Sh. Anil Grover, New Delhi V. ACIT, New Delhi

ITA 2487/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6690 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 20-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D V TANEJA
• Keywords: Depreciation
• Section: 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-2 NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER ITA NO. 2487/DEL/2015 ASSTT. YRS: 2011-12 ANIL GROVER VS. ACIT CIRCLE 23(1), 306-307, BHANDARI HOUSE, NEW DELHI. NEHRU PLACE, NEW DELHI. PAN: AAGPG 7124 B ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI D.V. TANEJA CA RESPONDENT BY : SHRI N.K. BANSAL SR. DR DATE OF HEARING : 20/07/2016. DATE OF ORDER : 29/07/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATE D 18.3.2015 PASSED BY THE LD. CIT(A)-10, NEW DELHI, RELATING TO A.Y. 2011-12. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE IN ITS APPEAL: 1. LD.CIT (A) ERRED IN FACTS AND IN LAW IN CONFIRMI NG AN ADDITION OF RS.54,060/-TOWARDS CAR MAINTENANCE AND TELEPHONE AND TRAVELLING. 2. THAT CAR WAS USED FOR BUSINESS PURPOSES AND TEL EPHONE EXPENSES ARE FOR TELEPHONES AT BUSINESS PREMISES AN D TRAVEL WAS DONE FOR BUSINESS DISALLOWANCE @ 5% IS HIGHLY E XCESSIVE AND THE ADDITION MADE AT RS.54,060/- IS BAD IN LAW. 2 3. LD.CIT (A) ERRED IN FACTS AND IN LAW IN CONFIRMI NG AND DISALLOWANCE OF RS.9,36,900/- TOWARDS COMMISSION PA YMENTS .. 4. THAT LD. A.O. MADE OBSERVATIONS REGARDING COMMIS SION PAYMENTS IN THE ASSTT. ORDER AT PAGE 6 PARA (1) TO VII ARE OPPOSED TO FACTS LAW AND CIRCUMSTANCES OF THE CASE AN DOCUMENTS PRODUCED AND ADDITION MADE AND CONFIRMED BY LD.CIT (A) AND ADDITION CONFIRMED IS BAD IN LAW. 5. LD.CIT (A) IGNORED THE EVIDENCE PLACE ON RECORD BY OBSERVING OF SERVICES RENDERED AND COMMISSION EARNE D AT RS.22, 19,369/ - AND TURNOVER GENERATED AT RS.6,78, 40,322/ - AND CONFIRMATION OF DISALLOWANCE AT RS.9,36,900/- IS BAD IN LAW . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, P ROPRIETOR OF M/S MICRO DEVICES INC., IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF TRADING IN COMPUTER PERIPHERALS AND ELECTRONIC COMP ONENTS. HE FILED HIS RETURN OF INCOME SHOWING INCOME OF RS. 20,51,397/-. 3.1. AO COMPLETED THE ASSESSMENT AFTER MAKING FOLLO WING DISALLOWANCES: (A) OUT OF EXPENSES CLAIMED RS. 1,27,797/- (B) ADDITION ON ACCOUNT OF COMMISSION PAID RS. 11 ,64,500/- 3.2. LD. CIT(A) PARTLY ALLOWED THE ASESSEES APPEAL . BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BRIEF FACTS APROPOS GROUND NOS. 1 & 2 ARE THAT T HE AO NOTICED FROM THE P&L A/C THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 2,04,312/- UNDER THE HEAD CAR REPAIR & MAINTENANCE; RS. 1,47,786/- ON TE LEPHONE, RS. 1,96,785/- ON DEPRECIATION ON CAR AND RS. 7,29,096/- ON TRAVEL LING. THE AO MADE 3 DISALLOWANCE OF 10% OF THESE EXPENSES ON ACCOUNT OF PERSONAL USE OF THESE FACILITIES, OBSERVING AS UNDER: THE ISSUE OF NON BUSINESS USE OF CAR AND TELEPHONE WAS DISCUSSED WITH LD. COUNSEL WHO AGREED THAT NON BUSI NESS USE OF THESE ITEMS CANNOT BE RULED OUT COMPLETELY. ACCORDI NGLY, 10% OF THESE EXPENSES BEING FAIR PROPORTIONATE IS DISAL LOWED U/S 37 & 38 OF THE INCOME TAX ACT, 1961. THE TOTAL OF THES E EXPENSES COMES TO RS. 12,77,979/- (RS. 2,04,312+RS. 1,47,786 + RS. 1,96,785/- RS. 7,29,096/-) AND RS. 1,27,797/- BEING 10% OF THIS AMOUNT IS ADDED IN THE INCOME OF ASSESSEE. 5. I HAVE HEARD BOTH THE PARTIES. LD. COUNSEL FOR T HE ASSESSEE POINTED OUT THAT KEEPING IN VIEW THE ASSESSEES TURNOVER OF RS . 6 CRORES, THE DISALLOWANCE MADE BY AO IS ON HIGHER SIDE. I FIND T HAT AO HAS NOT POINTED OUT ANY SPECIFIC ITEM OF DISALLOWANCE, BUT AT THE S AME TIME SINCE IT CANNOT BE DENIED THAT THERE WAS PERSONAL USE OF VARIOUS FACIL ITIES UNDER CONSIDERATION, THEREFORE, I DIRECT THAT THE DISALLOWANCE BE RESTRI CTED TO 3% OF THE TOTAL EXPENSES AS AGAINST 5% MADE BY LD. CIT(A). GROUND I S PARTLY ALLOWED. 6. GROUND NOS. 3 & 5: BRIEF FACTS APROPOS GROUND NO S. 3 & 5 ARE THAT THE AO CALLED FOR THE DETAILS OF EXPENSES DEBITED TO P & L A/C. THE ASSESSEE, INTER ALIA, SUBMITTED COPY OF LEDGER ACCOUNT OF COM MISSION EXPENSES. THE AO NOTICED THAT ASSESSEE HAD PAID ALL THE COMMISSIO N IN CASH AND NO TDS HAD BEEN DEDUCTED BY THE ASSESSEE ON THESE PAYMENTS EXCEPT THREE PAYMENTS MADE ON 28.2.2011 PAID TO M/S SWASTIC MARKETING AND SHRI ASHOK ANAND THROUGH CHEQUE. THE ASSESSEE POINTED OUT THAT NO TA X WAS DEDUCTED EXCEPT IN RESPECT OF THREE BILLS OF M/S SWASTIC MARKETING AND SHRI ASHOK ANAND, AS THE PAYMENTS MADE WERE BELOW RS. 20,000/-. THE AO H AS REPRODUCED THE ENTIRE LEDGER ACCOUNT OF THE COMMISSION AGGREGATING TO RS. 17,64,500/- AND FROM THAT CONCLUDED AS UNDER: 4 (I) DURING THE YEAR PAYMENTS HAVE BEEN MADE TO DIFFEREN T PERSONS AS A SINGLE PAYMENT AND THEIR NAMES NEVER B EEN REPEATED. THE COMMISSION AGENTS ARE USUALLY COMMON AND. THEY TOOK ORDERS CONTINUOUSLY. (II) ALL THE ABOVE FIGURES OF COMMISSION PAYMENTS ARE IN ROUND FIGURES, THE AMOUNT OF THE SALE I ORDERS MAY BE SOME IN ROUNDS FIGURES BUT MOSTLY IT IS NOT POSSIBL E THAT ORDERS CAN BE PLACED IN ROUNDS FIGURES ONLY. IN THI S CASE ALL PAYMENTS HAVE BEEN MADE IN ROUND FIGURES. (III) THE ASSESSEE WAS ASKED TO PRODUCE THE PERSONS TO WH OM COMMISSION HAD BEEN PAID BUT THE ASSESSEE HAVE BEEN SHOWN HIS INABILITY TO PRODUCE THE PERSONS AND ALSO STATED IN FAVOUR OF HIS VERSION THAT THE COMMISSION AGENTS ARE NOT COMMON AND NOT COMING CONTINUOUSLY FOR ORDERS, HENCE COULD NOT BE PRODUCE IN PERSON IN ABSENCE OF ANY RESIDENTIAL ADDRESSES OF THE AGENTS. (IV) MAXIMUM PAYMENTS HAVE BEEN MADE ON DIFFERENT DATES AND TO DIFFERENT PERSONS. IT IS NOT POSSIBLE THAT M OREOVER 60 TO 70 COMMISSION AGENTS COME TO RECEIVE HIS COMMISSION ON DIFFERENT DATES, BECAUSE THE COMMISSI ON EXPENSES ARE FIXITIES HENCE, THE ASSESSEE TRIED TO ADJUST THE EXPENSES DEBITED UNDER THIS HEAD TO THE WHOLE Y EAR. (V) MOST IMPORTANT REASON FOR DISALLOWANCE IS THAT THE ASSESSEE HAS MADE ALL THE PAYMENTS IN CASH WHILE HE KNOWS THAT HE HAS TO PAY COMMISSION TO HIS AGENTS W HICH ARE REGULARLY PLACED THE ORDERS. HE CAN FORCE HIM T O OPEN AN ACCOUNT IN THE BANK FOR PAYMENTS AND WHICH AGENT S NOT FULFILL THIS CONDITION, HE CAN DENY FOR TAKING FURTHER ORDERS. (VI) ALL THE ABOVE TRANSACTIONS (OTHER THAN THREE TRANSACTIONS MADE ON 28.02.2011) HAVE BEEN MADE KEEPING IN MIND THE PROVISIONS OF SEC. 40 OF IT ACT, 1961, WHICH IS NOT TO MADE ANY PAYMENTS ABOVE RS.20,OOOI- IN CASH. ALL TH E 5 ABOVE TRANSACTIONS CLEARLY SHOW THAT THE LIMIT PROV IDED IN THE ACT HAS NOT BEEN BREAK VERY WISELY. (VII) THE ASSESSEE WAS ALSO CALLED FOR TO PRODUCE A LL THE VOUCHERS OF THESE COMMISSION EXPENSES BUT THE ASSES SEE SHOWS HIS INABILITY TO PRODUCE THE SAME AND STATED THAT VOUCHERS ARE MISPLACED. IN THIS CONDITION, THE COMMISSION EXPENSES SHOULD NOT BE ALLOWED. 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSE SSEE IS OPERATING IN NEHRU PLACE, WHERE CUSTOMARILY HE HAS TO MAKE THE P AYMENT OF COMMISSION TO VARIOUS PARTIES IN ORDER TO MEET THE EXTENSIVE C OMPETITION IN THE MARKET. HE SUBMITTED THAT THEY ARE PETTY SALES AGENT AND, T HEREFORE, IT WAS NOT POSSIBLE FOR ASSESSEE TO PRODUCE THEM. 8. LD. DR SUBMITTED THAT ASSESSEE HAS NOT LINKED TH E COMMISSION WITH THE SALES AND, THEREFORE, THE DISALLOWANCE HAS TO B E CONFIRMED. 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND HAVE PERUSED THE RECORD OF THE CASE. ADMITTEDLY, ASSESSE E HAD PAID COMMISSION AGAINST THREE BILLS THROUGH CHEQUE AFTER DULY DEDUC TING TDS AND, THEREFORE, LD. CIT(A) HAD ALLOWED A RELIEF OF RS. 2,27,600/-. IT CANNOT BE DENIED THAT THE COMPUTER INDUSTRY IS IN HIGHLY COMPETITIVE FIELD, A S ALSO NOTED BY LD. CIT(A) ALSO AND, THEREFORE, IN ORDER TO ENSURE SALES, THE ASSESSEE MUST BE PAYING COMMISSION TO VARIOUS SALES AGENT. THE AO HAS PRIMA RILY DRAWN ADVERSE INFERENCE FROM ADJOINING CIRCUMSTANCES NOTED EARLIE R. HOWEVER, HE HAS NOT POINTED OUT ANY SPECIFIC INSTANCE TO CONTROVERT THE STAND TAKEN BY ASSESSEE. BUT AT THE SAME TIME IT CANNOT BE DENIED THAT THE O NUS WAS ON ASSESSEE TO SUBSTANTIATE THE CLAIM MADE BY IT. CONSIDERING THE CUSTOM PREVAILING IN THE MARKET, I AM OF THE CONSIDERED OPINION THAT IT WOUL D MEET THE ENDS OF JUSTICE IF EXPENDITURE ON COMMISSION IS RESTRICTED TO 1% O F THE GROSS SALES BEING RS. 6 6,78,40,322/-, WHICH WILL INCLUDE THE COMMISSION PA ID THROUGH CHEQUE BY ASSESSEE, WHICH HAS BEEN ALLOWED BY LD. CIT(A). THE AO WILL ALLOW THE BALANCE AMOUNT AS EXPENDITURE. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCEMENT IN OPEN COURT ON 29/07/2016. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 29/07/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.