TMI Blog2016 (5) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... eals names of clients, most of whom are corporates, the assessee made no attempt to adduce any evidence as to which the partners dealt with clients in question. No attempt has been made to establish whether the payments were for the purpose of business. In fact the Assessing Officer has in our view rightly concluded that payment of commission did not result in any expeditious payments due to the assessee. Moreover, the finding of fact reveal that the rate of commission was not uniform. There is no evidence brought on record by the appellant to establish that payment of commission was matter of trade practice in its line of business. In absence of such evidence, we are inclined to accept the findings of the tribunal which is last fact finding authority and as such we are not inclined to interfere with this finding. In the view we have taken on the basis of the law existing at the time, the impugned order was passed to hold that the appellant had not established the payment of secret commission. No occasion arises to examine the application of the Explanation 1 to Section 37 of the Act, which would arise only if it is held that the expenditure of secret commission had in fact been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1.45 lakhs as Mehta Sukhadi i.e. secret commission paid to employees of its customers. The Assessing Officer by his order dated 31st March 1992 passed under Section 143(3) of the Act disallowed the secret commission by relying upon his Order in the Appellants case for A.Y. 1990-91. Our attention was invited to the order dated 31.3.1992 passed by the Assessing Officer for AY 1990-91 wherein also the appellant claimed payment of secret commission to the employees of companies to whom tarpaulins were given on rent. In Assessment year 1990-91 this amounted to ₹ 1,37,375/-. In respect of this alleged payment of secret commission there were no receipts or vouchers or any other written evidence. The assessee's representative submitted before the Assessing Officer that on account of severe competition they were required to make certain percentage of the contract amount to select employees of clients, secretly, in order to approve the assessee's contracts, rates and help in getting quick payment of such hire charges. According to the appellants, these amounts are allowable as business expenditure. The representative submitted that it is not possible to disclose t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to all the above years together and passed a common impugned order on 31st January, 2000. It held that the appellants was given an opportunity by the Assessing Officer to substantiate the claim but the appellant simply contended that in their line of business, due to severe competition, a percentage of receivables had to be paid to select employee(s) secretly and which amounts were deductible as business expenses. 7. The Tribunal concluded that the assessee had failed to provide documentary evidence to substantiate the payment of secret commission. It also recorded that the appellant was unable to give names of recipients of the commission. Thus reversed the order of the Commissioner of Income Tax (Appeals). In doing so the Tribunal did not rely solely on the fact that the appellant had not furnished the names of recipients of the commission but held that evidence adduced was not enough to substantiate the actual payment of commission. The assessee-appellant is before us being aggrieved by the order of the Tribunal. Submissions on behalf the Assessee: 8. Mr. Joshi, the learned counsel appearing on behalf of the appellants has taken us through the various factual aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er took us through various decisions of this Court, firstly, Mr.Joshi sought to rely upon the fact that secret commission had been recognized in the pronouncement in Goodlass (Supra). In paragraph 5 of the said judgment it is recorded that in order to be entitled to deduction of payments to persons whose name were not disclosed, the assessee has to establish the practice prevailing in that line of business for making such payments. It has to adduce evidence to establish the payments and has to satisfy the authorities that the payments were in fact made for the purpose of business. 13. Mr. Joshi then relied upon the decisions of this Court in the matter of Sigma Paints Ltd. (supra), and submitted that the tribunal had found that there was sufficient evidence to support the case of payment of secret commission. Relying upon the decision of the Hon'ble Supreme Court in the Gannon Dunkerley and Co. Ltd. (supra), Mr. Joshi submitted that the Hon'ble Supreme Court had held that the question of deduction of secret commission was question of law and had directed the question to be referred to the High Court for its opinion. 14. Mr.Joshi then relied upon the judgment of the Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to support the petitioner's case and the judgments referred to by Mr.Joshi cannot come to his assistance since there was no evidence that payments were in fact made and that these payments were made for the purpose of business of the assessee. 18. Mr.Suresh Kumar relied upon the decision of the Tribunal in the case of I.T.O V/s. D.B. Taraporevala Sons Co. 2005(1) SOT 123(Mum) in which it is held that the assessee was given many opportunities to bring out details with regard to expenditure claimed but they failed to do so. It was stated that when the assessee claims such expenditure as deductions, the burden of proving that such expenditure was incurred is entirely upon the assessee and which included the burden of proving that the expenditure that was incurred for the purpose of business and if the same is not proved it may be presumed that it was not so incurred. In the instant case the assessee did not produce evidence that the payment was actually made and did not discharge that burden. 19. Mr.Suresh Kumar relied upon observation in case of the CIT vs. Gill and Co. (supra) wherein it was held that merely because the orders are passed in favour of the assessee in ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounting to ₹ 2,72,980/- found and seized as unaccounted and various blank signed debit cash vouchers found in order to inflate labour charges which do not concern us in the present appeals which only pertain to the payment of secret commission. 22. The order of the first appellate authority reveals that the partners of the appellants were stated to be present before the Commissioner of Income Tax (Appeals) and they reportedly confirmed that the disbursements were made the partners in charge of the particular client's site by withdrawing money from bank. The Commissioner of Income Tax (Appeals) further observed that the Assessing Officer had noted that the appellant had furnished details of payment but the names of recipients were not made available. In paragraph 17 of the order of the Commissioner of Income Tax (Appeals) had observed that on perusal of the details and the decisions relied upon by the appellant, they have rendered a proper account of payment received from various companies and the amount of secret commission paid by the assessee to the staff of such companies. The only detail missing was the names of recipients. The Commissioner of Income Tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee therein had failed to establish that the said expenditure was incurred. 26. In the case of Goodlass Nerolac (supra) the Tribunal had considered the facts and found that the assessee was maintaining proper accounts and records with regard to the payments and that the payments were made under the instructions and directions of the top executives of the company and were approved by the Board of Directors at the end of every month. The Tribunal found in the facts of Goodlass Nerolac (supra) that the assessee was a public limited company whose accounts were not merely audited but were also placed before the general body of the shareholders. Moreover the assessee's turnover in Goodlas Nerolac (supra) was increasing year after year whereas amounts claimed as eligible for deduction had dropped from 1.34% to 0.22% in the year in question. These were considered to be very relevant and on the basis of this and other evidence the Tribunal concluded that the fact of payment of commission had been established in the case of Goodlas Nerolac (supra) even though the names and addresses of the recipient were not provided. It was further found by the tribunal that the payments were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required reconsideration and the Tribunal was directed to decide the issue in the light of explanation inserted in Section 37(I). 30. In Gill Co (supra) since the explanation to Section 37(I) had not been introduced to the statute book it was held that such reliance could not have been placed on the orders passed in favour of the assessee in past the issue came to be remanded back to the tribunal. In Dr. G.G. Joshi (supra) the secret commission was held to be deductible in that case. It was observed that since the assessee had established that the practice of paying secret commission was prevailing in that line of business and the evidence established that payments had been made for the purpose of business. 31. In Gannon Dunkerley (supra) also the assessee was not inclined to disclose the identity of persons to whom commission was paid. The Assessing Officer did not accept the claim that the payments was made for the purpose of business. The assessee appeared before the CIT (Appeals) without success, yet again the made second appeal to the Tribunal but without success. The High Court then answered the question in favour of revenue and against the assessee specially in view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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