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2015 (6) TMI 244 - ITAT AMRITSAR

2015 (6) TMI 244 - ITAT AMRITSAR - TMI - Disallowance of commission paid - CIT(A) deleted the addition - Held that:- It is evident from the statements recorded by the AO and reproduced in his order and the confirmations sent by various parties that all the parties have recognized Sh. Nawal Khanna and some of them stated that they were thinking that Sh. Nawal Khanna was an employee of the assessee-company and some were thinking he is representing the assessee-company. The middleman Sh. Nawal Khan .....

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in the impugned year. It is also not the case that only Sh. Nawal Khanna has been paid commission and nothing has been paid as commission to others, as mentioned in the order of the ld. CIT(A) referred to hereinabove i.e. to Sh. Harminder Benipal of M/s. Marlik Seam and others were paid commission and the said commission has been allowed as expenditure by the Income Tax Department is not under dispute. The said Sh. Nawal Khanna is not relevant person as provided u/s 40A(2)(b) of the Act. Furthe .....

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61(Asr)/2014 - Dated:- 26-3-2015 - A D Jain, JM And B P Jain, AM,JJ. For the Appellant : Shri K R Jain, Adv. For the Respondent : Shri Tarsem Lal ORDER Per B. P. Jain, AM. This appeal of the Revenue arises from the order of the CIT(A), Amritsar, dated 03.02.2014 for the assessment year 2005-06. The Revenue has raised the following grounds of appeal: "1. Whether on the facts and circumstances of the case the ld. CIT(A) is right in deleting the addition made by the AO on account of disallowan .....

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d. 3. Whether on the facts and circumstances of the case the ld. CIT(A) is right in ignoring the fact that out of commission of ₹ 17,43,477/- credited in the name of Sh. Naval Khanna, only ₹ 12,802/- were actually paid during the year and ₹ 1730,675/- has been shown as payable in the balance sheet as on 31.03.2005, which is not commensurate with the earnings of a person having no other source of income." 2. The brief facts of the case are that during assessment proceedings .....

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he CIT(A), who vide order dated 4.1.2008 partly allowed the appeal of the assessee and confirmed the addition made by the AO on account of commission paid to Sh. Nawal Khanna. The AO in his order held as under: "In view of the above discussion, it is held that no services have been provided by Sh.Nawal Khanna and so the commission debited by the appellant in its books of accounts cannot be allowed u/s 37 of the Act since it is not wholly and exclusively laid out/spent for the purpose of bus .....

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urther directed that if the AO fails to get response of the purchasers, the same facts may be brought to the notice of the assessee and if the assessee fails to produce the purchasers, the AO is at liberty to decide the issue in accordance with the law. As the case was set aside by the ITAT, Amritsar Bench, a notice u/s 143(2) was issued in response to which Sh. K.R.Jain, Advocate attended the proceedings. Following the directions of ITAT, Amritsar Bench, summons were issued to the following 10 .....

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fied below the summons and not to depart until they receive my permission to do so. i) A copy of account of M/s. H.B.Velvets Pvt. Ltd. in your books of accounts. ii) If there was any middleman involved. If so, give details thereof. iii) Who used to take orders for the purchases made b you on behalf of M/s. H.B. Valvets Pvt. Ltd. iv) Whether there were any terms and conditions of transaction v) Since how long you are dealing with M/s. H.B.Velvets Pvt. Ltd and what is the modus operandi of the bus .....

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n 4. Sh. Nawal Kumar Other persons were also sent summons to send the written reply that either there was no intermediary involved and those persons placed orders to the company through their representatives or employees. The AO not being satisfied with the statement taken from Sh.Harminder Benipal in person or in writing and the rest of the persons, observed that commission amounting to ₹ 17,43,477/- is not wholly and exclusively declared to have been paid for the purpose of business of t .....

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oss examined by the counsel of the assessee. All these assessee parties have denied presence of middle man in these transactions. However, they recognized Mr. Naval Khanna as employee/representative of the assessee. I have gone through all these statements and cross examination statements and I find that all of the parties have recognized Mr. Naval Khanna, some have stated that they were thinking he was employee of the assessee company and some were thinking he is representing Assessee Company. .....

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he present case, it was assessee who was paying service charges to Sh. Naval Khanna. The AO should have inquired about the role and visits of Sh. Naval Khanna for procuring orders for the assessee. The AO was thinking that Sh. Naval Khanna is an 'Independent Agent', who is receiving orders on his letterhead/purchase order forms and then passing them to the assessee. Whereas Sh. Naval Khanna was more like an employee of the assessee who was at best can be described as Dependent Agent' .....

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ssessment year 2001-02 onward and it is found that assessee is paying commission on sales to various person including Sh. Naval Khanna during various years. Sh. Naval Khanna has been paid commission in various assessment years as under:- Assessment Year Amount 2001-02 194905.00 2002-03 200840.00 2003-04 876496.00 2004-05 1009846.00 2005-06 1743477.00 2006-07 1595512.00 2007-08 771225.00 It can be seen from above Sh. Naval Khanna has been paid ₹ 15,95,512/- in assessment year 2006-07 and &# .....

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56595.49 45978411.44 1158241.00 The ld. Counsel has further stated that Sh. Naval Khanna has filed his return of income on receipt basis and Sh. Naval Khanna was not paid any salary by the assessee company and as such his performance was based on the purchase order procured for the company. Sh. Naval Khanna is not related person as provided u/s 40A (2)(b) of the Income Tax Act and as such there is no question of diversion of any income by the assessee by paying him higher commission. In fact, AO .....

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ew of above, main ground of appeal regarding disallowance of commission expenses (ground no 2 to 7) is allowed and general grounds (Gr No.1,8,9 & 10) are dismissed." 5. The Ld. DR relied upon the order of the AO whereas the ld. Counsel for the assessee, Mr. K.R. Jain relied upon the submissions made before the ld. CIT(A) and the order of the ld. CIT(A). 6. We have heard the rival contentions and perused the facts of the case. It is evident from the statements recorded by the AO and repr .....

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