Sunil Vishram Chawda, Hyd, Hyderabad V. ACIT, Circle-10(1), Hyd, Hyderabad

ITA 1430/HYD/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5992 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-04-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 23-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SURESH BABU
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Reopening of assessment; Depreciation; Business expenditure; Tangible material; Bad and doubtful debts; Difference of opinion; Commercial expediency; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 1430, 1431, 1432 & 1433/HYD/2015 ASSESSMENT YEARS: 2009-10, 2010-11, 2011-12 AND 201 2-13 SUNIL VISHRAM, HYDERABAD. PAN AAMPM 3617 P VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 10(1), HYDERABAD. (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI K.A. SAIPRASAD REVENUE BY : SHRI B. SURESH BABU DATE OF HEARING 26/04/2018 DATE OF PRONOUNCEMENT 25/05/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THESE FOUR APPEALS FILED BY THE ASSESSEE ARE DIRE CTED AGAINST ORDERS, ALL DATED, 26/10/2015 OF CIT(A) 6, HYDER ABAD FOR AY 2009- 10, 2010-11, 2011-12 AND 2012-13. SINCE IDENTICAL I SSUES ARE INVOLVED IN THESE APPEALS, THE SAME WERE CLUBBED AN D HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SA KE OF CONVENIENCE. ITA NO. 1432/H/2015 FOR AY 2011-12 2. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE IS A PROPRIETOR OF M/S CLASSIC CHEMICALS THAT DEALS IN TRADING AND SUP PLY OF WATER TREATMENT CHEMICALS. ASSESSEE FILED HIS RETURN OF I NCOME DECLARING A TOTAL INCOME OF RS. 1,05,44,238/-. THE ASSESSMENT W AS COMPLETED ON A TOTAL INCOME OF RS. 1,63,68,054/- BY MAKING DISAL LOWANCE OF RS. 2 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA 52,57,750/- ON ACCOUNT OF COMMISSION, DISALLOWING 2 0% OF EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT UNDER VARIOUS HE ADS. 2.1 DURING THE ASSESSMENT PROCEEDING, THE ASSESSIN G OFFICER FOUND THAT THE ASSESSEE HAD DEBITED A SUM OF RS.52, 57,750/- IN THE P&L ACCOUNT AS COMMISSION EXPENSES. THE ASSESSEE WA S ASKED TO FURNISH COMPLETE DETAILS OF COMMISSION PAID TO PART IES, ALONG WITH THE NAME, ADDRESS, AMOUNT PAID, MODE OF PAYMENT, PAN AN D NATURE OF SERVICES RENDERED BY EACH PARTY. ALL THE PARTIES WE RE SUMMONED AND THE STATEMENTS WERE RECORDED IN THE PRESENCE OF ASS ESSEE WHO WAS ALSO OFFERED TO CROSS-EXAMINE THE PARTIES BY THE AS SESSING OFFICER. ON BEING ASKED TO JUSTIFY THE AMOUNT PAID AS COMMIS SION IN THE LIGHT THAT NONE OF THE PERSONS COULD INFORM ABOUT ANY SPE CIFIC WORK DONE FOR THE ASSESSEE, IT WAS SUBMITTED THAT THE COMMISS ION EXPENSES WERE INCIDENTAL TO RUN THE BUSINESS AND THE PARTIES HAD BEEN PAID COMMISSION IN EARLIER YEARS ALSO AND THAT THE SAME HAD BEEN ACCEPTED BY THE DEPARTMENT. THE COMMISSION WAS BEIN G PAID BECAUSE THOSE PARTIES WERE INSTRUMENTAL IN PROCURIN G THE BUSINESS BY INTRODUCING THE CUSTOMERS/ POTENTIAL CUSTOMERS; THI S HAD RESULTED IN INCREASE OF THE TURNOVER. IT WAS STATED THAT THE PA YMENTS WERE MADE THROUGH CHEQUES; TDS WAS MADE FOR ALL THE RECIPIENT S, AND THAT ALL OF THEM WERE INCOME TAX ASSESSEES AND THEREFORE THE CO MMISSION EXPENDITURE WAS ALLOWABLE. THE ASSESSING OFFICER, A FTER GIVING HIS FINDING ON STATEMENTS RECORDED FROM 15 PERSONS (GIV EN IN PARA 8 OF ASSESSMENT ORDER) QUESTIONED THE FACT OF SERVICES B EING ACTUALLY RENDERED BY THOSE PERSONS TO THE ASSESSEE. 2.2 ACCORDING TO THE ASSESSING OFFICER, THE QUESTIO N OF MAKING PAYMENTS BY CHEQUE AND DEDUCTING TAX U/S. 194H WOUL D COME INTO PLAY ONLY WHEN THE PARTICULAR EXPENSES FELL UNDER T HE HEAD 'COMMISSION' AND ITS NEXUS WITH THE BUSINESS OF THE ASSESSEE WAS PROVED BEYOND DOUBT. HE REJECTED THE LOGIC OF THE A SSESSEE AS IRRELEVANT, I.E. THE PAYMENTS WERE THROUGH CHEQUES AND THE TDS WAS 3 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA MADE AND THEREFORE, THE EXPENDITURE SHOULD BE TREAT ED AS GENUINE. ACCORDING TO THE ASSESSING OFFICER, NONE OF THE PER SONS WHOSE STATEMENT WERE RECORDED COULD COME OUT WITH AN IOTA OF CREDIBLE DETAIL TO SUBSTANTIATE THEIR STAND THAT THEY HAD RE NDERED ANY SERVICE TO THE ASSESSEE TO HAVE DESERVED TO RECEIVE ANY PAY MENT ON THAT ACCOUNT. THE ASSESSING OFFICER ON THE BASIS OF HIS ANALYSIS ARRIVED AT THE CONCLUSION THAT THE ASSESSEE HAD OVER THE YEARS ADOPTED THE MODUS OPERANDI OF BOOKING CERTAIN EXPENSES UNDER TH E HEAD COMMISSION AND HAD TRIED TO LEGITIMISE THE SAME BY DEDUCTING NECESSARY TDS. 2.3 AFTER PLACING RELIANCE ON VARIOUS CASE LAWS, T HE ASSESSING OFFICER CONCLUDED THAT THE PAYMENTS WERE MADE BY TH E ASSESSEE NOT FOR THE ACTUAL SERVICES RENDERED BY THE AGENTS FOR THE ASSESSEE'S BUSINESS BUT TO REDUCE TAX INCIDENCE. THEREFORE, HE FOUND THE PAYMENTS TO BE NOT GENUINE AND ADDED THE EXPENDITUR E OF RS.52,57,750/- TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A). 4. DURING APPELLATE PROCEEDING, THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND S UBMITTED THAT THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THA T THE AGENT NEED NOT MAINTAIN ANY RECORD OF THE NEXUS AND ADDRESSES OF THE PERSONS WHO HAD PURCHASED THE GOODS FROM THE ASSESSEE THROU GH THEM. 4.1 IT WAS SUBMITTED THAT THERE WAS SEVERE COMPETI TION FOR BUSINESS. THE ASSESSEE BEING AN INDIVIDUAL (PROPRIE TOR) HAD TO NECESSARILY DEPEND UPON SOMEBODY TO ACHIEVE AND REA CH HIGHER SALES TO SURVIVE IN THE MARKET. THERE WAS AN INCREA SE IN TURNOVER AND IN FACT THE COMMISSION CLAIMED AT RS.52,57,750/- IN THE PREVIOUS YEAR UNDER CONSIDERATION (A.Y. 2011-12) WAS MUCH LESS TH AN THE 4 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA COMMISSION OF RS.64,76,842/- PAID IN THE EARLIER YE AR TO IT. ACCORDING TO THE ASSESSEE, THE SALARY CLAIMED AT RS.18,02,100 /- SHOWED THAT THERE WERE ONLY 2 EMPLOYEES IN SALES. THEREFORE, HE HAD APPOINTED THE AGENTS, THROUGH PROPER APPOINTMENT LETTERS RIGH T AT THE STARTING STAGE OF HIS BUSINESS. THE ASSESSMENTS FOR A.Y. 200 8-09, 2009-10 2010-11 WERE COMPLETED U/S. 143(3) AND IN ALL THE Y EARS THE COMMISSION PAYMENT WAS ACCEPTED. COMPLETE DETAILS O F COMMISSION PAYMENTS SHOWING THE COMMISSION PAYMENT, AGENT WISE , DATE WISE DETAILS OF DEDUCTEE OF TAX, PAN OF THE AGENTS WERE FILED BEFORE THE AO. COPIES OF THE INCOME TAX RETURN ACKNOWLEDGEMEN TS AND COMPUTATION OF INCOME OF THE COMMISSION AGENTS WERE ALSO FILED BEFORE THE ASSESSING OFFICER. ALL THE EVIDENCE BEFO RE THE ASSESSING OFFICER PROVED BEYOND DOUBT THE GENUINENESS OF PAYM ENT OF COMMISSION TO AGENTS AND ALL THE PAYMENTS WERE THRO UGH BANKING CHANNELS. ACCORDING TO THE ASSESSEE THE ONLY DOUBT THAT THE ASSESSING OFFICER HAD WAS WHETHER THE AGENTS HAD RE ALLY RENDERED THE SERVICES. ACCORDINGLY, CALLED ALL THE AGENTS, A LL HAVE RESPONDED AND CONFIRMED THE PERFORMANCE SERVICE AND RECEIPT O F COMMISSION. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND AO, CIT(A) HAS ANALYSED THE ISSUE WITH THE FOLLOWING PA RAMETERS: I. THERE WAS A CONTRACT FOR SUPPLY OF GOODS/SERVICE S WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE ASSESSEE'S BUSI NESS (COMMERCIAL EXPEDIENCY) II. THE GOODS OR SERVICES HAD ACTUALLY BEEN SUPPLIE D IN PURSUANCE OF SUCH A CONTRACT (GENUINENESS OF EXPEND ITURE) III. THE DEDUCTION IS NOT HIT BY THE MISCHIEF OF AN Y PROVISION OF THE INCOME TAX ACT. 5.1 TO WHAT EXTENT THESE PARAMETERS ARE SATISFIED I N THIS CASE IS ANALYSED BY THE CIT(A) AS UNDER: 5 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA 06.3.1 COMMERCIAL EXPEDIENCY: NORMALLY, A CONTRACT FOR SERVICE CONTAINS EXPLICIT STATEMENT OF THE MUTUAL RIGHTS AN D OBLIGATIONS OF THE PARTIES THERETO SO THAT THEY KNOW WHAT TO EX PECT FROM EACH OTHER AND, IN CASE OF BREACH, ARE ABLE TO ENFO RCE SPECIFIC PERFORMANCE. IN THIS CASE, THERE IS NO CONTRACT. TH ERE ARE ONLY STEREOTYPE LETTERS ADDRESSED BY THE ASSESSEE TO THE ALLEGED COMMISSION AGENTS TO THE EFFECT THAT THEY HAD BEEN APPOINTED AS COMMISSION AGENTS AND THAT THEY WOULD BE ELIGIBL E TO RECEIVE COMMISSION AS MUTUALLY AGREED. PAYMENT OF COMMISSIO N ON THE BASIS OF SUCH BLAND LETTERS OF INTENT ARE NOT GENER ALLY SEEN IN REGULAR BUSINESSES. 06.3.2 GENUINENESS: FOR A TRANSACTION TO BE CONSIDE RED AS GENUINE, IT IS NECESSARY THAT THE APPARENT MUST BE THE REAL, I.E. THE PARTIES TO THE TRANSACTION SHOULD HAVE THE REQU ISITE DOCUMENTS AND KNOWLEDGE WHICH A PERSON, IF HE HAD A CTUALLY DONE THE TRANSACTION, WOULD HAVE IN THE ORDINARY CO URSE OF THE BUSINESS. IN THIS CASE, COMMISSION IS CLAIMED TO HA VE BEEN PAID TO AS MANY AS 16 PERSONS. BUT, ALL OF THEM, BY AND LARGE, DISPLAYED LACK OF PRIMARY KNOWLEDGE ABOUT THE BASIC FACTS OF THE BUSINESS, VIZ. GOODS FOR WHICH ORDERS HAD BEEN PROC URED BY THEM, PERSONS CONTACTED IN COURSE OF PROCURING THE ORDERS, THE CONTACT NUMBERS, ETC. SOME OF THEM DID NOT EVEN KNO W THE ASSESSEE (EVEN THOUGH THEY CONFIRMED THAT THEIR FAM ILY MEMBERS KNEW HIM). ONE OF THEM, MS. SONAL FITKARIWA LA, DID NOT EVEN KNOW THE CONCERN (SHRI VARI ENTERPRISES) W HOSE PROPRIETRESS SHE WAS SUPPOSED TO BE. THEY INVARIABL Y STATED THAT THE EMPLOYEES THROUGH WHOM THEY HAD PROCURED O RDERS FOR THE ASSESSEE HAD LEFT AND THAT THEIR CURRENT WHEREA BOUTS WERE NOT KNOWN. THE WHOLE FAMILY OF MR. UMESH AGARWAL IS SHOWN TO BE WORKING FOR THE ASSESSEE AS COMMISSION AGENTS BU T NONE OF THEM FURNISHED SATISFACTORY EXPLANATION ABOUT THE N ATURE, SCOPE AND DETAILS OF THE SERVICES RENDERED. THESE DISCREP ANCIES HAVE BEEN DISCUSSED IN DETAIL BY THE AO IN THE ASSESSMEN T ORDER. 5.2 CIT(A) OBSERVED THAT IT IS TRUE THAT THE PERSO NS HAD FURNISHED THEIR RESPECTIVE RETURNS OF INCOME AND SHOWN THE RE CEIPT OF COMMISSION FROM THE ASSESSEE. BUT IT IS EQUALLY NO TEWORTHY THAT THEY, ALMOST WITHOUT EXCEPTION, CLAIMED REFUND FOR PRACTI CALLY THE ENTIRE AMOUNT OF TAX DEDUCTED AT SOURCE BY THE ASSESSEE. I F THEY HAD PAID TAX AT THE SAME RATE AT WHICH THE ASSESSEE HAD, OR AT A HIGHER RATE, THE DISPUTE COULD BE TREATED AS MERELY ACADEMIC IN NATURE. BUT, IF THEY PRACTICALLY DID NOT PAY ANY TAX (EVEN THOUGH T HEY REPORTED THE RECEIPTS IN THEIR RESPECTIVE RETURNS OF INCOME), SU CH REPORTING OF 6 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA INCOME BY THEM AND, FOR THAT MATTER, DEDUCTION OF T AX AT SOURCE BY THE ASSESSEE ON THOSE PAYMENTS, HAS HARDLY ANY MEANING. THE DETAILS ARE AS BELOW: PERSON PAN TDS REFUND CLAIMED PANNALAL FITKARIWALA AAIPF3460B 51,058 36,867 SONAL FITKARIWALA AAGPF2455E 78,539 42,603 BELA AGARWAL ABFPB5720L 89,543 81,877 KAJAL AGARWAL AIIPA3538M 37,307 34,153 RAJESH KUMAR AGARWAL ACZPA6945M 65,145 58,728 KETAN AGARWAL AFUPA5182N 28,004 22,485 DIMPEL AGARWAL AIZPA4974A 24,510 23,779 INDU JHUNJHUNWALA ACUPJ4786C 23,000 15,685 AJAY JHUNJHUNWALA AAGHA0988F 17,506 17,506 KESHAV AGARWAL ARHPA2978D 23,345 19,204 SUBHASH CHAND GAODDIA AAJPG6304J 20,002 6,486 UMESH KUMAR AGARWAL AAAHU5753L 21,340 17,686 PARIKH NEEMA BHAVESH AGKPP0932G 50,000 0 5.3 CIT(A) OBSERVED THAT THE ASSESSEE COULD NOT FUR NISH ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THAT SERVICES HAD ACTUALLY BEEN RENDERED BY THESE PERSONS. THERE ARE NO BILLS FROM THE PAYEES AND NO REFERENCE TO THE PAYEES IN THE PURCHASE ORDERS FROM THE CUSTOMERS. EVEN THE PAYEES COULD NOT PRODUCE ANY DOCUMENTARY E VIDENCE TO SUBSTANTIATE THE CLAIM OF SERVICES RENDERED BY THEM . OF COURSE, THEY APPEARED BEFORE THE AO AND CONFIRMED THAT THEY REND ERED SERVICES TO THE ASSESSEE. BUT, THEY DID NOT RECALL THE PERSONS WHO WERE CONTACTED IN THE PROCESS, HOW THE ORDERS HAD BEEN PROCURED, W HAT WERE THE SPECIFIC ITEMS OF SUPPLY, ETC. SHE OPINED THAT IF A PERSON IS A GENERAL COMMISSION MERCHANT, SECURING ORDERS FROM A NUMBER OF PERSONS FOR SUPPLIES TO BE MADE BY A NUMBER OF PERSONS, IT WOUL D STAND TO REASON THAT HE WOULD NOT REMEMBER THE DETAILS OF TRANSACTI ONS FOR A PARTICULAR SET OF PERSONS. BUT, IF A PERSON IS WORKING EXCLUSI VELY FOR A PARTICULAR SUPPLIER, IT IS NOT UNDERSTANDABLE WHY HE OR SHE SH OULD NOT REMEMBER THE BASIC DETAILS OF THE TRANSACTIONS. NONE OF THE ALLEGED PAYEES DISPLAYED ANY SUCH KNOWLEDGE. 7 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA 5.4 CIT(A) OBSERVED THAT IN THIS CASE, THE ASSESSEE HAS BEEN ABLE TO SHOW THAT HE MADE PAYMENTS TO SOME PERSONS OSTEN SIBLY AS REMUNERATION FOR SERVICES OF COMMISSION AGENCY REND ERED BY THEM. THE FACT THAT THE SERVICES HAD ACTUALLY BEEN RECORD ED HOWEVER, HAS NOT BEEN ESTABLISHED. HENCE, SUCH PAYMENT CANNOT BE CALLED PAYMENT OF COMMISSION BY THE ASSESSEE IN REGULAR COURSE OF HIS BUSINESS. AT THE BEST, IT CAN BE CALLED GRATUITOUS PAYMENT BY HI M TO PERSONS KNOWN TO HIM, DIRECTLY OR INDIRECTLY. WHETHER THEY WERE H IS RELATIONS OR NOT IS NOT CLEAR BUT IT IS CLEAR THAT THEY WERE NOT STRANG ERS EITHER. WHETHER THERE WAS A QUID PRO QUO OR NOT IS NOT KNOWN. BUT, EXISTENCE OF QUID PRO QUO IS NOT NECESSARY TO PROVE. IT IS SUFFICIENT TO SAY THAT THE SERVICES FOR WHICH THE PAYMENTS HAD OSTENSIBLY BEEN MADE HAD NOT BEEN RENDERED ACTUALLY AND, HENCE, SUCH PAYMENTS SH OULD NOT BE ALLOWED AS BUSINESS EXPENDITURE. THE CLAIM OF DEDU CTION MAY HAVE BEEN ALLOWED IN THE PAST. BUT, IF, ON THE BASIS OF SPECIFIC ENQUIRY CARRIED OUT, THE AO REACHES A CONCLUSION THAT THE S AME IS NOT ALLOWABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON, THERE IS NOTHING IN LAW TO PREVENT HIM FROM DOING SO. 5.5 IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT(A) HELD THAT THERE IS A PREPONDERANCE OF PROBABILITY TO CONCLUDE THAT THE PAYMENTS DID NOT CONSTITUTE REMUNERATION FOR SERVICES RENDERED B Y THESE PERSONS AND, HENCE, ARE NOT ALLOWABLE AS DEDUCTION WHILE CO MPUTING HIS PROFIT OF BUSINESS. CONSIDERING, HOWEVER, THAT SOME OF THE PAYEES WERE IN REGULAR BUSINESS, BENEFIT OF DOUBT TO SOME EXTENT C AN BE ALLOWED. IT IS NOTED THAT THE CLAIM OF COMMISSION PAYMENT INCLUDED A PAYMENT OF RS.1,10,000/- TO M/S. SRIDHAR CLEARING SERVICES PVT LTD, CHENNAI. THE SAID COMPANY WAS ACTING AS HIS CLEARING AGENT AT TH E DOCKYARD AND DOCUMENTARY EVIDENCE OF THE SERVICES RENDERED HAS A LSO BEEN SUBMITTED. ENDS OF JUSTICE SHOULD BE MET IF DEDUCTI ON OF RS.5,00,000/- WAS ALLOWED TOWARDS COMMISSION EXPENDITURE WHICH MI GHT HAVE BEEN INCURRED EVEN THOUGH THE RELEVANT EVIDENCE TO THE D ESIRED DEGREE OF 8 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA SATISFACTION MAY NOT HAVE BEEN FURNISHED BY THE ASS ESSEE. THE ADDITION IS ACCORDINGLY REDUCED TO RS. 47,57,750/-. 6. IN AY 2012-13, LD. CIT(A) FOLLOWED THE SAME DECI SION AS IN AY 2011-12 BY ACCEPTING THE FINDINGS OF AO AND GAVE RE LIEF TO THE EXTENT OF RS. 5 LAKHS TO MEET THE ENDS OF JUSTICE. 7. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS, WHICH ARE COMMON IN 2011-12 AND 2012-13, EXCEPT THE QUANTUM OF ADDITION: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) IS NOT CORRECT EITHER ON FACTS OR IN LAW AND IN BOTH. 2. THE LEARNED COMMISSIONER OF INCOME TAX(A) IS NOT JUSTIFIED IN CONFIRMING A DISALLOWANCE OF COMMISSION PAYMENT TO THE EXTENT OF RS. 5,00,000/- OUT OF TOTAL CLAIM OF RS.5 2,57,750/-. 3. THE LEARNED FIRST APPELLATE AUTHORITY IS NOT JUS TIFIED IN CONFIRMING THE DISALLOWANCE OF THE COMMISSION PAYME NTS ESPECIALLY WHEN THE FIRST APPELLATE AUTHORITY HERSE LF HAD ALLOWED PAYMENT OF RS. 5,00,000 ON ROUND SUM BASIS. 4. THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT THAT THE COMMISSION PAYMENTS WERE THROUGH BANK ING CHANNELS AND THE RECIPIENTS UNRELATED ARE ASSESSED TO TAX. 5. THE ASSESSEE CRAVE LEAVE TO ADD OR AMEND OR ALTE R ANY OF THE GROUNDS AT THE TIME OF HEARING OF APPEAL. 8. LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESS EE IS ENGAGED IN SALE OF VARIOUS CHEMICALS AND MOST OF THE CHEMIC ALS ARE IMPORTED MATERIAL. THERE IS SEVER COMPETITION FOR THIS BUSIN ESS. HE SUBMITTED THAT THE ASSESSEE BEING AN INDIVIDUAL (PROPRIETOR) HAD TO NECESSARILY DEPEND UPON SOMEBODY TO ACHIEVE HIGHER SALES TO SUR VIVE IN THE MARKET. HE SUBMITTED THAT THERE IS AN INCREASE IN TURNOVER AND IN FACT THE COMMISSION CLAIM AT RS. 52,57,750/- IN THIS AY 2011-12 IS MUCH LESS THAN THE COMMISSION OF RS. 64,76,842/- PAID IN EARLIER AY 2010- 11. THE GROSS PROFIT AND NET PROFIT REFLECT STEADY PROGRESS. 9 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA 8.1 LD. AR SUBMITTED THAT THE PROFIT & LOSS A/C (PA GE 3 OF PAPER BOOK) SHOWS THE SALARY CLAIM AT RS.18,02,100 FOR AS ST.YEAR 2011-12. THE DETAILS PLACED AT PAGE 67 OF THE PAPER BOOK SHO WS THAT THERE ARE ONLY 2 EMPLOYEES ON SALES TO MONITOR SALES. HENCE THE ASSESSE HAS TO NECESSARILY DEPEND UPON OUTSIDE AGENCIES FOR THE MARKETING JOB. (THESE TWO EMPLYEES ALSO COORDINATE THE SALES BOOKI NGS DONE BY AGENTS). THEREFORE HE HAD APPOINTED THE AGENTS, THR OUGH PROPER APPOINTMENT LETTERS RIGHT AT THE STARTING STAGES OF HIS BUSINESS. COPIES OF SOME OF THE APPOINTMENT LETTERS ARE PLACE D AT PAGES 60 TO 64 OF THE PAPER BOOK. 8.2 LD. AR SUBMITTED THAT IT IS AN UNDISPUTED FACT THAT THE ASSESSMENTS OF THE ASSESSE FOR ASST. YEARS 200809, 2009-10 & 2010- 11 WERE COMPLETED U/S 143(3) AFTER DETAILED EXAMINA TION. IN ALL THE YEARS THE ASSESSEE PAID THE COMMISSION TO ALL THE A GENTS. IN ALL THE YEARS THE COMMISSION WAS PAID THROUGH BANKING CHANN EL AND TAX WAS DEDUCTED AT SOURCE. ALL THE AGENTS WERE ASSESSED TO TAX AND IN SOME CASES THE TAX IS PAID AT HIGHEST SLAB. HE SUBMITTED THAT BEFORE THE ASSESSING OFFICER, THE ASSESSE HAD FILED COMPLETE D ETAILS OF COMMISSION PAYMENTS. THE SAID DETAILS PLACED AT PAG E 15 OF PAPER BOOK SHOW THE COMMISSION PAYMENT AGENT WISE, DATE W ISE AND THE DETAILS OF DEDUCTEE OF TAX. THE STATEMENT ITSELF IN DICATES THE PAN OF THE AGENTS. FURTHER COMMODITY WISE, DATE-WISE, QUAN TITY-WISE AND AGENT WISE COMMISSION WORKINGS WERE FILED AND PLACE D AT PAGES 16 TO 30 OF THE PAPER BOOK. STATEMENT OF TDS, SECTION-WIS E, FILED BEFORE ASSESSING OFFICER IS PLACED AT PAGE 31 OF THE PAPER BOOK. HE SUBMITTED THAT COPIES OF THE INCOME TAX RETURN ACKN OWLEDGEMENT AND COMPUTATION OF THE COMMISSION AGENTS FILED BEFORE A SSESSING OFFICER ARE PLACED AT PAGES 33 TO 59 AND PAGES 89 TO 92 OF THE PAPER BOOK RESPECTIVELY. ALL THE EVIDENCES THUS FILED BEFORE T HE ASSESSING OFFICER PROVE BEYOND DOUBT THE GENUINENESS OF CLAIM OF COMM ISSION TO 10 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA AGENTS. THE ASSESSEE HAD DULY COMPLIED WITH ALL THE PROCEDURES REQUIRED, TO ESTABLISH AND SUBSTANTIATE HIS CLAIM. 8.3 LD. AR CONTENDED THAT IN SPITE OF THIS HEAVILY LOADED EVIDENCES, AND CONFIRMATIONS IN FAVOUR OF THE ASSESSEE, THE AS SESSING OFFICER RESORTED TO DISALLOWANCE SIMPLY ON PRESUMPTIONS AND ASSUMPTIONS. IN DOING SO, THE ASSESSING OFFICER OVERLOOKED THE VITA L FACTS THAT: I) SUCH COMMISSION WAS ALLOWED IN EARLIER YEARS. II) THE SALARY CLAIM FOR A TURNOVER OF RS.24.52 CRO RES IS ONLY 18 LAKHS THAT TOO MOSTLY FOR THE ADMINISTRATION STAFF ONLY. THERE IS MINIMUM CLAIM OF SALARIES FOR THE FIELD STAFF. KIND ATTENTION IS INVITED TO THE DETAILS OF SALARY PAYMENTS (PAGE 67 OF PAPER BOOK). III) THE WHOLE PRESUMPTION OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAD RESORTED TO THIS CLAIM TO REDUCE OR EV ADE THE TAXES. THE ASSESSING OFFICER GROSSLY FAILED TO APPR ECIATE THE FACT THAT THE ASSESSE IS CONSTANTLY OFFERING SUBSTA NTIAL INCOME TO TAX. FOR THE ASST.YEAR 2011-12 THE ASSESSEE ADMI TTED INCOME AT RS.77.95 LAKHS ON A TURNOVER OF RS.24.52 CRORES. CONSIDERING THE FACT THAT THIS IS A TRADING BUSINES S OF A PROPRIETOR TO ACHIEVE THAT MUCH TURNOVER AND ADMIT SUCH A HIGH INCOME IS NOT AN EASY TASK. IV) THE WHOLE APPROACH OF THE ASSESSING OFFICER IS AS IF THE ASSESSEE HAD FOR THE FIRST TIME RESORTED TO CLAIM S UCH EXPENSES. HE FAILED TO APPRECIATE THE FACT THAT PAYMENT OF SU CH COMMISSION IS ONE OF THE MAIN EXPENDITURE CLAIMED Y EAR AFTER YEAR IN THIS LINE OF BUSINESS. V) THE MOST IMPORTANT ASPECT IS THAT BASED ON THESE FINDINGS, THE ASSESSMENT FOR ASST.YEAR 2008-09 WHICH WAS EARL IER COMPLETED U/S 143(3) ON 25.09.2010 WAS REOPENED U/S 148 AND OUT OF THE TOTAL AMOUNT OF RS.24,47,000 CLAIMED AS COMMISSION PAYMENT, THE ASSESSING OFFICER IN HIS ORDER U/S 143 (3) R.W.S.148 11 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA DISALLOWED RS.21,21,000 ACCEPTING THE PAYMENT OF RS .3,26,000 (COPY OF THE ORDER U/S 143(3) R.W.S.148) DT.26.07.2 014 IS ENCLOSED AS ANNEXURE). AGAIN FOR ASST.YEAR 2009-10 THE ASSESSING OFFICER IN AN ORDER U/S 143(3) R.W.S. 148 ALLOWED COMMISSION OF RS.3,07,000. SIMILARLY FOR ASST.YEAR 2010-11 IN THE ORDER U/S 143(3) R.W.S.147 AN AMOUNT OF RS.16,3 2,955 WAS ALLOWED ON THE SIMILAR SET OF FACTS. THIS SHOWS THA T THE ASSESSING OFFICER EVEN IN HIS REASSESSMENT ORDER IS SATISFIED WITH A PORTION OF THE COMMISSION PAYMENT. THE EVIDE NCES AVAILABLE FOR ALLOWING SUCH EXPENDITURE, NOT ONCE B UT TWICE, ONCE AT THE TIME OF 143(3) AND FOR THE SECOND TIME AT IN THE COURSE OF 143(3) R.W.S.147, ARE SAME AND EQUALLY AP PLICABLE AND AVAILABLE IN OTHER CASES ALSO. HENCE ALLOWING S OME PAYMENTS AND DISALLOWING OTHERS ON SIMILAR AND IDEN TICAL SET OF FACTS IS UNJUSTIFIED AND ARBITRARY. THIS ESTABLISHE S THE FACT THAT THE DISALLOWANCE IS ONLY ON PRESUMPTIONS AND NOT BA SED ON ANY CONCRETE EVIDENCES. VI. THE THEORY OF THE ASSESSING OFFICER THAT ASSESS EERESORTED TO AGENCY COMMISSION PAYMENTS ONLY TO REDUCE PROFIT IS ALSO NOT CORRECT. ALL THE RECIPIENTS HAVE OFFERED THE SAID C OMMISSION TO TAX. SOME OF THE AGENTS ARE IN THE 20% TAX BRACKET AND HENCE THE THEORY OF THE EVASION / REDUCTION ALSO HAS NO B ASIS. VII). ANOTHER GLARING INSTANCE IS THAT THE ASSESSIN G OFFICER IN HIS OVER ENTHUSIASM TO DISALLOW THE COMMISSION ON SALES , DISALLOWED EVEN THE COMMISSION PAID BY THE ASSESSE TO THE CUSTOMS CLEARANCE AGENT ON THE PURCHASES MADE. S.NO .16 PAGE 2 OF THE ASST. ORDER IS THE PAYMENT OF RS.1,10,000 FOR ASST. YEAR 2011-12 TO SRIDHAR CLEARING SERVICE PVT LTD. T HIS PARTY IS THE CUSTOMS CLEARING AGENT AT CHENNAI PORT. HE REND ERS THE SERVICE IN THIS REGARD. THE PURCHASES MADE BY THE A SSESSE OUTSIDE INDIA WAS SHIPPED TO INDIA AND AT THE CHENN AI PORT THE 12 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA GOODS WERE GOT DELIVERED THROUGH THE SERVICES OF TH IS AUTHORIZED AGENT. THIS PARTY CHARGES COMMISSION FOR EACH SHIPMENT. RELEVANT DOCUMENTS PLACED AT PAGES 73 TO 88 SHOW THE SERVICE RENDERED BY THIS PARTY IN RESPECT OF ON E SHIPMENT. THE AGENCY COMMISSION CLAIM IS SUPPORTED BY THE BIL L PLACED AT PAGE 78 OF THE PAPER BOOK. DETAILS OF GOODS RECEIVE D AND CLEARED ARE INDICATED IN THE RELEVANT INVOICES PLAC ED AT PAGE 84 OF THE PAPER BOOK. DETAILS OF PURCHASES MADE CLEARE D BY THIS AGENT AND COMMISSION PAID ARE PLACED AT PAGE 66 OF THE PAPER BOOK. APPELLANTS LEDGER ALE IN THE BOOKS OF SREEDHA R AGENCY SHOWS THE SERVICE CHARGES CLAIMED FROM THE APPELLAN T. AGENCY COMMISSION OF RS.3,000 AT PAGE 76 IS DULY REFLECTED AS PART OF RS.13,677 AT PAGE 72 OF THE PAPER BOOK. THUS THE AS SESSING OFFICER IS TOTALLY UNJUSTIFIED IN DISALLOWING EVEN THE COMMISSION PAID TO THE CLEARING AGENTS. VIII. THE ASSESSING OFFICER IN HIS ORDER AT PARA 6 MAKES AN OBSERVATION THAT THE ASSESSEE HAD NOT TAKEN THE OFF ER OF CROSS EXAMINATION. SINCE NONE OF THE AGENTS HAVE DENIED T HE RECEIPT OF COMMISSION AND ALL OF THEM HAVE IN FACT CONFIRME D THE RECEIPT OF SUCH COMMISSION, THE ASSESSE DID NOT FIND IT NEC ESSARY TO CROSS EXAMINE AND THIS CAN BY NO STRETCH OF IMAGINA TION BE AN ISSUE AGAINST THE ASSESSEE'S CLAIM OF COMMISSION PA YMENT TO AGENTS. IX. IT IS PERTINENT TO SUBMIT THAT NONE OF THE AGEN TS EXAMINED BY THE ASSESSING OFFICER ARE RELATED TO THE APPELLANT. X. IT IS NOT, IN ANY CASE, THE ALLEGATION OF THE AS SESSING OFFICER THAT THE COMMISSION PAID TO THE AGENTS HAD FLOWN BA CK TO THE ASSESSE. HENCE IN SUCH CIRCUMSTANCES DISBELIEVING T HE COMMISSION PAYMENT IS NOT PROPER. 13 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA XI. IN THIS REGARD KIND ATTENTION OF THE HON'BLE CO MMISSIONER OF INCOME TAX IS INVITED TO THE RELEVANT OBSERVATIONS OF THE HON'BLE MEMBER IN THE CASE OF SACHIN B DESAI VS ITO ITA NO.2280/KOI/2013 DT.07.08.15 (COPY ENCLOSED). 'IT IS QUITE POSSIBLE THAT THE COMPANY HAS VARIOUS TYPES OF ACTIVITIES AND WORKING AS COMMISSION AGENT IS ALSO A PART AND SUCH COMPANIES WORK FOR MANY TYPES OF CLIENTS. QUIT E POSSIBLE A DIRECTOR MIGHT NOT BE AWARE OF NAMES AND DETAILS OF ALL THE CLIENTS OF THE COMPANY. THE ASSESSING OFFICER SHOUL D HAVE ENQUIRED THROUGH THE SALES MAN OF THE COMMISSION AG ENT OR THROUGH THE BUYERS OF THE PRODUCTS OF THE ASSESSE I N ORDER TO VERIFY THE ACTUAL COMMISSION GIVEN TO M/S. WIDE ANG LE PACKAGING SYSTEM (P) LTD FOR DOING THE SALES ON BEH ALF OF THE ASSESSE AGAINST COMMISSION. THE ASSESSE HAS PAID COMMISSION BY ACCOUNT PAYEE CHEQUE. DUE TDS PAID, IDENTITY OF THE COMMISSION AGENT IS VERIFIABLE WHIC H ARE SUFFICIENT EVIDENCE ON RECORD TO PROVE THE GENUINEN ESS OF THE TRANSACTION AND CREDITWORTHINESS AND IDENTITY O F THE SO CALLED COMMISSION AGENT. IN VIEW OF THE ABOVE I AM OF THE VIEW THAT THE ENTIRE COMMISSION IS ALLOWABLE. THIS GROUND OF APPEAL IS ALLOWED'. (EMPHASIS SUPPLIED). 8.5 IN THE LIGHT OF THE ABOVE SUBMISSIONS, THE LD. AR SUBMITTED THAT THE REVENUE AUTHORITIES HAVE NOT JUSTIFIED TO DISAL LOW THE CLAIM OF COMMISSION PAYMENT SIMPLY/BASED ON THE PRESUMPTIONS AND ASSUMPTIONS ESPECIALLY WHEN EACH ONE OF THE AGENTS HAVE CATEGORICALLY CONFIRMED THE RECEIPT OF AGENCY COMMI SSION. HE, THEREFORE, PLEADED THE BENCH TO DELETE THE ADDITION MADE ON THIS COUNT. HE RELIED ON THE FOLLOWING DECISIONS: 1. SACHIN B. DESI VS. ITO, ITAT KOLKATA DT. 07/08/ 2015. 2. PINKCITY INDUSTRIES VS. ITO RAJASTHAN HIGH COU RT, D.B. INCOME TAX APPEAL NO. 290/2010. 3. SMT. B. SUBHADRA VS. ITO, 92 ITD 285 (HYD. 4. ITO VS. SHYAM SUNDER JAJODIA, 26 SOT 541 (DELHI ) 5. CIT VS. PRINTERS HOUSE (P) LTD., 188 TAXMAN 70 (DELHI) 6. CIT VS. SIDDARTHA TRADE LINKS PVT. LTD., ITAT DE LHI, 08/12/2011. 9. LD. DR, ON THE OTHER HAND RELIED ON THE ORDER OF CIT(A). 14 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA 10. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE OBSERVE THAT ASSESSEE HAD CLAIMED COMMIS SION PAYMENT AS EXPENDITURE AND PAID THROUGH BANKING CHANNEL AND DEDUCTED TDS AS PER THE PROVISIONS OF I.T. ACT. THE ISSUE BEFORE US IS, AO AFTER RECORDING STATEMENT OF ALL AGENTS CAME TO CONCLUSIO N THAT ALL THE AGENTS ARE NOT GENUINE AS THEY DO NOT HAVE ANY BASI C INFORMATION OF DOING ANY BUSINESS WITH THE ASSESSEE. THE SAME VIEW WAS RATIFIED BY LD. CIT(A). WE NOTICE FROM THE STATEMENT RECORDED F ROM AGENTS THAT ALL HAVE CONFIRMED THE RECEIPT OF COMMISSION AND DECLAR ED THE SAME AS INCOME IN THEIR RESPECTIVE RETURNS. FROM THE STATE MENT, WE NOTICE THAT FEW AGENTS ARE EITHER HOUSE-WIVES, STUDENTS OR RETIRED PERSONNEL. THEY DO NOT HAVE ANY INFORMATION OF THE TRANSACTION CARRIED ON WITH THE ASSESSEE BUT ALL OF THEM HAD A DIRECT LINK WITH THE ASSESSEE AS THEIR HUSBANDS, PARENTS OR ONE OF THE FAMILY MEMBER S, WHO ARE IN DIRECT CONTACT WITH THE ASSESSEE. IT SHOWS THAT THE SUBORDINATES OR FAMILY MEMBERS HAVE ASSISTED IN CARRYING OUT THE AG ENCY BUSINESS FOR THE RECIPIENT OF THE COMMISSION. 10.1 COMING BACK TO LD. CIT(A)S OBSERVATION THAT T HERE IS NO CONTRACT IN EXISTENCE. IT IS NOT NECESSARY THAT ALL AGENTS SHOULD HAVE WRITTEN AGREEMENT. GENERALLY, THESE BUSINESSES ARE RUN ON THE BASIS OF REFERRAL AND PROMPT COLLECTION OF SALE PROCEEDS. THE AGENTS REFER THE CLIENTS AND COLLECTS THE COMMISSION AS SOON AS THE SALE PROCEEDS ARE COLLECTED AS PER THE CONTRACT TERMS. THERE IS N O QUESTION OF BREACH IN THESE TYPE TRANSACTIONS, UNTIL THE SALE P ROCEEDS ARE REALIZED, NO AGENT IS ELIGIBLE TO CLAIM AND AS SOON AS SALE PROCEEDS ARE RECEIVED, THE DUE COMMISSIONS ARE SETTLED. IT I S CLEAR FROM THE RECORD THAT ASSESSEE HAS NOT CLAIMED ANY BAD DEBTS IN THESE YEARS UNDER CONSIDERATION. 10.2 WITH REGARD TO GENUINENESS, ASSESSEE HAS DECLA RED THE PROFIT AND COMMISSION CONSISTENTLY OVER THE YEARS AND THE RESULTS ARE (REFER 15 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA FINANCIAL RESULTS SUBMITTED BY LD. AR) CONSISTENT. WE ALSO NOTICE THAT ASSESSEE HAS NOT CLAIMED ANY BAD DEBTS IN THE STATE MENT OF ACCOUNTS, IT SHOWS THAT THE SALES ARE GENUINE AND T HE AGENTS PROMPTLY COLLECTS THE SALE PROCEEDS. 10.3 FURTHER, LD. CIT(A) HAS BROUGHT ON RECORD THAT THE AGENTS HAVE DECLARED THE COMMISSION AS INCOME IN THEIR RETURN A ND ALL HAVE CLAIMED REFUND. WE FIND IT DIFFICULT TO UNDERSTAND, ON WHAT WAY, IT WILL DECIDE THE GENUINENESS OF TRANSACTION IN THE CASE O F ASSESSEE, PARTICULARLY, WHEN THERE IS NO FINDING THAT THE ASS ESSEE HAS RECEIVED BACK ANY COMMISSION OR ENJOYED ANY BENEFIT OUT OF T HIS TRANSACTION EXCEPT ACHIEVING TARGETED SALES. 10.4 CIT(A) OBSERVED THAT ASSESSEE MADE THE PAYMENT TO CERTAIN PERSONS OSTENSIBLY AND HAS NOT ESTABLISHED THE SERV ICES RENDERED BY THEM. SHE FURTHER OBSERVED THAT IT CAN BE CALLED GR ATUITOUS PAYMENTS TO PERSONS KNOWN TO ASSESSEE, BUT, SHE COULD NOT ES TABLISH THE RELATIONSHIP WITH THE ASSESSEE BUT EXPRESSED THAT I T IS NOT CLEAR WHETHER THEY ARE RELATIVES, BUT, THEY WERE NOT STRA NGERS EITHER. FURTHER, SHE HELD THAT THERE IS A PREPONDERANCE OF PROBABILITY TO CONCLUDE THAT THE PAYMENTS DID NOT CONSTITUTE FOR R EMUNERATION FOR SERVICES OF AGENCY. AT THE SAME TIME, SHE ALLOWED A RANDOM AMOUNT OF RS. 5 LAKHS AS COMMISSION WITHOUT ANY BASIS. 10.5 SHE FAILED TO CONSIDER THE OTHER ASPECTS IN TH IS CASE, NONE OF THE AGENTS ARE RELATIVES TO THE ASSESSEE. NO BUSINE SSMAN WILL GIVE PAYMENT TO OUTSIDERS ON GRATUITOUS BASIS, PARTICULA RLY, THE AMOUNT INVOLVED ARE HUGE. THE AGENTS HAVE CONFIRMED THAT T HEY HAVE RECEIVED THE COMMISSION AND THE OTHER FAMILY MEMBER S OR SUBORDINATES HAVE ASSISTED THEM ACHIEVE THE SALES. THIS ASPECT CANNOT BE RULED OUT THAT NO BUSINESSMAN WILL DISTRI BUTE MONEY ON GRATUITOUS BASIS WITHOUT TAKING BENEFIT FROM SUCH P AYMENTS. THIS IS ALSO PREPONDERANCE OF PROBABILITY. ANOTHER ASPECT W AS ALSO NOT 16 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA CONSIDERED BY LD. CIT(A) THAT THERE IS NO PROOF THA T THE ASSESSEE HAS RECEIVED BACK THE ALLEGED COMMISSION PAYMENT FROM T HE RESPECTIVE AGENTS. IT SHOWS THAT THE PAYMENTS ARE GENUINE. 10.6 LET US ANALYSE THIS ASPECT UNDER JUDICIAL VIEW . IN THE SIMILAR SITUATION, THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF PINKCITY INDUSTRIES (SUPRA), HAS ADJUDICATED AS BELOW: TAKING INTO CONSIDERATION THAT THE BUSINESS HAS GON E ALMOST ALL TIME AND PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHE QUE, IN OUR CONSIDERED OPINION, THE BUSINESS EXPENSES IS WR ONGLY DISALLOWED. HENCE, THE FIRST ISSUE IS REQUIRED TO B E ANSWERED IN FAVOUR OF THE ASSESSEE AND HE OUGHT TO HAVE BEEN AL LOWED THE EXPENSES WHICH IS ARISING OUT OF THE BUSINESS EXIGE NCY AND IN THAT VIEW OF THE MATTER, THE OBSERVATIONS MADE IN C ASE OF S.A. BUILDERS LTD. CIT(A) 288 ITR 0001Z (SC), THE EXPENS ES ARE REQUIRED TO BE ALLOWED. IN THE GIVEN CASE, THE ASSESSEE HAS MAINTAINED SALE S OVER THE YEARS AND CARRIED ON THE BUSINESS WITH THE HELP OF ONLY 2 PERSONS TO MONITOR THE SALES. IT IS NOT POSSIBLE TO ACHIEVE TH E VOLUME OF 24.52 CRORES WITHOUT THE SERVICES OF SALESMEN OR AGENTS. ALSO ALL THE PAYMENTS ARE MADE THROUGH BANKING CHANNELS. 10.7 IN THE CASE OF ITO VS. SHYAM SUNDER JAJODIA (S UPRA), THE HONBE DELHI HIGH COURT HELD AS UNDER: THE ASSESSEE CLAIMED A DEDUCTION ON THE GROUND THAT HE HAD PAID COMMISSION TO 12 PARTIES. THE ASSESSING OFFICE R REJECTED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THERE W AS NO AGREEMENT FOR THE PAYMENT OF COMMISSION. THE ASSESS ING OFFICER FURTHER OBSERVED THAT THE ASSESSEE FAILED T O PROVE THAT EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ON APPEAL, THE COMMISSIONER (APPEALS) RE- APPRECIATED THE CONTROVERSY AND DELETED THE ADDITIO N. ON REVENUE'S APPEAL : HELD IN ORDER TO CLAIM ANY EXPENDITURE NOT BEING EXPENSE S DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENSES OR PERSONAL EXPENSES LAID OUT AND SPENT WH OLLY AND 17 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, ONE'S CLAI M HAS TO BE EXAMINED UNDER THE RESIDUARY PROVISION OF SECTION 3 7. HENCE, IN ORDER TO BE ELIGIBLE FOR AN EXPENSE UNDER THIS SECT ION, ONE HAS TO FULFIL THE CONDITIONS; (T) THE EXPENDITURE MUST NOT BE GOVERNED BY THE PROVISIONS OF SECTIONS 30 TO 36, (II) THE EX PENDITURE MUST HAVE BEEN LAID OUT WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF THE BUSINESS OF THE ASSESSEE, (III) THE EXPENDITURE MUS T NOT BE PERSONAL IN NATURE AND (IV) THE EXPENDITURE MUST NO T BE CAPITAL IN NATURE. THE EXPRESSION 'WHOLLY' EMPLOYED IN SECT ION 37 REFERS TO THE QUANTUM OF EXPENDITURE, WHILE THE WORD 'EXCL USIVELY' REFERS TO THE MOTIVE, OBJECTIVE AND PURPOSE OF THE EXPENDITURE. IN THE INSTANT CASE, THE ASSESSEE HAD ESTABLISHED T HAT PAYMENT WAS MADE THROUGH BANKING CHANNEL. ALL THE PAYEES RE SPONDED TO THE QUERY OF THE ASSESSING OFFICER AND SOME OF T HEM SUPPLIED THE INFORMATION ABOUT THE SERVICES RENDERE D BY THEM. THE COMMISSION HAD BEEN ALLOWED IN THE EARLIER YEAR S AND IN THE SUBSEQUENT YEARS ON SIMILAR LINES. ALL THE PAYE ES WERE ASSESSED TO TAX. THEIR PANS HAD ALSO BEEN DISCLOSED TO THE ASSESSING OFFICER. THE OBJECTION OF THE ASSESSING O FFICER WAS THAT THERE WAS NO AGREEMENT FOR PAYMENT OF COMMISSI ON. IT WAS FOR THE ASSESSEE TO CARRY OUT HIS BUSINESS. IF HE H AD AN UNDERSTANDING WITH CERTAIN PERSON, THEN IT MIGHT NO T BE VERY MUCH NECESSARY TO ENTER INTO AN AGREEMENT. THE ASSE SSEE AS WELL AS THE PAYEES WERE WITHSTANDING TO THEIR STAND . THERE WAS NO VARIANCE IN THEIR CONDUCT. AS FAR AS THE ALLEGAT ION OF FAILURE TO PRODUCE DEMONSTRATIVE EVIDENCE AGAINST THE ASSES SEE WAS CONCERNED, ONE HAD TO SEE THE NATURE OF BUSINESS. T HE ASSESSEE WAS IN THE BUSINESS OF SALE OF PLASTIC DAN A. THE AGENTS WERE REQUIRED TO SEND CUSTOMERS FOR PURCHASE OF DANA. THEY COULD BE INTRODUCED ON PHONE ALSO. THERE MIGHT NOT BE ANY DEMONSTRATIVE EVIDENCE IN CERTAIN CIRCUMSTANCES BUT THAT DID NOT MEAN THAT EXPENSE WAS NOT INCURRED. THE ASS ESSEE HAD SHOWN COMMISSION INCOME ON SALE OF PLASTIC DANA; IT SUGGESTED THAT HE HAD CARRIED ON BUSINESS. THUS, ALL THESE CI RCUMSTANCES WERE TO BE SEEN BEFORE MAKING THE DISALLOWANCE. IN SUCH CIRCUMSTANCES, THE DISALLOWANCE COULD NOT BE MADE. THE APPELLATE AUTHORITY HAD APPRECIATED THE FACTS AND C IRCUMSTANCES AND DELETED THE DISALLOWANCES CORRECTLY. THERE WAS NO MERIT IN THE INSTANT GROUND OF APPEAL ALSO. IT WAS TO BE REJ ECTED. IN THIS CASE, THE ASSESSEE HAS ISSUED APPOINTMENT L ETTERS AND THE NATURE OF THE BUSINESS IS SELLING OF CHEMICALS. THE ASSESSEE HAS SUBMITTED THE AGENT-WISE AND CHEMICAL WISE DETAILS BEFORE REVENUE AUTHORITIES. IT SHOWS THAT THE AGENTS OR THEIR SUBO RDINATES HAD CONTRIBUTED IN SELLING THE CHEMICALS. 18 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA 10.8 IN THE CASE OF CIT VS. PRINTERS HOUSE (P) LTD . (SUPRA), THE HONBLE DELHI HIGH COURT HELD AS UNDER: 1. THE QUESTION THAT HAS BEEN AGITATED BEFORE US PE RTAINS TO A SUM OF RS. 32 LAKHS APPROXIMATELY PAID AS COMMISSIO N BY THE ASSESSEE TO SEVERAL PARTIES. THE IMPUGNED ORDER DET AILS 18 SUCH PERSONS AND ALSO EXPRESSES SATISFACTION THAT T HE PAYMENTS WERE GENUINE. MS. BANSAL, LEARNED COUNSEL APPEARING FOR THE REVENUE, CONTENDS THAT THE PAYMENTS OF COMMISSION I S NOT IN ISSUE. THE ARGUMENT IS THAT THERE WAS NO CONSIDERAT ION OR CAUSE FOR PAYMENT OF COMMISSION TO THOSE PARTIES, S INCE, NO SERVICES HAD BEEN RENDERED BY THE RECIPIENTS OF COM MISSION. THIS IS COMPLETELY BELIED BY THE DETAILED FINDINGS RECORDED BY THE TRIBUNAL IN PARAGRAPHS 7 TO 7.13 OF THE IMPUGNE D JUDGMENT. WE NOTE THAT THE TRIBUNAL HAS ALSO RECORDED THAT TH ERE IS NO EVIDENCE THAT COMMISSION FLOWED BACK TO THE ASSESSE E OR THAT THE ENTRIES WITH RESPECT TO COMMISSION PAYMENTS WER E JUST PAPER TRANSACTION. THE FOLLOWING OBSERVATIONS BEING RELEVANT ARE EXTRACTED HEREINAFTER: ' .. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT TH E COMMISSION WAS PAID TO ANY NEAR RELATIVE, FAMILY MEMBER OR SIS TER CONCERN. THERE IS NO IOTA OF EVIDENCE TO SHOW THAT THE PAYME NT OF COMMISSION REPRESENTED ONLY ACCOMMODATION ENTRY OR WAS ONLY A PAPER TRANSACTION. THERE IS ALSO NO EVIDENCE TO S HOW THAT THE AMOUNT OF COMMISSION CAME BACK TO THE ASSESSEE IN A NY FORM SINCE THE ASSESSEE HAS GIVEN FULL DETAILS INCLUDING THE ADDRESSES OF BUYERS AND ADDRESSES OF THE AGENTS AS WELL AS DETAILS OF PAYMENT ETC. THE TRANSACTIONS OF PAYMENT OF COMMISSION AS WELL AS THE ASPECT OF RENDERING SERV ICES BY THE COMMISSION AGENTS WERE FULLY VERIFIABLE. HOWEVER, N EITHER THE ASSESSING OFFICER NOR THE LEARNED CIT (APPEALS) MAD E ANY ATTEMPT AT THEIR END TO MAKE PROBE INTO THE MATTER FOR COMING TO THE CONCLUSION THAT THE TRANSACTIONS WERE BOGUS, UN FAIR AND FRAUDULENT. IN OUR OPINION, IN ABSENCE OF ANY SUCH MATERIAL ON RECORD AND IN ABSENCE OF ANY INQUIRY CONDUCTED TO P ROVE THE NON-GENUINENESS OF THE TRANSACTIONS THE DEPARTMENTA L AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE C LAIM OF THE ASSESSEE WHICH WAS FULLY SUPPORTED BY THE DOCUMENTA RY EVIDENCE ON RECORD. 2. APART FROM EXPRESSING ITS SATISFACTION AS TO THE GENUINENESS OF THE TRANSACTION THE ITA T HAS TAKEN INTO CONSIDE RATION THE FACT THAT COMMISSION HAS BEEN PAID AND ALLOWED IN T HE PAST AND THAT THE COMMISSION PERCENTAGE IS NEGLIGIBLE. MS. B ANSAL CONTESTS THIS POSITION. THE TOTAL TURNOVER OF THE A SSESSEE WAS RS. 68 CRORES BEFORE TAX, INTER ALIA OF WHICH INCLU DED RS. 25.68 CRORES OF EXPORT TURNOVER. THE TURNOVER WE ARE CONC ERNED WITH IS STATED TO BE RS. 3.74 CRORES ON WHICH THE COMMIS SION HAS 19 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA BEEN PAID. IT HAS BEEN POINTED OUT BY MS. BANSAL TH AT RATHER THAN THE STATED 0.05 PER CENT THE COMMISSION, THE C OMMISSION WORKS OUT TO 1.5 PER CENT IN RELATION TO LOCAL SALE S AND 7 PER CENT AS FAR AS EXPORT TURNOVER IS CONCERNED. EVEN T HEN ACCORDING TO US THERE REMAINS NO REASON TO DOUBT TH ESE PAYMENTS. IT HAS BEEN LAID DOWN IN SEVERAL DECISION S OF THE SUPREME COURT THAT THE ITAT IS A FINAL FORUM FOR FI NDINGS OF FACT. THE HIGH COURT WOULD INTERVENE ONLY IF A FINDING AP PEARS TO BE PERVERSE, WHICH WE ARE UNABLE TO CONCLUDE IN THE / CASE IN HAND. 10.9 IN THE CASE OF CIT VS. SIDDHARTHA TRADE LINKS PVT. LTD. (SUPRA), THE HONBLE DELHI HIGH COURT HELD AS UNDER: 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORDS. WE FIND THAT IN VIEW OF THE VOLUMINOUS EVI DENCE SUBMITTED BY THE ASSESSEE IN THIS REGARD, IT CANNOT BE SAID THAT ASSESSEE, AS FAILED TO ESTABLISH THAT THERE WAS NO EVIDENCE OF RENDERING THE CORRESPONDING SERVICES BY SUCH PERSON S. WE FIND THAT ASSESSEE HAS DULY SUBMITTED VARIOUS DOCUMENTS PERTAINING TO LEDGER ACCOUNTS, COMMISSION PAID, BILLS RAISED A ND CORRESPONDENCES IN THIS REGARD. THE SERVICES PROVID ED HAVE ALSO BEEN DULY EXPLAINED. IT IS A SETTLED LAW THAT REVENUE AUTHORITIES CANNOT SIT INTO THE SHOE OF THE BUSINES SMAN. IN THIS REGARD, WE PLACE RELIANCE UPON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT, BOMBAY VS. WALCHAND AND C O. PRIVATE LTD. IN 65 ITR 381, WHEREIN IT WAS HELD THAT 'IN AP PLYING THE TEST OF COMMERCIAL EXPEDIENCY FOR DETERMINING WHETHER AN EXPENDITURE WAS WHOLLY AND EXCLUSIVELY FOR BUSINESS , THE EXPENDITURE HAS TO BE ADJUDGED FROM THE POINT OF VI EW OF THE BUSINESSMAN AND NOT OF REVENUE'. ACCORDINGLY, WE HO LD THAT ASSESSEE HAS DULY ESTABLISHED THAT SUFFICIENT SERVI CES WERE RENDERED FOR THE PAYMENT OF THE COMMISSION INVOLVED IN THIS REGARD. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE.' IN THE GIVEN CASE ALSO, ASSESSEE HAS PRODUCED THE D ETAILS OF SALES ACHIEVED BY THE AGENTS BY SUBMITTING ITEM-WISE, AGE NT-WISE DETAILS BEFORE REVENUE AUTHORITIES. FURTHER, ASSESSEE HAS F ILED THE RELEVANT BOOKS OF ACCOUNT RELATING TO AGENTS, PAYMENT DETAIL S, ADVANCE TAX COMPLIANCE BEFORE AUTHORITIES. IT SHOWS THAT ASSESS EE KNOWS THE BUSINESS HE CARRIES ON AND AS PER THE HONBLE HIGH COURTS OBSERVATION, IT IS SETTLED LAW THAT REVENUE AUTHORI TIES CANNOT SIT INTO 20 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA THE SHOE OF THE BUSINESSMAN. BY REFERRING TO CIT VS . WALCHANG AND CO (SUPRA), IN APPLYING THE TEST OF COMMERCIAL EXPE DIENCY FOR DETERMINING WHETHER AN EXPENDITURE WAS WHOLLY OR EX CLUSIVELY FOR BUSINESS, THE EXPENDITURE HAS TO BE ADJUDGED FROM T HE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF REVENUE. 10.10 FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT T HE ASSESSEE HAS SUBMITTED ENOUGH EVIDENCE IN SUPPORT OF UTILIZING T HE SERVICES OF AGENTS IN THE BUSINESS AND ALSO REVENUE AUTHORITIES HAVE NOT BROUGHT ANY COGENT MATERIAL TO SHOW THAT THE PAYMENTS WERE COME BACK TO ASSESSEE AND THESE PAYMENTS CANNOT BE CATEGORIZED A S GRATUITOUS PAYMENTS. THEREFORE, WE DELETE THE ADDITION MADE BY THE AO. HENCE, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 10.11 IN THE RESULT, BOTH THE APPEALS OF THE ASSES SEE IN AY 2011-12 AND 2012-13 ARE ALLOWED. ITA NO. 1430/HYD/2015 FOR AY 2009-10 11. BRIEFLY THE FACTS IN THIS AY ARE, THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2011-12, HAD ENQUIRED INTO THE GENUINENESS OF THE CLAIM OF COMMISSION EXPENDITURE AND HAD REACHED A CONCLUSION THAT THE SAME WAS NOT ALLOWABLE. BASED ON THAT FINDING, HE INITIATED PROCEEDINGS U/S 147 OF THE IT ACT FOR AY UNDER CONSIDERATION AND DISALLOWED THE CLAIM TO THE EXTEN T OF RS. 28,37,805/-. 12. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT(A) BY RAISING AN ADDITIONAL GROUND C HALLENGING THE VALIDITY OF THE PROCEEDING U/S 147, WHICH IS AS UND ER: THE LD. AO, IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 147 ESPECIALLY WHEN THE THEN AO COMPLETED THE ASSESSMENT U/S 143(3 ) ON 23/11/2011. 21 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA 12. THE CIT(A) ADMITTED THE ABOVE ADDITIONAL GROUND RELYING ON THE JUDGMENTS, INTER-ALIA, NTPC VS. CIT, 229 ITR 383. 13. BEFORE THE CIT(A), IT WAS SUBMITTED BY THE ASSE SSEE THAT ORIGINAL ASSESSMENT U/S 143(3) OF THE IT ACT WAS MA DE IN THIS CASE ON 23/11/2011. IT WAS SUBMITTED THAT THE AO HAD EXAMIN ED THE ISSUE AS WELL AS DETAILS OF THE COMMISSION EXPENDITURE AND, AFTER SATISFYING HIMSELF ABOUT THE SAME, ALLOWED THE SAME. IT WAS TH EREFORE ARGUED THAT INITIATION OF THE REASSESSMENT PROCEEDINGS WAS NOT VALID. 14. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE UPHELD THE ACTION OF THE AO BY HOLDING THAT THE INI TIATION OF THE REASSESSMENT PROCEEDINGS WERE VALID AND SHE OBSERVE D AS UNDER: 06.0 THE SUBMISSION HAS BEEN CONSIDERED. ORIGINAL ASSESSMENT U/S 143(3) OF THE I.T. ACT WAS MADE IN T HIS CASE ON 23.11.2011. IN COURSE OF THE ASSESSMENT PROCEEDING, THE AO HAD ENQUIRED INTO THE CLAIM OF THE COMMISSION EXPEN DITURE. THE ASSESSEE HAD ALSO FURNISHED DETAILS OF THE SAME. TH E ASSESSMENT WAS MADE WITHOUT DISALLOWING THE EXPENDI TURE. THAT BEING THE CASE, IT COULD BE ARGUED THAT AO HAD EXAM INED THE ISSUE AND WAS SATISFIED WITH THE EXPLANATION. IF TH E AO REACHED A DIFFERENT CONCLUSION ON THE SAME FACTS, IT COULD BE ARGUED THAT SUCH AN ACTION WAS NOT APPROPRIATE. BUT, IT IS NOT THE CASE WHERE THE FACTS AND CIRCUMSTANCES OF THE CASE WERE THE SAME WHEN THE ORIGINAL ASSESSMENT WAS MADE AND WHEN THE REASSESSMENT WAS MADE. AS DISCUSSED ABOVE, HE ENQUI RED INTO THE ISSUE OF COMMISSION EXPENSES IN CASE OF THE ASS ESSMENT PROCEEDING FOR A.Y. 2011-12 AND, BASED ON THAT FIND ING REACHED THE SATISFACTION THAT THE EXPENDITURE FOR A.Y. 2009 -10 SHOULD ALSO BE DISALLOWED. THE FINDING OF THE ENQUIRY FOR A.Y. 2011-12 CONSTITUTED A FRESH EVIDENCE BASED ON WHICH HE RECO RDED THE REASON AND INITIATED PROCEEDING FOR REASSESSMENT FO R THE ASSESSMENT YEAR UNDER CONSIDERATION. HENCE, IT IS A CASE NOT OF MERE CHANGE OF OPINION BUT APPLICATION OF FRESH EVI DENCE JUSTIFYING REACHING OF THE DIFFERENT CONCLUSION ON THE SAME SET OF FACTS. IN SO FAR AS THE PAYEES OF THE COMMISSION WE RE THE- SAME PERSONS AS THOSE FOR A.Y. 2011-12, THE APPLICATION OF THE ADVERSE FINDING TO THE ASSESSMENT YEAR UNDER CONSID ERATION WAS AN HONEST EXERCISE. IT IS THEREFORE HELD THAT T HE INITIATION OF THE REASSESSMENT PROCEEDINGS WAS VALID. 22 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA 15. AS REGARDS THE MERITS OF THE ADDITION TOWARDS T HE CLAIM OF COMMISSION EXPENDITURE, FOLLOWING HER DECISION IN A Y 2011-12, RESTRICTED THE ADDITION TO RS. 23,37,805/- BY GIVIN G RELIEF OF RS. 5,00,000/-. 16. IN AY 2010-11 ALSO, THE CIT(A) UPHELD THE INITI ATION OF REASSESSMENT PROCEEDINGS AND RESTRICTED THE ADDITIO N TO RS. 43,43,887/- BY GIVING RELIEF OF RS. 5,00,000/-. 17. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL, WHICH ARE COMMON IN AY 2009-10 AND 2010-11 EXCEPT THE QUANTUM OF ADD ITION: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) IS NOT CORRECT EITHER ON FACTS OR IN LAW AND IN BOTH. 2. THE LEARNED COMMISSIONER OF INCOME TAX(A), IN TH E FACTS AND CIRCUMSTANCES OF THE CASE IS NOT JUSTIFIED IN NOT H OLDING THE PROCEEDINGS INITIATED U/S 147 AS INVALID ESPECIALLY WHEN THE INITIAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX(A), FAILE D TO APPRECIATE THE FACT THAT THERE IS NO TANGIBLE FRESH MATERIAL WARRANTING INITIATION OF PROCEEDINGS U/S 147. 4. THE LEARNED COMMISSIONER OF INCOME TAX(A) IS NOT JUSTIFIED IN CONFIRMING AN DISALLOWANCE OF COMMISSION PAYMENT TO THE EXTENT OF RS. 5,00,000/- OUT OF TOTAL CLAIM OF RS. 28,37,805/-. 5. THE LEARNED COMMISSIONER OF INCOME TAX(A), FAILE D TO APPRECIATE THE FACT THAT THE COMMISSION PAYMENTS WE RE ALREADY EXAMINED AND ALLOWED IN THE ASSESSMENT INITIALLY CO MPLETED EARLIER U/S 143(3). 6. THE LEARNED FIRST APPELLATE AUTHORITY IS NOT JUS TIFIED IN CONFIRMING THE DISALLOWANCE OF THE COMMISSION PAYME NTS ESPECIALLY WHEN THE ASSESSING OFFICER HIMSELF HAS A LLOWED THE PAYMENTS OF SOME AGENTS AND THE FIRST APPELLATE AUT HORITY HERSELF HAD ALLOWED FURTHER PAYMENT OF RS. 5,00,000 ON ROUND SUM BASIS. 23 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA 7. THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT THAT THE COMMISSION PAYMENTS WERE THROUGH BANK ING CHANNELS AND THE RECIPIENTS UNRELATED ARE ASSESSED TO TAX. 8. THE APPELLANT CRAVE LEAVE TO ADD OR AMEND OR ALT ER ANY OF THE GROUNDS AT THE TIME OF HEARING OF APPEAL. 18. THE LD. AR SUBMITTED THAT THE NOTICE U/S 148 I S ISSUED LESS THAN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEA R 2009-10. HENCE THE PROVISO TO SEC 147 MAY NOT BE DIRECTLY APPLICAB LE. HOWEVER THE HON'BLE INCOME TAX APPELLATE TRIBUNAL HYDERABAD IN THE CASE OF DCIT VS. LEE PHARMA HELD THAT IN SUCH CASES ALSO T HE REOPENING IS BAD IN LAW IF THE MATERIAL FACTS WERE DISCLOSED IN THE ORIGINAL ASSESSMENT. 18.1 LD. AR SUBMITTED THAT IN THE COURSE OF THE INI TIAL ASSESSMENT IN RESPONSE TO THE QUESTIONNAIRE ISSUED (PAGE 20 OF PA PER BOOK) THE ASSESSEE FILED THE DETAILS OF COMMISSION PAYMENTS W ITH TDS DETAILS. HENCE THE MATERIAL FACTS ARE AVAILABLE ON RECORD AN D THE REOPENING IS BAD IN LAW. IN ANY CASE SINCE THE ASSESSING OFFICE R HAS NO TANGIBLE MATERIAL ON RECORD, THE REOPENING IS BAD IN LAW. 18.2 FURTHER, HE ALSO SUBMITTED THAT THE JUDICIAL AUTHORITIES HAVE DECIDED THAT IN THE ABSENCE OF TANGIBLE MATERIAL ON RECORD, NOTICE U/S 148 CANNOT BE GIVEN EVEN WITHIN 4 YEARS FROM THE EN D OF THE RELEVANT ASST.YEARS. FOR THIS PROPOSITION, HE RELIED ON THE FOLLOWING CASES: 1. KELVINATOR, 320 ITR1 560 (SC) 2. ASIAN PAINTS, 308 ITR 195 (BOM.) 3. WESTERN OUTDOOR, 286 ITR 620 (BOM.) 4. BAPALAL & SONS, 289 ITR 37 (CHENNAI) 18.3 ON MERITS, LD. AR SUBMITTED THAT THE LIST OF COMMISSION PAYMENTS INDICATED AT PAGE 2 OF ASSESSMENT ORDER, T HE ASSESSE PAID COMMISSION TO 14 MEMBERS. OUT OF THEM 4 MEMBERS WER E NEVER EXAMINED AND THE PAYMENTS TO THEM WAS ACCEPTED AS G ENUINE. HE SUBMITTED THAT EXCEPT RELYING ON THE IFORDER FOR AS ST. ORDER 2011-12, 24 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA THE ASSESSING OFFICER DID NOT BRING ON RECORD ANY M ATERIAL TO DISBELIEVE THE PAYMENTS TO OTHER PARTIES. ALL THE P AYMENTS WERE THROUGH BANK CHANNELS AND THE TAX WAS DEDUCTED AT S OURCE. ALL THE AGENTS CONFIRMED THE RECEIPT OF COMMISSIONS. NONE O F THE AGENTS ARE RELATED TO THE ASSESSE AND IN FACT ONE OF THE AGENT S IS THE AUTHORIZED CUSTOMS CLEARING AGENTS TO WHOM COMMISSION WAS PAID IN CONNECTION WITH SERVICES RENDERED IN GET THE CUSTOMS CLEARANCE FOR THE PURCHASES MADE BY ASSESSE. THE SAID COMMISSION IS ON PURCHASE S AND NOT ON SALES. THIS SHOWS THAT THE ASSESSING OFFICER HAD DI SALLOWED THE COMMISSION IN A ROUTINE MANNER AND THE CIT(A) ERRED IN SUSTAINING THE ADDITION. 18.4 IN THE LIGHT OF THE ABOVE SUBMISSIONS, THE LD . AR PRAYED THAT THE REASSESSMENT PROCEEDINGS MAY BE QUASHED AND THE ADDITION MAY BE DELETED. 19. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 20. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE FIND THAT THE AO COMPLETED THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT AFTER EXAMINING THE ISSUE AS WELL AS THE DETAILS OF THE COMMISSION EXPENDITURE AND AFTER SATISFYING HIM SELF ABOUT THE SAME, ALLOWED THE ASSESSEES CLAIM OF COMMISSION EX PENDITURE. THEREAFTER, AO REOPENED THE ASSESSMENT. IN THE REAS SESSMENT PROCEEDINGS, THE AO HAS FOUND NO TANGIBLE MATERIAL ON RECORD EXCEPT RELYING ON FINDINGS MADE IN AY 2011-12. IN THIS CON NECTION, WE REFER TO THE FOLLOWING CASE LAW: 20.1 IN ITO VS. LAKHMANI MEWAL DAS [(1976) 103 ITR 437 (SC)], THE SUPREME COURT HELD THAT THE POWERS OF THE ITO TO RE OPEN THE ASSESSMENT, THOUGH WIDE ARE NOT PLENARY. THE WORDS USED BY THE STATUTE ARE REASONS TO BELIEVE AND NOT REASONS T O SUSPECT. IN CIT 25 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA VS. KELVINATOR OF INDIA LTD [(2010) 228 CTR (SC) 48 8], HONOURABLE SUPREME COURT HELD THAT AFTER 01.04.1989, ASSESSING OFFICER HAS POWER TO RE-OPEN THE ASSESSMENT U/S 147 PROVIDED TH ERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ES CAPEMENT OF INCOME FROM ASSESSMENT, REASONS MUST HAVE LINK WITH THE FO RMATION OF THE BELIEF. IN CIT VS. ATLAS CYCLE INDUSTRIES [(1989) 1 80 ITR 319 (P&H)], IT WAS HELD THAT ASSESSING OFFICER WILL NOT HAVE JURIS DICTION TO PROCEED WITH THE REASSESSMENT THE MOMENT HE FINDS THE GROUN D MENTIONED IN THE REASSESSMENT NOTICE AS INCORRECT OR NON-EXISTEN T. 20.2 IN THE CASE OF ASIAN PAINTS, 308 ITR 195 (BOM. ), THE HONBLE COURT HELD AS UNDER: IT IS FURTHER TO BE SEEN THAT THE LEGISLATURE HAS NOT CONFERRED POWER ON THE ASSESSING OFFICER TO REVIEW ITS OWN OR DER. THEREFORE, THE POWER UNDER SECTION 147 CANNOT BE US ED TO REVIEW THE ORDER. IN THE PRESENT CASE, THOUGH THE A SSESSING OFFICER HAS USED THE PHRASE 'REASON TO BELIEVE', AD MITTEDLY BETWEEN THE DATE OF THE ORDER OF ASSESSMENT SOUGHT TO BE REOPENED AND THE DATE OF FORMATION OF OPINION BY TH E ASSESSING OFFICER, NOTHING NEW HAS HAPPENED, THEREFORE, NO NE W MATERIAL HAS COME ON RECORD, NO NEW INFORMATION HAS BEEN REC EIVED, IT IS MERELY A FRESH APPLICATION OF MIND BY THE SAME ASSE SSING OFFICER TO THE SAME SET OF FACTS AND THE REASON THA T HAS BEEN GIVEN IS THAT THE SOME MATERIAL WHICH WAS AVAILABLE ON RECORD WHILE ASSESSMENT ORDER WAS MADE WAS INADVERTENTLY E XCLUDED FROM CONSIDERATION. THIS WILL, IN OUR OPINION, AMOU NT TO OPENING OF THE ASSESSMENT MERELY BECAUSE THERE IS CHANGE OF OPINION. THE FULL BENCH OF THE DELHI HIGH COURT IN ITS JUDGM ENT IN THE CASE OF KELVINATOR, REFERRED TO ABOVE, HAS TAKEN A CLEAR VIEW THAT REOPENING OF ASSESSMENT UNDER SECTION 147 MERE LY BECAUSE THERE IS A CHANGE OF OPINION CANNOT BE ALLO WED. IN OUR OPINION, THEREFORE, IN THE PRESENT CASE ALSO, IT WA S NOT PERMISSIBLE FOR THE RESPONDENT NO.1 TO ISSUE NOTICE UNDER SECTION 148. 20.3 IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE CA SES, WE ARE OF THE VIEW THAT THE AO REOPENED THE ASSESSMENT BASED ON T HE CHANGE OF OPINION AS THERE IS NO TANGIBLE MATERIAL FOUND IN T HE REASSESSMENT TO ESTABLISH THAT THE INCOME HAS ESCAPED ASSESSMENT. I N THIS CONNECTION, WE REFER TO THE FOLLOWING CASE LAWS DISCUSSED WOULD 26 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA DEMONSTRATE WHAT WOULD AMOUNT TO CHANGE OF OPINION WHICH BARS REASSESSMENT: (1) IN DEPUTY COMMISSIONER OF INCOME TAX VS. MANAK SHOES C O. P. LIMITED, (2011) 11 ITR (TRIB) 673 (DEL), THE TRIBUNAL HELD T HAT WHERE REGULAR ASSESSMENT HAD BEEN MADE UNDER SECTION 143(3) ALLOW ING DEPRECIATION OF FACTORY BUILDING, PLANT AND MACHINERY, AND REASSESS MENT PROCEEDINGS WERE INITIATED ON THE GROUND THAT DEPRECIATION WAS NOT A DMISSIBLE SINCE THE ASSESSEE HAD NO MANUFACTURING ACTIVITY DURING THE YEAR, THE TRIBUNAL FOUND THAT THE MATTER HAD BEEN EXAMINED DURING THE ASSESSMENT STAGE AND T HAT THERE WAS NO FRESH INFORMATION TO JUSTIFY A DIFFERENT INFERENCE AND NO TICE UNDER SECTION 148. THOUGH ACTION WAS INITIATED WITHIN THE FOUR YEAR TIME LIMI T, IT WAS FOUND THAT IT WAS BASED ON MERE CHANGE OF OPINION AND REASSESSMENT PROCEEDINGS WAS, THEREFORE, NOT JUSTIFIED. (2) IN CONSOLIDATED AND FIN VEST LIMITED VS. ASST. COMMISSIONER OF INCOME TAX, (2006) 281 ITR 394 (DELHI), THE HIGH COURT HELD THAT THE DOCTRINE OF CHANGE OF OPINION COULD NOT BE A BASIS FOR REOPENING COMPLETED ASSESSMENTS AND WOULD BE APPLICABLE ONLY TO SITUATIONS WHERE THE ASSESSING OFFICER HAD APPLIED HIS MIND (IN EARLIER ASSESSMENT) AND TAKEN CONSCIOUS DECISION ON A PARTICULAR MATTER IN ISSUE, AND IT WOULD HAVE NO APPLICATION, WHERE THE ORDER OF ASSESSMENT DID NOT ADDRESS ITSELF TO THE ASPECT WHICH WAS THE BASIS FOR RE-OPENING OF THE ASSESSMEN T. THE HIGH COURT FURTHER HELD THAT MERE PRODUCTION OF BOOKS OF ACCOUNT OR OT HER EVIDENCE FROM WHICH THE ASSESSING OFFICER COULD HAVE, WITH DUE DILIGENCE, D ISCOVERED THE MATERIAL EVIDENCE DOES NOT NECESSARILY AMOUNT TO A DISCLOSUR E WITHIN THE MEANING OF THE PROVISO TO SECTION 147 OF THE ACT. (3) IN JAI HOTELS CO. LIMITED VS. ASST. DIT, (2009) 24 DTR 37 (DEL), THE DELHI HIGH COURT HAS HELD THAT THERE BEING NO NEW M ATERIAL IN THE HANDS OF THE REVENUE LEADING TO VIEW THAT THERE WAS REASON TO BE LIEVE THAT INCOME HAD ESCAPED ASSESSMENT, THE CASE IS A CLASSIC INSTANCE OF A CHANGE OF OPINION. THE HIGH COURT FURTHER OBSERVED THAT WHEN COPIES OF STA TEMENT OF INCOME, TRADING ACCOUNT, PROFIT AND LOSS ACCOUNT, AUDIT REPORT ETC. , WERE APPENDED TO THE RETURN FILED BY THE ASSESSEE, TAKING RESORT TO SECTION 147 /148 WAS UNWARRANTED AS IT CONSTITUTED A CHANGE OF OPINION, SINCE THE MATERIAL ACTED UPON HAD BEEN MADE AVAILABLE ALONG WITH RETURN OF INCOME. (4) IN SATNAM OVERSEAS VS. ADDL. COMMISSIONER OF INCOME TA X, (2010) 329 ITR 237 (DELHI), THE HIGH COURT HELD THAT THE ONLY REASON WHICH HAS BEEN GIVEN SEEKING REOPENING OF THE ASSESSMENT FOR THE YEARS 1 997-98 AND 1998-99 IS THAT SUPPRESSION OF SALES HAS TAKEN PLACE ON ACCOUNT OF THE FACT THAT WHEN AVERAGE PRICE OF THE CLOSING STOCK IS MULTIPLIED WITH THE Q UANTITY OF THE SALES IN THE YEAR THEN THE VALUE OF THE SALES WOULD BE AT A HIGHER FI GURE, THAN DECLARED BY THE ASSESSEE. CLEARLY, THERE IS NO NEW MATERIAL WHICH I S ALLEGED TO HAVE COME TO THE NOTICE OF THE ASSESSING OFFICER WHICH HAS CAUSE D HIM TO SEEK REOPENING OF THE ASSESSMENT. ADMITTEDLY, THE REASONS GIVEN FOR S EEKING REOPENING OF THE ASSESSMENT CONTAINS THE EXPRESSION PERUSAL OF THE CASE RECORD REVEALS CLEARLY SHOWING THAT IT IS ON THE BASIS OF THE SAME ASSESSM ENT RECORD AS WAS FILED BY THE ASSESSEE, DURING THE RELEVANT ASSESSMENT YEARS AND ALSO SCRUTINISED BY THE ASSESSING OFFICER BEFORE PASSING THE ORDERS UNDER S ECTION 143(3). FURTHER, THE 27 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA NEW LOGIC, RATIONALE AND OPINION WHICH HAS BEEN FOR MED BY THE ASSESSING OFFICER FOR SEEKING REOPENING OF THE ASSESSMENT IS NOTHING BUT A CHANGE OF OPINION AND A NEW APPROACH TO THE EXISTING FACTS AN D MATERIAL WHICH THE ASSESSING OFFICER COULD WELL HAVE DONE DURING THE R EGULAR ASSESSMENT PROCEEDINGS OF THE RELEVANT ASSESSMENT YEARS. (5) IN COMMISSIONER OF INCOME TAX VS. EICHER LIMITED, (2007) 294 ITR 310 (DEL), THE HIGH COURT HAS TAKEN A VIEW THAT SINCE T HE FACTS AND MATERIALS WERE BEFORE THE ASSESSING OFFICER AT THE TIME OF FRAMING OF THE ORIGINAL ASSESSMENT, AND LATER A DIFFERENT VIEW WAS TAKEN BY HIM OR HIS SUCCESSOR ON THE SAME FACTS, IT CLEARLY AMOUNTED TO A CHANGE OF OPINION, WHICH W OULD NOT FORM THE BASIS FOR PERMITTING THE ASSESSING OFFICER OR HIS SUCCESSOR T O REOPEN THE ASSESSMENT OF THE ASSESSEE. THE HONORABLE HIGH COURT FURTHER OBSE RVED THAT IF THE ENTIRE MATERIAL HAD BEEN PLACED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AT THE TIME WHEN THE ORIGINAL ASSESSMENT WAS MADE AND THE ASSESSING OFFICER APPLIED HIS MIND TO THAT MATERIAL AND ACCEPTED THE VIEW CANVASSED BY THE ASSESSEE, THEN MERELY BECAUSE HE DID NOT EXPRESS TH IS IN THE ASSESSMENT ORDER, THAT BY ITSELF WOULD NOT GIVE HIM A GROUND T O CONCLUDE THAT INCOME HAD ESCAPED ASSESSMENT AND, THEREFORE, THE ASSESSMENT N EEDED TO BE REOPENED. THE ASSESSEE HAD NO CONTROL OVER THE WAY AN ASSESSM ENT ORDER IS DRAFTED. (6) IN COMMISSIONER OF INCOME TAX VS. KELVINATOR OF INDIA LIMITED, (2010) 320 ITR 561, THE SUPREME COURT OBSERVED THAT POST 01-04 - 1989, THE POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BELIEVE FAI LING WHICH, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICE R TO REOPEN THE ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION WHICH CANNOT BE PER SE REASON TO REOPEN. THE CONCEPTUAL DIFFERENCE BETWEEN THE POWER TO REVIEW AND POWER TO REASSESS IS TO BE KEPT IN MIND. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. B UT REASSESSMENT HAS TO BE BASED ON THE FULFILLMENT OF CERTAIN PRE CONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, IN THE GARB OF RE-OPENING T HE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION A S AN IN- BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 01-08-1989, THE ASSESSING OFFICER HAS POWER TO REOP EN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LINK WITH THE FORMATION OF THE BELIEF. 20.4 IN VIEW OF THE ABOVE DISCUSSION, IN THIS CASE , AO CAME TO CONCLUSION THAT THE PAYMENTS OF COMMISSION CLAIMED BY ASSESSEE ARE NOT GENUINE IN AY 2011-12 AND HE CAME TO CONCLUSION ON THE SAME BREATH THAT THE PAYMENTS WERE MADE IN THE EARLIER Y EARS ARE ALSO NOT GENUINE EVEN THOUGH THESE ASSESSMENTS WERE COMPLETE D U/S 143(3). THE FINDINGS OF AO ARE MERE PRESUMPTIONS AND NOT RE ACHED THE LOGICAL CONCLUSION AND NOT PUT TO TEST BEFORE ANY A DJUDICATING AUTHORITIES. IF IT IS ALLOWED TO THESE ACTIONS, THE RE CANNOT BE ANY 28 ITA NOS. 1430 TO 1433/HYD/15 SUNIL VISHRAM CHAWDA COMPLETED ASSESSMENTS. THE LEGISLATURE/COURTS HAVE TAKEN ENOUGH PRECAUTIONS TO AVOID SUCH TYPE OF REOPENING OF ASSE SSMENT BY MERE CHANGE OF OPINION. BY RELYING ON THE ABOVE JUDICIAL PRECEDENTS, IN OUR VIEW, AO HAS REOPENED THE ASSESSMENT MERELY BASED O N PRESUMPTION AND CHANGE OF OPINION. THEREFORE, THE REOPENING OF ASSESSMENT IN AY 2009-10 & 2010-11 ARE BAD IN LAW. ACCORDINGLY, GRO UND RAISED BY THE ASSESSEE IS ALLOWED IN BOTH THE YEARS UNDER CONSIDE RATION. 21. IN THE RESULT, ALL THE APPEALS UNDER CONSIDERAT ION ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25 TH MAY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 25 TH MAY, 2018 KV COPY TO:- 1) SHRI SUNIL VISHRAM CHAWDA, C/O CH. PARTHASARATHY & CO., 1-1- 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO. 1, ASHOKNAGAR, HYDERABAD 500 020. 2) DCIT, CIRCLE 14(1), IT TOWERS, HYDERABAD 3) CIT(A) 6, HYDERABAD. 4) PR. CIT - 6, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE