ITAT  upholds  disallowance of ‘commission on sales’ for failure to demonstrate actual role played by Commission Agents in procuring sales [Read Order]

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The Income Tax Appellate Tribunal (ITAT), Delhi bench upheld the disallowance of commission on sales due to the failure to demonstrate the actual role played by the commission agents in procuring sales.

The assessee, Maini Construction Equipments Pvt. Ltd, engaged in the business of manufacturing scaffolding. During the course of scrutiny assessment proceedings, the assessee had furnished the books maintained in a computerized environment. The Assessing Officer (AO) observed that the assessee had claimed a deduction on account of “commission on sales”. The assessee was asked to furnish a confirmation from the recipient, i.e., the commission agents. However, the assessee could not furnish the same before the AO.

Therefore, the AO concluded that the said expenditure remained unverifiable and proceeded to disallow it as non-genuine expenses under Section 37 of the Income Tax Act in the assessment.

Aggrieved by the order, the assessee filed an appeal before the CIT(A), who confirmed the disallowance. Thus, the assessee filed a second appeal before the tribunal.

During the proceedings, the counsel for the assessee argued that the assessee made sales to Reliance Industries Ltd, apart from other parties, and also furnished year-wise details of sales made to Reliance Industries Ltd vis-à-vis commission paid. Further, it was argued that the commission was duly subjected to deduction of tax at source, and the payments were made through regular banking channels.

Alok Bhura, counsel for the Revenue, supported the order of the assessing officers.

The Tribunal, while considering the appeal, observed that the CIT(A) concluded that no evidence had been placed on record by the assessee to demonstrate the actual role played by these commission agents in procuring sales orders from Reliance Industries Ltd. Furthermore, the invoices supplied therein don’t seem to be authentic because they lack the company’s seal, receipt number, or invoice number. It was also observed that all three commission agents are residing at the same address.

After reviewing the facts and records, the two-member bench of M. Balaganesh (Accountant Member) and Anubhav Sharma (Judicial Member) observed that the entire transaction was not genuine. Therefore, the bench upheld the disallowance of “commission on sales” due to the failure to demonstrate the actual role played by the commission agents in procuring sales.

Thus, the bench dismissed the appeal of the assessee.

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