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Income Tax Appellate Tribunal, KOLKATA BENCH ‘SMC’, KOLKATA
Before: Hon’ble Shri J. Sudhakar Reddy]
order : September 20, 2017 ORDER This is an appeal filed by the assessee directed against the order of Commissioner of Income Tax (Appeals) - 10, Kolkata dated 22.04.2013 for the assessment year 2010-11 on the following grounds:
1. That the learned Commissioner of Income-Tax (Appeals)-10, Kolkata has erred in law and in facts in confirming the following additions made by the Assessing Officer. i. Addition of commission expense of Rs. 7,22,432/- ii. Addition of motor car expense of Rs. 23,371/- on estimate under section 37.
2. The Appellant craves leave to add/alter/modify any other grounds of appeal before or at the time of hearing.
2. After hearing the rival contention, we hold as follows. Ground No 1 is on the disallowance of commission expenses on the ground 2 Assessment Year 2010-11 M/s. Rattan Steel Supply Co. that these are not genuine. The contention of the assessee is that all the commission payments were made through account payee cheques after deducting tax at source and that the assessee has filed all the necessary details including sale that were executed through each of the commission agent and relating it to the earning of the commission. It was also contended that all these commission agents have duly complied with the notices issued u/s 136 of the Act by the Assessing Officer. The Assessing Officer rejected the contentions for various reasons given at para 7.4 of his order of appeal. The assessee carried the matter in appeal. The First Appellate Authority granted part relief. He held that no evidence has been placed on record by the assessee that these agents have in fact rendered services to the assessee. He confirmed the addition of Rs. 7,22,432/- and granted relief for an amount of Rs. 2,57,923/-.
3. After hearing rival submission, we find that the First Appellate Authority at para 9 held as follows: “After examining all the issues and the documents, it is to be observed that there is no gainsaying that the payments to the commission agents were routed through cheques, TDS was effected, and statements related to the alleged transactions of the commission agents with the Buyers have been brought on record. The identity in terms of PAN, bank accounts, TDS, IT returns have also been brought on record. However, I find that there has been no evidence placed by the appellant in so far as the rendering of services is concerned. One of the fundamental requirements for allowing deduction in respect of commission payments is that there should be evidence of some services having been rendered What has been produced by the appellant vis-à-vis services rendered, before the AO or during appeal does not, in my considered opinion take the place of evidence. Only statements have been placed that each commission agent was involved in the sale of certain amounts to certain parties or customers, and accordingly the commission has been worked out, and TDS effected while paying the same. Therefore, in my considered opinion, only certain 3 Assessment Year 2010-11 M/s. Rattan Steel Supply Co. matching details have been furnished, and no evidence has been furnished. Evidence for services rendered would be, in my considered opinion, agreements between the assessee and the commission party, the proof that there was any liasoning work carried out on behalf of the seller, the number of visits made to the customer to try and sell the product in a highly competitive market, negotiations made on behalf of the seller, letters bearing the authority of the seller to negotiate on his behalf with the Customer, and concrete proof from the customers that they have had dealings with the commission agents who has represented the seller in a highly competitive market. In my considered opinion merely stating that the works of liaison was done orally and over telephone are merely assertions, and lack the adequate proof that such work was actually done, and that the commission was paid to bring more clients and customers, new business and goodwill and boost the turnovers. I have also looked at the situation from the reasonableness of expenditure.”
From the above it is seen that the Ld. CIT (A) held that the list of evidence to prove rendering of services are a. Agents b. Proof of liason work carried out c. Number of visits made to customer d. Negotiations made on behalf of seller e. Authority to negotiate f. Concrete proof from the customer that they have had dealings with the Commission Agents. We also find that the assessee has submitted the following evidences in support of its claim a. Statements relating to the transactions done through the agents b. Payment through cheques c. Deduction of tax at source d. Identity of the Commission Agent, I.T. return 4 Assessment Year 2010-11 M/s. Rattan Steel Supply Co. In my view, the assessee has discharge the burden of proof that lay on it on this issue of payment of commission. Written agreements are not mandatory. When sale is effected through one’s contacts no proof of liason work can be produced. In that day communications net work one need not visit persons to make a safe.
In any event one cannot ask the commission agent to maintain such deduction. What has to be seen in the business practice followed in the business of trading in iron and steel. It is well known that in some business, trade goes on a word of mouth. In the case on hand the assessee has discharged the burden of proof that lay on it. The AO had made enquiry and has not found anything adverse. All notices issued u/s 133(6) were positively rendered to. Under this circumstances, in my opinion no disallowance can be made.
In view of the above discussion, we delete the disallowance and allow the ground on commission expenses. On the second issue of Motor Car expenses of Rs. 23,371/- an element of personal use cannot be ruled out. Hence, in my view this disallowance is reasonable and does not call for any interference. Hence this ground is dismissed.