The ACIT, Ahmedabad Circle-3, V. M/s. Tuton Pharmaceuticals Ltd.,

ITA 1075/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8962 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-07-2009
• Assessment Year: 1993-1994
• Appeal Filed On: 05-04-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M K PANDIT; C K MISHRA DRS
• Assessee Lawyers: S N DIVATIA
• Keywords: Reassessment proceedings; Set aside
• Section: 143(3); 133(6); 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AHMEDABAD BEN CHES C BENCH: AHMEDABAD (BEFORE S/SHRI MAHAVIR SINGH, JM AND A N PAHUJA, AM ) ITA NO. 1075/AHD/2004 A Y: 1993-94 ACIT CIRCLE -3, 5 TH FLOOR INSURANCE BUILDING, ASHRAM ROAD, AHMEDABAD VS MS. TUTON PHARMACEUTICALS, 85, GIDC ESTATE, NARODA, AHMEDABAD [PAN: AAAFT 8598A] APPELLANT RESPONDENT REVENUE BY SHRI M. K. PANDIT & SHRI C.K.MISHRA, DRS ASSESSEE BY SHRI S.N DIVATIA, AR ORDER A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 23-1- 2004 OF THE LEARNED CIT(A)-VII, AHMEDABAD, RAISES T HE FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.8,72,775/- MADE ON ACCOUNT OF SA LES COMMISSION. 1.1. THE LD. CIT(A) HAS FURTHER ERRED IN OVERLOOKIN G THE FACT THAT THE SALES PARTIES HAD DENIED THE INVOLVEMENT OF MIDDLEMAN/BROKER. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) O N THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RE STORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY OF THE GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS. 82,80,654/- FILED ON 29-10-1993 BY THE ASSESSEE , MANUFACTURING MEDICINES, WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT) ON 31-1-1994. SUBSEQUENTLY, ASSESSMENT WAS COMPLETED US 143(3) OF THE ACT ON 27-11-1995 ON AN INCOME OF RS. 83, 50,1 76/- THEREAFTER, ASSESSMENT WAS REOPENED U/S 147 WITH THE ISSUE OF NOTICE U/S 1 48 OF THE ACT ON 24-5-2001.IN RESPONSE, THE ASSESSEE FILED RETURN. DURING THE COU RSE OF REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOT ICED THAT THE ASSESSEE ITA NO.1075/AHD/2004 M/S. TUTON PHARMACEUTICAL 2 CLAIMED DEDUCTION FOR COMMISSION OF RS.8,72,775/-. THEREFORE, THE AO ASKED THE ASSESSEE TO FURNISH NAME, ADDRESS AND PAN OF THE PE RSONS, RECEIVING COMMISSION AS ALSO FURNISH EVIDENCE OF SERVICES RE NDERED BY THEM BESIDES BASIS OF PAYMENT, COPIES OF AGREEMENT WITH THE COM MISSION AGENTS, DETAILS OF ORDERS PROCURED BY THE AGENTS. THE AO ALSO ASKED TH E ASSESSEE TO PRODUCE THE SAID COMMISSION AGENTS FOR CROSS VERIFICATION. IN R ESPONSE, THE ASSESSEE SUBMITTED THAT DURING THE AY 1997-98, NECESSARY DET AILS WERE SUBMITTED AND VERIFICATION WAS MADE BY THE AO. THE DISALLOWANCE O F COMMISSION IN THAT YEAR WAS DELETED BY THE LEARNED CIT(A). THE ASSESSEE PLE ADED THAT SINCE THE COMMISSION AGENTS AND PARTIES WERE MORE OR LESS S AME AS IN AY 1991-92 AND MODUS OPERANDI OF THE AGENTS WAS ALSO SAME, NO DISA LLOWANCE SHOULD BE MADE. THE ASSESSEE ALSO SUBMITTED NAME AND ADDRESS OF THE EIGHT AGENTS AS ALSO THE AMOUNT AND RATE OF COMMISSION PAID TO THEM AND FURT HER POINTED OUT THAT AGENTS WERE ENGAGED IN COLLECTING TENDERS FROM THE PROSPE CTIVE BUYERS AND AFTER FILLING IN RESUBMITTING THE SAME .HOWEVER, THE AO WHILE REF ERRING TO HIS FINDINGS IN THE AY 1997-98 OBSERVED THAT NONE OF THE SALES PARTIES WERE AWARE OF THE ROLE OF COMMISSION AGENTS IN THAT YEAR. THE ASSESSEE FAILED TO FURNISH THE BASIS OF PAYMENT OF COMMISSION OR ANY AGREEMENT OR ANY EVIDE NCE OF SERVICES RENDERED, WHILE NONE OF THE FOLLOWING PURCHASERS WERE AWARE O F THE ROLE OF COMMISSION AGENTS IN THE PERIOD RELEVANT TO THE AY 1997-98: 1) COMMANDANT ARMED FORCES MEDICAL STORES, LUCKNOW 2) ARMED FORCES MEDICAL STORES, DELHI 3) DIRECTOR HEALTH AND FAMILY WELFARE, PUNJAB 4) SUPERINTENDENT, TURA CIVIL HOSPITAL, TURA 5) DIRECTOR & HEALTH OFFICER, EAST GARO HILLS, WILI AMNAGAR, TURA 6) DIST. HEALTH OFFICER, HEALTH OFFICER, EAST GARO HILLS, WILLIAMNAGAR, TURA 7) DIRECTOR, ESI SCHEME MEDICAL SERVICES, RAJAJINAG AR, BANGALORE 8) DIRECTOR OF INSURANCE MEDICAL SERVICES, IC CENT. MEDICAL STORES,THIRUVANANTHAPURAM 9) DIRECTOR OF INSURANCE MEDICAL SERVICES, I C CENT . MEDIAL STORES,, 10) REGIONAL DY. DIRECTOR, INSURANCE MEDICAL SERVIC ES ESTI SUB STORE, KOZHIKODE. ITA NO.1075/AHD/2004 M/S. TUTON PHARMACEUTICAL 3 2.1 IN ORDER TO ASCERTAIN THE GENUINENESS OF PAY MENT OF COMMISSION, THE AO ISSUED NOTICES U/S 133(6) OF THE ACT. IN RESPONSE, THE PARTIES MENTIONED AT SR. NO.2, 6, 8, 9 AND 10 ABOVE DENIED THE ROLE OF ANY C OMMISSION AGENT AND STATED THAT PURCHASES WERE DIRECTLY FROM THE ASSESSEE. TH E AO BROUGHT THE FACTS REPORTED BY THE BUYERS TO THE ASSESSEE. IN THESE CI RCUMSTANCES WHEN ORDERS WERE PLACED DIRECTLY BY THE BUYERS WHILE THE ASSESS EE DID NOT FURNISH ANY EVIDENCE OF SERVICES RENDERED BY THE AGENTS IN THE YEAR UNDER CONSIDERATION NOR PRODUCED THEM FOR EXAMINATION, RELYING UPON HIS OWN FINDINGS FOR THE AY 1997- 98,THE AO DISALLOWED THE ENTIRE AMOUNT OF RS.8,72,7 72/- ON ACCOUNT OF COMMISSION . 3. ON APPEAL, THE LEARNED CIT(A) MERELY RELIED UPON HIS OWN ORDER FOR THE ASSESSMENT YEAR 1991-92 AND DELETED THE ADDITION. 4. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORESA ID ORDER OF THE LEARNED CIT(A). AT THE OUTSET, THE LD. AR ON BEHALF OF THE ASSESSEE POINTED OUT THAT ITAT VIDE ORDER DATED 4-1-2008 IN ITA NO.2717/AHD/2000 IN THE ASSESSEES OWN CASE FOR THE AY 1997-98 UPHELD THE ORDER OF THE LEARNED CIT(A) AND HAD DELETED THE DISALLOWANCE OF COMMISSION TO THE SAME PARTIES AS A RE REFERRED IN THE YEAR UNDER CONSIDERATION. IT WAS FURTHER SUBMITTED THAT IN ANO THER ORDER DATED 12.6.2008 IN ITA NOS.1076,1078,1079 & 1080/AHD./2004 FOR THE AY 1994-95 & 1996-97,1998- 99 & 1999-2000, THE ITAT HAD RESTORED THE ISSUE TO THE FILE OF THE AO FOR DECIDING THE SAME IN THE LIGHT OF OBSERVATIONS OF THE TRIBUN AL IN THEIR ORDER DATED 4.1.2008. TO A QUERY BY THE BENCH, THOUGH THE LD. A R CONTENDED THAT ALL THE AGENTS EXCEPT M/S ANAND DISTRIBUTORS WERE SAME AS I N THE AYS.1991-92 OR 1992- 93 OR 94-95 & 1995-96, THE LD. DR DID NOT SUBMIT A COPY OF ORDER OF THE ITAT IN THE APPEAL OF THE REVENUE FOR THE AY 1991-92 NOR RE FERRED US TO ANY EVIDENCE OF SERVICES RENDERED BY THE AGENTS, WHICH HAD BEEN PLA CED BEFORE THE LOWER AUTHORITIES. ON THE OTHER HAND, THE LEARNED DR SUPP ORTED THE FINDINGS OF AO. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO DECISIONS OF THE ITAT IN THE ASSESSEES OWN CA SE FOR THE AYS. 1994-95, ITA NO.1075/AHD/2004 M/S. TUTON PHARMACEUTICAL 4 1996-97 TO 1999-2000. WE FIND THAT IN THE YEAR UNDE R CONSIDERATION ,THE ASSESSEE PAID COMMISSION TO THE FOLLOWING PARTIES: SR. NO. NAME OF PARTY TO WHOM COMMISSION IS PAID TOTAL AMOUNT OF COMMISSION PAID 01. MEDICAMEN, NEW DELHI 1,75,055.00 02 C. V.RAMCHANDRA 22,553.00 03 DEVI PHARAMA 17,919.00 04 JP ENTERPRISE 2,30,462.00 05 MANJULA AGENCIES 27,880.00 06 RAJASTHAN MEDICAL 8,350.20 07 ANAND DISTRIBUTORS 42,146.50 08 MEDICAMENT EXPORT PVT. LTD. 3,48,410.00 THE AO DISALLOWED THE CLAIM FOR COMMISSION ON THE GROUND THAT THE PARTIES TO WHOM SALES WERE MADE DID NOT CONFIRM INVOLVEMENT OF ANY AGENT IN SALE BY THE ASSESSEE TO THE SAID PARTIES. COPIES OF ORDERS SUBM ITTED BEFORE THE AO REVEALED THAT ORDERS WERE PLACED DIRECTLY WITH THE PARTIES A ND NOT THROUGH ANY AGENT. MOST OF THE PARTIES BEING GOVERNMENT ORGANIZATIONS, DENI ED INVOLVEMENT OF ANY AGENT FOR PURCHASE OF THE GOODS FROM THE ASSESSEE. SINCE GENUINENESS OF THE COMMISSION PAYMENT WAS NOT ESTABLISHED NOR ANY EVID ENCE OF SERVICES RENDERED BY THE AFORESAID AGENTS WAS PRODUCED WHILE NOR EVEN THE AGENTS WERE PRODUCED FOR EXAMINATION, THE AO DISALLOWED THE CLAIM FOR DE DUCTION. ON APPEAL, THE LEARNED CIT(A) MERELY RELIED UPON HIS FINDINGS IN A Y 1991-92 AND ALLOWED THE CLAIM, WITHOUT RECORDING ANY FINDINGS IN RESPECT OF SERVICES RENDERED BY THE AFORESAID AGENTS IN THE YEAR UNDER CONSIDERATION. THOUGH THE ASSESSEE FILED A COPY OF ORDER DATED 12-6-2008 OF THE ITAT IN ITA N OS.1076,1078,1079 & 1080/AHD./2004 FOR THE AY 1994-95 & 1996-97,1998-9 9 & 1999-2000 IN THE APPEAL FILED BY THE REVENUE, COPY OF THE RELEVANT O RDER OF THE ITAT FOR THE AY 1991-92 HAS NOT BEEN PLACED BEFORE US, DESPITE SPEC IFIC DIRECTIONS NOR IT IS INFORMED AS TO WHETHER OR NOT THE REVENUE CARRIED T HE MATTER IN FURTHER APPEAL BEFORE THE ITAT IN AY 1991-92. IN ANY CASE, ON THE ASSESSEES APPEAL, THE TRIBUNAL SET ASIDE THE REASSESSMENT BACK TO THE FIL E OF THE AO IN AY 1991-92 FOR RE-ADJUDICATION. BEFORE US, THOUGH THE LEARNED AR O N BEHALF OF THE ASSESSEE SUBMITTED THAT ALL THE AFORESAID PARTIES EXCEPT ANA ND DISTRIBUTORS WERE PAID ITA NO.1075/AHD/2004 M/S. TUTON PHARMACEUTICAL 5 COMMISSION IN AY 1991-92 OR 1992-93 OR 94-95 & 1995 -96, THE LD. AR DID NOT INFORM AS TO WHETHER OR NOT ANY EVIDENCE OF SERVICE S RENDERED BY THE AGENTS WAS PLACED BEFORE THE AO OR THE LD. CIT(A) NOR AS TO WH ETHER COPIES OF FEW LETTERS PLACED BEFORE US IN TERMS OF LETTER DATED 20.8.20 09, WERE MADE AVAILABLE BEFORE THE AO OR THE LD. CIT(A). ON GOING THROUGH ORDER DA TED 4.1.2008 OF THE ITAT IN ITA NOS.2717-2324/AHD./2000 FOR THE AY 1997-98, WE FIND THAT THE ITAT IN THE SAID ORDER OBSERVED THAT THE ASSESSEE HAS PRODUCED ALL THE DETAILS ABOUT THE COMMISSION PAID, BUT THE ASSESSEE HAS FAILED TO EST ABLISH PRODUCING NECESSARY EVIDENCE FACT THAT PARTIES TO WHOM COMMISSION WAS P AID HAVE RENDERED ANY PARTICULAR SERVICE. AFTER THESE OBSERVATIONS, THE ITAT DELETED THE ADDITION ON ACCOUNT OF COMMISSION. WE FIND FROM THE ASSESSMENT ORDER THAT THE AO WHILE DISALLOWING CLAIM IN THE YEAR UNDER CONSIDERATION,E XTENSIVELY REFERRED TO HIS FINDINGS IN THE AY 1997-98. IN THE AY 1994-95,1996- 97,1998-99 & 1999-2000, THE ITAT VIDE THEIR ORDER DATED 12.6.2008 IN ITA NO S.1076,1078,1079 & 1080/AHD./2004 HAVE RESTORED THE ISSUE OF PAYMENT OF COMMISSION TO THE FILE OF THE AO FOR DECIDING THE SAME IN THE LIGHT OF OBSERV ATIONS OF THE TRIBUNAL IN THEIR ORDER DATED 4.1.2008. IN THESE CIRCUMSTANCES, ESPE CIALLY WHEN THE LD. CIT(A) HAVE NOT RECORDED ANY FINDINGS AS TO WHETHER OR NOT ANY SERVICES WERE RENDERED BY THE AFORESAID AGENTS IN THE YEAR UNDER CONSIDERA TION WHILE THE ITAT IN THE AYS1994-95,1996-97,1998-99 & 1999-2000 HAVE RESTORE D THE MATTER TO THE FILE OF THE AO, WE CONSIDER IT FAIR AND PROPER TO SET AS IDE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ALLOW A FINAL OPPORTUNITY TO THE ASSE SSEE TO ESTABLISH THAT THE AFORESAID AGENTS HAD, INDEED, RENDERED SERVICES TO THE ASSESSEE FOR WHICH COMMISSION HAD BEEN PAID IN THE YEAR UNDER CONSIDER ATION AND THEREAFTER, DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW. WITH THESE DIRECTIONS, GROUNDS NOS. 1 AND 1.1 IN THE APPEAL OF THE REVENUE ARE DISPOSED OF. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF RESIDUARY GROUND IN THE APPEAL, THEREFORE, THE SAID GROUND IS DISMISSED . ITA NO.1075/AHD/2004 M/S. TUTON PHARMACEUTICAL 6 7. IN THE RESULT, APPEAL IS ALLOWED, BUT FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18TH SEPTEMBE R,2009 SD/- SD/- (MAHAVIR SINGH) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 18TH SEPTEMBER,2009 LAKSHMIKANT/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE 2. ACIT CIRCLE -3,5 TH FLOOR INSURANCE BUILDING,ASHRAM ROAD, AHMEDABAD 3. CIT(A)-VII, AHMEDABAD 4. THE CIT CONCERNED 5. THE D.R. ITAT, AHMEDABAD, 6. GUARD FILE BY ORDER DR / AR, ITAT, AHMEDABAD