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2015 (12) TMI 191 - AT - Income TaxAddition on account of undisclosed receipts - Held that - In the present case the AO has not doubted the books of accounts as he has not rejected the same. Secondly, he has compared two audit reports and taken the higher figures from both the accounts accompanying the audit reports. The AO, first of all, has not given any finding which is the correct state of accounts as audited by two Chartered Accountants despite the fact that he has examined both the Chartered Accountants. It is also a fact that the assessee has produced complete address of the party SWDL and TDS certificates issued by that party clearly reveals that the total receipts are at ₹ 2,14,70,195/- as against the total receipt adopted by AO ₹ 2,93,30,087/-. The assessee has produced complete bills issued by SWDL and payments are received by cheque through bank accounts. The assessee filed before the authorities concerned all the books of account reflecting the receipts from SWDL and in that case it was the duty of the authorities to definitely come to one conclusion or the other in regard to the reliability of everyone of the relevant account filed by the assessee. In the absence of any such finding, it was not open to them to pick and chose one receipt or the other, which are more favourable to the revenue. They could accept the assessee s explanation or reject them or they could check the entries therein with reference to the books of account. But they have not done none of these things. Accordingly, the assessee s audit report as filed along with the return of income as audited by M/s. Anurag Mathur & Co. is the correct accounts for the reason that the receipts disclosed therein are matching with the TDS certificates issued by SWDL and also with the bills raised. Accordingly, we delete the addition - Decided in favour of assessee. Disallowance of commission - Held that - In the immediate preceding year i.e., assessment year 2003-04, the assessee was engaged in the same business and also taken services from the said parties and paid commission to them and no disallowance was made by the AO originally, but again case was reopened by issuing notice u/s. 148 read with section 147 of the Act on the basis of information that one of the parties Umang Credit Capital Ltd., the transaction had not been reflected in its Trading & P&L Account and transaction had been denied by this party. Accordingly, commission paid to these parties were disallowed but CIT(A) vide his appellate order dated 20.11.2012 considered all the aspects and acknowledged the services rendered by these parties and allowed the payment of commission except in the case of M/s. Dave Commercial Co. In view of these facts and circumstances of the case, we are of the view that that, since there is no change in the facts in the present case for the relevant assessment year in comparison to earlier AY 2003-04, as far as this issue is concerned and hence, the revenue should not have taken different conclusion than allowing the payments except in the case of M/s. Dave Commercial Co. We direct the AO to restrict the disallowance to the extent of this party i.e., M/s. Dave Commercial Co. only. We direct the AO accordingly. - Decided partly in favor of assessee. Disallowance of business promotion expenses - Held that - We find that exactly similar expenses on account of business promotion was allowed in immediately preceding assessment year 2003-04 by the AO himself. The AO in the immediately preceding year has clearly held that these are business expenses relatable to the business of the assessee for the reason that the assessee being the sale coordinator for supplies to Canteen Stores Department (of Military Wing) from SWDL and such expenditure is allowable as business expenditure. Thus hese expenses are allowable expenditure, first on the principles of consistency and even otherwise the CIT(A) has admitted the expenses to be business in nature but disallowed 50% on the basis of estimate. That cannot be the basis for disallowance. Accordingly, we delete the disallowance - Decided in favour of assessee.
Issues Involved:
1. Addition on account of undisclosed receipts. 2. Disallowance of commission expenses. 3. Disallowance of business promotion expenses. Detailed Analysis: 1. Addition on Account of Undisclosed Receipts: The first issue pertains to the addition of Rs. 78,59,892/- as undisclosed receipts. The assessee, a partnership firm, filed two audit reports for AY 2004-05: one by K. M. Gulgulia & Co. showing receipts of Rs. 2,93,30,087/- and another by Anurag Mathur & Co. showing receipts of Rs. 2,14,70,195/-. The AO added the difference of Rs. 78,59,892/- to the assessee's income, citing the lack of explanation for the discrepancy. The CIT(A) upheld this addition, noting the absence of reconciliation and confirmation from Shaw Wallace Distilleries Ltd. (SWDL). The Tribunal found that the AO failed to verify the actual receipts from SWDL, despite the assessee providing comprehensive evidence, including TDS certificates and bills matching the lower receipt figure. The Tribunal cited precedents emphasizing that authorities must conclusively determine the reliability of accounts and cannot arbitrarily select figures favoring revenue. Thus, the Tribunal deleted the addition, accepting the audit report by Anurag Mathur & Co. as accurate. 2. Disallowance of Commission Expenses: The second issue involves the disallowance of Rs. 1,93,89,240/- claimed as commission expenses paid to five parties. The AO disallowed the commission, citing non-service of notices to these parties and the absence of TDS deduction. The CIT(A) upheld the disallowance, noting discrepancies in the commission amounts reported by the recipients and the lack of evidence for services rendered. The Tribunal observed that the assessee had provided detailed evidence, including PAN, bills, and cheque payments, which the AO failed to investigate properly. It noted that similar commissions were allowed in the preceding year, except for a partial disallowance related to one party, Dave Commercial Co. The Tribunal directed the AO to restrict the disallowance to the amount paid to Dave Commercial Co. only, recognizing the consistency in the business practice and the evidence provided. 3. Disallowance of Business Promotion Expenses: The third issue concerns the disallowance of Rs. 4,88,704/- out of Rs. 8,39,894/- claimed as business promotion expenses. The AO disallowed the entire amount, questioning its relevance to the assessee's business. The CIT(A) allowed 50% of the expenses, disallowing the rest due to lack of proper evidence for certain payments. The Tribunal noted that similar expenses were allowed in the previous year and cited a precedent where such promotional expenses were deemed necessary for business. It criticized the CIT(A) for disallowing expenses on an arbitrary estimate and not on concrete evidence. Consequently, the Tribunal deleted the disallowance, accepting the expenses as business-related. Conclusion: The Tribunal partly allowed the appeal, deleting the additions related to undisclosed receipts and business promotion expenses, and restricting the disallowance of commission expenses to the amount paid to Dave Commercial Co. The judgment emphasized the necessity of thorough verification and consistency in the treatment of similar expenses across different assessment years.
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