IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA No. 1228/Del/2018 Assessment Year: 2014-15 Ritu Taneja vs ITO House No. 409, Imperial Block, Ward 2(2) Suppertech Estate, Ghaziabad. Sector-9, Vaishali, Ghaziabad. PAN No. AIVPT8395A APPELLANT RESPONDENT Assessee by Shri R.K. Gaur, CA Revenue by Shri S.L. Anuragi, Sr. DR Date of Hearing 21.08.2019 Date of Pronouncement 02.09.2019 ORDER This appeal by assessee has been directed against order of Ld. CIT(Appeals)-Ghaziabad dated 14/12/2017 for AY 2014-15, challenging addition of Rs. 20 lakhs on account of commission paid and Rs. 10,34,290/- on account of salary. 2. Briefly facts of case are that assessee is individual and filed return of income at Rs. 8,78,820/-. assessee is proprietor of M/s Loan Art and has shown income from providing home loans of various banking and non banking companies to 2 ITA No. 1228/Del/2018 different customers against commission income. Net profit has been shown at Rs. 9,60,362/- against total commission receipt of Rs. 1,54,37,816/- which comes to 6% of gross commission receipts. It was further observed that there is steep decline from 11% to 6% in net profit shown by assessee as compared to previous assessment year. AO noted that in this line of business net profit increases with increase in turnover, since basic establishment expenses have to be incurred even if there is low turnover. From perusal of profit and loss account, it was found that assessee has claimed very high commission expenses and salary expenses to tune of Rs. 63,52,632/- and Rs. 51,71,448/- respectively. commission payable at end of year was of Rs. 18 lakhs. AO asked assessee to file complete details of persons to whom commission has been paid along with their ITR, computation of income, confirmation and details of client and work against which commission has been paid and to produce bills and vouchers. Assessee was also required to produce persons to whom commission has been shown payable at end of year, in order to substantiate genuineness of expenses claimed by assessee along with bills and vouchers and agreement with them. assessee filed list of commission expenses which contained name of parties, TDS deduction, Amount of Commission paid and PAN Number. AO noted that commission expenses shown from serial no. 18 to 25 of list at page 3 of assessment order are in round figures. Out of which name appearing at serial no. 18 i.e. Shri 3 ITA No. 1228/Del/2018 Amit Mehta is husband of assessee. As per ledger account, assessee has paid payable amount to these parties in subsequent year. assessee also filed copy of ITR and computation of income in respect of 7 persons. perusal of address shows that most of 7 persons belong to same family and at same address. Even in some of cases instead of commission, interest has been shown. assessee did not furnish details regarding agreement and what services have been rendered for making commission payment. assessee also could not produce these persons to whom commission has been paid. AO also noted that burden is upon assessee to prove commission payable are genuine and is required to produce such persons for examination. AO also noted that even TDS return filed for fourth quarter revealed that TDS has not been paid on time. AO after considering explanation of assessee noted that commission expenses has been booked on 31.03.2014 and have bee shown payable only at fag end of next financial year. perusal of addresses shows most of them belong to same family and in some of cases interest has been paid instead of commission. assessee did not produce any commission agreement etc. despite giving opportunity. assessee failed to discharge onus to prove commission payable shown outstanding as liability in balance sheet and also failed to produce any of such persons for examination. TDS is also not paid in time. AO, accordingly, disallowed commission 4 ITA No. 1228/Del/2018 payable to extent of Rs. 20 lakhs which includes Rs. 18 lakhs commission payable and Rs. 2 lakh at TDS. 3. AO also found that assessee has paid salary expenses of Rs. 51,71,448/- during assessment year under appeal. In earlier year assessee has paid salary expenses of Rs. 16,48,128/- against gross commission of Rs. 72,36,680/-. assessee was asked to produce list of employees, their designation and details of salary paid but same could not be substantiated through any evidence. assessee failed to produce attendance register and receipts given by employees against payment of salary. AO, accordingly, disallowed 30% out of salary paid and made addition of Rs. 15,51,434/- . 4. Both additions were challenged before Ld. CIT(A). Ld. CIT(A) partly allowed appeal of assessee. findings of CIT(A) in para 5.1 of appellate order is reproduced as under: 5.1 Ground nos. 1 & 2: appellant has challenged disallowance of commission and salary of Rs. 15,51,434/- and Rs. 20,00,000/- respectively. During course of appellate proceedings it has been argued that these expenses are business expenses allowable u/s 37. Examination of facts reveals that AO examined expenses considering steep decline in profit from 11% in previous year to 6% during year and AO observed that commission has been paid to some person covered by 40A(2)(b) and expenses were found to be payable as on 31.03.2014. In respect of commission documents furnished by appellant during assessment proceedings as well as during appellate proceedings did not prove services rendered by seven persons. Merely deduction of TDS does not justify that expenditure has not incurred 5 ITA No. 1228/Del/2018 wholly and exclusively for business purpose. Similarly in case of salary appellant failed to furnish details of employees, their complete address and their assessment particulars by specific document such as attendance register or receipts. Besides that AO noted that considerable part of salary was made in cash. However, estimate of disallowance of 30% of unverifiable expenses on account of salary of Rs. 51,71,448/- is found to be on higher side. disallowance is restricted to 20% of total expenses of Rs. 51,71,448/- confirming addition of Rs. 10,34,290/- giving partial relief to appellant. Thus, these grounds of appeal are partly allowed. 5. I have heard Ld. Representatives of both parties. Ld. Counsel for assessee reiterated submission made before authorities below and submitted that assessee received references from various persons for business to whom commission has been paid on which TDS has been deducted and paid to Government Department. assessee also paid salary to 38 employees for business purposes. Therefore, both additions should be deleted. 6. On other hand, Ld. DR relied upon orders of authorities below. 7. I have considered rival submissions. It is not in dispute that in assessment year under appeal assessee received gross commission of Rs. 1.54 crores. In preceding assessment year assessee received gross commission of Rs. 72,36,680/-. AO noted that there is steep decline in gross profit because it has fallen from 11% to 6% in assessment year under appeal as 6 ITA No. 1228/Del/2018 compared to earlier years. AO found that expenses have been increased as compared to commission received. assessee has shown Rs. 18 lakhs as commission payable at end of year and Rs. 2 lakhs as TDS on same which was paid belatedly. assessee could not produce those persons to whom commission was shown payable at end of year. assessee failed to produce any evidence as to what services those commission agents have rendered for business of assessee. amounts have been paid to them subsequently. These persons are related persons with assessee and even one of person is husband of assessee. Since assessee failed to produce relevant evidences and also failed to produce such persons for examination before AO, therefore, onus upon assessee to prove genuine commission was payable have not been discharged by assessee. Merely because assessee dedycted TDS would not justified that expenses have been incurred wholly and exclusively for purpose of business. Thus, commission payable has been rightly disallowed by authorities below. assessee in respect of salary paid has failed to provide complete details before AO as well as failed to produce attendance register and receipts given by employees against payment of salary. Ld. CIT(A) has already given sufficient benefit to assessee. It may be noted here that assessee has received gross commission of Rs. 1.54 crores against which net profit has been shown at Rs. 9,60,362/- and return of income has been filed at Rs. 8,78,820/-. It, therefore, appears that assessee has parted 7 ITA No. 1228/Del/2018 with substantial gross commission to others and has earned net profit at meager figure. assessee could not justify fall in profit rate in assessment year under appeal to satisfaction of authorities below. No prudent person who has earned commission in crore would pay such amount to others to earn only Rs. 8.78 lakhs. history of assessee noted above clearly show that assessee failed to produce any documentary evidences before authorities below to justify commission payable and salary to above extent. In absence of production of such persons for examination before AO also cast doubt in explanation of assessee that expenses have been incurred wholly and exclusively for purpose of business of assessee. It would, therefore, show that assessee has inflated expenses just to reduce taxable income. No interference is required in matter. I, therefore, confirm order of Ld. CIT(A) and dismissed appeal of assessee. 8. In result, appeal of assessee is dismissed. Order pronounced in open Court. Sd/- (BHAVNESH SAINI) JUDICIAL MEMBER Dated: 02/09/2019 *Kavita Arora 8 ITA No. 1228/Del/2018 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI Date of dictation 23.08.2019 Date on which typed draft is placed before dictating 26.08.2019 Member Date on which typed draft is placed before Other Member 02.09.2019 Date on which approved draft comes to Sr. PS/PS 02.09.2019 Date on which fair order is placed before Dictating Member 02.09.2019 for pronouncement Date on which fair order comes back to Sr. PS/PS 02.09.2019 Date on which final order is uploaded on website of ITAT 02.09.2019 Date on which file goes to Bench Clerk 03.09.2019 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 9 ITA No. 1228/Del/2018 Ritu Taneja v. ITO Ward 2(2) Ghaziabad