The order of the Bench was delivered by
Annapurna Gupta (Accountant Member)-Both the appeals filed by the same assessee are directed against different orders of the Commissioner of Income-tax (Appeals)-2, Ludhiana, dated May 10, 2012 and March 20, 2015 pertaining to the assessment years 2009-10 and 2010- 11 respectively. Since the issue involved in both the appeals is identical, they were heard together and are being disposed of by this common order.
2. For the sake of convenience, we will take up the appeal of the assessee in I. T. A. No. 733/Chd/2012 and the decision given in this appeal will apply to other appeal of the assessee in I. T. A. No. 443/Chd/2015 mutatis mutandis.
I. T. A. No. 733/Chd/2012 : Assessment year 2009-10
3. The only ground raised by the assessee reads as under :
"That order passed under section 250(6) of the Income-tax Act, 1961 by the learned Commissioner of Income-tax (Appeals)-II, Ludhiana is against law and facts on the file inasmuch he was not justified to arbitrarily uphold the action of the learned Assessing Officer in disallowing commission amounting to Rs. 23,31,537 as business expenditure."
4. The only issue in the present appeal is against the disallowance of Rs. 23,31,537 out of commission expenses.
5. Brief facts relating to the case are that during assessment proceedings the Assessing Officer found that the assessee had claimed expenses amounting to Rs. 23,31,537 on account of commission paid on sale of power press machines. The assessee was asked to justify the expenses. On scrutiny of the details and evidences filed the Assessing Officer found that the assessee had paid commission to 15 persons. The Assessing Officer issued summons under section 131 to the agents in response to which 11 appeared and their statements were recorded. From the statement recorded the Assessing Officer concluded that the commission paid was bogus since none of the persons had any experience in the line of selling machines, had no knowledge of power press machines, did not know the purchasing parties, got heavy commission for no services except for one time introducing them to the assessee, there was no written agreement and all the purchasing parties were reputed who had no reason to buy these machines through unknown persons when they could have very well bought it directly from the assessee and were purchasing machines from the assessee in earlier years also. The Assessing Officer also found that three persons namely Sh. Angrej Singh, Surinder Kumar Sood and Nirmal Singh had admitted that they had not received any commission and only to make capital for filing returns of income they got cheques of commission from the assessee and returned back the amount in cash. The Assessing Officer therefore concluded that no services had been rendered by the agents and no commission had actually been paid by the assessee. He therefore disallowed the commission expense of Rs. 23,31,537 treating the same to be bogus expenses. The learned Commissioner of Income-tax (Appeals) upheld the disallowance made holding the expenses to be bogus in the absence of any evidence of services rendered by the agents and further since the assessee could not rebut the findings of the Assessing Officer.
6. Before us, the learned counsel for the assessee reiterated the submissions made before the Commissioner of Income-tax (Appeals) and stated that the commission expenses were genuine since it was shown in the Income-tax return of the agent and TDS had been deducted thereon. He further stated that only three agents had denied receiving commission and they had not proved the genuineness of their statement by way of any documentary evidence.
7. The learned Departmental representative, on the other hand, relied upon heavily on the order of the Assessing Officer as well as that of the learned Commissioner of Income-tax (Appeals).
8. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record.
9. We find no infirmity in the order of the learned Commissioner of Income-tax (Appeals) confirming the disallowance made on account of commission. The relevant findings of the Commissioner of Income-tax (Appeals) upholding the disallowance at paragraph 3.3 of the order is as under :
"3.3 I have carefully perused the written submission and the assessment order. The Assessing Officer has held that the commission expenses claimed were bogus and that no services were rendered by the persons to whom commission have been paid. In this regard, the following facts may be mentioned once again :
(i) The appellant inspite of repeated opportunities did not give any evidence of services rendered by these persons in lieu of which the commission was paid.
(ii) The appellant failed to produce the persons to whom the commission was paid, before the Assessing Officer.
(iii) In response to summons under section 133, only 11 out of 15 persons appeared.
(iv) In the statement recorded under section 131, three persons admitted that they returned cash to the appellant against the cheques received by them on account of commission payments.
(v) None of the person have knowledge about the power press machines nor any experience in the line of selling these machines.
(vi) All the persons stated that they had no links with the purchasing parties and met them incidentally.
(vii) The persons to whom commission expenses claimed to have been paid stated that they merely introduced the purchasing parties to the appellant. Thereafter no service were rendered by them.
(viii) Most of the purchasing parties were already known to the appellant. As such they did not require any introduction with the appellant.
Even during the course of appellate proceedings, the appellant has not given any details of services rendered by these persons for which commission has been claimed. The appellant has also not been able to rebut the findings of the Assessing Officer discussed at pages 2 to 4 of this order, or give any explanation as to how inspite of these findings, the commission payments can be held to be genuine. The appellant has merely claimed that the Assessing Officer was biased and that he pressurised the persons whose statements were recorded. Perusal of the assessment records shows that the Assessing Officer has recorded the detailed statements under section 131 in order to establish the genuineness or otherwise of the commission expenses. The claim of the appellant that the Assessing Officer was biased is totally incorrect. The detailed statements clearly establish that commission payments were a sham arrangement to reduce income of the appellant.
The appellant has also submitted that all the documentary evidence submitted by it before the Assessing Officer were ignored. This statement is also factually incorrect. The Assessing Officer has mentioned about all the details submitted by the appellant and given detailed justification as to why the submissions are not satisfactory. The Assessing Officer has clearly pointed out that no evidence with regard to the services rendered by these persons was submitted during the course of assessment proceedings. As mentioned above, even during the course of appellate proceedings no such evidence was submitted to substantiate its claim.
From all the facts discussed above, it is my considered view that the Assessing Officer was fully justified in disallowing the commission of Rs. 23,31,537. This ground of appeal of the appellant is accordingly dismissed."
10. We find that the learned Commissioner of Income-tax (Appeals), on appreciation of the evidence on record has given a categorical finding of fact that no work was done by the agents for the assessee warranting payment of commission. This fact has not been controverted by the learned counsel for the assessee before us. No evidence whatsoever has been produced before us contradicting this finding of the Commissioner of Income-tax (Appeals). The only evidences on which the learned authorised representative places reliance upon is the Income-tax returns of the agents which do not establish that they had done any work for the assessee. Further the statement of the three agents admitting in so many words that the commission paid was merely an accommodation entry, explaining the manner of execution also coupled with the above facts as found by the Assessing Officer that no evidence of services rendered by the agents was filed by the assessee, the agents had no knowledge of the product sold, had no links with the purchasers, had claimed the receipt of commission only for introducing the buyers and the fact that most of the buyers were known to the assessee and did not require any introduction, seals the matter against the assessee.
11. In view of the same, we uphold the order of the Commissioner of Income-tax (Appeals) confirming the disallowance of commission expenses paid amounting to Rs. 23,31,537 and thus dismiss the ground of appeal raised by the assessee.
12. In the result, both the appeals of the assessee are dismissed.