×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.
The above captioned appeal pertaining to the Assessment Year 2011-12 is filed at the instance of the Revenue for Assessment Year 2011-12 is directed against the order of Ld. CIT(Appeals)-I (in short ‘CIT(A)’), Indore dated 18.05.2017 which is arising out of the order u/s 143(3) of the Income Tax Act 1961 (In short the ‘Act’) dated 26.02.2014 framed by DCIT-5(1), Indore.
2. Revenue has raised following grounds of appeal;
1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.67,00,000/- on account of commission expenses by ignoring the findings of Assessing Officer in the assessment order.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.43,27,751/- on account of various expenses by ignoring the findings of Assessing Officer in the assessment order.
3. The appellant craves leave to add, to alter, amend, modify, substitute, delete and or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arise
3. Brief facts of the case as culled out from the records are that the assessee is a private limited company carrying out the business as dealer of electronic goods. E-return of income filed on 8.9.2011 declaring income of Rs.1,14,58,020/-. Case selected for scrutiny followed by serving of notices u/s 143(2) and 142(1) of the Act. During the course of assessment proceedings Ld. A.O while examining the commission expenses observed that a sum of Rs.67,00,000/- was paid to various persons covered under the category of relatives u/s 40A(2)(b) of the Act. It was submitted by the assessee that commission paid to employees is directly related to the extra efforts made by them to increase the sales by around 39% in comparison to the earlier years. Ld. A.O was not convinced and did not accepted the genuineness of the commission expenses merely for the failure on the part of the assessee to produce any of the commission payee and disallowed the commission expenses of Rs.67,00,000/-. Ld. A.O also on examining the details of various expenditure relating to general publicity, show room, Diwali festival, insurance disallowed the same as the assessee failed to produce vouchers before him. Accordingly after making disallowance for commission expenses at Rs.67,00,000/- and disallowance of various expenses at Rs.45,90,961/-, income assessed at Rs.2,27,48,981/-.
4. Aggrieved assessee preferred appeal before Ld. CIT(A) and succeeded.
5. Now the revenue is in appeal before the Tribunal challenging the additions/disallowance deleted by Ld. CIT(A).
6. We will first take up Ground No.1 relating to disallowance of commission expenses of Rs.67,00,000/- deleted by Ld. CIT(A). Ld. Counsel for the assessee referring to the detailed submission filed before the lower authorities as well as various documentary evidences placed in the paper book submitted that the commission expenses has been incurred after making due compliances of the necessary formalities which included passing of the Board resolutions, specific work assigned to each of the payee and commission calculated on the basis of sales target achieved. He also submitted that payment of commission has been made through account payee cheque after deducting tax at source and duly offered to tax by respective payees, who were subject to maximum marginal rate of taxation similar to that of the assessee and therefore there cannot be a case of providing accommodation commission in the garb of reducing the tax liability. He further submitted that in the subsequent years the claim of the commission paid to same payees has been allowed by the Ld. A.O in the assessment proceedings and no doubt has been raised on the genuineness of the transaction.
7. Per contra Ld. Departmental Representative vehemently argued and supporting the orders of Ld. A.O submitting that the payment have been made to relatives/directors of the company which are covered under the provisions of Section 40A(2)(b) of the Act and the Ld. A.O has rightly disallowed the expenses.
8. We have heard rival contentions and perused the records placed before us. Revenue’s grievance in Ground No.1 is against the finding of Ld. CIT(A) deleting the disallowance of commission expenses of Rs.67,00,000/-. We observe that the assessee is a dealer in electronic goods and running show rooms at various places across Madhya Pradesh for sale of electronic goods. During the year under appeal commission was paid to the following persons;
9. All the above persons are either Directors or relatives/share holders of the company and falls under the category of relative u/s 40A(2)(b) of the Act. We find that the Ld. CIT(A) deleted the impugned disallowance by giving following finding of fact;