M/s. Khaitan Electronics, Kolkata V. JCIT, Range-35, Kolkata, Kolkata

ITA 1966/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1576 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADEEN
• Assessee Lawyers: S M SURANA
• Keywords: Principle of natural justice; Question of law
• Section: 143(3); 131

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1966/KOL/2014 ASSESSMENT YEAR:2009-10 M/S KHAITAN ELECTRONICS P-38, INDIA EXCHANGE PLACE, KOLKATA-700 001 [ PAN NO.AAEFK 9226 A ] / V/S . JCIT, RANGE-35, KOLKATA /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI S.M. SURANA, ADVOCATE /BY RESPONDENT SHRI SALLONG YADEEN, ADDL. CIT-DR ! /DATE OF HEARING 22-06-2017 ! /DATE OF PRONOUNCEMENT 30-08-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DATED 29.08.2014. ASSESSMENT WAS FRAMED BY JCIT, RANGE-35, KOLKATA U/S 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 27.12.2011 FO R ASSESSMENT YEAR 2009-10. SHRI S.M. SURANA, LD. ADVOCATE APPEARED ON BEHALF O F ASSESSEE AND SHRI SALLONG YADEEN, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. FIRST ISSUE RAISED BY ASSESSEE IN GROUND NO.1 AN D 2 IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING O FFICER BY SUSTAINING THE DISALLOWANCE OF 80,37,079/- ON ACCOUNT OF COMMISSION EXPENSE. ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 2 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PART NERSHIP FIRM AND ENGAGED IN MANUFACTURING BUSINESS OF BALLASTS/CHOKE. THE ASSES SEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED EXPENDITURE OF 80,37,079/- FOR THE COMMISSION PAID ON PURCHASE FOR A VALUE OF 42,21,17,013/- AND DETAILS OF THE COMMISSION STANDS AS UNDER:- SL. NO . NAME OF THE AGENT/PARTY WHOM COMMISSION HAS BEEN CLAIMED AS PAID AMOUNT (RS) TDS (RS) SERVICE RENDERED 1 M/S SHREE GOPAL GOVIND SPONGE PVT. LTD. KOLKATA 78,37,893/- 8,17,603/- PROCUREMENT OF PURCHASE 2 SHRI PRAMOD KUMAR AGARWL, KOLKATA 97,341/- 10,026/- PROCUREMENT OF PURCHASE 3 SHRI SANJAY KUMAR AGARWAL 1,844/- NA PURCHASE OF DEPB LICENCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBS ERVED CERTAIN FACTS AS DETAILED UNDER:- I) THE ASSESSEE IN THE IMMEDIATE PRECEDING ASSESSME NT YEAR 2008-09 HAS CLAIMED COMMISSION OF 31,176/- ONLY. II) THERE WAS NO AGREEMENT BETWEEN ASSESSEE AND THE PARTIES TO WHOM THE COMMISSION WAS PAID. III) THE ASSESSEE HAS ALSO PROCURED THE GOODS FROM THE PARTIES IN EARLIER YEARS AS WELL WITHOUT MAKING ANY PAYMENT OF COMMISSION. IV) AS SUCH, THE COMMISSION AGENT HAS NOT INTRODUCE D ANY NEW PARTY IN CONNECTION WITH THE PURCHASE OF MATERIALS. V) THE COMMISSION EXPENSE BOOKED IN THE NAME OF M/S SHREE GOPL GOVIND SPONGE PVT. LTD. KOLKATA APPEARED OUTSTANDING AS ON 31.03.2009. THE BILLS OF THE COMMISSION WERE RAISED TO THE ASSESSEE AT THE F AG-END OF THE FINANCIAL YEAR THOUGH THE PURCHASES FROM THE PARTIES WERE MADE REG ULARLY DURING THE ENTIRE YEAR. VI) THE ASSESSEE HAS NOT PRODUCED THE COPY OF THE B ILL FOR THE COMMISSION EXCEPT ONE BILL AND SIMILARLY NO DETAIL OF THE PAYM ENT HAS BEEN FURNISHED. ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 3 VII) THE DEDUCTION OF TAX DEDUCTED AT SOURCE (TDS) ON THE AMOUNT OF COMMISSION EXPENSE IS NOT SACROSANCT FOR JUSTIFYING GENUINENESS OF THE TRANSACTIONS. VIII) IT WAS DUTY OF THE ASSESSEE TO PROVIDE ALL TH E BILLS OF THE PURCHASE ON WHICH COMMISSION HAS BEEN PAID IN ORDER TO ESTABLISH THE RELATIONSHIP AMONG THE PARTIES E.G. THE ASSESSEE, COMMISSION AGENTS AND SU PPLIERS OF GOODS. BUT THE ASSESSEE FAILED TO BRING SUCH EVIDENCE ON R ECORD. IN VIEW OF THE ABOVE, AO HELD THAT THE COMMISSION EXPENSES ARE NOT GENUINE A ND ACCORDINGLY MADE DISALLOWANCE OF 80,37,079/- BY ADDING TO THE TOTAL OF THE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) FILED THE COPIES OF COMMISSION BI LLS RAISED BY THE PARTIES, COPIES OF LEDGER ALONG WITH THE PROVE OF PAYMENT. LD. CIT(A) FOUND THAT ASSESSEE HAS SUBMITTED ADDITIONAL DOCUMENTS AND THEREFORE CALLED FOR REMAN D REPORT FROM THE AO. THE CONTENTS OF REMAND REPORT ARE DETAILED AS UNDER:- 1) THE ASSESSEE HAS FURNISHED COPY OF THE BILL RAIS ED BY M/S SHREE GOPAL GOVIND SPONGE PVT. LTD., KOLKATA FOR THE AMOUNT OF COMMISSION EXPENSE BUT NO JUSTIFICATION FOR SUCH EXPENSES WAS FURNISHED. 2) THE ASSESSEE HAS ALSO FURNISHED THE COPY OF LEDG ER AND BANK STATEMENT SHOWING THE PAYMENT TO THE COMMISSION AGENT. HOWEVER, THE AO IN HIS REMAND REPORT HAS CATEGORICA LLY SUBMITTED THAT NO JUSTIFICATION FOR THE PAYMENT OF COMMISSION TO THE PARTY HAS BEEN JUSTIFIED. IT WAS ALSO OBSERVED THAT THE COMMISSION WAS PAID ON THE PURCHASE OF GOO DS FROM SAIL BEING PUBLIC SECTOR UNDERTAKING (PSU) AND THEREFORE IT IS VERY U NLIKELY FOR THE INVOLVEMENT OF COMMISSION AGENTS AND CONSEQUENTLY ANY PAYMENT OF C OMMISSION TO THEM. AFTER CONSIDERING THE SUBMISSIONS MADE BY ASSESSEE AS WEL L AS REMAND REPORT OF AO CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- .. AFTER GOING THROUGH THE FACTS AND CIRCUMSTANC ES OF THE CASE, SUBMISSION/REJOINDER OF THE APPELLANT AND ALSO PERU SAL OF THE ASSESSMENT ORDER AS WELL AS REMAND REPORT OF THE AO, I DO NOT FIND A NY MERIT IN THE ARGUMENT OF THE APPELLANT. THE FACT REMAINS THAT THE BUSINESS O F THE APPELLANT WAS NOT NEW AS THE SAME HAS BEEN RUNNING FOR LAST SO MANY YEARS AND THE PURCHASES DURING THE YEAR WERE MADE FROM THE SAME OLD/REGULAR PARTIE S. NO PAYMENT OF ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 4 COMMISSION AS SUCH WAS MADE IN THE EARLIER YEARS. T HOUGH THERE WAS PURCHASES FROM THE BEGINNING OF THE YEAR WHEREAS TH E BILL WAS RAISED BY M/S SHRI GOPAL GOVIND SPONGE PVT LTD IN THE MONTH OF FE BRUARY/MARCH ONLY. FURTHER, NO PAYMENT AGAINST THE BILL RAISED WAS MAD E TO THE ABOVE MENTIONED PARTY DURING THE YEAR UNDER CONSIDERATION. NO DOCUM ENT/DETAILS SUBSTANTIATING THE NATURE OF SERVICES RENDERED WERE FURNISHED. ALL THE ABOVE FACTS MAKE IT CLEAR THAT THE CLAIM OF COMMISSION WAS NOT GENUINE AS THE APPELLANT FAILED TO PROVE THE FACT THAT THERE WAS AN SERVICES RENDERED TO THE APPELLANT BY THE COMMISSION AGENTS. MERELY MAKING PAYMENT BY CHEQUE AND THAT TO IN THE SUBSEQUENT YEAR DOES NOT MAKE THE TRANSACTION TO BE GENUINE WHEN THERE WAS TO PROOF WITH REGARD TO SERVICES RENDERED BY THE PARTY CONCERNED. IN THIS REGARD, RELIANCE IS PLACED ON THE JUDGMENT OF HON'BLE SUPRE ME COURT IN THE CASE OF SUMATI DAYAL VS. CIT REPORTED IN 214 ITR 801 (SC) I N WHICH THE COURT HAS DISCUSSED THE ISSUE OF HUMAN PROBABILITY AND SURROU NDING CIRCUMSTANCES. IT HAS BEEN HELD THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTE R AS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. IN THE PR ESENT CASE, THE SURROUNDING CIRCUMSTANCES AND FACTS CLEARLY SHOW THAT THE APPEL LANT ADOPTED COLOURABLE DEVICE FOR CLAIMING COMMISSION WHICH WAS OTHERWISE NOT GENUINE. UNDER THESE CIRCUMSTANCES, I DO NOT FIND ANY INFIRMITY IN THE A OS ORDER, HENCE, APPEAL ON THIS GROUND IS DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 5. LD. AR BEFORE US FILED PAPER BOOK WHICH IS RUNNI NG PAGES FROM 1 TO 122 AND SUBMITTED THAT AMOUNT OF COMMISSION WAS PAID AFTER THE DEDUCTION OF TDS. HE IN THIS REGARD DREW OUR ATTENTION AT PAGES 55 TO 58 OF THE PAPER BOOK WHERE THE DETAILS OF COPY OF LEDGER AS WELL AS TDS CERTIFICATE WERE PLAC ED. IT WAS OBSERVED THAT THE MAJOR AMOUNT OF COMMISSION WAS PAID TO M/S SHREE GOPAL GO VIND SPONGE PVT. LTD. THEREFORE THE AMOUNT OF COMMISSION TO M/S SHREE GOP AL GOVIND SPONGE PVT. LTD. REQUIRES GREATER ATTENTION. LD. AR ALSO DREW OUR ATTENTION ON BILLS RAISED BY M /S SHREE GOPAL GOVIND SPONGE PVT. LTD., KOLKATA FOR THE AMOUNT OF COMMISSION WHI CH ARE PLACED ON PAGES 115 TO 117 OF THE PAPER BOOK. FROM THE BILLS RAISED BY M/S SHREE GOPAL GOVIND SPO NGE PVT. LTD, IT WAS OBSERVED THAT THE BILLS FOR THE COMMISSION WERE NOT RAISED I N CONNECTION WITH THE PURCHASES MADE BY THE ASSESSEE FROM SAIL BUT IT INVOLVES MANY MORE PARTIES. THE LIST OF THE ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 5 PARTIES FROM WHICH THE PURCHASES WERE MADE BY THE A SSESSEE THROUGH M/S SHREE GOPAL GOVIND SPONGE PVT LTD IS DETAILED AS UNDER:- NAME OF THE PARTY AMOUNT M/S BHUSHAN POWER & STEEL LTD. 2,84,80,866.10 M/S BLACK BURN & CO PVT. LTD. 94,91,184.57 M/S DEE BEE POLYMERS PVT. LTD. 70,82,910.00 M/S DELIGHT POLYMERS PVT LTD. 56,12,393.43 M/S EAST ENG SUPPLY CO. 30,81,523.43 M/S ELANTAS BECK INDIA LTD 1,28,01,797.14 M/S EVEREST ENGINEERS & TOOLMAKERS 1,31,10,445.66 M/S MCRO INKS LTD. 36,99,993.24 M/S SHARMA & ASSOCIATES 21,16,887.06 M/S SUJATA ELECTRIC PVT. LTD. 71,23,037.25 M/S S.D. ENTEPRISES 26,94,754.00 TOTAL 9,82,40,141.59 THUS THE ALLEGATION OF THE AO THAT THE PURCHASES WE RE MADE BY THE ASSESSEE TO COMMISSION AGENT FROM SAIL PUBLIC SECTOR UNDERTAKIN G IS INVALID. LD. AR FURTHER ALSO FILED A CERTIFICATE OF CA OF THE COMMISSION AGENT C ERTIFYING THE AMOUNT OF COMMISSION RECEIVED FROM THE ASSESSEE. THE COPY OF THE CERTIFI CATE IS PLACED AT PAGES 117 OF THE PAPER BOOK. LD. AR ALSO SUBMITTED A CHART SHOWING THE IMPACT ON THE PROFITABILITY INCOME OF THE ASSESSEE AS A RESULT OF COMMISSION EXPENSES WHICH I S PLACED AT PAGE 101 OF THE PAPER BOOK. THE RELEVANT EXTRACT OF THE CHART IS REPRODUC ED BELOW:- ASST. YEAR COMMISSION (RS) NET SALES (RS IN LACS) NET PURCHASES (RS. IIN LACS) % OF PURCHASES ON SALES 06-07 - - 1281 1171 91.41 07-08 58,79,043 3866 3424 88.58 08-09 31,176 4349 3813 87,68 09-10 80,37,079 4920 4048 82.27 ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 6 ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. IN REJOINDER LD. AR FOR THE ASSESSEE SUBMITTED THAT TH E JUSTIFICATION FOR THE COMMISSION EXPENSE WAS DULY SUBMITTED AT THE TIME OF ASSESSMEN T PROCEEDINGS. LD. AR IN SUPPORT OF ASSESSEES CLAIM DREW OUR ATTENTION ON PAGES 105 AND 109 OF THE PAPER BOOK THE ORDER-SHEET ENTRY OF THE AO WAS PLACED AND IN THIS REGARD LD. AR ALSO SUBMITTED THAT THE AO HAS NOT ISSUED ANY NOTICE TO THE COMMISSION AGENT U/S 133(6)/131 OF THE ACT BEFORE MAKING ANY DISALLOWANCE OF THE COMMISSION EX PENSE. ALTHOUGH THE NECESSARY DETAILS OF THE PARTIES FROM WHICH THE PURCHASES WER E MADE AND COMMISSION AGENTS WERE AVAILABLE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE INST ANT CASE RELATES WITH THE DISALLOWANCE MADE FOR THE COMMISSION EXPENSES ON THE GROUND THAT THE JUSTIFICATION FOR THE COMMISSION EXPENSES WAS NOT EXPLAINED BY THE ASSESS EE. THE UNDISPUTED FACT IS THAT THERE IS NO DOUBT ABOUT THE GENUINENESS OF THE PART IES AND THE TRANSACTIONS WITH THEM. THUS THE LIMITED ISSUE BEFORE US TO ADJUDICATE WHET HER THE SERVICES WERE RENDERED BY THE COMMISSION AGENTS TO THE ASSESSEE IN CONNECTION WITH THE PURCHASES. FROM THE FOREGOING DISCUSSION CERTAIN FACTS WERE OBSERVED AS DETAILED UNDER : 1) THE AUTHORITIES BELOW WERE PROVIDED THE DETAILS OF THE COMMISSION AGENTS AND THE DETAILS OF THE PURCHASE/ SUPPLIERS F ROM WHOM THE PURCHASES WERE MADE BY THE ASSESSEE. 2) THE INVOICE RAISED BY COMMISSION AGENTS CONTAIN THE DETAILS OF THE PURCHASE MADE BY THE ASSESSEE FROM THE CONCERN PART IES AND THE CORRESPONDING COMMISSIONS PAID BY THE ASSESSEE ON S UCH PURCHASE. SUCH RELEVANT DETAILS ARE AVAILABLE ON PAGES 115 TO 122 OF THE PAPER BOOK. 3. FROM THE DETAILS SUBMITTED BY THE ASSESSEE, WE F IND THAT THERE WERE SEVERAL PARTIES FROM WHOM, THE PURCHASES WERE MADE AND ACCORDINGLY COMMISSION WAS PAID. HOWEVER, THE AO IN HIS ORDER H AS GIVEN A FINDING THAT SUBSTANTIAL COMMISSION WAS PAID ON THE AMOUNT OF PURCHASE MADE FROM SAIL THOUGH NO PURCHASE HAS BEEN MADE BY THE A SSESSEE FROM SAIL. ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 7 4. THE MANNER OF QUANTIFICATION OF COMMISSION HAS B EEN GIVEN BY THE ASSESSEE AND THE SAME HAS NOT BEEN DISPUTED BY THE AUTHORITIES BELOW. 5. ALL THE NECESSARY DETAILS ALONG WITH ADDRESSES O F THE PARTIES FROM WHOM THE PURCHASES WERE MADE WERE AVAILABLE AT THE TIME OF REMAND REPORT WHICH ARE PLACED ON PAGES 113 AND 114 OF THE PAPER BOOK. 6. THE LOWER AUTHORITIES HAVE NOT ISSUED ANY NOTICE UNDER SECTION 133(6)/ 131 OF THE ACT EITHER TO THE SUPPLIERS OR COMMISSIO N AGENTS IN ORDER TO ASCERTAIN THE SERVICES RENDERED BY THE AGENTS. SUCH CONFIRMATION SHOULD HAVE PLAYED THE VITAL ROLE IN ASCERTAINING THE FACT S. THUS IT IS CLEAR THAT THE LOWER AUTHORITIES HAVE NOT EXERCISED THE POWERS ASSIGNED TO THEM UNDER THE STATUTE. 7. IT WAS ALSO OBSERVED THAT THE ASSESSEE HAS INCUR RED COMMISSION EXPENSES IN THE ASSESSMENT YEAR 2007-08 FOR RS.5879043 IN RE LATION TO THE PURCHASES RS.4.03 4 TO 4 LACS THUS IT IS NOT THE 1 ST YEAR IN WHICH THE ASSESSEE HAS INCURRED THE COMMISSION EXPENSES. 8. IT WAS ALSO OBSERVED THAT THERE WAS A OVERALL RE DUCTION IN THE AMOUNT OF PURCHASES AFTER THE INVOLVEMENT OF THE COMMISSION A GENTS AS WELL AS THE VOLUME OF THE SALE WAS ALSO INCREASED WHICH RESULTE D GREATER PROFITABILITY TO THE ASSESSEE. THE IMPACT ON PROFIT ABILITY AFTER INCURRING THE COMMISSION EXPENSES HAS ALREADY BEEN EXPLAINED IN THE PRECEDING PARAGRAPH. THE NECESSARY DETAILS ARE ALSO PLACED ON PAGE 101 OF THE PAPER BOOK. 9. IT WAS ALSO OBSERVED THAT COMMISSION AGENTS HAVE RAISED THE BILLS ALONG WITH THE SERVICE TAX AND THE PAYMENT WAS MADE TO TH EM BY THE ASSESSEE AFTER THE DEDUCTION OF THE TDS UNDER THE PROVISIONS OF LAW. IN VIEW OF ABOVE, WE FIND THAT THE AMOUNT OF COMMIS SION EXPENSES CANNOT BE JUST DISALLOWED WITHOUT THE COGENT REASONS. ALL THE ABOV E STATED FACTS CANNOT BE JUST BRUSHED ASIDE BY THE LOWER AUTHORITIES. THEREFORE I N THE GIVEN FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT THE IMPUGNED COMMISSION EXP ENSES CANNOT BE DISALLOWED ON THE GROUND THAT NO SERVICES WERE RENDERED BY THE CO MMISSION AGENTS. IN THIS CONNECTION WE FIND GUIDANCE AND SUPPORT FROM THE JU DGMENT OF HONBLE GUJARAT HIGH ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 8 COURT IN THE CASE OF CIT VERSUS NANGALIA FABRICS PR IVATE LTD REPORTED IN 40 TAXMAN.COM 206 WHEREIN IT WAS HELD AS UNDER: 6. WHEN CIT(A)'S ORDER WAS CHALLENGED BEFORE THE TRIB UNAL, THE TRIBUNAL DELETED THE ENTIRE ADDITION BY OBSERVING THUS: '23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND THE MA TERIALS PLACED ON RECORD. WE ARE INCLINED TO AGREE WITH THE SUBMISSION MADE ON BEHALF OF THE ASS ESSEE AND FIND THAT NO EVIDENCE HAD BEEN PLACED ON RECORD THAT THE COMMISSION EXPENSE IS BOG US. ASSESSEE MADE PAYMENT OF COMMISSION EXPENSES IS BOGUS. ASSESSEE MADE PAYMENT OF COMMISS ION THROUGH ACCOUNT PAYEE CHEQUES FOR SALES CANVASSED BY THE PARTY AND ALSO IN CONSIDERAT ION OF THE COLLECTION RECOVERED FROM PURCHASER. PAYMENTS CANNOT BE UNREASONABLE PARTICUL ARLY WHEN M/S. SHREE SHANTINATH SILK INDUSTRIES IS NOT RELATED TO THE ASSESSEE AND SO EV EN DISALLOWANCE MADE BY CIT(A) IS NOT PROPER. WE THEREFORE DELETE THE FULL DISALLOWANCE OF RS. 72 ,37,808/- MADE BY THE ASSESSING OFFICER. HENCE ASSESSEE'S GROUND OF APPEAL IS ALLOWED AND REVENUE' S GROUND OF APPEAL IS ALLOWED AND REVENUE'S GROUND OF APPEAL IS DISMISSED.' 7. THIS ISSUE IS AGAIN BASED ON FACTS. ESSENTIALLY, T HE TRIBUNAL HAS, WITH COGENT REASONS DEALT WITH THE ISSUE, NO QUESTION OF LAW, MUCH LESS ANY S UBSTANTIAL QUESTION OF LAW ARISES. THE TAX APPEAL IS, RESULTANTLY, DISMISSED. IN VIEW OF THE ABOVE WE HOLD THAT THE ASSESSEE HAS DEMONSTRATED THE SERVICES RENDERED BY THE COMMISSION AGENTS IN CONNECTION WITH THE PUR CHASES MADE BY IT. ACCORDINGLY THE COMMISSION EXPENSES CLAIMED BY THE ASSESSEE ARE ELIGIBLE FOR DEDUCTION WHILE WORKING OUT THE TAXABLE PROFIT FROM THE BUSINESS. T HUS WERE INCLINED TO REVERSE THE ORDER OF AUTHORITIES BELOW. THE AO IS DIRECTED ACCO RDINGLY. THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 7. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO. 3 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE ADDITI ON OF 28,248/- ON ACCOUNT OF INTEREST INCOME ON DEPOSIT WITH CESC. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED FROM THE ITS DETAILS THAT THE ASSESSEE HAS RECEIVED INTEREST OF 28,248/- ON ACCOUNT OF DEPOSIT MADE WITH CESC BUT NO SUCH INCOME HAS BEEN DISCLOSED IN ITS PROFIT AND LOSS ACCOUNT. ACCORDINGLY, AO CALLED UPON THE ASSESSEE TO EXPLAIN THE ABOVE FACTS BUT HE FAILED TO OFFER ANY SATISFACTORY EXPLANATION. THUS THE AO TRE ATED THE SAME AS UNDISCLOSED INCOME AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 8. GROUND NO.(V) RELATES TO ADDITION OF RS.28,248/ - MADE BY THE AO U/S 40(A)(IA). THE FACT OF THE CASE IS THAT FROM THE IT SS DETAILS, THE AO FOUND THAT THE APPELLANT HAD RECEIVED A SUM OF RS.28,248/- AS INTEREST FROM CESC BUT THE ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 9 SAME WAS NOT INCLUDED IN THE TOTAL INCOME SHOWN FOR THE YEAR. HOWEVER, THE APPELLANT SUBMITTED THAT THE AMOUNT OF INTEREST WAS DULY ADJUSTED AGAINST THE AMOUNT OF ELECTRICITY BILL FOR THE YEAR. THOUGH THE AMOUNT OF INTEREST WAS ADJUSTED AGAINST THE ELECTRICITY BILLS BUT IT COULD NOT BE PROVED THAT THE CLAIM OF EXPENDITURE WAS REDUCED TO THAT EXTENT. UNDER THESE CIRCUMSTANCES, THE ARGUMENT OF THE APPELLANT WAS NOT FOUND TO BE SUSTA INABLE. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 10. LD. AR BEFORE US SUBMITTED THAT THE AMOUNT OF I NTEREST GIVEN BY CESC LIMITED ON THE DEPOSIT MADE WITH IT WAS DULY ADJUSTED IN TH E BILL RAISED BY CESC. LD. AR FURTHER FILED THE COPY OF ELECTRICITY BILL WHICH WA S RAISED AFTER ADJUSTING THE INTEREST INCOME PROVIDED BY CESC. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE IS THAT CESC BEFORE PROVIDING ANY ELECTRICITY CONNECTION KEEP CERTAIN A MOUNT OF DEPOSIT ON WHICH INTEREST IS PAID. IT IS A NORMAL PRACTICE THAT THE AMOUNT OF INTEREST TO BE PAID BY CESC ON THE DEPOSIT AMOUNT IS ALWAYS ADJUSTED AGAINST THE ELECT RICITY BILL GENERATED BY IT. THE CESC NEVER GIVES INTEREST INCOME THROUGH BANKING CH ANNEL RATHER IT ADJUSTS THE INTEREST INCOME IN THE ELECTRICITY BILL. WE ALSO FI ND FROM THE SAMPLE COPY OF THE BILL PLACED AT PAGES 59 OF THE PAPER BOOK WHERE AN AMOUN T OF 72,066/- WAS SHOWN AS INTEREST WHICH IS LIABLE TO BE ADJUSTED. HOWEVER, LD. CIT(A) HAS TREATED THE INTEREST ON DEP OSIT WITH CESC AS INCOME ON THE GROUND THAT ASSESSEE FAILED TO BRING ANYTHING ON RE CORD TO PROVE THAT THE ELECTRICITY BILL WAS CLAIMED AFTER REDUCING THE INTEREST INCOME. AS THE NECESSARY DOCUMENT WERE NOT FILED BEFORE THE LOWER AUTHORITIES, WE ARE INCLINED TO RESTORE THIS ISSUE TO THE FILE OF AO FOR LIMITED PURPOSE TO VERIFY WHETHER THE ELECTRICI TY BILL WAS CLAIMED BY THE ASSESSEE AFTER ADJUSTING THE INTEREST INCOME IF SO, RELIEF W ILL BE ALLOWED OTHERWISE VICE VERSA. THUS, THE GROUND OF ASSESSEES APPEAL IS ALLOWED FO R STATISTICAL PURPOSE. 12. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.4 IS THAT LD. CIT(A) ERRED IN RESTRICTING THE ADDITION TO 10% ON ACCOUNT OF EXPE NSE I.E. LOADING AND UNLOADING, FREIGHT, CARRIAGE AND OTHER SIMILAR EXPENSES. ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 10 13. THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT HAS CLAIMED CERTAIN EXPENSE IN CASH AS DETAILED UNDER:- I) TRANSPORT CHARGES (OTHERS) RS.26,772/- II) FREIGHT CHARGES RS.58,918/- III) CARRIAGE OUTWARD RS.15,348/- IV) LOADING & UNLOADING RS. 51,530/- V) PACKING CHARGES RS. 1,565/- VI) DELIVERY CHARGES RS. 2,500/- VII) MIS. EXPENSES RS. 84,095/- RS.2,40,728/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO FOU ND THAT ALL THE AFORESAID EXPENSES ARE SUPPORTED ON THE BASIS OF SELF-MADE VO UCHERS AND THEREFORE THE SAME CANNOT BE VERIFIED IN FULL. ACCORDINGLY, AO DISALLO WED THE EXPENSE ON ESTIMATED BASIS @ 20% OF 2,40,728/- EQUAL TO 48,146/- AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 14. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO RESTRICTED THE DISALLOWANCE @ 10% BY OBSERVING AS UNDER:- 10. GROUND NO. (VII) RELATES TO DISALLOWANCE OF RS .48,146/- OUT OF TOTAL CLAIM OF RS.2,40,728/- WITH REGARD TO VARIOUS HEADS OF EX PENSES. THE AO FOUND THAT THE CLAIM OF EXPENDITURE OF THESE HEADS OF EXPENSES WAS SUPPORTED BY SELF-MADE VOUCHERS AND THE PAYMENT WAS MADE IN CASH, HENCE, H E DISALLOWED 2% OF THE CLAIM ON ESTIMATE BASIS. I FIND THAT THE EXPENSES W ERE SUPPORTED BY SELF-MADE VOUCHERS FOR WHICH PAYMENT WAS MADE IN CASH. UNDER THESE CIRCUMSTANCES, THE POSSIBILITY TO INFLATE THE EXPENDITURE CANNOT BE RU LED OUT. THEREFORE, I AGREE WITH THE AO. HOWEVER, IN THE INTEREST OF NATURAL JU STICE IT WOULD BE REASONABLE TO RESTRICT THE DISALLOWANCE AT 10% INSTEAD OF 20% MADE BY THE AO. THE AO IS, THEREFORE, DIRECTED TO CALCULATE THE DISALLOWANCE A CCORDINGLY. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 15. LD. AR BEFORE US SUBMITTED THAT AO HAS MADE THE DISALLOWANCE ON AD HOC BASIS AND WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE DOCUMENTS SUBMITTED BEFORE HIM. LD. AR IN SUPPORT OF ASSESSEES CLAIM HAS FILED COP IES OF LEDGER FOR THE EXPENSES WHICH ARE PLACED ON PAGES 63 TO 83 OF THE PAPER BOO K. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 16. WE HAVE GONE THROUGH THE SUBMISSION MADE BY BOT H THE SIDES AND ORDER OF THE LOWER AUTHORITIES ALONG WITH THE MATERIALS AVAILABL E ON RECORD. THE FACTS OF THE CASE ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 11 HAVE ALREADY BEEN DISCUSSED IN THE AFORESAID PARAGR APHS. NOW THE CRUX OF THE ISSUE FOR OUR ADJUDICATION IS WHETHER THE ACTION OF LD. CIT(A ) IS CORRECT FOR SUSTAINING THE DISALLOWANCES OF THE EXPENSES AS DISCUSSED ABOVE IN THE ABOVE STATED FACTS & CIRCUMSTANCES. ON THE PERUSAL OF THE ASSESSMENT REC ORDS WE FIND THAT THE AO HAS NOT VERIFIED THE DOCUMENTS AS WELL AS POINTED OUT ANY D EFECT IN THE EXPENSES CLAIMED BY THE ASSESSEE BUT HE HAS DISALLOWED THE SAME ON ESTI MATED BASIS. FROM THE LIST OF THE DOCUMENTS WE FIND THAT MOST OF THE EXPENSES ARE VER IFIABLE FROM THE DOCUMENTARY EVIDENCE AS ENCLOSED ON PAGES 60 TO 94 OF THE PAPER BOOK. THEREFORE IN OUR CONSIDERED VIEW THE AO SHOULD HAVE VERIFIED THE EXPENSES AT TH E TIME ASSESSMENT RATHER DISALLOWING THE SAME ON THE BASIS OF ESTIMATION. TH E AO SHOULD HAVE POINTED OUT DEFECTS IN RESPECT TO THE SPECIFIC HEAD OF EXPENSES BEFORE MAKING THE DISALLOWANCE. IN OUR CONSIDERED VIEW THE AO SHOULD NOT DISALLOW THE EXPENSES BASED ON SOME SUSPICION, DOUBT AND SHOULD NOT DRAW UNREASONABLE I NFERENCES BASED ON SOME UNREASONABLE APPREHENSIONS. THE AO HAS NOT BROUGHT ON RECORD ANY COGENT REASONS AS TO WHY THIS EXPENDITURE WAS TO BE DISALLOWED. IT IS NOT THE CASE THAT THE EXPENSE WAS CONSIDERED TO BE BOGUS OR SHORT COMINGS IN THE VOUC HERS IN THIS REGARD AS OBSERVED BY THE REVENUE. NO MATERIAL HAS BEEN PLACED BEFORE US BY THE REVENUE TO CONTROVERT THE ARGUMENTS OF LD. AR. IN THIS CONNECTION, WE ALSO RE LY IN THE ORDER OF CO-ORDINATE BENCH OF ITAT KOLKATA IN THE CASE OF ANIMESH SADHU VS. ACIT IN ITA 11/KOL/2013 DATED 12.11.2014. THE RELEVANT EXTRACT IS REPRODUCE D BELOW.:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS DISALLOW ED 20% OF THE EXPENSES ON ESTIMATE BASIS ON THE GROUND THAT NO INDEPENDENT VE RIFICATION TO BE MADE TO FIND OUT THE AUTHENTICITY OF THE EXPENSES. LD. CIT( APPEALS) HAS REDUCED THE SAME ON THE SAME GROUND. HOWEVER, WE ARE OF THE VIE W THAT NO ESTIMATED DISALLOWANCES CAN BE MADE FOR INABILITY TO MAKE IND EPENDENT VERIFICATION. IF ANY SPECIFIC EXPENDITURE IS UNVERIFIABLE OR IS UN-V OUCHED, THEN SUCH SPECIFIC EXPENDITURE IS DISALLOWABLE. HERE NO SUCH SPECIFIC IDENTIFICATION HAS BEEN DONE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ESTIMATED DISALLOWANCE AS CONFIRMED BY THE LD. CIT(APPEALS) IS UNSUSTAINABLE. CONSEQUENTLY THE SAME STANDS DELETED. IN THE RESULT, GROUNDS NO. 2 & 3 OF THE ASSESSEES APPEAL STAND ALLOWED. RESPECTFULLY, FOLLOWING THE ORDER OF THE CO-ORDINAT E BENCH (SUPRA), WE DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES. HENCE, THIS GROUND OF ASSESSEE IS ALLOWED. ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 12 17. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.5 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY RESTRICTING THE ADDIT ION @ 10% OF EXPENSES ON ACCOUNT OF REPAIR & MAINTENANCE. 18. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S DEBITED ITS PROFIT AND LOSS ACCOUNT BY AN AMOUNT OF 22,34,375/- UNDER THE HEAD REPAIR & MAINTENANCE. IT WAS OBSERVED BY THE AO THAT ALL THE EXPENSES WERE CLAIM ED ON CASH BASIS AS WELL AS ALL THE BILLS AND VOUCHERS WERE NOT FULLY VERIFIABLE. THERE FORE, THE AO HAS DISALLOWED 20% ON SUCH EXPENSES ON AD HOC BASIS FOR 4,46,875/- AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 19. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO RESTRICTED THE DISALLOWANCE MADE BY THE AO @ 10% BY OBSERVING AS U NDER:- 11. GROUND NO. (VIII) RELATES TO DISALLOWANCE OF R S.4,46,875/- MADE OUT OF CLAIM OF EXPENDITURE TOWARDS REPAIR AND MAINTENANCE . THE FACT OF THE CASE IS THAT THE AO FOUND THAT THERE WAS TOTAL CLAIM OF REP AIR AND MAINTENANCE IN P & L A/C OF RS.22,34,375/-. SINCE, THE PAYMENT WAS MAD E IN CASH AND THE BILLS/.VOUCHERS WERE NOT FULLY VERIFIABLE, THEREFOR E, HE MADE 20% DISALLOWANCE OUT OF THE CLAIM. AFTER GOING THROUGH THE FACTS AND CIRCUMSTANCES O THE CASE, I FIND THAT THE PAYMENT TOWARDS THAT EXPENDITURE WAS MADE IN CASH AND NO PROPER BILLS/VOUCHERS WERE FURNISHED BEFORE THE AO FOR VERIFICATION. THEREFORE, I AGREE WITH THE AO. HOWEVER, IN THE INTEREST OF NA TURAL JUSTICE IT WOULD BE REASONABLE TO RESTRICT THE DISALLOWANCE AT 10% INST EAD OF 20% MADE BY THE AO. THE AO IS, THEREFORE, DIRECTED TO CALCULATED THE DI SALLOWANCE ACCORDINGLY. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 20. LD. AR BEFORE US SUBMITTED THAT THE AO HAS MADE DISALLOWANCE ON AD HOC BASIS AND WITHOUT POINTING OUT ANY SPECIFIC VOUCHERS OF T HE EXPENSE UNDER THE PROVISION OF LAW THE DISALLOWANCE ON AD HOC BASIS RE NOT ALLOWAB LE. LD. AR IN SUPPORT OF ASSESSEES CLAIM HAS FILED THE COPY OF LEDGER WHICH ARE PLACED ON PAGES 84 TO 94 OF THE PAPER BOOK. HE ALSO SUBMITTED THE BREAK-UP OF REPAIR & MA INTENANCE WHICH ARE AS DETAILED UNDER:- I) REPAIR CHARGES RS.3,05,312/- II) BUILDING AND FACTORY MAINTENANCE RS.4,83,615/- III) PLANT & MACHINERY RS.13,94,639/- IV) OTHER MAINTENANCE CHARES RS. 50,807/- ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 13 ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 21. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE FOREGOING DI SCUSSION IT IS CLEAR THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC DETAILS IN THE EXPENSE S CLAIMED BY THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF VIEW THAT THE ESTIMATED DI SALLOWANCE IS NOT SUSTAINABLE IN THE EYES OF LAW. IN THIS CONNECTION WE ALSO RELY IN THE ORDER OF HONBLE ITAT KOLKATA IN THE CASE OF ANIMESH SADHU VS. ACIT IN ITA 11/KOL/2013 (SUPRA). IN VIEW OF ABOVE, WE DELETE THE ADDITION MADE BY THE LOWER AUTHORITIE S. HENCE, THIS GROUND OF ASSESSEE IS ALLOWED. 22. AT THE TIME OF HEARING LD. AR HAS NOT RAISED TH E GROUND NO.6. HENCE, SAME IS DISMISSED AS NOT PRESSED. 23. LAST ISSUE RAISED BY ASSESSEE IN GROUND NO.7 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY MAKING THE ADDITION O F 3,75,127- ON ACCOUNT OF DOUBLE TAXATION AS SAME WAS OFFERED FOR TAXATION IN AY 2008-09. 24. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS RECEIVED A SUM OF 3,75,127/- FROM M/S FLEX ELECTRONICS INDIA LTD. AS INCOME BUT THE SAME WAS NOT SHOWN IN THE PROFIT AND LOSS ACCOUNT. ON QUESTION BY AO THE ASSESSEE SUBMITTED THAT THE INCOME FROM M/S FLEX ELECTRONICS INDIA LTD. FOR 3,75,127/- WAS OFFERED TO TAX IN AY 2008-09 BUT ASSESSEE FAILED TO SUBSTANTIATED ITS CLAIM. THEREFORE, THE AO TREATED THE SAME AS INCOME OF THE CURRENT YE AR AND ACCORDINGLY ADDED TO THE TOTAL INCOME OF ASSESSEE. 25. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) BY WAY OF ADDITIONAL GROUND OF APPEAL. BUT THE SAME WAS NOT A DJUDICATED BY LD. CIT(A) IN HIS APPELLATE ORDER. 26. AT THE OUTSET, IT WAS OBSERVED THAT ISSUE RAISE D BY ASSESSEE HAS NOT ADJUDICATED BY LD. CIT(A). THE AFORESAID ISSUE WAS RAISED BY AS SESSEE IN ADDITIONAL GROUND OF APPEAL BEFORE LD. CIT(A). UPON CAREFUL CONSIDERATIO N WE NOTE THAT INTEREST OF NATURAL JUSTICE WILL BE SERVED IF THE MATTER IS REMITTED BA CK TO THE FILE OF LD. CIT(A). THE LD. CIT(A) IS DIRECTED TO CONSIDER THE ISSUE AFRESH. TH E LD. CIT(A) SHALL TAKE INTO ACCOUNT THE SUBMISSIONS OF THE ASSESSEE. ACCORDINGLY, WE RE MIT THE ISSUE RAISED BY ASSESSEE. ITA NO.1966/KOL/2014 A.Y. 20 09-10 M/S KHAITAN ELECTRONICS VS. JCIT RNG35 KOL PAGE 14 NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQ UATE OPPORTUNITIES OF BEING HEARD. HENCE, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 27. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 30/08/2017 SD/- SD/- (%&') (!&') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP-SR.PS )&*+ - 30/08/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S KHAITNA ELECTRONICS, P-38, INDIA EXC HANGE PLACE,KOL-01 2. /RESPONDENT-JCIT, RAAANGE-35, KOLKATA 3. **, - / CONCERNED CIT 4. - - / CIT (A) 5. ./0 %%, , , / DR, ITAT, KOLKATA 6. 012 / GUARD FILE. BY ORD ER/ & , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO , ,