SRI. SANDEEP KEDIA,BANGALORE vs. INCOME-TAX OFFICER, WARD-4(3)(4) , BANGALORE

O R D E R

Per George George K, JM :

 “The assessee has not furnished any written agreements entered with the parties to whom commission was paid.  The assessee has not furnished any written correspondence with these parties regarding the customers introduced by them and sales effected thereof.  In a nutshell the assessee could not produce any documentary evidence in support of the services rendered to support the basis of payment of commission.  Considering the aforesaid facts in the light of the ratios laid down by the Hon’ble Delhi High Court in case of Schneider Electric India Ltd. vs. CIT (304 ITR 360) and by the Hon’ble Supreme Supreme Court in case of Lachminarayan Madanlal vs. CIT (86 ITR 49), it is pertinent to note that:  “even if there is an agreement between the assessee and its selling agents for payment of certain amounts as commission, assuming there was such payment, that does not bind the Assessing Officer to hold that the payment was made exclusively and wholly for the purposes of assessee’s business.”  It may also be noted that, not only there are no agreements; even there are no evidences of any correspondences or personal meetings between the assessee and the commission agents, so as to suggest that there was any relationship on the basis of which the commission agents procured customers for the assessee and for which they are entitled for any commission.  Hence the argument put forth by the assessee that mere payment of commission through account payee cheque (copy of bank account statement) after TDS, in absence of any other supporting evidence will not absolve the assessee from discharging its burden regarding proving the business purpose of such payment.  The assessee has not furnished even the basis of commission payment and has not furnished party-wise details of sales made through the alleged agents and the resultant working of commission.  The assessee has claimed commission expenses of Rs.1,36,29,700/- on total sales of Rs.5,34,01,103/- which comes to 25.52% of gross sales made and the same is not in line with similar businesses.”

“1. The order passed by the authorities below in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case. 2. The appellant denies himself to be assessed at Rs.1,17,11,290/- as against the returned income of Rs.23,58,420/- for the assessment year 2016-17 under the facts and circumstances of the case.

3. The learned CIT(A) was not justified m confirming the disallowance of Rs.93,53,500/- being commission paid, on the facts and circumstances of the case.

4. The learned CIT(A) was not justified in stating that the appellant has not made any submission, which is an erroneous observation of fact and contrary to record, on the facts and circumstances of the case. 5. The learned CIT(A) was not justified in appreciating that the assessing officer has disallowed the commission expenditure, without appreciating the revised documents filed during the assessment proceedings and ought to have obtained a remand report on the evidences stated to have been filed as per the statement of facts, under the facts and circumstances of the case. 6. The learned CIT was not justified in confirming the addition without appreciating the documents submitted during the course of appellate proceedings, to justify the claim of commission expenditure and has passed the impugned order on the premise that no submissions were made, whereas the documents were available before, both the lower authorities, on the facts and circumstances of the case. 7. The learned CIT(A) ought to have provided one more opportunity of hearing before passing the impugned order under the facts and circumstances of the case. 8. The authorities below failed to appreciate that higher turnover achieved, was on account of expenditure incurred towards commission which was a well settled practice in the nature of business, on the facts and circumstances of the case. 9. The appellant denies the liability to pay interest under section 234A, 234B and 234C of the Act in view of the fact that there is no liability to additional tax as determined by the learned assessing officer. Without prejudice the rate, period and on what quantum the interest has been levied are not in accordance with law and further are not discernible from the order and hence deserves to be cancelled on the facts and circumstances of the case. 10. The appellant craves to add, alter, amend, substitute, change and delete any of the grounds of appeal.

11. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered.” 6. The assessee has filed a paper book comprising of 130 pages enclosing therein the confirmation of the parties to whom the assessee has paid the commission, the details of the TDS amount, the bank statements, the financial statement of the assessee, etc. The learned AR submitted that the parties, to whom the notices u/s 133(6) of the I.T.Act has been issued, have changed the address and the correct address has been furnished by the assessee to the A.O. It was contended that the assessee had provided the confirmation letters from the parties to whom the commissions were paid. It was also contended that the assessee due to paucity of time, could not produce the parties, who had received the commission payment before the A.O. As regards the proceedings before the first appellate authority, the learned AR submitted that the assessee had uploaded on 23.02.2023 the written submissions, the details / confirmations, etc. It was contended that since the impugned order has been passed only on 27.02.2023, the written submission and the documents / evidences furnished in support of assessee’s contention ought to have been taken note by the first appellate authority before rendering the impugned ex parte order.

Order pronounced on this 26th day of April, 2023.