AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 762
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....without appreciating the facts and circumstances that the term Sale was used inter changeably for commission. (c) In as much raising a presumption that the payments made by way of commission were not through banking channel's and no TDS was effected which is contrary to the facts on record. 2. That the Commission of Rs. 27,00,000/- paid by way expenses be allowed. 3. The appellant craves leave to add, amend or delete any of the found of appeal before the same in taken up for final disposal. 2. Briefly the facts of the case are that the assessee, engaged in trading and service of Agro chemicals, seeds, etc. in the name of New Malwa Sales Corporation, filed his return of income on 02/08/2018 declaring total income of Rs. 16,00,320/- and in the Profit and Loss Account, he has shown commission income of Rs. 91,34,077/- and has incurred commission expenses of Rs. 27,50,000/-. The case of the assessee was selected for complete scrutiny to verify business expenses compare to large commission receipts. Accordingly, notice under section 143(2) and 142(1) were issued. After calling for information and explanation from the assessee, the AO made an addition of Rs. 27,50,000/- by dis....
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....herefore, the said payment made to M/s. United Pest Management Services, Partner Shri Nikhil Singh Arora son of Gagan Singh Arora, of Rs. 7,50,000/- are hereby disallowed from the business income of the assessee. Similarly, the ledger of New Malwa Sales Corporation in the books of M/s. Mahadev Industries (Prop. Nikhil Singh Arora, S/o. Gagan Singh Arora) has been submitted where in vide entry dated 14.01.2018, the account of New Malwa Sales Corp. is debited by Rs. 10,00,538/- on account of sales. In this regard the assessee accepted that the said firm is related party but all the payments are at comparable prices in the market and all payments are at arm's length. However, considering the fact of the case and as assessee not furnished any satisfactorily justification, addition is required to be made in this regard. M/s. Mahadev Industries also submitted a chart of monthly sales activities with the client New Malwa Sales Corp. showing sales of total amount of Rs. 10,00,538/-. M/s. Mahadev industries also submitted the invoice number 2017-18/0010 dated 14.01.2018 showing the commission against ULALA sales amounting to Rs. 10,00,538/-. It also reported that, on perusal of the ac....
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....ee entities i.e. M/s. The United Pest Management Services, M/s. Mahadev Industries and M/s. A.K. Associates were furnished the details of sale showing the amount mentioned by the appellant as sale and not as Commission received as stated by the appellant Shri Gagan Singh Arora. This fact also clears from the reading of the terms and conditions mentioned in the related agreements and Profit and Loss accounts of the said three parties. It is to be noted the appellant had only executed services - it has been categorically specified in the agreements. It is also to be verified, from the agreements so executed, the appellant was not allowed by these two parties (Sumito Chemical India Pvt. Ltd. and UPL), to appoint any sub agent for such services - as per the terms of the agreement, executed with Sumito Chemical India Pvt. Ltd. and UPL. 4.2 Further, the A.O. observed that these three concerns i.e. M/s. The United Pest Management Services, M/s. Mahadev Industries and M/s. A.K. Associates are belonging to Shri Nikhil Singh Arora and Akhil Singh Arora who are sons of the appellant. During the course of assessment proceedings, the appellant accepted that the said firms are related parties....
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....the income tax authorities are entitled to look into surrounding circumstances in order to find out the real intention behind the apparent transactions. While doing so, test of Human Probabilities' would assume a vital significance. Accordingly, the addition made by the AO is hereby confirmed. Thus, the ground No. 1 and 2 of appeal raised by the appellant are dismissed." 4. Against the said findings and directions of the Ld. CIT(A), the assessee is in appeal before us. 5. During the course of hearing, the Ld. AR reiterated the submissions made before the lower authorities and also relied on the written submissions which read as under: 1. "That the effective ground of appeal that requires to be adjudicated upon is ground i(a)/b No. i(a) of the appeal which pertain to the disallowance of commission paid to known parties and which ground of appeal read as follow. Ground No. i(a)/b. 2. Facts of the case are that the assessee is engaged in the business of Trading and liaison agent on Commission basis for Agent Chemicals, Pesticides and other crop protection product. He conducts his business as a proprietary concern in the name of M/s. New Malwa Sales Corporation. 2.1. For th....
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....,00,538/- 3. 3. Ground 1(c): That the Ld. CIT Appeal has raised a presumption against that the assessee that payments by way of commission were not through banking channels and that no tax was deducted at sources. This observation does not emanate from the assessment order. The payment was through banking Channel as will be evident from Page 81 to 83 of the Paper book TDS returns are placed at. 68 to 71 of the Paper Book. 4. The Ld. assessing Officer in the same Para referred "Commission Expense" supra has made a passing reference that the assessee under the agreement with Sumitomo & UPL Ltd. could not appoint the Sub-agent. Before the Ld. CIT(A) the appellant had urged that the only restraint placed on the appellant that it would not transfer the terms and condition to this agreement to any other party. There was no restraint on the appoint of sub-agent. The Contestants raised the bills agents New Malwa Sales Corporation only. The Agreement with the other party i.e. Sumitomo Chemical India Pvt. Ltd. silent on this aspect. Reliance placed on the case of DCIT Vs. M/s. Ganges International Pvt. Ltd. B-36, Lawrence Road, Industrial Area, New Delhi 110035 Date of Pronouncement....
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....endered by them, the assessee has agreed to pay commission to them @ 2.5% of the billing price of sales generated to end customers for sales up to 10 MT and 3% for sales beyond 10 MT. 9. During the course of assessment proceedings, copy of the agreements, the invoices raised by these related concerns and the fact the payments have been made through banking channel and TDS thereon has been done were duly submitted before the Assessing officer. It was also submitted that the payment to these related concerns were at the comparable price as prevailing in the market and in this regard, the relevant submissions dated 10/03/2021 of the assessee submitted before the AO read as under: "Transactions with Related Parties: Commission paid to M/S. United Pest Management on the basis of service provided by such firm in a particular area to the state of Punjab purpose for appoint to maximize the sales volume because our commission directly linked to the sales quantity volume. The appointed firm have to demonstrate the product to the farmers who actually consumed such products i.e. ULALA and the commission based on such performance. Further the said firm is related party but all the payments....
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....resaid factual background, let's look at the findings of the AO. On perusal of the order passed by the AO, it is noted that he has taken into account all the aforesaid documentation and submissions made by the assessee. Further, the payment of commission has been verified from the respective entities and the AO has also verified respective tax returns filed by the related entities wherein the commission income has been disclosed and offered for taxation. At the same time, the AO has disallowed the commission expenses on the ground that the payment have been made to related parties for instance, it has been stated that the payments to M/s. United Pest Management Services have been made where Shri Nikhil Singh is the partner in the said concern and also happens to be the son of the assessee. Similarly, it has been stated that Shri Nikhil Singh is also the proprietor of M/s. Mahadev Industries and similarly Shri Akhil Singh, another son of the assessee is the proprietor of M/s. A.K. Association. It therefore appears that the AO was guided by the fact that since the payment have been made to related parties and the assessee has not furnished any satisfactory justification for payme....