M/s. Gordhan Ramjivan HUF, JODHPUR v. ITO, NAGAUR

ITA 566/JODH/2013 | 2009-2010
Pronouncement Date: 31-07-2014 | Result: Partly Allowed

Appeal Details

RSA Number 56623314 RSA 2013
Assessee PAN AAAHG4154R
Bench Jodhpur
Appeal Number ITA 566/JODH/2013
Duration Of Justice 7 month(s) 21 day(s)
Appellant M/s. Gordhan Ramjivan HUF, JODHPUR
Respondent ITO, NAGAUR
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 22-05-2014
Date Of Final Hearing 22-05-2014
Next Hearing Date 22-05-2014
Assessment Year 2009-2010
Appeal Filed On 10-12-2013
Judgment Text
IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.K. SAINI ACCOUNTANT MEMBER. ITA NO. 566 /JODH/2013 (A.Y. 200 9 - 10) M/S. GORDHAN RAMJIVAN HUF VS. ITO WARD - 1 C/O SHRI MAHAVEER JAIN C.A. NAGAUR. M - 1 OLYMPIC COMPLEX NEAR RAILWAY STATION JODHPUR. PAN NO. AAAHG 4154 R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAHAVEER JAIN . DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 22 / 0 5 /201 4 . DATE OF PRONOUNCEMENT : 31 /0 7 /201 4 . O R D E R PER N.K. SAINI A.M TH IS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 11 / 1 0/2013 OF L D . CIT(A) J ODHPUR . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE PROVISIONS OF THE I.T. ACT 1961 THE ASSESSMENT ORDER IS INVALID AND THEREFORE THE APPELLANT APPEALS F OR ITS CA NCELLATION. 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO DID N O T JUSTIFY IN DISALLOWING INTEREST OF RS. 5 41 676/ - I.E. BY SUBSTITUTING NOTIONAL INTEREST RATE OF 18% P.A. FOR ACTUAL INTEREST RATE RECEIVABLE BY THE APPELLANT FROM ITS DEBTORS AND THE LD. CIT(A) DID NOT JUSTIFY IN SUSTAINING THE SAME TO THE EXTENT OF RS. 3 37 768/ - BY SUBSTITUTING THE NOTIONAL INTEREST RATE OF 18% P.A. BY 15.75% P.A. THE APPELLANT VERY HUMBLY APPEALS FOR ORDERING TO ALLOW THE S USTAINED DISALLOWANCE OF RS. 3 37 768/ - . 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. AO DID NOT JUSTIFY IN DISALLOWING RS. 1 72 897/ - U/S 40A(3) AND THE LD. CIT(A) DID NOT JUSTIFY IN SUSTAINING THE SAME. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. AO DID NOT JUSTIFY IN DISALLOWING RS. 5 826/ - OUT OF TELEPHONE AND MOBILE EXPENSES INCURRED FOR THE BUSINESS PURPOSE BY ASSUMING THAT EXPENSES TO THE EXTENT OF RS. 5 826/ - WERE INCURRED FOR THE APPELLANTS PERSONAL PURPOSES. THE LD. AO MADE THE DISALLOWANCE WITHOUT APPRECIATING THE APPELLANTS EXPLANATION IN THIS REGARD AND THE LD. CIT(A) DID NOT JUSTIFY IN SUSTAINING THE SAME. THAT APPELLANT VERY HUMBLY APPEALS FOR ORDERING TO ALLOW THE SUSTAINED DISALLO WANCE OF RS. 5 826/ - 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. AO DID NOT JUSTIFY IN DISALLOWING RS. 6 598/ - OUT OF PETROL EXPENSES INCURRED AND DEPRECIATION SUFFERED FOR THE BUSINESS PURPOSE BY ASSUMING THAT EXPENSES AND DEPRE CIATION TO THE EXTENT OF RS. 6 598/ - WERE INCURRED / SUFFERED FOR THE APPELLANTS PERSONAL PURPOSES. THE LD. AO MADE THE DISALLOWANCE WITHOUT APPRECIATING THE APPELLANTS EXPLANATION IN THIS REGARD AND THE LD. CIT(A) DID NOT JUSTIFY IN SUSTAINING THE SAME . THE APPELLANT VERY HUMBLY APPEALS FOR ORDERING TO ALLOW THE SUSTAINED DISALLOWANCE OF RS. 6 598/ - 6. THAT THE LD. AO DID NOT JUSTIFY IN CHARGING INTEREST U/S 234B AND 234D RESPECTIVELY AND IN WITHDRAWING INTEREST U/S 244A(3) OF THE I.T. ACT 1961 AND THE LD. CIT(A) DID NOT JUSTIFY IN SUSTAINING THE SAME. 7. THAT THE APPELLANT CRAVES OPPORTUNITY FOR FURNISHING ANY OTHER GROUND/S OF APPEAL ON OR BEFORE THE DATE OF APPEAL HEARING. 3 2 GRO UND NO. 7 IS GENERAL IN NATURE WHILE GROUND NO. 1 WAS NOT PRESSED THEREFORE THESE GROUNDS DO NOT REQUIRE ANY ADJUDICATION ON OUR PART. 3. VIDE GROUND NO. 2 THE GRIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF DISALLOWANCE OF RS. 3 37 768/ - . 4. FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 29/09/2009 DECLARING AN INCOME OF RS. 4 37 080/ - WHICH WAS PROCESSED U/S 143(1) OF THE I.T. ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) ON 24/04/2010. L ATER ON THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE PAID INTEREST TO THE BANKS @ 1 5% P.A. AND A L SO PAID INTEREST FROM 15% TO 18% TO OTHER PERSONS WHEREAS HE HIMSELF HAD RECEIVED INTEREST @ 5% TO 15% ON ADVANCES GIVEN TO RELATIVES AND OTHER PARTIES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD RECEIVED LESS INTEREST AMOUNTING TO RS. 4 09 417/ - AND RS. 1 32 626/ - FROM FAMILY MEMBERS AND OTHER PERSONS RESPEC TIVELY. THE DETAILS OF THE SAME HAD BEEN GIVEN AT PAGE NOS. 2 & 3 OF THE ASSESSMENT ORDER FOR THE COST OF REP ET ITION THE SAME IS NOT REPRODUCED HEREIN. THE EXPLANATION OF THE ASSESSEE TO THE ASSESSING OFFICER WAS THAT HE WAS 4 HAVING INTEREST FREE FUNDS AMOUNTING TO RS. 17 14 469/ - OUT OF WHICH ADVANCES WERE MADE TO THE RELATIVES AND OTHER PERSONS ON WHICH INTEREST @12% HAD BEEN CHARGED. HOWEVER THE ASSESSING OFFICER WAS NOT SATISFIED FROM THE REPLY OF THE ASSESSEE AND MADE THE DISALLOWANCE OF RS. 5 41 676/ - (RS. 4 09 417/ - + RS. 1 32 259/ - ) . 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT INTEREST FREE FUND WAS AVAILABLE WITH THE ASSESSEE TO ADVANCE LOANS BEARING LESS INTEREST . IT WAS FURTHER STATED THAT IF INTEREST ON INTEREST FREE ADVANCES OR THE ADVANCE GIVEN AT LOWER RATE OF INTEREST WAS REQUIRED TO BE DISALLOWED BUT THE SAME COULD BE DISALLOWED WITH REFERENCE TO THE AMOUNTS ADVANCED ONLY DURING THE YEAR UNDER CONSIDERATION AND NO DISALLOWANCE COULD BE MADE ON ACCOUNT OF INTEREST ON OPENING BALANCE. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRIDEV E NTERPRISES REPORTED AT 192 ITR 165 AND THE DECISION OF THE ITAT JODHPUR BENCH IN THE CASE OF SALEEM CHAWDA VS. ITO REPORTED AT 96 TTJ (JD) 656 . THE ASSESSEE FURNISHED A CHART BEFORE THE LD. CIT(A) SHOWING THE AMOUNT OF DISALLOWABLE INTEREST ONLY WITH REFERENCE TO THE ADVANCES GIVEN DURING THE YEAR UNDER CONSIDERATION @12% AND ACCORDINGLY THE DISALLOWABLE 5 AMOUNT OF INTEREST WAS WORKED OUT AT RS. 47 444/ - . IT WAS STATED THAT IF RATE OF 15% WAS TO BE APPLIED THEN THE DISALLOWA BLE AMOUNT WOULD BE AT RS. 24 138/ - . IT WAS FURTHER STATED THAT THE ASSESSING OFFICER ADOPTED THE RATE OF INTEREST AT 18% P.A. ON THE GROUND THAT THE ASSESSEE HAD PAID INTEREST TO MOST OF ITS CREDITORS @18% P.A. IT WAS CONTENDED THAT OUT OF THE TOTAL INTEREST OF RS. 25 03 491/ - INTEREST OF RS. 18 69 10 6/ - WAS PAID @9% P.A. TO 15% P.A. AND INTEREST OF RS. 6 34 385/ - WAS PAID @18% P.A. TO 21% P.A. IT WAS FURTHER CONTENDED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADOPTING RATE OF INTEREST OF 18% P.A. FOR COMPUTING THE DISALLOWABLE AMOUNT OF INTEREST O F RS. 5 41 676/ - . 6 . THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PROPORTIONATE DISALLOWANCE SHOULD NOT BE MADE OUT OF THE INTEREST PAID TO BANK U/S 36(1)( III) OF THE ACT AND THE ASSESSEE FAILED TO EXPLAIN SATISFACTOR IL Y THE REASONS FOR CHAR G ING LESS RATE OF INTEREST ON ADVANCE THAN THE RATE O N WHICH INTEREST WAS PAID TO THE BANK AND THE ASSESSING OFFICER BY FOLLOWING THE DECISION OF THE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES REPORTED AT 286 ITR 1 MADE THE DISALLOWANCE TO THE TUNE OF RS. 5 41 676/ - . LD. CIT(A) OBSERVED THAT THE ASSESSEE MADE ADVANCES WHICH WERE NOT RELATED TO THE BUSINESS 6 AS NO NEXUS HAD BEEN ESTABLISHED BY MATERIAL EVIDENCE BETWEEN THE BUSINESS NEEDS AND ADVANCEMENT OF INTEREST FREE LOANS . HE FURTHER OBSERVED THAT HAD THE ASSESSEE INSTEAD OF PROVIDING INTEREST AT LOWER RATE TO THOSE PERSONS UTILIZED THE AMOUNT / FUNDS IN DISCHARGIN G THE BANK LOAN THE INTEREST BURDEN OF THE ASSESSEE COULD HAVE BEEN SAVED BY A SUBSTANTIAL AMOUNT. ACCORD I NG TO HIM THE ASSESSING OFFICER RIGHTLY PLACED RELIANCE ON THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. (SUPRA) . THE LD. CIT(A) ALSO REFERRED THE FOLLOW ING DECISIONS OF THE VARIOUS HON'BLE HIGH COURTS: - 1. K. SOMASUNDARAM AND B ROTHERS VS. CIT (1998) 238 ITR 393 . (MAD.) 2. CIT VS. M.S. VENKATESWARAN 222 ITR 163 . (MAD.) 3. CIT VS. V.I. BABY & CO. (2002) 254 ITR 248 (KAR .) 4. CIT VS. MOTOR GENERAL FINANCE LTD. (2002) 254 ITR 449 (DELHI) 5. CIT VS. H.R. SUGAR FACTORY P. LTD. (1991) 187 ITR 363 (ALL) . 7 . THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD BORROWED FUNDS ON WHICH INTEREST WAS BEING CLAIMED AS DEDUCTION ON HIGHER RATE AND ON THE OTHER HAND CERTAIN AMOUNT HAD BEEN ADVANCED ON LOWER RATE OF INTEREST THE DIFFERENCE OF INTEREST TO THE EXTENT THE LOAN HAD BEEN GIVEN ON LOWER INTEREST RATE WAS TO BE DISALLOWED . HE FURTHER OBSER VED THAT SUBMISSIONS OF THE ASSESSEE THAT THE AMOUNT OF INTEREST ON THE OPENING BALANCE SHOULD 7 BE EXCLUDED WAS ALSO DIFFICULT TO ACCEPT FOR THE REA S ON THAT INTEREST WAS BEING CLAIMED EVEN ON SUCH OPENING BALANCE DURING THE YEAR UNDER CONSIDERATION AND DIVE RSION OF FUND EVEN RAISED IN EARLIER YEARS FETCHING LESS RETURNS DURING THE YEAR WAS LOWERING THE TAXABLE INCOME OF THE YEAR UNDER CONSIDERATION . THE LD. CIT(A) HELD THAT THE ASSESSEE HAD TOTALLY FAILED TO ESTABLISH ANY BUSINESS NEXUS OR ANY BUSINESS EXPE DIENCY IN ADVANCING LOAN AT LOWER RATE OF INTEREST AND THAT THE ADVANCES ATTRACTING LOWER INTEREST HAD BEEN GIVEN FOR THE PURPOSE OTHER THAN BUSINESS . THEREFORE THE ASSESSING OFFICER RIGHT L Y MADE THE DISALLOWANCE U/S 36(1)(III) OF THE ACT. H OWEVER RATE APPLIED BY THE ASSESSING OFFICER AT 18% WAS FOUND TO BE EXCESSIVE T HE LD. CIT(A) OBSERVED THAT APPLICABLE BANK RATE ON THE LOAN AND ADVANCES WAS OF 15% AND IN SOME OF THE CASES THE INTEREST WAS 9% TO 12% P.A. AND THAT THE ASSESSEE HAD PAID I NTEREST TO SOME OF THE CREDITORS @ 18%. THE LD. CIT(A) POINTED OUT THAT OUT OF TOTAL INTEREST PAYMENT OF RS. 25 03 491/ - A SUM OF RS. 16 89 382/ - HAD BEEN PAID TO BANK @15% AND ONLY A SUM OF RS. 5 04 832/ - HAD BEEN PAID AS INTEREST @18% AND RS. 1 28 911/ - HAD BEEN PAID @21%. THEREFORE UNIFORM APPLICATION OF 18% OF INTEREST RATE ON LOAN ADVANCED TO 16 PERSONS WAS ON HIGHER SIDE. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DISALLOW INTEREST BY APPLYING RATE OF INTEREST OF 15.75% ON THE ADVANCES 8 WHICH WERE GIVEN @12% OR LESS AS AGAINST 18% APPLIED BY THE ASSESSING OFFICER . NOW THE ASSESSEE IS IN APPEAL. 8 . LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT NO DISALLOWANCE COU LD HAVE BEEN MADE ON ACCOUNT OF INTEREST ON OPENING BALANCE OF THE AMOUNT OF THE INTEREST FREE DEBTORS IN THE YEAR UNDER CONSIDERATION. IT WAS FURTHER STATED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD MADE ADVANCES TO ONLY 4 DEBTORS AND THE DISALLOWABLE INTEREST RELATING TO 10 PERSONS FROM WHOM INTEREST HAD BEEN CHARGED AT DIFFERENT RATES MOSTLY AT 12% P.A. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT D ISALLOWABLE INTEREST IF THE RATE OF 15.75% IS ADOPTED WORKED OUT TO RS. 55 756/ - THE CALCULATION HAS BEEN PLACED AT PAGE 12 OF THE ASSESSEES PAPER BOOK . 9 . IN HIS RIVAL SUBMISSIONS LEARNED D.R. S T RONGLY SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW . 10 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD GIVEN ADVANCES TO THE 9 FAMILY MEMBERS AND THE RELATIVES ON LOWER RATE OF IN TEREST IN COMPARISON TO THE INTEREST PAID TO THE CREDITORS AND THE BANK AND THOSE ADVANCES WERE DEFINITELY NOT RELATED TO THE BUSINESS OF THE ASSESSEE. THE PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT NO DISALLOWANCE CAN BE MADE ON THE DEBTORS WHICH WERE GIVEN IN PAST IS NOT ACCEPTABLE BECAUSE THE ASSESSEE WAS PAYING INTEREST ON THE LOANS AND TO THE CREDITORS WHICH WERE ALSO OLD ONE AND IT IS NOT THE CASE THAT ONLY ON THE NEW CREDITORS INTEREST HAS BEEN PAID AND NOT ON THE OLD CREDITORS. IN T HE PRESENT CASE THE L EARNED COUNSEL FOR THE ASSESSEE HIMSELF HA S GIVEN WORKING OF THE DIFFERENCE IN INTEREST WHICH IS PLACED AT 12 OF THE ASSESSEES PAPER BOOK AND DISALLOWABLE AMOUNT OF INTEREST HAS BEEN WORKED OUT AT RS. 55 756/ - IN RESPECT OF 10 PERSON S AND DISALLOWABLE INTEREST IN RESPECT OF 4 PERSONS TO WHOM ADVANCES WERE GIVEN DURING THE YEAR UNDER CONSIDERATION HAS BEEN WORKED OUT AT PAGE NO.3 OF THE WRITTEN SUBMISSION AT RS. 29 964/ - . WE THEREFORE CONSIDERING THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE DIRECT THE ASSESSING OFFICER TO DISALLOW RS. 85 720/ - ( RS. 55 756/ - + RS. 29 964/ - ) BECAUSE THIS WAS THE ONLY AMOUNT WHICH WAS DISALLOWABLE AND THE LD. CIT(A) WAS NOT JUSTIFIED IN ADOPTI NG THE UNIFORM RATE OF INTEREST AT 15.75% ON ALL THE ADVANCES . BEFORE PARTING IT IS ALSO MENTIONED THAT IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE WORKING 10 GIVEN BY THE LEARNED COUNSEL FOR THE ASSESSEE HE CAN MODIFY THE SAME AFTER GIVING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 11 . NEXT ISSUE VIDE GROUND NO. 3 RELATES TO THE SUSTENANCE OF DISALLOWANCE OF RS. 1 72 897/ - MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE ACT. 12. FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD CLAIMED RS. 3 39 334/ - UNDER TRUCK - TANKER ACCOUNT . THE FOLLOWING PAYMENTS AGAINST THE PURCHASE OF TYRES WERE FOUND TO BE IN CONTRAVENTION OF SECTION 40A(3) OF THE ACT : - S.NO NAME OF PARTY DATE BILL NO . RS. 1 JAIN TYRES CO. NAGAUR 19/07/20008 676 47997/ - 2 JAIN TYRES CO. NAGAUR 23/07/2008 696 23499/ - 3 JAIN TYRES CO. NAGAUR 07/08/2008 781 24100/ - 4 JAIN TYRES CO. NAGAUR 25/10/2008 1258 53802/ - 5 JAIN TYRES CO. NAGAUR 20/03/2008 2391 23499/ - TOTAL 172897/ - THE PARTIES HAD ALSO CONFIRMED TO HAVE RECEIVED IN CASH. 11 13 THE ASSESSING OFFICER SOUGHT AN EXPLANATION AS TO WHY THE PAYMENTS AMOUNTING TO RS. 1 72 897/ - MADE IN CONTRAVENTION OF SECTION 40A(3) OF THE ACT SHOULD NOT BE DIS ALLOWED . THE ASSESSEE SUBMITTED THAT ITS INCOME FROM PLYING OF TRUCK WAS COVERED BY SECTION 44AE OF THE ACT AND AUDITED TRUCK TANKER ACCOUNT WAS SHOWING INCOME OF RS. 84 315/ - WHICH WAS MORE THAN THE AMOUNT OF RS. 42 000/ - PRESCRIBED AS ASSESSABLE U/S 44AF OF THE ACT . IT WAS CONTENDED THAT THE ASSESSEE BOUGHT THE TYRES IN CASH WHICH WERE URGENTL Y REQUIRED FOR THE REASON THAT THE GOODS WERE REQUIRED TO BE TRANSPORTED URGENTLY AND AT THE RELEVANT TIME CHEQUE WAS NOT READILY AVAILABLE. THE ASSESSING OFFICER HOWEVER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND DISALLOWED THE PAYMENT TOTALING TO RS. 1 72 897/ - BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 14 BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. IT WAS FURTHER STATED THAT THE INC OME FROM PLYING OF TRUCK AS SHOWN WAS MORE THAN THE PRESUMPTIVE INCOME OF RS. 42 000/ - U /S 44AE OF THE ACT WHICH RULE D OUT APPLICATION OF SECTION 40A(3) OF THE ACT. IT WAS FURTHER STATED THAT THE CASH PAYMENTS WERE MADE AGAINST THE URGENT NEED OF TYRES . IT WAS ALSO STATED THAT THERE WERE 5 CASH PAYMENTS ON DIFFERENT DATES AND 12 IN ANY CASE THE AMOUNT OF ADDITION WAS REQUIRED TO BE RESTRICTED TO RS. 72 897/ - BECAUSE THE PERMISSIBLE LIMIT OF RS. 20 000/ - PER DAY SHOULD BE REDUCED FROM THE RELEVANT AMOUNT O F CASH PAYMENT. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. AJANTA DYEING AND PRINTING MILLS REPORTED AT 264 ITR 505 . 15 LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE PROVI SIONS OF SECTION 44AE OF THE ACT WERE NOT APPLICABLE IN THIS CASE AS WAS EVIDENT FROM THE AUDIT REPORT AND RETURN OF INCOME . HE FURTHER OBSERVED THAT THE TRUCK - TANKER ACCOUNT HAD SEPARATELY BEEN MAINTAINED AND AUDITED WHICH REVEALED THAT THE INCOME W AS SHOWN AT RS. 84 315/ - . THE LD. CIT(A) OBSERVED THAT AS PER THE PROVISIONS OF SECTION 40A(3) OF THE ACT ANY EXPENDITURE INCURRED IN RESPECT OF WHICH PAYMENT IS MADE IN A SUM EXCEEDING RS. 20 000/ - OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE SHALL NOT BE A LLOWED AS DEDUCTION. HE ALSO POINTED OUT THAT THE CASE LAW RELIED BY THE ASSESSEE WAS NOT RELEVANT AS THE SAME DEALT WITH THE PROVISIONS OF SECTION 271D OF THE ACT. HE ALSO OBSERVED THAT THE PARTY RECEIVING PAYMENT WAS HAVING BUSINESS AT NAGAUR WHERE BANK ING FACILITY WAS EASILY AVAILABLE. SO THERE WAS NO JUSTIFICATION FOR PAYMENTS OF CASH IN CONTRAVENTION OF SECTION 13 40A(3) OF THE ACT. THE LD. CIT(A) OBSERVED THAT IT COULD NOT BE SAID THAT CASH PAYMENTS WERE MADE BY THE ASSESSEE DUE TO ANY EXCEPTION AL AND UNAVOIDABLE CIRCUMSTANCES AS ENVISAGED BY CLA USE (J) OF RULE 6DD OF THE I.T. RULES . HE THEREFORE CONFORMED THE ADDITION MADE BY THE ASSESSING OFFICER. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - 1. NAHGI LAL VS. CIT 167 ITR 139 (RAJ.) 2. ASSOCIATED ENGINEERING ENTERPRISES VS. CIT 216 ITR 366 (GUJ.) NOW THE ASSESSEE IS IN APPEAL. 16 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT APART FROM TRADING ACCOUNT RELATING TO THE BUSINESS OF PETROLEUM PRODUCTS A SEPARATE TRADING ACCOUNT RELATING TO THE BUSINESS OF PLYING OF TRUC K (TANKER) WAS PREPARED. REFERENCE WAS MADE TO PAGE 13 OF THE ASSESSEES COMPILATIO N. IT WAS STATED THAT SUB - SECTION (2) OF SECTION 44AE OF THE ACT PROVIDES THAT COMPUTATION OF PROFITS AND GAINS FROM EACH GOODS CARRIAGES PROFITS AND GAINS FROM EACH HEAVY GOODS VEHICLE SHOULD BE EQUAL TO RS. 3 5 00/ - FOR E VERY MONTH I.E. RS. 42 000/ - P.A. OR HIGHER THAN THIS AMOUNT. IT WAS STATED THAT THE ASSESSEE CLAIMED DEPRECIAT ION RELATING TO TRUCK AND NET PROFIT DECLARED AT RS. 84 315.29 WHICH WAS MORE THAN THE AMOUNT PRESCRIBED U/S 44AE OF THE ACT . THEREFORE THE PROVISIONS OF SECTION 14 40A(3) OF THE ACT WERE NOT APPLICABLE AND THE DISALLOWANCE OF RS. 1 72 897/ - SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED . 17 IN HIS RIVAL SUBMISSIONS LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . 18 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE ASSESSEE WAS HAVING INCOME FROM PLYING THE TRUCK (TANKER) ON HIRE SO IT WAS COVERED U/ S 44AE OF THE ACT. THE INCOME DECLARED BY THE ASSESSEE WAS MORE THAN THE INCOME PRESCRIBED U/S 44 AE OF THE ACT AND WHEN THE PROVISIONS OF SECTION 44AE OF THE ACT IT IS PRESUMED THAT THE PROVISIONS OF SECTION S 28 TO 43 C OF THE ACT ARE NOT APPLICABLE AND A NY DEDUCTION ALLOWABLE UNDER THE PROVISIONS OF SECTION 30 TO 38 OF THE ACT SHALL FOR THE PURPOSE OF SUB - SECTION (1) BE DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT. THE RELEVANT PROVISIONS CONTAINED IN SECTION 44AE (1) & (2) OF THE ACT READ AS UNDER: - (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTIONS 28 TO 43C IN THE CASE OF AN ASSESSEE WHO OWNS NOT MORE THAN TEN GOODS CARRIAGES AND WHO IS ENGAGED IN THE BUSINESS OF PLYING HIRING OR LEASING SUCH GOODS CARRIAGES THE INCOME OF SUCH B USINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE DEEMED TO BE THE AGGREGATE OF THE PROFITS AND GAINS FROM ALL 15 THE GOODS CARRIAGES OWNED BY HIM IN THE PREVIOUS YEAR COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SUB - SECTION (2). (2) FOR THE PURPOSES OF SUB - SECTION (1) THE PROFITS AND GAINS FROM EACH GOODS CARRIAGE - (I) BEING A HEAVY GOODS VEHICLE SHALL BE AN AMOUNT EQUAL TO THREE THOUSAND AND FIVE HUNDRED RUPEES FOR EVERY MONTH OR A PART OF MONTH DURING WHICH THE HEAVY GOODS VEHICLE IS OWNED BY THE ASSESSEE IN THE PREVIOUS YEAR OR AS THE CASE MAY BE AN AMOUNT HIGHER THAN THE AFORESAID AMOUNT AS DECLARED BY HIM IN HIS RETURN OF INCOME. (II) OTHER THAN A HEAVY GOODS VEHICLE SHALL BE AN AMOUNT EQUAL TO THREE THOUSAND ONE HUNDRED AND FIFTY RUPEES FOR EVERY MONTH OR PART OF A MONTH DURING WHICH THE GOODS CARRIAGE IS OWNED BY THE ASSESSEE IN THE PREVIOUS YEAR OR AS THE CASE MAY BE AN AMOUNT HIGHER THAN THE AFORESAID AMOUNT AS DECLARED BY HIM IN HIS RETURN OF INCOME. SUB - SECTION(1) OF SECTION 44AE OF THE ACT STARTS WITH NON - OBSTANTE C L AUSE WHICH CLEARLY SHOWS THAT WHEN THE PROVISIONS OF SECTION 44AE OF THE ACT ARE APPLICABLE NOTHING CONTRARY CONTAINED IN S ECTION 28 TO 43A SHALL BE APPLICABLE AND THE PROFIT IS TO BE DETERMINED AS PER SUB - SECTION(2) OF SECTION 44AE OF THE ACT WHICH STATES THAT FOR THE YEAR UNDER CONSIDERATION THE INCOME PER MONTH SHALL BE THE AMOUNT EQUAL TO RS. 3 500/ - P.M OR THE AMOUNT HIGHER THAN THE AFORESAID AMOUNT AS DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME. IN THE PRESENT CASE THE ASSESSEE DECLARED THE INCOME OF RS. 84 315.29 WHICH WAS MORE THAN THE AMOUNT OF RS. 42 000/ - PRESCRIBED U/S 44AE OF THE ACT. THEREFORE THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE ACT AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. ACCORDINGLY THE SAME IS DELETED. 16 19 THE NEXT ISSUE VIDE GROUND NO. 4 RELATES TO THE DISALLOWANCE OF RS. 5 826/ - OUT OF TELEPHONE AND MOBILE EXPENSES . 20 FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD INCURRED TELEPHONE EXPENSES OF RS. 10 278/ - AND MOBILE EXPENSES OF RS. 18 850/ - TOTALING TO RS. 29 128/ - . HE OBSERVED THAT THE ASSESSEE HAD NOT MAINTAINED CALL REGISTER THEREFORE PERSONAL USE COULD NOT BE RULED OUT . HE DISALLOWED 1/5 TH EXPENSES AND MAD E THE ADDITION OF RS. 5 8 26/ - . 21 BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND STATED THAT THE EXPENSES WERE REASONABLE LOOKING TO THE TURNOVER OF THE ASSESSEES BUSINESS. LD. CIT(A) DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL. 22 LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY TH E LD. CIT(A) WAS NOT 17 JUSTIFIED CONSIDERING THE TURNOVER OF THE ASSESSEE WHICH WAS AT RS. 16.96 CRORE . 23 IN HIS RIVAL SUBMISSIONS LEARNED D.R. STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . 24 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN OUR OPINION IN SUCH TYPE OF CASES PERSONAL USE OF TELEPHONE CANNOT BE RULED OUT HOWEVER THE DISALLOWANCE MADE BY THE ASSESSING OFFICE R AND SUSTAINED BY THE LD. CIT(A) APPEARS TO BE ON HIGHER SIDE. WE THEREFORE TO MEET THE ENDS OF JUSTICE RESTRICT THE SAME TO 1/10 TH OF THE EXPENSES. ACCORDINGLY THE DISALLOWANCE OF RS. 2 918/ - IS SUSTAINED INSTEAD OF RS. 5 826/ - . 25 THE NEXT ISSUE VIDE GROUND NO. 5 RELATES TO THE SUSTENANCE OF DISALLOWANCE OF RS. 6 598/ - OUT OF PETROL EXPENSES AND DEPRECIATION. 26 FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD CLAIMED PETROL EXPENSES OF RS. 24 758/ - AND DEPRECIATION ON 18 MOTORCYCLE AND SCOOTER AT RS. 8 234/ - TOTALING TO RS. 32 992/ - . THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD NOT MAINTAINED LOG BOOK FOR VEHICLE THEREFORE PERSONAL USE CANN OT BE RULED. HE DISALLOWED 1/5 TH OF THE EXPENSES. THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS SUSTAINED BY THE LD. CIT(A) . NOW THE ASSESSEE IS IN APPEAL. 27 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH A T THE EXPENSES WERE INCURRED ONLY FOR BUSINESS PURPOSE THEREFORE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 28 IN HIS RIVAL SUBMISSIONS LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . 29 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN OUR OPINION IN SUCH TYPE OF CASES PERSONAL USE OF VEHICLE CANNOT BE RULED OUT HOWEVER THE DISALLOWANCE @ 20% OF THE EXPENSES I.E. 1/5 TH APPEARS TO BE ON HIGHER SIDE. WE THEREFORE TO MEET THE ENDS OF JUSTICE RESTRICT THE SAME TO 1 0 % . ACCORDINGLY THE DISALLOWANCE IS RESTRICTED TO RS. 3 299/ - INSTEAD OF RS. 6 598/ - . 19 30 LAST ISSUE VIDE GROUND NO. 6 RELATES TO THE CHARGING OF INTEREST U/S 234B AND 234D AND WITHDRAWAL OF THE INTEREST U/S 244A(3) OF THE ACT . AS REGARDS THIS ISSUE IT WAS THE COMMON CONTENTION OF BOTH THE PARTIES THAT IT IS CONSEQUENTIAL IN NATURE . WE ORDER ACCORDINGLY. 31 IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ( ORDER PRONOUNCED IN THE COURT ON 31 ST JULY 201 4) . SD/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST JULY 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY ITAT JODHPUR .