Vikas Hisariya, Secunderabad, Hyderabad V. DCIT, Circle-10(1), Hyderabad, Hyderabad

ITA 1495/HYD/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0926 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 09-07-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH PADUCHURI
• Assessee Lawyers: S RAMA RAO
• Section: 143(3); 147; 148; 10

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO S . 1494 & 1495 /HYD/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 HISARIYA VIKAS KUMAR, SECUNDERABAD. PAN: AFHPM 1954 P VS. DCIT, CIRCLE - 10(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI S. RAMA RAO REVENUE BY: SRI DINESH PADUCHURI, DR DATE OF HEARING: 09/07/2019 DATE OF PRONOUNCEMENT: 30 /0 8 /2019 ORDER PER A. MOHAN ALANKAMONY, AM.: THE CAPTIONED TWO APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDERS OF THE LD. CIT(A) - 6, HYDERABAD DATED 29/08/2016 IN APPEAL NO S . 1550 & 1554 /2014 - 15/CIT(A) - 6/16 - 17 & PASSED U/S. 143(3) R.W.S 147 & U/S. 250(6) OF THE ACT FOR THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 RESPECTIVELY. 2. THE ASSESSEE HAS RAISED IDENTICAL GROUNDS IN BOTH THESE APPEALS HOWEVER THE CRUX OF THE ISSUE IS THAT T HE LD. CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD. A.O. WHO HAD DISALLOWED RS. 2 LAKHS AND 2 RS. 10 LAKHS FOR THE AY 2009 - 10 AND 2010 - 11 RESPECTIV ELY BEING THE COMMISSION PAID . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF SELLING COMPUTERS, COMPUTER PERIPHERALS AND SPARE PARTS IN THE NAME AND STYLE OF HIS SOLE PROPRIETORSHIP CONCERN M/S. VISHAL PERIP HERALS. THE ASSESSEE HAD FILED HIS RETURN OF INCOME ON 28/9/2009 AND 20/9/2010 DECLARING INCOME OF RS. 62,89,097/ - AND RS. 81,64,705/ - FOR THE AY 2009 - 10 AND 2010 - 11 RESPECTIVELY. THEREAFTER THE CASE WAS TAKEN UP FOR SCRUTINY ASSESSMENT BY ISSUANCE OF N OTICE U/S. 148 OF THE ACT AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) / 147 OF THE ACT ON 12/1/2015 FOR BOTH THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 WHEREIN THE LD. AO DISALLOWED COMMISSION EXPENSE OF RS. 2 LAKHS AND RS.10 LAKH RESPECTIVELY ALONG WITH DI SALLOWANCE OF CERTAIN SALARY EXPENSES. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE HAD PAID RS. 5 LAKHS TO SRI PANCHAM HISARIYA DURING THE AY 2009 - 10. IT WAS FURTHER OBSERVED THAT SRI PANCHAM HISARIYA IS A COUSIN OF THE ASSESSEE. ON FURTHER VERIFICATION THE LD. AO OPINED THAT PROPER EXPLANATION COULD NOT BE ADVANCED BY THE ASSESSEE TOWARDS THE COMMISSION PAID TO HIS RELATED PARTY AND THEREFORE, DISALLOWED 60% OF THE COMMISSION PAID TO SRI PANCHAM 3 HISARIYA. ACCORDINGLY, THE LD. AO MADE ADDITION OF RS. 2 LAKHS IN THE HANDS OF THE ASSESSEE FOR THE AY 2009 - 10. SIMILARLY, IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE HAD PAID RS. 1 0 LAKHS COMMISSION TO M/S. VISHAL COMPUTECH PVT LTD., A COMPANY OWNED BY THE ASSESSEE AND HIS BROTHER. IN OPINION OF THE LD. AO THE ASSESSEE COULD NOT JUSTIFY THE COMMISSION PAYMENT TO THE EXTENT OF RS. 10 LAKHS AND SINCE THE PAYMENT WAS MADE TO RELATED PA RTY THE ENTIRE AMOUNT WAS DISALLOWED. 5. ON APPEAL, THE LD. CIT (A) CONFIRMED THE ADDITION MADE BY THE LD. AO FOR BOTH THE RELEVANT ASSESSMENTS YEARS BECAUSE HE WAS ALSO OF THE VIEW THAT THE ASSESSEE IS NOT ABLE TO JUSTIFY THE SERVICES RENDERED BY THE C OMMISSION AGENTS. AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE ASSESSEE IS I N APPEAL BEFORE US. 6. BEFORE US, THE LD. AR SUBMITTED THAT COMPARING TO THE TURNOVER OF THE ASSESSEE FOR BOTH THE RELEVANT ASSESSMENT YEARS THE PAYMENT OF COMMISSION WAS QUITE NOMINAL AND GENUINE. IT WAS FURTHER ARGUED THAT THE ENTIRE PAYMENT WAS MADE TOWARDS THE EFFORT PUT IN BY THE RECIPIENT OF THE COMMISSION FOR MATERIALISING THE SALES. THE LD. AR FURTHER VEHEMENTLY ARGUED THAT THE COMMISSION RECEIVED BY THE PARTIES WERE ACC OUNTED IN THE IR RESPECTIVE BOOKS OF ACCOUNTS AND TAX PAID ACCORDINGLY. IT WAS THEREFORE PLEADED THAT THE DISALLOWANCE MADE BY THE AO IS NOT WARRANTED. THE LD. DR ON THE OTHER HAND ARGUED IN SUPPORT 4 OF THE ORDERS OF THE LD. REVENUE AUTHORITIES AND PLEADED FOR CONFIRMING THE SAME . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. ON PERUSING THE TRADING AND P & L ACCOUNT OF M/S. VISHAL PERIPHERALS , THE SOLE PROPRIETORSHIP CONCERN OF THE ASSESSEE, WE FIND THAT THE TURNOV ER FOR THE AY 2009 - 10 IS RS. 108,71,31,578/ - AND RS. 104,45,12,403/ - FOR THE ASST. YEAR 2009 - 10 AND 2010 - 11 AND THE ASSESSEE HAD CLAIMED REASONABLE EXPENSES TOWARDS COMMISSION FOR BOTH THE RELEVANT ASST. YEARS. THOUGH THE LD. REVENUE AUTHORITIES HAS POINTED OUT THE NEXUS BETWEEN THE ASSESSEE AND THE COMMISSION AGENTS AS RELATED PARTIES, THEY HAVE NOT EXAMINED THE RATE OF COMMISSION PAID IN ORDER TO ESTABLISH THAT THE COMMISSION PAID IS EXCESSIVE. HENCE IT APPEARS THAT THE ENTIRE DISALLOWANCE IS BASED ON SURMISES AND CONJUNCTURES AND NOT BASED ON VALID FACTS. IN THIS SITUATION, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE MADE BY THE LD. REVENUE AUTHORITIES TOWARDS COMMISSION PAYMENT FOR BOTH THE RELEVANT AS SESSMENT YEARS IS NOT WARRANTED. THEREFORE , WE HEREBY DIRECT THE LD. AO TO DELETE THE ADDITION MADE FOR RS. 2 LAKHS AND RS. 10 LAKHS FOR THE AYS 2009 - 10 AND 2010 - 11 RESPECTIVELY TOWARDS COMMISSION EXPENSES. 5 8. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR BOTH THE RELEVANT ASSESSMENT YEARS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST , 2019. S D/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 30 TH AUGUST , 2019 OKK COPY TO: - 1) SRI S. RAMARAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, 3 - 6 - 643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029. 2) DCIT, CIRCLE - 10(1), HYDERABAD. 3) THE CIT(A) - 1 , HYDERABAD 4) THE PR. CIT - 1 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE