ITO 14(1)(3), MUMBAI vs EXIM TRADELINKS, MUMBAI

Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

For Appellant: Shri. Sanjiv M Shah, AR

For Respondent: Shri. B.S. Bist, DR, Shri. Sanjiv M Shah, AR

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI ASHWANI TANEJA, AM (A.Y:2011-12) Income Tax Officer M/s Exim Tradelinks 14(1)(3), Mumbai. 611, Girgaum Road, Ground Room No.204, 2nd Floor, Earnest Vs. Floor, Opp. Wadia Agaiary House, Nariman Point, Mumbai-400002 Mumbai-21 PAN No.AAAFE1235D Appellant .. Respondent Revenue by .. Shri. B.S. Bist, DR Assessee by .. Shri. Sanjiv M Shah, AR Date of hearing .. 14-12-2016 Date of pronouncement .. 14-12-2016 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the Revenue is arising out of the order of CIT (A)-25, Mumbai in appeal No. CIT (A)-25/IT-363/14(1)(3)/13-14 dated 18-07-2014. The Assessment was framed by ITO-14(1)(3), Mumbai for the A.Y. 2011-12 vide order dated 23-01-2014 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

The only issue in this appeal of Revenue is against the order of CIT(A) deleting the addition being outstanding liability for commission towards Shri Fahimi Toihir. For this Revenue has raised following two grounds: - “1. On the facts and in the circumstances, the Ld. CIT(A) has erred in deleting the addition of Rs.43,83,575/- being outstanding liability for commission towards Shri Fahimi Toihir which was not reflected in the books of accounts maintained by the assessee firm. 2. On the facts and in the circumstances, the CIT(A) has erred in allowing, the outstanding liability of commission as the assessee has not proved the genuineness of commission payable during the course of the assessment proceedings as the onus lines with the assessee to prove the same.””

Briefly stated facts are that the assessee is a partnership firm involved in the business of export of Textiles made garments, towels, etc. During the year under consideration, the AO noticed from the accounts of the assessee that there is outstanding commission payable to Shri Fahimi Toihir for an amount of Rs.43,83,575/- as on 31-03- 2011 under the head current liabilities. According to AO, the assessee could not filed the Shri. Fahimi Toihir is a commission agent and even ledger account in respect of commission does not show that commission payable to Shri Fahimi Toihir is genuine. He further noted that the assessee is unable to prove that the commission is due and payable to assessee on account of outstanding commission and sale made to Assiand Abdou during F.Y. 2010-11. Accordingly, he disallowed the outstanding liability by invoking the provisions of Section 41(1) of the Act. Aggrieved, assessee preferred appeal before CIT(A), who allowed the claim of the assessee by observing in Para 4.5 as under: -

4.5. 1 have perused the assessment order, remand report, rejoinder, facts of the case and appellant's submissions very carefully. The appellant has contended that the addition as ceased liability u/s 41 (1) is made without appreciating and correctly interpreting the evidence filed and without giving sufficient time. I find that the year of provision of the commission expense is AY 2009-10 and not AY 2011-12 and the assessee had given all the details to establish the nature of expense, name of payee, etc and the assessment was completed a/s 143(3) of the Income Tax Act, 1961 and the AO had not disallowed such expenses. The assessee had provided the ledger of Assiand Abdou which reflected the sales made by the assessee. The commission to Shri Fahirni Toihir was payable by the assessee only after obtaining the export order from Assiand Abdou. The admission of expense in one year which was allowed could not be disallowed by another officer in subsequent year especially when there were no changes in the accounting system adopted by the appellant and especially when no procedure prescribed under the Act was followed to disallow the same. No new facts were brought out by Assessing Officer. In fact, onus was on the Assessing Officer to show as to how the amount which was due and payable had become non payable. No such material was brought in by the Assessing Officer to show that the amount was not payable. Further in a commercial transaction, it is only one of the parties to the contract that can decide whether the amount was payable or not and not the third party. The appellant had paid a sum of Rs.2,76,875/-and the aforesaid payment was made to the commission agent Fahirni Toihir only. The Assessing Officer had accepted such payments as commission and the liability of payment was continuing, existing and subsisting. The payment of commission was allowed in AY 09-10 after due verification by A.O and hence it was evident that the commission was payable to the agent. The appellant also produced the copy of bank advice showing the payment made to the agent. This payment advice was dated 12/09/2012. It is evident that commission was not only partially paid but balance amount is payable to the agent. It is seems to be an undisputed fact that the said commission payable by appellant is not waived or unilaterally written off by the receiver of commission, and also the payment of said amount was not time barred in relevant A.Y. Therefore, it cannot be considered as ceased liability u./s 41(1) of the Act. It cannot be interpreted that liability has ceased to exist and there is no further payment to be made. The appellant’s reliance on various case laws referred in the written submission also supports the claim of the appellant and does not seem to be out of context.

Aggrieved, now Revenue is in appeal before the Tribunal. Page 2 of 3

We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case are that this provision for commission expenses was made in A.Y. 2009-10 and assessee has filed all the details to establish the claim of commission expenses including the names of payees etc. The assessment was completed u/s 143(3) for the A.Y. 2009-10 and accepted the commission expenses as it is. Further, the assessee provided ledger copy of Assiand Abdou, which clearly reflects that the assessee has made sales and commission was payable to Shri. Fahim Tohir only after obtaining export orders from Assiand Abdou. This expenses were accepted in A.Y, 2009-10 and party is very much in existence, this cannot be disallowed in the relevant A.Y. 2011-12 by invoking the provisions of Section 41(1) of the Act for the reason that the assessee has paid a sum of Rs.2,76,875/- and this payment was made to Shri Fahim Tohir the commission agent. The AO has accepted such payment as expense and the liability of the payment was continuing and existing. In view of these facts, we are of the view that the CIT(A) has rightly deleted the addition and we confirm the same. This issue of Revenue’s appeal is dismissed.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 14-12-2016.

ITO 14(1)(3), MUMBAI vs. EXIM TRADELINKS, MUMBAI