2013 (4) TMI 137 - HC - Income Tax

Payment of commission - According to the AO, the assessee failed to prove that the alleged commission agent rendered any service and thus, disbelieved the agreement - Held that - The Revenue could not place any evidence before us to the extent that the actual payment was not genuine or that the agent has not disclosed such payment in its Return - In absence of such evidence, once it is proved that there existed a written agreement and consequent to such agreement payments were actually made from time to time by account payee cheques - having regard to the nature of work the agent was required to perform, in our opinion, the Tribunal below was quite justified in deleting the addition. - Decided against the revenue.

Summary

Issues:
1. Dispute over addition of amount paid by assessee to commission agent for assessment year 2004-2005.

Analysis:
The appeal under Section 260-A of the Income Tax Act, 1961 was filed by the Revenue against the order of the Income Tax Appellate Tribunal, which had allowed the appeal of the assessee and deleted the addition of the amount paid to its commission agent. The Assessing Officer had doubted the agreement between the assessee and the commission agent, stating that the assessee failed to prove that any services were rendered. However, the assessee produced a copy of the agreement before the CIT (Appeals), which outlined the agent's role in securing information and ensuring timely payments from various companies. The Tribunal noted evidence such as bank cheque clearance statements, ledger account copies, and correspondence with a trading company, which supported the genuineness of the payments made to the agent.

The High Court observed that the nature of assistance mentioned in the agreement could not be proven by direct evidence. However, since payments were made by account payee cheques and there was no evidence to suggest the agent was fake or that payments were not disclosed in tax returns, the Court upheld the Tribunal's decision to delete the addition. The Court emphasized that in the absence of evidence contradicting the genuineness of payments and considering the nature of work the agent was required to perform as per the agreement, the Tribunal's decision was justified. Consequently, the Court dismissed the appeal, stating that no substantial question of law was involved.

Additionally, a similar appeal for a different assessment year was also dismissed based on the same reasoning. The Court found no grounds to interfere with the Tribunal's findings and upheld the deletion of the addition made by the Revenue.

This detailed analysis of the judgment highlights the key points of contention, the evidence presented by the parties, the reasoning behind the Tribunal's decision, and the High Court's affirmation of the Tribunal's ruling based on the lack of substantial evidence to dispute the genuineness of the payments made to the commission agent.