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2015 (9) TMI 998 - ITAT HYDERABAD

2015 (9) TMI 998 - ITAT HYDERABAD - TMI - Disallowance of claim of the assessee for shortage - claim of double deduction at the time of purchase and the shortage at the time of sale - Held that:- We are unable to accept the contention of the learned D.R. The shortage at the time of purchase and the shortage at the time of sale are two different issues and it cannot be said by any stretch of imagination that once the assessee has claimed shortage at the time of purchase, he cannot claim shortage .....

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Disallowance under section 40A(3) - cash payment - Held that:- The work of unloading maize from lorries and loading the same into railway wagons some times was done in the late evenings and since the payments on account of Hamali Charges were required to be made by the concerned contractor to Hammals immediately after the completion of the work, he demanded payments in cash which the assessee was compelled to make. - In our opinion, this stand taken by the assessee before the Ld. CIT(A), which w .....

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t : Mr P Raviseshagiri Rao For the Respondent : Mr R Clement Ramesh Kumar ORDER Per P. M. Jagtap, AM. This appeal filed by the assessee is directed against the order of the Ld. CIT(A)-18, Mumbai dated 04.02.2014. 2. Ground Nos. 1 and 4 raised by the assessee in this appeal are general in nature which do not call for any specific decision. The issue involved in ground No.2 relates to the addition of ₹ 7,01,536 made by the A.O. and confirmed by the Ld. CIT(A) by disallowing the claim of the .....

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essee on account of difference in quality and rate of maize supplied. During the course of assessment proceedings, the assessee therefore was called by the A.O. to offer its explanation in the matter. In reply filed by the assessee vide letter dated 03.10.2007, the following submission was offered by the assessee. "During the previous year relevant to the A.Y. 2005-06 we have paid a sum of ₹ 12,06,896/- towards rate differences, shortage and excess moisture content to the maize purcha .....

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wards shortage and excess moisture content in maize. Further, we have sold 23390.30 quintals of maize to M/s. PEC Ltd., Vishakhapatnam (Regd. Office is in New Delhi) on 02.05.2004 under bill no. 20 for ₹ 1,46,18, 938/-. The purchaser has paid a sum of ₹ 1,25,25,666/- on 14.05.2004 and a further sum of ₹ 12,52,566/- on 30.07.2004 through cheques. The balance, of ₹ 8,40,706/- was deducted by them towards quantity shortage and excess moisture content. We have already written .....

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higher at 4.8% and not 0.57% as claimed by the assessee. He held that the said short fall claimed by the assessee in respect of sales effected to PEC Limited in addition to the shortage of 1117.74 quintals claimed in respect of purchase was quite unreasonable and accordingly, the deduction claimed by the assessee on account of such shortage to the extent of ₹ 7,01,536 was disallowed by him in the assessment completed under section 143(3) vide order dated 27.12.2007. 4. Against the order p .....

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,46,16,447/-. In respect of sales to PEC Ltd under sale bills No. 20, dated 02.05.2004, 23390 quintals of maize was sold for a sum of ₹ 1 46,18 938/-. While settling the bill, the purchaser company has paid a sum of ₹ 1,37,78,232/- only deducting ₹ 7,01,536/- under two heads of account viz. ₹ 7,01,532/- towards shortage in weight and ₹ 1,39,174/- towards excess moisture content. We are herewith enclosing copy of the certificate issued by the PEC Ltd confirming the a .....

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ition of ₹ 7,01,532/- made by the A.O. without any basis." 4.1. The Ld. CIT(A) did not find merit in the submission made by the assessee on this issue and proceeded to confirm the addition made by the A.O. for the following reasons given in para 2.3 of his impugned order. "2.3. I have considered the submissions of the appellant, order of the A.O. and facts of the case carefully, it is noticed that the A.O. has observed that the assessee has claimed loss of 1,177.74 quintals as sh .....

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ontent and an amount of ₹ 3,66,190/- towards rate difference from M/s. M. K. International Ltd. The A.O. has also allowed the shortfall on account of moisture content @ 0.57% claimed by the appellant On purchase, but has not allowed the short fall of ₹ 7,01,536/-as claimed by the assessee from M/s. PEC Ltd., Visakhapatnam which was claimed at a substantially higher rate of 4.8%. On the other hand, the AR of the appellant has submitted that the AO. has disallowed the shortfall of 1,12 .....

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en nor any evidence was submitted before the AO. to prove that how the entire shortfall of 1,122.45 quintals was claimed in a single bill No. 20 dated 0205.2004 sold to M/s. PEC Ltd. Since onus is on 'the assesses to submit complete details and evidence before claiming any deduction, but in the present case, no evidence was submitted for claiming moisture content deduction @ 4.8% in place of 0.57% shortfall claimed on the purchases. Thus, the assessee has failed to discharge its onus, theref .....

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the said party that a sum of ₹ 7,01,532 had been deducted by them for such shortage while making the payment of the relevant bill to the assessee. As submitted by the Ld. Counsel for the assessee, this certificate was filed before the Ld. CIT(A) by the assessee as additional evidence and although a clear mention of the same was made in the written submission filed before him, which is also evident from the relevant portion of the written submission reproduced by the Ld. CIT(A) in his impu .....

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ion on account of shortage and the Ld. CIT(A) was not justified in confirming the disallowance made by the A.O. on this issue by completely overlooking the said evidence. At the time of hearing before us, the learned D.R. has not been able to dispute that the confirmation certificate dated 11.08.2009 issued by PEC Limited is sufficient to support and establish the claim of the assessee for shortage of 1122.45 quintals of maize in the supply made to the said party as well as the deduction of S .....

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time of purchase, he cannot claim shortage at the time of sales. In the present case, the claim of the assessee for shortage at the time of sale was duly supported by the certificate issued by the concerned customer confirming the shortage and the Ld. CIT(A) in our opinion was not justified in confirming the disallowance made by the A.O. on account of such shortage. We, therefore, set aside his impugned order on this issue and direct the A.O. to delete the addition made on account of shortage. .....

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e assessee to the concerned party through cheques, the A.O. was of the view that the impugned payments made in cash could have been made by the assessee through cheques. In this regard, the explanation offered by the assessee that the payments in cash were made as a matter of business exigency was not found acceptable by the A.O. and by invoking the provisions of section 40A(3), he made disallowance of ₹ 1,49,424 being 20% of the cash payments of ₹ 7,47,120. 6.2. The disallowance mad .....

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to the Railway licensed hamalies for unloading maize from lorries and loading the same into wagons. As the payments cannot be made individually to each hamali, the appellant has made the hamali payments collectively to Mr.K. Narender Babu, authorized agent by cash. The work of unloading and loading was done in the late evenings and as the payments have to be made to hamalies immediately after the completion of work on the same day, the appellant has made the payments in cash as demanded by Mr. .....

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the appellant requests to delete the addition of ₹ 1,49,242/- made by the A.O." 6.3. The Ld. CIT(A) did not find merit in the above submission made by the assessee on this issue and confirmed the disallowance made by the A.O. under section 40A(3) for the following reasons given in para 3.3 of his impugned order. 3.3. I have considered the submissions of the appellant, order of the A.O. and facts of the case carefully, it is noticed that the assessee has made cash payment of ₹ 7 .....

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submitted that the assessee has debited a sum of ₹ 19,53,528/- to the profit & loss account under the head Kanta Cooli Account. The A.O. has disallowed ₹ 1,49,242/- under section 40A(3) being 20% of cash payments of the loading and unloading charges were paid to Railway License Hamalis for unloading maize from lorries and loading the same into wagons. Since this payment was not made in cash to each and every person, therefore, the collective payment was made to Shri K. Narendra B .....

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to each of individual by the assessee, but the cash payment was made on different intervals to Shri K.Narendra Babu, authorized agent of the assessee. The appellant has failed to submit why the cheque payment was not made to Shri K.Narendra Babu, agent of the assessee when he was having a bank account. The right way was to issue cheque to Shri K.Narendra Babu, who should have deposited it in its bank account and as and when the labour payment was to be distributed he should have withdrawn from .....

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and is arbitrary. Keeping in view these facts & circumstances it is held that the appellant has violated the provisions of Sec. 40A(3), therefore, addition made of ₹ 1,49,242/- is upheld and ground of appeal dismissed." 7. We have heard both the sides and also perused the relevant material on record. As submitted by the Ld. Counsel for the assessee, the work of unloading maize from lorries and loading the same into railway wagons some times was done in the late evenings and since .....

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