2018 (12) TMI 1391 - HC - Income Tax

Allowability of commission payment - Genuineness of claim - AO has been asked to re-examine the claim for deduction of alleged commission payments - Held that - We do not find any justification and reason to review and set aside the direction for remand. However, we are not making any comments and giving detailed reasons on merits to avoid prejudice. Observations of the Tribunal are factual. Tribunal was required to set aside the findings recorded by Commissioner of Income Tax (Appeals) and therefore, certain observations have been made. These observations were only for the decision of the appeal by the Tribunal and are not to be treated as conclusive findings on merits. If the findings were final and conclusive, then no order of remit was necessary. AO has been asked to re-examine the issue of the commission allegedly paid in its entirety on merits. AO would examine the question of genuineness of the commission payment and all aspects relating to allowability of the stated expenditure under Section 37 or Section 28 of the Income Tax Act, 1961. We also clarify that we have not interfered with the direction of the Tribunal regarding production/appearance of the commission agents for verification about rendition of services, production of relevant information and details to prove allowability of commission expenses.

Summary

Issues:
1. Condonation of delay in re-filing.
2. Case of remand by the Income Tax Appellate Tribunal regarding deduction of commission payments.
3. Concerns raised by the assessee regarding potential prejudice due to observations in the Tribunal's order.
4. Review of Tribunal's directions for remand.
5. Re-examination of commission payments by the Assessing Officer.
6. Examination of genuineness and allowability of commission expenses under relevant sections of the Income Tax Act.
7. Direction regarding production/appearance of commission agents for verification.

Condonation of Delay in Re-filing:
The High Court condoned a delay of 57 days in re-filing the case based on the reasons presented in the application.

Case of Remand by the Income Tax Appellate Tribunal:
The Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and directed the Assessing Officer to re-examine the deduction of commission payments allegedly made to specific entities. The High Court clarified that the Tribunal's observations were not conclusive findings on merits but were necessary for the decision of the appeal.

Concerns Raised by the Assessee:
The assessee expressed concerns that certain observations in the Tribunal's order could be interpreted as final and binding findings, potentially prejudicing the assessee. The High Court acknowledged the concerns but did not find justification to review or set aside the direction for remand.

Re-examination of Commission Payments:
The Assessing Officer was instructed to re-examine the issue of commission payments in its entirety, focusing on the genuineness and allowability of the expenses under relevant sections of the Income Tax Act. The High Court emphasized that the direction for production/appearance of commission agents for verification should be adhered to, with legal consequences for non-appearance to be examined.

Conclusion:
The High Court disposed of the appeal, clarifying that no comments were made on the merits of the case. The judgment highlighted the need for a thorough re-examination of the commission payments by the Assessing Officer, ensuring compliance with relevant legal provisions and directions regarding verification of expenses.