Shri Bhupendra Ambalal Thakkar, (HUF), Ahmedabad V. The Income Tax Officer, Ward 6(4), Ahmedabad

ITA 2078/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0131 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANTONY PARIATH
• Assessee Lawyers: DARSHIT R JOSHI

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2078/AHD/2013 / ASSTT. YEAR: 2009-2010 AND ./ ITA.NO.1282/AHD/2015 / ASSTT. YEAR: 2011-2012 BHUPENDRA AMBALAL THAKKAR (HUF) A/67, PRESTIGE BUNGALOWS NR.PUNIT NAGAR CROSSING GHODASAR, AHMEDABAD. PAN : AAAHT 3391 M VS ITO, WARD - 6(4) AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI DARSHIT R. JOSHI, AR REVENUE BY : SHRI ANTONY PARIATH, SR.DR / DATE OF HEARING : 25/10/2016 / DATE OF PRONOUNCEMENT: 08/11/2016 $%/ O R D E R PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST ORDERS OF THE LD.CIT(A)-XI, AHMEDABAD DATED 24.5.20 13 AND ORDER OF THE CIT(A)-3, AHMEDABAD DATED 16.3.2015 PASSED FOR THE ASSTT.YEAR 2009-10 AND 2011-12 RESPECTIVELY. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IN BOTH THE Y EARS IS THE LD.CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE UNDER SECTION 40A( 2)(B) OF THE INCOME TAX ACT, 1961. FACTS ON ALL VITAL POINTS ARE COMMON, T HEREFORE, FOR THE SAKE OF ITA NO.2078/AHD/2013 & ANR. 2 FACILITY OF REFERENCE, I TAKE UP THE MATTER MAINLY FROM THE ASSTT.YEARS 2009- 10. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 26.7.2009 AND 25.8.201 DECLARING TOTAL INCOME AT RS.2,79,827/- AND RS.4,99,640/- FOR THE ASSTT.YEARS 2009-10 AND 2011- 12 RESPECTIVELY. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THA T THE ASSESSEE HAS DEBITED AN EXPENDITURE OF RS.10,72,010/- AND RS.15,77,180/- AS COMMISSION EXPENSES IN THE ASSTT.YEAR 2009-10 AND 2011-12 RESPECTIVELY. O UT OF THIS TOTAL AMOUNT, SUM OF RS.8,43,489/- WAS PAID TO SHRI DEPAK AMBALAL THAKKAR IN THE ASSTT.YEAR 2009-10. SHRI DEPAK AMBALAL THAKKAR IS A PERSON COVERED UNDER SECTION 40A(2)(B) OF THE INCOME TAX ACT. SIMILARLY , IN THE ASSTT.YEAR 2011- 12, A SUM OF RS.12,60,000/- PAID TO SHRI DEPAK AMBA LAL THAKKAR. SHRI THAKKAR HAS SHOWN THESE AMOUNTS AS INCOME IN HIS RE TURN. THE AO IN THE ASSTT.YEAR 2009-10 HAS OBSERVED THAT THE COMMISSION AT THE RATE OF 4% OF THE SALE WAS PAID TO OTHER FOUR PERSONS, WHEREAS IT HAS PAID AT THE RATE OF 6% OF THE SALES TO SHRI DEPAK AMBALAL THAKKAR. THEREFORE , THE LD.AO HAS ALLOWED THE COMPASSION PAYMENT AT THE RATE OF 4% AND THE EX CESS PAYMENT OF RS.2,33,697/- WAS DISALLOWED. IN THE ASSTT.YEAR 20 11-12, THE LD.AO HAS DISALLOWED TOTAL PAYMENT OF RS.12,60,000/- ON THE G ROUND THAT THE ASSESSEE FAILED TO PROVE SERVICES RENDERED BY SHRI THAKKAR. 4. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED THE DISAL LOWANCE IN THE ASSTT.YEAR 2009-10, WHEREAS IN THE ASSTT.YEAR 011-1 2, THE LD.CIT(A) HAS ALLOWED THE COMMISSION PAID TO SHRI THAKKAR, BUT RE STRICTED IT AT THE RATE OF 4%. IN THIS WAY, A DISALLOWANCE OF RS.2,33,697/- I S BEING CONFIRMED IN THE ASSTT.YEAR 2009-10 AND DISALLOWANCE OF RS.4,20,000/ - HAS BEEN CONFIRMED IN THE ASSTT.YEAR 2011-12. ITA NO.2078/AHD/2013 & ANR. 3 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, I HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 40A(2)(B) CONTEMPLATES T HAT IF AN ASSESSEE INCURS ANY EXPENDITURE FOR AVAILING SERVICES FROM PERSONS MENTIONED IN SUB-CLAUSE (B), THEN, AO WOULD DISALLOW THE CLAIM OF EXPENDITU RE TO THE EXTENT IT WAS PAID IN EXCESS OF MARKET VALUE OF SUCH SERVICES. I N OTHER WORDS, IF THAT GOODS OR SERVICES CAN BE PURCHASED OR AVAILED BY THE ASSE SSEE FROM THE OPEN MARKET AT A LESSER PRICE, THEN EXPENSES COULD BE DISALLOWE D EQUIVALENT TO THE VALUE OF SUCH SERVICES AVAILED IN OPEN MARKET. QUESTION BEF ORE ME IS WHETHER SERVICES OF SHRI DEPAK AMBALAL THAKKAR COULD BE AVAILED AT 4 % OF THE SALES EFFECTED THROUGH HIM OR THE ASSESSEE HAS RIGHTLY PAID COMMIS SION AT THE RATE OF 6% OF THE SALES. SO FAR AS THE ISSUE REGARDING TOTAL DIS ALLOWANCE OF COMMISSION IN THE ASSTT.YEAR 2011-12 IS CONCERNED, THE LD.CIT(A) HAS ALREADY ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF 4% AND THE R EVENUE HAS NOT CHALLENGED THAT ORDER OF THE LD.CIT(A). THEREFORE, NOW THE QU ESTION BEFORE ME IN BOTH THE YEARS IS WHETHER EXPENSES AT THE RATE OF 6% OF THE SALES COULD BE ALLOWED TO THE ASSESSEE WITH RESPECT TO THE COMMISSION PAID TO SHRI DEPAK AMBALAL THAKKAR. A PERUSAL OF THE RECORD, I FIND THAT THE ASSESSEE HAS TURNOVER OF RS.1,53,85,924/- IN THE ASSTT.YEAR 2009-10. OUT OF THIS TOTAL, SALES TO THE EXTENT OF RS.1,50,43,947/- WAS MADE BY SHRI DEPAK A MBALAL THAKKAR. THE ASSESSEE HAS NO INDEPENDENT SALES COUNTER OR OFFICE . THUS, HE WAS THE PERSON WHO HAS BROUGHT BUSINESS TO THE ASSESSEE. A LITTLE HIGHER COMPENSATION WOULD BE JUSTIFIED TO A PERSON WHO HAS GIVEN MORE THAN 96 % OF THE BUSINESS. THE LD.AO HAS NOWHERE BROUGHT ANY MATERIAL ON RECORD TO INDICATE THAT SERVICES RENDERED BY SHRI DEPAK AMBALAL THAKKAR COULD BE AVA ILED AT LOWER RATE. HE JUST MADE COMPARISON WITH PERSONS WHO HAVE EFFECTED A MARGINAL SALES IN COMPARISON TO SHRI DEPAK AMBALAL THAKKAR. THEREFOR E, THERE IS NO ITA NO.2078/AHD/2013 & ANR. 4 JUSTIFICATION FOR MAKING DISALLOWANCE. I ALLOW BOT H THE APPEALS AND DELETE IMPUGNED DISALLOWANCE. 6. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 8 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER