2015 (10) TMI 1624 - AT - Income Tax

Disallowance of brokerage/commission expenses - CIT(A) allowed the claim - Held that - CIT(A) rightly points out that there is no dispute about the impugned payments having been made to the assessee s agents or services rendered in lieu thereof. It has come on record that the assessee s turnover has increased to almost 300% in the impugned assessment year as compared to that in the preceding assessment year. All other supportive material is already on record. The Revenue fails to point out any evidence in support of its plea seeking to restore the impugned disallowance. We express our agreement with the CIT(A) findings under challenge in these circumstances and reject the Revenue s first substantive ground. - Decided in favour of assessee. Unexplained cash credit - CIT(A) delted the addition - Held that - The Revenue draws support from the assessment order doubtincreditworthiness of the abovesaid HUFs from whom the impugned deposit of ₹ 1 lac have come in assessee s account. The CIT(A) refers to their assessment records, books of account, interest charged along with TDS deducted and also sufficient capital balance for the purpose of advancing ₹ 60,000/ and 40,000/- to the assessee. The Revenue fails to rebut the said factual findings by referring to the case record available in the file. Thus, we affirm the CIT(A) findings accepting the assessee s plea of genuineness/creditworthiness of the impugned deposits thereby deleting the impugned addition of unexplained cash credits. - Decided in favour of assessee.

Summary

Issues involved:
1. Disallowance of brokerage/commission expenses
2. Unexplained cash credit addition under section 68 of the Income Tax Act, 1961

Disallowance of brokerage/commission expenses:
The appeal pertains to the disallowance of brokerage/commission expenses by the Revenue for the assessment year 2008-09. The Assessing Officer disallowed the brokerage claim of &8377; 17,06,271 made by the assessee-firm in its profit and loss account, suspecting it as an attempt to reduce profits. The Assessing Officer raised concerns about the lack of proof of services rendered by the payee-agents, the absence of rationality in amounts paid, and the relationship of most payees with the assessee. Additionally, the Assessing Officer criticized the delay in payments and the absence of TDS deduction at the time of crediting the brokerage payments. Consequently, the disallowance was made based on these grounds.

The CIT(A) accepted the assessee's explanation, noting the substantial increase in turnover and the detailed evidence provided by the assessee regarding brokerage expenses. The CIT(A) emphasized that doubts alone cannot be conclusive evidence and that in the absence of contrary evidence, the claim based on supporting documents must be accepted. The CIT(A) found no evidence to support the Revenue's plea to restore the disallowance, leading to the deletion of the addition.

The ITAT upheld the CIT(A)'s decision, highlighting the lack of evidence presented by the Revenue to challenge the genuineness of the payments made to the agents or the services rendered. The ITAT agreed with the CIT(A) that the substantial increase in turnover and the supporting material on record justified the acceptance of the assessee's claim. Consequently, the Revenue's appeal on the disallowance of brokerage expenses was dismissed.

Unexplained cash credit addition under section 68:
The second issue concerns the addition of &8377; 1 lac as unexplained cash credits under section 68 of the Income Tax Act. The Assessing Officer raised doubts about the genuineness and creditworthiness of the loans credited from two HUFs, leading to the invocation of section 68. The CIT(A) examined the details of the transactions with the two HUFs and found that the creditors were regular income-tax assesses, had sufficient capital balance, and received interest from the appellant after TDS deduction. The CIT(A) concluded that the assessee had fulfilled its burden of proving the identity and creditworthiness of the creditors and the genuineness of the transactions, leading to the deletion of the addition.

The ITAT upheld the CIT(A)'s decision, noting the lack of evidence provided by the Revenue to challenge the genuineness and creditworthiness of the loans from the HUFs. The ITAT affirmed the CIT(A)'s findings based on the creditors' assessment records, books of account, and sufficient capital balance, thereby supporting the genuineness of the transactions. Consequently, the addition of unexplained cash credits was deleted.

In conclusion, the ITAT dismissed the Revenue's appeal concerning the unexplained cash credit addition under section 68, affirming the CIT(A)'s decision based on the evidence presented regarding the genuineness and creditworthiness of the loans from the HUFs.

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