GENNEX CRESA PARTNERS CONSULTANTS P.LTD,MUMBAI vs. ITO WD 8(1)(4), MUMBAI

Assessee by : Shri Firoze Andhyarujina(AR) Revenue by : Shri K.P.P.R. Murthy (DR) Date of hearing : 20.07.2016 Date of Pronouncement : 22.07.2016 O R D E R

PER PAWAN SINGH, JM:

Disallowed by CIT(A) Disallowed by ITO Out of pocket Expenses Rs. 2,40,000/- 2,40,000/- Business Promotion Expenses Rs. 2,23,441/- 2,23,441/- Salary Expenses to staff Rs. 6,42,695/- 6,42,695/- Commission Expenses Rs. 37,88,225/- 37,88,225/-

Commission Expenses of Rs. 37,88,225/-. Aggrieved by the order of AO assessee filed appeal before the CIT(A) but without any success. Thus the present appeal is filed before us. 3. We have heard Ld. AR for assessee and Ld. DR for revenue and perused the material available on record. During the proceedings before us in connection with the disallowance No. (i) to (iii) of Ground of appeal

, the Ld. AR of the assessee submits that disallowance @ 20% is at higher side. In support of the same ld AR claimed that percentages of disallowance of various expenses by AO in assessee’s own case in other assessment years were at lower side. Ld AR submits that nothing was disallowed in assessment year 2011-12, only 5% was disallowed in assessment year 2005-06 and 10% was disallowed(adopted) in assessment year 2012-13. Therefore, the 20% disallowance of the expenses in the year under consideration is on higher side. After hearing both the parties, we find that Department is not consistent when it came to the extent of disallowance on this counts. Considering the percentage varying from 0% to 5% and arises to 10%, we are of the opinion that 20% disallowance adopted by AO is without any sustainable reasons. Therefore, the AO is directed to adopt 10% disallowance at par with assessment year 2012-13, with regard to (i) out of pocket expenses,(ii) business promotion expenses and (iii) salary expenses to staff. Thus this part of ground of appeal is partly allowed.

4. The remaining part (iv) of Ground of appeal is with regard to Commission expenses of Rs. 37,88,225/-. Ld. AR of the assessee argued as the assessee engaged in the business of corporate consultant services, offering exclusive tenant representation service to corporate real estate portfolio of companies, assessee made expenses for delivering transaction management and professional services to various corporate clients through their associate of different locations, the Commission was paid to the parties to identify the City, location and business prospect etc. Expenses claimed are genuine one. All the parties were genuine to whom the commission was paid. Ld. AR further argued that assessee has given all details of the persons to whom the commission was paid which included their PAN Card, addresses and details of banking transactions. Ld AR of the assessee argued that finding of AO and of Learned CIT (A) is perverse. Ld DR for Revenue argued that the name and address of the person to whom commission was paid was not verified. Further , among the persons, whose names were furnished, two of them were closely related with the Director of the assessee-company i.e. Smt. Sushila Singh is the mother of Ashok Kumar( Director) and Smt. Manju is wife of Ashok Kumar. Ld DR for revenue argued that the claim of Commission of assessee is bogus.

Ld DR for revenue further argued that during the assessment proceeding, the AO issued notice to the various parties u/s 133(6) of the Act, out of which two notices were returned back, one notice was duly served and one returned back as unclaimed. Ld DR for Revenue vehemently argued that claim of commission of assessee is bogus and the findings of the lower authority do not require any interference of this Tribunal. In the rejoinder arguments ld AR for assessee argued that payment made to relatives of Directors is allowable for business activity 5. We have considered the rival contentions of the partiers and gone though the order of authorities below. During the assessment assessee claimed to have made the commission payments of Rs. 83,97,720/-. The assessee was asked to furnish the details of commission paid along with copies of bill etc. Assessee furnished party-wise details of commission payments made during the year including their PAN Card and addresses and details of payments along with confirmation. AO issued notice u/s 133(6) to various parties including to Manbabu Rai, Anand Sinha, R.N. Singh and Phula Rani Prasad. Notice addresses to these parties were returned by the postal authorities. Three notices were returned with the remark “not known” and notice address to Phula Rani Prasad as unclaimed. The AO concluded that no details/documents were furnished to justify the claim of commission, hence, the amount of commission of Rs. 9,98,000/- to Anand S. Sinha, Rs. 8,50,500/- to Manbabu Rai, Rs. 9,68,775/- to Phula Rani Prasad and Rs. 9,70,950/- to R.N. Singh was disallowed. The Ld. CIT(A) while considering this Ground sought the remand report from AO. In the remand report it was mentioned that AO conducted investigation from the respective bank accounts wherein the commission payment made by the assessee were credited in the first instance. But in fact, the amounts were siphoned off by the Directors, or paid out in cash ultimately. There was no proof of services rendered actually. Smt. Phula Rani Prasad (Pula Rani Prasad) is the mother of Smt. Manju Kumar, Director of the assessee-company and her residential address is also of the Director of the assessee-company. She has no PAN Card and not assessed to Tax. She is 63 years of age and no capacity to render such professional services as claimed by assessee-company. Another person namely Smt. Sushila Singh is the mother of Ashok Kumar, Director of the assessee-company. She also declared her residential address as of Ashok Kumar. She is 76 years old has no PAN Card. Not assessed to Tax and no capacity or qualification to render such professional services as claimed by assessee-company. The assessee-company has been deposited the amount in the joint account of Smt. Sushila Singh and Ashok Kumar. Further, the payment to R. N. Singh has been enchased in the bank account held in the joint name of Smt. Phula Rani