SHREEJI CHEMICAL INDUSTRIES,,AHMEDABAD vs. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2,, BHARUCH

Ground No.1, 1.1 to 1.6 are against the confirmation of disallowance of Rs.34,06,675/- being commission payments without appreciating the facts and circumstances of the case, which should have been allowed as deduction as the

Succinct facts are that the assessee is engaged in the business of manufacturing of chemical goods. The assessee has filed return of income on 21.08.2012 declaring total income of Rs.20,33,270/-. The AO noticed that the assessee has debited commission expenses of Rs.34,06,675/- in the Profit & Loss Account for which party-wise complete details of sales commission, PAN, Addresses, service rendered and details of sales on which commission was paid were called for by the AO. However, the assessee has filed copy of ledger account, credit note issued by the assessee, but did not furnish exact nature of service rendered. Therefore, the AO issued notice under section 133(6) to four parties to whom sales were made through commission agents. However, M/s. Tatva Chintan Pharma Chem Pvt. Ltd. and Dishman Pharmaceuticals & Chemicals have replied that there was no commission agents involved in the transaction of purchases made from the assessee. M/s. Jubiliant Life Science Ltd. confirmed that they have made purchased from the assessee but were silent on commission matter. M/s. Camlin Fine Science Ltd. did not furnish any reply. In view of these facts and circumstances, the AO has provided the replies of

Feeling aggrieved, the assessee filed an appeal before CIT(A). The assessee has stated that details of all the parties in which quantity, rate of payment of commission were filed before the AO. The assessee has also issued credit notes to all commission agents with quantity, rates and amount was clearly mentioned. Therefore, the AO was not justified by putting remarks that the assessee has not furnished exact nature of services rendered. The assessee

Feeling aggrieved and dissatisfied, the assessee has come up before this Tribunal by way of this appeal. The learned counsel for the assessee submitted that the assessee has filed copy of ITR, PAN, address of payee, TDS details, copies of ledger accounts, bank statement of majority

On the other hand, the learned D.R. supporting the orders of lower authorities submitted that the assessee has failed to provide any documentary evidence of services rendered by the so-called commission agents. Further, the parties to whom sales were claimed to have made have denied in response to notice under section 133(6) issued to them that there was any commission agents in purchase of goods by them from the assessee.

We have heard the rival submissions and perused the relevant material on record. We observe that the assessee has filed copy of ITR, PAN, Addresses, ledger account of parties, but the assessee has not filed any confirmation letters from the commission agents. The assessee has failed to explain the nature of specific services rendered by the so-called commission agents for effecting sales of the assessee to buyers. Further, the buyer parties have specifically denied in response to notice under section 133(6) of the Act and clearly stated that they have made purchases from the assessee directly and there was no commission agents involved. We find that the assessee has failed to furnish any documentary evidence regarding service rendered by each commission party, correspondence by the commission agents with the assessee prior to sales and post sales. Therefore, mere payments by account payee cheques and deduction of TDS does not make commission payment as genuine when no proof of services rendered is filed and buyer parties have denied of having any involvement of commission agents. the reliance in the case of Aluminium Corporation of India Limited v. CIT (supra) is distinguishable on facts as in that case there was agreement with selling agents with the assessee for selling of goods of the assessee, however, in the case of assessee, there is no such agreement has been

The AO noted that the repairs and maintenance expenses are not fully supported by bills and vouchers and in most of the cases payments were incurred in cash. In view

Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A). It was submitted that the details has been mentioned in ledger accounts, copy of which was filed before the CIT (A). However, Ld. CIT (A) viewed that submission of ledger account is not sufficient to support the stand of the assessee. Hence, disallowance made by the AO were confirmed.

Being, dissatisfied the assessee filed this appeal before the Tribunal. Learned counsel submits that the assessee has fully accounted repairs and maintenance expenses, which have been duly reflected in ledger account maintained by the assessee copies of which were filed before the AO as well as before CIT (A). However, the AO made ad- hoc disallowance @20% of total expenses without pointing out any specific defects in the books of accounts. Therefore, CIT (A) was not justified in confirming the same as some expenses were incurred in cash.

Per contra, the Ld. DR relied upon the orders of the lower authorities.

We have heard the rival submissions of both the parties and have perused the material placed before us. We find that repairs and maintenance expenses were duly accounted in the ledger account in which details were mentioned. The AO by making general remarks made ad-hoc disallowance @20% without mentioning specific defects in maintenance of vouchers/ bills. On careful considered of facts and circumstances, we are of the considered opinion that the AO was not justified in making disallowance on ad-hoc basis, without pointing specific defects and only made general remarks without rejecting books of accounts. Therefore, the same is deleted. This ground of appeal is therefore, allowed.

In the result, the appeal of the assessee is partly allowed.