2017 (7) TMI 69 - AT - Income Tax

Disallowance of commission as business expenditure - proof of actual work - Held that - No work was done by the agents for the assessee warranting payment of commission. This fact has not been controverted by the assessee before us. No evidence whatsoever has been produced before us contradicting this finding of the CIT(A). The only evidences on which the Ld. AR places reliance upon is the Income Tax Returns of the agents which do not establish that they had done any work for the assessee. Further the statement of the three agents admitting in so many words that the commission paid was merely an accommodation entry, explaining the manner of execution also coupled with the above facts as found by the AO that no evidence of services rendered by the agents was filed by the assessee, the agents had no knowledge of the product sold, had no links with the purchasers, had claimed receipt of commission only for introducing the buyers and the fact that most of the buyers were known to the assessee and did not require any introduction, seals the matter against the assessee. Thus we uphold the order of the CIT(A) confirming the disallowance of commission expenses - Decided against assessee.

Summary

Issues Involved:
Dispute over disallowance of commission expenses in assessment years 2009-10 and 2010-11.

Analysis:
1. The appeals were filed against orders of the Commissioner of Income Tax (Appeals) concerning the disallowance of commission expenses.
2. The issue in both appeals was identical and thus heard together for a common decision.
3. The primary concern was the disallowance of ?23,31,537/- as business expenditure on commission.
4. During assessment, it was found that commission paid on sale of power press machines was questionable.
5. The Assessing Officer concluded that the commission payments were bogus as agents had no relevant experience or knowledge, and some admitted to returning the commission amount.
6. The CIT (Appeals) upheld the disallowance due to lack of evidence of services rendered by the agents.
7. The appellant argued that commission expenses were genuine, citing TDS deductions and income tax returns of agents.
8. The Tribunal found no fault in the CIT (Appeals) order, supporting the disallowance of commission based on lack of evidence of services rendered.
9. The CIT (Appeals) had categorically stated that no work was done by agents justifying commission payments, a fact unchallenged by the appellant.
10. Lack of evidence contradicting the findings led to upholding the disallowance of commission expenses.
11. Consequently, both appeals were dismissed, affirming the disallowance of commission expenses.

This detailed analysis highlights the key aspects of the judgment, focusing on the disallowance of commission expenses due to lack of evidence supporting the services rendered by the agents. The decision was based on factual findings and legal reasoning, ultimately leading to the dismissal of the appeals.