Indore Pvt. Ltd., V. ITO Coy. Ward-16(1),

ITA 1695/DEL/2003

• Counselvise Citation: 169520114 RSA 2003
• Duration Of Justice: 8 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 15-11-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 10-04-2003
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Keywords: Additional evidence; Reasonable cause
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 1695(DEL)/2003 ASSESSMENT YEAR: 1999-00 THE INDURE PVT. LTD., INCOME-TAX OFFICER, INDURE HOUSE, GREATER KAILASH-II, VS. CO Y. WARD 16(1), NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR, C.A. RESPONDENT BY : SMT. S. MOHANTY, DR DATE OF HEARIN G: 23.11.2011 DATE OF PRONOU NCEMENT: 09.12.2011. ORDER PER K.G. BANSAL : AM IN THIS APPEAL, THE ASSESSEE HAS TAKEN UP ONLY ONE GROUND THAT THE REVENUE ERRED ON FACTS AND IN LAW IN DISALLOWING C OMMISSION OF RS. 10.00 LAKH. 2. THE FACTS OF THE CASE ARE THAT THE RETURN W AS FILED ON 28.12.1999 DECLARING TOTAL INCOME OF RS.91,82,740/-. THE RETUR N WAS PROCESSED U/S 143(1)(A) ON 20.10.2000. LATER ON, ASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U/S 143(2) OF THE I NCOME-TAX ACT, 1961 (THE ACT FOR SHORT) ON 22.12.2000, WHICH WAS DULY SE RVED ON THE ASSESSEE- ITA NO.1695(DEL)/2003 2 COMPANY. IN THE COURSE OF ASSESSMENT PROCEEDINGS , IT WAS INTER-ALIA FOUND THAT THE ASSESSEE CLAIMED DEDUCTION OF THE COMM ISSION OF RS. 44.20 LAKH PAID TO FOUR PARTIES, GIANT MARINE CO., SEWOONG PLANT CO. LTD. , SATPUSHP STEELS PVT. LTD. AND SEWA STEELS PVT. LTD. THE TW O PARTIES ARE LOCATED IN SOUTH KOREA WHILE THE LATTER TWO PARTIES ARE SI TUATED IN INDIA. THE ASSESSEE WAS REQUIRED TO FILE THE EVIDENCE REGAR DING TENDERING OF SERVICES BY THESE COMPANIES AND PAYMENT OF COMMISSION TO T HEM. SUCH EVIDENCE WAS FILED IN RESPECT OF SOUTH KOREAN COMPANIES. HO WEVER, IN CASE OF SATPUSHP STEELS PVT. LTD. AND SEWA STEELS PVT. LTD., ONLY GENERAL INFORMATION WAS FURNISHED. ACCORDING TO THE AO, NO EVIDENCE WAS TENDERED TO SHOW THAT COMMISSIONS TO THESE PARTIES WERE PAID FOR THE PURPOSE OF BUSINESS. THEREFORE, THE EXPENDITURE OF RS. 10.00 LAKH DEBITED IN THE BOOKS IN RESPECT OF THESE PARTIES WAS DIS ALLOWED. 3. IN THE COURSE OF PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE SOUGHT TO FILE ADDITIONAL EVIDENCE. IT WAS STATED THAT THE EVIDENCE COULD NOT BE FILED BECAUSE THE AO NEVER ASKED FOR THE EVIDENCE. THE COMMENTS OF THE AO WERE INVITED, WHO OBJECTE D TO THE ADMISSION ON THE GROUND THAT SUFFICIENT OPPORTUNITIES HAD BEE N PROVIDED TO THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS TO LEAD ANY EVIDENCE IN THE ITA NO.1695(DEL)/2003 3 MATTER. THE LD. CIT(APPEALS) CONSIDERED THE F ACTS OF THE CASE AND MENTIONED THAT THE CONTENTION THAT THE EVIDENCE WAS NOT CALLED FOR BY THE AO IS INCORRECT. FURTHER, THE CASE OF THE ASSES SEE IS NOT COVERED UNDER ANY PROVISION UNDER RULE 46A OF INCOME-TAX RULES, 196 2. THEREFORE, IN ABSENCE OF ANY REASONABLE CAUSE AS MENTIONED IN THE AFORESAID RULE, THE ADDITION WAS NOT ADMITTED. COMING TO THE MERITS , THE SUBMISSIONS OF THE ASSESSEE WERE THAT THE DETAILS OF THE EXPENDITU RE WERE CALLED FOR BY THE AO, WHICH WERE FURNISHED ON 12.02.2002. SOME M ORE DETAILS WERE ASKED FOR AND FILED IN THE COURSE OF ASSESSMENT P ROCEEDINGS. THE ASSESSEE HAD FILED COMPLETE DETAILS REGARDING SALES, COMM ISSION PAID, AGENCY AGREEMENT AND THE NECESSITY OF AVAILING OF THE SE RVICES OF THE AGENTS. THE PARTICULARS OF SERVICES RENDERED WERE ALSO FIL ED. THEREFORE, IT WAS CONTENDED THAT THE EXPENDITURE SHOULD BE ALLOWED I N COMPUTING THE TOTAL INCOME. THE LD. CIT(APPEALS) CONSIDERED THE FA CTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. IT IS MENTIONED THAT THE DISALLOWANCE WAS MADE IN ASSESSMENT YEAR 1998-99, WHICH WAS UPHEL D BY THE FIRST APPELLATE AUTHORITY IN ORDER DATED 04.02.2002. THIS ORDER WAS CONFIRMED BY THE C BENCH OF THE TRIBUNAL IN ITA NO. 1232(DEL)/2002 D ATED 19.08.2002. IN THE DECISION OF THE TRIBUNAL, IT WAS INTER-ALIA MENTIONED THAT THIS MAKES US BELIEVE THAT THE ASSESSEE HAS ESTABLISHED ST AFF, WORKFORCE AND ITA NO.1695(DEL)/2003 4 EXPERIENCE AT ITS BACK THAT IS WHY THEY COULD IN THIS COMPETITIVE WORLD EXIST FOR SUCH A LONG TIME, AS HAS BEEN CLAIMED BY THEM THAT THEY WERE WELL ESTABLISHED IN THE FIELD. IT IS FURTHER MEN TIONED THAT THE ASSESSEE DID NOT FILE ANY DOCUMENTARY EVIDENCE REGARDING RENDE RING OF SERVICES BY THE AGENT. SATPUSHP STEELS PVT. LTD. ALLEGEDLY RENDE RED SERVICE IN RESPECT OF M/S RAIN CALCINING LIMITED. NO EVIDENCE EXISTS THAT THIS COMPANY RENDERED ANY SERVICE. EVEN THE ADDITIONAL EVI DENCE, WHICH HAS NOT BEEN ADMITTED, IS IN THE NATURE OF GENERAL CORRESPOND ENCE BETWEEN THE ASSESSEE AND THE AGENT. IN THE CASE OF SEWA STEEL PVT. LT D., IT IS CLAIMED THAT THE COMPANY HAD DONE LIAISON WORK WITH ANDHRA PRADESH STATE ELECTRICITY BOARD FOR SUPPLY OF ASH HANDING PLANT SPARES. T HE BOARD IS A GOVERNMENT BODY AND, THEREFORE, THERE COULD NOT BE ANY LIAISO N WORK FOR PROCURING ORDER FROM IT. THUS, IT WAS HELD THAT THE AO WAS RIG HT IN DISALLOWING THE EXPENDITURE STATED TO BE INCURRED FOR AVAILING OFF SERVICES FROM THESE COMPANIES. 4. AGGRIEVED BY THIS ORDER, THE ASSESSEE IS IN APP EAL BEFORE US. THE LD. COUNSEL TOOK US THROUGH THE ORDERS OF THE LOWER A UTHORITIES AND SUBMITTED THAT THE AO HAS GIVEN A FINDING THAT THERE IS NO EVIDENCE IN SUPPORT OF RENDERING OF SERVICES BY THE AGENTS. THE LD. CI T(APPEALS) DID NOT ADMIT ITA NO.1695(DEL)/2003 5 ADDITIONAL EVIDENCE. HOWEVER, HE RELIED ON THE ORDER OF THE TRIBUNAL FOR EARLIER YEAR FOR UPHOLDING THE DISALLOWANCE. TH E ASSESSEE HAD CLAIMED PAYMENT OF COMMISSION IN ALL THE YEARS STARTING FROM FINANCIAL YEAR 1989- 90 TO FINANCIAL YEAR 2005-06. IN ALL ASSESSMENTS UP TO ASSESSMENT YEAR 1997-98, THE EXPENDITURE OF COMMISSION WAS ALLOWE D IN ASSESSMENTS MADE U/S 143(3) OF THE ACT. THE QUANTUM OF COMMISSION PAID IN THESE YEARS VARIED BETWEEN 0.12% TO 0.60% OF THE TURNOVER. IN ASSESSMENT YEAR 1998-98, THE ASSESSEE HAD CLAIMED THE DEDUCTION O F THE EXPENDITURE AT RS. 31.75 LAKH, WHICH CONSTITUTED 0.60% OF THE TOTAL TURNOVER. THE AO DISALLOWED THE EXPENDITURE. HOWEVER, THE LD. CI T(APPEALS) ALLOWED THE EXPENDITURE OF RS. 30.00 LAKH. IN SECOND APPEAL, THE DISALLOWANCE TO THE EXTENT OF RS. 28.75 LAKH WAS UPHELD. THE APPEAL IS PENDING WITH HONBLE DELHI HIGH COURT. THE EXPENDITURE HAS BEEN ALLO WED IN FULL IN ASSESSMENTS MADE U/S 143(3) FOR ASSESSMENT YEA R 2001-02 TO ASSESSMENT YEAR 2006-07. ON THE BASIS OF THIS DATA, THE CASE OF THE LD. COUNSEL IS THAT THE SERVICES HAD BEEN RENDERED AND, THEREFORE, TH E EXPENDITURE IS DEDUCTIBLE IN COMPUTING THE TOTAL INCOME. FURTHER, COMING TO THE ADDITIONAL EVIDENCE, IT IS SUBMITTED THAT IT CONSISTED OF THE STATEMENT OF TURNOVER AND PROFITABILITY, COMMISSIONS PAID AND TURNOVER IN A SSESSMENT YEARS 1990-91 TO 1999-00, COPIES OF CORRESPONDENCE WITH THE A GENTS AND COPIES OF ITA NO.1695(DEL)/2003 6 ORDERS PROCURED THROUGH THEM. THIS EVIDENCE HAS HOWEVER NOT BEEN ADMITTED BY THE LD. CIT(APPEALS). VARIOUS SUBMIS SIONS WERE MADE BEFORE THE AO IN RESPECT OF PAYMENT OF COMMISSION. IN THE CASE OF SATPUSHP STEELS PVT. LTD., TO WHOM COMMISSION OF RS. 8.85 LAKH WAS PAID, IT WAS SUBMITTED THAT THE AGENT APPROACHED THE ASSESSE E-COMPANY FOR RENDERING HELP IN THE PROCESS OF MAKING TENDERS WITH POWE R UTILITIES. IT OFFERED SERVICES IN THE AREA OF PRE/POST TENDER STAGE, ARRANGING TRAVELS, QUALIFICATION OF TECHNICAL/COMMERCIAL BIDS, SECURI NG JOB ORDERS, ASSISTING IN EXECUTION OF JOB AND ORDERS AND TO UNDERTAKE FOLLO W-UP ACTION ON REGULAR BASIS INCLUDING IN RESPECT OF PAYMENTS. IT WAS I NFORMED THAT RAIN CALCINING LTD. HAD INVITED OFFER FOR ASH HANDING SYSTEM, AN AREA IN WHICH IT CAN RENDER ASSISTANCE. WITH THE HELP OF TH E AGENT, THE ASSESSEE WAS ABLE TO SECURE CONTRACT FROM S & L ENGINEERS LTD., CONSULTANTS TO RAIN CALCINING LTD. FOR ASH HANDING PLANT OF THE VALUE OF RS. 1.77 CRORE. ALTHOUGH IT IS THE CLAIM OF THE ASSESSEE THAT A PHOTOCOPY OF THE LETTER RECEIVED FROM THE AGENT DATED 23.04.1997WAS FIL ED WITH THE AO ALONG WITH AFORESAID SUBMISSIONS DATED 21.03.2002, THE LETTER DOES NOT FORM PART OF THE ANNEXURE TO THIS LETTER, WHICH IS PLAC ED IN THE PAPER BOOK FROM PAGE NOS. 18 TO 33. IN THE CASE OF SEWA STEELS PVT. LTD., IT WAS SUBMITTED THAT THERE WAS A KEEN COMPETITION OF SALE OF SPARES TO STATE ELECTRICITY ITA NO.1695(DEL)/2003 7 BOARDS. THE AGENT APPROACHED THE ASSESSEE FOR RENDERING HELP IN PROCURING ORDER FOR SUPPLY OF SPARES TO ANDHRA P RADESH STATE ELECTRICITY BOARD. THE PAYMENT TO THE AGENT WAS MADE THROUGH BANKERS CHEQUE AND HE IS ASSESSED TO TAX. IN THIS CASE ALSO, WHILE IT IS MENTIONED THAT COPY OF THE AGENT DATED 25.02.1998 IS ENCLOSED, THE SAME DOES NOT FORM PART OF THE AFORESAID SUBMISSIONS AS PLACED IN THE PAPER BOOK . THE CASE OF THE LD. COUNSEL IS THAT THE COMPANIES EXIST AND PAYMENTS T O THEM HAS BEEN MADE BY WAY OF CHEQUES. THEREFORE, EVEN IN ABSENCE OF ADDITIONAL EVIDENCE, THE ASSESSEE IS ENTITLED TO DEDUCTION OF THE EXPENDIT URE. 4.1 IN REPLY, THE LD. DR RELIED ON THE DECISION OF THE LD. CIT(APPEALS), IN WHICH IT HAS BEEN HELD THAT THERE WAS NO NECES SITY OF LIAISON WORK WITH ANDHRA PRADESH STATE ELECTRICITY BOARD AND GENERA L CORRESPONDENCE BETWEEN SATPUSHP STEELS PVT. LTD. AND THE ASSESSE E-COMPANY DOES NOT CONSTITUTE SUFFICIENT EVIDENCE OF RENDERING OF SE RVICES. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE FIND THAT THE ASSESSEE HAS NOT TAK EN UP ANY GROUND IN RESPECT OF REJECTION OF ADDITIONAL EVIDENCE BY THE LD. CIT(APPEALS). FURTHER, NO APPLICATION HAS BEEN MOVED FOR ADMISSION OF THE E VIDENCE FOR THE FIRST TIME ITA NO.1695(DEL)/2003 8 BEFORE THE TRIBUNAL. THE LD. COUNSEL HAS ARGUED T HE CASE DE-HORS THE ADDITIONAL EVIDENCE FILED BEFORE THE LD. CIT(APPE ALS). THEREFORE, IT IS NOT TAKEN INTO ACCOUNT FOR DECIDING THIS APPEAL. 5.1 THE FACTS WHICH EMERGE ARE THAT THE ASSESSEE CLAIMED EXPENDITURE BY WAY OF PAYMENT OF COMMISSION OF RS. 8.85 LAKH TO SATPUSHP STEELS PVT. LTD. AND RS. 1.15 LAKH TO SEWA STEELS PVT. LTD. THE PAYMENT OF COMMISSION, ALBEIT TO OTHER PARTIES WAS NOT AL LOWED TO BE DEDUCTED BY THE TRIBUNAL IN THE PROCEEDINGS FOR ASSESSMENT YEAR 1998-99. THE ASSESSEE HAS FURNISHED GENERAL CORRESPONDENCE BETWEEN ITSE LF AND THE AGENTS AND NO INDEPENDENT EVIDENCE FROM ANDHRA PRADESH STATE ELECTRICITY BOARD OR RAIN CALCINING LTD. HAD BEEN FILED TO SHOW THAT THEY HAD ANY INTERACTION WHATSOEVER WITH THE AGENTS. IN OTHER WORDS, THE RE IS NO INDEPENDENT EVIDENCE, WHICH COULD BE SAID TO BE RELIABLE EVIDE NCE, FOR PROCURING OF ORDERS BY THE AGENTS FROM RAIN CALCINING LTD. AN D ANDHRA PRADESH STATE ELECTRICITY BOARD. OBVIOUSLY, THE AGENT WOULD SUBM IT SOME CORRESPONDENCE TRYING TO SHOW THAT THEY WERE IN A POSITION TO P ROCURE ORDERS ON BEHALF OF THE ASSESSEE AND SUCH ORDER WAS ACTUALLY OBTAINE D BY THEM FOR RECEIPT OF CONSIDERATION. THE LD. COUNSEL HAS NOT BEEN ABLE T O DISPLACE THE FINDING OF THE TRIBUNAL IN THE EARLIER YEAR THAT IN VIEW O F ESTABLISHED STAFF, ITA NO.1695(DEL)/2003 9 WORKFORCE AND EXPERIENCE THE ASSESSEE COULD SUR VIVE IN COMPETITIVE WORLD FOR A LONG TIME AND, THEREFORE, THERE WAS N O NEED TO AVAIL SERVICES OF THE AGENTS. IT MAY BE MENTIONED HERE THAT THE ANDHRA PRADESH STATE ELECTRICITY BOARD IS A GOVERNMENT BODY WHICH DOES NOT REQUIRE THE SERVICES OF AN INTERMEDIARY. IN THE CASE OF THE OTHER AG ENT, NO EVIDENCE HAS BEEN FILED REGARDING ACTUAL RENDERING OF SERVICES OR P ROCURING ORDER WHICH IN ANY CASE IS STATED TO HAVE BEEN RECEIVED FROM S & L ENGINEERS LTD. 5.2 THE LD. SENIOR DR RELIED ON THE DECISION OF E BENCH OF DELHI TRIBUNAL IN THE CASE OF PICKER INDIA LTD. VS. DE PUTY CIT, (2008) 7 DTR (DEL) (TRIB.) 391. ONE OF THE QUESTIONS BEFORE TH E TRIBUNAL WAS REGARDING ALLOWABILITY OF COMMISSION EXPENDITURE, THE PAYMEN T IN RESPECT OF WHICH WAS MADE TO AN AGENT. IT WAS FOUND THAT THE COPY OF THE SALE BILL DID NOT HAVE PARTICULARS ABOUT THE AGENT. THERE WAS NO AGREEMENT BETWEEN THE PARTIES. THERE WAS NO EVIDENCE THAT THE SERVICES WERE RENDERED FOR SPECIFIED SERVICES. HOWEVER, THERE WAS NO DISP UTE REGARDING PAYMENT OF THE COMMISSION. IT WAS MENTIONED THAT IN THE CON TEXT OF PROVISIONS CONTAINED IN SECTION 37(1), THE PURPOSE IS VERY IMPORTANT AS THE EXPENDITURE CAN BE ALLOWED ONLY IF IT HAS BEEN I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ITA NO.1695(DEL)/2003 10 5.3 CONSIDERING THE FACTS AND POSITION OF LAW A S DISCUSSED ABOVE, WE FIND THAT THE ASSESSEE HAS NOT BEEN ABLE TO BRING ON RECORD ANY OBJECTIVE EVIDENCE REGARDING RENDERING OF SERVICES BY THE COMMISSION AGENTS. THEREFORE, THE CASE IS COVERED BY THE DECISION I N THE CASE OF PICKER INDIA LTD. (SUPRA). ACCORDINGLY, IT IS HELD THAT THE LD . CIT(APPEALS) WAS RIGHT IN DISALLOWING THE PAYMENT OF COMMISSION OF RS. 10.00 LAKH. 6. IN THE RESULT, THE APPEAL IS DISMISSED. SD/- SD/- (RAJPAL YADAV) (K.G. BANS AL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- THE INDURE PVT. LTD., G.K.-II, NEW DELHI. ITO, COY. WARD 16(1), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.