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TMI Blog2015 (12) TMI 1828X X X X Extracts X X X X X X X X Extracts X X X X ..... dered by the commission agents. In response to this, except highlighting the role of commission agent, no evidence was furnished in support of the services rendered by the commission agent. The AO gave categorical finding that the assessee had failed to substantiate the actual services rendered by the sales agent. Assessee company had chosen not to file any evidence in support of the services rendered by sales agencies either before the learned CIT(A)or before us. Even before us, the learned AR miserably failed to demonstrate before us as to what kind of proof was filed before the lower authorities in support of services rendered by the commission agent. Pursuant to the direction of the Bench to file evidence in support of the services rendered the assessee had chosen to file only correspondence relating to the payment which no way establishes the actual services rendered by the commission agent. Thus, the assessee failed to discharge the burden of proving that the expenditure laid out were incurred wholly and exclusively for the purpose of business. CIT(A) had not examined any evidence to show that the agents have actually rendered their services. The learned CIT(A) had totally mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the relevant assessment year. 6. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed and that of the AO be restored. 7. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal" 3. Brief facts of the case are that the assessee is a company duly incorporated under the provisions of Companies Act, 1956. It is engaged in manufacture and sale of Hydro Turbines. The return of income for the AY: 2009-10 was filed on 26-09-2009 declaring total income of ₹ 18,44,7,730/-and the same was revised on 22-03-2011 after processing the return of income under the provisions of Sec.143(1) of the IT Act. The case was selected for scrutiny assessment and the assessment was completed at a total income of ₹ 21,37,96,180/-. While doing so, the AO disallowed the commission payment of ₹ 2,93,08,446/-. During the course of assessment proceedings the AO called for the details of commission payment made to various parties. The assessee had duly furnished full details of the commission payments and copies of the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pen to the ITO to consider the relevant facts and determine for himself whether the commission set to have been paid to the selling agents or any part thereof is properly deductible u/s 37 of the Act". 9. Thus, the AO is empowered to probe further and reach at a conclusion whether the commission was paid for the services actually rendered and determine whether the expenditure was laid out wholly and exclusively for the purpose of business. In the present case, the AO had called upon the assessee company to furnish evidence in support of the services rendered by the commission agents. In response to this, except highlighting the role of commission agent, no evidence was furnished in support of the services rendered by the commission agent. The AO gave categorical finding that the assessee had failed to substantiate the actual services rendered by the sales agent. The AO observed as under vide para-8 of his order; " 8. In this context, the assessee -company was asked to explain the exact nature of work carried out by the local agencies for providing these services. The assessee-company could be able to provide certain correspondences carried out between the assessee-company and lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either before the learned CIT(A)or before us. Even before us, the learned AR miserably failed to demonstrate before us as to what kind of proof was filed before the lower authorities in support of services rendered by the commission agent. Pursuant to the direction of the Bench to file evidence in support of the services rendered the assessee had chosen to file only correspondence relating to the payment which no way establishes the actual services rendered by the commission agent. Thus, the assessee failed to discharge the burden of proving that the expenditure laid out were incurred wholly and exclusively for the purpose of business. We may further add that the Hon'ble Supreme Court in the case of CIT Vs Imperial Chemical Industries (Ind.) Pvt. Ltd (1969) 74 ITR 17 has unequivocally held that the burden of proving that a particular expenditure had been aid out or incurred wholly and exclusively for the purpose of business entirely lies on the assessee. The discharge of the burden had to be effective and meaningful and not to cover up by merely book entries and paper work. The mere fact of payment of commission by account payee cheques and compliances with the TDS provisions shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encies procured some orders for the assessee for which it was entitled to receive commission. Moreover, we find that the understanding between the parties was an oral understanding and it appears to be doubtful that such an oral understanding can be arrived at without any long standing relationship having been established between the assessee and M/s Ram Agencies. It seems a bit out of place that the parties entered into an oral business relationship involving such huge amounts of money over a period of time". 13, The Co-ordinate Bench of Delhi in the case of Printer House Pvt.Ltd. Vs DCIT (Del.) authored by Accountant Member, after referring to the above precedence on this issue held as follows: "Thus, having regard to the ratio laid down in the above cases that in the absence of proof in support of the services rendered by the commission agent, no commission can be allowed as a deduction. Therefore, we dismiss the appeal filed by the assessee and allow the appeals filed by the revenue". 14. In the present case, the learned CIT(A) had not examined any evidence to show that the agents have actually rendered their services. The learned CIT(A) had totally misdirected himself by e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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