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Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dated 05/02/2016 of CIT(A)-16,Mumbai, the Assessee has filed the present appeal.Assessee-company,engaged in the business of development of computer software and trading in computer software/hardware, filed its return of income on 20/09/ 2011,declaring Loss of Rs.29.44 lakhs.The AO completed the assessment u/s.143(3)on30 03. 2014,determining its income at Rs.37.91 lakhs. 2.Vide its letter,dtd.14.2.2017,the assessee has filed additional evidences stating that same were not produced before the lower authorities, that one of the ground for part disallowance for commission payment was non verification of PAN and addresses of the parties, that the AO had not verified the data from the TDS data base.The assessee ,alongwith its application, also submitted the names,PAN.s.,addresses of the parties to whom commission was paid,the net profit comparative chart ; P&L Accounts for the AY.s 2008-09, 2009-10 and 2011-12. It was also stated that the evidence would go to the root cause of the matter.The DR left the issue of admission of additional evidences to the discretion of the Bench. We find that the assessee had filed details with regard to commission payment, furnishing the details of PA No. and addresses of recipients of commission.These documents were not available to AO/FAA.Therefore, we are of the opinion that same should be admitted as additional evidences as per the provisions of Rule 29 of the ITAT Rules. 3.Solitary Ground of appeal is about disallowance of commission of Rs.29.48 lakhs. During the assessment proceedings the AO found that the assessee had paid commission on sales to
2890/M/16(11-12) M/s. Datacomp Web Technologies (India) Pvt.Ltd. its dealers and employees.After comparing the commission payments of two assessment years last year and the year under consideration he observed that there was disproportionate increase in commission payment, he directed the assessee to explain as to why disproportona -te expenses should not be allowed. After considering the submission of the assessee dtd., 24. 3.2014,the AO held that the assessee had complied with the provisions of Section 194H of the Act and made TDS on commission paid to dealers and to the employees, that merely complying with the statutory provisions would not make expenses allowable, that the assessee had to justify that the expenses were incurred for business purposes, that in the preceeding year the rate of commission to the employees worked out at 4.67 % and 14.95% for the dealers, that during the year under consideration the assessee paid commission to the employees and dealer @5.19 % and 16.78% respectively, that generally the commission rate were fixed, that the inflation had no bearing on the rate of commission, that there could not be disproportionate increase in the rate of commission , that the assessee had merely provided the names of the parties, that it did not furnish addresses of the recipients of commission, that it did not furnish details of services rendered by them. Finally he held that 15% of sales was reasonable commission, that the excess amount had to be disallowed as non business expenditure. The disallowance on account of commission to dealers worked out to Rs.23.70 lakhs. He further observed that commission was also paid to 95 employees, that commission of 4.75% would be reasonable.Accordingly,he allowed commission of Rs.63.2 lakhs and balance commission of Rs.5.77 lakhs was disallowed.Thus,the disallowance worked out to Rs.29.48 lakhs.
4.Aggrieved by order of AO,the assessee preferred an appeal before the First Appellate Authority(FAA).The assessee argued that the AO had disallowed the expenses merely on presumptions,that it had furnished all necessary details during the assessment proceedings, that the expenses were made for business purposes, that expenses were incurred through banking channels,that the nature of the business was such that percentage of commission from dealer to dealer basis would vary,that after its approval commission to dealer/staff was finalised, that same could not be compared on total sales and commission value of last year. It relied upon certain case laws. After considering the submissions of the assessee and the assessment order the FAA held that the AO had called for details regarding names of dealers/staff members,quantum of commissions paid etc.,that no convincing explanation was furnished before AO, that he made proportionate disallowances of Rs.29.48 lakhs,that during the appellate proceedings no 2
2890/M/16(11-12) M/s. Datacomp Web Technologies (India) Pvt.Ltd. convincing evidences were furnished, in absence of explanation supported with documentary evidences claim made by assessee could not be accepted.Finally,he upheld the addition made by the AO.
5.During the course of hearing before us, the Authorised Representative (AR) stated that during the year under consideration the assessee had tried to focus on some new products wherein it had incurred the additional expenses for marketing and seminars, that assessee had submitted all the supporting vouchers, bills of payment of commission, that in the last year assessee paid commission @14.95%, that this year payment to agent was @ 16.78%, that there was no abnormal higher payment during the year under appeal. He relied upon the cases of Hero Cycles(P.) Ltd. (63taxmann.com308); IFB Agro Industries Ltd.(63SOT207). The Departmental Representative (DR) stated that commission of payment was excessive.