2017 (12) TMI 1345 - AT - Income Tax

Disallowance of commission expenses - Held that - We find that the assessee has filed detailed submission alongwith evidences for justification of the commission expenses, and thus, Ld. CIT(A) was not justified in not considering all those evidences. Addition has been sustained without providing sufficient opportunity to the assessee and without considering submission of the assessee as well as without following the procedure under Rule 46A of Income-tax Rules, hence we feel it appropriate to restore the issue to the file of the learned CIT(A) for deciding afresh after considering the evidences filed by the assessee and after carrying out necessary enquiries required in the matter. Both the parties shall be afforded adequate opportunity of being heard. Accordingly, the ground of the appeal is allowed for statistical purposes. Disallowance on account of Diwali expenses - Held that - CIT(A) has not given any reasons for upholding the finding of the Assessing Officer and not considered the submission of the assessee. As the order of the learned CIT(A) on the issue in dispute is non-reasoned, we feel it appropriate to restore the issue-in-dispute to the file of the learned CIT(A) for passing a speaking and reasoned order after considering the submission of the assessee.Accordingly, the Ground No. 2 of the appeal is allowed for statistical purposes.

Issues Involved:
1. Disallowance of ?16,09,778/- on account of commission expenses.
2. Disallowance of ?38,000/- on account of Diwali expenses.
3. Legality and validity of the assessment order.
4. Charging of interest under sections 234A and 234B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of ?16,09,778/- on account of commission expenses:
The assessee, a partnership firm engaged in trading electrical goods, filed a return declaring an income of ?1,37,22,030/-. During scrutiny, the Assessing Officer (AO) noticed commission expenses of ?22,09,778/- and sought detailed justifications, including services provided by agents, sales orders procured, agreements, correspondence, and basis of commission paid. The assessee provided ledger accounts and TDS details but failed to furnish complete replies and vouchers. Consequently, the AO allowed ?6,00,000/- as genuine commission and disallowed ?16,09,778/-.

On appeal, the assessee submitted detailed justifications, including agent details, TDS information, sales corresponding to commission, and tax returns of agents. However, the Ld. CIT(A) observed that the entire information was not submitted to the AO and noted discrepancies such as missing profit and loss accounts, bank statements, and confirmations from agents. The CIT(A) upheld the disallowance, citing insufficient evidence and lack of agent involvement in sales to large buyers like BHEL and HINDALCO.

Before the Tribunal, the assessee argued for inadequate hearing opportunities and requested a remand for detailed verification. The Tribunal found that the Ld. CIT(A) did not follow Rule 46A procedures and failed to provide sufficient opportunity for the assessee to justify the commission expenses. The Tribunal restored the issue to the Ld. CIT(A) for fresh consideration, ensuring adequate hearing opportunities and necessary inquiries.

2. Disallowance of ?38,000/- on account of Diwali expenses:
The AO observed Diwali expenses of ?1,73,779/- but noted that vouchers for ?88,000/- paid to 13 persons lacked proper signatures and explanations of their relation to the assessee. Consequently, ?38,000/- was disallowed.

On appeal, the assessee provided detailed justifications, including employee names, designations, and bonus amounts. However, the Ld. CIT(A) upheld the disallowance, citing concrete evidence supporting the AO's decision.

Before the Tribunal, the assessee argued that the bonus payments to employees were substantiated with vouchers and details. The Tribunal found that the Ld. CIT(A) did not provide reasons for upholding the AO's findings and failed to consider the assessee's submissions. The Tribunal restored the issue to the Ld. CIT(A) for a reasoned order after considering the assessee's submissions and ensuring adequate hearing opportunities.

3. Legality and validity of the assessment order:
The assessee contended that the disallowances and the assessment order were illegal, void ab-initio, and beyond jurisdiction. However, specific details and arguments regarding this issue were not elaborated in the judgment.

4. Charging of interest under sections 234A and 234B of the Income Tax Act, 1961:
The assessee challenged the charging of interest under sections 234A and 234B. However, the judgment did not provide detailed discussions or conclusions on this issue.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, restoring the issues of commission and Diwali expenses to the Ld. CIT(A) for fresh consideration, ensuring adequate hearing opportunities and necessary inquiries. The decision was pronounced in the open court on 21st Dec., 2017.

← Previous Next →