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TMI Blog2018 (7) TMI 2356X X X X Extracts X X X X X X X X Extracts X X X X ..... s and allowable as business expenditure. Decided in favour of assessee. Disallowance under the head other expenses - According to AO, most of the above expenses were repetitive in nature as training, stipend or staff incentive are similar type of expenses and most of them were paid in cash - CIT(A) deleted addition - HELD THAT:- Assessee in response to the show cause explained the nature of expenses and filed detailed of statement of expenditure headwise. But, however, the AO without considering the same estimated the disallowance @ 20% as pointed out by the CIT-A. The AO did not dispute the genuineness of expenditure and make out adverse comment with the vouchers. Therefore, we find no infirmity in the order of the CIT-A and it is justified. Appeal of revenue dismissed. - Shri J. Sudhakar Reddy, Accountant Member And Shri S.S. Viswanethra Ravi, Judicial Member For the Appellant: Shri Saurabh Kumar, Addl. CIT, Sr. DR. For the Respondent : Shri M.S. Murthy, FCA, ld.AR. ORDER SHRI S.S. VISWANETHRA RAVI, JM: This appeal by the Revenue is against the order dt. 13-03- 2014 of the CIT-A, 4, Kolkata for the A.Y 2010-11. 2. Ground no. (i) is relating to deletion of disallowance made on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zation of the deal. The appellant had produced all the relevant material which was available with it in support of its claim of commission/brokerage in dispute. It had also produced the details of sales on which commission was paid to majority of brokers. The appellant had named the brokers, their addresses were adduced on record and their permanent account numbers were also provided to the AO. The appellant also tax deduction at source from the payments made to these brokers. The entire amount was disbursed through banking channel. It was further claimed that each commission/brokerage was paid as per business practice and on the basis of mutual understanding. It was, therefore, not possible to accept that there was no evidence of services rendered by the brokers. It was substantiated that the brokers have duly played their role by way of augmenting a sale. By producing the above material, the appellant had fully discharged the burden which lay on it to prove the payment of brokerage as similar brokerage was paid by it in earlier year and was also paid by other entities in similar line of trade. It was therefore not logical to hold that the expenditure of brokerage was not wholly l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agents. It may not be possible for the assessee to know them personally. Whatever address was furnished to the assessee, has been disclosed to the Income-tax Department. Payments were admittedly made by cheque after deduction of tax. The tax deducted as source has duly been deposited. The judgment in the case of CIT vs. Precision Finance Pvt. Ltd. reported in 208 ITR 465 relied upon by Mr. Bhowmick does not really assist him. The aforesaid judgment is an authority for the proposition that mere payment by account payee cheque cannot establish that the transaction was genuine, but in the case before us, besides the fact that payment was made by cheque, there are other pieces of evidence available which are as follows: a) Books of Accounts maintained by the assessee in the ordinary course of business; b) Deduction of Tax at source; c) Deposit of the money deducted at source; d) Particulars of the recipient were duly furnished; We are, as such, of the opinion that the views expressed by the learned Tribunal are unexceptionable. We, therefore refuse to admit the appeal. The appeal is thus dismissed. The decision rendered by the Hon'ble Calcutta High Court is wholly applicable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the services of brokers who acted as an interface between the assessee and the customers for successful conclusion of sale of vehicles. In order to be eligible for the expenses u/s. 37 of the Act one has to fulfill the conditions: (i) the expenditure must not be governed by the provisions of sections 30 to 36 of the Act, (ii) the expenditure must have been laid out wholly and exclusively for the purpose of the business of the assessee, (iii) the expenditure must not be personal in nature, (iv) the expenditure must not be capital in nature. The expression 'wholly' employed in sec. 37 of the Act refers to the quantum of expenditure, while the word 'exclusively' refers to the motive, objective and purpose of the expenditure. In the present context, it was the relevance of the expenditure was duly explained with evidence. Though the AO has disputed the factum of expenses incurred by the appellant on this account in his assessment order, however, he has not pointed out a single item in respect of which documentation was lacking or in respect of which he desired particulars to be produced which the appellant failed to comply with. It is not his case that the expenses w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if 'on materials available, the authorities concerned come to a finding on then available facts that arrangement of lease by the assessee did not depict any intention of temporary arrangement and in fact it was a final parting with the factory, appropriate decision could be taken on such finding by the authorities. Such finding would not be hit by the principles of res judicata. The principle of res judicata does not apply in income-tax matters, but for coming to separate conclusion in two different years, there must be separate facts leading to such different conclusions. On identical facts, separate conclusions by the revenue authorities are not desired. Therefore, considering the totality of the facts and circumstances of the case, I find substance in the argument of the A/R that the claim of the appellant is liable to be accede to on the grounds of rule of consistency also. As such, considering all the facts of the case, I have no hesitation to conclude that the disallowance of Commission Brokerage made by the AO to the extent of ~22,80,000/- is not justified in the facts and circumstances of the instant case and accordingly, the AO is directed to delete the same. Thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentation. The Income-tax Officer disallowed the claim and the said disallowance was confirmed by the Appellate Assistant Commissioner on appeal. On further appeal, the Income- tax Appellate Tribunal allowed the appeals in part. In para 12 of its order, the Tribunal pointed out that these expenses were incurred for the poojas etc., performed by the workers and that they should form part of the welfare expenses. It also pointed out that, similarly, expenses on bakshish and presentation were found to have been incurred in respect of the workers alone. Hence, the Tribunal did not find any reason for the disallowance of these claims. It is this conclusion of the Tribunal that is now sought to be questioned. Having regard to the finding of the Tribunal that these expenses have been incurred only in respect of the workers, it is clear that the expenses have been rightly held to be ones incurred for the welfare of the workers. The conclusion of the Tribunal is based on the particular facts and, therefore, no question of law arises out of the order of the Tribunal. 5.3. In respect of Donation, it is observed that the appellant had filed details of expenses. It was found that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,015/- ix) Conveyance Rs. 14,93,881/- 10. According to AO, most of the above expenses were repetitive in nature as training, stipend or staff incentive are similar type of expenses and most of them were paid in cash. The AO show caused the assessee why the above expenses should not be disallowed. In response, the assessee filed written submissions explaining all expenses and details of statement of expenditure head wise. For not filing proper supporting evidences the AO disallowed @ 20% of the above expenditure i.e. at Rs. 44,49,647/-. We find from the order of the CIT-A that the AO failed to make any effort to identify any specific expenditure, which not incurred in relation to assessee s business and does not tally with the vouchers. The AO did not dispute the correct of books of assessee and no basis or whatsoever was given by the AO for estimating the said disallowance @ 20%. The CIT-A deleted the said disallowance as under:- 6.2 I have considered the issue in the assessment order framed by the AO in light of the arguments made by the appellant. The short issue for my consideration is that whether the disallowance of 20% of expenses out of Other expenses is justified or not. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t were duly produced before the AO who, apart from his contradictory findings, did not dispute the completeness or correctness thereof. In the teeth of such admission, it is observed that the AO indulged in speculation, surmise, suspicion and conjecture in resorting to the impugned disallowance on this account. Since the AO had speculated upon a presumption of absence of proper evidence , such finding does not have any legs to stand upon. In the instant case, no defects in the details underlined by evidence have been found in the head wise expenses by the AO and as such, he was precluded from resorting to an ad hoc disallowance on estimate. It is also observed that there is no basis for holding that a portion of the expense @ 20% as the income of the appellant. It is a mere surmise and conjecture of the AO to suggest such imaginative speculation which vitiates the addition made and is thus devoid of merits. It is observed that the AO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. In this respect, it is imperative to refer on the ratio in the case of Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC) whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross profit rate on sales did not act on any material but acted on pure guess and suspicion. Most respectfully following the aforesaid ratio, it is observed that the action of the AO in resorting to the impugned disallowance by ad hoc estimation of treating a part of the expenses as income of the appellant is unjustified in the circumstances. Such specious action of the AO accordingly renders his impugned findings being without any valid basis as such disallowance does not stand the test of judicial scrutiny. 6.4 Therefore, considering the totality of the facts and circumstances of the case, I find substance in the argument of the A/R that the disallowance of Rs. 44,49,647/- is uncalled for since it is contrary to the settled legal principles and therefore, I have no hesitation to hold that such disallowance by the AO made on this account is directed to be deleted. Thus, ground no. 4 of the appeal are allowed. 11. It is noted from para 7.1 of AO that the assessee in response to the show cause explained the nature of expenses and filed detailed of statement of expenditure headwise. But, however, the AO without considering the same estimated the disallowance @ 20% as pointed out by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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