Commission expenses disallowed for lack of evidence, interest expenses relief granted on appeal.

The disallowance of commission expenses of Rs. 33,92,430/- was upheld due to lack of evidence for services rendered by agents, despite previous decisions. However, relief of Rs. 20,08,563/- for interest expenses disallowance was granted by the ITAT, overturning the CIT(A)'s dismissal based on a technicality of filing delay. The appeal was partly allowed, with the commission expenses disallowance upheld and relief for interest expenses reinstated.

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Issues Involved:
1. Disallowance of commission expenses of Rs. 33,92,430/- under Section 40A(2)(b).
2. Relief granted of Rs. 20,08,563/- for addition under Section 40A(2)(b) disallowed by CIT(A) by invoking Section 249(3) of the Act.

Summary:

Issue 1: Disallowance of Commission Expenses of Rs. 33,92,430/-:

The assessee filed a return of income declaring total income of Rs. 1,69,14,010/-. The Assessing Officer disallowed sales commission expenses of Rs. 33,92,430/- paid to Sonali Traders, a sister concern, due to the inability to ascertain the genuineness of the expenditure. The CIT(A) upheld this disallowance, citing a similar addition confirmed in the preceding Assessment Year 2013-14. The ITAT in the assessee's own case for A.Y. 2013-14 had also dismissed the appeal, noting the lack of evidence for services rendered by the agents and emphasizing that the principle of res judicata does not apply to Income Tax proceedings. Consequently, the disallowance of Rs. 33,92,430/- was upheld for the current year as well.

Issue 2: Relief Granted of Rs. 20,08,563/- for Addition under Section 40A(2)(b) Disallowed by CIT(A) by Invoking Section 249(3) of the Act:

The Assessing Officer disallowed Rs. 20,08,563/- out of interest expenses, arguing that the assessee paid higher interest rates to related parties without justification. The CIT(A) allowed relief based on decisions from earlier assessment years but dismissed the appeal on a technicality, citing a delay in filing under Section 249(3) of the Act. The assessee contended that the appeal was filed within the due date. The ITAT observed that there was no evidence of the assessment order being served on the same date it was passed and decided that the minor delay should have been condoned in the interest of justice. Thus, the ITAT allowed Ground Nos. 4 & 5 of the assessee's appeal, dismissing the CIT(A)'s order on the technical ground.

Conclusion:

The appeal of the assessee was partly allowed, with the disallowance of commission expenses upheld and the relief granted for the interest expenses disallowance reinstated.

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