VINOD BHATI,BALLABGARH V. ITO WARD - 2(5), FARIDABAD

ITA 14/DEL/2021

AI Insights

Vinod Bhati, engaged in the business of property dealing, appealed against the order of the CIT(A), Faridabad, which had upheld the additions made by the Income Tax Officer (ITO) to his income for the Assessment Year 2016-17. The additions were related to commission and rental expenses that the ITO deemed unverifiable. The Tribunal examined the submissions and evidence presented by both parties, including the ledger accounts and vouchers provided by the assessee. The Tribunal found that while some expenses were substantiated, others were not, leading to the decision to partially allow the appeal by disallowing a percentage of the claimed expenses.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792304 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2016-2017
• Appeal Filed On: 12-01-2021
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: VIBHOR GARG
• Keywords: Additional evidence; Commercial expediency; TDS; Bogus

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.14/Del/2021, A.Y. 2016-17 Vinod Bhati, FCA-231, Mohana Road, Yadav Colony, Ballabhgarh-121004 PAN: AVGPB7529Q Vs. Income Tax Officer, Ward-2(5), Faridabad (Appellant) (Respondent) Appellant by Sh. Vibhor Garg, CA Respondent by Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing 27/11/2025 Date of Pronouncement 03/12/2025 ORDER PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by the assessee directed against the order of Ld. CIT(A), Faridabad dated 28.02.2020 for the assessment year (‘AY’) 2016-17. The assessee has raised following grounds of appeal: “The assessee is engaged in the business of property dealing. He purchased agricultural land in palwal in acres and did plotting and sold it to various customers. For selling the plots he set up works office in various areas of Faridabad and palwal and paid rent accordingly. Ground appeal No 1 Commission expenses = Rs 1,64,40,646/- added to the returned Income In order to sale his plots he had to pay commission @20% on sales to various persons. In property dealing business, it is customary to pay commission for the purpose of operating the Business and to enhance the sales to get better price. Printed from counselvise.com ITA No. 14/Del/2021 Vinod Bhati (AY 2016-17) 2 The commission expenses ledger along with the vouchers were submitted to A.O. for verification. However, the Ld. ITO did not took coznigance of the same and added the full commission expenses to the tune of Rs 1,65,04,646/- to the returned income. More so we had moved an application to Hon'ble CIT(APPEALS) dated 27/01/2020 regarding additional evidence of the expense of the commission. However, Hon'ble CIT(Appeal) did not consider the contention and mentioned in his order that \"Appellant has failed to prove even the basic identity of the persons to whom such commission has been paid\" Even though vouchers were submitted mentioning the name and address and their signature were affixed on it. Ground Appeal No 2 Rental Expenses: Disallowed Rs 12,19,500/- The rent agreements were submitted to the Ld Assessing Officer. The ledger of Rental Expenses were also furnished. However, Ld. ITO did not consider the same and allowed rental expenses partially. In the CIT(Appeals), the assessee moved an application for additional evidence dated 27/01/2020 to submit rent agreement for his perusal. However, this contention was not accepted by the Hon’ble CIT(Appeals) and he has mentioned in his order that “The appellant has not furnished the documentary evidence in respect of the Balance.” 2. The brief facts of the case as gathered from the orders of lower authorities are that the assessee is individual filed his Income Tax Return (‘ITR’) for A.Y. 2016- 17 on 20.10.2016 declaring income of Rs. 7,51,830/-. The case was selected for scrutiny. During the assessment year, the Assessing Officer (‘AO’) noted that in the profit and loss account, the assessee has debited commission expenses of Rs. 1.65 crore. The AO issued a show cause notice to the assessee to furnish ledger account along with relevant evidence to justify such commission expenses. The AO recorded that the assessee furnished only ledger account of commission expenses with some vouchers. On perusal of such details and vouchers, the AO formed his view that assessee booked daily commission expenses and not Printed from counselvise.com ITA No. 14/Del/2021 Vinod Bhati (AY 2016-17) 3 provided the name of such persons to whom commission was paid. The assessee is engaged in plotting of land in Palwal. The commission payment is kept below Rs. 5,000/-. Only three vouchers showing aggregate payment of Rs. 49,500/- were furnished, which cannot identify the person to whom such commission was paid. The AO recorded sale of plots in the year under consideration is of more than Rs. 7.00 crores which is comparatively on higher as it was Rs. 86.44 lacs in earlier year. In earlier year, the assessee had not debited such commission payment. The AO treated such commission payment as bogus and added to the income of assessee. The AO further noted that in the profit and loss account, the assessee has also claimed the rental expenses of Rs. 19.56 lacs. Out of such total rental expenses only Rs. 2,52,500/- were made through cheque. With regard to the remaining amount, no agreement or identity of the premises or the person to whom rent was paid provided by the assessee. The AO on page No. 4 of assessment order, recorded the name of four persons to whom aggregate payment of Rs. 4,84,300/-only, was provided. Thus, the AO allowed Rs. 2,52,500/- and Rs. 4,84,000/- and remaining amount of Rs. 12,19,500/- was added as unverifiable rental expenses. 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee, in his written submission, submitted that he is engaged in the business of plotting of land. The assessee purchased land from various persons and sold it to different persons after plottings. The assessee is doing his business in the name of M/s. Kuber Printed from counselvise.com ITA No. 14/Del/2021 Vinod Bhati (AY 2016-17) 4 Developers. The commission were paid for the purpose of business and commercial expediency. During the assessment, ledger account of commission expenses was furnished and ledger account of commission’s recipient was furnished. To support commission expenses, the assessee relied on certain cases laws. With regard to rental expenses, the assessee claimed that all rent agreements were furnished along with electricity bill. 4. The Ld. CIT(A), on considering the submission of the assessee, upheld both the addition. While upholding the addition of commission expenses, the ld. CIT(A) recorded that the assessee had made commission payments on 4,317 instances, but no verifiable evidence was furnished. There is no basis for commission paid. In the earlier year, no such commission was paid. The assessee has not deducted TDS on such commission. Even during the appellate proceeding, no documentary evidences was furnished. On rental expenses, the ld. CIT(A) held that the assessee claimed total rental expenses of Rs. 25,32,250/- in profit and loss account. The AO disallowed Rs. 12,19,500/- only in respect of such expenses wherein documentary evidences was furnished. During the appellate proceeding, the assessee stated that all rent agreement and electricity bills was furnished in support of his claim. The Ld. CIT(A) recorded that on perusal of assessment order, he find that the AO allowed such expenses which was substantiated with the rent agreement or electricity bill, with regard to the disallowances in dispute, no evidence was furnished and upheld the action of AO. Further, aggrieved the assessee, filed the present appeal before the Tribunal. Printed from counselvise.com ITA No. 14/Del/2021 Vinod Bhati (AY 2016-17) 5 5. We have heard the submission of Ld. Authorized Representative (‘AR’) of the assessee and the ld. Senior Departmental Representative (‘Sr. DR’) for the Revenue. With the assistance of Ld. AR and Ld. Sr. DR, we have perused the order of lower authorities carefully. The Ld. AR of the assessee submits that the assessee in the business of land developing on rural side. The assessee is working in the name of Kuber Developer. The assessee purchases certain lands from agriculturist and after preparation of layout plans, selling such land to needy persons. For inviting and publicity of his business, the assessee availed the service of various persons to whom the assessee had made commission payment. None of the payment of commission required TDS as payments were made below the threshold limit for making TDS. The payments were made to small persons who were soliciting the business to assessee. Making such commission payment is the common fact in real estate business. The ld. AR for the assessee further submits that during the assessment proceedings the assessee furnished certain detains with vouchers, however, at the stage of Ld. CIT(A) level the assessee furnish the name of majority of person to whom commission was paid. The assessee has now filed all the details. The name of purchaser of plots with the names to whom commission was paid is also placed on record and same may be considered. And in case bench is of the view that it is additional evidence same may be admitted grounds of appeal may be restored to AO. Similar submissions were made in respect of rental expenses. In alternative submission, the Ld. AR of the assessee submits that both the expenses were incurred for the purpose of business and to Printed from counselvise.com ITA No. 14/Del/2021 Vinod Bhati (AY 2016-17) 6 avoid the long drawn litigation with the department, and in order to possibility of revenue leakages, some percentage on reasonable basis may be disallowed on both additions. 6. On the other hand, the Ld. Sr. DR for the revenue supported the order of lower authorities. The ld. Sr. DR for the revenue allowing submits that despite being sufficient opportunity, the assessee failed to substantiate both heads of expenses. The list of persons to whom the plots were sold or commission were paid or rent was paid is still not verifiable. The ld. Sr. DR for the revenue prayed for dismissal of appeal. 7. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. Ground No. 1 and 2 both related to disallowance of commission expenses and rental expenses. We find that AO as well as ld CIT(A) held that, the assessee failed to substantiate with complete evidence about genuineness of such expenses. From the order of AO, we find that while the issuing show cause notice to the assessee the AO issued show cause notice as to why 20% of expenses of on which TDS is required other than commission and rental expenses be disallowed after rejecting books of accounts. Further, in respect of rent and commission payment by 30% of the amount should not be disallowed for want of TDS. However, by making such addition, the AO disallowed the entire commission payment rental expenses. 8. Now, before us ld. AR of the assessee has made two-fold submissions. Firstly, the matter may be restored back to the file of the AO with the liberty to assessee to Printed from counselvise.com ITA No. 14/Del/2021 Vinod Bhati (AY 2016-17) 7 substantiate the expenses on the basis of evidences placed on record; and secondly, in alternative the disallowance may be made on ad-hock basis to avoid long drawn process of litigation and to avoid possibility of revenue leakage. On considering the nature of business of assessee the total receipt shown by the assessee, we instead of sending the matter back to the AO, thinks it appropriate to finally adjudicate the issue. We find that initially the AO issued show cause notice to disallow 30% of commission expenses and rental expenses. However, finally the AO disallowed entire commission expenses and those rental expenses which were not substantiated with evidence. We find that commission payment ranges from Rs. 2000/- and Rs.4800/- which does not require any TDS. Thus, to avoid the possibility of revenue leakage 20% of commission expenses is disallowed. So far as the rental expenses is concerned, the assessee has furnished the ledger account and rent agreement, although the same were not furnished before lower authorities instead of sending back the matter to the AO. We restrict disallowance of rental expenses to 50% of Rs. 12,19,500/-. In the result, both the grounds of appeal are partly allowed 7. In the result, the appeal of the assessee is partly allowed. Order pronounced in open Court on 03rd December, 2025 Sd/- Sd/- (BRAJESH KUMAR SINGH) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 03/12/2025 Binita, Sr. PS Printed from counselvise.com ITA No. 14/Del/2021 Vinod Bhati (AY 2016-17) 8 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT/PCIT 4. CIT(Appeals) 5. Sr. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DEL Printed from counselvise.com "