DCIT, Circle-3(1), Kolkata, Kolkata V. M/s Calcutta Mining Sealants Pvt. Ltd., Kolkata

ITA 1805/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3347 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA A DDL
• Keywords: Commercial expediency
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 1805/KOL/20 16 ASSESSMENT YEAR : 2010-1 1 DCIT, CIRCLE-3(1), KOLKATA -VS- M/S CALCUTTA MINING SEALANTS PVT. LTD. [PAN: AABCC 4335 N ] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S. DASGUPTA, A DDL. CIT DR FOR THE RESPONDENT : SHRI SUBASH AGARWAL, AD VOCATE DATE OF HEARING : 24.07.2018 DATE OF PRONOUNCEMENT : 24.08.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-1, KOLKATA [IN SHORT THE LD CIT (A)] IN APPEAL NO. 03/CIT(A)- 1/CIRCLE-3(1)/2015-16 DATED 14.07.2016 AGAINST THE ORDER PASSED BY THE DCIT, CIRCLE- 3(1), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 16.03.2015 FOR THE ASS ESSMENT YEAR 2010-11. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE IN THE SUM OF RS. 1,21,52,000/- TOWARDS COMMISSION EXPENDITURE, IN THE FACTS AND CIRCUMSTAN CES OF THE CASE. 2 ITA NO.1805/KOL/2016 M/S CALCUTTA MINING SEALANTS PVT. LTD. A.YR. 2010-11 2 3. THE BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF MINING EQUIPMEN T/CHEMICALS AND HAD FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 ON 29.09.2012 DECLARING TOTAL INCOME O RS. 1,29,17,339/-. IN THE COURSE OF THE ASSESSMENT PROC EEDINGS, THE ASSESSEE FILED THE DETAILS OF COMMISSION EXPENDITURE TOGETHER WITH THE SUPPORT ING DOCUMENTS AMONG OTHER DETAILS. THE LD. AO FROM THE DOCUMENTS SUBMITTED BY THE ASSE SSEE COMPANY OBSERVED THAT THE ASSESSEE HAD PAID COMMISSION TO THE FOLLOWING PARTI ES: NAME AND ADDRESS OF THE PARTY NATURE OF EXPENSES AMOUNT OF THE EXPENSES TDS MADE SUGAM VINIMAY PVT. LTD., ANANTA BHAVAN, 94, VIVEKANAND NAGAR, P.O.- PODRAH, HOWRAH-711109. COMMISSIONS 1,02,30,000/- NIL SNEHSIL MARKETING PVT. LTD., ANANTA BHAVAN, 94, VIVEKANAND NAGAR, P.O.- PODRAH, HOWRAH-711109. COMMISSIONS 15,50,000/- NIL SILVERPOINT INFRATECH PVT. LTD., ANANTA BHAVAN, 94, VIVEKANAND NAGAR, P.O.- PODRAH, HOWRAH-711109. COMMISSIONS 3,72,000/- NIL TOTAL 1,21,52,000/- THE LD. AO IN ORDER TO VERIFY THE SAID EXPENDITURE ISSUED SUMMONS TO THOSE COMMISSION AGENTS. THESE SUMMONS WERE DULY SERVED ON THOSE COM MISSION AGENTS BUT NONE APPEARED BEFORE THE LD. AO IN RESPONSE TO THE SUMMO NS. LATER THE LD. AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE COMPANY ON 09.02.2015. THE LD. AO OBSERVED THAT IN RESPONSE TO THE SAID SHOW CAUSE NOTICE NO EXPLANATI ON WAS FURNISHED BY THE ASSESSEE 3 ITA NO.1805/KOL/2016 M/S CALCUTTA MINING SEALANTS PVT. LTD. A.YR. 2010-11 3 COMPANY. ACCORDINGLY HE PROCEEDED TO DISALLOW THE C OMMISSION EXPENDITURE OF RS. 1,21,52,000/- TREATING THE SAME AS BOGUS EXPENDITUR E AND COMPLETED THE ASSESSMENT. 4. BEFORE THE LD. CIT(A), THE ASSESSEE STATED THAT IT HAD PAID COMMISSION TO THE FOLLOWING PARTIES: NAME AMOUNT SUGAM VINIMAY PVT. LTD 1,02,30,000/- SNEHSIL MARKETING PVT. LTD. 15,50,000/- SILVERPOINT INFRATECH PVT. LTD. 3,72,0000/- KALOL KUMAR MUKHERJEE 31,58,121/- TOTAL 1,53,10,121/- OUT OF THE ABOVE, THE COMMISSION PAID TO MR. KALOL KUMAR MUKHERJEE IN THE SUM OF RS. 31,58,121/-WAS ALLOWED BY THE LD. AO IN THE ASSESSM ENT. THE ASSESSEE PLEADED THAT THE SUMMONS ISSUED BY THE LD. AO U/S 131 OF THE ACT TO THE REMAINING THREE PARTIES WERE DULY SERVED ON THEM. THIS CLEARLY PROVES THAT THE E XISTENCE OF THOSE PARTIES ARE PROVED BEYOND DOUBT. THE PAYMENTS OF COMMISSION WERE MADE BY THE ASSESSEE TO THOSE PARTIES FOR PROCUREMENT OF ORDERS FROM DIFFERENT LOCATIONS OF THE EASTERN COAL FIELDS LTD AND FOR COLLECTING THE PAYMENTS FROM SUCH LOCATIONS. IT WAS SUBMITTED THAT EACH OF THE ABOVE PARTIES HAVE RAISED THEIR PERIODICAL BILLS FOR SERV ICES RENDERED AND THEIR ENTITLEMENT OF COMMISSION, BASED ON SUPPLIES MADE TO EASTERN COAL FIELDS LTD. EACH MONTH. ALL THE AFORESAID PARTIES HAVE DULY COLLECTED SERVICE TAX O N THEIR MONTHLY/PERIODICAL COMMISSION ENTITLEMENTS AS PER THEIR INVOICES RAISED. THE PAYM ENTS OF COMMISSION WAS ALSO MADE ON A MONTHLY BASIS AS PER THE CLEARING OF THE BILLS RA ISED BY THE ASSESSEE. NO TAX WAS DEDUCTED AT SOURCE ON COMMISSION PAYMENTS MADE TO T HOSE PARTIES IN VIEW OF THE ZERO PERCENTAGE TAX DEDUCTION CERTIFICATE OBTAINED BY TH OSE AGENTS FROM DCIT(TDS) U/S 197(1) OF THE ACT. THE ASSESSEE ALSO PLACED EVIDENC E ON RECORD TO PROVE THAT ALL THE AFORESAID COMPANIES WERE SHOWN AS ACTIVE COMPANIES IN THE MASTER DATE OF WEBSITE OF 4 ITA NO.1805/KOL/2016 M/S CALCUTTA MINING SEALANTS PVT. LTD. A.YR. 2010-11 4 REGISTRAR OF COMPANIES (ROC) AND HAD DULY FILED THE IR ANNUAL RETURNS FOR THE YEAR ENDED 31.03.2012 DULY SHOWING HUGE COMMISSION INCOM E WHICH INCLUDES COMMISSION RECEIVED FROM THE ASSESSEE ALSO. THE ASSESSEE PLACE D RELIANCE ON VARIOUS HIGH COURT DECISIONS AND HONBLE SUPREME COURT DECISIONS INCLU DING THE CO-ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF ASHOK KUMA R AGARWAL VS. ACIT IN I.T.A. NO. 1701/KOL/2014 DATED 09.10.2015. APART FROM THAT, T HE ASSESSEE HAS FORCIBLY SUBMITTED BEFORE THE LD. CIT(A) THAT THE LD. AO GROSSLY ERRED IN STATING THAT NO DETAILS WERE FILED BY THE ASSESSEE IN RESPONSE TO SHOW CAUSE NOTICE IS SUED ON 09.02.2015 PROPOSING TO DISALLOW THE COMMISSION EXPENDITURE. IN THIS REGARD , HE STATED THAT A DETAILED REPLY DATED 11.02.2015 WAS FILED BEFORE THE LD. AO IN TAP AL IN SUPPORT OF WHICH ACKNOWLEDGEMENT GIVEN BY THE ASK INFORMATION CENTRE OF THE INCOME-TAX DEPARTMENT WAS PLACED ON RECORD. IT WAS ALSO PLEADED THAT ALL THESE PARTIES ARE REGULAR PARTIES OF THE ASSESSEE AND THE ASSESSEE HAS BEEN PAYING THE COMMI SSION IN THE EARLIER YEARS WHICH WERE ALLOWED AS DEDUCTION BY THE LD. AO. ALL THESE COMMISSION PAYMENTS WERE MADE IN THE REGULAR TRADE AND NORMAL COURSE OF BUSINESS AND WARRANTED BY COMMERCIAL EXPEDIENCY. 5. THE LD. CIT(A) APPRECIATED THE AFORESAID FACTS A ND CONTENTIONS OF THE ASSESSEE AND DELETED THE DISALLOWANCE OF RS. 1,21,52,000/- TOWAR DS COMMISSION. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE OUTS ET, WE FIND THAT THE LD. AO HAD ERRED IN STATING THAT THE ASSESSEE HAD NOT FILED ANY REPL Y IN RESPONSE TO SHOW CAUSE NOTICE DATED 09.02.2015 WHEREIN HE PROPOSED TO DISALLOW TH E COMMISSION EXPENDITURE TREATING THE SAME AS BOGUS. IN THIS REGARD, WE FIND THAT THE LD. AR HAD FILED A COPY OF LETTER DATED 11.02.2015 FILED BEFORE THE LD. AO IN TAPAL. THE SA ID LETTER CLEARLY REFLECTS THE ACKNOWLEDGEMENT GIVEN BY THE ASK INFORMATION CENTRE OF THE INCOME-TAX DEPARTMENT AS HAVING BEEN FILED ON 11.02.2015 IN CONNECTION WI TH THE ASSESSMENT PROCEEDINGS FOR 5 ITA NO.1805/KOL/2016 M/S CALCUTTA MINING SEALANTS PVT. LTD. A.YR. 2010-11 5 ASSESSMENT YEAR 2012-13 OF THE ASSESSEE. IN THE SAI D LETTER, THE ASSESSEE HAD GIVEN COMPLETE DETAILS OF THE SUBJECT MENTIONED COMMISSIO N PAYMENT TOGETHER WITH LEGAL SUBMISSIONS. WE FIND THAT THE LD. CIT(A) HAD PLACED RELIANCE ON THE DECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ASHO K KUMAR AGARWAL VS. ACIT IN I.T.A. NO. 1701/KOL/2014 DATED 09.10.2015. THE LD. DR STAT ED THAT THE FACTS BEFORE THE TRIBUNAL IN THAT CASE WERE TOTALLY DIFFERENT FROM T HE FACTS OF THE INSTANT CASE, INASMUCH AS IN THAT CASE, THE BOOKS OF ACCOUNTS WERE PRODUCE D BY THE ASSESSEE AND COMPLETE DETAILS OF COMMISSION WERE FILED BY THE ASSESSEE, W HEREAS, IN THE INSTANT CASE, NO DETAILS WERE FILED BY THE ASSESSEE COMPANY ACCORDING TO ASS ESSMENT ORDER. ACCORDINGLY, HE ARGUED THAT THE RELIANCE PLACED ON THE DECISION OF THE TRIBUNAL IS MISPLACED ON FACTS. WE FIND THAT THIS ARGUMENT OF THE LD. DR HAS ALREADY B EEN ADDRESSED HEREINABOVE INASMUCH AS THE ASSESSEE HAD DULY FILED THE COMPLETE REPLY V IDE HIS LETTER DATED 11.02.2015 BEFORE THE LD. AO. WE ALSO FIND THAT THE LD. AO INDIRECTLY ACKNOWLEDGES FURNISHING OF THESE DETAILS IN HIS ASSESSMENT ORDER IN PAGE 2 BY MENTIO NING THAT FROM THE DOCUMENTS SUBMITTED BY THE ASSESSEE. THIS ITSELF GOES TO PRO VE THAT THE ASSESSEE HAD INDEED FILED RELEVANT DOCUMENTS BEFORE THE LD. AO. THERE IS NO D ISPUTE ABOUT RENDERING OF SERVICES BY THE CONCERNED COMMISSION AGENTS TO THE ASSESSEE BY WAY OF PROCURING ORDERS FROM THE CUSTOMERS AND SECURING THE PAYMENTS FROM THEM. THERE IS NO DISPUTE THAT THE COMMISSION BILLS ARE RAISED BY THESE AGENTS PERIODI CALLY AND THAT THE PAYMENTS ARE MADE TO THEM TOGETHER WITH SERVICE TAX PORTION THEREON B Y ACCOUNT PAYEE CHEQUES. IT IS NOT IN DISPUTE THAT ALL THE THREE COMMISSION AGENTS HAD DU LY FURNISHED A CERTIFICATE ISSUED BY DCIT(TDS) U/S 197(1) OF THE ACT AS UNDER: SUGAM VINIMAY PVT. LTD. CERTIFICATE DATED 17.08. 2011 SNEHSIL MARKETING PVT. LTD. CERTIFICATE DATED 16. 08.2011 SILVERPOINT INFRATECH PVT. LTD. CERTIFICATE DATED 16.08.2011 THE VERY FACT THAT THE DCIT(TDS) HAS ISSUED NIL DED UCTION CERTIFICATE U/S 197(1) OF THE ACT OBLIGATES THE ASSESSEE TO MAKE THE PAYMENT WITH OUT DEDUCTION OF TAX AT SOURCE. WE HOLD THAT THE IDENTITY OF THE COMMISSION AGENTS ARE PROVED BEYOND DOUBT INASMUCH AS 6 ITA NO.1805/KOL/2016 M/S CALCUTTA MINING SEALANTS PVT. LTD. A.YR. 2010-11 6 THE SUMMONS ISSUED BY THE LD. AO ON THEM WERE DULY SERVED ON THEM; THEY ARE INCOME TAX ASSESSEES; CERTIFICATE ISSUED U/S 197(1) OF THE ACT FOR EACH OF THE COMMISSION AGENTS BY THE INCOME-TAX DEPARTMENT; ALL THE COMMISSION AG ENTS HAVE FILED THEIR INCOME-TAX RETURNS SHOWING THE COMMISSION RECEIVED AS INCOME I N THEIR RESPECTIVE RETURNS AND MASTER DATA OF REGISTRAR OF COMPANIES WEBSITE SHOWI NG THESE COMPANIES IN ACTIVE CATEGORY. WE HOLD THAT THE PAYMENTS IN COMMISSION A RE MADE ON A MONTHLY/PERIODICAL BASIS BASED ON THE CLEARING OF THE BILLS OF THE ASS ESSEE PURSUANT TO PERIODICAL INVOICES RAISED BY THOSE COMMISSION AGENTS CLEARLY DEFINING THE SERVICES RENDERED BY THEM AND LINKING THE SALES MADE THROUGH THEM FOR AND ON BEHA LF OF THE ASSESSEE. ALL THESE PAYMENTS ARE MADE BY A/C PAYEE CHEQUES. THERE IS AB SOLUTELY NO IOTA OF EVIDENCE TO SUSPECT THE GENUINENESS OF THESE TRANSACTIONS AND T HERE IS NO CASE MADE OUT BY THE REVENUE BEFORE US TO SUSTAIN THE ORDER OF THE LD. A O. WE ALSO FIND THAT THE LD. CIT(A) HAD RIGHTLY PLACED RELIANCE ON THE CO-ORDINATE BENC H DECISION RENDERED TO SUPRA AMONG OTHER DECISIONS. 7. IN VIEW OF THE AFORESAID OBSERVATIONS, IN THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) HAD RIGHTLY DELETED THE DI SALLOWANCE IN THE SUM OF RS. 1,21,52,000/- AND WE FIND NO INFIRMITY IN HIS ORDER . ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 24.08.2018 SD/- SD/- [S.S. GODARA] [ M .BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 24.08.2018 SB, SR. PS 7 ITA NO.1805/KOL/2016 M/S CALCUTTA MINING SEALANTS PVT. LTD. A.YR. 2010-11 7 COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRLCE-3(1), KOLKATA, P-7, CHOWRINGHEE SQU ARE, AAYAKAR BHAWAN, 4 TH FLOOR, ROOM NO. 19, KOLKATA-69. 2. M/S CALCUTTA MINING SEALANTS PVT. LTD., 4/24, WA TERLOO STREET, KOLKATA-69. 3..C.I.T.(A)- 4. C.I.T .- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S