2022 (11) TMI 478 - AT - Income Tax

Addition on account of commission and brokerage paid - genuineness of services rendered - purchase of land from land owners - HELD THAT - We note in this admitted factual backdrop that the assessee acted on behalf of the said company and purchased lands from various land owners which ultimately stood transferred to the company. He had claimed the impugned payments involving 74 persons in total transactions of Rs.16.72 crores. There is further no quarrel that all the payments had been made through banking channel and list of recipients had also been submitted before lower authorities. We find that the AO expressed his disagreement with the impugned expenditure commission claimed which ultimately stands accepted in the CIT(A) s order. Coming to our reason for not agreeing with either party submits, we find that neither the assessee had been able to prove each and every head of claim nor the AO had called him to substantiate the same regarding all the 74 persons as we are concerned with only 9 parties herein. Faced with this situation and in the light of the fact that all the land owners/payees herein are agriculturists who randomly joined the assessee cause of clubbing the lands for setting up windmills and allied activities for M/s. Suzlon Gujrat Wind Park Ltd (an undisputed fact in assessment), we hold that a lump sum commission disallowance of Rs.12.21 lakhs cash component out of that in issue of Rs.1,68,33,800/- would be just and proper with a rider that the same shall not be treated as a precedent. The CIT(A) details findings deleting the impugned commission/expenditure disallowance of Rs.1,56,12,800/- are upheld in very terms. - Revenue s appeal is partly allowed.

Issues Involved:
1. Deletion of addition of Rs.1,68,33,800/- on account of commission and brokerage paid.
2. Genuineness of transactions and services rendered for commission and brokerage.
3. Non-response to notices under section 133(6) by concerned payees.
4. Non-deduction of TDS on commission and brokerage payments.
5. Reliance on judicial precedents and the burden of proof.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs.1,68,33,800/- on Account of Commission and Brokerage Paid:
The Revenue challenged the CIT(A)'s decision to delete the addition of Rs.1,68,33,800/- made by the Assessing Officer (AO) on account of commission and brokerage paid by the assessee. The AO had disallowed the entire amount, citing the lack of confirmation from the recipients and doubts about the genuineness of the transactions. The CIT(A), however, found that the assessee had provided sufficient details, including names, addresses, PAN cards, Aadhaar cards, and bank statements, to substantiate the payments. The CIT(A) concluded that the AO's disallowance was based on assumptions and lacked concrete evidence.

2. Genuineness of Transactions and Services Rendered for Commission and Brokerage:
The Revenue argued that the CIT(A) erred in accepting the genuineness of the transactions merely because they were conducted through banking channels. The AO had noted that the services rendered were not established, and the payments were not confirmed by the recipients. The CIT(A) countered this by stating that the assessee had provided detailed explanations and supporting documents, including confirmation letters and identity proofs of the recipients. The CIT(A) emphasized that the AO could have taken further steps, such as summoning the recipients or conducting spot inquiries, to verify the transactions.

3. Non-response to Notices Under Section 133(6) by Concerned Payees:
The AO had issued notices under section 133(6) to nine recipients of the commission and brokerage payments, but none of them responded. The AO used this non-response as a basis for disallowing the payments. The CIT(A) argued that the AO should have taken additional measures, such as issuing summons under section 131 or conducting bank inquiries, to verify the transactions. The CIT(A) found that the assessee had discharged its onus by providing all necessary details and that the AO's reliance on non-response was insufficient to justify the disallowance.

4. Non-deduction of TDS on Commission and Brokerage Payments:
The AO had also noted that the assessee did not deduct TDS on the commission and brokerage payments, which was another reason for the disallowance. The assessee contended that it was not liable to deduct TDS as per the provisions of section 194A, as its accounts for the preceding assessment year were not required to be audited under section 44AB. The CIT(A) accepted the assessee's explanation and found that the non-deduction of TDS did not invalidate the genuineness of the payments.

5. Reliance on Judicial Precedents and the Burden of Proof:
The assessee cited various judicial precedents to support its case, arguing that the AO had failed to conclusively prove the allegations of non-genuineness. The CIT(A) referred to decisions such as M/s S.D. Enterprises Vs. ACIT and Rajesh P. Soni Vs. A.C.I.T., where it was held that the burden of proof lies with the AO to substantiate allegations of non-genuineness. The CIT(A) found that the AO's disallowance was based on suspicion and preponderance of probabilities rather than concrete evidence.

Conclusion:
The Tribunal, after considering the rival pleadings, found that neither party had fully substantiated their claims. The Tribunal noted that the assessee had acted on behalf of M/s. Suzlon Gujarat Wind Park Ltd. to purchase lands from various owners and had made payments through banking channels. However, the Tribunal also observed that the AO had not verified the transactions for all 74 recipients and had focused only on nine parties. The Tribunal decided to uphold the CIT(A)'s deletion of Rs.1,56,12,800/- but made a lump sum disallowance of Rs.12.21 lakhs for the cash component, emphasizing that this decision should not be treated as a precedent. The Revenue's appeal was thus partly allowed.

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