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ITA 1467/Del/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G" NEW DELHI
BEFORE SHRI G.D. AGRAWAL : VICE PRESIDENT
AND
SHRI GEORGE GEORGE K.: JUDICIAL MEMBER
ITA no. 1467/Del/2012
Asstt. Yr: 2001-02
M/s Sikkas Kwick Handling Vs. ACIT Circle-8(1),
Services (P) Ltd., New Delhi.
N-67, Middle Circle,
Connaught Place, New Delhi.
PAN: AABCS 2867 D
( Appellant ) (Respondent)
Appellant by : Shri Ashwani Taneja Adv.
Respondent by : Shri B.R.R. Kumar Sr. DR
Date of hearing: 04/03/2015.
Date of order : _____/03/2015.
ORDER
PER G.D. AGRAWAL, V.P.:
This appeal, by the assessee, is directed against CIT(A)'s order dated
13-08-2010, relating to A.Y. 2001-02.
2. Ground no. 1 of the asessee's appeal reads as under:
"That having regard to the facts and circumstances of the case,
Ld. CIT(A) has erred in law and on facts in confirming the
action of Ld. AO in not complying with the directions of
Hon'ble Income tax Appellate Tribunal wherein Hon'ble Bench
has directed that mater needs to be examined afresh by Ld. AO
after giving adequate opportunity of hearing to the assessee and
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ITA 1467/Del/2012
has further erred in framing the impugned order without serving
mandatory notices u/s 143(2) of the Income Tax Act, 1961."
2.1. Ld. counsel for the assessee, at the time of hearing , did not press
ground no. 1. Accordingly, ground no. 1 stands dismissed being not
pressed.
3. Ground no. 2 of the asessee's appeal reads as under:
"That having regard to the facts and circumstances of the case,
Ld. CIT(A) has erred in law and on facts in confirming the
action of Ld. AO in confirming the action of Ld. AO in making
addition of Rs. 4,02,803/- on account of miscellaneous
expenses."
3.1. At the time of hearing before us, it was pointed out by the ld. counsel
for the assessee that in the original assessment proceedings the AO vide
order dated 29-3-2004 disallowed the sum of Rs. 80,000/- out of the total
misc. expenses of Rs. 4,02,803/-.
3.2. On appeal, the ITAT vide order dated 31-8-2007 set aside the matter
back to the file of AO. However, in the set aside assessment, the AO
disallowed the entire misc. expenses of Rs. 4,02,803/-.
3.3. It is stated by the ld. counsel that in the set aside assessment, the AO
could not have disallowed more than what was originally disallowed. He
also stated that even otherwise there is no justification for the 100%
disallowance out of expenses. In support of this contention, he relied upon
the following decisions:
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ITA 1467/Del/2012
- Hon'ble Delhi High Court in the case of - Multiplex Trading &
Industrial co. Ltd. Vs. ITO ( ITA no. 762/2010 order dated 26-7-
2010);
- Hon'ble Delhi High Court in the case of - CIT Vs. Machino Plastic
Ltd. (ITA no. 92/2011- order dated 28-2-2012); and
- M Coop Global (P) Ltd. Vs. CIT 309 ITR 434 (SC).
4. The Ld. DR, on the other hand, relied upon the orders of authorities
below.
5. We have carefully considered the arguments of both the parties and
perused the material placed before us. After considering the facts of the case,
the decisions relied upon by the ld. Counsel and the order of the AO in the
original proceedings, we are of the opinion that there was no justification for
the disallowance of 100% of the misc. expenses. Admittedly assessee was
carrying on the business during the accounting year relevant to assessment
year under consideration. Therefore, incurring of the misc. expenses for the
purpose of business, cannot be ruled out. The total expenditure incurred by
the assessee was only Rs. 4,02,803/-. Therefore, in the original assessment
proceedings, the AO has rightly disallowed the sum of Rs. 80,000/-. We,
therefore, sustain the disallowance at Rs. 80,000/- out of the misc. expenses
at Rs. 4,02,803/-.
6. Ground no. 3 of the assesse's appeal reads as under:
"That having regard to the facts and circumstances of the case,
Ld. CIT(A) has erred in law and on facts in not deleting the
addition fully as by Ld. AO and has further erred in sustaining
the action of Ld. AO in making addition of Rs. 8,16,505/- on
account of commissions expenses."
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ITA 1467/Del/2012
6.1. Facts of the case are that during the accounting year, relevant to the
assessment year under consideration, the assessee claimed expenses of Rs.
1,14,58,396/-. The AO formed an opinion that the commission expenses
paid by the assessee is to be restricted at 7% of the total freight handled by
the assessee. He, accordingly, disallowed a sum of Rs. 8,54,837/-. The
relevant portion of the assessment order reads as under:
"Therefore, in the absence of any verification, he
restricted the commission paid to the various customers
at 7% of the total freight handled as per the norms of the
industry and the same was worked out to Rs.
1,06,04,100/- being 7% of the total freight handled by the
assessee company. The remaining commission amounting
to Rs. 8,54,837/- was disallowed and added to the income
of the assessee."
6.2. Before the ld. CIT(A) the assessee explained that total freight handled
by the assessee was Rs. 19.34 crores. On the total freight handled the
commission @ 7% would be Rs. 1.35 crores. The assessee claimed the
commission at 1.14 crores. Therefore, no disallowance is called for.
However, after noticing the above facts, the CIT(A) was of the opinion that
the commission is to be restricted at 5.5% of the total freight handled. He,
therefore, sustained the disallowance at Rs. 8,16,505/- as against Rs.
8,54,837/-. The relevant finding of the CIT(A) reads as under:
"5.2 Examined the rival submissions. The observation made by
the original AO as confirmed by the present AO is on a solid
substantial footing. It is a fact that the appellant has failed to
explain the discrepancy in the commission in case of various
customers including M/s Young International, M/s Movers etc.
There was no explanation whatsoever before the AO regarding
such discrepancies. There was no explanation before the present
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ITA 1467/Del/2012
AO passing the order from the side of the appellant. Hence the
principle of rejecting part of the commission payment is correct.
But it is also a fact that there was some calculation mistake.
Although the AO has restricted the amount to r/o but in fact he
has applied this ratio only on freight handled at Delhi. The total
freight handled was Rs.19,34,88,938/-. He has not applied 7'%
rate on this amount, otherwise the figure would have come
Rs.1,35,44,225/- whereas the claim of the appellant was only
Rs.1,14,58,3971- which is 5.9'10 of the total freight handled
and less than the rate applied by the AO. This was a clerical
mistake on part of the AO while framing the calculation for this
purpose. Considering all the material facts in minutes details, I
am of the opinion that ends of justice would be met by
restricting the commission amount to 5.5'10 of the total freight
handled of Rs.19,34,88,938/- which comes to Rs. 1,06,41,892/-
. The claim of the appellant was Rs. 1,14,58,397/-. Hence the
excess claim of the appellant comes to Rs. 8,16,505/- and I
direct the AO to restrict the disallowance to that amount only."
6.3. We have carefully considered the arguments of both the sides and
perused the material placed before us. In our opinion the ld. CIT(A) was not
justified in restricting the commission to 5.5%of the total freight handled. He
has not given any basis or reasoning for allowing the commission to the
extent of 5.5%, when the AO has clearly mentioned in the assessment order
that commission @ 7% of the total freight handled is the norm in the said
industry. Thus, the AO allowed 7% of the commission which is being paid
by the other persons in the same line of business. Since the
commission claimed by the assessee is less than 7%, which, as per AO is
normal rate of commission in this line of business, in our opinion, no
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ITA 1467/Del/2012
disallowance on the commission is called for. Accordingly, disallowance of
Rs. 8,10,505/- sustained by the CIT(A) is deleted. Ground is allowed.
7. In the result, assessee's appeal is partly allowed.
Order pronounced in open court on 10/03/2015.
Sd/- Sd/-
( GEORGE GEORGE K. ) ( G.D. AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated: 10/03/2015.
*MP*
Copy of order to:
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR, ITAT, New Delhi.
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