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 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

Surinder Kumar, Prop. Mosaic House (India) And Diler Stone, Kund, Distt. Rewari Vs. Acit, Rewari Circle, Aayakar Bhawan, Model Town, Rewari
June, 17th 2015
                                     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
                                       2
                                                      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.
                                      3
                                                    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
                                       4
                                                      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
                                          5
                                                        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
                                        6
                                                          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:
                                              7
                                                             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
                                        8
                                                     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
                                     9
                                                       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)
                                     10
                                                   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)
                                     11
                                                   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
                                      12
                                                   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
                                      13
                                                     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/-
                                        14
                                                     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
                                    15
                                                    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)
                                     16
                                                    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
                                      17
                                                      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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