DCIT, BHILWARA V. M/s. Suraj Fabrics Industries Ltd., BHILWARA

ITA 278/JODH/2014

• Counselvise Citation: 27823314 RSA 2014
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH
• Assessee Lawyers: R S JAITHILA
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; Additional evidence; Cost of acquisition; Fair market value
• Section: 43B; 40A(3); 37

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 262 /JODH/2014 (A.Y. 200 9 - 1 0 ) M/S. SURAJ FABRICS INDUSTRIES LTD. , G - 198 TO 200, RIICO INDUSTRIAL AREA, PHASE - IV, BHILWARA. VS. J CIT, BHILWARA . PAN NO. AABCS 8988 B (APPELLANT) (RESPONDENT) ITA NO. 278 /JODH/2014 (A.Y. 200 9 - 10 ) D CIT, CIRCLE, BHILWARA. VS. M/S. SURAJ FABRICS INDUSTRIES LTD., G - 198 TO 200, RIICO INDUSTRIAL AREA, PHASE - IV, BHILWARA. (APPELLANT) PAN NO. AABCS 8988 B ( RESPONDENT) ASSESSEE BY : SHRI R.S. JAITHILA. DEPARTMENT BY : SHRI JAI SINGH - D.R. DATE OF HEARING : 25 / 0 8 /201 4 . DATE OF PRONOUNCEMENT : 09 /0 9 /201 4 . O R D E R 2 PER N.K. SAINI, A.M TH E S E TWO CROSS APPEAL BY THE D EPARTMENT AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 11 /0 2 /201 4 OF L D . CIT(A), AJMER . 2 FIRST WE WILL DEAL WITH THE DEPARTMENTAL APPEAL IN I.T.A.NO. 278/JODH/2014 . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: - THE LD. CIT(A), AJMER IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE HAS ERRED IN: - 1. DELETING THE DISALLOWANCE U/S. 40A(2)(B) AMOUNTING TO RS. 32,88,216/ - MADE BY THE A.O. WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. DELETING THE DISALLOWANCE OF LATE DEPOSIT OF ESIC & PF AMOUNTING TO RS. 11,98,259/ - MADE BY THE A.O. U/S. 36(1)(V A ) OF THE I.T. ACT, 1961. 3. THE APPELLA NT CRAVES TO ADD, AMEND, ALTER, DELETE OR MODIFY THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. FIRST ISSUE VIDE GROUND NO. 1 RELATES TO THE DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 40A(2)(B) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT). 4. FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD MADE PURCHASES OF SCRAP I RON FROM THE PARTIES COVERED U/S. 40A(2)(B) OF THE ACT IN THE STEEL DIVISION I.E. SPS STEEL POWER LTD. AND BENGAL INDI. THE PURCHASES HAD BEEN MADE AT AVERAGE PRICE OF RS. 24 / - PER KG OF M S 3 S CRAP ON HIGH SEAS BASIS FROM THE SE CONCERNS , THE ASSESSING OFFICER COMPARED THE AVERAGE PURCHASE PRICE OF THE SCRAP IRON FROM VARIOUS OUTSIDE PARTIES WHICH ARE LISTED AT PAGES 7 & 8 OF THE ASSESSMENT ORDER AND NOTED THAT THE SCRAP IRON WAS AVAILABLE IN THE MARKET AT THE RATES VARYING FROM RS. 20 TO RS. 34 PER KG. THE ASSESSING OFFICER MENTIONED THAT THE ASSESSEE MADE ONLY 6.78% OF THE TOTAL PURCHASES FROM OUTSIDE PARTIES AT LOWER RATE THAN THE RATE OF RS. 24 PER KG. PAID TO SISTER CONCERN FOR THE SCRAP IRON AND THE REMAINING PURCHASES WERE AT HIGHER PRICE THAN THE RATE OF SISTER CONCER N . T HE ASSESSING OFFICER MENTIONED THAT THE GOODS WERE AVAILABLE WITH OUTSIDE PARTIES AT CHEAPER RATES ON CERTAIN OCCASIONS, YET ASSESSEE CHOOSE TO PURCHASE FROM ITS SISTER CONCERN AT HIGHER PRICE . HE THEREFORE, DISALLOWED 1% OF THE TOTAL PURCHASES OF RS. 32.88 CRORES BEING PURCHASE S FROM THE SISTER CONCERN AND ACCORDINGLY , MADE THE DISALLOWANCE OF RS. 38,88,216/ - . 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE AS INCORPORATED IN PARA 5.2 OF THE IMPUGNED ORDER ARE REPRODUCED VERBATIM AS UNDER: - WE WOULD, LIKE TO STATE THAT THE ASSESSEE COMPANY HAS BEEN MANUFACTURING TMT BAR AND M.S.BILLETS OF 70/30 WHICH NEED GOOD QUALITY OF IRON SCRAP HAVING LESS IMPURITIES. THE IRON SCRAP AVAILABLE AT THE RATE OF RS. 21,22,23.... PER KG. DOES NOT MATCH THE REQUISITE STANDARDS. COMPROMISE ON COST OF RAW MATERIAL LED INTO INFERIOR QUALITY ON INPUT. IF THE COMPANY WILL 4 USE INFERIOR QUALITY OF IRON SCRAP THEN TO PRODUCE BETTER QUALITY OF OUTPUT THE PROCESSING COST WILL INCREASE ACCORDINGLY. AND IF OUTPUT SO PRODUCED FAILS TO MEET THE REQUISITE STANDARDS SELLING PRICE WILL HAVE TO BE CUT DOWN . WE ARE REPRODUCING THE FOLLOWING DETAILS OF TOTAL SCRAP IRON PURCHASE FROM RELATED PARTIES AS WELL AS FROM LOCAL SUPPLIER AS SUBMITTED BEFORE THE A.O. DETAILS OF PURCHASE LOWER THAN RELATED PARTIES PARLY NAME ITEM QTY (KG) RATE AMOUNT A R CORPORATION SCRAP IRON 32100 20 654840 BHAGWATI OIL CARRIER SCRAP IRON 550 20 11000 BUDH RAM & SONS SCRAP IRON 6340 22 139480 JAI AMBEY TRADING COMPANY SCRAP IRON 11830 21 247365 PADMAVATI TRADING CO. SCRAP IRON 183445 22 3953512 RAJPUT ENGINEERING WORKS SCRAP IRON 10270 20 210400 SHRI SALASAR BALAJI ENTERPRISE SCRAP IRON 75720 22 1701944 SRI RAMA STEELS LTD SCRAP IRON 1439695 21 29596176 VISHAL TRADING CO. SCRAP IRON 22410 21 473743 TOTAL 1782360 36988460 DETAILS OF PURCHASE HIGHER THAN RELATED PARTIES PARTY NAME ITEM RATE AMOUNT A.G. IRON STORE SCRAP IRON 20845 26 546432 ANIL KUMAR & SONS SCRAP IRON 12195 27 328686 ARIHCMT SALES CORPN. SCRAP IRON 12900 33 425661 ARVIND SALES CORPORATION . SCRAP IRON 9040 25 230041 ASHER SINGH SCRAP IRON 3890 27 104329 ASHU BOTTLES STORE SCRAP IRON 46965 28 1303847 BAJAJ SCRAP TRADERS SCRAP IRON 60710 27 1651582 BEACON STEELS SCRAP IRON 33255 29 95459S BHUMI ENTERPRISES SCRAP IRON 683205 27 18589926 B. K. EXPORT (INDIA) SCRAP IRON 28390 28 793235 BPTP LIMITED SCRAP IRON 28110 26 725304 DASHMESH TRADERS SCRAP IRON 9810 26 250155 DHARAMPAL IRON STORE SCRAP IRON 26025 28 716729 DIWAN GENERAL STORE SCRAP IRON 34020 28 965155 DUGGAL TRADING CO. SCRAP IRON 42540 27 1158118 EMSON TRADERS SCRAP IRON 243810 29 7170226 GAJANAN CORPORATION SCRAP IRON 30550 31 936030 HARDIK ENTERPRISE SCRAP IRON 145795 25 3664991 HARYANA IRON SCRAP CO. SCRAP IRON 64660 27 1734982 HIMALAYA SCRAP STORE SCRAP IRON 629935 29 18264317 IMPACT INDUSTRIES SCRAP IRON 1060 29 30740 JAI STEEL INDUSTRIES SCRAP IRON 10760 26 27986S JIGAN ENTERPRISES (JUGAL JI) SCRAP IRON 128120 34 4312516 KALYANI SALES CORPORATION SCRAP IRON 1212920 29 35453912 KHANNA TRADERS SCRAP IRON 46630 28 1296219 KUMAR SALES SCRAP IRON 154765 28 4271160 LAXMI MARBLE & TILES CO. SCRAP IRON 11140 33 362050 LUXMI BOTTLE STORE SCRAP IRON 125535 26 3272752 MAHABIR TRADING CO. (MONU) SCRAP IRON 222425 33 7376843 MS TARA CHANDRA JAIN SCRAP IRON 35110 29 1020648 NAGESHWAR ENTERPRISES SCRAP IRON 47225 27 1273805 N.K.IRON STORE SCRAP IRON 73235 25 1848795 N.L. GARG & SONS SCRAP IRON 28685 28 812368 PARKASH ENTERPRISES SCRAP IRON 102250 29 2935233 PARVEEN BOTTLE WORKS SCRAP IRON 9500 33 310650 PRESTO STEEL COMPANY SCRAP IRON 1397080 27 37110484 RADHA META! SCRAP IRON 405755 32 13119016 REGENT STEEL INDUSTRIES SCRAP IRON 710275 29 20549350 R.K. DOGRA & BROS. SCRAP IRON 249580 31 7739842 ROYAL MARKETING SCRAP IRON 15555 28 428384 ROYAL SALES (INDIA) SCRAP IRON 154400 29 4545086 ROVAL STEEL TRADERS SCRAP IRON 102400 28 2900199 SAMBHAV SALES CORPORATION SCRAP IRON 147665 29 4328034 SARITA ENTERPRISE SCRAP IRON 66170 27 1806224 SHARADA SALES AGENCY SCRAP IRON 298900 26 7633019 SHEIKHU ENTERPRISES SCRAP IRON 1998755 29 58932612 SHIV SAI TRADERS SCRAP IRON 103135 30 3133756 SHREE BALAJI TRADERS SCRAP IRON 163355 32 5187259 SHREE KRISHNA ENTERPRISES SCRAP IRON 169495 28 4668714 SHRI TIRUPATI STEELS SCRAP IRON 32380 28 911100 SHYAM METAL TRADERS SCRAP IRON 80485 29 2363506 TOTAL 10471395 300728487 5 PURCHASE FROM RELATED PARTIES FROM SISTER CONCERN ITEM OTV (KG) RATE AMOUNT SPS STEELS & POWER LTD. SCRAP IRON 1607075 24345830 BENGAL INDIA GLOBAL INFRASTRUCTURE LTD. SCRAP IRON 12088610 201614588 CUSTOMS DUTY & OTHER EXP. 56906314 FREIGHT OF RAW MATERIAL 45954852 TOTAL FROM SISTER CONCERN RATE 13695685 24 328821584 PARTICULARS OTY (KG) AVERAG E RATE (RS PER KG.) AMOUNT (IN RS) %OF TOTAL QTY. % VARIATION IN PRICE FROM RELATED PARTY LOWER THAN RELATED PARTY PURCHASE 1782360 21 36988460 5.55 12.50 RELATED PARTY PURCHASE 13695685 24 328821584 49.33 HIGHER THAN RELATED PARTY PURCHASE 10471395 29 300728487 45.12 20.83 TOTAL 25949440 26 666538531 AS ILLUSTRATED IN THE ABOVE TABLE THE ASSESSEE COMPANY IS FACTUALLY WORKING ON COST EFFECTIVE MANNER. OUT OF TOTAL PURCHASES 45.12% IS ACQUIRED FROM OUTSIDERS AT THE AVERAGE RATE OF RS.29/ - PER KG. AND 49.33% IS ACQUIRED FROM THE RELATED PARTIES AT THE AVERAGE RATE OF RS.24/ - PER KG., ONLY 5.5 5% OF TOTAL PURCHASE IS ACQUIRED FROM OUTSIDERS AT THE AVERAGE RATE OF RS.2L/ - PER KG. WHICH IS VERY IMMATERIAL QUANTUM TO SET THE BENCHMARK OF AVERAGE RATE. FURTHER VARIATION IN PRICE OF PURCHASE MADE FROM OUTSIDERS AS COMPARED TO PURCHASE MADE FROM RELAT ED PARTIES ON HIGHER FRONTS IS 20.83%, WHEREAS ON LOWER FRONTS IS ONLY 12.50%. SO IT CAN BE CONCLUDED THAT THE PURCHASE FROM THE SISTER CONCERNS ARE MADE AT ARMS LENGTH OR FAIR MARKET PRICE. HENCE INSTEAD OF APPRECIATING THE PURCHASE MECHANISM OF THE ASSE SSEE COMPANY THE LD. A.O. IS PENALIZING IT BY CREATING BASELESS BENCHMARKS OF THE AVERAGE RATES. THE PRICE OF THE IRON SCRAP ARE FLEXIBLE AND DEPEND UPON SO MANY FACTORS, MOREOVER PRICES ARE BEING CONTROLLED BY DEMAND AND SUPPLY AND AVAILABILITY OF MATERIAL NATIONALLY AND INTERNATIONALLY. THE PRICE OF SCRAP IRON DEPEND UPON QUANTUM OF SCRAP MATERIAL, PLACE WHERE TO SUPPLY, TERMS OF PAYMENT, AVAILABILITY OF TRANSPORT VEHICLE, SIZE OF LOTS ETC. IT CANT BE CONCLUDED IN AVERAGE TERMS FOR THE WHOLE YEAR BECAUSE PRICES ARE CHANGED SEVERAL TIMES IN A DAY ITSELF. SO ABSOLUTE AVERAGE WORKING IS MEANINGLESS AND BEYOND THE CONTROL OF ANYONE. ABSOLUTE COMPARISON OF PRICES IGNORING QUALITY IS AGAIN A MISLEADING CONCLUSION. ASSESSEE HAS OPTED TO PURCHASE SCRAP IRO N ON HIGH SEAS USUALLY OF BETTER QUALITY IN COMPARISON TO SMALL LOTS AVAILABLE IN LOCAL MARKET. PROCUREMENT OF SCRAP IRON DEPENDS UPON PRODUCTION CYCLE, REQUIREMENT OF 6 CUSTOMER WHICH WAS WIDELY DECIDED BY THE ENTITY. SO OPTIMUM DECISION WAS BEEN TAKEN TO C ONTROL PRODUCTION CYCLE. AS ASSESSEE COMPANY IS CLAIMING DEDUCTION U/S 80IC FOR THE PROFIT OF STEEL DIVISION SO THE COMPANY IS NOT REQUIRED TO MAKE BOGUS TRANSACTION OF SALE & PURCHASE TO MISLEAD PROFIT OF THE COMPANY AS ALL THE PROFIT OF STEEL DIVISION IS EXEMPT FROM TAX. ALL THE SISTER CONCERNS ARE SEPARATE ENTITIES HAVING ITS OWN PAN AND ARE BEING SEPARATELY ASSESSED ON REGULAR BASIS IN INCOME TAX ACT, 1961. THE ASSESSEE COMPANY HAS MADE THE TRANSACTIONS AT ARMS LENGTH PRICE OR FAIR MARKET VALUE DURING THE WHOLE YEAR. THE A.O. HAS MADE WRONG CONCLUSION AND ALSO MISUSED THE STATICAL DATA AT ITS OWN WISH AND ADDITION HAVE BEEN MADE ON BASELESS ASSUMPTION AND PRESUMPTION BASIS WHICH IS BETTER KNOWN TO LD. A.O. ADDITION ARE ONLY MADE FOR THE SAKE OF ADDITION WHICH IS BAD IN LAW. NO PARALLEL AND FACTUAL EXAMPLES OR SHORT COMING HAVE BEEN POINTED OUT BY THE A.O. SO THE ADDITION DESERVES TO BE DELETED. SO WE REQUEST YOUR GOODSELF TO DROP THE DISALLOWANCE OF RS. 32,88,216/ - U/S 40A(2)(B) OF THE I.T .ACT, 1961. 6 . THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAD EXPLAINED THAT IT HAD PURCHASED 5.55% OF THE TOTAL SCRAP IRON AT THE AVERAGE RATE OF RS. 21/ - FROM OUTSIDE PARTIES. THIS RATE WAS LOWER THAN THE RATE AT WHICH THE PURCHASES WERE MADE FROM THE SISTER CONCERN BY 12.50% . FURTHER, 49.33% OF THE TOTAL PURCHASES WERE MADE @ RS. 24/ - PER KG. OF SCRAP IRON FROM THE SISTER CONCERN & 45.12% OF THE TOTAL PURCHASES WERE MADE @ RS. 29/ - PER KG FROM THE OUTSIDE PARTIES WHICH WAS HIGHER BY 20.83% THAN THE RATE OF SISTER CONCERN. THE LD. CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAD EXPLAINED THAT AVERAGE PURCHASE RATE OF IT WAS RS. 25.68% PER KG. THE LD. CIT(A) OBSERVED THAT IF TOTAL PURCHASE OF 2,59,49,444 KG OF R S. 7 66,65,38,531/ - WERE CONSIDERED AS PER THE CHART GIVEN BY THE ASSESSEE WHICH REVEAL ED THAT THE ASSESSEE HAD PAID ONLY RS. 24 PER KG OF THE SCRAP IRON TO ITS SISTER CONCERNS WHICH WAS BELOW THE AVERAGE MARKET RATE AND NO SPECIFIC INSTANCE OF AVAILABILITY OF THE SIMILAR RAW MATERIAL AT THE LOWER RATE THAN THAT OF THE SI S TER CONCERN ON THE SAME DAY HAD BEEN CITED BY THE ASSESSING OFFICER. THE LD. CIT(A), ACCORDINGLY DELETED THE IMPUGNED ADDITION BY OBSERVING THAT THE PAYMENTS MADE TO THE SIS TER CONCERNS COULD NOT BE TREATED AS UNREASONABLE, EXCESSIVE OR ABOVE THE FAIR MARKET VALUE. NOW THE DEPARTMENT IS IN APPEAL. 7 . LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER DATED 28/1 2 /2011 . 8 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS ABSOLUTELY ERRONEOUS BECAUSE H E NEITHER CONDUCTED ANY ENQUIRY NOR MADE ANY SINGLE INSTANCE THAT HOW THE PURCHASE COST OF SISTER CONCERNS WERE EXCESSIVE OR UNREASONABLE. IT WAS STATED THAT THE RATES GIVEN TO THE SISTER CONCERNS WERE NEITHER EXCESSIVE NOR UNREASONABLE EVEN THOSE WERE LO WER THAN THE 8 PREVAILING MARKE T RATES. IT WAS CONTENDED THAT THE MARKET RATE OF THE IRON SCRAP WAS VERY MUCH FLUCTUAT ING AND THE RATES CHANGES EVERY DAY AND EVEN IN A DAY, BUT THE RATES GIVEN TO THE SISTER CONCERNS COULD NOT BE SAID TO BE EXCESSIVE IN ANY CASE BECAUSE THE SISTER CONCERNS SUPPLIED THE GOODS IN BULK , T HEREFORE, THEY WERE PAID REASONABLE RATE IN A C CORDANCE WITH THE PREVAILING MARKET. IT WAS EMPHASIZED THAT THE PURCHASES WERE HIGH SEAS PURCHASES , WHICH WERE OF INTERNATIONAL STANDARD IN WHICH I MPURITIES WERE LESS. IT WAS EXPLAINED THAT THE PURCHASES FROM SISTER CONCERNS WERE ONLY 40% WHEREAS FROM OTHER PARTIES W ERE 60% AND ON HIGHER PRICES. IT WAS EMPHASIZED THAT TOTAL PURCHASES FROM OTHER PARTIES WERE OF RS. 33,63,91,967/ - OUT OF WHICH AT A PRICE LESS THAN RS. 24 / - PER KG. WERE ONLY OF RS. 3,22,40,622/ - WHICH WAS ONLY 4.85% OF THE TOTAL PURCHASES AND THE OTHER PURCHASES WERE AT HIGHER PRICE THAN RS. 24 PER KG. IT WAS CONTENDED THAT THE AVERAGE RATE OF PURCHASE WAS AT RS. 25.68 WHEREAS THE RATE OF PURCHASE FROM THE SISTER CONCERNS WAS ONLY OF RS. 24 / - PER KG. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER WAS RIGHTLY DELETED BY THE LD. CIT(A). 9 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GON E THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT 9 CASE , IT APPEARS THAT THE ASSESSING OFFICER HAD NOT APPRECIATED THE FACTS IN RIGHT PERSPECTIVE AND CAME TO THE CONCLU SION THAT THE ASSESSEE PAID EXCESSIVE PURCHASE PRICE TO THE SISTER CONCERNS. ON THE OTHER HAND , THE ASSESSEE EXPLAINED ON THE BASIS OF DETAILS OF PURCHASES THAT THE AVERAGE RATE OF PURCHASES WAS AT RS. 25.68 PER KG WHEREAS THE RATE OF PURCHASES FROM THE SISTER CONCERNS WAS ONLY RS. 24 / - PER KG WHICH WAS LESS THAN THE AVERAGE PURCHASE PRICE. IN THE PRESENT CASE, THE PURCHASES FROM THE OTHER PARTIES AT A RATE LESS THAN RS. 24 / - PER KG W ERE ONLY 4.8 5 % O F THE TOTAL PURCHASES. SO, IT CANNOT BE SAID THAT THE PAYMENTS MADE TO THE SISTER CONCERNS WERE EXCESSIVE IN COMPARISON TO THE OTHER PARTIES PARTICULARLY WHEN THE PURCHASES FROM THE SISTER CONCERNS WERE ONLY 40% OF THE TOTAL PURCHASES AND REMAINING 60% PURCHASES FROM OUTSIDE PARTIES WERE AT A HIGHER PRICE THAN THE PRICE PAID TO THE SIST ER CONCERN. WE THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 10 . THE NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LATE DEPOSIT OF ESIC & PF AMOUNTING TO RS. 11,98,259/ - U/S. 36(1)(VA) OF THE ACT . 10 11 . FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DISALLOWED THE IMPUGNED AMOUNT SINCE THE ASSESSEE HAD MADE DELAYED PAYMENT . WHEN THE MATTER WAS TAKEN TO THE LD. CIT(A), THE ASSESSEE SUBMITTED AS UNDER: - 'THE DATES GIVEN IN TAX AUDI T REPORT AS WELL AS TAKEN BY A.O. ARE SAME & CORRECT. WE ARE ENCLOSING COPY OF ANNEXURE C OF TAX AUDIT REPORT DATED: 10.06.2009FOR STEEL DIVISION FOR YOUR READY REFERENCE. WE RELY ON THE PRINCIPLE L AID DOWN AND FOLLOW THE VIEW OF SUPREME COURT IN CASE OF VINAY CEMENT LTD [2009] 313 ITR (ST.) 1 AS ALSO THE VIEW OF DIVISION BENCH OF COURT IN DHARMENDRA SHARMAS CASE*2008+ 297 ITR 320(DELHI). 'IT IS STATED THAT IF THE EMPLOYEES CONTRIBUTION IS NOT DEPOSIT ED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENTS BUT CAN INCUR PENALTIES ALSO, FOR WHICH SPECIFIC PROVISIONS ARE MADE IN THE PF ACT AS WELL AS IN ESI ACT. THEREFORE THE ACT PERMITS THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS, SUBJECT TO AFORESAID CONSEQUENCES. IN SO FAR AS THE INCOME TAX ACT IS CONCERNED, THE ASSESSEE CAN GET BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED, AS PER PRINCIPLE LAID DOWN B Y THE SUPREME COURT IN VINAY CEMENT*2009+ 313 ITR (ST.) 1. WE ARE ENCLOSING COPY OF CASE LAW OF VINAY CEMENT [2009] 313 ITR (ST.) 1. AS THE ASSESSEE PAID ALL PAYMENTS BEFORE DUE DATE OF FILLING OF RETURN SO THE PAYMENT MADE SHOULD HAVE BEEN SPECIFICALLY ALLOWED AS DECIDED BY THE SUPREME COURT IN CASE OF (I) VINAY CEMENT[2009] 313 ITR (ST.) 1. (II) 321 ITR 508 (DEL) CITV/S AIMIL LIMITED . SO WE REQUEST OUR GOODSELF TO DROP THE DISALLOWANCE OF LATE DEPOSIT OF PF & ESIC FOR A SUM OF RS. 1 1,98,257/ - . ' 12. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE IMPUGNED ADDITION BY OBSERVING AS UNDER: - 8.1 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE CONTENTIONS OF THE APPELLANT. IT IS SEEN THAT APPELLANT HAS POINTED OUT THAT P.F. AND ESI 11 CONTRIBUTION HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN AS IS EVIDENT FROM THE CHART ON PAGE 13 OF THE ASSESSMENT ORDER. THE SAID PAYMENT IS ALLOWABLE IN VIEW OF DECISION OF HONOURABLE SUPREME COURT IN THE CASE OF VINAYL CEMENT REPORTED AT 239 C TR 268 WHICH HAS BEEN FOLLOWED IN THE CASE OF P.M. ELECTRONIC LTD REPORTED AT 313 ITR 161. ACCORDINGLY, THE SAID CONTRIBUTION IS ALLOWABLE UNDER SECTION 43B, IF IT HAS BEEN PAID BEFORE THE DATE OF FILING THE RETURN UNDER SECTION 139(1) OF THE ACT. IN VIEW OF ABOVE DISCUSSIONS AND SUBMISSIONS OF THE APPELLANT, THE ADDITION MADE BY THE AO OF RS. 11,98,257 IS DELETED . NOW THE DEPARTMENT IS IN APPEAL. 13 LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHILE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THIS ISSUE IS COVERED IN FAV O UR OF THE ASSESSEE VIDE JUDGMENT DATED 13/05/2013 OF TH E HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD. , UDAIPUR, COPY OF THE SAID JUDGMENT WAS FURNISHED. 14 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE DEPOSITED THE AMOUNT OF PF & ESIC BEFORE FILING THE RETURN OF INCOME, SO IT WA S ALLOWABLE U/S. 43B OF THE ACT AS PER THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE AFORESAID REFERRED TO CASE OF CIT VS. M/S. UDAIPUR DUGDH UTPADAK 12 SAHAKARI SANGH LTD., UDAIPUR WHEREIN THEIR LORDSHIP OBSERVED AT PAGE NOS. 3 TO 5 OF THE ORDER DATED 13/05/2013 AS UNDER: - THE EFFECT OF DELETION OF SECOND PROVISO TO SECTION 43B OF THE ACT WAS CONSIDERED BY HON'BLE SUPREME COURT IN COMMISSIONER OF INCOME TAX V. ALOM EXTRUSIONS LTD. : (2009) 319 ITR 306 AND IT WAS OBSERVED AT PAGE 314 OF THE ORDER AS UNDER: - ' SECTION 43B (MAIN SECTION), WHICH STOOD INSERTED BY THE FINANCE ACT, 1983, WITH EFFECT FROM APRIL 1, 1984, EXPRESSLY COMMENCES WITH A NON OBSTANTE CLAUSE, THE UNDERLYING OBJECT BEING TO DISALLOW DEDUCTIONS CLAIMED MERELY BY MAKING A BOOK ENTRY BASED ON THE MERCANTILE SYSTEM OF ACCOUNTING. AT THE SAME TIME, SECTION 43B (MAIN SECTI ON) MADE IT MANDATORY FOR THE DEPARTMENT TO GRANT DEDUCTION IN COMPUTING THE INCOME UNDER SECTION 28 IN THE YEAR IN WHICH TAX, DUTY, CESS, ETC., IS ACTUALLY PAID. HOWEVER, PARLIAMENT TOOK COGNIZANCE OF THE FACT THAT THE ACCOUNTING YEAR OF A COMPANY DID NOT ALWAYS TALLY WITH THE DUE DATES UNDER THE PROVIDENT FUND ACT, MUNICIPAL CORPORATION ACT (OCTROI) AND OTHER TAX LAWS. THEREFORE, BY WAY OF THE FIRST PROVISO, AN INCENTIVE/RELAXATION WAS SOUGHT TO BE GIVEN IN RESPECT OF TAX, DUTY, CESS OR FEE BY EXPLICITLY STATING THAT IF SUCH TAX, DUTY, CESS OR FEE IS PAID BEFORE THE DATE OF FILING OF THE RETURN UNDER THE INCOME - TAX ACT (DUE DATE), THE ASSESSEE(S) THEN WOULD BE ENTITLED TO DEDUCTION. HOWEVER, THIS RELAXATION/INCENTIVE WAS RESTRICTED ONLY TO TAX, DUTY, CESS AND FEE. IT DID NOT APPLY TO CONTRIBUTIONS TO LABOUR WELFARE FUNDS. THE REASON APPEARS TO BE THAT THE EMPLOYER(S) SHOULD NOT SIT ON THE COLLECTED CONTRIBUTIONS AND DEPRIVE THE WORKMEN OF THE RIGHTFUL BENEFITS UNDER SOCIAL WELFARE LEGISLATIONS BY DELAYING P AYMENT OF CONTRIBUTIONS TO THE WELFARE FUNDS. HOWEVER, AS STATED ABOVE, THE SECOND PROVISO RESULTED IN IMPLEMENTATION PROBLEMS, WHICH HAVE BEEN MENTIONED HEREINABOVE, AND WHICH RESULTED IN THE ENACTMENT OF THE FINANCE ACT, 2003, DELETING THE SECOND PROVISO AND BRINING ABOUT UNIFORMITY IN THE FIRST PROVISO BY EQUATING TAX, DUTY, CESS, AND FEE WITH CONTRIBUTIONS TO WELFARE FUNDS.' FURTHER THE HON'BLE SUPREME COURT IN CIT V. VINAY CEMENT LTD. : (2009) 313 ITR (ST.) 1 WHILE DISMISSING THE SPECIAL LEAVE PETITION PREFERRED BY THE 13 REVENUE AGAINST THE JUDGMENT OF THE GUWAHATI HIGH COURT OBSERVED AS UNDER: - 'IN THE PRESENT CASE WE ARE CONCERNED WITH THE LAW AS IT STOOD PRIOR TO THE AMENDMENT OF SECTION 43B. IN THE CIRCUMSTANCES THE ASSESSEE WAS ENTITLED TO CLAIM THE BENEFIT IN SECTION 43B FOR THAT PERIOD PARTICULARLY IN VIEW OF THE FACT THAT HE HAS CONTRIBUTED TO PROVIDENT FUND BEFORE FILING OF THE RETURN.' FOLLOWING THE OBSERVATIONS OF HON'BLE SUPREME COURT IN VINAY CEMENT (SUPRA), THE DELHI HIGH COURT IN COMMISSION ER OF INCOME - TAX V. AIMIL LTD : (2010) 321 ITR 508 (DELHI) HELD AT PAGE 518 AS UNDER: - 'WE MAY ONLY ADD THAT IF THE EMPLOYEES' CONTRIBUTION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO, FOR WHICH SPECIFIC PROVISIONS ARE MADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI ACT. THEREFORE, THE ACT PERMITS THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS, SUBJECT TO THE AFORESAID C ONSEQUENCES. IN SO FAR AS THE INCOME - TAX ACT IS CONCERNED, THE ASSESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED, AS PER THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN VINAY CEMENT (2009) 313 ITR (ST.) 1.' IN VIEW OF T HE SETTLED LEGAL POSITION, THE APPEAL PREFERRED BY THE REVENUE HAS NO SUBSTANCE AND THE SAME IS, THEREFORE, DISMISSED. NO COSTS . 15 WE THEREFORE, BY CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE , DO NOT SEE ANY MERIT IN THIS GROUND OF TH E DEPARTMENTAL APPEAL. 1 6 NOW WE WILL DEAL WITH THE APPEAL OF THE ASSESSEE IN I.T.A.NO. 262/JODH/2013. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: - 14 THAT ON THE FACT OF THE CASE THE LD. CIT(A), AJMER GROSSLY ERRED ON THE MAKING AN ADDITION OR DISALLOWANCE OF FOLLOWING POINTS: - 1. RS. 43,50,079/ - ON ACCOUNT OF COMMISSION PAYMENT. 2. RS. 24,11,265/ - U/S. 40A(3) ON ACCOUNT OF CASH PAYMENTS. 3. THAT THE APPELLANT DESERVE TO ADD, ALTER AND AMEND ANY GROUND O R GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING OF THE APPEAL. 1 7 VIDE GROUND NO. 1, THE GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF ADDITION OF RS. 43,50,079/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAYMENT. 1 8 FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS , NOTICED THAT THE ASSESSEE HAD CLAIMED A COMMISSION PAYMENT OF RS. 43,50,079/ - . HE REQUIRED THE ASSESSEE TO FURNISH THE CONFIRMATION, PAN , DESIGNATION OF ASSESSING OFFICER OF THE PARTIES TO WHOM THE COMMISSION HAD BEEN PAID EXCEEDING RS. 5,00,000/ - . THE ASSESSEE FAILED TO FILE THE SAID DETAILS AND DOCUMENTS IN RESPECT OF THE FOLL OWING PARTIES IN STEEL DIVISION AND FABRIC DIVISION : - S.NO. NAME PAN AMOUNT 1 ANIL GAUR AFOPG1450R 57511 2 SHREE KUBER MARKETING ALJPD4775F 28938 3 S.B. MARKETING 903 4 RAJAT MARKETING 18404 TOTAL 105756 S.NO. NAME PAN AMOUNT 1 M/SSHREE TRADERS AAWFS6422J 1775276 2 M/S GIRIRAJ STEELS AFHPG6126N 704596 3 SHIPRA SALES AGENCV AAJPG7869G 505722 4 LORD KRISHNA ASSOCIATES AATPG2867S 445199 5 AGARWAL ASSOCIATES AAZPG9191P 423955 6 SUPER STEELS (INDIA) ADPPKI837K 225066 7 RAJESH KUMAR GARG AAJPG7560R 164509 TOTAL 4244323 15 1 9 THE ASSESSING OFFICER MENTIONED THAT IN SPITE OF TEN OPPORTUNITIES AND A PERIOD OF THREE AND HALF MONTHS GIVEN TO THE ASSESSEE, THE CONFIRMATIONS AND RELEVANT DETAILS WERE NOT FURNISHED, HENCE, THE GENUINENESS OF THOSE TRANSACTIONS WAS NOT PROVED AND THAT NATURE OF SERVICES RENDERED BY THOSE PARTIES FOR WHICH THE COMMISSION HAD BEEN PAID WAS NOT FURNISHED. HE, ACCORDINGLY , DISALLOWED THE IMPUGNED COMMISSION AND MADE THE ADDITION OF RS. 4 3 ,50,079/ - . 20 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: - 'IN THIS RESPECT WE MENTION THAT WE HAVE FURNISHED THE ENTIRE DETAILS WHICH WERE REQUIRED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE COMPANY ALREADY PRODUCED TDS CERTIFICATE WHICH CLEARLY SHOWS NAME, PAN, ADDRESS OF THE CONCERNED PARTIES WHICH ITSELF IS EVIDENCE FOR CONCLUSIVE PAYMENT WHICH THE A.O. HAS ADMITTED. ALL THE PAYMENTS ARE DULY RECORDED IN ACCOUNTS. WE ARE ENCLOSING COPIES OF TDS CERTIFICATE I.E. FORM 16A AS SUBMITTED BEFORE THE LD. A.O. AS FAR AS CONFIRMATIONS ARE CONCERNED, THE ASSESSEE HAS REQUESTED FOR THE SAME BUT IN THE ORDINARY COURSE THE ASSESSEE CAN T ENFORCE ITS DEADLINES ON OUTSIDE PARTIES. ASSESSEE HAS PROVIDED THE NAME AND THE PAN OF THE CONCERNED PARTIES TO ESTABLISH THE GENUINENESS OF THE EXPENDITURE. THE ASSESSEE COMPANY HAS DEDUCTED TDS ON THE COMMISSION PAID TO THE CONCERNED PARTIES ON TIME. FURTHER THE POWERS TO INITIATE THE PROCESS OF MAKING QUERY TO THE CONCERNED PERSONS WERE VESTED IN THE HANDS OF THE A.O. AS WE HAVE NOW RECEIVED THE CONFIRMATION OF CONCERNED PARTIES WE ARE ENCLOSING THE SAME IN SUPPORT OF OUR CLAIM OF COMMISSION EXPENDITU RE THAT SHOULD BE TREATED IN CONTINUATION TO TDS CERTIFICATE S ALREADY SUBMITTED BEFORE A.O. THE ASSESSEE COMPANY HAD MADE PAYMENT OF COMMISSION AMOUNTING TO 16 RS.1,07,81,713/ - IN STEEL DIVISION. THE A.O HAS ONLY DISALLOWED RS.43,50,079/ - FOR WHICH NO CONF IRMATION HAS BEEN SUBMITTED. THE A.O. HAS ALLOWED PAYMENT OF RS.64,31,634/ - WHICH JUSTIFY THE NATURE OF SERVICE RENDERED BY THE DISTRIBUTORS AND AGENTS. THE LD. A.O. HAS ADDED BACK ONLY AND ON THE BASIS OF NON - SUBMISSION OF CONFIRMATION. THEREFORE OBJECTIO N OF THE LEARNED ASSESSING OFFICER REGARDING ABSENCE OF CONFIRMATION AND NATURE OF SERVICES RENDERED ARE NOT JUSTIFIED BASIS FOR MAKING ADDITION OF COMMISSION EXPENDITURE AS NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER. SO FAR AS THE NATURE OF SERVICE IS CONCERNED, COMMISSION IS PAID TO ALL THE PARTIES FOR SALES WHICH IS CLEARLY MENTIONED IN CONFIRMATION OF CONCERNED PARTIES. ANY EXPENDITURE WHICH ARE INCURRED FOR BUSINESS PURPOSE IS FULLY ALLOWABLE U/S 37 (1) OF INCOME TAX ACT, 1961. THE A.O. HAS NOT SPECIFICALLY MENTIONED THE SECTION OF I.T. ACT, 1961 UNDER WHICH THE COMMISSION IS DISALLOWED. AS PER SECTION 40(A) ( IA) IF TDS IS NOT DEDUCTED ON ANY PAYMENT MADE THEN WHOLE OF THE EXPENSES IS DISALLOWED BUT IN OUR CASE WE HAVE TIMELY DEDUCTED AND DEPOSITED TDS ON ALL COMMISSION PAYMENT. THE A.O. HAS NOT CHALLENGE THE GE NUINENESS OF THE TRANSACTION BUT ONLY MADE DISALLOWANCE ON T HE BASIS THAT NO CONFIRMATION HAS BEEN SUBMITTED. SO WE REQUEST YOUR GOODSELF TO DROP THE DISALLOWANCE OF RS 43, 50,079/ - FOR C OMMISSION PAYMENT. 2 1 THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAD NOT FURNISHED THE DETAILS ASKED BY THE ASSESSING OFFICER, THEREFORE, THE GENUINENESS OF THE SERVICES REMAINED UNVERIFIED AND THE ASSESSEE HAD NOT DISCHARGED THE ONUS IN THIS REGARD. HE ALSO OBSERVED THAT THE ASSESSEE HAD FILED SOME CONFIRMATIONS OF THE ACCOUNTS WHICH CONSTITUTED ADDITIONAL EVIDENCE, BUT THE SAME COULD NOT BE ADMITTED UNDER RULE 46A OF THE I.T. RULES AS THE ASSESSEE 17 HAD NOT MADE ANY REQUEST TO THIS EFFECT AND HAD NOT GIVEN ANY REASON FOR NOT PRODUCING THE S AME BEFORE THE ASSESSING OFFICER. THE LD. CIT(A), ACCORDINGLY, CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL. 2 2 LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURT HER SUBMITTED THAT THE ASSESSEE FURNISHED TDS CERTIFICATE UNDER THE HEAD COMMISSION PAYMENTS WHICH WERE ACCEPTED BY THE ASSESSING OFFICER AND THE NAME, ADDRESSES, PAN NO. AND NATURE OF S ERVICES RENDERED WERE CLEARLY MENTIONED IN THE TDS CERTIFICATE, THOSE PAYMENTS WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS WHICH WERE THOROUGHLY EXAMINED NUMBER OF TIMES BY THE ASSESSING OFFICER. IT WAS ALSO STATED THAT AS THE PARTIES TO WHOM COMMISSION WAS PAID WERE OUTSIDERS , THEREFORE, THE ASSESSEE COULD NOT RECEIVE THE CONFIRMATION IN TIME AND PRODUCE THEM BEFORE THE DEADLINE. IT WAS CONTENDED THAT THE ASSESSEE RECEIVED THE CONFIRMATION S AFTER ASSESSMENT WAS DON E AND FURNISHED THE SAME BEFORE THE LD. CIT(A) UNDER RULE 46A OF THE I.T. RULES, BUT THE LD. CIT(A) FOR THE REASONS BEST KNOWN TO HIM DID NOT ADMIT THOSE CONFIRMATIONS , A LTHOUGH, THERE WAS SUFFICIENT CAUSE FOR NOT FURNISHING THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDINGS . H E 18 REQUESTED THAT THE MATTER MAY BE SENT BACK TO THE ASSESSING OFFICER FOR EXAMINATION BY CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE. 2 3 IN HIS RIVAL SUBMISSIONS, LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . 2 4 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, IT APPEARS THAT THE ASSESSING OFFICER DISALLOWED THE COMMISSION PAID BY THE ASSESSEE FOR THE REASON THAT THE CONFIRMAT IONS FROM THOS E PARTIES WERE NOT FURNISHED AND THE ASSESSEE DID NOT PRODUCE THEM BEFORE THE ASSESSING OFFICER, HOWEVER, THE ASSESSEE FURNISHED THE TDS CERTIFICATE BEFORE THE ASSESSING OFFICER. IN THOSE CERTIFICATES, NAME OF THE PARTIES TO WHOM COMMISSION WAS PAID WAS MENTIONED, BUT THE ASSESSING OFFICER DID NOT CONSIDER THOSE SUFFICIENT PROOF FOR THE PURPOSES OF NATURE OF SERVICES RENDERED BY THOSE PARTIES AND ACCORDINGLY MADE THE ADDITION. IN THE PRESENT CASE , THE ASSESSEE FURNISHED THE CONFIRMATIONS BEF ORE THE LD. CIT(A), BUT THOSE WERE NOT ADMITTED UNDER RULE 46A OF THE I.T. RULES ON THE TECHNICAL GROUND BECAUSE THE ASSESSEE HAD NOT MADE ANY REQUEST TO THIS EFFECT. ON THE CONTRARY, CLAIM OF THE ASSESSEE IS THAT THOSE 19 CONFIRMATIONS WERE FURNISHED BEFORE THE LD. CIT(A) . IT IS NOTICED THAT THE LD. CIT(A) MENTIONED THE CONTENTS OF THE ASSESSEES SUBMISSIONS IN SUB - PARA 4 OF THE PARA 4.2 OF THE IMPUGNED ORDER WHICH READ AS UNDER: - AS WE HAVE NOW RECEIVED THE CONFIRMATION OF CONCERNED PARTIES WE ARE ENCLOSING THE SAME IN SUPPORT OF OUR CLAIM OF COMMISSION EXPENDITURE THAT SHOULD BE TREATED IN CONTINUATION TO TDS CERTIFICATES ALREADY SUBMITTED BEFORE A.O. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE FURNISHED THE CONFIRMATION RECEIVED FROM THE CONCERNED PARTIES AND REQUESTED TO TREAT THE SAME IN CONTINUATION OF THE TDS CERTIFICATES ALREADY SUBMITTED BEFORE THE ASSESSING OFFICER. IN OUR OPINION, LD. CIT(A) OUGHT TO HAVE ADMITTE D THE ADDITIONAL EVIDENCE BECAUSE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FOR NOT PRODUCING THE SAME BEFORE THE ASSESSING OFFICER AS THE PARTIES WERE OUTSIDERS AND SUFFICIENT TIME WAS NOT THERE TO COLLECT THE CONFIRMATIONS. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACT S OF THE CASE, REMAND THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO BE ADJ U DI CATED AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 25 NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE CONFIRMATION OF DISALLOWANCE OF RS. 24,11,265/ - MADE BY THE ASSESSING OFFICER U/S. 40A(3) OF THE ACT ON ACCOUNT OF CASH PAYMENTS. 20 26 FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE MADE CASH PAYMENTS EXCEEDING RS. 20,000/ - IN VIOLATION OF SECTION 40A(3) OF THE ACT AMOUNTING TO RS. 27,76,248/ - . THE ASSESSEE EXPLAINED THAT IT HAD ITSELF ADDED BACK RS. 3,64,983/ - IN COMPUTATION OF INCOME . THE ASSESSING OFFICER DISALLOWED THE BALANCE AMOUNT OF RS. 24,11,265/ - U/S. 40A(3) OF THE ACT. 27 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: - THE BUSINESS OF THE ASSESSEE IS SITUATED AT REMOTE PLACE ON HILLS SIDE .THE ASSESSEE IS DEALING & MANUFACTURING M.S.BILLETS AND TMT BAR AS SUCH RAW MATERIAL AND FINISHED GOODS REQUIRED IN BULKY QUANTITY. BUSINESS PLACE IS SITUATED AT THAT PLACE WHERE THERE IS LACK OF INFRASTRUCTURE FACIL ITY & ALSO SITUATED AT NOTIFIED AREA OF CENTRAL GOVT, FOR DEVELOPMENT. LOOKING TO THE SIZE OF BUSINESS THE ASSESSEE IS REQUIRED TO MADE PAYMENT IN CASH FOR TRANSPORTATION. PLYING OF HEAVY VEHICLE REQUIRE CONSUMPTION OF FUEL IN HIGH VALUE CONSTANTLY ON CASH BASIS. THATS WHY PAYMENT OVER RS.20000/ - WERE MADE FOR BUSINESS EXPEDIENCY .THE COMPANY HAS DEDUCTED TDS ON ALMOST ALL PAYMENTS TO THE TRANSPORTERS. AS THE ASSESSEE COMPANY HAS DEDUCTED TDS ON ALL PAYMENT TO TRANSPORTERS WHICH WAS ACCEPTED BY LD. A.O. AS SUCH GENUINESS OF TRANSACTION IS PROVED AND LOOKING TO EXCEPTIONAL CIRCUMSTANCES AND IN INTEREST OF NATURAL JUSTICE IT SHOULD HAVE BEEN ALLOWED. ALMOST ALL PAYMENT IN CASH HAVE TO BE MADE IN BUSINESS EXPEDIENCY AS WELL AS THE CIRCUMSTANCES GIVEN IN SUB CLAUSE (A)(G) AND (A)(K) OF RULE 6DD OF IT RULES 1962. ASSESSEE IS ALSO ENTITLED TO GET BENEFIT U/S 80IC OF I.T. ACT, 1961 IN WHICH ENTIRE BUSINESS PROFIT IS EXEMPT FROM TAX, THUS SUCH DEDUCTION SHOULD HAVE BEEN ALLOWED. 21 28 THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE CLAIM OF THE ASSESSEE THAT THE PAYMENTS HAD BEEN MADE AFTER DEDUCTION OF TDS DID NOT EXEMPT IT FROM THE PROVISIONS OF SECTION 40A(3) OF THE ACT . HE FURTHER OBSERVED T HAT NO SPECIFIC DETAILS OF PAYMENTS OR PLACE S IN THE REMOTE AREA HAD BEEN GIVEN AND THAT THE CLAIM OF THE ASSESSEE THAT THE PAYMENTS HAD BEEN MADE AS PER RULE 6DD(A)(G) AND 6DD(A)(K) WAS ALSO NOT SUPPORTED BY ANY EVIDENCE TO THIS EFFECT . HE, THEREFORE, CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL. 29 LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT UNIT OF THE ASSESSEE WAS LOCATED IN A REMOTE AREA WHERE THE BANK FACILITIES WERE NOT AVAILABLE AND THE PAYMENTS WERE COVERED UNDER SUB - RULE (G) & (K) OF RULE 6DD OF THE I.T. RULES, BUT NEITHER THE ASSESSING OFFICER NOR LD. CIT(A) HAD APPRECIATED TH E FACT S IN RIGHT PERSPECTIVE. IT WAS CONTENDE D THAT THE TRANSPORTERS ALWAYS REQUIRED THE PAYMENT IN CASH FOR THEIR DAY TO DAY EXPENSES LIKE DIESEL ETC., SO, THERE WAS NO ALTERNATIVE WITH THE ASSESSEE EXCEPT TO MAKE PAYMENT IN CASH ON PURSUANCE. IT WAS FURTHER STATED THAT 22 THE ASSESSEE WAS ENTITLED TO GET 100% DEDUCTION OF ITS INCOME U/S. 80(I)(C) OF THE ACT AS THE UNIT WAS SITUATED IN SPECIAL CATEGORY STATE AT HIMACHAL PRADESH. THEREFORE, THE AMOUNT DISALLOWED U/S. 40A(3) OF THE ACT SHOULD HAVE BEEN ALLOWED AS PER DEDUCTION U/S. 80(I)(C) OF THE ACT. 30 IN HIS RIVAL SUBMISSIONS, LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 31 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE , IT IS NOTICED THAT THE CLAIM OF THE ASSESSEE WAS THAT ITS UNIT WAS SITUATED AT A REMOTE AREA WHERE BANK FACILITIES WERE NOT AVAILABLE AND THE PAYMENTS WERE COVERED UNDER CLAUSES (A)(G) & (A) (K) OF RULE 6DD OF THE I.T. RULES , H OWEVER, NEITHER THE ASSESSING OFFICER NOR LD. CIT(A) HAD STATED ANYTHING ON THE ABOVE SAID CLAIM OF THE ASSESSEE. WE THEREFORE, DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO BE ADJU DI CATED AFRESH IN ACCORDANCE WITH LAW A FTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 23 32 I N THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED AND THAT OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ( ORDER PRONOUNCED IN THE COURT ON 09 TH SEPTEMBER , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH SEPTEMBER , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .