Surinder Kumar, Rewari V. ITO, Rewari

ITA 2222/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91169 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 11-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: P K KAMAL
• Keywords: Business expenditure; Income from undisclosed sources; Question of law; Notional interest; Reason to believe
• Section: 40A(3); 143(3); 142(1); 194C; 68

Judgement Text

ITA NOS. 467/DEL/2011 & 2222/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI J.S. REDDY, ACCOUNTANT MEMBER I.T.A.NO.467/DEL/2011 (A.Y. 2007 - 08) AND ITA NO. 2222/DEL/2012 (A.Y. 2009 - 10) SURINDER KUMAR, PROP. MOSAIC HOUSE (INDIA) AND DILER STONE, KUND, DISTT. REWARI C/O SH. ML GULATI, AVOCATE, GANJ BAZAR, REWARI - HARYANA (PAN: AIHPK9865G) VS. ACIT, REWARI CIRCLE, AAYAKAR BHAWAN, MODEL TOWN, REWARI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. GAUTAM JAIN, ADV. & SH. P.K. KAMAL, ADV. DEPARTMENT BY : SH. BRR KUMAR, SR. DR DATE OF HEARING : 11 - 06 - 2015 DATE OF ORDER : 16 - 06 - 2015 ORDER PER H.S. SIDHU : JM THE ASSESSEE HAS FILED THESE APPEALS AGAINST THE SEPARATE IMPUGNED ORDERS DATED 19.11.2010 FOR AY 2007 - 08 AND DATED 28.3.2012 (AY 2009 - 10) PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), ROHTAK. SINCE SOME ISSUES INVOLVED IN BOTH THE APPEAL S ARE COMMON, HENCE, WE ARE DISPOSING OF THE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF BREVITY. 2. THE GROUNDS RAISED IN ITA NO. 467/DEL/2011 (A.Y. 2007 - 2008) READ AS UNDER: - 1. THAT THE LEAMED CIT (APPEAL) ROHTAK HAS ERRED IN CONFIRMING TH E ADDITION OF RS. 1267193/ - BY NOT CONSIDERING THE SALE AGREEMENT OF RS. 1150000/ - WHILE ALL THE RELEVANT DOCUMENTS AND OTHER FACTS ARE ON RECORD. 2. THAT THE LEARNED CIT (APPEAL) ROHTAK HAS ERRED IN CONFIRMING THE ADDITION OF RS. 386041/ - BY IGNORING TH AT THE ITA NOS. 467/DEL/2011 & 2222/DEL/2012 2 SAID AMOUNT WAS OUT OF WITHDRAWALS ENTRY OF RS. 4 LACS FROM THE BOOKS OF M/S MOSAIC HOUSE (INDIA) KUND. 3. THAT THE ADDITION OF RS. 107939/ - THE ALLEGED DIFFERENCE IN SUNDRY CREDITORS ACCOUNTS CONFIRMED BY THE LEARNED CIT(A) ROHTAK IS AGAINST THE F ACTS, WRITTEN SUBMISSIONS AND DOCUMENTS ON RECORD. 4. THAT THE LEARNED CIT (AT ROHTAK HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE THE EXPENDITURE CLAIMED AT RS. 1872599/ - INCURRED IN EXPORTING IN GOODS OUT OF INDIA BY FOREIGN SHIPPING COMPANIES THROU GH INDIAN AGENTS WHILE ALL THE RELEVANT DOCUMENTS AND CERTIFICATES ARE ON RECORD. 5. THAT THE CONFIRMING OF 50% DISALLOWANCE OF EXPENSES AT RS. 154665/ - OUT OF RS. 309330/ - BY THE LEARNED CIT (APPEAL) ROHTAK IGNORING AND WITHOUT DISCUSSING THAT THE EXPENS ES ARE UNDER VARIOUS HEADS AND QUITE RELEVANT TO THE BUSINESS ACTIVITIES AND NONE OF THE SAME ARE OF CAPITAL OR PERSONAL IN NATURE. 6. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY OF THE GROUND OF APPEAL AT THE TIME OF HEARING. FURTHER ALL THE GROUNDS OF APPEAL AS ABOVE ARE WITHOUT PREJUDICE TO EACH OTHER. 3. THE GROUNDS RAISED IN ITA NO. 2222/DEL/2012 (A.Y. 2009 - 10) READ AS UNDER: - 1. THAT THE LEARNED CIT (A) ROHTAK HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1321034/ - ALLEGED DIFFERENCE IN THE ACCOUNT OF MLS VENUS STONE, SPAIN. HE HAS FURTHER ERRED IN IGNORING ALL THE FACTS, FIGURES AND RELEVANT DOCUMENTS. 2. THAT THE CONFIRMING OF ADDITION OF RS. 6' LACS WHICH WAS MADE BY THE LEARNED AO U/S 40A(3) BY THE LEARNED CIT (A) ROHT AK IS QUITE ARBITRARY, EXCESSIVE, AGAINST FACTS AND LAW OF THE CASE. THE LEARNED CIT (A) ROHTAK IS ALSO ERRED IN NOT CONSIDERING THE REPLY, BANK STATEMENT AND OTHER DOCUMENTS ON RECORD. ITA NOS. 467/DEL/2011 & 2222/DEL/2012 3 3. THAT THE LEARNED CIT (A) ROHTAK HAS ERRED IN CONFIRMING THE ADDITI ONS OF RS. 1531108/ - THE PAYMENT MADE TO M/S POOJA FREIGHT FORWARDERS, THE INTERMEDIARY AGENT ON THE BEHALF OF APPELLANT REGARDING IN LAND HAULAGE CHARGES/FREIGHT CHARGES ETC. TO FOREIGN AGENTS AND GOVT. AGENCIES WHERE THE PROVISIONS OF SECTION 194C I.E. T DS NOT APPLICABLE. 4. THAT THE LEARNED CIT (A) ROHTAK HAS ALSO GROSSLY ERRED IN ENHANCING THE FREIGHT CHARGES AT RS. 1803881/ - WHICH WERE PAID FOR EXPORTING THE GOODS OUTSIDE INDIA TO SHIPPING AGENT EXEMPTED UNDER THE PROVISIONS OF TDS. HE HAS ALSO IGNORE D THE FACTS AND CERTIFICATES OF THE SHIPPING AGENTS ARE ON RECORD AND WERE DULY CONSIDERED BY AO WHILE ALLOWING THE SAME. 5. THAT THE DISALLOWING THE ENTIRE PAYMENTS OF RS. 3334986/ - I.E. (1531105+180388) MADE TO M/S POOJA FREIGHT FORWARDERS THE INTERMEDI ARY AGENT ON ACCOUNT OF AS NOTED BELOW: . S. NO. NATURE OF EXPENSES AMOUNT (RS.) 1. HWC CHARGES 53875.00 2. SHIPPING LINE CHARGES 1803881.00 3. TRANSPORTATION CHARGES 79200.00 4. INLAND HAULAGE CHARGES 720893.00 5. SHIPPING BILL FO RMALITIES CHARGES 8700.00 6. AGENT COMMISSION 30000.00 7. LOADING/UNLOADING CHARGES 10875.00 8. CERTIFICATE OF ORIGIN CHARGES 7200.00 9. FUMIGATION CHARGES 43500.00 10. LASING CHARGES 5800.00 11. MISCELLANEOUS 1900.00 12. SEA/ AIR FREIGHT CHARGES 569162.00 TOTAL 3334986.00 ITA NOS. 467/DEL/2011 & 2222/DEL/2012 4 HE HAS FURTHER ERRED IN APPLYING THE PROVISIONS OF SECTION 40(A)(IA) READ WITH SECTION 194C ON ALL THE PAYMENTS SUPPORTED - WITH COPIES OF BILLS AND RELEVANT DOCUMENTS ON RECORD. 6. THAT THE CONFIRMING FOR ADDITIONS OF RS. 24760/ - THE ALLEGED CALCULATIONS OF INTEREST ON TRADE ADVANCES TO M/S VIPIN STONE, KUND, CONFIRMED BY THE LEARNED CIT (A) ROHTAK IS QUITE ARBITRARY, IGNORING ALL THE FACTS AND FIGURES ON RECORD. 7. THAT THE CONFIR MING OF ADDITION OF RS. 95830/ - I.E. AGRICULTURAL INCOME SUPPORTED WITH DOCUMENTS ON RECORD BY THE LEARNED CIT (A) ROHTAK IS QUITE ARBITRARY. HE HAS FURTHER ERRED IN IGNORING THE REPLY, DOCUMENTS AND SUBMISSIONS WHICH ARE VERY WELL ON RECORD. 8. THAT THE CONFIRMING THE ADDITIONS OF RS. 33900/ - I.E. 20% DISALLOWANCES OF EXPENSES UNDER VARIOUS HEADS ARE QUITE ARBITRARY AND WITHOUT ANY FINDINGS. 9. THAT THE CONFIRMING THE ADDITION OF RS. 20000/ - UNDER HOUSE HOLD EXPENSES BY THE LEARNED CIT (A) ROHTA K WITHOUT ANY CONCRETE FINDINGS AND DETECTION ON RECORD. 10. THAT THE APPELLANT CRAVES THE RIGHT TO AMEND, DELETE OR ADD ANY NOW GROUNDS OF APPEAL BEFORE AND DURING HEARING OF APPEAL. ITA NO. 467/DEL/2011 (AY 2007 - 08) 4. THE BRIEF FACTS OF THE CASE AR E THAT THE RETURN DECLARING TOTAL INCOME OF RS. 7,37,090/ - WAS FILED ON 2.11.2007. THE RETURN WAS PROCESSED U/S. 143(1) ON RETURNED INCOME. ASSESSEE IS RUNNING TWO PROPRIETORSHIP CONCERNS IN THE NAME AND STYLE OF M/S MOSAIC HOUSE (INDIA) & M/S DILER STO NE, VPO MAJRA, KUND, REWARI. M/S MOSAIC HOUSE (INDIA) IS A NEW CONCERN AND M/S DILER STONE IS A EXISTING CONCERN OF THE ASSESSEE. THE ASSESSEE DEALS IN DOMESTIC AND FOREIGN SALE OF STONE TILES. STATUTORY NOTICE U/S. 143(2) AND 142(1) WERE ISSUED ALONG WITH QUESTIONNAIRE ON 12.9.2008 FOR 10.10.2008. ON 10.10.2008, NONE ATTENDED THE PROCEEDINGS. AGAIN NOTICE U/S. 142(1) WAS ISSUED ON ITA NOS. 467/DEL/2011 & 2222/DEL/2012 5 22.4.2009 FOR 1.4.2009 ON 1.4.2009 ALSO NO BODY ATTENDED THE ASSESSMENT PROCEEDINGS NOR FILED ANY APPLICATION FOR SEEKING ADJOURNMENT. AGAIN NOTICE U/S. 142(1) WAS ISSUED ON 1.9.2009 FOR 11.9.2009 AND ON THAT DATE ASSESSEE S COUNSEL ATTENDED AND SOUGHT ADJOURNMENT FOR 22.10.2009. ON 22.10.2009 ASSESSEE S COUNSEL FILED THE DETAILS, BUT NOT PRODUCED BOOKS OF ACCOUNTS AND CASE WAS ADJOURNED FOR 29.10.2009 TO PRODUCE BOOKS OF ACCOUNTS AND LATER BOOKS WERE PRODUCED BUT WITHOUT VOUCHERS. AFTER GOING THROUGH THE RECORDS, AO HAS COMPLETED THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT. VIDE HIS ORDER DATED 24.12.2009 AND MADE THE V ARIOUS ADDITIONS. 5. AGAINST THE ASSESSMENT ORDER DATED 24.12.2009, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 19.11.2010 HAS DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ADDITIONS MADE BY THE AO. 6. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. LD. COUNSEL OF THE ASSESSEE IN SUPPORT OF HIS CONTENTION HAS FILED THE WRITTEN SYNOPSIS. FOR THE SAKE OF CONVENIENCE, WE ARE REPRODUCING THE SAME AS UNDER: - 1. FACTS - IN - BRIEF: 1.1 THAT APPELLANT IS PROPRIETOR OF TWO CONCERNS: - SR. NAME OF THE CONCERN NATURE OF BUSINESS NO. I) MLS MOSAIC HOUSE (INDIA), NANDHA MORE, MAJRA KUND, REWARI DOMESTIC AND FOREIGN SALE OF STONE TILES II) M/S DILER STONE NANDHA MORE, MAJRA KUND, REWARI ---- DO --- 1.2 BOTH PROPRIETORSHIP CONCERNS ARE ENGAGED IN BUSINESS OF DOMESTIC SALE AND EXPORT OF STONE TILES 1.3 RELEVANT DATES 2.11.2007 RETURN OF INCOME RS. 7,37,090 (PAGE 2. OF PAPER ITA NOS. 467/DEL/2011 & 2222/DEL/2012 6 BOOK). THI S RETURN WAS SUPPORTED BY AUDITED FINANCIAL STATEMENT OF MOSAIC HOUSE (PAGES 4 - 15 OF PAPER BOOK) 24.12.2009 ORDER OF ASSESSMENT RS. 45,25,527/ - U/S. 143(3) 19.11.2010 ORDER OF CIT(A) 1.4 ISSUE INVOLVED GROUND ISSUE AMOUNT PAGE PAGE NO. (RS.) (PARA) (PARA) (AO CIT(A) 1. ADDITION MADE ON ACCOUNT OF ALLEGED UNEXPLAINED SOURCES OF CASH PAYMENTS REFLECTED IN THE CASH BOOKS OF M/S MOSAIC HOUSE. 12,67,193 5 TO 7 (2.3 TO 2.5) 6 - 7 (6 TO 6.1) 2. ADDITION MADE ON ACCOUNT OF ALLEGED UNEXPLAINED CASH DEPOSITS IN BANK ACCOUNT OF M/S DILER STONE 3,86,041/ - 7 (2.6) 7 (707.1) 3 ADDITIONS ON ACCOUNT OF PAYMENT TO SUNDRY CREDITORS OUTSIDE BOOKS OF ACCOUNT U/S 68 OF THE ACT. 1,07,939 8 (3) 7 (8 8.1) 4. DISALLOWANCE OF EXPENDITURE INCURRED ON EXPORT OF GOODS THROUGH AGENTS OF FREIGHT SHIPPING COMPANIES 18,72,599 9 (4.2) 8 - 9 (9 - 9.2) 5. ADHOC DISALLOWANCE OF 50% OF FOLLOWING EXPENSES 1,54,665 9 (5) 9(10) 1.5 GROUND WISE SUBMISSION IS AS UNDER: - 2. ADDITION OF RS. 12,67,193/ - 2.1 MANNER OF COMPUTATION: PERUSAL OF CASH BOOK (PAGES 65 - 75 OF PAPER BOOK) OF MOSAIC HOUSE (INDIA) REVEALS THAT THE FOLLOWING POSITION: ITA NOS. 467/DEL/2011 & 2222/DEL/2012 7 PARTICULARS AMOUNT (RS.) OPENING BALAN CE NIL RECEIPTS 5,29,948 (UPTO 30.3.2007) TOTAL 5,29,948/ - LESS: PAYMENT 17,97,141/ - (UPTO 30.3.2007) DIFFERENCE ADDED AS INCOME FROM UNDISCLOSED 12,67,193 SOURCES 2.2 BASIS OF ADDITION: RELEVANT PAGES OF THE LEARNED ASSE SSING OFFICER: (PAGES 5 TO 7 PARA 2.3 TO 2.5) I) THE EXPLANATION OF THE APPELLANT THAT HE HAD RECEIVED ADVANCE OF RS. 11,50,000/ - IN MARCH 2006 IS AN AFTER THOUGHT II) THE AFFIDAVIT FURNISHED IS ON SELF - SERVING DOCUMENTS AND, SUFFERS FROM DISCREPANCIES (PARAS 2.3.1 TO 2.3.9 OF THE ORDER AT PAGES 5 AND 6 RELEVANT PAGES OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS): (PAGES 6 - 7 PARAS 6 TO 6.1): III) THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) HAS RELIED ON THE FACT THAT SUCH PARTIES WERE NOT PRODUCED DURING THE 'REMAND PROCEEDINGS AND, DENIED OF ONE OF PURCHASES TO ENTER TO AN AGREEMENT 2.3 RELEVANT DOCUMENTS: A) COPY OF BALANCE SHEET OF MOSAIC HOUSE (PAGE 5 OF PAPER B OOK) B) COPY OF CASH BOOK (ORIGINAL) PRODUCED DURING .ASSESSMENT PROCEEDINGS (PAGES 65 - 75 OF PAPER BOOK) MARKED AS ANNEXURE I TO THE ORDER (PAGES 2 OF THE ORDER) AND, ON THE BASIS OF WHICH ADDITION HAS BEEN MADE IN THE IMPUGNED ORDER ITA NOS. 467/DEL/2011 & 2222/DEL/2012 8 C) SHOW CAUSE NOTICE DATED 11.12.2009 (PAGE' 34 OF PAPER BOOK) AND 18.12.2009 (PAGE 42 OF PAPER BOOK) D) REPLY DATED 15.12.2009 (PAGE 38 OF PAPER BOOK) AND 21.12.2009 (PAGES 43 - 44 OF PAPER BOOK) E) EVIDENCE: I) AGREEMENT TO SELL DATED 26.3.2006 (PAGES 77 - 78 OF PAPER BOOK) II) . CASH FLOW STATEMENT (PAGE 76 OF PAPER BOOK) III) REVENUE CASH BOOK (PAGES 79 - 90 OF PAPER BOOK STATED AT PAGES 46 OF PAPER BOOK) IV) AFFIDAVITS OF EIGHT PERSONS (PAGE 58 OF PAPER BOOK) V) STATEMENT OF TWO PERSONS (PAGE 58 OF PAPER BOOK) VI) TITLE DEED OFLAND (PAGES 111 - 118 OF PAPER BOOK) F) SUBMISSIONS: I) DATED 15.3.2010 (PAGES 46 - 47 OF PAPER BOOK) II) DATED 26.5.2010 (PAGE 54 OF PAPER BOOK) III) DATED 16.8.2010 (PAGE 63 OF PAPER BOOK) G) REMAND REPORT: I) DATED 3.5.2010 (PAGE 50 OF PAPER BOOK) II) 23.7.2010 (PAGES 57 - 58 OF PAPER BOOK) CONTENTIONS - IN - BRIEF: I) THAT PERUSAL OF BALANCE SHEET OF MLS MOSAIC HOUSE FILED ALOGNWITH RETURN OF INCOME ON 2.11.2007 SHOWS AN ADDITION OF RS. 11,50,0001 - AGAINST PROPE RTY. THE BALANCE SHEET IS DATED 20.10.2007 AND, IS DULY AUDITED, AS WOULD BE EVIDENT FROM PAGE 5 OF PAPER BOOK. II) THAT BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED AND, NOT REJECTED U/S 145(3) OF THE ACT ITA NOS. 467/DEL/2011 & 2222/DEL/2012 9 III) THAT CASH - IN - HAND AS ON 31.3.2007 AS PER BALANCE SHEET IS RS. 45,228/ - (PAGE 5 OF PAPER BOOK), WHICH IS ALSO THE BALANCE AS PER CASH BOOK (PAGE 75 OF PAPER BOOK) IV) THAT EVEN THE ORIGINAL CASH BOOK, WHICH HAS BEEN MADE THE BASIS OF ADDITION SHOWS ADVANCE OF RS. 11,50,000/ - (PAGE 75 OF PAPER BOOK) AND, TRANSFER FROM CAPITAL ACCOUNT (RS. 1,74,506/ - (PAGE 75 OF PAPER BOOK)., THIS TRANSFER IS HOWEVER REFLECTED ON 313.2007 ON ACCOUNT OF VIRUS IN THE COMPUTER V) THAT THE DIFFERENCE OF RS. 12,67,193/ - IS EXPLAINED OUT OF THE FOLLOWING: A) ADVANCE AGAINS T LAND RS. 11,50,000/ - B) TRANSFER FROM DILER STONE RS . 1,95,320/ - VI) THE FACT OF ADVANCE OF RS. 11,50,0001 - HAVING BEEN RECEIVED IS EVIDENT FROM FOLLOWING EVIDENCES: A) AGREEMENT TO SELL DATED 26.3.206 (PAGES 77 - 78 OF PAPER BOOK) B) . CASH FLOW STATEMENT (PAGE 76 OF PAPER BOOK) C) REVISED CASH BOOK (PAGES 79 - 90 OF PAPER BOOK) VII) THE LEARNED ASSESSING OFFICER HAS ADMITTED THAT EVEN AS PER CASH BOOK THE ADVANCE WAS RECEIVED OF RS. 11,50,000/ - . ACCORDING TO HIM HOWEVER SUCH ADVANCE WAS R ECEIVED ON 31.3.2007 AND, ON 31.3.2006+ AS IS STATED IN CASH BOOK. THE FINDING IS CONTRADICTORY. IT IS SUBMITTED THAT FACTUM OF RECEIPT OF ADVANCE CANNOT BE DEEMED, AS THE SAME ID DULY REFLECTED IN FINANCIAL STATEMENTS/CASH BOOK. IT IS SUBMITTED THAT THE L EARNED ASSESSING OFFICER HAS ACCEPTED THE CASH BALANCE AT THE CLOSE OF YEAR TO BE AS DECLARED IN THE CASH BOOK/FINANCIAL STATEMENT. IT IS SUBMITTED THAT IN SUCH CIRCUMSTANCES, LOGICALLY AND LEGALLY, IT OUGHT TO BE HELD THAT CASH PAYMENTS WAS OUT OF ADVANC E WHICH WAS RECEIVED IN MARCH' 2006. IT MAY BE ADDED HERE THAT BOOKS OF ACCOUNTS STAND ACCEPTED AS CORRECT, AS HAS BEEN HELD BY THE LEARNED ASSESSING OFFICER (PAGE 7 PARA 2.4 OF ORDER) ITA NOS. 467/DEL/2011 & 2222/DEL/2012 10 VIII) THAT FACTUM OF ADVANCE HAS BEEN ALSO CONFIRMED BY AFFIDAVITS OF EIGHT PERSONS AND STATEMENT OF TWO PERSONS RECORDED DURING ASSESSMENT PROCEEDINGS, WHICH HAVE BEEN BRUSHED ASIDE BY THE LEARNED ASSESSING OFFICER/COMMISSIONER OF INCOME TAX (APPEALS) (SEE PAGE 63 OF PAPER BOOK READ WITH PAGE 58 OF PAPER BOOK); IT IS SUBMIT TED THAT ARE AFFIDAVITS HAVE BEEN FILED, MERE NON APPEARANCE IN RESPONSE TO SUMMONS CANNOT BE A GROUND TO REJECT THE CLAIM OF ASSESSEE. IN VIEW THEREOF, ADDITION MADE MAY KINDLY BE DELETED. 3 ADDITION OF RS. 3,86,041/ - 3.1 MANNER OF COMPUTATION OF ADD ITION (CASH BOOK OF APPELLANT (DILER STONE (PAGES 91 TO 96 OF PAPER BOOK) PARTICULARS AMOUNT (RS.) CASH: DEPOSITS IN BANK ON 23.5.2006 (RS. 4,62,000 12000/ - RS. 450000/ - ) PAGES 91 AND 92 OF PAPER BOOK) LESS: CASH AVAILABLE AS PER CASH BOOK 75,959/ - ADDITION 3,86,041 - 3.2 BASIS OF ADDITION: NO EVIDENCE TO SHOW WITHDRAWAL OF CASH OF RS. 4LACS FROM MOSAIC INDIA (PAGE 7 PARA 2.6 OF THE ASSESSMENT ORDER) 3.3 RELEVANT DOCUMENTS: A) COPY OF BAL ANCE SHEET OF MLS DILER STONE AS ON 31.3.2007 (PAGES 17 OF PAPER BOOK) WHICH SHOWS CASH IN HAND OF RS. 1,13,968/ - B) COPY OF ORIGINAL CASH BOOK FURNISHED DURING ASSESSMENT PROCEEDINGS (PAGES 91 TO 96 OF PAPER BOOK) WHICH ALSO SHOWS CLEARLY CASH IN HAND OF RS. 1,13,966 (PAGES 96 OF PAPER BOOK) C) SHOW CAUSE NOTICE DATED 11.12.2009 (PAGES 34 - 35 OF PAPER BOOK) D) REPLY DATED 15.12.2009 (PAGE 38 OF PAPER BOOK) ITA NOS. 467/DEL/2011 & 2222/DEL/2012 11 E) COPY OF REVISED CASH BOOK (PAGES 97 TO 103 OF PAPER BOOK) F) SUBMISSIONS: I) DATED 15.3.2010 (PAGE 47 OF PAPER BOOK) II) DATED 26.5.2010 (PAGE 54 OF PAPER BOOK) III) DATED 16.8.2010 (PAGE 63 OF PAPER BOOK) G) REMAND REPORT: I) DATED 3.5.2010 (PAGE 51 OF PAPER BOOK) II) 23.7.2010 (PAGE 57 OF PAPER 3.4 CONTENTIONS - IN - BRIEF: I) A SUM OF RS. 4,00,000/ - WAS TRANSFERRED FOR MOSAIC HOUSE (INDIA) ON 23.5.2006 (PAGES 80 OF PAPER BOOK) II) ONCE REVISED CASH BOOK (PAGES 97 - 103 OF PAPER BOOK) OF DILER STONE AND AT (PAGES 79 TO 90 AT PAGE 80 OF PAPER BOOK) OF MOSAIC HOUSE WAS PLACED ON R ECORD, THE LEARNED ASSESSING OFFICER/COMMISSIONER OF INCOME TAX (APPEALS) COLD NOT AUTOMATICALLY DISCREDIT THE SAME. IN VIEW THEREOF, ADDITION MADE MAY KINDLY BE DELETED. 4 GROUND NO.3: ADDITION OF RS. 1,07,939/ - THE LEARNED ASSESSING OFFICER HAS HELD AT PAGE 8 PARAS 3 TO 3.2 HAVE BEEN PAID IN CASH OUT OF THE BOOKS AND, THEREFORE SUCH PAYMENTS HAVE BEEN TREATED AS INCOME FROM UNDISCLOSED SOURCES U/S 68 OF THE ACT SR. NO. NAME OF CREDITORS AMOUNT (RS.) PAGES OF PAPER BOOK (SHOWING CLOSING BALANCE IN BALANCE SHEET) EXPLANATION OF ASSESSEE PAGES OF PAPER BOOK LEDGER ACCOUNT I) HARYANA ENGINEERING STORE, JAIPUR 22,000 19 47 209 AND 210 ITA NOS. 467/DEL/2011 & 2222/DEL/2012 12 II) PRATIBHA GRANITES, BHILWARA 2,1696 19 48 210 AND 207 III) NABERA GRANITES, BILWARA GRA 41,409 19 48 211 AND 208 IV) MAHADEV STONES 22,834 7 48 205 TOTAL 1,07,939 4.1 ACCORDING TO THE LEARNED ASSESSING OFFICER, ALL THE PARTIES HAVE DENIED HAVING ANY OUTSTANDING DEMAND AT THE CLOSE OF YEAR. HE REJECTED THE EXPLANATION THAT UNILATERAL ENTRIES MADE BY PARTIES CANNOT BE A BASIS TO DISCREDIT THE AUDITED BOOKS OF APPELLANT (P AGES 38 - 39 OF PAPER BOOK). HE HAS HELD THAT THE EXPLANATION IS EVASIVE AND ABSURD, WITHOUT APPRECIATING THAT BURDEN WAS ON THE BASIS TO PROVIDE CROSS - EXAMINE OF THE SAID CREDITORS. IT IS SUBMITTED THAT NO OPPORTUNITY WAS PROVIDED TO THE APPELLANT TO EXCESS THE PARTIES (PAGES 47 - 48 OF PAPER BOOK). IT IS SUBMITTED THAT PERUSAL OF PAGES 205 TO 208 OF PAPER BOOK WOULD SHOW THAT PAYMENT TO ALL PARTIES A SUBSEQUENT YEAR HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES EXCEPT HARYANA . IT IS SUBMITTED THAT EVEN IN REJOINDE R TO REPORT DATED 23.7.2010 (PAGES 60 OF PAPER BOOK). THE APPELLANT HAS FURNISHED REPLY DATED 16.8.2010 (PAGE 64 OF PAPER BOOK) WHICH HAVE BEEN OVERLOOKED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHEREIN COMPLETE DETAILS WERE PLACED ON RECORD, B UT NO ENQUIRIES HAVE BEEN MADE. IT IS THEREOF PRAYED THAT ADDITIONS MADE MAY KINDLY BE DELETED. 5 GROUND NO. 4: DISALLOWANCE OF RS. 1,82, 72,599/~ ON ACCOUNT OF SHIPPING FREIGHT OUTWARD 5.1 THE LEARNED ASSESSING OFFICER HAS HELD THAT (PAGE 9 PARA 4.2) N O EVIDENCE WAS FILED TO PROVE THAT PAYMENT MADE TO AGENTS OF SHIPPING COMPANIES AND, IN ABSENCE THEREOF, APPELLANT OBLIGED TO DEDUCT TDS U/S 194C OF THE ACT AND, SINCE NO TDS HAS BEEN DEDUCTED, SUM WAS DISALLOWED U/S 40(A)(IA) OF THE ACT 5.2 THE CIT(A) P AGES 8 - 9 PARAS 9 TO 9.2) 5.2.1 THE LEARNED CIT(A) HAS ALSO UPHELD THE DISALLOWANCE ON THE GROUND THAT MLS. POOJA FREIGHT AND FORWARDERS WERE NOT AGENTS OF NON RESIDENT ITA NOS. 467/DEL/2011 & 2222/DEL/2012 13 SHIPPING COMPANIES AND THEREFORE, APPELLANT WAS OBLIGED TO DEDUCT TDS UN:DER SECTION 40 A(IA) OF THE ACT. 5.3 IT IS SUBMITTED THAT THE APPELLANT IN SUPPORT OF THE SUBMISSION THAT APPELLANT WAS NOT OBLIGED TO DEDUCT TDS HAD PLACED ON RECORD FOLLOWING EVIDENCES AND REPLIES: A) REPLY DATED 15.12.2009 (PAGES 39 TO 40 OF PAPER BOOK) B) CERTIFIC ATE FROM POOJA FREIGHT AND FORWARDERS (PAGE 45 OF PAPER BOOK) C) REJOINDER SUBMISSIONS DATED 16.8.201 (PAGE 64 OF PAPER BOOK) IN RESPECT OF THE REMAND REPORT OF THE AA DATED 23.7.2010 WHEREIN SHRI MAMAN SINGH HAD ADMITTED THAT THEY WERE NOT AGENTS OF NON RESIDENT SHIPPING COMPANY. D) NOTE ON EXPENSES OF M/S. POOJA FREI GHT & FORWARDERS (PAGES 104 TO 105 OF PAPER BOOK) E) DETAILS OF CHARGES REMITTANCES BY THE APPELLANT TO MLS. POOJA FREIGHT & FORWARDERS (PAGES 106 - 107 OF PAPER BOOK) F) COPY OF LEDGER ACCOUNT OF MLS. POOJA FREIGHT & FORWARDERS (PAGES 212 TO 217 OF PAPER BOOK) SHOWING THE CLOSING BALANCE OF RS. 1,18,758/ - G) COPY OF PAYMENTS OF POOJA FRIEGHT & FORWARDED (PAGES 218 TO 257 OF PAPER BOOK) 5.4 HE HELD THAT THE AFORESAID SUM REPRESENTED PAYMENT 'MADE OUTSIDE BOOKS OF ACCOUNTS. THE LEARNED ASSESSING OFFICER IS SUED NOTICE DATED 11.12.2009 AND, IN RESPONSE TO WHICH REPLY WAS FURNISHED ON 17.12.2009 (PAGE 38 OF PAPER BOOK), WHEREBY CASH FLOW STATEMENT (PAGE 76 OF PAPER BOOK) PLACED ON RECORD. THE DIFFERENCE WAS EXPLAINED ON ACCOUNT OF FOLLOWING REASONS: A) ADVA NCE AGAINST LAND: RS. 11,50,000/ - B) TRANSFER FROM DILER STONE RS. 1,95,320/ - ITA NOS. 467/DEL/2011 & 2222/DEL/2012 14 THE CLAIM WAS SUPPORTED BY AN AGREEMENT TO SELL DATED 26.3.2006 (PAGES 77 - 78 OF PAPER BOOK) AND RAISED CASH BOOK (PAGES 79 TO 90 OF PAPER BOOK) THE LEARNED ASSESSING OFFIC ER (PARA 2.4 AND 2.5) HOWEVER HELD THAT EXPLANATION TENDERED IS NOT ACCEPTABLE ON ACCOUNT OF FOLLOWING REASONS: I) AFFIDAVIT IS A SELF SERVING DOCUMENT AND SUFFERS FROM MANY DISCREPANCIES: A) OVERWRITING OF THE DATE; B) NOT ENTERED IN REVENUE RECORDS; C) PERSON MENTIONED ARE NOT FROM SINGLE FAMILY AND, INCLUDES MATTER OF ASSESSEE; D) AMOUNTS CONTRIBUTED ARE NOT IN EQUAL PROPRIETOR; E) TOTAL SALE CONSIDERATION IS NOT MENTIONED FOR AGREEMENT IS FOR A PERIOD OF MORE THAN FIVE YEAR; F) AGREEMENT IS FOR A PERIOD OF MORE THAN FIVE YEAR; G) SALE CONSIDERATION (RS. 20 LACS) IN 23 TIMES MORE THAN BOOK VALUE (RS. 88,000/ - ) II) PROPERTY IS PERSONAL PROPERTY 5.5 THE APPELLANT FILED WRITTEN SUBMISSION ON 15.3.2010 (PAGES 46 AND 47 OF PAPER BOOK). . IT WAS STA TED THAT THE LEARNED ASSESSING OFFICER THEREAFTER ASSESSING OFFICER ISSUED NOTICE DATED 18.12.2009 (PAGE 42 OF PAPER BOOK) AND, APPELLANT FILED REPLY DATED 21.12.2009 (PAGES 43 - 44 OF PAPER BOOK) 5.6 THE APPELLANT SEEKS TO PLACE RELIANCE ON FOLLOWING JUDGM ENTS: I) 361 ITR 192 (GUJ) CIT VS. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. EXTRACTED (PAGES 261 - 262 OF PAPER BOOK) 'IT. IS REQUIRED TO BE NOTED THAT WHILE CONFIRMING THE ORDER PASSED BY THE CIT(A) AND DELETING THE DISALLOWANCE, IT HAS BEEN SPECIFICAL LY OBSERVED BY THE TRIBUNAL THAT IN FACT THE EXPENSES WERE INCURRED BY ITA NOS. 467/DEL/2011 & 2222/DEL/2012 15 THE AGENT ON BEHALF OF THE ASSESSEE FOR TRANSPORTATION AND OTHER CHARGES, WHICH HAS BEEN SPELT OUT IN THE BILL ITSELF INCLUDING THE COMMISSION TO THE AGENT. THE LEARNED TRIBUNAL ALSO OBSERVED THAT THE RELATION BETWEEN THE ASSESSEE AND THE AGENT IS PRINCIPAL AND AN AGENT. THE LEARNED TRIBUNAL ALSO OBSERVED THAT SO FAR AS THE OBLIGATION TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF TRANSPORT CHARGES AND OTHER CHARGES IS CONCERNED, THE SA ME WAS COMPLIED WITH BY THE AGENT, WHO HAD MADE PAYMENT ON ITS BEHALF. ON THE AFORESAID FACTS THE LEARNED TRIBUNAL ALSO OBSERVED THAT THE CIRCULAR RELIED UPON BY THE REVENUE THAT IT IS THE LIABILITY OF THE ASSESSEE AS PRINCIPAL AGENT TO DEDUCT THE TDS WILL NOT BE APPLICABLE AND THE SAID CIRCULAR WOULD BE APPLICABLE FOR PAYMENT MADE TO PRINCIPAL TO PRINCIPAL. CONSIDERING THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE LEARNED TRIBUNAL HAS CONFIRMED THE ORDER PASSED BY THE CIT(A) QUASHING AND SETT ING ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER IN DELETING THE DISALLOWANCE OF RS. 6,93,372/ - AND RS. 76,00,509/ - CLAIMED BY THE ASSESSEE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, WE SEE NO REASON TO INTERFERE WITH THE SAME' II) 61 SOT 102 (CHD) ITO VS. BHOGAL EXPORT (PAGES 287 - 291 OF PAPER BOOK) III) 158 TT J 4 (JODH) SHREE RAJASTHAN SYNTEX LTD. (PAGES 294 - 303 OF PAPER BOOK) IV) 143 TTJ 331 (JODH) ACIT VS. MINPRO INDUSTRIES (PAGES 263 - 274 OF PAPER BOOK) V) ITA NO. 2278/AHD /2009 (AHD) DATED 30.6.2011 ITO VS. SHRI SANIANI VIVEK GOPE (PAGES 304 - 323 OF PAPER BOOK) VI) ITA NO. 1948/AHD/2009 (AH) DCIT VS. HARSH GEOCHEM LTD. (PAGES 324 - 347 OF PAPER BOOK) 5.7 APART FROM THE ABOVE, IT IS WELL SETTLED LAW THAT PROVISION OF SECTION 194C OF THE ACT ARE NOT ATTRACTED ON PAYMENTS MADE TO AGENTS OF NON RESIDENT SHIPPING COMPANIES AS HAS BEEN HELD IN FOLLOWING JUDGMENTS: I) 163 TAXMAN 479 (DEL) CIT VS. CONTINENTAL CAR RIERS (P) LTD. (PAGES 292 - 293 OF PAPER BOOK) ITA NOS. 467/DEL/2011 & 2222/DEL/2012 16 II) 103 TTJ 103 (DEL) ITO VS. FREIGHT SYSTEMS (INDIA) PVT. LTD. III) 271 CTR 165 (CAL) PODDAR SONS EX. L. (P) LTD. VS. CIT (PAGES 277 - 280 OF PAPER BOOK) 5.8 IN VIEW OF THE AFORESAID, IT IS PRAYED THAT NO D ISALLOWANCE BE MADE UNDER SECTION 40A(IA) OF THE ACT AS THE ISSUE INVOLVED IS SQUARELY COVERED BY THE DECISIONS AND JUDGMENTS CITED ABOVE AND THERE IS NO DISTINGUISHING FEATURE. 5.9 IT IS ALSO WELL SETTLED LAW THAT REIMBURSEMENT OF EXPENSES IS NOT ELIGIBL E FOR DEDUCTION OF TDS UNDER SECTION 194C OF THE ACT IN VIEW OF THE FOLLOWING JUDGMENTS: I) ITA NO. 359 AND 511/2012 (DEL) DATED 25.8.2014 CIT VS. OPERA GLOBAL (P) LTD. (PAGES 353 - 356 OF PAPER BOOK) II) 146 ITD 745 (MUM) ITO (TDS) VS. VISHINDA DIAMONDS (PAGES 281 - 286 OF PAPER BOOK) III) 64 SOT 15 (BANG) DCIT VS. DHAANYA SEEDS (P) LTD. SECTION 194C, READ WITH SECTION 40(A)(IA), OF THE INCOME - TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - CONTRACTORS/SUB - CONTRACTORS, PAYMENTS TO [REIMBURSEMENT OF EXPENSE S] - ASSESSMENT YEAR 2005 - 06 - WHETHER WHERE EXPENSES WERE INCURRED BY C&F AGENTS ON BEHALF OF ASSESSEE AND CLAIMS WERE MADE ON ACTUAL BASIS, ASSESSEE WHILE MAKING REIMBURSEMENT OF SAID EXPENSES WAS NOT LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C - H ELD, YES [PARA 6.4.3] [IN FAVOUR OF ASSESSEE] IV) 26 ITR (TRIB) 35 (CAL) DCIT VS. MARUTI FREIGHT MOVERS LTD. (PAGES 275 - 276 OF PAPER BOOK) ONCE ASSESSEE HAS NOT CLAIMED EXPENDITURE QUA REIMBURSEMENT OF EXPENSES, ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT S OURCE. SECTION 194C OF THE INCOME - TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - CONTRACTORS/SUB - CONTRACTORS, PAYMENTS TO [REIMBURSEMENT OF EXPENSES] - ASSESSMENT YEAR 2002 - 03 - ASSESSEE ENTERED INTO AN AGREEMENT WITH 'NLP' TO WORK AS AN AGENT FOR ASSESSEE - ASSESSING OFFICER HAVING INFORMATION THAT ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON' CERTAIN PAYMENT TO 'NLP' DISALLOWED SAID AMOUNT - WHETHER PAYMENT MADE TO NLP AS AN AGENT IN PURSUANCE OF ITA NOS. 467/DEL/2011 & 2222/DEL/2012 17 AGREEMENT FOR SUPPLY OF TRUCKS WERE MERELY REIMBURSEMENT, AND A SSESSEE HAD ALREADY DEDUCTED TAX AT SOURCE UNDER SECTION 194C ON CONTRACTUAL PAYMENT OF FREIGHT, NOTHING WAS TO BE DEDUCTED FROM REIMBURSEMENT - HELD, YES - WHETHER AS AMOUNTS IN QUESTION WERE NEVER CLAIMED AS EXPENDITURE BY ASSESSEE, ASSESSEE WAS NOT LIAB LE TO TAX DEDUCTION AT SOURCE UNDER SECTION 194C - HELD, YES - WHETHER AS PAYMENT MADE OF REIMBURSEMENT OF EXPENSES WERE PURELY FOR BUSINESS EXPENSES, IMPUGNED DISALLOWANCE MADE BY ASSESSING OFFICER WAS TO BE DELETED - HELD, YES [PARA 6] [IN FAVOUR OF ASSE SSEE] IV) ITA NO.32911AHD72008 DATED 11.11.2009 ITO VS. MLS YASH ENTERPRISE SECTION 194J I) 95 TTJ 53 (DEL) ITO VS. DR. WILLMAR SCHWABE INDIA (P.) LTD. II) 51 TAXMANN.COM 128 (MUM) ASK WEALTH ADVISORS (P.) LTD. VS. ASST. CIT III) 146 ITD 745 (MU M) ITO VS. VISHINDA DIAMONDS IV) 134 ITD 486 (AHD) KARNAVATI CO - OP. BANK LTD. VS. DCIT V) 209 TAXMAN 18 (DEL) CIT VS. EXPEDITORS INTERNATIONAL (INDIA) .(P.) LTD. 5.10 APART FROM THE ABOVE IT IS SUBMITTED THAT SINCE SUM STOOD DECLARED AS INCOME BY THE PAYEE THEREFORE ASSESSEE WAS NOT OBLIGED TO DEDUCT TDS ULS 194C OF THE ACT SINCE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IS RETROSPECTIVE. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS: I) 357 ITR 642 (ALL) CIT VS. MLS VECTOR SHIPPING SERVICES (P) LTD CIT VS. VECTOR SHIPPING SERVICES (P) LTD. WHEREIN SLP HAS BEEN DISMISSED BY APEX COURT IN ORDER DATED 02.07.2014. ALSO, CIVIL MISC. REVIEW APPLICATION NO. 248688 OF 201 3 (ALL) CIT VS. MLS VECTOR SHIPPING SERVICES (P) LTD. HAS BEEN DISMISSED. II) 146 TTJ 1 (SB) (VISHAKAPATNAM) (SB) MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT III) ITA NO. 249 OF 2013 (AP) CIT VS. NEW BOMBAY GOODS TRANSPORT ITA NOS. 467/DEL/2011 & 2222/DEL/2012 18 IV) 123 TTJ 888 (JAIPUR) JAIPUR VIDYUT VITRAN NIGAM LTD. VS. DCIT V) ITA NO. 228/2014 (O&M) (P&H) DATED 20.11.2014 CIT VS. MLS RAJINDER PARSHAD JAIN (PAGES 348 - 352 OF PAPER BOOK) VI) ITA NO. 52/2014 (HYD) CIT VS. JANAPRIYA ENGINEERS SYNDICATE (PAGES 366 - 368 OF PAPER BOOK) 5.11 IT IS ALSO SUBMITTED THAT ONCE ASSESSEE HAD BONAFIDE REASON TO BELIEVE TDS WAS NOT DEDUCTIBLE, SECTION 40(A)(IA) OF THE ACT IS INAPPLICABLE AS HAS BEEN HELD BY THE FOLLOWING JUDGMENTS: I) 340 ITR 333 (BOM) CIT VS. KOTAK SECURITIES LTD. II) 109 DTR 7 0 (HP) PALAM GAS SERVICE VS. CIT . 5.12 THIS SUBMISSION IS SUPPORTED BY INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, WHICH IS EXPLAINED IN FINANCE BILL' 2012 AS UNDER: I) 342 ITR 49 (ST.) FINANCE BILL' 2012 II) 342 ITR 152 (ST.) NOT E ON CLAUSES III) 342 ITR 261 (ST.) MEMORANDUM EXPLAINING THE PROVISION IN FINANCE BILL 2012 5.13 IT IS SUBMITTED THAT THE AFORESAID AMENDMENT IS RETROSPECTIVE AS THE SAME IS CLARIFICATORY: I) 224 ITR 677 (SC) ALLIED MOTORS (P) LTD. VS. CIT II) ITA NO. 10791HYD/2013 DATED 123.2014 A.Y. 2007 - 08. ASTT. CIT VS. MLS PLR PROJECTS (P) LTD. IV) ITA NO. 590/2013 DATED 15.7.2014 (KAR) SANTOSH KUMAR SHETTY V) ITA NO. 412/2013 (GUJ) OM PRAKASH R. CHAUDHARY VI) ITA NO. 1056IMUM/2011 A.Y. 2006 - 07 DATED 26.11.2014 DR. ADI R. NAZIR VS. ACIT VI) ITA NO. 18521PUNE/2012 DATED 6.1.2014 A.Y. 2008 - 09 ITO VS. MLS GAURIMAL MAHAJAN & SONS VII) 149 ITD 363 (AGRA) RAJEEV KUMAR AGGARWAL ITA NOS. 467/DEL/2011 & 2222/DEL/2012 19 5.14 IN VIEW OF THE AFORESAID DISALL OWANCE MADE MAY KINDLY BE DELETED. GROUND NO. 6 : ADHOC DISALLOWANCE OF EXPENSES THE LEARNED ASSESSING OFFICER HAS DISALLOWED 50% OF FOLLOWING EXPENSES (PAGE 9 PARA 5) SR. NO. NATURE OF EXPENSES AMOUNT (RS.) I) DIWALI EXPENSES 16,500 II) PAINTING & WHITE WASH 14,600 III) PUBLICITY 45,000 IV) TRAVELLING 1,02,890 V) ENTERTAINMENT 91,590 VI) PRINTING AND STATIONERY 24,250 TOTAL 3,09,330/ - 6.2 IN THIS VIEW, THE INTERNAL VOUCHERS DO NOT HAVE NARRAT ION AND, SIGNED BY ONE MAN IS SAME STYLE. AS SUCH, HE HELD GENUINENESS AND, REASONABLENESS OF EXPLANATION IS NOT ASCERTAINABLE. 6.3 THE APPELLANT FILED FOLLOWING SUBMISSION IN RESPECT OF ABOVE CLAIMS: I) SUBMISSION DATED 15.12.2010 (PAGE 49 OF PAPER BOOK) 6.4 IT IS WELL SETTLED POSITION OF LAW THAT ADHOC DISALLOWANCES ARE NOT TENABLE IN LAW, AS HAS BEEN HELD BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS: A) 102 TTJ 882 (PUNE) LAVRIDS KNUDSEN MASKINFABRIK (INDIA) LIMITED. VS ADDITIONAL COMMISSIONER OF I NCOME - TAX B) 43DTR 116 (TM) (AGRA) ITO VS. MAYUR AGGARWAL C) 254 ITR 673 (GUJ) DINESH MILLS LTD. VS. COMMISSIONER OF INCOME TAX. D) 73 ITD 189 (DEL) GOODYEAR INDIA LTD V ITO E) 106 TTJ 1065 (DEL) HUGHES ESCORTS COMMUNICATIONS LIMITED. VS ITA NOS. 467/DEL/2011 & 2222/DEL/2012 20 JOINT COMMISS IONER OF INCOME - TAX. F) 94 TTJ 423 (ASR) SUNDER MAL SAT PAL VS. INCOME TAX OFFICER G) 81 TTJ 448 (JODH) DCIT VS. SURFACE FINISHING EQUIPMENT H) 12 TTJ 485 (CAL) TRIMURTI SALT COMPNAY V ITO 6.5 IT IS FURTHER SUBMITTED THAT, IN ABSENCE OF ANY BASIS GIVE N BY THE LEARNED ASSESSING OFFICER, THE DISALLOWANCE IS NOT TENABLE. RELIANCE IS PLACED ON THE JUDGMENT OF STATE OF ORISSA V. MAHARAJA SHRI B.P.SINGH DEO (1970) REPORTED IN 76 ITR 690 (SC) 6.6 MOREOVER IT IS NOT A CASE WHERE BOOKS OF ACCOUNTS HAVE BEEN P RODUCED ALONGWITH VOUCHERS. IT IS SUBMITTED THAT VOUCHERS ARE ALWAYS SELF GENERATED AND SUSPICION HOWSOEVER STRONG CANNOT BE BASIS TO DISALLOWANCE AN ELIGIBLE EXPENDITURE. RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: A) 37 ITR 151(SC) OM AR SALAY MOHAMMAD SAIT V CIT B) 26 ITR 736 (SC) DHIRAJLAL GIRDHARILAL V CIT, BOMBAY C) 26 ITR 775 (SC) DHAKESHWARI COTTON MILLS ITD. V CIT D) 37 ITR 288 (SC) LAL CHAND BHAGAT AMBICA RAM V CIT 6.7 THE APPELLANT ALSO SEEKS TO PLACE ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF R.B. JESSARAM FATEHCHAND (SUGAR DEPTT.) VS. CIT 6.8 IN VIEW THEREOF, DISALLOWANCE MADE MAY KINDLY BE DELETED. 8. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY AND STATED THAT THE APPEAL FILED BY THE ASSESSEE MAY BE DISMISSED, BECAUSE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SUPPORT ITS CLAIM BEFORE THE REVENUE AUTHORITY. 9. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH THE WRITTEN SYNOPSIS FILED BY THE ASSESSEE AS WELL AS THE CASE LAWS CITED BY HIM. AFTER GOING THROUGH THE ASSESSMENT ORDER, WE ARE OF THE VIEW THAT THE ADDITIONS IN DISPUTE HAVE BEEN MADE BY THE AO FOR WANT ITA NOS. 467/DEL/2011 & 2222/DEL/2012 21 OF EVIDENCE AND FOR NON - PRODUCTION OF EVIDENCE, AS REQUIRED BY HIM. SIMILARLY, LD. CIT(A) HAS ALSO UPHELD THE ORDER OF THE AO, BECAUSE THE ASSESSEE HAS N OT PRODUCED ANY EVIDENCE BEFORE HIM ALSO. 10. GROUND 1 AND 2 RELATE TO ADDITIONS OF RS. 12,67,193/ - AND RS. 3,86,041/ - ON ACCOUNT OF UNEXPLAINED CASH PAYMENTS REFLECTED IN CASH BOOK OF M/S. MOSAIC HOUSE AND M/S DILER STONE, PROPRIETORSHIP CONCERNS OF T HE APPELLANT. FROM THE PERUSAL OF THE CASH BOOK OF M/S. MOSAIC HOUSE, THE ASSESSING OFFICER NOTED THAT THERE IS NO OPENING CASH IN HAND AND PAYMENTS IN CASH UPTO 30.3.2007 WERE OF RS. 17,97,141/ - ; WHEREAS THE CASH RECEIPTS AMOUNTED TO ONLY RS. 5,29,948/ - A ND AS SUCH, THERE WAS A DIFFERENCE OF RS. 12,67,193/ - WHICH WAS ADDED AS INCOME. FURTHER, THE CASH BOOK OF M/S DILER STONE FOR THE PERIOD L.4.2006 TO 3L.3.2007 REVEALED THAT ASSESSEE HAS MADE CASH DEPOSIT OF RS. 4,62,000/ - BUT CASH IN HAND ON THE SAID DATE WAS RS. 75,959/ - AND THEREFORE, THE ADDITION WAS MADE ON ACCOUNT OF UNEXPLAINED CASH DEPOSIT OF RS. 3,86,041/ - . THE APPELLANT EXPLAINED THAT DIFFERENCE OF RS. 12,67,193/ - WAS MET OUT OF THE ADVANCE OF RS. 11,50,000/ - RECEIVED AGAINST LAND AND TRANSFER OF RS. 1,95,320/ - FROM M/S DILER STONE. THE APPELLANT IN SUPPORT OF THE ABOVE FURNISHED AGREEMENT TO SELF DATED 26.3.2006, CASH FLOW STATEMENT AND REVISED CASH BOOK. IN A REPLY DATED 15.12.2009 FURNISHED BY THE APPELLANT, IN RESPONSE TO LETTER DATED 11.12.20 09 OF THE ASSESSING OFFICER, IT WAS STATED AS UNDER: '1 THAT AS REGARDS TO YOUR QUERY REGARDING DIFFERENCE IN INFLOW OF CASH OF RS. 12,67,193/ - IN MOSAIC HOUSE (INDIA), IT IS SUBMITTED THAT WHILE CONSIDERING THE INFLOW YOU HAVE NOT CONSIDERED THE AMOUNT O F RS. 11,50,000/ - RECEIVED AS ADVANCE AGAINST LAND PROPERTY AND FURTHER A SUM OF RS. 1,95,320/ - WAS ALSO TRANSFERRED FROM THE BOOKS OF DILER STONE, IF THE SAME ARE CONSIDERED THE DIFFERENCE WILL AUTOMATICALLY RECONCILE. THE ADVANCE AGAINST LAND PROPERTY WA S TAKEN IN THE MONTH OF MARCH 2006 AND IT WAS ENTERED IN THE CASH BOOK BUT UNFORTUNATELY AT THE TIME OF FEEDING/PRINTING OR VIRUS MY VIEW I AM ENCLOSING COPY OF AGREEMENT AND DETAILED CASH FLOW OF MOSAIC HOUSE (INDIA) FOR YOUR KIND CONSIDERATION. 2 THAT A S REGARD TO CASH DIFFERENCE OF RS. 3,86,041/ - IN THE BOOKS OF DILER STONE AS MENTIONED IN THE ABOVE NOTICE, IT IS SUBMITTED THAT THERE WAS OPENING BALANCE OF RS. 75,959/ - AND THEREAFTER A SUM OF RS. 4,00,000/ - WAS TRANSFERRED FROM THE CASH BOOK OF MOSAIC H OUSE (INDIA) AND OUT OF ITA NOS. 467/DEL/2011 & 2222/DEL/2012 22 THESE AMOUNTS A SUM OF RS. 4,50,000/ - WAS DEPOSITED IN THE BANK. BOTH THE ACCOUNTS WERE MAINTAINED IN SAME COMPUTER. BUT DUE TO VIRUS PROBLEM UNFORTUNATELY THESE ENTRY WAS DISTURBED AND DUE TO OVER SIGHT OF THESE ENTRIES BOTH THE CA SH BOOK WERE PRINTED WITHOUT NOTICING THESE ENTRIES. ' 10 .1 THE LEARNED ASSESSING OFFICER EXAMINED THE AGREEMENT FURNISHED BY THE APPELLANT AND HELD THAT IT IS A SELF SERVING DOCUMENT AND DOES NOT HAVE ANY EVIDENTIARY VALUE AND MOREOVER, SINCE THE PROPER TY IS THE PERSONAL PROPERTY, ANY AMOUNT RECEIVED AGAINST THE PERSONAL PROPERTY HAS TO BE INTRODUCED IN THE CAPITAL ACCOUNT OF THE ASSESSEE AND NOT IN THE BALANCE SHEET OF THE FIRM AS ADVANCE AGAINST PROPERTY. HE THUS REJECTED EXPLANATION OF THE ASSESSEE AN D MADE THE IMPUGNED ADDITIONS. 10 .2 ON APPEAL, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO FURNISH A REMAND REPORT WHEREBY THE ASSESSING OFFICER ADMITTED THAT APPELLANT FURNISHED AFFIDAVITS OF ALL THE PERSONS WHO HAD ADVANCED THE SUMS TO THE APPELLANT. HE ALSO ADMITTED THAT ONE OF THE PERSONS SHRI SANTOSH KUMAR ATTENDED AND ADMITTED TO HAVE ADVANCED RS.1,15,000/ - - THOUGH NOT AS AN ADVANCE AGAINST THE PROPERTY. AS REGARDS SHRI RAJESH KUMAR, ANOTHER PERSON PRODUCED BEFORE THE ASSESSING OFFICER, THE ASSESS ING OFFICER DID NOT RECORD ANY STATEMENT AS NAME OF THE PERSON IN THE AGREEMENT WAS RAJESH CHAUHAN AND NOT RAJESH KUMAR. THE CIT(A) THUS REJECTED THE EXPLANATION OF THE APPELLANT ON THE GROUND THAT THERE IS A DENIAL OF THE SOLE PURCHASER PRODUCED BEFORE TH E ASSESSING OFFICER OF ENTERING INTO ANY SUCH AGREEMENT AND APPELLANT FAILED TO PRODUCE REMAINING PARTIES. 10. 3. AS REGARDS GROUND NOS. 1 AND 2, HAVING GONE THROUGH THE RECORD, WE FIND THAT THE BALANCE SHEET OF M/S. MOSAIC HOUSE FURNISHED ALONG WITH RET URN OF INCOME SHOWS THE ADDITION OF RS. 1,50,000/ - AGAINST THE PROPERTY. MOREOVER IT IS NOT IN DISPUTE THAT ASSESSEE IS AN OWNER OF THE PROPERTY ALTHOUGH A PERSONAL PROPERTY. IT IS ALSO A MATTER OF RECORD THAT APPELLANT HAS FURNISHED AFFIDAVITS OF ALL THE EIGHT PARTIES IN SUPPORT OF THE CLAIM OF ADVANCE AGAINST LAND. NO DOUBT, APPELLANT HAS FAILED TO PRODUCE THE PARTIES BEFORE THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS YET IT IS A MATTER OF RECORD THAT ONE OF THE PERSONS WHO WAS PRODUCED ADMITTED TO HAVE ADVANCED RS. 1,50,000/ - TO THE APPELLANT. THE AFFIDAVITS AND THE STATEMENT AS RECORDED HAVE NOT BEEN PLACED BEFORE US. WE THEREFORE ACCEPT THE CONTENTION OF THE COUNSEL OF THE APPELLANT THAT ITA NOS. 467/DEL/2011 & 2222/DEL/2012 23 THE ISSUE BE RESTORED TO THE FILE FOR THE ASSESSING OFFIC ER FOR VERIFICATION AFTER EXAMINATION OF THE PERSONS WHO HAVE ADVANCED TO THE APPELLANT. WE ALSO NOTICE THAT APPELLANT HAS FURNISHED REVISED CASH BOOK DURING THE ASSESSMENT PROCEEDINGS EXPLAINING THE DISCREPANCY IN THE ORIGINAL CASH BOOK FURNISHED DURING T HE ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAS DISCREDITED THE SAID CASH BOOK WITHOUT EXAMINING THE SAME. WE THEREFORE, DIRECT THAT WHILE CONDUCTING FRESH EXAMINATION, THE ASSESSING OFFICER WOULD LOOK INTO THE EXPLANATION TENDERED AND THE REVISED CAS H BOOK AND NOT MERELY DISCREDIT THE SAME. ACCORDINGLY, THE ISSUE OF ADDITION REGARDING UNEXPLAINED DEPOSIT IN THE CASH BOOK OF THE APPELLANT IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DENOVA EXAMINATION AND ADJUDICATION AFTER GRANTING NECESSARY O PPORTUNITY TO THE APPELLANT. 1 1 . WITH REGARD TO GROUND NO. 3 RELATING TO CONFIRMATION OF ADDITION OF RS. 1,07,939/ - IS CONCERNED, WE FIND THAT LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE WAS AFFORDED ONE MORE OPPORTUNITY TO PRODUCE THE SAID CREDITORS BE FORE THE AO DURING THE REMAND PROCEEDINGS. THE APPELLANT COULD NOT PRODUCE THESE PARTIES INSPITE OF SEVERAL OPPORTUNITIES. BUT FOR FURNISHING THE BILLS OF THESE PARTIES, NO EFFORTS WERE MADE TO PROVE HIS VERSION. IN THE REJOINDER TO THE REMAND REPORT, THE ASSESSEE CONTENDED THAT COMPLETE ADDRESS, TELEPHONE/FAX NO. AND BANK A/C NO. WAS FURNISHED TO THE AO DURING THE REMAND PROCEEDINGS BUT THE AO HAS NOT TAKEN ANY STEPS TO ENQUIRE AT HIS OWN LEVEL. WE FURTHER FIND THAT LD. CIT(A) HAS OBSERVED THAT IT COUL D BE SEEN THAT THE AO MADE ADDITION IN RESPECT OF THE PARTIES WHO HAVE DENIED TO HAVE ANY OUTSTANDING AMOUNT WITH THE APPELLANT. IT IS NOT THE CASE OF NOT RECEIVING ANY RESPONSE FROM THE CREDITORS OR RETURN OF THE LETTERS AS COMEBACK UN - SERVED. UNDER THESE CIRCUMSTANCES, ONUS IS ON THE APPELLANT TO PROVE THAT THE LIABILITY EXISTS BY PRODUCING THEM OR FURNISHING RECONCILIATION STATEMENT ETC. INSTEAD THE ASSESSEE HAS MERELY GIVEN THE ADDRESS ETC. OF THE CREDITORS WHICH WAS ALREADY AVAILABLE WITH AO. IN THE BA CKGROUND OF THE AFORESAID DISCUSSIONS, WE FIND THAT THE LD. CIT(A) WAS RIGHT IN UPHOLDING THE ADDITION OF RS. 1,07,939/ - , WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE GROUND N O. 3 RAISED BY THE ASSESSEE. ITA NOS. 467/DEL/2011 & 2222/DEL/2012 24 1 2 . GROUND 4 OF THE GROUNDS OF APPEAL RELATES TO DISALLOWANCE OF RS. 18,72,599/ - REPRESENTING EXPENDITURE INCURRED ON EXPORT OF GOODS THROUGH AGENTS OF FREIGHT SHIPPING COMPANIES. THE ASSESSING OFFICER HAS HELD THAT NO EVID ENCE WAS FILED TO PROVE THAT PAYMENTS WERE MADE TO AGENTS OF SHIPPING COMPANIES AND THEREFORE, SINCE APPELLANT DID NOT DEDUCT TDS UNDER SECTION 194C OF THE ACT, THE SAME IS NOT ALLOWABLE UNDER SECTION 40(A)(IA) OF THE ACT. DURING THE COURSE OF APPELLATE PR OCEEDINGS, THE APPELLANT HIGHLIGHTED PAGE 45 WHICH IS A CERTIFICATE FROM M/S. POOJA FREIGHT FORWARDERS STATING THAT M/S. POOJA FREIGHT FORWARDERS IS AN INTERNATIONAL FREIGHT FORWARDING COMPANY WHICH NEGOTIATES OCEAN FREIGHT WITH THE CARRIERS/SHIPPING LINES ON BEHALF OF THE EXPORTER FOR THEIR OUT BOUND SHIPMENT. IT HAS BEEN CONFIRMED THAT SHIPMENTS FROM THE APPELLANT HAVE BEEN BOOKED THROUGH MEDITERRANEAN SHIPPING COMPANY SA AND M/S. POOJA FREIGHT FORWARDERS HAS PAID FREIGHT TO THE SHIPPING LINE ON BEHALF OF THE APPELLANT. IT HAS BEEN CLARIFIED THAT MEDITERRANEAN SHIPPING COMPANY IS A GENEVA, ITALY BASED SHIPPING LINE AND THEY HAVE A TAX EXEMPTION CERTIFICATE FROM THE INCOME TAX DEPARTMENT. THE CIT(A) HOWEVER HELD THAT SINCE M/S. POOJA FREIGHT FORWARDERS IS N OT A AGENT OF ANY FOREIGN SHIPPING COMPANIES AND THEREFORE, THE PAYMENTS MADE BY THE APPELLANT TO M/S. POOJA FREIGHT FORWARDERS WAS LIABLE FOR TDS. WE FIND THAT THE ISSUE INVOLVED IN THE INSTANT CASE IS NO LONGER RES INTEGRA. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT NARMADA VALLEY CORPORATION REPORTED IN 361 ITR 192 WAS CONSIDERING A CASE WHERE ASSESSEE CLAIMED DEDUCTION OF RS.6,93,372/ - TOWARDS REIMBURSEMENT OF CHA CHARGES PAID OF C&F AGENTS AND RS.76,00,509/ - TOWARDS REIMBURSEMENT EXP ENSES TOWARDS CONSIGNMENT AGENTS. THE HIGH COURT UPHELD THE DELETION OF THE ADDITION BY THE CIT(A) AND THE TRIBUNAL ON THE GROUND THAT EXPENSES WERE INCURRED BY THE AGENTS ON BEHALF OF THE ASSESSEE FOR TRANSPORTATION AS NO OTHER PARTIES WHICH HAS BEEN FELT OUT IN THE BILLS INCLUDING COMMISSION TO THE AGENT. IT WAS THEREFORE, HELD AS UNDER: THE LEARNED TRIBUNAL ALSO OBSERVED THAT THE RELATION BETWEEN THE ASSESSEE AND THE AGENT IS PRINCIPAL AND AN AGENT. THE LEARNED TRIBUNAL ALSO OBSERVED THAT SO FAR AS TH E OBLIGATION TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF TRANSPORT CHARGES AND OTHER CHARGES IS ITA NOS. 467/DEL/2011 & 2222/DEL/2012 25 CONCERNED, THE SAME WAS COMPLIED WITH BY THE AGENT, WHO HAD MADE PAYMENT ON IT'S BEHALF. ON THE AFORESAID FACTS THE LEARNED TRIBUNAL ALSO OBSERVED THAT THE CI RCULAR RELIED UPON BY THE REVENUE THAT IT IS THE LIABILITY OF THE ASSESSEE AS PRINCIPAL AGENT TO DEDUCT THE TDS WILL NOT BE APPLICABLE AND THE SAID CIRCULAR WOULD BE APPLICABLE FOR PAYMENT MADE TO PRINCIPAL TO PRINCIPAL. CONSIDERING THE AFORESAID FACTS AN D CIRCUMSTANCES OF THE CASE, WHEN THE LEARNED TRIBUNAL HAS CONFIRMED THE ORDER PASSED BY THE CIT(A) QUASHING AND SETTING ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER IN DELETING THE DISALLOWANCE OF RS.6,93,372/ - AND RS. 76,00,509/ - CLAIMED BY THE ASSESSE E UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, WE SEE NO REASON TO INTERFERE WITH THE SAME. NO ERROR HAS BEEN COMMITTED BY THE LEARNED TRIBUNAL IN CONFIRMING THE ORDER PASSED BY THE CIT(A). NO QUESTION OF LAW, MUCH LESS SUBSTANTIAL QUESTION OF LAW, ARISE S IN THE PRESENT APPEAL. HENCE, THE PRESENT APPEAL DESERVES TO BE DISMISSED AND IS ACCORDINGLY DISMISSED. 1 2 .1. ALSO, JODHPUR BENCH IN THE CASE OF ACIT VS. MINPRO INDUSTRIES 143 TTJ 331 (JODH) HAS HELD AS UNDER: '8.2 WE HAVE GONE THROUGH THE BOARD CIRCULAR NO. 723, COPY OF WHICH IS PLACED ON RECORD AND CONTENTS OF THE SAME HAVE BEEN TABULATED IN THE ORDER OF LEARNED CIT(A) ALSO AND FOUND THAT ABOUT CERTAIN PAYMENTS IT HAS BEEN CLARIFIED BY THE BOARD THAT ON THESE PAYMENTS PROVISIONS OF SS. 194C AND 195 WILL NOT APPLY AND PROVISIONS OF S. 172 WILL BE APPLICABLE. THE LEARNED CIT(A) HAS TAKEN INTO CONSIDERATION THIS CIRCULAR AND FOUND THAT CERTAIN PAYMENTS MADE BY THE ASSESSEE TO THE C AND F AGENTS WHO HAVE ALREADY MA DE THE PAYMENT ON BEHALF OF THE ASSESSEE WERE NOT COVERED EITHER UNDER S. 194C OR UNDER S. 195, AS THEY ARE COVERED UNDER THE PROVISIONS OF S. 172. THEREFORE, WE HOLD THAT LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT ON CERTAIN PAYMENTS THE PROVISIONS OF S S. 194C AND 195 WERE NOT APPLICABLE AND, THEREFORE, ASSESSEE WAS NOT LIABLE TO DEDUCT TDS. SUCH PAYMENTS HAVE BEEN DISCUSSED BY LEARNED CIT(A) IN HIS ORDER. THEY WERE ON ACCOUNT OF ITA NOS. 467/DEL/2011 & 2222/DEL/2012 26 SEA FREIGHT TRANSPORT WHICH WERE AT RS. 1,16,11,550, CCI CHARGES, STEAMER F REIGHT CHARGES, REPO CONTAINER CHARGES. REMAINING EXPENSES REIMBURSED BY THE ASSESSEE WERE ON ACCOUNT OF TRANSPORTATION CHARGES AT RS.20,31,226 AND ON THIS AMOUNT THE AGENT HAS DEDUCTED TDS BEFORE MAKING PAYMENT TO THE PRINCIPAL. SIMILARLY, TDS HAS BEEN DE DUCTED ON SHIPPING BILL OF RS. 2,18,718, AGENCY CHARGES OF RS. 3,61,550 PAID BY ASSESSEE ON WHICH TDS HAS BEEN DEDUCTED BY ASSESSEE. THERE WERE OTHER SMALL PAYMENTS OF RS. 9,816 ON ACCOUNT OF OTHER EXPENSES ON WHICH TDS WAS NOT APPLICABLE. IN THIS WAY, THE ENTIRE ADDITION OF RS. 1,60,41,692 WAS DELETED BY LEARNED CIT(A). THE LEARNED CIT(A) HAS DISCUSSED EACH ITEM IN DETAIL AND THEN ONLY IT HAS BEEN HELD THAT ASSESSEE WAS NOT LIABLE TO MAKE DEDUCTION OF TDS ON REIMBURSEMENT OF EXPENSES. VARIOUS BENCHES OF TH E TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT IF THE PAYMENTS ARE MADE ON ACCOUNT OF REIMBURSEMENT, THEN NO TDS IS LIABLE TO BE DEDUCTED ON BEHALF OF THE PAYER I. E. ASSESSEE. 1 2 .2. THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN CASE OF KAMATAKA URBAN INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION (SUPRA). 1 2 .3 WE HAVE GONE THROUGH THE RATIO OF THIS DECISION AND FOUND THAT THE SAME IS DISTINGUISHABLE. IN THIS CASE ON BONA FIDE BELIEF OF THE AS SESSEE COMPANY WHICH WAS WHOLLY - OWNED BY STATE OF KARNATAKA HAD NOT DEDUCTED TDS ON ACCOUNT OF NON - RESIDENT COMPANY BY OBSERVING THAT THE AMOUNT SPENT TOWARDS ACCOMMODATION AND CONVEYANCE OF THE OFFICER/EMPLOYEE OF THE NON - RESIDENT COMPANY WAS NOT REQUIRE D TO BE TREATED AS A PART OF THEIR INCOME, WHEREAS IT WAS A PART OF THEIR INCOME. THEREFORE, HON'BLE KARNATAKA HIGH COURT HELD THAT ON THIS AMOUNT TDS WAS DEDUCTIBLE. HOWEVER, IN THE PRESENT CASE THE FACTS ARE ENTIRELY DISTINGUISHABLE. THERE IS NO COMPONEN T OF INCOME ON THE AMOUNT PAID BY ASSESSEE ON ACCOUNT OF REIMBURSEMENT. WHATEVER THE AMOUNT WAS PAID BY THE AGENT, THAT WAS REIMBURSED BY THE ASSESSEE. THEREFORE, THERE WAS NO INCOME COMPONENT IN THE HANDS OF AGENT. IT IS FURTHER SEEN THAT PROVISIONS OF S. 172 WERE VERY CLEAR THAT SUCH TYPE OF PAYMENTS WHICH ARE MADE BY ASSESSEE HAD BEEN HELD THAT THEY ARE NOT PART OF REGULAR INCOME ITA NOS. 467/DEL/2011 & 2222/DEL/2012 27 AND, THEREFORE, PROVISIONS OF SS. 194C AND 195 ARE NOT APPLICABLE AND BOARD HAS CLARIFIED THE SAME. THEREFORE, THERE IS NO QUE STION OF MAKING ANY TDS ON THE PART OF THE ASSESSEE AND LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE. ONE MORE DECISION HAS BEEN RELIED ON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IN CASE OF ASSOCIATED CEMENT CO. LTD. (SUPRA) AND WE FIND THA T FACTS IN THIS CASE ARE ALSO DISTINGUISHABLE. IN THIS CASE ALSO WE FIND THAT FACTS ARE TOTALLY DIFFERENT FROM THE FACTS INVOLVED IN THE CASE IN HAND. MOREOVER, THE PAYMENTS MADE BY ASSESSEE ARE COVERED BY S. 172 WHERE PROVISIONS OF SS. 194C AND 195 ARE NO T APPLICABLE AS CLARIFIED BY THE BOARD VIDE CIRCULAR NO. 723, DT. 19TH SEPT., 1995. THE AO HAS PLACED RELIANCE ON THE CIRCULAR NO. 715 WHICH IS OF EARLIER DATE FROM THE CIRCULAR NO. 723. THE LEARNED CIT(A) HAS OBSERVED THAT THIS CIRCULAR WAS WRONGLY APPLIE D BY AO AS CIRCULAR NO. 723 IS APPLICABLE ON THE FACTS OF THE PRESENT CASE. NATURE OF PAYMENTS HAS ALREADY BEEN DISCUSSED BY LEARNED CIT(A) AT P. 11 OF HIS ORDER. THEREFORE, WE ARE NOT REPEATING THOSE DETAILS AGAIN AND IN THESE DETAILS IT HAS BEEN CLARIFIE D THAT THE ENTIRE PAYMENTS ARE COVERED BY CIRCULAR NO. 723, DT. 19TH SEPT., 1995 AND ON REMAINING PAYMENT, THE AGENT HAS DEDUCTED TDS OR THE ASSESSEE HAS DEDUCTED THE TDS. THEREFORE, IN VIEW OF THESE FACTS AND CIRCUMSTANCES AND IN VIEW OF DETAILED REASONIN G GIVEN BY LEARNED CIT(A) WHICH HAS BEEN REPRODUCED IN THIS ORDER, WE HOLD THAT LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT ASSESSEE WAS NOT LIABLE TO DEDUCT TDS ON THE AMOUNT REIMBURSED BY THE ASSESSEE. ACCORDINGLY, WE CONFIRM THE ORDER OF LEARNED CIT(A) . ' 1 2 .4. DURING THE COURSE OF HEARING, ASSESSEE HIGHLIGHTED THAT THE BREAK UP OF THE PAYMENTS OF RS.18,70,771/ - IS AS UNDER. RS.95, 545 WARE HOUSE CHARGES TO GOVT. AGENCIES FOR STORAGE RS. 3,52,869.81 LANDING CHARGES CHARGED BY SHIPPING COMPANIES OWNED BY GOVT. RS.8,04,085 TRANSPORTATION CHARGES WHICH ARE BILL WISE AND AMOUNT IS BELOW RS.20,000/ - AND PAID TO TRUCK WISE NOT TO THE CO. RS.23,400 INLAND HAULAGE CHARGES TO CONTAINER CORPORATION OF INDIA WHO IS EXEMPTED FOR TAX DEDUCTION AT SOURCES AND OTHER SHIPPING COY. CERTIFICATES FURNISHED. RS.61,224 SHIPPING BILL FOR MATERIAL CHARGES CHARGED BY GOVT. ITA NOS. 467/DEL/2011 & 2222/DEL/2012 28 RS.19,495 CERTIFICATE CHARGES BY GOVT. ON DOCUMENTS FURNISHED FOR EXPORT RS.13,500 LOADING AND UNLOADING CHARGES, PETTY IN NATURE RS.75,000 CE RTIFICATE FEE CHARGES BY GOVT. RS.11,000 FUMIGATION CHARGES ON STORAGE TO PREVENT THE GOODS FOR DAMAGES RS.6,100 LICENSE FEE CHARGES BILL WISE RS.2,42,608.50 MISC. AND PETTY CHARGES SEA/AIR FREIGHT NOT SUBJECT TO TDS TOTAL : RS.18,70,773.01 1 2 .5. A PERUSAL OF THE ABOVE CHART DEMONSTRATES THAT MOST OF THE PAYMENTS ARE REIMBURSEMENT OF EXPENSES. WHEN EXPENDITURE IS RECONCILED THERE IS NO ELEMENT OF INCOME TO THE RECIPIENT. 1 2 .6. HAVING RE GA RD TO TH E A BO V E FACTU A L POSITION W HICH I S N O T DISPUTED B Y A UTHORITIES BELOW , WE HOLD TH A T SIN C E T H E PA Y MENTS H AV E BEEN MADE AS REIMBURSEMENT OF EXPENSES TO THE AGENTS OF THE APPELLANT, THEREFORE, APPELLANT WAS NOT OBLIGED TO DEDUCT TDS UNDER SECTION 194C OF THE ACT AND AS SUCH, NO DISALLOWANCE IS WARRANTED U/S 40(A)(IA) OF THE ACT . HA V ING REGARD TO THE A BO V E, W E D E L E T E THE ADDITION A ND ALLOW THE GROUND RAISED BY THE APPELLANT . 1 3 . WITH REGARD TO GROUND NO. 5 RELATING TO CONFIRMATION OF ADDITION OF RS. 1,54,665/ - IS CONCERNED, WE FIND THAT THE AR OF THE COUNSEL HAS SUBMITTED THAT ALL THE EXPENSES CLAIMED ARE SUPPORTED WITH VOUCHERS. THE ACTION OF THE AO IN DISALLOWING 50% OF THE EXPE NDITURE WITHOUT POINTING OUT ANY DEFECT IS ARBITRARY AND UNJUSTIFIED. LD. CIT(A) HAS CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR AND OBSERVED THAT THE AO MADE A CATEGORICAL FINDING REGARDING THE GENUINENESS, REASONABLENESS AND VERIFIABILITY OF THE BILLS. THE REVENUE AUTHORITY BELOW HAS COME TO THE CONCLUSION AGAINST THE ASSESSEE, AFTER VERIFYING THE VOUCHERS PRODUCED BY THE ASSESSEE. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES, LD. CIT(A) HAS RIGHTLY HELD THAT THE DISALLOWANCE MADE BY THE A O WAS TREATED AS FAIR AND REASONABLE AND THUS THE ADDITION OF RS. 1,54,665/ - WAS SUSTAINED BY THE LD. CIT(A), WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE GROUND NO. 5 RAISED BY THE ASSESEE IN ITS APPEAL. ITA NOS. 467/DEL/2011 & 2222/DEL/2012 29 IN THE RESULT, THE ASSESSEE S BEING ITA NO. 467/DEL/2011 (A.Y. 2007 - 08) STANDS PARTY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 2222/DEL/2012 (A.Y. 2009 - 10) 1 4. WITH REGARD TO GROUND NOS. 3, 4 AND 5 IN THE ASSESSEE S OWN CASE THE ISSUE IS THE SAME AS DEALT WITH BY US IN THE ORDER FOR THE AY 2007 - 08 AT PARAGRAPHS 1 2 TO 1 2 .5. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DELETE THE SAID DELETION. GROUNDS ALLOWED. 15. WITH REGARD TO GROUND NO . 1, THE LD.CIT(A) OBSERVES T HAT THERE IS A DIFFERENCE OF ACCOUNTS. THE SALES IN THIS CASE IS RS.1.08 CRORES AND THE LEDGER ACCOUNT REFLECTS RS.1.21 CRORES. AT PAGE 18 OF THE PAPER BOOK THE ASSESSEE FURNISHED A COPY OF THE RECONCILIATION. THE OPENING BALANCE IS RS.13,21,034/ - . AL L THESE ARE EXPORT SALES AND A PERUSAL OF THIS COPY OF THE LEDGER OF M/S VENUS STORES, SPAIN DEMONSTRATES THAT THE FIGURES HAVE BEEN RECONCILES, THE DISCREPANCY EXPLAINED. IN THE RESULT GROUND NO.1 IS ALLOWED. 16. WITH REGARD TO GROUND NO. 2 RELATING TO CONFIRMATION OF ADDITION OF RS. 6 LACS U/S. 40A(3) IS CONCERNED, WE FIND THAT LD. CIT(A) HAS OBSERVED THAT IT HAS NOT BEEN DISPUTED BY THE ASSESSEE THAT THE CHEQUES ARE NOT BEARER CHEQUES. THE ASSESSEE S COUNSEL FAILED TO LEAD ONLY EVIDENCE AND SUBMIS SIONS AS TO HOW THE PARTICULAR TRANSACTIONS ARE COVERED UNDER RULE 6DD. IN OUR CONSIDERED OPINION, LD. CIT(A) WAS RIGHT IN OBSERVING THAT MERE STATEMENT THAT THE PURCHASERS HAVE NO BANK ACCOUNT A/C AT THAT VERY PLACE HAS NO MEANING WITHOUT EXPLAINING THE CIRCUMSTANCES UNDER WHICH THE ASSESSEE HAD TO ISSUE BEARER CHEQUES AND AS TO HOW THE TRANSACTIONS ARE COVERED UNDER RULE 6DD. IN VIEW OF ABOVE, LD. CIT(A) HAS FORCE IN HIS FINDING IN HOLDING THAT IN THE ABSENCE OF ANY EVIDENCE LED BY THE ASSESSEE, TH E ACTION OF THE AO IN DISALLOWING THE AMOUNT U/S. 40A(3) WAS UPHELD, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME AND DISMISS THE GROUND NO. 2 RAISED BY THE ASSESSEE. 17. GROUND NO.6 IS ADDITION ON ACCOUNT OF NOTIONAL INT EREST. IT IS WELL SETTLED LAW THAT THE HON BLE GAUHATI HIGH COURT IN THE CASE OF HIGHWAYS ITA NOS. 467/DEL/2011 & 2222/DEL/2012 30 CONSTRUCTIONS CO. PVT. LTD. VS. COMMISSIONER OF INCOME TAX 199 ITR 702 HELD THAT NOTIONAL INTEREST CANNOT BE CHARGED. THIS GROUND IS ALLOWED. 18 . THE GROUND NO. 7 RELATING TO CONFIRMATION OF ADDITION OF RS.95830/ - IS NOT PRESSED BEFORE US, HENCE, THE SAME IS DISMISSED, AS NOT PRESSED. 19 . WITH REGARD TO GROUND NO. 8 RELATING TO CONFIRMATION OF ADDITION OF RS. 33900/ - I.E. 20% DISALLOWANCES OF EXPENSES UNDER VARIO US HEADS IS CONCERNED, WE FIND THAT THE LD. CIT(A) HAS OBSERVED THAT A FACT FINDING HAS BEEN GIVEN BY THE AO THAT SOME OF THE EXPENSES ARE UNVOUCHED OR NOT PROPERLY VOUCHED. THE ASSESSEE S COUNSEL HAS NOT CONTRAVENED THESE OBSERVATIONS OF THE AO. THEREFO RE, IN VIEW OF THE ABOVE FACTUAL FINDING OF THE AO AND LD. CIT(A), LD. CIT(A) UPHELD THE DISALLOWANCE OF 20% OF THE EXPENSES, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DECIDE THE ISSUE AGAINST THE ASSESSEE BY DISMISSING THE GROUND NO. 8 RAISED IN ITS APPEAL. 2 0 . WITH REGARD TO GROUND NO. 9 RELATING TO CONFIRMATION OF ADDITION OF RS. 20000/ - UNDER HOUSE HOLD EXPENSES IS CONCERNED, WE FIND THAT THE LD. CIT(A) HAS OBSERVED THAT THE AO N OTED THAT THE HOUSE HOLD WITHDRAWALS OF RS. 1.00 LAKH ARE QUITE LOW IN RESPONSE TO WHICH THE ASSESSEE STATED THAT THEIRS IS AN AGRICULTURE BASED FAMILY AND HE HAS ONLY TWO SCHOOL GOING DEPENDENT CHILDREN AND THE WITHDRAWALS ARE QUITE REASONABLE AND JUSTICE . LD. CIT(A) FURTHER OBSERVED THAT HAVING REGARD TO THE STATUS AND LIFE STYLE ENJOYED BY THE FAMILY, THE AO ESTIMATED THE EXPENSES AT RS. 10000/ - PER MONTH AND MADE AN ADDITION OF RS. 20,000/ - . IN OUR CONSIDERED OPINION, LD. CIT(A) WAS QUITE REASONABLE IN SUSTAINING THE ESTIMATING ADDITION OF RS. 10,000/ - , WHICH DOES NOT NEED ITA NOS. 467/DEL/2011 & 2222/DEL/2012 31 ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DECIDE THE GROUND NO. 10 AGAINST THE ASSESSEE. 2 1 . IN THE RESULT, THE ITA NO. 467/DEL/2011 (A.Y. 2007 - 08) IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA NO. 2222/DEL/2012 (A.Y. 2009 - 10) IS PARTLY ALLOWED , FILED BY THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 16 / 6 /2015. SD/ - SD/ - [J.S. REDDY] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 16 /0 6 /2015 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES