MAHANTH MOTORS,DAVANGERE vs. DCIT, CIRCLE-1(1), BANGALORE

Both these appeals are related to the same assessee and the issues involved are one and the same, the appeals are taken up for hearing together and the appeal in ITA No. 1445/Bang/2025 is taken as the lead case and the decision arrived will apply mutatis mutandis to the another

The Appellant denies itself liable to be assessed at Rs.66,02,192/- as against the returned income of Rs.25,73,260/- for the assessment year 2014-15, on the facts and circumstances of the case.

Grounds on disallowance of personnel expenditure, Rs.24,50,932/- a. The authorities below are not justified in restricting the personnel expenditure to Rs.95,o0,000/- against Rs.1,19,50,932/- claimed by the appellant, on the facts and circumstances of the case.

Grounds on disallowance of incentive and commission expenditure, Rs.7,50,000/-: a. The authorities below have erred in arriving at a conclusion that the incentives and commission is not linked to business, on the facts and circumstances of the case.

Grounds on addition of Rs.8,28,000/- towards TP registration income: a. The authorities below have failed to appreciate that the appellant has not earned any income from Vehicle registration, on the facts and circumstances of the case.

The learned CIT(A) has erred in confirming the order of the learned assessing officer, as adhoc disallowances of expenditure and adhoc addition of income is not warranted without rejection of books of accounts, on the facts and circumstances of the case.

The Appellant denies the liability to pay interest under section 234 of the Act in view of the fact that there is no liability to additional tax as determined by the learned Assessing Officer on the facts and circumstances of the case.

The Appellant craves to add, alter, modify, substitute, change and delete any or all of the grounds and to file a paper book at the time of hearing the appeal.

In the view of the above and other grounds that may be urged at the time of the hearing of appeal, the Appellant pray that the appeal may be allowed in the interest of justice and equity.”

The brief facts of the case are that the assessee is a firm and dealer in motor cars and filed their return of income on 12.11.2014. The said return was processed u/s. 143(1) of the Act. Thereafter the case was selected for scrutiny through CASS and notice u/s. 143(2) was issued. Subsequently, notice u/s. 142(1) was issued and the assessee also appeared and produced

Similarly, the incentive and commission also restricted since the same is not in commensurate with the vehicles sold. The AO had not accepted the incentives since the same is more in the month of March whereas no such huge sale of vehicles were reported. Further, the AO had alleged that the commission paid to one Mr. Ajjappa, Accountant of the firm could not be believed since he is not at all involved with sales promotion. The AO also verified the ITR of Mr. Ajjappa and gave a finding that the incentive is 63% more of the declared income and also claimed the refund of entire TDS. Therefore the AO had disallowed the claim of incentives and commission for want of supporting documents.

The AO also estimated the TP registration income at Rs. 800/- per vehicle. The AO had made the addition because of the various discrepancies and also no supporting documents were produced by the assessee.

As against the orders, the assessee filed appeals before the Ld.CIT(A). The Ld.CIT(A) after considering the issues in details and also the data and handmade vouchers furnished by the assessee, had not accepted the claims and confirmed the orders of the AO. The assessee is in appeal before this Tribunal challenging the orders of the Ld.CIT(A).

At the time of hearing, the Ld.AR reiterated the grounds and also relied on the documents filed before the Ld.CIT(A). The Ld.AR also filed an application to admit the additional ground. In the said additional ground, the assessee submitted that the adhoc disallowance made by the AO without rejecting the books of accounts is not correct. The Ld.AR also relied on the judgment of the Hon’ble Juri ictional High Court reported in 386 ITR 702 (Kar) in the case of CIT vs. Anil Kumar & Co. and prayed to allow the appeal.

The Ld.DR relied on the orders of the lower authorities and submitted that the judgment relied on by the Ld.AR can be distinguished based on the facts of the present case and prayed to dismiss the appeal.

We have heard the arguments of both sides and perused the materials available on record.

We have perused the assessment order in which the AO had considered the explanations offered by the assessee and arrived a conclusion that the assessee had increased the employees strength in order to claim more deduction whereas no documentary evidences were made available to sustain their contention that there is no discrepancy in the number of employees. The assessee also not produced any records about the fire incident and the shifting of HR office. We are not able to understand

Even before us the assessee had not produced any documents to show that there is no mismatch in the number of employees and therefore the claim is in order. Therefore we are confirming the addition made by the AO.

The next addition made by the AO is about the commission and incentive paid to the employees. The assessee submitted that the commission and incentives are paid to the employees based on the sales achieved by them. The assessee had not adduced any supporting documents to show that the claims were made by the employees and also no correlation was made by the assessee about the claim made by the employees and the corresponding payments. Corroborative evidences will be available with the assessee but no such evidences were furnished. The assessee had also not furnished any evidence to show that the services rendered by the individuals. Similarly, in respect of the commission paid to Page 7 of 8 ITA Nos. 1445 & 1446/Bang/2025

Before the Ld.CIT(A), the assessee submitted that the Accountant was paid for dealing with the insurance claim but no proper evidence was filed by the assessee. Before the AO, the assessee submitted a reason but changed the reason before the Ld.CIT(A). In such circumstances, the authorities had confirmed the additions. In fact the Ld.CIT(A) in his order, in paras 6.2.4 and 6.2.5 had given a clear finding which were not controverted by the assessee before this Tribunal by adducing evidences and therefore we have no hesitation to confirm the addition.

Insofar as the estimation of income from TP registration activities is concerned, the AO had disbelieved the version of the assessee by observing that the sample hand made vouchers are under various heads and also considering the fact that the assessee had collected the money from the customers for rendering registration services. The AO also stated that the collection of money and later on returned and paid to the brokers are not supported by any corroborative evidence. The Ld.CIT(A) after considering the issue and the fact that the assessee had collected the on road cost of the vehicles from the customers, had confirmed the order of the AO. The assessee had not produced any documents to take a different view and therefore we do not find any reason to differ from the orders of the lower authorities.

In respect of the additional ground raised by the assessee that adhoc disallowance could not be made without rejecting the books of accounts and the reliance made on the Hon’ble Juri ictional High Court judgment, we are of the view that the Hon’ble Juri ictional High Court judgment cannot be relied on to the facts of the present case. Even in the judgment, the Hon’ble Karnataka High Court had considered the addition made in respect

We therefore find no fault in the order of the lower authorities and confirmed the same in toto.

In the result, both the appeals filed by the assessee are dismissed.

Respondent 3. CIT

DR, ITAT, Bangalore

Guard file

CIT(A)