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Facts
The assessee, a Co-operative Society, claimed commission expenditure of ₹56,09,642/- for collecting daily deposits from its members through agents. The Assessing Officer disallowed this expenditure for lack of supporting evidence, and the CIT(A) confirmed the disallowance.
Held
The Tribunal held that the assessee has now produced bank statements as additional evidence and has undertaken to produce the commission agents for verification. Therefore, the matter requires fresh examination. The Tribunal set aside the orders of the lower authorities and restored the issue to the Assessing Officer.
Key Issues
Whether commission paid to agents for collecting daily deposits is a disallowable expenditure due to lack of supporting documents. Whether the Tribunal should consider additional evidence produced at the appellate stage.
Sections Cited
69C, 68
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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. SUCHITRA RAGHUNATH KAMBLE
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 24.10.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2020-21, raising following grounds:
Ground l. That on the facts and circumstances of the case, the Id Commissioner of Income-tax (Appeals) erred in not deleting the addition of Rs. 56,09,642/ addition of Rs. 56,09,642/- on account of Commission paid to on account of Commission paid to Agents as Unexplained expenditure u/s 69C. Ground Agents as Unexplained expenditure u/s 69C. Ground Ground2. That the Ld CIT (Appeals) failed to appreciate the fact that Ground2. That the Ld CIT (Appeals) failed to appreciate the fact that Ground2. That the Ld CIT (Appeals) failed to appreciate the fact that the commission was paid to various Agents who mobilse the commission was paid to various Agents who mobilse the commission was paid to various Agents who mobilsed business to the appellant and being genuine was allowable as business to the appellant and being genuine was allowable as business to the appellant and being genuine was allowable as business expenditure Ground3. That without prejudice, the Ld CIT (Appeals) erred in Ground3. That without prejudice, the Ld CIT (Appeals) erred in Ground3. That without prejudice, the Ld CIT (Appeals) erred in confirming the addition as Unexplained Expenditure u/s 69C confirming the addition as Unexplained Expenditure u/s 69C confirming the addition as Unexplained Expenditure u/s 69C though the facts before him proved that the expend though the facts before him proved that the expend though the facts before him proved that the expenditure was genuine and were made to persons whose full details were genuine and were made to persons whose full details were genuine and were made to persons whose full details were available on record and that there was no case of expenditure being available on record and that there was no case of expenditure being available on record and that there was no case of expenditure being unexplained and the source unexplained and the source not proved.
Briefly stated, the facts of the case are that the assessee, a Co Briefly stated, the facts of the case are that the assessee, a Co Briefly stated, the facts of the case are that the assessee, a Co- operative Society, is engaged in the business of providing credit Society, is engaged in the business of providing credit Society, is engaged in the business of providing credit facilities to its members. The assessee filed its return of income for facilities to its members. The assessee filed its return of income for facilities to its members. The assessee filed its return of income for the relevant assessment year on 04.02.2021, declaring a total loss the relevant assessment year on 04.02.2021, declaring a total loss the relevant assessment year on 04.02.2021, declaring a total loss of (-) ₹37,482/-. The said return was selected for scrutiny an . The said return was selected for scrutiny an . The said return was selected for scrutiny and, accordingly, statutory notices under the Income-tax Act, 1961 accordingly, statutory notices under the Income accordingly, statutory notices under the Income (hereinafter referred to as “the Act”) were issued and duly complied (hereinafter referred to as “the Act”) were issued and duly complied (hereinafter referred to as “the Act”) were issued and duly complied with.
During the course of assessment proceedings, the Assessing 2.1 During the course of assessment proceedings, the Assessing During the course of assessment proceedings, the Assessing noticed that the assessee had claimed commission Officer(AO) noticed that the assessee had claimed com noticed that the assessee had claimed com expenditure of ₹56,09,642/ 56,09,642/- stated to have been paid to certain stated to have been paid to certain agents for collection of daily deposits from its members. The agents for collection of daily deposits from its members. The agents for collection of daily deposits from its members. The Assessing Officer required the assessee to furnish the details of Assessing Officer required the assessee to furnish the details of Assessing Officer required the assessee to furnish the details of members and to justify the allowability of such members/non- -members and to justify the allowability commission expenditure with supporting evidence. Despite repeated commission expenditure with supporting evidence. Despite repeated commission expenditure with supporting evidence. Despite repeated opportunities, the assessee failed to furnish any cogent explanation opportunities, the assessee failed to furnish any cogent explanation opportunities, the assessee failed to furnish any cogent explanation or verifiable material in support of the claim. A final show-cause or verifiable material in support of the claim. A final show or verifiable material in support of the claim. A final show notice dated 16.08.2022 was issued, proposing disallowance of the notice dated 16.08.2022 was issued, proposing disa notice dated 16.08.2022 was issued, proposing disa said commission.
2.2 In response, the assessee submitted that the commission paid In response, the assessee submitted that the commission paid In response, the assessee submitted that the commission paid was less than 5% of the aggregate deposits of was less than 5% of the aggregate deposits of ₹11,38,84,394/ 11,38,84,394/-, and therefore, being negligible, the same ought not to be disallowed. It therefore, being negligible, the same ought not to be disallowed. It therefore, being negligible, the same ought not to be disallowed. It was further contended was further contended that a list of agents along with the details of that a list of agents along with the details of TDS deducted was submitted. However, the assessee did not TDS deducted was submitted. However, the assessee did not TDS deducted was submitted. However, the assessee did not produce the relevant bank statements evidencing such payments, produce the relevant bank statements evidencing such payments, produce the relevant bank statements evidencing such payments, nor did it furnish any agreement or written contract with the alleged nor did it furnish any agreement or written contract with the alleged nor did it furnish any agreement or written contract with the alleged commission agents. In the absence of such supporting material, the . In the absence of such supporting material, the . In the absence of such supporting material, the Assessing Officer disallowed the expenditure of Assessing Officer disallowed the expenditure of ₹56,09,642/ 56,09,642/- and added the same to the income of the assessee. added the same to the income of the assessee.
Aggrieved, the assessee carried the matter in appeal before the Aggrieved, the assessee carried the matter in appeal before the Aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). Before the Ld. CIT(A). Before the appellate authority, the assessee filed a ledger appellate authority, the assessee filed a ledger account reflecting commission payments on various dates, but did account reflecting commission payments on various dates, but did account reflecting commission payments on various dates, but did not produce the bank statements or any agreements with the not produce the bank statements or any agreements with the not produce the bank statements or any agreements with the agents. In the absence of credible documentary evidence, the Ld. agents. In the absence of credible documentary evidence, the Ld. agents. In the absence of credible documentary evidence, the Ld. CIT(A) confirmed the disallowance he disallowance observing as under: observing as under:
6.3 First of all it is pertinent to discussed Section 68 of the Income 6.3 First of all it is pertinent to discussed Section 68 of the Income 6.3 First of all it is pertinent to discussed Section 68 of the Income tax Act which reads as under: tax Act which reads as under:
Cash credits. "Cash credits.
Where any sum is found credited in the books of an assessee 68. Where any sum is found credited in the books of an assessee 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and maintained for any previous year, and the assessee offers no the assessee offers no explanation about the nature and source thereof or the explanation explanation about the nature and source thereof or the explanation explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, offered by him is not, in the opinion of the Assessing Officer, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income satisfactory, the sum so credited may be charged to income satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that p the income of the assessee of that previous year: Provided that where the assessee is a company (not being a Provided that where the assessee is a company (not being a Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the company in which the public are substantially interested), and the company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, sum so credited consists of share application money, share capital, sum so credited consists of share application money, share capital, share premium or any such amount by whatever nam share premium or any such amount by whatever nam share premium or any such amount by whatever name called, any explanation offered by such assessee explanation offered by such assessee-company shall be deemed to company shall be deemed to be not satisfactory, unless be not satisfactory, unless— (a) the person, being a resident in whose name such credit is (a) the person, being a resident in whose name such credit is (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation recorded in the books of such company also offers an explanation recorded in the books of such company also offers an explanation about the nature and s about the nature and source of such sum so credited; and ource of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer (b) such explanation in the opinion of the Assessing Officer (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall Provided further that nothing contained in the first proviso shall Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum refer apply if the person, in whose name the sum referred to therein is red to therein is recorded, is a venture capital fund or a venture caplial company as recorded, is a venture capital fund or a venture caplial company as recorded, is a venture capital fund or a venture caplial company as referred to in clause (23FB)of section 10." n clause (23FB)of section 10." In view of the above discussion, as the assessee could not In view of the above discussion, as the assessee could not In view of the above discussion, as the assessee could not providereasonable explanation to the aforementioned bad debt loan providereasonable explanation to the aforementioned bad debt loan providereasonable explanation to the aforementioned bad debt loan funds, therefore, the said credit entries in the books. of accounts funds, therefore, the said credit entries in the books. of accounts funds, therefore, the said credit entries in the books. of accounts remained unexplained, Hence, the difference in bad debt loan funds remained unexplained, Hence, the difference in bad debt loan funds remained unexplained, Hence, the difference in bad debt loan funds of Rs. 4,31.805/ of Rs. 4,31.805/-[Rs.29,00,000/07 Rs: 24,68,195/- - ] are being treated as unexplained cash credit u/s 68 of the Act and ad treated as unexplained cash credit u/s 68 of the Act and ad treated as unexplained cash credit u/s 68 of the Act and added to the income of the assessee. the income of the assessee. (Addition: Rs.4,31,805/ Rs.4,31,805/-)”
The assessee has preferred the present appeal before us. At The assessee has preferred the present appeal before us. At The assessee has preferred the present appeal before us. At the outset, the Ld. counsel for the assessee submitted that there is the outset, the Ld. counsel for the assessee submitted that there is the outset, the Ld. counsel for the assessee submitted that there is a delay of 150 days in filing the appeal. A petition for condonation a delay of 150 days in filing the appeal. A petition for condonation a delay of 150 days in filing the appeal. A petition for condonation of delay along with an affidavit has been filed, explaining that the of delay along with an affidavit has been filed, explainin of delay along with an affidavit has been filed, explainin order of the Ld. CIT(A) was served only through the Income-tax order of the Ld. CIT(A) was served only through the Income order of the Ld. CIT(A) was served only through the Income portal, and no physical copy was dispatched. The assessee, being portal, and no physical copy was dispatched. The assessee, being portal, and no physical copy was dispatched. The assessee, being unaware of the change in the mode of service, became aware of the unaware of the change in the mode of service, became aware of the unaware of the change in the mode of service, became aware of the appellate order only upon receipt of a penalty show appellate order only upon receipt of a penalty show- -cause notice. It was contended that the delay was neither deliberate nor intentional was contended that the delay was neither deliberate nor intentional was contended that the delay was neither deliberate nor intentional but occasioned due to the changed procedure of communication of but occasioned due to the changed procedure of communication of but occasioned due to the changed procedure of communication of orders. orders. orders. The The The Ld. Ld. Ld. Departmental Departmental Departmental Representative Representative Representative opposed opposed opposed the the the condonation of delay. condonation of delay.
4.1 We have considered rival We have considered rival submissions on this issue. In our submissions on this issue. In our considered opinion, the explanation tendered by the assessee considered opinion, the explanation tendered by the assessee considered opinion, the explanation tendered by the assessee constitutes “sufficient cause” within the meaning of section 5 of the constitutes “sufficient cause” within the meaning of section 5 of the constitutes “sufficient cause” within the meaning of section 5 of the Limitation Act, 1963, as applicable to appellate proceedings under Limitation Act, 1963, as applicable to appellate proceedings under Limitation Act, 1963, as applicable to appellate proceedings under the Act. Accordingly, i the Act. Accordingly, in the interest of substantial justice, the delay n the interest of substantial justice, the delay is condoned, and the appeal is admitted for adjudication on merits. is condoned, and the appeal is admitted for adjudication on merits. is condoned, and the appeal is admitted for adjudication on merits.
On merits, the dispute pertains to the disallowance of On merits, the dispute pertains to the disallowance of On merits, the dispute pertains to the disallowance of commission expenditure of commission expenditure of ₹56,09,642/-. The case of the assessee . The case of the assessee is that its members comprise small vendors and businessmen, and ers comprise small vendors and businessmen, and ers comprise small vendors and businessmen, and in order to recover the loans in order to recover the loans/credit granted to them, the assessee granted to them, the assessee collects daily deposits through appointed agents, to whom the collects daily deposits through appointed agents, to whom the collects daily deposits through appointed agents, to whom the impugned commission has been paid. A list of 17 such agents, the impugned commission has been paid. A list of 17 such agents, the impugned commission has been paid. A list of 17 such agents, the amount of deposits collected, the commission paid, and tax sits collected, the commission paid, and tax sits collected, the commission paid, and tax deducted at source thereon has been furnished before us, which is deducted at source thereon has been furnished before us, which is deducted at source thereon has been furnished before us, which is available on Paper Book page 4. Paper Book page 4. The details reveal commission The details reveal commission payments ranging from a few thousand to several lakhs of rupees , payments ranging from a few thousand to several lakhs of rupees , payments ranging from a few thousand to several lakhs of rupees , against annual collection of the deposits in the range from Rs. ollection of the deposits in the range from Rs. ollection of the deposits in the range from Rs. lakhs to crores. A list of those commission agents A list of those commission agents is is reproduced as under:
SR.f JO IAGENTNAME Address PAN NO COMMISSION TDS 5% Address ANNUAL ANNUAL EARNED @ COLLECTION COLLECTION 3% of DEPOSITS of DEPOSITS 1 BXAPM7598D 5,53,980 5,53,980 16,620 NITESH RAMESH Shakti Niwas Khetwadi 6th Lane MESTRY Room No. 15, first floor, Khetwadi Room No. 15, first floor, Khetwadi Mumbai-400004 Mumbai 2 ASXPN0903E 2,64,58,033 2,64,58,033 7,93,742 1 38,342 SUNITA NAVNATH Mhananda Co Mhananda Co-Op Housing NIPANE Society, B Wing, Yashodhan Society, B Wing, Yashodhan Nagar 3rd Floor, Thane west Nagar 3rd Floor, Thane west 400606 Thane-400606 3 ARCHANA GANESH BAVPD8229C 1,66,58,135 4,99,745 23,866 1,66,58,135 306 H Wing, Shree Ganesh 306 H Wing, Shree Ganesh SURYAVANSHI Residency, Veer Mata Jijae Nagar Residency, Veer Mata Jijae Nagar Moregaon, Nalasopara East Moregaon, Nalasopara East - 401209 401209 4 A00PB4510N 7,18,227 34,085 VILAS NIVRUTI |Sal Wadi, Tell Lane, Transit |Sal Wadi, Tell Lane, Transit BONDRE Camp Number 5, Andheri East Number 5, Andheri East Mumbai- 400093 Mumbai 5 EQGPS7804Q 95,28,625 2,85,857 13,615 ISARIKA SATISH 95,28,625 Laxman Hira Apartment, Room Laxman Hira Apartment, Room SHINDE Number 203, Sector Number 22, Number 203, Sector Number 22, Turbe, Sanpada, Navi Mumbai Turbe, Sanpada, Navi Mumbai 400705 400705 ' 6 BFKPS5528F 5,66,100 16,984 5,66,100 MILIND khetwadi 4th Cross Lane, khetwadi 4th Cross Lane, CHANDRAKANT Chandan Bhuvan, Khetwadi Chandan Bhuvan, Khetwadi SOGAM Mumbai 400004. Mumbai 400004. 7 AQDPB2172K 67,43,440 2,02,303 9,639 SMITA PRAKASH 67,43,440 44 Kabi Bhai Building, Room 44 Kabi Bhai Building, Room BENDRE Number 11, 2nd Floor, Sant Sena Number 11, 2nd Floor, Sant Sena M Marg, 2nd Kumbharwada M Marg, 2nd Kumbharwada Mumbai 400004 Mumbai 400004 8 AUNPS7386L 1,54,79,950 4,64,400 22,371 1,54,79,950 SURESH SHRINAG Room Number 127, Reva Housing Room Number 127, Reva Housing 5HINDKAR Society, 3rd Floor, Karanjale, Navi Society, 3rd Floor, Karanjale, Navi Mumbai, Panvel Mumbai, Panvel 9 AALPY9526E 62,31,000 1,86,930 8,885 62,31,000 (AMAKANT RAJNATH 402 Shri Balaji Krupa Apartment, 402 Shri Balaji Krupa Apartment, ADAV flinnapurna Estate Indralok 6, flinnapurna Estate Indralok 6, 3hayandar East, Thane 401105. 3hayandar East, Thane 401105.
10 DDDPM9033G 2,20,47,495 2,20,47,495 6,61,424 30,757 WSHREE PRASHANT Hanuman Chawl, Pande Hanuman Chawl, Pande f 10RAWALE Compound, toom Number 14, Compound, toom Number 14, Jivalapada Road, Jorivali East, Jivalapada Road, Jorivali East, Mumbai Mumbai 11 AWFPK8025N 1,22,77,190 3,68,316 17,465 4NDANA RUPAJI 1,22,77,190 uithone Chawl, Aliyawar Jung uithone Chawl, Aliyawar Jung KESHVE Marg, Jear Shankar Temple, Marg, Jear Shankar Temple, ShivajiNagar, etaki Pada, Dahisar ShivajiNagar, etaki Pada, Dahisar East, Mumbai 00068 East, Mumbai 00068
BEIPD6085F 99,92,695 2,99,783 14,004 12 99,92,695 JPESH SURESH andurang Wadi, andurang Wadi, Sidhhivainayak DEVGADE P hawl, Mira Palace A Wing 301, hawl, Mira Palace A Wing 301, C Mira oad Thane 401107 Mira oad Thane 401107 R 13 DEAPS9344P 1,88,16,458 5,64,496 25,251 JPALI HANMANT 1,88,16,458 anu Pada, Hanuman Nagar anu Pada, Hanuman Nagar SHINDE Kandivali ast Borivali 400066 Kandivali ast Borivali 400066 14 ROHIT RAMDAS Ganesh Apartment, 4th floor Ganesh Apartment, 4th floor CWRPG6253Q 81,98,330 81,98,330 2,45,950 11,598 GHORPADE Yashodhan Nagar, Thane West Yashodhan Nagar, Thane West 400606 15 RAGINIJAYWANT Ashara Metro Tower 3005, Vartak Ashara Metro Tower 3005, Vartak DXDPS2687J 34,60,200 34,60,200 1,03,807 4,652 SHINDE Nagar Thane West 400606 Nagar Thane West 400606 16 TANAJI MURUDHAR Jadhavaji Yadav Chawl, Room Jadhavaji Yadav Chawl, Room AVUPK1869N 3,00,230 3,00,230 9,007 KOLI number 6/8, Devala Pada, Borivali number 6/8, Devala Pada, Borivali East, Mumbai 400066. East, Mumbai 400066.
17 SACHIN LAXMAN MANE 05 B Sidhhivlnayak Chawl, Data Pada 05 B Sidhhivlnayak Chawl, Data Pada BTKPM6676C 57,35,002 57,35,002 1,72,051 8,602 Road, Borivali East Mumbai 400066 Road, Borivali East Mumbai 400066 Total 18,69,87,743 18,69,87,743 56,09,642 2,63,132 5.2 The assessee produced, for the first time before us, copies of The assessee produced, for the first time before us, copies of The assessee produced, for the first time before us, copies of its bank statements evidencing payment of commission. The Ld. its bank statements evidencing payment of commission. its bank statements evidencing payment of commission. counsel for the assessee referred to said bank statement of the counsel for the assessee referred to said bank statement of the counsel for the assessee referred to said bank statement of the assessee depicting the payment of commission to the agents depicting the payment of commission to the agents depicting the payment of commission to the agents for admission. Since this material was not Since this material was not produced before the lower before the lower authorities, it constitutes additional evidence. authorities, it constitutes additional evidence.
5.3 Further, it has been submitted that the Assessing Officer, in Further, it has been submitted that the Assessing Officer, in Further, it has been submitted that the Assessing Officer, in his show-cause notic cause notice, only questioned the allowability of e, only questioned the allowability of commission payments to non commission payments to non-members by relying upon the members by relying upon the judgment of the Hon’ble Supreme Court in judgment of the Hon’ble Supreme Court in Mavilayi Service Coop. Mavilayi Service Coop. Bank Ltd. & Ors. v. CIT Bank Ltd. & Ors. v. CIT (Civil Appeal Nos. 7343 & 7350 of 2019, (Civil Appeal Nos. 7343 & 7350 of 2019, dated 12.01.2021). However, the fi dated 12.01.2021). However, the final disallowance was made on nal disallowance was made on the ground of lack of supporting documents, without affording the ground of lack of supporting documents, without affording the ground of lack of supporting documents, without affording adequate opportunity to the assessee to substantiate its claim. adequate opportunity to the assessee to substantiate its claim. adequate opportunity to the assessee to substantiate its claim.
5.4 Regarding copy of agreement Regarding copy of agreement with the commission agents with the commission agents , the Ld. counsel for the assessee submitt Ld. counsel for the assessee submitted that no such agreement ed that no such agreements were entered into in writing and therefore, the assessee was willing were entered into in writing and therefore, the assessee was willing were entered into in writing and therefore, the assessee was willing to produce all the commission agents before the Assessing Officer to produce all the commission agents before the Assessing Officer to produce all the commission agents before the Assessing Officer for verification of claim of the services rendered by them along with for verification of claim of the services rendered by them along with for verification of claim of the services rendered by them along with necessary evidence there necessary evidence thereof 5.5 The Ld. counsel has given an undertaking that, if the matter is The Ld. counsel has given an undertaking that, if the matter is The Ld. counsel has given an undertaking that, if the matter is restored, the assessee shall produce the concerned commission restored, the assessee shall produce the concerned commission restored, the assessee shall produce the concerned commission agents before the Assessing Officer for verification of the agents before the Assessing Officer for verification of the agents before the Assessing Officer for verification of the genuineness of services rendered and the payments made. genuineness of services rendered and the payments made. genuineness of services rendered and the payments made.
5.6 In view of the foregoing, and having regard to the fact that the In view of the foregoing, and having regard to the fact that the In view of the foregoing, and having regard to the fact that the assessee has now produced bank statements for the first time as assessee has now produced bank statements for the first time assessee has now produced bank statements for the first time additional evidence and has undertaken to produce the agents for and has undertaken to produce the agents for and has undertaken to produce the agents for verification, we are of the considered opinion that the matter verification, we are of the considered opinion that the matter verification, we are of the considered opinion that the matter requires fresh examination. In the interest of justice, we set aside requires fresh examination. In the interest of justice, we set aside requires fresh examination. In the interest of justice, we set aside the orders of the lower authorities and restore the issue to the file of the orders of the lower authorities and restore the issue to the file of the orders of the lower authorities and restore the issue to the file of the Assessing Officer, who shall verify the genuineness of the the Assessing Officer, who shall verify the genuineness of the the Assessing Officer, who shall verify the genuineness of the commission payments, after affording adequate opportunity of commission payments, after affording adequate oppo commission payments, after affording adequate oppo hearing to the assessee. The assessee shall cooperate fully and hearing to the assessee. The assessee shall cooperate fully and hearing to the assessee. The assessee shall cooperate fully and produce the agents as undertaken. produce the agents as undertaken. The ground raised by the The ground raised by the assessee on merit is accordingly allowed for statistical purposes. is accordingly allowed for statistical purposes. is accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowe In the result, the appeal of the assessee is allowe In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court. Order pronounced in the open Court.