Tribunal grants relief on expenses, limits disallowances, and deletes addition for discrepancies

The Tribunal partially allowed both appeals of the appellant, providing relief on the issues of commission expenses, carriage outward expenses, and bogus purchases. The disallowance of commission expenses was restricted to 50% of the claimed amount, disallowance of carriage outward expenses reduced to 50% instead of 70%, and the addition of Rs.4,57,283 towards bogus purchases was deleted as the discrepancies were related to opening balances, not current year purchases.

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Issues:
1. Disallowance of commission expenses
2. Disallowance of carriage outward expenses
3. Disallowance of bogus purchases

Issue 1: Disallowance of Commission Expenses
The appellant filed appeals against the orders of Ld. CIT(A) for AY 2010-11 and AY 2011-12 related to disallowance of commission expenses. The Tribunal noted that the appellant failed to appear for multiple hearings, leading to ex parte proceedings. The commission payments were scrutinized, and it was found that the claimed amount exceeded the permissible limit. The AO disallowed the excess amount under section 40(a)(ia) of the Income-tax Act, 1961. The appellant argued that the payments were incentives in lieu of salary, not commission. The Tribunal referred to a previous case where a similar issue was resolved by restricting the disallowance to 50% of the claimed expenses. Despite the CIT(A) confirming the disallowance, the Tribunal decided to restrict the disallowance to 50%, providing relief to the appellant.

Issue 2: Disallowance of Carriage Outward Expenses
The second issue involved the disallowance of 70% of expenses towards carriage outward by the AO due to lack of proper supporting evidence. The Tribunal noted that a previous case involving the appellant had seen the disallowance restricted to 50%. Following this precedent, the Tribunal provided partial relief to the appellant by reducing the disallowance to 50% instead of 70% as determined by the AO.

Issue 3: Disallowance of Bogus Purchases
Regarding the disallowance of Rs.4,57,283 for bogus purchases in AY 2011-12, the Tribunal examined purchases from three different parties. Discrepancies were noted between the purchases claimed by the appellant and those reported by the suppliers. The AO treated these differences as bogus purchases, which was upheld by the CIT(A). However, the Tribunal found that the discrepancies were related to opening balances, not current year purchases. As there were no differences in the purchases made during the year, the Tribunal deemed the disallowance unjustified. Consequently, the Tribunal decided to delete the addition of Rs.4,57,283 towards bogus purchases, providing relief to the appellant.

In conclusion, the Tribunal partly allowed both appeals of the appellant, providing relief on the issues of commission expenses, carriage outward expenses, and bogus purchases.

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