TaxTMI 
TaxTMI 
2023 (10) TMI 611
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....and circumstances of the case, the ld. CIT(A) has erred in facts and in law sustaining the 10% disallowance amounting to Rs. 28,691/- of DG Fuel Expenses of Rs. 2,86,910/- claimed by the proprietary firm M/s. Bajrang Filling Station alleging that the said payment was made in cash hence not verifiable.'' 2.1 Apropos Ground No. 1 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- ''3.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. Disallowance of commission/sales incentive of Rs. 30,31,765/- was made by the Assessing Officer as assessee failed to furnish nature of services rendered and no cogent evidences were filed. Assessee furnished that copy of ledger account and chart of the sales made through these persons before me. But he could not substantiate the nature of service rendered as it was claimed that the incentive was given to 6 persons for promoting the sales of cement in various areas. But neither any confirmation was filed of the recipient nor were services of these persons were confirmed by any of the buyers. All the 6 persons are related parties/family members of assessee inclu....
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....in confirming the disallowance so made by the AO for which the ld. AR of the assessee filed the following written submission. Submission: 1.1 Commission Expenses: Fully Justified: With regard to the Sales incentive expenses it is submitted that the assessee this year has paid Sales incentive of Rs. 30,31,765/- as against Rs. 35,58,079/- claimed in the preceding year (copy of year wise comparative chart enclosed). It is submitted that because of the cut-thought competition created by the competitors and the new entrants in the market, the assessee was required to pay Sales incentive to his Sales persons, not only to survive but also to increase its sales / turnover on continuous basis. It is because of this continuous efforts and hard work, that the assessee was able to achieve increase in turnover of Rs. 174.04 lacs, thereby resulting into N.P of Rs. 22.25 lacs this, as compared to Rs. 12.96 Lacs in the preceding year. The comparative GP & NP chart is as follows: (PB 62-107). The low G.P in AY 13-14 is because of the inflated cost of purchases. Notably the AO was satisfied with the declared trading results. Moreover, the accounts were not rejected. (Rs....
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.... line of trade. They made efforts according to their specific knowledge with reference to a particular party or a particular area and tried to convince the buyers so as to make more purchases then the past. It is because of their vast experience and knowledge that the assessee could to achieve these financial results. Section 40A(2)(b) was not invoked. 2. Commission Expenses was incurred out of Commercial Expediency: 2.1 It is submitted that it was a decision taken by a business man out of commercial expediency and looking from this angle, it was an expenditure incurred by the assessee solely and exclusively for the purposes of the business and is fully allowable u/s 37(1) of the act. Such arrangement from a businessman point of view was fully justified that despite a tuff competition, the assessee firm was not only able to maintain the turnover but has also shown a tremendous increase not only in the sale but also GP and NP even. It is settled that a businessman is the best judge to take care of its own interest & to take decisions in the best of its business interest. Kindly refer T.T. Pvt. Ltd. v/s ITO (1980) 121 ITR 551 (Kar), CIT v/s Udhoji Shrikrishnadas (19....
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.... buyers have left the assessee and made no purchases. 4. Various evidences submitted: There are ample evidences direct and circumstantial supporting the fact and the contention that these payee agents really rendered services to the assessee-firm. The assessee filed following documents covering all points raised by your good-self: 4.1 The details being name, address along with the copies of ITR and computation of the payees (PB 64-88) to whom commission was paid along with chart showing Sales made by them has been filed. (PB 14-42). 4.2 Copies of the detailed ledger account of all these payees' in the books of assessee's firm are enclosed (PB 14-42). 4.2 The agents maintained a continuous rapport and contact with the buyers and has been continuously persuading them to purchase more & more quantity from the assessee-firm. Though this was mostly done over phone yet however, in a few cases, the agents even also visited the places of the buyers and personally persuaded them to make purchases. 5. Settled Past History: Covered Issue 5.1 It is submitted that the assessee has paid sales inventive in the earlier years also, for the servi....
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...., however the N.P. is much higher at Rs. 22.25 Lacs. Hence, when the department has accepted that trading results, they must accept the same this year too since the trading results are much better. 6.2 Further, the N.P this year is Rs. 22.25 lacs which is almost twice the NP declared in the immediately preceding year at Rs. 12.96 lacs. (PB 62-107) 7. CIT(A) objections: 7.1 Finding of CIT(A) recorded in para 3.3.3 at page 8, is worth noting that "3.3.3......Order of earlier years show that assessee may have substantiate the services rendered with plausible evidences but his has not been done, in the year under appeal as neither any confirmation was filed nor it has been established that services were actually rendered by all the recipients." 7.2 This finding clearly shows admission by the CIT(A) that almost all the payees being the same they did render services and were having requisite past experience. Therefore, the benefit of their past experience could not have been denied in this year, at least neither denied nor established so. The allegation that no expenditure was incurred by the payees, dealers and hence no services were establis....
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....TO if it is intended to make the estimate on the foot of those enquiries" 7.3 The CIT(A) simply ignoring all the above admitted facts and the judicial guideline alleged the expenditure as bogus without demonstrating how the same was bogus expenditure. Mere suspicion when alleged that out of six, two were ladies only. As if women were not at all capable for doing business. Needless to say such an objection was a result of conservative thinking in the Indian society about women empowerment, whose capabilities, capacities stand established all over the world and even the CIT(A) is herself a woman. She did not at all elaborate as to precisely what type of evidence she wanted. 7.4 Non-filing of confirmation of buyer not much relevant: The repeated allegation of non-filing of confirmation is completely irrelevant and is not of much substance. All the six recipients have duly declared the amount of incentive commission so received in their ROI show confirmation of receipt. It is submitted that neither the AO nor the ld. CIT(A) has ever, during the course of proceedings, asked the assessee to furnish the confirmation of the buyer. Hence, the objection of the ld. ....
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....ich read as under: - "48. From the facts discussed above, it is obvious that in the result it would be difficult to conclude as has been done by the Revenue Authorities that no service were rendered by the commission agents to the assessee. Assessee's sales/supplies have shown enormous increase and there is substantial and abnormal increase in income of the assessee. There is documentary evidence to show that the assessee and various parties/commission agents had agreed on some terms and conditions on the basis of which payments of commission is claimed by the assessee. All the parties/commission agents are existing income tax assessees and they are identifiable and verifiable and they have confirmed the payments received by them through cheques and nature of services rendered. In the earlier years similar payments were made. There is no material change in the facts of the case for the assessment year under consideration where the facts, circumstances & mode are identical. The findings of the CIT(A) that the assessee might have spent certain amount, which is prohibited under the law for securing purchase orders through so called commission agents is not based on any ev....
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....; that it was not doubted by revenue and same was accepted; further, that receipts of same were duly shown by commission agents in their balance sheet and profit and loss accounts and that they had paid tax thereon, which was also accepted by revenue - Whether impugned order of Tribunal could not be treated as perverse - Held, yes [Para 9] [In favour of assessee] 10.3 Voltamp Transformers P. Ltd V CIT (1981) 129 ITR 105 (Guj) (DPB 15). Hence, this disallowance may kindly be deleted. 2.3 On the other hand, the ld. DR supported the orders of the authorities below. 2.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the assessee is engaged in the business of wholesale trading of cement, fertilizer and LPG agency in his proprietary M/s Agarwal Trading Co and is having Petrol pump under the proprietary M/s Bajrang Filling Station. The assessee file his Return of income dated 29.09.2013 declaring total income of Rs. 50,26,050/-. The case of the assessee was selected for scrutiny assessment through CASS and notice u/s 143(2) was issued on 04.09.2014. During the course of assessment proceedings, the AO n....
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.... paid as sales incentive to M/s Radhey Shyam Gupta, HUF, Rs. 55,200/- paid as sales incentive to M/s. Giriraj Prasad Gupta HUF, Rs. 1,11,426/- paid to M/s. Mahesh Kumar Goel HUF and Rs. 1,13,204/- paid to M/s. Suresh Kumar Goyal HUF totaling to Rs. 3,44,286/-. The AO disallowed the said sale incentive paid to the said HUFs with the observation that HUFs are non-living persons and non-living persons cannot perform any duties for payment as incentive based on work done. The ld. CIT(A) deleted the addition that HUF is a legal entity and distinct from the Karta and income is generated by collective efforts of all the members of HUF and cannot be said to be income of any individual person. 8. We have perused the facts of the case and find that HUF is a person defined u/s 2(31)(ii) of the Act. Therefore, the findings of the AO that the HUF being non-living person cannot perform any duty are findings with a non-application of mind. Whereas the HUF can perform the duties as any other person can do under Income Tax Act. Therefore, we do not find any infirmity in the order of the ld. CIT(A) who has rightly deleted the said addition. Thus Ground No. 2 of the Revenue is dismissed.'' ....
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....declared, which in the present case, the AO is completely failed. In the past no such addition is reported. Hence the impugned addition so made and confirmed deserves a complete deletion. Hence, this disallowance may kindly be deleted.'' 3.3 On the other hand, the ld. DR supported the orders of the authorities below. 3.4 The Bench has heard both the parties and perused the materials available on record. It is noted from the record that the AO has made disallowance of Rs. 88,993/- as to house hold expenses of the assessee which has been confirmed by the ld. CIT(A). However, during the course of hearing, the ld.AR could not advance any satisfactory reply controverting the order of the ld.CIT(A). In this situation, the Bench has no other alternative except to confirm the order of the ld. CIT(A). Thus Ground No. 2 of the assessee is dismissed. 4.1 Apropos Ground No. 3 of the assessee, brief facts of the case are that the AO has dealt with this issue at page 6 para 9 wherein he alleges that the expense of DG fuel of Rs. 2,86,910/- were incurred in cash and no reply was given by the assessee in response to Show Cause Notice. Further assuming possibility of inflation of such expe....