TMI Blog2019 (11) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... their respective returns. From the statement, we notice that few agents are either house-wives, students or retired personnel. They do not have any information of the transaction carried on with the assessee but all of them had a direct link with the assessee as their husbands, parents or one of the family members, who are in direct contact with the assessee. It shows that the subordinates or family members have assisted in carrying out the agency business for the recipient of the commission. Assessee has submitted enough evidence in support of utilizing the services of agents in the business and also revenue authorities have not brought any cogent material to show that the payments were come back to assessee and these payments cannot be categorized as gratuitous payments. Therefore, we delete the addition made by the AO. - Decided in favour of assessee. - I.T.A. No. 1239/HYD/2018 - - - Dated:- 15-11-2019 - Smt. P. Madhavi Devi, Judicial Member And Shri A. Mohan Alankamony, Accountant Member For the Assessee : Shri K.A. Sai Prasad, AR For the Revenue : Shri A.S. Sant, DR ORDER PER SMT. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year. For the sake of clarity and ready reference, relevant paragraphs of the ITAT order are reproduced herein under: 8. Ld. AR of the assessee submitted that the assessee is engaged in sale of various chemicals and most of the chemicals are imported material. There is sever competition for this business. He submitted that the assessee being an individual (proprietor) had to necessarily depend upon somebody to achieve higher sales to survive in the market. He submitted that there is an increase in turnover and in fact the commission claim at ₹ 52,57,750/- in this AY 2011-12 is much less than the commission of ₹ 64,76,842/- paid in earlier AY 2010- 11. The gross profit and net profit reflect steady progress. 8.1 Ld. AR submitted that the Profit Loss a/c (page 3 of paper book) shows the salary claim at ₹ 18,02,100 for Asst.year 2011-12. The details placed at Page 67 of the paper book shows that there are only 2 employees on sales to monitor sales. Hence the assesse has to necessarily depend upon outside agencies for the marketing job. (These two emplyees also coordinate the sales book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is that the assessee had resorted to this claim to reduce or evade the taxes. The Assessing Officer grossly failed to appreciate the fact that the assessee is constantly offering substantial income to tax. For the Asst.Year 2011-12 the assessee admitted income at ₹ 77.95 lakhs on a turnover of ₹ 24.52 crores. Considering the fact that this is a trading business of a proprietor to achieve that much turnover and admit such a high income is not an easy task. iv) The whole approach of the Assessing Officer is as if the assessee had for the first time resorted to claim such expenses. He failed to appreciate the fact that payment of such commission is one of the main expenditure claimed year after year in this line of business. v) The most important aspect is that based on these findings, the assessment for Asst.Year 2008-09 which was earlier completed u/s 143(3) on 25.09.2010 was reopened u/s 148 and out of the total amount of ₹ 24,47,000 claimed as commission payment, the Assessing Officer in his order u/s 143(3) r.w.s.148 disallowed ₹ 21,21,000 accepting the payment of ₹ 3,26,000 (copy of the order u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book. Appellants ledger Ale in the books of Sreedhar agency shows the service charges claimed from the appellant. Agency commission of ₹ 3,000 at page 76 is duly reflected as part of ₹ 13,677 at page 72 of the paper book. Thus the Assessing Officer is totally unjustified in disallowing even the commission paid to the clearing agents. viii. The Assessing Officer in his order at para 6 makes an observation that the assessee had not taken the offer of cross examination. Since none of the agents have denied the receipt of commission and all of them have in fact confirmed the receipt of such commission, the assessee did not find it necessary to cross examine and this can by no stretch of imagination be an issue against the assessee's claim of commission payment to agents. ix. It is pertinent to submit that none of the agents examined by the Assessing Officer are related to the appellant. x. It is not, in any case, the allegation of the Assessing Officer that the commission paid to the agents had flown back to the assessee. Hence in such circumstances disbelieving the commission payment is not proper. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as expenditure and paid through banking channel and deducted TDS as per the provisions of I.T. Act. The issue before us is, AO after recording statement of all agents came to conclusion that all the agents are not genuine as they do not have any basic information of doing any business with the assessee. The same view was ratified by ld. CIT(A). We notice from the statement recorded from agents that all have confirmed the receipt of commission and declared the same as income in their respective returns. From the statement, we notice that few agents are either house-wives, students or retired personnel. They do not have any information of the transaction carried on with the assessee but all of them had a direct link with the assessee as their husbands, parents or one of the family members, who are in direct contact with the assessee. It shows that the subordinates or family members have assisted in carrying out the agency business for the recipient of the commission. 10.1 Coming back to ld. CIT(A) s observation that there is no contract in existence. It is not necessary that all agents should have written agreement. Generally, these businesses a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achieve the sales. This aspect cannot be ruled out that no businessman will distribute money on gratuitous basis without taking benefit from such payments. This is also preponderance of probability. Another aspect was also not considered by ld. CIT(A) that there is no proof that the assessee has received back the alleged commission payment from the respective agents. It shows that the payments are genuine. 10.6 Let us analyse this aspect under judicial view. In the similar situation, the Hon ble Rajasthan High Court in the case of Pinkcity Industries (supra), has adjudicated as below: Taking into consideration that the business has gone almost all time and payment was made through account payee cheque, in our considered opinion, the business expenses is wrongly disallowed. Hence, the first issue is required to be answered in favour of the assessee and he ought to have been allowed the expenses which is arising out of the business exigency and in that view of the matter, the observations made in case of S.A. Builders Ltd. CIT(A) 288 ITR 0001Z (SC), the expenses are required to be allowed. In the given case, the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no agreement for payment of commission. It was for the assessee to carry out his business. If he had an understanding with certain person, then it might not be very much necessary to enter into an agreement. The assessee as well as the payees were withstanding to their stand. There was no variance in their conduct. As far as the allegation of failure to produce demonstrative evidence against the assessee was concerned, one had to see the nature of business. The assessee was in the business of sale of plastic dana. The agents were required to send customers for purchase of dana. They could be introduced on phone also. There might not be any demonstrative evidence in certain circumstances but that did not mean that expense was not incurred. The assessee had shown commission income on sale of plastic dana; it suggested that he had carried on business. Thus, all these circumstances were to be seen before making the disallowance. In such circumstances, the disallowance could not be made. The appellate authority had appreciated the facts and circumstances and deleted the disallowances correctly. There was no merit in the instant ground of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any inquiry conducted to prove the non-genuineness of the transactions the departmental authorities were not justified in disallowing the claim of the assessee which was fully supported by the documentary evidence on record. 2. Apart from expressing its satisfaction as to the genuineness of the transaction the ITA T has taken into consideration the fact that commission has been paid and allowed in the past and that the commission percentage is negligible. Ms. Bansal contests this position. The total turnover of the assessee was ₹ 68 crores before tax, inter alia of which included ₹ 25.68 crores of export turnover. The turnover we are concerned with is stated to be ₹ 3.74 crores on which the commission has been paid. It has been pointed out by Ms. Bansal that rather than the stated 0.05 per cent the commission, the commission works out to 1.5 per cent in relation to local sales and 7 per cent as far as export turnover is concerned. Even then according to us there remains no reason to doubt these payments. It has been laid down in several decisions of the Supreme Court that the ITAT is a final forum for findings of fact. The High Court would i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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