2012 (3) TMI 59 - AT - Income Tax

Dis allowance of Commission - Sales bill didn t mention assessee as Commission agent - Appellant failed to produce any material in support of agent obtaining orders from these parties - No evidence on support of material transferred and liaisoning - Held That - the appellant has failed to explain why M/s Rohit Traders has failed to raise debit note at the end of the every sale. The appellant has also failed to explain why the claim of commission @2% is on sales much lower than the total sales to these two companies. The sales Hindalco Industries Ltd. is of Rs.103.04 crores but the commission is only of Rs.88.36 lacs. The sales to Essar Steel Ltd. are Rs.97.09 lacs but commission is claimed only on Rs.86.74 lacs. Decided against assessee. Disallowance - The assessee stated that it had made payment on three different dates and it submitted copy of payment vouchers copy of bank statement, DD through which payment was made and TDS certificate evidencing the payment. The assessee further argued that since the TDS payment was made late, proportionate disallowance has already been made u/s 40(a)(ia) and it amounts to double addition. The AO, however, disallowed the commission payment because the assessee failed to give evidence of rendering services. No evidence was brought on record for services being rendered. The AO further stated that the TDS was not deducted at the rate prescribed under the Income-tax Act. - disallowance confirmed. Incentive paid to workers - genuiness of expenses - while going through the details filed by the assessee in the Paper Book in respect of these expenses and taking into consideration the smallness of the amount involved that too for welfare of labourers and taking a lenient view of the matter, the addition of Rs.53,200/- made by the AO and sustained by ld. CIT(A) is deleted.

Summary

Issues Involved:
1. Disallowance of commission paid to Rohit Traders.
2. Disallowance of commission paid to Shri Bankimchandra Tripathi under Section 40(a)(ia).
3. Disallowance of incentive paid to various workers.
4. Addition under Section 40(a)(ia) of Rs.68,275/-.

Detailed Analysis:

1. Disallowance of Commission Paid to Rohit Traders:

The assessee, engaged in manufacturing refractory items, filed a return of income for the Assessment Year 2005-06. The assessee claimed a commission payment of Rs.3,50,229/- to Rohit Traders. The Assessing Officer (AO) disallowed this commission due to the following reasons:
- No evidence was provided for obtaining orders from Essar Steel Ltd. and Hindalco Industries Ltd.
- No evidence was provided for material transferred and liaisoning work.
- Sales bills did not mention Rohit Traders as a commission agent.
- No confirmation from Essar Steel Ltd. and Hindalco Industries Ltd. regarding Rohit Traders acting as a commission agent.
- The contract for commission did not show involvement of the said companies.
- Commission entries were made at the end of the year, not sales bill-wise.
- The commission rate did not match the sales figures.

The CIT(A) upheld the AO's decision, noting that the assessee failed to address these issues. However, the Tribunal found that there was a valid contract for commission, and expenses incurred by Rohit Traders were reimbursed, indicating services were rendered. The Tribunal concluded that the disallowance was not justified and deleted the disallowance of Rs.3,50,229/-.

2. Disallowance of Commission Paid to Shri Bankimchandra Tripathi under Section 40(a)(ia):

The assessee claimed a commission payment of Rs.1,13,296/- to Shri Bankimchandra Tripathi. The AO disallowed this commission due to:
- Lack of evidence of services rendered.
- TDS was not deducted at the prescribed rate.

The CIT(A) confirmed the AO's decision, citing the absence of proof of services rendered. The Tribunal also upheld this disallowance, agreeing that no evidence was provided to substantiate the claim.

3. Disallowance of Incentive Paid to Various Workers:

The assessee claimed an incentive payment of Rs.53,200/- to various workers. The AO disallowed this payment, stating that the vouchers indicated these were commission payments, not incentives, and the nature of work done by the recipients was not specified. The CIT(A) dismissed the assessee's appeal, noting discrepancies in the vouchers.

The Tribunal, however, took a lenient view considering the small amount involved and the welfare of the laborers. It deleted the disallowance of Rs.53,200/-.

4. Addition under Section 40(a)(ia) of Rs.68,275/-:

The assessee did not press this ground, and hence, the Tribunal dismissed it as not pressed.

Conclusion:
The appeal filed by the assessee was partly allowed. The Tribunal deleted the disallowance of Rs.3,50,229/- paid to Rohit Traders and Rs.53,200/- paid as incentives to workers, while upholding the disallowance of Rs.1,13,296/- paid to Shri Bankimchandra Tripathi and dismissing the addition of Rs.68,275/- as not pressed.