TMI Blog2015 (6) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... that:- In past, similar additions were made by the Assessing Officer, which has been either deleted by the CIT(A) or confirmed by the CIT(A) but finally the Coordinate Bench had confirmed a lump sum addition of ₹ 50,000/- in each year. The ld CIT(A) has specified the defects with reference to bills and not deduction TDS on commission payment but he is not allowed the assessee to explain the reasons for not deducting TDS. The discrepancy is specific and commission payment in this line of business is accepted in general as the handicraft emporiums generally pay the commission to the guides, taxi drivers, auto drivers. They come from outside and had dealing occasionally and it was not fair to pay commission in front of customers. It is just like a secret commission and a very short duration is available with the assessee to complete the formalities for paying commission. Therefore, there may be defects in the receipts of commission payment but it is a part and parcel of the business dealings. Therefore, we confirm the disallowance under this head at ₹ 1 lac out of total disallowance made by the Assessing Officer at ₹ 16,54,883/- - Decided partly in favour of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export orders. The said finding is illegal and unjustified. 6. That on the facts and circumstances of the case the learned CIT(Appeals) has erred in sustaining a disallowance of ₹ 16,54,883/- out of commission paid by the assessee. The disallowance sustained is illegal, unjustified and excessive. 7. That on the facts and circumstances of the case the learned CIT(Appeals) has erred in sustaining a disallowance of ₹ 75,424/- out of entertainment expenses. The disallowance sustained is unjustified and excessive. 8. That the learned CIT(Appeals) has erred in sustaining disallowance of ₹ 24,600/- on account of employee s contribution towards PF. The disallowance sustained is unjustified and excessive. 2. The 1st and 2nd grounds of the assessee s appeal is against applying the G.P. rate 56.17% in export division resulting in trading addition of ₹ 20,30,516/- and also applying a GP rate of 36% in local division and making trading addition of ₹ 17,06,982/-. The ld Assessing Officer observed that the assessee filed his return of income on 06/10/2008 declaring total income of ₹ 1,36,17,080/-. His case was scrutinized U/s 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 145(3) of the Act on the basis of defects pointed out by the Assessing Officer in preceding para. He also relied upon the decision of the Hon'ble Supreme Court in the case of S.N. Namaswery Chettiyar Vs. CIT (1960) ITR 579 for maintenance of stock register, CIT Vs. British Paints India Ltd. 188 ITR 44 for the books disclosed the true statement of account and correct income, Commissioner of Sales Tax Vs. H.Esuf Ali, H.M. Abdul Ali 90 ITR S.C. 1973 271 for estimating the turn over. The ld Assessing Officer estimated the G.P. rate @ 56.17% in export division similar to the G.P. rate declared by the assessee in A.Y. 2004-05 and applied by the Assessing Officer in A.Y. 2005-06 to 2007-08 as no reasons for fall in G.P. rate in the year under consideration has been explained by the assessee. Likewise G.P. rate on local sale is applied @ 36% as against the declared G.P. rate of 34.53%. Accordingly, he made trading addition of ₹ 20,30,516/- in export sale and ₹ 17,06,982/- in local sale. 3. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had confirmed the addition by observing as under:- 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 145(3) of the Act by pointing out various defects in the books of account but the ld CIT(A) had completely disregarded the past history in this case. The assessee had declared G.P. rate in export unit at 49.06% as against G.P. rate of 49.07% and 49.1% in assessment year 2007-08 and 2006-07 respectively. The ld Assessing Officer applied G.P. rate in A.Y. 2005-06 @ 56.17%, which was confirmed by the ld CIT(A) @ 52% as reasonable in export unit. The assessee had preferred further appeal before the Hon ble ITAT Jaipur Bench, Jaipur vide ITA No. 21/JP/2009 for A.Y. 2005-06. It had been decided vide order dated 23/10/2009 and had deleted the entire addition and GP rate of 47.5% declared by the assessee, had been accepted as such. In A.Y. 2006-07 and 2007-08, similar additions were made by the Assessing Officer by applying the G.P. rate which has been deleted by the ld CIT(A) in both the years, which has been challenged by the revenue before the Hon ble ITAT but the Hon ble ITAT had confirmed the order of the ld CIT(A) in both the years. In view of the past history of the case and the order of the Hon ble Tribunal for the A.Y. 2005-06 to 2007-08, there is no justification for applying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has accepted the explanation may be to some extent which is not defined. In the facts and circumstances of the present case, no addition is called for when the explanation of fall in G.P. appears to be satisfactory. In the present case, the finding of the Coordinate Bench are squarely applicable as no specific defect in purchase and sale has been pointed out by the Assessing Officer. In local sale, the G.P. had increased from 34.46% to 34.53% compared to preceding year. In export division, the GP was constant as shown in A.Y. 2007-08 @ 49.07% and in year under consideration @ 49.06%. Therefore, by respectfully following the decision of the Coordinate Bench, we delete the addition confirmed by the ld CIT(A). Accordingly, both the grounds of assessee s appeal are allowed. 7. Grounds No. 3 to 6 of the assessee s appear are against confirming the disallowance of ₹ 16,54,883/- out of commission paid by the assessee. The ld Assessing Officer observed that during the year under consideration, the assessee had claimed commission payment on local sale at ₹ 1,80,92,369/- and ₹ 25,53,674/- on export unit. On verification of vouchers, the payment of commission, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assess was showed that it were printed receipts showing the sale voucher number, amount of bill, name of persons to whom commission given alongwith signature of the recipient. The assessee had not submitted address of the recipient nor the identity of person from these vouchers. The contention of the assessee that the commission had been paid to various drivers and guides of the vehicles is very general statement. The details were prepared by the staff of the assessee, which are not verifiable. Thus, he disallowed the commission @ 8% from the total commission claimed by the assessee. He made addition of ₹ 16,54,883/- in the income of the assessee. 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by asking the assessee to produce the tourists guide/taxi drivers or auto drivers for verification. He also directed the assessee to submit the complete name and addresses of regular commission agents, who were regularly paid commission for bringing customer to its premises. It was submitted by the assessee before the ld CIT(A) that it is not possible to produce commission recipients for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the same taxi. The voucher dated 20/06/2007 showed that commission of ₹ 22,800/- was paid to Shri Arvind in cash and voucher dated 23/06/2007 showed that commission of ₹ 20,900/- was paid to Shri Gyan Prakash in cash. Since the amount paid in cash exceeded ₹ 20,000/-, disallowance U/s 40(A)(3) was liable to be made. However, the counsel of appellant had produced vouchers for few months only. Therefore, it was difficult to ascertain the disallowance U/s 40(A)(3) The vouchers dated 05/4/2007 and 23/06/2007 showed that commission of ₹ 57,624/- and ₹ 33,860/- was paid to Shri Pramod. However, the alleged vouchers showed different taxi numbers and different signatures. The voucher dated 26/06/2007 showed that commission of ₹ 23.120/- was paid to Shri Jivan in cash, voucher dated 27/07/2007 showed that commission of ₹ 27,050/- was paid to Shri Dinesh in cash and voucher dated 06/08/2007 showed that commission of ₹ 22,600/- was paid to Shri Jaswant Singh in cash. Since the amount paid in cash exceeded ₹ 20,000/-, disallowance U/s 40(A)(3) was liable to be made. However, the counsel of appellant had produced vouchers for few months o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi High Court in the case of Schneider Electric India Ltd. 304 ITR 360, Hon'ble Supreme Court s decision in the case of CIT Vs. Premier Breweries Ltd. 279 ITR 51, Onam Agarbathis Co Vs. DCIT 310 ITR 56 and CIT Vs. McDowell Co Ltd. 291 ITR 107. Accordingly it was held that the assessee was not entitled to deduct commission. The assessee had miserably failed to substantiate his claim for export commission. Accordingly, he confirmed the addition. 9. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that the ld CIT(A) had pointed out various discrepancies in his order and confirmed the addition but no opportunity has been provided by the ld CIT(A). He drawn our attention on page No. 1 and 2 i.e. the copy of ordersheet of the ld CIT(A). The ld CIT(A) has not given any show cause notice and not called any explanation from the assessee with regard to discrepancies mentioned by him in the appellate order, which is violation of principle of natural justice. He further not allowed the assessee to explain all defects pointed out, non deduction of TDS on commission. The ld Assessing Officer had not pointed out any defect and no disallowance has been made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is against disallowance of ₹ 24,600/- on account of employee s contribution towards PF. The ld Assessing Officer observed that the assessee paid PF on 21/5/2007 and 28/09/2007 whereas the due date was on 15/5/2007 and 15/09/2007, accordingly he made addition U/s 36(1)(va) read with Section 2(24)(x) of the Act. The ld CIT(A) confirmed the addition by observing that the provisions of Section 43B(b) are applicable only in respect of employees contribution to PF or ESI and not to the employee s contribution. This view was supported by the decision of Hon ble Pune Tribunal in the case of Indian Card Clothing Company Ltd. (ITA No. 214/PN/98), accordingly he confirmed the addition. The ld AR of the assessee has submitted that the assessee had deposited this amount within the accounting year itself and much before the due date of filing of return. He relied upon the decision of Hon'ble jurisdictional High Court in the case of Jaipur Vidyut Vitran Nigam Ltd. 363 ITR 307 (Raj) and prayed to allow the same. The ld DR has vehemently supported the order of the ld CIT(A). We consider the issue after considering the argument of both the sides and the Hon ble Rajasthan High Court decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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