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2015 (9) TMI 1002 - ITAT LUCKNOW

2015 (9) TMI 1002 - ITAT LUCKNOW - TMI - Addition on account of job charges income - fall in N.P. rate for job charges income - CIT(A) allowed part relief - Held that:- The Assessing Officer has applied the average net profit rate of 76.23% being average of last two years. In this regard, it was the claim of the assessee before learned CIT(A) that the assessee has not maintained the books of account of job work separately and selling of parts separately. Regarding the reason for fall in net prof .....

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ting into fall in profit of the service provider. Apart from pointing out fall in net profit rate, the Assessing Officer has not pointed out any specific defect in the books of the assessee. It is not the case of the Assessing Officer that the expenses are not supported by bill and vouchers. Considering these facts, we are of the considered opinion that no interference is called for in the order of learned CIT(A) on this issue - Decided against revenue.

Addition made on account of dis .....

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d before the Assessing Officer but he could not throw any light on this aspect because he was not the director of the commission agent during the period when the transaction took place and the persons who were directors during the relevant period were not available, when te A.O. asked to appear. It is also noted by the Assessing Officer that the payment has been made under an agreement by way of account payee cheque after deducting TDS and the director of the commission agent company as well as .....

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ing expenses’ was deleted by CIT(A) on the basis that nowhere in the order of the Assessing Officer, he has said that the expenses have either not been incurred for business purposes or are personal in nature or capital in nature and therefore, the same are allowable u/s 37 of the Act. We do not find any infirmity in the order of CIT(A) on this issue because there is no specific objection of the A.O. as has been noted by CIT (A) and this finding of CIT (A) could not be controverted by learned DR .....

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nce under the heading repairs and maintenance – others expenses was deleted by CIT(A) by making same observation on page 10 of his order. So is the case regarding disallowance under the head office maintenance expenses. Similarly, the disallowance under the head sales promotion expenses was also deleted by CIT(A) by making same observation. For the same reasons, we do not find any infirmity in the order of CIT(A) on these issues also. Hence, we decline to interfere in the order of CIT (A) on the .....

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did not give any excessive benefit to the person covered u/s 40a(2)(b) of the Act. On this issue also, we do not find any infirmity in the order of CIT(A).- Decided against revenue. - ITA No.558/LKW/2014, C.O.No.02/Lkw/2015 - Dated:- 28-8-2015 - SHRI SUNIL KUMAR YADAV AND SHRI A.K. GARODIA, JJ. For The Revenue by Shri R. K. Ram, D. R. For the Assessee by None ORDER PER A. K. GARODIA, A.M. The appeal is filed by the Revenue and the Cross Objection is filed by the assessee, which are directed aga .....

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n facts in allowing the relief of ₹ 11,35,126/- deleting the addition on account of job charges income without appreciating the fact that assessee failed to substantiate the reason for fall in N.P. rate for job charges income and also failed to elucidate any reason for huge increase in expenses in the A.Y. under consideration. 3. That the Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing the relief of ₹ 11,50,186/- deleting the addition made on account of .....

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expenditure debited without considering the facts and material brought on record by the A.O. as well as marks of the case. 5. That the order of Commissioner of Income Tax (Appeals), being erroneous, unjust and bad in law be vacated and the order of Assessing officer be restored. 3. Shri P. K. Kapoor, C. A. submitted an application for adjournment but since this is an old appeal and hearing was adjourned earlier on several occasions, adjournment application was rejected. Shri P. K. Kapoor, C. A. .....

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observations on page No. 6 & 7 of his order, which are reproduced below for the sake of ready reference:- I have considered the contentions of the Assessing Officer and the submissions made by the appellant. The AO has itself in the order written that the appellant has submitted that being consolidated business, the appellant has not segregated the parts, travelling and other expenses incurred during providing maintenance services of diesel engines. All the expenses are booked in totality a .....

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ich are beyond the control of the appellant and the persons owning the diesel engines. It may also be important to mention that all the list of vouchers which has been quoted in the order is either fully supported or wherever the supporting cannot be taken due to business practices self made vouchers are present. The Assessing officer has erred by on one hand is accepting the net profit of the appellant and on the other hand rejecting the job income books which are not kept separately by the app .....

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icer has erred in rejecting and adding ₹ 11,35,126/- on adhoc estimate basis by merely comparing the previous year comparables. Thus the appellant gets relief and the addition made by the Assessing Officer is deleted. 6. We find that the only objection of the Assessing Officer is that the net profit rate in the present year against job charges has been reduced to 63.27% as against 76.89% in assessment year 2002-03 and 75.58% in assessment year 2001-02. The Assessing Officer has applied the .....

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g business. It is also very important to consider the nature of business of the assessee which is selling and service of diesel engine. In servicing of diesel engine, in the initial years, income may be high because the break-down are less but as the engine grows old, break-down are more resulting into fall in profit of the service provider. Apart from pointing out fall in net profit rate, the Assessing Officer has not pointed out any specific defect in the books of the assessee. It is not the c .....

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ing Officer and the submissions made by the appellant. Allowability of commission under the Income Tax Act, 1961 is very clear as held by many judicial authorities. There are 5 major components the services rendered have to be established, the genuineness of the transaction has to be established, the expenditure should be for business purposes, the expenditure should not be a capital expenditure and the expenditure should not be a personal expenditure. Now as far as the 3 components goes that ex .....

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early justified by the fact that the payment has been made under an agreement, the payment has been made by account payees cheques and tax as required to be deducted on the same has been deducted. The genuineness of the transaction is also justified by the statement of the authorized persons who appeared on behalf of the commission agent. Even the name of the telecom department of Allahabad who also was a client brought by the commission agent has been accepted by the accountant of the Commissio .....

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. 8. From the above Para from the order of learned CIT(A), it is seen that a clear finding has been given by CIT(A) that the genuineness of the transaction is justified by the statement of the authorized persons who appeared on behalf of the commission agent. He has also noted that a statement on oath u/s 131 of the Act has been recorded by the Assessing Officer of the Accountant of the commission agent and he has confirmed the services rendered. The present director of the commission agent also .....

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well as accountant of that company have appeared before the Assessing Officer and the transaction was confirmed and no adverse material or adverse statement of these persons is the basis of the action of the A.O. Considering all these facts, we do not find any reason to interfere in the order of CIT(A) on this issue also. Ground No. 3 is also rejected. 9. Regarding ground No. 4 i.e. regarding various disallowances, which are partly deleted by CIT(A) and the assessee has filed Cross Objection hav .....

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ead telephone expenses, CIT(A) has confirmed the disallowance of ₹ 7,500/-. Similarly out of disallowance of ₹ 6,657/- under the head vehicle running and depreciation, disallowance is confirmed of ₹ 2,500/-. Regarding the last two disallowances out of telephone and vehicle running and depreciation, we are of the considered opinion that as per the judgment of Hon'ble Gujarat High Court rendered in the case of Sayaji Iron and Engg. Co. Ltd. vs CIT [2002] 253 ITR 749 (Guj), ev .....

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nce of legal expenses of ₹ 2,200/-, it is noted by CIT(A) that the disallowance has been made for documents expenses of new jeep. In our considered opinion, such expenses for new jeep cannot be considered as Revenue expenditure and hence, we decline to interfere in the order of learned CIT(A) on this issue. 9.2 Regarding disallowance of ₹ 7,430/- under the head advertisement expenses, it is noted by CIT(A) on page No. 10 of his order that the bills and vouchers produced by the assess .....

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allowed relief of ₹ 17,203/- in respect of balance written off and therefore, we do not find any reason to interfere in the order of CIT(A) for relief allowed by him on this issue. Regarding the addition confirmed by CIT(A) of ₹ 7,920/- out of misc. expenses, we find that a clear finding has been given by CIT(A) that these expenses were not incurred for business purposes. This finding of CIT(A) could not be controverted by Learned A.R. of the assessee by bringing cogent material on r .....

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ed by the Revenue. Still, we have tried to examine and decide these issues by going through the order of CIT(A). On page No. 8 of his order, CIT(A) has decided the issue of disallowance of ₹ 23,988/- under the heading travelling expenses . This disallowance was deleted by CIT(A) on the basis that nowhere in the order of the Assessing Officer, he has said that the expenses have either not been incurred for business purposes or are personal in nature or capital in nature and therefore, the s .....

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; 12,080/- under the head repairs and maintenance was also deleted by CIT(A) by making the same observation. For the same reasons, we do not find any infirmity in the order of CIT(A) on these issues also. Hence, we decline to interfere in the order of CIT (A) on these issues also. 10.2 The disallowance of ₹ 26,014/- under the heading repairs and maintenance -others expenses was deleted by CIT(A) by making same observation on page 10 of his order. So is the case regarding disallowance of &# .....

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