Chandra Poojari, Accountant Member. - This appeal is directed against the order passed by the learned CIT(A)-VI, Hyderabad, dated 16-12-2008 and it pertains to assessment year 2005-06.

2. Assessee raised the following grounds :

"(1)The order of the Assessing Officer is erroneous, unjust and contrary to the facts of the case.

(2)The Assessing Officer erred in rejecting the books of account and in restoring to estimation of income.

(3)The Assessing Officer erred in estimating net income at 10 per cent of the gross receipts without allowing the expenditure towards depreciation, salary, remuneration and interest to partners.

(4)The Assessing Officer ought to have considered that the rate of 10 per cent adopted is much higher, in the circumstances of the assessee’s case.

(5)The Assessing Officer erred in holding that the provisions of section 194C have application to the facts of the case with regard to payments made to Harvin Constructions (P.) Ltd. and further erred in holding that the provisions of section 40(a)( ia) are applicable in the circumstances.

(6)The Assessing Officer erred in disallowing Rs. 8,33,28,307 by applying provisions of section 40(a)( ia) particularly, when the books, of account are rejected and estimation of income is resorted to.

(7)The Assessing Officer erred in charging interest under section 234B of Rs. 1,22,64,166."

3. Brief facts of the case are that the assessee, a partnership firm, filed return of income for the assessment year 2005-06 on 1-11-2005 admitting an income of Rs. 71,16,656. The assessment was completed under section 143(1) or the Income-tax Act, determining the income at Rs. 10,88,55,722. The Assessing Officer while completing the assessment rejected the book of accounts and estimated the total income at 10 per cent of the gross, receipts. Therefore, he disallowed the payment made by the sub-contractors without deducting the TDS by invoking provisions under section 40(a)(ia ) of the Income-tax Act.

4. On appeal, the CIT(A) confirmed the order of the Assessing Officer. Aggrieved by this, the assessee is in appeal before us.

5. The learned Authorised Representative submitted that the assessee Carried out the contract work in three ways. Firstly, executed contracts taken by the firm itself. Secondly, contract executed by the assessee taken from other contractors and acted as sub-contractor. Thirdly, contract taken by the assessee got executed by other sub-contractor. Hence, he submitted that the lower authorities are not justified in estimating uniform gross profit at 9 per cent on the entire gross receipts. He submitted that the assessee is getting 9 per cent on their own contracts executed by the firm itself and the assessee is getting only 8 per cent on the contracts got executed from other sub-contractors, since the assessee has to forgo certain profit of the contracts to the subcontractors. Further in relation to the contracts taken from subcontractors, the assessee is getting only 4 per cent profit. He submitted that in the earlier year 2004-05, the assessment was completed by applying the above rates. He relied on the judgment, of Supreme Court in the case Brij Bhushan Lal Parduman Kumar v. CIT [1978] 115 ITR 524 (SC) where it was held :

"Reversing the decision of the High Court, that since in substance and in reality the materials supplied by the Government always remained the property of the Government and the assessee merely had custody and fixed or incorporated them into the works, there was not even a theoretical possibility of any element of profit being involved in the turnover represented by the cost of such materials. Though, ordinarily, when a works contract, was put through or completed by a contractor, profit from the contract was determined on the value of the contract as a whole and not by considering the several items that would go to form such value of the contract, where, as in this case, materials were supplied at fixed rates by the Government to the contractor solely for being used, fixed or incorporated in the works on the terms that they would remain the property of the Government and any surplus should be returned to the Government, the real total value of the entire contract would be the value minus the cost of such materials so supplied. Since no element of profit was involved in the turnover represented by the cost of the materials supplied by the Government to the assessee, the income or profits derived by the assessee from such contracts had to be determined on the basis of the value of the contracts represented by the cash payments received by the assessee from the Government exclusive of the cost of the materials received for being used, fixed or incorporated in the works."

6. On the other hand, the learned Departmental Representative submitted that the books of account of the assessee are not reliable. The assessee has not produced the proper vouchers and bills in support of the claim of the assessee, hence the Assessing Officer having no option other than making an estimation of income as such, he estimated the income of the assessee. The Assessing Officer after rejecting the books of account made a reasonable estimate of the income at a reasonable percentage of gross receipts at 10 per cent. However the CIT(A) reduced the same to the tune of 9 per cent and he supported the order of the CIT(A).

7. We have heard both the parties and perused the material on record. In the present case, the Assessing Officer rejected the books of account on the reason that, the assessee has not maintained proper books of account and also failed to produced vouchers for verification and the expenditure claimed by the assessee arc not substantiated. The assessee in earlier years also has not maintained the proper books of account. The assessee’s past track records show that the assessed has neglected the presenting of the books of account in accordance with law. When the assessee claimed any expenditure, it is mandatory on the part of the assessee to produce the books of account supported by proper bills and vouchers. Since the assessee has not produced the proper books of account, true profits or loss cannot be deduced from the books of account of the assessee. The Assessing Officer having no other option rejected the books of account and estimated the income at 10 per cent of gross receipts. But the position is that, the assessee is carrying on three kinds of contracts, as in earlier years, i.e., (i ) own contracts, (ii) contracts taken from the sub-contractors, (iii) contracts given to other parties on sub-contracts. The assessee had a higher rate of profit on the contracts executed by the assessee itself. In these contracts, the assessee agreed that his income is at 9 per cent of the gross receipts. Thus, accordingly the Assessing Officer is directed to estimate the income on the contracts executed by the assessed own at 9 per cent. In case of contracts taken by assessee on sub-contract, the income to be estimated at 8 per cent of the gross receipts. In case of contracts given by the assessee to the 3rd party on sub-contract, income to be estimated at 4 per cent. This is, because, when the assessee gives contract to the other parties on sub-contract, the assessee cannot keep the same percentage of profit at 9 per cent, it has to forgo certain portion of profit i.e., around 5 per cent to the sub-contractors. Similar position in the case of contracts taken by assessee on sub-contract from other parties. Further, the assessee is entitled for depreciation and remuneration, and interests to partners on the profit estimated by Assessing Officer at applicable rates, because the income estimated as above of the assessee is before the depreciation and interest and remuneration of the partners. Accordingly, we direct the Assessing Officer to compute the income of the assessee afresh. Accordingly, this ground of the assessee appeal is partly allowed.

8. Regarding ground No. 2 of the assessee, the learned Authorised Representative submitted that when the income is estimated by rejecting the books of account of the assessee, that books of account cannot be relied further for the purpose of completing the assessment of the assessee. He submitted that once the Assessing Officer has observed that books of account are not reliable, how the same books can be relied for other purpose for invoking other provisions of the Act.

9. Further he submitted that for the assessment year under consideration, the Assessing Officer resorted to rejection of books of account and estimation of income. In such circumstances, no separate additions can be made based on the books of account. If it seen from the assessment order that the Assessing Officer estimated income on the gross receipts at 10 per cent including the amount paid to the sub-contractor after rejecting the books of account. The Authorised Representative submitted that the Hon’ble jurisdiction of High Court of Andhra Pradesh had an occasion to consider a similar issue in the case of Indwell Constructions v. Commissioner Of Income-Tax. [1998] 232 ITR 776 (AP), wherein it is held that no separate addition under section 40 of the Act can be made by the Assessing Officer, when he rejected the books of account. A similar view is taken by the Allahabad High Court in the case of CIT v. Banwarilal Banshidhar [1998] 229 ITR 229 , wherein it is held that no separate addition under section 40A(3) of the Act can be made when the gross profit is estimated by rejecting the books of account.

(b)The Authorised Representative submitted that the provisions of section 194C have no application to the payments made by a sub-contractor to another sub-contractor. The assessee’s counsel submitted that the Assessing Officer is not correct in holding that a contractor can be a sub-contractor.

He submitted that the expression ‘contractor’ is explained in Explanation 1 to sub-section (2) of the Act. If is mentioned that contractor includes a person who undertakes works from Government of a foreign State or a foreign enterprise or any body established outside India. This Explanation does not provide that the meaning assigned by the Assessing Officer. It is submitted that sub-section (1) clearly mentions that deduction has to be made at the rate of the 2 per cent by the person who enters into an agreement for carrying out any work. He submitted that in the instant case, the Government of Andhra Pradesh entered into an agreement with Harvins Constructions (P.) Ltd., and therefore, the said company is a contractor. Thereafter, the said company entered into an agreement with the assessee herein. This contract is covered by the provisions of sub-section (2) of the section 194C of the Act. Therefore, the said company, in compliance with the said provisions deducted tax at source at 1 per cent on the payments made by it to the assessee herein. He submitted that the next question is whether the provisions of section 194C cover the payments made by the assessee herein (being a sub contractor) to another sub-contractor. There is no such provision in section 194C providing for deduction of tax at source. Therefore, the assessee is not under obligation to deduct tax at source.

Further he submitted that insofar as deduction of tax at source is concerned, the assessee merely acts as an agent in collecting the tax from the payee and making payment to the Government. When the provisions of the Act do not delegate such power of deduction from the payments to be made, the payee would never agree for deduction of tax at source. Therefore, when there is no clear obligation attached to the assessee, it was not correct for the Assessing Officer. to mention about the intention of the Parliament.

(c)Further submitted that the provisions of section 40(a)( ia) are applicable only when the amounts remained payable. According to the said section ‘any interest..........or amounts payable to a contractor or a sub-contractor’. He submitted that it is clear from the provisions of the said section that the disallowance can be made only when the TDS was riot made in accordance with the provisions of the Income-tax Act in respect of the amounts payable. The Assessing Officer rejected the claim on the ground that according to section 194C stipulates that the person making payment to a contractor or at the time of credit to the account has to deduct tax at source. According to the Assessing Officer, once the TDS is required to be made, section 40(a)( ia) comes into picture. This observation of the Assessing Officer is not correct. The provisions of section 194C mention two different situations for deducting tax at source—(a) at the time of credit of such sum to the account of the contractor and (b) at the time of making payment, to the contractor. Explanation 2 to section 194C further elaborates what is the meaning of credit to the account. Section 194C itself bifurcates the amount paid and the amount payable which is credited to the account. Therefore, for deduction of tax at source, there is a specific mention in the section itself that tax is to be deducted at source even at the time of crediting the amount to the account. But section 40a( ia) mentions only the word ‘payable’. The said section does not include the payments made to the payee. There is a specific purpose for such a provision. The amounts payable arise out of adjustment entries and, therefore, there is a need to have a control over the amount payable. However, no such control is required in respect of payments already made. However, no such control is required in respect of the payments already made. Therefore, the legislature clearly meant to cover such cases where the adjustment entries were made and the amounts shown as payable and not where the payments were already made. Therefore, the learned Authorised Representative submitted that the provisions of section 40a( ia) apply strictly only to the amounts payable and not the amounts paid.

He submitted that there is no scope for the Assessing Officer to interpret the provisions of section 194C when they are very plain and unambiguous. The Assessing Officer cannot read anything into a statutory provision, the Hon’ble Supreme Court had an occasion to consider the question of interpretation of the provisions of the Act in the case of Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC) wherein it was held that the Court cannot interpret the provisions when they are plain.

The Supreme Court in the case of Asstt. CIT v. Velliappa Textiles Ltd. [2003] 263 ITR 550 ¹ held that the words in the statute are to be strictly interpreted and plugging loopholes is only for legislature and not for the Court.

10. On the other hand, the Departmental Representative submitted that, the rejection of books of account and estimate of the income is different from invoking provisions of section 40(a)( ia), and these two are entirely, mutually exclusive and he submitted that there is no bar in invoking the provisions under section 40(a)( ia) after estimating the income of the assessee. He submitted that there is a failure by the assessee to deduct TDS under section 194C of the Income-tax Act, as such, invoking the provisions of section 40(a)( ia) is justified.

11. We have heard both, the parties and perused the material on record.

In this case, main contention of the assessee’s counsel is that, once the books of account are rejected, income is estimated, the Assessing Officer precluded from invoking any other provisions of the Income-tax Act to make further addition. The books of account of the assessee was not relied, it was rejected by the Assessing Officer and the same was confirmed by the CIT(A) as well as by us. Now, based on the reliance on the same books, for the purpose of invoking the provisions of section 40(a)(ia ) is improper. The estimation of income take care of the irregularities committed by the assessee. Further addition by invoking section 40(a)(ia ) amounts to punishing the assessee for a same offence on double occasions, which is not permitted by law. There is a connection between expenditure claimed by the assessee and making non-deduction of TDS. Since the books of account not verifiable, for which the assessee’s books were rejected and income was determined. It was held in the case of Commissioner Of Income Tax, U.P v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC) where a particular business income of the assessee has been estimated and determined and in such a case, the Assessing Officer precluded from adding any unexplained cash credit as undisclosed income of the business.

12. Further, the argument of the learned counsel for the assessee is that, strict interpretation of statute to be made. He relied on the judgment of Velliappa Textiles Ltd.’s case (supra) wherein it was held :

"(iii)A Court cannot breach a casus omissus and no canon of construction permits the Court to supply a lacuna in a statute nor can Courts of law fill up the lacuna in an ill drafted and hasty legislation. Whether the omission is intentional or inadvertent is no concern of the Court. The duty of the Court is to decide what the law is an apply it, not to make it.

(iv)Since the function of the Court of law is jus dicere and no jus dare, the Court of law cannot read the recommendations of the Law Commission as justifying an interpretation of the section in tune with them, even when the words of the section are plain and unambiguous."

We find force in this argument of the assessee’s counsel. Section 40(a)(ia ) reads as under :

"40. Amounts not deductible.—Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head ‘Profits and gains of business or profession’—

(a)in the case of any assessee

(i).............

(ia)any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work) on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid.

(A) In the case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of section 139 or

(B) In any other case, on or before the last..........."

The bare provision of section 40(a)( ia) provides for non-deduction of amount which remains payable to a resident in respect of fees for technical services etc. It is not applicable where expenditure is paid. It is applicable only in cases where the payments are due and outstanding. The word payable is not defined though the word paid is defined under section 43(2) to mean actually paid or incurred. Hence, by implication the word payable does not mean actually paid or incurred. Hence, by implication the word ‘payable’ does not include paid. The difference in the word paid and payable is also there in the rules for depositing the TDS and also for levy of interest under section 234B where interest is worked out on the basis of tax actually deducted at source and not on the basis of tax deductible. Section 40(a)(ia ) otherwise being a legal fiction needs to be construed strictly in view of the decision of Supreme Court in CIT v. Mother India Refrigeration Industries (P.) Ltd. [1985] 155 ITR 711 ¹ (SC). The CBDT Circular No. 5 of 2005, dated 15-7-2005 [(2005)197 CTR (St.) 1] has also clarified that the provision of the section 40(a)( ia) is to augment compliance of TDS provision in the case of residents and curb bogus payments to them. In the present case the payment is not in dispute and on the issue whether tax is to be deducted at source on such payment is not free from doubt in any case, if the assessee has paid the impugned amount and (the amount is) not payable at the end of the year of the date of balance sheet then the provisions of section 40(a)( ia) are not applicable. It is only applicable in respect of ‘payable amount’ shown in the balance sheet as outstanding expenses on which TDS has not been made. Further, tax is deductible under sections 193, 194A, 194C, 194H and 194J either at the time of payment or at the time of giving credit to the recipient. However, section 40(a)( ia) is applicable only in respect of TDS capital defaults amount is ‘payable’. If amount is actually paid and tax is not deducted under the above section, section 40(a)( ia) is not applicable. There is difference between the word ‘paid’ or ‘payable’, the legislature used the word very carefully in section 40(a)( ia) and in all its wisdom at the time of incorporating the section by way of Finance (No. 2) Bill, 2004. It was inserted in section 40(a)( ia) that the amount payable to contractor or sub-contractor liable for disallowance, its TDS not deducted. Section 40(a)(ia ) has to be subjected to strict interpretation. Going by the rule of strict interpretation the default with reference to actual ‘payment’ of expenditure would not entail disallowance. This is because, the language used in the section 40(a)( ia) is very simple, clear and unambiguous. Literal rule of interpretation has to be applied. The Speech of Finance Minister or even other provisions of the Act can be pressed into service if there is some ambiguity about the meaning of the section. But the same was not the case in the instant case. Even the principles of liberal interpretation cannot be applied where the language is clear, simple, and the meaning of the word is apparent. As such, the provisions of section 40(a)( ia) are not applicable in the present fats of the case. The disallowance if any required to be made shall be restricted to the extent of payable shown in the balance sheet at the end of the year. However, this is not the case in the present case because one the estimation of income is made, further disallowance are unwarranted.

13. Further in the case of N. Ramachandra Reddy ITA No. 1372 of 2007 the Tribunal order dated 6-3-2009 (sic) held as follows on the similar circumstances.

"We have considered the rival submissions and perused the material available on record. Undisputedly, there are defects and discrepancies in the books of account noted by the Assessing Officer as well as the CIT(A). The Assessing Officer on that ground has not rejected the books of account, but proceeding on the basis of returned income of Rs. 24,92,428, made substantial additions including statutory disallowance of Rs. 3,92,08,601 under section 40(a)( ia) of the Act. He thus, completed the assessment on a total income of Rs. 5,04,75,532 as against returned income of Rs. 24,92.428, on a total undisputed turnover of Rs. 8,14,78,527. When the of found the books of account and other records maintained by the assessee to be defective, in all fairness, he should have rejected the same and proceeded to estimate the income as a reasonable percentage of turnover instead of preferring to start with the returned income and makes Substantial item-wise, statutory/otherwise additions/disallowances. Faced with substantially,, exorbitant additions to the returned income of Rs. 24,92,428, which resulted in the determination of assessee’s income by the Assessing Officer at an abnormal rate, of 64 per cent of the gross receipts, in the course of appellate proceedings, the assessee filed an affidavit, proposing before the CIT(A) to reject the books of account for the defects and discrepancies noticed and estimate the net income from contracts @ 13 per cent of the gross receipts. Even though the Assessing Officer has not rejected the books and estimated the income, since the powers of CIT(A) are coterminous with those of the Assessing Officer, the CIT(A) in our considered view was competent and justified in rejecting the books maintained by the assessee, for the deficiencies therein, noticed even by the Assessing Officer, and proceeding to determine the income at the rate proposed by the assessee. After carefully examining the affidavit of the assessee, which has also been extracted by the CIT(A) on pp. 13 to 14 of impugned order, the CIT(A) accepting the proposal of the assessee, estimated the income of the assessee at 13 per cent of the gross receipts computed at Rs. 8,14,78,527 and determined the total income including bank interest at Rs. 1,07,47,807.

On a careful consideration of the matter in the light of the totality of the facts and circumstances of the case, we find no infirmity in the impugned order of the CIT(A). In the first place, we may note that in the assessee’s line of business, viz., execution of civil contracts, the rate of 13 per cent proposed by the assessee and accepted by the CIT(A) for estimation of assessor’s net income from contracts is not only reasonable, but also on a higher side compared to the rate approved by this Tribunal in similar cases. If the assessee himself has come forward with such a higher rate for estimation of profit, it is because he is faced with several other statutory/otherwise additions made by the Assessing Officer, which if sustained by the CIT(A), would result in determination of its income at a very substantially higher rate of 64 per cent or even more than 100 per cent if separate disallowance under section 40A(3) is also considered. The fact that the assessee has made this offer for estimation of income at a higher rate of 13 per cent, is also evident from the rider he put in the concluding sentence of the penultimate para of his affidavit, which reads as follows :—

........This statement and affirmation are made subject to the point that no other adverse inference are drawn and no other proceedings under the Income-tax Act for the said assessment consequent to the statement and affirmation are invoked.

On a close reading of the above provisions, it is observed that though the above provisions stipulate a statutory disallowance, leaving no scope for any discretion or lenient view considering the peculiar circumstances under which payments caught by the scheme of section 40(a)(ia ) have been made, the non obstante clause. ‘Notwithstanding anything to the contrary in sections 30 to 38’, with which the provisions of section 40 begin the items of expenses covered by the provisions of sections 30 to 38 alone within the ambit of section 40, and any item of expenditure allowed the provisions of the Act, preceding 30, are not covered by the said statutory disallowances envisaged under section 40. It may also be observed that if an assessee claims any expenditure as necessary to earn the business income and as such the same is allowable under section 28; and not under section 37, because section 28 taxes profits of the business which can be worked out only after allowing expenditure, such expenditure goes out of the clutches of the disallowances in terms of the provisions of section 40. In this view of the matter, an assessee may claim all his expenditure, except for those which are clearly covered by some other sections e.g., section 30 covering rent, rates, taxes, insurance, etc., as allowable under section 28. It may further be observed that all the expenditure, just as labour charges in the instant case, which represents direct costs and therefore, adjustable against revenue for the purpose of determining the profit under section 28(i) of the Act, do not come within the provisions under section 40(a)( ia). As such, it may be observed that it is only the deductions referred to in sections 30 to 38 which would definitely fall for consideration of disallowance under section 40 and they cannot be claimed as deduction under section 28. This reasoning applies with equal force to the analogous provisions of sections 43, section 44AD, section 44AFC, section 44AF, section 44B, section 41BB, section 44ABA, section 44BBB, section 44C, section 44D and so on which all relate to computation of business income and dearly start with a non obstanle clause, which is similar to the one in section 40, but reading ‘Notwithstanding anything to the contrary in sections 28 to 43C’. In this view of the mailer, it may be observed that the provisions of section 40(a)(ia ) arc applicable only to items covered by section 30 to section 38 and not to section 28 and all the direct cost/expenditure covered by section 28 of the Act, are beyond the scope of disallowance under section 40(a)( ia) of the Act.

As for the permissibility of the independent disallowance in terms of section 10(a(ia ), after determining the income by resorting to estimation as a percentage of turnover/gross receipts, we find that in the case of Indwell Constructions v. Commissioner Of Income-Tax. [1998] 232 ITR 776 (AP) it has been clearly held that where the books of account have been rejected, the revenue cannot rely on the same books of account for addition of an exact amount of expenditure in the P&L a/c. It was also held in that case that when an estimate is made, it is in substitution of the income that is to be computed under section 29 and in other words, all the deductions which are referred to under section 29 are deemed to have been taken into account, while making such an estimate. This will also mean, the High Court observed, the embargo placed in section 40 is also taken into account. It has been held in the concluding paras 4 and 5 of that decision as follows :

4. The pattern of assessment under the Income-tax Act is given by section 29 which states that the income from profits and gains of business shall be computed in accordance with the provisions contained in sections 30 to 43D. Section 40 provides for certain disallowances in certain cases notwithstanding that those amounts are allowed generally under other sections. The computation under section 29 is to be made under section 145 on the basis of the books regularly maintained by the assessee. If those Books are not correct or complete, the ITO may reject those books and estimate the income to the best of his judgment. When such an estimate is made it is In substitution of the income that is to be computed under section 29. In other words, all the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. This will also mean that the embargo placed in section 450 is also taken into account.

5. No doubt there is big difference between profit earned with own capital and profit earned with borrowed capital and such a difference could have been taken into account by the ITO while making an estimate. If the CIT had set aside the estimate on the ground that the vital fact that the business was carried on with own capital and not with borrowed capital has been ignored by the ITO, there may not have been any difficulty in upholding that order. But, when he proposes to add back an exact item in the P&L a/c, he was relying on the rejected books which he could not do as held by the Bench of this Court in Maddi Sudarsanam Oil Mills Co. (supra). There is also a further difficulty if section 40, as argued by learned counsel, is to be taken into account even after making an estimate. When there arc certain other deductions which are to be disallowed such as wealth-tax payment in section 4, can it be said that after making an estimate, the wealth-tax charged in the P&L a/c should again be added back to the profit. This example, illustrates how the contention of the revenue, that section 40(b) makes a difference in the situation, is untenable.....’

The above decision of the Andhra Pradesh High Court has been followed and a similar view has been taken by the Special Bench (Kolkata) of this Tribunal in the case of ITO v. Kenaram Saha & Subhash Saha [2008] 301 ITR 171 (Kol.)(SB)(AT), wherein disallowance made in terms of section 40A(3) has been deleted. Respectfully following the decision of the jurisdictional High Court in the case of Indwell Constructions ( supra), besides the Special Bench decision of this Tribunal noted above, we are of the considered opinion that the income of the assessee having been determined by resorting to estimation, there is no scope for any further disallowance either in terms of section 40(a)( ia)/40A(3) or otherwise.

In the light of the above discussion, we uphold the impugned order of the CIT(A) and reject the grounds of the revenue in this appeal."

13. In this view of the matter, we are unable to uphold the action of CIT(A) in confirming the disallowance under section 40(a)( ia) of the Income-tax Act. The same is deleted.

14. In the result, the appeal of the assessee is partly allowed.