SRI SHYAMBABA ELECTRONIC PVT LTD,HYDERABAD vs. DCIT., CIRCLE-3(1), HYDERABAD

5 ITA.No.453/Hyd./2024 be remanded to the record of the Assessing Officer for proper verification and examination of the relevant record.

5. We have considered the rival submissions as well as the relevant material on record. The assessee is a Private Limited Company engaged in the business of trading of mobile phones, mobile accessories and electronic goods. The assessee filed its return of income for the year under consideration on 17.01.2022 declaring total income of Rs.76,20,250/-. The assessment was completed on 23.12.2022 u/sec.143(3) r.w.s.144B of the Income Tax Act, 1961 [in short "the Act"] whereby the Assessing Officer has made various disallowances including the disallowance on account of commission payment, disallowance of purchases, and disallowance of credit card payments, the details of which are given in para-6 of the assessment order as under:

Sl.No. Description Amount in Rs. Amount in Rs. Income as per the Return of income filed/Income as 76,20,250 computed u/s 143(1)(a) Variations made Variation in respect of issue 1. 46,15,226 discussed in para 4.1

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Variation in respect of issue 3. discussed in para 4.3 51,000 50% of the donation (Rs.25,500/-) is considered in Chapter-VIA

Variation in respect of issue 4. 77,86,411 discussed in para 4.4 Total of variations made 3,71,40,772 Total income determined as 4,47,61,022 per the above proposal.

5.1. Thus, the Assessing Officer made three disallowances in respect of the expenditure incurred by the assessee for purchase commission paid and credit card payment which was challenged by the assessee before the learned CIT(A) by raising the grounds as under :

1. “That on the facts and circumstances of the case the order of Learned. AO is bad in law and the A.O has erred in disallowing entire commission expenses of Rs.45,15,226/- 2. That on the facts and circumstances of the case the order of Learned. A.O is bad in law and the A. O has erred in disallowing Purchases of Rs.45,15,226/- 3. That on the facts and circumstances of the case the order of Learned. A.O is bad in law and the A.O has erred in disallowing the payments for business expenditure of Rs.77,86,411/-made through credit card. 4. That the Learned A.O. has erred on facts and in law in completing the assessment on the basis of assumptions and surmises and totally ignoring the facts in case.

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6. That the appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing.”

5.2. As it is manifest from these grounds raised by the assessee that the amount of disallowance on account of commission expenses as well as on account of purchases was mentioned in the ground nos.1 and 2 is identical. Therefore, there is an apparent mistake in these grounds as the disallowance for purchases was made by the Assessing Officer to the tune of Rs.2,46,88,135/-, but, mistakenly the assessee has stated in the ground no.2 the said amount as Rs.45,15,226/- which is in fact disallowances made by the Assessing Officer on account of commission expenses. The learned CIT(A) has not adjudicated this ground no.2 of the assessee’s appeal and has decided only the ground no.1 and ground no.3 while passing the impugned order. It is pertinent to note that the learned CIT(A) has reproduced the submissions of the assessee from pages 10 to 23 of the impugned order wherein the assessee has specifically

8 ITA.No.453/Hyd./2024 mentioned the correct amount of disallowance made by the Assessing Officer on account of purchases giving all the details at pages 17 and 18 as under :

“(b) Ground of Appeal : Addition of Rs.2,46,88,135/- on account of alleged ingenuine purchases. Our Submission: The appellant Sri Shyambaba electronics Pvt Ltd. have made purchases from the following mentioned parties as under :

9 ITA.No.453/Hyd./2024 5.3. Apart from giving the correct details and amount of disallowance, the assessee has also submitted the detailed arguments before the learned CIT(A) against ground no.2 in respect of disallowance of purchases. However, the learned CIT(A) has decided only ground no.1 in para-8.1.1 and 8.1.2 as under :

“8.1.1. The AO, after examining the submissions of the assessee was of the view that from the above commission invoices, it was noticed that all the invoices were prepared with same serial number 1 and on the same date i.e 31-03-2021 and no signature. Also, no details of sales on which the commission was paid/ accrued and the details of delivery note etc. were mentioned. Also, said commission payments were not subjected to GST as well. Further, on verification of bank accounts of the assessee it was noticed, that the payments were made well before the date of invoice ie. 31-03-2021 and no payment was made to S.No. 1 (Rajamalla Abhishek) and 6 (Srikantha). Further on verification of the information available with the department, out of these 6 parties, Rajamalla Abhishek, Srikantha and Irshad had not filed their return of income. Thus, the AO was of the view that the assessee had failed to establish that the payment of commissions was incurred wholly and exclusively for the purposes of business. Accordingly, the commission expenditure Rs.46,15,226/- was disallowed by the AO as proposed in the show cause notice.

8.2. It is therefore, clear that the assessee had failed to establish the genuineness of expenses of commission expenditure

10 ITA.No.453/Hyd./2024 and failed to explain on what account commission had been paid and as to how the assessee's business had benefitted by paying the commission. Merely proving the payment and making the TDS, the payment does not become genuine. The assessee has to establish that it was incurred for the purpose of the business of the assessee. By not doing so the assessee cannot debit the amounts in the P&L account. Therefore the disallowance of commission expenditure Rs.46,15,226/-made by the AO is confirmed. Hence, the grounds of appeal No. 1 & 2 are Dismissed.”

5.4. Thus, the only issue as involved in ground no.1 was decided by the learned CIT(A), whereas in the conclusion it is stated that the grounds of appeal nos.1 and 2 are dismissed. Therefore, it is apparent from the impugned order that the learned CIT(A) has not adjudicated the issue raised by the assessee in ground no.2. Since the assessee has filed voluminous supporting evidences running into about 560 pages and the learned CIT(A) has not adjudicated the main issue of genuineness of the purchases of the assessee, then, in the facts and circumstances of the case and in the interest of justice, the impugned order of the learned CIT(A) is set-aside and the matter is remanded to the record Assessing Officer for proper verification and 11. ITA.No.453/Hyd./2024 examination of the relevant record filed by the assessee and then, adjudicate these issues as raised in the appeal as per law. Needless to say, the assessee be given reasonable opportunity of hearing before passing the fresh order.

Order pronounced in the open Court on 15th October, 2025.