AI Drafter 
TaxTMI 
TaxTMI 
2016 (12) TMI 612
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.... Name Amount I . Pankaj Bakliwal 99,967 2. Anil Maheshwai 1,50,110 3. Prateek Mantri 6,56,859 4. Gopal Sharma 1,82,248 6. Rahul Mantri 7,24,415 6. K.G. Colours 1,61,793 7. Deepak Sharma 1,99,623 8. Kundan Ram Choudhary 82,447 Total 22,57,462 (ii) The AO required the appellant to furnish the details of the persons to whom commission was paid, the details of the parties to whom sales were made and commission was given to these persons. Subsequently, the AO made enquiries from a number of buyers of the appellant and the outcome of these enquiries have been given in detail in the assessment order. On the basis of these enquiries, the AO concluded that the persons to whom commission has been paid has no role in the sales made by the appellant and these expenses have been claimed in order to reduce profits. Consequently, the AO disallowed the sum of Rs. 22,57,462/- claimed by the appellant as commission expenses. (iii) During the appellate proceedings, it was submitted by the appellant that it had also received commission of Rs. 39,01,610/- on consignment sales and the payment of co....
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....sed by the High Court was whether acceptance of the agreements, affidavits and proof of payment would debar the assessing authority to go into the question whether the expenses claimed would still be allowable under Section 37 of the Act. This is a question which the High Court held was required to be answered in the facts of each case in the light of the decision of this Court in Swadeshi Cotton Mills Co. Ltd. Vs. Commissioner of Income Tax, 1967 (63) ITR 57 and Lachminarayan Madan Lai vs. Commissioner of Income Tax West Bengal, 1972 (86) ITR 439. In fact the High Court noted the following observations of this Court in Lachminarayan (supra): "The mere existence of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, does not bind the Income Tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessee's business. Although there might be such an agreement in existence and the payments might have been made. It is still open to the Income tax Officer to consider the relevant facts and determine for himself whether the commission said to have been paid ....
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.... set up by the assessee. The details of payment of commission amounting to Rs. 22,57,462/- paid by the assessee to the following persons are as under:- Sr.No Name Amount I . Pankaj Bakliwal 99,967 2. Anil Maheshwai 1,50,110 3. Prateek Mantri 6,56,859 4. Gopal Sharma 1,82,248 6. Rahul Mantri 7,24,415 6. K.G. Colours 1,61,793 7. Deepak Sharma 1,99,623 8. Kundan Ram Choudhary 82,447 Total 22,57,462 The AO required the assessee to furnish the details of the persons to whom commission was paid for which assessee provided the desired details to the AO. The AO after making enquiry came to the conclusion that the persons to whom commission had been paid had no role in the sales made by them and these expenses had been claimed by the assessee in order to reduce the profits. Consequently, the AO disallowed the sum of Rs. 22,57,462/- claimed by the assessee as commission expenses. In the appellate proceedings, the ld. CIT(A) disallowed the commission expenses of Rs. 22,57,462/- on the contention of the assessee that commission was allowed in the earlier years and he did not find any m....
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....of account of the assessee. The assessee had maintained regular books of accounts during the course of business which included cash book, journal, ledger etc. The books of accounts were audited u/s 44AB of the Act for which the assessee filed the audit report at pages 23 to 40 of the assessee's paper book. It is also noted that the gross profit rate the assessee is better as compared to earlier years and the same is depicted as under:- A.Y. Sales Gross Profit GP Rate NP NP rate 2009-10 29482112 800601 2.71% 538225 1.82% 2010-11 42975949 1165889 2.71% 851881 1.98% 2011-12 42511535 2462741 5.79% 779645 1.83% It is also noted from the record that out of total commission payment of Rs. 22,57,462/-, the assessee had made payment of Rs. 6,56,859/- and Rs. 7,24,415/- to her sons namely Shri Prateek Mantri and Shri Rahul Mantri respectively. It is natural in Indian culture that if the members of the family are competent to work in the business of the family, naturally they will be required to pay the minimum / the same compensation / benefit/incentive as other employees are paid. Hence, it has no relev....