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Income Tax Appellate Tribunal, [ DELHI BENCH “D” : DELHI ]
Before: SHRI SHAMIM YAYHAMS. ASTHA CHANDRA
आदेश / O R D E R PER SHAMIM YAYHA, A. M. :
This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-11, New Delhi [hereinafter referred to CIT (Appeals)] dated 01.04.2014 and pertains to assessment year 2011-12. 1
The grounds of appeal raised by the assessee are as under:-
“1. That on the facts and circumstances of the case, the order of the Ld. Commissioner of Income Tax, (Appeal) is bad in law and on the facts of the case. 2. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) is not justified in sustaining the disallowance of commission amounting to Rs.53,08,610/- paid to staff and others. “
Brief facts of the case are that assessee in this case is engaged in the business of distribution in wholesale of machine tools of various types. The Assessing Officer examined the details of commission expenditure of Rs.53,08,610/- debited to profit and loss account. The Assessing Officer asked the assessee to furnish copies of the agreements with the parties with terms and conditions and details with evidences of services provided and also the TDS deducted. The Assessing Officer noted that assessee provided the details with names, addresses, date of commission paid, but the assessee did not provide any agreement or any other relevant document in support of the commission. However, the Assessing Officer noted that assessee later on produced three persons, who are salaried employees of propriety concern of the assessee in support of genuineness of expenses. The Assessing Officer also observed that summon under Section 131 of the Act were issued to various persons to whom payment of commission has been shown. Out of these the Assessing Officer noted that three persons appeared and their statements were recorded under Section 131 of the Act. From these statements the Assessing Officer noted that they have not any role in procurement of orders for the assessee; that these persons have mentioned the names of the parties from whom orders were taken as their names are already mentioned and in whose names commission expenses have been shown. However, the Assessing Officer noted that none of these have any business transaction with the parties who have provided orders to the assessee; that no agreement has been executed on any terms and conditions. The Assessing Officer also found fault in the persons claiming commission in HUF capacity as well as individual capacity. However, the Assessing Officer noted that details of services provided including the regular meetings were not provided. It was again reiterated that the assessee could not produce some of the parties as requested. The concluding portion of the Assessing Officer’s order reads as under:-
“ 5.3 The reply filed by the counsel for the assessee in regard to commission expenses has been examined but is found without merit. Even if, the commission expenses were incurred on referral basis for procuring orders, the assessee must have been in a position to furnish relevant documents or other evidences to prove that the said persons were involved for procuring business to the assessee. No evidence has been furnished in respect of genuineness of commission expenses and providing of any services in this matter, in respect of any of the parties. The parties whose statements were recorded u/s 131 also do not establish their role in providing of services for procurement of orders. Many of the parties to whom commission payments have been shown are HUFs who cannot be said to have provided any service in the matter. As far as the commission expenses to the salaries employees of the assesses are concerned, no agreements regarding terms and conditions of the employment providing commission on sales in addition to the salary have been filed. Further, if the commission expenses are paid to the salaried employees, it becomes profits in lieu of salary assessable u/s 17 of the l. T. Act, 1961 on which deduction of TDS is also required u/s 192 of the l.T. Act. However, from the facts of the case, it is clear that the booking of commission expenses has been made by the assessee in collusion with other parties to claim fictitious expenses. Though the Assessee has shown that TDS was deducted on the commission expenses incurred by him but it does not makes the wrong claims of commission expenses made by the assessee has genuine.
5.4 In view of the above fact and circumstances of the case, it is clear that the commission expenses claimed by the assessee in the P&L account are not genuine and have been shown by the assessee only to book fictitious expenses to reduce the tax liability. Therefore, the commission expenses of Rs.77,23,040/- claimed by the assessee are disallowed and added to the income of the assessee.
5.4 Penalty proceedings under section 271(1)(c) of the Income- Tax Act, 1961 are hereby initiated for which notice u/s 274 is issued separately for concealment of income and for filing in accurate particulars of taxable income. “
Upon assessee’s appeal the ld. CIT (Appeals) noted that Assessing Officer’s observation regarding e-mail or correspondence with regard to services provided being not there. The ld. CIT (Appeals) also rejected the assessee’s appeal that similar commission was earlier allowed on the ground that res judicata would not apply. He also held that there was no legal duty to summon parties to whom commission has been paid. The ld. CIT (Appeals) proceeded to confirm the entire claim of commission amounting to Rs.53,08,610/-. Against this order, the assessee is in appeal before us.
We have heard the ld. DR and perused the records. None appeared on behalf of the assessee despite notice and nobody is appearing on the last several occasions, hence we proceed to adjudicate the issue as under:
We note that the Assessing Officer has denied the commission payment amounting to Rs.53,08,610/-. As emanating from the facts narrated in the orders of the authorities below, commission was also paid in earlier years and no adverse inference was taken by the Revenue. The ld. CIT (Appeals) has observed in this regard that no res judicata applies in tax proceedings. We find that this summary observation by the ld. CIT (Appeals) is not sustainable in absence of cogent reasoning inasmuch as it has been held by Hon’ble Supreme Court that unless there is change in facts or in law, Revenue cannot go on taking divergent stands.
Moreover, the entire details including the address of the parties and rate of commission was before the Assessing Officer. There is no adverse inference that TDS has not been deducted. The view of the authorities below that there has to be written agreement for the commission is not legally sustainable. The observations of the ld. CIT (Appeals) that there was no onus upon the Assessing Officer to issue notice to the concerned parties is also de void of any legal backing. When the address of the parties is before the Assessing Officer and it is not the case that the parties are bogus, the Assessing Officer cannot insist that assessee should produce these parties and otherwise Assessing Officer shall take adverse inference. The emphasis of the Revenue authorities in providing e-mail and correspondence is also un-called for. As per the rate of commission noted it is very small amount and by no stretch of imagination can be said to be exorbitant. In our considered opinion when the commission paid is of a normal amount, the names and address of the parties have been duly mentioned, the persons who have appeared have also acknowledged the receipt of commission, then the disallowance is solely based upon surmises and conjectures. No law provides that commission expense will be allowed only if there is written agreement. The insistence of the Assessing Officer for the assessee to produce the party is also un-called for. No case has been made that the percentage of expenditure does not compare well with earlier years which the Revenue has accepted. Hence, in our considered opinion, this disallowance is based on surmise and conjecture and hence not sustainable in law. We have no hesitation in setting aside the order of ld. CIT (Appeals), which holds that acceptance by Revenue of similar commission in previous years has no relevance and that there is no onus 5 of Assessing Officer to issue summons to the parties, if he is not satisfied or that there has to be a written agreement. This is coupled with the fact that the rate of commission is normal and there is no case of lack of deduction of TDS. Hence we set aside the order of Revenue authorities to decide the issue in favour of assessee.
The assessee’s appeal stands allowed.
Order pronounced in the open court on : 09/06/2022.