2016 (2) TMI 1160 - AT - Income Tax

Bogus purchases - trading addition - Held that - We found force in the arguments of the Ld AR that when the department has accepted the sales made by M/s Clarity Gold Pvt. Ltd which is assessed to tax, how the purchases made by the assessee from the same party can be held to be unverifiable/non-genuine more particularly when the party has given the confirmation for the transaction. We accordingly agree with the contention of the assessee and the AO is directed to allow the said claim after verifying the assessment records of M/s Clarity Gold Pvt Ltd. Further, the matter in respect of unverifiable purchases in case of Anuj Kumar Varshney vs. ITO (2015 (4) TMI 533 - ITAT JAIPUR) as referred by the ld AR has since been referred and pending adjudication before the Hon ble Rajasthan High Court. Given the consistent stand taken by this Bench, we are inclined to set aside the issues raised in this appeal in respect of unverifiable purchases from the remaining three parties (other than M/s Clarity Gold) and restore the matter to the file of AO to decide the same afresh after the judgement of Hon ble Rajasthan High Court in the case of Anuj Kumar Varshney and other vs. ITO(supra) is delivered, after giving adequate opportunity of being heard to the assessee. Addition of commission payment - Held that - In respect of 17 parties who have complied with the summons, tax has been deducted at source and they have also reported the commission receipts in their return of income, we donot see a rationale basis which prompted the AO to disallow the commission payment. More so, where the matter is covered in favour of the assessee by earlier orders of the Coordinate Bench which has been referred to by the ld CIT(A). We accordingly upheld the deletion of additions of commission payments to these 17 parties. In respect of other 4 parties, it is noted that Shri Sudhir Jain has already complied with the summons and further assessee has filed additional evidence before the Bench. The additional evidence is accepted and the matter is set-aside to the file of the AO in respect of these 4 parties to examine the same afresh considering the additional evidence after giving proper opportunity to the assessee. Addition of travelling expenses including foreign travelling - expenditure for busniss purpose - Held that - The assessee has provided the necessary explanation in respect of travel of tourist guide Vikas Kaul and Neeta Dadda who is a partner in the firm. Further, it is noted that on similar facts, the disallowance was deleted by ld CIT(A) for AY 2008- 09 against which the department has not filed any appeal. Keeping in mind the nature of the business of the assessee and the explanation provided by the assessee, we see not reason to interfere with the order of ld CIT(A) who has deleted the disallowance of ₹ 1 lacs towards foreign travel expenses. TDS u/s 194H - disallowance on payment to BOB and ICICI - non deduction of tds - Held that - As in assessee s own case for A.Y. 2008-09 2012 (2) TMI 521 - ITAT JAIPUR , we hereby delete the disallowance of ₹ 726312 under section 40a(ia) in the hands of the assessee.

Summary

Issues Involved:
1. Trading addition on account of alleged bogus purchases.
2. Disallowance of sales commission paid.
3. Disallowance of foreign traveling expenses.
4. Disallowance under Section 40(a)(ia) for non-deduction of TDS on credit card commission.

Issue-wise Detailed Analysis:

1. Trading Addition on Account of Alleged Bogus Purchases:

The assessee firm, engaged in trading, manufacturing, and exporting handicrafts and jewelry, declared a gross profit rate of 25.06%. The Assessing Officer (AO) disallowed 25% of purchases amounting to Rs. 1,01,00,729/- from four parties, terming them unverifiable and bogus, leading to a trading addition of Rs. 25,25,182/-. The CIT(A) reduced this addition to Rs. 6,63,915/- by applying a G.P. rate of 25.50%.

The assessee argued that complete books of accounts were maintained and audited, with all transactions verifiable. Specifically, purchases from M/s Clarity Gold Pvt. Ltd., which were confirmed by the seller, were deemed unverifiable by the AO based on a previous search operation. The ITAT noted that the department accepted sales made by M/s Clarity Gold Pvt. Ltd., thus questioning the non-genuine status of purchases from the same entity. The ITAT directed the AO to allow the claim after verifying the assessment records of M/s Clarity Gold Pvt. Ltd.

For the remaining three parties, the ITAT restored the matter to the AO to decide afresh after the Rajasthan High Court's judgment in a related case (Anuj Kumar Varshney vs. ITO) is delivered.

2. Disallowance of Sales Commission Paid:

The AO disallowed 30% of the total sales commission of Rs. 36,66,562/- paid to 21 parties, as four parties did not respond to summons. The CIT(A) restricted the disallowance to Rs. 1,44,276/-, being 20% of the commission paid to the four non-compliant parties, based on previous ITAT orders.

The assessee provided complete details of commission payments, including TDS deductions and confirmations from 17 parties. For the four non-compliant parties, additional evidence was submitted. The ITAT upheld the deletion of disallowances for the 17 compliant parties and set aside the matter for the four non-compliant parties to the AO for fresh examination considering the additional evidence.

3. Disallowance of Foreign Traveling Expenses:

The AO disallowed Rs. 1,00,000/- out of total foreign traveling expenses of Rs. 21,95,887/-, citing non-business-related expenses. The CIT(A) deleted this disallowance, noting that a similar disallowance in the previous year was also deleted.

The assessee explained that all expenses were for business purposes, including participation in a jewelry show in the USA. The ITAT found the explanation satisfactory and upheld the CIT(A)'s deletion of the disallowance.

4. Disallowance under Section 40(a)(ia) for Non-deduction of TDS on Credit Card Commission:

The AO disallowed Rs. 7,26,312/- paid to BOB and ICICI for non-deduction of TDS under Section 194H. The CIT(A) deleted the disallowance based on a previous ITAT order in the assessee's case.

The ITAT, following the coordinate bench's decision, upheld the deletion of the disallowance under Section 40(a)(ia).

Conclusion:

The appeal of the revenue and the cross objection of the assessee were partly allowed for statistical purposes. The ITAT directed specific re-examinations and upheld deletions based on past judgments and provided evidence.