The ACIT, Circle-2, Surat V. M/s. Balaji Corporation, Surat

ITA 2360/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57309 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 07-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; TDS; Set aside
• Section: 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI MUKUL KUMAR SHRAWAT, JM AND SHRI T. R. MEENA, AM) ITA NO.2360/AHD/2009 A. Y.: 2004-05 THE A. C. I. T., CIRCLE-2, ROOM NO.110, 1 ST FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S. BALAJI CORPORATION, 2 ND FLOOR, KOHINOOR DYEING & PRINTING MILLS, SALABATPURA, SURAT PA NO. AADFB 5722 H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SAMIR TEKRIWAL, SR. DR RESPONDENT BY WRITTEN SUBMISSION DATE OF HEARING: 14-03-2012 DATE OF PRONOUNCEMENT: 23-03-2012 O R D E R PER TEJ RAM MEENA: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II , SURAT DATED 28 TH MAY, 2009 IN APPEAL NO. CAS/II/445/07-07, FOR ASSES SMENT YEAR 2004-05, CHALLENGING THE DELETION OF ADDITION OF RS .24,61,841/- MADE BY THE AO ON ACCOUNT OF DISALLOWING FOREIGN AGENT C OMMISSION AND RS.3,42,935/- ON ACCOUNT OF SELLING AND ADMINISTRA TIVE EXPENSES. 2. BRIEF FACTS OF THE CASE RELATING TO GROUND NO.1 OF THE APPEAL OF THE REVENUE ARE THAT DURING THE COURSE OF ASSESSME NT THE AO NOTICED THAT THE ASSESSEE HAD PAID COMMISSION TO FOREIGN AG ENTS FOR A SUM OF RS.24,61,841/-. THE AO ASKED THE ASSESSEE TO PRODUC E RELEVANT EXPORT INVOICES AND BANK REALIZATION STATEMENT IN T HIS REGARD. ON ITA NO.22360/AHD/2009 (AY 2004-05): ACIT VS BALAJI CORPORATION, SURAT 2 VERIFICATION OF THESE DOCUMENTS THE AO FOUND THAT T HE ASSESSEE HAD PAID ON THE VALUE OF THE INVOICES AT 10% AVERAGE RA TE. THE AO ALSO FOUND THAT THE IDENTITY OF THE AGENTS AND PURPOSE O F COMMISSION PAYMENTS WAS NOT VERIFIABLE. THE AO SOUGHT FOR THE DETAILED INFORMATION FROM THE AO UNDER THE PROVISIONS OF SEC TION 133(4) OF THE ACT AND SIMULTANEOUSLY ISSUED LETTER U/S 133(6) OF THE ACT TO SYNDICATE BANK WHICH WAS AUTHORIZED DEALER OF FOREI GN CURRENCY. THE AO ALSO RECORDED THE STATEMENT OF THE MANAGING PART NER OF THE ASSESSEE FIRM U/S 131 OF THE ACT. THE ASSESSEE FAIL ED TO RESPOND TO THE NOTICE U/S 133(4) OF THE ACT. THE BANK ALSO INF ORMED THE AO THAT THE ASSESSEE HAD NOT REMITTED ANY AMOUNT OF COMMISS ION FROM INDIA DURING THE YEAR. HOWEVER, FROM THE BANK RECONCILIAT ION CERTIFICATE IT WAS FOUND THAT THE BANK CERTIFIED THE PAYMENT OF CO MMISSION ON THE BASIS OF DECLARATION MADE BY THE ASSESSEE AS AN EXP ORTED ON THE GUARANTEED RECEIPT AND SDF FORM, WHICH WERE REQUIRE D TO BE FILED TO RESERVE BANK OF INDIA TO ENSURE THAT EXPORT PROCEED S ARE RECEIVED IN INDIA THROUGH PROPER BANKING CHANNELS. ULTIMATELY, THE AO HELD THAT NO COMMISSION COULD BE PAID TO THE BUYER ITSELF AND NO BUYER HAD CONFIRMED THE RECEIPT COMMISSION. ACCORDINGLY, THE AO DISALLOWED THE COMMISSION PAYMENT OF RS.24,61,841/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 2.1 THE LEARNED CIT(A) CONSIDERING THE OBSERVATION S OF THE AO ALONG WITH REMAND REPORTS AND THE SUBMISSIONS OF TH E ASSESSEE DELETED THE ADDITION HOLDING THAT THE AO WRONGLY AP PLIED THE PROVISIONS OF SECTION 93(1) (A) OF THE ACT WHICH RE LATES TO TRANSFER ITA NO.22360/AHD/2009 (AY 2004-05): ACIT VS BALAJI CORPORATION, SURAT 3 PRICING. THE LEARNED CIT(A) IN DOING SO, RELIED ON THE DECISION IN THE CASE OF M/S. T. M. PATEL EXPORTS. 3. WE HAVE HEARD THE LEARNED DR, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND CONSIDERED THE WRITTEN SUBMIS SION OF THE ASSESSEE. THE LEARNED DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT HIS ORDER MAY BE UPHELD. THE ASSESSE E IN ITS WRITTEN SUBMISSION REFERRED TO THE DECISIONS OF THE ITAT AH MEDABAD BENCH IN THE CASE OF (I) SHRI SAMIR A. BATRA VS ITO ORDER DATED 12-12-2008 IN ITA NO.4130/AHD/2007, SHRI ATMA PRAKASH BARA VS ADDL. CIT ORDER DATED 12-12-2008 IN ITA NO.4131 & 4552/AHD/20 07, (II) SHRI SANJAY JAIN VS DCIT ORDER DATED 16-12-2009 IN ITA NO.1533/AHD/2008, (III) ACIT VS M/S. RACHNA EXPORTS ORDER DATED 24-03-2010 IN ITA NO.3781/AHD/2007 AND IN THE CASE OF ACIT VS M/S. T. M. PATEL EXPORTS ORDER DATED 04-05-2011 IN ITA NOS. 2016 AND 2426/AHD/2008 WHEREIN ADDITIONS ON ACCOUNT OF F OREIGN BUYERS AGENT COMMISSIONS HAVE BEEN DELETED (PAPER BOOK PAG ES 12 TO 130). THE ASSESSEE FURTHER IN ITS WRITTEN SUBMISSION REFE RRED TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO. 232 OF 2009 DATED 21-12-2010 IN THE CASE OF CIT VS ATMA PRAKASH BATRA WHEREIN THE HONBLE HIGH COURT HAS DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE ON THE SAME IDENTICAL ISSUE BY DISMISSING THE DEPARTMENTAL APPEAL AND PLEADED THAT THE ORDER OF THE LEARNED CI T(A) BE UPHELD. WE FIND THAT THE ASSESSEE HAD FURNISHED COMPLETE DO CUMENTARY EVIDENCES IN RESPECT OF EXPORT COMMISSION PAYMENT I NCLUDING CONFIRMATION OF FOREIGN BUYERS AGENT DULY NOTORAIS ED BEFORE THE ITA NO.22360/AHD/2009 (AY 2004-05): ACIT VS BALAJI CORPORATION, SURAT 4 PUBLIC NOTARY IN INDIA DURING HIS VISIT TO INDIA AN D THE ASSESSEE PROVED THAT IT HAS RECEIVED THE NET SALES PROCEEDS AFTER DEDUCTION OF COMMISSION, EXISTENCE OF FOREIGN BUYERS AGENTS AND GENUINENESS OF THE TRANSACTIONS AND SERVICES RENDERED BY THEM BY F URNISHING THIRD PARTY DOCUMENTARY EVIDENCES BUT THE AO HAS IGNORED THE SAME. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT THE L EARNED CIT(A) ON PROPER APPRECIATION OF THE FACTS OF THE CASE, SUBMI SSIONS OF THE ASSESSEE AND THE CASE LAWS CITED, HAS RIGHTLY DELET ED THE ADDITION MADE BY THE AO. WE FIND NO JUSTIFICATION TO INTERFE RE WITH THE ORDER OF THE LEARNED CIT(A). THE DEPARTMENTAL APPEAL HAS NO MERIT ON THIS ISSUE. ACCORDINGLY, WE DISMISS THE GROUND NO.1 OF T HE APPEAL OF THE REVENUE. 4. REGARDING GROUND NO.2 RELATING TO 5% DISALLOWANC E OUT OF SELLING AND ADMINISTRATIVE EXPENSES AMOUNTING TO RS .3,42,935/-, THE AO HAS DISCUSSED THE ISSUE IN PARA 71 OF THE ASSESS MENT ORDER. THE ASSESSEE HAD CLAIMED A SUM OF RS.68,58,690/- UNDER THIS HEAD. THE AO STATED THAT THE ASSESSEE FAILED TO FURNISH ANY D ETAIL OR EVIDENCE TO SHOW THAT THE GENUINENESS OF THE EXPENSES AS WELL A S TO SHOW THAT THE SAME WERE INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF ASSESSEES BUSINESS. ACCORDINGLY, THE AO DISALLOWED 5% OF SUCH EXPENSES AND MADE ADDITION OF RS.3,42,935/-. THE AS SESSEE SUBMITTED THAT DURING THE REMAND REPORT THE ASSESSE E FILED COPIES OF RELEVANT LEDGER ACCOUNTS AND VOUCHERS ALONG WITH CO PY OF TDS RETURN OF THE ASSESSEE BUT THE AO DID NOT GIVE HIS COMMENT S ON THE ISSUE IN THE REMAND REPORT. THE ASSESSEE, THEREFORE, PLEADED THAT THE ADDITION BE DELETED. THE LEARNED CIT(A) NOTED THAT THOUGH T HE AO HAD ITA NO.22360/AHD/2009 (AY 2004-05): ACIT VS BALAJI CORPORATION, SURAT 5 COMMENTED ON THE REMAND REPORT BUT THE ASSESSEE DID NOT PRODUCED THE ORIGINAL SET OF BOOKS OF ACCOUNTS. IN REBUTTAL, THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS NOT ASKED FOR THE B Y THE AO FOR CASH BOOK AND BANK BOOK DURING THE REMAND PROCEEDINGS AN D IT WAS SUBMITTED THAT THERE WAS NO ADVERSE REMARKS OF THE AUDITORS IN THE DULY AUDITED BOOKS OF ACCOUNTS OF THE ASSESSEE AND HENCE THE AD HOC DISALLOWANCE OF THE ENTIRE SELLING AND ADMINIST RATIVE EXPENSES MAY BE DELETED. 5. WE HAVE HEARD THE LEARNED DR, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND CONSIDERED THE WRITTEN SUBMIS SION OF THE ASSESSEE. BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE SAME MAY BE UPHELD. ON THE O THER HAND, THE ASSESSEE IN ITS WRITTEN SUBMISSION PLEADED THAT THE ASSESSEE PRODUCED ALL THE RELEVANT DOCUMENTS BEFORE THE AO I NCLUDING LEDGER ACCOUNT, VOUCHERS AND BILLS FOR THE EXPENSES ALONG WITH COPY OF TDS RETURNS TO JUSTIFY ITS CLAIM. BUT THE AO HAS NOT AC CEPTED THE EXPLANATION BY NOT COMMENTING ON THE REMAND REPORT AND MADE THE AD HOC ADDITION BY OBSERVING THAT THE ASSESSEE FAIL ED TO PRODUCE ORIGINAL SET OF BOOKS OF ACCOUNTS FOR VERIFICATION, WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCOUNTS ARE COMPUTER GE NERATED ONE, RELEVANT LEDGERS OF WHICH WERE ALSO SUBMITTED BEFOR E THE AO. THE ASSESSEE IN THIS VIEW, PRAYED FOR DISMISSAL OF THE DEPARTMENTAL APPEAL. WE, FIND THAT THE LEARNED CIT(A) WHILE DI RECTING TO DELETE THE AD HOC ADDITION MADE BY THE AO, HAS NOT APPRECIATE D THE ADMITTED POSITION OF FACT THAT NO ORIGINAL BOOKS OF ACCOUNTS WERE FILED BY THE ASSESSEE BEFORE THE AO AND THAT THE AO HAS ALSO NOT PROPERLY ITA NO.22360/AHD/2009 (AY 2004-05): ACIT VS BALAJI CORPORATION, SURAT 6 COMMENTED ON THE REMAND REPORT. IN VIEW OF THE ABOV E, WE FIND THAT THE LEARNED CIT(A) WAS NOT RIGHT IN DELETING THE AD DITION ON THE MATTER IN ISSUE, SINCE THE ADDITION WAS MADE BY THE AO IN THE ABSENCE OF EXAMINATION OF THE ORIGINAL BOOKS OF ACCOUNTS OF TH E ASSESSEE. ACCORDINGLY, WE SET ASIDE HIS ORDER AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE AND CONSIDER THE DOCUMENTS FILED BY THE ASSESSEE DURING THE COURSE OF REMAND P ROCEEDINGS AND DECIDE THE ISSUE AFRESH AFTER GIVING SUFFICIENT REA SONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALS O DIRECTED TO COOPERATE WITH THE AO IN DECIDING THE ISSUE AFRESH. IN THE RESULT, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STAT ISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23-03-2012 SD/- SD/- (MUKUL KUMAR SHRAWAT) JUDICIAL MEMBER (T. R. MEENA) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - ITA NO.22360/AHD/2009 (AY 2004-05): ACIT VS BALAJI CORPORATION, SURAT 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD