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Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payments - Assessment year 1990-91 - Assessee-firm derived its income from building trucks, dumpers on hire/rental basis - While completing assessment, Assessing Officer found that books of account of assessee were not supported by bills and vouchers and salary paid to close relatives of partners was disallowable under section 40A(2)(b) - Whether in view of facts found by Tribunal that salary had been paid for work done by employees, salary payment of Rs. 1000 p.m. to such a person could not be said to be unreliable and, thus, could not be disallowed under section 40A(2) - Held, yes Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1990-91 - Whether where employees of assessee-firm filed affidavits confirming payment of salary, expenditure incurred on payment of salary could not be disallowed on comparing net profit in earlier years - Held, yes - Whether expenditure incurred on diesel and oil consumed in trucks and dumpers of assessee-firm could not be disallowed when same had been fully supported by vouchers and had been incorporated in books of account - Held, yes Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessment year 1990-91 - Whether depreciation on new bodies of dumpers could not be disallowed when party who did that job, on examination, had accepted that he had done that work - Held, yes J.K. Singhi and Anuroop Singhi for the Petitioner. Vijay Choudhary for the Respondent. ORDER 1. The appeal was admitted in terms of the following questions. "1. Whether the provisions of section 40A(2)(b) are applicable in the present matter where the salaries/payments were made to the close relatives of partners of the assessee firm ? 2. Whether the Assessing Officer is bound to admit the entries made in the case books even if their genuineness is doubted and further is it necessary for the Assessing Officer to first reject the cash books, purchase vouchers and expenses bills etc. Even if he disagrees with the same for the purpose of making addition or for rejecting the claim of…

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