Dy. Commissioner of Income Tax, Lucknow V. M/s Manish Overseas (Electronics) Pvt. Ltd., Lucknow

ITA 179/LKW/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1168 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 DY.C.I.T., RANGE-4, LUCKNOW. VS. M/S MANISH OVERSEAS (ELECTRONICS) PVT. LTD., 19, MAHANAGAR EXTENSION, LUCKNOW. PAN:AACCM 8183 F (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 27/01/2016. THE GROUNDS OF APPEAL TAKEN BY T HE REVENUE ARE REPRODUCED BELOW: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION MADE BY ASSESSING OFFICER OF RS.1,74,414/- ON ACCOUNT OF ACCRUED INTEREST IN ABSENCE OF ANY EXPLANATION M ADE BY THE ASSESSEE AND BASED ON TOTAL FDRS PURCHASED DURING T HE YEAR. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION MADE BY ASSESSING OFFICER OF RS.36,00,025/ - ON ACCOUNT OF DISALLOWANCE OF SALARY & WELFARE EXPENSE S ON THE APPELLANT BY SMT. ALKA SINGH, D. R. RESPONDENT BY SHRI ASHWINI TANEJA, ADVOCATE DATE OF HEARING 10/01/2018 DATE OF PRONOUNCEMENT 18 / 01 /201 8 I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 2 BASIS OF DISCREPANCIES AND FICTITIOUS ENTRIES FOUND BY THE ASSESSING OFFICER. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING AN ADDITION OF AMOUNT OF RS.48,000/- MADE ON ACCOUNT O F SALARY PAID TO SHRI R.K. TIWARI AND SMT. REKHA TIWARI IN C ASH AND IN ABSENCE OF ANY AUTHENTIC DOCUMENTARY EVIDENCE. 4. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION MADE BY ASSESSING OFFICER OF RS.46,18,225/ - ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAID DUE TO F AILURE TO PRODUCE ANY AGREEMENT ENTERED INTO BETWEEN THE PERS ON TO WHOM THE COMMISSION WERE PAID, TO AUTHENTICATE ITS CLAIM. 5. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.3,05,597/- MADE ON ACCOUNT OF DISCOU NT ON SALE IN ABSENCE OF ANY DOCUMENTARY EVIDENCE TO ESTABLISH ITS CLAIM. 6. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF RS.1,08,000/- IN RESPECT OF RENT PAID TO THE DIRECT OR IN ABSENCE OF ANY DOCUMENTARY EVIDENCE FOR UTILIZATION OF THE PREMISES BY THE COMPANY ON RENT. 7. THE GIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.13,56.369/- MADE ON ACCOUNT OF UNDIS CLOSED RECEIPTS ON THE BASIS OF THE DIFFERENCE IN TDS DETA ILS AND TOTAL RECEIPTS SHOWN BY THE ASSESSEE. 2. AT THE OUTSET, LEARNED D. R. SUBMITTED THAT LEAR NED CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE ON ACCOUNT OF VARIOU S ADDITIONS WHICH THE ASSESSING OFFICER HAD MADE KEEPING IN VIEW THE FACT S AND CIRCUMSTANCES OF THE CASE. AS REGARDS GROUND NO. 1, LEARNED D. R. S UBMITTED THAT ASSESSING OFFICER HAD MADE ADDITION ON ACCOUNT OF ACCRUED INT EREST IN THE ABSENCE OF ANY EXPLANATION AND THE ADDITION WAS MADE ON ACCOUN T OF FDRS PURCHASED DURING THE YEAR WHICH HAVE BEEN WRONGLY ALLOWED BY THE CIT(A). SIMILARLY, SHE ARGUED THAT THE ASSESSING OFFICER HAD MADE DISA LLOWANCE OUT OF SALARY AND WELFARE EXPENSES ON THE BASIS OF DISCREPANCIES AND FICTITIOUS ENTRIES I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 3 FOUND BY THE ASSESSING OFFICER WHICH CIT(A) HAS WRO NGLY DELETED. AS REGARDS DELETION OF COMMISSION DEBITED BY ASSESSEE, LEARNED D. R. SUBMITTED THAT ASSESSEE HAD NOT PRODUCED ANY AGREEM ENT WITH THE PERSONS TO WHOM COMMISSIONS WERE PAID AND THEREFORE, THE CL AIM OF THE ASSESSEE WAS NOT AUTHENTIC AND THEREFORE, THE CIT(A) SHOULD HAVE UPHELD THE SAME. SHE FURTHER ARGUED THAT LEARNED CIT(A) HAS WRONGLY DELETED THE ADDITION WHICH THE ASSESSING OFFICER HAD MADE ON ACCOUNT OF DISCOUNT ON SALE IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE TO ESTABLISH TH E CLAIM. LEARNED D. R. STATED THAT LEARNED CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.13,56,369/- WHICH WAS M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE IN TDS DETAILS AND TOTAL RECEIPTS SHOWN BY THE ASSESSEE. LEARNED D. R. HEAVILY PLACED HER REL IANCE ON THE ORDER OF THE ASSESSING OFFICER. LEARNED D. R. STRESSED THAT IN REMAND PROCEEDINGS ALSO THE ASSESSING OFFICER HAD CONFIRMED THE ADDITIONS. 3. ON THE OTHER HAND, LEARNED A. R. STATED THAT AS REGARDS THE ACCRUED INTEREST ON FDRS, THE ASSESSEE HAD ACCOUNTED THE CU RRENT YEARS INTEREST OF RS.6,68,745/- IN ITS PROFIT & LOSS ACCOUNT. IT WAS SUBMITTED THAT EVERY YEAR, THE INTEREST RELATING TO THAT YEAR IS CREDITED TO P ROFIT & LOSS ACCOUNT AND THE SAID AMOUNT IS SHOWN AS ACCRUED INTEREST IN THE BAL ANCE SHEET. IT WAS SUBMITTED THAT THE AMOUNT OF RS.1,74,414/- REPRESEN TS ACCRUED INTEREST UPTO 31/03/2006 OUT OF WHICH EVERY YEARS INTEREST HAS BEEN CREDITED TO PROFIT & LOSS ACCOUNT AND HAS BEEN OFFERED TO TAX. OUT ATTENTION WAS INVITED TO ORDER OF LEARNED CIT(A) WHERE HE HAS MEN TIONED THAT YEARWISE BREAK-UP OF ACCRUED INTEREST OF RS.1,74,414/- WAS P LACED IN PAPER BOOK PAGES 220 TO 231. OUR ATTENTION WAS ALSO INVITED T O PAPER BOOK PAGES 232 TO 258 FILED BEFORE LEARNED CIT(A) WHERE THE COPIES OF PROFIT & LOSS ACCOUNT ALONG WITH THE COPIES OF COMPUTATION OF INCOME AND BALANCE SHEET OF EACH YEAR WAS PLACED. IT WAS SUBMITTED THAT ALL THESE D OCUMENTS PROVE THAT I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 4 INTEREST RECEIPT OF RESPECTIVE YEARS HAS BEEN OFFER ED TO TAX ON YEARLY BASIS ON THE BASIS OF ACCRUAL SYSTEM AND THEREFORE, THE C IT(A) HAS RIGHTLY DELETED THE ADDITION. 3.1 AS REGARDS DELETION OF ADDITION ON ACCOUNT OF D ISALLOWANCE OUT OF SALARY AND WELFARE EXPENSES, LEARNED A. R. STATED T HAT THE ASSESSING OFFICER HAD MADE THIS ADDITION HOLDING THE SAME TO BE BOGUS WHICH THE CIT(A) HAS RIGHTLY DELETED AS THE SALARY INCLUDED T HE SALARIES OF DIRECTORS TO THE EXTENT OF RS.25.20 LAKHS AND SALARY TO STAFF WA S RS.9,38,724/- AND THE ABOVE FIGURE ALSO INCLUDED LABOUR CHARGES AND LEAVE ENCASHMENT CHARGES. AS REGARDS SALARY PAID TO DIRECTORS, IT WAS SUBMITT ED THAT THE DIRECTORS HAD DISCLOSED THE SALARY IN THEIR RESPECTIVE INCOME TAX RETURNS AND OUR ATTENTION WAS INVITED TO THE WRITTEN SUBMISSIONS FILED BEFORE LEARNED CIT(A) WHERE AT PAGES 311 TO 325 OF THE PAPER BOOK THE COPIES OF IN COME TAX RETURNS OF DIRECTORS WERE PLACED. IT WAS SUBMITTED THAT DUE T DS WAS DEDUCTED FROM THE DIRECTORS SALARY AND THE SAME WAS ALSO PAID IN THE EARLIER YEAR AND IN THE EARLIER YEAR NO SUCH DISALLOWANCE WAS MADE AND THEREFORE, THE DISALLOWANCE DURING THIS YEAR WAS NOT JUSTIFIED ESP ECIALLY IN VIEW OF THE FACT THAT CONSISTENCY HAS TO BE FOLLOWED IN THE INCOME T AX PROCEEDINGS AS WAS HELD BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS . EXCEL INDUSTRIES LTD. [2013] 358 ITR 295 (SC). IT WAS SUBMITTED THAT STA FF WELFARE EXPENSES AND LABOUR CHARGES WERE ALSO PART OF SALARY AND THESE E XPENSES WERE FULLY VOUCHED AND REASONABLE. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD DISALLOWED THE ENTIRE SALARY EXPENSES WHICH ON THE FACE OF IT WAS NOT UNJUSTIFIED. THE REASON FOR DISALLOWANCE WAS THAT SALARY REGISTER WAS NOT PRODUCED WHEREAS MAINTENANCE OF SALARY REGISTER IS NOT COMPULSORY AS THE EXPENSES WERE FULLY VOUCHED. IT WAS SUBMITTED THAT ASSESSING OFFICER HAS MENTIONED THAT ASSESSEE HAD FILED DETAILS OF RS.9,3 8,742/- ONLY WITH RESPECT TO SALARY AND HENCE BALANCE SALARY WAS NOT ESTABLIS HED. IN THIS RESPECT I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 5 LEARNED A. R. SUBMITTED THAT ASSESSING OFFICER HAD REQUIRED ASSESSEE TO FILE DETAILS OF STAFF SALARY WHICH WAS DULY FURNISHED AN D THE BALANCE AMOUNT WAS ON ACCOUNT OF DIRECTORS REMUNERATION AND SALAR Y TO OTHERS ETC. 3.2 AS REGARDS THE DISALLOWANCE OF RS.48,000/- BEIN G CASH SALARY PAID TO SHRI R. K. TIWARI AND SMT. REKHA TIWARI ON THE GROU ND THAT VOUCHERS WERE NOT POSTED IN THE SALARY ACCOUNT OF LEDGER, IT WAS SUBMITTED THAT HAD THE ASSESSING OFFICER ASKED THE EXPLANATION OF THE ASSE SSEE, THE ISSUE WOULD HAVE BEEN CLARIFIED. IT WAS SUBMITTED THAT SHRI R. K. TIWARI AND SMT. REKHA TIWARI ARE EMPLOYEES OF THE ASSESSEE COMPANY SINCE SEVERAL YEARS AND THEIR TOTAL SALARY WAS RS.11,000/- PER MONTH OUT OF WHICH RS.2,000/- EACH PER MONTH USED TO BE PAID IN CASH AND BALANCE WAS P AID AT THE YEAR END THROUGH CHEQUES. 3.3 REGARDING DISCOUNT ON SALE, LEARNED A. R. SUBMI TTED THAT DISCOUNT ON SALES WAS GIVEN TO CUSTOMERS ON THE BILL ITSELF. D ETAIL OF DISCOUNT ALONG WITH THE COPIES OF BILLS, SHOWING THE DISCOUNT ALLOWED, WAS FILED WITH THE ASSESSING OFFICER AND THEREFORE, THERE WAS NO JUSTI FICATION FOR THE IMPUGNED DISALLOWANCE AND LEARNED CIT(A) HAS RIGHTLY DELETED THE SAME. 3.4 REGARDING THE ADDITION ON ACCOUNT OF DIFFERENCE IN TOTAL RECEIPTS AS PER TDS CERTIFICATES AND AS PER THE FIGURE DECLARED IN THE PROFIT & LOSS ACCOUNT, THE LEARNED A. R. SUBMITTED THAT ASSESSING OFFICER ASKED ABOUT THE DISCREPANCY VIDE LETTER DATED 13/05/2013 AND TH E REPLY WAS FILED VIDE LETTER DATED 11/12/2013. WITHOUT CONSIDERING THE R EPLY OF THE ASSESSEE, THE ASSESSING OFFICER HAS WRONGLY MENTIONED THE TOT AL RECEIPT AS PER TDS CERTIFICATE TO BE TO THE TUNE OF RS.4,22,97,626/-. IN FACT THE TOTAL RECEIPT AS PER TDS CERTIFICATE WAS TO THE TUNE OF RS.21,44,58, 941/- WHICH WAS EXPLAINED TO THE ASSESSING OFFICER THROUGH VARIOUS LETTERS. LEARNED A. R., IN I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 6 VIEW OF THE FACTS AND CIRCUMSTANCES, SUBMITTED THAT LEARNED CIT(A) HAS PASSED A REASONED AND SPEAKING ORDER AND THEREFORE, THE APPEAL FILED BY THE REVENUE NEEDS TO BE DISMISSED. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD WE FIND THAT IN RESPECT OF VARIOUS ADDITIONS, THE LEARNED CIT(A) HAS DELETED THE SAME BY PASSING A REASONED A ND SPEAKING ORDER. THE ORDER OF LEARNED CIT(A) IS QUITE EXHAUSTIVE AND FOR THE SAKE OF COMPLETENESS, THE RELEVANT PORTION OF THE SAME IS R EPRODUCED BELOW: DISALLOWANCE ON ACCOUNT OF ACCRUED INTEREST 5(6) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO THE COMMENTS OF THE APPELLANT ON THE REMAND REPORT SUBMITTED BY THE APPELLANT. I FIND THAT THE AMOUNT OF RS.1,74 ,414/- ADDED BY THE AO IS THE ACCRUED INTEREST SHOWN BY TH E APPELLANT IN THE BALANCE SHEET AS AT 31.03.2006. TH E ACCRUED INTEREST IS FOR THE PERIOD FROM 01.04.2001 TO 31.03 .2006. THE YEAR WISE DETAILS HAVE BEEN FILED BY THE APPELLANT AT PAGE NUMBERS 220-231 OF THE PAPER BOOK. THE ACCRUED INTE REST FOR THE RELEVANT YEAR HAS BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT. FOR THE YEAR UNDER CONSIDERATION INTEREST ACCRUED AMOUNTING TO RS. 66,875/- HAS BEEN SHOWN IN THE PRO FIT AND LOSS ACCOUNT. THE AMOUNT OF RS.1,74,414/- IS THEREF ORE INTEREST ACCRUED FOR THE CURRENT YEAR AS WELL AS EARLIER YEA RS WHICH WAS SHOWN IN THE PROFIT AND LOSS ACCOUNT OF THE RELEVAN T YEAR. SINCE THE ACCRUED INTEREST HAS ALREADY BEEN SHOWN BY THE APPELLANT, THE ADDITION OF RS. 1,74,414/- IS UNCALLED FOR.THE ADDITION OF RS.1,74,414/- MADE BY THE ASSESSING OFFICER IS DELE TED GIVING CONSEQUENTIAL RELIEF TO THE APPELLANT. DISALLOWANCE OUT OF SALARY AND WELFARE I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT AND ALSO THE COMMENTS OF THE APPELLANT ON THE REMAND RE PORT SUBMITTED BY THE APPELLANT. I FIND THAT THE AO EXAM INED THE I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 7 DETAILS OF STAFF SALARY OF RS. 9,38,742/- AND ON TH E BASIS OF CERTAIN DISCREPANCIES NOTICED REGARDING PRODUCTION AND MAINTENANCE OF VOUCHERS, THE AO DISALLOWED THE ENTI RE CLAIM OF SALARY EXPENSES OF RS.36,00,025/- OBSERVING THAT RS . 14,69,859/- TOWARDS SALARY AND WELFARE EXPENSES WAS INCURRED IN IMMEDIATELY PRECEDING YEAR. I FIND THAT THE BREA KUP OF SALARY EXPENSES OF RS.36,00,025/- IS AS UNDER DIRECTORS SALARY RS.2 5,20,000/- SALARY OF STAFF RS. 9,38,742/- SALARY OF OTHER RS.2 7,800/- LEAVE ENCASHMENT OF STAFF RS.45,079/- STAFF WELFARE EXPENSES RS.28,29 4/- LABOUR CHARGES RS.40, 110/- THE DIRECTOR'S SALARY HAS BEEN PAID TO SHRI AKHIL KUMAR, SHRI DHIRENDRA KUMAR SMT. REKHA SRIVASTAVA AND SMT. NEELAM AFTER DEDUCTION OF TDS. THE AO HAS NOT COMMENTED ANYTHING ADVERSE AS REGARDS THE SERVICES RENDERED AND ONLY OBSERVATI ON IS WITH REGARDS TO STEEP RISE IN TOTAL EXPENSES. I FIND THAT THE MAIN INCREASE IN EXPENSES AS COMPARED TO EARLIER YE AR WAS IN DIRECTOR'S REMUNERATION WHICH WAS NECESSITATED BY I NCREASE IN TURNOVER FROM RS.1.87 CRORES IN IMMEDIATELY PRECEDI NG YEAR TO RS.3.55 CRORES IN THE YEAR UNDER CONSIDERATION. 6(7) I ALSO FIND THAT THERE IS NO MANDATORY REQUIRE MENT OF MAINTENANCE OF SALARY REGISTER. THE APPELLANT HAS M AINTAINED AND FILED COPIES OF RELEVANT LEDGER ACCOUNTS AND VO UCHERS FOR SALARY EXPENSES. THE VOUCHERS NOT BEING NUMBERED AR E NOT A GROUND TO DISALLOW THE CLAIM OF EXPENSES. THE APPEL LANT HAS ALSO FILED PROOF OF PAYMENT OF EXTRA SALARY OF RS.4 1,000/-AND ARREARS OF RS.57,000/- AT PAGES 56-64 OF THE PAPER BOOK. IN THE REMAND REPORT THE AO HAS MENTIONED THAT EXPENSE S OF RS.1,41,283/- ARE NOT EXPLAINED. HOWEVER, AS PER DE TAILS REPRODUCED ABOVE THE AMOUNT OF RS.1,41,283/- IS SUM OF LAST 4 HEADS AS MENTIONED ABOVE. 6(8) I THEREFORE FIND THAT THE SALARY AND WELFARE E XPENSES OF RS. 36,00,025/- ARE PROPERLY VOUCHED AND NECESSARY LEDGER ACCOUNTS HAVE BEEN MAINTAINED AND FILED BY THE APPE LLANT. THE DISALLOWANCE MADE BY THE AO IS NOT FOR PROPER REASO NS AND IS I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 8 UNSUSTAINABLE. THE DISALLOWANCE OF SALARY EXPENSES OF RS.36,00,025/-IS DELETED GIVING RELIEF TO THE APPEL LANT. DISALLOWANCE OUT OF SALARY PAID TO RK TIWARI & SMT. REKHA TIWARI 7(6) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO THE COMMENTS OF THE APPELLANT ON THE REMAND REPORT SUBMITTED BY THE APPELLANT. I FIND THAT THE TWO EMPLOYEES SMT . R. K. TIWARI AND SMT. SHIKHA TIWARI WERE PAID SALARY OF R S.11,000/- AGGREGATE PER MONTH. A PAYMENT OF RS.4,000/- WAS MA DE IN CASH AND THE BALANCE WAS SHOWN AS SALARY PAYABLE IN ACCOUNTS PAID BY CHEQUE IN YEAR END. THE APPELLANT HAS FILED COPIES OF CASH BOOK AT PAGES 363-373 OF THE PAPER BOOK AND SA LARY PAYABLE ACCOUNT AT PAGES 295-298 OF THE PAPER BOOK WHICH PROVE THE CONTENTION OF THE APPELLANT. THE DISALLOW ANCE OF RS.48,000/- IS DELETED GIVING EQUIVALENT RELIEF TO THE APPELLANT. DISALLOWANCE ON ACCOUNT OF COMMISSION 8(6) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO THE COMMENTS OF THE APPELLANT ON THE REMAND REPORT SUBMITTED BY THE APPELLANT. I FIND THAT M/S SHREE BANKEY BIHA RI STEEL PVT . LTD., 25/7 RAM SAGAR JANSATH ROAD, MUZAFFARNAGAR, H AS CONFIRMED RECEIPT OF COMMISSION OF RS. 39,84,149/- (INCLUDING TDS OF RS.2,02,823/-) BY CREDIT TO HIS ACCOUNT ON 3 1.03.2006 AND PAID BY FOUR CHEQUES AS PER DETAILS GIVEN BELOW : 31.03.2006 CH. NO. 013407 RS.1 0,00,000/- 28.06.2006 CH. NO. 014364 RS. 3,68,769/- 12.07.2006 CH. NO. 014385 RS. 14,12,557/- 12.07.2006 CH. NO. 014384 RS. 10,00,000/- SHRI SANJAY TANDON RESIDENT OF JANKIPURAM MMS-1/78 SECTOR A LUCKNOW, HAS CONFIRMED RECEIPT OF RS.2,04,026/- AS COMMISSION. SIMILARLY, SHRI ISHTIYAQ ALI RESIDENT O F 657, 1ST LANE BALDA ROAD NISHATGANJ, LUCKNOW HAS CONFIRMED R ECEIPT OF RS.1,38,580/- AS COMMISSION AND SHRI EZAZ ALI RES IDENT OF 657 1ST LANE BALDA ROAD, NISHATGANJ, LUCKNOW, HAS ALSO CONFIRMED RECEIPT OF RS.2,91.470/- AS COMMISSION FRONM THE AP PELLANT. I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 9 8(7) THE RECIPIENTS HAVE THEREFORE CONFIRMED RECEIP T OF COMMISSION PAID BY THE APPELLANT. THE AO DISALLOWED COMMISSION PAID TO THEM OBSERVING THAT COMMISSION P AID WAS EXORBITANT AND NOT BUSINESS SENSE AND THAT AGREEMEN TS WERE NOT PRODUCED TO AUTHENTICATE THE CLAIM. AS REGARDS THE JUSTIFICATION OF CLAIM OF COMMISSION I FIND THAT IN THE IMMEDIATELY PRECEDING YEAR THE APPELLANT PAID COMMI SSION OF RS. 49,43,225/- ON SALES OF RS.1,87,15,843/- WHICH IS 26.41% OF TURNOVER AS COMPARED TO YEAR UNDER CONSIDERATION WHERE COMMISSION OF RS. 46,18,225/- HAS BEEN PAID ON SALE S OF RS.3,55,16,868/- WHICH IS 13% OF THE TURNOVER. THE OBSERVATION OF THE AO THAT THE COMMISSION IS EXORBI TANT AND NOT BUSINESS SENSE IS UNFOUNDED. 8(8) FURTHER, THE RECIPIENTS HAVE CONFIRMED THE REC EIPT AND THE PARTIES ARE NOT RELATED TO THE APPELLANT. THERE IS NO REQUIREMENT IN LAW THAT THERE SHOULD BE A WRITTEN A GREEMENT TO CLAIM EXPENDITURE ON ACCOUNT OF COMMISSION WHICH IS OTHERWISE PROVED BY ACTUAL PAYMENT ON THE BASIS OF ORAL AGREEMENTS. THE ALLOWABILITY OF THE EXPENDITURE ON PAYMENT BASIS HAS BEEN EXAMINED BY HON'BLE PUNJAB AND HARYA NA HIGH COURT IN THE CASE OF VIT VS SEPTU INDIA (P) LTD 305 ITR 295 WHEREIN IT HAS BEEN HELD THAT IN OUR OPINION, THE TRIBUNAL HAS COME TO THE AFORES AID CONCLUSION ON THE BASIS OF SUFFICIENT EVIDENCE AVAI LABLE ON THE RECORD WHICH CLEARLY PROVES THAT THE AMOUNT OF COMMISSIONS/SERVICE EXPENSES WAS ACTUALLY PAID BY T HE ASSESSEE TO THOSE PARTIES. IN OUR OPINION, WHEN THE ASSESSEE HAS PROVED THE ACTUAL PAYMENT OF THE AFORE SAID AMOUNTS AS WELL AS RECEIPT OF THE SAME AMOUNT BY TH E ABOVESAID PARTIES, THEN THE CLAIM PUT FORTH BY THE ASSESSEE SHOULD NOT HAVE BEEN DISALLOWED MERELY ON THE GROUND THAT THE SAME WAS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. THEREFORE, IN OUR VIEW, THE TRIBUNAL HAS RIGHTLY HELD THAT THE ADJUDICATING AUT HORITIES BELOW WERE NOT JUSTIFIED IN DISALLOWING THE DEDUCTI ON CLAIMED BY THE ASSESSEE. RELIANCE IS ALSO PLACED ON THE DECISIONS IN 298 ITR 203 (RAJASTHAN HIGH COURT) TO THE AFFECT THAT EXPENDITU RE CANNOT I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 10 BE DISALLOWED ON THE BASIS OF SUSPICION WHEN THE RE CIPIENT OF COMMISSION IS NOT RELATED TO THE APPELLANT AND IS N OT A SISTER CONCERN. SIMILARLY, IN 225 ITR PAGE 537/540 IT IS C LEARLY LAID DOWN THAT COMMISSION PAID IN TERMS OF ORAL AGREEMEN T WAS TO BE ALLOWED. IN VIEW OF ABOVE THE DISALLOWANCE OF RS.46,18,225/-IS DELETED GIVING RELIEF TO THE APPEL LANT. DISALLOWANCE ON ACCOUNT OF DISCOUNT 9(6) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO THE COMMENTS OF THE APPELLANT ON THE REMAND REPORT SUBMITTED BY THE APPELLANT. I FIND THAT THE APPELLANT HAS FIL ED PAGES 167 TO 219 OF THE PAPER BOOK WHICH ARE COPIES OF SALE B ILLS TO SHOW THAT THE DISCOUNT IS ALLOWED ON SATES ON THE BILL I TSELF. THE SALE BILL ITSELF IS THEREFORE AN EVIDENCE OF THE DISCOUN T ALLOWED BY THE APPELLANT. 9(7)(A) A BENCH OF THE KERALA HIGH COURT IN KALPANA LAMPS AND COMPONENTS LTD. V. STATE OF KERALA,(2006) 143 S TC 666, IN PARAGRAPHS 4 AND 5 OF THE JUDGMENT OBSERVED AND HEL D AS FOLLOWS: - BEFORE PARTING WITH THE CASE, WE MAY STA TE THAT SO FAR AS THE SPECIAL DISCOUNT IS CONCERNED, ALL THAT THE AUTHORITIES HAVE TO LOOK INTO WHETHER AS A MATTER OF FACT, THE PETITIONER RECEIVED ONLY THE SUM ORIGINALLY CHARGED LESS THE D ISCOUNT. IT IS THE LOOK OUT OF THE TRADERS TO SEE THAT THE TRADE I NCREASE AND IT IS FOR THAT PURPOSE THE TRADE DISCOUNT IS GIVEN. HE NCE, A PERSON MAY NOT BE ABLE TO CLEARLY PROVE AS TO WHY THE SPEC IAL DISCOUNT WAS GIVEN. BUT IF THERE HAS BEEN A CONSISTENT PRACT ICE OF GIVING SPECIAL DISCOUNT THAT HAS TO BE ACCEPTED BY THE ASS ESSING AUTHORITY. 9(7)(B) IN UNION OF INDIA AND OTHERS V. BOMBAY TYRE S INTERNATIONAL (P) LTD., (2005) 3 SCC 787, IN A VERY BRIEF ORDER THE COURT VERY SUCCINCTLY DESCRIBED 'TRADE DISCOUNT ' AND HELD IT TO BE DEDUCTIBLE FROM THE SALE PRICE: '(1) TRADE DI SCOUNTS - DISCOUNTS ALLOWED IN THE TRADE (BY WHATEVER NAME SU CH DISCOUNT IS DESCRIBED) SHOULD BE ALLOWED TO BE DEDU CTED FROM THE SALE PRICE HAVING REGARD TO THE NATURE OF THE G OODS, IF ESTABLISHED UNDER AGREEMENTS OR UNDER TERMS OF SALE OR BY ESTABLISHED PRACTICE, THE ALLOWANCE AND THE NATURE OF THE DISCOUNT BEING KNOWN AT OR PRIOR TO THE REMOVAL OF THE GOODS. I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 11 SUCH TRADE DISCOUNTS SHALL NOT BE DISALLOWED, ONLY BECAUSE THEY ARE NOT PAYABLE AT THE TIME OF EACH INVOICE OR DEDUCTED FROM THE INVOICE PRICE. 9(8) IN VIEW OF THE ABOVE DISCUSSION I FIND THAT TH E APPELLANT REALIZED THE NET VALUE OF GOODS SOLD AFTER ADJUSTIN G FOR THE DISCOUNT ALLOWED ON BILLS AND THEREFORE THE DISCOUN T ALLOWED WAS A GENUINE CLAIM WHICH HAS TO BE ALLOWED. THE DISALLOWANCE OF RS.3,06,597/- (ACTUALLY AMOUNT IS R S. 3,05,597/-) IS DELETED GIVING RELIEF TO THE APPELLA NT. DISALLOWANCE OUT OF RENT PAID TO DIRECTORS 12(6) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT AND ALSO THE COMMENTS OF THE APPELLANT ON THE REMAND RE PORT SUBMITTED BY THE APPELLANT. I FIND THAT THE COPY OF RENT AGREEMENT WAS FILED IN THE ASSESSMENT PROCEEDINGS I N THE CASE OF SMT. REKHA SRIVASTAVA, WHO IS ASSESSED TO TAX WI TH THE SAME AO. IN ANY CASE THE COPY THEREOF IS AVAILABLE AT PAGE 359-361 OF THE PAPER BOOK WHICH SHOWS THAT THE PREM ISES WAS TAKEN ON RENT BY THE APPELLANT-COMPANY.THE DISALLOW ANCE OF RS.1,08,000/- IS THEREFORE DELETED ALLOWING RELIEF TO THE APPELLANT. DISALLOWANCE ON ACCOUNT OF UNDISCLOSED RECEIPTS 13(6) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT AND ALSO THE COMMENTS OF THE APPELLANT ON THE REMAND RE PORT SUBMITTED BY THE APPELLANT. THE APPELLANT HAS FILED PAGE 55 IN THE PAPER BOOK WHICH SHOWS SALES AS PER TAX EVASION PETITION REFERRED BY THE AO IN THE REMAND REPORT AT RS.2,09, 83,874/-; WHEREAS SALES AS PER TDS CERTIFICATES IS RS.2,14,45 ,994/-. THE APPELLANT HAS SHOWN SALES OF RS. 4,09,41,257/- IN T HE PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. I FIND THAT THE AO HAS NOT GIVEN ANY WORKING ON HOW THE AMOUNT OF RS.4,22,97,626/- WAS ARRIVED AT AS PER TDS CERTIFIC ATES. THE ADDITION OF RS.13,56,369/-THEREFORE HAS NO BASIS. T HE SALES SHOWN BY THE APPELLANT IN PROFIT AND LOSS ACCOUNT A RE MORE THAN THE SALES AS PER TDS CERTIFICATES AND THE AO H AS NOT IDENTIFIED ANY SALES NOT DISCLOSED IN THE BOOKS OF ACCOUNTS AS I.T.A. NO.179/LKW/2016 ASSESSMENT YEAR:2006-07 12 PER TDS CERTIFICATES. IN VIEW THEREOF THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.13,56,369/- IS DELETED GIVI NG RELIEF TO THE APPELLANT. 5. THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE E XHAUSTIVE AND ARE IN ACCORDANCE WITH THE FACTS AND CIRCUMSTANCES OF THE CASE AND WE DO NOT FIND ANY INFIRMITY IN THE SAME. IN VIEW OF THE ABOVE, TH E APPEAL FILED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18/01 /2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:18/01/2018 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW