2024 (2) TMI 630 - AT - Income Tax

Disallowance of commission payment - ex-parte order paased by CIT(A) - HED THAT - Assessee had made most of the payments through RTGS or Account Payee Cheque. It has given the details of those recipients including copies of their income tax returns. Validity of assessment order - Enquiry by Assessing Officer - AO issued notice u/s 143(2) on 04.09.2014. Thereafter he issued a questionnaire on 23.11.2015, i.e. the proceeding remains dormant more than one year. He started the inquiry in November, 2015 and passed the assessment order on 08.03.2016. According to him, he has issued notice under section 133(6), which was returned back. Thereafter he has issued summons u/s 131 dated 04.02.2016 directing those individuals to appear before him on 11.02.2016. Looking at recipients, first party is in Kolkata, but the next party is from Jaipur, Rajasthan and third one is from Delhi. How these summons u/s 131 could have been served upon them within a week and they could revert back to AO. It is practically impossible. It is not ascertainable whether these summons have ever served upon or not. Therefore, the inquiry at the end of the ld. Assessing Officer is a flawed one. AO nowhere examined how this expenditure was not necessary for the business. What are the products obtained by the assessee as a commission agent and how these were sold with the help of different parties across India. Assessee has not shown losses rather it has shown profit. Instead of approaching the controversy with that approach, AO all of a sudden took help of jurisprudence which deals with unexplained share application money from paper companies. This shows the careless attitude at the end of AO while framing the assessment order. On appeal, ld. CIT(Appeals) has totally ignored all these submissions, which are available on the Portal but dismissed the appeals for want of prosecution. It is very difficult to make understand the grievances of the assessee before the authority on an overall appreciation of the evidence available before us. We are satisfied that these expenses were incurred for the business purposes during the course of business. The assessee has submitted all basic details. The Officer failed to cross verify these details - Assessee appeal allowed.

Summary

Issues involved:
The judgment involves the confirmation of disallowance of commission payments by the ld. CIT(Appeals) in A.Ys. 2013-14 and 2014-15, based on alleged lack of proof of identity and genuineness of transactions.

Details of the Judgment:

Issue 1: Disallowance of Commission Payments
In the case, the assessee filed returns declaring income for A.Ys. 2013-14 and 2014-15. The ld. Assessing Officer alleged lack of proof regarding commission recipients' identity and transaction genuineness, leading to disallowance of payments. The AO cited non-response from some recipients to notices under section 133(6) of the Act. The ld. Assessing Officer's finding highlighted the failure to establish recipient identity and transaction genuineness, referring to judicial precedents. The AO emphasized that mere filing of PAN, IT returns, and bank statements was insufficient to discharge the onus on the assessee. The AO concluded that the commission transactions were not satisfactorily proved by the assessee, leading to disallowance of payments.

Issue 2: Appeal before ld. CIT(Appeals)
The assessee appealed the disallowance before the ld. CIT(Appeals), who dismissed the appeals for want of prosecution. The assessee's counsel submitted details on the Income Tax Portal during assessment proceedings and applied for adjournment, which was denied. The ld. CIT(Appeals) dismissed the appeals, leading to dissatisfaction from the assessee.

Issue 3: Tribunal's Decision
Upon consideration, the Tribunal found flaws in the ld. Assessing Officer's inquiry process, highlighting delays and impracticalities in serving summons to recipients located in different cities. The Tribunal noted the lack of examination regarding the necessity of the expenses for business purposes and the absence of losses shown by the assessee. The Tribunal criticized the AO's reliance on jurisprudence related to unexplained share application money, indicating a careless attitude in framing the assessment order. The Tribunal concluded that the expenses were incurred for business purposes and allowed the appeals, deleting the additions in both years.

Conclusion:
The Tribunal allowed both appeals, overturning the disallowance of commission payments by the ld. CIT(Appeals) in A.Ys. 2013-14 and 2014-15, based on the flawed inquiry process and lack of examination of business necessity by the ld. Assessing Officer.