DCIT 24(3), MUMBAI vs. DEVDAS VASUDEVAN, MUMBAI

The appeal filed by the revenue is directed against the order dated 30-08-2012 passed by Ld CIT(A)-34, Mumbai and it relates to the assessment year 2009-10. The revenue is aggrieved by the decision of Ld CIT(A) in respect of the following issues:- (a) Disallowance made u/s 40(a)(ia) of the Act. (b) Disallowance made out of commission expenses. (c) Disallowance made out of various other expenses.

The assessee herein is an exporter and carrying on the business of exporting garments under the name and style “M/s Dev Exports”. The assessing officer, inter alia, disallowed the above said three expenses and the same was deleted by Ld CIT(A).

The first issue relates to the disallowance made u/s 40(a)(ia) of the Act for non- remittance of tax deducted at source within the due date prescribed under sec. 200(1) of the Act. The Ld CIT(A) noticed that the assessee has paid the TDS amount before the due date for filing return of income. He further noticed that the amendment to sec. 40(a)(ia) of the Act which provided payment of TDS amount before the due date for filing return of income was brought into the Act by Finance Act 2010 was held to have retrospective application by the decision rendered by Hon’ble Calcutta High Court in the case of CIT Vs. M/s Virgin Creations (ITA No.302 of 2011 dated 23.11.2011) and also by the Mumbai bench of the Tribunal in the case of Piyush C Mehta Vs. ACIT and the Visakhapatnam bench of Tribunal in the case of Rajamahendra Shipping & Oil field services Ltd. Accordingly, the Ld CIT(A) deleted the disallowance made u/s 40(a)(ia) of the Act by following the above said decisions.

Before us, the Ld D.R submitted that the Ld CIT(A) was not correct in law in applying the provisions which were brought into the statute subsequently. On the other hand, the Ld A.R strongly supported the order of Ld CIT(A). Having heard the rival submissions, we are of the view that the order of Ld CIT(A) on this issue needs to be upheld, since the Ld CIT(A) has followed the decisions rendered by co-ordinate benches of Tribunal as well as the decision rendered by Hon’ble Calcutta High Court. Accordingly we uphold his order on this issue.

The next issue relates to the disallowance made out of commission expenses. The AO noticed that the assessee has paid commission at different rates ranging from 1% to 7%. Accordingly, the AO took the view that the assessee has not followed any scientific basis for giving commission and accordingly disallowed 5% of Commission expenses claim of Rs.25,18,583/-. Before Ld CIT(A), the assessee submitted that he is dealing in various types of Garments and exporting to different types of Countries. Accordingly, he is receiving sale proceeds in various currencies like US$, Euro, GBP etc. Accordingly, it was submitted that the Commission expenses are paid at different rates depending upon the product as well as the Country. It was also submitted that the average Commission paid in the earlier years compares well with the average commission paid during the year under consideration. The Ld CIT(A) was convinced with the explanations of the assessee. Further, the Ld CIT(A) noticed that the assessing officer has not brought any material on record to suggest that the commission payment was bogus. Accordingly he took the view that the AO could not have made adhoc disallowance out of commission expenses and accordingly deleted the same.

Having heard the rival submissions and having perused the facts, we are of the view that the decision rendered by Ld CIT(A) does not call for any interference, since the disallowance made by the AO was not supported by any material. Further, the assessee has also convincingly explained the reasons for the difference in the rate of commission and the average commission expenses incurred during the year compares well with that of the earlier years. Accordingly, we uphold the order of Ld CIT(A) on this issue.

The next issue relates to the adhoc disallowance of Rs.1,11,710/- made out of expenses incurred under various heads. The AO noticed that General expenses, miscellaneous expenses, office expenses, business promotion expenses, conveyance expenses, Travelling expenses, pooja expenses, all aggregating to Rs.11,17,095/-. The assessee filed ledger account copies of these expenses. On perusal of the same, the AO noticed that most of the expenses have been incurred by way of cash. Further, the assessee has also failed to provide documentary evidences. Accordingly, the AO disallowed 10% of the above said expenses. The Ld CIT(A) deleted the same by holding that the assessing officer has not brought on record any material to show that these expenses were not genuine.

We heard rival contentions on this issue and perused the record. We notice that the assessee has furnished only ledger account copies of the above said expenses and did not furnish documentary evidences to support the expenses. There should not be any doubt that the burden of proof to prove the claim of expenses is placed upon the assessee. Hence the Ld CIT(A) was not justified in finding fault with the AO in not bringing supporting materials on record, when the assessee himself has failed to furnish the evidences in support of the expenses claimed. Accordingly, we are of the view that the AO was justified in disallowing 10% of the expenses. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the addition made by the AO.

In the result, the appeal filed by the revenue is partly allowed.