9911796707
TMI Blog2012 (8) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... ee donors." 1.1.1 Brief facts of the case till the assessment stage are noted by Ld. CIT(A) in para 4 & 4.1 of his order which are reproduced below: "The gifts shown by the Assessee have been reproduced in para-4, page 2 of the assessment order. The Assessee submitted copies of gift deeds and capital accounts of the donors as on 31-03- 2004. According to the AO, the opening balances in each of the capital accounts were not supported by any evidence. The AO therefore, asked the Assessee to produce the donors for personal verification. The Assessee submitted that two of the donors Smt. Afrozbanu Arab and Mr. Azizbhai Arab were out of town, while the third donor, Shri Abdul Rashid A. Shaikh was 78 years of age and could not appear personally before the AO. However, on 26- 11-2007, Shri Azizbhai Arab and Smt Afrozbanu Arab appeared before the AO. According to the AO, in their statements, both of them stated that they had no knowledge about the source of the deposits in their bank accounts with UCO Bank, Muglisara, Surat. They further stated that their cheque books and other documents pertaining to the bank accounts were generally kept with the Assessee. While both the donors had cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2 Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) but without success and now, the assessee is in further appeal before us. 1.1.3 It was submitted by the Ld. A.R. that out of this gift of Rs.5 lacs from three donors, one donor Shri Abdul Rashid A Shaikh, who has given a gift of Rs.2 lacs, is father of the assessee. He further submitted that he is 74 years of age and because of his old age, he could not be produced before the A.O. for examination and, therefore, no adverse inference should be drawn due to this. He further submitted that the donor is also income tax assessee and the copy of the gift deed along with photocopy of PAN card, income tax return filed for this very year, computation of total income along with bank statement etc. are available in he paper book on pages 24-31 of the paper book and hence, no addition is justified with regard to this gift which is received by the assessee from his father. Regarding two other gifts, it was submitted that these two donors were produced before the A.O. and they have duly confirmed before the A.O. regarding these two gifts given by them to the assessee. But the A.O. was not satisfied about their sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of Ld. CIT(A). 1.2.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that out of telephone expenses, the A.O. has made disallowance of 20% by holding that to this extent, the expenses are personal in nature. Since, assessee is not maintaining any personal telephone, in our considered opinion, this disallowance is not excessive and hence, we confirm the same. This ground is rejected. 1.3 Ground No.3 is as under: "3. On the facts and in the circumstances of the case, the Id. CIT(A) has erred in confirming the addition of Rs.19490/- made by the AO out of interest paid to Chandan Commercial Corporation." 1.3.1 This disallowance was made by the A.O. on this basis that the assessee had paid interest @ 24% to this concern as against the rate of 18% paid to other entities. When confronted, it was submitted by the assessee before the A.O. that this party is a financier and, therefore, they charge higher rate of interest as compared to other ordinary lenders. The A.O. was not satisfied and he made disallowance of excess interest paid to the extent of 6%, which was worked out by he A.O. at Rs.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that the addition was made by the A.O. u/s 69C of the Income tax Act, 1961. Section 69C is applicable when the assessee has incurred any expenditure and it could not explain the source of expenditure. In the present case, the source of incurring the expenditure is not in doubt because the source of expenditure is from books and, therefore, Section 69C is not applicable. But at the same time, it is seen that as per the ledger account of the party M/s. Volvo (India) Pvt. Ltd. submitted by the assessee to the A.O., this party has shown sales of Rs.4,51,989/- but the assessee is showing purchases of Rs.5,35,392/- and difference of Rs.83,403/- could not be reconciled by the assessee before the A.O. or before Ld. CIT(A) or even before us. Hence, this is a case of bogus purchases claimed by the assessee and, therefore, we decline to interfere in the order of Ld. CIT(A) on this issue because the assessee could not explain or reconcile this difference. This ground is also rejected. 1.5 In the result, appeal of the assessee is partly allowed. 2. Now, we tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es cannot be reused, nor can the tyres which burst. It therefore has to be accepted that there could not be any resale value of such tyres. The explanation furnished by the Assessee and the AR that whatever nominal amounts are receivable against the sale of such tyres is adjusted by the truck repairers or garage owners against the expenses to be incurred on repairing punctures and other miscellaneous repairs. What is also to be considered is the fact that the Assessee had furnished not only a copy of the said account but all relevant details including complete bills and vouchers pertaining to the said expenditure. The AO was unable to point out any defect in the accounts or supporting documents. In such a situation, a percentage disallowance on estimate was really not warranted. The addition of the sum of Rs7,13,800 will therefore, stand deleted." 2.1.2 From the above para of the order of Ld. CIT(A), we find that a clear finding is given by Ld. CIT(A) that the used tyres by the transporter is generally not having any resale value and whatever nominal amounts are receivable against the said tyres is adjusted by the truck driver against minor repair/puncture and other miscellaneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn capital of Rs.78.92 lacs in the beginning of the year and Rs.90.18 lacs at the close of the year. This goes to show that the sufficient own interest free funds were available with the assessee and, therefore, no disallowance of interest is justified in respect of these interest free advances. Hence, we decline to interfere in the order of Ld. CIT(A) on this issue also. 2.4 Regarding ground No.1.d, we find that this issue has been decided by Ld. CIT(A) as per para 20, 20.1 and 20.2 and these paras of the order of Ld. CIT(A) are reproduced below: "20. I fully agree with the submission of the AR. An expenditure can either be genuine or not genuine. In this particular case, by seeking evidence regarding the services rendered by M/s Arrow Logistics, the AO had actually questioned the genuineness of the expenditure claimed. If that be so, then he should have disallowed the entire expenditure and not made only a percentage disallowance. It was very clear at the outset that M/s Arrow Logistics was the only party doing supervision work for the Assessee. Therefore, it was erroneous on the part of the AO to seek comparison with the payment made to other supervisors, Instead of asking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) in assessment year 2004-05 was reversed or is pending before the tribunal. Moreover, we find that it was submitted by the assessee be fore the A.O. as has been reproduced by the A.O. in para 14 of the assessment order that when a driver goes on long trips, the amount is given to him for expenses such as diesel, RTO and other unforeseen expenses. On return, the driver gives account of expenses with receipt/bills etc. It was also submitted that there may be some items which cannot be described in its particulars given by the driver. It was also submitted that even if it is to be examined for disallowance u/s 40A(2B), it has to be shown as excessive or unreasonable having regard to the fair market value of the goods or services for which the payment is made or it is not for the need of the business. It was submitted that these are payments to outsider and there is no observance of unreasonable payments. The disallowance was made by the A.O. on this basis that when the assessee is accounting for, all the specific expenses separately such as vehicle repairing, RTO and miscellaneous expenses, what is justification of this separate expenses of truck trip expenses. He had finally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present year, the GP ratio is 25.39% whereas it was 24.18% in the preceding year and 21.53% in assessment year 2003-04. Considering all these facts and in view of this fact that the disallowance was made by the A.O. on ad hoc basis without bringing any adverse material on record, no interference is called for in the order of Ld. CIT(A) on this issue also. This ground of the revenue is also rejected. 2.7 Regarding ground No.1.g, we find that the disallowance was made by the A.O. in respect of prepaid insurance paid by the assessee. The same was deleted by Ld. CIT(A) on this basis that this amount was paid by the assessee during this year on the basis of notice received from insurance company and therefore, the liability accrued during the year under consideration on the basis of such notice. We are not satisfied on this aspect because the liability neither accrues on the basis of receipt of notice nor on payment if the insurance premium is paid for a subsequent period, the same is not allowable in the present year and, therefore, on this issue, we reverse the order of Ld. CIT(A) and restore that of the A.O. This is consequential that the deduction on this account has to be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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