M/S. B FOURESS (P) LIMITED V. THE DEPUTY COMMISSIONER

ITA/203/2016

AI Insights

The case involves M/s. B Fouress (P) Limited, which appealed against the disallowance of commission payments for the Assessment Years 2009-10 and 2010-11. The Assessing Officer initially disallowed the commission payments, which was partially overturned by the Commissioner of Income Tax (Appeals) for 2009-10 but sustained for 2010-11. The ITAT upheld the disallowance, leading the assessee to approach the High Court. The main legal contention was whether the ITAT was justified in upholding the disallowance without proper appreciation of the facts and evidence for the relevant years.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 691966 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-01-2021
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: JINITA CHATTERJEE
• Keywords: Assessment; Commission Payment; Commissioner of Income Tax (Appeals); Disallowance; Income tax appellate tribunal
• Section: 143(3); 37; 260A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF JANUARY 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE NATARAJ RANGASWAMY I.T.A. NO.203/2016 BETWEEN: M/S. B FOURESS (P) LIMITED PLOT NO.7, PB NO.11 KIADB INDUSTRIAL AREA HOSAKOTE - 562 114 REPRESENTED BY ITS MANAGING DIRECTOR MR. SAMEER SHETTY AGED ABOUT 44 YEARS SON OF LATE MR. SADANAND A. SHETTY. ... APPELLANT (BY MISS. JINITA CHATTERJEE, ADV., FOR MR. S. PARTHASARATHI, ADV.,) AND: THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 11(2) 5TH FLOOR, R.P.BHAVAN NRUPATHUNGA ROAD BANGALORE - 560 001. ... RESPONDENT (BY MR. K.V. ARAVIND, ADV.,) - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 30.12.2015 PASSED IN ITA NOS.847 & 848/BANG/2014 FOR THE ASSESSMENT YEAR 2 2009-10 AND 2010-11 AND ITA NO.846(BNG)/2014 FOR THE ASSESSMENT YEAR 2010-11, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE ITAT DATED 30.12.2015 BEARING ITA NOS.847 & 848 (BNG)/2014 FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11 AND ITA NO.846 (BANG)/ 2014 FOR THE ASSESSMENT YEAR 2010-11 AND ETC. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment years 2009-10 and 2010-11. The appeal was admitted by a bench of this Court vide order dated 25.01.2017 on the following substantial question of law: Whether the tribunal was justified in upholding the disallowance under Section 37 of IT Act of commission payment as made by the Assessing Officer which was only on the basis of the order for the preceding year without appreciation of facts and evidence placed before the Assessing Officer for the 3 relevant years and such an unspeaking order was sustainable and the tribunal was right in restoring the disallowance as made by the Assessing Officer? 2. Facts leading to filing of this appeal briefly stated are that the assessee is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the manufacture and sale of Hydro Turbines. The assessee filed its return of income for the Assessment Year 2009-10 on 26.09.2009 declaring total income of Rs.18,44,87,730/- which was revised on 22.03.2011. Thereafter, the assessment was concluded under Section 143(3) of the Act on 14.12.2011 by the Assessing Officer after disallowing commission of Rs.2,93,08,446/- and total income of the assessee was assessed at Rs.21,37,96,180/-. Similarly for the Assessment Year 2010-11, commission to the extent of Rs.10,15,95,341/- was disallowed by an order dated 31.01.2013 under Section 143(3) of the Act and total income of Rs.22,47,55,162/ was determined by the 4 Assessing Officer vide order dated 31.03.2013. 3. The assessee thereupon filed appeals before the Commissioner of Income Tax (Appeals) against the orders of assessment inter alia on the ground that the Assessing Officer did not independently examine the details furnished by the assessee to justify the disallowance of commission payment and simply followed the finding of the Assessing Officer for the Assessment Year 2002-03. It was also brought to the notice of Commissioner of Income Tax (Appeals) that with regard to the assessment for Assessment Year 2006-07, though the Commissioner of Income Tax (Appeals) confirmed the addition, on an appeal being preferred to the tribunal, the tribunal remitted the matter to the file of Assessing Officer for independent enquiry and thereafter to pass separate order. The assessee further furnished the details with regard to justification for the claim of commission payment for the relevant years. The Commissioner of Income Tax 5 (Appeals) by an order dated 27.02.2014 deleted the addition pertaining to Assessment Year 2009-10. However, the addition pertaining to Assessment Year 2010-11 was sustained. The assessee thereupon filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal by an order dated 30.12.2015 dismissed the appeal preferred by the assessee. In the aforesaid factual background, the assessee has approached this court. 4. Learned counsel for the assessee submitted that the assessee had furnished all the details, which were furnished before the Commissioner of Income Tax (Appeals) viz., copies of agency agreement with commission agents entered into on different dates, copies of invoice raised by commission agents, copies of bank statements showing amount remitted to the said commission agents along with payment vouchers as well as copies of TDS certificates in Form No.16A. It is also 6 pointed out that it was brought to the notice of the tribunal that for Assessment Year 2006-07, the tribunal had restored the case to the file of the Assessing Officer who on the basis of appreciation of facts and evidence on record accepted the claim and allowed the deduction and copy of the order passed by the tribunal for the Assessment Year 2006-07 was also placed on record. It was also pointed out that assessee had provided adequate material with regard to justification of the claim. However, the tribunal did not take note of the material placed by the assessee and held that the assessee had not chosen to file any evidence in support of services rendered by the sales agencies either before the Commissioner of Income Tax (Appeals) or before the tribunal. It is also pointed out that the aforesaid finding is perverse and therefore, the matter be remitted for decision afresh to the tribunal. On the other hand, learned counsel for the revenue has invited the attention of this court to para 10 of the order passed by the 7 tribunal and has submitted that the order passed by the tribunal is just and proper and does not call for any interference. 5. We have considered the submissions made by learned counsel for the parties and have perused the record. From perusal of para 4.6 of the order passed by the Commissioner of Income Tax (Appeals), it is evident that the material was produced by the assessee which has not been considered by the tribunal. It is also noteworthy that the tribunal has not considered its order passed in respect of Assessment Year 2006-07 by which it had restored the case back to the file of the Assessing Officer who after appreciation of material on record had allowed the claim of the assessee for deduction. However, the tribunal has upheld the disallowance under Section 37 of the Act merely on the basis of order passed in respect of preceding year. The order passed by the tribunal is cryptic and suffers from the vice of non application of mind. 8 In view of preceding analysis, the substantial question of law is answered in favour of the assessee and against the revenue. In the result, the order dated 30.12.2015 insofar as it pertains to Assessment Years 2009-10 and 2010-11 is hereby quashed and the matter is remitted to the tribunal for decision afresh in accordance with law. Accordingly, the appeal is disposed of. Sd/- JUDGE Sd/- JUDGE ss "