M/S Deep Management & Eco Consultant ... vs Department Of Income Tax

DCIT - 6 v. M/s Deep Management & Eco Kanpur Consultant Pvt. Ltd. 15/212-B, Civil Lines Kanpur TAN/PAN:AABCD0652P (Appellant) (Respondent)

Appellant by: Shri. Punit Kumar, D.R. Respondent by: Shri. Rakesh Garg, Advocate Date of hearing: 17 03 2015 Date of pronouncement: 26 03 2015

ORDER

PER SUNIL KUMAR YADAV:

This appeal is preferred by the Revenue against the order of the ld. CIT(A), inter alia, on the following grounds:

1. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur, has erred in law and on facts by ignoring the facts and findings of the Assessing Officer that assessee company could not furnish the complete addresses of the alleged persons and their confirmations with PAN to whom commission has been paid.

2. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur, has erred in law and on facts by accepting additional evidences or fresh evidences during appellate proceedings whereas the same should not take into account any, evidence produced under sub-rule (1) of Rule 46A unless the Assessing Officer has been allowed a reasonable opportunity.

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3. That the order of Id. Commissioner of Income Tax (Appeals) being erroneous, in law and on facts deserves to be vacated and the order of the Assessing Officer be restored.

2. The main issue involved in this appeal is with regard to the disallowance of commission paid to different persons and brokers from time to time depending upon the business procured through them.

3. The facts in brief borne out from the record are that the assessee is a private limited company engaged in the business of mutual fund from different clients and on the business so procured, Assessee Company earns commission income. The assessee has received a total commission of Rs.2,37,84,016/- as against Rs.1,03,44,625/- which shows a 130% increase in the total business. Against the aforesaid receipt, the assessee has claimed an expenditure of Rs.2,06,81,369/- on account of commission paid to the brokers and different persons from time to time depending upon the business procured through them. The assessee was required to furnish the list of all the persons to whom commission was paid. The details were furnished before the Assessing Officer and on account of incomplete address of certain commission agents, the Assessing Officer has made disallowance of 10% of the total commission paid and made addition of Rs.20,68,140/-, against which an appeal was filed before the ld. CIT(A) and the ld. CIT(A) re-examined the claim in the light of evidence filed by the assessee.

4. The ld. CIT(A) has also made test check and summons were also issued to few persons for confirmation of the transaction to the commission paid. Compliance was received and the same was analyzed by the ld. CIT(A). Being convinced with the explanations and evidence placed before the ld. CIT(A), he deleted the addition.

5. Now the Revenue has filed an appeal before the Tribunal with the submission that new evidence was filed before the ld. CIT(A) and the ld.

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CIT(A) has admitted the same in gross violation of rule 46A of the rules. Therefore, the order passed by the ld. CIT(A) is in gross violation of the provisions of rule 46A of the rules.

6. Per contra, the ld. counsel for the assessee has submitted that no new evidence was filed by the assessee before the ld. CIT(A) and on the available evidence the ld. CIT(A) has made an enquiry by issuing summons to verify the correctness of the payment of commission. Therefore, there is no violation of the provisions of rule 46A of the rules. In order to verify the correct factual position, the ld. D.R. was directed to produce the ld. CIT(A)'s folder and the assessment record. These directions were given first time on 7.1.2015 and thereafter the matter was listed for hearing on 10.2.2015; 19.2.2015; 27.2.2015 and 17.3.2015. Pursuant to the directions of the Tribunal, the ld. D.R. has also written letters to the Assessing Officer and the ld. CIT(A) for production of the ld. CIT(A)'s folder and assessment record. But despite various opportunities granted to the Revenue, neither the ld. CIT(A)'s folder nor the assessment record was produced before the Tribunal. Under these circumstances, we have no option but to accept the findings given by the ld. CIT(A) in his order with regard to the availability of evidence on record.

7. On a careful perusal of the order of the ld. CIT(A), we find that the ld. CIT(A) has categorically mentioned in his order that the Assessing Officer has made ad-hoc disallowance and need was felt to decide the issue on test check basis. The ld. CIT(A) issued summons on test check basis to few persons for the purpose of confirmation of the transaction paid to the commission agents and confirmation received by the ld. CIT(A) was analyzed and being convinced with it, he deleted the addition. The relevant observations of the ld. CIT(A) are extracted hereunder for the sake of reference:-

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"3.4.1 The records were called for. The same are in two volumes and were examined. I find that the assessee had furnished complete details of the commission paid. The details include the name, addresses and the amount of the commission paid. The confirmations from the parties to whom commission had been paid has also been filed alongwith the said list. The same is available on the file of the Assessing Officer. The Assessing Officer has not pointed out any defect or discrepancy in the same. It appears that on receipt of the details and list of commission paid the AO proceeded to complete the assessment. The same is apparent from the order sheet also. The relevant portion of the order sheet is reproduced below.

11.12.2008 To file details/names with complete address of the persons to whom commission has been paid with confirmation.

19.12.2008 Shri HK, FCA attends for the assessee and files letter of date 15.12.2008 with required details which are seen. Books of accounts are also produced which are put to test check. Case discussed with him. "

3.5 Thereafter there is no other entry in the order sheet with reference to the above. The assessment order came to be passed on 19.12.2008 itself. The AO did not even make any further enquiry by issue of any notice u/s 131 or 133(6). Meaning thereby the AO had no doubts about the genuineness of the payments. Once when the details were filed, how the AO has mentioned that inspite of repeated requests the details were not filed is not understandable. Also when the details were filed, and if the AO was not satisfied with the explanation or the details filed the AO was duty bound to make further inquiries before making any disallowance. First the AO called for the details and when the details were provided, failed to make any inquiry and thereafter simply proceeded to make the addition on :-5-:

adhoc basis. The failure on the part of the AO to make further inquiry, itself has made the addition without jurisdiction. This is not done.

3.6 In absence of the verification by the A.O before reaching to the conclusion of addition of commission of Rs.20,68,140/- (@ 10% of the total commission paid on adhoc basis, it was felt necessary to decide the issue further on test check basis before arriving on any decision in the course of appellate proceedings. Accordingly, the office of the undersigned issued summons on test check basis to few persons for the purpose of confirmation of the transactions of the commission paid. The compliances received, in response to the summons issued, have been analysed and found the confirmations of transactions by them. Under these perspectives of confirmations of transactions of payment of commission by the Recipients, the disallowance made by the A.O does not hold good. The A.R of the assessee had already argued before that the confirmations from the persons whom the commission claimed to have been paid have already been filed during the assessment proceedings before the A.O. In spite of confirmations from these persons lying in the assessment record, disallowance of Rs.20,68,1407- has been reached by the A.O on ahoc basis. Therefore, it was needed to have independent verifications of few of them to reach to the decision as per the provisions of rule 46A(4) which has resulted into confirmation of the said transactions. Therefore, disallowance of the commission by the A.O deserves to be deleted. On consideration of the whole perspective of the case and the circumstances, the addition of commission is hereby deleted."

8. Since the Revenue has not brought out any material on record to rebut the findings given by the ld. CIT(A), we had no option but to accept the findings of the ld. CIT(A). Moreover, while adjudicating the issue the ld. CIT(A) has also issued summons to ascertain the correctness of the payment of commission. The confirmation received by the ld. CIT(A) was :-6-:

also analyzed by him and being convinced with the explanations of the assessee, the ld. CIT(A) deleted the addition. Since no infirmity has been pointed out by the ld. D.R. in the order of the ld. CIT(A), we confirm his order. Accordingly, the appeal of the Revenue stands dismissed.

9. In the result, appeal of the Revenue stands dismissed.

Order was pronounced in the open court on the date mentioned on the captioned page.

Sd/- Sd/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED: 26th March, 2015 JJ:1703

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar