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2017 (1) TMI 563

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..... tail of rate of payment and the destination where the oil was delivered. We find that the assessing officer had not pointed out any specific defects and the disallowance was made on general assumption that expenses were incurred in cash and the vouchers not contained the detail of rate of payment and the destination where the oil was delivered for want of proper maintenance of vouchers. Looking to the volume of expenditure incurred in cash and the facts reported by the Ld. CIT(A), we uphold the decision of the ld. CIT(A) to restrict the disallowance to the extent of being 3% of the Khargat expenses incurred in cash. Shortage in loose ground nut oil and cotton seeds oil - Held that:- We noticed that the assessee’s claim of shortage of oil in percentage term comes to 0.19% to 0.23% which was not unusual. We observed that the shortage in oil had been taken place in the process of transforming the oil from the tankers to storage tanks and therefore into the packing material such as bottles, jars tins and pouches. We find that the assessing officer had disallowed the shortage in oil without any supporting material just on the basis of presumption and guess work. In view of the above .....

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..... 2 Shri Mangrol Oil Mill 1,64,83,962/- 3 Pankaj Foods 2,94,86,307/- In this connection the ssessee has stated that due to competition in the market, he has to maintain and deliver a quality product to the customer and for this purpose. They have to pass through certain process which included using double filter oil and the cost for such oil is generally more than the filter oil. Because of these facts slightly higher price was paid to the three associated concern. The assessing officer has not accepted the explanation of the assessee and disallowed excess payment to the extent of ₹ 2,19,919 made to the specified person by invoking the provision of section 40 A(2)(b) of the act. Aggrieved against the addition made by the assessing officer, the assessee has filed appeal before the learned CIT(appeal). The learned CIT(appeal) has allowed the appeal of the assessee. The decision of the learned CIT(appeal) is reproduced as under 4. I have perused the assessment order and the written submission put forth before me by the AR of the appellant. I hav .....

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..... e of sourcing of double filter edible oil. We observed that it is clear that double filter oil is more costly than the filter oil and it also fetch more price in the market than the filtered oil. We find that learned CIT appeal has justified his decision keeping in view the nature of business, volume and quality of products involved. In view of above facts and findings, we do not find any reason to interfere in the finding of the learned Commissioner of Income Tax (appeal). Disallowance out of Kharagat expenses 6. During the course of assessment proceedings, the assessing officer has noticed that assessee has defected the P L a/c on account of Kharajat expenses of ₹ 1,19,88,695/-. On verification, the assessing officer find that most of the expenses were incurred in cash and the vouchers not contained the detail of rate of payment and the destination where the oil was delivered. In this regard the assessee stated that only the amount of ₹ 2, 72,8,756 was incurred in cash out of the total expenses incurred under this head. He further stated that it cannot be said that the expenditure was not genuine merely on the reasoning that the expenses were incurred in cash. .....

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..... of rate of payment and the destination where the oil was delivered for want of proper maintenance of vouchers. Looking to the volume of expenditure incurred in cash and the facts reported by the Ld. CIT(A), we uphold the decision of the ld. CIT(A) to restrict the disallowance to the extent of being 3% of the Khargat expenses incurred in cash. Shortage in loose ground nut oil and cotton seeds oil of ₹ 31,55,969/- 9. During the course of assessment proceedings, the assessing officer observed that the assessee has claimed shortage of 54670 kgs. In this connection, he stated that the shortage to be on the higher side as the assessee was not manufacturing the oil. He therefore allowed shortage to the extent of 3038 kg out of ground nut oil and 2432 Kg. out of cotton seed oil resulted in addition of ₹ 28,39,945/- to the total income of the assessee. The assessee preferred appeal before the Ld. Commissioner of Income Tax(A). 10. The Ld. Commissioner of Income Tax(A) has deleted the addition made by the assessing officer, the decision of the Ld. Commissioner of Income Tax(A) is reproduced as under:- 7.1 From the above it can be seen that, although the AO starts hi .....

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..... A)-IV, Rajkot has vide orders dated 18.09.2013 in appeal No.CIT(A)-IV/0272/ll-12 deleted the disallowance and allowed the appeal of the appellant. 7.2 I find substantial force in the above arguments, particularly when the AO's findings are contrary in itself. By allowing 10% shortage, the AO in principle agrees that there are occurrence of shortage, albeit, the disallowance are made on surmises and conjectures. No reason for allowing 10% of the shortage has been brought on record. Looking to all the above factors, the disallowance out of shortage made by the AO being arbitrary in nature and having without base, the same is directed to be deleted. In the result, this ground of appellant's appeal is allowed. 10.1 During the course of appellate proceedings before us, the Ld. D.R. relied on the order of assessing officer. On the other hand, Ld. A.R. relied on the order of Commissioner of Income Tax(A). 11. We have heard both the sides and perused the material on record. We noticed that the assessee s claim of shortage of oil in percentage term comes to 0.19% to 0.23% which was not unusual. We observed that the shortage in oil had been taken place in the process o .....

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