The ACIT,Vapi Circle, Vapi V. Shri Tulsibhai Ishwarbhai Patel, Valsad

ITA 1130/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94787 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 24-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ITA NO. 1005/AHD/2012 / ASSESSMENT YEAR: 2009-10 SHRI TULSHIBHAI ISWARBHAI PATEL, 8, MEHSANA NAGAR, SILVASSA ROAD, VAPI, DIST. VALSAD PAN : ACCPP 2595 F VS INCOME TAX OFFICER, VAPI, WARD-3, VAPI ./ ITA NO. 1130/AHD/2012 / ASSESSMENT YEAR: 2009-10 ACIT, VAPI CIRCLE, VAPI VS SHRI TULSHIBHAI ISWARBHAI PATEL, VAPI, DIST. VALSAD PAN : ACCPP 2595 F / (APPELLANT) / (RESPONDENT) ASSESSEE(S) BY : NONE REVENUE BY : SHRI DINESH SINGH, SR DR / DATE OF HEARING : 19/11/2015 /DATE OF PRONOUNCEMENT: 30/11/2015 / O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER: THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), VALSAD DATED 27.02.2012 FOR ASSESSMENT YEAR 2009-10. 2. THE BRIEF FACTS OF THE CASE, AS CULLED OUT FROM THE RECORDS ARE AS UNDER:- 3. THE ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAG ED IN THE BUSINESS OF TRADING OF INDUSTRIAL CHEMICALS. THE ASSESSEE FILE D HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 30.09.2009, DECLARING TO TAL INCOME OF ITA NOS. 1005 & 1130/AHD/2012 SHRI TULSHIBHAI ISWARBHAI PATEL-CROSS APPEALS AY 2009-10 - 2 - RS.17,66,680/-. HIS CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 2 8.12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS.42,52,720/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 27.02.2012 GRANTED PART IAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) , THE ASSESSEE AS WELL AS REVENUE ARE NOW IN APPEAL BEFORE US. THE GROUNDS R AISED BY THE REVENUE IN ITA NO. 1130/AHD/2012 READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING UNEXPLAINED COMMISSION EXPEND ITURE TO THE EXTENT OF RS.12,89,235/-. 2. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT THE ORDER OF THE AO BE RESTORED. 4. ON THE OTHER HAND, THE GROUND RAISED BY THE ASSE SSEE IN ITA NO. 1005/AHD/2012 READS AS UNDER:- THE LEARNED CIT(A) HAS ERRED IN MAKING ADDITION ON ACCOUNT OF COMMISSION PAID TO RELATIVE AMOUNTING TO RS.12,89,2 35/-. 5. SINCE THE GROUNDS RAISED BY THE REVENUE AND ASSE SSEE ARE INTER- CONNECTED, BOTH THE APPEALS ARE CONSIDERED TOGETHER . 6. IN THIS CASE IT IS NOTICED THAT ON EARLIER OCCAS ION ALSO THE CASE WAS ADJOURNED AND THEREFORE, DURING THE LAST HEARING WH ICH WAS HELD ON 21.09.2015, THE CO-ORDINATE BENCH OF THE TRIBUNAL D IRECTED THE SERVICE OF NOTICE OF HEARING THROUGH DEPARTMENTAL REPRESENTATI VE. THE REVENUE VIDE LETTER DATED 04.11.2015, WHICH IS PLACED ON RECORD, HAS STATED THAT THE NOTICE INTIMATING THE ASSESSEE ABOUT THE DATE OF HEARING W AS SERVED UPON THE ASSESSEE BY HAND AND COPY OF WHICH IS ALSO PLACED O N RECORD. ON THE DATE OF HEARING, I.E., ON 19.11.2015, NONE APPEARED ON B EHALF OF THE ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED. WE, THEREFOR E, PROCEED TO DISPOSE OF ITA NOS. 1005 & 1130/AHD/2012 SHRI TULSHIBHAI ISWARBHAI PATEL-CROSS APPEALS AY 2009-10 - 3 - THE APPEAL EX-PARTE QUA THE ASSESSEE ON THE BASIS O F THE SUBMISSIONS MADE BY THE REVENUE AND THE MATERIAL AVAILABLE ON RECORD . 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF THE PROFIT AND LOSS ACCOUNTS, THE ASSESSING OFFICER NOTICED TH AT THE ASSESSEE HAD DEBITED RS.24,86,035/- AS COMMISSION PAYMENTS. THE ASSESSEE WAS ASKED TO PRODUCE THE PERSONS TO WHOM THE COMMISSION WAS PAID FOR VERIFICATION OF THE GENUINENESS OF EXPENSES. THE ASSESSING OFFICER NOTED THAT NO PERSONS WERE PRODUCED BEFORE THE ASSESSING OFFICER. THE ASS ESSING OFFICER, ON VERIFICATION OF THE LEDGER COPIES NOTICED THAT MOST OF THE PAYMENTS WERE UNPAID AND SHOWN AS OUTSTANDING LIABILITY. THE ASS ESSING OFFICER WAS OF THE VIEW THAT IF THE TRANSACTIONS WERE GENUINE, NO AGENT WILL KEEP HIS COMMISSION OUTSTANDING FOR A LONG TIME. FURTHER, T HE SUBMISSIONS OF THE ASSESSEE THAT IT HAS DEDUCTED TDS WHILE MAKING THE COMMISSION PAYMENT TO PROVE THE GENUINENESS OF COMMISSION WAS NOT FOUN D ACCEPTABLE TO THE ASSESSING OFFICER. THE ASSESSING OFFICER, IN THE AB SENCE OF ANY PROOF IN RESPECT OF THE PERSONS TO WHOM THE ASSESSEE HAD PAI D THE COMMISSION, CONSIDERED THE ASSESSEES CLAIM OF COMMISSION PAYME NTS TO BE A COLORFUL DEVICE AND ACCORDINGLY DISALLOWED THE EXPENDITURE O F RS.23,86,035/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 4.3 DECISION : I HAVE CAREFULLY CONSIDERED THE OBS ERVATIONS MADE BY THE AC IN THE ASSESSMENT ORDER AS WELL AS CONTENTION RA ISED BY THE AR OF THE APPELLANT- THE CORE ISSUE HERE IS THE COMMISSION PA YMENT CLAIMED BY THE APPELLANT IS GENUINE OR NOT. THE AO OBSERVED THAT T HE APPELLANT FAILED TO PRODUCED THOSE COMMISSION AGENTS BEFORE HIM DURING THE ASSESSMENT PROCEEDING. FURTHER, THE AO HELD THAT THE MODUS OPE RANDI ADOPTED BY THE APPELLANT WAS TO AVOID TAX/ LESSEN THE TAX LIABILIT Y. THE AO PRODUCED BEFORE HIM LEDGER COPY AND ALSO THE TDS DEDUCTION DETAILS BEFORE THE AO BUT HE DISBELIEF AND MADE ADDITION OF THE AGENCY COMMISSIO N CLAIMED BY THE APPELLANT. ON THE OTHER HAND THE LD. AR CLAIMED TH AT THE COMMISSION PAYMENT WAS GENUINE AND TO PROVE THAT THE LD. AR SU BMITTED AUDITED P&L ITA NOS. 1005 & 1130/AHD/2012 SHRI TULSHIBHAI ISWARBHAI PATEL-CROSS APPEALS AY 2009-10 - 4 - A/C, AND BALANCE SHEET. THE LD. AR ALSO SUBMITTED N ECESSARY EVIDENCES FOR HAVING DEDUCTED TDS FOR MAKING PAYMENT OF COMMISSIO N. THE LD. AR ALSO SUBMITTED RETURN COPIES OF ALL THE AGENTS SHOWING C OMMISSION RECEIPT AS THEIR INCOME IN THE RETURN FILED BY THEM. I HAVE CA REFULLY PERUSED THE DETAILS FURNISHED ABOUT THE COMMISSION AGENTS AND THE COMMI SSION PAID BY THE APPELLANT. THE FACT IS THAT IN THE CHEMICAL TRADING , COMMISSION HAS BEEN PAID INVARIABLY. THE APPELLANT HAS ALSO BEEN MAKING COMM ISSION PAYMENTS IN THE PRECEDING YEARS WHICH THE DEPARTMENT HAS ACCEPTED. THEREFORE, THE COMMISSION PAID DURING THIS YEAR CANNOT BE SAID THA T IT IS BOGUS. THERE ARE TOTAL 9 PARTIES TO WHOM THE COMMISSION OF AMOUNTING TO RS.24,86,035/- WAS PAID. WHEN ASKED, THE LD. AR SUBMITTED THAT THE FOL LOWING 4 PARTIES ARE RELATIVES; SR NO. NAME OF THE AGENTS COMMISSION PAID RS. RELATION WITH THE APPELLANT 1 DUSHYANT V. PATEL 3,05,720/- BROTHER'S SON 2 RAJNIKANT I. PATEL 3,04,865/ - NEPHEW 3 SMITABEN P. PATEL 2,89,300/- BROTHER'S WIFE 4 VIVEKBHAI T. PATEL 4,89,350/- SON TOTAL 12,89,235/ - I HAVE PERUSED THE AUDITED REPORT, P&L A/C AND THE BALANCE SHEET. THE FACTS REVEALED THAT THERE WAS AN INCREASE IN THE TU RNOVER (RS. 767.99 LAKHS) THIS YEAR COMPARED TO THE PREVIOUS YEAR (RS. 643.85 LAKHS). THE COMMISSION OUT GO THIS YEAR CLAIMED WAS RS. 24.86 LAKHS COMPAR ED TO RS. 9.37 LAKHS IN THE PREVIOUS YEAR. IT APPEARS THERE WAS A QUANTUM J UMP IN THE COMMISSION PAID BY THE APPELLANT THIS YEAR. IN THAT CONTEXT, T HE COMMISSION PAID TO THE RELATIVES AND KEEPING AS OUTSTANDING IN THE BOOKS B ECAME SUBJECT MATTER OF CONTENTION. AS MENTIONED EARLIER, IN THIS TRADE COM MISSION PAYMENT IS AN ACCEPTED FACTS. BUT IN THE APPELLANT'S CASE THE COM MISSION PAID DURING THE CURRENT YEAR IS MORE THAN 150% WITHOUT GIVING SUFF ICIENT REASONS, CALLS FOR DELIBERATION. THE NET PROFIT VIS-A-VIS THE TURNOVER DURING THIS YEAR AS COMPARED TO THE PREVIOUS YEAR WAS ALSO LESS BY ABOU T 2.00 LAKHS. IN THIS BACKGROUND, THE DETAILS OF COMMISSION PAID WAS CALL ED FOR DURING THE APPELLATE PROCEEDING. ON PERUSAL OF THE DETAILS FUR NISHED IT WAS NOTICED THAT OUT OF THE 9 PARTIES, 4 PARTIES WERE FAMILY MEMBERS AND THE PAYMENT MADE TO THEM WAS RS.12,89,235/- OUT OF TOTAL COMMISSION PAI D OF RS. 24,86,035/- (P.Y, 9,37,440/-)-. THEREFORE, AS MENTIONED EARLIER , THE COMMISSION PAID THIS YEAR APPEARS TO BE EXORBITANT. IN THE INTEREST OF J USTICE, IT IS UNFAIR TO DISALLOW ENTIRE COMMISSION PAID. BUT AT THE SAME TI ME ONE SHOULD NOT BLINDLY ACCEPT THE COMMISSION PAID WITHOUT ADEQUATE EVIDENCE ON RECORD AND WITHOUT PROPER JUSTIFICATION. THE NEXT QUESTION IS WHAT AMOUNT OF COMMISSION PAID SHOULD BE JUSTIFIABLE IN THIS CASE. AS STATED ABOVE, THE UNDISPUTED FACT IS THAT THE COMMISSION PAID THIS YE AR IS MORE THAN 150% COMPARED TO IMMEDIATE PRECEDING YEAR. ALSO DURING T HE YEAR THE COMMISSION ITA NOS. 1005 & 1130/AHD/2012 SHRI TULSHIBHAI ISWARBHAI PATEL-CROSS APPEALS AY 2009-10 - 5 - PAID TO THE FAMILY MEMBERS AND KEPT AS OUTSTANDING. THUS, COMMISSION PAID TO THE FAMILY MEMBERS ARE AFTERTHOUGHT. THUS, SUCH AMOUNT SHOULD BE DISALLOWED BECAUSE IT WAS BOGUS COMMISSION PAID TO THEM. THE LD. AR HAS NOT BROUGHT ON RECORD WHAT AMOUNT OF PURCHASE ORDER OR SERVICES THESE FAMILY MEMBERS CONTRIBUTED TO THE APPELLANT. THIS W ORKING IS JUSTIFIABLE BECAUSE THE COMMISSION EXPENSES ALLOWED RS. 11,96,8 00/- (24,86,035 - 12,89,235) AFTER DISALLOWING COMMISSION PAID TO THE FAMILY MEMBERS STILL EXCEEDS BY 2.59 LAKHS COMPARED TO THE LAST YEAR. TH EREFORE, IN MY VIEW, THE COMMISSION PAID TO THE FAMILY MEMBERS SHOULD BE DIS ALLOWED BECAUSE NO EVIDENCE IS PLACED ON RECORD FOR HAVING RENDERED TO THE APPELLANT. ACCORDINGLY, THE AO IS DIRECTED TO DELETE RS. 12,89 ,235/- OUT OF TOTAL COMMISSION DISALLOWED. ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), WHEREBY HE GRANTED THE PARTIAL RELIEF, BOTH THE PARTIES ARE NOW IN APPEAL BEFORE U S. BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT TO THE VARI OUS OBSERVATIONS MADE BY THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT THE ASSESSEE HAD NOT PROVED THE RENDERING OF SERVICES BY THE COMMISSION AGENTS NOR ANY DETAILS OF THE SERVICES RENDERED WERE SUBMITTED BY THE ASSE SSEE DESPITE VARIOUS OPPORTUNITIES BEING GRANTED TO HIM. HE, THEREFORE, SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF EXP ENSES AND IN SUCH SITUATION THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN DISALLOWING THE ENTIRE EXPENDITURE. HE FURTHER SUBMITTED THAT THE LD. CIT (A) SHOULD HAVE UPHELD THE ENTIRE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER. HE THUS SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 8. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT THE DISALLOWANCE OF COMMISSION PAYMENTS. IT IS AN UNDISPUTED FACT TH AT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.24,86,035/- ON ACCOUNT OF C OMMISSION PAYMENTS. IT IS ALSO A FACT THAT THE TOTAL COMMISSION INCLUDE S THE AGGREGATE OF RS.12,89,235/- WHICH HAVE BEEN PAID TO FOUR FAMILY MEMBERS OF THE ASSESSEE. AS FAR AS THE COMMISSION PAYMENTS TO THE FAMILY MEMBERS ARE CONCERNED, WE FIND THAT THE CIT(A) HAS NOTED THAT T HE PAYMENT OF COMMISSION OF RS.12,89,235/- TO BE EXORBITANT AND H ELD IT TO BE AN ITA NOS. 1005 & 1130/AHD/2012 SHRI TULSHIBHAI ISWARBHAI PATEL-CROSS APPEALS AY 2009-10 - 6 - AFTERTHOUGHT IN VIEW OF THE FACT THAT IT WAS KEPT A S OUTSTANDING; MORE SO WHEN THE ASSESSEE HAS NOT PLACED ON RECORD ANY EVID ENCE OF THE SERVICES RENDERED BY THEM. BEFORE US, NO MATERIAL HAS BEEN PLACED ON RECORD ON BEHALF OF THE ASSESSEE TO CONTROVERT THE AFORESAID FINDINGS OF THE CIT(A). WE, THEREFORE, FIND NO REASON TO INTERFERE INTO THE ORDER OF THE LD. CIT(A) AS FAR AS THE DISALLOWANCE OF COMMISSION PAYMENTS OF R S.12,89,235/- MADE TO FOUR FAMILY MEMBERS IS CONCERNED. 9. AS FAR AS THE COMMISSION PAYMENTS OF BALANCE RS. 11,96,800/- TO OTHER PARTIES ARE CONCERNED, WE FIND THAT THE LD. CIT(A) HAS NOTED THAT THERE IS AN INCREASE IN THE TURNOVER AS COMPARED TO THE IMMEDIA TELY PRECEDING PREVIOUS YEAR AND THAT THE ASSESSEE HAS ALSO BEEN M AKING COMMISSION PAYMENT IN THE PRECEDING YEAR WHICH HAS ALSO BEEN A CCEPTED BY THE DEPARTMENT AND THE PAYMENT OF COMMISSIONS WERE INVA RIABLY PAYABLE IN THE NATURE OF BUSINESS IN WHICH THE ASSESSEE IS ENG AGED IN. THE LD. CIT(A), AFTER CONSIDERING THE ENTIRE FACTS, HAS GRANTED THE RELIEF AS FAR AS THE COMMISSION PAYMENTS TO OTHER THAN FAMILY MEMBERS AR E CONCERNED. BEFORE US, THE REVENUE HAS NOT PLACED ANY MATERIAL ON RECO RD TO POINT OUT ANY FALLACY IN THE ORDER OF THE LD. CIT(A) SO FAR AS PA YMENT OF COMMISSION TO NON-RELATIVES IS CONCERNED. IN VIEW OF THESE FACTS , WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). IN THE RESULT, THE GROUNDS RAISED BY THE REVENUE AS WELL AS ASSESSEE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE AND AS SESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 30 TH NOVEMBER, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (ANIL CHATURVEDI) ACCOUNTANT MEMBER AHMEDABAD; DATED 30/11/2015 *BIJU T, PS ITA NOS. 1005 & 1130/AHD/2012 SHRI TULSHIBHAI ISWARBHAI PATEL-CROSS APPEALS AY 2009-10 - 7 - !'#$#%! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. !' # / CONCERNED CIT 4. # ( ) / THE CIT(A) 5. &'( ' , ' , ! / DR, ITAT, AHMEDABAD 6. (-. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD