2015 (6) TMI 565 - AT - Income Tax

Nature of Commission earned - treated as Income from Other Source or Business income - Held that - The assessee in each and every case was provided opportunity on several occasions to prove that the said miscellaneous income was in fact the commission income received in lieu of the services provided to various persons. The fact of notices being returned back unserved or denial by Shri Pawan Kumar Kedia and Sri R.K.Khetrapal and reply of Rawmet Commodities Pvt. Ltd. and M/s.Rawmet Resources were informed to the assessee and due opportunities was given to the assessee to prove the commission income received in lieu of services provided to various persons in the form of evidences/documents or details etc. but nothing was produced before AO as well as ld.CIT(A). Even before us no documentary evidence was placed on record to establish that in fact it was a commission income in lieu of the services rendered to various persons. CIT(A) correctly the finding of A.O. that commission earned by assessee is assessable as Income from Other Source - Decided against assessee. Disallowance of set off of business loss comprising current depreciation and unabsorbed depreciation against the Commission Income - Held that - In the circumstances and facts of the case order of ld. CIT(A) is not a speaking order and accordingly order of ld. CIT(A) on this issue is set aside to his file to decide the issue denovo and pass a speaking order and to deal with the decisions of various courts of law relied upon by the assessee along with the decisions of the Tribunal in the case of M/s. Jai Ushin Limited 2008 (1) TMI 441 - ITAT DELHI-F and Suresh Industries Limited (2012 (11) TMI 674 - ITAT MUMBAI) relied upon before us and decide the issue de novo but after affording adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Classification of commission income as "Income from Other Sources" versus "Business Income."
2. Set-off of business loss, including current and unabsorbed depreciation, against commission income.
3. Disallowance of telephone expenses for personal use.

Issue-wise Detailed Analysis:

1. Classification of Commission Income:
The assessee declared Rs. 1,20,87,649/- under the head "Miscellaneous Income," later clarified as commission income from various parties. The AO issued notices under section 133(6) to verify the nature of this income. Most notices were returned unserved, and some parties denied transactions with the assessee. Only Rawmet Commodities Pvt. Ltd. and Rawmet Resources confirmed payment but did not establish services rendered by the assessee. The AO treated this income as "Income from Other Sources" due to lack of evidence proving services rendered. The CIT(A) upheld this classification, and the Tribunal found no infirmity in this decision, dismissing the assessee's ground.

2. Set-off of Business Loss:
The assessee claimed set-off of depreciation amounting to Rs. 1,63,50,515/- (current depreciation of Rs. 1,25,47,302/- and unabsorbed depreciation of Rs. 36,59,752/-) against the commission income. The AO disallowed this set-off, and the CIT(A) upheld the decision, stating no business income was available for such set-off. The Tribunal noted that the CIT(A) did not discuss the various court decisions relied upon by the assessee. Consequently, the Tribunal set aside the CIT(A)'s order on this issue and remanded it for a de novo decision, instructing the CIT(A) to pass a speaking order after considering the relevant case laws.

3. Disallowance of Telephone Expenses:
The AO disallowed Rs. 15,000/- out of telephone expenses, citing lack of details provided by the assessee. The CIT(A) confirmed this disallowance. The Tribunal observed that the assessee did not pursue this ground actively and found no infirmity in the CIT(A)'s order, thereby dismissing this ground.

4. General Grounds:
The Tribunal noted that the fourth ground raised by the assessee was general in nature and did not require adjudication.

Conclusion:
The Tribunal upheld the classification of commission income as "Income from Other Sources," remanded the issue of set-off of business loss for a de novo decision, and confirmed the disallowance of telephone expenses. The general ground raised by the assessee was dismissed as it did not require specific adjudication.