2014 (7) TMI 512

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....hed by the assessee, the Assessing Officer observed that the assessee has not deducted TDS on shipping and forwarding expenses. Therefore, the Assessing Officer issued show cause notice requiring the assessee to explain why shipping and forwarding expenses of Rs. 40,86,749/- should not be disallowed u/s. 40(a)(ia) of the Income Tax Act, 1961. The assessee submitted that such charges are actual charges paid on behalf of the company by the agent and he is being reimbursed for such expenses. These are expenses related to import of materials and customs clearing agent is simply acting as an agent. TDS clauses on such payments are not applicable. The bills of such expenses are raised in the name of the company. The assessee submitted that on going through the statement furnished, it will be observed that of the total charges, major part of the charges were in relation to the government payments i.e. CWC charges i.e. Central Warehousing charges of Rs. 2,57,954/-, detention charges of Rs. 7,59,627/-, stamp duty charges of Rs. 38,694/-, CCI charges i.e. Container Corporation of India Ltd. (a government organization) Rs. 3,54,510/-, inland haulage charges i.e. shipping line charges of movem....

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....efore, the order of the Commissioner of Income Tax (Appeals) should be reversed and the order of the Assessing Officer should be upheld. 7. On the other hand, the Authorized Representative of the assessee submitted that the Commissioner of Income Tax (Appeals) though deleted the addition by following the decision of the Vishakhapatnam Special Bench of the Tribunal in the case of Merilyn Shipping & Transports Limited (supra), he has not adjudicated upon the submission of the assessee that provisions of section 194C are not applicable on reimbursement of expenses made by the assessee to his agent. The assessee has relied on the decision of the Delhi Bench of the Tribunal in the case of Dr. Willmar Schwabe India (P) Ltd. (supra) which is in favour of the assessee. It was, therefore, prayed that the order of the Commissioner of Income Tax (Appeals) should be confirmed. 8. After considering the rival submissions and perusing the orders of lower authorities and materials available on record, we find that the undisputed facts of the case are that the Assessing Officer disallowed expenses of Rs. 27,14,737/- out of the total expenses of Rs. 40,86,749/- claimed by the assessee under the he....

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....in law and on facts in confirming the Assessing officer's action in computing alleged undisclosed/suppressed sales of Rs. 6,74,81,761/- and in further upholding addition of alleged profit from such sales to the extent of Rs. 1,11,59,372/- out of Rs. 1,68,70,442/-, thereby upholding the addition to the returned income to that extent.     2. The learned C.I.T. (A) has further erred in ignoring the fact that the Assessing officer, in adopting the alleged suppression of sales of Rs. 6,74,81,761/-, had in his own words "fully relied upon the show cause notice" issued by the DGCE thereby disregarding the fact that a show-cause notice only expresses suspicions/allegations which are at that stage in the process of verification and do not reflect findings of established facts.     3. The learned C.I.T.(A) has also erred in upholding the action of the Assessing Officer in adopting the alleged suppression of sales in respect of each and every transaction of sales made to a large number of buyers by relying upon the statements of only thirteen (13) persons which also stood retracted.     4. The learned C.I.T.(A) has also erred in ignoring the....

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....addition of Rs. 1,68,70,442/- was made by the Assessing Officer as gross profit estimated at the rate of 25% on the suppressed sale of Rs. 6,74,81,767/- on the ground that suppression of sale was found by the Central Excise authorities. 12. On appeal, the Commissioner of Income Tax (Appeals) was of the view that the estimation of gross profit at the rate of 25% was not correct on the ground that expenses on gas are not variable on account of its purchases being from Oil & Natural Gas Corporation. Besides, the Commissioner, CE & C in his order has also held that expenses on gas were fully accounted for in the books of account. The Commissioner of Income Tax (Appeals) further observed that similarly depreciation was also not variable. Therefore, he held that if these expenses are taken out, then the ratio of resultant net profit to sales was 16.54%. He, therefore, held that the assessee was expected to earn at least this amount of profit on the suppressed value of sales. He, therefore, by applying rate of 16.54% on the suppressed sale of Rs. 6,74,81,767/- estimated the undisclosed profits at Rs. 1,11,59,372/- and thereby deleted the addition of Rs. 57,11,070/-. 13. Being aggrieved ....