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2020 (2) TMI 252 - AT - Income TaxDisallowance of commission expenses claimed - assessee is carrying on business in name of Rajasthan Small Scale Cottage Industries and is deriving income from sale of handicraft, carpets and other similar items - HELD THAT:- CIT(A) has not recorded any specific adverse findings on perusal of the reconciliation statement except in respect of two vehicles, where she has relied on the findings of the AO in the remand report, and held that vehicles are not found registered and prima facie, the entries are fictitious in nature. Basis non-verification of two entries out of total 264 entries examined by the Assessing officer which represent less than 1% of the sample size, it would be factually incorrect to hold that the assessee has failed to substantiate whole of his claim of commission expenditure. As we have held above, in case of voluminous transactions, some defined audit methodology and adequate sample size may be adopted to verify the expenses and being a factual matter, it can vary from year to year. Once the sample size has been selected by the AO and which has been accepted by the ld CIT(A), the findings on examination of such sample size should be correlated and could reasonably be held representative only proportionality and not of the whole data under examination. In the instant case, basis the sample size of less than 1% which remains unverified, it is incorrect to hold that 100% of claim of commission expenditure remains unsubstantiated. We therefore deem it appropriate to restrict the disallowance of commission expenditure to the extent of 1% of ₹ 2,08,66,037 which comes to ₹ 208,660/- which remains unsubstantiated and the remaining addition is hereby directed to be deleted. Disallowance of 8% out of commission payment - For A.Y 2014-15 - HELD THAT:- We find that the ld CIT(A) has followed and relied on her findings for A.Y 2013-14 and further held that in this year, one entry out of total 55 entries examined by the Assessing officer remain unsubstantiated and therefore, the assessee has failed to establish the genuineness of the whole of the commission expenditure. In his submission, the assessee has submitted that in respect of one entry so pointed out by the Assessing officer and referred to by the CIT(A), there was a clerical mistake where in the voucher, the vehicle number has wrongly been written as DL-132117 instead of DL-13C-2117 and besides that, there is no other specific defect pointed out by the AO. Following our findings and reasoning given for AY 2013-14, we find that in absence of any specific finding by the Assessing officer except in respect of one entry where the vehicle number has been wrongly written by the assessee, a mistake admitted by the assessee and not disputed by the Revenue, the whole of commission expenditure cannot be disallowed. In the result, the addition so made is directed to be deleted.
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