2022 (5) TMI 1104

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....he Assessment Year (AY) 2010-11. 2. While admitting this appeal on 11th March 2022, the following question was framed for consideration by this Court: "Whether the Assessing Officer (AO), CIT (A) and the ITAT were right in disallowing commission expenses and in applying Section 37 of the IT Act?" 3. The background facts are that the Appellant during the AY in question was engaged in the business of manufacturing and sale of P.P. woven sacks meant for packing of fertilizer and cement etc. It filed its return of income for the AY in question on 10th September, 2010 declaring a total income of Rs.1,47,09,311/-. The return was picked up for scrutiny and the statutory notice was sent along with a questionnaire to the Appellant by ....

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....d and therefore, was not accepted by the CIT (A). 7. Thereafter, the Appellant went before the ITAT, which perused in great detail the actual payments of commission made. It was noted that the gross turnover of the Assessee was Rs.5278.63 lakhs and, therefore, the commission paid worked out to 1.35% thereof. It is further noticed that before the CIT(A), the Appellant had admitted that of the 7 individuals to whom the commission had been paid, 3 were Directors of the Company and 4 were relatives of the Directors. The Appellant had failed to bring on record their expertise to render services and also what services had in fact been rendered to enhance the business of the Appellant. Merely because TDS had been deducted, would not justify all....

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.... required to make the supply, pursuant to an export order, in a short span of time. Nevertheless, claiming that each of the seven persons to whom commission was paid actually had the expertise to help the Appellant procuring the IOF from different sources appears to be stretching things a bit too far. 12. It is not a sheer coincidence that three of the seven persons to whom commission was paid happened to be Directors of the Appellant and the remaining four were relatives of such Directors. Particularly, with the Appellant not being able to demonstrate their special expertise in procuring IOF from the markets in India, the AO appears to be justified in disallowing the commission insofar as it was paid to the said seven persons. The AO ha....