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TMI Blog2022 (11) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... did any work as Marketing Executive for the assessee s business, from 01.04.2013 to 30.09.2013. Merely stating that she included the said commission in her income-tax return is not sufficient. Further, merely because part of the expenses are allowed by authorities below(may be erroneously) will not create any vested right in favour of the assessee that the entire expenses should be allowed. The assessee has to first discharge its onus u/s 37(1) and then the burden shifts to Revenue to rebut the same with cogent/credible evidence. The assessee in the instant case , failed to discharge even its primary onus , as is required u/s 37(1) of the 1961 Act. Thus, in the absence of any evidence to the effect of actual rendering of services and work done by daughter-in-law of the assessee as Marketing Executive of the assessee s business, we are afraid the same cannot be allowed as business expenses. We are in agreement with the appellate order passed by ld. CIT(A) on this issue and decline to interfere with the same. We order accordingly. Disallowance of commission paid by assessee to middlemen of different gas agencies of different places - The authorities below partly allowed comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings had arisen before Learned CIT(A)from assessment order dated 30.11.2016 passed by learned Assessing Officer (hereinafter called the AO ) under Section 143(3)of the Income-tax Act, 1961 (hereinafter called the Act ). We have heard both the parties in Virtual Court through Virtual hearing mode. 2. The grounds of appeal raised by assessee in memo of appeal filed with Income Tax Appellate Tribunal, Varanasi (hereinafter called the tribunal ), reads as under: 1. Because the learned CIT(Appeals) has erred in law as well as on facts in not allowing the total commission of Rs. 4,00,289/- paid @0.5% of total sales to Mrs. Priyanka Keshri and restricting it to Rs. 15,000/- per month by treating it as not relating to business and excessive. 2. Because the learned CIT(A) has erred in law as well as on facts in treating commission paid @0.5 as excessive and on the same facts has allowed commission @1% for the subsequent period paid to another executive employed in her place. 3. Because the learned CIT(A)has erred in as well as on facts in sustaining the Ad-hoc disallowance of Rs. 2,94,000/- 3. The brief facts of the case are that the assesse filed his return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO that assessee has claimed that there is an increase in turnover of the assessee which stood at Rs. 1839.19 lacs during the impugned assessment year ,as compared to turnover of Rs. 1008.17Lacs in the immediately preceding financial year 2012-13. The AO observed that the assessee has claimed that this huge increase in turnover and net profit was possible only due to incurring of commission expenses. The AO observed that the assessee has claimed that increase in commission is commensurate with increase in turnover and net profits. The AO, however ,also observed that the assessee has not filed any confirmation from any middlemen to whom commission was claimed to have been paid, and the AO disallowed commission to the tune of 0.16% of the turnover viz. Rs. 1839.19lacs , and hence consequently an amount of Rs. 2.94 lacs stood disallowed which was added by AO to the income of the assessee. The assessee had filed return of income declaring income of Rs. 58,79,070/- , while the AO assessed the total income of the assessee at Rs. 61,73,070/- for the impugned assessment vide assessment order dated 30th November, 2016 passed under Section 143(3) of the Act. 3c. The AO while perusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n income is not taken into account and that Shri Vivek Keshari has paid tax @30% in his individual hand on his income by including commission income and there is no loss to Revenue on account of payment commission to Shri Vivek Keshari. 4b. The Ld. CIT(A) considered the contentions of the assessee, and observed that so far as commission paid to Smt. Priyanka Keshari (daughter-in-law of the assessee ), the details of qualification and work done by Smt. Priayanka Keshari is not submitted by the assessee during assessment proceedings as well during appellate proceedings before ld. CIT(A).The ld. CIT(A) observed that she was removed from the post of Marketing Executive because she was not able to devote much time to the business of the assessee. The ld. CIT(A) observed that no evidence has been submitted by the assessee about the work done by Smt. Priyanka Keshari. The ld. CIT(A) sustained the order of the AO on this issue , wherein the commission expenses @ Rs. 15,000/- per month for the period from 01.04.2013 to 30.09.2013 aggregating to Rs. 90,000/- were allowed by ld. CIT(A) as was earlier allowed by AO, while the balance amount of commission claimed to have been paid by assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of Rs. 2,94,000/- as reasonable and accordingly, the disallowance as was made by AO was confirmed by Ld. CIT(A), vide appellate order dated 29.11.2019 passed by ld. CIT(A). 5. Aggrieved by the appellate order dated 29.11.2019 passed by ld. CIT(A), the assessee has filed second appeal before the tribunal, agitating two issues , firstly disallowance of commission paid to Marketing Executive namely Mrs. Priyanka Keshari(daughter-in-law of the assessee) to the tune of Rs. 3,10,289/- and secondly disallowance of Commission Expenses paid to the Middlemen at different gas agencies of different places to the tune of Rs. 2,94,000/- .The Learned counsel for the assessee opened arguments before the tribunal . It was explained that the assessee is in the business of wholesale trading business of LPG appliances, Kitchen ware, Household Appliances and allied items . It was submitted by ld. Counsel for the assessee before Division bench that the commission was paid to the employee of the assessee namely Mrs. Priyanka Keshari (daughter in law of the assessee). It was submitted that she was working at the shop of the assessee as Marketing executive from 01.04.2013 to 30.09.2013 . It was submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computed and paid , was submitted before the AO as well as before ld. CIT(A) . 5aa. The Learned Sr. DR, on the other hand submitted that there are two issues in this appeal, first is the disallowance by AO of commission paid to his daughter in law, which was duly confirmed by ld. CIT(A), and secondly the disallowance of commission paid to middlemen at various gas agencies of different places.Our attention was drawn by ld. Sr. DR to the orders of authorities below. On the first issue, the ld. Sr. DR at the outset submitted before Division Bench that in the preceding year no such commission was paid to any Marketing Executive , and it is only in the year under consideration, the assessee has paid commission to his daughter-in-law whom the assessee claimed to be employed with him as Marketing Executive. Thus, it was submitted that this is the first year, when the assessee has claimed to have paid commission to his daughter-in-law . It was submitted that the said daughter-in-law namely Smt. Priyanka Keshari was removed on account of engaged in domestic affairs, as she was not able to devote time . It was submitted that she claimed to have worked for six months, from 01.04.2013 til ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged person , and he employed Mrs. Priyanka Keshari(daughter-in-law of assessee) and Mr. Vivek Keshari(son of the assessee) as Marketing Executive. It was submitted that turnover increased as well net profit has also gone up in this year as compared to preceding year. It was submitted that Section 40A(2)(b) has no applicability so far as Smt. Priyanka Keshari(daughter-in-law) is concerned as she does not fall in the definition of Relative as defined u/s 2(41) of the 1961 Act. So far as other commission paid to various middlemen at various gas agencies at different places, it was submitted that commission has been paid for increase in sales , and there is no reason why 0.16% of commission was disallowed. It was submitted that ledger accounts are submitted and vouchers can be verified. 6. We have considered rival contentions and perused the material on record. We have observed that the assessee is in the business of wholesale trading of LPG appliances, Kitchen ware, Household Appliances and allied items. The assessee filed his return of income with Revenue declaring total income of Rs. 58,79,070/- , on 27.11.2014. The said return of income was selected by Revenue for framing scrut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he daughter-in-law Mrs. Priyanka Keshari as well there is no evidence on record to the effect of actual work being done by her for the business of the assessee. Even before us , no evidence is filed by the assessee to substantiate her qualifications as well experience in handling of business affairs , as well no evidence is submitted to the effect of actual rendering of services and doing of any work for the business of the assessee by Smt. Priyanka Keshari. As can be seen , the AO invoked Section 40A(2) , but ld. CIT(A) invoked Section 37(1) of the 1961 Act . Section 37(1) mandates that the expenditure (not being expenditure in the nature described in Section 30 to 36 ) should be incurred wholly and exclusively for the purposes of business before being allowed as deduction while computing business income , and further the said expenditure should not be personal expenditure nor capital expenditure. The primary onus is on the assessee to bring on record cogent evidences to substantiate that the expenses claimed as business expenses were incurred wholly and exclusively for the purposes of the business of the assessee, and these expenses so claimed are neither personal expenses nor ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edible evidence. The assessee in the instant case , failed to discharge even its primary onus , as is required u/s 37(1) of the 1961 Act. Thus, in the absence of any evidence to the effect of actual rendering of services and work done by Mrs . Priyanka Keshari(daughter-in-law of the assessee) as Marketing Executive of the assessee s business, we are afraid the same cannot be allowed as business expenses. We are in agreement with the appellate order passed by ld. CIT(A) on this issue and decline to interfere with the same. We order accordingly. 6b. On the second issue , with respect to disallowance of commission paid by assessee to middlemen of different gas agencies of different places, we have observed that the assessee is again not able to discharge its primary onus as is required u/s 37(1) of the 1961 Act. The complete details of the middlemen along with their names , addresses, PAN etc. , to whom commission is paid is not furnished by the assessee , before lower authorities as well before us . The assessee has also not furnished any working details of commission to explain how and manner in which the commission expenses are worked out by the assessee, before lower authorities a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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