MR. GURPREET SINGH,NEW DELHI vs. ACIT, NEW DELHI

The appellant, Shri Gurpreet Singh (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 31.03.2015 passed by Ld. CIT (Appeals)-18, New Delhi qua the assessment year 2011-12 on the grounds inter alia that :- “1. On the facts and circumstances of the case, the order passed by the ld. CIT (Appeals) is bad & erroneous in law.

Briefly stated the facts necessary for adjudication of the controversy at hand are : The assessee is into mutual fund distribution; distributing insurance and postal/Government product and scheme; and investing in mutual funds, filed return of income at the income of Rs.38,91,330/-. From P&L account, AO noticed that an amount of Rs.83,38,000/- have been debited as an expenditure on account of further payment of commission paid to the sub-broker on sale of financial products. In order to verify the payment of commission paid by the assessee, a list of recipient of commission has been provided by the assessee to whom notices u/s 133 (6) of the Income-tax Act, 1961 (for short ‘the Act’) were issued who have stated to have received the commission from assessee more than Rs.1,00,000/-. During assessment proceedings, notice u/s 133 (6) of the Act has been issued to 24 persons who have furnished confirmations. AO finding discrepancies in the confirmations received from the recipients of the commission proceeded to conclude that the confirmations/replies have not been signed by the original recipients and the assessee has failed to prove the genuineness of the commission paid and thereby disallowed the claim of commission to the extent of Rs.42,76,991/- to the total income of the assessee.

Assessee carried the matter by way of appeal before the ld. CIT (A) who has confirmed the addition by dismissing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

Undisputedly, during the appellate proceedings, remand report was called and it is also not in dispute that AO made addition of Rs.42,76,991/- on account of unverified commission due to numerous discrepancies in the confirmation/replies received. It is also not in dispute that during remand proceedings, out of 17 contentious recipients of the commission only four, namely, Rakesh Gupta, Mukesh Kumar Gupta HUF, Naveen Kumar Sharma and Deepali Gupta were produced and they have brought on record bank pass book, ITR, computation etc.

However, we are of the considered view that when the AO has made a detailed enquiry to prove the genuineness and existence of the recipients of the commission by issuing a notice u/s 133 (6) of the Act at that point of time, assessee has failed to discharge the onus. When the huge commission is being paid to the various persons, all of them were required to be produced before the AO. However, commission paid to four persons, namely, Rakesh Gupta, Mukesh Kumar Gupta HUF, Naveen Kumar Sharma and Deepali Gupta is allowable business expenditure and to that extent order of AO/CIT(A) is reversed.

However, we are of the considered view that since the issue in question has not been appreciated in the right perspective during the appellate proceedings, the same is required to be remanded back to the AO to decide afresh after providing an opportunity of being heard to the assessee. Assessee shall get the verification, genuineness and existence of the recipients of the commission before AO done and if satisfied, no disallowance shall be made. 8. Resultantly, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in open court on this 23rd day of October, 2018.