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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI BHAGIRATH MAL BIYANI & SHRI PARESH M. JOSHI
आदेश / O R D E R
Per Paresh M Joshi, J.M.:
This is an appeal filed by the assessee Under Section 253 of the Income Tax Act, 1961 (hereinafter referred to as the “Act” for sake of brevity) before this Tribunal. The assessee is aggrieved by the order bearing Number ITBA/APL/S/250/2024- 25/1069740579(1) dated 17.10.2024 passed by the Ld. CIT(A) u/s 250 of the Act which is hereinafter referred to as the “Impugned order”. The relevant Assessment Year is 2016-17
Page 1 of 9 31.03.2016.
FACTUAL MATRIX 2.1 That as and by way of an assessment order made u/s 143 of the Act, the total income of the assessee was computed and assessed at Rs.13,00,722/-. The return of income was at Rs.4,41,660/-. Addition of Rs.8,59,062/- was made on the ground that this amount was expended by the assessee on certain persons and no work was done by these persons. That the aforesaid assessment order bears No.ITBA/AST/S/143(3)/2018- 19/1014127924(1) and that same is dated 08.12.2018 which is hereinafter referred to as the “impugned assessment order”.
2.2 That the assessee being aggrieved by the aforesaid “Impugned Assessment Order” prefers the first appeal u/s 246A of the Act before the Ld. CIT(A) who by the “Impugned Order” has dismissed the 1st appeal of the assessee on the grounds and reasons stated therein. The core ground and reason for dismissal of 1st appeal was as under:-
“4.2 Reply filed by the appellant has been considered by me. On the one hand the appellant has said that all the details have been filed but on the ITBA system no such details are available. It appears that proceedings u/s 263 were also going on Page 2 of 9 A.Y. 2016-17 simultaneously and the appellant might have filed certain documents with the concerned PCIT regarding proceedings u/s 263, but no details are available on ITBA system with respect to the appeal proceedings. Notice u/s 250 were issued to the appellant time and again and he was requested to file the necessary documents but rather than filing the related documents he has expressed his grievance.
4.3 For any expenditure to be allowed as eligible business expenditure, it is duly of the appellant or an assessee to prove that the expenditure was incurred wholly and exclusive for the purpose of the business. The so called commission paid to various people, admittedly have been paid through banking channel, as stated by the appellant but it itself does not per se establish that it was paid for the purpose of the business. The assessee must explain the purpose for which the commission was paid.
4,4 The assessing officer has recorded the statement of the assessee and he has voluntarily replied to these queries and nowhere in his replies he has informed about the purpose which could be said to be expansion of business and procurement of business. A bare reading of the reply reproduced in assessment order implies that it was paid to facilitate sanctioning of loans or to fast track the sanctioning of loans. During the course sof appellate proceedings, the appellant has not controverted the replies given by him before the assessing officer during the assessment proceedings. The appellant has not filed even a single conformation from these person, to whom the commission was allegedly paid, wherein they could conform the service rendered by them for getting such commission.
4.5 In absence any documentary evidence explaining the purpose, beyond doubt, for which commission has been paid. I am inclined to accept the order of assessing officer and appeal filed by the appellant is hereby dismissed.
5. In view of the above, the appeal is dismissed”.
2.3 That the assessee being aggrieved by the aforesaid “Impugned Order” has preferred the instant second appeal before this Tribunal and has raised following grounds of appeal
Page 3 of 9 under:-
“1. That the Ld. A.O erred in assessing the total income of Rs.13,00,722/- and the Ld. CIT(A) committed a grave error of law in confirming the same.
2. That the Ld. A.O further erred in making an addition of Rs.8,59,062/- as per para 5 of the assessment order. The perusal of the assessment order reveals that, there is no para 5 in the assessment order. This action of Ld. Assessing Officer has also been confirmed by the CIT(A) Faceless Office, New Delhi, which is not fair and proper.
3. That the Ld. A.O has been wrong and unjustified in disallowing commission paid to 9 perons, the appellant reached to the Office of Assessing Officer along with the confirmation letters of 9 persons but the Ld. Assessing Officer did not accept them and rather did not take the same on record. The action of Ld. Assessing Officer has been confirmed by CIT(A), Faceless Office, New Delhi which is not proper.
4. That the Ld. A.O further erred in considering the written submission filed by the appellant from time to time during the course of assessment proceedings and the Ld. CIT(A) Faceless Office, New Delhi did not take the congnizance of the same.
5. The Ld. CIT(A), New Delhi has committed a grave mistake of law and facts in giving the finding that the appellant might have filed the documents during the course of 263 proceedings. Thus action of Hon’ble CIT(A) is not proper, he should have called the relevant papers from Shri Shelvy Jindal in who’s office 263 proceedings were going on, an innocement assessee should not put to loss like this.
That the Ld. CIT(A) dismissed the appeal giving 5 para’s of his finding.
That, the Ld. Assessing Officer erred in not understanding the provision of Section 37. Section 37 is regarding business expenditure, when the assessee derives income from business, the commission has also been paid from the business income and it is a judicial dishonesty to make an addition of Rs.8,59,062/- on account of commission paid to 9 persons.
Page 4 of 9 A.Y. 2016-17 8. That, the Ld. Assessing Officer disallowed the commission paid without giving the proper opportunity of hearing. While deciding the appeal order of Assessing Officer is before CIT(A), New Delhi and therefore inspite of taking advantage of innocent assessee, is not fair and proper. This action of CIT(A) has been done without giving the fair opportunity of hearing.
That the Ld. Assessing Officer committed a great mistake of law in not issuing ITNS 150 and not issuing notice of demand to the appellant.
That, the appellant craves leave to amend, alter, add or withdraw any of the above grounds before or at the time of hearing of the case. NOTE: The brief facts of the case have been given on a separate annexure which is the part of this appeal”.
Record of Hearing 3.1 That the hearing in the matter took place before this Tribunal on 19.08.2025 when the Ld. AR for and on behalf of the assessee contended that the assessee is an individual and that he had filed his Income Tax Return for Rs.4,41,660/-. The assessee has business income and income by way of commission income. It was contended that the commission income of the assessee was Rs.22,86,563/- whereas he had debited expenses as “commission to others” of Rs.16,20,323/-. Out of this, expenses of Rs.16,20,323/-, an amount of Rs.8,59,062/- was disallowed by the Ld. Assessing Officer and consequential addition was made on returned income. It was next contended that the assessee is in the business of arranging vehicle finance
Page 5 of 9 hence his income is from commission so received from these companies. The assessee simultaneously in order to promote his business of “arranging vehicle finances” pays commission to certain persons (who are employed by companies which give loans on vehicles). During the course of the assessment proceedings the assessee statement was recorded wherein he was questioned about nature of expenses of Rs.16,20,323/- which was shown in profit and loss account as “commission to other”.
The assessee had replied that this amount was paid in different tranches to few persons (supra) who are manager or directors in their respective financial companies. These persons can not directly receive commission from their finance companies on loans, as loans are directly sanctioned from their companies.
These persons therefore had shown loans sanctioned through assessee’s firm “infinity service” in their respective companies and provided commission to the assessee. The commission received on loans had been returned back to their accounts, the same was debited to profit and loss account as expenses namely “commission to others”. Save and except this activity these
Page 6 of 9 that there was no agreement with such other persons and commission was given on mutual understanding basis. The Ld.
Assessing Officer in his “impugned assessment order” has quantified an amount of Rs.8,59,062/- which were paid to certain persons (Name stated in the “impugned assessment order” internal page 4) in different tranches who had in fact not done any work and services to the assessee. The Ld. A.O concluded that assessee had made these payment as commission expenses returned back to certain person on basis of income received from their companies as commission income and for which no work was done by these persons totalling to Rs.8,59,062/-. The Ld.AO finally disallowed this amount as not eligible expenses incurred wholly or exclusively for purpose of business by virtue of Section 37 of the Act.
3.2 In so far as the “impugned order” is concerned the Ld. AR stated that on paper book pages 64 to 123 he has enclosed 9 confirmations which can be verified by the Ld. A.O now. He prayed for remand of the case back to Ld.AO. Per contra the Ld. DR stated that fresh material is placed before this Tribunal as Page 7 of 9 equitable that matter be remanded back to the file of Ld. Assessing Officer for verification of confirmation letters. The Ld. DR suggested that matter should be remanded to JAO.
Observations & findings & conclusions 4.1 We now have to decide the legality, validity and proprietary of the “impugned order” basis records of the case and the contentions canvassed before us.
4.2 We have carefully perused the records of the case.
4.3 We basis records of the case and after hearing and upon examining the contentions are of the considered view that since assessee as and by way of a paper book pages 1 to 147 particularly pages 64 to 123 which are 9 confirmations of persons to whom commission was paid by the assessee it would be in the fitness of things that Ld. A.O verify these confirmations after conducting an inquiry. Therefore we set aside the “Impugned Order” and remand case back to the file of Jurisdictional Assessing Officer (JAO) who shall verify these confirmation letters according to law and thereafter shall pass a speaking order on Page 8 of 9 mind judiciously and pass a reasoned order.
Order 5.1 In result, the “Impugned Order” is set aside as and by way of remand back to Jurisdictional Assessing Officer (JAO) on denovo basis with directions as aforesaid.
5.2 The appeal of the assessee is allowed for statistical purpose.
Order pronounced in open court on 22.08.2025.