2021 (3) TMI 1102 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision on Commission Payments, Rejects Revenue's Appeal

The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s decisions. It emphasized that once the Assessing Officer accepts the ... Maintainability of appeal - Assessing officer himself had filed remand report dated 19.09.2018 before the CIT(A) regarding commission payment(s) - CIT DR vehemently contended during the course of hearing that the CIT(A)'s order has erred in law and on facts in granting relief to the assessee despite the fact that the Maharashtra State Electricity distribution company had deposed in department's favour that there was no involvement of any commission component in the entire bidding process - Whether CIT(A) is correct in allowing the appeal of assessee by completely ignoring the fact that a Government authority viz. the Chief Engineer, Maharashtra State Electricity Distribution Company has clearly spelled out the process of e-tender, design, specification of a public utility product and confirmed that no third party was involved in any of the services as mentioned in the relied upon agreement? - HELD THAT:- We find no merit in Revenue's foregoing argument. It has already come on record that the Assessing Officer has himself verified the impugned commission activity/payment in the remand report. Case law (2020) 426 ITR 119 (Kar) PCIT vs. DM Purnesh [2020 (9) TMI 731 - KARNATAKA HIGH COURT] and Smt. B. Jayalakshmi vs. ACIT [2018 (8) TMI 208 - MADRAS HIGH COURT] holds that the Revenue cannot be held to be an aggrieved party once the Assessing Officer himself finds assessee's explanation to be genuine. We thus hold in view of Assessing Officer's remand report that the Revenue's instant appeal deserves to be declined even on the ground of maintainability itself. Revenue's appeal is dismissed. Issues:1. Whether the CIT(A) was correct in allowing the appeal by ignoring certain facts related to e-tender process and involvement of third parties.2. Whether the CIT(A) was correct in allowing the appeal by disregarding the lack of involvement of certain parties in liaisoning work.3. Whether the CIT(A) was correct in deleting the addition of commission paid to agents without considering the actual nature of services rendered.Analysis:1. The first issue raised by the Revenue pertained to the correctness of the CIT(A)'s decision in allowing the appeal by overlooking the e-tender process and absence of third-party involvement. The Revenue argued that the Chief Engineer of a government authority had clarified the process and confirmed no third party was involved. However, the Tribunal found that the Assessing Officer had already verified the commission payments and activities in a remand report. Citing case law, the Tribunal held that once the Assessing Officer accepts the assessee's explanation, the Revenue cannot challenge it. Therefore, the Tribunal dismissed the Revenue's appeal on the ground of maintainability.2. The second issue revolved around the CIT(A)'s decision to allow the appeal despite the lack of involvement of specific parties in liaisoning work. The Revenue contended that certain parties were not engaged in tender management or payments, as confirmed by the Chief Engineer. However, the Tribunal reiterated that the Assessing Officer had already examined the commission payments and their nature during the assessment proceedings. The Tribunal emphasized that the Assessing Officer's acceptance of the assessee's explanation precluded the Revenue from disputing it. Consequently, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal.3. The final issue concerned the CIT(A)'s deletion of the addition of commission paid to agents without considering the actual services rendered. The Revenue questioned the nature of services provided by the agents and the validity of the expenses falling under the head of commission. However, during the remand proceedings, statements from the agents confirmed the services rendered and the payments received, which were duly reflected in their tax returns. The Tribunal noted that the agreements between the assessee and the agents clearly outlined the services to be provided. Additionally, the Tribunal highlighted the assessee's submission regarding the significant contracts secured with the agents' assistance. Based on the evidence and explanations provided, the Tribunal upheld the CIT(A)'s decision to delete the commission addition.In conclusion, the Tribunal dismissed the Revenue's appeal on all grounds, emphasizing the Assessing Officer's verification and acceptance of the assessee's explanations regarding the commission payments and services rendered by the agents.