IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER ITA No.4275/Del/2018 Assessment Year: 2011-12 Anshul Agarwal Income Tax Officer A-48, Wazirpur Industrial Area Vs Ward 34 (3) Delhi-110052 New Delhi PAN No.ADCPA3590N (APPELLANT) (RESPONDENT) Appellant by Ms. Aakriti Dhawan, Advocate Respondent by Shri S. L. Anuragi, Sr. DR Date of hearing: 30/07/2019 Date of Pronouncement: 27/08/2019 ORDER PER R.K. PANDA, AM: This appeal filed by assessee is directed against order dated 08.03.2018 of CIT(A)-12, New Delhi relating to A. Y. 2011-12. 2. assessee in its various grounds of appeal has challenged order of CIT(A) in confirming addition of Rs.21,35,426/- made by Assessing Officer on account of disallowance of commission. 3. Facts of case, in brief, are that assessee is individual and engaged in business of trading of polyester. She filed her return of income on 30.09.2011 disclosing total income of Rs.13,74,200/-. During course of assessment proceedings Assessing Officer noted that assessee has paid commission of Rs.21,31,426/- to following parties, details of which are as under :- Sumit Goel : Rs.117488/- Parmod Mittal : Rs.436052/- Saurabh Garg (HUF) : Rs.518005/- Suresh Goel :Rs. 141725/- Madhu Basia : Rs.126170/- Anuj Jain : Rs.407359/- Anuj Jain (HUF) : Rs.388667/- 4. He issued notice u/s. 133(6) to which parties confirmed that they have received commission. Assessing Officer noted from records that assessee had not paid any such commission in immediately preceding assessment year whereas assessee has paid substantial commission during this year to various parties. From replies received, from various parties to whom commission was paid, Assessing Officer noted following : i) M/s Anuj Jain & Anuj Jain (HUF) has claimed commission on a/c of sale effected to M/s Ambika Sales (wrongly written as ambika Industries) & M/s Lalani Industries amongst other parties. It was also seen from details of sale furnished by assessee during scrutiny proceedings that assessee Page | 2 had business transactions with both parties in immediately preceding year and no such commission was paid by assessee company to any broker. op Bal shown by assessee against Ambika Sales and M/s Lalani Industries is Rs 9215280/- and Rs - 3137148/- meaning thereby assessee had good business transactions with both of them and it did not require any broker for introduction of parties or effecting sales or obtaining orders. ii) In case of Saurabh Garg (HUF) commission was claimed to have been received for effecting sales to Multipac Industries of Rs.27703996/- and Rs.19387385/-. However, total sales during year to Multipack is 27703996/- only. There is no sale of Rs.19387385/- against any party as per sale details filed with this office. iii) Shri Sumit Goel in his reply has stated that he has obtained orders for assessee from Lalani Industries & other parties. But it has already been stated that M/s Anuj Jain has already claimed that entire sales of Rs 22888593/- has been effected by him and commission @ 9% has been claimed by him. So, it w>as never clear as to how Shri Sumit Goel can again claim commission on same sale. iv) Shri Suresh Goel in his reply has stated that he has received commission for obtaining orders for Ketan Polymers and Shri Ram Traders. 5. In view of above Assessing Officer held that letters received from above parties are not reliable for which he issued letters to various parties to whom sales were claimed to have been effected. Most of letters came back un-served However, replies were received from M/s. Ketan Polymers & M/s. Multipac Industries. M/s. Ketan Polymers stated that transactions with assessee took place directly without involvement of any third party and M/s. Multipac Industries also stated that transaction was made with assessee directly. Assessing Officer, therefore, confronted same to Page | 3 assessee. It was submitted that TDS has been duly deducted from commission so paid and parties have confirmed to have received commission. So far as reply of M/s. Ketan Polymers and M/s. Multipac Industries are concerned it was submitted that it may be due to loss memory for which they might have stated so. 6. However, Assessing Officer was not satisfied with reply given by assessee and rejected same on account of following :- a. Commission is being claimed by more than one broker for obtaining order from same company. b. Commission is being claimed on amount which is much more than sale effected. c. Payment on account of commission has not been made by assessee company during whole year in many cases only TDS has been made. d. Lastly denial of involvement of any third party in transactions made by M/s. Ketan Polymers and M/s. Multipac Industries has made whole story clear. 7. Assessing Officer accordingly made addition of Rs.21,35,426/- to total income of assessee. 8. In appeal Ld. CIT(A) confirmed addition made by Assessing Officer by observing as under :- 6.1 I have gone through assessment order, reasoning advanced by Page | 4 Assessing Officer while disallowing claim of commission and written submission filed by appellant. 6.2 Assessing Officer has disallowed claim of commission by making enquiry from parties to whom sales had purportedly been effected by commission agents. Most of letters issued by Assessing Officer to parties come back un-served and replies were received from M/s. Ketan Polymer, M/s. Multipac Industries both of whom stated that transaction with appellant did not involve any third party and they have made transaction directly with appellant. 6.3 Assessing Officer confronted appellant during course of assessment proceedings with his findings. appellant replied in general, vague terms that parties may have stated that they had direct dealings with appellant due to loss of memory. appellant did not furnish any satisfactory reply to queries of Assessing Officer and replied in general terms that it had made TDS, paid commission by cheque and recipient had declared receipts in their return of income etc. 6.4 I find from replies and written submissions made during course of assessment and appellate proceedings, appellant has not been able to justify business exigency of commission paid by him during year. 6.5 appellant has not been able to bring on record justification for payment of commission nor have purchaser parties confirmed involvement of commission agents. Assessing Officer has also pointed out inconsistencies in claim of commission wherein certain seller parties as per detail furnished in assessment order seem to have accounted for in order booking by more than one agent, for example, Mr. Anuj Jain is supposed to have received commission on entire sales @ .9% whereas Mr. Sumit Goyal is stated to have been paid commission for sales order received from M/s. Lalani Industries and other parties. 6.6 Similarly, there are differences in quantum of sales as per party wise detail of sales furnished and amount on which sales commission was claimed by appellant. 6.7 Keeping in view totality of facts and findings of Assessing Officer, which have not been rebutted by appellant either in assessment or in appellate proceedings, 1 find appellant has not been able to establish claim of commission for rendering services in furtherance of its business as Page | 5 claimed by it. I find there is no nexus between payment of commission and business of appellant in view of which I sustain addition of Rs. 21,35,426/- made by Assessing Officer by disallowing claim of commission. In result, appeal grounds are dismissed and addition made by Assessing Office is sustained. 9. Aggrieved with such order of CIT(A), assessee is in appeal before Tribunal. 10. Ld. Counsel for assessee strongly challenged order of CIT(A) in confirming addition so made by Assessing Officer. He submitted that commission was paid by cheque and due TDS has been deducted from such commission. parties have confirmed to have received such commission from assessee before Assessing Officer. She submitted that Ld. CIT(A) while sustaining disallowance made by Assessing Officer has not applied his independent mind and without appreciating various submissions made by assessee. She submitted that assessments in case of commission recipients have been completed u/s. 143 (3) and therefore, same should not have been doubted by CIT(A). Further Assessing Officer while making addition has not issued any show cause notice to assessee and made addition at his own whims and fancies. She submitted that no meaningful enquiry was conducted by Assessing Officer which is sufficient to strike down additions so made by Assessing Officer. Further various documents filed by assessee on 06.08.2018 on counter were not appreciated by Page | 6 CIT(A) who sustained addition. She accordingly submitted that addition so made by Assessing Officer and sustained by CTI(A) should be deleted. 11. Ld. DR on other hand heavily relied on order of AO and CIT(A). He submitted that Assessing Officer had brought on record clearly as to how assessee has paid commission to various parties during year whereas no such commission was paid in immediately preceding assessment year. Further commission has been claimed by more than 1 broker for obtaining orders from same party. Some of suppliers have denied to have any involvement of any third party. He accordingly submitted that order of CIT(A) being in accordance with law should be upheld. 12. I have considered rival arguments made by both sides, perused orders of AO and CIT(A) and paper book filed on behalf of assessee. I find Assessing Officer in instant case disallowed commission of Rs.21,35,426/- paid by assessee on ground that such commission has been claimed by more than 1 broker for obtaining orders from same company. In certain cases commission has been claimed on amount which is much more than sales effected. Further some of parties have denied to involvement of any third party. Assessing Officer has further noted that although TDS has been deducted but commission has not been paid during year. He, therefore, Page | 7 disbelieved commission so paid during year since no such commission was paid during preceding assessment year. It is submission of Ld. Counsel for assessee that payment has been made through account payee cheque after deduction of TDS and parties have confirmed to have received commission from assessee. It is also her submission that various details furnished by assessee were not properly appreciated either by Assessing Officer or by CIT(A). It is also her submission that neither CIT(A) nor Assessing Officer has properly considered various submissions made by assessee from time to time. It is settled proposition of law that for claiming any expenditure as allowable deduction onus is always on assessee to substantiate with evidence to satisfaction of Assessing Officer. However, in instant case Assessing Officer had made certain observations which according to him could not be explained satisfactorily by assessee. Considering totality of facts of case and in interest of justice I deem it proper to restore issue to file of Assessing Officer with direction to give one more opportunity to assessee to substantiate allowability of such commission and decide issue as per fact and law. I hold and direct accordingly. grounds raised by assessee are accordingly allowed for statistical purposes. 13. In result, appeal filed by assessee is allowed for statistical purpose. Page | 8 Order pronounced in open court on 27.08.2019. Sd/- (R.K PANDA) ACCOUNTANT MEMBER *Neha* Date:- 27.08.2019 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date of dictation Date on which typed draft is placed before dictating Member Date on which approved draft comes to Sr.PS/PS Date on which fair order is placed before Dictating Member for Pronouncement Date on which fair order comes back to Sr. PS/ PS 27.08.2019 Date on which final order is uploaded on website of 27.08.2019 ITAT Date on which file goes to Bench Clerk Date on which file goes to Head Clerk. date on which file goes to Assistant Registrar for signature on order Date of dispatch of Order Page | 9 Anshul Agarwal v. Income-tax Officer Ward 34(3), New Delhi