Notional Chits & Loans Pvt. Ltd. Vs ITO (ITAT Cochin)
The Income Tax Appellate Tribunal (ITAT) in Cochin has dismissed the appeal of Notional Chits & Loans Pvt. Ltd., upholding the disallowance of 90% of the company’s claimed commission expenses. The company, a chit fund business in Thrissur, had its income re-assessed at a significantly higher amount by the Assessing Officer (AO) after failing to provide satisfactory evidence for a commission payment of Rs. 45,16,845. The AO’s full disallowance was subsequently reduced by the Commissioner of Income-tax (Appeals) [CIT(A)] to 90%, allowing only 10% of the expenditure, or Rs. 4,51,684. The ITAT noted that the company, which had claimed a gross commission of over Rs. 82 lakhs and paid a commission of over Rs. 46 lakhs, did not provide party-wise details or evidence to substantiate the high commission amount. Citing the lack of documentation and the unreasonableness of the expense, the ITAT found the CIT(A)’s decision to be sound and dismissed the company’s appeal.
FULL TEXT OF THE ORDER OF ITAT COCHIN
This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 06.08.2024 for Assessment Year (AY) 2018-19.
2. Brief facts of the case are that the assessee is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of conducting chits in Thrissur District. The return of income for AY 2018-19 was filed declaring total income of Rs. 4,50,625/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1(1), Thrissur (hereinafter called “the AO”) vide order dated 05.03.2021 passed u/s. 143(3) r.w.s 143(3A) & 143(3B) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 49,67,470/-. While doing so, the AO disallowed the commission payment of Rs. 45,16,845/- for the failure of the assessee to substantiate that the expenditure was occurred for business purposes. On appeal before the CIT(A), the CIT(A) allowed 10% of the expenditure of commission paid of Rs. 4,51,684/- and the balance addition of Rs.40,65,160/- was confirmed.
