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2016 (12) TMI 612 - AT - Income TaxAddition on account of disallowance of commission payment - Held that - As the assessee has proved the genuineness of the commission paid to the above persons i.e. 08 persons amounting to ₹ 22,57,462/- indicating therein the PAN on the sales achieved by them. Thus, it appears from the record available before the Bench that the assessee has rightly paid the commission payment to the respective persons. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of commission payment amounting to ?22,57,462/-. Detailed Analysis: 1. Disallowance of Commission Payment: Background: The appellant, engaged in the business of consignment agent and trading of color chemicals, claimed a sum of ?22,57,462/- as commission payment in its profit and loss account. The breakdown of the commission payments was provided, listing amounts paid to various individuals. Assessment Proceedings: The Assessing Officer (AO) required the appellant to furnish details of the persons to whom commission was paid and the parties to whom sales were made. Upon conducting enquiries with several buyers, the AO concluded that the recipients of the commission had no role in the sales, leading to the disallowance of the claimed commission expenses, suspecting these were claimed to reduce profits. Appellate Proceedings: During the appellate proceedings, the appellant argued that it had received commission on consignment sales and that similar payments were allowed in earlier assessment years. The appellant also highlighted an increase in the gross profit (GP) rate, attributing it to the engagement of agents. However, the appellant failed to provide documentary evidence supporting the services rendered by the commission recipients. CIT(A) Observations: The CIT(A) sustained the addition, noting the absence of agreements or documentary evidence of services rendered by the commission recipients. The CIT(A) referenced the Supreme Court's judgment in Premier Breweries Ltd., which emphasized that the mere existence of agreements or proof of payment does not bind the Income Tax Officer to allow the expenses under Section 37 of the Act. Tribunal's Findings: The Tribunal noted that the appellant had paid the commission to various persons for enhancing business and had deducted TDS on these payments. The Tribunal observed that the appellant maintained regular books of accounts, which were audited, and the GP rate had improved compared to previous years. The Tribunal also considered the fact that the commission payments to the appellant's sons were for services rendered and were subjected to TDS. Case Laws Referenced: The Tribunal referred to several case laws, including: - Mobile Communication (India) (P) Ltd. Vs. DCIT - V.I.P. Industries Ltd. Vs. IAC - Anupam Synthetics (P) Ltd. Vs. JCIT - CIT Vs. Ishwar Prakash & Bros. - CIT Vs. Gautam Creations (P) Ltd. - CIT Vs. Shriram Pistons & Rings Ltd. - J.K. Steel & Industries Ltd. Vs. CIT - ITO Vs. Desh Rakshak Austhalaya (P) Ltd. Conclusion: The Tribunal concluded that the appellant had sufficiently proved the genuineness of the commission payments, indicating the PAN and sales achieved by the recipients. The Tribunal did not concur with the findings of the CIT(A) and allowed the appeal, thereby permitting the commission expenses claimed by the appellant. Result: The appeal of the assessee was allowed, and the disallowance of ?22,57,462/- on account of commission payment was overturned. Order Pronouncement: The order was pronounced in the open court on 23/11/2016.
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