2012 (12) TMI 291 - AT - Income Tax

Validity of Assessment order passed by Tax Recovery Officer, who is not AO - Held that - Tax Recovery Officer inherently lacks the status of an Income Tax Officer. In the present case, assessment is framed on 29.12.2008, and, the provisions of section 2(44) permitting Tax Recovery Officers to do assessment work was amended well before this date. It is wholly immaterial whether or not this provision was in force in the beginning of the relevant assessment year, because it is a procedural provision and all that matters is that the procedure should be carried out in accordance when such procedure is adopted. In any event, power to transfer cases u/s. 127(2) cannot be challenged before this forum - plea of the assessee is rejected. Disallowance of Commission - Held that - It is illegal, unjust and arbitrary since these have allowed under similar terms and conditions subsequently, and in same case, opportunity for cross examination of witnesses was not allowed to appellant. fundamental requirements for allowing deduction in respect of commission payment is that there should be evidence for some services having been rendered. The services having been rendered cannot be simply assumed or inferred. In the absence of such evidence, no interference is called for in this disallowance - confirm the same - In the result, appeal filed by assessee is dismissed.

Summary

Issues:
1. Jurisdiction of Tax Recovery Officer to frame assessment order.
2. Disallowance of commission and lack of evidence for services rendered.

Issue 1: Jurisdiction of Tax Recovery Officer to frame assessment order

The appeal challenges the correctness of the Commissioner of Income Tax (Appeals)'s order regarding the assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2006-07. The primary contention raised is that the assessment order, executed by the Tax Recovery Officer, who is not an Assessing Officer, is legally flawed and should be annulled. The case background reveals that the CIT transferred the case to the Tax Recovery Officer for disposal of time-barring scrutiny assessment. The appellant argues that the Tax Recovery Officer lacked the authority to frame the assessment order. The appellant relies on the definition of "Assessing Officer" under section 2(7A) of the Act, highlighting that it does not explicitly include a Tax Recovery Officer. Additionally, the appellant points out that the provisions allowing Tax Recovery Officers to perform assessment functions were not in force during the relevant assessment year. However, the Tribunal rejects the appellant's plea, emphasizing that a Tax Recovery Officer, when authorized, essentially acts as an Income Tax Officer and that procedural provisions should be followed regardless of the timing of their enactment. The Tribunal dismisses the appeal, concluding that the power to transfer cases under section 127(2) cannot be contested at this stage.

Issue 2: Disallowance of commission and lack of evidence for services rendered

The second ground of appeal challenges the disallowance of commission, claiming it to be illegal, unjust, and arbitrary. The appellant argues that similar commissions were allowed under comparable terms subsequently and that the opportunity for cross-examination of witnesses was not provided. During the proceedings, the appellant fails to produce evidence of services rendered by the individuals who received the commission, despite asserting that these incomes were disclosed by the recipients and that deductions were allowed in other years. The Tribunal stresses that a fundamental requirement for commission payment deduction is evidence of services rendered, which cannot be assumed or inferred. As no such evidence is presented, the Tribunal upholds the disallowance of the commission. Consequently, the second ground of appeal is also dismissed. Ultimately, the Tribunal rejects both grounds of appeal, resulting in the dismissal of the appellant's appeal.

This detailed analysis of the judgment from the Appellate Tribunal ITAT KOLKATA highlights the legal issues, arguments presented, and the Tribunal's reasoning and decision on each issue.