Commission expenditure supported by documents and prior scrutiny acceptance cannot be partly disallowed as excessive without contrary material.

Commission expenditure supported by confirmations, returns, audited financial statements, Form 26AS, TDS certificates, agreement and bills was treated as genuine business ; the recipient also confirmed the services and receipt through banking channels after tax deduction at source. Prior acceptance of similar commission in earlier scrutiny assessments further supported genuineness. On these facts, the partial disallowance as excessive and non-genuine under section 37 could not be sustained in the absence of contrary material, and the disallowance was deleted.

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Issues: Whether the disallowance of commission expenditure as excessive and non-genuine under section 37 of the Income-tax Act, 1961 was justified.

Analysis: The assessee supported the commission payment with confirmations, returns, audited financial statements, Form 26AS, TDS certificates, agreement, and bills. The recipient's statement recorded under section 131 of the Income-tax Act, 1961 confirmed the rendering of services and receipt of commission through banking channels after deduction of tax at source. The same party had also received similar commission in earlier years, which had been accepted in scrutiny assessments. On these facts, the payment was established as a genuine business expenditure and there was no basis to treat the commission as excessive or to disallow a part of it.

Conclusion: The disallowance was not sustainable and was deleted in favour of the assessee.

Ratio Decidendi: Where commission expenditure is supported by documentary evidence, confirmation of services, tax deduction at source, and acceptance in earlier scrutiny assessments, a partial disallowance as excessive cannot be sustained absent contrary material.

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