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Facts
The assessee, engaged in trading medical goods, appealed against the disallowance of commission expenses for AY 2013-14. The AO observed a significant increase in commission expenses compared to the previous year, disallowing a portion as bogus. The CIT(A) not only affirmed the disallowance but also enhanced the income, holding the expenses bogus due to non-compliance with summons u/s 131 and notices u/s 133(6).
Held
The tribunal held that the commission payments were a regular business practice, made through banking channels, subjected to TDS, and supported by invoices. It ruled that the genuineness of these transactions could not be doubted solely based on increased percentage or non-compliance with summons, especially when evidence was submitted. Consequently, the appellate order was set aside, and the AO was directed to delete the addition.
Key Issues
Whether the disallowance and enhancement of income on account of alleged bogus commission expenses were justified.
Sections Cited
143(1), 143(2), 142(1), 131, 133(6)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 21.06.2024 for the AY 2013-14.
The issue raised in ground no.1 is general in nature and does not require any specific adjudication.
The issue raised in ground Nos.2,3 and 4 is against the order of ld. AO confirming the addition on account of bogus commission expenses amounting to ₹67,98,098/- and further enhancing the income by ₹66,84,362/- on account of bogus commission expenses.
In the appellate proceedings, the ld. CIT (A) not only affirmed the order of the ld. AO, but also enhanced the income of the assessee by making further disallowance and made enhancement to income by ₹66,84,362/- on account of bogus commission expenses. The ld. CIT (A) also called for the remand report from the ld. AO which was duly furnished by the AO before the ld. CIT (A). The ld. CIT (A) held that the commission expenses were bogus as summons u/s 131 and letters issued u/s 133(6) of the Act were not complied with and hence, commissions were bogus.
After hearing the rival contentions and perusing the materials available on record, we find that the assessee is engaged in the business of trading of medical goods and equipments for the last several years and it was regular phenomenon to pay the commission for procuring the sales through agents and hence, commission was paid to these parties. The sale commission was paid for securing the orders and supply of medical equipments in the hospitals and various
In the result, the appeal of the assesseeis allowed.
Order pronounced in the open court on 25.03.2025.