9911796707
TMI Blog1999 (10) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted what the assessee pleaded and ignored the correct facts brought out on record by the ITO which prove beyond any shadow of doubt that there has been variation in the stock position as per bank's records and that as reflected in assessee's books. The learned CIT(A) also did not appreciate the fact that as per facts and figures contained in the seized records, suppression of sales was obvious. 5. The learned CIT(A) also erred in law and on facts in deleting the disallowance of Rs. 2,00,000 made by the ITO out of the commission account. 6. While allowing the relief as at '5' above, the learned CIT(A) misdirected himself in mixing this account with the variation in sales and completely disregarded the fact that the expenditure was not only unvouched but the assessee had also failed to furnish particulars of persons to whom the alleged commission was said to have been paid. The assessee had in fact not proved genuineness of this claim. 7. The learned CIT(A) further erred in law and on facts in deleting the addition of Rs. 48,522 on account of payments to assessee's son, Mr. Jahangir Mir. 8. While allowing the relief as at '7' above, the learned CIT(A) ignored the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lary and travelling expenses claimed by the assessee by making the following observations: "4. Shri B.R. Bhasin, learned advocate of the assessee, gave in writing that of course the assessee went to Miami in connection with the opening of a branch there but he was not only looking after the opening of the branch there but was also working for his trading business in India. Some other employees have also visited other countries in connection with the business of the assessee. This has been the practice in the past as well to promote his business in the foreign countries, therefore, it was argued by him that whole of expenses of Rs. 1,51,754 are not related to Miami branch but part of the expenses relate to his other business in India. He could not give any bifurcation of these expenses because it was argued that doing such an exercise would be a wide guess. Taking into consideration past history of the case and the business activity of the assessee in India and abroad, I am of the opinion that atleast a sum of Rs. one lakh is related to the business affairs of the Miami branch. While arriving at this figure, I was guided by the factor that his first visit was entirely in connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will get an overall relief of Rs. 1,86,060 on this account (This is out of total disallowance of Rs. 2,04,306 and 6,754 made by the ITO)." 6. Now, aggrieved with the order of the CIT(A), the Revenue is in appeal before us for setting aside the order of the CIT(A) and for restoring the order of the AO. 7. The Authorised Representative of the Revenue has argued that since the assessee has not furnished his accounts at Miami and the P L a/c or balance sheet in respect of business at Miami during the year under consideration, there has been no receipt from Miami and further, because the assessee could not give any details or bifurcation of these expenses having been incurred by the assessee in respect of this business in India and in respect of business at Miami. so the AO was justified in disallowing the expenditure amounting to Rs. 2,50,060 and Rs. 6,754 adding back the same to the income of the assessee. It has also been pointed out by the Authorised Representative of the Revenue that in his entire order, the learned CIT(A) has not discussed anything about the reasoning given by the AO while disallowing the expenditure claimed by the assessee in the account of the Delhi admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness at Miami branch but he has not been able to explain how the whole of these expenses are related to the Delhi administrative office at Delhi when he has carried on his business in Miami as an independent incorporated company under the Miami laws and similarly he has also been carrying on his business in India. The assessee has not been able to give any bifurcation of these expenses as to which of the expenses incurred for the purposes of business in India and which of the expenses incurred for the business conducted in Miami, and hence, in our opinion, the possibility cannot be ruled out that only part of expenses might have been incurred in connection with his business in India. 11. Similarly, in case of salary to Mr. Dalip Kocher, Jahangir Mir and Abdul Rahim, which was debited by the assessee to Delhi branch, in our opinion, the assessee is not able to bifurcate these expenses having been incurred for the business at Miami and in India, then there is no option left with the AO to allow him the relief after taking into consideration the past history of the assessee with respect to the amount which he claimed towards his business activity in India and abroad. We are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , at Rs. 37,82,340. Presuming that the figures mentioned in the letter are correct, still the difference of Rs. 5,86,319 was left uncovered. The learned advocate tried to explain that certain variations in the valuation of the carpets were made at the time of preparing the statements for getting loans from the bank on hypothecation of the goods. It was explained by him that the stock worth Rs. 3,23,363 was transferred by head office to Srinagar branch, whereas the branch office at Agra showed the value of that stock at Rs. 5,61,472 and pledged that with them. Similarly, some discrepancies occurred in the statements for the month of May, 1981. In this way, the assessee claimed that the Agra branch had shown the value of the stock higher by a sum of Rs. 5,67,067. 15. In order to explain this discrepancy, the assessee in his reply submitted that some discrepancy has occurred due to inexperience of the dealing hands at Delhi as that man was not fully conversant with the method of preparing such statements and he intermingled the few facts and as a result of that, statements given to the bank cannot be now tallied. He further explained before the AO that the hypothecation statement f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r figure than the real one cannot be made the basis for making any addition and find myself in agreement with the learned counsel's view. Accordingly, the addition of Rs. 4,00,000 made by the ITO is directed to be deleted." 18. However, the significant fact which weighed in deleting the addition with the CIT(A) was that he fully agreed with the following observations of the counsel for the assessee which were made before him: "It is submitted by the learned counsel for the appellant that certain discrepancies were found in the first check up. However, on a second check up it was found that in the statement for the month of November, there was an obtuse arithmetical mistake of Rs. 2,00,000 which persisted in the subsequent months from December to February. In the statement for the November, 1981, the last balance of carpets in rupees was Rs. 7,01,280. The receipts were Rs. 1,98,940. The total of these two figures was given in col. No. 3 at Rs. 11,00,220, whereas the same should have been Rs. 9,00,220. This resulted in a mistake of Rs. 2,00,000. In the last column where the balance value in rupees is shown at Rs. 9,06,640, the figure should have been Rs. 7,06,640. This mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is proved." 19. Now, aggrieved with the order of the CIT(A), the Revenue is in appeal before us for setting aside the order of the CIT(A) and for restoring the order of the AO. 20. The learned Departmental Representative has relied upon the order of the AO and the reasons given therein for making the addition and in addition to this, he has also relied upon the recently delivered decision of this very Bench in the case of ITO vs. Bhandari Pharma Products, ITA No. 616/Asr/1993, dt. 30th Aug., 1999. 21. On the other hand, the counsel for the assessee has relied upon the reasonings given by the CIT(A) and repeated the same arguments, which he has advanced before the CIT(A). 22. We have gone through the arguments advanced by the parties, perused the records and looked into the reasonings given by the lower authorities in their orders. 23. Firstly, we shall take up the decision of this very Bench in the case of Bhandari Pharma Products cited by the Departmental Representative wherein this Bench has, after giving proper guidelines, settled the issue that if there is substantial difference giving rise to a discrepancy between the hypothecation statement given to the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher figure than one reflected in the trading account cannot be made the basis for making any addition, cannot be sustained as it is against the norms and guidelines issued in this decision of the Bench cited by the Departmental Representative, wherein we have clearly discussed that where difference in stock valuation given to the bank is at a higher figure it can definitely be the ground unless the assessee is able to explain satisfactorily such discrepancies by proper evidence. 26. For the reasons stated above, we find sufficient merits in the grounds of appeal of the Revenue and the ground Nos. 3 and 4 of the appeal of the Revenue are accordingly allowed, and as a consequence of the same, the order of the CIT(A), in deleting the addition of Rs. 4 lakhs, is set aside and the order of the AO in making the addition of Rs. 4 lakhs is sustained. 27. Ground Nos. 5 and 6 of the appeal of the Revenue relate to the deletion of disallowance of Rs. 2 lakhs by the CIT(A) on account of commission paid by the assessee. 28. The assessee claimed that he made payments towards commission to travel agents as under: Rs. M/s A. Majid 1,62,136 M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation for making the impugned addition of Rs. 2,00,000 out of commission account. Accordingly, the addition is deleted." 30. Now, the Revenue is in appeal before us for setting aside the order of the CIT(A) on the abovestated grounds. 31. On going through the order of the CIT(A), we find that the CIT(A) has misdirected himself in deleting the disallowance because the simple point required to be considered by him was regarding the genuineness of the payment of commission but the same has not been done by him. In this case, it is not in dispute that the expenditure claimed by the assessee on commission was not only unvouched but the assessee even failed to furnish the particulars of the persons to whom the alleged commission was said to have been paid. In these circumstances, the assessee had, in fact, not proved the genuineness of this claim of payment of commission because the same was devoid of any verification by the AO. We may also mention here that the CIT(A) was, in fact, in error when he took into consideration the sales and variation in sales, and in arriving at the conclusion whether the commission was paid by the assessee or not instead of considering the point whet ..... 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