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2015 (12) TMI 191 - ITAT KOLKATA

2015 (12) TMI 191 - ITAT KOLKATA - TMI - Addition on account of undisclosed receipts - Held that:- In the present case the AO has not doubted the books of accounts as he has not rejected the same. Secondly, he has compared two audit reports and taken the higher figures from both the accounts accompanying the audit reports. The AO, first of all, has not given any finding which is the correct state of accounts as audited by two Chartered Accountants despite the fact that he has examined both the C .....

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rom SWDL and in that case it was the duty of the authorities to definitely come to one conclusion or the other in regard to the reliability of everyone of the relevant account filed by the assessee. In the absence of any such finding, it was not open to them to pick and chose one receipt or the other, which are more favourable to the revenue. They could accept the assessee's explanation or reject them or they could check the entries therein with reference to the books of account. But they have n .....

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assessee was engaged in the same business and also taken services from the said parties and paid commission to them and no disallowance was made by the AO originally, but again case was reopened by issuing notice u/s. 148 read with section 147 of the Act on the basis of information that one of the parties Umang Credit Capital Ltd., the transaction had not been reflected in its Trading & P&L Account and transaction had been denied by this party. Accordingly, commission paid to these parties were .....

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should not have taken different conclusion than allowing the payments except in the case of M/s. Dave Commercial Co. We direct the AO to restrict the disallowance to the extent of this party i.e., M/s. Dave Commercial Co. only. We direct the AO accordingly. - Decided partly in favor of assessee.

Disallowance of business promotion expenses - Held that:- We find that exactly similar expenses on account of business promotion was allowed in immediately preceding assessment year 2003-04 b .....

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nature but disallowed 50% on the basis of estimate. That cannot be the basis for disallowance. Accordingly, we delete the disallowance - Decided in favour of assessee. - ITA No. 120/Kol/2010 - Dated:- 10-11-2015 - Mahavir Singh, JM And Waseem Ahmed, AM For the Appellant : Shri S K Tulsiyan, Adv For the Respondent : Md. Ghayas Uddin, JCIT, Sr. DR ORDER Per Mahavir Singh, JM This appeal by assessee is arising out of order of CIT(A)-XXX, Kolkata in Appeal No.215/CIT(A)-XXX/Ward-45(2)/2008-09 dated .....

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ase the addition on account of undisclosed receipts of ₹ 78,59,892/- is unfair, based on no evidence and based on incongruous factual premises." 3. Briefly stated facts are that the assessee is a partnership firm and earning income from coordination commission received from Shaw Wallace Distilleries Ltd. (in short SWDL). The AO during the course of assessment proceedings noted that during the relevant AY the assessee has filed two audit reports, one along with forwarding letter dated .....

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al audit report filed along with the return of income but, according to AO, the assessee has maintained two separate sets of accounts and hence, two separate audit reports were prepared. According to AO, he has recorded statements of both the auditors and both of them have stated that they have audited the accounts of the assessee on the basis of books of account and documents provided and supplied by the assessee to them. Both of them have denied having knowledge of any other audit reports for .....

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7; 2,14,70,195/- and on the other hand, in the P&L Account audited by Shri K. M. Gulgulia of M/s. K. M. Gulgulia & Co. dated 30.10.2004, the assessee has shown total receipts at ₹ 2,93,30,087/-. According to AO, the assessee failed to furnish any explanation in respect to this excess receipt of ₹ 78,59,892/- as revealed from the audit report of Shri K. M. Gulgulia of M/s. K. M. Gulgulia & Co. dated 30.10.2004. Accordingly, he added this receipt of ₹ 78,59,892/- as t .....

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report was 2,14,70,195/-. The A.O noticed that the appellant furnished another audit report dt. 30-10-04 which is prepared by Mr. K.M.Gulgulia of M/s. K.M.Gulgulla & Co. The A.O noticed that the amount received as per this audit report was ₹ 2,93,30,097/-. The A.O Informed the appellant regarding two audit reports filed by the appellant and the variation in the amount received. The appellant submitted that the report dt. 27-10-04 prepared by Mr. Anurag Mathur is correct and be conside .....

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dings. The appellant has not obtained any confirmation from M/s. Shaw Wallace Distilleries Ltd. regarding the commission payment made to the appellant. The appellant placed reliance on the TDS certificates submitted. It is seen that the appellant received commission for the service rendered to M/s. Shaw Wallace Distilleries Ltd. In the absence of confirmation from the company regarding the payment made to the appellant and since the appellant failed to reconcile the variation of commission recei .....

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levant FY 2003-04 relevant to this AY 2004-05, the partners of the assessee firm have shifted the audit to M/s. A. K. Mathur & Co. In this regard, he argued that the accounts audited by M/s. K. M. Gulgulia & Co. was not at all authorized by the partners and was only filed by the staff members without the knowledge of the partners of the assessee firm. According to ld. Counsel, the AO compared the two audit reports & accounts and based on the same, difference of the total receipt i.e. .....

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g the responsibility to look after the policy matters for liquor purchase, cordial relationship between SWDL and the buyer i.e. different Military Depots ordering liquor, bill payments, claim settlement, introduction of new product and pricing, CSD depot operation, URC operation etc. The assessee submitted copy of account of SWDL in the books of assessee and also the copy of account of assessee in the books of SWDL and stated that there is no difference and according to him, the total receipt in .....

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p; Co. According to Ld. Counsel, SWDL is a highly reputed company and a very big concern from where the AO should have verified the total receipts of the assessee, but AO not chose to carry out that exercise. According to Ld. Counsel, the assessee has discharged its onus by producing all the above mentioned evidences before the AO as well as before CIT(A). When these evidences were available before AO he could not find any mistake in the books of account despite the fact that complete books of a .....

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fference between the two audit reports and according to him, even Shri K. M. Gulgulia of M/s. K. M. Gulgulia & Co. admitted to have audited the accounts of the assessee when his statement was recorded. Accordingly, he urged the bench to confirm the orders of the lower authorities. 6. We have heard rival submissions and gone through facts and circumstances of the case. We have also perused the case records and paper book filed by assessee. We find that the facts narrated above are undisputed. .....

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ditor of the assessee firm who used to audit the accounts of the assessee firm but during the relevant FY 2003-04 relevant to this AY 2004-05, the partners of the assessee firm have shifted the audit to M/s. A. K. Mathur & Co. The AO compared the two audit reports & accounts and based on the same, difference of the total receipt i.e. the total receipt of ₹ 2,14,70,195/- disclosed by the accounts audited by M/s. Anurag Mathur & Co. and receipts disclosed at ₹ 2,93,30,087/- .....

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ill payments, claim settlement, introduction of new product and pricing, CSD depot operation, URC operation etc. The assessee submitted copy of account of SWDL in the books of assessee and also the copy of account of assessee in the books of SWDL and there is no difference and the total receipt in all these accounts are disclosed at ₹ 2,14,70,195/- as against the total receipt disclosed by auditor M/s. K. M. Gulgulia & Co. at ₹ 2,93,30,087/-. From the agreement with SWDL and copi .....

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ssee has discharged its onus by producing all the above mentioned evidences before the AO as well as before CIT(A) and when these evidences were available before AO, and he could not find any mistake in the books of account, he cannot make any addition on this account. 7. We find that this issue has been dealt with by Hon'ble Supreme Court in the case of Indore Malwa United Mills Ltd. Vs. State of Madhya Pradesh & Anr. (1966) 60 ITR 41 (MP), wherein the Hon'ble High Court has held as .....

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) 293 ITR 266 (Gau), wherein it has been held as under: "Held, dismissing the appeal, that the two amounts were received by the assessee from a Government agency by cheques and they were deposited in the bank account of the assessee and duly reflected in the regular books of account. The Assessing Officer relied upon a part of the entries in the books of account and rejected the other part. Since the entries made in the books of account before the date of search and seizure had been accepte .....

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not to have been treated as undisclosed bank accounts and could not be the subject matter of block assessment proceedings." Similarly, Coordinate Bench of this Tribunal in the case of Bansal Strips (P) Ltd. Vs. ACIT (2006) 99 ITD 177 has held as under: "While relying on the aforesaid statement of Shri V. P. Jain the Assessing Officer, in the absence of any specific material, is not justified in adopting a pick and choose policy. He cannot selectively rely upon the parts of the stateme .....

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ct state of accounts as audited by two Chartered Accountants despite the fact that he has examined both the Chartered Accountants. It is also a fact that the assessee has produced complete address of the party SWDL and TDS certificates issued by that party clearly reveals that the total receipts are at ₹ 2,14,70,195/- as against the total receipt adopted by AO ₹ 2,93,30,087/-. The assessee has produced complete bills issued by SWDL and payments are received by cheque through bank acc .....

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on or reject them or they could check the entries therein with reference to the books of account. But they have not done none of these things. Accordingly, we are of the view that the assessee's audit report as filed along with the return of income as audited by M/s. Anurag Mathur & Co. is the correct accounts for the reason that the receipts disclosed therein are matching with the TDS certificates issued by SWDL and also with the bills raised. Accordingly, we delete the addition and all .....

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e that the AO during the course of assessment proceedings noticed from the P&L Account as audited by Shri Anurag Mathur of M/s. Anurag Mathur & Co. dated 27.10.2004 that it has debited a sum of ₹ 1,93,89,240/- under subcoordination commission. The AO required the assessee to give details of the parties and assessee submitted the details of commission paid to the following parties: "Sl. No. Name of the Person Amount 1 Dave Commercial Co. 40,55,150 2 Symcom Sales Services (P) Lt .....

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'. According to AO, the assessee has not deducted any TDS on the above commission and hence, he added the commission to the total income of the assessee at ₹ 1,93,89,240/-. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO by observing as under: "i) The A.O Issued notice u/s. 133(6) which could not be served on these parties at the address given by the appellant. The appellant was informed and the A.O requested for production of these parties. .....

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garding the discrepancy noticed by the A.O. It is contended during the appeal proceedings that they are appointed on cost plus remuneration basis and bills are raised periodically. However no evidence is furnished In support of this contention. Further no such explanation given before the A.O. iii) The appellant has not made deduction of tax from the commission payment claimed to have been made. iv) The appellant has not furnished any confirmation from the parties regarding the sub-coordinator c .....

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ub-coordinator commission. The A.O's action is correct as per law and is upheld." Aggrieved, assessee is in second appeal before Tribunal. 11. We have heard rival submissions and gone through facts and circumstances of the case. The Ld. Counsel for the assessee before us stated that the assessee was receiving commission income of ₹ 2,14,70,195/- from SWDL for undertaking responsibility to look after all the policy matters for requiring purchase, cordial relationship between SWDL a .....

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he aforesaid parties mentioning their PAN with Xerox copies of bills and account payee cheques along with ledger account of commission payment. Ld. Counsel for the assessee stated that the assessee produced complete details including cheque payments, bills and recipients' income tax returns along with PAN to the AO but he failed to carry out any enquiry in this respect. Ld. Counsel for the assessee also stated that in the immediately preceding assessment year 2003-04, the assessee was engage .....

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ut CIT(A) vide his appellate order dated 20.11.2012 considered all the aspects and acknowledged the services rendered by these parties and allowed the payment of commission except in the case of M/s. Dave Commercial Co. at ₹ 6,99,975/-. In view of this, ld. Counsel for the assessee argued that there is no change in the facts in the present case for the relevant assessment year in comparison to earlier AY 2003-04, as far as this issue is concerned and hence, the revenue should not have take .....

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r requiring purchase, cordial relationship between SWDL and the buyers, liquor ordering, URC operation etc. and in lieu of this, the SWDL paid commission to the assessee. We find from record that the aforesaid job was executed by the assessee by assigning the work to third parties as mentioned above and these parties were engaged in the same job. Apart from cost plus remuneration, the parties raised the bills for expenses incurred by them along with their service charges on monthly basis. The as .....

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ssment year 2003-04, the assessee was engaged in the same business and also taken services from the said parties and paid commission to them and no disallowance was made by the AO originally, but again case was reopened by issuing notice u/s. 148 read with section 147 of the Act on the basis of information that one of the parties Umang Credit Capital Ltd., the transaction had not been reflected in its Trading & P&L Account and transaction had been denied by this party. Accordingly, commi .....

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as far as this issue is concerned and hence, the revenue should not have taken different conclusion than allowing the payments except in the case of M/s. Dave Commercial Co. We direct the AO to restrict the disallowance to the extent of this party i.e., M/s. Dave Commercial Co. only. We direct the AO accordingly. This issue of assessee's appeal is partly allowed. 13. The next issue in this appeal of assessee is against the order of CIT(A) confirming the action of AO in disallowing business p .....

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business promotion expenses of ₹ 8,39,894/-. The AO disallowed the entire business promotion expenses by stating that the aforesaid expenditure is not in the line of assessee's business. The CIT(A) partly allowed i.e. 50% of the business promotion expenses by observing as under: "The appellant claimed business promotion expenses of ₹ 8,39,894/-. The ledger copy of the expenditure is furnished. From the ledger copy it is seen that the following expenses are incurred: i) Paym .....

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correct in making disallowance of the amount of ₹ 2,88,704/-. The appellant claimed payment of ₹ 3,0-4,000/- to Rohit Enterprises for the purchase of ball pens. In the absence of proper bills and vouchers, a disallowance of ₹ 1 lakh out of the claim would meet the ends of justice. The appellant gets a relief of ₹ 2,04,000/- (3,04,000 - 1,00,000). The appellant claimed cash expenditure towards hotel bills, guest entertainment. The total expenditure claimed by the appellan .....

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4). Aggrieved assessee is in second appeal before Tribunal. 15. We have heard rival submissions and gone through facts and circumstances of the case. We find that exactly similar expenses on account of business promotion was allowed in immediately preceding assessment year 2003-04 by the AO himself. The AO in the immediately preceding year has clearly held that these are business expenses relatable to the business of the assessee for the reason that the assessee being the sale coordinator for su .....

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