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2012 (11) TMI 703 - AT - Income TaxDis allowance of account of payment of commission - The assessee claimed a sum of Rs.84,47,845/- as deduction towards Commission payments, out of which a sum of Rs.79,46,846/- was claimed to have been paid to Shri Sandeep Mehta, proprietor of M/s Safal Inc., Mumbai. - The AO also recorded a statement u/s 131 of the Act from Shri Sandeep Mehta and in the said statement also he averred that he has received only Rs.9,71,000/- from the assessee company. - AO made the additions but CIT(A) deleted the additions - held that - The action of the AO in not affording the opportunity of cross examination to the assessee is against the principles of natural justice. In view of the above discussions, we are of the view that the impugned issue requires reconsideration at the end of the assessing officer, in which the AO should invariably provide opportunity of cross examination of Shri Sandeep Mehta to the assessee. Section 43B - Disallowance relating to the Finance charges claimed by the assessee - payment of scheduled bank - Held that - the assessee did not file any evidence to show that the above cited Co-operative banks would not fall in the category of Scheduled Bank as defined in sec. 11(5)(iii) of the Act, more particularly the copy of Second Schedule to the Reserve Bank India Act, 1934. - matter remanded back. Share application money - held that - here is no dispute with regard to the fact that the impugned amount of Rs.36.60 lakhs pertains to Share application money and the assessee has furnished the names and addresses of the share holders along with other details that were available with it. - Decided in favor of assessee.
Issues Involved:
1. Deletion of Rs.69,75,846/- relating to Commission expenses. 2. Deletion of Rs.51,36,721/- relating to Finance Charges. 3. Deletion of Rs.36,60,925/- relating to Call money receipts. Issue-wise Detailed Analysis: 1. Deletion of Rs.69,75,846/- relating to Commission expenses: The assessee claimed a deduction for commission payments amounting to Rs.84,47,845/-, with Rs.79,46,846/- paid to Shri Sandeep Mehta, proprietor of M/s Safal Inc., Mumbai. The AO, upon inquiry, found discrepancies as Shri Sandeep Mehta confirmed receipt of only Rs.9,71,000/-. The AO disallowed the excess commission payment of Rs.69,75,846/- based on Mehta's statement. The CIT (A) deleted the addition, criticizing the AO for not allowing cross-examination of Mehta, a principle of natural justice. The Tribunal upheld this view, emphasizing that the AO's reliance on evidence collected behind the assessee's back without confrontation was unjustified. The Tribunal directed the AO to reconsider the issue, allowing cross-examination and considering all relevant evidence. 2. Deletion of Rs.51,36,721/- relating to Finance Charges: The assessee claimed finance charges related to interest on loans from various banks. The AO disallowed Rs.51,36,721/- under Section 43B of the Act, as the interest was outstanding at the year-end and not paid before the due date for filing the return. The CIT (A) deleted the addition, accepting the assessee's contention that interest payable to co-operative banks did not fall under "Scheduled Bank" as per Section 11(5)(iii) of the Act. The Tribunal found that the assessee did not provide evidence to support this claim and noted that the CIT (A) accepted the payment of interest to Andhra Bank without verification. The Tribunal remanded the issue to the AO for verification of the assessee's claims and directed the assessee to provide necessary documents. 3. Deletion of Rs.36,60,925/- relating to Call money receipts: The assessee's share capital increased by Rs.36,60,925/- due to share application money. The AO added this amount under Section 68 of the Act, as the assessee failed to provide PANs and some shareholders did not respond to notices. The CIT (A) deleted the addition, relying on various judicial decisions. The Tribunal upheld the CIT (A)'s decision, noting that the assessee furnished all available details and could not control shareholder responses. The Tribunal referenced its decision in Belgium Glass Ceramics (P) Ltd, which supported the assessee under similar facts. Conclusion: The appeal of the revenue was partly allowed for statistical purposes, and the cross objection of the assessee was dismissed as not pressed.
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