2019 (1) TMI 1519

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.... for 2008-09 electronically on 13.09.2008 declaring a loss of Rs. 35,70,049/-. The AO passed an order u/s 143(3) of the Income Tax Act, 1961 (in short "Act") on 20.04.2010 determining the total income of the assessee at NIL by disallowing on an adhoc basis, direct expenses and collection charges. The disallowance of direct expenses was made by the AO on the ground that there was an abnormal increase in expenditure and the assessee failed to submit the details of expenditure. One percent of purchase and One percent of sale amount disallowed. Similarly collection charges were disallowed on adhoc basis, on the ground that there was an abnormal increase in collection charges. The explanation of the assessee that this expenditure relates to paym....

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.... the assessee filed this appeal on the following concise grounds:- 1. "For that in view of the facts and circumstances of the case the learned CIT(A) erred in law as well as on facts in allowing part relief to the extent of Rs. 4778490/- out of total expenses of Rs. 8527074/- claimed on account of Discount allowed to the customers and debited under the head Direct Expenses without properly appreciating the submissions and details filed in the course of hearing instead of deleting the entire additions of Rs. 7980919/- made by the Assessing officer out of total expenses claimed at Rs. 10049909/- under the head Direct expenses. 2. For that in view of the facts and circumstances of the case that complete details of Direct expenses claimed a....

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....rabh Kumar, Addl.CIT, Sr.DR for the Revenue. On a careful consideration of the rival contentions, papers on record, we hold as follows:- As regards, the adhoc disallowance of direct expenses claimed, we find that the CIT(A) had accepted the contention of the assessee that there was no abnormal increase in the direct expenses during the year and it was a matter of method of accounting. The CIT(A) has agreed that in the earlier years, discount on sales was reduced from the sale figure and only net sale was shown in the P&L A/c and whereas in the impugned assessment year, gross sales figure has been shown in the receipts side of P&L A/c and the discounts were shown as direct expenses in the payment side of the P&L A/c. When the CIT(A) has acc....