2009 (12) TMI 700 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance of commission payments by the Commissioner of Income-tax (Appeals).
2. Evidentiary value of statements recorded during the survey.
3. Legality and public policy concerns regarding commission payments.
4. Consistency of findings across different assessment years.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Commission Payments:
The core issue in these appeals revolves around the disallowance of commission payments made by the assessee to various sub-agents. The Assessing Officer (AO) disallowed these payments on the grounds that the assessee failed to produce evidence proving the services rendered by the sub-agents. However, the Commissioner of Income-tax (Appeals) (CIT(A)) deleted the disallowance, noting that the sub-agents appeared before the AO during remand proceedings and confirmed the receipt of commission and the services rendered. The CIT(A) found no material discrepancies in their statements or documents, thus concluding that the disallowance was unwarranted.

2. Evidentiary Value of Statements Recorded During the Survey:
A significant point of contention was the evidentiary value of the statement given by the assessee during the survey under section 133A, where the assessee admitted that the commission payments were bogus. The CIT(A) and the Tribunal noted that statements recorded under section 133A do not have the same evidentiary value as those recorded under sections 131 or 132(4), which are on oath. The Tribunal referenced the Andhra Pradesh High Court's decision in CIT v. Shri Ramdas Motor Transport, emphasizing that confessional statements without corroborative evidence cannot be used solely for making additions.

3. Legality and Public Policy Concerns Regarding Commission Payments:
The Revenue argued that the commission payments were against public policy, especially since the dealings involved government organizations like the Indian Navy and Coast Guard. The Tribunal, however, found no evidence that such payments were illegal or prohibited by law. The Tribunal cited the cases of Surya Foods and Agro Ltd. and Asst. CIT v. Jindal Saw Pipes Ltd., concluding that the payments were not against public policy and were therefore deductible under section 37(1).

4. Consistency of Findings Across Different Assessment Years:
The Tribunal noted that the CIT(A) had allowed similar commission payments for the assessment years 1999-2000 to 2004-05, but a contrary view was taken for the assessment year 2005-06. The Tribunal found no distinguishing features between the facts of these years and thus applied the same reasoning across all years. The Tribunal emphasized consistency in judicial decisions, particularly when the facts remain unchanged.

Conclusion:
The Tribunal concluded that the assessee could only be taxed on the net amount retained after paying the sub-agents. The statement made during the survey, which was later retracted, could not be the sole basis for disallowing the commission payments, especially in the absence of corroborative evidence. Consequently, the appeal of the assessee was partly allowed, and the appeals of the Revenue were dismissed. The Tribunal's decision for the assessment year 2005-06 was made applicable to the other years as well, ensuring consistency in the treatment of similar facts.