The ACIT,Vapi Circle, Vapi V. Shri Sandeep R Kapoor,

ITA 989/AHD/2009

• Counselvise Citation: 98920514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 02-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA SRDR
• Assessee Lawyers: M J SHAH
• Keywords: Opportunity of being heard; Principle of natural justice; Retrospective amendment; Non-deduction of tax; Commercial expediency
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.989 & 1164/AHD/2009 ASSESSMENT YEAR:2005-06 DATE OF HEARING:4.8.11 DRAFTED:4.8.11 ASSTT. COMMISSIONER OF INCOME-TAX, VAPI CIRCLE, VAPI SANDEEP R KAPOOR, FLAT NO.8/91, PANCHVATI APARTMENT, B/H DAN HOTEL, VRINDAVAN SOCIETY, THOKHARKHADA, SILVASSA, PAN NO.ADQPK9012K V/S. V/S. SHRI SANDEEP R KAPOOR, 8/91, PANCHAVATI APARTMENT, VRINDAVAN SOCIETY, THOKHARKHADA, SILVASSA ASSTT. COMMISSIONER OF INCOME-TAX, VAPI CIRCLE- 1, SHIVAM COMMERCIAL COMPLEX, NATIONAL HIGHWAY NO.8, VAPI (APPELLANT) .. (RESPONDENT) ITA NO.990 & 1163/AHD/2009 ASSESSMENT YEAR: 2005-06 ASSTT. COMMISSIONER OF INCOME-TAX, VAPI CIRCLE, VAPI SANDEEP R KAPOOR, (HUF) FLAT NO.8/91, PANCHVATI APARTMENT, B/H DAN HOTEL, VRINDAVAN SOCIETY, THOKHARKHADA, SILVASSA, PAN NO.AAFHK8140L V/S. V/S. SHRI SANDEEP R KAPOOR, HUF 8/91, PANCHAVATI APARTMENT, VRINDAVAN SOCIETY, THOKHARKHADA, SILVASSA ASSTT. COMMISSIONER OF INCOME-TAX, VAPI CIRCLE- 1, SHIVAM COMMERCIAL COMPLEX, NATIONAL HIGHWAY NO.8, VAPI (APPELLANT) .. (RESPONDENT) ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 2 ASSESSEE BY :- SHRI M.J. SHAH, AR REVENUE BY:- SHRI S.K. MEENA, SR-DR DATE OF HEARING : 4-8-2011 DATE OF PRONOUNCEMENT :26-8-2011 O R D E R PER R.C. SHARMA, ACCOUNTANT MEMBER:- THESE ARE CROSS-APPEALS FILED BY ASSESSEE AND REVE NUE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-VAPI F OR THE ASSESSMENT YEAR 2005-06, IN THE MATTER OF ORDER PASSED U/S.143(3) O F THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). ITA NO.899 & 1164/AHD/2009. 2. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN T HE BUSINESS OF TRANSPORTATION AS A PROPRIETOR OF SANDEEP TRANSPORT SERVICES. WHILE FRAMING ASSESSMENT U/S. 143(3) OF THE ACT FOLLOWING ADDITIO NS/DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER:- I) DIESEL EXPENSES RS.13,95,072/- II) UNSECURED LOANS RS.11,50,000/- III) OUT OF HIRE CHARGES RS.16,31,275/- IV) OUT OF LOADING AND UNLOADING RS. 86,340/- V) DISALLOWANCE U/S.40(A)(IA) RS.46,01,943/- 3. IN AN APPEAL FILED BEFORE LD. CIT (APPEALS) ADDI TIONS MADE ON ACCOUNT OF UNSECURED LOANS AND DISALLOWANCE U/S.40(A)(IA) W AS CONFIRMED BY LD. CIT(APPEALS). IN RESPECT OF ADDITIONS MADE ON ACCO UNT OF DIESEL EXPENSES, LD. CIT (APPEALS) HAS CONFIRMED THE ADDITION TO THE EXTENT OF RS.2 LAKH AND DELETED THE ENTIRE ADDITION IN RESPECT OF ADDITION MADE ON ACCOUNT OF HIRE ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 3 CHARGES. AGAINST THIS ORDER OF LD. CIT (APPEALS) BO TH ASSESSEE AND REVENUE ARE IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FIND FROM RECOR D THAT ASSESSEE WAS IN THE BUSINESS OF TRANSPORTATION. DURING THE YEAR ASSESSE E HAD GROSS RECEIPTS OF HIRE CHARGES AMOUNTING TO RS.1.58 CRORES AGAINST WH ICH NET PROFIT OF WHICH RS.8.11 LAKH WAS SHOWN. THE ENTIRE HIRE CHARGES WA S RECEIVED FROM M/S JBF INDUSTRIES. FOR PROVIDING TRANSPORT SERVICES, THE A SSESSEE WAS HAVING HIS OWN THREE TRUCKS, ASSESSEE ALSO USED TO HIRE TRUCKS FRO M OUTSIDE PARTIES FOR DEPLOYING THEM TO THE SAID COMPANY M/S JBF INDUSTRI ES. THE FREIGHT CHARGES WAS RECEIVED BY THE ASSESSEE AS PER THE RATE FIXED PER KG., DESTINATION-WISE, WHEREAS HIRE CHARGES WAS PAID TO THE TRANSPORTERS A T THE FIXED RATE TRUCK-WISE. IN RESPECT OF PAYMENT MADE TO THE TRANSPORTERS, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS PROVIDED DIESEL TO THE 1 2 TRANSPORTERS AND ALSO PAID TRANSPORT CHARGES TO THEM AT THE SAME RATE AS THAT OF OTHER TRANSPORTERS TO WHOM NO DIESEL WAS PROVIDED. TO SUBSTANTIATE IT S CLAIM OF MAKING PAYMENT OF DIESEL PROVIDED TO THE TRANSPORTERS, THE ASSESSE E HAS FURNISHED CONFIRMATION OF PAYMENT FROM THESE 12 PARTIES. THE AO OBSERVED T HAT ASSESSEE COULD NOT FURNISH THE DETAILS REGARDING NUMBER OF TRIPS MADE BY 12 PARTIES AND THE TRANSPORT CHARGES RECEIVED AGAINST THOSE TRIPS FROM M/S JBF INDUSTRIES. OUT OF TOTAL DIESEL EXPENDITURE OF RS.16.34 LAKH, THE AO D ISALLOWED DIESEL EXPENDITURE OF RS.13.95 LAKH. BY THE IMPUGNED ORDER LD. CIT (APPEALS) RESTRICTED DISALLOWANCE TO THE EXTENT OF RS.2 LAKH BY OBSERVING THAT AO HAS WRONGLY PRESUMED THAT FIXED RATE OF TRANSPORTATION CHARGES IS BEING PAID BY THE ASSESSEE TO VARIOUS TRANSPORTERS WITHOUT APPREC IATING THE FACT THAT EXIGENCY OF THE SITUATION AND THE TIME OF HIRING OF TRUCKS WOULD BE DIFFERENT IN DIFFERENT SITUATION. LD. CIT (APPEALS) ALSO OBSERV ED THAT TRANSPORTERS REFERRED BY THE AO IN HIS ASSESSMENT ORDER HAVE ALREADY CONF IRMED HAVING RECEIVED THE PAYMENT AS CLAIMED BY THE ASSESSEE AND IF THE A O HAD ANY DOUBT REGARDING PAYMENT TO SUCH TRANSPORTERS OR THAT SUCH PAYMENT WAS EXCESSIVE, ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 4 THE AO COULD HAVE EXAMINED SOME OF THE TRANSPORTERS TO VERIFY THE ASSESSEES CLAIM. IT WAS ALSO OBSERVED BY LD. CIT (APPEALS) TH AT ADDITION WAS MADE BY THE AO WITHOUT BRINGING ANY CONCRETE MATERIAL ON RE CORD AND THEREFORE SAME IS NOT SUSTAINABLE. THE FINDING RECORDED BY LD. CIT (A PPEALS) HAS NOT BEEN CONTROVERTED BY REVENUE BY BRINGING ANY COGENT MATE RIAL ON RECORD. EVEN WITH RESPECT TO ADDITION OF RS.2 LAKH SUSTAINED BY LD. CIT(APPEALS), THE CONTENTION OF LD. AR WAS THAT THERE IS NO JUSTIFICA TION NOR ANY VALID REASON MUCH LESS A COGENT REASON TO SUSTAIN A LUMP SUM DIS ALLOWANCE OF RS.2 LAKH, OUT OF TOTAL DIESEL EXPENSES. AS PER LD. AR FULL DE TAILS OF EXPENDITURE INCURRED WAS FILED BEFORE AO WHEREIN NO DEFECT WAS POINTED B Y AO NOR IT WAS THE CASE OF REVENUE THAT THE TRANSPORTERS TO WHOM PAYMENT WA S MADE WERE ANY HOW RELATED TO THE ASSESSEE. WE ALSO FOUND THAT THE WRI TTEN SUBMISSION FILED BEFORE LD. CIT(APPEALS) WERE ALSO SENT BY HIM TO TH E AO FOR HIS REMAND REPORT VIDE LETTER DATED 13-08-2008, HOWEVER, UPTILL PASSI NG ORDER BY CIT (A) DATED 12-01-2009, NOTHING CAME FROM THE AO AGAINST THE SA ID SUBMISSION. LD. A.R. THEREFORE CONTENDED THAT EVEN AD HOC DISALLOWANCE O F RS.2 LAKH WAS NOT WARRANTED. FROM THE RECORD WE FIND THAT ASSESSEE HA D RECEIVED TRANSPORTATION CHARGES FROM M/S JBF INDUSTRIES AS PER THE RATE FIX ED PER KG, HOWEVER PAYMENT WAS MADE AT THE FIXED RATE TO THE TRANSPORT ERS, IN SOME CASES THE ASSESSEE WAS ALSO REIMBURSING THE DIESEL CONSUMED B Y THE TRANSPORTERS AND THE PAYMENT WAS ONLY MADE TO THEM AFTER DEDUCTING T HE AMOUNT OF DIESEL SUPPLIED BY THEM. IT IS NOT THE CASE OF AO THAT IN ADDITION TO AGREED PRICE OF TRANSPORTATION THE ASSESSEE WAS ALSO SUPPLYING DIES EL TO THE TRANSPORTER. THE VALUE OF DIESEL SO SUPPLIED WAS DEDUCTED OUT OF THE TOTAL BILLS AND THE ASSESSEE WAS ACCORDINGLY MAKING THE NET PAYMENT ONL Y TO THE TRANSPORTERS. FOR TRANSPORTATION OF GOODS AT DIFFERENT DESTINATIO NS THE ASSESSEE IS REQUIRED TO TAKE PRUDENT BUSINESS DECISION REGARDING PRICE T O BE PAID FOR THE SAME AND THE MANNER IN WHICH PAYMENT IS TO BE MADE. IF PART OF PAYMENT IS MADE BY INCURRING COST OF DIESEL AND BALANCE IN CASH/CHEQUE , NO FAULT CAN BE FOUND BY REVENUE, UNLESS THE PAYMENT IS TO THE CONCERNS FALL ING U/S. 40A(2) (B) AND EXCESSIVE PAYMENT IS MADE. WE THEREFORE DO NOT FIN D ANY MERIT IN THE ACTION ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 5 OF AO FOR DISALLOWING THE EXPENSES INCURRED IN PROV IDING DIESEL AS A PART OF PAYMENT TO THE TRANSPORTER. WE FOUND THAT PAYMENT W AS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS OF TRANSPORTATION. IT IS NOT THE CASE OF AO THAT THE TRANSPORTERS WERE RELATED T O THE ASSESSEE OR THAT EXCESSIVE PAYMENT WAS MADE TO THE PERSONS FILING U/ S.40A (2) (B). WHEN THE GENUINENESS OF EXPENDITURE IS NOT IN DISPUTE AND TH E SAME IS FOUND TO HAVE BEEN INCURRED IN COURSE OF CARRYING ON BUSINESS BY AN ASSESSEE IN ITS CAPACITY AS A TRADER, NO DISALLOWANCE CAN BE MADE UNLESS SUC H EXPENDITURE IS EITHER CAPITAL OR OF PERSONAL NATURE. 5. IN THE RESULT, GROUND TAKEN BY REVENUE IS DISMIS SED, WHEREAS GROUND TAKEN BY ASSESSEE IN THIS REGARD IS ALLOWED. 6. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO DISALL OWANCE OF RS.46,01,943/-BY INVOKING PROVISION OF U/S.40(A) (I A) OF THE ACT. 7. IN THIS REGARD THE ASSESSING OFFICER HAS OBSERVE D THAT ASSESSEE HAS MADE PAYMENT OF HIRE CHARGES AND ALSO DEDUCTED TAX AT SOURCE ON ALL SUCH PAYMENTS. HOWEVER, TDS WAS NOT DEPOSITED IN THE GOV ERNMENT ACCOUNT WITHIN PRESCRIBED TIME. ACCORDINGLY ENTIRE AMOUNT WAS DISA LLOWED BY THE ASSESSING OFFICER AND CIT (A) CONFIRMED THE ACTION OF ASSESSI NG OFFICER BY OBSERVING THAT ASSESSEE WAS IN FAULT IN NOT DEPOSITING THE TD S WITHIN THE STIPULATED PERIOD. 8. AT THE OUTSET LD AR PLACED ON RECORD THE ORDER O F THE TRIBUNAL IN CASE OF AAVKAR DEVELOPERS V. ITO IN ITA NO.3165 & 3085/AHD/2009 , ORDER DATED 17- 06-2011, WHEREIN EXACTLY SIMILAR ISSUE WAS DEALT WI TH AND IT WAS HELD THAT AMENDMENT IN SECTION 40(A)(IA) BY THE FINANCE ACT, 2001 IS REMEDIAL IN NATURE AND IT WAS DESIGNED TO ELIMINATE UNINTENDED CONSEQU ENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE TAXPAYERS AND THEREFORE THIS AMENDMENT WOULD BE ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 6 RETROSPECTIVE IN NATURE AND ACCORDINGLY APPLICABLE TO THE ASSESSMENT ORDER UNDER APPEAL, WHICH WAS ASSESSMENT ORDER 2006-07. 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO GO NE THROUGH THE ORDER OF THE TRIBUNAL REFERRED BY LD. A.R. WE FOUND THAT IN THE INSTANT CASE DISALLOWANCE HAS BEEN MADE BY ASSESSING OFFICER ONL Y ON THE PLEA THAT PAYMENT OF TDS WAS NOT MADE TO THE CREDIT TO THE GO VERNMENT ACCOUNT WITHIN THE PRESCRIBED TIME I.E. ON OR BEFORE 07-04-2005. T HE CONTENTION OF LD. AR WAS THAT PAYMENT WAS MADE BEFORE LAST DATE OF FILIN G RETURN, THEREFORE AMENDMENT MADE U/S.40(A)(IA) TO THE EFFECT THAT IF THE PAYMENT OF TDS MADE BEFORE LAST DATE OF FILING RETURN, NO DISALLOWANCE CAN BE MADE U/S.40(A)(IA) OF THE ACT. AMENDMENT BROUGHT IN SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 HAS BEEN ELABORATELY DISCUSSED BY TRIBUNAL IN THE CASE OF SHRI KANUBHAIRAMJIBHAI V. ITO IN ITA NO.3983/AHD/2008 , ORDER DATED 03-12-2010, IT WAS HELD THAT AMENDMENT BROUGHT OUT IN U/S.40(A)(IA) BY FINANCE A CT, 2010 WAS DECLARATORY AND CLARIFICATORY IN NATURE. THUS IT IS DESIGNED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE TAXPAYER AND WHICH MADE THE PROVISION UN-WORKABLE OR UNJUST IN A SPECI FIC SITUATION, THEREFORE HAS TO BE TREATED AS RETROSPECTIVE WITH EFFECT FROM 01- 04-2005 THAT ON THE DATE ON WHICH SECTION 40(A)(IA) HAS BEEN INSERTED BY THE FI NANCE ACT NO.2 IN 2004. FOLLOWING WAS THE PRECISE OBSERVATION OF THE BENCH: - 9. NOW THE QUESTION ARISES IS, WHETHER THE AMENDME NT BROUGHT OUT BY THE FINANCE ACT, 2010 W.E.F 1-4-2010 IN SECT ION 40(A)(IA) OF THE ACT IS CLARIFICATORY IN NATURE OR NOT. TO DECID E THIS ISSUE, NOW WE HAVE TO GO TO THE HISTORY OF THE PROVISIONS OF S ECTION 40(A)(IA), WHICH WAS SUBSTITUTED FOR SUB-CLAUSE-I BY FINANCE ( NO. 2) ACT, 2004 W.E.F. 1-4-2005 AS UNDER: AMOUNT NOT DEDUCTIBLE. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC TIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSIONS, - (A) ...... ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 7 (IA) ANY INTEREST, COMMISSION OR BROKERAGE, FEES FO R PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABO UR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN T HE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUBSECTION (1) OF SECTION 200: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCT ED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTIO N 200, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE IN COME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION:- FOR THE PURPOSES OF THIS SUB-CLAUSE: (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEAN ING AS IN CLAUSE ) OF THE EXPLANATION TO SECTION 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE S AME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (11) OF SECTION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME M EANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLA NATION-ILL TO SECTION 194C; SUBSEQUENTLY, IN SUB-CLAUSE (IA) THE WORDS, (RENT A ND ROYALTY) HAS BEEN INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 2006 W.R.E.F. 1-4-2006 AND SIMILARLY IN EXPLANATION SUB- CLAUSE (V) & (VI) WERE INSERTED AS UNDER: (V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUS E ) TO THE EXPLANATION TO SECTION 194-1; ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 8 (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EX PLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; FURTHER, BY THE FINANCE ACT, 2008, THE QUOTED WORDS WERE SUBSTITUTED IN SUB-CLAUSE (IA) W.R.E.F. 1-4-2005 AS UNDER: HAS NOT BEEN PAID (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139: OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAT DAY OF THE PREVIOUS YEAR AND FINALLY BY THE FINANCE ACT, 2010 W.E.F. 1-4-201 0 SUB-CLAUSE (IA) IS AS UNDER : (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT RO YALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SER VICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT AN Y WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SU B-SECTION (1) OF SECTION 139: 10. WE FIND FROM THE ABOVE PROVISION OF SECTION 40( A)(IA) OF THE ACT, AMENDED BY FINANCE ACT, 2010, THAT THE PAYMENT OF EXPENSES AS SPECIFIED IN THIS PROVISION, ON WHICH TAX IS DED UCTIBLE AT SOURCE UNDER CHAPTER XVII-B OF THE ACT AND THE ASSESSEE HA S NOT DEDUCTED THE TAX OR AFTER DEDUCTION HAS NOT BEEN PA ID ON OR BEFORE THE DUE DATE SPECIFIED IN SECTION 139(1) OF THE ACT , WILL BE DISALLOWED WHILE COMPUTING THE INCOME CHARGEABLE UN DER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IT MEANS THAT THE TAX SO DEDUCTIBLE AT SOURCE HAS BEEN DEDUCTED A ND PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SECTION 139(1) OF THE ACT, THE EXPENSES RELATED TO THE SAME WILL BE ALLOWED WHILE COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 9 OR PROFESSION. PRIOR TO ITS AMENDMENT, THIS SECTIO N WAS AMENDED BY THE FINANCE ACT, 2008, W.R.E.F. 1-4-2005 WHERE T HE PROVISION WAS MADE TO DISALLOW THE PAYMENTS ON WHICH TAX IS D EDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID: (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEARS. FROM THE ABOVE AMENDMENTS IN THIS PROVISION OF SECT ION 40(A)(IA) OF THE ACT IT IS CLEAR THAT THE INTENTION OF THE LE GISLATURE IS TO OPERATES RETROSPECTIVELY TO SERVE ITS OBJECT OF REM OVING HARDSHIP FACED BY THE TAXPAYERS. WHILE BRINGING THIS AMENDME NT BY FINANCE BILL, 2010, THE OBJECT WAS EXPLAINED IN NOTES ON CL AUSES AND THE RELEVANT CLAUSE-12 WAS EXPLAINED AS UNDER: CLAUSE 12 OF THE BILL SEEKS TO AMEND SECTION 40 OF THE INCOME-TAX ACT RELATING TO AMOUNTS NOT DEDUCTIBLE. UNDER THE EXISTING PROVISIONS CONTAINED IN SUB-CLAU SE (IA) OF CLAUSE (A) OF THE AFORESAID SECTION, NON-DEDUCTION OF TAX OR NON-PAYMENT OF TAX AFTER DEDUCTION ON PAYMENT OF AN Y SUM BY WAY OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTR ACTOR OR SUB-CONTRACTOR, BEING RESIDENT, RESULTS IN THE DISA LLOWANCE OF THE SAID SUM, IN THE COMPUTATION OF INCOME OF THE P AYER, ON WHICH TAX IS REQUIRED TO BE DEDUCTED UNDER CHAPTER XVII-B. THE PROVISO TO THE SAID SUB-CLAUSE PROVIDES THAT WH ERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN A NY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE LA ST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE DUE D ATE OF FILING OF RETURN OR DEDUCTED DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PR EVIOUS YEAR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN C OMPUTING ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 10 THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX H AS BEEN PAID. FURTHER THE AMENDMENT WAS EXPLAINED IN MEMORANDUM E XPLAINING THE PROVISION IN FINANCE BILL, 2010 AS UNDER: DISALLOWANCE EXPENDITURE ON ACCOUNT OF NON-COMPLIAN CE WITH TDS PROVISIONS, THE EXISTING PROVISIONS OF SECTION 40(A)(IA) OF TH E INCOME-TAX ACT PROVIDE FOR THE DISALLOWANCE OF EXPENDITURE LIKE INTEREST, COMMISSION,, BROKERAGE, PROFESSIONAL FEES, ETC. IF TAX ON SUCH EXPENDITURE WAS NOT DEDUCTED, OR AFTER DEDUCTION WAS NOT PAID DURIN G THE PREVIOUS YEAR. HOWEVER, IN CASE THE DEDUCTION O F TAX IS MADE DURING THE LAST MONTH OF THE PREVIOUS Y EAR, NO DISALLOWANCE IS MADE IF THE TAX IS DEPOSITED ON OR BEFORE THE DUE DATE OF FILING OF RETURN. IT IS PROPOSED TO AMEND THE SAID SECTION TO PROVIDE THAT NO DISALLOWANCE WILL BE MADE IF AFTER DEDUCTION OF TAX DURING THE PREVIOUS YEAR, THE SAME HAS BEEN PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME SPECIFIED IN SUBSECTION(1) OF SECTION 139. THIS AMENDMENT IS PROPOSED TO TAKE EFFECT RETROSPEC TIVELY FROM 1ST APRIL, 2010 AND WILL, ACCORDINGLY, APPLY I N RELATION TO THE ASSESSMENT YEAR 2010-11 AND SUBSEQUENT YEARS . 11. IN VIEW OF THE ABOVE AMENDMENTS BROUGHT OUT IN SECTION 40(A)(IA) ON DIFFERENT TIMES TO REMOVE THE DIFFICUL TIES OF TAXPAYERS A REMEDIAL STEPS WERE TAKEN BY THE LEGISLATURE. WE AR E OF THE VIEW THAT FOR MODERN PURPOSES A DECLARATORY AMENDMENT IN SECTION OF THE ACT MAY BE DEFINED AS AN AMENDMENT TO REMOVE DO UBTS EXISTING AS TO THE MEANING OR EFFECT OF ANY STATUTE AND SUCH AMENDMENTS ARE USUALLY HELD TO BE RETROSPECTIVE. AN EXPLANATORY ACT IS GENERALLY PASSED TO SUPPLY AN OBVIOUS OMISSI ON OR TO CLEAR UP DOUBTS AS TO THE MEANING OF THE PREVIOUS ACT AND THIS VIEW HAS BEEN HELD IN KESHAVLAL JETHALAL SHAH V. MOHANALAL B HAGWANDAS, AIR 1968 SC 1336, 1339]. FURTHER HONBLE APEX COURT IN THE CASE OF CIT V. PODAR CEMENT PVT. LTD., (1997) 226 ITR 625, 652 (SC) ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 11 SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DEC LARATORY OF THE PREVIOUS LAW RETROSPECTIVE OPERATION IS GENERALLY I NTENDED. FURTHER MORE IN SIMILAR CIRCUMSTANCES, HONBLE APEX COURT I N THE CASE OF ALLIED MOTORS (P). LTD. V CIT (1977) 224 ITR 677,687 (SC) HELD THAT THE AMENDMENT WILL NOT SERVE ITS OBJECT IN SUC H A SITUATION UNLESS IT IS CONSTRUED AS RETROSPECTIVE. THE HONBL E APEX COURT HELD AS UNDER: THE DEPARTMENTAL UNDERSTANDING ALSO APPEARS TO BE THAT SECTION 43B, THE PROVISO AND EXPLANATION 2 HAVE TO BE READ TOGETHER AS EXPRESSING THE TRUE INTENTION OF SECTIO N 43B. EXPLANATION 2 HAS BEEN EXPRESSLY MADE RETROSPECTIVE . THE FIRST PROVISO, HOWEVER, CANNOT BE ISOLATED FROM EXP LANATION 2 AND THE MAIN BODY OF SECTION 43B. WITHOUT THE FIRST PROVISO, EXPLANATION 2 WOULD NOT OBVIATE THE HARDSHIP OR THE UNINTENDED CONSEQUENCES OF SECTION 43B. THE PROVISO SUPPLIES N OBVIOUS, OMISSION. BUT FOR THIS PROVISO THE AMBIT OF SECTION 43B BECOMES UNDULY WIDE BRINGING WITHIN ITS SCOPE THOSE PAYMENTS, WHICH WERE NOT INTENDED TO BE PROHI BITED FROM THE CATEGORY OF PERMISSIBLE DEDUCTIONS. IN THE CASE OF GOODYEAR INDIA LTD. V. STATE OF HARYANA (1991) 188 ITR 402, THIS COURT SAID THAT THE RULE O F REASONABLE CONSTRUCTION MUST BE APPLIED WHILE CONST RUING A STATUTE. A LITERAL CONSTRUCTION SHOULD BE AVOIDED I F IT DEFEATS THE MANIFEST OBJECT AND PURPOSE OF THE ACT. THEREFORE, IN THE WELL KNOWN WORDS OF JUDGE LEARNED HAND, ONE CANNOT MAKE A FORTRESS OUT OF THE DICTIONARY; A ND SHOULD REMEMBER THAT STATUTES HAVE SOME PURPOSE AND OBJECT TO ACCOMPLISH WHOSE SYMPATHETIC AND IMAGINATIVE DISCOV ERY IS THE SUREST GUIDE TO THEIR MEANING. IN THE CASE OF R.B. JODHA MAL KUTHIALA V. CIT (1971) 82 ITR 570, THIS COURT SAID THAT ONE SHOULD APPLY THE RULE OF REASONABLE INTERPRETAT ION. A PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE PROVISION WORKABLE, A PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION IN THE SECTION A ND IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SE CTION A REASONABLE INTERPRETATION, REQUIRES TO BE TREATED A S RETROSPECTIVE IN OPERATION, SO THAT A REASONABLE IN TERPRETATION CAN BE GIVEN TO THE SECTION AS A WHOLE. ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 12 THIS VIEW HAS BEEN ACCEPTED BY A NUMBER OF HIGH COU RTS. IN THE CASE OF CIT V. CHANDULAL VENICHAND (1984) 209 I TR 7, THE GUJARAT HIGH COURT HAS HELD THAT THE FIRST PROV ISO TO SECTION 43B IS RETROSPECTIVE AND SALES TAX FOR THE LAST QUARTER PAID BEFORE THE FILING OF THE RETURN FOR THE ASSESS MENT YEAR IS DEDUCTIBLE. THIS DECISION DEALS WITH ASSESSMENT YEA R 1984- 85. THE CALCUTTA HIGH COURT IN THE CASE OF CIT V. SRI JAGANNATH STEEL CORPORATION (1991) 191 ITR 676, HAS TAKEN A SIMILAR VIEW HOLDING THAT THE STATUTORY LIA BILITY FOR SALES TAX ACTUALLY DISCHARGED AFTER THE EXPIRY OF T HE ACCOUNTING YEAR IN COMPLIANCE WITH THE RELEVANT STA TUTE IS ENTITLED TO DEDUCTION UNDER SECTION 43B. THE HIGH C OURT HAS HELD THE AMENDMENT TO BE CLARIFICATORY AND, THEREFO RE, RETROSPECTIVE. THE GUJARAT HIGH COURT IN THE ABOVE CASE HELD THE AMENDMENT TO BE CURATIVE AND EXPLANATORY AND HE NCE RETROSPECTIVE. THE PATNA HIGH COURT HAS ALSO HELD T HE AMENDMENT INSERTING THE FIRST PROVISOS TO BE EXPLAN ATORY IN THE CASE OF JAMSHEDPUR MOTOR ACCESSORIES STORES V. UNION OF INDIA (1991) 189 ITR 70. IT HAS HELD THE AMENDMENT INSERTING FIRST PROVISO TO BE RETROSPECTI VE. THE SPECIAL LEAVE PETITION FROM THIS DECISION OF THE PA TNA HIGH COURT WAS DISMISSED (SEE [1991] 191 ITR (ST.) 8). T HE VIEW OF THE DELHI HIGH COURT, THEREFORE, THAT THE FIRST PROVISO TO SECTION 43B WILL BE AVAILABLE ONLY PROSPECTIVELY DO ES NOT APPEAR TO BE CORRECT. AS OBSERVED BY G. P. SINGH IN HIS PRINCIPLES OF STATUTORY INTERPRETATION, 43B WILL BE AVAILABLE ONLY PROSPECTIVELY DOES NOT APPEAR TO BE CORRECT. A S OBSERVED BY G. P. SINGH IN HIS PRINCIPLES OF STATUT ORY INTERPRETATION, 4TH EDN., PAGE 291. IT IS WELL SET TLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PR EVIOUS LAW, RETROSPECTIVE OPERATION IS GENERALLY INTENDED. IN ACT THE AMENDMENT WOULD NOT SERVE ITS SUBJECT IN SUCH A SIT UATION, UNLESS IT IS CONSTRUED AS RETROSPECTIVE. THE VIEW, THEREFORE, TAKEN BY THE DELHI HIGH COURT CANNOT BE SUSTAINED. 12. ACCORDINGLY, WE ARE OF THE VIEW THAT THE AMENDM ENTS BROUGHT OUT IN SECTION 40(A)(IA) OF THE ACT FROM TIME-TO-TI ME WAS CLARIFICATORY AND WHEN AN AMENDMENT IS DECLARATORY AND CLARIFICATORY IN NATURE, THE PRESUMPTION AGAINST IT S RETROSPECTIVITY IS NOT APPLICABLE AND AMENDMENTS OF THIS KIND ONLY DEC LARE. IT IS NO DOUBT TRUE THAT, ORDINARILY, A STATUTE, AND PARTICU LARLY WHEN THE SAME HAS BEEN MADE APPLICABLE WITH EFFECT FROM A PA RTICULAR DATE ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 13 SHOULD BE CONSTRUED PROSPECTIVELY AND NOT RETROSPEC TIVELY. BUT THIS PRINCIPLE WILL NOT BE APPLICABLE IN A CASE WHERE TH E PROVISION CONSTRUED IS MERELY EXPLANATORY, CLARIFICATORY OR D ECLARATORY IT CANNOT BE DISPUTED THAT THE OBJECT OF THE EXPLANATI ON IS TO EXPLAIN THE MEANING AND INTENDMENT OF THE ACT ITSELF AND TH IS VIEW HAS BEEN HOLD BY HOBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. INDIA STEAMSHIP CO. LTD. (1992) 196 ITR 917, 936 (CAL)]. IN THAT CASE, EXPLANATION 8, WHICH HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 1986, WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 1974, TO SECTION 43(1), HAS BEEN HELD TO BE CLARIFICATORY IN NATURE AND THE SAME HAS BEEN HELD TO BE DEEMED TO BE ALWAYS IN EXI STENCE EVEN BEFORE 1-4-1974. SIMILARLY, IN THE CASE OF ALLIED M OTORS (P) LTD (SUPRA), IT HAS BEEN HELD THAT THE PROVISIONS OF TH E FIRST PROVISO, WHICH HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 1 987, WITH EFFECT FROM 1ST APRIL, 1988 TO SECTION 43B IS REMED IAL IN NATURE, DESIGNED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE ASSESSEE AND WHICH MADE THE P ROVISION UNWORKABLE OR UNJUST IN A SPECIFIC SITUATION, AND I S OF CLARIFICATORY NATURE AND, THEREFORE, HAS TO BE TREATED AS RETROSP ECTIVE WITH EFFECT FROM 1ST APRIL, 1984, THE DATE ON WHICH SECTION 43B HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 1983. IN TAKING T HIS VIEW, THE SUPREME COURT HAS APPROVED JAMSHEDPUR MOTOR ACCESSORIES STORES V. UNION OF INDIA [(1991) 189 ITR 70 (PAT), SPECIAL LEAVE PETITION DISMISSED BY THE SUPREME COURT : (1991) 19 1 ITR (ST.) 8 (SC)], CIT V. SRI JAGANNATH STEEL CORPORATION [(1991) 191 ITR 676 (CAL)], AND CIT V. CHANDULAL VENICHAND [(1992) 197 ITR 718, 720 (CAL)] AND CIT V. PYARILAL KASAM MANJI & CO. [(1992) 198 IGTR 110 (ON)]. 13. IN VIEW OF THE ABOVE DISCUSSION, FOLLOWING THE CASE LAWS OF HONBLE APEX COURT AND OF HONBLE HIGH COURTS CITED ABOVE, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A)(IA ) AS AMENDED BY THE FINANCE ACT, 2010 W.E.F 1-4-2010, WHICH HAS NEW LY BEEN INSERTED BY THE FINANCE (NO.2) ACT, 2004, WITH EFFE CT FROM 1ST APRIL, 2005 TO SECTION 40 OF THE ACT IS REMEDIAL IN NATURE , DESIGNED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE U NDUE HARDSHIP TO THE TAXPAYERS AND WHICH MADE THE PROVIS ION UNWORKABLE OR UNJUST IN A SPECIFIC SITUATION, AND I S OF CLARIFICATORY NATURE AND, THEREFORE, HAS TO BE TREATED AS RETROSP ECTIVE WITH EFFECT FROM 1ST APRIL, 2005, THE DATE ON WHICH SECTION 40( A)(IA) HAS BEEN INSERTED BY THE FINANCE (NO.2) ACT, 2004. ACCORDING LY, THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 14 10. IN VIEW OF ABOVE DECISION, WE DIRECT THE ASSESS ING OFFICER TO VERIFY THE ACTUAL DATE OF PAYMENT OF TDS AND WHERE THE AMOUNT OF TDS IS FOUND TO BE DEPOSITED BEFORE DUE DATE OF FILING OF RETURN, NO D ISALLOWANCE IS WARRANTED U/S.40(A)(IA). HOWEVER, IN RESPECT OF ITEMS, WHERE NO TDS WAS DEDUCTED OR AFTER DEDUCTION THE SAME IS NOT DEPOSITED BEFORE TH E DUE DATE OF FILING OF RETURN OF INCOME, THE DISALLOWANCE WOULD BE SUSTAINED. WE DIRECT ACCORDINGLY. NEEDLESS TO SAY THAT ASSESSING OFFICER WILL ADJUDIC ATE THE ISSUE AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE , IN THE LIGHT OF OUR ABOVE DIRECTION. 11. NEXT GRIEVANCE OF THE REVENUE RELATES ADDITION OF RS.16,31,275/- OUT OF HIRE CHARGES. IN THIS REGARD THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS RECEIVED HIRE CHARGES FROM M/S JBF INDUSTRIES ON TH E BASIS OF RATES SO FIXED WHEREAS ASSESSEE IN TURN WAS PAYING SAME RATE TO AL L TRANSPORTERS EXCEPT IN A FEW CASES. THE ASSESSING OFFICER FURTHER OBSERVED T HAT ASSESSEE WAS NOT PAYING MORE THAN 60% OF THE HIRE CHARGES RECEIVED F ROM M/S JBF INDUSTRIES TO THE TRANSPORTERS IN RESPECT OF PARTICULAR TRIP AND THEREFORE THE CLAIM OF HIRE CHARGES DEBITED TO THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE WAS NOT ACCEPTED. THE AO ESTIMATED THE BILLING AMOUNT OF RS .10 LAKH ON ACCOUNT OF ASSESSEES OWN TRUCKS, HE CONCLUDED THAT THE RECEIP T ON ACCOUNT OF TRANSPORTATION CHARGES ON THE HIRED TRUCKS WOULD BE RS.1,48,89,953/- 60% OF WHICH WAS CALCULATED BY THE AO AS ASSESSEES EXPEND ITURE ON HIRE CHARGES WHICH WORKED OUT AT RS.89,33,972/-. THUS AGAINST TH E AMOUNT EXPENDITURE OF RS.1,05,65,247/- CLAIMED BY THE ASSESSEE, THE AO DI SALLOWED A SUM OF RS.16,31,275/- ( RS.1,05,65,244 RS.89,39,972/-). 12. BY THE IMPUGNED ORDER THE LD. CIT(APPEALS) DELE TED THE ADDITION AFTER HAVING THE ADDITION THE FOLLOWING OBSERVATION:- I HAVE CONSIDERED THE SUBMISSIONS AND FIND THAT TH E AO HAS PRESUMED THAT IN ALL CASES OF HIRING OF THE TRUCKS BY THE AP PELLANT, CONDITIONS WOULD BE THE SAME AND THERE WOULD BE NO DIFFERENCE BETWEE N A TRUCK BEING HIRED AT DIFFERENT POINTS OF TIME OR DIFFERENT DAYS OR WEATHER CONDITIONS OR ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 15 EMERGENCIES. THE ESTIMATION OF 60% OF THE TOTAL HIR E CHARGES BEING PASSED ON TO THE TRANSPORTERS IS WITHOUT APPRECIATI NG THE APPELLANTS SUBMISSION THAT IN QUITE A FEW CASES, THE APPELLANT WAS INCURRING EXPENDITURE BY SUPPLYING DIESEL TO THESE PARTIES AL SO WHICH HAS BEEN ADMITTED BY THE AO ALSO IN THE EARLIER PART OF HIS ORDER. IT IS ALSO A FACT THAT THE PAYMENT HAVE BEEN MADE BY THE APPELLANT TO THE TRANSPORTERS THROUGH BANKING CHANNELS AND NO DEFECTS HAVE BEEN F OUND IN THE BOOKS OF ACCOUNTS TO WARRANT ANY SUCH DISALLOWANCE. FURTH ER AS ALREADY DECIDED IN EARLIER PART OF THIS ORDER, THERE IS NO JUSTIFICATION OF ESTIMATING APPELLANTS RECEIPT IN RESPECT OF HIS OWN TRUCKS AT RS.10 LACS. THE ENTIRE DISALLOWANCE HAS BEEN MADE ON THE BASIS OF CONJECTU RES AND SURMISES AND IS DIRECTED TO BE DELETED. 13. THE REVENUE IS IN FURTHER APPEAL BEFORE US AGAI NST THE ABOVE ORDER OF LD. CIT (APPEALS). 14. WE HAVE CONSIDERED RIVAL CONTENTIONS AND DELIBE RATED ON THE CASE LAWS CITED BY THE LD. A.R., IN THE CONTEXT OF FACTUAL MA TRIX OF THE CASE. FROM THE RECORD WE FOUND THAT AO HAS WITHOUT INDICATING ANY BASIS ESTIMATED RECEIPT IN RESPECT OF ASSESSEES OWN TRUCKS. THE ASSESSING OFF ICER WITHOUT REFERRING ANY MATERIAL ALSO ESTIMATED 60% EXPENDITURE AGAINST T HE TRANSPORTATION CHARGES RECEIVED BY ASSESSEE. HOWEVER, NOWHERE THE AO HAS D OUBTED THE GENUINENESS OF ACTUAL EXPENDITURE OF RS.1,05,65,247 /- INCURRED ON HIRING OF TRUCKS. THE PAYMENT OF HIRE CHARGES WAS AS PER THE MARKET CONDITIONS AND FOR PROVIDING TIMELY SERVICES TO THE CUSTOMERS. IT IS F OR THE ASSESSEE TO DECIDE AS TO PRICE WHICH IS TO BE PAID TO THE TRANSPORTERS WH ILE HIRING THE TRUCKS. IF THE SUPPLY OF THE TRUCKS IN THE MARKET IS IN SCARCITY, THE ASSESSEE MAY BE REQUIRED TO PAY MORE PRICE FOR THE SAME TRIP FOR WHICH HE HA S HIRED THE TRUCK ON LOWER PRICE ON SOME DIFFERENT OCCASIONS. IN THIS REGARD, THE PROPOSITION OF LAW AS LAID DOWN BY THE HONBLE SUPREME COURT IN CASE CIT V. WALCHAND AND CO. PVT. LTD. (1967) 65 ITR 381 (SC) IS VERY RELEVANT, WHEREIN I T WAS HELD THAT WHILE APPLYING THE TEST OF COMMERCIAL EXPEDIENCY FOR DETE RMINING WHETHER AN EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF BUSINESS, REASONABLENESS OF THE EXPENDITURE HAS TO BE ADJUDGE D FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF THE REVENUE. IN THE I NSTANT CASE, IT IS NOT THE ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 16 CASE OF AO THAT TRUCKS HIRED FROM THE MARKET WERE RELATED TO THE CONCERNS FALLING U/S. 40A (2)(B) NOR IT WAS THE CASE OF THE A.O. THAT EXCESSIVE OR UNREASONABLE PAYMENT WAS MADE BY ASSESSEE ADDITION WAS MADE BY AO PURELY ON THE BASIS OF PROBABILITIES AND WITHOUT CO NSIDERING THE COMMERCIAL EXIGENCIES OF BUSINESS WHERE THE REQUIREMENT TO MEE T COMMITMENT OF SERVICE RESULTS IN DIFFERENT PURPOSE. GENUINENESS OF EXPEN DITURE ACTUALLY INCURRED ON TRANSPORTATION IS NOT IN DOUBT AND THE SAME HAVE BE EN INCURRED IN COURSE OF ASSESSEES BUSINESS OF TRANSPORTATION. AS THE EXPEN DITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSIN ESS NO DISALLOWANCE WAS WARRANTED. THE FINDING RECORDED BY CIT (A) WHILE DE LETING THE DISALLOWANCE WAS AS PER MATERIAL ON RECORD THEREFORE DO NOT WARR ANT ANY INTERFERENCE. 15. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT (APPEALS) FOR DELETING THE DISALLOWANCE MADE ON ACCOUNT OF HIRE CHARGES PAID TO THE TRANSPORTERS AND ARE INCLINED T O AGREE WITH LD. A.R. THAT ESTIMATION OF EXPENDITURE BY AO WAS DEVOID OF ANY M ERITS. 16. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ADDIT ION OF RS.11.50 LAKH ON ACCOUNT OF UNSECURED LOANS. IN THIS REGARD THE ASSE SSING OFFICER HAS OBSERVED THAT ASSESSEE HAS NOT FILED ANY LOAN CONFIRMATION I N RESPECT OF LOAN TAKEN FROM DIPAK POLYTEX AND S.S. TRANSPORT FOR THE AMOUNT OF RS.10 LAKH AND RS.1.05 LAKH RESPECTIVELY. 17. BEFORE LD. CIT(APPEALS) THE ASSESSEE HAS FURNIS HED CONFIRMATION LETTER FROM THE SAID PARTIES, HOWEVER, THE LD. CIT(APPEALS ) DID NOT ADMIT THE SAME AND CONFIRMED THE ADDITION MADE BY ASSESSING OFFICE R. DURING THE COURSE OF HEARING BEFORE US LD. AR DRAWN OUR ATTENTION TO THE BANK STATEMENT PLACED ON RECORD INDICATING CLEARING CHEQUE OF RS.10 LAKH, CO PY OF CONFIRMATION LETTER FROM DIPAK POLYTEX ALONG WITH RECONCILIATION STATEM ENT SUPPORTING THE UNSECURED LOANS TAKEN BY THE ASSESSEE. SINCE ALL TH ESE EVIDENCES GOES TO THE ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 17 ROOT OF THE ISSUE REQUIRE DETAILED EXAMINATION AT T HE PART OF AO. AS THE AO HAS NOT EXAMINED ALL THESE EVIDENCES, IN THE INTEREST O F NATURAL JUSTICE WE RESTORE THIS MATTER BACK TO THE FILE OF ASSESSING OFFICER F OR DECIDING AFRESH AFTER VERIFYING THE CONFIRMATION AND OTHER DOCUMENTS PLAC ED ON RECORD. WE DIRECT ACCORDINGLY. IN RESPECT OF LOAN OF S.S. TRANSPORTS, IT WAS SUBMITTED BY LD. AR THAT THIS AMOUNT WAS OFFERED FOR TAXATION IN THE A. Y. 2007-08 UNDER THE HEAD OTHER INCOME. THEREFORE NO ADDITION IS WARRANTED OTHERWISE IT WOULD RESULT IN DOUBLE TAXATION OF THE SAME AMOUNT. IN THE INTEREST OF JUSTICE, ISSUE WITH REGARD TO ADDITION OF RS.1.05 LAKH ALLEGED TO HAVE BEEN RECEIVED FROM S.S. TRANSPORT AND WHICH HAS BEEN OFFERED FOR TAXATION I N THE A.Y 2007-08 IS ALSO RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR DECIDING AFRESH AFTER VERIFYING ALL THE FACTS AND DOCUMENTS AS PLACED ON RECORD BY THE ASSESSEE. WE DIRECT ACCORDINGLY. 18. THE ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWANCE OF RS.86,340/- BEING 10% OF LOADING AND UNLOADING CHARGES FOR WANT OF PR OPER VOUCHERS. THE OBSERVATION OF THE LOWER AUTHORITIES TO THE EFFECT THAT EXPENDITURE ON ACCOUNT OF LOADING CHARGES WERE NOT PROPERLY VOUCHERED HAS NOT BEEN CONTROVERTED BY LD. AR. WE ARE THEREFORE INCLINED TO SUSTAIN THE AD DITION OF RS.86,340/- MADE BY ASSESSING OFFICER AND CONFIRMED BY CIT (A).. 19. IN THE RESULT APPEAL OF REVENUE IS DISMISSED, W HEREAS APPEAL OF THE ASSESSEE IS ALLOWED IN PART IN TERMS INDICATED HEA R-IN-ABOVE. I.T.A. NO. 990 & 1163/AHD/2009 . 20. IN THE APPEAL FILED BY THE REVENUE VIDE ITA NO. 990/AHD/2009, THE GROUNDS HAVE BEEN TAKEN WITH REGARD TO DELETING ADD ITION OF RS. 2,48,840/- ON ACCOUNT OF EXCESS DIESEL EXPENSES AND DELETING ADDI TION OF RS. 14,35,919/- BEING THE DISALLOWANCE ON ACCOUNT OF EXCESS HIRE CH ARGES PAID TO THE ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 18 TRANSPORTERS. AS THE FACTS AND CIRCUMSTANCES ARE SI MILAR, FOLLOWING THE REASONING DISCUSSED BY US HEREINABOVE IN ITA NO.989 & ITA.1164/AHD/2009, IN THE CASE OF SHRI SANDEEP R. KAPOOR, WE DISMISS B OTH THE GROUNDS RAISED BY THE REVENUE. 21. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 22. IN THE APPEAL FILED BY THE ASSESSEE GROUND HAS BEEN TAKEN FOR NOT DISPOSING THE GROUND BY THE CIT (A) WITH REGARD TO ADDITION OF RS.4,20,000/- MADE BY WAY OF UNRECORDED TRANSPORTATION INCOME. FR OM THE RECORD WE FIND THAT SPECIFIC GROUND WAS TAKEN BEFORE THE CIT (A) B UT HE HAS NOT ADJUDICATED THE SAME. IN THE INTEREST OF JUSTICE WE RESTORE THI S GROUND BACK TO THE FILE OF THE CIT (A) FOR DECIDING AFRESH AS PER LAW, AFTER GIVIN G DUE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. WE DIRECT ACCOR DINGLY. 23. THE ASSESSEE IS ALSO AGGRIEVED FOR CONFIRMING T HE ADDITION OF RS.1 LAC OUT OF UNSECURED LOANS. WE HAVE GONE THROUGH THE OR DERS OF THE AUTHORITIES BELOW AND FIND THAT ADDITION WAS MADE IN RESPECT OF LOAN FROM DIPAK POLYTEX ON THE GROUND THAT CONFIRMATION WAS NOT FILED. THE APPELLANT FURNISHED CONFIRMATION LETTER FROM THE SAID PARTY BEFORE THE CIT (A).. HOWEVER, CIT(A) HAS DECLINED TO ACCEPT THE CONFIRMATION AND CONFIRM ED AOS ACTION. AS THE CONFIRMATION FILED BY THE ASSESSEE GOES TO THE ROOT OF THE ISSUE FOR DETERMINING THE GENUINENESS OF THE TRANSACTION, ACCORDINGLY THI S GROUND IS ALSO RESTORED BACK TO THE FILE OF THE CIT (A) FOR DECIDING AFRESH AS PER LAW. 24. LAST GRIEVANCE OF THE ASSESSEE RELATES TO THE D ISALLOWING LOADING AND UNLOADING EXPENSES OF RS. 38,588/-. THE ISSUE HAS A LREADY BEEN CONSIDERED IN THE CASE OF ITAA NO.989/AHD/2009, HEREINABOVE, R ESPECTFULLY FOLLOWING THE SAME, WE CONFIRM THE ADDITION OF RS.38,588/-.. ITA NO.989-990 & 1163-1164/AHD/2009 A.Y.2005-06 ACIT VAPI CIR V. SH SANDEEP R KAPOOR & HUF PAGE 19 25. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMI SSED, WHEREAS APPEAL OF ASSESSEE IS ALLOWED IN PART, IN TERMS INDICATED HER EINABOVE. ORDER PRONOUNCED IN OPEN COURT ON 26 - 08 - 2011 SD/- SD/- (D.K. TYAGI) (R.C. SHARMA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, DATED : 26 /08/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- VALSAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD