M/s. Hazira Refrectory Works Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(3), Surat

ITA 1481/AHD/2009

• Counselvise Citation: 148120514 RSA 2009
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 20-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K N BHATT
• Keywords: Business income
• Section: 37

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM AND A. MOHAN ALANKAMON Y, AM. ITA NO.1481/AHD/2009 ASST. YEAR: 2005-06 M/S HAZIRA REFRECTORY WORKS (P) LTD., PLOT NO.47-50, GIDC, ICHHAPORE, VILLAGE BHATPORE, HAZIRA, SURAT. VS. INCOME-TAX OFFICER, WARD-1(3), SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI K. N. BHATT, AR RESPONDENT BY:- SHRI VINOD TANWANI, SR.DR DATE OF HEARING :20/12/2011 DATE OF PRONOUNCEMENT : O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 13.03.2009 FOR ASST. YEAR 2005-06. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL:- (1) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF COMM ISSION OF RS.3,50,229/- PAID TO ROHIT TRADERS AND YOUR APPELL ANT PRAYS THAT THE SAME BE ALLOWED AS CLAIMED BY THE APPELLAN T. ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 2 (2) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 40(A)(IA) OF THE TNCOME-TAX ACT OF COMMISSION OF RS.1,13296/- PA ID TO SHRI BANKIMCHANDRA TRIPATHI FOR THE ALLEGED FAILURE TO D EDUCT TDS AND HENCE YOUR APPELLANT PRAYS THAT THE SAME BE ALL OWED. (3) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INCE NTIVE OF RS.53,200/- PAID TO VARIOUS WORKERS AND HENCE YOUR APPELLANT PRAYS THAT THE SAME BE ALLOWED AS CLAIMED BY THE AP PELLANT. (4) IN VIEW OF THE FACTS AND CIRCUMSTANCES, THE LD. CIT (A) HAS ERRED IN DIRECTING THE ADDITION OF RS.68275/- U/S 40(A)(I A) THOUGH THE APPELLANT HIMSELF DISALLOWED IT IN COMPUTATION OF I NCOME AND HENCE YOUR APPELLANT PRAYS THAT THIS DIRECTION BE Q UASHED. 2. GROUND NO.1 RELATES TO DISALLOWANCE OF COMMISSIO N OF RS.3,50,229/- PAID TO M/S ROHIT TRADERS. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURING OF REFRACTORY ITEMS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASST. Y EAR 2005-06 ON 25.10.2005 BY SHOWING TOTAL INCOME OF RS.3,15,697/- . THE RETURN WAS PROCESSED U/S 143(1) OF THE IT ACT, 27.03.2006 BY A CCEPTING RETURNED INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND A NO TICE U/S 143(2) OF THE IT ACT DATED 26.10.2006 WAS ISSUED WHICH WAS SERVED UPON THE ASSESSEE THROUGH RPAD ON 30.10.2006. DURING THE YEAR UNDER C ONSIDERATION THE ASSESSEE HAD SHOWN TURNOVER OF RS.2,15,14,514/- AND THE GROSS PROFIT IS SHOWN AT THE RATIO OF 22.60% AS AGAINST THE GROSS L OSS SHOWN IN THE PRECEDING ASST. YEAR. DURING THE ASSESSMENT PROCEED INGS THE ASSESSEE CLAIMED COMMISSION PAYMENT I.E. RS.3,50,229/- TO M/ S ROHIT TRADERS, ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 3 WHICH FALLS UNDER DEFINITION OF SECTION 40A(2)(B) O F THE IT ACT. THE ASSESSEE WAS ASKED TO PROVE THE GENUINENESS, REASON ABLENESS OF COMMISSION PAYMENT MADE TO M/S ROHIT TRADERS. IN RE SPONSE, VIDE LETTER DATED 26.11.2007 IT WAS STATED THAT ASSESSEE COMPAN Y HAD PAID COMMISSION ON THE SALE OF ESSAR STEEL LTD. AMOUNTIN G TO RS.1,73,497/- AND HINDALCO INDUSTRIES LTD. AMOUNTING TO RS.1,76,7 32/- FOR OBTAINING ORDERS FOR MATERIAL TRANSFERRED TO ABOVE SAID PARTI ES AND FOR LIAISONING WORK WITH BOTH THE PARTIES. THE AO ASKED THE ASSESS EE TO PRODUCE EVIDENCE FOR OBTAINING ORDERS FROM BOTH THE COMPANI ES AND ALSO PRODUCE EVIDENCE ON MATERIAL TRANSFERRED TO THE PARTIES. TH E AO POINTED OUT THAT THE SALES BILL DID NOT MENTION NAME OF M/S ROHIT TR ADERS, AS COMMISSION AGENT. THE AO ASKED THE ASSESSEE TO FURNISH EVIDENC E FROM BOTH THESE PARTIES WHETHER M/S ROHIT TRADERS WAS INDEED ACTING AS COMMISSION AGENT OR NOT. THE AO DISALLOWED THE COMMISSION PAYM ENT FOR THE FOLLOWING REASONS :- (I) NO EVIDENCE WAS GIVEN IN SUPPORT OF OBTAINING ORDER S FROM BOTH THE COMPANIES. (II) NO EVIDENCE WAS GIVEN IN SUPPORT OF MATERIAL TRANSF ERRED AND LIAISONING WORK CARRIED OUT WITH BOTH THESE PAR TIES. (III) THE BILLS RAISED BY THE ASSESSEE COMPANY ON ESSAR S TEEL LTD. AND HINDALCO INDUSTRIES LTD. DID NOT BEAR THE NAME OF THE COMMISSION AGENT. ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 4 (IV) NO EVIDENCE WAS FURNISHED FROM ESSAR STEEL LTD. AND HINDALCO INDUSTRIES LTD. CONFIRMING THAT M/S ROHIT TRADERS WAS INDEED COMMISSION AGENT ACTING BETWEEN THEM. (V) ALTHOUGH THE ASSESSEE HAS PRODUCED A COPY OF CONTR ACT FOR COMMISSION ON ITS OWN LETTERHEAD SIGNED BY M/S ROHIT TRADERS. THIS AGREEMENT DOES NOT SHOW THE INVOLVEMENT OF ESSAR STEEL LTD. AND HINDALCO INDUST RIES LTD. (VI) THE COPY OF ACCOUNT OF M/S ROHIT TRADERS SHOWS THAT THE ENTRY OF COMMISSION WAS PASSED AT THE END OF THE YE AR ON 31.03.2005 AND NO PAYMENT OF COMMISSION WAS FOUND PAID DURING THE YEAR UNDER CONSIDERATION AS AND WHE N BECAME DUE. THE ENTRY HAS NOT BEEN MADE SALES BILL- WISE BUT HAS BEEN MADE AT THE END OF THE YEAR. (VII) EVEN THOUGH THE ASSESSEE HAS CLAIMED 2% COMMISSION ON SALE TO ESSAR STEEL LTD. AND HINDALCO INDUSTRIES LT D. BUT NEITHER M/S ROHIT TRADERS HAS RAISED ITS BILL ON EV ERY SALES BILLS NOR THE ASSESSEE COMPANY CREDITED COMMI SSION IN THE ACCOUNT OF M/S ROHIT TRADERS AT THE END OF T HE OTHER SALE. (VIII) THE SALES MADE TO ESSAR STEEL LTD. OF RS.97,09,122. 19 AND HINDALCO INDUSTRIES LTD. OF RS.1,03,04,723.00 A ND IF THE COMMISSION RATE IS TAKEN AT 2% THEN THE SAME DO ES NOT MATCH WITH THE CLAIM MADE BY THE ASSESSEE COMPA NY. THE ASSESSEE COMPANY HAS CLAIMED 2% COMMISSION ON SALES OF RS.86.74 LACS TO ESSAR STEEL LTD. AND RS.8 8.36 LACS TO HINDALCO INDUSTRIES LTD. WHICH FURTHER SHOW S THAT THERE IS NO CO-RELATION BETWEEN THE CLAIM AND THE PAYMENT. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN IT WAS SUBMITTED MOST OF THE SUBM ISSIONS MADE BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO FILED COPY OF DEBIT NOTE RAISED BY M/S ROHIT TRADERS IN RESPEC T OF BOTH THE ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 5 COMPANIES ARE DATED 31.03.2005. THE ASSESSEE ARGUED THAT THE CONTRACT AGREEMENT COULD NOT CONTAIN THE NAME OF THE PARTY T O WHOM THE SALES ARE MADE BECAUSE THE AGENT WAS SUPPOSED TO PROCURE SALE S FROM UNKNOWN PARTIES ALSO. 4. THE LD. CIT(A) AFTER CONSIDERING THE OBSERVATION S OF AO AND THE SUBMISSIONS OF THE ASSESSEE DISMISSED THE GROUND RA ISED BY THE ASSESSEE VIDE PARA 2.3 OF HIS APPELLATE ORDER BY OBSERVING A S UNDER :- 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE AO. THE APPELLANT HAS CLEARLY FA ILED TO ANSWER SEVERAL QUESTIONS RAISED BY THE AO IN THE ASSESSMENT ORDER. THE APPELLANT HAS FAILED TO PRODUCE ANY MATERIAL IN SUPPORT OF AGENT OBTAINING ORDERS FROM THESE PARTIES. THEY HAVE FAILED TO FURNISH ANY EVID ENCE IN SUPPORT OF MATERIAL TRANSFERRED AND LIAISONING WORK CARRIED OU T BY THESE PARTIES. THEY HAVE FAILED TO OBTAIN ANY CONFIRMATIONS FROM B OTH THESE PARTIES THAT M/S ROHIT TRADERS WAS INDEED A MIDDLEMAN OR COMMISS ION AGENT THROUGH WHICH ORDERS WERE PLACED. THE APPELLANT HAS FAILED TO BRING ON RECORD ANY CORRESPONDENCE IN THIS REGARD. THE APPELLANT HA S ALSO FAILED TO EXPLAIN AS TO WHY ONLY ONE CREDIT NOTE WAS RAISED B Y THE ASSESSEE COMPANY ON 31.03.2005 IN RESPECT OF ESSAR STEEL LTD . AND HINDALCO INDUSTRIES LTD. THE APPELLANT HAS FAILED TO EXPLAIN AS TO WHY CREDIT NOTES WERE NOT RAISED AT THE END OF THE EVERY SALE. THE A PPELLANT HAS FAILED TO EXPLAIN WHY M/S ROHIT TRADERS HAS FAILED TO RAISE D EBIT NOTE AT THE END OF THE EVERY SALE. THE APPELLANT HAS ALSO FAILED TO EX PLAIN WHY THE CLAIM OF COMMISSION @2% IS ON SALES MUCH LOWER THAN THE TOTA L SALES TO THESE TWO COMPANIES. THE SALES HINDALCO INDUSTRIES LTD. IS OF RS.103.04 CRORES BUT THE COMMISSION IS ONLY OF RS.88.36 LACS. THE SALES TO ESSAR STEEL LTD. ARE RS.97.09 LACS BUT COMMISSION IS CLAIMED ONLY ON RS. 86.74 LACS. IN VIEW OF THE ABOVE REASONS, THE AO IS RIGHT IN DISALLOWING T HE COMMISSION AS THE APPELLANT HAS FAILED TO PROVE THE GENUINENESS OF TH E COMMISSION PAYMENT. HENCE THE DISALLOWANCE MADE BY THE AO IS CORRECT AN D THIS GROUND OF APPEAL IS DISMISSED. AGAINST THIS ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN SECOND APPEAL. ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 6 5. THE LD. COUNSEL OF THE ASSESSEE REITERATED THE S UBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND FURTHER SUBMITTED THAT THERE WAS A CONTRACT AGREEMENT BETWEEN THE ASSESSEE AND THE COM MISSION AGENT, I.E. M/S ROHIT TRADERS WHICH IS PLACED AT PAGE 34 OF THE PAPER BOOK. THE LD. COUNSEL SUBMITTED THAT COPY OF DEBIT NOTE RAISED BY M/S ROHIT TRADERS IN RESPECT OF BOTH THE COMPANIES I.E. ESSAR STEEL LTD. AND HINDALCO INDUSTRIES LTD., HAD BEEN FILED BEFORE THE AO. THE CONTRACT AGREEMENT COULD NOT CONTAIN THE NAME(S) OF THE PARTY TO WHOM THE SALES WERE MADE BECAUSE THE AGENT IS SUPPOSED TO PROCURE SALES FROM UNKNOWN PARTIES ALSO. IT WAS FURTHER ARGUED THAT IN PURSUANCE OF THE CONT RACT BETWEEN THE ASSESSEE AND M/S ROHIT TRADERS, M/S ROHIT TRADERS I NCURRED SOME EXPENSES ON BEHALF OF THE ASSESSEE WHICH WERE ALSO REIMBURSED, WHICH SHOWS THAT SERVICES WERE RENDERED BY M/S ROHIT TRAD ERS TO THE ASSESSEE. AS FAR AS THE FINDING OF THE LD. CIT(A) IS CONCERNE D THAT 2% COMMISSION HAS NOT BEEN PAID TO M/S ROHIT TRADERS ON TOTAL SAL ES MADE TO ESSAR STEEL LTD. AND HINDALCO INDUSTRIES LTD. BY THE ASSESSEE I T WAS CONTENDED THAT COMMISSION HAS BEEN PAID ON NET SALES EXCLUDING THE AMOUNT OF EXCISE ETC., THEREFORE, IT CANNOT BE A GROUND FOR DISALLOW ING THE EXPENSES OF RS.3,50,229/-, CONCLUDING HIS ARGUMENT THAT THE ORD ERS OF LOWER AUTHORITIES BE SET ASIDE AND THE ADDITION BE DELETE D. ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 7 6. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDE RS OF LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE FAILED TO PRODUCE ANY MATERIAL IN SUPPORT OF AGENT OBTAINING ORDERS FROM THE PARTI ES. THEY HAD FAILED TO FURNISH ANY EVIDENCE IN SUPPORT OF MATERIAL TRANSFE RRED AND LIAISONING WORK CARRIED OUT BY THESE PARTIES. THE ASSESSEE FAI LED TO EXPLAIN WHY M/S ROHIT TRADERS HAD FAILED TO RAISE DEBIT NOTE AT THE END OF EVERY SALE. THUS THE LD. CIT(A) HAS RIGHTLY UPHELD THE ACTION OF THE AO. HIS ORDER MAY KINDLY BE UPHELD. 7. HEARD BOTH THE PARTIES, PERUSED THE RECORD AND W E FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT THERE WAS A CONTRACT FOR COMMISSION DATED 1 ST APRIL, 2004 BETWEEN THE ASSESSEE AND M/S ROHIT TRA DERS ACCORDING TO WHICH M/S ROHIT TRADERS SHOWED HIS WILLINGNESS TO H ANDLE THE CONTRACT, OBTAIN ORDER, MATERIAL SUPPLY, COLLECTION AND DO LI AISON WORK FOR THE TYPE OF GOODS TO BE SUPPLIED TO M/S ESSAR STEEL LTD. AND HINDALCO INDUSTRIES LTD. AND OTHER COMPANIES AS AND WHEN THE WORK IS AS SIGNED BY THE PRINCIPAL AND ALSO LOOK AFTER THE ENTIRE WORK OF TH E CONTRACT. M/S ROHIT TRADERS WAS TO GET 2% OF THE BASIC AMOUNT OF SALES MADE BY ASSESSEE AS PER THIS AGREEMENT. THE CONTENTION OF THE ASSESSEE THAT IN PURSUANCE OF THIS AGREEMENT EXPENSES INCURRED BY M/S ROHIT TRADE RS ON BEHALF OF THE ASSESSEE WERE ALSO REIMBURSED BY THE ASSESSEE, THUS SHOWING THAT SERVICES FOR EARNING THIS COMMISSION WERE RENDERED BY M/S RO HIT TRADERS, HAS NOT ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 8 BEEN CONTROVERTED BY THE REVENUE AT THE TIME OF HEA RING BEFORE US. WE FURTHER FIND THAT LD. CIT(A)S OBSERVATION THAT 2% COMMISSION WAS NOT PAID BY THE ASSESSEE TO M/S ROHIT TRADERS ON TOTAL SALES MADE TO M/S ESSAR STEEL LTD. AND M/S HINDALCO INDUSTRIES LTD. I S NOT CORRECT AS THE COMMISSION WAS PAID ON NET SALES MADE TO THESE PART IES EXCLUDING EXCISE DUTY ETC. THEREFORE, THIS CANNOT BE THE REASON FOR DISALLOWING THE EXPENDITURE ON COMMISSION. SINCE IN THIS CASE COMMI SSION HAS BEEN PAID BY THE ASSESSEE IN PURSUANCE OF CONTRACT SIGNED BET WEEN THE ASSESSEE AND M/S ROHIT TRADERS AND SERVICES WERE RENDERED, WE FE EL IT WAS NOT A FIT CASE IN WHICH A MEAGER SUM OF RS.3,50,229/- INCURRE D BY ASSESSEE FOR PAYMENT OF COMMISSION SHOULD HAVE BEEN DISALLOWED A ND THE DISALLOWANCE SO MADE IS HEREBY DELETED. 8. GROUND NO.2 OF ASSESSEES APPEAL RELATES TO DISA LLOWANCE OF COMMISSION OF RS.1,13,296/- U/S 40(A)(IA) PAID TO S HRI BANKIMCHANDRA TRIPATHI. IN THE ASSESSMENT ORDER THE AO HAS STATED THAT THE ASSESSEE HAD CLAIMED A COMMISSION PAYMENT OF RS.1,13,296/- TO SH RI BANKIMCHANDRA TRIPATHI EVEN THOUGH NO SUCH ACCOUNT WAS AVAILABLE IN THE LEDGER IN THE NAME OF SHRI BANKIMCHANDRA TRIPATHI. THE AO, THEREF ORE, ASKED THE ASSESSEE TO EXPLAIN THE SAME. THE ASSESSEE STATED T HAT IT HAD MADE PAYMENT ON THREE DIFFERENT DATES AND IT SUBMITTED C OPY OF PAYMENT VOUCHERS COPY OF BANK STATEMENT, DD THROUGH WHICH P AYMENT WAS MADE ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 9 AND TDS CERTIFICATE EVIDENCING THE PAYMENT. THE ASS ESSEE FURTHER ARGUED THAT SINCE THE TDS PAYMENT WAS MADE LATE, PROPORTIO NATE DISALLOWANCE HAS ALREADY BEEN MADE U/S 40(A)(IA) AND IT AMOUNTS TO DOUBLE ADDITION. THE AO, HOWEVER, DISALLOWED THE COMMISSION PAYMENT BECAUSE THE ASSESSEE FAILED TO GIVE EVIDENCE OF RENDERING SERVI CES. NO EVIDENCE WAS BROUGHT ON RECORD FOR SERVICES BEING RENDERED. THE AO FURTHER STATED THAT THE TDS WAS NOT DEDUCTED AT THE RATE PRESCRIBED UND ER THE INCOME-TAX ACT. 9. IN APPEAL BEFORE LD. CIT(A) THE ASSESSEE REITERA TED THE SUBMISSIONS MADE BEFORE THE AO. THE LD. CIT(A) CONSIDERING THE SUBMISSIONS OF ASSESSEE AND THE OBSERVATION OF THE AO, CONFIRMED T HE ACTION OF AO BY OBSERVING AS UNDER :- 5.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND THE OBSERVATION OF THE AO. NEITHER DURING THE ASSESSMEN T PROCEEDINGS NOR DURING THE APPELLATE PROCEEDING THE APPELLANT COULD PRODUCE PROOF OF SERVICES HAVING BEEN RENDERED. IT IS A SETTLED POSI TION OF LAW THAT EVEN WHEN THE SERVICES RENDERED ARE NOT PROVED THE COMMI SSION CANNOT BE ALLOWED. IN THIS REGARD, RELIANCE IS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LAXMIRATTAN COTTON MIL LS 73 ITR 634 THAT THE BURDEN OF PROVING THAT SERVICES WERE RENDERED B Y THE MANAGING AGENTS FOR EARNING THE REMUNERATION LAW UPON THE CO MPANY AND IF NO RELIABLE EVIDENCE WAS FORTHCOMING THE TRIBUNAL WAS COMPETENT TO REACH THE CONCLUSION THAT IT DID. THE RECITALS IN THE MAN AGING AGENCY AGREEMENT WHICH AUTHORIZED THE MANAGING AGENTS TO DO CERTAIN ACTS COULD NOT BE A SUBSTITUTE FOR EVIDENCE THAT THOSE ACTS WERE DONE B Y THE MANAGING AGENTS. FURTHER, RELIANCE IS PLACED IN THE CASE OF LACHMINA RAYAN MADANALAL 86 ITR 439 THAT THE MERE EXISTENCE OF AN AGREEMENT BET WEEN THE ASSESSEE AND ITS SELLING AGENTS OR PAYMENT OF CERTAIN AMOUNT S AS COMMISSION, ASSUMING THERE WAS SUCH PAYMENT, DOES NOT BIND THE INCOME-TAX OFFICER ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 10 TO HOLD THAT THE PAYMENT WAS MADE EXCLUSIVELY AND W HOLLY FOR THE PURPOSE OF THE ASSESSEES BUSINESS. ALTHOUGH THERE MIGHT BE SUCH AN AGREEMENT IN EXISTENCE AND THE PAYMENTS MIGHT HAVE BEEN MADE, IT IS STILL OPEN TO THE INCOME-TAX OFFICER TO CONSIDER THE RELEVANT FACTS A ND DETERMINE FOR HIMSELF WHETHER THE COMMISSION SAID TO HAVE BEEN PA ID TO THE SELLING AGENTS OR ANY PART THEREOF IS PROPERLY DEDUCTIBLE U NDER SECTION 37 OF THE ACT. SWADESH COTTON MILLS CO. LTD. VS. CIT (1967) 6 3 ITR 57 (SC) FOLLOWED. IN VIEW OF ABOVE, THE DISALLOWANCE MADE B Y THE AO IS CONFIRMED AND THIS GROUND OF APPEAL IS DISMISSED. AGAINST THIS ORDER OF LD. CIT(A) ASSESSEE IS IN SEC OND APPEAL BEFORE US. 10.. HEARD BOTH THE PARTIES, PERUSED THE RECORD AND WE FIND THAT THE ASSESSEE HAS PAID COMMISSION TO SHRI BANKIMCHANDRA TRIPATHI AMOUNTING TO RS.1,13,296/-. THE AO HAS DISALLOWED THIS COMMIS SION HOLDING THAT ASSESSEE HAS FAILED TO GIVE EVIDENCE OF SERVICES RE NDERED BY SHRI BANKIMCHANDRA TRIPATHI TO ASSESSEE. THE LD. CIT(A) HAS ALSO CONFIRMED THIS ADDITION BECAUSE BEFORE HIM ALSO NO EVIDENCE W AS PRODUCED IN THIS REGARD. THE SAME HAS BEEN THE SITUATION BEFORE US A S NO EVIDENCE WHATSOEVER IN RESPECT OF SERVICES BEING RENDERED BY SHRI BANKIMCHANDRA TRIPATHI TO THE ASSESSEE HAS BEEN BROUGHT ON RECORD . THEREFORE, WE FEEL NO NEED TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THE SAME IS HEREBY CONFIRMED. 11. THE THIRD GROUND RAISED BY THE ASSESSEE IS REGA RDING DISALLOWANCE OF RS.53,200/- CLAIMED AS INCENTIVE PAID TO VARIOUS LABOURERS. IN THE ASSESSMENT ORDER, THE AO HAS STATED THAT THE ASSESS EE HAD CLAIMED THIS PAYMENT AS INCENTIVE TO THE LABOURERS. THE ASSESSEE FILED THE DETAILS OF THE ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 11 SAME. ACCORDING TO THE AO THE PAYMENTS SEEMED TO HA VE BEEN MADE TO THE LABOURERS FOR EFFICIENT AND TIMELY COMPLETION O F WORK AND IT WAS IN THE NATURE OF OVER TIME INCENTIVE. HOWEVER, THE VOUCHER S FILED BY THE ASSESSEE SHOWED THAT THE PAYMENTS OF RS.3,000/- WAS COMMISSION CLAIMED TO HAVE BEEN PAID TO THE SISTER CONCERN, NA MELY M/S ROHIT TRADERS. SIMILARLY, IT CONSISTED OF AMOUNTS OF RS.1 ,000/- PAID TO SHRI DINESHBHAI, RS.800/- TO SHRI MANSUKHBHAI AND AMOUNT OF RS.1,2000/- PAID TO SHRI RAVJIBHAI. ALL THESE WERE NOTHING BUT COMMISSION PAYMENT AND NOT INCENTIVE. THE ASSESSEE ALSO DID NOT GIVE N ATURE OF WORK DONE BY THESE PERSONS. THE SISTER CONCERN OF THE ASSESSEE, M/S ROHIT TRADERS HAS CLAIMED PAYMENT OF RS.13,000/- AS HAVING BEEN PAID TO 13 LABOURERS AS RS.1,000/- PER LABOURER. THIS CLAIM WAS AT VARIANCE WITH THE VOUCHERS PREPARED BY M/S ROHIT TRADERS DATED 26.06.2004 WHIC H SHOWED THAT M/S ROHIT TRADERS HAD CLAIMED 10% COMMISSION @ RS.1,300 0/- PER PERSON. THIS SHOWS THAT THE CLAIM OF THE ASSESSEE WAS TOTAL LY WRONG. THE AO HAS FURTHER GIVEN VARIOUS EXAMPLES OF VOUCHERS WHICH AR E NOT INCONSONANCE WITH THE CLAIM. THE AO HAS PREPARED A DETAILED ANNE XURE,A, B, C & D WHICH SHOW THAT THE CLAIM OF PAYMENT AND CONTAINS O F VOUCHERS ARE TOTALLY DIFFERENT. THESE DETAILS HAVE BEEN DISCUSSE D BY THE AO AT PAGE 13 OF THE ASSESSMENT ORDER. THE AO, THEREFORE, DISALLO WED THE CLAIM OF THIS PAYMENT OF RS.53,200/- ALSO BECAUSE THE SAME HAS BE EN PAID TO SISTER ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 12 CONCERN, M/S ROHIT TRADERS, IN RESPECT OF WHICH THE COMMISSION PAYMENT HAD ALREADY BEEN FOUND TO BE BOGUS IN EARLIER GROUN D. 12. IN APPEAL BEFORE LD. CIT(A) THE ASSESSEE GAVE A GENERAL SUBMISSION THAT THESE PAYMENTS WERE MADE FOR EFFICIENT AND TIM ELY COMPLETION OF WORK. REGARDING THE MISTAKES IN VOUCHERS ABOUT RS.1 ,300/- PAID TO 10 WORKERS INSTEAD OF RS.1,000/- AND TO THE WORKERS, T HE ASSESSEE HAD STATED THAT IT IS A CLERICAL MISTAKE. 13. THE LD. CIT(A) DISMISSED THIS GROUND OF ASSESSE E BY OBSERVING AS UNDER :- 6.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE AO. I DO NOT AGREE WITH THE APPE LLANT THAT THERE IS A CLERICAL MISTAKE. THE APPELLANT HAS PAID RS,1,000/- TO 13 PARTIES BUT THE VOUCHER SAYS 10 WORKERS HAVE BEEN PAID AT THE RATE OF RS.1,3000/-. THIS CLEARLY SHOWS THAT THE ENTIRE CLAIM IS NON-GENUINE. SIMILARLY, THE ASSESSEE HAS FAILED TO SHOW THE GENUINENESS OF THESE PAYMENT S WHEN THE VOUCHERS SAY THAT IT IS COMMISSION AND THE ASSESSEE SAYS IT HAS INCENTIVE. FURTHER, IT IS VERY FACT THAT THESE ARE POINTED OUT A DOUBT OF GENUINENESS. I AGREE WITH THE AO AND THE DISALLOWANCE MADE BY HIM IS CONFIRME D. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. AGGRIEVED, THE ASSESSEE IS APPEAL BEFORE US. 14, AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THE ASSESSEE DURING THE YEAR UNDER APPEAL HAS INCUR RED AN EXPENDITURE OF RS.53,200/- WHICH IS INCENTIVE PAID TO VARIOUS LABO URERS. THE AO HAS DISALLOWED THESE EXPENSES ON THE GROUND THAT ASSESS EE HAS NOT FILED FULL ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 13 DETAILS IN THIS RESPECT. THE LD. CIT(A) HAS ALSO CO NFIRMED THIS ACTION OF THE AO AS HE WAS ALSO OF THE VIEW THAT ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE EXPENSES INCURRED. HOWEVER, WHIL E GOING THROUGH THE DETAILS FILED BY THE ASSESSEE IN THE PAPER BOOK IN RESPECT OF THESE EXPENSES AND TAKING INTO CONSIDERATION THE SMALLNES S OF THE AMOUNT INVOLVED THAT TOO FOR WELFARE OF LABOURERS AND TAKI NG A LENIENT VIEW OF THE MATTER, THE ADDITION OF RS.53,200/- MADE BY THE AO AND SUSTAINED BY LD. CIT(A) IS DELETED. 15. THE FOURTH GROUND OF THE APPEAL RELATING TO CON FIRMATION OF ADDITION OF RS.68,275/- OUT OF RS.2,67,427/- U/S 40(A)(IA), IS NOT PRESSED AND HENCE THE SAME IS DISMISSED AS NOT PRESSED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 6-1-12. SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD, MAHATA/- ITA NO.1481/AHD/2009 ASST. YEAR 2005-06 14 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 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 20/12/2011. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 30/12/2011 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..