Jagdeep Bansal, Bolangir V. ACIT, Sambalpur

ITA 189/CTK/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4265 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 22-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: P K MISHRA
• Keywords: Business expenditure
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.189 /CTK/2015 ASSESSMENT YEAR S : 2011 - 12 SRI SUNIL KUMAR CHANDAK, VISHNU TRADING COMPANY, NAYABAZAR, BALASORE. VS. JCIT, BALASORE RANGE, BALASORE. PAN/GIR NO. ADGPC 0558 A (APPELLANT ) .. ( RESPONDENT ) ASSESSEE S BY : SHRI P.K.MISHRA, AR REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 9 /11 / 2016 DATE OF PRONOUNCEMENT : 9 /11 / 2016 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - CUTTACK, DATED 3.3.2016 , FOR THE ASSESSMENT YEAR 2011 - 2012 . 2. IN GROUND NOS.2,3 & 4, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF 10% OF THE COMMISSION EXPENSES OU T OF THE DISALLOWANCE OF 25% OF THE COMMISSION EXPENSES MADE BY THE ASSESSING OFFICER. 2 ITA NO.189 /CTK/2015 ASSESSMENT YEARS : 2011 - 12 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED COMMISSION PAYMENT ON PURCHASE OF DAL AND SOYA CHUNKS FOR MID DAY MEAL SCHEME OF RS.22,74,226/ - . THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO JUSTIFY THE CLAIM OF PAYMENT OF COMMISSION ON PURCHASES. THE ASSESSEE SUBMITTED THAT FOR SUPPLY OF MID DAY MEAL SCHEME, SUPPLY HAD TO BE MADE IN LARGE QUANTITIES AND AT VERY SHORT INTERVALS. THE PURCHASES ARE MADE FROM OUTSIDE THE STATE FOR WHICH THE ASSESSEE HAD TO SEEK THE SERVICES OF MIDDLEMAN T O ENSURE TIMELY SUPPLY. IT WAS ALSO SUBMITTED THAT THE PAYMENT OF COMMISSION W AS SUBJECTED TO TDS. T HE ASSESSING OFFICER OBSERVED THAT THE PAYMENT OF COMMISSION WAS NOT VERIFIABLE AND MADE AN ESTIMATED DISALLOWANCE OF 25% OUT OF THE TOTAL COMMISSION EXPE NSES OF RS.22,74,226/ - AND MADE AN ADDITION OF RS.7,07,259/ - TO THE INCOME OF THE ASSESSEE. 4. ON APPEAL, LD CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT MADE ANY EFFORT TO PRODUCE THE DETAILS OF COMMISSION PAID, NAME AND ADDRESS AND PAN OF THE PERSONS TO WHO M THE COMMISSIONS WERE PAID AND THE MODE OF SUCH PAYMENTS, HENCE, INFLATION OF EXPENDITURE COULD NOT BE RULED OUT. THEREFORE, HE SUSTAINED THE DISALLOWANCE AT 10% OF THE COMMISSION CLAIMED BY THE ASSESSEE. 3 ITA NO.189 /CTK/2015 ASSESSMENT YEARS : 2011 - 12 5. BEFORE ME , LD A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OUT OF COMMISSION PAYMENT OF RS.22,74,226/ - CLAIMED BY THE ASSESSEE @ 25% AND ADDITION OF RS.7,07,259/ - WAS MADE TO THE INCOME OF THE ASSESSEE ON THE GROUND THAT COMMISSION PAYMENTS WERE NOT VERIFIABLE. HE SUBMITTED THAT THE DISALLOWANCE WAS MADE WITHOUT POINTING OUT WHICH OF THE COMMISSION PAYMENTS WERE NOT VERIFIABLE. WITHOUT POINTING OUT THE SAME, AN ESTIMATED DISALLOWANCE OUT OF COMMISSION PAYMENTS CLAIMED BY THE ASSESSEE WAS NOT JUSTIFIED. 6. ON THE O THER HAND, LD D.R. SUPPORTED THE ORDER OF THE LD CIT(A). 7. I FIND THAT THE ASSESSING OFFICER HAS MADE ESTIMATED DISALLOWANCE OF 25% OF THE COMMISSION EXPENSES OF RS.22,74,226/ - WHICH WORKED OUT TO RS.7,07,259/ - ON THE GROUND THAT COMMISSION PAYMENTS ARE N OT VERIFIABLE. I FIND THAT THE ASSESSEE HAD SUBMITTED BEFORE THE LOWER AUTHORITIES THAT COMMISSION PAYMENTS WERE SUBJECTED TO TDS AND HENCE, THE AMOUNT OF TDS MUST HAVE BEEN DEPOSITED BY THE ASSESSEE WITH THE DEPARTMENT. THERE IS NO WHISPER IN THE ASSESS MENT ORDER OR IN THE ORDER OF THE LD CIT(A) AS TO WHY SUCH DETAILS OF COMMISSION PAYMENTS ARE NOT ACCEPTABLE TO THE DEPARTMENT AND HOW THEY ARE NOT VERIFIABLE. FURTHER, IF ACCORDING TO THE ASSESSING OFFICER, THE PAYMENT OF COMMISSION IS NOT VERIFIABLE, TH EN HOW HE ALLOWED DEDUCTION OF 75% OF THE COMMISSION PAYMENTS AND DISALLOWED 25% OUT OF SUCH PAYMENT. HE HAS NOT POINTED OUT WHICH OF THE COMMISSION PAYMENTS 4 ITA NO.189 /CTK/2015 ASSESSMENT YEARS : 2011 - 12 MADE BY THE ASSESSEE ARE NOT VERIFIABLE. WITHOUT POINTING OUT SUCH SPECIFIC PAYMENTS WHICH ARE N OT VERIFIABLE AN ESTIMATED DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF COMMISSION PAYMENT WHICH IS A GENUINE BUSINESS EXPENDITURE OF THE ASSESSEE, IS NOT SUSTAINABLE IN LAW. THEREFORE, I SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE DISAL LOWANCE OF COMMISSION EXPENSES SUSTAINED BY THE LD CIT(A) AT 10% OF THE COMMISSION EXPENDITURE CLAIMED BY THE ASSESSEE. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 8. IN GROUND NOS.5 & 6 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD CIT(A ) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OUT OF INTEREST EXPENDITURE OF RS.96,300/ - MADE BY THE ASSESSING OFFICER. 9. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFIC E R OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION FOR INTEREST EXPENDITURE ON UNSECURED LOAN OF RS.5,84,885/ - IN THE PROFIT AND LOSS ACCOUNT. A PERUSAL OF THE BALANCE SHEET SCHEDULE - 7, SUNDRY ADVANCES SHOWS THAT THE ASSESSEE HAD ADVANCED A SUM OF RS.92,41,310/ - INCLUDING ADVANCE INCOME TAX AND TDS AT RS.2,50,000/ - FOR NON - BUSINESS PURPOSES. ON A QUERY, THE ASSESSEE REPLIED THAT THE ADVANCES WERE MADE FOR BUSINESS PURPOSES FOR PURCHASE OF DAL, ETC. THE ASSESSING OFFICER OBSERVED THAT TH E REPLY OF THE ASSESSEE IS NOT ACCEPTABLE AS THE ASSESSEE HAS NO TRADE DEALINGS WITH MAA TARINI ROADWA Y S TO WHOM AN ADVANCE OF RS. 9,00,000/ - WAS GIVEN AND ALSO WITH SR I M ANOJ 5 ITA NO.189 /CTK/2015 ASSESSMENT YEARS : 2011 - 12 CHANDAK TO WHOM AN ADVANCE OF RS. RS.1,70,000/ - WAS GIVEN. HE HAS OBSERVED THAT THESE ARE OPENING BALANCES AND THERE ARE NO TRANSACTIONS MADE DURING THE YEAR. THEREFORE, THE ADVANCES APPEAR TO BE FOR NON - BUSINESS PURPOSES. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PAID INTEREST @ 9% ON UNSECURED LOAN AND, THEREFORE, HE DI SALLOWED INTEREST @9% ON ADVANCES TO TWO PERSONS AGGREGATING TO RS.10,70,000/ - AND MADE A DISALLOWANCE OF RS.96,300/ - OUT OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE. 10. THE CONTENTION OF THE LD A.R. IS THAT THESE ADVANCES AS ADMITTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ARE BROUGHT FORWARD BALANCES OF THE IMMEDIATELY PRECEDING YEARS. HE SUBMITTED THAT NO DISALLOWANCE OF INTEREST EXPENDITURE WAS MADE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2010 - 2011. THUS, IT WAS ADMITTED BY THE DEPAR TMENT THAT THE SAID ADVANCES TO TWO PERSONS OF RS.10,70,000/ - WERE BUSINESS ADVANCES OF THE ASSESSEE. IN THE YEAR UNDER APPEAL, THERE IS NO FURTHER ADVANCE MADE TO THESE TWO PERSONS AND, THEREFORE, THE DEPARTMENT CANNOT TURN AROUND IN THIS YEAR AND MAKE T HE DISALLOWANCE OUT OF INTEREST EXPENDITURE OF RS.96,300/ - ON THE GROUND THAT SAID ADVANCES ARE NOT BUSINESS ADVANCES. IT WAS FURTHER ARGUED THAT NO NEXUS BETWEEN THE ADVANCES GIVEN BY THE ASSESSEE AND INTEREST BEARING UNSECURED LOANS OBTAINED BY THE ASSE SSEE HAS BEEN POINTED OUT BY THE ASSESSING OFFICER AND HENCE, NO DISALLOWANCE OF INTEREST 6 ITA NO.189 /CTK/2015 ASSESSMENT YEARS : 2011 - 12 EXPENDITURE COULD BE MADE WITHOUT POINTING OUT SUCH NEXUS. HENCE, HE PRAYED THAT THE DISALLOWANCE MADE SHOULD BE DELETED. 11. ON THE OTHER HAND, LD D.R. SUPPORTED TH E ORDERS OF LOWER AUTHORITIES. 12. I FIND THAT IT IS AN UNDISPUTED FACT THAT THE ADVANCE OF RS.9,00,000/ - TO MAA TARINI ROADWAYS AND ADVANCE OF RS.1,70,000/ - PAID TO SRI MANOJ CHANDAK ARE BROUGHT FORWARD BALANCES OF THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. FURTHER, IT IS THE CONTENTION OF THE ASSESSEE THAT NO DISALLOWANCE OF INTEREST EXPENDITURE WAS MADE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR ON THESE ADVANCES. THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT,(1992) 193 ITR 221 (SC) HAS HELD THAT WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL, AN UNIFORM VIEW SHOULD BE ADOPTED FOR THE SUBSEQUENT ASSESSMENT YEAR IN THE INCOME TAX PROCEEDINGS EVEN THOUGH TECHNICALLY THE PRINCIPLE OF RES - JUDICATA MAY NOT APPLY TO THE INCOME TAX PRO CEEDINGS. THIS VIEW HAS BEEN FOLLOWED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NEO POLY PACK (P) LTD., 245 ITR 492 (DEL) AND HON BLE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. GOPAL PUROHIT (2011) 336 ITR 287 (BOM) . FURTHER, BEFORE DISALLOWI NG INTEREST EXPENDITURE, IT IS MANDATORY FOR THE ASSESSING OFFICER TO PROVE THE NEXUS BETWEEN THE AMOUNT ADVANCED BY THE ASSESSEE AND THE BORROWED FUNDS OF THE ASSESSEE. IN THE INSTA NT CASE, THIS HAS NOT BEEN DONE BY THE ASSESSING OFFICER. THEREFORE, I 7 ITA NO.189 /CTK/2015 ASSESSMENT YEARS : 2011 - 12 SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE DISALLOWANCE OF RS.96,300/ - AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 9 /11 /2016 IN THE P RESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 9 /11 /2016 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK 1. THE APPELLANT : SRI SUNIL KUMAR CHANDAK, VISHNU TRADING COMPANY, NAYABAZAR, BALASORE 2. THE RESPONDENT. JCIT, BALASORE RANGE, BALASORE. 3. THE CIT(A) CUTTACK 4. CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//