ACIT, Ajmer V. RAHUL PANCHOLI, Ajmer

ITA 949/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99335 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY MALICK
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Opportunity of being heard; Non-deduction of tax
• Section: 40A(3); 143(3); 194C; 131; 12

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 VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE:SHRI T.R. MEENA,AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 949/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 THE ACIT CIRCLE- 2 AJMER CUKE VS. SHRI RAHUL PANCHOLI PROP. M/S. RAHUL AGRO INDUSTRIES JHALKARI NAGAR,ALWAR GATE, AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ANPPP 5213 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO.4/JP/2014 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 949/JP/2013) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SHRI RAHUL PANCHOLI PROP. M/S. RAHUL AGRO INDUSTRIES JHALKARI NAGAR,ALWAR GATE, AJMER CUKE VS. THE ACIT CIRCLE- 2 AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ANPPP 5213 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI AJAY MALICK, JCIT -DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/09/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30/09/2015 VKNS'K@ ORDER PER T.R. MEENA, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST T HE ORDER OF THE LD. CIT(A), AJMER DATED 25-09-2013 FOR THE ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS FILED THE CROSS OBJECTION. ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 2 2.1 THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: - IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A), AJMER HAS ERRED IN:- 1. DELETING THE TRADING ADDITION OF RS. 97,77,900/- MADE BY THE AO AFTER REJECTING THE BOOKS OF ACCOUNT U/S 145(3) AS THE SPECIFIC DEFECTS HAD BEEN POINTED OUT BY THE AO; 2. DELETING THE ELECTRICITY EXPENSES OF RS. 80,092/ - MADE BY THE AO AS THERE IS VIOLATION OF SECTION 40A(3) OF THE I.T. ACT; 3. RESTRICTING THE ADDITION TO RS. 50,34/- AS AGAIN ST THE ADDITION MADE BY THE AO FOR RS. 4,79,532/- AS T HE ASSESSEE HIMSELF HAD SHOWN INADMISSIBLE EXPENSES U/ S 40(A) IN COLUMN 17(F) OF THE FORM 3CD REPORT; 4. DELETING THE ADDITION OF INTEREST EXPENSES OF RS . 85,950/- MADE BY THE AO WHEN THE ASSESSEE HAD FAILE D TO SUBMIT THE PROOF OF SUBMISSION OF FORM 15G TO TH E DEPARTMENT; 5. DELETING THE ADDITION OF RS. 7,39,409/- ON ACCOUNT OF SHORT WEIGHT EXPENSES MADE BY THE AO AS THE ASSESSEE FAILED TO FURNISH EVIDENCE BEFORE THE AO. 3.1 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN HI S C.O. 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING DISALLOWANCE OF TRANSPORTATION EXPENSES OF RS. 50,365/- PAID TO JAI BHARAT TRANSPORT COMPANY F OR GOODS TRANSPORTED BY TRUCK NO.RJ34G0246 U 40(A)(IA) 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF SALARY EXPENSES OF RS. 70,000/- PAID TO SHRI LOKESH MAHESHWARI. ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 3 4.1 THE FIRST GROUND OF THE REVENUE IS AGAINST DELE TION OF TRADING ADDITION OF RS. 97,77,900/- AFTER REJECTING THE BO OKS OF ACCOUNT U/S 145(3) BY THE AO. 4.2 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE D EALS IN PURCHASE AND SALE OF TILL. THE ASSESSEE FILED HIS RETURN OF INCO ME ON 30-09-2010 AT RS. 57,33,650/-. THE CASE OF THE ASSESSEE WAS SCRUTINIZ ED U/S 143(3) OF THE ACT. THE AO OBSERVED THAT THE ASSESSEE HAD NOT ENCL OSED THE AUDIT REPORT PRESCRIBED U/S 44AB OF THE ACT. THE ASSESSEE HAS SU BMITTED IN THE RETURN THAT THE CASE IS NOT AUDITABLE. THEREFORE, THE AO GAVE THE REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE WHETHER THE ASSESSEE'S CASE WAS LIABLE TO AUDITED OR NOT. THE ASSESSEE SUBMITTED BE FORE THE AO THAT THE CASE WAS AUDITED BY SHRI P.K. AJMER, PARTNER OF M/S . P.K. AJMERA & CO. ON 29-09-2009 BUT WHILE FILING THE RETURN COMPUTER CLERK HAD NOT MENTIONED THE NAME OF THE AUDITOR AND DUE TO HEAVY RUSH FOR SUBMITTING THE RETURN AT LAST DATE. THE AO ENQUIRED FROM M/S. PAWAN AJMER & COMPANY WHETHER HE HAD AUDITED THE ACCOUNTS OR NOT BUT HE HAS NOT RESPONDED TO THE AO AND NEITHER HE CONFIRMED NOR HE DENIED HAVING BEEN AUDITED THE CASE OF THE ASSESSEE. HE FURTHER OBSERV ED THAT THE AUDIT REPORT IS INCOMPLETE AND MANY ENCLOSURES AND SCHEDULES ARE NOT ENCLOSED WITH THE AUDIT REPORT I.E. QUANTITATIVE DETAILS OF GOODS , AUDITED AND CERTIFIED WHICH IS THE PART OF FORM NO. 3CD. HE FURTHER HELD THAT THE ASSESSEE DID ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 4 NOT MAINTAIN THE QUANTITATIVE DETAILS OF OPENING A ND CLOSING STOCK WITH VALUATION OF STOCK AND METHOD OF VALUATION AND THE ASSESSEE FAILED TO SUBMIT THE REQUIRED INFORMATION REGARDING METHOD OF VALUATION OF STOCK. THE AO OBSERVED THAT THE ASSESSEE HAD NOT DEDUCTED TAXES REGARDING TRANSPORTATION EXPENSES CLAIMED AND PAID T M/S. JAY PRABHA TRANSPORT COMPANY, TRUCK UNION, DAUSA AND J.K. TRANSPORT. THE TOTAL PAYMENT AMOUNTING TO RS. 4,79,532/- MADE TO THE TRANSPORTER S ON WHICH TAXES WERE NOT DEDUCTED. THE ASSESSEE HAD SUBMITTED FORM NO. 15G FOR NON- DEDUCTION OF TAX AS PER PROVISIONS OF SECTION 194 O F THE ACT. THE AO ASKED THE ASSESSEE TO FURNISH THE EVIDENCES WHETHER THIS CERTIFICATE WAS SUBMITTED BEFORE THE LD. CIT, AJMER OR ITO TDS, I F ANY BUT NO REPLY WAS SUBMITTED BY THE ASSESSEE. THE AO OBSERVED THAT THE ASSESSEE CLAIMED SALARY IN THE NAME OF SHRI LOKESH MAHESHWAR I AT RS. 1.20 LACS. HOWEVER, ON VERIFICATION OF THE VOUCHERS OF SALARY EXPENSES , IT WAS FOUND THAT THE SALARY EXPENSES VOUCHERS ARE WITHOUT THE SIGNATURE OF THE RECIPIENT. THE AO ISSUED SUMMON U/S 131 OF THE ACT TO VERIFY THE SALARY PAYMENT MADE IN THE NAME OF SHRI LOKESH MAHESHWARI WHICH WAS RETURNED BACK UNSERVED WITH THE REMARKS BY THE POST AL AUTHORITIES INCOMPLETE ADDRESS. THE ASSESSEE WAS ASKED TO F URNISH THE COMPLETE ADDRESS OF THE EMPLOYEE BUT THE ASSESSEE FAILED TO SUBMIT THE NEW ADDRESS OF THE EMPLOYEE BY CLAIMING THAT HE IS RESIDING IN BHILWADA. THE AO ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 5 OBSERVED WHILE EXAMINING THE LEDGER ACCOUNT OF CONS TRUCTION OF NEW BUILDING THAT MOSTLY PAYMENTS WERE MADE IN CASH AND ABOUT 60% PAYMENTS WERE MADE AND PAYMENTS VOUCHERS WERE PRODU CED WITHOUT SIGNATURE OF THE RECIPIENT TO ASCERTAIN THE AUTHENT ICITY OF THE PAYMENTS MADE. IN VIEW OF THE ABOVE DISCREPANCIES POINTED OU T BY THE AO, THE AO INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND REJECTED THE BOOK RESULT AND THUS APPLIED GROSS PROFIT RATE ON TOTAL TURNOVER @ 9.55% AS SHOWN IN THE LAST PREVIOUS YEAR. THUS THE AO MADE TRADING ADDITION OF RS. 97,99,900/- ON TURNOVER OF RS. 25,61,65,240/-. 4.3 BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAS DELETED THE AD DITION BY OBSERVING AT PAGE 3.3 OF HIS ORDER AS UNDER:- 3.3 I HAVE CONSIDERED THE CONTENTIONS OF TH APPEL LANT AS WELL AS ASSESSMENT ORDER. THE AO HAS OBSERVED THAT GROSS PROFIT RATE OF THE ASSESSEE HAS DECREASED FROM 9.55% IN T HE LAST YEAR TO 5.73% AND ACCORDINGLY ENHANCED THE GROSS PROFIT RAT E AFTER REJECTING THE BOOKS OF ACCOUNT. THE ASSESSEE HAS ME NTIONED THAT ALL THE BOOKS OF ACCOUNTS WERE MAINTAINED AND PRODUCED AS NOTED IN THE FIRST PAGE OF THE ASSESSMENT ORDER. THE BASIS R EASON FOR REDUCTION IN GROSS PROFIT RATE IS THAT PRICES OF TH E TILL/TILLI (SESAME SEEDS) ARE FLUCTUATING FROM YEAR TO YEAR AND MARGIN IN TILLI HAS REDUCED FROM 9.98% IN THE LAST YEAR TO 6.62% DURING THE CURRENT YEAR. IN THIS REGARD, MONTHLY PURCHASE AND SALE RAT E CHART WAS ALSO PRODUCED BEFORE THE AO IN SUPPORT OF THIS FACT AND AO HAS NOT CONTROVERTED THE ABOVE CLAIM OF THE ASSESSEE. FURTH ER, THE APPELLANT HAS POINTED OUT THAT GROSS PROFIT RATE 5. 73% OFFERED BY THE ASSESSEE IS BETTER THAN GROSS PROFIT OF 4.26% I N ASSESSMENT YEAR 2007-08. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSEE HAS SUPPORTED ITS BOO RESULTS BY PRODUCING THE BOOK S OF ACCOUNT ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 6 ALONGWITH THE BILLS FOR PURCHASE AND SALES AND EXPE NSES. NONE OF THESE TRANSACTIONS HAVE BEEN FOUND TO BE INCORRECT BY THE AO. IT HAS NOT BEEN SHOWN THAT PURCHASES ARE INFLATED, SAL ES ARE SUPPRESSED OR EXPENSES FORMING PART OF THE TRADING ACCOUNT ARE NON-GENUINE. FURTHER, IT IS SEEN THAT ASSESSEE HAS MAINTAINED TH E BOOKS OF ACCOUNT ALONGWITH THE STOCK REGISTER SUPPORTED BY T HE PURCHASE AND SALE BILLS. THOUGH THE AO HAS MENTIONED THAT IN COMPLETE AUDIT REPORT HAS BEEN SUBMITTED WITHOUT THE QUANTITATIVE DETAILS OF GOODS, THAT ITSELF CANNOT MADE THE ASSESSEE'S BOOS LIABLE TO REJECTION. THE AO HAS FURTHER MENTIONED THAT ASSESSEE HAS FAILED T O SUBMIT THE INFORMATION REGARDING STOCK VALUATION. HOWEVER, IT HAS BEEN POINTED OUT BY THE ASSESSEE THAT ALL THE PURCHASES AND SALES WERE ACCOUNTED BY THE ASSESSEE AND ENTERED IN THE BOOKS OF ACCOUNT AD STOCK REGISTER WAS MAINTAINED. THE AVERAGE RATE OF THE CLOSING STOCK IS RS. 67/- PER G WHEREAS THE AVERAGE PURCHAS E RATE IN THE MONTH OF MARCH IS RS. 64.93 PER KG. THE AO HAS ANAL YZED THE PURCHASE AN SALE BILLS TO SHOW THAT THERE WAS SUPPR ESSION OF THE CLOSING STOCK. AS REGARDING THE OTHER REASONS, THE APPELLANT HAS POINTED OUT THAT TDS ON TRANSPORT PAYMENT OR UN-VER IFIABILITY OF SALARY PAYMENT/ CONSTRUCTION EXPENSES HAVE NO RELEV ANCE WITH THE TRADING RESULTS. IT IS APPARENT THAT NON-DEDUCTION OF TAX U/S 194C TO THE TRANSPORTERS AD ON THE INTEREST PAYMENT U/S 194 A CANNOT BE THE REASON FOR THE REJECTION OF BOOKS OF ACCOUNT. FURTH ER, SALARY PAYMENT TO ONE EMPLOYEE I.E. SHRI LOKESH MAHESHWARI HAS BEEN SEPARATELY DISALLOWED BY THE AO. THE EXPENSES INCUR RED FOR CONSTRUCTION OF NEW BUILDING DO NOT EFFECT THE GROS S PROFIT RATE OF THE ASSESSEE AND CANNOT BE THE REASON FOR REJECTING THE TRADING RESULTS. IN VIEW OF THE ABOVE DISCUSSIONS, IT CANNOT BE SAID THAT ACCOUNTS MAINTAINED BY THE ASSESSEE ARE INCORRECT O R INCOMPLETE AND INCOME CANNOT BE PROPERLY DETERMINED FROM METHO D EMPLOYED BY THE ASSESSEE. IN THIS CONTEXT, IT HAS BEEN HELD IN THE CASE OF MALANI RAMJIVAN JAGANNATH VS. ACIT, 316 ITR 120 (RA J.) AS UNDER: (HEADNOTE) ACCOUNTS REJECTION ESTIMATION OF GROSS PROFIT RATE QUANTUM AND VALUE OF PURCHASE AND SALES WERE NOT DISPUTED INASMUCH AS THEY WERE FOUND TO BE FULLY VO UCHED VALUE OF OPENING STOCK ALSO CANNOT BE DISPUTED AS I T IS THE ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 7 CLOSING STOCK OF THE PREVIOUS YEAR INVENTORY OF CLOSING STOCK WAS ALSO NOT FOUND TO BE INCORRECT THUS, TH ERE BEING NO DISPUTE REGARDING PURCHASES AND SALES, NON-MAINT ENANCE OF STOCK REGISTER LOSS SIGNIFICANCE SO FAR AS DETER MINATION OF GP IS CONCERNED- ALL THE LOWER AUTHORITIES HAVE ACC EPTED THE REASON FOR FALL IN GP RATE NAMELY, STIFF COMPETITIO N IN THE MARKET AND THE HUGE LOSS INCURRED BY ASSESSEE IN A PARTICULAR TRANSACTION THEREFORE, NEITHER THE REJ ECTION OF BOOKS OF ACCOUNT NOR ESTIMATION OF GP BY APPLICATIO N OF RULE OF THUMB WAS JUSTIFIED WHEN NONE OF THE DATA AND ENTRIES IN THE TRADING ACCOUNT HAS BEEN FOUND TO BE INCORRECT IN ANY MANNER, THE RESULT SHOWN BY THE ASSESSEE IN THE BOO KS OF ACCOUNT HAS TO BE TAKEN AS TRUE. IN VIEW OF THE ABOVE DISCUSSION, THE REJECTION OF T HE BOOKS OF ACCOUNT U/S 145(3) OF THE I.T. ACT IS NOT SUSTAINED . AS THE AO HAS MADE THE ADDITION ONLY DUE TO REJECTION OF BOOKS OF ACCOUNT WHICH HAS NOT BEEN SUSTAINED, THERE REMAINS NO OTHER REAS ON TO ENHANCE THE GROSS PROFIT RATE OF THE ASSESSEE WITHOUT THE E VIDENCE TO THIS EFFECT. ACCORDINGLY, THE ADDITION OF RS. 97,77,900/ - MADE BY THE AO IS DELETED. 4.4 NOW THE REVENUE IS BEFORE US WHEREIN THE LD. DR SUPPORTED THE ORDER OF THE AO AND ARGUED THAT THE ASSESSEE FAILED TO SUBMIT THE INFORMATION REGARD STOCK VALUATION DURING THE ASSES SMENT PROCEEDINGS. THE LD. CIT(A) ONLY ALLOWED THE APPEAL ON THE SUBMI SSIONS MADE BY THE ASSESSEE BEFORE HIM THAT ALL THE PURCHASES AND SALE S WERE ACCOUNTED BY THE ASSESSEE AND ENTRY IN THE BOOKS OF ACCOUNT AND STOCK REGISTER WAS MAINTAINED WITHOUT VERIFYING THE FACT. THE ASSESSEE 'S AUDIT REPORT WAS DEFECTIVE AS PER THE FORM PRESCRIBED IN FORM NO. 3 CD. THE AO VERIFIED FROM THE CA WHETHER HE HAS MADE AUDIT IN THIS CASE . THE CONCERNED CA HAS NOT RESPONDED TO THE NOTICE ISSUED BY THE AO WH ICH PROVES THAT ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 8 ASSESSEE'S BOOKS OF ACCOUNT WERE NOT PROPERLY AUDIT ED AND THUS THE AO INITIATED SEPARATE PENALTY PROCEEDINGS U/S 271B OF THE ACT. IT IS FURTHER ARGUED THAT THE ASSESSEE HAD CLAIMED SHORTAGE IN WE IGHT. THE SALARY EXPENSES WAS NOT VERIFIABLE AND EVEN THE TDS WAS NO T DEDUCTED ON TRANSPORTATION CHARGES CLAIMED AND PAID TO M/S. JAY PRABHA TRANSPORT CO., TRUCK UNION, DAUSA AND M/S. J.K. TRANSPORT. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF PRECEDI NG YEAR I.E. AT 9.98% WHICH HAS COME DOWN TO 6.62% IN THE YEAR UNDER CONS IDERATION. THUS THERE WAS NO SATISFACTORY EXPLANATION BEFORE THE AO ON THIS HEAVY DECLINE IN GROSS PROFIT RATE. IN THE END, THE LD. DR REQUES TED TO REVERSE THE ORDER OF THE LD. CIT(A). 4.5 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED AS UNDER:- 1. AT THE OUTSET IT MAY BE POINTED OUT THAT ASSES SEE HAS MAINTAINED DAY TO DAY CORRECT AND COMPLETE BOOKS OF ACCOUNT ALONGWITH THE DAY TO DAY STOCK REGISTER SUPPORTED B Y PURCHASE AND SALE BILLS. THEY WERE PRODUCED BEFORE THE AO AND EX AMINED BY HIM AS AFFIRMED ON PAGE 1 OF THE ASSESSMENT ORDER. NO D EFECT IS FOUND BY AO IN THESE BOOKS OF ACCOUNTS. THEREFORE SIMPLY BECAUSE THERE IS A DECLINE IN GP RATE DURING THE YEAR CANNOT BE G ROUND FOR MAKING THE TRADING ADDITION, WHEN NO DEFECT AS SUCH IS FOU ND IN THE TRADING ACCOUNT OF THE ASSESSEE. 2. SO FAR AS THE DECLINE IN G.P RATE AS COMPARED TO THE LAST YEAR IS CONCERNED, FROM THE TRADING ACCOUNT FOR AY 2008-09 AND AY 2009-10 ALONG WITH THE QUANTITY AND VALUE OF TIL LI PURCHASED AND SOLD PLACED AT PB 1-5, IT CAN BE NOTED THAT THE GROSS MARGIN IN ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 9 TILLI PURCHASED AND SOLD IN AY 08-09 WAS 9.98 % (44 .19- 39.78/44.19*100) WHEREAS IN AY 09-10 IT IS 6.62% (6 5.44- 61.11/65.44*100). THIS IS BECAUSE THE AVERAGE MARGI N HAVE DECLINED DURING THE YEAR AS COMPARED TO THE LAST YE AR THOUGH THERE IS INCREASE IN THE RATES OF PURCHASE AND SALES AS C OMPARED TO LAST YEAR. IT MAY BE NOTED THAT THE PRICES OF THE TILLI ARE FLUCTUATING AND GOVERNED BY MARKET FORCES. IN EACH MONTH RATHER ON EACH DAY THE PRICES FLUCTUATE AS IS EVIDENT FROM THE AVERAGE MON THLY PURCHASE AND SALE RATE CHART PLACED AT P.B 4-5 .THEREFORE, THERE CANNOT BE A CONSTANT MARGIN IN THIS TRADE. THIS CAN BE MORE PER CEIVED FROM THE GP RATE OF LAST THREE FINANCIAL YEARS, FROM WHICH I T CAN BE NOTED THAT IN AY 2007-08 THE GP RATE WAS 4.26%, WHICH INCREASE D TO 9.55 % IN THE AY 2008-09, BUT AGAIN DECLINED TO 5.73% IN A Y 2009-10 WHICH THOUGH LOWER AS COMPARED TO AY 2008-09 IS BET TER AS COMPARED TO AY 2007-08. IN THESE CIRCUMSTANCES WHE N THE ASSESSEE HAS MAINTAINED COMPLETE BOOKS OF ACCOUNT A ND THE STOCK RECORDS, APPLICATION OF SECTION 145(3) IS UNJUSTIFI ED AND CONSEQUENTLY,TRADING ADDITION MADE BY AO BY APPLICA TION OF GP RATE OF LAST YEAR IS UNWARRANTED. 3. THE OTHER REASONS GIVEN BY THE AO AS TO NON- DEDUCTION OF TDS ON TRANSPORT PAYMENT OR UNVERIFIAB ILITY OF SALARY PAYMENTS/CONSTRUCTION EXPENSES HAS NO RELEVANCE WIT H THE TRADING RESULTS DECLARED BY THE ASSESSEE MORE PARTICULARLY WHEN AO HAS SEPARATELY DISALLOWED THE EXPENSES ON THIS ACCOUNT. SO FAR AS THE VALUATION OF CLOSING STOCK IS CONCERNED, THE SAME H AS BEEN CONSISTENTLY VALUED AT MARKET RATE AS SPECIFIED IN FORM NO. 3CD OF TAX AUDIT REPORT. AT THE END OF THE YEAR, THE CLOSI NG STOCK WAS 300337 KG WHICH IS VALUED AT RS. 2,01,22,579/- GIVI NG AN AVERAGE RATE OF RS.67 PER KG WHEREAS THE AVERAGE MARKET RAT E OF PURCHASE FOR THE MONTH OF MARCH IS 64.93 PER KG. (PB 4). THUS THE VALUATION OF CLOSING STOCK IS FULLY VERIFIABLE FROM THE RECOR DS AVAILABLE BEFORE AO. HENCE FOR THESE REASONS ALSO APPLICATION OF SEC TION 145(3) IS NOT JUSTIFIED. 4. IT IS A SETTLED LAW THAT WHEN ASSESSEE HAS MAINT AINED COMPLETE AND PROPER BOOKS OF ACCOUNT FROM WHICH PRO FITS ARE DEDUCIBLE, SECTION 145(3) CANNOT BE INVOKED ONLY BE CAUSE THERE IS ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 10 DECLINE IN THE G.P RATE. FOR THIS RELIANCE IS PLACE D ON THE CASES RELIED BEFORE THE CIT(A). IN VIEW OF ABOVE, TRADING ADDITION OF RS.97,77,90 0/- MADE BY THE AO IS RIGHTLY DELETED BY CIT(A) AND THUS THE GR OUND OF THE DEPARTMENT BE DISMISSED. 4.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE GROSS PROFIT RATE OF THE A SSESSEE HAS SUBSTANTIALLY COME DOWN FROM PRECEDING YEAR WHICH WAS NOT EXPLAIN ED BEFORE THE AO. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT VIDE L ETTER RECEIVED ON 28-12- 2011 BY THE AO THAT GROSS PROFIT RATE HAS BEEN CALC ULATED @ 4.34% WHEREAS ACTUAL GROSS PROFIT RATE AS DECLARED IN TH IS YEAR IS 5.73%. NOW THE ASSESSEE HAS CLAIMED THE GROSS PROFIT RATE AT 6 .62% IN THE YEAR UNDER CONSIDERATION. THE LD. AR HAS PLACED DATA OF SALE A ND GROSS PROFIT AT SERIAL NO. 1 OF THE PAGE OF 1 OF PAPER BOOK WHICH SHOWS TH AT ON THAT BASIS WE CAN VERIFY THE GROSS PROFIT RATE WHICH COMES TO 5.7 3% DURING THE YEAR UNDER CONSIDERATION AND IT WAS AT 9.55% IN PRECEDIN G YEAR. THE ASSESSEE HAD MADE VALUATION OF CLOSING STOCK AT THE AVERAGE OF RS. 67/- PER KG WHEREAS HIS AVERAGE PURCHASES OF TILL DURING THE YE AR UNDER CONSIDERATION IS AT RS. 61.11 PER KG. THE VALUATION OF THE CLOSI NG STOCK IS MADE AT A HIGHER PRICE WHICH ALSO INCREASED THE GROSS PROFIT MEANING THEREBY THAT GROSS PROFIT WAS LESSER THAN DISCLOSED BY THE ASSES SEE. THE LD. CIT(A) SIMPLY ACCEPTED THE SUBMISSIONS WITHOUT MAKING ANY VERIFICATION ON THE ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 11 HUGE ADDITION MADE BY THE AO AND THERE IS NO WHISPE R IN HIS ORDER THAT ON WHAT BASIS HE HAS ACCEPTED THE SALES AND PURCHASES WITHOUT ANY VERIFICATION AND JUST ON THE SUBMISSIONS OF MADE BY THE ASSESSEE. THE VALUATION HAS NOT BEEN SUBMITTED BY THE ASSESSEE BE FORE THE AO. THE GROSS PROFIT FIGURE SHOWN BY THE ASSESSEE IS ALSO C ONTRADICTORY AT EVERY LEVEL. THERE WAS ALSO DISCREPANCY IN THE GROSS PROF IT DECLARED BY THE ASSESSEE IN THE RETURN FORM. THE LD. AR HAS ALSO N OT SUBMITTED THE SHORTAGE CHART AS WELL AS QUANTITY CHART OF LAST T WO YEARS. THE LD. AR HAS ALSO NOT FILED THE COPY OF EXPLANATION BEFORE THE B ENCH. HE ONLY FILED THE COPY OF THE LETTER WITHOUT DATE AND WITHOUT ANY SIG NATURE AT SERIAL NO. 6 & 7 OF THE PAPER BOOK. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE GROUND NO. 1 OF THE ASSESSEE TO THE FILE OF THE AO TO EXAM INE IT AFRESH BY PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE ASSESSEE IS ALSO DIRECTED TO PRODUCE THE RELEVANT R ECORDS TO VERIFY THE QUANTITY OF SALES AND PURCHASES AS WELL AS OPENING AND CLOSING STOCK BEFORE THE AO AND ALSO TO PRODUCE THE BOOKS OF ACCO UNT TO VERIFY THE GROSS PROFIT RATE. FURTHER IT SHOULD BE VERIFIED FR OM THE AUDITOR WHETHER HE HAS AUDITED THE BOOKS OF ACCOUNT OR NOT. IF YES, TH EN THE ASSESSEE'S EXPENSES FOR PAYMENT OF AUDITOR ARE ALSO REQUIRED T O BE VERIFIED. ACCORDINGLY, THIS GROUND NO. 1 OF THE REVENUE IS S ET ASIDE TO THE FILE OF THE AO FOR DE NOVO ADJUDICATION. ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 12 5.1 THE SECOND GROUND OF THE REVENUE IS THAT THE LD . CIT(A) HAS ERRED IN DELETING ELECTRICITY EXPENSES OF RS. 80,092/- U/ S 40A(3) OF THE ACT. 5.2 BRIEF FACTS OF THIS GROUND ARE THAT THE ASSESSE E MADE CASH PAYMENT OF RS. 80,092/- ON ACCOUNT OF ELECTRICITY EXPENSES . THE AO OBSERVED THAT SUCH EXPENSES PAID BY THE ASSESSEE ON ACCOUNT OF ELECTRICITY EXPENSES ARE NOT PERMISSIBLE U/S 40A(3) OF THE ACT. THEREFOR E, THE AO DISALLOWED THE EXPENSES OF RS. 80,092/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5.3 BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DELETED THE ELECTR ICITY EXPENSES OF RS. 80,092/- DISALLOWED BY THE AO BY FOLLOWING OBSERV ATIONS AT PARA 4.3 OF HIS ORDER. 4.3 I HAVE CONSIDERED THE CONTENTIONS OF THE APPE LLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN THAT THE ASSES SEE HAS PAID ELECTRICITY BILL OF RS. 80,092/- FOR THE MONTH OF N OV. 2008 AND IT WAS PAID IN CASH ON 01-12-2008 AS PER RECEIPT OF RA JASTHAN STATE ELECTRICITY BOARD. THE AMOUNT WAS PAID IN CASH AS I T WAS LAST DATE OF PAYMENT OTHERWISE ELECTRICITY CONNECTION WOULD H AVE BEEN DISCONNECTED AND THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT PAYMENT IS MADE TO THE GOVERNMENT. IN SUCH CIRCUMST ANCES, IT IS APPARENT THAT THE PAYMENT WAS MADE IN VIEW OF THE C ONSIDERATION OF THE BUSINESS EXPEDIENCY TO AVOID THE TERMINATION OF ELECTRICITY CONNECTION. IT IS APPARENT THAT IN SUCH CIRCUMSTANC ES THE SAID IS COVERED BY SECOND PROVISION TO SECTION 40A(3) OF TH E I.T. ACT. IT HAS BEEN HELD IN THE CASE OF R.C. GOYAL VS. CIT, 21 3 TAXMAN 305 (DEL.) (SUPRA) THAT CASH PAYMENTS MADE IN VIEW OF B USINESS EXPEDIENCY IS ALLOWABLE AS PER SECTION 40A(3) OF TH E I.T. ACT. IN VIEW OF ABOVE DISCUSSION, THE ADDITION MADE BY THE AO OF RS. 82,092/- IS DELETED. ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 13 5.4 THE LD. DR RELIED ON THE ORDER OF THE AO. 5.5 THE LD. AR OF THE ASSESSEE MAINLY CONTENDED THA T THE ASSESSEE HAS PAID THE ELECTRICITY BILL OF RS. 80,092/- FOR BILLI NG MONTH NOV. 2008 IN CASH ON 1.12.2008 VIDE R.NO. 30 TO RAJASTHAN STATE ELECTRICITY BOARD (RSEB). THE PAYMENT WAS MADE IN CASH AS IT WAS THE LAST DATE OF PAYMENT, OTHERWISE THE ELECTRICITY CONNECTION COULD HAVE BEEN DISCONNECTED. THE ASSESSEE WAS ALSO UNDER THE BONAF IDE BELIEF THAT PAYMENT IS MADE TO THE GOVERNMENT AND THEREFORE PAY MENT CAN BE MADE IN CASH. IN THESE CIRCUMSTANCES, WHEN PAYMENT IN CA SH HAS BEEN MADE DUE TO BUSINESS EXIGENCIES, NO DISALLOWANCE U/S 40A(3) R.W.R 6DD IS CALLED FOR. FOR THIS PREPOSITION, THE LD. AR OF THE ASSESS EE RELIED ON DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF R.C GOEL V S. CIT 213 TAXMAN 305 (DELHI) WHEREIN IT WAS HELD AS UNDER :- THE ASSESSEE ENGAGES ITSELF IN EXECUTING CATERING CONTRACTS FOR RAILWAY IN RESPECT OF TWO TRAINS. IN THOSE TRAINS, ITS PERSONNEL ARE DEPLOYED FOR SALE OF SMALL ARTICLES OF DAILY NECESS ITY AND USE TO THE PASSENGERS. PER FORCE, THE PAYMENTRECEIVED BY THEM ARE NECESSARILY IN CASH. THESE AMOUNTS ARE COLLECTED AN D IN TURN HANDED OVER TO THE ASSESSEE. THE ASSESSEE IN TERMS OF ITS CONTRACTS IS BOUND TO MAINTAIN CONSTANT SUPPLIES IN THE TRAIN S AND ENSURE THAT AT NO POINT IN TIME CAN THE PASSENGERS BE DEPRIVED OF THESE ARTICLES (WHICH ARE FOOD ARTICLES, SOFT DRINKS AND OTHER ITE MS NECESSARY FOR TRAVEL). IN THE COURSE OF SUCH TRANSACTIONS, IT SOU RCES THESE ARTICLES FROM SR. APPARENTLY, THAT CONCERN IS ALSO A SMALL T IME ONE AND INSISTS ON CASH PAYMENTS FOR ENSURING CONTINUITY AN D TIMELY ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 14 SUPPLIES. WHILST, THE COURT IS CONSCIOUS AND DOES N OT IN ANY MANNER WISH TO COMMENT ADVERSELY ON THE LARGER PUBL IC INTEREST ELEMENT EMBEDDED IN S.40A AND THE UNDERLYING PRINCI PLE, AT THE SAME TIME, THE COURT ALSO NOTES THAT THE PROVISO SE EKS TO RELIEVE TO A CERTAIN EXTENT, THE MEASURE OF HARDSHIP WHICH MIG HT BE IMPOSED UPON SMALL BUSINESS AND PROFESSIONALS WHO ARE ENGAG ED IN ACTIVITIES AND ARE DEPENDED ENTIRELY ON TIMELY CASH FLOW.IT IS IN SUCH CASES THAT R.6DDWHICH WAS FORMULATED AS PROVIS O TOS.40A(3)STEPS INTO AID SUCH ASSESSEE AND CONCERNS . IN THIS CONTEXT, THE STATUTORY MANDATE IN R.6DD(K), AT LEA ST IN THE CIRCUMSTANCES OF THE CASE, HAS TO BE SO CONSTRUED A S TO MEAN THAT BUT FOR THE CASH PAYMENT, THE ASSESSEE WOULD HAVE B EEN DEPRIVED THE BENEFIT OF SUPPLIES ITSELF. THIS COURT CLARIFIE S THAT THE INTERPRETATION OF THE CASE EXPRESSION WHO IS REQUI RED TO MAKE PAYMENT IN CASH HAVING REGARD TO THE CIRCUMSTANCE OF THE CASE IS FACT DEPENDENT, AT LEAST IN THE PRESENT CASE. THE C ONSEQUENCES OF INSTANCES OF PAYMENT THROUGH ACCOUNT PAYEE CHEQUES IN SMALL BUSINESSES WHICH ARE DEPENDED ON SUCH SUPPLIES WOUL D BE TO COMPLETELY STIFLE, IF NOT STOP THE BUSINESS ACTIVIT IES .IT IS IN THAT SENSE THAT THE EXPRESSION REQUIRED WOULD HAVE TO BE CONSTRUED . THIS COURT IS OF OPINION THAT HAVING REGARD TO THE PECULIAR FACTS AND CIRCUMSTANCES, THE TRIBUNAL AND THE LOWER AUTHORITI ES ADOPTED AN UNDULY NARROW AND TECHNICAL INTERPRETATION OF R.6DD (K), THE BENEFIT OF WHICH THE ASSESSEE CLEARLY WAS ENTITLED TO. 5.6 THE LD. AR OF THE ASSESSEE PRAYED FOR DISMISSAL OF THIS GROUND AS THE LD. CIT(A) HAS RIGHTLY DELETED THIS GROUND IN V IEW OF THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF R.C. GOYAL VS. CIT (SUPRA). 5.7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE RECORDS THAT THE ASSESSEE HAS PAID IN CASH ELECTRICITY BILL OF RS. 80,092/- FOR THE MONTH OF NOV. 2008 TO ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 15 RAJASTHAN STATE ELECTRICITY BOARD UNDER THE BONA FI DE BELIEF THAT THE PAYMENT IS MADE TO THE GOVERNMENT BECAUSE OF THE BU SINESS EXPEDIENCY AND TO AVOID ELECTRICITY CONNECTION. THE LD. CIT(A) HAS TAKEN INTO CONSIDERATION THE DECISION OF HON'BLE DELHI HIGH CO URT IN THE CASE OF R.C. GOYAL VS. CIT (SUPRA) WHEREIN IT IS HELD THAT CASH PAYMENTS MADE IN VIEW OF THE BUSINESS EXPEDIENCY IS ALLOWABLE AS PER SECTION 40A(3) OF THE ACT. THUS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE WHICH IS SUSTAINED. THEREFORE, GROUND NO . 2 OF THE REVENUE IS DISMISSED. 6.1 THE THIRD GROUND OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS. 50,364/- AS AGAINST THE ADDITION MADE BY THE AO FOR RS. 4,79,532/- AS THE ASSESSEE HIMSELF HAD S HOWN INADMISSIBLE EXPENSES U/S 40(A) IN COLUMN 17(F) OF THE FORM 3CD REPORT. 6.2 THE GROUND NO. 1 OF THE ASSESSEE IN HIS C.O. IS REGARDING CONFIRMING THE DISALLOWANCE OF TRANSPORTATION EXPEN SES OF RS. 50,364/- PAID TO JAI BHARAT TRANSPORT COMPANY FOR GOODS TRAN SPORTED BY TRUCK NO.RJ34G 0246 U/S 40(A)(IA) OF THE ACT 6.3 THE BRIEF FACTS IN THIS CASE IS THAT THE ASSE SSEE HAS PAID TRANSPORTATION EXPENSES TO THE FOLLOWING PARTIES. ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 16 JAI PRABHAT TRANSPORT CO. RS. 1,82,956/- TRUCK UNION, DAUSA RS. 2,23,855/- J.K. TRANSPORT RS. 72,721/- THE AO WHILE VERIFYING THE LEDGER ACCOUNT AND VOUCH ERS OF THE ABOVE EXPENSES OBSERVED THAT ASSESSEE HAS NOT DEDUCTED TD S U/S 194C OF THE ACT FOR WHICH THE AO ASKED THE REASONS FROM THE AS SESSEE FOR NOT DEDUCTING THE TDS OF THE ABOVE PARTIES BUT THE ASS ESSEE COULD NOT EXPLAIN THE REASONS FOR THE SAME. THE AO THEREFORE, APPLIED THE PROVISIONS U/S 40(A)(IA) FOR NOT DEDUCTING THE TAX AND THUS DISALL OWED THE EXPENSES TO THE TUNE OF RS. 4,79,532/- 6.4 BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAD CONFIRMED THE DISALLOWANCE OF TRANSPORTATION EXPENSES OF RS.50,364/- PAID TO JAI BHARAT TRANSPORT CO. AND DELETED THE REMAINING DISALLOWANCE BY GIVING TH E FOLLOWING FINDINGS:- 5.3 I HAVE CONSIDERED THE CONTENTIONS OF THE APPE LLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN THAT THE ASSES SEE HAS PURCHASED TILLI FROM VARIOUS PLACES IN RAJASTHAN ON FREIGHT T O PAY BASIS. THE TRUCKS WERE BOOKED BY ABOVE TRANSPORTATION CONCERNS I.E. JAI PRABHAT CO., TRUCK UNION DAUSA AND J.K. TRANSPORT O N THE COMMISSION BASIS. THE ASSESSEE BEING THE RECIPIENT OF THE GOODS HAS MADE THE PAYMENT TO THE TRUCK OWNERS/ TRUCK DRI VERS ON THE RECEIPT OF THE GOODS. IN ABOVE FACTS, IT CANNOT BE SAID THAT THERE WAS ANY WRITTEN OR ORAL CONTRACT OF THE ABOVE CONCERNS WITH THE ASSESSEE. THE TRUCK OWNERS ARE NOT THE AGENTS OF AB OVE THREE CONCERNS AND HAVE EXECUTED THE WORK IN THEIR OWN RI GHT. THERE WAS NO PAYMENT IN PURSUANT OF A CONTRACT FOR A SPECIFIC PERIOD AND ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 17 QUANTITY TO THE ABOVE TRANSPORT COMPANIES. IN SIMI LAR FACTS, IT HAS BEEN HELD THAT IN THE CASE OF R.K STEELS VS. ADDL. CIT BY HON'BLE ITAT , JAIPUR (SUPRA) RELYING UPON THE DECISION IN CASE OF CIT VS. UNITED RICE LAND LTD., 322 ITR 594 (P&H) THE PROVIS IONS OF SECTION 194C ARE NOT APPLICABLE. HOWEVER, IT IS SEE N THAT THERE WAS CONTRACT FOR TRANSPORTATION OF GOODS WITH THE TRUCK OPERATORS/OWNERS AND THE ASSESSEE FOR TRANSPORT OF GOODS AS PER EACH GOODS RECEIPT (GR). IT IS SEEN THAT AS PER THE TRUCK WISE DETAILS OF PAYMENT AT PAPER BOOK PAGE 11, THE PAYME NT OF MORE THAN RS.50,000/- HAS BEEN MADE IN RESPECT OF GOODS TRANSPORTED BY TRUCK NO. RJ 34 G 0246 (ENGAGED THROUGH JAI BHARAT TRANSPORT CO.). THE TOTAL FREIGHT PAYMENT IN RESPECT OF ABOVE TRUCK IS RS.50,364/- (RS.10,224 + RS.9,720 + RS.9,900 + RS.1 0,368 + RS.10,152). SO, THE ABOVE PAYMENT IS IN VIOLATION O F PROVISIONS OF SEC. 194C OF THE IT ACT. ACCORDINGLY, ADDITION MADE BY THE AO TO THE EXTENT OF RS.50,364/- U/S 40(A)(IA) OF THE IT A CT IS CONFIRMED AND THE BALANCE AMOUNT IS DELETED. 6.5 THE LD. DR RELIED ON THE ORDER OF THE AO. 6.6 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE AS TO GROUND NO. 1 OF THE C.O. MADE FOLLOWING SUBMISSIONS BEFORE US FOR CONFIRMING THE PART DISALLOWANCE OF RS. 50,364 BY T HE LD. CIT(A). THE ASSESSEE PURCHASES TILLI FROM VARIOUS PLACE S IN THE STATE OF RAJASTHAN ON FREIGHT TO PAY BASIS. THE VAR IOUS SUPPLIERS ARRANGED THE TRUCKS FROM VARIOUS TRUCK OWNERS AND G OODS ARE SENT BY THEM THROUGH DIFFERENT TRANSPORT COMPANIES WHO O NLY ISSUE THE BILTY. SAMPLE COPY OF TRANSPORT BILLS IS AT PB 12-14 . THESE TRANSPORT COMPANIES HAVE NO ROLE EXCEPT TO GET THE COMMISSION FROM THE CONCERNED TRUCK OWNER FOR ISSUING THE BILTY AND IT IS THE TRUCK OWNER/ DRIVER WHO IS PAID THE FREIGHT BY THE ASSESS EE. THE INDIVIDUAL PAYMENT TO EACH TRUCK OWNER/ DRIVER TOWA RDS THE FREIGHT IS LESS THAN RS. 20,000/- IN EACH CASE AND DOES NOT EXCEED RS. 50,000/- IN THE FINANCIAL YEAR AS IS EVIDENT FROM T HE COPY OF BILTY AND TRUCK WISE DETAIL OF PAYMENT PLACED AT PB 10-11. THE ASSESSEE HAS NO WRITTEN/ORAL AGREEMENT WITH THE TRANSPORTER OR ISSUER OF BILTY ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 18 FOR CARRYING OUT THE TRANSPORT OF MATERIAL FROM THE PLACE OF THE SUPPLIER TO THE PLACE OF THE ASSESSEE.HE IS NOT MAK ING ANY PAYMENT TO TRANSPORT COMPANIES IN AS MUCH AS THE PAYMENT OF FREIGHT IS MADE TO TRUCK OWNER/TRUCK DRIVER WHO TRANSPORT THE GOODS.IT IS ALSO NOT THE CASE OF AO THAT FREIGHT CHARGES WERE PAID T O THE TRANSPORT AGENCY IN PURSUANCE OF A CONTRACT FOR A SPECIFIC PE RIOD, QUANTITY OR PRICE. IN THESE FACTS SECTION 194C IS NOT APPLICABL E AND THEREFORE NO DISALLOWANCE U/S 40(A)(IA) IS CALLED FOR. RELIANCE IS PLACED AS UNDER:- (I) CIT VS. UNITED RICELAND LTD. 322 ITR 594 (PUN. &HAR.) (II) R.K STEELS VS. ACIT (JPR.)(TRIB.) ITA NO. 434/JP/10DT. 29.10.10 A.Y. 2006-07(PB15-21) THE LD. CIT(A) HAS INCORRECTLY HELD THAT THERE IS A ORAL CONTRACT WITH THE TRUCK OPERATORS/OWNERS. THIS FIND ING IS INCORRECT. THE SUPPLIER OF THE GOODS ARRANGES THE TRANSPORT OF GOODS. ASSESSEE ONLY PAYS THE TRANSPORTATION CHARGES AT THE TIME OF DELIVERY OF GOODS. THEREFORE, ASSESSEE HAS NO ORAL CONTRACT WIT H THE TRUCK OPERATORS/OWNERS. IN FACT, ASSESSEE EVEN DOES NOT K NOW THE OWNER OF THE TRUCK AND HE ONLY PAYS THE FREIGHT TO THE TR UCK DRIVER. THEREFORE, THE CASES REFERRED ABOVE, WOULD APPLY TO ALL TRANSPORT PAYMENT EVEN IF THE AGGREGATE PAYMENT WITH REFERENC E TO A PARTICULAR TRUCK EXCEEDS RS.50,000/-. THEREFORE THE DISALLOWANCE OF RS. 50,364/- UPHELD BY THE CIT(A) IS INCORRECT. IN VIEW OF THE ABOVE, DELETION MADE BY CIT(A) BE UP HELD AND THE AO BE FURTHER DIRECTED TO DELETE THE DISALL OWANCE CONFIRMED BY CIT(A). ACCORDINGLY, THE GROUND OF THE DEPARTMENT BE DISMISSED AND THE CROSS OBJECTION OF THE ASSESSE E BE ALLOWED. 6.7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE LD. CIT(A)S ORDER THAT HE HAS CONFIRMED THE DISALLOWANCE OF TRANSPORTATION EXPENS ES TO THE EXTENT OF RS. ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 19 50,364/- PAID TO M/S. JAI BHARAT TRANSPORT CO. AND DELETED THE REMAINING DISALLOWANCE. WE HAVE OBSERVED THAT LD. CIT(A) HAS TAKEN CARE TO CONSIDER ALL THE ASPECTS AS TO DISALLOWANCE TRANSP ORTATION EXPENSES OF RS. 4,79,532/- U/S 40(A)(IA) OF THE ACT MADE BY THE AO. HOWEVER, FOR CONFIRMING DISALLOWANCE OF RS. 50,364/- PAID TO M/S . JAI BHARAT TRANSPORT CO. BY THE LD. CIT(A), WE FEEL THAT THE TRANSPORT C OMPANY HAS NO ROLE EXCEPT TO GET THE COMMISSION FROM THE TRUCK DRIVER FOR ISSUING BILTY AND IT IS THE TRUCK OWNER /DRIVER WHO IS PAID FREIGHT BY T HE ASSESSEE. IT IS ALSO SEEN THAT INDIVIDUAL PAYMENT TO EACH TRUCK OWNER/ D RIVER TOWARDS THE FREIGHT IS LES THAN RS. 20,000/- IN EACH CASE AND I T DOES NOT EXCEED RS. 50,000/- IN THE FINANCIAL YEAR WHICH IS EVIDENT FRO M THE BILTY AND OTHER RECORDS. THUS KEEPING IN VIEW THE ABOVE CASE LAWS C ITED BY THE ASSESSEE AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FEEL NO HESITATION TO DELETE THE ADDITION OF RS. 50,364/- CONFIRMED BY TH E LD. CIT(A) IN THE CASE OF JAI BHARAT TRANSPORT CO. THUS GROUND NO. 3 OF THE REVENUE IS DISMISSED AND THE GROUND NO. 1 OF THE C.O. OF THE A SSESSEE IS ALLOWED. 7.1 THE GROUND NO. 4 OF THE REVENUE IS PERTAINING T O DELETION OF ADDITION OF INTEREST EXPENSES OF RS. 85,950/- MADE BY THE AO WHEN THE ASSESSEE HAD FAILED TO SUBMIT THE PROOF OF SUBMISSI ON OF FORM 15G TO THE DEPARTMENT. ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 20 7.2 BRIEF FACTS OF THE CASE ARE THAT THE AO WHILE V ERIFYING THE BOOKS OF ACCOUNT OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD PAID INTEREST TO THE FOLLOWING PARTIES. 1. ASHA DEVI LUDHANI RS. 41,400/- 2. DEEPAK LUDHANI RS. 14,600/- 3. RAMCHANDRA LUDHANI RS. 14,600/- 4. RAMA KHANDELWAL RS. 15,350/- THE AO OBSERVED THAT AS PER PROVISIONS OF SECTION 1 94A OF THE ACT, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX WHILE MAKING PA YMENT OF INTEREST TO THE ABOVE PARTIES FOR WHICH THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY TDS WAS NOT DEDUCTED ON INTEREST PAID TO THE ABOVE PARTIES. THE AO FURTHER OBSERVED THAT THE ASSESSEE FAILED TO SUBMIT FORM 15G AS TO NON- DEDUCTION OF TAX AS PROOF. THEREFORE, THE AO DISALL OWED THE PAYMENT OF INTEREST TO THE ABOVE PARTIES AMOUNTING TO RS. 85,9 50/- U/S 194A OF THE ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSE E. 7.3 BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAS DELETED THE AD DITION BY OBSERVING AS UNDER:- 6.3 I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN T HAT THE AO HAS MENTIONED THAT ASSESSEE HAS SUBMITTED THE FORM NO. 15G BEFORE THE AO FOR CLAIMING CERTAIN INTEREST PAYMENT S WITHOUT DEDUCTION OF TAX U/S 194A OF THE I.T. ACT. HOWEVER, AO DISALLOWED THE SAME HOLDING THAT ASSESSEE HAS NOT P RODUCED ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 21 THE PROOF OF SUBMISSION OF ABOVE FORMS TO THE DEPAR TMENT. IN THIS RESPECT, IT HAS BEEN HELD BY HON'BLE ITAT JAIPUR IN THE CASE OF SHYAMSUNDER KAILASH CHAND VS. ITO, 60 D TR (JP)(TRIB) 270 AS UNDER:- DEPOSITORS HAVING SUBMITTED FORM NO. 15G TO THE ASSESSEE WELL IN TIME, INTEREST PAID TO THEM WI THOUT DEDUCTION OF TAX AT SOURCE CANNOT BE DISALLOWED U/S 40(A)(IA) SIMPLY BECAUSE THE SAID FORMS COULD NOT B E SUBMITTED TO THE AO WITHIN THE TIME STIPULATED IN T HE ACT ONCE THE SAME WERE AVAILABLE TO THE AO WHILE FRAMING THE ASSESSMENT. IT IS PERTINENT THAT ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE AS THE FORM NO.15G/15H WERE SUBMITTED BY THE RECIPIENTS TO THE ASSESSEE. IN VIEW OF ABOVE DISCUS SION, THE ADDITION MADE BY THE AO OF RS. 85,950/- IS DELETED. 7.4 THE LD. DR SUPPORTED THE ORDER OF THE AO. 7.5 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE THROUGH THE WRITTEN SUBMISSION HAS SUBMITTED AS UNDER:- 1. IT MAY BE NOTED THAT OUT OF FOUR PARTIES, MRS. RAMA KHANDELWAL IS A SENIOR CITIZEN AND IN HER CASE FORM NO. 15H WAS OBTAINEDWHILE IN CASE OF OTHER THREE PARTIES FORM N O. 15G WAS OBTAINED BY THE ASSESSEE ON 31.03.2009 AND THE SAME WAS ALSO SUBMITTED TO THE DEPARTMENT(PB 22-29).IN EARLIER YE AR ALSO, SUCH FORMS WERE OBTAINED AND SUBMITTED TO THE DEPARTMENT AND ON THAT BASIS NO TAX WAS DEDUCTED AT SOURCE. THEREFORE, ONL Y BECAUSE ASSESSEE COULD NOT FILE THE EVIDENCE OF SUBMITTING THESE FORMS TO THE DEPARTMENT, INTEREST PAID TO THEM CANNOT BE DISALLO WED U/S 40(A)(IA) UNLESS IT IS ESTABLISHED THAT ASSESSEE HA D NOT OBTAINED THESE DECLARATION FROM THE CONCERNED PERSON AND NOT FILED THE SAME TO THE DEPARTMENT. 2. IN CASE OF SHYAM SUNDER KAILASH CHAND VS. ITO 60 DTR 270 (JP), WHERE THE DEPOSITORS SUBMITTED DECLARATION IN FORM 15G TO ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 22 THE ASSESSEE IN TIME BUT THE SAME WERE SENT BY THE ASSESSEE TO THE AO LATE, IT WAS HELD THAT ONLY FAULT ON PART OF THE ASSESSEE IS THAT THE FORMS COULD NOT BE SUBMITTED WITHIN THE TIME ST IPULATED IN THE ACT. HOWEVER THE SAME WERE AVAILABLE BEFORE THE AO WHILE FRAMING THE ASSESSMENT.THEREFORE, THERE IS NO REASON TO DIS ALLOW THE INTEREST ON NON DEDUCTION OF TAX AT SOURCE. IN THIS CASE ALSO, FORM 15H/G WERE AVAILABLE BEFORE THE AO IN COURSE OF ASS ESSMENT PROCEEDINGS AND THEREFORE THE DISALLOWANCE UNDER SE CTION 40(A)(IA) IS NOT JUSTIFIED. IN VIEW OF ABOVE, CIT(A) HAS RIGHTLY DELETED THE AD DITION AND THUS THE GROUND OF THE DEPARTMENT BE DISMISSED. 7.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE RECORDS THAT THE ASSESSEE HAS SUBMITTED THE FORM NO. 15G BEFORE THE AO FOR CLAIMI NG CERTAIN INTEREST PAYMENT WITHOUT DEDUCTION OF TAX U/S 194A OF THE AC T. HOWEVER, THE AO DISALLOWED THE SAME BECAUSE OF NON-PRODUCTION OF PR OOF OF SUBMISSION OF ABOVE FORMS TO THE DEPARTMENT AT THE TIME OF FRAMIN G THE ASSESSMENT. THE LD. CIT(A) CONSIDERING THE ORDER OF THIS BENCH IN T HE CASE OF SHYAMSUNDER KAILASH CHAND VS. ITO (SUPRA) DELETED T HE ADDITION MADE BY THE AO OBSERVING THAT THE SAME WERE AVAILABLE TO THE AO WHILE FRAMING THE ASSESSMENT. THUS IN THIS VIEW OF THE MA TTER, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS C ONFIRMED ON THIS ISSUE. HENCE, GROUND NO. 3 OF THE REVENUE IS DISMISSED. ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 23 8.1 THE GROUND NO. 5 OF THE REVENUE IS AGAINST DELE TION OF ADDITION OF RS. 7,39,909/- ON ACCOUNT OF SHORT WEIGHT EXPENSES MADE BY THE AO AS THE ASSESSEE FAILED TO FURNISH EVIDENCE BEFORE THE AO. 8.2 BRIEF FACTS OF THE CASE ARE THAT THE AO WHILE E XAMINING THE DIRECT EXPENSES OBSERVED THAT ASSESSEE HAD CLAIMED SHORT W EIGHT EXPENSES AMOUNTING TO RS. 7,39,909/- FOR WHICH THE LD. AR OF THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF SHORT WEIGHT EXPENSE S. THE LD. A.R. OF THE ASSESSEE VIDE LETTER DATED 28-12-2011 SUBMITTED TH AT WHILE FILLING THE GOODS FOR TRANSPORTATION TO THE PARTY, THE AMOUNT I S PAID BY THE PARTY ON THE WEIGHT RECEIVED BY HIM. HOWEVER, THE AO REQUIRE D THE ASSESSEE TO SUBMIT THE EVIDENCE FOR CLAIMING SUCH EXPENSES BUT THE LD. AR DID NOT FURNISH THE SAME. THEREFORE, THE FOR WANT OF SUPPOR TING EVIDENCE BY THE ASSESSEE, DISALLOW THE INDIRECT EXPENSES OF RS. 7,3 9,909/- TO THE INCOME OF THE ASSESSEE. 8.3 BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAS DELETED THE AD DITION MADE BY THE AO BY OBSERVING AS UNDER:- 8.3 I HAVE CONSIDERED THE CONTENTIONS OF THE APPE LLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN THAT THE ASSES SEE HAS EXPLAINED THAT TILL WHEN PROCESSED HAS SOME MOISTURE IN IT. T HE ASSESSEE SELLS THE GOODS TO VARIOUS PARTIES AND DELIVERS THE GOODS AT VARIOUS DESTINATIONS. THEREFORE, DIFFERENCE IN WEIGHT ARISE S DUE TO THE LOSS ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 24 IN TRANSIT AND WEIGHMENT BY THE DIFFERENT BRIDGE AT THE DESTINATION OF GOODS. FOR SUCH A DIFFERENCE IN WEIGHT, THE PURC HASERS RAISED THE DEBIT NOTE AS PER WHICH ASSESSEE CLAIMS THE WEIGHT SHORTAGE EXPENSES. IN THIS REGARD, IT HAS BEEN STATED THAT A T THE TIME OF ASSESSMENT, THE ASSESSEE HAD SUBMITTED THE COPY OF WEIGHT SHORTAGE ACCOUNT ALONGWITH THE DETAILS OF WEIGHT SHORTAGE IN DIFFERENT ACCOUNTS IN SUPPORT OF THE SAID CLAIM AND FILED COP Y OF SAID DETAILS DURING APPEAL. IN THE NARRATION IN THE ABOVE ACCOUN T, THE VARIOUS DETAILS REGARDING THE SHORTAGE OF THE WEIGHT AGAINS T VARIOUS BILLS HAS BEEN MENTIONED. IT IS NOTED THAT THE CLAIM IS M AINLY REGARDING THE WEIGHT SHORTAGE ALONGWITH QUALITY CLAIM AND RAT E DIFFERENCE. IN FACT, ASSESSEE HAS ALSO DEDUCTED RS. 48,531/- ON AC COUNT OF WEIGHT SHORTAGE IN RESPECT OF PURCHASES MADE BY THE ASSES SEE FORM VARIOUS PARTIES AND THIS AMOUNT HAS BEEN CREDITED I N THE WEIGHT SHORTAGE ACCOUNT. THE ASSESSEE HAD SUBMITTED THE CO PY OF DHAVAL AGRO EXPORTS RAJKOT, NAVJOT INTERNATIONAL MUMBAI AN D MAC AGREE EXPORT MUMABI WHO ARE THE MAJOR PARTIES CLAIMING TH E SHORTAGE IN THE GOODS RECEIVED. IN VIEW OF THE ABOVE DISCUSSION , IT IS APPARENT THAT WEIGHT SHORTAGE IS INHERENT IN THIS LINE OF BU SINESS. THE AO HAS NOT SHOWN THAT THERE WAS NO SHORTAGE IN THE GOODS D ELIVERED TO THE VARIOUS PARTIES. IN VIEW OF ABOVE DISCUSSION, THE D ISALLOWANCE OF RS. 7,39,909/- MADE BY THE AO IS DELETED. 8.4 THE LD. DR SUPPORTED THE ORDER OF THE AO. 8.5 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THROUGH THE WRITTEN SUBMISSION AS UNDER:- 1. THE ASSESSEE SELLS THE GOODS WITH THE CONDITION OF DOOR DELIVERY. THE TILLI WHEN PROCESSED HAS SOME MOISTUR E. FURTHER, THE DIFFERENCE IN WEIGHT ARISES ON ACCOUNT OF TRANSIT S HORTAGE AND WEIGHTMENT ON BIGGER WEIGHT BRIDGE(BADAKANTA). FOR ALL THESE REASONS, WHEN THE GOODS REACHES TO THE RECEIVING PA RTY, THERE ARISES SOME DIFFERENCE IN WEIGHT AS PER THE SALE BI LL AND THE WEIGHT ACTUALLY RECEIVED BY THEM. FOR SUCH DIFFERENCE,THEY RAISE DEBIT NOTE WHICH IS DEBITED TO WEIGHT SHORT EXPENSES. ALL THES E FACTS WERE ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 25 EXPLAINED TO THE AO BUT WITHOUT ANY ENQUIRY HE MADE THE DISALLOWANCE. 2. FROM THE COPY OF LEDGER ACCOUNT OF WEIGHT SHORT EXPENSES (PB 32-36) , IT CAN BE NOTED THAT MAJOR CLAIM OF WEIGHT SHORT HAS BEEN PAID TO DHAVAL EXPORTS AGRI, RAJKOT, NAVJOT INTERNATIONAL, MUMBAI AND MAC AGRI EXPORTS, MUMBAI. IN RESPECT OF DHAVAL EXPORTS AGRI, RAJKOT FROM THE STATEMENT P LACED AT PB37 , THE BILL WISE DETAIL OF WEIGHT SHORT DEDUCTED BY HI M IS ASCERTAINABLE ACCORDING TO WHICH RS. 2,57,508/- WAS DEDUCTED BY T HE PARTY ON ACCOUNT OF WEIGHT SHORTAGE. SIMILARLY IN CASE OF NA VJOT INTERNATIONAL, MUMBAI, THEY HAVE DEDUCTED RS.1,90,7 17/- ON ACCOUNT OF WEIGHT SHORTAGE AS IS EVIDENT FROM THE C OPY OF ACCOUNT OF THE ASSESSEE IN ITS BOOKS OF ACCOUNT (PB 39) WHERE THEY HAVE CREDITED THE ACCOUNT OF THE ASSESSEE FOR RS. 35,43, 739/- AS AGAINST RS. 37,34,456/- DEBITED BY THE ASSESSEE (PB 38) . AGAIN IN CASE OF MAC AGRI EXPORTS, THEY HAVE DEDUCTED RS. 293543/- O N ACCOUNT OF WEIGHT SHORTAGE AS IS EVIDENT FROM THE COPY OF THEI R LETTER PLACED AT PB 40-41. FROM THESE EVIDENCE, ITCAN BE NOTED THAT CLAIM OF WEIGHT SHORTAGE IS INHERENT IN THIS LINE OF TRADE. ASSESSE E HAS ALSO DEDUCTED RS.48,531/- ON ACCOUNT OF WEIGHT SHORTAGE IN RESPECT OF PURCHASES MADE BY ITFROM VARIOUS PARTIES WHICH IS C REDITED IN THIS ACCOUNT. IN VIEW OF ABOVE,CIT(A) HAS RIGHTLY DELETED THE ADD ITION AND THUS THE GROUND OF THE DEPARTMENT BE DISMISSED. 8.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE RECORDS THAT THE ASSESSEE HAS NOT FURNISHED EVIDENCE FOR CLAIMING THE EXPENSES ON ACC OUNT OF SHORT WEIGHT EXPENSES AMOUNTING TO RS. 7,39,908/- BEFORE THE AO BUT THE ASSESSEE HAS SUBMITTED THE SAME BEFORE THE LD. CIT(A) WHO HAS AL LOWED THIS GROUND OF THE ASSESSEE WITHOUT ANY VERIFICATION. THIS ISSUE O F THE ASSESSEE IS DIRECTLY CONNECTED WITH THE GROSS PROFIT RATE. WE THEREFORE, IN THE INTEREST OF ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 26 JUSTICE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO DECIDE IT AFRESH BY PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FURNISH THE EVIDENCES RELAT ING TO THIS ISSUE BEFORE THE AO SO THAT THE AO MAY ADJUDICATE UPON THIS GRO UND AS PER LAW. HENCE, THIS GROUND NO. 5 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 9.1 THE GROUND NO. 2 OF THE C.O. OF THE ASSESSEE IS REGARDING CONFIRMING THE DISALLOWANCE OF SALARY EXPENSES OF R S. 70,000/- PAID TO SHRI LOKESH MAHESHWARI. 9.2 THE BRIEF FACTS OF THE CASE ARE THAT THE AO WHI LE EXAMINING THE SALARY EXPENSES HAS OBSERVED THAT THE ASSESSEE HAD CLAIMED SALARY OF RS. 1.20 LACS ON ACCOUNT OF PAYMENT TO SHRI LOKESH MAH ESHWARI BUT HE OBSERVED THAT THE PAYMENT VOUCHERS OF THE CONCERNED EMPLOYEE WERE UNSIGNED. THE AO ISSUED SUMMON U/S 131 OF THE ACT O N THE GIVEN ADDRESS TO THE EMPLOYEE SHRI LOKESH MAHEHSWARI BUT THE SAME WAS RETURNED BY THE POSTAL AUTHORITY WITH THE REMARKS INCOMPLETE ADDRESS. THE AO FURTHER ASKED THE ASSESSEE TO FURNISH THE COMPLETE ADDRESS OF THE EMPLOYEE BUT THE ASSESSEE INTIMATED THAT THE CONCER NED EMPLOYEE HAD LEFT JOB AND HE HAS NO FULL DETAILS OF HIS ADDRESS. IN V IEW OF THIS, THE AO ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 27 DISALLOWED THE SALARY EXPENSES OF RS. 1.20 LACS AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 9.3 BEING AGGRIEVED BY THE ORDER OF THE AO, THE LD. CIT(A) CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO CONFIRMED THE SALA RY EXPENSES TO THE EXTENT OF RS. 70,000/- BY OBSERVING AS UNDER:- 7.3 I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN T HAT AS PER THE DETAILS OF SALARY PAYMENT, SALARY PAYMENT OF RS .70,000/- I.E. RS.10,000 PER MONTH FOR SEVEN MONTHS HAS BEEN DEBITED IN THE NAME OF SH. LOKESH MAHESHWARI, KRISHNA COLON Y, RAMNAGAR, AJMER. IT IS ALSO EVIDENT THATTHE SIGNATU RE OF THE PAYEE HAS NOT BEEN OBTAINED ON THE SAID PAYMENT VOU CHERS. THE ONUS LIES ON THE ASSESSEE TO PROVE THE CLAIM OF EXPENSES CLAIMED BY THE ASSESSEE. IN THIS PARTICULAR CASE, T HE SUMMONS WERE ALSO ISSUED FOR VERIFYING THE SAID PAYMENTS. H OWEVER, THEY WERE RETURNED BACK BY THE POSTAL AUTHORITIES D UE TO INCOMPLETE ADDRESS. DURING APPEAL, ASSESSEE HAS FIL ED THE COPY OF RETURN OF SH. LOKESHMAHESHWARI. HOWEVER, SA ID RETURN DOES NOT PROVE THAT INCOME SHOWN BY THE SAID PERSON REPRESENTS SALARY PAYMENTS CLAIMED BY THE ASSESSEE. MOREOVER, IT IS APPARENT THAT THIS RETURN WAS FILED ON 21.03.2011 [I.E. 8 DAYS (SHOULD BE 8 MONTHS) BEFORE THE COMPLETION OF ASSESSMENT ON 29.12.2011] AFTER THE E NQUIRIES WERE STARTED BY THE AO. IN VIEW OF ABOVE DISCUSSION , THE DISALLOWANCE OF SALARY EXPENSES TO THE EXTENT OF RS .70,000/- IS CONFIRMED. 9.4 THE LD. AR OF THE ASSESSEE THROUGH HIS WRITTEN SUBMISSION PRAYED AS UNDER:- SH. LOKESH MAHESHWARI JOINED THE ASSESSEE IN APRIL 2008 AND LEFT THE SERVICE IN THE MONTH OF NOV. 2008. HE WORKED ONLY FOR ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 28 SEVEN MONTHS FOR WHICH HE WAS REGULARLY PAID SALARY @ RS. 10,000/- PER MONTH I.E. RS.70,000/- DURING THE YEAR . HE WAS LOOKING AFTER THE BANK WORK, RAISING OF BILLS AND C OLLECTION FROM CUSTOMERS. HE IS ASSESSED TO TAX AND HAS FILED HIS RETURN OF INCOME FOR A.Y. 09-10 ON 21.03.2011 DECLARING INCOME OF RS .1,15,800/- (PB 31). COPY OF HIS PAN IS AT PB 30 . THUS, THE IDENTITY OF THE EMPLOYEE IS ESTABLISHED. FURTHER THE PAYMENT OF SAL ARY MADE TO HIM IS DULY RECORDED IN THE CASH BOOK. THE OBSERVAT ION OF THE CIT(A) THAT LOKESH MAHESHWARI FILED THE RETURN ONLY AFTER AO STARTED THE ENQUIRY IS INCORRECT IN AS MUCH AS AO S TARTED THE ENQUIRY ON THIS ISSUE IN THE MONTH OF DEC.2011 ONLY (FROM 16.12.2011 AS EVIDENT FROM THE ASSESSMENT ORDER). I N VIEW OF ABOVE, THE DISALLOWANCE CONFIRMED BY THE CIT(A) BE DELETED AND THE CROSS OBJECTION OF THE ASSESSEE BE ALLOWED. 9.5 THE LD. DR RELIED ON THE ORDER OF THE AO . 9.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE OBSERVED FROM THE RECO RDS THAT THE SHRI LOKESH MAHESHWARI WAS THE EMPLOYEE OF THE ASSESSEE . SHRI LOKESH MAHESHWARI IS ASSESSED TO TAX AND HAS FILED HIS RE TURN OF INCOME FOR A.Y. 09-10 ON 21.03.2011 DECLARING INCOME OF RS.1,15,800 /- . THE COPY OF HIS PAN IS FILED IN THE PAPER AT PAGEA 30 . THUS, THE IDENTITY OF THE EMPLOYEE IS ESTABLISHED. IN VIEW OF THE FACTS, CIRCUMSTANCES OF THE CASE AND THE RECORDS AVAILABLE , THE DISALLOWANCE OF RS. 70,000/ - CONFIRMED BY THE LD. CIT(A) IS DELETED. THEREFORE, GROUND NO. 2 OF THE C.O. OF THE ASSESSEE IS ALLOWED. ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 29 10. IN THE RESULT, THE APPEAL OF THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND C.O. OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/09/201 5. SD/- SD/- (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30/09/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT THE ACIT, CIRCLE- 2, AJMER 2. IZR;FKHZ@ THE RESPONDENT- SHRI RAHUL PANCHOLI, AJMER 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 3. VK;DJ VK;QDR@ CIT 4. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 5. XKMZ QKBZY@ GUARD FILE (ITA NO.949/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 30 ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 31 GROUND NO. 2 (ASSESSEES CROSS OBJECTION) CONFIRMING DISALLOWANCE OF SALARY EXPENSES OF RS.70 ,000/- PAID TO SH. LOKESH MAHESHWARI AO PAGE 6 CIT(A) PAGE FACTS:- 1. THE AO OBSERVED THAT PAYMENT VOUCHER OF SALARY TO S H. LOKESH MAHESHWARI IS UNSIGNED, SUMMON U/S 131 ISSUED HAS RETURN BACK UNS ERVED WITH THE REMARKS INCOMPLETE ADDRESS AND ASSESSEE ONLY STATED THAT THE EMPLOYEE HAS LEFT THE JOB AND HIS PRESENT ADDRESS IS AT BHILWARA WITHOUT GIVING A NY PARTICULAR ADDRESS PLACE/AREA. HE, THEREFORE, DISALLOWED SALARY PAYMENT TO HIM FOR WAN T OF EVIDENCE PRESUMING THAT HE IS NOT PAID SALARY OF RS. 1,20,000/- DURING THE YEAR. 2. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF RS.70, 000/- BY GIVING THE FOLLOWING FINDINGS (PAGE 16, PARA 7.3 OF THE ORDER) :- IT IS SEEN THAT AS PER THE DETAILS OF SALARY PAYME NT, SALARY PAYMENT OF RS.70,000/- I.E. RS.10,000 PER MONTH FOR SEVEN MONTHS HAS BEEN DEBIT ED IN THE NAME OF SH. LOKESH MAHESHWARI, KRISHNA COLONY, RAMNAGAR, AJMER. IT IS ALSO EVIDENT THATTHE SIGNATURE OF THE ITA NO.949//JP/2013 ACIT, CIRCLE- 2, AJMER VS. SHRI RAHUL PANCHOLI. 32 PAYEE HAS NOT BEEN OBTAINED ON THE SAID PAYMENT VOU CHERS. THE ONUS LIES ON THE ASSESSEE TO PROVE THE CLAIM OF EXPENSES CLAIMED BY THE ASSESSEE. IN THIS PARTICULAR CASE, THE SUMMONS WERE ALSO ISSUED FOR VERIFYING THE SAID PAYMENTS. HOWEVER, THEY WERE RETURNED BACK BY THE POSTAL AUTHORITIES DUE TO INCO MPLETE ADDRESS. DURING APPEAL, ASSESSEE HAS FILED THE COPY OF RETURN OF SH. LOKESH MAHESHWARI. HOWEVER, SAID RETURN DOES NOT PROVE THAT INCOME SHOWN BY THE SAID PERSON REPRESENTS SALARY PAYMENTS CLAIMED BY THE ASSESSEE. MOREOVER, IT IS APPARENT T HAT THIS RETURN WAS FILED ON 21.03.2011 [I.E. 8 DAYS (SHOULD BE 8 MONTHS) BEFORE THE COMPLETION OF ASSESSMENT ON 29.12.2011] AFTER THE ENQUIRIES WERE STARTED BY THE AO. IN VIEW OF ABOVE DISCUSSION, THE DISALLOWANCE OF SALARY EXPENSES TO THE EXTENT OF RS .70,000/- IS CONFIRMED. SUBMISSION:- SH. LOKESH MAHESHWARI JOINED THE ASSESSEE IN APRIL 2008 AND LEFT THE SERVICE IN THE MONTH OF NOV. 2008. HE WORKED ONLY FOR SEVEN MONTHS FOR WHIC H HE WAS REGULARLY PAID SALARY @ RS. 10,000/- PER MONTH I.E. RS.70,000/- DURING THE YEAR . HE WAS LOOKING AFTER THE BANK WORK, RAISING OF BILLS AND COLLECTION FROM CUSTOMERS. HE IS ASSESSED TO TAX AND HAS FILED HIS RETURN OF INCOME FOR A.Y. 09-10 ON 21.03.2011 DECLARING INCOM E OF RS.1,15,800/- (PB 31). COPY OF HIS PAN IS AT PB 30 . THUS, THE IDENTITY OF THE EMPLOYEE IS ESTABLISHED . FURTHER THE PAYMENT OF SALARY MADE TO HIM IS DULY RECORDED IN THE CASH BOO K. THE OBSERVATION OF THE CIT(A) THAT LOKESH MAHESHWARI FILED THE RETURN ONLY AFTER AO ST ARTED THE ENQUIRY IS INCORRECT IN AS MUCH AS AO STARTED THE ENQUIRY ON THIS ISSUE IN THE MONT H OF DEC.2011 ONLY (FROM 16.12.2011 AS EVIDENT FROM THE ASSESSMENT ORDER). IN VIEW OF ABOV E, THE DISALLOWANCE CONFIRMED BY THE CIT(A) BE DELETED AND THE CROSS OBJECTION OF THE AS SESSEE BE ALLOWED.