Smt. Kanta N.Taporia, Ahmedabad V. The Income tax Officer,Ward-8(1), Ahmedabad

ITA 2158/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0366 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-09-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 08-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 16/09/2009 DRAFTED ON: 30/09/ 2009 ITA NO.2158/AHD/2009 ASSESSMENT YEAR : 2006-07 SMT.KANTA N. TAPORIA 65, EMBASSY MARKET ASHRAM ROAD AHMEDABAD VS. THE ITO WARD-8(1) AHMEDABAD PAN/GIR NO. : AAWPT 4434 H (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SUNIL TALATI, CA RESPONDENT BY: SHRI GOVIND SINGHAL, DR O R D E R PER D.C.AGRAWAL , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED CIT(APPEALS)-XIV, AHMEDABAD DATED 11/06/200 9 PASSED FOR ASSESSMENT YEAR 2006-07 BY RAISING GRO UNDS RELATING TO THE FOLLOWING ISSUES:- (1) CONFIRMING DISALLOWANCE OF PAYMENT OF COMMISSI ON AMOUNTING TO RS.5,07,351/- WHICH INCLUDED COMMISSIO N PAYMENT TO M/S.MAHESH KABRA OF M/S.AYODHYA ENTERPRI SE FOR RS.1,25,131/- AND TO MR.KANUBHAI M.PATEL FOR RS.3,82,220/-. ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 2 - (2) DISALLOWANCE OF SALARY AMOUNTING TO RS.1,60, 000/-. (3) DISALLOWANCE OF RS.47,828/- BEING EXPENDITURE INCURRED ON VEHICLES AND TELEPHONES. (4) ENHANCING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY RS.48,000/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS INVOLVED IN THE BUSINESS OF COMMISSION AGENCY. IT CLAIMED PAYMENT OF COMMISSION OF RS.5,07,351/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE DET AILS OF COMMISSION PAYMENT. IT WAS EXPLAINED THAT THE COMMISSION WAS PAID TO TWO PERSONS; NAMELY, MR. MAHESH KABRA OF M/S.AYODHYA ENTERPRISE AMOUNTING TO RS.1,21,131/- AND SHRI KANUBHAI M.PATEL AMOUNTING T O RS.3,82,220/-. 3. IT WAS FURTHER CLAIMED BEFORE THE ASSESSING OFF ICER THAT THE COMMISSION WAS PAID FOR DEALING WITH TWO BIG PARTIE S; NAMELY M/S.JYOTI LTD AND M/S.IVRCL INFRASTRUCTURE & PROJECTS LTD. I T WAS FURTHER SUBMITTED THAT COMMISSION HAS BEEN PAID FOR STRONG CONTACTS. THESE PERSONS WERE KEEPING LIAISON WITH BIG PARTIES. THE SE AGENTS ARE INVOLVED FOR THE PURPOSES OF ENQUIRY, DATA COLLECTION, FOR S URGE ANALYSIS BY CHARACTERISTICS, NEGOTIATION OF PRICES, FINALIZATIO N OF ORDERS, APPROVAL OF ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 3 - DRAWINGS, FACILITATING THIRD PARTY INSPECTION, VEND OR REGISTRATION, ETC. WHEN THE ASSESSING OFFICER CARRIED OUT ENQUIRIES WI TH TWO PARTIES; NAMELY M/S.JYOTI LTD. AND M/S.IVRCL INFRASTRUCTURE & PROJECTS LTD. THOSE PARTIES DID NOT MENTION ABOUT ANY ROLE, THE COMMISSION AGENTS HAD PLAYED IN THE BUSINESS WITH THE ASSESSEE. THE INVO ICES DID NOT MENTION THE PRESENCE OF ANY MIDDLE MAN. FURTHER ENQUIRES REVEALED THAT SHRI MAHESH KABRA WAS DEALING IN SUPPLY OF DYES AND CHEM ICALS AND SHRI KANUBHAI M.PATEL WAS ENGAGED IN THE BUSINESS OF LA ND DEALING. SHRI K.M. PATEL DID NOT ATTEND IN RESPONSE TO SUMMONS U/ S.131 OF THE I.T. ACT, 1961. SHRI MAHESH KABRA STATED U/S.131 WHEN HIS ST ATEMENT WAS RECORDED ON 05/09/2008 THAT HIS FAMILY HAD CLOSE FA MILY RELATIONSHIP WITH SHRI NIRAJBHAI TAPARIA, THE HUSBAND OF THE ASSESSEE . BECAUSE OF THIS RELATIONSHIP, SHRI MAHESH KABRA HAS ALLOWED THE ASS ESSEE TO USE HIS NAME THOUGH HE DID NOT HAVE ANY EXPERIENCE OF THE WORK DONE BY M/S.AQUA CARE COMPANY, PROPRIETARY-CONCERN OF THE ASSESSEE. FROM THIS, THE ASSESSING OFFICER INFERRED THAT THE TWO ALLEGED COM MISSION AGENTS HAVE NO INVOLVEMENT IN THE WORK CARRIED ON BY THE ASSESS EE AS THEY DID NOT HAVE ANY KNOWLEDGE OF THE WORK DONE BY THE ASSESSE E. ONE PERSON IS DEALING IN DYES AND CHEMICALS, WHILE OTHER PERSON I S DEALING IN LAND. MERELY BECAUSE RECEIPT OF COMMISSION IS CONFIRMED A ND COMMISSION HAS ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 4 - BEEN OFFERED FOR TAXATION IS NOT SUFFICIENT PROOF T HAT COMMISSION PAYMENT WAS GENUINE. HE ACCORDINGLY DISALLOWED THE CLAIM. 5. THE LEARNED CIT(APPEALS) EXAMINED THE ISSUE IN D ETAIL AND FOUND THAT THE ASSESSEE IS ALSO DEALING IN COMMISSION BUSINESS AND HAS NEARLY PARTED AWAY 1/3 RD OF THE COMMISSION RECEIVED BY HER. EVENTHOUGH, P AYMENT HAS BEEN MADE BY 'A/C PAYEE CHEQUES' BUT THERE IS N O EVIDENCE OF SERVICES HAVING BEEN RENDERED BY THE TWO AGENTS. THE ASSESSEE HAS NOT ASKED FOR CROSS-EXAMINATION OF SHRI MAHESH KABRA EV ENTHOUGH ASSESSEE WAS AWARE THAT ADVERSE STATEMENT WAS GIVEN BY HIM. SHRI KANUBHAI M.PATEL DID NOT ATTEND THE OFFICE OF THE ASSESSING OFFICER IN RESPONSE TO SUMMONS. BOTH OF THESE PERSONS, I.E. S/SHRI KANUM BAHI PATEL AND MAHESH KABRA ARE NOT DEALING IN PIPES AND THEIR BUS INESS IS NOT EVEN REMOTELY CONNECTED WITH BUSINESS OF THE ASSESSEE. THERE IS NO DOCUMENTARY EVIDENCE SHOWING INVOLVEMENT OF THE SAI D TWO PERSONS IN PROCURING BUSINESS FOR THE ASSESSEE, THOUGH M/S.JYO TI LTD. HAD REPLIED TO THE ASSESSING OFFICER THAT SHRI KANUBHAI PATEL WAS REPRESENTING M/S.SURESEAL AQUA CARE, THEN COMMISSION, IF AT ALL PAYABLE, SHOULD HAVE BEEN PAID BY M/S.SURESEAL. NO CORRESPONDENCE B ETWEEN CUSTOMERS AND COMMISSION AGENTS HAVE BEEN SUBMITTED. THUS, R ELYING ON FOLLOWING ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 5 - DECISIONS, THE LEARNED CIT(APPEALS) UPHELD THE DISA LLOWANCE OF COMMISSION:- SL.NO(S) DECISION IN THE CASE OF REPORTED IN 1. ALUMINIUM CORPORATION OF INDIA LTD. VS. CIT 86 ITR 11 (SC) 2. PRECISION INSTRUMENT MFG.CO. 137 ITR 5 (DEL) 3. PESTICIDES & AGRO CHEMICALS VS. CIT 227 ITR 846 (GAU) 4. INDIAN PRESS EXCHANGE LTD. 138 ITR 594 (CAL) 5. SWADESH COTTON MILLS CO.LTD. 63 ITR 57 (SC) 6. ESS ESS KAY ENGINEERING CO.P.LTD. 151 ITR 636 (PUNJ) 7. SCHNEIDER ELECTRIC INDIA LTD. VS. CIT 304 ITR 360 (DEL) 8. LACHMINARAYAN MADAN LAL VS. CIT (1972) 86 ITR 439 (SC) 5. AGAINST ABOVE, THE LEARNED AUTHORISED REPRESENTA TIVE OF THE ASSESSEE SUBMITTED THAT SHRI MAHESH KABRA HAS APPEA RED BEFORE THE ASSESSING OFFICER AND HE ADMITTED TO HAVE RECEIVED COMMISSION PAYMENT WHICH HAS BEEN DECLARED BY HIM IN HIS RETURN OF INC OME. FURTHER, ASSESSEE HAS NOT BEEN ALLOWED THE OPPORTUNITY OF CR OSS-EXAMINATION. 6. ON THE OTHER HAND, THE LD.DR RELIED ON THE ORDER S OF THE AUTHORITIES BELOW AND SUBMITTED THAT NO EVIDENCE OF SERVICES RE NDERED HAS BEEN FURNISHED. ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 6 - 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE REST ORE THE ISSUE TO THE FILE OF ASSESSING OFFICER TO GIVE AN OPPORTUNITY TH E ASSESSEE TO PRODUCE THE TWO COMMISSION AGENTS; NAMELY S/SHRI MAHESH KAB RA AND KANUBHAI PATEL, RECORD THEIR STATEMENT AFRESH, ASK THEM TO S UBMIT THE EVIDENCES OF SERVICES RENDERED AND ALLOW CROSS-EXAMINATION TO TH E ASSESSEE. EVENTHOUGH, THE TWO PERSONS ARE WITNESSES OF THE AS SESSEE, BUT STILL LET THE ASSESSEE PUT THE QUESTIONS, IF SHE WANTS, TO S HOW THAT THE FACTUM OF SERVICES HAVING BEEN RENDERED, IF ANY, IS BROUGHT O N RECORD. THIS IS CONSIDERED NECESSARY IN THE INTEREST OF JUSTICE. 8. AS A RESULT, THIS GROUND OF THE ASSESSEE IS TREA TED AS ALLOWED BUT FOR STATISTICAL PURPOSES. 9. THE SECOND ISSUE RELATES TO DISALLOWANCE OF RS.1 ,60,000/- OUT OF SALARY. 10. THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED PAYMENT OF SALARY OF RS.1,60,000/- TO HER (ASSESSEES) FATHER-IN-LAW SHR I S.J. TAPARIA. IT WAS EXPLAINED THAT SHRI S.J.TAPARIA HAD 14 YEARS EXPER IENCE OF MARKETING IN THE FIELD OF HYDRAULIC ENGINEERING SECTOR, MARKETIN G PIPES MANUFACTURED ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 7 - BY SHRI DIGVIJAY CEMENT CO.LTD. HE HAS BEEN GUIDE AND ADVISOR TO THE ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT TH E EXPLANATION. ACCORDING TO HIM, ASSESSEE IS DOING BUSINESS ONLY O N COMMISSION BASIS AND IS NOT ENGAGED IN THE MANUFACTURING OF STEEL OR CEMENT PRODUCTS. FURTHER, THERE IS NO MENTION OF SHRI S.J. TAPARIA I N THE CORRESPONDENCE WITH VARIOUS PARTIES INVOLVED. ACCORDINGLY, THE A SSESSING OFFICER DISALLOWED THE CLAIM. THE LEARNED CIT(APPEALS) CO NFIRMED THE ADDITION ON THE GROUND THAT NO DOCUMENTARY EVIDENCE OR DETAI LS HAVE BEEN FILED TO SUBSTANTIATE THE CLAIM AND PAYMENT IS NO PROOF OF O BTAINING ANY PARTICULAR TECHNICAL ADVICE. MERELY ON THE BASIS OF EXPERIEN CE OR PAYMENT RECEIVED BY SHRI TAPARIA, CLAIM COULD NOT BE ALLOWED. 11. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE SUBMITTED THAT ANY ADVICE, GUIDANCE AND SUPPORT NEE D NOT BE BROUGHT ON RECORD. MERE ADVICE BASED ON EXPERIENCE MAY HELP THE ASSESSEE IN PROCURING MORE BUSINESS. THE PRESENCE OF SHRI S.J .TAPARIA AT THE ASSESSEES BECK AND CALL IS ENOUGH FOR THE ASSESS EE TO MAKE A DENT IN THE MARKET AND, THEREFORE, SALARY TO HIM IS JUSTIFIED. ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 8 - 12. AGAINST THIS, THE LD.DR SUBMITTED THAT SHRI S.J .TAPARIA WAS AVAILABLE IN EARLIER YEAR ALSO. HE MIGHT BE SUPPOR TING THE ASSESSEE IN THE SAME MANNER IN EARLIER YEAR ALSO AND SHE IS HIS DAU GHTER-IN-LAW. IF NO SALARY IS CLAIMED IN EARLIER YEARS, THEN CLAIM OF S ALARY THIS YEAR CANNOT BE ALLOWED UNLESS FACTS ARE DIFFERENT. THERE IS NO EV IDENCE THAT SHRI S.J.TAPARIA IS AN EMPLOYMENT OF THE ASSESSEE OR THA T SHRI S.J.TAPARIA HAS RENDERED SERVICES TO THE ASSESSEE. 13. AFTER CONSIDERING RIVAL SUBMISSIONS, WE RESTORE THE MATTER TO THE ASSESSING OFFICER FOR GIVING AN OPPORTUNITY TO PROD UCE THE DOCUMENTS RELATING TO EMPLOYMENT AND NATURE OF JOB ENTRUSTED TO SHRI TAPARIA AND DETAILS OF THE WORK DONE BY SHRI S.J. TAPARIA FOR T HE ASSESSEE ON PERIODICAL BASIS. IF SATISFACTORY EVIDENCE IS FOR THCOMING ABOUT THE SERVICES RENDERED BY SHRI S.J.TAPARIA, THEN THE CLA IM OF THE ASSESSEE SHOULD BE ALLOWED. 14. AS A RESULT THIS GROUND OF THE ASSESSEE IS ALSO TREATED AS ALLOWED, BUT FOR STATISTICAL PURPOSES. ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 9 - 15. THE THIRD GROUND RELATES TO DISALLOWANCE OUT OF EXPENSES INCURRED ON VEHICLES AND TELEPHONE. 16. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER HAS DISALLOWED 25% OUT OF TOTAL EXPENSES CLAIMED UNDER THE HEAD TELEPHONE AND VEHICLES. 17. AFTER HEARING BOTH THE PARTIES, WE RESTRICT THE DISALLOWANCE TO 10% OF THE TOTAL EXPENSES AS THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT ENTIRE EXPENSES WERE INCURRED FOR THE PURPOSES OF BUSINESS . THEREFORE, THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. 18. GROUND NO.4 RELATES TO ADDITION OF RS.48,000/- UNDER THE HEAD FROM HOUSE PROPERTY. 19. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LEARNED CIT(APPEALS) NOTICED THAT ASSESSEE IS AN OWNER OF THE FLAT NAMED BHAVYA AT BOPAL WHOSE VALUE WAS DECLARED AT RS.2,50,000/- AND WAS SHOWN IN THE RETURN, BUT NO RENTAL INCOME WAS DECLARED FROM THE SAID FLAT. ACCORDING TO HIM, IT WAS SELF OCCUPIED. THE LEARNED CIT(APPEALS), THEREFORE, PROPOSED TO ENHANC E THE TOTAL INCOME ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 10 - OF THE ASSESSEE BY ESTIMATING THE RENTAL INCOME FRO M THAT FLAT AT A RATE OF RS.5,000/- PER MONTH. IN RESPONSE TO SHOW-CAUSE N OTICE ISSUED BY THE LEARNED CIT(APPEALS), THE ASSESSEE EXPLAINED THAT T HE FLAT IN QUESTION IS SITUATED IN A MIDDLE CLASS SOCIETY AT THE OUTSKIRT OF AHMEDABAD. IT WAS BOOKED 10 YEARS BACK WITH AN INTENTION TO STAY THER E, BUT DUE TO FAULT OF THE DEVELOPERS THE POSSESSION WAS UNDULY DELAYED. ACCORDINGLY, THE ASSESSEE CONSTRUCTED ANOTHER FLAT AT THALTEJ WERE S HE IS STAYING AT PRESENT. THE FLAT IN QUESTION LACKED CERTAIN BASIC AMENITIES AND IS NOT INHABITABLE AND, HENCE, IT CANNOT BE CONSIDERED AS A PROPERTY FALLING UNDER THE PURVIEW OF SECTIONS 22/23 OF THE I.T. ACT, 1961 . THE LEARNED CIT(APPEALS) AFTER CONSIDERING THE EXPLANATION, RED UCED THE ESTIMATED RENTAL VALUE TO RS.4,000/- PER MONTH AND, THUS, EST IMATED THE ALV AT RS.48,000/-. IT WAS ALSO TREATED AS INCOME OF THE ASSESSEE. 20. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENT ATIVE OF THE ASSESSEE AND LD.DR. IN OUR CONSIDERED VIEW, THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF THE LEARNED CIT(APPEAL S). NO EVIDENCE IS FURNISHED AS TO HOW THE FLAT IS NOT RESIDENCE-WORTH Y OR THAT EXPECTED MONTHLY RENT WOULD BE LOWER THAN WHAT HAS BEEN ESTI MATED BY THE ITA NO.2158/AHD /2009 SMT. KANTA N.TAPORIA VS. ITO ASST.YEAR - 2006-07 - 11 - LEARNED CIT(APPEALS). THEREFORE, THIS GROUND IN AS SESSEES APPEAL IS DISMISSED. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED AND ALSO TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 09/10/2009. SD/- SD/- ( T.K.SHARMA ) ( D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 09 / 10 /2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIV, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD