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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI L.P. SAHU
Per L.P. Sahu, Accountant Member:
These two appeals are filed by the assessee against separate orders dated 19.06.2014 of ld. CIT(A)-XI, New Delhi, challenging the disallowance of commission paid by assessee to Ms. Rachna Mohan of Rs.2,04,161/- and Ms.
Juhi Sinha of Rs.3,42,983/- during the A.Y. 2008-09 and payment of commission of Rs.1,32,310/- to Ms. Rachana Mohan, Rs.3,45,544/- to Ms. Juhi Sinha and Rs.27,500/- to Ms. Akanksha Malik in A.Y. 2009-10.
The Registry has pointed out that the present appeals are barred by limitation by two days. In this respect the assessee, explaining the discrepancy, submitted that the orders of the ld. CIT(A)-XI was received on 12.07.2014 though the order was dated 19.06.2014, but in column No. 9 of Form No. 36, the date of order was wrongly written instead of date of receipt of the order. Therefore, there is no delay in filing the appeal before the Tribunal. In view this, the defect pointed out by the Registry stands removed.
The brief facts of the case are that the appellant runs a proprietorship concern in the name and style of M/s. INPUTS and is engaged in the consultancy of Manpower Recruitment. The appellant filed her returns of income declaring income at Rs.94,97,380/- and Rs.17,13,240/- respectively for A.Y. 2008-09 and 2009-10. The returns were processed u/s. 143(1) and later on the cases were selected for scrutiny and the AO completed the assessments u/s. 143(3) for both the years after making certain disallowances.
The main grievance before us is in regard to disallowances out of commission paid by assessee to Ms. Rachna Mohan of Rs.2,04,161/- and Ms.
Juhi Sinha of Rs.3,42,983/- during the A.Y. 2008-09 and payment of commission of Rs.1,32,310/- to Ms. Rachana Mohan, Rs.3,45,544/- to Ms. Juhi Sinha and Rs.27,500/- to Ms. Akanksha Malik in A.Y. 2009-10. Since the issue is common in both the appeals, hence, we first take up the appeal for the A.Y. 2008-09.
5. During the course of assessment proceedings for this year, the AO asked the assessee to furnish a justification of the above payments. The assessee submitted confirmations of accounts of these parties vide her letter dated 15.07.2010. On 22.10.2010, the Assessee asked her counsel regarding the nature of work done by these persons and also furnish the evidence of their qualifications, copy of ITR and computation. In this regard the AR of the assessee submitted that INPUTS is an HR consulting firm, providing recruitment and HR services. Clients pay us professional charges for delivery of various kinds of services. The employees on the roles of the company largely provide backend and administration support. Key roles are executed by freelancers who are largely educated, senior women, and are looking for flexible jobs. Depending on their expertise, they are hired for specific jobs and paid a pre-agreed percentage of the bill amount as fees. These are therefore, booked in our books as ‘commission’. The Assessing Officer noted that the assessee could not submit any evidence in regard to their qualifications. The assessee simply claimed that these women are freelancers who are largely educated senior women and are looking for flexible jobs. Neither the assessee produced these women for examination nor any documentary evidence which may lead or prove that these women were actually doing this profession even on part time basis. The AO, accordingly disallowed the commission paid to above parties and added the same to the total income of the assessee.
Aggrieved by the order of the Assessing Officer, the assessee appealed before the ld. CIT(A) who sustained the impugned additions observing as under :
“10.4. It is observed that the appellant had produced Ms. Geeta Kumar for examination before the AO. The AO has examined her educational qualifications and it was verified by him that she was working as HR Consultant since 1991. Therefore, there remains no reason to suspect the payment of Rs.9,97,8527- made to Ms. Geeta Kumar. However, the appellant failed to produce Ms. Rachna Mohan, and Ms. Juhi Sinha despite the fact that specific request the appellant during the appellate proceedings that these persons shall be produced by her before the AO for examination. In the remand proceedings, the appellant has submitted the old documents which were submitted by her during the assessment proceedings. No reasons were submitted by the ld. AR of the appellant as to why he could not produce them before the AO despite the fact that he only had requested to provide opportunity as the appellant was willing to produce them.
10.5. Coupled with the fact that the appellant has apparently admitted payments of kickbacks in the case of M/s. Factorial Solutions, the AO’s observation that the payments made to Ms. Rachna Mohan and Ms. Juhi Sinha, is nothing but a modus operandi adopted by the appellant to siphon off her income and given them to pass on gratification to MNCs from whom the appellant acquired business has logic and force. The appellant has miserably failed to rebut the AO's inference despite availing the opportunity during the appellate proceedings. Therefore, the AO is fully justified in disallowing the payments of Rs.2,04,161/- made to Ms. Rachna Mohan, and Rs.3,42,983/- made to Ms. Juhi Sinha as consultancy/commission along with the disallowance of Rs.2,680/- made by the appellant to M/s Factorial Solutions, which has not been contested by the appellant. Thus, out of total disallowance of Rs.15,47,676/-, made by the AO, the disallowance of Rs.5,49,824/- is sustained and the appellant gets a relief of Rs.9,97,852/-. Ground No. 4 & 5 of the appeal are, therefore, partly allowed.”
During the course of hearing, the ld. AR of the assessee requested to the Bench to restore the matter to the file of Assessing Officer for cross examination of the above recipients of commission paid. It was submitted that all the persons who received the commission are existing entities and they have given their statements on oath for the similar transactions during the assessment proceedings for A.Y. 2010-11 and the ld. CIT(A) has allowed the appeal of the assessee in the identical facts and circumstances of the case. In such circumstances, if the Assessing Officer makes proper efforts to summon the above recipients for recording their statements, the payments of commission made by assessee can be verified.
The ld. DR, on the other hand, relied on the order of the authorities below and vehemently objected to the restoration of the matter to the file of AO.
We have considered the rival submissions and have perused the entire materials available on record. It is borne out on record that the persons who received the payment of commission have made their statements regarding similar transactions in the assessment year 2010-11. In presence of these facts, it cannot be out rightly stated that the said recipients were bogus and the amount paid by assessee travelled from her own coffers. However, unless the payment of commission is verified from the recipients, the same cannot be allowed in the peculiar facts and circumstances of the present case. We, therefore, deem it expedient in the interest of justice that both the matters should be restored to the file of AO for deciding the same afresh after making herculean efforts to record the statements of the recipients and to verify the genuineness of the transactions/payments, challenged in both these appeals of the assessee. The AO has also to examine as to whether the payments so made by assessee was made against any bills raised by the recipients.
Needless to say, the assessee shall be given reasonable opportunity of being heard and she shall also show her diligent cooperation with the department.
We order accordingly.
In the result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open court on 23.09.2016.