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2015 (10) TMI 813 - ITAT DELHI

2015 (10) TMI 813 - ITAT DELHI - TMI - Bogus commission - CIT(A) deleted the addition - revenue asked to remand the matter for reconsideration - Held that:- In the absence of any cogent argument or reason canvassed before us by Revenue remand cannot be directed. In order to so direct atleast some shortcoming in the nature of evidences filed and consideration should have been pointed out so as to justify such a demand. A matter cannot be remanded for the mere asking. A perusal of the impugned ord .....

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t payee cheque. - Decided against revenue.

Excess payment u/s 40A(2) (b) - CIT(A) deleted the addition - Held that:- Carefully examining the working of the commission paid to Sh. Vipin Malhan is on the sales executed by him from 20.06.2001, the date of agreement between the company and Sh. Vipin Malhan. The sales effected by the company for the period up to 19.06.2001 has been reduced from the total sales while calculating the commission paid to Mr. Vipin Malhan. The order of the AO d .....

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,500/- being income from web packages alone while the company has calculated the commission on reconciled sales. The copy of the statement showing working of the commission paid to Mr. Vipin Malhan had been sent to the AO along with the reply of the AR for his comments. However in the Remand Report submitted by the AO, find that the AO has not made any adverse comments on the working of the figure of the sales as arrived at and the commission of ₹ 29,35,002/- worked out at @ 10% of the tot .....

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for want of any contrary fact or argument the departmental ground is dismissed and the impugned order is upheld. - Decided against revenue. - ITA No. 1163/Del/2011 - Dated:- 19-8-2015 - Diva Singh, JM And T S Kapoor, AM For the Petitioner : Smt Parwinder Kaur, Sr. DR For the Respondent : Shri Ashok Gandhi, Adv ORDER Per Diva Singh, JM The present appeal has been filed by the Revenue assailing the correctness of the order dated 17.12.2010 of CIT(A), Ghaziabad pertaining to 2002-03 assessment year .....

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-aside and the order of the A.O. be restored." 2. The relevant facts of the case are that the assessee earning income from sale of online education and other programs filed a return of income of ₹ 33,37,780/- by way of filing its return. The said return was picked up for scrutiny after issuance of notice u/s 143(2) etc. The AO observed that the net profit rate of the assessee in the year under consideration was 13.18% as per the books of accounts and details furnished before him. On c .....

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nies, Delhi and started the online operations and registration w.e.f. 25.6.2001. The income received it was stated was from sale of online education and other programs. The earning from these has been disclosed at ₹ 2.62,80,06,337/- and other income of ₹ 5,10,119/- totaling to ₹ 2,67,90,186/- on which net profit had been disclosed at ₹ 35,32,2S2/- which gave the N.P. rate of 13.18%. 3. The record further shows that in order to verify the expenses, the AO issued notice u/s .....

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on the basis of the sales of the product through the associates under Binary Compensation Plan. Considering arguments, addition of ₹ 9,10,500/- was made for the following 10 persons on the ground that either the confirmations were not filed or the person did not exist:- 4. "The submission made by the assessee is not acceptable because it is the onus on the assessee to prove the genuineness of the expenses claimed by furnishing the necessary evidence and confirmation as well as to prov .....

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ssociates 77500 No such firm 3. Rajyanti 40000 Regular Associate 4. Anju Bist 44000 No Confirmation 5. Harvinder Singh Sandhu 29000 No Confirmation 6. Daljit Singh Sandhu 153000 No Confirmation 7. Padam Sinha 202000 No Confirmation 8. M.B.M.Enterprises 165000 No Confirmation 9. Kamla Devi 44000 No Confirmation 10. Jyoti Verma 30000 No Confirmation Total 910500 The total commission paid to the above persons comes to ₹ 9,10,500/- for which genuineness has not been established. Therefore, it .....

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eiterating the submissions advanced before the AO, it was submitted that only the persons who continue to renew their status remain connected and the persons who had not renewed their status as associates do not remain in touch with the assessee company. Accordingly it pleaded that it is difficult for the assessee to obtain their latest addresses. It was again re-iterated that the commission it was stated is automatically generated in the account of the assessee on the event of sale on which tax .....

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and the evidence filed before the CIT(A), it was submitted may be remanded back to carry out necessary enquiries as the CIT(A) considering the evidence on record deleted the addition without appreciating the evidence. 6. Ld. AR, on the other hand, submitted that the assessee has all along submitted before the AO and the CIT(A) that whenever a new customer was introduced by an associates automatically a commission is earned and this is the manner in which the business model of the assessee functi .....

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east thousands of "associates" at a point of time and out of these only 39 persons were chosen and out of which the AO for want of confirmation by 10 of those the AO was not satisfied. At the time of enquiry by the AO it was submitted that these persons may have changed addresses or cities as a result miniscule number of people could not reply. However this deficiency it was submitted was made good by the assessee at the Appellate proceedings as confirmations from 8 out of these 10 per .....

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rival submissions and perused the material available on record. On a consideration of the same, we find in the absence of any cogent argument or reason canvassed before us by Revenue remand cannot be directed. In order to so direct atleast some shortcoming in the nature of evidences filed and consideration should have been pointed out so as to justify such a demand. A matter cannot be remanded for the mere asking. A perusal of the impugned order at page 8 shows that the major commission payment .....

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rial facts and evidences on record which remain unrebutted and where no infirmity in the confirmations filed has been pointed out, we find no good reason to interfere with the finding arrived at in the impugned order. Being satisfied by the reasoning and finding, Ground No.-1 of the Revenue is dismissed. 9. The facts relatable to the second ground agitated by the Revenue are set out at page 4 and 5 of the assessment order. A perusal of the same shows that the commission of ₹ 32,90,502/- wa .....

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essee company and Sh. Vipin Malhan and it was stated that this agreement was valid from 20.06.2001 to 19.06.2002 it was submitted that the rate of commission was decided as per the fourth condition of the agreement at 10% of the total receipts from the sale of minimum 2000 packages. It was further submitted that it had been agreed between the company that if the second party had not completed the sale of 2000 packages within six months, the commission would be 8% and it would be paid after compl .....

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line sales being the member of the associates as Sh.Vipin Malhan is also associate of the company. 11. The AO in the facts was of the view that the submission made by the assessee are not correct because the payment has been made to the person specified under section 40A(2)(b) of the Act and thus is not acceptable because the provisions of the agreement made between the parties were considered to have been violated. Accordingly addition of ₹ 8,88,052/- was made by the AO to the income of .....

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pto the sale of 2000 web packages, commission was to be paid @ 10% of the total receipts and in case the sale of 2000 web packages was not completed within six months, the entitlement to commission was only @ 8%. The commission it was stated was to be paid by the company on a monthly basis after deduction of tax at source. It was stated that Sh.Vipin Malhan was paid, the commission of ₹ 29,53,002/- on the total receipts from the sale of web packages and the further payment of ₹ 3,37, .....

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the company relating to the account year under consideration amounted to ₹ 2,39,69,500/-. The company has also received annual maintenance charges of ₹ 20,81,703/- which is an essential ingredient of the sale of the web package. Besides company had also received advance payment of ₹ 39,75,357/- from the customer which of course, as per scheme of the company is always charged on annual basis while the amount is transferred to the profit and loss account on actuarial basis. To qu .....

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the commission under the agreement and was accordingly paid commission strictly under the agreement. No part of the commission was paid in excess of the actual payable commission. This fact can be verified from the reconciliation statement filed along with the reply. From the statement it would be seen that during the year under consideration the company had received total sale amount of ₹ 2,95,30,020/- on which commission @ 10% is paid. This is definitely inclusive of the annual maintenan .....

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led reconciliation of the commission paid to Sh. Vipin Malhan which is reproduced hereunder; Receipts during the year Rs.2,40,24,500/- Less:- Receipts up to 19.06.2001 ₹ 55,000/- Rs.2,39,69,500/- Rs.2,39,69,500/- Add:- Annual Maintenance Charges Rs.20,97,103/- Less receipts up to 19.06.2001 ₹ 15,400/- Rs.20,81,703/- ₹ 20,81,703/- Advance received from customers ₹ 39,75,357/- Total Receipts Rs.3,00,26,560/- Less:- Other receipts on which commission not payable Rs.4,96,540/ .....

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associate member is not correct. It is also wrong on the part of the assessing officer to observe that this commission has been not devised or mentioned in the agreement for the payment of commission as an associate member. This observation of the assessing officer is not correct and is a mere hypothetical observation. The commission to Sh. Vipin Malhan is paid as an associate member as per marketing policy of the company. This commission is certainly paid to Vipin Malhan not under the agreement .....

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s stated by the AR, the payment has been made to Sh. Vipin Malhan under the agreement executed between the company and Sh. Vipin Malhan on 20.06.2001. I have also examined carefully the working of the commission paid to Sh. Vipin Malhan and it is seen that the commission has been paid to Sh. Vipin Malhan on the sales executed by him from 20.06.2001, the date of agreement between the company and Sh. Vipin Malhan. The sales effected by the company for the period up to 19.06.2001 has been reduced f .....

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