The ACIT., Vijayawada V. M/s. Krnti Road Transport Pvt. Ltd., Vijayawada

ITA 375/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8704 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 25-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S MURTHY
• Assessee Lawyers: G V V SATYANARAYANA
• Keywords: Depreciation; Rectification of order; Additional evidence; Corroborative evidences
• Section: 143(3); 147

Judgement Text

ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.375/VIZAG/2016 ( / ASSESSMENT YEAR: 2009-10) ACIT, CIRCLE - 3(1), VIJAYAWADA M/S. KRANTI ROAD TRANSPORT PVT. LTD. VIJAYAWADA [PAN NO. AAACK9322N ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI P.S. MURTHY DR / RESPONDENT BY : SHRI G.V.V. SATYANARAYANA, AR / DATE OF HEARING : 20.02.2018 / DATE OF PRONOUNCEMENT : 16.03.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) {CIT(A)}, VIJA YAWADA VIDE ITA NO.78/CIT(A)/VJA/2015-16 DATED 28.3.2016 FOR THE AS SESSMENT YEAR 2009-10. ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 2 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY CARRYI NG ON THE BUSINESS IN TRANSPORTATION OF GOODS BY ENGAGING/HIR ING VEHICLES FROM SEVERAL PERSONS INCLUDING THE DIRECTORS, RELATIVES OF DIRECTORS AND OTHERS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y . 2009-10 ADMITTING TOTAL INCOME OF ` 85,57,730/-. ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WAS COMPLETED ASSESSING ON TOTAL INCOME OF ` 99,64,837/-. BY RECTIFICATION ORDER, THE TOTAL IN COME WAS REVISED AT ` 1,03,39,880/- AFTER DISALLOWING THE EXCESS CLAIM O F DEPRECIATION OF ` 3,75,038/-. SUBSEQUENTLY, THE CASE WAS REOPENED U /S 147 OF THE ACT FOR THE REASON THAT THE ASSESSEE HAD SHOWN THE SAME VEHICLES IN THE CHART OF LEASED VEHICLES AND OWN V EHICLES AND CLAIMED LEASE RENT. THE A.O. ALSO OBSERVED THAT THE PAYMEN T IS COVERED BY SECTION 40A(2)(B) OF THE ACT. THE REASSESSMENT PRO CEEDINGS WERE COMPLETED BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT AFTER MAKING THE DISALLOWANCE OF ` 14,16,600/- ON ACCOUNT OF LEASE RENT PAID TO THE DIRECTORS AND DISALLOWANCE OF ` 2,12,64,270/- U/S 40A(2)(B) OF THE ACT. 3. AS REGARDS THE DISALLOWANCE MADE ON ACCOUNT OF LEASE RENT PAID, THE A.O. NOTICED THAT THE ASSESSEE HAD CLAIME D THE EXPENSE OF LEASE RENT TO THE EXTENT OF RS.14,16,600/- ON VE HICLES OWNED BY THE COMPANY. IN THIS REGARD, THE ASSESSEE SUBMITT ED DURING THE ASSESSMENT PROCEEDINGS THAT IT HAD SOLD THE OWN VEH ICLES TO ITS ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 3 DIRECTORS ON 31.12.2008 AND TAKEN THE SAME VEHICLES ON LEASE, HENCE, THEY APPEARED IN BOTH LISTS OF OWN VEHICLES AND THE LEASED VEHICLES. THE ASSESSEE FURTHER STATED THAT IT HAS PAID THE LEASE RENT TO ITS DIRECTORS FOR 3 MONTHS ONLY AND FOR THE REMAINING PERIOD THEY WERE USED AS OWN VEHICLES AND NO LEASE RENT WA S PAID HENCE NO DOUBLE CLAIM. HOWEVER, THE A.O. FOUND FROM THE D ETAILS FURNISHED BY THE ASSESSEE RELATING TO ITS DIRECTORS THAT THEY HAD NOT ADMITTED THE LEASE RENT OF RS.14,16,600/- IN TH EIR RESPECTIVE RETURNS OF INCOME AND THE ASSESSEE HAS NOT FURNISH ED THE COPY OF RESOLUTION PASSED IN ORDER TO TAKE THE DIRECTORS' V EHICLES ON LEASE. HENCE, THE A.O. CONCLUDED THAT ON THE ONE HAND THE ASSESSEE STATED TO HAVE PAID THE LEASE RENT OF RS.14,16,600/ - AND ON THE OTHER HAND THE DIRECTORS OF THE ASSESSEE COMPANY HA D NOT ADMITTED THE LEASE RENT IN THEIR RETURNS OF INCOME, HENCE, HELD THAT THE ASSESSEE FAILED TO PROVE THE PAYMENT OF LE ASE RENT OF RS.14,16,600/- AND ACCORDINGLY DISALLOWED THE SAME. 4. WITH REGARD TO DISALLOWANCE MADE U/S.40A(2)(B) OF THE ACT, THE A.O. ON EXAMINATION OF PROFIT & LOSS ACCOUNT NOTICE D THAT THE ASSESSEE HAD CLAIMED OTHER LORRY CHARGES OF RS. 11, 77,95,333/-, WHICH INCLUDES LEASE RENT FOR 44 VEHICLES SAID TO B E TAKEN FROM THE DIRECTORS AND THEIR SPOUSES AND RELATIVES. THE ASSE SSEE PAID LEASE ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 4 RENT OF RS.2,98,80,869/- ON ACCOUNT OF THESE 44 VEH ICLES. THE ASSESSEE EXPLAINED BEFORE THE A.O. THAT THESE 44 VE HICLES ARE USED FOR THE PURPOSE OF BUSINESS AND WERE TAKEN ON LEASE FROM THE DIRECTORS, FOR WHICH 36 VEHICLES WERE USED FOR THE WHOLE YEAR AND REMAINING VEHICLES FOR 3 MONTHS. THE ASSESSEE IS MA KING THE PAYMENTS TOWARDS THE HIRE CHARGES PER KM BASIS @ RS.10/- PER KM TO THE DIRECTORS AS WELL AS OUTSIDERS. THE ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED THE DE TAILS RELATING TO GROSS RECEIPTS PER VEHICLE ALONG WITH TRIP SHEET S, TERMS AND CONDITIONS ENTERED INTO WITH ITS DIRECTORS AND RELA TIVES OF THE DIRECTORS AND WORKING DETAILS TO SHOW THAT THERE WA S NO EXCESSIVE OR UNREASONABLE LEASE RENT PAID. FURTHER, THE ASSES SING OFFICER ON VERIFICATION OF INFORMATION FURNISHED WITH REGARD T O LEASE RENT PAID TO DIRECTORS AND RELATIVES OF DIRECTORS NOTICED THA T IT CONTAINS ONLY THE JOURNAL ENTRIES OF DATE TRUCK HIRE ADVANCE AND OTHER LORRY HIRE PAYABLES ETC. ACCORDINGLY, THE A.O. AFTER CONSIDER ING THE INFORMATION FURNISHED BY THE ASSESSEE HELD THAT THE CLAIM FOR EXPENDITURE CAN BE ALLOWED TO AN ASSESSEE, ONLY WHE N IT PRODUCES SUPPORTING EVIDENCE AND ESTABLISHES THAT THE EXPEND ITURE HAS BEEN INCURRED WHOLLY, EXCLUSIVELY AND NECESSARILY FOR TH E PURPOSES OF ITS BUSINESS. IN THIS REGARD, THE A.O. HAS RELIED ON T HE DECISION ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 5 RENDERED BY THE HONBLE SUPREME COURT IN THE CASE O F M/S. SUTLEJ COTTON MILLS LTD. 116 ITR 1 (SC) (1979). THE A.O. HELD THAT THE PAYMENT OF ` 2,00,000/- PER VEHICLE PER MONTH IS REASONABLE AND WORKED OUT THE DISALLOWANCE U/S 40A(2)(B) OF THE AC T AT ` 2,12,64,270/- AND ACCORDINGLY COMPLETED THE ASSESSM ENT. 5. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) AFTER V ERIFICATION OF THE DETAILS PRODUCED BY THE ASSESSEE, HE HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. AGGRIEVED BY THE ORDER THE CIT(A), THE REVENUE I S IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS OF APPEAL: 1. THE ID. CIT(A) ERRED BOTH IN LAW AND ON THE FACTS O F THE CASE; 2. THE ID. CIT(A) ERRED IN DELETING THE ADDITION OF RS.2,1264,270/- MADE TOWARDS EXCESS HIRE CHARGES PAID TO ITS DIRECTORS/R ELATIVES OF THE DIRECTORS U/S.40A(2)(B) WITHOUT CONSIDERING THE FACT THAT THE AO ADOPTED THE RATE OF RS.2 LAKHS PER VEHICLE A S FAIR LEASE RENT BASED ON THE ASSESSEE'S CLAIM OF LEASE RENT EX PENDITURE OF RS.14,16,600/- IN RESPECT OF 8 VEHICLES SOLD TO ITS DIRECTORS; 3. THE ID. CIT(A) OUGHT TO HAVE CONSIDERED THAT THOUGH THE ASSESSEE FOLLOWED THE UNIFORM RATE, THE ASSESSEE CO ULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM OF EXP ENDITURE I.E. THE DETAILS RELATING TO GROSS RECEIPTS PER EACH VEH ICLE ALONG WITH TRIP SHEETS, TERMS AND CONDITIONS ENTERED WITH ITS DIRECTORS AND RELATIVES OF THE DIRECTORS AND WORKING DETAILS TO S HOW THAT THERE WAS NO EXCESSIVE OR UNREASONABLE LEASE RENT PAID TO THEM. 4. THE ID. CIT(A) ERRED IN DELETING THE ADDITION ACCEPT ING THE ADDITIONAL EVIDENCES WITHOUT CALLING FOR THE REMAND REPORT FRO M THE AO UNDER RULE 46A OF THE I.T. RULES; 5. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS .14,16,600/- MERELY ON SUBMISSION OF CERTIFICATES OF REGISTRATIO N FURNISHED BY THE ASSESSEE IGNORING THE FACTS ELABORATED IN PAGE 18 OF THE ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 6 ASSESSMENT ORDER PASSED U/S.143(3) R.W.S.147 OF THE I.T.ACT. 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 7. GROUND NOS.1 & 6 ARE GENERAL IN NATURE WHICH DOES N OT REQUIRE SPECIFIC ADJUDICATION. 8. GROUND NOS.2, 3 & 5 ARE RELATED TO THE ADDITION OF ` 2,12,64,270/- DISALLOWED U/S 40A(2)(B) OF THE ACT I N RESPECT OF THE HIRE CHARGES PAID TO THE RELATIVES OF THE DIREC TORS AND A SUM OF ` 14,16,600/- LEASE RENT PAID TO THE DIRECTORS. 9. DISALLOWANCE OF HIRE CHARGES U/S 40A(2)(B) OF TH E ACT: DURING THE APPEAL HEARING, THE LD. D.R. ARGUED THAT THE A. O. HAS CONSIDERED FOR DISALLOWANCE OF ` 2,12,64,270/- FOR TAKING 44 LORRIES ON HIRE FROM THE DIRECTORS AND RELATIVES. OUT OF T HE 44 VEHICLES, 36 VEHICLES WERE PLIED FOR 12 MONTHS AND 8 VEHICLES WE RE PLIED FOR 3 MONTHS. THE TOTAL AMOUNT PAID TO THE DIRECTORS AND THEIR RELATIVES AS A HIRE CHARGES WAS ` 2,98,80,865/- OUT OF WHICH THE A.O. ALLOWED THE DEDUCTION OF ` 72 LAKHS @ 2 LAKHS PER VEHICLE FOR 36 VEHICLES AND DISALLOWED A SUM OF ` 14,16,600/- FOR 8 VEHICLES TAKEN ON LEASE FROM THE DIRECTORS AND THE BALANCE AMOUNT OF ` 2,12,64,270/- WAS DISALLOWED AS EXCESS PAYMENT U/S 40A(2)(B) OF THE A CT. THE REASONS ASSIGNED BY THE A.O. WAS ASSESSEES FAILURE TO FURNISH THE ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 7 DETAILS CALLED FOR BY THE A.O. AS UNDER: 1. THE GROSS RECEIPTS PER VEHICLE ALONG WITH TRIP SHEE TS AND AFTER DEDUCTING THE CORRESPONDING EXPENDITURE WITH SUPPOR TING EVIDENCE, THE QUANTUM OF NET PROFIT ARRIVED. OUT OF WHICH, T HE QUANTUM OF LEASE RENT PAID EITHER BY WAY OF CASH OR THROUGH CH EQUE TO ITS DIRECTORS AND RELATIVES OF THE DIRECTORS. 2. MATERIAL EVIDENCE TO SHOW I.E. TERMS AND CONDITIONS ENTERED WITH ITS DIRECTORS AND RELATIVES OF THE DIRECTORS I.E. IN TH E FORM OF RESOLUTION PASSED AND COPIES OF LEASE AGREEMENT DEEDS. 3. WORKING DETAILS TO SHOW THAT THERE WAS NO EXCESSIVE OR UNREASONABLE LEASE RENT PAID TO ITS DIRECTORS AND RELATIVES OF T HE DIRECTOS. 10. THE LD. D.R. ARGUED THAT THE LD. A.O. COULD NOT ASCERTAIN THE REASONABLENESS OF THE PAYMENT MADE TO THE DIRECTORS IN THE ABSENCE OF THE INFORMATION CALLED FOR AND HENCE THE A.O. HAS M ADE THE DISALLOWANCE CORRECTLY. THE LD. D.R. FURTHER SUBMITTED THAT DUR ING THE APPEAL HEARING, THE ASSESSEE HAD FURNISHED THE ABOVE DETAI LS TO THE CIT(A), HENCE THE LD.CIT(A) OUGHT TO HAVE GIVEN THE OPPORT UNITY TO THE A.O. AS REQUIRED UNDER RULE 46A OF THE INCOME TAX RULES, TH US, REQUESTED TO REMIT THE MATTER BACK TO THE FILE OF THE A.O. FOR F RESH ADJUDICATION. 11. ON THE OTHER HAND, THE LD. A.R. OF THE ASSESSEE ARGUED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PRODUC ED THE BOOKS OF ACCOUNTS, RELEVANT VOUCHERS AND THE ENTIRE INFORMAT ION INCLUDING THE TRIP SHEETS BEFORE THE A.O., BOTH AT THE TIME OF ORIGINA L ASSESSMENT U/S 143(3) AS WELL AS IN REASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT. THE LD. A.R. FURTHER ARGUED THAT THE ASSESSEE HAS NEITH ER FURNISHED ANY ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 8 FRESH INFORMATION NOR FRESH EVIDENCE BEFORE THE CIT (A), WHICH WARRANTS OPPORTUNITY UNDER RULE 46A OF THE I.T. RULES. THE INFORMATION PLACED BEFORE THE A.O. WAS FURNISHED TO THE LD. CIT(A) DUR ING THE APPEAL PROCEEDINGS. SINCE THE ASSESSEE HAS FURNISHED ENTI RE INFORMATION BEFORE THE A.O. AND PRODUCED THE BOOKS OF ACCOUNTS ALONG W ITH VOUCHERS AND EVIDENCES IN TWO ROUNDS I.E. AT THE ORIGINAL ASSESS MENT AND IN THE RE- ASSESSMENT PROCEEDINGS, AGAIN REMITTING THE MATTER BACK TO THE FILE OF THE A.O. IS NOTHING BUT UNDUE HARDSHIP TO THE ASSES SEE TO APPEAR TIME AND AGAIN ON THE SAME ISSUE IN SPITE OF SUBMITTING ALL THE DETAILS, THEREFORE, ARGUED THAT THERE IS NO CASE FOR SENDING THE CASE BACK TO THE A.O. AND REQUESTED TO DISPOSE OF THE APPEAL. THE L D. A.R. FURTHER SUBMITTED THAT THE ASSESSEE IS MAKING THE PAYMENT O F HIRE CHARGES @ ` 10/- PER KM. FOR ALL THE VEHICLES TAKEN ON LEASE BO TH FROM THE DIRECTORS AS WELL AS FROM OTHERS. THOUGH THE VEHICLES APPEAR TO BE OLD, THE ASSESSEE HAD MAINTAINED THEM VERY WELL THEY ARE IN GOOD CONDITION AND GIVING GOOD MILEAGE. THE VEHICLES ARE ALSO IN FIT CONDITION, WHICH WAS APPROVED BY THE CONCERNED MOTOR VEHICLE AUTHORITIES , HENCE, THERE IS NO REASON TO GIVE LESS PRICE TO THE VEHICLES HIRED FRO M DIRECTORS. THE LD. A.R. FURTHER ARGUED THAT THE A.O. MADE DISALLOWANCE U/S 40A(2)(B) OF THE ACT WITHOUT ASCERTAINING MARKET RATE OF HIRE CH ARGES FROM OTHERS. THERE IS NO INCIDENCE OF COMPARABLE CASES BROUGHT O N RECORD TO MAKE ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 9 THE DISALLOWANCE U/S 40A(2)(B) OF THE ACT. THE A.O . REQUIRED TO BRING THE MARKET RATE OF COMPARABLE CASES AND FIX THE MAR KET RATE TO ARRIVE AT THE EXCESS IF ANY. NO SUCH EXCUSE WAS MADE BY THE A.O. THE LD. A.R. ARGUED THAT THE A.O. FIXED THE YEARLY RENT AT ` 2 LAKHS PER VEHICLE, WHICH WORKED OUT APPROXIMATELY TO ` 17,000/- P.M. FOR WHICH AN AUTO ALSO CANNOT BE HIRED. THE LD. A.R. ARGUED THAT THE ORDER PASSED BY THE A.O. IS HIGHLY ARBITRARY AND THE LD.CIT (A) HAS CONSIDER ED ALL THE FACTS AND ALLOWED THE APPEAL HENCE NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD.CIT(A) IN THIS ISSUE. 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE THE DISALLOWANCE OF ` 2,12,64,270/- AS EXCESS CLAIM TOWARDS HIRING OF VEHICLES FROM THE DIRECTORS AND RELATIVES . THE ASSESSEE HAS DEBITED A SUM OF ` 11,77,95,333/- TOWARDS THE LORRY CHARGES, OUT OF WHICH THE ASSESSEE HAS TAKEN 44 VEHICLES ON LEASE F ROM THE DIRECTORS AND THEIR RELATIVES. OUT OF THE 44 VEHICLES, 36 VE HICLES WERE OPERATED THROUGHOUT THE YEAR AND 8 VEHICLES WERE OPERATED FO R PARTIAL PERIOD. THE A.O. COMPUTED THE FAIR RENT OF 36 VEHICLES AT ` 72 LAKHS PER YEAR WHICH WORKS OUT TO ` 2 LAKHS PER MONTH. WHILE FIXING THE ANNUAL RENT OF ` 2.00 LAKHS PER MONTH, THE A.O. HAS MISGUIDED HIMSE LF WITH MONTHLY RENT OF ` 1,55,000/- TO ` 1,77,000/- PAID BY THE ASSESSEE FOR OTHER ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 10 VEHICLES. ON CAREFUL VERIFICATION, THE FAIR RENTAL VALUE FIXED BY THE A.O. WORKS OUT TO ` 17,000/- PER MONTH FOR WHICH AN AUTO ALSO CANNOT B E HIRED LET ALONE THE LORRY. CONSIDERING THE EXPENSE S INVOLVED FOR PLYING THE TRUCK, THE FAIR RENTAL VALUE DETERMINED BY THE A.O. AT ` 2 LAKHS PER YEAR IS HIGHLY ARBITRARY AND WITHOUT APPLICATION OF MIND. WE ARE ALSO NOT INCLINED SEND THE CASE BACK TO THE AO SINCE IT IS S ETTLED ISSUE THAT THE CIT(A) IS HAVING CO-TERMINUS POWERS TO DO FURTHER E NQUIRIES WHICH THE AO FAILED. FROM THE ABOVE INFORMATION WE DO NOT FI ND ANY REASON TO HOLD THAT THE A.O. ACTED FAIRLY TO DETERMINE THE FA IR RENTAL VALUE OF THE VEHICLES HIRED FROM THE DIRECTORS AND CONNECTED REL ATIVES. MERELY BECAUSE OF THE GROSS RECEIPTS OF EACH VEHICLE ALONG WITH TRIP SHEET AND THE TERMS AND CONDITIONS ENTERED WITH THE DIRECTORS WERE NOT FURNISHED IT IS UNFAIR ON THE PART OF THE A.O. TO MAKE SUCH H UGE DISALLOWANCE U/S 40A(2)(B) OF THE ACT. AS PER THE ASSESSMENT ORDER, IT IS GATHERED THAT THE ASSESSEE IS MAKING THE PAYMENT OF ` 10/- PER KM FOR HIRE FOR BOTH THE VEHICLES TAKEN FROM DIRECTORS AS WELL AS FROM T HE OUTSIDERS LD. A.R. OF THE ASSESSEE HAS STATED THAT THE ASSESSEE HAD PR ODUCED THE BOOKS OF ACCOUNTS AND ALL RELEVANT VOUCHERS BEFORE THE A.O. THE INFORMATION AVAILABLE FOR DETERMINING THE FAIR RENTAL VALUE OF THE VEHICLES HIRED FROM OTHERS AND THE DIRECTORS CAN BE CULLED OUT FROM THE BOOKS OF ACCOUNTS, THE VOUCHERS AND OTHER RELEVANT INFORMATION SUBMITT ED BY THE ASSESSEE ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 11 BEFORE THE A.O. HAVING PRODUCED THE BOOKS OF ACCOUN TS IN TWO SUCCEEDING PROCEEDINGS BEFORE THE AO WE ARE NOT INC LINED RELY ON THE LD. D.RS SUBMISSION THAT THE ASSESSEE HAS NOT PROD UCED THE INFORMATION CALLED FOR BY THE AO. THE LD. CIT(A) HAS VERIFIED T HE ENTIRE INFORMATION WITH TRIP SHEETS AND LEASE RENT PAID TO DIRECTORS A ND OTHER RELATIVES OF DIRECTORS, DEPRECIATION PAYMENTS, ETC. AND ALLOWED THE APPEAL OF THE ASSESSEE. FOR THE SAKE OF CLARIFY AND CONVENIENCE, WE EXTRACT RELEVANT PART OF THE CIT(A)S ORDER WHICH READS AS UNDER: 5.1.3 IN VIEW OF THE ABOVE, I HOLD THAT RE-OPENING O F ASSESSMENT IS IN ORDER. APPELLANTS GROUND OF APPEAL ON THIS ISSUE FAILS. 5.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, APP ELLANT SUBMITTED ALL RELEVANT DETAILS FOR PERUSAL AND NECESSARY EXAMINAT ION. IN RESPECT OF 8 VEHICLES MENTIONED IN PAGE 12 OF ASSESSMENT ORDER, COPIES OF FORM 23 (CERTIFICATE OF REGISTRATION) CLEARLY INDICATED THA T TRANSFER OF OWNERSHIP W.E.F. 31.12.2008 I.E. HYPOTHECATION/HIRE PURCHASE/ LEASE TERMINATION W.E.F. 31.12.2008. THUS, THESE VEHICLES APPEARED I N COMPANYS OWN VEHICLE LIST FOR 9 MONTHS AND LEASED VEHICLE CHART FOR 3 MONTHS OF THE RELEVANT ASST. YEAR. 5.2.1 THUS, LEASE RENTAL PAYMENT OF ` 14,16,000/- IN THE HANDS OF APPELLANT COMPANY IS DULY SUPPORTED BY PROPER EVIDE NCE. HENCE, DISALLOWANCE OF ` 14,16,000/- MADE BY ASSESSING OFFICER IS NOT IN OR DER. 5.2.2 THE DIRECTORS, ON THE OTHER HAND, OPTED FOR O FFERING THE LORRY INCOME U/S 44AE OF THE ACT AS THEY CLAIMED TO HAVE SATISFIED THE CONDITIONS THEREIN. CONSEQUENTLY, THIS ENTIRE PAYM ENT OF ` 14,16,000/- WAS NOT OFFERED AS LEASE RENTAL RECEIPTS FOR TAXATI ON IN THE HANDS OF THE RELEVANT DIRECTORS. 5.2.3 HOWEVER, ASSESSING OFFICER DID NOT LET IN ANY EVIDENCE TO PROVE THAT EXPENDITURE OF ` 14,16,000/- WAS NOT INCURRED BY THE APPELLANT OR I T WAS NOT GENUINE. IF THE PROPER LEASE RENTAL RECEIPT WA S NOT OFFERED IN THE HANDS OF RESPECTIVE DIRECTORS, THEN ASSESSING OFFIC ER SHOULD INTIMATE THE JURISDICTIONAL ASSESSING OFFICER OF RESPECTIVE DIRE CTORS FOR TAKING NECESSARY ACTION IN THIS REGARD IN THE CASES OF RELEVANT DIRE CTORS. DISALLOWANCE IN THE HANDS OF THE APPELLANT COMPANY OF A GENUINE EXPENDI TURE IS NOT ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 12 WARRANTED. HENCE, I DIRECT THE ASSESSING OFFICER TO DELETE ADDITION OF ` 14,16,000/-. 13. THE A.O. WHILE COMPARING THE LORRY HIRE MISUNDE RSTOOD THE PAYMENT OF RENT OF ` 1,50,000/-, ` 1,64,000/-, ` 1,74,000/-, ` 1,50,000/-, ETC. TREATING THEM AS A YEARLY RENT. I N FACT THE A.R. SUBMITTED THAT THE SAME WAS RENT FOR 3 MONTHS. TAK ING INTO CONSIDERATION OF 3 MONTHS AT ` 1,50,000/- TO ` 1,74,000/-, THE LEASE RENT PAID BY THE ASSESSEE APPEARS TO BE REASONABLE. FURTHER, THE RENT PAYMENT WORKS OUT FROM ` 7 LAKHS TO ` 9 LAKHS PER ANNUM. DEPENDING ON THE RENT PER KM AS OBSERVED FROM THE D ETAILS FILED BY THE ASSESSEE BEFORE THE CIT(A), IT IS OBSERVED THAT THE ASSESSEE HAS PAID A RENT OF ` 10/- PER KM BOTH TO THE OUTSIDERS AS WELL AS THE DIRECTORS AND THERE IS NO DISPUTE. IN THIS CASE AS RIGHTLY OBSERVED BY THE CIT(A), THE A.O. HAS NOT BROUGHT ANY BASIS FOR DETERMINING THE FAIR RENTAL VALUE OF ` 2 LAKHS PER VEHICLE AND THE DISALLOWANCE U/S 40A(2)(B) OF THE ACT IS BASED ON COMPLETE HYPOTHETI CAL. THE A.O. NEITHER PROVED THE EXCESSIVE NOR UNREASONABLE WITH REGARD TO THE HIRE CHARGES PAID TO THE DIRECTORS AND RELATIVES, H ENCE, WE HOLD THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND NO INTERFERENCE IS WARRANTED. THE REVENUES APPEAL ON THIS GROUND IS DISMISSED. 14. THE NEXT ISSUE IN THIS APPEAL IS RELATED TO THE DISALLOWANCE OF ` 14,16,000/- IN RESPECT OF 8 VEHICLES SOLD TO DIRECT ORS. THE A.O. FOUND ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 13 THAT THE ASSESSEE HAS SHOWN 8 VEHICLES IN THE OWN V EHICLES AS WELL AS THE LEASED VEHICLES LIST AS FOLLOWS: 15. THE ASSESSEE EXPLAINED BEFORE THE A.O. THAT THE COMPANY HAS SOLD THE VEHICLES TO THE DIRECTORS AND THE DIRECTORS HAV E LEASED THE VEHICLES TO THE COMPANY. DURING THE PERIOD OF OWNERSHIP OF VEHICLES BY THE COMPANY, THE COMPANY HAS NOT CLAIMED ANY LEASE RENT BUT SUBSEQUENT TO THE SALE OF VEHICLES TO THE DIRECTORS, THE LEASE RENT WAS PAID TO THE DIRECTORS AND THE SAME WAS CLAIMED AS DEDUCTION. THEREFORE, ARGUED THAT THE ASSESSEE HAS RIGHTLY CLAIMED THE EXPENDITU RE OF LEASE RENT. THE ASSESSING OFFICER HAS VERIFIED FROM THE CASH FLOW S TATEMENT OF THE RESPECTIVE DIRECTORS AND OBSERVED THAT THE DIRECTOR S HAVE NOT ADMITTED THE LEASE RENT IN THEIR RETURNS OF INCOME AND ALSO DID NOT ADMIT THE RECEIPT IN THEIR CASH FLOW STATEMENT. HENCE, THE A .O. DOUBTED THE S.NO FROM WHOM VEHICLE SAID TO BE TAKEN VEHICLE NO MAKE & MADE LEASE AMOUNT (IN RS.) 1 S. RAMA RAO AP16X2166 15. 05 . 2000 1, 55 , 620 2 S.RAMA RAO AP 1 6X5844 19 . 03.2001 1,72 , 190 3 S.SUJATHA AP16W9322 06 . 08 . 1999 1,78,290 4 S.SUJATHA AP16W9622 06.08.19 99 2,08,340 5 S.GANGABHAVANI AP16W9422 03.08.1999 1 , 57,300 6 S.GANGA BHAVANI AP16W856 03.08.1996 2 , 03,210 7 S.VASAVI AP16X1866 15 . 05.2000 1 , 77 , 060 8 S.VASAVI AP16X1966 15.05.2000 1,64,590 TOTAL 14,16,6 00 ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 14 GENUINENESS OF THE PAYMENT, ACCORDINGLY DISALLOWED THE SUM OF ` 14,16,600/- LEASE RENT PAID TO THE ASSESSEE. IN FI RST APPEAL THE LD.CIT(A) DELETED THE ADDITION. HENCE THE REVENUE I S IN APPEAL BEFORE US. 16. DURING THE APPEAL HEARING, THE LD. D.R. SUPPORT ED THE ORDER OF THE A.O. AND THE LD. A.R. SUPPORTED THE ORDERS OF THE C IT(A). THE LD. CIT(A) OBSERVED THAT 8 VEHICLES MENTIONED IN THE AS SESSMENT ORDER WERE OWNED BY THE COMPANY FOR 9 MONTHS AND SUBSEQUE NTLY SOLD THE SAME AND TAKEN BACK ON LEASE ON SALE AND LEASE BACK TRANSACTION, HENCE, THE VEHICLES APPEARED BOTH IN OWN VEHICLES A ND LEASED VEHICLES OF THE COMPANY. THE RECIPIENTS HAVE DULY ADMITTED THE INCOME IN THEIR HANDS U/S 44AE OF THE ACT. SINCE THE SAME IS ADMIT TED IN SECTION 44AE OF THE ACT, THE PAYMENT MADE BY THE COMPANY DOES NO T FIND PLACE IN THE CASH FLOW STATEMENTS. HENCE, OBSERVED THAT PAY MENT OF ` 14,16,000/- IS SUPPORTED BY THE PROPER EVIDENCE AND NO DISALLOWANCE IS WARRANTED. FOR THE SAKE OF CLARITY AND CONVENIENCE WE EXTRACT RELEVANT PART OF THE CIT(A) ORDER IN PARA NOS.5.2.2 & 5.2.3 WHICH READS AS UNDER: 5.2.2 THE DIRECTORS, ON THE OTHER HAND, OPTED FOR O FFERING THE LORRY INCOME U/S 44AE OF THE ACT AS THEY CLAIMED TO HAVE SATISFIED THE CONDITIONS THEREIN. CONSEQUENTLY, THIS ENTIRE PAYM ENT OF ` 14,16,000/- WAS NOT OFFERED AS LEASE RENTAL RECEIPTS FOR TAXATI ON IN THE HANDS OF THE RELEVANT DIRECTORS. 5.2.3 HOWEVER, ASSESSING OFFICER DID NOT LET IN ANY EVIDENCE TO PROVE THAT EXPENDITURE OF ` 14,16,000/- WAS NOT INCURRED BY THE APPELLANT OR I T WAS NOT GENUINE. IF THE PROPER LEASE RENTAL RECEIPT WA S NOT OFFERED IN THE ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 15 HANDS OF RESPECTIVE DIRECTORS, THEN ASSESSING OFFIC ER SHOULD INTIMATE THE JURISDICTIONAL ASSESSING OFFICER OF RESPECTIVE DIRE CTORS FOR TAKING NECESSARY ACTION IN THIS REGARD IN THE CASES OF RELEVANT DIRE CTORS. DISALLOWANCE IN THE HANDS OF THE APPELLANT COMPANY OF A GENUINE EXPENDI TURE IS NOT WARRANTED. HENCE, I DIRECT THE ASSESSING OFFICER TO DELETE ADDITION OF ` 14,16,000/-. 17. WE HAVE GONE THROUGH THE LD. CIT(A)S ORDER AND THE ASSESSMENT ORDER AND THE SUBMISSIONS OF BOTH THE PA RTIES. THE DIRECTORS HAVE DECLARED THEIR INCOME ON OPERATING T HE TRUCKS U/S 44AE OF I.T. ACT. WHEN THE INCOME IS DECLARED U/S 44AE, THE NET INCOME WOULD BE ADMITTED BUT NOT THE GROSS RECEIPTS . FURTHER IF THE ADMISSION OF INCOME IS SUSPICIOUS, THE DIRECTORS CA SES HAVE TO BE EXAMINED BUT THE ADDITION SHOULD NOT BE MADE IN TH E HANDS OF THE ASSESSEE. HENCE, WE DO NOT FIND ANY REASON TO IN TERFERE WITH THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. 18. IN GROUND NO.4 THE REVENUE RAISED THE OBJECTION WITH REGARD TO FRESH EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. CIT(A). WE HAVE ALREADY ADDRESSED THIS ISSUE IN PRECEDING PARAGRAPH S OF THIS ORDER AND DECIDED THE ISSUE AGAINST THE REVENUE SINCE THE ASSESSEE HAD PRODUCED THE BOOKS OF ACCOUNTS AND RELEVANT INFORMA TION BEFORE THE A.O. AT THE TIME OF ASSESSMENT PROCEEDINGS. HENCE, WE DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. ITA NO.375/VIZAG/2016 M/S. KRANTI ROAD TRANSPORT PVT. LTD., VIJAYAWADA 16 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 16 TH MAR18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 16.03.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-3(1), VIJAYAWAD A 2. / THE RESPONDENT M/S. KRANTI ROAD TRANSPORT PVT. LTD., 5 TH ROAD, JAWAHAR AUTONAGAR, VIJAYAWADA-520 007. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM