AI Drafter 
TaxTMI 
TaxTMI 
2012 (2) TMI 521
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....- giving a G.P. rate of 25.01% as against G.P. rate of 24.93% declared on sales of Rs. 17,53,08,741/- in last year. The AO by referring to 13 parties from whom purchases of Rs. 3,54,96,161/- was made held that these purchases are not verifiable. He, therefore, invoked section 145(3) & disallowed 25% of these purchases resulting into trading addition of Rs. 89,49,544/-. 5. The ld. CIT (A) by following the decision of ITAT in assessee's own case for A.Y. 05-06 & 06-07 upheld the application of section 145(3) but restricted trading addition to Rs. 10,92,695/- by applying G.P. Rate of 25.50% as upheld in A.Y. 06-07. 6. The ld. Counsel of the assessee invited attention on the written submission filed during the appellate proceedings. 7. On the other hand, the ld. D/R also filed a brief note in writing on this aspect. It was submitted that though GP rate is better during the year but the fact remains that purchases of more than about Rs. 4 crores remained unverifiable. None of the parties could be produced and neither there is any information about these parties. All the purchases were bogus. Therefore, the order of AO is liable to be restored on this aspect. It was also submitt....
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....ion the decision of Hon'ble Jurisdictional High Court in case of Gottan Lime Khaniz Udyog and various other decisions and has held that where provisions of section 145(3) is attracted, then addition should be made taking into consideration the past history of the case. Past history is that assessee declared 24.92% in the last year and in this year GP rate declared is 25.01%. Taking into consideration this aspect and taking into consideration that certain purchases remained unverifiable, we are of the view that if a trading addition of Rs. 4,00,000/- is sustained that will meet the ends of justice. We order accordingly. Ground of the assessee is allowed in part and ground of the department fails. 9. Second ground in appeal of the assessee is against confirming the disallowance of Rs. 1,16,753/- out of commission expenses. 10. The department has also challenged this issue as AO made addition of Rs. 12,50,749/- on account of disallowance of commission expenses which is restricted by ld. CIT (A) to Rs. 1,16,753/-. 11. Since both the issues are common, therefore, they are being disposed off together. 12. Brief facts of the case are that the assessee claimed sales commission ....
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....ure should be in proportion to the increase in sales as compared to the last year is misconceived. He has not pointed out any specific payment of commission which is not genuine. There is no requirement of the law that there should be written agreement for payment of commission. In case of commission payment, bringing the customer to the show room is the rendering of the services by the agent for which he is paid the commission. The expenses are thus wholly and necessarily for the purpose of the business. No part of such commission payment therefore can be disallowed. 15. In A.Y. 2006-07 also, the AO made disallowance of commission payment of Rs. 39,43,847/- which has been reduced to Rs. 3,41,205/- by the ld. CIT (A)/ITAT being 20% of the commission paid to the parties to whom summons were issued and no satisfactory reply received. In the present case, the AO has neither issued summons to any of the party nor pointed out any specific payment which is not verifiable. Hence, no disallowance out of the commission payment is warranted. 16. The assessee rate of sales commission is fixed. It pays commission at 10% on the sales routed through guide or commission agent. If there is a....
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.... more particularly when in A.Y. 06-07, ITAT have not considered & given any finding on the explanation given by the assessee. 19. On the other hand, ld. D/R has placed reliance on the order of AO as well as written note. 20. After considering the submissions and perusing the material on record, we feel no infirmity in the finding of ld. CIT (A) who restricted the addition to Rs. 1,16,753/- on the basis of order of Tribunal for A.Y. 2006-07. In assessment year 2006-07 the disallowance on account of commission was made by the AO. However, appeal of the assessee was allowed in part by the ld. CIT (A) as he restricted the disallowance of commission @ 20% to the parties whose summons under section 131 could not be served. In the year under consideration, there are five parties which were involved for assessment year 2006-07 to whom the commission was paid. Total commission paid to these parties was Rs. 5,83,763/- as ld. CIT (A) restricted the disallowance @ 20% on this commission on the basis of his finding for A.Y. 2006-07. Order of ld. CIT (A) for A.Y. 2006-07 was confirmed by the Tribunal. Facts are similar for the year under consideration. Accordingly we confirm his finding on....
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....owance of Rs. 45,56,789/-. The AO alternatively held that the assessee is liable for making TDS u/s 194J. 24. The ld. CIT (A) in Para 7.4 to 7.17 (Page 21-33) of his order upheld the finding of the AO that the service fees/discount/merchant discount rate (MDR)/commission retained by the bank is payment of commission liable for deduction of tax at source u/s 194H. For this, she extensively quoted from the different terms of the contract entered by the assessee with various banks & held that bank represents the assessee & derives his power & authority to collect the money from the customer/customers bank & also to deal with the appropriate card association/card issuers & therefore the bank is acting as agent of assessee. However, she deleted the addition made by the AO in respect of service charges paid to American Express Bank on account of the general no deduction certificate issued to them by the Income Tax Department but confirmed the addition in respect of payment to ICICI Bank & BOB for Rs. 15,17,572/-. 25. The ld. Counsel of the assessee filed detailed written submission and the factum of case was also explained. 26. On the other hand, ld. D/R has placed reliance on t....