Maldeep Catalysts Pvt.Ltd., Surat V. The ACIT.(OSD)Range-1, Surat

ITA 1444/AHD/2009

• Counselvise Citation: 144420514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Section: 143(3)

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH BAHMEDABAD BEFORE S/SHRI G. D. AGRAWAL, V.P. AND D. K. TYAGI, JM ITA NO.1444/AHD/2009 & ITA NO.1799/AHD/2009 ASST. YEAR:2006-07 MALDEEP CATALYST (P) LTD., 3, HARIKUNJ, UDHNA INDUSTRIAL ESTATE, SVP ROAD NO.3, UDHNA, SURAT- 394 210. V/S . ASSTT. CIT, (OSD), RANGE-1, SURAT AAYKAR BHAVAN, MAJURA GATE, SURAT-395001. AND DY. CIT, CIRCLE-1, SURAT. V/S . M/S MALDEEP CATALYST (P) LTD. 3, HARIKUNJ, UDHNA INDUSTRIAL ESTATE, SVP ROAD NO.3, UDHNA, SURAT-394 210 (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI J. P. SHAH, AR RESPONDENT BY:- SHRI SAMIR TEKRIWAL, SR.DR DATE OF HEARING 1/9/2011. DATE OF PRONOUNCEMENT 9/9/2011. O R D E R PER D. K. TYAGI, JUDICIAL MEMBER. THESE ARE TWO CROSS APPEALS ONE FILED BY THE ASSE SSEE AND THE OTHER BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A )-I, SURAT, DATED 16.03.2009. THE ASSESSEE HAS COME IN APPEAL AGAINST SUSTAINING PART ITA NOS.1444 & 1799/AHD/2009 ASST. YEAR 2006-07 2 DISALLOWANCE OF COMMISSION (RS.5,37,667/-) WHEREAS THE REVENUE IS IN APPEAL AGAINST DELETION OF DISALLOWANCE OF COMMISSI ON (RS.16,05,857/-) MADE BY AO. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PAINT DRIERS WHICH ARE USED AS RAW MATERIAL BY THE PAINT INDUSTRY. THE RETURN OF INCOM E FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 29.12.2006, DECLARING A BOOK PROFIT OF RS.19,02,423/-. THE CASE WAS SELECTED FOR SCRUTINY WHEREIN VARIOUS DETAILS WERE CALLED, WHICH WERE SUBMITTED TO THE AO FROM TI ME TO TIME. THE AO DISALLOWED THE ENTIRE COMMISSION EXPENSES OF RS.21, 43,524/- FOLLOWING THE ASSESSMENT ORDER FOR ASST. YEAR 2005-06. THE AO STATED THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.21,43,524/- AS AGAINST COMMISSION. THE AO STATED THAT THE ASSESSEE HAS NOT ESTABLISHED THE IDENTITY OF THE PARTIES, GENUINENESS OF TRANSACTION AND HAS NOT PRO VED THAT THE EXPENDITURES ARE WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS. THE DETAILS OF CLAIM OF COMMISSION ARE AS UNDER :- NAME OF THE PARTY PARTICULARS AMOUNT (RS.) PHNEO CHEM INDUSTRIES, NEW DELHI FOR SALE OF MATERIAL 4,68,766 M/S KAPADIA ENTERPRISES -DO- 13,50,534 M/S CAMPLEX MARKETING CORPN. -DO- 2,55,323 SCORPION ENTERPRISES -DO- 36,325 AMAR CHEMICALS -DO- 32,576 TOTAL 21,43,524/- 3. THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APP ELLATE AUTHORITY WHEREIN IT WAS SUBMITTED THAT THE AO HAS MADE THE D ISALLOWANCE FOLLOWING THE DECISION FOR ASST. YEAR 2005-06. THE CIT(A) HAS DELETED THIS DISALLOWANCE IN HIS ORDER DATED 18.09.2008 IN ASSESSEES OWN CASE IN ITA NOS.1444 & 1799/AHD/2009 ASST. YEAR 2006-07 3 CAS-1/301/07-08 FOR ASST. YEAR 2005-06. THE LD. CIT (A) CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE AND THE OBSERVATIO N OF THE A.O. THE LD. CIT(A) HAS OBSERVED AS UNDER :- 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE A.O. THE DISALLOWANCE HAS BEEN M ADE WITHOUT DISCUSSION ON THE BASIS OF ASSESSMENT ORDER OF A.Y. 2005-06. THE FACTS IN THE CURRENT YEAR ARE SAME IN THE YEAR 2005-06. THER EFORE, FOLLOWING THE DECISION OF THE CIT(A) IN THE APPELLATE ORDER DATED 18.09.2008 MENTIONED ABOVE, THE DISALLOWANCE OF COMMISSION IS DELETED IN RESPECT OF M/S KAPADIA ENTERPRISE AND M/S COMPLEX MARKETING CORPOR ATION. IN RESPECT OF COMMISSION OF THE OTHER THREE PARTIES, NAMELY, M /S PHNEO CHEM INDUSTRIES, M/S SCORPION ENTERPRISES AND M/S AMAR C HEMICALS, THE DISALLOWANCE IS CONFIRMED. THE DECISION OF A.Y. 200 5-06 IS AS UNDER :- 3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE A.O. WHILE DECIDING THE APPE AL FOR ASST. YEAR 2004-05, THE CIT(A) HAD CONSIDERED THIS ISSUE AND HAD ALLOWED THE COMMISSION IN RESPECT OF KAPADIA ENTERP RISE AND CAMPLEX MARKETING CORPORATION AS PER THE FOLLOWING DECISION:- 3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. THE APPELLANT HAS SHOWN COMM ISSION PAYMENT OF M/S PHNEO CHEM INDUSTRIES, M/S KAPADIA ENTERPRIS ES, M/S CAMPLEX MARKETING CORPORATION AND M/S SCORPION ENTERPRISES. WITH RESPECT TO KAPADIA ENTERPRISES AND CAMPLEX MARKETING CORPORATI ON, M/S ASIAN PAINTS LTD. AND BERGER PAINTS INDIA LTD. HAVE CONFI RMED THAT THEY ARE THE AGENTS THROUGH WHOM THEY HAVE MADE PURCHASES FR OM THE ASSESSEE COMPANY. THEREFORE, IN RESPECT OF THESE TWO PARTIES THE PROOF THAT THEY ARE COMMISSION AGENTS HAS BEEN ESTABLISHED. HOWEVER , THERE IS NO EVIDENCE THAT PHENO CHEM INDUSTRIES OR SCORPION ENT ERPRISE WERE AGENTS AT ALL BECAUSE THE AO HAS STATED HAS THAT TH E INVOICES ARE NOT BELIEVABLE BECAUSE THEY SEEM TO HAVE BEEN TAMPERED WITH. THE APPELLANT HAS NOT PROVED WHAT SERVICES HAVE BEEN RE NDERED BY PHENO CHEM INDUSTRIES AND SCORPION ENTERPRISES AND THEREF ORE COMMISSION PAYMENT IN RESPECT OF PHENO CHEM INDUSTRIES AND SCO RPION ENTERPRISES HAS BEEN RIGHTLY DISALLOWED BY THE AO. IN VIEW OF THE ABOVE REASONS THE DISALLOWANCE MADE BY THE AO OF CO MMISSION PAYMENT IN RESPECT OF PHENO CHEM INDUSTRIES AND SCO RPION ENTERPRISES IS CONFIRMED AND THE COMMISSION PAYMENT IN RESPECT OF KAPADIA ENTERPRISE AND CAMPLEX MARKETING CORPORATIO N IS DELETED. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. ITA NOS.1444 & 1799/AHD/2009 ASST. YEAR 2006-07 4 SINCE THE FACTS IN THE CURRENT YEAR ARE SAME, THERE FORE, FOLLOWING THE DECISION OF ASST. YEAR 2004-05 THE COMMISSION P AID TO M/S KAPADIA ENTERPRISE AND M/S CAMPLEX MARKETING CORPOR ATION IS ALLOWED. HOWEVER, THERE IS NO EVIDENCE THAT PHENO C HEM INDUSTRIES, AMAR CHEMICALS OR SCORPION ENTERPRISE W ERE AGENTS AT ALL BECAUSE THE AO HAS STATED THAT THE INVOICES ARE NOT BELIEVABLE BECAUSE THEY SEEM TO HAVE BEEN TAMPERED WITH. THE A PPELLANT HAS NOT PROVED WHAT SERVICES HAVE BEEN RENDERED BY PHEN O CHEM INDUSTRIES, AMAR CHEMICALS AND SCORPION ENTERPRISES AND THEREFORE COMMISSION PAYMENT IN RESPECT OF PHENO CH EM INDUSTRIES, AMAR CHEMICALS AND SCORPION ENTERPRISE HAS BEEN RIGHTLY DISALLOWED BY THE AO. IN VIEW OF THE ABOVE REASONS THE DISALLOWANCE MADE BY THE AO OF COMMISSION PAYMENT I N RESPECT OF PHENO CHEM INDUSTRIES, AMAR CHEMICALS AND SCORPION ENTERPRISE IS CONFIRMED. IN VIEW OF THE ABOVE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. AGAINST THIS ORDER OF LD. CIT(A) BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. 4. AT THE OUTSET THE LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL FOR ASST. YEAR 20 05-06 IN ITA NO.3708/AHD/2008 & ITA NO.3911/AHD/2008 VIDE ORDER DATED 18.03.2011 IN THE CASE OF ASSESSEE AND THE TRIBUNAL HAD RESTORED THE MATTER TO THE AO FOR VERIFICATION AND DECIDING THE SAME. THE ASSESSMENT ORDERS FRAMED U/S 143(3) R.W.S. 254 OF THE IT ACT, 1961 FOR ASST. YEAR 2004-05 & 2005-06 DATED 29.11.2010 AND 16.08.2011, GIVING EFFECT TO THE TRIBUNALS ORDER, HAVE BEEN PLACED ON RECORD WHEREI N THE AO HAS STATED THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACC OUNT OF COMMISSION EXPENSES IS FOUND ACCEPTABLE IN RESPECT OF FOUR PAR TIES NAMELY PHNEO CHEM INDUSTRIES, NEW DELHI, M/S KAPADIA ENTERPRISES , M/S CAMPLEX MARKETING CORPN. AND SCORPION ENTERPRISES. IN THE C ASE OF AMAR CHEMICALS THOUGH FOR ASST. YEAR 2005-06 THE TRIBUNA L HAD CONFIRMED THE ITA NOS.1444 & 1799/AHD/2009 ASST. YEAR 2006-07 5 DISALLOWANCE IT WAS PRAYED THAT FACTS REMAINING THE SAME COMMISSION PAID TO IT MAY ALSO BE ALLOWED. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF AO TO SUBMIT THAT SINCE THE ASSESSEE HAS NOT ESTABLISHED THE IDE NTITIES OF THE PARTIES, GENUINENESS OF THE TRANSACTIONS AND HAS NOT PROVED THAT THE EXPENDITURE WERE WHOLLY AND EXCLUSIVELY WERE INCURRED FOR THE P URPOSE OF BUSINESS, THE DISALLOWANCE MADE BY THE AO MAY KINDLY BE CONFI RMED. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT THE AO HAS DISALLOWED THE ENTIRE COMMISSION EXPENSE S OF RS.21,43,524/- PAID BY THE ASSESSEE TO THE FIVE PARTIES FOLLOWING THE ASSESSMENT ORDER FOR ASST. YEAR 2005-06. HE ALSO OBSERVED THAT THE ASSES SEE HAS NOT BEEN ABLE TO ESTABLISH THE IDENTITY OF THE PARTIES, GENUINENE SS OF THE TRANSACTIONS AND HAS ALSO NOT PROVED THAT THE COMMISSION WAS PAID WH OLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN APPEAL, FOLLOWING T HE ORDER OF HIS PREDECESSOR FOR ASST. YEAR 2005-06 THE LD. CIT(A) D ELETED THE DISALLOWANCE OF COMMISSION PAID TO M/S. KAPADIA ENT ERPRISES, M/S CAMPLEX MARKETING CORPN. IN RESPECT OF COMMISSION P AID TO OTHER THREE PARTIES NAMELY PHENO CHEM INDUSTRIES, M/S SCORPION ENTERPRISES AND M/S AMAR CHEMICALS THE DISALLOWANCE WAS CONFIRMED. WE FURTHER FIND THAT THE MATTER WAS CARRIED TO THE TRIBUNAL FOR ASS T. YEAR 2005-06 AND THE TRIBUNAL VIDE ITS ORDER DATED 18.03.2011 RESTORED T HE MATTER BACK TO THE FILE OF AO IN RESPECT OF FOLLOWING FOUR PARTIES :- M/S CAMPLEX MARKETING CORPORATION, M/S KAPADIA ENTERPRISES, M/S PHENO CHEM INDUSTRIES, AND M/S SCORPION ENTERPRISES ITA NOS.1444 & 1799/AHD/2009 ASST. YEAR 2006-07 6 FOR FRESH ADJUDICATION BUT IN THE CASE OF M/S AMAR CHEMICALS THE DISALLOWANCE ON ACCOUNT OF COMMISSION PAYMENT WAS C ONFIRMED BY THE TRIBUNAL AS THE ASSESSEE FAILED TO FURNISH EVIDENCE OF SERVICES RENDERED BY THIS PARTY TO THE ASSESSEE BEFORE THE LOWER AUTHORI TIES AND EVEN BEFORE THE TRIBUNAL. CONSEQUENT TO THIS ORDER OF THE TRIBUNAL FOR ASST. YEAR 2005- 06, COMMISSION PAID TO THE FOUR PARTIES WAS FOUND A CCEPTABLE BY THE AO AS IS CLEAR FROM THE ASSESSMENT ORDER DATED 16.8.20 11 FOR ASST. YEAR 2005-06 WHICH IS AVAILABLE IN THE PAPER BOOK. THE F ACTS OF THE CASE ADMITTEDLY BEING THE SAME FOR THIS ASST. YEAR ALSO, WE FEEL NO HESITATION IN HOLDING THAT COMMISSION PAID TO THE ABOVE FOUR P ARTIES IS ACCEPTABLE AND NO DISALLOWANCE IS CALLED FOR. SINCE LD. CIT(A) HAS ALREADY DELETED THE DISALLOWANCE MADE IN THE CASE OF M/S KAPADIA EN TERPRISE AND M/S CAMPLEX MARKETING CORPORATION, THE DISALLOWANCE IN RESPECT OF M/S PHENO CHEM INDUSTRIES, AND M/S SCORPION ENTERPRISES IS ALSO DELETED. IN THE CASE OF AMAR CHEMICALS, FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASST. YEAR 2005-06, THE DISALLOWANCE MADE BY THE AO IS CO NFIRMED. THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 9/9/2011 SD/- SD/- (G. D. AGRAWAL) (D. K. TYAGI) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD, DATED : 9/9/2011 ITA NOS.1444 & 1799/AHD/2009 ASST. YEAR 2006-07 7 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 2/9/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 6/9/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..