2013 (8) TMI 1172 - AT - Income Tax

Summary

Issues involved: Revenue's appeal against CIT(A)'s order for assessment years 2008-09 and 2009-10 regarding disallowance u/s 40A(2)(b) of the Act.

For AY 2008-09:
The assessee, engaged in trading, filed return declaring income. AO framed assessment u/s 143(3) determining higher income. CIT(A) granted partial relief. Revenue appealed against the deletion of Rs.40,00,000 disallowance u/s 40A(2)(b) on commission payment to brother of the assessee.

AO found commission payment to brother excessive, not backed by evidence. CIT(A) deleted the addition, considering it legitimate business expense based on services rendered by the brother. Revenue contended AO's detailed verification justified the disallowance, supported by the maximum tax rate of both parties. CIT(A)'s decision was upheld based on the professional capabilities of the brother and the increase in turnover.

For AY 2009-10:
Similar facts as AY 2008-09, with the AO disallowing a portion of commission payment as excessive. Both parties agreed on the similarity of facts. The Tribunal restricted the disallowance to a lower amount based on the findings for AY 2008-09.

In conclusion, the Tribunal partly allowed both appeals of the Revenue by restricting the disallowance amounts for both assessment years.