Devchhaya Industries, Pune V. Assistant Commissioner of Income-tax,

ITA 2088/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1755 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D N PARAKH
• Keywords: Additional evidence; Avoidance of tax; Onus to prove
• Section: 143(3); 131

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.2088/PN/2013 ASSESSMENT YEAR : 2009-10 DEVCHHAYA INDUSTRIES, W 189, S BLOCK, MIDC, BHOSARI, PUNE 411 026. PAN : AADFD6177C . APPELLANT VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 8, PUNE. . RESPONDENT / APPELLANT BY : SHRI PRAMOD SHINGTE / RESPONDENT BY : SHRI D. N. PARAKH / DATE OF HEARING : 10.05.2016 / DATE OF PRONOUNCEMENT: 25.05.2016 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL FILED BY THE ASSESSEE IS AGAIN ST THE ORDER OF CIT(A)-V, PUNE DATED 30.10.2013 RELATING TO ASSESSM ENT YEAR 2009-10 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT). 2. BY WAY OF THE PRESENT APPEAL, THE ASSESSEE HAS C HALLENGED THE ACTION OF THE CIT(A) IN DISALLOWING THE COMMISSION EXPENSES O F A SUM OF RS.90,00,000/- PAID TO SHRI B.S. AGARWAL AGAINST SA LE OF PLOT. 3. BRIEFLY STATED, THE RELEVANT FACTS CONCERNING TH E ISSUE RAISED BY THE ASSESSEE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF MANUFACTURE OF PRESS COMPONENTS AND ALSO DOES JOB WORKS. DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INC OME DECLARING TOTAL INCOME OF 2 ITA NO.2088/PN/2013 RS.71,09,710/-. IN THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE FIRM HAD SOLD A P LOT NO.T-80 AT T-BLOCK, MIDC, PIMPRI IN PUNE FOR A CONSIDERATION OF RS.3 CR ORES. ON THIS SALE CONSIDERATION, THE ASSESSEE CLAIMED DEDUCTION TOWAR DS COMMISSION EXPENSES OF RS.90,00,000/- ATTRIBUTABLE TO ITS SALE. THE AFORE SAID COMMISSION OF RS.90,00,000/- FOR SALE OF PLOT WAS PAID TO ONE SHR I B.S. AGARWAL. THE TDS OF RS.10,19,700/- WAS DEDUCTED AND PAID BY THE ASSESSE E WHILE MAKING THE PAYMENT TOWARDS COMMISSION. FOR VERIFICATION OF BO NAFIDES OF THE COMMISSION PAYMENT, THE ASSESSEE PRODUCED THE PAYEE OF THE COMMISSION SHRI B.S. AGARWAL PERSONALLY BEFORE THE ASSESSING OFFICE R AS ITS WITNESS. HE WAS EXAMINED BY THE ASSESSING OFFICER UNDER SECTION 131 (1) OF THE ACT. ON EXAMINATION, IT WAS OBSERVED BY THE ASSESSING OFFIC ER THAT WITNESS SHRI BALKRISHNA AGARWAL WAS NEITHER ENGAGED IN THE BUSIN ESS OF BROKERAGE/COMMISSION INCLUDING THE LAND TRANSACTION S NOR EARNED INCOME EITHER PRIOR TO THESE TRANSACTIONS OR SUBSEQUENT TO THESE TRANSACTIONS. FURTHER, THE ASSESSING OFFICER ALSO OBSERVED THAT ON EXAMINA TION UNDER SECTION 131(1) OF THE ACT, IT WAS FOUND THAT THE PAYEE OF THE COMM ISSION DID NOT KNOW THE PERSON TO WHOM THE LAND WAS SOLD AND ALSO COULD NOT REVEAL ANY RELEVANT DETAILS IN CONNECTION WITH THE IMPUGNED LAND TRANSA CTIONS. THE ASSESSING OFFICER FURTHER OBSERVED THAT IN JUSTIFICATION OF T HE EXORBITANT COMMISSION PAID TO HIM, SHRI AGARWAL SUBMITTED THAT HE RENDERED VAR IOUS INTRICATE SERVICES IN CONNECTION WITH SETTLEMENT OF LIGHT BILLS OF MSEB, WATER BILLS AND CORPORATIONS TAX. HOWEVER, HE COULD NOT FURNISH P RIMARY DETAILS IN CORROBORATION OF SUCH AVERMENTS SUCH AS QUANTUM OF SUCH BILLS ETC.. THE ASSESSING OFFICER FURTHER OBSERVED THAT PURCHASER O F THE PLOT DENIED ANY COMMISSION AGENT BETWEEN THE ASSESSEE AND THE BUYER PARTY. ON THE BASIS OF AFORESAID FACTS, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE RECIPIENT OF PURPORTED COMMISSION SHRI B.S. AGARWAL HAS NOT P LAYED ANY ROLE IN PLOT DEAL BETWEEN THE ASSESSEE AND THE PURCHASER M/S DYN ALOG (INDIA) LTD. AND HELD THAT THE PAYMENT IN THE FORM OF COMMISSION IS NOT F OUND TO BE GENUINE. THE ASSESSING OFFICER ACCORDINGLY DISALLOWED THE COMMIS SION PAID OF RS.90,00,000/- AND ADDED THE SAME TO THE TOTAL INCO ME OF THE ASSESSEE. 3 ITA NO.2088/PN/2013 4. THE ASSESSEE AGITATED THE ORDER OF THE ASSESSING OFFICER BEFORE THE CIT(A). THE ASSESSEE FILED CERTAIN ADDITIONAL EVID ENCES IN THE FORM OF : (I) COPY OF LETTER OF COMMISSION RECIPIENT SHRI B.S . AGARWAL DATED 26.12.2011 FILED ON 30.11.2011. (II) RETURN OF COMMISSION RECIPIENT ALONG WITH BANK STATEMENT AS WELL AS TAX COMPUTATION WHEREIN THE IMPUGNED INCOME RECE IVED FROM THE ASSESSEE HAS BEEN DECLARED BY THE RECIPIENT. (II) COPY OF LETTER RECEIVED FROM THE PURCHASER DAT ED 08.01.2013 AND COPY OF LETTERS FROM SHRI GYANOBA TAPKIR AND SHRI R AM SADASHIV GAVDE, WHO WERE WITNESSES TO THE MOU DATED 15.08.20 08. 5. A REMAND REPORT WAS OBTAINED BY THE CIT(A) ON TH E DOCUMENTS AND ADDITIONAL EVIDENCES FILED BY THE ASSESSEE. THEREA FTER, ON CONSIDERATION OF THE REPLY AND THE REMAND REPORT THE CIT(A) DISMISSED TH E APPEAL OF THE ASSESSEE AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 6. AGGRIEVED THERETO, THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL. 7. THE LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE A SSESSEE SHRI PRAMOD SHINGTE, AT THE OUTSET, ADVERTED OUR ATTENTION TO T HE COPY OF MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN THE ASSESSEE AND THE RE CIPIENT OF THE COMMISSION SHRI B.S. AGARWAL DATED 17.04.2008. THE LD. AR SUBMITTED THAT BY VIRTUE OF THIS MOU, IT WAS AGREED BETWEEN THE PA RTIES THAT THE SAID PLOT WILL BE SOLD BY SHRI BALAKRISHNA AGARWAL WITHIN A PERIOD OF SIX MONTHS AND IF SHRI B.S. AGARWAL CANNOT SELL THIS PLOT WITHIN SIX MONTH S, THEN HE WILL BUY THIS PARTICULAR PROPERTY FROM THE ASSESSEE FOR A CONSIDE RATION OF RS.2 CRORE. HOWEVER, IF HE SELLS THE PLOT WITHIN SIX MONTHS TO OUTSIDE PARTY, THEN THE ASSESSEE FIRM IS ENTITLED TO RECEIVE THE PRICE OF R S.2.10 CRORES. IN SUCH A SITUATION, IF SO ARISES, EXCESS PRICE RECEIVED OVER AND ABOVE RS.2.10 CRORES SHALL BE RETAINED AS A COMMISSION BY SHRI B.S. AGARWAL. IT WAS FURTHER AGREED BETWEEN THE ASSESSEE AND SHRI SHRI B.S. AGARWAL THA T SHRI AGARWAL WILL TAKE 4 ITA NO.2088/PN/2013 THE RESPONSIBILITY OF CLEARING THE ILLEGAL ENCROACH MENTS, HELP IN CLEARING PMC TAXES, GET BUILDING COMPLETION FROM MIDC, RESTORE T HE WATER CONNECTION, MSEB POWER TO BE ACTIVATED, GETTING THE PLOT MEASUR ED AND CONFIRM THE AREA, RECTIFICATION OF BOUNDARY AND APPOINT A SECURITY GU ARD TO TAKE CARE OF THE PROPERTY TILL THE PROPERTY IS SOLD OUT. PURSUANT T O THE MOU, SHRI AGARWAL IDENTIFIED A CUSTOMER IN THE MONTH OF JULY, 2008. AFTER DISCUSSION AND NEGOTIATION, M/S DYNALOG INDIA LTD. REPRESENTED BY ITS CHAIRMAN SHRI SHIVAJIRAO ADHALRAO PATIL HAS AGREED TO PURCHASE TH E SAID PLOT FOR A TOTAL CONSIDERATION OF RS.3 CRORES. ACCORDINGLY, THEY HA VE ENTERED INTO A SECOND MOU DATED 15.08.2008. THUS, IN PURSUANCE OF MOU EN TERED BETWEEN THE ASSESSEE AND THE COMMISSION AGENT, RS.90,00,000/- W ERE PAID TO SHRI AGARWAL OUT OF RECEIPT OF THE SALE CONSIDERATION OF RS.3 CR ORES. THE LD. AR, THEREAFTER, ADVERTED OUR ATTENTION TO THE INCOME-TAX RETURNS FI LED BY THE RECIPIENT OF THE COMMISSION AGENT AND SUBMITTED THAT THE RECIPIENT A LSO HAS PAID TAXES AT THE MAXIMUM MARGINAL OF RATE OF TAXES AND THEREFORE THE RE IS NO AVOIDANCE OF TAXES PER SE . THE TDS ALSO HAS BEEN DEDUCTED BY THE ASSESSEE W HILE MAKING THE PAYMENT. HE, THEREAFTER, SUBMITTED THAT THE AVERME NTS MADE IN THE STATEMENT RECORDED UNDER SECTION 131(1) ARE IN NO WAY INCRIMI NATING AGAINST THE ASSESSEE. AS PER QUESTION NO.17 OF THE STATEMENT, IT IS CLEAR THAT MOU WAS ENTERED WITH THE ASSESSEE FOR THIS PURPOSE AND THE TERMS AND CON DITIONS WERE ALSO PROVIDED IN THE STATEMENT AS WELL AS IN THE MOU. NON-EXPLAN ATION OF CERTAIN INFORMATION AT THE SPUR OF MOMENT WILL NOT VITIATE THE TRANSACTIONS PER SE. HE RELIED UPON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. GLAXO SMITHKLINE ASIA (P.) LTD., (2010) 195 TAXMANN .COM 35 (SC) FOR THE PROPOSITION THAT IN THE CIRCUMSTANCES WHEN THE TRAN SACTIONS ARE REVENUE NEUTRAL IN NATURE, ALLEGED EXCESSIVE PAYMENT OF COMMISSION SHOULD NOT BE DISTURBED. HE ALSO EXHORTED THAT THE RECIPIENT OF THE COMMISSI ON SHRI B.S. AGARWAL IS NO WAY RELATED OR CONNECTED TO THE ASSESSEE AND THEREF ORE SECTION 40A(2) IS ALSO NOT APPLICABLE. IN THE ABSENCE OF ANY TAX BENEFIT TO THE ASSESSEE BY INDULGING IN WRONGFUL COMMISSION PAYMENT AS ALLEGED, THE TRAN SACTIONS BACKED BY DOCUMENTARY EVIDENCE MUST BE TAKEN AS BONAFIDE AND THEREFORE IT WAS URGED 5 ITA NO.2088/PN/2013 THAT COMMISSION PAYMENT ROUTED THROUGH BANKING CHAN NEL AND BACKED BY DOCUMENTARY EVIDENCES SHOULD BE ALLOWED AS CLAIMED. 8. PER CONTRA , THE LD. DEPARTMENTAL REPRESENTATIVE (DR) ON BEHAL F OF THE REVENUE EXTENSIVELY RELIED UPON THE ORDER OF THE AS SESSING OFFICER AS WELL AS THE CIT(A). THE LD. DR SUBMITTED THAT THE TRANSACT ION IS EX FACIE ABNORMAL. HAVING REGARD TO THE MARKET PRACTICES, THE COMMISSI ON ATTRIBUTABLE TO THE LAND DEALS ORDINARILY RANGES BETWEEN 1% TO 2% OF THE SAL E PRICE. HOWEVER, IN THE INSTANCE CASE, THE ALLEGED COMMISSION ON SALE OF LA ND DEALS WORKS OUT TO ABOUT 30% OF THE SALE CONSIDERATION. HE SUBMITTED THAT T HE STATEMENT RECORDED BY THE ASSESSING OFFICER MAKES IT OBVIOUS THAT THE RECIPIE NT OF THE COMMISSION WAS HAVING NO KNOWLEDGE OF THE SUBJECT AND HAS NOT REND ERED ANY VALUABLE SERVICES TO THE ASSESSEE. THE COMMISSION PAYMENT IS WITHOUT OBTAINING ANY SERVICES AS A QUID PRO QUO. HE ACCORDINGLY INSISTED THAT THE NO INTERFERE WITH THE ORDER OF THE CIT(A) IS CALLED FOR. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND REFERRED THE CASE LAWS CITED. THE ASSESSING OFFICER HAS IMPUGNED THE BONAFIDES OF THE COMMISSIO N PAYMENT OF RS.90,00,000/- ON SALE OF ITS LAND PURPORTEDLY ARRA NGED BY SHRI B.S. AGARWAL. TO PAY THIS EXTRA-ORDINARY SUM, THE ASSESSEE HEAVIL Y RELIED UPON THE MEMORANDUM OF UNDERSTANDING (MOU) DATED 17.04.2008 ENTERED INTO BETWEEN ASSESSEE AND RECIPIENT OF COMMISSION; SHRI B.S. AGARWAL WHICH SERVES AS A GUIDING FACTOR IN THIS REGARD. IT IS T HE CONTENTION OF THE ASSESSEE THAT BY VIRTUE OF THIS MOU, AFORESAID PAYMENT OF RS .90,00,000/- HAD BEEN MADE TO SHRI B.S. AGARWAL FOR RENDERING THE SERVICE S AS PER MOU. IT WOULD BE THEREFORE PERTINENT TO NOTE THE CONTENTS OF THE MOU WHICH IS REPRODUCED HEREUNDER :- MEMORANDUM OF UNDERSTANDING THIS MEMORANDUM OF UNDERSTANDING IS MADE AND EXECUT ED AT BHOSARI, PUNE ON THIS 17 TH DAY OF APRIL IN THE YEAR 2008. 6 ITA NO.2088/PN/2013 BETWEEN MR. ISHWARCHAND RAMDHARI AGARWAL, AGE: ADULT, OCCUP ATION: BUSINESS, R/AT: RAM VATIKA APTE COLONY, BEHIND AYAPPA MANDIR, BHO SARI, PUNE 411 039 AND MR. RAJENDRA CHANDRABHAN GUPTA, AGE: ADULT, OCCUPAT ION: BUSINESS, R/AT; 84, HERMESH HERITAGE SHASTRINAGAR, YERWADA, PUNE 411 006, BOTH PARTNER OF M/S DEVCHHAYA INDUSTRIES, A PARTNERSHIP FIRM HAVING ITS REGD. OFFICE W-189, M.I.D.C., BHOSARI, PUNE-411026. ...PARTY OF THE FIRST PART AND MR. BALKISHAN SADHURAM AGARWAL, AGE ADULT, OCCUPATI ON: BUSINESS, R/AT GAVALI NAGAR, NEAR RAJGURUNAGAR BANK, BHOSARI, PUNE - 411 039 ........................ PARTY OF THE SECOND PART WHEREAS ALL THAT PIECE AND PARCEL OF THE PLOT NO.T -80, BEARING AREA OF THE PLOT IS 3984 SQ.. MTR., SITUATED IN T-BLOCK M.I.D.C., PIMPR I INDUSTRIAL AREA, PUNE. AND WHEREAS PARTY OF THE FIRST PART IS THE OWNER OF THE PROPERTY MENTIONED BELOW. AND WHEREAS IT IS HEREBY AGREED BETWEEN PARTY OF TH E FIRST PART AND PARTY OF THE SECOND PART THE ABOVE MENTION PROPERTY IS TO BE SOL D BY THE PARTY OF THE SECOND PART. THE PARTY OF THE SECOND PART WILL GIVE US RS.2,10,0 0,000/- (RUPEES TWO CRORE TEN LACS ONLY) WITHIN A PERIOD OF 6 MONTHS. THE PARTY OF SEC OND PART MAY DEALING WITH ANY PARTY OR ANY BUYER BY HIMSELF OR BRINGS THE PARTY T O US FOR NEGOTIATION OR DISCUSSION. WHATEVER EXCESS OF THE SAID AMOUNT WILL BE GIVEN TO PARTY OF THE SECOND PARTY AS HIS PROFIT OR COMMISSION. IS THE PARTY OF THE SECOND PA RT FAILS TO GET THE CUSTOMER HE WILL HIMSELF PURCHASE THE PROPERTY FOR RS.2,00,00,000/- (RUPEES TWO CRORE ONLY) BUT HE SELLING THE PROPERTY TO THE OTHER PARTY HE WILL PAY RS. 2,10,00,000/- (RUPEES TWO CRORE TEN LACS ONLY) AND WHEREAS IT IS ALSO DECIDED BY AND BETWEEN THE P ARTIES THAT IT IS THE RESPONSIBILITIES OF THE SECOND PART TO REMOVE ILLEG AL ENCROACHMENT, CLEAR PCMC TAXES, GET BUILDING COMPLETION FROM M.I.D.C., WATER CONNECTION TO BE RESTORED, M.S.E.B. POWER TO BE CONNECTED, GETTING THE PLOT ME ASURED AND CONFIRM THE AREA RECTIFICATION OF BOUNDARY AND APPOINT THE SECURITY GUARD AND TO TAKE CARE OF THE PROPERTY TILL THE PROPERTY IS SOLD OUT. SCHEDULE DESCRIPTION OF THE PROPERTY ALL THE PIECE AND PARCEL OF PLOT NO.T-80 AREA MEASU RING 3984 SQ. MTRS T BLOCK M.I.D.C., PIMPRP, TALUKE HAVELI, DIST. PUNE IN THE LOCAL LIMITS OF PCMC AND REGISTRATION JURISDICTION SUB REGISTER HAVELI, PUNE ON OR TOWARDS NORTH : BY PLOT NO.T-79 7 ITA NO.2088/PN/2013 ON OR TOWARDS SOUTH : BY PLOT NO.T-81 ON OR TOWARDS EAST : BY PLOT NO.T-92/91 ON OR TOWARDS WEST : BY ROAD IT WITNESS WHEREOF THE PARTIES HERETO HAVE SIGNED H EREUNDER ON THE DAY AND DATE FIRST HEREIN ABOVE WRITTEN. SD/- 1) ISHWARCHAND RAMDHARI AGARWAL SD/- 2) RAJENDRA CHANDRABHAN GUPTA PARTNERS OF DEVCHHAYA INDUSTRIES (PARTY OF THE FIRST PART) SD/- BALKRISHNA SADHURAM AGARWAL (PARTY OF THE SECOND PART) IN THE PRESENCE OF :- 1) NAME : Y. K. SHARMA. ADDRESS: BHOSARI, PUNE 39. SIGNATURE: SD/- 10. FROM A BARE PERUSAL OF THE MOU REPRODUCED HEREI NABOVE, IT IS EVIDENT THAT MOU FALLS SHORT OF BASIC TRAITS OF A COMMERCIA L TRANSACTION. THE PURPORTED MOU ONLY ASSERTS ALLEGED UNDERSTANDING THAT SHRI B. S. AGARWAL WILL SELL THE PROPERTY AT RS.2,10,00,000/- WITHIN A PERIOD OF SIX MONTHS. THE SURPLUS AMOUNT RECEIVED ON SALE OF PLOT WILL BE TAKEN AS TH E PROFIT / COMMISSION IN THE HANDS OF SHRI B.S. AGARWAL. IN THE ALTERNATE, HE W ILL PURCHASE THE PROPERTY HIMSELF AT RS.2 CRORE. THE MOU ALSO MENTIONS THAT SHRI B.S. AGARWAL SHALL HAVE THE RESPONSIBILITIES TO REMOVE ILLEGAL ENCROAC HMENTS AND OTHER SERVICES AS NOTED IN THE MOU. THE NOTABLE FEATURE ARE THAT THE ASSESSEE HAS NOT CARED TO SECURE ANY EARNEST MONEY OR ANY UPFRONT PAYMENT TO ENFORCE THE COMMITMENT TO PURCHASE THE PROPERTY IN THE EVENT OF FAILURE TO FIND BUYER FOR THE PROPERTY. THIS IS ON THE FACE OF THE FACT THAT THE BENEFICIAR Y OF COMMISSION HAS NO EXPERTISE OR SKILL OR KNOWLEDGE ON THE SUBJECT AS N OTED LATER. THUS, NO CONTROL 8 ITA NO.2088/PN/2013 OR COMMAND OVER THE RECIPIENT OF COMMISSION EMANATE S FROM MOU FOR ENFORCING IT. ANOTHER POINT WHICH IS WORTH NOTING H ERE IS THAT IN THE EVENT OF FAILURE TO PERFORM THE OBLIGATIONS CAST UPON SHRI B .S. AGARWAL, THE ASSESSEE HAS NO LEGAL RECOURSE AVAILABLE AGAINST HIM. THE M OU IS TOTALLY SILENT ON SUCH A CRUCIAL ASPECT. THEREFORE, THE ASSESSEE IS IN NO WAY COMPENSATED IN THE EVENT OF THE OTHER PARTY REFUSING TO MEET THE OBLIGATIONS . NO PERSON OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE WOULD ENTER INTO SUCH AN MOU EXCEPT FOR EXTRANEOUS REASONS. THE MOU IS NOT LOADED WITH ANY AUTHORITY TO ENFORCE THE PURPORTED COMMITMENT. THEREFORE, THE INFERENCE IS INESCAPABLE THAT SUCH PURPORTED MOU IS MERELY A PIECE OF PAPER AND IS DEV OID OF ANY LEGAL EFFICACY. IT IS MANIFEST THAT THE MOU IS DICTATED BY EXTRANEO US CONSIDERATIONS AND IS A MERE SELF SERVING PIECE OF PAPER WITH NO RATIONAL P ROBATIVE VALUE. ON THE BASIS OF SO CALLED MOU, NEITHER PARTY HAS ANY RECOURSE AV AILABLE AGAINST EACH OTHER. THE SO CALLED MOU THUS DOES NOT GRANT ANY LEGAL RIG HT TO RECEIVE IMPUGNED SUBSTANTIAL SURPLUS WHICH IS NEARLY ONE THIRD OF TH E TOTAL SALE CONSIDERATION. THEREFORE, THE ARRANGEMENT AS STATED BY THE ASSESSE E IS CLEARLY SHOWN TO BE ENTERED TO SUIT ITS INTENTION OF TRANSFER OF WHOPPI NG ONE THIRD OF SALE OF CONSIDERATION IN THE HANDS OF THE OTHER PERSON WITH A SET PURPOSE TO CLAIM DEDUCTION THEREOF AND REDUCE ITS TAX LIABILITY. 11. HAVING NOTED THE DISQUIETING FEATURES OF MOU WH ICH CLEARLY SHOWS THAT NO SUCH UNDERSTANDING AS STATED IN THE MOU IS PLAUS IBLE IN THE CIRCUMSTANCES, WE SHALL NOW TAKE NOTICE OF THE CONTENTS OF STATEME NT OF WITNESS SHRI B. S. AGARWAL DATED 14.10.2011 RECORDED BY ASSESSING OFFI CER ON OATH WHILE EXAMINING HIM UNDER SECTION 131 OF THE ACT. AS PER THE STATEMENT, THE RECIPIENT OF COMMISSION, SHRI B.S. AGARWAL STATES B EFORE THE ASSESSING OFFICER ON OATH THAT HE IS PROPRIETOR OF ONE BALKISHNA ENT ERPRISES AND IS ENGAGED IN THE STEAL TRADING ACTIVITIES. HE IS MATRICULATE AN D UNDERSTANDS HINDI AND MARATHI. NOTABLY, THE WITNESS CONFESSED BEFORE THE AO THAT HE WAS HARDLY ENGAGED IN BROKING OF ANY LAND/PROPERTY DEALS AND H AS BARELY DONE SO IN THE PAST ONCE OR TWICE. THE AFORESAID WITNESS ALSO FAIL ED TO PROVIDE ANY CLUE OF PREVAILING BROKERAGE RATE IN THE LAST THREE YEARS O N LAND DEALS. THE WITNESS ALSO 9 ITA NO.2088/PN/2013 OBSERVED ON OATH THAT IN 10 YEARS PRIOR TO IMPUGNED ASSESSMENT YEAR 2008-09 AND IN THE SUBSEQUENT YEAR ALSO, HE HAS NOT EARNED ANY INCOME OUT OF LAND DEALS. AS REGARDS SALE OF LAND OF ASSESSEE TO DYNA LOG INDIA LTD., THE WITNESS STATED ON OATH THAT HE DID NOT ENTER INTO ANY COMMU NICATION FOR SALE OF LAND WITH THE AFORESAID PARTY. IN A VERY CURIOUS ASSERT IONS, HE STATED THAT ALL TALKS AND CONVERSIONS WERE MADE BY HIS EMPLOYEE SHRI PAND URANG GOMDE. HE ALSO FAILED TO PROVIDE ANY INFORMATION OF WHAT TRANSPIRE D BETWEEN SHRI GOMDE AND PROSPECTIVE BUYING PARTIES PRIOR TO CRYSTALLIZATION OF SALE. HE EVEN STATED THAT SALE CONSIDERATION WAS ALSO NEGOTIATED ONLY BY SHR I GOMDE. SHRI B.S. AGARWAL ALSO ADMITTED THAT HE DID NOT PAY ANY AMOUNT TO SHR I GOMDE FOR SUCH SERVICES. IN SUM AND SUBSTANCE, AS MADE OUT IN THE STATEMENT UNDER S. 131 DATED 14.10.2011 [ PAGE NO. 41-42 OF PAPER BOOK], WITNESS SHRI B.S. AGARWAL ADMITTED THAT EXCEPT FOR THE SETTLEMENT OF BILLS PE RTAINING TO MSEB BILLS, CORPORATION TAXES AND WATER BILLS, ETC.. HE WAS NOT PRIVY TO ANY DETAILS AND NEGOTIATIONS. WITH REGARD TO DETAILS OF PAYMENT AG AINST THE LAND DEALS ALSO, SHRI B.S. AGARWAL DREW TOTAL BLANK AND SUBMITTED TH AT HE IS KNOWN TO SELLING PARTY I.E. ASSESSEE ONLY. HE ALSO CATEGORICALLY AD MITTED THAT HE DID NOT MEET THE PURCHASING PARTY AT ALL. THUS, ENTIRE CONDUCT IS I NEXPLICABLE. THUS, FROM A READING OF THE STATEMENT, IT IS APPARENT THAT SHRI B.S. AGARWAL WHO HAS BEEN MERRILY ALLOWED TO APPROPRIATE LARGE CHUNK OF SURPL US FROM LAND DEAL HAS NO CLUE ABOUT THE TRANSACTIONS AT ALL. HE ALSO MADE C ONFESSION TO THE EFFECT THAT HE DID NOT MET THE BUYING PARTY AT ALL. THE WITNESS TH US PRODUCED BY THE ASSESSEE BEFORE THE AO WAS FOUND TO BE TOTALLY NOVICE AND TO BE A PERSON OF NO UNDERSTANDING ON THE SUBJECT TO CATER TO SUCH DEAL. HE HAS MISERABLY FAILED TO ESTABLISH THAT HE WAS INVOLVED IN THE TRANSACTIONS IN ANY MANNER. HE WAS NEITHER INSTRUMENTAL IN ENSURING THE PASS THROUGH O F THE TRANSACTION NOR WAS HE INVOLVED IN ANY MANNER. THE STATEMENT OF THE WITNES S MAKES THE CONCLUSION UNFLINCHING THAT THE RECIPIENT OF COMMISSION HAS NO T RENDERED ANY CORRESPONDING SERVICES FOR WHICH HE WAS BENEVOLENTL Y REWARDED NEARLY ONE THIRD OF THE TOTAL SALE CONSIDERATION ITSELF WHICH IS 10-15 TIMES IN EXCESS OF THE COMMISSION PAYABLE ON SUCH TRANSACTIONS. THE CONTEN TION OF THE ASSESSEE THAT THE PAYMENTS FOR COMMISSION WERE ROUTED THROUGH BAN KING CHANNEL IS AN 10 ITA NO.2088/PN/2013 IRRELEVANT CONSIDERATION. MERE PAYMENT TOWARDS ALLE GED COMMISSION AND DEDUCTION OF TDS THEREON DOES NOT PROVE THE BONAFID ES OF THE SERVICES RENDERED IN ANY MANNER. 12. THE STATEMENT DATED 14.10.2011 DEPOSED ON OATH WAS NEITHER CONTROVERTED NOR RETRACTED BY THE WITNESS ALTHOUGH HE SOUGHT TO SOMEWHAT WRIGGLED OUT OF THE EARLIER ASSERTIONS IN THE SUBSE QUENT STATEMENT. SHRI B.S. AGARWAL WAS CROSS-EXAMINED ON 27.12.2011 BY PARTNER OF THE ASSESSEE FIRM BEFORE THE ASSESSING OFFICER, NOTWITHSTANDING THE F ACT THAT IN THE EARLIER OCCASIONS ALSO HE WAS PRODUCED BEFORE THE ASSESSING OFFICER BY THE ASSESSEE AS HIS WITNESS. THE COPY THEREOF IS ALSO PLACED ON REC ORD AT PAGE NO.45-46 OF THE PAPER BOOK. IN THE CROSS-EXAMINATION, AS NOTED EAR LIER, HE TOOK A U-TURN AND MADE BALD ASSERTIONS IN NEGATION TO EARLIER STATEME NT TO SAY THAT HE HAD ENTERED INTO COMMUNICATION WITH ONE SHRI SHIVAJIRAO ADHALRA O PATIL ( REPRESENTING THE BUYERS) FOR SALE OF PLOT. HE ALSO STATED THAT HE H AS ACTED AS A MIDDLE MAN BETWEEN ASSESSEE AND THE BUYER FOR SALE OF PLOT. I T WAS INTER-ALIA POINTED OUT BY THE AO TO THE WITNESS THAT THE BUYER DENIES BY A WRITTEN COMMUNICATION OF ANY INVOLVEMENT OF ANY MIDDLE MAN IN THE DEAL. IN R ESPONSE THERETO, SHRI B.S. AGARWAL STATED THAT HE MET SHRI SHIVAJIRAO ADHALRAO PATIL AT HIS HOME WHERE HE ARRANGED FOR THE MEETING OF THE BUYER AND SELLER . HE CLAIMED THAT HE RECEIVED RS.90,00,000/- AS A PROFIT ON ARRANGEMENT OF SUCH SALE. THUS, IN DEPARTURE TO THE INITIAL STATEMENT GIVEN AS WITNESS OF THE ASSESSEE BEFORE THE AO, SHRI B.S. AGARWAL NOW IN THE SECOND ROUND OF EX AMINATION I.E. CROSS- EXAMINATION BY THE ASSESSEE IN THE PRESENCE OF AO S TATES THAT HE ARRANGED FOR THE FINALIZATION OF DEAL WITH PURCHASER SHRI SHIVAJ IRAO ADHALRAO PATIL. BUT FOR THIS ASSERTION, NO OTHER CORROBORATION IS DISCERNIB LE. IT IS OBVIOUS THAT STATEMENT MADE IN THE SECOND ROUND IS TUTOURED ONE. 13. WHEN THE STATEMENTS DEPOSED BEFORE THE AO ARE R EAD AS A WHOLE, THEY DO NOT INSPIRE ANY CONFIDENCE IN THE BONAFIDES OF E NGAGEMENT OF SHRI B.S. AGARWAL IN THE DEAL INVOLVING AMOUNT OF THE MAGNITU DE OF RS. 3 CRORES WHERE HE IS ALSO A PURPORTED BENEFICIARY OF AN AMOUNT AS HIGHER AS RS.90 LACS. THE 11 ITA NO.2088/PN/2013 COMMISSION RECIPIENT WAS FOUND WANTING EVEN ON VERY BASIC ASPECTS OF THE SUBJECT MATTER AT THE FIRST INSTANCE. HE HAS DISPLA YED ALARMING SHOW OF LACK OF KNOWLEDGE ON THE TRANSACTION. ALSO, THERE IS A DIS TURBING DISCONNECT BETWEEN THE WINDFALL GAIN OF RS. 90 LACS ALLEGED TO BE PAID TOWARDS SERVICES FOR SALE OF PROPERTY AND THE BACKGROUND OR CAPABILITIES OF THE MIDDLE MAN TO EXECUTE DEAL OF SUCH FORMIDABLE AMOUNT. THERE IS NO CORROBORATIO N FOR INVOLVEMENT OF THE MIDDLEMEN IN THE DEAL EXCEPT THE MOU WHICH IS FOUND TO BE ILLUSORY AND LACKS IN MATERIAL FEATURES. THE BUYER HAS ALSO NOT VOUCHE D THE DEAL. PAYMENT OF SUCH ASTOUNDING SUM TO A PERSON HAVING AS LITTLE UNDERST ANDING OF THE SUBJECT AS POSSIBLE NEITHER ACCORDS WITH ANY BUSINESS PRACTICE NOR IS CORROBORATED BY ANY DIRECT OR CIRCUMSTANTIAL EVIDENCES. IT ONLY MILITAT ES AGAINST ANY LOGIC. WHICH ARE THOSE OTHER PARTIES WHO WERE CONTACTED OR WHAT OTHER EFFORTS WERE CARRIED OUT PRIOR TO AND IN THE COURSE OF DEAL ARE NOT BORN E OUT FROM RECORDS. IT IS DIFFICULT TO BELIEVE THE CREDIBILITY OF EXPENDITURE STATED TO BE INCURRED BY THE ASSESSEE ON THE FACE OF SUCH SORDID FACTS. THUS, VI EWED FROM ANY PERSPECTIVE, THE PROPRIETY OF PAYMENT OF STAGGERING AMOUNT OF RS . 90 LACS PURPORTEDLY MADE AGAINST OBTAINING SERVICES FOR SALE OF PROPERTY BAS ED ON SOME SYMBOLIC MOU DESERVES TO DISCREDITED. 14. THE RELIANCE PLACED BY THE ASSESSEE ON THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE GLAXO SMITHKLINE ASIA (P. ) LTD. (SUPRA) IS TOTALLY MISPLACED. THE HONBLE SUPREME COURT IN THE AFORES AID CASE OBSERVED THAT IN THE CASE OF DOMESTIC TRANSACTIONS, UNDER-INVOICING OF SALES OR OVER- INVOICING OF EXPENSES ORDINARY WILL BE REVENUE NEUTRAL IN NAT URE, IN THE ABSENCE OF TAX ARBITRAGE. IN THE PRESENT CASE, THE CORRECTNESS OF VALUE TO BE ASSIGNED FOR IMPUGNED SERVICES IS NOT IN QUESTION. THE BONAFIDE S OF INCURRING EXPENDITURE FLOWING FROM MOU ITSELF IS IN QUESTION. THERE IS NO THING ON RECORD TO DEMONSTRATE THAT SERVICES WERE ACTUALLY RENDERED BY SHRI B.S. AGARWAL TO THE ASSESSEE. THE GENUINENESS OF THE EXPENDITURE INCURR ED IS NOT AT ALL PROVED. THE INITIAL EXAMINATION OF SHRI B.S. AGARWAL CLEARLY SH OWS THAT SHRI B.S. AGARWAL DID NOT PLAY ANY ROLE IN THE LAND DEAL. THUS, PAYME NT OF EXHORBITANT AMOUNT OF RS.90,00,000/- TOWARDS COMMISSION ON SOME MUNDANE M OU WITHOUT 12 ITA NO.2088/PN/2013 EXHIBITION OF SERVICES IS AN UTTER IMPROBABILITY AN D DOES NOT STAND TO ANY REASON. THUS, THE ASSESSEE HAS NOT DISCHARGED INITI AL BURDEN OF PROOF WHICH SQUARELY LIES UPON HIM TO REASONABLY ESTABLISH RECE IPT OF SERVICES. THE RECEIPT BY PAYEE CAN BE FOR VARIETY OF REASONS BOTH GRATUIT OUS AND NON-GRATUITOUS. THE PAYMENT OF TAXES PAID BY THE RECIPIENT THOUGH A MIT IGATING FACTOR, BY ITSELF WILL NOT RENDER THE CORRESPONDING EXPENSES AS SACROSANCT . THE ASSESSEE IS UNDER OBLIGATION TO DISCHARGE THE BURDEN TO REASONABLY PR OVE THE BONAFIDES OF EXPENSES CLAIMED. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE, 82 ITR 540 (SC) HAS HELD THAT THE TAXI NG AUTHORITIES ARE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DO CUMENTS PRODUCED BEFORE THEM. THEY ARE ENTITLED TO LOOK INTO THE SURROUNDIN G CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THE DOCUMENTS. THE HONBLE SUPREME COURT IN THE CASE OF GANAPATHY AND CO. VS. CIT, 381 ITR 3 63 (SC) HAS HELD THAT RENDITION OF SERVICE MUST BE PROVED AS A MATTER OF FACT. IN THE TOTALITY OF THE CIRCUMSTANCES, WE ARE INCLINED TO AGREE WITH THE VI EW OF THE CIT(A) THAT THE AFORESAID EXPENDITURE CLAIMED TOWARDS PAYMENT OF RS .90,00,000/- REQUIRES TO BE DISALLOWED. HENCE, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE AND DECLINE TO INTERFERE WITH THE ORDER OTHE CIT(A). 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2016. SD/- SD/- ( VIKAS AWASTHY ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 25 TH MAY, 2016. 13 ITA NO.2088/PN/2013 & ' () *+( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE