Shri Amit Ashokraj Kapoor, Ahmedabad V. The Asst. Commissioner of Income Tax, Circle-6(1), Ahmedabad

ITA 212/AHD/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2725 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 25-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Assessee Lawyers: VIJAY MITTAL
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 212/AHD/2018 (ASSESSMENT YEAR: 2014-15) SHRI AMIT ASHOKRAJ KAPOOR 3-A, JAIHIND SOCIETY, NR. RAMBAUG, ROAD, MANINAGAR, AHMEDABAD V/S ASST. COMMISSIONER OF INCOME TAX, CIRCLE-6(1), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AGMPK7410N APPELLANT BY : SHRI VIJAY MITTAL, AR RESPONDENT BY : SHRI ALBINUS TIRKEY, SR. D.R . ( )/ ORDER DATE OF HEARING : 01 -08-201 8 DATE OF PRONOUNCEMENT : 13 -08-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-6, AHMEDABAD DATED 20.11.2017 PERTAINING TO A.Y. 2014- 15 AND FOLLOWING GROUND HAS BEEN TAKEN: ITA NO. 212/ AHD/2018 . A.Y. 2014-15 2 THAT THE AUTHORITIES BELOW HAVE ERRED IN LAW AND F ACTS BY DISALLOWING THE COMMISSION PAID TO SHRI DWARKANATH OF RS.433939/-, THE PAYMENT IN RELATION TO COMMISSION EXPENSES WERE BY ACCOUNT PAYEE CHEQUE AND THROUGH BANKING CHANNEL, MOREOVER PROPER TDS WAS ALSO DEDUCTED BY THE ASSESSEE ON THE SAID PAYMENT 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF MANUFACTURING OF FOOTWEAR. ON PERUSAL OF FORM 3CD I T IS FOUND THAT THE ASSESSEE HAS SHOWN NIL PAYMENT TO SPECIFIED PERSONS U/S. 40A(2)(B). THE COLUMN NO.23 WAS LEFT BLANK MARKING NIL IT MEANS TH AT HE HAS NOT PAID ANY AMOUNT UNDER THIS SECTION BUT THE SUBMISSION' MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS FOUND THAT HE HAS PAID COMMISSION TO THE FOLLOWING PERSONS, SPECIFIED U/S.40A(2)(B) OF T HE ACT: NAME OF THE PERSON AMOUNT OF COMMISSION ASHOKRAJ KAPOOR (FATHER) RS. 2,65,065/- SUMIT ASHOKRAJ KAPOOR (BROTHER) RS. 2,65,065/- DWARKANATH (RELATIVE) RS. 6,50,883/- AND THEREAFTER ASSESSEE WAS ASKED TO SHOW CAUSE THA T WHY THE COMMISSION PAYMENT OF ABOVE SAID AMOUNT SHOULD NOT BE DISALLOW ED. 3. IN SUPPORT OF ITS CONTENTION, ASSESSEE STATED THAT THE PAYMENTS ARE REASONABLE AND MODERATE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICES RENDERED BY THEM. THE ASSESSEE MERELY GAVE THE CONFIRMATION OF ACCOUNT PURPOSE AND GENUINITY WAS NOT PROVIDED. AS PER LAST YEAR RECORD THE ASSESSEE ALSO GAVE SALARIES TO THESE PERSONS. NO DETAIL OF SALARY PAID WAS FILED THIS YEAR. IT IS ESTABLISHED IN EARLIER YEARS THAT THESE PERSONS HAV E NO TECHNICAL QUALIFICATION FOR THE BUSINESS OF THE ASSESSEE. IT WAS FURTHER NOTIC ED THAT THE IN THE CURRENT YEAR, THE ASSESSEE HAS PAID EQUAL COMMISSION TO RELATED P ERSONS. FROM THIS PRACTICE ITA NO. 212/ AHD/2018 . A.Y. 2014-15 3 OF THE ASSESSEE, IT CAN BE ASCERTAINED THAT THERE I S NO STANDARD FORMULA TOR PAYMENT OF COMMISSION. EVEN THE ASSESSEE HAS FAILED TO FURNISH PROOF OF ANY CONTRACT WITH THE ABOVE TWO PERSONS. IN VIEW OF THE ABOVE IT IS VERY CLEAR THAT THERE IS NO DIRECT NEXUS BETWEEN THE COMMISSION PAI D TO THE SPECIFIED PERSONS AND SERVICES RENDERED BY THEM AND ALSO THERE IS NO- GENUINENESS OF THE PAYMENTS MADE. HENCE, LD. A.O. MADE DISALLOWANCE OF RS. 11,81,013/-. 4. AGAINST THE SAID DISALLOWANCE, ASSESSEE PREFERRED F IRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND THE IM PUGNED ORDER. IN THIS CASE, ASSESSEE MADE FOLLOWING PAYMENTS ON THE BASIS OF PER PAIR OF SHOES AND PERCENTAGE-WISE AS WELL: ASHOK KAPOOR RS, 5/- PER PAIR = 5,30,135*5 =2,65,06 5/- SUMIT KAPOOR RS. 5/- PER PAIR = 5,30,135*5=2,65,065 /- DWARKANATH @ 1.5 % OF SALES = 4,33,88,871*1.5=6,50, 833/- 6. ASSESSEES CONTENTION IS THAT SHRI ASHOK KAPOOR AND SUMIT KAPOOR GOT THE SALES PROMOTION, THEREFORE THEY WERE GIVEN RS. 5 PE R PAIR OF SHOES WHEREAS DWARKANATH WAS GIVEN COMMISSION OF 1.5% OF TOTAL SA LES AS HE COULD FETCH SALES OF RS. 4,33,88,871/- AS COMPARED TO SHRI ASHO K KAPPOR AND SUMIT KAPOOR. THEY COULD FETCH SALE OF RS. 5,30,135/- EAC H. 7. AND IN SUPPORT OF ITS CONTENTION, ASSESSEE CITED AN ORDER OF THE DELHI HIGH COURT IN THE MATTER OF CIT VS. DALMIA CEMENT (BHARA T) LTD. (2002) 254 ITR 377 WHEREIN IT HAS BEEN HELD THAT ONCE IT IS ESTAB LISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSI NESS (WHICH NEED NOT ITA NO. 212/ AHD/2018 . A.Y. 2014-15 4 NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF) , THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINES SMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HO W MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF T HE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE ITS PROFIT. THE INCOME TAX AUTHORITIES MUST PUT THEMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. THE AUTHORITIES MUST NOT LOOK AT THE MAT TER FROM THEIR OWN VIEW POINT BUT THAT OF A PRUDENT BUSINESSMAN. 8. IN OUR CONSIDERED OPINION, THIS IS A CASE OF BUSINE SS EXPEDIENCY AND DEPARTMENT CANNOT GOVERN A BUSINESSMAN THAT HOW TO RUN HIS BUSINESS AND HOW TO MANAGE HIS EXPENDITURE. IN THIS CASE, COMMIS SION HAS BEEN GIVEN THROUGH BANKING CHANNEL AND TDS WAS DEDUCTED AND IN CASE OF DWARKANATH HE COULD FETCH SALES THEREFORE HE WAS GIVEN COMMISSION @ 1.5% OF THE TOTAL SALES. IN OUR CONSIDERED OPINION, THIS IS A FIT CASE WHERE APPELLANT SHOULD GET RELIEF AT OUR END. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 08- 2018 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 13 /08/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT.