Alpha Packaging Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 2184/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94582 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 01-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER ALPHA PACKAGING PVT. LTD , 1, JASH MARKET, RING ROAD, SURAT, PAN:AACCA0053A (APPELLANT) VS DCIT, CIRLCE - 1, SURAT (RESPONDENT) REVENUE BY : S H RI G.C. DAXINI , SR. D . R. ASSESSEE B Y: S H RI TUSHAR HEMANI , A.R. DATE OF HEARING : 30 - 09 - 2 015 DATE OF PRONOUNCEMENT : 21 - 10 - 2 015 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2005 - 06 , AR ISES FROM ORDER OF THE CIT(A) - I, SURAT DATED 09 - 06 - 2011 IN APPEAL NO. CAS - I/70/10 - 11 , IN I T A NO . 2184 / A HD/20 11 A SSESSMENT YEAR 200 5 - 06 I.T.A NO. 2184/AHD/2011 A.Y. 2005 - 06 PAGE NO ALPHA PACKAG ING PVT. LTD VS. DCIT 2 PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2 . THE ASSESSEE S SOLE SUBSTANTIVE GROUND CHALLENGES ACTION O F THE CIT(A) IN CONFIRMING SECTION 271(1)(C) PENALTY OF RS. 12,89,870/ - IMPOSED BY THE ASSESSING OFFICER IN PENALTY ORDER DATED 24 - 03 - 2010. THIS PENALTY AROSE FROM A COMMISSION DISALLOWANCE CLAIMED AS EXPENDITURE AMOUNTING TO RS. 30,02,525/ - . TH E ASSESSE E - COMPANY MANUFACTURES LIQUOR BOTTLES IN CONTAINER DIVISION AND CARRIES AGENCY BUSINESS IN THE OTHER ONE UNDER THE NAME AND STYLE OF M/S. ALPHA POLYPROPYLENE. IT FILED ITS RETURN ON 30 - 07 - 2005 SHOWING INCOME OF RS. 1,07,45,210/ - . THE ASSESSING OFFICER TO OK UP SECURITY. HE INTER ALIA NOTICED ASSESSEE S COMMISSION PAYMENT MADE TO ITS SISTER CONCERNS M/S. ALPHA PLASTOMASTER PVT. LTD AND M/S. ALPHA POLYMERS AMOUNTING TO RS. 18,41,925/ - AND RS. 11,60,000/ - ; RESPECTIVELY TOTALING TO RS. 30,02,525/ - . HE WOULD SEEK PROOF OF THE SERVICES RENDERED. THE ASSESSEE PLEADED THAT ITS COMMISSION DIVISION IS A DEL CREDRE AGENT OF M/S. RELIANCE INDUSTRIES AND IPCL. AND RECEIVED COMMISSION ON ORDERS BOOKED ON BEHALF OF ITS CUSTOMERS DURING THE RELEVANT PREVIOUS YEAR RESUL TING IN COMMISSION INCOME OF RS. 86,48,587/ - @ RS. 275 PER METRIC TONE OF THE QUANTITY BOOKED. THE ASSESSEE STATED TO HAVE P LACED BULK ORDERS ON BEHAL F OF ITS ABOVE STATED SISTER CONCERN AND THE ABOVE STATED COMMISSION WAS PASSED ON TO THEM @ RS. 200 PER METRIC TONE BY FOLLOWING MUTUAL AGREEMENT. THE ASSESSING OFFICER WAS NOT IMPRESSED. HE INVOKED DISALLOWANCE OF THE IMPUGNED COMMISSION EXPENDITURE IN ASSESSMENT ORDER DATED I.T.A NO. 2184/AHD/2011 A.Y. 2005 - 06 PAGE NO ALPHA PACKAG ING PVT. LTD VS. DCIT 3 24 - 12 - 2007 BY INTER ALIA QUOTING ASSESSEE S FAILURE PROVING ANY SERVICES ACTUALLY RENDERED BY THE ABOVE STATED PAYEES AND ALSO OBSERVED THAT THE EXPENDITURE IN QUESTION WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSING AUTH O RITY'S FINDINGS FURTHER READ THAT THE WHOLE RISK FOR THE PAYMENT AND SERVICES I S TAKEN BY ITS AGENCY DIVISI ON AND THE SAME IS ALREADY ENTITLED FOR RECEI VING PAYMENT FROM M/S RIL AND IPCL . THE ASSESSING OFFICER DOUBTED THE GENUINENESS OF THE TRANSACTION BETWEEN ASSESSEE AND ITS SISTER CONCERN S . HE FURTHER REMARKED THAT THIS EXPENDIT URE DEMONSTRATING CONNIVANCE BETWEEN ASSESSEE AND ITS GROUP CONCERNS. THE ASSESSING OFFICER ACCORDINGLY INVOLVED THE IMPUGNED DISALLOWANCE. HE ALSO INITIATED SECTION 271(1)(C) PENALTY ALLEGING CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS OF INCOM E AT ASSESSEE S BEHEST IN CLAIMING THE ABOVE STATED COMMISSION OUTGO. THE CIT(A) UPHELD A SSESSING OFFICER S FINDINGS IN ORDER DATED 17 - 10 - 2008. THE ASSESS EE FILED ITA 4169/AHD/2008 BEFORE THE TRIBUNAL. IT STOOD DISMISSED ON 23 - 03 - 2012. QUANTUM PROCEEDI NG ACCORDINGLY ATTAINED FINALITY. 3 . NOW, WE COME TO PENALTY PROCEEDINGS. THE ASSESSING OFFICER HEAVILY RELIED UPON SCRUTINY DEVELOPMENTS AND OBSERVED IN THE PENALTY ORDER THAT ASSESSEE S FAILURE IN EXPLAINING ANY JUSTIFICATION OF THE EXCLUSIVE BUSINE SS USE OF THE COMMISSION EXPENDITURE IN QUESTION ESTABLISHED BEYOND DOUBT THAT IT HAD FURNISHED INACCURATE PARTICULARS THEREBY CONCEALING INCOME TO THE TUNE OF 30,02,525/ - . HE ACCORDINGL Y IMPOSED THE IMPUGNED PENALTY. IT APPEARS THAT THIS PENALTY SUM I.T.A NO. 2184/AHD/2011 A.Y. 2005 - 06 PAGE NO ALPHA PACKAG ING PVT. LTD VS. DCIT 4 INC LUDED PENAL SUMS RELATING TO OTHER DISALLOWANCES/ADDITIONS AS WELL. THE CIT(A) PARTLY ACCEPTED ASSESSEE S APPEAL QUA THE SAID OTHER DISALLOWANCES/ADDITIONS AND CONFIRMS ASSESSING OFFICER S ACTION RELATING TO THE ABOVE STATED COMMISSION EXPENDITURE DISALLO WANCE . 4 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE CAF FILE. THE ASSESSEE REFERS PAGE 37 OF THE PAPER BOOK DEMONSTRATING PARTICULARS OF PAY MENTS MADE TO SPECIFIED PERSONS TO PAGES COVERED U/S. 40A(2)(B) OF THE ACT. IT THEREAFTER TAKES US TO PAG E 55 DEMONSTRATING COMMISSION EXPENSES BEING PAID IN PRECEDING ASSESSMENT YEAR AS WELL. IT CONTENDS THAT THIS DISALLOWANCE OF COMMISSION EXPENDITURE DOES NOT INVOLVE ACTUAL COMMISSION PAYMENT BUT R EDUCTION IN RATES FROM RS. 275 PER METRIC TONE TO RS. 20 0 PER METRIC TONE. THE ASSESSEE SUBMITS THAT SUCH A REDUCTION IN SALE PRICE DOES NOT AMOUNT TO COMMISSION PAYMENT AS PER HON BLE JURISDICTIONAL HIGH COURT DECISION IN AHMEDABAD STAMP VENDORS ASSOCIATION VS. UNION OF IN IDA 257 ITR 202. ITS LAST ARGUMENT I S THAT ALL THE RELEVANT DETAILS STOOD DULY DISCLOSED BEFORE THE ASSESSING OFFICER. AND IT HAD MERELY FOLLOWED PAST PRACTICE IN RECOGNIZING SUCH REDUCTIONS IN SALE PRICE AS COMMISSION EXPENDITURE. 5 . THE REVENUE STRONGLY SUPPORTS LOWER AUTHORITIES ACT ION IN IMPOSING THE IMPUGNED PENALTY. IT PRAYS FOR REJECTION OF THE ASSESSEE S APPEAL. I.T.A NO. 2184/AHD/2011 A.Y. 2005 - 06 PAGE NO ALPHA PACKAG ING PVT. LTD VS. DCIT 5 6. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS . RELEVANT FACT NARRATED IN THE PRECEDING PARAGRAPHS DOES NOT REQUIRE REPETITION FOR THE SAKE OF BRE VITY. THERE IS NO DISPUTE THAT THE ASSESSEE HAS COLLECTED BULK ORDERS ON BEHALF OF ITS SISTER CONCERNS/COMMISSION PAYEES AND OTHER CUSTOMERS IN LIEU OF CHARGING COMMISSION @ RS. 270 TO 275 PER METRIC TONE. IT THEREAFTER RED UCED THIS RATE TO RS. 200 PER MT ONLY IN CASE OF THE ABOVE STATED TWO SISTER CONCERNS. AND RECOGNIZED THE SAME AS COMMISSION. MEANING THEREBY THAT THERE IS NO ACTUAL COMMISSION PAYMENT BUT MERE REDUCTION OF SALE PRICE. THE ASSESSING OFFICER, CIT(A) AND THE TRIBUNAL HAVE DISALLOWED THE SAME (SUPRA) ON THE GROUND OF NO EVIDENCE IN PROVING ACTUAL SERVICE RENDERED. WE ARE OF THE VIEW IN THESE FACTS THAT THIS IS A CASE OF ACCOUNTING TREATMENT OF RECORDING REDUCTION IN SALE PRICE AS COMMISSION ONLY AND NOT THAT OF AN INSTANCE INVOLVING ANY FALSE OR BOGUS CLAIM OF EXPENDITURE BEING RAISED. THE REVENUE FAILS TO REBUT THE ASSESSEE S PLEA OF FOLLOWING PAST PRACTICE AS WELL. WE FIND THAT A CO - ORDINATE BENCH ITA 1801 & 1802/AHD/2001 ACIT VS. GUJCHEM DISTILLERS INDIA LTD DECIDED ON 05 - 06 - 2015 HOL DING THAT MERE DISALLOWANCE OF COMMISSION EXPENDITURE BEING MADE WITHOUT FINDING OF INCORRECT RETURN OF INCOME OR ERRONEOUS OR FALSE CLAIM BEING RAISED DOES NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTI CULARS THEREOF AS HELD BY HON B L E APEX COURT IN CIT VS. RELIANCE PETRO - PRODUCTS PVT. LTD (2010) 322 ITR 158 (SC). WE DRAW SUPPORT FROM THE SAME AND ACCEPT ASSESSEE S ARGUMENTS RAISED HEREINABOVE. THE IMPUGNED PENALTY IS ACCORDINGLY DELETED. I.T.A NO. 2184/AHD/2011 A.Y. 2005 - 06 PAGE NO ALPHA PACKAG ING PVT. LTD VS. DCIT 6 7. THIS ASSESSEE S APPEAL IS ALLOWED ORDER PR ONOUNCED IN THE OPEN C OURT ON 21 - 10 - 2015 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 21 /10 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,