The DCIT, Circle-2, Surat V. Shri Ramesh Chhotalal Zaveri, Surat

ITA 2245/AHD/2011

• Counselvise Citation: 224520514 RSA 2011
• Duration Of Justice: 4 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILIP KUMAR
• Assessee Lawyers: MANISH J SHAH
• Section: 143(3)

Judgement Text

I.T.A. NO.: 2245/AHD /2011 ASSESSMENT YEAR: 2008 - 09 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO. : 2245/ AHD/201 1 ASSESSMENT YEAR: 2008 - 09 DY COMMISSIONER OF INCOME TAX CIRCLE 2 , SURAT .APPELLANT VS. RAMESH CHOTTALA ZAVERI . RESPONDENT 222 BHAVANI CHAMBERS NANI BEGUMWADI, SALBATPURA, SURAT [PAN: AA APZ3393B ] APPEARANCES BY: DILIP KUMAR FOR THE REVENUE MANISH J SHAH FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : SEPTEMBER 10 , 201 5 DATE OF PRONOUNCING THE ORDER : DECEMBER 9 TH , 201 5 O R D E R PER PRAMOD KUMAR AM : 1 . BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 24 TH JUNE 2011 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2008 - 09. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSING OFFICER HAS RAISED A GRIEVANCE AGAI NST THE CIT(A) DELETING THE ADDITION OF RS 3,34,272 OF INTEREST EXPENSES. 3. SO FAR AS THIS GRIEVANCE IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF THE SCRU TINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT WHI LE THE ASSESSEE IS STATED TO HAVE FOLLOWED CASH SYSTEM OF ACCOUNTING I.T.A. NO.: 2245/AHD /2011 ASSESSMENT YEAR: 2008 - 09 PAGE 2 OF 5 IN RESPECT OF BROKERAGE DIVISION, HE HAS CLAIMED A DEDUCTION OF RS 3,34,272 IN RESPECT OF INTEREST WHICH WAS DEBITED BUT HAS NOT BEEN PAID. THE ASSESSEE DID POINT OUT THAT THE INTEREST W AS PAID BEFORE 31 ST MARCH 2008 BUT THE ASSESSING OFFICER NONETHELESS PROCEED TO MAKE THE DISALLOWANCE. IN APPEAL, LEARNED CIT(A) NOTED THAT THE AMOUNT HAS BEEN PAID WELL WITHIN THE FINANCIAL YEAR, AND DELETED THE DISALLOWANCE. THE ASSESSING OFFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE SEE NO REASONS TO INTERFERE IN THE MATTER. WE HAVE NOTED THAT THE ASSESSING OFFICER HAS NOTED ONLY ONE ENTRY, I.E INTEREST EXPENSES TO BE DEBIT OF UNSECURED LOANS, BUT HAS IGNORED ANOTHER CORRESPONDING ENTRY WHICH IS DEBITED T THE UNSECURED LOANS TO THE CREDIT OF BANK ACCOUNT. THE AMOUNT WAS THUS PAID BY THE ASSESSEE. LEARNED CIT(A) HAS GIVEN A CATEGORICAL FINDING ON THIS ASPECT WHILE DELETING THE DISALLOWANCE, BUT NO MATERIAL, TO CONTROVERT THIS FINDING, HAS BEEN BROUGHT ON RECORD. WE CONFIRM THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 5. GROUND NO. 1 IS THUS DISMISSED. 6. IN THE SECOND GROUND OF APPEAL, THE ASSESSING OFFICER HAS RAISED A GRIEVANCE AGAINST LEARNED CIT(A) S DELETING THE ADDITION OF RS 1,93,000 IN RESPECT OF INTEREST RECEIVED FROM THE SISTER CONCERN. 7. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS GIVEN, TO ITS SISTER CONCERN, ITS FACTORY BUILDING AND MACHINERY FOR A RENT OF RS 60,000 P.A. AND RS 48,000 P.A. RESPECTIVELY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE RENT SO CHARGED FROM THE SISTER CONCERN IS MUCH BELOW THE MARKET RATE AND, THEREFORE, HE REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE FAIR RENT OF RS 25,000 PER MONTH NOT BE ADOPTED FOR THE SAME. IT WAS EXPLAINED BY THE ASSESSEE THAT THIS RENT WAS FIXED IN AN EARLIER YEAR AND WAS QUITE REASONABLE HAVING REGARD TO THE THEN PREVAILING MARKET RENT. A COPY OF THE MUNICIPAL VALUATION WAS ALSO GIVEN. HOWEVER, THE I.T.A. NO.: 2245/AHD /2011 ASSESSMENT YEAR: 2008 - 09 PAGE 3 OF 5 ASSESSING OFFICER PROCEEDED TO DISREGARD THIS EXPLANATION BY OBSERVING THAT, RENT INCOME OF THE FACTORY CANNOT BE DECIDED ON THE BASIS OF MUNICIPAL VALUATION AND IS GOVERNED BY THE MARKET FACTORS . HE ADOPTED THE FACTORY BUILDING RENT OF RS 10,000, AS AGAINST RS 5,000 CHARGED BY THE ASSESSEE, AND MACHINERY RENT OF RS 15,000, AS AGAINST RS 4,000 CHARGED BY THE ASSE SSEE. AN ADDITION OF RS 1,92,000 WAS, ACCORDINGLY, MADE BY THE ASSESSING OFFICER. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DELETED THE ADDITION BY OBSERVING THAT IT WAS ALL ALONG AN ACCEPTED ARRANGEMENTS, RIGHT FROM THE ASSESS MENT YEAR 2001 - 02, AND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL WHATSOEVER TO SHOW AS TO HOW THE RENT SO CHARGED IS EXCESSIVE OR UNREASONABLE. 8. HAVING HEARD THE RIVAL CONTENTIONS, AND HAVING PERUSED THE MATERIAL ON RECORD, WE SE E NO REASONS TO INTERFERE IN THE CONCLUSIONS ARRIVED AT BY THE CIT(A). THERE WAS NO MATERIAL WHATSOEVER, BEFORE THE CIT(A) AS ALSO IS THE POSITION BEFORE US, TO DEMONSTRATE THAT THE RENT CHARGED BY THE ASSESSEE IS EXCESSIVE OR UNREASONABLE. THE VAGUE GENER ALITIES BY THE ASSESSING OFFICER CANNOT MEET ANY JUDICIAL APPROVAL. IN ANY EVENT, THE RENT WAS FIXED LONG AGO AND IT HAS BEEN ACCEPTED IN ALL THE PAST ASSESSMENTS. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE C ONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER ON THIS COUNT AS WELL. 9. GROUND NO. 2 IS ALSO DISMISSED. 10. IN GROUND NO. 3, THE ASSESSING OFFICER IS AGGRIEVED OF THE LEARNED CIT(A) S DELETING THE ADDITION OF RS 24,58,680 TOWARDS ESTIMATION OF COMMISSION INCOME ON SALES. 11. ON THIS ISSUE, RELEVANT MATER IAL FACTS ARE LIKE THIS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT OVER AND ABOVE THE YARN SOLD BY THE ASSESSEE, THE ASSESSEE IS S ELLING THE YARN TO THE CUSTOMER DIRECTLY FROM THE SUPPLIER. ON THIS BASIS, AND TAKING THE FIGURE OF SUCH DIRECT SALES AT RS 16,39,12,404, THE ASSESSING OFFICER ADOPTED 1.5% COMMISSION AS INCOME OF THE I.T.A. NO.: 2245/AHD /2011 ASSESSMENT YEAR: 2008 - 09 PAGE 4 OF 5 ASSESSEE. THE AMOUNT OF RS 24,58,686 AS THUS BROUGHT T O TAX ON AN ESTIMATE BASIS. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DELETED THE ADDITION BY OBSERVING THAT WHAT HAS BEEN TERMED AS DELAY PAYMENT CHARGES AND SHOWN AT RS 28,56,932 IN THE PROFIT AND LOSS ACCOUNT, IS NOTHING BU T CONSIDERATION FOR THE SERVICES RENDERED BY THE ASSESSEE IN THE SALES, AND, AS SUCH, ADDITION ON ACCOUNT OF COMMISSION INCOME IS NOT WARRANTED. THE ASSESSING OFFICER IS NOT SATISFIED AND IS IN APPEAL AGAINST THE RELIEF SO GIVEN BY THE CIT(A). 12. WE HAV E HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 13. WE HAVE NOTICED THAT THE ONLY BASIS OF IMPUGNED ADDITION WAS THE ASSESSING OFFICER S INFERENCE THAT THE ASSESSEE S SERVICES IN CONNECTION WITH THE DIRECT SALES HAVE NOT BEEN REMUNERATED FOR, WHICH IS CONTRARY TO THE REAL LIFE PROBABILITIES. THIS INFERENCE, AS EVIDENT FROM THE UNCONTROVERTED FINDINGS OF THE CIT(A), IS FACTUALLY INCORRECT. IT IS IMMATERIAL AS TO WHETHER THE ECONOMIC REWARD FOR THESE SERVICES IS REFLECTED IN THE PROFIT AND LOSS AS COMMISSION OR UNDER ANY OTHER HEAD OF RECEIPTS BUT, AS LONG AS THE ASSESSEE HAS BEEN COMPENSATED FOR THE SERVICES SO RENDERED, THERE IS NO OCCASION TO ESTIMATE THE CO MMISSION INCOME AND BRING THE SAME TO TAX. WHEN WE POINTED THIS OUT TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, AND ASKED HIM WHETHER IN THE LIGHT OF CIT(A) S FINDING THAT DELAY PAYMENT CHARGES AT RS 28,56,932 BEING ACTUALLY IN THE NATURE OF COMMISSION, WAS THERE ACTUALLY ANY BASIS FOR ESTIMATING COMMISSION INCOME, LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT HAVE MUCH TO SAY. HE SIMPLY PLACED HIS RELIANCE ON THE STAND OF THE ASSESSING OFFICER. OBVIOUSLY, THIS ASPECT OF THE MATTER WAS NOT EXAMINED BY THE ASSESSING OFFICER AND NOW THAT THE CIT(A) HAS EXAMINED THE SAME, REVENUE AUTHORITIES HAVE NOT BEEN ABLE TO POINT OUT ANY MISTAKE IN THE SAME. IN ANY CASE, THIS HAS BEEN THE ACCEPTED BUSINESS MODEL FOR ALL THESE YEARS AND THE SAME WAS DULY ACCEPTED. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE I.T.A. NO.: 2245/AHD /2011 ASSESSMENT YEAR: 2008 - 09 PAGE 5 OF 5 THE CONCLUSIONS ARRIVED AT BY THE CIT(A) ON THIS COUNT AS WELL. NO INTERFERENCE IS CALLED FOR. 14. GROUND NO. 3 IS ALSO DISMISSED. 15. IN THE RESULT, THE APPEAL IS DI SMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 9 TH DAY OF DECEMBER, 2015. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 9 TH DAY OF DECEMBER , 201 5 . COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD