2024 (5) TMI 99 - AT - Income Tax

ITAT Delhi sets aside CIT(A) deletions on commission payments and fund diversions due to insufficient evidence

The ITAT Delhi allowed both revenue appeals due to assessee's non-representation despite multiple opportunities. The tribunal found insufficient ... Disallowance of commission paid to foreign agents - Assesee failed to prove actual delivery of services by these agents - Disallowance of legal and professional charges - CIT(A) deleted addition relying on the information submitted before him - as per revenue payments to above said agents were in the nature of fee for technical services on which neither any TDS was deducted by the assessee nor any certificate for no deduction of TDS was furnished by the assessee - CIT(A) has deleted the disallowance of interest amount by the assessee, who has diverted its interest bearing funds to its sister concern for non-business purposes - HELD THAT:- All the above said issues were not clarified by the assessee by making proper representation and failed to utilize the several opportunities granted to the assessee. We are of the view also that the issue raised by the Revenue needs to be verified afresh and adjudicated accordingly. The issues raised by the Revenue apparently shows that the assessee has not justified in bringing on record the services rendered by the agents and how the percentage of payment of commission justified in this case. With regard to interest bearing fund, the Ld. CIT(A) has observed that the assessee has enough interest free the funds, however, it has not been demonstrated how the interest free fund were actually diverted to sister concern and not interest bearing funds. Accordingly, both appeals filed by the Revenue are allowed due to non representation from the assessee side. In the result, both appeals filed by the Revenue are allowed. Issues involved:The issues involved in this case are related to the allowance of commission expenses, disallowance of legal and professional charges, disallowance of interest, and non-representation by the assessee during the proceedings.ITA No.5502/Del/2017:The Revenue appealed against the orders of the Learned Commissioner of Income Tax (Appeals) regarding the disallowance of commission expenses paid to various parties. The Revenue contended that the commission expenses should be disallowed as the services provided by the agents were not proven. Additionally, the Revenue argued that the payments to the agents were in the nature of fee for technical services on which no TDS was deducted. The Revenue also raised concerns about the disallowance of interest due to the failure of the assessee to prove the business purpose of loans given to sister concerns. The Revenue further highlighted the non-appearance of the assessee during the proceedings and the lack of proper representation.ITA No.7113/Del/2017:In this appeal, the Revenue challenged the deletion of disallowance of commission expenses paid to foreign agents. The Revenue contended that the actual delivery of services by these agents was not proven, and no TDS was deducted on the payments. The Revenue also raised issues regarding the disallowance of interest, alleging that the assessee diverted interest-bearing funds to its sister concern for non-business purposes. The Revenue emphasized the lack of proper representation by the assessee during the proceedings.Judgment Details:The Income Tax Appellate Tribunal (ITAT) heard both appeals together and noted the non-appearance of the assessee despite multiple opportunities for representation. The Assessing Officer had disallowed commission expenses and other charges, which were later allowed by the Learned Commissioner of Income Tax (Appeals) based on the submissions and evidences provided by the assessee.The ITAT observed that the assessee failed to prove the services rendered by the agents and the justification for the commission payments. The ITAT also noted discrepancies in the utilization of interest-bearing funds by the assessee. Due to the lack of proper representation and clarification from the assessee, the ITAT allowed the appeals filed by the Revenue.In conclusion, both appeals filed by the Revenue were allowed, and the orders of the Learned Commissioner of Income Tax (Appeals) were overturned due to the non-representation and failure of the assessee to substantiate the expenses and fund utilization.Order pronounced in open Court on 30th April, 2024.