TMI Blog2021 (10) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... - AO order passed u/sec 143(3) of the Act does not satisfy the twin conditions of erroneous and prejudicial to the interest of revenue and Accordingly, the revision order passed by the Ld.Pr.CIT is quashed and allow the grounds of appeal in favour of the assessee. - ITA No. 1765/Mum/2020 (A.Y: 2015-16) - - - Dated:- 28-9-2021 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER Appellant by: Shri. Subhash Shethy. AR Respondent by: Shri. Rahul Raman Shri. Manpreet Duggal, DR ORDER PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the Pr.Commissioner of Income Tax 1, Mumbai order passed u/s 263 of the Income Tax Act, 1961. The assessee has raised the following grounds of appeal: 1. The Ld. PCIT erred in setting aside the assessment order for AY 2015-16 by invoking powers under s 263, when the said assessment order was neither erroneous nor prejudicial to the interests of the revenue. 2. The learned PCIT erred in exercising powers u/s 263, when the jurisdictional conditions for the same had not been satisfied. 3. The learned PCIT failed to take into account the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing and trading of electronic process controls. The assessee has filed the return of income for the A.Y 2015-16 declaring a total income of Rs.(-) 53,286/- and book profit u/s 115JB of ₹ 1,63,291/- and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny under the CASS and notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued. In compliance, the Ld. AR of the assessee has appeared from time to time and submitted the information and the case was discussed. The A.O after considering the details and facts has assessed the total income of Rs.(-)53,286/- and passed the order u/s 143(3) of the Act dated 08.11.2017. 3. Subsequently, the Pr.CIT find that the A.O. has not examined the large commission expenses and low net profit and there is a mismatch of interest paid to the related persons u/s 40A(2)(b) of the Act. Therefore, the Pr. CIT is of the opinion that the A.O has failed to examine the genuineness and reasonableness of the claim of large commission paid to M/s. Toshbro controls P Ltd which is also related party. The Pr. CIT observed that the A.O has not applied his mind and the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in response to the notice. Even other wise, the contention of the Ld. AR that the similar claim of commission payment was disallowed in the A.Y 2012-13 and the Hon ble Tribunal has granted the relief to the assessee. Whereas for A.Y 2014-15 on the similar disallowance, the appeal is pending before the first appellate authority (CIT(A)). The contentions of the Ld. AR that the claim is wholly and exclusively incurred for the purpose of the business and there is no change in the criteria. The Ld. AR referred to the paper book and refered to the details of activities and the questionnaire issued. Further the Ld.AR emphasized on the Agency agreement between the assessee company and M/s Toshbro Controls Pvt Ltd. The Ld. AR demonstrated the statement showing the profit earned by the assessee due to the transactions of commission payment for the last five years at page 65 of the paper book. Further, the statement of commission received by M/s Toshbro Controls Pvt ltd on orders procured from various other parties referred at page 66 to 67 of the paper book. The Ld.AR also submitted that the assessment order does not satisfy the twin conditions of erroneous and prejudicial to the interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee deleted the disallowance observing that the recipient company is a loss making company and is not a ground for disallowance of commission. He also accepted the submissions of the assessee that M/s. Toshbro Controls Pvt. Ltd. is known to customers by its flag ship company and may not be aware of the subsidiary company and therefore the customer might have stated that they have got materials directly from the assessee company M/s. Nova Controls Pvt. Ltd. which is the flag ship company. 6. We further find from the details that similar commission has been paid to M/s. Toshbro Controls Pvt. Ltd., during the Financial Years 2007-08 to 2014-15 and the percentage of total sales made through the M/s. Toshbro Controls Pvt. Ltd. by the assessee ranges from 58.30% to 78.78% and the commission paid ranges between 11.57% and 18.83% depending upon the percentage of sales to total sales. We find that that the Revenue has accepted the payment of commission in all the earlier years and disallowance was made only during this year and based on an apprehension that the sister concern is making loss and therefore assessee tried to shift the prof its, this fact is not proved beyond doubt. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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