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Income Tax Appellate Tribunal, ‘A’ SMC BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN
आदेश /O R D E R
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 5, Chennai, dated 11.02.2016 and pertains to assessment year 2011-12.
Shri T.N. Seetharaman, the Ld.counsel for the assessee, submitted that the only issue arises for consideration is with regard to disallowance of commission paid to the extent of `22,25,873/-.
The Ld.counsel submitted that the Assessing Officer appears to have recorded statements under Section 131 of the Income-tax Act, 1961 (in short 'the Act') from the persons to whom the commission was paid. However, the Assessing Officer has not furnished the copies of the statement to the assessee, therefore, the assessee had no occasion to respond to the so-called statements said to be recorded from the commission agents. Without furnishing the copies of the statements said to be recorded from the recipients of the commission, the Assessing Officer concluded that the recipients of the commission have not rendered any service, therefore, he disallowed the payment of commission to the extent of `22,25,873/- According to the Ld. counsel, the assessee has to be given an opportunity to go through the statements said to be recorded from the commission agents and opportunity has to be given for cross- examination.
On the contrary, Sh. P. Radhakrishnan, the Ld. Departmental Representative, submitted that the assessee was shown the statements recorded by the Assessing Officer under Section 131 of the Act. Since the assessee was aware of the statements, according to the Ld. D.R., now the assessee cannot claim that the statements were not furnished to him. On the query from the Bench, whether the statements were furnished to the assessee, the Ld. D.R. clarified that copies of the statements were not furnished to the assessee, however, it was shown to the assessee. Referring to the assessment order, the Ld. D.R. pointed out that the so-called recipients of the commission could not even furnish the details of the medicines they have supplied. They could not furnish the details of the clients to whom the assessee introduced and other details regarding the services said to be rendered by them. None of the agents provided debit notes or evidence for having actually rendered the service. In the absence of any material, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer.
I have considered the rival submissions on either side and perused the relevant material available on record. During the course of assessment proceeding, the Assessing Officer summoned the recipients of the commission under Section 131 of the Act and statements were also admittedly recorded from them. The Assessing Officer, in fact, placed reliance on the statements recorded from the so-called commission agents and found that there was no evidence for the services actually rendered by them.
Admittedly, the copies of so-called statements recorded under Section 131 of the Act were not furnished to the assessee. The Revenue claims that the statements were shown to the assessee.
This Tribunal is of the considered opinion that when the Assessing Officer is placing reliance on the statements recorded under Section 131 of the Act, the judicial propriety demands that copies of the statements should be served on the assessee and an opportunity should also be given to cross-examine. Since such an exercise was not done, this Tribunal is of the considered opinion that there was gross violation of principles of natural justice in placing reliance on the statements recorded under Section 131 of the Act. Therefore, this Tribunal is of the considered opinion that the Assessing Officer shall reconsider the issue after furnishing the copies of the statements recorded under Section 131 of the Act and providing opportunity to the assessee to cross-examine the so-called deponents. Accordingly, the orders of the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall serve the copies of the statements recorded under Section 131 of the Act to the assessee and also give opportunity to cross-examine those persons who were examined under Section 131 of the Act and thereafter decide the issue afresh in accordance with law after giving reasonable to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 18th August, 2016 at Chennai.