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TMI Blog2017 (12) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 13/10/2010. The case was selected for scrutiny. The assessee also filed a revised return of income declaring total income of Rs. 5,82,620/-. In the revised return of income, the assessee claimed loss under the head income from house property. 3. Ground No. 1 of the appeal is against confirming the addition of Rs. 22,90,000/- on account of disallowance of commission paid. The facts in this regard are that the assessee had debited Rs. 22,90,000/- in the P&L account as commission expenses. Commission was paid to the following persons: 1. Samridhi Furniture Prop Anita Gupta Rs. 10,00,000/- 2. Sarveshwari Enterprises (Partnership firm of Sunita Mishra) Rs. 2,90,000/- 3. Sunita Mishra Rs. 3,00,000/- 4. Sunita Gupta Rs. 2,00,000/- 5. Alok Gupta HUF Rs. 3,00,000/- 6. Pankaj Gupta & Sons HUF Rs. 2,00,000/- The Assessing Officer observed that the commission payment made in the year consideration was very huge. No such commission was paid in the preceding year. Statement of these persons were recorded and show cause was issued. The assessee filed his reply. After considering the entire facts and circumstances as well as the evidences submitted by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 the commission payees viz. Smt. Anita Gupta, Smt. Sunita Gupta, Sh. Alok Gupta ( Karta of Alok Gupta, HUF) and Sh. Pankaj Gupta (Karta of Pankaj Gupta, HUF) are close relatives of Sh. Rakesh Gupta of NHAI. Sh. Naresh Gupta is real brother of Sh. Rakesh Gupta and is also husband of Smt. Anita Gupta (Proprietor of Samriddhi Furniture), who is the biggest payee of commission viz. Rs. 10,00,000/-. Similarly, Sh. Alok Gupta and Sh. Pankaj Gupta are cousin brothers/ close relatives of Sh. Rakesh Gupta as stated in the assessee's submissions quoted above. It is further seen that the fifth payee, Smt. Sunita Mishra is wife of Shri Opendra Mishra, who was working in NHAI at a leading position at the time when the said contracts were given. Similarly, the sixth payee, M/s Sarveshwari Enterprises is a firm whose partners are Smt. Sunita Mishra and her two minor children. The important point that emerges from the entire web of facts, is that both Sh. Opendra Mishra and Sh. Rakesh Gupta held important positions in NHAI, Jaipur, when the contracts were given to the assessee. Therefore, it is not a coincidence that all the commission payees are intimately related to these two public servants, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court has held that payment of commission to Government doctors for obtaining a favour therefrom by prescribing medicines in which the assessee is dealing, will come within the category of illegal gratification of bribe and therefore cannot be allowed as business expenditure. 2.6 The Hon'ble Karnataka High Court, in the case of J.K. Panthaki & Co. Vs ITO (2012) 22 taxmann.com 49 (Kar.). has held that commission paid to MD etc. Of a company awarding civil contract being a bribe could not be construed as an expenditure at all. In the present appellant's case, the facts are quite similar since commission has indirectly been paid to the public servants who were in a position to influence the award of contracts to the appellant. In fact, the Karnataka High Court dealt with the issue of commission payment to private persons in a company, whereas in the case of the appellant, the payment is made to public servants, indirectly through their close relations. Such unholy nexus has led to a loss of Rs. 22,90,000/- to the Government, since contract amount paid to the assessee has naturally been inflated to that extent to enable payment of the said amount of commission. 2.7 The other ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and it was only due to new business of NHAI. This fact has been agreed by Ld A.O. The assessee submitted the books of accounts along with the vouchers for examination and learned assessing officer could not point out any mistake there in and therefore accepted the books of accounts. It is also not the case of Ld A.O. that recipients are relatives of assessee. Assessee also submitted before learned assessing officer: - 1. A chart showing total business receipt from NHAI through above referred 6 recipients of commission along with total commission received by the assessee from the respective news paper agency and the details of the commission paid to respective recipients on their work. In this chart it was also mentioned that on which bill no. and for which work the commission was paid to whom copy of chart is also submitted herewith.(APB-29&30) Apart from this copy of ledger account of NHAI in the books of assessee(APB-31), copy of MOU with M/s Samridhi Furnitures (APB-28) and copy of credit notes issued by the assessee to the recipients of the commission were also submitted before learned assessing officer and are again submitted herewith(APB 32-42). Your h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... que no. 911405 which was deposited in bank account. She is M.Com and doing shares investment business since 7 years. F. Pankai Gupta HUF PAN No. AAHHP6397QR APB 23- 27) :-while answering question no.7, 8 & 9 it was specifically stated that his HUF had business relationship during A.Y.. 2010-11 with M/s Rishabh Advertising Agency and worked on commission for the owner of M/s Rishabh Advertising Agency Mr. Raj Kumar Baid. It is also on record that all the recipients have filed their return of income and have shown the commission receipts in their respective return and have paid due taxes. It is also on record that all the payments were made through account payee cheque after deducting TDS. It is also submitted that Ld A.O. has made the disallowance simply on the basis of assumptions & presumptions and on the basis of incorrect facts. Ld A.O. has stated that the payees withdrawn the cash from the bank accounts. At the very outset it is the right of payees to use their money in their own way. However Smt Sunita Gupta in her statement has stated that she deposited the money in her husband's firm & getting interest thereon. Ld A.O. has also mentioned only one case of Sh. Pank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have worked for the assessee and have received the payments, the ratio of decision of MC Dowell & Co. Ltd case 154ITR148 is not applicable on the facts of the case of the assessee .Assessee has not adopted any colourable device or dubious methods. Assessee has not avoided the payment of tax. Reliance is placed on the decision of CIT V/s Noshira Dara Mody (2014) 50 Taxman.Com (Bombay) where it has been held that "where the recipients of commission payment has accepted the same and has disclosed the said receipt in their ROI, no disallowance u/s 37 can be made". Reliance is also placed in the case of CIT V/s Nanglia Fabrics (P) Ltd 220 Taxman 17 (Guj) where it has been held that "if the commission payment has been made through a/c payee cheque, no disallowance can be made". In CIT Vs Shree Rama Multi Tech Ltd. 220 Taxman 76 (Guj) has been held that simply more expenses on commission has been incurred during the year, the disallowance cannot be made. In CIT V/s E. Ram Chandran 359 ITR 671 (Madras) it has been held that where business has been procured, genuineness of payment is established. In Maruti Ins distribution services v/s CIT 225 Taxman 63(Delhi) it has been held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fabrics (P) Ltd. 220 Taxman 17 (Guj), CIT Vs Shree Rama Multi Tech Ltd. 220 Taxman 76 (Guj), CIT Vs. E. Ram Chandran 359 ITR 671 (Mad) and Maruti Ins. Distribution Services Vs CIT 225 Taxman 63 (Del). Considering the ratio laid down in these case laws and the facts on the issue, Bench direct to delete the addition. This ground of appeal is allowed. 8. The 2nd ground of the appeal is against disallowing the TDS credit of Rs. 6799/-. The ld CIT(A) has confirmed the disallowance by holding that the income corresponding to the TDS amount of Rs. 6799/- has been shown by the assessee in the preceding year. According to Section 199 r.w.r 37BA, credit for such TDS would not be allowable in this year. 9. Now the assessee is in appeal. The ld AR of the assessee has submitted that during the year under consideration the assessee has claimed TDS of Rs. 6799/- for which sales has been booked in previous year. Such TDS was deducted by the client at the time of payment made to the assessee and also issued TDS certificate in the year of payment. Therefore we submit that the assessee has correctly claimed TDS of Rs. 6799/- during the year under consideration and should be allowed to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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