IN COMPARISON TO LEASE RENT RECEIVED BY THE APPELLANT. ON PERUSAL OF ASSESSMENT ORDER, IT IS OBSERVED THAT THE AO HAS TREATED THE LEASE RENT TRANSACTION AS SHAM TRANSACTION ONLY FOR THE REASON THAT THE APPELLANT COMPANY HAD INCURRED LOSS DUE TO CLAIM OF DEPRECIATION AS PROVI DED UNDER THE LAW. ACCORDING TO THE AO, THE APPELLANT COMPANY HAD PAID INTEREST OF RS.7 ,10,988/- TO M/S. IDEAL MOVERS PVT. LTD. AND HAS ALSO CLAIMED DEPRECIATION OF RS.1,53,3 1,406/- ON MOTOR LORRIES AND AS AGAINST, IT HAS EARNED LEASE RENT OF RS.88,29,409/- THEREBY INCURRING A LOSS OF RS.71,62,609/- ON THE SAID TRANSACTIONS. THE AO WAS OF THE OPINION THAT THE APPELLANT COMPANY HAS ENTERED INTO THE SAID ARRANGEMENT WITH A RELATED PARTY ONLY TO ENSURE THAT IT DOES NOT HAVE TO PAY TAX ON ITS INCOME WHICH IS CHARGEABLE TO TAX UNDER THIS ACT AND IT IS A CLEAR CASE OF SIPHONING OF INCOME BY WAY OF VA RIOUS EXPENSES INCLUDING DEPRECIATION WHICH IS RELATED TO INCOME FROM RELATE D PARTY. THE AO WAS ALSO OF THE OPINION THAT IT DEFIES ALL SENSE OF BUSINESS PRUDEN CE THAT AN ASSESSEE WOULD PURCHASE MOTOR LORRIES TO GIVE THEM ON HIRE FOR AN INCOME OR RECEIPT WHICH IS ALMOST HALF OF THE AMOUNT OF DEPRECIATION AND OTHER EXPENSES RELATED T O SUCH VEHICLES. BY MAKING SEVERAL OBSERVATIONS, THE AO APPLIED PRINCIPLES LAID DOWN B Y THE HONBLE SUPREME COURT IN THE CASE OF MCDOWELL & CO. LTD. AND IT IS HELD BY HIM T HAT APPELLANT COMPANY HAS RESORTED TO A COLOURABLE DEVICE OF GIVING MOTOR LORRIES ON L EASE TO M/S. IDEAL MOVERS PVT. LTD. TO REDUCE ITS TAXABLE INCOME BY CHARGING DEPRECIATION AND INTEREST ETC. UNDER THE CIRCUMSTANCES, HE DISALLOWED THE SUM OF RS 71,62,60 9/- WHICH WAS ARRIVED BY HIM BY DEDUCTING PAYMENT OF INTEREST TO M/S IDEAL MOVERS P VT. LTD. AS WELL AS THE DEPRECIATION ON MOTOR LORRIES FROM THE AMOUNT OF LEASE RENTAL RE CEIVED BY THE APPELLANT COMPANY. ON CAREFUL CONSIDERATION OF THE FACTS AND IN LAW, I AM NOT INCLINED TO AGREE WITH THE VIEW TAKEN BY THE AO THAT THE LEASE TRANSACTION ENTERED INTO THE APPELLANT COMPANY WITH M/S. IDEAL MOVERS PVT. LTD. WAS A SHAM TRANSACTION OR A COLOURABLE DEVICE UNDERTAKEN TO REDUCE THE TAX LIABILITY. IT IS NOT KNOWN AS TO HOW THE AO HAS ARRIVED ON CONCLUSION THAT IT IS A CASE OF SIPHONING OF INCOME BY WAY OF VARIO US EXPENSES INCLUDING DEPRECIATION. HOW INCOME CAN BE SIPHONED BY WAY OF EXPENSES? THE APPELLANT COMPANY HAD ENTERED INTO LEASE TRANSACTIONS WITH M/S. IDEAL MOVERS PVT. LTD. BY HIRING ABOUT 30 MOTOR LORRIES TO THEM. SOME OF THE LORRIES GIVEN ON LEASE IN THE PRECEDING YEAR. THE BUSINESS UNDERTAKEN BY THE APPELLANT COMPANY IS NOT AN ILLEG AL BUSINESS WHICH SHOULD HAVE NOT BEEN CARRIED ON BY THE APPELLANT COMPANY. AS PER TH E BALANCE SHEET OF THE APPELLANT, IT IS OBSERVED THAT MOTOR LORRIES ARE MOSTLY FINANCED BY THE BANK AND AS A RESULT, THERE IS SUBSTANTIAL INCREASE IN THE SECURED LOANS IN THE YE AR UNDER CONSIDERATION. THE AO HAS NOT DOUBTED THE EXPENSES OF MOTOR LORRIES AND HE HA S ALSO NOT DOUBTED THAT THE LEASE RENT RECEIVED BY THE APPELLANT COMPANY WAS LESS THAN THE FAIR MARKET VALUE. HE HAS NOT DOUBTED THE EXISTENCE OF ASSETS AND THAT THE MOTOR LORRIES LEASED BY THE APPELLANT TO M/S. IDEAL MOVERS PVT. LTD. WERE UTILIZED FOR THE PURPOS E OF BUSINESS. THE AO HAS NOT BROUGHT ANY ADVERSE MATERIAL ON RECORD WHICH MAY SAY THAT T HE TRANSACTION ENTERED INTO BY THE APPELLANT COMPANY WAS A SHAM TRANSACTION OR IT WAS UNDERTAKEN WITH CONSCIOUS DECISION OF AVOIDING PAYMENT OF TAX. MERELY FOR THE REASON THAT THE APPELLANT COMPANY HAS CLAIMED THE DEPRECIATION ON MOTOR LORRIES AS PR OVIDED UNDER THE LAW AND THE AMOUNT OF DEPRECIATION WAS MORE THAN THE LEASE RENT RECEIV ED IN THE YEAR UNDER APPEAL, IT DOES NOT MEAN THAT THE TRANSACTION OF LEASE CARRIED ON B Y THE APPELLANT WAS A SHAM TRANSACTION OR A COLOURABLE DEVICE. IF THE MOTOR LO RRIES PURCHASED BY THE APPELLANT COMPANY, WITHOUT GIVING THEM ON LEASE, WOULD HAVE B EEN UTILIZED BY THE COMPANY ITSELF TO RUN THEM ON HIRE, IN THAT CASE ALSO, THE AMOUNT OF DEPRECIATION CLAIMED BY THE APPELLANT, HAVE BEEN SAME AND IT WAS NOT NECESSARY THAT ON PLYING THE MOTOR LORRIES BY THE APPELLANT ITSELF, WOULD HAVE FETCHED MORE RECEI PTS THAN THE LEASE RENT RECEIVED BY THE COMPANY FROM M/S. IDEAL MOVERS PVT. LTD. TO TREAT A TRANSACTION AS SHAM TRANSACTION OR A COLOURABLE DEVICE TO AVOID THE PAYMENT OF TAXES, THE ONUS IS ON THE AO TO ESTABLISH THE SAME WITH SOME MATERIAL ON RECORD. ONLY FOR THE REA SON THAT THE APPELLANT HAS INCURRED LOSS DUE TO CLAIM OF DEPRECIATION THE LEASE TRANSAC TION CANNOT BE TREATED A SHAM TRANSACTION OR A COLOURABLE DEVICE TO EVADE THE TAX ES. IF THE VIEW TAKEN BY THE AO IS 4 ITA NO. 308/K/2012 M/S. EXULT LOGISTICS PVT. LTD, AY 2007-08 ACCEPTED, IN THAT CASE, IN ALL THE CASES WHERE AN A SSESSEE HAS NCURRED LOSS DUE TO CLAIM OF DEPRECIATION, THE TRANSACTION HAVE TO BE TREATED AS SHAM TRANSACTION. ON THE OTHER HAND, IN MOST OF THE CASES IN THE INITIAL YEAR OF A CQUISITION OF AN ASSET BY AN ASSESSEE, THE AMOUNT OF DEPRECIATION IS HIGHER THAN THE RECEIPTS EARNED THROUGH THOSE ASSETS AND IN SUCH A SITUATION, IT CANNOT BE SAID THAT IF AN ASSE SSEE HAS INCURRED LOSS, HIS BUSINESS ACTIVITIES ARE NOT GENUINE. IN THE ASSESSMENT ORDER , REPEATEDLY THE AO HAS HELD THAT THE AMOUNT OF DEPRECIATION CLAIMED BY THE APPELLANT IS AN EXPENDITURE INCURRED BY HIM TO EARN THE LEASE RENT. I AM OF THE OPINION THAT HE HA S NOT APPRECIATED THE FACTS PROPERLY AND THE AMOUNT OF DEPRECIATION CANNOT BE TREATED AS AN EXPENDITURE DEBITED TO THE PROFIT & LOSS A/C. THE DEPRECIATION IS ALLOWED UNDER THE I NCOME TAX ACT FOR THE PURPOSE OF WEAR AND TEAR OF AN ASSET USED FOR THE PURPOSE OF B USINESS AND IT CANNOT BE CONCLUDED AS AN EXPENDITURE IN TERMS OF MONEY DEBITED TO P & L A /C. IT IS OBSERVED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT SUBMITTED AN EXPLANATION BEFORE THE AO WHEREIN IT WAS EXPLAINED TO HIM THAT IN THE P & L A /C AND IN THE BOOKS OF ACCOUNT, THE APPELLANT HAD CHARGED THE DEPRECIATION ON MOTOR LOR RIES AS PER THE COMPANIES ACT AND IT RESULTED INTO BOOK PROFT ON THE LEASE TRANSACTI ONS. UNDER THE INCOME TAX ACT, THE LOSS WAS INCURRED ONLY DUE TO THE REASON THAT THE RATE O F DEPRECIATION ALLOWABLE ON MOTOR LORRIES USED FOR THE PURPOSE OF BUSINESS OF HIRING OF THEM IS HIGHER, I.E. @ 30%. BUT IN ACTUAL, THE APPELLANT COMPANY HAS NOT INCURRED ANY LOSS ON LEASE TRANSACTION AND ON THE BOOK PROFIT THE APPELLANT COMPANY HAS PAID TAX U/S. 115JB OF THE ACT. I AM OF THE OPINION THAT THE AO HAS FAILED TO APPRECIATE THAT IN SUBSEQ UENT YEARS THE AMOUNT OF DEPRECIATION WOULD BE LESS AND THE APPELLANT COMPANY MAY DECLARE THE PROFIT EVEN AFTER CLAIMING DEPRECIATION ON SUCH ASSETS. IN VIEW OF ABOVE FACTS , I AM OF THE OPINION THAT THE PRINCIPLES LAID DOWN IN THE DECISION OF MCDOWELL & CO. LTD. ARE NOT APPLICABLE IN THE CASE OF APPELLANT COMPANY AND THE LEASE TRANSACTION CARRIED ON BY THE APPELLANT CANNOT BE TREATED AS SHAM TRANSACTION OR COLOURABLE DEVICE TO REDUCE THE TAX LIABILITY. ON PERUSAL OF ASSESSMENT ORDER, IT IS OBSERVED THAT THE AO HAS FURTHER HELD THAT OTHERWISE ALSO THE APPELLANT COMPANY IS HIT BY THE PROVISIONS OF SECTION 40A(2)(A) READ WITH SECTION 40A(2)(B) OF THE ACT. I AM OF THE OPIN ION THAT THE AO HAS NOT APPRECIATED THE PROVISIONS OF SEC. 40A OF THE ACT AND IT IS NOT KNOWN AS TO HOW HE HAS ARRIVED ON THE CONCLUSION THAT THE PROVISIONS OF SEC. 40A(2)(A) AR E APPLICABLE IN THE CASE OF APPELLANT COMPANY. THE MAIN HEADING OF PROVISIONS OF SECTION 40A IS EXPENSES OR PAYMENTS NOT DEDUCTIBLE N CERTAIN CIRCUMSTANCES. THE SECTION 4 0A(2)(A) SAYS THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THI S SUB- SECTION, AND THE AO IS OF THE OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREA SONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES F OR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF T HE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITU RE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS D EDUCTION. UNDER SECTION 40A(2)(B), THE PERSONS REFERRED TO IN CLAUSE (A) IN RESPECT WH ERE THE ASSESSEE IS A COMPANY, IS ANY DIRECTOR OF THE COMPANY OR ANY RELATIVE OF SUCH DIR ECTOR. ON PERUSAL OF PROVISIONS OF SEC. 40A(2)(A) IT IS APPARENT THAT IT IS APPLCABLE ONLY IN THE CASE WHERE THE ASSESSEE INCURS ANY EXPENDITURE AND THE PAYMENT HAS BEEN MAD E A PERSON SPECIFED IN CLAUSE (B) OF THAT SUB-SECTION. IN THE CASE OF APPELLANT COMPA NY, IT HAS NOT INCURRED ANY EXPENDITURE OF WHICH THE PAYMENT HAS BEEN MADE TO T HE DIRECTOR OF THE COMPANY OR ANY RELATIVE OF SUCH DIRECTOR. THE APPELLANT COMPANY HA S NOT INCURRED ANY EXPENDTURE FOR GOODS, SERVICES AND FACILITIES. THE APPELLANT COMPA NY HAS INCURRED EXPENDITURE OF RS.7,10,988/- ON ACCOUNT OF INTEREST WHICH WAS PAID TO M/S. IDEAL MOVERS PVT. LTD. AND IT IS NOT HELD BY THE AO AS EXCESSIVE OR UNREASONABLE AND PAID MORE THAN MARKET RATE. FURTHER, THE APPELLANT HAS CLAIMED DEPRECIATION ON MOTOR LORRIES WHICH CANNOT BE TREATED AS EXPENDITURE FOR THE PURPOSE OF PROVISION S OF SEC. 40A(2)(A). OF THE ACT. I AM OF THE OPINION THAT THE PROVISIONS OF SEC. 40A(2)(A) R EAD WITH 40A(2)(B) ARE NOT AT ALL APPLICABLE IN THE CASE OF APPELLANT, BECAUSE IT HAS NOT INCURRED ANY EXPENDITURE OR PAD 5 ITA NO. 308/K/2012 M/S. EXULT LOGISTICS PVT. LTD, AY 2007-08 ANY AMOUNT FOR SERVICES RENDERED BY ANY OTHER PERSO N. IN FACT, THE APPELLANT HAS SHOWN RECEIPT FROM A RELATED PARTY, I.E. M/S. IDEAL MOVER S PVT. LTD. IF AT ALL THE PROVISIONS OF SEC. 40A(2)(A) READ WITH 40A(2)(B) WOULD BE APPLICA BLE, IT WILL BE IN THE CASE OF M/S. IDEAL MOVERS PVT. LTD. AND NOT THE CASE OF THE APPE LLANT COMPANY. IN VIEW OF ABOVE FACTS, I AM OF THE OPINION THAT THE AO WAS NOT JUST IFIED IN HOLDING THAT THE LEASE TRANSACTION WAS A SHAM TRANSACTION OR A COLOURABLE DEVICE TO REDUCE THE TAX LIABILITY OR THAT THE PROVISIONS OF SEC. 40A(2)(A) READ SEC. 40A (2)(B) ARE APPLICABLE IN THE CASE OF APPELLANT COMPANY. CONSEQUENTLY, THE AO WAS NOT JUS TIFIED IN MAKING THE ADDITION OF RS.71,62,609/- ON ACCOUNT OF ALLEGED LOSS INCURRED BY THE APPELLANT COMPANY AND SAME IS DIRECTED TO BE DELETED. THE GROUND NOS. 5 TO 10 ARE ALLOWED. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THERE IS NO DISPUTE AS REGARDS TO THE FACTS OF THE CASE THAT THE ASSESSEE EARNED INCOME FROM HANDLING AND CRANE CHARGES. IT IS ALSO NOT IN DISPUTE THAT ASSESSEE HAS CLAIMED DEPRECIATION ON LEASED VEHICLES AND INTEREST PAID T O IDEAL MOVERS PVT. LTD. ONLY THE AO WAS UNDER WRONG IMPRESSION THAT THIS IS COLOURABLE DEVI CE TO REDUCE THE INCOME. WE FAIL TO UNDERSTAND HOW THE AO CAN DISALLOW THE CLAIM OF LOS S WITHOUT ANY EVIDENCE RATHER THE ASSESSEE HAS PROVIDED ALL THE DETAILS AND EVIDENCE INCLUDING BILLS, VOUCHERS AND BOOKS OF ACCOUNT. AS REGARDS TO THE ASPECT OF APPLICABILITY OF SEC. 40A( 2)(A) OF THE ACT READ WITH SECTION 40A(2)(B) OF THE ACT, THE AO HAS NOT BROUGHT ANY COMPARATIVE INS TANCE THAT THE LEASE RENTAL CHARGED BY THE ASSESSEE ARE IN ANY WAY LESS OR UNREASONABLE THAN THE OTHER PARTY OF THE SIMILAR NATURE SIMILAR TRADE. THE AO IS UNABLE TO BRING ON RECORD THE FAC T THAT HOW THE PROVISIONS OF SECTION 40A(2)(A) READ WITH SECTION 40A(2)(B) OF THE ACT WI LL BE APPLIED FOR DISALLOWANCE OF DEPRECIATION AS WELL AS INTEREST. THE AO HAS NOT D ISCUSSED ANY RATE DIFFERENCE IN CHARGING OF INTEREST NOR RATE DIFFERENCE IN CHARGING OF DEPRECI ATION. IN SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAS ELABORATELY DIS CUSSED THE ISSUE AFTER CONSIDERING THE FACTUAL POSITION AND ALLOWED THE SAME. WE ARE IN T OTAL CONFORMITY WITH THE ORDER OF CIT(A). THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 6. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS R EGARDS TO THE ORDER OF CIT(A) DELETING THE ADDITION OF SHORTAGE OF CASH OF RS.34,549/-. FOR T HIS, REVENUE HAS RAISED FOLLOWING GROUND NO.2: 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS.34,549/- DESPITE THE FACT THAT SUCH PAYMENTS WERE MADE IN EXCESS OF ACTUAL CASH AVAILABLE AS PER CASH BOOK. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CIT(A) AFTER EXAMINING THE BANK ST ATEMENT, CASH BOOK, VOUCHERS FOUND THAT 6 ITA NO. 308/K/2012 M/S. EXULT LOGISTICS PVT. LTD, AY 2007-08 THERE IS NO SHORTAGE OF CASH AND MOREOVER THE REASO N GIVEN BY AO FOR MAKING THIS ADDITION IS THAT THE VOUCHERS MADE ARE SELF MADE VOUCHERS AND A RE NOT GENUINE. WE FIND THAT THE CIT(A) HAS REASONABLY DISCUSSED THE ISSUE VIDE PARA 5.2 OF HIS APPELLATE ORDER, WHICH READS AS UNDER: 5.2. I HAVE CONSIDERED THE SUBMISSION OF THE APPEL LANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE COPY OF BANK S TATEMENT, COPY OF CASH BOOK AND THE VOUCHERS OF EXPENSES INCURRED BY THE APPELLANT. ON CAREFUL CONSIDERATION OF THE FACTS, I AM OF THE OPINION THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.34,549/- U/S. 68 OF THE ACT. ON PERUSAL OF BANK STATEMENT IT IS FOUN D TO BE CORRECT THAT SUM OF RS.45,000/- WAS WITHDRAWN FROM THE BANK ON 27/12/2006. HOWEVER, AS PER THE CASH ENTRIES THE AMOUNT OF RS.45,000/- HAS BEEN DEBITED ON 23/12/200 6. THE CHEQUE NO. MENTIONED IN THE CASH BOOK IS SAME AS REFLECTED IN THE BANK STATEMEN T. FURTHER, ON PERUSAL OF CASH BOOK IT IS FOUND THAT ON 27.12.2006, NO ENTRY OF CASH WITHD RAWAL HAS BEEN MADE BY THE APPELLANT IN ITS CASH BOOK. HENCE, THE CONTENTION OF THE APPE LLANT APPEARS TO BE CORRECT THAT BY MISTAKE THE ENTRY OF CASH WITHDRAWAL IN THE CASH BO OK WAS MADE ON 23.12.2006 INSTEAD OF 27/12/2006. ON PERUSAL OF VOUCHERS OF EXPENSES IT I S OBSERVED THAT ALL THE EXPENSES AGAINST THE WITHDRAWAL OF AFORESAID AMOUNT OF RS.45 ,000/- WERE INCURRED ON 28/12/2006. MERELY FOR THE REASON THAT THE VOUCHERS ARE SELF-MA DE, IT CANNOT BE SAID THAT THE SAME ARE NOT GENUINE. THERE COULD BE SUBSTANCE IN THE VIEW O F THE AO IF IN THE CASH BOOK AGAIN THE APPELLANT WOULD HAVE MADE ENTRY OF RS.45,000/ ON AC COUNT OF CASH WITHDRAWAL ON 27/12/2006. IN THAT CASE, IT COULD HAVE BEEN CONCLU DED THAT ON 23/12/2006 THE CASH OF RS.45,000/- HAS BEEN INTRODUCED IN THE CASH BOOK, B UT THERE WAS NO CORRESPONDING WITHDRAWAL IN THE BANK STATEMENT. HOWEVER, IN THE P RESENT CASE, THE FACT REMAINS THAT IN THE CASH BOOK NO ENTRY OF CASH WITHDRAWAL WAS MADE ON 27/12/2006, I.E., THE ACTUAL DATE OF CASH WITHDRAWAL, BUT THERE IS ONLY ONE ENTRY MAD E ON 23/12/2006, WHICH, ACCORDING TO THE APPELLANT, MADE INADVERTENTLY. THE EXPENSES WER E ALSO INCURRED ON 28/12/2006, I.E. AFTER ACTUAL WITHDRAWAL DATE ON 27/12/2006. IN VIEW OF ABOVE, IT CANNOT BE SAID THAT THERE WAS ANY SHORTAGE OF CASH AS OBSERVED BY THE AO. HE IS DIRECTED TO DELETE THE ADDITION OF RS.34,549/- MADE U/S. 68 OF THE ACT. THE GROUND NO . 4 IS ALLOWED. IN VIEW OF THE ABOVE AND IN THE FACTS AND CIRCUMSTA NCES, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 9. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST MARCH, 2014 ,- #./ 0 JD.(SR.P.S.) 7 ITA NO. 308/K/2012 M/S. EXULT LOGISTICS PVT. LTD, AY 2007-08 1 *2 3 2%4- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT ITO, WARD-12(1), KOLKATA 2 *+() / RESPONDENT M/S. EXULT LOGISTICS PVT. LTD., 9, MA YFAIR ROAD, KOLKATA-700 019. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 2:; *# / DR, KOLKATA BENCHES, KOLKATA +2 */ TRUE COPY, #