Ritu Taneja, Ghaziabad V. ITO, Ward-2(2), Ghaziabad

ITA 1228/DEL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2844 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 21-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Business expenditure; Onus to prove; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1228/DEL/2018 ASSESSMENT YEAR: 2014-15 RITU TANEJA HOUSE NO. 409, IMPERIAL BLOCK, SUPPERTECH ESTATE, SECTOR-9, VAISHALI, GHAZIABAD. PAN NO. AIVPT8395A VS ITO WARD 2(2) GHAZIABAD. APPELLANT RESPONDENT ASSESSEE BY SHRI R.K. GAUR, CA REVENUE BY SHRI S.L. ANURAGI, SR. DR ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS)-GHAZIABAD DATED 14/12/2017 FOR AY 2014-15, CHALLENGING THE ADDITION OF RS. 20 LAKHS ON ACCOUNT OF COMMISSION PAID AND RS. 10,34,290/- ON ACCOUNT OF SALARY. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVIDUAL AND FILED RETURN OF INCOME AT RS. 8,78,820/-. THE ASSESSEE IS PROPRIETOR OF M/S LOAN ART AND HAS SHOWN INCOME FRO M PROVIDING HOME LOANS OF VARIOUS BANKING AND NON BANKING COMPA NIES TO DATE OF HEARING 21.08.2019 DATE OF PRONOUNCEMENT 02.09.2019 2 ITA NO . 1228/DEL/2018 DIFFERENT CUSTOMERS AGAINST COMMISSION INCOME. NET PROFIT HAS BEEN SHOWN AT RS. 9,60,362/- AGAINST TOTAL COMMISSI ON RECEIPT OF RS. 1,54,37,816/- WHICH COMES TO 6% OF THE GROSS CO MMISSION RECEIPTS. IT WAS FURTHER OBSERVED THAT THERE IS A STEEP DECLINE FROM 11% TO 6% IN THE NET PROFIT SHOWN BY THE ASSESSEE A S COMPARED TO THE PREVIOUS ASSESSMENT YEAR. THE AO NOTED THAT IN THIS LINE OF BUSINESS NET PROFIT INCREASES WITH INCREASE IN TURN OVER, SINCE BASIC ESTABLISHMENT EXPENSES HAVE TO BE INCURRED EVEN IF THERE IS LOW TURNOVER. FROM PERUSAL OF THE PROFIT AND LOSS ACCO UNT, IT WAS FOUND THAT ASSESSEE HAS CLAIMED VERY HIGH COMMISSIO N EXPENSES AND SALARY EXPENSES TO THE TUNE OF RS. 63,52,632/- AND RS. 51,71,448/- RESPECTIVELY. THE COMMISSION PAYABLE A T THE END OF THE YEAR WAS OF RS. 18 LAKHS. THE AO ASKED THE ASS ESSEE TO FILE COMPLETE DETAILS OF THE PERSONS TO WHOM COMMISSION HAS BEEN PAID ALONG WITH THEIR ITR, COMPUTATION OF INCOME, C ONFIRMATION AND DETAILS OF CLIENT AND WORK AGAINST WHICH THE CO MMISSION HAS BEEN PAID AND TO PRODUCE BILLS AND VOUCHERS. ASSES SEE WAS ALSO REQUIRED TO PRODUCE THE PERSONS TO WHOM COMMISSION HAS BEEN SHOWN PAYABLE AT THE END OF THE YEAR, IN ORDER TO S UBSTANTIATE THE GENUINENESS OF EXPENSES CLAIMED BY THE ASSESSEE ALO NG WITH BILLS AND VOUCHERS AND AGREEMENT WITH THEM. THE ASSESSEE FILED LIST OF THE COMMISSION EXPENSES WHICH CONTAINED NAME OF THE PARTIES, TDS DEDUCTION, AMOUNT OF COMMISSION PAID AND PAN NU MBER. THE AO NOTED THAT COMMISSION EXPENSES SHOWN FROM SE RIAL NO. 18 TO 25 OF THE LIST AT PAGE 3 OF THE ASSESSMENT ORDER ARE IN ROUND FIGURES. OUT OF WHICH THE NAME APPEARING AT SERIAL NO. 18 I.E. SHRI 3 ITA NO . 1228/DEL/2018 AMIT MEHTA IS THE HUSBAND OF ASSESSEE. AS PER THE LEDGER ACCOUNT, THE ASSESSEE HAS PAID THE PAYABLE AMOUNT T O THESE PARTIES IN SUBSEQUENT YEAR. THE ASSESSEE ALSO FILE D COPY OF THE ITR AND COMPUTATION OF INCOME IN RESPECT OF 7 PERSONS. THE PERUSAL OF THE ADDRESS SHOWS THAT MOST OF THE 7 PERSONS BELONG TO THE SAME FAMILY AND AT THE SAME ADDRESS. EVEN IN SOME OF TH E CASES INSTEAD OF COMMISSION, INTEREST HAS BEEN SHOWN. TH E ASSESSEE DID NOT FURNISH DETAILS REGARDING AGREEMENT AND WHAT SE RVICES HAVE BEEN RENDERED FOR MAKING COMMISSION PAYMENT. THE A SSESSEE ALSO COULD NOT PRODUCE THESE PERSONS TO WHOM COMMIS SION HAS BEEN PAID. THE AO ALSO NOTED THAT BURDEN IS UPON T HE ASSESSEE TO PROVE COMMISSION PAYABLE ARE GENUINE AND IS REQUIRE D TO PRODUCE SUCH PERSONS FOR EXAMINATION. THE AO ALSO NOTED TH AT EVEN TDS RETURN FILED FOR FOURTH QUARTER REVEALED THAT TDS H AS NOT BEEN PAID ON TIME. THE AO AFTER CONSIDERING EXPLANATION OF A SSESSEE NOTED THAT COMMISSION EXPENSES HAS BEEN BOOKED ON 31.03.2 014 AND HAVE BEE SHOWN PAYABLE ONLY AT THE FAG END OF THE N EXT FINANCIAL YEAR. THE PERUSAL OF THE ADDRESSES SHOWS MOST OF T HEM BELONG TO THE SAME FAMILY AND IN SOME OF THE CASES INTEREST H AS BEEN PAID INSTEAD OF COMMISSION. THE ASSESSEE DID NOT PRODUC E ANY COMMISSION AGREEMENT ETC. DESPITE GIVING OPPORTUNIT Y. THE ASSESSEE FAILED TO DISCHARGE ONUS TO PROVE COMMISSI ON PAYABLE SHOWN OUTSTANDING AS LIABILITY IN THE BALANCE SHEET AND ALSO FAILED TO PRODUCE ANY OF SUCH PERSONS FOR EXAMINATION. TD S IS ALSO NOT PAID IN TIME. THE AO, ACCORDINGLY, DISALLOWED THE COMMISSION 4 ITA NO . 1228/DEL/2018 PAYABLE TO THE EXTENT OF RS. 20 LAKHS WHICH INCLUDE S RS. 18 LAKHS COMMISSION PAYABLE AND RS. 2 LAKH AT TDS. 3. THE AO ALSO FOUND THAT ASSESSEE HAS PAID SALARY EXPENSES OF RS. 51,71,448/- DURING ASSESSMENT YEAR UNDER APPEAL . IN EARLIER YEAR ASSESSEE HAS PAID SALARY EXPENSES OF RS. 16,48 ,128/- AGAINST GROSS COMMISSION OF RS. 72,36,680/-. THE ASSESSEE WAS ASKED TO PRODUCE LIST OF THE EMPLOYEES, THEIR DESIGNATION AN D DETAILS OF SALARY PAID BUT THE SAME COULD NOT BE SUBSTANTIATED THROUGH ANY EVIDENCE. THE ASSESSEE FAILED TO PRODUCE ATTENDANC E REGISTER AND RECEIPTS GIVEN BY THE EMPLOYEES AGAINST PAYMENT OF SALARY. THE AO, ACCORDINGLY, DISALLOWED 30% OUT OF THE SALARY P AID AND MADE ADDITION OF RS. 15,51,434/- . 4. BOTH THE ADDITIONS WERE CHALLENGED BEFORE LD. CI T(A). THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. THE FINDINGS OF CIT(A) IN PARA 5.1 OF THE APPELLATE ORDER IS REP RODUCED AS UNDER: 5.1 GROUND NOS. 1 & 2 : THE APPELLANT HAS CHALLENGED DISALLOWANCE OF COMMISSION AND SALARY OF RS. 15,51, 434/- AND RS. 20,00,000/- RESPECTIVELY. DURING THE COURS E OF APPELLATE PROCEEDINGS IT HAS BEEN ARGUED THAT THESE EXPENSES ARE BUSINESS EXPENSES ALLOWABLE U/S 37. EXAMINATION OF FACTS REVEALS THAT AO EXAMINED EXPEN SES CONSIDERING THE STEEP DECLINE IN PROFIT FROM 11% IN THE PREVIOUS YEAR TO 6% DURING THE YEAR AND AO OBSERVED THAT COMMISSION HAS BEEN PAID TO SOME PERSON COVERED BY 40A(2)(B) AND EXPENSES WERE FOUND TO BE PAYABLE AS ON 31.03.2014. IN RESPECT OF COMMISSION DOCUMENTS FURNISHED BY THE APPELLANT DURING ASSESSMENT PROCEE DINGS AS WELL AS DURING APPELLATE PROCEEDINGS DID NOT PRO VE THE SERVICES RENDERED BY SEVEN PERSONS. MERELY THE DED UCTION OF TDS DOES NOT JUSTIFY THAT EXPENDITURE HAS NOT IN CURRED 5 ITA NO . 1228/DEL/2018 WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. SIMIL ARLY IN THE CASE OF SALARY APPELLANT FAILED TO FURNISH DETA ILS OF EMPLOYEES, THEIR COMPLETE ADDRESS AND THEIR ASSESSM ENT PARTICULARS BY SPECIFIC DOCUMENT SUCH AS ATTENDANCE REGISTER OR RECEIPTS. BESIDES THAT AO NOTED THAT CONSIDERABLE PART OF SALARY WAS MADE IN CASH. HOWE VER, THE ESTIMATE OF DISALLOWANCE OF 30% OF UNVERIFIABLE EXPENSES ON ACCOUNT OF SALARY OF RS. 51,71,448/- IS FOUND TO BE ON HIGHER SIDE. THE DISALLOWANCE IS RESTRICT ED TO 20% OF TOTAL EXPENSES OF RS. 51,71,448/- CONFIRMING THE ADDITION OF RS. 10,34,290/- GIVING PARTIAL RELIEF T O THE APPELLANT. THUS, THESE GROUNDS OF APPEAL ARE PARTL Y ALLOWED. 5. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES. LD. COUNSEL FOR ASSESSEE REITERATED THE SUBMISSION MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSEE RECEI VED REFERENCES FROM VARIOUS PERSONS FOR BUSINESS TO WHOM COMMISSIO N HAS BEEN PAID ON WHICH TDS HAS BEEN DEDUCTED AND PAID TO THE GOVERNMENT DEPARTMENT. THE ASSESSEE ALSO PAID SALA RY TO 38 EMPLOYEES FOR BUSINESS PURPOSES. THEREFORE, BOTH T HE ADDITIONS SHOULD BE DELETED. 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT IN ASSESSMENT YEAR UNDER APPEAL ASSESSEE RECEI VED GROSS COMMISSION OF RS. 1.54 CRORES. IN PRECEDING ASSESS MENT YEAR ASSESSEE RECEIVED GROSS COMMISSION OF RS. 72,36,680 /-. THE AO NOTED THAT THERE IS A STEEP DECLINE IN GROSS PROFIT BECAUSE IT HAS FALLEN FROM 11% TO 6% IN ASSESSMENT YEAR UNDER APPE AL AS 6 ITA NO . 1228/DEL/2018 COMPARED TO EARLIER YEARS. THE AO FOUND THAT EXPEN SES HAVE BEEN INCREASED AS COMPARED TO THE COMMISSION RECEIVED. THE ASSESSEE HAS SHOWN RS. 18 LAKHS AS COMMISSION PAYABLE AT THE END OF THE YEAR AND RS. 2 LAKHS AS TDS ON THE SAME WHICH WAS P AID BELATEDLY. THE ASSESSEE COULD NOT PRODUCE THOSE PE RSONS TO WHOM COMMISSION WAS SHOWN PAYABLE AT THE END OF THE YEAR . THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE AS TO WHAT SERVICES THOSE COMMISSION AGENTS HAVE RENDERED FOR THE BUSINESS OF THE ASSESSEE. THE AMOUNTS HAVE BEEN PAID TO THEM SUBSEQUENTLY. T HESE PERSONS ARE RELATED PERSONS WITH THE ASSESSEE AND E VEN ONE OF THE PERSON IS THE HUSBAND OF ASSESSEE. SINCE THE ASSES SEE FAILED TO PRODUCE RELEVANT EVIDENCES AND ALSO FAILED TO PRODU CE SUCH PERSONS FOR EXAMINATION BEFORE THE AO, THEREFORE, T HE ONUS UPON ASSESSEE TO PROVE GENUINE COMMISSION WAS PAYABLE HA VE NOT BEEN DISCHARGED BY THE ASSESSEE. MERELY BECAUSE ASSESSE E DEDYCTED TDS WOULD NOT JUSTIFIED THAT EXPENSES HAVE BEEN INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THUS, COMMISSION PAYABLE HAS BEEN RIGHTLY DISALLOWED BY THE AUTHORIT IES BELOW. THE ASSESSEE IN RESPECT OF THE SALARY PAID HAS FAILED T O PROVIDE COMPLETE DETAILS BEFORE AO AS WELL AS FAILED TO PRO DUCE ATTENDANCE REGISTER AND THE RECEIPTS GIVEN BY THE EMPLOYEES AG AINST PAYMENT OF SALARY. THE LD. CIT(A) HAS ALREADY GIVEN SUFFIC IENT BENEFIT TO THE ASSESSEE. IT MAY BE NOTED HERE THAT ASSESSEE HAS R ECEIVED GROSS COMMISSION OF RS. 1.54 CRORES AGAINST WHICH NET PRO FIT HAS BEEN SHOWN AT RS. 9,60,362/- AND RETURN OF INCOME HAS BE EN FILED AT RS. 8,78,820/-. IT, THEREFORE, APPEARS THAT THE AS SESSEE HAS PARTED 7 ITA NO . 1228/DEL/2018 WITH THE SUBSTANTIAL GROSS COMMISSION TO OTHERS AND HAS EARNED NET PROFIT AT A MEAGER FIGURE. THE ASSESSEE COULD NOT JUSTIFY FALL IN THE PROFIT RATE IN ASSESSMENT YEAR UNDER APPEAL TO THE SATISFACTION OF THE AUTHORITIES BELOW. NO PRUDENT PERSON WHO HA S EARNED COMMISSION IN CRORE WOULD PAY SUCH AN AMOUNT TO OTH ERS TO EARN ONLY RS. 8.78 LAKHS. THE HISTORY OF THE ASSESSEE N OTED ABOVE CLEARLY SHOW THAT ASSESSEE FAILED TO PRODUCE ANY DO CUMENTARY EVIDENCES BEFORE THE AUTHORITIES BELOW TO JUSTIFY T HE COMMISSION PAYABLE AND SALARY TO THE ABOVE EXTENT. IN ABSENCE OF PRODUCTION OF SUCH PERSONS FOR EXAMINATION BEFORE THE AO ALSO CAST DOUBT IN THE EXPLANATION OF THE ASSESSEE THAT EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IT WOULD, THEREFORE, SHOW THAT ASSESSEE HAS INFLATE D THE EXPENSES JUST TO REDUCE THE TAXABLE INCOME. NO INTERFERENCE IS REQUIRED IN THE MATTER. I, THEREFORE, CONFIRM THE ORDER OF LD. CIT(A) AND DISMISSED THE APPEAL OF ASSESSEE. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 02/09/2019 *KAVITA ARORA 8 ITA NO . 1228/DEL/2018 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 23.08.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26.08.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 02.09.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS 02.09.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 02.09.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 02.09.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 02.09.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 03.0 9.2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 9 ITA NO . 1228/DEL/2018