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TMI Blog2018 (4) TMI 1608X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, against which no counter case is laid before us on behalf of the Revenue. The ld. CIT(A) has properly rebutted all the objections raised by the Assessing Officer and after verification has found that the amount paid by assessee was towards custom duties paid and not with respect to any fine or penalty. In our opinion, the ld. CIT(A) has passed a reasoned order which needs no interference at this stage. Accordingly, this ground of Revenue’s appeal deserves to be dismissed. Disallowance u/s. 40A(2)(a) on account of commission paid to M/s. Vrinda International - Enhancement of income without affording any opportunity of hearing to assessee - Held that:- We find that the ld. CIT(A) has mentioned that income of the assessee is enhanced by ₹ 3,28,073.25 after hearing the objections of the appellant. However, no fact regarding issuance of any notice to the assessee by the CIT(A) or any objection of the assessee on it or finding of the ld. CIT(A) on any such objection is found recorded in the impugned order. Therefore, the plea of the assessee that enhancement in income has been made without affording any opportunity of hearing is found acceptable and thus, the action of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 4,24,800/-. 2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in enhancing the income of the appellant by ₹ 3,28,073.257- (i.e. 5% of ₹ 65,61,465/-) on account of sale of imported raw material by treating the same as out of the books of appellant that too without giving opportunity as per law and impugned enhancement is beyond jurisdiction and contrary to law and facts. 3. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of ₹ 64,112/- under the head telephone and vehicle expenses. 4. That in any case and any view of the matter, action of Ld. CIT(A) in not reversing the action of Ld. AO in making the impugned disallowances and enhancing the income of appellant and framing the impugned assessment order which is contrary to law and facts, void ab initio, beyond jurisdiction, and without giving adequate opportunity of hearing, by recording incorrect facts and findings and the same is not sustainable on various legal and factual grounds. 2. The brief facts of the case are that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head rebate Discount . 4.2 The Assessing Officer was not convinced with the with the reply of assessee and disallowed the claim of the assessee u/s. 40-A(2)(a) of the IT Act on the following premise : (i). M/s. Vrinda International is not an Agent of the assessee for the reason - (a). that M/s. Vrinda International engaged in the trading business of Alluminium Foil Containers etc., as specifically mentioned its audit report; (b). that assessee has shown sales to Vrinda International and M/s. Vrinda International has been showing purchase from assessee in their books of account; (c). that M/s. Vrinda International has been showing purchases from other parties, maintaining stock and showing opening and closing stocks in its profit loss account and balance sheet; and (d). that on search of the Custom Department, Shri Himanshu Singhania, prop. Of M/s. Vrinda International was found to have made clandestine receipt of goods imported from Dubai, UAE by underinvoicing the cost thereof through Bill of Entry dated 27.10.2008 and admitted to have paid the concealed Excise duty plus interest of ₹ 2,20,200/-, which was paid through cheque. (ii). The reply of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, on the issue under consideration. It was submitted that the rebate and discount allowed to the proprietorship concern of one of the partners, M/s. Vrinda International, was given at the highest rate as compared to other consignment agents. It was also submitted that the ld. CIT(A) while deleting the addition u/s. 40A(2)(a) has failed to consider that undue expenditure has been paid by the assessee to the proprietary concern of one of its partner Shri Himanshu Singhania, which were disallowable as contemplated u/s. 40A(2)(a) of the IT Act. The comparison of rebate and discounts made by the ld. CIT(A) also does not stand on any recognized standard. He, therefore, supporting the order of the Assessing Officer, urged for its restoration. 6. The learned AR, on the other hand, relying on the submissions made before the ld. CIT (A), vehemently supported the impugned order. He also referred to a small written synopsis submitted before us and a chart of rebate and discounts given to all the consignment agents without any discrimination. It was submitted that substantial part of sales was made through the consignment agent, M/s. Vrinda International, and therefore, there is no abnorm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt orders of preceding years, as referred to by the ld. CIT(A) cannot be taken as valid ground for deleting the impugned addition in the instant case, as in this case, the Assessing Officer has specifically objected to the authenticity of rebates and discounts allowed to proprietary concern of one of the assessee s partners. 9. We, however, find that the ld. CIT(A) has deleted the entire addition after considering the detailed chart of Rebate and Discounts allowed to various consignment Agents, prepared by the assessee on the basis of sample bills. The ld. CIT(A) after making comparison of rebates and discounts has categorically recorded a finding that rebate and discounts had been granted by the assessee to all the consignment agents without any discrimination. He has also compared the rebates and discounts given to M/s. Vrinda International with other consignment agents and found that the net sale price realized on the sales made through M/s. Vrinda International was far more than the sale price realized on the sales made through other consignment agents. We have also examined the chart of rebate and discounts referred to above and we find that the assessee in this chart has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted to have been allowed to this similarly based consignment agent, there remains no justification to accept such a huge discount given to proprietary concern of one of the assessee s partner as done in the instant case. We, therefore, are not inclined to endorse the conclusion reached by the ld. CIT(A) in the impugned order on this count. 10. The decisions relied by the assessee are found not applicable to the present case as in the reported cases, the matter under consideration was relating to trade discounts allowed to the purchasers of good on the sales made by the assessee. The trade discount is given on the sale of the goods and net amount of sale is accounted for in the books of account. In the instant case, the matter is altogether different, inasmuch as the difference between the assessee s sale value and actual selling price realized by M/s. Vrinda International, has been credited to the account of the consignment agent as rebate and discounts on quarterly basis. 11. The ld. Assessing Officer has made the disallowance u/s. 40A(2)(a) of the IT Act. The provisions of this section read as under : (2)(a) Where the assessee incurs any expenditure in respect of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- claimed by the assessee. 13.1 In appeal, the ld. CIT(A) deleted this addition observing as under : On Grounds no. 5(a) (b) agitating the addition of ₹ 20,00,000/- the Assessing Officer submitted as under in its remand report:- (i) The payment of ₹ 20,00,000/- was not towards custom duty as the appellant was guilty of selling the dutiable goods in the open market without using the same in the manufacture of exported goods. (ii) Infringement of law and hence cannot be termed as revenue expenses. (iii) The payments were part of advance paid to the Customs Department for any future liability and were not on account of demand created on finalization of the proceedings under the Customs Act. (iv) The demand was created on 24.01.2012 where as the payments were made on 29/1/2010 12/2/2010. (v) The order raising the demand was not only contested but also got stayed by the appellant till the disposal of appeal. The above objections of the AO were carefully considered by me in the light of the evidence filed by the appellant in the course of appellate proceedings. The paper book forwarded to the AO for his comments in the remand proceedings contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance placed by the appellant on the judgments rendered by various courts of the country in the cases of Dy. Cit vs. Glaxo Smithkline Consumer Healthcare Ltd. 107ITD 343 (CHD.)(SB), CIT v. Modipon Lid. (No. 2) 334 ITR 106 (Delhi), Paharpur Cooling Towers Ltd. vs. CIT 61 DTK 309 (Cal), CIT vs Zaverchand Gaekwad (P) Ltd - 202 CTR 94 (Guj), CIT vs. Dharampal Satyapal Sons (P) Ltd. 50 DTR 287 (Del), even in cases were duties were paid in advance compels me to accord consent to the claim made by the appellant for ₹ 20 lacs on account of payment of outstanding customs duty. Business disallowance - Certain deductions to be allowed only on actual payment - Assessment year 2001-02 - Whether for claiming deduction under section 43B, in respect of payment of excise duty, it is not necessary that liability to pay duty must be incurred first and only thereafter, payment of such duty is made - Held, yes - Whether therefore, deduction for tax, excise duty, etc. is allowable under section*43B on payment basis before incurring liability to pay such amounts - Held, yes. Deduction only on actual payment-Excise duty paid in advance-Assessing Officer holding that deduction can be claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso not made clear whether the amount of ₹ 15 lacs and ₹ 5 lacs was paid exclusively for custom duties or includes interest, fine or penalty. Therefore, the Assessing Officer was justified to disallow these expenditures. 15. On the other hand, the ld. Counsel for the assessee, relied on the order of the ld. CIT(A), deleting the addition for good reasons. 16. We have considered the rival submissions and have gone through the entire material available on record and we find that the ld. CIT(A) while giving relief to the assessee has considered the facts of the issue in right perspective. He has made an elaborate discussion in the impugned order and has also relied on various decisions on the subject, against which no counter case is laid before us on behalf of the Revenue. The ld. CIT(A) has properly rebutted all the objections raised by the Assessing Officer and after verification has found that the amount paid by assessee was towards custom duties paid and not with respect to any fine or penalty. In our opinion, the ld. CIT(A) has passed a reasoned order which needs no interference at this stage. Accordingly, this ground No. 2 of Revenue s appeal deserves to be dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Delhi. 18.2 In appeal, the ld. CIT(A) restricted the disallowance to ₹ 4,24,800/- representing to 2% of the sales made through M/s. Vrinda International and deleted the disallowance of ₹ 8,50,000/-. 19. The ld. DR relied on the order of the Assessing Officer while the ld. AR of the assessee reiterating the submissions made before the ld. CIT(A), further submitted small synopsis stating that the ld. CIT(A) has committed a factual error in observing that commission paid to Vrinda International was 3% which was actually 2.74%. He also committed another error that other parties were paid commission @ 2% whereas, it was 2.5%. Even if these mistakes are rectified, the disallowance could at the most be made @ 0.24% amounting to ₹ 1,11,661/- even if the stand of ld. CIT(A) is accepted. It was also submitted that the net sale price realized through M/s. Vrinda International was at higher side. 20. After hearing the submissions of both the parties and going through the material on record, we find that the assessee has shown to have paid commission to its different consignment agents based on different locations at different rates. The assessee has not been able ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the assessee has been that no opportunity of being heard was given by the ld. CIT(A) before enhancing the income and hence, the action of the ld. CIT(A) is not sustainable in the interest of natural justice and under the provisions of law. The ld. DR could not controvert the plea of the assessee. We find that as per section 251(1)(a), the ld. CIT(A) has power to enhance income of the assessee, but as per section 251(2), the ld. CIT(A) has to give reasonable opportunity to the assessee before such enhancement of income. On perusal of the impugned order, we find that the ld. CIT(A) has mentioned that income of the assessee is enhanced by ₹ 3,28,073.25 after hearing the objections of the appellant. However, no fact regarding issuance of any notice to the assessee by the ld. CIT(A) or any objection of the assessee on it or finding of the ld. CIT(A) on any such objection is found recorded in the impugned order. Therefore, the plea of the assessee that enhancement in income has been made without affording any opportunity of hearing is found acceptable and thus, the action of the ld. CIT(A) being in violation of section 251(2) of the Act cannot be approved. Accordingly, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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