Tribunal upholds decision disallowing commission payment for lack of evidence

The tribunal upheld the lower authorities' decision, dismissing the appellant's appeal regarding the disallowance of commission payment to M/s. Vidhyashree Buildcon. The tribunal found the appellant failed to substantiate the genuineness of the payment and the services provided by the agent. It was concluded that the commission amount was excessive and lacked adequate evidence of services rendered. The appeal was denied, emphasizing the lack of proof of services and the excessive nature of the payment.

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Issues Involved:
1. Confirmation of disallowance of Rs. 49,89,000/- out of the commission paid by the appellant.
2. Allegation of excessive and unreasonable commission payment.
3. Genuineness of the commission expenses.
4. Principles of natural justice and adequate opportunity to rebut the disallowance.

Issue-wise Detailed Analysis:

1. Confirmation of Disallowance of Rs. 49,89,000/-:
The appellant, Ks Commodities Private Limited, contested the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which confirmed the disallowance of Rs. 49,89,000/- out of the commission paid. The assessment was completed under section 143(3) of the Income-tax Act, 1961, with the assessing officer making three disallowances, of which the disputed one was the commission expense.

2. Allegation of Excessive and Unreasonable Commission Payment:
The assessing officer observed that the commission paid to M/s. Vidhyashree Buildcon Private Limited was Rs. 4989000/- for the export of 6652 metric tons of yellow maize at Rs. 674/- per metric ton, which was 6.32% of the sale value. This was compared to other commodities like sugar and soya, where the commission was much lower. The officer noted discrepancies in the commission rates paid to different parties for similar transactions, indicating that the rate paid to Vidhyashree Buildcon was excessive and unreasonable.

3. Genuineness of the Commission Expenses:
The appellant provided invoices and modus operandi of the transactions, explaining the distinct characteristics of each commodity and the basis for the commission rates. However, the assessing officer rejected these explanations, questioning the genuineness of the bills and the services rendered by the commission agent. The CIT(A) upheld this view, noting that the appellant failed to provide evidence of actual services rendered by the commission agent. The tribunal also found that the broker, Vidhyashree Buildcon, lacked the capability to secure such export orders, as evidenced by its financial statements and lack of relevant experience.

4. Principles of Natural Justice and Adequate Opportunity:
The appellant argued that the disallowance was confirmed without adequate opportunity to rebut the same, violating the principles of natural justice. However, the tribunal concluded that despite the appellant's claims, there was no substantial evidence provided to prove the genuineness of the commission payment or the services rendered by the agent.

Conclusion:
The tribunal confirmed the orders of the lower authorities, concluding that the appellant failed to demonstrate the genuineness of the commission payment of Rs. 49,89,000/- to M/s. Vidhyashree Buildcon. The appeal was dismissed, with the tribunal emphasizing the lack of evidence regarding the services rendered and the excessive nature of the commission payment. The judgment was pronounced in the open court on 18/11/2019.

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