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ACIT, Circle – 7, Ahmedabad Versus M/s. Kiwifx Solutions

2018 (2) TMI 859 - ITAT AHMEDABAD

Disallowance of commission expenses - bogus expenditure - CIT-A allowed the claim - Held that:- The services have been rendered for appellant’s business by the above said commission agents, the appellant has discharged its onus by filing all possible details including confirmations and TDS and successfully established that the genuine expenditure has been expended for the business purposes. On the other hand, the AO could not gather the positive evidence for the department and taken decision bas .....

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e more than 20,000/-. Ld. CIT(A) has given reasoned and detailed order and we find force in the observation of the ld. CIT(A) therefore, we dismiss this ground of appeal of revenue - I.T.A. No.1536/Ahd/2013 - Dated:- 12-1-2018 - Shri N.K. Billaiya, Accountant Member And Shri Mahavir Prasad, Judicial Member For the Appellant : Shri V. K. Singh, Sr. D.R. For the Respondent : Shri S.V. Agrawal, A.R. ORDER PER MAHAVIR PRASAD, JUDICIAL MEMBER : This appeal has been filed by the revenue against the or .....

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vided any service for which commission was paid. ii). The ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 22,580/- made by invoking provisions of sections 40A(3) of the I.T. Act. iii).On the facts and circumstances of the case, the ld.CIT(A) ought to have upheld the order of the Assessing Officer. iv). It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the assessing officer be restored. 2. Briefly stated facts as culled out from th .....

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commission/basis of commission, their copies of accounts, details of services provided by them, details of TDS deducted and paid into the Govt. a/c, proof of payment made. File evidence also ". The assessee in his written submission dated 10.10.2011 has filed only copy of commission exp. ledger a/c -which is as under:- Commission Exp. Ledger Account 1-April-2008 to 31-Mar-2009 Date Particulars Vch Type Vch No Debit Credit 02-06-2008 To PRAN JAIN Invoice No.-Jun/24/2008-09 Journal 15 1,32,50 .....

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AN JAIN Invoice No.-Jul/38/2008-09 Journal 46 77,500.00 27-07-2008 To PRAN JAIN Invoice No.-Jul/39/2008-09 Journal 48 1,70,500.00 11-08-2008 To PRAN JAIN Invoice No.-Aug/43/2008-09 Journal 52 1,55,000.00 13-08-2008 To NEGA MANAGEMENT SERVICES Invoice No.-NS/AUG/08-09 Journal 55 96,000.00 17-08-2008 To PRAN JAIN Invoice No.-Aug/44/2008-09 Journal 57 1,32,340.00 21-08-2008 To AMIT RAJKUMAR Invoice No.-03/2008-09 Journal 58 50,000.00 04-10-2008 To NEGA MANAGEMENT SERVICES Invoice No.-NS/oct/07/08-0 .....

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l 163 4,15,000.00 16-02-2009 To M. Lakshmi Invoice No.Feb/38/2008-09 Journal 167 53,606.00 17-02-2009 To M. Lakshmi Invoice No.Jan/32/2008-09 Journal 169 2,01,275.00 18-02-2008 To Monika Jain Invoice No.-Feb/15/2008-09 Journal 172 1,05,000.00 33,91,662.00 33,91,662.00 Closing Balance 33,91,662.00 33,91,662.00 Thereafter, assessee was required to file remaining details on 10.10.2011. The assessee filed written submission on 14.10.2011 but he did not file required details regarding commission. The .....

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ereafter, the assessee submitted vouchers related to commission expenses in the written submission dated 02.10.2011 (by enclosing page-114 to 148). All these vouchers are made part of this order as annexure A (1 to 35). A perusal of these vouchers shows that in these vouchers different parties have mentioned narration as under:- Krishna Associates, Being value of actual expenditure incurred for providing client services related to international banking (reimbursement of expenses). Pran Jain, Mon .....

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f expenditure incurred for providing client services related to international banking. It is also noticeable in all these vouchers that it is mentioned in these vouchers that please issue cheque in favour of individual person like B Sreeshkumar, Pran Jain, Monika Jain, M. R. Somayajulu, S. Uma Bharti, M. Lakshmi, Amit Rajkumar, Jaymin V Shah, Neha Saxena. A perusal of these vouchers also shows that all these vouchers have been made by a particular persons, on a particular computer and not by eac .....

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ar II. Neha Management Services III. Pran Jain IV, Monika Jain V. Krishna Associates VI. Uma Financial Services. The confirmations submitted by the assessee is also made part of this order as annexure 'B'. A perusal of these confirmations shows that the signature of the said persons in the confirmation and signature of the same person in voucher are not same. This shows that the person who has given vouchers and the person who has given confirmations are different for each of the above. .....

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e required details in submission dated 16.11.2011. Therefore, assessee was again required to file /produce the same and was also required to produce the commission agents for verification. The assessee in his written submission dated 23.11.2011 has submitted as under:- "(2) Explanation on narration in bills received from commission agents for commission paid to them: The commission agents have issued bills to assessee firm for introducing the clients (customers) to the assessee firm and ren .....

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at is the meaning of reimbursement of expense. The commission agent procured the clients, provide some services to the clients, and sometimes convince the clients to obtain services of assessee firm i.e. procuring buyers credit facility. For all these work the commission agents charge commission as well as expenses incurred by him. Reimbursement of expense does not mean that assessee firm had incurred expenses on behalf of agent. Because assessee firm is not claiming reimbursement of expenses bu .....

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ntry dated 16.11.2011, it was required to produce commission agents for verification. Please produce them. The basis on which quantum of commission has been given to different commission agent has not been provided so far. Please provide the same i.e. on what basis particular quantum of commission has been given to the particular commission agent. Please file evidences for arriving such quantum also. Adjourned to 23.11.2011 at 11:30 AM. " In written submission dated 30.11.2011 the assessee .....

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customers, facility provide by agents to customers and assessee firm, time within which commission is received by assessee firm, repetition of work from same customer and quantum of commission received by firm etc. The few bills of sales i.e. professional fee received from customers are enclosed herewith." The details of commission paid has been mentioned as under:- PRAN JAIN Inv. No. Amt Comm.% Comm. amts 20 760000 50% 132000 77500 170500 22 866410 30% 132340 23 189440 155000 42 129000 62 .....

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0 50% 95000 190000 The assessee produced Shri Amit Rajkumar, "the statement of Shri Amit Rajkumar u/s.131 as cross examination wherein it was stated by him. (1) I am helping my father's textile business since last 4 months before this, I was studying. (2) I have completed my studies in 2011. (3) I have received commission from M/s. Kiwifix Solutions. On further being asked about the nature of reference Shri Amit Rajkumar stated that (4) I have provided contact details J have given only .....

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n arrived as mentioned in written submission dated 30.11.2011 in para 3.9. The assessee in his written submission dated 02.12.2011 has submitted as under:- "(1) Basis of fixation of rate of commission paid Your goodself has asked to explain what are the basis on which differential rate of commission ranging from 11.50% to 55% have been paid. The explanation is enclosed herewith at page No.1." "Basis on which Commission is decided: (1) Nature of Business the Commission agent has gi .....

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The designation at which the commission agent is appointed in the same company or elsewhere. (9) Fierce competition in our business, i.e. if we don't give him higher commission, the deal will go to our competitor Hence the basis of commission decided is completely verbal, and decided on deal to deal and also no of layers involved in that deal. E.g. Mr. Pran Jain, Ms. Umabharti and Ms. Monika Jain are very senior people and have very strong hold in the companies through which we get business .....

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paid to M, R, Somayajulu, which is 11.5%. This shows that the commission paid has no relation with the services provided. if any, though not proved. A perusal of percentage of commission mentioned in the chart para 3.9 shows that the commission amount is not @ rate of the commission mentioned in the said chart. This also shows that the commission paid has no relation with the business stated to be achieved through said commission agents. The basis of commission/services mentioned in submission .....

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ther commission agents are located at Hyderabad city, Andhra Pradesh state and one at Indore city, Madhya Pradesh state. One commission agent located at Ahmedabad, has been produce before your goodself on 30-] 1-2011 for verification. We have contacted the commission agents located at Hyderabad & Indore and they have informed that, they have already given confirmation, IT details etc., which prove services rendered and the payment received by them. They have stated that, they do not have obj .....

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e buyer's credit in Import-Export. Mainly through commission agents the clients are introduced to assessee firm for their requirement. Therefore, the receipt of assessee is not be possible without payment of commission. Your goodself is prayed therefore, to accept commission paid and oblige." The assessee has shown inability to produced the commission agent as mentioned above which are of out station. But it has not produced another commission agent which is of Ahmedabad itself i.e. Shr .....

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mitted confirmation of Shri Jaimin V Shah & M. Lakshmi respectively. These confirmation are also made part of this order as Annexure 'C'. Signature in these confirmation are also not matching with the signature in vouchers. Apart from this assessee has not been able to file confirmation of Shri M. R. Somayajulu. The confirmation submitted by the assessee proves only that they have received amount as commission. It has no reference that what services were provided by them and the same .....

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nor commission agents in their confirmation have confirmed that they received amount for any services provided by them, the assessee has not been able to produce the commission agents from whom these facts can be verified. This shows that the commission expenses have not been incurred wholly and exclusively for the business purpose. From the above discussion, it is clear that genuineness of the commission paid/reimbursement of the expenses is not proved beyond the doubt that the same were incurr .....

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examine these matters. As mentioned above the assessee has not been able to prove that the commission was incurred wholly and exclusively for business purpose. In the instant case neither the recipient of commission were produced, nor assessee was able to justify its logic. One person who was produced could satisfy the genuine of the commission received by him. It has been held that nexus between expenditure and business is essential which the assessee failed to substantiate CIT Vs Amalgamation .....

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s and proportion on which it was done. The assessee has paid commission which is from 11.5% up to 55% which is unreasonable. Looking to the above facts, the commission of ₹ 33,91,662/- is hereby disallowed and added back to the income of the assessee." 3. Therefore, assessee preferred first statutory appeal before the ld.CIT(A) but ld. CIT(A) has allowed the commission expenses of ₹ 33,91,662/- with following observation: I have carefully perused the assessment order and the sub .....

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pose of introduction Section 40A(3) was to block the loopholes of making cash payments and claiming deductions with a view to frustrate investigation as to the identity of the receipts and the genuineness of the claim provided each such payment is above ₹ 20,000/-. Therefore, I am in agreement with the submission given by the appellant and the disallowance made is deleted. The ground of appeal is accordingly allowed. 4. We have gone through the relevant record and impugned order. The servi .....

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paid to bogus parties which has come indirectly to the appellant through cash. In absence of any proof AO should not have given such finding. In our considered opinion, ld.CIT(A) has passed detailed and reasoned order. Therefore, we do not incline to interfere in the order passed by the ld. CIT(A). 5. So far as Ground No.2 is concerned that CIT(A) has erred in law and on facts in deleting the addition of ₹ 22,580/- made by invoking provision of Section 40A(3) of the I.T. Act. The assessing .....

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ck as per section 40A(3) of I.T. Act. 6. Ld. CIT given relief to the appellant with the following observation: I have carefully perused the assessment order and the submission given by the appellant. Such expenditure is claimed to have been incurred for business purposes and in view of the facts of the case on record, the submission cannot be brushed aside. The genuineness of expenditure is not in doubt even by AO Payments have been made through cheque and copy of bills is on record. The action .....

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ssessment order, which is reproduced as under: Assessee has made an expenses of ₹ 22,580/- in cash on 11/02/2009 as evident from details of business promotion expenses. The assessee has filed copy of voucher of Hotel Hillocks, Mount Abu in the name of 4 adults and 2 children. The guest name mention is Mr. Panjabi Monisha. Whether the same is related to business or not is not clear. Since the expenses are made in cash same are disallowed and added back as per section 40A(3) of I.T. Act. 3.2 .....

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