DCIT, CHENNAI vs. METRO MULTIMEDIA PRIVATE LIMITED, CHENNAI

This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) 8, Chennai dated 19.09.2016 relevant to the assessment year 2012-13. The only effective ground raised in the appeal of the Revenue is that the ld. CIT(A) has erred in deleting the disallowance made on account of commission expenses by admitting fresh evidence in violation of Rule 46A of the Income Tax Rules.

Brief facts of the case are that the assessee is engaged in outdoor advertisements and filed its return of income on 29.09.2012 admitting income of ₹.3,20,73,977/-. The return filed by the assessee was selected for scrutiny and issued statutory notices. The details called for were filed by the assessee. On perusal of the details, the Assessing Officer noticed that the assessee has debited a sum of ₹.73,42,100/- to the profit and loss account towards the commission expenses. During the course of assessment proceedings, the assessee has filed the copies of the bills said to have been raised by the parties who are claimed to have offered services to the assessee. On examination of invoices, the Assessing Officer noticed that most of the invoices (except one) are raised on 31.03.2012 and all the persons are reflected to be appearing from the same address. Except for the change in the name of these bills are similar rather same. More so, the bills of six different entities are serially numbered so as to read as 0012, 006, etc. From the above, the Assessing Officer was of the opinion that the expenditure of commission of ₹.73,42,100/- was not genuine and added to the total income of the assessee.

The assessee carried the matter in appeal before the ld. CIT(A) and challenged the disallowance of commission expenses. After considering the submissions of the assessee and verifying the confirmation letters of agents with whom the assessee had entered into agreement to facilitate its business development on payment of commission, filed by the assessee, the ld. CIT(A) deleted the disallowance of ₹.73,42,100/-.

On being aggrieved, the Revenue is in appeal before the Tribunal and the ld. DR has mainly argued that by accepting fresh evidence in terms of confirmation letters of agents, which was not produced before the Assessing Officer, the ld. CIT(A) allowed the claim of assessee, which is in violation of Rule 46A and pleaded that the issue may be remitted to the file of the Assessing Officer for verification of the details filed before the ld. CIT(A).

On the other hand, the ld. Counsel for the assessee has strongly supported the order passed by the ld. CIT(A) and prayed for its confirmation.

We have heard both sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee has claimed commission expenses by producing bills/invoices. However, the Assessing Officer disallowance the above expenses on the ground that most of the invoices (except one) are raised on 31.03.2012, all persons are reflected to be appearing from the same address and the bills of the six different entities are serially numbered so as to read as 0012, 006, etc. Before the ld. CIT(A), it was the submission of the assessee that the services of a business group were utilized and therefore, there was nothing wrong if at all the agents operate from the same location. It was also submitted that payment of commission in this case was made through banking channels and tax has been deducted at source as per the provisions of the Act. Further, the details of Service Tax paid by the assessee was also brought to the notice of the ld. CIT(A). Moreover, the assessee furnished the copies of the income tax returns filed along with confirmation letters from the agents in support of its contentions. By considering all the above material evidence, the ld. CIT(A) deleted the disallowance made. While considering the above details filed by the assessee during the course of appellate proceedings, the ld. CIT(A) has not obtained any remand report from the Assessing Officer before accepting the details filed by the assessee, which is clearly in violation of provisions of Rule 46A. Under the above facts and circumstances, we remit the matter back to the Assessing Officer to verify the details filed before the ld. CIT(A) and decide the issue afresh in accordance with law after allowing an opportunity of being heard to the assessee.

In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced on the 26th February, 2018 at Chennai.