LATE SH. BHIM SEN BATRA L/H SH. HIMANSHU BATRA,ALWAR vs. ITO, ALWAR

PER VIJAY PAL RAO, JM :

These three appeals by the assessee are directed against three separate

orders of ld. CIT (A), Alwar for the assessment years 2009-10, 10-11 & 11-12

respectively. For the assessment year 2009-10, the assessee has raised the

following grounds :-

2 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

offered by the assessee after considering the surrender of Rs. 5,17,673/- made in AY 2007-08.

Nature of Expenses Amount (Rs.) Freight Expenses 30,000

Bardana charges 7,000 Entertainment expenses 5,000 Godown Rent 36,000 Food and Beverages 9,000 Mobile expenses 2,000 Traveling expenses 9,000 Shop expenses 2,000 Petrol, Depreciation on car and 15,000 Insurance Printing and Stationery 1,500 Interest Paid to Bank and Others 37,886 Vehicle Repair and Maintenance 3,000 Wages 45,000 Local conveyance 2,700 Salary 3,27,800

3 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

Ground No. 1 is regarding validity of reopening of assessment.

business as a Commission Agent holding Mandi Licence at Alwar Fruit & Vegetable

Market Union. Thus the assessee is earning commission income from the fruits and

vegetables sold at the place of the assessee. The assessee filed his return of income

on 31.08.2009 which was processed under section 143(1). There was a survey under section 133A of the IT Act at the business premises of the assessee on 1st

February, 2011. During the survey proceedings, the assessee offered/surrendered an

income of Rs. 3,14,490/- for the assessment year 2009-10 and similarly income was

offered for the other assessment year. The AO subsequently reopened the assessment by issuing notice under section 148 on 28th March, 2013 to assess the

said income of Rs. 3,14,490/- being the income from transactions out of books. In

the reassessment proceedings, the assessee contended that the assessee had

already offered the said surrendered income of Rs. 3,14,490/- to tax in the revised return of income filed on 11th March, 2011. However, the AO declined to accept the

revised return of income on the ground that the said return was filed beyond the

limitation period provided under section 139(5) of the Act. The AO has completed

the reassessment under section 143(3) read with section 147 and made various

additions apart from the surrendered income of Rs. 3,14,490/-. The assessee

challenged the action of the AO before the ld. CIT (A) and also raised objections

against the validity of reopening of the assessment. However, the ld. CIT (A) has

upheld the validity of reopening.

4 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

reasons recorded for reopening of the assessment proposed to assess the

surrendered income of Rs. 3,14,490/- which was already offered by the assessee to

tax in the revised return of income. He has referred to revised return of income filed on 11th March, 2011 and submitted that the said revised return of income was within

the period of limitation under section 139(5) of the Act. The ld. A/R has submitted

that the limitation provided under section 139(5) of the Act is one year from the end

of the assessment year and, therefore, the return filed on 11.03.2011 is within the

period of limitation. The ld. A/R has further contended that the reasons recorded by

the AO does not refer to the revised return of income filed by the assessee and,

therefore, the AO has reopened the assessment without considering the revised

return of income wherein the proposed income of Rs. 3,14,490/- was already offered

to tax. Thus the ld. A/R has submitted that the AO has reopened the assessment

without application of mind and the formation of belief that the income has escaped

has no live connection with the reasons recorded or relevant information or material

once the assessee had already offered the said income to tax. Hence the reopening

is not justified and bad in law.

section 133A, it was detected that the assessee has entered the sale transactions in

the dasti books which were not recorded in the regular books of account and,

therefore, there was unaccounted income for which the AO invoked the provisions of

section 147/148 of the Act. The ld. D/R has thus contended that the reopening is

based on tangible material revealing the unaccounted income which escaped

assessment while the return of income was already processed under section 143(1)

5 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

of the Act. Hence the AO was having the reasons to form the belief that the income

has escaped assessment. He has further contended that the assessee has not taken

this plea of filing of revised return of income before the ld. CIT (A) and, therefore,

this is a fresh plea taken by the assessee at this stage. He has relied upon the

orders of the authorities below.

record. On our directions, the ld. D/R has produced the assessment records

containing the return of income as well as the revised return of income for the

assessment years 2009-10 and 2010-11. We find from the assessment records

produced before us that the original return of income for the A.Y. 2009-10 was filed

on 31.08.2009. Thereafter a survey under section 133A was carried out at the business premises of the assessee on 1st February, 2011. During the survey

proceedings, certain unaccounted income was detected and consequently the

assessee surrendered income of Rs. 3,14,490/-. We further note that the assessee

had filed a revised return of income on 11.03.2011 and as per the provisions of

section 139(5) of the IT Act, the limitation for filing the revised return is on or before

expiry of one year from the end of the relevant assessment year or before the

completion of the assessment year whichever is earlier. In the case in hand, since

there was no original assessment and the original return of income was processed

under section 143(1) on 29.06.2010, therefore, the limitation for filing the revised

return was before expiry of one year from the end of the assessment year i.e. upto 31st March, 2011. We find that the assessee filed the revised return of income on

11.03.2011 which was also available on the assessment record as well as the AO has recorded the fact of the filing of the revised return on 11th March, 2011 in para 2 of

6 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

the assessment order. The AO declined to accept the said revised return as a valid

return on the ground that the same is beyond the limit prescribed under section

139(5) of the IT Act. However, we find that the revised return filed on 11.03.2011 is

well within the period of limitation. We have also considered the aspect of the time

period allowed for filing the original return of income under section 139(1) of the Act

and found that the assessee was liable to get its accounts audited and the original

return of income filed by the assessee on 31.08.2009 was also within the limitation

provided under section 139(1) of the Act. In cases where the assessee’s accounts

are required to be audited, the limitation for filing the original return of income under section 139 of the Act was 30th September, 2009. In the original return of

income assessee has duly mentioned the requirement of accounts to be audited and

to file tax audit report. Hence this finding of the AO that the revised return is barred

by limitation is contrary to the facts as well as law. Though the assessee did not

raise the specific ground before the ld. CIT (A), however, we find that when this

issue was raised by the assessee before the AO and all relevant facts as well as

material required for adjudication of this issue are already available on the

assessment record, then the legal issue which goes to the root of the matter can be

raised at this stage even if the same was not raised before the ld. CIT (A). Thus

when the assessee has raised this issue before the AO then not raising the same

before the ld. CIT (A), will not debar the assessee from raising such a legal issue

before the Tribunal. The AO has reopened the assessment by recording the reasons

as under :-

7 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

“ The assessee furnished his return declaring total income of Rs. 2,97,340/- on 31.08.2009 which was processed u/s 143 (1) on 29.06.2010. A survey u/s 133A of the IT Act 1961 was carried out on the business premises of the assessee who is a proprietor of M/s. Bhim Sen Ram Swaroop, B-7, New Subji Mandi, Alwar. During the survey, it has been noticed that sale transactions of Rs. 3,14,490/- entered in dasti books were found unrecorded in regular books of accounts which is required to be taxed in the hands of the assessee in the A.Y. 2009-10. This Dasti books has been taken seized by the A.O. Keeping in view the above facts, I have reasons to believe that the income to the extent of Rs. 3,14,490/- has escaped assessment. It is a fit case for initiating action u/s 147 of the I.T. Act. Therefore notice u/s 148 issued.”

Thus it is clear that the assessment was reopened on the basis of the sale

transactions of Rs. 3,14,490/- which were found entered in the Dasti books and not

in the regular books of account as detected during the course of survey proceedings.

We note that this amount was surrendered by the assessee to tax during the course

of survey proceedings and subsequently the assessee has filed the revised return of

income on 11.03.2011 which was valid as within the period of limitation and,

therefore, at the time of reopening of the assessment and recording the reasons, the

AO was having no reason to believe that the said income has escaped assessment

when it was already offered to tax in the revised return of income filed on 11.03.2011. Hence the reasons recorded on 28th March, 2013 and the notice issued

under section 148 are based on incorrect material facts and rather without

application of mind on the relevant material available with the AO. Once the

8 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

assessee has already offered the said amount to tax in the revised return of income

and already paid the tax at the time of filing the revised return of income then there

is no question of said income treated as income escaped assessment. Hence the AO

has proceeded in a mechanical manner without considering the relevant facts while

reopening of the assessment. Accordingly, we hold that the reopening of

assessment is without any basis as the AO proposed to assess the income of Rs.

3,14,490/- which was already offered to tax by the assessee while filing the revised

return of income prior to the date of recording of reasons and issuing the notice

under section 148 of the Act. Accordingly, we hold that the reopening of the

assessment is not valid and the same is liable to be quashed. We order accordingly.

therefore, the other grounds raised by the assessee become infructuous and we do

not propose to go into the other grounds of the assessee.

For the Assessment Year 2010-11 :

9 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

Nature of Expenses Amount (Rs.) Bardana charges 4,000 Entertainment expenses 8,000 Godown Rent 36,000 Food and Beverages 12,000 Mobile expenses 4,000 Traveling expenses 8,000 Shop expenses 1,000 Petrol, Depreciation on car and 10,000 Insurance Printing and Stationery 800 Interest Paid to Bank and Others 34,077 Vehicle Repair and Maintenance 3,000 Wages 90,000 Local conveyance 5,000 Salary 2,34,200

Ground No. 1 is regarding validity of reopening of assessment.

on record. At the outset, we note that the facts on this issue are identical as to the

10 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

facts for the assessment year 2009-10. The original return of income for the assessment year 2010-11 was filed on 1st September, 2010 which was within the

stipulated time period as prescribed under section 139(1) of the Act as the assessee

was liable to get its accounts audited and to file tax audit report which is clearly

mentioned in the original return of income. We find that the original return of

income is well within the period of limitation as it was before the expiry of due date on 30th September, 2010. Subsequently, after the survey under section 133A, the

assessee filed the revised return of income for the assessment year under consideration on 11th March, 2011 and surrendered the income of Rs. 2,50,077/-.

The AO without considering the revised return of income has reopened the

assessment by recording the reasons as under :-

“ The assessee furnished his return declaring total income of Rs. 3,86,510/- on 01.09.2010 which was processed u/s 143(1) on 29.04.2011. A survey u/s 133A of the IT Act 1961 was carried out on the business premises of the assessee who is a proprietor of M/s. Bhim Sen Ram Swaroop, B-7, New Subji Mandi, Alwar. During the survey, it has been noticed that sale transactions of Rs. 2,50,080/- entered in dasti books were found unrecorded in regular books of accounts which is required to be taxed in the hands of the assessee in the A.Y. 2010- 11. This Dasti books has been taken seized by the A.O. Keeping in view the above facts, I have reasons to believe that the income to the extent of Rs. 2,50,080/- has escaped assessment. It is a fit case for initiating action u/s 147 of the I.T. Act. Therefore notice u/s 148 issued.”

11 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

Thus it is clear that the AO has proposed to assess the income of Rs. 2,50,080/- in

the reasons recorded for reopening of the assessment. We find from the

assessment record that the assessee had already offered the said income to tax in

the revised return of income filed much prior to the notice issued under section 148

and, therefore, the facts and circumstances under which the assessment was

reopened by the AO are identical to the facts and circumstances for the assessment

year 2009-10. Since the AO has reopened the assessment to assess the income of

Rs. 2,50,080/- which was in fact already offered to tax by the assessee in the

revised return of income, accordingly in view of our finding on this issue for the

assessment year 2009-10, the reopening of the assessment is invalid and the same

is quashed.

therefore, the other grounds raised by the assessee become infructuous and we do

not propose to go into the other grounds of the assessee.

For the Assessment Year : 2011-12 :

12 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

Ground No. 1 is regarding disallowance of expenses to the tune of

Rs. 3,63,707/-.

various expenses to the tune of Rs. 3,63,707/-. The summarized details of the

disallowances made by the AO are as under :-

Expenses Amount Amount Reason Confirmed by Disallowed CIT(A) Bardana 11,791 3,500 No vouchers 3,500 expenses Godown Rent 36,000 36,000 No vouchers 36,000 Food expenses 36,171 11,000 No vouchers 11,000 Mobile charges 18,482 5,000 No vouchers 5,000 Travelling 35,186 10,500 No vouchers 10,500 charges Shop expenses 4,586 1,500 No vouchers 1,500 Petrol and 92,769 10,000 No vouchers 10,000 vehicle expenses Printing and 2,489 800 No vouchers 800 Stationary expenses Bank and 17,407 17,407 Interest free 17,407 Interest loans to charges Krishan Kumar Vehicle 24,337 7,500 No vouchers 7,500 Maintenance Wages 1,89,163 60,000 No details and 60,000

13 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

vouchers Local 25,596 8,000 No vouchers 8,000 conveyance Salary 3,30,000 1,74,000 Expenses not 1,74,000 expenses as per details given in survey Tea expenses 32,383 10,000 10,000 Business 27,700 8,500 No vouchers 8,500 Promotion expenses Total 8,84,060 3,63,707 3,63,707

Thus the disallowances were made by the AO from 10% to 100% of the various

expenses. We will consider each disallowance separately :

(1) Bardana Expenses Rs. 11,791/- :

13.1. The ld. A/R of the assessee has submitted that the AO has made an

adhoc disallowance of Rs. 3500/- out of total expenses of Rs. 11,791/-. He

has further contended that when the expenses claimed by the assessee are

reasonable and not found to be excessive then the adhoc disallowance made

by the AO is not justified. Thus the ld. A/R has submitted that the

disallowance made by the AO may be deleted. Alternatively, the ld. A/R has

submitted that a reasonable disallowance may be considered by this Tribunal.

13.2. On the other hand, the ld. D/R has submitted that the AO has made a

disallowance of Rs. 3500/- for the reason that the assessee not produced any

vouchers in support of the claim and, therefore, there is a failure on the part

of the assessee to discharge his onus to establish that the expenditure was

incurred wholly and exclusively for the purpose of business of the assessee.

He has relied on the orders of the authorities below.

14 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

13.3. We have considered the rival submissions as well as the relevant

material on record. There is no dispute that the assessee has not filed or

produced any supporting evidence in respect of the claim of expenditure on

account of Bardana expenses of Rs. 11,791/-. However, the AO has not

given finding that the claim made by the assessee is bogus and the expenses

are not required in the business of the assessee. The AO has made the

adhoc disallowance of Rs. 3500/-. Having regard to the facts and

circumstances of the case, when the expenditure is not found to be bogus

then on failure of the assessee to produce the supporting vouchers, a

disallowance @ 10% of the total expenses will meet the ends of justice.

Accordingly, we restrict the disallowance to 10% of the expenses. The AO is

directed accordingly.

(2) Godown Rent Rs. 36,000/- :

13.4. The ld. A/R of the assessee has submitted that the AO has made adhoc

disallowance of entire claim of Godown Rent of Rs. 36,000/- whereas the

assessee has claimed the said expenses as per the requirement of assessee’s

business. The ld. A/R has submitted that when the assessee is using the

godown for storage of vegetables and fruits, then the expenditure on godown

rent is an allowable claim. Thus the ld. A/R has submitted that 100%

disallowance made by the AO which is confirmed by the ld. CIT (A) is not

justified.

13.5. On the other hand, the ld. D/R has submitted that the assessee has

not produced a single document in support of the claim of godown rent. Even

the assessee has not given the particulars and details of the godown for

15 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

which the assessee has claimed the payment of rent of Rs. 36,000/-. The ld.

CIT (A) has discussed this issue in detail and has confirmed the disallowance

made by the AO on the ground that the assessee has not produced any

record or details in support of the claim. He has relied upon the orders of the

authorities below.

13.6. We have considered the rival submissions as well as the relevant

material on record. Though the assessee has claimed the expenditure on

godown rent of Rs. 36,000/-, however, neither any supporting evidence nor

any details of hiring of the godown has been produced either before the AO

or before the ld. CIT (A). Even before us, the assessee has not produced any

supporting evidence in respect of the claim of godown expenditure in

question. The ld. A/R of the assessee has submitted that since the assessee

expired on 09.05.2013, therefore, the legal heir of the assessee could not

produce the relevant documents and evidence. We do not accept this

contention of the assessee because the assessee has failed to produce even

the evidence of payment of rent and particulars of the godown taken on hire.

Even it is not clear whether the godown claimed by the assessee is assessee’s

own premises or it is actually hired from some third party. Hence in the

absence of any supporting evidence and at least the details of the premises

which is hired by the assessee and payment of rent, we do not find any error

or illegality in the orders of the authorities below, qua this issue.

16 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

(3) Food Expenses Rs. 36,171/- :

13.7. The assessee has claimed the food expenses of Rs. 36,171/-. The AO

has disallowed Rs. 11,000/- which was confirmed by the ld. CIT (A).

We have heard the ld. A/R as well as the ld. D/R and considered the

relevant material on record. The AO has not given the finding of bogus claim,

however, for want of supporting evidence and vouchers, the AO has made an

adhoc disallowance of Rs. 11,000/-. Since this disallowance made by the AO

is excessive in nature, accordingly we restrict the disallowance to 10% of the

claim made by the assessee. The AO is directed to restrict the disallowance

to 10% of Rs. 36,171/-.

(4) Mobile Charges Rs. 18,482/- :

13.8. We have heard the ld. A/R as well as the ld. D/R and considered the

relevant record. The assessee has claimed Mobile charges of Rs. 18,482/-.

The AO disallowed Rs. 5,000/- as an adhoc disallowance for want of

supporting vouchers and evidence. We find that the adhoc disallowance

made by the AO is on excessive side and in view of our finding in respect of

similar disallowance, we restrict the disallowance to 10% of the claim. The

AO is accordingly directed to restrict the disallowance to 10% of the claim.

(5) Travelling Charges Rs. 35,186/- :

13.9. We have heard the ld. A/R as well as the ld. D/R and considered the

relevant record. The assessee claimed Rs. 35,186/- as travelling expenses.

The AO has made an adhoc disallowance of Rs. 10,500/- for want of vouchers

and supporting evidence. We find that once the claim of the assessee is not

found to be bogus, then the adhoc disallowance made by the AO is excessive

17 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

and accordingly we restrict the AO to disallow the claim to 10% for want of

supporting vouchers and evidence.

(6) Shop Expenses Rs. 4,586/- :

13.10.The assessee has claimed Rs. 4,586/- on account of shop expenses.

The AO has made an adhoc disallowance of Rs. 1500/- for want of supporting

vouchers.

We have heard the ld. A/R as well as the ld. D/R and considered the

relevant material on record. The adhoc disallowance made by the AO is more

than 30% and is excessive. Accordingly, we restrict the disallowance to 10%

of the claim.

(7) Petrol & Vehicle expenses Rs. 92,769/- :

13.11. The assessee has claimed Rs. 92,769/- as Petrol and vehicle expenses.

Since the assessee has not produced complete vouchers in support of the

claim, the AO made an adhoc disallowance of Rs. 10,000/-.

We have heard the rival submissions and considered the relevant

material on record. Though the disallowance made by the AO is about 10%,

however, to maintain the consistency, we restrict the disallowance exactly to

10% of the claim made by the sssessee.

(8) Printing and Stationary expenses Rs. 2,489/- :

13.12. The assessee has claimed Rs. 2,489/- as Printing and Stationary

expenses. However, the supporting vouchers were not filed by the assessee.

Accordingly, the AO made an adhoc disallowance of Rs. 800/-.

18 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

We have considered the rival submissions as well as the relevant

material on record. The adhoc disallowance made by the AO is excessive

and, therefore, we restrict the disallowance to 10% of the claim.

(9) Bank and Interest charges Rs. 17,407/- :

13.13. The assessee has claimed bank and interest charges of Rs. 17,407/-.

In the assessment proceedings, the AO noted that the assessee has made

interest free advance of Rs. 1,55,000/- to the related parties. Accordingly,

the AO has disallowed the claim of interest of Rs. 17,407/-. The ld. CIT (A)

has confirmed the disallowance made by the AO.

13.14. Before us, the ld. A/R of the assessee submitted that though the

assessee has given the advance of Rs. 1,55,000/- to the related persons

without charging any interest, however, when the assessee was having his

own sufficient funds, then no disallowance is called for on this account. He

has referred to the capital account of the assessee at page 61 of the Paper

Book and submitted that the assessee was having his own capital of Rs. 2,54,286/- and net profit of Rs. 3,73,445/- as on 31st March, 2010, thus the

interest free advance of Rs. 1,55,000/- was given from the assessee’s own

interest free funds and not from the interest bearing funds which was used

for business purposes of the assessee. Hence the ld. A/R has submitted that

the said disallowance made by the AO be deleted.

13.15. On the other hand, the ld. D/R has submitted that the amount has

been given to the related persons from the proprietorship concern and from

the personal account of the assessee and, therefore, the AO has rightly made

19 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

the disallowance of interest. He has relied upon the orders of the authorities

below.

13.16. We have considered the rival submissions as well as the relevant

material on record. There is no dispute that the assessee was having more

than Rs. 2,54,000/- in his capital account and net profit of Rs. 3,73,445/- as on 31st March, 2010. Thus the opening balance as on 1.4.2010 in the capital

account was Rs. 10,66,375/- inclusive of cash gift of Rs. 5,75,000/-. Once

the assessee was having the balance of more than Rs. 10 lacs in the capital

account, then giving an amount of Rs. 1,55,000/- can be considered as

drawing from the capital account and, therefore, no disallowance is called for

in respect of the interest of Rs. 17,407/- which was incurred by the assessee

in respect of the amount taken from the bank. Having regard to the facts,

when the assessee was having sufficient balance in the capital account, we

delete the disallowance made by the AO on account of interest payment to

the bank of Rs. 17,407/-.

(10) Vehicle Maintenance Rs. 24,337/- :

13.17. The assessee has claimed Rs. 24,337/- towards vehicle maintenance.

The AO has made an adhoc disallowance of Rs. 7,500/- for want of vouchers

and supporting evidence.

We have considered the rival submissions as well as the relevant

material on record. Since the adhoc disallowance made by the AO is excessive

in nature when the claim made by the assessee is not found to be bogus.

Accordingly, we restrict the disallowance to 10% of the claim.

20 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

(11) Wages expenses Rs. 1,89,163/- :

13.18. The assessee has claimed wages expenses of Rs. 1,89,163/-. The AO

has made an adhoc disallowance of Rs. 60,000/- for want of details and

vouchers.

We have considered the rival submissions as well as the relevant

material on record. Though the assessee has failed to produce the complete

details and vouchers in respect of the Wages expenditure, however, the

adhoc disallowance made by the AO of Rs. 60,000/- is excessive in nature.

Accordingly, we restrict the disallowance made by the AO to 10% of the

claim.

(12) Local Conveyance Rs. 25,596/- :

13.19. The assessee has claimed Rs. 25,596/- as local conveyance expenses.

The AO has made an adhoc disallowance of Rs. 8,000/- for want of vouchers.

To maintain the rule of consistency, we restrict the disallowance to 10% of

the claim.

(13) Salary expenses Rs. 3,30,000/- :

13.20. The assessee has claimed the salary expenses of Rs. 3,30,000/-. The

AO noted that during the course of survey at the business premises of the

assessee, the assessee has stated that he is having 3 employees to whom the

assessee claimed to have paid wages of Rs. 3,500/- per month to one

employee and Rs. 5,000/- each per month to two employees. However, in

the return of income the assessee has claimed the salary expenses of Rs.

3,30,000/- in respect of 9 employees. The AO has also considered the

statement of one of the employees recorded during the course of survey who

21 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

has stated that he is receiving Rs. 3,000/- per month as salary as against Rs.

3,500/- per month. Accordingly, the AO allowed the salary of Rs. 3,000/- to

one employee and the salary of Rs. 5,000/- each per month in respect of two

employees. The total claim of the assessee was allowed at Rs. 1,56,000/-

and the balance of Rs. 1,74,000/- was disallowed. The assessee challenged

the action of the AO before the ld. CIT (A) but could not succeed.

13.21. Before us, the ld. A/R of the assessee has submitted that the AO has

made the disallowance by considering the statement of the assessee during

the course of survey proceedings. However, at that point of time the

assessee was not having good frame of mind and has forgotten to give the

correct details of the employees. Thus the ld. A/R has submitted that the AO

has made the disallowance without conducting a proper enquiry on this issue.

13.22. On the other hand, the ld. D/R has submitted that the assessee himself

has admitted the payment of salary to only three employees whereas in the

return of income filed, the assessee has claimed to have paid the salary to 9

employees which is contrary to the fact as well as the statement given by the

assessee during the course of survey proceedings. He has relied upon the

orders of the authorities below.

13.23. We have considered the rival submissions as well as the relevant

material on record. There is no dispute that at the time of survey the

assessee has stated that he is having 3 employees, one of whom is Shri

Surendra. The statement of Shri Surendra was also recorded in which he has

stated to have received salary of Rs. 3,000/- per month as against Rs. 3,500/-

per month claimed by the assessee. The remaining two employees were

22 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

claimed to have been paid @ Rs. 5,000/- each per month. This fact has not

been disputed by the assessee even during the assessment proceedings,

however, the assessee has claimed salary expenses of 9 employees. The AO

has made the disallowance of remaining salary expenses except in respect of

3 employees which were explained by the assessee during the course of

survey proceedings. We find that the assessee has clearly given the details of

employment of 3 persons. Statement of Shri Surendra was also recorded

and, therefore during the survey proceedings in the statement of the

assessee as well as one of his employees, it was explained that the assessee was having only 3 employees. Since the statement was recorded on 1st

February, 2011 and as on that date the assessee has given an unambiguous

statement recording the number of employees and the salary paid to them,

then at the time of filing the return the assessee has claimed the salary

payment of 9 employees for whole of the year which itself is contrary to the

facts as stated during the survey proceedings. The ld. CIT (A) has also

considered this fact as under :-

“ (xiii) Salary – a disallowance of Rs. 1,74,000 out of the total expenses of Rs. 3,30,000/- has been made by the AO. The disallowance was made on the basis that the details of salary given to each person employed by the assessee were noted in the course of survey at the business premises. The appellant failed to justify the payment made to the employees and payments were stated to have been made in cash for which no confirmatory evidence could be filed. Considering the fact that no controverting evidence could be filed by the

23 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

appellant, the disallowance made by the AO is confirmed.”

Hence, in view of the facts and circumstances of the case, when in the

month of February, 2011 the assessee has given the details of the employees

and payment of salary which is allowed by the AO and, therefore, the claim of

3 times more of the employees in the return of income is contrary to the

admitted facts by the assessee himself during the survey proceedings.

Accordingly, we find no error or illegality in the impugned orders of the

authorities below, qua this issue.

(14) Tea expenses Rs. 32,383/- :

13.24. The assessee has claimed Rs. 32,383/- as Tea expenses. The AO

made an adhoc disallowance of Rs. 10,000/-.

We have heard the ld. A/R as well as the ld. D/R and considered the

relevant material on record. Having considered the nature of business of the

assessee where both the purchasers and sellers are regularly visiting at the

place of the assessee for sale and purchase of their products. Accordingly,

the adhoc disallowance of Rs. 10,000/- made by the AO is excessive.

Maintaining the rule of consistency, we restrict the disallowance to 10% of

the total expenses.

(15) Business Promotion expenses Rs. 27,700/- :

13.25. The assessee has claimed Rs. 27,700/- as Business Promotion

expenses. The AO has made the disallowance of Rs. 8,500/- for want of

vouchers.

24 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

We have considered the rival submissions as well as the relevant

material on record. The AO has made the disallowance of Rs. 8,500/- which

is excessive in nature having regard to the fact that the claim of the assessee

was not found to be bogus. Accordingly, we restrict the disallowance to 10%

of the claim.

Ground No. 2 is regarding claim of cash discount given to the

customers of Rs. 83,000/-.

disallowance of Rs. 83,000/- out of the total claim of Rs. 2,70,993/-. The ld. A/R has

submitted that the discount is customary in this business and was given for prompt

and regular payment from the customers. He has referred to the confirmations filed

by the assessee from some of the customers as well as from the Alwar Fruit &

Vegetable Mandi Union. Thus the ld. A/R has submitted that when it is a prevailing

practice in this trade, then the adhoc disallowance made by the AO is not justified.

The assessee has produced the supporting documents to prove the discount given

by the assessee, thus in the absence of any contrary material or document, the

disallowance made by the AO is not justified.

below and submitted that the assessee has not produced any details of the persons

and the dates regarding the discount given to the customers. Thus it is an excessive

claim made by the assessee without giving the details of payment as well as the

dates, hence the claim of the assessee cannot be accepted. He has further

submitted that in this trade the question of allowing discount does not arise when

the assessee is earning only commission income.

25 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

record. Though the AO has made an adhoc disallowance of Rs. 83,000/- out of total

claim of cash discount of Rs. 2,70,993/-, however, we find that the assessee is

working as a Commission Agent and facilitate the transactions of fruits and

vegetables brought by the one party is sold to the other party. Thus the role of the

assessee is only providing a platform for the transactions of purchase and sale

between two parties. Since the assessee is earning commission income and no

income on account of profit on sale is either recorded in the books of account or

included in the total income, then such a claim of cash discount cannot be

considered as an expenditure incurred wholly and exclusively for the business of the

assessee. The nature of business of the assessee is only to facilitate the platform

for the transactions between the parties though the assessee is having certain duties

and responsibilities of assuring the payment to the owner of the goods who has

brought the goods for sale. Accordingly the cash discount allowed by the assessee

to the customers has no direct connection with the business of the assessee. Since

the AO has made part disallowance, accordingly we find no reason to interfere with

the orders of the authorities below. The same is confirmed.

Ground No. 3 is regarding an addition of Rs. 66,000/- on account of

excess stock of Potatoes.

66,000/- was found in the premises of the assessee which were not reflected in the

books. During the course of assessment proceedings, the AO made an addition of

Rs. 66,000/- on account of excess stock. The assessee challenged the action of the

AO before the ld. CIT (A) and contended that being a Commission Agent, the

26 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

assessee would not be holding any stock in his own account and the stock at the

premises of the assessee would belong to independent parties being third party on

behalf of whom goods are dealt with by the assessee. The ld. CIT (A) called for a

remand report from the AO and after considering the remand report, the ld. CIT (A)

has confirmed the addition made by the AO.

misdirected himself in considering that the stock of potatoes belonging to the

assessee. He has asserted that the assessee is merely a Commission Agent and

sells goods on behalf of third parties only. Similarly, stock of potatoes found during

the course of survey belonged to third parties, which is to be sold by the assessee

on commission basis. Since the assessee is not doing any trading activities,

therefore, such addition on account of excess stock is not justified. In support of his

contention he has relied upon the decision of Patna Bench of the Tribunal in case of

Niranjan Kumar Agarwal vs. ITO, 53 ITR (Trib.) 643 (Patna) and submitted that the

Tribunal has held that the stocks found at the premises of the assessee who is only

a Commission Agent cannot be treated as excess stock of assessee.

explain the stocks found at the premises of the assessee during the survey

proceedings. Even during the assessment proceedings, the assessee has not

furnished any explanation giving the details of the parties to whom the stocks

belonged or the treatment of the said stocks found at the time of survey. He has

relied upon the orders of the authorities below.

record. There is no dispute that at the time of survey under section 133A, 330 bags

27 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

of potatoes having 50 kg each were found at the premises of the assessee. The

value of the said stocks of Rs. 66,000/- is not in dispute. The AO has made the

addition of the said amount as the assessee has not explained or produced any

evidence to show that the said stocks belonged to some other party. It is also not in

dispute that the said stocks were not recorded in the books of the assessee. We

find that neither during the assessment proceedings nor before the ld. CIT (A) in the

remand proceedings nor before us the assessee has produced any record or details

to show that the said stocks found at the premises of the assessee belonged to

some specific person. Even the assessee has not given the details of what

happened to the said stocks whether it was sold and assessee’s role was only a

commission agent, then the entry of the said transaction must be recorded in the

books of the assessee. In the absence of any documentary evidence as well as

entries in the books of the assessee regarding the treatment of the said stocks, the

assessee has failed to discharge his onus on this account. The ld. CIT (A) has dealt

with this issue in para 12.5 to 12.8 as under :-

“ 12.5. I have perused the assessment order, remand report of the AO, submissions and cross reply of the appellant and find that an addition of Rs. 66,000 has been made on account of stock of Aaloo and also cash balance of Rs. 18,860 which was found at the time of survey operation u/s 133A of the IT Act at the business premises of the appellant. These balances of stock and cash were held to be unaccounted income of the appellant by the AO on the ground that these entries were not recorded in the books of accounts. 12.6. The appellant has stated that the stock of Aaloo did not belong to the business and the ownership of this stock was with some client

28 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

who had sent these items for sale. The appellant is engaged in the business of commission agent and therefore stock did not pertain to him. As regards the cash balance of Rs. 18,860 is concerned, the appellant has stated that he does not wish to press this ground and is withdrawing the same. 12.7. Having considered the material available on record, I find that appellant has not been able to furnish any evidence with regard to the stock of Aaloo amounting to Rs. 66,000 found at the time of survey. The contention of the appellant that it is engaged in the business of a commission agent and therefore there is no question of any stock being owned by him cannot be accepted on the face value as no controverting evidence could be produced either before the AO or in the course of present proceedings to substantiate the fact of ownership of stock by any third party. Thus, in the absence of any evidence, the ownership of any moveable property shall vest in the person, in whose possession the same is found to be. In this case, possession of stock on own account cannot be ruled out, in the absence of any evidence to the contrary. 12.8. In view of the above discussion, I confirm the addition of Rs. 66,000 on account of unexplained stock of Aaloo and unexplained cash of Rs. 18,860 found at the time of survey.”

Accordingly, when the assessee has failed to give any explanation much less the

satisfactory explanation regarding the stock of potatoes found at the premises of the

assessee, then we do not find any error or illegality in the order of the ld. CIT (A),

qua this issue.

29 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.

Ground No. 4 is regarding addition made on account of cash found at

the time of survey.

assessee does not press ground no. 4 and the same may be dismissed as not

pressed. The ld. D/R has raised no objection if the ground no. 4 of the assessee’s

appeal is dismissed as not pressed. Accordingly, ground no. 4 of the assessee’s

appeal is dismissed being not pressed.

allowed and ITA No. 439/JP/2016 is partly allowed.

Order is pronounced in the open court on 12/10/2018.

Sd/- Sd/- (foØe flag ;kno) (fot; iky jkWo ½ (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Jaipur Dated:- 12/10/2018. Das/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- late Shri Bheem Sen Batra, Alwar. 2. The Respondent – The ITO Ward 2(3), Alwar. 3. The CIT(A). 4. The CIT, 5. The DR, ITAT, Jaipur 6. Guard File (ITA No. 184 & 185/JP/2015 & ITA 439/JP/2016)

vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

30 ITA Nos. 184, 185/JP/2015 & ITA No. 439/JP/2016 Late Shri Bheem Sen Batra, Alwar.