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2016 (5) TMI 976 - ITAT KOLKATA

2016 (5) TMI 976 - ITAT KOLKATA - TMI - TDS u/s 194C - Disallowance u/s. 40(a)(ia) - non deduction of tds - CIT(A) deleted the disallowance - Held that:- In respect of payments made to Air Transport Corporation (Assam) Ltd., the Ld. CIT(A) had recorded a categorical finding that there was no oral or written contract the assessee had with lorry operators as vehicles were hired whenever the need arose. This finding has not been controverted by the revenue before us. Hence, we hold that the provisi .....

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e, we are convinced that the provisions of section 194C of the Act cannot be made applicable to the facts of the instant case.

In respect of payments made to Samsuddin Pailan, we find that no specific arguments were advanced by the Ld. DR by controverting the findings of ld. CIT(A) and hence, we find no infirmity in his order in this regard.

In respect of payments made to Das Enterprise, it is established by the assessee that the payment is made towards purchase of material .....

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n is dismissed.

Disallowance u/s. 40A(3) - Held that:- We find that the AO adjudicated this issue in detail with regard to payment made to each party. The Ld. AR before us was not able to prove that the case falls under the exception provided in rule 6DD of the I. T. Rules. Hence, we confirm the addition made by the Ld. AO. - Decided against assessee.

Disallowance on account of bogus purchases - estimation of gross profit by increasing it by 4% on the bogus purchases - Held .....

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ription to various puja committees and payments to Chamber of Commerce and Industry. Hence, we find that the reliance placed by the Ld. AR on the decision of Hon’ble Calcutta High Court in the case of Bata India ltd., supra is well founded. [1993 (3) TMI 89 - CALCUTTA High Court ] - Decided in favour of assessee - I.T.A No. 2453/Kol/2013, C.O. No. 139/Kol/2013 - Dated:- 20-5-2016 - Shri N. V. Vasudevan, JM And Shri M. Balaganesh, AM For the Appellant : Md. Ghayas Uddin Ansari, JCIT, Sr. DR For t .....

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of CIT(A), we dispose them off by this common order. 2. The first issue to be decided in this appeal of revenue is as to whether the disallowance u/s. 40(a)(ia) of the Act could be made in the sum of ₹ 10,59,658/- in the facts and circumstances of the case. 3. Brief facts of this issue are that the assessee is a partnership firm engaged in the business of general order supplies and catering services. During the course of assessment proceedings, the Ld AO observed that the assessee had mad .....

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o M/s. Air Transport Corporation Ltd.(Assam). The copies of bills as well the documents showing the transportation of goods were filed before the AO. According to the AO the payment on account of transportation charges paid to the said party were contractual payment and accordingly the provisions of section 40(a)(ia) were applicable. It was submitted that there was no oral or written contract with any transport operators who were hired whenever the need arose without any pre requisition or order .....

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t the tax and the provisions of section 194C read with section 40(a)(ia) of the Act were not applicable. 3.2. Rayana Paper Board Ltd. - ₹ 1,95,000/- As far as the payment to Rayana Paper Boards Ltd is concerned, the same was not a payment towards transport charges. The assessee purchased paper from Rayana Paper Board Ltd. The said company also took reimbursement of the transport charges paid by them on behalf of the assessee for delivery of the goods to assessee s place. They included this .....

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ng work carried out through various labours. The party was a Labour Sardar who himself was engaged in doing the labour work. Accordingly it was claimed that no tax was required to be deducted in case the payment is made to labour sardar. 3.4. Das Enterprise - ₹ 2,70,595/- The payment to M/s. Das Enterprise was for purchase of goods and debited to the purchase a/c. The copy of purchase bill was produced before the revenue. Needless to mention that for payment for purchase of material, the p .....

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es of the case Ld. CIT(A) erred in deleting the disallowance made u/s. 40(a)(ia) whereas, all the relevant expenses were well within the purview of TDS. And the assessee has raised cross objections before us on the following ground no. 1: 1. For that the Ld. CIT(A) erred in confirming the disallowance of ₹ 159509/- out of disallowance u/s. 40(a)(ia), 6,14,711/- out of disallowance u/s. 40A(3), ₹ 4,36,000/- disallowed as prior period expenses, without property considering the submissi .....

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.2010, (iii) Decision of Visakhapatnam ITAT in the case of Mythri Transport Corporation Vs. ACIT reported in 124 TTJ 970 The Ld. DR vehemently supported the order of the AO. 3.7. We have heard rival submissions and perused the material available on record and case laws cited above. We find in respect of payments made to Air Transport Corporation (Assam) Ltd., the Ld. CIT(A) had recorded a categorical finding that there was no oral or written contract the assessee had with lorry operators as vehi .....

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urce. The learned Tribunal has recorded the fact that the department has not been able to bring any material on record to show that the assessee has made the payment to the transporters in pursuance of contract for carriage of goods of the assessee and the question of deduction at source under section 194C does not and cannot arise. In the absence of evidence of payment made by the assessee to the transporters, the assessee cannot be saddled with the liability of deducting tax at source. Before .....

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n pages 10 to 70 of the paper book containing details of freight charges including bills and money receipt from various parties. In view of the same, we are convinced that the provisions of section 194C of the Act cannot be made applicable to the facts of the instant case. 3.9. In respect of payments made to Samsuddin Pailan, we find that no specific arguments were advanced by the Ld. DR by controverting the findings of ld. CIT(A) and hence, we find no infirmity in his order in this regard. 3.10 .....

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y specific arguments before us against the order of Ld. CIT(A) in respect of this addition and accordingly the assessee s Cross Objection is dismissed. 4. The second ground to be decided in this appeal of revenue is as to whether the disallowance u/s. 40A(3) of the Act could be made in the facts and circumstances of the case. 4.1. Brief facts of this issue is that the Ld. AO observed that the assessee had made payments in cash exceeding ₹ 20,000/- otherwise than by way of an account payee .....

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was revealed that payments were actually made in cash exceeding ₹ 20,000/- on a single payment basis on each day. The Ld. AO , therefore, held that the goods do not fall under the exception provided in Rule 6DD of the I. T. Rules, 1962 and hence, disallowed u/s/. 40A(3) of the Act a sum of ₹ 6,94,861/- in the assessment order. 4.2. Before the Ld. CIT(A), the assessee argued that the details were submitted to the Ld. AO in the course of assessment proceedings along with the ledger cop .....

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ccepted by the AO and they were fully supported by bills and vouchers. As regards payments made to National Pipe and Sanitary Stores it is submitted that the same were paid on various dates but the said amount was credited by the party on one single day and receipt was issued by them accordingly. There was no payment exceeding ₹ 20000/- as is evident from the ledger of the party in the books of the assessee. The said books have not been rejected. Therefore, no disallowance under sec. 40A(3 .....

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d. CIT(A) gave relief to the extent of ₹ 80,150/- and upheld the balance addition of ₹ 6,14,711/-. Aggrieved, the revenue is in appeal before us and assessee has also raised cross objection in this regard. 4.4. The Ld. AR during the course of hearing agreed for the addition confirmed by the ld. CIT(A) to the extent of ₹ 80,150/-. He reiterated the arguments as made before the CIT(A). In response to this, Ld. DR vehemently supported the orders of the lower authorities for the ba .....

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sed. 5. The third issue to be decided in this appeal of revenue is as to whether the disallowance on account of bogus purchases could be made in the facts and circumstances of the case. 5.1. Brief facts of this issue are that the Ld. AO observed that the assessee has shown a meager profit of ₹ 21,000/- on purchase and sale of betel nuts. He accordingly, proceeded to issue notice u/s. 133(6) of the Act to the parties from whom purchases were made. The Ld. AO observed that letters in many ca .....

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06.2012 was prepared and signed by him at the behest of the assessee. The said statement was given to the assessee and opportunity for cross examination was provided by the AO to assessee which the assessee for reasons best known to him failed to utilize. Accordingly, the Ld. AO treated the purchases made from M/s. Asha Traders in the sum of ₹ 18,02,848/- as bogus. 5.2. The Ld. AO issued letter to Mr. T. William John who had confirmed that he had not done any transaction with the assessee .....

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hn. The Postal Authority will not do such a silly mistake (that too, twice) that letter addressed to Mr. William Tham will be delivered to Mr. T. William John and both the time Mr. T. William John will receive and reply the letter addressed to Mr. William Tham. That means Mr. William Tham and Mr. T. William John are one person. The said fact was confirmed by Mr. T. William John over his cell phone. Mr. T. William John confirmed the undersigned over the cell phone that there is no any William Tha .....

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ctions shown by the assessee with them. In response, ITO port Blair, vide his letter dt. 31.10.2012 informed that the existence of M/s MKM Copra & Co. could not be ascertained in Calicut, Port Blair Andaman. The said fact was conveyed to the assessee. In response, assessee furnished a Xerox copy of affidavit from one Mr. R. Madhivannan. Vide this affidavit Mr. R. Madhivannan declared that he carried out the business under the name and style M.K.M. Copra & Co. and had a transaction of  .....

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ed that there is no existence of the said party at the given address. The report of the Inspector is reproduced as below:- "As directed by ITO Port Blair, I went to conduct an enquiry on 19.10.2012 in the case of M/s Saha Agency at the office premises of M/s. M.K.M. Copra & Co. Calicut, Port Blair, Andaman. I enquired in Calicut locality regarding the M.K.M. Copra & Co. but no one could tell whereabouts of M.K.M Copra & Co. I met with persons running copra business even they als .....

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; Co. was signed by one R. Madhi, as Partner of the concern. As stated earlier when assessee was informed about the non-service of letter, confirmation from parties reached suo moto. - The signature of R. Madhi on affidavit and on letter dt. 11.06.2012 also differs. - Assessee failed to furnish/produce any other identity of the said concern like trade licence, PAN, Electricity/Telephone Bills etc. Here, it is important to mention that onus of proving identity of the person and genuineness of the .....

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is a labour and at present his bank balance is only of ₹ 300/- . - Mr. R. Madhivannan failed to produce Partnership deed, Trade licence and / or any documentary evidence that he is/was partner of M/s MKM Copra & Co. - Mr. R. Madhivannan failed to produce any proof of business activity; even he has no letter pad, bill book etc. - The affidavit has been made either in exchange of some favour or under coercion or pressure from the party. The aforesaid facts of the report of I.T.O, Port Bl .....

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(iii) M.K.M. Copra & Co. - ₹ 16,15,935/- Rs.48,94,198/- as bogus purchases and disallowed the same. 5.5. Before the Ld. CIT(A) the assessee argued that the assessee purchased raw betel nuts and the same cannot be kept in store for more than one or two days. The assessee immediately sold the same. The parties who sold the betel nuts procure the same for the assessee from producers and after adding their commission or remuneration sold the same to the assessee. The assessee in turn also .....

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en any sale. From the details of the quantity recorded in the ledger account of betel nuts purchase and sale, it could be found that the total quantity purchased was 374629 kgs and the same quantity have been sold. Unless such quantity was purchased there could not have been any sale and if the purchase was bogus then the sale was also bogus. If the quantity purchased have been sold, purchase cannot be treated as bogus even though the parties may not be available. Reference in this connection wa .....

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ch the betel nuts were purchased from the so called bogus parties were also not higher than the rates at which the betel nuts were purchased from other parties whose purchases have been accepted by the AO. Date wise purchase of betel nuts were filed before the AO. Hence it also cannot be said that the purchase from the so called bogus parties was inflated. The Ld. CIT(A) appreciated the contentions of the assessee that but for purchase of betel nuts, there cannot be any sale. He held that just b .....

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94,198 x 4%) and granted relief for the balance. Aggrieved, the revenue is in appeal before us on the following ground: 3(a) On the facts and circumstances of the case ld. CIT(A) erred in restricting the disallowance of ₹ 48,94,198/- on account of bogus purchase made by the AO to ₹ 1,93,566/- (b) On the facts and circumstances of the case CIT(A) erred in not continuing the total disallowance made on a/c of bogus purchase as the purchase was shows from two nonexisted party and the thi .....

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he AO and erred in resorting to estimation of gross profit by increasing it by 4% on the bogus purchases of ₹ 48,94,198/-. We find that the ld. AO had accepted the sales to be genuine. He had not treated the amounts credited in the books towards sale proceeds of betel nuts as unexplained cash credit u/s. 68 of the Act. This goes to prove that credits in amounts represent only sale proceeds. Hence, arguments of the Ld. AR that without purchase of betel nuts, there cannot be any sales, needs .....

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nd perused the records. The finding of the CIT(A) is that the assessee had discharged all its onus and complied with his duties providing that purchases are genuine, parties are not bogus, goods have been received and only after receiving the goods, the sales were made. It has been further held that there is no finding of AO or no material on record which shows payments of impugned purchases came back to the assessee. The CIT(A) has also examined the issue in the light of provisions of s. 69C an .....

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closing stock filed is also not in dispute. If the addition made by the AO is on account of purchases of ₹ 27,39,407, the total GP comes to ₹ 28,34,147 (27,39,407 + 94,740). The GP calculation on this estimation of profit comes to 100.6 per cent. We find that such GP is not possible in such a trade of the assessee. The finding of the AO is that following three parties were not found nor were they produced for examination: 1. Anus Association ₹ 2,10,709 2. Rolex Enterprises  .....

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ccordingly the order of the CIT(A) is modified and the addition to the extent of ₹ 50,000 is sustained and balance addition of ₹ 26,89,407 is deleted out of the total addition made of ₹ 27,39,407/-. 5.8 ITAT, Chandigarh bench third member case in the case of J. R. Solvent Industries Pvt. Ltd. Vs. ACIT reported in 68 ITD 65( TM) wherein it was held as under: HELD (AS PER THIRD MEMBER) There was no categorical finding that the purchases in question were made from R since the Acco .....

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inal payment of ₹ 800; (3) There was possibility of the firm having shifted to some other place by the time the Inspector of the Department deputed to locate the firm proceeded to do so; (4) The raw material purchased from whatever source went into the production of rice bran oil and this stood duly established by day-to-day records kept by the assessee company and in respect of which no discrepancies were pointed out by the Assessing Officer; (5) The yield shown by the assessee was reason .....

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ould be the yield resulting therefrom would be quite abnormal not only as compared to the preceding assessment year but also with reference to the yield in the other months of the year; (7) Treating the purchases as bogus would result in a situation where the out- put in the form of rice bran oil and DORB would be more than the input by figure of 1000 qtls. which was not possible in the rice bran oil extraction industry. The Accountant Member also ruled out the diversion of funds from Firm R to .....

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essment year 1988-89 and this apparently was also not projected on behalf of the assessee. The Judicial Member, however, had not offered any comment whatsoever on these aspects as also on various other factual details and findings recorded by the Accountant Member in his order. In conclusion, the Accountant Member had rightly took the view that the assessee did purchase rice bran, whether from the firm R or from some other party/parties, and such rice bran did go into the production of oil other .....

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ied and to that extent the claim of the assessee was not genuine. As in the case of the main addition, the Judicial Member had not offered any comments and proceeded to restore major addition while deleting the other two additions of ₹ 4,22,124 and ₹ 1,45,600. Hence, inasmuch as all the three items were the facet of a consolidated order, the view of the Accountant Member had to be confirmed in toto. 5.9 In view of the aforesaid findings and judicial precedents relied upon hereinabove .....

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owards donation in the sum of ₹ 42,792/- in the facts and circumstances of the case. 6.1. Brief facts of this issue are that the assessee debited donation and subscription of ₹ 42,792/- in its P&L Account. The Ld. AO disallowed the same for want of supporting evidence and disallowed the same. Before the Ld. CIT(A), the assessee stated the addition was made as the assessee could not produce any supporting evidences for the same. However, it was submitted that details of the said i .....

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