ITO, WARD 2(3)(8), SURAT V. MUKESH MAHAVIRPRASAD SEN, SURAT

ITA 15/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1695 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-12-2022
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained cash credit; Rule of consistency; Question of law; TDS
• Section: 68; 37(1); 251; 73; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA Nos. 175 & 176/Srt/2020 (Assessment Years: 2010-11 & 2012-13) (Hearing in Physical Court) A.C.I.T., Central Circle, Vapi. Vs. M/s Shah Virchand Govanji Jewellers Pvt. Ltd., Opp. Amba Mata Temple, Juna Thana, Valsad. PAN No. AADCS 2930 B Appellant/ assessee Respondent/ revenue C.O. No. 14 & 15/SRT/2020 (Arising out of ITA Nos. 175 & 176/Srt/2020) (AY: 2010-11 & 2012-13) M/s Shah Virchand Govanji Jewellers Pvt. Ltd., Opp. Amba Mata Temple, Juna Thana, Valsad. PAN No. AADCS 2930 B Vs. A.C.I.T., Central Circle, Vapi. APPELLANT RESPONDEDNT Department represented by Shri H.P. Meena, CIT-DR with Shri Vinod Kumar, Sr.DR Assessee represented by Shri Manish Shah, Advocate with Shri Rushin Patel, CA Date of hearing 25/08/2022 Date of pronouncement 12/09/2022 Order under section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by the revenue and the cross objections therein by the assessee are directed against the separate orders of learned Commissioner ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 2 of Income Tax (Appeals), Valsad (in short, the ld. CIT(A) both dated 03/01/2020 for the Assessment years (AY) 2010-11 and 2012-13 respectively. 2. In both these appeals, the revenue has raised common grounds of appeals, except variation of figure of disallowance/additions deleted and confirmed by the ld. CIT(A), certain facts are common in both the appeals, thus, both the appeals were clubbed, heard together and are decided by this consolidate order to avoid the conflicting decision. For appreciation of fact, the appeal for A.Y. 2010-11 in ITA No. 175/Srt/2020 and CO No. 14/Srt/2020 is treated as ‘lead’ case, wherein the revenue and the assessee has raised following grounds of appeal: Grounds of appeal raised by the Revenue: “1. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 1,75,00,000/- made on account of disallowance of commission paid to the directors without considering the judgment of Special Bench of the Hon’ble ITAT in the case of Dalal Broacha Stock Broking Pvt. Ltd. Vs Addl.CIT, Range-4(1), Mumbai 131 ITD 36 (Mumbai) (SB). 2. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 48,90,672/- made on account of unexplained cash credits without appreciating that the assessee failed to provide PAN, confirmation and even address of the so called customers from whom advances were claimed to be received. 3. It is therefore, prayed that the order of the Ld. CIT(A), Valsad may be set aside and that of assessing officer may be restored to the above extent. ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 3 4. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 3. The assessee in his Cross Objection has raised following grounds: “1. The Revenue has challenged the addition deleted by the honourable CIT(A) amounting to Rs. 1,75,00,000/- being commission paid to Directors. The Honorable CIT(A) has considered the ratio applied by the Honorable Gujarat High Court in your appellant’s own case for Assessment Years 2011-12, 2013-14 and 2014-15 vide order dated 20/08/2019 in ITA No. 72, 73, 74 of 2019 confirming the order of the Honorable ITAT Surat deleting the said addition on account of commission of directors. Hence, the issue is directly covered by the Judicial Precedence of Jurisdictional High Court in Your appellant’s own case. 2. The Revenue has challenged the addition deleted by the Honorable CIT(A) amounting to Rs. 48,90,672/- being advance from customers considered by the AO as unexplained Credit under Section 68 of the Act. The advance received from customers are duly accounted for in the books of accounts and shown as payable under the head of current liability. Your appellant contends that the said amount has already included in Sales Turnover in subsequent years whenever actual sales takes place, hence taxing the same under section 68 as unexplained credit amounts to double taxation of the same income. The said situation has been upheld in latest Apex Court Judgment of Montage Enterprises (P) Ltd. (2018) 100 Taxmann.com 100 (SC) and other decisions. The Honorable CIT(A) has also relied on the said decisions as mentioned in last para of the Appellate order challenged by the revenue.” 4. At the outset of hearing, the learned Authorised Representative (ld. AR) of the assessee submits that the grounds of appeal raised by the Revenue are squarely covered in favour of assessee and against the Revenue by the decision of the Tribunal in assessee’s own case for A.Y. 2011-12, 2013-14 and 2014-15 wherein similar disallowances on account of commission ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 4 payment was made. On appeal before the ld. CIT(A), the disallowance was upheld, however on further appeal before the Tribunal, the assessee was allowed relief in ITA No. 01 to 03/Srt/2018 for the A.Y. 2011-12, 2013-14 and 2014-15 respectively. The ld. AR further submits that against the decision of the Tribunal, the Revenue filed appeal before the Hon’ble Jurisdictional High Court and the same was dismissed vide order dated 20/08/2019 in Tax Appeal No. 72, 73 and 74 of 2019 reported in (2019) 418 ITR 472 (Guj). The Revenue filed Special Leave Petition (SLP) before the Hon’ble Supreme Court and the same was dismissed. The ld. AR submits that the SLP of Revenue was dismissed as there was delay of 452 days in filing SLP and the delay was not condoned. The ld. AR, thus, submits that the grounds of appeal are covered in favour of assessee and against the Revenue. 5. On the other hand, the ld. CIT-DR and the ld. Sr.DR for the revenue both submits that the principle of res judicata is not application in income tax cases and each assessment order has to be considered separately. The ld. CIT-DR submits that the assessee has not explained the services rendered by each of the directors. The assessee has paid similar commission to all the directors without specifying the services rendered by them. The directors to ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 5 whom the said commission is paid are having substantial shareholding and they have been paid dividend in the garb of commission which is not allowable. The ld. CIT-DR submits that the assessee is required to pay the remuneration to its director in accordance with provisions of Section 309 of Companies Act. As per Section 309 of Companies Act, the maximum limit of paying remuneration to its director is 11% which includes salary, commission and bonus etc. In the present case, the assessee has exceeded the threshold limit while paying additional remuneration by way of commission for its directors. The ld. CIT-DR submits that either the order of Assessing officer may be restored or the matter may be restored back to the file of Assessing officer with direction to the assessee to prove the services rendered by each of the directors to whom the assessee has paid commission. 6. In the rejoinder submission, the ld. AR of the assessee submits that he is agreed that principle of res judicata is not applicable in the income tax cases, however, the principle of consistency on the similar fact and on similar issues are applicable as has been held by the Hon’ble Apex Court in the case of Radhasoamy Satsang Vs CIT 193 ITR 321 (SC) which has been followed in a series of decisions by the various High Courts including in a ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 6 latest decision by Hon’ble Apex Court in the case of CIT Vs. Excel Industries Ltd. 358 ITR 295 (SC) wherein it has been held that this Court (Hon’ble Apex Court) did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same ‘fundamental aspect’ permeates in difference assessment years, thus the Hon’ble Apex Court reiterated the rule of consistency should be respected by the tax authorities. The ld. AR of the assessee submits that the department in assessee’s own case in A.Y. 2006-07 and 2007-08 allowed the similar commission payment in F.Y. 2005-06 and 2006-07 and in assessment order passed under Section 143(3) for A.Y. 2007-08 and 2009-10 as there was no disallowance on account of additional remuneration/commission paid to the directors in the scrutiny assessment. The ld. AR further submits that the ld. CIT(A) allowed the relief to the assessee by following the order of Tribunal for A.Y. 2010- 11, 2013-14 and 2014-15. The ld. AR submits that similar submission/objection was raised by the revenue in appeal for A.Y. 2011-12, 2013-14 and 2014-15 and after considering all the submissions, the appeal of assessee was allowed by the Tribunal. So far as the objection regarding minimum/maximum remuneration to the directors as per provisions of Section 309 of the Companies Act, the ld. AR submits that such provision is ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 7 applicable to the public limited companies and not to the private limited companies, therefore, the submission of ld. CIT-DR is misplaced. The ld. AR submits that even similar submission was considered by the Tribunal while deciding the appeal for A.Y. 2011-12, 2013-14 and 2014-15. The ld. AR submits that once the order of Tribunal is affirmed by the Hon’ble Jurisdictional High Court, the issue attend finality and thus the issue is squarely covered in favour of assessee. 7. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that during the assessment, the Assessing Officer made disallowance of commission payment to five of its directors, aggregating of Rs. 1.750 crore by taking a view that all the executive directors were paid equal amount of Rs. 35.00 lacs each irrespective of percentage of their shareholding. All these directors including their HUFs having substantial shareholding of 95.75%. The payment of commission to its director amounts to circumventing the requirement of dividend distribution tax, which is not permissible as it amounts to a device to evade tax as opposed to tax planning. We further find that the Assessing Officer made observation that similar disallowance was made in A.Y. 2011-12, 2013-14 and 2014-15, which were confirmed by ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 8 ld. CIT(A). The ld. CIT(A) granted relief to the assessee by taking a view that in assessee’s own case for A.Y. 2011-12, 2013-14 and 2014-15, similar disallowance of commission payment to directors was made, which was deleted by Surat Tribunal and further appeal before the Hon’ble Gujarat High Court was dismissed vide order dated 20/08/2019 in ITA No. 72, 73 and 74 of 2019. We find that the grounds of appeal raised by revenue are in fact covered by the decision of Tribunal in assessee’s own case for A.Y. 2011-12, 2013-14 and 2014-15 in ITA No. 1, 2 and 3/Srt/2018 dated 28/09/2018, relevant part of the said decision is extracted below: “29. On careful consideration of above all rival submissions, first of all, we may point out some glaring and undisputed facts which are as follows: i) The AO initiated re-assessment proceedings u/s.147 of the Act and also issued notice u/s.148 of the Act but the assessee has not challenged initiation of re-assessment and notice in these appeals. ii) From the table noted by the ld.CIT(A) at page 23 it is clear that the assessee is paying commission / additional remuneration continuously since F.Y.2005-06 relevant to A.Y.2006-07 till F.Y. 2013-14 relevant to A.Y. 2014-15. iii) Commission / additional remuneration has been paid to five directors equally of Rs.65,67,280/- each and recipient directors have show this amount in their income tax returns and has paid tax etc. thereon. iv) One Director, Smt.Ragini J Kothari is holding 2.75% shares, but no commission has been paid to her, perhaps due to the reason there was no additional service rendered by her. v) Other five Directors viz., Shri Jayneesh Kothari, Shri Ketan R Shah, Shri Rameshchandra C Kothari, Smt.Sangita K Shah and Shri ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 9 Shashwat J Kothari are holding shares in the company 35%, 35%, 8%, 2.75%, and 4% respectively, whereas all these Directors have received equal amount of addition / additional remuneration which shows that the payment of additional remuneration has been made against made towards services rendered by them as submitted by the assessee before the AO and reproduced in the assessment order para 12.10 which shows that the assessee explained the services rendered by the recipient Directors towards administration, purchase of goods, product designing, advertisement, sales promotion and other administration which contributed to the overall growth of the company. vi) From the table noted by the ld.CIT(A) at page 23 it is also vivid that in A.Y. 2011-12, which is under consideration, the growth of turnover was 139.77% and growth in the profit was 45.84% and the remuneration was increased by 87.64% and these facts collectively show that the additional remuneration / commission has been paid to the Directors against the services rendered by them which resulted into steep growth of the company. 30. Let us adjudicate the contention of the authorities below and written submissions of the ld.CIT-DR, in the written submissions the AO has alleged that there is increase of 113% in the commission / additional remuneration paid to the Directors whereas, increase in the gold price was only 30% and thereafter, the AO alleges that the appellant contention is not acceptable that the commissions payments to the Directors was linked to the increase in the turnover of the company. We are not agree with these allegation of the AO which have been arrived by considering the growth in the remuneration with the price of gold. The AO is required to consider the percentage of increase or decrease in the turnover and thereafter only it can be observed that as to whether the payment of remuneration is linked with the increased turnover of the assessee. As we have noted above from the table, noted by the ld.CIT(A) at page 23 of the impugned order and also by the AO in the written submissions page 3, it is clear that in F.Y. 2009-10 the growth in turnover was 20.27% and growth in the additional remuneration was only 1.27% in comparison to the previous year. Further, in F.Y. 2010-11 pertaining to present A.Y.2011-12 the growth in the turnover 139.77% ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 10 and growth in the commission / additional remuneration was 87.64% which shows that it is linked with the turnover but has not increased or shoot up in the ratio of the increase in the turnover which supports the fact that the payment of additional remuneration / commission has been made by considering the growth in the turnover but the payment has been made lesser in comparison with the growth in the turnover. 31. The learned authorities below as well as the ld.CIT-DR has placed vehement reliance on the decision of a Special Bench in the case of Dalal & Broacha Stock Broking P. (supra) wherein Special Bench of ITAT Mumbai held that the growth of business was attributable to overall growth of share market and not because of services rendered by the Directors. Payment of commission was thus held as not allowable as per section 36(1)(ii) of the Act. On this contention of the ld.CIT-DR, the ld.Senior Counsel has drawn our attention towards order of ITAT Delhi ‘F’ Bench in the case of ACIT vs Botil Oil Tools (India) Pvt. Ltd. (supra) and submitted that in this order paras 12 to 14 it has been held that in the light of decision of Hon'ble High Court of Delhi in the case of CIT vs Convertech Equipments Pvt. Ltd. reported as [2012] TIOL–10025HC-DEL-IT, wherein referring to its own decision in the case of AMD Metaplast Pvt. Ltd. vs. DCIT (supra) it was held that while the commission was paid as a form of remuneration for actual services rendered, dividend is a return of investment and is paid to all its shareholders equally in proportion to their shareholding and if the commission is paid for actual services rendered then it is allowable u/s.37(1) of the Act. The ld.Senior Counsel submitted that the Tribunal in para 13 & 14 of this order clearly observed that in existence of binding decision of Hon'ble High Court the Tribunal is not required to consider the decision of ITAT Special Bench Mumbai in the case of Dalal Broacha Stock Broking Pvt. Ltd. (supra). 32. On careful consideration of above submissions, on the applicability of ratio of the order of the Special Bench in the case of Dalal Broacha Stock Broking Pvt. Ltd. (supra) we are of the view that from para 7 of this order of a Special Bench it is clear that the issue for adjudication before the Special Bench was regarding ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 11 allowability of deduction on account of payment of commission of Rs.1.20 crores to the Three Employee Directors u/s.36(1)(ii) of the Act and in para 8.2 of this order it was held that under the provision of section 36(1)(ii) of the Act and section 37(1) of the Act will not be applicable in the cases wherein payment of commission has been made to the Directors. At the same time, we further observe that ITAT Delhi ‘F’ Bench in the case of ACIT vs. Botil Oil Tools (I) Pvt. Ltd. (supra) after considering the ratio of the various decisions including decision of Hon'ble Delhi High Court in the case of CIT vs. Convertech Equipments P. Ltd.(supra) and AMD Metaplast Pvt. Ltd. (supra) held that while the commission was paid as a form of remuneration for actual services rendered, then section 36(1)(ii) would not apply, however, it is allowable u/s.37(1) of the Act. 33. In the present case also the AO has failed to establish that the commission paid to the recipient Directors was payable as profits or dividends of the assessee company. Per contra, from the facts and circumstances revealed from the orders of the authorities below as well as submissions and contentions of the appellant assessee, it is apparently clear that the payment of equal amount of commission / additional remuneration have been made to the recipient directors towards the services rendered by them and it has no relevance / nexus with the shareholding pattern of recipient directors in the company, therefore, the claim of assessee is allowable u/s.37(1) of the Act. We have no hesitation to hold that in the light of preposition rendered by Hon'ble Delhi High Court in the case of CIT vs. Convertech Equipments P. Ltd.(supra) and AMD Metaplast Pvt. Ltd. (supra) the impugned commission / additional remuneration is allowable u/s.37(1) of the Act. Therefore, we respectfully hold that the benefit of the ratio of the order of Special Bench Mumbai in the case of Dalal Broacha Stock Broking Pvt. Ltd. (supra) is not available for the Revenue in the light of ratio laid down by Hon'ble Delhi High Court in the binding decisions in the cases of CIT vs. Convertech Equipments P. Ltd.(supra) and AMD Metaplast Pvt. Ltd. (supra). Therefore, contention of authorities below as well as ld.CIT-DR are not found to be sustainable and thus we dismiss the same. ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 12 34. The Hon'ble Delhi High Court in the case of Controls and Switchgear Contractor Ltd.(supra) held that the commission paid to directors in consideration of personal surety given to bank for facilitating loan, is allowable as deduction in hands of company which is not a fact of the present case, therefore, ratio of this decision is not applicable in favour of the assessee in the present case. 35. In the case of AMD Metaplast Pvt. Ltd.(supra), as vehemently relied by the ld.Senior Counsel, the Hon'ble High Court held that where in terms of board resolution the Managing Director / Director was entitled to receive commission for the services rendered to the company then commission was to be treated as a part and parcel of salary and tax has been deducted at source, then the recipient director is liable to pay tax on both the salary component and the commission. In this judgment, their lordship categorically held that the payment of dividend is made in terms of companies Act and dividend had to be paid to all the shareholders equally. In the present case also the ld.AO and ld.First Appellate Authority was wrong in observing that there is no nexus between growth of turnover and growth in the percentage of commission paid to the Directors. At the same time, from the copies of the resolutions passed by the Board of Directors from F.Y. 2005-06 to F.Y. 2013-14, which has been placed at pages 1 to 11 of the assessee’s paper book, dated 31.05.2018 it is vivid that the commission / additional remuneration has been paid by way of resolution passed by the company at the respective Board Meetings and for present A.Y. 2011-12 the copy of Board Resolution dated 02.09.2011 has been placed at page 8 of the same paper book. 36. At the cost of repetition, we may again point out that the assessee submitted the details of services rendered by the recipient Directors which was noted by the AO in para 12.10 of the assessment order but without controverting the contention and submission of the assessee, he proceeded to adjudicate the applicability of exception u/s.36(1)(ii) of the Act and by following the decision of Special Bench Mumbai in the case of Dalal Broacha Stock Broking Pvt. Ltd.(supra), which is not binding in the light of ratio of decision of Hon'ble Delhi High Court in the case ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 13 AMD Metaplast Ltd. (supra), he proceeded to hold that there is a failure on the part of the assessee in establishing that the payment of commission has been in lieu of any services rendered. Thereafter, he hold that the facts and surrounding circumstances prove that the payment of commission is but a measure to distribute dividends in that guise in order to escape tax liabilities associated with distribution of dividend. These observations of the AO are based on incorrect appreciation of facts and ignorance of relevant and correct facts which clearly shows that the payment of additional remuneration / commission has been made to the Directors in lieu of services rendered by them towards administrative and financial growth of the company and there is no link or nexus with the shareholding of the recipient Directors in the company as the shareholding of recipient Directors, in the company is different and commission / additional remuneration has been paid to them equally without any relation with the shareholding percentage, therefore, above noted contentions of the AO are baseless and unsustainable and we dismiss the same. At this stage, we may point out that the payment of commission has been made by the assessee company to its Directors since A.Y. 2006-07 which was allowed up to A.Y. 2010- 11 continuously for five years and first time dispute was raised by the AO in present A.Y.2011-12 by way of initiating re-assessment proceedings, that too without specifically alleging or mentioning or stating about the escapement of income regarding payment of commission / additional remuneration in the reasons recorded for re-opening of assessment. However, since the assessee has not challenged initiation of re-opening of assessment, therefore, contention of ld.Senior Counsel in this regard does not demand any adjudication by this Bench. 37. It is a well-accepted principle of tax jurisprudence that the principle of res- judicata does not apply to the tax case but rule of consistency has to be respected by the tax authorities. This principle has been rendered in various judgments including judgments of Hon'ble Supreme Court in the cases of Radhaswami Satsang Vs. CIT (supra), CIT Vs. Excel Industries Ltd. (supra), CIT Vs. Dalmia Promoters and Developers Pvt. Ltd. (supra) and in the recent decision of Apex ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 14 Court in the case of Godrej and Boyce Manufacturing Pvt. Ltd. vs. DCIT (supra) therefore, contention of the ld.CIT-DR has no legs to stand that the cases relied by the ld.Senior Counsel are not applicable to the present case as they have dis- similar facts and circumstances. The rule of consistency also supports the case of the assessee as the facts and circumstances of immediately preceding years are quite similar and identical in the present A.Y. 2011-12 and it is not a case of the AO that there was any difference in the facts and circumstances of the present A.Y. with the immediately preceding years. Therefore, we are inclined to hold that in this case the principle / rule of consistency has not been respected and followed by the authorities below, therefore, their conclusion on the issue is incorrect, perverse and thus, not sustainable and we hold so. 38. The ld. Senior Counsel has also contended that as per decision of ITAT Pune ‘B’ Bench in the case of Arihantam Infraproject (P.) Ltd. vs JCIT (supra) it has been held that even otherwise, since commission had been paid to directors and taxes had been paid by them on said income, no disallowance was warranted in hands of assessee-company. In the present case, as we have noted above the recipient Directors had rendered services to the assessee company which enhanced turnover and overall financial and commercial growth of the company, then the payment of additional remuneration / commission cannot be questioned merely on the baseless allegation that the same has been paid to avoid payment of dividend distribution tax, particularly when the payment of commission has no nexus or link or proportion, even remotely, with the shareholding percentage of recipient Directors. Therefore, we decline to accept contention of the ld.CIT-DR that ratio of order of ITAT Pune Bench is not applicable to the present case and we hold that by paying said commission the assessee has not avoided paying dividend distribution tax as the amount paid to the directors could not be distributed as dividend and it was not the intention of the assessee company to make payment of dividend in the cover of commission / additional remuneration. 39. So far as applicability of ratio of decision of Hon'ble Supreme Court in the case of ITO vs. CH.Atchaiah (supra) and order of ITAT Special Bench, Delhi in the case of ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 15 Pradeep Agencies vs. ITO (supra) is concerned in the present case the assessee, by way of resolutions of Board of Directors and the contribution towards administrative and financial growth of the company made by the recipient Directors has been established and the same claim had been allowed to the assessee during immediately preceding five assessment years from 2006-07 to 2010-11 and neither the AO nor the ld.CIT(A) has observed any dis-similarity or deviation in the facts and circumstances of all these years with the present assessment year 2011-12, hence, we safely presume that facts and circumstances of all assessment years from A.Y. 2006-07 to 2014-15 including the A.Y. under consideration 2011-12 are identical and similar and hence the principle of consistency has to be applied and respected in all assessment years on the issue of payment of commission / additional remuneration. In view of above noted facts and circumstances the benefit of the ratio of decisions of Hon'ble Supreme Court in the case of CIT Vs. Excel Industries Ltd. (supra), CIT vs M/s. Dalmia Promoters & Developers (P.) Ltd. (supra) and Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT (supra), as strenuously relied and referred by the ld. Senior Counsel appearing on behalf of the assessee, supports the contention of assessee that the disallowance has been made by the authorities below by flouting and disrespecting Rule of consistency, which is applicable and widely respected by the Tax Authorities as a well-accepted principle of the tax jurisprudence. 40. Therefore, we are inclined to hold that the Revenue Authorities was not justified and correct in making dis-allowance in A.Y. 2011-12 flouting the Rule of consistency. In this scenario, we also observe that the commission / additional remuneration has been paid by the assessee company to the recipient Directors against the services rendered by them to the company after deducting TDS while making payment, which resulted into positive financial growth of the company. In view of this factual position, the recipient Directors paid tax on such commission, then it is an Act of charging tax under right head in the right hands of the right person for the right Assessment year. Therefore, we are of the considered opinion that it is not a case of taxing wrong person and thereafter ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 16 exercising the powers of taxing the same income in the hands of right person as already right recipient Director has been taxed on payment of commission in the present case. Therefore, we respectfully hold that the benefit of the proposition laid down by Hon'ble Supreme Court in the case of ITO vs. CH.Atchaiah (supra) and order of ITAT Special Bench, Delhi in the case of Pradeep Agencies vs. ITO (supra) is not available in favour of the Revenue and against the assessee in the extent case having dis-similar and distinguishable facts and circumstances. 41. Now, at this juncture we also find it appropriate to consider the ratio of the decision of Hon'ble Supreme Court in the case of Shahzada Nand and Sons [1977] 108 ITR 358 (SC), which has been relied by the learned Senior Counsel, wherein their Lordship speaking for the Apex Court of India held that “It is not necessary that the commission should be paid under a contractual obligation, it may be purely voluntary. But it must be for services rendered and here services were in fact rendered.” In the present case the assessee, by way of submitting documentary evidence as well as factual matrix of the case, has successfully established that the commission / additional remuneration has been paid to the Directors against the services rendered by them towards overall growth of the company and it has no nexus or link with the shareholding percentage of the recipient Directors. Thus, we are inclined to agree with the submission and contention of the learned Senior Counsel that the commission / additional remuneration has been paid to the recipient Directors against the services rendered by them and it has no link with the shareholding percentage of the recipient Directors in the assessee company. 42. Further, from the Circular No.516 dated 15.06.1988, Circle No.545, dated 24.09.1989, Circular No.549, dated 31.10.1989 and circular No.551, dated 23.1.1990 it is clear mandate rendered by the CBDT that even if unreasonable excessive payments are made to relatives or connected persons, the same cannot be disallowed under the provision of section 40A(2) of the Act. However, we may point out that in the present case it is not a case of the AO that the impugned commission / additional remuneration has been excessively paid to the ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 17 connected persons / Directors and impugned disallowance has not been made u/s.40A(2) of the Act, hence, benefit of these circulars is not available for the assessee in the present case. 43. Finally, on the basis of foregoing discussion we reach to a logical conclusion that the AO has made disallowance of commission / additional remuneration by considering and appreciating the incorrect facts and figures and by flouting the Rule of consistency. We also observe that the contention of the learned AO while making disallowance and learned CIT(A) while confirming the disallowance in the impugned order are not sustainable, justified and correct. Per contra, we observe that the assessee has successfully established that the commission / additional remuneration has been paid in lieu of services rendered by the recipient Directors towards administrative and financial activities of the assessee company, which also resulted into steep financial growth in the turnover and profit of the assessee company, and for making such said payment the company passed resolutions in the Board of Directors meeting for the respective financial years / assessment years. Therefore, we also observe that the ratio of the decision of Hon'ble Delhi High Court in the case AMD Metaplast Ltd. (supra) and Chryscapital Investment Advisors (India) P. Ltd. Vs. DCIT [2015] 376 ITR 183 (Del) support the claim of the assessee and we hold so. Therefore, Ground No.2 of assessee for A.Y. 2011-12 is allowed and the AO is directed to allow claim of assessee regarding payment of commission / additional remuneration to its Directors.” 8. We find that similar disallowance was deleted for the A.Y. 2013-14 and 2014-15 by following the order of A.Y. 2011-12. We further find that the Revenue has challenged the order of the Tribunal before the Hon’ble Jurisdictional High Court by raising question of law as reproduced as under: “1. Whether on the facts and in the circumstances of the case, the Hon’ble Income-tax Appellate Tribunal erred in deleting the addition under Section 36(1)(ii) of Rs. 3,28,36,400, without considering the judgment of the Special ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 18 Bench of Hon’ble Income-tax Appellate Tribunal in the case of Dalal Broacha Stock Broking Pvt. Ltd. Vs Addl.CIT (2011) 10 ITR (Trib) 357 (Mum) (SB); (2011 131 ITD 36 (Mumbai) (SB)?” 9. The Hon’ble High Court after considering the contention of both the parties, dismissed the appeal of revenue by holding that payment of commission was made by the assesse company to its director have been allowed for five continuous assessment years. Nothing has been pointed out to show that the position has changed in the year under consideration. Under such circumstances, the Tribunal was wholly justified in allowing the grounds of appeal. The grounds of appeal, therefore, does not rise to any question of law, much less, a substantial question of law, warranting interference (para 3.8). It was also held that Hon’ble Supreme Court Radhasoami Satsang Vs CIT (1992) 193 ITR 321 (SC) wherein the Hon’ble Supreme Court held that, where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have been allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in subsequent year. We find that no change in fact for the year under consideration is brought to our notice to take the other view, therefore, respectfully following the decision of Coordinate bench, which has been ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 19 affirmed by the Hon’ble Jurisdictional High court, we do not find any merit in the grounds of appeal raised by revenue. All the submissions or the objections raised by the ld. CIT-DR for the revenue has already been considered by our predecessor while deciding the similar issue in appeal for A.Y. 2011-12, 2013-14 and 2014-15. In the result, ground No. 1 of appeal is dismissed. 10. Ground No. 2 relates to deleting the addition of Rs. 4890672/- on account of unexplained cash credit. The ld. CIT-DR for the revenue submits that during the assessment, the Assessing Officer noted that the assessee has shown advances from customers of Rs. 5308928/- during A.Y. 2010-11. The assessee was asked to furnish the complete details, including name, address, PAN No. and amount deceived. The assessee failed to furnish the details of such persons from whom advance of Rs. 4890672/- was received. The Assessing Officer treated the said amount as unexplained cash credit. The ld. CIT(A) allowed relief to the assessee by holding that the customer’s advance received in current assessment year were duly adjusted against the sales in subsequent assessment years. It was also noted by the ld. CIT(A) that majority of advance received in current assessment year to the extent of 89% were duly adjusted against the sale made in next assessment year ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 20 2011-12, thus, the case do not warrant treatment of customers advances as unexplained cash credit, merely for non-submission of full address and PAN, when facts clearly indicates that such advances are duly recorded in the books of assessee as sales turnover in subsequent year. The Assessing officer accepted in the assessment order that none of the advances were outstanding up to the date of assessment order. The ld. CIT-DR submits that order of ld. CIT(A) is not sustainable as assesse failed to provide PAN and address and confirmation of persons from whom such advances were shown to have received in the books of account. The assessee has shown such modus operandi of conversion of unaccounted money by way of obtaining advances from customers in such colourable device. The ld. CIT(A) committed error in accepting the assessee’s version and in deleting the additions. 11. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR for assesse submits that advances received from customers were duly accounted for in the books of account and shown as payable under the head of “current liability”. The no account has remained unadjusted and each account of customer is adjusted against the sales bills which were duly offered for tax by the assesse. The assessee furnished ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 21 receipt issues to customers while accepting the advances from customers for verifications and cross verifications by Assessing officer. The analysis of list of advances suggests that advances amounting to Rs. 10,000 or less constitute 97 number of persons. The advances above Rs. 1.00 lacs are merely from 13 parties. Most of the persons were from nearby villages, were uneducated and not bothered to give their complete postal address, simply the name of village in substantial number of cases were given. There were 28821 number of bills against the turnover of Rs. 95.00 crores, which clearly proves that assessee is dealing in such a huge turnover in a town like Valsad. It was totally unrealistic to call confirmation after more than seven years which is not practically possible to find the customer after such passage of time. The ld. AR submits that the list of 198 persons from whom advances were received were provided to the Assessing Officer. The Assessing Officer accepted the sales against the advance in the subsequent assessment year. Once, the income offered from the transaction of advance has been accepted in the subsequent year, taxing the same in the current assessment year would lead to double taxation. The ld. AR submits that receiving advance from customers are regular feature in the business of jewellery and the assessee explained before the lower authorities by ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 22 showing chart from A.Y. 2009-10 to 2014-15 that 3.6 to 5.5 of the total turnover shown in the balance sheet as customer advances. The advances received in the business cannot be treated for the addition under Section 68. To support his submission, the ld. AR for the assessee relied upon the decision of Hon’ble Supreme Court in PCIT Vs Montage Enterprises Limited (2018) 100 taxmann.com 100 (SC) wherein the decision of Delhi High Court in PCIT Vs Montage Enterprises Limited (2018) 100 taxmann.com 99 (Del), decision of Kolkata High Court in PCIT Vs Datta Automobiles P Limited (2017) 81 taxmann.com 107 (Kolk) and Gujarat High Court in CIT Vs Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251 (Gujarat). 12. We have considered the rival contentions of both the parties and have gone through the orders of the lower authorities carefully. We have also deliberated on various case laws relied by the ld. AR of the assessee. We find that during the assessment, the Assessing Officer noted that assessee has shown to have received advances from customers of Rs. 5308928/-. The assessee was issued show cause notice to furnish the complete details including name, address and PAN number of such customers. The assessee furnished list of such customers, however, the complete address and PAN number was not furnished. The Assessing Officer noted that the assessee ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 23 has furnished confirmation of Patel Prakash Bhai Maganbhai of Daman for Rs. 115975/- and no confirmation or PAN number with regard to other customers were furnished, the Assessing Officer treated the advances of Rs. 4890672/- as unexplained cash credit and added under Section 68 of the Act. Before the ld. CIT(A), the assessee made similar submission as made before us, which we have recorded above. The ld. CIT(A) after considering the submission of assessee noted that the customers’ advances received in the current assessment year were duly adjusted against sales in subsequent assessment years. It was also noted that majority of the advances in the current year i.e. to the extent of 89% were adjusted against the sales in succeeding assessment year i.e. in A.Y. 2011-12. On the basis of such observation, the ld. CIT(A) held that the fact do not warrant the treatment of customers advance as unexplained cash credit, merely for non- submission of full address and PAN, when facts clearly indicates that such advances are duly recorded in the books of account as sales turnover in subsequent year. The Assessing officer accepted in the assessment order that none of the advances were outstanding up to the date of assessment order. Before us, the ld. AR vehemently submitted that in the business of jewellery, the customers made advances and details of such advances in the ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 24 form of chart from assessment year 2009-10 to 2014-15, indicating 3.6 to 5.5% of the total turnover was shown in the balance sheet as customers’ advance. We find that similar facts were brought in the notice of ld. CIT(A), which is not converted before us. We further find that the Assessing Officer has not made any investigation on the address furnished by assessee. There is no allegation of Assessing Officer that such person is not available at the given addresses. The Hon’ble Supreme Court in PCIT Vs Montage Enterprises P Limited (supra) held that where the High Court upheld the order of Tribunal in deleting the addition made under Section 68 in respect of trade advances on the ground of that the said advances were adjusted against sales made in the subsequent assessment years, the special leave filed against the said decision was to be dismissed. The Hon’ble Kolkata High Court in PCIT Vs Dutta Automobiles P Limited (supra) also held that where a Tribunal recorded finding of find that money in question was advance deposit received from customers on account of sale of motor cycle, the assessee being a dealer in automobiles, and whenever sale took place, within one or two months, the said deposits were adjusted against sale price of motorcycle, Section 68 would not apply. We find that Hon’ble Jurisdictional High Court in CIT Vs. Ayachi Chandrashekhar Narsangji ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 25 (supra), though, on the context of repayment of loan in subsequent year, also held that when the department had accepted repayment of loan in subsequent years, no addition was to be made in the current year on account of cash credit. At the cost of repetition, we may mention that once the Assessing Officer has accepted the sale against the advances of previous year and the assessee has offered due tax thereon, no addition against the trade advance was liable to be added. With the aforesaid additional observation, we affirm the order of ld. CIT(A). In the result, ground No. 2 of appeal raised by revenue is also dismissed. 13. In the result, appeal for A.Y. 2010-11 is dismissed. ITA No. 176/Srt/2020 (A.Y. 2012-13) by Revenue. 14. As noted earlier, the Revenue has raised identical grounds of appeal with regard to deleting the disallowance of commission payment as well as deleting the addition of unexplained cash credit, except variation of figures of commission payment and cash credit. Considering the fact that we have already dismissed the appeal of revenue in appeal for A.Y. 2010-11 on similar ground of appeal, therefore, following the principle of consistency, the appeal for A.Y. 2012-13 is also dismissed with similar observation. C.O. No. 14/Srt/2020 in ITA No. 175/Srt/2020 (A.Y. 2010-11) ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 26 15. We find that the assessee has raised the grounds in cross objection in support of order of ld. CIT(A), which we have already affirmed, therefore, the grounds raised in the cross objection have become infructuous. 16. In the result, the C.O. raised by the assessee in A.Y. 2010-11 is dismissed. C.O. No. 15/Srt/2020 in ITA No. 176/Srt/2020 (A.Y. 2012-13) 17. The assessee has raised similar ground in cross objection for A.Y. 2012-13 as raised in A.Y. 2010-11, which we have already dismissed being infructuous, therefore, this cross objection is also dismissed with similar direction. 18. Finally, both the appeals of the revenue as well as both the cross objections of the assessee are dismissed. Order pronounced in the open court on 12 th September, 2022 at the time of hearing of this appeal. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 12/09/2022 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT ITA No.175 & 176/Srt/2020 & CO 14 & 15/Srt/2020 ACIT Vs M/s Shah Virchand Govanji Jewellers 27 5. DR 6. Guard File By order Sr.Private Secretary, ITAT, Surat