B.D. Khaitan & Sons (HUF), Kolkata V. ITO, Ward - 34(1), Kolkata, Kolkata

ITA 2181/KOL/2010

• Counselvise Citation: 218123514 RSA 2010
• Duration Of Justice: 4 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 09-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 131

Judgement Text

I.T.A. NO. 2181/KOL./2010 ASSESSMENT YEAR: 2006-2007 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2181/KOL/ 2010 ASSESSMENT YEAR : 2006-2007 B.D. KHAITAN & SONS (HUF).......................... .........................APPELLANT P-38, INDIA EXCHANGE PLACE, KOLKATA-700 001 [PAN : AACHB 0892 D] -VS.- INCOME TAX OFFICER,................................ ............................RESPONDENT WARD-34(1), KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 APPEARANCES BY: SHRI SOUMITRA CHOUDHURY, ADVOCATE , FOR THE ASSESSEE SHRI DEBASHIS BANERJEE, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : OCTOBER 07, 2015 DATE OF PRONOUNCING THE ORDER : NOVEMBER 04, 2015 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DA TED 20.09.2010 FOR THE ASSESSMENT YEAR 2006-07 AND THE MAIN ISSUE AS I S RAISED IN GROUND NO. 1 RELATES TO THE DISALLOWANCE MADE BY THE ASSES SING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF COM MISSION PAID TO EASTERN MICRO ELECTRONICS (P) LIMITED AT RS.2,51,28 9/- AND TO MURARKAS AT RS.3,24,853/-. 2. THE ASSESSEE IN THE PRESENT CASE IS A HUF, WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN ELECTRONIC GOODS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31.10.2006 D ECLARING TOTAL INCOME I.T.A. NO. 2181/KOL./2010 ASSESSMENT YEAR: 2006-2007 PAGE 2 OF 6 OF RS.4,64,452/-. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF COMMISSION OF RS.2,51,289/- PAID TO M /S. EASTERN MICRO ELECTRONICS (P) LIMITED. IN ORDER TO VERIFY THE SAI D CLAIM OF THE ASSESSEE, SUMMONS UNDER SECTION 131 WAS ISSUED BY THE ASSESSI NG OFFICER TO M/S. EASTERN MICRO ELECTRONICS (P) LIMITED, IN RESPONSE TO WHICH, THE ACCOUNTANT OF THE SAID CONCERN WAS APPEARED BEFORE THE ASSESSING OFFICER. THE STATEMENT OF THE SAID ACCOUNTANT WAS R ECORDED BY THE ASSESSING OFFICER IN WHICH HE COULD NOT EXPLAIN THE NATURE OF SERVICES RENDERED BY HIS COMPANY TO THE ASSESSEE. SIMILARLY, THE CLAIM OF THE ASSESSEE FOR HAVING PAID COMMISSION OF RS.3,24,853/ - TO THE MEMBERS OF MURARKA FAMILY WAS ALSO EXAMINED BY THE ASSESSING O FFICER. IN THIS REGARD, HE RECORDED THE STATEMENTS OF THE CONCERNED MEMBERS OF THE MURARKA FAMILY, WHO WERE FOUND TO HAVE NO TECHNICAL KNOWLEDGE EVEN ABOUT THE GAUGE OF THE WIRES DEALT WITH BY THE ASSE SSEE. THEY ALSO COULD NOT NAME THE PARTIES TO WHOM THE SALES WERE MADE BY THE ASSESSEE THROUGH THEM. IN THE LIGHT OF THESE ADVERSE FINDING S, EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF COMMISSION PAID TO M/S. EASTERN MICRO ELECTRONICS (P) LIMITED AND MURARKA FAMILY MEMBERS, WERE DISALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED U NDER SECTION 143(3) VIDE AN ORDER DATED 24.11.2008. 3. AGAINST THE ORDER PASSED UNDER SECTION 143(3), A N APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(APPEAL S). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(APPEALS ), CERTAIN DETAILS AND DOCUMENTS WERE FILED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM FOR COMMISSION PAID TO M/S. EASTERN MICRO ELECTRONICS ( P) LIMITED AND MURARKA FAMILY MEMBERS. THE SAID DETAILS AND DOCUME NTS WERE FORWARDED BY THE LD. CIT(APPEALS) TO THE ASSESSING OFFICER SE EKING THE LATERS COMMENTS THEREON. IN THE REMAND REPORT SUBMITTED TO THE LD. CIT(APPEALS), THE ASSESSING OFFICER OFFERED HIS COM MENTS AND AFTER TAKING INTO CONSIDERATION THE SAME AS WELL AS THE OTHER MA TERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) CONFIRMED THE DISALLOW ANCE MADE BY THE I.T.A. NO. 2181/KOL./2010 ASSESSMENT YEAR: 2006-2007 PAGE 3 OF 6 ASSESSING OFFICER ON ACCOUNT OF COMMISSION PAID TO M/S. EASTERN MICRO ELECTRONICS (P) LIMITED AND MURARKA FAMILY MEMBERS OBSERVING THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO ESTABL ISH THAT THE SERVICES JUSTIFYING THE PAYMENT OF COMMISSION WERE ACTUALLY RENDERED BY M/S. EASTERN MICRO ELECTRONICS (P) LIMITED AND MURARKA F AMILY MEMBERS. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION R AISED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US IS THAT THE RELE VANT DETAILS AND DOCUMENTS FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) WERE SUFFICIENT TO SUPPORT AND SUBSTANTIATE ITS CLAIM OF COMMISSION PAID TO M/S. EASTERN MICRO ELECTRONICS (P) LIMITED AND MURA RKA FAMILY MEMBERS AND EVEN IN THE REMAND REPORT SUBMITTED TO THE LD. CIT(APPEALS), THIS POSITION WAS NOT DISPUTED BY THE ASSESSING OFFICER. HE HAS ALSO INVITED OUR ATTENTION TO THE COPY OF REMAND REPORT PLACED A T PAGES 31 & 32 OF THE PAPER BOOK, THE RELEVANT PORTION OF WHICH, CONTAINI NG THE COMMENTS OF THE ASSESSING OFFICER ON THE CLAIM OF THE ASSESSEE FOR PAYMENT OF COMMISSION TO M/S. EASTERN MICRO ELECTRONICS (P) LI MITED AND MURARKAS, IS REPRODUCED HEREUNDER:- (A) DISALLOWED OF COMMISSION OF RS.2,51,286/- PAID TO M/S. EASTERN MICRO ELECTRONICS (P) LIMITED: THE A/R CONTENDED THAT THE DISALLOWANCE WAS BASED ON THE DEPOSITION GIVEN BY THE PART-TIME ACCOUNTANT, ON BE HALF OF THE DIRECTORS OF THE COMPANY, WHO APPEARED IN RESPONSE OF SUMMONS U/S 131 ISSUED BY THE AO IN COURSE OF THE A SSESSMENT PROCEEDINGS. BUT ACCORDING TO THE A/R, THIS ADDITIO N WAS HIGHLY IRREGULAR IN THE ABSENCE OF THE DIRECTOR, TH E WORDS OF THE ACCOUNTANT CANNOT BE TAKEN AS GOSPEL TRUTH. HE WAS NOT SUPPOSED TO KNOW THE INS AND OUTS OF ALL THE BUSINE SS TRANSACTIONS ENTERED INTO BY THE COMPANY. INADEQUAT E INFORMATION FROM THE IMPROPERLY INFORMED PART TIME ACCOUNTANT CANNOT FORM THE BASIS OF DISALLOWANCE OF COMMISSION ACTUALLY PAID AND RECEIVED. ON THE OTHER HAND, THE DOCUMENTARY EVIDENCES OF SALES OF COPPER WIRE THROU GH THE PAYEE COMPANY AS REFLECTED IN THE BOOKS, BANK RECOR DS AND I.T.A. NO. 2181/KOL./2010 ASSESSMENT YEAR: 2006-2007 PAGE 4 OF 6 I.T. RECORDS REPRESENT GENUINENESS OF THE TRANSACTI ONS. IN SUPPORT OF HIS CONTENTIONS, THE A/R PRODUCED THE DOCUMENTS FOR INSPECTION, WHICH APPEAR, PRIMA FACIE IN ORDER. BUT IT WAS ALSO MADE CLEAR TO THE A/R THAT THE OPPORTUNITY TO CROSS EXAMINE THE DIRECTORS OF THE C OMPANY, CANNOT BE PROVIDED BY THE AO. IT MAY BE CONCLUDED HERE THAT NO MATERIAL EVIDENCE WAS BROUGHT ON RECORD BY THE A O MAKING THE ASSESSMENT ORDER TO PROVE CONTRARY TO TH E CLAIM OF THE ASSESSEE HUF. (B) DISALLOWANCE OF COMMISSION PAID TO MURARKAS OF RS.3,,24,853/-: IN THE ASSESSMENT ORDER, THE AO HAD STATED, THE AS SESSEE CLAIMED THAT THE TOTAL AMOUNT OF RS.3,24,853/- WERE PAID TO THE DIFFERENT MEMBERS OF THE SAME MURARKA FAMILY. A LL OF THEM WERE SUMMONED AND DEPOSITIONS WERE TAKEN. SINGLE OF THEM COULD NOT SPECIFY WHAT KINDS OF WIRE WERE SOLD TO T HE CUSTOMERS ON BEHALF OF THE ASSESSEE. NONE OF THEM H AVE TECHNICAL KNOWLEDGE ABOUT GAUGE OF THE WIRE THAT WA S CLAIMED TO SELL ON BEHALF OF THE ASSESSEE. THIS LED TO THE CONCLUSION THAT THEY DID NOT WORK AS COMMISSION AGENT AT ALL A ND COMMISSION CLAIMED TO HAVE BEEN PAID TO THEM WAS DI SALLOWED. THE A/R CONTENDED THAT WHEN EACH OF THE MURARKAS FU RNISHED AND PROVIDED THE RELEVANT PARTICULARS OF TRANSACTIO NS ON WHICH COMMISSION WAS EARNED, THEIR RELEVANT P&L ACCOUNT, BALANCE- SHEET AND I.T. RECORDS THUS DULY ACCOUNTING FOR THE IR RELEVANT COMMISSION INCOME, THERE REMAINED NO SCOPE FOR THE AO TO DOUBT THE GENUINITY OF THE TRANSACTION. MOREOVER, A LL THE PAYMENTS WERE ROUTED THROUGH BANK. IGNORANCE REGARD ING THE EXACT SPECIFICATIONS OF THE PRODUCTS INVOLVE IN THE TRANSACTIONS, CANNOT RENDER THE PROCEEDINGS FALSE. IT APPEARS THAT THERE IS SUBSTANCE IN THE ARGUMENTS OF THE A/R. IT IS TRUE T HAT THE PERSON OR PERSONS ARRANGING SALES OF COMMODITIES IN ORDER TO EARN COMMISSIONS, MAY NOT BE COMPLETELY AWARE OF THE EXACT SPECIFICATIONS OF THOSE COMMODITIES. IT IS THEIR DUTY TO CONTACT THE WILLING BUYERS TO THE SELLERS, WHEREAS THE TERMS, CONDITIONS AND THE TECHNICAL SPECIFICATION WOULD BE DECIDED BY THE PARTIES IN QUESTION. THE DOCUMENTS ASSOCIATED WITH THE TRANSACTIONS WERE ALSO FOUND TO BE IN ORDER. NOW, THE QUESTION OF ALLOWABILITY OF THE PAYMENT OF COMMISSI ONS IN (A) & (B) ABOVE, RESTS WITH THE DISCRETION OF THE LD. C IT(A). (EMPHASIS SUPPLIED) I.T.A. NO. 2181/KOL./2010 ASSESSMENT YEAR: 2006-2007 PAGE 5 OF 6 5. A PERUSAL OF THE RELEVANT PORTION OF THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER TO THE LD. CIT(APPEALS), AS R EPRODUCED ABOVE, CLEARLY SHOWS THAT THE DETAILS AND DOCUMENTS FURNISHED BY T HE ASSESSEE WERE FOUND TO BE SUFFICIENT BY THE ASSESSING OFFICER TO SUPPORT AND SUBSTANTIATE ITS CLAIM FOR COMMISSION PAID TO M/S. EASTERN MICRO ELECTRONICS (P) LIMITED AND MURARKAS. AS A MATTER OF FACT, THE CLAIM OF THE ASSESSEE FOR SUCH COMMISSION WAS FOUND TO BE PRIMA FACIE IN ORDER BY THE ASSESSING OFFICER AND IT WAS ADMITTED BY HIM TH AT THERE WAS NO MATERIAL AVAILABLE ON RECORD TO PROVE CONTRARY TO T HE CLAIM OF THE ASSESSEE. THIS POSITION CLEARLY EVIDENT FROM THE RE LEVANT PORTION OF THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER (AS HIGHLIGHTED) IS NOT DISPUTED EVEN BY THE LD. D.R. KEEPING IN VIEW THESE CATEGORICAL FINDINGS RECORDED BY THE ASSESSING OFFICER IN THE REMAND REP ORT SUBMITTED TO THE LD. CIT(APPEALS), WE ARE OF THE VIEW THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE LD. CIT(APPEALS) TO CONFIRM THE DISALLO WANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISSION PAID TO M/S. EASTERN MICRO ELECTRONICS (P) LIMITED AND MURARKAS AND DELETING THE SAME, WE ALLOW GROUND NO. 1 OF THE ASSESSEES APPEAL. 6. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 2 RE LATING TO THE ADDITION OF RS.40,000/- MADE BY THE ASSESSING OFFIC ER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF ADVANCE RECEIVED FROM ONE CUSTOMER M/S. DEEPSUN INDUSTRIAL CORPORATION, IT IS OBSERVED THAT THE SAID ADVANCE RECEIVED BY THE ASSESSEE WAS TREATED BY THE ASSESSI NG OFFICER AS SALE MADE BY THE ASSESSEE TO THE CONCERNED PARTY AS IT W AS FOUND BY HIM ON VERIFICATION THAT THERE WAS NO SUCH ADVANCE DUE BY THE ASSESSEE TO M/S. DEEPSUN INDUSTRIAL CORPORATION. AT THE TIME OF HEAR ING BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE W AS NO SUCH SALE MADE BY THE ASSESSEE AND, IN FACT, THE ADVANCE OF RS.40, 000/- RECEIVED FROM M/S. DEEPSUN INDUSTRIAL CORPORATION WAS RETURNED BA CK TO THE SAID PARTY BY THE ASSESSEE DURING THE SUBSEQUENT PERIOD. HE HA S CONTENDED THAT THE ASSESSEE IS IN A POSITION TO ESTABLISH ON EVIDENCE THIS REPAYMENT BEFORE THE ASSESSING OFFICER IF AN OPPORTUNITY IS CLAIMED TO DO SO. ACCORDINGLY, I.T.A. NO. 2181/KOL./2010 ASSESSMENT YEAR: 2006-2007 PAGE 6 OF 6 THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER GIVING THE ASSESSEE AN OPPORTUNIT Y TO ESTABLISH THAT THERE WAS NO SALE OF RS.40,000/- MADE TO M/S. DEEPS UN INDUSTRIAL CORPORATION AND THE AMOUNT OF ADVANCE OF RS.40,000/ WAS ACTUALLY REPAID TO THE SAID PARTY DURING THE SUBSEQUENT PERIOD. GRO UND NO. 2 IS, ACCORDINGLY, TREATED AS ALLOWED FOR STATISTICAL PUR POSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 4 TH , 2015. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 4 TH DAY OF NOVEMBER, 2015 COPIES TO : (1) B.D. KHAITAN & SONS (HUF), P-38, INDIA EXCHANGE PLACE, KOLKATA-700 001 (2) INCOME TAX OFFICER, WARD-34(1), KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 (3) COMMISSIONER OF INCOME-TAX (APPEALS)- XX, KOL KATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.