TRADERS INTERNATIONAL,KOLKATA vs. ITO, WD-39(3), KOLKATA, KOLKATA

The assessee in the present case is a partnership firm, which is engaged in the business of trading of sanitary items. The return of income for the year under consideration was filed by it on 18.08.2004 declaring total income of Rs.1,74,260/-. In the Profit & Loss A/c. filed along with the said return, a sum of Rs.2,09,720/- was debited by the assessee on account of commission and discount. During the course of assessment proceedings, the claim of the assessee for deduction on account of ./2015 Assessment year: 2004-2005 Page 2 of 4 commission and discount was examined by the Assessing Officer. On such examination, he found that a sum of Rs.40,000/- was claimed by the assessee on account of the amount provided for next year, while a further sum of Rs.51,505/- was claimed by the assessee as the amount adjusted to outstanding liabilities for commission. Further going by this narration/ nomenclature given by the assessee to the relevant two amounts, the Assessing Officer was of the opinion that the said amounts did not pertain to the year under consideration but the same were pertained either to the earlier year or to the next year. He, therefore, disallowed the claim of the assessee for commission to the extent of Rs.91,505/-.

On appeal, the ld. CIT(Appeals) confirmed the said disallowance made by the Assessing Officer observing that the assessee could not produce the books of account in order to support and substantiate its claim that the impugned amount of commission was pertaining to the year under consideration. He also held that the photo-copies of vouchers produced by the assessee to show that the outstanding commission was paid off in the next financial year were not sufficient to support and substantiate the claim of the assessee for deduction on account of commission. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and perused the relevant material available on record. It is observed that the claim of the assessee for deduction on account of outstanding commission was disallowed by the Assessing Officer merely on the basis of nomenclature/narration given by the assessee in its books of account and the conclusion drawn by the Assessing Officer on the basis of the said nomenclature/narration that the commission was not pertaining to the year under consideration, was not corroborated by any evidence or material brought on record by him. As explained by the assessee before ./2015 Assessment year: 2004-2005 Page 3 of 4 the ld. CIT(Appeals), the commission provided for was pertaining to the year under consideration but since the same was not paid in that year, it was payable in the next year. The narration/ nomenclature given in the books of account, however, was not happily worded and the said commission having been actually paid by the assessee in the subsequent year, I am of the view that the ld. CIT(Appeals) was not justified in confirming the disallowance made by the Assessing Officer on the ground that the assessee could not produce the books of account to support and substantiate its claim. As submitted by the ld. Counsel for the assesese before me, the appeal of the assessee was heard by the ld. CIT(Appeals) in the year 2015 and due to lapse of time, the assessee could not produce the books of account for the year under consideration, i.e. financial year 2003-04. Moreover, keeping in view the nature of the business of the assessee that is of trading of sanitary items, the payment of commission is a regular feature and as pointed out by the ld. Counsel for the assesese, the claim of the assessee for commission was partly allowed by the Assessing Officer himself while making disallowance only to the extent of Rs.91,505/- out of the total commission of Rs.2,09,720/- claimed by the assessee. Having regard to these facts of the case, I am of the view that the disallowance made by the Assessing Officer on account of commission and confirmed by the ld. CIT(Appeals) is not sustainable and deleting the same, I allow this appeal of the assessee.