SHREE KRISHNA DEVELOPERS,DHULE vs. ITO, WARD 2, DHULE, DHULE

This appeal by the assessee pertaining to Assessment Year 2016-17 is directed against the order dated 07.12.2023 passed by CIT(A), National Faceless Appeal Centre, Delhi (NFAC) u/s 250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) which in turn is arising out of the Assessment Order passed u/s.143(3) dated 31.12.2018.

The Assessee has raised following grounds of appeal:- 1] The learned CIT(A) erred in confirming the disallowance of Rs. 67,50,000 towards commission paid in relation to contract executed by the appellant on the ground that the appellant was not able to prove the business expediency in making the above commission payment without appreciating that the said disallowance was not justified on facts and in law. 2] The learned CIT(A) failed to appreciate that the impugned payment of Rs.67,50,000 was bound to make the above payment as a condition to obtain the contract work from M/s. Shree Krupa Group and Construction and therefore, there was no reason to disallow the said payment TDS and which was also offered to tax in hands of the recipients. 3] The learned CIT(A) ought to have appreciated that the payees were third parties and were not in any way related to the appellant u/s 40А(2) ог otherwise, and therefore, the question of making the said payments as part of tax planning device as alleged by A.O. did not arise at all in absence of any material on record to show that the said payments were received back by the appellant. 4] The learned CIT(A) erred in not appreciating that the A.O. could not sit in the armchair of businessman and dictate terms of business to the appellant and once the genuineness of the said payment made through banking channel was proved, then the said payment could not have been disallowed merely by judging the business propriety of the said payment. The appellant craves leave to add/ alter/ amend any of the grounds of appeal. 5]

Facts in brief relating to the issue raised in the instant appeal regarding disallowing of the commission expenditure of Rs. 67,50,000/- is that assessee is a Partnership Firm and in the profit and loss account for A.Y. 2016-17 it has claimed commission expense of Rs. 67,50,000/- paid to nine HUF parties. The Assessing Officer while carrying out the limited scrutiny for A.Y. 2016-17 did not allow the claim of commission expense for want of necessary details and also observing that the commission paid is almost 50% of the contract receipts, Ld. AO added the alleged commission expenditure to the income of assessee against which assessee went in appeal before Ld. CIT(A) but failed to succeed. Now the assessee is in appeal before this Tribunal alongwith placing additional evidence and requesting false setting aside the issue to lower authorities.

On the other hand Ld. DR supported the order of lower authorities but did not object to the admission of additional evidence.

However, for the commission service rendered by the nine HUF no details of proof of service rendered by Karta of HUF were given. Even the name of Karta was also not given. The assessee had failed to prove the genuineness of commission expenditure before the lower authorities for want of necessary details. Before us the assessee has filed an application for admission of additional evidence which are placed in the paper book at page No. 1-22 containing the details of Karta of HUF, confirmation letters, agreement dated 15.05.2015 between assessee firm and Narayani Family Members.

Since the additional evidence goes to the root cause of the impugned disallowance, under the given facts and circumstances and that the Ld. DR having no objection to the admission of additional evidence, deem it proper to restore the issue on merit about alleged commission expense of Rs. 67,50,000/- to the file of Ld. Jurisdictional Officer to examine the veracity of additional evidence and then decide the issue in accordance with law. Ld. Jurisdictional Assessing Officer shall afford reasonable opportunity of hearing to the assessee. Further the assessee is directed to place necessary details on the date of hearing and should not take unnecessary adjournment unless otherwise required for reasonable clause. Assessee is also directed to ensure that its correct email address and Mobile No. are updated on the Income Tax Website (In case they are changed). Effective grounds of appeal are allowed for statistical purposes.

In the result appeal of the assessee is allowed for statistical purposes.