Sunil Vishram Chawda, Hyderabad V. Asst. Commissioner of Income Tax, Circle-14(1), Hyderabad

ITA 1239/Hyd/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3252 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 06-11-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 11-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S SANT
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Business expenditure; Bad and doubtful debts; Commercial expediency; TDS; Set aside
• Section: 143(3); 64; 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER I.T.A. NO. 1239/HYD/2018 ASSESSMENT YEAR: 2013-14 SRI SUNIL VISHRAM CHAWDA, HYDERABAD [PAN: AAUPC0487H] VS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-14(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD, AR FOR REVENUE : SHRI A.S. SANT, DR DATE OF HEARING : 06-11-2019 DATE OF PRONOUNCEMENT : 15-11-2019 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THIS IS ASSESSEES APPEAL FOR THE AY.2013-14, DIREC TED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, HYDERABAD, DATED 01-03-2018. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S.CLASSIC CHEMICALS, ENGAGED IN TRADI NG AND SUPPLY OF WATER TREATMENT CHEMICALS, FILED HIS RETURN O F INCOME FOR THE AY.2013-14 ON 28-09-2013, ADMITTING TOTAL INCOME OF RS.1,31,88,370/-. ITA NO. 1239/HYD/2018 :- 2 -: 3. DURING THE ASSESSMENT PROCEEDINGS U/S.143(3) OF TH E INCOME TAX ACT [ACT], THE ASSESSING OFFICER (AO) OBSER VED THAT THE ASSESSEE HAS CLAIMED RS.29,75,098/- AS COMMISSIO N PAID TO DIFFERENT COMMISSION AGENTS. HE ALSO OBSERVED FROM THE RECORD OF THE PREVIOUS YEAR FOR THE AY.2011-12, THAT THE COMMISSION AGENTS WERE SUMMONED U/S.131 OF THE ACT AN D THEIR STATEMENTS WERE RECORDED ON OATH IN THE PRESENCE OF ASSESSEE AND THAT THE OPPORTUNITY TO CROSS-EXAMINE THE S AID PERSONS WAS ALSO GIVEN TO THE ASSESSEE, BUT THE ASSESSE E DID NOT AVAIL SUCH FACILITY. HE THEREFORE RELYING UPON TH E DECISION IN THE ASSESSMENT ORDER FOR THE AY.2011-12, DISALLOWE D THE CLAIM OF COMMISSION PAID BY THE ASSESSEE. 3.1. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A), WHO ALSO RELIED UPON THE FI NDINGS OF HIS PREDECESSOR FOR THE AY.2011-12 TO CONFIRM THE DISALLOWANCE AND HAS RESTRICTED THE DISALLOWANCE ONLY TO 50% OF THE COMMISSION EXPENSES CLAIMED BY THE ASSESSEE. FURTHER AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSU E HAD COME UP BEFORE THE TRIBUNAL FOR THE AYS.2011-12, 2012-13 AND ALSO IN 2014-15 AND THE TRIBUNAL AFTER DISCUSSING THE ISSUE AT LENGTH HAD DELETED THE DISALLOWANCE FOR THE AY .2011- 12, WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL IN THE AY.2014-15 ALSO. IN THIS REGARD, LD.COUNSEL PLACED RELIANCE ON THE ORDER OF ITAT AND PRAYED FOR DELETION OF THE SAME IN THIS ASSES SMENT YEAR ALSO. ITA NO. 1239/HYD/2018 :- 3 -: 5. LD.DR, HOWEVER, RELIED UPON THE ORDERS OF THE AUTHO RITIES BELOW. 6. HAVING REGARD TO THE FACT THAT THE EXTENSIVE DISCUSSION WAS MADE ON THE ISSUE IN THE AY.2011-12 BY THE AO, CI T(A) AS WELL AS THE ITAT, WE DEEM IT NECESSARY TO FOLLOW THE OR DER OF ITAT IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSME NT YEARS AS WELL AS THE SUBSEQUENT ASSESSMENT YEAR. FOR THE SAKE OF CLARITY AND READY REFERENCE, RELEVANT PARAGRAPHS OF THE ITAT ORDER ARE REPRODUCED HEREIN UNDER: 8. LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSES SEE IS ENGAGED IN SALE OF VARIOUS CHEMICALS AND MOST OF THE CHEMIC ALS ARE IMPORTED MATERIAL. THERE IS SEVER COMPETITION FOR THIS BUSIN ESS. HE SUBMITTED THAT THE ASSESSEE BEING AN INDIVIDUAL (PROPRIETOR) HAD TO NECESSARILY DEPEND UPON SOMEBODY TO ACHIEVE HIGHER SALES TO SUR VIVE IN THE MARKET. HE SUBMITTED THAT THERE IS AN INCREASE IN T URNOVER AND IN FACT THE COMMISSION CLAIM AT RS. 52,57,750/- IN THIS AY 2011-12 IS MUCH LESS THAN THE COMMISSION OF RS. 64,76,842/- PAID IN EARLIER AY 2010- 11. THE GROSS PROFIT AND NET PROFIT REFLECT STEADY PROGRESS. 8.1 LD. AR SUBMITTED THAT THE PROFIT & LOSS A/C (PA GE 3 OF PAPER BOOK) SHOWS THE SALARY CLAIM AT RS.18,02,100 FOR AS ST.YEAR 2011-12. THE DETAILS PLACED AT PAGE 67 OF THE PAPER BOOK SHO WS THAT THERE ARE ONLY 2 EMPLOYEES ON SALES TO MONITOR SALES. HENCE THE ASSESSE HAS TO NECESSARILY DEPEND UPON OUTSIDE AGENCIES FOR THE MARKETING JOB. (THESE TWO EMPLYEES ALSO COORDINATE THE SALES BOOKI NGS DONE BY AGENTS). THEREFORE HE HAD APPOINTED THE AGENTS, THR OUGH PROPER APPOINTMENT LETTERS RIGHT AT THE STARTING STAGES OF HIS BUSINESS. COPIES OF SOME OF THE APPOINTMENT LETTERS ARE PLACE D AT PAGES 60 TO 64 OF THE PAPER BOOK. 8.2 LD. AR SUBMITTED THAT IT IS AN UNDISPUTED FACT THAT THE ASSESSMENTS OF THE ASSESSE FOR ASST. YEARS 200809, 2009-10 & 2010-11 WERE COMPLETED U/S 143(3) AFTER DETAILED EX AMINATION. IN ALL THE YEARS THE ASSESSEE PAID THE COMMISSION TO ALL T HE AGENTS. IN ALL THE YEARS THE COMMISSION WAS PAID THROUGH BANKING C HANNEL AND TAX WAS DEDUCTED AT SOURCE. ALL THE AGENTS WERE ASSESSE D TO TAX AND IN SOME CASES THE TAX IS PAID AT HIGHEST SLAB. HE SUBM ITTED THAT BEFORE THE ASSESSING OFFICER, THE ASSESSE HAD FILED COMPLE TE DETAILS OF ITA NO. 1239/HYD/2018 :- 4 -: COMMISSION PAYMENTS. THE SAID DETAILS PLACED AT PAG E 15 OF PAPER BOOK SHOW THE COMMISSION PAYMENT AGENT WISE, DATE W ISE AND THE DETAILS OF DEDUCTEE OF TAX. THE STATEMENT ITSELF IN DICATES THE PAN OF THE AGENTS. FURTHER COMMODITY WISE, DATE-WISE, QUAN TITY-WISE AND AGENT WISE COMMISSION WORKINGS WERE FILED AND PLACE D AT PAGES 16 TO 30 OF THE PAPER BOOK. STATEMENT OF TDS, SECTION- WISE, FILED BEFORE ASSESSING OFFICER IS PLACED AT PAGE 31 OF THE PAPER BOOK. HE SUBMITTED THAT COPIES OF THE INCOME TAX RETURN ACKN OWLEDGEMENT AND COMPUTATION OF THE COMMISSION AGENTS FILED BEFORE A SSESSING OFFICER ARE PLACED AT PAGES 33 TO 59 AND PAGES 89 TO 92 OF THE PAPER BOOK RESPECTIVELY. ALL THE EVIDENCES THUS FILED BEFORE T HE ASSESSING OFFICER PROVE BEYOND DOUBT THE GENUINENESS OF CLAIM OF COMM ISSION TO AGENTS. THE ASSESSEE HAD DULY COMPLIED WITH ALL THE PROCEDURES REQUIRED, TO ESTABLISH AND SUBSTANTIATE HIS CLAIM. 8.3 LD. AR CONTENDED THAT IN SPITE OF THIS HEAVILY LOADED EVIDENCES, AND CONFIRMATIONS IN FAVOUR OF THE ASSESSEE, THE AS SESSING OFFICER RESORTED TO DISALLOWANCE SIMPLY ON PRESUMPTIONS AND ASSUMPTIONS. IN DOING SO, THE ASSESSING OFFICER OVERLOOKED THE V ITAL FACTS THAT: I) SUCH COMMISSION WAS ALLOWED IN EARLIER YEARS. II) THE SALARY CLAIM FOR A TURNOVER OF RS.24.52 CRO RES IS ONLY 18 LAKHS THAT TOO MOSTLY FOR THE ADMINISTRATION STAFF ONLY. THERE IS MINIMUM CLAIM OF SALARIES FOR THE FIELD STAFF. KIND ATTENTI ON IS INVITED TO THE DETAILS OF SALARY PAYMENTS (PAGE 67 OF PAPER BOOK). III) THE WHOLE PRESUMPTION OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAD RESORTED TO THIS CLAIM TO REDUCE OR EV ADE THE TAXES. THE ASSESSING OFFICER GROSSLY FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS CONSTANTLY OFFERING SUBSTANTIAL INCOME TO TAX. FOR THE ASST.YEAR 2011-12 THE ASSESSEE ADMITTED INCOME AT R S.77.95 LAKHS ON A TURNOVER OF RS.24.52 CRORES. CONSIDERING THE F ACT THAT THIS IS A TRADING BUSINESS OF A PROPRIETOR TO ACHIEVE THAT MU CH TURNOVER AND ADMIT SUCH A HIGH INCOME IS NOT AN EASY TASK. IV) THE WHOLE APPROACH OF THE ASSESSING OFFICER IS AS IF THE ASSESSEE HAD FOR THE FIRST TIME RESORTED TO CLAIM SUCH EXPEN SES. HE FAILED TO APPRECIATE THE FACT THAT PAYMENT OF SUCH COMMISSION IS ONE OF THE MAIN EXPENDITURE CLAIMED YEAR AFTER YEAR IN THIS LI NE OF BUSINESS. V) THE MOST IMPORTANT ASPECT IS THAT BASED ON THESE FINDINGS, THE ASSESSMENT FOR ASST.YEAR 2008-09 WHICH WAS EARLIER COMPLETED U/S 143(3) ON 25.09.2010 WAS REOPENED U/S 148 AND OUT O F THE TOTAL AMOUNT OF RS.24,47,000 CLAIMED AS COMMISSION PAYMEN T, THE ASSESSING OFFICER IN HIS ORDER U/S 143(3) R.W.S.148 DISALLOWED RS.21,21,000 ACCEPTING THE PAYMENT OF RS.3,26,000 ( COPY OF THE ORDER U/S 143(3) R.W.S.148) DT.26.07.2014 IS ENCLOS ED AS ANNEXURE). AGAIN FOR ASST.YEAR 2009-10 THE ASSESSING OFFICER I N AN ORDER U/S 143(3) R.W.S. 148 ALLOWED COMMISSION OF RS.3,07,000 . SIMILARLY FOR ITA NO. 1239/HYD/2018 :- 5 -: ASST.YEAR 2010-11 IN THE ORDER U/S 143(3) R.W.S.147 AN AMOUNT OF RS.16,32,955 WAS ALLOWED ON THE SIMILAR SET OF FACT S. THIS SHOWS THAT THE ASSESSING OFFICER EVEN IN HIS REASSESSMENT ORDER IS SATISFIED WITH A PORTION OF THE COMMISSION PAYMENT. THE EVIDE NCES AVAILABLE FOR ALLOWING SUCH EXPENDITURE, NOT ONCE BUT TWICE, ONCE AT THE TIME OF 143(3) AND FOR THE SECOND TIME AT IN THE COURSE OF 143(3) R.W.S.147, ARE SAME AND EQUALLY APPLICABLE AND AVAILABLE IN OT HER CASES ALSO. HENCE ALLOWING SOME PAYMENTS AND DISALLOWING OTHERS ON SIMILAR AND IDENTICAL SET OF FACTS IS UNJUSTIFIED AND ARBIT RARY. THIS ESTABLISHES THE FACT THAT THE DISALLOWANCE IS ONLY ON PRESUMPTI ONS AND NOT BASED ON ANY CONCRETE EVIDENCES. VI. THE THEORY OF THE ASSESSING OFFICER THAT ASSESS EE RESORTED TO AGENCY COMMISSION PAYMENTS ONLY TO REDUCE PROFIT IS ALSO NOT CORRECT. ALL THE RECIPIENTS HAVE OFFERED THE SAID COMMISSION TO TAX. SOME OF THE AGENTS ARE IN THE 20% TAX BRACKET AND HENCE THE THE ORY OF THE EVASION / REDUCTION ALSO HAS NO BASIS. VII). ANOTHER GLARING INSTANCE IS THAT THE ASSESSIN G OFFICER IN HIS OVER ENTHUSIASM TO DISALLOW THE COMMISSION ON SALES, DIS ALLOWED EVEN THE COMMISSION PAID BY THE ASSESSEE TO THE CUSTOMS CLEA RANCE AGENT ON THE PURCHASES MADE. S.NO.16 PAGE 2 OF THE ASST. ORD ER IS THE PAYMENT OF RS.1,10,000 FOR ASST. YEAR 2011-12 TO SRIDHAR CL EARING SERVICE PVT LTD. THIS PARTY IS THE CUSTOMS CLEARING AGENT AT CH ENNAI PORT. HE RENDERS THE SERVICE IN THIS REGARD. THE PURCHASES M ADE BY THE ASSESSEE OUTSIDE INDIA WAS SHIPPED TO INDIA AND AT THE CHENNAI PORT THE GOODS WERE GOT DELIVERED THROUGH THE SERVICES O F THIS AUTHORIZED AGENT. THIS PARTY CHARGES COMMISSION FOR EACH SHIPM ENT. RELEVANT DOCUMENTS PLACED AT PAGES 73 TO 88 SHOW THE SERVICE RENDERED BY THIS PARTY IN RESPECT OF ONE SHIPMENT. THE AGENCY C OMMISSION CLAIM IS SUPPORTED BY THE BILL PLACED AT PAGE 78 OF THE PAPE R BOOK. DETAILS OF GOODS RECEIVED AND CLEARED ARE INDICATED IN THE REL EVANT INVOICES PLACED AT PAGE 84 OF THE PAPER BOOK. DETAILS OF PUR CHASES MADE CLEARED BY THIS AGENT AND COMMISSION PAID ARE PLACE D AT PAGE 66 OF THE PAPER BOOK. APPELLANTS LEDGER ALE IN THE BOOKS OF SREEDHAR AGENCY SHOWS THE SERVICE CHARGES CLAIMED FROM THE A PPELLANT. AGENCY COMMISSION OF RS.3,000 AT PAGE 76 IS DULY REFLECTED AS PART OF RS.13,677 AT PAGE 72 OF THE PAPER BOOK. THUS THE AS SESSING OFFICER IS TOTALLY UNJUSTIFIED IN DISALLOWING EVEN THE COMMISS ION PAID TO THE CLEARING AGENTS. VIII. THE ASSESSING OFFICER IN HIS ORDER AT PARA 6 MAKES AN OBSERVATION THAT THE ASSESSEE HAD NOT TAKEN THE OFF ER OF CROSS EXAMINATION. SINCE NONE OF THE AGENTS HAVE DENIED T HE RECEIPT OF COMMISSION AND ALL OF THEM HAVE IN FACT CONFIRMED T HE RECEIPT OF SUCH COMMISSION, THE ASSESSEE DID NOT FIND IT NECESSARY TO CROSS EXAMINE ITA NO. 1239/HYD/2018 :- 6 -: AND THIS CAN BY NO STRETCH OF IMAGINATION BE AN ISS UE AGAINST THE ASSESSEE'S CLAIM OF COMMISSION PAYMENT TO AGENTS. IX. IT IS PERTINENT TO SUBMIT THAT NONE OF THE AGEN TS EXAMINED BY THE ASSESSING OFFICER ARE RELATED TO THE APPELLANT. X. IT IS NOT, IN ANY CASE, THE ALLEGATION OF THE AS SESSING OFFICER THAT THE COMMISSION PAID TO THE AGENTS HAD FLOWN BACK TO THE ASSESSEE. HENCE IN SUCH CIRCUMSTANCES DISBELIEVING THE COMMISSION P AYMENT IS NOT PROPER. XI. IN THIS REGARD KIND ATTENTION OF THE HON'BLE CO MMISSIONER OF INCOME TAX IS INVITED TO THE RELEVANT OBSERVATIONS OF THE HON'BLE MEMBER IN THE CASE OF SACHIN B DESAI VS ITO ITA NO.2280/KOI/2013 DT.07.08.15 (COPY ENCLOSED). 'IT IS QUITE POSSIBLE THAT THE COMPANY HAS VARIOUS TYPES OF ACTIVITIES AND WORKING AS COMMISSION AGENT IS ALSO A PART AND SUCH COMPANIES WORK FOR MANY TYPES OF CLIENTS. QUITE POSSIBLE A DI RECTOR MIGHT NOT BE AWARE OF NAMES AND DETAILS OF ALL THE CLIENTS OF TH E COMPANY. THE ASSESSING OFFICER SHOULD HAVE ENQUIRED THROUGH THE SALES MAN OF THE COMMISSION AGENT OR THROUGH THE BUYERS OF THE PRODU CTS OF THE ASSESSEE IN ORDER TO VERIFY THE ACTUAL COMMISSION G IVEN TO M/S. WIDE ANGLE PACKAGING SYSTEM (P) LTD FOR DOING THE SALES ON BEHALF OF THE ASSESSEE AGAINST COMMISSION. THE ASSESSEE HAS PAID COMMISSION BY ACCOUNT PAYEE CHEQUE. DUE TDS PAID, IDENTITY OF THE COMMISSION AGENT IS VERIFIABLE WHICH ARE SUFFICIENT EVIDENCE O N RECORD TO PROVE THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS AND IDENTITY OF THE SO CALLED COMMISSION AGENT. IN VIEW OF THE ABOV E I AM OF THE VIEW THAT THE ENTIRE COMMISSION IS ALLOWABLE. THIS GROUND OF APPEAL IS ALLOWED'. (EMPHASIS SUPPLIED). 8.5 IN THE LIGHT OF THE ABOVE SUBMISSIONS, THE LD. AR SUBMITTED THAT THE REVENUE AUTHORITIES HAVE NOT JUSTIFIED TO DISAL LOW THE CLAIM OF COMMISSION PAYMENT SIMPLY/BASED ON THE PRESUMPTIONS AND ASSUMPTIONS ESPECIALLY WHEN EACH ONE OF THE AGENTS HAVE CATEGORICALLY CONFIRMED THE RECEIPT OF AGENCY COMMI SSION. HE, THEREFORE, PLEADED THE BENCH TO DELETE THE ADDITION MADE ON THIS COUNT. HE RELIED ON THE FOLLOWING DECISIONS: 1. SACHIN B. DESI VS. ITO, ITAT KOLKATA DT. 07/08/ 2015. 2. PINKCITY INDUSTRIES VS. ITO RAJASTHAN HIGH COU RT, D.B. INCOME TAX APPEAL NO. 290/2010. 3. SMT. B. SUBHADRA VS. ITO, 92 ITD 285 (HYD. 4. ITO VS. SHYAM SUNDER JAJODIA, 26 SOT 541 (DELHI ) 5. CIT VS. PRINTERS HOUSE (P) LTD., 188 TAXMAN 70 (DELHI) ITA NO. 1239/HYD/2018 :- 7 -: 6. CIT VS. SIDDARTHA TRADE LINKS PVT. LTD., ITAT DE LHI, 08/12/2011. 9. LD. DR, ON THE OTHER HAND RELIED ON THE ORDER OF CIT(A). 10. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE OBSERVE THAT ASSESSEE HAD CLAIMED COMMIS SION PAYMENT AS EXPENDITURE AND PAID THROUGH BANKING CHANNEL AND DEDUCTED TDS AS PER THE PROVISIONS OF I.T. ACT. THE ISSUE BEFORE US IS, AO AFTER RECORDING STATEMENT OF ALL AGENTS CAME TO CONCLUSIO N THAT ALL THE AGENTS ARE NOT GENUINE AS THEY DO NOT HAVE ANY BASI C INFORMATION OF DOING ANY BUSINESS WITH THE ASSESSEE. THE SAME VIEW WAS RATIFIED BY LD. CIT(A). WE NOTICE FROM THE STATEMENT RECORDE D FROM AGENTS THAT ALL HAVE CONFIRMED THE RECEIPT OF COMMISSION AND DE CLARED THE SAME AS INCOME IN THEIR RESPECTIVE RETURNS. FROM THE ST ATEMENT, WE NOTICE THAT FEW AGENTS ARE EITHER HOUSE-WIVES, STUDENTS OR RETIRED PERSONNEL. THEY DO NOT HAVE ANY INFORMATION OF THE TRANSACTION CARRIED ON WITH THE ASSESSEE BUT ALL OF THEM HAD A DIRECT LINK WITH THE ASSESSEE AS THEIR HUSBANDS, PARENTS OR ONE OF THE FAMILY MEMBER S, WHO ARE IN DIRECT CONTACT WITH THE ASSESSEE. IT SHOWS THAT THE SUBORDINATES OR FAMILY MEMBERS HAVE ASSISTED IN CARRYING OUT THE AG ENCY BUSINESS FOR THE RECIPIENT OF THE COMMISSION. 10.1 COMING BACK TO LD. CIT(A)S OBSERVATION THAT T HERE IS NO CONTRACT IN EXISTENCE. IT IS NOT NECESSARY THAT ALL AGENTS S HOULD HAVE WRITTEN AGREEMENT. GENERALLY, THESE BUSINESSES ARE RUN ON T HE BASIS OF REFERRAL AND PROMPT COLLECTION OF SALE PROCEEDS. TH E AGENTS REFER THE CLIENTS AND COLLECTS THE COMMISSION AS SOON AS THE SALE PROCEEDS ARE COLLECTED AS PER THE CONTRACT TERMS. THERE IS NO QU ESTION OF BREACH IN THESE TYPE TRANSACTIONS, UNTIL THE SALE PROCEEDS AR E REALIZED, NO AGENT IS ELIGIBLE TO CLAIM AND AS SOON AS SALE PROCEEDS A RE RECEIVED, THE DUE COMMISSIONS ARE SETTLED. IT IS CLEAR FROM THE RECOR D THAT ASSESSEE HAS NOT CLAIMED ANY BAD DEBTS IN THESE YEARS UNDER CONS IDERATION. 10.2 WITH REGARD TO GENUINENESS, ASSESSEE HAS DECLA RED THE PROFIT AND COMMISSION CONSISTENTLY OVER THE YEARS AND THE RESULTS ARE (REFER FINANCIAL RESULTS SUBMITTED BY LD. AR) CONSISTENT. WE ALSO NOTICE THAT ASSESSEE HAS NOT CLAIMED ANY BAD DEBTS IN THE STATE MENT OF ACCOUNTS, IT SHOWS THAT THE SALES ARE GENUINE AND T HE AGENTS PROMPTLY COLLECTS THE SALE PROCEEDS. 10.3 FURTHER, LD. CIT(A) HAS BROUGHT ON RECORD THAT THE AGENTS HAVE DECLARED THE COMMISSION AS INCOME IN THEIR RETURN A ND ALL HAVE CLAIMED REFUND. WE FIND IT DIFFICULT TO UNDERSTAND, ON WHAT WAY, IT WILL DECIDE THE GENUINENESS OF TRANSACTION IN THE CASE O F ASSESSEE, PARTICULARLY, WHEN THERE IS NO FINDING THAT THE ASS ESSEE HAS RECEIVED ITA NO. 1239/HYD/2018 :- 8 -: BACK ANY COMMISSION OR ENJOYED ANY BENEFIT OUT OF T HIS TRANSACTION EXCEPT ACHIEVING TARGETED SALES. 10.4 CIT(A) OBSERVED THAT ASSESSEE MADE THE PAYMENT TO CERTAIN PERSONS OSTENSIBLY AND HAS NOT ESTABLISHED THE SERV ICES RENDERED BY THEM. SHE FURTHER OBSERVED THAT IT CAN BE CALLED GR ATUITOUS PAYMENTS TO PERSONS KNOWN TO ASSESSEE, BUT, SHE COULD NOT ES TABLISH THE RELATIONSHIP WITH THE ASSESSEE BUT EXPRESSED THAT I T IS NOT CLEAR WHETHER THEY ARE RELATIVES, BUT, THEY WERE NOT STRA NGERS EITHER. FURTHER, SHE HELD THAT THERE IS A PREPONDERANCE OF PROBABILITY TO CONCLUDE THAT THE PAYMENTS DID NOT CONSTITUTE FOR R EMUNERATION FOR SERVICES OF AGENCY. AT THE SAME TIME, SHE ALLOWED A RANDOM AMOUNT OF RS. 5 LAKHS AS COMMISSION WITHOUT ANY BASIS. 10.5 SHE FAILED TO CONSIDER THE OTHER ASPECTS IN TH IS CASE, NONE OF THE AGENTS ARE RELATIVES TO THE ASSESSEE. NO BUSINESSMA N WILL GIVE PAYMENT TO OUTSIDERS ON GRATUITOUS BASIS, PARTICULA RLY, THE AMOUNT INVOLVED ARE HUGE. THE AGENTS HAVE CONFIRMED THAT T HEY HAVE RECEIVED THE COMMISSION AND THE OTHER FAMILY MEMBERS OR SUBO RDINATES HAVE ASSISTED THEM ACHIEVE THE SALES. THIS ASPECT CANNOT BE RULED OUT THAT NO BUSINESSMAN WILL DISTRIBUTE MONEY ON GRATUITOUS BASIS WITHOUT TAKING BENEFIT FROM SUCH PAYMENTS. THIS IS ALSO PRE PONDERANCE OF PROBABILITY. ANOTHER ASPECT WAS ALSO NOT CONSIDERED BY LD. CIT(A) THAT THERE IS NO PROOF THAT THE ASSESSEE HAS RECEIVED BA CK THE ALLEGED COMMISSION PAYMENT FROM THE RESPECTIVE AGENTS. IT S HOWS THAT THE PAYMENTS ARE GENUINE. 10.6 LET US ANALYSE THIS ASPECT UNDER JUDICIAL VIEW . IN THE SIMILAR SITUATION, THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF PINKCITY INDUSTRIES (SUPRA), HAS ADJUDICATED AS BELOW: TAKING INTO CONSIDERATION THAT THE BUSINESS HAS GON E ALMOST ALL TIME AND PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUE, IN OUR CONSI DERED OPINION, THE BUSINESS EXPENSES IS WRONGLY DISALLOWED. HENCE, THE FIRST IS SUE IS REQUIRED TO BE ANSWERED IN FAVOUR OF THE ASSESSEE AND HE OUGHT TO HAVE BEEN AL LOWED THE EXPENSES WHICH IS ARISING OUT OF THE BUSINESS EXIGENCY AND IN THAT VI EW OF THE MATTER, THE OBSERVATIONS MADE IN CASE OF S.A. BUILDERS LTD. CIT (A) 288 ITR 0001Z (SC), THE EXPENSES ARE REQUIRED TO BE ALLOWED. IN THE GIVEN CASE, THE ASSESSEE HAS MAINTAINED SALE S OVER THE YEARS AND CARRIED ON THE BUSINESS WITH THE HELP OF ONLY 2 PERSONS TO MONITOR THE SALES. IT IS NOT POSSIBLE TO ACHIEVE TH E VOLUME OF 24.52 CRORES WITHOUT THE SERVICES OF SALESMEN OR AGENTS. ALSO ALL THE PAYMENTS ARE MADE THROUGH BANKING CHANNELS. ITA NO. 1239/HYD/2018 :- 9 -: 10.7 IN THE CASE OF ITO VS. SHYAM SUNDER JAJODIA (S UPRA), THE HONBE DELHI HIGH COURT HELD AS UNDER: THE ASSESSEE CLAIMED A DEDUCTION ON THE GROUND THAT HE HAD PAID COMMISSION TO 12 PARTIES. THE ASSESSING OFFICER REJECTED THE CLAI M OF THE ASSESSEE BY OBSERVING THAT THERE WAS NO AGREEMENT FOR THE PAYMENT OF COMM ISSION. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE FAILED T O PROVE THAT EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ON APPEAL, THE COMMISSIONER (APPEALS) RE-APPRECIATED THE CONTROVER SY AND DELETED THE ADDITION. ON REVENUE'S APPEAL : HELD IN ORDER TO CLAIM ANY EXPENDITURE NOT BEING EXPENSE S DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENSES OR PERSONAL EXPENSES LAID OUT AND SPENT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUS INESS, ONE'S CLAIM HAS TO BE EXAMINED UNDER THE RESIDUARY PROVISION OF SECTION 3 7. HENCE, IN ORDER TO BE ELIGIBLE FOR AN EXPENSE UNDER THIS SECTION, ONE HAS TO FULFI L THE CONDITIONS; (T) THE EXPENDITURE MUST NOT BE GOVERNED BY THE PROVISIONS OF SECTIONS 30 TO 36, (II) THE EXPENDITURE MUST HAVE BEEN LAID OUT WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE, (III) THE EXPENDITURE MUS T NOT BE PERSONAL IN NATURE AND (IV) THE EXPENDITURE MUST NOT BE CAPITAL IN NATURE. THE EXPRESSION 'WHOLLY' EMPLOYED IN SECTION 37 REFERS TO THE QUANTUM OF EXP ENDITURE, WHILE THE WORD 'EXCLUSIVELY' REFERS TO THE MOTIVE, OBJECTIVE AND P URPOSE OF THE EXPENDITURE. IN THE INSTANT CASE, THE ASSESSEE HAD ESTABLISHED T HAT PAYMENT WAS MADE THROUGH BANKING CHANNEL. ALL THE PAYEES RESPONDED TO THE QU ERY OF THE ASSESSING OFFICER AND SOME OF THEM SUPPLIED THE INFORMATION ABOUT THE SERVICES RENDERED BY THEM. THE COMMISSION HAD BEEN ALLOWED IN THE EARLIER YEAR S AND IN THE SUBSEQUENT YEARS ON SIMILAR LINES. ALL THE PAYEES WERE ASSESSED TO T AX. THEIR PANS HAD ALSO BEEN DISCLOSED TO THE ASSESSING OFFICER. THE OBJECTION O F THE ASSESSING OFFICER WAS THAT THERE WAS NO AGREEMENT FOR PAYMENT OF COMMISSION. I T WAS FOR THE ASSESSEE TO CARRY OUT HIS BUSINESS. IF HE HAD AN UNDERSTANDING WITH CERTAIN PERSON, THEN IT MIGHT NOT BE VERY MUCH NECESSARY TO ENTER INTO AN A GREEMENT. THE ASSESSEE AS WELL AS THE PAYEES WERE WITHSTANDING TO THEIR STAND . THERE WAS NO VARIANCE IN THEIR CONDUCT. AS FAR AS THE ALLEGATION OF FAILURE TO PRO DUCE DEMONSTRATIVE EVIDENCE AGAINST THE ASSESSEE WAS CONCERNED, ONE HAD TO SEE THE NATURE OF BUSINESS. THE ASSESSEE WAS IN THE BUSINESS OF SALE OF PLASTIC DAN A. THE AGENTS WERE REQUIRED TO SEND CUSTOMERS FOR PURCHASE OF DANA. THEY COULD BE INTRODUCED ON PHONE ALSO. THERE MIGHT NOT BE ANY DEMONSTRATIVE EVIDENCE IN CE RTAIN CIRCUMSTANCES BUT THAT DID NOT MEAN THAT EXPENSE WAS NOT INCURRED. THE ASS ESSEE HAD SHOWN COMMISSION INCOME ON SALE OF PLASTIC DANA; IT SUGGESTED THAT H E HAD CARRIED ON BUSINESS. THUS, ALL THESE CIRCUMSTANCES WERE TO BE SEEN BEFORE MAKI NG THE DISALLOWANCE. IN SUCH CIRCUMSTANCES, THE DISALLOWANCE COULD NOT BE MADE. THE APPELLATE AUTHORITY HAD ITA NO. 1239/HYD/2018 :- 10 -: APPRECIATED THE FACTS AND CIRCUMSTANCES AND DELETED THE DISALLOWANCES CORRECTLY. THERE WAS NO MERIT IN THE INSTANT GROUND OF APPEAL ALSO. IT WAS TO BE REJECTED. IN THIS CASE, THE ASSESSEE HAS ISSUED APPOINTMENT L ETTERS AND THE NATURE OF THE BUSINESS IS SELLING OF CHEMICALS. THE ASSESSEE HAS SUBMITTED THE AGENT-WISE AND CHEMICAL WISE DETAILS BEFORE REVENUE AUTHORITIES. IT SHOWS THAT THE AGENTS OR THEIR SUBO RDINATES HAD CONTRIBUTED IN SELLING THE CHEMICALS. 10.8 IN THE CASE OF CIT VS. PRINTERS HOUSE (P) LTD . (SUPRA), THE HONBLE DELHI HIGH COURT HELD AS UNDER: 1. THE QUESTION THAT HAS BEEN AGITATED BEFORE US PE RTAINS TO A SUM OF RS. 32 LAKHS APPROXIMATELY PAID AS COMMISSION BY THE ASSESSEE TO SEVERAL PARTIES. THE IMPUGNED ORDER DETAILS 18 SUCH PERSONS AND ALSO EXP RESSES SATISFACTION THAT THE PAYMENTS WERE GENUINE. MS. BANSAL, LEARNED COUNSEL APPEARING FOR THE REVENUE, CONTENDS THAT THE PAYMENTS OF COMMISSION IS NOT IN ISSUE. THE ARGUMENT IS THAT THERE WAS NO CONSIDERATION OR CAUSE FOR PAYMENT OF COMMISSION TO THOSE PARTIES, SINCE, NO SERVICES HAD BEEN RENDERED BY THE RECIPIE NTS OF COMMISSION. THIS IS COMPLETELY BELIED BY THE DETAILED FINDINGS RECORDED BY THE TRIBUNAL IN PARAGRAPHS 7 TO 7.13 OF THE IMPUGNED JUDGMENT. WE NOTE THAT THE TRIBUNAL HAS ALSO RECORDED THAT THERE IS NO EVIDENCE THAT COMMISSION FLOWED BA CK TO THE ASSESSEE OR THAT THE ENTRIES WITH RESPECT TO COMMISSION PAYMENTS WERE JU ST PAPER TRANSACTION. THE FOLLOWING OBSERVATIONS BEING RELEVANT ARE EXTRACTED HEREINAFTER: ' .. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT TH E COMMISSION WAS PAID TO ANY NEAR RELATIVE, FAMILY MEMBER OR SISTER CONCERN. THE RE IS NO IOTA OF EVIDENCE TO SHOW THAT THE PAYMENT OF COMMISSION REPRESENTED ONL Y ACCOMMODATION ENTRY OR WAS ONLY A PAPER TRANSACTION. THERE IS ALSO NO EVID ENCE TO SHOW THAT THE AMOUNT OF COMMISSION CAME BACK TO THE ASSESSEE IN ANY FORM SINCE THE ASSESSEE HAS GIVEN FULL DETAILS INCLUDING THE ADDRESSES OF BUYERS AND ADDRESSES OF THE AGENTS AS WELL AS DETAILS OF PAYMENT ETC. THE TRANSACTIONS OF PAYM ENT OF COMMISSION AS WELL AS THE ASPECT OF RENDERING SERVICES BY THE COMMISSION AGENTS WERE FULLY VERIFIABLE. HOWEVER, NEITHER THE ASSESSING OFFICER NOR THE LEAR NED CIT (APPEALS) MADE ANY ATTEMPT AT THEIR END TO MAKE PROBE INTO THE MATTER FOR COMING TO THE CONCLUSION THAT THE TRANSACTIONS WERE BOGUS, UNFAIR AND FRAUDU LENT. IN OUR OPINION, IN ABSENCE OF ANY SUCH MATERIAL ON RECORD AND IN ABSENCE OF AN Y INQUIRY CONDUCTED TO PROVE THE NON-GENUINENESS OF THE TRANSACTIONS THE DEPARTM ENTAL AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE WHICH WAS FULLY SUPPORTED BY THE DOCUMENTARY EVIDENCE ON RECORD. 2. APART FROM EXPRESSING ITS SATISFACTION AS TO THE GENUINENESS OF THE TRANSACTION THE ITA T HAS TAKEN INTO CONSIDERATION THE FACT THA T COMMISSION HAS BEEN PAID AND ALLOWED IN THE PAST AND THAT THE COMMISSION PERCENT AGE IS NEGLIGIBLE. MS. BANSAL CONTESTS THIS POSITION. THE TOTAL TURNOVER OF THE A SSESSEE WAS RS. 68 CRORES BEFORE ITA NO. 1239/HYD/2018 :- 11 -: TAX, INTER ALIA OF WHICH INCLUDED RS. 25.68 CRORES OF EXPORT TURNOVER. THE TURNOVER WE ARE CONCERNED WITH IS STATED TO BE RS. 3.74 CROR ES ON WHICH THE COMMISSION HAS BEEN PAID. IT HAS BEEN POINTED OUT BY MS. BANSAL TH AT RATHER THAN THE STATED 0.05 PER CENT THE COMMISSION, THE COMMISSION WORKS OUT T O 1.5 PER CENT IN RELATION TO LOCAL SALES AND 7 PER CENT AS FAR AS EXPORT TURNOVE R IS CONCERNED. EVEN THEN ACCORDING TO US THERE REMAINS NO REASON TO DOUBT TH ESE PAYMENTS. IT HAS BEEN LAID DOWN IN SEVERAL DECISIONS OF THE SUPREME COURT THAT THE ITAT IS A FINAL FORUM FOR FINDINGS OF FACT. THE HIGH COURT WOULD INTERVENE ON LY IF A FINDING APPEARS TO BE PERVERSE, WHICH WE ARE UNABLE TO CONCLUDE IN THE / CASE IN HAND. 10.9 IN THE CASE OF CIT VS. SIDDHARTHA TRADE LINKS PVT. LTD. (SUPRA), THE HONBLE DELHI HIGH COURT HELD AS UNDER : 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORDS. WE FIND THAT IN VIEW OF THE VOLUMINOUS EVI DENCE SUBMITTED BY THE ASSESSEE IN THIS REGARD, IT CANNOT BE SAID THAT ASSESSEE, AS FAILED TO ESTABLISH THAT THERE WAS NO EVIDENCE OF RENDERING THE CORRESPONDING SERVICES BY SUCH PERSON S. WE FIND THAT ASSESSEE HAS DULY SUBMITTED VARIOUS DOCUMENTS PERTAINING TO LEDGER ACCOUNTS, COMMISSION PAID, BILLS RAISED A ND CORRESPONDENCES IN THIS REGARD. THE SERVICES PROVID ED HAVE ALSO BEEN DULY EXPLAINED. IT IS A SETTLED LAW THAT REVEN UE AUTHORITIES CANNOT SIT INTO THE SHOE OF THE BUSINESSMAN. IN THI S REGARD, WE PLACE RELIANCE UPON THE DECISION OF THE HON'BLE APE X COURT IN THE CASE OF CIT, BOMBAY VS. WALCHAND AND CO. PRIVATE LT D. IN 65 ITR 381, WHEREIN IT WAS HELD THAT 'IN APPLYING THE TEST OF COMMERCIAL EXPEDIENCY FOR DETERMINING WHETHER AN EXPENDITURE W AS WHOLLY AND EXCLUSIVELY FOR BUSINESS, THE EXPENDITURE HAS T O BE ADJUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT O F REVENUE'. ACCORDINGLY, WE HOLD THAT ASSESSEE HAS DULY ESTABLI SHED THAT SUFFICIENT SERVICES WERE RENDERED FOR THE PAYMENT O F THE COMMISSION INVOLVED IN THIS REGARD. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND D ECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE.' IN THE GIVEN CASE ALSO, ASSESSEE HAS PRODUCED THE D ETAILS OF SALES ACHIEVED BY THE AGENTS BY SUBMITTING ITEM-WIS E, AGENT- WISE DETAILS BEFORE REVENUE AUTHORITIES. FURTHER, A SSESSEE HAS FILED THE RELEVANT BOOKS OF ACCOUNT RELATING TO AGENTS, PAYMENT DETAILS, ADVANCE TAX COMPLIANCE BEFORE AUTH ORITIES. IT SHOWS THAT ASSESSEE KNOWS THE BUSINESS HE CARRIE S ON AND AS PER THE HONBLE HIGH COURTS OBSERVATION, IT IS SETTLED LAW THAT REVENUE AUTHORITIES CANNOT SIT INTO THE SHOE O F THE BUSINESSMAN. BY REFERRING TO CIT VS. WALCHANG AND C O ITA NO. 1239/HYD/2018 :- 12 -: (SUPRA), IN APPLYING THE TEST OF COMMERCIAL EXPEDIE NCY FOR DETERMINING WHETHER AN EXPENDITURE WAS WHOLLY OR EXCLUSIVELY FOR BUSINESS, THE EXPENDITURE HAS TO BE ADJUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT O F REVENUE. 10.10 FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT T HE ASSESSEE HAS SUBMITTED ENOUGH EVIDENCE IN SUPPORT O F UTILIZING THE SERVICES OF AGENTS IN THE BUSINESS AN D ALSO REVENUE AUTHORITIES HAVE NOT BROUGHT ANY COGENT MAT ERIAL TO SHOW THAT THE PAYMENTS WERE COME BACK TO ASSESSEE A ND THESE PAYMENTS CANNOT BE CATEGORIZED AS GRATUITOUS PAYMENTS. THEREFORE, WE DELETE THE ADDITION MADE BY THE AO. HENCE, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6.1. RESPECTFULLY FOLLOWING THE ABOVE ORDER, THE APPE AL FILED BY ASSESSEE FOR THE AY.2013-14 IS ALSO ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH NOVEMBER, 2019 SD/- SD/- ( A. MOHAN ALANKAMONY ) ( P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 15-11-2019 TNMM ITA NO. 1239/HYD/2018 :- 13 -: COPY TO : 1. SRI SUNIL VISHRAM CHAWDA, C/O.CH.PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST.NO.1, ASHOKNAGAR, HYDERABAD. 2. THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE-14(1 ), HYDERABAD. 3. CIT(APPEALS)-6, HYDERABAD. 4. THE PR.CIT-6, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.