2021 (1) TMI 784 - AT - Income Tax

Disallowance of payment of commission - rendition of services by the payees - whether in the year under consideration there was any rendition of services by the payees? - HELD THAT - No doubt, payments are supported by invoices and confirmations but the moot point is that no evidence has been submitted for rendition of services by the payees. It is true that in earlier assessment years, similar commissions were allowed to some parties and also in subsequent assessment year - Merely because the payees have shown commission income in their respective return of incomes and transactions have been done through banking channels would not suffice, as rendition of services have to be proved. Where similar commission has been allowed, we are of the considered view that in those years the assessee must have established/proved the rendition of services. Considering the facts in totality, in our considered opinion, 50% of the commission disallowed by the Assessing Officer needs to be allowed. Addition on account of unsecured loans received - Ungenuineness of the loans taken in light of section 68 - HELD THAT - Sapebelle Trader Linkers Pvt Ltd - The bank statement of this company shows transactions in crores. Therefore, it can be safely concluded that this company has sufficient credit worthiness to give the impugned loan. Considering the fact that there was opening balance and part of loan has been repaid during the year and full loan has been repaid in subsequent year, we are of the considered view that the appellant has discharged the initial onus cast upon him by provisions of section 68 of the Act. Therefore, no addition is called for. Ishwar Dass Gupta - Documents referred to and relied upon by AR show that Shri Ishwar Das Gupta is HUF. The income tax return is also that of HUF and bank statement is also that of HUF. Since the facts are not clearly coming out from the orders of the authorities below, we restore this addition to the file of the Assessing Officer. AO is directed to examine this transaction afresh in light of the statement made by the ld. counsel for the assessee that the loan has been taken from Shri Ishwar Das Gupta, HUF. The assessee is directed to furnish necessary evidences before the AO and the Assessing Officer is directed to examine the same after giving reasonable opportunity of being heard to the assessee. Shri Binod Choudhary - We find that the assessee has only filed copy of ledger account of Shri Binod Choudhary in the books of Delhi Sugar Company which has not been confirmed by Shri Binod Choudhary though the PAN is mentioned there. No other evidence has been brought to our notice. Therefore, we do not find any merit in the submissions of the learned counsel which have been duly considered by the CIT(A) during the first appellate proceedings. Addition on account of loan from Shri Binod Choudhary is, accordingly, confirmed. Addition relates to interest paid on unsecured loan - HELD THAT - Qua our findings given hereinabove, we direct the Assessing Officer to allow interest payment to Sapebelle Traders Linkers Pvt Ltd keeping in abeyance the allowance of interest in respect of Ishwar Das Gupta after deciding the issue as per our directions given hereinabove and disallow the interest paid to Shri Binod Choudhary. Ground is accordingly decided.

Summary

Issues:
1. Disallowance of commission expenses
2. Addition on account of unsecured loans
3. Interest paid on unsecured loans

Disallowance of Commission Expenses:
The Assessing Officer disallowed a portion of commission expenses claimed by the assessee due to lack of evidence regarding the rendition of services by the payees. Despite invoices and confirmations, the authorities required proof of services provided. The ITAT considered previous years' assessments where similar commissions were allowed, indicating the need to establish service rendition. They decided to partially allow the disallowance, restricting it to ?9,40,000, based on the lack of evidence for services provided in the current year.

Addition on Account of Unsecured Loans:
Regarding unsecured loans, the Assessing Officer questioned the genuineness of loans from specific parties. The ITAT analyzed each case separately. For Sapebelle Trader Linkers Pvt Ltd, the ITAT found sufficient evidence of genuineness based on transactions, repayments, and creditworthiness. Hence, no addition was warranted. However, for Ishwar Das Gupta, discrepancies between individual and HUF status required further examination by the Assessing Officer. The addition was allowed for statistical purposes pending additional evidence. In the case of Shri Binod Choudhary, lack of confirmation and additional evidence led to the confirmation of the addition.

Interest Paid on Unsecured Loans:
The ITAT directed the Assessing Officer to allow interest payment to Sapebelle Traders Linkers Pvt Ltd, pending further examination of the loan from Ishwar Das Gupta. Interest paid to Shri Binod Choudhary was disallowed. The decision on interest payments was aligned with the findings on the underlying loan transactions. Overall, the appeal was partly allowed for statistical purposes, with specific directions provided for each issue.

This detailed analysis of the judgment highlights the key issues addressed by the ITAT in relation to the disallowance of commission expenses, addition on account of unsecured loans, and interest paid on unsecured loans. The judgment provides a comprehensive understanding of the rationale behind the decisions made by the tribunal in each specific issue raised by the assessee.