M/S H. P. TRADING CORPORATION,KOLKATA vs. THE ITO, WD-40(1), KOLKATA, KOLKATA

In Ground No. 1, the assessee has challenged the disallowance of Rs. 5,57,307/- made by the A.O. and confirmed by the Ld. CIT(A) on account of delivery charges.

The assessee in the present is a partnership firm which is engaged in the business of trading of Iron & Steel and Commission Agent. The return of income for the year under consideration was filed by it on 13.10.2010 declaring a total income of Rs. 7,73,328/-. In the Profit & Loss Account filed along with the said return, a sum of Rs. 5,90,103/- was credited by the assessee on account of delivery charges and the same amount was also debited to the Profit & Loss Account under the same head. During the course of assessment proceedings, the assessee however failed to produce the supporting bills for delivery charges to the extent of Rs. 5,57,307/-. The A.O., therefore, made disallowance on account of delivery charges to that extent.

The disallowance made by the A.O. on account of delivery charges was challenged by the assessee in the appeal filed before the Ld. CIT(A). During the course of appellate proceedings before the Ld. CIT(A), written submission was filed by the assessee in support of its case on this issue. This was forwarded by the Ld. CIT(A) to the A.O. for his comments. In the remand report dated 06.02.2014 submitted to the Ld. CIT(A), the A.O. offered his comments and after considering the said remand report, written submission filed by the assessee and other material available on record, the Ld. CIT(A) proceeded to confirm the disallowance made by the A.O. on account of delivery charges by observing as under: “The next disputed disallowance is of expenses of Rs. 5,57,307/- on account of delivery charges and carriage inward expenses made for want of supporting evidence. During the appellate proceedings, the appellant has contested the Assessing Officer’s claim that the supporting bills / vouchers were not produced. In the remand report after verifying the appellant’s submissions, the Assessing Officer has supported the finding given in the assessment order with greater clarity. He has given the specific details of the bills etc. produced by the appellant and reported that the appellant failed to furnish any evidence whatsoever in support of the delivery charges of Rs. 4,28,095/- (claim of Rs. 5,90,103/- - claim of Rs. 1,62,008/- supported by bills) and Rs. 1,29,212/- debited as carriage inward in the profit and loss account. I agree with the Assessing Officer that the appellant has made only vague arguments at the appellate stage also and not submitted any cogent evidence to support its claim. Hence, the disallowance of Rs. 5,57,307/- is confirmed.”

I have heard the arguments of both the sides and also perused the relevant material available on record. The limited contention raised by the learned counsel for the assessee on this issue is that there was no specific opportunity effectively given to the assessee by the authorities below to produce the relevant bills in order to support and substantiate its claim of delivery charges. He has submitted that such bills are fully available with the assessee and urged that an opportunity may be given to the assessee to produce the same for verification of the A.O. Although the learned DR has contended that sufficient opportunity has already been given by the authorities below to the assessee to produce such supporting evidence, I consider it fair and proper and in the interest of justice to give one more opportunity to the assessee to support and substantiate its claims of delivery charges by producing the relevant documentary evidence in the form of bills which are claimed to be available with the assessee, I, therefore, set aside the impugned order of the Ld. CIT(A) on this issue and restore the matter to the file of the A.O. for deciding the same afresh after giving the assessee one more opportunity to support and substantiate its claim of delivery charges by producing the relevant documentary evidence. Ground No. 1 of the assessee’s appeal is accordingly treated as allowed for statistical purpose.

As regards the issue raised in Ground No. 2 relating to the disallowance of Rs. 57,988/- made by the A.O. and confirmed by the Ld. CIT(A) on account of brokerage and commission, it is observed that the said disallowance was made by the A.O. and confirmed by the Ld. CIT(A) due to the failure of the assessee to establish the genuineness of the payment made on account of brokerage and commission by filing the supporting details and documents as well as its failure to establish the business expediency of such expenditure. On this issue, the learned counsel for the assessee has submitted that the relevant documentary evidence in the form of bills is available with the assessee to support and substantiate its claim of brokerage and commission and an opportunity may be given to the assessee to produce the same for verification before the A.O. Keeping in view this submission made by the learned counsel for the assessee, I consider it just and proper to restore this issue also to the file of the A.O. for deciding the same afresh after giving the assessee one more opportunity of supporting its claim for brokerage and commission by producing the relevant documentary evidence. Ground No. 2 is accordingly treated as allowed for specific purpose.

As regards the issue involved in Ground No. 3 relating to the disallowance made by the A.O. on account of legal expenses under section 40(a)(ia) and sustained by the Ld. CIT(A) to the extent of Rs. 73,833/-, the limited contention raised by the learned counsel for the assessee is that the amount of Rs. 73,833/- having been paid on account of reimbursement of expenses, there was no obligation to deduct tax at source and the question of disallowance under section 40(a)(ia) would not arise. He has submitted that this claim of the assessee can also be verified by the A.O. and for the purpose, the matter may be sent back to the A.O. I accordingly set aside the impugned order of the Ld. CIT(A) on this issue and restore the matter to the file of the A.O. for deciding the same afresh after verifying the claim of the assessee that the amount in question being paid towards reimbursement of expenses, there is no liability to deduct tax at source and the question of disallowance under section 40(a)(ia) would not arise. Ground No. 3 is accordingly treated as allowed.

In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order Pronounced in the Open Court on 11th April, 2018.