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ACIT-17 (2) , Mumbai Versus Shri Natrajan Venkatraman,

2015 (10) TMI 1273 - ITAT MUMBAI

Disallowance of commission/brokerage - as per AO assessee neither offered the same for taxation nor produced any evidence to show that the deductors have reversed the entries wrongly made by them in this respect in their original TDS returns by way of its revision - CIT(A) deleted the dis-allowance - Held that:- After careful consideration, we find that Ld. CIT(A) did not commit any error in granting appropriate relief to the assessee. It was the case of the assessee that he had earned total com .....

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eeting expenses, vehicle expenses, depreciation, vehicle insurance, driver’s salary, travelling expenses and gift expenses - Held that;- For the expenses incurred under the head ‘business promotion expenses’ the entire expenses could not be disallowed. The assessee had discharged his burden of proof by submitting the name of the persons to whom such incentive/discount/commission had been paid. After considering the overall facts and circumstances of the case, the Ld. CIT(A) deleted the disallowa .....

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ing to the CBDT Instruction No.225/26/2006-ITA-II(Pt.) dated 8.9.2010, wherein guidelines for completion of scrutiny assessment selected on the basis of AIR information laid down and if disallowances are made in excess of ₹ 10 lakhs, then the AO has to obtain prior permission/approval of the jurisdictional CIT to proceed with area of investigation other than AIR based scrutiny assessment. He observed that such instructions have not been followed and from the assessment record he noted that .....

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nal flat. Due to certain reasons the fund was refunded to the assessee and TDS was deducted by the Anik Developers by mistake. TDS certificate was also not issued by Anik Developers. After considering the relevant facts and circumstances, the Ld. CIT(A) observed that there was no income to the extent of ₹ 75 636/-. It was a personal advance for interior decoration work to the builder which had been refunded by them to the assessee. He further observed that the assessee was not a developer .....

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d by the Revenue against the order dated 07.06.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10. The Revenue has taken the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CJT(A) has erred in disallowing the entire addition made by the AO on account of commission/brokerage of ₹ 10,75,373/- without appreciating the fact that the assessee neither offered the same f .....

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the expenses under these heads were incurred by the assessee in cash and also in spite of sufficient opportunities has failed to produce bills / vouchers in support of these expenses and other details like names and addresses of the persons to whom the payment for these expenses were alleged to be made. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting 25% disallowances made by the AO out of books & periodicals expenses of ₹ 69,500 .....

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of ₹ 88,639/- to 10% without appreciating the fact that the assessee inspite of sufficient opportunities has failed to establish the co-relation between income offered and expenditure claimed under these heads with supporting documentary evidences. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the entire disallowances made by the AO out of salary expenses of ₹ 12,44,600/- without appreciating the fact that the assessee inspite o .....

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s and other details showing the venue and purposes of the meeting in respect of which such expenses have been claimed. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO on account of commission/ brokerages of ₹ 751636/- received from M/s. Anik Developers without appreciating the fact that the assessee inspite of sufficient opportunity has failed to furnish the proof for payment of his advance or any other evide .....

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rt of his order. b) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting 25% disallowances made by the AO out of driver's salary of ₹ 1,28,000/- to 10% without appreciating the fact that the assessee inspite of sufficient opportunities has failed to produce supporting documentary evidences in respect of the same. 9. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting 25% disallowances mad .....

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in restricting 25% disallowances made by the AO out of gift expenses of ₹ 1,07,665/- to 10% without appreciating the fact that the assessee even failed to produce basic information like its nature, kind and proof/ confirmation of the recipient in respect of expenses claimed under this head. 2. Ground No.1: Facts relating to Ground No.1 are that the assessee has been carrying on business of commission agent and commission income was shown at ₹ 1,64,06,455/- from Twinkle Envirotech Lt .....

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rokerage shown by the assessee in her profit and loss account and details generated from the system was computed at ₹ 10,77,963/-. 3. The assessee was required to explain the same and it was submitted that there were some double entries and that the income shown by the assessee was correct. The assessee also submitted conformation letters from both companies in respect of commission earned and TDS deducted thereon in support of his contention. However, the AO did not accept such submission .....

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the aforementioned additions were made on the basis of AIR information but the same were not sustainable as both the companies had uploaded erroneous entries into 26AS system and they had rectified/reversed the said entries. Correct payment of commission had been uploaded into system. These figures tally with the commission actually received by the assessee. The correct commission received from Twinkle Envirotech Ltd. amounted to ₹ 1,64,06,455//- and from Royal Twinkle Star Club ₹ 1 .....

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with the figures. 5. We have heard both the parties and their contentions have carefully been considered. After careful consideration, we find that Ld. CIT(A) did not commit any error in granting appropriate relief to the assessee. It was the case of the assessee that he had earned total commission of ₹ 3,10,44,414/- from both the parties and confirmations were also submitted. The assessee also produced the TDS certificate in which correct amount was shown. In view of these evidences, we a .....

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ed that the assessee, during the assessment year under consideration had debited the above stated various expenses to the P & L Account. The AO called for ledger account of electricity payment, rent payment and business promotion payment along with bills & vouchers. On verification of the same, it was observed by the AO that the expenditure amount of ₹ 18,07,503.40/- incurred towards electricity payment, rent payment and business promotion payment was in cash but the documentary ev .....

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unting to ₹ 1,60,578/- out of the expenses incurred in relation to vehicle expenses, vehicle insurance, driver s salary and depreciation observing that involvement of personal element in these expenses could not be ruled out. The AO also disallowed an amount of ₹ 3,14,204/- being 25% of the expenses incurred on books and periodicals, printing and stationery, entertainment expenses and Misc. expenses He further disallowed 25% amounting to ₹ 3,69,720/- out of the expenses incurre .....

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ning commission in respect of fund mobilizing, commission agents had been assigned certain responsibilities for which the assessee had to maintain office at several places to offer customer service and also to pay some portion of the commission back. It was also submitted that the net profit declared by the assessee on the entire receipt was 78.92%, therefore disallowance made by the AO was not right. From the details, the Ld. CIT(A) observed that so far as the expenses incurred under the head b .....

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he entire expenses could not be disallowed. The assessee had discharged his burden of proof by submitting the name of the persons to whom such incentive/discount/commission had been paid. After considering the overall facts and circumstances of the case, the Ld. CIT(A) deleted the disallowance made on account of business promotion expenses, rent and electricity expenses. However, learned CIT(A) upheld the disallowance at 20% of the expenses incurred in respect of telephone and 10% of expenses in .....

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ade in excess of ₹ 10 lakhs, then the AO has to obtain prior permission/approval of the jurisdictional CIT to proceed with area of investigation other than AIR based scrutiny assessment. He observed that such instructions have not been followed and from the assessment record he noted that the AO did not consider the aforementioned CBDT instructions while proceeding to make other disallowable business expenses. It is in these circumstances, Ld. CIT(A) has deleted the disallowance made by th .....

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by the assessee and some of the disallowances have been upheld on the basis of estimate. Keeping in view of the entirety of the facts mentioned above and also fact that the assessee has shown net profit @ 78.92%and also fact that the Assessing Officer did not follow the aforementioned Instruction of CBDT, we are of the opinion that no interference is required in the order of learned CIT(A) so as to it relates to Ground 2 to 5 of the Departmental appeal. It may be mentioned here that the Departm .....

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s are accordingly dismissed. 10. Ground No. 5: This Ground of appeal is in relation to the issue of allowability of salary expense of ₹ 12,44,600/-. The AO had disallowed the entire expenses under this head stating that salary register and Form No.16A, etc. were not submitted. 11. Before the CIT(A), the assessee submitted that the salary had been paid to 13 employees for the entire year with a salary range of ₹ 60,000/- to ₹ 1,20,000/- annually. There was no need to deduct tax .....

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