Mahesh Chand Gupta , Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 392/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2008-09

Mahesh Chand Gupta cuke Addl. CIT, Prop- M/s Rajasthan Small Scale Vs. Range-5, Jaipur. Cottage Industries, 1, Jagat Shiromani Road, Amer, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACEPG 9938 K vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Madhukar Garg (CA) jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph (JCIT)

lquokbZ dh rkjh[k@ Date of Hearing : 06/05/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 15/05/2015

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

This is an appeal filed by the assessee against the order dated

19/03/2012 passed by the learned CIT(A)-II, Jaipur for A.Y. 2008-09

The effective grounds of appeal are as under:-

"1 That the learned CIT(Appeals) has erred in confirming the action of the Assessing Officer in applying a GP rate of 56.17% in export division resulting in trading addition of Rs. 20,30,516/-. The 2 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

trading addition sustained is unjustified and excessive.

2. That the learned CIT(Appeals) has erred in confirming the action of the Assessing Officer in applying a GP rate of 36% in local division and making trading addition of Rs. 17,06,982/-. The action of the learned CIT(Appeals) in sustaining the trading addition is unjustified and excessive.

3. That the learned CIT(Appeals) has erred in holding that the appellant had stated that none of the commission recipients had come back to his emporium. The said finding is illegal and unjustified.

4. That the learned CIT(Appeals) has erred in holding that there is change in the facts and circumstances in the current year as compared to earlier years. The said finding is illegal and unjustified.

5. That the learned CIT(Appeals) has erred in holding that the appellant has miserably failed to submit that the commission agents have procured any export orders. The said finding is illegal and unjustified.

6. That on the facts and circumstances of the case the learned CIT(Appeals) has erred in sustaining a disallowance of Rs. 16,54,883/- out of commission paid by the assessee. The disallowance sustained is illegal, unjustified and excessive.

7. That on the facts and circumstances of the case the learned CIT(Appeals) has erred in sustaining a disallowance of Rs. 75,424/- out of entertainment expenses. The disallowance sustained is unjustified and excessive.

8. That the learned CIT(Appeals) has erred in sustaining disallowance of Rs. 24,600/- on account of employee's contribution towards PF. The disallowance sustained is unjustified and excessive."

3 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

2. The 1st and 2nd grounds of the assessee's appeal is against

applying the G.P. rate 56.17% in export division resulting in trading

addition of Rs. 20,30,516/- and also applying a GP rate of 36% in local

division and making trading addition of Rs. 17,06,982/-. The ld

Assessing Officer observed that the assessee filed his return of income

on 06/10/2008 declaring total income of Rs. 1,36,17,080/-. His case

was scrutinized U/s 143(3) of the Income Tax Act, 1961 (hereinafter

referred as the Act). The assessee is engaged in the trading and export

of Handicraft Items and Carpets in the name and style of M/s Rajasthan

Small Scale Cottage Industries (Export). The assessee also produced

the books of account such as cash book, ledger etc. The Assessing

Officer has examined the GP result for the year under consideration and

found that the assessee admittedly continued not to maintain day to

day stock register or quantitative and qualitative details in respect of

purchase and sale, consumption of raw material. Therefore, verification

of trading results is not possible. The assessee had also made some

purchases from URDs and payments to them were made in cash below

Rs. 20,000/- each at a stretch on different dates. These URD purchases

are unverifiable as simply self made vouchers have been maintained by

the assessee without containing complete addresses of the parties.

4 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

Therefore, he held that correct income of the assessee could not be

deduced on the basis of books produced by him. Thus, he applied

Section 145(3) of the Act. The ld Assessing Officer gave reasonable

opportunity of being heard on trading results, which was replied by the

assessee vide letter dated 06/10/2010. After examining the submission

of the assessee, he found these submissions in general in nature. The

assessee had shown sale of Rs. 11.37 crores and purchase of Rs. 7.84

crores besides closing stock Rs. 4.71 crores in local sales. Likewise in

export unit, the assessee had shown the sale of Rs. 2.85 crores,

purchase of Rs. 1.4 crores, showing closing stock of Rs. 013 crore. On

the basis of purchase and sale bill and narration made on it, it is not

possible that what item purchased and what item had been sold by the

assessee, therefore, quantitative verification is not possible including

closing stock. Neither the quantity nor the rate of each of the item had

been mentioned in purchase and sale invoices. Thus, the Assessing

Officer was helpless to examine anything from the record maintained by

the assessee. The assessee had disclosed G.P. on estimate basis near

about the G.P. rate shown in the preceding years. In preceding year

also, the same defects were noticed by the Assessing Officer and books

of account were rejected and trading additions were made by him.

5 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

Accordingly he rejected the book result U/s 145(3) of the Act on the

basis of defects pointed out by the Assessing Officer in preceding para.

He also relied upon the decision of the Hon'ble Supreme Court in the

case of S.N. Namaswery Chettiyar Vs. CIT (1960) ITR 579 for

maintenance of stock register, CIT Vs. British Paints India Ltd. 188 ITR

44 for the books disclosed the true statement of account and correct

income, Commissioner of Sales Tax Vs. H.Esuf Ali, H.M. Abdul Ali 90 ITR

S.C. 1973 271 for estimating the turn over. The ld Assessing Officer

estimated the G.P. rate @ 56.17% in export division similar to the G.P.

rate declared by the assessee in A.Y. 2004-05 and applied by the

Assessing Officer in A.Y. 2005-06 to 2007-08 as no reasons for fall in

G.P. rate in the year under consideration has been explained by the

assessee. Likewise G.P. rate on local sale is applied @ 36% as against

the declared G.P. rate of 34.53%. Accordingly, he made trading addition

of Rs. 20,30,516/- in export sale and Rs. 17,06,982/- in local sale.

3. Being aggrieved by the order of the learned Assessing Officer, the

assessee carried the matter before the learned CIT(A), who had

confirmed the addition by observing as under:-

"3.1 It is seen that the appellant has not made any specific arguments in this regard except relying on the orders of 6 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

CIT(A) and Hon'ble ITAT for the earlier years. The counsel of the appellant has made no efforts to rebut the presumption of the A.O. inasmuch as the findings of the A.O. have remained uncontroverted. In fact, the Hon'ble ITAT, Jaipur has upheld the rejection of books of account in A.Y. 2005-06 vide its order ITA No. 21/JP/2009 dated 23/10/2009. My predecessor had also upheld the rejection of books of account in A.Y. 2007-08 vide his order No. 398/09-10 dated 16/06/2010. The various discrepancies pointed out by the A.O. are enumerated as under:

a) The appellant had not maintained any stock register therefore details of opening stock and closing stock were not verifiable.

b) The appellant had not maintained any quantitative and qualitative details for various items purchased and sold. In fact, the appellant had given only the value of various items in the closing stock such as carpets, textiles, readymade garments. Neither the quantity not the rate of each item was available.

c) The appellant had not submitted the quantitative details of monthly purchases and sales on the ground that these records were not maintained. Therefore the trading results shown by the appellant were not amenable to verification.

He relied on the following case laws:-

(i) Sanjay Vs. CIT (298 ITR 363). 7 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

(ii) Radhey Shyam Sita Ram Vs. DCIT (10 DTR 168).

(iii) Narsinghdas Ramakishan Pungaliya Vs. ACIT (272 ITR 467).

(iv) Sriram & Co (316 ITR 139)

(v) CIT Vs. Nathekkattu Constructions (269 ITR 346).

He further held that there is no cogent evidence or reasons advanced

by the assessee whereas the Assessing Officer's estimation is supported

by the material fact of assessee's own case of A.Y. 2004-05. The

Assessing Officer had applied G.P. rate of 56.17% shown by the

appellant in its export division in A.Y. 2004-05. Similarly, the Assessing

Officer had applied G.P. rate of 36% in the local unit which is quite fair

and reasonable. The same is upheld by following the decision of Hon'ble

Rajasthan High Court in the case of Radhey Shyam Sita Ram Vs. DCIT

(supra). Accordingly, assessee's appeal had been dismissed in both the

grounds.

4. Now the assessee is in appeal before us. The ld AR of the

assessee has submitted that the ld Assessing Officer applied Section

145(3) of the Act by pointing out various defects in the books of

account but the ld CIT(A) had completely disregarded the past history

in this case. The assessee had declared G.P. rate in export unit at

49.06% as against G.P. rate of 49.07% and 49.1% in assessment year 8 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

2007-08 and 2006-07 respectively. The ld Assessing Officer applied G.P.

rate in A.Y. 2005-06 @ 56.17%, which was confirmed by the ld CIT(A)

@ 52% as reasonable in export unit. The assessee had preferred

further appeal before the Hon'ble ITAT Jaipur Bench, Jaipur vide ITA

No. 21/JP/2009 for A.Y. 2005-06. It had been decided vide order dated

23/10/2009 and had deleted the entire addition and GP rate of 47.5%

declared by the assessee, had been accepted as such. In A.Y. 2006-07

and 2007-08, similar additions were made by the Assessing Officer by

applying the G.P. rate which has been deleted by the ld CIT(A) in both

the years, which has been challenged by the revenue before the

Hon'ble ITAT but the Hon'ble ITAT had confirmed the order of the ld

CIT(A) in both the years. In view of the past history of the case and the

order of the Hon'ble Tribunal for the A.Y. 2005-06 to 2007-08, there is

no justification for applying the G.P. rate of 56.17% in export unit.

4.1 Similarly the Assessing Officer made the addition in G.P. rate in

local unit from A.Y. 2005-06 to 2007-08, which was deleted by the ld

CIT(A) and the ld CIT(A)'s order was upheld by the Hon'ble ITAT. The

department further filed appeal before the Hon'ble Rajasthan High

Court but no question of law had been admitted by the Hon'ble High 9 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

court. This issue has become final, therefore, addition made by the

Assessing Officer may please be deleted.

5. The ld D.R. has vehemently supported the order of the ld CIT(A).

6. We have heard the rival contentions of both the parties and

perused the material available on the record. Whatever defects had

been pointed out by the Assessing Officer to reject the book result U/s

145(3) of the Act, are sufficient to reject the book result and also the

assessee has not challenged this ground of appeal. However, this

aspect has been considered by the Coordinate Bench in A.Y. 2005-06 to

2007-08. The Coordinate Bench confirmed the rejection of books but it

further observed that as regards the estimation of income in local unit,

in absence of any comparable case and past history in the assessee's

own case is the best guide in the present case. The assessee had

declared better result as compared to preceding two years as

mentioned by the ld CIT(A) and is a matter of record. Therefore, in

view of the decision of Hon'ble Jurisdictional High Court's decision in the

case of CIT vs. Gotan Lime Khanij Udyog 256 ITR 243 even if books of

account have been rejected in the circumstances and fact of the

present case, no addition is called for. Therefore, the order of the

CIT(A) upheld by the coordinate Bench for local sale. As regards the 10 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

export unit, it was pointed out that there was only one woolen carpet

each in the opening as well as in the closing stock and the relevant bills

and record was available. As regards purchases and sales no specific

defect has been pointed out. The purchases and sales are fully

vouched. The reason for fall in G.P. was explained because the export

of gold jewellery was made for the first time by the assessee during the

impugned year. The ld CIT(A) has accepted the contention of the

assessee to some extent. The explanation given appears to be

satisfactory. The estimation made by the Assessing Officer appears to

be on the higher side in spite of the fact that the ld CIT(A) has accepted

the explanation may be to some extent which is not defined. In the

facts and circumstances of the present case, no addition is called for

when the explanation of fall in G.P. appears to be satisfactory. In the

present case, the finding of the Coordinate Bench are squarely

applicable as no specific defect in purchase and sale has been pointed

out by the Assessing Officer. In local sale, the G.P. had increased from

34.46% to 34.53% compared to preceding year. In export division, the

GP was constant as shown in A.Y. 2007-08 @ 49.07% and in year

under consideration @ 49.06%. Therefore, by respectfully following the

decision of the Coordinate Bench, we delete the addition confirmed by 11 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

the ld CIT(A). Accordingly, both the grounds of assessee's appeal are

allowed.

7. Grounds No. 3 to 6 of the assessee's appear are against

confirming the disallowance of Rs. 16,54,883/- out of commission paid

by the assessee. The ld Assessing Officer observed that during the year

under consideration, the assessee had claimed commission payment on

local sale at Rs. 1,80,92,369/- and Rs. 25,53,674/- on export unit. On

verification of vouchers, the payment of commission, it was found that

there was no complete name and addresses of the person/recipient of

commission. There was no agreement with these commissions' agents

and no evidence to prove that they rendered any service. Thus the

identity and genuineness of the commission payment is unverifiable.

The assessee was show caused as to why 8% of these commission

payments amount to Rs. 2,06,86,043/- should not be disallowed as per

the past history of the case of the assessee from A.Y. 2003-04 to 2006-

07. The assessee submitted justification of payment of commission

before the Assessing Officer. It was further argued before the Assessing

Officer that the assessee had preferred appeal before the higher

appellate forum and matter has been decided by the Hon'ble ITAT and

meager amount of Rs. 50,000/- had been confirmed in all the each year 12 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

by it. It is further submitted that Emporiums are situated at nearby

places of tourist interest a person who is bringing customers to

assessee's premises takes commission. It is prevalent in the handicrafts

business that a reasonable percentage of commission is to be paid to

the agents, which are in form of guides, taxi drivers, auto drivers etc..

the assessee had maintained a complete vouchers of payment, which

were prepared relating to each and every payment to the corresponding

sales. This voucher is signed by the recipient and contains the date of

bill, bill number, sale amount, commission paid, date of payment of

commission and the signature of the recipients. The AR for the assessee

relied the decision before the Assessing Officer passed by the Hon'ble

Gujarat High Court in the case of Dr. G.G. Joshi Vs. CIT reported in 209

ITR 324 wherein it has been held that the assessee is to establish the

following three conditions.

i) Establish the practice prevailing in that line of business for making such payment.

ii) To adduce satisfactory evidence to establish the payments and

iii) To satisfy the authorities that the payments were made for the purpose of business.

13 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

He further relied on the decision of Hon'ble Bombay High Court in the

case of CIT Vs. Sigma Paints reported in 103 CTR (Bom) 305 wherein it

has been decided that even name of recipient has not been mentioned

on the bill for secret commission, it is allowable. After consider the

assessee's submission, the ld Assessing Officer held that whatever

evidence submitted by the assess was showed that it were printed

receipts showing the sale voucher number, amount of bill, name of

persons to whom commission given alongwith signature of the

recipient. The assessee had not submitted address of the recipient nor

the identity of person from these vouchers. The contention of the

assessee that the commission had been paid to various drivers and

guides of the vehicles is very general statement. The details were

prepared by the staff of the assessee, which are not verifiable. Thus, he

disallowed the commission @ 8% from the total commission claimed by

the assessee. He made addition of Rs. 16,54,883/- in the income of the

assessee.

8. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the ld CIT(A), who had confirmed

the addition by asking the assessee to produce the tourists guide/taxi

drivers or auto drivers for verification. He also directed the assessee to 14 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

submit the complete name and addresses of regular commission

agents, who were regularly paid commission for bringing customer to its

premises. It was submitted by the assessee before the ld CIT(A) that it

is not possible to produce commission recipients for A.Y. 2008-09

because it is not necessary that the same person would come again. He

held that in absence of required details, the commission expenses were

not amenable to verification. He further verified the voucher dated

03/4/2007, which showed that the commission of Rs. 31,466/- was

payable to Shri Jitu, however, he was paid commission of Rs. 11,466/-

in cash on same day and balance amount was paid through account

payee cheque. He held that it was totally against the human probability

that any taxi driver would leave any amount of commission in the hands

of the payer. The voucher dated 05/4/2007 showed that the

commission of Rs. 57624/- was payable to Shri Shravan, however, he

was paid commission of Rs. 17,624/- on the same day and remaining

amount of Rs. 40,000/- paid through account payee cheque. It was

hard to believe that the appellant did not have complete address of Shri

Shravan. The voucher numbers 4 to 8 dated 05/4/2007 showed

identical amount of commission of Rs. 57,624/- each to Shri Shravan,

Shri Suresh, Shri Anish and Shri Pramod on sales of Rs. 11,52,480/- to 15 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

Shri Dayal.T.Meshri, 1110, W Keystone, Avecatoosa, USA. It was hard

to believe that the same customer was brought to the emporium of the

appellant through four different taxis i.e. RJ-14-0761, RJ-14-4255, RJ-

14-3852 and RJ-14-1355 on the same day through four taxi drivers.

Vouchers dated 01/4/2007 and 24/04/2007 showed that commission of

Rs. 5,000/- and 14,120/- was paid to Shri Aizaz. However, the alleged

vouchers showed different taxi numbers and different signatures. He

further observed that voucher dated 28/04/2007 showed that

commission of Rs. 26,387/- was paid to Shri Anish in cash and voucher

dated 29/04/2007 showed that commission of Rs. 20,530/- was paid to

Shri Dilawar in cash. Since the amount paid in cash exceeded Rs.

20,000/-, disallowance U/s 40(A)(3) was liable to be made. However,

the counsel of appellant had produced vouchers for the few months

only. Therefore, it was difficult to ascertain the disallowance U/s

40(A)(3).

The voucher dated 29/04/2007 showed that commission of Rs.

20,530/- was paid to Shri Dilawar in respect of sales made to Haleleine

Reeve of Australia and Virgilio Mazzardo of Italy. It was hard to believe

that same taxi driver had brought 2 customers (not of same family) on

the same day to the emporium through the same taxi.

16 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

The voucher dated 20/06/2007 showed that commission of Rs.

22,800/- was paid to Shri Arvind in cash and voucher dated 23/06/2007

showed that commission of Rs. 20,900/- was paid to Shri Gyan Prakash

in cash. Since the amount paid in cash exceeded Rs. 20,000/-,

disallowance U/s 40(A)(3) was liable to be made. However, the counsel

of appellant had produced vouchers for few months only. Therefore, it

was difficult to ascertain the disallowance U/s 40(A)(3)

The vouchers dated 05/4/2007 and 23/06/2007 showed that

commission of Rs. 57,624/- and Rs. 33,860/- was paid to Shri Pramod.

However, the alleged vouchers showed different taxi numbers and

different signatures.

The voucher dated 26/06/2007 showed that commission of Rs.

23.120/- was paid to Shri Jivan in cash, voucher dated 27/07/2007

showed that commission of Rs. 27,050/- was paid to Shri Dinesh in cash

and voucher dated 06/08/2007 showed that commission of Rs. 22,600/-

was paid to Shri Jaswant Singh in cash. Since the amount paid in cash

exceeded Rs. 20,000/-, disallowance U/s 40(A)(3) was liable to be

made. However, the counsel of appellant had produced vouchers for 17 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

few months only. Therefore, it was difficult to ascertain the

disallowance U/s 40(A)(3).

The voucher dated 04/8/2011 showed that commission of Rs.

59,110/- was payable to Shri Lokesh however, he was paid commission

of Rs. 20,000/- in cash on 04/8/2011. The balance amount of Rs.

39,110/- was paid to him through cheque. It was totally against the

human probability that any taxi driver would leave any amount of

commission in the hands of the payer. The appellant has also

contradicted his stand that none of the commission recipients had come

back to his emporium.

It is seen that one guide Shri Mitesh Taluka was p[aid

commission of Rs. 67,650/- on 6 days between the period 15/3/2008 to

25/3/2008. It was highly improbable and against the human conduct

that a guide could have brought customers to an emporium so

regularly. It is equally strange that the appellant did not have even his

contact number.

It is further held that these discrepancies were not brought to the

notice of the Hon'ble ITAT in deciding the appeal of the preceding

years. The appellant had also not deducted TDS on payments made to 18 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

the various commission agents in cash although their aggregate amount

exceeded the statutory limit. On the other hand, in the ledger account,

the appellant had debited commission of Rs. 49,406/- on 01/04/2007

which is split into 13 journal entries each below Rs. 2500/- and 1

journal entry of Rs. 17,364/-. However, before him only one voucher

bearing No. 1 in the name of Shri Aizaz has been filed. Similarly the

appellant has debited commission of Rs. 40,453/- on 02/4/2007 in the

ledger account, which is split into 11 journal entries each below Rs.

2500/- and 1 journal entry of Rs. 13,202/-. However, before him only 2

vouchers bearing No. 2 and 3 in the name of Shri Shamshad and Shri

Razaak have been filed. This showed that the appellant has been

systematically inflating its commission expenses. It is the duty of the

court to go behind the smoke screen and discover the true state of

affairs. The court is not to be satisfied with the form but with the

substance of the transactions. Merely because a paper trail had been

created, that would not by itself make the transaction genuine. He

further relied on the decision of Hon'ble Punjab & Haryana High Court in

the case of Mittal Belting and Machinery Stores Vs. CIT 253 ITR 341,

decision of Hon'ble Delhi High Court in the case of Schneider Electric

India Ltd. 304 ITR 360, Hon'ble Supreme Court's decision in the case of 19 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

CIT Vs. Premier Breweries Ltd. 279 ITR 51, Onam Agarbathis Co Vs.

DCIT 310 ITR 56 and CIT Vs. McDowell Co Ltd. 291 ITR 107.

Accordingly it was held that the assessee was not entitled to deduct

commission. The assessee had miserably failed to substantiate his claim

for export commission. Accordingly, he confirmed the addition.

9. Now the assessee is in appeal before us. The ld AR of the

assessee has submitted that the ld CIT(A) had pointed out various

discrepancies in his order and confirmed the addition but no opportunity

has been provided by the ld CIT(A). He drawn our attention on page

No. 1 and 2 i.e. the copy of ordersheet of the ld CIT(A). The ld CIT(A)

has not given any show cause notice and not called any explanation

from the assessee with regard to discrepancies mentioned by him in the

appellate order, which is violation of principle of natural justice. He

further not allowed the assessee to explain all defects pointed out, non

deduction of TDS on commission. The ld Assessing Officer had not

pointed out any defect and no disallowance has been made by the

Assessing Officer in assessment order. In past also similar additions

were made by the Assessing Officer @ 8% but the Hon'ble ITAT has

confirmed the lump sum addition of Rs. 50,000/- in each of the year.

Therefore, rule of consistency is to be followed by the revenue. He 20 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

relied on the decision in the case of CIT Vs. Escorts Limited 338 ITR

435, Hon'ble Supreme Court decision in the case of Radhaswami

Satsang Vs. CIT 193 ITR 321, Bharat Sanchar Nigam Limited Vs. Union

of India 282 ITR 273, Hon'ble Bombay High Court decision in the case

of CIT Vs. Gopal Purohit 336 ITR 287, Hon'ble Allahabad High Court

decision in the case of CIT Vs. Goel Builders 331 ITR 344, Hon'ble

Calcutta High Court decision in the Mukti Properties (P) Ltd. Vs. CIT 344

ITR 177. He also cited various decisions on consistency.

10. At the outset, the ld DR vehemently supported the order of the ld

CIT(A).

11. We have heard the rival contentions of both the parties and

perused the material available on the record. In past, similar additions

were made by the Assessing Officer, which has been either deleted by

the CIT(A) or confirmed by the CIT(A) but finally the Coordinate Bench

had confirmed a lump sum addition of Rs. 50,000/- in each year. The ld

CIT(A) has specified the defects with reference to bills and not

deduction TDS on commission payment but he is not allowed the

assessee to explain the reasons for not deducting TDS. The discrepancy

is specific and commission payment in this line of business is accepted 21 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

in general as the handicraft emporiums generally pay the commission to

the guides, taxi drivers, auto drivers. They come from outside and had

dealing occasionally and it was not fair to pay commission in front of

customers. It is just like a secret commission and a very short duration

is available with the assessee to complete the formalities for paying

commission. Therefore, there may be defects in the receipts of

commission payment but it is a part and parcel of the business dealings.

Therefore, we confirm the disallowance under this head at Rs. 1 lac out

of total disallowance made by the Assessing Officer at Rs.16,54,883/-.

Accordingly, grounds No. 3 to 6 of the appeal are partly allowed.

12. Ground No. 7 of the assessee's appeal is not pressed, therefore,

we dismiss this ground as not pressed.

13. Ground No. 8 of the assessee's appeal is against disallowance of

Rs. 24,600/- on account of employee's contribution towards PF. The ld

Assessing Officer observed that the assessee paid PF on 21/5/2007 and

28/09/2007 whereas the due date was on 15/5/2007 and 15/09/2007,

accordingly he made addition U/s 36(1)(va) read with Section 2(24)(x)

of the Act. The ld CIT(A) confirmed the addition by observing that the

provisions of Section 43B(b) are applicable only in respect of employees' 22 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

contribution to PF or ESI and not to the employee's contribution. This

view was supported by the decision of Hon'ble Pune Tribunal in the

case of Indian Card Clothing Company Ltd. (ITA No. 214/PN/98),

accordingly he confirmed the addition.

The ld AR of the assessee has submitted that the assessee had

deposited this amount within the accounting year itself and much

before the due date of filing of return. He relied upon the decision of

Hon'ble jurisdictional High Court in the case of Jaipur Vidyut Vitran

Nigam Ltd. 363 ITR 307 (Raj) and prayed to allow the same.

The ld DR has vehemently supported the order of the ld CIT(A).

We consider the issue after considering the argument of both the

sides and the Hon'ble Rajasthan High Court decision in the case Jaipur

Vidyut Vitran Nigam Ltd. (supra) had decided that these payments are

allowable U/s 43 of the Act even paid before due date of return. The

assessee had filed return on 06/10/2008 whereas payments were made

in the month of May and September, 2007 in accounting year itself,

therefore, we delete the addition made by the Assessing Officer and

confirmed by the ld CIT(A). Accordingly, this ground of appeal is

allowed.

23 ITA 392/JP/2012_ Mahesh Chand Gupta Vs. ACIT

14. In the result, the assessee's appeal is partly allowed.

Order pronounced in the open court on 15/05/2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur

fnukad@Dated:- 15th May, 2015

*Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Mahesh Chand Gupta, Jaipur

2. izR;FkhZ@ The Respondent- Addl. CIT, Range-5, Jaipur

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 392/JP/2012)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar