M/S. NORINCO PRIVATE LIMITED,KOLKATA vs. DCIT, CIRCLE - 6(2), KOLKATA, KOLKATA

- This assessee’s appeal for assessment year 2007-08 arises against the Commissioner of Income Tax (Appeals)-2, Kolkata’s dated 20.04.2017 passed in case No.857/CIT(A)-2/14-15, involving proceedings u/s 147 r.w.s. 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

The assessee’s twin folded pleadings make it clear that it challenges validity of the impugned re-opening as well as both the CIT(A)’s action disallowing / commission expense of ₹17,,28,897/- on account of brokerage commission.

We advert to the relevant basic facts first. This assessee is admittedly engaged in commission agent, manufacturing, representatives, electronic fair tradings, maintenance contracts and project consultancy services as per assessment order dated 27.12.2010. The dispute herein issue that of M/s Norinco Pvt. Ltd. Vs. DCIT, Cir-6(2), Kol. Page 2 correctness of bogus commission payment disallowance involving commission / brokerage amount of ₹12,36,457, ₹4,92,440/- dated 23.02.2007 and 18.09.2006 in case M/s Nischal Corporate Services (P) Ltd and M/s Indravanau Sales Agency (P) Ltd.; respectively. The Assessing Officer issued sec. 148 notice dated 23.10.2009. The department’s Investigation Wing’s indicated that the said payees had been found to have been providing commission / brokerage bogus sales bills alongwith services. The same triggered the impugned re-opening into motion. The assessee pleaded during the course of re-assessment that it had executed its contracts agreements with the two payees in the relevant previous year. It placed on record copies of bills issued by the said companies, agreements and list of the persons / individuals who had actually provide the services in issue. The Assessing Officer declined the same in his assessment order dated 27.12.2010 to disallow the impugned commission / brokerage of ₹17,28,897/- as paper transactions without any actual receipt of services. The CIT(A) has upheld the Assessing Officer’s action in his lower appellate findings going by the department investigation wing’s information received.

We have given our thoughtful consideration to rival contentions against and in support of the impugned commission / brokerage disallowance made in both the lower proceedings. Case file suggests that the assessee had placed on record all of its services agreement, payees particulars as well as bank statement, TDs and other supporting evidence before both the lower authorities for claiming the impugned commission / brokerage as allowable business expenditure. Both lower authorities have rejected the same going by the investigation wing’s report accusing its payees to be providing bogus commission / brokerage entries. It is in this backdrop of facts that we find hon'ble jurisdictional high court’s decision in CIT vs. M/s Inbuilt Merchant Pvt. Ltd. ITAT No.225 of 2013 GA No.3825 of 2013 decided on 14.03.2014 has upheld this tribunal’s order deleting similar commission / brokerage disallowance on the ground that the concerned taxpayer had duly placed on M/s Norinco Pvt. Ltd. Vs. DCIT, Cir-6(2), Kol. Page 3 record its books of account maintained in ordinary course of business, TDS deduction and all particulars of the recipients. The factual position is no different in the instant case as well. The department had not recorded any material apart from the investigation wing’s information which has nowhere been seen light of the day. We therefore go by their lordships reasoning to delete the impugned commission / brokerage disallowance of ₹17,28,897/-. The assessee succeeds in its latter substantive ground on merits. The Revenue’s vehement contention supporting the impugned commission / brokerage disallowance are rejected therefore.