A.C.I.T.,Circle-36, Kolkata V. M/s Rohit & Co., Kolkata

ITA 1425/KOL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2675 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-10-2021
• Assessment Year: 2009-2010
• Appeal Filed On: 11-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: S M SURANA
• Keywords: Gift; Principle of natural justice; Proportionate interest; Reasonable cause; Commercial expediency; Onus to prove; TDS
• Section: 133(6); 2(A); 13; 131

Judgement Text

1 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI P. M. JAGTAP, VICE PRESIDENT (KZ) & SHRI A. T. VARKEY, JUDICIAL MEMBER I.T.A. NOS. 1425 & 1427/KOL/2019 ASSESSMENT YEARS: 2009-10 & 2011-12 ACIT, CIRCLE-36, KOLKATA VS. M/S. ROHIT & CO. (PAN: AADFR3190D) APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 06.10.2021 DATE OF PRONOUNCEMENT 28.10.2021 FOR THE APPELLANT SMT. RANU BISWAS, ADDL. CIT FOR THE RESPONDENT SHRI S. M. SURANA, ADVOCATE ORDER PER BENCH: BOTH THESE APPEALS ARE PREFERRED BY THE REVENUE WH ICH ARE AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A)-10, KOLKATA DATED 31.01.2019 FOR AYS 2009-10 AND 2011-12. 2. BOTH THESE APPEALS OF THE REVENUE ARE TIME BARRE D BY 59 DAYS AND FOR CONDONING THE DELAY, THE REVENUE HAS FILED PETITION S FOR THE SAME. AFTER HEARING BOTH THE SIDES AND AFTER PERUSING THE REASONS STATED IN THE PETITION, WE CONDONE THE DELAY SINCE THERE WAS REASONABLE CAUSE FOR THE CAUSE OF D ELAY AND ADMIT BOTH THE APPEALS FOR HEARING ON MERITS. 3. FIRST OF ALL WE TAKE UP THE GROUNDS OF APPEAL RA ISED BY THE REVENUE FOR AY 2009-10. 4. GROUND NO. 1 OF THE REVENUE APPEAL IS AGAINST TH E ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.1,05,60,000/- WHICH WAS MADE BY THE AO DISALLOWING THE EXPENSES ON ACCOUNT OF RENT. 5. BRIEF FACTS PERTAINING TO THIS GROUND OF APPEAL AS NOTED BY THE AO ARE THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS.1,05,60,000/ - IN RESPECT OF RENT PAID FOR 2 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 PREMISES AT MUMBAI. ACCORDING TO THE AO, THE ASSES SEE HAD TAKEN ON RENT A BUILDING FROM FOUR (4) PERSONS OUT OF WHOM THREE (3 ) WERE THE PARTNERS OF THE ASSESSEE FIRM ITSELF. THE AO NOTED THAT THE ELECTR ICITY BILLS OF THE PREMISES WERE RAISED BY BEST WHICH SHOWS THAT THE BILLS WERE RAIS ED IN THE NAME OF M/S. MARATHON REALITY LTD. (DEVELOPER OF THE PROPERTY/FL ATS) THOUGH THE AO AGREED THAT THE ASSESSEE HAD SUBMITTED THE COPY OF THE SALE/PUR CHASE DEED TO PROVE THE GENUINENESS OF THE OWNERSHIP OF THE PREMISES IN QUE STION WHICH WAS OWNED BY THREE (3) PARTNERS AND THE FOURTH PERSON BEING MRS. MEENA KSHI BIHANI (WIFE OF A PARTNER). ACCORDING TO AO, IT COULD NOT BE ASCERTAINED AS TO WHETHER THE ASSESSEE HAD TAKEN ON RENT THE PREMISES OF THESE THREE PARTNERS AND MR S. MEENASKHI BHIHANI FOR BUSINESS PURPOSE. ACCORDING TO THE AO, COMMISSION U/S 131 OF THE ACT WERE ISSUED TO VERIFY THE FACT/CLAIM OF THE ASSESSEE THAT THE P ROPERTIES TAKEN ON RENT WERE USED FOR BUSINESS PURPOSE. HOWEVER, ACCORDING TO AO, TH E COMMISSION REPORTED THAT THE PREMISES WERE FOUND OCCUPIED BY DOMESTIC HELPS. TH EREFORE, ACCORDING TO THE AO, ASSESSEE FAILED TO PROVE AS TO WHETHER THE ASSESSEE WAS IN USE OF THIS PREMISES IN QUESTION AND WHETHER THE PREMISES WERE USED FOR BUS INESS/COMMERCIAL PURPOSE. THEREFORE, THE AO DISALLOWED THE CLAIM OF EXPENDITU RE OF RS.1,05,60,000/-. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A), WHO WAS PLEASED TO DELETE THE SAME BY HOLDING AS UNDER (RELEVANT PO RTIONS ONLY):- I HAVE CAREFULLY EXAMINED THE ACTION OF THE LD. A. O IN ADDING THE IMPUGNED AMOUNT OF RS.L,05,60,000/- UNDER HEAD 'EXPENSES ON ACCOUNT OF RENT MUMBAI'. I FIND THAT THE LD. A.O HAS DISALLOWED THE ENTIRE AMOUNT ON GROUNDS THAT AL L THE ESSENTIAL DOCUMENTS WERE NOT PROVIDED BY THE APPELLANT ASSESSEE TO PLACE ON RECO RD THE GENUINENESS OF THE RENT PAID. THE LD. A.O, IT WOULD APPEAR SUSPECTED THE PAYMENTS ON ACCOUNT OF THE FACT THAT THREE OF THE FOUR PERSONS WERE PARTNERS OF THE FIRM M/S. ROHIT & CO ITSELF. IN THE COURSE OF THE SCRUTINY ASSESSMENT, THE APPELLANT HAS SUBMITTED COPIES OF T HE RENTAL AGREEMENTS, COPIES OF THE TDS CERTIFICATES EVIDENCING DEDUCTION OF TAX (TDS) FOR THE RENTS PAID AS WELL AS DOCUMENTS RELATING TO THE DISCLOSURE OF SUCH INCOME S IN THE HANDS OF THE PARTNERS AND OTHER PERSON. HOWEVER; THE LD. AO WAS NOT CONVINCED WITH THE DOCUMENTS AND WANTED ANSWERS TO QUERIES SUCH AS WHETHER THE PROPERTIES/PREMISES WERE ACTUALLY USED BY THE ASSESSEE, AND WHETHER THE USE WAS FOR BUSINESS PURPOSES TO BE ELI GIBLE FOR DEDUCTION AS A 'BUSINESS EXPENSE'. THE APPELLANT PROVIDED COPIES OF THE SALE DEEDS BY WAY OF DOCUMENTATION OF OWNERSHIP, AND IT WAS ALSO SUBMITTED THAT THE ENTIR E PROPERTY WAS UTILIZED FOR THE BUSINESS OF THE APPELLANT, BUT THE LD. A.O WAS NOT CONVINCED ABOUT EITHER THE OWNERSHIP OR THE USE OF THE PROPERTY, AND PROCEEDED TO MAKE THE IMPUGNED ADDITION. 2(A) TO (H) .. (I) THE UNDISPUTED FACT OF THE CASE ARE AS UNDER: 3 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 I. THE PROPERTY IS BEING OWNED 1. SHREE NARAYAN BI HANI; 2) ROHIT BIHANI; 3. RAGHAV BIHANI ALL THE PARTNER'S OF THE FIRM AND 4. MRS. ME ENAKSHI BIHANI, WIFE OF SHREE NARAYAN BIHANI. THE SAID PROPERTY WAS SITUATED AT L OWER PAREL, MUMBAI. II. THE SAID PROPERTY WAS PURCHASED FROM MARATHON R EALITY LTD., WHO DEVELOPED AND SOLD THE SAME TO THE OWNER OF THE PROPERTY. (COPY OF SAL E DEED ENCLOSED AS MARK - K) III. THE ASSESSEE HAS TAKEN THE SAID PROPERTIES ON RENT AND RENT AGREEMENT WAS ALSO BEEN SUBMITTED DURING THE COURSE OF HEARING. (COPY OF RE NT AGREEMENT ENCLOSED AS MARK - L), IV. THE ASSESSEE HAS PAID RENT TO THE OWNER'S OF TH E PROPERTY (COPY ENCLOSED AS MARK - M) I.E. QUANTUM OF RENT PAID. V. THE ASSESSEE HAS BUSINESS ESTABLISHMENT IN MUMBA I AND HAVING TURNOVER OF RS. 458.91 CRORES FROM MUMBAI OFFICE ITSELF. (J) TO (K) 3. I HAVE CAREFULLY EXAMINED THE SUBMISSIONS PLACED BY THE APPELLANT-ASSESSEE, AS AGAINST THE FINDINGS RECORDED BY THE LD. A.O. I HAVE ALSO C AREFULLY EXAMINED THE VARIOUS EVIDENCES BROUGHT ON RECORD BY THE APPELLANT TO ESTABLISH THE VERACITY OF ITS CLAIMS OF HAVING PAID RENT. THERE SEEMS TO BE NO DISPUTE ABOUT THE FACT T HAT THE PREMISES IN QUESTION WAS OWNED BY SHREE NARAYAN BIHANI, SHRI ROHIT BIHANI, SHRI RA GHAV BIHANI [WHO ARE ALL PARTNERS IN THE APPELLANT-FIRM] AND SMT. MEENAKSHI BIHANI, WIFE OF SHREE NARAYAN BIHANI, AND THAT THE PREMISES WERE LOCATED AT LOWER PAREL, MUMBAI. BY FU RNISHING A COPY OF THE SALE DEED [PURCHASE DEED IN THE HANDS OF THE 4 PERSONS], THE APPELLANT HAS BEEN ABLE TO ESTABLISH THAT THE SAID PREMISES/ PROPERTY WAS PURCHASED FROM THE DEVELOPER, M/S MARATHON REALITY LTD, WHO DEVELOPED AND SOLD THE SAME TO THE OWNER(S) OF THE PROPERTY. IT IS ALSO APPARENT THAT THE SAID PREMISES WERE TAKEN ON RENT BY THE FIRM, A ND THE RENTAL AGREEMENTS HAVE BEEN FILED BY THE APPELLANT BEFORE THE LD. A.O AS WELL AS IN A PPEAL. THE RENTS WERE REGULARLY PAID BY THE APPELLANT TO THE OWNERS, AND NECESSARY TDS EFFE CTED. AS REGARDS, THE REQUIREMENT TO PAY A RATHER LARGE COMPONENT AS RENT, I ALSO FIND M ERIT IN THE CLAIM OF THE APPELLANT THAT WITH TURNOVERS RANGING UPTO 458.91 CRORES AS IN THE PRES ENT YEAR, THERE WAS REQUIREMENT FOR LARGE SPACE IN THE BUSINESS PREMISE TO CARRY OUT BUSINESS SMOOTHLY. I FIND THAT THE LD. A.O HAS DISALLOWED THE ENTIRE RENT AND HAS NOT ALLOWED ANY PORTION OF THE RENT; THE LD. A.O HAS NOT CONSIDERED IN MY OPINION THE VERY JURISDICTIONAL FA CT THAT AS TO HOW AS THE APPELLANT TO RUN ITS BUSINESS IF THE VERY PREMISES HAD BECOME QUESTI ONABLE. THE LD. A.O HAS NOT ANSWERED THE SIMPLE QUESTION THAT THERE WAS REQUIREMENT FOR LARGE PREMISES GIVEN THE TURNOVERS RETURNED BY THE APPELLANT, AND DEFINITELY A LARGE S PACE WAS REQUIRED. I FIND FROM THE REPLIES GIVEN BY THE APPELLANT THAT ALL THE QUESTIONS RAISE D BY THE LD. AO ABOUT THE NAMES ON THE ELECTRICITY BILLS, SALE DEED ETC HAVE BEEN ANSWERED BY THE APPELLANT AND WELL EXPLAINED. I FIND THAT IN THE YEAR IN QUESTION, THE LD. A.O HAS DISBELIEVED THE MATERIAL EVIDENCE FILED BEFORE HIM SUCH AS PROOF OF RENTAL AGREEMENT, PROOF OF PAYMENT BY CHEQUES, TDS AFFECTED, ELECTRICITY BILLS ETC. I FIND THAT WHILE THE LD. A. O HAS IN THIS YEAR DISBELIEVED THE ENTIRE PAYMENTS IN SUCCEEDING YEARS, WHICH ARE ALSO UNDER APPEAL, THE LD. A.O HAS QUESTIONED THE 'EXCESSIVE PAYMENTS' MADE TO RELATED PARTIES. I FIN D THAT IN A.Y'S 2013-14 AND 2014-15, THE IMPUGNED MATTER HAS BEEN TREATED AS 'EXCESSIVE PAYM ENTS' TO RELATED PARTIES AND REFERRED TO THE TPO, AND THE LD. TPO HAS NOT MADE ANY ADVERSE R EMARKS AGAINST THE SUMS BEING PAID AS RENT. IN ANY CASE, FOR THIS YEAR UNDER APPEAL, I FIND THAT THE APPELLANT HAS BEEN ABLE TO COUNTER THE REMARKS OF THE LD. A.O WITH NECESSARY E VIDENCE .AND EXPLANATION. ONCE FACTUALLY, IT HAS BEEN ESTABLISHED THAT THE RENTS W ERE ACTUALLY PAID, AND TDS EFFECTED WHILE MAKING SUCH PAYMENTS, I FIND THAT THE LD. A.O HAS N O CLEAR EVIDENCE THAT THE PREMISES WERE NOT UTILIZED FOR THE BUSINESS PURPOSES OF THE APPEL LANT AT MUMBAI. HE HAS ONLY ARRIVED AT ADVERSE CONCLUSIONS ON THE BASIS OF CERTAIN COMMISS ION ISSUED IN THE CASE OF THE RECEIVERS 4 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 OF RENT, AND THE STATEMENT GIVEN. IT IS QUITE APPAR ENT THAT SUCH STATEMENT OR ANY ADVERSE FINDINGS THEREIN WERE NOT MADE AVAILABLE TO THE APP ELLANT TO DEFEND ITSELF, BEFORE THE LD. A.O REACHED ANY ADVERSE CONCLUSIONS. IN MY CONSIDER ED VIEW THEREFORE, I FIND THAT THERE WAS A COMPLETE DENIAL OF THE PRINCIPLES OF NATURAL JUSTICE AS CONTEMPLATED IN THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASES OF KISHINCHAN D CHELLARAM V. CIT (1980) 125 ITR 713 (SC) AND ANDAMAN TIMBER INDUSTRIES VS. COMMISSI ONER OF CENTRAL EXCISE, KOLKATA-II REPORTED IN [2015] 62 TAXMANN.COM 3 (SC), IN SUCH M ATTERS. OVERALL, AFTER CAREFULLY CONSIDERING ALL THE MATERIAL FACTS AND EVIDENCES, I AM UNABLE TO SUSTAIN ANY PORTION OF THE DISALLOWANCE MADE BY THE LD. A.O ON ACCOUNT OF RENT PAID, AND THEREFORE THE SAME IS DELETED. THE GROUND OF APPEAL STANDS ALLOWED. 6. AGGRIEVED BY THE AFORESAID DECISION OF THE LD. C IT(A), THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESS EE HAD CLAIMED RENTAL EXPENDITURE ON A PREMISES AT MUMBAI WHICH HAS BEEN DISALLOWED B Y THE AO BECAUSE MOST OF THE OWNERS OF THE PREMISES WERE PARTNERS OF THE ASSESSE E FIRM AND ONE OF THEM WAS THE PARTNERS WIFE (MRS. MEENAKSHI BIHANI WIFE OF SHRI NARAYAN BIHANI). ONE OF THE REASONS FOR THE AO TO DOUBT THE GENUINENESS OF THE CLAIM WAS THAT SINCE THE ELECTRICITY BILL SHOWED THE NAME OF M/S. MARATHON R EALITY LTD. (BILLS RAISED BY BEST) AND THE OTHER REASON WAS THAT SINCE THE LOCAL INSPECTION REVEALED THAT SOME DOMESTIC HELP WAS ONLY FOUND IN THAT PREMISES. BAS ED ON THE AFORESAID REASONS THE AO WAS OF THE OPINION THAT THE PREMISES IN QUESTION WHICH THE ASSESSEE CLAIMED TO HAVE INCURRED RENTAL EXPENDITURE WAS NOT GENUINE, S INCE NO BUSINESS WAS CARRIED OUT IN THAT PREMISES AND THEREFORE HE DID NOT ALLOW THE RENTAL EXPENDITURE. ON APPEAL, THE LD. CIT(A) HAS TAKEN NOTE THAT IN ORDER TO PROV E THE OWNERSHIP OF THE BUSINESS PREMISES TAKEN ON RENT ALL THE THREE PARTNERS AS WE LL AS THE PARTNERS WIFE MRS. MEENAKSHI BIHANI HAD FURNISHED COPY OF THE SALE DEE D/PURCHASE DEED. THE LD. CIT(A) HAS ALSO GIVEN A FINDING OF FACT THAT THESE OWNERS OF THE BUILDING HAD PURCHASED THE PREMISES IN QUESTION FROM THE DEVELOP ER M/S. MARATHON REALITY LTD. (ELECTRICITY BILLS RAISED BY THE BEST IN RESPECT OF THIS PREMISES). FURTHER THE LD. CIT(A) HAS ALSO NOTED THAT THE ASSESSEE REQUIRED T HIS PREMISES FOR RUNNING THE BUSINESS SINCE ITS TURNOVER WAS TO THE TUNE OF RS.4 58.91 CR. AND THE LD. CIT(A) TAKING NOTE THAT THE ASSESSEE HAD FILED RENTAL AGRE EMENT OF THE PROPERTY IN QUESTION AND PROOF OF PAYMENT BY CHEQUES, TDS EFFECTED, ELE CTRICITY BILLS AS WELL AS THE FACT THAT THE OWNERS/PARTNERS OF THE PREMISES HAVE DULY SHOWN THE RENTAL INCOME IN THEIR 5 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 RESPECTIVE RETURN OF INCOME. MOREOVER, THE LD. CIT (A) HAS NOTED THAT FOR AYS. 2013-14 AND 2014-15 THE AO HAD QUESTIONED THE EXCES SIVE PAYMENTS MADE TO RELATED PARTIES IN THIS REGARD AND, THEREFORE, HE R EFERRED THE MATTER TO TPO PURSUANT TO WHICH THE TPO HAS NOT MADE ANY ADVERSE REMARK AG AINST THE SUMS/RENT PAID AS RENT. IN THE LIGHT OF THE AFORESAID DISCUSSION, WE FIND THAT THE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THAT THE ASSESSEE HAD TAKEN ON RENT THE PREMISES IN QUESTION AT MUMBAI FOR ITS BUSINESS NEED I.E. ALL T HE COMMERCIAL ACTIVITIES ( VIZ, BACK OFFICE WORK, MARKETING, BUSINESS MEET, CONFERENCES AND ACCOMMODATION TO VISITING EXECUTIVES ) WERE BEING CARRIED OUT FROM THIS RENTAL PREMISES. WE NOTE THAT EVEN THOUGH THE OWNERS OF THE PROPERTY ARE RELATIVES, TH E ASSESSEE HAS BEEN ABLE TO BRING ON RECORD RELEVANT MATERIAL TO SUPPORT ITS CLAIM OF HAVING TAKEN THE PREMISES IN QUESTION ON RENT. NEXT WE NEED TO SEE WHETHER THE A SSESSEE WAS ABLE TO SHOW THAT THE RENTAL PREMISES WAS USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. IN THIS REGARD IT WAS BROUGHT TO OUR NOTICE THAT AL L ITS COMMERCIAL ACTIVITIES LIKE BACK OFFICE WORK ETC. WAS CARRIED OUT AT THAT PREMISES, FROM WHICH ONLY THE ASSESSEE HAS TURNOVER OF RS 458 CRORE. WE NOTE THAT THE PAYMENT OF RENT WAS MADE BY THE ASSESSEE FIRM TO THE OWNERS (PARTNERS) THROUGH CHEQ UE AFTER DEDUCTION OF TDS AND THE OWNERS (PARTNERS) HAVE DULY SHOWN THE RENTAL IN COME IN THEIR RESPECTIVE INCOME TAX RETURNS AND THAT TAX HAS BEEN PAID ON IT. TO S UBSTANTIATE THE INCURRING OF RENTAL EXPENDITURE THE ASSESSEE HAD FILED THE RENTAL AGREE MENT, SALE DEED OF THE RELATED PARTIES, ELECTRICITY BILLS, PAYMENT BY CHEQUE AND D ETAILS OF TDS DEDUCTED ON THE RENTAL PAYMENTS. IT IS NOTED THAT THESE EVIDENCE CO ULD NOT BE CONTROVERTED/REBUTTED BY THE AO/LD DR AND THE AO HAS DISALLOWED THE EXPEN DITURE ON THE BASIS OF SURMISES AND CONJECTURES. SO WE ARE OF THE OPINION THAT DISALLOWANCE MADE BY THE AO HAS BEEN RIGHTLY REVERSED BY THE LD. CIT(A). TH EREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ) AND WE CONFIRM THE SAME. THEREFORE, THIS GROUND OF APPEAL OF REVENUE STANDS DISMISSED. 8. GROUND NO. 2 OF REVENUES APPEAL IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.7,12,705/- AS EXCESS I NTEREST CLAIMED ON UNSECURED LOAN. 6 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 9. BRIEF FACTS AS NOTED BY THE AO ARE THAT THE ASSE SSEE HAS INCURRED INTEREST EXPENDITURE ON ACCOUNT OF UNSECURED LOAN. HE NOTED THAT THE ASSESSEE HAD BORROWED SUMS FROM TWO (2) TYPES OF PARTIES VIZ., RELATED PARTIES AS DEFINED U/S. 40A(2)(B) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) AND NON-RELATED PARTIES . FROM THE TAX AUDIT REPORT THE AO NOTED THAT THE AUDITOR HAS REPORTED THAT THE INTEREST PAID TO THE RELATED PARTIES ARE NOT EXCESSIVE TO ATTRACT ANY ADVERSE VIEW AS PER THE ACT. HOWEVER, THE AO BENCH-MARKED THE I NTEREST EXPENDITURE AT 8% WHICH WAS PAID BY THE ASSESSEE TO THE RELATED PARTI ES AND HAS DISALLOWED AMOUNT PAID TO UNRELATED PARTIES ABOVE 8% AS UN-REASONAB LE BY HOLDING IT TO BE EXCESSIVE. ACCORDING TO THE AO, THE ASSESSEE FAILED TO GIVE PR OPER EXPLANATION WITH REGARD TO THE EXCESS INTEREST PAID TO THE UNRELATED PARTIES ( I.E. MORE THAN 8%), THEREFORE, HE DISALLOWED THE AMOUNT OF RS.7,12,705/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DE LETE THE SAME BY HOLDING AS UNDER:- 1. I HAVE CAREFULLY EXAMINED THE ACTION OF THE LD .AO IN MAKING THE IMPUGNED DISALLOWANCE OF RS.7,12,705/-, FROM THE CLAIM OF IN TEREST PAYMENT MADE BY THE ASSESSEE. I HAVE ALSO CAREFULLY EXAMINED THE SUBMISSIONS AND AR GUMENTS ADVANCED BY THE APPELLANT / LD A.R FOR THE APPELLANT, AND THE VARIOUS DOCUMENTS SUBMITTED IN SUPPORT OF ITS REPLY. THE BASIC FACTS OF THE CASE ARE THAT THE APPELLANT HAS BORROWED SUMS FROM TWO TYPES OF PARTIES VIZ., 'RELATED PARTIES' AS DEFINED U/S 40(A)(2)(B) OF THE INCOME TAX ACT, 1961 AND NON- RELATED PARTIES. THE RELATED PARTIES HAVE BEEN MENT IONED IN THE TAX AUDIT REPORT, AND IT HAS BEEN CERTIFIED THAT THE INTEREST PAYMENTS MADE TO T HEM WERE NOT EXCESSIVE TO ATTRACT THE PROVISION OF THE ACT IN ANY ADVERSE FASHION. IT APP EARS THAT THE LD. AO HAS BENCHMARKED THIS AMOUNT OF 8 % PAID TO RELATED PARTIES, AND HAS DISALLOWED ANY AMOUNTS PAID TO THE UNRELATED PARTIES BEYOND 8&HOLDING THE RATE OF 8% A S REASONABLE, AND ANY RATE ABOVE THAT TO BE 'EXCESSIVE'. THE LD. A.O HAS OPINED THAT THE ASS ESSEE-FIRM HAS FAILED TO EXPLAIN AS TO WHY ANY RATE ABOVE 8% OF INTEREST PAID WAS NOT ALLO WABLE. IN SCRUTINY, IT WAS EXPLAINED BY THE ASSESSEE, THAT THE ASSESSEE THAT TAKEN LOANS AT DIFFERENT RATES FROM BANKS, FINANCIAL INSTITUTIONS AS WELL AS RELATED AND NON-RELATED PAR TIES, AND THAT THE RATES OF INTEREST PAID TO RELATED PARTIES VARY FROM 8 % TO 10% , AND THAT PAI D TO UNRELATED PARTIES VARY FROM 12 % TO 15%. IT WAS ALSO FURTHER EXPLAINED THAT IN CASE OF SECURED LOANS TAKEN FROM BANKS AND FINANCIAL INSTITUTIONS, THE INTEREST RATE PAID VARI ED FROM 12.25% TO 13.50%, AS PER THE PRIME LENDING RATE (PLR) OF THE BANKS / INSTITUTIONS. IN SUMMARY, IT WAS ARGUED BY THE APPELLANT THAT THE INTEREST RATES PAID TO RELATED PARTIES WAS MUCH LESS THAN WHAT WAS PAID TO NON- RELATED PARTIES OR TO BANKS, AND THEREFORE THE SAME WAS TO BE ALLOWED. IN THE CASE OF NON- RELATED PARTIES, IT WAS ARGUED THAT THE INTEREST RA TE PAID WAS LESS THAN THE PREVAILING MARKET RATES, AND THEREFORE THE SAID RATES BEING REASONABL E, THEY OUGHT TO BE ACCEPTED BY THE LD. A.O. HOWEVER, THE LD. A.O WAS NOT AMENABLE TO SUCH REASONS AS OFFERED BY THE ASSESSEE- FIRM AND RECKONED THAT THE APPELLANT HAD NOT EXPLAI NED THE REQUIREMENT OF THE LOANS AND THE NEED TO PAY AT HIGHER RATE OF INTEREST IN TERMS OF THE BUSINESS REQUIREMENTS. 2(A) TO (H) .. 7 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 3. HAVING CAREFULLY EXAMINED THE SUBMISSIONS OF THE APPELLANT AGAINST THE ACTION OF THE LD. AO, I NOTE THAT THE LD. A.O HAS BENCH MARKE D 8% OF INTEREST PAYABLE AS THE NORM, AND TREATED ALL AMOUNTS PAID ABOVE THIS PERCENTAGE TO BE EXCESSIVE IN CASE OF PRIVATE/UNSECURED LOANS. I ALSO OBSERVE THAT THIS I S A CASE WHERE THE APPELLANT BY ITS OWN ADMISSION HAS PAID LESSER RATE OF INTEREST TO ITS ' RELATED PARTIES', SO AS NOT TO CONTRAVENE ANY OF THE PROVISIONS OF SEC 40A(2)(B) OF THE INCOME TA X AT, 1961. THE REST OF THE PARTIES FROM WHOM UNSECURED LOANS WERE TAKEN HAVE BEEN PAID, ACC ORDING TO THE APPELLANT AT RATES LESSER THAN THE PREVAILING MARKET RATE. THERE IS ONLY ONE EXCEPTION WHERE 15% OF INTEREST RATE WAS PAID, AND I FIND THAT THE EXPLANATION OFFERED BY TH E APPELLANT THAT THE SAID LOAN FROM THIS PARTY, NAMELY M/S. SYNTHETICS MOULDERS LTD -, AN UN RELATED PARTY WAS @ 15% , WHICH IS HIGHER THAN THE BANK RATE, AS THE LOAN WAS FOR A VE RY SHORT PERIOD AND WAS REPAID ALSO WITHIN THE YEAR. IN MY CONSIDERED VIEW OF THE MATTE R, THIS PRECISELY EXPLAINS THE URGENT REQUIREMENT FOR BUSINESS AS HAS BEEN ARGUED BY THE APPELLANT-FIRM. I FIND THAT THERE HAS BEEN COMPLETE DISCLOSURE OF THE LOANS AND INTEREST RATES BY THE APPELLANT, AND THE TAX AUDIT REPORT ALSO STATES ABOUT THE INTEREST RATES TO THE RELATED PARTIES. IN MY CONSIDERED VIEW, THE APPELLANT HAS BEEN ABLE TO SUBSTANTIATE AS TO WHY H IGHER RATE OF INTEREST WAS PAID ON UNSECURED LOANS TO THE UNRELATED PARTIES, AND THE L D. A.O HAS QUITE CLEARLY OVERLOOKED SUCH EXPLANATION. I FIND NO REASON FOR THE LD. A.O TO BE NCHMARK THE ALLOWABLE INTEREST RATE @ 8% INTEREST RATE, AND DISALLOW THE AMOUNTS OF INTER EST PAID OVER SUCH RATE. THE APPELLANT HAS RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S. A. BUILDERS LTD. (SUPRA), WHEREIN THE HON'BLE APEX COURT HAS DESCRIB ED THE PURPOSE OF BUSINESS AND COMMERCIAL EXPEDIENCY BY CONSIDERING, WHETHER ONE S HOULD ALLOW DEDUCTION UNDER SECTION 36(1)(III) OF INTEREST PAID BY ASSESSEE ON AMOUNTS BORROWED BY IT FOR ADVANCING TO A SISTER CONCERN, AND THAT THE AUTHORITIES SHOULD EXAMINE TH E PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MONEY AND WHAT THE SISTER CONCERN DID WITH THE MONEY. IT HAS BEEN EXPOUNDED THAT THE BORROWED AMOUNT IS NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SIST ER CONCERN IS NOT RELEVANT, AND THAT WHAT IS GERMANE IS THAT, IS WHETHER THE AMOUNT WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER T HE AMOUNT WAS ADVANCED FOR EARNING PROFITS. ONCE IT IS ESTABLISHED THAT THERE WAS NEXU S BETWEEN THE EXPENDITURE AND PURPOSE OF THE BUSINESS THE REVENUE CANNOT JUSTIFIABLY CLAIM T O PUT ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE PARTNERS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMS TANCES OF THE CASE. 4. . 5. . 6. . OVERALL IN VIEW OF THE FACTS AND CIRCUMSTANCES, AS EMANATING FROM THE CASE, I FIND THAT THE ARGUMENTS AND REASONING OF THE APPELLANT / LD A.R F IND FAVOUR WITH MOST OF THE HON'BLE COURTS AND MORE SPECIFICALLY WITH THE JUDGMENTS EMA NATING FROM THE HON'BLE SUPREME COURT IN THE CASE OF M/S. MUNJAL SALES CORPORATION VS. CIT REPORTED IN (2008) 168 TAXMAN 43(SC) AND ALSO S. A. BUILDERS (SUPRA). IN THE CIRC UMSTANCES, I FIND THAT THE ACTION OF THE LD AO IN DISALLOWING A SUM OF RS.7,12,705/- ON ACCOUNT OF DISALLOWANCE OF PROPORTIONATE INTEREST WAS NOT JUSTIFIED, AND I FIND THAT THE SAM E CANNOT BE SUSTAINED. THE GROUND IS THEREFORE ALLOWED IN FAVOUR OF THE APPELLANT-ASSESS EE . 10. AGGRIEVED BY THE AFORESAID DECISION OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 8 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 11. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESS EE HAS TAKEN LOAN FROM TWO SOURCES I.E ONE FROM RELATED PARTIES AND OTHER FROM UNRELATED PARTIES AND SINCE THE ASSESSEE HAD PAID 8% AS INTEREST EXPENDITURE TO THE RELATED PARTIES, THE AO BENCHMARKED 8% LENDING RATE AS REASONABLE RATE OF I NTEREST AND HELD THAT ANYTHING BEYOND THAT WAS EXCESSIVE AND WHICH WAS DISALLOWED BY THE AO AND THUS DISALLOWED RS.7,12,705/-. ON APPEAL, THE LD. CIT(A ) NOTED THAT THE ASSESSEE HAS TAKEN UNSECURED LOANS AT DIFFERENT RATES FROM RELAT ED AND UNRELATED PARTIES AS WELL AS BANKS, FINANCIAL INSTITUTIONS WHICH WAS VARYING FRO M 8 TO 10% AND PAID TO UNRELATED PARTIES INTEREST VARYING FROM 12 TO 15% RESPECTIVEL Y. THE LD. CIT(A) TOOK NOTE OF THE FACT THAT IN THE CASE OF SECURED LOANS TAKEN FR OM BANK AND FINANCIAL INSTITUTIONS INTEREST RATE PAID WAS VARYING FROM 12.25 TO 13.50% AS PER PRIME LENDING RATE (PLR) OF THE BANKS/FINANCIAL INSTITUTIONS. IN THE CASE OF THE UNRELATED PARTIES IT WAS CONTENDED THAT THE INTEREST RATE PAID WAS LESS THAN THE PREVAILING MARKET RATE AND, THEREFORE, THE SAID RATE IS REASONABLE. AFTER HEAR ING THE ASSESSEE AND HAVING GONE THROUGH THE RECORDS THE LD. CIT(A) NOTED THAT THE A O HAS BENCHMARKED 8% AS INTEREST PAYABLE AS REASONABLE AND TREATED ALL AMO UNTS PAID ABOVE THIS PERCENTAGE (8%) TO BE EXCESSIVE IN CASE OF PRIVATE/UNSECURED L OANS. THE LD. CIT(A) NOTED THAT THE ASSESSEE HAS PAID LESSER RATE OF INTEREST TO IT S RELATED PARTIES, SO THERE WAS NO CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(2)(B ) OF THE ACT. WHEN IT COMES TO THE UNRELATED PARTIES FROM WHOM THE ASSESSEE HAD TA KEN UNSECURED LOANS, THE LD. CIT(A) NOTED THAT ASSESSEE HAD INCURRED INTEREST EX PENDITURE LESSER THAN THE PREVAILING MARKET RATE EXCEPT FROM ONE PARTY I.E. M /S. SYNTHETICS MOULDERS LTD., WHICH WAS ALSO UNRELATED PARTY FROM WHOM ASSESSEE H AD TAKEN UNSECURED LOAN @ 15% WHICH WAS HIGHER THAN THE BANK RATE. HOWEVER, IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE LD. CIT(A) THAT THIS LOAN WAS F OR A SHORT PERIOD AND WAS REPAID WITHIN THE YEAR ITSELF. THE LD. CIT(A) HAS FOUND T HAT SINCE THERE WAS AN URGENT BUSINESS REQUIREMENT, THE ASSESSEE HAD TAKEN THE UN SECURED LOAN DUE TO BUSINESS EXIGENCY AT HIGHER RATE @ 15% WHICH WAS ALSO REPAID IN THE SAME YEAR. THE LD. CIT(A) HAS NOTED THAT THE ASSESSEE HAD DISCLOSED T HE LOANS, NATURE OF THE LOANS, INTEREST RATES PAID ETC. WHICH WERE REFLECTED IN T HE TAX AUDIT REPORT WHICH INCLUDED 9 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 THE DETAILS OF THE UNSECURED LOAN FROM RELATED PART IES. THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSESSEE HAS MADE OUT A CASE THAT DUE TO BUSINESS EXIGENCY, LOANS WERE TAKEN AT A HIGHER RATE OF 15% AT SHORT NOTICE WHICH WARRANTED PAYMENT OF HIGHER RATE OF INTEREST. THE LD. CIT(A) THEREAFTER RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF S. A. BUILDERS (SUPRA) TO ALLOW THE ASSESSEES INTEREST EXPENDITURE. THE AFORESAID FACTS NARRATED ABOVE COULD NOT BE REBUTTED/CONTRADICTED BY THE LD. DR BEFORE US. THE REFORE, BASED ON THE FACTUAL FINDING OF THE LD. CIT(A) ON THIS ISSUE AS DISCUSSE D SUPRA, WE DO NOT FIND ANY REASON TO OVERTURN THE DECISION OF THE LD. CIT(A) A CCEPTING THE INTEREST EXPENDITURE TO THE TUNE OF RS. 7,12,705/-. THEREFORE, WE CONFIR M THE ACTION OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF REVENUE. 12. GROUND NO. 3 OF THE REVENUES APPEAL IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.1,61,35,327/- WHICH WAS MADE BY THE AO BY DISALLOWING THE COMMISSION PAID TO SELLING AGENTS. FACTS NOTED BY THE LD. CIT(A) ARE THAT THE ASSESSEE IS IN THE TRADE OF STEEL ITEM S. IT WAS BROUGHT TO THE NOTICE OF THE AO THAT THE IN IRON & STEEL TRADE, MOST OF THE SALE S WERE EFFECTED THROUGH BROKERS AND THE AO TAKING NOTE THAT THE ASSESSEE HAD PAID A COMMISSION OF RS.1,61,35,327/- DURING THE RELEVANT ASSESSMENT YEAR (AY 2009-10) TO VARIOUS PARTIES ASKED FOR THE DETAILS OF COMMISSION PAID PARTY WISE. ASSESSEE PU RSUANT TO THE SAME GAVE PARTY WISE DETAILS BEFORE THE AO AND BROUGHT TO THE AOS NOTICE OF THE FOLLOWING FACTS ON THIS ISSUE: A. MOST OF BROKER ARE OLD ONE AND ARE WORKING WITH MY CLIENT SINCE LONG. THE DETAILS OF BROKERAGE DURING THE YEAR TO ALL BROKER HAS ALREADY BEEN PROVIDED. B. THE BROKERS PROCURED ORDER ON BEHALF OF MY CLIEN T AND ALSO RESPONSIBLE TO COLLECT PAYMENT FROM BUYER FOR WHICH THEY HAVE BEEN GIVEN C OMMISSION. THE CHARGE OF COMMISSION VARIES FROM PARTY TO PARTY AS WELL AS SA LES TO SALES. USUALLY Y CLIENT PAID COMMISSION ON PERCENTAGE BASIS ON THE VALUE OF SALE S WHICH RANGING BETWEEN 0.50% TO 2%. HOWEVER SOME TIME COMMISSION IS ALSO PAID ON TONNAG E BASIS I.E. FIXED AMOUNT OF COMMISSION PER TON. BILLS RAISED BY THEM IS BEING S UBMITTED FOR VERIFICATION, C. THERE IS NO AGREEMENT WITH THE BROKER AND MY CLI ENT HOWEVER IF THERE IS ANY AGREEMENT BETWEEN BUYER AND BROKERS IS NOT KNOWN TO MY CLIENT . D. BROKERS RAISED THE BILLS FOR HIS COMMISSION MENT IONING ALL THE RELEVANT DETAILS I.E. NAME OF PARTY, QTY SOLD, DESCRIPTION OF MATERIAL, ETC. W HICH CAN BE VERIFIED FROM THEIR BILLS. HOWEVER LIST OF PARTIES TO WHOM SALES HAVE BEEN EFF ECT WE LIKE TO STATE YOU THAT TOTAL NO OF 10 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 BROKERAGE ENGAGED IN AHMADABAD BR IS 21 WHEREAS IN MUMBAI IT IS 216. FURTHER AS ASKED FOR PROVIDING DETAILS OF BROKERAGE PARTY WISE DETAI LS OF SALES EFFECTED THROUGH BROKER, WE LIKE TO STATE YOU THAT CLIENT IS NOT MAINTAINING DE TAILS IN REQUESTED FORMAT, HENCE WE HAVE TO MANUALLY PREPARE THE DETAILS WHICH REQUIRE ANOTHER 7 TO 10 DAYS TO PREPARE. ' 13. AFTER TAKING NOTE OF THE EXPLANATION AND DOCUME NTS SUBMITTED BY THE ASSESSEE ON THIS ISSUE, THE AO DISALLOWED THE COMM ISSION EXPENSE BY TAKING NOTE THAT THERE WAS NO WRITTEN AGREEMENT BETWEEN THE ASS ESSEE AND SUCH BROKERS. ACCORDING TO HIM, PAYMENT MADE BY CHEQUE/TDS DEDUCT ED CANNOT BE THE DECIDING FACTOR REGARDING GENUINENESS OF CLAIM OF THE COMMIS SION PAID BY THE ASSESSEE. EVEN THOUGH THE AO ACCEPTED THAT SEVERAL BROKERS HA D CONFIRMED TO HIS NOTICE U/S 133(6) OF THE ACT, THE PAYMENT OF COMMISSION PAID T O THEM BY THE ASSESSEE AFTER DEDUCTION OF TAX (TDS), THE AO WAS OF THE OPINION T HAT PAYMENT MADE BY CHEQUE MAY BE ONE OF THE CRITERIA FOR VERIFYING THE GENUIN ENESS OF THE CLAIM OF SUCH EXPENDITURE BUT IT CANNOT BE SOLE CRITERIA FOR SUC H CLAIM. ACCORDING TO HIM, THE ASSESSEE FAILED TO PROVE THAT THE COMMISSION EXPEND ITURE WAS MADE WHOLLY FOR THE PURPOSE OF THE BUSINESS AND, THEREFORE, HE DISALLO WED RS.1,61,35,327/- AND ADDED TO THE INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DELETE THE SAME BY HOLDING AS UNDER: 1. I HAVE CAREFULLY CONSIDERED THE ACTION OF THE L D. A.O IN MAKING THE IMPUGNED DISALLOWANCE OF RS.L,61,35,327/-, BEING THE CLAIM O F COMMISSION EXPENSES AS MADE BY THE APPELLANT. VERY BRIEFLY, THE FACTS OF THE CASE ARE THAT THE LD. A.O TOWARDS THE FAG END OF THE TIME-BARRING PERIOD OF ASSESSMENT, REQUIRED THE APP ELLANT-FIRM TO SUBMIT DETAILS IN A CERTAIN NEW FORMAT SEEKING VARIOUS DETAILS REGARDING GENUIN ENESS OF COMMISSION PAID TO THE SELLING AGENTS. DURING THE COURSE OF HEARING, THE L D. A.O ALSO ISSUED NOTICE U/S 133(6) TO THE VARIOUS COMMISSION AGENTS AND ALSO RECEIVED THE CERTAIN RESPONSES THERE FROM. IT WAS PLEADED BY THE APPELLANT THAT THE DETAILS AS CALLED FOR BY THE LD. A.O IN THE SPECIFIED FORMAT FOR OVER 200 SELLING (COMMISSION ) AGENTS WAS VERY DIFFICULT WITHIN THE SHORT TIME ALLOWED, AND THAT THE LD. A.O COULD VERIFY THE TRAN SACTIONS AND REQUIRED DETAILS FROM THEIR BILLS WHICH WAS SUBMITTED DURING THE COURSE OF HEAR ING. IT WAS FURTHER SUBMITTED BY THE APPELLANT BEFORE THE LD. A.O THAT IN IRON & STEEL T RADE MOST OF THE SALES ARE EFFECTED THROUGH BROKER AND AS THE ASSESSEE IS DISTRIBUTOR O F IRON & STEEL PRODUCTS ALSO ADOPTED THESE PRACTICE, MOREOVER THE PRACTICE ADOPTED BY TH E ASSESSEE IS NOT NEW AND COMMISSION AGENT WERE ALSO ASSOCIATED WITH ASSESSEE SINCE LONG . IT IS THE CONTENTION OF THE APPELLANT IN APPEAL THAT THE LD. A.O DID NOT CONSIDER ANY OF THE FACTS PLACED ON RECORD, OR THE SUBMISSIONS MADE, AND RECKONED THAT AS THE ASSESSEE -FIRM COULD NOT FURNISH DETAILS AS ASKED FOR IN THE SPECIFIC FORMAT TO SUPPORT ITS CLAIM OF PAYMENTS, THE SAME PAYMENTS WERE TO BE TREATED AS UNEXPLAINED. THE LD A.O THEREFORE ADDED BACK THE ENTIRE CLAIM OF COMMISSION PAYMENTS TOTALLING RS.L,61,35,327/- WITH THE TOTAL INCOME OF THE ASSESSEE. 2. IN THIS MATTER, IT IS PERTINENT TO NOTE THAT MY PREDECESSOR-IN-OFFICE HAD CALLED FOR A REMAND REPORT AFTER ADMITTING THE PLEA OF THE APPEL LANT THAT IT WAS PREVENTED BY 'SUFFICIENT CAUSE' FROM PRODUCING THE PARTY-WISE DETAILS BEFORE THE LD. A.O DUE TO THE PAUCITY OF TIME, 11 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 AND THE LD. A.O HAD BEEN DIRECTED TO EXAMINE THE DE TAILS OF PARTY-WISE PAYMENTS AS SUBMITTED IN APPEAL, AND TO FORWARD A REMAND REPORT IN THE MATTER. IT HAS TO BE STATED THAT THE LD. A.O HAS CAUSED NECESSARY VERIFICATION OF TH E CLAIMS BY THE ISSUE OF COMMISSION U/S.131 TO OFFICERS AT MUMBAI AND THANE, AND THE NE CESSARY SPOT VERIFICATION ABOUT THE PAN, EXISTENCE AND SERVICES RENDERED BY SOME OF THE COMMISSION AGENTS ON A SAMPLE BASIS HAD BEEN OBTAINED BY THE LD. A.O, AND THE SAM E WERE FORWARDED TO THIS OFFICE. I FIND THAT THERE WERE 237 COMMISSION AGENTS, AND THE LD. A.O HAS BY ISSUE OF COMMISSION OBTAINED REPLIES IN 14 COMMISSION AGENTS, 8 CASES O N ONE OCCASION, AND 6 ON ANOTHER SUBSEQUENT OCCASION. IN CERTAIN CASES, THE REPORTS INCLUDE BRIEF NOTE ON BUSINESS ACTIVITY OF THE COMMISSION AGENTS, COPES OF RETURN OF INCOME TA X, COPY OF THE TAR, COPIES OF THE P&L ACCOUNT AND THE DETAILS OF COMMISSION RECEIVED FOR WORK RENDERED BY THE COMMISSION AGENT FOR THE APPELLANT-FIRM. I ALSO NOTE FROM THE REPLIES SUBMITTED BY THE OFFICERS AT MUMBAI AND THANE THAT IN MOST OF THE CASES, NOTHING ADVERSE HAS BEEN REPORTED, EXCEPT WHERE THERE WAS NON-COOPERATION BY THE AGENT, OR TH AT THE AGENT WAS NOT FOUND IN THE ADDRESS STATED. 3. ON ANALYSIS OF THE SUBMISSIONS AND ARGUMENTS MAD E BY THE ASSESSEE AS AGAINST THE FINDINGS RECORDED BY THE LD. A.O, IT APPEARS FROM T HAT THE FACTUAL MATRIX FOR THE PRESENT YEAR UNDER APPEAL THAT THE ASSESSEE HAD A TURNOVER RS.458.91 CRORES FROM MUMBAI OFFICE ITSELF WHICH IS AROUND 72% OF TOTAL TURNOVER OF RS. 622.24 CRORES, AND THAT THE COMMISSION EXPENSES WORK OUT TO LESS THAN VERY SMALL AND REASO NABLE FRACTION OF SUCH DISCLOSED TURNOVER, AND THE SAME APPEARS PRIMA FACIE TO BE RE ASONABLE, ESPECIALLY IN THE SITUATION WHERE THE SALARY PAYMENTS ARE NOT EXCESSIVE. I FIND THAT THERE IS A CERTAIN JUSTIFICATION FOR PAYING THE COMMISSION TO ACHIEVE HIGHER TURNOVERS. IT IS ALSO TRUE THAT THE APPELLANT HAS IN THE NATURE OF BUSINESS EXPEDIENCY, APPOINTED COMMIS SION AGENTS FOR PROCURING ADDITIONAL TURNOVERS, AND THEY MAY NOT BE RECOGNIZED AS 'AGENT S' OR 'MIDDLEMEN BY THE TRANSACTING PARTIES, AND THEY MAY BE DEALING WITH THE ASSESSEE THROUGH THESE AGENTS WITHOUT REALIZING THAT THEY ARE AGENTS AS SUCH. IN ANY CASE, I FIND T HAT THE LD. AO HAS, ON FACTS NOT FOUND ANY OF THE PAYMENTS TO BE FALSE OR MADE TO RELATED PART IES. IT HAS BEEN HELD IN THE CASE OF CIT V. SHRIRAM PISTONS & RINGS LTD. (2012) 19 TAXMANN.COM 205/206 TAXMAN 41 (MAG.) (DELHI) 'WHERE ASSESSEE PAID COMMISSION TO AGENTS FOR WORK PERFORMED BY THEM, AGENTS WERE NOT BOGUS, AND COMMISSION WAS PAID BY CROSSED CHEQUE, S AME WAS ALLOWABLE AS DEDUCTION. '. 14. AGGRIEVED BY THE AFORESAID DECISION OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 15. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESS EE IS A DISTRIBUTOR OF IRON & STEEL PRODUCTS AND HAD INCURRED COMMISSION EXPENDITURE OF RS.1,61,35,327/-. THE AO ASKED FOR THE DETAILS OF THE COMMISSION AGENTS WHIC H WERE PROVIDED BY THE ASSESSEE. THOUGH THE AO ACKNOWLEDGES THAT THE NOTICE U/S. 133 (6) OF THE ACT TO VARIOUS AGENTS WERE CONFIRMED BY SOME OF THEM, HOWEVER, HE WAS OF THE OPINION THAT THE CONFIRMATION OF RECEIVING PAYMENTS CANNOT BE THE SO LE CRITERIA FOR DECIDING THE ALLOWABILITY OF COMMISSION EXPENDITURE. AND EVEN T HOUGH IT WAS BROUGHT TO THE NOTICE OF THE AO THAT THESE ARE 200 OLD BROKERS WHO WERE WORKING IN BOMBAY AND 12 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 AHMEDABAD, AND THIS KIND OF COMMISSION WAS REGULARL Y DISBURSED TO THEM AND WAS BEING ALLOWED IN THE EARLIER ASSESSMENT YEARS. HOW EVER, THE AO SOUGHT CERTAIN MORE DETAILS IN A PARTICULAR FORMAT AT THE FAG-END WHEN THE ASSESSMENT WAS GETTING TIME BARRED. AND EVEN THOUGH IT WAS BROUGHT TO THE NOTICE OF THE AO THAT THE COMMISSION PAYMENTS WERE MADE BY CHEQUE AS WELL AS TDS WAS DEDUCTED STILL THE AO WAS OF THE OPINION THAT THE ASSESSEE FAILED TO PROVE THAT THE EXPENDITURE WAS MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND DISALLOWED THE SAME. ON APPEAL, THE LD. CIT(A) CALLED FOR REMAND REPORT FROM THE AO WHEREIN THE AO AGREED THAT THERE WAS PAUCITY OF TIME WHILE FRAM ING THE ASSESSMENT ORDER TO ENQUIRE INTO THE NATURE OF THE SERVICES RENDERED BY THE COMMISSION AGENTS. THE AO IN THE REMAND REPORT HAS ACKNOWLEDGED TO HAVE ISSUE D COMMISSION U/S. 131 OF THE ACT TO OFFICERS AT MUMBAI AND THANE AND WHO DID SOM E SPOT VERIFICATION OF THE DETAILS OF THE SOME OF THE COMMISSION AGENTS ON A S AMPLE BASIS VIZ ABOUT THEIR PAN, EXISTENCE AND SERVICES RENDERED ETC. THE LD. CIT(A ) NOTED FROM THE PERUSAL OF THE REMAND REPORT THAT ASSESSEE HAD 237 COMMISSION AGEN TS AND BY ISSUE OF COMMISSION U/S 131 OF THE ACT, HAD OBTAINED REPLIES FROM 14 CO MMISSION AGENTS (8 CASES ON ONE OCCASION AND 6 ON OTHER OCCASION). THE LD. CIT(A) NOTED THAT THE REMAND REPORT INCLUDED BRIEF NOTE ON THE BUSINESS ACTIVITY OF THE COMMISSION AGENTS, COPIES OF RETURN OF INCOME TAX, COPY OF THE TAR, COPIES OF TH E P&L ACCOUNT AND THE DETAILS OF COMMISSION RECEIVED FOR WORK RENDERED BY THE COM MISSION AGENTS FOR THE ASSESSEE. THE LD. CIT(A) ALSO NOTED THAT THE ASSES SEE HAD A TURNOVER OF RS.458.91 CR. FROM MUMBAI OFFICE ITSELF WHICH ACCORDING THE L D. CIT(A) WAS AROUND 72% OF THE TOTAL TURNOVER OF RS.622.24 CR. AND THAT THE CO MMISSION EXPENSES WORKED OUT TO BE VERY LESS AND CONSTITUTED ONLY A FRACTION OF SUC H DISCLOSED TURNOVER, WHICH ACCORDING TO THE LD. CIT(A) WAS REASONABLE, ESPECIA LLY IN THE SITUATION WHEN THE SALARY PAYMENTS INCURRED BY THE ASSESSEE ARE NOT EX CESSIVE. SO, HE FOUND JUSTIFICATION FOR PAYING THE COMMISSION TO AGENTS T O ACHIEVE HIGHER TURNOVERS. THE LD. CIT(A) HAS RELIED ON FEW CASE LAWS TO JUSTIFY H IS ACTION OF ALLOWING THE COMMISSION EXPENSES WHICH HAS BEEN REPRODUCED (SUPR A). WE NOTE THAT THE AO/LD DR DID NOT BRING ON RECORD ANY MATERIAL TO SHOW THA T THE TRANSACTION OF PAYMENT OF COMMISSION TO AGENTS WERE NOT GENUINE OR THE COMMIS SION PAID WAS EXCESSIVE OR 13 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 UNREASONABLE, THEREFORE, NO DISALLOWANCE COULD HAVE BEEN MADE BY THE AO AT THE FIRST PLACE ITSELF. FOR THAT PROPOSITION, WE RELY O N THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ALFA HYDRONICS PV T. LTD., ITA NO. 549/2004 DECIDED ON 10.11.2014. THEREFORE, THE LD. CIT(A) R IGHTLY DELETED THE ADDITION WHICH DOES NOT REQUIRE OUR INTERFERENCE SO, WE CONF IRM THE SAME. THEREFORE, THIS GROUND OF APPEAL OF REVENUE STANDS DISMISSED. 16. COMING TO APPEAL FOR AY 2011-12. WE NOTE THAT GROUND NO. 1 IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION O F RS.1,05,60,000/- AS MADE BY THE AO AS EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF RENT. WE FIND THAT THIS ISSUE IS PERMEATING IN AY 2009-10 WHEREIN WE HAVE UPHELD THE ACTION OF THE LD. CIT(A) DELETING THE ADDITION. SINCE THERE IS NO CHANGE IN FACTS AND LAW, WE CONFIRM THE ACTION OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 17. GROUND NO. 3 WHICH IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.3,46,775/- MADE BY THE AO AS EXPENSE S ON ACCOUNT OF EXCESS INTEREST CLAIMED ON UNSECURED LOAN. WE FIND THAT THE SAME I SSUE DID CAME UP IN THE APPEAL FOR AY 2009-10 AS GROUND NO. 2, WHEREIN WE HAVE ALR EADY CONFIRMED THE ACTION OF THE LD. CIT(A). SINCE THERE IS NO CHANGE IN FACTS AND LAW, WE CONFIRM THE ACTION OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 18. GROUND NO. 4 IS AGAINST THE ACTION OF THE LD. C IT(A) IN DELETING THE ADDITION OF RS.7,06,973/- MADE BY THE AO AS COMMISSION PAID TO THE SELLING AGENTS. WE NOTE THAT THE SAME ISSUE CAME UP IN THE APPEAL FOR AY 20 09-10 WHILE ADJUDICATING GROUND NO. 3, WHEREIN WE HAVE ALREADY CONFIRMED THE ACTION OF THE LD. CIT(A) DELETING THE ADDITION OF RS.1,61,35,327/- WHICH WAS INCURRED BY THE ASSESSEE AS COMMISSION PAID TO SELLING AGENTS. IN THIS YEAR WE NOTE THAT THE AO HAD PARTLY ONLY DISALLOWED IT TO THE TUNE OF RS.7,06,973/- WHICH HA S BEEN DELETED BY THE LD. CIT(A) ON THE SAME REASON FOR AY 2009-10. WE NOTE THAT IN THIS YEAR THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.1.52 CR. AS COMMISSION E XPENSES AND THE AO HAS ACCEPTED THE CLAIM OF ASSESSEE EXCEPT RS.7,06,973/- WHICH HAS BEEN DELETED BY THE 14 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 LD. CIT(A) FOR THE VERY SAME REASONS WHICH WE HAVE TAKEN NOTE IN THE CASE OF THE ASSESSEE FOR AY 2009-10. SINCE THERE IS NO CHANGE IN FACTS AND LAW, WE CONFIRM THE ACTION OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 19. NOW THE ONLY GROUND REMAINING IS GROUND NO. 2 W HICH IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.1,06, 54,614/- WHICH WAS CLAIMED BY THE ASSESSEE AS EXPENSES ON ACCOUNT OF SALES PROMOT ION. 20. BRIEF FACTS OF THE CASE AS NOTED BY THE AO ARE THAT HE NOTED FROM THE FINANCIAL SUBMITTED BY THE ASSESSEE THAT ASSESSEE H AD INCURRED AND CLAIMED EXPENDITURE OF RS.1,44,17,572/- UNDER THE HEAD SALE S PROMOTION. THE AO NOTED FROM THE BREAKUP OF THESE EXPENSES THAT IT WERE INC URRED ON THE FOLLOWING EXPENDITURE (I) PAYMENT MADE TO M/S. TITAN INDUSTRI ES LTD. RS.97,614/- ( PURCHASE OF GOLD/SILVER ), (II) PAYMENT MADE TO M/S. TITAL INDUSTRIES LTD., APEEJAY HOUSE BLOCK- C 8 TH FLOOR, 15 PARK STREET, KOL-16 RS.39,38,000/- ( TANISHQ GIFT VOUCHER FOR DISTRIBUTION AS PART OF DEALER INCENTIVE SCHEME ) AND (III) PAYMENT MADE TO M/S. TOUCH POINT CRM SOLUTIONS P. LTD. RS.66,19,000/- ( FOR DISTRIBUTION OF GIFT ). THE AO ACKNOWLEDGES THAT THE ASSESSEE FIRM HAS SHOWN TH E PROOF OF PAYMENT FOR PURCHASE OF GIFT VOUCHER ETC. HOWEVER, THE AO IN O RDER TO EXAMINE THE REQUIREMENT FOR THE GIFTS FOR THE PURPOSE OF THE BUSINESS, THE ASSESSEE WAS ASKED TO PRODUCE LEDGER ACCOUNT OF PERSONS TO WHOM THE GIFTS WERE DI STRIBUTED. PURSUANT TO THE SAME, THE ASSESSEE SUBMITTED THAT THESE GIFTS WERE GIVEN TO THE SALE PARTIES. HOWEVER, ACCORDING TO THE AO, THE LEDGER OF NONE OF THE SALE PARTIES OF THE ASSESSEE REFLECTED ANY SUCH ITEM BEING GIVEN TO THEM. THEREFORE, HE W AS OF THE OPINION THAT THE ASSESSEE FAILED TO BRING ANY MATERIAL ON RECORD TO SUBSTANTIATE THAT THE GIFTS WERE ACTUALLY DELIVERED TO THE SAID PARTIES. THEREFORE, HE WAS OF THE OPINION THAT THE PURCHASE OF GIFTS AMOUNTING TO RS.1,06,54,614/- CAN NOT BE HELD TO BE EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS OF THE ASSESSEE, SO HE DISALLOWED THE AMOUNT OF RS.1,06,54,614/-. AGGRIEV ED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DEL ETE THE SAME BY HOLDING AS UNDER: 15 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 I HAVE CAREFULLY EXAMINED THE SUBMISSIONS MADE BY THE APPELLANT IN THE LIGHT OF THE ACTION OF THE LD. A.O. I FIND THAT THE DISTRIBUTION OF THE GIFTS WHICH WERE QUESTIONED BY THE LD. A.O ARE ON ACCOUNT OF THE SCHEME OFFERED BY THE PRI NCIPAL M/S TATA STEEL, AND THE COST OF SUCH DISTRIBUTION WAS TO BE BORNE BY THE APPELLANT, WHO IS A MAJOR DEALER FOR THE M/S TATA STEEL IN GUJARAT AND PARTS OF MAHARASHTRA. I FIND T HAT THE NECESSARY BILLS RELATING TO PURCHASE OF THE GIFTS HAD BEEN PRODUCED BEFORE THE LD. A.O, AND THE SAME HAVE NOT BEEN DOUBTED. THEREFORE THE EXPENDITURE TOWARDS THE PURCHASES HAV E UNDOUBTEDLY BEEN PROVEN IN THE CASE AT HAND. AS HAS BEEN EXPLAINED BY THE APPELLANT, TH E GIFTS WERE FOR THE END USERS, AND WERE PASSED ON TO THEM FROM THE OUTLETS WHERE THE FINAL END-USE PURCHASES WERE MADE. THE LD. A.O HAS OPINED THAT THE GIFTS OUGHT TO HAVE BEEN RO UTED THROUGH THE LEDGERS OF THE SALE PARTIES, AND THAT THIS HAS NOT BEEN DONE. HOWEVER, I FIND THAT ONCE INFORMATION WAS AVAILABLE AS TO WHOM THE APPELLANT HAD PASSED ON TH E GIFTS TO BE GIVEN TO THE END-USERS, IN A SITUATION WHERE LD. A.O HAS DOUBTS ABOUT THE SAME H E COULD HAVE SOUGHT CONFIRMATION FROM THE DEALERS TO WHOM THE GIFTS WERE MADE AND OB TAINED THE NAMES OF THE END-USERS WHO HAD RECEIVED THE GIFTS. THIS HAS NOT BEEN DONE AND I FIND THAT THE LD. A.O HAS NOT MADE ANY ENQUIRIES BEFORE ARRIVING AT ADVERSE CONCL USIONS AGAINST THE APPELLANT. I FIND THAT THERE IS NO DISPUTE THAT THE GIFTS WERE PASSED ON T O THE END USERS, ONLY THAT THE SAME WERE ROUTED THROUGH THE SALES LEGER ACCOUNT. HOWEVER, IN MY CONSIDERED VIEW OF THE MATTER, AS LONG AS THE GENUINENESS OF THE GIFTS WAS ESTABLISHE D, IT WAS NOT ABSOLUTELY NECESSARY THAT THE ACCOUNTING ENTRIES REGARDING THE VALUE OF THE GIFTS (WHICH WERE BASICALLY INCENTIVE IN NATURE) WERE TO BE NARRATED IN THE PARTY SALES LEGE R, WHICH ARE BASICALLY TRANSACTION LEGERS OF PURCHASE AND SALE. I FIND THAT THE ENTIRE SCHEME WAS GOVERNED BY THE SCHEME PUT IN PLACE BY M/S TATA STEELS, AND THAT PURCHASES OF THE GIFTS WERE ALSO FROM TATA RELATED OUTLETS LIKE TITAN AND TANISHQ. THE DISTRIBUTION WAS ALSO C ARRIED OUT BY AN AUTHORIZED GIFT DISTRIBUTOR COMPANY FOR M/S TATA STEELS. THE ARRANG EMENT AS IN PLACE CLEARLY SUGGESTS THAT THE ORIGINAL PRINCIPAL MI TATA STEELS HAS FULL CONT ROL AND SUPERVISION OVER THE SCHEME AND WAS TO ENSURE THAT THE END-USERS WOULD BENEFIT, WHE RE ELIGIBLE. I FIND THAT, IN A SITUATION WHERE THERE WAS DOUBT ABOUT THE BUSINESS EXPEDIENCY OF THE SCHEME AND DISTRIBUTION IN THE MIND OF THE LD. A.O, HE COULD HAVE WELL VERIFIED TH E SAME FROM THE PRINCIPAL WHO HAD FORMULATED THE SCHEME M/S TATA. SUCH REQUIREMENTS H AVE NOT BEEN FULFILLED BY THE LD. A.O, WHO HAS OPINED THAT THE PARTY SALES LEGER DID NOT HAVE THE NECESSARY ENTRIES RELATING TO THE GIFTS. AFTER OVERALL EXAMINATION OF THE IMPU GNED MATTER, I AM AGREEABLE WITH THE SUBMISSION OF THE APPELLANT THAT THE LD. A.O HAS NO T BEEN ABLE TO POINT OUT ANY SPECIFIC ILLEGALITY, IRREGULARITIES OR PERVERSITY RELATING T O THE TRANSACTIONS, AND HAD GENERALIZED THE ISSUE. IN THE EMERGENT SITUATION, AND FOR THE AFORE SAID REASONS, I AM UNABLE TO SUSTAIN ANY PORTION OF THE DISALLOWANCE MADE BY THE LD. AO. TH E DISALLOWANCE IS THEREFORE DIRECTED TO BE DELETED. THE GROUND OF APPEAL STANDS ALLOWED. 21. AGGRIEVED BY THE AFORESAID DECISION OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 22. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESS EE HAD INCURRED AN AMOUNT OF RS.1,44,17,572/- WHICH WAS DEBITED UNDER THE HEAD SALES PROMOTION. THE AO BEING DISSATISFIED ABOUT PART OF THE CLAIM DISALLOW ED RS.1,06,54,614/- WHICH HAS BEEN DELETED BY THE LD. CIT(A). WE NOTE THAT THE A SSESSEE HAD FILED THE DETAILS OF BUSINESS PROMOTION EXPENDITURE FOR RS.1,44,17,572/- INCLUDING BILLS, VOUCHERS, 16 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 DOCUMENTS AND RECORDS; AND THAT SUCH EXPENSES INCL UDED EXPENDITURE FOR CONFERENCE AND REFRESHMENT, BRANDING EXPENSES, DIST RIBUTION OF SCRATCH CARDS, COST OF GOLD AND SILVER COIN, GIFT VOUCHERS ETC. WE NOT E THAT THE AO HAD ACCEPTED THAT THE PAYMENT WAS INCURRED BY THE ASSESSEE FOR PURCHA SE OF GIFTS AND HAS PARTLY DISALLOWED THE SAME ON THE GROUND THAT NONE OF THE SALES PARTY LEDGER MAINTAINED BY THE ASSESSEE REFLECTS ANY SUCH GIFTS ITEM GIVEN TO THEM. THEREFORE, HE WAS OF THE OPINION THAT BUSINESS PROMOTION EXPENDITURE OF RS.1 ,06,54,614/- IS NOT RELATED TO THE BUSINESS AND ACCORDINGLY DISALLOWED PART OF THE EXP ENSES. ON APPEAL, THE LD. CIT(A) HAS NOTED THAT THE ASSESSEE IS AN AUTHORISED DISTRIBUTOR OF M/S. TATA STEEL LTD. IN GUJARAT STATE AS WELL AS STATE OF MAHARASTR A AND IN THIS YEAR THE ASSESSEE FIRM HAD INCURRED EXPENSES ON BUSINESS PROMOTION ACCOUNT FOR DISTRIBUTION OF GIFTS, GIFT VOUCHERS TO THE END CUSTOMERS OF TATA PRODUCTS AND DEALERS OF M/S. TATA STEEL. THE LD. CIT(A) NOTED THAT AS PER THE SCHEME OF M/S. TAT A STEEL, FOR ITS DIFFERENT PRODUCTS, WHEN A DEALER ACHIEVES THE TARGET FIXED B Y THEM, THEN IT WOULD BE ENTITLED FOR CERTAIN BENEFIT/RECOGNITION/INCENTIVES. BUSINES S PROMOTIONAL SCHEME FURTHER PROVIDES THAT END CONSUMERS BENEFIT BY WAY OF LOTTE RY, SCRATCH CARD FOR IMMEDIATE REDUCTION IN BILL ETC. AS WELL AS IT ACTS AS INCENT IVE AND RECOGNITION TO SUB-DEALERS AND IN-TURN ENABLE BUSINESS ENTITIES TO ACHIEVE QU ANTITATIVE OR QUALITATIVE OBJECTIVE SUCH AS BOOST IN SALES, BUILDING TEAM SPIRIT, MANAG ING BETTER NETWORK ETC. THE LD. CIT(A) TOOK NOTE OF THE FACT THAT THE GIFTS PRESENT ED IN THE FORM OF REDEEMABLE GIFT VOUCHER OF VARIOUS DENOMINATION SUCH AS GOLD/SILVER GIFTS ETC. WAS MEANT FOR PROMOTING THE BUSINESS OF THE ASSESSEE THUS ATTRACT ING GENERATION OF MORE REVENUE AND, THEREFORE, IS AN ALLOWABLE EXPENDITURE. WE NO TE THAT THE ENTIRE SCHEME (PROMOTION SCHEME) WAS GOVERNED BY THE SCHEME PUT IN PLACE BY M/S. TATA STEELS, AND THAT PURCHASES OF THE GIFTS WERE ALSO FROM TAT A RELATED OUTLETS LIKE M/S TITAN AND M/S TANISHQ. AND THE DISTRIBUTION WAS ALSO CAR RIED OUT BY AN AUTHORIZED GIFT DISTRIBUTOR COMPANY FOR M/S. TATA STEELS. THE SCHE ME WAS CONTROLLED BY M/S. TATA STEELS AND WAS TO ENSURE THAT THE END USERS WOULD B ENEFIT IF THEY ARE ELIGIBLE. THE LD. CIT(A) HAS FOUND THAT THERE WAS NO DOUBT ABOUT THE GENUINENESS OF THE EXPENDITURE AND THE EXPENDITURE WAS FOR PROMOTION O F BUSINESS OF THE ASSESSEE AND THEREFORE AN ALLOWABLE EXPENSE. THIS FINDING OF FAC TS COULD NOT BE CONTROVERTED OR 17 ITA NOS.1425 & 1427/KOL/2019, M/S. ROHIT & CO., AYS 2009-10 & 2011-12 REBUTTED BY AO/LD DR, SO IN SUCH A CASE, WE FIND N O INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND WE CONFIRM THE ORDER OF THE LD. CIT( A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 23. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2021. SD/- SD/- (P. M. JAGTAP) (A. T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER DATED: 28 TH OCTOBER, 2021 JD, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- ACIT, CIRCLE-36, KOLKATA 2. RESPONDENT M/S ROHIT & CO., 22, STRAND ROAD, 1 ST FLOOR, KOLKATA-700 001. 3. CIT(A)-10, KOLKATA (SENT THROUGH E-MAIL) 4. CIT, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY/DDO ITAT, KOLKATA BENCHES, KOLKATA