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TMI Blog1986 (11) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... 83. When the matter went up in appeal before the CIT(A) he found that brokerage and commission similarly paid in the preceding assessment years had never been disallowed. He also examined some of the internal vouchers singed by the recipients of brokerage and commission and found that commission varying between 3to 5 per cent if sales had been paid to them. The CIT(A) also noted that on the reverse of each internal voucher details of sale bills name of the purchaser bill amount and brokerage paid had been duly entered. After noticing these facts and having regard to the past history of the assessee the CIT(A) held that there was no justification for disallowing part of the expenditure. 3. It is in the background of these facts, that the Revenue is in appeal contending that the burden to prove that the payment had been made by way of commission and brokerage having not been discharged and the identity of the recipients having not been established by the assessee the CIT(A) had no justification for vacating the disallowance made by the IAC(A) in the asst. yrs. 1981-82 and 1982-83 Mr. R.N. Bara ld. Sr. DR has contended that the evidence in support of the expenditure having not been f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r augmenting its business. The ld. ITO made the addition with the following observations: "4. While scrutinising the books of accounts of the assessee, it was found that during this year brokerage and commission of Rs. 24,814 was paid to various persons and commission received from the principal was Rs. 11,703. The assessee was asked to justify the claim of the brokerage made. The assessee admitted the position that there is no written agreement for the appointment of the persons to whom the brokerage has been paid nor could he produce before me convincing explanation regarding the nexus of the commission paid with the business and also the nature of services rendered by the persons to whom the commission was paid. The assessee only made submission that the commission is nearly paid @ 10 per cent to the persons who procure some business for the firm. Assessee also admitted that it is not possible to produce all the parties to whom the commission has been paid was able to provide full information regarding the whereabouts and the addresses of these person. In view of these facts the claim of brokerage made does not appear to be fully justified nor the same appears to have been incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other persons similarly placed, (g) the assessee was also not in a position to produce the so called commission agents and brokers before the ld. ITO to establish the identify, service and the receipt and, (h) the assessee also did not request the ld. ITO to issue summons to the said parties. 4. The disallowance was made in those circumstances. The ld. CIT(A) deleted the disallowance without meeting even a part of the reasons employed by the ld. ITO for making addition. The ld. CIT(A)'s only reason for deleting the addition was that the ld. ITO has not made the addition was of the entire amount said to have been paid by the assessee by way of commission and brokerage. This is hardly any reason for interfering with the finding. The ld. CIT(A) in fact should have required the ld. ITO to record the statements of the persons who are said to have received the commission or brokerage as before us and so also it is said to have been argued earlier that the names of the commission agents and brokers were mentioned in the receipts, copies existing with the assessee. The ld. CIT(A) in fact on the basis of those receipts should have directed the ld. ITO to procure the presence of the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is a firm carrying on business of purchase and sale of mill, stores and chemicals. It also holds the distributorship of Fenner V. Belts in certain specified territories. In the assessment year under appeal 1981-82 its turnover amounted to about Rs. 84,77 lacs. In the asst. yr. 1982-83 its turnover had gone up to Rs. 93.29 lacs. The assessee firm claimed that it was usual and normal to pay brokerage and commission in order to push up the sales and that in the asst. yr. 1981-82 Rs. 16,319 and in the asst. yr. 1921-22 a sum of Rs. 24,214 was paid as and by way of brokerage and commission. These amounts were claimed as deductions in the computing the incomes of those two assessment years. The IAC (Asst.) observed that this expenditure was not verifiable. He was also of the opinion that the payment of brokerage and commission did not appear to have been made for the purpose of business. However he did not disallow the whole of the amount of commission but disallowed only Rs. 12,000 in each of the relevant years. When the matter came on appeal before the Commissioner(A) he noticed that the brokerage and commission similarly paid in the preceeding assessment years were always allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt between the assessee and the so called commission agents or brokers, (b) there was no evidence that any service by the commission agents and brokers was rendered to the assessee in connection with its business, (c) no nexus was established between the payment and the service, (d) the assessee was not able to disclose full particulars about the arrangement, (e) the assessee was not in a position to disclose the details about the commission agents and brokers, (f) the assessee also did not establish that similar commission/brokerage has also been paid by the other persons similarly placed, (g) the assessee was also not in a position to produce the so called commission agents and brokers before the ld. ITO to establish the identity, service and the receipt, and (h) the assessee also did not request the ld. ITO to issue summons to the said parties" According to him the Commissioner(A) deleted the disallowances without meeting even a part of the reasons furnished by the IAC for making the additions. He considered that the Commissioner(A) should have required the assessee to produce the recipients before the IAC to enable him to record the statements and only then the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending the case back to the IAC for examination. On the internal vouchers maintained by the assessee not only the signatures of the recipients were obtained but full details, which are necessary to establish the genuineness of the payment of commission, was recorded. These details would serve as a proper voucher in support of the payment of brokerage and commission. Thus, when production of parties for examination is rendered impossible by making a part disallowance when full details are available to hold that the payment of commission in the earlier years, I see no reason why the further exercise of sending the case back to the IAC (Asst.) for examination should be resorted to. That exercise would have become necessary only if the entire commission was disallowed or commission with reference to certain payments was disallowed but not in a case where part disallowance was made on an estimate basis without reference to any specific payment. 4. I am therefore of the opinion that on the facts of this case, the assessee has proved beyond doubt the necessity for the payment of brokerage and commission, the factum of services, the mode and method of payment of commission and the voucher ..... X X X X Extracts X X X X X X X X Extracts X X X X
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