TMI Blog2017 (12) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided in favour of assessee Disallowing the TDS credit - Held that:- It is noted from the written submissions of the A.R. of the assessee wherein he has prayed that TDS was deducted by the client at the time of payment made to the assessee and TDS certificate was issued during the year of payment. The ld A.R. further submitted that the assessee has correctly claimed TDS of ₹ 6799/-. In this view of the matter, it will be in the interest of justice and equity to restore the ground of appeal to the file of the Assessing Officer to decide it de novo after taking into consideration various facts of the issue including issue of the TDS certificate. Accordingly, ground No. 2 of the appeal is allowed for statistical purposes. - ITA No. 853/JP/2016 - - - Dated:- 12-12-2017 - SHRI BHAGCHAND, ACCOUNTANT MEMBER For The Assessee : Shri Satish Gupta (CA) For The Revenue : Smt. Poonam Roy (DCIT) ORDER PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-5, Jaipur dated 29/07/2016 for the A.Y. 2010-11, wherein the assessee has following grounds of appeal: 1. On the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Assessing Officer by holding as under: 2.3 I have considered the facts of the case, the assessment order and the submissions of the appellant. The brief facts of the case are that the assessee is proprietor of M/s Risnabh Advertising Agency, engaged in advertising business. During the year the assessee has debited commission payment of ₹ 22,90,000/- in the P L account. The said commission was paid to 6 persons being 3 ladies viz. Smt. Anita Gupta, Smt. Sunita Gupta and Smt. Sunita Mishra, 2 HUFs viz. Alok Gupta (HUF) and Pankaj Gupta (HUF) and one firm viz Sarveshwari Enterprises whose partners are Smt Sunita Mishra and her two minor daughters. The commission was claimed to be paid to these 6 persons for obtaining advertisements from National Highway Authority of India (NHAI). The AO recorded the statements of the said payees and found that all the recipients did not have any knowledge of the field of advertising. None of them had obtained any contract from anybody before or after this particular advertising contract of NHAI. All the recipients claimed to have worked only for one person i.e. the assessee and obtained orders only from NHAI and that too only in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e simply fronts or facades and the real beneficiaries of the impugned commission payments are the above named public servants. This being the case, the said commission payments amount to nothing but bribes paid to public servants. Such payments, which are in contravention of law, are expressly disallowable under Explanation to section 37(1). This view is supported by the decision of Hon ble ITAT, Jaipur Bench in the case of ACIT vs. Raiendra Kumar Dangayach Co. (1993) 45 ITD 109 (JP.), wherein the assessee transporter had debited speed money payments to public servants (policemen) and the issue was decided as follows:- Making payments to the police personnel on the routes would be an act in contravention of the provisions of the Indian Penal Code and would accordingly amount to infraction of law besides being opposed to public policy. That would not be a normal incident of business. It would, therefore, be disqualified as an allowable business expenditure. Therefore, the allowability of the expenditure in question for various years could not be accorded judicial recognition. The Deputy Commissioner (Appeal) s orders were accordingly vacated, and those of the ITO restored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so it is observed that the entire exercise is a well designed hogwash since commission payments have been received in the hands of ladies and HUF, and a firm, all of whom have practically no other income. Thus effectively, after taking advantage of the basic exemption limit as well as after debiting certain expenditures, the taxes paid by all payees is negligible. 2.8 The further fact that none of the payees could produce any evidence of rendering any genuine services so as to earn the said commission and also the fact that none of the payees had any experience of the advertising field either before or after the impugned transaction, coupled with the fact that they are all closely associated to influential officers of NHAI, sufficiently proves that no actual services were rendered by the payees. Further, as discussed earlier, the commission payments amount to illegal gratification or bribe paid to public servants, which stands in clear contravention of law. Accordingly, the commission payments amounting to ₹ 22,90,000/- are disallowable not only under Explanation to Sec. 37(1), but are also disallowable on the grounds of non rendering of actual services by the payees. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ridhi Furniture, proprietor Smt Anita Gupta W/o Shri Naresh Gupta PAN No. ABYPG1735FIAPB 01- 06): Statements of above referred recipient of commission M/s Samridhi Furniture through proprietor Anita Gupta was taken on 15 Feb.2013. In the statements Smt. Anita Gupta while answering question no. 7 specifically stated that the commission was received by me from M/s Rishabh Advertising Agency for bringing the advertisement proposal. It was also stated while answering question no. 10 that for the above referred commission the written agreement was made in between her and M/s Rishabh Advertising Agency. It is also on the record that she submitted her copy of audited financial statement before the learned assessing officer. It was also stated by her that in future she did not do commission business because see did not receive the orders and opportunity for the same. Smt Anita Gupta is M.COM and doing business since 1995. B. Smt. Sunita Misra W/o Shri Qpendra Misra PAN No. ACKPM8677M ( APB 07-13) :-while answering question no.7 5 Smt. Sunita Misra stated that she received commission of ₹ 300000/- from M/s Rishabh Advertising Agency on account of procuring advertisement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prisingly no enquiry was made from Sh. Pankaj Gupta Karta even no specific question was asked from him during the course of recording of statements. Similar type of questions were not asked from Alok Gupta, Sunita Gupta Sunita Misra. There were valid reasons for withdrawn of money. Moreover these are simply assumptions presumptions which should not be made basis for disallowance. It is further submitted that the assessee has incurred the expenditure wholly exclusively for the purpose of business as required by section 37 of the Act. This fact is established as the receipts from advertising has increased this year substantially from ₹ 2.66 crore to ₹ 4.08 Crore. Therefore it is clear that the assessee has incurred this expenditure wholly and exclusively for the purpose of business. Mere making of payment or making of payment through cheque may or may not be sole acceptable evidence for allowing or disallowing expenditure but if the payment made through banking channel is linked with increase in business receipts and acceptance of payment work by the payees the expenditure is not only genuine but has been incurred wholly and exclusively for the business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of commission. 6. On the other hand, the ld DR has relied on the orders of the authorities below. 7. Both the sides were heard on this issue. The assessee was engaged in the advertising business. The turnover of the assessee for the year under consideration increased substantially from ₹ 2.66 crores to 4.08 crores. The persons to whom the commissions paid were assessed to income tax. The receipt of the commission has been declared in their return of income by these persons. These persons appeared in person before the Assessing Officer in response to the summons issued U/s 131 of the Act and all of them confirmed the transaction and receipt of commission. The payments of the commission made through banking channels and necessary tax was deducted at source, which was duly deposited in the government treasury. The allegation that the amount received through cheque was returned back in cash to the assessee is completely baseless and based on surmises. No such evidence brought on record. Further, the assessee has started new business with National Highway Authority of India during the year. The turnover has increased substantially. The books were duly audited and no disc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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