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2013 (11) TMI 1329 - AT - Income TaxAllowability of commission expense – Held that:- The assessee could not substantiate its claim of commission payments with any of the credible evidences - Assessee did not declare the claim of commission expense in the export documents filed before the Customs Department - In view of the foregoing discussions, the assessee has failed to substantiate its claim of payment of commission with adequate evidences - Even if the claim of payment is accepted for a moment, the same is liable to disallowed on technical grounds - It is stated that the payment was claimed to have been received by Mr. Ahmed Taha in India, in which case, the same is liable to be taxed in his hands in India as per the provisions of sec. 5(2) of the Act. In that case, the assessee is liable to deduct tax at source on such payments - It is the responsibility of the assessee to show that the said commission amount is not taxable in India in the hands of Mr. Ahmed Taha - The impugned commission payment is liable to be disallowed u/s. 40(a)(i) of the Act for non deduction of tax at source u/s. 195 of the Act - Commission amount has been claimed to have been paid by way of cash and hence provisions of sec. 40A(3) of the Act also get violated - Impugned commission expense is liable to be disallowed for more than one reason. Cash credit u/s 68 of the Income Tax Act - Cross examination of the person on whose statement the loan has been added as income of the assessee – Held that:- Assessee company itself has offered the impugned cash credit of Rs.14.50 lakhs as its income after the statement given by Shri Prabhakaran, which means that the assessee company has accepted the statement given by Shri Prabhakaran. Hence, the plea raised about cross examination at the appellate stage is clearly an after though and lacks credence - It is well settled proposition that the assessee is required to prove the three main ingredients in respect of the cash credit viz., the identity of the creditor, the credit worthiness of the creditor and the genuineness of the transaction. In the instant case, the creditor is the Managing director of the assessee company. With regard to the sources for making a loan of Rs.14.50 lakhs to the assessee, the Managing director claimed that he had received a loan of identical amount from a person named Mr. Prabhakaran. However, before the AO, Mr. Prabhakaran denied the claim of giving of any loan to the managing director of the company - Thus one of the three ingredients viz., “credit worthiness of the creditor” was failed to be proved by the assessee company. In that case, it cannot be said that the assessee company has discharged the burden of proof placed upon it by sec. 68 of the Act and hence the impugned cash credit is assessable in the hands of the assessee company only – Decided against the Assessee. Penalty levied u/s 271(1)(c) of the Act – Held that:- Assessee has failed to prove the payment of commission with adequate evidences - Amount of Rs.6,38,217/- represented not only the commission amount, but also the expenses incurred by the assessee company during his stay in India - Mr. Ahmed Taha has acknowledged the receipt of commission amount to the tune of Rs.5,70,000/- only and it was in variance to the amount booked by the assessee - Assessee has attempted to explain the difference between the two figures by stating that the difference between the two amounts represents expenses incurred by the assessee company on the visit of Mr. Ahmed Taha. It is noticed that the assessee has furnished the copy of Hotel Bill in support of its contentions that Mr. Ahmed Taha visited Cochin. The assessee has also shown the withdrawals made from a bank account - In the assessment proceedings, the said evidences were not found to be adequate and hence the addition was made. It is well settled proposition of law that an addition made in the assessment proceeding would not automatically give rise to penalty and the scope of penalty has to be examined afresh during the course of penalty proceedings - It cannot be denied that the assessee did furnish all the documents that were available with it. Under these circumstances, the additions made for want of evidences would not give rise to penalty, since the explanations furnished in this regard were not found to be false – Decided in favor of Assessee.
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