Asstt.CIT,Cir-8, Nagpur V. Prakash Ramdeo Jaiswal, Gondia

ITA 229/NAG/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9658 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 18-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Assessee Lawyers: M K M AGRAWAL
• Keywords: Business expenditure; Salary income; Tangible material; Relationship of principal and agent
• Section: 40A(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.229/NAG./2012 ( ASSESSMENT YEAR : 200809 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE8, NAGPUR APPELLANT V/S SHRI PRAKASH RAMDEO JAISWAL MANOHAR CHOWK, GONDIA PAN ABJPJ4064H .... RESPONDENT CROSS OBJECTION NO.13/NAG./2012 (ARISING OUT OF ITA NO. 229/NAG./2012 ) ( ASSESSMENT YEAR : 200809 ) SHRI PRAKASH RAMDEO JAISWAL MANOHAR CHOWK, GONDIA PAN ABJPJ4064H CROSS OBJECTOR (ORIGINAL RESPONDENT) V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE8, NAGPUR .... RESPONDENT (ORIGINAL APPELLANT) ASSESSEE BY : SHRI M.K.M. AGRAWAL REVENUE BY : SHRI A.R. NINAWE DATE OF HEARING 28.06.2017 DATE OF ORDER 29.06 .2017 O R D E R PER AMARJIT SINGH, J.M. THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 12 TH MARCH 2012, PASSED 2 SHRI PRAKASH RAMDEO JAISWAL BY THE LEARNED COMMISSIONER (APPEALS)II, NAGPUR, F OR THE ASSESSMENT YEAR 200809. ITA NO.229/NAG./2012 REVENUES APPEAL 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THERE EXISTED A RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN BSNL AN D THE ASSESSEE AND THAT PROVISIONS OF SECTION 40A(3) ARE NOT ATTRACTED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F ` 44,69,242 MADE BY THE A.O. UNDER SECTION 40A(3) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 6 TH OCTOBER 2008, DECLARING TOTAL INCOME TO THE TUNE O F ` 7,99,520. THE RETURN OF INCOME WAS PROPOSED UNDER S ECTION 143(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) ON 24 TH SEPTEMBER 2009. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS . NOTICE UNDER SECTION 143(2) WAS ISSUED ON 29 TH MAY 2009 AND SERVED UPON THE ASSESSEE ON 4 TH JUNE 2009. SUBSEQUENTLY, NOTICE UNDER SECTION 142( 1) OF THE ACT WAS ALSO ISSUED AND SERVED UPON THE ASSE SSEE. THE ASSESSEE WAS DERIVING HIS INCOME FROM SALARY FROM DHANPAT PLASTIC PVT. LTD., M/S. JAI BAMLESHWARI RICE MILL, BROKEN RICE & M/S. JA I BAMLESHWARI TRAVEL AGENT AND INCOME FROM OTHER SOURCES I.E., DI VIDEND AND 3 SHRI PRAKASH RAMDEO JAISWAL INTEREST, FIXED DEPOSIT INTEREST AND PPF INTEREST. THE ASSESSEE WAS A PART OF BUSINESS CONCERN JAISWAL GROUP OF GONDIA. T HE MAIN PERSON IN THIS GROUP WAS SHRI ROSHANLALJAISWAL, THEREFORE, TH E MATTER WAS TAKEN UP WITH HIM. A SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON THIS GROUP ON 14 TH DECEMBER 2007 AND 15 TH DECEMBER 2007. DURING THE SURVEY, CASH OF ` 1,59,785 WAS FOUND AT JAI BAMLESHWARI RICE MILL WHICH REPRESENTED THE JOINT CA SH OF FOUR CONCERNS. STOCK-IN-TRADE AND BOOKS OF ACCOUNT WERE INVENTORIZED, HOWEVER, SUBSEQUENTLY, THE SAME WERE RELEASED WITH THE ASSESSEE. THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED BY ASS ESSING THE INCOME TO THE TUNE OF ` 54,42,920. SINCE THE ASSESSEE WAS NOT SATISFIED, THEREFORE, THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS) WHO DELETED THE ADDITION MAD E BY THE ASSESSING OFFICER UNDER SECTION 40A(3) OF THE ACT A ND ALSO DELETED THE ADDITION OF ` 1,28,350 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS STOCK. FEELING AGGRIEVED, THE REVENUE HAS FI LED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 AND 2 4. THESE ISSUES ARE INTER-CONNECTED, THEREFORE, ARE BE ING TAKEN UP FOR ADJUDICATION. IN FACT, BOTH THE ISSUES ARE IN C ONNECTION WITH THE DELETION OF ADDITION OF ` 44,69,492 MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) OF THE ACT. BEFORE GOING FURTHE R, IT WOULD BE 4 SHRI PRAKASH RAMDEO JAISWAL NECESSARY TO ADVERT THE FINDING OF THE LEARNED COMM ISSIONER (APPEALS), ON THIS ISSUE. 4.0 GROUND NO.2 : THIS GROUND IS REGARDING DISALLOWANCE OF PAYMENT MADE TO BSNL IN CASH BY APPELLANT U/S.40A(3 ). 4. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED THAT THE ALLOWANCE OF THE PAYMENT AS ABOVE TO BSNL IS NOT CORRECT ON THE FACT THAT: A.THE A.O.HAS NOT GIVEN ANY COGNIZANCE TO THE RELAT ION OF BSNL WITH ITS FRANCHISEE I.E. OF PRINCIPAL AND AGENT. B. THE A.O. HAS NOT TAKEN IN FACTUAL SENSE THE NATU RE OF SERVICES PROVIDE BY THE FRANCHISEE ON' BEHALF OF ITS PRINCIP AL I.E. SERVICE PROVIDER (BSNL). WE TAKE AN OPPORTUNITY TO EXPLAIN THE MODE OF MARKE TING OF VARIOUS CELLULAR PRODUCTS BY BSNL.BSNL IS A SERVICE PROVIDER FOR VARIOUS CELLULAR SERVICES AND IT APPOINTS THE DISTR IBUTORS/FRANCHISEE AT DISTRICT LEVEL TO MARKET ITS PRODUCTS. WE HAVE A N AGREEMENT WITH BSNL AND WE ARE CALLED FRANCHISEE OF THE BSNL. WE GET COMMISSION FOR THE SERVICES GIVEN BY US. THIS ESTABLISHES THAT BSNL IS A PRINCIPAL AND WE DI STRIBUTORS ARE THE AGENT OF BSNL. IN THIS REFERENCE THE JUDGEMENT OF VODAFONE ESSAR CELLULAR LTD., VS. ACIT DT. 17.8.2010 OF THE HONOURABLE KERALA HIGH COURT IS RELEVANT THE COURT HAS GIVEN D UE CONSIDERATION TO THE RELATION OF BSNL WITH ITS FRAN CHISEE WHILE DECIDING THE APPLICABILITY OF SECTION 194H. AS PER THE JUDGEMENT THE HONOURABLE HIGH COURT HAS ADMITTED THAT THE ROLE OF THE DISTRIBUTOR IS THAT OF A MIDDL EMAN BETWEEN THE SERVICE PROVIDER AND THE CONSUMERS. THE ESSENCE OF A CONTRACT OF AGENCY IS THE AGENT'S AUTHORITY TO COMMIT THE PRINC IPAL. IN THIS CASE THE DISTRIBUTOR ACTUALLY CANVASS BUSINESS FOR THE ASSESSEE (BSNL) AND ONLY THROUGH DISTRIBUTORS AND RETAILERS APPOINTED BY THEM ASSESSEE (BSNL) GET SUBSCRIBERS, FOR THE MOBIL E SERVICE. ASSESSEE(BSNL) RENDERS SERVICES TO THE SUBSCRIBERS BASED ON CONTRACT ENTERED INTO BETWEEN DISTRIBUTORS AND SUBS CRIBERS. THE DISTRIBUTOR IS ONLY RENDERING SERVICES TO THE ASSES SEE (BSNL) AND THE DISTRIBUTOR COMMITS THE ASSESSEE (BSNL) TO THE SUBSCRIBERS TO WHOM ASSESSEE (BSNL) IS ACCOUNTABLE UNDER THE SERVI CE CONTRACT WHICH IS THE SUBSCRIBER CONNECTION ARRANGED BY THE DISTRIBUTOR FOR THE ASSESSEE(BSNL).THE TERMINOLOGY USED BY THE ASSE SSEE(BSNL) FOR THE PAYMENT TO THE DISTRIBUTORS, IN OUR VIEW, I S IMMATERIAL AND 5 SHRI PRAKASH RAMDEO JAISWAL IN SUBSTANCE THE DISCOUNT GIVEN AT THE TIME OF SALE OF SIM CARDS OR RECHARGE COUPONS BY THE ASSESSEE (BSNL) TO THE DIST RIBUTORS IS A PAYMENT RECEIVED OR RECEIVABLE BY THE DISTRIBUTOR F OR THE SERVICES TO BE RENDERED TO THE ASSESSEE(BSNL) AND SO MUCH SO ,IT FALLS WITHIN THE DEFINITION OF COMMISSION OR BROKERAGE UN DER EXPLANATION (I) OF SECTION 194H OF THE ACT. FROM THE GIST OF THE JUDGMENT IT IS CLEAR THAT THE HONOURABLE HIGH COURT HAS STRESSED UPON TWO FACTS I.E.RELATION BETW EEN BSNL AND FRANCHISEE AND SECONDLY WHETHER THERE IS ANY SALE T RANSACTION BETWEEN THE BSNL AND THE FRANCHISEE. THE HONOURABLE HIGH COURT HAS FURTHER CLARIFIED THA T A CUSTOMER CAN HAVE ACCESS TO MOBILE PHONE SERVICE ONLY BY INS ERTING SIM CARD IN HIS HAND SET (MOBILE PHONE) AND THE ASSESSE E(BSNL) ACTIVATING IT .BESIDES GETTING CONNECTION TO THE MO BILE NETWORK, THE SIM CARD HAS NO VALUE OR USE FOR THE SUBSCRIBER . IN OTHER WORDS, SIM CARD IS WHAT LINKS THE MOBILE SUBSCRIBER TO THE ASSESSEE'S (BSNL) NET WORK. THEREFORE SUPPLY OF SIM CARD WHETHER IT IS TREATED AS SALE BY THE ASSESSEE(BSNL) OR NOT, IS ONLY FOR THE PURPOSE OF RENDERING CONTINUED SERVICES BY THE ASSE SSEE(BSNL) TO THE SUBSCRIBER OF THE MOBILE PHONES. BESIDES THE PU RPOSE OF RETAINING A MOBILE PHONE CONNECTION WITH A SERVICE PROVIDER, THE SUBSCRIBER HAS NO USE OR VALUE FOR THE SIM CARD PUR CHASED BY HIM FROM THE ASSESSEE'S DISTRIBUTOR. THE POSITION IS SA ME SO FAR AS RECHARGE COUPONS OR E TOP-UPS ARE CONCERNED WHICH A RE ONLY AIR TIME CHARGES COLLECTED FROM THE SUBSCRIBERS IN ADVA NCE. THERE IS NO SALE OF ANY GOODS INVOLVED AS CLAIMED B Y THE ASSESSEE (BSNL) AND THE ENTIRE CHARGES COLLECTED BY THE ASSE SSEE (BSNL) AT THE TIME OF DELIVERY OF SIM CARDS OR RECHARGE CO UPONS IS ONLY FOR RENDERING SERVICES TO ULTIMATE SUBSCRIBERS AND THE DISTRIBUTOR IS ONLY MIDDLEMAN ARRANGING CUSTOMERS OR SUBSCRIBER S FOR THE ASSESSEE (BSNL). THE TERMS OF DISTRIBUTION AGREEMENT CLEARLY INDICAT E THAT IT IS FOR THE DISTRIBUTOR TO ENROLL THE SUBSCRIBERS WITH PROP ER IDENTIFICATION AND DOCUMENTATION WHICH RESPONSIBILITY IS ENTRUSTED BY THE ASSESSEE(BSNL) ON THE DISTRIBUTORS UNDER THE AGREEM ENT. IT IS PERTINENT TO NOTE THAT BESIDES THE DISCOUNT GIVEN A T THE TIME OF SUPPLY OF SIM CARDS AND RECHARGE COUPONS , THE ASSE SSEE(BSNL) IS' NOT PAYING ANY AMOUNT TO THE DISTRIBUTORS FOR T HE SERVICES RENDERED BY THEM LIKE GETTING THE SUBSCRIBERS IDENT IFIED, DOING THE DOCUMENTATION WORK AND ENROLLING THEM AS MOBILE SUB SCRIBERS TO THE SERVICE PROVIDER NAMELY THE ASSESSEE(BSNL). EVE N THOUGH THE BSNL HAS CONTENDED THAT THE RELATIONSHIP BETWEEN TH E BSNL AND THE DISTRIBUTORS IS PRINCIPAL TO PRINCIPAL BASIS TH E HONOURABLE HIGH COURT WAS UNABLE TO ACCEPT THIS CONTENTION BECAUSE THE ROLE OF THE DISTRIBUTORS AS EXPLAINED ABOVE IS THAT OF A MIDDLE MAN BETWEEN 6 SHRI PRAKASH RAMDEO JAISWAL THE SERVICE PROVIDER NAMELY BSNL AND THE CONSUMERS. THE ESSENCE OF A CONTRACT OF AGENCY IS THAT AGENT'S AUT HORITY TO COMMIT THE PRINCIPAL. IN THIS CASE THE DISTRIBUTORS ACTUALLY CANVASS BUSINESS FOR THE BSNL AND ONLY THROUGH DISTRIBUTORS AND RETAILERS APPOINTED BY THEM, BSNL GETS SUBSCRIBERS FOR THE MO BILE SERVICE. THE DISCOUNT OR COMMISSION GIVEN TO THE DISTRIBUTOR IS NOTHING BUT A MARGIN GIVEN BY THE BSNL TO THE DISTRIBUTOR AT TH E TIME OF DELIVERY OF SIM CARDS AND RECHARGE COUPONS AGAINST ADVANCE PAYMENT MADE BY THE DISTRIBUTOR. THE DISTRIBUTOR UN DOUBTEDLY CHARGES OVER AND ABOVE WHAT IS PAID TO THE BSNL AND THE ONLY LIMITATION IS THAT THE DISTRIBUTOR CANNOT CHARGE AN YTHING MORE THAN THE MRP SHOWN IN THE PRODUCT NAMELY SIM CARDS, RECH ARGE COUPONS. DISTRIBUTOR DIRECTLY OR INDIRECTLY GETS CU STOMERS FOR THE BSNL AND SIM CARDS ARE ONLY USED FOR GIVING CONNECT ION TO THE CUSTOMERS PROCURED BY THE DISTRIBUTOR FOR THE BSNL. THE BSNL IS ACCOUNTABLE TO THE SUBSCRIBER FOR FAILURE TO RENDER PROMPT SERVICES PURSUANT TO CONNECTIONS GIVEN BY THE DISTRIBUTOR FO R THE BSNL. THEREFORE THE DISTRIBUTOR ACTS ON BEHALF OF THE BSN L FOR PROCURING AND RETAINING CUSTOMERS. THE MOBILE SERVICE PROVIDERS ARE EXONERATED FROM SA LES TAX LIABILITY AND ARE LIABLE TO PAY SERVICE TAX TO THE CENTRAL GOVERNMENT UNDER THE FINANCE ACT., 1994 THE HOUNOUR ABLE HIGH COURT HAS CONSIDERED THE CHARGES RECEIVED BY BSNL A S CHARGES FOR SERVICES RENDERED AND NOT ON A/C OF SALES ON WHICH BSNL IS NOT SUPPOSED TO PAY ANY SALES TAX. WE ENCLOSE A COPY OF THE ABOVE VERDICT OF THE HONOU RABLE HIGH COURT FOR YOUR REFERENCE. WE ALSO REFER THE DECISION OF HONOURABLE ITAT OF CO CHIN BENCH IN THE CASE OF S.RAHUMATHULLA VS. ASSISSTANT COMMISSIO NER OF INCOME TAX. THE DECISION HAS BEEN IN FAVOUR OF THE ASSESSEE WHI CH RELATES TO OUR CASE IN TOTALITY. W E REPRODUCE THE GIST OF THE DECISION OF THE ITAT AS UNDER: BUSINESS EXPENDITURE-DISALLOWANCE UNDER SEC.40A(3) CASH PAYMENT FOR TELEPHONE CARDS, RECHARGE COUPONS ETC. BY DISTRIBUTOR TO CELLULAR SERVICE PROVIDER. RECHARGE COUPONS.SIM CARDS ETC NOT BEING GOODS IN THE REAL SENSE UPFRONT PAYMENT .THER EFORE THOUGH CLASSIFIED AS PURCHASES IN THE BOOKS OF THE ASSESSE E A DISTRIBUTOR OF SERVICE PRODUCTS OF BSNL ,ARE NOT ESSENTIALLY SO . SIMILARLY THERE IS NO PURCHASE OR ANY SERVICES BY THE ASSESSEE ON A SSUMING POSSESSION OF THE SAID SERVICE PRODUCTS. ACQUISITIO N OF THE SAME ONLY EQUIPS IT TO PERFORM ITS PART OF THE SERVICES TO THE CUSTOMERS. POSITION IS NO DIFFERENT EVEN WHEN THE SERVICE PROD UCTS ARE 7 SHRI PRAKASH RAMDEO JAISWAL SOURCED FROM OTHER SOURCES, AS THE ORIGIN THEREOF A ND THE SERVICE BEING PROVIDED TO THE CUSTOMER IS ONLY FOR AND ON B EHALF OF BSNL. THUS .THE ASSESSEE (DISTRIBUTOR) DOES NOT MAKE ANY PURCHASES EITHER OF GOODS OR SERVICES ON ACCEPTANCE OF DELIVE RY OF SIM CARDS OR OTHER SERVICE PRODUCTS AND CONSEQUENTLY DOES NOT INCUR ANY EXPENDITURE IN THIS RESPECT THOUGH THE TRANSACTION MAY BE CLASSIFIED AS SUCH IN HIS ACCOUNTS. RELATIONSHIP BE TWEEN THE SERVICE PROVIDER AND THE FRANCHISEE (DISTRIBUTOR) I S ONE OF PRINCIPAL AND AGENT AND THERE IS NO QUESTION OF ANY PURCHASE BY THE LATTER. THEREFORE NO DISALLOWANCE CAN BE MADE BY APPLYING S ECTION 40A(3) IRRESPECTIVE OF THE MODE OF PAYMENT. THE A.O. IN PARA 12.9 OF HIS ORDER HAS MADE COMMENT S REGARDING OF PRINCIPAL AND AGENT BETWEEN BSNL AND FRANCHISEE IN SHORT WHICH GOES AGAINST THE ABOVE VERDICTS .IT SEEMS THA T THE A.O. HAS NOT GIVEN PROPER CONGNIZANCE TO THE VERDICT OF HONO URABLE HIGH COURT OF KERALA IN THE CASE OF VODAFONE ESSAR CELLU LAR LTD., V/S ACIT DT.17.8.10 WHICH WAS REFERRED BY US IN OUR LET TER DT. 20.12.10. FURTHER THE A.O.HAS COMMENTED THAT ' THIS DISCOUNT IS SOUGHT TO BE OBFUSCATED BY THE ASSESSEE FOR COMMISSION TO CRE ATE A RELATIONSHIP OF PRINCIPAL AND AGENT WHICH IS NOT A FACT'. THIS COMMENT IS ALSO AGAINST THE VERDICT OF HONOURABLE H IGH COURT OF KERALA IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. V/S ACIT DT.17.8.10 WHICH WAS REFERRED BY US IN OUR LETTER D T.20.12.10.THE HONOURABLE HIGH COURT HAS GIVEN VERDICT THAT THE DI SCOUNT PAID TO THE DISTRIBUTOR IS NOTHING BUT COMMISSION SO AS THE SECTION 194H IS APPLICABLE. THE A.O.'S CONTENTION THAT WE COULD NOT EXPLAIN THE RELEVANCE OF OF ABOVE VERDICT OF HONOURABLE KERALA HIGH COURT TO THE ISSUE ON HAND IS UNJUSTIFIED AND NOT TRUE. WE HAVE EXPLAINED IN DETAILS IN OUR LETTER DT. 20.12.10 THE VERDICT AS ABOVE WHICH IS SELF EXPLANATORY. THE A.O. HAS NOT COMMENTED ANYTHING RE GARDING HIS DISAGREEMENT WITH RELATIONSHIP BETWEEN BSNL AND US AND ALSO REGARDING DISAGREEMENT ABOUT NATURE OF CHARGES PAID BY US TO BSNL. HOWEVER THE A.O. HAS STATED THAT RECHARGE COU PONS ARE A TANGIBLE COMMODITY FOR THE CONSUMERS IN THE FORM OF 'TALK TIME'. HOW A SERVICE OF THE SERVICE PROVIDER CAN BE A COMM ERCIAL COMMODITY IS NOT CLEAR TO US. THIS GOES AGAIN IN CO NTRAVENTION OF THE VERDICT OF THE ABOVE TWO HIGHER LEVEL OF JUDICI ARY AUTHORITIES. IN VIEW OF THE ABOVE FACTS ,VERDICTS OF HONOURABLE KERALA HIGH COURT AND ITAT COCHIN BENCH THE ADDITION OF THE A.O . IS NOT CORRECT AND JUSTIFIED .WE PRAY THAT THE ADDITIONS O F RS.4469492.00 SHOULD BE DELETED AND JUSTICE BE GIVEN TO US. 8 SHRI PRAKASH RAMDEO JAISWAL 4.2 A.O. HAS HELD THAT THESE ARE PURCHASES MADE BY APPELLANT. HOWEVER, APPELLANT HAS CONTENDED THAT THE RELATIONS HIP BETWEEN HIM AND BSNL IS OF 'PRINCIPAL AND AGENT' AND HENCE CASH PAYMENT CAN BE MADE BY HIM TO HIS PRINCIPAL. APPELLANT HAS QUOTED TWO CASE LAWS TO SUPPORT OF HIS CONTENTION AS MENTIONED ABOVE. I FIND MYSELF INCLINED TO AGREE WITH APPELLANT IN THE MATT ER IN VIEW OF SPECIFIC CASE LAWS AND HENCE ADDITION MADE BY A.O. IS DELETED. 5. ON APPRAISAL OF THE ABOVE MENTIONED FINDINGS, WE OB SERVE THAT THE LEARNED COMMISSIONER (APPEALS) DELETED THE ADDI TION RAISED IN VIEW OF THE PROVISIONS UNDER SECTION 40A(3) OF THE ACT ON THE BASIS OF FINDING OF THE LEARNED COMMISSIONER (APPEALS)-II, N AGPUR, IN WHICH ON THE BASIS OF IDENTICAL FACTS BY THE SAID APPELLATE AUTHORITY DELETED THE ADDITION ON THE BASIS OF THE JUDGMENT PASSED IN THE CASE OF VODAFONE ESSAR CELLULAR LTD., V/S ACIT, DATED 17 TH AUGUST 2014 AND ALSO RELIED UPON THE FINDINGS OF THE CO-ORDINATE BENCH OF THE TR IBUNAL, COCHIN BENCH, IN THE CASE OF S. RAHUMATHULLA V/S ACIT, [201 0] 127 ITD 440 (COCHIN). THE HONBLE HIGH COURT OF KERALA AND THE TRIBUNAL, COCHIN BENCH, HAVE HELD THAT THE RELATIONSHIP BETWEEN THE A SSESSEE AND THE BSNL IS PRINCIPAL AND AGENT IN NATURE, THEREFORE, THE PROVISIONS UNDER SECTION 40A(3) HAS NOT BEEN ATTRACTED AND, AC CORDINGLY, THE LEARNED COMMISSIONER (APPEALS) ALSO DELETED THE ADD ITION MADE BY THE ASSESSING OFFICER TO THE TUNE OF ` 7,62,692. NO DISTINGUISHABLE MATERIAL HAS BEEN PRODUCED BEFORE US TO DEVIATE FROM THE FIN DINGS OF THE LEARNED COMMISSIONER (APPEALS) IN QUESTION. THE MAT TER OF CONTROVERSY HAS BEEN ADJUDICATED EARLIER IN THE ABO VE MENTIONED CASE AND THE CASE OF THE ASSESSEE HAS DULY BEEN COVERED WITH THE CASE 9 SHRI PRAKASH RAMDEO JAISWAL RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE MENTIONED ABOVE. FINDING NO TANGIBLE MATERIAL OR ANY OTHER LAW CONTR ARY TO THE LAW RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE AR E OF THE VIEW THAT THE LEARNED COMMISSIONER (APPEALS) HAS PASSED THE O RDER IN QUESTION JUDICIOUSLY AND CORRECTLY WHICH IS NOT REQUIRED TO BE INTERFERED WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THESE ISSUES ARE DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. THUS, THE GR OUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS HEREBY ORDERED T O BE DISMISSED. C.O NO.13/NAG./2012 7. THE ASSESSEE HAS FILED THIS CROSS OBJECTION AGAINST THE DELETION OF ADDITION MADE BY THE ASSESSING OFFICER IN VIEW OF T HE PROVISIONS OF SECTION 40A(3) OF THE ACT. 8. ON APPRAISAL OF THE FINDING OF THE LEARNED COMMISSI ONER (APPEALS), WE OBSERVE THAT THE LEARNED COMMISSIONER (APPEALS) HAS RIGHTLY DELETED THE SAID ADDITION IN VIEW OF THE DE CISION OF THE HONBLE HIGH COURT OF KERALA IN VODAFONE ESSAR CELLULER LTD . (SUPRA) AND ON THE BASIS OF DECISION OF CO-ORDINATE BENCH OF THE TRIBUN AL, COCHIN BENCH IN S. RAHUMATHULLA (SUPRA). NO LAW CONTRARY TO THE SAI D LAW HAS BEEN PRODUCED BY THE REVENUE. THE LEARNED COMMISSIONER ( APPEALS) HAS 10 SHRI PRAKASH RAMDEO JAISWAL RIGHTLY DELETED THE ADDITION RAISED BY THE ASSESSIN G OFFICER IN VIEW OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE LE ARNED COMMISSIONER (APPEALS) HAS RIGHTLY HELD THAT THE RELATIONSHIP OF THE ASSESSEE WITH BSNL IS PRINCIPAL AND AGENT TO WHICH PROVISIONS OF SECTION 40A(3) IS NOT APPLICABLE. ACCORDINGLY, WE AFFIRM THE FINDING OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE AND ALLOW THE GROUND RAISED BY THE ASSESSEE. ISSUE NO.3 9. UNDER THIS ISSUE, THE ASSESSEE HAS RAISED THE QUESTI ON THAT THE LEARNED COMMISSIONER (APPEALS) HAS RIGHTLY DELETED THE ADDITION OF ` 1,28,350, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS OF STOCK. THE FINDING OF THE LEARNED COMMISSIONER (APP EALS) IS HEREBY REPRODUCED BELOW:- 3.3 IT IS CLEAR THAT AFTER SURRENDERED, APPELLANT INTRODUCED THE CASH IN BOOKS AND NOW WANTS TO TAKE ITS ADVANTAGE A GAINST THE ADDITIONS MADE ON ACCOUNT OF; I) DISALOWANCE OF TRAVELLING EXPENSES OF RS.10,000/ - II) DISALLOWANCE OF AGRICULTURAL EXPENSES III) ADDITION AGAINST EXCESS STOCK OF RS.1,28,350/- IT IS CLEAR THAT FIRST TWO DISALLOWANCES ARE NOT CO NNECTED WITH SURVEY AND THAT CANNOT BE TELESCOPED IN TO RS.8 LAK HS SURRENDERED BY APPELLANT DURING SURVEY THEY ARE ADDITIONAL POIN TS RAISED BY A.O. NOT EMANATING FROM SURVEY, HENCE, CANNOT BE SE T OFF AGAINST RS.8 LAKHS SURRENDERED BY APPELLANT. HOWEVER, THIRD ADDITION ON ACCOUNT OF EXCESS STOCK IS DIRECTLY RELATED TO SURV EY AND HENCE SEPARATE ADDITION MADE BY A.O. ON THIS ACCOUNT IS H ELD TO BE PART OF RS.8 LAKHS DECLARED. HENCE, SEPARATE ADDITION IS NOT CALLED FOR. HENCE THIS GROUND IS PARTLY ALLOWED. 11 SHRI PRAKASH RAMDEO JAISWAL 10. ON APPRAISAL OF THE ABOVE MENTIONED FINDINGS, WE OB SERVE THAT THE DISALLOWANCE OF TRAVEL EXPENDITURE AND AGRICULT URAL EXPENDITURE WERE NOT PART OF SURVEY. HOWEVER, THE ADDITION AGAI NST THE EXCESS STOCK OF ` 1,28,350 WAS THE PART OF SURVEY AND DURING THE SUR VEY THE ASSESSEE HAS DECLARED HIS ADDITIONAL INCOME TO THE TUNE OF ` 8 LAKH, THEREFORE, IN THE SAID CIRCUMSTANCES, THE LEARNED C OMMISSIONER (APPEALS) HAS RIGHTLY DELETED THE SAID ADDITION. CO NSEQUENTLY, WE AFFIRM THE FINDINGS OF THE LEARNED COMMISSIONER (AP PEALS) ON THIS ISSUE AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND AS SESSEES CROSS OBJECTION IS HEREBY DISMISSED BEING INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 29.06.2017 SD/ - P.K. BANSAL VICE PRESIDENT SD/ - AMARJIT SINGH JUDICIAL MEMBER NAGPUR, DATED: 29.06.2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, NAGPUR