TaxTMI 
TaxTMI 
2011 (1) TMI 1497
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....798/- on two cars which were not owned by the assessee and were registered with RTO in the names of Directors. 4. In appeal the Learned Commissioner of Income Tax (Appeals) following the order of his predecessor in Assessment Year 2004-05 held that as the cars were used by the assessee in its business the disallowance of depreciation was deleted. 5. At the time of hearing before us both the parties agreed that the issue stands covered in favor of the assessee by the decision of the Tribunal in assessee's own case for Assessment Year 2004-05 vide order dated 11-1-2008 in ITA No.2851/AHD/2007. We find that the Tribunal in Assessment Year 200405 held as under:- "7. We have heard the parties, and perused the material on record. The relevant facts stand borne out by the record as well as delineated by the assessee in its 'Statement of Facts' before the first appellate authority. The beneficial or the de facto ownership of the motor cars, in view of the same, is of the assessee-company only, even as the relevant invoice/bill (s); the registration being in the individual name of the Directors, would only be in their name, so that they hold the titular ownership of the said ....
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....ar and therefore disallowed an amount of Rs. 19,32,263/- as prepaid insurance expenses not pertaining to assessment year 2005-06. 9. In appeal the Learned Authorised Representative of the assessee submitted that the expenditure incurred must be allowed in its entirety in the year in which it is incurred. The same cannot be apportioned on period or time basis. The appellant stated that under the mercantile system of accounting the amount of premium paid is fully deductible in the year in which the premium is paid. Since liability was incurred on the date when premium became due, it was an ascertained and accrued liability which is fully allowable. The assessee submitted that the risk under keyman policies starts on the commencement of the policies and therefore the amounts of premiums paid become fully allowable and the Assessing Officer has failed to notice that the premium paid is fully allowable as per para 14.4 of CBDT Circular referred in 230 ITR 21 (St.). The Learned Authorised Representative of the assessee relied upon following decisions:- 1. Saurashtra Cement and Chemical Industries Ltd. 213 ITR-523(Guj.) 2. CIT vs. Brilliant Tutorials (P) Ltd., 292 ITR 399 (Mad.) ....
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....duction in the earlier year as well as in the subsequent year to the assessee in the year of payment. 13 We find that it is not in dispute that the assessee follows mercantile system of accounting. As per this system of accounting an amount is recognized as income of the year in which right to receive accrues to the assessee and an amount is recognized as expenditure in the year in which liability crystallizes so as a corresponding right to receive gets vested in some other person. Further, we find that it is not in dispute that keyman's insurance premium paid by the assessee was revenue in nature and as per the terms of the policy the liability to pay entire premium of Rs. 23,19,521/- crystallized during the year under consideration. Thus, we do not find any error in the order of the Learned Commissioner of Income Tax (Appeals). Further, we find that no material could be brought on record before us by the Revenue to show that the assessee had any right to receive Rs. 19,32,263/- from the Insurance Company as at the end of the relevant previous year which can be treated as real existing asset of the assessee as on the balance sheet date which was not recognized by the assessee i....
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....ts viz. (i) Synthetics & Polymer Industries/and or Synpol Products (P) Ltd. (referred to as Domestic Unit) (ii) Synpol International (referred to as E.O.U. Unit) The assessee explained this fact in its letter dated 10-12-2007 and filed separate copy of account of Venus for purchases made by Domestic Unit as well as by E.O.U. Unit. The transactions with Venus as per copy of account filed from the books of Domestic Unit are summarized as under:- Debit Credit 1 Opening Balance Nil 2 Aggregate amount of various purchases 1573020 3 Aggregate amount of various purchases Made by account payee cheques 1288153 4 Closing Credit Balance shown in balance- Sheet as sundry creditors for goods 2848867 Total Rs. 1573020 1573020 The transactions with Venus as per the copy of account filed from the books of E.O.U. unit are summarized as under:- Debit Credit 1 Opening Balance Nil 2 Aggregate amount of various purchases 95320 3 Aggregate amount of payments made BY Account Payee cheques 95320 4 Balance Nil Total Rs. 95320 9....
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.... and export unit and submitted that the purchases of Rs. 15,73,020/- made by domestic unit fully tallied. The assessee therefore requested that the said statements be admitted as additional evidence under rule 46A of I.T. Rules. Accordingly the same was forwarded to the A.O. calling for his comments. The A.O. submitted a report dated 24-04-2008 stating that papers now submitted should not be admitted and that any papers submitted after the assessment stated to be its evidences should not be entertained and he relied upon the decision of Hon'ble Supreme Court in Goetz India Ltd.284 ITR 323 to contend that assessee cannot raise such ground at appellate stage which has been decided against the assessee. 17. In rebuttal to the said remand report the A.R. replied that as per the copy of account of domestic unit of the appellant from the books of Venus Petrochemicals (Bombay) Pvt. Ltd. received vide letter dated 5-01-2008 the purchases of Rs. 15,73,020/- in domestic unit tally. The decision relied upon by the A.O. of Goetz India was in different context and it was with regard to claim of deduction after filing of return of income. 18 After considering the aforesaid submissions ....
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....see on the ground that no confirmation was filed from Venus Petrochemicals (B) Pvt. Ltd. and therefore treated Rs. 14,77,700/- as inflation of purchases and Rs. 2,84,867/- as unexplained cash credit and added both the amounts to the income of the assessee. 20 Before the Learned Commissioner of Income Tax (Appeals) the assessee filed confirmation from Venus Petrochemicals (B) Pvt. Ltd. which tallied with the details furnished by the assessee before the Learned Assessing Officer. The Learned Commissioner of Income Tax (Appeals) after calling a remand report from the Learned Assessing Officer and considering the confirmation filed by the assessee, observed that the Learned Assessing Officer could not point out any discrepancy in the confirmation of Venus Petrochemicals (B) Pvt. Ltd. and therefore deleted the addition of Rs. 14,77,700/- and Rs. 2,84,867/-. 21 The Learned Departmental Representative relied upon the order of the Learned Assessing Officer and could not point out any error in the order of the Learned Commissioner of Income Tax (Appeals). We find that the Learned Assessing Officer simply on the basis of an information received from Venus Petrochemicals (B) Pvt. Ltd. t....
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....ion 145 of the I.T. Act and estimated GP on the basis of GP rate of A.Y. 2004-05 and made addition of Rs. 35,81,152/-. 23 On appeal, the Learned Commissioner of Income Tax (Appeals) has decided the issue with the following observations: "6.1 Before me the A.R. submitted that the reasons mentioned by the A.O. in the assessment order for rejecting the book result of the appellant are not legally sustainable and do not in any way warrant for rejection of the book results by invoking provisions of section 145(3) of the Act and as a consequence the conclusion drawn by A.O. to make the addition on account of estimated G.P. stands vitiated. It was further submitted that the accounts of the appellant are audited by the Company Auditors under the Company Law as well as by the Tax Auditors under the Income tax Act. They have not found any defects in the method and manner in which the accounts have been maintained. On the contrary, both the Auditors have certified that the accounts as maintained by the appellant are full and true in regard to the material particulars which would go to show that the accounts have been maintained as per the accepted accountancy standards as prescrib....
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....suppression of material facts-Rejection of Accounts and estimate of income-Not justified-Income tax Act, 1961. c) Vishal Infrastructure Ltd. 104 ITD 537 (Hyd) Page 150 It was held as under: Section 145 of the Income tax Act, 1961 - Method of accounting - Rejection of accounts- Assessment year 2001-02 - Whether accounts regularly maintained in course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable and incorrect- Held yes. d) Senzo Engineering (P) Ltd. 18 SOT 577 (Mum)" 6.3 As regards addition to GP the A.R submitted as under "The impugned addition is based solely on the assumption of non-genuine purchases from VENUS and thereby rejection of book results of the appellant. However as stated in para 4.1 to para 4.11 and para 5.1 to para 5.5 these assumptions cannot be sustained on facts as well as on law and as a consequence the G.P. addition is automatically required to be deleted and cannot be sustained. It is pertinent to state that the Id. A.O. during the course of assessment proceedings called for foil quantitative details of purchases, consumption, pro....
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.... A.R. and as no other defect from books of accounts has been found by the A.O. and as fall in GP rate alone cannot be a ground for rejection of books of accounts, relying on the case laws cited by the A.R., I hold that the rejection of books of accounts is not justified especially when the appellant has explained fall in GP with sufficient evidences . Accordingly I also hold that the addition to GP of Rs. 35,81,152/- is not justified and hence the same is deleted." 24 We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. The Learned Assessing Officer observed that the gross profit rate disclosed by the assessee during the year comes to 30.23% whereas in the immediately preceding year the gross profit rate was 33.26%. The Learned Assessing Officer further observed that the reason for decline in the gross profit rate was explained by the assessee as increase in the prices of raw materials without any increase in the sale prices of finished goods, could not be substantiated by the assessee by bringing any material. The Learned Assessing Officer therefore rejected the explanation of the assessee and estimated the g....
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....ommission expenses of Rs. 11,31,243/- without giving adequate opportunity and as a result natural justice is denied. It was further submitted the appellant had submitted vide their letter dated 5-10-2007 and 20-12-2007, full details of commission expenses from time to time which are part of assessment records. The following evidences were produced during the course of assessment proceedings:- a). Copy of account of commission expense, b) Copies of accounts of the parties to whom commission was paid. The copies of account of parties were showing complete details of commission credited, payments made by account payee cheques, taxes deducted etc. c) Names, addresses and PANo. of the parties to whom commission was paid. d) Details of nature of services rendered by the commission agents. According to the A.R. the above facts clearly revealed the genuineness of commission expenses and the A.O. erred in making entire disallowance without bringing any adverse material on record. It was further submitted that the A.O. further failed to notice following vital facts as per pages No.226 to 229 & Page No.340 of the paper book and the disallowance can....
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.... Devid And Co. (P) Ltd. v, CIT 118ITR 161 (SC). "Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business." e) CIT v. A and A Bakery P. Ltd. 302 ITR 51 (Del) "Business expenditure - payment by account payee cheque to subsidiary of Government undertaking - No proof that bill raised by company unreasonable or fraud involved - deduction allowable - Income tax act, 1961, s.37. 7.2 I have carefully considered the facts of the case and the submissions as advanced by the A.R. of the appellant. I find that the appellant has paid commission in the past years also and the same have been allowed by the A.O. in the past years. The appellant has deducted TDS form commission payments, The copies of agreements for_the_sales representatives were called for and perused by me. The appellant was asked to give copies of debit notes for three major parties i.e. Rupani Brothers and Co., V.L. Natrajan and Sahyadri Enterprises, the appellant also furnished details of sales arranged through these parties and the commission rate has been 2 to 2.5% of net sale value. The sales representatives are to propag....
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....find that the names and addresses of the recipients of commission were furnished by the assessee at the far end of the assessment proceedings and therefore the Learned Assessing Officer could not verify the same. Further, it is observed that the Learned Commissioner of Income Tax (Appeals) deleted the addition by relying upon the documents furnished by the assessee without verifying the genuineness of payments from the recipients. Considering the full facts and circumstances of the case, in our considered opinion, it shall be in the interest of justice to restore the issue back to the file of the Learned Assessing Officer for adjudication afresh after proper verification and after allowing a reasonable opportunity of hearing to the assessee. We order accordingly. This ground of appeal of the Revenue is allowed for statistical purpose. 33 Ground No.6 in the appeal reads as under:- "The Learned Commissioner of Income Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the additions of Rs. 2,55,831/- made by the Learned Assessing Officer on account of bad debts claim of the assessee." The facts of the case are that the Learned Assessing Officer observ....