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TMI Blog2017 (12) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... med as business expenditure. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition Rs. 30,00,000/." 2. Regarding ground No. 1, briefly stated, the facts of the case are that the assessee is a partnership firm engaged in the business of magnetic sorting of iron ore at the mines situated at Khetri, Jhunjhunu, Rajasthan. During the year under consideration, it paid commission of Rs. 5,00,000 each to Kishan Agarwal (HUF) and Gaurav Bansal (HUF) on total sales of Rs. 10,34,690/- made by these two HUFs. These two HUFs are specified persons covered u/s 40A(2)(b) of the Act. A show cause notice was issued by the AO to the assessee as to why excess commission payment should not be disallowed u/s 40A(2)(b) of the Act. In response, the assessee submitted that there was no fixed percentage of commission on turnover. It was further submitted that although turnover made by them is of less amount but commission has been paid to them on lumpsum basis hence it is not matching with the percentage of commission paid to other parties. It was observed by the AO that commission paid to other parties dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the appellant that the AO cannot sit in the armchair of the assessee has no weight and deserves to be rejected looking to the peculiar facts and circumstances of the case. It is the duty of the AO to examine the payments to entities covered u/s 40A(2)(b) of the Act and the AO has appreciated the facts of the case in a correct perspective. The appellant has not brought on record copy of any agreement executed with these two HUFs for which commission was paid." 5. During the course of hearing, the ld. AR reiterated the submission made before the CIT(A) which we have already noted above. It was further submitted that it is undisputed fact that the amount of commission which was paid to both the parties was the minimum amount of commission decided, irrespective of the sales made by the assessee firm through such parties. It was submitted that the assessee firm unfortunately could not derive the benefit to the fullest out of such commission paid. Even after efforts made to increase sales, the same could not be increased and the desired benefits could not be obtained. However, since the assessee firm had mutually decided with the parties with regard to the commission paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld AR that the amount of commission which was paid to both the HUFs was the minimum amount of commission decided, irrespective of the sales made by the assessee firm through such parties remain unsubstantiated before us. There is nothing on record either in terms of written agreement or understanding between the assessee and these two HUFs or even where the agreement/understanding is verbal, the onus is on the assessee to bring on record some evidence by way of confirmation etc., which defines and lays down the terms of such engagement in terms of sales target, target customers/area, years of engagement, etc. The assessee has thus failed to discharge the said onus cast on it. Secondly, regarding the determination of excessive amount of commission so paid and the comparative cases whereby the onus is cast on the AO, we find that where the assessee itself is paying commission to other entities on the sales so made through them and where there is nothing on record to distinguish the nature of services so rendered by these entities vis-à-vis two HUFs, the said internal comparable cases have been rightly applied by the AO. In these comparable cases, the assessee itself is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical handwriting, very apparently appearing fake. Moreover, Sukhmal Kumar Jain's date of birth is appearing to be 27.10.1945 which means he is around 71 years old. It is highly questionable as to how can a person of this age do any supervision work and that too in iron ore mines site in Khetri. Another reason for need of verification is that both R.K. Agarwal HUF and Nitin Jain HUF are getting fees for supervision and it is not clear as to why the supervision is being done by the HUF and not in individual capacity. In fact, even the handwriting on the envelopes in which confirmation have come of Nitin Jain HUF, Sukhmal Kumar Jain, Alka Jain & one R.N. Forging Pvt. Ltd. (for commission) is exactly identical & sent by the same person. The person who had come to submit the confirmation of R.K.Agarwal HUF had also come from the office of the A/R Sh. Abhishek Dalmia, as revealed when enquired by the Inspector of this Office. 2. Renu Nathawat and Sushil Kanwar Nathawat: Both of them were issued letters u/s 133(6) on 12.10.2015 which were dispatched through the Indian Post but both the letters came back unserved with the remarks, "Unclaimed" 19.10.2015. Later, when the A/R was confront ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is accepted by the AO at page 8 of the assessment order. The AO had all the authority under the law to enforce the attendance of these persons and the AO has not exercised the said authority for the reasons best known to him. It was further submitted that disallowing the sum simply for the reason for non appearance is not at all justified when no other material is brought on record by the AO that the said payments or the parties were non genuine or the services were not received. It was further submitted that similar supervision charges paid by the appellant firm for similar services for AY 2012-13 were accepted by the department and the assessment for the said year was completed under section 143(3) of the Act. The ld. CIT(A) however, confirmed the disallowance of supervision charges of Rs. 30,00,000/-. Now, the assessee is in appeal before us. 13. During the course of hearing, the ld. AR submitted that the following facts remain undisputed namely, computation, ITR and Bank Statement of the parties, whatever applicable, evidencing the receipt of supervision charges by them were submitted to the ld. AO. All summons issued by the ld. AO, u/s 131, were served on all the parties. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... people. Even the distance cannot in any way be a factor as even the assessee's office was situated in Mansarover, Jaipur whereas larger operations were carried out in Jhunjhunu. It was further submitted that supervision charges were even paid in the immediately preceding year i.e. AY 2012-13 by the assessee firm and no additions were made in this regard by the ld. AO. The ld. CIT(A) is not correct in contending that books of accounts of assessee firm were rejected and GP was estimated. In this regard it is submitted that the books were rejected by the ld. AO on all together a different footing that certain expenses were paid in cash and were not supported by proper vouchers. Ld. AO has nowhere, in the said order, doubted with regard to the genuineness of the supervision charges which in the said year, as in the current year, were paid through proper banking channel. It was further submitted that the Hon'ble Supreme Court in the case of Radhasoami Satsang [1992] 193 ITR 321 (SC) held that "...... We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge of consideration for rendering of services and unless such rendering of services is not proved, as in the instant case, mere payment is not sufficient enough to hold that the expenditure has been incurred and allowable in the hands of the assessee firm. Further, it is not a case that the AO has not taken any action to verify the transaction. He has issued notices under section 133(6) and when he was not convinced with the replies, he also issued summons under section 131 as well which remain uncomplied with and which has put further question mark on the authencity of the transaction under consideration. We have also gone through the assessment order passed under section 143(3) for AY 2012-13 wherein the AO noticed that various expenses such as carriage inwards, diesel and oil expenses, loading charges, supervision charges and unloading charges were made in cash and no supporting evidence has been maintained and were not verifiable and the AO has thus rejected the books of accounts u/s 145(3) of the Act and has made lump sum trading addition thereof. Hence, it cannot be said that the supervision charges were allowed by the AO for the AY 2012-13. 16. Further, we have gone throu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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