M/s. Sikkas Kwick Handling Services (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 1467/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87004 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 03-03-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 29-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: ASHWANI TANEJA

Judgement Text

1 ITA 1467/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI G.D. AGRAWAL : VICE PRESIDENT AND SHRI GEORGE GEORGE K.: JUDICIAL MEMBER ITA NO. 1467/DEL/2012 ASSTT. YR: 2001-02 M/S SIKKAS KWICK HANDLING VS. ACIT CIRCLE-8(1), SERVICES (P) LTD., NEW DELHI. N-67, MIDDLE CIRCLE, CONNAUGHT PLACE, NEW DELHI. PAN: AABCS 2867 D ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI ASHWANI TANEJA ADV. RESPONDENT BY : SHRI B.R.R. KUMAR SR. DR DATE OF HEARING: 04/03/2015. DATE OF ORDER : _____/03/2015. O R D E R PER G.D. AGRAWAL, V.P. : THIS APPEAL, BY THE ASSESSEE, IS DIRECTED AGAINST C IT(A)S ORDER DATED 13-08-2010, RELATING TO A.Y. 2001-02. 2. GROUND NO. 1 OF THE ASESSEES APPEAL READS AS UN DER: THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN NOT COMPLYING WITH THE DIRECTIO NS OF HONBLE INCOME TAX APPELLATE TRIBUNAL WHEREIN HONB LE BENCH HAS DIRECTED THAT MATER NEEDS TO BE EXAMINED AFRESH BY LD. AO AFTER GIVING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE AND 2 ITA 1467/DEL/2012 HAS FURTHER ERRED IN FRAMING THE IMPUGNED ORDER WIT HOUT SERVING MANDATORY NOTICES U/S 143(2) OF THE INCOME TAX ACT, 1961. 2.1. LD. COUNSEL FOR THE ASSESSEE, AT THE TIME OF H EARING , DID NOT PRESS GROUND NO. 1. ACCORDINGLY, GROUND NO. 1 STANDS DI SMISSED BEING NOT PRESSED. 3. GROUND NO. 2 OF THE ASESSEES APPEAL READS AS UN DER: THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS. 4,02,803/- ON ACCOUNT OF MISCELLANE OUS EXPENSES. 3.1. AT THE TIME OF HEARING BEFORE US, IT WAS POINT ED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT IN THE ORIGINAL ASSESSMENT PR OCEEDINGS THE AO VIDE ORDER DATED 29-3-2004 DISALLOWED THE SUM OF RS. 80, 000/- OUT OF THE TOTAL MISC. EXPENSES OF RS. 4,02,803/-. 3.2. ON APPEAL, THE ITAT VIDE ORDER DATED 31-8-2007 SET ASIDE THE MATTER BACK TO THE FILE OF AO. HOWEVER, IN THE SET ASIDE A SSESSMENT, THE AO DISALLOWED THE ENTIRE MISC. EXPENSES OF RS. 4,02,8 03/-. 3.3. IT IS STATED BY THE LD. COUNSEL THAT IN THE S ET ASIDE ASSESSMENT, THE AO COULD NOT HAVE DISALLOWED MORE THAN WHAT WAS ORIGIN ALLY DISALLOWED. HE ALSO STATED THAT EVEN OTHERWISE THERE IS NO JUSTIFI CATION FOR THE 100% DISALLOWANCE OUT OF EXPENSES. IN SUPPORT OF THIS CO NTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: 3 ITA 1467/DEL/2012 - HONBLE DELHI HIGH COURT IN THE CASE OF - MULTIPLEX TRADING & INDUSTRIAL CO. LTD. VS. ITO ( ITA NO. 762/2010 ORDE R DATED 26-7- 2010); - HONBLE DELHI HIGH COURT IN THE CASE OF - CIT VS. MACHINO PLASTIC LTD. (ITA NO. 92/2011- ORDER DATED 28-2-2012); AND - M COOP GLOBAL (P) LTD. VS. CIT 309 ITR 434 (SC). 4. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF AUTHORITIES BELOW. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. AFTER CONSID ERING THE FACTS OF THE CASE, THE DECISIONS RELIED UPON BY THE LD. COUNSEL AND TH E ORDER OF THE AO IN THE ORIGINAL PROCEEDINGS, WE ARE OF THE OPINION THAT TH ERE WAS NO JUSTIFICATION FOR THE DISALLOWANCE OF 100% OF THE MISC. EXPENSES. ADM ITTEDLY ASSESSEE WAS CARRYING ON THE BUSINESS DURING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, INCURRING OF T HE MISC. EXPENSES FOR THE PURPOSE OF BUSINESS, CANNOT BE RULED OUT. THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE WAS ONLY RS. 4,02,803/-. THEREFORE, IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE AO HAS RIGHTLY DISALLOWED THE SUM OF RS. 80,000/-. WE, THEREFORE, SUSTAIN THE DISALLOWANCE AT RS. 80,000/- OUT OF THE MISC. EXPENSES AT RS. 4,02,803/-. 6. GROUND NO. 3 OF THE ASSESSES APPEAL READS AS UN DER: THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT DEL ETING THE ADDITION FULLY AS BY LD. AO AND HAS FURTHER ERRED I N SUSTAINING THE ACTION OF LD. AO IN MAKING ADDITION OF RS. 8,16 ,505/- ON ACCOUNT OF COMMISSIONS EXPENSES. 4 ITA 1467/DEL/2012 6.1. FACTS OF THE CASE ARE THAT DURING THE ACCOUNTI NG YEAR, RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE C LAIMED EXPENSES OF RS. 1,14,58,396/-. THE AO FORMED AN OPINION THAT THE CO MMISSION EXPENSES PAID BY THE ASSESSEE IS TO BE RESTRICTED AT 7% OF T HE TOTAL FREIGHT HANDLED BY THE ASSESSEE. HE, ACCORDINGLY, DISALLOWED A SUM OF RS. 8,54,837/-. THE RELEVANT PORTION OF THE ASSESSMENT ORDER READS AS U NDER: THEREFORE, IN THE ABSENCE OF ANY VERIFICATION, HE RESTRICTED THE COMMISSION PAID TO THE VARIOUS CUSTO MERS AT 7% OF THE TOTAL FREIGHT HANDLED AS PER THE NORMS OF THE INDUSTRY AND THE SAME WAS WORKED OUT TO RS. 1,06,04,100/- BEING 7% OF THE TOTAL FREIGHT HANDLED BY THE ASSESSEE COMPANY. THE REMAINING COMMISSION AMOUNTIN G TO RS. 8,54,837/- WAS DISALLOWED AND ADDED TO THE I NCOME OF THE ASSESSEE. 6.2. BEFORE THE LD. CIT(A) THE ASSESSEE EXPLAINED T HAT TOTAL FREIGHT HANDLED BY THE ASSESSEE WAS RS. 19.34 CRORES. ON THE TOTAL FREIGHT HANDLED THE COMMISSION @ 7% WOULD BE RS. 1.35 CRORES. THE ASSE SSEE CLAIMED THE COMMISSION AT 1.14 CRORES. THEREFORE, NO DISALLOWA NCE IS CALLED FOR. HOWEVER, AFTER NOTICING THE ABOVE FACTS, THE CIT(A) WAS OF THE OPINION THAT THE COMMISSION IS TO BE RESTRICTED AT 5.5% OF THE TOTAL FREIGHT HANDLED. HE, THEREFORE, SUSTAINED THE DISALLOWANCE AT RS. 8,16,5 05/- AS AGAINST RS. 8,54,837/-. THE RELEVANT FINDING OF THE CIT(A) READ S AS UNDER: 5.2 EXAMINED THE RIVAL SUBMISSIONS. THE OBSERVATIO N MADE BY THE ORIGINAL AO AS CONFIRMED BY THE PRESENT AO IS O N A SOLID SUBSTANTIAL FOOTING. IT IS A FACT THAT THE APPELLAN T HAS FAILED TO EXPLAIN THE DISCREPANCY IN THE COMMISSION IN CASE O F VARIOUS CUSTOMERS INCLUDING M/S YOUNG INTERNATIONAL, M/S MO VERS ETC. THERE WAS NO EXPLANATION WHATSOEVER BEFORE THE AO R EGARDING SUCH DISCREPANCIES. THERE WAS NO EXPLANATION BEFORE THE PRESENT 5 ITA 1467/DEL/2012 AO PASSING THE ORDER FROM THE SIDE OF THE APPELLANT . HENCE THE PRINCIPLE OF REJECTING PART OF THE COMMISSION PAYME NT IS CORRECT. BUT IT IS ALSO A FACT THAT THERE WAS SOME CALCULATI ON MISTAKE. ALTHOUGH THE AO HAS RESTRICTED THE AMOUNT TO R/O BU T IN FACT HE HAS APPLIED THIS RATIO ONLY ON FREIGHT HANDLED AT D ELHI. THE TOTAL FREIGHT HANDLED WAS RS.19,34,88,938/-. HE HAS NOT A PPLIED 7'% RATE ON THIS AMOUNT, OTHERWISE THE FIGURE WOULD HAV E COME RS.1,35,44,225/- WHEREAS THE CLAIM OF THE APPELLANT WAS ONLY RS.1,14,58,3971- WHICH IS 5.9'10 OF THE TOTAL FREIG HT HANDLED AND LESS THAN THE RATE APPLIED BY THE AO. THIS WAS A CLERICAL MISTAKE ON PART OF THE AO WHILE FRAMING THE CALCULA TION FOR THIS PURPOSE. CONSIDERING ALL THE MATERIAL FACTS IN MINU TES DETAILS, I AM OF THE OPINION THAT ENDS OF JUSTICE WOULD BE MET BY RESTRICTING THE COMMISSION AMOUNT TO 5.5'10 OF THE TOTAL FREIGHT HANDLED OF RS.19,34,88,938/- WHICH COMES TO RS. 1, 06,41,892/- . THE CLAIM OF THE APPELLANT WAS RS. 1,14,58,397/-. HENCE THE EXCESS CLAIM OF THE APPELLANT COMES TO RS. 8,16,505 /- AND I DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO THAT AMOUNT ONLY. 6.3. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. IN OUR OPINI ON THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE COMMISSION TO 5.5%OF T HE TOTAL FREIGHT HANDLED. HE HAS NOT GIVEN ANY BASIS OR REASONING FOR ALLOWING T HE COMMISSION TO THE EXTENT OF 5.5%, WHEN THE AO HAS CLEARLY MENTIONED I N THE ASSESSMENT ORDER THAT COMMISSION @ 7% OF THE TOTAL FREIGHT HANDLED I S THE NORM IN THE SAID INDUSTRY. THUS, THE AO ALLOWED 7% OF THE COMMISSION WHICH IS BEING PAID BY THE OTHER PERSONS IN THE SAME LINE OF BUSINESS. SINCE THE COMMISSION CLAIMED BY THE ASSESSEE IS LESS THAN 7%, WHICH, AS PER AO IS NORMAL RATE OF COMMISSION IN THIS LINE OF BUSINESS, IN OUR OPINION, NO 6 ITA 1467/DEL/2012 DISALLOWANCE ON THE COMMISSION IS CALLED FOR. ACCOR DINGLY, DISALLOWANCE OF RS. 8,10,505/- SUSTAINED BY THE CIT(A) IS DELETED. GROUND IS ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 10/03/2015. SD/- SD/- ( GEORGE GEORGE K. ) ( G.D. AGRAWAL) JUDICIAL MEMBER VICE PRESIDENT DATED: 10/03/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.