2024 (3) TMI 96 - AT - Income Tax

Revision u/s 263 - Genuineness of expenditure (Commission paid) - discrepancies in the GST shown in the commission bills and GST reported in the Audit Report - CIT opined that the transaction is abnormal in nature which is approximately 3.03% on the total turnover of the assessee company HELD THAT - We find that the assessee has deducted tax at source on the commission payment made to the agent. This fact is also evidenced in the Tax Audit Report filed by the assessee. We find that various judicial pronouncements have held that the business decision of the assessee cannot be questioned by the Revenue. However, only the genuineness of the transaction needs to be verified. In the instant case, there is an agreement between the parties and the payments have been made through banking channels after deduction of tax at source. Merely because, the commission payments were huge in nature, it cannot be a ground for questioning the genuineness of the transactions in the absence of any adverse material on record. Argument of the DR that the commission have been credited only at the year-end could not be accepted because the payment of commission has been made by the assessee on regular intervals during the year, while calculation of the commission based on supplies was credited in the books of accounts on 31/3/2018. With respect to the capital gains as observed in the order of the Ld. Pr. CIT passed u/s. 263, we find from the submissions of the Ld. AR that the assets form part of the books of account. AR also submitted the copy of Form 26QB and the Sale Deed before us. Assessee has also provided sample confirmation letters for the sales made through the agent from the ultimate buyer. Difference in GST calculation and reported does not have any relevance in the instant case. Therefore find no merit in the arguments of the Ld. DR thereby considering the order passed by the CIT u/s. 263 of the Act deserves to be quashed. We allow the grounds raised by the assessee.

Summary

Issues involved:
The appeal is against the order of the Ld. Principal Commissioner of Income Tax-1, Visakhapatnam [Pr. CIT] passed u/s. 263 of the Income Tax Act, 1961 for the AY 2018-19.

Issue 1: Validity of the order passed u/s 263 of the Act

The assessee contended that the order passed by the Ld. Pr. CIT u/s. 263 of the Act is illegal and void-ab-initio. The Ld. AR argued that the decision to engage an agent for marketing products was a legitimate business decision, resulting in a significant increase in turnover and net profit. The Ld. DR, however, argued against the justification of a substantial commission paid. The Tribunal found that the commission agreement was in place, payments were made through banking channels, and tax was deducted at source, indicating genuineness. The Tribunal held that questioning the business decision of the assessee without adverse material was unwarranted. The order passed by the Ld. Pr. CIT u/s. 263 was deemed to be quashed, and the appeal was allowed.

Significant Phrases:
- Ld. Principal Commissioner of Income Tax-1
- Income Tax Act, 1961
- Assessment u/s. 143(3) r.w.s.143(3A) and 143(3B) of the Act
- Section 263 of the Act
- Commission agreement
- Tax Audit Report
- Banking channels
- Judicial pronouncements
- Genuineness of the transaction
- Adverse material
- Capital gains
- Form 26QB
- Sale Deed
- Sample confirmation letters

This summary provides a detailed breakdown of the legal judgment, focusing on the issues involved and the Tribunal's decision on the validity of the order passed under section 263 of the Income Tax Act, 1961.