TaxTMI 
TaxTMI 
2017 (3) TMI 525
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....mentioned any specific defect. 2 On the facts & circumstances of the case & in law also Ld. Lower authorities grossly erred in confirming the disallowance of Rs. 5,11,060/- on a/c of disallowance of interest paid. 2. In respect of ground no. 1, the brief facts of the case are that during the assessment proceedings, it was observed by the AO that the assessee company has claimed job work expenses of Rs. 8,77,81,594/- as per the profit and loss account. The assessee was specifically requested to furnish bills in respect of these claimed expenses. However, the bills so produced were found to be without any description of the work done. While some of the bills were found to be unsigned, in some of the bills signatures were found to be in the same handwriting. These discrepancies were also pointed out to the assessee. In response, it was submitted by the assessee that majority payments were made through banking channels and the TDS was duly deducted and paid on all these payments. The submission of the assessee was considered by AO and it was stated by the AO that the reply of the assessee falls short of justification in respect of discrepancies as enumerated in the bills ab....
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....rmed". 4. The ld. Counsel for the assessee drawn our attention to Para 3.1 at page 2 of the assessment order where the Assessing Officer made the disallowance by mentioning "The reply of the assessee has been carefully considered, which falls short of justification in respect of discrepancies as enumerated in the bills above, because without any detailed description of the work done and appropriate endorsement, the veracity of the expenses claimed under job work stands disputed, unverified and unproved. Total job work charges debited in the P/L account are Rs. 8,77,81,594/-. Disallowance @ 10% of these expenses comes out to Rs. 87,78,159/- and @ 5% comes out to Rs. 43,89,80/-. Keeping in view, the reply of the assessee and looking to all possibilities invoked, a lump sum disallowance of Rs. 25,00,000/- is made out of the job work expenses claimed and added to the total income of the assessee." 4.1 It was submitted that from the perusal of the above para of the AO's order that it is clear that the disallowance has been made on lump sum basis without specifying any voucher or bill which is without any description of work done, which is found unsigned and bills where signatures ....
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....bmit all the bills of job work for your kind perusal and verification if your honour kindly permit. Some of the bills of job work are hereby submitted for your kind perusal and verification. 4.3 It was further submitted that the ld CIT (Appeals) confirmed the disallowances by bringing one more allegation in the order that in some cases cash payment on account of job work charges has also been made to the related parties. 4.4 It was further submitted that the expenses are 100% vouched and no specific instance of any unvouched expenses has been given by Ld lower authorities. That on all the bills the description has been mentioned in the bills in short form, the language adopted by the trade. For example for the job work BORE/OD/FACE the words in shortcut BOF has been mentioned. Likewise, IR represents Inner Ring and OR represents Outer Ring. Likewise DP represents Drilling and Parting. Therefore it is not correct observation of Ld lower authorities that description of work done was not mentioned. Regarding another alleged defects that bills were found to be unsigned and some of the bills signatories were found in same handwriting are irrelevant observations because no specific....
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....humbly submitted that all the expenses are verifiable and no disallowance should have been made. The receipt of the assessee during the year under consideration was of Rs. 51.20 crore. Some of the vouchers which are also submitted before Ld CIT (Appeals) are part of paper book for the perusal and verification of the Hon'ble Bench. 5. The ld DR is heard who has relied upon the order of the lower authorities and also submitted that the sample size of sample bills produced is not commensurate with the quantum of job work expenses claimed in the profit/loss account. 6. We have heard the rival contentions and pursued the material available on record. The Assessing Officer has disallowed a lump sum amount of Rs. 25 lacs out of Rs. 8,77,81,594/- job work expenses claimed by the assessee in its profit & loss account. As per the Assessing Officer, the bills submitted by the assessee for verification donot contain any detailed description of the work and some of bills were found to be unsigned and some of the bills were signed in the same handwriting. The matter was again examined by the Ld. CIT(A). Considering the defects in vouchers and substantial cash payment of more than Rs. 20 la....
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....s interest is paid such excess is disallowable under Section 40A(2)(b) irrespective of disclosure of such income by the recipient. Therefore appellant's argument is not justified. When appellant was borrowing from banks at 12%, how interest of 16.8% paid to related party can be reasonable. The interest payment in earlier years will not be relevant to decide the issue of disallowance of interest this year. Considering all these facts, it is held that disallowance of interest made by the Assessing Officer is justified and accordingly the same if confirmed". 7. The ld. Counsel for the assessee submitted that the A.O treated this recipient as related party having the belief that the recipient is shareholder of the company and it was mentioned before Ld CIT(Appeals) that the recipient is not the shareholder of the company. Surprising, Ld CIT (Appeals) did not consider this facts and even did not mention this fact in his order under the head written submission of the assessee. 7.1 The assessee in the financial statement has given all the details of related parties and M/S Poddar Consultancy Organization is not the related party, therefore the disallowance has been made on wrong fac....