Raj Kumar Wadhwa, Patiala V. ACIT, Patiala

ITA 1268/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68519 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 03-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: D K GOYAL
• Keywords: Business expenditure; Reassessment proceedings
• Section: 143(3); 133(6); 147; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1268/CHD/2012 ASSESSMENT YEAR:2005-06 SHRI RAJ KUMAR WADHWA, VS THE ACIT, THROUGH L/H MS.USHA WADHWA, CIRCLE C/O LUCKY TRADERS, PATIALA. LOWER MALL, PATIALA. PAN NO. AABPW-6062H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI D.K.GOYAL RESPONDENT BY : SHRI J.S.NAGAR DATE OF HEARING : 24.09.2013 DATE OF PRONOUNCEMENT : 30.09.2013 O R D E R PER SUSHMA CHOWLA, J.M. THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE CIT(APPEALS), PATIALA DATED 18.09.2012 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST THE ORDER PASSED UNDER SECTION 143( 3) OF THE INCOME- TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ACTION FOR INITIATION, CONTINUATION AND CO NCLUSION OF THE REASSESSMENT PROCEEDINGS U/S 147,148 IS BEING CHALL ENGED ON FACTS AND LAW. 2. THAT THE ACTION IS UNDER CHALLENGE FOR THERE BEING MISINTERPRETATION TO THE TERMS OF CONTRACT {THE IND IAN CONTRACT ACT, 1872} BETWEEN THE 'ASSESSEE AND THE SERVICE PROVIDE R' WHEREBY THE AGREED TERMS ARE CONFINED TO 'RECEIPT OF CONTINUOUS ORDERS AFTER THE TENDER AND THE CONSEQUENTIAL DISBURSAL OF RECEIPTS' TO THE BEN EFICIARY ASSESSEE. 3. THAT THE CONCLUSION OF THE REASSESSMENT PROCEEDINGS IS BEING CHALLENGED ON FACTS & LAW, SINCE NOT CONSIDERING ALL THE PLEAD INGS ADVANCED AND NEITHER GRANTING OPPORTUNITY FOR OPPORTUNITY FOR 'S UMMONING & CROSS EXAMINATION OF PERSONS' AND HENCE ACTION IS UNWARRA NTED AND UNREASONABLE. 2 4. THAT THE QUANTUM OF ADDITION OF RS. 25,27,856/- IS BEING CONTESTED ON FACTS & LAW WITH A PRAYER FOR GRANTING THE BENEFIT OF TELESCOPING TO THE EXTENT OF RESOURCE AVAILABLE THROUGH THE CAPITAL AC COUNT. 3. THE GROUND NOS. 1 TO 3 ARE NOT PRESSED AND THE S AME ARE DISMISSED AS NOT PRESSED. 4. THE ISSUE IN GROUND NO. 4 IS AGAINST THE ADDITIO N OF RS. 25,27,856/-. 5. THE LD. AR FOR THE ASSESSEE, AT THE OUTSET POINT ED OUT THAT THE ISSUE STANDS COVERED BY THE ORDER OF THE TRIBUNAL I N ASSESSEE'S OWN CASE RELATING TO ASSESSMENT YEAR 2006-07. 6. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING T OTAL INCOME OF RS. 7,87,738/- AND AGRICULTURE INCOME OF RS.1,58,000/-. THE ASSESSMENT IN THE CASE WAS COMPLETED UNDER SECTION 143(3) OF T HE ACT AT A TOTAL INCOME OF RS. 8,57,738/- AND AGRICULTURE INCOME OF RS. 1,58,000/-. THEREAFTER, REASONS WERE RECORDED UNDER SECTION 147 OF THE ACT AND NOTICE WAS ISSUED UNDER SECTION 148 OF THE ACT AS I N THE TRADING AND PROFIT & LOSS ACCOUNT, THE ASSESSEE HAD SHOWN LIAIS ONING RECEIPTS OF RS. 13,35,258/- ONLY WHEREAS THE TDS CERTIFICATES R EFLECTED RECEIPTS OF RS. 54,02,836/-. THE SAID RE-OPENING OF THE ASS ESSMENT WAS MADE IN VIEW OF THE ASSESSMENT COMPLETED IN ASSESSMENT Y EAR 2006-07 ON SIMILAR ISSUE. THE ASSESSEE CLAIMED THAT IT HAD PAI D COMMISSION TO THE SUB-AGENTS ON ACCOUNT OF LIAISONING AND THE NET REC EIPTS HAD BEEN DECLARED IN THE RETURN OF INCOME. THE ASSESSING OF FICER ISSUED NOTICES UNDER SECTION 131 OF THE ACT TO THE SAID CO NCERNS, WHO IN 3 THEIR STATEMENTS DENIED THE SAME. IN VIEW THEREOF AND ALSO FOLLOWING THE ORDER OF THE TRIBUNAL IN THE EARLIER YEAR, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BUSINESS EXPENDITURE OF RS. 25,27,856/-. 8. THE CIT(APPEALS) HAS CONFIRMED THE SAID DISALLOW ANCE IN VIEW OF THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CAS E RELATING TO ASSESSMENT YEAR 2006-07. 9. WE FIND THAT THE TRIBUNAL IN CROSS-APPEALS OF TH E ASSESSEE AND REVENUE IN ITA NOS. 697/CHD/2009 & ITA 741/CHD/2009 RELATING TO ASSESSMENT YEAR 2006-07 VIDE PARA 13 TO 19 HELD AS UNDER : 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORDS. THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION HAD CLAIMED EXPENDITURE OF RS. 41.14 LACS ON ACCOUNT OF LIASON CHARGES PAID. THE ASSESSEE WAS CARRYING ON COMMISSION BUSIN ESS OF HANDLING CUM SALES PROMOTION FOR M/S J.K. CEMENT WO RKS. IN ADDITION, THE ASSESSEE WAS EARNING LIASON COMMISSIO N FROM M/S SSTPL FOR SOLICITING PRODUCTS OF M/S J.K. CEMENT WO RKS TO THE GOVERNMENT AND SEMI GOVERNMENT ORGANIZATIONS AND IN STITUTIONAL BUYERS. DURING THE YEAR UNDER CONSIDERATION, THE AS SESSEE HAD RECEIVED TOTAL COMMISSION OF RS. 55,86,869/- AGAINS T WHICH THE PAYMENT TO SUB AGENTS WAS CLAIMED AT RS. 41,14,518/ -. THE ASSESSEE CLAIMS TO HAVE MADE THE SAID PAYMENTS TO T HE UNDER MENTIONED PARTIES AS DETAILED AT PAGE 9 OF THE PAPE R BOOK, WHICH ARE AS UNDER:- NAME OF THE PARTY INV.N O DATE LIASON AMOUNT OF COMMISSION (IN RS.) AREA (DISTT. WISE) S.K. WOOLTEX, PANIPAT 643 11.02.06 8,87,693/- BHIWANI, HISSAR & ROHTAK SHYAM LAI RAJNEESH KUMAR, KAITHAL 1 13.03.06 2,50,000/- REWARI, FARIDABAD, GURGAON, JIND, MOHINDERGARH, SIRSA, SONEPAT, PANIPAT, KAITHAL TEK CHAND SHYAM LAI, KAITHAL 195 13.3.06 3,50,000/- REWARI, FARIDABAD, GURGAON, JIND, MOHINDERGARH, SIRSA, SONEPAT, PANIPAT, KAITHAL PUNJAB ENGG. WORKS, DISTT. PATIALA 81 20.03.06 14,28, 891/- REWARI, FARIDABAD, GURGAON, JIND, MOHINDERGARH, SIRSA, SONEPAT, PANIPAT, KAITHAL PUNJAB ENGG. 88 30.03.06 4,60, 987/ - REWARI, 4 DISTT. PATIALA FARIDABAD, GURGAON, JIND, MOHINDERGARH, SIRSA, SONEPAT, PANIPAT, KAITHAL RAJASTHANI ENGG. WORKS, RAJGARH 88 31.03.06 7,46,9547/ - REWARI, FARIDABAD, GURGAON, JIND, MOHINDERGARH, SIRSA, SONEPAT, PANIPAT, KAITHAL 41,14,5187 - 14. THE CLAIM OF THE ASSESSEE IS THAT IT HAD ENTERE D INTO AN AGREEMENT WITH M/S SSTPL FOR PROVIDING SERVICES OF A SERVICE AGENT. THE COPY OF AGREEMENT DATED 18.5.2005 IS PLACED AT PAGES 6 & 7 OF THE PAPER BOOK. AS PER THE TERMS OF SAID AGREEMENT, THE ASSESSEE WA S APPOINTED AS SERVICE AGENT FOR SUPPLY OF MATERIAL TO DIRECTOR SU PPLIES AND DISPOSALS (DS&D). THE SAID AGREEMENT WAS EXECUTED ON 18.5.200 5 AND WAS VALID UPTO 31.3.2006. AS PER CLAUSE (2), IT WAS AGREED UP ON THAT M/S SSTPL WOULD SUPPLY QUANTITY ON THE RECOMMENDATION OF THE ASSESSEE AND AS PER CLAUSE (3), THE BILLS WERE TO BE SUBMITTED TO T HE AUTHORITIES IN TIME AND PAYMENT AGAINST THE SAME WAS TO BE RECEIVED WIT HIN STIPULATED PERIOD. FOR THE ABOVE SAID SERVICES, COMMISSION AS NEGOTIATED, SUBJECT TO MATURITY OF CONTRACT WITH DS&D WAS TO BE PAID TO THE ASSESSEE, AS PER CLAUSE (8) OF THE AGREEMENT. AS PER CLAUSE (9) OF THE AGREEMENT, IT WAS AGREED UPON 'THIS AGREEMENT SHALL NOT BE ASSIGN ED OR CHARGED OR MORTGAGED BY YOU IN FAVOUR OF ANY OTHER PARTY'. M/S SSTPL VIDE LETTER DATED 30.5.2005 CONFIRMED THAT THE COMMISSION ON AL L THE SUPPLIES TO THE DEPARTMENT SHALL BE MADE @ RS. 25 PMT. A COPY O F THE SAID LETTER IS PLACED AT PAGE 109 OF THE PAPER BOOK. 15. IN RESPECT OF THE COMMISSION PAID TO VARIOUS EN TITIES, THE ASSESSEE CONFIRMS TO HAVE ALLOTTED THE AREAS FOR LI ASONING TO THE SISTER CONCERN OF M/S PUNJAB ENGINEERING WORKS (M/S PEW), SHERGARH. THE ASSESSEE CLAIMS TO HAVE ENTERED INTO A MUTUAL UNDERSTANDING WITH M/S PEW THROUGH ITS PARTNERS SHR I RAJNEESH GARG VIDE LETTER DATED 8.4.2005 PLACED AT PAGE 1 OF THE PAPER BOOK. AS PER THE SAID UNDERSTANDING, M/S PEW WAS RE SPONSIBLE FOR COLLECTION OF PAYMENTS AND IN CASE OF ANY DISPU TES RAISED IN THE GOVERNMENT DEPARTMENT DUE TO SUPPLIES, THE SAME WOULD BE SETTLED BY M/S PEW. HOWEVER, M/S PEW WAS ALSO ALLOW ED TO LIASON IN THE NAME OF HIS FIRM AS WELL, AS SISTER C ONCERN / FAMILY FIRM NAME. THE AGREED LIASON COMMISSION WAS @ RS. 2 0 PMT FOR THE PERIOD. AT PAGES 2 & 3 OF THE PAPER BOOK ARE PL ACED COMMUNICATIONS BETWEEN THE ASSESSEE AND M/S PEW DAT ED 1.4.2005 AND 5.4.2005. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER ISSUED SUMMONS U /S 133 (6) TO VARIOUS PARTIES TO WHOM COMMISSION WAS PAID. THE AS SESSEE HAS ENCLOSED THE COPIES OF THE SUMMONS ISSUED TO VARIOU S PARTIES ALONG WITH COPIES OF INVOICE RAISED BY EACH PARTY, COPY OF ACCOUNT OF THE ASSESSEE IN THE RESPECTIVE BOOKS OF ACCOUNT OF THE SAID PARTY/S AND IN SOME CASES, BANK STATEMENTS OF THE R ESPECTIVE PARTIES. THE COPIES OF THE ABOVESAID COMMUNICATIONS ARE PLACED AT PAGES 10 TO 52 OF THE PAPER BOOK. THE PERUSAL OF THE BILL RAISED BY M/S S.K. WOLTEX AT PAGE 13 REVEALS THAT THE LIAI SONING CHARGES ARE CHARGED AGAINST ORDER NO. 23 DATED 12.7.2004 OF DS&D, HARYANA. THE TOTAL COMMISSION EXCLUDING SERVICE TAX WAS RS. 8,77,693/-. THE QUANTITY SUPPLIED HAS BEEN MENTIONE D IN THE SAID INVOICE, HOWEVER, THE BILL WISE AND DATE WISE DETAI LS OF QUANTITY SUPPLIED HAS NOT BEEN FURNISHED ON RECORD AS ADMITT ED BY THE 5 PARTIES U/S 131 / 133(6) OF THE ACT. ONE BILL WAS R AISED AT THE CLOSE OF THE YEAR IN RESPECT OF TOTAL SERVICE CHARG ES TO BE RECEIVED. THE SECOND PARTY TO WHOM SERVICECHARG ES HAS BEEN PAID IS M/S SHAM LAI RAJNEESH KUMAR AND THE COPY OF THE INVOICE IS PLACED AT PAGE 18 OF THE PAPER BOOK. HOWEVER, TH E SAID INVOICE DOES NOT DETAIL THE QUANTITY OR THE ITEMS AGAINST W HICH THE COMMISSION HAS BEEN PAID. THE TOTAL COMMISSION PAID TO THE SAID PARTY WAS RS. 2,50,000/-. SIMILARLY, THE BILL OF M/ S TEK CHAND SHYAM LAI OF RS. 3,50,0007- IS PLACED AT PAGE 25 OF THE PAPER BOOK AND THE SAID INVOICE DO NOT DETAIL THE QUANTIT Y SUPPLIED OR THE PARTIES TO WHOM THE SUPPLIES WERE MADE. THE INV OICE RAISED BY M/S PEW ARE PLACED AT PAGES 37 & 38 OF THE PAPER BO OK IN WHICH IT HAS BEEN MENTIONED THAT COMMISSION IS CHARGED ON SUPPLIES MADE TO DS&D, HARYANA AT VARIOUS STATIONS AND THE T OTAL QUANTITY SUPPLIED IS ALSO MENTIONED. THE FIRST INVOICE NO. 8 1 DATED 20.3.2006 IS FOR A TOTAL CONSIDERATION OF RS. 14,28 ,891/- AND THE SECOND INVOICE NO. 88 DATED 30.3.2006 IS FOR A CONS IDERATION OF RS. 4,60,987/-. THE TWO INVOICES ARE PLACED AT PAGE S 37 & 38 OF THE PAPER BOOK. THE COMMISSION OF RS. 1,46,9411- HA S BEEN PAID TO M/S RAJASHANTI ENGG. WORKS AND THE COPY OF THE I NVOICE IS PLACED AT PAGE 47 OF THE PAPER BOOK. THE INVOICE NO . 88 DATED 31.3.2006 IS IN RESPECT OF COMMISSION CHARGED ON SU PPLIES TO DS&D, HARYANA AT VARIOUS STATIONS. THE ASSESSABLE V ALUE IS MENTIONED IN THE SAID INVOICE, HOWEVER, NO PARTY WI SE AND DATE WISE DETAILS OF THE SUPPLIES MADE HAVE BEEN GIVEN B Y THE ASSESSEE. 16. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE VIDE LETTER DATED 12.9.2008 PLACED AT PAGES 53 & 54 OF THE PAPER BOOK, BROUGHT TO THE NOTICE OF THE ASSESSING OFFICE R THAT THE ASSESSEE WAS PROVIDING LIAISONING SERVICES TO M/S S STPL, NEW DELHI BY SOLICITING THE PRODUCTS OF THE COMPANY. IT WAS FURTHER CLARIFIED THAT THE BILLS FOR SUCH SERVICES ARE RAIS ED ON MONTHLY BASIS. HOWEVER, THE PAYMENT THEREOF, ARE RECEIVED V ERY LATE, OBVIOUSLY ON THE COMPLETION OF THE RELATED TRANSACT IONS OF SUPPLY AT THE END OF THE COMPANY CONCERN AND PAYMENTS ARE RECEIVED FROM THE PURCHASERS CONCERNED. THE DETAILS OF MONTH WISE BILLS RAISED BY THE ASSESSEE WERE CLAIMED TO HAVE BEEN AL READY FILED. THE ASSESSEE FURNISHED A CHART SHOWING THE AMOUNT A CTUALLY RECEIVED WHICH REFLECTED THE ASSESSEE NOT TO HAVE R ECEIVED THE PAYMENTS ON MONTHLY BASIS AND A SUM OF RS. 15,83,53 87- DUE ON 31.3.2006, WAS RECEIVED IN MAY 2006 AND JULY 2006 O NLY. THE PAYMENTS IN RELATION TO THE EXPENDITURE INCURRED WE RE CLAIMED TO HAVE BEEN CLEARED BY 31.3.2006. THE CHART SHOWING T HE RECEIPTS / PAYMENTS IN RESPECT OF LIAISONING SERVICES FOR THE PERIOD CONCERNED IS PLACED PAGE 55 OF THE PAPER BOOK UNDER WHICH THE EXPENSES IN CONNECTION WITH LIAISONING WERE PAID BY 31.3.2006 AS AGAINST THE RECEIPTS NOT BEING RECEIVED UP TO 31.3. 2006. THE ASSESSEE HAS ALSO FURNISHED ON RECORD THE COPIES OF ACCOUNT OF THE RESPECTIVE PARTIES WHICH REFLECT THE PAYMENTS VIDE CHEQUES TO THE SAID PARTIES ON VARIOUS DATES UPTO 31.3.2006. THE R ESPECTIVE PARTIES HAVE FURNISHED ON RECORD THE COPIES OF BANK STATEMENT REFLECTING THE RECEIPTS OF THE SAID AMOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER RECOR DED STATEMENTS OF THE VARIOUS PERSONS TO WHOM THE SAID LIASON COMMISSION HAS BEEN PAID, WHICH HAVE BEEN REFERRED TO BY US IN THE PARAS HEREINABOVE. THE SAID PARTIES THOUGH ADMI T TO HAVE RECEIVED THE PAYMENTS BUT HAVE FAILED TO FURNISH TH E DETAILS OF 6 NAMES, ADDRESS, PLACES OF THE PARTIES AND QUANTITY OF THE CEMENT SUPPLIED DATE WISE AND PARTY WISE, DURING THE YEAR. THE BILLS REFLECT THE QUANTITY SUPPLIED DURING THE YEAR (CONS OLIDATED ) IN RESPECT OF THE SOME OF THE PARTIES, BUT THE DETAILS ABOUT THE COMMODITY, QUANTITY, RATE OF COMMISSION CHARGED AND PLACES OF SUPPLIES ARE MISSING FROM THE SAID BILLS. THE MAIN CONCERN M/S PEW HAS NOT MAINTAINED THE DAY TO DAY RECORD OF LIA ISONING COMMISSION. THE SAID PARTIES HAVE FAILED TO BRING O N RECORD ANY DOCUMENTARY EVIDENCE OF RENDERING THE SERVICES EXCE PT FOR THE COPIES OF BILLS RAISED AND COPIES OF THE ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNT. WHEN CONFRONTED, SHRI RAJNE ESH GARG, PARTNER OF M/S PEW CONFIRMED THAT HE WAS CARRYING O N THE BUSINESS OF MANUFACTURING IRON AND STEEL AND SALE A ND PURCHASE OF IRON SCRAP. HE FURTHER CONFIRMS THAT HE HAD ENTERED IN AN AGREEMENT WITH THE ASSESSEE WHERE HE WOULD BE RESPO NSIBLE FOR COLLECTION OF PAYMENTS AND SETTLEMENT OF DISPUTES. WHEN CONFRONTED AS TO THE QUANTUM OF COLLECTION MADE AND DISPUTES SETTLED, HE DEPOSES THAT PURCHASERS USED TO SEND MO NEY DIRECTLY TO M/S J.K. CEMENT AND NO DISPUTE AROSE IN THE TERRITO RY. THE PARTNER OF M/S RAJASTHANI ENGINEERING WORKS WHEN CO NFRONTED, STATED NOT TO HAVE ENTERED INTO ANY TRANSACTIONS IN PERSON WITH THE ASSESSEE AND THAT HIS FIRM HAD NO WRITTEN CONTRACT WITH THE ASSESSEE. HE ALSO FAILED TO BRING ON RECORD ANY EVI DENCE OF RENDERING THE SERVICES TO THE ASSESSEE EXCEPT FOR R AISING THE BILLS OF COMMISSION RECEIVABLE AT THE END OF THE YEAR. HO WEVER, THE SAID FIRM DID NOT PRODUCE THE BOOKS OF ACCOUNT REGA RDING ITS BUSINESS WITH THE ASSESSEE. THE STATEMENT OF SHRI S .K.CHHABRA, PROPRIETOR OF M/S S.K. WOLTEX WAS ALSO RECORDED. HE COULD NOT EXPLAIN THE NATURE OF SERVICES RENDERED AND NOR ANY BASIS FOR RAISING THE BILLS OF SERVICE CHARGES COULD BE EXPLA INED. 17. IN THE FACTS AND CIRCUMSTANCES OF THE CASE B EFORE US, THE ROLE OF THE ASSESSEE VIS-A-VIS SERVICES TO BE PROVI DED TO M/S SSTPL LTD WAS TO GET THE ORDERS FROM THE GOVERNMENT AND SEMI- GOVERNMENT ORGANIZATION AND OTHER INSTITUTIONAL BUY ERS AND TO ENSURE TIMELY SCHEDULE FOR SUPPLIES AND TIMELY PAYM ENTS AGAINST SUCH SUPPLIES. THE SAID SERVICES WERE BEING PROVIDE D BY THE ASSESSEE TO M/S SSTPL AGAINST WHICH IT WAS ENTITLED TO LIASON COMMISSION AS PER THE AGREEMENT ENTERED INTO BETWEE N PARTIES. THE ASSESSEE ADMITTEDLY WAS MAINTAINING OFFICES IN PATIALA AND BHATINDA AND HIS EMPLOYEES WERE LOOKING AFTER ACTIV ITIES IN THE STATE OF PUNJAB. FURTHER CLAIM OF THE ASSESSEE WAS FOR PROVIDING THE SERVICES IN THE STATE OF HARYANA, THE ASSESSEE ENGAGED SERVICE PROVIDERS AND SUB AGENTS FOR THE SAID PURPOSE. THE ASSESSEE HAD RECEIVED COMMISSION @ 25 PMT FOR RENDERING SERVICES TO M/S SSTPL AND IN TURN THE ASSESSEE ALLEGES TO HAVE PAID LIASON COMMISSION @ RS. 20 PMT TO THE SERVICE PROVIDERS. T HE ISSUE RAISED BEFORE US IS IN RESPECT OF THE AFORESAID PAY MENTS BEING MADE TO THE SERVICE PROVIDERS. THE ASSESSEE WHILE M AKING THE PAYMENTS ADMITTEDLY HAD DEDUCTED TDS AND SERVICE TA X AS APPLICABLE AND ITS CLAIM WAS THAT SIMILAR PAYMENTS WERE BEING ALLOWED IN THE EARLIER YEARS. THE ASSESSEE HAD FURN ISHED ON RECORD A CHART RELATING TO THE LIASON COMMISSION PA ID FOR THE FINANCIAL YEARS 2003-04 TO 2006-07. FROM THE PERUSA L OF THE SAID CHART, WE FIND THAT IN THE EARLIER YEARS, THE SAID LIASON COMMISSION WAS BEING PAID TO THE PARTIES OTHER THAN M/S PEW, M/S RAJNEESH ENGINEERING WORKS AND M/S S.K. WOLTEX. THE 7 ASSESSEE DURING THE YEAR UNDER APPEAL I.E. FINANCIA L YEAR 2005-06 HAD ALSO PAID COMMISSION TO M/S TEK CHAND SHAM LAI AND M/S SHAM LAI RAJNEESH KUMAR, TO WHOM COMMISSION WAS PAI D IN THE FINANCIAL YEAR 2003-04 ALSO. THE ALLOWABILITY OF CO MMISSION IN ASSESSMENT YEAR 2005-06 HAS NO BEARING AS THE PARTI ES ARE DIFFERENT. IN THE SUCCEEDING YEAR I.E. FINANCIAL YE AR 2006-07, COMMISSION HAS BEEN PAID TO THE PARTIES AS IN THE F INANCIAL YEAR 2005-06. THE STAND OF THE ASSESSEE THAT SIMILAR PAY MENTS HAVE BEEN ALLOWED IN THE SUCCEEDING YEARS HAS NO BEARING TO THE ALLOWABLILITY OF CLAIM DURING THE YEAR AS NO INVEST IGATION WAS MADE IN THE SUCCEEDING YEAR AND ONLY INTIMATION WAS ISSUED U/S 143(1) OF THE ACT. THE BASIS FOR DISALLOWING THE CO MMISSION IS THE INVESTIGATION CARRIED OUT BY THE ASSESSING OFFICER AND THE STATEMENT RECORDED OF THE VARIOUS PERSONS TO WHOM T HE AFORESAID COMMISSION IS CLAIMED TO HAVE BEEN PAID. IN THE SAI D STATEMENT RECORDED, NONE OF THE PARTIES HAVE BEEN ABLE TO JUS TIFIABLY EXPLAIN THE NATURE AND SERVICES OFFERED BY THEM ENTITLING T HEM TO THE RECEIPT OF THE COMMISSION. EVEN THE DETAILS OF SERV ICES RENDERED PARTY-WISE ON WHICH COMMISSION WAS DUE COULD NOT BE FORWARDED BY THE SAID PARTIES. IN THE ENTIRETY OF FACTS AND C IRCUMSTANCES OF THE CASE, WHERE THE ASSESSEE HAS FAILED TO EXPLAIN WITH EVIDENCE THE NATURE OF SERVICES BEING RENDERED BY THE SUB AG ENTS, DISENTITLES IT TO THE CLAIM OF DEDUCTION ON ACCOUNT OF THE SERVICE CHARGES. MERELY BECAUSE CERTAIN BILLS HAVE BEEN RAI SED AND PAYMENTS AGAINST THE SAME HAVE BEEN RELEASED BY THE ASSESSEE, DOES NOT ENTITLE THE ASSESSEE TO CLAIM OF DEDUCTION ON ACCOUNT OF SAID EXPENDITURE, IN THE ABSENCE OF THE ASSESSEE ES TABLISHING THAT THE SAID EXPENDITURE HAD BEEN LAID DOWN WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE SA ID PARTIES HAD FAILED TO BRING ON RECORD THE EXACT NATURE OF SERVI CES RENDERED AND EVEN THE QUANTITATIVE DETAILS OF THE SERVICES V IS-A-VIS, DATE WISE AND PARTY WISE DETAILS TO WHOM SUPPLIES WERE M ADE ON BEHALF OF THE ASSESSEE WERE NOT FURNISHED, EXCEPT FOR RAIS ING A CONSOLIDATED BILL AT THE END OF THE YEAR. THE ACCEP TANCE OF ALLOWABLILITY OF THE SAID EXPENDITURE IN THE SUCCEE DING YEAR VIDE INTIMATION ISSUED US/ 143(1) OF THE ACT AS AGAINST THE EVIDENCE AND MATERIAL COLLECTED BY THE ASSESSING OFFICER DUR ING THE YEAR, DOES NOT ESTABLISH THE CLAIM OF THE ASSESSEE IN RES PECT OF THE ALLOWABLILITY OF THE SAID EXPENDITURE. FURTHER, WE FIND THAT THE ALLEGED AGREEMENT WITH M/S PEW WAS ENTERED INTO BY THE ASSESSEE ON 8.4.2005 WHEREAS THE ASSESSEE WAS APPOINTED AS S ERVICE AGENT BY M/S SSTPL VIDE APPOINTMENT LETTER DATED 18.5.200 5. EVEN THE SAID APPOINTMENT LETTER DEBARRED THE ASSESSEE FROM ASSIGNING THE AGREEMENT WITH M/S SSTPL IN FAVOUR OF ANY OTHER PAR TY. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES, WE FIND NO MER IT IN THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE ON THE BASIS OF EXISTENCE OF AGREEMENT WITH ONE OF THE SUB AGENTS A ND ADMISSION OF RECEIPTS OF PAYMENTS BY THE PARTIES. 18. IN THE YEAR UNDER APPEAL, THE ASSESSING OFFICER HAS RECORDED THE STATEMENTS OF SHRI RAJNEESH GARG IN CONNECTION WITH SHAM LAI RAJNEESH KUMAR AND TEK CHAND SHAM LAI WHICH ADMITTE DLY ARE THE SISTER CONCERN OF M/S PEW AND IN HIS STATEMENT THE SAID PERSONS HAD FAILED TO ESTABLISH ITS CASE OF RENDERI NG THE SERVICES TO THE ASSESSEE. SHRI RAJNEESH GARG IN HIS STATEMEN T ADMITTED TO HAVE BEEN CARRYING ON THE BUSINESS OF MANUFACTURE O F IRON AND STEEL AND SALE OF IRON SCRAP AND HAS COMPLETELY DEN IED HIS 8 CARRYING ON ANY BUSINESS IN THE FIELD OF CEMENT. WH EN QUESTIONED ABOUT THE NATURE OF SERVICES PROVIDED, HE REPLIED T HAT HE WAS COLLECTING THE PAYMENTS ON BEHALF OF THE ASSESSEE, BUT IN REPLY TO ANOTHER QUESTION IT WAS EXPLAINED BY HIM THAT THE P AYMENTS IN CONNECTION WITH THE SUPPLIES WERE DIRECTLY MADE BY THE PARTIES TO M/S J.K.CEMENT WORKS. THE ASSESSING OFFICER ALSO PU T TO HIM TO GIVE THE DETAILS OF DISPUTE/S SETTLED AGAINST WHICH HE WAS PAID COMMISSION, IF ANY, AND IN HIS REPLY HE STATED NOT TO HAVE SETTLED ANY DISPUTES. THE SAID STATEMENT OF SHRI RAJNEESH G ARG WAS GIVEN ON BEHALF OF M/S PEW AND OTHER CONCERNS. FURTHER, S TATEMENT OF SHRI S.K. CHHABRA OF M/S S.K. WOLTEX WAS ALSO RECOR DED AND HE ADMITS TO HAVE RECEIVED THE COMMISSION IN RESPECT O F A SPECIFIC ORDER AND RELATED TO A PERIOD PRIOR TO THE YEAR UND ER CONSIDERATION. THE COPY OF BILL OF M/S S.K.WOOLLEX PLACED AT PAGE 13 REFLECTS THE LIASON CHARGES BEING MADE AGAINST O RDER NO. 23 DATED 12.7.2004 WHEREAS THE BILL RAISED IS DATED 11 .2.2006. IN RESPECT OF M/S SHAM LAI RAJNEESH KUMAR, AND TEK CHA ND SHAM LAI, THE CONSOLIDATED SERVICE CHARGES HAS BEEN RAIS ED AND IN THE ABSENCE OF THE DETAILS OF SERVICES RENDERED BY THEM , WE FIND NO MERIT IN ALLOWING THE CLAIM OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, EVEN THOUGH THE ASSESSEE CLAIMS IN T HE EARLIER YEAR PAYMENTS TO THE SAID PARTIES WERE ALLOWED. FURTHER, THE SAID PARTIES WERE PRODUCED BY THE ASSESSEE BEFORE THE AS SESSING OFFICER AND THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS FAILED TO CONFRONT THE AS SESSEE WITH HIS FINDINGS, BASED ON THE STATEMENTS RECORDED, BEFORE MAKING THE AFORESAID DISALLOWANCE. 19. THE SECOND ASPECT OF THE ISSUE IS THE ASSESSE E MAKING PAYMENTS DUE TO SUB AGENTS BEFORE OR BY 31.3.2006, EVEN BEFORE THE RECEIPT OF COMMISSION FROM M/S SSTPL, PART OF W HICH IS RECEIVED IN MAY 2006 AND JULY, 2006 I.E. AFTER THE CLOSE OF THE YEAR. THE LIASON COMMISSION WAS TO BE RECEIVED BY T HE ASSESSEE AFTER THE PARTIES TO WHOM THE SUPPLIES HAVE BEEN MA DE HAD CLEARED THEIR DUES AND DISPUTE, IF ANY, IN RESPECT OF THE SUPPLIES SETTLED WITH THE SAID PARTIES BY THE ASSESSEE ON BE HALF OF M/S SSTPL. WE FIND NO JUSTIFICATION IN THE CLAIM OF THE ASSESSEE IN RESPECT OF THE LIASON EXPENSES PAID WHICH ADMITTEDL Y WERE CLEARED UP TO MARCH, 2006 IN RESPECT OF THE COMMISSION BEIN G RECEIVED FROM THE PRINCIPALS, WHICH BECOMES DUE ON SETTLEMEN T OF THE PAYMENTS SCHEDULE AND ALSO SETTLEMENTS OF DISPUTES REGARDING SCHEDULE, IF ANY. UNDOUBTEDLY, THE INCURRING OF EXP ENDITURE BY THE BUSINESS MAN CANNOT BE QUESTIONED, BUT THE ALLOWABL ILITY OF THE SAID EXPENDITURE IS COVERED UNDER THE PROVISIONS OF THE INCOME TAX ACT, WHICH LAY DOWN THAT ALL SUCH EXPENDITURE, WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF CARRYING ON OF THE BUSINESS, IS TO BE ALLOWED AS AN EXPENDITURE. T HE ONUS IS UPON THE ASSESSEE TO ESTABLISH THAT IT HAD INCURRED A PA RTICULAR EXPENDITURE FOR THE PURPOSE OF CARRYING ON OF ITS B USINESS. THE SECOND LIMB OF SECTION 37, OF THE I.T.ACT, OF INCUR RING THE EXPENDITURE FOR THE PURPOSE OF BUSINESS, HAVE NOT B EEN SATISFACTORILY ESTABLISHED BY THE ASSESSEE. IN VIEW OF THE EVIDENCE COLLECTED BY THE ASSESSING OFFICER AND THE STATEMEN T RECORDED OF THE SUB AGENTS, WE FIND NO MERIT IN THE CLAIM OF TH E ASSESSEE IN RESPECT OF THE LIASON COMMISSION PAID BY IT, WHICH IN ANY CASE IS DEBARRED FROM VIS-A-VIS TERMS OF AGREEMENT ENTERED BETWEEN THE ASSESSEE AND ITS PRINCIPAL M/S STPL. THE SAID EXPEN DITURE BEING 9 ALLOWED IN THE EARLIER YEAR, UNDER ORDER PASSED U/S 143(3) DOE NOT ESTABLISH THE CASE OF THE ASSESSEE FOR THE YEAR UND ER CONSIDERATION AS THE PARTIES TO WHOM COMMISSION WAS PAID FOR ASSE SSMENT YEAR 2004-05, ARE COMPLETELY DIFFERENT AND IN RESPECT OF THE PARTIES IN ASSESSMENT YEAR 2003-04, THOUGH THERE WAS TWO COMMO N PARTIES, BUT THE ASSESSEE HAS FAILED TO FURNISH ON RECORD TH E EVIDENCE IN RESPECT OF THE SERVICES RENDERED IN FINANCIAL YEAR 2003-04 BY THE SAID PARTIES FOR WHICH COMMISSION WAS ALLOWED. WE F IND SUPPORT FROM THE RATIO LAID DOWN IN EMSON TOOLS MANUFACTURI NG CORPORATION LTD VS. C1T (SUPRA). ACCORDINGLY, REVER SING THE ORDER OF CIT(A), WE CONFIRM THE ORDER OF ASSESSING OFFICER IN MAKING AN ADDITION OF RS. 41,14,5187-. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS ALLOWED. 10. THE NATURE OF THE EXPENDITURE INCURRED BY THE A SSESSEE IS IDENTICAL TO THE CLAIM MADE IN THE EARLIER YEAR AND THE FACTS BEING IDENTICAL AND FOLLOWING THE SAME PARITY OF REASONIN G AS IN ASSESSMENT YEAR 2006-07, WE CONFIRM THE DISALLOWANC E OF RS. 25,27,856/- AS THE ASSESSEE HAS FAILED TO PRODUCE T HE EVIDENCE IN RESPECT OF THE SAID EXPENDITURE IN TOTALITY. UPHOL DING ORDER OF THE CIT(APPEALS), WE DISMISS GROUND NO. 4 RAISED BY THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 30 TH SEPTEMBER,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH