2019 (2) TMI 1836 - AT - Income Tax

Tribunal upholds disallowance of payments to related parties stressing genuine transactions & evidence

Ashok Raghunath Mane Versus ACIT, Circle-9, Pune

Ashok Raghunath Mane Versus ACIT, Circle-9, Pune - TMI Issues Involved:1. Confirmation of disallowance of Rs. 1,05,64,282/- paid to Agarwal Brothers.2. Confirmation of disallowance of commission expense of Rs. 8,80,000/- paid to the assessee's wife.Issue-wise Detailed Analysis:1. Confirmation of Disallowance of Rs. 1,05,64,282/- Paid to Agarwal Brothers:The assessee, a dealer in lands, filed a return declaring total income of Rs. 74,46,700/- and claimed a deduction for Rs. 1,28,44,282/- paid as commission, including Rs. 1,05,64,282/- to Agarwal Brothers. The assessee later clarified that this amount was not commission but their share in the sale consideration. The Government of Maharashtra had a scheme for acquiring land from farmers and allotting them 12.5% of developed land. The assessee had agreements with the Sane family and Sh. Subhash Anand to transfer their 12.5% developed land to him at predetermined prices. The assessee then agreed to transfer 50% of this land to Agarwal Brothers at Rs. 335/- per sq. ft. However, the AO observed that the MOUs between the assessee and Agarwal Brothers were aimed at shifting the assessee’s profit to them and treated the amount as 'Commission,' disallowing it. The CIT(A) sustained this addition.Upon review, the Tribunal noted that the assessee's transactions with the Sane family and Sh. Subhash Anand were undisputed. However, the alleged transfer of 50% share to Agarwal Brothers was found to be dubious. The Tribunal examined the sequence of events and MOUs, noting inconsistencies and lack of genuine financial transactions between the assessee and Agarwal Brothers. The Tribunal cited the Supreme Court's decision in Sumati Dayal vs. CIT, emphasizing that the apparent must be considered real until proven otherwise and that human probabilities should guide the inference.The Tribunal found that the MOU dated 01.09.2008, just one day before the actual sale, was not genuine. The assessee's claim of financial difficulties was not supported by evidence of actual payments received from Agarwal Brothers. The Tribunal concluded that the entire sale consideration of Rs. 3.64 crore belonged to the assessee and upheld the disallowance of Rs. 1,05,64,282/-.2. Confirmation of Disallowance of Commission Expense of Rs. 8,80,000/- Paid to the Assessee's Wife:The assessee claimed a deduction of Rs. 9 lakh as commission paid to his son and Rs. 8,80,000/- to his wife, Ms. Chhaya Mane. While the AO allowed the deduction for the commission paid to the son, the payment to the wife was disallowed due to lack of evidence of services rendered. The CIT(A) upheld this disallowance.The Tribunal observed that the assessee failed to provide specific evidence of services rendered by Ms. Chhaya Mane. General submissions about her role in convincing family members and bringing them to the registration office were not substantiated with concrete evidence. Consequently, the Tribunal upheld the addition of Rs. 8,80,000/-.Conclusion:The appeal was dismissed, with the Tribunal upholding the disallowance of Rs. 1,05,64,282/- paid to Agarwal Brothers and Rs. 8,80,000/- paid as commission to the assessee's wife. The judgment emphasized the importance of genuine financial transactions and adequate evidence to substantiate claims for deductions.