M/s. Asha Industries, Nadiad V. The ACIT, Kheda Circle, Nadiad

ITA 2393/AHD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9399 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 18-01-2017
• Assessment Year: 1991-1992
• Appeal Filed On: 12-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P S CHAUDHARY
• Assessee Lawyers: S N DIVATIA
• Keywords: Business expenditure
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NOS.2392 TO 2394/AHD/2015 (ASSESSMENT YEARS:1990-91 TO 1992-93) M/S. ASHA INDUSTRIES NR. HIMANSHU BUNGLOW, PETLAD ROAD, NADIAD 387001 AP PELLANT VS. THE ACIT, KHEDA CIRCLE, NADIAD, ROOM NO.201, 2 ND FLOOR, AAYAKAR BHAVAN, PIJ ROAD, NADIAD RES PONDENT PAN: AAEFA6022A & ITA NO.3255/AHD/2015 (ASSESSMENT YEAR:1993-94) M/S. TONA TAB AGENCY, C/O. SITA CORPRATION, PRIME LOCATION, 2 ND FLOOR, PETLAD ROAD, NADIAD 387001 APPELLANT VS. ITO, WARD: 3(4), AHMEDABAD RESPONDENT PAN: AAKFT6389F ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 2 - /BY ASSESSEE : SHRI S. N. DIVATIA, A.R. /BY REVENUE : SHRI P. S. CHAUDHARY, SR. D.R. /DATE OF HEARING : 18.01.2017 /DATE OF PRONOUNCEMENT : 24.01.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS BATCH OF FOUR APPEALS PERTAIN TO TWO DIFFERENT ASSESSEES M/S. ASHA INDUSTRIES (INDIA), NADIAD & M/S. TONA TAB AGENCY, AHMEDABAD. FORMER ASSESSEE HAS FILED ITS THREE APPEALS FOR ASSESSMENT YEARS 1990-91 TO 1992-93 AGAINST CIT(A)-IV, BARODAS SEPARATE ORDERS; ALL DA TED 25.03.2014 IN APPEAL NOS. CAB/IV-707/2009-10, CAB/IV-708/2009-10 & CAB/I V-709/2009-10, CONFIRMING ASSESSING OFFICERS ACTION DISALLOWING C OMMISSION PAYMENTS MADE TO THE LATTER ASSESSEE OF RS.5,45,773/-, 6,96, 813/- & 7,63,713/-; RESPECTIVELY, IN PROCEEDINGS U/S. 143(3) R.W.S. 147 R.W.S. 254 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. LATTER ASSESSEE M/S. TONA TAB AGENCY HAS FILED ITS APPEAL IN ASSESSMENT YEAR 1993-94 AGAINST CIT(A)S GANDHINAGA R ORDER DATED 31.08.2015 IN APPEAL NO. CIT(A)/GNR/4/2009-10, AFFI RMING ASSESSING OFFICERS FINDING HOLDING IT AS NOT TO HAVE PERFORM ED ANY AGENCY SERVICES TO THE FORMER ASSESSEE THEREBY CONCLUDING IT AS A NON GENUINE FIRM RESULTING IN DISALLOWANCE OF EXPENSES IN THE NATURE OF SALARY OF RS.40,500/-, TRAVELLING EXPENSES OF RS.32,315/- AND ADVERTISEMENT EXPENSES OF RS.7,28,875/-; RESPECTIVELY, IN PROCEEDINGS U/S.143(3) R.W.S. 154 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. A COMBINED PERUSAL OF ALL THESE APPEALS AT THE O UTSET REVEALS THAT FORMER ASSESSEES THREE CASES SUFFER FROM DELAY OF 81 DAYS. LATTER ASSESSEES ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 3 - APPEAL IS STATED TO HAVE BEEN FILED AFTER DELAY OF 12 DAYS. SHRI DEVATIA INVITES OUR ATTENTION TO ASSESSEES CONDONATION PETITION FI LED IN THE RESPECTIVE APPEALS. HE SUBMITS THAT THE IMPUGNED ASSESSMENT Y EARS ARE 1990-91 ONWARDS MAKING IT VERY DIFFICULT FOR THE ASSESSEE T O COMPILE ALL THE RELEVANT DETAILS WITHIN THE STIPULATED TIME. HE TERMS REASO NS OF THE DELAY IN QUESTION AS A CASE OF EXTREME HARDSHIPS IN GETTING ALL THE R ELEVANT INFORMATION NECESSARY FOR FILING OF THE INSTANT APPEAL. THE RE VENUE FAILS TO REBUT THE SAID SOLEMN AVERMENTS IN ASSESSEES CONDONATION PETITION . WE THUS FIND MERIT IN ASSESSEES CONDONATION PETITIONS AND CONCLUDE THAT THE DELAY IN QUESTION INVOLVED IN FILING OF ALL FOUR CASES IN NEITHER INT ENTIONAL NOR DELIBERATE. WE NOW PROCEED TO ADJUDICATE ALL THESE APPEALS ON MERI TS. 3. FIRST OF ALL WE DEEM IT APPROPRIATE TO START WIT H RELEVANT BASIC FACTS AND RELATION BETWEEN THESE TWO ASSESSEE. FORMER ASSESS EE M/S. ASHA INDUSTRIES (INDIA) MANUFACTURED CREAMY SNUFF FROM TOBACCO KNOW N AS IPCO. THE LATTER ASSESSEE M/S. TONA TAB AGENCY STATED TO HAVE LOOKED AFTER FORMERS MARKETING SERVICES. ONE SHRI INDUBHAI MAGANBHAI PA TEL (THE ONLY COPARCENER) HAPPENED TO BE HAPPENED TO BE A PARTNER IN HIS HUF CAPACITY IN THE LATTER ASSESSEE FIRM. HE WAS ALSO A PARTNER IN FORMER ASSESSEE M/S. ASHA INDUSTRIES ALONG WITH HIS DAUGHTER SMT. NAYNABEN. FORMER ASSESSEE M/S. ASHA INDUSTRY FILED ITS RETURN STATING INCOMES OF R S.5,43,251/-, RS.7,45,800/- AND 9,22,625/- IN ASSESSMENT YEARS 1990-91 TO 1992- 93. THE ASSESSING OFFICER COMPLETED REGULAR ASSESSMENTS IN THE SAID A SSESSMENT YEARS. HE THEREAFTER FORMED REASONS TO BELIEVE THAT M/S. ASHA INDUSTRIES TAXABLE INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT FOR TH E PRECISE REASON THAT LATTER ASSESSEES ASSESSING AUTHORITY HAS NOTICED IN THE C OURSE OF ITS ASSESSMENT THAT IT HAD NOT PERFORMED ANY MARKETING SERVICES TO THE FORMER ASSESSEE. HE THEN FRAMED CONSEQUENTIAL IMPUGNED RE-ASSESSMENT ON 02.0 1.1996 AND 08.02.1996 (IN LATTER TWO CASES) DISALLOWING THE ABOVE COMMIS SION EXPENSES CLAIMED AS ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 4 - BUSINESS EXPENDITURE. THIS ISSUE TRAVELLED UPTO TH E TRIBUNAL IN ITA NOS. 3991, 4503 AND 4504/AHD/1996 WHEREIN A CO-ORDINATE BENCH RESTORED THE ISSUE BACK TO THE LOWER APPELLATE AUTHORITY. THE C IT(A) THEREAFTER UPHOLDS THE IMPUGNED DISALLOWANCE/ADDITION OF COMMISSION EX PENSES PAID TO LATTER ASSESSEE M/S. TONA TAB AGENCY AS UNDER: 4.2 I HAVE CONSIDERED THE APPELLANT'S SUBMISSION AND THE AO'S OBSERVATIONS. IN THIS CASE, THE AO OF M/S TONA TAB AGENCIES HAS CONDUCTED SEVERAL ENQUIRIES IN RELATION TO RECEIPT OF COMMISS ION BY THIS PERSON FROM THE APPELLANT. THE RELEVANT PARTS, FINDINGS AND OBS ERVATIONS ARE REPRODUCED ON PAGES 2 TO 6 OF THE ASSESSMENT ORDER IN THE CASE OF APPELLANT. A PERUSAL OF SUCH OBSERVATIONS SHOWS THAT THOUGH THE OFFICE O F M/S. TONA TAB AGENCIES WAS IN AHMEDABAD, IT WAS CONFIRMED BY THE PARTNERS OF THE FIRM OCCUPYING THE SPACE AT WHICH TONA TAB AGENCIES WAS HAVING THE REGISTERED OFFICE, THAT INFACT THE ENTIRE BUSINESS AFFAIRS OF M/S. TONA TAB AGENCIES WERE BEING CONDUCTED FROM THE OFFICE SITUATED IN NA DIAD FOR LAST SO MANY YEARS. FROM THE STATEMENT RECORDED OF ONE OF THE PA RTNERS OF M/S. TONA TAB INDUSTRIES, MR. MANOJ R GANDHI IT WAS SEEN THAT HE DID NOT KNOW ANYTHING ABOUT THE BUSINESS AFFAIRS OF HIS FIRM AND HE CLAIM ED TO BE A SLEEPING PARTNER. THE AO ISSUED A LETTER TO SHRI. INDUBHAI M PATEL, ANOTHER PARTNER OF M/S. TONA TAB AT HIS NADIAD ADDRESS AND REQUESTE D HIM TO EXPLAIN THE REASONS FOR GIVING COMMISSION TO M/S. TONA TAB AGEN CIES WHO HAD INFACT NOT RENDERED ANY SERVICE TO THE APPELLANT I.E M/S. ASHA INDUSTRIES. A STATEMENT OF SHRI. INDUBHAI M PATEL WAS ALSO RECORD ED IN WHICH IT WAS FOUND THAT HE WAS PARTNER IN HIS HUF CAPACITY IN TH E FIRM OF M/S. TONA TAB AGENCIES AND A PARTNER IN HIS INDIVIDUAL CAPACITY I N THE APPELLANT FIRM. HE STATED THAT M/S. TONA TAB AGENCIES WAS LOOKING AFTE R MARKET ON BEHALF OF THE APPELLANT FIRM, AND HE ACCEPTED THAT ENTIRE WOR K OF M/S. TONA TAB AGENCIES WAS BEING CONDUCTED FROM NADIAD. HE FURTHE R STATED THAT COMMISSION TO M/S. TONA TAB AGENCIES WAS PAID AS IT WAS LOOKING AFTER THE WORK OF ADVERTISEMENT OF THE PRODUCTS OF THE APPELL ANT FIRM. MR. INDUBHAI M PATEL FURTHER SUBMITTED A LETTER DATED 30/10/1992 TO THE AO OF THE TONA TAB AGENCIES VIDE WHICH HE SUBMITTED A REVISED AGRE EMENT ACCEPTED ON 23/10/1987 REGARDING PAYMENT OF COMMISSION. THE AO OF TONA TAB AGENCIES ISSUED ANOTHER LETTER TO THE APPELLANT FIR M ON 30/10/1992 VIDE WHICH THE APPELLANT WAS REQUESTED TO EXPLAIN AS TO WHY THE INCOME OF M/S. TONA TAB AGENCIES SHOULD NOT BE CLUBBED IN ITS HAND S. THE REASONS GIVEN BY THE AO WERE AS FOLLOW:- '1. THE ENTIRE MANAGEMENT AND CONTROL OF M/S TONAT AB AGENCY IS FROM NADIAD. 2. THE BANK ACCOUNT OF THE FIRM IS IN NADIAD BANK. 3. THERE IS NO EVIDENCE IN SUPPORT DOES NOT KNOW ANYTHING ABOUT THE BUSINESS AFFAIRS. 4. PARTNER SHRI. INDUBHAI M PATEL HAS ALSO ADMIT TED THAT THE MANAGEMENT OF M/S. TONATAB AGENCY IS CONDUCTED FROM NADIAD. ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 5 - 5. I HAVE VERIFIED THE INVOICES PRODUCED BY SHRI INDUBHAI M PATEL ALONG WITH HIS WRITTEN SUBMISSION IN SUPPORT OF THE SALES 'IPCO' MANUFACTURE BY ASHA INDUSTRIES. THERE IS NO MENTION OF M/S TONATAB IN THE SALE INVOICES. 6. IT WAS STATED BY SHRI. INDUBHAI M PATEL THAT COMMISSION TO M/S. TONATAB AGENCY IS PAID, AS THEY LOOK AFTER SALES AN D ADVERTISEMENT. NO EVIDENCE IS PRODUCED IN SUPPORT OF THIS AREA OF MANAGEMENT.' 4.2.1 IN RESPONSE TO THIS LETTER, THE APPELLANT FIR M REPLIED THAT THE AO OF M/S. TONATAB AGENCIES DID NOT HAVE ANY JURISDICTION OVER THE APPELLANT FIRM AND HENCE CANNOT WRITE ANY LETTER TO IT. IT WAS ALSO ST ATED THAT AS PER AGREEMENT M/S. ASHA INDUSTRIES HAS TO PAY OVER RIDING COMMISS ION @ 10% ON NET SALE PROCEEDINGS AFFECTED TO THE TONA TAB AGENCIES. FINA LLY AO OF THE TONA TAB AGENCIES HELD AS FOLLOWS:- PARA 7 'THE ASSESSEE AND M/S. ASHA INDUSTRIES HAVE NEVER G IVEN DETAILS REGARDING SERVICES RENDERED BY M/S TONATAB AGENCY FOR WHICH T HE COMMISSION AT THE RATE OF 10% IS PAID. IT MAY BE BROUGHT ON RECORD TH AT THERE ARE TWO PARTNERS IN THE FIRM OF M/S ASHA INDUSTRIES AND THE IR RELATIONSHIP IS FATHER AND DAUGHTER. SHRI INDUBHAI M PATEL WHO IS PARTNER IN HIS INDIVIDUAL CAPACITY IN M/S ASHA INDUSTRIES IS ALSO PARTNER IN HUF CAPACITY IN THE FIRM OF M/S TONA TAB AGENCIES. THUS, THE ENTIRE BUSINESS AFFAIRS OF M/S ASHA INDUSTRIES AND M/S TONATAB AGENCIES IS CONTROLLED A ND CONDUCTED BY SHRI. INDUBHAI M. PATEL. DURING THE COURSE OF SCRUTINY OF PROFIT & LOSS A/C IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED ADVERTISE MENT EXPENSES OF RS.2,65,313/-. ON FURTHER, INQUIRY, IT WAS FOUND TH AT MAJOR PORTION OF THE ADVERTISEMENT EXPENSES WAS PAID TO PAINTERS AND ART ISTS SITUATED AT NADIAD (PAINTER RAMESH RAO, SAMIR ART ETC.) THE ASSESSEE H AS CLAIMED TRAVELLING EXPENDITURE OF RS.46,488/-. THREE ENTRIES ON PAGE-2 2, 206 AND 339 OF ROJMAL WERE VERIFIED. WHAT IS MENTIONED IS 'TRIPT A T DELHI AND AMRITSAR' BUT THE NAME OF THE PERSON WHO HAS PARTICIPATED IN TOUR OR TRIP AND OTHER DETAILS REGARDING THE CLAIM AMOUNTING TO RS.1,360/- PAGE NO,22, RS.1,870/- (PAGE NO. 206) RS.2,230/-(PAGE NO.339) IS NOT MENTI ONED. THE ASSESSEE HAS CLAIMED SALARY PAYMENT OF RS.56,700/-. ACCORDING TO THE STATEMENT OF SHRI. INDUBHAI M PATEL, THE DETAILS REGARDING EMPLOYEES I S AS UNDER- 1. SHRI. PRAFULBHAI PATEL WORKING REGARDING ADVERTI SEMENT. 2. SHRI. NATUBHAI A. PATEL ACCOUNTANT. 3. SHRI. SHALLESH. T. PATEL- SALES, ADVERTISEMENT. 4. SHRI. CHANDUBHAI C. PATEL - SALES, ADVERTISEME NT. IT WAS FURTHER ADMITTED THAT ALL THESE EMPLOYEES AR E WORKING AT NADIAD OFFICE. THE ASSESSEE WAS REQUESTED TO PRODUCE SALES BILLS, TO VERIFY WHETHER ORDERS ARE BOOKED BY AGENTS AND WHETHER THE NAME OF THE AGENT IS MENTIONED IN THE SAID BILLS OR NOT? THE ASSESSEE WA S PRODUCED INVOICES NO.37, 24, 11 AND 2 FOR SALES OUTSIDE NADIAD BUT TH ERE IS NO MENTION OF M/S TONATAB AGENCIES AS AGENT OR THERE IS NO MENTION OF ANY OTHER PERSON OR PARTLY CONCERN TO WHOM THESE SALE ARE EFFECTED. ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 6 - PARA-8 THE STATEMENTS OF SHRI. MANOJ R. GANDHI AND SHRI. I NDUBHAI M. PATEL RECORDED U/S 131 ARE SELF-EXPLANATORY AND NEEDS NO ELUCIDATION. THE ASSESSEE FIRM IS NOT ABLE TO EXPLAIN THE ROLL PLAYE D BY THE SAID FIRM FOR WHICH THE COMMISSION IS PAID BY M/S ASHA INDUSTRIES (PRINCIPAL). I, THEREFORE, PROCEED AND DETERMINE THE INCOME OF M/S TONATAB AGENCIES ON 'PROTECTIVE BASIS' WITH A FINDING THAT THE COMMISSI ON RECEIPTS SHOWN BY M/S TONATAB AGENCIES SHOULD NOT BE ALLOWED IN THE CASE OF M/S ASHA INDUSTRIES, REGISTERED FIRM AT NADIAD. LATTER TO THIS EFFECT IS ALREADY WRITTEN TO THE ASSESSING OFFICER I.E. ASSTT. COMMISSIONER OF INCOM E-TAX, CIRCLE, NADIAD AND THE COPY OF THIS ORDER WILL BE SENT TO HIM FOR FAVOUR OF HIS INFORMATION AND NECESSARY ACTIONS IN THE CASE OF M/S ASHA INDUS TRIES. THE ENTRIES CLAIM OF ADVERTISEMENT EXPENDITURE, TRAVELLING EXPENDITUR E AND SALARY EXPENDITURE IS NOT ALLOWED IN THIS CASE, IN VIEW OF THE DISCUSSION IN THE FOREGOING PARAS.' 4.2.2 DURING THE COURSE OF THE APPELLATE PROCEEDING S, EXCEPT FOR RELYING UPON THE AGREEMENT WITH M/S. TONATAB AGENCIES AND PROVIDING THE STATEMENT SHOWING MONTH-WISE DETAILS OF SALES COMMISSIONS A.Y . 1991-92 BOOKED AS THE PERCENTAGE OF SALES AND PROVIDING COPYING OF CR EDIT NOTES ISSUED BY THE APPELLANT, NO DETAILS OF SPECIFIC SERVICES RENDERED BY M/S TONA TAB AGENCIES TO THE APPELLANT FIRM FOR WHICH THE COMMIS SION WAS BEING PAID BY THE APPELLANT HAS BEEN PROVIDED, DESPITE THE FACT T HAT BOTH THE FIRMS ARE HAVING COMMON PARTNERS AND HENCE ARE RELATED CONCER NS. HENCE SUCH COMMISSION PAYMENT IS NOT ALLOWABLE AS A DEDUCTION IN COMPUTATION OF THE APPELLANT'S INCOME. THIS BACKDROP OF FACTS LEAVES THE FORMER ASSESSEE AGGRIEVED. IT HAS THUS FILED ITS THREE APPEALS FOR ASSESSMENT YEARS 1 990-91 TO 1992-93. 4. WE NOW ADVERT TO LATTER ASSESSEE M/S. TONA TAB A GENCYS APPEAL FOR ASSESSMENT YEAR 1993-94 SEEKING TO REVERSE THE CIT( A)S FINDING UNDER CHALLENGE UPHOLDING THE ASSESSING OFFICERS ACTION CONCLUDING IT AS A NON GENUINE FIRM AND MAKING PROTECTIVE ASSESSMENT IN IT S CASE QUA DISALLOWANCES OF SALARY, TRAVELLING EXPENSES AND ADVERTISEMENT RE LATED EXPENSES NARRATED HEREINABOVE. SUFFICE TO SAY, THE TRIBUNAL HAS REMI TTED THIS ISSUE AS WELL BACK TO THE ASSESSING OFFICER IN ITA NO.1975/AHD/2000 FO R DE NOVO ASSESSMENT. THE ASSESSING OFFICER OBSERVED IN ITS CONSEQUENTIAL ORDER DATED 24.12.2007 THE ASSESSEE FAILED TO FILE ANY SUBSTANTIVE EVIDENC E OF HAVING PROVIDED MARKETING SERVICES TO M/S. ASHA INDUSTRIES. HE REF ERS TO A COPY OF AGREEMENT ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 7 - BETWEEN THESE TWO PARTIES DATED 15.02.1973 AND 01.1 1.1973 REGARDING MARKETING SERVICES COMMISSION @15% LATER ON MODIFI ED TO 10% ON 23.10.1987. THE ASSESSING OFFICER OBSERVED THAT TH E SAID AGREEMENTS MADE IT CLEAR THAT THE FORMER ASSESSEE WOULD NOT PAY ANY CO MMISSION ON DIRECT SALES THROUGH VIP, LOCAL SALES AT NADIAD AND EXPORT SALES . HE ACCORDINGLY HOLDS THE LATTER ASSESSEE NOT TO HAVE RENDERED ANY MARKET ING SERVICES WHICH COULD BE PROVED BY WAY OF SUFFICIENT COGENT EVIDENCE. HE THUS COMPLETED ASSESSMENT REITERATING HIS EARLIER FINDINGS. 5. THE LATTER ASSESSEE M/S. TONA TAB THEREAFTER PRE FERRED APPEAL. THE CIT(A) DECLINES THE SAME IN THE ORDER UNDER CHALLEN GE AS FOLLOWS: 6. I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESS MENT ORDER AND SUBMISSION MADE BY THE APPELLANT. THE FACTS AS DISCUSSED IN P ARA.4 OF THIS ORDER, AO WHILE FINALIZING THE ASSESSMENT FOR THE YEAR UNDER APPEAL NOTICED THAT APPELLANT HAD RECEIVED COMMISSION FOR AYS 1990-91 TO 1992-93 FROM M/S ASHA INDUSTRIES AGAINST WHICH THEY CLAIMED DEDUCTION FOR VARIOUS EXPENSES. IN THE YEAR UNDER APPEAL, FOLLOWING THE LINE OF ACTION IN PRECEDING YEARS I.E . AYS 1990-91 TO 1992-93, DETERMINED INCOME OF M/S TONATAB AGENCY-ON PROTECTI VE BASIS WITH A FINDING THAT THE EXPENSES COMMISSION RECEIVED BY M/S TONATA B AGENCY SHOULD NOT BE ALLOWED. SIMILARLY, THE A.O OF M/S ASHA INDUSTRIES HAS ALSO MADE ASSESSMENT BY DISALLOWING THE COMMISSION EXPENSES SO CLAIMED AS P AYMENT TO M/S TONATAB AGENCY. THE HON'BLE CIT(A) HAS DECIDED THE APPEAL I N THE CASE OF APPELLANT - CONSIDERING THE APPELLANT FIRM AS GENUINE FIRM & AL LOWED MAJOR RELIEF IN RESPECT OF DISALLOWANCE OF EXPENSES. ON OTHER SIDE, THE HON'BL E CIT(A) IN THE CASE OF M/S ASHA INDUSTRIES HAS ALLOWED THE APPEAL BY WAY OF DE LETING THE ADDITION MADE IN RESPECT OF DISALLOWANCE OF COMMISSION PAYMENT TO M/ S TONATAB AGENCY. THEREAFTER, DEPARTMENT WENT IN FURTHER APPEAL BEFOR E THE HON'BLE ITAT, BOTH IN THE CASES OF APPELLANT FIRM M/S TONATAB AGENCY AS WELL AS IN THE CASE OF M/S ASHA INDUSTRIES FOR A.Y. 1990-91 TO 1992-93, WHEREIN THE HON'BLE ITAT HAS SET-ASIDE THE MATTER AT THE LEVEL OF HON'BLE CIT(A). HOWEVER, IN THE CASE OF THE APPELLANT, THE ISSUE WAS SET-ASIDE TO THE FILE OF THE AO AND AO HA S PASSED AN ORDER ON THE DIRECTIONS OF HON'BLE ITAT, MADE THE DISALLOWANCE O F ENTIRE EXPENSES CLAIMED BY THE APPELLANT FIRM AGAINST THE COMMISSION RECEIVED FROM M/S ASHA INDUSTRIES AND MADE THE ASSESSMENT ON PROTECTIVE BASIS. AO HAD MADE THE PROTECTIVE ASSESSMENT ON THE BASIS OF FACTS MENTIONED IN THE COPY OF AGREEMENT ENTERED INTO BETWEEN ASHA IND USTRIES AND THE APPELLANT DATED 15/02/1973 AND ON THE AMENDED AGREEMENT DATED 01/11/1973 ON A SIMPLE LETTER HEAD. IN THIS AGREEMENT IT WAS MENTIONED THA T M/S TONA TAB AGENCY WILL NOT BE PAID ANY COMMISSION ON DIRECT SALES BY VIP, LO CAL SALES AT NADIAD AND ON ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 8 - EXPORT SALES. AFTER CONSIDERING THE FACTS OF THE CA SE AND THE AGREEMENT AND AMENDED AGREEMENT, AO OFFICER HAS FINALIZED THE A SSESSMENT ON PROTECTIVE BASIS. THE AR OF THE APPELLANT SHRI SUNIL TALATI, CA ATTEN DED THE APPELLATE PROCEEDINGS FROM TIME TO TIME AND HE WAS; ASKED REG ARDING THE STATUS OF APPEALS OF ASHA INDUSTRIES FILED WITH CIT(A)-4, BARODA/ SHRI T ALATI VIDE LETTER DATED 13/3/2015 STATED THAT CASES WERE PENDING BEFORE THE CIT(A)-4, BARODA AND THEREFORE, THE PRESENT APPEAL COULD NOT BE TAKEN UP FOR DISPOSAL. A FRESH NOTICE WAS ISSUED TO THE APPELLANT DATED 7/8/2015 AND IN RESPO NSE TO THE SAME, AR OF THE APPELLANT ATTENDED ON 24/8/2015 AND FURNISHED COPIE S OF ORDERS PASSED BY THE CIT(A)-4, BARODA FOR AYS 1990-91 1992-93 AND 1992-9 3 AND IN AIL THE ORDERS FOR THE 3 YEARS, CIT(A)-4, BARODA HAD CONFIRMED THE VIE W OF THE AO THAT ASHA INDUSTRIES HAD NOT GIVEN COMMISSION TO TONA TAB AGE NCY (APPELLANT) AND THUS THE CONTENTION OF THE AO THAT THE EXPENSES CLAIMED BY T HE APPELLANT WHICH IS DISALLOWED BY THE AO ARE BOGUS AND NON-GENUINE. FUR THER, IT IS ALSO SUBMITTED BY THE AO THAT ASHA INDUSTRIES HAS NOT GONE IN FURTHER APPEAL AGAINST THE ORDER PASSED BY THE CIT(A)-4, BARODA WHICH PROVES THAT TH E VIEW OF THE AO HAS BEEN ACCEPTED BY M/S. ASHA INDUSTRIES. AR OF THE APPELLA NT WAS SPECIFICALLY ASKED ABOUT THE FATE OF THE ORDER OF THE AO IN THE CASE OF ASHA INDUSTRIES FOR AY 1993-94 AT THE APPELLATE STAGE. THE AR OF THE APPELLANT HAS SUBMIT TED THAT AS SUCH THERE IS NO INFORMATION AVAILABLE WITH HIM WITH REGARD TO THE A PPEAL FILED IN THE CASE OF ASHA INDUSTRIES FOR AY 1993-94, SINCE, CIT(A)-4, BARODA HAS TAKEN A DECISION IN THE CASE OF ASHA INDUSTRIES FOR AYS 1990-91 TO 1992-93 BY HOLDING THAT THE COMMISSION PAYMENT TO TONA TAB AGENCY IS BOGUS, THE CLAIM OF THE APPELLANT WITH REGARD TO THE COMMISSION EXPENSES IS DECIDED ON SIM ILAR LINES. AO HAS MADE THE ADDITIONS RELYING ON THE COPY OF THE AGREEMENT ENTE RED INTO BETWEEN THE APPELLANT AND ASHA INDUSTRIES DATED 15/2/1973 AND AMENDED AGR EEMENT DATED 1/11/1973 WHEREIN IT IS SPECIFICALLY MENTIONED THAT M/S. TONA TAB AGENCY WILL NOT BE PAID ANY COMMISSION ON DIRECT SALES BY VIP, LOCAL SALES AT NADIAD AND ON EXPORT SALES, IT WAS CONTENDED BY THE APPELLANT BEFORE THE AO THA T THEY HAD MADE A MINOR CHANGE IN CLAUSE 4, HOWEVER, NO DOCUMENTARY EVIDENC ES FURNISHED BEFORE HIM. EVEN DURING THE CURRENT APPELLATE PROCEEDINGS, AR O F THE APPELLANT HAS NOT SUBMITTED ANY DOCUMENTARY TO THIS CONTENTION OF THE AO. IN SUCH CIRCUMSTANCES, FOLLOWING THE VIEW TAKEN BY CIT(A)-4, BARODA IN THE CASE OF ASHA INDUSTRIES FOR AY 1990-91 TO 1992-93 THAT COMMISSION PAYMENTS TO TONA TAB AGENCY (APPELLANT) IS BOGUS, THE DISALLOWANCE AND ADDITION MADE BY THE AO IS HELD JUSTIFIED AND IS HEREBY CONFIRMED. RELEVANT ROUND OF APPEAL IS REJEC TED. 6. WE HAVE HEARD BOTH THE PARTIES. SHRI DIVATIA IN VITES OUR ATTENTION TO PAGE 4 OF THE PAPER BOOK COMPRISING OF TRIBUNALS C OMMON ORDER IN M/S. TONA TAB AGENCIES CASE FOR ASSESSMENT YEAR 1990-91 TO 1992-93 SUBSTANTIVELY ASSESSING THE AMOUNTS RECEIVED FROM M /S. ASHA INDUSTRIES AS ITS INCOME TO BE SUBSTANTIVELY ASSESSED READING AS UNDE R: 8. WE HAVE CAREFUL CONSIDERATION TO THE RIVAL CONT ENTIONS. THE FINDING OF FACT RECORDED BY THE CIT(A) THAT NEITHER THERE IS ANY DI SALLOWANCE OF COMMISSION IN THE ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 9 - CASE OF M/S ASHA INDUSTRIES NOR HAS THE INCOME OF T HE ASSESSEE BEEN CLUBBED WITH THE INCOME OF M/S ASHA INDUSTRIES, HAS NOT BEEN REB UTTED BEFORE US BY AN EVIDENCE. THEREFORE, THE CONTROVERSY IN THIS CASE AS TO WHETH ER INCOME SHOULD BE ASSESSED ON PROTECTIVE BASIS OR NOT, IS CONSEQUENTIAL. ONCE NO ASSESSMENT HAS BEEN MADE, ON SUBSTANTIVE BASIS, IN ANY OTHER CASE, OF THE INCOME ASSESSED IN THIS CASE ON PROTECTIVE BASIS, THE PROTECTIVE ASSESSMENT IS REND ERED AS SUBSTANTIVE ASSESSMENT AUTOMATICALLY. IN THE LIGHT OF THESE FACTS, IT IS UNNECESSARY FOR US TO GO INTO THE FINDINGS OF THE CIT(A) AS WELL AS THAT OF THE AO AN D RECORD A FINDING ABOUT BENAMI CHARACTER OF THE ASSESSEE FIRM. WE WOULD HOWEVER L IKE TO MENTION THAT MERE FACT THAT THE FIRM HAS BEEN GRANTED REGISTRATION, DOES N OT BIND THE AO TO ASSESSEE THE ALLEGED INCOME FROM ANY SOURCE ON SUBSTANTIVE BASIS IN THE HANDS OF THE FIRM. HOWEVER, AS ALREADY POINTED OUT, THIS ISSUE HAS BEC OME IRRELEVANT, IN THE LIGHT OF NO SUBSTANTIVE ASSESSMENT HAVING BEEN MADE OF THE I NCOME ASSESSED BY THE AO ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE. WE ACCORDINGLY CONFIRM THE CONCLUSION OF THE CIT(A) THAT THE INCOME OF THE RES PONDENT FIRM IS ASSESSED ON SUBSTANTIVE BASIS. 7. SHRI DIVATIAS CASE ACCORDINGLY IS THAT THE SAID CO-ORDINATE BENCHS ORDER HAS ATTAINED FINALITY. HE THUS PLEADS THAT T HE FORMER ASSESSEES COMMISSION DISALLOWANCES IN ASSESSMENT YEAR 1990-91 TO 1992-93 IS ACCORDINGLY NOT SUSTAINABLE. THIS ARGUMENT FAILS T O IMPRESS UPON US AS THE LD. CO-ORDINATE BENCH APPEARS TO HAVE NOT BEEN APPRISED OF THE CORRECT FACTUAL POSITION WHEREIN THE ASSESSING OFFICER HAD DISALLOW ED THE ABOVE COMMISSIONS PAYMENT IN THE VERY IMPUGNED ASSESSMEN T YEARS IN THE REASSESSMENT IN QUESTION FRAMED IN FEBRUARY 1996 I. E. MUCH BEFORE THE TRIBUNALS ORDER DATED 19.11.2011. THE ABOVE CO-OR DINATE BENCHS FINDINGS ARE ACCORDINGLY NOT BASED UPON CORRECT APPRECIATION OF FACTS. THE ASSESSEES FIRST ARGUMENT IS REJECTED. 8. SHRI DIVATIA NEXT ARGUMENT IS THAT THE FORMER AS SESSEE HAD IN FACT AVAILED MARKETING SERVICES OF THE LATTER ASSESSEE A S PER THE RELEVANT AGREEMENTS ON RECORD AND THEREFORE, THE IMPUGNED CO MMISSION DISALLOWANCES ARE LIABLE TO BE DELETED. WE FIND FROM THE PAPER B OOK THAT THERE IS NOT EVEN THE LIST OF MARKETING SERVICES VIS--VIS THE CORRES PONDING SALES ALONG WITH THE COMMISSION PAYMENTS IN QUESTION SO AS TO PROVE THE ABOVE ARGUMENT. THE CASE FILE FURTHER CONTAINS SHRI INDUBHAI PATELS AN D SHRI MANOJBHAI R. ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 10 - GANDHIS STATEMENTS DATED 22.11.1992 & 14.09.1992 W HICH ARE MERE ORAL ASSERTIONS AT THE BEST IN ABSENCE OF ANY DOCUMENTAR Y EVIDENCE. WE ACCORDINGLY REJECT THIS LATTER CONTENTION AS WELL. 9. WE FURTHER DO NOT FIND ANY MERIT IN SHRI DEVATIA S LAST ARGUMENT THAT THE DEPARTMENT ITSELF HAS BEEN ALLOWING THESE ASSES SEES CLAIMS REGARDING RENDERING OF MARKETING SERVICES IN ALL EARLIER ASSE SSMENT YEARS. WE OBSERVE IN THESE PECULIAR FACTS THAT EACH AND EVERY ASSESSM ENT YEAR IS A SEPARATE UNIT AND MERELY BECAUSE AN ASSESSEE HAS PROVED SOME EXPE NSES IN EARLIER ASSESSMENT YEAR DOES NOT IPSO FACTO LEAD TO A CONCL USION THAT THE VERY PAYEE HAS RENDERED IN FACT THE VERY SERVICES IN ALL LATTE R ASSESSMENT YEARS AS WELL. WE ACCORDINGLY UPHOLD CIT(A)S WELL REASONED ORDERS FORMING SUBJECT MATTER OF FIRST THREE APPEALS. WE THUS REJECT FORM ER ASSESSEES APPEALS ITA NOS. 2392 TO 2394/AHD./2015 IN ALL THREE ASSESSMENT YEARS CHALLENGING CORRECTNESS OF MARKETING COMMISSION EXPENDITURE DIS ALLOWANCES STATED HEREINABOVE. 10. WE NOW ADVERT TO LATTER ASSESSEES APPEAL ITA N O.3255/AHD/2015 FOR ASSESSMENT YEAR 1993-94 CHALLENGING THE CIT(A)S OR DER AFFIRMING ASSESSING OFFICERS FINDING HOLDING IT AS A NON GENUINE FIRM THEREBY FINALIZING PROTECTIVE ASSESSMENT AS WELL AS DISALLOWANCE THE A BOVE SALARY, TRAVELLING AND ADVERTISEMENT EXPENSES STATED HEREINABOVE. BOTH TH E LEARNED REPRESENTATIVES EXPRESS AGREEMENT THAT THE MAIN ISSUE HEREIN IS THA T THIS ASSESSEE ALLEGEDLY CLAIM TO HAVE RECEIVED COMMISSION INCOME FROM THE F ORMER ASSESSEE AND ALSO INCURRED THE ABOVE THREE HEADS OF EXPENSES. WE REL Y ON OUR FINDINGS IN PRECEDING PARAGRAPH IN SAID FORMER ASSESSEES CASE TO CONCLUDE THAT THIS APPELLANT/LATTER ASSESSEE HAS FAILED TO PROVE ITSEL F AS A GENUINE FIRM SO AS TO PROVE ITS CLAIM OF HAVING RENDERED MARKETING SERVIC ES IN QUESTION. WE REITERATE THAT OUR NARRATION OF FACTS IN PRECEDING PARAGRAPHS HAS SUFFICIENTLY ITA NOS. 2392 TO 2394 & 3255/AHD/2015 (ASHA INDUSTR IES & TONA TAB AGENCY) A.YS. 1990-91 TO 1993-94 - 11 - HIGHLIGHTED A CLOSE RELATION BETWEEN THESE TWO ASSE SSEES (SUPRA). WE THUS FOLLOW OUR FINDINGS IN CASE OF FORMER ASSESSEE TO U PHOLD THE CIT(A)S ORDER UNDER CHALLENGE HEREIN AS WELL. LATTER ASSESSEES APPEAL ITA NO.3255/AHD/2015 IS REJECTED. 11. ALL THESE FOUR APPEALS ARE DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF JANUARY, 2017.] SD/- SD/- ( MANISH BORAD ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 24/01/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0