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TMI Blog2021 (4) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ) erred in assuming wastage charges at 1% without any evidence to support their stand, ignoring specific evidences filed by the assessee to prove that normal wastage incurred while manufacturing gold ornaments was at 6 to 7%. AO has quantified excessive wastage purely on arbitrary and suspicious manner, which cannot be justified in the given facts and circumstances of the case. Assessee has also produced necessary evidences to prove that it has separately paid making charges to goldsmith and further, deducted TDS, wherever applicable. AO as well as learned CIT(A) were erred in estimating making charges mere relying upon statements of two goldsmiths recorded at the back of the assesse, even though the assessee has demonstrated with evidences that statement given by goldsmiths was incorrect. Further, the learned CIT(A) was also not justified in ipso facto , affirming version of the AO without giving due credence to the facts put forth by the assessee. Wastage allowed by the assessee to goldsmiths is as a matter of business prudence /commercial expediency and the same cannot be called upon to question by the AO unless, he had evidence to prove that the same is excessive. Case l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is unwarranted and unjustified on the facts of the case. 5. The CIT(A) further failed to appreciate that the assessee had made payments to the goldsmiths for making of jewellery as per the agreed trade norms and was not justified in assuming the wastage in the making at jewellery as making charge and disallowing the amount for not effecting TDS by the Assessee. 6. The CIT(A further failed to appreciate that the goIdsmith returns roughly 94% of the gold as jewellery out o the quantum of gold given for ornament making that the 6% is accepted as wastage in gold making and there was no basis to assume this as the making charge and hence the disallowance merely on surmises and conjectures is wholly unjustified and unsustainable on the facts of the case. 7. The CIT(A) further failed to appreciate that the mere reliance on the statement of two goldsmiths recorded at the back at the assessee cannot be the basis to validate the assumption of the officer that the wastage shown by assessee was the making charges on which TDS was not effected and hence the disallowance u/s.4O(a)(ia) is unjustified. 8. The ClTA) was not justified in ipso facto adopting the version of the of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of works contract as defined under section 194C of the Act. The Assessing Officer has taken support from statement of goldsmiths in support of his findings, where they have stated that they will deliver 94 gms of gold out of 100 gms received by them for making ornaments. Accordingly, rejected the arguments of the assessee and treated excessive wastage charges over and above 1% as making charges. Since the assessee has shown wastage of 6755.29 gms of gold, after allowing 1% of wastage, balance 5669.527 gms of gold, has been treated as making charges and after taking prevailing market rate of gold which was 2837.55 gms gold has esimated making charges of ₹ 1,64,65,887/- and disallowed the same u/s. 40(a)(ia) of the Act for non-deduction of TDS u/s.194C of the Act. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee has reiterated its submissions made before the Assessing Officer and argued that additions made by the Assessing Officer towards estimated making charges on the basis of excessive wastage quantified by him is purely on assumption and suspicion, without there being any mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed by the assessee is nothing but making charges, which attracts provisions of section 194C and thus, for non-deduction of TDS, the same needs to be disallowed u/s.40(a)(ia) of the Act. 6. The learned AR for the assessee submitted that the learned CIT(A) has erred in confirming disallowance u/s.40(a)(ia) of the Act, without appreciating the fact that there can be no disallowance, where no payment is made and/or debited into books of account of the assessee. The learned AR for the assessee further submitted that additions made by the Assessing Officer and sustained by the learned CIT(A) is purely a guess work on assumption, without there being any evidence to prove that assessee has paid making charges in the form of gold. The assessee has filed all evidences to prove that making charges in this line of industry is between 5 to 6% and said percentage is depends upon type of ornaments manufactured by the assessee. The assessee has also obtained affidavit from goldsmiths, where they have clarified that normal wastage in manufacturing of gold ornaments is 6 to 7%. Therefore, there is no merit in the reasons given by the Assessing Officer that assessee has paid making charges i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement recorded from goldsmiths, who had involved in manufacturing of gold ornaments. 9. We have given our thoughtful consideration to the arguments advanced by the learned AR for the assessee in light of facts brought out by the Assessing Officer and find that there is no merit in the reasons given by the Assessing Officer to treat excessive wastage as making charges. Further, there is no uniform yardstick to quantify making wastage in any process of manufacturing of goods, including manufacturing of gold ornaments. But, it all depends upon nature of goods manufactured or types of gold ornaments manufactured by the parties. The Assessing Officer has considered 1% wastage and to support his stand taken statement from goldsmiths, where they have stated that they have returned 94 gms of gold out of 100 gms gold received from the assessee. Except this, no other independent evidence was brought on record to support his findings. On the other hand, the assessee has filed affidavit from goldsmiths to support its arguments, where they have clearly stated that normal wastage in manufacturing of gold ornaments is between 6 to 7%. Therefore, we are of the considered view that Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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