GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (2) TMI 291 - ITAT CHANDIGARH

2016 (2) TMI 291 - ITAT CHANDIGARH - TMI - Disallowance 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llow 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 submitte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 wa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nsidering 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 - ITA No. 609/Chd/2013, ITA No. 706/Chd/2013 - Dated:- 26-11-2015 - SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER For The Appellant: Sh. Rohi t Goel For The Respondent : Ms. Chander Kanta ORDER PER H.L.KARWA, VP These two appeals filed by the assessee and Revenue are directed against the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the statements of the original producers of the hides and skins from whom the purchases were made by the appellant. 2. The CIT(A) is not justified while disallowing the benefit of Rule 6DD(e)(ii) read with Circular No. 4 of 2006 by misreading the statement of both the pheriwalas recorded during the remand proceedings in the presence of the appellant that they are the original producers of hides and skins. 3. Briefly stated, the facts of the case are that assessee is manufacturing leather garmen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

large number of payments in cash for the purchases made. The assessee claimed that payments were made in cash as per Rule 6DD(e)(ii) of the Income Tax Rules, 1962. The Assessing officer noted that purchases made in cash exceeding ₹ 20,000/- was made in violation of provisions of section 40A(3) of the Act. The total of such cash purchases made during the year under consideration came to ₹ 67,11,436/-. Accordingly, ₹ 67,11,436/- was disallowed by the Assessing officer by invoking .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he assessee to explain its stand or to cross examine them. He further pointed out that all the suppliers of the assessee are producers of hides and skins to whom payments are made in cash. In support of the above contention, the assessee produced affidavits of all the suppliers before the lower authorities and suppliers have confirmed that they are purchasers of skins and hides. He further pointed out that the seller namely Ram Kumar and Harish Kumar whose statements were recorded by the Assessi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd skins from other producers and treated the same before selling to the assessee, therefore, the contention of the Revenue is that these two persons are not the original producers of hides and skins by any stretch of imagination. In our considered opinion, the view taken by the Revenue in this case is not tenable in view of the judgement of the Hon'ble Calcutta High Court in the case of CIT v CPL Tannery [2009] 318 ITR 179 (Cal.), wherein the Hon'ble High Court has categorically held th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sue was before the Hon'ble Calcutta High Court in the case of CPL Tannery (supra), wherein the Assessing officer admitted that the small suppliers of hides and skins did not carry out processing after obtaining the goods from original skin peelers. The Hon'ble High Court upheld the view of the Tribunal and the relevant observations of the Hon'ble High Court are as under:- It appears that the Tribunal has specifically held as follows:- "We have heard and considered the rival subm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s under : 'We have given our thoughtful consideration to the arguments advanced from both sides and also perused carefully the relevant papers. We find that the Assessing Officer in his order at paragraph 3.8 states that " The assessee has also admitted that they collect raw hides/skins from villages from the original skin peelers, process these hides and skins to some extent and only after that, those skins/hides are sold to tannery". Thus, the Assessing Officer admits that the sm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d meaningless and will frustrate the provisions of the rule. Rule 6DD was created to carve out exceptions of the rigours of section 40A(3) and such exceptions are to be understood in the background of commercial expediency and other relevant factors. This has been accepted by the Central Board of Direct Taxes by issuing press note dated May 2, 1969, and the view that products otherwise covered under rule 6DD, when subjected to some processing should also qualify for exemption has been admitted. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that products of hides and skins cannot be regarded as products of animal husbandry because the producers are not directly connected to live animals at some point of time, is, in our opinion, far-fetched. The plain reading of the rule suggests that the words (including hides and skins) are specifically inserted in the rule to describe products of animal husbandry. When the plain reading of the rule is unambiguous, the principles of interpretation suggests that there is no necessity to derive oth .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for purchase of goods so essential for carrying on of its business, was also not disputed by the Assessing Officer. The genuinity of the transactions, rate of gross profit or the fact that the bona fides of the assessee that payments are made to producers of hides and skins are also neither doubted nor disputed by the Assessing Officer. On the basis of these facts it is not justified on the part of the Assessing Officer to disallow 20 per cent. of the payments under section 40A(3) in the proces .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r; - 8. We do not find any justification to accept the said plea of the Revenue. As a matter of fact, the Tribunal noted that a large quantity of sale of wet blue was stated to be out of previous year's closing stock and current year's purchases. Further, verification of the regular accounts could not be considered as additional evidence to be called as violation under rule 46A(3). Considering the finding of fact by the Tribunal, we do not find any question of law for interference. On th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ner, that considering the fact that the purchases were made from the unorganized sector, cash payments were indispensable. In the above circumstances, the Tribunal rightly came to the conclusion, giving the relief to the assessee. This court, in the decision in CIT v. Chrome Leather Company P. Ltd. reported in [1999] 235 ITR 708, held that rule 6DD provides that an assessee can be exempted from the payment by a crossed cheque or crossed bank draft in the circumstances specified in the rule. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not find any justification to take it a reason to interfere. 6. Considering the entire facts and circumstances and circumstance of the present case, we hold 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and hence no disallowance u/s 40A(3) of the Act is called for. Accordingly, we delete the addition. 7. Ground No.3 of the appeal reads as under:- 3. That in the facts and circumstances of the case the Ld. CIT(A) is not justified in applying GP rate of 11% instead of accepting the GP rate shown by the appellant with reasons of fall in the GP rate shown. 8. During the current year the GP rate declared by the assessee @ 9.87% was considered very low by the Assessing officer as against of GP rate of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

undersigned. The addition was made by the Ld. AO on account of application of a higher GP rate @ 15% as compared to 9.87% declared by the appellant. The reason given was that higher GP @ 17% was declared by the appellant in the preceding year. During appellate proceedings the appellant filed a computation chart for three years after considering direct expenses in trading account as under- Comparatiye Chart of Gross Profit A.Y. 2007-08 A.V. 2008-09 A.Y. 2009-10 Particulars Year ended 31.03.2007 Y .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Gross profit 43.27 56.47 95.13 Total 711.88 859.45 1410.50 G.P. ratio 9.42% 11.19% 7.77% 4.6 The discrepancy in the GP rate declared in A.Y.2008-09 as per audit report and as per chart filed during assessment/appellate proceedings is due to consideration of direct expenses in the trading account by the appellant in the chart (supra). 4.7 It would be fair and reasonable to apply the GP rate of 11.19% on the gross sales of ₹ 12,23,72,378/- as shown by him in the preceding year. In the succe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he rival submissions. Shri Rohit Goel Ld. Counsel for the assessee submitted that during the year under consideration the sale has increased to ₹ 1223.72 lakhs as compared to the sale of ₹ 504.43 lakhs during the immediately preceding year. Besides selling leather garments and leather goods, assessee is also engaged in tanning (job work) of raw leather as per the requirements of the clients. He further stated that there is increase in the sale almost to the tune of 242.60% as compare .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

decrease in the job work. which was 186.77 lakhs during the preceding year as compared to 178.32 lakhs during the year under consideration. It is relevant to observe here that both the authorities below have not properly appreciated the explanation of the assessee regarding low GP declared in this year. In the instant case, the Assessing officer has applied adhoc GP rate of 15% without pointing out any discrepancy in the audited books of account regularly maintained by the assessee. The Assessin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e uniform in all the years. It depends on many factors namely general market conditions based on demand and supply position, the rise and fall in market rates, the capital position vis-a-vis turn over achieved and many others. The explanation offered by the assessee is self explanatory. In our opinion, the first appellate authority was not justified in sustaining a part of addition made by the Assessing officer because low profit is neither a circumstance nor material to justify the addition of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rial fact in this line of trade because the smaller sizes the finished goods are not of good quality in this line of trade. As we have observed hereinabove, the 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the addition of ₹ 13,80,680/- and accordingly we delete the same and allow this ground of appeal. 11. Ground No.4 of the appeal, reads as under:- "4. That in the facts and circumstances of the case, the Ld. CIT(A) is not justified in upholding the addition of ₹ 5,39,772/- on alleged suppressed sales of ₹ 49,03,385/- to the sister concern by comparing 2 - 3 bills without appreciating the quality of the material and without controverting the facts that some items had been so .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

City @ ₹ 4/- per DMS whereas on 15.4.2008 vide sale bill No. 641, Sheep NAPPA Black had been sold to Indiggo, Gurgaon @ ₹ 5.75 per DMS. Similarly, the Assessing officer has quoted other bills in the assessment order. The Assessing officer computed the total suppressed sales at ₹ 49,03,385/- on which GP rate of 15% was applied and made addition of ₹ 7,35,508/- . 13. On appeal, the CIT(A) confirmed the view taken by the Assessing officer but he has applied GP rate of 11% as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

xmann.com 622 wherein it has been held that sister concerns were being taxed at a same rate at which the assessee was being taxed and there was no reason for the assessee to show purchase at higher rate from its sister concerns and, therefore, Tribunal was justified in deleting the addition made by the Assessing officer on account of excess payments made to the sister concerns. Shri Rohit Goel, Ld. Counsel for the assessee also submitted that rate in assessee's line of trade vary from lot- t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 te .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s issue at length, and the addition sustained by CIT(A) on account of low GP rate has already been deleted by us. The decision given in ITA No. 609/Chd/2013 shall also apply to this ground of appeal with equal force. Therefore, we do not see any merit in ground Nos. (i) and (ii) of Revenue's appeal. Accordingly these grounds are dismissed. 17. Ground No.(iii) of the appeal is directed against the action of CIT(A) in restricting the disallowance to ₹ 17,419/- out of total disallowance o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ore, there was no justification in making adhoc disallowance of about 15% out of total salary and bonus paid by the assessee. The assessee submitted that the addition to the extent of mere doubt regarding the payment of bonus to one employee who had left the job one year earlier, amounting of ₹ 17,419/- could be made. Addition made beyond that and that too merely on adhoc basis which is unreasonable and arbitrary could not be made. 20. The Ld. CIT(A)accepted the contention of the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version