TMI Blog2018 (1) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be allowed. - Decided in favour of assessee Disallowance of power and fuel expenses - Held that:- Maintaining of day to day register for the consumption of paddy husk would be a very difficult proposition to measure quantitatively daily for the reason that the paddy husk are kept in a heap outside in open which is always subject to rigours of weather and is quite prone to wastage. If the overall stock and net consumption has been shown on which no discrepancy has been pointed out, then simply because day to day register for consumption has not been maintained cannot be a ground for making any kind of disallowance on the consumption. There is no reason for the AO to draw adverse inference or take a different view in this year when the percentage of consumption is less in this year in comparison to the earlier years. Therefore, on these facts we do not find any reason to sustain any kind of adhoc disallowance and same is directed to be deleted - Decided against revenue Addition of unverified purchases - Held that:- Once it is not disputed that the purchases have been made through cheques and the cheques have been cleared in their favour, then it cannot be held that these p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of agreement from the parties to whom commission has been paid nor could it file any confirmations from the said parties. Accordingly, he disallowed the claim of commission payment of ₹ 16,70,260/-. 4. Before the Ld. CIT (A) the assessee submitted that during the course of assessment proceedings the AO had not given any adequate opportunity to file the evidences as the query was raised at the fag end and no time was given by the AO. Accordingly, the application for admission of additional evidences u/s 46A was filed before the Ld. CIT (A) which were forwarded by him to the AO to submit his remand report. In remand proceedings, AO sent notices u/s 133(6) to the parties and out of the 12 parties to whom commission was paid, the names of which are as under:- (i) M/s. Goyal Enterprises (ii) M/s. Agarwal Co. (iii) M/s. Shri Govind Agency (iv) M/s. Mool Chand Goel and Sons (v) M/s. Chomukhi Enterprises (vi) M/s. Delhi Trading Co. (vii) M/s. Jagdish Khandelwal (viii) M/s. Daulat Ram Giyamalani (ix) Rajesh Chand Agarwal (x) M/s. Ankit Broker Co. (xi) Sh. Shiv Kumar (xii) Sh. Ghanshyam Dass; following seven parties had responded, who had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of ledger with Income Tax Return and PAN of the proprietor. The narration of the Ledger dearly depicts brokerage income of ₹ 85,635/- with detail of TDS. 6. Mool Chand Goel sons The assessee filed confirmation for payment of Commission with TDS (Page 88 of P.B). There is no comments by the A.O. Chart for Last Four Year payment of commission to the same Party to establish party is regular party (Relevant Page 117 of P.B at serial no 16), It was not examined and therefore no comments by the A.O Further in response to notice u/s 133(6), the party complied by sending following documents vide it's letter dated 11.10.2013. (Letter dt 11.10.2013 enclosed with the remand report). ( i) Confirmed copy of Accounts of the Appellant for the F. Y 2009-10. ( ii) The certified copies of Bill Books for commission. ( iii) The computation of income, Balance Sheet, Profit Loss account; and ( iv) Acknowledgment of Return of the proprietor for the A. Y 2010-11. In the profit loss Account the proprietor has shown total brokerage income of ₹ 8,39,387/- apart from other income. 7. Delhi Trading Co (Commission Payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty is regular party (Relevant Page 116 of P.B at serial no 9), It was not examined and therefore no comments by the Ld. A.O. Further in response to notice u/s 133(6), the party complied by sending following documents vide its letter dated 04.10.2013. (Letter dt 04.10.2013 enclosed with the remand report). ( i) Confirmed copy of Accounts of the appellant for the F. Y 2009- 10 showing brokerage receipt of ₹ 30,060/- with TDS detail too. ( ii) Bill Book Summary for entire Commission received. Out of the total commission of ₹ 4,24,060/-, Commission of ₹ 30,060/- has been shown from the assessee. ( iii) Bill book for commission raised to the assessee. ( iv) TDS certificate (Form No 16A) issued by the appellant to the party showing brokerage payment of ₹ 30,060/- ( v) Acknowledged Copy of Return with computation of income and Balance sheet. It is pertinent to mention here that in the Computation of Income, party has claimed TDS of ₹ 3,096/- relating to the assessee M/s Swastik Solvents Products India Limited. In the Balance Sheet also the party has shown Brokerage income of ₹ 4,24,060/- 10. Rajesh Chand A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58-60 of P.B) Copy of Confirmation (Page 72 of the P.B). The appellant had also filed chart for the last four year payments of Commission with a view to establish regularity. (See Relevant page 115 of P.B). No examination of all this by the A. O before adverse comments. 4. Sh. Shiv Kumar: We are not in a position to say whether notice was in fact served on the party. Even otherwise the assessee by way of additional evidence had itself filed Copy of Confirmation with PAN of the recipient (Page 113-114 of the P.B). The appellant had also filed Chart for the last four year payments of Commission with a view to establish regularity. (See relevant page 119 of P.B). NO examination of all this by the A.O before adverse comments. 5. Sh. Ghanshyam Dass: We are not in a position to say whether notice was in fact served on the party. Even otherwise the assessee by way of additional evidence had itself filed Copy of invoice raised to the assessee (Page 62 of P.B) Copy of Confirmation with PAN (Page 106- 107 of the P.B). The appellant had also filed Chart for the last four year payments of Commission with a view to establish regularity. (See relevant page 119 of P.B). No exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Khandelwal, M/s. Daulat Ram Giyamalani, Rajesh Chand Agarwal, cannot be disallowed. With regard to the other five parties, the assessee s contention that they have filed their confirmation alongwith the PAN and also similar commission has been paid to these parties in last four years also, the Ld. CIT (A) accepted the payment of commission in respect of the four parties, namely, M/s. Ankit Broker Co., M/s. Goyal Enterprises, M/s. Chomukhi Enterprises and Shri Ghanshyam Dass. The Ld. CIT (A) has deleted the disallowance mainly on the ground that the assessee had filed all the supporting details and documents during the remand proceedings including the PAN nos.; details of the commission paid; and also that similar payments have been made in various years. However, so far as in the case of one party, namely, Shri Shiv Kumar, the Ld. CIT(A) has confirmed the addition on the ground that no payments have been made to said person in last two years and no confirmation could be received by the AO in response to notice u/s 133(6). 8. Before us, Ld. Sr. DR submitted that in some cases notices were not responded to and in cases where notices were complied with, the evidences placed on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments made to the seven parties who have duly confirmed the payment of commission directly on the ground that they could not produce the bill book. Such an observation for discarding the information received from his own inquiry cannot be upheld because bill book for commission cannot be reckoned as solitary piece of evidence to accept or reject the payment of commission. The Ld. Counsel for the assessee had submitted before us that the assessee was having its registered office in Delhi and do not have any sales office in any part of the country nor did it have any executives for sales promotion. All the products manufactured have been sold through agents since the establishment of the company in the year 1977. These agents used to procure the sales from various buyers located at various parts of country at rates which were negotiated with the company and thereafter the goods were dispatched to the parties in accordance with the details given by the agents. He further submitted that no marketing and sales expenditure had been debited except for commission payment which is a regular feature. Such a contention of the Ld. Counsel appears to be correct on the face of the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not confirmed the transaction in response to notice u/s 133(6) and in the immediately two preceding assessment years no payments have been made. However nowhere it has been denied that assessee had filed confirmed copy of accounts of the said person alongwith the PAN and also the payments have been made through account payee cheque on which TDS has been deducted. The payment of cheque only reflects that transaction is genuine and so far as whether the commission payment is to be allowed same has to be seen from the fact that in case of the assessee, payment of commission is a regular feature and same has been made for procuring sales and in this particular case it is seen that commission was paid to the said party in the assessment year 2007-08 and when in early years this party was paid the commission which appears to have been accepted, then merely because in immediately preceding two years commission was not paid cannot be the ground for adverse inference. In the case of other agents also similar nature of evidence has been appreciated by the Ld. CIT(A) and one such fact was that, in those cases payments have been made in the earlier two assessment years also. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52000 10605100 46043 0.43 2010-11 52000 14864135 901600 14014535 47449 0.34 2011--12 901600 17537946 755000 17684546 59528 0.34 13. Ld. CIT (A), however has restricted the disallowance to ₹ 3 lacs simply on the ground that the assessee has not been able to establish that there was proper accounting of these expenses on the basis of day to day consumption register and the contention of the AO cannot be totally ignored. 14. Before us Ld. Counsel for assessee submitted that the paddy husk is a by-product which is used for fuel in the boiler. Though manufacturing register and other details like stock register has been maintained meticulously which have been subject to audit also but it is impossible to maintain day to day stock register of heaps of paddy husk lying in the factory premises because, there are certain wastage also. He further submitted that once accounts have been au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties the purchases could not be verified, the details of which are as under :- i) M/s. S.R. Industries ₹ 12,65,085/- ii) M/s. Dixit Rice Mills ₹ 14,55,372/- iii) M/s. Bhagwati Agro Mills ₹ 14,71,672/- Since the assessee could not produce these parties, the AO has confirmed the purchases made from these parties. Before the Ld. CIT(A) the assessee contended that, since AO did not gave proper opportunity and that matter was getting time barred, the AO has made the addition without giving any chance to rebut the AO s finding. Accordingly, assessee filed additional evidences before the Ld. CIT (A) which were in the nature of; i) confirmation of accounts by these parties; ii) comparative chart of last four years giving the details of the transaction carried out in the earlier years from the same parties; iii) bank statement in respect of purchase transaction; and iv) bank certificate by HDFC bank and PNB in respect of credit of amount in favour of the three parties. The Ld. CIT (A) called for the remand report on these evidences from the AO, who in his remand report has submitted as under:- It is further submitted that notice u/s 133(6) of the I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. Chart for Last Four Year purchase with the same Party to establish party is regular party (Page 133 of P.B). It was not examined and therefore no comments by the A.O Further In response to Notice u/s 133(6), the party complied by sending confirmed copy of Account from their books along with Copy of its PAN. ( The enclosure attached with the remand report is incomplete and therefore Complete Confirmed copy of account sent by the party is enclosed for perusal) 2. Dixit Rice Mills (Purchase worth 14,55,372/-) The assessee itself furnished Copy of Confirmation with PAN (Page 128- 132 of P.B). There is no comment by the A.O. Bank Statement of HDFC Bank, Rudrapur Punjab National Bank, Rudrapur showing clearance of all the cheques in favour of Dixit Rice Mills (Page 162-178 of P.B). There is no comments by the A.O The Bank Certificate by HDFC Bank Punjab National Bank (Page 181, 182 of PB), but this was not examined and therefore no comments by the A. O. Chart for Last Four Year purchase with the same Party to establish party is regular party (Page 133 of P.B). It was not examined and therefore no comments by the A.O. Further in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the required details as asked could not be furnished by the said parties, hence purchases could not be fully established. Mere confirmations and earlier year reference is not sufficient as the transaction of purchase needs to be verified. Thus, he strongly relied upon the remand report of the AO. 20. The Ld. Counsel for the assessee submitted that, the purchases were made through invoices which contained all the particulars of the parties and not only that, when independently inquired by the AO, the parties have directly confirmed the purchases along with their copy of accounts. Hence Ld. CIT (A) has rightly deleted the addition. 21. After hearing both the parties and on perusal of the relevant material placed on record, we find that these parties from whom assessee had made purchases of raw materials, in the remand proceedings have duly responded to the notices u/s 133(6) issued by the AO and have given their confirmations before the AO duly acknowledging the sale made to the assessee. Not only that, these transactions are also reflected in bill books and invoices of purchases, which have been placed in the paper book. Certificates from the bank of the assessee had been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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