AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (11) TMI 988
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....ereinafter called "the tribunal"), reads as under: "1. Because the learned CIT(Appeals) has erred in law as well as on facts in not allowing the total commission of Rs. 4,00,289/- paid @0.5% of total sales to Mrs. Priyanka Keshri and restricting it to Rs. 15,000/- per month by treating it as not relating to business and excessive. 2. Because the learned CIT(A) has erred in law as well as on facts in treating commission paid @0.5 as excessive and on the same facts has allowed commission @1% for the subsequent period paid to another executive employed in her place. 3. Because the learned CIT(A)has erred in as well as on facts in sustaining the Ad-hoc disallowance of Rs. 2,94,000/-" 3. The brief facts of the case are that the assesse filed his return of income with Revenue on 27.11.2014 ,declaring total income of Rs. 58,79,070/- . The assessee is engaged in the business of wholesale trading of LPG appliances, Kitchen ware, Household Appliances and allied items . The return of income was selected by Revenue for framing scrutiny assessment through CASS ,and statutory notices u/s 143(2) and 142(1) were issued by AO to the assessee, which were claimed by AO to have been duly ser....
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.... assessee has claimed that increase in commission is commensurate with increase in turnover and net profits. The AO, however ,also observed that the assessee has not filed any confirmation from any middlemen to whom commission was claimed to have been paid, and the AO disallowed commission to the tune of 0.16% of the turnover viz. Rs. 1839.19lacs , and hence consequently an amount of Rs. 2.94 lacs stood disallowed which was added by AO to the income of the assessee. The assessee had filed return of income declaring income of Rs. 58,79,070/- , while the AO assessed the total income of the assessee at Rs. 61,73,070/- for the impugned assessment vide assessment order dated 30th November, 2016 passed under Section 143(3) of the Act. 3c. The AO while perusing the assessment records realized that the additions proposed by the AO to the tune of Rs. 12,56,000/- , on account of disallowance of commission paid to the Marketing Executives were not added to the income of the assessee while passing assessment order dated 30.11.2016 and is thus the mistake apparent from records, and to rectify said mistake after giving an opportunity of heard to the assessee, the AO passed rectification order u....
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....work done by Smt. Priayanka Keshari is not submitted by the assessee during assessment proceedings as well during appellate proceedings before ld. CIT(A).The ld. CIT(A) observed that she was removed from the post of Marketing Executive because she was not able to devote much time to the business of the assessee. The ld. CIT(A) observed that no evidence has been submitted by the assessee about the work done by Smt. Priyanka Keshari. The ld. CIT(A) sustained the order of the AO on this issue , wherein the commission expenses @ Rs. 15,000/- per month for the period from 01.04.2013 to 30.09.2013 aggregating to Rs. 90,000/- were allowed by ld. CIT(A) as was earlier allowed by AO, while the balance amount of commission claimed to have been paid by assessee to Smt. Priyanka Keshari to the tune of Rs. 3,10,289/- as disallowed by the AO stood confirmed by ld. CIT(A). So far as commission paid by assessee to his son Shri Vivek Keshari is concerned, the ld. CIT(A) observed that the assessee has been able to prove that Shri Vivek Keshari has experience in running the business of similar nature as that of the assessee and that he has closed his business to join his father's business . The ld. C....
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.... the assessee) to the tune of Rs. 3,10,289/- and secondly disallowance of Commission Expenses paid to the Middlemen at different gas agencies of different places to the tune of Rs. 2,94,000/- .The Learned counsel for the assessee opened arguments before the tribunal . It was explained that the assessee is in the business of wholesale trading business of LPG appliances, Kitchen ware, Household Appliances and allied items . It was submitted by ld. Counsel for the assessee before Division bench that the commission was paid to the employee of the assessee namely Mrs. Priyanka Keshari (daughter in law of the assessee). It was submitted that she was working at the shop of the assessee as Marketing executive from 01.04.2013 to 30.09.2013 . It was submitted that commission @0.5% of the turnover was paid to her. It was submitted that she worked for a period of six months from 01.04.2013 to 30.09.2013, and thereafter she left the job due to domestic reasons. It was submitted that thereafter son of the assessee namely Mr. Vivek Keshari was appointed with effect from 01.10.2013 as Marketing Executive of the assessee. It was submitted that in the year under consideration turnover of the assesse....
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....he orders of authorities below. On the first issue, the ld. Sr. DR at the outset submitted before Division Bench that in the preceding year no such commission was paid to any Marketing Executive , and it is only in the year under consideration, the assessee has paid commission to his daughter-in-law whom the assessee claimed to be employed with him as Marketing Executive. Thus, it was submitted that this is the first year, when the assessee has claimed to have paid commission to his daughter-in-law . It was submitted that the said daughter-in-law namely Smt. Priyanka Keshari was removed on account of engaged in domestic affairs, as she was not able to devote time . It was submitted that she claimed to have worked for six months, from 01.04.2013 till 30.09.2013. It was submitted by ld. Sr. DR that the AO allowed the commission paid to Mrs. Priyanka Keshari (daughter-in-law of the assessee) to the tune of Rs. 15,000/- per month for the aforesaid period from 01.04.2013 to 30.09.2013 , while balance commission expenses claimed to the tune of Rs. 3,10,289/- claimed to be paid to Mrs. Priyanka Keshari was disallowed by AO which stood confirmed by ld. CIT(A). It was submitted that onus is....
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....defined u/s 2(41) of the 1961 Act. So far as other commission paid to various middlemen at various gas agencies at different places, it was submitted that commission has been paid for increase in sales , and there is no reason why 0.16% of commission was disallowed. It was submitted that ledger accounts are submitted and vouchers can be verified. 6. We have considered rival contentions and perused the material on record. We have observed that the assessee is in the business of wholesale trading of LPG appliances, Kitchen ware, Household Appliances and allied items. The assessee filed his return of income with Revenue declaring total income of Rs. 58,79,070/- , on 27.11.2014. The said return of income was selected by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act , through CASS. The AO issued statutory notices u/s 143(2) and 142(1) to the assessee, which were claimed by AO to have been duly served on the assessee. During course of assessment proceedings, the AO observed that the assessee has , for the first time, claimed Commission paid to his daughter-in-law Mrs. Priyanka Keshari as well to his son Mr. Vivek Keshari, who were claimed by....
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....yanka Keshari. As can be seen , the AO invoked Section 40A(2) , but ld. CIT(A) invoked Section 37(1) of the 1961 Act . Section 37(1) mandates that the expenditure (not being expenditure in the nature described in Section 30 to 36 ) should be incurred wholly and exclusively for the purposes of business before being allowed as deduction while computing business income , and further the said expenditure should not be personal expenditure nor capital expenditure. The primary onus is on the assessee to bring on record cogent evidences to substantiate that the expenses claimed as business expenses were incurred wholly and exclusively for the purposes of the business of the assessee, and these expenses so claimed are neither personal expenses nor capital expenses. Section 40A starts with non obtsante clause in section 40A(1) and stipulate that the provision of this Section shall have effect notwithstanding anything to the contrary contained in any other provisions of the 1961 Act relating to the computation of the income under the head "Profits and gains of business or profession. Section 37(1) requires that the expenses shall be allowable as business expenses if the expense is incurred w....
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....rder passed by ld. CIT(A) on this issue and decline to interfere with the same. We order accordingly. 6b. On the second issue , with respect to disallowance of commission paid by assessee to middlemen of different gas agencies of different places, we have observed that the assessee is again not able to discharge its primary onus as is required u/s 37(1) of the 1961 Act. The complete details of the middlemen along with their names , addresses, PAN etc. , to whom commission is paid is not furnished by the assessee , before lower authorities as well before us . The assessee has also not furnished any working details of commission to explain how and manner in which the commission expenses are worked out by the assessee, before lower authorities as well before us. The entire commission expenses are claimed to have been paid in cash. The turnover of the assessee is Rs. 1839.19 lacs during the year under consideration , and the assessee's business is based at Varanasi which is fully supported by banking facilities, but reasons and necessity of paying entire commission in cash instead of through banking channel, is not explained by the assessee. The authorities below partly allowed commiss....