Raj Kumar Daga HUF Vs ACIT (ITAT Delhi)
AO’s Suspicion Not Evidence- Commission Payments Genuine- Section 68 Cannot Apply to Opening Balances
Assessee, proprietor of M/s Gappu Ispat, engaged in trading of iron & steel, filed returns declaring income of Rs.31,20,070 for AY 2013-14. In scrutiny, AO disallowed Rs.49,51,599 out of total commission of Rs.1,25,90,385 alleging bogus payments—seven parties did not appear, notices returned unserved, & explanations of three parties were rejected. AO assessed income at Rs.80,71,670. Ld. CIT(A)/NFAC confirmed the additions.
Before Tribunal, Assessee submitted full details of all agents, including confirmations, invoices, bank statements, ITRs, & in some cases affidavits affirming receipt of commission. All payments were through banking channels with TDS deduction, & recipients declared the income. It was argued that AO accepted sales of ~Rs.13 crores which required middlemen; commission of 2.01% was reasonable. Importantly, identical documentation was accepted for commission of Rs.75,57,786, thus partial disallowance was inconsistent.
Tribunal noted that identity, genuineness & services of agents were established. AO proceeded merely on suspicion without disproving documents or showing commissions were not rendered. Commission percentage was low & commensurate with trade practice. Disallowance was therefore deleted.
For AY 2014-15, AO similarly disallowed commission of Rs.1,05,63,454 (though wrongly enhanced to Rs.1,38,60,230 in computation). Both parties admitted that facts were identical to earlier year. Tribunal held that the same reasoning applied & deleted the entire disallowance.
