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TMI Blog2020 (2) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the ld CIT(A), the findings on examination of such sample size should be correlated and could reasonably be held representative only proportionality and not of the whole data under examination. In the instant case, basis the sample size of less than 1% which remains unverified, it is incorrect to hold that 100% of claim of commission expenditure remains unsubstantiated. We therefore deem it appropriate to restrict the disallowance of commission expenditure to the extent of 1% of ₹ 2,08,66,037 which comes to ₹ 208,660/- which remains unsubstantiated and the remaining addition is hereby directed to be deleted. Disallowance of 8% out of commission payment - For A.Y 2014-15 - HELD THAT:- We find that the ld CIT(A) has followed and relied on her findings for A.Y 2013-14 and further held that in this year, one entry out of total 55 entries examined by the Assessing officer remain unsubstantiated and therefore, the assessee has failed to establish the genuineness of the whole of the commission expenditure. In his submission, the assessee has submitted that in respect of one entry so pointed out by the Assessing officer and referred to by the CIT(A), there was a cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled for along with vouchers of sale for test check verification. In response, the assessee submitted that he is in the handicraft business and its business is dependent on the tourists who are coming to visit assessee s premises. It is a well known trade practice in handicraft business that reasonable percentage of commission is to be paid to agents in the form of taxi drivers, guides, auto drivers etc. Further, it was submitted that the payment of commission is being made at 20% of sale bills and the same has been made since last number of years. Further, during the course of assessment proceedings, the assessee was asked to submit the ledger of commission expenses and on perusal of the entries in the ledger so submitted by the assessee, the Assessing Officer observed that the assessee has paid commission on as many as 4,342 times to different taxi drivers/guides and all these payments of commission are between ₹ 4,700 to 4,999/-and not a single payment is exceeding ₹ 5,000/- which is the limit for deduction of TDS U/s 194H of the Act. Further, the assessee was asked to produce all the commission vouchers which were submitted by him and on perusal of the same, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee the necessary opportunity to rebut the findings of the AO and after calling for the remand report on the submissions so filed by the assessee has sustained the disallowance so made by the AO. The contention of the assessee that in the past also, similar disallowances made have been restricted by the Tribunal and rules of consistency should be followed was also not accepted by the ld CIT(A). Against the said findings, the assessee is in appeal before us and the findings of the ld CIT(A) which are under challenge read as under: 3.3.1 In the present proceedings, the AR submitted that no opportunity was given to the appellant to rebut the evidences collected by the AO. It was further submitted that payment of commissions to various agents, Taxi drivers guides is a regular feature of the appellants line of business, in the past also disallowance of 8% of commission was made which has been restricted by the appellate authorities. It was further stated that in this line of business any person who brings in customers to the said premises takes commission and usually the same is paid at 20% of the bill amount. It was further submitted that in the past also similar disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registration Date Fitness Date Owner Name 1. 72 RJ14TA596 Vehicle Not Found 2. 76 RJ14TA516 Vehicle Not Found 3. 82 RJ14TA813 10.03.201 12.05.201 Sh. Akshey Bansal 4. 95 RJ14TB339 10.05.201 08.04.201 Sh. Arvind Singh 5. 85 DL1Z1199 08.10.200 08.10.200 Pranav Tours Travels *As per above primafacie vehicle no. at S. No. 72 and 76 of Annexure B are fictitious entries. Submitted for kind perusal. 3.3.4 It is pertinent to note that the onus is on the appellant to prove that this expenditure is actually incurred and provide some evidence for the same. The vouchers maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ums generally pay the commission to the guides, taxi drivers, auto drivers. They come from outside and had dealing occasionally and it was not fair to pay commission in front of customers. It is just like a secret commission and a very short duration is available with the assessee to complete the formalities for paying commission. Therefore, there may be defects in the receipt of commission payment it is a part and parcel of the business dealings. Therefore, we confirm the disallowance under this head at ₹ 1 lac out of total disallowance made by the Assessing Officer at ₹ 16,54,883/-. Accordingly, grounds No. 3 to 6 of the appeal are partly allowed. 3.3.6 In the order for A.Y. 08-09 the ITAT had observed that the specific defects found by the CIT(A) had not been confronted to the Subsequently from A.Y. 09-10 to 12-13 similar orders have been passed. In the present case enough opportunities have been provided to the appellant to appraise and make submissions on the defects found. It is fact that this expenditure is not verifiable. Further in view of the verification conducted by the AO, the disallowance made at 8% of the total commissions claimed, is confirmed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details regarding reconciliation of non-existing vehicles and the said details are placed at PBP No.4-10. It was also explained that most of the drivers/guides are illiterate and some time, full vehicle number is either not mentioned by them or is not mentioned on the vouchers prepared by the person preparing the vouchers for payment of commission. It was also explained with regard to the observation that the fitness certificate has expired, even without fitness certificates, the vehicles are running on the roads and no adverse inference can be drawn against the assessee on this basis because if the driver is running the vehicle without fitness certificate, he would be liable to action under relevant law. 8. It was further submitted that the driver/guide who is bringing the customers to assessee's premises is getting commission on the basis of purchases made by the customers and after bill is prepared, the guide/driver ask for his commission and the commission is paid to him and vehicle number on the commission voucher is noted as mentioned by the driver/guide. The driver of the vehicle/ guide is in a hurry to leave the premises of the assessee as the customer is ready to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed that substantial portion of vehicles remained unreconciled and even out of 5 test cases, 2 vehicles could not be identified as reported in the remand report. The learned CIT(A) has thereafter concluded that in view of above, it has to be concluded that the A/R has completely failed to establish the genuineness of this expenditure. 12. It was submitted that when the assessee had filed complete details and has also filed reconciliation of vehicle numbers and even in the remand report, only 2 out of 5 test cases chosen by the CIT(A) could not be identified, it is not understandable as to how the CIT(A) has mentioned that the A/R has completely failed to establish the genuineness of this expenditure. 13. It was further submitted that the payment of commission to various agents, taxi drivers and guides is a regular feature of assessee's line of business and in the past also, disallowance of 8% out of commission payment was made which has been restricted by the appellate authorities. 14. With regard to justification of commission paid, it was submitted that it is well known fact that in case of Emporiums which are situated at or nearby places of tourist inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival contentions and perused the material available on record. It is a settled proposition that whether a particular expenditure is required to be incurred or not is the domain and prerogative of the company s management and not that of the Revenue. At the same time, the Assessing officer is well within his jurisdiction to verify whether the expenditure so claimed has actually been incurred for the purposes of business and what documentation is submitted by the assessee to substantiate its claim. The factum of commission payment in assessee s line of business may be consistent with earlier years, however, the examination thereof is a factual exercise and outcome thereof need not be guided solely with the outcome and treatment done in the earlier years. It is therefore, incumbent on part of the Assessing officer, where he intends to disallow any expenses, to bring out specific defect in the documentation so maintained for the year under examination and submitted for verification, and record a finding that a particular expense has not been incurred for the purposes of business or the expense is bogus in nature for the relevant year. In case of voluminous transactions, some defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liation statement, the ld CIT(A) has recorded her findings as under: The AR has submitted a chart whereby he pointed out certain errors in the observations of AO and in some cases he provided a different number saying that the same had been incorrectly picked up by the AO. The AR in the reconciliation chart mainly took the plea that the less educated drivers could not give the correct vehicle no. and the vehicles were sometimes in the parking so the number could not verified. After the conciliation by the AR, the same was forwarded to the AO for his comments and asked to verify sl. no. 72,76,82,85 95 because these cars were claimed as purchased registered in 2013. Even after such elaborate reconciliations wherein in some cases parts of the number were said to be incorrect even though picked up from the same voucher, undertaken by the AR, there were vehicles which could not be found and appeared as fictitious entries. The remand report of the AO wherein from the list submitted by the AR after reconciliation only five entries were chosen on text check basis and even in them two were not verifiable. 18. We thus find that the ld CIT(A) has not recorded any specific ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as for non-existing vehicle. The Assessing Officer has worked out the bogus voucher at 1.82% (1 out of 55) and he rejected the explanation of the assessee and made disallowance of ₹ 3,63,593/- being 1.83% of the commission paid. Further, in para 1.6 of assessment order, it was also mentioned that the expenses to the extent of ₹ 1,99,77,624/- were unsubstantiated/unverified and possibility of artificially acceleration of expenditure in P L account to reduce the net profit cannot be ruled out and therefore, to safeguard the revenue from any leakage, he disallowed 8% out of the remaining amount of ₹ 1,96,14,031/- working out disallowance at ₹ 15,69,122/-. 20. Before the learned CIT(A), it was explained that only one voucher was found defective with regard to vehicle No. DL-132117 and it was pointed out that there is only a slight mistake in the voucher and the mistake is that after DL-13, the digit C has been omitted being written on the commission slip. It was pointed out that this was only a clerical mistake on the part of the staff as the vouchers are prepared in a hurry and some time one or two digit of the vehicle is wrongly written due to paucity o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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