B. GUPTA, A.M. These two appeals by Revenue raising identical grounds may be conveniently consolidated and disposed of by common order. 2 . In asst. yr. 1981-82 assessee firm carrying on business of purchase and sale of Mill Stores and Chemicals and distributorship of Fenner V' belts in certain specified territories had paid brokerage and commission amounting to Rs. 24,814. Its turn over in that year amounted to Rs. 84,77,156. Similarly, in asst. yr. 1982-83 brokerage and commission amounting to Rs. 16,318 had been paid when its turn over was of Rs. 93,29,606. According to IAC (A) expenditure by way of brokerage and commission was not verifiable. Further according to him, assessee had failed to prove by evidence that payments of brokerage and commission had been made for purposes of business. He therefore disallowed estimated sums of Rs. 12,000 in each of asst. yrs. 1981-82 and 1982-83. When matter went up in appeal before CIT(A) he found that brokerage and commission similarly paid in preceding assessment years had never been disallowed. He also examined some of internal vouchers singed by recipients of brokerage and commission and found that commission varying between 3to 5 per cent if sales had been paid to them. CIT(A) also noted that on reverse of each internal voucher details of sale bills name of purchaser bill amount and brokerage paid had been duly entered. After noticing these facts and having regard to past history of assessee CIT (A) held that there was no justification for disallowing part of expenditure. 3 . It is in background of these facts, that Revenue is in appeal contending that burden to prove that payment had been made by way of commission and brokerage having not been discharged and identity of recipients having not been established by assessee CIT (A) had no justification for vacating disallowance made by IAC(A) in asst. yrs. 1981-82 and 1982-83 Mr. R.N. Bara Id. Sr. DR has contended that evidence i n support of expenditure having not been furnished before IAC(A), CIT(A) has no justification in entertaining fresh evidence and vacating disallowance made by IAC(A). On other hand, Shri Anurag Chopra, Id. Authorised counsel of assessee respondent has supported orders passed by CIT(A). 4. We have considered rival submissions. Having regard to extent of turnover effected by assessee and past practice, we are satisfied that there was no scope for disallowing any party of expenses on brokerage and commission claimed in two assessment years. In asst. yr. 1980-81, when commission and brokerage amounting to over Rs, 39,000 had been paid same had been allowed by assessing officer. In two assessment years which are under appeal turnover had increased considerably while expenditure on brokerage and commission had inversely declined. It may be that having regard to nature of expenditure incurred assessee was not able to produce recipients by since internal vouchers contained necessary details which were verified by CIT (A), we would agree with latter that expenditure as claimed in two assessment years on brokerage years on brokerage and commission was wholly allowable. 5 . There is no substances in representation made by Id. DR that CIT (A) had entertained some new evidence which was not produced before assessing officer. In fact, all books of accounts had been produced before assessing officer and disallowance had been made by him on ground that evidence produced was not convincing. According to us, evidence which was available before assessing officer and which had been once again produced before CIT(A) was adequate to establish that expenses claimed by assessee on brokerage and commission had in fact been incurred. 6. In conclusion, we hold that expenditure as claimed by assessee was allowable as business expenditure in two assessment years. appeals filed by Revenue fail. 19th March, 1986 S.S. MEHRA, J.M. I have, benefit of having gone through detailed order prepared by my Id. Brother but regret my inability to agree with conclusion arrived at. In this appeal we are concerned with deletion of addition of Rs, 12,000 made out of brokerage and commission said to have been paid by assessee for augmenting its business. Id. ITO made addition with following observations : "4. While scrutinising books of accounts of assessee, it was found that during this year brokerage and commission of Rs. 24,814 was paid to various persons and commission received from principal was Rs. 11,703. assessee was asked to justify claim of brokerage made. assessee admitted position that there is no written agreement for appointment of persons to whom brokerage has been paid nor could he produce before me convincing explanation regarding nexus of commission paid with business and also nature of services rendered by persons to whom commission was paid. assessee only made submission that commission is nearly paid @ 10 per cent to persons who procure some business for firm. Assessee also admitted that it is not possible to produce all parties to whom commission has been paid was able to provide full information regarding whereabouts and addresses of these person. In view of these facts claim of brokerage made does not appear to be fully justified nor same appears to have been incurred wholly or inclusively for purpose of business. It has been held in various decisions that factors atleast had first to be proved by assessee and they are (i) that amount had been expended by assessee and (ii) that payments had been made for services rendered. After establishing both these factors assessee has still to satisfy test that expenditure had been incurred wholly or exclusively for purpose of business. But if either preliminary factors had been proved and if no payment can be made at all or if payment was made which was not Correlated to any services rendered to assessee, question of deciding whether commercial expediency would sanction claim that money had been expended wholly or inclusively for business of assessee could not arise at all for consideration. Madura knitting Co. vs. CIT (1956) 30 ITR 764 at 797 (Mad). In view of aforesaid discussion and also keeping in view facts of In view of aforesaid discussion and also keeping in view facts of assessee's case where assessee is not able to correlate sales and commission paid thereof to different parties for services rendered and his inability to produce all parties assessee does not have justification for claiming brokerage debited in his accounts. From ever onus of discharging burden of proof is entirely on assessee and as that has not been discharged commission paid is not allowable in full. I therefore estimate basis disallowed claim of assessee at Rs. 12,000". 2. ld. CIT(A) Agra deleted addition observing that he could not find any justification for part disallowance of amount. revenue came before us against said finding. 3. Submissions made on behalf of parties have been heard. Some of admitted facts in this case are: (a) that there was no agreement between assessee and so called commission agents or brokers, (b) there was no evidence that any service by commission agents and brokers was rendered to assessee in connection with its business, (c) no nexus was established between payment and service, (d) assessee was not able to disclose full particulars about arrangement, (e) assessee was not able to disclose details about commission agents and brokers, (f) assessee also did not establish that similar commission/brokerage has also been paid by other persons similarly placed, (g) assessee was also not in position to produce so called commission agents and brokers before ld. ITO to establish identify, service and receipt and, (h) assessee also did not request ld. ITO to issue summons to said parties. 4 . disallowance was made in those circumstances. ld. CIT(A) deleted disallowance without meeting even part of reasons employed by ld. ITO for making addition. ld. CIT(A)'s only reason for deleting addition was that ld. ITO has not made addition was of entire amount said to have been paid by assessee by way of commission and brokerage. This is hardly any reason for interfering with finding. ld. CIT(A) in fact should have required ld. ITO to record statements of persons who are said to have received commission or brokerage as before us and so also it is said to have been argued earlier that names of commission agents and brokers were mentioned in receipts, copies existing with assessee. ld. CIT(A) in fact on basis of those receipts should have directed ld. ITO to procure presence of parties and ascertain correct state of affairs about services rendered and payments received. This was least which was supposed to have been done by ld. CIT(A). He in fact without meeting reasons of ld. ITO unjustifiably disturbed finding. That does not appear to be justified. 5. Before us on behalf of assessee it was vehemently and emphatically argued that names of parties to whom commission or brokerage was paid, appeared in copies of bills available with assessee. On our specific query it was submitted on behalf of assessee that on basis of those receipts persons should have been examined by ld. ITO. We further add that in case ld. ITO failed to do so at least ld. CIT(A) instead of deleting addition should have in fact required ld. ITO to ascertain correct position after recording statements. That would have been in our view proper thing to do. We are therefore satisfied that deletion of addition was not justified and matters require to be set-aside to file of ld. ITO for recording statements of persons whose names are said to be appearing in copies of bills and who are stated to have received payment by way of commission etc. We in these circumstances, set aside impugned finding and restore matter to file of ld. ITO for doing needful as mentioned herein above. 21st March, , 1986 Since we have differed in present matter, record is being placed before President, Income tax Tribunal for proceeding further in matter in accordance with law. point of difference is as under: "Whether on facts and in circumstances of case, appeals should have been allowed or matters should have been set aside to file of ld. assessing officer for statements". 7th November , 1986 G. KRISHNAMURTHY, V.P. In these appeals heard by Delhi Bench 'C' there was difference of opinion between my ld. brothers which was referred to me by President of Tribunal for my opinion, under s. 255(4) of ITA, 1961. point of difference is : "Whether on facts and in circumstances of case appeals should have been set aside to file of ld. Assessing officer for statements and decision." 2. relevant facts are: assessee is firm carrying on business of purchase and sale of mill, stores and chemicals. It also holds distributorship of Fenner V. Belts in certain specified territories. In assessment year under appeal 1981-82 its turnover amounted to about Rs. 84,77 lacs. In asst. yr. 1982-83 its turnover had gone up to Rs. 93.29 lacs. assessee firm claimed that it was usual and normal to pay brokerage and commission in order to push up sales and that in asst. yr. 1981-82 Rs. 16,319 and in asst. yr. 1921-22 sum of Rs. 24,214 was paid as and by way of brokerage and commission. These amounts were claimed as deductions in computing incomes of those two assessment years. IAC (Asst.) observed that this expenditure was not verifiable. He was also of opinion that payment of brokerage and commission did not appear to have been made for purpose of business. However he did not disallow whole of amount of commission but disallowed only Rs. 12,000 in each of relevant years. When matter came on appeal before Commissioner(A) he noticed that brokerage and commission similarly paid in preceeding assessment years were always allowed and never disallowed. He also found that assessee maintained some internal vouchers signed by recipients of brokerage and commission on back of which vouchers, details in regard to sales in respect of this brokerage and commission was paid were entered. He also noticed that rate of commission varied between 3-5 per cent of sales. On these facts he held that there was no justification for disallowance of any part of expenditure. revenue was dissatisfied with conclusion reached by Commissioner(A) and, in further appeal filed by it before Tribunal, it contended that burden to prove that payments were mainly made by way of brokerage and commission was on assessee and that burden was not discharged. Not even identity of recipient was established by Commissioner(A) was therefore not justified in deleting disallowances made by Inspecting Asstt. Commissioner. It was also contended that evidence that was relied upon by Commissioner(A) was not produced before IAC (Asstt.) and that Commissioner(A) had no jurisdiction or justification in entertaining fresh evidence to vacate disallowances. After going through evidence and considering arguments Bench could not come to agreed conclusion. ld. Accountant Member, who proposed main order of Bench came to conclusion that on evidence considered by Commissioner(A) and past history of case, there was no justification for disallowance of brokerage and commission. He also noticed that payment of commission in years under appeal was comparatively less than commission paid in earlier years even though turnovers in years under appeal had enormously increased. Merely on ground that recipients were not produced it is not open to Revenue to disbelieve internal vouchers and hold against assessee even though internal voucher furnished all necessary details. ld. Accountant Member also dispelled argument of ld. Deptl. Representative that Commissioner(A) had entertained new evidence which was not produced before t h e assessing officer. But ld. Judicial Member disagreed with view expressed by ld. Accountant Member. According to him following are admitted facts in this case: "(a) that there was no agreement between assessee and so called commission agents or brokers, (b) there was no evidence that any service by commission agents and brokers was rendered to assessee in connection with its business, (c) no nexus was established between payment and service, (d) assessee was not able to disclose full particulars about arrangement, (e) assessee was not in position to disclose details about commission agents and brokers, (f) assessee also did not establish that similar commission/brokerage has also been paid by other persons similarly placed, (g) assessee was also not in position to produce so called commission agents and brokers before ld. ITO to establish identity, service and receipt, and (h) assessee also did not request ld. ITO to issue summons to said parties" According to him Commissioner(A) deleted disallowances without meeting even part of reasons furnished by IAC for making additions. He considered that Commissioner(A) should have required assessee to produce recipients before IAC to enable him to record statements and only then questions of allowance should have been considered. Commissioner(A) not having adopted this procedure according to ld. Judicial Member, committed mistake in deleting additions in toto. According to him allowance of this commissions either in past or disallowance of commission in part, did not make any difference. 3 . Hence difference of opinion between my ld. brothers which was referred to me. I have heard ld. Counsel for assessee as well as departmental representative, perused records and I am of view that on facts of this case, department did not make out case for disallowance of brokerage and commission. First and foremost factum that payment of brokerage and commission was necessary for purpose of business was recognised by department in past by allowing commission in full and in years under appeal by making part allowance. When IAC (Asst.) pointed out that assessee did not produce any evidence to show nature of service rendered to entitle commission to be allowed as deduction, entire commission should have been disallowed. That was not done in this case. Allowance of part of commission on ad hoc basis would prove that payment of brokerage and commission was necessary for purpose of business and services meriting payment of brokerage and commission were rendered. There cannot therefore be any argument from side of Revenue that there was no proof of any services having been rendered. Thus it would only mean that payment of commissions though necessary for purpose of business was found to be excessive. Unless it was implication held that payment of commission was excessive, part of amount could not be disallowed. Part disallowance would therefore mean that payment of commission was either excessive or to extent disallowed no proof of services was produced. Now in this state of record, what actually would be done by IAC if matter had been remitted by Commissioner(A) to him for fresh examination. Since disallowance was on estimate basis, IAC has no means to know, which part of payment was held to be not proved. Whom would he examine? There was no need to examine all of them because there was part allowance. In this state of doubt, I see no useful purpose would be served by sending case back to IAC for examination. On internal vouchers maintained by assessee not only signatures of recipients were obtained but full details, which are necessary to establish genuineness of payment of commission, was recorded. These details would serve as proper voucher in support of payment of brokerage and commission. Thus, when production of parties for examination is rendered impossible by making part disallowance when full details are available to hold that payment of commission in earlier years, I see no reason why further exercise of sending case back to IAC (Asst.) for examination should be resorted to. That exercise would have become necessary only if entire commission was disallowed or commission with reference to certain payments was disallowed but not in case where part disallowance was made on estimate basis without reference to any specific payment. 4. I am therefore of opinion that on facts of this case, assessee has proved beyond doubt necessity for payment of brokerage and commission, factum of services, mode and method of payment of commission and vouchers in respect of payments. I therefore agree with view expressed by ld. Accountant Member. 5 . matter will now go back to regular Bench. Which heard appeals, for decision according to majority opinion. *** INSPECTING ASSISTANT COMMISSIONER v. MILLS STORES SYNDICATE