MINAXI R SOBTI, MUMBAI V. ASST CIT 19(3), MUMBAI

ITA 2324/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3206 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OTHER TWO APPE; SHRIMATI BHARTI SINGH MUM
• Keywords: Retrospective amendment; Fair market value; Tax effect
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO. 2324 /MUM/201 4 ( / ASSESSMENT YEAR : 20 08 - 09 ) SMT.MI NAXI R SOBTI, 301/302, A N CHAMBERS , TURNER ROAD, BANDRA (W), MUMBAI - 400050 / VS. ASSTT. COMMISSIONER OF INCOME TAX 1 9 ( 3 ) , AYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ./ I.T.A. NO. 2644/MUM/2012 ( / ASSESSMENT YEAR : 20 0 4 - 0 5 ) ASSTT. COMMISSIONER OF INCOME TAX 19(3), ROOM NO.305, 3 RD FLOOR, PIRAMAL CHAMBERS, MUMBAI - 400012 / VS. SMT.MINAXI R SOBTI, 301/302, A N CHAMBERS , TURNER ROAD, BANDRA (W), MUMBAI - 400050 ./ I.T.A. NO. 2689/MUM /2012 ( / ASSESSMENT YEAR : 20 05 - 06 ) INCOME TAX OFFICER 19(3)(3), ROOM NO.305, 3 RD FLOOR, PIRAMAL CHAMBERS, MUMBAI - 400012 / VS. SMT.MINAXI R SOBTI, 301/302, A N CHAMBERS , TURNER ROAD, BANDRA (W), MUMBAI - 400050 ./ PAN : ADFPS2234L / ASSESSEE BY SHRI VIJAY MEHTA / REVENUE BY SHRIMATI BHARTI SINGH 2 2644 /MUM/ 201 2 AND OTHER TWO APPELS / DATE OF HEARING : 2 4 . 5.2016 / DATE OF PRONOUNCEMENT : 27. 5.2016 / O R D E R PER RAJESH KUMAR, A. M: THE SE ARE THREE APPEALS UNDER CONSIDERATION. OUT OF THESE THREE APPEALS, ITA NO.2324/MUM/2014 IS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 09 , WHICH IS DIRECTED AGAINST ORDER OF LD.CIT(A ) DATED 3.1.2014. APPEAL S BEARING ITA NO S . 2644/MUM/2012 AND 2689/MUM/2012 ARE FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 200 4 - 05 AND 200 5 - 06 . SINCE, THE SE APPEALS PERTAIN TO THE SAME ASSESSEE , THEREFORE, FOR THE SAKE OF CONVENIENCE; THEY ARE CLUBBED TOGETHER, HEARD TOGETHER AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE SUCCEEDING PARAGRAPHS. 2. FIRST OF ALL, WE WILL TAKE THE APPEAL FILE BY THE ASSESSEE. THE ONLY ISSUE RAISED IN THIS APPEAL OF ASSESSEE IS AGAINS T THE ORDER OF LD.CIT(A) CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE PAYMENT OF EXPORT COMMISSION PAID TO ASSESSEES HUSBAND IN PURSUANCE TO AGENCY AGREEMENT AMOUNTING TO RS.12,57,388/ - BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B)OF THE INCOME TAX ACT, 1961 (THE ACT). 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A EXPORTER OF M/S MINAR ENTERPRISES SINCE 1993 WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OF SANITARY ARTICLES, BATHROOM FITTINGS AND OTHER BUILDER HARDWARE MAINLY TO SAUDI ARABIA, 3 2644 /MUM/ 201 2 AND OTHER TWO APPELS HONGKONG, CHINA, UAE AND EUROPEAN COUNTRIES. ADMITTEDLY, NO LOCAL SALES MADE BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS PAID COMMISSION AGAINST EXPORT INCOME AT RS.12,57,388/ - . THE AO REQU IRED THE ASSESSEE TO EXPLAIN THE PAYMENT OF OVERSEAS COMMISSION AND ALSO FILE D DETAILS RELATING TO THE SAME. THE ASSESSEE EXPLAINED THAT THE SAID COMMISSION HAS BEEN PAID TO HER HUSBAND SHRI RAJIV KUMAR SOBTI IN VIEW OF AGENCY COMMISSION AGREEMENT ENTER ED INTO WITH HIM AT FIXED RATE OF 3%. ACCORDING TO THE ASSESSEE, HER HUSBAND SHRI RAJIV KUMAR SOBTI LOOKS AFTER THE ENTIRE EXPORT BUSINESS INCLUDING THE SALES, MAINTENANCE OF LABOUR WORK, AND RECEIPT OF PAYMENT ETC. ACCORDING TO THE ASSESSEE THE ENTIR E RESPONSIBILITY OF THE EXPORT BUSINESS IS ON HER HUSBAND AND THIS IS A PART OF AGENCY AGREEMENT. BUT THE AO WAS NOT CON VINCED WITH THE EXPLANATION TENDERED BY THE ASSESSEE AND ACCORDINGLY HE DISALLOWED THE COMMISSION PAYMENT PAID TO HER HUSBAND BY INV OKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. AGGRIEVED, BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO ALSO CONFIRMED THE ACTION OF THE AO BY OBSERVING AND HOLDING AS UNDER : 5. DECISION: 5.1 I HAVE DULY CO NSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT. GROUNDS OF APPEAL NO. 1 TO 6, 8 AND 10 ARE AGAINST THE ADDITION OF RS.12,57,388/ - BY WAY OF DISALLOWANCE OF EXPORT COMMISSION PAID TO HUSBAND OF THE APPELLANT. THE APPELLANT'S SUBMISSIONS ON THE ABOVE GROUND S OF APPEAL ARE THAT THERE IS A LEGALLY ENFORCEABLE AGENCY AGREEMENT BETWEEN THE APPELLANT AND 'HER' HUSBAND, AND PAYMENT OF THE COMMISSION HAS BEEN MADE T HR OUGH PROPER' 'BANKING - CHANNELS AND M/S 4 2644 /MUM/ 201 2 AND OTHER TWO APPELS AL - DAWA MAH ESTABLISHMENT WITH WHOM, APPELLANT'S HUSBAND IS WORKING, HAS ALSO CONFIRMED THE RECEIPT OF EXPORT COMMISSION. THE APPELLANT'S FURTHER SUBMISSION IS THAT THE COMMISSION HAS BEEN PAID FOR VARIOUS SERVICES, VIZ. MARKETING, NEGOTIATING PRICES, PROCURING ORDERS ETC AND IN THE ASSESSMENT YEARS 2004 - 05 AND 2005 - 06, THE CIT(AL HAS ALLOWED THE ABOVE COMMISSION PAYMENTS. THE APPELLANT HAS, HOWEVER, NOT FURNISHED ANY PROOF TO SHOW THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SHE FURNISHED D ETAILS OF THE ORDERS PROCURED BY HER HUSBAND AND THE PARTIES WITH WH OM HE NEGOTIATED PRICES AND MARKETING OF GOODS, SENDING INDENT AND ALSO THE HANDLING OF EXPORT DOCUMENTS, AS WELL AS FOLLOWING UP FOR PAYMENTS ETC. I AM, THEREFORE, INCLINED TO AGREE WITH THE FINDING GIVEN BY THE ASSESSING OFFICER THAT THE APPELLANT HAS DI VERTED A GOOD CHUNK OF PROFIT TO HER HUSBAND EMPLOYED IN SAUDI ARABIA, WHERE THE SAID INCOME IS NOT TAXABLE, AND CONFIRM THE DISALLOWANCE OF PAYMENT OF THE ALLEGED OVERSEAS COMMISSION OF RS. 12,57388/ - AND DISMISS THE ABOVE GROUNDS OF APPEAL. 4 . AGGRIEV ED BY THE DECISION OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5 . BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SHRI VIJAY MEHTA FIRST OF ALL ARGUED THAT THE ASSESSEE BEING EXPORTER OF SANITARY ARTICLES AND OTHER HARDWARE MATERIAL TO SAUDI ARABIA, HONGKONG, CHINA, UAE AND EUROPEAN COUNTRIES SINCE 1993 AND SHE IS PAYING AGENCY COMMISSION TO HER HUSBAND SINCE VERY BEGINNING. ACCORDING TO THE LD.COUNSEL, THIS COMMISSION PAYMENT HAS BEEN ALLOWED BY THE REVENUE WHILE ASSESSING THE INCOM E U/S 143(3) FOR THE ASSESSMENT YEARS 2003 - 04, 2004 - 05 AND 2005 - 06. THE LD. COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO PAGE 10 OF THE ASSESSEES PAPER BOOK WHEREIN THE ASSESSEES HUSBAND SHRI RAJIV KUMAR SOBTI INTENDED COMMISSION AGENT AND COMMISS ION PAYMENT MADE TO HIM AT THE RATE OF 3%. THE LD.COUNSEL FOR THE ASSESSEE 5 2644 /MUM/ 201 2 AND OTHER TWO APPELS PARTICULARLY REFERRED TO LETTER DATED 3.1.2003, WHEREIN COMPLETE DUTIES OF AGENT WAS PRESCRIBED WHICH READS AS UNDER : THIS IS TO INFORM YOU THAT AS PER OUR INTERNAL BUSINESS AGRE EMENT WITH MR RAJIV KUMAR SOBTI OUR COMPANY PERMITS HIM TO CARRY ON, BUSINESS IN THE NAME OF OUR COMPANY. THE COMPANY ALLOWS BOOKING ORDERS, ISSUING INDENT IN - THE NAME OF THE COMP ANY AND ALSO PERMITTING HIM TO RECEIVE THE INDENTING AGENT COMMISSION ON HIS PERSONAL NAME FOR & ON BEHALF OF OUR COMPANY FOR THE COMPANY. THE SAID BUSINESS ARRANGEMENT IS WITH ALL OUR OTHER EXPORTERS/MANUFACTURERS FROM CHINA/JAPAN/ TAIWAN/ KOREA/ THAILAND/GERMANY / ENGLAND/ITALY/INDIA ETC. 6 . THE LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT IN THE EARLIER YEARS NO SUCH DISALLOWANCES WERE MADE BY THE REVENUE. THE LD. AR ARGUED THAT THE AO HAS INVOKED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT FOR MAKING THE BUSINESS DISALLOWANCE . THE INTENTION AND PURPOSE OF THE SECTION 40A( 2)(B) IS CLEAR THAT THE DISALLOWANCE COULD BE MADE ONLY IN THE EVENTUALITY IF THE PAYMENTS ARE MADE TO RELATIVES/FRIENDS/ASSOCIATE CONCERNS, WHEREIN THE TRANSACTIONS IS SHAM ONE OR THE VALUE SHOWN ON THE BOOKS OF ACCOUNT WAS NOT REALLY PAID AND THE VALUE OF TRANSACTIONS IS NOT A BONAFIDE TO THE TRANSACTIONS AND TO SHOW THIS THE ONUS IS CAST ON THE REVENUE. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE CRUCIAL PROVISIONS OF SECTION 40A(2)(B) IN WHICH IT HAS BEEN ENUMERATED THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES. THE GOODS , SERVICES AND FACILITIES ARE THOSE WHICH HAVE MARKET VALUE WHICH ARE COMMERCIAL IN NATURE. THE REVENUE HAS TO SHOW THE PAYMENTS MADE ARE NOT REASONABLE AND NOT ACCORDING TO MARKET VALUE IN THAT EVENTUALITY THE DISALLOWANCE CAN BE MADE. 6 2644 /MUM/ 201 2 AND OTHER TWO APPELS ACCORDING TO HIM, THE REVENUE IS UNABLE TO SHOW ANYTHING THAT THE PAYMENT IS UNREASONABLE AND NOT ACCORDING TO MARKET PRACTICE. IN VIEW OF THESE ARGUMENTS, THE LD. COUNSEL OF THE ASSESSEE REQUESTED FOR DELETION OF ADDITION. 7 . O N THE OTHER HAND, THE LD.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. WE HAVE CONSIDERED THE FACTS THAT THE ASSESSEE IS PAYING THE COMMISSION TO HER HUSBAND WHO IS A COMMISSION AGENT FOR HER BUSINESS OF SANITARY WARE AND EXPORTING THE SAME TO THE COUNTRIES MENTIONED ABOVE. THE COMMISSION IS BEING PAID IN LIEU OF VARIOUS SERVICES RENDERED BY HIM LIKE BOOKING ORDERS, ISSUING INDENT IN - THE NAME OF THE COMPANY AND A LSO PERMITTING HIM TO RECEIVE THE INDENTING AGENT COMMISSION ON HIS PERSONAL NAME F OR & ON BEHALF OF THE ASSESSEES COMPANY AND ALSO FOLLOW UP THE PAYMENT ETC. WE ALSO FIND THAT THERE IS NO FINDING RECORDED BY THE AO AND THE LD.CIT(A) THAT THE PAYMENT MADE B Y THE ASSESSEE TO HER HUSBAND IS EXCESSIVE OR UNREASONABLE IN TERMS OF SECTION 40A(2)(B) OF THE ACT. EVEN OTHERWISE THE REVENUE HAS CONSTANTLY ALLOW ED THIS COMMISSION IN THE EARLIER YEARS I.E. AYS 2003 - 04, 2004 - 05 AND 2005 - 06 AND EVEN UNDER SCRUTINY ASSESS MENT , THE REVENUE HAS ALLOWED THIS COMMISSION IN THE ASSESSMENT YEAR 2004 - 05 AND 2005 - 06. THIS IS ONLY ASSESSMENT YEAR IN WHICH THE REVENUE HAS DISPUTED THE COMMISSION PAYMENT MADE TO THE HUSBAND OF 7 2644 /MUM/ 201 2 AND OTHER TWO APPELS ASSESSEE. IN TERMS OF THE ABOVE DISCUSSIONS, WE ARE OF T HE VIEW THAT THIS ADDITION DESERVES TO BE DELETED. ACCORDINGLY, WE DELETE THE SAME. 9 . NOW, WE WILL TAKE UP THE APPEALS OF THE REVENUE. 10. THE REVENUE HAS FILED THESE TWO APPEALS FOR THE ASSESSMENT YEARS 200 4 - 05 AND 200 5 - 06 CHALLENGING THE SEPARATE OR DER OF LD.CIT(A) DATED 9.1.2012 . THE ASSESSEE FILED HER RETURN OF INCOME ON 1.11.2004 AND 22.3.2006 D ECLARING TOTAL INCOME AT RS. 1477,770 AND RS.6,62,720/ - FOR THE ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 RESPECTIVELY. 11 . THE AO COMPLETED THE ASSESSMENT U/S 143(3) AT AN AMOUNT OF RS. RS.37,08,980/ - AND RS.31.78,380 FOR THE ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 RESPECTIVELY. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE CHALLENGED THIS ADDITION BEFORE THE LD.CIT(A), WHO IN TURN DELETED THE ADDITION OF RS.26,26 ,304/ - RS.20,57,631/ - RESPECTIVELY FOR BOTH THE ASSESSMENT YEARS IN QUESTION BY FOLLOWING THE DECISION RENDERED IN THE CASE OF ASSESSEE HERSELF FOR THE ASSESSMENT YEAR 2004 - 05. AGGRIEVED BY THE DECISION OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 12 . AT THE OUTSET, THE LD.AR SUBMITTED BEFORE US THAT IN BOTH THE CASES, THE TAX EFFECT INVOLVED IS LESS THAN RS.10 LAKHS . THE LD. AR SUBMITTED THAT RECENTLY, THE CBDT HAS ISSUED A CIRCULAR ISSUED BEARING NO.21/2015 DATED 10.12.2015 PRESCRIBING NEW MON ETARY LIMIT OF RS.10.00 LAKHS FOR PREFERRING APPEAL AGAINST THE ORDERS PASSED BY LD CIT(A) BEFORE THE TRIBUNAL AND PROVIDED THAT THE SAID 8 2644 /MUM/ 201 2 AND OTHER TWO APPELS CIRCULAR HAS RETROSPECTIVE EFFECT AND IS APPLICABLE TO THE EXISTING APPEALS ALSO. THEREFORE, THE LD.AR SUBMITTED THAT THESE TWO APPEALS FILED BY THE REVENUE IS NOT MAINTAINABLE AS PER THE INSTRUCTIONS GIVEN IN CBDT CIRCULAR MENTIONED ABOVE AND THEREFORE BE DISMISS ED . 13 . WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE QUANTUM IN DIS PUTE IS RS.22,31,210/ - AND RS. 11,20,749/ - FOR THE ASSESSMENT YEAR S 200 4 - 05 AND 2005 - 06 AND THE TAX EFFECT INVOLVED THEREIN IS LESS THAN RS.10 LAKHS. IN VIEW OF THE CIRCULAR ISSUED BY CBDT BEARING NO.21/2015 DATED 10.12.2015 PRESCRIBING NEW MONETARY LIMIT OF RS.10.00 LAKHS FOR PREFERRING APPEAL AGAINST THE ORDERS PASSED BY LD CIT(A) BEFORE THE TRIBUNAL, THE REVENUE IS PRECLUDED FROM PURSUING TH ESE APPEAL S , AS THE SAID CIRCULAR HAS RETROSPECTIVE EFFECT AND IS APPLICABLE TO THE EXISTING APPEALS ALSO. ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE. 1 4. THEREFORE, BY FOLLOWING THE ABOVE SAID CIRCULAR ISSUED BY CBDT, WE DISMISS THESE APPEALS FILED BY THE REVENUE. 1 5. IN SUM AND SUBSTANCE, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEALS OF THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH MAY , 201 6 SD SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 27 . 05.2016 9 2644 /MUM/ 201 2 AND OTHER TWO APPELS SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY [ / (DY./ASSTT. REGISTRA R) , / ITAT, MUMBAI