TaxTMI 
TaxTMI 
2017 (11) TMI 1074
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....erals. The Ld. AO during the course of scrutiny proceedings called for various details by issuing notice u/s 142(1) of the Act dated 25.10.2013 which included details of purchase and sales above 50,000/-, details of commission paid, details of sale promotion expenses, details of bad debts, details of carriage outwards and details of loading and unloading charges. The assessee vide its reply letter dated 06.11.2013 furnished the details in respect of purchases, sales and commission paid. From the said details, the Ld. AO observed that the assessee paid commission to the following three parties: (i) Ambootia Organic Plantations Pvt. Ltd. Rs. 6,44,858/- (ii) IDA Organic Pvt. Ltd. Rs. 6,51,860/- (iii) Pankaj Kapoor HUF Rs. 2,98,932/- Total Rs. 15,95,650/- The assessee stated that this commission payments for sales made by the assessee to various parties introduced by these three commission agents. The assessee also furnished the bill raised by these parties on the assessee clearly mentioning the amount of sales made to each party and the commission percentage thereon as aggrieved by the assessee. The bill of these commission agents included the PAN and address of t....
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....Ld. AO in order to understand this transaction could have cross verified the same with the concerned customers of the assessee to understand the truth as to whether these commission agents were indeed employed by the assessee for rendering services. All the documents produced before the Ld. AO had been conveniently ignored by him. The Ld. CIT(A) deleted the disallowance by observing as under : "4.2 In ground nos. 2.2 the appellant has disputed the payment of commission. I find that the commission was paid by account payee cheque, tax was duly deducted, confirmation letter from the commissions agents were filed, summons u/s 131 were issued to the commissions agents to which confirmation of the payment of commission was received, the commission agents also informed the names of parties with regard to the goods sold by them, addresses of the parties were available with the AO since the assessee duly filed the details of sales in response to the notice u/s 142(1) which details included the names and addresses of the said parties. It is not the case of the AO that the commission agents have not included the commission receipts in their return, or that the commission was not actually p....
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....rties were introduced to the assessee by the concerned commission agents. We also find that the assessee had furnished the details of sales above Rs. 50,000/- before the Ld. AO for the whole year which admittedly contained sales made to the various parties mentioned in the commission bill raised by commission agents. We have also cross verified from the details of sales furnished by the assessee before the Ld. AO with the commission bill raised by commission agents wherein the total sales made to these parties also tally. We also find that the said commission agents even though did not respond to the summons issued by the Ld. AO by making their personal appearance, but had furnished the requisite details to the Ld. AO and had also given confirmation that they had indeed included the subject mentioned commission in their returns and paid taxes thereon. All these facts clearly proved the services rendered by the commission to the assessee achieving the payment of commission. There could be more than one justifiable reason for commission agents for not appearing before the Ld. AO in response to the summons issued thereon. The Ld. AO is empowered under the law to take necessary action ....
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....und that genuineness of the claim and services rendered were not proved and also as to what type of promotion these persons have made to the business of the assessee were not proved. The assessee stated that it had incurred sales promotion expenses of Rs. 10,11,323/- towards purchase of small denomination of gold coins for distribution to the persons who had helped in achieving the business targets and Rs. 19,665/- towards payments made to clubs. The Ld. AO observed that the payments to clubs were personal expenses of proprietor and as regards distribution of gold coins, he observed that the assessee failed to give the details of persons to whom such gold coins were distributed. The assessee's explanation that the payment made to clubs is allowable as decided by the Hon'ble Calcutta High Court in the case of Ashoka Marketing reported in 181 ITR 493 among others was not accepted by the Ld. AO. Similarly the assessee's explanation that the small denomination of gold coins were distributed to various persons who have been marketing for the business of the assessee in promptly executing the orders in the course of sales and purchase of goods among other services were not accepted by th....
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....by the assessee is bona fide and reasonable and the same has been given to various parties for maintaining cordial relationship with the concerned sales executives who contributed for substantial increase in turnover of the assessee. We find that the Ld. CIT(A) had categorically mentioned that the turnover of the assessee had increased from 7 crores to 11 crores during the year which fact remain uncontroverted before us. This goes to prove the services rendered by those persons who are at the realm of affairs of improving the sales of the company and this also proves the business expediency and incurrence of such sales promotion expenses. Admittedly, these gold coins which were purchased were given as gifts to customers of the assessee and hence, becomes allowable deduction thereon. In this regard, the reliance placed by the Ld. AR on the following decisions are well founded: (i) CIT vs. Avery Cycle Industries Ltd. reported in 296 ITR 393 (P & H) (ii) CIT vs. Tirrihannah Co. Ltd. reported in 195 ITR 393 (Cal) In view of the aforesaid facts and findings given thereon and respectfully following the aforesaid judicial precedents, we did not find any justifiable reason to interfer....