TaxTMI 
TaxTMI 
2013 (7) TMI 1189
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.... the addition for double claim of VAT from Rs. 14,57,800/- to Rs. 66,249/-. 3. In the cross objection, the assessee is aggrieved for part confirming the disallowance of expenses by the CIT(A). 4. Rival contentions have been heard and records perused. Facts in brief are that the assessee is engaged in the business of Government Contractor and supplier. During the course of assessment, the Assessing Officer found that the assessee made supplies on the M. P. Government approved rates to Government Department, like P.W.D. and I.D.A. On the supplies so made, the assessee has claimed the commission expenditure of 20 % paid to various persons. The Assessing Officer found that the assessee could not produce any evidence to prove the services rendered by the so called commission agents. It was stated before the Assessing Officer that the commission was paid for procurement of order and collection of payment from the Government Department. After having detailed discussion at para 3, the Assessing Officer found that M.P.Laghu Udyog Nigam to whom the assessee was supplying material and was raising bill according to the supplies raised by the supplier and payment was made directly to the ....
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....ceipt in their returns and have paid taxes thereon. So far as payment of commission to related persons is concerned, there is no bar on engaging related persons as commission agents and no disallowance is called for or made by Assessing Officer u/s 40A(2)(b) of the Income-tax Act, 1961, if services are rendered. Payment of commission to related parties is allowed in case of Computer Graphics Limited, (2006), 285 ITR 84 (Mad) and Microtex Separators Limited, (2007) 293 ITR 451 (Kar) holding that reasonableness of commission payment to interested parties has to be judged form the view point of businessman and not that of revenue. In case of Computer Graphics Limited, it was held that payment of commission to interested parties was reasonable and same had admittedly resulted more business for the assessee and there was no proof of excessive or unreasonable payments. In present case also as the commission payment grew over the years, the turnover of appellant has increased substantially, as is visible from the table given above. When work orders, agreement with Government agencies, ledger accounts of commission agents in books of appellant showing transaction....
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....epresentatives. That is disallowable under the explanation to Section 37(1) of Income-tax Act, 1961. But there is no such allegation neither is there any proof of the same in present case. Besides the rule of consistency has to be followed as held in the case of Mandeep Singh, (2010) 328 ITR 169 (P&H) wherein commission payment to sub-dealers was allowed on the ground that Assessing Officer cannot deviate from his earlier decisions since facts are identical. IN appellant's case commission expenses are allowed in earlier years i.e. A.Y. 05-06 to A.Y. 08-09 as per the details given in remarks column of the table on page no.14 of this order. Therefore, even from consistency principle also such commission expenses should have been allowed. Considering the discussion in aforesaid paragraphs, the commission expense of appellant of Rs. 27,34,612/- are held allowable Ground no. 2 of the appeal, therefore, stands allowed." 7. Shri R. A. Verma, ld. Senior DR appeared on behalf of Revenue and contended that since the assessee was supplying goods to Government Department, there was no system of any order being given through middleman nor there was any system of commission ....
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....ing Officer was as under :- "3.5 The assessee has only provided copy of credit notes prepared by itself and not produced the persons for verification except one who also could not provide any evidence with respect to any work done for the assessee. Shri Manish who presented himself also could not provide any evidence that he has provided some services to the assessee. As such the assessee could not discharge his onus in respect of commission expenses. Only providing credit notes and details of the persons to whom credit note is issued, do not prove genuineness of the expenses. There is also no indication of any agent on the bill issued by the assessee in respect of supply. On the perusal of copies of bill it is noticed that there are mention of order number and date which shows that the assessee has received order through M.P. Laghu Udyog Nigam and not directly from the Government Department as such to claim that the so called agents have collected order is totally incorrect. Further there is no possibility of making payments by the Government Department to parties other than from whom such purchases were made. As such, claim of collecting payment by the so called agents i....
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....dered view, mere payment of commission by cheque and offering of some commission income by the agents in their returns of income is not sufficient to allow claim of commission expenses, when assessee is unable to prove the services rendered for which such commission payment is being made. The ld. CIT(A) has not controverted various findings recorded by the Assessing Officer with regard to the system of assessee's business and the fact that the assessee could not produce any evidence to prove the services rendered by the so called agent. The rate of commission so paid, which was 20 % of work executed and supply made was also found to be very exorbitant. Accordingly, the Assessing Officer has held that neither the genuineness nor the reasonableness of the services rendered by so called commission agents have been established. Nowhere CIT(A) has discussed any evidence produced by the assessee either before the Assessing Officer or before him so, as to prove the business exigency of the expenditure and genuineness of the services so rendered. Accordingly, we set-aside the order of CIT(A) on this ground and the matter is restored back to the file of Assessing Officer for deciding afresh....
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....In the result, ground taken both by assessee and Revenue are dismissed. 14. The addition of Rs. 17,65,385/- was made by the Assessing Officer on the plea that the assessee had shown nil closing balance in place of closing stock of Rs. 17,65,385/- worked out by A.O. The relevant observation of the Assessing Officer in this regard was as under :- "The assessee has two different categories i.e. works division and supply division. It maintains separate Trading and Profit and loss accounts. The purchases and Government receipts/sale are also separately entered in the books. Date Amount 02.02.2009 11,357 05.2.2009 2,00,180 10.02.2009 2,50,790 12.2.2009 53,766 13.02.2009 2,06,187 17.02.2009 2,36,950 30.02.2009 157 25.02.2009 3,65,850 25.02.2009 3,10,756 02.03.2009 125 02.03.2009 81,470 06.03.2009 2,60,100 06.03.2009 14,85,000 12.03.2009 5,200 13.03.2009 468 19.03.2009 3,43,325 20.03.2009 1,325 20.03.2009 87,204 27.03.2009 1,820 Total 39,02,030 The assessee has issued up to bill no. 543 till Jan.2009. From the month of Feb. to Mar. the supply/sa....
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....ading " is of Rs. 3,92,645/-. At average rate of purchase to sales of 54 % of two divisions, such sales of Rs. 3,92,645/- comes to Rs. 2,12,028/- of corresponding purchase which leaves closing stock of Rs. 2,21,645/- ( Rs. 4,33,674/- - Rs. 2,12,028). Considering these facts, zero closing stock shown by appellant is held to be incorrect and addition on account of closing stock is confirmed to the extent of Rs. 2,79,801/-" 16. Both assessee and Revenue are aggrieved by the above order of CIT(A). 17. We have considered the rival submissions and found from record that assessee has two different categories i.e. Work Division and Sub Division, for which separate reading and profit and loss account was maintained. During the course of assessment, the Assessing Officer found some discrepancy in the purchase sales. The Assessing Officer also found that the assessee has shown nil closing balance in the stock in place of closing stock of Rs. 17,65,385/-. The ld. CIT(A) has verified the bills of works contract, which were got mixed up in the purchase of "Supply Trading Account". Total of such bills comes to Rs. 14,85,584/-. As these bills were pertaining to purchases of M. S. Pipe angle,....