CONTROLWELL (I) P. LTD, THANE V. ACIT RG 10(3), MUMBAI

ITA 2387/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79423 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 26-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2012
• Court: TRIBUNAL
• Keywords: Maximum Marginal Rate; Fair market value; Commercial expediency
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; ,OA ,OA ,OA ,OA JH JH JH JH MH D:.KKDJ JKO MH D:.KKDJ JKO MH D:.KKDJ JKO MH D:.KKDJ JKO] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K / ITA NO.2387/MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2009-10 CONTROL WELL (INDIA) PVT LTD. D-14, PHASE 11 MIDC, DOMBIVALI, THANE 421 204 VS. ACIT RANGE 10(3), MUMBAI. PAN:-AABCC3801H APPELLANT RESPONDENT ASSESSEE BY / FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS SHRI PARESH SHEEPARIA REVENUE BY/ JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS SMT. PARMINDER ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 7.03.2012 OF CIT(A) FOR THE A.Y. 2009-10. THE ASSES SEE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL:- I. DISALLOWANCE OF COMMISSION PAID TO ASSOCIATE /RELATED PARTIES OF RS. 1,25,46,625/- 1. THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWA NCE OF FULL COMMISSION PAID TO ASSOCIATE/RELATED PARTY CONNECTW ELL INDUSTRIES P LTD OF RS. 1,25,46,625/- @ 12.5% DATE OF HEARING 16.07.2014 DATE OF PRONOUNCEMENT 25.07.2014 CONTROL WELL (INDIA) PVT LTD . 2 | P A G E 2. THE LEARNED CIT(A) OUGHT NOT TO HAVE CONFIRMED T HC DISALLOWANCE OF COMMISSION PAID TO ASSOCIATE/RELATED PARTY OFRS. 1,25,46.625/-. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION WITHOUT CONSIDERING THE SUBMISSION IN TOTALITY 4. THE DISALLOWANCE OF RS. 1,25,46,625/- ON ACCOUNT OF COMMISSION PAYMENT TO RELATED PARTY REQUIRES TO BE DELETED. II.DISALLOWANCE OF COMMISSION PAID TO OUTSIDE PARTI ES OF RS. 3,56,244/- 1. THE LEAMED CIT(A) ERRED IN CONFIRMING OF DISALLO WANCE OF COMMISSION PAID TO OUTSTATION PARTIES OF RS. 3,56,2 44/- NAMELY; A) KRISHNA GUPTA RS. 58,387/- B) MUTHU KUMAR RS.2,97,857/- 2. THE LEARNED CIT(A) OUGHT NOT TO HAVE CONFIRMED T HE DISALLOWANCE OF COMMISSION PAID TO OUTSTATION PARTIES OF RS. 3,5 6,244/-. 3. THE DISALLOWANCE OFRS. 3,56,244/- REQUIRES TO BE DELETED. 2. GROUND NO. I IS REGARDING DISALLOWANCE OF COMMISSION PAID TO REL ATED PARTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS PAID COMMISSION OF RS. 1,25,44,625/- TO ITS ASSOCIATE/RELATED CONCERN, I.E. M/S CONNECTWELL IND USTRIES PVT. LTD CIPL @ 12.5% ON SALES. THE ASSESSING OFFICER ASKED THE ASS ESSEE TO JUSTIFY THE PAYMENT OF COMMISSION TO RELATED PARTY. THE ASSESS EE VIDE ITS LETTER DATED 24.11.2011 EXPLAINED THAT ASSOCIATE CONCERNED HAS R ENDERED THE SERVICES OF MARKETING AND BUSINESS DEVELOPMENT AS PER THE AGREE MENT DATED 06.04.2006 BETWEEN THE PARTIES FOR A PERIOD OF 5 YE ARS. THE ASSESSEE EXPLAINED THAT AS PER THE AGREEMENT (CIPL) IS TO PR OVIDE ITS EXPERTISE IN SETTING UP MARKETING CHAIN FOR THE ASSESSEE AS WELL AS AGREED TO PROVIDE ITS EXPERTISE IN SOURCING OF QUALITY PRODUCTS/MATERIALS , SELECT GOOD PRINCIPLES WHO WOULD PROVIDE THE SAID MATERIAL AT COMPETITIVE RATE S. CIPL ALSO USED ITS EXISTING INFRASTRUCTURE & LOGISTICS FOR THE PURPOSE OF IMPORTS OF MATERIALS. THE CONTROL WELL (INDIA) PVT LTD . 3 | P A G E CIPL PROVIDED ITS EXISTING SALES TEAM TO MARKET AND PROMOTE THE PRODUCT IMPORTED BY ASSESSEE TO ITS EXISTING CUSTOMERS BASE AND TO ESTABLISH NEW CUSTOMERS. IT WILL ALSO PROVIDE/ADVERTISE/PROMOTE T HE PRODUCTS OF THE ASSESSEE IN ALL PROMOTIONAL ACTIVITIES BY DISPLAY ING THE PRODUCT LINE IN ALL THE LOCAL & INTERNATIONAL EXHIBITIONS PARTICIPATED BY CIPL FOR A PERIOD OF 5 YEARS. THUS THE ASSESSEE SUBMITTED THAT THE SAID EXPENSES ARE FOR THE SERVICES RENDERED BY THE CIPL TO THE ASSESSEE FOR THE ENTIRE SERVICES AND NOT QUANTIFIED INDIVIDUALLY BUT IT WAS AGREED TO PAY A COMMISSION AT THE RATE OF 12.5% ON SALES FOR THE FIRST 4 YEARS OF OPERATION A ND FOR THE EXTENDED PERIOD OF ONE YEAR THE COMMISSION PAYABLE WOULD BE REDUCED TO 7.5%. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION AN D CONTENTION OF THE ASSESSEE AND RECORDED THAT THE ASSESSEE HAD ONLY GI VEN A THEORETICAL REPLY WITHOUT BRINGING ON RECORD ANY EVIDENCE IN SUPPORT OF THE SERVICES RENDERED BY THE RELATED PARTY. THE ASSESSING OFFICER FURTHER NOTED THAT THE COMMISSION PAYABLE TO OUTSIDE PARTIES ARE IN RANGE OF 1% TO 3. 5% ONLY. ACCORDINGLY THE ASSESSING OFFICER DISALLOWED THE ENTIRE SUM OF RS. 1,25,44,625/- AND ADDED TO THE INCOME OF THE ASSESSEE. 3. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER BEFORE CIT(A) AND CONTENDED ON THE SAME LINE THAT THE RELATED PA RTY NAMELY CIPL HAS RENDERED THE SERVICES OF SELLING, DISTRIBUTION, MAR KETING, COMMUNICATION, TRAVELLING AND ADVERTISEMENT EXPENSES AS PER THE AG REEMENT. IT WAS ALSO POINTED OUT THAT CIPL CHARGED SERVICE TAX AT THE RA TE OF 13.36% TO 10.30% ON THE COMMISSION INCOME RECEIVED FROM THE ASSESSEE AND THE SAME WAS PAID TO THE GOVERNMENT. THE ASSESSEE WAS ALSO ALLOW ED TO USE THE DEALERS OF CIPL APART FROM THE SERVICE IN APPOINTING NEW DE ALERS AND DISTRIBUTORS ALL OVER INDIA. APART FROM THIS THE ASSESSEE HAS ALSO B ROUGHT TO THE NOTICE OF CIT(A) THAT THE EXPENSES ON ACCOUNT OF VARIOUS HEAD S LIKE SALES PROMOTION, MARKETING EXPENSES, CATALOGUE EXPENSES, ADVERTISEME NT, TRAVELLING, CONTROL WELL (INDIA) PVT LTD . 4 | P A G E EXHIBITION EXPENSES, COMMUNICATION EXPENSES AND ADM INISTRATIVE SALARY & RELATED EXPENSES ARE INCURRED BY THE CIPL AND NOT B Y THE ASSESSEE AS PER THE DETAILS PRODUCED BEFORE THE CIT(A). CIT(A) DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE MADE BY ASSESSING OFFICER. 4. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS REITERATED THE CONTENTION AS RAISED BEFORE THE AUTH ORITIES BELOW AND SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINES S OF TRADING IN ELECTRICAL AND ELECTRONIC PARTS VIZ., CONDUIT, CONDUIT GLANDS, CABLE GLANDS ETC. THE ASSESSEE IMPORTS FINISHED GOODS FOR SALES IN INDIAN MARKET. HE HAS REFERRED THE EXPLANATION FURNISHED BEFORE THE AUTHORITIES BE LOW AND SUBMITTED THAT THE ASSESSEE PRODUCED THE DETAILS BEFORE CIT(A) IN SUPP ORT OF ITS CONTENTION THAT ENTIRE EXPENDITURE ON SALES PROMOTION, MARKETING, A DVERTISEMENT, EXHIBITION, COMMUNICATION ETC WERE INCURRED BY CIPL EVEN IN RES PECT OF THE PRODUCT OF THE ASSESSEE AND, THEREFORE, THE COMMISSION WAS PAI D TO CIPL AGAINST THE SERVICES RENDERED BY IT. HE HAS FURTHER POINTED OUT THAT THE GP RATIO OF THE ASSESSEE IS 51.15% IN COMPARISON TO THE SISTER CONC ERN (CIPL) AT THE RATE 34.30%, THEREFORE, THERE IS NO QUESTION OF SHIFTING THE TAXABLE INCOME. FURTHER BOTH THE ASSESSEE AS WELL AS ITS SISTER CONCERN ARE SUBJECTED TO MAXIMUM MARGINAL TAX, THEREFORE, THERE IS NO QUESTION OF EV ASION OF ANY TAX BY PAYMENT OF COMMISSION TO SISTER CONCERN. THE DIFFERENCE BET WEEN THE RATE OF COMMISSION PAID TO THE SISTER CONCERN AND TO THE OT HER PARTIES IS DUE TO THE SERVICES RENDERED BY THE SISTER CONCERN IN RESPECT OF APPOINTMENT OF DEALER, PROCUREMENT PURCHASES & IMPORTS DOCUMENTATION, DI STRIBUTION NETWORK, ADVERTISING AND SALES PROMOTION, PARTICIPATION IN E XHIBITION ETC. WHEREAS THE COMMISSION PAID TO THE THIRD PARTY IS ONLY ON SIMPL E SALE AND NOT FOR OTHER SERVICES. THE LD. AUTHORIZED REPRESENTATIVE HAS AL SO FORCEFULLY ARGUED THAT IT WAS A CONTRACTUAL OBLIGATION AND COMMISSION IS P AID CONSISTENTLY WHICH WAS ALLOWED BY THE ASSESSING OFFICER SINCE A.Y. 200 5-06 AND AS PER THE RULE CONTROL WELL (INDIA) PVT LTD . 5 | P A G E OF CONSISTENCY THE DISALLOWANCE IS NOT JUSTIFIED. I N SUPPORT OF HIS CONTENTION HE HAS RELIED THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS NEW KRISHNA ENGINEERING INDUSTRIES. (242 ITR 536) AS WELL AS THE DECISION OF HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF LAXMI ENGINEERING INDUSTRIES VS. INCOME-TAX OFFICER ( 298 ITR 203). H E HAS ALSO RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MEDICAL TECHNOLOGIES LTD. ( 215 TAXMAN 10) AND SUBMITTED TH AT WHEN THE COMMISSIONIS PAID BY THE ASSESSEE AS PER THE TERMS OF CONTRACT THEN IN THE ABSENCE OF ANY CONTRARY EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER, THE SAME CANNOT BE DISALLOWED. ON THE POIN T OF CONSISTENCY THE LD. AUTHORIZED REPRESENTATIVE HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GO PAL PUROHIT ( 336 ITR 287) AS WELL AS THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (193 ITR 321). SINCE BOTH ASSESSEE AND SISTER CONCERN HAS PAID THE TAX AT THE MAXIMUM MARGINAL RATE, THEREFOR E, THE TRANSACTION IS TAX NEUTRAL AND IN SUPPORT OF ITS CONTENTION THE LD. AU THORIZED REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPONT HE DECISION OF HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INDO SAUDI SERVICES (TRAVEL) (P.) LTD ( 310 ITR 306). THE NEXT LEG OF ARGUMENT OF LD. AUTH ORIZED REPRESENTATIVE IS THE COMMERCIAL EXPEDIENCY AND SUBMITTED THAT THE C OMMISSION HAS BEEN PAID AGAINST THE VARIOUS SERVICES RENDERED BY THE S ISTER CONCERN, THEREFORE, THE PAYMENT IS FOR THE COMMERCIAL EXPEDIENCY OF THE ASSESSEE AND FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AS BASED ON THE DECISION AS A PRUDENT BUSINESS MAN. WHEN THE TRANSACTION IS REVENUE NEUTR AL THEN THE ASSESSING OFFICER CANNOT DISALLOW THE CLAIM OF THE ASSESSEE B Y PUTTING ITSELF IN THE ARM CHAIR OF THE BUSINESS MAN. IN SUPPORT OF HIS CONTE NTION HE HAS RELIED UPON THE FOLLOWING DECISIONS:- (I) S.A. BUILDERS VS CIT (288 ITR 1, 9) (SC) CONTROL WELL (INDIA) PVT LTD . 6 | P A G E (II) CIT VS UDAIPUR DISTILLERY CO. LTD. ( 2009) 224 CTR 32 (SC) (III) CIT VS. DHARAMRAJ GIRIJI RIYA NARSINGIRIJI 91 ITR 544 (SC) (IV) J K WOOLLEN MANUFACTURERS VS. CIT 72 ITR 62 (SC) 5. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN A FINDING THAT THE CONTENTION OF THE ASSESSEE IS ONLY THEORETICAL EXPL ANATION WITHOUT BRINGING ANY EVIDENCE ON RECORD TO SHOW THAT THE SISTER CONC ERN HAS RENDERED THE SERVICES AND THE PAYMENT IS AS PER THE PREVAILING M ARKET PRICE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS DISALLOWED THE PAYMENT OF COMMISSION TO THE SISTER CONCERN BY OBSERVING THAT THE ASSESSE E HAS NOT PRODUCED ANY EVIDENCE TO SHOW THAT THE SISTER CONCERN HAS RENDE RED THE SERVICES TO THE ASSESSEE AND FURTHER THE ASSESSEE HAS PAID THE COMM ISSION IN THE RANGE OF 1% TO 3.5% TO THE OUTSIDERS/3 RD PARTIES THEN THE PAYMENT TO SISTER CONCERN AT THE RATE OF 12.5% IS EXCESSIVE. THERE IS NO QUARREL ON THE POINT THAT IF AN EXPENDITURE IS INCURRED INVOLVING THE PAYMENT TO T HE RELATED PARTIES THEN AS PER THE PROVISIONS OF SECTION 40A, THE ASSESSING OF FICER HAS THE POWER TO EXAMINE THE PAYMENT MADE TO THE SISTER CONCERN BY C ONSIDERING THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES F OR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEED OF THE BUSINESS OR PROF ESSION OF THE ASSESSEE. THUS IN CASE THE ASSESSING OFFICER FINDS THAT A POR TION OF THE EXPENDITURE WHICH IS EXCESSIVE AND UNREASONABLE BY COMPARING TH E SAME TO THE FAIR MARKET VALUE OF THE GOODS AND SERVICES RENDERED BY THE RELATED PARTY THEN, THE SAME COULD BE DISALLOWED IN COMPUTING THE PROFI T OF BUSINESS OR PROFESSION. IN THE CASE IN HAND, THE ASSESSING OFFI CER HAS DISALLOWED THE CLAIM OF THE ASSESSEE IN TOTO WITHOUT EVEN EXAMINING THE CLAIM BY COMPARING CONTROL WELL (INDIA) PVT LTD . 7 | P A G E THE FAIR MARKET VALUE OF THE SERVICES RENDERED BY T HE SISTER CONCERN. IT IS PERTINENT TO NOTE THAT THE PROVISIONS OF SECTION 40 A HAVE BEEN BROUGHT INTO THE STATUTE JUST TO DISALLOW THE EXCESSIVE/UNREASON ABLE PAYMENT TO THE RELATED PARTY. THERE IS NO DISPUTE THAT BOTH THE AS SESSEE AS WELL AS THE SISTER CONCERN IN QUESTION HAVE PAID THE TAX AT THE MAXIMU M MARGINAL RATE AND CONSEQUENTLY THE QUESTION OF REDUCTION OF TAX LIABI LITY IS RULED OUT. FURTHER THE ASSESSEE HAS PRODUCED THE DETAILS OF THE EXPENDITUR E INCURRED BY THE ASSESSEE AS WELL AS BY ITS SISTER CONCERN IN RESPEC T OF SALES PROMOTION, MARKETING EXPENSES, ADVERTISEMENT, TRAVELLING, EXHI BITION EXPENSES, COMMUNICATION EXPENSES AND ADMINISTRATIVE SALARY ET C. THE CIT(A) HAS REPRODUCED THE DETAILS OF EXPENDITURE INCURRED BY T HE ASSESSEE AND ITS SISTER CONCERN IN PARA 2.3 AS UNDER:- HEAD CONNECTWELL APPELLANT TURNOVER 51,13,33,410 9,09,53,025 SALES PROMOTION 7,03,894 1,51,749 MARKETING EXPENSES 65,23,586 3,81,599 CATLOGUE EXPENSES 31,87,833 16,39,524 ADVERTISEMENT 13,64,155 3,40,948 TRAVELLING 56,51,551 1,68,378 EXHIBITION EXP 71,14,918 5,40,315 COMMUNICATION EXP 25,99,931 2,41,330 ADMN. SALARY & RELATED EXP (OTHER THAN MARKETING SALARY) 1,50,34,276 21,22,609 7. IT IS CLEAR FROM THE DETAILS OF EXPENSES THAT EX PENSES ON ACCOUNT OF SALES PROMOTION, MARKETING, ADVERTISEMENT, TRAVELLI NG, EXHIBITION, COMMUNICATION AND ADMINISTRATIVE SALARY ARE VERY HI GH IN CASE OF SISTER CONTROL WELL (INDIA) PVT LTD . 8 | P A G E CONCERN IN COMPARISON OF THE ASSESSEE WHICH SUPPORT S THE CLAIM OF THE ASSESSEE THAT ALL THESE SERVICES WERE RENDERED BY THE SISTER CONCERN IN RESPECT OF THE ASSESSEES PRODUCT AND, THEREFORE, THE ASSESSEE WAS NOT REQUIRED TO INCUR ANY EXPENDITURE ON THESE ACCOUNTS EXCEPT THE PAYMENT OF COMMISSION AS PER THE AGREEMENT BETWEEN THE PARTIES . FURTHER THE GP RATIO AS WELL AS NET PROFIT RATIO IN CASE OF THE ASSESSEE IS MORE THAN THE GP RATIO AND NET PROFIT RATIO OF THE SISTER CONCERN NAMELY CIPL WHICH GOES TO THE SHOW THAT EVEN AFTER THE PAYMENT OF COMMISSION TO T HE SISTER CONCERN, THE ASSESSEE IS EARNING THE INCOME WHICH IS HIGHER THA N THE NORMAL INCOME IN THE TRADE. WE FURTHER NOTE THAT THE ASSESSING OFFIC ER HAS NOT EXAMINED THE CLAIM OF THE ASSESSEE BY COMPARING TO THE FAIR MARK ET VALUE OF THE SERVICES RENDERED BY THE SISTER CONCERN AGAINST WHICH THE CO MMISSION WAS PAID. IT IS ALSO NOT DISPUTED BY THE REVENUE THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF THE PAYMENT OF COMMISSION AT THE RATE OF 12.5% HAS BEEN ACCEPTED BY THE ASSESSING OFFICER FOR THE A.Y. 2005-06. THUS IT IS CLEAR THAT THE ASSESSEE HAS BROUGHT ON RECORD ENOUGH MATERIAL IN SUPPORT OF ITS CLAIM. FURTHER THE AUTHORITIES BELOW DECLINED TO CONSIDER THE SAME WHI LE DISALLOWING THE CLAIM OF THE ASSESSEE. ACCORDINGLY IN THE FACTS AND CIRCUMST ANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, THE ISSUE IS SET ASIDE TO THE RECORD OF ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AS PER LAW AFTER CONSI DERING ALL THE DETAILS AS DISCUSSED ABOVE AND FURTHER BY COMPARING THE PAYMEN T OF THE ASSESSEE WITH THE FAIR MARKET VALUE OF THE SUCH SERVICES PROVIDED BY THE SISTER CONCERN. 8. GROUND NO. II IS REGARDING DISALLOWANCE OF COMMISSION PAID TO THE OUTSIDE PARTIES. THE ASSESSING OFFICER NOTED THAT T HE ASSESSEE HAS PAID THE COMMISSION TO 8 OUTSIDE PARTIES. IN ORDER TO EXAMIN E THE CLAIM OF PAYMENT OF COMMISSION TO OUTSIDE PARTIES, THE ASSESSING OFFICE R ISSUE NOTICES U/S 133(6) CONTROL WELL (INDIA) PVT LTD . 9 | P A G E TO THESE PARTIES CALLING FOR INFORMATION. OUT OF TH ESE EIGHT PARTIES SIX PARTIES SENT THEIR CONFIRMATION. ACCORDINGLY THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS FAILED TO SUBMIT THE CONFIRMATION FROM TWO PARTIES NAMELY (1) KRISHNA GUPTA AND (2) MUTHU KUMAR IN RESPECT OF THE PAYMENT OF RS. 58,387/- AND 2,97,857/- RESPECTIVELY. ACCORDINLGY T HE ASSESSING OFFICER DISALLOWED THE TOTAL AMOUNT OF RS. 3,56,244/- ON AC COUNT OF COMMISSION PAID TO THESE TWO PARTIES. THE REASON ASSIGNED BY THE AS SESSING OFFICER IS THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS THAT THE SAID EXPENDITURE IS GENUINE AND INCURRED WHOLLY FOR THE PURPOSE OF BUSINESS. 9. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESS ING OFFICER BEFORE CIT(A) BUT COULD NOT SUCCEED. 10. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE FILED BEFORE THE CIT(A) THE CONFIRMATION, INCOME TAX RETURN ACKNOWLEDGEMENT AND PAN NO OF BOTH THE P ARTIES. HE HAS FURTHER SUBMITTED THAT EVEN FOR THE EARLIER YEARS THE COMMI SSION PAID TO THESE TWO PARTIES WERE ALLOWED BY THE ASSESSING OFFICER . THE LD. AUTHORIZED REPRESENTATIVE HAS POINTED OUT THAT THE PAYMENT WAS MADE AFTER DEDUCTION OF TAX AT SOURCE AND FURTHER THE ASSESSING OFFICER ISSUED THE NOTICE ON 21.10.2011 WHICH WAS SERVED ON THE ASSESSEE ON 22.1 1.2011 AND ASSESSEE REPLIED ON 24.11.2011. SINCE A SUFFICIENT TIME WAS NOT GIVEN TO THE ASSESSEE TO PRODUCE THE CONFIRMATION FROM THESE TWO PARTIES AS THE ASSESSMENT ORDER WAS PASSED ON 6.12.2011, THEREFORE, THE ASSESSEE PR ODUCED THE CONFIRMATION, INCOME TAX ACKNOWLEDGEMENT, PAN OF TH ESE PARTIES BEFORE THE CIT(A), HOWEVER, THE CIT(A)| DID NOT ADMIT THE SAID CONFIRMATION AND PAN OF THESE PARTIES. THUS THE LD. AUTHORIZED REPRESENTATI VE HAS SUBMITTED THAT CONTROL WELL (INDIA) PVT LTD . 10 | P A G E BECAUSE OF SHORTAGE OF TIME THE ASSESSEE COULD NOT PRODUCE THE CONFIRMATION AND OTHER RELATED EVIDENCE BEFORE THE ASSESSING OFF ICER BUT HE SAME WAS BEFORE THE CIT(A). 11. ON THE OTHER HAND. THE LD. DR HAS RELIED UPON T HE ORDERS OF AUTHORITIES BELOW. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. WE NOTE THAT THE NOTICE FOR CALLING FOR CONFIRMATION WAS RECEIVED BY ASSESSEE ON 22.11.2011. THE ASSESSEE PRODUCED THE C ONFIRMATION AS IT WAS SENT BY THE OTHER SIX PARTIES HOWEVER IN RESPECT OF TWO PARTIES NAMELY KRISHNA GUPTA OF DELHI AND MUTHU KUMAR OF CHENNAI, THE ASSESSEE COULD NOT PRODUCE THE SAME AS THE ASSESSMENT ORDER WAS PA SSED ON 6.12.2011 . WE FIND THAT THE PERIOD FROM 22.11.2011 TILL 6.12.2 011 WAS NOT SUFFICIENT ENOUGH TO GET THE CONFIRMATION FROM OUTSIDE PARTIES ALONG WITH RELEVANT RECORDS. THE CIT(A) HAS RECORDED IN THE IMPUGNED OR DER THAT THE CONFIRMATION BEING PRODUCED BEFORE IT CANNOT BE ADMITTED SINCE T HE SAME WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER. THEREFORE, T HERE IS NO DISPUTE THAT THE ASSESSEE PRODUCED THE CONFIRMATION, INCOME TAX ACKN OWLEDGEMENT WITH PAN REGARDING THESE TWO PARTIES BEFORE THE CIT(A) H OWEVER THE SAME WAS NOT EXAMINED BY THE AUTHORITIES BELOW. ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JU STICE, WE SET ASIDE THIS ISSUE TO THE RECORD OF ASSESSING OFFICER TO CONSIDE R THE CONFIRMATION, INCOME TAX ACKNOWLEDGEMENT WITH PAN PRODUCED BY THE ASSESS EE BEFORE THE CIT(A) AND THEN DECIDE THE ISSUE AS PER LAW AFTER PROVIDIN G AN OPPORTUNITY OF HEARING TO THE ASSESSEE. CONTROL WELL (INDIA) PVT LTD . 11 | P A G E 13. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 2 5-7-2014 SD/- SD/- ( D.KARUNAKARA RAO ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 25-7 -2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI