TMI Blog2017 (8) TMI 1710X X X X Extracts X X X X X X X X Extracts X X X X ..... gents have filed detailed reply before the AO and described the various formalities and services required to be handled by the assessee or representatives of the agents - we are of the considered opinion that the ld. CIT(A) was not justified in deleting only 50% of the commission payments paid to private parties debited to the profit and loss account. We also find that payments made to commission agents are unrelated to the assessee therefore, there cannot be said that the quantum of commission is not justified. Thus as the commission has been paid in respect of service rendered for facilitating the recoveries, giving information of tenders etc. which are not prohibited by law, we are of the view that no disallowance of commission payment is called for. Decided in favour of assessee. Addition u/s 68 - Unexplained cash credit - HELD THAT:- When we analyse the company wise facts then we find that these companies have filed reply to notice under section 133(6) to the AO directly. There are no cash deposit before issue of cheque to the assessee. All the creditors have filed copy of income-tax return acknowledgement, confirmation letters, copies of the bank statements, copies of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No. 1 in Cross Objection, of the assessee has challenged the confirmation of 50% commission expenses at Rs. 31,91,080/-, even though, it was proved before CIT (A) that the commission to Shafa A. M. Consultants was paid as business expediency and confirmation was duly filed. 3. Succinctly, facts as culled out from the orders of lower authorities are that the assessee is in the business of manufacturing and sales of pharmaceuticals products and around 95% sales is to government Departments. The assessee supplies goods to M. P. Laghu Udhyog Nigam (MPLUN). The assessee has debited commission expenditure of Rs. 63,82,162 and Rs. 27,57557 under the head commission on sales and MPLUN commission respectively to Profit Loss Account. The AO was of the view that there is no scope of any middlemen for giving assignment of purchase of medicines to the State government Departments. The AO therefore, allowed commission payments to MPLUN and disallowed the entire commission payments paid to other against of Rs. 63,82,162 on the ground that middlemen is not allowed in sales and products made to government agencies, as government takes serious view of the same. The AO also observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f commission to other agents. 4. Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A). The assessee filed details submissions before the CIT (A) which are reproduced by the CIT (A) at para 2 on page No 2 to 6 of his order. The CIT (A) has also called for remand report from the AO on this issue. After careful consideration , the CIT (A) observed that it emerges that the appellant is into business of manufacturing and sales of pharmaceuticals products, where selling is entirely based on canvassing done by selling agents. Hence, existence of selling agents is reality is such business and this is proved from the facts that all these parties are unrelated to the appellant and each one of them have confirmed to the AO that they were working as agents to the appellant The CIT (A) further observed that such commission agents are not middlemen as so far no proof has been adduced by the AO that out of such payments to agents any gratification was paid to government Departments for procuring such orders. But these commission payments were for helping to the appellant for filing various tenders , pursuing the authorities for placement of orders, helping in smooth supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MPLUN was allowed by the AO while commission payments to other private parties was disallowed as there was no system keeping middleman in supply to goods to government Departments. The Ld. Sr. D.R. contended that the Ld. CIT (A) has accepted that the commission payments to 16 parties was in the range of 1% to 5% whereas commission payments to 4 commission agents was in the range up to 25%. Further, the assessee was unable to prove that what type of services were rendered by these agents. Therefore, the Ld. CIT (A) was not justified is allowing deduction of 50% out of total commission payments. The Ld. Sr. D.R. also relied in the case of DCIT v. Shri Nautmal Sons I.T.A. No. 78/Ind/2013 dated 19- 07-2013 [Indore-Tribunal] wherein such exorbitant commission payments at the rate of 20% allowed by the CIT (A) was set-aside to the file of the AO by the Tribunal. The Ld. Sr. D.R. further place reliance in the case of DCIT v. Mcdowell Co Ltd. [2007] 291 ITR 0107 (Karn) wherein disallowance of commission payments for providing service of sale of liquor to canteen stores Department of Indian Military by the assessee company was upheld on the ground that such canvassing was prohibited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services rendered and the AO has not brought on record anything contrary to the admission of the agents, whether the payments have been made by cheques after deduction of TDS. The Ld. AR also cited decision of this Tribunal in the case of Kriti Industries v. ACIT 4(1) Indore in I.T.A. No. 268/Ind/2016 dated 27-10-2016(Tribunal-Indore) (PB-16 PB-II), CIT v. Bharat Medical Stores [2009] 308 ITR 373 (P H), Prochem Laboratories Pvt. Ltd. v. ACIT , I.T.A. No. 86/Ind/2010 dtd. 28- 11-2011, CIT v. Septu India Pvt. Ltd. [2008] 305 ITR 295 (P H) and other as per his written submissions. 7. We have considered the facts, rival submissions and perused the material available on record. Ongoing through the assessment record as well as findings of the ld. CIT(A), we find that the assessee has submitted detailed evidences like names of the agents, PAN numbers, describing services rendered by the Agents, confirming the transaction, details of the TDS made. In remand report proceedings, the AO issued notice under section 133(6) to these against who appeared before the AO and admitted of rendering services as a receipt of commission from the assessee. We also note that the MPLUN was nodal agenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous financial year, the assessee had paid total commission of Rs. 13,35,336/-. Out of this, a sum of Rs. 10,24,290/- was paid as commission on sales made to the Government and its agencies and a sum of Rs. 3,11,046/- was paid as commission to non-Government purchases. Since, a doubt was raised with regard to the payments made to various parties as commission, enquiry was held. It was found that all the payments have been made as commission to various parties by demand drafts, wherein the identity of each of the agents was also established. It has also been found that the commission was paid exclusively for business purposes only. 4. All these are findings of fact and no substantial question of law, as is required to be formulated for deciding the appeal, arises in the same. The Tribunal has also placed reliance on a judgment of the Delhi High Court reported in CIT vs. Electric Construction Equipment Co. Ltd., [1990] 182 ITR 510, wherein the Delhi High Court dealing with identical question has already decided the matter against the present appellant-Revenue. 8. Therefore, considering the totality of the facts and respectfully following the decision of Jurisdictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has made three observation in remand report that depositors have shown meagre income, they have deposited substantial amounts in their accounts just prior to advancing loans and they have failed to produce directors of such companies to prove identity. The AO has relied on the decisions in the case of Agarwal Coal Corporation Ltd. v. Addl. CIT [2011] 135 ITD 270 (Indore-Trib) : 142 ITJ 409 :[2012} 13 ITR(T) 531 (Indore-Tribunal) I.T.A. No. 151/Ind/2009 dated 31.01.2011(Indore-Trib). However, the assessee submitted that said decision is not applicable in their case, as that was regarding addition of share capital while appellant s is that of receiving unsecured loans, wherein identity of all depositors are established, as they are assessed to tax and in number of cases even assessment were made under section 143 (3) in case of depositors is also filed. It was further submitted that the AO framed assessment assuming that various depositors were of Lunkad group, but none of these companies belong to Lunkad group. It was further submitted that AO s remarks that there was huge deposits in their bank account is correct but the AO had forgot to mention that all those deposits were throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant and was accepted by the AO and payments were made through account payee cheques, genuineness of transaction cannot be doubted, AO has not conducted any enquiry into the same or has no material in his possession to show those particulars are false and cannot be acted upon, then no addition can be made in hands of the appellant u/s. 68 as held in case of Gangeshwari Metal Pvt. Ltd. [2013] 214 Taxman 423(Del). In this case it was noted by the Hon`ble judges that AO sat with folded hands till the appellant exhausted all the evidence or material in his possession and then forward to merely reject the same on the presumptions. In such an eventuality, no addition can be made u/s. 68 of I. T. Act. 15.2 Following the aforesaid discussion, the addition of Rs. 1,33,00,000/- of unsecured loan from various deposits added u/s. 68 of the I.T. Act cannot be sustained while addition of such unsecured loan of Rs. 15 Lakh received from M/s. Plasia Leasing Investment Pvt. Ltd. is confirmed because as AO reported in a table annexed to remand report, the appellant selectively avoided to file copy of bank account of this depositor, while bank a/c of all other depositors were filed. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, in the light of decision in the case of Gangeshwari Metal Pvt. Ltd. [2013] 214 Taxman 423(Del). The Ld. AR submitted that the ratio of the decision of the Hon'ble Madhya Pradesh High Court in the case of Rathi Finlease Limited (supra) is not applicable to the present case as it is related with share application money and the share applicants were not found to be in existence and in that case, amounts were paid in cash on the same dates on which the amounts were credited to the bank accounts of such applicants. The Ld. AR further submitted that other decisions of the Hon'ble High Court, as relied upon by the learned DR, do not apply to the present case having distinct facts and circumstances. Therefore, the first appellate order may kindly be upheld and sustained by dismissing the appeal of the revenue. The Ld. AR further relied on following decision viz: CIT v. Tania Investment Pvt. Ltd. [2011] 322 ITR 394 (Bombay), CIT v. Varinder Rawley [2014] 366 ITR 232 (P H), CIT v. Kinetic Capital Finance Ltd. [2013] 354 ITR 296 (Del), ACIT v. Pravin Mittal [2016] 28 ITJ 473 (Trib-Indore), CIT v. Metachem Industries [2000] 245 ITR 160 (MP):161 CTR 444 (MP) : [2001] 116 Taxman 572 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly. There are no cash deposit before issue of cheque to the assessee. All the creditors have filed copy of income-tax return acknowledgement, confirmation letters, copies of the bank statements, copies of accounts, acknowledgement of ITRs, computation, audited annual accounts, etc. were placed on record which are available from page 11 to 53 of the assessee s paper book-I and at pages 5 to 9 and 37 to 41 of the departmental paper book. The balance sheet of both the companies has been signed by the assessee himself as director. From the copies of bank statements of these two companies available at pages 8 and 40 of the departmental paper book we observe that there were no cash deposits during the assessment year under consideration in these accounts. The AO himself in his remand report has not pointed out any major discrepancies. In the present case in view of the above foregoing discussion, we observe that the assessee filed all possible documents before the AO which were also submitted to the AO by the respective companies in response to notices u/s 133(6) of the Act issued during remand proceedings and thus we can safely hold that the assessee discharged its onus lay upon i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid in cash on the same dates on which the amounts were credited to the bank accounts of such applicants. The Ld. AR further submitted that other decisions of the Hon'ble High Court, as relied upon by the learned DR, do not apply to the present case having distinct facts and circumstances. 25. On the other hand, the ld. Sr. DR submitted that said company is found to be paper company and addition related o said company is also upheld by the Hon`ble Jurisdictional High Court in the case of CIT v. Rathi Finlease Ltd. [2008] 215 CTR (MP) 429. Therefore, the Ld. CIT (A) was justified in confirming the addition in the case of said creditor. We have heard the rival submissions of both the parties and perused the material available on record. We also find that Ld. CIT (A) has also confirmed the addition in the case of this company on the ground that the assessee has not able to file copy of bank account and other details. We also observe that the Ld. Sr. D.R. has contended that Hon'ble High Court of Madhya Pradesh in the case of CIT v. Rathi Finlease Ltd. [2008] 215 CTR (MP) 429 has sustained the addition under section 68 of the Act in respect of M/s. Plasia Leasing Investme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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