VISHNU SARDA,JAIPUR vs. ACIT, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh Hkkxpan] ys[kk lnL;] ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 896/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2010-11 cuke Vishnu Sarda, A.C.I.T., Vs. 826, Jat Ke Kuve Ka Rasta, Circle-4, Chandpole Bazar, Jaipur, Jaipur (Rajasthan) LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHXPS 9085 M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Jain (Adv) jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 09/10/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 10/10/2017 vkns'k@ ORDER

PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-5, Jaipur dated 25/07/2016 for the A.Y. 2010-11. 2. The assessee is deriving income from trading of sugar and sugar products. Return of income was filed on 28/09/2010 declaring total income of Rs. 17,53,300/-. The Assessing Officer made certain additions and assessed the total income of the assessee at Rs. 22,50,098/-.

ITA 896/JP/2016_ 2 Vishnu Sarda Vs ACIT

appeal before the ITAT by taking following grounds of appeal:

“1. Disallowance of Brokerage expenses Rs. 408223: That on the facts and in the circumstances of the case, ld. CIT(A) 5th has grossly erred in law and facts by confirming disallowance of brokerage expenses of Rs. 40,8223/- without appreciating the true facts of the case and further without providing opportunity of being heard.

ITA 896/JP/2016_ 3 Vishnu Sarda Vs ACIT

Rs. 4,08,223/- made out of brokerage expenses. During the year, the

assessee had debited brokerage (dalali) expenses of Rs. 10,46,725/-. The

Assessing Officer asked to produce four persons namely Sh. Manoj Kumar

Agarwal, Sh. Shyam Agencies, Sh. Dinesh Kumar Khator and Sh. Satish

Machiwal. The assessee produced only two persons namely Sh. Manoj

Kumar Agarwal, and Sh. Satish Machiwal. The Assessing Officer made the

addition, which has been sustained by the ld. CIT(A) by holding as under:

2.3. I have considered the facts of the case, the assessment order and the submission of the A/R, the brief facts are that the assessee is engaged in trading and manufacturing of sugar products, for which he purchases damaged sugar which he converts into sugar products and sells the same. The assessee claimed to have paid brokerage on purchases as well as sale of sugar and sugar products. The AO asked the assessee to produce four specific brokers to whom substantial brokerage had been paid. The assessee could produce only two of them viz Sh. Satish Machiwal and Sh. Manoj Agarwal. Out of these two brokers, only Sh. Satish Machiwal was paid brokerage on purchases as well as sales. The statement of the two brokers was recorded. In his statement, Sh. Satish Machiwal stated in response to Q. No. 5 that there are 5-6 parties (including the assessee) which purchase goods through him, namely Shivshanker Pramod Kumar, Kalika General Store, Sundarlal Bherolal & Kishandas Hanuman Sahai. In response to Q. No. 6 when asked about the rate of brokerage earned, he stated that he earns Rs. 3 to 10 per bag, depending on the quality of goods. In response to Q. No. 7 he stated that no accounts of brokerage are maintained by him and the payment for brokerage is received at the

ITA 896/JP/2016_ 4 Vishnu Sarda Vs ACIT

year end on the basis of memory. In response to Q. No. 8 he stated that he was working as broker for 2 years only and was mainly working as an accountant. From the statement of Sh. Machiwal, the AO inferred that he is only procuring goods for the assessee on which he is charging commission of Rs. 3-10 per bag, since he has no where stated that commission is earned on sales from the assessee and also not stated the rate of such commission which is 1%. The AO therefore disallowed brokerage claimed to be paid on sales to all parties in respect of which such claim had been made by the assessee. The assessee has maintained that payment of brokerage is made on purchase as well as sales and payment for the same had been made by cheques after deducting TDS thereon. After carefully considering the statement of Sh. Satish Machiwal, I find that there are several anomalies therein as far as the claim of brokerage on sales is concerned. Firstly, the said broker is actually an accountant and claims to have worked for only 2 years as a broker, which casts a doubt on his capacity to render such services. Secondly, he has not maintained any accounts of brokerage due and brokerage received. No bill has been raised by him. There is no evidence regarding actual services being rendered by him. Moreover, he has named certain parties for whom he procures goods. Out of these parties, only 2 parties viz. Shivshanker Pramod Kumar and Kalika General Store figure in the ledger account of brokerage on sales submitted by the assessee. Surprisingly, the main party viz. Mahalaxmi & co. to which sales are shown to be made by the assessee through him has not been named by Sh. Machiwal. Further, the rate of commission of Rs. 3 to 10 per bag stated by Sh. Machiwal, is the brokerage rate applicable to purchases. On sales the brokerage rate is a flat 1% which has not been stated by him in his statement. From the above facts, it does not appear that Sh. Machiwal has effected any sales for the assessee. Also considering the non-production of two other brokers before the AO, it is seen that the

ITA 896/JP/2016_ 5 Vishnu Sarda Vs ACIT

assessee has been unable to prove the expenses on sales brokerage. Accordingly, the disallowance of brokerage claimed on sales is justified and the addition of Rs. 4,08,223/- is upheld.

hearing, the ld AR of the assessee has submitted that the assessee could

produce two persons namely Sh. Manoj Kumar Agarwal, and Sh. Satish

Machiwal before the Assessing Officer, who had accepted the receipt of

Dalali for the work done on behalf of the assessee. The revenue

authority’s contention that these persons were not keeping details of the

payment received, cannot be adversely taken against the assessee as the

assessee is not responsible for the maintaining the books of account of

these dalals to whom the dalali was paid. He has further submitted that

namely Sh. Satish Machiwal has specifically stated that he has worked for

the assessee as broker during the relevant financial year. Further Shri

Manoj Agarwal, whose statement was also recorded, has also stated that

he has been paid brokerage on the sales affected to various persons,

whose names were mentioned. He has further submitted that all the

payments of the brokerage were through account payee cheques and the

necessary TDS was also deducted.

orders of the authorities below.

ITA 896/JP/2016_ 6 Vishnu Sarda Vs ACIT

the payments to the dalals through cheques. The TDS was also deducted.

The income tax details of the persons to whom the dalalis were paid was

with the department. The assessee has produced certain persons before

the Assessing Officer. The affidavits of these persons were also filed

wherein they have admitted that they had done the work for the

assessee. The ledger account of these persons duly reflecting the

payments and the TDS thereon were also filed. Considering all these

aspects, I am of the view that the ld. CIT(A) was not justified in

sustaining the addition, accordingly, I delete the addition. Accordingly,

this ground of the assessee’s appeal is allowed.

disallowance of Rs. 42,625/- out of packing expenses. The ld. CIT(A) has

confirmed the addition by holding as under:

3.3. I have considered the facts of the case, assessment order and submission of the AR The bardana purchases have been made in cash and the bills thereof suffer from the drawbacks cited by the AO, which the assessee could not controvert. Moreover, the pattern of bardana purchases does not correspond to the month wise sales, which is also strange. The month wise purchases of bardana are as follows: Month Bardana Purchases (Rs.) April, 2009 26,614/- October, 2009 15,950/- November, 2009 61,607/- January, 2009 26,480/-

ITA 896/JP/2016_ 7 Vishnu Sarda Vs ACIT February, 2010 56,475/- March, 2010 26,000/- Total 2,13,126/- However, the sales are more or less uniformly spread month wise. It is thus strange that no bardana purchase was required between the months of April, 2009 and October, 2009 and that around 90% of bardana purchase is in the second half of the financial year, despite the fact that sales figure in the corresponding period is approx. 50% of annual sales. Thus bardana purchases appear to be inflated in the second half of the year. Moreover, being made in cash, these expenses are amenable to inflation particularly when the bills/letterheads are similar indicating that the concerned parties might have acted in concert with the assessee. The assessee has also not discharged the burden of proving the said expenses. Considering all these facts, disallowance of 20% of the packing expenses, made by the AO is justified and is accordingly upheld.

that the bardana purchases for the month of April, 2009 was Rs. 26,614/-

and thereafter the purchases were only in the month of October while

the sales affected during this period were around 50% of the annual

sales. The ld. CIT(A) has recorded that the purchases appears to be

inflated in the second half of the year. Before the Bench also the ld AR

was unable to controvert this finding of ld. CIT(A), therefore, after

hearing both the sides, I am of the view that purchases of bardana in the

second half of the financial year relevant to the assessment year were

inflated and the disallowance made by the Assessing Officer was justified

ITA 896/JP/2016_ 8 Vishnu Sarda Vs ACIT

which has been rightly sustained by the ld. CIT(A). Therefore, I do not

find any reason to interfere in the finding recorded by the ld. CIT(A), the

same is hereby sustained. Ground No. 2 of the appeal stands dismissed.

disallowance of Rs. 4706/- out of telephone expenses, Rs. 30278/- out of

travelling expenses and Rs. 5670/- out of vehicle and running expenses.

The ld. CIT(A) has decided the issue by holding as under:

“4.1 During the course of assessment proceedings, the AO noticed that the assessee has debited certain expenses i.e. telephone, travelling, vehicle running and maintenance expenses and depreciation on car. But the assessee was also not maintaining separate record of the same. Considering this and the possible element of personal use, the AO has disallowed 10% of these expenses as under:- 1. Telephone expenses Rs. 4706/- 2. Travelling expenses Rs. 30278/- 3. Vehicle and Running expenses Rs. 5670/- 4. Depreciation on car Rs. 5296/- Total Rs. 45950/-

4.2 I have considered the facts of the case, the assessment order and the submissions of the appellant. The AO has disallowed 10% of the claimed expenses and depreciation due to the element of personal use being undeniable more so in the absence of separate record of these expenses. Considering the non maintenance of separate record and also the undeniable possibility of personal element, the disallowance of Rs. 4706/-, Rs. 30278/- and Rs. 5670/- @ 10% made by the AO is not excessive and is accordingly upheld.

ITA 896/JP/2016_ 9 Vishnu Sarda Vs ACIT Further coming to the disallowance of depreciation, it is held that no disallowance can be made out of vehicle depreciation on account of personal use since depreciation on vehicle is a statutory allowance as held in the case of Kailash Chand Gupta Vs. DCIT in ITA No. 153/JP/2005 by ITAT, Jaipur Bench. Accordingly, the addition of Rs. 5296/- is deleted.”

sustained 10% of the expenses i.e. telephone expenses, travelling

expenses and vehicle running expenses debited in the books of account of

personal use. During the hearing, the ld AR of the assessee was not able

to controvert the findings recorded by the ld. CIT(A). There was personal

use of telephone, travelling and vehicle running, therefore, I find no

reason to interfere with the findings of the ld. CIT(A), the same is hereby

uphold. Accordingly, this ground of assessee’s appeal is dismissed.

Order pronounced in the open court on 10/10/2017.

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