×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
16-04-2019, Mushtak Khan, Section 40(a)(ia), 131, Tribunal Indore
The above captioned appeal is filed at the instance of the assessee pertaining to Assessment Year 2010-11 and is directed against the orders of Ld. Commissioner of Income Tax (Appeals)-II (in short ‘Ld.CIT(A)’], Indore dated 25.11.2016 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the ‘Act’) dated 31.10.2012 framed by ITO-4(1), Indore.
2. Assessee has raised following grounds of appeal;
1.The Ld Respondent didn't give proper and reasonable opportunity to substantiate the expenditure of Rs 1010287/- being commission/discount paid to customers and/or through Advocates or registry consultants.
2.The remand report called from the AO is defective and speaks of inaction as it brings nothing new on record, but simply puts the entire blame on the appellant without any basis for frivolous reasons like bad/ illegible handwriting on stamp sale register . Moreover, the report appears to be a copy of the erstwhile AO's story, described in original order of assessment. The AO did not conduct independent inquiry from even a single customer as directed by Hon'ble CIT (A).Hence, directions flouted
3.The additions are solely made on the assumption that assessee had to furnish the name and addresses of the customers which is contrary to the directions given by the CIT(A) to the AO calling remand report and as such the blame of inaction on the part of appellant fails.
4.That the Id responden erred in not appreciating the independent third party confirmations, affidavits and orders of comparable cases etc, which were vital and cogent evidences to justify the expenses claimed. Moreover, Id. AO disbelieved the same without cross verifying it.
5. The Id respondent did not exercise its powers vested u/s 131 & 133(6) of the IT Act, for calling/summoning the customers and parties in spite of specific written request made by the appellant, therefore, the additions are vitiated and bad in law. Moreover, Id. AO failed to consider the business practice of this line of business.
6.The Id respondent failed to see the observation/admission of the Id AO who clearly admits at page no 03 of the Assessment order that according to his findings the fact of payment of portion of commission claimed as deduction by the appellant , appears to be correct but beneficiaries of the same are the said advocates or the registry consultants and not the customers. This vital finding of the AO is also not disbelieved by the Id CIT (A) and on this ground alone, the expense claimed deserves to be allowed u/s 37 (1) of the IT Act.
7.The findings of Id. CIT(A) in holding the stamp sales registers mandatorily to be maintained by the appellant in own hand writing and deposited with the Govt. At the close of every year under the stamp Act r/w licensing rules as a self generated evidence having no evidencery value is contrary to law and incorrect findings.
3. Briefly stated facts as culled out from the records are that the assessee earns income from working as a licensed stamp vendor. Ereturn of income filed on 02.03.2011 declaring income of Rs.5,00,130/-. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. During the
course of assessment proceedings while examining the financial statements Learned Assessing Officer (in short Ld. A.O) observed that the assessee has claimed expenditure for commission payment of Rs.10,10,287/- which was claimed by the assessee as a genuine expenditure paid to registry consultants and clients in order to increase the sale of stamp. After considering statements of the assessee Ld. A.O did not find any merit in the submissions as the alleged commission payments were not supported by any voucher which can authenticate the payment of commission. He accordingly disallowed the commission expenditure of Rs.10,10,287/- and assessed the income at Rs.15,10,417/-.
4. Aggrieved assessee preferred appeal before Ld. CIT(A) but failed to succeed as Ld. CIT(A) after considering the additional evidence filed by the assessee and the remand report received from the Ld. A.O after admission of additional evidence confirmed the disallowance of commission of Rs.10,10,287/- claimed to have been paid to the customers buying the stamp papers observing as follows;
“4. All these grounds are primarily related to disallowance of commission paid to the customers buying stamps of Rs.10,10,287/-. I have gone through the assessment order (already reproduced above) especially the reasons cited by the AO for making the addition. I have also carefully considered the submissions made by the appellant in this regard. The same have already been reproduced above. Since, the major grievance of the appellant was of not providing opportunity to file customer's affidavits with regard to substantiating the claim of the appellant; it was decided to remand the matter to the AO with a direction to provide opportunity to the appellant to file the relevant evidences in its support. I would like to reproduce here the relevant para and the concluding remarks of the AO in the remand report:-
"During the course of appellate proceedings, Hon'ble Commissioner of Income Tax-Il, Indore called for remand report from this office. Accordingly notices were issued to the assessee calling for evidences in support of his claim of commission payment. In response, the assessee filed stamp sale register for the relevant period which contains the details of the purchasers. The assessee was asked to identify the persons and to furnish the details like name & address of the purchasers so the further enquiry could be carried out. But the assessee himself shown his inability to identify the purchasers as the name & address appearing on the stamp sale register was illegible. The assessee was provided numerous opportunities to attend personally and provide the name and address of the customers whose names are appearing in the stamp sale register. Since the writing appearing in the register was illegible the assessee was asked to provide the name and address, but the assessee failed to do so. It is pertinent to mention here that assessee has himself admitted that the entry appearing in the stamp sale register is made by him and it is highly surprising that he himself failed to read the names and address written by him only. The assessee was also asked to furnish the commission payment account, ledgers, etc so that the claim of the assessee could be verified with the purchasers but he also failed to so and gave evasive replies each time. Further the assessee had paid commission to his various customers and as per the provisions of section of 40(a)(ia) TDS
was required to be deducted on payment of commission. Though the assessee has claimed to have made a payment of over Rs. 10 Lacs by way of commission but he failed to maintain individual ledger accounts of recipient of the commission. Further the assessee, has maintained no records