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TMI Blog2022 (1) TMI 1441X X X X Extracts X X X X X X X X Extracts X X X X ..... the aggregate value of the impugned purchases in question. The Ground of appeal No. 1 is partly allowed in terms of our aforesaid observations. Addition u/s 40A(2)(b) - salary paid by the assessee company to daughter of one of the director of the assessee company[Ms. Anita Podda] - HELD THAT:- It is only in a case where the expenditure claimed by the assessee qua the related parties is found by the AO to be excessive or unreasonable having regard to the fair market value of the goods, service or facilities, it is only there that the disallowance of that part of the expenditure as is considered by the A.O to be excessive or unreasonable is to be made by invoking the provisions of Sec. 40A(2)(a) of the Act. In the case before us, we find that there is not even a whisper on the part of the A.O as to how the expenditure incurred on the salary paid director of the assessee company, a qualified MBA, was found by him to be either excessive or unreasonable having regard to the fair market value of the services which were rendered by her for the legitimate needs of the business of the assessee company. In sum and substance, the A.O had summarily scaled down the assessee s claim of salary pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny assessment u/s 143(2) of the Act. 3. Assessment was thereafter framed by the A.O vide his order passed u/s 143(3), dated 19.12.2016 assessing the income of the assessee company at Rs.50,44,588/- after making the following additions/disallowances: Sr. No. Particulars Amount 1. Disallowance of purchases. Rs.19,08,688/- 2. Disallowance of the salary u/s 40A(2)(b). Rs.6,00,000/- 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) not finding favour with the contentions advanced by the assessee upheld the order passed by the A.O and dismissed the appeal. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. Controversy involved in the present appeal lies in a narrow compass as regards two fold issues thererin involved, viz. (i) disallowance of purchases: Rs.19,08,688/-; and (ii) disallowance u/s 40A(2)(b) of the salary paid by the assessee company to Ms. Anita Poddar: Rs.6,00,000/-. 6. Adverting to the first issue i.e disallowance of the assessee s claim of purchases, we find that the A.O in the course of the assessment proceedings had in order to verify the genuineness and veracity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alated. Backed by his aforesaid conviction the A.O triggering the provisions of Sec.40A(2)(b) disallowed 50% of the salary that was paid to Ms. Anita Poddar and made a consequential addition/disallowance of Rs.6 lac to the returned income of the assessee. 7. We have heard the ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record. As regards the disallowance of Rs.1,32,962/- (supra) made by the A.O on account of the discrepancy as regards the purchases claimed by the assessee to have been made from M/s Cupid Ltd. (supra), as against that reflected in the latters confirmation, we are unable to comprehend the basis of the same. Before us, the assessee had placed on record the confirmation of the aforementioned party, viz. M/s Cupid Ltd., (Page 24 of APB), which therein reveals that the closing balance i.e Rs.6,86,162/- (cr.), as confirmed by the aforementioned party tallies with that reflected by the assessee in its books of account (Page 21 of APB). Apart from that, we find that the purchases claimed by the assessee to have been made from the aforementioned party also tallies with that reflected by the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the impugned purchases in question. The Ground of appeal No. 1 is partly allowed in terms of our aforesaid observations. 8. We shall now take up the disallowance of Rs.6 lac made by the A.O u/s 40A(2)(b), i.e, as regards the salary paid by the assessee company to Ms. Anita Poddar, daughter of one of the director of the assessee company. Admittedly, it is a matter of fact borne from the record that the assessee company had during the year under consideration paid a salary of Rs.12 lac to Ms. Anita Poddar, a qualified MBA, for the services which she had rendered w.r.t the marketing work of the assessee company. As is discernible from the orders of the lower authorities, we find that the allowability of the aforesaid salary expenditure had been scaled down by the A.O by 50%, for the reason, that while for the sales of the assessee company had reduced to one half, however, the salary and bonus expenses had almost doubled during the year. In our considered view the very basis for disallowing the salary paid by the assessee company to Ms. Anita Poddar (supra) under Sec. 40A(2)(b) is absolutely misconceived or in fact misplaced. As per Sec. 40A(2)(a), it is only where the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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