M/s. Siddhi Corporation, Ahmedabad V. The DY.CIT. Circle-7, Ahmedabad

ITA 2404/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6103 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 27-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASBIR CHOUHAN
• Assessee Lawyers: M J SHAH
• Section: 143(3); 263

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D. K. TYAGI, JM AND A. MOHAN ALANKAMO NY, AM M/S SIDDHI CORPORATION, A/318, POPULAR PLAZA, SOMESWAR COMPLEX-1, 132 RING ROAD, SATELLITE, AHMEDABAD. VS. ASSTT. CIT, CIR.7, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M. J. SHAH, AR RESPONDENT BY:- SHRI JASBIR CHOUHAN, SR.DR O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER . THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-XVI, AHMEDABAD, DATED 14.6.2010 WHEREIN THE LD. CIT(A) HAD CONFIRMED THE ORDER OF LD. AO PASSED U/S 271(1)(C) OF THE ACT LEVYING PENALTY FOR ADDITIONS MADE IN RESPECT OF COMMISSION PAID TO M/S JAIPUR MARKETING FOR RS.1,24,000/-. 2. THE ASSESSEE HAS RAISED TWO GROUNDS IN ITS APPEA L AND THEY ARE LISTED AS BELOW:- ITA NO.2404/AHD/2010 ASST. YEAR 2001-02 ITA NO.2404/AHD/2010 ASST. YEAR 2001-02 2 (1) THE CIT(A) ERRED IN UPHOLDING THE PENALTY UNDER SEC TION 271(1)(C) ON THE ADDITION OF RS.1,24,000/- MADE IN THE QUANTUM PROCEEDINGS. (2) THE CIT(A) OUGHT TO HAVE DELETED THE PENALTY LEVIE D IN TOTO, KEEPING IN MIND THE OVERALL FACTS AND EVIDENCES PRO DUCED DURING THE APPELLATE PROCEEDINGS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL CARRYING ON BUSINESS IN THE NAME OF M/S SIDDHI CORP ORATION, DEALING IN M. SEAL AND ELECTRICAL PRODUCTS. FURTHER THE ASSESS EE IS ALSO COMMISSION AGENT OF SYNTEX INDUSTRIES LTD. THE ASSESSEE FILED HIS RETURN OF INCOME ON 24.10.2001. INITIALLY RETURN OF INCOME WAS PROCESSE D U/S 143(1) OF THE ACT. SUBSEQUENTLY THE CASE WAS TAKEN UP FOR SCRUTIN Y U/S 143(3) OF THE ACT AND THE ASSESSMENT WAS COMPLETED ON 31.12.2003 WHEREIN ADDITIONS WERE MADE ON ACCOUNT OF EXCESSIVE PAYMENT TOWARDS C OMMISSION FOR RS.6,24,100/- AND AWARD MONEY PAID FOR RS.2,00,000/ - TO SHRI KURANG R. PANCHAL. HOWEVER, THE ASSESSMENT ORDER WAS REVIEWED BY THE LD. CIT, AHMEDABAD-III U/S 263 OF THE ACT AND ORDER PASSED O N 3.4.2005. AS PER THE DIRECTIONS OF THE LD. CIT THE AO REVISED THE TO TAL INCOME OF THE ASSESSEE AFTER MAKING AN ADDITION ON ACCOUNT OF DOU BLE PAYMENT OF COMMISSION IN THE FORM OF CREDIT NOTE ISSUED TO M/S KISHORE CORPORATION AND TO SHRI HARI OM SURJAK AGGREGATING TO RS.2,37,0 94/-. FURTHER ADDITIONS WERE MADE FOR AN AMOUNT OF RS.14,34,000/- WITH RESPECT TO PAYMENTS OF COMMISSION TO - ITA NO.2404/AHD/2010 ASST. YEAR 2001-02 3 (1) M/S RENUAL & CO. RS. 10,00,000/- (2) M/S PANCHAM PLYWOOD (P) LTD. RS. 3,10,000/- (3) M/S JAIPUR MARKETING RS. 1,24,000/- ----------------------- TOTAL RS. 14,34,000/- ============= 4. PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT WAS ALSO INITIATED BY THE LD. AO. ON APPEAL BY THE ASSESSEE BEFORE THE F IRST APPELLATE AUTHORITY, THE LD. CIT(A) DELETED THE ADDITIONS WITH RESPECT T O PAYMENTS MADE TO M/S RENUAL & CO. AND M/S PANCHAM PLYWOOD (P) LTD A ND RS.2,37,094 ON ACCOUNT OF DOUBLE PAYMENT OF COMMISSION. HOWEVER , THE ADDITION WITH RESPECT TO PAYMENT MADE TO M/S JAIPUR MARKETIN G FOR RS.1,24,000/- WAS CONFIRMED, SINCE THERE WAS NO CONFIRMATION LETT ER FROM M/S SYNTEX INDUSTRIES LTD. THE ASSESSEE DID NOT CARRY THE MATT ER ON FURTHER APPEAL. HOWEVER ON THE REVENUES APPEAL BEFORE THE TRIBUNAL WITH RESPECT TO DELETION OF ADDITION MADE ON ACCOUNT OF M/S RENUAL & CO. AND M/S PANCHAM PLYWOODS (P) LTD, THE TRIBUNAL CONFIRMED TH E ORDER OF LD. CIT(A) VIDE ITS ORDER IN ITA NO.814/AHD/2008 DATED 6.8.2010. 5. NOW THE ASSESSEE HAS CHALLENGED THE LEVY OF PENA LTY ON ACCOUNT OF ADDITION MADE WITH RESPECT TO PAYMENT MADE TO M/S J AIPUR MARKETING FOR RS.1,24,000/- BEFORE US. 6. THE LD. AR FORCEFULLY SUBMITTED THAT M/S JAIPUR MARKETING HAD RENDERED SERVICES TO M/S SYNTEX INDUSTRIES LTD., AN D THE AMOUNT OF RS.1,24,000/- WAS PAID TO THEM AT THE INSTANCE OF M /S SYNTEX INDUSTRIES ITA NO.2404/AHD/2010 ASST. YEAR 2001-02 4 LTD WHO SUBSEQUENTLY REIMBURSED THE ASSESSEE. SINCE THE AMOUNT INVOLVED WAS MEAGER THE ASSESSEE DID NOT PURSUE THE MATTER WITH M/S SYNTEX INDUSTRIES LTD., FOR OBTAINING CONFIRMATION LETTER. THE LD. AR SUBMITTED THAT SINCE M/S SYNTEX INDUSTRIES IS A LAR GE ORGANIZATION IT WAS DIFFICULT TO PURSUE SUCH MATTER AND, THEREFORE, THE ASSESSEE CONCEDED TO ADDITION IN THE QUANTUM APPEAL. THE LD. AR PRAYED C ITING THE ORDER OF THE TRIBUNAL THAT SINCE THE ADDITION MADE ON ACCOUNT OF THE OTHER TWO PARTIES HAVE BEEN DROPPED A LENIENT VIEW MAY BE TAKEN ON TH E PENALTY PROCEEDINGS SINCE ALL THE PAYMENTS MADE WERE IDENTI CAL. 7. THE LD. DR ON THE OTHER HAND, STOUTLY OPPOSED TO THE SUBMISSION OF LD. AR. HE SUBMITTED THAT SINCE THE ADDITION HAS BE EN CONFIRMED BY THE LD. CIT(A) AND THE ASSESSEE HAD NOT FURTHER CARRIED THE MATTER ON APPEAL, THE ISSUE IS WELL SETTLED. THE LD. DR PRAYED THAT THE P ENALTY ORDER OF THE LD. CIT(A) MAY BE CONFIRMED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE REVENUE HAD DISBELIEVED THE EXPLANATION GIVEN BY THE ASSESSEE THAT THE ASSESSEE HAD MADE PAYMENT TO M/S JAIPUR MARKETING ON THE ADVICE OF M/S SYNTEX INDUSTRIES LTD., AS THEY H AD RENDERED SERVICES TO M/S SYNTEX LTD. THE REVENUE ALSO DISBELIEVED THAT I T WAS A PAYMENT MADE FOR REIMBURSEMENT OF EXPENDITURE. THE REVENUE CAME TO THIS CONCLUSION BECAUSE THE ASSESSEE HAD NOT PRODUCED CO NFIRMATION LETTER ITA NO.2404/AHD/2010 ASST. YEAR 2001-02 5 FROM M/S SYNTEX INDUSTRIES LTD., OR ANY COMMUNICATI ON OR EVIDENCE TO ARRIVE AT THIS CONCLUSION. ON THE OVERALL EXAMINATI ON OF THE ISSUE ONE CANNOT BRUSH ASIDE THE ARGUMENTS OF LD. AR BECAUSE ALL THE THREE PAYMENTS WERE MADE ON THE SIMILAR FOOTINGS. IT IS ALSO QUITE OBVIOUS THAT TO GET CONFIRMATION FOR PETTY ISSUES FROM SUCH A LA RGE ORGANIZATION LIKE M/S SYNTEX INDUSTRIES LTD. WOULD BE DIFFICULT AND T IME CONSUMING. FURTHER THE IMPORTANT ASPECT TO BE SEEN IS THAT THE REVENUE HAS NOT DISPUTED THE PAYMENT MADE BY THE ASSESSEE TO M/S JA IPUR MARKETING. THE REVENUE HAS ONLY CHALLENGED THE NATURE OF PAYMENT. IT IS ALSO APPARENT FROM THE BANK STATEMENT AND THE GENERAL LEDGER FORM ING PART OF THE PAPER BOOK AT PAGE 23 & 24 THE ASSESSEE HAD MADE THE PAYM ENT TO M/S. JAIPUR MARKETING FOR RS. 1,20,000/- BY WAY OF DEMAND DRAFT NO.537356. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE FIRM OPINION THAT THOUGH THE CASE MAY BE A FIT CASE FOR ADDITION TO B E MADE, LEVY OF PENALTY U/S 271(1)(C) WILL BE A FARFETCHED PROPOSITION. IT WAS HELD BY THE HON. HIGH COURT (KER) IN THE CASE CIT V/S KERALA SPINNER S LTD., REPORTED IN 247 ITR 541(10/03/2000) THAT MERE FAILURE ON THE P ART OF THE ASSESSEE TO SUBSTANTIATE ITS EXPLANATION WAS NOT ENOUGH TO WARR ANT PENALTY IF SUCH EXPLANATION WAS BONAFIDE AND ALL FACTS RELATING TO THE SAME WERE DISCLOSED BY IT. RESPECTFULLY FOLLOWING THE DECISION CITED S UPRA WE HEREBY DELETE THE PENALTY LEVIED BY THE LD. AO WHICH WAS FURTHER CONFIRMED BY THE LD. CIT(A). ITA NO.2404/AHD/2010 ASST. YEAR 2001-02 6 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER WAS PRONOUNCED IN OPEN COURT ON 22/7/11. SD/- SD/- (D. K. TYAGI) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 22/7/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 19/7/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 20/7/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..