DCIT Circle-I, V. R.A. Castings (P) Ltd, Muzaffarnagar

ITA 2182/DEL/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9830 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-12-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 04-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTI
• Assessee Lawyers: V K TULSIAN
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI VIMAL GANDHI AND SHRI K.D.RANJAN ITA NO. 2182/DEL/2008 ASSESSMENT YEAR : 2001-02 DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, MUZAFFARNAGAR. VS. M/S R.A.CASTINGS (P) LTD. 7 TH K.M.STONE, MEERUT ROAD, MUZAFFARNAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. MONA MOHANTI, D.R. RESPONDENT BY : SHRI V.K.TULSIAN, A.R. ORDER PER RANJAN, AM: THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2001 -02 ARISES OUT OF ORDER OF LD.CIT(A), MUZAFFARNAGAR. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA DS AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOMETAX(APPEALS) HAS ERRED IN LAW & ON FACTS BY DELETING THE ADDITIONS OF RS.6 0,13,945/- SHOWN AS MISCELLANEOUS INCOME COMMISSION (NET) AND SHARE INCOME OF RS.99,124/- AS SHARE INCOME MADE BY ASSES SING OFFICER UNDER THE HEAD INCOME FROM OTHER SOURCES. SINCE THE COMPANY IS NOT IN THE BUSINESS OF PURCHASES AND SAL ES OF SHARES AND COMMISSION WORK WHICH HAD BEEN SHOWN AS BUSINES S INCOME TO BE SET OFF THE HUGE BROUGHT FORWARD LOSSE S. IN SIMILAR CASES OF M/S ASHIRWAD STEEL AND ALLOYS (P) LTD. FOR A.Y. 2000- 01. THE LD.CIT(APPALS), MUZAFFARNAGAR HELD THAT ASS ESSING OFFICER IS JUSTIFIED IN TREATING THE INCOME AS INCO ME FROM OTHER SOURCES. 2 2. THAT ORDER OF THE LD.CIT(APPEALS) BE SET ASIDE A ND THAT OF THE A.O. BE RESTORED. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO TREA TING THE COMMISSION INCOME OF R.60,13,945/- UNDER THE HEAD OTHER SOURC ES AS AGAINST SHOWN BY THE ASSESSEE AS PROFITS OF BUSINESS. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE RECEIVED COMMISSION OF RS.60 ,13,945/- FROM M/S KUNDAN RICE MILLS LTD.. THE ASSESSING OFFICER IN OR DER TO EXAMINE THE NATURE OF COMMISSION RECEIVED SUMMONED THE THEN DIR ECTOR OF THE COMPANY SHRI HAJI MOHAMMAD SULTAN. HE ALSO WROTE LETTER TO M/S KUNDAN RICE MILLS LTD.. IN REPLY M/S KUNDAN RICE MILLS LTD. NEITHER F ILED ANY COPY OF CORRESPONDENCE BETWEEN ASSESSEE AND M/S KUNDAN RICE MILLS LTD. NOR WERE THE DETAILS OF SHIPMENT, NAME OF CARGO CARRIER WITH ADDRESS OF COMPANY PROVIDING SHIPMENTS, RATE OF SHIPMENT, NAME OF JETT Y FURNISHED. NO DETAILS ABOUT THE SERVICES RENDERED IN PURSUANCE TO THE AGR EEMENT WAS FURNISHED. IN THE ABSENCE OF SUCH DETAILS, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT ASSESSEE HAD FAILED TO ESTABLISH NEXUS BETWEEN SERVICES RENDERED AND COMMISSION RECEIVED AND AS SUCH, THE AMOUNT OF RS.6 0,13,945/- WAS NOT FROM REGULAR BUSINESS ACTIVITIES. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE AMOUNT OF RS.60,13,945/- AS INCOME FROM OTHER S OURCES. 4. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD DIRECTLY VERIFIED THE INCOME EARNED BY WAY OF COMMI SSION FROM M/S KUNDAN RICE MILLS LTD.. THE ASSESSEE HAD FILED DOCUMENTARY EVIDENCES REGARDING THE INCOME EARNED BEFORE THE ASSESSING OFFICER. IT WAS ALSO SUBMITTED THAT SIMILAR TYPE OF INCOME HAD BEEN ASSESSED AS BUSINES S INCOME IN EARLIER YEARS AS WELL AS IN SUBSEQUENT YEARS. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF M/S DOABA ROLLING MILLS PVT. LTD. WHEREIN T HE LD. COMMISSIONER OF 3 INCOME-TAX AS WELL AS THE INCOME-TAX APPELLATE TRIB UNAL FOR THE ASSESSMENT YEARS 1995-96 AND 2000-01 HAVE HELD THAT INCOME FRO M COMMISSION WAS ASSESSABLE UNDER THE HEAD BUSINESS. THE ASSESSEE ALSO RELIED ON THE DECISION OF LD. CIT(A) FOR ASSESSMENT YEAR 2004-05 IN WHICH SIMILAR INCOME WAS HELD TO BE IN THE NATURE OF BUSINESS BY THE LD. CIT(A). THE LD. CIT(A) AFTER CONSIDERING THE REASONING GIVEN BY HIS PREDECESSOR AND THE I.T.A.T. IN THE CASE OF DOABA ROLLING MILLS PVT. LT D. AND HIS REASONING IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 HEL D THAT THE COMMISSION INCOME OF RS.60,13,945/- WAS TO BE ASSESSED AS BUSI NESS INCOME. 5. BEFORE US, LD. SR. D.R. SUBMITTED THAT THE ASSES SEE HAD NOT GIVEN ANY DETAILS ABOUT THE SERVICES RENDERED BY THE ASSESSEE TO M/S KUNDAN RICE MILLS. THEREFORE, NO NEXUS BETWEEN THE COMMISSION R ECEIVED AND SERVICES RENDERED HAD BEEN ESTABLISHED. HENCE, ACTIVITY OF T HE ASSESSEE COULD NOT BE TREATED AS BUSINESS INCOME. ACCORDINGLY, THE ASSESS ING OFFICER HAS RIGHTLY ASSESSED THE INCOME FROM COMMISSION UNDER THE HEAD OTHER SOURCES. ON THE OTHER HAND, LD. A.R. OF THE ASSESSEE PLACING RE LIANCE ON THE DECISION OF I.T.A.T. DELHI BENCH D IN ITA NO.2101/DEL/2000 FO R ASSESSMENT YEAR 1995-96 IN THE CASE OF M/S DOABA ROLLING MILLS PVT. LTD. SUBMITTED THAT COMMISSION INCOME IS TO BE ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION. HE FURTHER SUBMITTED THAT IN SIMILAR CASES OF THE GROUP, THE COMMISSION INCOME HAS BEEN ASSESSED UNDE R THE HEAD BUSINESS. THEREFORE, LD. CIT(A) IS JUSTIFIED IN ASSESSING THE COMMISSION INCOME AS BUSINESS INCOME. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD PLACED RELIAN CE ON THE DECISION OF I.T.A.T. IN THE CASE OF M/S DOABA MILLS PVT. LTD.. THE OBJECTS OF THIS 4 ASSESSEE INCLUDED CARRYING ON OF BUSINESS ON COMMIS SION BASIS AND, THEREFORE, IT WAS HELD THAT COMMISSION RECEIVED WAS IN LINE WITH THE OBJECTS BY THE ASSESSEE COMPANY AND HAD TO BE ASSESSED AS BUSINESS INCOME. IN THE CASE BEFORE US, THE ASSESSEE HAD NOT FILED COPY OF MEMORANDUM OF ASSOCIATION TO JUSTIFY THAT COMMISSION IS TO BE ASS ESSED AS BUSINESS INCOME. FURTHER, LD. CIT(A) HAS NOT DISCUSSED ANYTHING AS T O WHY THE COMMISSION INCOME SHOULD BE ASSESSED AS BUSINESS INCOME. FOR A SSESSMENT YEAR 2004- 05 IN THE CASE OF ASSESSEE, NOTHING HAS BEEN DISCUS SED ABOUT THE OBJECTS OF THE COMPANY. HE HAS SIMPLY PLACED RELIANCE ON THE D ECISION OF M/S DOABA ROLLING MILLS PVT. LTD. THE ASSESSEE HAD NOT PROVID ED COPY OF MEMORANDUM OF ASSOCIATION SO AS TO VERIFY WHETHER THE INCOME EARNED BY WAY OF COMMISSION WAS TO BE ASSESSED UNDER THE HEAD BUSIN ESS. IN THE ABSENCE OF ANY SUCH FINDING RECORDED BY THE LD. CIT(A), IN OUR CONSIDERED OPINION, THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF LD. C IT(A) WITH THE DIRECTION TO EXAMINE THE OBJECTS CLAUSE OF THE ASSESSEE AND DECI DE WHETHER THE COMMISSION INCOME WAS EARNED DURING THE COURSE OF REGULAR BUSINESS ACTIVITIES OR IT WAS AN ISOLATED TRANSACTION. THE L D. CIT(A) WILL ALSO EXAMINED THE SERVICES RENDERED BY THE ASSESSEE IN T HE LIGHT OF AGREEMENT ENTERED INTO BETWEEN M/S KUNDAN RICE MILLS AND THE ASSESSEE. THE LD. CIT(A) WILL PROVIDE OPPORTUNITY OF BEING HEARD TO ASSESSING OFFICER AS WELL AS THE LD. CIT(A) BEFORE DECIDING THE NATURE AND CH ARACTER OF THE COMMISSION INCOME IN THE LIGHT OF THE OBJECTS CLAUSE OF THE AS SESSEE. WE ORDER ACCORDINGLY. 5 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 8-01-2010 . SD/- SD/- (VIMAL GANDHI) (K.D.RANJAN) PRESIDENT ACCOUNTANT MEMBER DATED : 8-1-2010 PSP COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR