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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the revenue is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 29.05.2023, which in turn arises from the order passed by the A.O under Sec.144 r.w.s. 144B of the Income-tax Act, 1961 (in short ‘the Act’) dated 30.08.2022 for the assessment year 2020-21. The revenue has assailed the impugned order on the following grounds of appeal before us:
“1. Whether in the facts and in the circumstances of the case and in lams the Id. CIT(A), NFAC is justified in deleting the additions of Commission paid of Rs.3,87,04,969/- made-u/s 69C of the I.T. Act, 1961 merely by saying that TDS has been done on the expenditure whereas the assessee had not submitted any replies or justification about the Commission expenditure at all during the assessment proceedings? 2. Whether in the facts and in the circumstances of the case and in law, the Id. CIT(A), NFAC is justified in deleting the additions of Rs. 3,87,04,969/- on the basis of documents submitted by the assessee without following the procedure laid down in Rule 46A(3) of the Income Tax Rules, 1962? 3. Whether in the facts and in the circumstances of the case and in law, the Id. CIT(A), NFAC is justified in deleting the additions of Rs. 3,87,04,969/- without passing a speaking order without hearing the Assessing Officer or even calling for a remand report ? 4. Any other grounds as may be pressed at the time of hearing.”
Succinctly stated, the assessee company had e-filed its return of income for A.Y.2020-21 on 23.11.2020, declaring an income of Rs.50,190/-. Subsequently, the case of the assessee company was selected for scrutiny assessment u/s. 143(2) of the Act.
3 ITO, Ward-1(1), Raipur Vs. Rajsway Direct Trading Private Limited,
During the assessment proceedings, it was observed by the A.O. that the assessee company had raised a claim for deduction of commission expenditure of Rs.3,87,04,969/-. The A.O., in order to verify the aforesaid claim of expenditure, issued notice u/s. 142(1) of the Act to the assessee on 02.12.2021 and 02.03.2022, wherein it was directed to furnish the requisite details. The assessee company, despite sufficient opportunity, had failed to come forth with submission. Accordingly, the A.O., vide “Show Cause Notice” (SCN) dated 10.03.2022, called upon the assessee company to explain why assessment in its case may not be framed based on his best judgment u/s 144 of the Act. However, as the assessee did not come forth with any explanation, the A.O., thus, was constrained to proceed and frame the assessment on the basis of material available on record u/s. 144 of the Act.
As the assessee company had failed to place on record any material which would substantiate its claim for deduction of commission expenditure of Rs.3.87 crore (approx.), despite the fact that the A.O had, inter alia, vide his notice u/s. 142(1) dated 02.12.2021 directed him to furnish complete details of the commission paid; name, PAN, and address of the persons to whom the commission was paid; and details of nature of work; date of payment of TDS, the same, thus, was disallowed vide order passed u/s. 144 r.w.s. 144B dated 30.08.2022. Accordingly, the A.O. vide his order passed u/s. 144 r.w.s. 144B dated 30.08.2022, after disallowing the assessee’s claim for deduction of commission expenditure of Rs.3.87 crore (supra), determined its income at Rs.3,87,55,159/-.
4 ITO, Ward-1(1), Raipur Vs. Rajsway Direct Trading Private Limited,
Aggrieved the assessee company carried the matter in appeal before the CIT(Appeals). Observing, that the assessee company had demonstrated that tax was deducted at source (TDS) on the commission payment and the TDS return in Form 26Q had been uploaded in time, the CIT(Appeals) being guided by said facts, vacated the addition/disallowance of the assessee’s claim for deduction of Rs.3.87 crore (supra) and allowed the appeal.
The revenue being aggrieved with the order of the CIT(Appeals) has brought the matter in appeal before us. As the assessee-respondent, despite having been intimated about the hearing of the appeal, had failed to put up an appearance before us; therefore, we are constrained to proceed with the matter as per Rule 24 of the Income Tax Appellate Tribunal Rules, 1963, and dispose the appeal after hearing the Ld. Departmental Representative (for short ‘DR’) and perusing the material available on record.
As is discernible from the records, it is a matter of fact that the assessee company, despite specifically being directed by the A.O to substantiate its claim for deduction of commission expenditure of Rs.3.87 crore (supra), had failed to place on record any material in support thereof. On appeal, the CIT(Appeals) being guided by the fact that the assessee company had duly deducted TDS on the commission payment and had uploaded its quarterly TDS return in Form 26Q, found favor with the claim of the assessee and vacated the disallowance of the commission expenses of Rs.3.87 crore (supra) that the A.O. had made For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as under:
5 ITO, Ward-1(1), Raipur Vs. Rajsway Direct Trading Private Limited,
“6.4 I have perused the matter. It is noticed from the documents submitted by the appellant, the expenses pertain to commission paid is not disputed. The appellant has demonstrated that the TDS was already deducted on all such payments and Form 26Q has been uploaded in time. Hence, the amount was allowable as an expense.”
We have given thoughtful consideration and are unable to comprehend the very basis on which the unsubstantiated claim for deduction of commission expenditure of Rs.3.87 crore (supra) had been vacated by the CIT(Appeals). Admittedly, it is a matter of fact borne from the record that the assessee company, despite multiple opportunities and specific direction by the A.O to substantiate its claim for deduction of commission expenditure of Rs.3.87 crore (supra), had failed to place on record any material in support thereof. It was, thus, in light of the non-co- operative approach adopted by the assessee company, that the A.O. had framed the best judgment assessment u/s. 144 r.w.s. 144B of the Act dated 30.08.2022.
We have thoughtfully considered the issue in hand, i.e., as to whether or not the CIT(Appeals) is right in law and facts of the case in vacating the disallowance of commission expenditure of Rs.3.87 crore (supra) so made by the A.O and are unable to persuade ourselves to concur with the view taken by him. As per Section 37(1) of the Act, the allowability of an expenditure other than those contemplated in Sections 30 to 36 of the Act, not being in the nature of a capital expenditure or personal expenditure of the assessee pre-supposes a precondition that the same had been laid out or expended wholly and exclusively for the purposes of the business or profession. As the assessee company had grossly failed to place on record any material in the course of the proceedings before the lower authorities that would
6 ITO, Ward-1(1), Raipur Vs. Rajsway Direct Trading Private Limited, satisfy the aforesaid requisite condition for allowability of commission expenditure u/s. 37(1) of the Act; therefore, we are unable to persuade ourselves to concur with the view taken by the CIT(Appeals) who had vacated the said disallowance on the ground that the assessee company had duly deducted tax at source on the aforementioned expenditure and filed TDS return in Form 26Q within the stipulated time period. As the allowability of the aforesaid expenditure is dependent on the satisfaction of the condition set out in Section 37(1) of the Act, and not the fact that as to whether or not the assessee had deducted tax at source on the same and filed corresponding TDS return within the stipulated time period, we, thus, find it incomprehensible as to how the aforesaid claim for deduction of commission expenditure has been vacated by the CIT(Appeals).
As the assessee company had neither before the lower authorities nor in the course of the proceedings before us, placed on record any material which would substantiate the satisfaction of the requisite conditions for allowability of its claim for deduction of the commission expenditure as per mandate of Section 37(1) of the Act; therefore, we find no infirmity in the view taken by the A.O who had rightly disallowed the same. Accordingly, in terms of our aforesaid observations, we set aside the order of the CIT(Appeals) and uphold the disallowance of Rs.3.87 crore (supra) made by the A.O.
7 ITO, Ward-1(1), Raipur Vs. Rajsway Direct Trading Private Limited,
In the result, the appeal of the revenue is allowed in terms of our aforesaid observations.
Order pronounced in open court on 11th day of December, 2023.