2021 (2) TMI 940 - AT - Income Tax

Disallowance of commission expenses paid to other referral agents - non admission of additional evidence of assessee - assessee is an individual engaged in the business of a direct selling agent (DSA) for various Financial Institutions / Banks in the name and style of SSBS Financial Corp who gets various loans processed for his customers and earns commission from concerned financial institutions / banks -- HELD THAT - CIT(A) has rejected the additional documents filed by the assessee on the ground that a formal petition was not filed. Following the Board Circular, the CIT(A) should have given an opportunity to the assessee to file the formal petition. The Hon ble Supreme court in the case of Sambhaji and Others v. Gangabai and Others 2008 (11) TMI 393 - SUPREME COURT has held that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The procedures are handmaid and not the mistress. It is a lubricant and not a resistance. A procedural law should not ordinarily be construed as mandatory; the procedural law is always subservient to and is in aid to justice. The Hon ble High Court of Punjab and Haryana in the case of Principal CIT v. Daljit Singh Sra 2017 (3) TMI 1258 - PUNJAB AND HARYANA HIGH COURT has held that although the assessee did not co-operate with the Assessing Officer in completion of assessment proceedings but for delivery of justice, the real income of assessee has to be assessed and that too after hearing the assessee. The Court upheld the decision of Tribunal in directing the lower authorities to admit additional evidence and decide the case afresh after affording reasonable opportunity of being heard to the assessee. Additional evidences now sought to be admitted goes to the root of the issue raised in this appeal. Therefore, for a proper adjudication of the case and for substantial cause, admit the above additional evidence and the same is taken on record in light of aforesaid judicial pronouncement. Since I have admitted the additional evidence, the matter needs to be restored to the Assessing Officer de novo consideration. The A.O. shall take into consideration the additional evidences now admitted by the Tribunal. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
Whether the CIT(A) was justified in confirming the disallowance of commission expenses paid to referral agents.

Analysis:
The appeal concerns the disallowance of commission expenses amounting to ?36,05,862 paid to referral agents, which was confirmed by the CIT(A). The assessee, engaged in the business of a direct selling agent, claimed the commission paid as direct expenses. The Assessing Officer disallowed the amount due to lack of evidence on the referral agents' credentials. The assessee submitted additional documents before the CIT(A) to support the claim, including PAN and confirmation letters, but they were not admitted as no formal petition was filed. The Tribunal considered the new evidence submitted, including invoices, ledger accounts, and bank statements, highlighting payments made to the referral agents.

The Tribunal acknowledged that the details regarding referral commissions were sought by the Assessing Officer at a late stage, making it challenging for the assessee to provide the necessary evidence within the given timeframe. The new evidence submitted to the Tribunal, crucial for the case, was not accepted by the CIT(A) due to the lack of a formal petition. The Tribunal, following legal principles, admitted the additional evidence to ensure justice and proper adjudication. Citing the CBDT Circular and judicial precedents, the Tribunal emphasized the importance of assisting taxpayers and ensuring a fair process.

Referring to legal judgments, the Tribunal exercised its discretion to admit the additional evidence, as it was deemed necessary for substantial justice. The Tribunal highlighted that procedural laws should serve justice and not hinder it due to inadvertent errors or omissions. The case was restored to the Assessing Officer for reconsideration in light of the new evidence, emphasizing the need for a fair hearing and lawful decision-making process. Consequently, the appeal by the assessee was allowed for statistical purposes, emphasizing the importance of a just and thorough assessment process.

In conclusion, the Tribunal's decision to admit the additional evidence and remand the case to the Assessing Officer for a fresh consideration underscores the significance of a fair and comprehensive assessment process, ensuring that all relevant evidence is considered for a just outcome.