SHRI RAJENDRA PRASAD DUA,INDORE vs. THE ACIT 4(1), INDORE

आदेश /O R D E R

PER SHRI D.T. GARASIA, JM This appeal has been filed by the assessee against the

order of the learned CIT(A)-II, Indore, dated 31.5.2016.

Rajendra prasad Dua ITA No.877/Ind/2016 2. Ground no.1 of the appeal is that the learned CIT(A)

was not justified in maintaining the interest expenses at

15% as against the average rate of 17%.

taken loan in the firm at the rate ranging between 15% to

18% whereas in personal capacity the loans were taken @

12% to 13%. The Assessing Officer, therefore, disallowed

Rs.4,47,000/- being the deferential interest. On appeal, the

learned CIT(A) restricted the interest at 15% as against the

average rate of 17% with the direction to the Assessing

Officer to delete the resultant addition. Being dissatisfied

with this, the assessee is in appeal before the Tribunal.

submitted that the funds borrowed for the business

purpose were borrowed with the understanding that the

same were long term loan and lenders will not pressurise

the assessee to repay the loan. The learned counsel for the 2

Rajendra prasad Dua ITA No.877/Ind/2016 assessee also submitted that the same Assessing Officer

has restricted the interest to 15% in the assessment of

proprietorship concern.

of the learned CIT(A) and submitted that the learned CIT(A)

has rightly restricted the rate of interest to 15%.

Assessing Officer himself has restricted the addition to 15%

in the preceding assessment year, as contended by the

learned counsel for the assessee himself, in our opinion,

the learned CIT(A) has rightly restricted the interest to

15%. In this view of the matter, this ground of appeal of

the assessee fails and is dismissed.

justified in maintaining partial addition of Rs.2,00,000/- as

Rajendra prasad Dua ITA No.877/Ind/2016 made by the Assessing Officer u/s 40A(2)(b) of the Act on

account of salary paid to related parties.

huge salary amounting to Rs.8,16,000/- to three relatives,

viz. Kiran Kumar Dua, Rajesh Dua and Rakesh Dua. The

total payment made on account of salary was Rs.28.98

lacs. The Assessing Officer observed that the highest and

lowest salary paid to non-relative employees were Rs. 1.32

lacs and Rs. 48,000/- respectively. The Assessing Officer,

therefore, restricted the salary of the above three persons

at Rs. 1.32 lacs each and the balance amount of Rs. 4.20

lacs was added u/s 40A(2)(b) of the Act. On appeal, the

learned CIT(A) restricted the addition to Rs. 2 lacs as

against Rs. 4.20 lacs as made by the Assessing Officer. Still

being dis-satisfied, the assessee is in appeal before the

Tribunal.

Rajendra prasad Dua ITA No.877/Ind/2016 9. Before us, the learned counsel for the assessee

submitted that the relatives of the assessee were actively

involved in the business of the assessee and they were

looking after day to day activities of the business. The

learned counsel for the assessee also submitted that they

are also assessed to income tax. The learned counsel for

the assessee, therefore, prayed that the salary paid to

relatives may kindly be accepted.

the order of the learned CIT(A) with the submission that

the learned CIT(A) has rightly restricted the addition to

Rs.2 lacs which finding of the may kindly be sustained.

sides. We find that the learned CIT(A) has rightly pointed

out that the salary paid to the relatives was on higher side.

However, taking into consideration the involvement of

relatives in day to day activities in the business of the 5

Rajendra prasad Dua ITA No.877/Ind/2016 assessee, the learned CIT(A) has restricted the addition to

Rs. 2 lacs by granting relief of Rs.2.20 lacs to the assessee.

In our opinion, since the learned CIT(A) has decided the

issue only after considering all the aspects of the matter,

we sustain the order of the learned CIT(A) and dismiss this

ground of appeal of the assessee.

maintaining ad hoc disallowance to the extent of

Rs.41,306/- out of various expenses on account of shop

rent, conveyance expenses, telephone expenses and

travelling expenses.

P&L account it was seen by the Assessing Officer that the

following expenses were not properly vouched :-

S.No. Head Amount (Rs.) 1. Shop expenses 2,38,374 2. Conveyance 1,99,756 3. Telephone expenses 1,05,293

Rajendra prasad Dua ITA No.877/Ind/2016 4. Travelling expenses 2,82,763

The Assessing Officer also held that the assessee failed to

establish that the above expenditure was incurred

exclusively for the purpose of business entity. The

Assessing Officer, therefore, disallowed 10% of such

expenses. On appeal, the learned CIT(A) reduced the

disallowance to 5%. Now the assessee is in appeal before

the Tribunal.

CIT(A) has rightly restricted the disallowance to 5% of the

above expenses claimed by the assessee. We, therefore, find

no infirmity in the finding of the learned CIT(A) and

accordingly dismiss this ground of appeal.

disallowance of Rs. 5,78,845/- on account of commission

paid.

Rajendra prasad Dua ITA No.877/Ind/2016 16. During the course of assessment proceedings the

Assessing Officer found that the assessee has claimed

commission expenses of Rs. 20,92,154/- as against an

amount of Rs. 7,47,571/- for the assessment year 2011-12

which meant increase of 280% whereas the turnover

during the relevant assessment year has gone up by only

123%. The Assessing Officer, therefore, restricted the

commission expenses to 123% and the balance expenditure

of Rs. 11,57,690/- was disallowed. On appeal, the learned

CIT(A) restricted the addition to 50%. Still dissatisfied, the

assessee is in appeal before the Tribunal.

submitted that the assessee maintains day to day financial

record/books of accounts which are audited and all the

relevant bills/vouchers and details of commission were

maintained. The learned counsel for the assessee further

submitted that the Assessing Officer did not point out any

Rajendra prasad Dua ITA No.877/Ind/2016 specific defect in maintenance of books of accounts nor the

same were rejected u/s 145 of the Act and as such without

rejecting the books of accounts, no disallowance could be

made. The learned counsel for the assessee, therefore,

submitted that the commission expenses claimed by the

assessee may kindly be allowed.

order of the learned CIT(A).

We find that the assessee has neither been able to justify

the commission expenses before the authorities below nor

the same could be explained before us. The assessee has

also not been able to explain steep increase in commission

expenditure as compared to increase in the turnover. We,

therefore, find no infirmity in the finding of the learned

CIT(A) and accordingly uphold the same. This ground is,

therefore, dismissed. 9

Rajendra prasad Dua ITA No.877/Ind/2016 20. Ground no. 5 relates to maintaining ad hoc

disallowance to the extent of Rs.50,000/- out of freight and

cartage expenses.

assessment proceedings the Assessing Officer observed

that some of the bills/vouchers were not traceable. He also

found that some of the expenses were incurred in cash. He,

therefore, disallowed Rs. 50,000/- towards freight and

cartage expenses. On appeal, the learned CIT(A) confirmed

the action of the Assessing Officer.

Assessing Officer has made the disallowance of

Rs.50,000/- towards freight and cartage expenses only

after discussion with the learned counsel for the assessee.

Since the assessee himself has agreed to the addition, we

do not find any flaw in the orders of the authorities below.

We, therefore, confirm the same. 10

Rajendra prasad Dua ITA No.877/Ind/2016 23. In the result, the appeal of the assessee stands

dismissed.

The order has been pronounced in open Court on

6th January, 2017.

Sd/- sd/-

(ओ.पी.मीना) (डी.ट�.गरा�सया) लेखा सद�य �या�यक सद�य (O.P.Meena) (D.T.Garasia) Accountant Member Judicial Member

�दनांक /Dated : 6th January, 2017

Dn/