TaxTMI 
TaxTMI 
2014 (7) TMI 1060
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.... on account of commission received without appreciating the fact that the assessee is following mercantile system of accounting and therefore the commission received by the assessee is liable to be accounted for the year when related sales have been affected and not in any subsequent years. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disalowance of Rs. 19, 50, 328/- being 5% to Rs. 3, 90, 065/- being 1% of an amount of Rs. 3, 90, 06, 556/- made on account of expenses without appreciating the fact that many vouchers relating to some expenses were self made and were not used for purpose of business. 4. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. ITA/1896/Mum/2012-AY. 2008-09: "1. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in allowing the appeal of the assessee and deleting the addition of Rs. 20, 55, 521/- out of the total addition of Rs. 25, 69, 4011- made u/s. 37(1) of the I. T. Act, 1961. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee failed to furnish any corr....
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....e was following mercantile system of accounting, the AO, vide his order-sheet entry dated 18. 12. 2009 asked the assessee as to why the same should not be included in the income for the year. After considering the submission of the assessee, the AO held that discount received by the assessee of Rs. 14. 17 lakhs was to be assessed for the year under appeal. Accordingly, he added Rs. 14, 17, 497/- to the total income of the assessee. 4. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before him it was stated that the credit notes pertained to the transaction carried out in the accounting year under consideration, that same were offered for taxation in the subsequent AYs. due to certain circumstances beyond the control of the assessee, that the credit notes were issued by the suppliers to the assessee for the discounts earned by it on the sales performance of the Financial Year (FY) 2006-07, that the credit notes were issued after the end of the FY, though same were shown to have been paid by the suppliers as on 31. 03. 2007, that credit notes were actually issued quite late after 31. 03. 2007, that the assessee's accounts....
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....me under dispute crystalised only after the end of the FY, that the amount of Rs. 48, 17, 497/- could not be taxed in the year under consideration. 5. Before us, Departmental Representative (DR) supported the order of the AO. Authorised Representative(AR) stated that the assessee was following the same practice for last so many years and department had accepted it in the earlier years, that to buy the peace of mind the assessee had surrendered the discount incentives in the subsequent years and had paid taxes accordingly, that order of the FAA should be upheld. 6. We have heard the rival submissions and perused the material before us. The assessee is having more than 50 branches all over India and its turnover is more than 1000 Crores. We find that amount received by the assessee was not normal business discount- it was sales-performance based incentives given by the suppliers to the assessee, that the suppliers would be issuing discount notes after the accounting year was closed. It is a normal practice of the business to evaluate the performance and give some kind of incentives to the customers. Naturally, it takes some time to collate the data and to take final decision in thi....
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.... their books of accounts. He deleted the disallowance of Rs. 6. 05 lakhs. 9. Before us, DR supported the order of the AO. AR made the same arguments that were advanced for the ground no. 1. We have heard the rival submissions. We find that issue is identical to the trade discount received by the assessee during the year under consideration. As held earlier, the amount in question was not received by the assessee during the year due to certain peculiar circumstances of the nature of the business. Therefore, upholding the order of the FAA, we decide ground no. 2 against the AO. 10. Last ground of appeal deals with restricting the disallowing from 5% to 1%, made on account of expenses. During the assessment proceedings, the AO directed the assessee to submit expenses debited to P&L Account which had been incurred in cash along with the books of accounts, bills/ vouchers. After examining sample bills/vouchers, he observed that many vouchers relating to expenses were self-made, that those vouchers/bills did not conclusively show that the expenses were incurred wholly and exclusively for the business of assessee, that assessee had incurred cash under heads delivery expenses, general e....
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....see, that the assessee filed audited accounts, that similar expenses were allowed in the earlier years by the AO. Considering the fact that the AO had mentioned that the assessee had claimed expenses for self made vouchere, he held disallowance of 1% of the expenses would be sufficient to plug the possible revenue loss. 13. Before us, DR relied upon the order of the AO, whereas the AR advanced the same arguments that were made before the FAA. After hearing the rival submissions, we are of the opinion that for disallowing any expenditure AO has to establish that same was not incurred for carrying out the business for the year under consideration or that the expenses were not genuine. Merely because certain expenditure was incurred in cash cannot be the basis for making any disallowance. Act does not prohibits cash payments. We find that the AO had not invoked the provisions of section 40A(3)of the Act. The AO has not rejected the books of accouts. One important aspect to be noted is that the assessee had paid FBT for certain expenses. We find that entire expenditure was not incurred in cash majority of the payments were by cheques. As the genuineness of the expenditure is not in do....