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Income Tax Appellate Tribunal, DELHI BENCH “SMC-2”, NEW DELHI
Before: SHRI H.S. SIDHU
ORDER PER H.S. SIDHU, JM Assessee has filed the Appeal against the Order dated 27.1.2015 passed by the Ld. Commissioner of Income Tax (Appeals)—XX, New Delhi pertaining to assessment year 2010-11.
The assessee has filed the revised grounds of appeal which read as under:-
“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals)[(CIT(A)] is bad both in the eye of law and on facts.
2(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the disallowance of interest on capital amounting to Rs.2,30,975/- made by AO under section 40(b) of the Act.
(ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs.8,78,000/- made by the AO on account of the remuneration to the Partners ignoring the supplementary deed executed among the parties merely on the basis of suspicion.
(iii) That the disallowances on account of the interest and remuneration to the Partners have been confirmed despite the assessee fulfilling all the conditions for the same.
3(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the disallowance of commission amounting to Rs.4,83,880/- made by AO under Section 37(1) of the Act.
(ii) That the disallowance has been confirmed despite the expenses being incurred wholly and exclusively for the purposes of business and there is no prohibition under law for incurring such expenditure.
4(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the disallowance of an amount of Rs.63,895/- made by AO on account of cartage expenses.
(ii) That the disallowance has been confirmed despite the same have been made arbitrarily at the rate of 10% without there being any basis for the same.
That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
3. The brief facts of the case are that the assessee is a partnership firm engaged in the business of installation and sales of UPS and inverters systems and their maintenance. The firm is comprising of two Mrs. Anjali Bali and Mrs. Kopal Bakshi sharing profits in ratio of 1:1 respectively. The return was filed on 24.9.2010 declaring an income of Rs. 17,24,640/-. The said return was processed u/s. 143(1) of the I.T. Act, 1961 and subsequently the case of the assessee was selected for scrutiny. The AO issued a notice u/s. 143(2) on 24.8.2011. Further notice u/s. 142(1) alongwith the detailed questionnaire was issued on 23.1.2012. In compliance to the above said notices, the assessee filed the various details and information and attended the proceedings from time to time. Thereafter, the AO passed the assessment order dated 15.3.2013 u/s. 143(3) of the I.T. Act, 1961 by making various additions and assessed the taxable income at Rs. 33,81,390/-.
4. Against the assessment order dated 15.3.2013, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 27.1.2015 has dismissed the appeal of the assessee.
5. Aggrieved with the aforesaid order of the Ld. CIT(A), assessee is in appeal before the Tribunal. 3
During the hearing, Ld. Counsel of the assessee with regard to ground no. 2 has stated that addition in dispute has been made by the AO on account of remuneration to the Partners ignoring the supplementary deed executed among the parties merely on the basis of suspicion. As regards the ground no. 3 is concerned, the Ld. Counsel of the assessee stated that the disallowance in dispute has been confirmed by the Ld. CIT(A) despite the expenses being incurred wholly and exclusively for the purpose of business and there is no prohibition under law for incurring such expenditure and with regard to ground no. 4 he stated that the disallowance has been made @10% without any basis for the same. Therefore, he requested that the additions in dispute may be deleted and appeal of the Assessee be allowed.
On the contrary, Ld. DR opposed the aforesaid contention of the Ld. Counsel of the assessee and relied upon the orders of the authorities below and requested that the same may be upheld.
I have heard both the parties and perused the relevant records available with me, especially the orders passed by the revenue authorities. With regard to ground no. 2 is concerned, I find that it was the contention of the Ld. Counsel of the assessee that the lower authorities ignored the supplementary deed executed among the parties merely on the basis of suspicion, however, the Ld. DR has stated that assessee has not filed any document to show that the copy of supplementary deed filed by it is authentic, neither the supplementary deed was available nor there is any evidence to show that the copy of the deed was sent to the Registrar of Firms or to the AO to show that the deed was prepared on 1.10.2009 and the claim is authentic. In the interest of justice, I am of the view that the matter needs to be re-examined at the level of the AO to decide the same afresh, under the law. Accordingly, I remit back the issue in dispute to the file of the AO to decide the same afresh, after giving adequate opportunity of being heard. The Assessee is directed to produce all the materials/documents before the AO to substantiate his claim on the issue in dispute.
8.1 With regard to ground no. 3 is concerned, I find that Ld. Counsel of the assessee has stated that the disallowance on account of commission was the expenses incurred wholly and exclusively for the purpose of business and there is no prohibition under law for incurring such expenditure. However, the ld. DR stated that assessee was unable to produce any evidence to show that commission has actually been paid for performance of work in connection with the business. I find that assessee has to produce the evidence before the AO to show the commission has actually been paid which he has not done. Therefore, in the interest of justice, I remit back the issue in dispute to the file of the AO for fresh consideration, after giving adequate opportunity of being heard to the assessee. The assessee is directed to produce all the relevant documents / material to substantiate his claim before the AO.
8.2 With regard to ground no. 4 is concerned, I find that Ld. Counsel of the assessee has stated that the disallowance was made @10% without there being any basis for the same. However, the ld. DR stated that AO disallowed 10% of the expense on freight and cartage on the basis that the payments were made in cash and were not supported by any independent bills or documents. He further stated that even at the appellate stage the assessee was unable to show that the entire payment was authentic. I find that assessee has to produce the evidence before the AO to show that the entire payment was authentic which he has not done. Therefore, in the interest of justice, I remit back the issue in dispute to the file of the AO for fresh consideration, after giving adequate opportunity of being heard to the assessee. The assessee is directed to produce all the relevant documents / material to substantiate his claim before the AO.
In the result, the Appeal filed by the Assessee stands allowed for statistical purposes.
Order pronounced in the Open Court on 19/10/2016.