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TMI Blog2016 (5) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of discrepancies in sales and purchases - Held that:- Neither the AO nor the Ld. DR has brought on record any allegation to establish that the sales were made by the assessee during the FY 2008-09 relevant to AY 2009-10 amounting to ₹ 1,12,99,491/- from M/s. A.P.Sons and of ₹ 2,39,166/- from M/s. South Delhi Saree House and thus, we are in agreement with the conclusion of the CIT(A) wherein he held that there were no unaccounted sales of the assessee to its alleged dedicated dealers i.e. M/s A.P. Sons and M/s. South Delhi Saree House and hence we uphold the findings of the CIT(A) on this count. - Decided in favour of assessee Disallowance of expenses - Held that:- The assessing officer made additions without any reasonable cause for both the assessment years and the CIT(A), after considering and properly appreciating the facts, circumstances and explanation of the assessee to the rightly held that the expense was incurred wholly and exclusively for the purpose of the business of the assessee and the same was allowable expenses expenditure for the assessee under the provisions of the Act - Decided in favour of assessee - ITA No. 220 & 6439 /Del./2013 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,947/- made on account of disallowance of brokerage and commission pait to free lancer individual for increasing the relationship with various dealers and the assessee company by ignoring the fact that as per business model of the assessee, the goods imported to the dealers no longer appear in the stock of the company and the dealer is like any other buyer of the goods from the assessee company and account is maintained similar to the accounts for sundry debtors. The Assessing Officer had held that the expenses was not laid amount wholly and exclusively for the purpose of assessee s business. Ground no. 1 for AY 2009-10 : 2. We have heard argument of both the sides and carefully perused the relevant material placed on record before the Tribunal. The ld. Departmental Representative (DR) submitted that the CIT(A) has erred in law and on facts in deleting the addition made on account of discrepancy in DVAT account ignoring the facts that during the assessment proceedings it was observed that the value of sales return and branch transfer from gross turn over has shown in the DVAT return and increasing the same by the turn over of Noida and Panipat which do not attract VAT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been reduced from the Purchases (net of returns) claimed by the appellant in the Profit Loss A/c. It was apparent from the above reconciliation statement the ledgers in the books of both the parties that the Purchases the Purchase Returns shown by the appellant were same as that of the Sales Sales Returns mentioned by these parties in their books of accounts. Looking at these facts, I am of the view that there were no inflated Purchases mentioned by the appellant in its Profit Loss A/c. therefore, it is evident that there were no excess purchases claimed by the appellant in its Profit Loss A/c. The appellant also submitted that the AO mentioned in his order at page number 5 that It may be worthwhile to state that similar instances of inflated purchases have been unearthed while analyzing individual purchase transactions; by the assessee as have been elaborately discussed in Paragraph-4 below. In response to this objection of the AO, the appellant submitted as follows: Regarding the remaining three parties mentioned by the learned AO in paragraph 4 of his order, i.e. M/s. Gungun Fashions, M/s. Ritvika Creations M/s. Varhini; during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed purchases claimed by the assessee in its Profit Loss Account. Therefore, addition made by the AO on the allegation of inflated purchases cannot be held as sustainable and the same was rightly deleted by the CIT(A) and thus we uphold the impugned order on this count. Consequently, ground no. 1 of the Revenue being devoid of merits is dismissed. Ground no. 2 of the Revenue for AY 2009-10 6. The ld. Departmental Representative (DR) contended that the CIT(A) has erred in law and on facts in deleting the addition made by the AO on account of discrepancies in sales and purchases in sales and purchases ignoring the facts that during the assessment proceedings. The AO himself noted that there are several instances of discrepancy in the transactions of the assessee with Indian charges for sales as well as purchase of goods. The ld. DR strenuously contended that the CIT(A) grossly erred in accepting the explanation of the assessee that opening and closing balances were all match for the parties and this factual finding is not correct as per the figures of sales and figures given by the assessee itself. The ld. DR also drawn our attention towards relevant operative para no. 4 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO is directed to delete the addition of ₹ 24,43,888/- and the Ground of Appeal No. 2 is allowed. 9. In view of the above neither the AO nor the Ld. DR has brought on record any allegation to establish that the sales were made by the assessee during the FY 2008-09 relevant to AY 2009-10 amounting to ₹ 1,12,99,491/- from M/s. A.P.Sons and of ₹ 2,39,166/- from M/s. South Delhi Saree House and thus, we are in agreement with the conclusion of the CIT(A) wherein he held that there were no unaccounted sales of the assessee to its alleged dedicated dealers i.e. M/s A.P. Sons and M/s. South Delhi Saree House and hence we uphold the findings of the CIT(A) on this count. Consequently ground no. 2 of the Revenue being devoid of merits is dimissed. Ground no. 3 of AY 2009-10 and ground no. 1 of AY 2010-11 of the Revenue : 10. We have heard arguments of both the sides apropos issue of commission and brokerage and also carefully perused the relevant material placed on the record on Tribunal on these issue. The Ld. DR supporting the action of the AO submitted that the CIT(A) was not justified and erred in law and on the facts of the case in deleting the addition m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstance and nature of the expenses claimed by the assessee which has been incurred wholly and exclusively for the purposes of the business of the assessee. 12. The ld. Counsel also drawn our attention towards operative para 5.1 of the order of the CIT(A) for AY 2010-11 and submitted that the CIT(A) rightly following the doctrine of consistency correctly held that such expenditure have been incurred for the purpose of business expediency and business prudence for the overall mutual benefit of the assessee. The ld Counsel for the assessee also pointed out that free lance individuals have been appointed by the assessee to manage the asessee s business relationship with dedicated dealers so as to maximize the sales. Therefore, the expenses on brokerage and commission was incurred wholly and exclusively for the purpose of business of the assessee and following the principle of consistency the CIT(A) rightly deleted the baseless addition for growth the assessment years. 13. On carefully consideration on above submissions we observe that the CIT(A) deleted the addition for AY 2009-10 by observing as under : 6.1 I have carefully considered the submissions made by the Ld. AR a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistency and also considering the fact that in the relevant assessment year under consideration such expenditure have been incurred for the purpose of business expediency and business prudence and for the overall mutual business benefit, plea of the appellant is hereby accepted. Accordingly, the AO is directed to the delete the addition of ₹ 15,01,947/- and this ground of appeal is, therefore, allowed. 15. In view of the above, we are of the considered view that the sales to the dedicated dealers during AY 2009-10 was of ₹ 31.67 crores and for AY 2010-11 was of ₹ 27.08 crores which is major part of the sales made by the assessee during the relevant financial periods. Neither the AO nor the ld. DR has disputed this fact that free Lance individuals have been appointed by the assessee to manage the assessee s business relationship with the dedicated dealers and the method of computation of commission and brokerage clearly shows that the amount incurred on this account was an incentive for the individuals to increase the sales of the dedicated dealers further leading to the substantial increase of sales by the assessee to its dedicated dealers. In this situatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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