Shri Govindgopal R.Soni, Ahmedabad V. The Income tax Officer,Ward-6(2), Ahmedabad

ITA 2379/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89246 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 27-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 20-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: M K PATEL

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD 00 , ! ' #$, % & BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER !./ ITA NO. 2379/AHD/2011 % ) *)/ ASSESSMENT YEAR: 2008-2009 GOVINDGOPAL R. SONI 4 TH FLOOR, SIDHHACHAN COMPLEX NR.T.V. TOWER DRIVE-IN-ROAD AHMEDABAD 380 054. VS ITO, WARD - 6(2) AHMEDABAD. +, / (APPELLANT) -. +, / (RESPONDENT) ASSESSEE(S) BY : SHRI M.K. PATEL REVENUE BY : SHRI M.K. SINGH, SR.DR / DATE OF HEARING : 27/03/2015 / DATE OF PRONOUNCEMENT: 10/04/2015 // O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX-XI, AHMEDABAD DATED 1.9.2011. 2. THE GROUND NO.1 OF APPEAL OF THE ASSESSEE READS UNDER: 1. THE LD C.I.T. (APPEALS) ERRED IN LAW AND ON FA CTS TO UPHOLD THE DISALLOWANCE OF RS.6,33,922/- BEING RATE DIFFER ENCE PAID IN THE FORM OF COMMISSION. 2. THE LD C.I.T. (APPEALS) ERRED IN LAW AND ON FAC TS TO UPHOLD THE DISALLOWANCE OF RS.92,311/-OUT OF INTEREST EXPENSES FOR NOT DEDUCTING TDS. THE LEARNED CIT(A) ERRED IN NOT FOLL OWING THE DECISION OF THE JURISDICTIONAL HIGH COURT CITED BY THE APPELLANT IN CASE OF NIRMA INDUSTRIES LTD. ITA NO.2379/AHD/2011 2 3. BRIEF FACTS OF THE CASE ARE THAT THE AO OBSERVED THAT THE ASSESSEE HAD PAID COMMISSION TO SMT. KAJAL SOMANI, SMT. SANG ITA SOMANI AND SMT. SEEMA SOMANI AT THE RATE OF 25.1%, 33.89% AND 33.89% RESPECTIVELY. HE OBSERVED THAT THE COMMISSION PAI D TO OTHER PARTIES RANGED FROM 1.5% TO 2.5%. SINCE THE COMMISSION AMO UNT PAID TO THREE LADIES WAS ABNORMALLY HIGH, THE AO ISSUED SHO W CAUSE NOTICE TO THE ASSESSEE. IN REPLY TO THIS SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT IT HAD ENTERED INTO AN ORAL CONTRACT FOR SUPPLY OF GOODS TO THEM AT THE AGREED PRICE, BUT SINCE THESE PARTIE S WERE NOT HAVING VAT REGISTRATION, SO THEY INSISTED THAT THE BILLS S HOULD BE MADE DIRECTLY IN THE NAME OF PURCHASING PARTIES, AND THE DIFFEREN CE BE PAID TO THEM IN THE FORM OF COMMISSION. IT IS SUBMITTED THAT, IN THIS CASE, THE BILLED AMOUNT WAS ABNORMALLY HIGHER THAN WHAT THE ASSESSEE WAS GENERALLY SELLING GOODS TO OTHER PARTIES. THE ASSESSEE FILE D STATEMENT SHOWING THE RATES AT WHICH THE GOODS SOLD TO THESE PARTIES AND THE RATES AT WHICH SOLD TO OTHER PARTIES TO SUPPORT ITS CONTENTI ONS. THE AO AFTER CONSIDERING THE REPLY OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD NOT SUBMITTED ANY EVIDENCE TO SUBSTANTIATE ITS CLAI M THAT THE SALES HAVE BEEN MADE AT HIGHER RATE TO THE PARTIES INTRODUCED BY THREE LADIES COMPARED TO OTHER COMMISSION AGENTS. THEREFORE, T HE AO HELD THAT THE COMMISSION PAID TO THREE LADIES WAS UNREASONABLE. THE AO ALSO OBSERVED THAT THE BOOK ENTRY OF COMMISSION TO THREE LADIES WAS MADE THROUGH JV ENTRIES ON 31.3.2008, WHEREAS THE COMMIS SION TO OTHER PERSON HAS BEEN ENTERED IN REGULAR COURSE OF ACCOUN TING. THEREFORE, HE DISALLOWED COMMISSION PAYMENT TO THE EXTENT OF R S.6,33,922/- TO THE THREE LADIES. 4. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS SUBMITTED BEFORE HIM THAT THE PAYMENTS MADE TO THREE LADIES W ERE DEBITED UNDER THE HEAD COMMISSION. HOWEVER, THESE ARE NOT COMM ISSION, BUT THESE ARE RATE DIFFERENCE. THE CIT(A) HELD THAT IT WAS DIFFICULT TO BELIEVE THIS CONTENTION OF THE ASSESSEE, AS THE EXPENSES WERE DE BITED UNDER THE ITA NO.2379/AHD/2011 3 HEAD COMMISSION EXPENSES AND THE ASSESSEE HAD DEDUC TED TDS ON THESE PAYMENTS. BY DEDUCTING TDS, THE ASSESSEE WA S ACCEPTING THE FACTUM OF COMMISSION PAYMENTS AND THE ASSESSEE MIGH T HAVE ALSO ISSUED TDS CERTIFICATES TO THESE LADIES SHOWING THE AMOUNT AS COMMISSION AMOUNT. THE CIT(A) HELD THAT THE ASSESS EE CANNOT BE GIVEN FREEDOM TO RECAST AN ENTRY AS SUITS TO ITS EN DS. HE, THEREFORE, CONFIRMED THE ACTION OF THE AO. 5. THE DR RELIED ON THE ORDERS OF THE LOWER AUTHORI TIES. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION FOR COMMISS ION PAYMENT OF RS.6,33,922/- TO THREE LADIES. THE AO OBSERVED THA T THE RATE OF COMMISSION CLAIMED RANGES FROM 25.1% TO 33.89% WHER EAS THE COMMISSION PAID TO OTHER PARTIES RANGES FROM 1.5% T O 2.5%. THE AO ALSO OBSERVED THAT THE AFORESAID COMMISSION OF RS.6 ,33,922/- WAS ENTERED AS A JOURNAL ENTRY ON THE LAST DAY OF PREVI OUS YEAR, WHEREAS, IN THE CASE OF OTHER PARTIES, THE COMMISSION WAS PAID DURING THE YEAR. 7. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS CLAIMED BEFORE HIM THAT THE AFORESAID RS.6,33,922/- WAS IN FACT PAYMENT OF RATE DIFFERENCE TO THE THIRD PARTIES AND NOT PAYMENT OF COMMISSION. HOWEVER, THE CIT(A) DID NOT ACCEPT THE ABOVE SUBMIS SION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE CLAIMED EA RLIER BEFORE THE AO THAT THE PAYMENT IN QUESTION WAS COMMISSION AND ALS O THE ASSESSEE IN ITS TDS RETURN CLAIMED THE AMOUNT AS PAYMENT OF COM MISSION. 8. BEFORE US, THE AR OF THE ASSESSEE SUBMITTED THAT THE PAYMENT IN QUESTION WAS ON ACCOUNT OF RATE DIFFERENCE. WE FI ND THAT IN THE INSTANT CASE, THE ASSESSEE CLAIMED BEFORE THE AO THAT THE A SSESSEE ENTERED INTO AN ORAL AGREEMENT WITH THREE LADIES IN QUESTION FOR SALE OF CERTAIN GOODS BUT AS THE LADIES WERE NOT REGISTERED WITH VAT AUTH ORITIES, THEY INSISTED ITA NO.2379/AHD/2011 4 FOR RAISING OF BILL IN THE NAME OF THE REAL PURCHAS ER AND THE DIFFERENCE BETWEEN THE ACTUAL AND AGREED RATE AND THE INVOICE VALUE WAS CLAIMED AS DEDUCTION BY THE ASSESSEE. THUS, THOUGH THE ASS ESSEE HAS NOW GIVEN NOMENCLATURE OF PAYMENT AS RATE DIFFERENCE BU T THE NATURE OF PAYMENT AS PER THE FACTS EXPLAINED BY THE ASSESSEE IS OF COMMISSION. THE ASSESSEE FILED A CHART SHOWING SALES IN RESPECT OF WHICH THE PAYMENT IN QUESTION WAS MADE TO THREE LADIES, BUT T HE SAID CHART WAS NOT ADMITTED BY THE CIT(A), AS THE SAME WAS NOT FIL ED BEFORE THE AO, AND AS FRESH EVIDENCE FILED, FOR THE FIRST TIME, BE FORE THE CIT(A). 9. WE FIND THAT THE ASSESSEE HAS NOT STATED ANY REA SON AS TO WHY THESE EVIDENCES, WHICH WERE FILED BEFORE THE CIT(A) , WERE NOT FILED BEFORE THE AO. IN FACT NO ARGUMENT WAS ADVANCED BE FORE US IN RESPECT OF NON-ADMISSION OF FRESH EVIDENCE BY THE CIT(A). WE ALSO OBSERVED THAT NO SUBMISSION WAS MADE BY THE ASSESSEE IN RESP ECT OF OBSERVATION OF THE LOWER AUTHORITIES WITH REGARD TO THE AMOUNT IN QUESTION WAS ONLY ENTERED AS JOURNAL ENTRY IN THE BOOKS AT THE END OF THE RELEVANT YEAR. NO EVIDENCE WAS BROUGHT BEFORE US TO SHOW THAT ANY SERVICE WAS IN FACT RENDERED BY THE THREE LADIES IN QUESTION AND FACT O F ACTUAL PAYMENT MADE TO THESE THREE LADIES. IN THE ABSENCE OF SUCH MATERIAL, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED, AND THE GROUND OF APPEAL OF THE A SSESSEE IS DISMISSED. 10. THE GROUND NO.2 OF APPEAL OF THE ASSESSEE READS UNDER: 2. THE LD C.I.T. (APPEALS) ERRED IN LAW AND ON FAC TS TO UPHOLD THE DISALLOWANCE OF RS.92,311/-OUT OF INTEREST EXPENSES FOR NOT DEDUCTING TDS. THE LEARNED CIT(A) ERRED IN NOT FOLL OWING THE DECISION OF THE JURISDICTIONAL HIGH COURT CITED BY THE APPELLANT IN CASE OF NIRMA INDUSTRIES LTD. ITA NO.2379/AHD/2011 5 11. BRIEF FACTS OF THE CASE ARE THAT THE AO OBSERVE D THAT THE ASSESSEE MADE INTEREST PAYMENT TO M/S.SHREKHAN AND M/S.KOTAK MAHENDRA WITHOUT DEDUCTING TDS, AND ACCORDINGLY, HE DISALLOW ED THE SAME BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 12. ON APPEAL, THE CIT(A) OBSERVED THAT BEFORE HIM THE ASSESSEE SUBMITTED THAT THE AMOUNTS PAID AS INTEREST WAS ON ACCOUNT OF OUTSTANDING BUSINESS DUES, AND THEREFORE PART OF PU RCHASE CONSIDERATION. BUT THE ASSESSEE FAILED TO SUBSTANT IATE THE SAME BY FILING ANY EVIDENCE. HE NOTED THAT THE AUDITOR IN THE AUD IT REPORT HAS STATED THAT THE PAYMENTS OF INTEREST WERE MADE WITHOUT DED UCTING TDS, AND INSPITE OF THIS, THE ASSESSEE DID NOT DISALLOW THE SAME. HE HELD THAT IN VIEW OF SPECIFIC REMARK OF THE AUDITORS AND THE ADM ISSION THAT THE PAYMENTS WERE ON ACCOUNT OF INTEREST, HE CONFIRMED THE ACTION OF THE AO. 13. BEFORE US, THE AR OF THE ASSESSEE CONTENDED THA T THE AMOUNT PAID WAS INTEREST PAYMENT FOR MAKING DELAYED PAYMENT TO THE SUPPLIERS AND THEREFORE WAS PART OF PURCHASE PRICE PAID FOR GOODS . HE RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF NIRMA INDUSTRIES LTD. VS. DCIT, 283 ITR 402 (GUJ), WHEREI N IT WAS HELD THAT THE INTEREST RECEIVED ON LATE PAYMENT OF SALE CONSI DERATION WAS PART OF SALE CONSIDERATION. HENCE, IT WAS THE CONTENTION THAT THE DISALLOWANCE MADE WAS NOT JUSTIFIED, AND SHOULD BE DELETED. 14. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE MADE PAYMENT OF R S.92,311/- TO M/S.SHREKHAN AND M/S.KOTAK MAHENDRA AS INTEREST FOR MAKING DELAYED PAYMENT OF PURCHASE BILLS. THE AO DISALLOWED DEDUCT ION FOR THE SAME BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT AS THE ASSESSEE FAILED TO DEDUCT TDS FROM THIS AMOUNT. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE AO. THE CONTENTION OF THE ASSESSEE IS THAT ITA NO.2379/AHD/2011 6 INTEREST PAID TO SUPPLIERS FOR LATE PAYMENT WAS IN THE NATURE OF PURCHASE PRICE, AND HENCE NOT LIABLE TO TDS DEDUCTION. WE F IND THAT THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. PARAG MAHASUKHLAL SHAH [2011] 46 SOT 302/12 TAXMANN.COM 3 7 HAS HELD THAT PAYMENT WHICH HAS A DIRECT LINK AND IMMEDIATE NEXUS WITH THE TRADE LIABILITY BEING CONNECTED WITH THE DELAYED PU RCHASE PAYMENT, HENCE, WILL NOT FALL WITHIN THE CATEGORY OF INTERE ST AS DEFINED IN SECTION 2(28A) OF THE ACT. THEREFORE, RESPECTFULLY FOLLOW ING THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL, WE HOLD THAT THE A SSESSEE WAS NOT LIABLE TO DEDUCT TDS FROM THE PAYMENT OF RS.92,311/ -, AND THEREFORE, THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF TH E ACT WAS NOT JUSTIFIED. HENCE, WE DELETE THE ADDITION OF RS.92 ,311/-, AND ACCORDINGLY, THIS GROUND OF THE APPEAL OF THE ASSES SEE IS ALLOWED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 10 TH APRIL, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 10 /04/2015