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TMI Blog2015 (6) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission to others, as mentioned in the order of the ld. CIT(A) referred to hereinabove i.e. to Sh. Harminder Benipal of M/s. Marlik Seam and others were paid commission and the said commission has been allowed as expenditure by the Income Tax Department is not under dispute. The said Sh. Nawal Khanna is not relevant person as provided u/s 40A(2)(b) of the Act. Further, no basis brought on record by the AO to hold that the commission so paid is bogus. It is fact on record that all the parties knew Sh. Nawal Khanna and about the services carried out by him like procurement of orders and cheques etc. In the facts and circumstances, the said commission paid to Sh. Nawal Khanna is allowable under section 37(1) of the Act. We find no infirmity in the order of the ld. CIT(A), who has rightly allowed the claim of the assessee. - Decided against revenue. - ITA No. 261(Asr)/2014 - - - Dated:- 26-3-2015 - A D Jain, JM And B P Jain, AM,JJ. For the Appellant : Shri K R Jain, Adv. For the Respondent : Shri Tarsem Lal ORDER Per B. P. Jain, AM. This appeal of the Revenue arises from the order of the CIT(A), Amritsar, dated 03.02.2014 for the assessment year 2005-06. The R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amritsar, who vide their order in ITA No.483(Asr)/2008 dated 11.12.2008 set aside the entire issue to the file of the AO with the direction to issue summons to the purchasers, who have purchased through Sh. Nawal Khanna and give an opportunity of cross examination of them by the assessee. It was further directed that if the AO fails to get response of the purchasers, the same facts may be brought to the notice of the assessee and if the assessee fails to produce the purchasers, the AO is at liberty to decide the issue in accordance with the law. As the case was set aside by the ITAT, Amritsar Bench, a notice u/s 143(2) was issued in response to which Sh. K.R.Jain, Advocate attended the proceedings. Following the directions of ITAT, Amritsar Bench, summons were issued to the following 10 parties who had made purchases from M/s. H.B.Velvets (P) Ltd:. i) M/s. Mona Designs, Gurgaon ii) M/s. Seer Global Ltd. Noida iii) M/s. Malrik Seam, Gurgaon iv) M/s. J.J. Impex, Gurgaon v) M/s. Himanshu Apparels Pvt. Ltd, Gurgaon vi) M/s. Golden Strand Pvt. Ltd. Noida vii) M/s. Chunnu International, Gurgaon viii) M/s. Blessing Exports, Noida ix) M/s. Alankar Creations, Gur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all these statements and cross examination statements and I find that all of the parties have recognized Mr. Naval Khanna, some have stated that they were thinking he was employee of the assessee company and some were thinking he is representing Assessee Company. Assessee's counsel has submitted an exhaustive paper book giving details of all such examinations and cross examinations. It appears that AO has created certain confusion and was having some misconception about manner in which assessee was carrying out his business. The AO has asked in all examinations about the presence of middle man, which everybody has denied. In fact, middle man means a person who represents both the sides and received service charges from both the parties. Whereas, in the present case, it was assessee who was paying service charges to Sh. Naval Khanna. The AO should have inquired about the role and visits of Sh. Naval Khanna for procuring orders for the assessee. The AO was thinking that Sh. Naval Khanna is an 'Independent Agent', who is receiving orders on his letterhead/purchase order forms and then passing them to the assessee. Whereas Sh. Naval Khanna was more like an employee of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that Sh. Naval Khanna has filed his return of income on receipt basis and Sh. Naval Khanna was not paid any salary by the assessee company and as such his performance was based on the purchase order procured for the company. Sh. Naval Khanna is not related person as provided u/s 40A (2)(b) of the Income Tax Act and as such there is no question of diversion of any income by the assessee by paying him higher commission. In fact, AO has also not taken this ground and has disallowed u/s 37(1) as 'bogus'. The fact discussed above and as available in all the statement and cross examination clearly proves that all parties were knowing Sh. Naval Khanna and have also explained about various services carried out by Sh. Naval Khanna to the assessee, like procurement of orders, cheques etc. In view of above commission payment made by the assessee to Sh. Naval Khanna is being treated as genuine and allowable u/s 37(1). In view of above, main ground of appeal regarding disallowance of commission expenses (ground no 2 to 7) is allowed and general grounds (Gr No.1,8,9 10) are dismissed. 5. The Ld. DR relied upon the order of the AO whereas the ld. Counsel for the assessee, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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