The Commissioner of Income Tax vs Lanxess India Pvt. Ltd., (Successors of Bayer Indian Syntans Ltd.)

K. Raviraja Pandian, J.—The appeal is filed against the order of the Income Tax Appellate Tribunal Madras ''B'' Bench made in I.T.A. No.

1226/Mds/2005 dated 16.02.2007 The relevant the assessment year is 1998-99.

The assessee is a manufacture of leather chemicals. The original assessment was completed u/s 143(3) on 30.3.2001 determining loss at Rs.

2,45,19,970/- as against the returned loss of Rs. 2,60,85,146/-. On the basis of the information received by the assessing officer claim for

commission/discount paid to M/s. Amranj Chemical Agencies by the assessee was examined and the assessing officer after considering the

materials available on record disallowed the claim for the commission payment of Rs. 1,69,39,827/-. Against that order the assessee preferred an

appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax Appeals held that 20% of the total disallowance of

commission of Rs. 1,69,39,827/- should be disallowed as unreasonable and excessive. Thus, he directed the assessing officer to modify the

assessment accordingly. Against that order, the revenue preferred an appeal before the Income Tax Appellate Tribunal, which held that the

disallowance of 30% is to be considered as genuine and reasonable. Aggrieved by the order of the Tribunal, the present appeal is filed by

formulating the following substantial question of law.

Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that, the disallowance to

the extent of 30% is to be considered as genuine and reasonable even though the assessee could not produce sufficient evidence for the claim of

commission payment of Rs. 1,69,39,827/- is valid. ?

We heard the arguments of the learned Counsel for the Revenue and perused the orders of the authorities below.

The Commissioner of Income Tax (Appeals) recorded a finding that the basis for reassessment in the case of the respondent assessee was the

findings in the case of the agent company, where out of commission payment of Rs. 1.69 crores, Rs. 1.15 crores was disallowed by the assessing

officer for the reason that the expenses were not genuine. Subsequently, the said finding of the assessing officer was reversed by the appellate

authority by giving the reason that the assessing officer has opined that only the state of affairs indicated defects in the books of account and not

that the expenses were not genuine. On the basis of further remand report from the assessing officer, the Commissioner of Income Tax (Appeals)

has determined the profit at an estimated figure of 22% and by implication has substantially allowed the commission expenses. That order has

become final. On the basis of the assessment made in respect of the agent company, the Commissioner of Income Tax (Appeals) in the case of the

respondent assessee has held that 20% of the total disallowance of commission of Rs. 1,69,39,827/- should be disallowed as unreasonable and

excessive. The Tribunal on appeal at the instance of the Revenue has recorded a finding to the effect that the Revenue has assessed the commission

in the hands of the agent company as is evident from the assessment order. The Commissioner of Income Tax (Appeals) had gone through the

remand report of the assessing officer and the assessing officer has stated that the state of affairs of the assessee company indicates deficiencies in

the books of accounts and the expenses were not genuine. The Tribunal has further found that the estimate made by the Commissioner of Income

Tax (Appeals) is unreasonable because of the reason that in respect of the agent company, the Commissioner of Income Tax (Appeals) has given

a categorical finding that the income was ranging from 25 to 30%, which has become final. From the finding recorded, which has become final in

respect of agent company, the same relief has been granted at the hands of the assessee company. From the above finding recorded by the

Tribunal, which are factual in nature, we are of the view that there is no question of law muchless substantial question of law involved in the appeal

so as to entertain the same. The tax case appeal is dismissed.