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TMI Blog1985 (10) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... terest on instalments allowed by the hirer. Mr. Meena further submitted that in case the assessee defaults in making the payments on regular basis, the hirer has the right of impounding the vehicle, i.e., forfeiting the vehicle. Therefore the liability to pay interest does not arise when the agreement is entered. 2. On the other hand, Mr. N. M. Ranka by filing a copy of the agreement of higher purchase, submitted that the hirer takes into account the facility that he is providing to his customer for this purpose he charges a hire purchase charges. The facility that is provided by the hirer is by providing finances for the assessee for purchase of the truck, which finances is to be repaid over a period of time alongwith the hire purchase charges. The amount of charges to be paid for such finance arrangement is worked at the time providing of the finance. Since the assessee has entered into the agreement with the financier, he becomes liable for the charges as levied by the financier. The liability to pay the hire purchase charges is fastened on the assessee the moment the agreement is entered into. It is immaterial that the hire purchase charges are paid over the period of the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Department and, we, therefore, dismiss the Departmental appeal. 4. In the assessee s appeal, the issue is regarding applying a gross profit rate of 22.5 per cent and by rejecting the books of accounts. Mr. N. M. Ranka submitted that the assessee has a large fleet of trucks and uses the same in its business of transportation of goods. The assessee maintains regular books of accounts. The assessee maintains truck-wise, trip wise income and expenditure statement. the gross profit in the year was 18 per cent while in the immediately preceding year it was 31 per cent. It was case of an accepted history and it is for the first time that the Department, has chosen to reject the books of accounts. He submitted that the basis of rejection of the books of accounts was that (a) no log book was maintained; (b) diesel expenses are not vouched to the extent of 25 per cent; (c) expenses, like octroi charges, rasta allowance, commission and labour are not vouched to the extent of 25 per cent and (d) major expenses on repairs and spare parts were below Rs. 1,000 of which 10 per cent are not available. 5. Mr. Ranka submitted that the reasons for the fall in gross profit is in pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the truck-wise-trips filed at pages. 71-72, 104, 105 etc. He submitted that the vouchers clearly show the number of truck, the date and the quantum of diesel and oil drawn. Again referring to the truck-wise report, he submitted that each of these vouchers, are found entered in this statement of expenses. 7. Mr. Ranka them in respect of repairs and tyres and motor taxes, referred to pages 177 to 180 and also pages 181 and 182. He submitted that in respect of the same truck the taxes were only Rs. 550, which rose to Rs. 1,368 and this shows the increase on taxes levied by the authorities. He also submitted that the prices of tyres from about 2,300 had gone upto Rs. 2,600. He, therefore submitted by referring to page 58 that the major increase in expenses and insurance. He referred to the directions of the IAC wherein the IAC himself observes that in respect of repairs parts only a very small proportion of expenses are not supported by voucheRs. The IAC s direction is at pages 18 to 24. As regards the observation the Rasta allowance to drivers and cleaners as well as the commission that has been paid for use of vehicles belonging to others for transportation when the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these circumstances, according to Mr. Ranka any disturbance to the results shown by the assessee on mere surmises or conjectures is not all proper. 8. Mr. Ranka then submitted that the Ground Nos. 2 3 are in respect of personal use of car and telephone by the partneRs. He submitted that the disallowance is highly excessive. As regards the fourth ground, he submitted that CIT (A) could have verified the claim of deduction under s. 80G instead of remitting it back to the ITO. As the last ground, which is interest under ss. 139(8) and 217, he submitted are consequential. Mr. C.R. Meena, the. Departmental Representative submitted that increase in turnover results in increase in gross profit. There would no doubt be increases in expenses also, but such increase of expenses would not absorb the entire increase in the gross profit. Mr. C. R. Meena further argument was that the ITO has been categorical in pointing out that large percentage of expenses are not fully vouched and the bills is respect of expenses do not contain the addresses to the various persons, who have supplied materials and diesel expenses are not properly explained. According to Mr. Meena in view of the various circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The submission of the authorised representative was that octroi charges are fully supported and that Rasta allowance is given to the driver and the cleaner and the attendant while the trucks is in its movement from head office to various places. The commission is paid to various other truck operators whenever their trucks are used for transportation of the goods of the assessee clients. This is done usually wherever the assessee s own trucks are not available or is under repair. The commission so paid is fully vouched. As regards the labour it was submitted that it was for loading and unloading of goods from one truck to another and for unloading of the goods from truck at places. These are supported by vouchers bearing thumb impression of laboureRs. It would be wrong to say that they are not vouched. It is a known fact that the trucks travelled various places and there are mainly illiterate persons in the labour class. As regards the expenses such as on repairs a blatant remark has been made by the ITO that 10 per cent of the bills less than 1000 rupees which comprise of most of the expenditure is not fully vouched. The basis is that some of the vouchers of small amounts the bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not want to take pains to pinpoint exactly the area of disallowance but though it fit to make a general remark. No doubt, some of the vouchers which are at pages 67 68, do not indicate exactly the address of the repairers of the suppliers but these are found counter-signed by some person It is also quite likely that some of these vouchers are got prepared from some on and for certain works, which were never carried out. The suspicious of the Department is that there are certain vouchers which are not is reality supports of expenses incurred is no doubt valid but this cannot be the basis for holding a percentage to be not supported. In the absence of specific pointing of such vouchers which are not really vouchers it would be difficult to reject the submission of the assessee especially that the assessee has to rely on its employees. In view of these observations, rejecting the books of account would cover the disallowance to be made under the various heads of expenses, especially repairs and spares, they had not carried out any separated addition. For these reasons, we retain an ad hoc addition to the trading account at Rs. 30.000 12. As regards the issue in respect of uses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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