TMI Blog2019 (1) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... than the previous year as a percentage of sales. When the percentage of discounts to sales is consistent over the years then the ad-hoc disallowance is bad in law. Just because there are certain difficulty in verification of bills, the discounts cannot be restricted to the absolute figure of what amount was allowed in the immediately previous year. The discount in question is linked to the sales and is business expenditure. We see no reason why the discount should be restricted by the CIT(A) while agreeing with the contention of the assessee. The adhoc disallowance made by the AO, in our view is factually and legally not sustainable. We allow Ground of the assessee and direct the AO to grant deduction of the balance amount of discount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenditure. One percent of purchase and One percent of sale amount disallowed. Similarly collection charges were disallowed on adhoc basis, on the ground that there was an abnormal increase in collection charges. The explanation of the assessee that this expenditure relates to payments made to temporary/casual staff and is in the nature of salary, for Billguri Branch of ₹ 19,03,649/- and Malada Branch of ₹ 18,25,417/- was rejected on the ground that proper evidence was not produced. Aggrieved the assessee carried the matter before the CIT(A). 3. The CIT(A) agreed with the submissions of the assessee on the issue of adhoc disallowance of direct expenditure, that there is no abnormal increase in expenditure as stated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in the course of hearing instead of deleting the entire additions of ₹ 7980919/- made by the Assessing officer out of total expenses claimed at ₹ 10049909/- under the head Direct expenses. 2. For that in view of the facts and circumstances of the case that complete details of Direct expenses claimed at ₹ 10049908.96 including Discount allowed to customers amounting to ₹ 8527074/- were furnished before the Appellate Authorities as well as before the Assessing officer during the course of Remand Report and documentary evidences having been produced, the learned CIT(A) was not justified in allowing the claim of Discount allowed to the customers at ₹ 4778490/- to the extent of Discount amount of the earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. The CIT(A) has agreed that in the earlier years, discount on sales was reduced from the sale figure and only net sale was shown in the P L A/c and whereas in the impugned assessment year, gross sales figure has been shown in the receipts side of P L A/c and the discounts were shown as direct expenses in the payment side of the P L A/c. When the CIT(A) has accepted this explanation, there is no basis for disallowing the claim of the assessee. There is not finding that the discounts given were more than the previous year as a percentage of sales. When the percentage of discounts to sales is consistent over the years then the ad-hoc disallowance is bad in law. Just because there are certain difficulty in verification of bills, the discounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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