2015 (10) TMI 813 - AT - Income Tax

Bogus commission - CIT(A) deleted the addition - revenue asked to remand the matter for reconsideration - Held that - In the absence of any cogent argument or reason canvassed before us by Revenue remand cannot be directed. In order to so direct atleast some shortcoming in the nature of evidences filed and consideration should have been pointed out so as to justify such a demand. A matter cannot be remanded for the mere asking. A perusal of the impugned order at page 8 shows that the major commission payment out of these 8 people has been paid to Sri Padma Sinha, Sri Nirmal Singh, Sri Daljit Singh Sandhu in whose case PAN details were made available and in the case of the remaining 5 people the confirmations alongwith their telephone numbers and address details were provided. Apart from that it is seen that the admitted fact consistently on record is that the commission has been paid to the persons after deduction of tax at source by way of account payee cheque. - Decided against revenue. Excess payment u/s 40A(2) (b) - CIT(A) deleted the addition - Held that - Carefully examining the working of the commission paid to Sh. Vipin Malhan is on the sales executed by him from 20.06.2001, the date of agreement between the company and Sh. Vipin Malhan. The sales effected by the company for the period up to 19.06.2001 has been reduced from the total sales while calculating the commission paid to Mr. Vipin Malhan. The order of the AO dated 28.02.2005 under appeal and the Remand Report submitted by him vide F.No. ACIT/Circle/Noida/Remand Report/06-07 dated 20.07.2006 have been examined very carefully. The AO has not expressed any doubt on the genuineness of the agreement executed between the company and Sh. Vipin Malhan and also on the system of payment of commission. The AO has not expressed any doubt on the services rendered by Sh. Vipin Malhan to the company. The AO has worked out commission on the figure of ₹ 2,40,24,500/- being income from web packages alone while the company has calculated the commission on reconciled sales. The copy of the statement showing working of the commission paid to Mr. Vipin Malhan had been sent to the AO along with the reply of the AR for his comments. However in the Remand Report submitted by the AO, find that the AO has not made any adverse comments on the working of the figure of the sales as arrived at and the commission of ₹ 29,35,002/- worked out at @ 10% of the total sales of ₹ 2,93,50,020/- besides the commission of ₹ 3,37,500/- paid as an associate member of the company. AO was not justified in making an addition of ₹ 8,88,052/- on this account to the income of the appellant. On a consideration of the entire factual matrix of the case which we have brought out in the earlier part of this order in great detail, we find in the absence of any rebuttal on facts no interference in the impugned order is warranted. In the facts as they stand for want of any contrary fact or argument the departmental ground is dismissed and the impugned order is upheld. - Decided against revenue.

Summary

Issues Involved:
1. Relief of Rs. 9,10,500/- on account of bogus commission.
2. Relief of Rs. 8,88,052/- on account of excess payment under section 40A(2)(b).

Detailed Analysis:

Issue 1: Relief of Rs. 9,10,500/- on account of bogus commission

The Revenue challenged the CIT(A)'s decision to allow relief of Rs. 9,10,500/- on account of bogus commission. The AO had disallowed this amount, arguing that the assessee failed to prove the genuineness of the expenses and the existence of the associates to whom the commission was paid. Notices issued under section 133(6) to verify the expenses returned with comments like "no such person," and no confirmations were received for some associates. Consequently, the AO added Rs. 9,10,500/- to the assessee's income.

The assessee contended that the commission was automatically generated and paid through account payee cheques after deducting TDS, and that it was difficult to obtain current addresses of associates who did not renew their membership. The CIT(A) accepted the assessee's explanation and deleted the addition after considering the Remand Report from the AO.

The Tribunal upheld the CIT(A)'s decision, noting that the Revenue did not provide any cogent argument or evidence to justify a remand. The Tribunal emphasized that the commission payments were made after TDS deduction and through account payee cheques, and that confirmations from 8 out of 10 associates were provided. Therefore, the Tribunal found no reason to interfere with the CIT(A)'s findings and dismissed the Revenue's ground.

Issue 2: Relief of Rs. 8,88,052/- on account of excess payment under section 40A(2)(b)

The AO disallowed Rs. 8,88,052/- paid as commission to Mr. Vipin Malhan, the husband of the Director Anu Malhan, under section 40A(2)(b). The AO argued that the payment was not justified as per the agreement terms and considered it excessive. The assessee contended that the commission was paid according to a valid agreement and based on the sales executed by Mr. Vipin Malhan, including annual maintenance charges and advance payments from customers.

The CIT(A) deleted the addition, stating that the commission was paid under a valid agreement and the AO did not doubt the genuineness of the agreement or the services rendered by Mr. Vipin Malhan. The CIT(A) also noted that the AO did not provide any adverse comments on the working of the commission during the remand proceedings.

The Tribunal upheld the CIT(A)'s decision, finding no rebuttal from the Revenue against the material and evidence on record. The Tribunal concluded that the AO's addition was not justified and dismissed the Revenue's ground, thus upholding the CIT(A)'s order.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The Tribunal found that the Revenue failed to provide sufficient evidence or arguments to counter the CIT(A)'s findings and the material on record. The order was pronounced in the open court on 19.8.2015.