ACIT, Circle-10(1), Hyderabad V. Smt. Rita Narang, Hyderabad

ITA 1192/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66369 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1192/HYD/2011 ASSESSMENT YEAR: 2006-07 ACIT, CIR-10(1), HYDERABAD. .... APPELLANT VS. SMT. RITA NARANG, HYDERABAD. RESPONDENT PAN:AEYPR 1030 D APPELLANT BY : SHRI K. VISWANATHAM RESPONDENT BY : NONE DATE OF HEARING : 02-08-2012 DATE OF PRONOUNCEMENT : 17 -10-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 31-3-2011 PASSED IN ITA NO.594/08- 09/CIT(A)-VI/10-11 AND IT PERTAINS TO THE ASSESSMEN T YEAR 2006-07. 2. DESP ITE NOTICE, THERE WAS NO APPEARANCE ON BEHALF OF THE ASSESSEE. HOWEVER, THE ASSESSEE HAS SUBMITTED A P APER BOOK CONTAINING DOCUMENTS WHICH IS AVAILABLE ON RECORD. HENCE, WE DECIDE THE APPEAL AFTER HEARING THE SUBMISSIONS OF THE LEARNED DR AND CONSIDERING THE WRITTEN SUBMISSIONS OF THE AS SESSEE. 2 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... 3 . THE REVENUE RAISED THE FOLLOWING EFFECTIVE GROUNDS BEFORE US:- 1. THE LD. CIT (A) ERRED IN DIRECTING THE AO TO CONSID ER EXPENDITURE OF RS.11,43,675/- BEING COST OF IMPROVEMENT IN RESPECT OF PLOT WHILE COMPUTING THE PROFIT FROM THE SALE OF THE SAME. 2. THE CIT (A) ERRED IN DIRECTING THE AO TO CONSIDE R THE CHIT LOSS CLAIMED BY THE ASSESSEE IN THE ABSENCE OF ANY PROOF THAT THE CHIT WITHDRAWALS WERE USED FOR THE BUSINESS OF THE ASSESSEE. 3. THE CIT (A) ERRED IN CONSIDERING THAT DETAILS O F UTILISATION OF THE CHIT AMOUNT IN THE BUSINESS OF T HE ASSESSEE WEE FURNISHED TO THE AO IN THE ABSENCE OF ANY SUCH DETAILS FURNISHED BEFORE THE AO. 4. GROUND NO.2 RELATES TO CIT (A) DIRECTING THE AO TO CONSIDER THE EXPENDITURE OF RS.11,43,675/- WHILE COMPUTING THE PROFIT FROM SALE OF PROPERTY. BRIEFLY, THE FACTS ARE THE ASSESSEE I S AN INDIVIDUAL DERIVING INCOME FROM REAL ESTATE BUSINESS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED HER RETURN OF INCOME DECLARING AN INCOME OF RS.27,32,705. THE ASSESSEE ALONG WITH HER HUSBAND SRI ASHOK K. NARANG ON 15-3-2003 HAD ENTERE D INTO A DEVELOPMENT AGREEMENT WITH VIKAS V. SHAHANI FOR DE VELOPING 2052 SQ. YARDS OF LAND AT SURVEY NO.166/1 WITH THE CONDI TION TO HANDOVER 45% SHARE IN THE DEVELOPED AREA TO THE OWNER OF THE LAND MR. VIKAS SHAHANI. BY VIRTUE OF A DEVELOPMENT AGREEMENT, THE ASSESSEE ALONG WITH HER HUSBAND DEVELOPED THE LAND COMPRISIN G OF FOUR ADJ. PLOTS I.E., 1, 2, 3 AND 4 BELONGING TO VIKAS SHAHA NI. THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE ALONG W ITH HER 3 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... HUSBAND RECEIVED A GROSS AMOUNT OF RS.1,00,00,000/- FROM SALE OF FLATS. FROM THE GROSS RECEIPTS FROM SALE OF FLATS AFTER DEDUCTING THE COST OF LAND AT RS.36 LAKHS AND REGISTRATION AND IN CIDENTAL CHARGES OF RS.3,59,755/- AND CONSTRUCTION EXPENSES UP TO AN A MOUNT OF RS.11,43,675/- THE NET PROFIT DERIVED BY THE ASSESS EE ALONG WITH HER HUSBAND WAS RS.48,46,570/- AND ASSESSEES SHARE BEI NG RS.24,48,285 WAS SHOWN AS PROFIT IN THE PROFIT & LO SS A/C OF THE ASSESSEE. 5. THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO FURNISH THE DETAILS REGARDING THE EXPEN DITURE OF RS.11,43,675/- INCURRED TOWARDS COST OF CONSTRUCTI ON. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE CONSTRUCTION WORK WAS EXECUTED THROUGH A CONTRACTOR BY NAME GOPAL REDDY AND A COPY OF MEMORANDUM OF UNDERSTANDING SIGNED BY SRI GOPAL RED DY WAS ALSO SUBMITTED. THE ASSESSEE ALSO SUBMITTED COPY OF THE RECEIPT FROM GOPAL REDDY TOWARDS PAYMENT OF CONSTRUCTION COST. THE AO HOWEVER WAS NOT SATISFIED WITH THE EVIDENCE SUBMITT ED BY THE ASSESSEE. THE AO FURTHER NOTED THAT NO SUPPORTING DETAILS WERE SUBMITTED TO SHOW THAT TDS WAS MADE AGAINST THE PA YMENT TO CONTRACTOR. ON THE AFORESAID CONSIDERATION, THE AO DISALLOWED THE EXPENDITURE OF RS.11,43,675/- CLAIMED TOWARDS CONST RUCTION. THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE CIT (A). IN COURSE OF HEARING OF APPEAL, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT EXPENDITURE OF RS.11,43,675/- WAS CLAIMED TOWA RDS CONSTRUCTION THROUGH WORK EXECUTED BY GOPAL REDDY W ITH WHOM THE ASSESSEE HAS ENTERED MEMORANDUM OF UNDERSTANDING ON 10-6- 2005. THE CIT (A) FOUND THAT THE SALE DEED CLEARLY MENTIONED THAT A STRUCTURE WAS STANDING OVER THE PLOT WHEN THE SALE WAS MADE BY THE 4 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... ASSESSEE, THEREFORE, IT COULD NOT HAVE BEEN CONSTRU CTED WITHOUT INCURRING ANY EXPENDITURE BY THE ASSESSEE. THE CIT (A) HELD THAT MERE NON PRODUCTION OF DETAILS OF EXPENDITURE INCU RRED THROUGH CONTRACTOR COULD NOT ALONE ESTABLISH THE FACT THAT THERE WAS NO STRUCTURE AT ALL AND THAT THE EXPENDITURE WAS NOT I NCURRED BY THE ASSESSEE. THE CIT (A) THEREFORE DIRECTED THE AO TO CONSIDER THE EXPENDITURE OF RSD.11,43,675/-. 6. THE LEARNED DR SUPPORTING THE ORDER OF THE AO SU BMITTED THAT THE ASSESSEE HAVING FAILED TO PRODUCE ANY TANGIBLE EVIDENCE IN SUPPORT OF EXPENDITURE CLAIMED TOWARDS CONSTRUCTION WORK, THE AO WAS JUSTIFIED IN DISALLOWING THE CLAIM OF EXPENDITU RE. 7. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MAT ERIAL ON RECORD. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE AO HIMSELF HAS OBSERVED IN THE ASSESSMENT ORDER THAT THE ASSES SEE HAS SOLD THE PROPERTY TO ONE SHRI P. MOHANA REDDY ON 16-1-20 06 FOR A TOTAL CONSIDERATION OF RS.1 CRORE FOR PLOT NO.3 ADMEASURI NG 617 SQ. YARDS TOGETHER WITH A STRUCTURE. WHEREAS, THE ASSESSEE WHILE PURCHASING THE SAID PROPERTY IT COMPRISES OF ONLY 617 SQ. YARD S OF LAND, A ROOM BEING OF 100 SFT OF PLINTH AREA. THIS, TO SOME EXTE NT, DOES NOT RULE OUT THE FACT THAT THE ASSESSEE MIGHT HAVE INCURRED SOME EXPENDITURE TOWARDS CONSTRUCTION OF A STRUCTURE WHI CH WAS SOLD ALONG WITH THE LAND TO SRI MOHANA REDDY FOR CONSIDE RATION OF RS.1 CRORE. IT IS THE CONTENTION OF THE ASSESSEE THAT T HE ASSESSEE HAS SOLD THE PLOT ALONG WITH SEMI FINISHED STRUCTURE UP TO SLAB LEVEL WHICH WAS CONSTRUCTED BY THE ASSESSEE THROUGH A CONTRACTO R BY NAME SRI 5 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... GOPAL REDDY FOR WHICH A MEMORANDUM OF UNDERSTANDING WAS SIGNED BY THE CONTRACTOR. THE SO-CALLED MEMORANDUM OF UND ERSTANDING WHICH IS AT PAGE-59 OF THE PAPER BOOK IS ONLY SIGNE D BY SAID GOPAL REDDY. THERE IS NO COGENT MATERIAL ON RECORD TO SH OW THAT AN AMOUNT OF RS.11,43,675/- WAS ACTUALLY PAID TO SRI G OPAL REDDY FOR THE CONSTRUCTION WORK CARRIED OUT OVER THE PLOT SOL D BY THE ASSESSEE. NEITHER THE CIT (A) NOR THE AO HAVE CROSS VERIFIED AS TO WHAT IS THE EXACT NATURE OF CONSTRUCTION CARRIED OUT BY THE ASS ESSEE AND WHAT WILL BE THE COST FOR SUCH CONSTRUCTION. NO MATERIA L HAS BEEN PLACED ON RECORD AS TO WHETHER SRI GOPAL REDDY ACTUALLY CA RRIED OUT THE CONSTRUCTION WORK OR NOT. THIS FACT WOULD HAVE BEE N VERIFIED PROPERLY HAD SRI GOPAL REDDY BEEN PRODUCED FOR EXAM INATION BEFORE THE ASSESSING OFFICER. WITHOUT VERIFYING THESE BASI C FACTS, THE CIT (A) WAS NOT JUSTIFIED IN ACCEPTING THE PETITIONERS CLAIM OF EXPENDITURE INCURRED TOWARDS CONSTRUCTION AMOUNTING TO RS.11,43,675/-. IN AFORESAID VIEW OF THE MATTER, W E REMIT THE MATTER BACK TO THE ASSESSING OFFICER WHO SHALL EXAM INE THE ISSUE REGARDING THE CLAIM OF EXPENDITURE INCURRED TOWARDS CONSTRUCTIONS AS MENTIONED ABOVE BY CONDUCTING NECESSARY ENQUIRY. THE ASSESSING OFFICER, IF REQUIRED, MAY EXAMINE SRI G OPAL REDDY TO FIND OUT FOR HIMSELF AS TO WHETHER HE HAS ACTUALLY CARRI ED OUT THE CONSTRUCTION WORK AND HAS RECEIVED THE AMOUNT OF RS .11,43,675/-. THE ASSESSING OFFICER SHALL AFFORD A REASONABLE OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALISING THESE PROCE EDINGS. HENCE THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL P URPOSE. 8. GROUND NOS. 3 AND 4 RELATE TO THE DIRECTION OF T HE CIT (A) FOR CONSIDERING THE CHIT LOSS OF RS.5,41,500. BRIEFLY, THE FACTS ARE THE ASSESSEE HAS CONTRIBUTED TO THE MONTHLY CHIT SERIES TO POOJA CHIT 6 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... FUNDS. THE ASSESSEE HAS LIFTED THE CHIT IN OPEN AU CTION CONDUCTED BY THE CHIT FUND COMPANY AND THESE PROCEEDS WERE UT ILIZED FOR THE PURPOSE OF BUSINESS CARRIED ON BY THE ASSESSEE. THE AO FOUND FROM THE P & L A/C THAT THE ASSESSEE HAS SHOWN CHIT LOSS OF RS.9,50,000/- AND HAS SHOWN A DIVIDEND FROM CHIT OF RS.4,80,500/- . THE AO DISALLOWED THE DIFFERENTIAL AMOUNT OF RS.5,41,000/- BY OBSERVING THAT THE ASSESSEE COULD NOT FURNISH DETAILS TO SHO W THAT THE AMOUNT OF CHIT WITHDRAWAL WAS UTILIZED IN THE BUSINESS OF THE ASSESSEE. BEFORE THE CIT (A), THE ASSESSEE AGAIN REITERATED I TS STAND TAKEN BEFORE THE AO AND ALSO RELIED ON THE DECISION OF TH E HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. KOVU RU TEXTILES & CO. ( 136 ITR 61) (AP). THE CIT (A) AFTER CONSIDE RING THE CONTENTIONS OF THE ASSESSEE AND EXAMINING THE MATER IALS PLACED BEFORE HER FOUND THAT THE ASSESSEE HAD LIFTED THE C HIT IN AN OPEN AUCTION AND THE AMOUNTS WERE UTILIZED FOR BUSINESS PURPOSES THROUGH PROPER BANKING CHANNEL. THE CIT (A) THEREFO RE DIRECTED THE AO TO DELETE THE ADDITION MADE ON THIS ACCOUNT. 9.. THE LEARNED DR SUPPORTING THE ADDITION MADE BY THE AO CONTENDED THAT IN ABSENCE OF PROPER EVIDENCE TO SHO W THAT THE AMOUNT WAS UTILIZED FOR THE PURPOSE OF BUSINESS, TH E DISALLOWANCE WAS JUSTIFIED. 10. THE ASSESSEE IN HER WRITTEN SUBMISSIONS, HAS SU BMITTED THAT THE PROCEEDS OF THE CHIT AMOUNT WERE UTILIZED FOR T HE PURPOSE OF BUSINESS. IN SUPPORT OF SUCH CLAIM, THE ASSESSEE H AS SUBMITTED THE ACCOUNT EXTRACT OF POOJA CHIT FUND AND EXTRACT OF C HIT LOSS AND CHIT GAIN AND A COPY OF THE BANK STATEMENT WHICH IS PLAC ED IN THE PAPER BOOK. HOWEVER, THE ASSESSEE HAS NOT ESTABLISHED THE FACT WITH SUFFICIENT EVIDENCE THAT THE AMOUNTS WERE UTILISED FOR THE PURPOSE OF 7 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... BUSINESS. THE CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY SIMPLY OBSERVING THAT THE ADDITION MADE BY THE AO H AD NO LEGS TO STAND. THE ORDER PASSED BY THE CIT (A) IN THIS REG ARD IS BEREFT OF ANY REASON. CONSIDERING THE FACTS AND THE CIRCUMST ANCES OF THE CASE, WE THEREFORE DEEM IT FIT AND PROPER TO REMIT THE MATTER BACK TO THE AO BEFORE WHOM THE ASSESSEE SHALL PRODUCE N ECESSARY EVIDENCE TO SHOW THAT THE AMOUNTS WERE UTILISED FOR THE PURPOSE OF BUSINESS. IF THE ASSESSEE IS ABLE TO PROVE THIS FA CT, THEN THE AO HAS TO ALLOW THE CHIT LOSS. THE AO SHALL AFFORD A REAS ONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 17 -10-2012. SD/- S D/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 17 TH OCTOBER, 2012. COPY TO:- 1) ACIT, CIR-10(1), AC GUARDS, IT TOWERS, HYDERABAD . 2) MRS. RITA NARANG, RA PLAZA, POLOT NO. 4, 3 RD FLOOR, PUNJAGUTTA, HYDERABAD. 3) THE CIT (A)-VI, HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 8 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... N THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1192/HYD/2011 ASSESSMENT YEAR: 2006-07 ACIT, CIR-10(1), 9 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... HYDERABAD. .... APPELLANT VS. SMT. RITA NARANG, HYDERABAD. HYDERABAD. RESPONDENT PAN:AEYPR 1030 D APPELLANT BY : SHRI K. VISWANATHAM RESPONDENT BY : NONE DATE OF HEARING : 02-08-2012 DATE OF PRONOUNCEMENT : -10-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31-3-2011 PASSED IN ITA NO.594/08-09/CIT(A)-VI/10-11 AND IT PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. DESPITE NOTICE, THERE WAS NO APPEARANCE ON BEHAL F OF THE ASSESSEE. HOWEVER, THE ASSESSEE SUBMITTED A PAPER BOOK CONTAINING OTHER DOCUMENTS WHICH ARE AVAILABLE ON RECORD. HENCE, WE DECIDE THE APPEAL A FTER HEARING THE SUBMISSIONS OF THE LEARNED DR AND CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE . 3. THE REVENUE RAISED THE FOLLOWING EFFECTIVE GROUN DS BEFORE US:- 10 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... // GROUNDS// 4. GROUND NO.2 RELATES TO CIT (A) DIRECTING THE AO TO CONSIDER THE EXPENDITURE OF RS.11,43,675/- WHILE COMPUTING THE PROFIT FROM SALE OF PROPERTY. BRIEFL Y, THE FACTS ARE THE ASSESSEE IS AN INDIVIDUAL DERIVING IN COME FROM REAL ESTATE BUSINESS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED HER RETURN OF INCOME DECLARING AN INCOME OF RS.27,32,705. THE ASSESSEE ALONG WITH HIS HER HUSBAND SRI ASHOK K. NARANG ON 15-3-2003 HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH VIKAS V. SHAHANI FOR DEVELOPING 205 2 SQ. YARDS OF LAND AT SURVEY NO.166/1 WITH THE CONDI TION TO HANDOVER 45% SHARE IN THE DEVELOPED AREA TO THE OWNER OF THE LAND MR. VIKAS SHAHANI. BY VIRTUE OF A DEVELOPMENT AGREEMENT, THE ASSESSEE ALONG WITH HER HUSBAND DEVELOPED THE LAND COMPRISING OF FOUR ADJ. PLOTS I.E., 1, 2, 3 AND 4 BELONGING TO VIKAS SHAHA NI. THEREFORE, THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE ALONG WITH HER HUSBAND RECEIVED A GROSS AMOUNT OF RS.1,00,00,000/- FROM SALE OF FLATS. FRO M THE GROSS RECEIPTS FROM SALE OF FLATS AFTER DEDUCTING T HE COST OF LAND AT RS.36 LAKHS REGISTRATION AND INCIDENTAL CHARGES OF RS.3,59,00,155/- AND CONSTRUCTION EXPENS ES UP TO AN AMOUNT OF RS.11,43,675/- THE TOTAL PROFIT DERI8VED BY THE ASSESSEE ALONG WITH HER HUSBAND WA S RS.48,46,570/- AND ASSESSEES SHARE BEING RS.24,48,285 WAS SHOWN AS PROFIT IN THE PROFIT & LO SS A/C OF THE ASSESSEE. 11 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... 5. THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO FURNISH THE DETAILS REGARDING THE EXPENDITURE OF RS.11,43,675/- INCURRED TOWARDS COS T OF CONSTRUCTION. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE CONSTRUCTION WORK WAS EXECUTED THROUGH A CONTRACTOR BY NAME GOPAL REDDY AND A COPY OF MEMORANDUM OF UNDERSTANDING SIGNED BY SRI GOPAL REDDY WAS ALSO SUBMITTED. THE ASSESSEE ALSO SUBMITTED COPY OF THE RECEIPT FROM GOPAL REDDY TOWA RDS PAYMENT OF CONSTRUCTION COST. THE AO HOWEVER WAS N OT SATISFIED WITH THE EVIDENCE SUBMITTED BY THE ASSESS EE. THE AO FURTHER NOTED THAT NO SUPPORTING DETAILS WER E SUBMITTED TO SHOW THAT THE TDS WAS MADE AGAINST TH E PAYMENT TO CONTRACTOR. ON THE AFORESAID CONSIDERAT ION, THE AO DISALLOWED THE EXPENDITURE OF RS.11,43,675/- CLAIMED TOWARDS CONSTRUCTION. THE ASSESSEE CHALLEN GED THE DISALLOWANCE BEFORE THE CIT (A). IN COURSE OF HEARING OF APPEAL, IT WAS CONTENDED ON BEHALF OF TH E ASSESSEE THAT EXPENDITURE OF RS.11,43,675/- WAS CLAIMED TOWARDS CONSTRUCTION THROUGH WORK EXECUTED BY GOPAL REDDY WITH WHOM THE ASSESSEE HAS ENTERED MEMORANDUM OF UNDERSTANDING ON 10-6-2005. THE CIT (A) CONSIDERING THE FACT THAT THE SALE DEED CLEARLY MENTIONED THAT A STRUCTURE WAS STANDING OVER THE P LOT WHEN THE SALE WAS MADE BY THE ASSESSEE. THEREFORE, IT COULD NOT HAVE BEEN CONSTRUCTED WITHOUT INCURRING A NY EXPENDITURE BY THE ASSESSEE. THE CIT (A) HELD THAT MERE NON PRODUCTION OF DETAILS OF EXPENDITURE INCU RRED 12 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... THROUGH CONTRACTOR COULD NOT ALONE ESTABLISH THE FA CT THAT THERE WAS NO STRUCTURE AT ALL AND THAT THE EXPENDIT URE WAS NOT INCURRED BY THE ASSESSEE. THE CIT (A) THEREFORE DIRECTED THE AO TO CONSIDER THE EXPENDITU RE OF RSD.11,43,675/-. 6. THE LEARNED DR SUPPORTING THE ORDER OF THE AO SUBMITTED THAT THE ASSESSEE HAVING FAILED TO PRODUC E ANY TANGIBLE EVIDENCE IN SUPPORT OF EXPENDITURE CLA IMED TOWARDS CONSTRUCTION WORK, THE AO WAS JUSTIFIED IN DISALLOWING THE CLAIM OF EXPENDITURE. 7. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE AO HIMSELF HAS OBSERVED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS SOLD THE PROPERTY TO ON E SHRI P. MOHANA REDDY ON 16-1-2006 FOR A TOTAL CONSIDERATION OF RS.1 CRORE FOR PLOT NO.3 ADMEASURI NG 617 SQ. YARDS TOGETHER WITH A STRUCTURE. WHEREAS, THE ASSESSEE WHILE PURCHASING THE SAID PROPERTY IT COMPRISES OF ONLY 617 SQ. YARDS OF LAND, A ROOM BEI NG OF 100 SFT OF PLINTH AREA. THIS CLEARLY ESTABLISHES T HE FACT THAT A STRUCTURE HAS BEEN CONSTRUCTED BY THE ASSESS EE WHICH WAS SOLD TO SRI MOHANA REDDY FOR CONSIDERATIO N OF RS. RS. 1 CRORE. IT IS THE CONTENTION OF THE ASS ESSEE THAT THE ASSESSEE HAS SOLD THE PLOT ALONG WITH SEMI FINISHED STRUCTURE UPTO STUMP LEVEL WHICH WAS CONSTRUCTED BY THE ASSESSEE THROUGH A CONTRACTOR BY NAME SRI GOPAL REDDY FOR WHICH A MEMORANDUM OF 13 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... UNDERSTANDING WAS SIGNED BY THE CONTRACTOR. A COPY OF THE SAID MEMORANDUM OF UNDERSTANDING IS PLACED AT PAGE-59 OF PAPER BOOK FILED BY THE ASSESSEE WHICH REVEALS THAT THE ASSESSEE IS TO PAY RS.180 PER SFT OF CONSTRUCTION WORK TO SRI GOPAL REDDY. ON PAGE-57 OF THE PAPER BOOK IS THE BILL RAISED BY THE CONTRACTOR GOPAL REDDY FOR AN AMOUNT OF RS.11,43,675/- WHICH REVEALS THAT THE CONTRACTOR GOPAL REDDY HAS ALREADY RECEIV ED AN ADVANCE OF RS.1,50,000. PAGE-58 OF THE PAPER B OOK IS A RECEIPT BY THE CONTRACTOR GOPAL REDDY WHICH RE VEALS THAT PAYMENT OF RS.5 LAKH THROUGH A CHEQUE ISSUED B Y THE ASSESSEE AND HER HUSBAND ASHOK FROM THEIR JOINT ACCOUNT AT ING BANJARA HILLS BRANCH. THESE DOCUMENTS COUPLED WITH THE FACT THAT THE SALE DEED CLEARLY REVEALED THE PROPERTY SOLD IS THE LAND ADMEASURING 617 SQ. YARDS TOGETHER WITH A STRUCTURE . THEREFORE, THE CLAIM OF THE ASSESSEE THAT HE HAS INCURRED EXPENDITURE TOWARDS CONSTRUCTION CANNOT BE REJECTED. IN VIEW OF THE AFORESAID FACTS, THE DIRE CTION GIVEN BY THE CIT (A) REQUIRES TO BE UPHELD. THE GR OUND RAISED BY THE REVENUE IS DISMISSED. 8. GROUND NOS. 3 AND 4 RELATE TO THE DIRECTION OF T HE CIT (A) FOR CONSIDERING THE CHIT LOSS OF RS.5,41,50 0. BRIEFLY, THE FACTS ARE THE ASSESSEE HAS CONTRIBUTED TO THE MONTHLY CHIT SERIES TO POOJA CHIT FUNDS. THE ASSES SEE HAS LIFTED THE CHIT IN OPEN AUCTION CONDUCTED BY TH E CHIT FUND COMPANY AND THESE PROCEEDS WERE UTILIZED FOR T HE 14 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... PURPOSE OF BUSINESS CARRIED ON BY THE ASSESSEE. THE AO FOUND FROM THE P & L A/C THAT THE ASSESSEE HAS SHOWN CHIT LOSS OF RS.9,50,000/- AND HAS SHOWN A DIVIDEND FROM CHIT OF RS.4,80,500/-. THE AO DISALL OWED THE DIFFERENTIAL AMOUNT OF RS.5,41,000/- BY OBSERVI NG THAT THE ASSESSEE COULD NOT FURNISH DETAILS TO SHO W THAT THE AMOUNT OF CHIT WITHDRAWAL WAS UTILIZED IN THE BUSINESS OF THE ASSESSEE. BEFORE THE CIT (A), THE ASSESSEE AGAIN REITERATED ITS STAND TAKEN BEFORE TH E AO AND ALSO RELIED ON THE DECISION OF THE HONBLE HIG H COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. KOVU RU TEXTILES & CO. ( 136 ITR 61) (AP). THE CIT (A) AF TER CONSIDERING THE CONTENTIONS OF THE ASSESSEE AND EXAMINING THE MATERIALS PLACED BEFORE HER FOUND THA T THE ASSESSEE HAD LIFTED THE CHIT IN AN OPEN AUCTION AND THE AMOUNTS WERE UTILIZED FOR BUSINESS PURPOSES THROUGH PROPER BANKING CHANNEL. THE CIT (A) THEREFORE DIREC TED THE AO TO DELETE THE ADDITION MADE ON THIS ACCOUNT. 9.. THE LEARNED DR SUPPORTING THE ADDITION MADE BY THE AO CONTENDED THAT IN ABSENCE OF PROPER EVIDENCE TO SHOW THAT THE AMOUNT WAS UTILIZED FOR THE PURPOSE O F BUSINESS, THE DISALLOWANCE WAS JUSTIFIED. 10. THE ASSESSEE IN HER WRITTEN SUBMISSIONS, HAS SUBMITTED THAT THE PROCEEDS OF THE CHIT AMOUNT WERE UTILIZED FOR THE PURPOSE OF BUSINESS. IN SUPPORT O F SUCH CLAIM, THE ASSESSEE HAS SUBMITTED THE ACCOUNT EXTRA CT OF POOJA CHIT FUND AND EXTRACT OF CHIT LOSS AND CHI T GAIN AND A COPY OF THE BANK STATEMENT WHICH WAS PLACED I N 15 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... THE PAPER BOOK. IT IS SEEN FROM THE ABOVE DOCUMENT S THAT THE ENTIRE TRANSACTION HAS BEEN ROUTED THROUGH BANKING CHANNEL AND THEREFORE THERE IS NO JUSTIFICA TION ON THE PART OF THE AO TO DISALLOW THE CHIT LOSS ON CONJECTURES AND SURMISES. WE THEREFORE UPHOLD THE FINDINGS OF THE CIT (A) IN THIS REGARD. HENCE THE G ROUNDS RAISED BY THE REVENUE ARE DISMISSED. 11. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON -10-2012. (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE SEPT., 2012. COPY TO:- 1) XXXXXXXXXXXXXXXXXXXXX. 2)XXXXXXXXXXXXXXXXXXXXXXX 3) THE CIT (A), HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 16 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.116/HYD/2011 ASSESSMENT YEAR: 2007-08 VINS BIO PRODUCTS LTD., HYDERABAD. .... APPELLANT PAN:AABCV 0226F) VS. 17 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... ACIT, CIR-3(3), HYDERABAD. RESPONDENT ITA NO.237/HYD/2012 ASSESSMENT YEAR: 2007-08 DCIT, CIR-3(3), HYDERABAD. APPELLANT -VS- VINS BIO PRODUCTS LTD., HYDERABAD. .... APPELLANT PAN:AABCV 0226F) APPELLANT BY : SHRI A. SRINIVAS RESPONDENT BY : SHRI V. SRI NIVAS DATE OF HEARING : 02-08-2012 DATE OF PRONOUNCEMENT : - 10-2012 ORDER PER SAKTIJIT DEY, J.M.: THESE CROSS APPEALS ARE BY THE ASSESSEE AND THE DE PARTMENT AND ARE DIRECTED AGAINST THE ORDER DATED 7-1-2011 OF CIT (A ), GUNTUR PERTAINING TO THE ASSESSMENT YEAR 2007-08. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IS GROUND NO.2 WHICH READS AS UNDER:- //GROUND NO.2 // 2. BRIEFLY THE FACTS ARE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF BIOPRODUCTS. T HE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 30-10-2007 DECLARING A TOTAL INCOM E OF RS.1,62,43,594. THE RETURN WAS PROCESSED U/S 143(1 ). SUBSEQUENTLY, SCRUTINY ASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUING A NOTICE U/S 143(2). IN COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSEE PRODUCED ITS BOOKS OF ACC OUNTS AND OTHER DOCUMENTS WHICH WERE DULY EXAMINED BY THE AO. WHILE EXAMINING THE EXPENDITURE CLAIMED IN THE PROFIT & LOSS A/C, THE AO NOTICED THAT THE ASSESSEE HAS PAID AN AMOUNT OF RS.93,27,000 TO M/S VINAY TRADING CORPORATION. THE AO ASKED 18 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... FOR THE DETAILS OF PAYMENT MADE TO THE SAID PARTY. IN RESPONSE TO THE QUERY MADE BY THE AO, HE ASSESSEE SUBMITTED THAT THE PAYMENT OF RS.93,27,000 WAS PAID TO M/S VINAY TRADI NG CORPORATION TOWARDS COMMISSION FOR FACILITATING THE RATE CONTRACT WITH GOVERNMENT OF KARNATAKA. IN SUPPORT O F SUCH EXPLANATION, THE ASSESSEE SUBMITTED THE PROCEEDINGS OF MEETINGS HELD WITH THE FIRM M/S VINAY TRADING CORPO RATION. THE AO AFTER GOING THROUGH THE PROCEEDINGS BETWEEN THE ASSESSEE COMPANY AND M/S VINAY TRADING CORPORATION CAME TO A CONCLUSION THAT AS PER THE TERMS OF THE CONTRACTO R THE COMMISSION WILL BE PAID AS PER THE REQUEST OF THE L IAISON AGENT TO THIRD PERSON WHICH EFFECTIVELY REMAINS THAT THE PERSON RENDERING SERVICES HAS NOT BEEN PAID AND THERE IS D IVERSION OF INCOME TO A THIRD PARTY. THE AO WHILE EXAMINING T HE COMPUTATION OF CALCULATION OF COMMISSION ON THE SUP PLIES MADE TO KARNATAKA GOVERNMENT FOUND THAT THE COMMISSION O F RS.93,27,000/- WAS PAID TOWARDS COMMISSION FOR PAYM ENT RECEIVED AMOUNTING TO RS.3,24,89,908. THUS, THE CO MMISSION PAID COMES TO ABOUT 28.7% OF THE SALES WHEREAS AS P ER THE POTENTIALSHOWN, THE GROSS PROFIT HAS BEEN DECLARE D AT 9% ONLY. THE AO THEREFORE FOUND THE COMMISSION TO BE EXCESSIVE. THE AO FURTHER HELD THAT THE ASSESSEE HAS NOT JUSTI FIED THE PAYMENT OF COMMISSION AT 28.7% TO M/S VINAY TRADING CORPORATION. SINCE THERE WAS NO XXXXXXXXX FURNISH ED BY THE ASSESSEE TO SUBSTANTIATE THE SERVICES RENDERED BY T HE AGENT M/S VINAY TRADING CORPORATION FOR PROCURING ORDERS FROM KARNATAKA GOVERNMENT. ON THE AFORESAID CONCLUSION, THE AO DISALLOWED THE COMMISSION PAYMENT OF RS.93,27,000/- AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE BEING AGGRIEVED CHALLENGED THE ADDITION BY FILING A N APPEAL BEFORE THE CIT (A). BEFORE THE CIT (A) BY REITERA TING ITS STAND TAKEN BEFORE THE AO, THE ASSESSEE CONTENDED THAT AS PER 19 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... CLAUSE (IV) OF THE PROCEEDINGS ENTERED INTO WITH M/ S VINAY TRADING CORPN., THE ASSESSEE HAD PAID COMMISSION TO THE PERSONS WHOSE NAMES WERE COMMUNICATED BY M/S VINAY TRADING CORPN. IN FACT, THE PERSON AND SIGNATORIE S TO THE PROCEEDINGS, ONE OF THEM M/S DEEPAK KHURANA IS A PR OPRIETOR AND SRI G. KOTHARI IS THE MANAGER OF M/S. VINAY TR ADING COMPANY. THE ASSESSEE CONTENDED THAT SRI D.KUMAR WAS APPOINTED AS CLASS-I AGENT TO LOOK AFTER THE COMPAN YS BUSINESS ACTIVITIES IN THE KARNATAKA STATE AND BECAUSE OF H IS GOOD OFFICES, THE COMPANY COULD PROCURE A RATE CONTRACT FOR SUPPLY OF XXXXXXXXXX FOR USE IN THE GOVERNMENT HOSPITALS FOR THE PREVIOUS TWO YEARS ENDING ON 14-12-2006. IT WAS CONTENDED THAT DUE TO THE EFFORTS OF MR. DEEPAK KHURANA. THE ASSESSEES RATE CONTRACT WAS ACCEPTED AT A HIGHER RATE OF RS. 3367.60 PER VIAL AS AGAINST NORMAL SELLING PRICE OF RS.240/-. CONSIDERING THE PROCUREMENT OF RATE CONTRACT AS A VERY LUCRATI VE PRICE, THE ASSESSEE PAID HIGHER COMMISSION TO THE LIAISON AGEN T FOR THE SERVICES RENDERED BY HIM. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT SRI DEEPAK KHURANA WAS ACTING AS ASSE SSEES LIAISON AGENT RIGHT FROM THE STAGE OF SUBMITTING TE NDERS, GETTING IT ACCEPTED FROM DECEMBER, 2004 ONWARDS. HE WAS AL SO LOOKING DISTRIBUTION OF THE ASSESSEE- COMPANYS PRO DUCTS IN VARIOUS HOSPITALS IN KARNATAKA STATE AND ALSO FOLLO WED IT UP FOR GETTING ORDERS AND COLLECTION OF MONEY. SHRI DEEPA K KHURANA ALSO HELPED THE ASSESSEE IN VARIOUS OTHER MATTERS/W AYS. THE CIT (A) AFTER CONSIDERING THE SUBMISSION MADE BY TH E ASSESSEE AND ALSO MATERIALS PLACED BEFORE HIM, ACCEPTED THE FACT THAT THERE IS NO DISPUTE REGARDING THE PAYMENT OF COMMIS SION OF RS.93,27,000 BY THE ASSESSEE AS PER AN AGREEMENT EN TERED INTO WITH THE AGENT. THE CIT (A) ALSO FOUND THE R EJECTION OF CLAIM OF THE ASSESSEE BY THE AO AS NOT CORRECT SINE THE AO HAS NOT GIVEN ANY COGENT REASON FOR HIS DECISION AND HA S 20 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... DISALLOWED THE COMMISSION ONLY ON THE GROUND THAT T HE COMMISSION PAYMENT AMOUNTS TO 28.7% OF THE RECEIPTS WHEREAS THE ASSESSEE HAS DISCLOSED GROSS PROFIT AT ONLY 9%. THE CIT (A) HOWEVER DIRECTED THE AO TO RE-COMPUTE T HE PAYMENT OF COMMISSION BY ADOPTING THE PRICE PER VI AL. THE FINDING OF THE CIT (A) IN THIS REGARD IS EXTRACTED HEREUNDER FOR SAKE OF CONVENIENCE:- THE SUBMISSIONS MADE BY THE APPELLANT WERE CONSI DERED AND ALSO SEEN THE CIRCUMSTANCES UNDER WHICH THE AO HAS DENIED THE ENTIRE PAYMENT OF COMMISSION. THERE IS NO DISP UTE THAT THE CLAIM OF THE APPELLANT IS RS.93,27,000/-, WHICH WAS PAID/ PAYABLE AS PER AN AGREEMENT. IT IS THE CLAIM OF TH E APPELLANT THAT THE ISSUE OF TENDER BY GOVERNMENT OF KARNATAKA WAS BROUGHT TO ITS NOTICE BY THE AGENT AND THAT ITS HIG HER RATES WERE GOT ACCEPTED AT RS.336.60 PER VIAL AS AGAINST NORMA L SELLING PRICE OF RS.240/-. BUT THEN, WHAT WERE THE CIRCUMS TANCES UNDER WHICH HIGHER RATES PER VIAL WERE ACCEPTED WERE NOT FURNISHED BY THE APPELLANT. S AT THE SAME TIME REJECTING THE ENTIRE CLAIM OF THE APPELLANT ON THIS ISSUE BY THE AO IS ALSO NO T CORRECT, BECAUSE THE AO HAS NOT GIVEN ANY COGENT REASONS FOR HIS DECISION. THE PLEA OF THE AO THAT THE COMMISSION P AYMENTS, WHICH IS 28.7% OF RECEIPTS THROUGH THE AGENT WAS NO T JUSTIFIABLE IN LIGHT OF THE FACT THAT THE GP IS ONLY 9%, IS DIF FICULT TO COMPREHEND. IN THE CIRCUMSTANCES, IN VIEW OF THE M ATERIAL ON RECORD, EITHER AO IS CORRECT IN DISALLOWING THE ENT IRE COMMISSION PAYMENTS OR THE APPELLANT IS CORRECT IN PAYING HIGH ER PRICE OF RS.336.60 PER VIAL, WHEN THE PREVAILING RATE IN THE MARKET IS RS.240/- PER VIAL. IN THE GIVEN FACTUAL MATRIX, I AM OF THE CONSIDERED OPINION THAT ENDS OF JUSTICE ARE MET IF THE ORDERS PROCURED THROUGH THE AGENT AT RS.3,24,89,908 ARE RE COMPUTED ADOPTING THE PRICE PER VIAL AS DISCUSSED HEREIN ABO VE ON WHICH 21 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... SAME YARD STICK IS ADOPTED FOR WORKING OUT THE COMM ISSION INVOLVED AND THE AO IS DIRECTED ACCORDINGLY. X. THE LEARNED AR SUBMITTED BEFORE US THAT THE PAYM ENT OF COMMISSION AS PER THE TERMS OF MEMORANDUM OF UNDERS TANDING ENTERED INTO BETWEEN THE ASSESSEE COMPANY WITH M/S VINAY TRADING COMPANY, THE LEANED AR INVITED OUR ATTENTI ON TO THE PROCEEDINGS OF THE MEETINGS DATED 21-1-2005 WHICH I S AT PAGE- 58 OF THE PAPER BOOK. THE LEARNED AR SUBMITTED THA T BECAUSE OF THE AWARDS THE LIAISON AGENTS, THE ASSESSEE WAS ABLE TO PROCURE THE RATE CONTRACT FROM GOVERNMENT OF KARNAK ATA FOR SUPPLY OF ANTI SNAKE VENOM FOR A PERIOD OF 24 MONTH S. THEREFORE, THE ASSESSEE HAS PAID COMMISSION AS PER THE TERMS OF THE PROCEEDINGS HELD ON 21-1-2005. THE LEARNED AR FURTHER SUBMITTED THAT THE CONTRACT IS A CONTINUING CONTRAC T FROM THE FINANCIAL YEAR 2004-05 AND THE COMMISSION PAID FOR SIMILAR SERVICES RENDERED BY M/S. VINAY TRADING COMPANY WAS CLAIMED IN THE ASSESSMENT YEARS 2005-06 AND 2006-07 ALSO WHICH WERE ACCEPTED IN THE ASSESSMENT ORDER PASSED FOR THE RESPECTIVE ASSESSMENT YEARS. IN THIS REGARD, THE L EARNED AR REFERRED TO THE ANNUAL REPORT AND ASSESSMENT ORDER OF THE ASSESSMENT YEAR 2005-06 AND 2006-07 FORMING PART OF THE PAPER BOOK. THE LEARNED AR SUBMITTED THAT WHEN THE AO HAS ACCEPTED THE PAYMENT OF COMMISSION FOR THE PRECEDIN G TWO ASSESSMENT YEAR, THERE IS NO SUCH CHANGED OR INTERV ENING CIRCUMSTANCES WHICH COULD HAVE NECESSITATED DISALLO WANCE OF COMMISSION FOR THE ASSESSMENT YEAR 2007-08. THE LE ARNED AR FURTHER SUBMITTED THAT THE ENTIRE COMMISSION HAS BE EN PAID THROUGH CHEQUES WHICH COULD HAVE BEEN EASILY VERIFI ED BY THE AO . IT IS FURTHER CONTENTION OF THE LEARNED AR THA T THE DIRECTION 22 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... OF THE CIT (A) IS ALSO NOT SIMILAR HOW PAYMENT OF C OMMISSION IS TO BE RECOMPUTED. X. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T THE ACCEPTANCE OF PAYMENT COMMISSION FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 CANNOT BE A GROUND TO ALLOW SIM ILAR PAYMENT IN THE ASSESSMENT YEAR UNDER DISPUTE. THE LEARNED DR SUBMITTED THAT THE FACTS OF EACH YEAR WOULD GOVE RN ON THE BASIS OF FINDING IN THAT PARTICULAR YEAR AND IT CAN NOT BE MADE APPLICABLE TO ANOTHER YEAR. THE LEARNED DR RELYING UPON A DECISION OF HONBLE AP HIGH COURT IN THE CASE OF CI T VS. TCI (256 ITR 701) CONTENDED THAT THE PAYMENT OF COMMISS ION IS TO BE ALLOWED AS AN EXPENDITURE ONLY WHEN THE ASSESSEE BY PRODUCING SUFFICIENT PROOF ESTABLISHING THE FACT TH AT THE PAYMENT WAS MADE FOR COMMERCIAL CONSIDERATION. X. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS A FACT ON RECORD THAT THE ASSESSEE HAS ENTERED INTO A RATE CONTRACT WITH THE GOVERNMENT OF KARNATAKA FOR SUPPLY OF ANTI SNAKE VENOM FOR TWO YEARS ENDIN G DECEMBER, 2006. IT IS CLAIM OF THE ASSESSEE THAT T HE PROCUREMENT OF RATE CONTRACT WAS FACILITATED DUE TO THE EFFORTS OF THE LIAISON AGENT APPOINTED BY M/S. VINAY TRADING C OMPANY. IT IS FURTHER CONTENTION OF THE LEARNED AR THAT ONLY DUE TO THE EFFORTS THE LIAISON AGENT, THE ASSESSEE COMPANY WAS ABLE TO PROCURE THE RATE CONTRACT AT A MUCH HIGHER RATE THA N THE PREVAILING MARKET RATE. THE AO HAS DISALLOWED THE PAYMENT OF COMMISSION ONLY ON INTERPRETING CLAUSE(IV) OF MINUT ES OF THE PROCEEDINGS WHICH SIMPLY STATES THAT THE AGENTS WIL L NOMINATE THE PERSON IN WHOSE NAME THE COMMISSION IS TO BE PA ID. THAT 23 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... CANNOT BY ITSELF BE A GROUND FOR REJECTION OF THE A SSESSEES CLAIM. SIMILARLY, THE CONCLUSION ARRIVED AT BY THE AO THAT THE COMMISSION PAID APPEARS TO BE HIGHER AND EXCESSIVE IS ALSO NOT SUPPORTED BY VALID REASONS. THE FACT THAT THE COMMISSION PAID DURING THE IMPUGNED ASSESSMENT YEAR IS FOR A R ATE CONTRACT WHICH CONTINUED FROM THE PRECEDING ASSESSM ENT YEAR AND COMMISSION PAID IN THE PRECEDING YEAR I.E., 200 5-06 AND 2006-07 WAS ACCEPTED BY THE IT AUTHORITIES CANNOT B E TOTALLY IGNORED. THE LEARNED DRS CONTENTION THAT EACH ASS ESSMENT YEAR IS A SEPARATE AND FACTS OF EARLIER YEAR CANNOT BE MADE APPLICABLE TO ANOTHER YEAR THOUGH HE IS CORRECT BUT AT THE SAME TIME, PRINCIPLES OF CONSTANCY IS ALSO TO BE MAINTAI NED. IT IS ALSO PERTINENT TO NOTE THAT THE ENTIRE COMMISSION WAS PA ID THROUGH BANKING CHANNEL, THEREFORE THE GENUINENESS OF THE P AYMENT CAN BE VERIFIED BY EXAMINING THE BANK ACCOUNT. THE SE ASPECTS HAVE NOT BEEN PROPERLY CONSIDERED EITHER BY THE AO OR BY THE CIT (A). THE AO COULD HAVE SUMMONED THE CONCERNED PERSONS TO WHOM COMMISSION HAS BEEN PAID TO FINDING OUT THE GENUINENESS OF THE CLAIM MADE BY THE ASSESSEE WHICH HAS NOT BEEN DONE. IN AFORESAID VIEW OF THE MATTER, WE THI NK IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE AO WH O SHALL CONSIDER THE ISSUE OF THE EXPENDITURE CLAIMED TOWAR DS PAYMENT COMMISSION TO THE LIAISON AGENTS AFTER CAUSING PRO PER ENQUIRY IF THE ASSESSEE IS ABLE TO PROVE THAT COMMISSION HA S ACTUALLY BEEN PAID AND IT WAS FOR THE BUSINESS CONSIDERATION , THEN THE EXPENDITURE CLAIM SHOULD BE ALLOWED. THE AO SHALL AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE COMPLE TION OF THE PROCEEDINGS. 24 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... X. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE AS WELL AS DEPARTMENT ARE TREATED AS ALLOWED FOR STATI STICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON -10-2012. (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE SEPT., 2012. COPY TO:- 1) XXXXXXXXXXXXXXXXXXXXX. 2)XXXXXXXXXXXXXXXXXXXXXXX 3) THE CIT (A), HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 25 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD... 26 ITA NO.1192 OF 2011 SMT. RITA NARANG, HYD...