DCIT 13(1), MUMBAI V. HASMUKH PUKHRAJ JAIN, MUMBAI

ITA 2404/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84339 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Department
• Bench Allotted: H
• Next Hearing Date: 20-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 28-03-2013
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: D B SANGHI
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER .2404/M/2013 (AY 2009 - 2010) DCIT - 13(1), MUMBAI. / VS. SHRI HASMUKH PUKHRAJ JAIN, 41/42, 2 ND FLOOR, LIBERTY BUILDING, NEW MARINE LINES, MUMBAI 400 020. ./ PAN: ABIPJ 9917 A ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI JEETENDRA KUMAR, DR / RESPONDENT BY : SHRI D.B. SANGHI / DATE OF HEARING : 20.10.2014 / DATE OF PRONOUNCEMENT : 26 .11.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 28.3.2013 IS AGAINST THE ORDER OF THE CIT (A) - 24, MUMBAI DATED 28/12/2012 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 26,71,155/ - MADE OUT OF COMMISSION PAYMENT. (II) WHILE DOING SO, THE LD CIT (A) HAS FAILED TO APPRECIATE THAT THERE HAS BEEN ABNORMAL INCREASE OF 14% IN THE COMMISSION PAYMENT AS COMPARED TO THE COMMON PAYMENT MADE IN PRECEDING TWO YEARS. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF COMMISSION AGENT IN YARN AND POWER GENERATION. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 1,16,18,230/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT DETERMINING THE ASSESSED INCOME AT RS. 1,99,76,241/ - . IN THE ASSESSMENT, ASSESSING OFFICER MADE CERTAIN DISALLOWANCES AND DISALLOWANCE OF COMMISSION PAYMENT AMOUNTING TO RS. 2 26,71,155/ - IS ONE OF THEM. DURING THE ASSESSME NT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT DURING THE FY 2008 - 2009 RELEVANT TO AY 2009 - 2010 THE ASSESSEE PAID COMMISSION OF RS. 1,20,93,973/ - , WHICH IS ABOUT 46% OUT OF THE COMMISSION AMOUNT RECEIVED OF RS. 2,61,74,495/ - . THE SAID AMOUNT WHEN COMPARED TO IMMEDIATE PRECEDING YEAR HAS GO NE UP TO 14%. IN THE ABOVE BACKGROUND OF THE FACTS , ASSESSING OFFICER HELD THAT ANY INCREASE OF 4% CAN BE LOGICALLY CONCLUDED AS REASONABLE EXPENDITURE UNDER THE HEAD COMMISSION. THE SAME WORKED OUT TO 36% OF THE COMM ISSION INCOME I.E., RS. 94,22,818/ - . CONSIDERING THE HIGH EXPENDITURE ON COMMISSION, THE ASSESSING OFFICER DISALLOWED THE EXCESS COMMISSION OF RS. 26,71,155/ - . AGGRIEVED WITH THE ABOVE DECISION OF THE ASSESSING OFFICER, ASSESSEE FILED AN APPEAL BEFORE TH E FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) ALLOWED THE ASSESSEES APPEAL AND DELETED THE ADDITION MADE BY THE AO. P ARA 4 AT PAGES 12 AND 13 OF THE IMPUGNED ORDER ARE RELEVANT IN THIS REGARD. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS W ELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE ORDER OF THE CIT (A) IN GENERAL AND PARA 4 IN PARTICULAR WHICH IS PLACED PAGE 12 AND 13 OF THE IMPUGNED ORDER IS RELEVANT IN THIS REGARD. CONSIDERING THE IMPORTANCE OF THE SAID ORDER OF THE TRIBUNAL, WE FIND IT RELEVANT TO REPRODUCE THE SAID PARA 4 OF THE CIT (A)S ORDER AND THEREFORE, THE SAME IS EXTRACTED WHICH READS AS UNDER: 4. THE DECISION OF NEWTONE STUDIO LTD VS. CIT 28 ITR 378 (MADRAS HIGH COURT) AND RAYALOO IYER & SONS VS. CIT [195 4] 26 ITR 256 (SUPREME COURT) MENTIONED SUPRA ARE DIRECTLY ON THE POINT. FURTHER, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ITAT IN THE ASSESSEES OWN CASE S THE COMMISSION PAYMENT HAS NOT EXCEEDED 1% OF THE TOTAL COMMISSION RECEIVED BY THE ASSES SEE FROM THE PRINCIPLE (IN THAT YEAR ASSESSEE RECEIVED 2% OF COMMISSION FROM THE PRINCIPAL, IN OTHER WORDS 50% OF THE TOTAL COMMISSION RECEIVED). DURING THE RELEVANT YEAR, THE ASSESSEE PAID ONLY 45%, THEREFORE, IT IS STILL BELOW THE REASONABLE LIMIT AS OBSERVED BY THE ITAT IN ASSESSEES OWN CASE FOR AY 2005 - 2006. THE ABOVE DECISION HAS BEEN GIVEN IN THE CONTEXT OF RELATED PERSON U/S 40(A)(2)(B). FOR THE INSTANT ASSESSMENT YEAR, 3 THE PERSON TO WHOM THE COMMISSION PAID BEING THE SAME. THE DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSESSEE CAN BE MADE, IF SUCH EXPENDITURE FOUND TO BE UNREASONABLE OR EXCESSIVE OR CAPITAL EXPENDITURE OR PERSONAL EXPENDITURE OR NOT FOR THE PURPOSES OF BUSINESS. THE ASSESSING OFFICER HAS NOT ESTABLISHED ANY OF THE ABOVE WHIC H JUSTIFIES DISALLOWANCE EITHER U/S 40(A)(2)(B) OR 37(1). THEREFORE, THE DISALLOWANCE OF COMMISSION PAID BY THE ASSESSING OFFICER IS WITHOUT ANY MERIT. HENCE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE SAME. THIS GROUND OF APPEAL IS ALLOWED. 8. THE ABOVE DECISION IS GIVEN IN THE CONTEXT OF THE PAYMENT TO THE SPECIFIED PERSONS U/S 40(A)(2)(B) OF THE ACT. IN THE INSTANT CASE, COMPARISON OF PERCENTAGE OF COMMISSION INTERNALLY AMONG DIFFERENT AYS IS PURELY ARTIFICIAL AND IT LACKS SUBSTANCE. THE A BOVE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2005 - 2006 IS RELEVANT TO THE PROPOSITION THAT ASSESSING OFFICER NEED TO ESTABLISH THAT THE COMMISSION PAYMENTS ARE BOGUS AND THE AMOUNTS PAID TO PERSONS HAVE BEEN REFUNDED TO THE ASSESSEE BY S OME UNDISCLOSED FORM. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE CIT (A) HAS RIGHTLY DELETED THE ADDITION MADE BY ASSESSING OFFICER BY RELYING ON THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE AY 2005 - 2006. THE REVENUE HAS NOT BRO UGHT CONTRARY MATERIAL TO PROVE THAT THE AMOUNT PAID WAS IN THE NATURE OF CAPITAL EXPENDITURE OR NOT FOR THE BUSINESS PURPOSES OF THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE. THEREFORE, TH E DECISION OF THE CIT (A) IN THIS REGARD IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 6 T H NOVEMBER, 2014. S D / - S D / - ( VIJAY PAL RAO ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 2 6 /11/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 4 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI