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2023 (6) TMI 1208 - AT - Income TaxAddition on account of difference in Gross Profit Rate - method of accounting - AO noticed that the assessee company, in its trading account, is showing gross sales including trade discount as total sales which are, in fact, not being credited into its books of accounts - HELD THAT - GP rate adopted by the AO for A.Y 2010-11 is not comparable with the GP rate of A.Y 2011-12 and 2012-13 under the consideration because the sales is a predominant determinative factor and the same is not comparable as the assessee has accounted the sale at DLP during the A.Y 2010-11 as against the accounting of turnover at MRP during the year under consideration. Sale is prime component to determine the GP ratio and if the sale factor is not comparable, resulting GP cannot be considered comparable. On totality of facts, we do not find any reason to interfere with the findings of the ld. CIT(A). The common grounds relating to GP addition in A.Y 2011-12 and 2012-13 are dismissed. Addition on account of Scheme Expenses - as per AO though the assessee has given details of scheme but not furnished details of beneficiaries to whom these gift items were distributed - whether the expenses have been incurred for the purpose of the business and is not of capital in nature? - HELD THAT - As there is no dispute that the expenses were incurred for the purpose of business and were not of capital expenditure, the same has to be allowed. But, at the same time, the quantum can be questioned for want of supporting evidences as the same were not justified by production of books of account. Therefore, in the interest of justice and fair play, we deem it fit to restrict the disallowance to 10% of the expenditure claimed under this head. Thus direct the AO to restrict the disallowance. Addition of overriding commission - justification of claim of expenditure and explain the basis of payment asked - as per AO justification for payment given by the assessee is too general and no specific information has been given justifying payment - CIT-A deleted the addition - HELD THAT - It is true that in A.Y 2010-11 also, similar disallowance has been made and it is equally true that while making the disallowance for A.Y 2011-12, the AO has simply followed the findings given in A.Y 2010-11. Since in A.Y 2010-11 addition was deleted by the ld. CIT(A) and though the revenue was in appeal before this Tribunal but deletion of this addition was not challenged. Therefore, the same has attained finality. Finding parity of facts, we do not find any error or infirmity in the deletion made by the ld. CIT(A). Deletion stands confirmed.
Issues involved:
- Deletion of addition made by the Assessing Officer on account of difference in Gross Profit Rate - Deletion of addition made by the Assessing Officer on account of Scheme Expenses - Deletion of addition made by the Assessing Officer on account of overriding commission Deletion of addition on account of difference in Gross Profit Rate: - The Assessing Officer challenged the trade discount claimed by the assessee, contending it should have been in the trading account, not the profit and loss account. - The Assessing Officer recast the trading account, leading to additional amounts for A.Ys 2011-12 and 2012-13. - The CIT(A) found the GP rate adopted by the Assessing Officer not comparable and directed deletion of the additions. - The Tribunal concurred, emphasizing the need for comparable sales data to determine GP ratio, dismissing the grounds for GP addition. Deletion of addition on account of Scheme Expenses: - The Assessing Officer disallowed scheme expenses due to lack of details on beneficiaries and other expenses like trade discounts. - The CIT(A) emphasized the nexus between expenditure and business purpose, directing deletion of the additions. - The Tribunal restricted the disallowance to 10% of the claimed expenditure due to lack of supporting evidence, partially allowing the ground. Deletion of addition on account of overriding commission: - The Assessing Officer disallowed the overriding commission, citing lack of specific information justifying the payments. - The CIT(A) directed deletion of the addition based on consistency with a previous year's decision. - The Tribunal upheld the deletion, noting the finality of the previous year's decision and dismissing the appeal.
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