DEEPAK DHANRAJ MURPANA,MUMBAI vs. ASST CIT 23(1), MUMBAI

This is an appeal filed by the assessee. The relevant assessment year is 2012-13. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-32, Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).

The ground of appeal raised by the assessee in this appeal is that the Ld. CIT(A) erred in law and on facts in upholding the disallowance of commission expenses paid to 13 parties total aggregating to Rs.61,18,826/- ignoring plethora of evidence produced.

Briefly stated, the facts of the case are that the assessee had paid Rs.61,18,826/- as commission to 13 parties. During the course of assessment proceedings, the Assessing Officer (AO) issued notice u/s 142(1) to the assessee asking to file details of commission paid in a format incorporating (i) name and address of the person whom commission paid, (ii) amount, (iii) TDS, (iv) service for which commission paid and (v) amount of commission paid in AY 2011-12. The AO noticed that the assessee had filed details of commission paid save and except the nature of services. As per the AO, the assessee had not adduced any evidence to show that the assessee procured business with the help of the service of these agents. It was also the submission of the assessee before the AO that there was no written agreement for payment of commission. The AO thus came to a finding that (i) no evidence has been furnished by the assessee suggesting that the orders were brought specifically by these agents, (ii) the assessee has in fact split the total exports into four parts and further calculated commission @ 3%, 4% and 5% and paid to the 13 parties, (iii) the assessee has not been able to furnish and co-relate the invoices in relation to which the commission payments are made, (iv) the assessee failed to furnish evidence regarding the claim that the entire export sales were made possible only because of the contributions of these commission agents. In view of the above facts, the AO concluded that the assessee failed to establish the exact nature of services provided by the commission agents and therefore, he made an addition of Rs.61,18,826/-.

Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) held that (i) there is no evidence to demonstrate the fact that the export sales are indeed through these commission agents, (ii) the controversy here is not regarding the fact of payments but in respect of the purpose for which these payments are made, (iii) the assessee has not been able to provide any evidence to show the nature of services rendered by the so-called commission agents, (iv) apart from making general statement, linking some export turnover to the commission paid, there is no evidence to show that these agents actually facilitated export sale of the assessee. Therefore, the Ld. CIT(A) confirmed the disallowance of Rs.61,18,826/- made by the AO.

Before us, the Ld. counsel of the assessee files a ‘Paper Book’ containing inter alia copies of confirmations by commission agents, export sales ledger, commission account ledger, TDS account ledger, copies of sample export invoices and comparative turnover chart. The Ld. counsel submits that the AO failed in not accepting the confirmation of the parties to whom commission payments were made, which was a sufficient evidence to show that the assessee procured export business with the help of the parties to whom the commission payments were made. Hence it is stated by him that the claim of commission payment ought to be fully allowed. 6. Per contra, the Ld. DR relies on the order passed by the Ld. CIT(A). It is stated by him that neither before the AO nor before the Ld. CIT(A), there was evidence to demonstrate the fact that export sales were indeed through these commission agents. As the assessee failed