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TMI Blog2012 (5) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... deration i.e. Asst. Year 2006-07 was filed on 31st December, 2006 showing therein total income of Rs.1,40,544/-. The return was accompanied by the statement of total income, audit report, balance sheet, profit and loss account and their schedules. The return of income was processed u/s 143(1) by accepting the same. The case was selected for scrutiny assessment by issuing notice u/s 143(2) on 12th March, 2007 and the assessment was finalized u/s 143(3) of the IT Act. During the assessment proceedings all the details called for by the AO were submitted in due course and more over books of accounts of the assessee were also called by the ld. AO for verification and the same were submitted and had been verified in detail by the AO. During the year under appeal the assessee firm had purchased vehicles for its business of travels and details like RC book, purchase bills, diesel bills of the said vehicles were produced before the AO but he had disallowed the depreciation claimed on purchase of vehicles amounting to Rs.21,20,283/- @ 30% and it comes to Rs.6,36,084/-. In appeal, the assessee before the ld. CIT(A) filed copy of vehicle purchase bills, R.C. books, insurance receipts, loan rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted by the assessee. The receipts arising out of the use of the vehicles were taxed by the AO. The AO was not justified in disallowing the claim of depreciation and the ld. CIT(A) has rightly deleted the disallowance. His order may kindly be upheld. 6. We have heard the rival parties and perused the record. It is an undisputed fact that the assessee firm has purchased the vehicles for its business purpose and details like RC books, purchase bills, diesel bills of the said vehicles were produced before the AO but he disallowed the depreciation claimed on purchase of vehicles amounting to Rs.21,20,283/- @ 30% which comes to Rs.6,36,084/-. The ld. CIT(A) has directed the AO to allow depreciation by observing that the AO had taxed the receipts arising out of the use of the vehicles and his stand that the depreciation is not allowable in the absence of details filed appears contradictory. The AO has not brought anything on record to hold that vehicles were not used by the assessee. Therefore, we find no infirmity in the order of CIT(A)'s order directing the AO to allow depreciation on the new vehicles purchased during the year. The order passed by ld. CIT(A) is hereby up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itial onus. If the AO was not satisfied he could have taken appropriate action against the individual partners and not the firm. In view of the above, the ld. CIT(A) has deleted the impugned addition of Rs.2,00,000/- made u/s 68. Aggrieved by this order of ld. CIT(A), Revenue is in appeal. 9. The ld. DR submitted that three partnes brought in capital of Rs.2,00,000/- during the previous year relevant to assessment year under consideration. The assessee failed to furnish any authentic evidence in terms of identity, capacity and genuineness of transaction. Only 7/12 extract indicating agricultural land the assessee cropped 111.91 quintal wheat and 31.92 quintals of 3 types of pulse (Magudad and Guvar). Agricultural produce declared and sold in market is too excessive and unreasonable. Except this the assessee failed to furnish any evidence in respect of new capital introduced by these two partners. In respect of capital contributed by Shri Lalbhai M. Desai of Rs.1,00,000/- it was stated that copy of bank pass book was attached herewith and amount received from cheque No.20052 dated 9.4.0(5) but nothing was made available. In absence of any authentic evidence in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represented income of the assessee firm,. As held by the Allahabad High Court in the case of Commissioner of Income Tax Allahabad vs. Jaiswal Motor Finance (supra), in the absence of any material to indicate that there were profits of the firm, the amount credited to the partners' accounts could not be assessed in the hands of the firm. Once the partners have owned that the monies deposited in their accounts are their own, the Income Tax Officer is entitled to and may proceed against the partners and assess the same in their hands, if their explanation is not found satisfactory." Respectfully following the above decision of the Hon'ble Gujarat High Court in the case of Pankaj Dyestuff Industries in I.T. Ref.No.241/1993 decided on 6.7.2005 we dismiss the ground raised by the Revenue. 12. The last issue is regarding deletion of addition of Rs.39,04,731/- made by AO u/s 40(a)(ia) for non-deduction of tax from the payments made to the sub-contractors of vehicle hired by the assessee. The stand of the assessee before AO was that it had made payment to only procure the vehicle on rent, without the services of the drivers, which had been provided by the assessee. The AO's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial amount of salary. The appellant has also shown the bills of diesel which bear the number of vehicles hired by it. As against that the AO has neither examined the subcontractors nor the drivers nor the main party which had given the contract of transportation i.e. ONGC to come to any conclusion which can be treated contrary to the assessee's version of the relationship between it and its sub-contractors on one hand and with ONGC on the other hand. If that be so, the assessee's version has to be accepted and the payments for the vehicles would have to be treated as rental payment, which would neither get covered u/s 194C or 194I (as it stood in this assessment year). In that situation, assessee would not be under any obligation to deduct tax at source and therefore section 40(a)(ia) would not have any applicability. 5.2.1 Therefore, considering all the facts of the case, I think, the addition of Rs.39,04,731/- is not justified and the same is deleted." Against this order of the ld. CIT(A) the Revenue is in appeal. 15. Before us the ld. DR vehemently submitted that on scrutiny of the sub-rate commission income and expenses it was found by the AO that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicle from the vehicle owners and agreements to that effect have also been executed on plain papers. Text of the agreement itself indicates that the vehicles are accepted and plied on sub-contract basis; no such vehicle is rented by the assessee. Because the rent amount is on monthly basis and it does varies from owner to owner. According to agreement Drivers' and conductors are to be provided by the assessee, but the books of accounts does not indicate debit of drivers'/contractors' salary/bonus/BHATHA etc. It proves that the salary of driver/conductor are borne by the vehicle owner. All other expenses like diesel, of, repairing RTO tax and other Govt. taxes are to be borne by the owner. These expenses are also not borne by the assessee. Lastly in terms of payment, it is clearly mentioned that after deducting 10% commission balance will have to be paid to the owner." In our considered view it will meet the ends of justice if the matter is restored back to the file of AO for proper verification of the facts and decide the issue afresh after affording reasonable opportunity of being heard to the assessee. We order accordingly. This ground of Revenue is allowed for statisti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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