2023 (9) TMI 1317 - AT - Income Tax

Disallowing commission expenses - HELD THAT - AO has not made any attention to verify the authenticity of the transaction by calling the commission agent, Shri Majhi by issuing summon u/s 131 - Similarly, we find that out of total payment made to the alleged commission agent. While making payment, the assessee has deducted a sum from him as TDS. In such circumstances, the view taken by the ld. AO is not correct and in the present case while allowing the claim of the assessee ld. CIT(A) has elaborately discussed all the facts by allowing the claim of assessee. In such a situation, we do not find any infirmity in the order passed by the ld. CIT(A) accordingly we are inclined to dismiss the ground taken by the revenue. Calculating the addition @ 15% of the total addition made by the AO and the view taken by the CIT(A) - HELD THAT - We find that while passing the impugned order, ld. CIT(A) has taken a view that only element of profit embedded from such purchase to be considered for an addition by applying various important decisions rendered on the subject matter of the issue involved whereby restricting the profit element of 15% of aggregate purchase from the alleged sum - From the above facts, we do not find any infirmity in the impugned order passed by CIT(A). Accordingly, the ground taken by the revenue is hereby dismissed. Determine the element of profit in the transaction by applying 15% on the impugned purchase - HELD THAT - As element of profitability in transaction which had worked out at 15% following the various important decisions rendered - we do not find any infirmity in the findings given by the CIT(A) accordingly ground taken by revenue is hereby also dismissed.

Summary

Issues Involved:
1. Disallowance of commission expenses.
2. Restriction of addition regarding alleged bogus purchases.
3. Deletion of addition of sundry creditors.

Summary:

Issue 1: Disallowance of Commission Expenses
The revenue contended that the CIT(A) erred in allowing relief to the assessee by deleting the addition of Rs. 9,38,833/- made after disallowing commission expenses. The Tribunal noted that the AO did not verify the authenticity of the transaction by summoning the commission agent under Section 131 of the Income Tax Act. The CIT(A) observed that there was no evidence suggesting that the payments were made to related parties or were excessive. The Tribunal upheld the CIT(A)'s decision, referencing judicial precedents that allowed commission payments as business expenditure when justified by business needs and made through banking channels.

Issue 2: Restriction of Addition Regarding Alleged Bogus Purchases
The revenue challenged the CIT(A)'s decision to restrict the addition to Rs. 33,50,092/- (15% of the total alleged bogus purchases of Rs. 2,23,33,949/-). The Tribunal found that the CIT(A) appropriately applied the profit element of 15% based on various judicial decisions. The Tribunal dismissed the revenue's appeal, affirming that the CIT(A)'s approach was justified.

Issue 3: Deletion of Addition of Sundry Creditors
The revenue also contested the CIT(A)'s directive to determine the profit element in the transaction of Rs. 14,53,200/- by applying 15%. The Tribunal noted that the CIT(A) consistently applied the profit element approach, as done in the case of bogus purchases. The Tribunal found no infirmity in the CIT(A)'s decision and dismissed the revenue's appeal.

Conclusion:
The Tribunal dismissed both the revenue's and the assessee's appeals, affirming the CIT(A)'s decisions on all issues.