2020 (10) TMI 513 - AT - Income Tax

Ad hoc disallowance - adding 15% of the sub-agent commission involving payments - assessee distribution and commission agent business in communicative services - DR highlight the fact that assessee had failed to file the relevant detailed evidence before both the lower authorities - HELD THAT - This taxpayer has acted as distributor / commission agent in telephone / mobile services and paid the impugned re-charge sum(s) to the sub-agents working in the field. Assessee said documents formed part of the assessment record. From certificate dated 18.02.2016 (much before the assessment order dated 08.03.2016) coming from the cellular operator M/s Reliance Telecom Limited making it clear that the corresponding e-re-charges amount involved a sum of ₹ 235,11,268 including commission of ₹ 113,06,268/- and re-charge(s) figure of ₹ 122,05,000/-; respectively as per the relevant understanding between the parties. There is no rebuttal to this clinching fact coming from the Revenue s side. The assessee has also placed on record the relevant details of all the corresponding re-charge transactions. There is no prayer coming from the department side that the assessee s certificate having placed on record all these documents is factually incorrect. Assessee has also placed on record profit and loss account at page 104 in the paper having disclosed net profit on turnover @ 6.92% not identify any abnormal trend vis- -vis earlier and latter assessment years. This tribunals co-ordinate bench order in Gouranga Sundar Mondal 2018 (9) TMI 1997 - ITAT KOLKATA also deleted identical disallowance in similar telephone income / mobile services distribution and commission business on the basis of cellular operators certificate - lower authorities have erred in law and on facts in making the impugned ad hoc disallowance @ 15% - Assessee s appeal is allowed.

Summary

Issues:
Appeal against Commissioner of Income Tax (Appeals)-Burdwan's order disallowing 15% of sub-agent commission.

Analysis:
The assessee appealed against the disallowance of 15% of the sub-agent commission amounting to ?2,35,11,268. The Assessing Officer noted the absence of corresponding books of account for the sub-agent commission payments, leading to the ad hoc disallowance. The CIT(A) affirmed this decision, highlighting the appellant's non-compliance and lack of evidence submission. The appellant's grounds challenging lack of opportunity and mechanical order-making were dismissed by the CIT(A). The appellant's claim of payments to sub-agents was not substantiated with evidence, resulting in the disallowance. The tribunal noted the appellant's detailed paper book and certification of document submission. The tribunal also referenced a similar case where a disallowance was deleted based on cellular operator certificates. Consequently, the tribunal allowed the appeal, deleting the ad hoc disallowance.

In the detailed analysis, the tribunal emphasized the importance of evidence submission to support the appellant's claims. The appellant's failure to provide necessary documentation led to the disallowance upheld by the lower authorities. However, the tribunal considered the appellant's submission of a detailed paper book and certification of document submission. By referencing a similar case where a disallowance was deleted based on certificates from the cellular operator, the tribunal found merit in the appellant's case. The tribunal concluded that the lower authorities erred in making the ad hoc disallowance without sufficient evidence, leading to the allowance of the appeal.

Overall, the judgment underscores the significance of substantiating claims with proper documentation in tax assessment cases. The tribunal's decision to delete the disallowance was based on the appellant's submission of relevant certificates and documents, highlighting the importance of supporting evidence in tax disputes. The detailed analysis of the appellant's case and reference to precedent cases demonstrate a thorough consideration of the facts and legal principles involved in the appeal.