2008 (2) TMI 306 - HC - Income Tax

Assessee paid commission on sale of machinery & service charges in execution of sale of plant - AO disallowed both the expenses on the ground that the assessee failed to furnish appointment letters of commission agents, details of commission/service charges paid - ITAT on the basis of evidence has recorded a pure finding of fact while concluding that payment of the aforesaid two amounts has been proved by assessee - authorities below were not justified in disallowing the deduction claimed

Summary

Issues:
1. Disallowance of commission and service charges by the Assessing Officer.
2. Confirmation of disallowance by the Commissioner of Income Tax (Appeals).
3. Deletion of the disallowance by the Income Tax Appellate Tribunal (ITAT).
4. Justification of the ITAT's decision based on sufficient evidence.
5. Whether the deduction claimed by the assessee should have been disallowed.
6. Existence of any substantial question of law in the appeal.

Analysis:
1. The case involved the disallowance of commission and service charges by the Assessing Officer due to the failure of the assessee to provide necessary details. The Assessing Officer disallowed expenses amounting to Rs.10,38,860/- and Rs.1,29,600/- on the grounds of lack of appointment letters for commission agents and details of payments made.

2. Upon appeal by the assessee, the Commissioner of Income Tax (Appeals) upheld the disallowance of the expenses. The Commissioner confirmed the addition made by the Assessing Officer, leading to further appeal by the assessee.

3. The Income Tax Appellate Tribunal (ITAT) later deleted the disallowance of the expenses after considering the evidence provided by the assessee. The ITAT observed that the assessee had paid commissions for procuring orders and had submitted relevant documents such as statement of accounts, correspondence with parties, and a Memorandum of Understanding (MOU) signed with one of the parties.

4. The High Court noted that the ITAT's decision was based on sufficient evidence proving the actual payment of commission/service expenses by the assessee to the parties in question. The Court agreed with the ITAT's finding that the assessee had adequately demonstrated the payment of the amounts, and therefore, the deduction claimed should not have been disallowed solely based on the lack of documentary evidence.

5. The Court concluded that the ITAT's decision was justified, as it was supported by factual evidence presented in the case. The Court emphasized that since the assessee had proven the actual payment and receipt of the amounts by the parties, the deduction claimed should not have been disallowed by the lower adjudicating authorities.

6. Ultimately, the High Court found no substantial question of law involved in the appeal and dismissed the case, affirming the ITAT's decision to delete the disallowance of the expenses.