Nirupa Sahas Kanitkar, Pune V. Additional Commisisoner of Income-tax,

ITA 1192/PUN/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7684 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-05-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 27-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL PATHAK

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKAR A RAO, AM . / ITA NO.1192/PUN/2015 / ASSESSMENT YEAR : 2011-12 NIRUPA SUHAS KANITKAR, C/O. POONA POULTRY PRODUCTS, MAMURDI, DEHU ROAD, PUNE 412 101 PAN : AAZPK8355K . /APPELLANT VS. ADDL.CIT, RANGE-9, PUNE . / RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK REVENUE BY : SHRI ACHAL SHARMA / DATE OF HEARING : 07.05.2018 / DATE OF PRONOUNCEMENT: 09.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-6, PUNE, DATED 15-06-2015 FOR THE ASSESSMENT YEAR 2011-1 2. 2. GROUNDS RAISED BY THE ASSESSEE ARE EXTRACTED AS UNDER : ON FACTS AND IN LAW, 1. THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWAN CE OF COMMISSION OF RS.28,19,137/- WHICH WAS CLAIMED AS A DEDUCTION FROM THE PROFITS BY THE APPELLANT WHO IS A LAND AGGREGATOR. 2. THE LD.CIT(A) FAILED TO APPRECIATE THAT THE APPE LLANT HAS TO PAY THE COMMISSION TO THE LOCAL PERSONS WHO ACT AS INTERMED IARIES BETWEEN THE APPELLANT AND THE FARMERS FOR THE PURPOSES OF GETTI NG THE LAND FROM THE FARMERS AND THUS, THIS EXPENDITURE IS AN ALLOWABLE DEDUCTION. 3. THE LD.CIT(A) FAILED TO APPRECIATE THAT THE APPE LLANT HAD GIVEN THE NAMES OF THESE PERSONS, THE DETAILS OF THE LANDS IN RELATION TO WHICH THE COMMISSION WAS PAID, ETC ETC. AND HENCE, THE COMMISS ION WAS AN ALLOWABLE DEDUCTION. 2 4. THE APPELLANT REQUESTS FOR ADMISSION OF ADDITION AL EVIDENCES IF ANY, REQUIRED IN SUPPORT OF THE ABOVE GROUNDS OF AP PEAL. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSESSEE IS A LAND AGGREGATOR AND ENGAGED IN SECURING THE LAND FOR PROSPEC TIVE BUYERS AND SELLING THE SAME IN THE OPEN MARKET. SHE EARNS COMMISSION AS WELL AS PAY THE SAME TO THE BROKERS TOO. IN THE PROCESS, ASS ESSEE EARNED COMMISSION OF RS.2,25,41,211/- APART FROM EARNING OTHER INCOM E. FURTHER, ASSESSEE INCURRED COMMISSION EXPENDITURE TOO AM OUNTING TO RS.34,19,137/-. DURING THE COURSE OF ASSESSMENT PROCEED INGS U/S.143(3) OF THE ACT, THE ALLOWABILITY OF THE SAID COMMISSION E XPENSES WAS THE SUBJECT MATTER OF SCRUTINY BY THE AO. RELEVANT DISCUSSION ON THIS ISSUE IS SEEN IN PARA NO.6 OF THE ASSESSMENT ORDER ALONG WITH ITS SUB-PARAS. LOCATION AND LAND-WISE INCURRING OF COMMISSION P AYMENT IS GROUPED AND THE SUM OF RS.20,63,334/- WAS PAID IN RESPECT OF THE LAND AT SATE. RS.6,65,655/- WAS PAID IN RESPECT OF LAND AT AD HE. RS.90,148/- WAS PAID IN RESPECT OF THE LAND AT NANE AN D RS.6,00,000/- WAS PAID IN RESPECT OF THE LAND AT BADHALWADI. ASSESSEE SUBMITTED THAT THE COMMISSION WAS PAID TO VARIOUS AGENTS FOR IDENTIFYING T HE PROSPECTIVE SELLERS AND STAKEHOLDERS. THE PAYMENT OF COM MISSION WAS MADE THROUGH BANKING CHANNELS AFTER MAKING TDS AS PER T HE RULES. ASSESSEE FURNISHED DETAILS AND EVIDENCES IN RESPECT OF TH E PAYMENTS OF COMMISSION TO VARIOUS BROKERS. DESPITE THE SAME, THE AO PROPOSED TO DISALLOW THE SAME. ASSESSEE SUBMITTED THAT THE COMMISSION EXPENDITURE IS GENUINE AND THE SAME IS FOR THE COMMERCIA L PURPOSE OF THE BUSINESS. THEREFORE, THE ENTIRE AMOUNT HAS TO BE ALLOWED. HOWEVE R, AFTER CONSIDERING THE ASSESSEES EXPLANATION AND ON CONS IDERING THE FACT THAT THE ASSESSEE DID NOT REPORT EARNING OF ANY INCOME RELATING TO, CERTAIN LANDS RELYING ON THE PRINCIPLE OF MATCHING EXPENDITU RE TO THE 3 INCOME EARNED, THE AO ALLOWED ONLY COMMISSION PAYMENT OF R S.6 LAKHS AND DISALLOWED THE BALANCE AMOUNT OF RS.28,19,137/-. RELEVAN T LINES ARE EXTRACTED HERE AS UNDER : 6.3 . . . . . . . . . . . .THE MATCHING PRINCIPLE OF ACCOUNTING POSTULATE THAT ONLY THE EXPENSES MATCHING WITH THE REVENUE ARE TO BE CHARGED TO THE PROFIT AND LOSS ACCOUNT. THE AMOUNT OF ADVANCES/CO MMISSION PAID FOR THE TRANSACTIONS WHICH HAVE NOT BEEN MATERILIAZED D URING THE YEAR CANNOT BE MATCHED WITH THE REVENUE FROM RELEASE OF RIGHTS IN OTHER LANDS. AS SUCH, ADVANCES COULD HAVE BEEN TAKEN TO THE BALANCE SHEET AND SHOULD HAVE BEEN CLAIMED AGAINST THE REVENUE FROM RELEASIN G OF RIGHTS IN LAND AT SATE, NANE AND ADHE. IN VIEW OF THE ABOVE DISCUSSI ON, THE COMMISSION PAID IN RESPECT OF LAND AT SATE, NANE AND ADHE IS D ISALLOWED U/S.37 OF THE I.T. ACT, 1961.. 4. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE COULD NOT IMPROVE HIS CASE DESPITE THE WRITTEN SUBMISSIONS AND THE ARGUMENTS BEFORE THE FIRST APPELLATE AUTHORITY. EVENTUALLY, THE CIT(A ) DISMISSED THE APPEAL OF THE ASSESSEE CONFIRMING THE ADDITION MADE BY THE AO. CIT(A) RELIED ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN T HE CASE OF UMAKANT B. AGARWAL VS. DCIT 369 ITR 220 (BOM.) FOR THE PR OPOSITION THAT THE COMMISSION CANNOT BE HELD TO BE DEDUCTIBLE IF NO EVIDENCE OF SERVICES RENDERED IS FURNISHED. 5. AGGRIEVED WITH THE ORDER OF CIT(A) THE ASSESSEE IS IN A PPEAL BEFORE US WITH THE AFORESAID GROUNDS. 6. BRINGING OUR ATTENTION TO THE DETAILS OF COMMISSION PLACED AT PAGES 4 AND 5 OF THE PAPER BOOK, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE ASSESSEE INCURRED SUM OF RS.34,19,137/ - IN RESPECT OF VARIOUS LAND BROKERS. DETAILS OF THE BROKERS ARE FURNISH ED IN THE SAID PAGES. THE GUT NUMBERS OF THE LAND WHICH INVOLVED THE SE RVICES OF THE SAID BROKERS ARE ALSO GIVEN. IN MOST OF THE CASES PAYME NTS ARE MADE THROUGH BANKING CHANNELS AFTER MAKING TDS AS PER THE R ULES. IN THAT CASE, THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED IN FULL. HE ALSO BROUGHT OUR ATTENTION TO THE INDIVIDUAL LEDGER EXTRACTS OF THE INDIVIDUAL 4 BROKERS AND ALSO FILED COPIES OF THE VOUCHERS SIGNED BY T HE AGENTS EVIDENCING THE PROOF OF RECEIPT OF THE COMMISSION GIVING PART ICULARS OF GUT NUMBERS IN RESPECT OF WHICH SERVICES WERE RECEIVED B Y THE ASSESSEE. LD. COUNSEL FOR THE ASSESSEE PRAYED FOR ALLOWING THE ENTIRE CLAIM OF COMMISSION PAYMENT WITHOUT ANY DISTURBANCE. 7. ON THE OTHER HAND, LD. DR FOR THE REVENUE BROUGHT O UR ATTENTION TO CERTAIN ENTRIES WHERE TDS WAS NOT DEDUCTED. HOWEV ER, IT IS A FACT THAT AO DID NOT LOOK INTO THE CASES WHERE TDS WAS NOT DEDUCTED BEFORE DENYING THE CLAIM OF DEDUCTION OF COMMISSION PAYMENT. OTH ERWISE, HE RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 8. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AND THE PAPER BOOK FILED BEFORE US. THE CORE ISSUE TO BE DECIDED IS THE ALLOWABILITY OF COMMISSION PAYMENT OF RS.28,19,137/-. INVOKIN G THE MATCHING PRINCIPLE IS ALSO RELEVANT. WE PERUSED THE CONT ENTS ON PAGES 4 AND 5 OF THE PAPER BOOK WHICH CONTAINED THE EXHAUSTIV E LIST OF COMMISSION RECIPIENTS FROM THE ASSESSEE. WE FIND THE DOCUM ENTATION IS MAINTAINED PROPERLY. THESE DOCUMENTS SHOW THE FACT OF M AKING COMMISSION PAYMENT THROUGH BANKING CHANNELS AND THE TDS IS DEDUCTED AS PER THE RULES IN MOST OF THE CASES. IT IS A N UNDISPUTED FACT THAT ASSESSEE EARNED THE COMMISSION OF RS.2.25 CRORES (RO UNDED OFF)- PAGE 32 OF THE PAPER BOOK AND THE GROSS RECEIPTS OF TH E ASSESSEE IS TO THE TUNE OF RS.2.32 CRORES (ROUNDED OFF). IN OUR VIEW, CIT( A)S FINDING THAT THE ASSESSEE FAILED TO FILE THE PARTICULARS OF SERVICES RENDERED BY THE BROKERS IS UNSUSTAINABLE IN VIEW OF THE FACT THAT THE AS SESSEE EARNED INCOME FROM LAND DEALINGS TO THE TUNE OF RS.2.25 CRORES. IT IS A COMMON SENSE TO INFER THAT ASSESSEE COULD NOT HAVE EARNED THE SAID INCOME WITHOUT INCURRING COMMISSION PAYMENT OF RS.34,19,137/-. THE DEFECTS IDENTIFIED BY THE LD. DR FOR THE REVENUE ARE NOT SCANNED . IN OUR VIEW, 5 INVOKING THE MATCHING PRINCIPLE IS NOT APPROPRIATE IN THIS LINE OF BUSINESS ACTIVITIES OF THE ASSESSEE. THEREFORE, WE ARE OF T HE OPINION THAT THE GROUNDS RAISED BY THE ASSESSEE ARE DECIDED IN FAVOU R OF THE ASSESSEE AND WE HOLD THAT COMMISSION PAYMENT OF RS.34,19,137/- AS R EASONABLE WHEN IT COMES TO THE TOTAL EARNING OF INCOME OF RS.2.25 CRO RES (ROUNDED OFF). THUS, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.28 ,19,137/- IN THE HANDS OF THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF MAY, 2018. SD/- SD/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 09 TH MAY, 2018. SATISH / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. CIT(A)-6, PUNE CIT-6, PUNE 5. , , A BENCH PUNE; 6. / GUARD FILE.