- ITO Vs Mohammed Afzal Muchhada (ITAT Mumbai)
- Background and Assessment Proceedings
- Revenue’s Grounds of Appeal
- Evidence Considered by the CIT(A)
- Submissions Before the Tribunal
- Revenue’s Submissions
- Assessee’s Submissions
- Tribunal’s Observations and Findings
- Commission Details and Supporting Documents
- Identity of Overseas Customers and Commission Agent
- Objection Regarding Remand Report and Additional Evidence
- Tribunal’s Conclusion on Genuineness of Commission Expenditure
- Final Decision
- Cases Discussed
ITO Vs Mohammed Afzal Muchhada (ITAT Mumbai)
Summary: The Income Tax Appellate Tribunal, Mumbai dismissed the Revenue’s appeal against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, which had deleted a disallowance of Rs. 4,46,87,776/- relating to overseas commission expenditure claimed by the assessee for assessment year 2018–19.
The assessee, an individual carrying on export business under the proprietary concern S.G. International, had filed his return of income on 31.10.2018 declaring total income of Rs. 10,66,630/-. The case was selected for limited scrutiny, including examination of compliance relating to tax deduction at source on payments made outside India. The Assessing Officer noted overseas commission expenditure of Rs. 4,46,87,776/- against export sales of Rs. 44,88,46,698/-, approximately 10% of sales. According to the Assessing Officer, adequate party-wise details and supporting evidence had not been furnished despite notices under section 142(1). The entire commission expenditure was accordingly disallowed and total income was assessed at Rs. 4,57,54,410/-.
Before the CIT(A), the assessee’s claim was supported by commission agreements, commission invoices, bank realisation certificates and material showing that the commission ratio ranged between 10% and 12.5% in different years. The CIT(A) found that the Assessing Officer had not brought material establishing that the expenditure was bogus, personal or capital in nature and deleted the disallowance of Rs. 4,46,87,776/-, relying, inter alia, on the principles laid down by the Hon’ble Supreme Court in S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 and Bengal Enamel Works Ltd. v. CIT (1970) 77 ITR 119.
Before the Tribunal, the Departmental Representative contended that the CIT(A) had accepted fresh evidence without obtaining a remand report, that the identity of all alleged commission agents had not been established and that a difference concerning commission invoices had not been reconciled. The Authorised Representative, on the other hand, submitted that commission details had been uploaded before the Assessing Officer on 25.03.2021 and that the claim was supported by bank letters, foreign inward remittance certificates, sales commission invoices, electronic bank realisation certificates and the tax audit report in Forms 3CB and 3CD. It was further submitted that the entities appearing in the export statement were buyers/consignees rather than 53 separate commission agents.
The Tribunal examined the material on record and found that the CIT(A) had considered documents having a direct nexus with the export transactions, receipt of export proceeds and deduction/payment of overseas commission. It rejected the Revenue’s premise that the export-wise statement represented 53 different commission agents. The Tribunal noted that the recipient of commission was separately identified as ASAS/Al Rai General Trading LLC and that the commercial relationship was supported by a long-standing agreement and commission invoices.
The Tribunal also observed that the Revenue had not shown which particular document was admitted in breach of Rule 46A of the Income-tax Rules, 1962, nor had it controverted the contents of the banking, remittance and export realisation documents. It held that the assessee had established the commercial arrangement and substantiated the expenditure through contemporaneous export, banking and commission records. As no material had been brought by the Revenue to establish that the expenditure was not genuine or was not incurred for the export business, the Tribunal found no infirmity in the CIT(A)’s deletion of the disallowance.
Accordingly, the Revenue’s appeal was dismissed. The Tribunal had also condoned the one-day delay in filing the appeal after considering the explanation given by the Assessing Officer regarding tracing of case records, preparation of the scrutiny report and obtaining the requisite authorisation.
Background and Assessment Proceedings
The appeal arose from the order dated 03.10.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi under section 250 of the Income-tax Act, 1961. The appellate order arose from the assessment order dated 12.04.2021 passed under section 143(3) read with sections 143(3A) and 143(3B) of the Act by Ward 17(2)(1), Mumbai.
The assessee had claimed overseas commission expenditure of Rs. 4,46,87,776/- against export sales of Rs. 44,88,46,698/-. The Assessing Officer considered the commission to be approximately 10% of export sales and, according to the assessment order, found that adequate party-wise particulars and supporting evidence had not been furnished despite notices issued under section 142(1).
The Assessing Officer therefore disallowed the entire commission expenditure and assessed the total income at Rs. 4,57,54,410/-.
Revenue’s Grounds of Appeal
The Revenue challenged the deletion of the commission disallowance on several grounds. It questioned whether the CIT(A) was justified in deleting the disallowance where, according to the Revenue, the identity of the foreign agents had not been proved and only a list of 53 commission agents had been furnished.
The Revenue further challenged the reliance placed on documentary evidence concerning Al-Sadqain Al-Saqlain General LLC and contended that the evidence relating to that entity could not justify commission expenses concerning the remaining entities.
Another ground concerned an alleged difference between commission invoices of Al-Sadqain Al-Sadqain General Trading LLC submitted during appellate proceedings amounting to USD 7,00,499, equivalent to Rs. 4,55,88,474/-, and the commission claim of Rs. 73,01,205/- stated to have been made during assessment proceedings.
The Revenue also questioned the CIT(A)’s decision not to seek an Assessing Officer’s comment through a remand report concerning additional documents submitted during the appellate proceedings.
Evidence Considered by the CIT(A)
The CIT(A) examined commission agreements, commission invoices, bank realisation certificates and material showing that the commission ratio ranged between 10% and 12.5% in different years.
The appellate authority also considered bank letters, foreign inward remittance certificates, sales commission invoices, electronic bank realisation certificates and the tax audit report in Forms 3CB and 3CD, as referred to before the Tribunal.
The CIT(A) found that the Assessing Officer had not brought any material to establish that the expenditure was bogus, personal or capital in nature and had questioned the quantum on the basis of his own perception.
Submissions Before the Tribunal
Revenue’s Submissions
The learned Departmental Representative relied upon the assessment order and the grounds of appeal. The Revenue submitted that the CIT(A) had accepted fresh evidence without obtaining a remand report from the Assessing Officer.
It was also submitted that the identity of all the alleged commission agents had not been established and that the difference referred to in ground no. 3 remained unreconciled. On this basis, the Revenue contended that deletion of the entire disallowance was not justified.
Assessee’s Submissions
The learned Authorised Representative supported the order of the CIT(A). It was submitted that the assessee had uploaded the commission details before the Assessing Officer on 25.03.2021.
The learned AR further submitted that the CIT(A) had allowed the claim after considering bank letters, foreign inward remittance certificates, sales commission invoices, electronic bank realisation certificates and the tax audit report in Forms 3CB and 3CD.
The assessee also placed export-wise details containing names and addresses of overseas customers, export invoices and corresponding commission. It was explained that the entities appearing in the export statement were buyers/consignees and not 53 separate commission agents.
According to the assessee’s submission, commission was paid to ASAS/Al Rai General Trading LLC under a long-standing agreement, with the agent deducting its agreed commission before remitting the balance export proceeds to the assessee.
Tribunal’s Observations and Findings
Commission Details and Supporting Documents
The Tribunal noted that the assessee had uploaded commission details on 25.03.2021. It further found that the CIT(A) had considered the bank letters, foreign inward remittance certificates, sales commission invoices, electronic bank realisation certificates, commission agreement and tax audit report in Forms 3CB and 3CD.
According to the Tribunal, these documents had a direct nexus with the export transactions, receipt of export proceeds and deduction/payment of overseas commission.
Identity of Overseas Customers and Commission Agent
The Tribunal found that the principal premise of the Revenue’s first two grounds was not borne out from the documents explained before it. The export-wise statement contained particulars and addresses of overseas buyers/consignees together with export and commission details.
The Tribunal held that the names appearing in the statement could not, merely by their number, be treated as 53 different commission agents. The recipient of commission was separately identified as ASAS/Al Rai General Trading LLC, and the commercial relationship was supported by a long-standing agreement and commission invoices.
Thus, the Tribunal distinguished between the overseas customers to whom goods were exported and the overseas agent through whom orders and remittances were facilitated.
Objection Regarding Remand Report and Additional Evidence
The Tribunal considered the Revenue’s objection that the CIT(A) had not obtained a remand report concerning additional documents. It noted that the Revenue had not shown which particular document was admitted in breach of Rule 46A of the Income-tax Rules, 1962.
The Tribunal also noted that the Revenue had not controverted the contents of the banking, remittance and export realisation documents. In those circumstances, it held that the general objection that no remand report was called for did not, by itself, warrant interference with the conclusion reached on the evidence.
Tribunal’s Conclusion on Genuineness of Commission Expenditure
Applying its findings to the facts before it, the Tribunal held that the assessee had established the commercial arrangement and substantiated the expenditure through contemporaneous export, banking and commission records.
The Tribunal found that no material had been brought by the Revenue to establish that the expenditure was not genuine or was not incurred for the export business.
Accordingly, the Tribunal found no infirmity in the order of the CIT(A) deleting the disallowance of Rs. 4,46,87,776/-.
Final Decision
The Tribunal dismissed the appeal filed by the Revenue and upheld the deletion of the disallowance of Rs. 4,46,87,776/- relating to overseas commission expenditure.
The order was pronounced in the open court on 11/08/2026.
Cases Discussed
- ITO Vs Mohammed Afzal Muchhada (ITAT Mumbai)
- S.A. Builders Ltd. v. CIT (2007) 288 ITR 1
- Bengal Enamel Works Ltd. v. CIT (1970) 77 ITR 119
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal by the Revenue is directed against the order dated 03.10.2025 passed by the learned Commissioner of In come-tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], under section 250 of the Income-tax Act, 1961 [“the Act”], for the assessment year 2018–19. The impugned appellate order arises from the assessment order dated 12.04.2021 passed under section 143(3) read with sections 143(3A) and 143(3B) of the Act by the Ward 17(2)(1), Mumbai.
2. There is a delay of one day in filing the present appeal. The Assessing Officer has filed a petition stating that the case records were not readily traceable and that some time was consumed in tracing the records, preparing the scrutiny report and obtaining the requisite authorisation. Considering the nominal delay and the cause stated in the petition, we condone the delay and admit the appeal for adjudication on merits.
3. The Revenue has raised the following grounds of appeal:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in deleting disallowance of Rs. 4,46,87,776/- of commission paid to foreign agents whose identity is not proved as the assessee failed to submit any documentary evidences except a list of 53 commission agents.
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in relying on documentary evidences of only one entity i.e. Al-Sadqain Al-Saqlain General LLC and on that basis allowed commission expenses paid to all remaining 52 entities whose identity remained unverified and unexplained.
3. Whether on the facts and circumstances of the case and in law, the order of the Ld. CIT(A) is perverse on facts as he failed to appreciate that the assessee could not reconcile difference between commission invoices of Al-Sadqain Al-Saqlain General Trading LLC submitted during appellate proceeding amounting to USD 7,00,499 (equivalent to Rs. 4,55,88,474/-) whereas as per claim made by assessee during assessment proceeding was of Rs. 73,01,205/-.
4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in not seeking AO’s comment through a remand report on the admissibility of additional documents submitted during appellate proceeding?
5. The AO prays for condonation of delay of appeal as the due date of filing of appeal before the Hon’ble ITAT was 31.12.2025 but the same was not filed on time. The AO prays for condonation of one day of delay in filing of appeal due to unforeseen circumstances.
6. The appellant craves leave to amend or alter or add a new ground which may be necessary.
4. Briefly stated, the assessee, an individual carrying on export business under the proprietary concern S.G. International, filed his return of income on 31.10.2018 declaring total income of Rs. 10,66,630/-. The case was selected for limited scrutiny, inter alia, to examine compliance with the provisions relating to tax deduction at source on payments made outside India. The Assessing Officer noticed that the assessee had claimed overseas commission expenditure of Rs. 4,46,87,776/- against export sales of Rs. 44,88,46,698/-, being approximately 10% of the sales. According to the Assessing Officer, despite notices issued under section 142(1), the assessee did not furnish adequate party-wise details and supporting evidence. Holding the expenditure to be excessive and unsubstantiated, the Assessing Officer disallowed the entire commission and assessed the total income at Rs. 4,57,54,410/-.
5. In appeal, the learned CIT(A) examined the commis sion agreements, commission invoices, bank realisation certificates and the material showing that the commission ratio ranged between 10% and 12.5% in different years. He found that the Assessing Officer had not brought any material to establish that the expenditure was bogus, personal or capital in nature and had questioned the quantum merely on the basis of his own perception. Relying, inter alia, on the principles laid down by the Hon’ble Supreme Court in S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 and Bengal Enamel Works Ltd. v. CIT (1970) 77 ITR 119, the learned CIT(A) deleted the disallowance of Rs. 4,46,87,776/-.
6. The learned Departmental Representative relied up on the assessment order and the grounds of appeal. He submitted that the learned CIT(A) had accepted fresh evidence without obtaining a remand report from the Assessing Officer; that the identity of all the alleged commission agents had not been established; and that the difference referred to in ground no. 3 had not been reconciled. He, therefore, submitted that the deletion of the entire disallowance was not justified.
7. Per contra, the learned Authorised Representative supported the order of the learned CIT(A). He submitted that the assessee had uploaded the commission details before the Assessing Officer on 25.03.2021. He further submitted that the learned CIT(A) allowed the claim only after considering the bank letters, foreign inward remittance certificates, sales commission invoices, electronic bank realisation certificates and the tax audit report in Forms 3CB and 3CD. The learned AR also placed before us the export-wise details containing the names and addresses of the overseas customers, the export invoices and the corresponding commission. It was explained that the entities appearing in the export statement were buyers/consignees and not 53 separate commission agents, as assumed by the Revenue. The commission was paid to ASAS/Al Rai General Trading LLC, with whom the assessee had a long-standing agreement, and the agent deducted its agreed commission before remitting the balance export proceeds to the assessee. He accordingly submitted that the grounds of the Revenue proceed on an incorrect appreciation of the documents and that the appeal be dismissed.
8. We have heard the rival submissions and perused the material available on record. The entire disallowance was made because, according to the Assessing Officer, the assessee had not furnished the requisite particulars and because commission of about 10% of export turnover appeared excessive. We find from the record that the assessee had uploaded commission details on 25.03.2021. The learned CIT(A), while deciding the appeal, considered the bank letters, foreign inward remittance certificates, sales commission invoices, electronic bank realisation certificates, the commission agreement and the tax audit report in Forms 3CB and 3CD. These documents have a direct nexus with the export transactions, receipt of export proceeds and deduction/payment of the overseas commission.
9. The principal premise of grounds nos. 1 and 2 is that the assessee had produced only a list of 53 unidentified commission agents and evidence in respect of merely one of them. This premise is not borne out from the documents explained before us. The export-wise statement contains the particulars and addresses of the overs eas buyers/consignees, along with the export and commission details. The names appearing therein cannot, merely by their number, be treated as 53 different commission agents. The recipient of commission was separately identified as ASAS/Al Rai General Trading LLC and the commercial relationship was supported by a long-standing agreement and commission invoices. Thus, the distinction between the overseas customers to whom goods were exported and the overseas agent through whom orders and remittances were facilitated adequately answers the first two grounds.
10. The record further shows that the Assessing Officer’s conclusion itself was founded on the alleged absence of supporting details. The assessee’s specific contention is that the commission details had already been uploaded on 25.03.2021, and the assessment order also records a reply furnished in response to the show-cause notice. The appellate authority is empowered to examine the material germane to the issue before it. In the present case, the Revenue has not shown which particular document was admitted in breach of Rule 46A of the Income- tax Rules, 1962, nor has it controverted the contents of the banking, remittance and export realisation documents. In these circumstances, the general objection that no remand report was called for does not, by itself, warrant interference with the conclusion reached on the evidence.
11. Applying the above principle to the facts before us, the assessee has established the commercial arrangement and substantiated the expenditure through contemporaneous export, banking and commission records. No material has been brought by the Revenue to establish that the expenditure was not genuine or was not incurred for the export business. We, therefore, find no infirmity in the order of the learned CIT(A) deleting the disallowance of Rs. 4,46,87,776/-.
12. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 11/08/2026.
