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TMI Blog1995 (4) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... of bricks. For the year under consideration, the assessee, on a total sales of Rs. 32,08,567 declared a net profit of Rs. 780 which was also the returned income. On account of such a low profit disclosed, the Assessing Officer was prompted to select the case for scrutiny. 3. The facts gathered by the Assessing Officer revealed that the assessee-company had two directors, Shri Mahesh Kumar Gupta and his wife Smt. Heeru Gupta. The two Directors were also sole proprietors of M/s. Mahesh Company and M/s Ashi Brick Industries respectively. The two sole proprietory concerns were in the brick manufacturing business. The assessee purchased bricks from these two concerns and sold them in the market. 4. During the year, the assessee sold 76,22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding Unloading charges Rs. 36,360 ----------------------- Rs. 4,03,412 ------------------------ 7. Accordingly, the Assessing Officer calculated the cost of transporting the bricks by the two leased trucks to be Rs. 110.95 per 1,000 bricks. As against this, the total cost of transporting 6,78,500 bricks by hiring trucks from outsiders was Rs. 44,463 which worked out to be Rs. 65.53 per 1,000 bricks. 8. The Assessing Officer, therefore, computed the cost of transporting 36,36,067 bricks at the rate of Rs. 65.53 per 1,000 bricks, which worked out to Rs. 2,38,267. Deducting this amount from the claimed expenditure of Rs. 4,03,412, determined Rs. 1,65,145 to be excessive and disallowed the same under section 40A(2)(a). 9. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the engagement of trucks for twenty four hours. This is borne out from the submissions made before the lower authorities and considered by the ld. CIT(A). A maximum distance of 72 kms. was shown to be covered before the lower authorities and while doing so, the lanes and by-lanes that have to be resorted to during day-time delivery, were considered. Thus, on the one hand, day-time delivery was projected to justify the cost, on the other hand, 24-hour possession was shown to be of prime importance while appreciating the rent that would have been charged by the outsiders, had that been the case. In our view, therefore, comparing the lease rent with the rent of Rs. 600 to Rs. 650 per day was absolutely redundant and misguiding. We reject thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure is incurred. In the instant case, the service availed is those of trucks and hence the entire cost of service has to be compared and not merely the rent and that is what exactly has been done by the Assessing Officer. Of course, his reference to the W.D.V. of the trucks or to the expenses incurred towards the end of the year are not of much relevance. We are concerned with the comparison drawn by him in the cost of services, that is, Rs. 110.95 in case of trucks hired from the Directors and Rs. 65.53 in case of trucks hired from outsiders. Before the lower authorities it was submitted that the comparison so drawn is untenable as only 8% of the total bricks were transported by hiring outside trucks. In absence of any data, we fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo Directors, husband and wife. The bricks have been bought only from two concerns of which the Directors are the sole proprietors. Less than half of the goods have been transported by the two trucks owned by the two Directors, though the agreement subsisted for the whole year and barring depreciation, taxes and insurance charges, an other expenses pertaining to the trucks have been charged against the profits of the company. 20. It will also not be out of place here to refer to the finding of the ld. CIT(A) that the inference drawn on there being inflated expenditure on transportation was not well based. Neither the Assessing Officer has alleged there being inflated expenditure, nor does section 40A(2)(a) envisages such a situation. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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