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2017 (12) TMI 1403 - AT - Income TaxDisallowance of commission u/s 40A(2)(b) - contention of the AR that the amount of commission which was paid to both the HUFs was the minimum amount of commission decided, irrespective of the sales made by the assessee firm through such parties - Held that:- There is nothing on record either in terms of written agreement or understanding between the assessee and these two HUFs or even where the agreement/understanding is verbal, the onus is on the assessee to bring on record some evidence by way of confirmation etc., which defines and lays down the terms of such engagement in terms of sales target, target customers/area, years of engagement, etc. The assessee has thus failed to discharge the said onus cast on it. Secondly, regarding the determination of excessive amount of commission so paid and the comparative cases whereby the onus is cast on the AO, we find that where the assessee itself is paying commission to other entities on the sales so made through them and where there is nothing on record to distinguish the nature of services so rendered by these entities vis-à-vis two HUFs, the said internal comparable cases have been rightly applied by the AO. In these comparable cases, the assessee itself is paying commission which ranges between 27% to 37% and in the instant case, the AO has thus taken the average of such commission which comes to 33%, compared it with the actual commission so paid by the assessee and has determined the excessive commission payment. We therefore donot find any infirmity in the action of the AO who has rightly disallowed the excessive commission under the provisions of section 40A(2)(b) - Decided against assessee Disallowance of supervision charges - Held that:- the assessee firm has not brought on record any evidence through which it can be verified that such supervision services have been rendered or availed by the assessee firm. It is no doubt true that the payments have been made to these entities during the year and these entities have also filed the confirmations of receipt of such charges, however, the fact of payment is ancillary and secondary to the rendering of services or availment of supervision services and cannot be a basis to hold that since the payment have been made, the services ought to have been rendered or availed by the assessee firm. The payment is the consideration towards the discharge of consideration for rendering of services and unless such rendering of services is not proved, as in the instant case, mere payment is not sufficient enough to hold that the expenditure has been incurred and allowable in the hands of the assessee firm. Further, it is not a case that the AO has not taken any action to verify the transaction. He has issued notices under section 133(6) and when he was not convinced with the replies, he also issued summons under section 131 as well which remain uncomplied with and which has put further question mark on the authencity of the transaction under consideration. We have also gone through the assessment order passed under section 143(3) for AY 2012-13 wherein the AO noticed that various expenses such as carriage inwards, diesel and oil expenses, loading charges, supervision charges and unloading charges were made in cash and no supporting evidence has been maintained and were not verifiable and the AO has thus rejected the books of accounts u/s 145(3) of the Act and has made lump sum trading addition thereof. Hence, it cannot be said that the supervision charges were allowed by the AO for the AY 2012-13. - Decided against assessee.
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