AGRO SOLVENT PRODUCTS PVT. LTD.,GWALIORL vs. JCIT.,RANGE-2,, GWALIOR

Unexplained payments for Rs.72.68 Lacs The Ld. AO made addition for raw material suppliers on the ground that notices issued u/s 133(6) did not elicit satisfactory response. During remand proceedings, the assessee furnished confirmation letters along with copies of accounts which could not be controverted by Ld. AO. Accordingly, the impugned addition was deleted against which the revenue is in further appeal before us. It could be seen that the very reason which led to addition by Ld. AO was duly met by the assessee during remand proceedings. Therefore, the adjudication of Ld. CIT(A) could not be faulted with.

Provision of expenses for Rs.28.38 Lacs The Ld. AO added the same by treating the provision as contingent liabilities. However, the assessee amply demonstrated that the expenses were ascertained liabilities which were duly been paid in subsequent year. No adverse finding was given by Ld. AO in the remand report. Accordingly, the impugned addition was deleted against which the revenue is in further appeal before us. It could be seen that following mercantile system of accounting, the assessee would be entitled to claim deduction of expenses which have accrued in this year notwithstanding the fact that the same were paid in subsequent year. Therefore, the adjudication of Ld. CIT(A) could not be faulted with.

Deletion of disallowance u/s 43B for Rs.80.84 Lacs. The Ld. AO added back sales tax payable for Rs.35.70 Lacs. The ld. CIT(A) rendered a finding that the same was already been taxed in AY 2006-07 and therefore, adding the same would amount to double addition which is impermissible. The Ld. AO made addition of VAT payable for Rs.25.13 Lacs. The Ld. CIT(A) observed that the same was not charged to Profit & Loss Account. These findings remain uncontroverted before us. Therefore, the adjudication on these issues could not be faulted with. The Ld. AO also disallowed commission paid to related parties as specified u/s 40A(2) for Rs.20 Lacs. The Ld. AO disallowed the same u/s 43B. The same has been confirmed by Ld. CIT(A) in para 5.5.3 of the impugned order. Therefore, the revenue could not be said to be aggrieved on this issue. This issue has, in fact, been raised by the assessee in its appeal. From impugned order, it could be ascertained that this addition has been made invoking the provision of Sec.43B which is applicable for statutory payments and not for contractual payments. The impugned payments represent commission payment only as per contractual terms. Therefore, the impugned addition as sustained in the impugned order stand deleted. The ground of assessee’s appeal stand allowed. The revenue’s appeal stand dismissed. Assessee’s Appeal 5. Another issue in assessee’s appeal is disallowance of incremental salary payment of Rs.2.65 Lacs to Shri Ankit Kalra. Upon perusal of para 5.6.7 of impugned order, it could be seen that the incremental salary has been disallowed keeping in view the payment made to him in preceding year. However, no comparable market price has been brought on record. Therefore, the estimation so made could not be upheld. The assessee succeeds on this ground.

Lastly, the assessee is aggrieved by confirmation of disallowance u/s 14A for Rs.3.50 Lacs. It could be seen that the assessee has earned exempt income of Rs.47,617/- only which has attracted impugned disallowance and the same could not be held to be justified. We restrict the same to the extent of exempt income only. The ground stand partly allowed. Conclusion 7. The revenue’s appeal stand dismissed. The assessee’s appeal stand partly allowed. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.