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TMI Blog2009 (12) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... only ground is that the CIT(A) has erred in deleting substantial portion of the disallowance made by the assessing authority against the claim made by the assessee relating to the payment of commission to its sole selling agents. It is the ground of the Revenue that the CIT(A) has erred in sustaining only a partial disallowance of Rs.7,50,482/- as against the disallowance of Rs.1,27,57,505/- made by the assessing authority. 4. M/s. LGDA was appointed as sole selling agent of the assesseecompany with all India coverage. The assessee-company is engaged in the business of production of maize. The assessee being a public limited company, sole selling agent has been appointed in terms of the approval given by the shareholders in the Annual General Meeting and also by the Central Government as required under the provisions of the Companies Act, 1956. M/s. LGDA was appointed as a sole selling agent on the basis of an agreement dated 25-10-1988. On the basis of the sole selling agency agreement, the assessee claimed a deduction of Rs.1,27,57,505/- as the commission attributable to the services rendered by M/s. LGDA . This amount was deducted in computing the taxable income of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales to eight parties for Rs.2,85,49,075/- and no role was played by the sole selling agent in the above sale transactions. He therefore held that there was no justification in paying any sole selling agency commission with reference to the above sale turnover of Rs.2,85,49,075/-. Accordingly, he confirmed proportionate disallowance of commission payment of Rs.7,50,482/-. He deleted the balance amount. 7. Shri J.PShah along with Shri Mansih J. Shah appeared for the assessee-company and argued the case at length. 8. The learned counsel argued that the agreement was executed way back on 25-10-1988 and the sole selling agents were working for the company since then and the factum of services rendered by the sole selling agents and corresponding commission paid to them have been consistently accepted by the department in respect of the assessments concluded for earlier assessment years as well as for assessments concluded for subsequent assessment years. The contention of the learned counsel is that it is only for the impugned assessment year 1992- 93 that the AO has raised the objection that the payment of commission was not genuine. As explained by the assessee and accepted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the partial disallowance confirmed by the CIT(A) too is to be deleted to do justice to the facts and circumstances. 9. Shri Rajiv Agarwal, learned Commissioner of Income-tax who appeared for the Revenue defended the orders of the assessing authority. He explained that the AO has examined meticulously the facts and circumstances surrounding the claim of deduction made by the assesseecompany towards the sole selling agency. He pointed out that the products of the assessee-company are sold through a number of agents spread all over India and it is not correct to say that the sales are made by the assessee-company only through the sole selling agents. It is the case of the learned Commissioner that these agents are stated to be functioning independently and are dealing with the assessee-company directly, which showed that the arrangement of sole selling agency was only a sham arrangement. 10. The learned Commissioner further explained that a verification of the claim of the services rendered by the sole selling agents has been shattered by the fact that the eight parties who were examined in this regard had denied the involvement of the sole selling agents and had confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner for a number assessment years, it is necessary for the Revenue to collect formidable evidence to take a different view for the impugned assessment year 1992-93. A simple rule of probability on the basis of general observations alone will not sufficient to undo the finding arrived at by the assessing authority for so many assessment years. The onus cast on the Revenue to undo the finding arrived at in earlier and subsequent years, is in fact onerous. In the present case, except for the eight parties mentioned by the CIT(A), no other parties has stated that it had purchased goods from the assesseecompany directly. Even the eight parties, who had stated that the purchases were made by them directly from the assessee-company, have not stated anything against the existence and role of the sole selling agent, M/s. LGDA . Rather no such question was put to those eight parties. It shows that even the examination of those parties was lackadaisical. The statement of the eight parties that sales were directly made by the assessee-company does not discredit the agreement entered into by the assessee-company and its arguments relating to the payment of the sole selling agency commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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