TMI Blog2018 (2) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order of the Commissioner of Income Tax (Appeals)-XIV, Ahmedabad, vide Appeal No.CIT(A) XIV/Jt. CIT, R-7/277/2011-12 dated 19/03/2013 for the Assessment Year (AY) 2009-10 and following Grounds of appeal has taken by the assessee: i). The learned CIT(A) has erred in law and on facts in deleting the disallowance of commission expenses of ₹ 33,91,662/- even though AO through investigation, proved that commission payment was not genuine and Assessee failed to prove that commission agents and provided 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To PRAN JAIN Invoice No.-Jul/32/2008-09 Journal 38 1,65,000.00 12-07-2008 To PRAN JAIN Invoice No.-Jul/33/2008-09 Journal 39 92,400.00 23-07-2008 To PRAN JAIN Invoice No.-Jul/37/2008-09 Journal 45 1,32,000.00 24-07-2008 To PRAN 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Therefore, vide note sheet entry dated 14.10.2011, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing evidences for the same. Thereafter, vide written submission dated 03.11.2011 which was submitted on 11.11.2011, the assessee filed confirmation from 6 parties, mentioned below, to whom commission paid has been shown:- I. Amit Rajkumar 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. Since the assessee did not submit supporting evidences as required vide note sheet entry dated 11.11.2011, the assessee was again required to explain as under:- Regarding commission paid, it was required to file supporting evidences as the same has been claimed as reimbursement of expenses by the respective persons to whom shown to have paid as commission. Please also explain as to why the same may not be disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 has submitted as under;- (1) Basis of Commission Paid The commission paid to agents who procured customers who needed buyer's credit. The basis of commission is always decided mutually by assessee firm and commission agent. The commission is paid to the agents at the percentage fixed mutually on commission receipt by the firm. The rate of commission is ranging from 11.50% to 55% according to various factors like financial need of customers, time duration in procuring credit facility to 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 415000 M. LAXMI Inv no. amt Comm.% Comm. amts 70 138865 40% 53606 60 143144 30% 58000 62 59582 36 57050 40% 201275 37 122500 38 105840 39 225600 48 324000 15% 80000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at page No.1. Basis on which Commission is decided: (1) Nature of Business the Commission agent has gives us. (2) If he/she provides only the lead and nothing else, the commission would be Minimal. (3) Alongwith the lead if he/she provides concerned Persons designation and number, commission would be higher than (2). (4) Whether has very strong hold in the company or not. (5) Whether has the ability to get the deal dosed on his/her own, or is just a facilitator. (6) The size of company, where we get an entry. (7) Amount of business that is expected to generate from the reference or the lead. (8) 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. Further deals referred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n clients, who need finance in Import-Export. The assessee firm do not have knowledge of clients who need the 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. Shri Jaimin V Shah. The assessee has not produced supporting evidences of vouchers. It has also not filed any evidences regarding work attended/services provided by the commission agents as a result of which business achieved by the assessee and commission paid to them. This shows that commission paid to the parties was not wholly and exclusively for business purpose as also evident from the statement of Shri Amit Rajkumar. The assessee in further submissions dated 09.12.2011 and 16.12.2011 has submitted confirmation of Shri Jaimin V Shah M. Lakshmi respectively. These co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to substantiate CIT Vs Amalgamation Pvt. Ltd.(1997) 226 ITR 188 (SC) CIT Vs Amalgamation Pvt. Ltd.(1997) 108 ITR 895 (Mad) Assesses also failed to substantiate the commercial expendenary Aluminuym Corporation of India Ltd. Vs. CIT(1972) 86 ITR I1-17(SC) Travancore Itanium Product Ltd. Vs. CIT(1966) 60 ITR 277, 282-83 (SC) In CIT vs. Navsari cotton silk mills (1982) 135 ITR 546 (Guj) it was held that such an expenses should not be unreasonable and out of proportions. In this case assessee failed to substantiate reasonableness 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 submissions given by the appellant. The main thrust of the claim of the appellant is that the provisions of section 40A(3) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added back 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 of AO would have been correct, had there been no FBT paid. As the amount is subjected to FBT, no further disallowance is tenable. The addition made by the AO is, therefore, directed to be deleted and the ground of appeal is allowed. 3. The third ground of appeal relates to disallowance of ₹ 22,580/- u/s.40A(3) of the I.T. Act., 1961 in as much as the payment was made under the circumstances prescribed under Rule 6DD of I.T. Rules. 3.1 The Assessing Officer has made the observation in the assessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Coffee 56 207 08/02/09 14271 Lunch 691 208 08/02/09 13121 Coffee 56 209 08/02/09 13120 Coffee 56 210 09/02/09 13138 Snacks 107 211 09/02/09 13136 Coffee 56 212 09/02/09 13134 Lunch 540 213 (c) Luxury Tax (720 + 520) 1240 198 Total 22580 198 From the above, your honour can see that each bill is below ₹ 20000 of different dates to which provision of section 40A(3) is not applicable. Therefore disallowance made by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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