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M/s Radhashyam Versus Addl. CIT Range-50 Kolkata

Disallowance of expenses incurred under the head ‘subscription & donation’- Held that:- Disallowance was made by the Authorities Below due to non-production of evidence in support the expenditure claimed. The ld. AR has also not brought anything even before us in support of the aforesaid expenditure. Considering the facts and circumstances of the case, we find no reason to interfere in the order of Ld .CIT(A). - Decided against assessee - Disallowance on account of carriage outward - Held th .....

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d in the earlier AY and this year, the expense claimed by assessee are in commensuration with earlier year expense. We find force in the argument raised by L’d AR that there was a slightly increase in the aforesaid expense and that too mainly increase in the fuel cost and other escalated cost. However, it is also important to note that the documentary evidence was not placed before the lower authorities. Now, in the interest of natural justice and fair play, we after considering the totality of .....

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any factors which have been ignored by L’d CIT(A) before enhancing the total income of assessee by disallowing the aforesaid expenses. We also further find that this expense has been claimed by assessee consistently for the last several years and no such disallowance was made by the Authorities Below. Considering the totality of the facts and circumstances, we are inclined to reverse the orders of Authorities Below. AO is directed accordingly. - Decided in favour of assessee - ITA No.1226/Kol/20 .....

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his order dated 09.12.2010 for assessment year 2008-09. The grounds raised by the assessee per its appeal are as under:- 1) That in the facts and circumstances of the case, the ld. CIT(A) erred in confirming the addition of ₹ 52,201/- under the head Subscription & Donation without considering the facts of the case in proper perspective. 2) That in the facts and circumstances of the case, the ld. CIT(A) erred in confirming the addition of ₹ 1,80,719/- under the head Carriage Outw .....

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ad Home Biri Labour , without considering the explanations and submissions made by the assessee. 5) That in the facts and circumstances of the case, the ld. CIT(A) erred in enhancing the addition under the head Home Biri Labour amounting to ₹ 30,37,480/- in spite of examining and verifying the facts and other materials available in the records. 6) That in the facts and circumstances of the case, the ld. CIT(A) was arbitrary, unjust, unlawful and absolutely based on surmises. 7) That the or .....

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sum of ₹ 52,201/- on account of the expense incurred under the head subscription & donation . 3. The facts of the case are that assessee in the present case is a partnership firm and engaged in Bidi manufacturing business and trading business of match box. During the year under consideration, assessee has filed its return of income declaring profit of ₹1,25,53,220/- under the business head. Thereafter matter was selected for scrutiny assessment and notice was issued u/s. 143(3) .....

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ich therefore was disallowed on the ground of ineligibility for deduction u/s 80G of the Act. Therefore, a sum of ₹52,201/- was disallowed and added to the total income of assessee. 4. Aggrieved, assessee preferred an appeal before L d CIT(A) whereas it was prayed that the donation & subscription were paid exclusively for the purpose of assessee s business and therefore no disallowance is required to be made. The assessee in support of its claim has submitted the list of donation & .....

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thorities Below. On the other hand, L d DR vehemently supported the orders of Authorities Below. 6. We have heard the rival parties and perused the materials available on record. From the foregoing discussion, we find that disallowance was made by the Authorities Below due to non-production of evidence in support the expenditure claimed. The ld. AR has also not brought anything even before us in support of the aforesaid expenditure. Considering the facts and circumstances of the case, we find no .....

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nt of ₹1,80,715/- which was accordingly disallowed by AO and added to the total income of assessee. 8. Aggrieved, assessee preferred an appeal before L d CIT(A) whereas assessee submitted that expenditure incurred for the purpose of carriage of the goods from factory to the different markets on the part of North-East region. The AO has checked the above expense on test check basis and found no defects in the expense. The expenses incurred by assessee were quite reasonable and commensurate .....

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hat the expense was disallowed by AO on the ground of non-production of supporting evidence. Again, assessee has also failed to bring supporting evidence at the time of appellate stage. Consequently, Ld. CIT(A) confirmed the action of AO. Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. 9. Before us L d AR submitted that the expense was incurred for the purpose of business and similar expenses were also incurred in earlier years. There was no disallowance m .....

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s of Authorities Below. 10. We have heard rival contentions and perused the materials available on record. From the foregoing discussion, we understand that the lower authorities have disallowed the carriage outward expense claimed by assessee for a sum of ₹ 1,80,719/- out of ₹ 29,67,915/- due to non-production of supporting evidence. Before us L d AR has argued that L d CIT(A) erred by disallowing the expense on estimate basis. However, we find that lower authorities have given clea .....

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ry of the expense claimed in earlier years, audited financial year statement etc. In the instant case, assessee has produced all the documentary evidence in support of its expenditure except the aforesaid amount of ₹1,80,719/- which is just 1.18% of the total turnover of assessee business. At the same time, we cannot ignore that similar expenses were claimed in the earlier AY and this year, the expense claimed by assessee are in commensuration with earlier year expense. We find force in th .....

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n the interest of justice and fair play, we restrict the disallowance to the extent of ₹50,000/- for the year under consideration, as all the vouchers were not produced for verification during the appellate proceedings.Ground No. 2 is decided in favour of assessee in part. 11. Next issue is inter-connected in grounds No. 3, 4 & 5 are that L d CIT(A) erred in enforcing the addition made under head Home Biri Labour expenses for an amount of ₹ 30,37,480/- out the total labour expens .....

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the Bidi Merchandise Association with Trade Unions which was framed under the supervision of Labour Commissioner of Govt. of West Bengal. Accordingly the rate of bidi making was determined on the production of 1000 bidi by such home bidi labour for ₹ 41/- per 1000 bidi at Aurangabad, and Rs. ₹ 40.80/- per 1000 bidi making at Chamagram and ₹ 40/- per 1000 bidi making at Tungidighi. The assessee further submitted that this practice of making such payment is for more than 40 years .....

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However, L d CIT(A) issued show cause notice upon assessee for the production of details of the expense of ₹6,07,49,596/- and stated that why not 5% of home bidi labour expense should be treated as not genuine. In compliance to the notice, assessee submitted the details for the expense of home bidi makers for one month. However, L d CIT(A) has disallowed 5% of such expense and enhanced the total income of assessee by observing as under:- I carefully considered the material before me. I fo .....

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The genuineness of the expenses may examine on the basis of voucher. The name of labour and signature of the recipient but the appellant failed to file any documents which established that the expenses are genuine. In the absence of the supporting voucher, I am the view that the Home Biri Laboour expenses are not fully genuine. Hence, I issued a enhancement notice treating 5% of Home Biri Labour expenses as not genuine. Considering the above findings and facts of the case, I am the view that 5% .....

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e on estimated basis is not permissible in terms of Hon'ble Supreme Court judgment in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954) reported in 26 ITR 775 (SC) On the other hand, L d DR vehemently relied on the orders of Authorities Below. 15. We have heard rival contentions and perused the materials available on record. From the foregoing discussion, we find that assessee has claimed home bidi makers for an amount of ₹ 6,07,49,596/- but AO could not verify an amount of ₹ .....

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has given very clear-cut finding that expense of ₹3,15,026/- was not verifiable on the basis of non-production of document and AO reached to this conclusion after scrutinizing of all the expense claimed by assessee. However, L d CIT(A) issued show cause notice to assessee to produce the details of the home bidi makers expense. As per the appellate order, assessee has failed to produce the supporting evidence. So the addition was enhanced to ₹30,37,480/- by the ld. CIT(A) by observin .....

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f P.F., the assessee was also assessable under the Excise Act and assessee has paid excise duty on the production of bidi, in the earlier years such expenditures were claimed but no such disallowance was made by Authorities Below. There were also proceedings against assessee u/s 263 of the Act which was finally dropped by Revenue. The home bidi expenses were decided in terms of tripartite agreement which was made in the presence of Labour Commissioner of Govt. of West Bengal. As per the submissi .....

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Dhakeswari Cotton Mills Ltd. (supra). The relevant extract of the order is reproduced below. The ITO is not barred by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a Court of law, but in making the assessment under sub-s. (3) of s. 23 the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the .....

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ad a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, seems to be based on surmises, suspicions and conjectures. It is somewhat surprising that the Tribunal took from the representative of the Department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to show that statement had no relevancy whatsoever to the case of the mill in question. It is not known w .....

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