Rahul Kheria, Kolkata V. ITO, Ward-45(1), Kolkata, Kolkata

ITA 2380/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0440 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 20-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PINAKI MUKHERJEE ADD
• Assessee Lawyers: S M SURANA
• Keywords: Corroborative evidences
• Section: 142(1); 133(6); 37(1)

Judgement Text

1 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 2380/KOL/2016 ASSESSMENT YEAR: 2012-13 RAHUL KHERIA (PAN:AMVPK4998C) VS. INCOME-TAX OFFICE R, WD-45(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 13.06.2018 DATE OF PRONOUNCEMENT 11.09.2018 FOR THE APPELLANT SHRI S. M. SURANA, ADVOCATE FOR THE RESPONDENT SHRI PINAKI MUKHERJEE, ADD. CIT ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF LD. CIT(A)-13, KOLKATA DATED 01.08.2016 FOR AY 2012-13. 2. THOUGH THE ASSESSEE HAS RAISED AS MANY AS FIVE GROUNDS OF APPEAL BUT THE SOLE ISSUE INVOLVED IN THIS APPEAL OF ASSESSEE IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT OF COMMISSION/SE RVICE CHARGES. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS EN GAGED IN TRADING OF COTTON AND IRON AND STEEL THROUGH THE BUSINESS VENTURE NAMED AS M/S. SH ARP INTERNATIONAL AND M/S. PEACON INTERNATIONAL RESPECTIVELY. BOTH THESE BUSINESS U NITS ARE PROPRIETORSHIP CONCERN OF THE ASSESSEE. IN RESPECT OF COMMISSION EXPENSES CLAIMED IN THE ACCOUNTS OF M/S. SHARP INTERNATIONAL, THE ASSESSEE DISCLOSED GROSS SALES O F RS.10,25,08,000/-. FROM THE LIST OF PARTIES TO WHOM GOODS WERE SOLD AND AS FURNISHED BY ASSESSEE, THE AO FOUND THAT THE SALE WAS MADE TO ONLY THREE PARTIES. RS.10,19,91,795/- W ORTH OF COTTON WAS EXPORTED TO A PARTY 2 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 IN HONG KONG, NAMELY- M/S. SUNHING LEE TEXTILES LTD . AND FABRICS WORTH RS.5,16,200/- WAS SOLD TO TWO INDIAN PARTIES, NAMELY- M/S. PARLWA R (SALE AMOUNT BEING RS.4,66,313/-) AND M/S. METRO ENTERPRISES (SALE AMOUNT BEING RS.49,892 /-). AMONG THE VARIOUS EXPENSES INCURRED AND CLAIMED AS DEDUCTION INCLUDED IN THE P ROFIT & LOSS ACCOUNTS WAS RS.30,06,163/- TOWARDS COMMISSION. THE ASSESSEE WAS FIRST ASKED BY NOTICE U/S 142(1) OF THE ACT ISSUED ON 11/11/2014 TO FURNISH AMONG OTHER DETAILS AND DOCUMENTS, THE FOLLOWING IN RESPECT OF THE COMMISSION EXPENSES- 'NAMES AND COMPLETE POSTAL ADDRESSES OF THE AGENTS / BROKERS TO WHOM COMMISSION PAID. PLEASE STATE THE PURPOSE OF PAYING SUCH COMMISSION IN DETAIL. IF THE SAID COMMISSION WAS PAID FOR PROCURING SALE CONTRACTS THEN FURNISH CONFIRMAT ION FROM THE PARTIES TO WHOM GOODS SOLD WHO WILL CERTIFY THAT THE GOODS WERE PURCHASED BY T HEM ONLY DUE TO THE SERVICES PROVIDED BY THE SAID AGENTS / BROKERS. ALSO FURNISH EVIDENCE IN SUPPORT OF DEDUCTION AND DEPOSIT OF TDS ON COMMISSION. PLEASE NOTE THAT FAILURE TO FURNISH ANY OF THESE DETAILS AND DOCUMENTS SHALL BE CONSIDERED AS INSUFFICIENT EVIDENCE AND RENDER DISA LLOWANCE OF COMMISSION CHARGES FROM TOTAL INCOME. ' ACCORDING TO AO ON 24.02.2015 THE AR APPEARED AND CLAIMED PAYMENT OF COMMISSION TO FIVE PARTIES AS UNDER: I. H. YAM 5,83,560/- II. SWARAJ VANIJYA M. LTD. 5,08,194/- III. METRO NIKETAN PVT. LTD. 5,35,938/- IV. BIHARIJI CONSULTANCY PVT. LTD. 6,77,483/- V. KAMINI FERROUS LTD. 7,00,988/- 4. ACCORDING TO AO, SECTION 37(1) OF THE ACT CLEARL Y STIPULATES THAT A BUSINESS EXPENSE SHALL BE ALLOWED AS 'DEDUCTION IF IT IS OF REVENUE NATURE AND EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE DETAIL S WERE SOUGHT FROM THE ASSESSEE IN ORDER TO VERIFY WHETHER THE COMMISSION PAID TO THE PARTIE S MENTIONED ABOVE WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR NOT. THE AO OBSERVED THAT COMMISSION MEANS A FORM OF PAYMENT TO AN AGENT FOR SERVICES RENDERED. ACCORDING TO AO COMMISSION IS USUALLY PAID TO AGENTS AND BROKERS FOR PROCURING SALE ORDER OR TO FACILITATE SOME OTHER WORKS WHICH EVENTUALLY WILL RESULT IN HIGHER SALE AND PROFITS. THE AO, THEREFORE, SOUGHT TO CROSS EXAMINE SUCH AGENTS / BROKERS AS WELL AS THE PARTIES FROM W HOM SALE ORDERS WERE RECEIVED OR THE PARTIES WITH WHOM SUCH AGENTS WERE IN CONTACT TO FA CILITATE ASSESSEE'S WORKS. ACCORDING TO AO, ONLY AFTER SUCH CROSS EXAMINATION, IT WOULD BE POSSIBLE TO VERIFY WHETHER ASSESSEE'S 3 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 CLAIM THAT COMMISSION PAID TO THE FIVE PARTIES WERE EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR NOT IS AUTHENTIC AND GEN UINE. FOR THAT PURPOSE THE ASSESSEE WAS REQUESTED TO FURNISH THE DETAILS SUCH AS PURPOSE OF PAYING COMMISSION, PARTIES FROM WHOM SALE ORDERS WERE RECEIVED THROUGH THE RESPECTIVE A GENTS / BROKERS, AGREEMENT FOR COMMISSION, ETC. THE AO OBSERVED THAT ASSESSEE HAD FURNISHED ONLY THE EVIDENCE IN SUPPORT OF DEDUCTION OF TAX AT SOURCE AGAINST SUCH EXPENSES . ACCORDING TO AO, TDS IS ONLY A SECONDARY CONDITION FOR ALLOWING A BUSINESS EXPENSE AS DEDUCTION AND IF AN EXPENSE IS NOT SUBJECTED TO TDS AS REQUIRED AS PER THE PROVISIONS OF CHAPTER -XVII OF THE ACT, SUCH EXPENSE UNDER CERTAIN CONDITIONS ARE LIABLE TO BE D ISALLOWED U/S 40(A)(IA) OF THE ACT. BUT THE PRIMARY CONDITION TO BE SATISFIED FOR CLAIMING DEDU CTION OF A BUSINESS EXPENSE A BUSINESS EXPENSE SHALL BE ALLOWED AS 'DEDUCTION IF IT IS OF REVENUE IN NATURE AND EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ACCORDING TO AO, IT IS ALSO IRRELEVANT WHETHER THE OTHER PARTY HAS DISCLOSED THE CORRESPONDING INCOME AS HIS TAXABLE INCOME OR NOT. ACCORDING TO AO, THE LOGIC IS SIMPLE; EXPENSE FOR ONE IS NATU RALLY INCOME FOR OTHER. THE AO AFTER DETAILED HEARING AND DISCUSSION WHICH IS WRITTEN IN THE ASSESSMENT ORDER OBSERVED THAT IT IS CLEAR THAT THE ASSESSEE FAILED TO ESTABLISH THAT TH E COMMISSION CLAIMED TO HAVE BEEN PAID TO THE FOUR PARTIES, VIZ. SWARAJ VANIJYA, METRO NIKETA N, BIHARIJI CONSULTANCY AND KAMINI FERROUS WERE WHOLLY AND EXCLUSIVELY EXPENSED FOR TH E PURPOSE OF BUSINESS AS THE EXPLANATION PROVIDED BY HIM WERE NOT JUSTIFIED AND WITHOUT ANY SUPPORTING EVIDENCE. THE AO ALSO TRIED TO VERIFY THE SAME FROM THE END OF TH E RESPECTIVE AGENTS ALSO. FOR THAT HE ISSUED SUMMONS U/S. 133(6) OF THE ACT TO ALL THE FO UR PARTIES TO FURNISH THE FOLLOWING DETAILS. I) COPY OF ACKNOWLEDGMENT OF I. T. RETURN FILED BY YOU FOR THE AY 2012-13; II) NATURE OF SERVICES PROVIDED BY YOU TO M/S. SHARP IN TERNATIONAL DURING THE FY 2011- 12 FOR WHICH THEY PAID YOU COMMISSION; III) IF YOU ARRANGED SALES ON BEHALF OF M/S. SHARP INTER NATIONAL, THEN FURNISH THE NA ME AND COMPLETE POSTAL ADDRESS OF THE PERSON TO WHOM Y OU CONTACTED FOR GETTING THE SALE ORDER; IV) THE MEMORANDUM AND ARTICLES OF ASSOCIATION BY WHICH YOUR COMPANY WAS FORMED; V) AUDITED ACCOUNTS OF YOUR COMPANY FOR THE FY 2011-12 . 4 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 5. AFTER DETAILED ENQUIRY AND CONSIDERING THE INSPE CTORS REPORT AND ENQUIRY AND ASSESSEES INABILITY TO FURNISH THE NECESSARY DETAI LS AND DOCUMENTS AS MADE IN DETAIL IN THE ASSESSMENT ORDER, THE AO CAME TO THE CONCLUSION THA T THE PAYMENT OF COMMISSION TO THE FIVE PARTIES VIZ.- (I) SWARAJ VANIJYA PVT. LTD., (I I) METRO NIKETAN PVT. LTD., (III) BIHARIJI CONSULTANCY PVT, LTD., (IV) KAMINI FERROUS LTD. AND (V) GOVARDHAN NIRMAN PVT. LTD. AS CLAIMED BY THE ASSESSEE WAS FALSE, CONCOCTED AND AN ARRANGEMENT OF MUTUAL UNDERSTANDING OF PROVIDING ADJUSTMENT ENTRIES BY ONE PARTY TO ANO THER PARTY. ACCORDING TO AO, THE CIRCUMSTANTIAL EVIDENCES CLEARLY INDICATE THAT SUCH PAYMENTS WERE IN NO WAY EXPENDED EXCLUSIVELY AND WHOLLY FOR THE PURPOSE OF BUSINESS WHICH IS THE BASIC CONDITION FOR ELIGIBILITY OF AN EXPENSE AS DEDUCTION U/S 37(1) OF THE ACT. HENCE, THE COMMISSION PAID TO THE ABOVE FIVE PARTIES WAS DISALLOWED FOR NOT SATIS FYING THE CONDITIONS LAID DOWN IN SECTION 37(1) OF THE ACT AND ADDED BACK TO TOTAL INCOME . 6. IN RESPECT OF COMMISSION EXPENSES CLAIMED IN THE ACCOUNTS OF M/S. PEACON INTERNATIONAL, THE AO HAS OBSERVED AS UNDER: M/S. PEACON INTERNATIONAL WHICH DEALS IN TRADING OF SCRAP IRON. IN THE AUDITED ACCOUNTS OF THIS CONCERN, ASSESSEE HAS DISCLOSED GROSS SALES OF RS.2,41,46,011/-, PURCHASES OF RS.2,20,26,409/- AND COMMISSION EXPENSES OF RS.2,76 ,346/-. AS PER DETAILS FURNISHED DURING THE COURSE OF HEARING IT WAS NOTICED BY THE AO THAT GOODS WERE PURCHASED MAINLY FROM M/S. JESSOP & CO. LTD. COMMISSION WAS STATED TO HAVE BEE N PAID TO M/S. GOVARDHAN NIRMAN PVT. LTD. OF 55, CHOWRINGHEE ROAD, KOLKATA. 7. ON 24/2/2015, AR FURNISHED A LETTER STATING THER EIN THAT M/S. GOVARDHAN NIRMAN PVT. LTD. WAS PAID COMMISSION OF RS.2,76,346/- FOR ARRANGING PURCHASE. ACCORDING TO AO, SINCE THE ASSESSEE FAILED TO FURNISH THE DETAILS OF PARTIES FROM WHOM PURCHASE WAS MADE AND FOR WHOM THE SAID COMPANY HAD PROVIDED HIM SERVICES SO AS TO CALL FOR PAYMENT OF COMMISSION. ACCORDING TO AO, COMMISSION IS USUALLY PAID TO AGENTS AND BROKERS FOR PROCURING SALE ORDER OR TO FACILITATE SOME OTHER WO RKS WHICH EVENTUALLY WILL RESULT IN HIGHER SALE AND PROFITS. THE AO THEREFORE SOUGHT TO CROSS EXAMINE THE SAID AGENT AS WELL AS THE PARTIES FROM WHOM SALE ORDERS WERE RECEIVED OR THE PARTIES WITH WHOM SUCH AGENTS WERE IN CONTACT TO FACILITATE ASSESSEE'S WORKS. ACCORDING T O AO ONLY AFTER SUCH CROSS EXAMINATION, IT WOULD HAVE BEEN POSSIBLE TO VERIFY WHETHER ASSESSEE 'S CLAIM THAT COMMISSION PAID TO THE SAID COMPANY GOVARDHAN WAS EXPENDED WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF BUSINESS OR NOT IS AUTHENTIC AND GENUINE. ON 12/3/2015, I.E. ALMOST AT THE FAG END OF THE FINANCIAL 5 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 YEAR, ASSESSEE INFORMED THAT THE COMMISSION WAS PAI D FOR GETTING PURCHASE FROM M/S. JESSOP & CO. LTD. ACCORDING TO AO, IT IS EXTREMELY UNUSUAL THAT A BUSINESSMAN WILL EMPLOY AGENT TO PURCHASE GOODS. AO WAS OF THE OPINI ON THAT COMMISSION IS GENERALLY PAID TO OBTAIN SELL ORDERS OR FOR PROVIDING OTHER FACILI TIES. THE ASSESSEE ALSO FURNISHED A COPY OF WRITTEN AGREEMENT ENTERED INTO WITH M/S. GOVARDHAN NIRMAN AND EXECUTED ON 01.04.2011. IT WAS DISBELIEVED BY AO TO BE AN ACT OF AFTERTHOUG HT AND WAS OF THE OPINION THAT IT WAS PREPARED ONLY RECENTLY AND IN NO WAY APPEARED TO BE FOUR YEARS OLD AS CLAIMED BY ASSESSEE. ALL THESE FACTS AND THE DELAY OF ALMOST FOUR MONTHS IN PROVIDING THE DETAILS AFTER THESE WERE FIRST REQUISITIONED FROM ASSESSEE, COMPELLED THE AO TO CONCLUDE THAT ASSESSEE'S CLAIM WAS FALSE AND THE TIME OF FOUR MONTHS WAS TAKEN BY HIM JUST TO PREPARE THE NECESSARY DETAILS AND DOCUMENTS. 8. SO, AO SUMMONED BOTH AGENTS M/S. GOVARDHAN NIRMA N PVT. LTD. AND THE SELLER PARTY - M/S. JESSOP & CO. LTD. FOR CROSS EXAMINATIO N TO VERIFY ASSESSEE'S CLAIM AND TO KNOW ABOUT THE EXACT NATURE OF SERVICES PROVIDED BY THE SAID AGENT. INSPECTOR WAS DEPUTED TO SERVE THE NOTICE BUT THE ADDRESSES WERE FOUND TO BE INCORRECT. 9. IN RESPECT TO M/S. JESSOP & CO. LTD. THE AO DID NOT BELIEVE THE CONFIRMATION SENT BY THE COMPANY BECAUSE IT WAS VAGUE. THE REPLY OF M/S . JESSOP & CO. LTD. IS GIVEN AS UNDER:- 'WE HEREBY CONFIRM THAT M/S. PEACON INTERNATIONAL H AD PURCHASED SCRAP IRON FROM US DURING THE FINANCIAL YEAR 2011-12. WE HAD SOLD THE GOODS TO M/S. PEACON INTERNATIONAL. THEY MIGHT HAVE AVAILED THE SERVICES OF M/S. GOVARD HAN NIRMAN PVT. LTD.' ACCORDING TO AO, IF ANY AGENT WAS INVOLVED IN BUSIN ESS DEALINGS, THE COMPANY WOULD HAVE SURELY KNOWN ABOUT IT, THEREFORE, THE AO DISCARDED THE CONFIRMATION FROM M/S. JESSOP & CO. LTD. 10. SO, THE AO DISALLOWED THE COMMISSION CLAIM MADE BY THE ASSESSEE AS FALSE, CONCOCTED AND AN ARRANGEMENT OF MUTUAL UNDERSTANDIN G OF PROVIDING ADJUSTMENT ENTRIES BY ONE PARTY TO ANOTHER PARTY. HENCE, THE COMMISSION P AID TO THE ABOVE FIVE PARTIES AND DETAILED AS UNDER IS DISALLOWED FOR NOT SATISFYING THE CONDITIONS LAID DOWN IN SECTION 37(1) OF THE ACT AND ADDED BACK TO TOTAL INCOME. I. SWARAJ VANIJYA PVT. LTD. --- 5,08,194.00 6 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 II. METRO NIKETAN PVT. LTD. --- 5,35,938.00 III. BIHARIJI CONSULTANCY PVT. LTD. --- 6,77,483 .00 IV. KAMINI FERROUS LTD. --- 7,00,988.00 V. GOVARDHAN NIRMAN PVT. LTD. --- 2,76,346.00 TOTAL 26,98,949.00 11. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE LD. CIT(A), WHO UPHELD THE ACTION OF THE AO. AGGRIEVED, ASSESSEE IS BEFORE US . 12. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. THE SOLE ISSUE IS REGARDING THE ALLOWABIL ITY OF THE CLAIM OF COMMISSION PAID TO AFORESAID FIVE PARTIES FOR THE REASONS ELABORATELY DISCUSSED ABOVE AND IS NOT REPEATED FOR SAKE OF BREVITY. ASSAILING THE DECISION OF LOWER AU THORITIES THE LD AR BROUGHT TO OUR NOTICE THE FOLLOWING FACTS (1) THAT ALL THE FIVE PARTIES SUBMITTED THEIR COPY OF BILL WHICH CONTAINED THEIR PAN. (2) TAX WAS DEDUCTED AT SOURCE AND PAID IN TIME. (3) SUMMON U/S 133(6) WERE SERVED ON ALL THE PARTIES, AND ALL OF THEM REPLIED HAVING RECEIVED THE COMMISSION. (4) INSPECTOR DEPUTED FOUND THE PARTIES AT THE GIVEN AD DRESS AND ALSO-FOUND THAT THE COMPANIES ARE GROUP COMPANIES OF MOHAN MOTORS (WHO ARE THE BI GGEST DISTRIBUTORS OF MOTOR VEHICLES IN KOLKATA) AND HAVE WIDE RANGE OF CONNECTIONS ALL OVER INDIA. (5) ALL OF THEM DULY INCLUDED THE INCOME IN THEIR RETURN OF INCOME AND P AID TAXES THEREON AND THAT (6) THERE WAS NO EVIDENCE THAT THE MONEY HAS COME BACK TO ASSESSE E 13. WE NOTE THAT THE ASSESSEE HAS PAID COMMISSION TO M/S. SWARAJ BANIJYA PVT LTD & METRO NIKETAN PVT LTD FOR ARRANGING TWO EXPORTERS T O UNDERTAKE THE BALANCE EXPORT OBLIGATION WHICH RESULTED IN TRANSFER OF LC TO THOS E EXPORTERS ALSO, AND COMMISSION WAS PAID TO M/S. BEHARIJI CONSULTANCY PVT LTD AND KAMIN I FERROUS LTD FOR ARRANGING PURCHASE OF THE EXPORT QUALITY COTTON AND TO GOVARDHAN NIRMA N PVT LTD AGAINST PURCHASE OF IRON & STEEL SCRAPS FROM M/S. JESSOP AND CO. LTD. 14. WE NOTE THAT THE ASSESSEE IS EXPORTING FINE Q UALITY OF COTTON TO HONGKONG. APART FROM THAT THE ASSESSEE ALSO PURCHASE AND SELL COTTO N IN INDIA. WE NOTE THAT THE ASSESSEE ARRANGES EXPORT ORDER THROUGH HONGKONG AGENT MR. H. YAM. ACCORDING TO ASSESSEE THE FOREIGN BUYER ACCEPTS ONLY THE FINEST QUALITY OF TH E COTTON. AND THE FINEST QUALITY COTTON IN 7 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 INDIA IS MAINLY GROWN IN THE STATE OF ANDHRA PRADES H AND MAHARASHTRA AND IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE HAS NO OFFICE IN MA HARASTRA AND ANDHRA PRADESH. WE NOT THAT DURING THE YEAR TOTAL EXPORT AND LOCAL SALE OF COTT ON WAS MORE THAN RS 10 CRORES. THE EXPORT WAS ALSO OF SUBSTANTIAL QUANTITY WHICH IS PR OVED FROM THE FACT THAT DUTY DRAW BACK RECEIVED BY THE ASSESSEE WAS MORE THAN RS10 LAKHS. THE ASSESSEE FOR THE PURPOSE OF PURCHASING THE FINEST QUALITY OF COTTON ENGAGED AN D TOOK THE SERVICES OF THE TWO AGENTS VIZ. M/S. BEHARIJI CONSULTANCY PVT LTD AND KAMINI FERROU S LTD. WE NOTE THAT THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND TDS WAS DULY DEDUCTED. WE NOTE THAT THE PURCHASE PRICE OF COTTON FROM THE PARTIES FOR WHICH THE COMMISSION WAS PAID TO BOTH THE PARTIES WAS ALSO MADE BY ACCOUNT PAYEE CHEQUES AND THUS PURCHASED COTTON WAS EXPORTED. THESE FACTS HAVING NOT BEEN DISPUTED WE NOTE THAT T HE ROLE OF AGENTS FOR SALE AND PURCHASE OF GOODS CANNOT BE IGNORED AND FOR THE SERVICES REN DERED THEY ARE ENTITLED TO BE COMPENSATED AS PER AGREEMENT. WE NOTE THAT THE ASSE SSEE OBTAINED THE EXPORT ORDERS THROUGH FOREIGN AGENT MR. H. YAM FOR SUPPLY OF COTT ON TO M/S SUN HING LEE TEXTILES LTD HONGKONG WHOM ASSESSEE CLAIMS TO HAVE NEVER MET, BU T THE FACT OF EXPORT HAS BEEN BELIEVED. THE EXPORT OF COTTON WAS MADE FROM THE P URCHASE THUS MADE THROUGH THE AGENTS M/S. BEHARIJI CONSULTANCY PVT LTD AND KAMINI FERROU S LTD AND FOR THE SERVICES RENDERED THE COMMISSION WAS PAID TO THEM THROUGH BANK AFTER TDS. THE AO'S OBSERVATION THAT COMMISSION IS NOT PAID FOR EFFECTING PURCHASE CANNO T BE ACCEPTED AS SUCH. IT IS COMMON KNOWLEDGE THAT COMMISSION IS DEMANDED BY AGENTS FOR PURCHASE OF FLATS AND EVEN FOR REAL ESTATE TRANSACTIONS, EVEN COMMISSION IS THERE FOR C OMMODITY PURCHASE IN THE COMMODITY EXCHANGE, COMMISSION IS THERE FOR STOCK EXCHANGE BR OKER FOR PURCHASE OF SHARES AND SECURITIES AND COMMISSION IS THERE EVEN FOR PURCHAS E OF FOREIGN CURRENCY AND AGENTS COLLECT COMMISSION FOR FACILITATING PURCHASE OF AIR/RAILWAY TICKETS FOR TOUR AND TRAVEL. THE PRESUMPTION OF AO THAT COMMISSION CANNOT BE PAID FO R PURCHASE CANNOT BE ACCEPTED WITHOUT MATERIAL TO SUPPORT THE AOS VIEW. WE NOTE THAT ALL EVIDENCES OF PURCHASES WERE SUBMITTED INCLUDING COPY OF BILLS, TRANSPORT DETAIL S AND EXPORT OF SUCH GOODS. WE NOTE THAT THE BILLS OF THE PARTIES DID CONTAIN THEIR VAT NO. AS WELL AS TELEPHONE NUMBERS OF THOSE PARTIES AND THEREFORE THE COMMISSION PAYMENT MADE T HROUGH BANK AFTER TDS TO M/S. BEHARIJI CONSULTANCY PVT LTD AND KAMINI FERROUS LTD FOR ARRANGING PURCHASE OF THE EXPORT QUALITY COTTON FROM FAR FLUNG REGIONS OF MAHARASHTR A ETC WAS A BUSINESS EXPENSE AND NEEDS 8 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 TO BE ALLOWED AS 'DEDUCTION SINCE IT IS OF REVENUE NATURE AND EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 15. COMING NEXT TO THE COMMISSION CLAIMED TO HAVE BEEN PAID TO M/S. SWARAJ VANIJYA PVT LTD AND METRO NIKENTAN PVT LTD WE NOTE THAT WAS PAID BY ASSESSEE TO THE AGENTS FOR THEIR SERVICE IN ARRANGING TWO EXPORTERS TO UNDERTA KE ASSESSEES EXPORT OBLIGATION WHICH ASSESSEE COULD NOT HIMSELF FULFILL WHICH OCCASIONED TRANSFER OF L.C IN THOSE EXPORTERS NAME TOO. AS WE HAVE STATED EARLIER THE FOREIGN AGENT MR . H.YAM PLACED EXPORT ORDERS WITH THE ASSESSEE AND DURING THE YEAR HE PLACED EXPORT ORDER S TO THE TUNE OF 31,41,455 USD UNDER CONTRACT NO. SL/COT/L01/2011 AND ANOTHER ORDER FOR 10,47,185 USD UNDER CONTRACT NO. SL/COT/L03/2011 PLACED AT PAPER BOOK PAGE 29 AND 30 . SO ASSESSEE COULD HAVE EXPORTED THE COTTON FOR THIS EXPORT ORDER OR HE WAS ENTITLED TO NOMINATE SOME OTHER PERSON FOR EXPORT. ACCORDINGLY MR. H. YAM ARRANGED FULL VALUE OF L.C FOR EXPORT ORDERS GIVEN TO THE ASSESSEE AND SUCH L.C. IS FOUND PLACED AT PAGE 31 AND 32 OF THE PAPER BOOK. THE ASSESSEE THROUGH THE SERVICES RENDERED BY THE AGENTS VIZ. M/S BEHARI JI CONSULTANCY PVT. LTD AND KAMINI FASHIONS COULD ONLY PROCURE COTTON OF THE EXPORT VA LUE OF 10,35,940 USD AND 10,45,604 USD ONLY MAKING TOTAL EXPORT OF 20,91,544 USD AS A GAINST THE ORDER OF 41,88,640 USD. SINCE THE ASSESSEE COULD NOT PROCURE THE REQUIRED Q UANTITY OF FINE COTTON IN ORDER TO FULFILL THE EXPORT OBLIGATION, HAD TO SEARCH FOR SOME PARTY TO MEET THE EXPORT OBLIGATIONS. ACCORDINGLY THE SERVICES OF THE TWO AGENTS VIZ.M/S SWARAJ VANIJYA PVT LTD AND METRO NIKETAN PVT LTD WAS TAKEN AND THEY ARRANGED TWO PA RTIES TO UNDERTAKE THE REMAINING EXPORT OBLIGATION WHICH ASSESSEE COULD NOT DO ON HIS OWN V IZ. M/S. HARMAN KOTEX&SEEDS PVT LTD AND LUXMINARAYAN UDYOG PVT LTD . THE ASSESSEE THERE AFTER ARRANGED WITH HIS SINGAPORE AGENT H YAM TO MAKE M/S. HARMAN KOTEX SEEDS PVT LTD AND M/S. LUXMINARAYAN UDYOG PVT LTD AS SECOND BENEFICIARY OF THE L. C. SO THAT THEY CAN EXPORT THE COTTON. THE SINGAPORE AGENT PERSUADED THE BUYER AND IN THE LC THOSE TWO P ARTIES WERE MADE SECOND BENEFICIARIES OF THE LC WHO ULTIMATELY EXPORTED THE REMAINING QUA NTITY OF THE ORDER OF THE FINE QUALITY OF COTTON TO THE FOREIGN BUYER. THE TWO AGENTS WERE TH EREFORE PAID COMMISSION FOR ARRANGING THE TWO PARTIES NAMELY M/S. HARMAN KOTEX&SEEDS PVT LTD AND LUXMINARAYAN UDYOG PVT LTD WHO UNDER TOOK THE BALANCE EXPORT OBLIGATION TO THOSE ULTIMATE EXPORTERS. IT WAS IN THAT CONNECTION THAT THE COMMISSION WAS PAID TO THE TWO AGENTS. THIS IS EVIDENT EVIDENCES 9 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 PLACED FROM PAGE 40 TO PAGE 50 OF PB AND THEREAFTER PAGE 51 WHICH SHOWS THAT THE EXPORT FOR BALANCE QUANTITY OF THE ORDER WAS MADE BY M/S H ARMAN KOTEX AND PAGE 55 EXPORT BY M/S LUXMINARAYAN UDYOG. THE AO MISUNDERSTOOD THE F ACT AS IF THE COMMISSION WAS PAID FOR TRANSFER OF L. C. AND THAT L. C. CANNOT BE TRAN SFERRED WHEREAS IT WAS TRANSFER OF THE EXPORT ORDER ALONG WITH THE TRANSFER OF L. C. A PER USAL OF VARIOUS DOCUMENTS PLACE AT PAPER BOOK PAGE NO. 29 TO 85 GOES ON TO SHOW THAT IT WAS TRANSFER OF THE SURPLUS ORDER FOR EXPORT ALONG WITH THE L. C TO BE USED BY THEM. MOREOVER WE NOTE THAT ON THIS TRANSFER OF SURPLUS EXPORT ORDER, THE ASSESSEE EARNED RS. 16,17,406/- W HICH WAS DULY CREDITED IN P.L. ACCOUNT WHICH FACT IS EVIDENT FROM PERUSAL OF PAPER BOOK P AGE 3 UNDER THE HEAD 'SERVICE CHARGE ON EXPORT ORDER'. THEREFORE, THE SERVICE OF THE AGENT IN THE AFORESAID FACTS AND CIRCUMSTANCES ARE FOR BUSINESS PURPOSE AND THEREFORE, THE COMMISS ION PAID WAS A BUSINESS EXPENSE AND NEEDS TO BE ALLOWED AS 'DEDUCTION SINCE IT IS OF R EVENUE NATURE AND EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 16. THE COMMISSION CLAIMED TO HAVE BEEN PAID TO M/ S. GOVARDHAN NIRMAN PVT LTD WAS FOR PURCHASE OF SCRAP FROM M/S JESSOP AND CO. LTD. THE AO HAS ISSUED NOTICE U/S. 133(6) TO M/S JESSOP AND CO AND WE NOTE THAT THE SAID JESS OP REPLIED TO THE NOTICE. THE AO HOWEVER DOUBTED THE REPLY BY JESSOP ON THE GROUND I T WAS A REPUTED COMPANY SO THE LOGO IN THE LETTER-HEAD SHOULD HAVE BEEN IN DIFFERENT COLOR S ETC WHICH ACTION OF AO CANNOT BE COUNTENANCED. WE NOTE THAT THE AO HAS DISALLOWED T HE COMMISSION SIMPLY ON SURMISES WITHOUT BRINGING ANY EVIDENCE ON RECORD TO THE CONT RARY BUT ON PRESUMPTION THAT THE JESSOP COMPANIES BUILDING WAS IN DILAPIDATED CONDITION ETC OR THAT THE TELEPHONE MADE BY THE AO WAS NOT PICKED UP BY THE EMPLOYEE OF JESSOP CO. LTD CANNOT BE A GROUND FOR DISALLOWING THE COMMISSION. FURTHERMORE, WE NOTE THAT THE PARTI ES TO WHOM COMMISSION WAS PAID WERE NOT RELATIVES OF THE ASSESSEE. THERE IS NO EVIDENCE THAT THE COMMISSION PAID HAS COME BACK TO THE ASSESSEE. OUR ATTENTION WAS DRAWN TO THE FOL LOWING CASES WHEREIN IT HAS BEEN HELD THAT IF THERE IS NO EVIDENCE TO SHOW THAT THE AGENT S WERE RELATIVES OF THE ASSESSEE AND THAT THE COMMISSION PAID HAS NOT COME BACK TO THE ASSESS EE, THEN IT CANNOT BE SAID THAT THE COMMISSION PAID WAS NOT GENUINE. FOR THE SAID PROPO SITION WE RELY ON THE JUDGMENT OF THE HON'BLE KOLKATA HIGH COURT IN THE CASE OF COMMISSIO NER OF INCOME TAX VS INBUILT MERCHANTS PVT LTD IN ITAT NO. 225 OF 2013, GA NO. 2 825 OF 2013 WHEREIN IT WAS TAKEN 10 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 NOTE BY THE HONBLE HIGHCOURT THAT WITH THE ADVANCE MENT OF THE TECHNOLOGY IT HAS BECOME POSSIBLE TO SELL GOODS THROUGHOUT THE COUNTRY THROU GH INTERNET AND FOR THIS PURPOSE AGENTS ARE REQUIRED THROUGHOUT THE COUNTRY AND SO THE ASSE SSEE HAS TO RECRUIT THE AGENTS. THE HONBLE HIGHCOURT TOOK NOTE THAT IT MAY NOT BE POSS IBLE FOR THE ASSESSEE IN SUCH CASES TO KNOW THEM PERSONALLY. AND SINCE THE ASSESSEE HAS FU RNISHED THE ADDRESS OF THE AGENTS WHICH THEY HAVE PROVIDED TO THE ASSESSEE TO THE AO AND PAYMENTS WERE ADMITTEDLY MADE BY CHEQUE AFTER DEDUCTION OF TAX, THE HONBLE HIGH COURT AFTER TAKING NOTE THAT APART FROM THE PAYMENT BY CHEQUE THERE WERE OTHER EVIDENCE LI KE (A)BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN ORDINARY COURSE OF BUSINESS. (B )DE DUCTION OF TAX AT SOURCE.(C )DEPOSIT OF THE MONEY DEDUCTED AT SOURCE (D)PARTICULARS OF THE RECIPIENT WERE DULY DISCLOSED. ACCORDINGLY, THE HON'BLE COURT CONFIRMED THE ACTION OF TRIBUNAL ALLOWING THE COMMISSION PAID TO AGENT IN THAT CASE AND DISMISSED THE DEPART MENTAL APPEAL. SIMILAR VIEW WAS TAKEN BY THE HON'BLE HIGH COURT IN THE CASE OF ALBA HYDRONIC S PVT LTD. BY THE HON'BLE CALCUTTA HIGH COURT IN ITA NO. 549 OF 2004 HOLDING THAT THE REVENUE COULD NOT DEMONSTRATE EITHER THE MONEY WAS NOT PAID OR THE MONEY PAID WAS LATER ROUTED BACK TO THE ASSESSEE. HENCE THE COMMISSION PAID TO AGENT WAS ALLOWED. SIMILAR VIEW WAS TAKEN IN THE CASE OF PRINTER HOUSE BY HONBLE DELHI HIGH COURT REPORTED IN 188 ITR TAX MAN 70 WHEREIN IT WAS HELD THAT WHEN THERE WAS NO EVIDENCE THAT THE COMMISSION WAS PAID TO RELATIVES AND FAMILY MEMBERS AND THAT THERE WAS NO EVIDENCE THAT THE COMMISSION PAID HAS COME BACK TO THE ASSESSEE NO DISALLOWANCE CAN BE MADE. SIMILAR VIEW HAS ALSO BEE N TAKEN IN THE CASE OF AMBICA FORGING BY HONBLE PUNJAB & HARYANA HIGH COURT THAT WHEN TH ERE WAS NO EVIDENCE THAT THE COMMISSION WAS PAID TO RELATIVES AND THE COMMISSION PAID HAS COME BACK TO THE ASSESSEE, NO DISALLOWANCE CAN BE MADE. WE NOTE IN THE PRESENT CASE BEFORE US, THE ASSESSEE HAD MADE ALL THE PAYMENTS TO THE PARTIES FROM WHOM PURCHASE WAS MADE BY ACCOUNT PAYEE CHEQUES, THE PURCHASES MADE CAN BE VERIFIED FROM THE PURCHAS E BILLS, SALES TAX NUMBERS AND TRANSPORT DOCUMENTS. THE BOOKS OF ACCOUNTS WERE NOT REJECTED. WE NOTE THAT ALL THE FIVE PARTIES TO WHOM THE ASSESSEE PAID COMMISSION HAD SUBMITTED THE IR COPY OF BILL WHICH CONTAINED THEIR PAN DETAILS. TAX WAS DEDUCTED AT SOURCE BY THE ASSE SSEE AND DEPOSITED WITH THE GOVERNMENT. SUMMON U/S 133(6) WERE SERVED ON ALL TH E PARTIES/AGENTS, AND ALL OF THEM CONFIRMED TO HAVE RECEIVED THE COMMISSION. INSPECTO R DEPUTED FOUND THE PARTIES AT THE GIVEN ADDRESS AND ALSO FOUND THAT THE COMPANIES ARE GROUP COMPANIES OF MOHAN MOTORS 11 ITA NO. 2380/KOL/2016 RAHUL KHERIA, AY 2012-13 (WHO ARE THE BIGGEST DISTRIBUTORS OF MOTOR VEHICLES IN KOLKATA) AND HAVE WIDE RANGE OF CONNECTIONS ALL OVER INDIA. AND ALL THE FIVE AGENT S HAVE DULY INCLUDED THE INCOME IN THEIR RETURN OF INCOME AND PAID TAXES THEREON AND THAT TH ERE WAS NO EVIDENCE TO SHOW THAT THE MONEY HAS COME BACK TO ASSESSEE OR THE AGENTS WERE RELATED PARTIES. THEREFORE, THE SERVICE OF THE AGENTS IN THE AFORESAID FACTS AND CIRCUMSTAN CES ARE FOR BUSINESS PURPOSE AND THEREFORE, THE COMMISSION PAID WAS A BUSINESS EXPEN SE AND NEEDS TO BE ALLOWED AS 'DEDUCTION SINCE IT IS OF REVENUE NATURE AND EXPEN DED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND, THEREFORE, THE AO IS DIREC TED TO ALLOW COMMISSION EXPENDITURE INCURRED BY THE ASSESSEE. 17. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 11TH SEPTE MBER, 2018 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11TH SEPTEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT SHRI RAHUL KHERIA, 18/1, MAHARSHI DE VENDRA ROAD, 6 TH FLOOR, ROOM NO. 85, KOLKATA-700 007. 2 RESPONDENT ITO, WARD-45(1), KOLKATA. 3. 4. CIT(A)-13, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA. 5. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY