Assistant Commissioner of Income-tax, Satara Circle , Satara V. Vikram Hanmant Ghorpade, Satara

ITA 102/PUN/2018

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 8912 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 05-10-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 10-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: TDS
• Section: 143(3); 133(6); 44AB; 194A

Judgement Text

आयकर अपीलीय अधिकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI G.D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.102/PUN/2018 धििाारण वर्ा / Assessment Year : 2013-14 Assistant Commissioner of Income Tax, Satara Circle, Satara .......अपीलार्थी / Appellant बिाम / V/s. Vikram Hanmant Ghorpade, 102, Shriniwas Apartment, Deshmukhnagar, Satara – 415001 PAN : ALYPG8155H ......प्रत्यर्थी / Respondent Assessee by : Shri Pramod Shingte Revenue by : Shri M.G. Jasnani सुनवाई की तारीख / Date of Hearing : 06-10-2022 घोषणा की तारीख / Date of Pronouncement : 04-11-2022 आदेश / ORDER PER S.S. GODARA, JM : This Revenue’s appeal for assessment year 2013-14 arises against the CIT(A)-4, Pune’s order dated 16-08-2017 passed in case No. PN/CIT(A)- 4/ACIT, Satara Circle/42/2016-17, in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short “the Act”. Heard both the parties. Case file perused. 2. The Revenue raises the following substantive grounds in the instant appeal : 2 ITA No.102/PUN/2018, A.Y. 2013-14 “1. On the facts and in the circumstances of the case, the Commissioner of Income tax (A)-4, Pune, has erred in deleting the addition of Rs.1,68,33,800/- on account of commission and brokerage paid. 2. On the facts and in the circumstances of the case, the Commissioner of Income tax (A)-4, Pune, has erred in deleting the addition of Rs.1,68,33,800/- on account of commission and brokerage paid without appreciating the fact that the transactions have been carried out through banking channels does not mean that the transactions proved its genuineness and more so when notices u/s. 133(6) and reminders were not responded by concerned payees. 3. On the facts and in the circumstances of the case, the Commissioner of Income tax (A)-4, Pune, has erred in deleting the addition of Rs.1,68,33,800/- on account of commission and brokerage paid without appreciating the fact that rendition of service is not established which is essential for allowing deduction on account of commission and brokerage. 4. On the facts and in the circumstances of the case, the Id. Commissioner f Income tax (A)-4, Pune, has erred in deleting the addition of Rs.1,68,.33,800/- on account of commission and brokerage paid ignoring the settled position of law that disallowance of commission payment is warranted where genuineness of services rendered is not established (Premier Breweries Ltd V. CIT 56 Taxmann.com 351- Supreme Court; Lachminarayan Mandanlal 86 ITR 439 - Supreme Court; Printer House (P) Ltd V. DC IT 88 Taxmann.com 45-Delhi). 5. For these and such other reasons as may be urged at the time of hearing, the order of the Id. CIT(A) may be vacated and that of the Assessing Officer be restored. 6. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of the appellate proceedings before the Hon'ble ITAT.” 3. Both the learned representatives invited our attention to the CIT(A)’s detailed discussion deleting the impugned commission disallowance of Rs.1,68,33,800/- in issue as follows : “5.3 DECISION: -I have perused the assessment order and the submission made by the appellant as above carefully. I find from para 5 and its sub paras of the assessment order that the AO found during assessment proceedings from profit and loss account that the appellant had claimed an amount of Rs.1,68,33,800/- on account of Commission & Brokerage paid to various persons in connection with purchase of land from land owners, which were subsequently transferred to M/ s. Suzlon Gujarat Wind Part Ltd. It was submitted by the appellant before the AO that the said commission and brokerage were paid for smooth transfer of the land, as the assessee had no knowledge about the land owners individually. It was also contended before the AO that the payments were made by cheques but TDS was not deducted as the assessee was not liable to deduct TDS as per provisions of section 194A as his accounts for immediately preceding assessment year were not required to be audited u/s. 44AB of the Act. The 3 ITA No.102/PUN/2018, A.Y. 2013-14 AO, further asked the assessee to furnish the details of such payment along with complete postal addresses of such persons. The assessee furnished certain details on the basis of which letters were issued to 9 persons out of 74 persons u/s. 133(6) of the Act on 07/01/2016 to verify the claim of the assessee. However, no reply was received from the said persons. The AO, therefore, issue reminder letter on 08/03/2016 to all the persons again but there was again no compliance. As the transactions relating the aforesaid payments could not be confirmed from the respective persons. The AO issued a show cause letter to the appellant on 16/03/2016, stating the aforesaid facts and to explain as to why the commission and brokerage paid should not be disallowed. 5.3.1 In response, the assessee filed a written submission which has been quoted in the assessment order. The assessee contended before the AO that the required information was submitted from time to time including list of the persons and address to whom payments were made. Apart from this, the assessee had to develop a number of facilities, such as approach roads, storage facilities, temporary accommodations etc. at the project side. The assessee therefore had obtained the rights of usage of the land from the persons mentioned in the list. The assessee also had paid crop compensation to the persons for the loss of their crops standing on such land purchased and also consideration for the services rendered by these persons. The AO submitted that various details such as names of the persons, postal addresses, dates of payments, amounts paid, mode of payments and cheque nos. were also furnished before the AO. The assessee also furnished confirmation letters of the persons to whom verification letters were issue by the AO. The assessee also furnished copies of identity proves of the persons before the AO. It was contended that the accounts of the assessee for this year were audited and the amounts paid as brokerage and commission were independently verified by the auditor during tax audit. It was, therefore, requested by the assessee to the AO that the transactions were genuine and hence be not disallowed. 5.3.1.1 The AO, however, did not accept the submission of the appellant assessee. The AO contended that the transactions were not confirmed by the persons in writing. Mere payments made through bank accounts were not conclusive evidence to prove that the transaction were beyond reasonable doubt. The confirmation letters purportedly signed by the persons to whom letters u/ s. 133(6) were issued, could not prove the authenticity as the same were furnished by the appellant assessee and in the nature of self serving documents without having any evidentially value because the same were not receive through independent channel. Copies of the voter ID and PAN Cards only established the identity of the persons but could not prove the transaction as genuine. The AO also notice that payments were also made in cash to the commission agent and therefore such transaction were not amenable to verification. The appellant also failed to furnish any copy of bills raise by the aforesaid commission agent claiming commission or brokerage. The AO, accordingly, supporting documentary evidences since not confirm on not enquiry as not acceptable and in absence of the evidences as he sought for, had disallowed the entire commission or brokerage payment of Rs.1,68,33,800/- and added the same to the total income. 5.3.2 During the appellate proceedings, the appellant more or less made the identical submission and the summary of such submission as given in the letter filed on 10/08/2017 have been quoted above. The appellant 4 ITA No.102/PUN/2018, A.Y. 2013-14 contended that the payments were supported by vouchers & agreements. Substantial amount of the payments was made by account payee cheques. The appellant also proved the identity of the payees by producing their Aadhaar cards / PAN Cards / Election cards / Driving license & also 7/12 extracts of their lands. In spite of these evidences, the A.O. had raised doubts about the genuineness of the letters. The AO could have summoned the concerned persons to testify before him, but he had failed to do so and therefore failed to prove his allegations. It was A.O.'s only surmise that the entire payments of Rs.1,68,33,800/- remained unsubstantiated & deserve to be disallowed. Referring to the decision in the case of M/s S.D. Enterprises Vs. ACIT, Circle-2, Surat (ITAT)(Ahmedabad); It is held by Hon. ITAT (Ahmedabad) that if allegation is made by AO, onus is on him to prove it conclusively, the appellant contended that the AO had failed to do so. The appellant also submitted that the expenditure was genuine, reasonable & for the purpose of business. Referring to the decision of the Hon. ITAT G Bench Mumbai in Shri Ganpatraj A. Sanghvi Vs. A.C.LT. 15(3), the appellant contended that the addition deserved to be deleted as the same could not be made on the basis of preponderance of probabilities. Suspicion could not form the basis of addition, as was held in the said decision. The appellant also cited the decision in the case of Rajesh P. Soni Vs. A.C.I.T. 100 TTJ 892 (Ahmedabad), Annexure - 14, wherein the Hon. ITAT Ahmedabad inter-alia held that purchases were recorded in the regular books of account maintained. The purchases were supported by proper bills I vouchers. The assessee filed the necessary details regarding name, address, sales-tax numbers. The payments were made through banking channels and therefore the sales against the purchases could not be doubted. It was not the case of AO that amounts paid for purchases had come back to the assessee. It was also found by the Court that the addition had merely on the ground that the suppliers were not located and they were not produced for examination. It was held that when purchases were supported with authenticated purchase bills, having sales- tax numbers and payment through cheques, the addition could not be made. The appellant contended that he had furnished all relevant details and documents in support of proofs that the payments to identified persons were made by the appellant as commission and brokerage for making available of the lands for the Suzland Gujrat Wind Park Ltd, from various farmers, as the said persons were acquainted with the farmers, and the appellant was paid by the said company for arranging to get such lands in the unknown locality of the said company. Referring to the above decisions, the appellant contended that the addition so made on account of disallowance of commission and brokerage of Rs.1,68,33,800/- was not warranted, as the payments made were genuine and incurred for my business exclusively. 5.4 I find merit in the submission and contention of the appellant. It is seen from the assessment order that the appellant had discharged his onus by providing all the necessary details and information such as, names & addresses of all 74 persons, copies of their PAN cards, Adhar cards, Election cards and Driving Licenses, copies of notarized agreements as in the cases could be. In other words, as far as the identity of the persons, there was no dispute and doubts. The also did not give any adverse findings in this regard. The AO's contention was that letters u/s. 133(6) of the Act were issued to 9 persons to whom major payments were made to verify the assessee s claim, however, none of them filed any reply confirming such payments received by the said persons. Again reminders were issued but still there was no response. The assessee was brought to notice of the above 5 ITA No.102/PUN/2018, A.Y. 2013-14 facts of their non-compliance, informing the appellant that his claim was not proved. The other contention of the AO was that no TDS was deducted and it was not known to the AO whether the said persons had filed their returns of income, since the amounts paid had exceeded the limit chargeable to tax. The appellant replied to the above to the AO that the required information was already filed such as, complete list of the persons, details as stated above , dates of payments, amounts paid by cheques etc and therefore, genuineness of payments were proved. The appellant also detailed the reasons for making such payments to the concerned persons contending that the same was required for determination of Gat numbers as well as the owners of the lands required for the project; co-ordination between the land owners and the assessee in respect of the proposed deals; clearing off the various constraints and hurdles arising in this regard; cleaning of proposed area and other works till the completion of the assigned works. I find that the AP restrained himself to his enquiry only to calling for information u/s. 133(6) of the Act, that too only 9 persons out of 74 persons. When the persons did not comply to AO's notices, the AO could have deputed his Inspector for verification and spot enquired so as to ensure the non-genuine nature of transactions, if any. Further, when the AO had all required documents for the identity of the persons, he could issue summons u/s.131 of the Act to some of such persons. The AO could also try to trail the source and outgo of the amounts by making detailed bank enquiries as all the payments claimed to have been made by cheques. In fact, despite of having all relevant details and information of the persons to whom payments of commission and brokerage were paid, the, as it appears, without resorting to various means to prove the same as not genuine, only on assumption and presumption that such substantial payments in that regard could not be made by the appellant, had disallowed the amount paid by the appellant of Rs.1,68,33,800/-, with comments that "Mere payments made through bank Accounts is not conclusive evidence to prove the transactions beyond reasonable doubt". I find that it was a casual approach for the AO to decide the issue against the appellant. Such findings of the AO do not deserve to be sustained. I, on the other hand, find that the appellant had discharged his onus of payments towards commission and brokerage and has rightly contended that the disallowance was made on the basis of preponderance of probabilities and suspicion could not form the basis of addition. I am inclined with the contention of the appellant for the reasons as detailed above. I therefore, hold that the AO was not justified in disallowing the amount of Rs.1,68,33,800/- on account of payments towards brokerage and commission, thereby adding the same to the total income. The addition so made is therefore deleted. Ground no. 1 raised by the appellant is accordingly allowed.” 4. Mr. Jasnani vehemently argued in the light of the Revenue’s pleadings that the assessee had failed to prove the impugned commission payments by way of relevant supportive evidence which made the Assessing Officer to invoke this disallowance. He also quoted Premier Breweries Ltd. Vs. CIT reported in (2015) 372 ITR 180 (SC) in support. 6 ITA No.102/PUN/2018, A.Y. 2013-14 5. The assessee had strongly supported the order of CIT(A)’s invoking detailed discussion in the light of his paper book running into 219 pages containing all the documentary evidences of commission payments, bank statements as well as various judicial precedents. 6. We have given our thoughtful consideration to rival pleadings and find no reason to express our agreement with either of them in entirety. Suffice to say, we note from the assessment discussion dated 28-03-2016 in para 4 onwards that the assessee had been engaged by M/s. Suzlon Gujrat Wind Park Ltd for purchase of lands from various land owners for the purpose of establishing windmills so as to produce wind power. We note in this admitted factual backdrop that the assessee acted on behalf of the said company and purchased lands from various land owners which ultimately stood transferred to the company. He had claimed the impugned payments involving 74 persons in total transactions of Rs.16.72 crores. There is further no quarrel that all the payments had been made through banking channel and list of recipients had also been submitted before lower authorities. We find that the Assessing Officer expressed his disagreement with the impugned expenditure commission claimed which ultimately stands accepted in the CIT(A)’s order. 7. Coming to our reason for not agreeing with either party submits, we find that neither the assessee had been able to prove each and every head of claim nor the Assessing Officer had called him to substantiate the same regarding all the 74 persons as we are concerned with only 9 parties herein. Faced with this situation and in the light of the fact that all the land owners/payees herein are agriculturists who randomly joined the assessee cause of clubbing the lands for setting up windmills and allied activities for M/s. Suzlon Gujrat Wind Park Ltd (an undisputed fact in assessment), we hold that a lump sum commission disallowance of 7 ITA No.102/PUN/2018, A.Y. 2013-14 Rs.12.21 lakhs cash component out of that in issue of Rs.1,68,33,800/- would be just and proper with a rider that the same shall not be treated as a precedent. The CIT(A) details findings deleting the impugned commission/expenditure disallowance of Rs.1,56,12,800/- are upheld in very terms. 8. No other ground or arguments has been pressed before us. 9. This Revenue’s appeal is partly allowed in above terms. Order pronounced in the open court on 04 th November, 2022. Sd/- Sd/- (G.D. Padmahshali) (S.S. Godara ) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; दिनाांक / Dated : 04 th November, 2022. रदव आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A)-4, Pune 4. The Pr. CIT-3, Pune 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गार्ड फ़ाइल / Guard File. //सत्यादपत प्रदत// True Copy// आिेशानुसार / BY ORDER, वररष्ठ दनजी सदचव / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune