2015 (10) TMI 1519 - HC - Income Tax

Court overturns ITAT decision on commission deduction for Assessment Year 1992-93, emphasizes evidence scrutiny

The Court allowed the appeal filed by the Revenue against the ITAT order for the Assessment Year 1992-93, questioning the deduction claimed on commission ... Deduction on account of commission paid to M/s UNIPLUS INDIA LTD - ITAT allowed the claim - Held that:- The Court is unable to find any justification for the ITAT to have overlooked the factual findings of the AO and the CIT (A) which showed that the story made up by the Assessee of engaging the services of UIL for procuring orders from the Government of Punjab and other parties, was not substantiated. The ITAT surmised that 'There must have been something in the bottom that assessee was able to procure the order and able to sell the machine of ₹ 5.35 lakhs at a sum of ₹ 13.76 lakhs'. This was the phototypesetting machine procured by the controller of printing and stationery, Government of Punjab. It is inconceivable that for making a profit in the sum of ₹ 8 lakhs, the Assessee would agree to pay ₹ 5 lakhs as commission. The order of the ITAT fails to discuss the elaborate reasons given both by the AO and the CIT (A) for concluding that no 'finder services' were shown to have been rendered by the UIL to the Assessee. The only conclusion that the Court can draw from a reading of the impugned order of the ITAT is that it completely overlooked the evidence on record and came to a conclusion that can only be termed as perverse. The Court is, therefore, unable to sustain the impugned order of the ITAT. - Decided in favour of the Revenue Issues Involved:Appeal under Section 260A of the Income Tax Act, 1961 against ITAT order for AY 1992-93 - Deduction claimed on commission paid to M/s UNIPLUS INDIA LTD.Analysis:1. The appeal was filed by the Revenue against the ITAT order for the Assessment Year 1992-93 questioning the deduction claimed on commission paid to M/s UNIPLUS INDIA LTD. The Court framed the question of law regarding the correctness of allowing the deductions claimed by the assessee.2. The assessee, a proprietor of three concerns and a partner in another firm, declared income for the AY in question. During scrutiny, it was found that a commission of Rs. 8,00,000 was paid to M/s UNIPLUS INDIA LTD. The assessee provided documents to support the payment, claiming it was for procuring orders from potential customers.3. The Assessing Officer (AO) disallowed the commission as a business expenditure, finding the evidence fabricated and forged. The Commissioner of Income Tax (Appeals) upheld this decision, stating that no services were rendered by UNIPLUS INDIA LTD. and the story of engaging them was to reduce tax liability.4. However, the ITAT held that the amounts were for business expediency, and UNIPLUS INDIA LTD. had indeed rendered finder services. The Court noted that the ITAT overlooked the factual findings of the AO and CIT (A) which showed the lack of substantiation for engaging UNIPLUS INDIA LTD.5. The Court found the ITAT's conclusion as perverse, as it failed to consider the evidence on record. The Court, therefore, answered the question framed in favor of the Revenue, restoring the orders of the AO and CIT (A) disallowing the claimed deduction.6. In conclusion, the appeal was allowed with no orders as to costs, emphasizing the importance of substantiating business expenditures and the need for proper scrutiny of evidence to support claims for deductions under the Income Tax Act, 1961.