ROCHEM SEPARATION SYSTEMS (INDIA) P.TD, MUMBAI V. ASST CIT CEN CIR 2(4), MUMBAI

ITA 1282/MUM/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5901 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 10-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS
• Keywords: Transfer pricing; Additional evidence; TDS; Set aside
• Section: 37(1); 201; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE S HRI G.S. PANNU ( VP ) AND SHRI RAM LAL NEGI (JM) ITA NO. 1282 /MUM/2016 ASSESSMENT Y EAR: 2011 - 12 M/S ROCHEM SEPARATION SYSTEMS (INDIA) PVT. LTD., HDIL TOWER, ANANT KANEKAR MARG, BANDRA EAST, MUMBAI - 400051 PAN: AABCR1955P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2(4), OLD C.G.O. BLDG. (ANNEX), ROOM NO. 802, 8 TH FLOOR, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VINOD KUMAR BI NDAL, GAURAV BANSAL (A R S ) REVENUE BY : SHRI B. SRINIVAS (DR) DATE OF HEARING: 01 / 10 /201 8 DATE OF PRONOUNCEMENT: 17 / 12 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S 143 (3) R EAD WITH SECTION 144C (1) OF THE INCOME TAX ACT (FOR SHORT THE ACT), IN ACCORDANCE WITH THE DIRECTION S OF THE DISPUTES RESOLUTION PANEL - 2 (FOR SHORT DRP ) , MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 201 1 - 12 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 8,84,40,190/ - . SINCE, THE CASE WAS SELECTED FOR SCRUTINY, THE AO ISSUED NOTICE U/S 143 (2) AND 142 (1). IN RESPONSE TO THE SAID NOTICES, THE AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE APPEARED BEFORE THE AO AND SUBMITTED THE DETAILS CALLED FOR U/S 142 (1) OF THE ACT . SINCE, IT WAS NOTICED THAT THE ASSESSEE 2 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 HAD ENTERED INTO AN INTERNATI ONAL TRANSACTION, A REFERENCE IN RESPECT OF THE SAID TRANSACTION WAS SENT TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINING ARMS LENGTH PRICE . THE TPO AFTER HEARING THE ASSESSEE MADE UPWARD ADJUSTMENT OF RS. 25,25,184/ - VIDE ORDER PASSED U/S 92CA (3) OF THE ACT. 3. THE AO FURTHER MADE DISALLOWANCE OF RS. 9,00,000/ - PAID BY THE ASSESSEE COMPANY TO M/S INVENTA RESEARCH PVT. LTD. , AN ASSOCIATED ENTITY OF THE ASSESSEE TOWARDS TECHNICAL CONSULTANCY FEES BY TREATING THE TRANSACTION THE TRANSACTION SHAME A ND BOGUS OR THE THAT EXPENDITURE WAS NOT INCURRED IN RELATION TO THE BUSINESS OF THE ASSESSEE. THE AO FURTHER MADE DISALLOWANCE OF RS. 15,20,000/ - PAID TO M/S CAPTAIN K N GEORGE & COMPANY AND SMIT ENTERPRISES PVT. LTD. TOWARDS COMMISSION ON SALES ON THE G ROUND THAT THE TRANSACTION S ARE NOT GENUINE OR THAT THE SAME WAS NOT INCURRED IN RELATION TO THE BUSINESS OF THE ASSESSEE. SIMILARLY, AO MADE DISALLOWANCE OF RS. 5,94,000/ - PAID EACH TO MS. NAMRATA GOEL AND MS. NIDHI GOEL TOWARDS FEES FOR PROVIDING CONSUL TANCY SERVICES HOLDING THAT THE TRANSACTION S ARE NOT GENUINE. THE AO AFTER MAKING INTER ALIA THE AFORESAID ADDITIONS DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 9,45,73,370/ - . 4. AG GRIEVED BY THE DRAFT ASSESSMENT ORDER , THE ASSESSEE FILED OBJECTION BEFORE THE LD. DRP. AS REGARDS THE OBJECTION AGAINST TRANSFER PRICING ADJUSTMENT BY THE LD. TPO, T HE LD. DRP AFTER HEARING THE ASSESSEE DIRECTED THE AO/TPO TO APPLY LIBOR + 3% AS INTEREST RATE AND FURTHER DIRECTED TO APPLY LIBOR RATE + 3% AS ALP FOR INTER EST ON LOAN BORROWED BY THE AES . 5. SO FAR AS THE OTHER DISALLOWANCES ARE CONCERNED, THE LD. DRP REJECTED THE OBJECTIONS RAISED BY THE APPELLANT/ASSESSEE AND CONFIRMED THE DISALLOWANCE OF RS. 9,00,000/ - PAID BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES L EGAL AND PROFESSIONAL FEES, RS. 15,20,000/ - PAID TO M/S CAPTAIN K.N. GEORGE & COMPANY AND SMIT ENTERPRISES PVT. LTD. TOWARDS COMMISSION ON SALES AND RS. 5,94,000/ - PAID EACH TO MS. NAMRATA GEOL AND MS. NIDHI GOEL TOWARDS CONSULTATION FEES, HOLDING THAT TH E TRANSACTIONS ARE BOGUS OR THE SAME WERE NOT 3 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 INCURRED EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. THE ASSESSEE AGGRIEVED BY THE DIRECTIONS OF THE LD. DRP IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER BY RAISING THE FOLLOWING EFFECTIVE GROUNDS: GROUND 1: DISALLOWANCE OF LEGAL AND PROFESSIONAL EXPENSES PAID TO ASSOCIATED ENTERPRISE INR 900,000 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE DRP ERRED IN UPHOLDING/CONFIRMING THE ACTION OF AO IN DISALLOWING AN AMOUNT OF INR 900,000/ - PAID TOWARDS LEGAL AND PROFESSIONAL FEES ALLEGING THAT PAYMENT MADE TO M/S INVENTA RESEARCH PRIVATE LIMITED IS A SHAM TRANSACTION AND BOGUS EXPENDITURE NOT INCURRED IN RELATION TO THE BUSINESS OF THE APPELLANT. G ROUND 2: DISALLOWANCE OF LEGAL AND PROFESSIONAL EXPENSES PAID ON ACCOUNT OF COMMISSION ON SALES INR 1,520,000 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE DRP ERRED IN UPHOLDING/CONFIRMING THE ACTION OF AO IN DISALLOWING A S UM OF INR 1,520,000/ - INCURRED TOWARDS LEGAL AND PROFESSIONAL FESS ALLEGING THAT PAYMENT MADE TO M/S CAPTAIN K.N. GEORGE & COMPANY AND SMIT ENTERPRISE PRIVATE LIMITED ON ACCOUNT OF COMMISSION ON SALES IS NOT A GENUINE TRANSACTION AND NOT INCURRED IN RELATI ON TO THE BUSINESS OF THE APPELLANT. GROUND 3: DISALLOWANCE OF LEGAL AND PROFESSIONAL EXPENSES PAID ON ACCOUNT OF PROVIDING FINANCIAL CONSULTANCY AND HUMAN RESOURCE CONSULTANCY SERVICES TO MS. NAMRATA GOEL AND MS. NIDHI GOEL INR 594,000 EACH 3) ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE DRP ERRED IN UPHOLDING/CONFIRMING THE ACTION OF AO IN DISALLOWING A SUM OF INR 594,000/ - EACH INCURRED ON ACCOUNT FEES PAID FOR PROVIDING CONSULTANCY SERVICES TO MS. NAMRATA GOEL AND MS. NIDHI GOEL ALLEGING IT TO BE NOT A GENUINE TRANSACTION. EACH OF THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. 4 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 7. GROUND NO. 1 PERTAINS TO DISALLOWANCE OF RS. 9,00,000/ - PAID BY THE ASSESSEE TOWARDS LEGAL AND PROFESSIONAL EXPENSES TO AN ASSOCIATE COMPANY M/S INVENTA RESEARCH PVT. LTD. THE LD. COUNSEL SUBMITTED BEFORE US THAT THE ASSESSEE HAS SUBMITTED THE INVOICES RAISED BY M/S INVENTA RESEARCH PVT. LTD. WHICH ARE AVAILABLE AT PAGE NO. 46 TO 50 OF THE PAPER BOOK. THE ASSESS EE HAS ALSO SUBMITTED THE COPY OF TDS CERTIFICATE S ISSUED BY THE ASSESSEE WHICH ARE AVAILABLE AT PAGE 51 TO 58 OF THE PAPER BOOK. THE LD. COUNSEL FURTHER SUBMITTED THAT THE SERVICES PROVIDED BY M/S INVENTA ARE MENTIONED ON THE INVOICES AS PER WHICH THE COM PANY PROVIDED TECHNICAL SERVICES WHICH HELPED THE ASSESSEE COMPANY IN DEVELOPING PROTOTYPE MODULES FOR VARIOUS SEPARATION SYSTEMS AND IN DEVELOP ING, PROCESS ING, MODIFY ING AND CUSTOMIZ ING THE MEMBRANES USED BY THE ASSESSEE IN ITS MANUFACTURING TECHNIQUE . T H E SAID COMPANY HAS BEEN PROVIDING SPECIALIZED SERVICES TO THE ASSESSEE COMPANY SINCE, THE FINANCIAL YEAR 2008 - 09 AND THE SIMILAR EXPENDITURE HAS BEEN ALLOWED BY THE REVENUE IN THE A.Y. 2009 - 10. THE LD. COUNSEL FURTHER PLACED ON RECORD, THE FOLLOWING ADDITI ONAL DOCUMENTS TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE . A) PHOTOCOPY OF THE TECHNOLOGY TRANSFER AGREEMENT OF PREPARATION OF COMPOSITE POLYAMIDE REVERSE OSMOSIS (RO) MEMBRANE FOR BRACKISH WATER DESALINATION TECHNOLOGY BETWEEN M/S INVENTA RESEARCH AND BHA BHA RESEARCH CENTRE DATED 02.06.2010. B) DESCRIPTION OF TECHNOLOGY AVAILABLE FOR TRANSFER. C) APPOINTMENT LETTER OF AN EMPLOYEE FOR THE R&D DEPARTMENT D) AUDITED BALANCE SHEET FOR AY 2010 - 11 E) SALARY LEDGER ACCOUNT FROM ITS BOOKS OF ACCOUNT. F) M ATERIAL PURCHASE FOR R ESEARCH WORK. G) OFFICE RENT EXPENSES INCURRED FOR OFFICE AT CHANDIVALI PALM ROAD, SEPARATE FROM THE ADDRESS OF THE ASSESSEE COMPANY. 5 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 8. THE LD. COUNSEL FURTHER SUBMITTED THAT THESE DOCUMENTS COULD NOT BE SUBMITTED BEFORE THE AUTHORITIES BELOW AS THE SAME WE RE NOT READILY AVAILABLE WITH THE ASSESSEE. THE ASSESSEE HAS OBTAINED THE SAID DOCUMENTS FROM M/S INVENTA RESEARCH PRIVATE LTD. AS THESE DOCUMENTS GO TO THE ROOT OF THE MATTER AND ARE ESSENTIAL FOR PROPER ADJUDICATION OF THE ISSUE IN QUESTION . THE LD. COUN SEL ACCORDINGLY SUBMITTED THAT THE DOCUMENTS MAY BE ADMITTED AS ADDITIONAL EVIDENCE IN THE INTEREST OF JUSTICE . 9. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT SINCE THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM DESPITE SUFFI CIENT OPPORTUNITY AFFORDED BY THE AO AS WELL AS THE LD. DRP, THE ADDITIONAL DOCUMENTS MAY NOT BE ADMITTED AS ADDITIONAL EVIDENCE. MOREOVER, SINCE THE ASSESSEE HAS PRODUCE D THESE DOCUMENTS FOR THE FIRST TIME BEFORE THIS TRIBUNAL, THE SAME ARE REQUIRED TO BE VERIFIED BY THE AO. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE MATERIAL AVAILABLE BEFORE US. SINCE, THE AO AND THE LD. DRP HAVE HELD THAT THE EVIDENCE ON RECORD IS NOT SUFFICIENT TO SUBSTANTIATE THE CONTENTION OF THE ASSESSEE , THE ASSESSEE HAS COLLECTED THE ADDITIONAL DOCUMENTS FROM M/S INVENTA RESEARCH AND SUBMITTED BEFORE US FOR ADMITTING AS ADDITIONAL EVIDENCE. WE HAVE PERUSED THESE DOCUMENTS AND WE ARE ALSO OF THE CONSIDERED VIEW THAT THESE DOCUMENTS ARE ESSENTIAL FOR PROPER ADJ UDICATION OF TH E ISSUE RAISED BY THE APPELLANT/ ASSESSEE. ADMITTEDLY, THESE DOCUMENTS WERE NOT AVAILABLE WITH THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS OR PROCEEDINGS BEFORE THE LD. DRP, THE ASSESSEE COULD NOT FURNISH THE SAME BEFORE THE AUTHORITIES C ONCERNED. WE THEREFORE, ADMIT THESE DOCUMENTS AS ADDITIONAL EVIDENCE IN THE INTEREST OF JUSTICE. HOWEVER, SINCE THESE DOCUMENTS HAVE BEEN PLACED FOR THE FIRST TIME THE SAME ARE REQUIRED TO BE VERIFIED AND TAKEN INTO CONSIDERATION BY THE AO. ACCORDINGLY, WE SET ASIDE THE FINDINGS OF THE LD. DRP AND SEND TH IS ISSUE BACK TO THE FILE OF AO FOR DECIDING THE SAME AFRESH AFTER HEARING THE ASSESSEE IN THE 6 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 LIGHT OF THE ADDITIONAL DOCUMENTS SUBMITTED BY THE ASSESSEE. HENCE, THIS GROUND OF APPEAL IS ALLOWED FOR THE ST ATISTICAL PURPOSES. 11. VIDE GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE DIRECTION OF LD. DRP CONFIRMING DISALLOWANCE RS. 15,20,000/ - INCURRED BY THE ASSESSEE TOWARDS COMMISSION ON SALE, ON THE GROUND THAT PAYMENT S MADE TO M/S CAPTAIN N K GEORGE & COMPA NY AND SMIT ENTERPRISES PVT. LTD. ON ACCOUNT OF COMMISSION ON SALES IS NOT A GENUINE TRANSACTION OR NOT INCURRED IN RELATION TO THE BUSINESS OF THE APPELLANT. THE LD. COUNSEL FURTHER SUBMITTED THAT DISALLOWANCE WAS MADE MAINLY ON THE GROUND THAT NO PAYMENT WAS MADE BY THE ASSESSEE WHICH IS ACTUALLY INCORRECT AS THE PAYMENTS WERE MADE AS PER THE INVOICES RAISED BY THE AGENTS. THESE INVOICES WERE SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND ALSO BEFORE THE LD. DRP . FURTHER, THE LD. DRP HAS WRONGLY OB SERVED THAT THE E - MAIL EXCHANGED WITH THE AGENTS ARE IN CONNECTION WITH THE DRAWINGS AND TECHNICAL SPECIFICATIONS ETC. , WITHOUT APPRECIATING THAT THE AGREEMENT S WERE ENTERED BETWEEN THE ASSESSEE AND THE AGENTS FOR SALE OF GOODS IN TH E AREA TO BE DECIDED FROM TIME TO TIME BY MUTUAL CONSENT UNDER THE TRADEMARKS OF THE COMPANY. IT WAS FURTHER AGREED AND UNDERSTOOD BY THE PARTIES TO THE AGREEMENT THAT GOODS IN POSSESSION OF AGENTS SHALL REMAIN THE SOLE AND EXCLUSIVE PROPERTY OF THE COMPAN Y UNTIL THEY ARE DELIVERED BY THE AGENT TO THE CUSTOMER AND DURING THIS PERIOD, THE AGENT SHALL NOT CLAIM ANY OWNERSHIP, RIGHT, TITLE, LIEN OR INTEREST THEREON OF ANY NATURE WHATSOEVER. THE ASSESSEE HAS DEBITED THE SAID EXPENSES IN THE BOOKS OF ACCOUNT AS PROFESSIONAL EXPENSES AND HOW THE AGENTS HAVE SHOWN THE SAID INCOME IN THEIR RETURN IS NOT RELEVANT FOR THE ASSESSEE COMPANY. MOREOVER, SIMILAR EXPENSES WERE INCURRED BY THE ASSESSEE IN THE PRECEDING YEARS FOR THE A.Y. 2000 - 01 TO 2006 - 07. T HE LD. DRP HAS C ONFIRMED THE DISALLOWED IN THE ASSESSMENT YEAR UNDER CONSIDERATION IGNORING THE FACT THAT THE ITAT HAS ALLOWED THESE EXPENSES IN THE ASSESSEES CASE FOR THE PREVIOUS ASSESSMENT YEARS FOR THE REASON THAT THE ASSESSMENT PROCEEDINGS U/S 143 (3) AND 153 ARE 7 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 ENTIRELY DIFFERENT. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE ALL THE DETAILS INCLUDING THE CONFIRMATION FROM THE PARTIES, COPIES OF AGREEMENT, BALANCE SHEETS, INVOICES, WORKING OF COMMISSION, PAYMENT, ETC. WERE FURNISHED BEFORE THE ASSESSING OFFICER . T HE LD. DRP HAS WRONGLY CONFIRMED THE DISALLOWANCE MADE BY THE AO. SINCE, THE DISALLOWANCE HAS BEEN MADE WITHOUT TAKING INTO CONSIDERATION, THE EVIDENCE ON RECORD AND WITHOUT TAKING INTO CONSIDERATION OF THE DECISION S OF THE ITAT RENDERED IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS, THE IMPUGNED ORDER IS BAD IN LAW AND IS LIABLE TO BE SET ASIDE. 12. ON THE OTHER HAND, THE LD. DR RELYING ON THE FINDINGS OF THE AO BASED ON THE DIRECTIONS ISSUED BY THE LD. DRP SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO PROVE THAT THE AMOUNTS IN QUESTION WERE PAID TO THE AGENTS FOR THE SALE OF GOODS OF THE ASSESSEE COMPANY OR THAT THE EXPENSES WERE INCURRED EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE , THE LD. DRP HAS RIGHTLY CONFIRMED THE DISALLOWANCE . MORE OVER, AS PER THE SERVICE TAX RETURNS OF M/S SMIT ENTERPRISES PVT. LTD. , IT HAD PAID TAX FOR CONSULTING ENGINEERING SERVICES. THEREFORE, IT CANNOT BE CONCLUDED THAT THE ASSESSEE HAD PAID COMMISSION FOR SALES TO THE CONCERNED AGENTS. 13. WE HAVE PERUSED THE RELEVANT MATERIAL IN THE LIGHT OF THE RIVAL SUBMISSIONS. WE NOTICE THAT THE ASSESSEE HAS FURNISHED THE FOLLOWING DOCUMENTS BEFORE THE AO TO SUBSTANTIATE ITS CLAIM THAT THE COMMISSION OF RS. 8,00,000/ - WAS PAID TO SMIT ENTERPRISES PVT. LTD. 1. C OPY OF AGEN CY AGREEMENT ENTERED INTO BETWEEN ASSESSEE AND SMIT ENTERPRISES. 2. DETAILS OF SALES MADE THROUGH SMIT ENTERPRISES. 3. C OPY OF THE LEDGER ACCOUNT OF SMIT ENTERPRISES IN THE BOOKS OF THE ASSESSEE. 4. C ONFIRMATION FROM SMIT ENTERPRISES PVT. LTD. SHOWING THE INCOME EA RNED FROM ASSESSEE HAS BEEN OFFERED TO TAX. 8 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 5. C OPY OF THE ACKNOWLEDGEMENT OF RETURN OF INCOME FOR THE AY 2011 - 12. 6. PHOTOCOPIES OF THE EMAILS EXCHANGED WITH SMIT ENTERPRISES. 7. PHOTOCOPY OF AUDITED BALANCE SHEET OF SMIT ENTERPRISES PVT. LTD. FOR THE YEAR ENDED O N 31 ST MARCH, 2011. 8. PHOTOCOPY OF A SNAPSHOT OF THE WEBSITE OF M/S SMIT ENTERPRISES SHOWING ITS SERVICES AND THE CLIENT LIST HAVING ROCHEM SEPARATION AS A CLIENT. 14. FURTHER, THE ASSESSEE HAS FURNISHED THE FOLLOWING DOCUMENTS TO SUBSTANTIATE THE CLAIM O F THE ASSESSEE THAT COMMISSION OF RS. 7,20,000/ - WAS PAID TO M/S CAPTAIN K N GEORGE AND COMPANY. 1. C OPY OF AGENCY AGREEMENT WITH CAPT. K N GEORGE ALONG WITH EXTENTIONS LETTER OF AN AGREEMENT ENTERED,. 2. DETAILS OF COMMISSION PAYABLE WITH THE DETAILS OF SALES M ATERIALIZED THROUGH HIM 3. PHOTOCOPIES OF THE INVOICES RAISED BY CAPT. K N GEORGE FOR MARKETING MANAGEMENT SERVICES. 4. TDS CERTIFICATES ISSUED TO CAPT. K N GEORGE. 5. PHOTOCOPIES OF THE EMAILS EXCHANGED WITH CAPT. K N GEORGE. 6. ACKNOWLEDGMENT OF INCOME TAX RETURN O F CAPT. K N GEORGE. 7. C OPY OF LEDGER ACCOUNT OF COMMISSION IN THE BOOKS OF CAPT. K N GEORGE. 8. PHOTOCOPY OF SERVICE TAX CHALLAN OF CAPT. K N GEORGE. 9. THE DETAILS OF THE WORK ORDER OBTAINED BY CAPT. K N GEORGE FOR THE ASSESSEE. 10. ACKNOWLEDGMENT OF RETURN OF INCO ME OF CAPT. K N GEORGE FOR AY 2010 - 11 AND 2011 - 1 2 ALONG WITH COMPUTATION INCOME . 15. DURING THE PROCEEDINGS BEFORE THE LD. DRP, THE LD. DRP OBTAINED REMAND REPORT FROM THE AO. THE AO IN ITS REPORT CONFIRMED THAT THE ASSESSEE HAS FURNISHED CONFIRMATION S , ROI, SERVICE TAX RETURN S , LEDGER ACCOUNT OF THE 9 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 ASSESSEE IN THE BOOKS OF M/S SMIT ENTERPRISES AND M/S K N GEORGE AND COMPANY AND DETAILS OF EMAIL EXCHANGES BETWEEN THE ASSESSEE AND THE AGENTS, M/S SMIT ENTERPRISES AND M/S CAPTAIN K N GEORGE AND COMPANY. T H E ASSESSEE HAS ALSO FURNISHED THE DOCUMENTS BEFORE THE LD. DRP AS ADDITIONAL EVIDENCE APART FROM THE DOCUMENTS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. AS PER PARA 5.1.11 OF THE ORDER OF THE LD. DRP, APART FROM THE DOCUMENTS WHICH HAD BEEN SUBMITTED BE FORE THE AO, THE ASSESSEE SUBMITTED ACKNOWLEDGMENT OF RETURN OF INCOME, COPY OF LEDGER ACCOUNT OF ASSESSEE IN THE BOOKS OF THE AGENTS , EMAIL EXCHANGED BETWEEN THE ASSESSEE AND THE AGENTS , SERVIC E TAX CHALL A N FOR THE AY. 2001 - 12, WORK ORDER OBTAINED BY THE ASSESSEE DURING THE YEAR 2010 - 11, BEFORE THE LD. DRP. BOTH THE AGENTS HAVE CONFIRMED THE NATURE OF SERVICES TENDER AND PAYMENT RECEIPT FROM THE ASSESSEE. 16. WE FURTHER NOTICE THAT THE AUTHORITIES BELOW HAVE NOT POINTED OUT ANY DOCUMENT/EVIDENCE WHICH WAS CALLED FOR BY THE AO OR LD. DRP AND THE ASSESSEE FAILED TO PRODUCE THE SAME . THE ASSESSEE HAS SUBMITTED EACH AND EVERY DETAIL CALLED FOR BY THE AUTHORITIES BELOW TO SUBSTANTIATE ITS CLAIM . MOREOVER, THE ITAT HAS ALLOWED THE SIMILAR CLAIM IN ASSESSESS CAS E FOR THE EARLIER ASSESSMENT YEARS. 1 7 . THE HONBLE DELHI HIGH COURT HAS HELD IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. MOHAN EXPORT INDIA PVT. LTD. 90 TAXMANN.COM 168 (DEL ) THAT COMMISSION PAID BY THE ASSESSEE TO VARIOUS AGENTS IN ORDER TO SECURE ORDERS FROM OTHER COUNTRIES AND TO ENSURE PAYMENT IS TO BE ALLOWED U/S 137 (1) OF THE ACT. THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SEPTU INDIA PVT. LTD. 305 ITR 295 (P & H) , HAS HELD THAT WHEN THE AS SESSEE HAD PROVED THE ACTUAL PAYMENTS OF AMOUNTS OF COMMISSION AND SERVICE CHARGES AS WELL AS RECEIPT OF THE SAME AMOUNT BY THE PARTIES CONCERNED THEN THE CLAIM PUT FORTH BY THE ASSESSEE SHOULD NOT HAVE BEEN DISALLOWED MERELY ON THE GROUND THAT THE SAME WA S NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE . HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE 10 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 HAS DISCHARGED THE PRIMARY ONUS OF ESTABLISHING THE GENUINENESS OF THE EXPENDITURE MADE IN CONNECTION WITH ITS BUSINESS. ON THE OTHER HAND, THE LD. DRP HAS CONFIRMED THE DISALLOWANCE WITHOUT POINTING OUT ANY COGENT EVIDENCE WHICH REBUT THE CLAIM OF THE ASSESSEE. WE ACCORDINGLY ALLOW THIS GROUND OF APPEAL AND SET ASIDE THE DRP DIRECTION . HENCE, WE DIRECT THE AO TO ALLOW THE EXPENDITURE CLAIMED BY THE ASSESSEE. 1 8 . VIDE GROUND NO. 3, THE ASSESSEE HAS CHALLENGED THE DIRECTION OF THE LD. DRP IN CONFIRMING DISALLOWANCE OF RS. 5,94,000/ - EACH TO MS. NAMRATA GOEL AND MS. NIDHI GOEL PAID ON ACCOUNT OF PROVING FINANCIAL CONSULTANCY AND HUMAN RESOURCES CONSULTANCY SE RVICES. 19 . BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SUBMITTED THE COPIES OF AGREEMENTS ENTERED INTO MS. NARMATA GOEL AND MS. NIDHI GOEL TO ESTABLISH THAT MS. NAMRATA GEOL WAS APPOINTED AS FINANCIAL CONSULTANT OF THE AS SESSEE COMPANY ON RETAINER SHIP BASIS TO PROVIDE FINANCIAL INPUT AND ADVISE TO THE MANAGEMENT OF THE COMPANY AND MS. NIDHI GOEL WAS APPOINTED AS CORPORATE RELATIONS CONSULTANT ON RETAINER SHIP BASIS. THE LD. DRP HAS CONFIRMED THE DISALLOWANCE PROPOSED BY THE AO IN THE DRAT ASSESSMENT ORDER ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION AND SUBSTANTIATE THAT THE EXPENDITURE HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. THE LD. COUNSEL POIN TED OUT THAT THE ASSESSEE HAS FURNISHED THE COPY OF APPOINTMENT LETTER, COPY OF TDS CERTIFICATES ISSUED AND CONFIRMATION OF THE RECEIPT OF THE AMOUNTS BOTH THE VERSIONS. THE LD. COUNSEL FURTHER CONTENDED THAT MERELY BECAUSE BOTH OF THEM ARE WIVES OF THE DI RECTORS DOES NOT MEAN THAT THEY CANNOT BE EMPLOYED IN THE SAME COMPANY. 20 . ON THE OTHER HAND, THE LD. DR RELYING ON THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE SHOWING THE NATURE OF SERVICES RENDERED BY THEM BEFORE THE AO OR 11 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 BEFORE THE LD. DRP, THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE. HENCE, THE LD. DRP HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE AO. 21 . WE HAVE PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE R IVAL CONTENTIONS OF THE PARTIES. WE NOTICE THAT THE ASSESSE E HAS NOT PRODUCED ANY EVIDENCE TO ESTABLISH THAT THE SERVICES OF SMT. NAMRATA GOEL AND NIDHI GOEL WERE AVAILED BY THE ASSESSEE . FURTHER, THE ASSESSEE HAS NOT PLACED ON RECORD ANY EVIDENCE TO EXPLA IN THE NATURE OF SERVICES RENDERED BY THEM FOR WHICH THE ASSESSEE COMPANY HAD PAID RS. 5,94,000/ - EACH TO THE AFORESAID PARTIES DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. EVEN BEFORE US, THE LD. COUNSEL DID NOT POINT OUT ANY EVIDE NCE AVAILABLE ON RECORD TO SUBSTANTIATE THAT THE EXPEN DITURE WAS INCURRED AND THAT TOO IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE. UNDER SECTION 37(1) OF THE ACT, EXPENDITURE S INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS ARE ALLOWE D IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD. IN THE PRESENT CASE, EVEN IF IT IS ASSUMED THAT THE ASSESSEE HAD PAID THE SAID AMOUNT TO THE AFORESAID PARTIES, IT HAS FAILED TO ESTABLISH THAT THE EXPENDITURE HAS BEEN LAID OUT WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. HENCE, WE ENDORSE THE FINDINGS OF THE LD. DRP AND UPHOLD THE DISALLOWANCE OF RS. 11, 88,000/ - (RS. 5,94,000/ - EACH) MADE BY THE AO IN TERMS OF THE DRP DIRECTIONS . ACCORDINGLY, WE DISMISS THIS GROUND OF THE APP EAL OF THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2011 - 2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DECEMBER , 2018. SD/ - SD/ - ( G .S. PANNU ) ( RAM LAL NEGI ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; DATED: 17 / 12 / 201 8 ALINDRA, PS 12 ITA NO. 128 2 / MUM/2016 ASSESSMENT YEAR: 2011 - 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI