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TMI Blog2018 (8) TMI 2089X X X X Extracts X X X X X X X X Extracts X X X X ..... engage other lorries for transportation of goods. This is therefore a case of accepting correctness of the entire receipts as income and disallowing the entire expenditure claim which is not permissible in our considered opinion. CIT(A) has estimated assessee s profit @12% these peculiar circumstances only by exercising his co-terminus powers as well as to that of the AO the first appellate jurisdiction as well. Needless to say, the assessee s books admittedly stood rejected. The CIT(A) has correctly appreciated the entire facts thereafter in holding that section 40(a)(ia) pre-supposes genuine business expenditure which cannot go side by side to an instance involving rejection of books. We thus affirm CIT(A) s well reasoned findings. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of Rs 8,75,71,214/- from transport business and against this income they claimed an expenditure of Rs.7,84,28,827/-. The AO observed that the appellant had claimed expenditure of 89.56% to the income shown. The partnership deed did not mention Transport as one of its business, the appellant had never in the past done transport business, and they failed to produce any details, regarding transport expenses and in view of such circumstances the AO held that the expenses could not be accepted as genuine and held that there was all possibility that the transport expenditure was accommodation entry to nullify the transport income. He also found that the firm had no infrastructure to provide transport service and therefore he concluded that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the AO has held the transport expenditure to be bogus then there cannot be any basis to make disallowance u/s 40(a)(ia) of the Act. This is because in order to disallow expenditure u/s 40 (a)(ia) the expenditure should first be allowable u/s 30-38 of the IT Act 1961. When the AO himself found that the appellant did not produce books/details and he rejected the details given by the appellant related to the impugned expenditure by holding the same to be nongenuine. In such circumstances, the disallowance u/s 40(a)(ia) was not applicable in the facts of this case as the expenses were not held to be genuine with regards to the transport business. There is merit in the argument of the appellant that when they did not have their own trucks t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly contends that the Assessing Officer had rightly disallowed assessee s expenditure claim of Rs.7,84,28,827/- and correctly applied section 40(a)(ia) of the Act. We find no merit in either of these submissions. The fact remains that the Assessing Officer had himself accepted and assessed assessee s total turnover of Rs.8,75,71,214/- to have been derived from transport business. He thereafter disallowed its corresponding transport expenditure amounting to Rs.7,84,28,827/- to be not proved as genuine. Learned Departmental Representative fails to dispute the clinching fact that this assessee is in transport commission agent business rather than owning vehicles of its own. That being the case, it was very much necessary for the tax payer to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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