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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
PER MAHAVIR PRASAD, JUDICIAL MEMBER
These two appeals have been filed by the Assessee are directed against the order of the Ld. CIT(A), Gandhinagar, Ahmedabad dated 03.02.2015 pertaining to A.Ys. 2010-11 & 2011-12. Since facts and circumstances and & 3554/Ahd/2015 2 . A.Ys. 2010-11 & 2011-12 issues are common, therefore for the sake of brevity, we would like to dispose of both the appeals by way of a common order.
In A.Y. 2010-11, the assessee has taken following grounds of appeal:
1. The Id. CIT(A) has erred in law and on the facts of the case in confirming the additions made by Ld. AO while framing the assessment u/s 143(3) of the Act. Under the facts and circumstances of the case the action of both the authority are required to be quashed.
2. The Id. CIT(A) has erred in law and on the facts of the case in confirming the action of Ld. AO in confirming the genuine business commission of Rs.38,72,755/- which otherwise not required. 3. Both the lower authorities have failed to appreciate that without the commission agent sales could not be achieved up to 25,26,17,943/- 4. Both the lower authorities have erred in law and on facts in passing the orders without properly appreciating the facts and that he further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of both the authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s 234B/C of the Act. 6. The learned CIT(A) has erred in law and on facts of the case in confirming the initiation of penalty proceedings u/s271(l)(c) of the Act.
Facts of the case are that assessee is in the business of manufacturing of sodium Silicate etc. On verification of the P&L Account of the assessee it is noticed that the assessee had claimed commission expense of Rs. 38,72,755/-. The assessee was asked to submit the list of the person to whom commission has been paid. The assessee was requested to submit the copy of accounts along with necessary confirmation from the recipient and also the nature of services rendered. & 3554/Ahd/2015 3 . A.Ys. 2010-11 & 2011-12 4. During the assessment proceedings, vide order sheet entry dated 11.02.2013, the assessee was specifically asked why the commission expense should not be disallowed. Apart from the requisition by the assessee to establish the genuineness of transaction, the persons to whom the assessee had claimed to have paid the alleged commission were also summoned u/s 131 of the Act to cross-examine then and obtain necessary proof of having received the commission and also the nature of services rendered. However, no one attended in person to state on oath and explain the nature of services rendered.
As discussed above, on being asked to the assessee about claim of the commission expenses, the assessee vide reply dated 11.02.2013 stated as under: "... The said expenditure of Rs. 38.73 lacs is fully allowable as a business expenditure as it was a genuine expense incurred wholly and exclusively for the purpose of business of the assessee,.... .The commission was based on sales generated by these persons and various other services rendered by them as indicated above. Their efforts helped the company expanding the sales and fetching better prices. New parties were developed and far away situated places were explored. Orders were also procured from such parties. The dealings and day to day transactions with parties remained smooth and uninterrupted because of the supporting services rendered by the persons..."
The contention made by the assessee has been considered in view of submission made but the same is not acceptable. No cogent evidence could be produced by the assessee to prove the fact that any service had actually been rendered by the persons/parries, which could justify payment of such a huge sum of Rs. 38,72,755/ to this company, neither the assessee company nor the person/parties could produce any details or evidence of any service actually rendered. Merely stating that the persons/parties had helped in increase in sales & 3554/Ahd/2015 4 . A.Ys. 2010-11 & 2011-12 and corresponding self made calculations of commission cannot be treated as sufficient proof of any service actually rendered. Hence, without the proof of any service actually rendered by the persons to whom commission has been paid, in respect of sale to this concern, a mere confirmation letter is nothing but a self serving statement given by the parties to help the company.
In view of the above, it is clear that the assessee company has failed to discharge the burden heavily lying upon them to prove that commission payment-to the person/parties was a genuine payment and was for the business purpose. The assessee also failed to establish that any service was actually rendered by the persons to assessee company which could justify such a huge commission payment. It is worth to mention here that in the immediately proceedings year also, commission expenses claimed to have been paid to these persons, was disallowed and added to the total income. During the preceding years also, the assessee could not bring on record any cogent evidence to prove that the persons to whom commission has been paid, had actually rendered services which ultimately increased the commercial activities of the assessee company.
During the year under reference also, the assessee could not put forth any cogent evidence to justify the payment of commission to the persons. Under the circumstances and considering the facts of the case it is held that the alleged commission payment of Rs. 38,72,755/ has not been made wholly and exclusively for its business purpose and hence deserves to be disallowed being unreasonable and against the legitimate business needs of the assessee. & 3554/Ahd/2015 5 . A.Ys. 2010-11 & 2011-12 9. Against the said order, assessee preferred first statutory appeal before the ld. CIT(A) who confirmed the action of the A.O. by holding that in assessment year 2010-11 is similar to that of assessment year 2009-10 and on the principle of consistency, ld. CIT(A) confirmed addition made by the ld. A.O.
Now assessee has come before us and stated that facts and circumstances are totally different with the case of assessment year 2009-10. Therefore, ld. CIT(A) has erred in holding that present case in hand is similar to assessment year 2009-10. Ld. A.R. further stated that assessee gave business commission to Shri Mehulkumar B Patel for A.Y. 2011-12 whose statement was recorded u/s 131 by the department and same is part of paper book at page no. 170-172. Statement of Shri Ratneshkumar H Modh for A.Y. 2011-12 was also recorded u/s. 131 on 05.03.2014 and same is part of paper book at page no. 173-175. Statement of Shri Ankur K Patel for A.Y. 2011-12 was recorded u/s 131 on 05.03.2014 same is part of paper book at page no. 176-180 and re-examination of Shri Ratneshkumar H Modh was also recorded on 05.03.2014 for A.Y. 2011- 12 and same is part of paper book at page no. 181-184. Thereafter cross- examination of Shri Ratnesh H Modh was recorded and same is part of paper book at page no. 185.
Ld. A.R. contention is that lower authorities have failed to consider statement and cross examination recorded by the revenue has not been considered before passing the order.
In the interest of justice, we set aside this matter to the file of the ld. CIT(A) to decide this matter afresh after considering the statement of above said persons to whom commissions were given. Therefore will decide matter as per law. & 3554/Ahd/2015 6 . A.Ys. 2010-11 & 2011-12 13. In the result, appeal filed by the Assessee is allowed for statistical purposes.
Now we come to for A.Y. 2011-12, the assessee has taken following grounds of appeal:
1. The Id. CIT(A) has erred in law and on the facts of the case in confirming the additions made by Ld. AO while framing the assessment u/s 143(3) of the Act. Under the facts and circumstances of the case the action of both the authority are required to be quashed.
2. The Id. CIT(A) has erred in law and on the facts of the case in confirming the action of Ld. AO in confirming the genuine business commission of Rs.22,49,024/- which otherwise not required. 3. Both the lower authorities have failed to appreciate that without the commission agent sales could not be achieved up to 28,32,01,338/- 4. Both the lower authorities have erred in law and on facts in passing the orders without properly appreciating the facts and that he further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of both the authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The learned CIT (A) has erred in law and on facts of the ' case in confirming action of the Ld. AO in levying interest u/s 234B/C of the Act. 6. The learned CIT(A) has erred in law and on facts of the case in confirming the initiation of penalty proceedings u/s271(l)(c) of the Act.
15. Since facts and circumstances are similar to ITA, we remanded the matter back to the file of ld. CIT(A) for re- adjudication.
16. Thus, in parity with the connected appeal, this matter is also set aside to the file of the ld. CIT(A) for re-adjudication after considering the submission and arguments and documents to be filed by the assessee. Thereafter will pass an order as per law. & 3554/Ahd/2015 7 . A.Ys. 2010-11 & 2011-12
In the result, both the appeals filed by the Assessee are allowed for statistical purposes.
Order pronounced in Open Court on 30 - 01- 2020