2008 (2) TMI 281 - HC - Income Tax

Sales commission - no material to suggest that M/s. Ram had procured any sale orders for the assessee - production of a few bills or account payee cheques, are not satisfactory proof - no evidence of any personal meetings to suggest that there was any relationship on the basis of which M/s. Ram procured some orders for the assessee for which it was entitled to receive commission transaction was based mere on oral understanding - tribunal is justified in disallowing the commission

Summary

Issues:
1. Disallowance of expenses claimed as commission and discount.
2. Existence of a written agreement between the assessee and the commission recipient.
3. Genuineness of transactions and evidence supporting the claim of commission payment.
4. Assessment of whether a substantial question of law is involved.

Issue 1: Disallowance of Expenses:
The assessee claimed expenses on commission and discount, specifically focusing on an amount paid as commission to M/s. Ram Agencies. The Assessing Officer disallowed the claim due to the absence of an agreement and lack of evidence supporting the commission payment.

Issue 2: Written Agreement Existence:
The Commissioner of Income-tax (Appeals) acknowledged the absence of a written agreement between the assessee and M/s. Ram Agencies. However, it was noted that there was an internal note regarding the commission payment and invoices raised by M/s. Ram Agencies, indicating a mutual understanding for the commission.

Issue 3: Genuineness of Transactions:
The Tribunal allowed the Revenue's appeal, emphasizing the lack of details regarding services rendered by M/s. Ram Agencies and the absence of a confirmed arrangement between the parties. Despite payments made through account payee cheques, doubts were raised about the legitimacy of the transactions without concrete evidence of sales orders procured.

Issue 4: Substantial Question of Law:
The court examined whether a substantial question of law was involved, referencing precedents to determine the criteria for such a question. It was concluded that the case did not meet the standards for a substantial question of law, leading to the dismissal of the appeal.

In conclusion, the judgment upheld the disallowance of the claimed expenses due to insufficient evidence supporting the commission payment. The absence of a written agreement and doubts regarding the genuineness of the transactions were key factors in the decision. Additionally, the court determined that the case did not raise a substantial question of law warranting further consideration, resulting in the dismissal of the appeal.