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TMI Blog2014 (5) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... st arbitrary, erroneous and unlawful must be quashed with directions for appropriate relief. I.T.A. No.1289/Del/2011: That on the facts and circumstances of the case and in law the authorities below erred in making the following additions to the returned income. 1. In making additions of Rs20,51,634/- on account of commission paid to the various sales agents of the company. 3. In making addition of Rs.1,75,523/- on account of miscellaneous sales expenses. Above actions being most arbitrary, erroneous and unlawful must be quashed with directions for appropriate relief. 2. The brief facts of the case are that for assessment year 2002-03 the assessee had claimed an amount of Rs.13,92,785/- as commission paid to various sales agents which was added back by the Assessing Officer. On appeal before Ld CIT(A), the same was deleted., However, on appeal by revenue before ITAT, the same was remitted back to the Assessing Officer for re-adjudication on account of violation of provisions of Rule 46A of the IT Rules, 1962. Similarly, the second addition of Rs.9,75,150/- claimed on account of arre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas the commission was not paid to other parties listed at page 2 of assessment order and therefore they did not reply. In view of the above, for ascertaining the factual position, the Assessing Officer was required to attend the proceedings along assessment records from where the Ld CIT(A) had held that though reply was filed by two parties but the reply was not complete as the parties did not reply about the details of transaction for which commission was paid and therefore he upheld the addition. 6. Regarding commission of Rs.3,05,343/- claimed to have been paid to foreign parties, the Ld CIT(A) upheld the disallowance by holding as under:- "I further find that out of total disallowances of Rs.13,92,785/- an amount of Rs.3,05,349/- is claimed on account of commission payments to foreign parties for which the appellant has relied on bank realization certificates which were filed during the original assessment proceedings. No further proof of commission payment has admittedly been filed during the proceedings u/s 143(3) r.w.s. 254 of the Act on the ground that the same was not asked by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide resolution dated 18.,9.1999 be given w.e.f. 1.9.1999." The appellant has not linked up the decision taken on 29.5.1999 with resolution dated 18.1.2002. Further the details of resolution dated 18.9.1999 have not been filed, nor the working of the arrear salary has been given. It is also an admitted fact that no provision was made for these arrears in earlier years in such circumstances, I find that the Assessing Officer was justified in not allowing the claim of the appellant. Hence, the addition made by him is upheld." 8. In assessment year 2007-08, the Ld CIT(A) upheld the disallowance of sales commission to parties listed at page 2 of this order by holding as under:- "For the assessment year 2007-08, the facts and circumstances are identical, the appellant claimed an amount of Rs.20,51,634/- on account of sales commission. The details of these payments are reproduced on page 3 & 4 of this order. The Assessing Officer has disallowed these expenses as neither the assessee company nor the alleged recipients could establish as to what were the services rendered. It is an admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate authorities had accepted the contentions of assessee and in the second round the same level of authority has not accepted the contentions which is not justified specifically keeping in view the fact that all necessary particulars were furnished. The Ld CIT(A) confirmed the addition only on the basis that the parties had not submitted documents with regard to nature of transactions. The Ld AR relied upon the case law of CIT, Orissa v. Orissa Corporation Pvt. Ltd. 159 ITR 79 with the proposition that where the assessee had provided details of creditors and Department did nothing to examine the creditors except sending the letters which were returned back, the Department was not justified in making the addition. Commenting upon the case law relied upon by Ld CIT(A), the Ld AR submitted that these were not applicable to the facts and circumstances of the case as in the case of assessee the parties were doing business with the assessee for the last so many years and they had confirmed the receipt of payment and also appropriate TDS was deducted. 11. Regarding disallowance of commission paid to foreign parties the Ld AR invited our attention to paper book page 8 to 17 where cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the examination of these documents we find that on these certificates the word mentioned is discount and not commission, therefore, this issue is also restored back to the office of Assessing Officer with the direction to examine as to whether the discount claimed on export realization certificate was claimed by the assessee as reduction from turnover or whether the assessee had claimed it as a separate item of expenditure and if on examination it is found that discount as mentioned on these certificates was not claimed by the assessee in the manner as mentioned above then he can allow the same as per law and if on the other hand. he observes that the same was already allowed as discount or otherwise as reduction from turnover then conclude as per law. In view of the above ground No.1 in both years is allowed for statistical purposes. 16. Regarding second issue of Director's salary in assessment year 2002-03 we find from the copy of resolution that increase in salary was with retrospective effect and some part of it related to earlier year but the liability to pay with retrospective effect happened due to resolution passed on 18.1.2002. The Ld CIT(A) has himself noted these fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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