Shiv Ratan Mundra, Cuttack V. ITO, Cuttack

ITA 224/CTK/2014

• Counselvise Citation: 22422114 RSA 2014
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 02-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RABIN CHOUDHURI
• Assessee Lawyers: P K MISHRA
• Keywords: Opportunity of being heard; Commercial expediency

Judgement Text

1 I.T.A. NO. 224/CTK/2014 ASSESSMENT YEAR: 2009-2010 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE S/SHRI P.K.BANSAL (AM) AND D.T.GARASIA (JM) I.T.A. NO. 224/CTK/2014 ASSESSMENT YEAR: 2009-2010 SHIV RATAN MUNDRA, AT: NANDI SAHI, CHOUDHURY BAZAR, CUTTACK PA NO.ACXPM 8816 B VS ITO, WARD - 2(3) CUTTACK APPELLANT RESPONDENT FOR THE APPELLANT: SHRI P.K.MISHRA FOR THE RESPONDENT: RABIN CHOUDHURI DATE OF HEARING: 05/02/2015 DATE OF PRONOUNCEMENT: 3 / 3/2015 ORDER PER P.K.BANSAL, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER DATED 4.3.2014 OF LD CIT(A) CUTTACK FOR THE ASSESSMENT YEAR 2009-2010. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS RELATI NG TO THE DISALLOWANCE OF COMMISSION PAID AMOUNTING TO RS.9,84,894/-. 3. THE ASSESSING OFFICER NOTED THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE IS A MANUFACTURER AND WHOLESALER OF A PART ICULAR BRAND OF CLOTHES NAMELY, MONUTEX. DURING THE YEAR, THE ASSESSEE HAS SHOWN A GROSS TUR NOVER OF RS.9,73,60,950/-. THE ASSESSEE HAS CLAIMED COMMISSION FOR EFFECTING SALES AMOUNTIN G TO RS.9,84,894/- AND FOR EFFECTING PURCHASE AMOUNTING TO RS.5,26,356/-. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS EFFECTED SALES OF RS.6,50,37,180/- TO M/S. M.K.MAHE SWARI AND SALES OF RS.3,76,97,818/- TO M/S. PAYAL TRADING CUTTACK AND ALMOST ENTIRE STOCK OF TH E ASSESSEE HAVE BEEN SOLD TO THESE TWO 2 I.T.A. NO. 224/CTK/2014 ASSESSMENT YEAR: 2009-2010 PARTIES. IT WAS ALSO NOTED BY THE AO THAT M/S. M. K.MAHESWARI IS A PARTNERSHIP FIRM CONSISTING OF THREE SONS OF THE ASSESSEE VIZ; PAWAN KUMAR MUND RA, SANTOSH KUMAR MUNDRA AND MANOJ KUMAR MUNDRA. M/S. PAYAL TRADING CO. WAS A PROPRIE TORSHIP CONCERN OF BIJAYALAXMI MUNDRA, W/O MANOJ KUMAR MUNDRA, WHO WAS ONE OF THE DAUGHTER S-IN-LAW OF THE ASSESSEE. IT WAS ALSO NOTED BY THE AO THAT SHRI PAWAN KUMAR MUNDRA AND SA NTOSH KUMAR MUNDRA, TWO SONS OF THE ASSESSEE, WHO WERE ALSO PARTNERS IN M/S. M.K.MAHESW ARI WERE PAID REMUNERATION @ RS.6,000/- PER MONTH AS EMPLOYEES OF THE ASSESSEE. IT WAS ALS O ASCERTAINED THAT BOTH THE BUSINESS PREMISES OF M/S. M.K.MAHESWARI AND PAYAL TRADING CO ., WERE SITUATED IN THE SAME BUILDING. THE COMMISSION HAS BEEN PAID BY THE ASSESSEE FOR MA KING THE SALES TO THESE PARTIES BUT IN THE OPINION OF THE AO, THE PAYMENT OF COMMISSION CANNO T BE REGARDED TO HAVE BEEN INCURRED FOR COMMERCIAL EXPEDIENCY. THE AO THEREFORE, AFTER GIVI NG AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, DISALLOWED COMMISSION OF RS.9,84,894/-. WHEN THE MATTER WENT IN APPEAL BEFORE LD CIT(A), THE ASSESSEE CONTENDED THAT THE ASSESSEE HA S INCREASED ITS TURNOVER TREMENDOUSLY FOR THE LAST THREE YEARS BUT DENIED THE FACT THAT THE SALES WERE MADE TO THESE TWO PARTIES, WHICH WERE RUN BY SONS AND DAUGHTER-IN-LAW OF THE ASSESSE E. HOWEVER, LD CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y GONE THROUGH THE ORDERS OF TAX AUTHORITIES. IN OUR OPINION, WHEN THE ASSESSEE HAS CLAIMED DEDUCTION U/S.37 OF THE ACT, IT IS NECESSARY FOR THE ASSESSEE TO PROVE THAT THE EXPEND ITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS, COMMERCIAL EXPEDIENCY CAN BE REGARDED THA T THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS. NO DOUBT, IN THIS CASE, C OMMISSION HAS BEEN PAID TO THE OUTSIDERS AND THE ASSESSEE HAS DEDUCTED TDS BUT IT CANNOT BE SAID THAT THE EXPENDITURE HAS BEEN INCURRED FOR BUSINESS EXPEDIENCY. IT IS DENIED BY LD A.R. THA T THE SALES ARE EFFECTED ONLY TO CONCERNS IN WHICH SONS AND DAUGHTER-IN-LAW OF THE ASSESSEE ARE PARTNERS OR PROPRIETORS. THE LD A.R. SINCE VEHEMENTLY SUBMITTED THAT HE HAS TO FILE FRESH EVID ENCE TO PROVE THE GENUINENITY OF THE COMMISSION. WE, THEREFORE, IN THE INTEREST OF JUST ICE AND FAIR PLAY TO BOTH THE PARTIES SET ASIDE THE IMPUGNED ORDER AND RESTORE THIS ISSUE TO THE FI LE OF THE ASSESSING OFFICER TO REDECIDE THIS ISSUE AFRESH AFTER GIVING THE OPPORTUNITY TO THE AS SESSEE, IN ACCORDANCE WITH LAW. 4. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED STATISTICALLY. 3 I.T.A. NO. 224/CTK/2014 ASSESSMENT YEAR: 2009-2010 ORDER PRONOUNCED IN PURSUANCE WITH RULE 34(4) BY P UTTING THE COPY OF THE SAME ON NOTICE B OARD ON 3/3/2015. SD/- SD/- (D.T.GARASIA) (P.K.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, PANAJI 3 / 3 /2015 B.K.PARIDA, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: SHIV RATAN MUNDRA, AT: NANDI SAHI, CHOUDHURY BAZAR, CUTTACK 2. THE RESPONDENT: ITO, WARD-2(4), CUTTACK 3. THE CIT, CUTTACK 4. THE CIT(A), CUTTACK 5. DR, CUTTACK BENCH 6. GUARD FILE. TRUE COPY// BY ORDER ASST. REGISTRAR, ITAT, CUTTACK