Princy Bhat Vs ITO (Delhi ITAT)
Commission Expense Cannot Be Disallowed Without Verification – ITAT Restores Matter Where PAN, ITR, Addresses & Confirmations of Agents Were Furnished but Not Properly Examined
Summary: The Delhi ITAT dealt with disallowance of commission expenditure where the assessee contended that substantial documentary details regarding the commission agents had been furnished, but the AO did not undertake verification from the concerned parties. The difficulty was compounded at the appellate stage when the CIT(A) refused to admit additional evidence subsequently collected by the assessee. Finding that neither stage had resulted in proper verification of the evidence, the Tribunal restored the matter to the AO for a de novo assessment after granting adequate opportunity to the assessee.
Facts & controversy
The assessee challenged the disallowance of commission expenses on the ground that the relevant expenditure had actually been incurred for business purposes & sufficient particulars regarding the recipients had been furnished.
According to the assessee, she had collected ITRs & confirmations from the commission agents to substantiate the expenditure. However, because sufficient time was allegedly not available during assessment, she could not obtain all confirmations within the stipulated period & the entire expenditure came to be disallowed.
The assessee contended that the confirmations contained names, PANs, addresses & amounts paid. Nevertheless, the evidence was considered insufficient, inter alia, because the confirmations were not printed on letterheads.
The assessee explained that the agents were individuals who did not maintain printed letterheads & that all material particulars necessary for independent verification were already available with the Department.
No letterhead – but PAN, address & ITR were available
One of the interesting features of the dispute was the manner in which the confirmations were evaluated.
The assessee’s grievance was that she had furnished practically all information obtainable from the third-party agents—including their PAN, ITR, addresses & confirmations—yet these were rejected as inadequate.
Her contention was essentially that absence of a formal letterhead could not by itself destroy the evidentiary value of a confirmation when the identity of the recipient & particulars necessary for verification were otherwise available.
The assessee further pointed out that the commission recipients were regular income-tax assessees filing their respective returns. The payments had also been made through banking channels for business purposes.
AO doubted the expenditure but did not verify the recipients
A significant grievance before the Tribunal was that although the assessee had provided third-party particulars, the AO did not carry out verification from those parties.
The assessee contended that the complete list of payees together with their PAN, addresses & commission amounts had been furnished. Therefore, if the AO entertained doubts regarding genuineness, the information necessary to independently verify the recipients was available.
Instead, according to the assessee, the claim was simply disallowed for want of evidence without pursuing verification from the parties whose particulars were already on record.
The assessee also explained that this was her first year of tax audit, as the gross receipts had crossed the applicable turnover threshold, & the inability to furnish certain material within the limited time available was a technical but bona fide lapse.
CIT(A) refused additional evidence
The assessee attempted to supplement the record during the first appellate proceedings by furnishing additional evidence.
However, the CIT(A) refused to admit the additional evidence & confirmed the AO’s additions.
Thus, according to the assessee, the evidence suffered an unfortunate fate at both stages—the AO had not verified all the documents/details originally furnished, while the CIT(A) declined to admit the additional evidence produced to substantiate the expenditure further.
ITAT – Evidence deserves proper examination
The Tribunal found substance in this procedural grievance.
It specifically noticed two aspects. First, the CIT(A) had not accepted the additional evidence filed by the assessee. Secondly, even the AO had not verified all the documents & details furnished during assessment.
In these circumstances, the ITAT considered it appropriate that the issue should not be finally decided either for or against the assessee without a proper factual exercise.
Accordingly, in the fitness of things, the matter was restored to the AO for de novo assessment after providing the assessee an adequate opportunity as required under law.
The assessee was correspondingly directed to furnish all necessary documents, details & data before the AO within time so that the fresh assessment could be completed expeditiously.
Not a deletion on merits
An important qualification is necessary.
The ITAT did not hold that the commission expenditure was proved or automatically allowable merely because PANs, ITRs, addresses & confirmations had been furnished. Nor did it finally hold that payment through banking channels conclusively established genuineness.
The Tribunal’s decision is essentially founded on proper verification & adequate opportunity.
The AO has therefore been given another opportunity to examine the evidence, verify the commission recipients & determine the allowability of the expenditure in accordance with law.
Accordingly, the assessee’s appeal was allowed for statistical purposes.
Author’s Comment
The order highlights a practical point frequently encountered in assessments involving commission, brokerage & third-party expenses. Once an assessee furnishes the names, PANs, addresses, ITR particulars & confirmations of recipients, the AO certainly remains entitled to test their genuineness. But if doubts persist, verification is preferable to outright rejection—particularly when the recipients are identifiable income-tax assessees.
Equally, a confirmation does not become worthless merely because an individual commission agent does not possess a printed letterhead. Tax proceedings are concerned with the substance & verifiability of evidence, not its stationery.
At the same time, the decision should not be read as automatic approval of the expenditure. The assessee now gets another opportunity, but also carries the responsibility of producing the complete evidence before the AO.
When PAN, address & ITR are available, the better course is to verify the payee-not verify the quality of his letterhead.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT DELHI
Appeal in this case has been filed by the Assessee against the order dated 16.03.2026 passed by the CIT(A)/NFAC, Delhi for the A.Y. 2020-21. Grounds of appeal are as under :-
GROUNDS OF APPEAL
1. Disallowance of expenses where all the relevant information are already furnished
The learned CIT(A) gravely erred in law and on facts in confirming the addition made by learned AO by not admitting additional evidences submitted by the assessee.
The assessee has collected the ITRs and Confirmations from her agents to prove her commission expense but since in the given time she was unable to obtain all the confirmations, the complete expense was disallowed which is unjustified.
The confirmations and the submissions included Name, PAN, addresses and amount, but both the Id. AO and the Id. CIT(A) have treated the submitted evidences as insufficient since the confirmations were not printed on letter head.
Assessee also explained that the agents were individuals and do not have any printed letter heads and all the information is there for verification but the same was not found acceptable by Id. CIT(A).
Your honour, assessee submitted all the documents possible to be obtained from a third party including their PAN, ITR, Address, and most importantly confirmations but rejecting the same by considering them insufficient without providing the extra information required is unjustified.
We hence pray before your honour to kindly accept the submissions and allow the appeal and oblige.
2. Non verification of data submitted
During the course of assessment and first appeal proceedings, the assessee submitted data of third parties and furnished information of expenses paid to each respective party but the learned AO failed to execute any verification from any of those parties and disallowed the claim of the assessee citing lack of evidence which is against the principal of natural justified and is contested before your honour in this present appeal since all the persons to whom the commissions were paid are all regular assesses of the department and are filing their respective ITR
We pray before your honours to kindly consider the fact that all the payments were made from bank account only for the purpose of business.
Complete list of payees was submitted along with their PAN, Address and respective commission paid to each person to prove geniuses of the transactions.
This was the first year of audit for the assessee where her gross receipts crossed the applicable turnover threshold.
Non-submission due to insufficient time allowed is a technical but bona fide situation in case of the assessee.
And disallowing the major important expense of the assessee even after all the relevant necessary details were furnished creates a very high demand for the assessee where the expenses were actually made, which is wrong.
We hence pray before your honour to kindly delete the demand, quash the order and oblige.
We hope your honour finds the above in order and accept the appeal and oblige.”
2. During proceedings before us the Ld. Counsel of the assessee submitted that during the course of assessment as well as during appellate proceedings the assessee submitted data of third parties and furnished information of expenses paid to each respective party but the Ld. AO failed to execute any verification from any of those parties and disallowed the claim of the assessee citing lack of evidences. Similarly, The Ld. CIT(A) refused to admit additional evidences and confirmed the order and additions made by the AO.
3. Per contra the Ld. DR relied on the findings of the authorities below.
4. We have heard the arguments of both the parties and we find that the Ld. CIT(A) did not accept additional evidences filed by the assessee. Even the AO has not made verifications of all the document and details filed by the appellant during the assessment proceedings. Therefore, in our considered view in the fitness of things the matter should go back to the file of the AO for denovo assessment after giving adequate opportunity to the assessee as required under law. The appellant is also directed to file all the necessary documents and details and data before the AO in time so that the assessment order may be passed at the earliest.
5. In the result, the appeal filed by the assessee is allowed for statistical purpose.
Order pronounced in the Court on 02.09.2026.
