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TMI Blog2018 (1) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of power and fuel expenses" 3. "On the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition to Rs. 41,92,129/- made by the AO on account of unverified purchases." 3. The brief facts qua the first issue are that the assessee company is engaged in the business of product of rice bran and rice bran oil near Rudrapur in state of UP. The AO noted that assessee has claimed an expenditure of Rs. 16,70,260/- out of which sum of Rs. 10,80,532/- was on account of commission in respect of sale of its products; and Rs. 6,51,728/- was on account of commission in connection with purchase of raw materials. The AO had observed that assessee could not file any copies of agreement from the parties to whom commission has been paid nor could it file any confirmations from the said parties. Accordingly, he disallowed the claim of commission payment of Rs. 16,70,260/-. 4. Before the Ld. CIT (A) the assessee submitted that during the course of assessment proceedings the AO had not given any adequate opportunity to file the evidences as the query was raised at the fag end and no time was given by the AO. Accordingly, the application for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010-11. In the profit & loss Account the proprietor has categorically shown Dalali Receipts of Rs. 6,13,290/- as the main Income. 5. Shri Govind Agencies (Commission of Rs. 85,635/-) The Assessee itself filed the Confirmed Copy of Bill Book showing complete detail of transactions. (page 48-51 of P.B). There is no comment by A.O. Chart for last four Year payment of commission to the same Party to establish party is regular party (Relevant Page 118 of P.B at serial no 24). It was not examined and therefore no comments by the Ld. A.O. Further in response to Notice u/s 133(6), the party complied by sending Confirmed Copy of ledger with Income Tax Return and PAN of the proprietor. The narration of the Ledger dearly depicts brokerage income of Rs. 85,635/- with detail of TDS. 6. Mool Chand Goel & sons The assessee filed confirmation for payment of Commission with TDS (Page 88 of P.B). There is no comments by the A.O. Chart for Last Four Year payment of commission to the same Party to establish party is regular party (Relevant Page 117 of P.B at serial no 16), It was not examined and therefore no comments by the A.O Further in response to notice u/s 133(6), the party com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Form 16A issued by the appellant as well as 26AS showing Payment of Rs. 93,600/- with deduction of TDS. of Rs. 9,360/- (iii) Certified copy of Bill book issued to the assessee/appellant. 9. M/s Daulat Ram Giyamalani (Commission Payment of Rs. 30,060/-) The assessee filed Copy of confirmation with Copy of PAN of the proprietor (Page 75-76 of P.B). There is no comments by the A.O. Chart for last four year payment 'of commission to the same Party to establish party is regular party (Relevant Page 116 of P.B at serial no 9), It was not examined and therefore no comments by the Ld. A.O. Further in response to notice u/s 133(6), the party complied by sending following documents vide its letter dated 04.10.2013. (Letter dt 04.10.2013 enclosed with the remand report). (i) Confirmed copy of Accounts of the appellant for the F. Y 2009- 10 showing brokerage receipt of Rs. 30,060/- with TDS detail too. (ii) Bill Book Summary for entire Commission received. Out of the total commission of Rs. 4,24,060/-, Commission of Rs. 30,060/- has been shown from the assessee. (iii) Bill book for commission raised to the assessee. (iv) TDS certificate (Form No 16A) issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission with a view to establish regularity. (See relevant page 116 of P.B). No examination of all this by the A. O before adverse comments. 3. M/s Chomukhi Enterprises: We are not in a position to say whether notice was in fact served on the party. Even otherwise the assessee by way of additional evidence had itself filed Copy of invoice raised to the assessee (Page 58-60 of P.B) & Copy of Confirmation (Page 72 of the P.B). The appellant had also filed chart for the last four year payments of Commission with a view to establish regularity. (See Relevant page 115 of P.B). No examination of all this by the A. O before adverse comments. 4. Sh. Shiv Kumar: We are not in a position to say whether notice was in fact served on the party. Even otherwise the assessee by way of additional evidence had itself filed Copy of Confirmation with PAN of the recipient (Page 113-114 of the P.B). The appellant had also filed Chart for the last four year payments of Commission with a view to establish regularity. (See relevant page 119 of P.B). NO examination of all this by the A.O before adverse comments. 5. Sh. Ghanshyam Dass: We are not in a position to say whether notice was in fact served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties have confirmed the commission payment and also rendered similar services and payment were made in the earlier years, therefore, disallowance of commission paid to the seven parties, namely, M/s. Agarwal & Co., M/s. Shri Govind Agency, M/s. Mool Chand Goel and Sons, M/s. Delhi Trading Co., M/s. Jagdish Khandelwal, M/s. Daulat Ram Giyamalani, Rajesh Chand Agarwal, cannot be disallowed. With regard to the other five parties, the assessee's contention that they have filed their confirmation alongwith the PAN and also similar commission has been paid to these parties in last four years also, the Ld. CIT (A) accepted the payment of commission in respect of the four parties, namely, M/s. Ankit Broker Co., M/s. Goyal Enterprises, M/s. Chomukhi Enterprises and Shri Ghanshyam Dass. The Ld. CIT (A) has deleted the disallowance mainly on the ground that the assessee had filed all the supporting details and documents during the remand proceedings including the PAN nos.; details of the commission paid; and also that similar payments have been made in various years. However, so far as in the case of one party, namely, Shri Shiv Kumar, the Ld. CIT(A) has confirmed the addition on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of remand proceedings had filed the confirmations of the parties and confirmed copies of account alongwith their PAN Numbers. All the commissions have been paid through account payee cheques and TDS have also been deducted wherever required. In the remand proceedings the AO had even disbelieved the payments made to the seven parties who have duly confirmed the payment of commission directly on the ground that they could not produce the bill book. Such an observation for discarding the information received from his own inquiry cannot be upheld because bill book for commission cannot be reckoned as solitary piece of evidence to accept or reject the payment of commission. The Ld. Counsel for the assessee had submitted before us that the assessee was having its registered office in Delhi and do not have any sales office in any part of the country nor did it have any executives for sales promotion. All the products manufactured have been sold through agents since the establishment of the company in the year 1977. These agents used to procure the sales from various buyers located at various parts of country at rates which were negotiated with the company and thereafter the goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be verified independently whether any such payment has been made to the said party and merely because payment has been made through cheque does not mean the commission payment has to be allowed. We find that Ld. CIT (A) has drawn adverse inference on the ground that firstly, he has not confirmed the transaction in response to notice u/s 133(6) and in the immediately two preceding assessment years no payments have been made. However nowhere it has been denied that assessee had filed confirmed copy of accounts of the said person alongwith the PAN and also the payments have been made through account payee cheque on which TDS has been deducted. The payment of cheque only reflects that transaction is genuine and so far as whether the commission payment is to be allowed same has to be seen from the fact that in case of the assessee, payment of commission is a regular feature and same has been made for procuring sales and in this particular case it is seen that commission was paid to the said party in the assessment year 2007-08 and when in early years this party was paid the commission which appears to have been accepted, then merely because in immediately preceding two years c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011--12 901600 17537946 755000 17684546 59528 0.34 13. Ld. CIT (A), however has restricted the disallowance to Rs. 3 lacs simply on the ground that the assessee has not been able to establish that there was proper accounting of these expenses on the basis of day to day consumption register and the contention of the AO cannot be totally ignored. 14. Before us Ld. Counsel for assessee submitted that the paddy husk is a by-product which is used for fuel in the boiler. Though manufacturing register and other details like stock register has been maintained meticulously which have been subject to audit also but it is impossible to maintain day to day stock register of heaps of paddy husk lying in the factory premises because, there are certain wastage also. He further submitted that once accounts have been audited and consumption of paddy husk is in consonance with the earlier years, then no disallowance at all should be made. On the other hand the Ld. DR submitted that there is no rebuttal of the finding of the AO and the Ld. CIT (A) that assessee has not maintained day to day consumption register of paddy husk and therefore, entire expenditure claimed cannot be upheld. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce AO did not gave proper opportunity and that matter was getting time barred, the AO has made the addition without giving any chance to rebut the AO's finding. Accordingly, assessee filed additional evidences before the Ld. CIT (A) which were in the nature of; i) confirmation of accounts by these parties; ii) comparative chart of last four years giving the details of the transaction carried out in the earlier years from the same parties; iii) bank statement in respect of purchase transaction; and iv) bank certificate by HDFC bank and PNB in respect of credit of amount in favour of the three parties. The Ld. CIT (A) called for the remand report on these evidences from the AO, who in his remand report has submitted as under:- "It is further submitted that notice u/s 133(6) of the I. T. Act, were also issued to the following parties namely M/s S.R. Industries, Sh. Bhagwati Agro Mills and M/s. Dixit Rice Mill from whom the assessee has claimed to have made genuine purchase, but the same had been treated as bogus by the AO during the course of assessment proceedings. All these parties below were asked to produce (i) ledger account of M/s. Swastik Solvent in the books of the concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account sent by the party is enclosed for perusal) 2. Dixit Rice Mills (Purchase worth 14,55,372/-) The assessee itself furnished Copy of Confirmation with PAN (Page 128- 132 of P.B). There is no comment by the A.O. Bank Statement of HDFC Bank, Rudrapur & Punjab National Bank, Rudrapur showing clearance of all the cheques in favour of Dixit Rice Mills (Page 162-178 of P.B). There is no comments by the A.O The Bank Certificate by HDFC Bank & Punjab National Bank (Page 181, & 182 of PB), but this was not examined and therefore no comments by the A. O. Chart for Last Four Year purchase with the same Party to establish party is regular party (Page 133 of P.B). It was not examined and therefore no comments by the A.O. Further in response to Notice u/s 133(6), the party complied vide it's letter dated 08.10.2013 by furnishing following document in support of transaction. (The Reply dt 08.10.2013 enclosed with the remand report) (i) The Confirmation by way of Ledger Account of M/s Swastik Solvent Products India Limited for the A. Y 2010-11. (ii) The Photo copy of Sale Bills of Rice polish. (iii) Duly attested relevant sale bill relating to M/s Swastik Solvent Produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties have directly confirmed the purchases along with their copy of accounts. Hence Ld. CIT (A) has rightly deleted the addition. 21. After hearing both the parties and on perusal of the relevant material placed on record, we find that these parties from whom assessee had made purchases of raw materials, in the remand proceedings have duly responded to the notices u/s 133(6) issued by the AO and have given their confirmations before the AO duly acknowledging the sale made to the assessee. Not only that, these transactions are also reflected in bill books and invoices of purchases, which have been placed in the paper book. Certificates from the bank of the assessee had been submitted that the amount of purchase has been cleared in favour of these parties in their respective bank accounts. It is also a matter of record that in the earlier years also assessee has been making regular purchases with these parties which have been not disturbed. In the wake of the evidences as incorporated above it is quite ostensible that these parties have sold the material to the assessee and have also confirmed the said transaction directly to the AO. The onus which lied upon the assessee to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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