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2018 (2) TMI 742

Disallowance on account of supervision charges - guinity of expenditure - as contented by assessee no enquiry was made by the A.O. with the concerned contractors to verify the genuineness of claim of the assessee for supervision charges - Held that:- No agreement or contract entered into with the concerned parties is produced by the assessee on record to show the nature of services agreed to be rendered by the concerned parties and the terms and conditions on which such services were to be rende .....

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s raised by the assessee, the solitary common issue involved therein relates to the disallowance of ₹ 35,00,000/- made by the A.O. and confirmed by the Ld. CIT(A) on account of supervision charges. 2. The assessee in the present is a company which is engaged in the business of trading of industrial consumables. The return of income for the year under consideration was filed by it on 28.09.2010 declaring a total income of ₹ 7,96,250/- In the Profit & Loss Account filed along with .....

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e required work through the skilled and unskilled staff appointed by them. It was submitted that the expenditure on supervision charges thus was incurred for providing services to the customers which had resulted in increase volume of business. This explanation of the assessee was not found acceptable by the A.O. and he proceeded to disallow the expenditure incurred by the assessee on supervision charges for the following reasons given in the assessment order: 1. The assessee has not required to .....

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se own residential flat or pay rent of flat. 3. The disallowance made by the A.O. on account of supervision charges was challenged by the assessee in the appeal filed before the Ld. CIT(A). It was submitted on behalf of the assessee before the Ld. CIT(A) that it was a dealer of Usha Martin and had supplied wire ropes manufactured by Usha Martin to the various customers. It was also submitted that the supervision charges of ₹ 35,00,000/- were paid to five contractors @ ₹ 7,00,000/- ea .....

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opies of purchase orders of the clients, guarantee certificates issued by Usha Martin, documents relating to dealer policy etc. The said documents filed by the assessee were forwarded by the Ld. CIT(A) to the A.O. seeking his comments. In the remand report submitted to the Ld. CIT(A) on 31.05.2016, the Assessing Officer offered his comments on the issue as under: 1. A.O. pointed out that the appeal proceedings assessee had submitted that supervisors work for groupings, fixing the loops at the en .....

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is that payment was made to contractors and the technical persons who actually provided services are complete strangers to the assessee. Assessee failed to furnish any evidence to show the identity and technical skill of those persons. 5. A.O. appointed out that inspection clause in dealer policy says: in some cases the dealers may place order with inspection clause. In such cases, it will be the dealers responsibility to organise inspection as soon as being informed of the readiness of the row .....

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shows that the bills are for Seamless Pipes and Polyster Sling and not for wire ropes. 10. Assessee did not produce TDS details for payments made to contractors. 5. When the remand submitted by the A.O. was confronted by the Ld. CIT(A) to the assessee, the later filed copies of acknowledgement of income tax returns filed by four contractors along with their Form 26AS. The assessee also offered following comments on the remand report submitted by the A.O.: 1. Assessee has given jobs of supervisio .....

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Policy. However perusal of the 'Inspection' clause shows that inspection was to be made of the Steel Wires manufactured by Usha Martin before it was supplied to customers whereas assessee had claimed that inspection/supervision was to be made a clients' place. Thus contradiction in assessee's statements start from the very basis of the need of supervision/inspection. Then assessee claims to have given this responsibility to contractors who are neither themselves qualified nor do .....

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essee. However, in the return of income , she has claimed credit of only ₹ 7301/-. 3) In the case of Sri Ashok Sharma, he has shown income receipts from only Maa Vaishnovi Sponge Ltd. and Reliable Sponge Ltd. There no mention of the assessee Co. in Form 26AS. 4) In the case of Sri Ghanashyam Das Agarwal, income has been received from Jagdamba Commercial Pvt. Ltd., Suraj Solutions Pvt. Ltd. and the assessee company. However, in the return of income he has not claimed credit for TDS made by .....

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eir return. In the case of Sri Raman Das, receipts appear in Form 26AS and are also reflected in his Return but considering overall situation, this also appears manipulated because total income is below taxable limit and entire TDS has been claimed as refund. Under the circumstances assessee s contentions are not acceptable. Assessee has failed to explain the purpose of payments made. Even the payments are doubtful in view of the facts narrated above. Hence, addition of ₹ 35,00,000/- is co .....

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ng the relevant documentary evidence was on the assessee and he clearly failed to discharge the same. He submitted that there was no agreement or contract entered into with the concerned parties that is produced by the assessee to show the terms and conditions of the contract stated to be for rendering the supervisory services. He also submitted that there was no other documentary evidence that is filed by the assessee to show the services claimed to be rendered by the concerned contractors for .....

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ly contended by the learned DR, having claimed expenditure on account of supervision charges, the onus was on the assessee to establish on evidence that the said expenditure was incurred wholly and exclusively for the purpose of its business. In this regard, it is observed that no agreement or contract entered into with the concerned parties is produced by the assessee on record to show the nature of services agreed to be rendered by the concerned parties and the terms and conditions on which su .....

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he facts involved in the case of Orissa Corporation (P) Ltd. (supra) are materially different from the facts involved in the present case in as much as the primary onus to explain the relevant cash credit in terms of section 68 was duly discharged by the assessee in the said case by producing the confirmation letters as well as discharged hundis and keeping in view the same, it was held that the addition made by the A.O. under section 68 without making any attempt to examine the creditors was no .....

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