Natwaria Shrilal Lasaria, Pune V. Income-tax Officer,

ITA 1838/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9097 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-03-2018
• Assessment Year: 2001-2002
• Appeal Filed On: 26-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , , . , ! , '# BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM . /ITA NO.1838/PUN/2016 $ % % / ASSESSMENT YEAR : 2001-02 SHRI NATWARLAL SHRILAL LASARIA, S. NO.170, DYANESHWAR COLONY, AKURDI, PUNE-411 035. PAN : AALPL8308B ....... / APPELLANT &$ / V/S. THE INCOME TAX OFFICER, WARD 9(2), PUNE. / RESPONDENT APPELLANT BY : SHRI M.K KULKARNI RESPONDENT BY : SHRI ANIL KUMAR CHAWARE / DATE OF HEARING : 20.03.2018 / DATE OF PRONOUNCEMENT :26.03.2018 ' / ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-9, PUNE DATED 23.06.2016 FOR ASSESSMENT Y EAR 2001-02. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A)-9 PUNE WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION M ADE BY THE A.O. UNDER SECTION 40A(2)(B) OF THE ACT ON ACCOUNT OF COMMISSI ON PAID TO TWO SONS OF THE ASSESSEE. THE PAYMENT OF COMMISSION OF RS.6,00,000/ - WAS ESSENTIAL FOR THE EXISTENCE OF THE BUSINESS AND BUSINESS EXIGENCI ES. THE ADDITION UNDER 2 ITA NO.1838/PUN/2016 A.Y.2001-02 SECTION 40A(2)(B) WAS UNWARRANTED AND IT BE DELETED . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LD. CIT WAS ALSO NOT JUSTIFIED IN REJECTING THE ALTERNATIVE SUBMISSI ON BASED ON THE AMENDMENT TO 2 ND PROVISO TO S. 40(A)(I-A) INTERPRETED AS HAVING RET ROSPECTIVE OPERATION W.E.F 2005-06. IN VIEW OF HON'BLE SUPREME COURT JUD GMENT IN HINDUSTAN COCA COLA (2007) 293 ITR 226 THE PROVISION I.E 2 ND PROVISO TO S. 40(A)(I-A) IS PRESUMED TO BE IN EXISTENCE SINCE THE ENACTMENT OF L AW. THE ADDITION MADE BE DELETED FOLLOWING HON'BLE SUPREME COURT JUDGMENT . 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE RECIPIENTS OF THE COMMISSION THE PAYMENT OF WHICH WAS ADDED BACK I N THE HANDS OF THE ASSESSEE WAS GENUINE AND WAS DECLARED BY THE RECIPI ENTS IN THEIR RESPECTIVE RETURNS OF INCOME WITH COMMENSURATE PAYMENTS OF TAX ES. IN THIS VIEW OF THE MATTER THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) WAS NOT SUSTAINABLE. IT BE DELETED. 4. THE APPELLANT CRAVES TO LEAVE, ADD/ AMEND OR ALT ER ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT TH E ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PLASTIC/AUTOMOBILE COMPONE NTS AND FILED RETURN OF INCOME ON 31.10.2001 DECLARING TOTAL INCOME AT RS .4,82,175/-. THE ASSESSING OFFICER MADE VARIOUS ADDITIONS ON THE FOLLOWING COU NTS AND DETERMINED TOTAL INCOME OF ASSESSEE AT RS.11,07,454/- : ADD : AS DISCUSSED ABOVE 1. ON ACCOUNT OF COMMISSION 6,00,806/- 2. ON ACCOUNT OF PERSONAL EXPENSES 8,842/- 3. ON ACCOUNT OF EXCESS ELECTRICITY 2,128/- 4. ON ACCOUNT OF AD-HOC ADDITION 5,000/- 5. ON ACCOUNT OF INTEREST U/S.244A NOT OFFERED FOR TAXATION 8,504/- 4. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE CON TESTED ALL THE ABOVE ADDITIONS. EVENTUALLY, THE ASSESSING OFFICER DISMISSED THE CON TENTIONS OF ASSESSEE. THE MAJOR ADDITION IS ON ACCOUNT OF COMMISSION PAYMENT AT RS.6,00,806/-. 5. THE GROUNDS RAISED BY ASSESSEE IN THIS APPEAL ALSO RE VOLVES AROUND THE SAID MAJOR ADDITION OF RS.6,00,806/-. THE FACTS RELATING TO AD DITION AT RS. 3 ITA NO.1838/PUN/2016 A.Y.2001-02 6,00,806/- INCLUDES THAT THE ASSESSEE MADE PAYMENTS OF C OMMISSION TO HIS TWO SONS NAMELY, SHRI DHEERAJ N. LASARIA AND SHRI NEERAJ N. L ASARIA OF RS.3,50,000/- AND RS.2,50,000/- RESPECTIVELY FOR BUSINESS P URPOSE OF ASSESSEE. THE RELEVANT FINDINGS OF THE ORDER COMMISSIONER OF INCOME T AX (APPEALS) ON THIS ISSUE IS EXTRACTED AS UNDER: 5.3 I HAVE CONSIDERED CAREFULLY THE FACTS OF THE CA SE AND SUBMISSIONS OF THE APPELLANT ON THE ISSUE. THE AO AFTER CARRYING OUT D ETAILS INVESTIGATION HAS DISALLOWED COMMISSION PAYMENT OF RS. 6,00,806/- WHI CH WAS PAID TO HIS TWO SONS AS UNDER: I) SHRI DHEERAJ N. LASARIA RS. 3,50,000/- II) SHRI NEERAJ N. LASARIA RS. 2,50,000/- THE AO HAS ESTABLISH THROUGH INQUIRES MADE AND RECO RDING THEIR STATEMENT THAT THEY DID NOT PROVIDE ANY SERVICES FOR EARNING SUCH COMMISSION SHOWN TO THEM BY THE APPELLANT. CONSIDERING THE FACTS GATHER ED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HE HAD CONCLUDED IN PARA 11 OF THE ASSESSMENT ORDER THAT BOTH SHRI DHEERAJ AND SHRI NE ERAJ LASARIA COULD NOT PRODUCE ANY EVIDENCE TO JUSTIFY THE COMMISSION PAYM ENT TO THEM. DHEERAJ LASARIA HAD NOT FILED ANY RETURN OF INCOME FOR A.Y. 2001-02. HE ONLY FILED IT AFTER THE INQUIRES WERE STARTED IN THE PRESENT CASE AND THE RETURN WAS BEYOND THE LIMITATION TIME AND WAS INVALID RETURN. THUS, THE CONSIDERING THE FACTS OF THE CASE THE AO CONCLUDED THAT THE APPELLA NT HAS FAILED TO JUSTIFY THE COMMISSION PAYMENT TO HIS SONS AND ACCORDINGLY HE D ISALLOWED THE SAME. FURTHER, DURING THE COURSE OF APPELLATE PROCEEDINGS THE AR OF THE APPELLANT WAS ASKED WHETHER ANY TDS WAS MADE ON THE COMMISSIO N CLAIMED TO HAVE MADE TO THE PERSONS SPECIFIED ON 40A(2)(B). THE REP LY FILED VIDE LETTER DATED 07.06.2016 REVEALED THAT NO TDS WAS MADE ON THE SAI D PAYMENT OF THE COMMISSION. HOWEVER, THE LD. AR IN SUPPORT OF THE C LAIM HAS REFERRED TO THE AMENDMENT INTRODUCED TO SECOND PROVISO TO SECTION 4 0A(IA) INSERTED BY FINANCE ACT, 2012. IT HAS FURTHER CLAIM THAT THE AM ENDMENT IS APPLICABLE RETROSPECTIVELY WITH EFFECT FROM 01.04.2005. HERE A LSO THE ARGUMENT OF THE ASSESSEE IS NOT FOUND ACCEPTABLE AS THESE PROVISION S ARE APPLIED IN CASE OF THE PAYER ASSESSEE WHERE THE AMOUNT UNDER QUESTION HAS BEEN REFLECTED IN THE RETURN OF THE PAYEE AND DUE TAXES HAVE BEEN PAI D. IN THE INSTANT CASE IT IS CLEAR FROM THE DISCUSSION MADE BY THE AO THAT SH RI DHEERAJ LASARIA HAS NOT FILED ANY RETURN AND THUS HAS NOT OFFERED ANY I NCOME AND IN THE CASE OF NEERAJ LASARIA ALSO IT IS NOT SUBSTANTIATED WITH PR OOF THAT SUCH INCOME WAS OFFERED IN THE RETURN. MOREOVER, THE APPELLANTS CA SE PERTAINS TO A.Y.2001-02 AND HENCE THE ABOVE AMENDED PROVISIONS ARE NOT APPL ICABLE IN HIS CASE. THUS, CONSIDERING THE FACTS OF THE CASE THE APPEAL ON GROUND NO. 1 TO 4 IS DISMISSED. 6. FROM THE ABOVE, I T IS THE CASE OF ASSESSEE THAT THE PAYMENTS ARE GENUIN E AND THE SAME WERE MADE IN RESPONSE TO SERVICES RENDER ED BY HIS SONS. THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT DO NOT APPROVE TH E DECISION OF AO IN DISALLOWANCE OF ENTIRE EXPENDITURE AS EXCESSIVE AND UNREAS ONABLE. THE ASSESSEE 4 ITA NO.1838/PUN/2016 A.Y.2001-02 EXPLAINED THAT THE COMMISSION PAID TO HIS TWO SONS @ 3% O N TOTAL TURNOVER OF RS. 1.08 CRORES ON ACCOUNT OF ONE SINGLE CONTRACT OF SU PPLYING GUNNY BAGS AND SERVICES RENDERED BY SHRI DHEERAJ LASARIA AND NEERAJ LASARIA . THE COMMISSIONER OF INCOME TAX(APPEALS) CONSIDERED THE SAID SUBMISSION OF THE ASSESSEE AND DISMISSED THE APPEAL AS PER DISCUSSION GIVEN IN PARA-5.3 OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEES FAILURE TO MAKE TDS ON THE SAID PAYMENTS AND THE APPLICABILITY OF PROVISIONS OF SECT ION 40A(IA) OF THE ACT ARE SOME OF THE REASONS GIVEN BY COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT SHRI DHEERAJ LASARIA AND NEERAJ LASARIA DID NOT FILE THE RETURN OF INCOME. THERE IS ALSO NO D EFINITE DISCUSSION ABOUT APPLICABILITY OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ABSENCE OF THE SUITABLE EXPLANA TIONS AS WELL AS THE CLARITY ON VARIOUS LEGAL PROPOSITION RELEVANT TO THE ISSUES, THE COMMISSIONER OF INCOME TAX (APPEALS) PROCEEDED TO CONFIRM THE ADDITIONS MA DE BY THE ASSESSING OFFICER. THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE US RAISIN G THE GROUNDS EXTRACTED ABOVE. 7. AT THE OUTSET, THE LD. COUNSEL OF ASSESSEE SUBMITTED T HAT APPLICABILITY OF SECTION 40A(2)(B) OF THE ACT IN THIS CASE IS PREMATURE AS TH E ASSESSING OFFICER FAILED TO DISCHARGE HIS ONUS ABOUT ESTABLISHING THE EXCESSIV ENESS OR UNREASONABLENESS OF PAYMENTS/ COMMISSION BY ASSESSEE TO SHRI DHEERAJ LASARIA AND NEERAJ LASARIA. IT IS THE CASE OF ASSESSEE THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REJECTING ALTERNATIVE SUBMISSION WITH REGARD TO APPLICABILITY OF THE AMENDED PROVISIONS OF SECTION 40(A)(IA) OF TH E ACT WHICH OPERATES RETROSPECTIVELY W.E.F ASSESSMENT YEAR 2005-06 ONWARDS. AS SUCH, THE YEAR UNDER CONSIDERATION IS PRIOR TO THIS AMENDMENT. FURTHER, THE A PPLICABILITY OF DECISION RENDERED BY JURISIDICTIONAL HIGH COURT IN THE CASE OF INDO SAUDI SERVICES (TRAVEL) PVT. LTD, 310 ITR 306 (BOM.) IS RELEVANT IN LAW WHICH IS RELEVANT 5 ITA NO.1838/PUN/2016 A.Y.2001-02 FOR THE PROPOSITION THAT DISALLOWANCE ON COMMISSION IS CALLED FOR ONLY WHEN PAYER AND PAYEE ARE NOT SUBJECT TO HIGHER TAX RATES. AS SUCH, THERE ARE NO PAPERS RELATING TO THE TAXABILITY OF INCOME OF THE PAYEES AT THE C OMMISSION. THUS, ACCORDING TO LD. AR WHEN THE AO FAILED TO MAKE OUT A CAS E OF EXCESSIVENESS OR UNREASONABILITY OF THE COMMISSION PAYMENTS TO THE PAYEES BASED ON THE DATA GATHERED FROM OPEN MARKET, THE PROVISION OF SECTION 40A(2)( B) OF THE ACT CANNOT BE APPLIED SUCCESSFULLY AND VALID. IN THIS CASE, THE AO DID NOT UNDERTAKE ANY INVESTIGATION OR COLLECTED ANY COMPARABLES CASES BEFORE D ISALLOWING THE CLAIM OF THE ASSESSEE. THEREFORE, THE LD. AR SUBMITTED FOR DELETING THE ADDITION ON THIS ACCOUNT. 8. LD. DR FOR THE REVENUE HEAVILY PLACED RELIANCE ON THE O RDER OF ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS). 9. ON HEARING BOTH THE PARTIES, WE FIND THAT THERE IS NO D ISPUTE THAT PAYMENTS OF COMMISSION ON TRANSACTIONS ARE GENUINE. THER EFORE, THE ONLY ISSUE IS WITH REGARD TO THE EXCESSIVENESS AND UNREASONABLENES S OF THE COMMISSION PAYMENTS. IN THIS REGARD, WE FIND THAT THE ASSESSING OFFICER IS UNDER OBLIGATION TO BRING COMPARABLE CASES OR GATHER DATA FROM THE OPEN MARKET, IF ANY. WE FIND THE ASSESSING OFFICER FAILED TO DISCHARGE HIS ONUS IN THIS REG ARD. FROM THAT POINT OF VIEW, ADDITION MADE BY THE ASSESSING OFFICER IS PREMATURE. UNDER THESE PROVISIONS, THE 100% OF THE PAYMENTS CANNOT BE CONSIDERE D AS EXCESSIVE OR UNREASONABLE. FURTHER, COMING TO THE APPLICABILITY OF THE PRO VISIONS OF SECTION 40A(IA), WE ARE OF THE OPINION THAT THERE WAS NO CONCLUSIV E FINDINGS OF THE AUTHORITIES BELOW IN THIS REGARD. THEREFORE, IN OUR VIEW, THE ASSESSING OFFICER DID NOT APPLY HIS MIND TO MAKE OUT THE APPLICABILITY OF PROVIS IONS OF SECTION 40A(IA) OF THE ACT PROPERLY. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSE E ARE ALLOWED. 6 ITA NO.1838/PUN/2016 A.Y.2001-02 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 26 TH DAY OF MARCH, 2018. SD/- SD/- ( / SUSHMA CHOWLA ) ( . / D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; ! ' / DATED : 26 TH MARCH, 2018. SB '()*+,-,* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-9, PUNE 4. THE PR. CIT-5, PUNE. 5. %&' () , * () , - +,- , / DR, ITAT, SMC BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // * 2 / BY ORDER, 3 (- /PRIVATE SECRETARY * () , / ITAT, PUNE.