2013 (7) TMI 846 - AT - Income Tax

Disallowance of commission paid - CIT(A) confirmed additions - Held that - CIT(A) has not followed the principles of natural justice because he has not provided due opportunity of cross- examination of witnesses and other material collected by DIT(Inv), Kolkata. Also the replies, evidence in the form of affidavit, confirmation and reconfirmation submitted by the assessee has also not been confronted to the AO while taking the same into consideration by the CIT(A). Accordingly, the impugned order is not sustainable and restored back to file of AO to readjudicate the issue. In favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Disallowance of commission paid to M/s Tridev Agencies (P) Ltd., M/s Vidhata Agencies (P) Ltd., and M/s Twinkle Vanijya (P) Ltd.
2. Adequacy of opportunity of hearing and cross-examination.
3. Charging of interest under sections 234A and 234B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Commission Paid:
The assessee challenged the disallowance of Rs. 69,06,732/- paid as commission to three companies. The Assessing Officer (AO) disallowed the commission on the grounds that there were no agreements or evidence of services rendered by these companies. The AO noted the lack of business connection and supporting documents. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's findings, emphasizing the improbability of the Kolkata-based companies providing services when the assessee, a senior broker based in Delhi, could have done the same job. The CIT(A) also referred to an inquiry report indicating that the companies were involved in bogus billing and accommodation entries, thus rejecting the genuineness of the commission payments.

2. Adequacy of Opportunity of Hearing and Cross-examination:
The assessee contended that the CIT(A) did not provide an adequate opportunity for hearing and did not grant the requested cross-examination of witnesses. The assessee argued that the adverse material used against them was not shared, violating the principles of natural justice. The Tribunal observed that the CIT(A) relied on statements and materials from the DIT(Inv.), Kolkata, without allowing the assessee to cross-examine the witnesses. The Tribunal found this approach contrary to the principles of natural justice and set aside the CIT(A)'s order, directing the AO to adjudicate the issue afresh, providing due opportunity for cross-examination and considering all evidence submitted by both parties.

3. Charging of Interest under Sections 234A and 234B:
Given the decision to restore the main issues to the AO for fresh adjudication, the Tribunal did not decide on the merits of charging interest under sections 234A and 234B. Instead, it directed the AO to address this issue in line with the final decision on the main issue.

Conclusion:
The Tribunal concluded that the CIT(A) did not follow the principles of natural justice by not providing an opportunity for cross-examination and not confronting the AO with the assessee's submissions. The Tribunal set aside the CIT(A)'s order and restored the matter to the AO for de novo adjudication, ensuring due process and consideration of all relevant evidence. The appeal was allowed for statistical purposes, with directions for the AO to provide a fair hearing and decide the issues afresh.