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Dy. CIT, Cir. -2, Ahmedabad Versus Jai Kumar Prabhudas Bajaj

2016 (4) TMI 423 - ITAT AHMEDABAD

Addition u/s 40A(2b) - cash discounts - TDS liability u/s 194H - Held that:- The amount that has been allowed by the assessee was in the nature of cash discounts and it was in line with the practice prevailing in trade and that A.O. has not made out any case of the cash discount paid to two parties to be excessive or unreasonable in terms of Section 40A(2b) of the Act, ld. CIT(A) has deleted the addition. We further find that ld. CIT(A) has given a finding that the nature of expenditure was in t .....

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given finding that the expenses aggregating to ₹ 12,36,224/- were genuine, having incurred wholly and exclusively for the purpose of business and the genuineness of the expenses have not been doubted. He has also given a finding that the aggregate amount of ₹ 12,36,224/- had been paid full in subsequent previous year. Before us, Revenue has not brought on record any material to controvert the aforesaid findings of ld. CIT(A). In view of the aforesaid facts, we find no reason to inter .....

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oked when addition is made on estimated basis. Before us, Revenue has not brought on record any material to controvert the aforesaid findings of ld. CIT(A) - Decided against revenue - ITA No. 66/Ahd/2011 - Dated:- 9-3-2016 - SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARAT, J.M. For The Appellant : Smt. Sonia Kumar, Sr. D.R. For The Respondent : Smt. Urvashi Sodhan, A.R. ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER This appeal filed by Revenue is against the order of CIT(A)- XIV, Ahmedabad, date .....

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.143(3) of the Act vide order dated 22.12.2009 and the total income was determined at ₹ 56,04,020/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before the ld. CIT(A) who vide order dated 29.11.2010 (in Appeal No. CIT(A)-XIV/315/09-10) granted substantial relief to the assessee. Aggrieved by the order of ld. CIT(A), Revenue is now in appeal before us and has raised following grounds: 1. The Ld. CIT(A) erred in law and on facts in deleting the disallowance of &# .....

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for unexplained household expenditure. 4. First ground is with respect to deleting the disallowance of ₹ 22,56,224/-. 4.1 During course of assessment proceedings, on perusing the Profit & Loss Account of the assessee, A.O. noticed that the assessee had debited ₹ 22,72,389/- under the head Discount which included discount of ₹ 19,28,232/- to K. Maheshkumar and ₹ 3,27,992/- to Harra, being the proprietary concerns owned by two brothers of the assessee. He also noticed t .....

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of the Act and the payments made were excessive. In the alternate, he was of the view that the discounts were at a fixed percentage and though assessee had used the nomenclature of Discount , the true nature of payment was in the nature of Sales Commission , on which, assessee had not deducted tax u/s.194H of the Act and therefore also the same were liable for disallowance u/s.40A(ia) of the Act. He accordingly disallowed ₹ 22,56,224/-. 4. Aggrieved by the order of A.O., assessee carried .....

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the Appellant has allowed cash discount of 1.25% to his two largest customers on the payments received from them during the previous year relevant A.Y.2007-08 which is in line with the practice prevailing in the trade. The Appellant has brought out the facts in the table on page : 4 if his written submission dt. 15-11-2002. The Id. DCIT has wrongly understood the cash discount as sales commission. 3.1.3. As observed such a cash discount of 1.25% on payments received during the year is in line wi .....

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d not a commission on sales. The cash discount granted to the customers on the payments received from them is outside the ambit of tax at source net. In these circumstances, I am of the view that the assessing officer is not justified in making disallowance of ₹ 22,56,224/- on this count. The disallowance made by the A.O. is deleted. This ground of appeal is allowed. 5. Aggrieved by the order of ld. CIT(A), Revenue is now in appeal before us. 5.1 Before us, ld. D.R. supported the order of .....

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dering the submissions of the assessee that the amount that has been allowed by the assessee was in the nature of cash discounts and it was in line with the practice prevailing in trade and that A.O. has not made out any case of the cash discount paid to two parties to be excessive or unreasonable in terms of Section 40A(2b) of the Act, ld. CIT(A) has deleted the addition. We further find that ld. CIT(A) has given a finding that the nature of expenditure was in the nature of cash discount and no .....

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using the various expenses accounts, like, Advertising and Modelling , Sales Promotion , Packing Expenses etc., noticed that assessee had debited various sums under the respective heads and credited the account of Harra , which was a proprietary concern of Shri Mahendrabhai, brother of assessee. He also noticed that the business premises of the assessee and Harra were same. A.O. was of the view that assessee had not explained the logic of claiming expenses incurred by Harra on its behalf and not .....

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onsidered the submissions made by the A.R. of the appellant. I have also gone through the decisions relied upon by the A.R. of the appellant and the observations of the assessing officer in the assessment order. There is sufficient force in the contentions put forth by the A.R. of the appellant. 4.1.2. It is seen that the various expenses aggregating to ₹ 12,36,224/- have been disallowed only on one ground that the payment has been made by M/s Harra on behalf of the Appellant and the balan .....

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ation or restriction including the ground for disallowance adopted by the Id. DCIT that the payment has been made by M/s Harra. 4.1.4. It is further seen that there is nothing unusual about the payment being made to the outside common supplier by a sister concern on behalf of the Appellant to keep good relations with them for better services. Such arrangement between the Appellant and M/s Harra, a sister concern, should not provide a ground for disallowance of the expenses which are incurred by .....

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. of the appellant it is seen that no such disallowance has been made in earlier A.Y. 2006-07 for which the assessment was completed u/s 143(3) vide order dt. 31-12-2008 on the similar facts. 4.1.6. In the light of the above discussion, I am of the view that the assessing officer is not justified in making the addition ₹ 12,36,224/- on account of various expenses credited to "Hara". The A.O.is directed to delete the addition made by him. This ground of appeal is allowed. 9. Aggri .....

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holly and exclusively for the purpose of business and the genuineness of the expenses have not been doubted. He has also given a finding that the aggregate amount of ₹ 12,36,224/- had been paid full in subsequent previous year. Before us, Revenue has not brought on record any material to controvert the aforesaid findings of ld. CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) and thus, this ground of Revenue is dismissed. 11. Ground no.3 i .....

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usehold expenses was too meager. He was further of the view that the withdrawals made from Harra and K. Maheshkumar cannot be taken as those were separate proprietary concerns of his brothers. He, accordingly, estimated the annual household expenses at ₹ 7,20,000/- as determined in A.Y. 2006-07 and after giving credit of ₹ 84,000/- shown by the assessee towards household expenses made addition of balance amount of ₹ 6,36,000/- u/s.69 of the Act. 12. Aggrieved by the order of A. .....

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LIC (Rs. 11,10,284/-); Personal Insurance (Rs. 7,513/-); Mediclaim (Rs. 28,846/- ); Income Tax Payment (Rs. 11,60,000/- + ₹ 15,24,227/-); School fees of the children (Rs. 2,38,625/-); Electric expenses (Rs. 36,369/-) and various other personal expenses of a joint family staying under one roof. 5.2.2. In view of the above, I am of considered view that the withdrawals made by the Appellant and his family members are sufficient enough for the size of the family who are staying with the appell .....

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