SMALL WONDER INDUSTRIES,MUMBAI vs. DCIT 24(3), MUMBAI

O R D E R

Per Ravish Sood, JM

“1. (a) On the facts and circumstances of the case and in law the Learned Commissioner of Income Tax (A) has erred in confirming the additions of Rs.2,12,136/- on account of commission paid to two parties. The same may be deleted in full. 2. (a) The Learned CIT (A) ought to have appreciated that the fact the commission expense paid was verified the time of the original assessment made. All the details relating to the commission expense made are genuine and all documents to prove that the same were genuine have been submitted to the assessing officer. (b) The Learned DCIT ought to have appreciated that the appellant has submitted confirmations from the sales party viz. M/S Vishnu Group of companies, that both the agents were M/s. Small Wonder Industries working for the appellant and they have given services as liaison work between the parties. (c) The Learned DCIT ought to have appreciated the fact that return of income of one agent is submitted with your goodself, which reflects that he earns commission income. Hence, the expense claimed by the appellant is genuine. Without prejudice to the above, I also wish to state as under:

1. 1. The appellant had filed an appeal against re-opening of the case u/s. 263 against order passed u/s. 143 (3) r.w.s 264 dated 29.11.2013 at Income Tax Appellate Tribunal. Further, the Ld. ITAT vide order 24/02/2017 has decided the matter in favor of the appellant and has treated the assessment u/s. 263 as bad in law.

2. The Ld. ITAT has appreciated the fact, that the order passed u/s. 143(3) was not erroneous and prejudicial to the interest of the revenue since the Ld. Assessing officer had collected necessary details, examined the same and then framed the assessment u/s. 143(3), where he had allowed the said expense as business expense.

3. Hence, taking the above facts into consideration, since the Ld. ITAT has decided that assessment u/s. 263 was bad in law, the assessment order passed u/s. 264 is void ab-initio.

4. Your appellant craves leave to add to, alter, amend, modify or delete any of the grounds of appeal

.”

3. Briefly stated, the assessment in the case of the assessee firm for A.Y. 2009-10 was completed on 21.11.2011, determining its total income at Rs. 49,72,441/- against the returned income of Rs. 49,04,386/-. The CIT-24, Mumbai, observed that as the A.O without making necessary verifications had allowed the commission expenses aggregating to Rs. 2,12,136/- which were claimed by the assessee company to have been paid to (i) Shri Kiran Jain : Rs. 77,160/-; and (ii) Shri Rajendra Jain : Rs. 1,34,976/-, thus the order passed by him was erroneous and prejudicial to the interest of the Revenue. On the basis of his aforesaid deliberations the CIT revised the assessment order vide his order passed under Section 263, dated 19.02.2013 and set aside the matter to the file of the AO for the limited purpose of verifying the genuineness and veracity of the commission claimed by the assessee firm to have been paid the aforementioned persons.

M/s. Small Wonder Industries 4. That pursuant to the order of the CIT-24, Mumbai the A.O framed assessment under Section 143(3) r.w.s. 263 of the Act, dated 21.11.2013. On the basis of necessary deliberations, the AO being of the view that the assessee has failed to specify the nature of services which were rendered by the aforementioned persons, viz. Shri Kiran Jain and Shri Rajendra Jain, thus characterised the commission expense as a non-genuine expense and added back the same to assessee‟s total income. In the backdrop of his aforesaid observations the AO assessed the income of the assessee firm under Section 143(3) r.w.s. 263 of the Act at Rs. 51,84,576/-.

Order pronounced in the open court on 12th September, 2018.