Compass Education Overseas Academy Private Limited, CHENNAI V. ACIT Corporate Circle 1(4), CHENNAI

ITA 2418/CHNY/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 5986 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 23-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D ANAND
• Keywords: Principle of natural justice; TDS
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , ! '!# $ , % & BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ! ./ ITA NO.2418/CHNY/2018 ' /ASSESSMENT YEAR: 2009-10 M/S. COMPASS EDUCATION OVERSEAS ACADEMY PVT. LTD., NO.17, RAMANUJAM STREET, CHOOLAIMEDU, CHENNAI 600 094. VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(4), CHENNAI. [PAN: AACCC 6356L] ( ( /APPELLANT) ( )*( /RESPONDENT) ( + , / APPELLANT BY : SHRI D. ANAND, ADVOCATE )*( + , /RESPONDENT BY : SHRI ARV SREENIVASAN, JCIT - + .% /DATE OF HEARING : 20.12.2018 /0' + .% /DATE OF PRONOUNCEMENT : 07.01.2019 1 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, CHEN NAI (CIT(A) FOR SHORT) DATED 16.07.2018 FOR THE ASSESSMENT YEAR (AY ) 2009-10. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS) - 4, CHENNAI DATED 16.07.2018 IN I.T.A.NO.01 /2011-1 2/A Y2009-1 OICIT(A)-4 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. ITA NO.2418/CHNY/2018 (AY: 2009-10) M/S. COMPASS EDUCATION OVERSEAS ACADEMY PVT. LTD. :- 2 -: 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF THE COMMISSION PAYMENTS MADE TO MR.C.G,BALAJI, HUE AMOU NTING TO RS.2,85,500/- IN THE COMPUTATION OF TAXABLE TOTAL I NCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF THE COMMISSION PAYMENTS MADE TO MR.R.RAMESH, HUF AMOUNT ING TO RS.5,38,000/- IN THE COMPUTATION OF TAXABLE TOTAL I NCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 4. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF THE COMMISSION PAYMENTS MADE TO MR.P.K.VENKATESWARAN, H UF AMOUNTING TO RS.5,71 ,500/- IN THE COMPUTATION OF TAXABLE TOT AL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 5. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF THE COMMISSION PAYMENTS MADE TO MR.P.MANOHARAN, HUF AMO UNTING TO RS.2,45,000/- IN THE COMPUTATION OF TAXABLE TOTAL I NCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 6. THE CIT (APPEALS) COMMISSION PAYMENTS DIRECTORS WAS ERRONEOUS FAILED TO APPRECIATE THAT THE DISALLOWANCE OF WITHO UT RECOGNIZING THE DUAL CAPACITY OF THE AND INVALID. 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE FINDINGS RECORDED IN THIS REGARD IN PARAS 3.1 TO 3.4 OF THE ASSESSMENT O RDER WERE WRONG, INCORRECT, UNJUSTIFIED, ERRONEOUS AND NOT SUSTAINAB LE BOTH ON FACTS AND IN LAW. 8. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVI NG NOT EXAMINED THE CAPACITY OF THE MEMBERS OF THE HUF IN PROCURING BUS INESS FOR THE APPELLANT AND HAVING NOT QUESTIONED THE REASONABLEN ESS OF THE AMOUNTS PAID/INCURRED, THE DISALLOWANCE OF COMMISSI ON PAYMENTS WAS WRONG, INCORRECT, UNJUSTIFIED, ERRONEOUS AND NOT SU STAINABLE BOTH ON FACTS AND IN LAW. 9. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE MATERIAL EVIDENCE FILED IN SUPPORT OF THE CLAIM WERE COMPLETELY IGNORED WHI LE VITIATING HIS FINDINGS IN PARA 16 OF THE IMPUGNED ORDER AND FURTH ER OUGHT TO HAVE APPRECIATED THAT THE AGREEMENTS ENTERED INTO WITH T HE RELATED PARTIES WOULD FORTIFY THE CLAIM FOR COMMISSION PAYMENTS FOR THE SERVICES RENDERED WHILE NEGATING THE APPLICABILITY OF SECTIO N 40A(2)(B) OF THE ACT AND FURTHER WHILE ESTABLISHING THE TRANSACTIONS ENT ERED INTO AT ARMS LENGTH. 10. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISAL LOWANCE OF RS.92,464/- BEING THE TRAVELING EXPENSES PAID TO M/ S VENKATESWARA ITA NO.2418/CHNY/2018 (AY: 2009-10) M/S. COMPASS EDUCATION OVERSEAS ACADEMY PVT. LTD. :- 3 -: TRAVELS FOR WANT OF TDS IN APPLYING SECTION 40 (A) (IA) OF THE ACT IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNI NG PROPER REASONS AND JUSTIFICATION AND WENT WRONG IN RECORDING THE F INDINGS IN THIS REGARD IN PARA 20 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 11. THE ACIT FAILED TO APPRECIATE THAT THERE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING THE IMPUGNED ORDER AND ANY ORD ER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IS N ULLITY IN LAW. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS A COMPANY AND ENGAGED IN THE BUSI NESS OF EDUCATIONAL CONSULTANT AND FILED ITS RETURN OF INCO ME FOR THE AY 2009-10 ON 15.09.2009 DECLARING TOTAL INCOME OF RS. 4,98,86 0/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY T HE ASST. CIT, CIRCLE-I(4), CHENNAI VIDE ORDER DATED 29.12.2011 PA SSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AT A TOTAL INCOME OF RS.22,31,324/-, WHILE DOING SO, THE ASSESSING OFFIC ER DISALLOWED THE COMMISSION PAID TO THE DIRECTORS, HUF AS DETAILED B ELOW: SL. NO. COMMISSION PAID TO COMMISSION PAID (RS.) 1. SHRI C.G. BALAJI (HUF) 2,85,500/- 2. SHRI R. RAMESH (HUF) 5,38,000/- 3. SHRI P.K. VENKATESWARAN(HUF) 5,71,500/- 4. SHRI P. MANOHARAN(HUF) 2,45,000/- TOTAL 16,40,000/- INVOKING THE PROVISIONS OF S. 40A(2)(B) OF THE ACT HOLDING THAT THE PAYMENTS ARE EXCESSIVE AND UNREASONABLE. ITA NO.2418/CHNY/2018 (AY: 2009-10) M/S. COMPASS EDUCATION OVERSEAS ACADEMY PVT. LTD. :- 4 -: 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE THE IMPUGNED ORDER CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US IN THE IN THE P RESENT CASE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THE ONLY ISSUE IN THE PRESENT CA SE IS WHETHER THE AO IS JUSTIFIED TO MAKE THE DISALLOWANCE OF COMMISSION PAYMENT OR THERE IS ANY JUSTIFICATION MAKING THE DISALLOWANCE OF COMMIS SION PAID TO THE HUF OF THE DIRECTORS U/S. 40A(2)(B) OF THE ACT. THERE IS NO DISPUTE AS TO THE APPLICABILITY OF THE PROVISION OF S. 40A(2)(B) OF T HE ACT. THE BURDEN LIES ON THE REVENUE TO PROVE THAT WHAT IS THE FAIR MARKE T VALUE OF THE ALLEGED SERVICES RENDERED BY THE PAYEES AND IN THE PRESENT CASE, THE AO HAS NOT BROUGHT ANYTHING ON RECORD SUGGESTING THE FAIR MARK ET VALUE AND THE SERVICES RENDERED BY THE PAYEES. THEREFORE, THE AD DITION MADE BY THE AO CANNOT BE SUSTAINED IN LAW. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, ORDER PRONOUNCED IN THE OPEN COURT ON THE 07 TH DAY OF JANUARY, 2019 IN CHENNAI SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( '!# $ ) (INTURI RAMA RAO) % /ACCOUNTANT MEMBER /CHENNAI, 2! /DATED: 07 TH JANUARY, 2019 . EDN, SR. P.S ITA NO.2418/CHNY/2018 (AY: 2009-10) M/S. COMPASS EDUCATION OVERSEAS ACADEMY PVT. LTD. :- 5 -: 1 + ).34 54'. /COPY TO: 1. ( /APPELLANT 2. )*( /RESPONDENT 3. - 6. ( )/CIT(A) 4. - 6. /CIT 5. 4 78 ). /DR 6. 89 : /GF