TMI Blog2015 (2) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... fare expenses etc. cannot be fixed on standard basis. Thus looking to the past and subsequent history and the present facts of the case, we restrict the disallowance @ 10% which would be quite reasonable.- Decided partly in favour of assessee. Addition being transportation charges which was salary paid by the directors to the drivers engaged by them - Held that:- To prove that there is siphoning of profits of the assessee company by the related persons, it has to be brought on record with some tangible material that the assesse was actually paying the driver’s salary. The entire analysis and exercise done by the AO is based on presumption and that to be mainly on the premise that the sub-contract agreement does not specify, who will make the payment of salary. The source of the payment by these persons has been demonstrated along with the other documents as mentioned above. It is not the case of the department that the hire charges paid by the assessee to the relatives is either excessive or sham. The only case of the department is that the drivers’ salary of the trucks belonging or hired by the related persons must have been paid by the assessee. Thus, we do not find any reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the extract of the remand report has been dealt by the Ld.CIT(A) in paras 7.1 and 7.2. Thereafter, the Ld.CIT(A) analyzed the material placed on record and noted that in past scrutiny assessment were done, wherein bhatta charges were either not disallowed or only 10% of these expenses were disallowed. He also noted percentage of driver bhatta charges to the transportation charges receipts and therefore, held that disallowance should be restricted to 15%. 5. Before us, learned counsel submitted that the entire vouchers along with the details and explanation were filed before the AO as well as Ld.CIT(A), despite that, ad hoc disallowances have been. Ld.CIT(A) after noting entire facts has ultimately held that 15% should be restricted. Such a disallowance is not called for and in any case such a disallowance is quite excessive. 6. On the other hand, Ld. DR strongly relied upon the reasoning given by the Ld.CIT(A) and held that disallowance confirmed by the Ld.CIT(A) is quite reasonable. 7. After considering the rival submissions and also on the perusal of the finding given by the AO as well as Ld.CIT(A) and the material placed on record, we find that the only basis for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the disallowance to 40%. 10. Before us, learned counsel submitted that in scrutiny proceedings for the A.Ys. 2001-02 and 2002-03, no such disallowance was made and in A.Y. 2005-06, disallowance @ 10% was made. In A.Y. 2006-07 and 2007-08 lump sum disallowance was made which was much below 5%. He also drew our attention to the percentage of these expenses with reference to the transportation charges received by the assesse and submitted that the expense claim were quite reasonable. Thus he submitted that in this year, disallowance of 40% is too high and excessive. 11. On the other hand, Ld. DR strongly relied upon the finding of the Ld.CIT(A). 12. After considering the rival submissions and also on perusal of material on record, we find that, in the earlier year and in subsequent years, the disallowances under these heads were much less than 10%. The basis given by AO to work out the average expenses is not based on proper analysis as in the transportation business, average diesel expenses, average fare expenses etc. cannot be fixed on standard basis. Thus looking to the past and subsequent history and the present facts of the case, we restrict the disallowance @ 10% wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel submitted that in the past scrutiny assessment and in subsequent assessment years, no disallowance under this head was made. Further neither the AO nor Ld.CIT(A) has made any comparison to prove that how the payment made of hire charges was excessive and what should have been the reasonable payment. He submitted that payment made to the drivers by these related persons were on the same rate as paid by the assessee to its own drivers and the basis on which the assessee company had paid the hire charges cannot be doubted or said to be not genuine. In some of the cases of the directors, which were assessed under scrutiny proceedings, no disallowance has been made on account of payment of salary to the drivers. Thus no disallowance should be made. 16. On the other hand, Ld. DR strongly relied upon the order of the Ld.CIT(A) and submitted that the AO and Ld.CIT(A) has examined the agreement with these persons, which does not mention about the payment of driver charges in respect of vehicles engaged by the directors/related persons and the AO has also analyzed the dates of payment made by the assessee to these persons, and to prove that these persons could not have paid the dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges have been claimed by them. So far as the assessee is concerned, it has paid the transportation charges as per the agreement. Even if the agreement does not specify the payment of driver salary, it does not lead to any inference that the assessee has paid the drivers salary who were working for these related persons. To prove that there is siphoning of profits of the assessee company by the related persons, it has to be brought on record with some tangible material that the assesse was actually paying the driver s salary. The entire analysis and exercise done by the AO is based on presumption and that to be mainly on the premise that the sub-contract agreement does not specify, who will make the payment of salary. The source of the payment by these persons has been demonstrated along with the other documents as mentioned above. It is not the case of the department that the hire charges paid by the assessee to the relatives is either excessive or sham. The only case of the department is that the drivers salary of the trucks belonging or hired by the related persons must have been paid by the assessee. Thus, we do not find any reason to upheld such a premise, unless the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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