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TMI Blog2022 (4) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... dition has been made without appreciating the agreements, contract notes and copies of invoices and other substantiating documents submitted during the course of assessment related to the impugned addition. 3. That the Id. CIT(A) has erred on facts and in law in making addition of Rs. 36,08,001/- on estimated basis of alleged excessive commission paid for procuring orders for sale of agricultural commodity by the appellant on the pretext of no commercial expediency and wrongly treating certain parties as related parties and making disallowance of commission. 3.1. That the Id. CIT(A) has erred in upholding the addition made based on surmise and conjecture as disallowance is based on mere estimates and averages dehors facts of the case. 3.2. That the CIT(A) has erred in law and in facts by upholding the order that was not passing a speaking order and also not disclosing full facts in the order like recording of statement of Ms. Seema Verma, hence the order suffers from legal and factual infirmity. 4. Without Prejudice, the CIT(A) has erred confirming the addition that was made against the principles of natural justice without confronting/cross examining to the third parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d three parties viz-a- viz., brokerage paid to other parties, since the transaction were materially different inasmuch as the higher brokerage was paid in case of transaction of finding buyer of products more particularly for export sale and lower brokerage was paid in case of finding seller of goods for domestic purchases. 8. Per contra, Ld. DR vehemently contended that, the addition was made by the Assessing Officer on commission aggregating Rs. 36,08,001/- paid to three parties on the ground that, parties are related and share holders and the commission is highly excessive and unreasonable, which were substantially higher than the average range of commission paid by the assessee to all other parties. The difference in the rate of commission payment in case of Soybean is 32.5% (Trust Commodities Pvt. Ltd.), for sugar it is 189% (NRG Consultant Pvt. Ltd.) and for Rice it is 195%(Miss Seema Verma). Further argued that, even during the CIT(A) proceedings an opportunity has been provided to the assessee to specify the reason as to why higher payment was made to the three specific parties, but assessee has failed to submit any reply. By relying on the reasoning and findings of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, it is an undisputed fact that none of the parties fall within the persons specified as defined under clause (b) of section 40A (2) of the Act. Related parties are to be considered in terms of provisions of sec. 40A (2) of the Act and not as mentioned in AS-18 issued by the Institute of Chartered Accountant. Thus, we are of the view that the provisions of section 40A (2) do not apply to the present case. Further, there is no provision under the Act which authorizes the Assessing Officer to lift the corporate viel and disallow an expenditure on the ground of reasonableness and commercial expendiency unless it is established that the transaction is primarily deviced to evade tax. 13.18. In the present case, it was submitted by the learned AR of the assessee that the related parties are profit making companies and are subject to tax to at some less or the same rate of tax. Thus there is no loss of Revenue. This submission of the assessee has not been controverted before us by the learned DR. Tax benefit alleged is factually wrong as the other compared assessees are profit making companies/ assessees. There is no loss to the revenue if only the excess payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 16. Now come to the quantum of the commission paid to the above two entities. The average rate of commission paid by the assessee to others in respect of Soybean meal was 12.5, but the rate of commission paid to Trust Commodities Pvt. Ltd. was 45 and the difference of rate of commission is 32.5%. Further, the average rate of commission paid by the assessee to others in respect of rice was 20, but rate of commission paid to Ms. Seema Verma was at 215 and the difference of rate of commission is at 195%. The said deference is not only excessive and the same is unrealistic in the market. The AO has rightly made the comparison of the average rate of commission paid by the assessee himself in the case of non related parties to come to the said conclusion. Further, the Ld. CIT(A) has also given specific opportunity to the counsel of the assessee to explain the reason for commission being extraordinary in excess over the average expenditure, but no substantive reason was furnished by the assessee even before CIT(A) proceedings. In our opinion, the said commissions paid to those two entities are not only excessive and also unrealistic compared to average rate of commission paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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