2018 (7) TMI 944 - AT - Income Tax

Appeal partially allowed for Assessment Year 2006-07: Commission expenses disallowance overturned

The Tribunal partly allowed the assessee's appeal for the Assessment Year 2006-07. It overturned the disallowance of commission expenses amounting to Rs. ... Disallowance of commission expenses - addition sustained simply on the basis of statement recorded during survey/search - Held that:- Respectfully following the decision in the case of the assessee’s sister concerns M/s. D.S. Agencies and, M/s. Usha Distributor [2015 (12) TMI 1459 - ITAT MUMBAI] as held Assessing Officer has made addition purely on the basis of statement made during the course of survey u/s 133A, which was later on retracted by the assessee, therefore, we are of the considered view that any addition made on the basis of these statements is without any basis and deserves to be deleted as there is no corroborative materials on record. It seems that addition has been made merely on the basis of statement/presumptive basis and no corroborative material has been brought on record. Presumption cannot take the shape of evidence, however, strong it may be. - Decided in favour of assessee Issues Involved:1. Addition as undisclosed income in respect of commission expenses treated as non-genuine.2. Ad hoc disallowance of various expenses (transport, travelling, and guest house expenses).3. Other/consequential reliefs.Detailed Analysis:1. Addition as Undisclosed Income:The primary issue in this case was the disallowance of commission expenses amounting to Rs. 96,82,058/-. The assessee argued that the CIT(A) erred in upholding this addition based solely on statements made during a survey under section 133A of the Income Tax Act, which were later retracted. The assessee contended that these statements lacked corroborative evidence and were made under coercion. The assessee also highlighted that similar disallowances in the cases of its sister concerns were overturned by the ITAT, Mumbai 'J' Bench.The Tribunal considered the judicial precedents, including the Supreme Court's decision in CIT vs. Khader Khan Son, which held that statements made during surveys under section 133A have no evidentiary value without corroborative material. The Tribunal also noted that the assessee was not afforded the opportunity to cross-examine the third party (Shri Gopal Ramorti), whose statement was used against the assessee. Citing the principle of audi alteram partem (no person should be condemned unheard), the Tribunal found that the addition based solely on the retracted statement and without corroborative evidence was unjustified. Consequently, the Tribunal allowed this ground in favor of the assessee.2. Ad Hoc Disallowance of Various Expenses:The assessee challenged the ad hoc disallowance of Rs. 50,000/- upheld by the CIT(A) out of total disallowances made by the Assessing Officer for transport, sales commission, travelling, transportation charges, and guest house expenses due to lack of supporting evidence. However, since this ground was not pressed during the appeal proceedings, the Tribunal dismissed it as not pressed.3. Other/Consequential Reliefs:This ground was general in nature and did not require specific adjudication.Conclusion:The Tribunal partly allowed the assessee's appeal for the Assessment Year 2006-07, primarily overturning the disallowance of the commission expenses while dismissing the other grounds as not pressed or general in nature. The order was pronounced on July 11, 2018.