TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 235
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.... as under:- "2.1 That under the facts and circumstances, there is absolutely no legality and justification in not accepting the declared N.P. rate of 5.54% and estimating the same at 15% thereby in making and sustaining an addition of Rs.13,61,654/-." 2.2 That the ld. Commissioner of Income Tax(A), after giving a categorically finding that no adverse inference can be drawn from the statement of the auditor, was legally and factually required to accept the declared book results based on audited books of accounts. 2.3 That under the facts and circumstances, the expenses claimed needs to be allowed in toto. 2.4 That without prejudice, the N.P. rate applied is, at any rate very - very excessive." Ground No. 2 of the assessee and revenue 5. We have heard rival arguments of both the parties and carefully perused the record inter alia assessment and first appellate order. The assessee's representative (AR) submitted that the assessee is an agent of ICICI Bank and had been operating from four offices with about 100 telephone lines and about 100 employees. The AR further submitted that the assessee gets commission from ICICI Bank on soliciting property loans, car loans and other loans....
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....ooks of accounts and other vouchers and bills pertaining to claim of expenses reflected in the P&L account, then the Assessing Officer had no option but to disallow the claim of the expenses and the Assessing Officer rightly disallowed the claimed expenditure for which the assessee could not submit reliable evidentiary proof. The DR contended that some bills and vouchers produced by the assessee in support of claimed expenses were not found to be correct by the AO and in this situation, the Assessing Officer was right in making disallowance and additions in this regard. The DR also contended that during the first appellate proceedings, the Commissioner of Income Tax(A) proceeded to estimate the NP rate on the basis of 15% of total receipts during the year and the Commissioner of Income Tax(A) erred in law and on facts in restricting the disallowance made by the Assessing Officer to the tune of Rs.13,61,654/-. The DR further pointed out that some expenses of the assessee were in the nature of fixed expenses which do not increase or inflate in the same proportion in which the gross receipts increase like rent, fixed salary etc. and there was a substantial increase in the receipts of ....
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.... following observations and findings:- "9.4 Now, the important question arises for consideration that what should be the basis and the method for computing the assessable income from the said activity. As per the chart given above, out of total expenses claimed at Rs. 1,36,00,428/-, expenses to the tune of Rs. 1,28,71,393/- have been disallowed, thus, only Rs. 7,29,035/- have been allowed. In terms of percentage, 94.64% out of the total expenses stands disallowed and only balance 5.36% stands allowed. On examining the details of expenses claimed under various heads, as per the chart given earlier, it is clear that most of the expenses have been 100% disallowed. To quote some examples, 100% disallowed expenses includes major head of expenses namely conveyance, computer consumables, insurance, legal charges, mineral water, consultation, photostat, postage, bonus to staff, conveyance allowance, staff medical allowance, newspaper allowance, salary and wages, HRA, staff incentive, staff welfare, uniform, advertisement, business promotion, conference expenses printing and stationery, promotional benefit to business team, remuneration to sub DSA, staff / marketing team telephone expenses....
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.... has to be based on relevant basis and material. In the case of R. Tahilram 229 ITR 34 (AT) (AHD.) (TM), it has been held that where the claim of the assessee that the books were lost was found to be false, the estimate based on past records and profits in similar business is appropriate basis. Thus, in my considered opinion, in this case also, for determining the taxable income, the inference, guidance and support needs to taken from the results declared by the appellant in other years. As per 1 comparative study details in his own case filed by the appellant, it has been noticed that in A.Y. 2005 - 06 i.e. in the immediate preceding year, in the similar nature of business, N.P. rate of 9.23% has been declared. The claim the appellant is that, the correct comparison has to be made only from A.Y. 2007 - 08 where the nature of business was similar and the gross commission receipt in A.Y. 2007 - 08 was Rs. 1.47 cr which are comparative to A.Y. 2006-07, where receipts was Rs. 1.44 cr, whereas in A.Y.2005-06 the receipts was only Rs. 37 lacs. However, I do not find much substance in this contention the appellant. As per various authorities quoted above, more appropriately, the comparat....
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....f accounts and complete relevant bills and vouchers before the Assessing Officer and the Assessing Officer disallowed 94.54% of the expenses claimed by the assessee and during the first appellate proceedings, the Commissioner of Income Tax(A) proceeded to estimate the net profit of the assessee on the basis of 15% of total receipts of the assessee during the year under consideration. The revenue is aggrieved by the action of the Commissioner of Income Tax(A) which restricted the disallowance on the basis of 15% of NP rate of the receipts but revenue authorities are expected to act on the cogent justified basis and the basis of estimation was rightly adopted by the Commissioner of Income Tax(A). Accordingly, we hold that the Commissioner of Income Tax(A) rightly proceeded to estimate the NP on the basis of total receipts of the assessee during the financial year relevant to the assessment year under consideration. We also hold that when the assessee could not produce books of accounts and other relevant complete bills and vouchers before the Assessing Officer, then the Commissioner of Income Tax(A) was justified in estimation of NP rate on the basis of total receipts. The Commission....
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....70,170 and it was the duty and onus was on the Assessing Officer to specifically acknowledge the assessee about this difference and therefore, at the most, the assessee could not have allowed the credit of TDS related to Rs.70,170. The AR supported the impugned order. 15. On careful consideration of above submissions and contentions, we observe that the Assessing Officer made addition with following observations:- "61. As per TDS certificate issued by ICICI Bank, enclosed with the return it is seen that total service charges of Rs. 1,44,68,704/- have been credited by the bank to the assessee during the period 1/4/2005-31/3/2006. However, as per return filed the assessee has disclosed only a sum of Rs. 1,43,98,534/-vide questionnaire dated 17/9/2008 the assessee was asked to explain as to why the total service charges received by her had not been disclosed in the return. She was also asked to explain as to why the difference of Rs. 70,170/-should not be added to her income. (Addition of Rs. 70,170/-) 62. No explanation in this regard has been furnished by the assessee. Accordingly, the amount of Rs. 70,170/ - being commission earned by assessee is added to income of the assessee....