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TMI Blog1998 (5) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... ate reasons mentioned in the assessment order. The CIT(A) also confirmed the said disallowance. 1.2. The learned counsel for the assessee contented that the company made direct efforts for obtaining orders from Cimmco International but the same did not materialise. To corroborate this contention, copy of letter dt.2nd Jan., 1987& other letters sent by the company to Cimmco was brought to our notice. A certificate has also been submitted before the AO that the assessee could not enter into any transaction with Cimmco pursuant to their direct efforts. 1.3. On17th April, 1987, Ajay Kumar Gupta sent a letter to the assessee introducing himself as a commission agent/broker for supply of various kinds of surgical items. He also offered his services for obtaining orders on their behalf and indicated that he would charge commission @ 15 per cent on sale value. The company vide letter dt.30th April, 1987, invited him for personal discussion. On6th May, 1987, Ajay Kumar Gupta gave another letter to the assessee-company stating that they can obtain the details of requirement of surgical equipments of Cimmco International and can send the same to the assessee. The assessee vide letter dt.15t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween Gupta and the assessee-firm appears to be an afterthought and designed to suit the assessee's false claim of commission. The AO also observed that out of the commission of Rs. 1,04,384, the alleged commission to the extent of Rs. 91,272 was made in cash in violation of s. 40A(3). The details of such cash payments of commission have been given in para (v) at p. 5 of the assessment order. 1.8. The learned counsel submitted that there are no contradictions in the statements of the commission agent. The commission agent has procured the orders from Cimmco. He has also ensured that Simmco made the payment of the sale proceeds. Ajay Kumar Gupta is an existing income-tax assessee. Copies of his assessment orders, etc. were duly produced before the AO. As regards payments made in cash, the learned counsel submitted that cash payment had to be made to Ajay Kumar Gupta pursuant to his insistence for receiving commission in cash until he developed complete faith and confidence in the assessee. He invited our attention towards a certificate dt.16th Jan., 1991, given by Ajay Kumar Gupta, in which he has confirmed that he received cash payments to the extent of Rs. 92,272 and the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards the copy of statement of facts annexed with the assessee's appeal before the CIT(A) containing detailed explanation of the assessee in relation to the various observations made by the AO in the assessment order. He also pointed out that agent has admitted in the statement recorded by the AO on 4th Dec., 1990, that he visited the accounts branch of Cimmco once to receive a cheque on behalf of the assessee. The agent has also gone to Simmco office for collecting Form No. ST-49, which is evident from copy of letter dt.21st Dec., 1991, submitted at p. 21 of paper-book. The learned counsel submitted that the assessee has adequately discharged the onus of proving the genuineness of the transaction in question. The learned lawyer also pointed out that commission paid to various other persons has been allowed by the AO. He invited our attention towards the documents placed at pp. 32-36 of the compilation which give details of commission paid to Siddarath Enterprises @ 15 per cent on supplies made to S.M.G. Hospitals and @ 20 per cent on supply made to J.L.M.L. Hospital, Srinagar, as well as the details of commission paid to Mr. Vijay Tikku @ 15 per cent and 20 per cent as per detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons who received such letters and marked the seal of "received" with date. In the absence of any material, it is validly impossible to hold that these letters were cooked up to support the alleged false claim of commission. 2.2. The assessee has also produced the confirmation of Ajay Kumar Gupta. He has clearly confirmed that he received commission aggregating to Rs. 1,54,385.24. Such commission payments were received by Ajay Kumar Gupta after successful execution of the sale contracts procured through, Ajay Kumar Gupta. In the confirmation, Ajay Kumar Gupta has also stated that he is an existing income-tax assessee in Ward 11(3),New Delhi. The assessee also submitted copies of the acknowledgment slip of the returns of income furnished by Ajay Kumar Gupta for asst. yrs. 1988-89 and 1989-90. The AO recorded the statement of Ajay Kumar Gupta on different dates. In his statement recorded on4th Dec., 1990, Ajay Gupta has clearly confirmed that he has written a letter to the assessee that he can procure orders from Cimmco. He has also confirmed that after personal discussion, he agreed to obtain orders from Cimmco no commission @ 11 per cent. He has also confirmed that he received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dleman or reference to the middleman would not be generally material in the correspondence unless they were ascertained agents. In this case 'M' stated that they had appointed 'B' to work on their behalf and the correspondence was produced before the IAC. The IAC should have referred to this correspondence and prove it to be false. No attempt was made by the IAC to disprove any of the letters produced. An affidavit of 'B' was also submitted, in which he admitted having received total commission of Rs. 20 lakhs in respect of supplies made by the assessee pursuant to the orders obtained through the services of 'M'. The Department also did not enquire into the receipt of this commission from all angles and nor proved that this commission reached back to the assessee in one shape or the other or it was paid for some illegal purpose opposed to public policy. The Tribunal finally allowed deduction in respect of commission paid to 'M'. 2.4. A reference may also be made to the Tribunal,Delhi(Special Bench) in the case of ITO vs. French Dyes & Chemicals (I) (P). In this case, secret commission was paid by the assessee-company to the employee of customers on regular basis over a number of y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty earlier and after some transactions, he agreed to receive the payments by cheques. The remaining amount of Rs. 63,113.23p. was received by cheques. The confirmation so given by the agent clearly brings the assessee's case within the exceptions enumerated in the Circular No. 220 dt.31st May, 1977, in relation to interpretation of s. 40A(3) r/w r. 6DD(j). 2.6. On a careful consideration of the entire relevant material, we are of the considered opinion that the assessee is clearly entitled to grant of deduction of Rs. 1,54,385 in respect of commission paid to Ajay Gupta. The AO is accordingly directed to allow the same. 3. The next ground relates to confirmation of addition of Rs. 54,000 on account of unexplained investment in the capital account of one of the partners, Ajay Saxena. 3.1. The learned lawyer appearing on behalf of the assessee submitted that no such addition can be validly made in the hands of the assessee-firm, particularly when the partner has clearly confirmed that he invested the amount in question as his contribution. He invited our attention towards judgment in Narayan Das Kedar Das vs. CIT (1952) 22 ITR 18 (Bom), Balbhadra Chand Munnalal vs. CIT (1958) 33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. The statement of Ajay Saxena was recorded by the AO on26th Sept., 1990. In the said statement, Ajay Saxena has given complete details of capital contribution made by him in the assessee-firm on various dates in cash and by cheques. He has also given broad details of sources wherefrom such amount was given. Ajay Saxena had stated in the said statement that he is an existing income-tax assessee and he has duly disclosed his income from tuition in the returns of income for asst. yr. 1986-87 to asst. yr. 1989-90. 3.5. The initial onus which lies on the assessee to prove the genuineness of the credit stands discharged after the assessee has proved the identity and capacity of the person concerned and has also established the genuineness of the credits in question. In the present case, Ajay Saxena, who is an existing income-tax assessee has appeared before the AO and confirmed the fact of contributing the capital as recorded in the books of accounts of the firm. The burden of the assessee stands discharged. The credit in the name of a partner of a firm, who is an existing income-tax assessee, should ordinarily not be added in the hands of the firm after the partner has confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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