Addl. CIT, Noida V. M/s. Ebiz.Com (P) Ltd., Noida

ITA 1163/DEL/2011

• Counselvise Citation: 116320114 RSA 2011
• Duration Of Justice: 4 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-06-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 04-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Assessee Lawyers: ASHOK GA NDHI
• Keywords: Business income; Onus to prove
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. T .S. KAPOO R, ACCOUNTANT MEMBER I.T.A .NO. - 1163 /DEL/201 1 (ASSESSMENT YEAR - 200 2 - 03 ) ACIT, NOIDA RANGE, NOIDA, 2 ND FLOOR, G - COMPLEX, SHOPPING COMPLEX, SECTOR - 20, NOIDA - 201301. (A PPELLANT) VS EBIZ COM.(P) LTD., D - 210, SECTOR - 10, NOIDA . PAN - AABCE3009P (RESPONDENT) APPELLANT BY SMT. PARWINDER KAUR, SR. DR RESPONDENT BY SH.ASHOK GANDHI, ADV. ORDER PER DIVA SINGH, JM THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE CORRECTNESS OF THE ORDER DATED 17.12.2010 OF CIT(A), GHAZIABAD PE RTAINING TO 200 2 - 03 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS: - 1. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY ALLOWING RELIEF OF RS.9,10,500/ - ON ACCOUNT OF BOGUS COMMISSION WITHOUT APPRECIATING THE FACTS MENTIONED IN THE ASSESSMENT ORDER. 2. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY ALLOWING RELIEF OF RS.8,88,052/ - ON ACCOUNT OF EXCESS PAYMENT U/S 40A(2) (B) WITHOUT APPRECIATING THE FACTS MENTIONED IN THE ASSESSMENT ORDER 3. THAT THE ORDER OF THE LD. CIT(A) BEING ERRONEOUS IN LAW AND ON FACTS DESERVES TO BE SET - ASIDE AND THE ORDER OF THE A.O. BE RESTORED. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE EARNING INCOME FROM SALE OF ONLINE EDUCATION AND OTHER PROGRAMS FILED A RETURN OF INCOME OF RS.33,37,780/ - BY WAY OF FILING ITS RETURN . THE SAID RETURN WAS PICKED UP FOR SCRUTINY AFTER ISSUANCE OF NOTICE U/S 143(2) ETC. THE AO OBSERVED THAT THE NET PROFIT RATE OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WAS 13.18% AS PER THE BOOKS OF ACCOUNTS AND DETAILS FURNISHED BEFORE HIM. O N CONSIDERING THE SAME, HE INQUIRED INTO THE PAYMENTS OF THE ASSOCIATES WHICH DATE OF HEARING 02 .0 6 .2015 DATE OF PRONOUNCEMENT 19 .0 8 .2015 I.T.A .NO. - 1163/DEL/2011 PAGE 2 OF 9 HAD BEEN DEBITED TO THE EXTENT OF RS. 1,71,27,850/ - IN THE P&L A/C OF THE ASSESSEE. IN JUSTIFICATION OF THE SAID EXPENSES, THE ASSESSEE AS PER PAGE 2 OF THE ASSESSMENT ORDER IS FOUND TO HAVE STATED THAT THE ASSESSEE WAS DEALING IN MULTI - LEVEL MARKETING OF EDUCATIONAL WEB PACKAGES AND THIS WAS THE FIRST YEAR OF THE ASSESSEE COMPANY. THE COMPANY IT WAS STATED W A S INCORPORATED ON 8 TH JUNE 2001 WITH REGISTRAR OF COMPANIES, DELHI AND STARTED THE ONLIN E OPERATIONS AND REGISTRATION W.E.F . 25.6.200 1 . THE INCOME RECEIVED IT WAS STATED WAS FROM SALE OF ONLINE EDUCATION AND OTHER PROGRAMS. THE EARNING FROM THESE HAS BEEN DISCLOSED AT RS.2.62, 80,0 6 , 337/ - AND OTHER INCOME OF RS.5 , 10 , 119/ - TOTALING TO RS.2,67,90,186/ - ON WHICH NET PROFIT HA D BEEN DISCLOSED AT RS.35 , 32 , 2S2/ - WHICH G AVE THE N .P. RATE OF 13.18%. 3. THE RECORD FURTHER SHOWS THAT IN ORDER TO VERIFY THE EXPENSES, THE AO ISSUED NOTICE U/S 133(6) TO 39 ASSOCIATES WHEREIN SOME OF THE NOTICES RETURNED BACK WITH THE COMMENTS NO SUCH PERSON AND IN SOME OF THEM NO REPLY WAS RECEIVED. THIS FACT WAS CONFRONTED TO THE ASSESSEE WHO STATED THAT THE ASSOCIATES TO WHOM COMMISSION HAS BEEN PAID DO NOT NECESSARILY CONTINUE AS MEMBER AFTER ONE YEAR. I T WAS FURTHER STATED THAT AS PER THE TERMS AND CONDITIONS OF THE COMPANY THE MEMBERSHIP HAS TO BE RENEWED AND THE COMMISSION IS AUTOMATICALLY GENERATED IN THE ACCOUNT OF THE ASSOCIATES ON THE BASIS OF THE SALES OF THE PRODUCT THROUGH THE ASSOCI ATES UNDER BINARY COMPENSATION PLAN . CONSIDERING ARGUMENTS, ADDITION OF RS.9,10,500/ - WAS MADE FOR THE FOLLOWING 10 PERSONS ON THE GROUND THAT EITHER THE CONFIRMATIONS WERE NOT FILED OR THE PERSON DID NOT EXIST: - 4. THE SUBMISSION MADE BY THE ASSESSEE IS NOT ACCEPTABLE BECAUSE IT IS THE ONUS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE EXPENSES CLAIMED BY FURNISHING THE NECESSARY EVIDENCE AND CONFIRMATION AS WELL AS TO PROVE THE IDENTITY AND THE SERVICE RENDERED B Y THE ASSOCIATES FOR THE PURPOSES OF THE COMMISSION HAS CLAIMED. THE PAYMENTS MADE THROUGH CHEQUE DOES NOT PROVE WHETHER THE PAYMENT HAVE BEEN MADE FOR THE SERVICE RENDERED OR NOT UNTIL & UNLESS IT IS PROVED BY THE ASSESSEE. KEEPING IN VIEW THE LETTERS RECEIVED BACK IN THE FOLLOWING CASES AND NO CONFIRMATION FILED BY THEM OR BY THE ASSESSEE COMPANY. S.NO. NAME OF THE PERSON AMOUNT OF COMMISSION REMARKS 1. NIRMAL SINGH 126000 NO SUCH PERSON 2. ALLIED ASSOCIATES 77500 NO SUCH FIRM 3. RAJYANTI 40000 REGULAR ASSOCIATE I.T.A .NO. - 1163/DEL/2011 PAGE 3 OF 9 THE TOTAL COMMISSION PAID TO THE ABOVE PERSONS COMES TO RS.9,10,500 / - FOR WHICH GENUINENESS HAS NOT BEEN ESTABLISHED. THEREFORE, IT IS CLEAR THAT THE ASSESSEE COMPANY DID NOT DISCHARGE ITS ONUS TO PROVE THE GENUINENESS OF THE COMMISSION PAID EVEN TO RAJYANTI TO WHOM THE COMMISSION PAID IS RS.40,000/ - WHO IS STATED TO BE A REGULAR ASSOCIATE; WHICH RESULTED IN REDUCTION THE TAX INCIDENCE. ACCORDINGLY, SO - CALLED COMMISSION IS DISALLOWED AT RS.9,10,500/ - AND ADDED TO THE INCOME OF THE ASSESSEE. ADDITION OF RS.9,10,500/ - 4. AGGRIEVED BY THIS, THE ASSESSEE CAME IN APPEAL BEF ORE THE FIRST APPELLATE AUTHORITY. REITERATING THE SUBMISSIONS ADVANCED BEFORE THE AO, IT WAS SUBMITTED THAT ONLY THE PERSONS WHO CONTINUE TO RENEW THEIR STATUS REMAIN CONNECTED AND THE PERSONS WHO HAD NOT RENEWED THEIR STATUS AS ASSOCIATES DO NOT REMAIN IN TOUCH WITH THE ASSESSEE COMPANY . A CCORDINGLY IT PLEADED THAT IT IS DIFFICULT FOR THE ASSESSEE TO OBTAIN THEIR LATEST ADDRESSES. IT WAS AGAIN RE - ITERATED THAT T HE COMMISSION IT WAS STATED IS AUTOMATICALLY GENERATED IN THE ACCOUNT OF THE ASSESSEE ON THE EVENT OF SALE ON WHICH TAX HAD BEEN DEDUCTED AND PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUE. RELIANCE WAS ALSO PLACED ON THE CONFIRMATIONS RECEIVED FROM 8 OUT OF THE 10 PERSONS REFERRED TO BY T HE AO. THE CIT(A) CONFRONTED THESE DETAILS TO THE AO WHO FILE D A REMAND REPORT CONSIDERING WHICH THE ADDITION WAS DELETED. 5. AGGRIEVED BY THIS ACTION , THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. SR. DR INVITING ATTENTION TO THE ASSESSMENT ORD ER AND THE IMPUGNED ORDER SUBMITTED THAT BEFORE THE AO THE EVIDENCE WAS NOT FILED AND THE EVIDENCE FILED BEFORE THE CIT(A), IT WAS SUBMITTED MAY BE REMANDED BACK TO CARRY OUT NECESSARY ENQUIRIES AS THE CIT(A) CONSIDERING THE EVIDENCE ON RECORD DELETED THE ADDITION WITHOUT APPRECIATING THE EVIDENCE. 6. LD. AR, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE HAS ALL ALONG SUBMITTED BEFORE THE AO AND THE CIT(A) THAT WHENEVER A NEW CUSTOMER WAS 4. ANJU BIST 44000 NO CONFIRMATION 5. HARVINDER S I NGH SANDHU 29000 NO CONFIRMATION 6. DALJIT SINGH SANDHU 153000 NO CONFIRMATION 7. PADAM SINHA 202000 NO CONFIRMATION 8. M . B . M .ENTERPRISES 165000 NO CONFIRMATION 9. KAMLA DEVI 44000 NO CONFIRMATION 10. JYOTI VERMA 30000 NO CONFIRMATION TOTAL 910500 I.T.A .NO. - 1163/DEL/2011 PAGE 4 OF 9 INTRODUCED BY AN ASSOCIATES AUTOMATICALLY A COMMISSION IS EARNED A ND THIS IS THE MANNER IN WHICH THE BUSINESS MODEL OF THE ASSESSEE FUNCTIONS. IT WAS HIS SUBMISSION THAT EVERY PERSON WHO BUYS THE PARTICULAR ONLINE PROGRAMME ALONGWITH COMPACT DISK WHICH CONTAINS THE INFORMATION ABOUT THE PRODUCT AND ALSO THE TUTORIAL T HEREIN AUTOMATICALLY BECOMES AN ASSOCIATE AND IF AND WHEN HE INTRODUCES A NEW CUSTOMER COMMISSION IS AUTOMATICALLY EARNED BY HIM WHICH IS COMPUTERIZED AND THE PAYMENT BY ACCOUNT PAYEE CHEQUE AFTER DEDUCTING TDS IS MADE IN HIS FAVOUR. A DDRESSING THE MAGN ITUDE OF THE SALE IT WAS SUBMITTED THAT THERE WERE ATLEAST THOUSANDS OF ASSOCIATES AT A POINT OF TIME AND OUT OF THESE ONLY 39 PERSONS WERE CHOSEN AND OUT OF WHICH THE AO FOR WANT OF CONFIRMATION BY 10 OF THOSE THE AO WAS NOT SATISFIED. AT THE TIME O F ENQUIRY BY THE AO IT WAS SUBMITTED THAT T HESE PERSONS MAY HAVE CHANGED ADDRESSES OR CITIES AS A RESULT MINI SCULE NUMBER OF PEOPLE COULD NOT REPLY . H OWEVER THIS DEFICIENCY IT WAS SUBMITTED WAS MADE GOOD BY THE ASSESSEE AT THE A PPELLATE PROCEEDINGS AS CO NFIRMATIONS FROM 8 OUT OF THESE 10 PERSONS WAS PLACED BEFORE THE CIT(A). THESE EVIDENCES WERE REMANDED BACK TO THE AO WHO CHOOSES NOT TO CARRY OUT ANY ENQUIRIES AT THE REMAND STAGE AND ALSO HAS NOT REBUTTED THE EVIDENCE ON RECORD AT THIS STAGE WHICH IS E XACTLY WHAT WAS AVAILABLE BEFORE THE AO IN THE REMAND STAGE. ACCORDINGLY IT WAS HIS SUBMISSION THAT IT WOULD NOT BE APPROPRIATE TO REMAND THE ISSUE BACK AS NOTHING HAS BEEN BROUGHT BY THE REVENUE ON RECORD TO SHOW THAT THE EVIDENCE RELIED UPON WAS NOT SUF FICIENT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CONSIDERATION OF THE SAME, WE FIND IN THE ABSENCE OF ANY COGENT ARGUMENT OR REASON CANVASSED BEFORE US BY REVENUE REMAND CANNOT BE DIRECTED. IN ORDER TO SO DIRECT ATLEAST SOME SHORTCOMING IN THE NATURE OF EVIDENCES FILED AND CONSIDERATION SHOULD HAVE BEEN POINTED OUT SO AS TO JUSTIFY SUCH A DEMAND. A MATTER CANNOT BE REMANDED FOR THE MERE ASKING. A PERUSAL O F THE IMPUGNED ORDER AT PAGE 8 SHOWS THAT THE MA JOR COMMISSION PAYMENT OUT OF THESE 8 PEOPLE HAS BEEN PAID TO SRI PADMA SINHA, SRI NIRMAL SINGH, SRI DALJIT SINGH SANDHU IN WHOSE CASE PAN DETAILS WERE MADE AVAILABLE AND IN THE CASE OF THE REMAINING 5 PEOPLE THE I.T.A .NO. - 1163/DEL/2011 PAGE 5 OF 9 CONFIRMATIONS ALONGWITH THEIR TELEPHONE NU MBERS AND ADDRESS DETAILS WERE PROVIDED. APART FROM THAT IT IS SEEN THAT THE ADMITTED FACT CONSISTENTLY ON RECORD IS THAT THE COMMISSION HAS BEEN PAID TO THE PERSONS AFTER DEDUCTION OF TAX AT SOURCE BY WAY OF ACCOUNT PAYEE CHEQUE. 8. ACCORDINGLY IN VIEW OF THESE MATERIAL FACTS AND EVIDENCES ON RECORD WHICH REMAIN U N REBUTTED AND W H E R E NO INFIRMITY I N THE CONFIRMATIONS FILED HAS BEEN POINTED OUT, WE FIND NO GOOD REASON TO INTERFERE WITH THE FINDING ARRIVED AT IN THE IMPUGNED ORDER. BEING SATISFIED BY THE REASONING AND FINDING< GROUND NO. - 1 OF THE REVENUE IS DISMISSED. 9. THE FACTS RELATABLE TO THE SECOND GROUND AGITATED BY THE REVENUE ARE SET OUT AT PAGE 4 AND 5 OF THE ASSESSMENT ORDER. A PERUSAL OF THE SAME SHOWS THAT THE COMMISSION OF RS.32,90,502/ - WAS PAID TO MR. VIPIN MALHAN, THE HUSBAND OF THE DIRECTION ANU MALHAN. THE SAID COMMISSION COMPRISED OF RS.29,53,002/ - OUT OF BUSINESS PROMOTION AND RS.3,37,500/ - OUT OF PAYMENT TO ASSOCIATES . THE AO REQUIRED THE ASSESSEE TO JUSTIFY THE SAME. IN RESPONSE THERETO B OARD RESOLUTION DATED 20.06.2001 WAS FILED SO AS TO STATE THAT SH. VIPIN MALHAN WAS APPOINTED AS A MARKETING CONSULTANT. RELIANCE WAS ALSO PLACED ON THE MARKETING AGREEMENT DATED 20.06.2001 WHICH HAD BEEN ENTERED INTO BY THE ASSESSEE COMPANY AND SH. VIP IN MALHAN AND IT WAS STATED THAT THIS AGREEMENT WAS VALID FROM 20.06.2001 TO 19.06.2002 IT WAS SUBMITTED THAT THE RATE OF COMMISSION WAS DECIDED AS PER THE FOURTH CONDITION OF THE AGREEMENT AT 10% OF THE TOTAL RECEIPTS FROM THE SALE OF MINIMUM 2000 PACKA GES. IT WAS FURTHER SUBMITTED THAT IT HAD BEEN AGREED BETWEEN THE COMPANY THAT IF THE SECOND PARTY HA D NOT COMPLETED THE SALE OF 2000 PACKAGES WITHIN SIX MONTHS, THE COMMISSION W OULD BE 8% AND IT W OULD B E PAID AFTER COMPLETION OF SIX MONTHS OR THE SALE OF 2000 PACKAGES WHICH EVER IS EARLIER. IN THE THIRD PARA OF THE AGREEMENT IT WAS SUBMITTED THAT IT HAD BEEN AGREED THAT SECOND PARTY USES THE OFFICE OF THE FIRST PARTY FOR MEETING WITH THE ASSOCIATES. 10. IT IS SEEN THAT THE ASSESSEE WAS ALSO REQUIRED TO EXPLAIN THE WORK ING OF THE COMMISSION . IT IS SEEN THAT AS PER RECORD IT WAS REPLIED THAT THE TOTAL COMMISSION PAID WORKS OUT TO RS.29,53,002/ - BESIDES RS.3,37,500/ - PAID AS I.T.A .NO. - 1163/DEL/2011 PAGE 6 OF 9 COMMISSION ON ACCOUNT OF DOWN LINE SALES BEING THE MEMBER OF THE ASSOCIATES AS SH .VIPIN MALHAN IS ALSO ASSOCIATE OF THE COMPANY. 11. THE AO IN THE FACTS WAS OF THE VIEW THAT THE SUBMISSION MADE BY THE ASSESSEE ARE NOT CORRECT BECAUSE THE PAYMENT HAS BEEN MADE TO THE PERSON SPECIFIED UNDER SECTION 40A(2)(B) OF THE ACT AND THUS IS N OT ACCEPTABLE BECAUSE THE PROVISIONS OF THE AGREEMENT MADE BETWEEN T HE PARTIES WERE CONSIDERED TO HAVE BEEN VIOLATED. ACCORDINGLY ADDITION OF RS.8,88,052/ - WAS MADE BY THE AO TO THE INCOME OF THE A SSESSEE BY CALCULATING COMMISSION @10% OF THE TOTAL SALES OF RS.2,40,24,500/ - . 12 . AGGRIEVED BY THIS, THE ASSESSEE CAME IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. A PERUSAL OF THE SAME SHOWS THAT ON BEHALF OF THE ASSESSEE, R EFERRING TO THE AGREEMENT IT WAS SUBMITTED THAT THE WEB PACKAGES WAS INITIALLY SOLD @ RS. 5,000/ - PER PACKAGES UPTO 21.01.2002 AND @ 5,500/ - PER PACKAGE THEREAFTER. THE PAYMENT OF COMMISSION TO SH.VIPIN MALHAN, IT WAS STATED WAS BASED ON THIS AGREEMENT AS UPTO THE SALE OF 2000 WEB PA CKAGES, COMMISSION WAS TO BE PAID @ 10% OF THE TOTAL RECEIPTS AND IN CASE THE SALE OF 2000 WEB PACKAGES WAS NOT COMPLETED WITHIN SIX MONTHS, THE ENTITLEMENT TO COMMISSION WAS ONLY @ 8%. THE COMMISSION IT WAS STATED WAS TO BE PAID BY THE COMPANY ON A MONTH LY BASIS AFTER DEDUCTION OF TAX AT SOURCE. IT WAS STATED THAT SH.VIPIN MALHAN WAS PAID, THE COMMISSION OF RS.29,53,002/ - ON THE TOTAL RECEIPTS FROM THE SALE OF WEB PACKAGES AND THE FURTHER PAYMENT OF RS.3,37,500/ - OVER AND ABOVE THE COMMISSION WAS CALCULA TED ON SALES AND THIS PAYMENT WAS MADE AS A CHANNEL PARTNER BEING THE ASSOCIATE OF THE COMPANY. THE PAYMENT IT WAS STATED WAS PAID IN TERMS OF THE AGREEMENT. IN SUPPORT OF THE SAID CLAIM, RECONCILIATION OF THE PAYMENT OF COMMISSION WAS FILED WHICH ALSO I NCLUDED ITS MAINTENANCE CHARGES. THE ASSESSEE FURTHER SUPPORTED ITS CLAIM BY WAY OF FOLLOWING SUBMISSIONS : - FROM THE STATEMENT IT WOULD BE SEEN THAT THE TOTAL REGISTRATION CHARGES RECEIVED BY THE COMPANY RELATING TO THE ACCOUNT YEAR UNDER CONSIDERATION AMOUNTED TO RS.2,39,69,500/ - . THE COMPANY HAS ALSO RECEIVED ANNUAL MAINTENANCE CHARGES OF RS.20,81,703/ - WHICH IS AN ESSENTIAL INGREDIENT OF THE SALE OF THE WEB PACKAGE. BESIDES COMPANY HAD ALSO RECEIVED ADVANCE PAYMENT OF RS.39,75,357/ - FROM THE CUSTOMER WHICH OF COURSE, AS PER SCHEME OF THE COMPANY IS ALWAYS CHARGED ON ANNUAL BASIS WHILE THE AMOUNT IS TRANSFERRED TO I.T.A .NO. - 1163/DEL/2011 PAGE 7 OF 9 THE PROFIT AND LOSS ACCOUNT ON ACTUARIAL BASIS. TO QUOTE FOR EXAMPLE THE WEB PACKAGE SOLD IN THE MONTH OF OCTOBER WOULD GET PAYMENT FOR 12 MO NTHS FOR THE PERIOD OCTOBER TO SEPTEMBER OF THE SUBSEQUENT FINANCIAL YEAR. IN SUCH CIRCUMSTANCES THE PAYMENT FOR SIX MONTHS FROM OCTOBER TO MARCH OF THE RELEVANT YEAR IS TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT WHILE THE BALANCE PAYMENT RECEIVED IN THE S ALE OF THE WEB PACKAGE FOR THE PERIOD APRIL TO SEPTEMBER IS SHOWN AS ADVANCED PAYMENT RECEIVED. IT IS THIS AMOUNT ON WHICH SH. VIPIN MALHAN WAS ENTITLED TO THE COMMISSION UNDER THE AGREEMENT AND WAS ACCORDINGLY PAID COMMISSION STRICTLY UNDER THE AGREEMENT. NO PART OF THE COMMISSION WAS PAID IN EXCESS OF THE ACTUAL PAYABLE COMMISSION. THIS FACT CAN BE VERIFIED FROM THE RECONCILIATION STATEMENT FILED ALONG WITH THE REPLY. FROM THE STATEMENT IT WOULD BE SEEN THAT DURING THE YEAR UNDER CONSIDERATION THE COMPANY HAD RECEIVED TOTAL SALE AMOUNT OF RS.2,95,30,020/ - ON WHICH COMMISSION @ 10% IS PAID. THIS IS DEFINITELY INCLUSIVE OF THE ANNUAL MAINTENANCE CHARGE OF THE WEB PACKAGE SINCE IT IS AN INTEGRAL PART OF THE SALE OF THE WEB PACKAGE IN VIEW OF THE POLICY OF THE COMPANY. APART FROM COMMISSION ON SALE SH. VIPIN MALHAN WAS ALSO PAID COMMISSION AS A MEMBER OF THE ASSOCIATE. THIS IS AGAIN IN VIEW OF THE DEFINED POLICY OF THE COMPANY UNDER WHICH A MEMBER OF AN ASSOCIATE IS PAID COMMISSION ON THE SALES OF THE WEB PACKA GES AS EXECUTED BY HIM. ON RECEIPT OF SALE THE ASSOCIATE MEMBER AUTOMATICALLY BECOMES ENTITLED TO THE COMMISSION. THE AR HAS FILED RECONCILIATION OF THE COMMISSION PAID TO SH. VIPIN MALHAN WHICH IS REPRODUCED HEREUNDER; RECEIPTS DURING THE YEAR RS.2,40,2 4,500/ - LESS: - RECEIPTS UP TO 19.06.2001 RS. 55,000/ - RS.2,39,69,500/ - RS.2,39,69,500/ - ADD: - ANNUAL MAINTENANCE CHARGES RS.20,97,103/ - LESS RECEIPTS UP TO 19.06.2001 RS. 15,400/ - RS.20,81,703 / - RS. 20,81,703/ - ADVANCE RECEIVED FROM CUSTOMERS RS. 39,75,357/ - TOTAL RECEIPTS RS.3,00,26,560/ - LESS: - OTHER RECEIPTS ON WHICH COMMISSION NOT PAYABLE RS.4,96,540/ - NET RECEIPTS FOR THE PERIOD 20.06.01 TO 31.03.02 RS.2,95,30,020/ - COMMISSION PAID TO SH. VIPIN MALHAN @ 10% RS.29,35,002/ - ADD: - COMMISSION PAID AS AN ASSOCIATE OF THE COMPANY ON DOWN LINE SALES RS.3,37,500/ - RS.32,90,502/ - THE DETAILED LIST SHOWING COMMISSION PAID TO SH. VIPIN MALHAN AS AN ASSOCIATE D MEMBER HAS BEEN ALSO FILED ON RECORD. THE AR THUS SUBMITTED THAT THE OBSERVATION OF THE ASSESSING OFFICER THAT VIPIN MALHAN BEING THE MARKETING CONSULTANT IS NOT ENTITLED TO THE COMMISSION AS AN ASSOCIATE MEMBER IS NOT CORRECT. IT IS ALSO WRONG ON THE PA RT OF THE ASSESSING OFFICER TO OBSERVE THAT THIS COMMISSION HAS BEEN NOT DEVISED OR MENTIONED IN THE AGREEMENT FOR THE PAYMENT OF COMMISSION AS AN ASSOCIATE MEMBER. THIS OBSERVATION I.T.A .NO. - 1163/DEL/2011 PAGE 8 OF 9 OF THE ASSESSING OFFICER IS NOT CORRECT AND IS A MERE HYPOTHETICAL OBSERVA TION. THE COMMISSION TO SH. VIPIN MALHAN IS PAID AS AN ASSOCIATE MEMBER AS PER MARKETING POLICY OF THE COMPANY. THIS COMMISSION IS CERTAINLY PAID TO VIPIN MALHAN NOT UNDER THE AGREEMENT BUT THE SAME IS PAID ON ACCOUNT OF IN BUILT MECHANISM IN THE SCHEME O F THE SALE OF WEB PACKAGE AS A CHANNEL PARTNER. 13 . THESE SUBMISSIONS, FACTS AND EVIDENCES WERE CONFRONTED TO THE AO AND CONSIDERING THE REMAND REPORT FILED THE ADDITION WAS DELETED BY THE CIT(A) HOLDING AS UNDER: - 4.3. THE SUBMISSIONS OF THE LEARNED AR HAVE BEEN CONSIDERED ALONG WITH MATERIAL EVIDENCE ON RECORD. MY CONCLUSIONS ON GROUND NUMBER 2 IS AS UNDER: HAVING CAREFULLY CONSIDERED ALL THE RELEVANT FACTS AND CONTENTIONS AS STATED BY THE AR, THE PAYMENT HAS BEEN MADE TO SH. VIPIN MALHAN UNDER THE AGREEMENT EXECUTED BETWEEN THE COMPANY AND SH. VIPIN MALHAN ON 20.06.2001. I HAVE ALSO EXAMINED CAREFULLY THE WORKING OF THE COMMISSION PAID TO SH. VIPIN MALHAN AND IT IS SEEN THAT THE COMMISSION HAS BEEN PAID TO SH. VIP IN MALHAN ON THE SALES EXECUTED BY HIM FROM 20.06.2001, THE DATE OF AGREEMENT BETWEEN THE COMPANY AND SH. VIPIN MALHAN. THE SALES EFFECTED BY THE COMPANY FOR THE PERIOD UP TO 19.06.2001 HAS BEEN REDUCED FROM THE TOTAL SALES WHILE CALCULATING THE COMMISSION PAID TO MR. VIPIN MALHAN. THE ORDER OF THE AO DATED 28.02.2005 UNDER APPEAL AND THE REMAND REPORT SUBMITTED BY HIM VIDE F.NO. ACIT/CIRCLE/NOIDA/REMAND REPORT/06 - 07 DATED 20.07.2006 HAVE BEEN EXAMINED BY ME VERY CAREFULLY. THE AO HAS NOT EXPRESSED ANY DOUB T ON THE GENUINENESS OF THE AGREEMENT EXECUTED BETWEEN THE COMPANY AND SH. VIPIN MALHAN AND ALSO ON THE SYSTEM OF PAYMENT OF COMMISSION. THE AO HAS NOT EXPRESSED ANY DOUBT ON THE SERVICES RENDERED BY SH. VIPIN MALHAN TO THE COMPANY. THE AO HAS WORKED OUT C OMMISSION ON THE FIGURE OF RS.2,40,24,500/ - BEING INCOME FROM WEB PACKAGES ALONE WHILE THE COMPANY HAS CALCULATED THE COMMISSION ON RECONCILED SALES. THE COPY OF THE STATEMENT SHOWING WORKING OF THE COMMISSION PAID TO MR. VIPIN MALHAN HAD BEEN SENT TO THE AO ALONG WITH THE REPLY OF THE AR FOR HIS COMMENTS. HOWEVER IN THE REMAND REPORT SUBMITTED BY THE AO, I FIND THAT THE AO HAS NOT MADE ANY ADVERSE COMMENTS ON THE WORKING OF THE FIGURE OF THE SALES AS ARRIVED AT AND THE COMMISSION OF RS.29,35,002/ - WORKED O UT AT @ 10% OF THE TOTAL SALES OF RS.2,93,50,020/ - BESIDES THE COMMISSION OF RS.3,37,500/ - PAID AS AN ASSOCIATE MEMBER OF THE COMPANY. IN VIEW OF THE ABOVE IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING AN ADDITION OF RS.8,88,052/ - ON THIS ACCOUNT TO THE INCOME OF THE APPELLANT. THIS ADDITION OF RS.8,88,052/ - IS ACCORDINGLY DELETED. THE APPELLANT GETS RELIEF OF RS.8,88,052/ - . 1 4 . AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. SR. DR RELIES UPON THE ASSESSMENT ORDER AND THE AR OF THE ASSESSEE I.T.A .NO. - 1163/DEL/2011 PAGE 9 OF 9 RELYING UPON THE IMPUGNED ORDER SUBMITTED THAT IN THE ABSENCE OF ANY OBJECTION POINTED OUT BY THE LD. SR DR, THE MATERIAL AND EVIDENCE O N RECORD HAVE NOT BEEN REBUTTED THUS T HE FINDING IN THE IMPUGNED ORDER WAS HEAVILY RELIED UPON. 1 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CONSIDERATION OF THE ENTIRE FACTUAL MATRIX OF THE CASE WHICH WE HAVE BROUGHT OUT IN THE EARLIER PART OF THIS ORDER IN GREAT DETAIL, WE FIND IN THE ABSENCE OF ANY REBUT TAL ON FACTS NO INTERFERENCE IN THE IMPUGNED ORDER IS WARRANTED. IN THE FACTS AS THEY STAND FOR WANT OF ANY CONTRARY FACT OR ARGUMENT THE DEPARTMENTAL GROUND IS DISMISSED AND THE IMPUGNED ORDER IS UPHELD. 1 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 9 T H OF AUGUST 2015. S D / - S D / - (T.S.KAPOOR) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 9 / 0 8 /2015 * AMIT KUMAR & ANIL KUMAR VERMA * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI