The Ahmedabad Income Tax Appellate Tribunal ( ITAT ) has recently held that deduction on sale commission is not allowable if genuine expenditure cannot be ascertained.
Assessee Mangalya Ceramics filed a return of income for the year under consideration on 30.09.2014 declaring a total income of Rs. 1,69,14,010. During the course of assessment proceedings, the Assessing Officer made disallowance on account of sales commission.
The Assessing Officer, after examination and verification held that the genuineness of the expenditure could not be ascertained hence the sales commission expenses of Rs. 33,92,430/- were disallowed.
The assessee filed an appeal against the aforesaid order before CIT(A). The CIT(A) dismissed the appeal of the assessee. Thereafter, the assessee filed a second appeal before the tribunal.
S. N. Soparkar, counsel for the assessee submitted that the assessee has been paying commission for the past many years and which has never been disallowed in scrutiny assessment. That is the earlier years the Department accepted the payment of commission to various agents.
A. P. Singh, counsel for the revenue submitted that the genuineness of the expenditure could not be ascertained for allowed deduction to the sale commission.
The tribunal observed that this issue was already decided by the assessee’s own case by the CIT(A) Ahmedabad.
The bench determined that “there was no basis and reason for paying the commission to these agents who even otherwise were closely related to the assessee since the assessee was unable to demonstrate any service rendered by them as distributors.”
Therefore the tribunal comprising Waseem Ahmed, (Accountant Member) and Siddhartha Nautiyal, (Judicial Member) disallowed the grounds raised by the assessee for deduction in the sale commission.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
