TaxTMI 
TaxTMI 
2015 (9) TMI 998
X X X X Extracts X X X X
X X X X Extracts X X X X
....ddition to the shortage of 1177.74 quintals of maize, a deduction of Rs. 12,06,896 was claimed by the assessee on account of difference in quality and rate of maize supplied. During the course of assessment proceedings, the assessee therefore was called by the A.O. to offer its explanation in the matter. In reply filed by the assessee vide letter dated 03.10.2007, the following submission was offered by the assessee. "During the previous year relevant to the A.Y. 2005-06 we have paid a sum of Rs. 12,06,896/- towards rate differences, shortage and excess moisture content to the maize purchasers, details for which have already been furnished at the time of last hearing (Rs.3,66,190/- paid to M/s. M.K. International Ltd and Rs. 8,40,706/- paid to M/s. PEC Ltd.). We are now enclosing herewith debit note received from M/s. M. K International Ltd., New DeIhi under which we have paid Rs. 3,66,190/- towards rate difference on maize sold by us to them. We are also enclosing the statement of account of M/s. PEC Ltd., Visakhapatnam to whom we have paid a sum of Rs. 8,40,706/- towards shortage and excess moisture content in maize. Further, we have sold 23390.30 quintals of maize to M/....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sale bill No. 20 dt. 2.5.2004 and copies of related Railway Receipts No. 435047, 435048 & 435049 under which maize has been transported The A.O. allowed the sum of Rs. 1,39,174/- claimed as deduction towards excess moisture content but disallowed Rs. 7,01,532/- towards shortage in weight claimed by the appellant on the plea that the shortfall of 1,122.45 quintals was substantially high. Hence, the appellant requests to delete the addition of Rs. 7,01,532/- made by the A.O. without any basis." 4.1. The Ld. CIT(A) did not find merit in the submission made by the assessee on this issue and proceeded to confirm the addition made by the A.O. for the following reasons given in para 2.3 of his impugned order. "2.3. I have considered the submissions of the appellant, order of the A.O. and facts of the case carefully, it is noticed that the A.O. has observed that the assessee has claimed loss of 1,177.74 quintals as shortage on the sale and purchase of maize, It was also noticed that the assessee has debited Rs. 12,06,896/- in the trading account of maize towards quality and rate difference, Accordingly, show-cause notice was issued to the assessee to explain the same. In respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unsel for the assessee, this certificate was filed before the Ld. CIT(A) by the assessee as additional evidence and although a clear mention of the same was made in the written submission filed before him, which is also evident from the relevant portion of the written submission reproduced by the Ld. CIT(A) in his impugned order, no cognizance of the same was taken by the Ld. CIT(A). On the other hand, he confirmed the disallowance made by the A.O. on account of assessee's claim for shortage on the ground that there was failure on the part of the assessee to support and substantiate its claim by producing the relevant documentary evidence. In our opinion, such clinching evidence in the form of certificate issued by PEC Limited, was filed by the assessee before the Ld. CIT(A) in support of its claim for deduction on account of shortage and the Ld. CIT(A) was not justified in confirming the disallowance made by the A.O. on this issue by completely overlooking the said evidence. At the time of hearing before us, the learned D.R. has not been able to dispute that the confirmation certificate dated 11.08.2009 issued by PEC Limited is sufficient to support and establish the claim of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(loading and unloading charges at railway goods shed). The A.O. disallowed Rs. 1,49,242/- u/s 40A(3) being 20% of cash payments of Rs. 7,47,120/-. The loading and unloading charges are paid to the Railway licensed hamalies for unloading maize from lorries and loading the same into wagons. As the payments cannot be made individually to each hamali, the appellant has made the hamali payments collectively to Mr.K. Narender Babu, authorized agent by cash. The work of unloading and loading was done in the late evenings and as the payments have to be made to hamalies immediately after the completion of work on the same day, the appellant has made the payments in cash as demanded by Mr. K.Narender Babu for distribution to hamalies and payment to each hamali did not exceed Rs. 20,000/- on a single day. Confirmation letter from Mr. K.Narender Babu explaining the circumstances under which cash has to be paid to him is enclosed herewith for favour of your kind consideration. The A.O. without considering the necessity of the payment, its exigency and without considering the nature of payment disallowed 20% of the cash payments of Rs. 7,47,120/- which is not warranted. Hence, the appellant requ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d when the labour payment was to be distributed he should have withdrawn from his bank account. But actually, the assessee has not issued cheques to Shri Narendra Babu, but cash payments, have been made which is a clear violation of the provisions of Sec. 40A(3). The case of the appellant does not fall within any explanation mentioned in this section, moreover the Hon'ble Supreme Court in case of Attar Singh Gurmukh Singh Vs. ITO 191 ITR 667 has held that Sec. 40A(3) cannot be said to invalid on the ground that it places a restriction on the right to carry on business and is arbitrary. Keeping in view these facts & circumstances it is held that the appellant has violated the provisions of Sec. 40A(3), therefore, addition made of Rs. 1,49,242/- is upheld and ground of appeal dismissed." 7. We have heard both the sides and also perused the relevant material on record. As submitted by the Ld. Counsel for the assessee, the work of unloading maize from lorries and loading the same into railway wagons some times was done in the late evenings and since the payments on account of Hamali Charges were required to be made by the concerned contractor to Hammals immediately after the com....