TMI Blog2019 (4) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... passed any order u/s 144 - thus without rejecting books of accounts of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses by paying salary to staff and allowing discount to field staff. Therefore, action of AO is not acceptable. On appeal by the assessee, the ld. CIT(A) held that in order to protect the interest of revenue, it would be suffice to make an estimated disallowance of 15% of the claim of the salary. We note that ld. CIT(A) also sustained the addition based on estimation which is not acceptable for the reasons given above. As regards the discount claimed by the assessee the ld. CIT(A) noted that discount allowed by the Assessing Officer as per his own estimates is more than the amount claimed by the assessee, therefore ld. CIT(A) restricted the claim of the assessee to the lesser of the two figures. However, we note that assessee claimed discount given to field staff at ₹ 31,90,617/- and salary paid at ₹ 19,52,536/-. The Assessing Officer computed the discount @ 2.5% at ₹ 9,44,97,724/- which comes to ₹ 23,62,443/-; as against the claim of the assessee to the tune of ₹ 31,90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine the payments and adjudicate this issue in accordance with law. Hence we allow this ground raised by the assessee for statistical purposes. Disallowance on account of general expenses, miscellaneous expenses, conveyance expenses, printing, repairs and maintenance expenses - non rejection of books of accounts - CIT(A) reduced it to 15% - HELD THAT:- AO has not pointed out any cogent reasoning for making these disallowances. We note that assessee s books of accounts are not rejected by Assessing Officer u/s 145(3) of the Act and the assessment was carried out u/s 143(3) of the Act. Moreover, the Assessing Officer has not examined the genuineness of these expenses item wise. The Assessing Officer ought to disallow only those expenses for which the assessee has not submitted bills and vouchers to substantiate the bona fide of the claim. Without rejecting the books of accounts of the assessee and to make estimated disallowance is not justifiable and it needs to be deleted. Service tax liability - service tax liability which was directly paid by BSNL after year end from deduction of their account - HELD THAT:- no documentary evidence in support of this claim could be bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous advertisers through agent and each payment being below threshold limit for deduction of TDS. 4. FOR THAT the Ld. CIT(A) was not justified in sustaining 15% of ad hoc disallowance of bona fide and genuine supervision charges without bringing any material on record for confirming such disallowance. 5. FOR THAT the Ld. CIT(A) failed to appreciate that the legal charges paid amounting to ₹ 34,700/- to Advocate which was inclusive of various reimbursement of expenses and such payment cannot be subjected for Tax Deducted at Source. 6. FOR THAT the Ld. CIT(A) omitted to adjudicate the appellant's submission and Grounds of Appeal in relation to disallowance of Rent U/S 40(a)(ia) amounting to ₹ 3,98.193/- paid to three different owners cash payment being below the threshold limit prescribed for deduction of tax for rent. 7. FOR THAT the Ld. Authority below most arbitrarily upheld the disallowance to the tune of 15% on genuine and bona fide business expenses aggregating to ₹ 30,56,072/- on account of Conveyance, General Charges, Misc. Expenses, Printing, Repairs and maintenance. Tour Expenses which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereas the ld. The ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have discussed in our earlier para and the same is not being repeated for the sake of brevity. 8. We have heard both the parties and perused the material available on record. We note that the assessee was unable to reconcile the difference in Form 26AS and ld. Counsel also fairly agreed with us that assessee has failed to reconcile the difference. However the counsel submitted before us that the entire difference of ₹ 5,82,626/- should not be treated as income of the assessee. Only the gross profit rate should be applied on ₹ 5,82,626/-. The Assessing Officer as well as ld. CIT(A) both were wrongly treated the entire receipt as undisclosed income of the assessee instead to tax the profit element. We note that the gross profit rate of assessee is 5% therefore to meet the end of justice, we are of the view that ad hoc disallowance @ 6.5% should be sustained on the differential amount of 26AS to the tune of ₹ 5,82,626/- which comes to ₹ 37,870/-. Therefore we direct the Assessing Officer to disallow, only 6.5% of ₹ 5,82,626/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can be inferred that the assessee s employment of persons on salary would have been for non-business purposes and to inflate the expenses. Apart from this we note that the discount allowed to field staff were for the purpose of assessee s business therefore it is allowable expenses u/s 37 of the Act. We note that the Assessing Officer could have ventured into estimation only after rejecting books of accounts of the assessee u/s 145(3) and thereafter by best judgment assessment u/s 144 of the Act. Here in this case, the Assessing Officer has not passed any order u/s 144 of the Act. The Assessing Officer thus without rejecting books of accounts of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses by paying salary to staff and allowing discount to field staff. Therefore, action of the Assessing Officer is not acceptable. On appeal by the assessee, the ld. CIT(A) held that in order to protect the interest of revenue, it would be suffice to make an estimated disallowance of 15% of the claim of the salary. We note that ld. CIT(A) also sustained the addition based on estimation which is not acceptable for the reasons given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deducted. However, ld. CIT(A) has confirmed the addition for the balance amount of ₹ 1,33,500/- (Rs. 6,28,978/- - ₹ 4,95,478/-) However for the balance amount of ₹ 1,33,500/- as confirmed by ld. CIT(A), the ld. Counsel explained the Bench that the recipient of the said amount has shown in his return of income, as income and offered the taxes thereon. We find merit in the submissions made by the counsel that if the payee has included the receipts of ₹ 1,33,500/- in his books of accounts and has offered for taxes then disallowance on account of non-deduction of TDS, will not arise. The ld. DR for the revenue has fairly agreed with the submission made by ld. Counsel, therefore, we remit this issue back to the file of Assessing Officer with the direction to examine whether receipts of ₹ 1,33,500/- has been offered for taxation by the payee. If the payee has offered for taxation then no disallowance shall be made in respect of receipts of ₹ 1,33,500/- In respect of supervision charges of ₹ 11,28,047/- the ld. CIT(A) disallowed, on ad hoc basis 15% of the said supervision charges. We note that ld. Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we note that the assessee has paid rent below threshold limit to three persons the details of which are given below: Smt. Sur ₹ 1,71,000.00 Mr. Yogesh Nigam ₹ 75,731.00 Mr. Abhishekh Nigam ₹ 75,731.00 Ms. Ankita Nigam ₹ 75,731.00 ₹ 3,98,193.00 We note that all the payments to each person is below threshold limit of ₹ 1,80,000/-, and since it is below threshold limit therefore this does not require any deduction of TDS. However, considering the principle of natural justice and fair play we remit this issue back to the file of the Ld. Assessing Officer to examine whether each payment to these three land lord is below threshold limit of ₹ 1,80,000/- or not, if it is below ₹ 1,80,000/- no disallowance would be made. Therefore we direct the Ld. Assessing Officer to examine the payments and adjudicate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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