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2022 (4) TMI 667 - AT - Income TaxDisallowance of commission paid - excessive expense on commission - AO partly disallowed the commission paid to three parties on the ground that, such disallowed portion was excessive, more than average rate and the same were paid to related parties - HELD THAT:- In so for commission paid to NRG Consultant Pvt. Ltd. is concerned, we found that, there was no marital available on record to suggest that, the said entity is either the Director or the share holder of the assessee to bring to the purview of ‘related person’. The basic requirement of applicability of Section 40A (2) of the Act is that, payment should be made to a ‘related person’ i.e. to a person referred to in Clause (b), of sub-Section (2) of Section 40A of the Act. By respectfully following the ratio laid down in the case of Hero MotoCorp [2013 (8) TMI 57 - ITAT DELHI] and V. S. Dempo & Co. (P.) (Ltd.) [2010 (10) TMI 711 - BOMBAY HIGH COURT] we hold that, in the absence of any material on record to show that NRG Consultant Pvt. Ltd. is a ‘related person’, the commission paid to NRG Consultant Pvt. Ltd. cannot be disallowed under section 40A(2) of the Act. Accordingly the said issue regarding the payment of commission made by the Assessee to NRG Consultant Pvt. Ltd. is allowed and decided in favour of the assessee. Payment of commission made to Trust Commodities Pvt. Ltd. and Miss. Seema Verma - The average rate of commission paid by the assessee to others in respect of Soybean meal was 12.5, but the rate of commission paid to Trust Commodities Pvt. Ltd. was 45 and the difference of rate of commission is 32.5%. Further, the average rate of commission paid by the assessee to others in respect of rice was 20, but rate of commission paid to Ms. Seema Verma was at 215 and the difference of rate of commission is at 195%. The said deference is not only excessive and the same is unrealistic in the market. The AO has rightly made the comparison of the average rate of commission paid by the assessee himself in the case of non related parties to come to the said conclusion. Further, the Ld. CIT(A) has also given specific opportunity to the counsel of the assessee to explain the reason for commission being extraordinary in excess over the average expenditure, but no substantive reason was furnished by the assessee even before CIT(A) proceedings. In our opinion, the said commissions paid to those two entities are not only excessive and also unrealistic compared to average rate of commission paid by the assessee itself. We uphold the disallowance made in respect of the payment of commission made by the Assessee to Trust Commodities Pvt. Ltd. and Miss. Seema Verma and decide the said issue in favour of the Revenue. Accordingly the Grounds of Appeal No. 1 to 3.2 are partly allowed. Whether CIT(A) has erred confirming the addition that was made against the principles of natural justice without confronting/cross examining to the third parties? - There is no iota of evidence to suggest that, the assessee has sought for cross examination of any of the parties before the lower authorities. Further assessee has became absolutely silent about its rights without seeking for cross examination of any of the parties concerned before the Lower Authorities, now at this stage assessee cannot take such plea before us. Accordingly Ground No. 4 is dismissed.
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