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TMI Blog2016 (8) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... and notice under section143(2) was issued and after examination, the assessment was completed by the Assessing Officer by disallowing an amount of Rs. 48,13,253 claimed as commission payments to various alleged agents. 2.1 During the course of assessment proceedings the Assessing Officer sought for the details of the parties to which the commission had been paid along with the details of nature of services rendered by each party to justify such payments. The assessee did not file any details regarding the services rendered by the parties. However, the assessee claimed that the payments had been made by cheque and TDS was made wherever required. The Assessing Officer issued summons and examined the recipients of commission on oath and recorded their statements. The relevant portion of the statements had been incorporated in the assessment order at pages 4 to 17. The Assessing Officer also examined the purchaser companies named by the agents to ascertain the nature of services rendered to/on behalf of them also. After analysing the factual matrix and legal position at paragraph 21 of the order and considering the contention raised by the assessee, the Assessing Officer disallowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to appreciate that the Assessing Officer has conducted enquiry with a single mindedness of disallowance and not trade oriented enquiry and has not brought on record any material that there is no practice of paying commission nor the money paid as commission has come back to the assessee and further has disallowed the entire payment of commission on the basis of the statement of two persons which did not contain details as to why they accepted the payment and why they even accepted TDS and admitted it as income and thereby erred in confirming the disallowance. 5. The learned Commissioner of Income-tax (Appeals) further failed to appreciate that the disallowance results such margin of profit which is unheard of in the line of business that is carried out by the assessee and further failed to appreciate the fact that it is not necessary for the person who purchased material to know that the person who enquired about requirement is an agent of supplier as the agent may not reveal it and may even state that he is from assessee and thereby erred in confirming the disallowance on the ground that the service by the agent is not demonstrated." 5. The learned authorised representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies under the Act including the Tribunal. In the reference made to it, the Bombay High Court took the view that if the disclosure of the names of the recipients of the commission is detrimental to the interest of the assessee, it cannot be compelled and the corresponding amount cannot be disallowed as deduction as long as payments are genuine and for the purpose of business. The basis for this court to answer a question against the assessee in CIT v. Transport Corporation of India Ltd. [2002] 256 ITR 701 (AP) case is that, firstly, the item-wise expenditures were not furnished in the returns and no plea was raised to the effect that disclosure of the names of the recipients of the commission would be detrimental to the interest. The relevant portion of the judgment reads as under (page 713 of 256 ITR) : 'In the instant case, as noticed supra, firstly the payment itself is not established and, secondly, it is not the case of the assessee before the assessing authority that the particulars of the persons to whom secret commission was paid could not be supplied without detriment to the business of the assessee having regard to the nature of the business of transport of cargo c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer, it was noticed that their answers are stereo type, the sentences, coin of words are similar, how these people will give exact/similar statements. Secondly, the people who bought the materials also had denied, any presence of agents in the transaction. To counter these, the learned authorised representative submitted that the services utilised were not procuring the order but for gathering demand information/requirements from the market. The learned authorised representative has not clarified on the above issue to the Bench convincingly. However, in business, the important thing is the contractual relation between parties. In the given case, the assessee has utilised the services of few individuals to expand her business and the other parties had agreed to act as agents. They acknowledged the services by confirming before the Assessing Officer. The assessee also acknowledged the services by way of making payment after deducting TDS. However, the assessee has to prove the relevance of the expenses to the revenue generated by him along with the details of the service providers. The assessee had submitted the list of service providers and submitted that she had fulfilled the prima ..... X X X X Extracts X X X X X X X X Extracts X X X X
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