TMI Blog2020 (3) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... s, who were also share holders, were paid additional salary termed as commission and there are four employees who are also share holders who also have been paid salary with additional salary termed as commission . The total commission comes to 0.5% of the total turnover. In our humble opinion, considering the nature of the business of the assessee vis-a-vis the turnover, such payment of commission cannot be doubted. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). Thus, Ground No. 2 also stands dismissed. - ITA No. 6645/DEL/2016, CO No. 29/DEL/2017 (Arising out of ITA No. 6645/DEL/2016) - - - Dated:- 11-3-2020 - Sh. H. S. Sidhu, Judicial Member, And Shri N. K. Billaiya, Accountant Member For the Assessee : Sh. Rajkumar, C.A., Sh. Sumit Goel, C.A. For the Revenue : Sh. Sanjeev Goel, CIT-D.R. ORDER PER N. K. BILLAIYA, AM This appeal by the Revenue and cross objection by the assessee are preferred against the order of the CIT(A) - 1, New Delhi dated 10.10.2016 pertaining to A.Y 2011-12. 2. Substantive grievances of the Revenue read as under: 1. Ld. CIT(A) erred in law and on facts in deleting addition of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing price are not reliable and suffers from defects. The Assessing Officer further observed that the accounts with the parties are also not correctly maintained/reconciled showing thereby absurd figures. 8. In the light of these facts, the Assessing Officer rejected the books of account u/s 145(3) of the Act and proceeded to estimate profit. The Assessing Officer observed that the gross profit of 3.39% shown by the assessee is very low and estimated the same at 10.5% and made addition of ₹ 10,52,65,260/-. 9. The assessee strongly agitated the addition before the ld. CIT(A). It was strongly contended before the ld. CIT(A) that the Assessing Officer has proceeded on wrong assumption of facts and there is no discrepancy and no bogus purchases/unverifiable purchases. It was brought to the notice of the ld. CIT(A) that the assessee has maintained complete day-to-day stock register, which was examined by the Assessing Officer during the course of scrutiny assessment proceedings. 10. A complete g.p. chart was given and it was brought to the notice of the ld. CIT(A) that book results have been accepted in earlier years and in subsequent years and no addition has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 792/- As for un-verifiable purchases vide Para 3 of Asstt. Order. ₹ 10,47,804/- On account of difference in the cl. Bal of 2 parties as per books of assessee vis-a-vs books of said parties vide Para 4 of Asstt. Oder. ₹ 73,98,994/- To protect the leakage of revenue by assuming that sales discount to the extent of 0.5% has been allowed excessively/ lowering selling price, thereby calculating 0.5% on total turnover of ₹ 147.98 crores vide Para 5 of the asstt. order. ₹ 8,97,23,590 /- 16. A perusal of the detailed summary filed by the assessee shows that the Assessing Officer has added in some cases opening balance and cash payments made during the year and in some cases opening balances have been treated as purchases. In our considered opinion, opening balances relate to the purchases made in earlier years which have been accepted by the Assessing Officer while framing assessment for earlier Assessment Years. 17. From the details, we find that the payments for all the purchases have been made through banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance of ₹ 73,18,516/- on account of payment of commission to shareholders employees u/s 36(1)(ii) of the Act. 22. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has paid commission to the directors and relatives who are also share holders of the assessee company. Payment details ere as under: Name of Directors Position Amount of Salary Amount of Commission Extent of shareholding Shri Thaker pal Singh Managing Director+Major Shareholders ₹ 2,40,000/- ₹ 7,31,852/- 26.82% Shri Davinder Pal Singh Director+Major Shareholders ₹ 2,40,000/- ₹ 7,31,852/ 26.82% Shri Gurmeet Singh Director+Major Shareholders ₹ 2,40,000/- ₹ 7,31,852/ 21.26% Shri Rasvinder Kaur Director+Major Shareholders ₹ 1,92, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onwards. 26. After considering the facts and submissions, the ld. CIT(A) held as under: I have considered the submission of the appellant and observation of the Assessing Officer in the assessment order. It is seen that appellant has paid commission to the shareholders cum Directors during the year @ .075% to the four Directors and 0.050% to the shareholders. The total commission payment comes to 0.5% of the sales turnover. The appellant submitted before me that it has made commission payment to Directors as well as shareholders from A.Y. 2007-08 onwards and the same has been allowed without any disallowance except in the A.Y. 2010-11. In the A.Y. 2010-11, the commission was allowed on the same rate to the Directors cum shareholders which was disallowed by the AO in the assessment order, however, the said disallowance has been deleted by the CIT(A) vide its appeal no..31/13-14 dated 03.04.2014 with following observations: 6. I have carefully considered the submissions of the appellant and perused the order passed by the AO. In find that the commission to the director has been paid @ 0.075% of the total sale w.e.f. 1.4.2006 in pursuance of resolution passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities below. The undisputed fact is that there is no allegation that these persons are not working for the company. In our considered opinion, it is the prerogative of the assessee to decide the remuneration etc to be paid to the persons who work for his company. As per the agreement, six directors, who were also share holders, were paid additional salary termed as commission and there are four employees who are also share holders who also have been paid salary with additional salary termed as commission . The total commission comes to 0.5% of the total turnover. In our humble opinion, considering the nature of the business of the assessee vis a vis the turnover, such payment of commission cannot be doubted. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). Thus, Ground No. 2 also stands dismissed. 30. Ground No. 1 of the cross objections filed by the assessee was not pressed. Accordingly, the same is dismissed as not pressed. 31. Ground Nos. 2 and 3 of the cross objections are in support of the findings of the ld. CIT(A) and need no separate adjudication. Accordingly, the cross objections too, stand dismissed. 32. To sum up, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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