ASHLAR BUILDING SOLUTIONS INDIA PVT LTD,VIZIANAGARAM vs. PRINCIPAL COMMISSIONER OF INCOME TAX-1, VISAKHAPATANAM

per the provisions of section 263 of the Act, considered the order

of the Ld. AO as erroneous and prejudicial to the interests of the

Revenue. The main contention of the Ld. Pr. CIT is that the

assessee has claimed an expenditure of Rs. 7.61 Crs as

commission paid to M/s. Savitri Steel and Rerollings Pvt Ltd,

Hyderabad. The Ld. Pr. CIT also observed that the assessee is

based in Vizianagaram and it was using services as a commission

agent from Hyderabad for promoting its products. Based on the

suspicion, the Ld. Pr. CIT issued show cause notice on

31/1/2023 through ITBA and was served on the assessee. In

response, the assessee furnished the written submissions stating

that the assessee company is very new to the market and the

Steel Industry and therefore has appointed M/s. Savitri Steel and

3 Rolling Private Limited as its agent to promote the sales of the

assessee company. It was also submitted before the Ld. Pr. CIT

that subsequent to appointment of agent, the assessee company

has achieved the sales of Rs. 250.76 Crs which is approximately

six times to the turnover of the earlier year. The assessee also

stated that it has entered into commission agreement for

payment of commission at Rs. 1250/- per Metric Ton to achieve /

penetrate into the market. The assessee also submitted that the

payment of commission was made through banking channels and

Tax Deducted at Source on such commission payments.

Considering the submission of the assessee, the Ld. Pr. CIT

opined that the transaction is abnormal in nature which is

approximately 3.03% on the total turnover of the assessee

company. The Ld. Pr. CIT therefore directed the Ld. AO to verify

the entire transaction with reference to the genuineness of the

payment of commission and remitted the matter back to the file

of the Ld. AO. Further, the Ld. Pr. CIT also observed that there

are discrepancies in the GST shown in the commission bills and

GST reported in the Audit Report. The Ld. Pr. CIT also directed

the Ld. AO to verify the transaction with regard to immovable

properties between M/s. Maa Mahamaya Power Limited and the

assessee-company. The Ld. Pr. CIT directed the Ld. AO to

provide the sufficient opportunities of being heard to the

assessee thereby setting aside the decision of the Ld. AO to pass

suitable orders in accordance with law. Aggrieved by the order of

the Ld. Pr. CIT, the assessee is in appeal before us by raising the

following grounds of appeal:

“1. That on the facts and in the circumstances of the case and in law, the order dated 29/03/2023 passed U/s. 263 of the Act by Pr. CIT-1, Visakhapatnam is illegal and void-ab-initio.

above grounds is that the order of the Ld. Pr. CIT passed U/s.

263 of the Act is illegal and void-ab-initio. On this issue, the Ld.

AR submitted that even though the assessee-company

commenced its business in the FY 2015-16, it could not

penetrate into the market. Therefore, the assessee engaged an

agent in the AY 2018-19 to market its products for agreed

5 commission of Rs. 1250/- per Metric Ton. The Ld. AO also

submitted that this business decision of the assessee has

increased the turnover by six times during the impugned

assessment year. Further, the Ld. AR submitted that the

assessee has paid commission through banking channels and has

deducted the tax at source in accordance with law. He also

submitted that net profit for the impugned assessment year was

also increased by 5.5 times. The Ld. AR vehemently submitted

that the Revenue cannot question the business decisions of the

assessee and the payment of commission is in accordance with

the normal business practice. Countering the arguments of the

Ld. AR, the Ld. DR submitted that huge commission of Rs. 7.61

Crs cannot be justified. The Ld. DR also submitted that net

profit remained the same. The Ld. DR also submitted that the

commission was credited in its books of accounts only in the end

of the year and hence should not be considered. The Ld. DR fully

supported the order of the Ld. Pr. CIT. In response, the Ld. AR

once again reiterated that the net profit of the assessee during

the impugned assessment year also increased by 5.5 times as

compared to the earlier assessment years. He once reiterated

that the business decision of the assessee cannot be questioned

6 by the Revenue which was also confirmed by various judicial

pronouncements.

available on record as well as the orders of the Ld. Revenue

Authorities. We find from the submissions made by the Ld. AR

that the assessee has entered into a commission agreement with

M/s. Savitri Steel and Rerolling Private Limited to market its

products for an agreed commission of Rs. 1250/- per Metric Ton.

The agreement is placed in paper book page-19. Further, we find

that the assessee has deducted tax at source on the commission

payment made to the agent viz., M/s. Savitri Steel and Rolling

Private Limited. This fact is also evidenced in the Tax Audit

Report filed by the assessee. Further, we find that various

judicial pronouncements have held that the business decision of

the assessee cannot be questioned by the Revenue. However,

only the genuineness of the transaction needs to be verified. In

the instant case, there is an agreement between the parties and

the payments have been made through banking channels after

deduction of tax at source. Merely because, the commission

payments were huge in nature, it cannot be a ground for

questioning the genuineness of the transactions in the absence of

any adverse material on record. Further, the argument of the Ld.

7 DR that the commission have been credited only at the year-end

could not be accepted because the payment of commission has

been made by the assessee on regular intervals during the year,

while calculation of the commission based on supplies was

credited in the books of accounts on 31/3/2018. The copy of

the ledger account was also produced before us by the Ld. AR.

Further, with respect to the capital gains as observed in the

order of the Ld. Pr. CIT passed U/s. 263, we find from the

submissions of the Ld. AR that the assets form part of the books

of account. Further, the Ld. AR also submitted the copy of Form

26QB and the Sale Deed before us. Further, the assessee has

also provided sample confirmation letters for the sales made

through the agent from the ultimate buyer. The difference in

GST calculation and reported does not have any relevance in the

instant case. We therefore find no merit in the arguments of the

Ld. DR thereby considering the order passed by the Ld. Pr. CIT

U/s. 263 of the Act deserves to be quashed. Accordingly, we

allow the grounds raised by the assessee.

8 Pronounced in the open Court on 28th February, 2024.

Sd/- Sd/- (दु�वू�आर.एलरे�डी) (एसबालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखासद�य/ACCOUNTANT MEMBER Dated :28.02.2024 OKK - SPS

आदेशक���त�ल�पअ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee–Ashlar Building Solutions India Private 1. Limited, 2-98, Shop No.1, Jammandipeta Village-1, Kota, Vizianagaram, Andhra Pradesh-535161. राज�व/The Revenue –Principal Commissioner of Income Tax-1, 2. Aayakar Bhavan, Dabagardens, Visakhapatnam, Andhra Pradesh- 535161. 3. The Principal Commissioner of Income Tax, आयकरआयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, �वशाखापटणम/ DR,ITAT, 5. Visakhapatnam गाड�फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER

Sr. Private Secretary ITAT, Visakhapatnam