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2016 (2) TMI 291 - AT - Income TaxDisallowance u/s 40A(3) - Held that:- The assessee had made payments to small time venders who supplied hides and skins on vehicles such as cycles, rickshawalas and rehris. The payments were being made to them against kacha bills because the purchases were made from unorganized sectors and the butchers do not have printed bills. It is also clear from the statements of Shri Ram Kumar and Shri Harish Kumar that they confirmed having purchased kucha skins from other butchers and after processing them with salt and mixture they sold these goods to the assessee. In view of the decision of the Hon'ble Calcutta High Court referred to above, we hold that the payments made by the assessee is fully covered within the meaning of Rule 6DD(e)(ii) of the Rules and hence cash payments made to processors of hides and skins are producers within the meaning of aforesaid Rule, and hence no disallowance u/s 40A(3) of the Act is called for. Accordingly, we delete the addition. - Decided in favour of assessee G.P. addition - Held that:- Assessing officer has not invoked the provisions of section 145 of the Act. The books of account of the assessee are audited and the auditors have not given any adverse remarks. The Assessing officer has computed the suppressed sales without pointing out any discrepancy in the books of account regularly maintained by the assessee. It is observed that CIT(A) has allowed a substantial relief to the assessee but we are of the opinion that there is no justification in sustaining the addition of ₹ 13,80,680/-, particularly when it is not the case of the Assessing officer that the assessee has not declared the true profits and the books of account are not reliable as he has not rejected the book results. Thus, considering the entire facts of the present case and also settled legal position, we do not find any reason to sustain the addition of ₹ 13,80,680/- and accordingly we delete the same and allow this ground of appeal. - Decided in favour of assessee Addition to suppressed sales to the sister concern - Held that:- Considering the entire facts and circumstances of the present case, we observe that on the basis of certain bills, the Assessing officer came to the conclusion that the assessee was selling the goods to its sister concern at a lower price as compared with the sales made to other parties. It is also noticed that during the remand proceedings the assessee submitted two bills having bill Nos. 716 dated 25.10.2008 in which material was sold to the sister concern @ 4.50 per Sq DM and another having bill No. 719 dated 15.10.2008 vide which material was sold to M/s Indiggo @ 3.15 per Sq. DM. According to the assessee the rate of goods sold to sister concern is higher than the goods sold to the other parties. Thus, considering the entire facts and circumstances of the case, we are of the view that there is no justification in sustaining the impugned addition. The Assessing officer cannot dictate terms to the assessee as to how such profit is to be earned. There are no basis for making the impugned addition. - Decided in favour of assessee Disallowance out of salary wages and bonus - Held that:- The assessee himself has admitted that disallowance to the extent of ₹ 17,419/- can be made. The Assessing officer has not pointed out any discrepancy and, therefore, there was no justification in making the adhoc disallowance out of salary wages and bonus as made by the Assessing officer. It is apparent from the records that the assessee has recorded sale of ₹ 1223.72 lakhs and job work income of ₹ 178.32 lakhs and net profit of ₹ 43.23 lakhs. This huge amount of sales, job work income and net profit cannot be achieved without a proper and adequate labour force and concern's nature of business is that of manufacturing job work of hide and skins and leather. In this way, all the employees work day to day basis. . Considering the nature of assessee's business and relevant facts, we are of the opinion that order of CIT(A) requires no interference at our level.- Decided in favour of assessee
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