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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
This appeal by the Assessee is arising out of the order of Commissioner of Income Tax (Appeals)-31, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-31/IT-226/ITO-20(1)(4)/11-12 dated 24-06-2014. The Assessment was framed by the Income Tax Officer, Ward-20(1)(4), Mumbai (in short ITO) for the assessment year 2009-10 vide order dated 13-12-2011 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) in restricting the disallowance of commission, business promotion and advertisement expenses at ₹ 17,56,320/- out of total disallowance made by the AO at ₹ 43,31,320/-. For this assessee has raised following ground: -
Khalil Ahmad Khan (A.Y. 2009-10) “1. That on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the part disallowances of expenses to the tune of ₹ 17,56,320/- made by the Ld. AO out of Commission, Business Promotion & Advertisement expenses. As the disallowance out of above mentioned expenses retained by the Ld. CIT(A) at ₹ 17,56,320/- is wrong on facts & bad in law, therefore appellant prays that same may kindly be deleted.”
Briefly stated facts are that the assessee is an individual having business of insurance commission from various insurance companies. To set up the business of insurance at large scale, the assessee has further appointed some agents under him to do the insurance business and for which they get commission. It was claimed before the lower authorities that to earn this commission income, the assessee has to incur expenses on commission, business promotion and advertisement expenses. According to the AO, the assessee could not file any evidences in response to notice issued under section 142(1) of the Act as well as 143(2) of the Act and hence, the AO disallowed the expenses at Rs. 43,31,320/-. Aggrieved, assessee preferred the appeal before CIT(A), who after taking the remand report from the AO restricted the disallowance at Rs. 17,56,320/-. The CIT(A) referred to AO’s report dated 21-04-2014, who after admitting the additional evidences and as well as considering the remand report restricting the disallowance. He considered the AO’s report as under: -.
“The AO further stated that replies were received from parties at sr. nos. 2, 4 and 6 and that from the information submitted by these
Khalil Ahmad Khan (A.Y. 2009-10) parties the amount of commission paid against sale of policies was verified with the books of accounts of the appellant and found correct. As regards party at sr. no. 9, the AO noted that the transaction on account of sale of offset printing and other printing works amounting to Rs. 1 lakh had been duly accepted by the party and substantiated with the bank statement and copies of bills. However, the AO observed that there had been no replies from the remaining parties and the letters/notices issued for verification were returned by postal authorities with the remarks unclaimed/left/not known. Accordingly, the AO concluded that the transactions with parties listed at Sr. nos. 1, 3, 5 and 8 were not substantiated and could not be accepted as genuine and therefore expenses to the tune of Rs. 18,56,320/- out of the total amount of s. 43,31,320/- were disallowable.”
Finally, the CIT(A) restricted the disallowance vide para 5.2 as under: -
“5.2 In ground No 4,5 and 6 the appellant has challenged the disallowance of ₹ 43,31.320/- made in the impugned assessment order. As stated earlier during the assessment proceedings, the AO issued several notices but received no response from the appellant. Accordingly, he completed the assessment under section Khalil Ahmad Khan (A.Y. 2009-10) 144 disallowing the expenses of Rs. 43,31,320/- claimed by the appellant. During appeal proceedings, it was submitted that the appellant was unable to respond to the notices issued by the AO on account of his not residing in Mumbai during the said period. The additional evidence submitted by the appellant in support of his claim of expenses was therefore forwarded to the AO for consideration during remand proceedings. After verification, the AO vide remand report dated 21/04/2014 concluded that expenditure to the tune of Rs. 18,56,320/- remained to be proved. In response to the finding of the AO the appellant has stated that the AO did not conduct any enquiry with reference to the remaining commission payments totaling Rs. 10,75,987/- and therefore this amount should be accepted as genuine expenditure. On perusal of the facts I find that the remand report of the AC clearly states that the enquiry letters were issued to the names and addresses provided by the appellant during remand proceedings (encapsulated in the table reproduced at para 4.1 above) and that notices were returned unserved/left/unclaimed from the parties at sr. no. 1,3, 7 and 8. Thus the appellant's contention that no enquiry was done for the Khalil Ahmad Khan (A.Y. 2009-10) remaining commission expenditure lacks force. As regards expenditure under the remaining heads, it is seen that the AO has duly given a finding that payment of Rs. 1,00,000/- was confirmed by M/s Blossom Printing World. Thus on consideration of the facts, I find that the expenditure to the tune of Rs. 25,75,000/- {Rs. 24,75,000/- + Rs.1,00,000/-} from the total amount of Rs. 43,31,320/- stands substantiated. Regarding the remaining expenditure, as noted earlier, the A.O. did not receive any response to the enquiry letters issued during remand proceedings. The appellant has also not been able to furnish satisfactory documentary evidence to prove the genuineness of expenses / payments claimed in relation to these parties. The onus to prove that expenditure claimed is genuine and incurred wholly and exclusively in relation to business lies on the assessee. In the case of CIT v Calcutta Agency Ltd.”
Aggrieved, now assessee is in second appeal before Tribunal
We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the CIT(A) has gone into the remand report of the AO and consider the details of expenses disallowed by the AO as under: -
Expenditure Head Amount involved with parties notices issued under section.133(6) could not be served.
Khalil Ahmad Khan (A.Y. 2009-10) Commission expenses ₹ 50,000/- Business Promotion Expenses ₹ 20,501/- Advertisement Expenses ₹ 1,40,000/- Total ₹ 2,10,501/- 6. We find that the assessee himself admitted that in respect of commission expenses Rs. 50,000/- is paid to Anworul Haque Khan, the notice could not be served and for the commission of Rs. 10,75,987/-, no enquiry has been made by the AO during the remand proceedings. As regards to business promotion expenses, notice could not be served on same of the parties. Similarly, in respect of advertisement expenses a sum of Rs. 1,40,000/- could not be confirmed by the assessee. Even now, before us, the learned Counsel for the assessee could not controvert the finding of CIT(A) or could not submit any evidence regarding disallowance confirmed by CIT(A). In view of the above, we are of the view that the CIT(A) has rightly confirmed the addition and we sustain the same. The appeal of the assessee is dismissed.
In the result, the appeal of assessee is dismissed. 7.
Order pronounced in the open court on 16-11-2017.