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| The Tax Publishers2020 TaxPub(DT) 0834 (Jp-Trib) INCOME TAX ACT, 1961
Section 37(1)
Once sample size had been selected by findings on examination of such sample size should be correlated and could reasonably be held representative only proportionality and not of the whole data under examination. In the instant case, since sample size of less than 1% remained unverified, it was incorrect to hold that 100% of claim of commission expenditure remained unsubstantiated and therefore, disallowance of commission expenditure was restricted to the extent of 1% of commission expenses.
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Business expenditure - Sales commission expenses - Disallowance on the basis non-verification of two entries out of total 264 entries -
Assessee claimed deduction of sales commission paid by it. AO on the basis non-verification of two entries out of total 264 disallowed deduction.Held: On the basis non-verification of two entries out of total 264 entries examined by AO which represented less than 1% of sample size, it would be factually incorrect to hold that assessee failed to substantiate whole of his claim of commission expenditure. In case of voluminous transactions, some defined audit methodology and adequate sample size may be adopted to verify the expenses and being a factual matter, it can vary from year to year. Therefore, once sample size had been selected by findings on examination of such sample size should be correlated and could reasonably be held representative only proportionality and not of the whole data under examination. In the instant case, since sample size of less than 1% remained unverified, it was incorrect to hold that 100% of claim of commission expenditure remained unsubstantiated. Therefore, disallowance of commission expenditure was restricted to the extent of 1% of commission expenses.
REFERRED :
FAVOUR : Partly in assessee's faovur.
A.Y. : 2013-14 & 2014-15
IN THE ITAT, JAIPUR BENCH
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