HITESH RAMNIKALAL METHA,MUMBAI vs. INCOME TAX OFFICE, 19(1)(5), MUMBAI

This is an appeal preferred by the assessee against the order of the Ld. CIT(A)/NFAC, Delhi dated 11.11.2022 for AY. 2013-14.

The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the action of the AO disallowing provision of Rs.13,63,255/- viz, commission payable on sale of Rs.3,43,20,981/- (shown as outstanding commission) which has been added in this year; and in the alterative, since the deduction claimed of Rs.13,63,255/- didn’t materialize, assessee has written off the same, the ibid commission was offered to tax in the year AY. 2015-16 as income in P & L Account, so pleads deletion of addition. 3. Brief facts are that the assessee is engaged in the business of importing scrap metal from foreign country (USA etc.) and selling the same in India. The AO noted that the assessee had claimed expenditure 2 A.Y. 2013-14 Hitesh Ramniklal Mehta (provision of commission income payable) to the tune of Rs.13,63,255/-. On being confronted by the AO, the assessee replied that this was the first year of business and assessee was able to get its turnover of more than of Rs.3,43,20,981/- only because of the support of the two major parties M/s. Metal Trading Company (MTC) and M/s.Echelon Metal Pvt. Ltd. (EMPL) (refer page no. 1 of PB); and for the support/services rendered, assessee as per the custom in vogue made a provision to give commission for the business/high turnover. However, since the commission could not be disbursed to the parties before the finalization of accounts, the assessee showed it as provision for commission payable to the tune of Rs.13,63,255/-. However, the AO did not accept the claim of the assessee because no evidences were submitted by the assessee as proof of payment of commission. So it was disallowed, which action of the AO was confirmed by the Ld. CIT(A). Aggrieved, by the action of the Ld. CIT(A), the assessee is before this Tribunal. 4. I have heard both the parties and perused the records. The main plea of the assessee is that he started this business of importing metal scrap from USA and since this was the first year of retail business of assessee in metal scrap, and assessee was able to book sales/ turnover of more than Rs.3,43,20,981/- which was due to the service rendered mainly by two parties viz M/s. Metal Trading Company (MTC) and M/s.Echelon Metal Pvt. Ltd. (EMPL). And for the services rendered to bag the business from the two concerns, the assessee booked commission to the tune of Rs.13,63,255; and since payment didn’t 3 A.Y. 2013-14 Hitesh Ramniklal Mehta materialize before the financial were drawn, the same was shown as provision for commission (payable as outstanding). According to assessee, from the subsequent years, the business of assessee started declining and therefore taking note of the difficulties of assessee those parties (agents of two concerns) refused to take the commission i.e. Rs.13,63,255/-. So the assessee offered the same in the profit and loss account for AY. 2015-16 and offered it for tax (Rs.13,63,255/-) which fact was brought to my notice and is evident from perusal of page no. 29 of the PB. Therefore, according to the Ld. AR, since there was cessation of liability; the assessee had offered as income in subsequent AY. 2015-16, which was claimed as deduction/expenditure in the relevant AY. 2013-14. Therefore, Ld. AR prays that the deduction claimed for AY. 2013-14 of commission of Rs.13,63,255/- be allowed taking into consideration the aforesaid facts.

Per contra, the Ld. DR for the department submitted that in this year, the assessee had claimed to have incurred commission expense of Rs.13,63,255/- but since no evidence of making such a payment could be shown to the AO, the same was disallowed. However, the assessee is now claiming that it has offered the same/expenditure claimed in AY. 2013-14 for taxation in AY. 2015-16 which should be appreciated in the light of the fact that since assessee’s claim of expenditure was not genuine as AO disallowed it. So, it is an afterthought and should not be allowed by taking note of the subsequent year developments.