Arsh Iron & Steel Ltd., Burdwan V. ACIT, CIR-3, Asansol, Asansol

ITA 206/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1749 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SOUMITRA CHOUDHURY RESPONDE
• Assessee Lawyers: T VARKEY JUDIC IA L M EMBER; ARSH IRON
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Principle of natural justice; Additional depreciation; Question of law; Tangible material; Corroborative evidences; Revised return; Revenue expenditure
• Section: 143(3); 142(1); 10(10D); 133(6); 194C; 32; 131; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI ABY.T VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 206 - 207 / KOL / 2014 ASSESSMENT YEARS :2009-10 & 2010-11 ARSH IRON & STEEL LTD. C/O ABDUL RASHID DR. M.N. GHOSH ROAD, P.O. RANIGANJ, DIST. BURDWAN-713 347 [ PAN NO.AAECA 6215 E ] V/S . ACIT, CIRCLE-3, PARMAR BUILDING, 54, G.T. ROAD (WEST), ASANSOL-713 304, BURDWAN /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SOUMITRA CHOUDHURY, ADVOCATE /BY RESPONDENT SHRI SAURAV KUMAR, ADDL. CIT-SR-DR /DATE OF HEARING 17-03-2017 /DATE OF PRONOUNCEMENT 12-05-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- BOTH APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-ASANSOL DAT ED 27.11.2013 & 09.12.2013. ASSESSMENTS WERE FRAMED BY JCIT/ACIT, R ANGE-3/CIRCLE-3, ASANSOL U/S 143(3) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 30.12.2011 & 13.02.2013 FOR ASSESSMENT YEAR 2009- 10 & 2010-11 RESPECTIVELY. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 2 SHRI SHRI SOUMITRA CHOUDHURY, ADVOCATE APPEARED ON BEHALF OF ASSESSEE AND SHRI SAURAV KUMAR, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. BOTH THE APPEALS ARE HEARD TOGETHER AND ARE BEIN G DISPOSED OF BY WAY OF CONSOLIDATE ORDER FOR THE SAKE OF CONVENIENCE. FIRST WE TAKE UP ITA NO. 206/KOL/2014 FOR THE A.Y. 09-10 . 3. THE ASSESSEE BEFORE US HAS FILED ADDITIONAL GROU ND NO.1, WE FOR THE SAKE OF CONVENIENCE ARE TREATING THE SAME AS GROUND NO.10 IN CONTINUATION OF EARLIER GROUNDS WHILE CONSIDERING OF THE SAME ON ME RIT. 4. FIRST ISSUE RAISED BY ASSESSEE IN THIS INTER-CON NECTED GROUND NO. 2 TO 4 OF THIS APPEAL IS THAT LD. CIT(A) ERRED IN SUSTAINI NG THE DISALLOWANCE OF 1,50,98,433/- MADE BY THE AO ON ACCOUNT OF COMMISS ION PAYMENT DUE TO NON SERVICE BY THE COMMISSION AGENT. 5. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE MANUFACTURING BUSINESS OF SPO NGE IRON. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED AN EXPE NDITURE OF RS.1,50,98,433.00 ON ACCOUNT OF COMMISSION PAYMENT TO THE FOLLOWING PARTIES. 1. KUNAL PIPES (I) PRIVATE LIMITED 2. PARDIP KUMAR AGARWAL (HUF) 3. OM PRAKASH AGARWAL 4. INDIA STEEL 5. KAMAL IRON THE ASSESSEE PAID THE COMMISSION TO KUNAL PIPES ON THE BASIS OF AGREEMENT FOR THE SALES MADE TO THE FOLLOWING PARTIES:- I.BANDYA ISPAT LTD II. BRRAHASPATI IRON & STEEL CO III) BALAJI INDUSTRIES IV) DHHANSHREE ISPAT V) HANUMAN ISPAT PVT LTD. VI) HI-TECH AVRASIVES LTD ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 3 VII) INDIA SMELTERS LTD VIII) JAGDAMBA SPONG PT. LTD. IX) J.S.FORGE LTD. X) KOKDA STEEL (P)- LTD. XI) N.S. ISPTA (I) LTD XII) OM SAIRMAN STEEL & ALLOYS XIII) SHRI MELCAST PVT. LTD. XIV) S.K.K.STEEL ENTERPRISES PVT LTD. XV) SHIV REAL ISPAT PVT LTD. XVI) SHREE HANUMAN TUBES PVT LTD. XVII)SUPER IRON & STEEL PVT. LTD. SIMILARLY THE ASSESSEE PAID THE COMMISSION TO PARDI P KUMAR AGARWAL (HUF) FOR THE SALES MADE TO THE FOLLOWING PARTIES:- I) PRADIP KR. AGARWAL (HUF) II) SHREE HANUMAN TUBES PVT. LTD., III) MANKAMESHWAR STEEL PVT. LTD. IV) MAYA STEEL PVT. LTD. SIMILARLY THE ASSESSEE PAID THE COMMISSION TO INDIA STEEL FOR THE SALES MADE TO THE FOLLOWING PARTIES:- THE BILLS OF INDIA STEELS CLAIMS COMMISSIONS IN RE SPECT OF SALES MADE TO COSMOS CASTING (I) LTD., AND DHANSHREE ISPAT. FO R SALE TO THESE PARTIES, THE ASSESSEE CLAIMS TO HAVE MADE PAYMENTS TO M/S KUNAL PIPES ALSO. IT IS NOT POSSIBLE TO PAY COMMISSION TO TWO DIFFERENT PARTIES FOR SALES MADE TO THE SAME PARTY. THE AO DURING ASSESSMENT PROCEEDINGS ISSUED NOTICE TO THE ASSESSEE UNDER SECTION 142(1) OF THE ACT DATED 28 TH SEPTEMBER 2011 AND 21 ST OCTOBER 2011 TO JUSTIFY THE AFORESAID COMMISSION BY FURNISHING THE FOLLOWING DOCUMENTS. 1. THE DETAILS OF THE TDS 2. LIST OF THE PARTIES TO WHOM THE COMMISSION WAS P AID WITH PAN AND THEIR BUSINESS EXPERTISE 3. THE SERVICES RENDERED BY THE COMMISSION AGENTS A LONG WITH THE DETAILS OF SALES AGAINST WHICH THE COMMISSION WAS P AID. 4. DETAILS OF THE NEXUS BETWEEN THE COMMISSION AND THE BUSINESS OF THE ASSESSEE. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 4 5. BILLS OF THE COMMISSION BY THE PARTIES RAISED TO THE ASSESSEE, DETAILS OF MODE OF PAYMENT, COPIES OF THE LEDGER, DETAILS O F PAYMENT IN EARLIER & SUBSEQUENT YEARS ETC. 6. OTHER NECESSARY DETAILS HOWEVER IN SPITE OF SEVERAL REMINDERS GIVEN TO JUST IFY THE AMOUNT OF COMMISSION EXPENSES PAID DURING THE YEAR, THE ASSES SEE FAILED TO FURNISH THE NECESSARY DETAILS. THE AO DURING THE ASSESSMENT PROCEEDINGS ALSO MADE THE FOLLOWING OBSERVATIONS : 1. DETAILS OF THE COMMISSION VIZ A VIZ TURNOVER OF THE ASSESSEE S.NO. FINANCIAL YEAR TURN OVER AMOUNT OF COMMISSION I. 2006-07 RS. 6,22,98,603.00 NIL II. 2007-08 RS. 15,37,77,172.00 RS. 50,146.00 III. 2008-09 RS. 27,12,86,178.00 R S.1,50,98,433.00 2. THE ASSESSEE HAS MADE THE SALES ONLY TO THE PART IES REFERRED BY THE COMMISSION AGENT I.E. KUNAL PIPES IN THE MONTH OF M ARCH 2009 AND NO SALE WAS MADE TO THE REGULAR PARTIES OF THE ASSE SSEE IN THAT MONTH. 3. THE COMMISSION WAS PAID IN RESPECT TO THE SALES TO THE EXISTING CLIENTS. 4. THE ASSESSEE HAS ALSO PAID THE COMMISSION TO TWO PARTIES IN RESPECT OF SALES TO THE COMMON PARTIES. 5. THE COMMISSION EXPENSE WAS NOT BOOKED IMMEDIATEL Y AFTER THE SALE BOOKED BY THE ASSESSEE. FOR THE SALES OF THE MONTH OF APRIL, MAY, JUNE OR JULY THE COMMISSION EXPENSE WAS BOOKED IN T HE MONTH OF OCTOBER. 6. THE NET PROFIT DECLARED BY THE ASSESSEE IS VERY LESS IN COMPARISON TO THE PROFIT PREVAILING IN THE INDUSTRY OF SPONGE IRO N. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 5 7. THE COMMISSION AGENTS IN-SPITE OF HAVING SUCH HU GE AMOUNT OF COMMISSION HAVE NOT TAKEN THE GUARANTEE FOR THE REC OVERY OF THE SALES AMOUNT. 8. THE COMMISSION AGENT WAS NOT HAVING THE EXPERT K NOWLEDGE OF THE BUSINESS OF THE ASSESSEE AND THEY FILED THEIR INCOM E TAX RETURNS DECLARING THE LOSSES. THEY WERE PAID THE COMMISSION FIRST TIME BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. 9. THE SALARY PAID BY THE ASSESSEE IN THE YEAR UNDE R CONSIDERATION WAS FOR RS. 43,68,896.00 WHICH HAS JUST BECOME DOUBLE I N COMPARISON TO THE IMMEDIATE PRECEDING YEAR I.E. RS. 21,29,382.00 10. THE TURNOVER OF THE ASSESSEE HAS GONE HIGH DUE TO INCREASE IN SALE PRICE AND THERE WAS AS SUCH NO SIGNIFICANT EFFECT I N THE PRODUCTION CAPACITY OF THE ASSESSEE. THE PRICE PER TON IN THE YEAR UNDER CONSIDERATION IS RS. 18,300.00 ONLY WHEREAS IN THE PRECEDING YEAR IT WAS ONLY RS. 13,874.00 ONLY. THERE WAS SUDDEN DEMAN D OF SPONGE IRON WORLDWIDE IN MARCH 2008 TO SEPTEMBER 2008 THUS THE PRICE OF SPONGE IRON WAS ESCALATED. AS SUCH THERE WAS NO ROL E OF THE COMMISSION AGENTS. THE AO ALSO RECORDED THE STATEMENT OF THE DIRECTOR OF KUNAL PIPE UNDER SECTION 131 OF THE ACT. THE RELEVANT INFORMATION FR OM THE STATEMENT IS EXTRACTED BELOW:- A) ALL THE PAYMENTS WERE DIRECTLY MADE BY THE PARTI ES TO ARSH IRON. B) THERE WAS NO EMPLOYEE WORKING FOR THE KUNAL PIPE S REGARDING THE COMMISSION INCOME. WHATEVER WORK WAS DONE WAS CLAIM ED TO BE HAVE BEEN DONE BY SHRI TULSIAN ONLY. C) THE RESPONSIBILITY FOR ENSURING THE QUALITY LIED WITH THE ASSESSEE AND NOT WITH THE COMMISSION AGENT. D) THE SALE PRICE WAS DETERMINED BY THE ASSESSEE AN D NOT BY THE COMMISSION AGENT. E) THE COMMISSION AGENT HAS NEVER VISITED THE PREMI SE OF THE ASSESSEE COMPANY. F) THE COMMISSION AGENT STATED THAT LOOKING AT SPAT IAL DISPERSAL, THE WORK OF MARKETING COULD EASILY BE DONE BY THE DIRECTOR OR E MPLOYEE OF THE ASSESSEE COMPANY. IT IS NOT KNOWN WHY THE WORK WAS ASSIGNED TO THE COMMISSION AGENT. G) THE RATE OF COMMISSION WAS NOT DETERMINED BY THE COMMISSION AGENT BUT WAS DECIDED BY THE ASSESSEE COMPANY. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 6 H) THE COMMISSION AGENT IS UNAWARE OF THE AMOUNT OF SALE MADE THROUGH HIM. I) THE COMMISSION AGENT HAS NOT DONE ANY WORK REGAR DING COMMISSION FOR ANYONE ELSE OTHER THAN THE ASSESSEE COMPANY IN ANY OF THE YEARS. J) THERE WAS NO RESOLUTION OF THE BOARD OF THE COMM ISSION AGENT REGARDING CHANGE IN THE NATURE OF WORK OR TAKING UP ADDITIONA L WORK OF COMMISSION BUSINESS. THE COMPANY HAS NOT PASSED ANY RESOLUTION IN THIS REGARD. K) ON BEING ASKED THAT THERE WAS HARDLY ANY WORK TH AT WAS DONE BY THE COMMISSION AGENT AND THAT THE WORK COULD EASILY HAV E BEEN DONE BY ANY OTHER EMPLOYEE, AND ALSO CONSIDERING THE FACT THAT DISTANCE BETWEEN TILDA (WHERE SHRI TULSIAN IS STAYING) AND RAIPUR (WHERE T HE ASSESSEE IS BASED) IS HUGE, WHY IT SHOULD NOT BE DEDUCTED THAT NO SERVICE S HAS BEEN RENDERED; THE COMMISSION AGENT STATED THAT THIS WAS TO BE DECIDED BY THE DIRECTOR OF THE ASSESSEE. L) THE COMMISSION AGENTE CLAIMED TO HAVE INTERACTED WITH SHRI FIROZ BHAI AND ONE OF THE EMPLOYEE OF THE ASSESSEE COMPANY MR SHAR MA. M) SHRI TULSIAN HAS NO EXPERTISE OR SPECIAL QUALIFI CATION I THE FIELD OF SPONGE IRON. HE CLAIMS THAT THE WORK WAS GIVEN TO HIM ONLY BECAUSE HE WAS FREE. N) THE COMMISSION AGENT COULD NOT FURNISH ANY EVIDE NCE OF SERVICE HAVING BEING RENDERED. BESIDES THE ABOVE THE AO ALSO ISSUED NOTICES TO THE COMMISSION AGENTS UNDER SECTION 133(6) OF THE ACT WHO HAVE FURNISHED THE DOCUMENTS CONFIRMING THE COMMISSION BUT FAILED TO PROVIDE THE DETAILS OF THE SERVICES RENDERED TO THE ASSESSEE. IN VIEW OF ABOVE THE AO HAS DISALLOWED TH E COMMISSION EXPENSES CLAIMED BY THE ASSESSEE AND ADDED TO THE TOTAL INCO ME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT COMMI SSION AGENTS HAS DULY RENDERED THE SERVICES AS EVIDENT FROM THE COPY OF T HE AGREEMENT. THEREFORE, TURNOVER OF THE ASSESSEE WAS ENHANCED BY A SIGNIFIC ANT AMOUNT. HOWEVER, LD. CIT(A) AFTER CONSIDERING THE SUBMISSION MADE BY ASS ESSEE CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 15. I HAD CONSIDERED THE MATERIALS BROUGHT TO RECOR D. ASPECTS MENTIONED IN PARAGRAPH 12 STANDS OUT AWKWARDLY AGAINST THE APPEL LANT. THE EXISTENCE OF A WRITTEN AGREEMENT BETWEEN THE PARTIES CONCERNED DOE S NOT PROVE THAT THE EXPENSE GOES WHOLLY AND EXCLUSIVELY FOR BUSINESS. THE SERVICE RENDERED HAS TO BE DOCUMENTARILY PROVED TO ESTABLISH THAT THE EX PENSE IS WHOLLY AND EXCLUSIVELY FOR BUSINESS. PARAGRAPH 5.21, 5.24, 5.25, 5.27, 5 .34, 5.37, 5.39, 5.40, 5.41 ETC. OF ASSESSMENT ORDER CLEARLY ESTABLI SHES THAT THE PAYMENT IS AN ARRANGEMENT TO REDUCE INCIDENCE OF TAX AND CANNO T BE CONSIDERED AS ONE INCURRED TO BE WHOLLY AND EXCLUSIVELY FOR PURPOSE OF BUSINESS. THERE IS NO RECORD OR PROOF ON EXACT SERVICE RENDERED BY THE SO CALLED INTERMEDIARY NECESSITATING PAYMENT OF COMMISSION. DOCUMENTS WHIC H WERE TO BE ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 7 MAINTAINED AS PER AGREEMENT BETWEEN THE TWO PARTIES WERE ALSO NOT PRODUCED. 16. WHEN THESE ASPECTS STAND AGAINST THE APPELLANT, I HAVE NO GO BUT TO SUSTAIN THE ADDITION MADE BY ASSESSING OFFICER. I H OLD THAT THE APPELLANT HAS NOT ESTABLISHED THAT THE PAYMENT TO KUNAL PIPES (I) PVT. LTD. AS A GENUINE EXPENSE INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS, THE ONUS OF WHICH IS ON THE APPELLANT. ACCORDINGLY I DI SMISS THE GROUND OF APPELLANT AGAINST DISALLOWANCE OF COMMISSION PAID T O KUNAL PIPES (I) PVT. LTD., THE CASE DECISIONS CITED BY ASSESSING OFFICER IN PA RAGRAPH5.45, 5.46 AND 5.47 APPLIES HERE SQUARELY AND THE SAME IS REPEATED HERE:- CIT VS. DURGA PRASAD MORE (1974) 82 ITR 540 (SC) SUMATI DAYALA VS CIT (1995) 214 ITR 801 (SC) SICKHOMAL & SONS VS. CIT (1980) 122 ITR 839, 844 (D EL) AMRITLAL & CO. P LTD. VS. CIT (1977) 108 ITR 719 (B OM) TRAVANCORE TITANUM PRODUCT LTD. VS. CIT (1966) 60 I TR 277 CIT VS. INDIAN CEMENTS LTD. (1975) 98 ITR 69 (MAD) SWADESH COTTON MILLS VS. CIT (1967) 63 ITR 57 (SC) LACHMINARYAN MADAN LAL VS. CIT (1972) 86 ITR 739 (S C) WT SUREN & CO. P. LTD. VS. CIT (1971) 80 ITR 602 (B OM) CIT VS. CENTRAL INDIA MACHIERY MFG. CO. LTD. (1985) 45 CTR (MP) 126, 135 17. IN PARAGRAPH 12, I HAD UPHELD DISALLOWANCE OF C OMMISSION PAID TO KUNAL PIPES (I) PVT. LTD. THERE ARE OTHER PARTIES TO WHOM COMMISSION PAID. THE SERVICES RENDERED BY THESE PARTIES ARE ALSO NOT PRO VED. HENCE COMMISSION DEBITED AGAINST THESE PERSONS HAVE ALSO BEEN RIGHTL Y DISALLOWED BY ASSESSING OFFICER. ACCORDINGLY I UPHOLD THE TOTAL DISALLOWANC E OF RS.1,50,98,433/- GROUND 2.0 SAND DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN DITTOING THE ORDER OF THE AO AND CONFIRMING THE ADDITION AMOUNTI NG TO RS.1,50,98,433/- ON ACCOUNT OF COMMISSION PAYMENT WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONFIRMING THE DISALLOWANCE ON ACCOUNT OF COMMISSION PAYMENT AMOUNTING TO RS.1,50,98,433/- WITHOUT ANY BASIS, THEREFORE, THE WHOLE ADDITION IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) HAS NOT CONSIDERED THE FACTS THAT ALL PAYMENTS WERE MADE BY CHEQUE AND TDS WAS DEDUCTED, THEREFORE, THE TOTAL DISALLOWANCE OF RS.1,50,98,433 /- IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 6. LD. AR FOR THE ASSESSEE FILED PAPER BOOK WHICH I S RUNNING PAGES FROM 1 TO 169 AND SUBMITTED THAT TURNOVER OF THE ASSESSEE IN THE LAST YEAR WAS AT ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 8 15.37 CRORES AND THIS YEAR THE TURNOVER HAS GONE AT 27.12 CRORES. LD. AR ALSO SUBMITTED THAT THE STATEMENT OF SHRI SUSHIL KU MAR TULSIYIAN, DIRECTOR OF KUNAL PIPE INFRA PVT. LTD. U/S 131 OF THE ACT WAS R ECORDED WHEREIN IT WAS ACCEPTED THAT THE SERVICES WERE RENDERED IN CONNECT ION WITH THE SALE OF THE ASSESSEE. ON THE OTHER HAND, LD. DR BEFORE US SUBMITTED THAT HE WILL FILE WRITTEN STATEMENT IN A DAY OR TWO AFTER HEARING OF THIS APP EAL AND HEAVILY RELIED ON THE ORDER OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INS TANT CASE RELATES TO THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW FOR THE COMMISSION PAID BY THE ASSESSEE. THE REASON FOR THE DISALLOWANCE INTER-ALI A WAS OBSERVED BY THE AO THAT NO-SERVICE WAS RENDERED BY THE COMMISSION AGEN TS. THERE WERE AS MANY AS 5 PARTIES TO WHOM THE COMMISSION WAS PAID. BUT T HERE IS SINGLE PARTY TO WHOM THE MAJOR AMOUNT OF COMMISSION WAS PAID FOR RS . 1,49,73,810 LEAVING THE BALANCE OF COMMISSION AMOUNT OF RS. 1,24,623.00 ONLY WHICH WAS PAID TO THE REMAINING 4 PARTIES. THEREFORE WE ARE INCLINED TO FOCUS THE ISSUE OF THE COMMISSION PAYMENT TO KUNAL PIPE. AFTER PERUSING TH E ORDER OF AUTHORITIES BELOW, WE FIND THAT THE IDENTITY OF THE COMMISSION AGENT IN THE INSTANT CASE HAS NOT BEEN DOUBTED. THE ONLY ISSUE FOR OUR CONSID ERATION ARISES SO AS TO WHETHER COMMISSION AGENT HAS RENDERED THE SERVICES TO THE ASSESSEE AND THEREFORE THE IMPUGNED COMMISSION PAYMENT HAS NEXUS WITH THE BUSINESS OF ASSESSEE. WE FIND THAT TO ESTABLISH THE NEXUS OF TH E COMMISSION AMOUNT WITH THE BUSINESS OF THE ASSESSEE, THE AO HAS RECORDED T HE STATEMENT U/S. 131 OF THE ACT AND RELEVANT EXTRACT OF THE STATEMENT IS RE PRODUCED BELOW:- STATEMENT TODAY ON 23.12.2011 SRI SUSHIL KUMAR TULSIYIAN S/O SRI PRAHLAD ROY TULSIYIAN AGED 59 YEARS, R/O KUNAL PIPE INFRA PVT. LTD. RASNA DA, DURG MAKES THIS STATEMENT U/S 131 OF THE INCOME TAX ACT, 1961 BEFOR E THE DY. COMMISSIONER OF INCOME TAX (INV.)-I RANGE IN HIS OFFICE UNDER OA TH IN THE CASE OF KUNAL PIPE INFRA PVT. LTD. I SOLEMNLY AFFIRM THAT I WILL TELL THE TRUTH. SD/- ILLEGIBLE SD/- SHRANDIP SUSHIL KUMAR TULSIYIAN ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 9 23/12/11 23.12.11 ADMINISTERED OATH (SHRANDIP SINHA) DY. COMMISSIONER OF IT(INV)-I RAIAPUR (CG) Q1 : PLEASE IDENTIFY YOURSELF FULLY. A- : I AM THE AFORESAID PERSON. Q-2 : PLEASE STATE IN WHAT POST AND SINCE WHEN ARE YOU WORKING IN KUNAL PIPE I, PVT. LTD. A- : I AM WORKING AS DIRECTOR SINCE 2007 IN KUNAL PIPE PVT. LTD. Q-3 : PLEASE SAY WHAT THE SAID COMPANY ACCOMPLISHED IN THE FINANCIAL YEAR 2008-09? A- : IN FINANCIAL YEAR 2008-09 THE SAID SD/- ILLEGIBLE SD/- SHRANDIP SUSHIL KUMAR TULSIYIAN 23/12/11 23.12.11 ADMINISTERED OATH (SHARANDIP SINHA) DY. COMMISSIONER OF IT(INV)I RAIPUR (CG) COMPANY RAN THE ROLLING MILL, TUBE MILL WAS RUN IN PIPE PLANT, MS (ILLEGIBLE) MACHINE, BILLET WERE TAKEN AND M.S. STR IP WERE MADE, AND THE STRIP WERE SOLD AND MS TUBE WERE SOLD. APAR T FROM THIS WEST AND WERE SOLD. GOODS WERE SOLD TO ARSH SPONG E IRON ON COMMISSION BASIS. WORK WAS DONE ALSO IN THE COMMODI TY MARKET. Q-4 : PLEASE STATE WHAT YOU DID FOR KUNAL PIPE I. PVT. LTD. IN FINANCIAL YEAR 2008-09 A-: IN FINANCIAL YEAR 2008-09 I WOULD BE TOLD BY AR SH SPONGE IRON, M/S KUNAL PIPE I PVT. LTD. SUCH AND SUCH QUANTITY W OULD BE SOLD DTO DIFFERENT PARTIES EVERY DAY AT THE MARKET RATE WHICH I WOULD TELL ARSH SPONGE IRON. GOODS USED TO BE SENT TO PAR TIES FROM THERE AND THE PARTIES WOULD MAKE PAYMENT FOR IT DIR ECTLY TO ARSH IRON. Q-5 : PLEASE STATE WHAT SERVICES THE COMPANY RENDER ED FOR THE INCOME OF RS.25253941/- OF THE COMPANY ON COMMISSIO N BASIS? A- : FIROZ BHAI THE DIRECTOR AND THE EMPLOYEE SHARM AJI OF ARSH SPONGE IRON WOULD TELL ME AND ACCORDING TO THEM I W OULD CONTRACT DIFFERENT PARTIES AND SPEAK TO THEM AND TE LL FIROZ BHAIA AND SHARMAJI. GOODS USED TO BE SEND FROM ARSH SPONG E IRON ON THAT BASIS. KUNAL PIPE I. PVT. LTD. USED TO GET COM MISSION ON THIS BASIS SD/- ILLEGIBLE SD/- SHARANDIP SUSHIL KUMAR TULSIYIAN 23/12/11 23.12.11 ADMINISTERED OATH ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 10 (SHRANDIP SINHA) DY..COMMISSIONER OF IT (INV)-I RAIPUR (CG) PG-3 Q-6 : PLEASE STATE WHAT DO YOU MEAN BY GOODS? A- : BY GOODS I MEAN THE MAIN MANUFACTURED ITEM OF ARSH SPONGE IRON Q-7 : PLEAS STATE WHAT GOODS WOULD COME FROM WHICH FACTORY OF ARSH SPONGE IRON? A- : SPONGE IRON LUMPS AND SPONGE IRON FIVES USED T O COME FROM THE BILDA-NEURA FACTORY OF ARSH SPONGE IRON. Q-8: PLEASE STATE WHO HAD THE RESPONSIBILITY OF CHE CKING THE QUALITY? A- : ARSH SPONGE IRON HAD THE RESPONSIBILITY OF CHE CKING THE QUALITY OF THE ABOVE MANUFACTURE. Q-9: PLEASE STATE WHO WOULD DECIDE THE SALE PRICE. A-: ON THE BASIS OF SUPPLY, PRODUCTION AND DEMAND DAYS BEFORE SALE OF THE GOODS ON LOOKING AT THE MARKET THE CONVERSAT ION BETWEEN MYSELF AND THE CLIENT WAS TOLD TO THE DIRECTS OF FI ROZ BHAI AND EMPLOLYEE SHARMAJI OF ARSH SPONGE IRON AND IT WAS T HEM WHO DECIDED THE SALE PRICE. Q-10: HOW MANY TIMES HAVE YOU BEEN TO THE FACTORY O F ARSH SPONGE IRON INN TILDA AND HOW MANY PEOPLE DID YOU SEE WORK ING THERE? A-: I NEVER WENT TO THE FACTORY AT TILDA. Q-11: PLEASE STATE WHAT IS THE DISTANCE OF TILDA FR OM RAIPUR> SD/- ILLEGIBLE SD/- SHAANDIP SUSHIL KUMAR TULSIYIAN 23/12/11 23.12.11 ADMINISTERED OATH (SHARANDIP SINHA) DY. COMMISSIONER OF IT (INV)-I RAIPUR (CG) PG.4 A-: TILDA IS AROUND 50-60 KMS. FROM RAIPUR. Q-: PLEASE STATE HOW IS TILDA IS CONNECTED WITH RAI PUR BY ROAD AND RAILWAY? A-: TILDA IS CONNECTED TO RAIPUR BY ROAD AND ALSO B Y RAIL. Q-13: PLEASE STATE HOW MUCH TIME IS TAKEN TO TRAVEL FROM TILDA TO RAIPUR? A-: BY RAIL IT TAKEN ABOUT ONE TO ONE AND HALF HOU R AND A HALF TO TWO BY ROAD TO TRAVEL FROM TILDA TO RAIAPUR. Q-14: PLEASE STATE TILDA TO RAIPUR IS SITUATE AT 40 KMS. FROM RAIPUR. YOUR HOUSE IS ALSO SITUATED AROUND 40 KMS. FROM RAI PAUR. THE CONNECTIVITY OF TILDA AND RAPAUR IS VERY GOOD. UNDE R THESE ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 11 CIRCUMSTANCES DONT YOU THINK THAT THE EMPLOYER OF ARSH SPONGE IRON COULD HAVE DONE THOSE TRANSACTIONS TOO? A-: IT IS CORRECT THAT TILDA IS AT A DISTANCE OF AB OUT 40 KMS. FROM RAIPUR AND RESMARA IS ALSO 40 KMS. AWAY FROM RAIPUR SO IT WAS FOR THE EMPLOYEES OR DIRECTOR OF ARSH SPONGE IRON T O DIVIDE WHETHER THEY COULD DO THE ABOVE WORK OR NOT. Q-15: PLEASE MENTION THE SPECIAL ABILITY YOU HAVE F OR WHICH YOU HAVE BEEN JOIN THIS WORK? A-: FIROJ BHAI THE DIRECTOR OFARSH SPONGE IRON SD/- ILLEGIBLE SD/- SHRANDIP SUSHIL KUMAR TULSIYIAN 23/12/11 23.12.11 ADMINISTERED OATH (SHRANDIP SINHA) DY. COMMISSIONER OF IT (INV)-I RAIPUR (CG) PG. 5 CAME TO KNOW FROM THE MARKER THAT THERE IS LESS WO RK IN KUNAL PIPE I PVT. LTD. AND ITS DIRECTOR SUSHIL TULSIYIAN HAS SUFFICIENT TIME IN HIS HANDS. IF YOU HAVE THE WORK DONE BY HIM IT WILL BE DONE PROPERLY. FEROZE BHAI CONTRACTED ME AND GAVE M E THE WORK. Q-16: PLEASE SAY WHO FIXED THE RATE OF COMMISSION? A-: FEROZ BHAI HAD FIXED THE RATE OF COMMISSION WHI CH ARE RS.1500 PER TONNE. Q-17: PLEAS STATE HOW WAS THE KNOWLEDGE OF METALLIZ ATION OF SPONGE IRON RECEIVED? A-: IN ORDINARY LANGUAGE SPONGE IRON METALLIZATION IS SAID AS 80% WHICH IS CALLED FE 80 IN LAB TESTING, SCIENTIFIC LA NGUAGE. IF THERE IS ANY CHANGE IN IT THEN THE PARTY WAS INFORMED. Q-18: PLEASE STATE HOW MUCH ADDITIONAL SALES DID TH E COMPANY (ARSH SPONGE IRON) HAVE BY THE WORK DONE BY YOU? A-: I CAN SAY THIS ONLY AFTER CHECKING THE ACCOUNTS . Q-19: PLEASE STATE AS TO WHAT OTHER FIRMS YOU HAVE WORKED FOR APART FROM ARSH SPONGE IRON? A-: I HAVE DONE THIS WORK PRACTICALLY ONLY FOR ARSH SPONGE IRON. SD/- ILLEGIBLE SD/- SHRANDIP SUSHIL KUMAR TULSIYIAN 23/12/11 23.12.11 ADMINISTERED OATH (SHRANDIP SINHA) DY. COMMISSIONER OF IT (INV)-I RAIPUR (CG) PG.6 Q-20: BY WHAT AUTHORITY DID YOU DO THIS WORK, FOR T HE COMPANY KUNAL PIPE) OR YOURSELF? A-: I DID THIS AS THE DIRECTOR OF K9UNAL PIPE I PVT . LTD. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 12 Q-21: PLEASE STATE WHETHER KUNAL PIPE I PVT. LTD. H AD PASSED A RESOLUTION ABOUT THE WORK DONE BY YOU ON COMMISSION AND INFORMAL MCA (MINISTRY OF COMPANY AFFAIRS)? A-: NO THEE WAS NO RESOLUTION PASSED BY THE COMPANY KUNAL PIPE I PVT. LTD. FOR THE WORK DONE BY ME ON COMMISSION. Q-22: IF THE COMPANY DID NOT PASS ANY RESOLUTION TH EN WHY SHOULD THE COMMISSION RECEIVED BY YOU NOT BE DEEMED ON YOUR IN COME? A-: I SUSHIL KUMAR TULSIYIAN DIRECTOR OF KUNAL PIPE I PVT. LTD. AM LIVING INI RASMARA LONG AND HAVE DONE THE ABOVE WOR K FOR THIS COMPANY. Q-23: FROM THE STATEMENT GIVEN BY YOU IT IS FOUND T HAT ARSH SPONGE IRON HAS NOT HAD ANY SUCH SPECIAL WORK DONE BY YOU OR YOUR COMPANY FOR WHICH COMMISSION OF RS.252563941/- IS G IVEN. IT WAS POSSIBLE TO HAVE BEEN DONE BY ANY EMPLOYER TO H AVE BEEN DONE BY ANY EMPLOYER OF THE COMPANY AT A FOR LOWER EXPENSE. ON SEEING THE DISTANCE FROM TILDA TO RAIPUR. SD/- ILLEGIBLE SD/- SHRANDIP SUSHIL KUMAR TULSIYIAN 23/12/11 23.12.11 ADMINISTERED OATH (SHRANDIP SINHA) DY. COMMISSIONER OF IT 9INV)-I RAIPUR (CG) PG-7 IT WAS ABSOLUTELY POSSIBLE FOR ANY EMPLOYEE OR THE COMPANY TO GET IT DONE. PLEASE SAY WHY SHOULD IT NOT BE DEEMED THAT YOU HAVE NOT GIVEN ANY SERVICE TO ARSH SPONGE IRON AS A COMMISSION AGENT? A-: FROM MY ABOVE STATEMENT IS CLEAR THAT EVEN THOU GH TILDA IS 40 KMS. AWAY FROM RAIPUR AND DRUG IS 40 KMS. AWAY RAIP UR STILL I HAVE DONE MY WORK AND RECEIVED MY COMMISSION. THE R ENT WAS TO BE DECIDED BY FEROZ BHAI THE DIRECTOR OF ARSH SP ONGE IRON. Q-24: DO YOU WANT TO SAY ANYTHING ELSE? A-: NO I HAVE GIVEN THE ABOVE STATEMENT IN FULL POS SESSION OF SENSES OUT OF MY OWN ACCORD WITHOUT ANY PRESSURE. A ND I HAVE READ AND UNDERSTOOD THE STATEMENT AND HAVE SIGNED B Y MY OWN WILL. SD/- ILLEGIBLE SD/- SHRANDIP SUSIL KUMAR TULSIYIAN 23/12/11 23.12.11 ADMNISTERED OATH (SHRANDIP SINHA) DU. COMMISSIONER OF IT (INV)-I RAIPUR (CG) ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 13 FROM THE AFORESAID STATEMENT OF THE COMMISSION AGEN T, WE FIND THAT THE AGENT WAS DULY APPOINTED BY THE ASSESSEE AND HIS APPOINTM ENT WAS ALSO SUPPORTED ON THE BASIS OF AGENCY AGREEMENT WHICH PLACED ON PA GES 52-55 OF THE PAPER BOOK. THE COMMISSION AGENT WAS APPOINTED BY THE ASS ESSEE AFTER HAVING PASSED THE RESOLUTION IN THE MEETING OF THE BOARD O F DIRECTORS WHICH IS PLACED ON PAGE 56 OF THE PAPER BOOK. FROM THE FOREGOING DI SCUSSION, WE FIND THAT THE AMOUNT OF COMMISSION WAS DULY QUANTIFIED ON THE BAS IS OF TURNOVER ACHIEVED BY THE ASSESSEE THROUGH HIS APPOINTED AGENTS. THE C OMMISSION AGENTS DULY RAISED THE BILLS TO THE ASSESSEE WHICH ARE PLACED A LONG WITH LEDGER COPIES ON PAGES 68 TO 91 OF THE PAPER BOOK. THE DIRECTOR OF K UNAL PIPE IN QUESTION NO. 5 IN THE AFORESAID STATEMENT HAS DULY EXPLAINED THE S ERVICES IT HAD RENDERED TO THE ASSESSEE IN CONNECTION WITH THE SALES. IN THE INSTANT CASE BEFORE US THE GENUINENESS OF TH E COMMISSION PAYMENT HAS NOT BEEN DISPUTED BY THE LOWER AUTHORITIES BY THE A SSESSEE TO THE PARTY IN RELATION TO THE SALE. THE ASSESSEE CLAIMED TO HAVE PAID THE AMOUNT OF COMMISSION TO THE PARTIES FOR THE SALE ORDERS RECEI VED THROUGH IT. THE ASSESSEE AND KUNAL PIPE AGREED THAT THE SALES WILL BE THROUGH KUNAL PIPE AND THE COMMISSION ON SALES ON A PARTICULAR RATE WILL B E PAID BY THE ASSESSEE. ALL PAYMENTS ARE MADE BY THE ACCOUNT-PAYEE CHEQUE. THE DIRECTOR OF KUNAL PIPE HAD ADMITTED THAT THERE WAS AN AGREEMENT BETWEEN TH E ASSESSEE AND KUNAL PIPE FOR SALE OF THE PRODUCTS OF THE ASSESSEE ON CO MMISSION BASIS. THE COMMISSION HAS BEEN PAID AS PER THE AGREEMENT THROU GH ACCOUNT-PAYEE CHEQUE. WHETHER ANY SERVICE HAS BEEN RENDERED BY KU NAL PIPE-BASICALLY IT IS A QUESTION OF FACT. IN CASES OF SALE PROMOTION EVEN SALES CAN BE PROCURED ON TELEPHONE IF THE PURCHASER IS PERSUADED BY THE AGEN T. MERELY, IF THE LOWER AUTHORITIES ARE NOT SATISFIED WITH THE ANSWERS OF T HE ASSESSEE AND COMMISSION AGENT-KUNAL PIPE THAT DOES NOT MEAN THAT NO SERVICE S ARE RENDERED OR TO DISBELIEVE THE GENUINENESS OF THE AGREEMENT FOR SER VICES OR SALES, AS WELL AS OF THE PAYMENT. THE PAYMENTS FOR THE COMMISSIONS HA VE BEEN DULY ACKNOWLEDGED AND THE SAME HAVE NOT BEEN DENIED. THE REFORE, IN SUCH CASES, IT CANNOT BE SAID THAT NO SERVICES WERE RENDERED BY THE COMMISSION AGENT. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 14 WHEN THE FINDING OF FACT REGARDING RENDERING OF SER VICE IS NOT PERVERSE, THEN HOW THE PAYMENT OF COMMISSION CAN BE DISALLOWED. IN HOLDING SO WE RELY IN THE JUDGMENT OF CIT VS. INBUILT MERCHANT PRIVATE LTD . IN ITAT NO. 225 OF 2013, G.A. NO. 3825 OF 2013 VIDE ORDER DATED 14 TH MARCH 2014 WHEREIN IT WAS HELD AS UNDER:- WITH THE ADVANCEMENT OF TECHNOLOGY, IT HAS BECOME P OSSIBLE TO SELL GOODS THROUGHOUT THE COUNTRY THROUGH THE INTERNET. FOR THAT PURPOSE, AGENT ARE REQUIRED THROUGHOUT THE COUNTRY. THE MECHANISM IN THAT REGARD HAS BEEN DISCLOSED BY THE ASSESSEE AND HAS BEEN RECORDED IN THE ORDER OF THE CIT(APPEALS). FOR THE PURPOSE OF CARRYING ON ITS BU SINESS, THE ASSESSEE HAS TO RECRUIT THE AGENTS. IT MAY NOT BE POSSIBLE FOR T HE ASSESSEE TO KNOW THEM PERSONALLY. WHATEVER ADDRESS WAS FURNISHED TO THE A SSESSEE, HAS BEEN DISCLOSED TO THE INCOME-TAX DEPARTMENT. PAYMENTS WE RE ADMITTEDLY MADE BY CHEQUE AFTER DEDUCTION OF TAX. THE TAX DEDUCTED AS SOURCE HAS DULY BEEN DEPOSITED. THE JUDGMENT IN THE CASE OF CIT VS. PREC ISION FINANCE PVT. LTD. REPORTED IN 208 ITR 465 RELIED UPON B MR. BHOWMICK DOES NOT REALLY ASSIST HIM. THE AFORESAID JUDGMENT IS AN AUTHORITY FOR THE PROPOSITION THAT MERE PAYMENT BY ACCOUNT PAYEE CHEQUE CANNOT ESTABLISH TH AT THE TRANSACTIONS WAS GENUINE, BUT IN THE CASE BEFORE US, BESIDES THE FAC T THAT PAYMENT WAS MADE BY CHEQUE, THERE ARE OTHER PIECES OF EVIDENCE AVAIL ABLE WHICH ARE AS FOLLOWS: A) BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE IN THE ORDINARY COURSE OF BUSINESS B) DEDUCTION WE ARE, AS SUCH OF THE OPINION THAT THE VIEW EXPRES SED BY THE LEARNED TRIBUNAL ARE UNEXCEPTIONABLE. WE, THEREFORE REFUSE TO ADMIT THE APPEAL. THE APPEAL IS THUS DISMISSED. IN ADDITION TO THE ABOVE WE FIND THAT THE AO WAS HA VING IN HIS POSSESSION ALL THE DETAILS OF THE PARTIES TO WHOM THE ASSESSEE HAS CLAIMED TO HAVE MADE SALE THROUGH THE COMMISSION AGENT. THUS THE AO SHOU LD HAVE VERIFIED THE FACT WHETHER THERE IS ANY INVOLVEMENT OF THE COMMISSION AGENT IN THE IMPUGNED SALE BY EXERCISING HIS POWER UNDER SECTION 133(6)/ 131 OF THE ACT. BUT THE AO ERRED IN DOING AND DOUBTED THE PAYMENT OF THE COMMI SSION ON SEVERAL GROUNDS. INDEED IN THE IMMEDIATE PRECEDING YEAR THE AMOUNT O F COMMISSION PAYMENT WAS OF MEAGER AMOUNT AND IN THE CURRENT YEAR IT HAS INCREASED MANIFOLDS. IN THIS REGARD WE FIND THAT THE FACT THAT THE TURNOVER OF THE ASSESSEE HAS INCREASED SUBSTANTIALLY IN THE CURRENT YEAR CANNOT BE IGNORED. THE TURNOVER OF ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 15 THE ASSESSEE HAS INCREASED BY RS.10 CRORES APPROXIM ATELY IN COMPARISON TO THE EARLIER YEAR. THE COMPARISON MADE BY THE AO FOR THE SALES AND THE COMMISSION PAYMENT BY OBSERVING THAT THE SALE WAS I NCREASED BY 80% AND THE COMMISSION WAS INCREASED BY 30,000% IN COMPARIS ON TO THE EARLIER YEAR IS NOT LOGICAL COMPARISON. IT IS BECAUSE THE COMMIS SION EXPENSES WERE NOT COMPARED BY THE AO IN RELATION TO THE SALE OF THE C OMPANY. IF THE AMOUNT OF COMMISSION IS COMPARED IN RELATION TO SALE IN THE I MMEDIATE PRECEDING YEAR THEN IT WORKS OUT AT .032% ONLY WHEREAS IN THE CURR ENT YEAR IT WORKS OUT AT 5.56% ONLY. THUS THE ALLEGATION OF THE AO THAT THE COMMISSION HAS INCREASED BY 30000% IN COMPARISON TO THE EARLIER YEAR IS BASE LESS AS IT SHOULD ALWAYS BE COMPARED IN RELATION TO SALES BECAUSE THERE IS D IRECT NEXUS BETWEEN THE SALE & THE COMMISSION. THE ALLEGATION OF THE AO THAT THERE WAS HUGE DEMAND ACROSS THE GLOBE IN THE INDUSTRY OF SPONGE IRON AND THEREFORE THE SALE PRIC E HAS GONE HIGH IS NOT BASED ON ANY TANGIBLE MATERIALS. ADMITTEDLY THE SAL E PRICE WAS INCREASED IN THE YEAR UNDER CONSIDERATION FROM RS.13,874.31 PER TON TO RS.18,300.76 PER TON. AS PER THE AO THERE WAS HUGE DEMAND OF THE SPO NGE IRON ACROSS THE GLOBE THUS THE PRICE PER TON WAS INCREASED WHEREAS ASSESSEE CLAIMED THAT IT WAS INCREASED DUE TO THE INVOLVEMENT OF THE COMMISS ION AGENT. HOWEVER ON PERUSAL OF THE ORDER OF LOWER AUTHORITIES WE FIND T HAT NO EVIDENCE HAS BEEN BROUGHT ON THE RECORD IN SUPPORT OF THEIR ALLEGATIO N, THEREFORE WE REJECT THE SAME. SIMILARLY WE FIND THAT THE ALLEGATION OF THE AO THA T COMMISSION WAS PAID FOR THE SALES TO THE EXISTING PARTIES DOES NOT HOLD GOO D. IT IS BECAUSE WHEN THE ASSESSEE WAS SELLING THE GOODS DIRECTLY TO ITS PART IES THE PRICE WAS LESS BUT IN THE CURRENT YEAR WHEN THE GOODS WERE SOLD THOROUGH THE COMMISSION AGENTS IT FETCHED BETTER PRICE. BESIDES THIS THE LD. AR BEFOR E US SUBMITTED THAT MARKET OF THE SPONGE IRON IS CONTROLLED THOUGH THE COMMISSION AGENTS AND THEREFORE THE ASSESSEE HAD TO RESORT TO THE SERVICES OF THE COMMI SSION AGENTS IN-SPITE OF THE FACT THAT IT HAD DEALINGS WITH THE PARTIES ON E ARLIER OCCASIONS. THERE IS CUT- THROAT COMPETITION IN THE MARKET AND TO COMPETE THE COMPETITION THE SERVICES ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 16 OF THE COMMISSION AGENTS WERE VERY MUCH REQUIRED. T HE LD. DR HAS NOT BROUGHT ANYTHING ON RECORD CONTRARY TO THE ARGUMENT OF THE LD. AR. IN VIEW OF ABOVE, WE FIND THAT THE COMMISSION EXPEN SES PAID BY THE ASSESSEE QUALIFIED TO BE ALLOWED AS BUSINESS EXPENDITURE. TH E AO CANNOT STEP INTO THE SHOES OF THE ASSESSEE TO DECIDE WHETHER THE COMMISS ION EXPENSES REQUIRE TO BE INCURRED AND WHAT AMOUNT OF PROFIT IS DERIVED AG AINST THE COMMISSION EXPENSES. IT WAS THE CONSCIOUS DECISION OF THE ASSE SSEE WHICH WAS DULY APPROVED IN THE BOARD MEETING OF THE DIRECTORS. THE REFORE ALL OTHER ALLEGATIONS MADE BY THE AO ARE NOT SUSTAINABLE IN REGARD TO THE COMMISSION PAYMENT AND DO NOT REQUIRE ANY ADJUDICATION. THUS AFTER CONSIDE RING THE FACTS IN TOTALITY WE ARE INCLINED TO REVERSE THE ORDER OF AUTHORITIES BE LOW. THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.5 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE DISALL OWANCE OF 30,800/- ON ACCOUNT OF INCREASE IN AUTHORIZED SHARE CAPITAL. 9. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS INCREASED ITS AUTHORIZED SHARE CAPITAL BY 1.50 CRORES. THE ASSESSEE IN THIS CONNECTION HAS INCURRED AN EXPENDITURE OF 1.54 LACS WHICH WAS AMORTIZED BY THE ASSESSEE OVER A PERIOD OF FIVE YEAR. THUS, ASSESSEE CLAIMED 1/5 TH OF 1.54 LAKH HAS I.E. 30,800/- BY DEBITING IN ITS PROFIT AND LOSS A/C. T HE AO FOUND SUCH EXPENDITURE IS CAPITAL IN NATURE AND THEREFORE DISA LLOWED THE SAME BY ADDING TO THE TOTAL INCOME OF ASSESSEE. 10. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO CONFIRMED THE ORDER OF AO. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IS SECOND APPEAL BEFORE US ON THE FOLLOWING GROUND:- 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN DITTOING THE ORDER OF THE AO AND CONFIRMING THE ADDITION AMOUNTI NG TO RS.30,800/- ON ACCOUNT OF EXPENSES FOR INCREASE IN AUTHORIZED SHA RE CAPITAL, ALTHOUGH NO SHARE CAPITAL EXPENSES WERE DEBITED IN THIS FINANCI AL YEAR, THEREFORE, THE TOTAL DISALLOWANCE IS COMPLETELY ARBITRARY, UNJUSTIFIED A ND ILLEGAL. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 17 11. LD.AR FOR THE ASSESSEE BEFORE US FAIRLY AGREED THAT THE IMPUGNED EXPENDITURE IS CAPITAL IN NATURE AND THEREFORE NOT ALLOWABLE FOR DEDUCTION. ON THE CONTRARY, LD. DR AGREED WITH THE SUBMISSION RAI SED BY LD. AR. 12. IN VIEW OF ABOVE, WE FIND NO MERIT IN THE GROUN D RAISED BY ASSESSEE BEFORE US. HENCE, THIS GROUND RAISED BY ASSESSEE IS HEREBY DISMISSED. 13. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.6 IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN NOT ALLOWING THE ADDITIONAL DEPRECI ATION OF 46,68,086/-. 14. THE ASSESSEE IN THE IMMEDIATE PRECEDING ASSESSM ENT YEAR HAS SHOWN A BLOCK OF ASSET IN THE NAME OF PLANT AND MACHINERY @ 15% FOR 4,10,29,989/- AS ON 31.03.2008. THE ASSESSEE AS ON 31.03.2008 HAS BIFURCATED THIS BLOCK OF ASSET INTO TWO PARTS FIRSTLY A BLOCK @ 15% WAS SH OWN FOR 3,55,38,122 AND SECONDLY A BLOCK @ 100% WAS SHOWN FOR 54,91,866/-. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED DEPRECIATION @ 100% ON THE WRITTEN DOWN VALUE (WDV FOR SHORT) OF 54,91,866/- ON THE GROUND THAT THIS BLOCK REPRESENTS THE POLLUTION EQUIPMENT WHICH ARE ENTITL ED FOR THE DEPRECIATION @ 100%. ON REQUISITION BY THE AO ABOUT THE FURNISHING OF SUPPORTING EVIDENCE IN SUPPORT OF POLLUTION EQUIPMENT AS CLAIMED BY THE AS SESSEE WHO FAILED TO FURNISH THE SAME. THEREFORE, AO TREATED THE SAME AS PART OF THE BLOCK OF ASSET ELIGIBLE FOR DEPRECIATION @ 15%. THUS, THE AO ALLOW ED DEPRECIATION @ 15% ON WDV OF 54,91,856/- AND BALANCE AMOUNT OF 46,68,086/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 15. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO CONFIRMED THE ORDER OF AO. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUND:- ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 18 6. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN NOT ALLOWING ADDITIONAL DEPRECIATION AMOUNTING TO RS.46,68,086/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 16. LD. AR BEFORE US DREW OUR ATTENTION ON PAGE 132 OF THE PAPER BOOK WHERE THE LIST OF POLLUTION CONTROL EQUIPMENT WAS P LACED. HE ALSO SUBMITTED THAT ALL THE DETAILS OF THE PURCHASE BILLS OF POLLU TION EQUIPMENTS WERE DULY FURNISHED BEFORE THE AUTHORITIES BELOW. LD. AR FURT HER DREW OUR ATTENTION ON PAGES 136 TO 163 OF THE PAPER BOOK WHERE ALL THE BI LLS WERE PLACED. LD. AR ALSO SUBMITTED THAT ASSESSEE DUE TO MISTAKE COULD N OT CLAIM THE DEPRECIATION @ 100%. BUT NOW ASSESSEE COULD NOT BE DEPRIVED FROM CLAIMING THE DEPRECIATION @ 100% WHICH ARE ELIGIBLE ITEMS. ON THE OTHER HAND, LD. DR PRAYED BEFORE US THAT HE WOULD BE SUBMITTED WRITTEN SUBMISSION IN DAY OR TWO AND HEAVILY RELIED ON THE ORDER OF AUTHORITIES BELOW. 17. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES TO TH E DEPRECIATION CLAIMED BY THE ASSESSEE @ 100% ON THE OPENING WDV OF 54,91,866/- ONLY. THE ASSESSEE TILL THE PREVIOUS YEAR ENDING ON 31.03.2008 WAS CLA IMING THE DEPRECIATION ON THE POLLUTION CONTROLLED EQUIPMENT @ 15% THOUGH IT WAS ENTITLED TO CLAIM @ 100%. THE DEPRECIATION WAS CLAIMED AT A LOWER RATE BY THE ASSESSEE INADVERTENTLY IN THE YEAR BEFORE US. THE ASSESSEE C LAIMED THE DEPRECIATION AT THE CORRECT RATE APPLICABLE TO THE POLLUTION CONTRO LLED EQUIPMENTS IN THE YEAR UNDER CONSIDERATION. HOWEVER, WE FIND THAT THE CONT ENTION OF THE ASSESSEE WAS DISREGARDED BY LD. CIT(A) BY OBSERVING THAT THE DEPRECIATION IN THE EARLIER YEAR WAS CLAIMED AT A LESSER VALUE AND THEREFORE TH IS YEAR DEPRECIATION @ 100% CANNOT BE ALLOWED. ADMITTEDLY, THE ASSESSEE IS ENTITLED FOR DEPRECIATION @ 100% ON THE POLLUTION EQUIPMENTS. LD. AR IN SUPPO RT OF ASSESSEES CLAIM STATED THAT THE DETAILS OF POLLUTION CONTROLLED EQU IPMENTS HAVE BEEN DULY SUBMITTED AT THE TIME OF ASSESSMENT. THE AUTHORITIE S BELOW HAVE NOT BROUGHT ANY DEFECT IN THE BILLS OF POLLUTION CONTROL EQUIPM ENTS BUT THE DEPRECIATION WAS DENIED ON THE GROUND THAT IT WAS NOT CLAIMED IN THE EARLIER YEAR. ON ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 19 EXAMINATION OF THE FACTS WE FIND THAT THE ASSESSEE WAS ENTITLED TO CLAIM THE DEPRECIATION AT THE RATE OF HUNDRED PERCENT BUT THE ASSESSEE INADVERTENTLY CLAIMED THE DEPRECIATION AT A LOWER RATE. IN OUR VI EW IF THE ASSESSEE HAS CLAIMED THE DEPRECIATION AT WRONG RATE THEN THE AO SHOULD HAVE ALLOWED THE SAME AT THE CORRECT RATE. IT IS BECAUSE IT IS MANDA TORY FOR THE ASSESSEE TO CLAIM THE DEPRECIATION UNDER THE PROVISIONS OF SECT ION 32 OF THE ACT AT THE PRESCRIBED RATE. THE PROVISIONS OF THE ACT READS AS UNDER : DEPRECIATION. 77 32. (1) 78 [IN RESPECT OF DEPRECIATION OF (I) BUILDINGS 79 , MACHINERY 79 , PLANT OR FURNITURE, BEING TANGIBLE ASSETS; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE M ARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1 998, OWNED 79 , WHOLLY OR PARTLY, BY THE ASSESSEE 79 AND USED FOR THE PURPOSES OF THE BUSINESS 79 OR PROFESSION, THE FOLLOWING DEDUCTIONS SHALL BE A LLOWED] 80 [(I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAG ED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTAGE ON THE A CTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESCRIBED 81 ;] (II) 82 [IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCENTAG E ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED 83 : A PLAIN READING OF THE PROVISIONS REVEALS THAT THE DEPRECIATION SHALL BE COMPUTED AT A PRESCRIBED RATE. THE ASSESSEE CANNOT CLAIM THE SAME EITHER AT A HIGHER RATE NOR LOWER RATE THAN THE PRESCRIBED RA TE. IN THE INSTANT CASE BEFORE US IF THE ASSESSEE FAILED TO DO SO THEN IT BECOMES DUTY OF THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION AT A RATE PRESCRIBED UNDE R THE ACT. THE LOWER AUTHORITIES HAD NOT BROUGHT ANYTHING ON RECORD ANY DEFECT IN THE DETAILS SUBMITTED BY THE ASSESSEE IN SUPPORT OF THE DEPRECI ATION IN RESPECT OF POLLUTION CONTROL EQUIPMENTS. THE LOWER AUTHORITIES HAVE JUST DENIED THE BENEFIT OF THE APPRECIATION ON THE GROUND THAT THE SAME WAS ALLOWED IN THE IMMEDIATE PRECEDING YEAR AT THE RATE OF 15% ONLY. W E DISAGREE WITH THE ACTION OF THE LOWER AUTHORITIES ON THE GROUND THAT THE ASS ESSEE AS PER THE PROVISIONS OF LAW IS ENTITLED FOR THE APPRECIATION AT THE RAT E OF HUNDRED PERCENT. IF HE HAS MADE SOME MISTAKE IN CLAIMING THE DEPRECIATION IN O NE YEAR AND RECTIFIES THE SAME IN THE SUBSEQUENT YEAR IN RELATION TO DEPRECIA TION, THEN HE SHOULD BE ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 20 GIVEN FAIR CHANCE TO RECTIFY THE MISTAKE. IN VIEW O F ABOVE WE HAVE NO HESITATION TO REVERSE THE ORDER OF AUTHORITIES BELO W. HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 18. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO. 7 I S THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE DIS ALLOWANCE OF 8 LAKH ON ACCOUNT OF PAYMENT OF KEY-MAN INSURANCE POLICY U/S. 37 OF THE ACT. 19. DURING ASSESSMENT PROCEEDINGS BEFORE THE AO, AS SESSEE STATED THAT THE PAYMENT FOR THE INSURANCE WAS MADE THROUGH BANK . BUT THE ASSESSEE COULD NOT FURNISH THE INSURANCE POLICY AND THEREFOR E THE AO ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE. 20. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO CONFIRMED THE ORDER OF AO. 21. AT THE OUTSET WE FIND THAT HONBLE ITAT AHMADAB AD BENCH IN ITA NO.1722/AHD/2008 DATED 06-03-2009 DISMISSED THE REVENUES APPEAL AN D STATED THAT EXACTLY ON SAME FACTS, AND THE ISSUE BEING EXA CTLY IDENTICAL, THE ISSUE OF REVENUES APPEAL IS COVERED IN ASSESSEES OWN CASE IN ITA NO.1722/AHD/2008 (SUPRA) VIDE PARA-5, 5.1AND 5.2 , WHICH READS AS UNDER:- 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE AO DISALLOWED THE CLAIM FOR DEDUCTION MERELY ON THE GROUND THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE PARTNE RS AND RELIED UPON THE CIRCULAR NO.762 DATED 18-2-1998, WHICH READS AS UND ER:- TAXATION OF SUM RECEIVED UNDER THE KEYMAN INSURANCE POLICY 14.1 KEYMAN INSURANCE POLICY OF THE LIFE INSURANCE CORPORATION OF INDIA, ETC. PROVIDES FOR AN INSURANCE POLICY TAKEN BY A BUSINES S ORGANIZATION OR A PROFESSIONAL ORGANIZATION ON THE LIFE OF AN EMPLOYE E, IN ORDER TO PROTECT THE BUSINESS AGAINST THE FINANCIAL LOSS, WHICH MAY OCCU R FROM THE EMPLOYEES PREMATURE DEATH. THE KEYMAN IS AN EMPLOYEE OR A D IRECTOR, WHOSE SERVICES ARE PERCEIVED TO HAVE A SIGNIFICANT EFFECT ON THE P ROFITABILITY OF THE BUSINESS. THE PREMIUM IS PAID BY THE EMPLOYER. 14.2 THERE WERE SOME DOUBTS ON THE TAXABILITY OF TH E INCOME INCLUDING BONUS, ETC. FROM SUCH POLICY AND ALSO REGARDING THE TREATM ENT OF THE PREMIUM PAID WHETHER IT SHOULD BE ALLOWED AS A CAPITAL EXPENDITU RE OR AS REVENUE EXPENDITURE. THE FINANCE (NO.2) ACT, 1996, THEREFOR E, LAYS DOWN THE TAX TREATMENT OF THE KEYMAN INSURANCE POLICY. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 21 14.3 CLAUSE (10D OF S.10 OF THE IT ACT EXEMPTS CERTAIN INCOME FROM TAX. THE FINANCE (NO.2) ACT, 1996, AMENDS CL.(10D) OF S.10 TO EXCLUDE ANY SUM RECEIVED UNDER A KEYMAN INSURANCE POLICY INCLUDING THE SUM ALLOCATED BY WAY OF BONUS ON SUCH POLICY FOR THIS PURPOSE. 14.4 THE FINANCE (NO.2) ACT, 1996, ALSO LAYS DOWN T HAT THE SUMS RECEIVED BY THE SAID ORGANIZATION ON SUCH POLICIES, BE TAXED AS BUSINESS PROFITS; THE SURRENDER VALUE OF TH9E POLICY, ENDORSED IN FAVOUR OF THE EMPLOYEE (KEYMAN), OR THE SUM RECEIVED BY HIM AT THE TIME OF RETIREMEN T BE TAKEN AS PROFITS IN LIEU OF SALARY FOR TAX PURPOSES AND IN CASE OF OTHER P ERSONS HAVING NO EMPLOYER- EMPLOYEE RELATIONSHIP, THE SURRENDER VALUE OF THE P OLICY OR THE SUM RECEIVED UNDER THE POLICY BE TAKEN AS INCOME FROM OTHER SOUR CES AND TAXED ACCORDINGLY. THE PREMIUM PAID ON THE KEYMAN INSURAN CE POLICY IS ALLOWED AS BUSINESS EXPENDITURE. 14.5 THE AMENDMENTS TAKE EFFECT FROM THE 1 ST DAY OF OCTOBER 1996. A BARE PERUSAL OF THE AFORESAID CIRCULAR REVEALS TH AT THERE IS NOTHING IN THE CIRCULAR WHICH DEBARS THE ALLOWANCE OF DEDUCTION OF PREMIUM PAID ON THE LIFE OF THE PARTNERS BY THE FIRM. IN PARA 14.4 OF THE AFORESAID CIRCULAR IT IS ONLY MENTIONED THAT IN CASE OF OTHER PERSONS HAVING NO E MPLOYER-EMPLOYEE RELATIONSHIP, THE SURRENDER VALUE OF THE POLICY OR THE SUM RECEIVED UNDER THE POLICY BE TAKEN AS INCOME FROM OTHER SOURCES AND TA XED ACCORDINGLY. APPARENTLY, ONLY EMPLOYER AND EMPLOYEE RELATIONSHIP IS NOT ENVISAGED TO ALLOW THE PREMIUM PAID ON KEYMAN INSURANCE POLICY A S BUSINESS EXPENDITURE AND THERE CAN EXIST OTHER TYPES RELATIONSHIP. IT IS ALSO PERTINENT TO NOTE THE TERM PERSON OR PERSONS HAVE BEEN USED IN THE EX PLANATION TO SECTION 10(10D) WHICH MAY REFER TO NATURAL PERSON OR ARTIFI CIAL I.E. LEGAL PERSONS OR ENTITIES TREATED AS HAVING LEGAL ENTITY UNDER THE P ROVISIONS OF INCOME TAX ACT, 1961 AND IN THIS VIEW OF THE MATTER, THE AO'S CONCL USION IN DISALLOWING THE CLAIM IS NEITHER IN ACCORDANCE WITH THE AFORESAID C IRCULAR NOR IN ACCORDANCE WITH LAW. 5.1 NOW ADVERTING TO THE DECISION IN THE CASE OF P.G. ELECTRONICS (SUPRA) RELIEF UPON BY THE LD. AR, WHEREIN IT WAS HELD AS UNDER: IT MAY BE SEEN FROM PARA 14.2 OF THE CIRCULAR THAT THE BOARD WAS AWARE OF THE DOUBTS RELATING TO THE TREATMENT OF THE PREM IUM PAID IN RESPECT OF A KEYMAN INSURANCE POLICY ISSUED BY THE LIC OF INDI A AND HAS ACCORDINGLY CLARIFIED, TO PUT THE DOUBTS AT REST, I N THE LAST SENTENCE OF PARA 14.4 THAT THE PREMIUM PAID ON THE KEYMAN INSURANCE POLICY IS ALLOWED AS BUSINESS EXPENDITURE. IN THE LIGHT OF THE ABOVE AMENDMENTS AND THE CIRCUL AR CLARIFYING THE POSITION RELATING TO THE ALLOWABILITY OF THE PREMIU M PAID ON KEYMAN INSURANCE POLICY, THE CIT, IN MY VIEW, WAS NOT JUST IFIED IN DIRECTING THE AO TO DISALLOW THE PREMIUM PAID BY THE ASSESSEE-FIR M IN RESPECT OF THE LIFE OF PARTNER ANURAG GUPTA, ASSURED UNDER THE KEY MAN INSURANCE POLICY, AS CAN BE SEEN FROM PARA 2 OF THE ORDER OF THE CIT. THEREFORE, THE ORDER OF THE CIT CANNOT BE SUSTAINED AS IT RUNS COUNTER TO THE AMENDMENTS MADE TO THE ACT AS CLARIFIED BY THE CIRC ULAR ISSUED BY THE ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 22 CBDT. IT IS WELL-SETTLED THAT CIRCULAR ISSUED BY TH E CBDT REGARDING THE EXECUTION OF THE ACT ARE BINDING ON THE IT AUTHORIT IES. THE AMENDED LAW IS APPLICABLE TO THE YEAR UNDER CONSIDERATION. THE CIT WAS, THEREFORE, NOT JUSTIFIED IN ASSUMING JURISDICTION T O REVISE THE ASSESSMENT UNDER S.263. CONTRARY TO THE LAW AND CIRCULAR ISSUED BY THE BOA RD. HE COULD NOT HAVE CONSIDERED THE ASSESSMENT ERRONEOUS SINCE THE ALLOWANCE OF THE PREMIUM AS A DEDUCTION AS BUSINESS EXPENDITURE WAS IN CONFORMITY WITH THE CIRCULAR OF THE BOARD WHICH WAS BINDING ON THE AO. EVEN ON MERITS, HIS VIEW THAT THE PREMIUM PAID ON KEYMAN INSURANCE POLICY SHOULD BE DISALLOWED IS NOT TENABL E, ALSO BECAUSE OF THE CIRCULAR CITED ABOVE, I THEREFORE CANCEL THE OR DER UNDER S.263 ON BOTH COUNTS AND ALLOW THE APPEAL. 5.2 IN THE LIGHT OF THE AFORESAID DECISION, CIRCULA R DATED 18-2/1998 AND EXPLANATION TO SECTION 10(10D) OF THE ACT, WE ARE O F THE OPINION THAT THE PREMIUM PAID UNDER THE KEYMAN INSURANCE POLICY ON T HE LIFE OF PARTNERS CANNOT BE DISALLOWED. THEREFORE, THERE IS NO GROUND FOR INTERFERENCE WITH THE FINDINGS OF THE LEARNED CIT(A). ACCORDINGLY, GROUND NO.1 IS DISMISSED. 22. EXACTLY THE FACTS AND ISSUE BEING SAME IN THE P RESENT CASE, RESPECTFULLY FOLLOWING THE TRIBUNALS DECISION IN ITA NO.1722/AH D/2008 (SUPRA), THE ASSESSEES GROUNDS OF APPEAL DESERVES TO BE ALLOWED. BUT BEFOR E US THE LD. AR HAS FILED THE BANK STATEMENT SHOWING THE PAYMENT TOWARDS KEY-MAN INSURANCE POLICY. NO OTHER DOCUMENT WAS SUBMITTED BY THE ASSESSEE BEFORE THE L OWER AUTHORITIES IN SUPPORT OF THE IMPUGNED POLICY. HOWEVER, IN THE INTEREST OF JU STICE WE ARE INCLINED TO RESTORE THIS ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION TO V ERIFY THE SUPPORTING DOCUMENTS BEFORE ALLOWING THE CLAIM OF THE ASSESSEE. IT IS NE EDLESS TO MENTION THAT THE ASSESSEE SHOULD CO-OPERATE IN THE PROCEEDINGS BEFOR E THE AO. THEREFORE, IN THE INTEREST OF JUSTICE, THE GROUND OF APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 23. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.8 IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING T HE DISALLOWANCE OF 2,90,739/- ON ACCOUNT OF POLLUTION LICENSE EXPENDITURE. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CL AIMED AN EXPENDITURE OF 2,90,739/- IN RESPECT OF POLLUTION LICENCE BUT FAIL ED TO FURNISH NECESSARY DETAILS IN SUPPORT OF ITS EXPENSE. THEREFORE THE AO DISALLOWED SAME AND ADDED TO THE TOTAL INCOME OF ASSESSEE. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 23 24. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT FACTORY CANNOT RUN WITHOUT HAVING POLLUTION CERTIFICATE FROM THE CONCERNED AUTHORITY. THE ASSES SEE IN SUPPORT OF ITS CLAIM FURNISHED LEDGER COPY OF POLLUTION CONTROL EXPENSE. THE ASSESSEE ALSO SUBMITTED THAT ALL THE EXPENSES WERE INCURRED THROUGH BANKING CHAN NEL. HOWEVER, LD. CIT(A) DISREGARDED THE CLAIM OF ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING THAT IT WAS THE DUTY OF THE ASSESSEE TO PROVIDE SUPPORTING EVIDENCE AS ASSESSEE HAS FAILED TO FILE THE SAME. THEREFORE, THE DISALLOWANCE OF EX PENDITURE WAS WARRANTED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 25. LD. AR BEFORE US REITERATED THE ARGUMENTS THAT WERE MADE BEFORE THE LD. CIT(A) WHEREAS LD. DR VEHEMENTLY RELIED ON THE ORDE R OF AUTHORITIES BELOW. 26. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT ALL THE PAYMENT S WERE MADE THROUGH BANKING CHANNEL IN CONNECTION WITH THE POLLUTION CONTROL EX PENSE AS EVIDENT FROM THE COPY OF THE LEDGER SUBMITTED AND PLACED ON PAGES 167 TO 169 OF THE PAPER BOOK. ONCE THE ASSESSEE HAS DEMONSTRATED THAT THE PAYMENT WAS MADE THROUGH BANKING CHANNEL THEN THE SAME CANNOT BE DISALLOWED MERELY ON THE GR OUND THAT NO DOCUMENTARY EVIDENCED WAS SUBMITTED. THE AO IS WELL EMPOWERED U /S. 133(6) OF THE ACT CONDUCTED TO NECESSARY ENQUIRY BEFORE MAKING SUCH D ISALLOWANCE. BEFORE US THE CIRCUMSTANTIAL EVIDENCE SUGGESTING THAT A FACTORY C ANNOT RUN WITHOUT HAVING POLLUTION CONTROL DEVICE. THEREFORE, WE ARE OF THE VIEW THE A O SHOULD HAVE CONFIRMED FROM THE PARTIES ABOUT THE EXPENSE CLAIMED BY ASSESSEE WHICH THE AO HAS FAILED TO DO SO. THEREFORE, WE REVERSE THE ORDER OF LD. CIT(A) AND D ELETE THE ADDITION MADE BY AO. ACCORDINGLY, AO IS DIRECTED. THIS GROUND OF ASSESSE ES APPEAL IS ALLOWED. 27. NOW COMING TO ADDITIONAL GROUND RAISED BY ASSES SEE WHERE THE ISSUE IS THAT LD. CIT(A) ERRED IN NOT ALLOWING ADDITIONAL DEPRECI ATION U/S. 32(1)(IIA) OF THE ACT. 28. THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDI NGS SUBMITTED IT IS ENTITLED ADDITIONAL DEPRECIATION ON THE PLANT AND MACHINERY ACQUIRED AFTER 31.03.2005 AS DETAILED UNDER:- A.Y. AMOUNT (RS) 2007-08 7,39,32,596/- 2008-09 19,81,570/- 2009-10 12,88,177/- ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 24 TOTAL 7,72,02,343/- THE AFORESAID DEPRECIATION WAS NOT CLAIMED IN THE O RIGINAL RETURN FILED BY ASSESSEE. HOWEVER, SAME WAS CLAIMED BEFORE THE AO B Y WAY OF FILING A LETTER AT THE TIME OF ASSESSMENT PROCEEDINGS, WHICH WAS NO T ACCEPTED BY AO. 29. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO DENIED THE ADDITIONAL DEPRECIATION BY OBSERVING AS UNDER:- 30. THE MATTER IS COVERED Y DECISION IN CASE GOETZE (INDIA) LTD. VS. CIT (SC) 284 ITR 323. AS PER THE DECISION ANY CHANGE TO RETU RN OF INCOME MUST BE THROUGH A REVISED RETURN OF INCOME. IN THIS CASE TH ERE IS NO REVISED RETURN OF INCOME AND HENCE THE CLAIM FOR ADDITIONAL DEPRECIAT ION IS NOT ADMISSIBLE. FURTHER ADDITIONAL DEPRECIATION IS GOVERNED BY SECT ION 329(1)9IIA) AND EXPLANATION 5 TO SECTION 32(1)(II) CANNOT BE APPLIE D TO SECTION 32(1)(IIA). THIS IS DU9E TO THE FACT THAT EXPLANTING 5 OF SECTION 32 IS SPECIFIC TO SECTION 32(10(II). IN ANY CASE THE DECISION IN GOETZE (INDI A) LTD. VS. CIT (SC) 284 323 SETTLES MATTER AND THAT STANDS AGAINST APPELLANT. F URTHER IN APPEAL A MATTER NOT ARISING OUT OF THE ORDER APPEALED AGAINST CANNO T BE ADJUDICATED. MOREOVER FOR SUCH ERRORS PROVISION LIKE SECTION 264 AND SECT ION 154 (SUBJECT TO BUILT IN LIMITATIONS) CAN BE CONSIDERED BY APPELLANT FOR SUI TABLE REMEDY. CONSIDERING ALL THESE I DECLINE TO ADJUDICATE GROUND 7.0 BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING ADDITIONAL GROUND:- 1. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN NOT ALLOWING ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE IT A CT AMOUNTING TO RS.1,54,40,469/- WHICH IS COMPLETELY ARBITRARY, UNJ USTIFIED AND ILLEGAL. 30. THE ASSESSEE BEFORE US HAS FILED AN APPLICATION RAISING ADDITIONAL GROUNDS OF ITS APPEAL. ON PERUSAL OF THE SAME, WE F IND THAT THE ADDITIONAL GROUNDS ARE LEGAL IN NATURE AND GO TO THE ROOT OF T HE MATTER. IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F NTPC VS. CIT (1998) 229 ITR 383 (SC), THE ASSESSEE IS ENTITLED TO URGE QUESTION OF LAW ON THE BASIS OF FACTS ALREADY AVAILABLE ON RECORD. SO WE H EREBY ADMIT THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE. BEFORE US LD. AR SUBMITTED THAT ASSESSEE INADVERTEN TLY FAILED TO CLAIM THE ADDITIONAL DEPRECIATION ON THE MACHINERIES ACQUIRED AFTER 31.03.2005. AS PER ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 25 THE LD. AR THAT ASSESSEE IS VERY MUCH ENTITLED TO C LAIM ADDITIONAL DEPRECIATION WHEREAS LD. DR HEAVILY RELIED ON THE ORDER OF AUTHO RITIES BELOW. 31. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FI ND THAT LD. CIT(A) DISREGARDED THE CONTENTION OF THE ASSESSEE FOR THE ADDITIONAL DEPRECIATION AFTER HAVING RELIANCE ON THE JUDGMENT OF HON'BLE SU PREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 (SC). IT IS AN ADMITTED FACT THAT AO CANNOT ADMIT FRESH CLAIM OF ASSESSEE UNTIL AND UNLE SS ASSESSEE MADE THIS CLAIM EITHER IN ITS INCOME TAX RETURN OR IN REVISED RETURN FILED. IN THE CASE BEFORE US, ADMITTEDLY, ASSESSEE HAS NOT MADE ANY CL AIM IN ITS ORIGINAL INCOME TAX RETURN AND THEREFORE, AO RIGHTLY REJECTED THE C LAIM OF ASSESSEE. HOWEVER, THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) ALSO HELD THAT ADDITIONAL CLAIM BY THE ASSESSEE CAN BE MADE W ITHOUT FILING THE REVISED RETURN OF INCOME BEFORE THE LD. CIT(A) AS WELL AS H ON'BLE ITAT. THUS, IN OUR CONSIDERED VIEW, WE ARE OF THE OPINION THAT LD. CIT (A) WAS VERY MUCH EMPOWERED TO ENTERTAIN THE FRESH CLAIM OF ASSESSEE. THUS, IN THE INTEREST OF NATURAL JUSTICE AND FAIR PLAY WE ARE INCLINED TO RE STORE THIS ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. T HE AO WILL VERIFY WHETHER THE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATIO N AS PROVIDED U/S. 32(1)(IIA) OF THE ACT. THUS, THE ADDITIONAL GROUND OF ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 32. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED PARTLY FOR STATISTICAL PURPOSE. COMING TO ITA NO.207/KOL/2014 FOR A.Y. 10-11 . 33. FIRST INTERCONNECTED ISSUE RAISED BY ASSESSEE I N GROUNDS NO. 2 TO 7 OF THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE DISALLOWANCE OF 64,90,439/- ON ACCOUNT OF NON-DEDUCTION OF TDS U/S . 194C VIS--VIS 40(A)(IA) OF THE ACT. 34. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS INCURRED FREIGHT CHARGES FOR 2,26,14,316/- OUT OF THE SAID EXPENSE A SUM OF 69,86,305/- WAS DIRECTLY PAID TO THE TRUCK DRIVERS ON WHICH ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 26 NO TDS WAS DEDUCTED. THEREFORE THE AO DISALLOWED A SUM UNDER THE PROVISION OF SEC 40(A)(IA) OF THE ACT FOR NON-DEDUC TION OF TDS AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 35. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THERE IS NO AGREEMENT BETWEEN THE ASSESSEE AND THE TRUCK DRIVERS AND THEREFORE, THE P ROVISION OF SEC 194C OF THE ACT CANNOT BE APPLIED. IT WAS ALSO SUBMITTED THAT I N MANY CASES THE PAYMENT WAS BELOW 50,000/-, THEREFORE THE PROVISION OF SEC. 194C OF T HE ACT CANNOT BE INVOKED. LD. CIT(A) AFTER CONSIDERING THE SUBMIS SION OF ASSESSEE GAVE PARTLY RELIEF TO ASSESSEE BY OBSERVING AS UNDER:- 23. MY FINDINGS IN SHORT ON THE ISSUES ARE (A) THE CASE LAW CITED IS IN THE CONTEXT OF POSITION OF LAW PREVAILING PRIOR TO FINA NCE ACT, 2007 I.E. BEFORE NEW SECTION 194C(1) CAME INTO EFFECT AND FINANCE (NO2) ACT 2009 (B) TDS IS TO BE EFFECTED IN THE BIPARTITE TRANSACTIONS COVERED IN S ECTION 194C(1) AND NOT ON A TRIPARTITE TRANSACTIONS WHEN VIEWED ON THE BASIS PR ECEDING DECISIONS WHERE SECTION 194C(2) WAS FOCUS OF ATTENTION, (C) WHEN TH E APPELLANT PAYS THE CONTRACTOR [THE ROLE OF INTERMEDIARY IS IRRELEVANT AFTER SECTION 194C(1) CAME INTO EFFECT] FOR A WORK [EXECUTION OF A PRECISE SEQ UENCE OF EVENTS BEFORE PAYMENT OF WORK ON A REGULAR BASIS] UPON MEETING SP ECIFIED CONDITIONS [AGGREGATE PAYMENT EXCEEDING RS.50,000] TAX WAS TO BE DEDUCTED AT SOURCE AND (D) THE TERM CONTRACTOR IS A NOMENCLATURE IN SECTION 194C(1) A THE PAYMENT FOR WORK IS THE GUIDING FACTOR IN DETERMINI NG WHETHER TAX IS TO BE DEDUCTED AT SOURCE. 24. CONSIDERING ALL THE ABOVE, I HOLD THAT THE ASSE SSEE INDEED HAD LIABILITY TO DEDUCT TAX UNDER SECTION 194C ON THE PAYMENT MADE. THIS IS DUE TO THE FACT THAT PAYMENT MADE IS FOR CARRYING OUT WORK OF TRANS PORTING. THE SIMPLIFIED PROCEDURE APPLICABLE W.E.F. 01.10.2009 BY WHICH ALL ASSESSEE HAS TO DO IS TO OBTAIN PAN ALSO HAS NOT BEEN COMPLIED WITH. 25. CONSIDERING THE PLEA THAT ASSESSING OFFICER HAS WRONGLY APPLIED SECTION 40(A)(IA) CASES WHERE AGGREGATE PAYMENT IS BELOW RS .50,000/-. I DIRECT THE ASSESSING OFFICER TO VERIFY WHETHER THE CLAIM OF AS SESSEE IS CORRECT AND AFTER GIVING ASSESSEE OPPORTUNITY OF BEING HEARD, REDUCE THE DISALLOWANCE MADE INVOKING SECTION 40(A)(IA) TO THE EXTENT ASSESSEE P ROVES THAT DISALLOWANCE MADE IS INCORRECT. WITH THIS DIRECTION GROUND 3.0 I S DISPOSED OF. ACCORDINGLY THE GROUND IS TREATED AS PARTLY ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) HAS NOT CONSIDERED SECTION 194C(6) WHICH IS CLARIFICATORY IN NATURE AND RETROS PECTIVELY APPLICABLE, THEREFORE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TD S U/S. 194C OF THE IT ACT. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 27 3. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONFIRMING THE DISALLOWANCE U/S. 40(A)(IA) OF THE IT ACT AMOUN TING TO RS.64,90,439/- FOR PAYMENT ON TRUCK FREIGHT CHARGES WHICH IS COMPLETEL Y ARBITRARY, UNJUSTIFIED AND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) HAS NOT CONSIDERED THE FACT THAT THE ASSESSEE HAD NOT ENTERED INTO ANY ORAL OR WRITTEN CONTRACT WITH TRANSPORTERS AS THE GOODS WERE SENT BY THE SUPPLIER S, THEREFORE, SECTION 194C WAS NOT APPLICABLE AND THE ADDITION OF RS.64,90,439 /- SHOULD NOT HAVE BEEN DISALLOWED U/S. 40(A)(IA). 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONSIDERING THE FACT THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS ON PAYMENT OF TRUCK FREIGHT CHARGES AMOUNTING TO RS.69,86,305/-, THEREF ORE, THE CIT(A) WAS WRONG IN RESTRICTING THE DISALLOWANCE U/S. 40(A)(IA) OF T HE INCOME TAX ACT AMOUNTING TO RS.64,90,439/-, ALTHOUGH NO TDS WAS DEDUCTIBLE U /S. 194C OF THE IT ACT ON THE TOTAL PAYMENT OF LORRY HIRE CHARGES, THEREFORE, THE SAID DISALLOWANCE IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 6. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN NOT CONSIDERING THE FATS THAT THE ASSESSEE WAS NOT LIAB LE TO DEDUCT TDS U/S. 194C OF THE IT ACT ON THE PAYMENT OF TRUCK FREIGHT CHARG ES AMOUNTING TO RS.64,90,439/-, THEREFORE, THE DISALLOWANCE MADE U/ S. 40(A)(IA) OF THE IT ACT ON THE SAID AMOUNT IS COMPLETELY ARBITRARY, UNJUSTI FIED AND ILLEGAL. 7. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) SHOULD HAVE CONSIDERED THE FACT, ALTERNATIVELY THAT TDS ON LORRY HIRE CHARGES AMOUNTING TO RS.64,90,439/- WAS PAID, THEREFORE, THE LD. CIT(A) SHOULD NOT HAVE DISALLOWED THE SAID AMOUNT OF RS.64,90,439/- U/S 40(A)(IA) OF THE IT AC T. 36. LD. AR BEFORE US SUBMITTED THAT THERE WAS NO CO NTRACT BETWEEN ASSESSEE AND THE TRUCK DRIVERS THEREFORE THERE IS N O QUESTION OF DISALLOWING THE FREIGHT CHARGES ON ACCOUNT OF NON-DEDUCTION OF TDS, WHEREAS LD. DR SUBMITTED THAT THERE IS EMPLOYER CONTRACT BETWEEN A SSESSEE AND THE TRUCK DRIVERS AS PER THE PROVISION OF SEC. 194C OF THE AC T. LD. DR HEAVILY RELIED ON THE ORDER OF AO. 37. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT THE ASSESSEE HIRED THE LORRIES FROM OUTSIDE FOR THE TRANSPORTATION OF GOOD S AND THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE LORRY OWNERS. THE REVE NUE COULD NOT ESTABLISH THAT THESE LORRY OWNERS WERE FASTENED WITH ANY OF T HE LIABILITIES FOR THE SAID CARRIER OF THE GOODS. IN THE SIMILAR FACTS AND CIRC UMSTANCES, THE HONBLE JURISDICTIONAL HIGH COURT HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE IN THE CASE OF CIT VS. M/S STUMM INDIA IN ITA NO. 127 OF 2 009 AND RELEVANT EXTRACT IS REPRODUCED BELOW:- ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 28 IT IS URGED BEFORE US THAT THE LEARNED TRIBUNAL OUG HT NOT TO HAVE ACCEPTED THE JUDGMENT AND ORDER OF THE CIT (APPEAL) WHO HAS QUAS HED THE DISALLOWANCE OF DEDUCTION OF RS.41,33,710/- AND ON ACCOUNT OF TAX DEDUCTION AT SOURCE. THE LEARNED TRIBUNAL HAS RECORDED THE FACT THAT THE DEP ARTMENT HAS NOT BEEN ABLE TO BRING ANY MATERIAL ON RECORD TO SHOW THAT THE AS SESSEE HAS MADE THE PAYMENT TO THE TRANSPORTERS IN PURSUANCE OF CONTRAC T FOR CARRIAGE OF GOODS OF THE ASSESSEE AND THE QUESTION OF DEDUCTION AT SOURC E UNDER SECTION 194C DOES NOT AND CANNOT ARISE. IN THE ABSENCE OF EVIDENCE OF PAYMENT MADE BY THE A SSESSEE TO THE TRANSPORTERS, THE ASSESSEE CANNOT BE SADDLED WITH T HE LIABILITY OF DEDUCTING TAX AT SOURCE. BEFORE US NO OTHER POINT HAS BEEN URGED NOT IT IS SAID THAT THE AFORESAID FACT FINDING IS TRUTHFUL WITHOUT ANY BASI S WHATSOEVER. HENCE, WE DISMISS THE APPEAL HAVING FOUND NO POINT OF LAW HAVING BEEN INVOLVED. IN VIEW OF ABOVE, WE FIND THAT THERE WAS NO CONTRAC T BETWEEN THE ASSESSEE AND LORRY OWNERS. THE ROLE OF THE LORRY OWNERS WAS VERY LIMITED TO THE EXTENT OF CARRIAGE OF GOODS WITHOUT ANY OTHER LIABILITY. THER EFORE, THEIR PAYMENT CANNOT BE CONSIDERED AS IN PURSUANCE OF CONTRACT AS ENVISA GED UNDER SECTION 194C OF THE ACT. CONSIDERING THE FACTS AND CIRCUMSTANCES AND CITED CASE LAW, WE REVERSE THE ORDERS OF AUTHORITIES BELOW. THE GROUND RAISED BY ASSESSEE IS ALLOWED. ACCORDINGLY, AO IS DIRECTED. 38. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.8 IS THAT LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF AO BY SUSTAINING THE DISALLO WANCE OF 6 LAKH ON ACCOUNT OF SUBSCRIPTION AND DONATION PAID BY ASSES SEE. 39. AT THE OUTSET IT WAS OBSERVED THAT THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS GIVEN DONATION AND SUBSCRIPTION T O TWO ORGANIZATIONS NAMELY, HAZI SARIFF TRUST & GRAM VIKASH SAMITY. THE SE AFORESAID EXPENSES WERE CLAIMED BY ASSESSEE IN ITS PROFIT AND LOSS ACC OUNT. ON ENQUIRY BY AO IT WAS FOUND THAT THERE WAS NO NEXUS OF THE AFORESAID EXPENSES WITH THE BUSINESS OF THE ASSESSEE. THE ASSESSEE ALSO FAILED TO PROVIDE THE SUPPORTING EVIDENCE. THEREFORE, THE AMOUNT OF RS.6 LAKH WAS DI SALLOWED AND ADDED TO THE TOTAL INCOME OF ASSESSEE. ITA NO.206-207/KOL/2014 A.Y. 2009 -10 & 2010-11 ARSH IRON & STEEL LTD. VS. ACIT CIR-3 ASL. PAGE 29 IT WAS FURTHER OBSERVED THAT THE ISSUE IN THE AFOR ESAID GROUND OF APPEAL BEFORE US WAS NOT RAISED BEFORE THE LEARNED CIT(A). THEREF ORE WE FIND THAT THE IMPUGNED ISSUE HAS NOT BEEN ADJUDICATED BY THE LEAR NED CIT(A). THE INSTANT ISSUE HAS BEEN FILED FIRST TIME BEFORE US AND THE S AME IS NOT LEGAL ISSUE. INDEED THE INSTANT ISSUE IS EMANATING FROM THE AO O RDER BUT THE SAME WAS NOT RAISED BEFORE THE LD. CIT(A). THUS THE IMPUGNED ISS UE IS NOT EMANATING FROM THE LD. CIT(A). THEREFORE WE ARE NOT INCLINED TO AD MIT THE SAME FOR THE ADJUDICATION. HENCE THIS GROUND OF APPEAL OF THE AS SESSEE IS DISMISSED. 40. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. 41. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.206/KOL/ 2014 FOR A.Y. 09- 10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND TH AT OF ITA NO. 207/KOL/2014 FOR A.Y. 10-11 IS ALLOWED PARTLY. ORDER PRONOUNCED IN THE OPEN COURT 12 /05/2017 SD/- SD/- (ABY. T. VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 12 / 05 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ARSH IRON & STEEL LTD., C/O ABDUL RASHID , DR. M.N. GHOSH ROAD, P.O. RANIGANJ, D IST. BURDWAN-713 347 2. /RESPONDENT-ACIT, CIRCLE-3,PARMARBUILDING,54,G.T.RO AD (WEST) ASANSOL-713 304, BURDWAN 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , SR. PRIVATE SECRETARY HEAD OFFICE/DDO , *+ ,