INCOME TAX OFFICER, MUMBAI vs. MOHAMMED AFZAL MUCHHADA, MUMBAI

This appeal by the Revenue is directed against the order dated 03.10.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], under section 250 of the Income-tax Act, 1961 [“the Act”], for the assessment year 2018–19. The impugned appellate order arises from the assessment order dated 12.04.2021 passed under section 143(3) read with sections 143(3A) and 143(3B) of the Act by the Ward 17(2)(1), Mumbai.

There is a delay of one day in filing the present appeal. The Assessing Officer has filed a petition stating that the case records were not readily traceable and that some time was consumed in tracing the records, preparing the scrutiny report and obtaining the requisite authorisation. Considering the nominal delay and the cause stated in the petition, we condone the delay and admit the appeal for adjudication on merits.

The Revenue has raised the following grounds of appeal:

Briefly stated, the assessee, an individual carrying on export business under the proprietary concern S.G. International, filed his return of income on 31.10.2018 declaring total income of Rs. 10,66,630/-. The case was selected for limited scrutiny, inter alia, to examine compliance with the provisions relating to tax deduction at source on payments made outside India. The Assessing Officer noticed that the assessee had claimed overseas commission expenditure of Rs. 4,46,87,776/- against export sales of Rs. 44,88,46,698/-, being approximately 10% of the sales. According to the Assessing Officer, despite notices issued under section 142(1), the assessee did not furnish adequate party-wise details and supporting evidence. Holding the expenditure to be excessive and unsubstantiated, the Assessing Officer disallowed the entire commission and assessed the total income at Rs. 4,57,54,410/-.

In appeal, the learned CIT(A) examined the commission agreements, commission invoices, bank realisation certificates and the material showing that the commission ratio ranged between 10% and 12.5% in different years. He found that the Assessing Officer had not brought any material to establish that the expenditure was bogus, personal or capital in nature and had questioned the quantum merely on the basis of his own perception. Relying, inter alia, on the principles laid down by the Hon’ble Supreme Court in S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 and Bengal Enamel Works Ltd. v. CIT (1970) 77 ITR 119, the learned CIT(A) deleted the disallowance of Rs. 4,46,87,776/-. 3

The learned Departmental Representative relied upon the assessment order and the grounds of appeal. He submitted that the learned CIT(A) had accepted fresh evidence without obtaining a remand report from the Assessing Officer; that the identity of all the alleged commission agents had not been established; and that the difference referred to in ground no. 3 had not been reconciled. He, therefore, submitted that the deletion of the entire disallowance was not justified.

Per contra, the learned Authorised Representative supported the order of the learned CIT(A). He submitted that the assessee had uploaded the commission details before the Assessing Officer on 25.03.2021. He further submitted that the learned CIT(A) allowed the claim only after considering the bank letters, foreign inward remittance certificates, sales commission invoices, electronic bank realisation certificates and the tax audit report in Forms 3CB and 3CD. The learned AR also placed before us the export-wise details containing the names and addresses of the overseas customers, the export invoices and the corresponding commission. It was explained that the entities appearing in the export statement were buyers/consignees and not 53 separate commission agents, as assumed by the Revenue. The commission was paid to ASAS/Al Rai General Trading LLC, with whom the assessee had a long-standing agreement, and the agent deducted its agreed commission before remitting the balance export proceeds to the assessee. He accordingly submitted that the grounds of the Revenue proceed on an incorrect appreciation of the documents and that the appeal be dismissed.

We have heard the rival submissions and perused the material available on record. The entire disallowance was made because, according to the Assessing Officer, the assessee had not furnished the requisite particulars and because commission of about 10% of export turnover appeared excessive. We find from the record that the assessee had uploaded commission details on 25.03.2021. The learned CIT(A), while deciding the appeal, considered the bank letters, foreign inward remittance certificates, sales commission invoices, electronic bank realisation certificates, the commission agreement and the tax audit report in Forms 3CB and 3CD. These documents have a direct nexus with the export transactions, receipt of export proceeds and deduction/payment of the overseas commission.

The principal premise of grounds nos. 1 and 2 is that the assessee had produced only a list of 53 unidentified commission agents and evidence in respect of merely one of them. This premise is not borne out from the documents explained before us. The export-wise statement contains the particulars and addresses of the overseas buyers/consignees, along with the export and commission details. The names appearing therein cannot, merely by their number, be treated as 53 different commission agents. The recipient of commission was separately identified as ASAS/Al Rai General Trading LLC and the commercial relationship was supported by a long-standing agreement and commission invoices. Thus, the distinction between the overseas customers to whom goods were exported and the overseas agent through whom orders and remittances were facilitated adequately answers the first two grounds.

The record further shows that the Assessing Officer’s conclusion itself was founded on the alleged absence of supporting details. The assessee’s specific contention is that the commission details had already been uploaded on 25.03.2021, and the assessment order also records a reply furnished in response to the show-cause notice. The appellate authority is empowered to examine the material germane to the issue before it. In the present case, the Revenue has not shown which particular document was admitted in breach of Rule 46A of the Income- tax Rules, 1962, nor has it controverted the contents of the banking, remittance and export realisation documents. In these circumstances, the general objection that no remand report was called for does not, by itself, warrant interference with the conclusion reached on the evidence.

Applying the above principle to the facts before us, the assessee has established the commercial arrangement and substantiated the expenditure through contemporaneous export, banking and commission records. No material has been brought by the Revenue to establish that the expenditure was not genuine or was not incurred for the export business. We, therefore, find no infirmity in the order of the learned CIT(A) deleting the disallowance of Rs. 4,46,87,776/-.

In the result, the appeal filed by the Revenue is dismissed.