The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the Assessing Officer cannot interfere with the business decisions of the assessee.
The facts, in brief, are that the assessee is a private limited company and engaged in the business of manufacturing Glazed Ceramics Tiles. The assessee in the year under consideration has claimed commission expenses amounting to Rs. 6,61,569/- only. The assessee in support of such commission expenses has filed copy of accounts of the parties along with the copies of the income-tax return. However, the AO found that the assessee failed to furnish the details of the services rendered by such commission agents. Therefore, the AO disallowed the same and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the Ld.CIT(A). The assessee before the Ld.CIT(A) submitted that it’s a common prevailing practice to increase the business by way of getting references from the parties It was also submitted by the assessee that the commission expenses were paid to unrelated parties after deducting the TDS. Therefore, there cannot be any doubt on the genuineness of the expenses. However, the Ld. CIT(A), disregarded the contention of the assessee by observing that the assessee failed to furnish the details about the services rendered by the commission agents.
The Tribunal bench comprising Shri Waseem Ahmed, Accountant Member and Ms. Suchitra Kamble, Judicial Member after hearing the rival contentions of both the parties and perused the materials available on record. “There is no ambiguity to the fact that the AO is not expected to interfere in the decision making process of the assessee. In the business environment, there are certain decision which are taken by the assessee depending upon the market forces. However, the primary onus lies upon the assessee at least to justify based on the documentary evidence that the business decision were taken in the course of the business as mandated under the provision of section 37 of the Act. But in the given case we note that the Ld. AR for Assessee has just tried to justify the genuineness of the expenses which has been not doubted by the authorities below. What has been doubted, were the services which were rendered by the consultants as discussed above. To this effect no satisfactory explanation was furnished by the Ld. AR for the assessee before us. Therefore, we do not find any ambiguity in the order of the authorities below”
In the result, the appeal filed by the assessee is dismissed.
Akik Tiles Pvt Ltd vs J.C.I.T
ITA No. 966/AHD/2013
Assessment Year: 2009-2010
In Favour of: RevenueINCOME TAX APPELLATE TRIBUNAL, AHMEDABAD