ITO Vs Mohammed Afzal Muchhada (ITAT Mumbai)
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.
