Bal Kamal Dhir, Chandigarh V. ACIT, Chandigarh

ITA 51/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95522 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: DEEPINDER MALHOTRA
• Keywords: Proportionate interest; Question of law; Commercial expediency
• Section: 139; 143(3); 37(1); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NOS. 50 & 51/CHD/2015 ASSESSMENT YEAR: 2008-09 & 2009-10 BAL KAMAL DHIR, VS. ACIT PROP. DHIR ROADWAYS CIRCLE 5(1) CHANDIGARH CHANDIGARH PAN NO. AHCPD9618E & ITA NO. 52/CHD/2015 ASSESSMENT YEAR: 2010-11 BAL KAMAL DHIR, VS. ACIT PROP. DHIR ROADWAYS CIRCLE 5(1) CHANDIGARH CHANDIGARH PAN NO. AHCPD9618E & ITA NO. 53/CHD/2015 ASSESSMENT YEAR: 2011-12 BAL KAMAL DHIR, VS. JCIT PROP. DHIR ROADWAYS RANGE V CHANDIGARH CHANDIGARH PAN NO. AHCPD9618E (APPELLANT) (RESPONDENT) APPELLANT BY : SH. DEEPINDER MALHOTRA RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 18/08/2015 DATE OF PRONOUNCEMENT : 03/09/2015 ORDER PER ANNAPURNA MEHROTRA A.M. ALL THE APPEALS HAVE BEEN FILED BY THE ASSESSEE AG AINST THE DIFFERENT ORDERS OF THE LD. CIT(A) DT. 20/10/2014. 2 ITA NO. 50/CHANDI/2015 2. BRIEF FACTS RELATING TO THE CASE ARE THAT FOR TH E IMPUGNED AY, THE ASSESSEE E-FILED ITS RETURN OF INCOME ON 20/10/2008, DECLARI NG AN INCOME OF 49,32,073/-. ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT 1961 WAS FRAMED ON THE ASSESSEE ON 20/12/2010 AND THE INCOME WAS ASSESSED AT RS. 62,46,535/- AFTER MAKING DISALLOWANCE UNDER SECTION 40(A)(IA) AMOUNTI NG TO RS. 4,39,462/-, AND DISALLOWANCE ON ACCOUNT OF DIESEL, OIL AND LUBRICAN TS EXPENSES AMOUNTING TO RS. 4,50,000/-, ON ACCOUNT OF DRIVER EXPENSES AMOUN TING TO RS. 3,00,000/-, AND ON ACCOUNT OF REPAIR AND MAINTENANCE EXPENSES AMOUNTIN G TO RS. 1,25,000/-. 3. BEFORE THE LD. CIT(A) THE ASSESSEE AGITATED ONLY THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) WHICH WAS DISMISSED BY THE LD. CIT(A) VIDE HIS ORDER DT. 20/10/2014. 4. AGGRIEVED BY THE SAME, ASSESSEE FILED AN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS: 1) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AS WELL AS OF FACTS IN UPHOLDING THE DISALLOWAN CE OF RS. 4,39,462/- UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 . THE ADDITION IS NOT ONLY ARBITRARY AND CONTRARY TO THE PROVISIONS OF TH E SECTION AND THE ACT BUT ALSO VARIOUS JUDICIAL DECISIONS OF THE HIGHER COURT S. 2) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AS WELL AS OF FACTS IN UPHOLDING THE ADDITION O F RS. 4,50,000/- MADE ON ACCOUNT OF DISALLOWANCE OF THE EXPENSES UNDER THE H EAD DIESEL, OIL AND LUBRICANTS. THE ADDITION MADE IS NOT ONLY EXCESSIVE AND UREASONABLE BUT ALSO ARBITRARY AND UNJUSTIFIED. 3) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AS WELL AS OF FACTS IN UPHOLDING THE ADDITION O F RS. 3,00,000/- MADE ON ACCOUNT OF DISALLOWANCE OF THE DRIVER EXPENSES. THE ADDITION MADE IS NOT ONLY EXCESSIVE AND UNREASONABLE BUT ALSO ARBITRARY AND UNJUSTIFIED. 4) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AS WELL AS OF FACTS IN UPHOLDING THE ADDITION O F RS. 1,25,000/- MADE ON ACCOUNT OF DISALLOWANCE OF THE REPAIR AND MAINTENAN CE EXPENSES. THE ADDITION MADE IS NOT ONLY EXCESSIVE AND UNREASONABL E BUT ALSO ARBITRARY AND UNJUSTIFIED. 3 5. GROUND NO. 2 AND 3 HAVE NOT BEEN PRESSED BEFORE US AND ARE HEREBY TREATED AS DISMISSED. 6. GROUND NO. 1 RELATES TO DISALLOWANCE U/S 40(A)(I A) OF RS. 4,39,462/-. 7. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT H AD NOT DEDUCTED TAX AT SOURCE ON INTEREST PAID OF RS. 4,39,462/- TO THREE NBFCS NAMELY M/S CHOLAMANDALUM INVESTMENT, M/S G.E. CAPITAL, & M/S J AY BHARAT CREDIT LTD. THE AO DISALLOWED THE SAME U/S 40(A)(IA) OF THE ACT. BE FORE THE LD. CIT(A) NO SUBMISSIONS WERE MADE BY THE ASSESSEE AND THE LD. C IT(A) UPHELD THE DISALLOWANCE BY STATING THAT : (A) AS PER THE PROVISIONS OF SECTION 194 A OF THE I NCOME TAX ACT THE ASSESSEE WAS LIABLE TO DEDUCT TAX ON ALL PAYMENTS EXCEEDING RS. 5,000/-. (B) THE ASSESSEE DID NOT FALL UNDER ANY OF THE EXCE PTION GIVEN IN SECTION 194A(3)(III) AND (C) THE DISALLOWANCE U/S 40(A)(IA) HAD TO BE MADE E VEN ON SUMS NOT PAID DURING THE YEAR. 8. BEFORE US THE LD. AR CONTENDED THAT THE IMPUGNED INTEREST HAD BEEN DISCLOSED BY THE PAYEES I.E; THE NBFCS, IN THEIR RE TURN OF INCOME FILED FOR THE YEAR AND ALL DUE TAXES THEREON HAD BEEN PAID. THEREFORE, THE LD. AR CONTENDED, THAT AS PER THE SECOND PROVISO TO SECTION 40(A)(IA) , IT SHOULD BE DEEMED THAT THE ASSESSEE HAD DEDUCTED AND PAID THE TAX ON THE I MPUGNED SUMS AND THUS NO DISALLOWANCE U/S 40(A)(IA) SHOULD BE MADE. THE L D. AR FURTHER CONTENDED THAT THOUGH THE SECOND PROVISO TO SECTION 40(A)(IA) HAD COME ON THE STATUTE BY VIRTUE OF THE FINANCE ACT 2012, WITH EFFECT FROM 01 /04/2013, BUT THE SAME BEING CURATIVE IN NATURE HAD TO BE TREATED AS RETROSPECTI VE. HE PLACED RELIANCE ON THE FOLLOWING CASES IN SUPPORT OF HIS ABOVE PROPOSITION . 1. RAJEEV KUMAR AGARWAL VS. ACIT, IN ITA NO. 337/AGRA/ 2013 4 2. ITO VS. DR. JAIDEEP KUMAR SHARMA, IN ITA NO. 3893/D ELHI/2010 & 5696/DELHI/2011 3. ACIT VS. RAJA CHKRAVARTY, IN ITA NO. 49/LKW/2013 9. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF LD. CIT(A). 10. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. 11. WE FIND THAT THE ASSESSEE HAS IN THE IMPUGNED C ASE SOUGHT TO TAKE BENEFIT OF THE SECOND PROVISO TO SECTION 40(A)(IA) AGAINST THE DISALLOWANCE MADE. THE SECOND PROVISO GRANTS IMMUNITY FROM THE R IGOURS SECTION 40(A)(IA), TO THOSE ASSESSEES WHO ARE NOT DEEMED TO BE ASSESSEE S IN DEFAULT UNDER THE FIRST PROVISO TO SECTION 201. THE FIRST PROVISO TO SECTIO N 201, IN TURN STATES AS FOLLOWS: 201. (1) WHERE ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY,- (A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT; OR (B) REFERRED TO IN SUB-SECTION (1A) OF SECTION 192, BEING AN EMPLOYER, DOES NOT DEDUCT, OR DOES NOT PAY, OR AFTER SO DEDUCTING FAIL S TO PAY, THE WHOLE OR ANY PART OF THE TAX, AS REQUIRED BY OR UNDER THIS ACT, THEN, SUCH PERSON, SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY IN CUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX. PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL O FFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCOR DANCE WITH THE PROVISIONS OF THIS CHAPTER ON THE SUM PAID TO A RESIDENT OR ON TH E SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT- (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTIO N 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED B Y HIM IN SUCH RETURN OF INCOME, 12. A CONJOINT READING OF THE FIRST PROVISO TO SECT ION 201 AND THE SECOND PROVISO TO SECTION 40(A)(IA) MAKES IT CLEAR THAT TO TAKE BENEFIT OF THE SECOND PROVISO TO SECTION 40(A)(IA), THE THREE CONDITIONS STATED IN THE FIRST PROVISO TO SECTION 201 HAVE TO BE FULFILLED I.E; THE PAYEE OUG HT TO HAVE FURNISHED HIS RETURN OF INCOME U/S 139 INCLUDING IMPUGNED SUMS IN ITS IN COME, AND PAID TAXES THEREON. DURING THE COURSE OF HEARING BEFORE US THE LD. AR WAS ASKED BY THE BENCH TO PRODUCE EVIDENCE OF THE FACT THAT THE PAYE ES IN HIS CASE, I.E; THE 5 NBFCS, HAD FURNISHED THEIR RETURN U/S 139 TAKING IN TO ACCOUNT THE INTEREST INCOME EARNED FROM THE ASSESSEE AND PAID TAXES THEREON. TH E LD. AR WAS GIVEN NUMBER OF OPPORTUNITIES FOR THE SAME. THE CASE WAS INITIA LLY FIXED FOR HEARING ON 19/03/2015 AND WAS ON REQUEST OF THE LD. AR ADJOURN ED TO 08/06/2015. ON 08/06/2015 AGAIN ON REQUEST OF THE LD. AR THE CASE WAS ADJOURNED TO 18/08/2015. ON 18/08/2015 THE LD. AR FAILED TO ADD UCE ANY EVIDENCE IN SUPPORT OF HIS CONTENTION. 13. IN VIEW OF THE SAME WE ARE UNABLE TO AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THE SECOND PROVISO TO SECTION 40(A)(I A) IS APPLICABLE IN THIS CASE. WE THEREFORE UPHOLD THE DISALLOWANCE MADE U/S 40(A) (IA) OF RS. 439462/- AND DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 14. GROUND NO. 4 DEALS WITH ADDITION OF RS. 1,25,00 0/- MADE OUT OF REPAIR AND MAINTENANCE EXPENSES. DURING THE IMPUGNED AY THE AS SESSEE HAD DEBITED A SUM OF RS. 56,78,342/- ON ACCOUNT OF REPAIR & MAINT ENANCE EXPENSES. THE AO FOUND THAT THESE EXPENSES WERE NOT PROPERLY VOUCHED AND THE VOUCHER SUBMITTED BY THE ASSESSEE WERE INCLUSIVE OF KATCHA BILLS AND ALSO SELF MADE VOUCHERS. SINCE THE CORRECTNESS OF THE EXPENSES COU LD NOT BE VERIFIED THE AO DISALLOWED A SUM OF RS. 1,25,000/- OUT OF THE SAME. IN APPELLATE PROCEEDINGS THE ASSESSEE DID NOT TAKE A SPECIFIC GROUND AGAINST THE DISALLOWANCE AND THEREFORE THE LD. CIT(A) DID NOT ADJUDICATE ON THIS ISSUE. 15. BEFORE US THE LD. AR PLEADED THAT THE ENTIRE EX PENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS AND WAS THEREFORE ALLOWABLE U/S 37(1) OF THE ACT. HE FURTHER AGREED THAT THE DISALLOWANCE MADE WAS PUREL Y ADHOC AND WITHOUT ANY BASIS AND AS SUCH COULD NOT BE SUSTAINED. 6 16. WE FIND THAT THE FACT REMAINS THAT THE REPAIR A ND MAINTENANCE EXPENSES WERE NOT PROPERLY VOUCHED AND SUPPORTED. THE ASSESS EE HAS THEREFORE NOT BEEN ABLE TO SUBSTANTIATE HIS CLAIM OF THE IMPUGNED EXPE NSES. IT IS SETTLED LAW THAT FOR THE PURPOSE OF CLAIMING AN EXPENDITURE THE BURDEN O F PROVING THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS IS ON THE ASSESSEE. SINCE IN THE PRESENT C ASE THE ASSESSE HAS FAILED TO DISCHARGE THIS ONUS, THE CLAIM OF THE ASSESSEE IS N OT ALLOWABLE. MOREOVER, WE FIND THAT THE DISALLOWANCE MADE IS REASONABLE, IN T HE PRESENT FACTS OF THE CASE, BEING ONLY 2% APPROX.. OF THE EXPENSE INCURRED. WE THEREFORE UPHOLD THE DISALLOWANCE OF RS. 1,25,000/- ON ACCOUNT OF REPAIR & MAINTENANCE EXPENSES. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREFORE DISMISSED. 17. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DIS MISSED. ITA NO. 51/CHANDI/2015 18. IN THIS APPEAL THE ASSESSEE HAS RAISED FIVE GRO UNDS OUT OF WHICH GROUND NO. 1 TO 4 ARE ON IDENTICAL ISSUES AS RAISED IN ITA NO. 50/CHANDI/2015 DEALT WITH ABOVE. 19. GROUND NO. 1 IS AGAINST DISALLOWANCE OF RS. 6,2 7,708/- UNDER SECTION 40(A)(IA) OF THE ACT. 20. SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN GROUND NO. 1 OF ITA NO. 50/CHD/201 5 DEALT ABOVE IN PARA 6-13. FOLLOWING THE SAME WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. THIS GROUND OF APPEAL OF THE ASSESSEE THEREFORE STANDS DISMISSED. 21. GROUND NO. 2 RELATES TO DISALLOWANCE MADE OF RS . 3,00,000/- ON ACCOUNT OF DIESEL, OIL AND LUBRICANTS. 7 22. BRIEF FACTS ARE THAT THE APPELLANT HAD DEBITED AN AMOUNT OF RS. 502.41 LACS TO THE P&L ACCOUNT UNDER THE HEAD DIESEL, OIL AND LUBRICANTS. THE AO DISALLOWED A SUM OF RS. 3 LACS OUT OF THE SAME FOR THE REASON THAT THE EXPENSES WERE NOT PROPERLY VOUCHED AND NO LOG BOOKS FOR THE TRUCKS WERE PRODUCED FOR VERIFICATION OF THE ACTUAL CONSUMPTION OF DIESEL, O IL AND LUBRICANTS. 23. LD. CIT(A) UPHELD THE DISALLOWANCE AT PARA 5.2 OF HIS ORDER BY HOLDING: NO SUBMISSION HAS BEEN FILED IN THE APPELLATE PRO CEEDINGS. THE APPELLANT HAD NOT MAINTAINED LOG BOOKS OF TRUCKS AND SO IT WAS NO T POSSIBLE TO ASCERTAIN THE ACTUAL CONSUMPTION OF DIESEL, OIL AND LUBRICANTS. T HE ASSESSING OFFICER HAS DISALLOWED ONLY RS. 3,00,000/- OUT OF THE EXPENDITU RE CLAIMED OF MORE THAN RS. 5 CRORES, WHICH WORKS OUT TO 0..6% ONLY. IT IS NOTEWO RTHY THAT THE APPELLANT HAD NOT FILED APPEAL AGAINST DISALLOWANCE OF RS. 4,50,000/- OUT OF THE EXPENDITURE CLAIMED OF MORE THAN RS. 5 CRORES UNDER THIS HEAD IN THE PR ECEDING YEAR. BE AS IT MAY, THE ASSESSING OFFICER HAS BEEN QUITE REASONABLE IN DISA LLOWING A VERY SMALL AMOUNT IN VIEW OF THE DISCREPANCIES NOTICED BY HER AND SO THE DISALLOWANCE MADE OUT OF DIESEL, OIL AND LUBRICANTS EXPENSES IS CONFIRMED. 24. BEFORE US THE LD. AR ARGUED THAT THE ENTIRE EXP ENSE WAS INCURRED FOR THE PURPOSE OF THE BUSINESS AND WAS HENCE ALLOWABLE. H E FURTHER ARGUED THAT THE DISALLOWANCE WAS MADE ON AN ADHOC BASIS AND WAS THE REFORE NOT SUSTAINABLE. 25. THE LD. DR ON THE OTHER HAND RELIED ON THE DECI SION OF LD. CIT(A). 26. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. 27. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS FAIL ED TO ADDUCE ADEQUATE EVIDENCES IN SUPPORT OF HIS CLAIM OF DIESEL OIL & L UBRICANT EXPENSES. THE ONUS WAS ON THE ASSESSEE TO SUBSTANTIATE HIS CLAIM OF EXPENS ES. HAVING FAILED TO DO SO WE FIND THAT THE CLAIM OF THE ASSESSEE WAS NOT ALLOWAB LE. MOREOVER WE ARE IN AGREEMENT WITH THE LD. CIT(A) THAT THE DISALLOWANC E MADE IS QUITE REASONABLE BEING A VERY SMALL AMOUNT I.E. 0.26% OF THE TOTAL E XPENSES CLAIMED. WE THEREFORE UPHOLD THE DISALLOWANCE OF RS. 3 LACS OF DIESEL, OIL & LUBRICANT EXPENSES. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREFORE DISMISSED. 28. GROUND NO. 3 HAS NOT BEEN PRESSED BEFORE US AND IS HEREBY DISMISSED. 8 29. GROUND NO. 4 RELATES TO DISALLOWANCE MADE OF RS . 2,00,000/- ON ACCOUNT OF REPAIR & MAINTENANCE. 30. SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN GROUND NO. 4 OF ITA NO. 50/CHANDI/ 2015 AT PARA 14-16. FOLLOWING THE SAME WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 31. THIS GROUND OF APPEAL OF ASSESSEE IS THEREFORE DISMISSED. 32. GROUND NO. 5 IS AGAINST THE ADDITION OF RS. 3, 23,800/-, MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) O F THE INCOME TAX ACT, 1961. 33. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE DEBITED INTEREST OF RS. 37,16,430/- TO THE P&L ACCOUNT ON ACCOUNT OF LOANS TAKEN. THE AO NOTICED THAT THE APPELLANT HAD GIVEN INTEREST FREE ADVANCES FOR NON BUSINESS PURPOSES TO THE FAMILY MEMBERS AND SO SHE DISALLOWED PROPORTIONATE INTEREST @ 10% UNDER SECTION 36(1)(III) OF THE ACT. DURING APPELLATE PRO CEEDINGS NO SUBMISSIONS WERE FILED AND THE LD. CIT(A) UPHELD THE DISALLOWANCE RE LYING UPON THE JUDGEMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. 286 ITR 1. 34. BEFORE US THE LD. AR IN THE COURSE OF ARGUMENT ADMITTED THAT THERE WAS NO COMMERCIAL EXPEDIENCY IN MAKING THE ADVANCES BUT THE LD. AR ARGUED THAT IT HAD ENOUGH INTEREST FREE FUNDS IN THE FORM OF OW N CAPITAL AMOUNTING TO RS. 1.78 CRORES TO FINANCE THE INTEREST FREE LOANS MADE DURING THE YEAR AMOUNTING TO RS. 32.38 LACS WHICH WAS REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE AT PAPER BOOK PAGE NO.5. THE LD. AR ARGUED THAT THE INTEREST BEARING FUNDS WERE USED TO ACQUIRE ASSETS OF THE ASSESSEE. HE ARGUED THAT OUT OF THE TOTAL FIXED ASSETS OF APPROXIMATELY RS. 2.9 CRORES AS ON 31/03/2009, RS. 2.48 CRORES RELATED TO TRUCK AND VEHICLES OWNED BY THE ASSESSEE . THE LD. AR PLEADED THAT 9 THE SAME WERE FINANCED BY SECURED LOANS ARE AMOUNTE D TO RS. 2.30 CRORES (APPROX). THEREFORE THE INTEREST FREE FUNDS IN THE FORM OF THE CAPITAL OF THE ASSESSEE WERE FREELY AVAILABLE FOR FINANCING THE IN TEREST FREE LOANS GIVEN BY THE ASSESSEE. RELYING UPON THE JUDGMENT OF THE ITAT RAJ KOT BENCH IN CASE OF MAHESHWARI HANDLING AGENCY (P.) LTD. VS. ACIT IN IT A NO. 854/RJT/2009, THE LD. AR PLEADED THAT WHERE THE ASSESSEE HAD SUFFICIENT I NTEREST FREE FUNDS IN THE FORM OF CAPITAL AND RESERVES AGAINST INTEREST FREE ADVAN CES THE DISALLOWANCE OF INTEREST CLAIMED WAS NOT JUSTIFIED. 35. ON THE OTHER HAND LD. DR RELIED ON THE ORDER OF LD. CIT(A). 36. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. THE AO DISALLOWED INTEREST BY HOLDING AT PARA 6 OF HIS ORD ER : ASSESSEES OWN CAPITAL IN THE BALANCE SHEET IS RS . 1.78 CRORE (OPENING BALANCE RS. 1.49 CR. ) ALL OTHER FUNDS ARE INTEREST BEARING SECURED LOANS / UNSECURED LOANS. THE FIXED ASSETS ALONE ARE TO THE TUNE OF RS. 2.90 CRORE WHICH SHOWS THE ENTIRE CAPITAL (INTEREST-FREE) OF THE ASS ESSEE LIES LOCKED IN FIXED ASSETS. IN VIEW OF ABOVE, INTEREST DEBITED TO P&L ACCOUNT PROP ORTIONATE TO INTEREST @ 10% ON THE ABOVE NON BUSINESS LOANS AND ADVANCES IS DIS ALLOWED U/S 36(1)(III) TO THE EXTENT OF RS. 3,23,800/-. NO SUBMISSION WERE MADE BY THE ASSESEE BEFORE THE L D. CIT(A), WHO UPHELD THE ADDITION APPLYING THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES 286 ITR 1. OUR ATTENTIO N WAS INVITED TO THE FACT THAT THE ASSESSEE HAD INTEREST FREE OWNED FUNDS OF RS. 1 .78 CRORES WHILE THE INTEREST FREE ADVANCES AMOUNTED TO RS.32.38 LACS. ON A SIMIL AR FACTUAL MATRIX THE HON. PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT E NTERPRISES PVT. LTD. VS CIT JALANDHAR IN ITA NO. 224 OF 2013 9O&M) HAS HELD AT PARA 16 & 18 OF THE ORDER AS FOLLOWS; 16. AS WE NOTED EARLIER, THE FUNDS/RESERVES OF TH E APPELLANT WERE SUFFICIENT TO COVER THE INTEREST FREE ADVANCES MADE BY IT OF RS. 10.29 CRORES TO ITS SISTER COMPANY. WE ARE ENTIRELY IN AGREEMENT WITH THE JUDG MENT OF THE BOMBAY HIGH COURT IN COMMISSIONER OF INCOME TAX VS. RELIANCE UT ILITIES & POWER LTD., (2009) 313 10 ITR 340, PARA-10, THAT IF THERE ARE INTEREST FREE F UNDS AVAILABLE A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF THE INT EREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY IF THE INTEREST FREE FUN DS WERE SUFFICIENT TO MEET THE INVESTMENT. . 18. IN THE CIRCUMSTANCES, THE QUESTION OF LAW IS AN SWERED IN FAVOUR OF THE APPELLANT AND AGAINST THE DEPARTMENT. THE ORDER OF THE TRIBUNAL IS SET ASIDE. THE APPELLANT SHALL BE ENTITLED TO THE DEDUCTION UNDER SECTION 36(1)(III). THERE SHALL, HOWEVER, BE NO ORDER AS TO COSTS. HOWEVER IN THE PRESENT CASE THE FACT THAT THE ASSES SEE HAD ENOUGH INTEREST FREE FUNDS TO FINANCE THE INTEREST FREE ADVANCES WAS NEI THER BEFORE THE AO NOR THE CIT(A). THEREFORE THERE WAS NO OCCASION BEFORE ANY OF THE LOWER AUTHORITIES TO ADJUDICATE UPON THE SAME. IN THE INTEREST OF JUSTIC E WE RESTORE THE ISSUE TO THE FILE OF THE AO TO ADJUDICATE THE ISSUE IN VIEW OF T HE ABOVE STATED JUDGMENT OF THE JURISDICTIONAL HIGH COURT. THIS GROUND OF APPE AL OF THE ASSESSEE IS THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 37. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ITA NO. 52/CHD/2015 38. IN THIS APPEAL THE ASSESSEE HAS RAISED THREE SU BSTANTIAL GROUNDS ALL OF WHICH ARE ON IDENTICAL ISSUES DEALT WITH IN ITA NO. 50 AND 51/CHD/2015 OF THE ASSESSEES APPEAL DEALT WITH ABOVE. 39. GROUND NO. 1 IS AGAINST DISALLOWANCE OF RS. 2,8 9,604/- MADE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. SINCE THE ISSUE AS WEL L AS CONTENTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US AT GROUND NO.1 OF IT A NO. 50/CHD/2015 AT PARA 6-13 , FOLLOWING THE SAME WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 40. THIS GROUND OF APPEAL OF THE ASSESSEE THEREFORE STANDS DISMISSED. 41. GROUND NO. 2 IS AGAINST THE ADDITION OF RS. 4,6 2,735/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(I)(III) OF THE INCO ME TAX ACT, 1961. SINCE THE ISSUE AS WELL AS CONTENTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US AT GROUND NO.5 OF ITA NO. 51/CHD/ 2015 AT PARA 32-36 DEALT WI TH ABOVE. FOLLOWING THE SAME WE RESTORE THIS ISSUE BACK TO THE FILE OF THE AO. 11 42. THIS GROUND OF APPEAL OF THE ASSESSEE THEREFORE STANDS ALLOWED FOR STATISTICAL PURPOSES. 43. GROUND NO. 3 IS AGAINST THE DISALLOWANCE OF RS. 2,00,000/- OUT OF DIESEL, OIL AND LUBRICANTS AND REPAIR & MAINTENANCE. 44. SINCE THE ISSUE AS WELL AS CONTENTIONS REMAIN T HE SAME AS HAS BEEN DECIDED BY US AT GROUND NO. 2 OF ITA NO. 51/CHD/20 15 AT PARA 21-27 AND GROUND NO. 4 OF ITA NO. 50/CHD/2015 AT PARA 14-16 D EALT WITH ABOVE. FOLLOWING THE SAME WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. THIS GROUND OF APPEAL THEREFORE STANDS DISMISSED. 45. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 53/CHD/2015 46. IN THIS APPEAL THE ASSESSEE HAS RAISED FIVE SUB STANTIAL GROUNDS OF APPEAL OUT OF WHICH GROUND NO. 1, 2 AND 4 ARE ON IDENTICA L ISSUES RAISED IN ITA NO. 50/CHD/2015 AND ITA NO. 51/CHD/2015 OF THE ASSESSEE S APPEAL DEALT WITH ABOVE. 47. GROUND NO. 1 IS AGAINST DISALLOWANCE OF INTERES T AMOUNTING TO RS. 3,56,337/- U/S 36(I)(III) OF THE INCOME TAX ACT 196 1. 48. SINCE THE ISSUE AS WELL AS CONTENTIONS REMAIN T HE SAME AS HAS BEEN DECIDED BY US AT GROUND NO.5 OF ITA NO. 51/CHD/ 201 5 AT PARA 32-36 DEALT WITH ABOVE. FOLLOWING THE SAME WE RESTORE THIS ISSUE BAC K TO THE FILE OF THE AO. 12 49. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREF ORE ALLOWED FOR STATISTICAL PURPOSES. 50. GROUND NO. 2 IS AGAINST DISALLOWANCE OF RS. 97, 145/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. SINCE THE ISSUE AS WELL AS CO NTENTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US AT GROUND NO.1 OF ITA NO. 50 /CHD/2015 AT PARA 6-13, FOLLOWING THE SAME WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 51. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREF ORE DISMISSED. 52. GROUND NO. 3 IS AGAINST DISALLOWANCE OF RS. 2,4 7,200/- MADE ON ACCOUNT OF DRIVERS SALARY. 53. DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSE E HAD CLAIMED TRUCK DRIVERS SALARIES OF RS. 1,08,28,896/-. THE AO NOTED THAT IN SOME CASES THE ASSESSEE HAD CLAIMED EXPENSES ON ACCOUNT OF DRIVERS SALARY W ITH EFFECT FROM 01/04/2010, WHEREAS THE TRUCKS WERE PURCHASED IN THE MIDDLE OF THE YEAR. THE AO THEREFORE DISALLOWED EXPENDITURE OF RS. 2,47,200/- RELATING T O THE PERIOD FOR WHICH THESE TRUCKS WERE NOT IN EXISTENCE WITH THE ASSESSEE. 54. THE LD. CIT(A) UPHELD THE DISALLOWANCE HOLDING AT PARA 5.2 OF HIS ORDER AS FOLLOWS : NO SUBMISSION HAS BEEN FILED IN THE APPELLATE PRO CEEDINGS. THE APPELLANT HAD CLAIMED DRIVERS SALARY-EXPENSES EVEN FOR THE PERIOD FOR WHI CH SOME OF THE TRUCKS WERE NOT IN EXISTENCE, SINCE THE SAME WERE PURCHASED ON LATER D ATES. THE EXPENDITURE CLAIMED BY THE APPELLANT WAS OBVIOUSLY BOGUS EXPENDITURE AND A SSESSING OFFICER HAS RIGHTLY DISALLOWED THE SAME. THE DISALLOWANCE MADE OF RS. 2 ,47,200/- ON THIS ACCOUNT IS ACCORDINGLY UPHELD. 55. WE HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW AND THE DOCUMENTS PLACED BEFORE US. 13 56. WE FIND THAT IT IS UNDISPUTED THAT THE TRUCKS WERE PURCHASED IN THE MIDDLE OF THE YEAR. IT IS ALSO UNDISPUTED THAT SALARY AMOU NTING TO RS. 2,47,200/- RELATED TO THE PERIOD WHEN THE TRUCKS WERE NOT AVAILABLE WITH THE ASSESSEE. IN VIEW OF THESE FACTS THE EXPENDITURE CLAIMED BY THE ASSESSEE IS CLEARLY BOGUS AND THE SAME HAS BEEN RIGHTLY DISALLOWED. WE THEREFORE UPHO LD THE DISALLOWANCE MADE ON ACCOUNT OF SALARY EXPENSES AMOUNTING TO RS. 2,47 ,200/- THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREFORE IS DISMISSED. 57. GROUND NO. 4 IS AGAINST THE DISALLOWANCE OF RS. 3,36,000/- MADE ON ACCOUNT OF FREIGHT CHARGES PAID. 58 BRIEF FACTS OF THE CASE ARE THAT DURING ASSESSME NT PROCEEDING IT WAS NOTICED BY THE AO THAT OUT OF TOTAL FREIGHT PAID BY THE ASSESSEE DURING THE IMPUGNED AY AMOUNTING TO RS. 7,50,41,471/- IN RESPE CT OF TRUCKS HIRED THROUGH TRUCKS UNIONS, CERTAIN PAYMENTS WERE MADE IN RESPE CT OF TRUCK NUMBERS WHICH ACTUALLY BELONGED TO THE ASSESSEE. THE AO WORKED OU T THE AMOUNT IN RESPECT OF THESE TRUCKS AT RS. 3,36,000/- AND DISALLOWED THE S AME. 59. THE CIT(A) UPHELD THE DISALLOWANCE MADE BY THE AO HOLDING TO THE SAME TO BE BOGUS EXPENDITURE IN THE ABSENCE OF ANY EVIDE NCE TO THE CONTRARY BROUGHT ON RECORD BY THE ASSESSEE. 60. WE HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. 61. WE FIND THAT THE FACT THAT PAYMENTS AMOUNTING T O RS. 3,36,000/- ON ACCOUNT OF FREIGHT WERE MADE IN RESPECT OF TRUCK NU MBERS WHICH ACTUALLY BELONGED TO THE ASSESSEE IS AN UNDISPUTED FACT. IN VIEW OF THE SAME THE 14 PAYMENT MADE ARE CLEARLY BOGUS AND THE DISALLOWANCE OF THE SAME HAS BEEN RIGHTLY MADE. WE THEREFORE UPHELD THE DISALLOWANCE MADE OF DRIVERS SALARY OF RS. 3,36,000/- GROUND OF APPEAL OF THE ASSESSEE IS DIS MISSED. 62. GROUND NO. 5 IS AGAINST THE ADDITION OF RS. 21, 17,817/- MADE ON THE GROUND THAT INCORRECT PAN WAS GIVEN OF DIFFERENT PA RTIES TO WHOM FREIGHT PAYMENT WAS MADE. DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE HAD FURNISHED INVALID PAN IN RESPECT OF PA YMENTS MADE TO SOME PERSONS TOWARDS FREIGHT. APPLYING THE PROVISIONS OF SECTION 206AA, THE AO HELD THAT TAX @20% HAD TO BE DEDUCTED ON THE AFORESTATED PAYMENTS AND SINCE THE SAME HAD NOT BEEN DEDUCTED BY THE ASSESSEE, THE PRO VISION OF SECTION 40(A)(IA) WERE ATTRACTED AND DISALLOWANCE OF THE WHOLE AMOUNT OF RS. 21,17,817/- WAS MADE BY THE AO. 63. LD. CIT(A) AGREED WITH THE FINDINGS OF THE AO A ND UPHELD THE DISALLOWANCE. 64. BEFORE US THE LD. AR PLEADED THAT THE INCORRECT PAN NUMBERS WERE WRONGLY FURNISHED DURING THE ASSESSMENT PROCEEDINGS . HE STATED THAT IN FACT THE PERSON TO WHOM IMPUGNED FREIGHT PAYMENT HAVE BEEN M ADE HAD VALID PAN NUMBERS. ON BEING ASKED BY THE BENCH TO PRODUCE THE SAME, THE LD. AR FAILED TO PRODUCE THE VALID PAN NUMBERS, DESPITE REPEATED OPPORTUNITIES GIVEN TO HIM AS NOTED IN GROUND NO. 1 OF ITA NO. 50/CHD/2015. 65. THE LD. DR RELIED ON THE ORDER OF LD. CIT(A). 15 66. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. 67. IT IS NOT IN DISPUTE THAT FREIGHT PAYMENT OF RS . 21,17,817/- WAS LIABLE TO TDS U/S 194C(6). AS PER THE AFORESTATED SECTION NO DEDU CTION ON ACCOUNT OF TDS IS REQUIRED TO BE MADE FOR ANY SUM CREDITED OR PAID TO A CONTRACTOR, DURING THE COURSE OF PLYING HIRE OR LEASING GOODS CARRIAGE IF THE CONTRACTOR FURNISHES HIS PAN TO THE PERSON PAYING OR CREDITED SUCH SUM. IN THE C ASE BEFORE US SINCE VALID PAN NUMBER HAD NOT BEEN FURNISHED BY THE PERSON TO WHOM FREIGHT HAD BEEN PAID AND DESPITE REPEATED OPPORTUNITIES THE ASSESSEE WAS UNABLE TO FURNISH THE CORRECT PAN, IT TANTAMOUNTED TO NO PAN HAVING BEEN FURNISHED AT ALL. IN VIEW OF THESE FACTS THE ASSESSEE WAS LIABLE TO DEDUCT TAX A S PER THE PRESCRIBED RATE UNDER SECTION 194C AND THE EXEMPTION GRANTED UNDER SUB SECTION 6 OF 194 C WAS TO BE DENIED TO THE ASSESSEE. THE ASSESSEE NOT HAVING DEDUCTED TDS AS PER THE PROVISIONS OF SECTION 194C, THE PROVISIONS OF S ECTION 40(A)(IA) WERE ATTRACTED. THEREFORE WE FIND THE DISALLOWANCE OF FREIGHT PAYME NT OF RS. 21,17,817/- HAS BEEN RIGHTLY MADE. 68. THIS GROUND OF APPEAL OF THE ASSESSEE IS HEREB Y DISMISSED. 69. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 03/09/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR