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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy
Appearances by: Sh. S.M.Surana, Adv., appeared on behalf of the Assessee. Sh. Jayanta Khanna, JCIT, Sr. DR, appeared on behalf of the Revenue. Date of concluding the hearing : September 23rd, 2019 Date of pronouncing the order : October 18th, 2019 ORDER Per J. Sudhakar Reddy, AM :- This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-13, Kolkata (‘CIT(A)’ for short) dated 06.09.2018 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’ for short).
The appeal has been filed by one day delay. The same is condoned.
The assessee is an individual and is engaged in the business of trading in water proof clothes. He filed his return of income for Assessment Year (‘AY’ for short)-2013- 14 on 28.09.2013 declaring total income of Rs. 4,65,240/-. The Assessing Officer (‘AO’ for short) completed assessment u/s 143(3) of the Act on 22.02.2016 declaring the total income at Rs. 25,85,987/-, inter alia disallowing the claim of commission expenses of Rs. 19,97,878/-. On appeal the ld. first appellate authority confirmed the same. Aggrieved, the assessee is in appeal before me on this issue of allowability of expenditure incurred towards commission.
The ld. Counsel for the assessee submitted that, the assessee has been paying commission to the agents, who rendered service for increasing sales and that such Assessment Year: 2013-14 Arun Kumar Banthia commission was paid for the previous years, as well as for the subsequent assessment years. He submitted that the details of the commission agents, the amounts paid, the purpose for which the commission was paid, the mode of calculation, the details of sales made with the services of the commission agents, the tax invoices, the details of total quantity and volume of sales to specific parties etc. was furnished before the AO as well as the ld. CIT(A), but both the authorities have disallowed the claim in a pre-determined manner. He submitted that for the AY 2012-13, similar commission was paid of Rs. 18,61,270/- to different commission agents for sales made and that this was allowed as a genuine expenditure by the AO in his order passed u/s 143(3) of the Act on 26.03.2015. He submitted that tax was deducted at source as per the requirements of the Act from the commission and payments were made through regular banking channels. He further submitted that there was no material whatsoever with the Revenue to controvert the fact that the assessee had paid commission to agents for sales. He relied on the following case laws: a) CIT vs. Alpha Hydronics Pvt. Ltd. (High Court of Calcutta in of 2004 order dated 10.11.2014) b) CIT vs. Inbuilt Merchant Pvt. Ltd. (High Court of Calcutta in ITAT No. 225 of 2013 order dated 14.03.2014, c) ITO vs. Madhusudan Rungta & Sons (HUF) (ITAT, Kolkata in ITA No. 141/Kol/2016 order dated 15.11.2017) 5. The ld. DR on the other hand relied on the order of the AO as well as the ld. CIT(A) and submitted that, the assessee could not furnish any evidence of the services rendered by the commission agents, for whom the commission has been paid. He further pointed out that the contact details, the names and addresses of the persons to whom sales were made and against which commission was paid were not furnished. He relied on page 9 para 12 and 13 of the order of the AO and submitted that the facts prove that the commission was not paid for rendering of any service but funds were doled out by the assessee, to reduce the tax liability of the assessee. He further submitted that the circumstantial evidences suggest that the payment was not made wholly and exclusively for the purpose of business.
Assessment Year: 2013-14 Arun Kumar Banthia 6. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the case law cited as well as the orders of the authorities below, I hold as follows. 7. The assessee has furnished the following:
Sl No. PARTICULARS 1 Details of Commission Agent with amount paid 2 Addresses of Commission Agent 3 Details of Sales Made by the Commission Agents for A.Y 2013-14 Tax Invoices for sales to Elite Traexim (P) Ltd (5 Samples) 4 Sales Ledger of Banthia Enterprise 5 6 Details of Total Quantity and Volume of Sales to specific Parties for A.Y 2013-14 7 Comparative statement of Agents for A.Y 2012- 13 and 2013-14 8 P/L A/c , B/s and Schedules for A.Y 2012-13 of Banthia Enterprise 9 Details of Sales Made by the Commission Agents Billwise for A.Y 2012-13 8. The allegation of the Revenue that the assessee has not provided the required details is factually incorrect. All necessary details have been furnished by the assessee.
Be it as it may, I find from the comparable statements of the sales and commission for the AYs 2012-13, 2013-14, 2014-15 and 2016-17 that commission has been consistently paid for sales. The AO, for the immediately preceding AY 2012-13 has accepted as genuine, the payment of commission of Rs. 18,61,270/-. I also find that except for rejecting the submissions of the assessee, the AO could not gather any evidence, proof that the claim of the assessee is not genuine. It is not the case of the Revenue that the Commission Agents are related parties.
The Hon’ble Calcutta High Court in the case of Alpha Hydronics Pvt. Ltd.(supra) hold as follows:
“We find that the Tribunal while allowing the appeal of the assessee and held as under: "We have considered the rival submissions and gone through the facts of the case. We find that in the present case there is a binding contract between the parties by which the \recipients of the commission had the right to enforce realisation of commission stipulated between the parties. We also find from the communication between the parties that the payment was duly received by the parties and paid by the assessee by account payee cheques. The revenue has not alleged that the parties to the transactions are related to each other or that the payments are not genuine or that the payments having been made by the assessee to the recipients have found their way back to the assessee some way or the other. Such being the case, we find that the authorities below were not justified in rejecting the claim of the assessee for payment of commission. Since all the ingredients necessary for genuine business transaction exist in this case, we do not find any merit in the addition made by the AO and in the action of the CIT(A) in Assessment Year: 2013-14 Arun Kumar Banthia confirming the same. In reversing their orders, and respectfully following the decision of the Hon'ble Calcutta High Court in the case of Masther & plant (India) Ltd. (Supra) and the case of the Tribunal, Mumbai Bench (Third Member) discussed herein above, we allow the appeal of the assessee.” Heard Mr. Das, learned advocate appearing for the appellant revenue and Mr. J. P. Khaitan, learned senior advocate appearing for the respondent assessee. Before us the revenue could not demonstrate either the money was not paid or the money was paid and routed back to the assessee. In the circumstances interference with the order of the Tribunal is not warranted. No question arises for adjudication. The application and the appeal are dismissed.” In the case of Inbuilt Merchant Pvt. Ltd.(supra) payment of commission was held to be genuine.
Respectfully following the propositions of law laid down in these case laws to the facts of this case, I uphold the contentions of the assessee and delete the disallowance of commission payment of Rs. 19,97,878/-.
In the result, the appeal of the assessee is allowed.
Kolkata, the 18th October, 2019.