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2019 (5) TMI 1304 - AT - Income TaxDisallowance of commission expenses - HELD THAT - We find force in the contention AR for the assessee that the turnover of the assessee was quite huge amounting to ₹ 24,31,54,719/- which is not possible without the involvement of the commission agents in this kind of trade. The learned DR has not brought anything on record against the contention of the assessee. We also disagree with the contention of the DR to refer the matter to the AO for conducting the necessary inquiries from the commission agents. It is because the AO had sufficient details in its possession during the assessment proceedings. Therefore, we are reluctant to provide further opportunity to the Revenue for making the fresh inquiries on the same set of documents. We are not impressed with the finding of lower authorities. Therefore, we reverse the order of the authorities below - delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. Addition on account of capital contribution - HELD THAT - In the instant case, the assessee failed to furnish the supporting evidence for the capital contribution of ₹ 90,000 only. Indeed there was a credit amount reflected in the bank statement of the assessee amounting to ₹ 90,000/- but the onus is on the assessee to substantiate the same as a gift received from his brother on the basis of documentary evidence. AR before us has also not provided any details to adjust the same with the telescoping benefit. Thus in the absence of any documentary evidence, we are not inclined to disturb the finding of the authorities below. Hence the ground of appeal of the assessee is dismissed. Disallowance of depreciation - asset put to use - assets which are ready to use but were not put to use because their use depends upon the operation of other machinery which were not actually ready to use before 30th September - HELD THAT - In this regard, we note that the use of the plant and machinery depended upon the operation of the furnace which was not put to use before 30th September 2010. No ambiguity that the plant machinery were not put to use before 30th September. Accordingly, we hold that the assessee was entitled to depreciation at the rate of 50%. Thus we do not find any infirmity in the order of authorities below. Hence the ground of appeal of the assessee is dismissed. Ad-hock disallowance @20% of telephone and administrative expenses - HELD THAT - The learned counsel for the assessee has also not produced any documentary evidence to justify that there was no personal element in the aforesaid expenses. However, in our considered view the AO before making the disallowance of the expenses on an ad-hoc basis should have referred the claim made by the assessee in the earlier years as well as in the subsequent years which he failed to do. However, we are of the view that the disallowance at the rate of 20% is slightly on the higher side. Therefore, in the interest of justice and fair play we restrict the disallowance to the extent of 10% of the total expenses.
Issues Involved:
1. Disallowance of commission expenditure of ?10,10,000. 2. Addition of ?90,000 on account of capital introduction. 3. Disallowance of ?2,05,290 under Section 32 for excess depreciation. 4. Disallowance of ?52,342 under Section 37 for personal usage of telephone and administrative expenditures. 5. General grounds regarding the breach of law and Principles of Natural Justice. 6. Levying of interest under Section 234A/B/C/D. 7. Initiation of penalty under Section 271(1)(c). Detailed Analysis: 1. Disallowance of Commission Expenditure of ?10,10,000: The assessee, engaged in the business of Steel re-rolling mills, paid commission to various parties, including two parties, Shri Nayan Gulabrai Shah and Shri Ankit P. Goyal, amounting to ?5,20,000 and ?4,90,000 respectively. The AO issued a show-cause notice due to discrepancies in the commission details, such as varying commission rates and quantities. Despite the assessee's submission of revised bills and TDS deductions, the AO disallowed the commission, deeming it non-genuine. The CIT(A) upheld this view, citing a decline in Net Profit. However, the Tribunal noted that the commission was paid through banking channels, with TDS deducted, and confirmations from the parties were provided. The AO failed to utilize powers under Sections 133(6)/131 to verify the claims. The Tribunal found that the discrepancies were reconciled by the assessee and reversed the disallowance, directing the AO to delete the addition. 2. Addition of ?90,000 on Account of Capital Introduction: The assessee showed a capital contribution of ?1,50,616 as a gift from his brother, but the AO found that US $1350 equated to ?60,616, treating the remaining ?90,000 as unexplained cash credit. The CIT(A) confirmed this, noting a lack of evidence. The Tribunal upheld this view, stating the assessee failed to substantiate the claim with documentary evidence and dismissed the ground. 3. Disallowance of ?2,05,290 for Excess Depreciation: The assessee claimed full depreciation on additions to factory sheds, buildings, furnace, and plant & machinery before 30th September 2010. The AO disallowed part of this, arguing that the assets were not put to use by that date. The CIT(A) confirmed this, noting discrepancies in the dates and amounts of expenses. The Tribunal agreed, stating that the assessee failed to prove the assets were ready to use before the specified date and upheld the disallowance. 4. Disallowance of ?52,342 for Personal Usage of Telephone and Administrative Expenditures: The AO disallowed 20% of the telephone and administrative expenses, suspecting personal usage. The CIT(A) upheld this, citing a lack of supporting details. The Tribunal found the 20% disallowance excessive and reduced it to 10%, partly allowing the ground. 5. General Grounds Regarding Breach of Law and Principles of Natural Justice: The Tribunal did not find any specific breach of law or Principles of Natural Justice that required separate adjudication. 6. Levying of Interest under Section 234A/B/C/D: The Tribunal did not provide a detailed analysis for this ground, implying it did not require separate adjudication. 7. Initiation of Penalty under Section 271(1)(c): The Tribunal did not provide a detailed analysis for this ground, implying it did not require separate adjudication. Conclusion: The Tribunal allowed the appeal partly, reversing the disallowance of commission expenses, upholding the addition on account of capital introduction, confirming the disallowance for excess depreciation, and reducing the disallowance for personal usage of expenses. Other grounds were deemed general and did not require separate adjudication.
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