1 ITA No. 438/Del/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `A' NEW DELHI
BEFORE SHRI R. P. TOLANI, JUDICIAL MEMBER
AND
SHRI J. S. REDDY, ACCOUNTANT MEMBER
(ITA NOS. 438/DEL/2010)
ASSESSMENT YEAR: (2006-07)
DCIT Aspen Diagnostic Pvt.
Circle 2(1), Room No. 398D. Ltd.
C. R. Building vs B-159, Gujranwala
New Delhi Town-1
(APPELLANT) Delhi
AAECA5654P
(RESPONDENT)
Appellant by Ms. Y. Kakkar, DR
Respondent by Sh. Suresh Kumar Gupta, CA
ORDER
PER R. P. TOLANI, JM
This is Revenue appeal. Sole Ground read as under:-
"1. Whether in the facts and circumstances of the case, the
Ld. CIT(A) was right in allowing relief to the Assessee
Company of Rs.13,12,935/- on account of disallowance of
commission claimed in profit loss account ignoring that
(a) there was substantial increase in commission expenditure
during the year.
(b) in the absence of agreements and confirmation, it
could not be proved that the expenditure on commission
had been incurred wholly and exclusively for business
purpose."
2. The appellant craves leave for reserving the right
to amend, modify, alter, add or forego any ground(s) of
2 ITA No. 438/Del/2010
appeal at any time before or during the hearing of this
appeal."
2. Brief facts are: The assessee company, incorporated on 28/1/1995, is
engaged in the business of trading of medical diagnostics kits, instruments,
health care products, reagents and bio chemistry products etc. During
assessment proceedings the AO noticed that the assessee has shown
commission payment of Rs. 52,51,743/- & g.p. rate of 25.02% on turn over
of Rs. 4,95,86,142/- in A.Y. 2006-07 as against commission payment of Rs.
15,99,016/- & g.p. rate of 22.11% on turn over of Rs. 2,33,87,659/- in
previous A.Y. 2005-06. The AO required the assessee to explain steep
increase in commission payment and to file agreements with agents and the
basis for such commission payment. Assessee filed its reply which did not
find favour with AO who found it to be general in nature and observed that
assessee failed to produce any evidence to substantiate the claim of such
huge commission. AO on estimate disallowed an amount Rs. 13,12,935/-
being 25% of expenditure on commission.
2.1. Aggrieved, assessee preferred appeal before the CIT(A), who deleted
the disallowance by observing as under:
" In addition to above the assessee company has
submitted over whelming evidences evidencing the
genuineness of the expenses incurred. The assessee
company has submitted a chart showing that all the
agents are assessed on the records of the Department,
their PAN and copies of the returns have been filed
showing that all these persons have included these
payments in their incomes and the same has been
assessed and accepted in their respective hands.
Payments to all these persons have been made by
account payee cheques, and TDS has been deducted on
3 ITA No. 438/Del/2010
all these payments, confirmed copies of the accounts and
confirmations have been filed from all the payees with
copy of the TDS certificates issued to all these persons
have also been filed, their complete address are on
record. The copies of bills raised by these persons have
been filed showing the details of same facilitated to these
persons, copies of invoices and bills raised by the
assessee company upon its customers have also been
filed showing that the name of the concerned agent was
given each and every invoice through whom so ever the
sale was facilitated. Thus the evidence of services
rendered has also been given. The services of the agents
included first of all booking of sales and then approval of
the product and then arranging the payments. There is
no evidence with Ld. AO to show that expenses were not
incurred for the purposes of the business of the assessee
or that services were not rendered by any of these
persons. I have gone through to the case laws relied
upon by the assessee and the judgment of Hon'ble Delhi
Bench of ITAT, and Hon'ble Delhi High Court are
directly applicable on this issue. The only grievance with
Ld. AO was that written agreement with these persons
were not available, but that cannot be the sole ground to
make a disallowance specially when adequate evidences
have been filed showing that expenses have been
incurred for the purpose of the business of the assessee.
10. It is a matter of record tht the assessee has been
paying commission in past also and no disallowance has
ever been made and therefore, keeping in view the
totality of facts and circumstances of the case, the
impugned disallowance is contrary to law and facts and
the same is deserves to be delete and I hereby delete
disallowance of Rs.13,12,935/- made by the Ld. AO."
2.2. Aggrieved, revenue is before us.
3. Ld. DR contends that from the order of AO it is clear that assessee
did not file agreements executed for commission payment, basis thereof and
4 ITA No. 438/Del/2010
the reasons for steep increase in the commission when the turnover has
increased only by about double amount. Ld. CIT(A)'s findings are pleaded
to be contradictory in as much as in Para 9 it has been observed that
evidence like a chart showing of the details about agents being assessed has
placed on the record, PAN nos. copies of returns have been filed including
the commission amount in their income, whereas AO has commented that no
evidence was filed. Thus there is a contradiction between the findings of
AO and CIT(A) about the material filed before the respective authorities.
The assessee's reply filed before AO was found to be vague and general and
failed to show the business expediency of payment of commission. Ld. DR
contends that it implies that ld. CIT(A) gave the part relief based on some
additional evidence without any application by the assessee and without
calling for any remand report from AO. The relief has been granted on the
basis of material which was not before AO, therefore, the order of CIT(A)
should be reversed.
4. Ld. Counsel for the assessee, on the other hand, contends that
accusation of the AO that no submissions were made and the explanation
was vague, is not correct, as proper submissions and details were filed. The
payment of commission is allowed in earlier years.
4.1. AO has not disputed the fact that all the payments were through a/c
payee cheques, TDS was deducted, payees are assessed to tax. The income-
tax details of payees, their complete addresses, copies of bills raised by them
are on record along with invoices from the agent. The entire expenditure
was incurred wholly and exclusively for business. It has not been alleged
that any payment is to related parties. In such eventualities no ad hoc
5 ITA No. 438/Del/2010
disallowance can be made out of expenditure which has been incurred
wholly and exclusively for the purpose of business. For holding that
payment was not genuine and not incurred for business purposes, the AO
has to point out the specific payment which is to be disallowed. Therefore,
the order of CIT(A) is justified. Besides, similar issue arose in subsequent
years i.e. A.Y. 2007-08 & 2008-09 in ITA nos. 4503 & 4504/Del/2010
wherein the ITAT vide order dated 27-12-2010 has upheld the CIT(A)'s
order deleting the ad hoc additions out of commission by following
observations:
"In these circumstances, we are of the view that no sufficient
reason has been shown by the Assessing officer for making
disallowance. Further, the disallowance has been made on an
ad hoc basis in a situation where the details have been filed. It
is not mentioned by the assessing officer as to which payments
were not genuine or did not relate to the business of the
assessee. The learned DR has also not been able to displace the
aforesaid findings of the ld. CIT(A). Therefore, we are of the
view that the learned CIT(A) has considered the facts in
entirety and came to the right conclusion that the whole of the
commission was deductible in computing the income.
Therefore, we do not find any reason to interfere with his order.
This finding is equally applicable to the facts of assessment
year 2008-09, in which disallowance of a smaller sum of Rs. 5
lacs was made by the Assessing officer. Accordingly, the
findings of the learned CIT(A) for both the years are upheld."
5. We have heard rival contentions and perused the material available on
record. Since the department has not raised any issue challenging the
admission of additional evidence, the contention of ld. DR in this context
cannot be entertained. Coming to the issue of merits, we find merit in the
argument of ld. AR that there is no allegation about payments having been
made to specified parties u/s 40A(2)(b). The fact that payments are through
6 ITA No. 438/Del/2010
a/c payee cheques, payees are assessed to tax, TDS has been deducted,
relevant details filed, have not been disputed. We find merit in the argument
of ld. counsel that unless a specific payment is pointed out to be non-genuine
or not incurred for the purpose of business, the business expenditure cannot
be disallowed on ad hoc basis. On similar issue the similar deletion made by
CIT(A) for A.Y. 2007-08 & 2008-09 has been upheld by ITAT as mentioned
above. In view of these facts and circumstances, we see no reason to
interfere in the order of CIT(A), which is upheld.
6. In the result, Revenue's appeal is dismissed.
The order is pronounced in the open court on 28th April, 2014.
Sd/- Sd/-
(J. S. REDDY) (R. P. TOLANI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:- 28 /04/2014
*MP*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
7 ITA No. 438/Del/2010
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