ITAT Allows Full Rs. 8.55 Lakh Commission Paid by CA to Referral Agents, Holding Ad Hoc 30% Disallowance Unsustainable [Read Order]
The tribunal noted that the payments were duly confirmed by the recipients, supported by bills and vouchers, and no rationale was provided for the arbitrary disallowance.
![ITAT Allows Full Rs. 8.55 Lakh Commission Paid by CA to Referral Agents, Holding Ad Hoc 30% Disallowance Unsustainable [Read Order]](https://images.taxscan.in/h-upload/2025/10/17/2097374-itat-down-excessive-disallowance-taxscan.webp "ITAT Allows Full Rs. 8.55 Lakh Commission Paid by CA to Referral Agents, Holding Ad Hoc 30% Disallowance Unsustainable [Read Order]")
The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the full Rs. 8.55 lakh commission paid by a Chartered Accountant (CA) to 14 referral agents for identifying potential insurance customers, holding that the ad hoc 30% disallowance by the Assessing Officer (AO) was unsustainable. Bhavesh Karamshi Thakkar,appellant-assessee,was a resident individual, a...
The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the full Rs. 8.55 lakh commission paid by a Chartered Accountant (CA) to 14 referral agents for identifying potential insurance customers, holding that the ad hoc 30% disallowance by the Assessing Officer (AO) was unsustainable.
Bhavesh Karamshi Thakkar,appellant-assessee,was a resident individual, a qualified CharteredAccountant, and an insurance agent with LIC of India and Reliance General Insurance Company Ltd. For the assessment year 2015-16, he filed his return on 21.08.2015, declaring a total income of Rs.48,47,710/-, which was selected for scrutiny.
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During assessment, the A.O. observed that the assessee had claimed Rs.29,96,390/- as sales promotion expenses, of which Rs.28,50,093/- was paid as commission to 14 individuals who identified potential customers. The assessee explained that these persons only referred customers, while he handled the sales process, and argued that the expenditure was wholly for business purposes.
The AO issued notices under section 133(6) and summons under section 131 to verify the payments. Although the parties confirmed receipt, the AO remained unconvinced about the genuineness of the entire expenditure and disallowed 30% of it, totaling Rs.8,55,028/-. The assessee’s appeal before the first appellate authority was unsuccessful.
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The two member bench comprising Saktijit Dey (Vice President) and N.K Billaiya (Accountant Member) examined the submissions and the record. It noted that the assessee had paid Rs.28,59,093/- to 14 individuals for identifying potential insurance customers, and there was no dispute about these payments.
The AO had issued notices under section 133(6) and summons under section 131, and the individuals confirmed receipt of the payments. Supporting bills, vouchers, and payment details were also submitted.
Despite this, the AO disallowed 30% of the commission on an adhoc basis, without any explanation for the rate chosen. The tiibunal held that such disallowance was unjustified and allowed the ground.
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