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2015 (10) TMI 2179 - ITAT JAIPUR

2015 (10) TMI 2179 - ITAT JAIPUR - TMI - Trading addition - rejection of books of accounts - CIT(A) deleted the addition - Held that:- CIT(A) simply accepted the submissions without making any verification on the huge addition made by the AO and there is no whisper in his order that on what basis he has accepted the sales and purchases without any verification and just on the submissions of made by the assessee. The valuation has not been submitted by the assessee before the AO. The gross profit .....

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1 of the assessee to the file of the AO to examine it afresh by providing reasonable opportunity of being heard to the assessee and the assessee is also directed to produce the relevant records to verify the quantity of sales and purchases as well as opening and closing stock before the AO and also to produce the books of account to verify the gross profit rate. Further it should be verified from the auditor whether he has audited the books of account or not. If yes, then the assessee's expense .....

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ty connection. The ld. CIT(A) has taken into consideration the decision of Hon'ble Delhi High Court in the case of R.C. Goyal vs. CIT (2012 (12) TMI 452 - DELHI HIGH COURT) wherein it is held that cash payments made in view of the business expediency is allowable as per Section 40A(3) of the Act. Thus we do not find any infirmity in the order of the ld. CIT(A) on this issue which is sustained. - Decided against revenue.

Disallowance u/s 40(a) - CIT(A) restricted part addition - Held t .....

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the ld. CIT(A), we feel that the transport company has no role except to get the commission from the truck driver for issuing bilty and it is the truck owner /driver who is paid freight by the assessee. It is also seen that individual payment to each truck owner/ driver towards the freight is less than ₹ 20,000/- in each case and it does not exceed ₹ 50,000/- in the financial year which is evident from the bilty and other records - Decided against revenue.

Addition of inte .....

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ld. CIT(A) considering the order of this Bench in the case of Shyamsunder Kailash Chand vs. ITO (2010 (7) TMI 998 - ITAT JAIPUR) deleted the addition made by the AO observing that the same were available to the AO while framing the assessment. Thus in this view of the matter, we find no infirmity in the order of the ld. CIT(A) which is confirmed on this issue - Decided against revenue.

Addition on short weight expenses - Held that:- We find from the records that the assessee has not f .....

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of salary expenses paid to Shri Lokesh Maheshwari - Held that:- We have observed from the records that the Shri Lokesh Maheshwari was the employee of the assessee. Shri Lokesh Maheshwari is assessed to tax and has filed his return of income for A.Y. 09-10 on 21.03.2011 declaring income of ₹ 1,15,800/-. The Copy of his PAN is filed in the paper at page 30. Thus, the identity of the employee is established. In view of the facts, circumstances of the case and the records available, the disall .....

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ounds raised by the Revenue are as under:- "In view of the facts and circumstances of the case, the ld. CIT(A), Ajmer has erred in:- 1. Deleting the trading addition of ₹ 97,77,900/- made by the AO after rejecting the books of account u/s 145(3) as the specific defects had been pointed out by the AO; 2. Deleting the electricity expenses of ₹ 80,092/- made by the AO as there is violation of Section 40A(3) of the I.T. Act; 3. Restricting the addition to ₹ 50,34/- as against .....

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e assessee has raised following grounds in his C.O. "1. The ld. CIT(A) has erred on facts and in law in confirming disallowance of transportation expenses of ₹ 50,365/- paid to Jai Bharat Transport Company for goods transported by Truck No.RJ34G0246 u 40(a)(ia) 2. The ld. CIT(A) has erred on facts and in law in confirming disallowance of salary expenses of ₹ 70,000/- paid to Shri Lokesh Maheshwari." 4.1 The first ground of the Revenue is against deletion of trading addition .....

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O gave the reasonable opportunity of being heard to assessee whether the assessee's case was liable to audited or not. The assessee submitted before the AO that the case was audited by Shri P.K. Ajmer, Partner of M/s. P.K. Ajmera & Co. on 29-09-2009 but while filing the return computer clerk had not mentioned the name of the auditor and due to heavy rush for submitting the return at last date. The AO enquired from M/s. Pawan Ajmer & Company whether he had audited the accounts or not .....

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he assessee failed to submit the required information regarding method of valuation of stock. The AO observed that the assessee had not deducted taxes regarding transportation expenses claimed and paid t M/s. Jay Prabha Transport Company, Truck Union, Dausa and J.K. Transport. The total payment amounting to ₹ 4,79,532/- made to the transporters on which taxes were not deducted. The assessee had submitted Form No. 15G for nondeduction of tax as per provisions of Section 194 of the Act. The .....

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yment made in the name of Shri Lokesh Maheshwari which was returned back unserved with the remarks by the postal authorities "incomplete address". The assessee was asked to furnish the complete address of the employee but the assessee failed to submit the new address of the employee by claiming that he is residing in Bhilwada. The AO observed while examining the ledger account of construction of new building that mostly payments were made in cash and about 60% payments were made and pa .....

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the assessee carried the matter before the ld. CIT(A) who has deleted the addition by observing at page 3.3 of his order as under:- "3.3 I have considered the contentions of th appellant as well as assessment order. The AO has observed that gross profit rate of the assessee has decreased from 9.55% in the last year to 5.73% and accordingly enhanced the gross profit rate after rejecting the books of account. The assessee has mentioned that all the books of accounts were maintained and produc .....

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ss profit rate 5.73% offered by the assessee is better than gross profit of 4.26% in assessment year 2007-08. From the facts of the case, it is apparent that the assessee has supported its boo results by producing the books of account alongwith the bills for purchase and sales and expenses. None of these transactions have been found to be incorrect by the AO. It has not been shown that purchases are inflated, sales are suppressed or expenses forming part of the trading account are non-genuine. F .....

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chases and sales were accounted by the assessee and entered in the books of account ad stock register was maintained. The average rate of the closing stock is ₹ 67/- per g whereas the average purchase rate in the month of March is ₹ 64.93 per kg. The AO has analyzed the purchase an sale bills to show that there was suppression of the closing stock. As regarding the other reasons, the appellant has pointed out that TDS on transport payment or un-verifiability of salary payment/ constr .....

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s. In view of the above discussions, it cannot be said that accounts maintained by the assessee are incorrect or incomplete and income cannot be properly determined from method employed by the assessee. In this context, it has been held in the case of Malani Ramjivan Jagannath vs. ACIT, 316 ITR 120 (Raj.) as under: (Headnote) "Accounts - Rejection - Estimation of gross profit rate - Quantum and value of purchase and sales were not disputed inasmuch as they were found to be fully vouched - V .....

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efore, neither the rejection of books of account nor estimation of GP by application of rule of thumb was justified - When none of the data and entries in the trading account has been found to be incorrect in any manner, the result shown by the assessee in the books of account has to be taken as true." In view of the above discussion, the rejection of the books of account u/s 145(3) of the I.T. Act is not sustained. As the AO has made the addition only due to rejection of books of account w .....

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ssessee before him that all the purchases and sales were accounted by the assessee and entry in the books of account and stock register was maintained without verifying the fact. The assessee's audit report was defective as per the form prescribed in Form No. 3CD. The AO verified from the CA whether he has made audit in this case. The concerned CA has not responded to the notice issued by the AO which proves that assessee's books of account were not properly audited and thus the AO initi .....

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atisfactory explanation before the AO on this heavy decline in gross profit rate. In the end, the ld. DR requested to reverse the order of the ld. CIT(A). 4.5 During the course of hearing, the ld. AR of the assessee submitted as under:- "1. At the outset it may be pointed out that assessee has maintained day to day correct and complete books of account alongwith the day to day stock register supported by purchase and sale bills. They were produced before the AO and examined by him as affirm .....

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t can be noted that the gross margin in Tilli purchased and sold in AY 08-09 was 9.98 % (44.19- 39.78/44.19*100) whereas in AY 09-10 it is 6.62% (65.44- 61.11/65.44*100). This is because the average margin have declined during the year as compared to the last year though there is increase in the rates of purchase and sales as compared to last year. It may be noted that the prices of the Tilli are fluctuating and governed by market forces. In each month rather on each day the prices fluctuate as .....

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maintained complete books of account and the stock records, application of section 145(3) is unjustified and consequently,trading addition made by AO by application of GP rate of last year is unwarranted. 3. The other reasons given by the AO as to nondeduction of TDS on transport payment or unverifiability of salary payments/construction expenses has no relevance with the trading results declared by the assessee more particularly when AO has separately disallowed the expenses on this account. S .....

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asons also application of section 145(3) is not justified. 4. It is a settled law that when assessee has maintained complete and proper books of account from which profits are deducible, section 145(3) cannot be invoked only because there is decline in the g.p rate. For this reliance is placed on the cases relied before the CIT(A). In view of above, trading addition of ₹ 97,77,900/- made by the AO is rightly deleted by CIT(A) and thus the ground of the department be dismissed. " 4.6 W .....

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deration. The ld. AR has placed data of sale and gross profit at serial no. 1 of the page of 1 of paper book which shows that on that basis we can verify the gross profit rate which comes to 5.73% during the year under consideration and it was at 9.55% in preceding year. The assessee had made valuation of closing stock at the average of ₹ 67/- per kg whereas his average purchases of till during the year under consideration is at ₹ 61.11 per kg. The valuation of the closing stock is m .....

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oss profit figure shown by the assessee is also contradictory at every level. There was also discrepancy in the gross profit declared by the assessee in the return form. The ld. AR has also not submitted the shortage chart as well as quantity chart of last two years. The ld. AR has also not filed the copy of explanation before the Bench. He only filed the copy of the letter without date and without any signature at Serial No. 6 & 7 of the paper book. In this view of the matter, we set aside .....

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ssee's expenses for payment of auditor are also required to be verified. Accordingly, this Ground No. 1 of the Revenue is set aside to the file of the AO for de novo adjudication. 5.1 The second ground of the Revenue is that the ld. CIT(A) has erred in deleting electricity expenses of ₹ 80,092/- u/s 40A(3) of the Act. 5.2 Brief facts of this ground are that the assessee made cash payment of ₹ 80,092/- on account of electricity expenses. The AO observed that such expenses paid by .....

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as assessment order. It is seen that the assessee has paid electricity bill of ₹ 80,092/- for the month of Nov. 2008 and it was paid in cash on 01-12-2008 as per receipt of Rajasthan State Electricity Board. The amount was paid in cash as it was last date of payment otherwise electricity connection would have been disconnected and the assessee was under bona fide belief that payment is made to the Government. In such circumstances, it is apparent that the payment was made in view of the co .....

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ld. DR relied on the order of the AO. 5.5 The ld. AR of the assessee mainly contended that the assessee has paid the electricity bill of ₹ 80,092/- for billing month Nov. 2008 in cash on 1.12.2008 vide R.No. 30 to Rajasthan State Electricity Board (RSEB). The payment was made in cash as it was the last date of payment, otherwise the electricity connection could have been disconnected. The assessee was also under the bonafide belief that payment is made to the Government and therefore payme .....

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sale of small articles of daily necessity and use to the passengers. Per force, the paymentreceived by them are necessarily in cash. These amounts are collected and in turn handed over to the assessee. The assessee in terms of its contracts is bound to maintain constant supplies in the trains and ensure that at no point in time can the passengers be deprived of these articles (which are food articles, soft drinks and other items necessary for travel). In the course of such transactions, it sour .....

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who are engaged in activities and are depended entirely on timely cash flow.It is in such cases that r.6DDwhich was formulated as proviso toS.40A(3)steps into aid such assessee and concerns. In this context, the statutory mandate in r.6DD(K), at least in the circumstances of the case, has to be so construed as to mean that but for the cash payment, the assessee would have been deprived the benefit of supplies itself. This Court clarifies that the interpretation of the case expression "who .....

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ances, the Tribunal and the lower authorities adopted an unduly narrow and technical interpretation of r.6DD(K), the benefit of which the assessee clearly was entitled to". 5.6 The ld. AR of the assessee prayed for dismissal of this ground as the ld. CIT(A) has rightly deleted this ground in view of the decision of Hon'ble Delhi High Court in the case of R.C. Goyal vs. CIT (supra). 5.7 We have heard the rival contentions and perused the materials available on record. We find from the re .....

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wable as per Section 40A(3) of the Act. Thus we do not find any infirmity in the order of the ld. CIT(A) on this issue which is sustained. Therefore, Ground No. 2 of the Revenue is dismissed. 6.1 The third ground of the Revenue is that the ld. CIT(A) has erred in restricting the addition to ₹ 50,364/- as against the addition made by the AO for ₹ 4,79,532/- as the assessee himself had shown inadmissible expenses u/s 40(a) in column 17(f) of the form 3CD report. 6.2 The Ground No. 1 of .....

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ers of the above expenses observed that assessee has not deducted TDS u/s 194C of the Act for which the AO asked the reasons from the assessee for not deducting the TDS of the above parties but the assessee could not explain the reasons for the same. The AO therefore, applied the provisions u/s 40(a)(ia) for not deducting the tax and thus disallowed the expenses to the tune of ₹ 4,79,532/- 6.4 Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who .....

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the commission basis. The assessee being the recipient of the goods has made the payment to the truck owners/ truck drivers on the receipt of the goods. In above facts, it cannot be said that there was any written or oral contract of the above concerns with the assessee. The truck owners are not the agents of above three concerns and have executed the work in their own right. There was no payment in pursuant of a contract for a specific period and quantity to the above transport companies. In s .....

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page 11, the payment of more than ₹ 50,000/- has been made in respect of goods transported by Truck No. RJ 34 G 0246 (engaged through Jai Bharat Transport Co.). The total freight payment in respect of above truck is ₹ 50,364/- (Rs.10,224 + ₹ 9,720 + ₹ 9,900 + ₹ 10,368 + ₹ 10,152). So, the above payment is in violation of provisions of sec. 194C of the IT Act. Accordingly, addition made by the AO to the extent of ₹ 50,364/- u/s 40(a)(ia) of the IT Act is .....

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sent by them through different transport Companies who only issue the bilty. Sample copy of transport bills is at PB 12-14. These transport companies have no role except to get the commission from the concerned truck owner for issuing the bilty and it is the truck owner/ driver who is paid the freight by the assessee. The individual payment to each truck owner/ driver towards the freight is less than ₹ 20,000/- in each case and does not exceed ₹ 50,000/- in the financial year as is e .....

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y in pursuance of a contract for a specific period, quantity or price. In these facts section 194C is not applicable and therefore no disallowance u/s 40(a)(ia) is called for. Reliance is placed as under:- (i) CIT Vs. United Riceland Ltd. 322 ITR 594 (Pun. &Har.) (ii) R.K Steels Vs. ACIT (Jpr.)(Trib.) ITA No. 434/JP/10dt. 29.10.10 A.Y. 2006-07(PB15-21) The Ld. CIT(A) has incorrectly held that there is a oral contract with the truck operators/owners. This finding is incorrect. The supplier of .....

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e of ₹ 50,364/- upheld by the CIT(A) is incorrect. In view of the above, deletion made by CIT(A) be upheld and the AO be further directed to delete the disallowance confirmed by CIT(A). Accordingly, the ground of the department be dismissed and the cross objection of the assessee be allowed. " 6.7 We have heard the rival contentions and perused the materials available on record. We find from the ld. CIT(A)'s order that he has confirmed the disallowance of transportation expenses t .....

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iver for issuing bilty and it is the truck owner /driver who is paid freight by the assessee. It is also seen that individual payment to each truck owner/ driver towards the freight is les than ₹ 20,000/- in each case and it does not exceed ₹ 50,000/- in the financial year which is evident from the bilty and other records. Thus keeping in view the above case laws cited by the assessee and in the facts and circumstances of the case, we feel no hesitation to delete the addition of S .....

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assessee observed that the assessee had paid interest to the following parties. 1. Asha Devi Ludhani ₹ 41,400/- 2. Deepak Ludhani ₹ 14,600/- 3. Ramchandra Ludhani ₹ 14,600/- 4. Rama Khandelwal ₹ 15,350/- The AO observed that as per provisions of Section 194A of the Act, the assessee was required to deduct tax while making payment of interest to the above parties for which the assessee was asked to explain as to why TDS was not deducted on interest paid to the above partie .....

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as assessment order. It is seen that the AO has mentioned that assessee has submitted the Form No. 15G before the AO for claiming certain interest payments without deduction of tax u/s 194A of the I.T. Act. However, AO disallowed the same holding that assessee has not produced the proof of submission of above Forms to the Department. In this respect, it has been held by Hon'ble ITAT Jaipur in the case of Shyamsunder Kailash Chand vs. ITO, 60 DTR (JP)(Trib) 270 as under:- "Depositors ha .....

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n made by the AO of ₹ 85,950/- is deleted." 7.4 The ld. DR supported the order of the AO. 7.5 During the course of hearing, the ld. AR of the assessee through the written submission has submitted as under:- "1. It may be noted that out of four parties, Mrs. Rama Khandelwal is a senior citizen and in her case Form No. 15H was obtainedwhile in case of other three parties Form No. 15G was obtained by the assessee on 31.03.2009 and the same was also submitted to the department(PB 22- .....

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), where the depositors submitted declaration in Form 15G to the assessee in time but the same were sent by the assessee to the AO late, it was held that only fault on part of the assessee is that the forms could not be submitted within the time stipulated in the Act. However the same were available before the AO while framing the assessment.Therefore, there is no reason to disallow the interest on non deduction of tax at source. In this case also, Form 15H/G were available before the AO in cour .....

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wed the same because of non-production of proof of submission of above forms to the Department at the time of framing the assessment. The ld. CIT(A) considering the order of this Bench in the case of Shyamsunder Kailash Chand vs. ITO (supra) deleted the addition made by the AO observing that the same were available to the AO while framing the assessment. Thus in this view of the matter, we find no infirmity in the order of the ld. CIT(A) which is confirmed on this issue. Hence, Ground No. 3 of t .....

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of the assessee vide letter dated 28-12-2011 submitted that while filling the goods for transportation to the party, the amount is paid by the party on the weight received by him. However, the AO required the assessee to submit the evidence for claiming such expenses but the ld. AR did not furnish the same. Therefore, the for want of supporting evidence by the assessee, disallow the indirect expenses of ₹ 7,39,909/- to the income of the assessee. 8.3 Being aggrieved by the order of the AO .....

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ridge at the destination of goods. For such a difference in weight, the purchasers raised the debit note as per which assessee claims the weight shortage expenses. In this regard, it has been stated that at the time of assessment, the assessee had submitted the copy of weight shortage account alongwith the details of weight shortage in different accounts in support of the said claim and filed copy of said details during appeal. In the narration in the above account, the various details regarding .....

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Agree Export Mumabi who are the major parties claiming the shortage in the goods received. In view of the above discussion, it is apparent that weight shortage is inherent in this line of business. The AO has not shown that there was no shortage in the goods delivered to the various parties. In view of above discussion, the disallowance of ₹ 7,39,909/- made by the AO is deleted." 8.4 The ld. DR supported the order of the AO. 8.5 During the course of hearing, the ld. AR of the assessee .....

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te which is debited to weight short expenses. All these facts were explained to the AO but without any enquiry he made the disallowance. 2. From the copy of ledger account of "Weight Short expenses"(PB 32-36), it can be noted that major claim of weight short has been paid to Dhaval Exports Agri, Rajkot, Navjot International, Mumbai and Mac Agri Exports, Mumbai. In respect of Dhaval Exports Agri, Rajkot from the statement placed at PB37, the bill wise detail of weight short deducted by .....

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have deducted ₹ 293543/- on account of weight shortage as is evident from the copy of their letter placed at PB 40-41. From these evidence, itcan be noted that claim of weight shortage is inherent in this line of trade. Assessee has also deducted ₹ 48,531/- on account of weight shortage in respect of purchases made by itfrom various parties which is credited in this account. In view of above,CIT(A) has rightly deleted the addition and thus the ground of the department be dismissed. .....

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est of justice set aside this issue to the file of the AO to decide it afresh by providing reasonable opportunity of being heard to the assessee. The assessee is directed to furnish the evidences relating to this issue before the AO so that the AO may adjudicate upon this ground as per law. Hence, this Ground No. 5 of the Revenue is allowed for statistical purposes. 9.1 The Ground No. 2 of the C.O. of the assessee is regarding confirming the disallowance of salary expenses of ₹ 70,000/- pa .....

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address". The AO further asked the assessee to furnish the complete address of the employee but the assessee intimated that the concerned employee had left job and he has no full details of his address. In view of this, the AO disallowed the salary expenses of ₹ 1.20 lacs and added the same to the income of the assessee. 9.3 Being aggrieved by the order of the AO, the ld. CIT(A) carried the matter before the ld. CIT(A) who confirmed the salary expenses to the extent of ₹ 70,000/ .....

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ses claimed by the assessee. In this particular case, the summons were also issued for verifying the said payments. However, they were returned back by the postal authorities due to incomplete address. During appeal, assessee has filed the copy of return of Sh. LokeshMaheshwari. However, said return does not prove that income shown by the said person represents salary payments claimed by the assessee. Moreover, it is apparent that this return was filed on 21.03.2011 [i.e. 8 days (should be 8 mon .....

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