ACIT, Jaipur V. KISHORE SINGH GEHLOT HUF, Jaipur

ITA 143/JPR/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5574 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Business income
• Section: 40A(3); 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 143/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 THE ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-6, JAIPUR CUKE VS. KISHORE SINGH GEHLOT (HUF), C-1A, PRITHVIRAJ ROAD, C- SCHEME, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABHK 5774 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13.02.2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 15/02/2017. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-II, JAIPUR DATED 3.12.2013 FOR A.Y 2009-10 WHEREIN THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: (1) (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 21,83,749/- ON ACCOUNT OF DISALLOWANCE OF ALLEGED REFUNDS TO CUSTO MERS. (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IN RESPECT OF EXPENDITURE INCURRED BY WA Y OF REFUND TO CUSTOMERS. (2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 18,82,000/- ON ACCOUNT OF DISALLOWANCE OF FINANCIAL SERVICE CHARGES. ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 2 (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN THE ADDITION OF RS.1,58,00 0/- ON ACCOUNT OF COMMISSION ON SALE OF IMPLEMENTS. 2. IN RESPECT OF GROUND NO.1, BRIEFLY THE FACTS OF THE CASE ARE THAT THE A.O ON REVIEW OF THE LEDGER ACCOUNT OF THE ASSESSEES CUST OMERS NOTICED THAT SOME AMOUNT HAVE BEEN ADVANCED BY THE CUSTOMERS FOR THE PURCHASE OF TRACTORS, THEN LOAN AMOUNT IS CREDITED TO THE CUSTOMERS ACCO UNT, THEREAFTER, EXPENSES ON ACCOUNT OF TRACTOR REGISTRATION, INSURANCE AND P ROCESSING CHARGES FOR LOAN ARE CHARGED AND DEBITED TO THE CUSTOMERS ACCOUNT. THE CREDIT BALANCE IN THE CUSTOMER ACCOUNTS ARE THEREAFTER REFUNDED IN CASH T O THE CUSTOMERS AFTER A FEW MONTHS. IN RESPECT OF 21 CASES, REFUND AMOUNT EXCEEDS RS. 20,000/- TOTALLING TO RS. 5,39,360/-. THE ASSESSEE DIDNT M AINTAINS ANY RECEIPTS FROM THE CUSTOMERS REGARDING THE AMOUNT REFUNDED TO HIM. WI TH THESE OBSERVATIONS, THE AO CONFRONTED THE MATTER TO THE ASSESSEE ON 24. 10.2011 STATING THAT THESE EXPENSES INCURRED IN CASH EXCEEDING TO RS.20,000/- IS IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE IT ACT, 1961. AFTER CONSI DERING THE ASSSESSEE REPLY AND AND NATURE OF ENTRIES MADE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE AO HELD THAT THE REFUND AMOUNT HAS GENERATED DUE TO DI SCOUNT AND REVISION OF PRICE BY ISSUING CREDIT NOTE IN FAVOUR OF THE CUSTO MERS AND AFTER DEDUCTING CHARGES FOR REGISTRATION, INSURANCE AND LOAN PROCES SING CHARGES. THUS, THE NATURE OF REFUND IS EXPENDITURE ON ACCOUNT OF DISCO UNT ALLOWED TO THE CUSTOMERS FOR DIFFERENT REASONS. ANY REFUND IN CAS H OF AMOUNT EXCEEDING RS. 20,000/- IS IN VIOLATION OF PROVISIONS OF SECTION 4 0A(3) OF THE IT ACT, 1961. THUS RS. 5,39,360/- IS INADMISSIBLE FOR THE TWO REASONS ONE EXPENDITURE INCURRED IN VIOLATION OF SECTION 40A(3) AND SECOND THERE IS NO EVIDENCE WITH THE ASSESSEE THAT THE AMOUNT WAS INFACT REFUNDED TO THE CUSTOMER S. THEREAFTER, TOTAL REFUND AMOUNT OF RS. 21,83,749/- (INCLUDES THE REFU ND OF RS. 5,39,360/) ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 3 FORMING PART OF THE EXPENDITURE RESULTED DUE TO DIS COUNT AND REBATE ALLOWED TO THE CUSTOMERS BY ISSUE OF SELF MADE CREDIT NOTES WAS DISALLOWED BY THE AO. 2.1 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD CIT(A) WHO AFTER CONSIDERING THE ASSESSEES SUBMISS IONS HAS GIVEN HIS FINDINGS AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMEN T ORDER, APPELLANTS WRITTEN SUBMISSION, AOS REMAND REPORT AND APPELLA NTS REJOINDER. ASSESSING OFFICER DISALLOWED AMOUNTS REFUNDED TO TH E CUSTOMERS ON THE GROUND THAT THE SAME IS NOT VERIFIABLE AND NO VOUCH ERS FOR SUCH PAYMENTS WERE KEPT BY THE APPELLANT. DURING THE AP PEAL PROCEEDINGS, APPELLANT SUBMITTED THAT COMPLETE VOUCHERS WERE MAI NTAINED AND THE REFUND AMOUNT IS AS PER THE LEDGER ACCOUNT OF THE C USTOMERS. APPELLANT SUBMITTED LEDGER ACCOUNTS AND VOUCHERS WHICH WERE F ORWARDED FOR AOS REPORT BY MY PREDECESSOR. ON VERIFICATION OF THESE VOUCHERS AND DETAILS, ASSESSING OFFICER POINTED OUT THAT IN SOME OF THE V OUCHERS, CUSTOMERS SIGNATURE IS NOT THERE. IT WAS ALSO POINTED OUT BY THE AO THAT REVENUE STAMP IS NOT PUT WHERE PAYMENTS EXCEEDS RS. 5,000/- . APPELLANT SUBMITTED THAT AFTER DISCOUNT, THE MONEY RECEIVED F ROM THE CUSTOMERS BECAME REFUNDABLE AND THE SAME IS REFUNDED AS PER L EDGER ACCOUNT DETAILS IN EACH CASE. AS REGARDS CUSTOMER SIGNATUR E NOT THERE IN SOME VOUCHERS, APPELLANT SUBMITTED THAT ONLY IN SOME CAS ES IT MIGHT NOT BE THERE OTHERWISE MOST OF THE VOUCHERS CARRIED CUSTOM ERS SIGNATURE. THE REVENUE STAMP IS ONLY A TECHNICAL REQUIREMENT, VIOL ATION OF WHICH WILL NOT MAKE ANY PAYMENT DOUBTFUL. I HAVE GONE THROUGH THE LIST OF PERSONS TO WHOM EXC ESS MONEY RECEIVED WAS REFUNDED. APPELLANT RECEIVED BOOKING ADVANCE I N CASH. THEREAFTER, LOAM IS TAKEN BY THE CUSTOMER WHICH IS CREDITED IN HIS ACCOUNT. AGAINST THIS ADVANCE AND LOAN, SALE BILL AND DISCOUNT ETC. ARE DEBITED AND NET AMOUNT RECEIVED IN EXCESS IS REFUNDED. THE DETAILS OF CUSTOMERS ARE AVAILABLE AND THEREFORE IT CANNOT BE SAID THAT THE RECIPIENTS ARE NOT IDENTIFIABLE. SINCE THE REFUND IS GIVEN MOSTLY TO THE FARMERS AGAINST EXCESS MONEY RECEIVED, IT IS REFUNDED IN CASH AS MO ST OF THEM MAY NOT HAVE BANK ACCOUNTS. CONSIDERING THE FACT THAT THE REFUND GIVEN TO THE CUSTOMERS IS BASED ON LEDGER ACCOUNTS AND AO DID NO T FIND FAULT WITH ANY OF THE ENTRY IN THE LEDGER ACCOUNTS THEREFORE REFUN D BASED ON SUCH LEDGER ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 4 ACCOUNTS CANNOT BE QUESTIONED. REFUND IS OF THE BA LANCING FIGURE WHICH IS ARRIVED AT BY CERTAIN DEBIT AND CREDIT ENTRIES. IF THESE DEBIT AND CREDIT ENTRIES ARE NOT FOUND TO BE INCORRECT, BALANCING FI GURE CANNOT BE QUESTIONED. APPELLANT ALSO ARGUED THAT THIS IS THE PRACTICE BEING FOLLOWED SINCE LAST MANY YEARS AND ASSESSING OFFICE R DID NOT MAKE ANY DISALLOWANCE IN EARLIER YEARS. CONSIDERING THE FAC TS OF THE CASE AND NO MISTAKE FOUND IN THE LEDGER ACCOUNTS REPRESENTING T RANSACTIONS WITH THE CUSTOMERS, I DO NOT FIND ANY MERIT IN DISALLOWANCE OF REFUND OF EXCESS MONEY RECEIVED FROM CUSTOMERS. ASSESSING OFFICER ALSO SUBMITTED THAT SOME OF THE P AYMENTS WERE MADE IN CASH IN EXCESS OF RS. 20,000/- IN VIOLATION OF S ECTION 40A(3) WHICH ARE DISALLOWABLE. APPELLANT SUBMITTED THAT DISALLOWANC E OF SECTION 40A(3) CAN BE MADE IN RESPECT OF EXPENDITURE CLAIMED AND N OT AGAINST ANY OTHER PAYMENT. SINCE THE REFUND IS ON ACCOUNT OF EXCESS MONEY RECEIVED ON SALE OF GOODS, DISALLOWANCE UNDER SECTION 40A(3) WI LL NOT BE APPLICABLE. ACCORDINGLY THE ASSESSING OFFICERS ARGUMENT IN THI S REGARD IS NOT TENABLE. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS A CCORDINGLY DELETED. 2.2 THE LD. AR OF THE ASSESSEE SUBMITTED THAT ADHOC ADVANCE AMOUNT AND FURTHER AMOUNTS ARE RECEIVED FROM A CUSTOMER. AMOU NT TAKEN ON LOAN FROM THE BANK/FINANCIAL INSTITUTIONS IS RECEIVED AND IS DULY CREDITED IN THE ACCOUNT OF THE CUSTOMER. ON ACCOUNT OF ACUTE COMPETITION, RAT E DIFFERENCE/DISCOUNT HAS TO BE GIVEN TO THE CUSTOMER AND CREDIT NOTE IS ISSU ED FOR SUCH RATE DIFFERENCE. EXCESS OF SUCH COLLECTION IS REFUNDED TO THE CUSTOM ER. THE AMOUNT IS REFUNDED BY VOUCHER DULY RECEIPTED BY THE CUSTOMER. THE AMO UNT REFUNDABLE IS VERIFIED, APPROVED BY THE MANAGER AND THEREAFTER PAYMENT IS M ADE BY THE CASHIER AGAINST RECEIPT. THE ENTIRE REFUND IS DULY SUPPORT ED BY SUPPORTING MATERIAL AND CONTEMPORARY ENTRIES HAVE BEEN MADE IN THE BOOK S. SIMILAR REFUNDS HAVE BEEN MADE IN THE PAST YEARS. IT IS A REGULAR FEATU RE. IN SIMILAR CIRCUMSTANCES REFUND MADE DURING THE PAST YEARS HAVE NOT BEEN ADD ED OR DISALLOWED. ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07 WAS SCRU TINY ASSESSMENT U/S 143(3) OF THE ACT. NO SUCH DISALLOWANCE WAS MADE I N THE SAID ASSESSMENT YEAR ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 5 OR IN THE EARLIER ASSESSMENT YEARS. THE LD. ASSESS ING OFFICER WRONGLY RECORDED THAT THE ASSESSEE MAINTAINS NO RECEIPTS FROM THE CU STOMERS RESULTING THE AMOUNT REFUNDED TO HIM. WE ARE SUBMITTING HEREWITH DETAILS OF REFUND PAYMENTS ALONE WITH DATE, NAME OF THE CUSTOMER AND AMOUNT OF REFUND. COPY OF REFUND VOUCHERS IS ALSO SUBMITTED. ON PERUSAL, YOUR HONOUR, SHALL FIND THAT IT CONTAINS SIGNATURES OF THE CUSTOMER, MANAGER AND THE CASHIER. THE AMOUNT OF REFUND VARIED FOR DIFFERENT CUSTOMERS. AS MENTI ONED EARLIER, THE LD. AO HAS WRONGLY RECORDED THAT NO DOCUMENTARY EVIDENCE AVAIL ABLE WITH THE ASSESSEE TO PROVE THAT THE SUM WAS REFUNDED TO THE RESPECTIVE C USTOMERS. THE LD. AO HAS DISALLOWED A SUM OF RS. 5,39,360/- BEING REFUND IN CASH FOR AMOUNT EXCEEDING RS. 20,000/- BEING IN VIOLATION OF PROVISIONS OF SE CTION 40A(3) OF THE ACT IS UNATTRACTED. THERE IS NO VALID REASON TO DISALLOW THE SAID SUM OF RS. 5,39,360. AS SUBMITTED HEREIN ABOVE, BALANCE OF THE AMOUNT IS ALSO DULY SUPPORTED BY SUPPORTING PAYMENT VOUCHER DULY SIGNED BY THE CUSTO MER, APPROVED BY THE MANAGER AND ACTUAL CASH PAID BY THE CASHIER. THE L D. CIT(A) CONSIDERING THE ABOVE SUBMISSIONS OF ASSESSEE AND AFTER VERIFYING T HE FACTS HAS RIGHTLY DELETED THE ADDITION WHICH IS JUST AND CORRECT IN LAW. 2.3 THE LD DR IS HEARD WHO HAS TAKEN US THROUGH THE FINDINGS OF THE AO AND RELIED UPON THE SAID FINDINGS. 2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD CIT(A) HAS GIVEN A FINDING THAT THE AMOUNT HAS ACTUALLY BEEN REFUNDED AND THE LIST OF SUCH CUSTOMERS TO WHOM THE AMOUNT HAS BEEN REFUNDED IS IDENTIFIABLE AND THE SAME HAS BEEN VERI FIED BY HIM ALONG WITH DOCUMENTARY EVIDENCE. THE SAID FINDINGS REMAIN UNCO NTROVERTED BEFORE US. IN TERMS OF QUANTUM AND NATURE OF REFUND, THE SAME DEP ENDS UPON VARIOUS ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 6 FACTORS SUCH AS INITIAL ADVANCE RECEIVED FROM THE C USTOMERS, LOAN APPROVED AND CREDITED TO THE CUSTOMER ACCOUNT, VALUE OF SALES RE CORDED, VARIOUS CHARGES DEBITED TO THE CUSTOMER ACCOUNT AND OFF COURSE, THE RATE DIFFERENCE AND DISCOUNT ALLOWED TO THE CUSTOMERS. THE SAME WILL V ARY FROM CUSTOMER TO CUSTOMER AND FROM PRODUCT TO PRODUCT SOLD BY THE AS SESSEE. IN ABSENCE OF A SPECIFIC FINDING, IT IS DIFFICULT TO GENERALISE THA T IN ALL CASES, THE REFUND HAS ARISEN ONLY ON ACCOUNT OF DISCOUNT OFFERED TO THE C USTOMER AS HELD BY THE AO. IT IS ONLY IN A PARTICULAR SITUATION WHERE THE CASH ADVANCE ALONGWITH LOAN AMOUNT EQUALS THE SALES AND OTHER CHARGES, IT CAN B E SAID THAT THE BALANCING FIGURE RELATES TO DISCOUNT OFFERED TO THE CUSTOMER. IN LIGHT OF ABOVE, WE CONFIRM THE ORDER OF THE LD CIT(A) AND SUSTAIN THE DELETION OF ADDITION MADE BY THE AO. IN THE RESULT, GROUND NO. 1 OF REVENUE IS DISMISSED. 3. IN RESPECT OF GROUND NO.2, THE BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE HAS CLAIMED FINANCIAL SERVICE CHARGES OF RS. 18,782,000/- (RS. 32,000/- PERTAIN S TO THE EARLIER YEAR). AS EXPLAINED BY THE ASSESSEE THAT THESE EXPENSES HAVE BEEN INCURRED TO FACILITATE THE CUSTOMERS IN TAKING LOANS FROM THE BANKS FOR TH E PURCHASE OF TRACTORS. SUCH EXPENSES ARE NOT SUPPORTED BY ANY VOUCHER AND MOSTLY DEDUCTED AT A UNIFORM RATE OF RS. 15,000/- PER CUSTOMER AND COMPR ISES OF FOLLOWING: NATURE OF EXPENDITURE AMOUNT (RS) 1. JEEP FARE( FOR FIELD INSPECTION, DOCUMENTATION & 6000 PHYSICAL VERIFICATION) 2. LEGAL AND ADVOCATE EXPENSES 3000 3. STAMPING CHARGES 1500 4. TYPING & STATIONARY CHARGES 1000 5. REFRESHMENT 1500 6. ENTERTAINMENT 2000 TOTAL 15000 ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 7 THE ASSESSEE WAS ASKED TO JUSTIFY THE ADMISSIBILITY OF EXPENSES OF RS. 18,82,000/- ON ACCOUNT OF FINANCIAL CHARGES. IN R ESPONSE, THE ASSESSEE SUBMITTED THAT TO TAKE THE LOAN FROM THE NATIONALIZ ED BANKS, THE FORMALITIES ARE QUITE CUMBERSOME SO THE VILLAGE CUSTOMERS WANTS THE SERVICES OF OUR SALESMAN. WE HAVE TO INCUR EXPENSES THROUGH OUR S ALESMAN AND THE SAME IS DEBITED TO FINANCIAL SERVICE CHARGES. THE ESTIMATE D AMOUNT VARIES FROM RS. 10000 TO 20000 WHICH WAS PAID TO THEM. THE AO THER EAFTER HELD THAT FROM THE LEDGER ACCOUNT OF THE CUSTOMERS, IT IS APPARENT THA T EXPENSES TOWARDS PROCESSING CHARGES, INSURANCE AND REGISTRATION ARE CHARGED ARBITRARILY WITHOUT ANY UNIFORMITY. NO RELAXATION IS ALLOWED TO THE CU STOMERS, EACH AND EVERY KIND OF EXPENSES ARE CHARGED. UNDER SUCH CIRCUMSTANCES, IT CANNOT BE PRESUMED THAT THE ASSESSEE HAS INCURRED EXPENDITURE OF RS. 1 5,000/- PER CUSTOMER TO HELP THEM IN GETTING LOANS. MOREOVER, SUCH EXPENSE S ARE NOT SUPPORTED BY ANY KIND OF DOCUMENTS TO ESTABLISH ITS GENUINENESS. FR OM THE DETAILS OF EXPENSES GIVEN BY THE ASSESSEE AND REPRODUCED ABOVE IT IS VE RY MUCH APPARENT THAT EXPENSES ARE TAKEN IN ROUND FIGURE WITH THE INTENT TO INFLATE THE EXPENSES. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CA SE CONSIDERING THE NATURE AND IN THE ABSENCE OF EVIDENCE, FINANCIAL CHARGES O F RS. 18,50,000/- PERTAINING TO THE YEAR UNDER CONSIDERATION AND RS.32,000/- PER TAINING TO EARLIER YEAR TOTAL RS. 18,82,000/- WAS DISALLOWED BY THE AO. 3.1 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD CIT(A) WHO AFTER CONSIDERING THE ASSESSEES SUBMISS IONS HAS GIVEN HIS FINDINGS AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMEN T ORDER, APPELLANTS WRITTEN SUBMISSIONS, AOS REMAND REPORT AND APPELLA NTS REJOINDER. ASSESSING OFFICER DISALLOWED FINANCIAL CHARGES PAID BY THE APPELLANT FOR ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 8 ARRANGING LOANS FOR CUSTOMERS. APPELLANT SUBMITTED THAT THESE ARE REIMBURSEMENT OF EXPENSES INCURRED BY SALESMAN FOR PUSHING THE SALES TO VARIOUS CUSTOMERS SITUATED IN REMOTE PLACES. APPEL LANT SUBMITTED DETAILS OF SALESMAN WITH CUSTOMER AND AMOUNT OF REIMBURSEME NT. APPELLANT ALSO SUBMITTED VOUCHERS SIGNED BY THE RESPECTIVE SA LESMAN GIVING DETAILS OF NATURE OF EXPENSES INCURRED. APPELLANT MENTIONE D THE METHOD THROUGH WHICH THESE PAYMENTS WERE VERIFIED BY MANAG EMENT. THE AO SUBMITTED THAT SOME OF THE VOUCHERS ARE NOT BEARING SIGNATURE AND REVENUE STAMP. AO ALSO SUBMITTED THAT THE VOUCHERS OF ACTUAL EXPENSES INCURRED BY THE EMPLOYEES WERE NOT SUBMITTED. SINCE SALESMENS VOUCHERS CONTAINING DETAILS OF EXPENSES WERE ONLY S UBMITTED. VOUCHERS FOR ACTUAL EXPENSES INCURRED BY THE SALESMEN WERE N OT SUBMITTED, IT IS VERY DIFFICULT TO VERIFY THE COMPLETE BUSINESS PURP OSES OF THESE EXPENSES. HOWEVER, IT IS NOT IN DISPUTE THAT APPELLANT MADE T HE PAYMENT TO HIS SALESMEN BY WAY OF REIMBURSEMENT OF EXPENSES AND TH EREFORE PRIMA FACIE EXPENSES ARE ALLOWABLE. HOWEVER IN THE ABSEN CE OF ACTUAL EXPENDITURE VOUCHERS FROM SALESMEN, THE VERIFICATIO N OF EXPENSES IS NOT POSSIBLE. IN VIEW OF THIS, PART DISALLOWANCE OF T HESE EXPENSES FOR WANT OF VERIFICATION IS REQUIRED. ACCORDINGLY, DISALLOWANC E OF 20% OF THESE EXPENSES WILL BE REASONABLE AND HENCE THE SAME IS C ONFIRMED. THE DISALLOWANCE MADE BY THE AO IS CONFIRMED TO THE EXT ENT OF 20% FOR WANT OF VERIFICATION. 3.2 THE LD. AR OF THE ASSESSEE SUBMITTED THAT FOR P ROMOTION OF SALES, THE ASSESSEE HAS EMPLOYED SALESMEN, WHO VISIT THE TERRI TORIAL AREA, SEARCH OUT PROSPECTIVE CUSTOMERS, CANVAS THEM AND THEN BRING T HE CUSTOMER FOR BOOKING OF THE ORDER. SUCH SALESMEN ON THE SALE EFFECTED I S GIVEN INCENTIVE APART FROM THE REIMBURSEMENT OF THE EXPENDITURE INCURRED BY HI M IN VARIOUS ACCOUNT. HEADS OF SUCH EXPENDITURE ARE PLACED BY THE SALESME N BEFORE THE CASHIER WHO SATISFY HIMSELF, SEEKS APPROVAL FROM THE MANAGER AN D THEREAFTER PAYMENT IS ACTUALLY MADE. SUCH PAYMENTS ARE FULLY SUPPORTED B Y VOUCHERS. WE ARE SUBMITTING HEREWITH DETAILS OF FINANCIAL SERVICES E XPENDITURE ALONE WITH DATE, NAME OF THE SALESMEN, NAME OF THE CUSTOMER AND THE AMOUNT REIMBURSED. COPY OF THE PAYMENT VOUCHERS BEARING SIGNATURES OF THE RECIPIENT SALESMEN, CASHIER AND MANAGER IS SUBMITTED. THE AMOUNT VARIE S FROM RS 8000 TO RS ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 9 20000 LOOKING TO THE DISTANCE COVERED, JEEP FARE AN D OTHER ACTUAL EXPENDITURE AS DETAILED ON PAGE 6 OF THE IMPUGNED ASSESSMENT OR DER. THERE IS NO VALID REASON FOR THE DISALLOWANCE OF EXPENDITURE ACTUALLY INCURRED. SIMILAR EXPENDITURE HAS BEEN INCURRED IN THE PAST YEARS AND AS SUBMITTED HEREIN BEFORE HAVE BEEN ALWAYS ALLOWED. THE LD AR FURTHER SUBMITTED THAT THE AO HAS WRONGLY UNDERSTOOD THE NATURE OF EXPENDITURE. HE HAS MENTIONED AS TO CHARGING OF PRO CESSING CHARGES FROM THE CUSTOMERS. IT MAY BE CLARIFIED THAT PROCESSING CHA RGES HAVE BEEN DEBITED TO THE CUSTOMERS ACCOUNT IN SOME CASES AND THAT AMOUNT HAS BEEN TRANSFERRED TO K.S. CAPITAL SERVICES PRIVATE LTD. FOR THEIR PROCES SING CHARGES OF FINANCE BY KOTAK MAHINDRA BANK. THE RECIPIENT COMPANY IS ASSE SSED TO INCOME TAX AND THE AMOUNT SO TRANSFERRED STANDS DULY CREDITED IN T HEIR ACCOUNTS AND CONSIDERED IN THEIR ASSESSMENT. SUCH PROCESSING CHA RGES ARE NOT FOR ALL CUSTOMERS, IT IS ONLY IN RESPECT OF SUCH CUSTOMERS WHO HAVE AVAILED OFF THE FINANCE BY KOTAK MAHINDRA BANK. INSURANCE AND REGI STRATION CHARGES ARE CHARGED ON ACTUAL BASIS, NOT ARBITRARILY. THE REIM BURSEMENT AMOUNT PAID TO THE SALESMEN IS FOR THE SPECIFIC EXPENDITURE INCURR ED BY THEM AND SUCH EXPENDITURE HAS NOT BEEN CHARGED FROM THE CUSTOMERS . IT IS THE NATURE OF SALES PROMOTION EXPENSES. THE PAYMENT TO THE SALESMEN IS ACTUAL AND NOT INFLATED. AS SUBMITTED HEREIN ABOVE, THE PAYMENT VOUCHER IS P REPARED BY THE CASHIER, ON SATISFACTION IS APPROVED AFTER VERIFICATION BY T HE MANAGER AND THEN PAYMENT IS MADE BY THE CASHIER, AFTER OBTAINING SIG NATURES OF THE CONCERNED SALESMEN. THE LD. CIT(A) AFTER CONSIDERING THE ABO VE SUBMISSIONS OF ASSESSEE HELD PART DISALLOWANCE @ 20% OF THESE EXPENSES FOR WANT OF VERIFICATION AGAINST WHICH ASSESSEE HAD FILED NO APPEAL. THE LD . CIT(A) HAS RIGHTLY DELETED THE ADDITION WHICH IS JUST AND CORRECT IN LAW. ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 10 IT WAS FURTHER SUBMITTED THAT THE LD. AO THEREAFTER COMPLETED THE ASSESSMENT U/S 143(3) FOR A.Y. 2011-12 & 2012-13 (A.Y. 2010-11 COMPLETED U/S 143(1) HAVING SIMILAR FACTS AND ENTRIES IN ACCOUNTS AND VO UCHERS) ACCORDING TO FINDINGS OF LD. CIT(A) AND MADE ASSESSMENTS OF ASSESSEE HUF IN ACCORDANCE THERETO . 3.3 THE LD DR IS HEARD WHO HAS TAKEN US THROUGH THE FINDINGS OF THE AO AND RELIED UPON THE SAID FINDINGS. 3.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE EXPENSES UNDER CONSIDERATION ARE SAL ES PROMOTION EXPENDITURE WHICH ARE PAID TO SALESMAN FOR PUSHING THE SALES TO VARIOUS CUSTOMERS SITUATED IN REMOTE PLACES. THE DETAILS OF SALESMAN WITH CUST OMER AND AMOUNT OF REIMBURSEMENT, VOUCHERS SIGNED BY THE RESPECTIVE SA LESMAN GIVING DETAILS OF NATURE OF EXPENSES INCURRED AND THE METHOD THROUGH WHICH THESE PAYMENTS WERE VERIFIED BY MANAGEMENT WERE SUBMITTED AND VERI FIED BY THE LD CIT(A). AT THE SAME TIME, IN THE ABSENCE OF ACTUAL THIRD PARTY EXPENDITURE VOUCHERS FROM SALESMEN SUPPORTING THEIR RESPECTIVE CLAIMS, DISALL OWANCE OF 20% OF THESE EXPENSES WAS HELD REASONABLE AND DISALLOWED BY THE LD CIT(A) FOR WANT OF VERIFICATION. IN THIS FACTUAL MATRIX, FIRSTLY, THE INCURRENCE OF EXPENDITURE FOR BUSINESS PURPOSES CANNOT BE DISPUTED. SECONDLY, ON E CAN DEBATE ABOUT THE BASIS OF 20% DISALLOWANCE AND WHETHER THE SAME IS R EASONABLE OR NOT. IN THIS REGARD, WE WERE INFORMED BY THE LD AR THAT THE REVE NUE HAS ACCEPTED THE SAID POSITION OF 20% DISALLOWANCE IN SUBSEQUENT YEARS WH ILE COMPLETING THE ASSESSMENTS U/S 143(3) FOR A.Y. 2011-12 & 2012-13. IN LIGHT OF THAT, WHERE THE FACTS AND CIRCUMSTANCES ARE SAME AND THE REVENUE HA S ACCEPTED THE SAID POSITION IN SUBSEQUENT YEARS, WE DONT FEEL IT WOUL D BE APPROPRIATE TO UNSETTLE ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 11 THE POSITION. WE ACCORDINGLY CONFIRM THE ORDER OF THE LD CIT(A). GROUND NO. 2 OF THE REVENUE IS THUS DISMISSED. 4. IN RESPECT OF GROUND NO.3, THE BRIEF FACTS OF TH E CASE ARE THAT IN RESPECT OF SALE OF IMPLEMENTS AMOUNTING TO RS. 31,60,000/-, THE ASSESSEE HAS SUBMITTED THAT BILLS FOR IMPLEMENTS ARE ISSUED TO H ELP THE CUSTOMERS IN GETTING LOAN OF HIGHER AMOUNT. IN FACT NO SUCH SALES ARE M ADE. THEREFORE, A REVERSE ENTRY TO THIS EFFECT IS MADE IN THE BOOKS OF ACCOUN TS. THE ASSESSEE HAS NOT MADE ANY PURCHASE OF THE IMPLEMENTS AND ONLY SALE B ILLS HAVE BEEN ISSUED TO ENABLE THE CUSTOMERS TO GET HIGHER AMOUNT OF LOAN. AS PER AO, IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED, IT IS ALSO A FACT THAT A BUSINESS MAN WOULD NEVER ISSUE A BILL WITHOUT MAKING ANY CHARGE FROM THE CUSTOMERS. THERE IS ANOTHER POSSIBILITY THAT SUCH IMPLEMENTS COULD H AVE BEEN SOLD THROUGH SOME OTHER DEALER OR IMPLEMENTS. IN EITHER CASE, THE AS SESSEE WOULD GET SOME REMUNERATION FOR THE SERVICE RENDERED BY HIM. IN V IEW OF THIS FACT IT WAS ASSUMED BY AO THAT THE ASSESSEE HAS RECEIVED 5% COM MISSION ON THE TOTAL SALES BOOKED FOR IMPLEMENTS RESULTING INTO ADDITION OF RS. 1,58,000/- (31,60,000 X 5/100) TO THE INCOME OF THE ASSESSEE. 4.1 THE FINDINGS OF THE LD. CIT(A) IS AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMEN T ORDER AND APPELLANTS WRITTEN SUBMISSION. ASSESSING OFFICER MADE THE ADDITION OF 5% OF BILL AMOUNT OF EQUIPMENTS ON THE GROUND THAT APPELLANT MUST HAVE EARNED THIS MUCH COMMISSION FOR FACILITATING CUSTOM ERS IN GETTING LOAN OF HIGHER AMOUNT. APPELLANT SUBMITTED THAT HE HAS NOT RECEIVED ANY MONEY OR COMMISSION FOR THE FACILITY PROVIDED TO THE CUST OMERS. FOR MAKING SALES IN THE COMPETITIVE ENVIRONMENT, ALL THESE FAC ILITIES ARE REQUIRED TO BE PROVIDED TO THE CUSTOMERS FOR WHICH NO SEPARATE CHARGES ARE MADE. THE ADDITION MADE BY THE AO IS COMPLETELY PRESUMPTI VE WITHOUT ANY BASIS. I AGREE WITH THE APPELLANT THAT INCOME CANN OT BE PRESUMED. ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 12 THERE ARE SEVERAL DECISIONS IN WHICH COURTS HAVE HE LD THAT INCOME HAS TO BE REAL AND NOT PRESUMPTIVE. SINCE THERE IS NO BAS IS TO PRESUME THAT APPELLANT MUST HAVE EARNED COMMISSION AT 5%, THE AD DITION CANNOT BE SUSTAINED. THIS GROUND IS ACCORDINGLY ALLOWED. 4.2 THE LD. AR OF THE ASSESSEE SUBMITTED THAT MANY CUSTOMERS IN ORDER TO AVAIL OF HIGHER LOAN FACILITY REQUIRE THE ASSESSEE TO ISSUE BILL FOR SALE OF IMPLEMENTS. HOWEVER, THEY DO NOT PURCHASE SUCH IMP LEMENTS IN ACTUALITY AND, THEREFORE, CREDIT VOUCHER IS AGAIN ISSUED. NO ACTU AL SALE HAS BEEN EFFECTED. IT IS ONLY A DEBIT AND CREDIT ENTRY NOT RESULTING IN A NY PROFIT. THE LD. AO AFTER DISCUSSION IN PARA 8 OF ITS ORDER HAS ASSUMED AND P RESUMED THAT THE BILL HAS BEEN ISSUED AFTER MAKING A CHARGE. HE HAS INDULGED IN THE SURMISE, THAT A BUSINESS MAN WOULD NEVER ISSUE A BILL WITHOUT MAKIN G ANY CHARGE FROM THE CUSTOMERS. HE HAS NOT FOUND ANY CUSTOMER COMPLAINI NG THAT ANY CHARGE HAS BEEN MADE FOR SUCH ENTRY. THERE IS NO TRUTH IN THE SAID CLAIM AND THERE IS NO EVIDENCE IN SUPPORT OF IT. IT IS WITHOUT EVIDENCE AND MATERIAL. THE LD. AO HAS FURTHER OBSERVED THAT THERE IS ANOTHER POSSIBILITY THAT SUCH IMPLEMENTS COULD HAVE BEEN SOLD THROUGH SOME OTHER DEALER OF IMPLEME NTS. IT IS THE SURMISE AND CONJECTURE, WITHOUT ANY MATERIAL OR EVIDENCE. THE LD. AO HAS NOT FOUND AS TO SUCH ASSUMED SALE TO ANY OTHER DEALER. WE ARE S UBMITTING HEREWITH DETAILS OF SUCH IMPLEMENT SALE/RETURN ALONGWITH DATE, INVOI CE NUMBER, NAME OF THE PARTY, AMOUNT ALONGWITH DATE, CREDIT NOTE AND THE A MOUNT SQUARING UP SUCH DEBIT. IN ACTUALITY A SALE OF RS. 60,000/- WAS MAD E ON 31.3.2009 VIDE INVOICE NO.351 TO SHRI RAMAVTAR. SUCH AMOUNT OF RS. 60,000 /- HAS BEEN DULY SHOWN AS SALE AND PROFIT EARNED THEREON STANDS DULY CONSIDER ED IN THE TRADING ACCOUNT. WE ARE SUBMITTING HEREWITH SUCH DETAILS OF REVERSAL ENTRY OF RS. 31 LACS. WE SUBMIT THE ADDITION IS BASED ON SURMISE, CONJECTURE S, DOUBTS, SUSPICIOUS WITHOUT ANY MATERIAL OR EVIDENCE. THE LD. CIT(A) C ONSIDERING THE ABOVE ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 13 SUBMISSION AND AFTER VERIFYING THE FACTS HAS RIGHTL Y DELETED THE ADDITION WHICH IS JUST AND CORRECT IN LAW. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO HAS MADE THE SUBJECT ADDITION TOW ARDS EARNING COMMISSION INCOME BY THE ASSESSEE WITHOUT ANY MATERIAL/EVIDENC E AND IS THUS ON A PRESUMPTIVE BASIS. MERE SUSPICION OR PROBABILITY O F EARNING COMMISSION INCOME CANNOT FORM THE BASIS FOR BRINGING THE AMOUN T TO TAX IN THE HANDS OF THE ASSESSEE. THERE HAS TO BE SOMETHING POSITIVE A ND TANGIBLE TO SUBSANTIATE THE SAID POSITION TAKEN BY THE REVENUE WHICH UNFORT UNATELY IS NOT APPARENT IN THE PRESENT CASE. IN LIGHT OF ABOVE, WE DONOT SEE A NY INFIRMITY IN THE ORDER OF THE LD CIT(A) WHICH IS HEREBY CONFIRMED. GROUND NO . 3 OF THE REVENUE IS THUS DISMISSED. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/02/ 2017. SD/- SD/- (KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 15/02/2017 VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-6, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S KISHORE SINGH GEHLOT, JAIPOUR 3. VK;DJ VK;QDR@ CIT - 2, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A) -2, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 143/JP/2014) V KNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR. ITA NO. 143/JP/14 ACIT, CIRCLE-6, JAIPUR VS. M/S KISHORE SINGH GEHLOT (HUF), JAIPUR 14