9911796707
TMI Blog2014 (1) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 30.3.2000 and the income was assessed at Rs 452725/- after making addition of Rs 26,84,109/-. Assessee being aggrieved by the order of AO carried the matter before CIT(A). CIT(A) deleted the addition of Rs 2681109/-. The matter was carried before H'ble Tribunal. Tribunal while deciding the appeal ITA No 3476/Ahd/2002 order dated 31.8.2007, noted that disallowance of Rs 870358/- was made by AO but CIT(A) had not given any finding on this issue and accordingly the issue was set aside to the file of AO for fresh adjudication. Pursuant to the direction of Tribunal AO vide order dated 26.12.2008 passed order u/s 143(3) read with section 254 of the Act and addition u/s 40A(2)(b) of Rs 870358/- was made. Aggrieved by the order of AO, As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 kg) and added it to the income. Assessee carried the matter before CIT(A). C! T(A) confirmed the addition by holding as under:- "Before me, at the appellate stage the AR submitted his submission letter dated, 21.08.09 and 24.08.09. He stated that appellant had paid texturising job work charges to M/s. Member Texturisers Pvt. Ltd. and M/s. Amidhara Texturising Pvt. Ltd. total amounting to Rs. 15,16,073/- up to 31.08.1996. The appellant firm had no partner or relatives of such partners were Director or Shareholder of the above companies up to 31.08.1996. The appellant firm has no interest in above two companies and above two companies or the Directors of above two companies had also no interest in the firm. Hence 40A(2)(a) is not applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement of excessiveness in payment. Thus the entire arguments made in para 10 and 11, although sound and strong, fail on account of inadequacy in strength of evidence and credibility". 5. Aggrieved by the order of CIT(A), the Assessee is now in appeal before us. 6. Before us, the Ld.A.R. submitted that Assessee has paid texturising job work to Amidhara Texturising Pvt Ltd and Member Texturisers Pvt Ltd of Rs 17,30,500 and Rs 7,45,890/- respectively. He further submitted that the Assessee firm or no partner or relatives of such partners were Director or shareholder of the above companies upto 31.8.96. The Assessee has also no interest in the aforesaid two- companies to whom job charges paid. The two companies or the directors of these two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on referred to in cl. (b) of section 40A(2) and the AO is of the opinion that such expenditure is excessive or unreasonable having regard to (a) fair market value of the goods, services or facilities for which the payment is made; or (b) the legitimate needs of the business of the assessee; or (c) the benefits derived by or accruing to the assessee on receipt of such goods, services or facilities, then the AO shall not allow as a deduction so much of the expenditure as is so considered by the AO to be excessive or unreasonable. Thus it becomes apparent that the AO is required to form an opinion having regard to the fair market value of the service rendered. The AO has to record a finding as to whether the expenditure is excessive or unreaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be excessive or unreasonable shall not be allowed as a deduction. On careful readings of this Section 40, it is worth to mention that before applying the provision it is required that the Assessing Officer should form an opinion having regard to fair market value of the service rendered. In the present case this exercise is lacking and the Assessing Officer need not make any attempt to find out the prevailing market rate.. Meaning thereby the Assessing Officer has not collected any information, as is apparent from the assessment order on the basis of which it could be said that the Assessing Officer has formed an opinion after collecting necessary information from the market to compare the prevalent market rate of the job work done by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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