SHRI BHARAT KUMAR AGARWAL, JAIPUR V. INCOME TAX OFFICER, WARD-4-4, JAIPUR

ITA 1138/JPR/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4572 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 22-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; TDS
• Section: 32; 143(3); 133(6); 143(2); 208; 13

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 1138/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2012-13 Shri Bharat Kumar Agarwal Prop: M/s. Bharat Exports C-33, Near TPS, Ambabari, Jaipur cuke Vs. The ITO Ward 4(4) Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACOPA 5820 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Sandeep Jhanwar, CA jktLo dh vksj ls@Revenue by: Smt. Runi Pal, Addl. CIT lquokbZ dh rkjh[k@Date of Hearing : 05/04/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 13/04/2022 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal by the assessee is directed against the order of the ld. CIT(A)-2, Jaipur dated 30-07-2019 for the assessment year 2018-19. 2. The hearing of the appeal was concluded through video conference by both the parties in view of the prevailing situation of Covid-19 Pandemic. 3. The solitary ground raised by the assessee is as under:- ‘’Under the facts and circumstances of the case, the ld. CIT(A) has erred in confirming the disallowance of brokerage of 2 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur Rs.8.90 lacs paid to various persons by considering them to be ingenuine. 3.1 Brief facts of the case are that the assessee derives income from trading of precious and semi-precious stones under the trade name of M/s. Bharat Exports. The assesee filed his return of income on 10-10-2012 declaring total income of Rs.4,38,190/-. The case of the assessee was selected for scrutiny under CASS system. The notice u/s 143(2) of the Act was served on the assessee on 03-09- 2013. The assessment proceedings were completed by the AO by passing an order u/s 143(3) of the Income Tax Act, 1961 dated 20-03-2015, determining total income at Rs.13,28,190/-. The total income was arrived at by the AO after disallowing the brokerage paid to following three brokers amounting to Rs.8,90,000/- by considering them as in-genuine as these ladies could not make their presence in the office of the AO. 1. Smt. Giniya Devi Bansal Rs.3,00,000/- 2. Smt. Munni Devi Bansal Rs.3,00,000/- 3. Smt. Neha Bhandari Rs.2,90,000/- Total:- Rs.8,90,000/- This fact is observed from the assessment order that these ladies were not produced before the AO for examination and they had shown inability to appear before the AO on the ground of illness However, they had submitted the copy of respective ITR, bank account statement etc. medical certificate, copy of identity card etc. but 3 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur the AO did not consider it appropriate and disallowed the total brokerage amount of Rs.8,90,000/- as per details mentioned above. 3.2 In first appeal, the ld. CIT(A) had confirmed the action of the AO by observing as under:- ‘’2.3 I have perused the facts of the case, assessment order and the submission of the appellant. The Assessing Officer made disallowance of brokerage payment of Rs.8,90,000/- paid to 3 persons as no compliance was made to summon by them by filing medical certificate of illness. The reason in medical certificate not found proper by the Assessing Officer. 2.3.1 Ld. Authorized Representative argued that the commission is linked with specific sales, tax was deducted at source, bank account has been filed and all these ladies showed brokerage income in return. On perusal of overall facts, it is seen that all 3 persons were not produced for verification. No documents was filed which proves that these persons work for the assessee and brought the business. There is no reflection in sale bill. Therefore, simply since payment was made in cheque or TDS was made, the same cannot be said to be genuine. Accordingly, disallowance made is confirmed. This ground of appeal is dismissed. 3.3 During the course of hearing, the ld. AR of the assessee prayed that the ld. CIT(A) has wrongly sustained the order of the AO. However, these 03 ladies through their authorized representative had submitted the following documents for perusal before the lower authorities and as per the summon of the AO, which is mentioned in the assessment order. 4 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur S.N. Name of Broker Amount of Brokerage Response to summon 1. Giniya Devi Bansal Rs.3,00,000 She through her authorized representative filed the following documents as an evidence for brokerage received. 1. Copy of Income Tax Return wherein the brokerage received was shown and ITR was accepted by the Department. 2. Copy of Bank Statement showing the amount of brokerage received by her. She could not personally attend the office of the AO due to medical reason and medical certificate to this effect was filed. 2. Munni Devi Bansal Rs.3,00,000 She through her authorized representative filed the following documents as an evidence for brokerage received. 1. Copy of Income Tax Return wherein the brokerage received was shown and ITR was accepted by the Department. 2. Copy of Bank Statement showing the amount of brokerage received by her. She could not personally attend the office of the AO due to medical reason and medical certificate to this effect was filed. 3. Munni Devi Bansal Rs.2,90,000 She through her authorized representative filed the following documents as an evidence for brokerage received. 1. Copy of Income Tax Return wherein the brokerage received was shown and ITR was accepted by the Department. 2. Copy of Bank Statement showing the amount of brokerage received by her. She could not personally attend the office of the AO due to medical reason and medical certificate to this effect was filed. The ld. AR of the assessee further submitted that during the course of assessment proceedings, the assessee had duly discharged the primary onus by providing all the details regarding the brokerage paid in the desired format and the brokers had complied with the summons of the AO. The ld. AR of the assessee further submitted that the brokerage amount of Rs.8,90,000/- was disallowed by the AO on the ground that these old ladies could not make their personal presence in the 5 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur office of the AO. The ld. AR of the assessee further prayed that the assessee has no control on the brokers and the assessee should not be punished when no defect was pointed out in his books of accounts during the course of assessment proceedings and no corroborate evidence was brought on record for non- acceptance of the documents submitted by the brokers. The ld. AR of the assessee submitted that he had filed the reply dated 30-12-2014 against the queries raised by the AO during the assessment proceedings u/s 143(3) giving the details of brokerage paid to the brokers vide Paper book pages 10-20 of the paper book. The ld. AR further submitted that he had filed the details like addresses and PAN of the brokers before the AO vide letter dated 20-01-2015 (PBP-21). The ld. AR of the assessee further submitted that he has made full efforts to provide the desired details before the AO, however he made the disallowance only on the ground that the above mentioned lady brokers did not appear before him for examination. In the end of submission, the ld. AR of the assesse relied on following case laws praying that the AO did not find out any fault in the books of account of the assessee and the ITR of the respective lady brokers were accepted by the Department without any pinpointing of the details mentioned in their ITRs. 1. Hon’ble Kolkata ITAT Bench in case of Tirmuala Seven Hills Pvt. Ltd. vs JCIT (ITA No.782/Kol/2016, a.y. 2011-12 Date of Pronouncemnt 22-11-2018) Facts of the case: 6 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur The main grievance of the assessee in this appeal is against the Ld. CIT(A)'s action of confirming the disallowance of commission and annual maintenance expenses amounting to Rs.1,92,65,164/- and Rs.4,40,58,520/-made by the AO. Briefly stated the facts of the case are that the assessee is engaged in the business of sale & providing maintenance services of imported telecommunication equipment. The assessee imports foreign telecom equipments from Japan, China, Finland, France& USA. The assessee also provides agency services to reputed foreign telecom equipment manufacturing companies. The customers of the assessee comprised of both private players such as Tata Teleservices, Reliance etc. and as well as government companies such as BSNL & MTNL etc. In the course of its business the assessee had appointed liaison agents to provide marketing services, for soliciting orders, ensuring timely delivery of goods, collection of payment etc., to the customers who were located across India and also render after sale services to its telecom customers. The assessee had also appointed service partners to render end-to-end annual maintenance services in respect of the telecom equipment sold to the customers. In the course of assessment proceedings the AO required the assessee to explain the business response the assessee filed a detailed note explaining its modus operandi of the business and the nature of these payments. The AO issued notices u/s 133(6) to the two commission agents as well as the three service providers, who were appointed by the assessee and the notices went uncomplied. Having regard to the fact that the notices went un-served, the AO disbelieved the genuineness of the payments made by the assessee and accordingly disallowed the commission expenditure and annual maintenance expenses of Rs.1,92,65,165/- and Rs.4,40,58,520/-respectively. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A)-6, Kolkata, who confirmed the action of the AO. Held that We are of the considered view that the above judgments of the jurisdictional Hon'ble Calcutta High Court and also the Honble Gujarat High Court are squarely applicable to the facts involved in the present case. In the present case the assessee has furnished complete details with regard to the commission & service fees paid to the payees. The assessee has furnished complete details of payees including copies of invoices, PAN, ST certificate, confirmation and certificate u/s 197 of the Act. We note that the AO was unable to point out any specific defect or infirmity in the details furnished by the assessee. In our considered view, mere non-service of notice u/s 133(6) does not make an assessee bogus or an entry operator. Further the fact that the correctness 85 genuineness of the certificate u/s 197 has not been doubted by the AO, 7 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur it cannot be said that certificate u/s 197 was issued by the Department to bogus or non-existent entities. Instead it went on to establish the identity of the payees, and that they were regular income-tax assessees. We therefore note that the assessee had duly discharged its onus of substantiating the genuineness and business expediency behind the payments as well as the identity 85 creditworthiness of the payees. (Para 29) 2. Hon'ble Gujarat High Court in case of CIT v. M/s Nangalia Fabrics (P.) Ltd[2013] 40 taxmann.com 206 held that Whether where brokerage commission was paid through account payee cheques for sales canvassed by a party and also in consideration of collection recovered from purchaser, said commission payment could not be held to be bogus - Held, yes [Para 6] [In favour of assessee]. 3. Hon'ble High Court of Culcutta in case of CIT v. Inbuilt Merchant Pvt Ltd (ITAT No. 225/2013, G.A. No. 3825/2013, Date of order: 14.03.2014) held that The views expressed by the Assessing Officer are erroneous in law. The Assessing Officer has overlooked the importance of the books of accountsmaintained in the ordinary course of business. Reference in this regard may be made to sub-section (2) of Section 32 of the Indian Evidence Act, 1872. The books of accounts maintained in the ordinary course of business are relevant and they cannot be discarded in the absence of appropriate reasons. The mere fact that recipient did not reply in some cases or they were not found at the address furnished by the assessee does not in the least prove the fact that they were non existent or that the payments shown to have been made by the assessee were imaginary. With the advancement of technology, it has become possible to sell goods throughout the country through the internet. For that purpose, agents are required throughout the country. The mechanism in that regard has been disclosed by the assessee and has been recorded in the order of the CIT (Appeals). For the purpose of carrying on its business, the assessee has to recruit the agents. It may not be possible for the assessee to know them personally. Whatever address was furnished to the assessee, has been disclosed to the Income-tax Department. Payments were admittedly made by cheque after deduction of tax. The tax deducted as source has duly been deposited. The judgment in the case of CIT vs. Precision Finance Pvt. Ltd. reported in 208 ITR 465 relied upon by Mr.Bhowmick does not really assist him. The aforesaid judgment is an authority for the proposition that mere payment by account payee cheque cannot establish that the transaction was genuine, but in the case beforeus, besides the fact that payment was made by cheque, there are other pieces of evidence available which are as follows: (a) Books of Accounts maintained by the assessee in the ordinary course of business; (b) Deduction of Tax at source; 8 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur © Deposit of the money deducted at source; (d) Particulars of the recipient were duly furnished; We are, as such, of the opinion that the views expressed by the learned Tribunal are unexceptionable. We, therefore refuse to admit the appeal. The appeal is thus dismissed. 4. Hon'ble High Court of Rajasthan in case of CIT v. Bhawani Oil Mills (P.) Ltd [2012] 20 taxmann.com 441 held that non-appearance of other creditors in response to the notice given by the Assessing Officer, by itself, could not be a reason to discard their version, particularly when one of them had appeared and admitted advancement of loan and others had subsequently, filed their confirmations supported by their affidavits. The Tribunal had in detailed discussion dealt with the confirmations given by those creditors and observed that there was no reason to doubt correctness of the cash credit amounts taken from the above named creditors. The matter, therefore, touched upon appreciation and evaluation of evidence and did not raise any question of law, much less any substantial of law so as to justify interference by the Court. 5. Hon'ble ITAT Culcutta Bench in case of Syntexa vs. ACIT [2000] 111 Taxman 47 wherein it was held that When the assessee had furnished the names and addresses and other relevant particulars like details of payments, bills, etc. So, the assessee had discharged the primary onus. Moreover, the payments were made through account payee cheques which were duly shown in the books of account. No defect was found in the books of account submitted by the assessee. On the brokers the assessee had no control and if they became hostile, then the assessee could not be punished. The Commissioner (Appeals) had in principle accepted the genuineness of the payment made to the brokers. The payment towards brokerage/ commission was made for rendering the services through account payee cheques. Some brokers had appeared and for non-appearance of the remaining brokers, the assessee could not be punished. Therefore, the order of the Commissioner (Appeals) was set aside (where he allowed the brokerage of the persons who appeared before the Assessing Officer and disallowed the amount paid to remaining persons).The entire amount paid towards brokerage/ commission was allowed by Hon'ble Bench. 6. Hon'ble ITAT Jaipur Bench in the case of M/s Beauty Tax vs DCIT [ITA No. 508/JP/2016)wherein it was held that when there is no finding by the assessing officer as to reason for nonappearance of the documents submitted during the course of proceedings, merely non-appearance of the suppliers in absence of any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the transaction is bogus. In absence of any conclusive evidence brought on record the addition made cannot be sustained in the eye of law. 9 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur 7. Hon'ble High Court of Bombey in case of CIT vsNikunjEximp Enterprises (P.) Ltd[2013] 35 taxmann.com 384wherein it was held in the department appeal that: - The Books of Accounts of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs.1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases was not bogus. No fault can be found with the order dated 30-04-2010 of the Tribunal.’’ The ld. AR of the assessee thus prayed that the disallowance so confirmed by the lower authorities be quashed and appeal of the assessee on the basis of above submission may kindly be allowed. 3.4 On the other hand, the ld. DR supported the orders of the lower authorities. 3.5 We have heard both the parties and perused the materials available on record. In this case, the AO made disallowance of Rs.8,90,000/- as per details mentioned hereunder:- 1. Smt. Giniya Devi Bansal Rs.3,00,000/- 2. Smt. Munni Devi Bansal Rs.3,00,000/- 3. Smt. Neha Bhandari Rs.2,90,000/- Total:- Rs.8,90,000/- It is also noted that the AO had mentioned in his assessment order that in absence of verification from the Brokers, such expenses are considered as in-genuine and brokerage paid is disallowed and added to the income of the assessee. In first 10 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur appeal, the ld. CIT(A) has also confirmed the action of the AO giving following observation. ‘’......On perusal of overall facts, it is seen that all 3 persons were not produced for verification. No documents was filed which proves that these persons work for the assessee and brought the business. There is no reflection in sale bill.’’ We have noted from the paper Book II wherein the ld. AR of the assessee has filed the details of sales made through brokers alongwith sale Invoice of Bharat Exports which indicate that there is reflection of the brokers in the sale bills whose details are mentioned as under:- 1. Smt Giniya Devi Bansal Pages 1 to 13 2. Smt. Munni Devi Bansal Pages 14 to 31 3. Smt. Neha Bhandari Page 32-48 It is also noted that the assessee has provided all the details of the brokers like Income Tax Returns, Copy of Bank Statements, Pan Card Details, Addresses of the brokers and nothing has been found wrong except the lady brokers did not appear before the AO for verification. When the Department has accepted the Income Tax Returns of the brokers and did not find any infirmity then it is not imperative by the AO to compel the lady brokers for verification whose details have already been provided by the ld. AR of the assessee as per the format of the AO. Hence, in this view of the matter, we do not concur with the orders of the lower authorities and 11 ITA No.1138/JP/2019 Shri Bharat Kumar Agarwal, Jaipur vs ITO, Ward 4(4), Jaipur the disallowance of Rs.8,90,000/- sustained by the ld. CIT(A) is deleted. Thus the appeal of the assessee is allowed. 4.0. In the result, the appeal of the assessee is allowed Order pronounced in the open court on 13/04/2022 Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 13/04/2022 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shri Bharat Kumar Agarwal, Jaipur 2. izR;FkhZ@ The Respondent- The ITO, Ward 4(4), Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 1138/JP/2019) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar