TMI Blog2019 (11) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. Thus, ground of appeal No.2 filed by the assessee stands dismissed. Disallowance of commission paid to Balakrishnan Minor (HUF) u/s.40A(2) (b) - there was no proof of rendering any services by the Balakrishnan Minor (HUF) and secondly the services stated to have been rendered only in individual capacity - HELD THAT:- It is settled position of law that commission payment cannot be allowed as deduction in the absences of any evidence on record establishing rendition of services. Even before us, no material is shown establishing rendition of actual services by Balakrishnan Minor (HUF) and therefore commission payment cannot be allowed as deduction. Ground No.3 filed by the assessee is also stands dismissed. - I.T.A. No.366/CHNY/2016 - - - Dated:- 21-10-2019 - Shri Inturi Rama Rao, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member For the Appellant : Shri. N. Arjun Raj, C.A. for S. Sridhar, Advocate For the Respondent : Ms. Vidya Ramachandan, Addl. CIT. ORDER PER INTURI RAMA RAO, ACCOUNTANT MEMBER This is an appeal filed by the Assessee directed agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or payee bank draft. Sl. No. Name of Creditor/Supplier Nature of Transaction Mode of payment Bills or credit raised by the creditor Payment made 1 M/s.Sai Cotton Corporation. Cotton supplier Paid by partner Smt. Jayamani directly to parties 390150 390150 2 M/s. Saradevi Cotton Enterprises Cotton supplier --do-- 455098 455098 3 M/s. Venkataramana Traders Cotton supplier Paid by the partner V. Balakrishnan to the party 381430 381430 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of addition for the year under consideration does not arise. 6. On the other hand, ld. Senior Departmental Representative submitted that provisions of Section 40A(3) of the Act are squarely attracted and the lower authorities had rightly made the addition. 7. We heard the rival submissions and perused the material on record. The only issue in the present grounds of appeal relates to the disallowance under the provisions of Section 40A(3) of the Act. Undisputedly, the payments for purchases are made in cash to the tune of ₹ 28,17,587/-. It is the contention of the assessee that provisions of Section 40A(3) of the Act have no application in as much as, the credit balance of the parties were transferred to the partners account and partners in turn settled the claims of the parties in cash. Since assessee firm has not paid cash, the provisions of Section 40A(3) of the Act have no application. We are afraid this submission of the assessee cannot be accepted for the reasons that undisputedly, the payees had received money in cash and thereby defeating the very purpose of enacting the provisions of Section 40A( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er aforesaid was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof, and also furnishes evidence to the satisfaction of the Assessing Officer as to the, genuineness of the payment and the identity of the payee. As to the validity of section 40A(3), it was urged that, if the price of the purchased material is not allowed to be adjusted against the sale price of the material sold for want of proof of payment by a crossed cheque or a crossed bank draft, then the income-tax levied will not be on the income but it will be on an assumed income. It is said that the provision authorising levy of tax on an assumed income would be a restriction on the right to carry on business, besides being arbitrary. In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to the exclusion of rule 6DD. The section must be read along with the rule. If read together, it will be clear that the provisions are not intended to restrict the business activities. There is no restriction on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/-. The Assessing Officer disallowed the commission payment of ₹ 2,00,000/- paid to Balakrishnan Minor (HUF) under the provisions of Section 40A(2)(b) of the Act for two reasons, first there was no proof of rendering any services by the Balakrishnan Minor (HUF) and secondly the services stated to have been rendered only in individual capacity. 9. Even on appeal before the ld. CIT(A), the ld. CIT(A) confirmed the addition for want of evidence of services rendered. 10. Being aggrieved, the appellant is in appeal before us in the present appeal. The ld. Authorised Representative submitted that the Assessing Officer was not justified in making the addition without brining on record what is the fair market value of the services rendered. 11. On the other hand, the ld. Sr. Departmental Representative placed reliance on the orders of lower authorities. 12. We heard the rival submissions and perused the material on record. It is settled position of law that commission payment cannot be allowed as deduction in the absences of any evidence on record establishing rendition of services. In this connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. Thus the assessee as utterly failed to demonstrate the nature and extent of service rendered by the agent and availed of by the assessee for its business of modular kitchen. In this scenario what appears on record is merely book entries coupled with TDS the amount which will be claimed as a refund by the recipient being a loss making concern. In our considered view the assessee has produced only skeletal paper work of the arrangement without any iota of evidence about actual business services rendered. 23. The assessee s claim for allowing similar commission payment in subsequent year caries no merit inasmuch as the learned DR has rightly pleaded that each and every year of assessment is separate and independent unit and principles of resjudicata do not apply. The assessment for the assessment year 2009- 10 is under section 143(1) and for the assessment year 2010-11 there is no mention of the commission at all. Therefore, we are unable to give evidenced to the facts whose record is not before us and not referred to before the lower authorities . 12. Similarly, the Hon ble Delhi High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
