TaxTMI 
TaxTMI 
2018 (2) TMI 859
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.... made by invoking provisions of sections 40A(3) of the I.T. Act. iii).On the facts and circumstances of the case, the ld.CIT(A) ought to have upheld the order of the Assessing Officer. iv). It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the assessing officer be restored. 2. Briefly stated facts as culled out from the records are that the assessing officer has made an observation in assessment order, which is reproduced as under: "The assessee firm is an agency providing Forex advisory services. It is noticed that the assessee has debited Rs. 33,91,662/- as commission expenses in P&L a/c. Regarding commission expense vide para 11 of notice u/s.142(1) dated 30.06.2011, the assessee was required to file as under:- "Name and complete postal address of persons to whom commission paid, rate of commission/basis of commission, their copies of accounts, details of services provided by them, details of TDS deducted and paid into the Govt. a/c, proof of payment made. File evidence also ". The assessee in his written submission dated 10.10.2011 has filed only copy of commission exp. ledger a/c -which is as ....
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....,60,000.00 19-12-2008 To Monika Jain Invoice No.Dec/13/2008-09 Journal 131 4,85,000.00 To M. Lakshmi Invoice No.Jan/23/2008-09 Journal 132 80,000.00 13-01-2009 To M. Lakshmi Invoice No.Jan/29/2008-09 Journal 151 58,000.00 02-02-2009 To Uma Financial Services Journal 163 4,15,000.00 16-02-2009 To M. Lakshmi Invoice No.Feb/38/2008-09 Journal 167 53,606.00 17-02-2009 To M. Lakshmi Invoice No.Jan/32/2008-09 Journal 169 2,01,275.00 18-02-2008 To Monika Jain Invoice No.-Feb/15/2008-09 Journal 172 1,05,000.00 33,91,662.00 33,91,662.00 Closing Balance 33,91,662.00 33,91,662.00 Thereafter, assessee was required to file remaining details on 10.10.2011. The assessee filed written sub....
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....nditure done by the persons to whom it has been paid. They have claimed as reimbursement. Please file supporting evidences for the same. " Thereafter, vide written submission dated 03.11.2011 which was submitted on 11.11.2011, the assessee filed confirmation from 6 parties, mentioned below, to whom commission paid has been shown:- I. Amit Rajkumar II. Neha Management Services III. Pran Jain IV, Monika Jain V. Krishna Associates VI. Uma Financial Services. The confirmations submitted by the assessee is also made part of this order as annexure 'B'. A perusal of these confirmations shows that the signature of the said persons in the confirmation and signature of the same person in voucher are not same. This shows that the person who has given vouchers and the person who has given confirmations are different for each of the above. Since the assessee did not submit supporting evidences as required vide note sheet entry dated 11.11.2011, the assessee was again required to explain as under:- "Regarding commission paid, it was required to file supporting evidences as the same has been claimed as reimbu....
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....n which quantum of commission has been given to different commission agent has not been provided so far. Please provide the same i.e. on what basis particular quantum of commission has been given to the particular commission agent. Please file evidences for arriving such quantum also. Adjourned to 23.11.2011 at 11:30 AM. " In written submission dated 30.11.2011 the assessee has submitted as under;- "(1) Basis of Commission Paid The commission paid to agents who procured customers who needed buyer's credit. The basis of commission is always decided mutually by assessee firm and commission agent. The commission is paid to the agents at the percentage fixed mutually on commission receipt by the firm. The rate of commission is ranging from 11.50% to 55% according to various factors like financial need of customers, time duration in procuring credit facility to customers, facility provide by agents to customers and assessee firm, time within which commission is received by assessee firm, repetition of work from same customer and quantum of commission received by firm etc. The few bills of sales i.e. professional fee received from customer....
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....; 80000 49 215000 392881 NEHA MGMT SERVICES Inv no. Amt Comm.% Comm. amts 29 85600 45% 95000 30 126650 15 194300 50% 95000 190000 The assessee produced Shri Amit Rajkumar, "the statement of Shri Amit Rajkumar u/s.131 as cross examination wherein it was stated by him. (1) I am helping my father's textile business since last 4 months before this, I was studying. (2) I have completed my studies in 2011. (3) I have received commission from M/s. Kiwifix Solutions. On further being asked about the nature of reference Shri Amit Rajkumar stated that (4) I have provided contact details J have g....
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...., This contention of the assessee is also false. As per statement, Shri Amit Rajkumar has provided only telephone number (lead) still commission paid to him is not minimal He has been paid commission @27%, which is more than the minimum commission paid to M, R, Somayajulu, which is 11.5%. This shows that the commission paid has no relation with the services provided. if any, though not proved. A perusal of percentage of commission mentioned in the chart para 3.9 shows that the commission amount is not @ rate of the commission mentioned in the said chart. This also shows that the commission paid has no relation with the business stated to be achieved through said commission agents. The basis of commission/services mentioned in submission dated 30.11.2011 (para 3.8) and the basis mentioned in submission dated 02,12.2011(para 3.12) are totally different. This shows that the assessee is making story to prove commission paid for the business purpose. Regarding personal presence of the commission agents, the assessee has submitted as under:- "(2) Personal Presence of commission Agents: Your goodself has asked to produce the commission agents f....
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....t been able to file confirmation of Shri M. R. Somayajulu. The confirmation submitted by the assessee proves only that they have received amount as commission. It has no reference that what services were provided by them and the same was received in turn of any serviced provided by them except in the case of Smt. M. Lakshmi. The assessee has not filed any evidences that the commission paid was wholly and exclusively for business purpose. First of all assessee claimed that the commission was reimbursement of expenses for which he could not file supporting evidences. Thereafter, it claimed as commission for which it has not been able to establish that the commission was paid for any services provided by the commission agents nor commission agents in their confirmation have confirmed that they received amount for any services provided by them, the assessee has not been able to produce the commission agents from whom these facts can be verified. This shows that the commission expenses have not been incurred wholly and exclusively for the business purpose. From the above discussion, it is clear that genuineness of the commission paid/reimbursement of the expenses is not proved ....
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....expenses have been incurred otherwise than account payee cheque or demand draft. The main purpose of the provisions of section 40A(3) is to curb the illegitimate expenses which are shown in the garb of cash expenses. The purpose of introduction Section 40A(3) was to block the loopholes of making cash payments and claiming deductions with a view to frustrate investigation as to the identity of the receipts and the genuineness of the claim provided each such payment is above Rs. 20,000/-. Therefore, I am in agreement with the submission given by the appellant and the disallowance made is deleted. The ground of appeal is accordingly allowed." 4. We have gone through the relevant record and impugned order. The services have been rendered for appellant's business by the above said commission agents, the appellant has discharged its onus by filing all possible details including confirmations and TDS and successfully established that the genuine expenditure has been expended for the business purposes. On the other hand, the AO could not gather the positive evidence for the department and taken decision based on presumptions and not on the facts on record. It is not....
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....s Mr. Panjabi Monisha. Whether the same is related to business or not is not clear. Since the expenses are made in cash same are disallowed and added back as per section 40A(3) of I.T. Act." 3.2 During the course of appellate proceedings, the AR of the appellant has made the written submission and it will be appropriate to reproduce below the relevant part of the submission: "The AO has disallowed the payment of the ground that the payment was made in cash exceeding Rs. 20000/-. The expenses are paid to Hotel Hillock at Mount Abu to accommodate the guests of the firm. AO has not disputed the genuineness of expenses. It is respectfully submitted that the bill of Rs. 22580/- is not single bill but it is total of various bills. Each bill is below Rs. 20000/- as under. (A) Hotel Bill Date Bill No. Particulars Amount On page of Paper Book 11/02/09 529 Room Charges 17600 198 (B) Mayur Restaurant 09/02/09 13132 Tea 101 199 11/02/09 13168 Snacks 242 200 11/02/09 13167 Snacks 231 201 10/02/....