2022 (5) TMI 47 - AT - Income Tax

Tribunal directs re-examination of Section 68 addition, upholds disallowance of commission expenses.

M/s Heritage Holidays Pvt. Ltd. Versus Deputy Commissioner of Income Tax, Circle-11 (1), New Delhi

M/s Heritage Holidays Pvt. Ltd. Versus Deputy Commissioner of Income Tax, Circle-11 (1), New Delhi - TMI Issues Involved:1. Addition of Rs.76,62,000/- as income under Section 68.2. Disallowance of Rs.13,30,000/- commission expenses.Detailed Analysis:1. Addition of Rs.76,62,000/- as income under Section 68:The assessee, a company engaged in providing holiday vouchers, declared a total income of Rs.37,50,110/- for the Assessment Year 2013-14. The Assessing Officer (AO) questioned the assessee about treating Rs.76.62 lakhs as an advance from Samsung India Electronics Ltd. The assessee explained that the amount was an advance for holiday vouchers with extended validity, a common practice to maintain business relationships. However, the AO was not convinced due to the lack of confirmation from Samsung India Electronics Ltd. and invoked Section 68 of the Income Tax Act, adding the amount to the assessee's income.On appeal, the CIT(A) upheld the AO's decision, emphasizing the absence of independent confirmation from Samsung and the lack of evidence showing the amount as an advance. The CIT(A) noted that the revenue should be recognized in the current year since there was no clause for refunding the amount after the voucher's expiry.The Tribunal, after hearing both sides, noted that the assessee failed to provide bank statements or other evidence to substantiate the receipt of Rs.76.62 lakhs from Samsung. In the interest of justice, the Tribunal restored the issue to the AO, directing the assessee to provide evidence of the receipt and subsequent adjustments of the amount. The AO was instructed to decide the issue based on facts and law after giving the assessee an opportunity to be heard.2. Disallowance of Rs.13,30,000/- commission expenses:During the assessment proceedings, the AO asked the assessee to justify the commission payments of Rs.13,30,000/- to Mr. Mukesh Bathla and Ms. Sangeeta Bathla. The assessee provided invoices stating the commission was for the sale of Samsung laptops and printers, which was not the assessee's business. The AO recorded Mr. Mukesh Bathla's statement, where he claimed the commission was for introducing a Samsung representative to the assessee's director. However, he failed to provide details of the introduction or the representative. Ms. Sangeeta Bathla refused to appear before the AO. Consequently, the AO disallowed the commission payments, deeming them non-genuine.The CIT(A) upheld the AO's decision, highlighting the lack of evidence for the services rendered by the commission agents and the non-cooperation of Ms. Sangeeta Bathla. The CIT(A) noted that mere acceptance of commission by the recipients does not prove the genuineness of the transaction.The Tribunal, after reviewing the case, agreed with the lower authorities. It emphasized that the assessee failed to provide substantial evidence for the commission payments and noted inconsistencies in the assessee's explanations. The Tribunal upheld the CIT(A)'s order, dismissing the assessee's appeal on this issue.Conclusion:The Tribunal partly allowed the appeal for statistical purposes, directing the AO to re-examine the addition of Rs.76,62,000/- under Section 68 with proper evidence. However, it upheld the disallowance of Rs.13,30,000/- commission expenses due to the lack of substantial evidence.