SHUSHRUSHA EXPORTS, Jaipur V. DCIT, Jaipur

ITA 226/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5608 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KAILASH MANGAL JCIT DHK
• Keywords: Opportunity of being heard; Onus to prove
• Section: 143(3); 37

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 226/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 M/S SHUSHRUSHA EXPORT, 4YA 13, JAWAHAR NAGAR ROAD, JAIPUR. CUKE VS. D.C.I.T. CENTRAL CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AALFS 4485 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL & SHRI RAJESH AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI KAILASH MANGAL (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/10/2015. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11/01/2016. VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 10/01/2014 OF THE LEARNED CIT(A)-II, JAIPUR FOR A.Y. 2008-09. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS. 10,70,000/- ON ACCOUNT OF COMMISSION PAID. 2 ITA NO. 226/JP/2014 M/S SHUSHRUSHA EXPORTS VS DCIT 2. THE ABOVE ACTION OF THE CIT(A) AND LD ASSESSING OF FICER IS QUITE ILLEGAL, ARBITRARY, EXCESSIVE, WITHOUT ANY BASIS AND BASED ON GUESS, CONJECTURE AND SURMISES. 2. THE SOLE GROUND OF ASSESSEES APPEAL IS AGAINST C ONFIRMING THE DISALLOWANCE OF RS. 10,70 LACS ON ACCOUNT OF COMMISS ION PAID. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF ST ONES. THE ASSESSEE FIRM FILED ITS RETURN ON 29/09/2009 DECLARING TOTAL INCOME OF RS. 46,16,790/-. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE LD ASSESSING OFFIC ER OBSERVED THAT THE ASSESSEE HAD PAID COMMISSION AT RS. 33,92,594/-. IT WAS SEEN THAT THE ASSESSEE HAD PAID COMMISSION TO VARIOUS PERSONS AT VARIOUS RATES WHICH VARIED FROM 2.6% TO 17.50% WHICH WAS NOT FOUND JUSTIF IABLE. IT WAS ALSO FOUND BY HIM THAT IN ONE INSTANCE, THE ASSESSEE CLA IMED THE PAYMENT OF COMMISSION TO A PARTY FROM WHOM IT HAD MADE PURCHASE S. FURTHER ON VERIFICATION OF THESE EXPENSES IT WAS NOTICED THAT T HE ASSESSEE HAD CLAIMED PAYMENT OF COMMISSION OF RS. 10,70,000/- @ 1 3.50% ON SALE OF RS. 79,51,455/- MADE TO DURAT AL SAHIL. THIS COMMISS ION WAS PAID COLLECTIVELY TO NINE DIFFERENT PERSONS WHICH INCLUDE D TWO FEMALE RECIPIENTS ALSO. THE COMMISSION CLAIMED TO HAVE BEE N PAID TO THESE PERSONS VARIED FROM RS. 1.00 LAC TO 1.75 LACS. THE S URNAMES OF THE RECIPIENTS SUGGESTED THAT THEY ALL BELONGED TO 2 OR 3 FAMILIES. IT WAS 3 ITA NO. 226/JP/2014 M/S SHUSHRUSHA EXPORTS VS DCIT QUITE AN UNUSUAL PHENOMENON. THIS PAYMENT OF COMMIS SION IN A PARTICULAR SALE WAS NOT JUSTIFIABLE IN THE SENSE THA T THE COMMISSION WAS PAID TO NINE DIFFERENT PERSONS AT DIFFERENT RATES O N ONE SINGLE SALE. THESE CIRCUMSTANCES INDICATED THAT THE PAYMENT OF TH E COMMISSION WAS CLAIMED SIMPLY IN ORDER TO REDUCE THE TAX INCIDENCE . THEREFORE, HE HELD THAT PAYMENT OF COMMISSION WAS NOT GENUINE. THE LD AS SESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. THE ASSESSEE REPLIED VIDE LETTER DATED 26/11/2010, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE 3 AND 4 OF THE ASSESSMENT ORDER. AFTER CONSIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER HELD THAT THE COPY OF AGREEMENT, WHICH IS ON PLAIN PAPER BEARING S IGNATURE OF NINE RECIPIENTS. THIS KIND OF PAPER AGREEMENT IS NOT A GE NERAL TRADE PRACTICE. EVEN OTHERWISE, THE AGREEMENT IS NOT ON A STAMP PAPE R AND HAD BEEN PREPARED ONLY AFTER THE ASSESSEE WAS CONFRONTED TO S UBSTANTIATE ITS CLAIM AND THEREFORE, SAME COULD NOT BE TREATED AUTH ENTIC. THE AGREEMENT HAD NEITHER BEEN WITNESSED BY ANY THIRD PA RTY NOR ATTESTED BY THE NOTARY PUBLIC. THE AGREEMENT SIMPLY MENTIONED THE NAMES ONLY BUT ADDRESS OF NONE OF THE SO CALLED RECIPIENTS OF THE COMMISSION HAD BEEN MENTIONED. THE ASSESSEE HAD ALSO TRIED TO PROVE THE RELATION OF THE RECIPIENT OF THE COMMISSION WITH THE BUYER BUT THE S AME CLEARLY SHOWED 4 ITA NO. 226/JP/2014 M/S SHUSHRUSHA EXPORTS VS DCIT THAT IT WAS SIMPLY A FABRICATED ONE. THE ASSESSEE HAD NOT PUT FORTH ANY DOCUMENTARY EVIDENCE WHICH COULD PROVE THESE COMMISS ION PAYMENTS AS GENUINE. THE ASSESSEE HAD SIMPLY CLAIMED THESE EX PENSES IN ORDER TO REDUCE ITS TAX INCIDENCE BY MERELY CLAIMING THAT TH E TDS HAS BEEN DEDUCTED ON SUCH PAYMENTS. THE ASSESSEE DID NOT FUR NISH THE ADDRESSES OF THESE SO CALLED COMMISSION RECIPIENTS DESPITE ON BEING ASKED TO SPECIFICALLY. THIS IS AT ALL NOT POSSIBLE THAT A BUY ER IS DRAGGED BY NINE DIFFERENT PERSONS WHICH INCLUDED TWO FEMALES ALSO TO A SELLER TO MAKE ITS PURCHASES FROM A PARTICULAR SHOP. NO PAYMENTS TO EI THER OR ALL OF THESE PERSONS WERE EVER MADE AT ANY OTHER INSTANCE DURING THE YEAR UNDER CONSIDERATION WHICH SHOWED THAT THESE OR EITHER OF TH ESE PERSONS NEVER BROUGHT ANY OTHER CUSTOMER TO THE ASSESSEE. IN GENE RAL TRADE PRACTICE, NORMALLY THE PERSONS WORKING ON THE COMMISSION BASIS REGULARLY BRING CUSTOMERS TO THE SELLER. HAD THIS BEEN A GENUINE TR ANSACTION THEN THESE PERSONS WOULD HAVE DEFINITELY BROUGHT SOME OTHER BUY ERS ALSO TO THE BUSINESS PREMISES OF THE ASSESSEE. THESE ALL CIRCUM STANCES CLEARLY INDICATE THAT THE CLAIM OF COMMISSION PAYMENT OF RS . 10,70,000/- WAS NOT GENUINE BUT AN ARRANGEMENT TO REDUCE THE TAX IN CIDENCE. ACCORDINGLY, HE MADE ADDITION OF RS. 10,70,000/- IN THE INCOME OF THE ASSESSEE. 5 ITA NO. 226/JP/2014 M/S SHUSHRUSHA EXPORTS VS DCIT 3. BEING AGGRIEVED BY THE ORDER OF THE LD ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WH O HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESS MENT ORDER AND APPELLANTS WRITTEN SUBMISSION. ASSESSING OFFICER DISALLOWED PAYMENT OF COMMISSION TO A GROUP OF 9 PERSONS FROM 2-3 FAMILIES ON SALE OF GOODS TO A SINGLE PARTY BASED IN MUSKET. APPELLANT SUBMITTED THAT THIS GROUP OF NINE PERSONS HELPED IN INTRODUCI NG THE CUSTOMER TO THE APPELLANT THROUGH SOMEONE BASED IN MUSKET. APPELLANT ALSO SUBMITTED THAT PAYMENT WAS MADE BY CHEQUE AFTER DEDUCTING TDS AND COMMISSION @13.5% WAS PAID TO THEM OF THEIR INSISTENCE SINCE HIGHER PROFIT MARGIN WAS THERE IN T HIS DEAL. DURING APPEAL HEARING, IT WAS SPECIFICALLY ASKED AS TO WHAT SERVICES WERE RENDERED BY THE GROUP OF THESE NINE PERSONS AND TO SUBMIT EVIDENCE IN RESPECT OF RENDERING OF SERVICES BY THEM. HOWEVER NO DETAILS OR EVIDENCE IN THIS REGARD WERE SUBMITTED. THERE IS NO REFERENCE OF ANY OF THE PERSON TO WHOM COMMISSION WAS PAID WITH SALE CORRESPONDENCE WITH THE BUYER. IT WAS ACCEPTED BY THE AR IN APPEAL HEARING THAT THERE IS NO EVIDENCE EXCEPT AN MOU SIGNED BY THE APPELLANT WITH THESE PARTIES FOR RENDERING ANY SERVI CE 6 ITA NO. 226/JP/2014 M/S SHUSHRUSHA EXPORTS VS DCIT IN SALE TO MUSKET PARTY. IN ABSENCE OF ANY EVIDENCE OF RENDERING OF SERVICES BY ANY OF THE PARTY RECEIV ING COMMISSION, THE VITAL INGREDIENT FOR ALLOWING ANY CLAIM OF EXPENSE IS MISSING. PAYMENT BY CHEQUE AND DEDUCTION OF TDS ARE ONLY EVIDENCE OF PAYMENT AND NOT OF RENDERING OF SERVICES AND ESTABLISHING OF BUSINESS PURPOSE OF THE EXPENSE. SINCE THE NINE PERSONS SITTING IN JAIPUR HAVE NOT DONE ANYTHING IN EXPORT MADE TO MUSKET PARTY, THE CLAIM OF EXPENSE CANNOT BE TREATED AS BUSINESS EXPENSE. THE ENTIRE SUBMISSION OF THE APPELLANT IS ON THE EXISTENCE OF THESE PARTIES AND PAYMENT BY CHEQUE. APPELLANT HAS NOT ATTEMPTED TO EXPLAIN WITH EVIDENCE AS TO WHAT WERE DONE BY THESE PERSONS FOR WHICH THEY WERE PAID 13.5% COMMISSION. THE ARGUMENT MADE BY THE APPELLANT THAT THERE WAS HUGE MARGIN IN THIS EXPORT SALE AND THEREFORE THIS MUCH COMMISSION WAS PAID IS NOT EVIDENCED BY ANY FACT. THE PROFIT MARGIN COMPUTED BY THE APPELLANT SEPARATELY FOR MUSKET EXPORT AND OTHER EXPORTS IS WITHOUT ANY BASIS. EVEN OTHERWISE, THIS IS NOT RELEVANT IN THE ABSENCE OF RENDERING OF SERVICES BY THESE PARTIES. THE EXPENSE IS ALLOWABLE ONLY WHEN IT IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. BY NOT SUBMITTING ANY EVIDENCE WITH REGARD TO THE SERVICES RENDERED BY THESE PERSONS, APPELLANT HAS NOT 7 ITA NO. 226/JP/2014 M/S SHUSHRUSHA EXPORTS VS DCIT ESTABLISHED THE CLAIM OF COMMISSION TO THESE PARTIE S AS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE O F BUSINESS. ACCORDINGLY, I HAVE NO HESITATION IN HOLD ING THAT THE CLAIM OF COMMISSION IN THE NAME OF NINE PERSONS FOR ONE SALE IS NOTHING BUT AN ATTEMPT TO REDUCE TAXABLE INCOME. CLAIM OF COMMISSION IN THE NAME OF THESE PARTIES IS NOT ALLOWABLE SINCE APPELLA NT HAS NOT DISCHARGED ITS ONUS TO PROVE THE RENDERING OF SERVICES BY THESE PARTIES. ACCORDINGLY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS MADE BEFORE T HE LD CIT(A) AND FURTHER SUBMITTED THAT THE ASSESSEE IS AN EXPORTER FIRM. THE COMMISSION HAD BEEN PAID ON SALE MADE TO M/S DYURAT AL SAHIL, PARTY OF MUSCAT, WHO WERE CONSTRUCTING A HOTEL AND WANTED MATERIAL FOR THIS PROJECT. THEY ARE NOT INTO STONE BUSINESS THEREFORE THEMSELVE S WERE NOT AWARE OF THE STONE IMPORT SOURCE. THEY IMPORTED MARBLE THR OUGH THESE PERSONS DIRECTLY FROM THE INDIA. THE CONTACTED TO MR . RAMESH CHAND KUMAWAT BEING AN INDIAN, WHO WAS LIVING IN MUSCUT. MR. RAMESH CHAND KUMAWAT IS FRIEND OF THIS GROUP, THEREFORE, THE ASSE SSEE HELPED IN THIS TRANSACTION. THEY CONTACTED TO THE ASSESSEE TO PROVI DE THE REQUIRED 8 ITA NO. 226/JP/2014 M/S SHUSHRUSHA EXPORTS VS DCIT MARBLE AND ENTERED INTO AN MOU IN ORDER TO AVOID AN Y DISPUTE AT LATER STAGE. THE FINDING GIVEN BY THE LD ASSESSING OFFICER IS BASED ON SURMISES AND CONJECTURE AND NO WHERE PROHIBITED THAT FAMILY M EMBER CANNOT BE PART OF ANY TRANSACTION. THE ASSESSEE DEDUCTED TDS ON COMMISSION AND PAID TO THE GOVERNMENT ACCOUNT ON 29/05/2008, WHICH WAS VERY WELL IN TIME AS REQUIRED BY THE LAW AND MUCH BEFORE SCRUTINY PROCEEDING. THEREFORE, HE PRAYED TO ALLOW THE APPEAL. 5. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE A SSESSEE WAS SPECIFICALLY ASKED TO JUSTIFY THE SERVICE RENDERED BY THE GROUP OF THESE NINE PERSONS AND TO SUBMIT THE EVIDENCE IN RESPECT OF RENDERING SERVICE BEFORE THE ASSESSING OFFICER AS WELL AS LD CIT(A) BU T NO DETAILS OR EVIDENCE WERE SUBMITTED BEFORE THEM. EVEN BEFORE US, THE ASSESSEE WAS NOT ABLE TO JUSTIFY THE PAYMENT IN FORM OF COMMI SSION WITH REFERENCE TO SERVICE RENDERED. THE MOU IS ALSO NOT F OUND AUTHENTICATED AS NO ADDRESS OF RECEIPT WERE GIVEN, WHICH WAS ALSO NO T WITNESSED AND MERE DEDUCTING OF TDS CANNOT BE DISCHARGED ONUS CAST ON THE ASSESSEE 9 ITA NO. 226/JP/2014 M/S SHUSHRUSHA EXPORTS VS DCIT FOR CLAIMING THE EXPENSES U/S 37 OF THE ACT. THE RAT E OF COMMISSION WAS NOT COMPARABLE WITH THE LINE OF BUSINESS OF RATE OF COMMISSION PAID. THEREFORE, WE UPHOLD THE ORDER OF THE LD CIT(A). 7. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D ORDER PRONOUNCED IN THE OPEN COURT ON 11/1/2016. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11 TH JANUARY, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S SHUSHRUSHA EXPORT, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE D.C.I.T., CENTRAL CIRCLE-6, JAIP UR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 226/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR