Shri Arun Kumar Jhunjhunwala, Howrah V. ITO, Ward-48(1). Kolkata, Kolkata

ITA 2250/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1586 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K BISWAS
• Assessee Lawyers: MIRAJ D. SHAH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SRI A.T.VARKEY, JM & SHRI M.BALAG ANESH, AM ] I.T.A NO.2250/KOL/201 6 ASSESSMENT YEAR : 2009-1 0 SHRI ARUN KR. JHUNJHUNWALA. -VS.- I.T.O. , WARD-48(1) KOLKATA KOLKATA [PAN : ACOPJ 2610 D] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI MIRAJ D.SHAH, ADVOCATE FOR THE RESPONDENT : SHRI M.K.BISWAS, JCIT DATE OF HEARING : 22.06.2017. DATE OF PRONOUNCEMENT : 07.07.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -14 , KOLKATA [ IN SHORT THE L D CITA] IN APPEAL NO. 301/CIT(A)- 14/WD-47(2)/2011-12 DATED 29.07.2016 AGAINST THE O RDER PASSED BY THE INCOME TAX OFFICER, WARD-48(1), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) DATED 23.12.2011 FOR THE ASST YEAR 2009-10. 2. AT THE OUTSET, THERE IS A DELAY IN FILING THE AP PEAL BY THE ASSESSEE BY 35 DAYS FOR WHICH A DELAY CONDONATION PETITION HAS BEEN FILED BY THE ASSESSEE. IT WAS STATED THAT THE ASSESSEE IS SUFFERING FROM ORAL MALIGNANCY DUE TO W HICH HE IS NOT IN A POSITION TO PROPERLY CONCENTRATE IN HIS BUSINESS AND IS UNDERGO ING TREATMENT IN VARIOUS HOSPITALS IN KOLKATA, MUMBAI AND CHENNAI. BECAUSE OF HIS ILL HE ALTH, HE HAD MISPLACED THE ORDER AND THE SAME COULD BE TRACED ONLY ON 22.11.2016 AND THEREAFTER THE APPEAL WAS FILED IMMEDIATELY ON 28.11.2016 WITH A DELAY OF 35 DAYS. WE FIND THAT THE REASON ADDUCED FOR THE DELAY IS REASONABLE AND WE DEEM IT FIT TO C ONDONE THE DELAY AND ADMIT THE APPEAL FOR ADJUDICATION. 2 ITA NO.2250/KOL/2016 SHRI ARUN KR. JHUNJHUNWALA A.YR.2009-10 2 3. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE U/S 40A(2) OF TH E ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A PROPRIETOR OF M/S CONSOL ENGINEERING & FASTENERS INDUSTRIES ENGAGED IN THE B USINESS OF MANUFACTURE AND EXPORT OF ENGINEERING GOODS. THE ASSESSEE FILED HIS RETUR N OF INCOME FOR THE ASST YEAR 2009-10 ON 9.10.2009 DECLARING TOTAL INCOME OF RS 9,67,121/ -. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD AO OBSERVED THAT THE ASSESSEE H AD PAID COMMISSION TO FOUR PERSONS AT DIFFERENT RATES AS BELOW:- TABLE: - 1 SL. NO . NAME OF THE COMMISSION AGENT NAME OF THE PURCHASE PARTY ITEMS PURCHASED QUANTITY IN KGS. RATE OF COMMISSION COMMISSION PAID IN RS. 01 KAMAL BAID & OTHERS (HUF) SANVIJAY ROLLING & ENGINEERING LTD. STEEL ANGLE 47730 RS.5 PER KG 238650 02 SUMIT JHUNJHUNWALA SANVIJAY ROLLING & ENGINEERING LTD. STEEL ANGLE 39760 RS.5 PER KG 198800 TOTAL COMMISSION PAID 437450 TABLE :- 2 SL. NO . NAME OF THE COMMISSION AGENT NAME OF THE PURCHASE PARTY ITEMS PURCHASED QUANTITY IN KGS. RATE OF COMMISSION COMMISSION PAID IN RS. 01 NAMRATA JHUNJHUNWALA SANVIJAY ROLLING & ENGINEERING LTD. STEEL ANGLE 32760 RS.10 PER KG 327600 02 UTTAM KUMAR AGARWAL SANVIJAY ROLLING & ENGINEERING LTD. STEEL ANGLE 25420 RS.10 PER KG 254200 TOTAL COMMISSION PAID 581800 3 ITA NO.2250/KOL/2016 SHRI ARUN KR. JHUNJHUNWALA A.YR.2009-10 3 THE LD AO OBSERVED FROM THE VARIOUS SUBMISSIONS MAD E BY THE ASSESSEE AND THE AGREEMENTS FOR COMMISSION PAYMENTS ENTERED INTO WIT H THE ABOVEMENTIONED FOUR PERSONS THAT THE ASSESSEE HAD MADE COMMISSION PAYME NT AT RS 5 PER KG FOR TWO PARTIES (VIZ KAMAL BAID AND SUMIT JHUNJHUNWALA) AND AT RS 1 0 PER KG FOR OTHER TWO PARTIES (VIZ NAMRATA JHUNJHUNWALA AND UTTAM KUMAR AGARWAL). THE LD AO OBSERVED THAT THE ASSESSEE HAD MADE PAYMENT OF RS 10 PER KG AS COMMIS SION TO HIS RELATIVE AND HENCE THE EXCESS PAYMENT OF RS 5 PER KG WAS DISALLOWED BY INV OKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT AS EXCESSIVE AND UNREASONABLE. 5. THE ASSESSEE REITERATED THE SAME ARGUMENTS TAKEN BEFORE THE LD AO AND ALSO SUBMITTED THAT THE REASONING GIVEN BY THE LD AO CAN NOT BE EXTENDED TO PERSONS WHO ARE NOT RELATED TO THE ASSESSEE. ACCORDINGLY THE COMM ISSION PAID TO MR UTTAM KUMAR AGARWAL WOULD BE OUTSIDE THE SCOPE OF SECTION 40A(2 ) OF THE ACT. THE LD CITA OBSERVED THAT THE PROVISIONS OF SECTION 40A(2) OF T HE ACT WOULD BE APPLICABLE ONLY WHEN THE SAID PAYMENTS OR EXPENSES ARE PROVED TO BE EXCESSIVE OR UNREASONABLE AND THAT THOSE PAYMENTS WERE MADE TO THE SPECIFIED PERSONS W ITHIN THE MEANING OF THE SAID SECTION. HE HELD THAT THESE CONDITIONS ARE SATISF IED IN THE CASE OF PAYMENTS MADE TO DAUGHTER IN LAW OF THE ASSESSEE NAMRATA JHUNJHUNW ALA BUT NOT IN THE CASE OF UTTAM KUMAR AGARWAL. ACCORDINGLY, HE UPHELD THE DISALLO WANCE U/S 40A(2) OF THE ACT ONLY IN RESPECT OF NAMRATA JHUNJHUNWALA. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US O N THE FOLLOWING GROUNDS:- 01. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) - 14, KOLKATA ERRED IN LAW AS WELL AS ON FACTS OF THE CASE WHILE PARTLY CONFIRMING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF COMMISSION EXPENSES U/S 40(A) (2) OF THE INCOME TAX ACT, 1961. 02. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) - 14, KOLKATA ERRED IN LAW AS WELL AS IN FACTS OF THE CASE WHILE CONSIDERI NG NAMRATA JHUNJHUNWALA, BEING DAUGHTER IN LAW OF THE APPELLANT,. AS SPECIFIED PER SON WITHIN THE MEANING OF SECTION 40(A) (2) OF THE INCOME TAX ACT, 1961. 4 ITA NO.2250/KOL/2016 SHRI ARUN KR. JHUNJHUNWALA A.YR.2009-10 4 03. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) - 14, KOLKATA ERRED IN LAW AS WELL AS IN FACTS OF THE CASE WHILE CONFIRMIN G THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF LATE DELIVE RY CHARGES AMOUNTING TO RS.5,673/- AND RS.3005/- FOR LATE PAYMENT CHARGE. 04. THAT THE APPELLANT CRAVES LEAVE TO ADD/OR AMEN D ANY GROUND OF THIS APPEAL. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD MADE COMMISSION PAYME NTS AT RS 10 PER KG TO HIS DAUGHTER IN LAW MRS NAMRATA JHUNJHUNWALA. WE FIND FROM PAGE 2 OF THE PAPER BOOK THE MARRIAGE CERTIFICATE ISSUED ON 18.8.2007 THAT BOTH SUMIT JHUNJHUNWALA AND NAMRATA JHUNJHUNWALA ARE HUSBAND AND WIFE AND THAT MR SUMIT JHUNJHUNWALA IS SON OF THE ASSESSEE. HENCE THE PAYMENT OF RS 10 PER KG TOWAR DS COMMISSION WAS MADE BY THE ASSESSEE TO HIS DAUGHTER IN LAW. SECTION 40A(2)(B) OF THE ACT DEFINES SPECIFIED PERSONS IN RESPECT OF AN INDIVIDUAL AS ANY RELA TIVE OF SUCH INDIVIDUAL. AS SUCH DAUGHTER IN LAW WOULD FALL IN THAT MEANING AND TH EREFORE BECOMES SPECIFIED PERSON WITHIN THE MEANING OF SECTION 40A(2) OF THE ACT. N OW THE NEXT POINT TO BE DECIDED IS AS TO WHETHER THE PAYMENT MADE TO DAUGHTER IN LAW BY A SSESSEE IS EXCESSIVE OR UNREASONABLE SO AS TO WARRANT PARTIAL DISALLOWANCE OF COMMISSION PAID. IT IS NOT IN DISPUTE THAT THE COMMISSION PAYMENT IS MEANT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IT IS NOT IN DISPUTE THA T THE ASSESSEE HAD PAID RS 5 PER KG TO BOTH RELATED AND AN UNRELATED PARTY AND HAD PAID R S 10 PER KG TO AN UNRELATED PARTY. WHILE THIS IS SO, THE COMPARABLE CASES CONSTITUTE R S 10 PER KG PAID TO AN UNRELATED PARTY I.E UTTAM KUMAR AGARWAL. THE SAME RATE OF COMMISSI ON IS PAID TO DAUGHTER IN LAW IE NAMRATA JHUNJHUNWALA. HENCE THE SAME CANNOT BE CON SIDERED AS EXCESSIVE OR UNREASONABLE WITHIN THE MEANING OF SECTION 40A(2) O F THE ACT WARRANTING DISALLOWANCE. ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE IN T HIS REGARD ARE ALLOWED. 8. THE GROUND NO. 3 RAISED BY THE ASSESSEE WAS STAT ED TO BE NOT PRESSED BY THE LD AR IN VIEW OF SMALLNESS OF THE AMOUNT INVOLVED THEREIN. T HE SAME IS RECKONED AS A STATEMENT 5 ITA NO.2250/KOL/2016 SHRI ARUN KR. JHUNJHUNWALA A.YR.2009-10 5 FROM THE BAR AND ACCORDINGLY THE GROUND NO. 3 RAISE D BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 07.07.2017 SD/- SD/- [A.T.VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07.07.2017 [RG PS] COPY OF THE ORDER FORWARDED TO: 1. SHRI ARUN KUMAR JHUNJHUNWALA, 86, SALKIA SCHOOL ROAD, HOWRAH-711106. 2. I.T.O., WARD-48(1), KOLKATA. 3..C.I.T.(A)-14, KOLKATA 4. C.I.T.-16, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 6 ITA NO.2250/KOL/2016 SHRI ARUN KR. JHUNJHUNWALA A.YR.2009-10 6