TaxTMI 
TaxTMI 
2019 (1) TMI 737
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....onsistent allowability in previous three years under similar circumstances where the disallowances was restricted in appeals to 5%, 3.76% and 5% of the total commission expenditure. The disallowance of entire commission expenditure of Rs. 97,58,305/- under the facts and circumstances of the case is illegal, unjustified and liable to be quashed for which relief may please be granted. 3. The assessee may please be permitted to raise more/additional grounds of appeal before or at the time if hearing." 2. The assessee is a company and engaged in the business of trading of various types of pipes, sanitary wares, bath fittings and accessories etc. used in construction of buildings. The assessee is also engaged in trading of irrigation pipes and fittings. During the course of assessment proceedings, the Assessing Officer noted that the assessee has paid commission of Rs. 97,58,305/- on the sale of Rs. 15,66,26,437/- @ 6.23% of the sales which is very high in comparison to the prevailing rate in the trade. The Assessing Officer proposed to verify the claim of the assessee and asked the assessee to produce the persons for examination. Since the assessee did not produce the perso....
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....wance sustained by the ld. CIT(A) never exceeds 5% of the total payment. In support of his contention, he has relied upon the decision of the Hon'ble Jurisdictional High Court in the case of Harish Clays Vs ACIT & Anr decision dated 23rd November, 2016 2017 TaxPub (DT) 0085 (Raj. HC). Thus, the ld AR has contended that the Assessing Officer is bound to follow the rule of consistency and the payment of commission was accepted by the Assessing Officer in the earlier year except the disallowance of 5 to 10% on ad hoc basis then the entire disallowance for the year under consideration is not justified. He has relied upon the decision of Hon'ble Supreme Court in the case of Radhasoami Satsang Vs. CIT (1991) 100 CTR 0267 as well as decision of Hon'ble Delhi High Court in the case of CIT Vs. Amit Jain (2015) 374 ITR 0550 (Del) and contended that in absence of distinguishing fact or material for the year under consideration, the Assessing Officer cannot take a diverse stand from the preceding assessment years. Thus, the ld AR has submitted that when the expenditure was incurred wholly or exclusively for the business purposes and having consistent allowability in previous years, the dis....
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....ever, the earlier years disallowance being an ad hoc disallowance was based on the fact that the assessee has not produced supporting evidence of the expenditure. During the year under consideration, the Assessing Officer undertaken the exercise of enquiry and verification of the claim of the assessee. It is settled proposition of law that the onus is on the assessee to establish that the expenditure is incurred wholly and exclusive for the purpose of business. In order to establish the claim of expenditure wholly and exclusively lend out for the purpose of business, the assessee is required to produce supporting evidence to show that the expenditure was incurred against the services rendered by these persons. We find that, though the assessee has filed confirmation from the persons and the payment was made after deduction of TDS, however, when the Assessing Officer has issued the summons to ten persons, none has appeared before the Assessing Officer and only three persons responded to the summons issued by the Assessing Officer. The ld. CIT(A) in the impugned order has considered this issue in para 5.1 to 5.7 as under: "5.1 First and foremost, the background of the making....
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....d. No bills were furnished by any of the person for commission expenses. The assessee has suo-moto paid commission to them. e. Sale bills do not contain name any of the broker or person alleged to be broker, so it cannot be verified that for which sales they have been paid commission. f. The commission paid varied from 4% to 8%. g. Commission has alleged to have been paid on sales to individuals also. 5.5 Though there cannot be strait-jacket formula for the percentage of commission, sales which may or may not carry commission expenses, and reasonable and justifiable level of commission expenses, the verification exercise intended and undertaken by the AO was precisely to come at right conclusion on above aspects. It is precisely the failure of the appellant in producing witness of commission expenses the was under compulsion to make certain adverse observations as under:- b. Assessee's non-commission sales was Rs. 7,88,90,251.45, if we calculate only commission part on this sale then it comes to Rs. 48,91,195/- where as income as per return was Rs. 46,08,958/- which is below this figure. It means that the assessee has paid commission out....
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....,455/- on account of commission. On examination of bank account it was found that he received Rs. 3,14,509/- on28.03.2013 and on 29.03.2013 Rs. 3,14,539/- was transferred to Mahendra Kumar by RTGS. Shri Manoj Vyas is not filing return of income. Signature o submission filed on 14.03.2016 and confirmation filed by the assessee during assessment proceeding were entirely different. 5.7 There cannot be dispute to the ratio laid down by the Hon'ble Rajasthan High Court in the case of M/s Laxmi Engineering Industries vs. ITO (2008) 215 CTR 0319 that for incurring of any expenditure during the course of business there is no requirement of any written agreement for the payment of commission. At the same time, the very conduct of business, relevant vouchers, accounting made and general instructions from time to time on subject by the businessman are always able to justify the claim of business expenditure when called upon by the AO. In this case there is visibly failure to do so by the appellant. I am surprised to note that none of above is present to defend the appellant and justify the ever increasing commission expenses. This is required of appellant when this ....