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2018 (2) TMI 742 - AT - Income TaxDisallowance on account of supervision charges - guinity of expenditure - as contented by assessee no enquiry was made by the A.O. with the concerned contractors to verify the genuineness of claim of the assessee for supervision charges - Held that - No agreement or contract entered into with the concerned parties is produced by the assessee on record to show the nature of services agreed to be rendered by the concerned parties and the terms and conditions on which such services were to be rendered. The assessee has also not produced any evidence to show that the services were actually rendered by the said parties for the purpose of the assessee s business Assessee in the present case has failed to discharge the onus that lies on him to support and substantiate its claim for deduction on account of supervision charges by producing the relevant documentary evidence and this being so, we find no infirmity in the impugned order of the Ld. CIT(A) confirming the disallowance made by the A.O. on account of supervision charges. The same is accordingly upheld dismissing this appeal filed by the assessee.
Issues Involved:
1. Disallowance of ?35,00,000/- on account of supervision charges. Detailed Analysis: 1. Disallowance of ?35,00,000/- on account of supervision charges: The assessee, a company engaged in trading industrial consumables, filed its return of income declaring a total income of ?7,96,250/-. The Profit & Loss Account included a debit of ?35,00,000/- for supervision charges. The A.O. disallowed this expenditure, questioning its necessity, the qualifications of the supervisors, and the lack of supporting agreements or evidence of services rendered. The A.O. highlighted several discrepancies, such as the same address for multiple supervisors and the absence of agreements with customers regarding the appointment of supervisors. The assessee appealed to the Ld. CIT(A), arguing that the supervision charges were necessary for quality assurance and customer satisfaction, and were paid to contractors as per an agreement with Usha Martin. The assessee provided additional evidence, including purchase orders and guarantee certificates. However, the A.O. in the remand report pointed out inconsistencies in the assessee’s submissions and the lack of evidence proving the identity and qualifications of the supervisors. The A.O. also noted that the inspection clause in the dealer policy required inspection at Usha Martin’s premises, not the customers’ premises. The Ld. CIT(A) upheld the A.O.'s disallowance, citing contradictions in the assessee’s statements and the failure to provide complete payment details and TDS information. The Ld. CIT(A) also noted that the returns filed by the contractors were belated and did not consistently reflect the payments from the assessee. Only one contractor showed receipts from the assessee, raising doubts about the genuineness of the payments. The assessee then appealed to the Tribunal, arguing that the A.O. should have verified the genuineness of the supervision charges with the contractors. The Tribunal, however, held that the onus was on the assessee to substantiate its claim with evidence. The Tribunal observed that the assessee failed to produce any agreements or contracts with the supervisors and did not provide evidence of services rendered. The Tribunal found no infirmity in the Ld. CIT(A)’s order and upheld the disallowance, dismissing the assessee’s appeal. In conclusion, the Tribunal affirmed the disallowance of ?35,00,000/- on account of supervision charges due to the assessee’s failure to substantiate the claim with adequate evidence and documentation. Order Pronounced in the Open Court on 9th February, 2018.
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