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2011 (7) TMI 536 - AT - Income TaxLow gross profit - Rejection of books of accounts - G.P. rate of 15.08% applied by the Assessing Officer as against 14.28% returned by the assessee - CIT(A) deleted the addition - Held that:- The assessee had given an explanation in regard to increase in the price of Cooking Gas which has not yet been rebutted by the AO - The other main reason assigned by AO for rejection of books of account that assessee had failed to produce relevant vouchers/bills, invoices in support of cash purchases of milk, AO has rightly observed that onus is on the assessee to prove its claim of expenditure - As held in CIT vs. Calcutta Agency Limited [1950 (12) TMI 4 - SUPREME Court] that onus lies on the assessee to establish its claim - Under such circumstances, it would meet the ends of justice if G.P. rate is estimated at 14.5% as against 15.08% determined by AO - Ground of the Department is partly allowed. Non-business expenditure - foreign travel of the Director - Held that:- The assessee had shown export turn over of Rs.1.00 crores to UK therefore, assessee's claim regarding visit of Director to UK for business purposes can not be doubted - The assessee had produced all the relevant correspondence in this regard which has been taken note of by CIT(A) and not rebutted by Department - In favour of assessee. Commission disallowed u/s. 40A(2)(a) - Held that:- The commission had been paid to mother of Director of assessee-company who has been associated with this business for considerable long time as explained by assessee. He has pointed out that commission has been paid for the last 25 years and the lady still manages the outlet. Merely her age being 70 years, cannot be a basis for making disallowance - Her presence itself in the outlet was more than sufficient for making the payment of commission to her as she could manage the affairs effectively merely by sitting at the outlet - Though the Assessing Officer has made disallowance by referring to Section 40A(2)(a), but he has not made disallowance on the ground of the same of being excessive and unreasonable - He has made disallowance observing that it was an accommodation of expenses paid to a person satisfied u/s. 40A(2)(a) - AsO has wrongly referred to Section 40A(2)(a) because u/s. 40A(2)(a), disallowance can be made if the expenditure is considered to be excessive and unreasonable having regard to the fair market value of the services rendered by the person - In favour of assessee.
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