2013 (7) TMI 1032 - AT - Income Tax

Partnership firm appeal dismissed for commission payments to agents lacking evidence.

The appeal by the partnership firm, engaged in trading minerals, challenging the disallowance of commission payments to agents was dismissed. The ... - Issues Involved:1. Disallowance of expenditure claimed towards payment of commission to agents.Summary:Disallowance of Expenditure Claimed Towards Payment of Commission to Agents:The appeal by the assessee, a partnership firm engaged in trading minerals, contested the disallowance of commission payments made to agents. The Assessing Officer (AO) scrutinized the commission payments and required the assessee to provide details of services rendered, clients arranged, agreements, correspondence, and the basis of commission payments. The assessee failed to produce these documents, leading the AO to summon the partner u/s 131 of the Act. The AO inferred from the partner's statement that there were no written agreements or correspondence, and the assessee could not identify customers introduced by the agents or specify sales tonnage related to each agent. The AO also recorded statements from the commission agents, who could not provide definitive lists of customers or sales quantities and claimed inconsistent services.The AO concluded that the payments were not laid out wholly and exclusively for business purposes, disallowing the commission payments and adding them to the returned income. The CIT(A) upheld the AO's decision, noting the absence of documentary evidence and inconsistencies in the agents' statements. The CIT(A) found that the assessee's claim of collective customer introduction was illogical and that the agents could not substantiate their services.The assessee argued that commission payments were essential for entering the market, were made through banking channels after TDS, and were confirmed by the agents. The assessee cited trade practices and previous judicial decisions to support their claim. However, the CIT(A) dismissed these arguments, emphasizing the lack of evidence and the implausibility of the agents' claims.The ITAT, after reviewing submissions and evidence, agreed with the lower authorities. It noted the absence of agreements, correspondence, and credible evidence of services rendered by the agents. The ITAT referenced similar cases where disallowance of commission payments was upheld due to lack of evidence. Consequently, the ITAT upheld the disallowance of commission payments, dismissing the appeal.Order:The appeal of the assessee is dismissed. Order pronounced in the open court on 15th July, 2013.