2017 (1) TMI 1399 - AT - Income Tax

Disallowance of payment of commission - Held that - There is enhancement of rate of commission from 2.5% to the rate of 3.25%; secondly some of the commission agents are also the relatives of the assessee. Such a basis drawn by the AO for making the disallowance cannot be sustained for the reason that the Ld. CIT(A) has clarified that overall rate of commission paid is @ 3% on the total turnover and not 3.25% and the commission has been paid uniformly to all the parties including the relatives. Out of 11 party only 2 are relatives therefore it cannot be held that any unreasonable payment have been made to the relatives as compared to the outsiders. Such an ad-hoc disallowance of payment of commission made by the AO cannot be sustained and finding of the CIT(A) is thus affirmed. - Decided in favour of assessee. Addition u/s 40(a)(ia) - Held that - Following the decisions of the Hon ble Delhi High Court in Landmark Townships Pvt. Ltd. 2015 (9) TMI 79 - DELHI HIGH COURT we hold that in case the recipients have included interest income in their return of income then no disallowance should be made. Accordingly the AO is directed to verify the same and take remedial measures after giving a reasonable opportunity of being heard to the assessee. The assessee is also directed to produce the relevant documents before the AO.

Summary

Issues:
1. Addition to Gross Profit
2. Excess Commission Paid
3. Non-Deduction of TDS and Submission of Form 15G/15H

Addition to Gross Profit:
The appeal filed by the revenue contested the deletion of an addition to the Gross Profit made by the Assessing Officer (AO) due to incomplete books of account and lack of stock register maintenance. The AO rejected the books of accounts and estimated gross profit, leading to a tax difference. However, the Commissioner (Appeals) directed the AO to delete the addition after considering the higher net profit compared to the previous year and the absence of evidence showing inflation or suppression in sales or purchases.

Excess Commission Paid:
The AO disallowed excess commission paid by the assessee based on a comparison with previous years and relationships with commission recipients. The Commissioner (Appeals) found that the AO's approach was ad hoc and lacked proper verification with commission agents. The deletion of the addition was directed as the commission payments were made through account payee cheques and the rate of commission was consistent with turnover.

Non-Deduction of TDS and Submission of Form 15G/15H:
The AO disallowed interest payment due to non-deduction of TDS on certain amounts and lack of submission of Form 15G/15H. The Commissioner (Appeals) directed the AO to delete the addition as the assessee had obtained Form 15G/15H from depositors, relieving them of TDS liability. However, the AO was instructed to verify the submission of relevant documents and provide a reasonable opportunity for the assessee to be heard.

The Tribunal upheld the Commissioner (Appeals) decision on all grounds, citing similar cases from previous years involving the same assessee. The Tribunal dismissed the revenue's appeal on the grounds of Gross Profit addition and Excess Commission Paid, following the earlier decisions. Regarding the Non-Deduction of TDS and Submission of Form 15G/15H, the Tribunal directed the AO to verify the income inclusion by recipients before making any disallowances, emphasizing compliance with the relevant provisions.

The appeal was partly allowed, and the order was pronounced on 12/01/2017.