INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Disallowance of commission payment - No evidence furnished to prove incurring of expenses -

During the course of assessment proceedings, AO observed that assessee had paid a commission to M/s. V. Assessee submitted invoices in support of claim. However, AO issued show cause notice to assessee to justify claim of those expenses as according to him those expenses were not genuine and it was excessive and unreasonable. Assessee submitted modus operandi and sale and procurement methodology of each commodities stating that each of the commodities were traded differently. Therefore, commission paid on sale of one commodity could not be compared with other commodity. It was submitted that the rate of commission on commodities like soya and sugar are different from Maize. However, AO rejected the explanation of assessee and disallowed the said expenses. Held: No evidence were led to show that directors of company were capable of obtaining such a huge orders of export of maize for assessee. Their biodata or their credentials were also not shown that they have any experience in commodity market. Assessee did not produce on its own when rendition of the services were in doubt and directors of the broker company to establish that they know the importers in Bangladesh or they have an experience of commodity market. Though, payment might be at the convenience of parties or at the time of availability of funds but booking the bills after substantial delay proves that these expenditure were not genuine. Therefore assessee had failed to show the genuineness of commission payment and accordingly, disallowance was rightly made by AO.

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2012-13

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