2015 (6) TMI 90 - AT - Income Tax

Addition made on account of commission / brokerage - assessee has failed to produce evidences to show that the deductors have reversed the entries wrongly made by them in their original TDS returns by way of its revision - CIT(A) deleted the disallowance - Held that - CIT(A) did not commit any error in granting appropriate relief to the assessee. Right from the beginning it was the case of the assessee that it had earned total commission of ₹ 1,91,84,002/- from both the parties and confirmations were also submitted. The Assessing Officer disbelieved such contention of the assessee on the ground that the assessee failed to show as to whether entries made by those companies were reversed or not. If confirmations are filed by the assessee from the parties then without verifying the same the Assessing Officer could not add any further amount to the income of the assessee without discarding evidence submitted by the assessee in the shape of the confirmation. Later on the assessee was able to submit TDS certificate also in which correct amount was shown - Decided against revenue. Disallowances of various expenses - CIT(A) deleted the disallowance - Held that - Disallowance deleted by learned CIT(A) is on the submissions and explanation submitted by the assessee and some of the disallowances have been upheld on the basis of estimate. Keeping in view of the entirety of the facts mentioned above and also fact that the assessee has shown net profit @ 78.92%and also fact that the Assessing Officer did not follow the aforementioned Instruction of CBDT, we are of the opinion that no interference is required in the order of learned CIT(A) so as to it relates to Ground 2 to 5 of the Departmental appeal. It may be mentioned here that the Department did not bring any material on record to suggest that findings recorded by learned CIT(A), are contrary to the facts narrated by learned CIT(A). - Decided against revenue.

Summary

Issues:
1. Disallowance of commission/brokerage without evidence of reversed entries in TDS returns.
2. Disallowance of various business expenses and failure to produce supporting documents.
3. Disallowance of expenses under different heads without establishing correlation with income.
4. Disallowance of traveling and conveyance expenses without proper evidence.
5. Disallowance of gift expenses without proof of nature and confirmation of receipt.

Analysis:

Issue 1 - Disallowance of Commission/Brokerage:
The Revenue appealed against the disallowance of commission/brokerage by the CIT(A) due to lack of evidence regarding reversed entries in TDS returns. The CIT(A) found that the companies had rectified erroneous entries in the 26AS system, confirming the correct commission received by the appellant. The CIT(A) also considered confirmation letters from the companies, bank account records, and TDS credit to support the appellant's claim. The ITAT upheld the CIT(A)'s decision, noting that the Assessing Officer could not add further amounts without verifying the confirmations submitted by the appellant.

Issue 2 to 5 - Disallowance of Various Business Expenses:
The Assessing Officer disallowed various business expenses totaling a significant amount. The CIT(A) reviewed the details and found that the expenses under 'business promotion expenses' were not entirely disallowable as they included incentives and commissions paid to specific individuals. The CIT(A) considered the evidence provided by the appellant, including a list of persons to whom such payments were made, and deleted the disallowance. The ITAT upheld the CIT(A)'s decision, emphasizing that the appellant had submitted detailed evidence supporting the expenses incurred.

The CIT(A) also addressed other disallowances made by the Assessing Officer under different expense heads. The CIT(A) partially upheld disallowances based on estimates and guidelines, while deleting disallowances where the appellant had provided adequate explanations and evidence. The ITAT agreed with the CIT(A)'s findings, noting that the appellant's net profit percentage and the Assessing Officer's failure to follow CBDT instructions supported the deletion of certain disallowances.

In conclusion, the ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decisions regarding the disallowance of various business expenses. The ITAT found no grounds for interference based on the evidence and explanations provided by the appellant, leading to the dismissal of the appeal.

This detailed analysis highlights the key issues addressed in the legal judgment, focusing on the disallowance of expenses and commission/brokerage without sufficient evidence and the subsequent decisions made by the CIT(A) and the ITAT.