DCIT, Circle - 8(1), Kolkata, Kolkata V. M/s. Five Stein India Projects Private Limited, Kolkata

ITA 1447/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0447 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 15-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C GIRI LD
• Keywords: Rule of consistency
• Section: 131; 139

Judgement Text

1 ITA NO.1447/KOL/2017 FIVES STEIN INDIA PROJECTS PVT. LTD. AY 2011-12 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1447/KOL/2017 ASSESSMENT YEARS: 2011-12 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-8(1), KOLKATA VS. M/S. FIVES STEIN INDIA PROJECTS PVT. LTD. (PAN: AADCS7768M) APPELLANT RESPONDENT DATE OF HEARING 19.07.2018 DATE OF PRONOUNCEMENT 19.09.2018 FOR THE APPELLANT SHRI NICHOLAS MURMU, JCIT FOR THE RESPONDENT SHRI S. C. GIRI, LD. AR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF THE LD. CIT(A)-11, KOLKATA DATED 01.03.2017 FOR AY 2011-12. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL OF REVEN UE IS AGAINST THE ORDER OF LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS.46,89,261/- ON A CCOUNT OF COMMISSION PAID TO M/S. SUNSHINE COMMOTRADE PVT. LTD. 3. BRIEFLY STATED FACTS AS OBSERVED BY THE AO ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED TO HAVE PAID COM MISSION AMOUNTING TO RS.46,89,261/- TO M/S. SUNSHINE COMMOTRADE (P) LTD. (HEREINAFTER M/S. SCPL). ACCORDING TO AO, THE ASSESSEE WAS SPECIFICALLY ASKED TO PROVIDE THE NAME OF PARTIES AND PROJECTS, BUT THE ASSESSEE FAILED TO FURNISH ANY DETAILS IN THIS REGARD. HOWE VER, A NOTICE U/S 131 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WA S ISSUED TO THE DIRECTOR OF M/S. SCPL ON 28.02.2014. IN COMPLIANCE SHRI ANIL KUMAR KHANDELI A APPEARED ON 07.03.2014 AND ON THAT DATE A STATEMENT WAS RECORDED ON OATH, WHICH IS AVA ILABLE AT PAGE 2 OF THE ASSESSMENT ORDER. 2 ITA NO.1447/KOL/2017 FIVES STEIN INDIA PROJECTS PVT. LTD. AY 2011-12 ACCORDING TO AO, FROM THE REPLY OF THE DIRECTOR OF THE M/S SCPL IT IS EVIDENT THAT NO SERVICES HAVE BEEN RENDERED BY M/S. SUNSHINE COMMOT RADE PVT. LTD. TO THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION. MOREO VER THE AO TOOK NOTE OF THE FACT THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTIN G, THEREFORE, IF ANY PRIOR PERIOD EXPENSES WAS THERE THEN IT SHOULD HAVE BEEN CLAIME D IN THAT YEAR AND NOT IN THE CURRENT YEAR, THEREFORE, ACCORDING TO AO SINCE THE ASSESSEE WAS UNABLE TO JUSTIFY OR SUBSTANTIATE SUCH A CLAIM MADE, SO HE DISALLOWED THE SAID SUM OF RS.46,89,261/- CLAIMED BY THE ASSESSEE AS COMMISSION PAID TO M/S. SUNSHINE COMMOTRADE PVT. LTD. AND ADDED BACK TO THE INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO DELETED THE DISALLOWANCE AS MADE BY THE AO ON THE B ASIS OF THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR AY 2009-10 AND ALSO ON THE BASIS OF THE REMAND REPORT. AGGRIEVED, REVENUE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. FOR THE SAKE OF BREVITY WE ARE NOT REPEATING THE FACTS HERE AGAIN. BEFORE US, THE LD. AR SUBMITS THAT THE ISSUE RAISED BY THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CAS E FOR AY 2009-10 VIDE ORDER DATED 27.11.2015. HENCE, HE URGED BEFORE THE BENCH TO DI SMISS THIS GROUND OF APPEAL OF THE REVENUE. WE NOTE THAT THE TRIBUNAL IN ASSESSEES O WN CASE DECIDED THE SAME ISSUE AND DELETED THE ADDITION MADE ON ACCOUNT OF COMMISSION PAYMENTS FOR AY 2009-10. THE RELEVANT PORTION OF WHICH IS REPRODUCED BELOW: 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER COMMISSION PAID TO SUNSHINE COMMOTRADE PVT LTD AMOUNTING TO RS.40,82,939/- COULD BE DISALLOWED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS ISSUE IS ALSO INTER LINKED WITH THE GROUND NO.4 RAISED BY THE REVENUE. THE GROUND NO.2 AND 4 RAISED BY THE REVENU E BEFORE US ARE AS BELOW:- 2. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW IN HOLDING THAT THE AO HAS ERRED IN DISALLOWING THE COMMISSION PAID TO M/S. SUNSHINE COMMOTRADE PVT. LTD. AMOUNTING RS.40,82,939/-. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS VIOLATED RULE 46A BY NOT AFFORDING THE AO TO GIVE HIS COMMENTS ON THE FRESH EVIDENCES OR COUNTER THE SAME BEFORE DELETING THE DISALLOWANCE U/S 40(A)(IA) OF R S.46,56,333/-. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE ENTERED INTO AN AGREEMENT WITH SUNSHINE COMMOTRADE PVT LTD WHEREIN THE SAID PARTY WOULD REN DER CERTAIN SERVICES TO THE ASSSESSEE IN CONSIDERATION OF 2% COMMISSION ON TOTAL VALUE OF CO NTRACT. THE ASSESSEE DEBITED A SUM OF RS. 87,39,272/- AS EXPENDITURE INCURRED TOWARDS COMMISS ION PAID TO SUNSHINE COMMOTRADE PVT 3 ITA NO.1447/KOL/2017 FIVES STEIN INDIA PROJECTS PVT. LTD. AY 2011-12 LTD BY ACCOUNT PAYEE CHEQUES. ACCORDING TO LEARNED AO, THE SAID PARTY IS A RELATED CONCERN OF THE ASSESSEE COMPANY AND NO DETAILS REGARDING TH E NATURE OF SERVICES RENDERED BY THE SAID CONCERN WAS PRODUCED BEFORE HIM. IT WAS ALSO SEEN B Y THE LEARNED AO THAT ASSESSEE ITSELF HAD DISALLOWED A SUM OF RS. 46,56,633/- U/S 40(A)(IA) O F THE ACT IN ITS RETURN OF INCOME. ACCORDING TO LEARNED AO, SINCE THE COMMISSION PAYMENTS WERE M ADE TO SISTER CONCERN OF THE ASSESSEE AND NO DETAILS REGARDING NATURE OF SERVICES RENDERE D BY THE SAID CONCERN WAS MADE AVAILABLE BEFORE HIM AND WHETHER THE COMMISSION PAID TO SISTE R CONCERN IS EXCESSIVE OR UNREASONABLE OR NOT COULD NOT BE VERIFIED. ACCORDINGLY HE SOUGHT TO DISALLOW THE SUM OF RS. 40,82,939/- TOWARDS COMMISSION PAYMENT. 4.2. ON FIRST APPEAL, THE ASSESSEE PLACED THE COPY OF THE AGREEMENT ENTERED INTO WITH SUNSHINE COMMOTRADE PVT LTD AND ALSO ELABORATED THE VARIOUS SERVICES RENDERED BY THE SAID PARTY TO THE ASSESSEE. THE ASSESSEE PLEADED THAT THE SERVICE S PROVIDED BY SUNSHINE COMMOTRADE PVT LTD INTER ALIA INCLUDED THE FOLLOWING ACTIVITIES:- (I) ENTERING INTO BUSINESS RELATIONSHIPS WITH CUSTOMERS IN RELATION TO SALE OF THE PRODUCTS OF THE ASSESSEE. (II) GETTING INVOLVED INTO THE PROJECTS RELATING TO THE PRODUCTS OF THE ASSESSEE IN VARIOUS MATTERS (III) SECURING CONTRACTS FROM CUSTOMERS IN RELATION TO TH E PRODUCTS OF THE ASSESSEE. IT WAS ALSO PLEADED BEFORE THE LEARNED CITA THAT SU NSHINE COMMOTRADE PVT LTD ASSISTED THE ASSESSEE TO BID FOR AND NEGOTIATE CONTRACTS WITH VA RIOUS PARTIES , AND ON THE BASIS OF SUCH CONTRACTS THE ASSESSEE COMPANYS BUSINESS WAS SURVI VING. THE SAID CONCERN HAD THE REQUISITE KNOWLEDGE, EXPERIENCE AND EXPERTISE THAT ENABLED TH E ASSESSEE TO PROMOTE ITS BUSINESS. THE ASSESSEE ALSO FILED BEFORE THE LEARNED CIT(A) A DEC LARATION FROM ITS MANAGING DIRECTOR THAT THE SAID PARTY SUNSHINE COMMOTRADE PVT LTD IS NOT A RELATED CONCERN OF THE ASSESSEE. THE LEARNED CIT(A) SOUGHT FOR A REMAND REPORT FROM THE LEARNED AO. BEFORE THE LEARNED AO, THE CONCERNED PARTY I.E SUNSHINE COMMOTRADE PVT LTD ALS O CONFIRMED VIDE THEIR LETTER DATED 19.7.2012 THAT THEY ARE NOT RELATED TO THE ASSESSEE . IT WAS ALSO PLEADED BEFORE THE LEARNED CITA THAT THE ASSESSEE HAS BEEN PAYING COMMISSION B Y VIRTUE OF DULY EXECUTED AGREEMENT FOR A LONG TIME AND IN ALL THE PREVIOUS ASSESSMENT YEAR S, THE PREVIOUS ASSESSING OFFICERS HAVE ALLOWED THE SAME AS DEDUCTION. THE LEARNED CIT(A) R ELYING ON ALL THESE SUBMISSIONS AND EVIDENCES, DELETED THE ADDITION. 4.3. THE ASSESSEE RAISED ADDITIONAL GROUND BEFORE T HE LEARNED CIT(A) FOR SEEKING RELIEF IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT MA DE BY THE ASSESSEE VOLUNTARILY IN THE RETURN OF INCOME TO THE TUNE OF RS. 46,56,633/- TOWARDS CO MMISSION PAID DURING THE PERIOD APRIL 2008 TO FEB 2009. IT WAS PLEADED BEFORE THE LEARNED CIT(A) THAT THE COMMISSION PAYMENT TO THE EXTENT OF RS. 46,56,633/- WAS SUBJECTED TO DEDU CTION OF TAX AT SOURCE AND THE TDS THEREON WAS DULY REMITTED TO THE ACCOUNT OF CENTRAL GOVERNM ENT ON 8.9.2009 WHICH IS BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME U/S 139(1) OF T HE ACT AND ACCORDINGLY PRAYED FOR ALLOWING THE SAME AS DEDUCTION. THE LEARNED CIT(A) AFTER CAL LING FOR A REMAND REPORT IN THIS REGARD SOUGHT TO DELETE THE ADDITION IN VIEW OF THE PROVIS IONS OF SECTION 40(A)(IA) OF THE ACT IN THIS REGARD. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4.4. THE LEARNED AR REITERATED ALL THE SUBMISSIONS MADE BY HIM BEFORE THE LEARNED CITA. IN RESPONSE TO THIS, THE LEARNED DR VEHEMENTLY SUPPORT ED THE ORDER OF THE LEARNED AO. 4.5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE PAPER BOOK FILED BY THE ASSESSEE THAT SUNSHINE COMMOTRADE PVT LTD HAD BEEN RENDERING VARIOUS SERVICES TO THE ASSESSEE IN CONSI DERATION FOR RECEIPT OF COMMISSION AT AN AGREED RATE PURSUANT TO A DULY EXECUTED AGREEMENT E NTERED INTO BY THE ASSESSEE FOR A LONG TIME. WE FIND THAT THE REVENUE BEFORE US HAS NOT CO NTROVERTED THE FINDINGS GIVEN BY THE 4 ITA NO.1447/KOL/2017 FIVES STEIN INDIA PROJECTS PVT. LTD. AY 2011-12 LEARNED CITA WITH REGARD TO THE NATURE OF SERVICES RENDERED BY THE SAID PARTY AND THE VALIDITY OF THE AGREEMENT ENTERED INTO WITH THEM. WE ALSO FI ND FROM THE DECLARATION FILED BY THE MANAGING DIRECTOR OF THE ASSESSEE AND CONFIRMATION VIDE LETTER DATED 19.7.2012 FROM SUNSHINE COMMOTRADE PVT LTD THAT THEY ARE NOT RELAT ED TO THE ASSESSEE WITHIN THE MEANING OF SECTION 40A(2) OF THE ACT AND HENCE DISALLOWANCE MA DE BY THE LEARNED AO ON THIS WRONG UNDERSTANDING OF FACTS IS NOT APPRECIATED. WE FIND THAT THE ASSESSEES CASE IS ALSO COVERED BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF IFB AG RO INDUSTRIES LTD VS CIT IN ITA NO. 3756 (CAL.) 92 , 382 & 383 (CAL.)/90 FOR ASST YEARS 1985 -86 , 1984-85 & 1995-96 DATED 9.4.1996 WHEREIN IT WAS HELD AS FOLLOWS:- THE PAYMENT OF COMMISSION WOULD BE ALLOWABLE EVEN I F THE SAME HAS BEEN PAID TO ANY RELATED ENTITY PROVIDED THE FOLLOWING CONDITIONS ARE FULFIL LED:- (I) THERE MUST BE TWO SEPARATE CORPORATE ENTITIES (II) THERE MUST BE AN AGREEMENT ENTERED IN THE NORMAL CO URSE OF BUSINESS (III)THE AMOUNT PAID FOR COMMISSION SHOULD NOT FLOW BACK TO THE COFFERS OF THE ASSESSEE. IN THE INSTANT CASE, SUNSHINE COMMOTRADE PVT LTD A ND THE ASSESSEE WERE TWO INDEPENDENT UNRELATED CORPORATE ENTITIES ONE EARNING INCOME B Y WAY OF SUPPLY, ERECTION AND COMMISSIONING OF INDUSTRIAL FURNACES AND THE OTHER PARTY EARNING COMMISSION INCOME. THE AGREEMENT ENTERED INTO BETWEEN THE SAID PARTIES WER E IN THE NORMAL COURSE OF BUSINESS AS SUNSHINE WAS RENDERING SERVICES AGAINST WHICH THE A SSESSEE WAS MAKING PAYMENTS AT AN AGREED RATE. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE AMOUNT OF COMMISSION PAID TO SUNSHINE FLOWED BACK TO THE COFFERS OF THE ASSESSEE . 4.6. WE ALSO FIND THAT THE COMMISSION PAYMENTS WER E MADE BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES TO SUNSHINE COMMOTRADE PVT LTD. WE AL SO FIND THAT THIS COMMISSION PAYMENT HAS BEEN MADE BY THE ASSESSEE FOR A LONG TIME AND D EDUCTION HAS BEEN GRANTED BY THE LEARNED AO IN ALL THE PREVIOUS YEARS. THOUGH THE RES JUDICA TA DOES NOT APPLY TO INCOME TAX PROCEEDINGS, THE PRINCIPLE OF CONSISTENCY CANNOT BE GIVEN A GO BY. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT REPORTED IN 193 ITR 321 (SC), WHEREIN IT WAS HELD T HAT : AS WE ARE AWARE OF THE FACT THAT, STRICTLY SPEAKING RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UN IT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY O R THE OTHER AND THE PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING TH E ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YE AR. 4.7. WE ALSO FIND THAT THE LEARNED AO HAD AN OPPOR TUNITY IN THE REMAND PROCEEDINGS TO VERIFY THE ENTIRE VERACITY OF THE CLAIM MADE BY THE ASSESS EE IN THE ADDITIONAL GROUND BEFORE THE LEARNED CITA WITH REGARD TO ALLOWABILITY OF DEDUCTI ON OF COMMISSION TO THE EXTENT OF RS. 46,56,333/- . WE FIND THAT THE ASSESSEE HAD DULY RE MITTED THE TDS ON 8.9.2009 WHICH IS BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME U/S 139 (1) OF THE ACT AND ACCORDINGLY IS ENTITLED FOR DEDUCTION FOR THE SAME IN THE PREVIOUS YEAR ITSELF. NO ADVERSE REMARKS WERE RENDERED BY THE LEARNED AO IN THIS REGARD IN THE REMAND REPORT. HEN CE IT HAS TO BE PRESUMED THAT THE LEARNED AO HAD ACCEPTED THE SAME IN THE REMAND PROCEEDINGS. HAVING DONE SO, WE HOLD THAT THE REVENUE OUGHT NOT TO HAVE COME ON APPEAL BEFORE US ON THE ALLEGED GROUND OF VIOLATION OF RULE 46A OF THE INCOME TAX RULES. ACCORDINGLY, THE GROUN D NO. 2 & 4 RAISED BY THE REVENUE ARE DISMISSED. 5. IN VIEW OF THE ABOVE, FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10, AND SINCE THE LD DR COULD NOT POINT OUT ANY CHANGE IN FACTS OR LAW, WE CONFIRM 5 ITA NO.1447/KOL/2017 FIVES STEIN INDIA PROJECTS PVT. LTD. AY 2011-12 THE ORDER OF LD CIT(A) DELETING THE ADDITION MADE O N ACCOUNT OF COMMISSION PAYMENT TO M/S SCPL. THEREFORE, THIS GROUND OF APPEAL OF REVE NUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH SEPTEMB ER, 2018. SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19TH SEPTEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DCIT, CIRCLE-8(1), KOLKATA. 2 RESPONDENT M/S. FIVES STEIN INDIA PROJECTS PVT. L TD., 41, CHOWRINGHEE ROAD, KANAK BUILDING, 4 TH FLOOR, KOLKATA-700 071. 3 4 5 CIT(A)-11, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY