Siddhi Gold India Private Limited, CHENNAI V. Addl. CIT, Coimbatore

ITA 1778/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8921 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 03-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R ILAVARASI
• Assessee Lawyers: N MUTHUKUMARAN IRS RETD
• Keywords: Business expenditure; Condonation of delay; Revised return

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1 778 /MDS/2015 / ASSESSMENT YEAR :20 11 - 1 2 M/S. SIDDHI GOLD INDIA PVT. LTD., 617, JANANI COMPLEX, RAJA STREET, C OIMBATORE 6 41 001 . [PAN: A A L C S3941G ] VS. THE A DDITIONAL COMMISSIONER OF INCOME TAX , RANGE - I , CORPORATE RANGE, COIMBATORE. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI N. MUTHUKUMARAN, IRS (RETD.) / RESPONDENT BY : S MT. R. ILAVARASI, J CIT / DATE OF HEA RING : 1 2 . 0 4 .201 6 / DATE OF P RONOUNCEMENT : 06 . 0 7 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I , C OIMBATORE , DATED 1 3 . 0 1 .20 1 5 RELEVANT TO THE ASSESSMENT YEAR 20 11 - 1 2 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO CONFIRMATION OF DISALLOWANCE OF COMMISSION PAYMENT MADE BY THE ASSESSEE TO ITS AGENTS. 2. THE APPEAL OF THE ASSESSEE IS FOUND TO HAVE BEEN FILED LATE BY 132 DAYS IN FILING THE APPEAL. THE ASSESSEE FILED PETITION FOR CONDONATION OF DELAY I.T. A. NO . 1 778 /M/ 15 2 IN FILING THE APPEAL IN SUPPORT OF AFFIDAVIT ALONG WITH MEDICAL CERTIFICATE. BY REFERRING TO THE MEDICAL CERTIFICATE AND A FFIDAVIT, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY WAS UNDER MEDICAL TREATMENT FOR PARALYSIS DURING JANUARY, 2015 AND AFTER GETTING RECOVERED FROM THE ILLNESS, THE APPEAL WAS FILED ON 31.07.2015. THE REFORE, HE PLEADED THAT THERE IS NO WILLFUL DELAY IN FILING THE APPEAL AND PRAYED FOR CONDONATION OF DELAY IN FILING THE APPEAL. WE HAVE PERUSED THE RECORDS AND FOUND THAT THERE IS SUFFICIENT CAUSE FOR DELAY IN FILING THE APPEAL. THE LD. DR DID NOT OBJECT TO THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE. ACCORDINGLY, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING AND ADJUDICATION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF TRADING IN BULLION AND MANUFACTURING AND SELLING OF JEWELLERY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011 - 12 ON 24.12.2011 DECLARING TOTAL INCOME OF .1,69,700/ - AND LATER THE ASSESSEE FILED REVISED RETURN ON 31.03.2012 DECLARING TOTAL OF .4,84,042/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS ISSUED ON 16.05.2013 . IN RESPONSE THERETO, THE ASSESSEE FILED ALL DETAILS. THE CASE OF THE ASSESSEE IS THAT T HE ASSESSEE COMPANY HAS ALSO ENTERED INTO A CONTRACT WITH M/S. R.S. GOLD FOR MANAGING I.T. A. NO . 1 778 /M/ 15 3 THE DAY TO DAY TRADING ACTIVITIES IN THE COMMODITY EXCHANGE FOR VARIOUS CLIENTS O N ACCOUNT OF M/S. R.S. GOLD WHO IS THE MEMBER OF COMMODITY EXCHANGE. THE ASSESSEE EARNED CONTRACTUAL RECEIPTS FOR THE SAME FROM M/S. R.S. GOLD. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS PAID COMMISSION AMOUNTING TO .26,06,098/ - BOTH FOR INTRODUCING NEW CLIENTS TO COMMODITY EXCHANGE BUSINESS AND ALSO TOWARDS SALE OF BULLION AND JEWELLERY BUSINESS TO VARIOUS PARTIES. THIS AMOUNT WAS CLAIMED BY THE ASSESSEE AS EXPENDITURE IN THE NORMAL COURSE OF ITS BUSINESS AND QUALIF IED AS BUSINESS EXPENDITURE. THE ASSESSEE COMPANY HAS PAID COMMISSION TO THE PARTIES WHO HAD INTRODUCED NEW CLIENTS TO THE COMMODITY EXCHANGE. ON ACCOUNT OF THIS, THE COMPANY HAS EARNED HIGHER REVENUE OF CONTRACTUAL RECEIPTS AS IT WAS BASED ON THE VOLUME O F BUSINESS DONE BY THE CLIENTS IN THE COMMODITY EXCHANGE. THE COMMISSION WAS ALSO PAID TO PARTIES FOR INCREASING THE SALES TURNOVER IN BULLION AND JEWELLERY. THE ASSESSEE ALSO SUBMITS THAT THEY HAVE PAID COMMISSION TO PARTIES FOR BOTH ITS OWN SALE OF BULLI ON AND JEWELLERY OF WHICH IT HAD A TURNOVER OF .155.43 CRORES AND ALSO TOWARDS ITS MCX BUSINESS FOR WHICH THE ASSESSEE HAS EARNED . 31,49,065/ - AS INCOME. IT WAS THE SUBMISSION OF THE ASSESSEE THAT ALL THE PAYMENTS WERE MADE TO THE PARTIES BY CHEQUES AND TDS HAS ALSO BEEN DEDUCTED AND PAID. THEREFORE, IT WAS SUBMITTED THAT THE ENTIRE COMMISSION PAID WAS TOWARDS BUSINESS AND IT IS ALLOWABLE BUSINESS EXPENDITURE. HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND OBSERVED THA T I.T. A. NO . 1 778 /M/ 15 4 THE COMMISSION WAS MADE FOR THE PURPOSE OF THE BUSINESS OF SISTER CONCERN OF THE ASSESSEE AND FACTUALLY DID NOT RELATE TO THE ASSESSEE S BUSINESS. THEREFORE, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE EXPENDITURE OF .26,06,098/ - WAS NOT WHOLLY AND EXCLUSIVELY EXPENDED FOR THE PURPOSE OF ASSESSEE S BUSINESS. ACCORDINGLY, HE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE, THE LD. CIT(A) PARTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERVED AS UNDER: 7. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE ORDER OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IN HIS ORD ER HAS HELD THAT THE PAYMENT OF COMMISSION WAS MADE FOR THE PURPOSE OF BUSINESS OF A SISTER CONCERN OF THE ASSESSEE AND FACTUALLY DID NOT RELATE TO THE ASSESSEE'S BUSINESS AND THEREFORE THE EXPENDITURE OF RS.26,06,098/ - WAS DISALLOWED. AS SEEN FROM THE FAC TS SUBMITTED BY THE APPELLANT, THERE WAS A CONTRACTUAL AGREEMENT ENTERED ON THE 1 ST DAY OF APRIL 2008 BETWEEN THE PROPX. OF M/S. R.S. GOLD AND THE APPELLANT COMPANY. THE PROPRIETRIX OF M/S. R.S. GOLD WAS MRS. A. SWATHI, WHO HELD THE LICENCE FOR MULTI COMMO DITY EXCHANGE FOR TRADING IN MCX. THE APPELLANT HAS AGREED TO UNDERTAKE THE ADMINISTRATION OF THE OPERATIONS UNDER THE MCX LICENCE AND LOOK AFTER THE DAY TO DAY OPERATIONS ALONG WITH THE DEVELOPMENT OF BUSINESS BY ENROLLING NEW CLIENTS/SUB - CLIENTS. AS PER THIS AGREEMENT, THE APPELLANT SHALL BE PAID ALL THE MONTHLY GROSS RECEIPTS FROM MCX, FOR THE PAYMENT OF EXPENSES RELATING TO MCX. HOWEVER, THE APPELLANT COULD NOT FURNISH THE DETAILS OF RECEIPT OF MONTHLY GROSS RECEIPTS FROM MCX. AS PER THE MEMORANDUM OF U NDERSTANDING, AT POINT NO.9, IT IS MENTIONED THAT THE APPELLANT SHALL BE GIVEN 50% OF THE RECEIPTS AFTER ADJUSTING ALL EXPENDITURE OF MCX OPERATIONS AND FINALIZING THE ACCOUNTS ANNUALLY. AS SEEN FROM THE P&L ACCOUNT FILED BY THE APPELLANT, HE RECEIVED A CO MMISSION OF RS.31,49,065/ - AS CONTRACTUAL RECEIPTS. AS SEEN FROM THE P&L ACCOUNT OF M/S. R.S. GOLD, THE GROSS INCOME RECEIVED AS BROKERAGE AT MCX WAS RS.73,72,936/ - . DURING THE COURSE OF APPELLATE PROCEEDINGS; THE I.T. A. NO . 1 778 /M/ 15 5 APPELLANT FURNISHED THE DETAILS OF THE TDS CERTIFICATES AND THE TRANSACTIONS DONE BY THEIR CLIENTS AND ALSO THE DETAILS OF COMMISSION PAYMENTS. 8. I HAVE EXAMINED THE DETAILS OF COMMISSION PAYMENTS WITH THE NATURE OF TRADE DONE BY THE CLIENTS ALONG WITH KYC NORMS. AS SEEN FROM THESE DETAILS, TH E APPELLANT COMPANY HAS MADE PAYMENT OF RS.4,50,000/ - IN THE MONTH OF MARCH TO SHRI R. CHANDRASEKAR, HUF. THE APPELLANT COMPANY COULD NOT FURNISH ANY EVIDENCE TO SHOW THAT SHRI R. CHANDRASEKAR, HUF HAS INTRODUCED ANY CLIENTS FOR THE COMPANY TO MAKE COMMISS ION PAYMENT OF RS.4,50,000/ - . IT IS CLEARLY ESTABLISHED IN LAW THAT THE NATURE OF SERVICES RENDERED BY PERSONS RECEIVING THE COMMISSION HAS TO BE ESTABLISHED FOR CLAIMING THE COMMISSION AS EXPENDITURE. THE APPELLANT COULD NOT FURNISH ANY EVIDENCE TO PROVE THAT SHRI R. CHANDRASEKAR, HUF HAS RENDERED ANY SERVICES FOR PAYMENT OF COMMISSION. 9. SIMILARLY, IN THE CASE OF SMT. R. LAKSHMI AN AMOUNT OF RS.4,99,277/ - WAS PAID AS COMMISSION. NONE OF THE CLIENTS IN THEIR KYC NORMS HAVE STATED THAT THEY WERE INTRODU CED FOR THE MCX TRADING THROUGH SMT. R. LAKSHMI. THERE IS A COLUMN IN THE FORM OF KYC MENTIONING THE NAME OF THE INTRODUCER. ON VERIFICATION OF THE DETAILS NOWHERE IT COULD BE FOUND THAT ANY CLIENT WAS INTRODUCED TO DO BUSINESS WITH THE APPELLANT COMPANY. THE APPELLANT COMPANY ALSO COULD NOT FURNISH ANY DETAILS REGARDING THIS. 10. THE APPELLANT HAS ALSO PAID A COMMISSION OF RS.8 LAKHS TO SMT. PRAVEENA WHO IS THE WIFE OF SHRI R. CHANDRASEKAR, THE DIRECTOR OF THE COMPANY. THE BASIS OF ARRIVING AT THE COMMI SSION OF RS. 8 LAKHS COULD NOT BE PROVED BY THE APPELLANT COMPANY. NO SERVICES WERE RENDERED BY SMT. PRAVEENA REGARDING MCX TRADING. IN THE ABSENCE OF ANY EVIDENCE REGARDING THE NATURE OF SERVICES RENDERED BY THE ABOVE MENTIONED PERSONS, THE COMMISSION PAY MENTS MADE TO THEM ARE DISALLOWED. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS EXPENDITURE IS CONFIRMED. THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 5. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE COMMISSION PAYMENTS HAVE BEEN MADE TO THE PARTIES BY WAY OF CHEQUES AND TDS ALSO DEDUCTED AND PAID. THE COMMISSION RECIPIENTS ARE ASSESSED TO INCOME TAX AND ALSO I.T. A. NO . 1 778 /M/ 15 6 OFFERED THEIR INCOME IN THEIR RETURN OF INCOME AND FILED BEFORE THE ASSESSING OFFICER. HE FURTHER SUBMITS THAT THE ASSE SSING OFFICER HAS NOT BEEN LOOKED INTO THE SAME AND DISALLOWED THE EXPENDITURE WITHOUT ANY VALID REASON. 6. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDER PASSED BY THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE MAIN CONTENTION OF THE DEPARTMENT IS THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE FOR THE SERVICES RENDERED BY THE SAID THREE PERSONS /AGENTS . THE BURDEN HEAVILY LIES ON THE ASSESSEE TO ES TABLISH THAT THE SAID PERSONS/AGENTS HAVE INTRODUCED CLIENTS/CUSTOMERS TO THE ASSESSEE COMPANY. ADMITTEDLY, IN THIS CASE, THE ASSESSEE FAILS TO ESTABLISH THE NAMES OF THE CLIENTS/CUSTOMERS , WHO WERE INTRODUCED BY THE AGENTS TO THE ASSESSEE . IN THIS CASE, T HERE IS NO SUCH EVIDENCE PLACED BEFORE THE ASSESSING OFFICER OR LD. CIT(A) OR EVEN BEFORE US. THEREFORE, IN THE ABSENCE OF SUCH EVIDENCES, WE ARE UNABLE TO AGREE WITH THE SUBMISSION OF THE ASSESSEE EVEN THOUGH THE ASSESSEE MADE THE COMMISSION PAYMENT BY WA Y OF CHEQUES AND DEDUCTED THE TDS AND TAX PAID TO THE GOVERNMENT BY THE RECIPIENTS IS NOT A CONCLUSIVE EVIDENCE TO COME TO THE CONCLUSION THAT THE PERSONS HAVE RENDERED THE SERVICES FOR IMPROVEMENT OF BUSINESS OF THE ASSESSEE. THEREFORE, IN THE ABSENCE OF ANY EVIDENCE ON THE SERVICES RENDERED BY THE ABOVE SAID PERSONS TO THE ASSESSEE COMPANY, I.T. A. NO . 1 778 /M/ 15 7 THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THEREFORE, TH E GROUND RAISED BY THE ASSESSEE IS DISMISSED. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED ON THE 06 TH JU LY , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHEN NAI, DATED, THE 06 . 0 7 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.