1. This appeal by the assessee is preferred against the order of the CIT(A)-32, New Delhi dated 29.03.2019 pertaining to A.Y.2015-16.
2. The grievance of the assessee read as under :-
3. Representatives of both the sides were heard at length. Case records carefully perused, and the relevant documentary evidences brought on record duly considered in the light of Rule 18 (6) of the ITAT Rules.
4. Briefly stated the facts of the case are that the assessee company is engaged in the business of banking correspondent (BC) and has entered into agreement with State Bank of India and some other banks for providing BC services. The assessee’s only business is to provide various banking services in remote and unbanked area of North East region where the normal banking operation is merely impossible through its agents known Customer Services Point (CSP) or Bank Mitra.
5. For the year under consideration return of income declaring loss of Rs.507343/-was filed on 28.09.2015. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
6. During the course of the scrutiny assessment proceedings the AO analysed the following statement of Profit and Loss account for the year ended 31.03.2015 : -
7. The AO observed that during the year under consideration though the project receipts increased from 1.23 crores to 2.13 crores but the profit before tax has come out from 12.81 lacs to a loss of Rs. 5.04 lacs. The AO further observed that the commission payment increased to Rs.1.52 crores from 65.95 lacs in the immediately preceding financial year.
8. The assessee was asked to explain the nature of commission/ services rendered with reasons for sharp increase in commission for 53.50 percent to 71.38 percent in comparison to last year. The assessee was also asked to explain why the whole commission of Rs.1.52 crores be not disallowed.
9. Assessee filed a detailed reply which did not find any favour with the AO. The AO was of the opinion that the assessee has neither filed the copy of account of commission paid nor has filed any copy of agreement with the CSP on the basis of which the commission is paid. The AO further observed that the assessee has not filed any copy of agreement with the banks which was applicable for the year under consideration.
10. On finding no satisfactory documentary evidences the AO taking a leaf out of the percentage of commission paid in the immediately preceding financial year allowed the claim only to that extent and made addition of Rs.38,26,845/- which was confirmed by the CIT(A).
11. Before us the Counsel has filed additional documents in the form of business correspondence agreement business with SBI, business correspondence/ customer services point agreements, enrolment letter of CSP. The Counsel vehemently argued that the entire payment is documented and the basis of payment have been duly explained in the agreements. The Counsel drew our attention to the relevant clauses of the agreement. It is the say of the Counsel that the assessee is only pass through and the payment of commission is determined by the lead bank i.e. SBI under the control of RBI. The Counsel further stated that the agents / sub agents have to go places where cost of reaching is very high and, therefore, the payment of commission increased during the year under consideration.
12. Per contra the DR strongly supported the findings of the AO and stated that the documents now referred by the Counsel were never examined by the AO.
13. We have given a thoughtful consideration to the rival submissions. A perusal of the agreement shows that the payment of commission is contractual liability with SBI and with the customer service provider. It appears that these agreements have not been examined in detail by the AO, therefore, it becomes imperative to examine these agreements at the assessment stage. Therefore, in the interest of justice we restore this issue to the files of the AO. The assessee is directed to file all the relevant agreements and the AO is directed to examine the same and decide the issue afresh after affording a reasonable and sufficient opportunity of being heard to the assessee.
14. The AO has mentioned that the payment of commission is excessive but has not brought on record any cogent material evidence to demonstrate how the payment of commission is excessive. Therefore, we direct the AO to bring some cogent material evidence on record, may be comparables to show that the payment of commission is excessive.
15. With the above directions the appeal is treated as allowed for statistical purpose.
16. Decision announced in the open court on 24.05.2023.
