M/S. ITCG SOLUTINOS PVT. LTD.,,BARODA vs. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(2),, BARODA

The instant appeal filed by the assessee is directed against the order dated 31.03.2017 passed by the Commissioner of Income Tax (Appeals) – 1, Vadodara arising out of the order dated 20.03.2015 passed by the ACIT, Circle-1(1)(2), Baroda under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2012-13.

M/s. ITCG Solutions Pvt. Ltd. vs. ACIT Asst.Year –2012-13 - 2 - AO upon making addition of Rs. 43,91,614/- on account of bogus commission expenses out of the total commission expenses claimed of Rs. 53,99,419/- which was in turned upheld by the Ld. CIT(A). Hence, the instant appeal before us.

We have heard the parties, we have also perused the relevant materials available on record. The brief fact leading to the case is this that during the course of assessment proceeding upon verification of the profit and loss account and the return of income filed by the assessee it was found that the assessee has debited a sum of Rs. 53,99,419/- towards commission as against Rs. 3,87,136/- debited in the immediately preceding assessment year. The assessee as per request of the revenue submitted a letter dated 10.11.2014 showing the details of TDS deducted on the commission paid during the F.Y. 2011-12; however, no justification for payment of such commission was provided by the assessee at that juncture whereupon by and under a letter dated 05.03.2015 issued by the Revenue assessee was asked to justify the disproportionate hike in the commission expenses from Rs. 3,87,136 to 53,99,419/- in comparison to the last year. Further that the assessee was asked to furnish the details, the name and address of the agents, their qualification, nature of services rendered, name and address of the parties from whom the orders procured, services obtained, bill-wise quantum of business/services/sales procured as well as the evidences in respect of the services rendered along with the ledger accounts of the commission of those agents mentioned therein. The assessee was further directed to produce the seven agents along with their identity proof, bank passbook containing transaction during F.Ys. 2011-12 and 2012-13. In M/s. ITCG Solutions Pvt. Ltd. vs. ACIT Asst.Year –2012-13 - 3 - response thereof by and under a written submission dated 09.03.2015 the assessee informed the Ld. AO that since the company sales has increased from 3.64 crores to 17.43 crores, the commission expenses, consequently has also increased from Rs. 3,87,136/- to 53,99,419/-. Further that in order to increase the turnover and to sustain the business in the competitive market it is necessary for the assessee to introduce agent system with good incentive who can find business for the company. Apart from that the details regarding the nature of services rendered, name and address of the parties for whom orders were procured, bill-wise quantum of business, rate of commission and quantum of commission paid has already been made available to the Ld. AO by and under the earlier representation dated 10.11.2014 as also submitted by the assessee. The copies of the ledger accounts of all the commission agents as appeared in the books of account for A.Y. 2013-14 and the identity proof along with income-tax return showing commission income of commission agent were also submitted by the assessee on 29.11.2014. Copies of bank statement of the company for F.Y. 2011-12 highlighting debit entries, income-tax return along with the acknowledgement of return of income, and the PAN No. of all the parties as asked by the Revenue was duly submitted by the assessee.

M/s. ITCG Solutions Pvt. Ltd. vs. ACIT Asst.Year –2012-13 - 4 - and how much TDS was deducted as well as the date of payment of such commission. However, the case of the Revenue is this that the assessee has failed to furnish the services rendered by the agents or that the agreement entered into by and between the assessee company and the agents. Ultimately the Ld. AO has come to a finding that the assessee has debited the expenses just to reduce its tax liability and to eyewash the Revenue by claiming bogus commission expenses in the name of various commission agents and such commission has been paid without any basis or on a particular rate.

We have carefully considered the materials mentioned above which are available before us as has been pointed out by the Ld. AR which was required by the Revenue time to time; according to us those have not been taken care of in their proper perspective by the revenue. Hence in order to prevent the miscarriage of justice we find it fit and proper to remit the issue to the file of the Ld. AO with a direction upon him to revisit the issue afresh and to decide the same upon considering the evidences on record and any other evidences which the assessee may choose to file at the time of hearing of matter. Hence, assessee’s appeal is allowed for statistical purpose.