TaxTMI 
TaxTMI 
TaxTMI 
2012 (2) TMI 480
X X X X Extracts X X X X
X X X X Extracts X X X X
....olding disallowance of ₹ 16 lacs as commission u/s 40A(2) without appreciating assessee's submissions in this regard. 2. The assessee craves leave to amend/add any ground of appeal before the same is heard." 3. In Ground No.1(a), the assessee agitated that the CIT(A), erred in law and on facts in upholding the addition of ₹ 42,48,003/- made by the AO, on account of cash purchases of old silver, treating the same as bogus purchasers. The brief facts are that the AO, found that the assessee had made cash purchases of ₹ 42,48,003/-, and no particulars of sellers were recorded on the purchase bills. It was observed by the AO on a few purchase bills, some names had been mentioned without recording other identifiable details, such as addresses of the sellers. The AO granted opportunity to the assessee, to explain such transactions of purchases. However, the assessee failed to file any explanation. Consequently, such purchases were held as bogus/unverifiable by the AO and, consequently, the impugned addition was made. Before the CIT(A), assessee contended that the raw material, so purchased by the assessee had been sold after re-making the same by way of under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee contended that CIT(A), erred on facts and law, in upholding the disallowance of ₹ 10,50,806/-, out of total rent paid of ₹ 14,40,000/- u/s 40A(2), without appreciating the facts and submissions in the matter. The ld. 'AR' merely justified the said claim. However, Ld. 'DR' placed reliance, on the order of the lower authorities. 8. In the course of assessment proceedings, the AO found that the assessee had paid rent of ₹ 14,40,000/- which worked out approximately 370% more than the rent paid, in the preceding year, an increase from ₹ 3,89,194/-, to ₹ 14,40,000/-, to the same three persons - Deepak Malik, Ramesh Malim and Mukesh Malik. There being no agreement and no plausible explanation, was filed by the assessee, the AO disallowed the rent amounting to ₹ 10,50,806/-. Ld. CIT(A) upheld the finding of the AO vide para 11 to 13 of the appellate order. The relevant part of the said order is reproduced hereunder : "11. After having considered rival submissions, I find that 1. There is no evidence on record to support or prove the contention of the appellant in the absence of a proper rent agreement. 2. Deduction of TD....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lik, Proprietor Subhash Jewellers, SCF 32, Sector 8B, Chandigarh, had claimed expenses in the shape of commission amounting to ₹ 16 lacs, paid to his sons, daughter-in- law and daughter, namely Deepak Malik, Ramesh Malik and Mukesh Malik (sons) and Sarika Malik, (daughter- in-law) and Rama Malik (daughter). The chart indicating details of such payments, is reproduced, in para 4 of the order of the CIT(A), which is reproduced hereunder : COMMISSION ON SALE PAID ON 31.3.2007 Name Gross amount Deepak Malik Rs.2,40,000/- Ramesh Malik Rs.2,40,000/- Mukesh Malik Rs.2,40,000/- Sarika Malik Rs.4,40,000/- Rama Malik Rs.4,40,000/- Total : Rs.16,00,000/ - 12. It is undisputed fact that the assessee had paid ₹ 4,80,000/-, as salary, as also the impugned commission to each of the above closely related persons. A comparison of the commission paid viz-a- viz salary paid by the assessee to his sons, daughter and daughter-in-law, clearly indicates that ₹ 2,40,000/- and ₹ 4,80,000/- respectively, the assessee had merely adopted a device to reduce his taxable income. The assessee has failed to discharge the burden cast on him to prove the genuineness of the ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in support of the claim for allowance, the Income-tax Officer must independently collect evidence and decide that the allowance claimed is excessive or unreasonable having regard to the legitimate business needs of the assessee before the power under section 10(4A) may be exercised. " (ii) In the case of Synpro Inds. Vs. CIT [1984] 40 CTR 106 [mp], it has been held that "Business expenditure - Disallowance u/s 40A(2) -A firm paid commission of ₹ 12000/- in addition to salary to the husband of one of the partners. Since no agreement for payment of commission was executed during the previous year - Disallowance was held to be justified. " (iii) In case of Ganesh Soap Works vs. CIT [1987] 59 CTR [mp] 109, the Hon'ble High Court held that if Tribunal finds the amount claimed as payment of commission excessive or unreasonable having regard to services or facilities rendered to the assessee, disallowance on the ground that it does not .satisfy test of commercial expediency is justified. - The appellant is selling silver jewellery and utensils and nothing has been produced either during the assessment proceedings or appellate proceedings to establish the kind ....