TMI Blog2019 (9) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... been able to show that the payments have not been made to the purported agents and that these payments are not relatable to the carrying out the business and for other business purposes. The AO has merely leaped to conclusions (in the cases of Categories II, III and IV) that the seeming absence of buyers (as ostensibly evidenced by letters addressed to them returning unserved), or the negations or disavowals by such buyers of any knowledge or nexus with the agents or the inability of the Commission agents to list the actual buyers would automatically disentitle the agents of their status and rights to receive Commission payments. In the scheme set in place by the Appellant, the buyers directly transacted with her; the agents did not enroll them and therefore in most cases would not know them AO s action in disallowing the impugned expenses have been made on extremely thin and specious grounds that the buyers were not found or did not respond or disclaimed any knowledge of the agents or that the agents were not able to remember the buyers or were not able to furnish detailed particulars about them or for the reason that the Commission agents were HUFs. All of them are reasons th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the deletion of addition made by the Assessing Officer. The Tribunal vide its order dated 31.8.2017 upheld the findings of the CIT(A) in deleting the disallowance, inter alia, observing as under: 7. We have heard rival submissions, perused the orders of lower authorities and materials available on record. We find that the CIT(A) deleted the disallowance of ₹ 3,29,17,011/- out of total commission payment of ₹ 6,94,53,756/- by observing as under I have considered the content and substance of the impugned assessment order and the Grounds of Appeal preferred and the additional submissions filed by the Appellant, and accordingly decide as under: a) In respect of the disallowance of commission payments made by the appellant to the extent of ₹ 3,29,17,011/-, it appears that the AO has not correctly understood the meaning and import of the term agent . It is not necessary that an agent receiving Commission payments has to always be a physical go-between between the principal (the Appellant in the instant case) and his/her/its customers being buyers. An agent can carry out the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss and are motivated to that end; it is in this connection that some of them may keep track of buyers/customers in their own interests. Such tracking and retrieval of customer details upon demand, as the AO has insisted upon, is not. part of a mandatory or statutorily stipulated nature of duties of all agents. d) There are Commission agents who arrange and participate in the sales and arrange outboundmovement- and-packing, transport and logistics in the interests of the principal, and there are agents who do not. The law of agency is an area of commercial law dealing with a set of contractual, quasi-contractual and non-contractual fiduciary relationships that involve a person (the agent), who is authorized to act on behalf of another (the principal) to create legal relations with a third party. Succinctly, it may be referred to as a more-or-less equal relationship between a principal and an agent whereby the principal, expressly or implicitly, authorizes the agent to work under his or her or its control and on his or her or its behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him or her and third parties into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not what they seemed to be. The decision to disallow has been made on presumption, surmise, conjecture, supposition, and a summary and unilateral conclusion based on rudimentary facts (of the buyers being presumably non-existent or apparently unaware of the agents and the agents being unable to list the buyers) taken in prejudiced isolation and based on a spurious implied transcendental principle that seeks to cover/fill the schism between flimsy foundations and meretricious arguments on one side and a tendentious decision on the other. This is not a scientific, professional and responsible exercise carried out by the AO. Much more homework was required to be done by the AO in discharge of his responsibilities, which he plainly failed to carry out. g) How to go about doing one s business sis the prerogative of the business man, as are the related matters like incurring expenses, making investments, obtaining loans and providing advances, etc. The decision of Hon ble Supreme Court in the case of S.A. Builders Limited vs CIT, 288 ITR 1 (SC) is relevant. The Hon ble Court held in the above ratio reiterated the settled position in the past that no businessman can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returning unserved), or the negations or disavowals by such buyers of any knowledge or nexus with the agents or the inability of the Commission agents to list the actual buyers would automatically disentitle the agents of their status and rights to receive Commission payments. In the scheme set in place by the Appellant, the buyers directly transacted with her; the agents did not enroll them and therefore in most cases would not know them. The agents would be able to only provide some names of buyers in respect of whom/which the agent would have facilitated the supply after the sales were made. Likewise, sworn depositions from the buyers that they did not know the agents would not make for adverse finding because in the minds of these buyers, they had transacted directly with the Appellant, and the person referred to as an agent would have appeared in their eyes like an employee of the Appellant or other individual engaged in facilitating the movement of the goods, and not in a formal position of engagement as an agent . k) What was needed for the AO was to prove any of the following: a) the impugned agents did not exist or were not genuine agents; b) the agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumentation, made the necessary entries in books of accounts that have been duly audited and also furnished the Income-tax particulars of the agents before the AO. Copies of some of the communications made by the Appellant to the AO in this regard have been provided on record by the Appellant. j) The enhancement made of ₹ 3,29,17,011/- on the said count is consequently deleted and the Appeal allowed. 8. Ld D.R. could not point out any specific error in the findings of the CIT(A) that at times commission agent when approaches the purchasers, he does not identify himself as an agent of the seller and merely identifying himself as representative of the seller, in such circumstances, the buyer cannot be aware that the person who has approached is employee of the seller or agent of the seller. Further, the CIT(A) observed that the commission may be paid to an agent for facilitating the trade even when the orders are directly given to the sellers by the purchasers. Further, non-service of letters to the buyers or non-compliance of the letters by the buyers does not show that the payment of commission was not genuine when the relative sale was co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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