Shri. N.A. Prasad & Associates, Hubli v. ITO, Bangalore

ITA 914/BANG/2010 | 2004-2005
Pronouncement Date: 10-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 91421114 RSA 2010
Assessee PAN AACFM2009D
Bench Bangalore
Appeal Number ITA 914/BANG/2010
Duration Of Justice 1 year(s) 6 month(s) 22 day(s)
Appellant Shri. N.A. Prasad & Associates, Hubli
Respondent ITO, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 10-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 10-02-2012
Date Of Final Hearing 06-02-2012
Next Hearing Date 06-02-2012
Assessment Year 2004-2005
Appeal Filed On 19-07-2010
Judgment Text
PAGE 1 OF 15 ITA NO.914/BA NG/2010 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI N BARATHVAJA SANKAR VICE PRESIDENT AND SHRI GEORGE GEORGE K J.M ITA NO.914/BANG/2010 (ASST. YEAR 2004-05) SHRI N A PRASAD & ASSOCIATES SHINDE COMPLEX NEELIGIN ROAD HUBLI. PA NO.AACFM 2009 D VS THE INCOME TAX OFFICER WARD-1(1) BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING 06.02.2012 DATE OF PRONOUNCEMENT 10.02.2012 APPELLANT BY : SHRI P C CHADAGA ITP RESPONDENT BY : SMT. SUSAN THOMAS JOSE JCIT O R D E R PER GEORGE GEORGE K : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. CIT (A) HUBLI DATED 22.3.2010. THE RELEVANT ASSESSMENT YEAR IS 2004-05. 2. THE ASSESSEE HAS RAISED SEVEN GROUNDS OUT OF W HICH GROUND NOS.1 AND 7 BEING GENERAL IN NATURE AND NO SPECIFIC ISSUES INVO LVED THEY HAVE BECOME INCONSEQUENTIAL. THE REMAINING GROUND S FOR THE SAKE OF CLARITY AND APPRECIATION OF FACTS THEY ARE REFORMULATED IN CONCISE MANNER AS UNDER: PAGE 2 OF 15 ITA NO.914/BA NG/2010 2 THE CIT (A) ERRED IN: (I) CONFIRMING THE DISALLOWANCE OF RS.1.53 LAKHS OUT OF INTEREST OF RS.1.78 LAKHS DEBITED IN THE ACCOUNTS; (II) UPHOLDING THE ADDITION OF RS.2 37 032/- AS EXCESS O F ASSETS OVER LIABILITIES; (III) UPHOLDING THE ADDITION OF RS.69 643/-; (IV) UPHOLDING THE DISALLOWANCE OF RS.15 000/- FOR WANT OF VOUCHERS TOWARDS MAINTENANCE OF VEHICLE; & (V) CONFIRMING THE DISALLOWANCE OF RS.1 08 090/- (SIC) RS.21 618/- U/S 40A (3) OF THE ACT. 3. BEFORE ADJUDICATING THE ISSUES RAISED BY THE AS SESSEE IT HAS BEEN NOTICED THAT THERE WAS A DELAY OF 26 DAYS IN PRE FERRING THIS APPEAL AGAINST THE IMPUGNED ORDER OF THE FIRST APPELLATE A UTHORITY. AN AFFIDAVIT OF PARTNER IN SHRI N A PRASAD ASSOCIATES WAS FILED DE TAILING THE REASONS FOR FILING THE APPEAL BELATEDLY. THE RELEVANT EXTRACTS FROM THE AFFIDAVIT IS REPRODUCED BELOW:- THE FIRM HAS CLOSED ITS BUSINESS IN APRIL 2007 AND I AM NOW RESIDING IN BANGALORE. THE APPELLATE ORDERS OF THE CIT(A) DATED 19/3/2010 AND 23/3/2010 FOR THE RESPECTIVE ASSESSMENT YEARS WERE RECEIVED BY MY NEPHEW AND SINCE I WAS ATTENDING TO MY WIFE WHO WAS SUFFER ING FROM CANCER I COULD NOT GO TO HUBLI. A COPY OF THE HOSPITAL RECORD REGARDING THE TREATMENT GIVEN TO HE R IN 2008 IS ENCLOSED. ALTHOUGH SHE WAS DISCHARGED ON 1/9/2008 THE OUTPATIENT TREATMENT CONTINUED WHICH NECESSITATED MY CONTINUED PRESENCE IN BANGALORE. TH IS LED TO THE DELAY OF 26 DAYS IN FILING THE APPEAL. 3.1. DURING THE COURSE OF HEARING IT WAS SUBMITTE D THAT THE DELAY IN FILING THE APPEAL WAS ON ACCOUNT OF REASONABLE CAUS E AND THAT WAS NOT PAGE 3 OF 15 ITA NO.914/BA NG/2010 3 DELIBERATE OR INTENTIONAL. THEREFORE IT WAS PLEADE D THAT THE DELAY CAUSED MAY BE CONDONED. 3.2. THE LD. D R PRESENT WAS HEARD. AFTER DUE CO NSIDERATION OF THE CONTENTS OF THE AFFIDAVIT FURNISHED AND ALSO THE PL EA OF THE ASSESSEE WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS PR EVENTED BY A REASONABLE CAUSE AND ACCORDINGLY THE DELAY OF 26 DAYS IN PREFER RING THE APPEAL UNDER DISPUTE WAS CONDONED AND WE PROCEEDED TO DISPOSE OF F THE MATTER ON MERITS. 4. REVERTING BACK TO THE ISSUES ON HAND WE SHALL PROCEED TO ADJUDICATE THE APPEAL IN THE FOLLOWING MANNER: 5. BRIEFLY STATED THE ASSESSEE FIRM ENGAGED IN TH E BUSINESS OF PLASTER OF PARIS WORK HAD FURNISHED ITS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.61 610/-. THE BUSINESS PREMISES OF TH E ASSESSEE WAS SUBJECTED TO SURVEY ACTION U/S 133A OF THE ACT ON 29.9.2004 A ND CONSEQUENCE OF WHICH THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS WERE IMPO UNDED. (I) DISALLOWANCE OF RS.1.53 LAKHS OF INTEREST: DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD ADVANCED LOANS TO THE FOLLOWING SISTER CONCERNS IN WHICH THE MAIN PARTNER SHRI N.A.PRASAD WAS HAVING SUBSTANTIAL INTEREST: (A) MANMANDIR THEATRE UTRAULA RS.14.05 LAKHS; & (B) VARNA TRANSPORT RS. 1.30 LAKHS IT WAS THE STAND OF THE AO THAT THE SAID ADVANCES H AVE BEEN MADE FREE OF INTEREST FROM THE ASSESSEES CORPORATION BANKS CUR RENT ACCOUNT AND ALSO PAGE 4 OF 15 ITA NO.914/BA NG/2010 4 ENCASHING THE F.D HELD WITH KARNATAKA BANK; THAT T HE ASSESSEE HAD PAID HUGE INTEREST ON THE O.D ACCOUNT OF RS.1.78 LAKHS. IT WAS FURTHER HELD THAT THE ASSESSEE HAD ADVANCED LOANS TO THE PARTNER FREE OF INTEREST AND ON THE OTHER HAND IT WAS PAYING HUGE INTEREST ON THE O.D. ACCOUNT. IT WAS THE CASE OF THE AO HAD THE ASSESSEE REMITTED THE PROCEEDING S OF FD ENCASHED AGAINST THE OD ACCOUNT THE INTEREST BURDEN WOULD H AVE BEEN REDUCED TO A LARGE EXTENT. FURTHER THE PARTNER HAD AVAILED THE LOANS FOR INVESTMENT IN THE CONSTRUCTION OF A THEATRE IN U.P. IT WAS CONCL UDED BY THE AO THAT SINCE THE FUNDS HAVE BEEN DIVERTED FOR NON-BUSINESS PURPO SES OF THE ASSESSEE HE DISALLOWED A SUM OF RS.1.53 LAKHS OUT OF THE TOTAL CLAIM OF INTEREST OF RSW.1.78 LAKHS. THE RELEVANT FINDING OF THE ASSESS ING OFFICER READS AS FOLLOWS:- TAKING INTO ACCOUNT THE INTEREST PAYMENT ON OD ACCO UNT AT 10% THE INTEREST ON THE AMOUNT OF RS.15 35 000/ - ADVANCED BY THE ASSESSEE FIRM TO THE ABOVE CONCERNS. % WOULD WORK OUT TO RS.1 53 500/-. THEREFORE OUT OF TOTAL INTEREST ON OD A/C CLAIMED AT RS.1 78 433/- RS.1 53 500/- IS DISALLOWED AS INTEREST PAYMENT NOT INCIDENTAL TO BUSINESS CONSIDERING THE DIVERSION O F FUNDS FOR NON-BUSINESS PURPOSES. (II) EXCESS OF ASSETS OVER LIABILITIES: ACCORDING TO THE AO THE ASSESSEE HAD SHOWN CRED IT BALANCES TO THE TUNE OF RS.3 65 402/- IN THE CASES OF (I) IS KON TEMPLE; (II) MURUDESHWAR CERAMICS LTD; (III) BELLAD & CO. (BELLA D ENTERPRISES); AND (IV) KAMAT YATRI NIVAS BANGALORE. ON VERIFICATION OF ACCOUNT EXTRACTS OF THE ASSESSEE APPEARING IN THE BOOKS OF THE CONCERNS CIT ED SUPRA ACCORDING TO THE AO THE CREDIT BALANCES CLAIMED BY THE ASSESSEE WERE FOUND TO BE PAGE 5 OF 15 ITA NO.914/BA NG/2010 5 INCORRECT AND FOR THE DETAILED REASONS RECORDED IN THE IMPUGNED ORDER THE AO RESORTED TO ADD THE SUM OF RS.2.37 LAKHS BEING E XCESS OF ASSETS OVER LIABILITIES. (III) ADDITION OF RS.69 643/-: ACCORDING TO THE AO CERTAIN BILLS TOWARDS WORKS EXECUTED BY THE ASSESSEE TO THE TUNE OF RS.69 643/- WERE IMPOUN DED DURING THE COURSE OF SURVEY OPERATION AND THE ASSESSEE WAS REQUIRED TO CLARIFY AS TO WHETHER THOSE BILLS. HAVE BEEN ACCOUNTED FOR IN ITS BOOKS OF ACCOUNT. IN THE ABSENCE OF ANY CLARIFICATION FROM THE ASSESSEE THE AO HAD TREATED THE SAME AS ASSESSEES UNDISCLOSED INCOME. (IV) DISALLOWANCE OF RS.15 000/-: THE ASSESSEE WAS OWNING A TRUCK AND CLAIMED EXPE NSES TOWARDS ITS MAINTENANCE WHICH INCLUDED FUEL AND OTHER EXPEN SES SUCH AS REPAIRS. IT WAS THE CASE OF THE AO THAT THE ASSESSEE HAD NOT MA INTAINED ANY DETAILS WITH REGARD TO THE EXPENSES INCURRED AND ALSO IN TH E ABSENCE OF VOUCHERS/BILLS A SUM OF RS.15 000/-WAS DISALLOWED AS EXPENSES NOT RELATING TO ITS BUSINESS. (V) DISALLOWANCE U/S 40A(3) OF THE ACT: WHILE EXAMINING THE BOOKS OF ACCOUNTS THE AO NO TICED THAT THE ASSESSEE HAD MADE CASH PAYMENTS BEING FREIGHT PA YMENTS TO THE EXTENT OF RS.1.08 LAKHS ON FOUR OCCASIONS TO GOODWILL TRAN SPORT CO. THE AO HAD INVOKED THE PROVISIONS OF S.40A(3) OF THE ACT AND D ISALLOWED RS.21 618/- PAGE 6 OF 15 ITA NO.914/BA NG/2010 6 BEING 20% OF THE SAID EXPENSES AS THE PAYMENTS MADE WERE OTHER THAN BY CROSSED CHEQUES/BANK DRAFT ETC. 6. AGGRIEVED THE ASSESSEE CARRIED THE ISSUES BEFO RE THE CIT (A) FOR RELIEF. AFTER DUE CONSIDERATION OF THE SUBMISS IONS OF THE ASSESSEE THE CIT (A) HAD DEALT WITH THE ISSUES AND THE RELEVANT PORTIONS OF HIS FINDINGS ARE EXTRACTED SUBJECT-WISE AS UNDER: (I) DISALLOWANCE OF INTEREST: 4.1..THE APPELLANT HAS NOT DISPUTED THE FACT TH AT THE ADVANCES TO THESE TWO CONCERNS HAVE BEEN MADE BY WAY OF BORROWINGS FROM THE OVER DRAFT ACCOUNT AND BY EN - CASHMENT OF FDRS. IT IS ALSO NOT DISPUTED THAT SHR I N.A. PRASAD ONE OF THE PARTNERS OF THE APPELLANT FIRM IS HAVING SUBSTANTIAL INTEREST IN THE CONCERNS TO WHOM THE ADVANCES HAVE BEEN MADE FREE OF INTEREST BY THE APPELLANT. IT IS ALSO A FACT ON RECORD THAT THE A MOUNT ADVANCED BY THE FIRM HAS BEEN UTILIZED BY THE CONCERN S BELONGING TO ONE OF THE PARTNERS OF THE APPELLANT F OR THE PURPOSES OF CONSTRUCTION OF A THEATRE. THE APPEL LANT FIRM HAS PAID INTEREST ON THE AMOUNT WITHDRAWN AND ADVANCED TO THESE CONCERNS. FURTHER THAT BY VIRTUE OF ENCASHMENT OF FIXED DEPOSITS THE APPELLANT FIRM LO OSE INTEREST TO THAT EXTENT. IT THUS ADMITTEDLY BECOME S UNAMBIGUOUS THAT THE INTERESTS BEARING BORROWED FUN DS HAVE BEEN DIVERTED BY THE APPELLANT FREE OF INTEREST FOR THE PURPOSES OTHER THAN BUSINESS THEREFORE THE TRANSACTIONS CLEARLY FALLS WITHIN THE AMBIT OF DIVER SION OF FUNDS FOR NON-BUSINESS PURPOSES. THEREFORE THE AO IS JUSTIFIED IN DISALLOWING THE PROPORTIONATE INTEREST OF RS.1 53 500/- ATTRIBUTABLE TO THE DIVERSION OF FUND S FOR NON-BUSINESS PURPOSES ON WHICH THE APPELLANT FIRM H AS BORNE THE BURDEN OF INTEREST.. PAGE 7 OF 15 ITA NO.914/BA NG/2010 7 (II) EXCESS OF ASSETS OVER LIABILITIES: (A) ISKON TEMPLE: 4.1.2..IT IS SEEN THAT THE APPELLANT HAD RECEIVE D A SUM OF RS.16 043/- IN LIEU OF POP WORK DONE FOR ISKON TEMPLE. THEREFORE THIS ENTIRE AMOUNT SHOULD HAVE BEEN OFFERED FOR TAXATION BY THE APPELLANT AND THE QUESTI ON OF ANY AMOUNT HAVING SHOWN PAYABLE TO ISKON DOES NOT ARISE. THEREFORE THE LIABILITY SHOWN BY THE APPELL ANT AGAINST THE ACTUAL RECEIPTS REMAINS UNEXPLAINED WHI CH IS RIGHTLY DISALLOWED BY THE AO.. (B) MURUDESHWAR CERAMICS: 4.2.2..IT IS SEEN THAT THE APPELLANT HAS RECE IVED THE ENTIRE AMOUNT OF POP WORK DONE FOR M/S.MURUDESHWAR CERAMICS AND THERE REMAINS RS.21 965/- PAYABLE BY THE APPELLANT AS PER THE ACCOU NT EXTRACT. THEREFORE THE EXCESS LIABILITY SHOWN BY TH E APPELLANT AGAINST THE ACTUAL RECEIPTS REMAINS UNEXP LAINED WHICH IS RIGHTLY DISALLOWED BY AO (C) BELLAD & CO: 4.3.2....IT IS SEEN THAT THE APPELLANT HAS RECE IVED THE ENTIRE AMOUNT OF POP WORK DONE FOR M/S.BELLAD & CO AND THERE REMAINS RS.1 00 000/- PAYABLE BY THE APPELL ANT RECEIVED AS ADVANCE AS PER THE ACCOUNT EXTRACT. THEREFORE THE EXCESS LIABILITY SHOWN BY THE APPELLA NT AGAINST THE ACTUAL RECEIPTS REMAINS UNEXPLAINED WHI CH IS RIGHTLY DISALLOWED BY AO (D) KAMAT YATRI NIVAS: 4.4.2..IT IS SEEN THAT THE APPELLANT HAS RECEI VED THE ENTIRE AMOUNT OF POP WORK DONE FOR KAMAT YATRIN IVAS AND THERE REMAINS RS.6 405/- PAYABLE BY THE APPELLANT RECEIVED AS ADVANCE AS PER THE ACCOUNT EXTRACT. PAGE 8 OF 15 ITA NO.914/BA NG/2010 8 THEREFORE THE EXCESS LIABILITY SHOWN BY THE APPELLA NT AGAINST THE ACTUAL RECEIPTS REMAINS UNEXPLAINED WHI CH IS RIGHTLY DISALLOWED BY AO (III) ADDITION OF RS.69 643/-: 5.3.THE AO IN THE COURSE OF ASSESSMENT PROCEEDIN GS EXAMINED THE IMPOUNDED MATERIALS FOUND AND IMPOUNDE D DURING THE COURSE OF SURVEY ACTION AND NOTICED THAT CERTAIN BILLS/VOUCHERS RELATING TO THE POP BUSINESS OF THE APPELLANT HAVE NOT BEEN ACCOUNTED FOR BY THE APPELLA NT. THE AO HAS CONFRONTED THE EACH BILL TO THE APPELLAN T BUT THE APPELLANT COULD NOT EXPLAIN THE DISCREPANCIES N OTICED BY THE AO IN THE BOOKS TO THE EXTENT THAT THE BILLS PERTAINING TO THE BUSINESS RECEIPTS OF THE APPELLAN T WERE NOT ACCOUNTED FOR IN THE CASH BOOK. THE AO IN HIS ORDER HAS CLEARLY ESTABLISHED THE INHERENT DEFICIENCIES W. R TO THE FACTS AND FIGURES IN THE EXPLANATION FILED BY TH E APPELLANT. THE AO AS SUCH HAS PROCEEDED ON THE BAS IS OF ANALYSIS OF THE MATERIAL EVIDENCES SURFACED FROM THE IMPOUNDED PAPERS WHICH REVEALED THAT CERTAIN BILLS TO THE TUNE OF RS.69 643/- RELATING TO THE BUSINESS OF THE APPELLANT HAVE NOT BEEN ACCOUNTED FOR IN THE BOOKS FOR THE RELEVANT PERIOD. THE AO HAS ALSO CONFRONTED TH E DISCREPANCIES TO THE APPELLANT WHICH THE APPELLANT FAILED TO EXPLAIN W.R TO THE BOOKS. IN THE FACTS AND CIRCUMSTANCES THE ADDITIONS MADE BY THE AO OF RS.69 643/- IS UPHELD AND CONFIRMED. (IV) DISALLOWANCE OF RS.15 000/-: 6.3.1IT IS SEEN THAT THE TRUCK OWNERS ARE REQUI RED TO INCUR THE EXPENDITURE ON EN-ROUTE IN CASH TO MEE T THE EXPENSES SUCH AS DIESEL TYRE TUBES PARKING DRIVER S PERSONAL EXPENSES AND EXPENSES ON CROSS STATE BORDE RS WHICH ARE NORMALLY INCURRED IN CASH FOR WHICH NO PR OPER BILL AND VOUCHERS ARE MAINTAINED AND SUCH EXPENSES ARE SUPPORTED ONLY BY SELF MADE VOUCHERS BUT IN THE CASE OF PAGE 9 OF 15 ITA NO.914/BA NG/2010 9 PRESENT APPELLANT EVEN THE SELF MADE VOUCHERS ARE N OT AVAILABLE FOR VERIFICATION AS THE APPELLANT HAS NOT MAINTAINED THE DETAILS. THEREFORE THE DISALLOWANC E MADE BY AO FOR WANT OF BILLS AND VOUCHERS AND LOOKIN G TO THE NATURE OF BUSINESS THE ADDITION MADE BY AO OF RS.15 000/- IS CONFIRMED. (V) DISALLOWANCE U/S 40A(3) OF THE ACT: 7.2..IT IS SEEN THERE FROM THAT CASH PAYMENTS H AVE BEEN MADE TO ALL THE PARTIES IN CASH WHICH ON A PAR TICULAR DATE IN SINGLE TRANSACTION EXCEEDS RS.20 000/- WHIC H IS IN CONTRAVENTION TO THE PROVISIONS OF SECTION 40A(3) O F THE ACT. THE PAYMENTS MADE BY THE APPELLANT ARE NOT COVERED UNDER THE EXCEPTIONS OF RULE 6DD. THE RATI O OF THE DECISION RELIED UPON BY THE APPELLANT IS NOT APP LICABLE TO THE FACTS & CIRCUMSTANCES THEREFORE THE DISALLOWANCE MADE BY AO OF RS.1 08 090/- (SIC) RS.21 618/- U/S 40A(3) OF THE ACT. 7. AGITATED THE ASSESSEE HAS COME UP WITH THE PRE SENT APPEAL. IT WAS SUBMITTED BY THE LD. AR THAT THE AUTHORITIES BEL OW HAVE DISREGARDED THE ASSESSEES EXPLANATION THAT A PART OF THE ADVAN CES HAVE BEEN MADE OUT OF ENCASHMENT OF FDS AND THAT THE AO HAD FAILED TO ESTABLISH THE NEXUS BETWEEN THE AMOUNTS ADVANCED AND THE AMOUNTS WITHDR AWN FROM THE OD AMOUNT. WITH REGARD TO THE ADDITIONS ON ACCOUNT OF EXCESS OF ASSETS OVER LIABILITIES IT WAS ARGUED THAT THE AO HAD DISBELIE VED CERTAIN CREDITS SHOWN IN THE BALANCE SHEET AND ALSO DISREGARDING THE EXP LANATION OFFERED AT THE TIME OF ASSESSMENT PROCEEDINGS. IN RESPECT OF ADDI TIONS OF (I) SUPPRESSED RECEIPTS; (II) VEHICLE MAINTENANCE; & (III) DISALLO WANCE ON ACCOUNT OF CASH PAYMENTS THE LD. A R SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN DISALLOWING/UPHOLDING THE LEGITIMATE CLAIMS BY DISRE GARDING THE EXPLANATION PAGE 10 OF 15 ITA NO.914/B ANG/2010 10 OFFERED BY THE ASSESSEE. IN CONCLUSION THE LD. A R PLEADED THAT THE CLAIMS MADE BY THE ASSESSEE REQUIRE TO BE ALLOWED. 7.1. ON THE OTHER HAND THE LD. D R PRESENT CONTEN DED THAT THE AUTHORITIES BELOW HAVE AFTER DUE CONSIDERATION OF THE FACTS AND ALSO EXAMINING THE EXPLANATION OF THE ASSESSEE COME TO THE CONCLUSION IN A REASONABLE MANNER WHICH ENTAIL TO BE SUSTAINED. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS DULY PERUSED THE RELEVANT RECORDS AND ALSO THE EVIDENCE PRODUCED BY THE ASSESSEE IN THE SHAPE OF LEDGER ACCOUNT OF MANMANDI R TALKIES. THE ISSUES ARE DEALT WITH CHRONOLOGICALLY: (I) DISALLOWANCE OF PARTIAL INTEREST: THE CIT (A) HAD IN HIS FINDINGS OBSERVED THAT THE ASSESSEE ADVANCED TO THOSE TWO CONCERNS BY WAY OF BORROWINGS F ROM THE O.D ACCOUNT AND BY ENCASHMENT OF FDS. HOWEVER ON A CAREFUL PER USAL OF THE LEDGER ACCOUNT (MANMANDIR TALKIES); IT HAS BEEN NOTICED TH AT A SUM OF RS.4.65 LAKHS HAVE BEEN ADVANCED THROUGH CORPORATION BANK C HEQUES BESIDES RS.5 LAKHS FROM KARNATAKA BANK F.D ACCOUNT. THE MOOT QU ESTION FOR CONSIDERATION IS WHETHER THE AMOUNTS SO ADVANCED WERE FROM THE BORROWINGS FROM THE O.D ACCOUNT OF THE CORPORATION BANK OR FROM THE SURPLUS FUNDS OF THE ASSESSEE IN THAT ACCOUNT? MOR EOVER A SUBSTANTIAL AMOUNT OF RS.5 LAKHS HAS ALSO BEEN FROM THE ENCASHM ENT OF FDS HELD IN KARNATAKA BANK. THE ORIGIN OF THE AMOUNT DEPOSITED WITH THE F.D IN KARNATAKA BANK HAS NOT BEEN ENQUIRED INTO. NEITHER THE AO NOR THE FIRST PAGE 11 OF 15 ITA NO.914/B ANG/2010 11 APPELLATE AUTHORITY HAS BROUGHT ON RECORD WITH A SUB STANTIAL PROOF TO ESTABLISH THAT THE AMOUNTS HAVE BEEN ADVANCED FROM THE BORROWINGS FROM THE O.D. ACCOUNT HELD IN CORPORATION BANK. CONSIDERING THE ABOVE FACTS AND ALSO IN THE PRIN CIPLES OF NATURAL JUSTICE THIS ISSUE IS REMITTED BACK TO THE FILE OF THE AO WITH A SPECIFIC DIRECTION TO LOOK INTO THIS ASPECT AND TO TAKE APPR OPRIATE ACTION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT OF COURS E AFTER PROVIDING A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEAR D. THE ASSESSEE SHALL BE AT LIBERTY TO PRODUCE THE DOCUMENTARY EVIDENCE I F ANY AT ITS POSSESSION TO STRENGTHEN ITS CLAIM THAT THE LOANS ADVANCED ARE FROM SURPLUS FUNDS. IT IS ORDERED ACCORDINGLY. (II) ADDITION OF RS.2 37 032/- - EXCESS OF ASSETS OVER LIABILITY WITH REGARD TO SECOND GROUND (EXCESS OF ASSETS O VER LIABILITIES) WE HAVE CAREFULLY PERUSED THE REASONIN G OF THE AO AND ALSO THE DETAILED FINDINGS OF THE CIT (A). IN FACT THE AO HAD EXAMINED THE ACCOUNT EXTRACTS OF THE ASSESSEE IN THE RESPECTIVE FIRMS AN D BROUGHT ON RECORD THAT THE ASSESSEES CLAIMS WERE NOT BACKED WITH ANY DOCUM ENTARY PROOF. THE CIT (A) HAD ALSO AFTER DUE VERIFICATION OF FACTS SUST AINED THE STAND OF THE AO. EVEN AT THIS STAGE THE ASSESSEE HAD NOT BROUGHT AN Y EVIDENCE TO CONTRADICT THE REVENUES STAND ON THIS ISSUE. IN VIEW OF THE ABOVE FACTS WE ARE OF THE CONSIDERED VIEW THAT THERE HAS BEEN NO INFIRMITY IN THE FINDING OF THE CIT (A) WHICH WARRANTS OUR INTERVENTION AT THIS STAGE. IT IS ORDERED ACCORDINGLY. PAGE 12 OF 15 ITA NO.914/B ANG/2010 12 (III) ADDITION OF RS.69 643/-: DURING THE COURSE OF SURVEY SOME BILLS AGGREGATI NG TO RS.69 643/- WERE UNEARTHED AND DULY IMPOUNDED. THE ASSESSEE WAS CALLED UPON BY THE AO TO CLARIFY AS TO WHETHER THOSE BILLS H AVE BEEN ACCOUNTED FOR IN ITS BOOKS OF ACCOUNTS. REJECTING THE ASSESSEES CONTENTION THAT SOME OF THE PAPERS FOUND DURING THE COURSE OF SURVEY WERE NO THING BUT ONLY ESTIMATES AND NOT THE FINAL BILLS ETC. THE AO HAD ADDED THE SAID SUM BEING SUPPRESSED RECEIPTS. AFTER CONSIDERING THE ASSESSE ES CONTENTION AND ALSO THE REASONING OF THE AO THE CIT (A) CONFIRMED THE AOS STAND FOR THE REASONS RECORDED IN HIS IMPUGNED ORDER (SUPRA). EV EN AT THIS STAGE THE ASSESSEE HAD NOT ESTABLISHED WITH ANY DOCUMENTARY PRO OF TO REFUTE THE REVENUES CLAIM THAT SOME BILLS UNEARTHED DURING SU RVEY WERE NOTHING BUT ONLY ESTIMATE. IN VIEW OF THE ABOVE WE SUSTAIN THE FINDING OF THE CIT (A) ON THIS POINT. (IV) DISALLOWANCE OF RS.15 000/- ON VEHICLE ACCOUN T: ADMITTEDLY THE ASSESSEE WAS OWNING A TRUCK FOR W HICH THE ASSESSEE HAD CLAIMED MAINTENANCE EXPENSES INCLUDING PURCHASE OF DIESEL AND OTHER REPAIRS. IN THE ABSENCE OF ANY DETAILS THE AO HAD DISALLOWED RS.15 000/- ON THIS COUNT. THE CIT (A) HAD FAIRLY C ONCEDED THAT THE TRUCK OWNERS WERE REQUIRED TO INCUR EXPENDITURE SUCH AS O N FUEL BREAK-DOWN OF VEHICLE EXPENSES ON EXCEPTIONAL CIRCUMSTANCES WHICH WOULD NORMALLY BE SUPPORTED BY SELF-MADE VOUCHERS. IN THE CASE ON HAND EVEN SELF-MADE VOUCHERS ARE NOT MADE AVAILABLE FOR VERIFICATION TO PROVE THAT SUCH CONTINGENCY EXPENDITURE HAS BEEN INCURRED. IN SUCH A SITUATION THE PAGE 13 OF 15 ITA NO.914/B ANG/2010 13 AUTHORITIES BELOW WERE JUSTIFIED IN DISALLOWING A S UM OF RS.15 000/- WHICH WARRANTS NO INTERVENTION OF THIS BENCH AT THIS STAG E. (V) DISALLOWANCE U/S 40A(3) OF THE ACT-: WHILE SCRUTINIZING THE BOOKS OF ACCOUNT THE AO HAD NOTICED THAT THE ASSESSEE MADE CASH PAYMENTS TOWARDS FREIGHT CHARGES TO THE EXTENT OF RS.1.08 LAKHS. SINCE THE SAID PAYMENTS WE RE OTHER THAN BY A CROSSED CHEQUE/CROSSED BANK DRAFT WHICH CONTRAVENED THE PROVISIONS OF SECTION 40A(3) OF THE ACT THE AO RESORTED TO DISAL LOW 20% OF SUCH PAYMENTS. AFTER DELIBERATING THE ISSUE IN DETAIL THE CIT (A) FOR THE REASONS RECORDED IN HIS IMPUGNED ORDER CITED SUPRA CONFIRMED THE DISALLOWANCE OF RS.1.08 LAKHS (SIC) RS.21 618/- U/S 40A(3) OF THE ACT. BEFORE US IT WAS ARGUED THAT THE ASSESEE WAS FORCED TO MA KE FREIGHT CHARGES IN CASH TO THE EXTENT OF RS.1.08 LAKHS AS THE GOODS WE RE DELIVERED IN ITS PREMISES AT ODD HOURS AND THE TRUCK DRIVERS INSISTE D FOR CASH PAYMENTS TO MEET THE CONTINGENCY EXPENSES SUCH AS FUEL THEIR MA INTENANCE ETC. THE LD. A R SOUGHT REFUGE UNDER RULE 6DD (G) TO STRENGT HEN HIS ARGUMENT. HE ALSO PLACED RELIANCE ON THE FINDING OF THE EARLIER BENCH IN THE CASE OF M/S. HARYANA PLYWOOD V. ITO W 1(1) HUBLI IN ITA NO.208 & 209/BANG/2009 DATED 19.3.2010. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF T HE ASSESSEE AND ALSO PERUSED THE REASONING OF THE AUTHORITIES B ELOW. IT IS AN UNDISPUTED FACT THAT GOODS LORRIES/TRUCKS ARE PROHIBITED TO EN TER INTO CITY LIMITS DURING THE DAY TIME AND ACCORDINGLY THE DRIVERS OF SUCH VE HICLES WILL RESCHEDULE THE TIMINGS TO REACH THEIR DESTINATIONS PREFERABLY A T ODD HOURS WELL PAGE 14 OF 15 ITA NO.914/B ANG/2010 14 BEYOND THE WORKING HOURS OF THE BANKS. SUCH BEING T HE GROUND REALITIES THE RECIPIENTS OF SUCH GOODS WOULD NATURALLY BE FORCED T O MAKE PAYMENTS ONLY IN CASH AS THE CIRCUMSTANCES SO WARRANT. THOUGH MAKI NG SUCH PAYMENTS IN CASH CONTRAVENE THE PROVISIONS OF THE ACT THE ASSE SSEE WOULD BE FORCED TO OBLIGE THE DRIVERS REQUEST IN EXCEPTIONAL CIRCUMST ANCES. LET US NOW HAVE A GLIMPSE AT RULE 6DD (G) WHICH SUB SCRIBES AS (G) WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK TO ANY PERSON WHO ORDINARILY RESIDES OR IS CARRYING ON A NY BUSINESS PROFESSION OR VOCATION IN ANY SUCH VILLAG E OR TOWN; HOWEVER RULE 6DD(G) WILL NOT COME TO THE ASSESEES RESCUE AS ITS PLACE OF BUSINESS PREMISES BEING HUBLI WHICH WAS ADORNED WIT H A NUMBER OF LEADING BANKS. HOWEVER TAKING INTO ACCOUNT THE PECULIAR C IRCUMSTANCES UNDER WHICH THE ASSESSEE WAS PLACED AND ALSO IN CONFORMITY WITH THE FINDING OF THE EARLIER BENCH CITED SUPRA WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS PLACED IN AN EXCEPTIONAL CIRCUMSTANCE TO MAKE T HE CASH PAYMENTS TO THE EXTENT OF RS.1.08 LAKHS THE AUTHORITIES BELOW WERE NOT JUSTIFIED TO INVOKE THE PROVISIONS OF S.40A (3) OF THE ACT IN THE ASSES SEES CASE. IT IS ORDERED ACCORDINGLY. 9. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DAY OF FEBRUARY 2012. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER PAGE 15 OF 15 ITA NO.914/B ANG/2010 15 COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONC ERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR ITAT BANGALORE.