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2011 (5) TMI 370 - AT - Income TaxSearch and seizure - AO asked the assessee to explain the commission payments made to various parties - From the Financial Years 1998-99 to 2005-06, the assessee paid total commission of Rs.8,38,91,115/- for various financial years - It was on record that commission to the extent of 1.87 crores paid to M/s. Smith Enterprises was accepted by the AO having been confirmed by the said party in the course of Survey u/s.133A.there was no disallowance of the commission paid to the above party - Decided in favor of the assessee Regarding Commission paid to M/s. Buniyad Chemicals Ltd - It is also seen that some of the question being asked by the assessee's director in cross examination was not allowed or not answered by Shri Chokshi as that would incriminate the said person. It is also on record that the bank account of Raigad Sahakari Bank Ltd. was exclusively operated by the Director of the M/s. Buniyad Chemicals Ltd. and as stated,for the transactions those were not recorded in the books of accounts - Appeal is allowed for statistical purpose Regarding bogus purchase - in the course of search proceedings the assessee company director admitted bogus purchases from about 46 parties totaling to about 8 crores - In all, there are 3 statements, extracted by the AO in the assessment order, which indicate that the above named concern affirmed the supplies of the goods in the first two statements and retracted and stated that they are bogus purchases in the last statement - It was the submission of the asssessee that these two parties are regularly supplying specialized material required in its manufacturing activity and there were regular invoices, transportation of goods, excise records and third party evidences that the goods were received by the assessee company, and were used in the manufacturing process - Decided in favor of the assessee Regarding personal expenditure - Held that: No other person was selected for the specific course and since this benefit was extended to the said Shri Prerak Goel, being Son of the Director, the expenditure incurred cannot be allowed as business expenditure u/s. 37(1) of the Act, therefore, the disallowances made by the AO stands confirmed - Decided against the assessee Regarding Business Promotion Expenditure - there is a seized paper at3rd party premises which indicated that the expenditure was for the purpose of marriage reception of Shri Prerak Goel The assessee has not placed on record any other independent evidence that there was a separate reception called for by the Father of Shri Prerak Goel at a separate premises and this was a simple business meeting, like copies of invitation or letters sent for the meeting - Decided against the assessee Regarding Operation and Maintenance Expenses - There is no evidence of such expenditure either during search or immediately thereafter - If the expenditure was genuine and spent for the purposes of business, no one prevented the assessee to record the same in the books of accounts - assessee could have made entries in the books of account in financial year 2005-06 after the search on 10-08-05 if the expenditure was incurred for the purposes of business - Decided against the assessee
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