ITO, WARD-35(4), KOLKATA, KOLKATA vs. M/S J.L. GOWARD & CO., KOLKATA

The first ground of appeal is against the action of the Ld. CIT(A) in deleting the addition made by the AO u/s 40(a)(ia) of Rs. 1,80,10,460/-.

The learned DR assailing the decision of the Ld. CIT(A), supported the action of the AO and want us to reverse the order of the Ld. CIT(A) and restore the order of the AO. Per contra the learned AR supported the action of the Ld. CIT(A) and does not want us to interfere in the order of the Ld. CIT(A).

We have heard both the parties and perused the records. We note that the assessee is a clearing and forwarding agent working on behalf of several clients, and it is their job to secure the easy and event-free passage of goods for a service charge/brokerage from such clients. From the nature of work it is discerned that certain payments need to be made to the Government and other agencies to clear goods for timely smooth passage and delivery of goods imported to the clients. We note that Rs. 1,29,51,844/- was paid by the assessee for CFS charges, shipping agent charges paid to Indian Shipping Agent was to the tune of Rs. 46,82,854/-, survey fees of Rs. 3,75,771/- thus total Rs. 1,80,10,469/-. From the ledgers, it is seen that these amounts were paid by the assessee to the agencies on behalf of the clients and bills were raised against the clients to claim reimbursement of the same. We take note that over and above the reimbursement claim, the assessee has raised bills for services rendered for clients and this were paid by the clients after duly deducting the TDS. The Ld. CIT(A) has referred to his predecessors order for AY 2012-13 where in the CIT(A) has

Ground No. 2 of Revenue is against the action of the Ld. CIT(A) in deleting the disallowance of Rs. 50,052/- made u/s 36(1)(va) by accepting fresh evidence in violation of the provisions of Rule 46A.

Brief fact of the case is that the AO noted that employees contribution to PF and ESI of Rs. 35,856/- and Rs. 14,196/- was deposited in the Government account after the prescribed time limit as stipulated by PF Act & ESI Act, therefore, he disallowed Rs. 50,052/-. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who taking note of the earlier order of the Ld. CIT(A) in assessee’s own case for AY 2012-13 has given relief to the assessee. We do not countenance such an action of the Ld. CIT(A) because he has to record a finding of fact as to whether the assessee in fact had deposited the amount with the Govt. before the return of income was filed by the assessee. We note that the assessee has not produced any document before the AO to show that the liability have been cleared before furnishing of the return of income. Therefore, we set aside the order of the Ld. CIT(A) remand this issue back to the file of the AO to verify as to whether the assessee has deposited the employees contribution to PF and ESI before the return of income was filed. If the assessee had deposited the same before the return was filed then there should be no disallowance on this count. With the aforesaid observation, this issue goes back to AO for fresh adjudication.

Ground No. 3 is against the action of the Ld. CIT(A) in restricting the disallowance made on expenditure to 2% of claim of expenditure against 10% decided by the AO.

Brief fact of the case is that the AO noted that the assessee’s claim a total of Rs. 33,50,500/- on various heads of expenditure. The AO asked the assessee to produce ledgers bills/vouchers to substantiate the claim. According to the AO, the assessee only produced break up of such expenses and produced certain self-made vouchers in support of the same.

We have heard both the parties and perused the records. The Ld. CIT(A) has taken note that the books of the assessee are audited and the assessee has produced the books, vouchers and ledgers before the AO and has limited disallowance from 10% to 2% to cover the plausible leakage of Revenue. We note that the assessee is not in appeal against the action of the Ld. CIT(A). Though we are of the opinion that adhoc disallowances per-se is arbitrary and cannot be done without rejecting the books. However both the authorities have carried out the estimation without rejecting the books as per law, however the assessee has not preferred an appeal against the action of the Ld. CIT(A). Therefore, we do not want to interfere with the partial relief granted by the Ld. CIT(A) and confirm the same.

In the result, appeal of the Revenue is partially allowed for statistical purposes.