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Income Tax Appellate Tribunal, DELHI BENCH “SMC-I”, NEW DELHI
Before: SHRI S.V. MEHROTRA
O R D E R PER S.V. MEHROTRA, A.M : This is an appeal filed by the Revenue against the order dated 17.03.2015 passed by the Commissioner of Income Tax (Appeals)-19, New Delhi, u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”) relating to assessment year 2010-11.
Brief facts of the case are that during the year under consideration the assessee carried on business of sale of Mobile phone and Prepaid coupons in the name & style of Proprietorship firm M/s Perfect Enterprise, besides earning of commission from Aircel Company. She had filed return of income declaring total income of Rs.7,02,548/-. The Assessing Officer noticed that commission received as per Profit & Loss Account was Rs.64,34,944/- and commission paid under the head ‘dealer’s commission’ was at Rs.35,37,914/- and commission at Rs.1,87,650/-. He, further, noticed that assessee had claimed business promotion expenses of Rs.72,840,/-. The Assessing Officer required the assessee to furnish evidence for commission and dealer’s commission. The assessee filed its reply dated 15.02.2013 which has been reproduced at page 2 of the assessment order in which assessee requested for 15 days time for submission of evidence. The Assessing Officer being not satisfied with the assessee’s reply in regard to claim of dealer’s commission, disallowed the same.
3. He also disallowed a sum of Rs.1,87,650/- being other commission for which only copy of the ledger account was filed by assessee. As regards business promotion of Rs.72,840/-, the Assessing Officer disallowed the same in the absence of any evidence regarding gift items purchased every month which was debited to the ledger account and the names of persons to whom the same were gifted, rejecting the assessee’s contention that the gifts were provided to retailers and dealers for sales. Before ld. CIT(A) it was pointed out that the assessee being authorized distributor of M/s Aircel Limited sold recharge coupons through 387 dealers in and around Delhi.
The assessee had filed additional evidence under Rule 46A which was admitted by Ld. CIT(A), inter-alia, observing as under :-
“5. During the appellate proceedings, the appellant filed additional evidence under Rule 46A of the I.T. Rule and the same was admitted as the appellant in ground of appeal No.5 had stated that the Assessing Officer held that the appellant had not incurred any expenditure during the year under the heads 'dealer's commission', 'commission for achieving sales targets' and 'business promotion expenses'. It is surprising to note that the Assessing Officer had concluded in the assessment order that none of the expenditure incurred by the appellant towards dealer's commission and business promotion expenses etc. were allowable, though the appellant being the distributor of M/s. Aircel Ltd. had number of dealers and also received a commission of Rs. 64,34,944/- during the year. The Assessing Officer had stated in the assessment order that no satisfactory evidence was submitted during the assessment proceedings and that also only ledger account was submitted to deny the entire expenditure under the above heads debited in the Profit & Loss Account. As per the appellant, during the appellate proceedings, she was asked to submit the details of dealer's commission paid by the appellant in Form No. 16A received from M/s. Aircel Ltd. The appellant had paid dealer commission directly to their dealers and therefore, the logic of seeking confirmation in Form No. 16A from a third party namely, M/s. Aircel Ltd., that too in Form No. 16A is not made clear anywhere in the assessment order.”
4. The assessee had filed confirmation from all the 387 dealers for the entire expenditure of Rs.35,37,914/-. The assessee also pointed out that during the assessment proceedings she was never required to furnish the details of commission for achieving sales targets and/or to furnish the details of business promotion expenses. Ld. CIT(A) called for a remand report from Assessing Officer, who commented as under :-
“The appellant filed additional evidence/confirmation in support of commission paid and genuineness of the commission to dealers, which are not concrete satisfactory evidence to support of genuineness of the transactions. In view of the above discussions, it is clear that the appellant in the instant case had squarely failed to prove the genuineness of in support of commission and business expenses by way of adducing any corroborative evidence during the course of assessment proceedings to avoid detailed scrutiny of the case. The submissions made by the assessee before CIT(A) are afterthought and cannot be relied upon.”
Ld. CIT(A) allowed the assessee’s claim regarding commission paid to dealers aggregating to Rs.35,37,914/-, inter-alia, observing that the Assessing Officer disallowed the entire claim of assessee without understanding the nature of assessee’s distribution business of recharge coupons through numerous dealers in and around Delhi.
As regards disallowance of commission of Rs.1,87,650/- paid to dealers for achieving their sales targets, ld. CIT(A) observed that during the appellate proceedings assessee filed additional evidence in the form of list of 90 dealers with their names and addresses with the date of payment and their signatures to prove the payment of Rs.1,87,650/- as commission to them for achieving their sales targets. However, the Assessing Officer objected to this evidence. Ld. CIT(A) allowed the assessee’s claim, inter- alia, observing as under :-
I am of the view that this objection is not valid as he had failed to mention whether any supporting evidence was asked for during the assessment proceedings. Since the Assessing Officer had not objected to the merits of the additional evidence submitted by the appellant regarding commission paid to dealers on achieving sales targets, I am constrained to delete the disallowance of Rs.1,87,650/- made by the Assessing Officer on the entire commission expenditure for achieving sales targets debited in the Profit & Loss Account.
As regards the disallowance of Rs.72,840/- in regard to business promotion expenses, ld. CIT(A) allowed the same after considering the additional evidence in the form of purchase bills of all the gifts totaling to Rs.72,840/- and the list of dealers to whom these gifts were given with their addresses, date of giving the gifts with their signatures, inter-alia, observing as under :-
The Assessing Officer in his remand report dated 17.02.2015 dutifully objected to this additional evidence and I am of the view that the objection is not valid as he had failed to mention whether any supporting evidence was asked for during the assessment proceedings. But as the Assessing Officer had not objected to the merits of this additional evidence submitted by the appellant regarding the gifts given by her as business promotion expenses, I am constrained to delete the disallowance of Rs.72,840/- made by the Assessing Officer on the entire business promotion expenses debited in the Profit & Loss Account the appellant.
Being aggrieved with the order of the Ld. CIT(A), the Department is in appeal before the Tribunal and has taken following grounds of appeal :-
“1. The order of the Ld. CIT(A) is bad in law and not in consonance with the facts of the case.
2. The Ld. CIT(A) has erred in accepting the additional evidence submitted by the assessee, when the case of the assessee does not fall in any of the conditions mentioned in ruled 46A of the Income Tax Rules, 1962.
The CIT(A) erred in admitting the additional evidence on the ground that during assessment proceedings, AO had not asked for confirmation from the dealers to whom commission was paid when the AO vide notice u/s 142(1) of the Income Tax Act, 1961 dated 21.02.2013 specifically asked to provide confirmation of commission and dealer's commission.
The Ld. CIT(A) erred in deleting the addition of Rs. 35,37,914/- which was claimed by assessee under the head "Dealers Commission", by admitting additional evidences which should not have been accepted in view of the facts and circumstances of the case.
5. The Ld. CIT(A) erred in deleting the addition of Rs. 1,87,650/-, which was claimed by assessee under the head "Commission", by admitting additional evidences which should not have been accepted in view of the facts and circumstances of the case.
6. The Ld. CIT(A) erred in deleting the addition of Rs. 72,840/-, which was claimed by assessee under the head ‘Business Promotion", by admitting additional evidences which should not have been accepted in view of the facts and circumstances of the case.
7. The appellant craves leave to add, allow or amend any/ all the grounds of appeal before or during the course of hearing of the appeal.”
9. Ld DR submitted that primarily the Department is in appeal with the order of Ld. CIT(A) in deleting the disallowance on the basis of additional evidence without affording opportunity to Assessing Officer.
10. Ld. counsel pointed out that the Assessing Officer had not given sufficient time to furnish necessary evidence. Therefore, before ld. CIT(A) entire evidence was furnished in regard to various claims made by assessee.
He pointed out that the Assessing Officer in his remand report considered the evidence filed by assessee and concluded that they were not satisfactory.
Therefore, he has considered the merits of evidence and, therefore, ld. CIT(A)’s observations in regard to merits have to be considered being given after affording opportunity to Assessing Officer.
I have considered the submissions of both the parties and perused the record of the case. I find considerable force in the argument of the Ld. counsel for the assessee that Ld. CIT(A) had duly provided opportunity to Assessing Officer to comment upon the additional evidence filed by assessee in the form of confirmations from dealers, etc., as noted in the observations of the Ld. CIT(A), reproduced earlier. Once Ld. CIT(A) has given due opportunity to Assessing Officer to examine the additional evidence furnished before him and the Assessing Officer also comments upon the evidence then it cannot be said that the Assessing Officer was not afforded due opportunity by Ld. CIT(A). The nature of assessee’s business was such where without giving dealer’s commission, the same could not be carried on. Necessary confirmations have been filed by assessee. They have not at all been adversely commented by Assessing Officer except making a general observation that the same are not genuine. In view of the above discussion, I do not find any reason to interfere with the order of Ld. CIT(A). As regards other two disallowances also I find that ld. CIT(A), after due appreciation of evidence, allowed the assessee’s claim. Department has not controverted the findings of ld. CIT(A) on merits.
In the result, the appeal of the Department is dismissed. Order pronounced in the open court on this 08th day of December, 2016.