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Income Tax Appellate Tribunal, “ SMC” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED & Ms. MADHUMITA ROY
आदेश / O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)/GNR/450/2015-16 dated 09/12/2016 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961(here-in-after referred to as "the Act") dated 22/02/2016 relevant to Assessment Year (AY) 2012-13.
The assessee has raised the following grounds of appeal:
ITA No.372/Ahd/2017 Indravadan G.Patel vs. ITO Asst.Year – 2013-14 - 2 - (All the Grounds of appeal are independent of an without prejudice to each other)
In law and in the facts and circumstances of the case, the learned CIT(A) has erred in confirming the addition made by the learned Assessing Officer amounting to Rs.9,96,278/- on account of commission expenses paid by the appellant which were solely exclusively incurred for the purpose of business, hence it deserves to be deleted. 2. In law and in the facts and circumstances of the case, the learned CIT(A) has erred in confirming the entire disallowance made by the learned Assessing Officer amounting to Rs.9,96,278/- on account of commission expenses solely on the basis of one commission agent which is totally unjustified and against the principles of natural justice. 3. The appellant craves leave to add, amend and/or alter the ground or grounds of appeal either before or at the time of hearing of the appeal.
The interconnected issue raised by the assessee is that the Ld. CIT (A) erred in confirming the addition made by the AO on account of commission expenses.
At the outset, we note that there is a delay in filing the appeal by the assessee for 2 days only. None of the party, i.e. the learned AR and the DR advanced any argument for the delay in filing the appeal. In the absence of any argument and considering the length of delay, we are inclined to condone the same and accordingly proceed to adjudicate the issue on merit. 2. The facts of the case are that the assessee in the present case is an Individual and engaged in the business of Manufacturing of all types of fabrication item and resale and repairing of road equipment under the name and style of M/s Venus Infratech.
ITA No.372/Ahd/2017 Indravadan G.Patel vs. ITO Asst.Year – 2013-14 - 3 - The assessee in the year under consideration has claimed commission expenses in his profit and loss account in the name of the following parties: S.No. Name of the party Amount of commission 1. Rajesh Rohila 3,20,578 2. Anuradha Kholi 50,700 3. Basu Dev Ghosh 25,000 4. Hasumatiben J. Patel 2,00,000 5. Jitendrabhai J.Patel 2,00,000 6. Jitendrabhai J.Patel-HUF 2,00,000
The assessee to justify the commission expenses submitted that Shri Jitendra J. Pal was working as a commission agent in his individual capacity & on behalf of his wife, Smt. Hasumatiben J. Patel and HUF. Accordingly, the commission was paid by the assessee to Shri Jitendra J. Pal, his wife, Smt. Hasumatiben J. Patel and HUF. The assessee in support of his claim filed the copies of the income tax return of all three parties.
The AO to verify the genuineness of the commission expenses issued summon under section 131 of the Act Shri Jintendra J Pal & his wife Smt. Hasumitaben J Patel who accepted that they had taken the entry of commission. The AO further observed that the assessee did not file any documentary evidence in support of the services received from these persons. As such, Shri Jitendra J Pal also accepted that his wife and HUF do not work for the assessee.
ITA No.372/Ahd/2017 Indravadan G.Patel vs. ITO Asst.Year – 2013-14 - 4 - The AO also observed that the commission paid by the assessee to Shri Jitendra J. Pal, his wife, Smt. Hasumatiben J. Patel and HUF as well as Smt. Anuradha Kohli has returned back to the assessee.
Similarly, the notice issued under section 133(6) of the Act to Shri Rajesh Rohilla was also returned.
Thus, the AO was of the view that the assessee by making accommodation entries reduced its income, and by deducting TDS, he tried to justify the same. Therefore the AO disallowed the commission expenses of Rs. 9,96,278/- and added to the total income of the assessee.
The aggrieved assessee preferred an appeal before the Ld. CIT (A).
The assessee before the Ld. CIT (A) submitted that his turnover increased by Rs. 40,88,690/-only for such commission expenses. The assessee further submitted that Shri Jitender J. Pal also admitted in the statement recorded by the AO u/s 131 that he is doing the job with M/s Vinus Infratech and received commission against work.
The assessee also claimed that the commission was paid through a/c payee cheque against the bills raised by the agents. Such commission income was declared in the income tax return filed by them.
However, the Ld. CIT (A) observed that only payment through cheque and deduction of TDS does not itself prove that the expenses are genuine.
ITA No.372/Ahd/2017 Indravadan G.Patel vs. ITO Asst.Year – 2013-14 - 5 - As such, the assessee did not file the relevant details evidencing that the payment was made against the work done.
The Ld. CIT (A) further from the chart submitted by the assessee observed that the assessee paid commission to various parties through which sales were made but did not file any sale bill where commission agent’s name was reflected. Thus the assessee did not produce any document relating to the work done by the commission agent. Therefore the Ld. CIT (A) confirmed the addition made by the AO.
Aggrieve by the order of the Ld. CIT (A), the assessee is in appeal before us.
The Ld. AR filed a paper book running from pages 1 to 177 and reiterated the submission as made before the authorities below.
On the other hand, the Ld. DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates to the commission expenses incurred by the assessee. The AO was of the view that the commission expenses claimed by the assessee were bogus in nature. The learned CIT (A) subsequently confirmed the view taken by the AO.
ITA No.372/Ahd/2017 Indravadan G.Patel vs. ITO Asst.Year – 2013-14 - 6 - From the preceding discussion, we note that the assessee in support of commission expenses has furnished the details as mentioned below: i. Copies of the ITR of the commission agents. ii. Copies of the bills against which the commission was paid. iii. The commission was paid after the deduction of TDS. iv. The commission was paid through account payee cheques.
We further note that the statement recorded under section 131 of the Act of Shri Jitendra J. Pal and his wife Smt. Hasumatiben J. Patel was not provided for the cross-examination to the assessee. Therefore it is clear that the statement was recorded at the back of the assessee and used for the purpose of the addition. In this regard we note that the addition based on such statement cannot be sustained.
We further note that in the statement recorded under section 131 of the Act, it was submitted that Shri Shri Jitendra J. Pal was working as a commission agent in his individual capacity & on behalf of his wife smt. Hasumatiben J. Patel and HUF. Therefore the finding of the AO that Shri Shri Jitendra J. Pal admitted that the entry for the commission was just on the papers to reduce the profit appears untrue.
Regarding the commission expenses paid to Shri Rajesh Rohilla, we note that the addition cannot be sustained in the hands of the assessee merely on the ground that the party did not respond to the notice issued under section 133(6) of the Act. As such, the assessee is not under the obligation to force/ ensure that the party should to make a reply under the
ITA No.372/Ahd/2017 Indravadan G.Patel vs. ITO Asst.Year – 2013-14 - 7 - provisions of law. The assessee has discharged his onus by furnishing the necessary details about the parties to whom the commission was paid. As such the AO should have taken the clarification from the AO having jurisdiction over the commission agents before making the disallowance of the commission expenses paid to such parties/ agents.
Regarding the commission paid to Smt. Anuradha Kohli, we note that the AO has not brought anything on record suggesting that the commission expenses paid by the assessee have been returned back by the party.
Regarding the commission paid to Sherry Basu Dev Ghosh, we note that there was no discussion in the order of the AO and the learned CIT (A). Therefore, we are reluctant to uphold the disallowance of such commission expenses.
The allegation of the AO that the commission paid to the parties has come back to the assessee was not based on any tangible material. The learned DR has also not brought anything on record in support of the finding of the authorities below.
We are also conscious of the fact that the non-availability of the agreement and any correspondence between the assessee and the commission agents may create suspicion about the genuineness of the expenses. But to our mind, the disallowances cannot be made based on such suspicion. Therefore we are reluctant to uphold the order of the
ITA No.372/Ahd/2017 Indravadan G.Patel vs. ITO Asst.Year – 2013-14
- 8 - learned CIT (A) and accordingly direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed.
In the result, assessee’s appeal is allowed. This Order pronounced in Open Court on 31/05/2019
Sd/- Sd/- (Ms. MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 31/05/2019
ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-Gandhinagar, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 28.5.19 (word processed by Hon’ble AM in his computer by dragon) 2. Date on which the typed draft is placed before the Dictating Member 28.5.19 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S … 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….31.5.2019 7. Date on which the file goes to the Bench Clerk…………………31.5.2019 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order……………