The ACIT, Circle-4, Surat V. Shri Prakash C.Kaptan, Surat

ITA 1938/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67748 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS SRDR
• Assessee Lawyers: M J SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI B. P. JAIN, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO. 1938/AHD/2010 A.Y: 2007 -08 ITO, WARD 5(3), ROOM NO.315 3 RD FLOOR, AAYKAR BHAVAN, MAJURA GATE, SURAT VS SHRI PRAKASH C KAPTAN, 6, J J CHAMBERS, 3 RD FLOOR, OPP. SBI, ABOVE BOB, ATHUGAR STREET, NANPURA, SURAT. PAN: AHGPK 6523R (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.C. MATHEWS, SRDR ASSESSEE(S) BY : SHRI M. J. SHAH, A.R. DATE OF HEARING : 26/09/ 2013 DATE OF PRONOUNCEMENT : 27/09/2013 O R D E R PER SHRI B.P. JAIN, ACCONTANT MEMBER : THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER O F LEARNED CIT(A)-IV, SURAT, DATED 24.02.2009 FOR THE ASSESSME NT YEAR 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF THE APPEAL, REPRODUCED AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-IV, SURAT HAS ERRED IN RESTRICTING THE ADDIT ION AT 10% I.E., RS. 1,58,543/- INSTEAD OF TOTAL ADDITION OF RS.15,85,43 1/- MADE BY THE AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-IV, SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3 IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A)-IV, SURAT MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. ITA NO.1938/AHD/2010 ITO, SURAT V/S. SHRI PRAKASH C. KAPTAN. A.Y. 2007-08 - 2 - 2. THE BRIEF FACTS ARE THAT THE ASSESSEE IS A COMMI SSION AGENT OF HDFC BANK LTD. DURING THE YEAR, THE ASSESSEE HAS CL AIMED EXPENSES OF RS.15,85,431/- AGAINST THE TOTAL COMMISSION OF RS.2 7,44,423/-, I.E., 57.77% AS AGAINST 30.14% IN THE IMMEDIATE PRECEDING YEAR. AFTER GIVING SUFFICIENT OPPORTUNITIES TO FURNISH SUPPORTING EVID ENCES, THE ASSESSEE DID NOT FURNISH THE SAME FOR THE CLAIM OF THE EXPENSES AS AGAINST THE COMMISSION INCOME. ACCORDINGLY, THE AO MADE AN ADDI TION OF RS.15,85,431/- AS BOGUS COMMISSIONS EXPENSES. 3. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE RESTRICTED THE ADDITION OF DISALLOWANCE AT 10% OF T OTAL COMMISSION EXPENSES AT RS.1,58,543/- AND DELETED THE BALANCE A DDITION OF RS.14,26,888/-. 4. LEARNED DR HAS RELIED UPON THE ORDER OF THE AO A ND ARGUED THAT THE ASSESSEE HAD NOT SUBMITTED ANY DETAILS OF EXPEN SES AND THEREFORE, THE ORDER OF THE LEARNED CIT(A) SHOULD BE REVERSED. 4. ON THE OTHER HAND, MR. M.J. SHAH, LEARNED AR HAS ARGUED THAT THE ASSESSEE IS WORKING AS A DSA AND HIS JOB IS TO FIND AND ASSIST THE PEOPLE WHO ARE IN NEED OF LOAN. AS THE TARGET OF LOANS TO BE SANCTIONED IS FIXED BY THE BANK, THE ASSESSEE HAS TO WORK HARD TO ACHIEVE THE SET TARGETS. HE ALSO SUBMITTED THAT AS THE ASSESSEE COULD NOT DO ALL TYP E OF WORKS INVOLVED HE REQUIRED PEOPLE TO ASSIST HIM. SUCH PERSONS WERE NO T EMPLOYED BY THE ASSESSEE. THEIR JOB WAS TO OBTAIN THE PROSPECTIVE C USTOMERS WHO WERE IN NEED OF LOAN. THE CUSTOMERS WERE TO BE PROVIDED SER VICES ON THE SPOT. THE ASSESSEE RECEIVED THE CHEQUES OF COMMISSION FROM TH E BANK AND IN TURN HE ITA NO.1938/AHD/2010 ITO, SURAT V/S. SHRI PRAKASH C. KAPTAN. A.Y. 2007-08 - 3 - HAD PARTED WITH COMMISSION BY WAY OF ISSUING CHEQUE S TO THE PERSONS WHO WERE WORKING FOR THE ASSESSEE. IT WAS FURTHER S UBMITTED BY HIM THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO GET COMPLETE D ETAILS OF SUCH PERSONS SUCH AS NAMES AND ADDRESSES AND THEIR IDENTIFICATIO N. THE ASSESSEE CLAIMED THAT HE HAD TO ONLY VERIFY WHILE ISSUING CH EQUES WHETHER THE PERSONS HAVE PROVIDED ANY SERVICE TO HIM OR NOT. BE FORE LEARNED CIT(A), THE ASSESSEE HAS FILED COPIES OF SOME CONFIRMATIONS ON THE GROUND THAT THE SAME COULD NOT BE PRODUCED BEFORE THE AO FOR WANT O F SUFFICIENT TIME. AS REGARD THE DISCREPANCIES IN THE NAMES MENTIONED IN THE CHEQUE IT WAS SUBMITTED THAT AS PER THE RECORD OF THE ASSESSEE TH E NAME OF THE PERSON IS WRITTEN AS THE PERSON TO WHOM THE ASSESSEE HAS GIVE N CHEQUE, BUT ULTIMATELY THE NAME OF THE PERSON ENTERED INTO THE CHEQUE AND DEPOSITED IN THE BANK MAY DIFFER BUT SUCH INSTANCES ARE FEW. AS REGARD SELF WITHDRAWAL BY COMMISSION AGENT IT IS SUBMITTED THAT SOME TIMES IT HAPPENS THAT WHEN THE COMMISSION AGENT HAS SOME URGENCY OR HE HAS NO BANK ACCOUNT IN THAT CASE THE ASSESSEE HAD TO ISSUE BEARER CHEQUE BELOW RS.20000/-. THE LD. AR ALSO CONTENDED THAT THE COMMISSION EXPENSE IS TH E MAJOR EXPENSE IN THE ASSESSEES FIELD OF BUSINESS AND IN THIS REGARD HE HAS CITED THE COMPARABLE CASES AND CONTENDED THAT THE COMMISSION EXPENSE IS OF ESSENTIAL NATURE IN THEIR LINE OF BUSINESS. LEARNED AR FURTHER ARGUED THAT THE LEARNED CIT(A) HAS GIVEN THE FINDINGS THAT THE ASSESSEES BUSINESS BEING THAT OF MARKETING DEPENDS UPON THE WORKING OF FREE LANCER AGENTS AND THERE IS A CUT THROAT COMPETITION IN THE BUSINE SS AND THE ASSESSEE HAS NO ALTERNATIVE BUT TO INCUR HUGE EXPENDITURE BY WAY OF COMMISSION EXPENSES AND THE AO HAS NOT MADE ANY INDEPENDENT IN QUIRIES REGARDING THE GENUINENESS OF THE EXPENSES CLAIMED FROM THE PE RSONS WHOSE NAMES AND ADDRESSES WERE AVAILABLE WITH THE AO. THEREFORE , THE AO IS NOT ITA NO.1938/AHD/2010 ITO, SURAT V/S. SHRI PRAKASH C. KAPTAN. A.Y. 2007-08 - 4 - JUSTIFIED IN DISALLOWING THE ENTIRE COMMISSION EXPE NSES. LEARNED AR HAS RELIED UPON THE ORDER OF THE LEARNED CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE GROS S COMMISSION RECEIPTS DURING THE IMPUGNED YEAR WAS RS.27,44,423/- AND NET PROFIT WAS RS.2,72,128/-, I.E., 9.91% AS COMPARED TO THE COMM ISSION RECEIPTS OF RS.7,90,929/- AND NET PROFIT AT RS.1,40,032/-, I.E. , 17.70% IN THE IMMEDIATE PRECEDING YEAR. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS TO INCUR THE EXPENDITURE ESSENTIALLY, SINCE THE DEPART MENT HAS ACCEPTED SUCH EXPENDITURE IN THE PAST. IT IS ALSO NOT IN DISPUTE THAT THE AO HAS NOT MADE INDEPENDENT INQUIRIES REGARDING GENUINENESS OF THE EXPENSES CLAIMED SINCE NAMES AND ADDRESSES OF THE PERSONS TO WHOM TH E COMMISSION HAS BEEN PAID WERE AVAILABLE BEFORE THE AO. THE ASSESSE ES BUSINESS IS SUCH WHICH CANNOT BE DONE ALONE AND HE HAS TO TAKE THE H ELP OF SOME PERSONS WHICH THE ASSESSEE HAS DONE FOR MARKETING THE PRODU CT THROUGH FREE LANCER AGENTS. MOSTLY, THE PAYMENTS HAVE BEEN MADE FOR THE COMMISSION THROUGH ACCOUNT PAYEE CHEQUES AS STATED AND OTHER PAYMENTS HAVE BEEN MADE THROUGH BEARER CHEQUE BELOW RS.20,000/- THAT TOO IN CASE OF URGENCY OF THE PERSONS WHO ARE HAVING NO BANK ACCOUNT. IN PRIN CIPLE, WE CONCUR WITH THE VIEW OF THE LEARNED CIT(A) WHICH IN FACT HAS NO T BEEN DISPUTED EVEN BY LEARNED DR. AS A MATTER OF FACT, IT IS A QUESTIO N OF ESTIMATION OF NET PROFIT. LEARNED AR OF THE ASSESSEE, MR. M.J. SHAH, INVITED OUR ATTENTION AND MADE A WORKING THAT AFTER DISALLOWANCE BY THE L EARNED CIT(A) THE NET PROFIT RATE COMES AT 15.7% AS COMPARED TO 17.70% IN THE IMMEDIATE PRECEDING YEAR. IN THE PRESENT CIRCUMSTANCES AND FA CTS OF THE CASE AND SETTLED PRINCIPLES, WE ARE OF THE VIEW THAT THE PAS T YEAR RESULTS ARE THE BEST ITA NO.1938/AHD/2010 ITO, SURAT V/S. SHRI PRAKASH C. KAPTAN. A.Y. 2007-08 - 5 - GUIDE AND ACCORDINGLY IT WILL BE IN THE INTEREST OF JUSTICE IF THE NET PROFIT OF 17.70% BEING THE NET PROFIT DECLARED IN THE IMMEDIA TE PRECEDING YEAR ON THE GROSS COMMISSIONS RECEIPT IS MAINTAINED IN THE IMPUGNED YEAR AS WELL. ACCORDINGLY, THE AO IS DIRECTED TO RESTRICT THE DIS ALLOWANCE TO MAINTAIN A NET PROFIT RATIO AT 17.70% AS DIRECTED HEREINABOVE WHICH WILL MEET BOTH THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. IN THE R ESULT, THE GROUNDS OF THE REVENUE ARE PARTLY ALLOWED. SD/- SD/- (KUL BHARAT) ( B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD; DATED /09/2013 PRABHAT KR. KESARWANI, SR.P.S. TRUE COPY COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A)-III, AHMEDABAD 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, (DY./ASSTT.REGISTRAR) ITAT, AHMEDABAD