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TMI Blog2014 (5) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... owance is liable to be deleted. 3. The disallowance of other expenses amounting to Rs. 2,21,646/- by the Assessing Officer claiming that none of the expenses are allowable in view of his assessing the income of the appellant as 'Income from Other Sources' as against the 'Business Income' disclosed by the appellant, are liable to be allowed to the appellant in view of assessment of income as 'Business Income' by the Commissioner of Income Tax (Appeals)-VI, New Delhi. 4. The appellant craves leave to add or amend any of the grounds of appeal." 3. The grounds raised in the Revenue's appeal being ITA No. 6008/Del/2010 (A.Y. 2007-08) read as under:- "1. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) has erred on facts and in law in directing that the receipt of Rs. 37,09,000/- as purported commission from two parties be assessed under the head of 'Business Income' instead of under the head of 'Income from Other Sources' ordered in the assessment order as the assessee was found to be not providing any services to its purported principles as proved conclusively from various evidences collected during assessment proceedings. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year. the major expenses shown in the profit and loss account of the assessee are on account of salaries Rs.24,04,200/-; Commission Rs.5,79,800/-; Director's remuneration Rs.2,16,000/-; Rent Rs.1,32,000/-; Administrative and other expenses Rs. 1,47,165/-. 5. During the assessment proceedings, AO proceeded to examine the veracity of commission expenses, salary expenses etc. incurred by the assessee. He also examined as to whether the assessee's claim of receiving the commission from the above two parties was correct or not. From the enquiry of the statements of the purported commission agents of the assessee company, all of which were recorded in the presence of the authorized representative of the assessee, in which he was also given opportunity to cross examine the deponents, the Assessing Officer gathered that these persons did not provide any services to the assessee company. None of them could recall the names of parties to whom goods were sold on behalf of the assessee company. On the basis of. the information gathered and statements recorded, the Assessing Officer concluded that these persons were, in fact only assisting the assessee in introducing bogus expenditure. 5.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or could give the description of imported tiles for which orders were procured. The Assessing Officer, therefore, concluded that the assessee company did not provide any services to any of its purported clients - M/s Sarthak Metals Marketing Pvt. Ltd. or M/s Bhayana Builders Pvt. Ltd. 5.3 AO further observed that Sh. Amit Kumar Aggarwal, could not tell about designation or duties of any of the employees. Pursuant to the enquiry in this regard AO formed an opinion that the persons said to be employees were not in the service of the assessee company. AO concluded that the assessee company did not provide any services to its purported principles nor any real business was conducted by it during the relevant previous year. The amount of Rs. 37,09,000/- received from M/s Sarthak Metals Marketing Pvt. Ltd. and M/s Bhayana Builders Pvt. Ltd. was, therefore, assessed under the head 'income from other sources'. The Assessing Officer further added that since the true nature of income received by the assessee has not been explained by the assessee and therefore, the expenses can not be said to be expended wholly and exclusively for the purpose of earning such income. Therefore, no exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not brought any evidence on record to show that these transactions were not, in fact, carried out through the appellant company, nor is there any material to show that various commission receipts are not linked up with the work carried out on behalf of the above said two concerns. In such circumstances, I find that the Assessing Officer was not justified in treating the 'business income' as 'income from other sources' merely on possible interpretations of the statement of Shri Amit Kumar Aggarwal Ground NO.3 of the appeal is, therefore, treated as allowed. (ii) In Ground NO.4, the appellant has raised objections to disallowance of expenses, which mainly consist of Salaries, commission, Director's remuneration, rent and Admn. & other expenses. As regards disallowance of commission expenses of Rs. 5,79,800/-, it is evident from the reading of statements of commission agents and the letters filed by them that these persons have given general replies to the specific queries and were not able to substantiate that what were the specific activities carried out by them for which they received commission income. They were also not able to produce books of accounts. No p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have received salaries through cash. In such circumstances, the genuineness of the cash payments which are not supported by salary register/attendance register cannot be ascertained. In his statement Shri Amit Kumar Aggarwal also could not specify the activities carried out by various employees. Ld. AR has submitted that salaries of 5 employees other than Shri Aniruth Singhal were given by account payee cheques and not by cash. The Assessing Officer is directed to verify from his records and allow the claim of the appellant to the extent it is supported by bank statements. (v) As regards expenses of Rs. 1,32,0001- on account of rent, the Assessing officer has admitted that Smt Neelam Singhal and Lt. Bishan Singh Adhikari to whom rent is stated to be paid, has showed the same as their rental income in response to notice u/s 133(6) of the Act. However, since there was no rent agreement and the entire rent was paid in cash and also since Shri Amit Kumar Aggarwal in his statement u/s 131 could not give details of address of Smt. Neelam Singhal, the Assessing Officer doubted the genuineness of these expenses. During the proceedings before me, it was stated that the rent is not pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garwal could not give the specific details of service provided by the assessee to the above companies. In this regard, we note that Sh. Amit Kumar Aggarwal has stated that the commission was received from these parties, however, he could not remember the names of the parties from whom orders were procured for these parties. We agree with the Ld. CIT(A) that this itself cannot lead to the conclusion that these were sham transactions. The AO has himself mentioned that information was gathered from M/s Sarthak Metals Marketing P Ltd. and Bhayana Builders P Ltd. u/s. 131/133(6) of the Act, wherein they had confirmed the commission payment to the assessee company and have also given the details of the transactions and the work carried out by the assessee company. M/s Bhayana Builders P Ltd. has admitted to have paid commission to the assessee for sales made to 12 concerns, names of these concerns were also provided. Similarly, M/s Sarthak Metals P Ltd. has admited the commission payment was made to the assessee company for supply and follow up of Kasi cured wire to Bokara Steel Plant against three different purchase orders. 9.1 Furthermore, we note that Ld. CIT(A) in the case of M/s Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of M/s Sarthak Metals Marketing P ltd. and Bhayana Builders P Ltd. wherein it has been given a finding that assessee has provided the services to the aforesaid parties, we find that Ld. CIT(A)'s order is reasonable in this regard. Under the circumstances, we do not find any infirmity in the same. Accordingly, we uphold the same. Accordingly, we dismiss the ground no. 1 and 2 of the Revenue's appeal. 10. Now we deal with the claim of expenses by the assessee and its disallowance by the AO which was partly sustained by the Ld. CIT(A) against which Revenue and Assessee are in cross appeals. 11. Commission expenses On this issue from the enquiry of the statement of the purported commission agents of the assessee company all of which were recorded in the presence of the authorised representative of the assessee in which he was also given an opportunity to cross examine the deponent, the AO gathered that these persons did not provide any service to the assessee company. None of them could recall the names of the parties to whom goods were sold on behalf of the assessee company. On the basis of information gathered and statement recorded the Assessing Officer concluded that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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