Genuineness of Commission can’t be Suspected If It was not paid to Relatives or It is not come back to Assessee: ITAT [Read Order]

Commission

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has held that the genuineness of the commission payments cannot be suspected if the amount was not paid to relatives of the assessee or the same has not come back to the assessee.

In the instant case, the assessee is engaged in trading of cotton and iron and steel. The assessee’s claim for deduction of expenditure in respect of commission payments was rejected by the Assessing Officer by holding that the same was not genuine.

On second appeal, the Tribunal noted that the AO has disallowed the commission simply on surmises without bringing any evidence on record to the contrary but on presumption that the Jessop companies building was in dilapidated condition etc or that the telephone made by the AO was not picked up by the employee of Jessop Co. Ltd cannot be a ground for disallowing the commission.

It was further noted that the parties to whom commission was paid were not relatives of the assessee. There is no evidence that the commission paid has come back to the assessee.

The Tribunal relied on various cases wherein it has been held that if there is no evidence to show that the agents were relatives of the assessee and that the commission paid has not come back to the assessee, then it cannot be said that the commission paid was not genuine.

“We note in the present case before us, the assessee had made all the payments to the parties from whom purchase was made by account payee cheques, the purchases made can be verified from the purchase bills, sales tax numbers and transport documents. The books of accounts were not rejected. We note that all the five parties to whom the assessee paid commission had submitted their copy of bill which contained their PAN details. Tax was deducted at source by the assessee and deposited with the Government. Summon u/s 133(6) were served on all the parties/agents, and all of them confirmed to have received the commission,” the Tribunal observed.

“And all the five agents have duly included the income in their return of income and paid taxes thereon and that there was no evidence to show that the money has come back to assessee or the agents were related parties. Therefore, the service of the agents in the aforesaid facts and circumstances are for business purpose and therefore, the commission paid was a business expense and needs to be allowed as ‘deduction’ since it is of revenue nature and expended wholly and exclusively for the purpose of business and, therefore, the AO is directed to allow commission expenditure incurred by the assessee,” the Tribunal added.

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