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TMI Blog2009 (7) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... e said difference, the only embedded portion of the profits is to be taken into consideration. Therefore, we set aside the order of the Revenue authorities on the issue and direct the AO to adopt the GP rate declared by the assessee for the assessment year under consideration and compute addition in question accordingly. Disallowance by invoking provisions of s. 40(a)(ia ) - the assessee was not held liable to deduct tax u/s. 194C from payments made to the transporters. In view of the above, the learned Authorised Representative requested to delete the addition in question. Respectfully following the order of the Hon ble Punjab Haryana High Court in CIT vs. United Rice Land Ltd.[ 2008 (5) TMI 142 - PUNJAB AND HARYANA HIGH COURT] , we set aside the orders of the Revenue authorities on this issue and direct the AO to allow the expenditure claimed by the assessee without applying the provisions of s. 40(a)(ia). we find it undisputed that the assessee is a transporter executing various contracts by engaging its own vehicles and transporter s vehicles. The AO disallowed the payments by observing that payments made to the transporter as sub-contract. There is nothing on record to suggest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded by the AO under the head 'Undisclosed transportation receipt' in the income of the assessee, which was confirmed by the CIT(A). 3. The assessee stated that actually the assessee has not received this amount. Therefore, the assessee should not be taxed for the same. Alternatively, it was contended that the entire gross amount of understatement as per him, as income without allowing any expenses or estimating profit on the difference, detected in respect of gross receipt is not justified. So, AO should have estimated profit usually earned on the amount of Rs. 14,94,285 instead of adding the whole amount. In this connection, reliance was placed on the decision of the Hon'ble Gujarat High Court in the case of CIT us. President Industries (2000) 158 CTR (Guj) 372 : (2002) 258 ITR 654 (Guj) wherein undisclosed godown sales were found but there was nothing on record that investment was made from sources outside books in acquiring goods sold. Addition cannot be of entire sale proceeds. Only profits embedded in sale profits can be taxed. 4. Our attention was drawn towards the decision of the Hon'ble Madhya Pradesh High Court in the case of CIT vs. Balchand Ajit Kumar (2004) 186 CTR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). 7. The stand of the assessee is that disallowance has been made because of non-deduction of tax at source and deposit to the Government exchequer. While coming to the said conclusion for disallowance, the AO has considered the payments made to the contractor as a sub-contractor which is not the fact. In fact, there was no sub-contractor agreement between the assessee and the transporter, assessee also relied on various case laws in his favour. Hence, he requested that provisions of s. 40(a)(ia) is not applicable to facts of assessee's case. On the other hand, the learned Departmental Representative supported the order of the authorities below. 8. We find it undisputed that the assessee is a transport contractor and in addition to its own, it has engaged other truck-owners to execute the transportation work on as and when basis without any privity of contract. The assessee has not assigned any particular portion of the work. No sub-contract agreement, either written or oral, exists between the assessee and the outside truck owners. There is nothing on record to suggest that the assessee has floated any tender to that effect. Thus, there is no offer and acceptance which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved that any freight charges were paid to them in pursuance of a contract for a specific period, quantity or price, the assessee was not liable to deduct tax under s. 194C from the payments made to the transporters." 8.1 Respectfully following the order of the Hon'ble Punjab & Haryana High Court, we set aside the orders of the Revenue authorities on this issue and direct the AO to allow the expenditure claimed by the assessee without applying the provisions of s. 40(a)(ia) of the IT Act, 1961." 11. We find that in ITA No. 134/Ctk/2008 in the case of Anukul Bhandar, the Tribunal, vide para 9 held as under: "9. We have carefully considered the submissions of the learned representatives of both the parties and have perused the orders of the authorities below. We have also considered the pp. 12 to 37 of the paper book, which are the copies of the bills, receipts and the forwarding 'letters giving the details of transportation of goods from Nagpur to Cuttack. We observe that the said goods were transported by different trucks, as per the details given therein. The Department has not brought any contract on record that the said goods were transported through M/s Karn Freight Carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ryana High Court, we set aside the orders of the Revenue authorities on this issue and direct the AO to allow the expenditure claimed by the assessee without applying the provisions of s. 40(a)(ia) of the IT Act, 1961" 13. We also find that in ITA No. 201/Ctk/2008 in the case of Gurudeo Singh., the Tribunal, vide para Nos. 8 and 8.1, has taken the similar view in favour of the assessee. Nothing contrary was brought to our knowledge on behalf of the Revenue regarding the legal proposition. Facts being the same, so, following the same reasoning, we do not agree with the findings of the authorities below. 14. Thus, we find it undisputed that the assessee is a transporter executing various contracts by engaging its own vehicles and transporter's vehicles. The AO disallowed the payments by observing that payments made to the transporter as sub-contract. There is nothing on record to suggest that any contract existed between the assessee and the alleged transporter as sub-contractor. There is neither written nor oral agreement in this regard. There is no dispute to the settled legal proposition that written agreement is not compulsory. Even oral agreement can be inferred in the facts ..... 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