TaxTMI 
TaxTMI 
2019 (9) TMI 767
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....that the commission was paid to arrange buyers for sale of iron ore. The Assessing Officer sent notice u/s.133(6) of the Act to the persons who has arranged the buyers for sale of iron ore, as reproduced in the impugned order at page 4 & 5. In response to the query, the assessee has stated that the payments were made by the assessee and the buyers had nothing to do with it and hence, no disallowance should be made. The reply of the assessee was not favour to the Assessing Officer. Therefore, he disallowed the same and added to the total income of the assessee. 4. On appeal, the CIT(A) found that similar disallowance made for the assessment year 2010-2011 of Rs. 3,29,17,011/- has been deleted by the CIT(A)-2, Bhubaneswar. Hence, he deleted the addition made by the Assessing Officer. 5. Being aggrieved, the revenue is in appeal before us. 6. At the time of hearing, ld A.R. of the assessee produced a copy of decision of the ITAT in assessee's own case for the assessment year 2010-2011, in the appeal filed by the revenue against the deletion of addition made by the Assessing Officer. The Tribunal vide its order dated 31.8.2017 upheld the findings of the CIT(A) in deleting t....
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....on the facts and circumstances of the arrangement/agreement entered into with the principal, the nature of the products/goods sold, relevant business factors, etc. Benefits from the agency arrangement accrue to both the principal and agent. Principals can extend market reach without incurring major fixed personnel costs, and agents can earn compensation based on their productivity. Some agents may represent more than one principal. All of the above mean that the agent is more reactively dependent on the principal being part of a direct arrangement than with the clients/buyers/customer which relationship is more proactive and hence independent. While, commission agents depend on customers in generating their compensation, the compensation itself is paid by the principal after the customer/buyer pays the principal the proceeds of the sale or other transaction. While some agents may be aggressive, they also depend on satisfied customers for repeat business and are motivated to that end; it is in this connection that some of them may keep track of buyers/customers in their own interests. Such tracking and retrieval of customer details upon demand, as the AO has insisted upon, is not. p....
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....s operational at that time) and the agents had no reasons to prepare iron-clad lists and details of the buyers. Therefore, there was little reason for the buyers to make enquiries about the agents and certify the genuineness or veracity of the latter in the matter of supplies of materials. I All the buyers were concerned with was the timely delivery of quality-tested goods/products as specified by them. All the Appellant expected from the agents was total adherence to the terms of the agreement/arrangement between them. f) Therefore, the express non-remembrance of the agents in the creative-proactive awarenesses of the buyers alone will not negate the fact of the impugned transactions and the truth and character of the Commission payments. The AO has not carried out any investigations or inquires, on unearthed/discovered any evidences that suggest that the transactions and payments were not what they seemed to be. The decision to disallow has been made on presumption, surmise, conjecture, supposition, and a summary and unilateral conclusion based on rudimentary facts (of the buyers being presumably non-existent or apparently unaware of the agents and the agents be....
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....-genuine and no economic value is being generated by the agent for the principal. The Appellant is free to enter into agreements with and appoint as many agents, as it seeks to, in line with its business needs and commercial practices. If the agreements and appointments are wholly and exclusively for the purpose of business, and the payments made in the said regard are fully billed/vouched, accounted for and audited, then there is little scope for Revenue to take a prejudicial view. j) The AO has not been able to show that the payments have not been made to the purported agents and that these payments are not relatable to the carrying out the business and for other business purposes. The AO has merely leaped to conclusions (in the cases of Categories II, III and IV) that the seeming absence of buyers (as ostensibly evidenced by letters addressed to them returning unserved), or the negations or disavowals by such buyers of any knowledge or nexus with the agents or the inability of the Commission agents to list the actual buyers would automatically disentitle the agents of their status and rights to receive Commission payments. In the scheme set in place by the Appellant, th....
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....g such suspicion or presumption it could not replace legal proof. i) In consequence of all the above, it is held that the AO's action in disallowing the impugned expenses totaling Rs. 3,29,17,011/- have been made on extremely thin and specious grounds that the buyers were not found or did not respond or disclaimed any knowledge of the agents or that the agents were not able to remember the buyers or were not able to furnish detailed particulars about them or for the reason that the Commission agents were HUFs. All of them are reasons that do not show any clear understanding about the reasons for and the manner in which the agents have been employed and engaged by the Appellant. The Appellant is seen to have made the necessary deductions of I DS, maintained the necessary bills, receipts certificates and other documentation, made the necessary entries in books of accounts that have been duly audited and also furnished the Income-tax particulars of the agents before the AO. Copies of some of the communications made by the Appellant to the AO in this regard have been provided on record by the Appellant. j) The enhancement made of Rs. 3,29,17,011/- on the said count is....