DCIT, New Delhi V. M/s Interworld Cargo Care P. Ltd., New Delhi

ITA 1530/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3736 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 29-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: AMIT GOYAL CAS
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO.1530/DEL/2011 ASSESSMENT YEAR : 2007-08 DY. CIT, VS. M/S INTERWORLD CARGO CARE (P) LTD., CIRCLE 11(1), PLOT NO.1, GALI NO.2, MAHIPAL PUR NEW DELHI EXTN., NEW DELHI PAN NO.AAACI 5384 G (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. MONA MOHANTY, SR. DR RESPONDENT BY : SHRI AMIT GOYAL, CAS. ORDER PER I.P. BANSAL, JM: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECTED AGA INST THE ORDER DATED 25 TH JANUARY, 2011 PASSED BY THE LEARNED CIT(A), NEW DELHI FO R ASSESSMENT YEAR 2007-08. THE GROUNDS OF APPEAL READ AS UNDER:- I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , IN DELETING THE ADDITION OF `37,16,441/- ON ACCOUNT OF COMMISSION PAID. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IN DELETING THE ADDITION OF `37,16,441/- ON ACCOUNT OF SA LARY PAID. 2 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF HANDL ING AND FORWARDING OF IMPORT AND EXPORT CARGO AND IS A MEMBER OF INTERNATIONAL AIR TRANSPORT ASSOCIATION (IATA). 2.1 IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASS ESSEE HAS EARNED TOTAL INCOME FROM OPERATION AT `6,52,36,895/- AGAINST WHICH EXPENSES ON COMMISSION PAID WERE CLAIMED AT `5,28,77,322/- AND THUS THE RATI O OF COMMISSION PAID BY THE ASSESSEE OUT OF REVENUE EARNED ON THAT ACCOUNT COMES TO 8 1.05%. IN COMPARISON TO THE FIGURES OF IMMEDIATE PRECEDING ASSESSMENT YEAR WHERE THE COMMISSION PAID WAS OF `2,20,76,724/- AS AGAINST TH E REVENUE OF `2,91,06,854/- , THE RATIO WAS 75.85% AND THUS THERE WAS A DIRECT INCR EASE OF AROUND 5% UNDER THIS HEAD. HE CALLED FOR ALL THE DETAILS OF PAYMENT OF C OMMISSION WHICH WERE FILED BEFORE THE ASSESSING OFFICER AND HE SORTED OUT 22 PARTIES W HICH ARE LISTED AT PAGE 6 OF THE ASSESSMENT ORDER TOTALING TO `42,48,941/-. THE A SSESSING OFFICER OBSERVED THAT WITH REGARD TO THESE PARTIES, THERE IS ONLY ONE ENTRY AND THAT IS UNDER THE COLUMN DISCOUNT PAID. ACCORDING TO ASSESSING OFFICER, THES E PARTIES SHOULD BE EXPORTERS WITH WHOM THE ASSESSEE IS DEALING DIRECTLY AS IN THE COLUM N IATA, THEIR NAMES DID NOT EXIST. HE ASKED THE ASSESSEE TO FURNISH EVIDENCE WITH REG ARD TO THE PAYMENTS MADE TO THESE PARTIES AND, ULTIMATELY THE ASSESSING OFFIC ER HAS COME TO THE CONCLUSION THAT THE CASE OF THE ASSESSEE COULD NOT BE ACCEP TED WITH REGARD TO 19 PARTIES TO WHOM THE AGGREGATED COMMISSION OF `37,16,44 1/- WAS PAID. THE ASSESSING OFFICER ALSO OBSERVED THAT IF THE SAID AMOUNT IS DISALLOWED THEN IT WILL BRING DOWN THE PERCENTAGE OF EXPENSES, WHICH WILL BE ALMOST AT PAR WITH THE EXPENSES INCURRED BY THE ASSESSEE ON SUCH COMMISSION IN THE IMMEDIATE PRECEDING YEAR. HE, THEREFORE, DISALLOWED THIS AMOUNT. 3 2.2 IT WAS ALSO OBSERVED BY THE ASSESSING OFFICER THAT T HOUGH THE ASSESSEE HAS FURNISHED CONFIRMATION WITH REGARD TO ALL THE 22 PARTI ES BUT IN MAJORITY CASES, THE CONFIRMATION HAS BEEN TYPED BY THE ASSESSEE-COMPANY ON I TS LETTER HEAD AND THE RECIPIENT PARTY HAS SIMPLY PUT HIS SIGNATURES WITH THE PAN NUMBER AND THUS, THE EVIDENCE SUBMITTED BY THE ASSESSEE WAS NOT CREDIBLE ONE. MOST OF THE PERSONS TO WHOM THE COMMISSION HAS BEEN PAID HAVE NEITHER PUT UP AN Y RUBBER STAMP OR THE NAME OF THE FIRM AND THEY ARE OPERATING FROM RESIDENTIAL AREAS. NO BANK STATEMENT HAS BEEN ATTACHED AND COPY OF INCOME-TAX ACKNOWLEDGEMENT OR OTHER DOCUMENT HAS ALSO NOT BEEN FILED TO PROVE THE GENUINENESS OF THE COMM ISSION PAYMENT. 2.3 BEFORE LEARNED CIT(A), IT WAS SUBMITTED THAT CONFIRM ATIONS OF ALL THE PARTIES WERE FILED BEFORE THE ASSESSING OFFICER WITH THEIR PAN NUMBER AND THIS FACT HAS ALSO BEEN ACKNOWLEDGED BY THE ASSESSING OFFICER HIMSELF IN THE AS SESSMENT ORDER. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS WITHOUT AP PRECIATING THE FACTS IN A PROPER MANNER. THE ASSESSING OFFICER HAS WRONGLY WORKED OUT THE PERCENTAGE OF EXPENSES FOR IMMEDIATE PRECEDING YEAR AS THE SAME WAS 85.20% AS CAN BE SEEN THAT THE COMMISSION PAID WAS `2,20,78,724/- AGAINST THE TOTAL RECEIPTS OF `2,59,13,335/- AND THE ACTUAL PERCENTAGE WILL COME TO 85 .20%. IT WAS SUBMITTED THAT EARLIER YEAR I.E., ASSESSMENT YEAR 2006-07 ASSESSMENT W AS COMPLETED U/S 143(3) AND NO DISALLOWANCE ON ACCOUNT OF COMMISSION /INCENTIVE WAS MADE. IT WAS SUBMITTED AS THE PROVISIONS OF TDS WERE APPLICABLE, TAX WAS DEDUCTED THE SOURCE AND TDS CERTIFICATES WERE ALSO FILED. THE EXPENSES WERE INCURR ED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND W ERE MADE FOR GENUINE BUSINESS NEEDS. THE ASSESSING OFFICER HAS NOT BEEN ABLE TO ESTABLISH THAT THE EXPENDITURE INCURRED BY THE COMPANY WAS NOT FOR THE PURPO SE OF BUSINESS. THE ASSESSING OFFICER NEVER ASKED THE ASSESSEE TO FURNISH I.T. ACKNOWLEDGEMENTS OR BANK STATEMENTS. BY FURNISHING CONFIRMATION ALONG WI TH PAN NUMBER, THE ASSESSEE 4 HAD DISCHARGED ITS ONUS AND FURTHER ONUS WAS ON THE AS SESSING OFFICER IF HE HAD SOME DOUBT ABOUT IT. 2.4 CONSIDERING THESE SUBMISSIONS, THE LEARNED CIT(A) HAS MADE OUT A CHART IN PARA 3.2 OF HIS ORDER WHEREIN THE DETAILS REGARDING IMPU GNED DISALLOWANCE HAS BEEN MADE. THE COLUMNS CONTAINED THEREIN ARE NAME OF THE PAR TIES, THEIR ADDRESSES, PAN NUMBER, AMOUNT AND WHETHER INCENTIVE WAS PA ID IN THE LAST YEAR I.E. ASSESSMENT YEAR 2006-07, AND AFTER GIVING THESE PARTI CULARS HE HAS OBSERVED THAT THERE IS NO DISPUTE REGARDING THE FACT THAT THE CONF IRMATION OF ACCOUNT OF ALL THE ABOVE PARTIES WERE FURNISHED BY THE ASSESSEE. THE ASSESSING O FFICER HAS ALSO VERIFIED THE CONFIRMATION AND IN FACT, MADE A SEPARATE DI SALLOWANCE OF `78,19,094/- ON ACCOUNT OF DIFFERENCE IN AMOUNT AS P ER CONFIRMATION AS COMPARED TO THE AMOUNT CLAIMED BY THE ASSESSEE. THE ASSESSEE HAS ALSO FURNISHED BEFORE THE ASSESSING OFFICER DETAILED WORKING OF INCENTIVE/COMMISSI ON PAID ALONG WITH EITHER THE CREDIT NOTE ISSUED BY THE COMPANY OR THE DEBIT NOTE ISS UED BY THE PARTY. ALL THE PARTIES ARE INCOME-TAX ASSESSES EXCEPT ONE CASE INVOLVING A N AMOUNT OF 76,270/-. THE ASSESSEE HAS DEDUCTED TAX AT SOURCE IN ALL THE CASES AND IN VIEW OF THESE CIRCUMSTANCES, THE DISALLOWANCE COULD NOT BE MADE ONLY F OR THE REASONS THAT CONFIRMATIONS WERE NOT ON THE LETTERHEADS OF THE RECIPIENT P ARTIES. THE ASSESSEE HAS DISCHARGED ITS ONUS BY SUBMITTING THE NAMES AND ADDRESS ES OF THE PAYEES ALONG WITH INCOME-TAX PARTICULARS. THE ASSESSING OFFICER CO ULD HAVE VERIFIED THE SAME BY ISSUING NOTICES TO THE PAYEES. THERE WAS NO JUSTIFICATIO N FOR MAKING SUCH DISALLOWANCE. THE ASSESSING OFFICER HAS NOT ESTABLISHED THAT THE EXPENDITURE INCURRED WAS NOT FOR THE PURPOSE OF BUSINESS OR THAT IT WAS WITHOUT RECEIPT OF ANY SERVICES/BENEFIT. NONE OF THE PARTIES TO WHOM THE COMMISSI ON IS PAID IS RELATED TO THE COMPANY OR ITS PROMOTERS OR DIRECTORS. THE COMMISS ION PAID DOES NOT EXCEED IN PERCENTAGE AS COMPARED TO IMMEDIATE PRECEDING YEAR. IN THIS VIEW OF THE SITUATION, 5 THE LEARNED CIT(A) HAS DELETED THE ADDITION. THE DEPARTMENT IS AGGRIEVED, HENCE, HAS RAISED GROUND NO.1 2.5 AFTER NARRATING THE FACTS RELYING ON THE ORDER PASSED BY THE ASSESSING OFFICER, IT WAS VEHEMENTLY PLEADED BY LEARNED DR THAT DISALLOWANCE HAS WRONGLY BEEN DELETED AND THE ORDER OF CIT(A) ON THIS ISSUE SHOULD BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 2.6 ON THE OTHER HAND, RELYING ON THE ORDER OF LEARNED CIT (A), IT WAS PLEADED BY LEARNED AR THAT UPON APPRECIATION OF ALL THE EVIDENCES SUB MITTED BY THE ASSESSEE BEFORE ASSESSING OFFICER, LEARNED CIT(A) HAS RIGHTLY CONC LUDED THAT ADDITION WAS NOT CALLED FOR. 2.7 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. IT IS UNDISPUTED THAT ASSESSEE HAD SUBM ITTED CONFIRMATION WITH REGARD TO ALL THE PARTIES IN RESPECT OF WHOM THE COMMISSI ON HAS BEEN DISALLOWED BY THE ASSESSING OFFICER EXCEPT ONE PARTY WHICH HAS BEEN STATED EARLIER, AND COMMISSION PAID TO THAT PARTY IS AMOUNTING TO `76,2 70/-. A FINDING OF FACT HAS BEEN RECORDED BY THE LEARNED CIT(A) THAT ASSESSEE HAS DEDUCTED TAX AT SOURCE FROM ALL THESE PARTIES AND THEIR NAMES AND ADDRESSES WERE GIVEN TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IF IT IS SO , THEN IT CAN BE SAID THAT ASSESSEE HAD DISCHARGED INITIAL ONUS LAID UPON IT TO P ROVE THE PAYMENT OF COMMISSION. THEREAFTER, IT WAS OBLIGATORY UPON THE AS SESSING OFFICER TO MAKE FURTHER INQUIRIES, IF HE WANTED TO MAKE DISALLOWANCE OF THE COMMISSION. THE ASSESSING OFFICER SIMPLY HAS DISBELIEVED THE CONFIRMATION S ON THE GROUND THAT THEY WERE NOT ON THE LETTERHEAD OF THE PAYEE. IN THE PRESENCE OF PA RTICULARS GIVEN IN THE SHAPE OF NAME AND ADDRESS OF THE PARTIES, THEIR PAN NUMB ERS, IT CAN BE SAID THAT 6 THE NECESSARY PARTICULARS WERE FILED BY THE ASSESSEE ON THE BA SIS OF WHICH ASSESSING OFFICER SHOULD HAVE INVESTIGATED THE GENUINENESS OF THE PAYM ENT OF THE COMMISSION. MOREOVER, THE NATURE OF BUSINESS OF THE ASSESSEE IS ALSO OF THE NATURE THAT WHERE THE PAYMENT OF COMMISSION IS NECESSARY AND THIS FACT IS EVI DENT THAT MAJOR PORTION OF THE REVENUE EARNED BY THE ASSESSEE HAS BEEN CLAIMED TO BE PAID AS A COMMISSION, WHICH IS TO THE TUNE OF 85%. IT HAS ALSO BEEN THE FIN DING OF LEARNED CIT(A) THAT ASSESSING OFFICER HAS WRONGLY MENTIONED THAT THERE IS INC REASE IN PERCENTAGE OF PAYMENT OF COMMISSION FOR THE YEAR UNDER CONSIDERATION W HEN IT WAS COMPARED TO ASSESSMENT YEAR 2006-07 AND THIS POSITION HAS ALSO BEEN BROUGHT OUT IN THE ORDER OF CIT(A) WHEREBY IT HAS BEEN FOUND THAT EXPENSES ON COMM ISSION/INCENTIVE PAID BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION IS 84.20% AS A GAINST 85.20% PAID FOR ASSESSMENT YEAR 2006-07. IT IS ALSO MENTIONED IN THE ORD ER OF CIT(A) THAT FOR EARLIER YEAR THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT AND NO DISALLOWANCE OF COMMISSION/INCENTIVE WAS MADE. KEEPING IN VIEW OF THESE FA CTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A) V IDE WHICH THE IMPUGNED ADDITION OF `37,16,441/- IS DELETED. WE DECLINE TO INTERF ERE AND GROUND NO.1 OF THE REVENUE IS DISMISSED. 3. APROPOS GROUND NO.2, DISCUSSION HAS BEEN MADE BY TH E ASSESSING OFFICER IN PARA 4 OF THE ASSESSMENT ORDER. AN AMOUNT OF `39,04,8 50/- WAS CLAIMED BY THE ASSESSEE AS EXPENDITURE INCURRED ON SALARY. THE ASSESSEE WAS REQUIRED TO SUBMIT MONTH WISE AND EMPLOYEE-WISE SALARY PAYMENTS. IT WAS F OUND THAT SALARY PAYMENT OF `1,80,000/- WAS MADE TO MRS. DEEPIKA KAPOOR. IT WA S FURTHER NOTICED THAT A FURTHER SUM OF `5,17,269/- WAS ALSO PAID TO HER DISC OUNT PAID. FROM THE MONTH WISE DETAILS, IT WAS NOTICED THAT SHE WAS EMPLOYED FROM A PRIL TO JULY AND SHE WAS NOT WORKING FROM AUGUST AND SEPTEMBER AND SHE WAS AGAIN EMPLOYED FROM 7 OCTOBER TO MARCH. SINCE THE COMMISSION PAYMENTS WERE HELD TO BE BOGUS, THE SALARY PAID WAS ALSO DISALLOWED. 3.1 LEARNED CIT(A) HAS DISCUSSED THIS ISSUE IN PARA 4 O F HIS ORDER. IT WAS SUBMITTED BY THE ASSESSEE THAT DISALLOWANCE HAS BEEN MADE IN MOST ARBITRARY MANNER WITHOUT RAISING ANY QUERY OR SHOW CAUSE NOTICE. SHE WAS ON MATERNITY LEAVE DURING JULY TO SEPTEMBER FOR WHICH THE SALARY WAS N OT PAID TO HER. SHE HAS BEEN EMPLOYED IN THE ASSESSEE COMPANY SINCE EARLIER YEARS. F ORM NO.16 WAS ISSUED AND INCOME HAS BEEN SHOWN IN HER INCOME-TAX RETURN . SHE IS NOT RELATED TO ANY OF THE PROMOTERS OR DIRECTORS OF THE COMPANY. NO A DVERSE INFERENCE CAN BE DRAWN IF SHE HAS DONE EXTRA EFFORTS AND ARRANGED CLIENTS FOR WHICH SEPARATE INCENTIVE WAS PAID TO HER. AS A USUAL PRACTICE, MOST OF THE COMPANIES LIKE ASSESSEE ARE MAKING PAYMENT OF COMMISSION TO THE EMPLOYEES IN AD DITION TO SALARY. LAST YEAR ALSO, SHE WAS PAID COMMISSION AS WELL AS SALARY, WHICH HAS NOT BEEN MADE SUBJECT OF DISALLOWANCE IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. CONSIDERING THESE SUBMISSIONS, LEARNED CIT(A) HAS DELETED T HE ADDITION. 3.2 LEARNED DR RELIED ON THE ASSESSMENT ORDER AND THE LEARNED AR HAS PLACED RELIANCE ON THE ORDER OF CIT(A). 3.3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND GONE THROUGH THE ASSESSMENT ORDER AS WELL AS ORDER PASSED BY THE LEARNED CIT( A). MRS. DEEPIKA KAPOOR IS THE EMPLOYEE OF THE ASSESSEE COMPANY AND IN THE YEA R UNDER CONSIDERATION AS WELL AS IN THE PRECEDING YEAR, SHE WAS PA ID WITH THE COMMISSION AS WELL AS THE SALARY. SHE HAS DISCLOSED BOTH THESE INCOM ES IN HER INCOME-TAX RETURN, THEREFORE, THERE WAS NO JUSTIFICATION FOR MAKING ADDITION. ON THESE FACTS, WE 8 FOUND THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDI TION, WE DECLINE TO INTERFERE. THIS GROUND OF REVENUE IS ALSO DISMISSED. 4. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10.06.20 11. SD/- SD/- ( SHAMIM YAHYA ) ( I.P. BANSAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 10.06.2011. NS COPY FORWARDED TO:- 1. DCIT, CIRCLE 11(1), NEW DELHI. 2. M/S INTERNATIONAL CARGO CARE PVT. LTD., PLOT NO.1, GA LI NO.2, MAHIPAL PUR EXTENSION, NEW DELHI. 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).