Ritu Sanjay Toshniwal Vs ACIT (ITAT Mumbai)
ITAT Deletes Addition to Extent of Write-Back Already Taxed to Prevent Double Taxation; Foreign Commission Disallowed as Assessee Failed to Prove Genuineness of Services: ITAT; ITAT Upholds Commission Disallowance Due to Lack of Evidence and Foreign Entity’s Denial; Commission Expense Rejected for Failure to Establish Business Nexus and Statutory Compliance.
In , the Income Tax Appellate Tribunal (ITAT) Mumbai dealt with four appeals relating to Assessment Years (A.Ys.) 2007–08 to 2010–11 concerning disallowance of foreign agency commission claimed by the assessee in respect of payments payable to M/s Shore Chem LLC, USA.
The assessee, engaged in export and trading of paper products through a proprietary concern, had claimed deduction of foreign commission expenses in the relevant years. Original assessments under section 143(3) had accepted the returned income. Subsequently, based on information obtained through the Exchange of Information mechanism under Article 28 of the India-USA DTAA, the US tax authorities informed the Assessing Officer that M/s Shore Chem LLC had neither rendered services to the assessee nor had any income receivable from the assessee. Based on this information, reassessment proceedings were initiated for earlier years, and disallowances were also made for A.Y. 2010–11.
The Assessing Officer disallowed the commission expenditure on the grounds that the assessee failed to establish the genuineness of the services, did not furnish supporting invoices and documentary evidence, and there were contradictions regarding the identity of the commission recipient. Though the Tribunal in an earlier round restored the matter for fresh examination, the Assessing Officer again disallowed the expenditure after concluding that no credible new evidence had been furnished.
