TMI Blog2016 (10) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... d, which has moved the ld. CIT(A), would not prove a claim. His taking cognizance of the copies of the confirmations, i.e., which are inadmissible in evidence, cannot also to be regarded as valid. Even no finding qua commission to Parul Bahirwani, a relative, stands issued. We, accordingly, vacating his findings, restore the matter back to the file of the A.O. to allow the assessee an opportunity to present its case before him. The A.O. shall, on his part, proceed reasonably; that being the hallmark of any good assessment, sustainable in law. - ITA No. 7471/Mum/2014, ITA No. 7497/Mum/2014 - - - Dated:- 18-10-2016 - Sanjay Garg (Judicial Member) And Ashwani Taneja (Accountant Member) For the Appellant : Vipul Shah (AR) For the Revenue : B. S. Bist (Sr. DR) ORDER Ashwani Taneja (Accountant Member) These Cross Appeals are filed by the Revenue and assessee against separate orders of Ld. CIT(A) passed in each of the aforesaid assessment years. 2. During the course of hearing, arguments were made by Shri Vipul Shah, Authorised Representative (AR) on behalf of the Assessee and by Shri B.S. Bist, Departmental Representative (Sr. DR) on behalf of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns by the name of M/s Trinity Trading and M/s Satya Tex, both of which are engaged in trading in fabric. It has been further submitted that the quantitative details of opening stock (with value), details of purchase during the year (with quantity and purchase cost) and quantitative details of closing stock (with value) were duly furnished during the scrutiny proceedings along with copies of purchase bills etc. It is also submitted that the appellant had clarified to the A.O. that it had been consistently following the FIFO method of valuation of stock for the past many years and that the said method of valuation had been accepted by the Department in preceding years. The appellant has argued that the overheads considered by the A.O. are applicable in the hands of a manufacturer whereas he is only a trader. It is pointed out that since he is following FIFO method, the average cost method is not applicable in his case. In light of these facts, it is stated that the addition of ₹ 88,15,024/- is unwarranted and should be deleted. 5.1.2 I have carefully considered the facts related to this issue. One of the fundamental canons of taxation is that the method of accounting reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng tinder estimated tinder the impugned method of accounting. If the AO comes to the conclusion that there is tinder-estimation of profits, he must give facts and figures in that regard and demonstrate to the Court that the impugned method of accounting adopted by the assessee results in underestimation of profits and is therefore rejected. Otherwise, the presumption would be that the entire exercise is revenue neutral. 5.1.4 In the decision rendered in the case of CIT v. Margadarsi Chit Funds (P.) Ltd. [1985] 155 ITR 442 (AP), it was held that the A.O. must refer to the inherent defect in the system and record a clear finding that the system of accounting followed by the assessee is such that correct profits cannot be deduced from the books of account maintained by the assessee. It is not open to the ITO to intervene and substitute a different system of accounting from the one that is followed by the assessee, on the ground that the system which commends to the ITO, is better. 5.1.5 It is seen that the appellant has consistently followed the FIFO method of stock valuation as is evident from the Audit Reports for MIs Trinity Trading and M/s Satya Tex for A.Y. 2009-10, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A). 5.3. We have gone through the facts of the case as well as order of the Tribunal of A.Y. 2009-10 dated 08.05.2015. It is noted that commission paid in identical facts and circumstances was disallowed by the AO in A.Y. 2009-10. The matter reached before the Tribunal and Tribunal has sent this issue back to the file of the AO with following observations: 7. We have heard the parties, and perused the material on record. The case of both the parties before us was along with the same lines. We firstly observe that the primary reason of the A.O. in disallowing the expenditure, which he does in toto, is the non-furnishing of any evidence toward the rendering of the services for which commission on sales has been paid. In other words, the assessee s case was found deficient by him insofar as satisfactorily proving its claim was concerned. The A.O. nowhere doubted the genuineness of the expenditure, except, as it appears, in the case of Parul Bahirwani, a relative, whose place of residence; the assessee contending the payees to be out station parties, had not been specified. In fact, the doubt apparently arose in the mind of the A.O., as we infer from his calling for confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallmark of any good assessment, sustainable in law. The backdrop under which the expenditure stands incurred, is, as overly emphasized by the ld. CIT(A), nevertheless, relevant, and to be accorded due regard. Commercial expediency is an important ingredient, and which gets no doubt supported by the fact of regular expenditure, which we observe to vary over a wide range, and which may itself not be determinative, being rather in some circumstances a pointer to genuineness. Again, are the persons to whom the commission is paid the same from year to year, which would, where so, also establish them as regular commission agents, and toward which the A.O. had in fact called for their returns, etc. We leave it at that; the same being the purview of the assessing authority, only adding that his adjudication should satisfy the test of reasonableness and in accordance with the law in the facts and circumstances of the case, as validated by the material on record. We decide accordingly. 5.4. No distinction has been made on facts by the either party before us. Thus, we send the issue back to the file of the AO along with same directions as were given by the Tribunal in earlier years. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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