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TMI Blog2015 (5) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... rom commission as per TDS Certificate was at Rs. 55,80,92,528/-, but the commission disclosed by the assessee was at Rs. 10,72,32,586/-. The assessee explained to the AO that the clients had deducted tax on the amount of freight collected by the assessee on their behalf. It was, further, stated that the CBDT Circular no. 452 dated 17.3.1986 clarified that for the purposes of Section 44 AB of on I.T.Act 1961 (here in after referred as the "Act" in short) in the case of commission agents, the turn over does not include the sales effected on behalf of the principals. The AO noted that the amount of credit notes / discounts was not commensurate with the business provided by each party and that the credit notes were issued on only during the last few days of the previous year and were not accounted in chronological order. The AO disallowed 20% of the claim of the credit notes / discounts which worked out to Rs. 83,20,174/- and made the addition in the hands of the assessee. 3. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted as under : - "1. The Ld. A.O. has merely based his findings on hypothetical grounds and has not given any basis for such estimation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te with the business generated by them. To support this observation, he has pointed out that 'gross receipt by the party from M/s Kasturi & Sons amounted to Rs. 2,69, 28,427/-, no credit note or discount was allowed to it' In this regard, we would again like to bring your honor's attention to our reply dated 31/12/2010 (page no. 46049 of paper book-I), wherein in para 2, assessee has clarified that "details enclosed with our letter dt. 7/12/2010 mentions the names of parties as appearing in Form 16A of TDS issued, which happens to be the name as appearing in their Tan or PAN particulars. Whereas, in our books of accounts we are sometimes maintaining the ledger accounts for a particular group alongwith their associate concern in one account. Also sometimes the ledger account has been maintained for consigner or agent whereas TDS has been deducted on principal's account." We are enclosing herewith both the above lists on page no. 69-70 & 74-75 respectively of paper book, wherein we can observe that the name M/s Kasturi & Sons is appearing in first list (pg.69) with Gross Amount of Rs. 2,69,28,427/- , whereas in the second list, the same amount has been mentioned against the name "Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like long term benefit to the business, development of relationships with dealer, establishing good image in the market etc. The decision of incurring such huge expenses was taken by the assessee after taking so many points into consideration and has even earned profit of Rs. 439.30 lacs @ 29.50% of gross receipts. In these circumstances, the Ld. A.O. is not justified in questioning the genuineness of expenses and disallowing the same. 9. It is also pertinent to mention that expenses are incurred purely for business purposes and are fully allowable u/s 37(1) of the act." 3. Reliance was placed on the following cases :- 1. India Marketing (P) Limited Vs. Assessing Officer 10 Taxmann 18. 2. Udaipur Distillery Co. Ltd. 224 CTR 32 (SC) 3. CIT Vs. Dhanrajgirji Raja Narasingirji (1973) 91 ITR 544(SC). 4. Nebhomal Sons Vs. CIT [2005] 146 Taxman 345/278 ITR 345 (MP). 5. Ravi Marketing (P) Ltd. V. CIT [2006] 280 ITR 519 (Cal)." 4. The Ld. CIT(A) asked the remand report from the AO who submitted the report on 15.3.2013 which has been reproduced by the Ld. CIT(A) at page no. 19 to 29 of the impugned order, for the cost of repetition, the same is not reproduced herein. The Ld. CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ravi Marketing Pvt. Ltd. Vs. CIT(2006) 280 ITR 519, whether an expenditure is expedient for the purpose of business is to be looked at by the income tax authorities or the Court from the view point of the assessee, not from its armchair. It is not for the Court or the income tax authorities to suggest or advise, to presume or surmise as to the expedience. The Bombay High Court held in the case of CIT Vs. Sales Magnesite Pvt. Ltd. (1995) 214 ITR 1 that the question whether expenditure was necessary or commercially expedients is not to be decided by the subjective standard of reasonableness of the Revenue, but from the point of view of the businessman. 4.1 The Assessing Officer has observed that no credit note or discount was allowed to M/s Kasturi & Sons Ltd. on business of Rs. 2,69,28,427/- whereas discount of Rs. 5,38,586/- was allowed to M/s Quick N Save Services Pvt. Ltd. who had provided business of only Rs. 87,58,395/-. The appellant has explained that M/s Kasturi & Sons ltd. is the owner of the Hindu newspaper, and details of discounts and credit notes submitted shows discount of Rs. 8,09,553/- allowed to 'The Hindu'. The Assessing Officer has also observed that the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt vis-à-vis the amount mentioned in the TDS certificates. The assessee also gave credit notes and discount to the parties through whom Cargo bookings were done. In the instant case, the AO did not point out any specific instance were the expenses incurred by the assessee were not for the business purposes or those were not incurred in regular course of business. The AO doubted the credit notes issued by the assessee only on this basis that those were not issued in chronological or sequential order but nowhere he stated that the claim of the assessee was not genuineness. Even in the remand report sought by the Ld. CIT(A), the AO did not offer any comments with regard to the submissions filed by the assessee in connection or with relation to the ledger accounts of the customers to whom credit notes / discounts had been given. The AO also did not reject the books of account by invoking the provisions of Section 145 (3) of the Act, he made ad hoc disallowance @ 20% but without any basis. On the other hand, the assessee produced the books of accounts which had been duly audited and the practice to allow in credit notes / discounts to the clients had been the regular business pra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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