TaxTMI 
TaxTMI 
2018 (1) TMI 1108
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....Rs. 3,00,000/- instead of Rs. 14,01,454/- made by the AO on account of power and fuel expenses" 3. "On the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition to Rs. 41,92,129/- made by the AO on account of unverified purchases." 3. The brief facts qua the first issue are that the assessee company is engaged in the business of product of rice bran and rice bran oil near Rudrapur in state of UP. The AO noted that assessee has claimed an expenditure of Rs. 16,70,260/- out of which sum of Rs. 10,80,532/- was on account of commission in respect of sale of its products; and Rs. 6,51,728/- was on account of commission in connection with purchase of raw materials. The AO had observed that assessee could not file any copies of agreement from the parties to whom commission has been paid nor could it file any confirmations from the said parties. Accordingly, he disallowed the claim of commission payment of Rs. 16,70,260/-. 4. Before the Ld. CIT (A) the assessee submitted that during the course of assessment proceedings the AO had not given any adequate opportunity to file the evidences as the query was raised at the fag en....
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....opy of Accounts of the' appellant for the F. Y 2009- 10 (ii) The copies of Bill Books for commission. (iii) The computation of income, Balance Sheet, Profit & Loss account; and (iv) Acknowledgement of Return of the proprietor for the A. Y 2010-11. In the profit & loss Account the proprietor has categorically shown Dalali Receipts of Rs. 6,13,290/- as the main Income. 5. Shri Govind Agencies (Commission of Rs. 85,635/-) The Assessee itself filed the Confirmed Copy of Bill Book showing complete detail of transactions. (page 48-51 of P.B). There is no comment by A.O. Chart for last four Year payment of commission to the same Party to establish party is regular party (Relevant Page 118 of P.B at serial no 24). It was not examined and therefore no comments by the Ld. A.O. Further in response to Notice u/s 133(6), the party complied by sending Confirmed Copy of ledger with Income Tax Return and PAN of the proprietor. The narration of the Ledger dearly depicts brokerage income of Rs. 85,635/- with detail of TDS. 6. Mool Chand Goel & sons The assessee filed confirmation for payment of Commission w....
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....nsactions (Page 45-47 of P.B). There is no comments by the A.O. The Confirmation for transactions with Copy of PAN (Page 84-85 PB). There is no comments by the A.O. Further in response to notice u/s 133(6), the party complied by sending following documents vide its letter dated 04.10.2013 (Letter dt 04.10.2013 enclosed with the remand report). (i) Confirmed copy of Accounts of the appellant for the F. Y 2009- 10 with copy of Pan of the Proprietor. (ii) Form 16A issued by the appellant as well as 26AS showing Payment of Rs. 93,600/- with deduction of TDS. of Rs. 9,360/- (iii) Certified copy of Bill book issued to the assessee/appellant. 9. M/s Daulat Ram Giyamalani (Commission Payment of Rs. 30,060/-) The assessee filed Copy of confirmation with Copy of PAN of the proprietor (Page 75-76 of P.B). There is no comments by the A.O. Chart for last four year payment 'of commission to the same Party to establish party is regular party (Relevant Page 116 of P.B at serial no 9), It was not examined and therefore no comments by the Ld. A.O. Further in response to notice u/s 133(6), the party complied....
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....e 104-105 of P.B). The appellant had also filed Chart for the last four year payments of Commission with a view to establish regularity. (See relevant page 119 of P.B). No examination of all this by the A.O before adverse comments. 2. Goyal Enterprises: We are not in a position to say whether notice was in fact served on the party. Even otherwise the assessee by way of additional evidence had itself filed Copy of invoice raised to the assessee (Page 52-54 of P.B) & Copy of Confirmation with Copy of PAN of the proprietor. (Page 80-81 of the P.B). The appellant had also filed Chart for the last four year payments of Commission with a view to establish regularity. (See relevant page 116 of P.B). No examination of all this by the A. O before adverse comments. 3. M/s Chomukhi Enterprises: We are not in a position to say whether notice was in fact served on the party. Even otherwise the assessee by way of additional evidence had itself filed Copy of invoice raised to the assessee (Page 58-60 of P.B) & Copy of Confirmation (Page 72 of the P.B). The appellant had also filed chart for the last four year payments of Commission with a view to establish regularity. (....
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....had been sent at a wrong address. With regard to the other 4 parties i.e. Goyal Enterprise, Chomukhi Enterprise, Shiv Goyal and Ghanshyam Dass, there is no evidence brought on record by the A.O to state that the parties did not exist or the notices were returned back. The A.R. emphasized that in most cases similar commissions have been paid in the last several years and had also been accepted by the Department. 7. Ld. CIT (A) after considering the entire facts and material placed on record held that, so far as the seven parties are concerned who have responded to the notice u/s 133(6) have given the confirmations directly to the AO and also similar commission payments had been made to these parties in the earlier years. Once these parties have confirmed the commission payment and also rendered similar services and payment were made in the earlier years, therefore, disallowance of commission paid to the seven parties, namely, M/s. Agarwal & Co., M/s. Shri Govind Agency, M/s. Mool Chand Goel and Sons, M/s. Delhi Trading Co., M/s. Jagdish Khandelwal, M/s. Daulat Ram Giyamalani, Rajesh Chand Agarwal, cannot be disallowed. With regard to the other five parties, the assessee's content....
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....rch, 2013. It is for this reason the assessee had filed additional evidences, like invoice for transaction relating to commission; confirmation of account from the parties alongwith their PAN; and chart for payment of commission to same parties in the last four years. As stated above the assessee had made payment of commission to 12 parties namely, M/s. Goyal Enterprises, M/s. Agarwal & Co., M/s. Shri Govind Agency, M/s. Mool Chand Goel and Sons, M/s. Chomukhi Enterprises, M/s. Delhi Trading Co., M/s. Jagdish Khandelwal, M/s. Daulat Ram Giyamalani, Rajesh Chand Agarwal, M/s. Ankit Broker Co., Sh. Shiv Kumar, Sh. Ghanshyam Dass. In support of commission payment to these parties, the assessee before the Ld. CIT (A) and before the AO in the course of remand proceedings had filed the confirmations of the parties and confirmed copies of account alongwith their PAN Numbers. All the commissions have been paid through account payee cheques and TDS have also been deducted wherever required. In the remand proceedings the AO had even disbelieved the payments made to the seven parties who have duly confirmed the payment of commission directly on the ground that they could not produce the bill ....
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....ough payments have not been made to him in the assessment year 2008-09 and 2009-10, however in the assessment year 2007-08, payment of Rs. 56,328/- was made which stands accepted. He also drew our attention to confirmed copy of account appearing at page No. 93 of the paper book, wherein the said person has given his PAN number and also confirmed the payment of Rs. 87,340/- including the TDS amount. Thus, this addition should cannot be confirmed simply on the ground that in immediately preceding two years commission was not paid, when all the other evidence strongly indicate the genuineness of the payment. On the other hand, Ld. Sr. DR had submitted that, first of all, this party had not responded to the notice sent by the AO and therefore, it could not be verified independently whether any such payment has been made to the said party and merely because payment has been made through cheque does not mean the commission payment has to be allowed. We find that Ld. CIT (A) has drawn adverse inference on the ground that firstly, he has not confirmed the transaction in response to notice u/s 133(6) and in the immediately two preceding assessment years no payments have been made. Howeve....
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....cted the books of accounts and the stock register; and secondly, if for the last five years the consumption of paddy husk (bhusi) is to be seen then it is clear that the consumption of bhusi in this year is less despite production has increased consistently. In support, following chart was submitted before the Ld. CIT (A):- Percentage of Bhusi consumed in terms of Rice Bran Processed A.Y. Opening Stocks Rs. Purchases Rs. Closing Stocks Rs. Net Consumed Rs. Rice Bran Processed In (MT) % 2007-08 36900 6844215 42750 6838365 38466 0.56 2008-09 42750 7643115 45250 7640615 39795 0.52 2009-10 45250 10611850 52000 10605100 46043 0.43 2010-11 52000 14864135 901600 14014535 47449 0.34 2011--12 901600 17537946 755000 17684546 59528 0.34 13. Ld. CIT (A), however has restricted the disallowance to Rs. 3 lacs simply on the ground that the assessee has not been able to establish that there was proper accounting of these expenses on the basis o....
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....tage of consumption is less in this year in comparison to the earlier years. Therefore, on these facts we do not find any reason to sustain any kind of adhoc disallowance and same is directed to be deleted. In view of our finding ground No. 2 raised by the revenue is dismissed, whereas ground No. 4 to 7 of the assessee is allowed. 16. Lastly coming to the issue of addition of Rs. 41,92,129/- on account of unverified purchases, the brief facts are that AO had sent notices u/s 133(6) on test check basis to some of the parties and in case of three parties the purchases could not be verified, the details of which are as under :- i) M/s. S.R. Industries Rs. 12,65,085/- ii) M/s. Dixit Rice Mills Rs. 14,55,372/- iii) M/s. Bhagwati Agro Mills Rs. 14,71,672/- Since the assessee could not produce these parties, the AO has confirmed the purchases made from these parties. Before the Ld. CIT(A) the assessee contended that, since AO did not gave proper opportunity and that matter was getting time barred, the AO has made the addition without giving any chance to rebut the AO's finding. Accordingly, assessee filed additional evidences before the Ld. CIT (A) whic....
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....r reference." 17. In the rejoinder the assessee with regard to these parties had submitted as under:- 1. S.R. Industries (Purchase worth 12,65,085 were made.) The assessee itself furnished Copy of Confirmation with PAN (Page 121- 124 of P.B). There is no comment by the A.O. Bank Statement of HDFC Bank Rudrapur showing clearance of all the cheques in favour of S.R. Industries (Page 134-152 of P.B). There is no comments by the A.O The Bank Certificate by HDFC Bank (Page 179 of P.B), but this was not examined and therefore no comments by the A.O. Chart for Last Four Year purchase with the same Party to establish party is regular party (Page 133 of P.B). It was not examined and therefore no comments by the A.O Further In response to Notice u/s 133(6), the party complied by sending confirmed copy of Account from their books along with Copy of its PAN. (The enclosure attached with the remand report is incomplete and therefore Complete Confirmed copy of account sent by the party is enclosed for perusal) 2. Dixit Rice Mills (Purchase worth 14,55,372/-) The assessee itself furnished Copy of Confirmation with....
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....hese parties have confirmed the purchases before the AO in response to the notices issued u/s 133(6) and simply because these parties have not produced their books of account cannot be the ground to disbelieve the purchases. The assessee has produced all the relevant details and evidences regarding the purchase made from these parties which have been verified in the remand proceedings. Thus, the additions on account of purchases from these three parties cannot be upheld. 19. Ld. Sr. DR submitted that AO has specifically asked various details from the parties, which could have gone to establish the purchases made by the parties, but the required details as asked could not be furnished by the said parties, hence purchases could not be fully established. Mere confirmations and earlier year reference is not sufficient as the transaction of purchase needs to be verified. Thus, he strongly relied upon the remand report of the AO. 20. The Ld. Counsel for the assessee submitted that, the purchases were made through invoices which contained all the particulars of the parties and not only that, when independently inquired by the AO, the parties have directly confirmed the purchases ....