Chhaganlal Gupta, Balasore V. JCIT, Balasore Range, Balasore

ITA 130/CTK/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7567 (ITAT-CUTTACK)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: P K MISHRA
• Keywords: Business income; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.130/CTK/2016 ASSESSMENT YEAR : 2011 - 2012 CHHAGANLAL GUPTA, S/O. DWARIKA PRASAD GUPTA, AT: TANTI SAHI LANE, MOTIGANJ, DIST: BALASORE. VS. JCIT, BALASORE RANGE, BALASORE. PAN/GIR NO. AEVPG 4609 N (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.MISHRA, AR REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 10 /11 / 2016 DATE OF PRONOUNCEMENT : 10 /11 / 2016 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) - CUTTACK, DATE D 22.1.2016 , FOR THE ASSESSMENT YEAR 2011 - 12 . 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE LD CIT(A) ERRED IN ALLOWING COMMISSION PAYMENT @ 0.5% ON THE TOTAL SALES TURNOV ER AS AGAINST THE COMMISSION OF RS.21,04,400/ - CLAIMED BY THE ASSESSEE,. 2 ITA NO.130/CTK/2016 ASSESSMENT YEAR :2011 - 2012 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE THAT THE ASSESSEE HAS DEBITED SALES COMMISSION OF RS.21,04,400/ - ON A TOTAL TURNOVER OF RS.20,40,20,074/ - . THE ASSESSING OFFICER OB SERVED THAT THE COMMISSION PAID BY THE ASSESSEE TO THE FAMILY MEMBERS IN EARLIER ASSESSMENT YEARS SHOWS THAT THE APPELLANT HAS PAID COMMISSION OF 0.29% IN ASSESSMENT YEAR 2005 - 06, 0.5% IN A.Y. 2009 - 2010, WHEREAS THE COMMISSION PAYMENT CLAIMED TO HAVE BEE N MADE IN PRESENT YEAR WAS MORE THAN 1%. THEREFORE, THE ASSESSING OFFICER ALLOWED DEDUCTION TO THE ASSESSEE FOR COMMISSION PAYMENT OF RS.10,00,000/ - AND DISALLOWED BALANCE AMOUNT OF RS.11,04,400/ - . 4. ON APPEAL, LD CIT (A) DIRECTED THE ASSESSING OFFICER T O ALLOW COMMISSION @ 0. 5 %% ON THE TURNOVER OF RS.2 0,40,20,074/ - , WHICH WORKED TO R S.10,20,100/ - AS AGAINST THE COMMISSION CLAIMED BY THE ASSESSEE AT RS.21,04,400/ - . 5. AGAINST THE ORDER OF THE LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE ME. 6. LD A.R. SUBMITTED THAT THE ASSESSEE HAS DEDUCTED TDS FROM THE COMMISSION PAYMENT MADE AND THAT ALL THE RECIPIENTS OF THE COMMISSION ARE ASSESSED TO TAX @ 30% AND, THEREFORE, THERE IS NO LOSS TO THE REVENUE. IN 3 ITA NO.130/CTK/2016 ASSESSMENT YEAR :2011 - 2012 SUPPORT OF THE SAME, HE FILED A COPY OF THE I NCOME TAX RETURNS OF THE RECIPIENTS OF THE COMMISSION. HE FURTHER SUBMITTED THAT FOR INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT,, THE ASSESSING OFFICER HAS TO SHOW THAT THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKE T VALUE OF GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE HAS TO BE DISALLOWED. THE ASSESSING OFFICER HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT THE COMMISSION PAYMENT MADE BY THE ASSESSEE FOR THE SERVICES RENDERED TO THE ASSESSEE WAS IN EXCESS OF THE FAIR MARKET VALUE OF SUCH SERV ICES RENDERED TO THE ASSESSEE. IN ABSENCE OF THE SAME, NO DISALLOWANCE OF COMMISSION CAN BE MADE. 7. LD D.R. RELIED ON THE ORDER OF LD CIT(A). 8. I FIND THAT THE ASSESSING OFFICER HAS DISALL OWED COMMISSION EXPENDITURE OF R S.11,04,400/ - ON THE GROUND THAT THE COMMISSION PAID IN THE CURRENT YEAR IS HIGHER THAN THE COMMISSION PAID IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR BY THE ASSESSEE. LD CIT(A) HAS ALLOWED COMMISSION PAYMENT OF 0.5% ON THE TOTAL SALES TURNOVER OF RS.20,40,20,074/ - OF THE ASSESSEE AND DISALLOWED THE BALANCE AMOUNT. THE CONTENTION OF LD A.R. OF THE ASSESSEE THAT THE DISALLOWANCE OF COMMISSION 4 ITA NO.130/CTK/2016 ASSESSMENT YEAR :2011 - 2012 HAS BEEN MADE BY INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT. AS PER THE SAID SECTION, THE ASSESSING OFFICER HAS TO BRING MATERIAL ON RE CORD TO SHOW THAT THE COMMISSION PAYMENT IS HIGHER THAN THE FAIR MARKET VALUE OF THE SERVICES RENDERED TO THE ASSESSEE. SINCE NO SUCH MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THE COMMISSION PAYMENT IS HIGHER THAN THE FAIR MARKET VA LUE OF THE SERVICES RENDERED TO THE ASSESSEE, NO DISALLOWANCE CAN BE MADE. FURTHER, THE SUBMISSION OF THE ASSESSEE THAT ALL THE RECIPIENTS OF THE COMMISSION HAVE PAID TAX @ 30% WHICH IS THE TAX RATE APPLICABLE IN THE CASE OF THE ASSESSEE AND THERE IS NO REVENUE LOSS TO THE DEPARTMENT HAS ALSO NOT BEEN CONTROVERTED BY THE LD D.R DURING THE COURSE OF HEARING. THEREFORE, I OF THE CONSIDERED VIEW THAT NO DISALLOWANCE OUT OF COMMISSION EXPENDITURE CAN BE MADE IN THE HANDS OF THE ASSESSEE. I, THEREFORE, SET A SIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE DISALLOWANCE SUSTAINED BY THE LD CIT(A) AND ALLOW GROUNDS OF APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 10 /11 /2016 IN THE PRESENCE OF PARTIES. ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 10 /11 /2016 5 ITA NO.130/CTK/2016 ASSESSMENT YEAR :2011 - 2012 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK 1. THE APPELLANT : CHHAGANLAL GUPTA, S/O. DWARIKA PRASAD GUPTA, AT: TANTI SAHI LANE, MOTIGANJ, DIST: BALASORE 2. THE RESPONDENT. JCIT, BALASORE RANGE, BALASORE 3. THE CIT(A) CUTTACK 4. CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//