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The Income Tax Officer, Ward 2, Chitradurga Versus M/s. Sri Maruthi Traders

2016 (9) TMI 438 - ITAT BANGALORE

Disallowances of dehusking charges - inflation in the expenses - self-made vouchers - cash expenditures - Held that:- AO has not recorded the statement of labourers produced before him, but simply wrote their names against the signature. The CIT(Appeals) was of the view that there would be some inflation in the expenses claimed by the assessee and made a fair estimate that 20% of dehusking charges to be excessive and therefore upheld the addition to the extent of 20% of dehusking charges. We are .....

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s issue. - Disallowance of hamali, loading and unloading charges - Held that:- We subscribe to the view of the CIT(Appeals) that in the self-made vouchers, the probability of inflation has to be taken into account. The CIT(A) has reasonably restricted the disallowance to the extent of 10% of the total expenditure. Hence, we confirm the order of the CIT(Appeals) and dismiss the respective grounds raised by the department in its appeal as well as by the assessee in its CO on this issue. - .....

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ers in rural areas as it is covered by exemption under proviso to section 40A(3). Further, the CIT(Appeals) has found that the assessee has been in this business for the past 30 years and for the AY 2008-09, no disallowance was made u/s. 40A(3), whereas in the AY 2009-10 the assessee’s claim was accepted by the AO in the set aside proceedings. Since coconuts purchases are from farmers and in the present year, each payment is less than ₹ 20,000, provisions of section 40A(3) is not applicabl .....

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order dated 31.08.2015 of the CIT(Appeals), Davangere for the assessment year 2010-11. 2. The assessee is a partnership firm, engaged in trading of coconuts. For the relevant assessment year, the assessee filed the return of income declaring income of ₹ 60,300. The scrutiny assessment u/s.143(3) r.w.s.144A was completed on 28/3/2013 by computing a total income of ₹ 81,84,540 after disallowances of an amount of ₹ 13,95,106/- out of dehusking charges, ₹ 3,09,429/- out of Ha .....

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after take the coconuts only and let the husk with the sellers. According to the AO, the assessee is purchasing coconuts that have already been de-husked. The AO did not accept the assessee s statement that the de-husking charges are accounted and claimed as expenditure and the husk which is used in various industries including coir industry is left with the sellers. The AO observed that the assessee is running a coir products unit and the husk is the main raw material for that industry. Therefo .....

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as under:- a. The assessee produced all the 1173 number of vouchers for AOs perusal. b. The Husk, after de-husking, goes to the seller/farmer for being used as fuel. c. De-husking is done at purchasers point and labour of the assessee who accompanied the trucks do de-husking. d. De-husked coconuts are more economical than un-husked coconuts since the cost of transportation is more in the case of latter. e. The labourers who have produced before the AO admitted the fact of having travel in the tr .....

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on that de-husked items bring better revenue which will be used in various industries including coir industry. But the assessee has explained how purchase of de-husked coconuts are beneficial, cost wise as well as transporting the coconuts from purchase point to shop. The CIT(A) has pointed out that the A.O. has not recorded the statement of labourers to ascertain the veracity of payment of dehusking charges, but simply written their names against their signatures. The CIT(A) held that A.O. fail .....

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e us which is as follows:- Whether the Hon ble CIT(Appeal) is justified in granting relief to the assessee taking a completely different view taken by the AO, without considering the facts that whey the assessee leaving husk of coconut with the sellers, the raw material can be used in coir industry run by him even incurring de-husking expenses? 7. The assessee in its CO in ground No.2 raised objection, as it is aggrieved by the order of CIT(Appeals) sustaining an addition of ₹ 2,79,020 wit .....

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e dehusking is done at the purchase point and labourers of the assessee were sent in trucks to do dehusking. The AO has not recorded the statement of labourers produced before him, but simply wrote their names against the signature. The CIT(Appeals) was of the view that there would be some inflation in the expenses claimed by the assessee and made a fair estimate that 20% of dehusking charges to be excessive and therefore upheld the addition to the extent of 20% of dehusking charges. We are of t .....

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ue. 9. The next issue relates to disallowance of hamali, loading and unloading charges. The AO found an amount of ₹ 5,77,854/- and ₹ 6,59,863/- was claimed as expenditure towards loading and unloading charges and Hamali charges respectively. The assessee produced 805 vouchers for Hamali payments and 244 vouchers for the loading & unloading charges before the AO for examination. It was submitted that the expenses are in the nature of payment to coolies which assessee has been foll .....

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of the expenses. 10. On appeal before the CIT(Appeals), the assessee also produced copy of vouchers for Hamali Charges and loading & unloading charges. The assessee submitted that even though labourers for Hamali, Loading and Unloading charges were produced before the A.O., he failed to record the statement from them. 11. The CIT(Appeals) noted that the sample vouchers produced before him were in order, however, he observed that the vouchers are self made ones and in most of the vouchers, fu .....

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13. We have heard the rival submissions and perused the material on record. The ld. AR for the assessee submitted before us that though labourers were produced before the AO, but the AO failed to record their statement. He submitted that sample vouchers were produced before the CIT(Appeals), but the CIT(A) though found them to be in order, he however was of the view that the labourers were illiterates and would have signed the vouchers without knowing the contents. He was of the view that when s .....

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the department in its appeal as well as by the assessee in its CO on this issue. 15. The next issue is regarding cash payments in contravention of provisions of section 40A(3). The AO noted that all the payments made towards purchase of coconuts are made by cash and the payment in 239 cash bills/vouchers exceeds ₹ 20,000/- totalling to ₹ 63,79,700/-. The assessee s contention was that wherever bills exceed ₹ 20,000/-, the name of the route is mentioned and on the reverse of th .....

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g cultivated by the holders of the RTC. Hence the assessee has failed to prove that the coconuts are purchased from the farmers. The AO further observed that the assessee s claim that whenever the bill amount exceeds ₹ 20,000/- a list of sellers are noted on the reverse of the bills actually goes to prove the fact that coconuts are not purchased individually from farmers but are being purchased at particular purchase point. Further the name of the route of purchase is only mentioned on the .....

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ting to ₹ 63,79,000/- are in contravention of the provisions of the Section 40A(3), a sum of ₹ 63,79,700/- was, therefore, disallowed and added back to the total income. 16. The contentions of the assessee before the CIT(A) are that, coconuts are products of farmers in rural areas and the farmers need to be paid only in cash and each payment was less than ₹ 20,000/- even though each transaction mentioned in the voucher was for more than ₹ 20,000/- as the vouchers were pre .....

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gs, the assessee has furnished a booklet containing copies of all vouchers for purchase of coconuts. The CIT(Appeals) on examination of the same found that, wherever bill exceeded ₹ 20,000/-, the voucher is made in the name of purchase route not in any individual name on the reverse of the bill, but 3 to 4 transactions are recorded wherein the name of the persons and amount are mentioned which are less than ₹ 20,000/- in each case. These vouchers were submitted to the AO during the a .....

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