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2017 (6) TMI 337 - AT - Income TaxRejection of books of accounts - Held that - We confirm the order of the FAA and hold that there was no justification for rejecting the books of accounts and making ad hoc addition on account of alleged low GP.We want to mention that though the AO had alleged violation of rule 46A, yet,it was not mentioned as to which documents were produced before the FAA that were not made available to the AO.We decide first effective ground of appeal (GOA-1&2)against the AO. Addition on account of excess commission paid - Held that - Tribunal had dealt with the issue while adjudicating the appeal for the AY.2009-10 AO has made an ad-hoc disallowance on this score on the ground that firstly, there is enhancement of rate of commission from 2.5% to the rate of 3.25%; secondly, some of the commission agents are also the relatives of the assessee. Such a basis drawn by the AO for making the disallowance cannot be sustained for the reason that, CIT(A) has clarified that overall rate of commission paid is @ 3% on the total turnover and not 3.25% and the commission has been paid uniformly to all the parties including the relatives. Out of 11 party, only 2 are relatives, therefore, it cannot be held that any unreasonable payment have been made to the relatives as compared to the outsiders. Such an ad-hoc disallowance of payment of commission made by the AO cannot be sustained and finding of the CIT(A) is thus, affirmed. - Decided against revenue.
Issues Involved:
1. Rejection of books of accounts by the Assessing Officer and admission of additional evidences. 2. Addition of under-reported gross profit by the Assessing Officer. 3. Deletion of addition made by the Assessing Officer on account of lower gross profit. 4. Deletion of addition made by the Assessing Officer on account of excess commission paid. Analysis: Issue 1: Rejection of books of accounts and admission of additional evidences The Assessing Officer (AO) rejected the books of accounts of the assessee under section 145 of the Income Tax Act, 1961, and determined the gross profit at a higher rate. The First Appellate Authority (FAA) held that the rejection of books by the AO was not justified as the books were not incomplete or incorrect. The FAA observed that the AO had not compared the purchase and sales bills with the ledger account to establish any discrepancies. The AO's rejection was challenged, and the FAA deleted the addition made by the AO on the grounds of lower gross profit. Issue 2: Addition of under-reported gross profit The AO made an addition to the total income of the assessee under the head of under-reported gross profit due to the rejection of books of accounts. The FAA found that the AO had estimated the gross profit at a higher rate without proper justification. The FAA concluded that the AO's rejection of the book results was unwarranted as the assessee had maintained ledger accounts and provided purchase and sales bills. The addition made by the AO on account of lower gross profit was deleted by the FAA. Issue 3: Deletion of addition on account of lower gross profit The Departmental Representative argued that the assessee did not produce all bills and stock registers during the assessment proceedings, and the FAA admitted additional evidence. The Authorized Representative contended that no new evidence was filed before the FAA. The Tribunal referred to a similar case from a previous assessment year and confirmed the FAA's decision to delete the addition made by the AO on account of lower gross profit. Issue 4: Deletion of addition on account of excess commission paid The AO made an addition on account of excess commission paid by the assessee. The Tribunal referred to a previous case where a similar issue was addressed and held that the ad-hoc disallowance made by the AO was not justified. The Tribunal dismissed the AO's grounds for disallowance and affirmed the decision of the FAA to delete the addition made on account of excess commission paid. In conclusion, the appeal filed by the Assessing Officer was dismissed, and the decisions of the FAA and Tribunal were upheld in all the issues discussed.
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