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TMI Blog2015 (6) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... iture cannot be totally ruled out, it will be reasonable to allow 80% of the freight expenditure in respect of which assessee could not produce any evidence, subject to condition that such expenditure is not hit by section 40(a)(ia) and 40A(3) of the Act. As far as balance freight expenditure of ₹ 52,86,145 is concerned, though, it is supported by bills and vouchers but ld. CIT(A) on the basis of remand report of Addl. CIT disallowed an amount of ₹ 34,29,875 u/s 40(a)(ia), which also includes the amount of ₹ 14.92,500 representing cash payments exceeding ₹ 20,000 made in violation of section 40A(3). It is the contention of ld. AR before us since the entire payment was made during the relevant PY and nothing remained payable, no disallowance can be made u/s 40(a)(ia). It appears, this argument has not been advanced by assessee before the Departmental authorities. However, keeping in view the principle laid down by the ITAT Special Bench in case of Merlyn Shipping Transport and others (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ), we direct Assessing Officer to verify this aspect and if it is found that the entire payment was made during the relevant PY and nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that out of total turnover of ₹ 1.17 crore, assessee has shown huge expenditure on account of freight amounting to ₹ 1,06,45,936. In absence of any details with regard to the freight expenditure and also for the reason that tax has not been deducted at source on such payments, AO disallowed the entire freight expenditure claimed at ₹ 1,06,45,936 and added back to the income returned. As a result, total income was determined at ₹ 1,06,58,548. Being aggrieved of the addition made, assessee preferred appeal before ld. CIT(A). 4. In course of hearing before ld. CIT(A), assessee while challenging the disallowance of freight expenditure submitted cash book and ledger in support of the expenditure claimed. On the basis of the submissions made and evidences filed, ld. CIT(A) called for a remand report from AO. AO in her remand report stated that in course of remand, assessee s AR furnished freight invoices, LRs, challans and hire slips for an amount of ₹ 38,90,325. She further observed that assessee produced hire slips for an amount of ₹ 13,95,820 without corresponding LRs. As far as the balance freight expenditure is concerned, assessee could not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le transaction truck hiring of payment above ₹ 20,000. The Addl. CIT further stated that for an amount of ₹ 14,92,500, payments were made above ₹ 20,000 in cash in violation of section 40A(3), which is included in the amount of ₹ 34,29,875 and stated that the appellant was entitled for freight expenditure of only ₹ 18,56,270. 5.1 I totally agree with the findings of the Addl. CIT on the AO s remand report dated 31/03/2012 and hold that out of freight expenditure of ₹ 52,86,145 stated by the AO to be acceptable out of the total freight expenditure of ₹ 1,06,45,936, the appellant is only entitled for freight expenditure of ₹ 18,56,270 and ₹ 34,29,875 is sustained for failure to deduct TDS u/s 194C and for violation of section 40A(3) of the Act. Finally, out of total freight expenditure of ₹ 1,05,45,936, the appellant is entitled for freight expenditure of only ₹ 18,56,270 and the balance amount of ₹ 87,89,666 is confirmed. 5. Ld. AR submitted before us, before AO assessee did not produce any books of account, but, only before ld. CIT(A) cash book and ledger were produced. Ld. AR submitted, when the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete assessment u/s 144 of the Act to the best of his judgment on the basis of facts and materials available on record. While verifying the material on record, Assessing Officer noticed that assessee has claimed freight expenditure of ₹ 1,06,45,936, which constituted the major expenditure claimed by assessee. Therefore, in absence of any supporting evidence to prove the expenditure claimed and also due to the fact that TDS provisions are applicable on such expenditure, Assessing Officer disallowed the same while accepting profit declared by assessee. Thus, it is clear from the assessment order, Assessing Officer has not expressed any opinion with regard to the books of account of assessee. However, as can be seen, before ld. CIT(A), assessee produced cash book and ledger which was forwarded to Assessing Officer for verification. Assessing Officer while verifying the same when called upon assessee to produce supporting evidence towards the freight expenditure claimed, assessee could produce supporting evidence to the extent of ₹ 56,86,145. Further, it was found that out of this amount of ₹ 56,86,145, payments of ₹ 34,29,875 have been made in violation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 34,29,875 u/s 40(a)(ia), which also includes the amount of ₹ 14.92,500 representing cash payments exceeding ₹ 20,000 made in violation of section 40A(3). It is the contention of ld. AR before us since the entire payment was made during the relevant PY and nothing remained payable, no disallowance can be made u/s 40(a)(ia). It appears, this argument has not been advanced by assessee before the Departmental authorities. However, keeping in view the principle laid down by the ITAT Special Bench in case of Merlyn Shipping Transport and others (supra), we direct Assessing Officer to verify this aspect and if it is found that the entire payment was made during the relevant PY and nothing remained payable at the end of PY, no disallowance u/s 40(a)(ia) can be made. As far as violation of section 40A(3) is concerned, we remit this issue back to the file of Assessing Officer for affording an opportunity to assessee to explain as to whether the payments come within the exception provided under Rule 6DD. Assessing Officer shall decide the issue after giving reasonable opportunity of being heard to assessee and in accordance with law. 9. In the result, assessee s appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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