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Kishorebhai Devishibhai Iyava Versus ITO, Ward-1 (4) Bhavnagar.

2016 (3) TMI 412 - ITAT AHMEDABAD

Disallowance of expenditure - Held that:- The nature of activity which has given rise to commission income to the assessee, because, the assessee was working as plant operator in the Gujarat State Electricity Corporation Ltd. and a salaried employee. The assessee submitted that the assessee has received commission income from Jindal Aluminum and Banco Aluminum. These concerns must have made certain purchases of aluminum products and the assessee with the assistance of these three persons helped .....

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ived some income, but failed to demonstrate the activity of earning of this commission income. The expenditure for earning any income can be claimed by the assessee, if he is able to demonstrate that the expenditure was exclusively and wholly incurred for the purpose of business activity. The factum of the payment of money may not be in doubt, but the factum of rendering of services at the end of these three persons is totally missing. Therefore, the ld.CIT(A) has rightly confirmed the disallowa .....

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dition of ₹ 4,85,000/- . 3. Brief facts of the case are that the assessee has filed his return of income on 13.9.2011 declaring total income at ₹ 3,77,040/-. This return was processed under section 143(1) of the Act on 17.1.2012. The assessee, thereafter, revised the return on 30.3.2012 and declared total income at ₹ 9,71,910/-. The case was selected for scrutiny assessment and notice under section 143(2) was issued on 31.7.2012. The assessee at the relevant time was working as .....

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ed to have been incurred by the assessee for earning this commission income. According to the AO, the assessee failed to submit requisite details, and therefore, disallowed the claim of the expenditure at ₹ 4,85,000/-. 4. Appeal to the CIT(A) did not bring any relief to the assessee. The ld.CIT(A) has confirmed the disallowance of ₹ 4,85,000/- by observing as under: 4.3. I have considered the facts of the case, the appellant's submission and the AO's observations. As stated i .....

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in cash on different dates. The AO has also stated that it was duty of the appellant to furnish the details of the services rendered by the appellant's agents, however, no such information was furnished. The AO also held that no commission has been shown in the original return of income and appellant had paid commission only after getting letters, from the department. Accordingly, the AO has disallowed the commission claimed to have been paid to such agents. 4.3.1. Now during the course of .....

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ed 30/01/2015 to furnish the name and address of the persons to whom the appellant had paid commission along with complete details of services rendered by them for this purposes. The appellant had been also asked that such details should also include the details of the parties to whom sale were made through such commission agents. In this letter, date of hearing was given as on 10/02/2015. On that day no reply was submitted by the appellant. Hence, for the sake of natural justice, another hearin .....

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s and the details of parties to whom sales were made through them was filed. Thus, even after almost 04 months, the appellant failed to provide the details as asked for. The details of dates of payments of commission to these parties alongwith accounts were also no filed. Further, no documentary evidences in respect of-services rendered by the persons to whom the appellant had paid commission were filed. The AR asked for more opportunity which was provided on 08/06/2015. On that day no details w .....

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Also there are several bearer cheques issed to one Mr. Mitesh H Waghela. Hence without prejudice to whatever has been stated above, it is evident that the appellant, even if he has actually made any payment to these subagents, has made such payments in cash and hence is not providing the details, as the same may entail disallowability as per the provisions of section 40A(3). Even the affidavits filed by the sub-agents nowhere mention the dates of receipt of payments from the appellant. Besides t .....

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income from other sources also, Thus, the return of income filed by them is just an attempt by the appellant to fabricate evidence in support of his claim. All these facts are against human probabilities and they show that these persons have not rendered any service to the appellant in order to receive the commission from him. 4.3.3. In the decision in the case of 46 taxmann.com 338 (Bombay) in the case of Umakant B. Agrawal (SLP dismissed), the court has he!d as follows: "10, The Assessin .....

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Suvidha. Therefore, the Assessing Officer called upon the appellant to prove the nature of the services provided by these two entities and with their details. The Assessing Officer found, as a matter of fact, that the details were furnished, save and except the nature of the services........... 15. We are of the opinion, that the Income Tax Appellate Tribunal, therefore, did not commit any error and rather applied the correct test in reversing the order of Commissioner of Income Tax (Appeals). T .....

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ter details. It was a clear case where the onus which was resting on the assessee in law, has not been discharged by producing the details with regard to the matters which are to the personal knowledge only of the assessee." 4.3.3.1. Further, the Jurisdictional High Court in its decision in the case of 40 taxmann.com 166 (Gujarat),Gujarat Insecticides Ltd. has held as follows: "3. Having perused the decision of the Tribunal on this issue, we notice that in the previous year as well as .....

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disallowing the commission paid to these 3 persons is correct. As a result, this ground of appeal is dismissed. 5. Before us, the ld. counsel for the assessee contended that the assessee has paid sub-brokerage to three persons viz. Niranjan Adroja, Jigneshkumar K. Mashiyava and Jayebhai J. Parmar. All these persons have experience in marketing and selling of different products. He submitted copies of affidavits tendered by these persons and their copies of the return. According to the ld. counse .....

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