1
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI J.S. REDDY, ACCOUNTANT MEMBER
I.T.A.No.467/DEL/2011
(A.Y. 2007-08)
AND
ITA No. 2222/DEL/2012
(A.Y. 2009-10)
SURINDER KUMAR, ACIT, REWARI CIRCLE,
PROP. MOSAIC HOUSE (INDIA) VS. AAYAKAR BHAWAN,
AND DILER STONE, KUND, MODEL TOWN,
DISTT. REWARI REWARI
C/O SH. ML GULATI, AVOCATE,
GANJ BAZAR,
REWARI-HARYANA
(PAN: AIHPK9865G)
(APPELLANT) (RESPONDENT)
Assessee by : Sh. Gautam Jain, Adv. & Sh.
P.K. Kamal, Adv.
Department by : Sh. BRR Kumar, Sr. DR
Date of Hearing : 11-06-2015
Date of Order : 16-06-2015
ORDER
PER H.S. SIDHU : JM
The Assessee has filed these Appeals against the separate
impugned Orders dated 19.11.2010 for AY 2007-08 and dated 28.3.2012
(AY 2009-10) passed by the Ld. Commissioner of Income Tax (Appeals),
Rohtak. Since some issues involved in both the appeals are common,
hence, we are disposing of the appeals by this consolidated order for
the sake of brevity.
2. The grounds raised in ITA No. 467/Del/2011 (A.Y. 2007-2008)
read as under:-
1. That the leamed CIT (Appeal) Rohtak has erred in
confirming the addition of Rs. 1267193/- by not considering
the sale agreement of Rs. 1150000/-while all the relevant
documents and other facts are on record.
2. That the learned CIT (Appeal) Rohtak has erred in
confirming the addition of Rs. 386041/- by ignoring that the
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
said amount was out of withdrawals entry of Rs. 4 Lacs from
the books of M/s Mosaic House (India) Kund.
3. That the addition of Rs. 107939/- the alleged difference
in sundry creditors accounts confirmed by the learned CIT(A)
Rohtak is against the facts, written submissions and
documents on record.
4. That the learned CIT (At Rohtak has grossly erred in
confirming the disallowance the expenditure claimed at Rs.
1872599/- incurred in exporting in goods out of India by
foreign shipping companies through Indian Agents while all
the relevant documents and certificates are on record.
5. That the confirming of 50% disallowance of expenses at
Rs. 154665/- out of Rs. 309330/- by the learned CIT (Appeal)
Rohtak ignoring and without discussing that the expenses are
under various heads and quite relevant to the business
activities and none of the same are of capital or personal in
nature.
6. That the appellant craves the leave to add, modify,
amend or delete any of the ground of appeal at the time of
hearing. Further all the grounds of appeal as above are
without prejudice to each other.
3. The grounds raised in ITA No. 2222/Del/2012 (A.Y. 2009-10) read
as under:-
1. That the Learned CIT (A) Rohtak has erred in confirming
the addition of Rs. 1321034/- alleged difference in the
account of Mls Venus Stone, Spain. He has further erred in
ignoring all the facts, figures and relevant documents.
2. That the confirming of addition of Rs. 6' lacs which was
made by the Learned AO u/s 40A(3) by the Learned CIT (A)
Rohtak is quite arbitrary, excessive, against facts and Law of
the case. The Learned CIT (A) Rohtak is also erred in not
considering the reply, bank statement and other documents on
record.
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
3. That the Learned CIT (A) Rohtak has erred in confirming
the additions of Rs. 1531108/- the payment made to M/s
Pooja Freight Forwarders, the intermediary agent on the
behalf of appellant regarding in land haulage charges/Freight
charges etc. to foreign agents and Govt. agencies where the
provisions of Section 194C i.e. TDS not applicable.
4. That the Learned CIT (A) Rohtak has also grossly erred
in enhancing the freight charges at Rs. 1803881/- which were
paid for exporting the goods outside India to shipping agent
exempted under the provisions of TDS. He has also ignored
the facts and certificates of the shipping agents are on record
and were duly considered by AO while allowing the same.
5. That the disallowing the entire payments of Rs.
3334986/- i.e. (1531105+180388) made to M/s Pooja Freight
Forwarders the intermediary agent on account of as noted
below: .
S. No. Nature of Expenses Amount (Rs.)
1. HWC Charges 53875.00
2. Shipping Line Charges 1803881.00
3. Transportation Charges 79200.00
4. Inland Haulage Charges 720893.00
5. Shipping Bill formalities Charges 8700.00
6. Agent Commission 30000.00
7. Loading/Unloading Charges 10875.00
8. Certificate of Origin Charges 7200.00
9. Fumigation Charges 43500.00
10. Lasing Charges 5800.00
11. Miscellaneous 1900.00
12. Sea/ Air Freight Charges 569162.00
Total 3334986.00
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
He has further erred in applying the provisions of Section
40(a)(ia) read with Section 194C on all the payments
supported-with copies of bills and relevant documents on
record.
6. That the confirming for additions of Rs. 24760/- the
alleged calculations of interest on trade advances to M/s Vipin
Stone, Kund, confirmed by the Learned CIT (A) Rohtak is quite
arbitrary, ignoring all the facts and figures on record.
7. That the confirming of addition of Rs. 95830/- i.e.
agricultural income supported with documents on record by
the Learned CIT (A) Rohtak is quite arbitrary. He has further
erred in ignoring the reply, documents and submissions which
are very well on record.
8. That the confirming the additions of Rs. 33900/- i.e.
20% disallowances of expenses under various heads are quite
arbitrary and without any findings.
9. That the confirming the addition of Rs. 20000/- under
house hold expenses by the Learned CIT (A) Rohtak without
any concrete findings and detection on record.
10. That the appellant craves the right to amend, delete or
add any now grounds of appeal before and during
hearing of appeal."
ITA NO. 467/DEL/2011 (AY 2007-08)
4. The brief facts of the case are that the Return declaring total
income of Rs. 7,37,090/- was filed on 2.11.2007. The return was
processed u/s. 143(1) on returned income. Assessee is running two
proprietorship concerns in the name and style of M/s Mosaic House
(India) & M/s Diler Stone, VPO Majra, Kund, Rewari. M/s Mosaic House
(India) is a new concern and M/s Diler Stone is a existing concern of the
assessee. The assessee deals in domestic and foreign sale of stone tiles.
Statutory notice u/s. 143(2) and 142(1) were issued along with
questionnaire on 12.9.2008 for 10.10.2008. On 10.10.2008, none
attended the proceedings. Again notice u/s. 142(1) was issued on
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
22.4.2009 for 1.4.2009 on 1.4.2009 also no body attended the
assessment proceedings nor filed any application for seeking
adjournment. Again notice u/s. 142(1) was issued on 1.9.2009 for
11.9.2009 and on that date assessee's counsel attended and sought
adjournment for 22.10.2009. On 22.10.2009 assessee's counsel filed
the details, but not produced books of accounts and case was adjourned
for 29.10.2009 to produce books of accounts and later books were
produced but without vouchers. After going through the records, AO has
completed the assessment u/s. 143(3) of the I.T. Act. Vide his order
dated 24.12.2009 and made the various additions.
5. Against the assessment order dated 24.12.2009, assessee
appealed before the Ld. CIT(A), who vide impugned order dated
19.11.2010 has dismissed the appeal of the assessee by upholding the
additions made by the AO.
6. Aggrieved with the aforesaid order of the Ld. CIT(A), assessee is in
appeal before the Tribunal.
7. Ld. Counsel of the assessee in support of his contention has filed
the Written Synopsis. For the sake of convenience, we are reproducing
the same as under:-
"1. FACTS-IN-BRIEF:
1.1 That appellant is proprietor of two concerns:-
Sr. Name of the concern Nature of business
No.
i) Mls Mosaic House (India), Nandha
More, Majra Kund, Rewari Domestic and foreign
sale of stone tiles
ii) M/s Diler Stone Nandha More, Majra Kund, Rewari ----do---
1.2 Both proprietorship concerns are engaged in business of domestic
sale and export of stone tiles
1.3 Relevant Dates
2.11.2007 Return of income Rs. 7,37,090 (page 2. of Paper
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
Book). This return was supported by
audited financial statement of Mosaic
House (pages 4-15 of Paper
Book)
24.12.2009 Order of assessment Rs. 45,25,527/-
u/s. 143(3)
19.11.2010 Order of CIT(A)
1.4 ISSUE INVOLVED
Ground Issue Amount Page Page
No. (Rs.) (para) (para)
(AO CIT(A)
1. Addition made on 12,67,193 5 to 7 6-7
account of alleged (2.3 to 2.5) (6 to 6.1)
unexplained sources
of cash payments
reflected in the cash
books of M/s Mosaic
House.
2. Addition made on 3,86,041/- 7 7
account of alleged (2.6) (707.1)
unexplained cash
deposits in bank
account of M/s Diler
Stone
3 Additions on account 1,07,939 8 7
of payment to sundry (3) (8 8.1)
creditors outside books
of account u/s 68 of
the Act.
4. Disallowance of 18,72,599 9 8-9
expenditure incurred (4.2) (9-9.2)
on export of goods
through agents of
freight shipping
companies
5. Adhoc disallowance of 1,54,665 9 9(10)
50% of following (5)
expenses
1.5 Ground wise submission is as under:-
2. Addition of Rs. 12,67,193/-
2.1 Manner of Computation: Perusal of cash book (pages 65 -75 of Paper
Book) of Mosaic House (India) reveals that the following position:
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
Particulars Amount (Rs.)
Opening balance Nil
Receipts 5,29,948 (upto 30.3.2007)
Total 5,29,948/-
Less: payment 17,97,141/- (upto 30.3.2007)
Difference added as income from undisclosed 12,67,193
sources
2.2 Basis of Addition:
Relevant pages of the learned Assessing Officer: (pages 5 to 7 para 2.3 to
2.5)
i) The explanation of the appellant that he had received advance of
RS. 11,50,000/- in March 2006 is an after thought
ii) The affidavit furnished is on self-serving documents and, suffers
from discrepancies (paras 2.3.1 to 2.3.9 of the order at pages 5
and 6
Relevant pages of the learned Commissioner of Income Tax (Appeals):
(pages 6-7 paras 6 to 6.1):
iii) The learned Commissioner of Income Tax (Appeals) has relied on
the fact that such parties were not produced during the 'remand
proceedings and, denied of one of purchases to enter to an
agreement
2.3 Relevant Documents:
a) Copy of balance sheet of Mosaic House (page 5 of Paper Book)
b) Copy of cash book (original) produced during .assessment
proceedings (pages 65-75 of Paper Book) marked as Annexure I to
the order (pages 2 of the order) and, on the basis of which addition
has been made in the impugned order
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
c) Show cause notice dated 11.12.2009 (page' 34 of Paper Book) and
18.12.2009 (page 42 of Paper Book)
d) Reply dated 15.12.2009 (page 38 of Paper Book) and 21.12.2009
(pages 43-44 of Paper Book)
e) Evidence:
i) Agreement to sell dated 26.3.2006 (pages 77-78 of Paper
Book)
ii) . Cash flow statement (page 76 of Paper Book)
iii) Revenue cash book (pages 79-90 of Paper Book stated at
pages 46 of Paper Book)
iv) Affidavits of eight persons (page 58 of Paper Book)
v) Statement of two persons (page 58 of Paper Book)
vi) Title deed ofland (pages 111-118 of Paper Book)
f) Submissions:
i) Dated 15.3.2010 (pages 46-47 of Paper Book)
ii) Dated 26.5.2010 (page 54 of Paper Book)
iii) Dated 16.8.2010 (page 63 of Paper Book)
g) Remand Report:
i) Dated 3.5.2010 (page 50 of Paper Book)
ii) 23.7.2010 (pages 57-58 of Paper Book)
Contentions-in-brief:
i) That perusal of balance sheet of Mls Mosaic House filed alognwith
return of income on 2.11.2007 shows an addition of Rs. 11,50,0001-
against property. The balance sheet is dated 20.10.2007 and, is duly
audited, as would be evident from page 5 of Paper Book.
ii) That books of accounts have been accepted and, not rejected u/s
145(3) of the Act
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
iii) That cash-in-hand as on 31.3.2007 as per balance sheet is Rs.
45,228/- (page 5 of Paper Book), which is also the balance as per cash
book (page 75 of Paper Book)
iv) That even the original cash book, which has been made the basis of
addition shows advance of RS. 11,50,000/- (page 75 of Paper Book) and,
transfer from capital account (Rs. 1,74,506/- (page 75 of Paper Book)., This
transfer is however reflected on 313.2007 on account of virus in the
computer
v) That the difference of Rs. 12,67,193/- is explained out of the
following:
a) Advance against land Rs. 11,50,000/-
b) Transfer from Diler stone Rs . 1,95,320/-
vi) The fact of advance of Rs. 11,50,0001- having been received is
evident from following evidences:
a) Agreement to sell dated 26.3.206 (pages 77-78 of Paper Book)
b) . Cash flow statement (page 76 of Paper Book)
c) Revised cash book (pages 79-90 of Paper Book)
vii) The learned Assessing Officer has admitted that even as per cash
book the advance was received of Rs. 11,50,000/-. According to him
however such advance was received on 31.3.2007 and, on 31.3.2006+ as
is stated in cash book. The finding is contradictory. It is submitted that
factum of receipt of advance cannot be deemed, as the same id duly
reflected in financial statements/cash book. It is submitted that the
learned Assessing Officer has accepted the cash balance at the close of
year to be as declared in the cash book/financial statement. It is submitted
that in such circumstances,
logically and legally, it ought to be held that cash payments was out of
advance which was received in March' 2006. It may be added here that
books of accounts stand accepted as correct, as has been held by the
learned Assessing Officer (page 7 para 2.4 of order)
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
viii) That factum of advance has been also confirmed by affidavits of eight
persons and statement of two persons recorded during assessment
proceedings, which have been brushed aside by the learned Assessing
Officer/Commissioner of Income Tax (Appeals) (see page 63 of Paper Book
read with page 58 of Paper Book); It is submitted that are affidavits have
been filed, mere non appearance in response to summons cannot be a
ground to reject the claim of assessee.
In view thereof, addition made may kindly be deleted.
3 Addition of Rs. 3,86,041/-
3.1 Manner of Computation of addition (Cash book of appellant (Diler
Stone (pages 91 to 96 of Paper Book)
Particulars Amount (Rs.)
Cash: Deposits in bank on 23.5.2006 (Rs. 4,62,000
12000/- Rs. 450000/-) pages 91 and 92 of Paper
Book)
Less: Cash available as per cash book 75,959/-
Addition 3,86,041-
3.2 Basis of Addition:
No evidence to show withdrawal of cash of Rs. 4lacs from Mosaic India
(page 7 para 2.6 of the Assessment order)
3.3 Relevant Documents:
a) Copy of balance sheet of Mls Diler Stone as on 31.3.2007 (pages 17
of Paper Book) which shows cash in hand of Rs. 1,13,968/-
b) Copy of original cash book furnished during assessment proceedings
(pages 91 to 96 of Paper Book) which also shows clearly cash in hand of
Rs. 1,13,966 (pages 96 of Paper Book)
c) Show cause notice dated 11.12.2009 (pages 34-35 of Paper Book)
d) Reply dated 15.12.2009 (page 38 of Paper Book)
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
e) Copy of revised cash book (pages 97 to 103 of Paper Book)
f) Submissions:
i) Dated 15.3.2010 (page 47 of Paper Book)
ii) Dated 26.5.2010 (page 54 of Paper Book)
iii) Dated 16.8.2010 (page 63 of Paper Book)
g) Remand Report:
i) Dated 3.5.2010 (page 51 of Paper Book)
ii) 23.7.2010 (page 57 of Paper
3.4 Contentions-in-brief:
i) A sum of Rs. 4,00,000/- was transferred for Mosaic House (India) on
23.5.2006 (pages 80 of Paper Book)
ii) Once revised cash book (pages 97-103 of Paper Book) of Diler Stone
and at (pages 79 to 90 at page 80 of Paper Book) of Mosaic House was
placed on record, the learned Assessing Officer/Commissioner of Income
Tax (Appeals) cold not automatically discredit the same.
In view thereof, addition made may kindly be deleted.
4 Ground No.3: Addition of Rs. 1,07,939/-
The learned Assessing Officer has held at page 8 paras 3 to 3.2 have been
paid in cash out of the books and, therefore such payments have been
treated as income from undisclosed sources U/S 68 of the Act
Sr. No. Name of Amount (Rs.) Pages of Explanation of
creditors Paper Book assessee
(showing
closing
balance in
balance
sheet)
Pages Ledger
of account
paper
book
i) Haryana 22,000 19 47 209
Engineering and
Store, Jaipur 210
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
ii) Pratibha 2,1696 19 48 210
Granites, and
Bhilwara 207
iii) Nabera 41,409 19 48 211
Granites, and
Bilwara Gra 208
iv) Mahadev 22,834 7 48 205
Stones
Total 1,07,939
4.1 According to the learned Assessing Officer, all the parties have
denied having any outstanding demand at the close of year. He rejected
the explanation that unilateral entries made by parties cannot be a basis
to discredit the audited books of appellant (pages 38-39 of Paper Book). He
has held that the explanation is evasive and absurd, without appreciating
that burden was on the basis to provide cross-examine of the said
creditors. It is submitted that no opportunity was provided to the appellant
to excess the parties (pages 47-48 of Paper Book). It is submitted that
perusal of pages 205 to 208 of Paper Book would show that payment to all
parties a subsequent year have been made by account payee cheques
except Haryana . It is submitted that even in rejoinder to report dated
23.7.2010 (pages 60 of Paper Book). The appellant has furnished reply
dated 16.8.2010 (page 64 of Paper Book) which have been overlooked by
the learned Commissioner of Income Tax (Appeals) wherein complete
details were placed on record, but no enquiries have been made. It is
thereof prayed that additions made may kindly be deleted.
5 Ground No. 4:
Disallowance of Rs. 1,82, 72,599/~ on account of shipping freight outward
5.1 The learned Assessing Officer has held that (page 9 para 4.2) no
evidence was filed to prove that payment made to agents of shipping
companies and, in absence thereof, appellant obliged to deduct TDS U/S
194C of the Act and, since no TDS has been deducted, sum was
disallowed U/S 40(a)(ia) of the Act
5.2 The CIT(A) pages 8-9 paras 9 to 9.2)
5.2.1 The learned CIT(A) has also upheld the disallowance on the ground
that Mls. Pooja Freight and Forwarders were not agents of non resident
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
shipping companies and therefore, appellant was obliged to deduct TDS
un:der section 40a(ia) of the Act.
5.3 It is submitted that the appellant in support of the submission that
appellant was not obliged to deduct TDS had placed on record following
evidences and replies:
a) Reply dated 15.12.2009 (pages 39 to 40 of Paper Book)
b) Certificate from Pooja Freight and Forwarders (page 45 of Paper
Book)
c) Rejoinder submissions dated 16.8.201 (page 64 of Paper Book) in
respect of the remand report of the Aa dated 23.7.2010 wherein Shri
Maman Singh had admitted that they were not agents of non resident
shipping company.
d) Note on expenses of M/s. Pooja Freight & Forwarders (pages 104 to
105 of Paper Book)
e) Details of charges remittances by the appellant to Mls. Pooja Freight
& Forwarders (pages 106-107 of Paper Book)
f) Copy of ledger account of Mls. Pooja Freight & Forwarders (pages
212 to 217 of Paper Book) showing the closing balance of Rs. 1,18,758/-
g) Copy of payments of Pooja Frieght & Forwarded (pages 218 to 257
of Paper Book)
5.4 He held that the aforesaid sum represented payment 'made outside
books of accounts. The learned Assessing officer issued notice dated
11.12.2009 and, in response to which reply was furnished on 17.12.2009
(page 38 of Paper Book), whereby cash flow statement (page 76 of paper
Book) placed on record. The difference was explained on account of
following reasons:
a) Advance against land: Rs. 11,50,000/-
b) Transfer from Diler Stone Rs. 1,95,320/-
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
The claim was supported by an agreement to sell dated 26.3.2006
(pages 77-78 of Paper Book) and raised cash book (pages 79 to 90 of Paper
Book)
The learned Assessing Officer (para 2.4 and 2.5) however held that
explanation tendered is not acceptable on account of following reasons:
i) Affidavit is a self serving document and suffers from many
discrepancies:
a) Overwriting of the date;
b) Not entered in revenue records;
c) Person mentioned are not from single family and, includes matter of
assessee;
d) Amounts contributed are not in equal proprietor;
e) Total sale consideration is not mentioned for agreement is for a
period of more than five year;
f) Agreement is for a period of more than five year;
g) Sale consideration (Rs. 20 lacs) in 23 times more than book value
(Rs. 88,000/-)
ii) Property is personal property
5.5 The appellant filed written submission on 15.3.2010 (pages 46 and
47 of Paper Book). . It was stated that the learned Assessing Officer
thereafter Assessing Officer issued notice dated 18.12.2009 (page 42 of
Paper Book) and, appellant filed reply dated 21.12.2009 (pages 43-44 of
Paper Book)
5.6 The appellant seeks to place reliance on following judgments:
i) 361 ITR 192 (Guj) CIT vs. Gujarat Narmada Valley Fertilizers Co.
Ltd. extracted (pages 261-262 of Paper Book)
"It. is required to be noted that while confirming the order passed by
the CIT(A) and deleting the disallowance, it has been specifically
observed by the tribunal that in fact the expenses were incurred by
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
the agent on behalf of the assessee for transportation and other
charges, which has been spelt out in the bill itself including the
commission to the agent. The learned tribunal also observed that the
relation between the assessee and the agent is principal and an
agent. The learned tribunal also observed that so far as the
obligation to deduct tax at source from the payment of transport
charges and other charges is concerned, the same was complied
with by the agent, who had made payment on its behalf. On the
aforesaid facts the learned tribunal also observed that the circular
relied upon by the revenue that it is the liability of the assessee as
principal agent to deduct the TDS will not be applicable and the said
circular would be applicable for payment made to principal to
principal. Considering the aforesaid facts and circumstances of the
case, when the learned tribunal has confirmed the order passed by
the CIT(A) quashing and setting aside the order passed by the
Assessing Officer in deleting the disallowance of Rs. 6,93,372/- and
Rs. 76,00,509/- claimed by the assessee under Section 40(a)(ia) of
the Income Tax Act, we see no reason to interfere with the same"
ii) 61 SOT 102 (Chd) ITO vs. Bhogal Export (pages 287-291 of
Paper Book)
iii) 158 TT J 4 (Jodh) Shree Rajasthan Syntex Ltd. (pages 294-
303 of Paper Book)
iv) 143 TTJ 331 (Jodh) ACIT vs. Minpro Industries (pages 263-
274 of Paper Book)
v) ITA No. 2278/Ahd/2009 (Ahd) dated 30.6.2011 ITO vs. Shri Saniani
Vivek Gope (pages 304-323 of Paper Book)
vi) ITA No. 1948/Ahd/2009 (Ah) DCIT vs. Harsh Geochem Ltd.
(pages 324-347 of Paper Book)
5.7 Apart from the above, it is well settled law that provision of section
194C of the Act are not attracted on payments made to agents of non
resident shipping companies as has been held in following judgments:
i) 163 Taxman 479 (Del) CIT vs. Continental Carriers (P) Ltd. (pages
292-293 of Paper Book)
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
ii) 103 TTJ 103 (Del) ITO vs. Freight Systems (India) Pvt. Ltd.
iii) 271 CTR 165 (Cal) Poddar Sons Ex. L. (P) Ltd. vs. CIT (pages 277-
280 of Paper Book)
5.8 In view of the aforesaid, it is prayed that no disallowance be made
under section 40a(ia) of the Act as the issue involved is squarely covered
by the decisions and judgments cited above and there is no distinguishing
feature.
5.9 It is also well settled law that reimbursement of expenses is not
eligible for deduction of TDS under section 194C of the Act in view of the
following judgments:
i) ITA No. 359 and 511/2012 (Del) dated 25.8.2014 CIT vs. Opera
Global (P) Ltd. (pages 353-356 of Paper Book)
ii) 146 ITD 745 (Mum) ITO (TDS) vs. Vishinda Diamonds (pages 281-
286 of Paper Book)
iii) 64 SOT 15 (Bang) DCIT vs. Dhaanya Seeds (P) Ltd.
Section 194C, read with section 40(a)(ia), of the Income-tax Act, 1961 -
Deduction of tax at source - Contractors/sub-contractors, payments to
[Reimbursement of expenses] - Assessment year 2005-06 - Whether where
expenses were incurred by C&F agents on behalf of assessee and claims
were made on actual basis, assessee while making reimbursement of said
expenses was not liable to deduct tax at source under section 194C - Held,
yes [Para 6.4.3] [In favour of assessee]
iv) 26 ITR (Trib) 35 (Cal) DCIT vs. Maruti Freight Movers Ltd. (pages
275-276 of Paper Book)
Once assessee has not claimed expenditure qua reimbursement of
expenses, assessee is not liable to deduct tax at source. Section 194C of
the Income-tax Act, 1961 - Deduction of tax at source - Contractors/sub-
contractors, payments to [Reimbursement of expenses] - Assessment year
2002-03 - Assessee entered into an agreement with 'NLP' to work as an
agent for assessee - Assessing Officer having information that assessee
had not deducted tax at source on' certain payment to 'NLP' disallowed
said amount - Whether payment made to NLP as an agent in pursuance of
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ITA NOS. 467/DEL/2011 & 2222/DEL/2012
agreement for supply of trucks were merely reimbursement, and assessee
had already deducted tax at source under section 194C on contractual
payment of freight, nothing was to be deducted from reimbursement - Held,
yes - Whether as amounts in question were never claimed as expenditure
by assessee, assessee was not liable to tax deduction at source under
section 194C - Held, yes - Whether as payment made of reimbursement of
expenses were purely for business expenses, impugned disallowance
made by Assessing Officer was to be deleted - Held, yes [Para 6] [In favour
of assessee]
iv) ITA No.32911Ahd72008 dated 11.11.2009 ITO vs. Mls Yash
Enterprise
Section 194J
i) 95 TTJ 53 (Del) ITO vs. Dr. Willmar Schwabe India (p.) Ltd.
ii) 51 taxmann.com 128 (Mum) ASK Wealth Advisors (p.) Ltd. vs.
Asst. CIT
iii) 146 ITD 745 (Mum) ITO vs. Vishinda Diamonds
iv) 134 ITD 486 (Ahd) Karnavati Co-op. Bank Ltd. vs. DCIT
v) 209 Taxman 18 (Del) CIT vs. Expeditors International (India)
.(P.) Ltd.
5.10 Apart from the above it is submitted that since sum stood declared
as income by the payee therefore assessee was not obliged to deduct TDS
uls 194C of the Act since second proviso to section 40(a)(ia) of the Act is
retrospective. Reliance is placed on the following judgments:
i) 357 ITR 642 (All) CIT vs. Mls Vector Shipping Services (P) Ltd CIT vs.
Vector Shipping Services (P) Ltd. wherein SLP has been dismissed by Apex
Court in order dated 02.07.2014. Also, Civil Misc. Review Application No.
248688 of 2013 (All) CIT vs. Mls Vector Shipping Services (P) Ltd. has been
dismissed.
ii) 146 TTJ 1 (SB) (Vishakapatnam) (SB) Merilyn Shipping and
Transports vs. Addl. CIT
iii) ITA No. 249 of 2013 (AP) CIT vs. New Bombay Goods Transport
18
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
iv) 123 TTJ 888 (Jaipur) Jaipur Vidyut Vitran Nigam Ltd. vs. DCIT
v) ITA No. 228/2014 (O&M) (P&H) dated 20.11.2014 CIT vs. Mls
Rajinder Parshad Jain (pages 348-352 of Paper Book)
vi) ITA No. 52/2014 (Hyd) CIT vs. Janapriya Engineers Syndicate
(pages 366-368 of Paper Book)
5.11 It is also submitted that once assessee had bonafide reason to
believe TDS was not deductible, section 40(a)(ia) of the Act is inapplicable
as has been held by the following judgments:
i) 340 ITR 333 (Bom) CIT vs. Kotak Securities Ltd.
ii) 109 DTR 70 (HP) Palam Gas Service vs. CIT .
5.12 This submission is supported by insertion of second proviso to
section 40(a)(ia) of the Act, which is explained in Finance Bill' 2012 as
under:
i) 342 ITR 49 (St.) Finance Bill' 2012
ii) 342 ITR 152 (St.) Note on Clauses
iii) 342 ITR 261 (St.) Memorandum Explaining the provision in
Finance Bill 2012
5.13 It is submitted that the aforesaid amendment is retrospective as the
same is clarificatory:
i) 224 ITR 677 (SC) Allied Motors (P) Ltd. vs. CIT
ii) ITA No. 10791Hyd/2013 dated 123.2014 A.Y. 2007-08. Astt.
CIT vs. Mls PLR Projects (P) Ltd.
iv) ITA No. 590/2013 dated 15.7.2014 (Kar) Santosh Kumar Shetty
v) ITA No. 412/2013 (Guj) Om Prakash R. Chaudhary
vi) ITA No. 1056IMum/2011 A.Y. 2006-07 dated 26.11.2014 Dr. Adi R.
Nazir vs. ACIT
vi) ITA No. 18521Pune/2012 dated 6.1.2014 A.Y. 2008-09 ITO vs. Mls
Gaurimal Mahajan & Sons
vii) 149 ITD 363 (Agra) Rajeev Kumar Aggarwal
19
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
5.14 In view of the aforesaid disallowance made may kindly be deleted.
Ground NO. 6 : Adhoc disallowance of Expenses
The learned Assessing Officer has disallowed 50% of following expenses
(page 9 para 5)
Sr. No. Nature of expenses Amount (Rs.)
i) Diwali Expenses 16,500
ii) Painting & White wash 14,600
iii) Publicity 45,000
iv) Travelling 1,02,890
v) Entertainment 91,590
vi) Printing and Stationery 24,250
Total 3,09,330/-
6.2 In this view, the internal vouchers do not have narration and, signed
by one man is same style. As such, he held genuineness and,
reasonableness of explanation is not ascertainable.
6.3 The appellant filed following submission in respect of above claims:
i) Submission dated 15.12.2010 (page 49 of Paper Book)
6.4 It is well settled position of law that adhoc disallowances are not
tenable in law, as has been held by the following judicial pronouncements:
a) 102 TTJ 882 (Pune) Lavrids Knudsen Maskinfabrik (India) Limited.
vs Additional Commissioner Of Income-Tax
b) 43DTR 116 (TM) (Agra) ITO vs. Mayur Aggarwal
c) 254 ITR 673 (Guj) Dinesh Mills Ltd. vs. Commissioner Of Income Tax.
d) 73 ITD 189 (Del) Goodyear India Ltd v ITO
e) 106 TTJ 1065 (Del) Hughes Escorts Communications Limited. vs
20
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
Joint Commissioner of Income-tax.
f) 94 TTJ 423 (Asr) Sunder Mal Sat Pal vs. Income Tax Officer
g) 81 TTJ 448 (Jodh) DCIT vs. Surface Finishing Equipment
h) 12 TTJ 485 (Cal) Trimurti Salt Compnay v ITO
6.5 It is further submitted that, in absence of any basis given by the
learned Assessing Officer, the disallowance is not tenable. Reliance is
placed on the judgment of State of Orissa v. Maharaja Shri B.P.Singh Deo
(1970) reported in 76 ITR 690 (SC)
6.6 Moreover it is not a case where books of accounts have been
produced alongwith vouchers. It is submitted that vouchers are always self
·generated and suspicion howsoever strong cannot be basis to
disallowance an eligible expenditure.
Reliance is placed on the following judicial pronouncements:
a) 37 ITR 151(SC) Omar Salay Mohammad Sait v CIT
b) 26 ITR 736 (SC) Dhirajlal Girdharilal v CIT, Bombay
c) 26 ITR 775 (SC) Dhakeshwari Cotton Mills Itd. v CIT
d) 37 ITR 288 (SC) Lal Chand Bhagat Ambica Ram v CIT
6.7 The appellant also seeks to place on the judgment of Hon'ble
Bombay High Court in the case of R.B. Jessaram Fatehchand (Sugar
Deptt.) vs. CIT
6.8 In view thereof, disallowance made may kindly be deleted."
8. On the contrary, Ld. DR relied upon the order passed by the Ld.
First Appellate Authority and stated that the Appeal filed by the Assessee
may be dismissed, because assessee has not produced any evidence to
support its claim before the Revenue Authority.
9. We have heard both the counsel and perused the relevant records
available with us, especially the orders passed by the revenue authorities
alongwith the Written Synopsis filed by the assessee as well as the case
laws cited by him. After going through the assessment order, we are of
the view that the additions in dispute have been made by the AO for want
21
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
of evidence and for non-production of evidence, as required by him.
Similarly, Ld. CIT(A) has also upheld the order of the AO, because the
assessee has not produced any evidence before him also.
10. Ground 1 and 2 relate to additions of Rs. 12,67,193/- and Rs.
3,86,041/- on account of unexplained cash payments reflected in cash
book of M/s. Mosaic House and M/s Diler Stone, proprietorship concerns
of the appellant. From the perusal of the cash book of M/s. Mosaic
House, the Assessing Officer noted that there is no opening cash in hand
and payments in cash upto 30.3.2007 were of Rs. 17,97,141/-; whereas
the cash receipts amounted to only Rs. 5,29,948/- and as such, there
was a difference of Rs. 12,67,193/- which was added as income. Further,
the cash book of M/s Diler Stone for the period l.4.2006 to 3l.3.2007
revealed that assessee has made cash deposit of Rs. 4,62,000/- but cash
in hand on the said date was Rs. 75,959/- and therefore, the addition
was made on account of unexplained cash deposit of Rs. 3,86,041/-. The
appellant explained that difference of Rs. 12,67,193/- was met out of the
advance of Rs. 11,50,000/- received against land and transfer of Rs.
1,95,320/- from M/s Diler Stone. The appellant in support of the above
furnished agreement to self dated 26.3.2006, cash flow statement and
revised cash book. In a reply dated 15.12.2009 furnished by the
appellant, in response to letter dated 11.12.2009 of the Assessing Officer,
it was stated as under:
"1 That as regards to your query regarding difference in inflow of cash of
Rs. 12,67,193/- in Mosaic House (India), it is submitted that while
considering the inflow you have not considered the amount of Rs.
11,50,000/- received as advance against land property and further a sum
of Rs. 1,95,320/- was also transferred from the books of Diler Stone, if
the same are considered the difference will automatically reconcile. The
advance against land property was taken in the month of March 2006
and it was entered in the cash book but unfortunately at the time of
feeding/printing or virus my view I am enclosing copy of agreement and
detailed cash flow of Mosaic House (India) for your kind consideration.
2 That as regard to cash difference of Rs. 3,86,041/- in the books of Diler
Stone as mentioned in the above notice, it is submitted that there was
opening balance of Rs. 75,959/- and thereafter a sum of Rs. 4,00,000/-
was transferred from the cash book of Mosaic House (India) and out of
22
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
these amounts a sum of Rs. 4,50,000/- was deposited in the bank. Both
the accounts were maintained in same computer. But due to virus
problem unfortunately these entry was disturbed and due to over sight of
these entries both the cash book were printed without noticing these
entries. "
10.1 The learned Assessing Officer examined the agreement furnished
by the appellant and held that it is a self serving document and does not
have any evidentiary value and moreover, since the property is the
personal property, any amount received against the personal property
has to be introduced in the capital account of the assessee and not in the
balance sheet of the firm as advance against property. He thus rejected
explanation of the assessee and made the impugned additions.
10.2 On appeal, the CIT(A) directed the Assessing Officer to furnish a
remand report whereby the Assessing Officer admitted that appellant
furnished affidavits of all the persons who had advanced the sums to the
appellant. He also admitted that one of the persons Shri Santosh Kumar
attended and admitted to have advanced Rs.1,15,000/- - though not as
an advance against the property. As regards Shri Rajesh Kumar, another
person produced before the Assessing Officer, the Assessing Officer did
not record any statement as name of the person in the agreement was
Rajesh Chauhan and not Rajesh Kumar. The CIT(A) thus rejected the
explanation of the appellant on the ground that there is a denial of the
sole purchaser produced before the Assessing Officer of entering into any
such agreement and appellant failed to produce remaining parties.
10.3. As regards ground nos. 1 and 2, having gone through the
record, we find that the balance sheet of M/s. Mosaic House furnished
along with return of income shows the addition of Rs. 1,50,000/- against
the property. Moreover it is not in dispute that assessee is an owner of
the property although a personal property. It is also a matter of record
that appellant has furnished affidavits of all the eight parties in support
of the claim of advance against land. No doubt, appellant has failed to
produce the parties before the Assessing Officer during the remand
proceedings yet it is a matter of record that one of the persons who was
produced admitted to have advanced Rs. 1,50,000/- to the appellant. The
affidavits and the statement as recorded have not been placed before us.
We therefore accept the contention of the counsel of the appellant that
23
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
the issue be restored to the file for the Assessing Officer for verification
after examination of the persons who have advanced to the appellant. We
also notice that appellant has furnished revised cash book during the
assessment proceedings explaining the discrepancy in the original cash
book furnished during the assessment proceedings. The Assessing Officer
has discredited the said cash book without examining the same. We
therefore, direct that while conducting fresh examination, the Assessing
Officer would look into the explanation tendered and the revised cash
book and not merely discredit the same. Accordingly, the issue of
addition regarding unexplained deposit in the cash book of the appellant
is restored to the file of the Assessing Officer for denova examination and
adjudication after granting necessary opportunity to the appellant.
11. With regard to ground no. 3 relating to confirmation of addition of
Rs. 1,07,939/- is concerned, we find that Ld. CIT(A) has observed that
the assessee was afforded one more opportunity to produce the said
creditors before the AO during the remand proceedings. The appellant
could not produce these parties inspite of several opportunities. But for
furnishing the bills of these parties, no efforts were made to prove his
version. In the rejoinder to the remand report, the assessee contended
that complete address, telephone/FAX No. and bank a/c no. was
furnished to the AO during the remand proceedings but the AO has not
taken any steps to enquire at his own level. We further find that Ld.
CIT(A) has observed that it could be seen that the AO made addition in
respect of the parties who have denied to have any outstanding amount
with the appellant. It is not the case of not receiving any response from
the creditors or return of the letters as comeback un-served. Under these
circumstances, onus is on the appellant to prove that the liability exists
by producing them or furnishing reconciliation statement etc. Instead the
assessee has merely given the address etc. of the creditors which was
already available with AO. In the background of the aforesaid
discussions, we find that the Ld. CIT(A) was right in upholding the
addition of Rs. 1,07,939/-, which does not need any interference on our
part, hence, we uphold the order of the Ld. CIT(A) on this issue and
dismiss the ground no. 3 raised by the assessee.
24
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
12. Ground 4 of the Grounds of Appeal relates to disallowance of Rs.
18,72,599/- representing expenditure incurred on export of goods
through agents of freight shipping companies. The Assessing Officer has
held that no evidence was filed to prove that payments were made to
agents of shipping companies and therefore, since appellant did not
deduct TDS under section 194C of the Act, the same is not allowable
under section 40(a)(ia) of the Act. During the course of appellate
proceedings, the appellant highlighted page 45 which is a certificate from
M/s. Pooja Freight Forwarders stating that M/s. Pooja Freight
Forwarders is an International freight forwarding company which
negotiates ocean freight with the carriers/shipping lines on behalf of the
exporter for their out bound shipment. It has been confirmed that
shipments from the appellant have been booked through Mediterranean
shipping company SA and M/s. Pooja Freight Forwarders has paid freight
to the shipping line on behalf of the appellant. It has been clarified that
Mediterranean Shipping Company is a Geneva, Italy based shipping line
and they have a tax exemption certificate from the Income Tax
Department. The CIT(A) however held that since M/s. Pooja Freight
Forwarders is not a agent of any foreign shipping companies and
therefore, the payments made by the appellant to M/s. Pooja Freight
Forwarders was liable for TDS. We find that the issue involved in the
instant case is no longer res integra. The Hon'ble Gujarat High Court in
the case of CIT vs. Gujarat Narmada Valley Corporation reported in 361
ITR 192 was considering a case where assessee claimed deduction of
Rs.6,93,372/- towards reimbursement of CHA charges paid of C&F
agents and Rs.76,00,509/- towards reimbursement expenses towards
consignment agents. The High Court upheld the deletion of the addition
by the CIT(A) and the Tribunal on the ground that expenses were
incurred by the agents on behalf of the assessee for transportation as no
other parties which has been felt out in the bills including commission to
the agent. It was therefore, held as under:
"The learned tribunal also observed that the relation between the
assessee and the agent is principal and an agent. The learned
tribunal also observed that so far as the obligation to deduct tax at
source from the payment of transport charges and other charges is
25
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
concerned, the same was complied with by the agent, who had
made payment on it's behalf. On the aforesaid facts the learned
tribunal also observed that the circular relied upon by the revenue
that it is the liability of the assessee as principal agent to deduct
the TDS will not be applicable and the said circular would be
applicable for payment made to principal to principal. Considering
the aforesaid facts and circumstances of the case, when the
learned tribunal has confirmed the order passed by the CIT(A)
quashing and setting aside the order passed by the Assessing
Officer in deleting the disallowance of Rs.6,93,372/-and Rs.
76,00,509/- claimed by the assessee under Section 40(a)(ia) of the
Income Tax Act, we see no reason to interfere with the same. No
error has been committed by the learned tribunal in confirming the
order passed by the CIT(A). No question of law, much less
substantial question of law, arises in the present appeal. Hence,
the present appeal deserves to be dismissed and is accordingly
dismissed."
12.1. Also, Jodhpur Bench in the case of ACIT vs. Minpro
Industries 143 TTJ 331 (Jodh) has held as under:
"8.2 We have gone through the Board Circular No. 723, copy of
which is placed on record and contents of the same have been
tabulated in the order of learned CIT(A) also and found that about
certain payments it has been clarified by the Board that on these
payments provisions of ss. 194C and 195 will not apply and
provisions of s. 172 will be applicable. The learned CIT(A) has
taken into consideration this circular and found that certain
payments made by the assessee to the C and F agents who have
already made the payment on behalf of the assessee were not
covered either under s. 194C or under s. 195, as they are covered
under the provisions of s. 172. Therefore, we hold that learned
CIT(A) was justified in holding that on certain payments the
provisions of ss. 194C and 195 were not applicable and, therefore,
assessee was not liable to deduct TDS. Such payments have been
discussed by learned CIT(A) in his order. They were on account of
26
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
sea freight transport which were at Rs. 1,16,11,550, CCI charges,
steamer freight charges, REPO container charges. Remaining
expenses reimbursed by the assessee were on account of
transportation charges at Rs.20,31,226 and on this amount the
agent has deducted TDS before making payment to the principal.
Similarly, TDS has been deducted on shipping bill of Rs. 2,18,718,
agency charges of Rs. 3,61,550 paid by assessee on which TDS has
been deducted by assessee. There were other small payments of
Rs. 9,816 on account of other expenses on which TDS was not
applicable. In this way, the entire addition of Rs. 1,60,41,692 was
deleted by learned CIT(A). The learned CIT(A) has discussed each
item in detail and then only it has been held that assessee was not
liable to make deduction of TDS on reimbursement of expenses.
Various Benches of the Tribunal are taking a consistent view that if
the payments are made on account of reimbursement, then no TDS
is liable to be deducted on behalf of the payer i. e. assessee.
12.2. The learned Departmental Representative placed reliance on the
decision of Hon'ble Karnataka High Court in case of Kamataka Urban
Infrastructure Development Finance Corporation (supra).
12.3 We have gone through the ratio of this decision and found that the
same is distinguishable. In this case on bona fide belief of the assessee
company which was wholly-owned by State of Karnataka had not
deducted TDS on account of non-resident company by observing that the
amount spent towards accommodation and conveyance of the
officer/employee of the non-resident company was not required to be
treated as a part of their income, whereas it was a part of their income.
Therefore, Hon'ble Karnataka High Court held that on this amount TDS
was deductible. However, in the present case the facts are entirely
distinguishable. There is no component of income on the amount paid by
assessee on account of reimbursement. Whatever the amount was paid
by the agent, that was reimbursed by the assessee. Therefore, there was
no income component in the hands of agent. It is further seen that
provisions of s. 172 were very clear that such type of payments which are
made by assessee had been held that they are not part of regular income
27
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
and, therefore, provisions of ss. 194C and 195 are not applicable and
Board has clarified the same. Therefore, there is no question of making
any TDS on the part of the assessee and learned CIT(A) was justified in
deleting the disallowance. One more decision has been relied on by the
learned Departmental Representative in case of Associated Cement Co.
Ltd. (supra) and we find that facts in this case are also distinguishable.
In this case also we find that facts are totally different from the facts
involved in the case in hand. Moreover, the payments made by assessee
are covered by s. 172 where provisions of ss. 194C and 195 are not
applicable as clarified by the Board vide Circular No. 723, dt. 19th Sept.,
1995. The AO has placed reliance on the Circular No. 715 which is of
earlier date from the Circular No. 723. The learned CIT(A) has observed
that this circular was wrongly applied by AO as Circular No. 723 is
applicable on the facts of the present case. Nature of payments has
already been discussed by learned CIT(A) at p. 11 of his order. Therefore,
we are not repeating those details again and in these details it has been
clarified that the entire payments are covered by Circular No. 723, dt.
19th Sept., 1995 and on remaining payment, the agent has deducted
TDS or the assessee has deducted the TDS. Therefore, in view of these
facts and circumstances and in view of detailed reasoning given by
learned CIT(A) which has been reproduced in this order, we hold that
learned CIT(A) was justified in holding that assessee was not liable to
deduct TDS on the amount reimbursed by the assessee. Accordingly, we
confirm the order of learned CIT(A). "
12.4. During the course of hearing, assessee highlighted that the break
up of the payments of Rs.18,70,771/- is as under.
Rs.95, 545 Ware house charges to Govt. Agencies for
storage
Rs. 3,52,869.81 Landing charges charged by shipping
companies owned by govt.
Rs.8,04,085 Transportation charges which are bill wise and
amount is below Rs.20,000/- and paid to truck
wise not to the co.
Rs.23,400 Inland haulage charges to container
corporation of India who is exempted for tax
deduction at sources and other shipping coy.
Certificates furnished.
Rs.61,224 Shipping bill for material charges charged by
govt.
28
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
Rs.19,495 Certificate charges by govt. On documents
furnished for export
Rs.13,500 Loading and unloading charges, petty in nature
Rs.75,000 Certificate fee charges by govt.
Rs.11,000 Fumigation charges on storage to prevent the
goods for damages
Rs.6,100 License fee charges bill wise
Rs.2,42,608.50 Misc. And Petty charges
Sea/Air freight not subject to TDS
Total : Rs.18,70,773.01
12.5. A perusal of the above chart demonstrates that most of the
payments are reimbursement of expenses. When expenditure is
reconciled there is no element of income to the recipient.
12.6. Having regard to the above factual position which is not disputed
by authorities below, we hold that since the payments have been made as
reimbursement of expenses to the agents of the appellant, therefore,
appellant was not obliged to deduct TDS under section 194C of the Act
and as such, no disallowance is warranted u/s 40(a)(ia) of the Act.
Having regard to the above, we delete the addition and allow the ground
raised by the appellant.
13. With regard to ground no. 5 relating to confirmation of addition of
Rs. 1,54,665/- is concerned, we find that the AR of the counsel has
submitted that all the expenses claimed are supported with vouchers.
The action of the AO in disallowing 50% of the expenditure without
pointing out any defect is arbitrary and unjustified. Ld. CIT(A) has
considered the issue and the submissions made by the AR and observed
that the AO made a categorical finding regarding the genuineness,
reasonableness and verifiability of the bills. The Revenue Authority below
has come to the conclusion against the assessee, after verifying the
vouchers produced by the assessee. Keeping in view of the facts and
circumstances, Ld. CIT(A) has rightly held that the disallowance made by
the AO was treated as fair and reasonable and thus the addition of Rs.
1,54,665/- was sustained by the Ld. CIT(A), which does not need any
interference on our part, hence, we uphold the order of the Ld. CIT(A) on
this issue and dismiss the ground no. 5 raised by the assesee in its
appeal.
29
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
In the result, the Assessee's being ITA No. 467/Del/2011 (A.Y.
2007-08) stands party allowed for statistical purposes.
ITA No. 2222/Del/2012 (A.Y. 2009-10)
14. With regard to ground nos. 3, 4 and 5 in the assessee 's own case
the issue is the same as dealt with by us in the order for the AY 2007-08
at paragraphs 12 to 12.5. Consistent with the view taken therein, we
delete the said deletion. Grounds allowed.
15. With regard to ground no. 1, the Ld.CIT(A) observes that there is a
difference of accounts. The sales in this case is Rs.1.08 crores and the
ledger account reflects Rs.1.21 crores. At page 18 of the paper book the
assessee furnished a copy of the reconciliation. The opening balance is
Rs.13,21,034/-. All these are export sales and a perusal of this copy of
the ledger of M/s Venus Stores, Spain demonstrates that the figures
have been reconciles, the discrepancy explained. In the result ground
no.1 is allowed.
16. With regard to ground no. 2 relating to confirmation of addition of
Rs. 6 lacs u/s. 40A(3) is concerned, we find that Ld. CIT(A) has observed
that it has not been disputed by the assessee that the cheques are not
bearer cheques. The assessee's counsel failed to lead only evidence and
submissions as to how the particular transactions are covered under
Rule 6DD. In our considered opinion, Ld. CIT(A) was right in observing
that mere statement that the purchasers have no bank account a/c at
that very place has no meaning without explaining the circumstances
under which the assessee had to issue bearer cheques and as to how the
transactions are covered under Rule 6DD. In view of above, Ld. CIT(A)
has force in his finding in holding that in the absence of any evidence led
by the assessee, the action of the AO in disallowing the amount u/s.
40A(3) was upheld, which does not need any interference on our part,
hence, we uphold the same and dismiss the ground no. 2 raised by the
assessee.
17. Ground no.6 is addition on account of notional interest. It is well
settled law that the Hon'ble Gauhati High Court in the case of Highways
30
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
Constructions Co. Pvt. Ltd. Vs. Commissioner of Income Tax 199 ITR
702 held that notional interest cannot be charged. This ground is
allowed.
18. The ground no. 7 relating to confirmation of addition of
Rs.95830/- is not pressed before us, hence, the same is dismissed, as
not pressed.
19. With regard to ground no. 8 relating to confirmation of addition of
Rs. 33900/- i.e. 20% disallowances of expenses under various heads is
concerned, we find that the Ld. CIT(A) has observed that a fact finding
has been given by the AO that some of the expenses are unvouched or
not properly vouched. The Assessee's counsel has not contravened these
observations of the AO. Therefore, in view of the above factual finding of
the AO and Ld. CIT(A), Ld. CIT(A) upheld the disallowance of 20% of the
expenses, which does not need any interference on our part, hence, we
uphold the order of the Ld. CIT(A) on this issue and decide the issue
against the assessee by dismissing the ground no. 8 raised in its appeal.
20. With regard to ground no. 9 relating to confirmation of addition of
Rs. 20000/- under house hold expenses is concerned, we find that the
Ld. CIT(A) has observed that the AO noted that the house hold
withdrawals of Rs. 1.00 lakh are quite low in response to which the
assessee stated that theirs is an agriculture based family and he has only
two school going dependent children and the withdrawals are quite
reasonable and justice. Ld. CIT(A) further observed that having regard
to the status and life style enjoyed by the family, the AO estimated the
expenses at Rs. 10000/- per month and made an addition of Rs.
20,000/-. In our considered opinion, Ld. CIT(A) was quite reasonable in
sustaining the estimating addition of Rs. 10,000/-, which does not need
31
ITA NOS. 467/DEL/2011 & 2222/DEL/2012
any interference on our part, hence, we uphold the order of the Ld. CIT(A)
on this issue and decide the ground no. 10 against the assessee.
21. In the result, the ITA No. 467/Del/2011 (A.Y. 2007-08) is partly
allowed for statistical purposes and ITA No. 2222/Del/2012 (A.Y. 2009-
10) is partly allowed, filed by the assessee.
Order pronounced in the Open Court on 16/6/2015.
Sd/- Sd/-
[J.S. REDDY] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 16/06/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
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