M/s. Bhavani Ceramics Pvt.Ltd., Mehsana V. The ACIT.,Mehsana Circle, Mehsana

ITA 1539/AHD/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5768 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business expenditure; Principle of natural justice; Rule of consistency; Initiation of penalty proceedings; Set aside
• Section: 143(3); 153; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NOS: 1539 & 3554/AHD/2015 (ASSESSMENT YEAR: 2010-11) M/S. BHAVANI CERAMICS PVT. LTD. B-1, K.B. COMPLEX, DAIRY ROAD, MEHSANA-384002 V/S ACIT, MEHSANA CIRCLE, MEHSANA (APPELLANT) (RESPONDENT) PAN: AABCB 2030R APPELLANT BY : SHRI S. N. SOPARKAR & BANDISH SOPARKAR , AR RESPONDENT BY : SHRI VIDHYUT TRIVEDI, SR. D.R. ( )/ ORDER DATE OF HEARING : 29 -01-202 0 DATE OF PRONOUNCEMENT : 30-01-2020 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE A RE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), GANDHINAGAR, AHMEDABAD DAT ED 03.02.2015 PERTAINING TO A.YS. 2010-11 & 2011-12. SINCE FACTS AND CIRCUMSTANCES AND ITA NOS. 153 9 & 3554/AHD/2015 . A.YS. 2010 -11 & 2011-12 2 ISSUES ARE COMMON, THEREFORE FOR THE SAKE OF BREVIT Y, WE WOULD LIKE TO DISPOSE OF BOTH THE APPEALS BY WAY OF A COMMON ORDER. 2. IN ITA NO. 1539/AHD/2015 FOR A.Y. 2010-11, THE ASSE SSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITIONS MADE BY LD. AO WHILE FRAMING THE ASSESSME NT U/S 143(3) OF THE ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE A CTION OF BOTH THE AUTHORITY ARE REQUIRED TO BE QUASHED. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN CONFIRMING THE GENUINE BUSINESS COMMISSION OF RS.38,72,755/- WHICH OTHERWISE NOT REQUIRED. 3. BOTH THE LOWER AUTHORITIES HAVE FAILED TO A PPRECIATE THAT WITHOUT THE COMMISSION AGENT SALES COULD NOT BE ACHIEVED UP TO 25,26,17,943/- 4. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LA W AND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACTS AND THAT HE FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREF ORE DESERVES TO BE QUASHED. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD. AO IN LEVYING INTEREST U/S 2 34B/C OF THE ACT. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS U/S271(L)(C) OF THE ACT. 3. FACTS OF THE CASE ARE THAT ASSESSEE IS IN THE BUSIN ESS OF MANUFACTURING OF SODIUM SILICATE ETC. ON VERIFICATION OF THE P&L ACC OUNT OF THE ASSESSEE IT IS NOTICED THAT THE ASSESSEE HAD CLAIMED COMMISSION E XPENSE OF RS. 38,72,755/-. THE ASSESSEE WAS ASKED TO SUBMIT THE LIST OF THE PE RSON TO WHOM COMMISSION HAS BEEN PAID. THE ASSESSEE WAS REQUESTED TO SUBMIT THE COPY OF ACCOUNTS ALONG WITH NECESSARY CONFIRMATION FROM THE RECIPIEN T AND ALSO THE NATURE OF SERVICES RENDERED. ITA NOS. 153 9 & 3554/AHD/2015 . A.YS. 2010 -11 & 2011-12 3 4. DURING THE ASSESSMENT PROCEEDINGS, VIDE ORDER SHEET ENTRY DATED 11.02.2013, THE ASSESSEE WAS SPECIFICALLY ASKED WHY THE COMMISS ION EXPENSE SHOULD NOT BE DISALLOWED. APART FROM THE REQUISITION BY THE ASSES SEE TO ESTABLISH THE GENUINENESS OF TRANSACTION, THE PERSONS TO WHOM THE ASSESSEE HAD CLAIMED TO HAVE PAID THE ALLEGED COMMISSION WERE ALSO SUMMONED U/S 131 OF THE ACT TO CROSS-EXAMINE THEN AND OBTAIN NECESSARY PROOF OF HA VING RECEIVED THE COMMISSION AND ALSO THE NATURE OF SERVICES RENDERED . HOWEVER, NO ONE ATTENDED IN PERSON TO STATE ON OATH AND EXPLAIN THE NATURE OF SERVICES RENDERED. 5. AS DISCUSSED ABOVE, ON BEING ASKED TO TH E ASSESSEE ABOUT CLAIM OF THE COMMISSION EXPENSES, THE ASSESSEE VIDE REPLY DATED 11.02.2013 STATED AS UNDER: '... THE SAID EXPENDITURE OF RS. 38.73 LACS IS FULL Y ALLOWABLE AS A BUSINESS EXPENDITURE AS IT WAS A GENUINE EXPENSE INCURRED WH OLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE,.... .THE COMMI SSION WAS BASED ON SALES GENERATED BY THESE PERSONS AND VARIOUS OTHER SERVICES RENDERED B Y THEM AS INDICATED ABOVE. THEIR EFFORTS HELPED THE COMPANY EXPANDING THE SALES AND FETCHING BETTER PRICES. NEW PARTIES WERE DEVELOPED AND FAR AWAY SITUATED PLACES WERE EX PLORED. ORDERS WERE ALSO PROCURED FROM SUCH PARTIES. THE DEALINGS AND DAY TO DAY TRAN SACTIONS WITH PARTIES REMAINED SMOOTH AND UNINTERRUPTED BECAUSE OF THE SUPPORTING SERVICES RENDERED BY THE PERSONS...' 6. THE CONTENTION MADE BY THE ASSESSEE HAS BEEN CONSID ERED IN VIEW OF SUBMISSION MADE BUT THE SAME IS NOT ACCEPTABLE. NO COGENT EVIDENCE COULD BE PRODUCED BY THE ASSESSEE TO PROVE THE FACT THAT ANY SERVICE HAD ACTUALLY BEEN RENDERED BY THE PERSONS/PARRIES, WHICH COULD JUSTIF Y PAYMENT OF SUCH A HUGE SUM OF RS. 38,72,755/ TO THIS COMPANY, NEITHER THE ASSESSEE COMPANY NOR THE PERSON/PARTIES COULD PRODUCE ANY DETAILS OR EVIDENC E OF ANY SERVICE ACTUALLY RENDERED. MERELY STATING THAT THE PERSONS/PARTIES H AD HELPED IN INCREASE IN SALES ITA NOS. 153 9 & 3554/AHD/2015 . A.YS. 2010 -11 & 2011-12 4 AND CORRESPONDING SELF MADE CALCULATIONS OF COMMISS ION CANNOT BE TREATED AS SUFFICIENT PROOF OF ANY SERVICE ACTUALLY RENDERED. HENCE, WITHOUT THE PROOF OF ANY SERVICE ACTUALLY RENDERED BY THE PERSONS TO WHOM COMMISSION HAS BEEN PAID, IN RESPECT OF SALE T O THIS CONCERN, A MERE CONFIRMATION LETTER IS NOTHING BUT A SELF SERVING S TATEMENT GIVEN BY THE PARTIES TO HELP THE COMPANY. 7. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE ASSESSEE COMPANY HAS FAILED TO DISCHARGE THE BURDEN HEAVILY LYING UPON THEM TO PRO VE THAT COMMISSION PAYMENT-TO THE PERSON/PARTIES WAS A GENUINE PAYMENT AND WAS FOR THE BUSINESS PURPOSE. THE ASSESSEE ALSO FAILED TO ESTABLISH THAT ANY SERVICE WAS ACTUALLY RENDERED BY THE PERSONS TO ASSESSEE COMPANY WHICH C OULD JUSTIFY SUCH A HUGE COMMISSION PAYMENT. IT IS WORTH TO MENTION HERE THA T IN THE IMMEDIATELY PROCEEDINGS YEAR ALSO, COMMISSION EXPENSES CLAIMED TO HAVE BEEN PAID TO THESE PERSONS, WAS DISALLOWED AND ADDED TO THE TOTAL INCO ME. DURING THE PRECEDING YEARS ALSO, THE ASSESSEE COULD NOT BRING ON RECORD ANY COGENT EVIDENCE TO PROVE THAT THE PERSONS TO WHOM COMMISSION HAS BEEN PAID, HAD ACTUALLY RENDERED SERVICES WHICH ULTIMATELY INCREASED THE COMMERCIAL ACTIVITIES OF THE ASSESSEE COMPANY. 8. DURING THE YEAR UNDER REFERENCE ALSO, THE ASSESSEE COULD NOT PUT FORTH ANY COGENT EVIDENCE TO JUSTIFY THE PAYMENT OF COMMISSIO N TO THE PERSONS. UNDER THE CIRCUMSTANCES AND CONSIDERING THE FACTS OF THE CASE IT IS HELD THAT THE ALLEGED COMMISSION PAYMENT OF RS. 38,72,755/ HAS NOT BEEN M ADE WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS PURPOSE AND HENCE DESE RVES TO BE DISALLOWED BEING UNREASONABLE AND AGAINST THE LEGITIMATE BUSINESS NE EDS OF THE ASSESSEE. ITA NOS. 153 9 & 3554/AHD/2015 . A.YS. 2010 -11 & 2011-12 5 9. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE A.O. BY HOLD ING THAT IN ASSESSMENT YEAR 2010-11 IS SIMILAR TO THAT OF ASSESSMENT YEAR 2009-10 AND ON THE PRINCIPLE OF CONSISTENCY, LD. CIT(A) CONFIRMED ADDITION MADE BY THE LD. A.O. 10. NOW ASSESSEE HAS COME BEFORE US AND STATED THAT FAC TS AND CIRCUMSTANCES ARE TOTALLY DIFFERENT WITH THE CASE OF ASSESSMENT YEAR 2009-10. THEREFORE, LD. CIT(A) HAS ERRED IN HOLDING THAT PRESENT CASE IN HA ND IS SIMILAR TO ASSESSMENT YEAR 2009-10. LD. A.R. FURTHER STATED THAT ASSESSEE GAVE BUSINESS COMMISSION TO SHRI MEHULKUMAR B PATEL FOR A.Y. 2011-12 WHOSE STA TEMENT WAS RECORDED U/S 131 BY THE DEPARTMENT AND SAME IS PART OF PAPER BOO K AT PAGE NO. 170-172. STATEMENT OF SHRI RATNESHKUMAR H MODH FOR A.Y. 2011 -12 WAS ALSO RECORDED U/S. 131 ON 05.03.2014 AND SAME IS PART OF PAPER BO OK AT PAGE NO. 173-175. STATEMENT OF SHRI ANKUR K PATEL FOR A.Y. 2011-12 WA S RECORDED U/S 131 ON 05.03.2014 SAME IS PART OF PAPER BOOK AT PAGE NO. 1 76-180 AND RE-EXAMINATION OF SHRI RATNESHKUMAR H MODH WAS ALSO RECORDED ON 05 .03.2014 FOR A.Y. 2011- 12 AND SAME IS PART OF PAPER BOOK AT PAGE NO. 181-1 84. THEREAFTER CROSS- EXAMINATION OF SHRI RATNESH H MODH WAS RECORDED AND SAME IS PART OF PAPER BOOK AT PAGE NO. 185. 11. LD. A.R. CONTENTION IS THAT LOWER AUTHORITIES HAVE FAILED TO CONSIDER STATEMENT AND CROSS EXAMINATION RECORDED BY THE REVENUE HAS N OT BEEN CONSIDERED BEFORE PASSING THE ORDER. 12. IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS MATTE R TO THE FILE OF THE LD. CIT(A) TO DECIDE THIS MATTER AFRESH AFTER CONSIDERING THE STA TEMENT OF ABOVE SAID PERSONS TO WHOM COMMISSIONS WERE GIVEN. THEREFORE WILL DECI DE MATTER AS PER LAW. ITA NOS. 153 9 & 3554/AHD/2015 . A.YS. 2010 -11 & 2011-12 6 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. 14. NOW WE COME TO ITA NO. 3554/AHD/2015 FOR A.Y. 2011- 12, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITIONS MADE BY LD. AO WHILE FRAMING THE ASSESSME NT U/S 143(3) OF THE ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE A CTION OF BOTH THE AUTHORITY ARE REQUIRED TO BE QUASHED. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN CONFIRMING THE GENUINE BUSINESS COMMISSION OF RS.22,49,024/- WHICH OTHERWISE NOT REQUIRED. 3. BOTH THE LOWER AUTHORITIES HAVE FAILED TO A PPRECIATE THAT WITHOUT THE COMMISSION AGENT SALES COULD NOT BE ACHIEVED UP TO 28,32,01,338/- 4. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LA W AND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACTS AND THAT HE FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREF ORE DESERVES TO BE QUASHED. 5. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS OF THE ' CASE IN CONFIRMING ACTION OF THE LD. AO IN LEVYING INT EREST U/S 234B/C OF THE ACT. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS U/S271(L)(C) OF THE ACT. 15. SINCE FACTS AND CIRCUMSTANCES ARE SIMILAR TO ITA NO . 1539/AHD/2015 AND IN THE SAID ITA, WE REMANDED THE MATTER BACK TO THE FI LE OF LD. CIT(A) FOR RE- ADJUDICATION. 16. THUS, IN PARITY WITH THE CONNECTED APPEAL, THIS MAT TER IS ALSO SET ASIDE TO THE FILE OF THE LD. CIT(A) FOR RE-ADJUDICATION AFTER CONSIDE RING THE SUBMISSION AND ARGUMENTS AND DOCUMENTS TO BE FILED BY THE ASSESSEE . THEREAFTER WILL PASS AN ORDER AS PER LAW. ITA NOS. 153 9 & 3554/AHD/2015 . A.YS. 2010 -11 & 2011-12 7 17. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESS EE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 30 - 01- 2020 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 30/01/2020 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD