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The Printer House Pvt. Ltd. Versus DCIT, Circle-18 (1) , New Delhi And Vica-Versa

2015 (12) TMI 1232 - ITAT DELHI

Disallowance of commission - Held that:- In the absence of proof in support of the services rendered by the commission agent, no commission can be allowed as a deduction. Therefore, we dismiss the appeal filed by the assessee and allow the appeals filed by the Revenue. - Decided against assessee. - ITA No. 1674/Del/2011, ITA Nos. 2545 & 4530/Del/2011 - Dated:- 16-10-2015 - Inturi Rama Rao, AM And Sudhanshu Srivastava, JM For the Appellant : Sh V K Bindal, CA & Ms Swety Kothari, CA For the Re .....

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g grounds of appeal in ITA No. 1674/Del/2011: 1. The CIT(A) erred in law and on facts in: a) Confirming disallowance of ₹ 10,76,828/- (5%) while allowing ₹ 2,04,59,739/- (95%) of the total commission of ₹ 2,15,36,567/- paid by accepting not only the services received and the agents. b) Confirming the said addition on ad-hoc estimated basis without pointing out any deficiency in the information and evidence submitted or in respect of any particular agent. c) Ignoring that once t .....

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of Companies Act, 1956. It is engaged in the business of manufacturing and selling of off-set printing machines both in domestic market as well as in foreign market. The assessee-company filed the return of income for the assessment year 2007-08 on 31.10.2007, declaring total income of ₹ 22,20,87,977/-. Against the said return of income, the assessment was completed at a total income of ₹ 24,61,85,400/-. While doing so, the Assessing Officer disallowed the commission paid of ₹ .....

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llowing details with regard to the commission payment: i. The confirmation from the parties to whom the commission was paid. ii. To explain the role of commission agents and services provided by them. iii. Copy of agreement between the assessee and commission agents. iv. Whether similar percentage of commission was given for similar service to the commission agents. v. Whether the commission is for the purpose of business or not. vi. The gist of replies with whom the work was done. 3. The Assess .....

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d 28th February, 2011 set aside the issue relating to the disallowance made under Section 14A of the Act to the file of the Assessing Officer and in respect of the commission payment, 5% of the commission paid was disallowed vide para nos. 17.1 to 18, which read as under: "17.1 The AO categorically mentioned that to keep the issue alive, the commission payment was disallowed. The observations of the AO are as under: "4.1 In the books for Financial Year 2003-04 and 2004-05 relevant for .....

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addition made on this account was confirmed by CIT(A)-XIX, New Delhi, vide order dated 20.08.2007 in Appeal No. 119/2006-07. The Hon'ble ITAT and Hon'ble High Court allowed the expenses on account of money paid to the commission agents. However, the department has decided to go on SLP against the order of Hon'ble High Court. In A.Y. 2005-06 & 2006-07, the matter has been decided by the Ld. CIT(A)-XIX, New Delhi by following the order of Hon'ble ITAT in A.Y. 2004-05. Since th .....

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mp; 2006-07, the disallowance is restricted to 5% of the commission expenditure of ₹ 2,15,36,567/- claimed by the assessee." 4. Against the above order, the assessee company as well as the Revenue is before us with the present appeals. The assessee company challenged the orders of CIT(A) confirming the disallowance of 5% of commission paid whereas the Revenue has filed the appeals challenging the direction of CIT(A) for deleting the 95% of the commission paid. 5. Before us, the ld. Au .....

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hat full details of the commission paid have been filed before the Assessing Officer and therefore no disallowance is called for. 6. On the other hand, the learned Sr. DR submitted that the assessee company had not placed any evidence on record in support of the services rendered in consideration of which commission was paid. The mere fact that the amount was paid by account payee cheque and the TDS made does not ipso facto entitle the assessee for deduction. 7. We heard the rival submission and .....

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see company also filed copies of agreement between the assessee company and the commission agents in some cases. In our considered opinion, this fact alone does not enable the assessee to claim deduction. The Hon'ble Supreme Court in the case of Laxmi Narain Mandanlal Vs. CIT, 86 ITR 439, held as follows: "The mere existence at an agreement between the assessee and its selling agents or payment of certain amount as commission, assuming there was such payment, does not bind Income Tax Of .....

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services actually rendered and determine whether the expenditure was laid out wholly and exclusively for the purpose of business. In the present case, the Assessing Officer had called upon the assessee company to furnish evidence in support of the services rendered by the commission agents. In response to this, vide its letter dated 23rd December, 2009, except highlighting the role of commission agent, no evidence was furnished in support of the services rendered by the commission agent. Even b .....

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TR 17 has unequivocally held that the urden of proving that a particular expenditure had been laid out or incurred wholly and exclusively for the purpose of business entirely lies on the assessee. The discharge of the burden has to be effective and meaningful and not to cover up by merely book entries and paper work. In view thereof, we see no infirmity in the order of the lower authorities in making this disallowance, which is upheld. The mere fact of payment of commission by account payee cheq .....

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very assessment is separate and independent and the Hon'ble High Court of Delhi in the assessee's own case confirmed the order of Tribunal deleting the addition of commission payment in the following words: "There is no evidence on record to show that the commission was paid to any near relative, family member or sister concern. There is no iota of evidence to show that the payment of commission represented only accommodation entry or was only a paper transaction. There is also no e .....

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t the transactions were bogus, unfair and fraudulent. In our opinion, in the absence of any such material on record and in absence of any inquiry conducted to prove the non-genuineness of the transactions the departmental authorities were not justified in disallowing the claim of the assesee which was fully supported by the documentary evidence on record." 9. From the above, it is clear that the Hon'ble High Court had come to conclusion that the commission payment is allowable only beca .....

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nal of Delhi High Court in the case of Kanu Kitchen Kulture (P.) Ltd. Vs. DCIT, (2013) 28 ITR (T) 49 (Delhi-Trib.), held that whether the assessee failed to demonstrate the services rendered by the commission agent, the commission was disallowed. The relevant paragraphs of the judgment are reproduced below: "22. Thus the assessee has utterly failed to demonstrate the nature and extent of service rendered by the agent and availed of by the assessee for its business of modular kitchens. In th .....

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aded that each and every year of assessment is separate and independent unit and principles of res judicata do not apply. The assessment for the assessment year 2009-10 is under section 143(1) and for the assessment year 2010-11 there is no mention of the commission at all. Therefore, we are unable to give credence to the facts whose record is not before us and not referred to before the lower authorities." 10. Similarly, the Hon'ble Jurisdictional High Court in the case of Schneider El .....

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