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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI G.S.PANNU
ORDER The captioned appeal filed by the assessee pertaining to assessment year 2011-12 is directed against an order passed by CIT(A)-4, Mumbai dated 28/07/2016, which in turn, arises out of an order passed by the Assessing Officer under section 143(3)r.w.s.147 of the Income Tax Act, 1961 (in short ‘the Act’) dated 26/03/2015.
The only issue raised by the assessee in this appeal is with regard to a disallowance of Rs.34,69,254/- sustained by the CIT(A) out of commission expenses by applying section 40A(2)(b) of the Act.
In brief, the relevant facts are that the appellant is a company incorporated under the provisions of the Companies Act and is, inter-alia,
(Assessment Year 2011-12) engaged in the business of travel agency. The Assessing Officer noted that the assessee had paid commission to wives of its directors amounting to Rs.34,69,254/-, and asked the assessee to justify such payments under section 40A(2)(b) of the Act . The explanation furnished by the assessee was not to the satisfaction of the Assessing Officer and, therefore, an addition of Rs.34,69,254/- was made to the returned income by invoking section 40A(2)(b) of the Act. The said addition has also affirmed by the CIT(A), against which assessee is in further appeal before me.
Before me, the Ld. Representative for the assessee pointed out that similar payments have been made in the earlier assessment years also and the same stands allowed. The Ld. Representative for the assessee pointed out that in the instant year assessee could not fully substantiate its plea before the lower authorities since the relevant documents, namely, the income-tax returns of the wives of the directors were not available at the relevant point of time. The Ld. Representative for the assessee pointed out that such payments to the wives of the directors are comparable to the payments made in the earlier years and that now the assessee has been able to obtain copies of the income-tax returns filed by the wives of the directors, which substantiates that such incomes have been earned and declared by the recipients. The Ld. Representative for the assessee pointed out that the said additional documents be admitted under Rule 29 of the Income Tax (Appellate Tribunal) Rules,1963.
On the other hand, the Ld. Departmental Representative has pointed out that addition was made by the lower authorities noticing the failure of the assessee to substantiate the impugned payments.
(Assessment Year 2011-12) 6. I have carefully considered the rival submissions. The first and the foremost plea of the assessee in this case is for admission of additional evidences in the shape income tax returns of the wives of the directors, who have been paid the impugned commission expenses. In the Paper Book filed before us, assessee has placed copies of such additional evidence and also the details of payments made to such individuals in other assessment years right from assessment year 2007-08 to 2013-14. It has also been asserted by the Ld. Representative for the assessee that in other assessment years no such disallowance has been made. Considering the entirety of circumstances, in my view, it would be in the fitness of things that the additional documents are admitted for adjudication since the same are germane to decide the controversy in question. Therefore, the matter is restored back to the file of Assessing Officer, who shall consider the plea of the assessee regarding the allowability of expenditure on account of commission payments not only in the light of the additional evidence now sought to be produced, but also on the basis of any other submissions that the assessee may adopt to justify its return of income. Needless to mention, the Assessing Officer shall consider the plea of the assessee and, thereafter pass an order afresh on this limited aspect in accordance with law.
In the result, appeal of the assessee is partly allowed for statistical purposes, as above.
Order pronounced in the open court on 17/05/2017