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Income Tax Appellate Tribunal, KOLKATA BENCH ‘SMC’, KOLKATA
Before: Shri P.M. Jagtap, AM]
order : July 20, 2018 ORDER This appeal filed by the assessee is directed against the order of Ld. CIT (Appeals) – 13, Kolkata dated 08.08.2017 whereby he confirmed the disallowance of Rs. 18,24,427/- made by the A.O. and confirmed by the Ld. CIT(A) on account of commission and brokerage.
The assessee in the present case is an individual who is engaged in the business of trading in electrical goods. The return of income for the year under consideration was filed by him on 29.09.2011 declaring a total income of Rs. 5,57,180/-. In the said return deduction of Rs. 18,24,427/- was claimed by the assessee on account of commission and brokerage paid to the following commission agents: “1. Ashish Kumar Sharma, HUF 2. Madhav Prasad Sharma 3. Damodar Prasad Sharma, HUF 4. Dipika Parekh
Assessment Year: 2011-12 Govind Prasad Sharma 5. Sandip Bantra 6. R.N. Sharma & Sons HUF 7. Richa Maheswari 8. Ashish Parekh Madhab Prasad Sharma” 9.
During the course of assessment proceedings, the claim of the assessee for deduction on account of commission and brokerage was examined by the A.O. During the course of such examination, he required the assessee to explain as under: “i. What services were rendered by the Commission Agents? ii. How could the lady members of the family work as commission agents who canvassed for procuring orders from the buyers including institutional sales. Whether the lady members of the assessee family have ever worked as commission agents for any other parties? iii. How could the assessee make payments of commission to Ashis Kumar Sharma, HUF, which is a body of coparceners of the Hindu Undivided family and how could the HUF as a whole work as a commission agent – the job which can be solely executed by an individual through his personal contacts and efforts. iv. Whether any agreements for payment of commission were entered into. v. Why are the names of the commission agents not mentioned on the sales?”
The assessee could not offer any satisfactory explanation in response to the above queries raised by the A.O. He also could not produce any evidence to establish that the concerned commission agents related to him had rendered any services in making sales. The only contention raised by the assessee before the A.O. was that the commission and brokerage was paid to the concerned agents after deducting tax at source and the tax so deducted was deposited in the Central Government Account. This contention of the assessee was not found acceptable by the A.O. According to him amere transfer of fund
Assessment Year: 2011-12 Govind Prasad Sharma to the account of commission agents was not sufficient to allow the claim of the assessee for commission and brokerage. He also found that the relevant sales bills in respect of which commission and brokerage was claimed to be paid by the assessee to his close relatives did not bear any particulars about the commissions gents and there was no indication whatsoever in the said bills to show that the sales were executed through the alleged commission agents. The A.O. therefore disallowed the claim of the assessee for brokerage and commission and made an addition of Rs. 18,24,427/- to the total income of the assessee in the assessment completed under section 143(3) vide an order dated 28.03.2014.
Against the order passed by the A.O. under section 143(3), an appeal was preferred by the assessee before the Ld. CIT(A) and since the submissions made by the assessee before him in support of its claim for deduction on account of commission and brokerage was not found acceptable by the Ld. CIT(A), the later proceeded to confirm the disallowance made by the A.O. on account of commission and brokerage after recording his observations / findings as under: “During the course of appellate proceeding the appellant has relied on his statement of facts and earlier assessment orders. Perusal of facts shows that in earlier assessment order such issue was not enquired into. It was summarily accepted whereas during the year the A.O. has made observation on the commission issue and tried to ascertain the facts from commission agents. The perusal of fact have revealed that Mr. Sharma have given commission to his wife and other family members and his HUF in which he himself is Karta, Bill-wise, party-wise details of commission has not been submitted before the A.O. It is also seen that in case of Malti Sharma very vague statement has been submitted stating that he introduced the buyer to whom she meet in any social functions. How her introduction tentamounts to conversion into business which tentamount to rendering of services whereas the commission payment is made on the Assessment Year: 2011-12 Govind Prasad Sharma basis of sale. Merely introduction does not qualify for the commission if at all it was the introduction to its family members. In case of Sri Ritesh Muraka also it has been stated that he had relatives in Orissa & Kolkata and he referred some name to Mr. Govind Sharma which he got commission. The reply of Ritesh Mumarka is also very vague without any substance. It is not even bill-wise or value-wise commission, there is no written contract and agreement in this case. How a proprietor Mr. Damodar Sharma can be commission agent in its own concern, as a Karta of HUF. It is seen that the appellant has failed to establish the services rendered. The appellant has also not given any confirmatory letters from the buyers who can affirm that the services rendered were by the commission agents. It is also a matter of fact that the commission payments in most of the cases are below taxable limit. It is a clear cut case where the diversion of income has been made under the guise of commission payment and an attempt of capital generation has been made in individual hands of the concern persons and relatives. Keeping in view of the aforesaid facts the addition made by the A.O. is hereby upheld and the ground of appeal is dismissed.”
6. I have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has submitted that the claim of the assessee for commission and brokerage paid to the concerned commission agents related to him was disallowed by the A.O. and confirmed by the Ld. CIT(A) mainly on the ground that the assessee could not file any documentary evidence to establish that services were actually rendered by the said commission agents for securing sales. He has contended that the entire amount of commission and brokerage to the concerned commission agents was paid by the assessee by cheques after deducting tax at source and the tax so deducted was duly paid by the assessee to the credit of the Government. He has filed the declarations to the concerned commission agents as additional evidence giving the details of the sales secured by them for the assessee. He has also filed an application seeking admission of the Assessment Year: 2011-12 Govind Prasad Sharma additional evidence submitting that the said declarations made before the notary public, Kolkata were not available with the assessee either during the course of assessment proceedings or even during the course of appellate proceedings before the Ld. CIT(A). He has pointed out that similar commission and brokerage was paid to the same agents by the assessee in A.Y. 2009-10 and same was partly allowed by the A.O. in the assessment completed under section 143(3). He has urged that the additional evidence filed by the assessee may therefore be admitted and the matter may be sent back to the A.O. for deciding the same afresh after verifying the said additional evidence. Although the learned DR has raised an objection in this regard by submitting that sufficient opportunity of being heard was given to the assessee by the A.O. as well as by the Ld. CIT(A), I find it fair and proper and in the interest of justice to admit the additional evidence filed by the assessee in the form of declarations of the concerned commission agents giving the relevant details and restore the matter to the file of the A.O. for deciding the same afresh after verifying the said additional evidence.
In the result, the appeal of the assessee is treated as allowed for statistical purpose. Order Pronounced in the Open Court on 20th July, 2018.