M/s. SPG Marketing, Coimbatore V. ITO, Coimbatore

ITA 1840/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81179 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-08-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 18-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS C VATCHALA
• Assessee Lawyers: JHARNA B HARILAL
• Section: 131

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHE NNAI . , . ! ! ! ! , ' ' ' ' # # # # $ $$ $ BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.1840/MDS/2013 ' ! %! / ASSESSMENT YEAR :2010-11 M/S. SPG MARKETING, NO. 37, SECOND FLOOR, SIR SHANMUGAM ROAD, R.S. PURAM, COIMBATORE 641 002. [PAN: ABJFS3079B] VS. THE INCOME TAX OFFICER, WARD II(3), COIMBATORE 641 018. ( &' &' &' &' /APPELLANT ) ( ()&' ()&' ()&' ()&' / RESPONDENT ) &' * + / APPELLANT BY : MS. JHARNA B HARILAL, C.A. ()&' * + / RESPONDENT BY : MRS. C. VATCHALA, JCIT * , / DATE OF HEARING : 25.08.2014 -% * , /DATE OF PRONOUNCEMENT : 12.09.2014 . . . . / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX I, COIMBATORE, DATED 21. 08.2013 RELEVANT TO THE ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S IN THE BUSINESS OF TRADING IN TEXTILE MACHINERIES AND SPARES AND MARKE TING. THE ASSESSEE I.E. M/S. SPG MARKETING IS A PARTNERSHIP FIRM WITH THREE PARTNERS. THE ASSESSEE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1840 1840 1840 1840/M/ /M/ /M/ /M/1 11 13 33 3 2 IS AN AGENT OF BRACKER, A SWITZERLAND BASED COMPA NY MANUFACTURING TEXTILE MACHINERY PARTS. THE FIRM IS ALSO DOING TRADING OF TEXTILE MACHINERY PARTS OF THE SAME COMPANY. DURING THE RELEVANT ASSESSMENT YE AR, THE ASSESSING OFFICER HAS NOTICED FROM THE PROFIT AND LOSS ACCOUN T THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF .29,47,987/- AS COMMISSION FROM BRACKER AND HAS ALSO DONE A SALES TURNOVER OF .57,37,418/-. THE ASSESSEE HAS ALSO CLAIMED COMMISSION EXPENSES PAID OF .19,89,000/-. IN ADDITION TO THIS COMMISSION PAID ALSO CLAIMED .2,50,550/-. ON VERIFICATION BY THE ASSESSING OFFIC ER, IT WAS NOTICED THAT THE COMMISSION OF .19,89,000/- WAS PAID TO THREE LADIES I.E. SMT. PARVATHY, SMT. GAYATHRI AND SMT. SHYAMALA . EACH OF THEM WAS PAID AN EQUAL AMOUNT OF .6,63,000/-. THESE THREE LADIES ARE WIVES OF THE THREE PARTNERS OF THE FIRM. THE ASSESSING OFFICER I SSUED SUMMONS UNDER SECTION 131(1A) OF THE INCOME TAX ACT TO THESE SO C ALLED SUB AGENTS TO KNOW THEIR CONTRIBUTION TO EARN THE ABOVE MENTIONED COMM ISSION. ALL THREE OF THEM WERE PRESENT BEFORE THE ASSESSING OFFICER AND SWORN STATEMENTS WAS RECORDED FROM THEM UNDER SECTION 131 OF THE ACT. BO TH SMT. PARVATHY AND SMT. GAYATHRI WERE DEPOSED BEFORE THE ASSESSING OFF ICER THAT THEY ARE HOUSE WIVES. SMT. SHYAMALA IS EMPLOYED WITH NEW IND IAN EXPRESS NEWSPAPERS (P) LTD. WHEN THE ASSESSING OFFICER ASKE D THE THREE LADIES ABOUT THE PRODUCTS DEALT BY THE FIRM AND THEIR PERC ENTAGE OF COMMISSION, THEY ARE NOT ABLE TO SAY ANYTHING. THEREAFTER, THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE COMMISSION EXPENSES CLAI MED SHOULD NOT BE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1840 1840 1840 1840/M/ /M/ /M/ /M/1 11 13 33 3 3 DISALLOWED. IT WAS SUBMITTED THAT THERE IS AN AGREE MENT BETWEEN THE ASSESSEE AND THE SUB-AGENTS, ALL PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND TDS WAS ALSO DEDUCTED. THEREFORE, THE COMMISSION PAID BY THE ASSESSEE HAS TO BE ALLOWED. THEREAFTER, THE ASSESSING OFFICER FURTHER DEPUTED INCOME TAX INSPECTOR SHRI DANDAPANI TO MAKE ENQUIRY ABOUT THE SO CALLED SUB-AGENTS AND AFTER ENQUIRY HE SUBMITTED A REPORT THAT SMT. PARVATHY AND SMT. GAYATHRI ARE HOUSE WIVES AND SMT. SHYAMALA HAS ALREADY EMPLOYED WITH NEW INDIAN EXPRESS NEWSPAPERS (P) LTD. AFTER CONSIDERING THE REPORT OF THE INSPECTOR AND ALSO AF TER CONSIDERING THE ENTIRE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND SWI TZERLAND COMPANY BRACKER, THE ASSESSING OFFICER DISALLOWED THE COM MISSION EXPENSES CLAIMED BY THE ASSESSEE. 3. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE O RDER OF THE ASSESSING OFFICER BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE SUBMISSION MADE BY THE APP ELLANT AND ALSO THE ORDER OF THE ASSESSING OFFICER. THE ASSESS ING OFFICER HAS MADE PROPER INVESTIGATION OF THE FACT TO DISALLOW THE CL AIM OF PAYMENT OF COMMISSION. SWORN STATEMENT U/S.131 OF THE INCOME-T AX ACT RECORDED FROM THE SUB-AGENTS WHICH CLEARLY PROVED THAT THE S UB-AGENTS ARE NOT INVOLVED IN THE BUSINESS AT ALL. ONE OF THE SUB-AGE NT SMT. SHYAMALA WAS EMPLOYED WITH NEW INDIAN EXPRESS NEWS PAPERS (P) LT D. ON SPECIFIC QUESTIONS BY THE ASSESSING OFFICER REGARDING THE PR ODUCTS DEALT BY THE FIRM AND THEIR PERCENTAGE OF COMMISSION, THESE SUB- AGENTS WERE NOT ABLE TO ANSWER. THE ASSESSING OFFICER ALSO OBSERVED THAT ALL THE SUB- AGENTS WERE PAID AN EQUAL AMOUNT OF COMMISSION WHIC H SEEMS TO BE VERY PECULIAR AS NORMAL COMMISSION WHICH WAS PAID O N PRO-RATA BASIS ON SALES OR ORDERS EFFECTED BY THE COMMISSION AGENT S. THE ASSESSING I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1840 1840 1840 1840/M/ /M/ /M/ /M/1 11 13 33 3 4 OFFICER ALSO STATED IN THE ORDER THAT THESE LADIES ARE WIVES OF THE THREE PARTNERS OF THE FIRM. IT IS ESSENTIAL THAT THE APPELLANT SHOULD BE IN A P OSITION TO EXPLAIN THE NATURE OF SERVICES DONE BY THE SUB-AGEN TS FOR PAYING THE COMMISSION. IN THIS CASE THE APPELLANT WAS NOT ABLE TO EXPLAIN THE NATURE OF SERVICES RENDERED BY THE SUB-AGENTS. THE ASSESSING OFFICER ALSO MADE ENQUIRIES THROUGH THE INSPECTOR AND EXAMI NED THE VOUCHERS OF COMMISSION AND CONCLUDED THAT THE COPIES OF SUB- AGENT AGREEMENTS ENTERED BY THE FIRM AND SUB-AGENTS SHOW THE AGREEME NT AS DATED 17.3.2010. THE YEAR, 2010 WAS CORRECTED AS 2008 MAN UALLY. BUT IN THE ACCEPTANCE LETTER FROM THE SUB-AGENTS TO THE FIRM A CCEPTING THE TERMS AND CONDITIONS IT WAS MENTIONED AS FOLLOWS;- 'I ACK NOWLEDGE WITH THANKS THE RECEIPT OF YOUR AGREEMENT LETTER DATED 1 7.03.2010 AND THE DUPLICATE COPY DULY SIGNED BY ME IS ENCLOSED HEREWI TH FOR YOUR RECORDS'. THIS CLEARLY SHOWS THAT THERE WAS NO SUCH SUB-AGENT AGREEMENT DURING THAT PERIOD. THE ASSESSING OFFICER ALSO BROUGHT ON RECORD THAT A S PER CLAUSE 6 OF THE AGREEMENT ENTERED BY THE ASSESSEE WITH THE COMP ANY 'BRACKER', IT IS SAID THAT SPG MARKETING ARE NOT ENTITLED TO APPO INT ANY SUB-AGENTS WITHOUT WRITTEN APPROVAL FROM BRACKER. THE MANAGING PARTNER COULD NOT FURNISH ANY EVIDENCE TO SHOW THAT THE SUBAGENTS WERE APPOINTED WITH WRITTEN APPROVAL FROM 'BRACKER'. CONSIDERING A LL THE FACTS, THE INVESTIGATIONS AND FACTS VERIFIED BY THE ASSESSING OFFICER, I CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS AN AGREEMENT BETWEEN THE ASSESSEE AND THE SUB-AGENTS A ND ALL PAYMENTS WERE MADE THROUGH CHEQUES AND TDS WAS ALSO DEDUCTED AND THE COMMISSION AMOUNT PAID BY THE ASSESSEE HAS TO BE AL LOWED. 6. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTE D THE ORDER PASSED BY THE AUTHORITIES BELOW. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1840 1840 1840 1840/M/ /M/ /M/ /M/1 11 13 33 3 5 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CA SE, THE ASSESSEE IS AN AGENT OF BRACKER, A SWITZERLAND BASED COMPANY MAN UFACTURING TEXTILE MACHINERY PARTS. THE ASSESSEE HAS RECEIVED COMMISSI ON AMOUNT OF .29,47,987/- AND PAID COMMISSION TO THREE LADIES NA MELY SMT. PARVATHY, SMT. GAYATHRI AND SMT. SHYAMALA OF .19,89,000/-. THESE THREE LADIES ARE WIVES OF THREE PARTNERS OF THE ASSESSEE FIRM AND TH E PAYMENT ALSO MADE TO ALL THREE LADIES ON PRO-RATA BASIS I.E. .6,63,000/-. WHEN THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 131(1A) OF THE ACT, TWO LADIES NAMELY SMT. PARVATHY AND SMT. GAYATHRI STATED BEFORE THE A SSESSING OFFICER THAT THEY ARE HOUSE WIVES AND NOTHING TO DO WITH THE BUS INESS. ANOTHER LADY SMT. SHYAMALA HAS DEPOSED THAT SHE WAS ALREADY EMPLOYED WITH NEW INDIAN EXPRESS NEWSPAPERS (P) LTD. THE ASSESSING OFFICER HAS DEPUTED HIS INSPECTOR TO ENQUIRE ABOUT TWO LADIES. THE INSPECTO R AFTER ENQUIRY WITH NEIGHBOURS OF SUB-AGENTS, SUBMITTED THAT THEY ARE H OUSE WIVES. IN SO FAR AS SMT. SHYAMALA IS CONCERNED, SHE HAS ALREADY EMPLOYE D WITH NEW INDIAN EXPRESS NEWSPAPERS (P) LTD. THE ABOVE TWO LADIES SM T. PARVATHY AND SMT. GAYATHRI, THEY THEMSELVES ACCEPTED THAT THEY ARE HO USE WIVES AND ANOTHER LADY WAS WORKING WITH ANOTHER COMPANY NAMELY NEW IN DIAN EXPRESS NEWSPAPERS (P) LTD. THE ASSESSING OFFICER, AFTER DE TAILED ENQUIRY AND DETAILED EXPLANATION RECEIVED FROM THE SUB-AGENTS, DISALLOWED THE COMMISSION PAYMENT MADE BY THE ASSESSEE. WE FIND TH AT THE ASSESSING I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1840 1840 1840 1840/M/ /M/ /M/ /M/1 11 13 33 3 6 OFFICER HAS DISCHARGED THE ONUS CAST UPON HIM TO CO ME TO THE CONCLUSION THAT THE CLAIM OF THE ASSESSEE IS NOT CORRECT. NOW IT IS THE DUTY OF THE ASSESSEE TO DISCHARGE THE BURDEN CAST UPON IT TO SA Y THAT IT HAS PAID THE COMMISSION TO THREE LADIES, WHO ARE WIVES OF THE PA RTNERS OF THE ASSESSEE FIRM. FOR THAT IT HAS PRODUCED AGREEMENT ENTERED BE TWEEN THE THREE LADIES, PAYMENT MADE BY ACCOUNT PAYEE CHEQUES AND TDS DEDUC TED. WE FIND FROM THE ENTIRE FACTS OF THE CASE THAT SIMPLY BECAUSE TH ERE IS SOME AGREEMENT AND PAYMENT MADE BY ACCOUNT PAYEE CHEQUE AND TDS DE DUCTED ARE NOT SUFFICIENT TO SHOW THAT THE PAYMENTS MADE BY THE AS SESSEE TO THREE LADIES WHO ARE HAPPEN TO BE WIVES OF THE THREE PARTNERS OF THE ASSESSEE FIRM. IN THIS CASE, WHEN THE ASSESSEE RECEIVED COMMISSION OF .29,47,987/- AND PAID .19,89,000/- TO THREE LADIES, WHO ARE WIVES OF THE PARTNERS OF THE ASSESSEE FIRM AND THE PAYMENT ALSO MADE ON PRO-RATA BASIS. UNDER THESE CIRCUMSTANCES THERE IS HEAVY BURDEN ON THE ASSESSEE TO PROVE THAT THE COMMISSION PAYMENT WAS MADE BY THE ASSESSEE TO SUB- AGENTS. WE FIND THAT THE ASSESSEE FAILED TO DISCHARGE THE BURDEN CAST UP ON IT AND THE ASSESSEE HAS PAID THE COMMISSION TO THE WIVES OF THE THREE P ARTNERS ON PRO-RATA BASIS I.E. COMMISSION PAID TO THREE LADIES OUT OF WHICH T WO LADIES ARE HOUSE WIVES AND ANOTHER LADY WAS WORKING WITH NEW INDIAN EXPRES S NEWSPAPERS (P) LTD. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES, FIN DINGS OF THE LD. CIT(APPEALS) AS REPRODUCED HEREINABOVE AND OUR ABOV E FINDINGS, WE FIND NO I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1840 1840 1840 1840/M/ /M/ /M/ /M/1 11 13 33 3 7 REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD . CIT(APPEALS) AND ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS DI SMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON FRIDAY, THE 12 TH OF SEPTEMBER, 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 12.09.2014 VM/- . * (',/0 10%, /COPY TO: 1. &' / APPELLANT, 2. ()&' / RESPONDENT, 3. 2 ( ) /CIT(A), 4. 2 /CIT, 5. 03 (',' /DR & 6. 4! 5 /GF.