DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), VADODARA, RACE COURSE CIRLCE, VADODARA vs. EPIGRAL LIMITED, NARMADA
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD “B” BENCH
Before: Shri T.R. Senthil Kumar, Judicial Member And Shri Narendra Prasad Sinha, Accountant Member
Deputy Commissioner of Income Tax,
Circle-2(1)(1),
CH-1, Ch-2, GIDC
Industrial Estate,
Dahej, SO, Bharuch,
Narmada-392130,
Bharuch,
Gujarat-392130
PAN: AAFCM2288N
(Respondent)
Revenue Represented: Shri Abhijit, Sr.D.R.
Assessee Represented: Shri Bandish Soparkar, A.R.
Date of hearing
: 19-11-2025
Date of pronouncement : 16-12-2025
आदेश/ORDER
PER: T.R. SENTHIL KUMAR, JUDICIAL MEMBER
This appeal is filed by the Revenue as against the appellate order dated 20.03.2025 passed by the Addl. Commissioner of Income Tax/JCIT (Appeals), Bhubaneswar arising out of the assessment order passed under section 143(3) of the Income Tax
Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2011-12. ITA No: 1206/Ahd/2025
Assessment Year: 2011-12
I.T.A No. 1206/Ahd/2025 A.Y. 2011-12 Page No DCIT Vs. Epigral Limited
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2. Brief facts of the case is that the assessee is a company engaged in manufacture of basic and fine chemicals. For the Asst. Year
2011-12, assessee filed its Return of Income declaring total loss of Rs.34,26,57,814/-. The return was processed u/s. 143(1) on 27-
01-2012 and then selected for scrutiny assessment.
1. On verification of the profit & loss account, the Assessing Officer noticed that the assessee has debited Rs. 1,88,37,071/- on account of sales commission. The assessee was asked to furnish details of selling and distribution expenses of Rs.321.31 lakhs, nature of expenses and ledger copy of each head of expenses. The assessee filed copy of the ledger account without furnishing the nature being purpose of expenses. The assessing officer found that similar commission expenses were disallowed for the earlier Asst. Year 2010-11, thereby disallowed Rs.1,88,37,071/- for the present assessment year and demanded tax thereon.
Aggrieved against the assessment order, the assessee filed an appeal before CIT(A), who held that the principle of res judicata is not applicable in tax cases. However deleted the additions made by the A.O. by observing as follows:
“4.2.2 During the appellate proceedings the assessee has submitted the breakup of the expenses along with the details of the quantity of products sold against which commission is paid and the details of service tax. The assessee further submitted that the same was submitted on 14-3-2014
during the assessment proceedings also. Based on the discussion above it is held that the addition has been made without due verification and opportunity provided to the appellant and hence held as arbitrary and deleted. These grounds are allowed.”
I.T.A No. 1206/Ahd/2025 A.Y. 2011-12 Page No DCIT Vs. Epigral Limited
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4. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal:
(1) On the facts and in the circumstances of the case and in law, the Ld.Addl/JCIT(A) erred in deleting the disallowance of Sales Commission expenses of Rs.1,88,37,071/-made by the AO, without appreciating the fact that the assessee failed to prove with documentary evidences that the expenses claimed were related to its business and the parties have actually provided/rendered some services to the assessee for which the payment was made.
(ii) The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.
Ld. Sr. D.R. appearing for the Revenue in support of its grounds of appeal submitted that the Addl. CIT(A) erred in deleting the disallowance of commission expenses without verifying the documentary evidences of the commission expenses claimed by the assessee, therefore requested to uphold the disallowance.
Per contra, Ld. Counsel appearing for the assessee submitted before us a Paper Book which contains the reply filed by the assessee during the course of assessment proceedings vide letter dated 18-12-2013 and 14-03-2014 wherein details of commission paid to the dealers with party-wise break up comprising of Name, Address, PAN, amount paid and TDS deducted thereon as Annexure-1. The assessee also submitted the vendor ledgers for verification, the same is available at Page No. 7 to 50 of the Paper Book filed by the assessee. Further at Page No. 64 to 66 party-wise sales and purchase also furnished by the assessee. Thus Ld. Counsel submitted that the Ld. CIT(A) is correct in deleting the addition made by the assessing officer which does not require any interference.
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7. We have given our thoughtful consideration and perused the materials available on record. It is undisputed fact that the assessee vide his reply dated 14-03-2014 given sales commission alongwith party-wise breakup comprising of Name, Address, PAN, amount paid and TDS deducted before the assessing officer.
Further perusal of the profit and loss account, similar claim of commission expenses of Rs.1,06,40,345/- relating to the earlier assessment year. It is further claimed by the assessee that the chemicals namely Chlor-Alkali Products are predominantly dealer oriented and traded commodity products which are consumed almost in all manufacturing segments in small or large quantity.
The payment cycle of different consuming segments are varying from 60 to 120 days, in some other cases like Agro Segment, it may be also more. Therefore with a view to safeguard exposure, to recover payment in tandem with planned cash flow, the industry as a whole is operating through strong dealership network on Pan
India basis. In addition to this, value added services like transportation of liquid and hazardous product is a major task, which is arranged by the dealers. Thus the dealers are rendering after sales services and keep watch on credit worthiness of ultimate customers. Further storage is also matter of concern and governed by statutory restrictions, hence Dealers also keep storage in their premises/depot to meet urgent requirement of customers. Looking to all the above dynamics of the Chlor-Alkali business, the assessee has availed the services of the dealers which is beneficial to it by safeguarding payment, long term customer relationship by way of taking care of after sale services. Thus when every details have been furnished by the assessee, before the assessing officer without
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making any verification or cross checking of the dealers when the commission payments made through TDS and banking channel.
Thus the assessing officer is not justified in making the addition.
Therefore we do not find any infirmity in the order passed by the Addl. CIT(A) deleting the addition made by the A.O. Thus the ground raised by the Revenue are devoid of merits and liable to be rejected.
In the result, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 16 -12-2025 (NARENDRA PRASAD SINHA) (T.R. SENTHIL KUMAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad : Dated 16/12/2025
आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:-
1. Assessee
Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार
आयकर अपीलȣय अͬधकरण,
अहमदाबाद