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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-3’ NEW DELHI
Before: SMT DIVA SINGH
ORDER The present appeal has been filed by the assessee assailing the correctness of the order dated 16.05.2016 of CIT(A)-16, New Delhi pertaining to 2012–13 assessment year on the following grounds:-
“On the facts and in the circumstances of the case and in law the Ld.CIT(A) erred in confirming the following additions made by the Assessing Officer:-
1. 1. Commission paid to various parties in a sum of Rs.12,37,311/- on the erroneous ground that the services have not been rendered by them; 2. Ad hoc disallowance of telephone and car petrol expenses @ 20%. Both the above actions being arbitrarily, fallacious, misconceived and unjust must be quashed with directions for relief.”
2. The assessee is a proprietor of M/s Lachhi Ram Textile which is engaged in the business of purchase and sale of cloth. The assessee in the year under consideration declared an income of Rs.9,13,140/-. The assessee was required to explain brokerage and commission debited to the tune of Rs.19,92,347/-. The addition of Rs.12,37,311/- was made as the AO was of the view that the assessee has not been able to explain that the services rendered by the following parties:-
S.No. Name of the Party Amount of Commission Paid (in Rs.) 1. Shri Sushil Kumar Kasera HUF 5,73,065 2. Shri Govind Prasad Rastogi and Sons HUF 4,25,708 3. Devi Prasad And Co. 64,540 4. Lacchi Ram Devi Prasad 75,874 5. Om Pakash Sharma 98,124 Total 12,37,311 I.T.A .No.-3758/Del/2016 Pramod Maheshwari vs ITO
Page 2 of 4 3. The assessee assailed the addition before the CIT(A) on various grounds. In support of the relief, various arguments were advanced. The following extract of some of the arguments advanced before the CIT(A) are reproduced hereunder:-
“Therefore, commission paid to M/s Lachhi Ram Devi Prasad should be allowed as business expenditure on the basis of facts and circumstances of the case.
In support of the fact that the services have actually been rendered by the persons to whom commission has been paid, the assessee has already furnished the following documents:- (a) PAN and other details (Name and Address) of the payees. (b) TDS Return for the 4th Quarter (c) Bank Statement (d) Income tax Return filed by the assessee’s. (e) Confirmation of accounts. Further the Learned Assessing Officer has issued notice u/s 133(6) of Income Tax Act to various parties and all the notices have been duly served and relevant documents. Information has also been filed these persons. Therefore, no commission should be disallowed on the basis of facts and circumstances of the case.” 2.3. It is submitted that the assessee has been in the business of trading in cloth for the last over 30 years. He has always availed services of commission agents for making sales and purchases. In the present day trade, the businessman needs services of independent persons to go between himself and other constituents. The agents provide valuable services, like obtaining orders, settling rates, collecting payments and act as middlemen between sellers and buyers settling small irritants. The feet of making purchases and sales has been accepted by the Assessing Officer. The assessee had furnished following documents before the Assessing Officer proving genuineness of transactions: 1. Name and address of the brokers; 2. Their PAN 3. Confirmation of accounts 4. Bank statements 2.4 The Assessing Officer has, on his own, made independent enquiries issuing notices u/s 133(6) of the Act. Such notices have been responded by the agents. The assessee has duly deducted tax on commission paid. The agents/brokers have included such commission in their income statement and paid tax thereon. The -commission has been paid through banking channel. ……….
2.6. The objection of the Assessing Officer with regard to the address of the three agents being the same as that of the assessee is also unfounded. The agent has been working in the same premises having different floor independent of the business of the assesse. They have included the commission, earned from the assessee in their individual return and paid tax thereon. The assessee on his part has deducted tax and deposited the same in the government’s account. The transaction being genuine and duly supported by the evidence deserves to be accepted by the Assessing Officer.” 3.1. Not convinced with the explanation offered, the addition was confirmed.
I.T.A .No.-3758/Del/2016 Pramod Maheshwari vs ITO
Page 3 of 4 4. The Ld.AR reiterating the arguments advanced before the tax authorities including the above further submitted that most of the parties have acted as brokers and have been paid commission over the years for identical services and infact even in subsequent assessment year, the commission expense has been allowed by the AO in 2014-15 AY by an order u/s 143(3) dated 14.09.2016 to Govind Prasad Rastogi & Sons HUF and Devi Prasad & Co. amongst others and infact only in the year under consideration such a disallowance has been made. The Ld. AR was ready to demonstrate if so warranted on the basis of bills to show how commission has been worked out. The fact that these parties have been paying taxes on the commission income, it was submitted may be verified. However, disallowance in the manner made it was submitted on facts cannot be justified. The Ld.Sr.DR submitted that he would have no objection if the facts are verified.
Having heard the rival submissions and perused the material available on record, I find that in the facts of the present case where the assessee is stated to be in the very same business for more than three decades and has been incurring commission expenses to some of the very same parties on the basis of sales made through them. The notice sent by the AO u/s 133(6) infact have been received by them and have been confirmed by them. In the circumstances I find no reason to disallow the claim of the assessee subject to verification that the sales have been made through these brokers as per bills on record and these brokers have been filing their returns. Accordingly the impugned order is set aside and for this limited verification the issue is restored to the file of the AO. Needless to say that an opportunity of being heard shall be provided to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes. The order is pronounced in the open court on 07th of December, 2016. Sd/- (DIVA SINGH) JUDICIAL MEMBER *Amit Kumar*
I.T.A .No.-3758/Del/2016 Pramod Maheshwari vs ITO