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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Shri P.M. Jagtap
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-10, Kolkata dated 01.03.2016 and the grounds raised therein read as under:- (1) That both the A.O. and the ld. CIT(A) are erred to disallow the claim of principal payment Rs.49,145/- assuming the same as interest.
(2) That both the AO and the ld. CIT(A) is not justified to disallow the actual payment of commission of Rs.3,00,000/- on the basis of self-made story and on the basis of assumption. (3) That both the ITO and the ld. CIT(A) is not justified to disallow the claim made u/s 80E of the I.T. Act, 1961. 2. At the time of hearing before the Tribunal, the ld. Counsel for the assessee has not pressed Ground No. 1. The same is accordingly dismissed as not pressed.
Assessment year: 2011-2012 Page 2 of 7
Apropos the issue involved in Ground No. 2, the relevant facts of the case are that the assessee is an individual, who is engaged in the business of trading of electronics goods. The return of income for the year under consideration was filed by him on 26.09.2011 declaring total income of Rs.18,10,900/-. In the Profit & Loss Account filed along with the said return, a sum of Rs.15,90,000/- was debited on account of commission on sales. During the course of assessment proceedings, the claim of the assessee for the said expenditure incurred on commission was examined by the Assessing Officer and on such examination, he found that a sum of Rs.3,00,000/- was paid by the assessee as commission to his son Shri Ashish Jalan. While examining the nature of services rendered by Shri Ashish Jalan, it was submitted by the assessee that he had exerted his efforts and endeavour for securing orders for the assessee’s business. It was submitted that Shri Ashish Jalan secured orders for the purpose of assessee’s business and also kept contact with the buyers on regular intervals. In response to the notice issued by the Assessing Officer under section 133(6), Shri Ashish Jalan also confirmed that he had established contacts with the purchasers for and on behalf of the assessee and had secured orders from them. A copy of commission bill dated 30.03.2011 raised on the assessee was also filed by him showing that the commission @ 3% was charged on the sale of UPS, Inverters, Batteries & Battery Trolley, etc. to the various parties. On further enquiry, the Assessing Officer found that Shri Ashish Jalan had completed BBA in the year 2007 and thereafter had done MBA from Amity University, Uttar Pradesh during the year 2009-2011. In reply to the notice issued under section 133(6) by the Assessing Officer, the Assistant Registrar of Amity University informed that Shri Ashish Jalan was continuously attending his classes except during the period from 03.05.2011 to 11.07.2011 for summer Internship. The Assessing Officer also found that the commission bill dated 30.03.2011 raised by Shri Ashish Jalan, when he was at Noida, had been received by the assessee on the same date. In this regard, no satisfactory explanation could be offered by the assessee. Keeping in view
Assessment year: 2011-2012 Page 3 of 7 all these facts of the case, the Assessing Officer held that the claim of having paid commission of Rs.3,00,000/- to his son Shri Ashish Jalan was made by the assessee to inflate the expenditure and since the said expenditure was not laid out or expended wholly and exclusively for the purpose of assessee’s business, he disallowed the same.
The disallowance made by the Assessing Officer on account of commission paid to Shri Ashish Jalan was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and since the submission made by the assessee in support of his case on this case was not found acceptable by him, the ld. CIT(Appeals) confirmed the said disallowance made by the Assessing Officer, inter alia, for the following reasons given in paragraph no. 10 of his impugned order:- “10. With that backdrop in mind I find myself supporting the AO in so far that the human probability of the student (Shri Ashish Jalan) pursuing a tough course such as an MBS from an outstation University at Noida and selling UPS and batteries at Kolkata for the appellant Is not even remotely possible. I also find that the surrounding circumstances also are heavily loaded against the appellant. Also, the undisputed fact that the AO required the assessee to explain with supporting documentary evidences as to how the commission bill dated 30.03.11 raised by Sri Ashis Jalan was received by the assessee on the same date when Sri Ashis Jalan was at Noida on that date is very pertinent and germane to the issues at hand. The AO had also allowed the appellant-assessee 15 days time to furnish the explanation, whereas J despite such allowance, the assessee failed to produce any documentary evidences and stated that the bill was actually raised by Sri Ashis Jalan, and was submitted to the assessee prior to 30.03.11, but the assessee in order to verify the entire commission due for the relevant accounting year asked Sri Ashls Jalan to raise the bill giving the date as 30.03.2011. I find myself in total consonance with the AO that such submissions /explanations given by the assessee has no relevance or meaning and the assessee was predetermined to inflate business expenses to reduce his taxable profit and to accomplish the same he used the account of his son. The behaviour of the appellant is therefore to be measured against the norms of human conduct, and on such measurement, I find that the impugned commission payment fails miserably. Therefore on the preponderance of probability, I find that the AO has rightly disallowed the commission payments as having been made for other than reasons related to business, and the same would not be eligible
Assessment year: 2011-2012 Page 4 of 7 for deduction under the section 36 or 37 of the Income Tax Act, 1961. In view of the above discussion, I find no Infirmity In the orders of the AO, and I confirm the same.
In view of the facts and circumstances as emanating from the above observations, I hold that the AO has rightly disallowed the impugned payment of Rs.3,00,000/- and therefore this ground taken by the appellant stands dismissed”.
The ld. Counsel for the assessee submitted that the claim of the assessee for commission paid to Shri Ashish Jalan was duly supported by a bill raised by the said party. He has invited my attention to the copy of the said bill placed at page no. 28 and also the details of the same furnished at page 29 of the paper book. He also invited my attention to the ledger account of Shri Ashish Jalan placed at page no. 30 of the paper book and pointed out that after deducting tax at source from the amount of commission bill, the balance amount of Rs.2,70,000/- was paid by the assessee by account payee cheques. He contended that Shri Ashish Jalan is regularly assessed to tax and in his return of income for the year under consideration, the commission income received by the assessee was duly disclosed by him. He also contended that Shri Ashish Jalan had a marketing experience having worked with Ascu Arch Timber Protection Limited and keeping in view his experience as well as the documentary evidence produced in support, there was no justification for the authorities below to disallow the assessee’s claim of having paid sales commission to him merely on the ground that he was related to the assessee.
The ld. D.R., on the other hand, strongly relied on the impugned order of the ld. CIT(Appeals) on this issue and pointed out certain specific findings and observations recorded by the ld. CIT(Appeals) while confirming the disallowance made by the Assessing Officer on account of commission paid to Shri Ashish Jalan. He contended that Shri Ashish Jalan was doing MBA during the year under consideration in the Amity University at Noida and it was, therefore, practically impossible for him to secure orders for the assessee’s business as claimed. He contended
Assessment year: 2011-2012 Page 5 of 7 that more than one crore worth of orders were claimed to be secured by Shri Ashish Jalan for the assessee, which was simply not possible for him staying in Noida. He contended that the claim of the assessee of having paid commission to Shri Ashish Jalan thus is not acceptable on the basis of preponderance of human probabilities and even the evidence brought on record by the assessee is not sufficient to fully support the said claim.
I have considered the rival submissions and also perused the relevant material available on record. It is observed that even though the claim of the assessee of having paid commission on sales to his son Shri Ashish Jalan is supported by the documentary evidence in the form of bill, deduction of tax at source, payment of bill by account payee cheques, etc. the same is only self-serving evidence. The ld. Counsel for the assessee has placed on record the so-called confirmations from the concerned parties from whom the orders were claimed to be secured by Shri Ashish Jalan. A perusal of the said confirmations, however, shows that all are prepared by the assessee himself in stereo-typed manner and only acknowledgements of the concerned parties are obtained thereon. In any case, the orders as per the details furnished by the assessee were claimed to secure by Shri Ashish Jalan throughout the year under consideration and as rightly contended by the ld. D.R., it was almost impossible for a person to do the same when he was staying in Noida doing his MBA course during the relevant period. Moreover, if at all the orders were secured by Shri Ashish Jalan throughout the year, it is difficult to understand as to why the commission bill was raised by him only at the fag end of the year and even payments were made by the assessee to him in the month of March, 2011. Even the amount of commission claimed to be paid at 3% on sales is not tallying with the corresponding sales. Having regard to all these facts of the case, I find merit in the stand of the revenue that the claim of the assessee for deduction on account of expenditure incurred on payment of commission to his son is not acceptable when the test of preponderance of probabilities is applied. I, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals)
Assessment year: 2011-2012 Page 6 of 7 confirming the disallowance made by the Assessing Officer on account of such commission. Ground No. 2 of the assessee’s appeal is accordingly dismissed.
As regards the issue involved in Ground No. 3, it is observed that the deduction of Rs.34,777/- claimed by the assessee under section 80E on account of interest on educational loan taken for his son was disallowed by the authorities below on the ground that the said loan was not taken in the name of the assessee, but the same was taken in the name of his son Shri Ashish Jalan, who is regularly assessed to tax. According to the Assessing Officer, the assesese had acted only as a guarantor for the said loan and he, therefore, was not entitled for deduction on account of interest paid on the said loan under section 80E of the Act.
At the time of hearing before the Tribunal, the ld. Counsel for the assessee has submitted that the educational loan taken for his son Shri Ashish Jalan was in joint name and the assessee being a co-borrower of the said loan is entitled for deduction under section 80E. He has relied on the certificate issued by the concerned Bank, namely Indian Overseas Bank in this regard and submitted that the Assessing Officer may be directed to verify this position and allow the claim of the assessee. Since the ld. D.R. has also not raised any objection in this regard, I restore this issue to the file of the Assessing Officer for deciding the same afresh after verifying the claim of the assessee from the relevant records. Ground No. 3 is accordingly treated as allowed for statistical purposes.
In the result, the appeal of the assessee is treated as partly allowed for statistical purposes. Order pronounced in the open Court on April 13, 2018.