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TMI Blog2012 (8) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal No.1 is directed against disallowance of Hammali/ cartage expenses at Rs.2,98,572/ -. The AO has disallowed the amount of Rs. 2,98,572/- out of total amount claimed under this head at Rs.3,98,572/-with the finding that the appellant has not been able to produce vouchers regarding Hammali, Lab. and cartage expenses besides those furnished with letter dated 06.03.2006 & 10.03.2006. The AO has observed that an amount of Rs. l,00,000/- is allowed" in view of the fact that that these expenses are essential and incidental to the business of the assessee." 4.1.1 The AR of the appellant, besides written submission pointed out that books of accounts and other related documents which were written up to 05.01.2003 were impounded under survey proceedings on 06.01.2003 and were in the possession of the department. The AO while disallowing nearly 70% of total amount claimed under this head has not cared to identify to what extent bills and vouchers were produced and noted by him. He has altogether ignored the impounded books of accounts lying in the possession of the department. Once he was of the view that these expenses were essential and incidental to the business he should have exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drew inference that the firm was managed by few persons and total expenses were debited in the account. He also took note of the fact that salary was being pal to various relatives which was according to his view excessive considering the nature of duties performed by them. He also held that such salary was distributed to family members to reduce the profit and then with these findings he allowed an amount of Rs. 3,00,000/- and disallowed the balance amount of Rs.3,61,700/-. 4.4.1 The appellant, in its written submission filed as well oral arguments advanced, took the objection to the AO's observations and findings recorded in this behalf and it was contended that there was nothing wrong if salary was paid to family members of the appellant For the work carried out by them and the appellant was very much justified in engaging his own family members to discharge various duties, who were trustworthy compared to outsiders. It was also emphasized that the AO has not cited any instance to support his findings that the amount paid to various members was excessive or unreasonable. The appellant also enclosed photo copy of Register for the month of December to February, 2003, in the compi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount of Rs. 1,00,000/- only as reasonable and the balance of Rs. 92,000/- is disallowed. 6.1 Similar disallowance was made for Asstt. Year 2001-02 and partial relief was granted by CIT(A). It was held that the rent @ Rs. 2/- would be reasonable and if the same rate is applied the rent comes to Rs.15,040/-p.m. i.e. Rs.1,80,480/- .The Assessing Officer is accordingly directed to allow the rent to the extent of Rs.1,80,500/- and the balance disallowance is hereby confirmed. 4.7 The next grievance is directed to disallowance out of courier expenses at Rs.18,072/-. The AO has disallowed courier expenses at Rs.18,072/- out of total amount claimed at Rs.23,360/- for want of necessary vouchers i.e. broadly following the findings in respect of Hammali and freight payments. The appellant has also advanced similar contentions, hence considering the overall facts and circumstances of the case and huge turn over of the appellant such disallowance is not found to be justified and accordingly directed to be deleted. 4.8 Next grievance is against disallowance of stationary expenses' at Rs. 4,582/-. The A.O has made the disallowance in the similar fashion considering the total amount claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment was nothing but diversion of profit. The appellant has contended that such remunerations were paid to them in the past and has been allowed by the CIT(A) and considering the past history of the case such disallowance is also directed to be deleted. 4.13. The next grievance is against the addition made for interest on FDRs. The AO has made the addition as discussed in para 13 on page 8-9 of assessment order. In the course of appeal hearing it was explained by the AR apart from written submissions that such addition was made without appreciating the facts as these FDRs were made in the name of individual partners and the interest income on the basis of TDS certificates issued by the Bank were offered for taxation in the hands of partners. Copies of FDRs have also been filed with compilation. On consideration of facts and submissions of the appellant such addition is not found to be justified and accordingly directed to be deleted. 4.14. Last grievance is against disallowance of Commission expenses claimed at Rs. 79,482/ -. The AO has noted in para 14 of assessment order that it was not clear why the Company had to pay commission and to whom the same has been paid. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance b y observing that the Assessing Officer has not recorded any finding regarding verifiability of claim of such expenses. Keeping in view, assessee's failure to establish deductibility of full amount, the CIT(A) has retained the disallowance to the extent of Rs. 1 lakh. We do not find any infirmity in the order of CIT(A) for such deletion. 7. Expenditure incurred on account of salary was deleted by the ld.CIT(A) by observing that salary was even though paid to family members, but the same was for the work carried out by them and assessee was very much justified in engaging his own family members to discharge the various duties, who was trustworthy compared to the outsiders. The Assessing Officer had made disallowance merely on the ground of failure to obtain signature in the salary register. Keeping into view the amount of expenditure incurred on sales vis-à-vis total turnover of business and nature of business activities of assessee, we do not find any infirmity in the order of CIT(A) for deleting the disallowance on account of salary expenses. 8. Disallowance made on account of rent payment was restricted by the ld.CIT(A) to the extent of Rs. 11,500/- by observin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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