Sanjay Kale, V. Income Tax Officer-1,

ITA 234/JAB/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2247 (ITAT-JABALPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-03-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 23-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G N PUROHIT
• Keywords: Business income; Non-deduction of tax
• Section: 40A(3); 143(3); 37(1); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 234/JAB/2015 / ASSESSMENT YEAR : 2008-09 SANJAY KALE, VISHNU NAGAR, PARASIA ROAD, CHHINDWARA (MP) PAN : AMCPK 1268 L VS INCOME TAX OFFICER-1, CHHINDWARA (MP) / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI G.N. PUROHIT, SR. ADV. REVENUE BY : SHRI P.D. CHOUGULE, DR / DATE OF HEARING : 14/03/2018 / DATE OF PRONOUNCEMENT: 16/03/2018 / O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER:- THIS APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2008-09 IS DIRECT ED AGAINST THE ORDER OF THE CIT(A)-I, JABALPUR DATED 22.09.2015 VID E APPEAL NO.J/CIT/A/I/JBP/ITO/W/I/CWA/203/10-11, ARISING OUT OF ORDER UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER RE FERRED TO AS THE ACT), FRAMED ON 24.12.2010 BY THE ITO-1, CHHINDWARA. 2. BRIEFLY STATED FACTS, AS CULLED OUT FROM THE RECORDS , ARE THAT ASSESSEE IS AN INDIVIDUAL RUNNING PROPRIETORSHIP FIRM M/S. S.K. E NTERPRISES WHICH IS ENGAGED IN THE BUSINESS OF DERIVING COMMISSION RECEI PTS FROM TATA FINANCE IN RELATION TO FINANCE SCHEME FOR FOUR WHEELERS. IN COME OF RS.2,67,050/- DECLARED IN THE RETURN OF INCOME FILED ON 25.03.2009. CASE S ELECTED THROUGH CASS AND NECESSARY NOTICES UNDER SECTION 143(2)/142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. LEARNED ASSESSING OFFICER MADE VARIOUS ADDITION TOTALING TO RS.16,64,162/- WHICH MAJORLY INCLUDED DISALLOWAN CE UNDER SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT S OURCE ON COMMISSION PAID AT RS.11,15,549/- AND ASSESSED TOTAL INCOME OF THE ASSESSE E AT ITA NO. 234/JAB/2015 SANJAY KALE VS ITO AY : 2008-09 2 RS.19,31,210/-. APPEAL BY THE ASSESSEE BEFORE THE LEARNED C IT(A) BROUGHT PART RELIEF. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF T HE CASE IN CONFIRMING THE ADDITION OF RS 11,15,549/- ON WRONG ASSUMPTI ON OF THE FACTS OF THE CASE. THE ADDITION OF RS 11,15,549/- SHOULD BE QUASHED IN T OTO. 2. THE LEARNED CIT(A) IS NOT JUSTIFIED IN IGNORING THE R EVISED GROUNDS OF APPEAL SUBMITTED BEFORE HIM ON 11.09.2015 AT HIS BEHEST AS THE GROUN DS RAISED WERE ARGUMENTATIVE AND IGNORING THE OF NOTIFICAT ION NO S.O.17.17(E) DATED 12 TH JANUARY 1977 AND PROVISIONS OF SECTION 44AA AND 44AB FOR CONFIRMING THE ADDITION OF RS 11,15,549/- SAME SHOULD BE DELETE D. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT SECTION 40(A)(IA) AND 194H HAD NO APPLICATION IN THE FACTS OF THE CASE NO DISALLOWA NCE COULD BE MADE BY THE A.O. FOR OVERRIDING PAYMENT OF COMMISSION TO KAMAL KUMAR AHILYA ADDITION IS UNWARRANTED. 4. THE LEARNED CIT(A) HAS NOT ISSUED ANY NOTICE IN TERMS OF SECTION 251(4) DENYING OPPORTUNITY TO THE ASSESSEE BEFORE CHANGING THE BASI S OF ADDITION FROM 40(A)(IA) TO NONE PROVING OF SECTION 37(1) WHERE THE GENUINENESS OF PAYMENT IS NOT DOUBTED BY THE A.O. THE ADDITION IS NOT SUSTAI NABLE IN LAW. 5. THE OBSERVATION OF CIT(A) IN PARA II OF THE ORDER FOR CONDITIONAL DELETION OF ADDITION SHOULD BE EXPUNGED. 3. FROM THE PERUSAL OF ABOVE GROUNDS, FOLLOWING TWO IS SUES NEED OUR ADJUDICATION VIZ. (1) WHETHER THE LEARNED CIT(A) WAS JUST IFIED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 40(A)(IA) AT RS.11,15,549/- AND (2) WHETHER THE ASSESSEE IS LIABLE TO GET IT ACCOUNTS AUDITED UNDER SECTION 44AB OF THE ACT. AS BOTH THE ISSUES ARE COMMONLY RELATED TO THE COMMISSION INCOME AS WELL AS COMMISSION EXPENDITURE, WE ARE ADJUDICATING TH EM TOGETHER. 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS HAVING AN AGREEMENT WITH TATA FINANCE AND RECEIVES COMMIS SION AS PER THE PERCENTAGE AND OTHER CONDITIONS MENTIONED IN THE AGREE MENT. DURING THE ITA NO. 234/JAB/2015 SANJAY KALE VS ITO AY : 2008-09 3 YEAR UNDER ASSESSMENT, GROSS COMMISSION RECEIPTS AS PE R THE TDS CERTIFICATE IS RS.21,95,772/- ON WHICH TATA FINANCE HAS DEDUCTED TDS. FUR THER, THE ASSESSEE, IN ORDER TO CONDUCT THE BUSINESS MORE EXPE DITIOUSLY, ENTERED INTO A SUB-CONTRACT WITH MR. KAMAL KUMAR AHELIYA, THEREBY AGREEI NG TO SHARE 50% COMMISSION. IT HAS FURTHER CONTENDED THAT THE GROSS R ECEIPTS DURING THE YEAR WAS MUCH BELOW THAN THE PRESCRIBED LIMIT OF GROSS TUR NOVER REQUIRED FOR THE PURPOSE OF APPLICATION OF PROVISIONS OF SECTION 44AB O F THE ACT FOR GETTING ITS ACCOUNTS AUDITED. AS THE ASSESSEE WAS NOT REQUIRED TO GET ITS ACCOUNTS AUDITED UNDER SECTION 44AB OF THE ACT, IT IS ALSO NOT R EQUIRED TO DEDUCT THE TAX AT SOURCE AND THEREFORE, NO DISALLOWANCE WAS CALLED FOR UNDER SECTION 40(A)(IA) OF THE ACT. LEARNED COUNSEL FURTHER REFERRED AND RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006-07 AND 2008-09 IN ITA NOS. 233 & 234/JAB/2015 DATED 13.12.2016, WHICH HAS BEEN DECIDED IN FAVOUR OF THE ASSES SEE. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE VEHEME NTLY ARGUED SUPPORTING THE ORDER OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RE CORD PLACED BEFORE US AND ALSO GONE THROUGH THE ORDER OF THE CO-O RDINATE BENCH OF THIS TRIBUNAL DATED 13.12.2016 RELIED UPON BY THE LEARNED COUNSEL F OR THE ASSESSEE. THE ISSUES RAISED IN THIS APPEAL RELATES TO THE DISALLOWANCE UNDER SECTION 40(A) (IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE ON THE ALLEGED COMMISSION EXPENDITURE OF RS.11,15,549/-. WE OBSERVE THAT T HE ASSESSEE, WHO IS AN AGENT ON BEHALF OF TATA FINANCE, RECEIVED A GROS S COMMISSION OF RS.21,95,772/- DURING THE YEAR. THERE ALSO STAND ENTERED A S UB-CONTRACT BETWEEN THE ASSESSEE AND MR. KAMAL KUMAR AHELIYA, THEREB Y AGREEING TO SHARE THE COMMISSION RECEIVED FROM TATA FINANCE. IT IS TRUE THAT THE TOTAL COMMISSION IS RECEIVED IN THE ACCOUNT OF THE ASSESSEE , BUT IN THE FINANCIAL STATEMENT PREPARED BY THE ASSESSEE, ASSESSEE HAS DISCLOS ED GROSS RECEIPT OF ITA NO. 234/JAB/2015 SANJAY KALE VS ITO AY : 2008-09 4 RS.10,80,223/- AND THE REMAINING AMOUNT OF RS.11,15,549/- HAS BEEN DISCLOSED BY MR. KAMAL KUMAR AHELIYA IN HIS PROFIT AND LOSS ACCOUNT. DURING THE ASSESSMENT PROCEEDINGS, LEARNED ASSESSING OFFICER TOOK A VIEW THAT THE ASSESSEE SHOULD HAVE DISCLOSED TOTAL GROSS REC EIPTS UNDER HIS NAME IN THE PROFIT AND LOSS ACCOUNT AND THE COMMISSION OF RS.11,15,549/- IS TO BE SHOWN AS PAYMENT MADE TO MR. KAMAL KUMAR AHELIYA TOWARDS C OMMISSION EXPENDITURE. LEARNED ASSESSING OFFICER ALSO CONCLUDE D THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON THE ALLEGED COMMI SSION EXPENDITURE OF RS.11,15,549/-. ON THE BASIS OF THESE FINDINGS, LEARNED ASS ESSING OFFICER MADE ADDITION UNDER SECTION 40A(3) AT RS.3,65,549/- AND DISALLOWAN CE UNDER SECTION 40(A)(IA) AT RS.11,15,549/-. LEARNED CIT(A), WHI LE ADJUDICATING THIS ISSUE, DELETED THE DISALLOWANCE UNDER SECTION 40A(3)OF THE ACT RELATING TO CASH PAYMENT EXCEEDING RS.20,000/- BY OBSER VING THAT WHEN THE DISALLOWANCE OF RS.11,15,549/- IS CONFIRMED, THEN MAKING THE DISALLOWANCE OF RS.3,65,549/- UNDER SECTION 40A(3) OF THE ACT WILL MAKE IT A DOUBLE ADDITION. 6. FROM THE PERUSAL OF THE FINANCIAL STATEMENTS AS WELL AS PAPER BOOK, WE FIND THAT REVENUE HAS NOT DISPUTED THE FACT THAT THE GR OSS RECEIPT OF THE ASSESSEE HAS NOT EXCEEDED RS. 21,95,772/- WHICH IS THE TOTAL COMMISSION PROVIDED BY TATA FINANCE AND DULY SHOWN IN FORM NO.26AS. LOOKING TO THIS FIGURE OF TURNOVER OF RS.21,95,772/-, THERE STANDS NO REASON TO JUSTIFY THE ACTION OF THE ASSESSING OFFICER TREATING THE ASSESSEE LIABLE FOR GETTING ITS ACCOUNTS AUDITED UNDER SECTION 44AB OF THE ACT, BECAUSE THE ALLEGED RECEIPT IS FROM COMMISSION AND TATA FINANCE HAS ALSO SHOWN THE PAYMENT AS COMMISSION AND THEREFORE, THE GROSS RECEIPT OF COMMI SSION IS A BUSINESS RECEIPT AND NOT A PROFESSIONAL RECEIPT. IT IS ALSO NOT DISPUTED BY THE REVENUE THAT THE IN THE PRECEDING YEAR THE ASSESSEES BOOKS OF ACCOUNTS WERE NOT REQUIRED TO BE AUDITED UNDER SECTION 44AB OF THE ACT WHICH COULD HAVE ITA NO. 234/JAB/2015 SANJAY KALE VS ITO AY : 2008-09 5 TRIGGERED THE POSSIBILITY OF MAKING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE. IT IS ALS O PERTINENT TO NOTE THAT THAT THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 13.12.2016 IN ASSESSEES OWN CASE FOR AYS 2006-07 AND 2008-09 (SUPRA) HAS DECIDED THE VERY ISS UE OF PARTING OF THE COMMISSION WITH MR. KAMAL KUMAR AHELIYA IN 50:50 RATIO AND THE TRIBUNAL HAS DECIDED AS FOLLOWS:- 12. I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. THIS IS A CASE WHERE I NOTED THAT THE ASSESSEE HAD PAID 50% OF THE COMMISSION RECEI VED TO KAMAL AHELYA ON THE BASIS OF THE SERVICE RENDERED BY HIM IN GETTING THE LOAN PROPOSAL ETC. PREPARED AS WELL AS FOLLOW UP WITH THE C LIENTS AND THE ASSESSEE. THE ASSESSEE WAS CARRYING ON THE BUSINESS AS A COMMISS ION AGENT OF THE TATA FINANCE FOR THE LAST FOUR YEARS. THE COMMISSION HAS ALS O BEEN PAID TO SHRI KAMAL AHELYA FROM THIS YEAR, AS THE AGREEMENT HAS BEEN ENT ERED INTO AND MADE EFFECTIVE FROM 01.04.2005. THE ASSESSEE HAS DULY EXPLAINED BEF ORE THE ASSESSING OFFICER AS IS APPARENT FROM PAGE 2 OF THE AS SESSMENT ORDER, THE NATURE OF THE SERVICES TO BE RENDERED BY KAMAL AHELYA. KAMAL AHELYA ALSO USES THE LAPTOP COMPUTER, MOBILE AND ONLINE FACILITY FO R GUIDING THE CUSTOMER AND PROVIDING THE INFORMATION TO THEM FOR GETTING THE VEHIC LE LOAN. THIS IS AN ARRANGEMENT ENTERED INTO BETWEEN THE ASSESSEE AS WELL AS KAMAL AHELYA. ONCE THE ASSESSEE HAS SUBMITTED THAT THE COPY OF THE AGREE MENT AND THE NATURE OF THE ACTIVITIES HAVE BEEN CARRIED OUT BY KAMAL A HELYA ON THE BASIS OF WHICH THE COMMISSION HAS BEEN PAID. IN MY OPINION, THE ONUS GETS SHIFTED ON THE ASSESSING OFFICER TO BRING THE EVIDENCE TO THE CONTRA RY. WITHOUT BRINGING ANY EVIDENCE ON RECORD, MERELY NOT RELYING ON THE ASSESSE E, WILL NOT MEET THE REQUIREMENT OF THE LAW. THIS IS A SETTLED LAW IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF DAULATRAM RAWATM ULL REPORTED IN 87 ITR 349 (SC) THAT APPARENT IS REAL. ONUS IS ON THE PERSON WHO ALLEGES APPARENT IS NOT REAL. THE ASSESSEE HAS DULY SUBMITTED THE NATURE OF THE SERVICES AS WELL AS THE AGREEMENT. I, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DELETE THE ADDITION OF RS.3,98,878/ -. 7. FROM THE PERUSAL OF ABOVE ORDER, WE FIND THAT THE IS SUE ADJUDICATED BY THE CO-ORDINATE BENCH RELATED TO THE GENUINENESS O F THE EXPENDITURE RELATING TO COMMISSION PAID TO MR. KAMAL KUMAR AHELIYA. APPLYING THE DECISION OF THE TRIBUNAL ON THE FACTS OF THE INSTANT AP PEAL, WE ARE OF THE VIEW THAT THE ASSESSEE WAS NOT REQUIRED TO GET IT BOOKS OF ACCOUNTS AUDITED UNDER ITA NO. 234/JAB/2015 SANJAY KALE VS ITO AY : 2008-09 6 SECTION 44AB OF THE ACT AND EVEN IF THE GROSS RECEIPT S ARE TAKEN AT RS.21,95,772/-, THE ASSESSEE IS ELIGIBLE TO CLAIM THE EXPEND ITURE OF COMMISSION PAID TO MR. KAMAL KUMAR AHELIYA AT RA.11,15,549/-. H OWEVER, ONE FACT WHICH HAS ALSO NOT BEEN DISPUTED BY THE ASSESS EE THAT OUT OF TOTAL COMMISSION EXPENDITURE OF RS.11,15,549/-, SUM OF RS.3,65,549/- H AS BEEN PAID IN CASH FOR WHICH LEARNED ASSESSING OFFICER HAS MAD E DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT WHICH WAS DELETED BY TH E LEARNED CIT(A) ONLY BECAUSE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE A CT WAS CONFIRMED. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, ARE OF THE VIEW THAT DISALLOWANCE UNDER SECTION 40(A)(IA) AT RS.11,15,549/- S TANDS DELETED, BUT THE DISALLOWANCE UNDER SECTION 40A(3) OF TH E ACT FOR THE ALLEGED CASH EXPENDITURE EXCEEDING RS.20,000/- IN CASH TOTALING TO RS.3,65,549/- NEEDS TO BE CONFIRMED. WE ORDER ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 16 TH MARCH, 2018 AT JABALPUR. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER JABALPUR; DATED 16/03/ 2018 *BIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, JABALPUR 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, JABALPUR