TMI Blog2022 (8) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue out of the various expenses - HELD THAT:- In the present case it is noticed that the AO disallowed the expenses under the head Wages, Salary, Welfare expenses, Travelling expenses, Misc expenses and Telephone expenses totaling to Rs. 1040710/-. He disallowed 1/5th of the said expenses. However no specific defect was pointed out to substantiate that a particular expense was incurred for non business purposes. CIT(A) also sustained the disallowance of Rs. 1,00,000/- without pointing out any specific instance where the expenses were not incurred for the business purposes. At the same time, some of the expenses were unvouched and in such type of cases personal use out of Travelling, Telephone, Welfare expenses and Misc. expenses cannot be ruled out. The assessee incurred the expenses under these heads amounting to Rs. 27200/-, Rs. 32150/-, Rs. 68520/- and Rs, 35940/- totaling to Rs. 1,63,810/-. We therefore in order to cover any possible leakage in the revenue and to meet the ends of justice deem it appropriate to sustain the disallowance of Rs. 50,000/- out of the aforesaid expenses. Accordingly the assessee will get further relief of Rs. 50,000/-. Appeal of assessee partly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of assessment proceedings the AO called information under section 133(6) of the Act from Dy. Excise Taxation Commissioner(Excise), Jind regarding payments made on account of License Fee and Excise Duty during the year by the assessee. The information supplied by the Dy. Excise Taxation Commissioner (Excise), Jind revealed that the assessee during the year had paid a total amount of Rs. 5,10,48,700/- on account of License Fee and Excise Duty whereas in its P L Account the assessee had not debited any expenses under this head. When the AO asked the assessee to explain, it was submitted that the License Fee and Excise Duty was paid out of sales, after deducting these expenses, net sales was credited to trading and P L Account. In support of his claim the assessee furnished copies of sales ledger and License Fee ledger. The AO however was of the view that the assessee made up story and furnished copies of sales ledger during the assessment proceedings which reflected the same figure as shown in the trading and P L Account. He was of the view that the assessee had paid expenditure of Rs. 5,10,48,700/- out of books and furnished no plausible justification. He accordingly mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Gross Sale and Licenses Fee paid. He has also stated in his certificate that he has entered net figure (Sale -License Fee) in his Audit Report. Annexure - P2A. As for as the application of section 69C is concerned, it can be examined on the following points: iii) Whether provisions of section 69C can be applies in the matters where all the purchases and sales transactions part of regular books of accounts. iv) The recognized principles of accountancy and tax jurisprudence hold that no sales can take place without purchases. v) The AO have not rejected the books of accounts of the assessee nor have doubted the License Fee paid by it. vi) The assessee has offered satisfactory explanation about the source of License Fee paid and the copy of License Fee and sales accounts produced. In the light of above, the addition made by AO u/s 69C could have not been made. The assessee relied upon the cases decided by the various appellate authorities are as under: In the case of Parekh Corporation UI Building (32 CCH 129) the Tribunal has discussed the applicability of provisions of section 69C of the Act and held as under: In so for as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2017 held: The AO has not proved that the impugned purchases have not been sold, an item cannot be sold without purchasing the same. Hence, there is no reason to disallow the amount of purchases. In the light of the above, no addition could have been made under section 69C of the Act. 6.1 The Ld. CIT(A) after considering the submissions of the assessee observed that the contention of the assessee that the gross sales were of Rs. 15,60,33,500/- out of which License Fee of Rs. 5,10,48,700/- was paid and the net sales of Rs. 10,49,84,800/- were declared, was not found acceptable as it was not supported by the document on record. He further observed that the audit report for the assessment year under consideration revealed that the gross sales / turnover for year under consideration was shown at Rs. 10,49,84,800/- and not at Rs. 15,60,33,500/- as claimed by the assessee. And the same figure of gross turnover of Rs. 10,49,84,800/- had been adopted for calculating various ratios and similarly as per the audit report for the A.Y. 2016-17 the gross sales / total turnover for F.Y. 2015-16 had been shown at Rs. 21,90,08,104/-, in the preceding year s figures i.e; assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced herein. 6.4 The Ld. CIT(A) was of the view that the ledger account filed initially during assessment proceedings revealed that the claim regarding payment of License Fee of Rs. 5,10,48,700/- out of sales was a false story created after the assessee was confronted by the AO on this issue of non-accounting of this amount of License Fee. The Ld. CIT(A) did not accept this contention of the assessee that the addition had been made on suspicion and guesswork without bringing the corroborative material on record, and that the addition had been made after calling for information from the Excise Taxation Department which was duly confronted to the assessee during the assessment proceedings before passing the order and before making the addition. 6.5 The Ld. CIT(A) did not accept this contention of the assessee that in the succeeding year the same accounting terminology method of the assessee had been accepted. He also did not accept this contention of the assessee that the gross sales for the succeeding year had been entered into sale accounts and License Fee had been debited from that account and net amount of Rs. 21,90,08,104/- had been entered in the Audit Report. He reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,544/-, 7. Now the assessee is in appeal. 8. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee furnished all the relevant details to the AO and the License Fee was debited in the sales account, reference was made to page no. 49 to 54 of the assessee compilation which is the copy of the Contingency Ledger Account from 01/04/2014 to 31/03/2015 wherein the License Fee had been shown to be debited to the sale account on the various dates for the period from 01/04/2014 to 31/03/2015 amounting to Rs. 5,10,48,700/-. 8.1 The Ld. Counsel for the assessee also drew our attention towards page no. 21 to 32 of the assessee s paper book which are the copies of sales account and summary of the sales had been given at page no. 32 which revealed that the total sales from 01/04/2014 to 31/03/2015 was Rs. 15,60,33,500/- from which the License Fee of Rs. 5,10,48,700/- was reduced and net sales was shown at Rs. 10,49,84,800/-. 8.2 It was reiterated that the assessee reduced the License Fee from the sales account and net sales was shown in the P L Account. It was submitted that the assessee furnished all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the submissions of both the parties and carefully gone through the material available on the record. In the present case it is not in dispute that the addition on account of License Fee had been made by the AO for the reasons that the same was not reflected in the P L Account and as per the information supplied by the DETC (Excise) Jind, the assessee had paid a total amount of Rs. 5,10,48,700/- on account of License Fee for the year under consideration. In the present case the AO admitted that the assessee had supplied the copies of sales ledger and License Fee ledger and claimed that the License Fee was reduced from the sales, the AO considered the said contention of the assessee as a made up story. However, no discrepancy was pointed out in the copies of the sales ledger and the License Fee furnished by the assesse and even the Auditor in its Audit Report (copy of which is placed at page nos. 56 to 65 of the assessee s paper book) clearly stated in Column No. 11 that the assessee maintained books prescribed under section 44AA of the Act in the form of Cash Book Ledger Journal. In the instant case, it is noticed that the assessee had entered the day to day sales in the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be debited separately under the head License Fee in the Trading and P L Account. We therefore by considering the totality of the facts as discussed herein above are of the view that when the AO has accepted the gross sales reflected by the assessee in its ledger account and also not doubted the License Fee shown in the ledger account, there was no occasion to deny the benefit of the payment of License Fee which was reduced from the gross sales by the assessee. In that view of the matter we do not see any justification on the part of the Ld. CIT(A) in sustaining the addition made by the AO. Accordingly the same is deleted. 11. Vide Ground No. 3 the grievance of the assessee relates to the confirmation of addition of Rs. 1,00,000/- out of the disallowance made by the AO on account of possible leakage in the revenue out of the various expenses. 12. The facts related to this issue in brief are that the AO made the disallowance of Rs. 2,08,142/- out of the various expenses by observing in para 4 of the assessment order dt. 30/12/2017 as under: 4. Further, from the perusal of profit loss account it has been observed that the assessee has claimed following expenses:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uched expenses. Therefore, keeping in view the facts and circumstances of the case and the history of the case, the disallowance during the year is also restricted to Rs. 1,00,000/- and the appellant gets relief of the balance amount. 14. Now the Assessee is in appeal. 15. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that neither the AO nor the Ld. CIT(A) pointed out any instance where the expenses incurred in the regular course of business were utilized for any purpose other than the business of the assessee, alternatively it was submitted that the disallowance sustained by the Ld. CIT(A) was on higher side. 16. In his rival submissions the Ld. DR reiterated the observations made by the AO and strongly supported the impugned order passed by the Ld. CIT(A). 17. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is noticed that the AO disallowed the expenses under the head Wages, Salary, Welfare expenses, Travelling expenses, Misc expenses and Telephone expenses totaling to Rs. 1040710/-. He disallowed 1/5th of the said exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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