Sachin B. Desai, Kolkata V. I.T.O., Ward-36(3), Kolkata, Kolkata

ITA 2280/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99652 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 20-08-2013
• Court: TRIBUNAL
• Department Lawyers: R P NAG
• Assessee Lawyers: VARSHA JALAN ADVOCTAE
• Keywords: Depreciation; Wrong claim; Corroborative evidences; Onus to prove
• Section: 143(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC KOLKATA [BEFORE HON BLE S HRI MAHAVIR SINGH, JM ] ITA NO . 2280 /KOL/2013 ASSESSMENT YEAR : 2007 - 08 ( A PPELLANT ) (RESPONDENT) SACHIN B.DESI - VERSUS - I.T.O., WARD - 36(3) , KOLKATA KOLKATA (PAN: AEBPD 5871 K) FOR THE APPELLANT: MS.VARSHA JALAN, ADVOCTAE FOR THE RESPONDENT: R.P.NAG , JCIT DATE OF HEARING : 16 .07.2015 . DATE OF PRONOUNCEMENT : 07.08.2015. ORDER THIS APPEAL OF ASSESSEE IS ARISING OUT OF ORDER OF CIT(A) - XX , KOLKATA IN APPEAL NO . 219/CIT(A) - XX / WARD - 36(3)/2009 - 10/KOL DATED 22.04.2013 . ASSESSMENT WAS FRAMED BY I.T.O., WARD - 36(3) U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT ) FOR A.YR . 2007 - 08 VIDE ITS ORDER DATED 14.12.2009. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST ORDER OF CIT(A) IN CONFIRMING ADDITION MADE BY AO ON ACCOUNT OF DISALLOWANCE OF RS.8,41,536/ - MADE BY AO BEING PAYMENT OF COMMISSION. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 : - 1. FOR THAT THE LD. CIT(A) OUGHT TO HAVE PROPERLY APPRECIATED THE FACTS AND THE EVIDENCES ON RECORD AND OUGHT NOT TO HAVE CONFIRMED THE DISALLOWANCE OF RS.8,41,536/ - MADE BY THE AO BEING PAYMENT OF COMMISSION WHICH WAS DULY SUPPORTED BY EVIDENCES. 3. BR IEFLY STATED FACTS ARE THAT AO NOTICED THAT THE ASSESSEE IS A PROPRIETOR OF M/S. MAHAVIR INTERNATIONAL IN WHICH HE IS DOING TRADING BUSINESS OF STAMPING FOILS. DURING THE F.YR. ENDING 31.3.2007 THE ASSESSEE HAS MADE A TURNOVER OF RS.2.06 CRORES AND HAD PA ID COMMISSION OF RS.8,41,537/ - AFTER DEDUCTING TAX AT SOURCE OF RS.42,912/ - TO M/S. WIDE ANGLE PACKAGING SYSTEM P. LTD. THE DIRECTOR OF M/.S. WIDE ANGLE PACKAGING SYSTEM P.LTD. SHRI MILAN KUMAR MEHRA. AO EXAMINED THE CLAIM OF ITA NO. 2280/KOL/2013 SACHIN B.DESAI . A.YR. 2007 - 08 2 DEPRECIATION TO BE GENUINE THA T IS IDENTITY OF THE SO CALLED COMMISSION AGENT, GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS. AO IN HIS ASSESSMENT ORDER WAS OF THE OPINION THAT THE ASSESEE DID NOT DISCHARGE HIS ONUS AND GAVE THE FOLLOWING FINDINGS : - THE ASSESSEE HAS NOT DISCHA RGED THE INITIAL ONUS OF PROVING THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. PROPER EVIDENCE HAS NOT BEEN BROUGHT ON RECORD TO PROVE THE GENUINENESS. THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS OF PROOF REGARDING THE GENUINENESS OF THE ALLEG ED COMMISSION PAID. THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE AS THE ASSESSEE COULD NOT PRODUCE WHETHER THE SO CALLED COMMISSION PARTY RENDERED ANY SERVICES. EVEN IN THE NOTICE U/S 133(6) NONE OF THE PARTIES HAVE REPLIED TO DISCHARGE, DURING THE ASS ESSMENT PROCEEDINGS, THE BURDEN OF PROOF WHICH LIES ON THE ASSESSEE. THE ASSESSEE COULD NOT PROVIDE ANY EVIDENCE OF THE REASONS AS TO WHY WHEN A PERSON HAS NOT RENDERED ANY SERVICES, IT HAS SHOWN BOGUS CLAIM OF COMMISSION PAID. CLEARLY INDICATES THAT THE A SSESSEE HAD TAKEN REASONABLE RECOURSE TO EVADING TAX ON THE AMOUNT PAID AS COMMISSION. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS CLEAR THE CLAIM OF COMMISSION PAID IS BOGUS AND NON EXISTENT AND FALSE AND IT WAS ONLY AN ACCOUNTS ENTRY TO EVADE TAX. AO ALSO MADE REFERENCE TO VARIOUS JUDICIAL PRONOUNCEMENTS WHICH READ AS UNDER : - I ) CIT VS PRECISION FINANCE (P)LTD [1994] 208 ITR 465 (CAL) II ) SUMATI DAYAL VS CIT [1995] 214 ITR 801 (SC) III ) CIT VS UNITED COMMERCIAL AND INDUSTRIAL CO.(P)LTD [1991] 187 ITR 596 (CAL) IV ) DP MORE 82 ITR 540 (SC) V ) SMT. VASANTIBAI N.SHAH VS. CIT [1995] 213 ITR 805 (BOM) IN VIEW OF THE ABOVE AO CAME TO A CONCLUSION THAT IT IS CLEAR THAT AN AMOUNT OF RS.8,41,536/ - SHOWN BY THE ASSESSEE AS ALLEGED COMMISSION IS BOGUS AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. NOW AGGRIEVED THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). THE CIT(A) IN HIS ORDER STATED THAT 4.2. I HAVE PERUSED THE ASSESSMENT ORDER AND CONSIDERED THE SUBMISSION OF THE APPELLANT. THE FACT OF THE CASE IS THAT T HE AO FOUND THAT THE APPELLANT MADE PAYMENT OF RS.8,41,537/ - TOWARDS COMMISSION BUT GENUINENESS OF THE TRANSACTION WAS NOT PROVED. THE APPELLANT ARGUED THAT PAYMENT OF COMMISSION WAS MADE TO M/S. WIDE ANGLE PACKAGING SYSTEM (P)LTD ON WHICH TAX WAS DEDUCTED AND THE PAYMENT WAS MADE THROUGH CHEQUES. HOWEVER, THE FACT REMAINS THAT THE APPELLANT FAILED TO PROVE EITHER BEFORE THE AO NOR BEFORE ME THE NATURE OF SERVICES RENDERED BY THE PERSON CONCERNED. SINCE, THERE IS DIRECT NEXUS BETWEEN PAYMENT OF COMMISSION A ND SERVICES RENDERED IF ANY, FOR WHICH THE APPELLANT FAILED TO PROVE WITH SUPPORTING EVIDENCES. THEREFORE, THE ACTION OF THE AO WAS JUSTIFIED. HENCE, APPEAL ON THIS GROUND IS DISMISSED. ITA NO. 2280/KOL/2013 SACHIN B.DESAI . A.YR. 2007 - 08 3 AGGRIEVED NOW THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 4. I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT THE ASSESSEE HAS PAID RS.7,65,000/ - AFTER DEDUCTING TDS OF RS.42,918/ - ON ACCOUNT OF COMMISSION TO M/S. WIDE ANGLE PACKAGING SYSTEM (P)LTD THROUGH BAN K ACCOUNT AND THE COMMISSION INCOME WAS DULY SHOWN. THE COMMISSION IS PAID FOR ACHIEVING SALES. IN THE PRESENT CASE THE ASSESSEE IN ORDER TO EXCEL ITS SALES APPOINTED M/S.WIDE ANGLE PACKAGING SYSTEM (P)LTD AS AGENT TO AGREE TO GET THE SALES ORDER FOR THE A SSESSEE AGAINST COMMISSION. THE STRENGTH OF SALES ORDER IS CLEARLY DONE BY THE SALES TEAM WHO ARE MOVING IN THE MARKET. THESE SALESMEN ARE THE PERSONS WHO TRY TO ARRANGE ORDERS FOR THE PRODUCTS OF THE PRINCIPLE. AO HAS CALLED THE DIRECTOR OF THE COMPANY ON LY TO RECORD HIS STATEMENT BY GIVING HIM NOTICE U/S 131 OF THE ACT. IT IS QUITE POSSIBLE THAT THE COMPANY HAS VARIOUS TYPES OF ACTIVITIES AND WORKING AS COMMISSION AGENT IS ALSO A PART AND SUCH COMPANIES WORK FOR MANY TYPES OF CLIENTS. QUITE POSSIBLE A DI RECTOR MIGHT NOT BE AWARE OF NAMES AND DETAILS OF ALL THE CLIENTS OF THE COMPANY. THE AO SHOULD HAVE ENQUIRED THROUGH THE SALES MAN OF THE COMMISSION AGENT OR THROUGH THE BUYERS OF THE PRODUCTS OF THE ASSESSEE IN ORDER TO VERIFY THE ACTUAL COMMISSION GIVE N TO M/S.WIDE ANGLE PACKAGING SYSTEM (P)LTD FOR DOING THE SALES ON BEHALF OF THE ASSESSEE AGAINST C OMMISSION. THE ASSESSEE HAS PAID COMMISSION BY ACCOUNT PAYEE CHEQUE. DUE TDS PAID, IDENTITY OF THE COMMISSION AGENT IS VERIFIABLE WHICH ARE SUFFICIENT EVIDEN CE ON RECORD TO PROVE THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS AND IDENTITY OF THE SO CALLED COMMISSION AGENT. IN VIEW OF THE ABOVE I AM OF THE VIEW THAT THE ENTIRE COMMISSION IS ALLOWABLE. THIS GROUND OF APPEAL IS ALLOWED. 5. THE SECON D ISSUE IN THIS APPEAL OF ASSESSEE AS RAISED IN GROUND NO.2 IS AGAINST ORDER OF THE LD. CIT(A) IN RESTRICTING THE ESTIMATED DISALLOWANCE MADE BY AO FROM 15% TO 10% OUT OF VARIOUS REVENUE EXPENSES INCURRED BY THE ASSESSEE. 6. DURING THE ASSESSMENT PRO CEEDINGS AO DISALLOWED 15% OF SOME OF THE EXPENSES TOTALING TO RS.2,32,428/ - IN REGARD TO SOME OPERATION PERSONAL ELEMENT OF EXPENSES AS WELL AS IN REGARD TO NON AVAILABILITY OF PROPER SUPPORTING OF THESE EXPENSES. THESE ITA NO. 2280/KOL/2013 SACHIN B.DESAI . A.YR. 2007 - 08 4 EXPENSES MAINLY INCLUDE CARRIAGE CH ARGES, GENERAL EXPENSES, CONVEYANCE EXPENSES, TELEPHONE, DELIVERY, OFFICE EXPENSES, PRINTING AND STATIONERY AS WELL AS SALES PROMOTION, TRAVELLING EXPENSES AND VEHICLE EXPENSES. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) IN HIS ORD ER CONSIDERED THE SUBMISSIONS OF THE APPEAL OF THE ASSESSEE BUT MADE A FINDING THAT EXPENSES PERTAIN TO VARIOUS HEADS AND WERE SUPPORTED BY SELF MADE VOUCHERS AND THERE IS ALWAYS A POSSIBILITY TO INFLATE THE EXPENDITURE ON THE BASIS OF SELF MADE VOUCHERS. HOWEVER, IN THE INTEREST OF JUSTICE, THE CIT(A) FOUND IT REASONABLE THAT THE DISALLOWANCES BE RESTRICTED TO 10% OF THE CLAIM ON 15% DISALLOWED BY THE AO. AGGRIEVED, NOW THE ASSESSEE PREFERRED APPEAL BEFORE THIS TRIBUNAL. 7. THE LD. DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. 8. I HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. LOOKING INTO THE NATURE OF THE EXPENSES IN WHICH THERE IS ALWAYS A POSSIBILITY TO INFLATE THE EXPENDITURE AS WELL AS E XPENSES TO SOME EXTENT INCURRED FOR PERSONAL PURPOSES ALSO. THE CIT(A) HAS ALSO RESTRICTED THE DISALLOWANCE FROM 15% TO 10% IN THE INTEREST OF JUSTICE AND AS SUCH I FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) . THUS THIS GROUND OF APPEAL IS DISMISSED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNC ED IN TH E COURT . SD/ - [MAHAVIR SINGH] JUDICIAL MEMBER DATE: 07.08.2015. R.G.(.P. S.) ITA NO. 2280/KOL/2013 SACHIN B.DESAI . A.YR. 2007 - 08 5 COPY OF THE ORDER FORWARDED TO : 1 . SACHIN B.DESAI, 50, B.R.B.BASU ROAD, 1 ST FLOOR, KOLKATA - 700001. 2 I.T.O., WARD - 36(3), KOLKATA. 3 . THE CIT, 4. THE CIT(A) - XX , KOLKATA. 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY , BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES