Smt. Gunvanti N. Sanghvi, Indore V. The ACIT 4(1), Indore

CO 47/IND/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 9063 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 09-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHIMKUVAR
• Assessee Lawyers: NITIN PARIKH
• Keywords: Rule of consistency
• Section: 143(3); 37(1)

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 67/IND/2013 A.Y. 2009-10 ASSTT. COMMISSIONER OF INCOME TAX 4(1) INDORE :: APPELLANT VS SMT. GUNVANTI N. SANGHVI INDORE PAN APOPS 5006B :: RESPONDENT CO NO. 47/IND/2013 (ARISING OUT OF ITA NO. 67/IND/2013) SMT. GUNVANTI N. SANGHVI INDORE :: OBJECTOR VS ASSTT. COMMISSIONER OF INCOME TAX 4(1) INDORE :: RESPONDENT 2 ASSESSEE BY SHRI NITIN PARIKH REVENUE BY SHRI BHIMKUVAR DATE OF HEARING 28.10.2013 DATE OF PRONOUNCEMENT 28.10.2013 O R D E R PER JOGINDER SINGH , JUDICIAL MEMBER THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 20 TH NOVEMBER, 2012 OF THE LEARNED FIRST APPELLATE AUTHO RITY DELETING THE ADDITION OF RS. 77,32,430/- MADE ON ACCOUNT OF COMMISSION EXPENSES CLAIMED BY THE ASSESSEE. THE ASSESSEE HAS ALSO PREFERRED CROSS OBJECTION SUPPORTING THE DELETING O F DISALLOWANCE OF RS. 77,32,430/-, ORIGINALLY DISALLOWED BY THE AS SESSING OFFICER ON SUCH COMMISSION EXPENSES. 2. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE IMPUGNED ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL DATED 19 TH JULY, 2013 THAT TOO IN THE CASE OF SISTER CONCERN. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REVENUE. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE , WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE O RDER OF THE 3 TRIBUNAL DATED 19 TH JULY, 2013 (ITANO. 78/IND/2013 AND CO NO. 49/IND/2013) :- 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GOVERNMENT CONTRACTOR AND SUPPLIER. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE MADE SUPPLIES ON THE M. P. GOVERNMENT APPROVED RATES TO GOVERNMENT DEPARTMENT, LIKE P.W.D. AND I.D.A. ON THE SUPPLIES SO MADE, THE ASSESSEE HAS CLAIMED THE COMMISSION EXPENDITURE OF 20 % PAID TO VARIOUS PERSONS. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO PROVE THE SERVICES RENDERED BY THE SO CALLED COMMISSION AGENTS. IT WAS STATED BEFORE THE ASSESSING OFFICER THAT THE COMMISSION WAS PAID FOR PROCUREMENT OF ORDER AND COLLECTION OF PAYMENT FROM THE GOVERNMENT DEPARTMENT. AFTER HAVING DETAILED DISCUSSION AT PARA 3, THE ASSESSING OFFICER FOUND THAT M.P.LAGHU UDYOG NIGAM TO WHOM THE ASSESSEE WAS SUPPLYING MATERIAL AND WAS RAISING BILL ACCORDING TO THE SUPPLIES RAISED BY THE SUPPLIER AND PAYMENT WAS MADE DIRECTLY TO THE SUPPLIER. THE ASSESSING OFFICE R STATED THAT THE ASSESSEE HAS NOT PRODUCED THE BILLS RAISED BY THE SAID NIGAM. THE ASSESSEE PRODUCED, SHRI MANISH SANGHVI TO WHOM COMMISSION WAS PAID, WHO STATED THAT HE COLLECTED THE REQUIREMENT FROM VARIOUS GOVERNMENT DEPARTMENTS THAT SUPPLIES THE ORDER OF THE ASSESSEE AND FURTHER COLLECTED PAYMENT FROM IT. IT WAS ALSO SUBMITTED THAT SUPPLY IN THESE GOVERNMENT DEPARTMENT IS MADE ON THE BASIS OF RATE CONTRACT WITH M.P. LAGHU UDYOG NIGAM. THE ASSESSING OFFICER ASKED MR. SANGHVI TO PROVIDE EVIDENCE, WHICH CAN PROVE THAT SUPPLY WAS MADE THROUGH WHOM AND PAYMENT WAS COLLECTED BY HIM, BUT HE HAS SHOWN INABILITY TO PRODUCE ANY SUCH EVIDENCE. 4 5. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM OF COMMISSION EXPENDITURE AMOUNT TO RS. 27,34,612/-. 6. .BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATION S :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND ALSO SEEN VARIOUS SUBMISSIONS FILED BY APPELLANT. THE APPELLANT IS ENGAGED IN BUSINESS OF SUPPLY OF ROAD SIGN BOARDS, SAFETY EQUIPMENTS, ROAD MARKETING MATERIAL ETC. TO THE GOVT. DEPARTMENTS. APPELLANT IS RUNNING THIS BUSINESS IN VARIOUS PLACES OF M.P. THROUGH THE HELP OF A NUMBER OF RELATED AND UNRELATED COMMISSION AGENTS. WHILE MP LAGHU UDYOG NIGAM LTD IS DOING THE WORK OF TENDERING AND ALLOTMENT OF PROJECTS TO LOWEST BIDDERS, THE WORK OF PARTICIPATION IN VARIOUS TENDERS, UNDERTAKING RATE CONTRACTS, COLLECTION OF ORDER AND LIASONING WITH EXECUTIVE ENGINEER, PURCHASE OF RAW MATERIAL, IDENTIFICATION OF SITE FO R FIXING OF SIGH BOARDS, GETTING INSPECTION OF THE WO RK DONE, FOUNDATION WORK, TRANSPORTATION AND FIXING OF SIGN BOARDS, GETTING BILLING DONE AND COLLECTION OF PAYMENTS ARE LARGE NUMBER OF WORKS UNDERTAKEN BY COMMISSION AGENTS. CREDIT NOTES TO VARIOUS COMMISSION AGENTS ARE DIRECTLY LINKED TO VARIOUS WORK CONTRACTS AND TO TH E BILLS RAISED AGAINST GOVERNMENT AGENCIES, LIKE PWD OR IDA ETC. VERIFICATION OF LEDGER ACCOUNTS ALSO SHOW CREDIT OF COMMISSION AMOUNTS ON DIFFERENT DATES AND SUCH CREDIT IN DIFFERENT ACCOUNTS IS NEITHER ON SAME DATE NOR ON LAST DATE OF THE YEAR. THEREFORE, NO ABNORMALITY IS OBSERVED IN LEDGER ACCOUNTS. PAYMENT AGAINST SUCH COMMISSION EXPENSE IS MADE THROUGH BANK CHEQUES. AFTER RECEIVING THE COMMISSION INCOME, COMMISSION AGENTS HAVE REFLECTED SUCH COMMISSION RECEIPT IN THEIR RETURNS AND HAVE PAID TAXES THEREON. 5 SO FAR AS PAYMENT OF COMMISSION TO RELATED PERSONS IS CONCERNED, THERE IS NO BAR ON ENGAGING RELATED PERSONS AS COMMISSION AGENTS AND NO DISALLOWANCE IS CALLED FOR OR MADE BY ASSESSING OFFICER U/S 40A(2)(B) OF THE INCOME-TAX ACT, 1961, IF SERVICES ARE RENDERED. PAYMENT OF COMMISSION TO RELATED PARTIES IS ALLOWED IN CASE OF COMPUTER GRAPHICS LIMITED, (2006), 285 ITR 84 (MAD) AND MICROTEX SEPARATORS LIMITED, (2007) 293 ITR 451 (KAR) HOLDING THAT REASONABLENESS OF COMMISSION PAYMENT TO INTERESTED PARTIES HAS TO BE JUDGED FORM THE VIEW POINT OF BUSINESSMAN AND NOT THAT OF REVENUE . IN CASE OF COMPUTER GRAPHICS LIMITED, IT WAS HELD THAT PAYMENT OF COMMISSION TO INTERESTED PARTIES WAS REASONABLE AND SAME HAD ADMITTEDLY RESULTED MORE BUSINESS FOR THE ASSESSEE AND THERE WAS NO PROOF OF EXCESSIVE OR UNREASONABLE PAYMENTS. IN PRESENT CASE ALSO AS THE COMMISSION PAYMENT GREW OVER THE YEARS, THE TURNOVER OF APPELLANT HAS INCREASED SUBSTANTIALLY, AS IS VISIBLE FROM THE TAB LE GIVEN ABOVE. WHEN WORK ORDERS, AGREEMENT WITH GOVERNMENT AGENCIES, LEDGER ACCOUNTS OF COMMISSION AGENTS IN BOOKS OF APPELLANT SHOWING TRANSACTION THROUGH CHEQUES, DETAILS OF SERVICES RENDERED BY COMMISSION AGENTS TO APPELLANT, I.T. RETURNS OF COMMISSION AGENTS ETC. PROVE THE FACTUM OF SERVICES BEING RENDERED AND COMMISSION BEING PAID, THE ONUS SHIFTED ON THE ASSESSING OFFICER TO DISPROVE THE SAME. THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRIES WITH RESPECTIVE GOVERNMENT DEPARTMENTS TO DISLODGE APPELLANTS CLAIM. WHEN ONE COMMISSION AGENT SHRI MANISH SANGHAVI APPEARED BEFORE ASSESSING OFFICER, HE CONFIRMED TO HAVE COLLECTED REQUIREMENTS FROM VARIOUS GOVT. DEPTTS. AND SUPPLY ORDER TO THE APPELLANT AND HAVING COLLECTED THE PAYMENT. THE PAYMENT MAY HAVE BEEN COLLECTED AS PER RATE CONTRACT WITH MPLUN AND CONTRACT MAY BE WITH APPELLANT, BUT SUCH LARGE NUMBER OF CONTRACTS COULD BE GAINED IN 6 DIFFERENT LOCATION OF M.P. FROM IDA AND PWD ONLY BECAUSE OF ACTIVE INVOLVEMENT OF COMMISSION AGENTS IN PRE-TENDER WORKS AND THEY ARE INSTRUMENTAL IN GETTING THE WORK COMPLETION REPORT PASSED BY RESPECTIVE AUTHORITY AND ONLY THAN PAYMENTS ARE RELEASED TO APPELLANT AS PER RATE CONTRACT. SUCH FACTS HAVE BEEN AFFIRMED AND DETAILS OF SERVICES RENDERED ARE FILED BEFORE THE UNDERSIGNED BY SHRI MANISH SANGHVI IN FORM OF AN AFFIDAVIT, WHEREIN HE HAS ALSO ATTACHED A COPY OF HIS I.T. RETURN, FOR ASSESSMENT YEAR 2009-10 IN WHICH HE HAS SHOWN AN INCOME OF RS. 11,94,444/- WHICH INCLUDE COMMISSION OF RS. 1,77,530/- RECEIVED FROM APPELLANT. A.OS OBJECTION TO PRESENCE OF COMMISSION AGENTS IN GOVERNMENT CONTRACTS IS ALSO NO WELL FOUNDED. THERE IS NO BAR IN EXISTENCE OF COMMISSION AGENTS IN VARIOUS PRE-TENDER AND POST TENDER ACTIVITIES IN GOVERNMENT CONTRACTS. COMMISSION AGENTS CAN CERTAINLY PERSUADE GOVERNMENT INSTITUTIONS TO PLACE ORDERS AND ARRANGE FOR ACCEPTANCE OF THE WORK EXECUTED. SUCH VIEW IS CONSISTENTLY TAKEN BY SEVERAL COURTS NAMELY BHARAT MEDICAL STORE,(2009) 308 ITR 373 ( P & H ), LAXMI ENGG. INDUSTRIES (2008) 298 ITR 203 (RAJ), VOLTAMP TRANSFORMERS P.LTD.,(1981) 129 ITR 105 (GUJ)., NESTOR PHARMACEUTICALS P.LTD.,(2010) 33 DTR ( DEL ) 293, MOBILE COMMUNICATION (INDIA) (P) LTD. (2010) 128 TTJ (DEL) 666, ISHWAR PRAKASH & BROS., (1986) 159 ITR 843 ( P & H) AND ELECTRA (JAIPUR)(P) LTD. 26 IT D (DEL) 236. THE BAR IS ON TRANSACTIONS AND DEALINGS WITH GOVERNMENT THROUGH AN AGENT, AS THAT IS AGAINST THE PUBLIC POLICY. TO BE MORE PRECISE GOVERNMENT CONTRACTS COULD NOT BE CONCERNED BY COMMISSION PAYMENTS TO GOVT. OR ITS REPRESENTATIVES. THAT IS DISALLOWABLE UNDER THE EXPLANATION TO SECTION 37(1) OF INCOME-TAX ACT, 1961. BUT THERE IS NO SUCH ALLEGATION NEITHER IS THERE ANY PROOF OF THE SAME IN PRESENT CASE. BESIDES THE RULE OF CONSISTENCY HAS TO BE FOLLOWED AS HELD IN THE CASE OF MANDEEP SINGH, 7 (2010) 328 ITR 169 (P&H) WHEREIN COMMISSION PAYMENT TO SUB-DEALERS WAS ALLOWED ON THE GROUND THAT ASSESSING OFFICER CANNOT DEVIATE FROM HIS EARLIER DECISIONS SINCE FACTS ARE IDENTICAL. IN APPELLANTS CASE COMMISSION EXPENSES ARE ALLOWED IN EARLIER YEARS I.E. A.Y. 05-06 TO A.Y. 08-09 AS PER THE DETAILS GIVEN IN REMARKS COLUMN OF THE TABLE ON PAGE NO.14 OF THIS ORDER. THEREFORE, EVEN FROM CONSISTENCY PRINCIPLE ALSO SUCH COMMISSION EXPENSES SHOULD HAVE BEEN ALLOWED. CONSIDERING THE DISCUSSION IN AFORESAID PARAGRAPHS, THE COMMISSION EXPENSE OF APPELLANT OF RS. 27,34,612/- ARE HELD ALLOWABLE GROUND NO. 2 OF THE APPEAL, THEREFORE, STANDS ALLOWED. 7. SHRI R. A. VERMA, LD. SENIOR DR APPEARED ON BEHALF OF REVENUE AND CONTENDED THAT SINCE THE ASSESSEE WAS SUPPLYING GOODS TO GOVERNMENT DEPARTMENT, THERE WAS NO SYSTEM OF ANY ORDER BEING GIVEN THROUGH MIDDLEMAN NOR THERE WAS ANY SYSTEM OF COMMISSION BEING PAID. HE CONTENDED THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE FOR THE SERVICES RENDERED BY COMMISSION AGENTS, WHO WERE CLOSELY RELATED TO THE ASSESSEE. OUR ATTENTION WAS ALSO INVITED TO VARIOUS OBSERVATIONS OF THE ASSESSING OFFICER TO PROVE THAT THE ASSESSEE WAS UNABLE TO PRODUCE EVEN A SINGLE EVIDENCE IN SUPPORT OF THE SERVICES RENDERED BY THE SO CALLED COMMISSION AGENT. HE CONTENDED THAT THE LD. CIT(A) HAS WRONGLY DELETED THE DISALLOWANCE ON THE PLEA THAT PAYMENT OF COMMISSION WAS PAID BY CHEQUE AND THAT IN EARLIER YEAR ALSO SUCH COMMISSION WAS ALLOWED. HE, ACCORDINGLY, CONTENDED THAT THE ORDER OF THE CIT(A) ON THIS ISSUE SHOULD BE SET-ASIDE AND THAT OF ASSESSING OFFICER SHOULD BE RESTORED. 8. ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTATIVE CONTENDED THAT COMMISSION WAS PAID FOR VARIOUS WORKS PERFORMED BY THE COMMISSION AGENT WITH REGARD TO EXECUTION OF THE ORDER RECEIVED FROM GOVERNMENT DEPARTMENT AND CONTENDED THAT RECIPIENT OF COMMISSION INCOME 8 HAVE DULY OFFERED THE SAME IN THEIR RETURN OF INCOME. HE FURTHER RELIED ON THE ORDER OF THE CIT(A ). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT THE ASSESSEE WAS ENGAGED IN SUPPLYING GOODS TO THE GOVERNMENT DEPARTMENTS LIKE P.W.D. AND IDA ETC. ON THE RATES APPROVED BY THE M.P. GOVERNMENT FOR PROCUREMENT OF GOODS, QUOTATIONS WERE INVITED FROM THE PROSPECTIVE SUPPLIERS IN THE SEALED COVERS WHICH ARE OPENED ON A SPECIFIC DATE AND ON A TIME IN THE PRESENCE OF RESPONSIBLE PERSON OF THE DEPARTMENT AND ALSO THE REPRESENTATIVE OF THE SUPPLIERS. LOWEST QUOTATION IS GENERALLY ACCEPTED, WHICH IS FURTHER SUBJECT TO NEGOTIATION AS REGARD T O THE PRICE AT WHICH THE SAID GOODS ARE PURCHASED BY THE DEPARTMENT. FOR SUBSTANTIATING THE ASSESSEES CLAIM OF EXPENSES, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE EVIDENCE WITH REGARD TO THE SERVICES RENDERED BY THE SO CALLED COMMISSION AGENT. THE ASSESSING OFFICER FOUND THAT NOT A SINGLE EVIDENCE WAS PRODUCED FOR THE SERVICES SO RENDERED. CONTENTION OF ASSESSEE THAT ORDERS WERE PROCURED BY THE COMMISSION AGENT AND PAYMENT WAS ALSO COLLECTED FROM THE GOVERNMENT DEPARTMENT WAS ALSO FOUND TO BE NOT TRUE IN SO FAR AS ORDERS WERE DIRECTLY PLACED TO THE ASSESSEE AFTE R INVITING TENDERS AND PAYMENT WAS DIRECTLY MADE TO THE SUPPLIER AND NOT TO THE AGENT. PRECISE OBSERVATION OF ASSESSING OFFICER WAS AS UNDER :- 3.5 THE ASSESSEE HAS ONLY PROVIDED COPY OF CREDIT NOTES PREPARED BY ITSELF AND NOT PRODUCED THE PERSONS FOR VERIFICATION EXCEPT ONE WHO ALSO COULD NOT PROVIDE ANY EVIDENCE WITH RESPECT TO ANY WORK DONE FOR THE ASSESSEE. SHRI MANISH WHO PRESENTED HIMSELF ALSO COULD NOT PROVIDE ANY EVIDENCE THAT HE HAS PROVIDED SOME SERVICES TO THE ASSESSEE. AS SUCH THE 9 ASSESSEE COULD NOT DISCHARGE HIS ONUS IN RESPECT OF COMMISSION EXPENSES. ONLY PROVIDING CREDIT NOTES AND DETAILS OF THE PERSONS TO WHOM CREDIT NOTE IS ISSUED, DO NOT PROVE GENUINENESS OF THE EXPENSES. THERE IS ALSO NO INDICATION OF ANY AGENT ON THE BILL ISSUED BY THE ASSESSEE IN RESPECT OF SUPPLY. ON THE PERUSAL OF COPIES OF BILL IT IS NOTICED THAT THERE ARE MENTION OF ORDER NUMBER AND DATE WHICH SHOWS THAT THE ASSESSEE HAS RECEIVED ORDER THROUGH M.P. LAGHU UDYOG NIGAM AND NOT DIRECTLY FROM THE GOVERNMENT DEPARTMENT AS SUCH TO CLAIM THAT THE SO CALLED AGENTS HAVE COLLECTED ORDER IS TOTALLY INCORRECT. FURTHER THERE IS NO POSSIBILITY OF MAKING PAYMENTS BY THE GOVERNMENT DEPARTMENT TO PARTIES OTHER THAN FROM WHOM SUCH PURCHASES WERE MADE. AS SUCH, CLAIM OF COLLECTING PAYMENT BY THE SO CALLED AGENTS IS ALSO NOT CORRECT. FURTHER, THE RATE OF COMMISSION PROVIDED TO THE PERSONS IS 20% OF WORK EXECUTED AND SUPPLY MADE WHICH IS ALSO TOO HIGH TO ACCEPT. AS SUCH NEITHER THE GENUINENESS AND REASONABLENESS NOR THE SERVICES RENDERED BY THE SO CALLED COMMISSION AGENTS HAS BEEN ESTABLISHED. THUS, THE BUSINESS EXIGENCY OF THE EXPENDITURE REMAINS TO BE EXPLAINED BY THE ASSESSEE. 3.6 IN VIEW OF THE ABOVE PARAS, IT IS CLEAR THAT ASSESSEE HAS ADOPTED A TYPICAL MODUS OPERANDI FOR REDUCING THE PROFIT BY WAY OF BOOKING COMMISSION WHICH IS FACTUALLY INCORRECT, UNVERIFIABLE AND TO SOME EXTENT AGAINST THE POLICY OF GOVT. OF M.P. WHICH IS FOLLOWED IN LETTER AND SP IRIT BY THE STATE GOVERNMENT. IT WOULD NOT BE OUT OF PLACE TO MENTION THAT SUCH A PRACTICE IS UNWARRANTED AND UNCALLED FOR AS PERCEIVED FROM THE VARIOUS EVENTS OCCURRING AT DIFFERENT TIMES AND DIFFERENT PLACES WHERE THE GOVERNMENT HAS DISAPPROVED THE PRACTICE OF MIDDLEMEN IN THE 10 TRANSACTION WITH THE GOVT. BODIES MADE BY ANYBODY. THIS IS ALSO THE MORE CLEAR FROM THE FACT THAT DESPITE DEBITING EXORBITANT AMOUNT UNDER THE HEAD COMMISSION EXPENSES, IT HAS FAILED TO PRODUCE EVEN A SINGLE EVIDENCE IN SUPPORT OF SERVICES RENDERED BY THE SO CALLED COMMISSION AGENTS. OTHER ASPECTS IN THIS REGARD HAVE BEEN DISCUSSED WIDELY AND ELABORATELY IN THE PRECEDING PARAS WHICH THROWS SUFFICIENT LIGHT ON THE QUESTION OF RA TE OF COMMISSION, THE DATE OF BOOKING THE BOOKS OF ACCOUNT, AND ASSESSEES FAILURE TO PRODUCE THE SO CALLED COMMISSION AGENTS. THEREFORE, IT IS CLEAR TH AT THE ASSESSEE HAS INFLATED DEBIT SIDE OF THE PROFIT AND LOSS ACCOUNT BY BOOKING FICTITIOUS EXPENSES IN THE NAME OF COMMISSION TO PERSONS OTHER THAN M.P. LAGHU UDYOG NIGAM AMOUNTING TO RS. 27,34,612/-. THE SAID EXPENDITURE IS THEREFORE DISALLOWED. PENALTY PROCEEDINGS U/S 271(1)(C) IS SIMULTANEOUSLY INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 10. THE LD. CIT(A) HAS DELETED THE DISALLOWANCE OF COMMISSION BY OBSERVING THAT PAYMENT AGAINST SUCH COMMISSION AGENT WAS MADE THROUGH BANK CHEQUES AND AFTER RECEIPT OF SUCH COMMISSION, THE AGENTS HAVE REFLECTED SUCH COMMISSION RECEIPTS IN THEIR RETURN AND HAVE PAID TAXES THEREON. THE CIT(A) ALSO OBSERVED THAT IN EARLIER YEARS ALSO THE RE WAS COMMISSION PAYMENT FOR THE SIMILAR BUSINESS. HOWEVER, WE DO NOT FIND ANY ASSESSMENT OF EARLIER YEARS U/S 143(3) WHEREIN SIMILAR COMMISSION WAS ALLOWED. AS PER OUR CONSIDERED VIEW, MERE PAYMENT OF COMMISSION BY CHEQUE AND OFFERING OF SOME COMMISSION INCOME BY THE AGENTS IN THEIR RETURNS OF INCOME IS NOT SUFFICIENT TO ALLOW CLAIM OF COMMISSION EXPENSES, WHEN ASSESSEE IS UNABLE TO PROVE THE SERVICES RENDERED FOR WHICH SUCH COMMISSION PAYMENT IS BEING MADE. THE LD. CIT(A) HAS NOT CONTROVERTED VARIOUS FINDINGS RECORDED BY THE ASSESSING OFFICER WITH REGARD TO THE SYSTEM OF ASSESSEES BUSINESS AND THE FACT THAT THE ASSESSEE 11 COULD NOT PRODUCE ANY EVIDENCE TO PROVE THE SERVICES RENDERED BY THE SO CALLED AGENT. THE RATE OF COMMISSION SO PAID, WHICH WAS 20 % OF WORK EXECUTED AND SUPPLY MADE WAS ALSO FOUND TO BE VERY EXORBITANT. ACCORDINGLY, THE ASSESSING OFFICER HAS HELD THAT NEITHER THE GENUINENESS NOR THE REASONABLENESS OF THE SERVICES RENDERED BY SO CALLED COMMISSION AGENTS HAVE BEEN ESTABLISHED. NOWHERE CIT(A) HAS DISCUSSED ANY EVIDENCE PRODUCED BY THE ASSESSEE EITHER BEFORE THE ASSESSING OFFICER OR BEFORE HIM SO, AS TO PROVE THE BUSINESS EXIGENCY OF THE EXPENDITURE AND GENUINENESS OF THE SERVICES SO RENDERED. ACCORDINGLY, WE SET-ASIDE THE ORDER OF CIT(A) ON THIS GROUND AND THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR DECIDING AFRESH IN TE RMS OF OUR ABOVE DISCUSSION. WE DIRECT ACCORDINGLY. IN THE AFORESAID ORDER, AN ELABORATE DISCUSSION HAS BEEN MADE BY THE TRIBUNAL, THEREFORE, FOLLOWING THE REASONING CO NTAINED THEREIN, WE DIRECT THE LEARNED ASSESSING OFFICER TO FOLLOW THE DIRECTIONS OF THE TRIBUNAL AND DECIDE THE ISSUE ACC ORDINGLY. 4. SO FAR AS CROSS OBJECTION RAISED BY THE ASSESSEE IS CONCERNED, THE SAME IS IN SUPPORT OF THE ORDER OF C IT(A). IN VIEW OF THE ABOVE, THE CROSS OBJECTION OF THE ASSESSEE H AS BECOME INFRUCTUOUS. FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE CROSS OBJECTION OF THE ASSESSE E IS DISMISSED BEING INFRUCTUOUS. 12 THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 28.10.2013. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 28.10.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE VYAS