NOTIONAL CHITS & LOANS PVT LTD,THRISSUR vs. ITO WARD 1(1), TRICHUR

Brief facts of the case are that the assessee is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of conducting chits in Thrissur District. The return of income for AY 2018-19 was filed declaring total income of Rs. 4,50,625/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1(1), Thrissur (hereinafter called "the AO") vide order dated 05.03.2021 passed u/s. 143(3) r.w.s Notional Chits & Loans Pvt. Ltd. 143(3A) & 143(3B) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 49,67,470/-. While doing so, the AO disallowed the commission payment of Rs. 45,16,845/- for the failure of the assessee to substantiate that the expenditure was occurred for business purposes. On appeal before the CIT(A), the CIT(A) allowed 10% of the expenditure of commission paid of Rs. 4,51,684/- and the balance addition of Rs.40,65,160/- was confirmed.

Being aggrieved, the appellant is in appeal before the Tribunal in the present appeal.

When the appeal was called on, nobody appeared on behalf of the assessee despite due service of notice of hearing. Therefore, I proceeded to dispose of the appeal after hearing the learned Sr. DR.

The issue in the present appeal relates to allowability of commission expenditure incurred in conducting the chit business. Form the material on record it is clear that the appellant paid commission of Rs. 46,33,370/-. The appellant earned gross commission of Rs.82,07,425/- during the previous year relevant to the assessment year under consideration, against which the appellant had paid a commission of Rs. 46,33,370/-, which is unreasonably high. A perusal of the orders of the lower authorities clearly shows that the appellant had failed to give party- wise details, to whom the commission is paid, etc. and also failed to substantiate the reasonableness of the commission paid. The CIT(A) rightly allowed 10% of the commission expenditure. The order of the CIT(A) is reasonable and speaking one, requires no interference by this Tribunal.