Commission Disallowance Upheld for Marketing Exec & Middlemen Expenses

The Tribunal upheld the disallowance of commission paid to the Marketing Executive (daughter-in-law) and middlemen at different gas agencies. The assessee failed to prove the expenses were incurred wholly and exclusively for business purposes, resulting in the dismissal of the appeal.

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Issues Involved:
1. Disallowance of commission paid to Marketing Executive (daughter-in-law of the assessee).
2. Disallowance of commission paid to middlemen at different gas agencies.

Issue-wise Detailed Analysis:

1. Disallowance of Commission Paid to Marketing Executive (Daughter-in-law of the Assessee):

The assessee filed an appeal against the disallowance of commission paid to his daughter-in-law, Mrs. Priyanka Keshari, amounting to Rs. 3,10,289/-. The Assessing Officer (AO) observed that the commission was claimed for the first time and deemed it a colorable device to minimize tax liability. The AO allowed only Rs. 15,000/- per month and disallowed the remaining amount under Section 40A(2)(a) of the Income-tax Act, 1961. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting the lack of evidence regarding Mrs. Priyanka Keshari's qualifications and the actual work done. The Tribunal also upheld the CIT(A)'s decision, emphasizing that the primary onus is on the assessee to prove that the expenses were incurred wholly and exclusively for business purposes as per Section 37(1). The Tribunal found no evidence to substantiate the actual rendering of services by Mrs. Priyanka Keshari and thus confirmed the disallowance.

2. Disallowance of Commission Paid to Middlemen at Different Gas Agencies:

The AO disallowed Rs. 2,94,000/- out of the total commission paid to various middlemen, citing a lack of confirmation from the recipients. The CIT(A) confirmed this disallowance, noting that the turnover increased by 54.8%, but commission expenses increased by 132%, which seemed abnormally high. The Tribunal observed that the assessee failed to provide complete details of the middlemen, including names, addresses, and PANs, and did not furnish any working details of how the commission was computed. The entire commission was paid in cash on just two days, which was against the preponderance of probabilities. The Tribunal upheld the CIT(A)'s decision, stating that the assessee failed to discharge the primary onus under Section 37(1) to prove that the expenses were incurred wholly and exclusively for business purposes.

Conclusion:

The Tribunal dismissed the appeal filed by the assessee, confirming the disallowance of commission paid to both the Marketing Executive (daughter-in-law) and the middlemen at different gas agencies. The order was pronounced on 04.11.2022 at Allahabad, U.P.

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