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TMI Blog2017 (6) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... peal 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 commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter but same was not reliable.In absence of the books of accounts, the AO held that, book results declared by the assessee were not acceptable. Invoking the provisions of section 145 of the Act, he rejected the book results and determined the gross profit at the rate of 20%. Finally, he made an addition of ₹ 27.40 lakhs to the total income of the assessee under the head under-reported gross profit. 3. Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA)and made elaborate submissions.After considering the submission of the assessee and the assessment order,the FAA held that the AO could invoke section 145 only if the books of accounts were either incomplete or incorrect,that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee produced bills for purchase and sells of few months under the plea that it was not possible to produce all the books and bills files due to heavy volume. The AO asked the assessee to produce at least the stock register to verify the stock quantity and basis of valuation of closing stock declared. The AR of the assessee stated before the AO that the stock register was maintained but the same was not traceable now. As the assessee could not produce all the bills and stock register for verification, in spite being specifically asked to do so, the AO rejected the books of accounts u/s 145 of the Act and estimated gross profit @22% on the total turnover. The same comes to ₹ 1,60,21,172/-. As the assessee had declared gross profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y adhoc disallowance by comparing the commission rate with the earlier years. Even though, the major portion of the commission was remaining unpaid at the end of the year, the assessee paid the same in the subsequent year. Therefore, the learned CIT(A) directed the AO to delete the addition of ₹ 7,42,521/- made on account of excess commission. 5.Before us, the learned DR supported the order passed by the AO. The learned counsel of the assessee supported the order passed by the learned CIT(A) and also relied on the order of the ITAT Bench, Mumbai in the case of the assessee for the A.Y. 2007-08 (ITA No. 3737/Mum/2010) and A.Y. 2008-09 (ITA No. 4389/Mum/2011) 6. We have heard the rival submissions and perused the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll net profit has also increased. Thus, there may not be any prima facie inference that assessee s profit is not in commensurate with the earlier years so as to doubt the correctness of the profit shown by the assessee; and lastly, the manner in which the AO has worked out the gross profit on the basis of selected samples is also not a correct approach and if going by the trading result and gross profit of various items, it can be very well held that assessee s profit and trading results are much better this year, hence, the observation and the finding of the CIT(A) cannot be deviated from and accordingly, the same is affirmed. Thus, ground no. 1 as raised by the revenue is dismissed. Respectfully following the above, we confirm the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3% in F.Y. 2007-08 and then substantially increased the rate of commission to 4%. The AO took into consideration the fact that the nature of business of assessee has remained the same and payment commission has been made to persons closely related to the assessee and some portion of such commission is outstanding on the last day of the financial year. The AO disallowed the excess commission paid @1% in comparison to F.Y. 2005-06 and thereby added ₹ 7,42,521/-. 6.1 In respect of ground of appeal similar to 2nd ground in the instant case, the Tribunal has held as under: After considering the rival contention of the parties and on perusal of the impugned material on record, we find that AO has made an ad-hoc disallowance on this sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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