GOYAL SONS ZAVERI PVT. LTD.,HARYANA vs. DCIT, HISAR

With this appeal, the assessee has challenged the correctness of the order of the ld. CIT(A), Hisar dated 27.07.2016 pertaining to Assessment Year 2010-11.

The grievance of the assessee is two-fold:-

Briefly stated, the facts of the case are that the assessee is engaged in trading in gold, silver and diamond jewellery. The assessee company has franchisee of Tanishq.

During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has paid commission on sales amounting to Rs. 7,91,364/- as under:

The assessee was asked to explain the genuineness of the transactions with supporting evidences.

In its reply, the assessee explained that commission has been paid to ladies who had procured customers and executed sales. Copies of their bills were filed. It was explained that all the payments have been made through cheques and tax has been deducted at source, wherever applicable.

In so far as production of the ladies for examination is concerned, the assessee explained that it needs some time to contact them and know about their availability.

Reply of the assessee was considered by the Assessing Officer but did not find any favour.

The Assessing Officer observed that three ladies, namely, Ayushi Goyal, Sonu Goyal and Priyanka Goyal are relatives/family members of the Director and are residing at the same address, namely, SCF-97, Rajguru Market, Hisar, which is adjacent to the business premises of the assessee.

According to the Assessing Officer, since all the ladies are residing nearby to assessee’s business place, the assessee could easily produce them for examination. The Assessing Officer further observed that the assessee has not mentioned the rate of commission paid to the ladies and the basis of such commission.

The assessee has been consistently harping upon the fact that the payments have been made through account payee cheques subject to TDS.

Being not convinced with the explanation of the assessee, the Assessing Officer made an addition of Rs. 7,91,364/-

Proceeding further, the Assessing Officer asked the assessee to furnish the basis of valuation of the closing stock. The assessee furnished the details explaining that the stock was valued at cost or net realizable value whichever is less and since the purchase cost was lower, therefore, the stock has been valued at purchase cost.

The Assessing Officer, after perusing the details, found that the value of closing stock of gold/silver coins has been valued at average value of opening stock + purchases + closing stock as not correct. The Assessing Officer recalculated the value of closing stock on the basis of average of opening stock and cost price and made addition of Rs. 4,88,592/-.

Aggrieved by the aforementioned two additions, the assessee agitated the matter before the ld. CIT(A) but without any success.

Before us, the ld. counsel for the assessee vehemently stated that in the remand proceedings, two ladies, namely, Ayushi Goyal and Sangeeta Aggarwal were examined and they have categorically confirmed the transactions of receipt of commission @ 1.5%. it is the say of the ld. counsel for the assessee that in their respective statements, they have explained that they have introduced 25-30 customers on which they have received commission. In so far as other three ladies are concerned, the ld. counsel for the assessee stated that since they are now married, it was not possible to contact them.

Per contra, the ld. DR strongly supported the findings of the Assessing Officer.

We have given thoughtful consideration to the orders of the authorities below. It is true that all the five ladies are residents of Hisar and three ladies live at the adjacent building of the business premises of the assessee. It is also a fact that the two ladies, namely, Ayushi Goyal and Sangeeta Aggarwal did appear before the Assessing Officer whose statements were recorded by him and they have confirmed the receipt of sales commission. Their statements are exhibited at pages 69 to 76 of the paper book.

Since the two ladies have confirmed the transactions by statements recorded by the Assessing Officer, we do not find any reason why addition should be made. We, accordingly, direct the Assessing Officer to delete the addition of commission paid to Ayushi Goyal and Sangeeta Aggarwal.

In respect of the other ladies, namely Silky Aggarwal, Sonu Goyal and Priyanka Goyal, they may have been married, but nothing prevented them to furnish their statements by way of affidavits. Merely because the payments have been made through account payee cheques would not justify the rendition of services since no evidences have been furnished before us except for the bald statement that the ladies are now married and do not reside in Hisar.

The contention of the ld. counsel for the assessee that since out of the 5 ladies, 2 have confirmed the transactions, therefore by preponderance of probabilities it can be safely presumed that the transactions with other 3 ladies were also genuine is not acceptable. Since no evidence has been furnished towards rendition of services by Silky Aggarwal, Sonu Goyal and Priyanka Goyal, disallowance of commission paid to them is hereby confirmed which means Ground No. 1 is partly allowed.

Coming to the second grievance, we find that the Assessing Officer has valued the closing stock on the basis of average of opening stock and cost price whereas it the say of the ld. counsel for the assessee that the assessee has been consistently following the cost or market price, whichever is lower method of accounting for valuation of closing stock.

However, if the Assessing Officer is not satisfied with the details of the assessee, he may decide the issue afresh as

In the result, the appeal of the assessee in is partly allowed for statistical purposes.