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TMI Blog2018 (6) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... on the grounds that custom duty paid by CHA agent on behalf of the client will also get aggregated and will call for deduction of income-tax at source within the mandate of Chapter XVII-B with which we donot agree and in our considered view payment of custom duty to Government on import of goods even if paid through CHA agent by way of reimbursement will not warrant deduction of income-tax at source within provisions of the 1961 Act and no additions were warranted which we hereby order to be deleted subject to verification to a limited extent by the AO that the amount as were disallowed by the authorities below do actually constitute custom duty paid by CHA to government on behalf of the assessee on import of goods which is to be verified by the AO with reference to books of accounts maintained by the assessee Addition being refund of custom duty (SAD) receivable by the assessee from custom department as at year end - Held that:- No additions is warranted so far as refund of custom duties is concerned because it never entered Profit and Loss account and hence no addition is warranted. However, material is not placed on record to prove that no deduction whatsoever was claimed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) has erred in law on the facts of the case in confirming the additions made by the Assessing Officer with respect to Job Charges amounting to ₹ 16,06,052/- by applying the provisions of section 40(a)(ia) of the Act and considering the same as non genuine expenses 2) The CIT (A) has erred in law on the facts of the case in confirming the action of the Assessing Officer in disallowing the reimbursement of Custom House Agent amounting to ₹ 26,07,533/- by applying the provisions of section 40(a)(ia) of the Act. 3) The CIT (A) has erred in law on the facts of the case by not accepting the facts on record that that amount of ₹ 6,40,888/- is refund of customs duty and therefore the same is not an income of the Assessee 4) The CIT (A) has erred in law on the facts of the case in disallowing the purchases of ₹ 10,41,394/- by applying the provisions of 40A(3) of the Act on the ground that the Assessee has made the payment through journal entry and not made the payment through account payee cheque. The Appellant craves leave to add, alter or modify the above grounds of appeal. 3. The assessee is engaged in the business of tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax was required to be deducted at source within the provision of Chapter-XVII B of the Act. The AO concluded that facts brought on record by the assessee are without any invoices, bills, vouchers or addresses of the parties to the whom payments were made and hence the explanation offered by the assessee could not prove genuineness of the said parties as no evidence has been brought on record to establish the credibility or worthiness of the contractors mentioned in the ledger account of job charges (shirting). The AO invoked provision of Section 194C and since the income-tax was not deducted at source , the additions were made to the income of the assessee to the tune of ₹ 16,06,052/- u/s. 40 (a)(ia) of the 1961 Act by the AO , vide assessment order dated 05.03.2013 passed by the AO u/s 143(3) of the 1961 Act. 4. Aggrieved by the assessment order dated 05.03.2013 passed by the AO u/s 143(3) of the 1961 Act, the assessee filed first appeal before learned CIT(A) and contended as under:- Based on the specific Query of the Assessing Officer, the Assessee had submitted the following documents: the copies of the same are enclosed herewith. i. Tax Audit Report wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not there, since the total amount paid to each job worker is less than the limit prescribed under the law and the Assessing Officer has not confronted the assessee with his finding that some documents required by him is missing. Therefore, the disallowance of entice job charges [Shining] of ₹ 16,06,052/- applying the provision of u/s 40{a)(ia) is bad in law and hence may please be deleted. The learned CIT(A) rejected the contentions of the assessee and upheld the addition as were made by the AO vide appellate order dated 03.06.2014 passed by learned CIT(A), by holding as under:- 3.3 I have considered the finding of the Assessing Officer and rival submission of the appellant, carefully. I find that appellant has failed to establish the genuineness of claim of job charges (shirting) of ₹ 16,06,052/- . By order sheet noting dated 30.10.2012. appellant was asked by the Assessing Officer to produce the parties and furnish their full names and addresses. Case was fixed for compliance on 08.11.2012 but on this day of hearing, nothing was submitted. After taking failure of the assessee on record, Assessing Officer has further issued, a showcause notice asking app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is getting job work done from outside from job workers for fibre and yarn manufacturing. It was submitted that so far as job charges relating to yarn manufacturing is concerned they were allowed by the AO , while job charges paid for shirting were disallowed by the authorities to the tune of 100% of such job charges aggregating to ₹ 16,06,052/-. It was submitted by learned counsel for the assessee that the name and addresses of the parties to whom job charges were paid were duly furnished before the AO and payments were made through cheque. Our attention was drawn to page no. 39 and 39A of the first paper book to contend that the name and addresses of the person to whom job charges were paid were duly furnished before the authorities below. This fact is disputed by both AO and learned CIT(A) in their respective orders wherein it is stated by these authorities that addresses of the job workers were not given which prevented further enquiry . As per Revenue, these parties (job workers) were also not produced before the authorities below. Our attention was drawn to page number 23-24 of the first paper book , wherein notice dated 21.01.2013 issued by the AO u/s 142(1) seeking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted before the AO. Our attention was also drawn to page 1 of second paper book to contend that balance sheet , profit and loss account and schedules were duly submitted before the AO on 19-11-2012. It was also brought to our notice that vide first paper book / page 35 , vide letter dated 13-12-2012 filed before the AO the copies of balance sheet, profit and loss account and tax audit report with annexure and schedule were duly submitted before the AO. Our attention was also drawn to page no 40 of the first paper book wherein complete detail of job charges are placed . The Ld DR submitted that the contentions of the learned counsel for the assessee are wrong as the AO was consistently asking for the details which were not submitted which prevented further enquiry of the matter. The learned DR submitted that in any case admittedly invoices of job workers submitted by the assessee during the proceedings before the tribunal are additional evidences which cannot be admitted by the tribunal without confronting the same to the AO and hence the matter need to be restored to the file of the AO for fresh adjudication wherein the AO shall consider these invoices on merits . 7. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the provisions of Section 194C as is contained in Chapter XVII-B of the 1961 Act as it is claimed that each payment was below ₹ 20,000/- and in aggregate amount paid in the year to each of job workers was less than ₹ 50,000/- to each of the job worker and hence it is claimed that there was no requirement to deduct income-tax at source with in the provisions of the 1961 Act . The assessee did not produce these parties before the AO and as well before the learned CIT(A) . Under these circumstances in our considered view the matter need to be restored to the file of the AO for fresh adjudication of the issue on merits in accordance with law in set aside proceedings wherein the AO shall pass denovo orders on merits after admitting additional evidences filed by the assessee . Needless to say that the AO will grant proper and adequate opportunity of being heard to the assessee in accordance with law in accordance with principles of natural justice. The AO shall also admit and consider on merits all explanations and evidences submitted by the assessee in its defence. We clarify that we have not commented on merits of the issue under consideration. This ground of appeal is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ₹ 26,07,533/- was brought to tax by the AO in its assessment order dated 05-03-2013 passed u/s 143(3). 9. Aggrieved by the assessment order dated 05-03-2013 passed by the AO u/s 143(3), the assessee carried the matter in appeal before learned CIT(A) who dismissed the appeal of the assessee vide appellate order dated 03-06-2014 passed by learned CIT(A) by holding as under:- 4.3 I have considered the issue under appeal, carefully. I find that appellant has not explained properly as to how entire amount of ₹ 32,48.421/- is only an reimbursement of the custom duty. The so called ledger account submitted by the Ld. A.R. reveals nothing but the name of the Niranjan Shipping Agency Pvt. Ltd. and Debit Credit of accounts that does not reveal as to what was the actual nature of expenditure. Assessing Officer has mentioned that such charges under reference includes CFS charge, service charges, insurance charges, packing charges, freight and forwarding charges. Appellant has not rebuted such finding of the Assessing Officer with any contrary evidence. If services has been rendered by Niranjan Shipping Agency Pvt. Ltd. on behalf of the appellant, while making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er book page 29-30 and we are of the view that the AO committed grave error wherein CMC charges paid were only ₹ 67.00 of which reference number was 78100 as per debit note of CHA agent placed in paper book while the amount picked up by the AO in his assessment order was CMC charges of ₹ 78,100/- as against actual amount of ₹ 67/- . This claim of debit was raised by CHA agent namely Niranjan Shipping Agency Pvt. Ltd. on the assessee vide debit note no. 3023 dated 20-10-2009 which was towards reimbursement of expenses including custom duty paid to government on behalf of the assessee on import of goods of the aggregate value of ₹ 3,78,626/-(pb/page 30) , out of which custom duty paid was to the tune of ₹ 3,20,455/- . The assessee has also placed on record custom charges receipts issued by GOI (custom departments) to contend that custom duty was paid to Government and no TDS was required to be deducted at source within provisions of Chapter XVII-B of the 1961 Act. Our attention was also drawn to invoices raised separately by the Niranjan Shipping agency P. Ltd. which is placed in paper book page no. 29 towards their service charges and claim has been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AD) receivable from custom authorities is required to be shown as loans and advances under the head current asset, loans and advances‟ which as per audited accounts produced before us is infact so reflected (pb/97) and when the invoices are raised for sale of material and VAT/CST is paid on the said material, the claim is lodged with custom department for refund of special additional duties(SAD) . Under these circumstances , no additions is warranted so far as refund of custom duties is concerned because it never entered Profit and Loss account and hence no addition is warranted. However, material is not placed on record to prove that no deduction whatsoever was claimed of this SAD refund by the assessee while computing income and thus for limited purposes the matter is restored to the file of the AO for verifying the contention of the assessee vis-a-vis its books of accounts that the assessee never claimed the deduction of said custom duty (SAD) component as expenses to the tune of this refund receivable amount of ₹ 6,40,888/- of additional custom duty is concerned and only net amount of custom duty paid was claimed as an expense by the assessee in its return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41,394/- and has sold the goods to M/s. Challenger Tradelink Pvt. Ltd. who is the customer of the assessee. Both these parties are in the same market where assessee does business hence with mutual understanding, M/s, Challenger Tradeiink had made payment directly to Floratex Culture Pvt. Ltd. through cheque on behalf of the appellant and therefore appellant has made journal entry to square the liability. Therefore, there is no violation of law u/s. 40A(3). 6.3 I have considered the issue under appeal , carefully . I find that appellant has shown purchases from Floratex Culture Pvt. Ltd. of ₹ 10,41,394/- but has not made payment through account payee cheque or D.D. or through banking channel, hence provision of law u/s 40A(3) has been violated . The payment through journal entry adjustment cannot be regarded as not in violation of Section 40A(3). I find force in the finding of the Assessing Officer, hence the disallowance made u/s 40A(3) is sustained. 6.4 In the result, Ground No. 4 is dismissed. 14. Aggrieved by the appellate order dated 03-06-2014 passed by learned CIT(A) , the assessee has come in an appeal before the tribunal. It has been contended by lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustments in its books of account. The genuineness and bonafide of the transactions of sale and purchases made by the assessee is not disputed by Revenue. The identities of the parties is also not doubted/disputed by Revenue. The payments of ₹ 10,41,394/- made by M/s Challenger Trade Link (India) Private Limited was through approved banking modes to M/s Flora Texculture P. Ltd. which is also not doubted by Revenue. There were other sales to the tune of ₹ 3,83,838/- made by the assessee to said concern M/s Challenger Trade Link India Private Limited on 24-12-2009 for which payments through banking channels was made by the said concern to the assessee on 21-12-2009 and 19-2-2010. The confirmation of said party namely M/s Challenger Trade Link India Private Limited is also placed on record in pb/page 11 . The certificate dated 07-09-2013 issued by State Bank of India on behest of M/s Challenger Trade Link India Private Limited for making payment to said concern Flora Texculture P. Ltd. is also placed on record at page 12/pb. Section 40A(3) is undisputedly anti tax avoidance provision to check evasion of taxes and to discourage movement of funds exceeding monetary limits spe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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