TaxTMI 
TaxTMI 
2015 (10) TMI 2567
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....s consolidated order. Accordingly, these appeals are being disposed of one after the other. ITA No.663/LKW/2013 4. This appeal is preferred by the Revenue assailing the order of the CIT(A) interalia on the following grounds: "1. That the Ld. CIT(A) has erred in law and in facts without appreciating the facts and circumstances of the case brought on record of the case as well as facts given by the Special Auditor in his report. 2. That the Ld. CIT(A) has erred in !aw and in facts in deleting the addition of Rs. 58,343/- without appreciating the facts that the addition was made on account of expenditure shown against the name of Aman & Ayan Hide Company as assessee failed to produce any bill for such purchase. 3. That the Id. CIT(A) has erred in law and in facts in taking a contradictory position on similar facts while deleting addition of Rs. 58,343/- in para 6.3 of his order and upholding the addition of Rs. 30,099/- in para 9,3 of his order. 4. That the Ld. CIT(A) has erred in law and in facts in reading the exception made by Rule-8 DD(j) too broadly to cover any payment made on a Sunday failing to appreciate the said Rule provides exception only where payment was 'r....
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....made an addition of Rs. 58,343/- in respect of purchase from Aman & Aryan Hide Company and Rs. 30,099/- from Irfan Hyderabad, being amount debited to purchase account. The addition of Rs. 58,343/- was deleted by the CIT(A) whereas the addition of Rs. 30,099/- was confirmed by the CIT(A) and the Revenue has assailed the order of the CIT(A). In this regard, it was contended by the Ld. DR that the CIT(A) has taken a contrary stand, therefore, the order of CIT(A) deleting the addition of Rs. 58,343/- deserves to be set aside. The addition confirmed by the CIT(A) of Rs. 30,099/- was challenged by the assessee in its appeal therefore, the issue would be discussed while dealing with the appeal of the assessee. We, therefore, confine ourselves with respect to the addition of Rs. 58,343/- in the name of Aman & Aryan Hide Company and in this regard we find that the special auditors have pointed out that the opening debit balance of Rs. 58,343/- in the name of Aman & Ayan Hide Company was transferred to purchase (Raw Hide) account without producing any bills of purchases. During the course of assessment proceeding, the Assessing Officer asked the assessee to produce such bills but the assesse....
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.... From the bills, the Assessing Officer has noted that the parties are not producers of the hide but are commission agent and since the payments were made in cash, he made the disallowance having invoked the provision of Section 40A(3) of the Act. The details of purchase made in cash are as under:- Sr. No. Name of party amt of cash purchases 1. IBBANT Trading Co. 100000 2. Shah Traders 3435285 3. Unique Traders 157650 Total 3692935 9. Against the aforesaid addition, the assessee filed an appeal before the CIT(A) with the submission that the special auditor had mentioned in his report that that the assessee has made purchases, out of which, purchases to the tune of Rs. 97,02,424.94 were hit by Section 40A(3) of the Act. Assessee furnished the explanation before the AO. The AO has accepted all purchases except for the three referred to above. The copies of the accounts of parties were filed before the CIT(A) with the submission that most of the purchases were made on Sunday and due to the bank closing day the payments were made in cash. The detailed written submission was also filed before the CIT(A). 10. The CIT(A) has examined the detailed submissions....
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....dul Karim proprietor of Shah Traders, who worked as a commission agent in sale transaction of raw hides. When the assessee has purchased the raw hides from the producer, some agent is required to organize the deals, as the assessee do not know directly the producer and none of the parties can trust each other without any agent. Since Shah Trader has worked as an agent in this purchase of raw hides, it cannot be said that the purchases were not affected from the producer of the raw hides. We have also carefully examined the provision of Rule 6DD(e) of the Rules in which the payments for purchase of produces of animal husbandry ( including livestock, hides and skins) or doing or poultry forming are excluded from the clutches of payment in cash exceeding the specified limit. Therefore, we are of the view that since the payments were made for purchase of raw hides to the producer through the commission agent provision of Rule 40A(3) cannot be invoked as its falls within the exemption clause of Rules 6DD(e) of the Rule. 12. We, therefore, do not find any justification in the addition of Rs. 22,10,155/- made on account of purchases in cash by invoking in provision of Rule 40A(3) of the A....
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....cal products and arrive at his conclusions. The compilation done by the Special Auditor has resulted in erroneous conclusions. The Special Auditor has worked out that the Company has sold 27771 hides (4307481dcm2) to Treadstone Ltd., a sister concern at an average rate of 952.80 per hide. The Assessing Officer based on this information, compared the average rates charged to Treadstone Ltd. with the average rates charged to two firms i.e. Kundan Leather Pvt. Ltd. and Popular Trading Corporation. We have worked out the actual sales made to the two firms and the rates charged to them in each invoice. A copy of the same is enclosed for your perusal. On its perusal, it would be seen that the rates charged to the two firms are as under. Kundan Trading Corporation Qty. sold dcm2 335436 at an average rate of Rs. 7.35 dcm2. Popular Trading Corporation Qty sold dcm2 17720 at an average rate of Rs. 6.15 dcm2. As against the above, the Company has sold 1st quality of chrome leather to Treadstone Ltd. at an average rate of Rs. 7.30 per dcm2. The quantity sold is 2977919 dcm2. The rates charged for identical products compare favourably with the rate charged to the two firms. In this conn....
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....ning the bills drawn on M/s Treadstone, I find that sale of dressed cow hides has been made at average rate which are comparable to the average rate of sale to Kundan and in some cases even higher (i.e1 Rs. 8.50 per dm2. 8.30 per dm2. 8.10 dm2 and 8.00 dm2). The A.O. has compared the average rate of hides as against the area of the hides and he has also not made any distinction between cow hides, buff hides, fining etc; thus, his analysis of fact in this regard is erroneous. As regards, sale to M/s Popular, I find that the sale made is that of dressed buff hide which too, in a very small quantity and value i.e. only Rs. 1.06 lacs. The rate of sale of dressed buff hide to M/s Popular is Rs. 6.45 per dm2, whereas in the case of Treadstone, the sale of dressed buff hide has been made at varying rates from Rs. 7.15 to Rs. 4.4 per dm2. It was explained that the sale to M/s Popular was of a very small quantity and that too of a single quality, whereas sale to Treadstone is-of much bigger quantity and also of varying qualities, which is evident from the bills drawn. It was explained that there was a lot of variation in the quality of leather sold and thus the rates would vary greatly betw....
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.... have provided the percentage ratio of consumption of consumable stores to raw material consumed for the previous year and for the preceding year at 87.08% and 108.20% respectively. The assesses was a/so required to give its own calculations in this respect. According to the assessee these ratios are 93.56% for this year .and 105.82% for the preceding year. The main cause of difference between the ratio's worked out by the Special Auditors and the assessee is the difference in the figures of opening Work in Process which according to the Special Auditors is Rs. 1,22,83,585/-and as per the assessee is Rs. 2,54,80,210/-. It was explained that certain chemical treatment remain stil! to be done on the leather taken out of drums while the Special Auditors has treated the leather out of drums as finally finished stock. The Special Auditors were consulted in this respect and they also agreed that some chemical treatment still remains to be done even when the leather is. taken out of drums but, as complete details were not provided by the assessee during the special audit, they have excluded the same, although, they also have mentioned the same has 'finishing leather' and not &....
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....arriving at this percentage has neither been discussed with the assessee nor any papers establishing the authenticity of this information has been shown to the assessee. In the absence of any documentary support, the percentage projected by the auditor cannot be accepted. It was further contended that the Central Leather Research Institute, jajmau, Kanpur vide his letter dated 21.06.2011 has given a ratio of 60% to 70% for normal leather and have also added that, thickness, source, health of the animal and type of leather to be produced would play a major role in the chemical cost variation. The letter received from CLRI has not been shown to the assessee. The Assessing Officer has not taken a cognizance of their remarks thickness, source, health of the animal and type of the leather to be produced plays a major role in the chemical cost variation. It was further contended that the Assessing Officer himself has observed that percentage of chemicals consumed during the year have come down to 87.08% during the previous year, therefore, the consumption of chemicals in the earlier year, which was higher than the year under assessment, has already been accepted by the Department. The CI....
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....rce and health of the animal. The cost also varies significantly mainly due to quality of raw hide and chemicals to be used for the type of leather to be produced especially thickness variation has a major role for chemical cost variation from one leather to another - if thickness is less, weight of hide is less which consumes less chemicals as wet-chemicals are consumed on 1he basis of weight. However, the above figures are given on average and on present market cost which may not guarantee any uncommon or rare variety of leather. Last, but not the least, please feel free to contact us for any further assistance on public interest. For personal meeting as desired in your above referred letter, you are invited to visit our office or alternatively, one of our colleagues can visit yours. The meeting may be fixed with mutual discussion over phone at Dr. A. Garg -9935356901 P.K. Bhattacharyya -9839757321 \ it may please be noted that the above opinion is technical and not intended for any advertisement/ publicity/legal purpose. The Institute shall be indemnified against any dispute arising out of issue of this letter. With kind regards, Sd. P.K. Bhattacharyya Scientist To....
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....ein it was stated that "It may be possible for us to ascertain requirement of defined/declared, chemicals used in the final leather if particular leather sample is submitter which means verification of chemical requirement and cost can be estimated only if list of used chemicals, ut.age percentage-and their rates is provided for a particular sample.- However, on examination of the above referred samples, an average range of cost may be estimated as follows provided chemicals are efficiently utilized. 1. Consumption of chemicals per kg weight of raw hide could be Rs. 30,00 to Rs. 50.00. 2. Consumption of chemicals per Sq. ff of finished leather could be Rs. 35.00 to Rs. 60.00 It is important to mention that above figures are only assumptions and based on information collected from Industry sources Our institute does not have any commercial activity and therefore cost estimates are not practiced. Industry and Govt, departments such as customs send samples for technical opinion and pay @ Rs. 5515.00 per sample in the form of Demand draft towards our fees. It is therefore requested to take necessary action to enclose a required bank draft towards our fees for provi....
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....eal is preferred by the assessee against the order of the CIT(A) interalia on the following grounds:- "01. Because the CIT(A) has erred on facts and in law in upholding the validity of the assessment framed under section 143(3) of the Act, without taking into consideration that no valid notice under section 143(2) of the Act was issued. 02. Because the C1T(A) has failed to appreciate that the jurisdiction of the assessee was with ACIT-5, Kanpur, whereas the assessment has been framed by the DCIT-5, Kanpur and there being no order under section 127 of the Act, transferring the file from ACIT-5 to DCIT-5, the assessment framed is without jurisdiction, bad in law and be quashed. 03. Because the CIT(A) has erred on facts and in law in upholding the disallowance of Rs. 25,000/- made by the Assessing Officer by applying the provisions of section 40(a)(ia) of the Act, which addition is contrary to facts, bad in law and be deleted. 04. Because the CIT(A) has erred on facts and in law in upholding the disallowance of Rs. 1,41,753/- incurred on freight and cartage (inward) expenses without appreciating the facts and circumstances of the case. 05. Because the CJT(A) has erred on fact....
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....d. 13. Because the CIT (A) has failed to appreciate that no payment has been made exceeding the prescribed limit, the addition of Rs. 6,29,703/- made by the Assessing Officer and confirmed by the CIT(A) be deleted." 23. Apropos Grounds No. 1 and 2, it was submitted that after filing the return, notice u/s 143(2) was issued on 04.08.2009. Later on, another notice dated 06.11.2009 u/s 142(1) was issued alongwith questionnaire. The case was transferred vide CIT's order u/s 127(1) dated 21.01.2010 to ACIT-4, Kanpur. No copy of the order passed u/s 127(1) dated 21.01.2010 was served upon the assessee. Therefore, the notice u/s 143(2) and 142(1) were issued on 15.04.2010 by the ACIT-4. Again an order dated 06.10.2010 was passed by the CIT-II Kanpur transferring the jurisdiction to ACIT-5, Kanpur. Again no copy of the order passed u/s 127(1) dated 06.10.2010 was provided to the assessee. However the assessment order has been passed by the DCIT, Circle-5, Kanpur. No order had been passed u/s 127 transferring the file from ACIT-5, Kanpur to DCIT, Circle-5, Kanpour. No order having been passed u/s 127(1) transferring the file from ACIT- 5 to DCIT, Circle-5 Kanpur, the impugned assessment....
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....oticed that the AO made a disallowance of Rs. 25,000/- having invoked the provision of Section 40(a)(ia) of the Act on the ground that the assessee made a payment of professional fee of Rs. 25,000/- to one Shri G.C. Agarwal without deduction of tax at source under the provision of Section 194J of the Act. Aggrieved, assessee preferred an appeal before the CIT(A) with the submission that the copy of the account of Mr. G.C. Agarwal, which was placed before the CIT(A), it is clear that the payment was splitted in the fraction of Rs. 20,000/- as professional charges and Rs. 5000/- as accountancy fees. It was further contended that bonafide of the expenditure and the identity of Shri G.C. Agarwal was not doubted, therefore there should not be any disallowance. The CIT(A) was not convinced with the explanation of the assessee and he confirmed the addition. Now, the assessee is before us with the submission that even the recipient has paid taxes on this amount, therefore, no disallowance can be made u/s 40(a)(ia) of the Act in the light of various judicial pronouncement. 27. Ld. DR on the other hand, has contended that in such circumstances, the matter may be restored back to the AO for ....
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....alance of Rs. 30,099/- in the name of Irfan Hyderabad was adjusted against two credit entries amounting to Rs. 18,250/- and Rs. 11,849/- dated 31.08.2007 and dated 30.09.2007 against freight and cartage (inward). Assessee was asked to furnish the specific bills but the assessee could not furnish the bills and the AO has made the disallowance of Rs. 30,099/- for want of corroborating evidence. Before the CIT(A), it was contended that account of Mr. Irfan Hyderabad showed a debit balance in the beginning of the year. The balance has been carried forward from earlier years and is not recoverable. The amount being bad debt was required to be written off as such. Inadvertently the dealing clerk debited the respective expense heads to clear the debit balances, instead of writing off as bad debts. This explanation was not accepted by the CIT(A) and he confirmed the addition. Ld. counsel for the assessee further contended that if it is not a bad debt the assessee's clerk has made incorrect entries instead of claiming it to be a bad debts. During the course of hearing, Ld. counsel for the assessee has contended that let the matter be send back to the AO to verify the facts. If the assessee ....