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2021 (7) TMI 949 - AT - Income TaxDisallowance of Commission expenses - allowable business expenses or not? - HELD THAT - The commission is being paid regularly and scrutiny assessment was also made for the previous years. The assessee has enclosed assessment orders from AY 10-11 to 13-14. The details of commission paid to the agents has also been filed from the AY 10-11 to 14-15 . There is no dispute that the commission has been paid every year and no disallowance was made on this count. Facts for the impugned AY are the same to that of earlier AYs but, only there is a change in the names of the recipients. We find substance in submissions of the ld. AR that the principle of consistency should be followed. In support of our decision, we rely on the decision of co-ordinate bench of Mumbai ITAT in the case of Apne Aap Women Worldwide (India) Trust 2018 (10) TMI 426 - ITAT MUMBAI - Decided in favour of assessee.
Issues Involved:
1. Disallowance of commission expenses claimed by the assessee. 2. Violation of CBDT instructions regarding limited scrutiny. 3. Rule of consistency in assessment. Detailed Analysis: 1. Disallowance of Commission Expenses: The primary issue revolves around the disallowance of ?2,74,76,118/- claimed by the assessee as commission expenses. The Assessing Officer (AO) observed that the assessee failed to provide adequate proof of services rendered by the commission agents. Despite submitting details of the agents, including their addresses and PAN numbers, the AO noted inconsistencies and lack of responses from the companies allegedly involved. Consequently, the AO disallowed the entire commission expense, citing the assessee’s failure to establish the business expediency of the payments. Upon appeal, the CIT(A) partially allowed the commission expenses amounting to ?1,95,07,448/- based on the returns filed by certain agents, but sustained the disallowance of ?68,68,670/- due to lack of evidence. The CIT(A) reasoned that the returns of the parties were filed before the due date and scrutiny assessment, thus justifying the allowance of the claimed expenses. 2. Violation of CBDT Instructions on Limited Scrutiny: The assessee contended that the assessment violated CBDT instructions on limited scrutiny. The case was selected for limited scrutiny for AY 2015-16, focusing on six specific issues. The assessee argued that the AO expanded the scope of scrutiny beyond these issues without obtaining necessary approvals, thus violating CBDT Instruction No. 20 of 2015 and 5 of 2016. The assessee cited various judicial precedents to support the claim that such an assessment is liable to be quashed. 3. Rule of Consistency: The assessee argued that the principle of consistency should apply, as commission expenses were allowed in previous years without disallowance. The assessee provided evidence of regular commission payments and scrutiny assessments from AY 2010-11 to 2014-15, with no disallowance in those years. The assessee emphasized that the facts for the impugned AY were similar to earlier years, except for the change in the names of the recipients. The ITAT upheld the assessee’s appeal, emphasizing the rule of consistency. The tribunal referenced the decision of the Mumbai ITAT in Apne Aap Women Worldwide (India) Trust Vs. ITO, highlighting that the revenue should not deviate from an accepted principle without any change in law or facts. The ITAT noted that the commission expenses were consistently allowed in previous years and there was no material change in the current year’s facts to warrant a different view. Conclusion: The ITAT dismissed the revenue’s appeal and allowed the assessee’s appeal, emphasizing the importance of consistency in tax assessments. The tribunal found that the assessee had provided sufficient evidence to justify the commission expenses and that the AO’s expansion of the scrutiny scope violated CBDT instructions. The decision underscores the necessity for the revenue to maintain consistency in its assessments unless there is a significant change in facts or law.
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