J.C.I.T Range - 56,kolkata, Kolkata V. M/s Arti & Sons., Kolkata

ITA 1932/KOL/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1869 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V N PUROHIT
• Assessee Lawyers: G MALLIKARJUNA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI N.V.VASUDEVAN, JM & DR. A.L.SAINI, AM ./ ITA NO.1932/KOL/2012 ( / ASSESSMENT YEAR:2009-2010) JCIT, RANGE-56, 3, GOVT PLACE (W), 2 ND FLOOR, KOLKATA-700001 VS. M/S ARTI & SONS, 167/4, LENIN SARANI, 2 ND FLOOR, KOLKATA-700072 ./ ./PAN/GIR NO.: AAEFA 6622 J ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI G.MALLIKARJUNA, CIT DR REVENUE BY : SHRI V.N.PUROHIT, AR / DATE OF HEARING : 09/03/2017 /DATE OF PRONOUNCEMENT 19/04/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE PERTAININ G TO THE ASSESSMENT YEAR 2009-2010, IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-XXXVI, KOLKATA IN APPEAL NO.357/CIT(A)-XXXVI /KOL/R-56/10-11, DATED 29.10.2012, WHICH IN TURN ARISES OUT OF AN OR DER PASSED BY THE ASSESSING OFFICER (AO) UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961, (HEREINAFTER REFERRED TO AS THE ACT), DATED 30.12 .2010. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE FILED ITS E-RETURN OF INCOME, DISCLOSING TOTAL INCOME OF RS.99,12,640/- ON 22.09.2008. THE ASSESSEES CASE WAS SELECTED FOR SC RUTINY U/S.143(3) OF THE ACT AND THE AO HAS COMPLETED THE ASSESSMENT BY MAKING ADDITION ON ACCOUNT OF GROSS RECEIPTS FROM C&F COMMISSION AT R S.5,33,81,892/- AND ON ACCOUNT OF UNDISCLOSED LIABILITIES PAID THROUGH CREDITS IN THE BOOKS OF TIGER ASSOCIATES AT RS.7,12,32,585/-. ITA NO.1932/KOL/2012 M/S ARTI & SONS 2 3. AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS PARTLY ALLOWED THE A PPEAL OF THE ASSESSEE. LD CIT(A) OBSERVED THAT THE COMMISSION RECEIVED BY THE ASSESSEE AS PER LTS DETAILS AS-26 IS RS.5,71 ,57 ,871/- AS AGAINST DISCLOSURE OF GROSS COMMISSION OF RS.5,56,17,577 /- ONLY, WHICH LED TO UNDERREPORTING OF COMMISSION BY RS.15,40,294/-. THE MATTER WAS ALSO P OINTED OUT TO THE LD. A/R OF THE ASSESSEE AND WAS REQUESTED TO EXPLAIN TH E REASONS FOR SUCH UNDERREPORTING OF COMMISSION. THE LD. AR HOWEVER CO ULD NOT THROUGH ANY LIGHT AS TO WHY THE GROSS COMMISSION WAS DECLAR ED AT RS.5,56,17,577/- AS AGAINST RS.5,71,57,871/- ACTUAL LY RECEIVED/RECEIVABLE BY THE ASSESSEE. THEREFORE, THE FOLLOWING FACTS E MERGED BEFORE THE LD CIT(A): (I). THAT THE GROSS COMMISSION HAS BEEN UNDERREPORT ED BY THE ASSESSEE BY RS.15,40,294/-. (II) THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTAN TIATE THE GENUINENESS OF PAYMENT OF COMMISSION MADE TO THE SU B DISTRIBUTORS AND AGENTS TOTALING TO RS.4,18,41,598/ -. AND DID NOT DEDUCT THE TDS THEREON U/S 194G(1). REGARDING UNDER REPORTING OF COMMISSION BY RS.15,40 ,294/-, THE ASSESSEE COULD NOT EXPLAIN THIS DIFFERENCE DURING T HE REMAND REPORT TO A.O. AND ALSO DURING APPELLATE PROCEEDINGS, THE REFORE THE LD CIT(A) ENHANCED THE INCOME OF THE ASSESSEE BY RS.1 5,40,294/-. 4. REGARDING DISALLOWANCE OF COMMISSION PAYMENT OF RS.4,18,41,598/-, THE LD CIT(A) OBSERVED THAT THE A SSESSEE RECEIVED COMMISSION ON LOTTERY, PART OF WHICH IS PASSED TO D EALERS. THE LD CIT(A) NOTED THAT ON PERUSAL OF BALANCE SHEET, IT W AS FOUND THAT APPELLANT HAS PAID THIS AMOUNT AND NOTHING IS PAYAB LE. HENCE, KEEPING IN VIEW OF THE JUDGMENT OF HON'BLE ITAT, IN THE CASE OF MERILYN SHIPPING & TRANSPORT VS. ADDL.CIT, RANGE-1, ITA NO.477/VIZAG/2008 (VISAKHAPATNAM SPECIAL BENCH)(20 TAXMANN.COM 244), DECIDED ON 29-03-2012, PRONOUNCED ON 09-04- ITA NO.1932/KOL/2012 M/S ARTI & SONS 3 2012, AND JURISDICTIONAL ITAT, KOLKATA IN CASE OF M AHA LAXMI RICE MILLS VS. ADDL CLT, ITA NO. 172/K01/2012, THE DISAL LOWANCE U/S. 40(A)(IA) CAN BE MADE IN RESPECT OF EXPENSES PAYABL E (LIABILITY) ONLY. NO DISALLOWANCE CAN BE MADE IN RESPECT OF AMOUNTS A CTUALLY PAID. SECTION 40(A)(IA) WOULD APPLY ONLY TO AMOUNTS OUTST ANDING AS ON 31ST MARCH OF EVERY YEAR ON WHICH TDS NOT DEDUCTED AND NOT TO AMOUNTS PAID DURING PREVIOUS YEAR WITHOUT DEDUCTION OF TDS. HENCE, INCOME OF ASSESSEE IS ENHANCED BY RS.4,18,41,598/- U/S 40A(IA) AND THE SAME DISALLOWANCE OF RS.4,18,41,598/- MADE U/S. 40(A)(IA) IS DELETED. ASSESSEE GOT RELIEF OF RS. 4,18,41,598/ -. ALSO, ADDITION MADE BY A.O. OF RS.5,33,81,892/- ON ACCOUNT OF DIFF ERENCE COMMISSION RECEIPT IS DELETED BY LD CIT(A) AS NO SU CH DIFFERENCE WAS FOUND. ASSESSING OFFICER IN THE REMAND REPORT H AS REPORTED DIFFERENCE OF RS.15,40,294/- ONLY. 5. REGARDING UNDISCLOSED LIABILITIES OF RS.7,12,32, 585/-, THE LD CIT(A) OBSERVED THAT IN THE REMAND REPORT, AO HAS MENTIONE D THAT BOOK ENTRIES OF RS.7,12,32,585/- HAS BEEN MADE WITHOUT A NY CORROBORATORY EVIDENCE FROM M/S. BEST & COMPANY OR M/S. TIGER ASS OCIATES. BUT WHILE SENDING REMAND REPORT, THE AO HAS ENCLOSED TH E CONFIRMATION LETTER FROM BEST & COMPANY AND M/S. TIGER ASSOCIATE S. BOTH OF THEM HAVE CONFIRMED THE TRANSACTION AND BOOK ENTRIES WHE N TRANSACTION HAS BEEN CONFIRMED BY BOTH PARTIES THERE IS NO POIN T OF DENYING THE TRANSACTION WHICH IS NEITHER UNEXPLAINED NOR OUTSID E THE BOOKS. THEREFORE, ADDITION MADE OF RS.7,12,32,585/- ON ACC OUNT OF UNDISCLOSED LIABILITIES WAS DELETED BY THE LD CIT(A ). 6. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE REVENUE IS IN APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUND S OF APPEAL :- GROUNDS OF APPEAL 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) -XXXVI, KOLKATA ERRED IN FACTS BY NOT SUSTAINING THE ADDITI ON OF RS. 4,18,41,598, OUT OF AGGREGATE ADDITION OF RS. 5,33,81,892, REPRE SENTING COMMISSION ITA NO.1932/KOL/2012 M/S ARTI & SONS 4 PAYMENTS, GENUINENESS AND SOURCE OF WHICH WAS FOUND TO BE UNEXPLAINED EVEN IN THE COURSE OF THE REMAND PROCEEDINGS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE L'D CIT(A) - XXXVI, KOLKATA, ERRED IN FACTS AND IN LAW BY ALLOWI NG THE ASSESSEE'S APPEAL, ON THE BASIS OF CONFIRMATIONS OF THIRD PART IES WHEREAS IGNORING THE FINDINGS OF THE AO'S REMAND REPORT REGARDING THEIR GENUINENESS, AND DELETING ADDITIONS ON ACCOUNT UNDISCLOSED LIABILITI ES AMOUNTING TO RS. 7,12,32,585. 3. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE THE L'D CIT(A) - XXXVI, KOLKATA, ERRED IN LAW AND IN FACT BY SUO MOT O DELETING THE ADDITION MADE BY HIMSELF, IN VIEW OF PROVISIONS OF SECTION 2 51(1) &(2), FOR NON- DEDUCTION OF TAX ON COMMISSION PAYMENTS IN ACCORDAN CE WITH SECTION 194G, THEREBY VIOLATING THE PROVISION OF SECTION 40 (A)(IA). 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A) - XXXVI, KOLKATA, ERRED IN ALLOWING THE DEDUCTIONS CL AIMED BY THE ASSESSEE, RELYING ON THE JUDGMENT OF A DIFFERENT JU RISDICTIONAL APPELLATE TRIBUNAL (ITAT VIZAG), WITHOUT CONSIDERING THE ORDE R PASSED BY THE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF MILK SPECI AL TIES LTD VS CIT, 21 TAXMANN 327 [2012], FAVORING REVENUE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER/OR AMEND ANY OF THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING. 7. GROUND NO. 1 RELATES TO ADDITION OF RS. 4,18,41, 598/- DELETED BY LD CIT(A), OUT OF AGGREGATE ADDITION OF RS. 5,33,81,89 2/- REPRESENTING COMMISSION PAYMENTS. 7.1 LD. DR FOR THE REVENUE HAS SUBMITTED BEFORE US AS THAT THE DELETION OF ADDITION PERTAINING TO DIFFERENCE IN C& F COMMISSION RECEIVED IS NOT ACCEPTED AS THE GENUINENESS AND SOURCE OF THE S AME WAS FOUND TO BE UNEXPLAINED EVEN IN THE COURSE OF THE REMAND PROCEE DINGS AND THE LD CIT(A) DID NOT TAKE COGNIZANCE OF THIS FACT. 7.2 ON THE OTHER HAND, LD AR FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT TO MAKE THIS ADDITION - THE LEARNED ASSESSING OFFICER MENTIONED SO MANY ASPECTS THAT THE MAIN REASON FOR THE ADDITION HAS BECOME ILLEGIBLE. HOWEVER, FROM THE ORDER OF THE ASSESSING OFFICER IT IS UNDERSTOOD THAT. ITA NO.1932/KOL/2012 M/S ARTI & SONS 5 I. TAX AUDIT REPORT - GROSS RECEIPT - RS.1 ,37,75 ,979.00 2. DETAILS FILED BY THE ASSESSEE:- GROSS RECEIPT RS.5,56,17,577.00 PAID BY ASSESSEE RS.4,18,41 ,598.00 NET INCOME RS.1 ,37,75,979.00 THE LEARNED ASSESSING OFFICER DID NOT CONSIDER THE PAYMENTS OF C & F COMMISSION WHICH AMOUNTS TO RS.4,18,41,598.00. ALL DOCUMENTS WERE PRESENTED BEFORE THE LD AO BUT FOR REASONS BEST KNO WN TO HIM, HE IGNORED THE PAYMENT ASPECT OF C & F COMMISSION. HE NEVER DISCUSSED SUCH PAYMENT IN HIS REPORT. THE PAYMENTS WERE MADE IN THE FOLLOWING MANNER. DIFFERENT SMALL PARTIE S - RS.3, 18,41 ,598.00 VIRA AGENCY- RS .1,00,00,000.00 TOTAL RS.4,18,41,598.00 ASSESSEE RECEIVED RS.5,56,17,577.00 AS C & F COMMIS SION AGAINST TAX DEDUCTED AT SOURCE AND ASSESSEE IS DUTY BOUND TO DI STRIBUTE PART OF THE SAID AMOUNT. IT IS, THEREFORE, SUBMITTED THAT OUR N ET INCOME FROM C & F COMMISSION IS AS FOLLOWS. GROSS RECEIPTS- RS.5,56,17,577.00 LESS: PAID- RS.4,18,41 ,598.00 ITA NO.1932/KOL/2012 M/S ARTI & SONS 6 NET RECEIPTS- RS.1,37,75,979.00 THEREFORE, LD CIT(A) RIGHTLY DELETED ADDITION OF RS . 4,18,41,598/- AND ASSESSEE HAS RELIED ON THE ORDER OF LD CIT(A). 7.3 HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORDS, WE NOTICED THAT AS FAR AS SUM OF RS.4,18,4 1,598/- IS CONCERNED, THE CIT(A) HAS HELD THAT EXPENDITURE IS GENUINE AND IT RELATED TO THE BUSINESS OF ASSESSEE. THEREFORE, THE SAME WAS HELD TO BE DEDUCTIBLE EXPENSES WHILE COMPUTING INCOME FROM BUSINESS. THE AO ALSO INVOKED SECTION 40(A) (IA) OF THE ACT, AND DISALLOWED THE S AID SUM FOR NON- DEDUCTION OF TAX AT SOURCE. THE AO HAS NOT SPELT OU T, THE NATURE OF PAYMENT AS TO WHETHER, IT IS COMMISSION OR ANY OTHE R PAYMENT ON WHICH TDS HAS TO BE MADE. THE CIT(A) DELETED THE ADDITION U/S 40 (A) (IA) BY APPLYING MERILYN SHIPPING & TRANSPORT, ITA NO. 477/ VIZAG/2008 ( VISAKHAPATNAM SPECIAL BENCH) 20 TAXMANN.COM 244. IT IS NOT IN DISPUTE BEFORE US, THAT THE DECISION I N THE CASE OF MERILYN SHIPPING & TRANSPORT (SUPRA) HAS BEEN OVERRULED BY HON`BLE KOLKATA HIGH COURT IN THE CASE OF CRESCENT EXPORTS SYNDICATE 216 TAXMANN 258. THEREFORE, THE NATURE OF PAYMENT BY THE ASSESSEE TO THE SUB-DISTRIBUTER HAS NOT BEEN EXPLAINED BY THE REVENUE AUTHORITIES. WITHOUT GIVING A FINDING ON THE NATURE OF PAYMENT IN QUESTION, IT IS NOT POSSIBLE TO DECIDE, WHETHER PROVISIONS OF SECTION 40(A) (IA) ATTRACTED OR NOT. THEREFORE, IT IS A FIT CASE FOR REMAND TO THE AO FOR ADJUDICATION ON T HIS ASPECT. APART FROM THE ABOVE, THE LD AR FOR THE ASSESSEE AL SO SUBMITTED BEFORE US THAT THE RECIPIENT OF PAYMENT FROM THE ASSESSEE HAV E FILED RETURNS OF INCOME FOR THE RELEVANT ASSESSMENT YEARS AND HAVE S HOWN THE RECEIPTS FROM THE ASSESSEE, IN SUCH RETURN OF INCOME. BASED ON THE DECISION OF HON`BLE SUPREME COURT IN THE CASE OF M/S. HINDUSTAN COCA COLA BEVERAGE VS. COMMISSIONER OF INCOME TAX, ON 16 AUGU ST, 2007 APPEAL (CIVIL) 3765 OF 2007, THE LD AR FOR THE ASSESSEE P RAYED THE AO SHOULD ALSO BE DIRECTED TO VERIFY THIS ASPECT AND IF THE C LAIM OF THE ASSESSEE IS FOUND TO BE TRUE THEN NO DISALLOWANCE U/S 40(A) (IA ) CAN BE MADE. ITA NO.1932/KOL/2012 M/S ARTI & SONS 7 WE FIND FORCE IN THE SUBMISSION MADE ABOVE AND DIRE CT THE AO TO EXAMINE THIS ASPECT ALSO IN THE SET ASIDE PROCEEDIN GS. HENCE THE GROUND OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTIC AL PURPOSES. 7.4 IN THE RESULT, THE APPEAL FILED BY THE REVENUE ON GROUND NO.1, IS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.2 RAISED BY THE REVENUE RELATES TO UND ISCLOSED LIABILITIES AMOUNTING TO RS.7,12,32,585/- 8.1 LD DR FOR THE REVENUE HAS SUBMITTED BEFORE US T HAT DELETION OF THE ADDITION OF UNDISCLOSED LIABILITIES OF THE ASSESSEE IS ARBITRARY AS THE LD CIT(A) DID NOT GIVE CREDENCE TO THE FACT THAT AO HA D DOUBTED THE GENUINENESS OF THE CONFIRMATIONS RECEIVED FROM THIR D PARTIES. THE AO, IN THE REMAND REPORT HAD GIVEN COGENT REASONING AS REG ARDS THE GENUINENESS OF THE CONFIRMATIONS WHICH WAS TOTALLY IGNORED. 8.2 ON THE OTHER HAND, LD AR FOR THE ASSESSEE HAS S UBMITTED THAT ABOUT UNDISCLOSED LIABILITIES OF RS.7,12,32,585/-, THE AO IN THE REMAND REPORT HAS MENTIONED THAT BOOK ENTRIES OF RS.7,12,32,585/- HAS BEEN MADE WITHOUT ANY CORROBORATORY EVIDENCE FROM M/S. BEST & COMPANY OR M/S. TIGER ASSOCIATES. BUT WHILE SENDING REMAND REPORT, THE AO HAS ENCLOSED THE CONFIRMATION LETTER FROM BEST & COMPANY AND M/S . TIGER ASSOCIATES. BOTH OF THEM HAVE CONFIRMED THE TRANSACTION AND BOO K ENTRIES WHEN TRANSACTION HAS BEEN CONFIRMED BY BOTH PARTIES, THE RE IS NO POINT OF DENYING THE TRANSACTION WHICH IS NEITHER UNEXPLAINE D NOR OUTSIDE THE BOOKS. 8.3 HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMI SSIONS OF THE ASSESSEE, ITA NO.1932/KOL/2012 M/S ARTI & SONS 8 AS THE PROPOSITION CANVASSED BY LD. AR FOR THE ASSE SSEE ARE SUPPORTED BY THE FACTS NARRATED BY HIM. WE NOTICED THAT THE CONF IRMATION LETTER FROM BEST & COMPANY AND M/S. TIGER ASSOCIATES, BOTH OF T HEM HAVE CONFIRMED THE TRANSACTION AND BOOK ENTRIES. WHEN TRANSACTION HAS BEEN CONFIRMED BY BOTH PARTIES, THERE IS NO POINT OF DENYING THE T RANSACTION WHICH IS NEITHER UNEXPLAINED NOR OUTSIDE THE BOOKS, THEREFOR E, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD CIT(A). 8.4 IN THE RESULT, THE APPEAL FILED BY THE REVENUE ON GROUND NO.2, IS DISMISSED. 9. GROUND NO. 3 AND 4 RAISED BY THE REVENUE ARE SUP PORTING GROUNDS FOR GROUND NO. 1 AND 2. SINCE WE HAVE ALREADY ADJUDICAT ED THE GROUND NO. 1 AND 2 THEREFORE, GROUND NO. 3 AND 4 DO NOT REQUIRE ADJUDICATION. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19/0 4/2017. SD/ - (N.V.VASUDEVAN) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 19/04/2017 '#$%& /PRAKASH#MISHRA ,SR.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) $ % , / ITAT, KOLKATA 1. / THE APPELLANT-JCIT, RANGE-56, KOLKATA 2. / THE RESPONDENT.- M/S ARTI & SONS 3. 0 ( ) / THE CIT(A), KOLKATA. 4. 0 / CIT 5. 12 3 4456 , 56 , / DR, ITAT, KOLKATA 6. 3 78 / GUARD FILE. 1 4 //TRUE COPY//