TaxTMI 
TaxTMI 
2026 (4) TMI 1467
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....ccounting, auditing, taxation, treasury, assurance and business advisory services. The return of assessee was picked up for scrutiny assessment and during the assessment proceeding the transaction of payment of commission to 77 persons for procuring bonds from different sellers were procured to be sold to U.P State Bridge Corporation Ltd. was examined and the assessing officer after issuance of notices to the persons to whom the commission was paid observed that only 17 persons have replied and 60 persons have not responded the notice u/s 133(6) of the Act. The statement of brokers were recorded and certain discrepancies were noticed by the assessing officer which are reproduced below: "6. However, the statements of the brokers, who claimed to have provided the services, contained such glaring discrepancies that their assertion regarding providing of services to the assessee raises some valid doubts. These are: a. First, it is seen from their ITR that income shown for the year inconsideration is around the commission received from the Brivan Consultants Pvt. Ltd in most of the cases. b. It is found from the Bank Statements that commission were withdrawn b....
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....ir investment requirements were serviced by purchasing bonds from the secondary open market. Based on verbal commitment related to empanelment, trade practices and limited knowledge of the industry functioning, a network of brokers/clients/ intermediaries provided the information and liaising for closing bond transactions to facilitate the trade of bonds. With the help of these brokers/clients/ intermediaries, the assessee was able to sell bonds of Rs. 1,18,75,49,043/- to UP State Bridge Corporation Ltd EPF Trust. The copy of the sales invoice and transaction statement is already submitted by the assessee as an annexure of reply dated 05.01.2021 The copy of sale invoice and transaction statement is again enclosed as Annexure-2." 4. Assessing officer was not satisfied and made addition of Rs. 5,11,63,000/- on the basis of following observations: "8.1 The reply of assessee is not tenable from the facts that M/s Brivan Consultants Private Limited was incorporated on 26.09.2012; The company was founded by a team of experienced Chartered Accountants and has been in business for more than eight years. Citing reasons of not having any knowledge of the industry functio....
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.... in consequence of misreporting, therefore, provisions of section u/s 270A(8) will be initiated on this count." 5. Further, assessing officer examined the increase in expenditure of Rs. 58,47,765/- and concluded that this increase in expenditure is only to meet profits earned during the year and accordingly disallowance of these expenditure was made. 6. Then, based on the scrutiny of record an addition of Rs. 11,30,000/- was made on account of payment made to M/s Planwell Industries Corporation as a non-genuine expenditure to alleged paper company. 7. In appeal before the ld. First Appellate Authority the assessee received a part relief as doubted total commission expenses amounting to Rs. 5,11,63,000/- and Rs. 12,04,900/- were held to be bogus and from the remaining commission expenses of Rs. 3,07,54,000/-, 25% i.e. Rs. 76,88,500/- was considered disallowable on fair estimate basis. 7.1 Then, with regard to disallowable expenses of Rs. 65,95,960/- assessee got a relief of Rs. 25,00,000/-. 7.2 The addition of Rs. 11,30,000/- are also allowed partly as payment of Rs. 10,00,000/- was found to be non-genuine and with regard to reversal of service tax amounting to Rs. 1,....
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....n fair estimate basis when the assessee has not discharged the burden of proof cast on the assessee? 2. Whether the Ld.CIT(A) erred in not considering the fact that for claiming any expense u/s 37 of the Act, the onus is on the assessee to prove the expense as genuine and incurred wholly and exclusively for its business? 3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 8. We have considered rival contention and perused the material on record. Ground no. 2 in case of appeal of Revenue and ground no. 1 in appeal of department, relate to a common issue of disallowance of commission which was made by the assessing officer and for which assessee has succeeded partly in first appeal. The contention of ld. Counsel was that as it was a new venture of the assessee, assessee had to engage new persons for covering information from market through their own contacts and friends in sourcing the purchase and sale of bonds. It was submitted that since the trading activities do not meet the cost benefit analysis this activities was discontinued after 31st March, 2018. It was submitte....
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....ld have been appreciable, however, adventure in the nature of investment transactions can be taken up by any entity on one time basis and the nature of transaction was to provide assessee source of procurement of the bonds. This submission of assessee, that individuals of these companies may have otherwise been beneficial with their contacts and negotiations to procure contracts in the clients is not a very unreasonable and not beyond human conduct probability. 14. Then, ld. CIT(A) has doubted Rs. 67,99,000/- for reasons that KYC documents were not available. However, the PAN number of these parties was available along with confirmations. The bank details of the parties were also mentioned in the invoices raised by them. Ld. Counsel pointed had out that MahakGutpa&Anuj Gupta had in fact filed confirmation before assessing officer. It was also pointed out that in fact commission paid to Sudhish Chug HUF, ld. CIT(A) has considered the commission of Rs. 9,10,000/- in doubtful commission of Rs. 1,26,10,000/- also for lack of KYC while in fact Sudhish Chug had died. Quite apparently the relevant documents like PAN and bank account of these parties were available. Thus, to call for KY....
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....o such material to show that these sellers or purchased had submitted any response to show that payment of commission was not involved. Therefore, we are of the considered view that commission expenses were found to be non-genuine on mere conjectures and surmises while conditions of Section 37 of the Act stood fulfilled. Thus, the ground raised by assessee deserve to be sustained while of department deserved to be rejected. 18. Ground No. 4 relates to disallowance of employment expense to the extent of Rs. 5,00,000/- being annual salary paid to alleged related party M/s Nikita Jindal u/s 40A(2)(b) of the Act. It was submitted that she is post graduate from Delhi University and is working in the company at a position of marketing head. It appears that this disallowance was made without calling for any specific query and examining the issue in correct perspective about her education and qualification to render her professional services. Then, there is no allegation as to how this salary paid is excessive. Accordingly, this ground is allowed. 19. Ground No.5: Ld. Counsel has stressed for disposal of this ground qua disallowance of Rs. 10,00,000/- in respect of business promotion....