Sh. Cosmos International, New Delhi V. ACIT, New Delhi

CO 340/DEL/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9677 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-06-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 10-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PARVINDER KAUR SENIOR
• Keywords: Commercial expediency; Reassessment proceedings
• Section: 37(1); 147; 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.4138/DEL./2011 (ASSESSMENT YEAR : 2002-03) ACIT, CIRCLE 32 (1), VS. M/S. COSMOS INTERNATIONA L, NEW DELHI. 1, ARADHANA COLONY, SECTOR 13, NEW DELHI. (PAN : AAAFC5587A) CO NO.340/DEL/2011 (IN ITA NO.4138/DEL./2011) (ASSESSMENT YEAR : 2002-03) M/S. COSMOS INTERNATIONAL, VS. ACIT, CIRCLE 32 (1) , 1, ARADHANA COLONY, SECTOR 13, NEW DELHI. NEW DELHI. (PAN : AAAFC5587A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SMT. RANO JAIN, CA REVENUE BY : MS. PARVINDER KAUR, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE EMANATE FROM THE ORDER OF THE CIT (APPEALS )-XXVI, NEW DELHI DATED 28.06.2011. ITA NO.4138/DEL./2011 CO NO.340/DEL/2011 2 2. THE ASSESSEE FILED A RETURN OF INCOME ON 31.10.2 002 DECLARING INCOME AT RS.26,00,506/- WHICH WAS SUBSEQUENTLY REOPENED B Y ISSUING NOTICE U/S 148 OF THE INCOME-TAX ACT, 1961. THE REASON FOR REOPEN ING WAS BASED ON THE INFORMATION RECEIVED FROM CIT, DELHI-VIII, NEW DELH I THAT THE ASSESSEE HAS SUPPLIED GOODS TO IRAQ UNDER THE OIL FOOD PROGRAMME OF THE UNO AND IN VIEW OF THE CBDTS OFFICE MEMORANDUM NO.414/117/200 5-IT (INV.-1) DATED 18.11.2005 READ WITH VOLCKER COMMITTEES REPORT, TH E CASE WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON 30.12.2008. T HE ASSESSMENT WAS FINALIZED BY MAKING AN ADDITION OF RS.49,25,296/- B EING THE AMOUNT AS KICK- BACKS TO THE IRAQI AUTHORITIES. THE ASSESSEE FILED THE APPEAL BEFORE THE CIT (A) CHALLENGING THE REOPENING AS WELL AS MAKING THE ADDITION ON MERITS. THE CIT (A) SUSTAINED THE REOPENING, HOWEVER, ALLOWED T HE RELIEF ON MERITS. NOW, THE REVENUE IS IN APPEAL BY TAKING THE FOLLOWING GR OUNDS OF APPEAL :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHE THER THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION OF RS .49,25,296/- MADE BY THE A.O. WHEN THE PAYMENT WAS MADE AS KICKB ACKS TO IRAQI AUTHORITIES AS ILLEGAL PAYMENT WITHIN THE PRO VISIONS OF SECTION 37(1) OF I.T. ACT AND PAID UNDER THE 'OIL F OR FOOD PROGRAMME' OF UNO AND A CBDT MEMORANDUM NO.414/117/2005-IT (INV,-1) DATED 18.11.2005 READ W ITH VOLCKER COMMITTEE'S REPORT WHICH CONFIRMED THE ILLE GALITY OF THE PAYMENTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE LD. CIT(A) WAS JUSTIFIED IN ADMITTING ADDITIONAL EVIDEN CES IN VIOLATION OF RULE 46A WHEN SUFFICIENT OPPORTUNITIES WERE PROVIDED BY THE A.O. TO THE ASSESSEE TO FILE DETAIL S. ITA NO.4138/DEL./2011 CO NO.340/DEL/2011 3 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F HEARING OF THE APPEAL. THE ASSESSEE FILED CROSS OBJECTIONS BY TAKING THE F OLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] HAS E RRED, BOTH ON FACTS AND IN LAW, IN UPHOLDING REASSESSMENT ORDER PASSED UNDER SECTION 147 READ WITH SECTION 148 OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN REJE CTING THE CONTENTION OF THE APPELLANT THAT THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147 READ WITH SECTION 148 OF THE ACT WAS BAD IN THE EYE OF LAW AS THE CONDITIONS AND PROCEDURE PRES CRIBED UNDER THE STATUTE HAVE NOT BEEN COMPLIED WITH. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN REJE CTING THE CONTENTION OF THE APPELLANT THAT THE NOTICE ISSUED UNDER SECTION 148 IS BAD IN LAW, REASON RECORDED FOR THE ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT BEING CONTRARY TO THE FACTS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] HAS E RRED, BOTH ON FACTS AND IN LAW, IN IGNORING THE CONTENTIO N OF THE APPELLANT THAT THE REASSESSMENT PROCEEDINGS CANNOT BE OPENED MERELY ON THE BASIS OF DOUBT AND THERE IS NO LIVE N EXUS BETWEEN THE REASONS RECORDED AND THE FACTS OF THE CASE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF CROSS OBJECTION. 3. AT THE OUTSET OF THE HEARING, THE LD. AR SUBMITT ED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISI ONS OF ITAT AS WELL AS HON'BLE CALCUTTA HIGH COURT. ITA NO.4138/DEL./2011 CO NO.340/DEL/2011 4 4. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. ON T HE SIMILAR FACTS AND CIRCUMSTANCES, ITAT, CALCUTTA BENCH, IN THE CASE OF TIL LIMITED VS. ACIT IN ITA NO.281/K/2007 FOR ASSESSMENT YEAR 2003-04 IN ITS ORDER DATED 30 TH MARCH, 2007 REPORTED IN (2007) 16 SOT 33 (CAL.), HA S GRANTED THE RELIEF TO THE ASSESSEE BY HOLDING AS UNDER :- THERE ARE ALSO NO EVIDENCES TO SHOW THAT THE PAYME NT MADE BY THE APPELLANT WAS OF THE NATURE OF A KICK-BACK. NOR WOULD IT HAVE MADE ANY DIFFERENCE IN THE MATTER OF ALLOWABILITY O F THE EXPENSES CONCERNED IN THE I.T. ASSESSMENT OF THE PAYER HAD T HOSE FACTS ALSO BEEN CORRECT. THERE MAY BE LEGAL BAR IN PAYMEN T OF KICK- BACK IN THE MATTER OF PURCHASE OF GOODS OR ARTICLES BY THE GOVERNMENT OF INDIA OR EVEN ANY COMPANY UNDER THE C ONTROL OF THE GOVERNMENT. NO SUCH RESTRICTION A LIES IN THE C ASE OF PAYMENT MADE BY A PRIVATE PARTY FOR FURTHERING ITS BUSINESS INTERESTS. THERE IS NOTHING ON RECORD TO SHOW THAT THE PAYMENT WAS MADE TO ANY MAFIA GROUP OR TO OTHER FOR ANY ILL EGAL PURPOSE OR AGAINST PUBLIC POLICY. THE VOLKER COMMISSION'S R EPORT MOSTLY CONCERNS POLITICIANS AND OTHERS WHO ARE PUBL IC SERVANTS IN THE EYES OF LAW. IT DOES NOT MENTION ANY ILLEGAL ITY ON THE PART OF A PRIVATE INDIAN PARTY. ANY BAR IMPOSED BY UN ON SUPPLY OF GOODS TO IRAQ ALSO CANNOT DEBAR AN INDIAN PARTY TO DO SO UNLESS THE RESTRICTION IS IMPOSED BY THE GOVERNMENT OF IND IA THROUGH A LEGAL PROCESS. IN THE PRESENT CASE, THERE WAS NO SU CH RESTRICTION ON SUPPLY OF GOODS OR MATERIALS TO IRAQ IMPOSED BY THE GOVERNMENT OF INDIA. IN ANY CASE, THE RECORDS SHOW THAT EVEN THESE CONTINGENCIES ALSO DID NOT ARISE IN THIS CASE AS NEITHER THE NAME OF APPELLANT COMPANY HAS BEEN PROVED TO HAVE F IGURED IN THE VOLKER COMMISSION REPORT NOR HAS THE PAYMENT BE EN PROVED TO BE OF THE NATURE OF A KICK-BACK NOR EVEN IT HAS BEEN SHOWN THAT THE NECESSARY PERMISSION FROM UN WAS NOT TAKEN . SO FAR AS THE NATURE OF THE PAYMENT IS CONCERNED, IT HAS CLEA RLY BEEN ESTABLISHED THAT THE PAYMENT WAS MADE PURELY FOR TH E PURPOSE OF PROCURING EXPORT ORDER OF FORKLIFT TRUCKS TO IRAQ A ND ALSO CERTAIN AFTER-SALES SERVICES PERFORMED BY THE AGENT IN IRAQ AND WAS OF THE NATURE OF COMMISSION PAYMENT. ITA NO.4138/DEL./2011 CO NO.340/DEL/2011 5 SIMILARLY, IN THE CASE OF DCIT VS. RAJRANI EXPORTS LTD. REPORTED IN (2012) 52 SOT 168 (CAL) ORDER DATED 31.05.2012, THE ITAT, CAL CUTTA BENCH HAS DELETED THE ADDITION BY HOLDING AS UNDER :- 15. THE ASSESSEE HAS MADE PAYMENT FOR COMMISSION A ND HAS BEEN RENDERED SERVICES IN CONSIDERATION OF THE SAME . AS A MATTER OF FACT, IT IS NOT EVEN REVENUE'S CASE THAT NO SERV ICES HAVE BEEN RENDERED AT ALL. THE FACT THAT SERVICES HAVE BEEN R ENDERED BY A PARTY OTHER THAN THE AGENT TO WHOM COMMISSION IS PA ID IS WHOLLY IMMATERIAL SO FAR AS DEDUCTIBILITY IN THE HANDS OF THE ASSESSEE IS CONCERNED. 16. AS FOR THE POSITION THAT THE PAYMENT WAS HIGHLY EXCESSIVE VIS-A-VIS THE LOCAL COSTS, EVEN IF THAT BE SO, THAT ASPECT OF THE MATTER DOES NOT AFFECT THE DEDUCTIBILITY IN THE HAN DS OF THE ASSESSEE EITHER. THE ASSESSEE IS CONCERNED WITH COM MERCIAL EXPEDIENCY OF THE SAID PAYMENT AND NOT WITH WHAT AR E THE ACTUAL COSTS INCURRED IN RENDERING THE SERVICES FOR WHICH THE PAYMENT IS MADE. AS WE HAVE SEEN EARLIER IN THIS ORDER, FROM T HE EXTRACTS OF THE VOLKER COMMITTEE REPORT ITSELF, IT WAS ABSOLUTE LY NECESSARY FOR THE ASSESSEE TO MAKE THE IMPUGNED PAYMENTS AND, IN ANY EVENT, THE COMMERCIAL EXPEDIENCY OF THESE PAYMENTS HAS NOT EVEN BEEN CALLED INTO QUESTION BY THE ASSESSING OFF ICER. THE CASE OF THE REVENUE IS CONFINED TO INVOKING THE EXP LANATION TO SECTION 37(1). 17. THE OBJECTIONS TO THE SAID COMMISSION PAYMENTS DONOT, THEREFORE, ARE NOT THEREFORE SUSTAINABLE IN LAW, SO FAR AS DEDUCTIBILITY UNDER SECTION 37(1) IS CONCERNED. 18. A LOT OF EMPHASIS HAS BEEN PLACED BY THE CIT(A) ON THIS TRIBUNAL'S DECISION IN THE CASE OF TIL LTD (SUPRA). HOWEVER, AS WE HAVE DECIDED THE MATTER ON MERITS AND ON THE FIR ST PRINCIPLES, WE SEE NO NEED TO DEAL WITH THE SAID JUDICIAL PRECE DENT. OUR REASONING COULD BE DIFFERENT THAN THE REASONING ADO PTED BY THE CIT(A) AND THAT ADOPTED BY THE COORDINATE BENCH IN TIL'S CASE (SUPRA), BUT THEN OUR CONCLUSION IS THE SAME AS ARR IVED BY THE CIT(A) AND BY THE COORDINATE BENCH. IT IS THIS ASPE CT OF THE MATTER WHICH IS MATERIAL FOR THE PRESENT PURPOSES. ITA NO.4138/DEL./2011 CO NO.340/DEL/2011 6 19. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARI NG IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS AR RIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 20. AS WE PART WITH THE MATTER, WE MUST MAKE IT CLE AR THAT OUR REFERENCES TO THE VOLKER COMMITTEE REPORT WERE ONLY WITH A VIEW TO ANALYSE AS TO WHETHER EVEN IF EVERYTHING ST ATED IN THE VOLKER COMMITTEE REPORT IS TAKEN AS CORRECT AND THI S REPORT IS TAKEN AS AN ADMISSIBLE EVIDENCE, WILL THE DEDUCTIBI LITY OF EXPENSES IN THE HANDS OF THE ASSESSEE WILL BE HIT B Y EXPLANATION TO SECTION 37(1). HOWEVER, TO WHAT EXTENT THIS REPO RT CAN BE RELIED UPON IN INCOME TAX PROCEEDINGS IS STILL AN O PEN QUESTION. WE LEAVE IT AT THAT. 21. IN THE RESULT, THE APPEAL IS DISMISSED. THE DECISION OF ITAT, CALCUTTA BENCH IN THE CASE OF DCIT VS. RAJRANI EXPORTS HAS BEEN UPHELD BY HON'BLE CALCUTTA HIGH CO URT IN ITA NO.49 OF 2013 DATED 24 TH APRIL, 2013 AS UNDER :- 'THE QUESTION SUGGESTED BY THE REVENUE IS AS FOLLOW S: 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE TRIBUNAL WAS JUSTIFIED IN LAW TO DISMISS THE APPEAL OF THE REVENUE BY CONFIRMING THE ORDER OF THE CIT(A) ON AC COUNT OF DISALLOWING THE COMMISSION PAYMENTS IN VIEW OF EXPL ANATION TO SECTION 37(1) OF THE SAID ACT.' AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO IN HIS O RDER ALLOWING THE APPEAL, HELD AS FOLLOWS: 'IT IS OBSERVED THAT THE COMMISSION ON EXPORT ACTIV ITY HAD BEEN FULLY DISCLOSED IN ALL CORRESPONDENCES AND ACTIVITI ES IN RELATION TO EXPORT, THE COMMISSION WAS PAID THROUGH BANKING CHA NNEL OF RBI APPROVAL AND IT WAS PAID PURSUANT TO AN AGREEME NT APPROVED BY GOVERNMENT OF INDIA AND UN. THE PAYMENT OF COMMI SSION WAS FOR BUSINESS CONSIDERATION AND THERE WAS APPARE NTLY NO ILLEGALITY IN MAKING PAYMENT OF COMMISSION. BESIDES THIS, ITA NO.4138/DEL./2011 CO NO.340/DEL/2011 7 NOTHING HAS BROUGHT ON RECORD TO SHOW THAT THE TRAN SACTIONS RELATING TO PAYMENT OF COMMISSION ARE NON-GENUINE O R ARE EXCESSIVE AND UNREASONABLE. THE VOLKER COMMISSION R EPORT HAD DISCUSSED ABOUT THE UTILIZATION OF MONEY BY THE REC IPIENT OF THE COMMISSION IN PARTING SOME OF THE FUND SO RECEIVED AS COMMISSION WITH THE GOVERNMENT OF IRAQ AND SUCH PAR TING OF COMMISSION WITH THE GOVERNMENT OF IRAQ WAS OBJECTED TO BY THE VOLKER COMMISSION REPORT WHICH WAS A PACT BETWEEN T HE IRAQ GOVERNMENT AND THE UN WHEREIN, AS IT APPEARS, NEITH ER THE APPELLANT COMPANY IS INVOLVED NOR GOVERNMENT OF IND IA IS INVOLVED. ' AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE P REFERRED AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL DISMISSED THE APPEAL HOLDING, INTER ALIA, AS FOLLOWS: 'THE ASSESSEE HAS MADE PAYMENT FOR COMMISSION AND H AS BEEN RENDERED SERVICES IN CONSIDERATION OF THE SAME. AS A MATTER OF FACT, IT IS NOT EVEN REVENUE'S CASE THAT NO SERVICE S HAVE BEEN RENDERED AT ALL. THE FACT THAT SERVICES HAVE BEEN R ENDERED BY A PARTY OTHER THAN THE AGENT TO WHOM COMMISSION IS PA ID IS WHOLLY IMMATERIAL SO FAR AS DEDUCTIBILITY IN THE HANDS OF THE ASSESSEE IS CONCERNED. AS FOR THE POSITION THAT THE PAYMENT WAS HIGHLY EXC ESSIVE VIS-A- VIS THE LOCAL COSTS, EVEN IF THAT BE SO, THAT ASPEC T OF THE MATTER DOES NOT AFFECT THE DEDUCTIBILITY IN THE HANDS OF T HE ASSESSEE EITHER. THE ASSESSEE IS CONCERNED WITH COMMERCIAL E XPEDIENCY OF THE SAID PAYMENT AND NOT WITH WHAT ARE THE ACTUA L COSTS INCURRED IN RENDERING THE SERVICES FOR WHICH THE PA YMENT IS MADE. AS WE HAVE SEEN EARLIER IN THIS ORDER, FROM T HE EXTRACTS OF THE VOLKER COMMITTEE REPORT ITSELF, IT WAS ABSOLUTE LY NECESSARY FOR THE ASSESSEE TO MAKE THE IMPUGNED PAYMENTS AND, IN ANY EVENT, THE COMMERCIAL EXPEDIENCY OF THESE PAYMENTS HAS NOT EVEN BEEN CALLED INTO QUESTION BY THE ASSESSING OFF ICER THE CASE OF THE REVENUE IS CONFINED TO INVOKING THE EXPLANAT ION TO SECTION 37(1). THE OBJECTIONS TO THE SAID COMMISSION PAYMENTS ARE, THEREFORE, NOT SUSTAINABLE IN LAW, SO FAR AS DEDUCTIBILITY UND ER SECTION 39(1) IS CONCERNED.' ITA NO.4138/DEL./2011 CO NO.340/DEL/2011 8 RECENTLY, ITAT, MUMBAI BENCH IN THE CASE M/S. AIR P AC EXPORTS VS. ACIT IN ITA NO.2981 2983/MUM/2012 DATED 11 TH JUNE,2014 HAS ALSO DELETED THE ADDITION MADE ON THE SIMILAR FACTS AS UNDER :- COMMISSION PAYMENTS TO THIRD PARTY, NOT TO IRAQ GO VT, UNDER EXPORT CONTRACT SIGNED UNDER UNITED NATIONS 'FOOD F OR OIL PROGRAMME', NOT HIT BY EXPLANATION TO SEC. 37(1); A O'S RELIANCE ON VOLCKER COMMISSION'S REPORT INCORRECT AS IT PROH IBITED ILLICIT COMMISSION PAYMENTS TO IRAQ GOVT., WHILE IN PRESENT CASE PAYMENTS WERE MADE TO THIRD PARTY AND NOT TO IRAQ G OVT.; NO FINDING THAT THIRD PARTY HAD RENDERED SERVICES AND COMMISSION PAID TO THIRD PARTY WAS DIVERTED TO GOVERNMENT OF I RAQ, THUS DIRECTS AO TO DELETE DISALLOWANCE; RELIES ON CO-ORD INATE BENCH RULING IN NSIL EXPORTS LTD AS SQUARELY APPLICABLE T O PRESENT CASE. IN THE CASE OF NSIL EXPORTS LTD. VS. DCIT IN ITA NO .3050-3/MUM/2013 DATED 21.02.2014, THE ITAT, MUMBAI BENCH HAS ALSO D ELETED THE ADDITION ON SIMILAR FACTS BY HOLDING AS UNDER :- DISALLOWANCE ON TRANSPORT AND COMMISSION EXPENSES - ILLICIT PAYMENT TO THE SADDAM HUSSAIN REGIME - HELD THAT:- THE OBLIGATION OF THE TRANSPORTATION OF THE GOODS FROM PORTS TO THE DESTINATION IS ON THE PART OF THE ASSESSEE - THE AS SESSEE HAD TO ARRANGE THE TRANSPORTATION OF THE GOODS FROM TO POR T TO THE DESTINATION - WHEN THE PAYMENT OF TRANSPORTATION IS AS PER THE TERMS OF THE AGREEMENT THEN IT CANNOT BE TREATED AS BOGUS OR ILLEGAL PAYMENT - THE PAYMENTS WERE BARRED IN TERMS OF EXPLANATION TO SECTION 37(1) OF THE INCOME-TAX ACT - UNTIL AND UNLESS IT IS OTHERWISE PROVED THAT THE PAYMENT WAS AN ILLICIT PAYMENT TO THE SADDAM HUSSAIN REGIME AND NOT TO THE PARTIES IT CANNOT BE CONCLUDED THAT THE PAYMENTS ARE NOT MADE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE EXPLANATION TO SECTION 37 CANNOT BE INVOKED MER ELY ON THE BASIS OF SOME DOUBT ABOUT EXPENDITURE WHETHER MADE INFRACTION OF LAW. THERE SHOULD BE A DIRECT AND COGENT EVIDENC E TO SHOW ITA NO.4138/DEL./2011 CO NO.340/DEL/2011 9 THAT THE PAYMENT MADE BY THE ASSESSEE IS CONTRARY T O LAW. THE AUTHORITIES BELOW FAILED TO BRING ANYTHING ON RECOR D TO ESTABLISH THAT THE PAYMENTS IN QUESTION WERE ILLEGALLY MADE B Y THE ASSESSEE TO THE IRAQI AUTHORITIES. ON THE CONTRARY, THE ASSESSEE HAS PRODUCED THE EVIDENCE OF PAYMENT TO THE AGENT W HO IS NOT CONNECTED TO THE IRAQI AUTHORITIES. THEREFORE, IN T HE ABSENCE OF SPECIFIC FINDING THAT THE PAYMENTS WERE MADE TO THE IRAQI AUTHORITIES, IT CANNOT BE HELD AS ILLEGAL PAYMENT I NFRACTION OF LAW. EVEN IF THE ASSESSEE FAIL TO PROVE BEYOND DOUB T THAT THE PAYMENTS IN QUESTION ARE INCONSONANCE TO THE SERVIC E RENDERED BY THE AGENT THE SAME CANNOT BE HELD AS ILLEGAL IN THE ABSENCE OF ANY EVIDENCE TO PROVE THAT THE ASSESSEE INTENDED TO PAY THE AMOUNT ILLEGALLY THROUGH AGENT. RELYING UPON TIL LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLKATA [2007 (3) TMI 404 -IT AT KOLKATAJ - THE PAYMENTS WERE MADE PURELY FOR THE PU RPOSE OF PROCURING EXPORT ORDERS TO IRAQ AND ALSO FOR AFT ER SALE SERVICES PERFORM BY AGENT IN IRAQ AND THEREFORE WAS AN ALLOW ABLE EXPENDITURE - THE PAYMENT MADE TO DALALA & COMPANY AS COMMISSION, INCLUDED ANY PART OF ILLICIT PAYMENT TE RMED AS KICKBACK IN THE VOLCKER COMMITTEE REPORT, ON WHICH BASIS, THE PAYMENT MADE TO DALALA & COMPANY HAS BEEN DISALLOWE D. THE REVENUE AUTHORITIES HAVE NOT BEEN ABLE TO PIN T HE ASSESSEE ON ILLICIT PAYMENT MADE TO DALALA, WHICH ALSO IS STAMP ED WITH APPROVAL FROM THE RBI, A VERY HEAVY BURDEN IS CAST ON THE REVENUE AUTHORITIES TO PROVE THAT THE PAYMENT WAS M ADE WITH AN ILLICIT INTENT, WHICH IN THE END, THE REVENUE AUTHO RITIES WERE UNABLE TO SHIFT - THE PAYMENTS MADE BY THE ASSESSEE AS COMMISSION ARE FULLY DEDUCTIBLE AS THE SAID EXPENDI TURE WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUS INESS AND DOES NOT FALL UNDER THE CATEGORY OF AN EXPENDITURE INCUR RED FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED IN LAW IN TERMS OF EXPLANATION TO SECTION 37(1). RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF I TAT AND ALSO HON'BLE CALCUTTA HIGH COURT, WE SUSTAIN THE ORDER OF THE CI T (A) FOR DELETING THE ADDITION ON MERITS AND DISMISS THE REVENUES APPEAL ITA NO.4138/DEL./2011 CO NO.340/DEL/2011 10 5. THE CROSS OBJECTION FILED BY THE ASSESSEE WAS NO T PRESSED DURING THE YEAR, THEREFORE, THE SAME IS DISMISSED FOR NON-PROS ECUTION. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF JUNE, 2014. SD/- SD/- (I.C. SUDHIR) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 30 TH DAY OF JUNE, 2014 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.