JUDGMENT : K.S. Jhaveri, J. 1. By way of this appeal, the assessee has challenged the judgment and order of the Income Tax Appellate Tribunal (for short, "the Tribunal") dated 9.2.2007 passed in ITA No. 1550/Ahd/2002, whereby the Tribunal has confirmed the order of the Assessing Officer by reversing the order of the Commissioner of Income Tax (Appeals) [for short, "CIT(A)"]. 2. At the time of admission of this Appeal, this Court framed the following question of law:-- "Whether on the facts and in the circumstances of the case, the Tribunal was right in disallowing by application of section 40A (2)(b) Rs. 5,00,000/- from the payment of Rs. 10,00,000/- made by the assessee to M/s. Araham Developers Pvt. Ltd. in respect of the consultancy services provided by them to the assessee?" 3. Mr. Manish Shah, learned counsel for the appellant submitted that the assessee is a consultancy firm and since it was new in the business at the relevant point of time, it took the services of another consultancy firm and paid Rs. 10 Lacs for the work to the other firm. He further submitted that assistance of another firm was taken for a particular project and for that an amount of Rs. 10 Lacs was paid as per the understanding. He has taken us through the order of the Assessing Officer, CIT (Appeals) and the Tribunal. The CIT (A) has observed as under in para 3.2 and 3.3:-- "3.2 Before me the A/R contended that the sister concern M/s. Araham Developer Pvt. Ltd., has sufficient infrastructure to provide technical personnel to the appellant so as to enable the appellant to carry out the project work undertaken by the appellant for various associations of Bakeri group and for that services the appellant agreed to make payment of Rs. 10 lakhs to M/s. Araham Developer Pvt. Ltd. which was wholly and exclusively for the business purpose only and the same could not have been disallowed simply by invoking the provisions of Section 40A(2)(b) of the IT Act, 1961 and without bringing any contrary evidence to the facts of the case. It was contended that the provisions of section 40A(2)(b) couldn't be invoked mechanically and simply for the reasons that the payment was made to a group concern. It was contended that the provisions of section 40A(2)(b) couldn't be invoked mechanically and simply for the reasons that the payment was made to a group concern. Before invoking the provisions of section 40A(2)(b), the assessing officer has to sit in the chair of businessman and then to decide after considering commercial expediency and the necessity of incurring the expenditure so as to carry out the business. 3.3 I have considered the submissions of the A/R carefully and have gone through the observations of the assessing officer, I find that the appellant's main source of income is from consultancy services of Rs. 25 lakhs from various associations of Bakeri Group. This was the first year the appellant undertook to provide consultancy in projects. The appellant has received Rs. 25 lakhs as consultancy charges and as the appellant did not have necessary technical expertise, man power and infrastructure to provide the services like planning layout, designing of water storage facilities, electrical installations, construction work, coordination between various agencies, booking and terms of payments, agreements with the developers and members and to obtain permission from various authorities. For providing and assisting such services to twelve various associations of Bakeri Group five employees were deputed by M/s. Araham Developer Pvt. Ltd. and it was agreed to pay their salaries. However, the salaries were not paid to the employees directly but a lumpsum payment of Rs. 10 lakhs was paid to their employer M/s. Araham Developer Pvt. Ltd. towards salary. M/s. Araham Developer Pvt. Ltd. had the expert technical personnel, who were basically the engineers and technical persons, who had helped the appellant in designing and estimation work etc. It was contended that out of the total receipts of consultancy charges, consultancy fees were paid to M/s. Araham Developer Pvt. Ltd., because these persons were instrumental in helping the appellant for rendering the consultancy services to Baker Group of Association. The appellant had confirmed in the statement recorded before the AO and there is no doubt that the technical people of Araham Developer Pvt. Ltd. have rendered the services for helping the appellant for rendering the consultancy services to Bakeri Group. Therefore, without any proper basis, the Assessing Officer has valued the services rendered by Araham Developer Pvt. Ltd. to the appellant and has determined Rs. 5 lakhs payment as excessive u/s. 40A (2)(b) of the IT Act. Therefore, without any proper basis, the Assessing Officer has valued the services rendered by Araham Developer Pvt. Ltd. to the appellant and has determined Rs. 5 lakhs payment as excessive u/s. 40A (2)(b) of the IT Act. It is clear from the facts of the case that without the help of the employees of M/s. Araham Developer Pvt. Ltd. it would not have been possible for the appellant to have rendered the services to various associations of Bakeri Group. The claim of 40% of the total receipts as an expenditure against the total receipt of consultancy charges can be considered as reasonable expenditure and the entire payment of Rs. 10 lakhs to Araham Developer Pvt. Ltd. can be considered as reasonable, looking to the services rendered by them. Therefore, I am of the view that the Assessing Officer was not justified to disallow Rs. 5 lakhs as excessive u/s. 40A(2)(b) of the IT Act and I delete the addition made by the AO." 4. The Tribunal has observed as under in para 11 of the impugned order:-- "11. After carefully considering the rival submissions and going through the order of CIT(A), we noted that the assessee has taken help of five employees of Araham Developer Pvt. Ltd. It is not disputed that Araham Developers Pvt. Ltd. is a person to which the provision of sec. 40A(2)(b) are applicable. It is also an admitted fact that the assessee has received consultancy services from the Bakeri Group amounting to Rs. 25 lacs and has paid a sum of Rs. 10 lakhs to Araham Developer Pvt. Ltd. The assessee has submitted before the authorities below that the five employees of Araham Developer Pvt. Ltd. helped the assessee in rendering the consultancy services for associate concerns of Bakeri Group. This people had assisted the assessee in designing and estimation work of Bakeri Group. It was also argued that the assessee has agreed that Araham Developer Pvt. Ltd. would be paid for the salaries of these persons. We have also gone through page 77 and 80 of the paper book. We find that the salary paid to the employees by Araham Developer Pvt. Ltd. was Rs. 6,95,250/-. No break up was given before us how much salary was paid by Araham Developer Pvt. Ltd. to these five persons who have assisted the assessee. We have also gone through page 77 and 80 of the paper book. We find that the salary paid to the employees by Araham Developer Pvt. Ltd. was Rs. 6,95,250/-. No break up was given before us how much salary was paid by Araham Developer Pvt. Ltd. to these five persons who have assisted the assessee. The consultancy charges received by Araham Developer Pvt. Ltd. during the year are Rs. 20 lacs. Even if it is assumed that there were five persons, the salary allocated on the basis of consultancy fees received by Araham Developer Pvt. Ltd. relating to the assess would be only 50% of Rs. 6,95,250/-. We have also noted from the balance sheet that Araham Developer Pvt. Ltd. has received consultancy services for the first time and therefore we do not agree with the plea of learned AR that Araham Developer Pvt. Ltd. was having technical expertise in the field for which the assessee was rendering the consultancy services. We also do not agree with the plea of the ld. AR that the other expenses incurred by Araham Developer Pvt. Ltd. under the head "administrative expenses" are also recoverable from the assessee because the assessee himself has taken argument that the assessee has agreed that Araham Developer Pvt. Ltd. would be paid for the salaries of the five persons who have worked for the assessee. The AO in this case has allowed a sum of Rs. 5 lakhs out of the sum of Rs. 10 lakhs. Section 40 A (2) (b) empowers the AO whether the expenditure has been incurred on the persons referred to in sec. 40A(2)(b), only to allow those expenses as is considered by him to be reasonable having regard to the fair market value of the services rendered by such persons. It is an admitted fact that the assessee has availed of the services of five persons of Araham Developer Pvt. Ltd. and the salaries paid to these persons on the basis of consultancy services received by Araham Developer Pvt. Ltd., do not exceed 50% of Rs. 6,95,250/-, therefore, in our opinion, the AO was quite justified in estimating the fair market value of such services to be Rs. 5 lacs. We therefore confirm the order of the AO in disallowing the sum of Rs. 5 lakhs. 6,95,250/-, therefore, in our opinion, the AO was quite justified in estimating the fair market value of such services to be Rs. 5 lacs. We therefore confirm the order of the AO in disallowing the sum of Rs. 5 lakhs. Therefore, the order of CIT(A) is set aside on this issue while the order of AO is restored. Thus this ground stands allowed." 5. He submitted that only because the payment was made to a group concern, the same could not have been disallowed simply by invoking the provisions of Section 40A(2)(b) of the IT Act, 1961 and without bringing any contrary evidence to the facts of the case. He submitted that payment of Rs. 10 lakhs to M/s. Araham Developer Pvt. Ltd. was wholly and exclusively for the business purpose only. He has relied upon the decision of this Court rendered in Tax Appeal No. 1058 of 2080, wherein the payment made by way of commission under Section 40A(2)(b) was held to be valid and the appeal preferred by the assessee was allowed. 6. Mr. Nitin Mehta, learned counsel for the respondent has contended that the Tribunal has not committed any error while passing the impugned order. He contended that the reasoning adopted by the Tribunal as well as Assessing Officer are just and proper. He submitted that the appellant paid Rs. 6,90,250/- to the other firm and no break up was given, therefore, it was rightly reduced by 50% of the total amount. He submitted that, therefore, the Tribunal is justified in confirming the order of the Assessing Officer. 7. We have heard learned counsel for both sides. We have also considered the relevant provisions and the material on record. From the record, it is clear that in the statement recorded before the AO it is confirmed that there is no doubt that the technical people of Araham Developer Pvt. Ltd. have rendered the services for helping the appellant in rendering the consultancy services to Bakeri Group. Therefore, in view of the services rendered by Araham Developer Pvt. Ltd. to the appellant, it cannot be determined that payment of Rs. 5 lakhs was excessive u/s. 40A (2)(b) of the IT Act. Therefore, in view of the services rendered by Araham Developer Pvt. Ltd. to the appellant, it cannot be determined that payment of Rs. 5 lakhs was excessive u/s. 40A (2)(b) of the IT Act. It is clear from the facts of the case that without the help of the employees of M/s. Araham Developer Pvt. Ltd. it would not have been possible for the appellant to render the services to various associations of Bakeri Group. The entire payment of Rs. 10 lakhs to Araham Developer Pvt. Ltd. can be considered as reasonable, looking to the services rendered by them. Therefore, we find that the Tribunal has committed an error while passing the impugned order. We may also refer to the observations made by this Court at the time of deciding Tax Appeal No. 1058 of 2006:-- "4.1. Learned counsel for the appellant further submitted that in view of the decision of this Court in the case of Commissioner of Income Tax III v. Ashok J. Patel, reported in [2014] 43 Taxmann.com 227(Gujarat), more particularly paragraph Nos. 8, which reads as under:-- 8. That the assessee who is in the business of transportation claimed disallowance with respect to motor bus rent paid to various persons for transportation contracts. The AO was of the view that the assessee has failed to produce any comparative market price and that the nature of work carried out by the aforesaid persons is general in nature. The AO disallowed Rs. 15,49,163/- for AY 2005-06 and Rs. 14,97,668/- for AY 2006-07 out of the total payment of bus rent under section 40A(2)(b). With respect to AY 2006-07 AO also made disallowance of Rs. 93,25,426 made under section 40(a)(ia) of the Act by holding that the amendment carried out by Finance Act, 2010 can be held to be retrospective from AY 2005-06. Now, so far as the disallowance made under section 40A(2)(b) of the Act on the ground of motor bus rent is concerned, it appears that the AO disallowed 5% of the total payments towards motor bus rent by observing that the assessee has failed to reconcile the difference in payments as per tax audit report and as submitted during the assessment proceedings and had also not produced any comparative prices. The learned CIT(A) deleted the said disallowances by observing that the AO has not made out any case for excessive or unreasonable payments to the related purpose towards the motor bus rent. The learned CIT(A) also observed that no comparative prices for similar transport services was cited by the AO and therefore, was not justified in making ad-hoc disallowance of 5% under section 40A(2)(b) of the Act and therefore, the CIT(A) as such rightly deleted the disallowances made under section 40A(2)(b) of the Act. Considering the provisions of Section 40A(2)(b) of the Act and the Evidence Act, if the AO was of the opinion that the payment for which disallowance is claimed, is excessive or unreasonable. In that case, it was for the AO to assess fair market price and give comparative instances for payment for similar transport service. In absence of such comparative cases brought on record, as rightly observed by the ITAT it was not open for the AO to make disallowance under section 40A(2)(b) of the Act. While deleting disallowance made by the AO under section 40A(2)(b) of the Act, the learned ITAT has observed and held in para 7 as under:-- "7. It is plain on principle that, so far as disallowance under Section 40A(2) for payment being excessive or unreasonable can only be made when the payment is made to the specified persons under clause 40A(2)(b) and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market price of the goods, services or facilities for which the payment is made. The opinion of the Assessing Officer for the expenditure being excessive or unreasonable is to be formed vis-à-vis fair market price of such goods services or facilities. It is thus sine qua non for making a disallowance under section 40(A)(2) that the Assessing Officer has to ascertain the fair market price of such goods, services or facilities, and then make a disallowance for the amount which is in excess of fair market value of such goods, services or facilities. Unless there is a categorical finding about the fair market value and the assessee has an opportunity to be heard on Assessing Officers finding about such fair market value, there cannot be an occasion to make a disallowance under section 40A(2). Unless there is a categorical finding about the fair market value and the assessee has an opportunity to be heard on Assessing Officers finding about such fair market value, there cannot be an occasion to make a disallowance under section 40A(2). The very scheme of Section 40A(2)does not envisage an ad hoc disallowance as has been made in the present case. For this short reason alone, the impugned deletion of disallowance must stand confirmed. There is, however, one more reason for doing so. As evident from a plain reading of the assessment order, the Assessing Officer, had called upon the assessee to demonstrate that the payment made by the assessee to the specified persons is not unreasonable or excessive, and it is thus failure of the assessee which has resulted in disallowance under section 40A(2). However, proving a negative, as the assessee has been called upon to do in this case, is an impossible onus to perform. In any event, this onus is on the Assessing Officer and the AO has failed to discharge the said onus. For this reason also, the disallowance is unsustainable in law. As regards the discrepancy in the figures of the tax audit report and the assessee, neither such a situation can be a reason enough to make a disallowance under section 40A(2) nor the onus of explaining such a variation is on the assessee. A tax auditor is an independent professional and any errors in his report cannot be put to assessees disadvantage. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. We are in complete agreement with the view taken by the ITAT and the observations made by the learned ITAT while deleting disallowances made by the AO under section 40A(2)(b) of the Act on motor bus rent. No error has been committed by the learned ITAT which calls for interference of this Court. No question of law much less any substantial question of law arises. 4.2. Learned counsel for the appellant relied upon another decision of this Court in the case of Commissioner of Income Tax-IV v. Sarjan Realities Ltd. reported in [2014] 50 taxmann.com 52 (Gujarat), more particularly paragraph No. 5, which reads as under:-- 4. Heard Shri Varun Patel, learned advocate for the revenue. 4.2. Learned counsel for the appellant relied upon another decision of this Court in the case of Commissioner of Income Tax-IV v. Sarjan Realities Ltd. reported in [2014] 50 taxmann.com 52 (Gujarat), more particularly paragraph No. 5, which reads as under:-- 4. Heard Shri Varun Patel, learned advocate for the revenue. Now so far as question No. 2(a) with respect to disallowance of Rs. 1,22,13,280/- made by the AO u/s. 40A(2)(b) of the Act being excessive interest paid to associates is concerned, it is required to be noted that it is the contention on behalf of the revenue that as such the company paid the interest at different rates from different persons/companies and therefore, the same was rightly disallowed under Section 40A(2)(b) of the Act. However, it is required to be noted that except aforesaid there was no basis for the AO to come to the conclusion that amount of interest paid at the rate of 12% would relate to the concerned parties was otherwise excessive and/or unreasonable. It is not the case on behalf of the revenue that considering the market rate the aforesaid interest charged at the rate of 12% can be said to be excessive and/or unreasonable. Under the circumstances, solely because the assessee for whatever reasons/consideration charged the interest at different rates by that itself cannot be a ground to come to the conclusion that charging of interest at higher rate than charged from other party was excessive and/or unreasonable. Under the circumstances, both the learned CIT(A) as well as learned ITAT have rightly deleted the disallowance of Rs. 1,22,13,280/- made by the AO u/s. 40A(2)(b) of the Act. We are in complete agreement with the view taken by the learned Tribunal. Under the circumstances, question No. 2(a) is answered against the revenue. 5. As against this, Mr. Patel, learned advocate for the respondent has strongly urged that all the three authorities have concurrently held against the appellant. Therefore, he urged that the order of the Tribunal is just and proper and does not warrant any interference by this Court. 6. We have heard learned advocate for the parties and perused the material on record. Patel, learned advocate for the respondent has strongly urged that all the three authorities have concurrently held against the appellant. Therefore, he urged that the order of the Tribunal is just and proper and does not warrant any interference by this Court. 6. We have heard learned advocate for the parties and perused the material on record. If we go through paragraph No. 3.1 of the Assessing Officers order, wherein the Assessing Officer held relating to the question framed in this appeal i.e. commission of Govind Glass Industries limited, we see no germane reason in the finding of the Assessing Officer in concluding against the appellant. 7. Further, the CIT(A) while partly allowing the appeal of the assessee has again in paragraph No. 8 has held that the commission payment to GGL was justified but the CIT(A) has not given any reason why the total sales of 5% should not be granted. Similar mistake came to be committed by the Tribunal. The Tribunal again fall into error while partly allowing the appeal of the assessee. The Tribunal has also not given any germane reasons why 5% interest is not allowed. Further, it appears from the record that the appellant has produced the evidence before the Tribunal. Therefore, the decisions relied upon by the learned advocate for the appellant would enure for the benefit of the appellant. 8. Taking into consideration the aforesaid facts and circumstances of the case and also the principle laid down by this Court in the case of Ashok J. Patel (supra) & Sarjan Realities Ltd.(supra), it cannot be said that the Tribunal was right in granting 3% commission out of 5% to Govind Glass Industries Ltd." 8. In view of above, we are of the opinion that the decision of this Court will apply in the facts of the present case. Payment of Rs. 10 lakhs to M/s. Araham Developer Pvt. Ltd. was wholly and exclusively for the business purpose and the same could not have been disallowed simply by invoking the provisions of Section 40A(2)(b) of the IT Act, 1961 and without bringing any contrary evidence to the facts of the case. In our view, the provisions of section 40A(2)(b) couldn't be invoked mechanically and simply for the reasons that the payment was made to a group concern. In our view, the provisions of section 40A(2)(b) couldn't be invoked mechanically and simply for the reasons that the payment was made to a group concern. We find that the view taken by the CIT(A) is just and proper and the Tribunal has committed an error while passing the impugned order. Therefore, the appeal is allowed. The question posed for our consideration is answered in favour of the assessee and against the revenue.