2019 (7) TMI 702 - AT - Income Tax

Tribunal overturns decision on commission payments, citing lack of evidence.

The Tribunal set aside the CIT(A)'s decision and allowed the assessee's appeal regarding the addition made by the AO for commission payments to M/s. Wise ... Addition on account of payment of commission - bogus transactions - CIT(A) held that submissions of PAN card and registration certificate are not sufficient to prove the genuineness of commission payment. The assessee did not take steps in bringing the concerned persons of M/s. Wise Agencies Pvt.Ltd. for verification - no reply in response to the notice u/s 133(6) HELD THAT:- Fact remains admitted that the assessee filed all details relating to the transactions that have taken place with M/s. Wise Agencies Pvt.Ltd. before the AO. Even the resolution passed by the Directors to strike off its name off register before the Registrar of companies. Form FTE placed, an application seeking striking off was filed on 02.11.2011 and it is clearly shows that was well before date of assessment order. Not disputed that all the payments were paid through banking channel i.e. Account Payee cheques by deducting TDS evidence. Supporting the agreement between the assessee and M/s. Wise Agencies Pvt.Ltd. clearly shows that an agreement entered in respect of telecom companies namely Airtel, Aircel, Tata, Vodafone, Reliance and power cable, CESC and others by the assessee as first party and the second party therein i.e. M/s. Wise Agencies Pvt.Ltd. shall arrange permission and to help and resolve any problem arising in the site work. The first party i.e. the assessee agreed to pay 5% as commission for providing the services by the second party. Therefore, it is clear that there was an agreement between the assessee with M/s. Wise Agencies Pvt.Ltd. for which the assessee paid commission @ 5 %. We find that both the authorities did not examine and discuss the evidence filed by the assessee. Therefore, the finding of both the authorities below that the transactions between the assessee and M/s. Wise Agencies Pvt.Ltd. are bogus and not genuine which is in our opinion contrary to the evidence brought on record by the assessee. In the case of CIT vs M/s. Inbuilt Merchant Pvt. Ltd. [2014 (3) TMI 1107 - CALCUTTA HIGH COURT] of Hon’ble High Court of Calcutta wherein we find the AO held the transactions were not genuine as there was no reply in some cases and found no existence of such agents during the verification proceedings. The Hon’ble High Court of Calcutta held that no addition is maintainable for non-receipt of any reply and non-existence of the parties therein. - Decided in favour of assessee. Issues Involved:1. Justification of the CIT(A) in confirming the addition made by the AO on account of payment of commission.Issue-Wise Detailed Analysis:1. Justification of the CIT(A) in Confirming the Addition Made by the AO on Account of Payment of Commission:The appeal concerns whether the CIT(A) was justified in confirming the addition made by the AO regarding the payment of commission by the assessee to M/s. Wise Agencies Pvt. Ltd. The assessee, operating under M/s. Atindra Steel Company, declared an income of Rs. 86,75,039/- and faced a disallowance of Rs. 13,60,869/- by the AO for commission payments to M/s. Wise Agencies Pvt. Ltd. The AO found the submissions of the assessee untenable, leading to the addition of the amount to the total income.During the first appeal, the CIT(A) upheld the AO's decision, stating that the submission of PAN card and registration certificate alone was insufficient to prove the genuineness of the commission payment. The CIT(A) noted that M/s. Wise Agencies Pvt. Ltd. was untraceable and considered an entry provider, non-existent, and bogus. The assessee's failure to produce the concerned persons for verification further supported the CIT(A)'s decision.Before the Tribunal, the assessee's representative argued that the addition was based solely on the non-receipt of a reply from M/s. Wise Agencies Pvt. Ltd. The representative provided various documents, including a resolution to strike off the company's name from the Registrar of Companies, which predated the assessment order. The payments were made through banking channels with TDS deductions, and an agreement between the assessee and M/s. Wise Agencies Pvt. Ltd. was presented, detailing the commission arrangement for services related to telecom companies and power cables.The Tribunal found that both the AO and CIT(A) failed to examine the evidence provided by the assessee, which contradicted their findings of the transactions being bogus and not genuine. The Tribunal referred to the case of CIT vs. M/s. Inbuilt Merchant Pvt. Ltd., where it was held that no addition is maintainable for non-receipt of replies and non-existence of parties if payments were made by cheque with TDS deductions and other supporting evidence was provided.The Tribunal also cited the case of Rahul Khera vs. ITO, where it was held that disallowance based on surmises without contrary evidence is not justified, especially when payments are made by cheque, TDS is deducted, and recipient details are furnished. The Tribunal concluded that the transactions between the assessee and M/s. Wise Agencies Pvt. Ltd. were not imaginary or bogus, and the addition made by the AO and confirmed by the CIT(A) was not maintainable.Conclusion:The Tribunal set aside the CIT(A)'s order and allowed the appeal of the assessee, emphasizing the importance of examining all evidence and not making additions based on unverified assumptions. The appeal was allowed, and the addition made by the AO was deleted.