2011 (3) TMI 573 - AT - Income Tax

Agricultural income income on account of growing flowers and ornamental plants - Assessing Officer estimated the income on the basis of general information from Chief Agriculture Officer which was never confronted with assessee - Further such general information was with respect of earning from grain crop - But assessee was growing flowers and decorative plants which have been accepted by the revenue in past years - The assessee is holding the land of 24 bighas - Income of Rs.4,26,000/- have been accepted in the immediate preceding year, i.e. 2004- 05 - In this year, income from agriculture is only Rs.2,50,000/- Considering all these relevant facts and the pleadings of the assessee, find that the CIT (A) has rightly accepted the claim of the assessee and sustain the same on the issue. Commission expenditure - The assessee has submitted all the relevant details including the assessment record of persons to whom the commission was paid - Even the statement was recorded of Ms. Monica Bhargav to whom commission was paid - She had categorically stated that she was working for the assessee company and was receiving the commission. The commission income has been assessed in her hands by the order u/s 143(3) of the Income-tax Act for the same assessment year - The copy of the assessment order of Monika Bhargav is placed on record. He finally submitted that the commission has been paid for the business purposes of the assessee - The assessee had deducted necessary TDS on commission paid - No addition could be made - Decided in favour of assessee.

Summary

Issues involved:
1. Addition of agricultural income
2. Disallowance of commission expenditure

Analysis:

Issue 1: Addition of Agricultural Income
The appeal involved the deletion of an addition of Rs.2,00,000 on account of rejection of the claim of agricultural income. The Assessing Officer estimated income at Rs.50,000 based on general information from the Chief Agriculture Officer, which was not confronted with the assessee. The assessee, engaged in trading vehicles, argued that he derived agricultural income from growing flowers and ornamental plants, which had been accepted in previous years. The revenue had accepted agricultural income of Rs.4,26,000 in the preceding year. The ITAT upheld the CIT (A)'s decision, considering the assessee's landholding and past accepted income, sustaining the addition only to Rs.50,000. The grounds of the revenue's appeal were dismissed.

Issue 2: Disallowance of Commission Expenditure
The second issue revolved around the deletion of an addition of Rs.9,00,000 made from the commission paid to the assessee for business purposes. The Assessing Officer accepted part of the commission payment as genuine but deemed the balance as non-genuine. The assessee provided relevant details, including the assessment records of the recipients and statements from them confirming the commission receipt. The ITAT found that the assessee had submitted comprehensive information, including names, addresses, TDS details, and PAN numbers of the recipients. The commission payment was considered a business requirement in the competitive vehicle trading industry. The ITAT upheld the CIT (A)'s decision, dismissing the revenue's appeal on this issue.

The cross objection raised by the assessee was dismissed as the AR did not pursue the issues. Consequently, both the appeal of the revenue and the cross objection of the assessee were dismissed by the ITAT, affirming the decisions of the CIT (A) on both issues.