Smt. Anita Aggarwal, Kalka V. ITO, Panchkula

ITA 175/CHANDI/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5355 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 40A(3); 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,A BENCH, CHA NDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS.SUSHMA CHOWLA , JM ITA NO.1015/CHD/2008 AND ITA NO.175/CHD/2009 AY: 2004-05 & 2005-06 SMT.ANITA AGGARWAL, V. I.T.O., WARD 4 L/H OF SHRI DAVIINDER KUMAR AGGARWAL, PANCHKULA PROP.JAI DURGA ENTERPRISES, RAM NAGAR, KALKA PAN: AGNPA-3725F APPELLANT BY: SHRI AJAY JAIN, FCA RESPONDENT BY: SMT. SARITA KUMARI, DR ORDER D K SRIVASTAVA : WHILE THE APPEAL BEARING ITA NO. 1015/CHD/2008 FOR ASSESSMENT YEAR 2004-05 FILED BY THE ASSESSEE I S DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 09.09.2008, THE OTHER APPEAL BEARING ITA NO.175/CHD/2009 FOR ASSESSMENT YEAR 2005-06 FILED B Y THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 09.09.2008. IN BOTH THE APPEALS, THE ASSESSEE HAS PRESSED ONLY ONE GROUND O F APPEAL WHICH IS COMMON IN BOTH THE APPEALS. THE COMMON GROUND OF AP PEAL PRESSED BY THE ASSESSEE AT THE TIME OF HEARING READS AS UNDER: 1. THAT THE LD. A.O. HAS GROSSLY ERRED IN NOT BRIN GING ALL THE LEGAL HEIRS OF THE DECEASED ON RECORD AND HENCE THE VERY ISSUANCE OF NOTICE TO ONLY ONE LEGAL HEIR IS BAD IN LAW AND ACCORDINGLY ORDER PASSED U/S 143(3) IS ALSO BAD IN LAW AND LIABLE TO BE QUASHED. 2. SINCE THE ASSESSEE HAS PRESSED AND ADDRESSED ON THE AFORESAID GROUND, ALL GROUNDS OF APPEAL ARE DISMISSED. 3. THE APPELLANT IS LEGAL HEIR OF LATE SHRI DAVINDE R KUMAR AGGARWAL WHO WAS ENGAGED IN THE BUSINESS OF SUPPLY OF PACKING CA SES TO THE APPLE GROWERS IN HIMACHAL PRADESH ON COMMISSION BASIS, BE SIDES CARRYING OUT TRADING ACTIVITIES INVOLVING DIRECT SALES TO THE AP PLE GROWERS IN THE STATE OF HIMACHAL PRADESH. THE ASSESSEE WAS THUS A COMMISSIO N AGENT AS WELL AS TRADER. SURVEY OPERATIONS U/S 133A OF THE INCOME-T AX ACT WERE CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 20.10. 2004 DURING WHICH SOME DOCUMENTS WERE IMPOUNDED WHICH WERE USED BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE FILED HIS RETU RN OF INCOME ON 07.03.2005 FOR ASSESSMENT YEAR 2004-05 RETURNING TO TAL INCOME AT ITA 1015/CHD/2008 & 175/CHD/2009 ANITA AGGARWAL, KALKA RS.1,16,966/- AS AGAINST WHICH ASSESSMENT WAS COMPL ETED BY THE AO AT RS.36,37,545/- AFTER MAKING DISALLOWANCE OF RS.33,4 7,334/- U/S 40A(3) OF THE INCOME-TAX ACT. RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 WAS FILED BY THE ASSESSEE ON 31.10.2005 RETURNING TOTAL INCOME AT RS.3,85,600/- AS AGAINST WHICH ASSESSMENT WAS COMPLETED ASSESSING THE TOTAL INCOME AT RS.57,55,360/- AFTER MAKING DISALLOWANCE OF RS.51,6 0,420/- U/S 40A(3) OF THE INCOME-TAX ACT. 4. THE IMPUGNED DISALLOWANCE HAS BEEN MADE BY THE A O U/S 40A(3) IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004-05 WI TH THE FOLLOWING OBSERVATIONS: AS REGARDS THE 1 ST QUERY REGARDING TOTAL CASH SALES AMOUNTING TO RS.1,68,11,068/- DEPICTING IN LEDGER NO.21 SEIZED D URING THE COURSE OF SURVEY, THE COUNSEL OF THE ASSESSEE STATE D IN HIS REPLY DATED 10.08.2006 SHOWING COMMISSION FROM APPLE GROW ERS @ 1.5% IN RS.1,53,22,751/- AS SHOWN IN THE RETURN WIT HOUT ANY EVIDENCE PRODUCED WHEREAS THE LEDGER NO.21 IS IN TH E CUSTODY OF THE DEPARTMENT SHOWING TRADE BUSINESS OF RS.1,67,36 ,668/- INSTEAD OF 1,68,11,068/- AND NOT ON COMMISSION BASI S. THE ASSESSEE WAS ASKED TO SUBMIT THE INFORMATION REGARD ING TOTAL SALES, PURCHASES MADE THROUGH CHEQUES, PURCHASES TH ROUGH CASH AND PURCHASES MADE FROM AGRICULTURISTS. THE COUNSE L OF THE ASSESSEE STATED THAT MATERIAL WAS PURCHASED FOR RS. 32,79,969/-, THE DETAILS ARE GIVEN AS UNDER : PAYMENTS MADE BY A/C PAYEE CHEQUES 13,43,942/- PAYMENTS IN CASH IN SUMS NOT EXCEEDING 17,96,000/ - RS.20,000/- TOTAL 31,40,542/- THE COUNSEL FURTHER STATED THAT THE PURCHASES WERE NOT MADE FROM AGRICULTURISTS BUT THE SALES WERE MADE TO THE AGRICULTURISTS AFTER PROCURING ORDERS FROM THEM AND IN CONSIDERATI ON, THE ASSESSEE RECEIVED COMMISSION FROM AGRICULTURISTS. SINCE THE ASSESSEE WAS DERIVING INCOME MAINLY FROM THE APPLE GROWERS FOR SUPPLY OF PACKING MATERIAL TO THEM IN REMOTE AREAS, AND THE SAID BUSINESS WAS CONDUCTED ON COMMISSION BASIS FOR WHIC H AROUND 90% OF THE MATERIAL WAS SUPPLIED ON COMMISSION BASIS WHICH WAS AT A FIXED PERCENTAGE I.E. 1.5% OF EFFECTIVE C OST OF MATERIAL. THIS WAS STATED WITHOUT ANY BASE AND NOT PRODUCED A NY EVIDENCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AGAIN ASSESSEE WAS ASKED TO BIFURCATE THE FIGURE OF RS.1,68,11,068/- A ND EXPLAIN ITA 1015/CHD/2008 & 175/CHD/2009 ANITA AGGARWAL, KALKA UNDER WHAT CIRCUMSTANCES THE PURCHASES WERE MADE IN CASH. THE COUNSEL STATED VIDE HIS REPLY DATED 18.12.2006 AS U NDER : DESCRIPTION AMOUNT INCOME 1. DIRECT SALES 33,03,520/- (-)1,36,376/- 2. SUPPLY OF FOR SALE MATERIAL 1,53,22,751/- 2 ,29,842/- TOTAL 1,86,26,271/- 93,466/- THE REST REPLY REPEATED THE SAME AS EARLIER. THIS WAS STATED BY THE COUNSEL WITHOUT ANY BASE AND NO EVIDENCE WAS PR ODUCED DURING ASSESSMENT PROCEEDINGS, WHEREAS LEDGER NO.21 IS IN THE CUSTODY OF THE DEPARTMENT WHICH SHOWS THAT THE ASSE SSEE HAD PURCHASED MATERIAL WORTH RS.1,67,36,668/- IN CASH W HICH ATTRACTS THE PROVISIONS OF SECTION 40A(3). THE DETAIL IS GIV EN AS UNDER : TOTAL PURCHASES IN CASH 1,67,36,668/- 20% OF TOTAL AS PER PROVISIONS U/S 40A(3) 33,47, 334/- IT IS WORTH MENTIONED THAT THE ABOVE FIGURES HAVE B EEN TAKEN WHICH ARE MADE IN CASH EXCEEDING 20,000/- AS PAGEWI SE DETAILS SHOWN IN QUERY NO.1. THE COUNSEL STATED THE FIGURE BESIDES THESE FIGURES WHEREAS THE COUNSEL IS SILENT ABOUT THOSE F IGURES MENTIONED IN THE QUERY LETTER DATED 2.12.05. MOREOV ER THE ASSESSEE DID BUSINESS OUTSIDE THIS LEDGER AS THE CO UNSEL STATED THAT THE PAYMENTS WERE MADE BY CHEQUES TO ABHIMANYU CONTAINERS WHEREAS LEDGER DOES NOT SHOW THE NAME. FURTHER THE COUNSEL VIDE HIS LETTER DATED 26.12.2006 SUBMITTED THE PHOTOCOPIES OF LETTERS OF 4 PARTIES WITHOUT ANY BIL LS AND DETAILS AT THE LAST MOMENT. THE LIST OF 4 PARTIES IS GIVEN AS UNDER : 1. M/S SETH KAPOORI MAL PACKAGING & ALLIED P.LTD., RUR AL FOCAL POINT, BHINDRON. 2. SANGRUR PULP PACKAGING PVT.LTD., UPPLI ROAD, SANGRU R 3. N.S.PULP & PACKAGING INDUSTRIES, 5 FOCAL POINT, SAN GRUR 4. N.P.INDUSTRIES, UBHAWAL ROAD, SANGRUR THE COUNSEL SUBMITTED THESE COPIES ONLY ON 26.12.20 06 WITHOUT ANY EVIDENCE OR PRODUCED ANY BILL. MOREOVER, TH ESE LETTERS AREGIVEN BY THE PARTIES IN A ROUTINE WHERE NO FIGUR E OR DATE MENTIONED. AT THIS MOMENT, THE PARTIES COULD NOT BE CALLED FOR DUE TO PAUCITY OF TIME. IN THE ABSENCE OF ALL THES E, THE MATTER CANNOT BE DECIDED IN FAVOUR OF THE ASSESSEE. RS.33, 47,334/- IS ADDED N THE TOTAL INCOME OF THE ASSESSEE. ITA 1015/CHD/2008 & 175/CHD/2009 ANITA AGGARWAL, KALKA 5. DISALLOWANCE OF RS.51,60,420/- IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2005-06 WAS ALSO MADE FOLLOWING THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004-05. 6. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE IMPU GNED DISALLOWANCE MADE BY THE AO IN BOTH THE ASSESSMENT YEARS. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS EN GAGED IN THE BUSINESS OF SUPPLY OF PACKING CASES TO THE APPLE GROWERS IN HIMACHAL PRADESH ON COMMISSION BASIS IN THE NAME AND STYLE OF M/S JAI D URGA ENTERPRISES. ACCORDING TO HIM, THE ASSESSEE WAS ALSO ENGAGED IN CARRYING OUT TRADING ACTIVITIES IN PURSUANCE OF WHICH HE MADE DIRECT SAL ES TO THE APPLE GROWERS. HE SUBMITTED THAT THE ASSESSEE USED TO GET ORDERS F ROM APPLE GROWERS FOR SUPPLY OF PACKING CASES/PACKING MATERIALS AND PASS ON THOSE ORDERS TO VARIOUS MANUFACTURERS/SUPPLIERS OF PACKING CASE MAT ERIALS ALONGWITH A COMMUNICATION OVER TELEPHONE REGARDING THE NAME AND ADDRESSES OF THE PERSONS TO WHOM MATERIALS WERE TO BE INVOICED AND D ESTINATION OF THE GOODS. HE SUBMITTED THAT THOSE MANUFACTURERS/SUPPL IERS USED TO SUPPLY THE MATERIALS DIRECTLY TO THE CUSTOMERS, I.E., APPLE GR OWERS THROUGH-OUT THE UPPER SHIMLA AREA. IT WAS CLAIMED THAT THE ASSESSEE WAS GETTING ONLY COMMISSION @ 1.5% FROM THE APPLE GROWERS ON THE INV OICE VALUE. THE CASE OF THE ASSESSEE WAS THAT HE WAS MERELY ACTING AS CO LLECTING AGENT FOR THE SUPPLIERS OF GOODS AND COLLECTED PAYMENTS FROM THOS E CUSTOMERS AND PASS ON THE SAME TO THE SUPPLIERS ON BEHALF OF HIS CONST ITUENTS. HE FURTHER SUBMITTED THAT THE RETURN OF INCOME WAS FILED BY TH E ASSESSEE DECLARING INCOME @ 1.5% (RS.2,29,842/-) OF THE INVOICE VALUE OF MATERIAL (RS.1,53,22,751/-) SUPPLIED TO THE APPLE GROWERS, A S COMMISSION-BUSINESS INCOME. HE SUBMITTED THAT THE ASSESSEE WAS ALSO ENG AGED IN THE SUPPLY OF PACKING MATERIALS DIRECTLY TO THE CUSTOMERS AND ACC ORDINGLY REFLECTED SALES OF SUCH MATERIALS AT RS.33,03,520/- IN HI ACCOUNTS, A COPY OF WHICH WAS FILED TOGETHER WITH THE RETURN OF INCOME. IN SUPPOR T OF HIS CLAIM THAT THE ASSESSEE HAD EFFECTED SALES ONLY TO THE EXTENT OF S ALES OF PACKING MATERIAL AMOUNTING TO RS.33,03,520/-, THE LD. AUTHORIZED REP RESENTATIVE FOR THE ITA 1015/CHD/2008 & 175/CHD/2009 ANITA AGGARWAL, KALKA ASSESSEE FILED A COPY OF SALES TAX ORDER DATED 26.0 4.2005 IN WHICH THE SALE OF PACKING MATERIAL DECLARED BY THE ASSESSEE AT RS. 33,03,520/- WAS ACCEPTED. BASED ON THE AFORESAID FACTS, THE LD. AUT HORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE SALES OF PACKIN G MATERIAL WAS RESTRICTED TO RS.33,03,520/- AND THAT ALL OTHER RECEIPTS WERE ON ACCOUNT OF COMMISSION AND NOT ON ACCOUNT OF SALES OF MATERIALS. HE FURTH ER CONTENDED THAT THE AO HIMSELF HAS ACCEPTED THIS FACT IN THE ASSESSMENT OR DER AND ACCORDINGLY ACCEPTED THE COMMISSION INCOME DISCLOSED BY THE ASS ESSEE. 8. AS REGARDS THE DISALLOWANCE MADE BY THE AO U/S 4 0A(3), THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTE D THAT THE IMPUGNED DISALLOWANCE WAS COMPLETELY UN-TENABLE. ACCORDING T O HIM, THE ASSESSEE DID NOT PURCHASE ANY MATERIAL FROM THE SUPPLIERS IN HIS COMMISSION AGENCY BUSINESS AND THEREFORE THE IMPUGNED DISALLOWANCE ON THE ASSUMPTION THAT PURCHASES IN COMMISSION AGENCY BUSINESS WERE MADE I N CASH SHOULD BE DELETED. 7. IN REPLY, THE LD. DR SUPPORTED THE ORDER PASSED BY THE AO AND THE CIT(A). 8. WE HAVE HEARD BOTH PARTIES AND CAREFULLY CONSIDE RED THEIR SUBMISSIONS. THE AO HIMSELF HAS ASSESSED THE COMMI SSION INCOME DECLARED BY THE ASSESSEE. IN COMMISSION AGENCY BUSINESS, TH E COMMISSION AGENT DOES NOT MAKE EITHER PURCHASE OR SALES DIRECTLY. HE SIMPLY COLLECTS COMMISSION ON TRANSACTIONS. THE PROVISIONS OF SECT ION 40A(3) ARE THEREFORE NOT APPLICABLE TO COMMISSION AGENTS. SINCE THE AO H IMSELF HAS ACCEPTED COMMISSION AGENCY BUSINESS, THE IMPUGNED DISALLOWAN CE U/S 40A(3) CANNOT BE SUSTAINED. THE DISALLOWANCE MADE BY THE AO U/S 4 0A(3) IN BOTH THE ASSESSMENT YEARS IS THEREFORE DELETED AN CONSEQUENT LY BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON 29 TH JUNE 2011. SD/- SD/- (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH JUNE 2011. POONAM ITA 1015/CHD/2008 & 175/CHD/2009 ANITA AGGARWAL, KALKA COPY TO: 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), L 4. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH ASSISTANT REGISTRAR, ITAT, CHANDIGARH