Sri Damodar Prasad Agarwala, Kolkata V. ITO, Ward - 45(2)/Kolkata, Kolkata

ITA 1363/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48241 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 30-03-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 05-08-2009
• Court: TRIBUNAL
• Department Lawyers: D J SHAH
• Assessee Lawyers: R SALARPURIA
• Keywords: Depreciation; Audit objection; Tax effect
• Section: 142(1); 260A; 37(1); 12A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE . . , ! '# '# '# '# /AND ' # , ! ) [BEFORE HONBLE SHRI S. V. MEHROTRA, AM & HONBLE S RI MAHAVIR SINGH, JM] #$ #$ #$ #$ / I.T.A NO. 1363/KOL/2009 %& ''( %& ''( %& ''( %& ''(/ // / ASSESSMENT YEAR: 2006-07 SRI DAMODAR PRASAD AGARWAL VS. INCOME-TAX OFFICER, WD-45(2), KOLKATA (PAN-ADBPA 7647 P) ( *+ /APPELLANT ) (,-*+/ RESPONDENT ) & #$ #$ #$ #$ / I.T.A NO. 1558/KOL/2009 %& ''( %& ''( %& ''( %& ''(/ // / ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, WD-45(2), KOLKATA VS. SRI DAMOD AR PRASAD AGARWAL ( *+ /APPELLANT ) (,-*+/ RESPONDENT ) FOR THE ASSESSEE: SHRI R. SALARPURIA FOR THE REVENUE: SHRI D. J. SHAH . / ORDER PER MAHAVIR SINGH, JM/ ' # ' # ' # ' # , ! ! ! ! : THESE CROSS-APPEALS BY ASSESSEE AND REVENUE ARE ARI SING OUT OF THE ORDER OF CIT(A)- XXX, KOLKATA IN APPEAL NO.158/CIT(A)-XXX/WD-45(2)/2 008-09 VIDE DATED 11.05.2009. THE ASSESSMENT WAS FRAMED BY ITO, WD-45(2), KOLKATA U/S .143(3)(II) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2006-07 VIDE HIS ORDER DATED 27.11.2008. 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STA TED THAT REVENUES APPEAL IS NOT MAINTAINABLE IN VIEW OF THE TAX EFFECT INVOLVED IN THE APPEAL. THE TAX EFFECT INVOLVED IN THE APPEAL IS RS. 2,81,343/-, WHICH IS BELOW THE PRESCR IBED LIMIT OF RS. 3 LACS BY CBDT. THE ISSUE NOW REMAINS BEFORE US IS THAT THE APPEAL OF THE REV ENUE IS BELOW THE PRESCRIBED LIMIT OF TAX EFFECT IN VIEW OF THE BOARDS INSTRUCTION ISSUED FR OM TIME TO TIME REVISING THE MONETARY LIMITS FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE ITAT AND OTHER SUPERIOR COURTS. THE APPEAL RELATES TO ASSESSMENT YEAR 2006-07 AND FILED BEFORE THE TRIBUNAL ON 03.09.2009. SINCE THIS 2 ITA 1363&1558//K/2009 DAMODAR PD. AGARWAL. A.Y.2006-07 APPEAL FILED ON 03.09.2009, THE SAME WILL BE COVERE D BY INSTRUCTION NO. 3/2011 ISSUED ON 09.02.2011 I.E. THE REVISED MONETARY LIMIT FOR FILI NG OF APPEAL BEFORE ITAT, WHEREBY THE CBDT HAS FIXED THE LIMIT OF RS. 3 LACS. HONBLE DELHI HI GH COURT IN THE CASE OF CIT VS DELHI RACE CLUB IN ITA NO.128/2008 DATED 03.03.2011 HAS HELD A S UNDER: THE TAX EFFECT INVOLVED IN THE PRESENT APPEAL IS R S.4,65,860/-. AS PER THE RECENT GUIDELINES OF THE CBDT, APPEAL IN THOSE CASES WHERE THE TAX EFFECT IS LESS THAN 10 LACS, ARE NOT TO BE ENTERTAINED. THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TA X-III V. M/S. P. S. JAIN AND CO. BEING ITA NO. 179/1991 DECIDED ON 2 ND AUGUST, 2010 HAS TAKEN A VIEW THAT SUCH CIRCULAR WOULD ALSO APPLY TO PENDING CASES. IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT , THE REVISED MONETARY LIMIT OF RS. 3 LACS AS PER INSTRUCTION NO.3/2011 WILL APPLY TO PENDING APP EALS. THE RELEVANT CIRCULAR ISSUED BY CBDT READS AS UNDER : INSTRUCTION NO. 3/2011 [F. NO. 279/MISC. 142/2007- ITJ], DATED 9-2-2011 REFERENCE IS INVITED TO BOARD'S INSTRUCTION NO. 5/2 008 DATED 15-5-2008 WHEREIN MONETARY LIMITS AND OTHER CONDITIONS FOR FILING DEPARTMENTAL APPEALS (IN INCOME-TAX MATTERS) BEFORE APPELLATE TRIBUNAL, HIGH COURTS AND SUPREME COURT W ERE SPECIFIED. 2. IN SUPERSESSION OF THE ABOVE INSTRUCTION, IT HAS BE EN DECIDED BY THE BOARD THAT DEPARTMENTAL APPEALS MAY BE FILED ON MERITS BEFORE APPELLATE TRIBUNAL, HIGH COURTS AND SUPREME COURT KEEPING IN VIEW THE MONETARY LIMITS A ND CONDITIONS SPECIFIED BELOW. 3. HENCEFORTH APPEALS SHALL NOT BE FILED IN CASES WHER E THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER: S. NO. APPEALS IN INCOME-TAX MATTERS MONETARY LIMIT (IN RS.) 1. APPEAL BEFORE APPELLATE TRIBUNAL 3,00,000 2. APPEAL U/S. 260A BEFORE HIGH COURT 10,00,0 00 3. APPEAL BEFORE SUPREME COURT 25,00,000 IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PRESCRIBED ABOVE. FILIN G OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. 4. FOR THIS PURPOSE, TAX EFFECT MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABL E HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE ISSUES AG AINST WHICH APPEAL IS INTENDED TO BE FILED (HEREINAFTER REFERRED TO AS 'DISPUTED ISSUES' ). HOWEVER THE TAX WILL NOT INCLUDE ANY INTEREST THEREON, EXCEPT WHERE CHARGEABILITY OF INT EREST ITSELF IS IN DISPUTE. IN CASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UNDER DISPUT E, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED ADDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDUCED IN THE O RDER TO BE APPEALED AGAINST. 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX EFFEC T SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN THE CASE OF EV ERY ASSESSEE. IF, IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN MORE THAN ONE ASSESSME NT YEAR, APPEAL, CAN BE FILED IN RESPECT 3 ITA 1363&1558//K/2009 DAMODAR PD. AGARWAL. A.Y.2006-07 OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX E FFECT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MONETARY LIMIT SPECIFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RESPECT OF AN ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. IN OTHER WORDS, HENCEFORTH, APPEALS CAN BE FILED ONLY WITH REFERENCE TO THE TAX EFFECT IN THE RELEVANT ASSESSMENT YEAR. HOWEVER, IN CASE OF A COMPOSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTHORITY, WHICH INVOLVES MORE T HAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR, APPEAL SHA LL BE FILED IN RESPECT OF ALL SUCH ASSESSMENT YEARS EVEN IF THE 'TAX EFFECT' IS LESS T HAN THE PRESCRIBED MONETARY LIMITS IN ANY OF THE YEAR(S), IF IT IS DECIDED TO FILE APPEAL IN RES PECT OF THE YEAR(S) IN WHICH 'TAX EFFECT' EXCEEDS THE MONETARY LIMIT PRESCRIBED. IN CASE WHER E A COMPOSITE ORDER/JUDGMENT INVOLVES MORE THAN ONE ASSESSEE, EACH ASSESSEE SHALL BE DEAL T WITH SEPARATELY. 6. IN A CASE WHERE APPEAL BEFORE A TRIBUNAL OR A COURT IS NOT FILED ONLY ON ACCOUNT OF THE TAX EFFECT BEING LESS THAN THE MONETARY LIMIT SPECI FIED ABOVE, THE COMMISSIONER OF INCOME- TAX SHALL SPECIFICALLY RECORD THAT 'EVEN THOUGH THE DECISION IS NOT ACCEPTABLE, APPEAL IS NOT BEING FILED ONLY ON THE CONSIDERATION THAT THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN THIS INSTRUCTION'. FURTHER, IN SUCH CA SES, THERE WILL BE NO PRESUMPTION THAT THE INCOME-TAX DEPARTMENT HAS ACQUIESCED IN THE DECISIO N ON THE DISPUTED ISSUES. THE INCOME- TAX DEPARTMENT SHALL NOT BE PRECLUDED FROM FILING A N APPEAL AGAINST THE DISPUTED ISSUES IN THE CASE OF THE SAME ASSESSEE FOR ANY OTHER ASSESSM ENT YEAR, OR IN THE CASE OF ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, IF THE TAX EFFECT EXCEEDS THE SPECIFIED MONETARY LIMITS. 7. IN THE PAST, A NUMBER OF INSTANCES HAVE COME TO THE NOTICE OF THE BOARD, WHEREBY AN ASSESSEE HAS CLAIMED RELIEF FROM THE TRIBUNAL OR TH E COURT ONLY ON THE GROUND THAT THE DEPARTMENT HAS IMPLICITLY ACCEPTED THE DECISION OF THE TRIBUNAL OR COURT IN THE CASE OF THE ASSESSEE FOR ANY OTHER ASSESSMENT YEAR OR IN THE CA SE OF ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, BY NOT FILING AN APPEAL ON THE SAME DISPUTED ISSUES. THE DEPARTMENTAL REPRESENTATIVES/COUNSELS MUST MAKE EVE RY EFFORT TO BRING TO THE NOTICE OF THE TRIBUNAL OR THE COURT THAT THE APPEAL IN SUCH CASES WAS NOT FILED OR NOT ADMITTED ONLY FOR THE REASON OF THE TAX EFFECT BEING LESS THAN THE SP ECIFIED MONETARY LIMIT AND, THEREFORE, NO INFERENCE SHOULD BE DRAWN THAT THE DECISIONS RENDER ED THEREIN WERE ACCEPTABLE TO THE DEPARTMENT. ACCORDINGLY, THEY SHOULD IMPRESS UPON T HE TRIBUNAL OR THE COURT THAT SUCH CASES DO NOT HAVE ANY PRECEDENT VALUE. AS THE EVIDE NCE OF NOT FILING APPEAL DUE TO THIS INSTRUCTION MAY HAVE TO BE PRODUCED IN COURTS, THE JUDICIAL FOLDERS IN THE OFFICE OF CSIT MUST BE MAINTAINED IN A SYSTEMIC MANNER FOR EASY RE TRIEVAL. 8. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LES S THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT. A. WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR B. WHERE BOARD'S ORDER, NOTIFICATION, INSTRUCTION OR C IRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR C. WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT. 9. THE PROPOSAL FOR FILING SPECIAL LEAVE PETITION UNDE R ARTICLE 136 OF THE CONSTITUTION BEFORE THE SUPREME COURT SHOULD, IN ALL CASES, BE S ENT TO THE DIRECTORATE OF INCOME-TAX (LEGAL & RESEARCH), NEW DELHI AND THE DECISION TO F ILE SPECIAL LEAVE PETITION SHALL BE IN CONSULTATION WITH THE MINISTRY OF LAW AND JUSTICE. 4 ITA 1363&1558//K/2009 DAMODAR PD. AGARWAL. A.Y.2006-07 10. THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE SHALL NOT APPLY TO WRIT MATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME-TAX, FILING OF APPEAL S IN OTHER DIRECT TAX MATTERS SHALL CONTINUE TO BE GOVERNED BY RELEVANT PROVISIONS OF S TATUTE AND RULES. FURTHER, FILING OF APPEAL IN CASES OF INCOME-TAX, WHERE THE TAX EFFECT IS NOT QUANTIFIABLE OR NOT INVOLVED, SUCH AS THE CASE OF REGISTRATION OF TRUSTS OR INSTITUTIO NS UNDER SECTION 12A OF THE IT ACT, 1961, SHALL NOT BE GOVERNED BY THE LIMITS SPECIFIED IN PA RA 3 ABOVE AND DECISION TO FILE APPEAL IN SUCH CASES MAY BE TAKEN ON MERITS OF A PARTICULAR C ASE. 11. THIS INSTRUCTION WILL APPLY TO APPEALS FILED ON OR AFTER .. 2011. HOWEVER, THE CASES WHERE APPEALS HAVE BEEN FILED BEFORE 201 1 WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 12. THIS ISSUES UNDER SECTION 268(1) OF THE INCOME TAX ACT, 1961. 3. ON QUERY FROM THE BENCH, THE LD. DR COULD NOT PO INT OUT ANY OF THE EXCEPTIONS AS PROVIDED IN THE CIRCULAR AS UNDER: (A) THAT THIS IS A LOSS CASE HAVING TAX EFFECT MOR E THAN THE PRESCRIBED LIMIT, WHICH SHOULD BE TAKEN INTO ACCOUNT, (B) THAT THIS IS A COMPOSITE ORDER FOR MANY ASSESS MENT YEARS WHERE TAX EFFECT WILL BE MORE THAN THE PRESCRIBED LIMIT AS PER PARA 5 OF A BOVE INSTRUCTIONS, (C) THAT THERE IS OTHER YEAR PENDING AS DISPUTED O N THE SINGULAR ISSUE, (D) THAT IN THE CASE OF REVENUE, WHERE CONSTITUTIONAL V ALIDITY OF THE PROVISIONS OF THE ACT OR I.T. RULES 1962 ARE UNDER CHALLENGE , (E) THAT BOARDS ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, (F) THAT REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN A CCEPTED BY THE DEPARTMENT AND THE SAME IS UNDER CHALLENGE. THE LD. DR COULD NOT POINT OUT ANY OF THE EXCEPTION S AS PROVIDED ABOVE. ACCORDINGLY, THIS BEING A TAX EFFECT CASE, WE DISMISS THE APPEAL OF T HE REVENUE IN LIMINE AND AS UNADMITTED. 4. ANOTHER ASPECT OF REVENUES APPEAL AND THE APPEA L OF THE ASSESSEE IS THAT THE ISSUE INVOLVED IS COMMON AND ON MERITS, REVENUE IS IN APP EAL AGAINST DELETION OF RS.7 LACS AND ASSESSEE IS AGAINST CONFIRMATION OF BALANCE DISALLO WANCE OF RS.6,25,812/-. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1: 1.FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN ALLOWING PARTIAL RELIEF OF RS.7,00,000/- ONLY, OUT OF TOTAL DISALLOWANCE OF EXPENSE OF RS.13,25,811/- MADE IN A SSESSMENT ON A/C OF BROKERAGE & COMMISSION. THE ACTION OF THE LD. CIT(A) IN NOT AL LOWING THE FULL RELIEF INSPITE OF HIS ACCEPTANCE OF THE SERVICES RENDERED BY THE BROKERS AS SUCH, WAS WHOLLY UNREASONABLE, UNCALLED FOR AND BAD IN LAW. WITHOUT PREJUDICE AND EVEN OTHERWISE THE DISALLOWAN CE OF THE EXPENSE MADE IN THE ASSESSMENT AND TO THE EXTENT CONFIRMED BY THE LD. C IT(A) WERE HIGHLY EXCESSIVE AND WHOLLY UNREASONABLE. 5 ITA 1363&1558//K/2009 DAMODAR PD. AGARWAL. A.Y.2006-07 REVENUE HAS RAISED THE FOLLOWING GROUND: 1. THAT LD. CIT(A) IS ERRED IN HIS DECISION BY PAR T DELETION OF ADDITION OF RS.7,00,000/- MADE BY THE A.O UNDER HEAD COMMISSION & BROKERAGE. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEES NATURE OF BUSINESS IS THAT OF SUPPLY AND TRADING OF BED SHEETS, TOWELS, SAREES ETC. AND HE IS A RETAIL TRADER. THE ASSESSM ENT IN THIS CASE WAS FRAMED BY ISSUING NOTICES U/S. 143(2)(II) AND 142(1) OF THE ACT. ASSESSEE CL AIMED BROKERAGE AND COMMISSION AT RS.13,25,811/-. ASSESSING OFFICER REQUIRED THE ASS ESSEE TO FILE DETAILS AND ASSESSEE FILED LIST OF PARTIES TO WHOM COMMISSION AND BROKERAGE WAS PAID. THE COUNSELS OF THE BROKERS APPEARED BEFORE ASSESSING OFFICER AND ALL OF THEM WERE REQUE STED BY THE ASSESSING OFFICER TO MENTION THE ROLE OF BROKER IN THE BUSINESS OF THE ASSESSEE WITH EVIDENCE. ALL CLAIMED THAT BROKERS LOOK AFTER THE MATTER OF TENDERS, FILING OF TENDERS, PUR SUING FOR TENDERS, INSPECTION OF ASSESSEES GOODS AS WELL AS PAYMENT MATTERS. ASSESSING OFFICE R NOTED THAT ASSESSEES TURNOVER INCREASED BY ABOUT 34% COMPARING ASSESSMENT YEAR 2005-06, BUT DECREASED BY 37% FROM ASSESSMENT YEAR 2004-05. ASSESSING OFFICER NOTED THAT EXPENSE S ON BROKERAGE AND COMMISSION INCREASED BY 530%. THE ASSESSEE CLAIMED BEFORE ASSESSING OFF ICER THAT DUE TO OLD AGE OF ASSESSEE, IT HAS TO SUPPLY ALL THE ITEMS THROUGH BROKERS AND FOR THA T BROKERAGE IS PAID. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF ASSESSEE BY STATING THAT AS SESSEE FAILED TO ESTABLISH THE PAYMENTS OF ALLEGED BROKERAGE FOR THE PURPOSES OF BUSINESS. HE NCE, HE ADDED BACK A SUM OF RS.13,25,811/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) DELETED THE DISALLOWANCE OF BROKERAGE AND COMMISSION AT RS. 7 LACS AND CONFIRME D THE BALANCE RS.6,25,811/-. AGGRIEVED, BOTH CAME IN APPEALS BEFORE US. 6. THE LD. DR BEFORE US STATED THAT CIT(A) HAS ALLO WED THE CLAIM OF BROKERAGE AND EXPENSES TO THE EXTENT OF RS. 7 LACS WITHOUT ANY EV IDENCE QUA THE SERVICES RENDERED BY THESE BROKERS FOR HELPING ASSESSEE IN THE BUSINESS. HE S TATED THAT ASSESSEES BUSINESS IS OF SUPPLY TO RAILWAYS AND FOR THAT PURPOSE COMMISSION AGENTS ARE NOT REQUIRED AND EVEN HIT BY EXPLANATION TO SEC. 37(1) OF THE ACT. ON THE OTHER HAND, THE L D. COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE HAS PAID THIS BROKERAGE AND COMMISSION DUE TO HIS OLD AGE AND HE COULD NOT PERFORM THE DUTIES OF THE BUSINESS AND FOR THAT HE HAS ENGA GED BROKERS FOR TENDER, FILING OF TENDERS, PURSUING FOR TENDERS, INSPECT OF ASSESSEES GOODS A S WELL AS COLLECTION OF PAYMENTS. HE STATED THAT ALL THE ARS OF BROKERS APPEARED BEFORE ASSESS ING OFFICER TO CLARIFY PAYMENTS OF BROKERAGE AND COMMISSION. HE STATED THAT CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE TO THE EXTENT OF RS. 7 LACS BUT ERRED IN NOT ALLOWING THE CLAIM O F ASSESSEE TO THE EXTENT OF RS.6,25,811/-. WE AFTER GOING THROUGH THE CASE RECORDS FIND THAT THE BROKERS HAVE RENDERED SERVICES IN RESPECT OF 6 ITA 1363&1558//K/2009 DAMODAR PD. AGARWAL. A.Y.2006-07 TENDERS, FILING OF TENDERS, PURSUING FOR TENDERS, I NSPECTION OF ASSESSEES GOODS AS WELL AS FOR COLLECTION OF PAYMENTS. ASSESSEES TURNOVER IS INC REASED IN THIS YEAR COMPARED TO EARLIER YEAR TO THE EXTENT OF 34% AND GOING BY THE AGE OF THE AS SESSEE, WE ARE OF THE VIEW THAT THE PAYMENT OF BROKERAGE AND COMMISSION IS A NECESSITY FOR THE PURPOSE OF BUSINESS. EVEN THE ASSESSEE HAS DEDUCTED TDS ON THE BROKERAGE AND FILED DETAILS BEF ORE ASSESSING OFFICER. BEFORE ASSESSING OFFICER, THE CLAIM OF THE ASSESSEE VIDE REPLY DATED 17.11.2008 WAS AS UNDER: AS REGARDS INCREASES IN BROKERAGE EXPENSES, PLEASE NOTE THAT I AM A 66 YEAR OLD PERSON, IT IS NOT POSSIBLE FOR ME TO SEE THE SHOP A ND SUPPLY BUSINESS INDIVIDUALLY. PREVIOUSLY I USED TO SEE THE TOTAL BUSINESS INDIVID UALLY. IN THE YEAR 2005-06, I HAVE TAKEN THE HELP OF THE BROKERS. SO THE EXPENDITURE H AS INCREASED DRASTICALLY BUT THE REALIZATION WAS ALSO GOOD. THE DETAILS OF TDS PAID FOR BROKERAGE IS ENCLOSED AS PER ANNEXURE-E. 7. WE FIND THAT ASSESSEE HAS BEEN IN CRISIS OF HEAL TH AS HE HAS STRICKEN WITH ACUTE FORM OF DIABETES COUPLED WITH HYPER-TENSION AND INCAPACITAT E HIM TO MAINTAIN PERSONAL CONTACT WITH CLIENTS, HENCE, DEPENDENCE ON BROKERS IN THESE YEAR S WAS THERE. THIS RESTRICTION OF ACTIVITIES OF ASSESSEE TO DEAL CLIENTS, AS HE HAS BEEN ENGAGING H IMSELF IN THE PAST YEARS, COMPELLED ABSOLUTE RELIANCE ON THE BROKERS TO MEDIATE ON HIS BEHALF. EVEN CONTENTION OF THE ASSESSEE IS THAT THE ASSESSING OFFICER ISSUED NOTICE TO THESE PARTIES AS KING THEM TO APPEAR BEFORE HIM AND NOTICES WERE DULY COMPLIED WITH AND PARTIES APPEARED BEFORE ASSESSING OFFICER (EXCEPT M/S. SATVICHAR VANIJYA PVT. LTD. (IN SHORT SVPL). THE ASSESSEE CLA IMED THAT ALL THE BROKERS ARE INCOME TAX PAYERS AND BROKERAGE RECEIVED BY THEM WAS DULY REFL ECTED IN THEIR BOOKS OF ACCOUNT AND ACCORDINGLY, OFFERED THE SAME FOR TAXATION WHILE FI LING THEIR RETURNS OF INCOME. WE FIND THAT APART FROM ABOVE OBSERVATION ONLY IN RESPECT OF SVP L, THE ASSESSEE COULD NOT SUBSTANTIATE THE COMMISSION PAID. THE ASSESSING OFFICER RECORDED HI S FINDING IN RESPECT TO THESE PARTIES AS UNDER: NOTICE IN THE NAME OF M/S. SATVICHAR VANIJYA PVT. LTD. (TOTAL COMMISSION RS.2,97,275/-) WAS RETURNED BY THE DEPARTMENTAL INSPECTOR WITH REM ARKS, NOT KNOWN. THE ASSESSEE WAS REQUESTED TO FURNISH EXPLANATION. THE A/R OF TH E ASSESSEE FILED ONE CONFIRMATION LETTER FROM M/S. SATVICHAR VANIJYA PVT. LTD. BUT H E FAILED TO FURNISH ANY EVIDENCE TO ESTABLISH THEIR ROLE IN THE BUSINESS OF THE ASSESSE E AS PER THEIR CLAIM. THE A/R OF THE ASSESSEE FAILED TO FURNISH ANY EXPLANATION ABOUT NO N TRACING OF M/S. SATVICHAR VANIJYA PVT. LTD. AT THE GIVEN ADDRESS. HE FAILED TO FURNIS H THE CURRENT ADDRESS OF THE ABOVE PARTY. AT THE SAME TIME, HE FAILED TO PRODUCE THE SAID PARTY TO ESTABLISH HIS CLAIM. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE VIEW THAT THE BROKERS HAVE RENDERED SERVICES FOR THE PURPOSE OF ASSESSEES BUS INESS. HENCE, THE COMMISSION PAID IS ALLOWABLE EXCEPT SATVICHAR VANIJYA PVT. LTD. TO THE EXTENT OF RS.2,97,275/-. ACCORDINGLY, APPEAL OF REVENUE IS DISMISSED AND ASSESSEES APPEA L IS PARTLY ALLOWED ON THIS ISSUE. 7 ITA 1363&1558//K/2009 DAMODAR PD. AGARWAL. A.Y.2006-07 8. NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS REGAR DING THE ORDER OF CIT(A) CONFIRMING DISALLOWANCE OF FOLLOWINGS: I) RS.1361/- DISALLOWED IN THE ASSESSMENT ON A/C O F DEMAT CHARGES BY TREATING IT AS PERSONAL IN NATURE. II) RS.13,800/- DISALLOWED IN THE ASSESSMENT ON A/C OF PURCHASE OF INVERTER BATTERY BY TREATING IT AS CAPITAL IN NATURE. III) RS.24,427/- DISALLOWED IN THE ASSESSMENT @ 10% OF RS.2,44,268/- ON A/C OF LABOUR CHARGES PAID TO CASUAL LABOURERS I.E. COOLIES FOR L OADING AND UNLOADING, PURELY ON ESTIMATE AND WITHOUT ANY BASIS ON A VAGUE AND FLIMS Y GROUND THAT THE PAYMENTS WERE MADE IN CASH AGAINST SELF-MADE VOUCHERS. 9. AFTER HEARING RIVAL CONTENTIONS, IN REGARD TO TH E DISALLOWANCE OF DEMAT CHARGES, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THIS ISSUE , HENCE THE SAME IS DISMISSED AS NOT PRESSED. AS REGARDS TO DISALLOWANCE OF PURCHASE OF INVERTER BATTERY BY TREATING THE SAME IN THE NATURE OF CAPITAL, WE FIND THAT THE LD. COUNSEL FOR THE ASSES SEE FAIRLY CONCEDED THAT THE ALLOWANCE OF DEPRECIATION ON THE SAME WILL SUFFICE FOR THE JUSTI CE. ACCORDINGLY, WE DIRECT THE AO TO ALLOW DEPRECIATION ON THE SAME. THIS ISSUE IS PARTLY ALL OWED. IN REGARD TO DISALLOWANCE OF LABOUR CHARGES PAID TO CASUAL LABOURS I.E. COOLIES, WE FIN D THAT THESE EXPENSES WERE INCURRED FOR LABOUR PAYMENTS. THE AO AS WELL AS CIT(A) HAS DISALLOWED 10% ON ESTIMATE BASIS ON THE BASIS THAT VOUCHERS ARE SELF-MADE AND ENTIRE EXPENDITURE IS NO T VERIFIABLE. WE FIND THAT NEITHER AO NOR CIT(A) HAS POINTED OUT ANY MISTAKE OR ANY DEFECT IN THE VOUCHERS, HENCE DISALLOWANCE MADE IS WITHOUT ANY BASIS AND WE DELETE THE SAME. THIS ISSU E OF ASSESSEES APPEAL IS ALLOWED. IN RESPECT TO ABOVE THREE ISSUES, THE ISSUES ARE DECID ED IN TERMS OF THE ABOVE DIRECTION. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THAT OF ASSESSEE IS PARTLY ALLOWED. 11. ORDER PRONOUNCED IN OPEN COURT ON 30.6.2011. SD/- SD/- . . ! ' '' ' # # # # , ! (S. V. MEHROTRA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( / / / /) )) ) DATED 30TH JUNE, 2011 '01 %23 4' JD.(SR.P.S.) 8 ITA 1363&1558//K/2009 DAMODAR PD. AGARWAL. A.Y.2006-07 . 5 ,6 76'8- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT SHRI DAMADAR PD. AGARWAL, C/O SALARPURIA JAJODIA & CO., 7, C. R. AVENUE, KOLKATA-72. 2 ,-*+ / RESPONDENT, ITO, WARD-45(4), KOLKATA. . 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA 5 . '> ,% / DR, KOLKATA BENCHES, KOLKATA -6 ,/ TRUE COPY, .%?/ BY ORDER, #3 /ASSTT. REGISTRAR .