TMI Blog2021 (6) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... lling Expenses, Building Repair Maintenance Expenses and Office Expenses - HELD THAT:- As relying on own case except 10% of building repair and maintenance expenses, all other disallowances made by the A.O. and sustained by the ld. CIT(A) are hereby deleted and the ground is thus partly allowed. Disallowance being @ 15%, out of the commission paid and claimed by the assessee - HELD THAT:- We find that under identical set of facts and circumstances of the case, the disallowances were made in the earlier A.Y 2012-13 and the same have been partly confirmed by the ld CIT(A) and the assessee has not filed any appeal against the said decision before the Tribunal and the matter has thus attained finality. Therefore, following the earlier decision of his predecessor CIT(A), where the ld CIT(A) for the impugned assessment year has restricted the disallowance to 15%, we don t see any infirmity in the said decision and findings of the ld CIT(A) and are not inclined to interfere in the said findings and the ground of appeal so taken by the assessee is thus dismissed. - ITA Nos. 1179 & 1180/JP/2019 - - - Dated:- 22-6-2021 - Shri Sandeep Gosain, JM And Shri Vikram Singh Yadav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,589/- 3.3 Building Repair Maintenance Expenses ₹ 5,77,516/- 57,751/- 3.4 Office Expenses ₹ 1,98,293/- 19,829/- Total ₹ 10,26,581/- 102,656/- The disallowance so made being contrary to the provisions of law and facts of the case. Hence, the same kindly be deleted in full. 3. During the course of hearing, the ld. AR submitted that the assessee doesn t want to press ground No. 1 of its appeal. Hence, the same is dismissed as not pressed. 4. In Ground No. 2, the assessee has challenged the rejection of books of accounts and trading addition sustained by the ld. CIT(A) on account of low yield ratio in comparison to the preceding year. 5. Briefly, the facts of the case are that the assessee is a partnership firm engaged in the manufacturing and trading of edible oil, oil cakes from mustard, Tarameera and groundnuts. The assessee filed its return of income on 25/12/2013 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier year. It was accordingly submitted that there is no basis to sustain the disallowance so made by the Assessing Officer and which has been partly confirmed by the ld. CIT(A). 8. Per contra, the ld. DR submitted that the books of accounts have been rightly rejected by the Assessing officer on account of no separate stock register, low yield and various other reasons as so stated in the assessment order. Regarding the contention of the assessee that there was only slight decline in yield percentage as compared to average yield, it was submitted that the ld. CIT(A) has already restricted the additions to ₹ 1,50,000/- as against addition of ₹ 7,94,277/- made by the Assessing Officer. It was accordingly submitted that the addition so sustained by the ld. CIT(A) may be confirmed. 9. We have heard the rival contentions and perused the materials available on record. We find that the Co-ordinate Bench in assessee s own case for A.Y 2012-13 has dealt with similar issue on account of addition made by the Assessing Officer on account of low yield ratio and the relevant findings reads as under:- 6. We have considered the rival submissions as well as relevant mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned the complete books of accounts along with various ledgers and journals. The purchase, sales and expenses were fully vouched verifiable and these facts were also accepted by the AO. The AO had invoked the provisions of section 145(3) and issued a show cause notice after noticing discrepancies such as non maintenance of stock register, production registers, inward registers outward registers etc. but also considered the written submission of the appellant and had not rejected the books of account at all u/s 145(3). In a similar issue, The Hon'ble High Court, Rajasthan in the case of Malani Ramjivan Jagannath vs. ACIT 20T CTR (Raj) 19 held as under:- In doing so, it had ignored all admitted facts in the face of which there about the sales and purchases, non maintenance of stock register lost its significance so far as arriving at GP rate is concerned. Further the Hon'ble ITAT, Jaipur in the case of Ambika textile Industries vs. DCIT held that huge trading addition can't be made without pointing any defect in the books of accounts. Apart from this the Hon'ble ITAT, Jaipur in the case of DCIT vs. Mewar Textile Mills Ltd. held that the AO had nowhere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant in this year as compare to the average of 3 years which is as under:- Item Average of 3 Year Yield This Year Yield Ground Nut Oil 27.89% 27.58% Mustard Oil 35.03% 34.80% The difference is Ground Nut Oil is 0.31% and difference in mustard seeds oil is 0.23%. The A/R argued that the yield difference is due to the quality of the seeds and the oil content therein largely depend upon rains. This year, there were lesser rain as compared to the preceding year and hence there is a minor fall. There are various other factors which affect the rate of yield however, to keep the same rate of yield every year is beyond human control. There is substance in the submission of the A/R that yield % depends on the quality of Ground Nut, Mustard Seeds and it cannot same in every year. The Gross profit of the appellant is better in this year as compare to the last year. The appellant this year declared GP rate of 4.83% on sales of ₹ 53,20,035/-. The Gross profit rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wances have been made in the preceding assessment year 2012-13 as well and our reference was drawn to the findings of the Co-ordinate Bench which are contained at para 10 of its order which reads as under:- 10. We have heard the ld AR as well as the ld DR and considered the relevant material on record. The A.O. has disallowed 10% of the telephone expenses on the ground that the assessee did not maintain any call register and in absence thereof, personal element cannot be ruled out. Once the telephone expenses are verifiable from the telephone bills itself then this cannot be a case of unverifiable expenses. Further the personal element is only suspected by the A.O. and not found. Even otherwise, when the telephones are used in the business premises of the assessee and the expenses are verifiable from the telephone bills itself then the same cannot be disallowed on mere suspicion. Similarly, the travelling expenses were also disallowed as 10% on the ground of personal element. The A.O. has not doubted the expenditure incurred by the assessee and if the expenses are not found to be excessive having regard to the nature of business and volume of business of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrary to the submissions evidences available on record hence, the same kindly be deleted in full. 17. It was submitted that due to inadvertent mistake, this ground was not raised before the Tribunal at the time of filling memorandum appeal i.e. Form-36. This ground does not require any fresh investigation of facts in as much as the same are available on record. Per contra, the ld. DR objected to the raising of the additional ground of appeal. After hearing both the parties and considering the fact that the assessee has taken this ground before the ld. CIT(A) and therefore, emerging from the impugned order and all the relevant facts being available on record, the additional ground being raised is hereby admitted for necessary adjudication. 18. In this regard, the ld. AR submitted that the facts as noted by the AO are that in the Profit Loss account, the assessee has claimed ₹ 28,76,659/- on account of commission payment to various persons against total turnover of ₹ 53,20,85,035/- which is 0.54% of the turnover. During the course of assessment proceeding, the relevant details have been obtained and from the details so submitted, it is observed that out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement, minimum two separate parties are essential. In the instant case, when the members and karta of HUF are the very same persons, they are entering into agreement and negotiating rates of commission and terms of agreement only and this cannot be ignored. Accordingly, the addition made by the AO is hereby restricted to the tune of 15% i.e. ₹ 3,15,000/- appellant gets relief of ₹ 17,85,000/-. The ground is treated as partly allowed The facts of this case are totally similar as decided by the CIT(A)-1 Jodhpur. In this case the commission are paid to the same persons and the service also rendered by the recipient. The total commission in this year is ₹ 28,76,659/- which is 0.54% of total turnover. In the last year the commission payment is ₹ 27,15,336/- which 0.43%. The Net profit in this year is 1.07% as compute to last year 0.87% which is better in this year. It is also a fact that members of an HUF can very well discharge the functions for their HUF. Here I am the view that the commission is an expenditure incurred solely and exclusively for the purpose of the business and fully allowable. Further there had been no loss of revenue as all the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for the business purposes and also admitted that there was no loss to the revenue, yet however, he restricted the disallowance @ 15% of the claimed amount resulting into disallowances of ₹ 3,60,000/-. Pertinently however, he did not at all provide any basis of making disallowance of 15%. He did not bring the Fair Market Value on record. In case he found the claim to be excessive (although not alleged so) so as to invoked S.40A(2), unless this was done, no disallowance w.r.t. S.40A(2) could have been made as held in the case of Upper India Publishing House (P) Ltd. vs. CIT (1979) 117 ITR 0569 (SC) held as under: Reference-Question of fact/Academic question-The question whether a particular expenditure on rent is excessive and unreasonable or not is essentially a question of fact-The other question as regards applicability of s. 40A(2)(a) becomes academic as the same cannot have any application unless it is first held that the expenditure on rent was excessive or unreasonable. In fact, a reading of the order of the ld. CIT(A) clearly shows that the disallowance has been partly sustained only due to suspicion but absolutely without any basis. 22. Per contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the facts of the case in partly confirming the trading addition upto ₹ 6,50,796/- out of ₹ 59,90,090/- made by the AO. The addition so made and partly confirmed by the CIT(A) being contrary to the provisions of law and facts, the same may kindly be deleted in full. 3. ₹ 1,00,000/-: The ld. CIT also erred in law as well as on the facts of the case in fully confirming the disallowances a lump sum amount of ₹ 1,00,000/- made by the AO on account of Telephone Expenses, Travelling Expenses, Building Repair Maintenance Expenses and Office Expenses. The disallowance so made being contrary to the provisions of law and facts of the case. Hence, the same kindly be deleted in full. 26. Both the parties fairly submitted that the facts and circumstances of the case are identical as in A.Y 2013-14. Therefore, our findings and directions as contained in ITA No. 1179/JP/2019 for A.Y 2013-14 shall apply mutatis mutandis to this matter and the appeal is partly allowed. 27. In the result, both the appeals of the assessee are disposed off in light of aforesaid directions. Order pronounced in the open Court on 22/06/2021. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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