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TMI Blog2009 (12) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings, the AO sought to verify the export invoices issued by the assessee and the bank realization certificates obtained by him to see the correctness of the export sales account filed by the assessee. On verification of the invoices and bank certificates, the AO found that the assessee has paid commission to the importers in the respective invoice itself and such commission comes to Rs.1,42,31,458/- in total. As the issue needs more elaboration, notice under Section 133(4) was issued to the assessee and details were called for. To the queries raised by the AO, the reply of the assessee was that the commission was paid to the buyers/importers himself, as deduction directly from the export sales invoice. The assessee submitted that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not remitted any amount of commission from India during the previous year relevant to the assessment year under appeal and the commission had been directly deducted from the export invoices. The banks have further reconciled and certified that the commissions paid by the assessee through the export invoices were on the basis of Guaranteed Receipt (GR) and SDF forms scrutinized by the Reserve Bank of India. The CIT(A) agreed with the AO that the payments of commission to buyers in UAE are bound by their regulations and accordingly did not accept the contentions of the assessee regarding the payment of commission to foreign buyers. The assessee had also argued before the authorities that even though the nomenclature given to the payments was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. 6. We heard Shri Rashesh Shah, learned Chartered Accountant appearing for the assessee and Shri Rajiv Agarwal, the learned Commissioner of Income-tax appearing for the Revenue. The main plank of the argument advanced by the learned Chartered Accountant is that the commission paid by the assessee was in the nature of traditional discount extended to foreign buyers and the assessee had received only the net proceeds and therefore there could not be any concept of income against the amount which was never received by the assessee or accrued to the assessee. On the other hand, the main thrust made by the learned Commissioner is that even though the assessee has recorded the only net receipts as its export sales, the assessee has claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this difference reflected in the net invoice value and the gross invoice value for the purpose of accounting of export sale turnover and claiming DEPB benefits cannot be taken as a ground to reject the contentions of the assessee. Therefore, the issue has to be examined devoid of the above technicality pointed out by the learned Commissioner of Income-tax. 8. There is no dispute regarding the fact that the assessee has given commission/discount in the export invoices itself in favour of the foreign buyer. The foreign buyer has stated that this discount/commission would be distributed by him to the intending agents abroad. They have stated that the commissions are to be paid by them directly to the agents in the countries of import. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit opened by the foreign buyers. When the assessee has received only the net proceeds as per the invoice, there is nothing further left over to be treated as income received or to be received or accrued or deemed to be accrued or arising in India or outside India. Therefore, the reliance placed by the lower authorities on the Section 5 of the Income Tax Act is rather misleading. 10. As the assessee has not paid to the foreign buyers any amount by way of commission, but it was only adjustment through the export invoices by way of commission/discount, Section 94H also had no role to play. Therefore, we find that all the discussions made by the lower authorities to make additions of the commission amount were based on hypothesis and not on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s against the addition of Rs.11,21,753/- made by the assessing authority under Section 68 towards unexplained creditors. In fact it is to be seen that the creditors are reflected in the books of accounts of the assessee not for providing any cash credit to the assessee. The creditors are in fact sundry creditors for goods supplied to the assessee and services rendered to the assessee. It is not a case of cash credit at all. All those creditors are regularly supplying goods and services to the assessee and maintaining running accounts with the assessee. In such circumstances, the balance outstanding in those personal accounts cannot be treated as unexplained cash credits for the purpose of making additions under Section 68. In addition to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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