Sun Minerals, Hyd, Hyderabad V. DCIT, Circle-6(1), Hyd, Hyderabad

ITA 138/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2383 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-03-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Onus to prove

Judgement Text

ITA NO 138 OF 2016 SUN MINERALS HYDERABAD. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.138/HYD/2016 (ASSESSMENT YEAR: 2007-08) M/S. SUN MINERALS HYDERABAD PAN: ABGFS52 62D VS D.C.I.T., CIRCLE 6 ( 1 ) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V. RAGHAVENDRA RAO FOR REVENUE : SMT. N. SWAPNA, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2007-08 AGAIN ST THE ORDER OF THE CIT (A)-6, HYDERABAD, DATED 30.11. 2015. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS B OTH ON FACTS AND IN LAW SO FAR AS IT IS PREJUDICIAL TO THE APPELLANT. 2. THE LEARNED CIT (A) ERRED IN UPHOLDING THE DISALLOWANCE OF COMMISSION PAYMENT OF RS.4,18,80,995 . 2. AT THE TIME OF HEARING, THE LEARNED DR BROUGHT T O OUR NOTICE THAT THIS ISSUE HAD ARISEN IN THE ASSESSEES OWN CASE IN THE DATE OF HEARING: 28.03.2018 DATE OF PRONOUNCEMENT: 28 . 0 3 .2018 ITA NO 138 OF 2016 SUN MINERALS HYDERABAD. PAGE 2 OF 5 EARLIER A.Y 2008-09 AND THE TRIBUNAL HAS HELD THE I SSUE AGAINST THE ASSESSEE. COPY OF THE SAID ORDER IS FILED BEFOR E US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FAIRLY AGREED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY T HE ORDER OF THE TRIBUNAL ON SIMILAR SET OF FACTS IN THE ASSESSMENT YEAR 2008-09. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE TRIBUNAL IN THE ASSESSE ES OWN CASE FOR THE A.Y 2008-09 IN ITA NO.2117 & 2116/HYD/2011 DATE D 18.05.2012 AT PARAS 6 TO 13 HAS HELD AS UNDER: 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS SETTLED LAW THAT IF THE ASSESSEE CLAI MED DEDUCTION OF ANY EXPENDITURE THE BURDEN OF PROOF IS ON THE ASSESSEE TO ESTABLISH THAT SUCH EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF ASSESSEE'S BUSINESS. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THERE IS NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE RECIPIENTS OF THE 5 COMMISSION AGENTS. EVEN IF THER E IS NO WRITTEN AGREEMENT, THE ASSESSEE COULD CLAIM DEDUCTION FOR T HE EXPENSES PROVIDED IF IT IS ESTABLISHED WITH DOCUMENTARY AND COGENT EVIDENCE THAT SUCH EXPENDITURE WAS INCURRED FOR THE PURPOSE OF ITS BUSINESS. NOW IN THE ASSESSEE'S CASE THERE IS EVEN AN IOTA OF EVIDENCE REGARDING RENDER OF ANY SERVICES TO THE ASSESSEE TO PROCURE BUSINESS TO THE ASSESSEE. THE ASSESSEE COULD NOT EVEN PRODUC E ANY CORRESPONDENCE BETWEEN THE PARTIES WHICH COULD HAVE SERVED AS A CONTEMPORANEOUS CIRCUMSTANTIAL EVIDENCE. THE ASSESS EE IS NOT ABLE TO CORRELATE THE COMMISSION PAYMENTS WITH REFERENCE TO THE SALE. THOUGH THE ASSESSEE MADE A CLAIM THAT THE COMMISSIO N AGENTS COLLECTIVELY INTRODUCED THE PARTIES THERE IS NO COR RESPONDENCE BETWEEN THE COMMISSION AGENTS. AS SEEN FROM PARAS 6 .2 AND 6.3 OF THE CIT(A)'S ORDER, THE STATEMENTS GIVEN BY THE ASS ESSEE ARE CONTRADICTORY IN NATURE. THE PARTIES HEREIN HAVE NO T GIVEN ANY EVIDENCE ABOUT THE NAMES OF PERSONS WHO WERE RECOMM ENDED BY THEM. 7. BEING SO, IT CANNOT BE PRESUMED THAT THE PARTIES WHOM THE ASSESSEE MADE ANY SALES WERE THROUGH THESE PARTIES TO WHOM THE COMMISSION HAS BEEN PAID. AS THERE IS NO EVIDENCE W HATSOEVER TO SUPPORT THE CLAIM OF THE ASSESSEE THAT THESE IMPUGN ED RECIPIENTS OF THE PAYMENTS RENDERED ANY SERVICE FOR WHICH COMMISS ION HAS BEEN PAID WHEN THEY DID NOT EVEN KNOW THEM. THEREFORE, I T CANNOT BE SAID ITA NO 138 OF 2016 SUN MINERALS HYDERABAD. PAGE 3 OF 5 THAT THE ASSESSEE HAS DISCHARGED THE ONUS TO PROVE THAT THE COMMISSION WAS PAID WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEE'S BUSINESS. THE ASSESSEE RELIED ON VARIOUS JUDGEMENTS WHICH CANNOT BE APPLIED TO THE ASSESSEE'S CASE AS T HESE JUDGEMENTS ARE ON THEIR OWN FACTS. THE QUESTION WHETHER THE AS SESSEE HAS ESTABLISHED THAT THE EXPENDITURE WAS INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IS ESSENTIALLY A QUESTI ON OF FACT TO BE DECIDED ON MERIT OF EACH CASE. 8. FROM THE STATEMENTS OF THE SO CALLED COMMISSION AGENTS FURTHER INFERENCES CAN BE DRAWN THAT NONE OF THE COMMISSION AGENTS IS ABLE TO PROVIDE DEFINITIVE LIST OF CUSTOMERS, QUANTITY O F SALES EFFECTED, AND WORKING OF COMMISSION. IN FACT M/S. R K MARKETING S ERVICES CLAIMS THAT IT DID NOT KNOW ANY CUSTOMERS (LEAVE ALONE INT RODUCING THEM). IT STATES THAT IT WAS ONLY ENSURING QUALITY OF ORE LOA DED INTO TRUCKS. THE AGENTS RECEIVED COMMISSION ONLY FROM THREE PARTIES NAMELY, M/S. SUN LNFRAA. M/S. SUN MINERALS AND M/S. K V MINERALS AND NO ONE ELSE DESPITE THE FACT THAT BELLARY IS A BIG CENTRE FOR IRON ORE TRADING. THESE AGENTS DID NOT PROVIDE SIMILAR SERVICES TO AN Y OTHER PARTIES DESPITE BOASTING THEIR EXPERTISE IN IRON ORE TRADIN G. ALL THE AGENTS APPEAR TO BE DISPARATE AND THE ASSESSEE CLAIM, THAT ALL ITS CUSTOMERS WERE INTRODUCED BY ALL THESE AGENTS, DOES NOT APPEA R TO BE A RELIABLE STATEMENT. THE MOST GLARING INCONSISTENCY APPEARS I N THE STATEMENT OF SMT. B. BAGYA LAKSHMI, WHO STATES THAT SHE INTRO DUCED EVEN M/S. K V MINERALS. 9. THERE WAS NO AGREEMENT BETWEEN THE ASSESSEE AND THE COMMISSION AGENTS AND THERE WAS NO DOCUMENT ON THE BASIS OF WHICH IT COULD BE SAID THAT THE COMMISSION WAS DUE AND PA YABLE. AS IT HAS BEEN ALREADY POINTED OUT, EVEN THE AGREEMENTS DO NO T BIND THE ASSESSING OFFICER FROM ENQUIRING INTO DEDUCTIBILITY OF COMMISSION. IN THIS CASE THERE ARE NO AGREEMENTS AND ALSO THERE WAS NO EVIDENCE OF ANY CORRESPONDENCE OR ANY PERSONAL MEETINGS BETW EEN THE ASSESSEE AND THE COMMISSION AGENTS TO SUGGEST THAT THERE WAS ANY RELATIONSHIP ON THE BASIS OF WHICH THE COMMISSION A GENTS PROCURED CUSTOMERS FOR THE ASSESSEE FOR WHICH THEY WERE ENTI TLED TO RECEIVE COMMISSION. THE UNDERSTANDING BETWEEN THE PARTIES W AS AN ORAL UNDERSTANDING AND IT WAS DOUBTFUL THAT SUCH AN ORAL UNDERSTANDING COULD HAVE BEEN ARRIVED AT WITHOUT ANY LONGSTANDING RELATIONSHIP HAVING BEEN ESTABLISHED BETWEEN THE ASSESSEE AND TH E COMMISSION AGENTS INVOLVING SUCH HUGE AMOUNTS OF MONEY OVER A PERIOD OF TIME. FURTHER, THE ASSESSEE IS UNABLE TO FURNISH THE DETA ILS OF CUSTOMERS INTRODUCED BY EACH AGENT AND ALSO THE EXACT WORKING OF COMMISSION PAYMENT MADE TO EACH OF THE AGENTS. MERE PAYMENT OF COMMISSION THROUGH ACCOUNT PAYEE CHEQUE AFTER DEDUCTION OF TDS DOES NOT ABSOLVE THE ASSESSEE FROM DISCHARGING ITS BURDEN WI TH REGARD TO PROVING BUSINESS PURPOSE OF THE PAYMENTS. 10. IN THE ABSENCE OF ANY CREDIBLE EVIDENCE FOR MAK ING SUCH PAYMENTS, WE ARE INCLINED TO DISALLOW THE SAME. ITA NO 138 OF 2016 SUN MINERALS HYDERABAD. PAGE 4 OF 5 11. RELIANCE IS PLACED ON THE DECISION OF THE TRIBU NAL IN THE CASE OF DAVINDER SINGH V. ACIT (104 ITD 325) ( ASR), CIT VS. CALCUTTA AGENCY LTD . (19 ITR 191) ( SC), LAKSHMIRATAN COTTON MILLS CO. LTD. VS. CIT (73 ITR 634) ( SC) AND L.H. SUGAR FACTORY & OIL MILLS (P) LTD. VS. CIT (19 CTR) (SC) 185 : (1980) 125 ITR 293 (SC). 12. RELIANCE IS ALSO PLACED ON THE DECISION OF DELH I BENCH OF THE ITAT IN THE CASE OF ROGER ENTERPRISES (P) LTD. VS. DCIT (88 ITD 95) HELD AS UNDER; ' 51. EXAMINING THIS MATTER FROM ANOTHER ANGLE, WE FE EL THAT THE ONUS OF PROOF THAT THE COMMISSION PAID WAS GENUINE WAS O N THE ASSESSEE. THE QUESTION THAT FURTHER ARISES IS AS TO WHETHER T HE ASSESSEE HAS DISCHARGED THE ONUS AND IF YES THEN HOW. ACCORDING TO THE ASSESSEE HE HAS DISCHARGED THE ONUS BY PROVING THAT THE PAYM ENT HAS BEEN MADE BY CHEQUE. NOT ONLY THIS, THE NAME OF THE PERS ON TO WHOM THE PAYMENT BY CHEQUE IS MADE IS DISCLOSED AND THEREFOR E THE PAYMENT IS GENUINE. 52. THIS ARGUMENT SO RAISED BY THE ASSESSEE SOUNDED WELL AT THE THRESHOLD BUT WHEN WE EXAMINED IT FURTHER WE FOUND THAT IT CANNOT HOLD WATER. MERELY BECAUSE PAYMENT IS MADE BY CHEQU E MAY IN SOME CASES PERSUADE THE AUTHORITIES TO HOLD THE PAY MENT TO BE GENUINE BUT IN THIS CASE THE SITUATION IS TOTALLY R EVERSE AS THE PERSON/PARTY TO WHOM THE PAYMENT BY CHEQUE IS ALLEG ED TO HAVE BEEN MADE HAS HIS OWN STORY TO TELL AND WHICH STORY IS BELIEVED BY US. THERE IS A COMPLETE BLACK OUT ON THE NATURE OF SERVICES RENDERED. THERE IS NO MATERIAL PLACED ON RECORD NOR HAS OUR A TTENTION BEEN DRAWN TO ANY MATERIAL WHICH WOULD DEMONSTRATE WITHO UT DOUBT THE NATURE OF SERVICES RENDERED BY THESE THREE COMPANIE S. KEEPING IN MIND THESE FACTS, WE FEEL THAT THE ASSESSEE HAS MIS ERABLY FAILED TO DEMONSTRATE THE SERVICES RENDERED AND HAS THUS FAIL ED TO DISCHARGE THE ONUS. 53. AS THE ASSESSEE HAS FAILED TO DISCHARGE THE ONU S, HE IS NOT ENTITLED TO THE CLAIM OF COMMISSION PAID.' 13. IN THE RESULT, APPEALS OF THE ASSESSEES' ARE DI SMISSED. 5. SINCE IN THE A.Y BEFORE US, THE PAYMENTS OF COMMISSION DISALLOWED BY THE AO ARE TO THE VERY SAM E PARTIES AS IN THE EARLIER A.YS, WE RESPECTFULLY FOLLOW THE DEC ISION OF THE COORDINATE BENCH OF THE TRIBUNAL AND THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. ITA NO 138 OF 2016 SUN MINERALS HYDERABAD. PAGE 5 OF 5 6. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH, 2018. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 28 TH MARCH 2018. VINODAN/SPS COPY TO: 1 P.R. DATLA & CO. CAS, 6-3-788/A/9 FIST FLOOR, DUR GA NAGAR AMEERPET, HYDERABAD 500016 2 DCIT CIRCLE 6(1) HYDERABAD 3 CIT (A)-6 HYDERABAD 4 PR. CIT 6 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER