M/s. Panchsheel Intermediates, Surat V. The ACIT, Circle-6, Surat

ITA 1176/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6329 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-03-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Assessee Lawyers: HARSH S BHUTA
• Section: 143(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CAMP AT SURAT BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M/S. PANCHSHEEL INTERMEDIATES, 36, GIDC, PANDESARA, SURAT PAN: AADFP1002C (APPELLANT) VS THE ACIT, CIRCLE - 6, SURAT (RESPONDENT) REVENUE BY : MR. ALBINUS TIRKEY , SR. D . R. ASSESSEE BY: MR. HARSH S.BHUTA A.R. DATE OF HEARING : 09 - 03 - 2 017 DATE OF PRONOUNCEMENT : 06 - 04 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2004 - 05 , AR I SES FROM ORDER OF THE CIT(A) - I, SURAT DATED 03 - 03 - 2014 IN APPEAL NO. CAS - I/TFR/427/2012 - 13 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 1176 / A HD/20 14 A SSESSMENT YEAR 200 4 - 05 I.T.A NO. 1176 /AHD/20 14 A.Y. 2004 - 05 PAGE NO M/S. PANCHSHEEL INTERMEDIATES VS. ACIT 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED CO MMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN UPHOLDING DISALLOWANCE OF COMMISSION EXPENSES AMOUNTING TO RS. 7,34,054/ - U/S 37(1) OF THE INCOME TAX ACT, 1961. 3. IN THIS CASE, RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 23,42,830/ - WAS FILED ON 31 ST OCTOBER, 2004. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS PAID AN AMOUNT OF RS. 7 ,3 4 ,054 / - AS SALES COMMISSION TO VARIOUS PERSONS INCLUDING RS. 91 , 133 GIVEN TO A RELATIVE MAHUR D. NAYAK. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER STATED THAT THE SALE OF THE ASSESSEE INCREASED BY MERELY 10.25% WHEREAS THE SALE COMMISS ION HAS BEEN INCREASED BY 87%. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE FURNISHED CONFIRMATION, LEDGER COPY OF CURRENT AND NEXT YEAR , COPY OF TDS CERTIFICATE ETC. THE ASSESSING OFFICER HAS ALSO POINTED OUT IN THE PRECEDING ASSESSMENT YEAR COMMISSI ONS PAID WAS RS. 3 , 91 , 865/ - WHEREAS DURING THE YEAR UNDER CONSIDERATION THE COMMISSION PAID WAS RS. 7 , 34 , 054/ - . HE STATED THAT ASSESSEE FAILED TO EXPL AIN THE RISE IN SALE COMMISSION . HE FURTHER STATED THAT IN SUPPORT OF COMMISSION E XPENDITURE NO VERIFIA BLE DOCUMENT WAS PRODUCED BY THE ASSESSEE TO CATEGORICALLY ESTABLISH THAT ACTUAL SERVICES WERE RENDERED BY COMMISSION RECIPIENTS. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE COMMISSION EXPENDITURE CLAIM RS. 7 , 34 , 054/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. I.T.A NO. 1176 /AHD/20 14 A.Y. 2004 - 05 PAGE NO M/S. PANCHSHEEL INTERMEDIATES VS. ACIT 3 4. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 3. I HAVE CONSIDERED THE DIRECTIO NS OF HON'BLE ITAT AND SUBMISSIONS OF APPELLANT. IN THEIR DIRECTIONS, HON'BLE ITAT HAS CATEGORICALLY HELD THE PAYMENTS MADE AS COMMISSION TO PERSONS APPOINTED AS SELLING ARE ALLOWABLE AS DEDUCTION ONLY WHEN THE ASSESSEE ESTABLISHES THAT I) THE AMOUNTS SO UGHT TO B E DEDUCTED HAVE BEEN EX PENDED BY THE ASSESSEE IN FACT AND II) THE PAYMENTS H AVE BEEN MADE FOR SERVICES RENDERED TO THE ASSESSEE. IT IS FURTHER STATED THAT MERE EXISTENCE OF AN AGREEMENT WITHOUT ANYTHING MORE IS NOT ENOUGH FOR ALLOWANCE OF DEDUCTIO N OF COMMISSION. NOW THE SUBMISSIONS AND DETAILS FILED BY APPELLANT ARE TO BE EXAMINED IN THE LIGHT OF AFORESAID OBSERVATIONS AND DIRECTIONS OF HON'BLE ITAT. IN SUPPORT OF ITS CLAIM, APPELLANT FILED THE COPIES OF LEDGER, COPY OF OWN BANK STATEMENTS AND CO NFIRMATION OF SOME OF THE PARTIES. IN THE LEDGER ACCOUNTS, ENTRIES OF PAYMENTS HAVE BEEN MADE BY APPELL ANT WHEREAS IN ITS OWN BANK STATEMENT, THE NAMES OF RECIPIENT PARTIES HAVE BEEN WRITTEN I N SOMEONE'S HAND WRITING. HOWEVER, CONFIRMATIONS OF PARTIES HAVE BEEN SUBMITTED. IN VIEW OF THESE DETAILS, IT CAN BE CONCLUDED THAT THE PAYMENTS HAVE ACTUALLY MADE BY APPELLANT TO AFORESAID PARTIES. HOWEVER, IN RESPECT OF THE SECOND CONDITION, I T CAN BE CONCLUDED ON THE BASIS OF SUBMISSIONS AND DETAILS FILED BY APPELLA NT IT HAS FAILED TO ESTABLISH THAT SERVICES WERE RENDERED BY THOSE PERSONS IN LIEU OF COMMISSION RECEIVED BY THEM. AL L THE DETAILS AND SUBMISSIONS FILED BY APPELLANT ARE SAME AS WERE GIVEN DURING EARLIER APPELLATE PRO CEEDINGS AS WELL AS BEFORE HON'BIE IT AT. NO NEW EVIDENCE HAS FURNISHED TO PROVE THAT THE SERVICES WERE ACT UALLY RENDERED BY - THOSE PERSONS. FROM THE SUBMISSIONS, IT CLEARLY REFLECTS THE APPELLANT HAS GENERAL REPLIES AND FOCUSED ONLY ON ESTABLISHING THE GENUINENESS OF EXPENSES. NOWHERE IN THE SUBMISSIONS HAVE BEEN MENTIONED THAT WHAT SERVICES WERE RENDERED BY THE PERSONS WHO WERE GIVEN COMMISSION BY A PPELLANT . AS ALREADY OBSERVED BY HON'BLE ITAT, I T IS THE ASSESSEE WHO HAS TO ESTABLISH THAT PAYMENTS HAVE MADE FOR SERVICES RENDERED BY RE CIPIENTS OF COMMI SSION. IN THE CASE OF APPELLANT HE HAS FAILED TO ESTABLISH WITH THE RELEVANT DOCUMENTARY EVIDENCE THAT ANY SERVICES BEEN RENDERED BY THOSE PERSONS TO WHOM COMMISSION WAS PAID. IN I.T.A NO. 1176 /AHD/20 14 A.Y. 2004 - 05 PAGE NO M/S. PANCHSHEEL INTERMEDIATES VS. ACIT 4 VIEW OF THIS , I HOLD THAT THE DISALLOWANCE MADE BY AO IS SUS TAINABLE AN D GROUNDS TAKEN BY APPELLANT ARE LIABLE TO BE DISMISSED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. COUNSEL SUBMITTED PAPER BOOK CONTAINING JUDICIAL PRONOUNCEMENTS, COPY OF ITAT ORDER IN THE CASE OF THE ASSESSE AND COPIES OF DOCUMENTARY EVIDENCES ETC, ON OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICED THAT IN THIS CASE THE CO - ORDINATE BENCH OF ITAT VIDE ITA NO. 4095/AHD/2007 HAD RESTORED THIS MATTER TO THE CIT(A) FOR DECIDING THE ISSUE AFRESH BY OBSERVING AS UNDER: - 6. WE HAVE HEARD THE ID. DR AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE ASSESSEE DID NOT FILE CONFIRMATION OF THE PARTI ES TO WHOM THE COMMISSION HAD BEEN PAID EXCEPT IN THE CASE OF SHRI MEHUL D NAIK NOR SUBMITTED ANY EVIDENCE OF SERVICES RENDERED BY ANY OF THE RECIPIENT OF COMMISSION. EVEN THEN, THE CIT(A) CONCLUDED THAT THE EXPENDITURE HAVING BEEN INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, IS ALLOWABLE. IN ORDER THAT PAYMENTS MADE AS COMMISSION TO PERSONS APPOINTED AS SELLING AGENTS ARE ALLOWABLE AS DEDUCTION, THE ASSESSEE HAS TO ESTABLISH THAT I) THE AMOUNTS SOUGHT TO BE DEDUCTED HAVE BEEN EXPENDED BY THE ASSESSEE IN FACT AND II) THE PAYMENTS HAVE BEEN MADE FOR SERVICES RENDERED TO THE ASSESSEE. IF THERE IS NOTHING TO SHOW THAT THE AGENTS HAD RENDERED ANY SERVICES AT ALL TO TH E ASSESSEE, PAYMENTS CAN NOT BE DEDUCTED U/S 37 OF THE ACT.[MADURA KNITTING CO. VS. CIT,30 ITR 764(MAD.),VISHNU AGENCIES P LTD. VS, CIT.117 ITR 754(CAL.),117 ITR 823(CAL.),CHEMAUX P LTD. VS. CIT 109 ITR 705 (BOM). MERE EXISTENCE OF AN AGREEMENT WITHOUT ANYTHING MORE IS FOR ALLOWANCE OF DEDUCTION OF COMMISSION [ LACHMINARAYAN MADAN LAL VS. CIT.86 ITR 439(SC).] IN THE INSTANT THE AO DISALLOWED THE CLAIM FOR DEDUCTION OF COMMISSION SINCE ASSESSEE DID NOT FURN ISH ANY EVIDENCE OF SERVICES RENDERED BY AGENTS, TO WHOM COMMISSION HAD I.T.A NO. 1176 /AHD/20 14 A.Y. 2004 - 05 PAGE NO M/S. PANCHSHEEL INTERMEDIATES VS. ACIT 5 BEEN PAID. THE ID. CIT(A) WITHOUT RECORDING ANY FINDINGS AS TO WHETHER OR NOT THE SELLING AGENTS HAD INDEED RENDERED SERVICES TO THE ASSESSEE AND THE AMOUNT HAS BEEN EXPENDED IN FACT, ALLOWED THE CLAIM FOR DEDUCTION . WE ARE OF THE OPINION THIS APPROACH OF THE ID. CIT(A) IS NOT IN ACCORDANCE WITH LAW. IN THE ABSENCE OF ANY FINDING ON THE NATURE OF SERVICES RENDERED BY THE RECIPIENTS OF COMMISSION OR THE AMOUNT HAD BEEN EXPENDED IN FACT, WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE ID. CTT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUES RAISED IN THIS GROUND AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF OUR AFORESAID OBSERVATIONS, AFT ER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE RE - DECIDING THE ISSUE, THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 25O(6) OF THE ACT, BRINGING OUT CLEARLY THE NATURE OF SERVICES RENDERED BY EACH OF THE RECIPIENT OF COMMISSION . WITH THESE OBSERVATIONS, GROUND NO. 1 IN THE APPEAL IS DISPOSED OF. WE HAVE GONE THROUGH THE MATERIAL ON RECORD AND PAPER BOOK THROUGH THE ASSISTANCE OF THE REPRESENTATIVES. WE HAV E NOTICED THAT THE CASE OF THE ASSESSEE WAS SET ASIDE BY THE ITAT AS SUPRA BECAUSE THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE OF SERVICES RENDERED BY AGENTS, TO WHOM COMMISSION HAD BEEN PAID. THE ITAT COORDINATE BENCH VIDE ORDER SUPRA HAD DIRECT ED THE LEARNED CIT(A) TO PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 25O(6) OF THE ACT, BRINGING OUT CLEARLY THE NATURE OF SERVICES RENDERED BY EACH OF THE RECIPIENT OF COMMISSION . WE HAVE NOTICED FROM THE FINDINGS OF THE LD.CIT(A) THAT THE ASSESSEE FAILED TO ESTABLISH WITH THE RELEVANT DOCUMENTARY EVIDENCE THAT ANY SERVICES HAD BEEN RENDERED BY THOSE PERSONS TO WHOM COMMISSION WAS PAID . WE FIND THAT PART OF THE COMPLIANCE REGARDING THE SERVICES WERE ACTUALLY RE NDERED BY COMMISSION RECIPIENTS COULD NOT BE ESTABLISHED I N SPITE OF GIVING FURTHER I.T.A NO. 1176 /AHD/20 14 A.Y. 2004 - 05 PAGE NO M/S. PANCHSHEEL INTERMEDIATES VS. ACIT 6 OPPORTUNITY IN THE SET ASIDE PROCEEDING AS PER THE ORDER OF CO - ORDINATE BENCH OF ITAT . I N VIEW OF THESE FACTS AND FINDINGS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 06 - 04 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 06 /04 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,