Shreeji Chemical Industries, Ahmedabad V. The Asstt. Commissioner of Income Tax, Circle-2, Bharuch

ITA 1729/AHD/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2133 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 27-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R MEENA
• Assessee Lawyers: KETAN H SHAH; AMAN K SHAH
• Keywords: Corroborative evidences; Accommodation entries; TDS
• Section: 133(6)

Judgement Text

SHREEJI CHEMICAL INDUSTRIES V. ACIT- BHARUCH/ I.T.A.NO. 1729/AHD/2016/A.Y.:12-13 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.1729/AHD/2016 / ASSESSMENT YEAR: 2012-13 M/S. SHREEJI CHEMICAL INDUSTRIES, C/O KETAN H SHAH, ADVOCATE 903, SAPPHIRE COMPLEX NAVRANGPURA, AHMEDABAD - 380009. [PAN: AAJFS 6791 D] V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2, BHARUCH-394116. APPELLANT /RESPONDENT ASSESSEE BY SHRI KETAN H SHAH, ADVOCATE& SHRI AMAN K SHAH, ADVOCATE REVENUE BY SHRI S.R. MEENA, SR. D.R. DATE OF HEARING 25.07.2019 DATE OF PRONOUNCEMENT 27.08.2019 /ORDER PER O. P. MEENA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, VADODARA (IN SHORT THE CIT (A)) DATED 03.05.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. 2. GROUND NO.1, 1.1 TO 1.6 ARE AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.34,06,675/- BEING COMMISSION PAYMENTS WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE, WHICH SHOULD HAVE BEEN ALLOWED AS DEDUCTION AS THE SHREEJI CHEMICAL INDUSTRIES V. ACIT- BHARUCH/ I.T.A.NO. 1729/AHD/2016/A.Y.:12-13 2 ASSESSEE HAS MADE THE PAYMENT BY ACCOUNT PAYEE CHEQUES ON WHICH TDS WAS ALSO DEDUCTED. 3. SUCCINCT FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHEMICAL GOODS. THE ASSESSEE HAS FILED RETURN OF INCOME ON 21.08.2012 DECLARING TOTAL INCOME OF RS.20,33,270/-. THE AO NOTICED THAT THE ASSESSEE HAS DEBITED COMMISSION EXPENSES OF RS.34,06,675/- IN THE PROFIT & LOSS ACCOUNT FOR WHICH PARTY-WISE COMPLETE DETAILS OF SALES COMMISSION, PAN, ADDRESSES, SERVICE RENDERED AND DETAILS OF SALES ON WHICH COMMISSION WAS PAID WERE CALLED FOR BY THE AO. HOWEVER, THE ASSESSEE HAS FILED COPY OF LEDGER ACCOUNT, CREDIT NOTE ISSUED BY THE ASSESSEE, BUT DID NOT FURNISH EXACT NATURE OF SERVICE RENDERED. THEREFORE, THE AO ISSUED NOTICE UNDER SECTION 133(6) TO FOUR PARTIES TO WHOM SALES WERE MADE THROUGH COMMISSION AGENTS. HOWEVER, M/S. TATVA CHINTAN PHARMA CHEM PVT. LTD. AND DISHMAN PHARMACEUTICALS & CHEMICALS HAVE REPLIED THAT THERE WAS NO COMMISSION AGENTS INVOLVED IN THE TRANSACTION OF PURCHASES MADE FROM THE ASSESSEE. M/S. JUBILIANT LIFE SCIENCE LTD. CONFIRMED THAT THEY HAVE MADE PURCHASED FROM THE ASSESSEE BUT WERE SILENT ON COMMISSION MATTER. M/S. CAMLIN FINE SCIENCE LTD. DID NOT FURNISH ANY REPLY. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE AO HAS PROVIDED THE REPLIES OF SHREEJI CHEMICAL INDUSTRIES V. ACIT- BHARUCH/ I.T.A.NO. 1729/AHD/2016/A.Y.:12-13 3 ABOVE PARTYS TO THE ASSESSEE AND ASKED TO SHOW-CAUSE AS TO WHY COMMISSION PAYMENTS SHOULD NOT BE DISALLOWED AS THE ASSESSEE HAS FAILED TO FURNISH SUPPORTING EVIDENCE OF THE SERVICES RENDERED. IN RESPONSE TO WHICH, THE ASSESSEE HAS MERELY SUBMITTED COPIES OF INCOME-TAX RETURNS AND COMPUTATION OF INCOME TO JUSTIFY THE CLAIM OF COMMISSION EXPENSES. THE ASSESSEE HAS FAILED TO FURNISH ANY DOCUMENTARY EVIDENCE REGARDING SERVICE RENDERED BY EACH COMMISSION PARTY, CORRESPONDENCE BY THE COMMISSION AGENTS WITH THE ASSESSEE PRIOR TO SALES AND POST SALES. THEREFORE, THE AO HELD THAT MERE PAYMENTS BY ACCOUNT PAYEE CHEQUES AND DEDUCTION OF TDS DOES NOT MAKE COMMISSION PAYMENT GENUINE WHEN NO PROOF OF SERVICES RENDERED IS FILED AND BUYER PARTIES HAVE DENIED OF HAVING ANY INVOLVEMENT OF COMMISSION AGENTS. ACCORDINGLY, THE AMOUNT OF RS.34,06,675/- OF COMMISSION ON SALES WAS DISALLOWED. 4. FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE CIT(A). THE ASSESSEE HAS STATED THAT DETAILS OF ALL THE PARTIES IN WHICH QUANTITY, RATE OF PAYMENT OF COMMISSION WERE FILED BEFORE THE AO. THE ASSESSEE HAS ALSO ISSUED CREDIT NOTES TO ALL COMMISSION AGENTS WITH QUANTITY, RATES AND AMOUNT WAS CLEARLY MENTIONED. THEREFORE, THE AO WAS NOT JUSTIFIED BY PUTTING REMARKS THAT THE ASSESSEE HAS NOT FURNISHED EXACT NATURE OF SERVICES RENDERED. THE ASSESSEE SHREEJI CHEMICAL INDUSTRIES V. ACIT- BHARUCH/ I.T.A.NO. 1729/AHD/2016/A.Y.:12-13 4 HAS ALSO CITED CIT V. WALCHAND & CO. PVT. LTD. [1967] 65 ITR 381 (SC) IN HIS SUPPORT. HOWEVER, LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT ESTABLISHED BY WAY OF FILING OF DOCUMENTARY EVIDENCE AND RELEVANT EXPLANATION TO PROVE THAT THE COMMISSION AGENTS HAD ACTUALLY RENDERED THE SERVICES TO IT FOR WHICH COMMISSION OF RS.34,06,675/- WAS CLAIMED TO HAVE BEEN PAID. IT WAS FURTHER OBSERVED THAT THE APPELLANT WAS REQUIRED TO EXPLAIN AND IS REQUIRED TO FILE THE EVIDENCES TO SHOW THAT COMMISSION AGENTS HAVE ACTUALLY RENDERED THE SERVICES AND HAVE PLAYED THE ROLE FOR MAKING SALES OF THE APPELLANT TO VARIOUS PARTIES. THIS FACT CANNOT BE DENIED THAT SOME OF THE PARTIES TO WHOM SALES MADE, IN THEIR REPLY TO NOTICE UNDER SECTION 133(6) SUBMITTED TO THE AO THAT THEY HAD PURCHASED THE MATERIAL DIRECTLY FROM THE APPELLANT AND THERE WAS NO COMMISSION AGENTS INVOLVED IN THIS TRANSACTION. MANY OF THE PARTIES HAVE NOT RESPONDED TO THE NOTICE UNDER SECTION 133(6). THE APPELLANT DID NOT REBUT THIS SPECIFIC FINDING OF THE AO. IN VIEW OF THIS MATTER, THE DISALLOWANCE OF COMMISSION EXPENSES WERE CONFIRMED. 5. FEELING AGGRIEVED AND DISSATISFIED, THE ASSESSEE HAS COME UP BEFORE THIS TRIBUNAL BY WAY OF THIS APPEAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FILED COPY OF ITR, PAN, ADDRESS OF PAYEE, TDS DETAILS, COPIES OF LEDGER ACCOUNTS, BANK STATEMENT OF MAJORITY SHREEJI CHEMICAL INDUSTRIES V. ACIT- BHARUCH/ I.T.A.NO. 1729/AHD/2016/A.Y.:12-13 5 PARTIES AND REFUND CLAIM BY THEM IT AMOUNTS TO VERIFICATION MADE BY THEM. FURTHER, NOTICE UNDER SECTION 133(6) WERE ISSUED DIRECTLY TO THE PAYEE PARTIES ALTHOUGH RANDOM INQUIRY MADE WITH THE SALES PARTY AND SO CALLED INQUIRY HAS NOT BEEN CONFRONTED TO PAYEE PARTIES. NO EVIDENCE THAT THERE IS CASH DEPOSITS OR NO INQUIRY MADE TO PROVE THAT TRANSACTION IS BOGUS/ SHAM AND ACCOMMODATION ENTRIES TO REDUCE TAX LIABILITY. SINCE ALL THESE EVIDENCES WERE FILED WHICH SUPPORTS THE CONFIRMATION. LEARNED COUNSEL ALSO CITED SOME CASE LAWS LIKE DCIT V. ROHINI BUILDERS [2002] 256 ITR 360 (GUJ.)/ [2003] 127 TAXMAN 523 (GUJ) AND CIT V. HINDUSTAN DEVELOPMENT CORPN LTD. [1998] 101 TAXMAN 146 (CAL) AND ALUMINUM CORPORATION OF INDIA LIMITED V CIT [1972] 86 ITR 11 (SC). 6. ON THE OTHER HAND, THE LEARNED D.R. SUPPORTING THE ORDERS OF LOWER AUTHORITIES SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVIDE ANY DOCUMENTARY EVIDENCE OF SERVICES RENDERED BY THE SO-CALLED COMMISSION AGENTS. FURTHER, THE PARTIES TO WHOM SALES WERE CLAIMED TO HAVE MADE HAVE DENIED IN RESPONSE TO NOTICE UNDER SECTION 133(6) ISSUED TO THEM THAT THERE WAS ANY COMMISSION AGENTS IN PURCHASE OF GOODS BY THEM FROM THE ASSESSEE. SHREEJI CHEMICAL INDUSTRIES V. ACIT- BHARUCH/ I.T.A.NO. 1729/AHD/2016/A.Y.:12-13 6 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE OBSERVE THAT THE ASSESSEE HAS FILED COPY OF ITR, PAN, ADDRESSES, LEDGER ACCOUNT OF PARTIES, BUT THE ASSESSEE HAS NOT FILED ANY CONFIRMATION LETTERS FROM THE COMMISSION AGENTS. THE ASSESSEE HAS FAILED TO EXPLAIN THE NATURE OF SPECIFIC SERVICES RENDERED BY THE SO-CALLED COMMISSION AGENTS FOR EFFECTING SALES OF THE ASSESSEE TO BUYERS. FURTHER, THE BUYER PARTIES HAVE SPECIFICALLY DENIED IN RESPONSE TO NOTICE UNDER SECTION 133(6) OF THE ACT AND CLEARLY STATED THAT THEY HAVE MADE PURCHASES FROM THE ASSESSEE DIRECTLY AND THERE WAS NO COMMISSION AGENTS INVOLVED. WE FIND THAT THE ASSESSEE HAS FAILED TO FURNISH ANY DOCUMENTARY EVIDENCE REGARDING SERVICE RENDERED BY EACH COMMISSION PARTY, CORRESPONDENCE BY THE COMMISSION AGENTS WITH THE ASSESSEE PRIOR TO SALES AND POST SALES. THEREFORE, MERE PAYMENTS BY ACCOUNT PAYEE CHEQUES AND DEDUCTION OF TDS DOES NOT MAKE COMMISSION PAYMENT AS GENUINE WHEN NO PROOF OF SERVICES RENDERED IS FILED AND BUYER PARTIES HAVE DENIED OF HAVING ANY INVOLVEMENT OF COMMISSION AGENTS. THE RELIANCE IN THE CASE OF ALUMINIUM CORPORATION OF INDIA LIMITED V. CIT (SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THERE WAS AGREEMENT WITH SELLING AGENTS WITH THE ASSESSEE FOR SELLING OF GOODS OF THE ASSESSEE, HOWEVER, IN THE CASE OF ASSESSEE, THERE IS NO SUCH AGREEMENT HAS BEEN SHREEJI CHEMICAL INDUSTRIES V. ACIT- BHARUCH/ I.T.A.NO. 1729/AHD/2016/A.Y.:12-13 7 FILED AND EVEN CONFIRMATION OF COMMISSION AGENTS WAS NOT FILED. THE CASE LAWS OF DCIT V. ROHINI BUILDERS (SUPRA) WAS ON CASH CREDIT WHERE IDENTITY OF CASH CREDITORS WERE PROVED BY FILING SOME DOCUMENTARY EVIDENCE. HOWEVER, IN THE PRESENT CASE, THE BASIC EVIDENCE OF SERVICES RENDERED WAS NOT FURNISHED BEFORE THE AO. IN THE CASE OF CIT V. HINDUSTAN DEVELOPMENT CORPN LTD., (SUPRA) WHERE THE GENUINENESS OF AGREEMENT FOR PAYMENT OF COMMISSION AND SERVICES RENDERED WERE NOT IN DISPUTE BUT MERELY BECAUSE SOME PARTIES HAVE NOT GIVEN SATISFACTORY REPLY, THEREFORE, COMMISSION PAYMENT WAS HELD ALLOWABLE. HOWEVER, IN THE CASE OF NO SUCH AGREEMENT OF COMMISSION, PAYMENT WAS BROUGHT ON RECORD AND NO DOCUMENTARY EVIDENCE FOR SERVICES RENDERED WAS FILED. THEREFORE, THE ABOVE CASE LAW ARE NOT APPLICABLE TO THE FACTS OF THE CASE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A), ACCORDINGLY, SAME IS UPHELD. THIS GROUND OF APPEAL IS THEREFORE, DISMISSED. 8. GROUND NO. 2: RELATES TO CONFIRMING THE DISALLOWANCE OF RS.4,12,155/- OUT OF REPAIRS AND MAINTENANCE EXPENDITURE OF RS.20,60,773/- ON AD-HOC BASIS. 9. THE AO NOTED THAT THE REPAIRS AND MAINTENANCE EXPENSES ARE NOT FULLY SUPPORTED BY BILLS AND VOUCHERS AND IN MOST OF THE CASES PAYMENTS WERE INCURRED IN CASH. IN VIEW SHREEJI CHEMICAL INDUSTRIES V. ACIT- BHARUCH/ I.T.A.NO. 1729/AHD/2016/A.Y.:12-13 8 OF THIS, THE AO DISALLOWED 20% OF EXPENSES, WHICH WORKED OUT TO RS.4,12,155/-. 10. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). IT WAS SUBMITTED THAT THE DETAILS HAS BEEN MENTIONED IN LEDGER ACCOUNTS, COPY OF WHICH WAS FILED BEFORE THE CIT (A). HOWEVER, LD. CIT (A) VIEWED THAT SUBMISSION OF LEDGER ACCOUNT IS NOT SUFFICIENT TO SUPPORT THE STAND OF THE ASSESSEE. HENCE, DISALLOWANCE MADE BY THE AO WERE CONFIRMED. 11. BEING, DISSATISFIED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. LEARNED COUNSEL SUBMITS THAT THE ASSESSEE HAS FULLY ACCOUNTED REPAIRS AND MAINTENANCE EXPENSES, WHICH HAVE BEEN DULY REFLECTED IN LEDGER ACCOUNT MAINTAINED BY THE ASSESSEE COPIES OF WHICH WERE FILED BEFORE THE AO AS WELL AS BEFORE CIT (A). HOWEVER, THE AO MADE AD- HOC DISALLOWANCE @20% OF TOTAL EXPENSES WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS. THEREFORE, CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE SAME AS SOME EXPENSES WERE INCURRED IN CASH. 12. PER CONTRA , THE LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. SHREEJI CHEMICAL INDUSTRIES V. ACIT- BHARUCH/ I.T.A.NO. 1729/AHD/2016/A.Y.:12-13 9 13. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT REPAIRS AND MAINTENANCE EXPENSES WERE DULY ACCOUNTED IN THE LEDGER ACCOUNT IN WHICH DETAILS WERE MENTIONED. THE AO BY MAKING GENERAL REMARKS MADE AD-HOC DISALLOWANCE @20% WITHOUT MENTIONING SPECIFIC DEFECTS IN MAINTENANCE OF VOUCHERS/ BILLS. ON CAREFUL CONSIDERED OF FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE AO WAS NOT JUSTIFIED IN MAKING DISALLOWANCE ON AD-HOC BASIS, WITHOUT POINTING SPECIFIC DEFECTS AND ONLY MADE GENERAL REMARKS WITHOUT REJECTING BOOKS OF ACCOUNTS. THEREFORE, THE SAME IS DELETED. THIS GROUND OF APPEAL IS THEREFORE, ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 15. THE ORDER IS PRONOUNCED BY LISTING THE CASE ON THE NOTICE BOARD UNDER RULE 34(4) OF INCOME TAX APPELLATE TRIBUNAL RULES 1963. SD/- SD/- (BHAVNESH SAINI) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED: AUGUST- 27 TH , 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT