ITO, Ward - 36(3), Kolkata, Kolkata V. M/s. Saha Agency, Kolkata

ITA 1653/KOL/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7920 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 02-12-2011
• Court: TRIBUNAL
• Department Lawyers: A P ROY
• Assessee Lawyers: S M SURANA
• Keywords: Business expenditure; Assessment record
• Section: 40A(3); 143(3); 131

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.1653/KOL/2011 #$ %&/ ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, WD-36(3), KOLKATA. VS. M/S. S AHA AGENCY (PAN: AAOFS4826L) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 17.09.2014 DATE OF PRONOUNCEMENT: 14.10.2014 FOR THE APPELLANT: SHRI A. P. ROY, JCIT, SR. DR FOR THE RESPONDENT: SHRI S. M. SURANA, ADVOCATE / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XX KOLKATA IN APPEAL NO. 212/ CIT(A)-XX/WD-36(3)/09-10/KOL DATED 05.09.2011. ASS ESSMENT WAS FRAMED BY ITO, WARD-36(3), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 30.11. 2009. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO ON ACCOUNT OF COMMISSION PAYMEN T NOT PROVED BY EVIDENCE. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. LD. CIT(A)-XX, KOLKATA HAS ERRED IN DELETING TH E ADDITION OF RS.11,40,700/- ON ACCOUNT OF COMMISSION PAYMENT AS THERE WAS ENOUGH EVIDENCE AND MATERIAL ON RECORD WHICH COULD RAISED DOUBT OR SUSPICION ABOUT THE GENUINENESS OF TRANSAC TION. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF TRADING IN DIESEL ENGINE S, SPARE PARTS, ELECTRICAL GOODS, STATIONERY, CHEMICAL S, MEDICINES AND OTHERS. THE ASSESSEE HAS ITS UNIT IN KOLKATA AND PORT BLAIR. THE ASSESSEE HAS CLAIME D COMMISSION AT RS.11,40,700/- BY DEBITING THE P&L ACCOUNT. THE AO REQUIRED THE ASSESSEE TO EXPLA IN THE COMMISSION PAYMENT. THE ASSESSEE FILED COMPLETE PARTICULARS OF COMMISSION PAID TO CO MMISSION AGENTS I.E. NAMES, ADDRESSES, PANS, INCOME TAX RETURNS AND STATEMENT OF INCOME FILED WI TH THE RETURNS OF INCOME BY THE RECIPIENTS. THE 2 ITA NO.1653/K/2011 M/S. SAHA AGENCY. AY 2007-08 AO NOTED FROM THE DETAILS THAT THE ASSESSEE HAS PAI D COMMISSION TO EIGHT COMMISSION AGENTS VIZ., PRITI PODDAR, SAROJ PODDAR, MANJU PODDAR AND USHA P ODDAR, SUCHITRA GHOSH, MALABIKA MONDAL, MANJU DEVI SHARMA AND HUZFA FAKHRUDDIN BHIWANDIAWAL . THE AO ISSUED SUMMONS U/S. 131 OF THE ACT TO EXAMINE THESE PARTIES. FOUR PARTIES NAMELY, PRITI PODDAR, SAROJ PODDAR, MANJU PODDAR AND USHA PODDAR COULD NOT BE SERVED SUMMONS AS THEY WER E OUT OF STATION. SMT. SUCHITRA GHOSH APPEARED BEFORE THE AO AND CONFIRMED RECEIPT OF COM MISSION FOR PROCURING ORDER FROM AMRI HOSPITAL, DHAKURIA. SMT. MALABIKA MANDAL ALSO CONF IRMED THE RECEIPT OF COMMISSION VIDE LETTER DATED 27.08.2010 FOR PROCURING ORDERS FROM B.M. BI RAL HEART RESEARCH CENTRE, KOLKATA BUT MANJU DEVI SHARMA AND HUZFA FAKHRUDDIN BHIWANDIAWAL DID N OT RESPOND. HENCE, THE AO DISALLOWED THE ENTIRE COMMISSION PAID TO THESE EIGHT PARTIES. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO AFTER TAKING REMAND REPORT FROM THE AO AND CONSIDERING THE DETAILS DELETED THE ADDI TION BY OBSERVING IN PARA 6, 7 AND 8 AS UNDER: 6.- IN HIS REMAND REPORT, THE AO HAS SUBMITTED THA T SUMMONS U/S 131 WERE ISSUED TO THE 8 COMMISSION AGENTS, NAMELY PRITI PODDAR, SAROJ PODDA R, MANJU PODDAR, USHA PODDAR, SUCHITRA GHOSH, MALABIKA MANDAL, MANJU DEVI SHARMA AND HUZFA FAKHRUDDIN BHIWANDIAWAL IN COURSE OF THE REMAND PROCEEDINGS. HOWEVER, THE S UMMONS COULD NOT BE SERVED ON PRITI PODDAR, SAROJ PODDAR, MANJU PODDAR AND USHA PODDAR AS THEY WERE OUT OF STATION. SUCHITRA GHOSH APPEARED BEFORE THE AO AND CONFIRMED RECEIPT OF COMMISSION FOR PROCURING ORDER FROM AMRI HOSPITAL, DHAKURIA. MALABIKA MANDAL CONFIRRNED VIDE HER LETTER DATED 27-08-2010 THAT SHE HAD RECEIVED COMMISSION FOR PROCURING ORDER FR OM BM BIRLA HEART RESEARCH CENTRE, KOLKATA. THE REMAINING TWO COMMISSION AGENTS DID NO T RESPOND. 7. IN ITS REJOINDER TO THE REMAND REPORT, THE APP ELLANT HAS REITERATED THAT COMMISSION WAS PAID FOR SECURING ORDERS FROM DIFFERENT HOSPTALS F OR SALE OF MEDICAL EQUIPMENT. THE BILLS RAISED BY THE COMMISSION AGENTS, WHICH WAS PRODUCED AT THE ASSESSMENT STAGE, CONTAIN RELEVANT PARTICULARS (PLACED AT PAGE 30 TO 46 OF TH E PAPER-BOOK), NAMELY, PAN OF THE COMMISSION AGENTS AND HOSPITALS FROM WHICH ORDER WA S SECURED. FOR EXARNPLE, PRITI PODDAR, SAROJ PODDAR, MANJU PODDAR, USHA PODDAR AND MANJU D EVI SHARMA SECURED ORDERS FROM RABINDRA NATH TAGORE INTERNATIONAL INSTITUTE OF CAR DIAC SCIENCES, KOLKATA. SIMILARLY, SUCHITRA GHOSH SECURED ORDERS FRORN AMRI HOSPITAL, DHAKURIA AND MALABIKA MANDAL FROM BM BIRLA HEART RESEARCH CENTRE, KOLKATA . THE LD A R CONTENDED THAT COMMISSION WAS PAID THROUGH BANKING CHANNEL AND TAX WAS ALSO DEDUCTED A T SOURCE. THE APPELLANT HAS DISCHARGED ITS ONUS OF ESTABLISHING THE IDENTITY OF THE COMMIS SION AGENTS AND THE GENUINENESS OF THE TRANSACTIONS. THOUGH ALL RELEVANT DETAILS OF COMMIS SION AGENTS WERE PRODUCED, THE AO HAS BROUGHT NO MATERIAL ON RECORD TO CONTROVERT THE CON TENTIONS OF THE APPELLANT. IT WAS ALSO CONTENDED THAT THE COMMISSION WAS PAID IN LIEU OF S ERVICES RENDERED. FOR, TOTAL COMMISSION OF RS.11,40,700/- WAS PAD FOR SECURING SALES OF MEDIC AL EQUIPMENT FOR RS.81,50,904/-,WHICH IS DULY CREDITED IN THE PROFIT & LOSS A/C. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE AP PELLANT HAS BROUGHT SUFFICIENT MATERIAL ON RECORD TO SHOW THAT COMMISSION WAS PAID FOR SECURIN G ORDERS FOR SALE OF MEDICAL EQUPMENT FROM DIFFERENT HOSPITALS; AND CONSEQUENTLY, IT IS ALLOWABLE AS BUSINESS EXPENDITURE. THE BILLS RAISED BY THE COMMISSION AGENTS CONTAIN ALL RELEVAN T DETAILS WHICH WAS AVAILABLE BEFORE THE AO. HOWEVER, THE AO HAS BROUGHT NO POSITIVE MATE RIAL ON RECORD TO SHOW ANYTHING THAT COULD RAISE DOUBT OR SUSPICION ABOUT THE GENUINENES S OF THE TRANSACTIONS. EVEN IN COURSE OF THE REMAND PROCEEDINGS, THE AO HAS BROUGHT NO ADVE RSE MATERIAL ON RECORD. THE COMMISSION 3 ITA NO.1653/K/2011 M/S. SAHA AGENCY. AY 2007-08 WAS PAID THROUGH BANKING CHANNEL WHICH HAS NOT BEEN DISPUTED BY THE AO. IN VIEW OF THE ABOVE, THE ADDITION OF RS.11,40,700/- IS DELETED. G ROUND NO. 1 IS ALLOWED. WE FIND THAT IN ALL THE CASES THE ASSESSEE HAS PAID COMMISSION THROUGH BANKING CHANNEL AND TDS WAS DEDUCTED ON THE COMMISSION PAID. THE AO NEVER TRIED TO GO THROUGH THE RECORDS OF THE RECIPIENTS DESPITE THE FACT THAT ENTIRE ASSESSMENT RECORD AND ITS PARTICULARS WERE AVAILABLE WITH THE DEPARTMENT AND THE RECIPIENTS HAVE DISCLOSED THE RE SPECTIVE COMMISSION IN THEIR INCOME. SOME OF THE RECIPIENTS LIKE MALABIKA MONDAL AND SUCHITRA GH OSH CONFIRMED THE COMMISSION RECEIVED ON ACCOUNT OF THEIR BUSINESS TAKEN TO THE ASSESSEE FOR WHICH THE COMMISSION WAS PAID. NONE OF THE RECIPIENTS OF THE COMMISSION HAVE DENIED. IN TERM OF THE ABOVE, WE ARE OF THE VIEW THAT THE AGENTS HAVE PROCURED SALE OF MEDICAL EQUIPMENT TO THE EXTE NT OF RS.81,50,904/- AND THE SAME IS CREDITED IN P&L ACCOUNT OF THE ASSESSEE FOR WHICH THIS COMMISSI ON WAS PAID. WE FIND NO SUSPICION IN THE ABOVE COMMISSION AS IS PROVED BY DOCUMENTARY EVIDEN CE. IN TERM OF THE ABOVE, WE CONFIRM THE ORDER OF CIT(A) DELETING THE DISALLOWANCE. THIS IS SUE OF REVENUES APPEAL IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS R EGARDS TO THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY INVOKING THE PROVISIONS OF SECTIO N 40A(3) OF THE ACT FOR THE SUM OF RS.13,44,723/- AND RS.2,89,008/-. FOR THIS, REVENU E HAS RAISED FOLLOWING GROUND NOS. 2 AND 3: 2. LD. CIT(A)-XX, KOLKATA HAS ERRED IN DELETING TH E ADDITION OF RS.13,44,723/- ON ACCOUNT OF VIOLATION OF SEC. 40A(3) AS THE PAYMENTS WERE MA DE IN CASH ABOVE RS.20,000/- WHICH IS CLEARLY VIOLATION OF SEC. 40A(3) READ WITH RULE 6D. 3. THE LD. CIT(A)-XX, KOLKATA HAS ERRED IN DELETING ADDITION OF RS.2,89,008/- ON ACCOUNT OF VIOLATION OF SEC. 40A(3), AS THE PAYMENTS WERE MADE IN CASH ABOVE RS.20,000/- WHICH IS CLEARLY VIOLATION OF SEC. 40A(3) READ WITH RULE 6D. 6. BRIEFLY STATED FACTS ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE THAT IT H AS PAID A SUM OF RS.90,80,947/- FOR PURCHASE OF COPRA I.E. THE BASIC MATERIAL FOR COCONUT PRODUCT. THE AO MADE DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT AT RS.18,16 ,169/- FOR THE TOTAL PURCHASE MADE IN CASH AT RS.90,80,947/-. AGGRIEVED, ASSESSEE PREFERRED APPEA L BEFORE CIT(A), WHO RESTRICTED THE DISALLOWANCE AT RS.4,71,446/- AND DELETED THE BALAN CE ADDITION OF RS.13,44,723/- BY OBSERVING IN PARA 11 AS UNDER: 11. I HAVE PERUSED THE RELEVANT REPORTS AND CONSI DERED THE MATERIAL ON RECORD. THE AO HAS ADMITTED IN HIS REMAND REPORT THAT PAYMENTS TO THE EXTENT OF RS.3,50,272/- WERE NOT IN EXCESS OF RS.20,000/-; AND, THAT PAYMENTS OF RS.1,37,263/- WAS NOT OF THE NATURE COVERED BY SECTION 40A(3); AND CONSEQUENTLY, NO DISALLOWANCE ON SUCH P AYMENTS IS CALLED FOR. SECONDLY, I FIND FROM THE REMAND REPORT THAT 3 AGENTS, NAMELY, TAPAS KUMAR HALDER, ABANI KANTA DHAR AND SWAPAN KUMAR NAG APPEARED BEFORE ITO, PORT BLAIR AN D CONFIRMED THAT THEY HAD ACTED AS AGENTS OF THE APPELLANT FOR COLLECTING COPRA FROM T HE FARMERS OF THE ANDAMAN & NICOBAR ISLANDS. FROM THE LEDGER ACCOUNTS OF THESE AGENTS, I FIND THAT PAYMENTS OF RS.13,96,519.95 4 ITA NO.1653/K/2011 M/S. SAHA AGENCY. AY 2007-08 WAS MADE TO TAPAS KUMAR HALDER, THAT OF RS.30,41,29 7.50 TO ABANI KANTA DHAR AND THAT OF RS.17,98,266.50 TO SWAPAN KUMAR NAG. THUS, TOTAL PA YMENTS OF RS.62,36,083/- WERE MADE TO THE AGENTS WHICH IS NOT COVERED BY THE PROVISIONS O F SECTION 40A(3) IN VIEW OF CLAUSE (1) OF RULE 6DD. IN VIEW OF THE ABOVE, TOTAL PAYMENTS OF R S.67,23,618/- (RS.3,50,272/- + RS.1,37,263/- + RS.62,36,083/-) IS NOT COVERED BY T HE PROVISIONS OF SECTION 40A(3); AND CONSEQUENTLY, DISALLOWANCE TO THE EXTENT OF RS 13,4 4,723/- IS DELETED. HOWEVER, SINCE THE REMAINING AGENTS DID NOT APPEAR IN COURSE OF THE RE MAND PROCEEDINGS, THE APPELLANTS CONTENTION IN RESPECT OF SUCH AGENTS REMAINED UNVER IFIED. THE DISALLOWANCE OF RS.4,71,446/- IS CONFIRMED. GROUND NO 3 IS PARTLY ALLOWED. AGGRIEVED, REVENUE IS IN APPEAL BEFORE TRIBUNAL. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CIT(A) AFTER TAKING REMAND REPORT FRO M THE AO THAT THE COMMISSION PAYMENTS WERE MADE TO THE AGENTS NAMELY SHRI TAPAS KUMAR HALDER, SHRI ABANI KANTA DHAR AND SHRI SWAPAN KR. NAG IN CASH QUA THE PURCHASES AND BASED ON HIS REPO RT DELETED THE DISALLOWANCE. THE RELEVANT RECORD OF ITO, PORT BLAIR READS AS UNDER: IN RESPONSE TO THESE LETTERS, SHRI TAPAS KR. HALD ER, VILL-SMITH ISLAND, DIGLIPUR, SHRI ABANI KANTA DHAR, VILL MANGLUTON, PORT BLAIR AND SHRI SWA PAN KR. NAG, VILL NIMBUTALA, RANGAT ONLY APPEAR TILL DATE AND STATED THAT THEY WERE ACT ING AS AGENTS OF THE ASSESSEE WHO WERE ENGAGED TO COLLECT COPRA FROM THE FARMERS OF REMOTE LOCALITIES IN ANDAMAN & NICOBAR ISLANDS AND GOT COMMISSION @ 1% OF THE BILL AMOUNT. THEY A LSO STATED THAT THE TOTAL TRANSACTION WAS MADE BY CASH ONLY. THE GENUINENESS OF IDENTITY WAS ALSO VERIFIED BY THE UNDERSIGNED. ACCORDING TO CIT(A), THE PAYMENTS TO ABOVE THREE PA RTIES ARE NOT COVERED BY THE PROVISIONS OF SECTION 40A(3) OF THE ACT IN VIEW OF EXCEPTION CLAU SE (1) OF RULE 6DD. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) FOR THE REASON THAT NOW REVENUE COU LD NOT CONTROVERT THE FINDINGS RECORDED BY CIT(A). MOREOVER, THE FINDING OF CIT(A) IS ALSO SU PPORTIVE OF THE REMAND REPORT OF THE AO. IN SUCH CIRCUMSTANCES, WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 8. AS REGARDS TO DISALLOWANCE OF RS.2,89,008/- BY I NVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT BY THE AO, WHICH WAS CHALLENGED BEFORE CIT( A) AND CIT(A) RECORDED THE FACTS AFTER TAKING THE REMAND REPORT FROM THE AO AS UNDER: IN HIS REMAND REPORT, THE AO HAS STATED THAT NO PU RCHASE WAS MADE FROM M/S. J M TRADING. THE GOODS WERE PURCHASED FROM ELDER HEALTH CARE LIM ITED, AND, PAYMENT OF RS.14,78,240/- WAS MADE TO THEM BY M/S J M TRADING CO ON BEHALF OF THE APPELLANT. THE FACTS OF THE CASE CLEARLY SUGGEST THAT NO PURCHASE WAS MADE FROM M/S J M TRADING, AND, THAT GOODS WERE ACTUALLY PURCHASED FROM ELDER HEALTH CARE LIMITED; SECONDLY, PAYMENT AGAINST PURCHASES WAS MADE THROUGH CHEQUE TO ELDER HEALTH CARE LIMITE D BY M/S J M TRADING CO ON BEHALF OF THE APPELLANT. SINCE PAYMENT IN RESPECT OF PURCHASE S WAS MADE BY CHEQUE, THE PROVISIONS OF SECTION 40A(3) HAVE NO APPLCATION. I FIND MERIT IN THE ARGUMENT THAT THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE ON RE-PAYMENTS OF FINANCI AL ACCOMMODATION. IN VIEW OF THE ABOVE, THE DISALLOWANCE OF RS.2,89,008/- MADE BY THE AO U/ S 40A(3) IS NOT JUSTIFIED. GROUND NO. 4 IS ALLOWED. 5 ITA NO.1653/K/2011 M/S. SAHA AGENCY. AY 2007-08 ONCE THE FACT IS NOT DISPUTED BY THE REVENUE BEFORE US THAT THE GOODS WERE ACTUALLY PURCHASED FROM ELDER HEALTHCARE LTD. AND PAYMENTS WERE ALSO MADE T HROUGH CHEQUE BY M/S. J M TRADING CO. ON BEHALF OF THE ASSESSEE, NO DISALLOWANCE U/S. 40A(3) OF THE ACT IS PERMISSIBLE. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS CONFIRMED. T HIS ISSUE OF REVENUES APPEAL IS DISMISSED. 9. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 10. ORDER PRONOUNCED IN OPEN COURT ON 14.10.2014. SD/- SD/- , ! , (SHAMIM YAHYA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14TH OCTOBER, 2014 ,- #./ 0 JD.(SR.P.S.) 1 *2 3 2%4- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT ITO, WARD-36(3), KOLKATA 2 *+() / RESPONDENT M/S. SAHA AGENCY, 10, OLD POST OFFICE ST., KOLKATA- 700 001 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 2:; *# / DR, KOLKATA BENCHES, KOLKATA +2 */ TRUE COPY, #