2026 (1) TMI 1584 - AT - Income Tax

Commission expenditure backed by banking payments and TDS cannot be disallowed on mere non-production of recipients.

Commission expenditure cannot be disallowed merely because recipients were not personally produced, where payments were made through banking channels and ... Disallowance of expense of commission & brokerage paid to 24 parties - assessee failed to discharge the burden of proving that the commission was paid to genuine person - AO has noted that assessee has been carrying on the same business for the last many years but neither in the preceding years nor in the subsequent years any claim of commission and brokerage expense was made - Burden of proof HELD THAT: - Tribunal held that, although the assessee had not produced the commission recipients, the AO had also not taken steps to enforce their attendance through summons. It further noted that the payments were admittedly made through banking channels with due TDS deduction and that the books of account had not been rejected. Tribunal found that non-disclosure or inadequate disclosure of commission receipts in the hands of recipients could not, by itself, render the expenditure non-genuine, and that booking such expenditure in the last month of the financial year was not, by itself, a ground to disallow it. The reasoning adopted by the AO and relied upon by the appellate authority, was found to rest substantially on hypothetical assumptions and human probability rather than on cogent and demonstrative evidence. On that basis, the disallowance was held to be based on an incorrect appreciation of facts. [Paras 8, 9] The addition on account of commission expenditure was deleted. Final Conclusion: The Tribunal deleted disallowance of commission expenditure as easoning adopted by the Assessing Officer, and relied upon by the appellate authority, was found to rest substantially on hypothetical assumptions. Issues: Whether disallowance of commission expenditure was justified on the ground that the recipients were not produced and the payment was treated as non-genuine, and whether interest under sections 234A and 234B was chargeable as a consequential matter.Analysis: The addition was based on the absence of personal production of the commission recipients, alleged similarities in addresses, timing of payments in the closing month, and the view that banking channel payments and TDS deduction were insufficient to prove genuineness. The Tribunal noted that the Assessing Officer had not used summons powers to secure attendance under section 131, that the payments were admittedly made through banking channels with TDS deduction, and that non-disclosure by recipients did not by itself render the assessee's expenditure bogus. It further held that the disallowance rested largely on conjectures and human probability rather than cogent evidence, and that the consequential interest claim did not survive independently.Conclusion: The disallowance of commission expenditure was deleted and the assessee succeeded on the substantive ground. The grounds relating to consequential and unsupported issues were rejected or treated as not requiring separate relief.