TaxTMI 
TaxTMI 
2026 (2) TMI 1365
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....fter referred to as "the Act"]for the Assessment Year 2020-21 arising out of assessment framed by the Assessing Officer vide order dated 12.09.2022 passed under section 143(3) read with section 144B of the Act. Facts of the Case 2. The assessee is a resident company engaged in the business of advocacy and marketing of various services and acts as a direct marketing agent for services such as Insurance, DTH, Credit Cards and also signs up donors for reputed charities, NGOs and trusts, earning commission at predetermined rates. 3. The assessee filed its return of income declaring total income of Rs. 19,39,75,680/-. The case was selected for complete scrutiny under CASS for the reasons: i. Low turnover in comparison to outwar....
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....he same to turnover of Rs. 109 crores to arrive at permissible trade payables of Rs. 1.87 crores. Even assuming doubling due to COVID, he considered Rs. 3.74 crores as reasonable and treated the balance of Rs. 5.60 crores as income. Accordingly Rs. 5,60,00,000/- was added to total income. 6. The assessee preferred appeal before the CIT(A). Before CIT(A) the assessee reiterated that during the relevant year it had earned commission income of Rs. 1,09,32,79,235/- and had in turn paid commission of Rs. 79,15,48,238/- to various marketing companies for promoting its activities. It was submitted that month-wise details of commission earned and commission paid had been furnished before the Assessing Officer. The appellant further pointed out t....
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....rdingly, the addition of Rs. 5,60,00,000/- was directed to be deleted. 8. Aggrieved by the order of CIT(A), the Revenue is in appeal before us raising following grounds of appeal: i. Whether the Learned CIT(A) erred in law and on facts in deleting the addition of Rs.5,60,00,000 made towards unexplained increase in trade payables merely on the basis of explanation and confirmations filed by the assessee, without verifying the authenticity of the creditors or the actual payment thereof. ii. The appellant craves leave to add, alter, amend or delete all or any of the aforesaid grounds of appeal. 9. The learned Departmental Representative strongly relied upon the assessment order. He drew our attention to para 3.1(v) of t....
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....n 41(1) of the Act. There is no finding by the Assessing Officer that the liability had ceased to exist. There is also no finding that any particular creditor was non-existent or fictitious. The addition has been made purely on the basis of comparative ratio analysis and an assumption that trade payables cannot exceed a particular percentage of turnover. 14. In our considered view, such an approach cannot take the place of examination of individual liabilities. Estimation of a permissible ceiling of trade payables without identifying any specific bogus or non-genuine entry lacks legal foundation. The CIT(A) has recorded that confirmations were furnished by the assessee and were not rebutted by the Assessing Officer. The Revenue has not p....
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....that assessee is not a first timer business man and is regularly engaged in same nature of business since long. Further, AO has nowhere prove that whether that these balance trade payables are covered u/s. 41(1) or not and there was no comment regarding their genuineness or non-genuineness. AO has no documentary evidences to disprove documentary proof submitted by assessee. It is not the case that these trade payables remain unpaid since long time, as AO has not even done age wise analysis of creditors. AO, has simply on the basis of some surmises and conjectures, without any backing of any documentary evidences and on the basis of his own cooked theory, allowed Rs. 3,74,00,000/ worth trade payables and disallowedRs.5,60,00,000/- worth trad....