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Ashok Kumar Agarwal Versus Assistant Commissioner of Income-tax, Circle-3, Asansol

2015 (12) TMI 104 - ITAT KOLKATA

Addition on account of commission on sale - deduction of TDS - Held that:- When the payments are made through account payee cheques and also furnished PAN of recipients commission, the same could have been verified by the AO from the assessment records of the respective recipients. Further, this commission is subject to TDS and assessee has either deducted TDS or furnished certificate issued u/s. 197(1) of the Act by the ITO, TDS in favour of the commission agents for lower deduction or nil dedu .....

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umstances, we are of the considered view that the CIT(A) has erred in confirming the addition made by AO and accordingly, we delete the disallowance of commission paid to above mentioned parties. Decided in favour of assessee. - I.T.A No. 1701/Kol/2014 - Dated:- 9-10-2015 - Shri Mahavir Singh, JM & Shri M. Balaganesh, AM For The Appellant: Shri Soumitra Chowdhury, Advocate For The Respondent: Shri Sanjay Mukherjee, JCIT ORDER Per Shri Mahavir Singh, JM: This appeal by assessee is arising out .....

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rounds: 1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) erred in restricting the addition to the extent of ₹ 64,35,828/- out of the total addition of ₹ 74,35,828/- made by the AO on account of commission on sale. 2. For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have deleted the total addition of ₹ 74,35,828/- made on account of commission on sales. 3. Briefly stated facts of the case are that the assessee is en .....

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7; 8,75,000/- and ₹ 65,60,828/- respectively. The assessee was required to file details of date-wise commission paid to the parties. The assessee furnished the reply along with names and addresses of the parties to whom he had paid commission during the year and also nature of services rendered and business made, which is reproduced in the order of AO at page 2. Subsequently, the AO issued summons u/s. 131 of the Act on the commission agents but in respect of the following the summons were .....

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n paid to one commission agent Smt. Saroj Devi Agarwal, who is wife of the Shri Ashok Kumar Agarwal was also disallowed amounting to ₹ 7 lacs. Similarly, commission paid to Puja Sales Corporation, Proprietor Shri Ashok Kumar Agarwal, HUF amounting to ₹ 9 lacs, to Vikash Kr. Agarwal ₹ 5 lacs and Vinay Kr. Agarwal ₹ 5 lacs were disallowed. The AO noted that commission is paid usually for transactions with new parties whereas in this case the commission is paid for procuring .....

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Kumar Agarwal @ 13.74%. Accordingly, he disallowed total commission of ₹ 74,35,828/- by holding the same as bogus by observing as under: The circumstantial evidences discussed in the forging paragraphs establish the fact that the commission expenditure is a bogus expenditure and not incurred wholly and exclusively for the purpose of assessee s business. So total commission of ₹ 74,35,828.00 debited to profit & loss account is hereby disallowed and added to total income of the ass .....

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tc. makes it a case for total disallowance. This is due to fact that it is not established that payments was wholly and exclusively for business. Further the payment made to individuals/HUF are in round sum like ₹ 5,00,000/- (4 cases), ₹ 7,00,000/-, ₹ 9,00,000/-. There must be some link between the sum and intented work/work generated. This is also not established in this case. That makes a case of total disallowance of commission paid to individuals/HUF, all relatives of asses .....

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n 40A(2) is a specific section to handle payment to relatives. Hence the case decisions can be considered in the context of this case. These decision come to rescue of assessee only in respect of payment to Shri Vikash Kumar Agarwal and Shri Vinay Kumar Agarwal of ₹ 5,00,000/- each. 13. In two of the 6 cases out payment aggregating to ₹ 36,00,000/- the case decision in paragraph 11 comes to rescue of assessee. Accordingly I direct Assessing Officer to not to disallow the sum of ͅ .....

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gating to ₹ 38,35,828/- were returned unserved. The claim of appellant is that payment was made by cheque/RTGS, they are income tax assesses and filing returns of income. Their financial statements were produced before me. 15. The Assessing Officer wrote to all 5 cases asking for details. 4 were returned by postal authorities as 'Not Known' and one 'Move/Not Known'. This was intimated to assessee by Assessing Officer. The onus was as assessee to prove that payment was wholl .....

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tablished to satisfaction of Assessing Officer. Accordingly I uphold the disallowance made in respect of claimed payments to the five companies. Aggrieved, now assessee is in appeal before us. 5. We have heard rival submissions and gone through facts and circumstances of the case. First, in respect to Progressive Vinimay Pvt. Ltd., Rani Sati Vinimay Pvt. Ltd., Nakshatra Commercial Pvt. Ltd., Rohit Goods Pvt. Ltd. and Reliable Commotrade Pvt. Ltd., the AO issued summons u/s. 131 of the Act but re .....

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Act in favour of commission agents for lower deduction of TDS. The assessee also claimed that all these companies are registered companies and complete information is available in public domain i.e. the site of Ministry of Corporate Affairs and the same is maintained by Govt. of India. It was argued by assessee before the AO and before the CIT(A) and even now before us that these companies have incorporated the commissions received from assessee as income in their returns of income for the rele .....

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ch of the companies i.e. bills of commission, bills of sales and purchases, copy of ledger account, audited accounts of these parties, computation of income and ITR acknowledgement for AY 2010-11. All these parties are engaged in various business activities as is evidence from the audited accounts filed before lower authorities and even now before us. These activities have been accepted by the department from year to year basis i.e. procuring of orders and rendering of allied services for fulfil .....

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hip business is run under the name and style of M/s. Puja Sales Corporation and he deals in same items in which assessee deals. He has been paid commission of ₹ 9 lacs against procurement of sale and supply of order of electrical items. (iv) Shri Vikash Kr. Agarwal is son of the assessee and he has been paid commission of ₹ 5 lacs for procuring sale orders from the parties situated at Orissa on behalf of the assessee. (v) Shri Vinay Kr. Agarwal, again who is son of the assessee has b .....

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d the turnover of the assessee from two proprietary concerns is at ₹ 4,92,47,042/-. All these parties have procured orders for the assessee in respect to sales effected and this can be verified from the sale bills and also commission bills. The services rendered by them on account of commission is towards enquiry regarding the items, their implementation into orders, arrangement of supplies, collection of payments and also collection of statutory forms etc. The assessee has produced comple .....

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onsidering the submissions of the assessee, he deleted the addition by observing as under: 5. The ground of appeal reproduced below explains assessee s stand: Disallowance of Commission paid amounting to ₹ 13,56,630/-. Sir, during the course of scrutiny proceedings the Ld. Assessing Officer has asked for details of commission as shown in the P&L A/c. of the Audit Report filed complete details towards the said expenses were being produced before the Assessing Officer. Complete explanati .....

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aroj Devi Agarwal for arranging order & collection of payment respectively. The TDS provision u/s. 194H towards payment of commission was duly applied & the details of commission paid and TDS challan is fully disclosed in the TDS return filed. All these persons are working in favour of the firm and very efficiently effect the growth of firms business turnover. Again the commission paid to these persons are according to market rate & nothing more is paid than market rate. But on showi .....

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ural justice from your honour as the provision of section 38(1) does not apply here. Thus the assessee seeks natural justice from your honour for which he shall be obliged. 6. Before me, full details of Income Tax payment by the recipients was filed. I find that they had disclosed the same and the sum has nearly suffered tax at maximum marginal rate. 7. I had considered all aspects brought to record. I find that disallowance is unwarranted firstly on the reason on that no case has been made by A .....

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