LALITADEVI DEEPCHAND JAIN,SURAT vs. INCOME TAX DEPARTMENT - COMMISSIONER, SURAT

ITA 889/SRT/2025Status: DisposedITAT Surat06 October 2026AY 2018-197 pages
AI SummaryAllowed

What were the facts?

The assessee, Lalitadevi Deepchand Jain, filed an appeal against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2018-19. The assessee, engaged in procuring clientele for financial institutions for loans, claimed commission expenses of Rs. 25,02,434/-. The Assessing Officer (AO) disallowed Rs. 8,00,001/- paid as commission to Abhishek Bhutra (HUF) and Ghishulal Bhutra (HUF), citing lack of formal agreements, physical office setup, and the HUFs being related to the assessee. The Principal Commissioner of Income Tax initiated proceedings under Section 263, deeming the assessment order erroneous and prejudicial to revenue, directing a fresh assessment. The AO, in the revised assessment, disallowed the commission to the HUFs. The CIT(A) upheld the disallowance. The assessee appealed to the ITAT.

What did the Tribunal hold?

The Tribunal held that the disallowance of Rs. 8,00,001/- paid as commission to Abhishek Bhutra (HUF) and Ghishulal Bhutra (HUF) was not justified. The Tribunal found that these two HUFs were not related to the assessee, contrary to the AO's observation. The nature of business of these HUFs was clearly stated in their respective Income Tax Returns as commission agents, commodity brokers, and auctioneers, which the AO had failed to consider. The payments were made through banking channels, TDS was deducted, and the HUFs had declared this income in their returns, which were accepted by the department. The HUFs also showed salary expenditure, indicating they were engaged in commission activities with manpower. Therefore, the addition made by the AO and confirmed by the CIT(A) was deleted. The appeal of the assessee was allowed.

What were the issues?

1. Whether the disallowance of Rs. 8,00,001/- paid as commission to Abhishek Bhutra (HUF) and Ghishulal Bhutra (HUF) is justified, considering the genuineness of payments through banking channels, TDS deduction, and the recipients declaring income, despite the absence of formal written agreements and physical office setup (Section 37(1) of the Income Tax Act, 1961)? Assessee's arguments: The payments were genuine, evidenced by banking channels, TDS, and recipients' IT returns. Written agreements are not mandatory, and HUFs can conduct business without a physical office and employees. The AO failed to apply the principle of commercial expediency and ignored that payments were for business purposes. Similar payments to other parties were allowed without distinction. Revenue's arguments: The assessee did not provide details of the business conducted by the HUFs, and these HUFs were related to the assessee. The revenue relied on the assessment order and the CIT(A)'s order.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 194H,Section 143(3),Section 263,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI

Pronounced: 06.10.2026

PER : SUCHITRA KAMBLE, J M:

The appeal filed by the assessee is against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”] dated 24.06.2025 for the Assessment Year (in short “AY”) 2018-19. 2. The assessee has raised the following grounds of appeal:

“1. That on facts and in law, the learned CIT(A) erred in confirming the disallowance of Rs 8,00,001/- paid as commission to Abhishek Bhutra (HUF) and Ghishulal Bhutra (HUF), despite the genuin

The order continues below.

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