Shri Amit Ashokraj Kapoor, Ahmedabad V. The Dy. Commissioner of Income Tax, Circle-6(1), Ahmedabad

ITA 2401/AHD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8382 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 21-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: NITIN M PATHAK
• Keywords: Business income
• Section: 143(3)

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. 2401 & 2402/AHD/2016 (ASSESSMENT Y EARS: 20012-13 & 2013-14) SHRI AMIT ASHOKRAJ KAPOOR 3-A, JAIHIND SOCIETY, NR. RAMBAUG, MANINAGAR, AHMEDABAD APPELLA NT VS. DY. COMMISSIONER OF INCOME-TAX, CIRCLE-6(1), AHMEDABAD RESPONDENT PAN: AGMPK7410N /BY ASSESSEE : SHRI NITIN M. PATHAK, A.R. /BY REVENUE : SHRI V. K. SINGH, SR. D.R. /DATE OF HEARING : 05.10.2017 /DATE OF PRONOUNCEMENT : 10.10.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE TWO ASSESSEES APPEALS FOR ASSESSMENT YEARS 2 012-13 AND 2013-14 ARISE AGAINST THE CIT(A)-6, AHMEDABADS COMMON ORDE R DATED 29.07.2016 IN CASE NOS. CIT(A)-6/77/15-16 & CIT(A)-6/273/15-16, UPHOLD ING ASSESSING OFFICERS ACTION DISALLOWING COMMISSION PAID TO S/SHRI ASHOK RAJ KAPOOR AND SUMIT KAPOOR AMOUNTING TO RS.2,96,223/- EACH IN FORMER AND RS.66 ,265/- IN LATTER ASSESSMENT YEAR; RESPECTIVELY BY TERMING THE SAME TO BE EXCESS IVE U/S.40A(2)(B), IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT. ITA NOS. 2401 & 2402/AHD/16 [SHRI AMIT A. KAPOOR VS . DCIT] A.YS. 2012-13 & 2013-14 - 2 - HEARD BOTH SIDES. CASE FILE PERUSED. 2. THE ASSESSEES SOLITARY SUBSTANTIVE GRIEVANCE ID ENTICALLY PLEADED IN BOTH THE IMPUGNED ASSESSMENT YEARS SEEKS TO REVERSE LOWER AU THORITIES ACTION IN INVOKING THE DISALLOWANCE IN QUESTION OF COMMISSION EXPENSES . IT EMERGES THAT THE ASSESSEE; A FOOTWEAR MANUFACTURER, HAD PAID TOTAL COMMISSION EXPENSES TO THE ABOVESTATED PAYEES AMOUNTING TO RS.7,38,905/- EACH IN FORMER AN D RS.6,15,865/- IN LATTER ASSESSMENT YEAR. THE ASSESSING OFFICER DISALLOWED THE SAME TO THE EXTENT OF RS.5,77,810/- AND RS.1,32,530/- IN LATTER ASSESSMEN T YEAR; RESPECTIVELY MAINLY ON THE GROUND THAT THE SAME WAS EXCESSIVE. HE FURTHER SEEMS TO HAVE BEEN INFLUENCED BY HIS FINDINGS IN ASSESSMENT YEAR 2010-11 QUA THE VERY TWO PAYEES. ALL THIS RESULTED IN THE IMPUGNED DISALLOWANCE. 3. THE CIT(A) UPHOLDS ASSESSING OFFICERS ACTION IN HIS COMMON LOWER APPELLATE ORDER AS UNDER: 8. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND THE SUBMISSION OF THE APPELLANT. IT IS SEEN THAT THE AO HAS FOLLOWED THE FINDING OF ASSESSMENT ORDER AND APPELLATE ORDER OF A.Y. 2010-11 IN THE YEAR UNDER C ONSIDERATION. IN AY 2010-11 THE ISSUE OF COMMISSION PAYMENT WAS INVOLVED AND ST ATEMENT OF SHRI ASHOKRAJ KAPOOR WAS RECORDED TO WHOM COMMISSION WAS PAID ,AN D ASSESSEE'S STATEMENT WAS ALSO RECORDED. THE AO MADE DETAILED INQUIRY AND DIS ALLOWED THE COMMISSION PAYMENT. IN A.Y. 2011-12, THE CIT(A) DECIDED THE SA ME ISSUE AS UNDER : 'I HAVE CONSIDERED THE FACTS AND SUBMITTED FILED BY THE APPELLANT. THE A.O. HAS MADE THE DISALLOWANCE OF RS. 7,29,716/- OUT OF THE COMMISSION EXPENSES CLAIMED TO HAVE BEEN PAID TO SHRI SUMIT KAPOOR (BROTHER OF APPELLANT), AND SHRI ASHOK KAOPOR (FATHER) OUT OF THE COMMISSION PAYMENT OF RS . 7,64,858/- AND RS. 7,64,858/- RESPECTIVELY TOTALING TO RS. 15,29,716/- . IT HAS BEEN OBSERVED THAT THE AFORESAID COMMISSION PAYMENT WAS CLAIMED IN RESPECT OF SALES TO A CUSTOMER NAMELY RAM FASHION EXPORT LTD TO WHOM AROUND 70% OF THE TOTAL SALES HAVE BEEN MADE. DURING THE COURSE ASSTT. PROCEEDINGS STATEMEN T OF MANAGER OF THE AFORESAID CUSTOMER WAS RECORDED BY THE AO WHEREIN IT WAS ADMI TTED BY THE MANAGER THAT NO THIRD PARTY WAS INVOLVED IN THE TRANSACTIONS WITH T HE APPELLANT. A COPY OF STATEMENT OF THE MANAGER WAS PROVIDED TO THE APPELL ANT. AT THE SAME TIME THE AO A/SO RECORDED THE STATEMENT U/S 131(1) IT ACT OF SH RI ASHOK KAPOOR TO WHOM COMMISSION WAS PAID AND ALSO OF APPELLANT. BOTH HAV E STATED THE CRITERIA OF PAYING COMMISSION AT 1.5% OF TOTAL SATES BUT THE SA ME WAS HAVING NO DIRECT NEXUS WITH THE SALES TO AFORESAID PARTY. EVEN SHRI ASHOK KAPOOR DENIED OF HIS ROLE IN MAKING ANY SALE TO THE AFORESAID CUSTOMER. AS PER T HE APPELLANT THE COMMISSION TO SHRI ASHOK KAPOOR WAS FOR FINANCIAL AND GENERAL ADM INISTRATION AND COMMISSION TO SHRI SUMIT KAPOOR WAS FOR PURCHASES AND SALES. B OTH THE RECIPIENTS WERE THE SPECIFIED PERSONS U/S 40 A (2)(B) OF I.T. ACT. THE AO ALSO OBSERVED THAT THE HIGHER ITA NOS. 2401 & 2402/AHD/16 [SHRI AMIT A. KAPOOR VS . DCIT] A.YS. 2012-13 & 2013-14 - 3 - SALARY WAS PAID TO ONE SHRI S. K. SACHDEV (PRODUCTI ON MANAGER) OF RS. 1,81,200/-. CONSIDERING THE SALARY PAYMENT TO VARIOUS EMPLOYEES THE REMUNERATION @ RS. 4 LAKH EACH TO THE SPECIFIED PERSON WAS TREATED AS RE ASONABLE AND GENUINE AND ALLOWED SUCH CLAIM AS REMUNERATION AND BALANCE PAYM ENT OF RS. 7,29,716/-WAS DISALLOWED. ON THE OTHER SIDE APPELLANT HAS SUBMITTED THAT THE APPELLANT SINCE 2004 IS IN BUSINESS MANUFACTURING OF SHOES, AND SHRI ASHOKRAJ KAPOOR AND SHRI SUMIT KAPOOR WERE SUPPORTING THE BUSINESS. WITH THE HELP OF THESE TWO PERSONS, THE SALE HAS GONE TO -RS. 8,96,06,020/- THUS,THE. BUSINESS A ND THEIR REPUTATION HAS REACHED TO THE HEIGHTS AND THEREFORE THE. ROLE OF BOTH THE SPECIFIED PERSONS IS MEMORABLE. THUS THE PAYMENTS MADE TO THEM CANNOT BE SAID TO BE HIGHER AND NO DISALLOWANCE IS REQUIRED. ON GOING THROUGH THE FACTS AND SUBMISSION IT IS NOT ICED THAT THE TWO PERSONS HAVE NOT EFFECTED ANY SALE AS AGENT, TO THE CUSTOMERS FO R WHICH NO COMMISSION COULD BE ALLOWED: THE MANAGER OF THE CUSTOMER AND ALSO ONE O F THE RECIPIENT GAMELY SHRI ASHOK KAPOOR HAVE DENIED OF THEIR INVOLVEMENT IN TH E TRANSACTIONS. ALL THE TRANSACTIONS HAVE BEEN MADE DIRECTLY WITH THE APPEL LANT. HENCE PRIME FACIE THE COMMISSION CLAIM CANNOT BE SAID TO BE GENUINE. THE RECIPIENT PERSONS HAVE PLAYED THEIR ACTIVE ROLE IN ESTABLISHING AND EXPANDING THE BUSINESS OF THE APPELLANT. SHRI ASHOKRAJ KAPOOR WAS ACTIVELY INVOLVED IN FINANCIAL AND GENERAL ADMINISTRATION MATTERS-AND SHRI SUMIT KAPOOR WAS INVOLVED IN PURCH ASES OF RAW MATERIALS. THUS, THEY HAVE RENDERED THE SERVICES TO THE BUSINESS OF THE APPELLANT FOR WHICH REMUNERATION TO THEM MUST BE ALLOWABLE: SINCE THE H IGHEST SALARY OF RS.1,81,200/- HAS. BEEN PAID TO SHRI SACHADEV {PRODUCTION MANAGER ), BUT CONSIDERING THE SERVICES OF BOTH THE SPECIFIED PERSONS A REMUNERATI ON OF RS. 4 LAKH EACH WAS ALLOWED BY THE A.O., WHICH IS JUSTIFIED AND CORRECT . THE CASE LAWS RELIED UPON BY THE APPELLANT ARE NOT IDENTICAL TO THE FACTS OF THE PRESENT CASE AND HENCE COULD NOT BE APPLIED. THE AO'S ACTION FOR ALLOWING THE REMUNE RATION IS BASED UPON THE MAJOR ROLE PLAYED BY THESE TWO PERSONS AND THE SAME IS FOUND REASONABLE. HENCE AO'S ACTION FOR DISALLOWANCE OF THE EXCESS PAYMENT IS FOUND CORRECT AND THUS SAME IS CONFIRMED. THE GROUND OF THE APPELLANT IS DISMIS SED.' 8.1 SINCE THE FACTS AND CIRCUMSTANCES INVOLVED ARE EXACTLY SAME THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE CIT(A) I N A.Y. 2011-12, THE DISALLOWANCE MADE BY THE AO IN A.Y. 2012-13 IS FOUND JUSTIFIABLE AND THE SAME IS CONFIRMED. THE GROUND OF APPEAL IS DISMISSED. 9. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN THE CASE OF THE APPELLANT IN A.Y. 2013-14, BASED ON THE ABOVE FINDINGS IN PARA N O. 7, THE DISALLOWANCE MADE BY THE AO IN A.Y. 2013-14 IS ALSO CONFIRMED. 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL SUBMISSIONS. IT IS NO MORE AN ISSUE THAT BOTH THE LOWER AUTHORITIES HAVE INVOKED THE IMPUGNED DISALLOWANCE AS PER THEIR RESPECTIVE FINDINGS IN AS SESSMENT YEAR 2010-11. CASE FILE INDICATES THAT A CO-ORDINATE BENCH IN ITA NO.1955/A HD/2014 DECIDED ON 30.06.2017 HAS DELETED THE SAID IDENTICAL DISALLOWA NCE BY FOLLOWING HONBLE JURISDICTIONAL HIGH COURTS DECISION IN PCIT VS. GU JARAT GAS FINANCIAL SERVICES LTD. (2015) 60 TAXMANN.COM 483 (GUJ) ON THE GROUND THAT SECTION 40A(2)(B) IS NOT TO BE ITA NOS. 2401 & 2402/AHD/16 [SHRI AMIT A. KAPOOR VS . DCIT] A.YS. 2012-13 & 2013-14 - 4 - INVOKED IN CASE THE PAYER ASSESSEE AND THE PAYEE-RE CIPIENT ARE ASSESSED AT THE SAME RATE. THE REVENUE FAILS TO DISPUTE ALL THESE DEVEL OPMENTS. WE THEREFORE ACCEPT ASSESSEES ARGUMENTS IN BOTH ASSESSMENT YEARS TO DE LETE THE IMPUGNED DISALLOWANCE. 5. THESE TWO ASSESSEES APPEALS ARE ACCORDINGLY ALL OWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 10 TH DAY OF OCTOBER, 2017.] SD/- SD/- ( MANISH BORAD ) ( S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 10/10/2017 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