IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “D” BENCH : MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER

ITA No.	A.Y.	Appellant	Respondent
5863/Mum/2024	2015-16	M/s. Menzel Engineering India Pvt. Ltd., Gala No.9, Building No. 2, Agarwal Udyog Nagar, Ext Village Waliv, Vasai East, Maharashtra PAN: AAECM7733R	DCIT/ACIT, Circle-10(2)(2), Second Floor, Aayakar Bhavan, Maharshi Karve Road, Churchgate, Mumbai
5864/Mum/2024	2016-17

Assessee by : Shri Suchek Anchaliya, C.A. a/w.

Shri Tushar Nagori, C.A.

Revenue by : Shri R.R. Makwana, Sr.DR Date of Hearing : 16-01-2025 Date of Pronouncement : 20-01-2025 PER B.R. BASKARAN, A.M :

Both the appeals of the assessee relate to AYs. 2015-16 and

2016-17. They are directed against the orders passed by Ld CIT(A), NFAC, Delhi. The solitary common issue urged in both the appeals relate to the partial confirmation of disallowance of commission expenses incurred by the assessee. Both the appeals were heard together and hence they are being disposed of by this common order, for the sake of convenience.

2. The assessee is engaged in the business of manufacture and sale of textile processing machineries like fabric mercerizing machine, bleaching range, washing range etc.

3. We shall first discuss the facts relating to AY 2015-16. During the course of assessment proceedings relating to AY 2015-16, the AO noticed that the assessee has incurred commission expenses of Rs.1,04,42,539/- and the same was incurred in respect of sales made through 24 agents. In order to verify the genuineness of commission expenses, the AO asked the assessee to furnish purchase order copy/sales invoices or other document to show that these agents were instrumental for the sales done by the assessee. In response thereto, the assessee furnished the details of sales carried out through each of the commission agent, details of all sales parties.

4. Since those documents did not contain the name of the commission agents on them, the AO issued notices u/s 133(6) of the Act to the Sales parties asking them whether any broker/commission agent was involved in the transactions entered between them and the assessee. In response thereto five sales parties only responded by stating that no agent was involved in the sales made to them. The assessee was informed about the replies so given by five sales parties and also non-compliance of the notices by other sales parties. The assessee replied that the agents have been appointed by it and not by the sales parties. Hence the agents have rendered services to the assessee only. It was submitted that it is possible that the sales parties might have misconstrued the agents as employees of the assessee. The assessee also furnished confirmation letters and ledger accounts of agents.

5. The AO, however, did not get convinced with the explanations of the assessee. He took the view that the assessee has failed to show that the commission expenses have been incurred for the purposes of business of the assessee. Accordingly, the AO disallowed the entire commission expenses of Rs.1,04,42,539/- in AY 2015-16.

6. Before the Ld CIT(A), the assessee furnished certain documents showing correspondence between the assessee and one of the commission agent named R K Varandani. Accordingly, the Ld CIT(A) directed the AO to allow commission expenses relating to the above said agent and confirmed the remaining amount of disallowance.

7. We shall now discuss the facts relating to AY 2016-17. In this year, the assessee had claimed commission expenses of Rs.69,65,000/-. The AO noticed that the commission paid to five agents, viz., M/s Prime Enterprises, M/s Kannan Associates, M/s R K Varandani, M/s R S Enterprises and M/s Labquat Partner had been disallowed in AY 2015-16. Following the assessment order passed in AY 2015-16, the AO disallowed the commission expenses paid to the above said five agents aggregating to Rs.50,35,000/-. In the appellate proceedings

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