Air Cargo Connections India Pvt. Ltd., CHENNAI V. ACIT Corporate Range 1, CHENNAI

ITA 2421/CHNY/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8116 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 23-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Corroborative evidences
• Section: 20

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.2421/CHNY/2018 /ASSESSMENT YEAR: 2015-16 M/S.AIR CARGO CONNECTIONS INDIA- PVT. LTD., OLD NO.6, NEW NO.5, NEEMA BUILDING, THIRUMALAI PILLAI ROAD, T.NAGAR, CHENNAI-600 017. VS. THE ASST. COMMISSIONER OF- INCOME TAX, CORPORATE RANGE-I, CHENNAI-600 034. [PAN: AABCA 8592 R ] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR.M.KARUNAKARAN, ADV. *+) , /RESPONDENT BY : MR.AR.V.SREENIVASAN, JCIT , /DATE OF HEARING : 17.12.2018 , /DATE OF PRONOUNCEMENT : 26.12.2018 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE COMPANY DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 , CHENNAI, DATED 28.06.2018 FOR THE AY 2015-16. 2. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: ITA NO.2421/CHNY/2018 :- 2 -: 1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS) IN CONFIRMING THE DISALLOWANCE OF RS.15,65,316/- BEING THE COMMISSION PAID BY THE APPELLANTS IS ILLEGAL, ARBITRARY, AGAINST THE WEIGHT OF EVIDENCE AND ALL PROBABILITIES OF THE CASE. THE SAME IS NOT SUSTAINABLE IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAVING ACCEPTED THAT THE APPELLANT WAS BENEFITTED BY MAKING THE COMMISSION PAYMENT OUG HT TO HAVE ALLOWED THE CLAIM AND SHOULD NOT HAVE HELD THAT NO EVIDENCE WAS PRODUCED TO SHOW THAT THE AIRLINE REDUCED THE RATE ON THE ACCOUNT OF THE ROLE PLAYED BY THE COMMI SSION AGENTS. 3. THE APPELLANTS SUBMIT THAT IT HAS PAID COMMISSIO N TO THE PERSONS WHO HAVE RENDERED SERVICES TO THE APPELLANT BY GETTING SPECIAL RATES FROM THE AIRLINES FOR FREIGHT CHARGES AND THERE WAS NO OTHER NECESSITY FOR THE APPELLANT TO P AY THE AMOUNT TO SUCH PERSONS. 4. THE AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT HAD PAID THE COMMISSION TO THE VARIOUS AGENTS WHO ARE NOT INTERE STED PARTIES THROUGH BANKING CHANNEL AFTER DEDUCTION OF TAX AND ALSO FILED CONFIRMATION LETTERS FROM THEM. THE TOTAL COMMISSION OF RS.25.56 LAKHS PAID WAS VERY REASONABLE WHEN COM PARED TO THE TOTAL TURNOVER OF THE APPELLANT OF RS.1622.06 LAKHS. 5. THE APPELLANTS SUBMIT THAT THE RECIPIENTS HAVE A LSO ADMITTED THE SAME AS THEIR INCOME IN THEIR TAX RETURNS AND THE PAYMENT WAS A GENUINE ONE AND THEREFORE THE ASSESSING OFFICER SHOULD NOT HAVE DISALLOWED THE SAME ON TECHNICAL AN D FLIMSY GROUNDS ESPECIALLY WHEN THE APPELLANT HAD DISCHARGED ITS ONUS OF PROVING THE EX PENDITURE AS ONE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 6. THE APPELLANTS HAD SUBMITTED EVIDENCE TO ESTABLI SH THAT BY ENGAGING THE AGENTS AND BY PAYING COMMISSION TO THE AGENTS THEY HAD BENEFITTED IN GETTING HIGHER FREIGHT CHARGES FROM THE AIRLINES THAN NORMAL RATES. 7. THE APPELLANTS THEREFORE PRAY THAT THE DISALLOWA NCE OF COMMISSION OF RS.15,65,317/- MAY BE DELETED AND THE APPEAL MAY BE ALLOWED. 3. BRIEFLY, THE FACTS OF THE CARE ARE THAT THE APPE LLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF FREIGHT FORWARDER CLEARING AGENC Y. THE RETURN OF INCOME FOR THE AY 2015-16 WAS FILED ON 28.09.2015 DISCLOSI NG A TOTAL INCOME OF RS.17,36,490/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASST. COMMISSIONER OF INCOME TAX ( OSD), CORPORATE RANGE-1, CHENNAI, [HEREINAFTER CALLED AS ASSESSING OFFICER (IN SHORT AO)] PASSED U/S.143(3) OF THE INCOME TAX ACT, 196 1 AT A TOTAL INCOME OF RS.46,08,230/-. WHILE DOING SO, THE AO MADE DIS ALLOWANCE COMMISSION PAYMENT OF RS.15,65,316/- ON THE GROUND THAT THE AP PELLANT HAD FAILED TO SUBSTANTIATE THE RENDITION OF SERVICE BY THE COMMIS SION AGENTS. THE AO ITA NO.2421/CHNY/2018 :- 3 -: ALSO DISALLOWED A SUM OF RS.11,00,172/- OUT OF THE LOADING AND UNLOADING CHARGES AND TRANSPORTING CHARGES OF RS.23,66,659/- IN THE ABSENCE OF ANY SUPPORTING EVIDENCE OF PAYMENT. FURTHER, THE AO AL SO DISALLOWED 30% OF THE CONTRACT PAYMENT OF RS.6,87,508/- AS THE PAYMEN TS HAVE BEEN MADE WITHOUT DEDUCTING THE TAX AT SOURCE IN VIEW OF THE PROVISIONS OF SEC.40(A)(IA). 4. BEING AGGRIEVED BY THE ABOVE ORDER, AN APPEAL WA S PREFERRED BEFORE THE LD.CIT(A) WHO HAVE VIDE IMPUGNED ORDER PARTLY A LLOWED THE APPEAL. WHILE CONFIRMING THE ADDITION ON ACCOUNT OF COMMISS ION PAYMENT ON TRANSPORT AGENCY COMMISSION AND TRANSPORTATION CHAR GES HAD REMANDED THE ISSUE OF ADDITION U/S.40(A)(IA) TO THE AO FOR T HE PURPOSE OF VERIFICATION WHETHER THE PAYMENT MADE TO EACH PERSON DOES NOT EX CEED THE PRESCRIBED MINIMUM LIMIT. BEING AGGRIEVED, THE APP ELLANT IS IN APPEAL BEFORE US. IT IS SUBMITTED THAT ON ACCOUNT OF THE SERVICES RENDERED BY THE COMMISSION AGENTS, THE BUSINESS OF THE PROFITABILIT Y HAD INCREASED AND THE TAX HAS BEEN DEDUCTED ON THE PAYMENT MADE AND COMMI SSION PAYMENTS, TRANSPORTATION CHARGES AND THEREFORE NO DISALLOWANC E SHOULD BE MADE MERELY FOR THE REASON THAT THERE IS NO EVIDENCE IN SUPPORT OF THE RENDITION OF SERVICE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL PLACED ON RECORD. ITA NO.2421/CHNY/2018 :- 4 -: 6. THE ONLY ISSUE IN THE PRESENT GROUNDS OF APPEAL IS WHETHER THE ADDITION CAN BE MADE IN THE ABSENCE OF EVIDENCE IN SUPPORT OF RENDITION SERVICES BY COMMISSION AGENTS AND TRANSPORT SERVICE S. INDISPUTABLY, THERE IS NO DISPUTE WITH REGARD TO THE PAYMENT OF T HE CONSIDERATION FOR THE SERVICES RENDERED. THUS, SOLITARY GROUND ON WHICH THE ADDITION HAVE BEEN MADE BY THE AO AND AS CONFIRMED BY THE LD.CIT(A) IS THAT THERE IS NO EVIDENCE IN SUPPORT OF RENDITION SERVICES. IT HAS B EEN SETTLED PRINCIPLE OF LAW THAT IN THE ABSENCE OF PROOF FOR RENDITION OF S ERVICE, THE COMMISSION PAYMENT ON TRANSPORT CHARGES CANNOT BE ALLOWED. IN THIS CONNECTION, RELIANCE IS PLACED UPON THE FOLLOWING DECISIONS THA T HAVE HELD THAT IN THE ABSENCE OF RENDERING OF SERVICE, DISALLOWANCE OF CO MMISSION IS JUSTIFIABLE: A. THE BOMBAY HIGH COURT IN THE CASE OF UMAKANT V. AGA RWAL VS. DCIT (2014) 46 TAXMAN.COM 338 / 369 ITR 220 (BOMBAY) HAS HELD THAT W HERE THE APPELLANT FAILED TO PRODUCE EVIDENCES REGARDING THE SUB AGENCY COMMI SSION PAID BY SHOWING THE NATURE OF SERVICES RENDERED BY THE SUB-AGENTS, THE SAID EXPENDITURE COULD NOT BE ALLOWED. B. THE GUJARAT HIGH COURT IN THE CASE OF GUJARAT INSEC TICIDES LTD. V. DCIT (2013) 40 TAXRNAN.COM 166 (GUJ.) HAS HELD THAT WHERE THERE WAS NO EVIDENCE TO SUGGEST THAT ANY SERVICES WERE RENDERED BY THE RECIPIENT OF COMM ISSION, THE COMMISSION WAS RIGHTLY DISALLOWED. C. THE P & H HIGH COURT IN THE CASE OF CIT V. PUNJAB B REWERIES LTD. (2012) 20 TAXMAN.COM 630 (P&H) HAS UPHELD THE DISALLOWANCE OF HANDLING CHARGES PAID TO AGENT WHEN NO MATERIAL WAS BROUGHT ON RECORD TO SHO W THAT ANY SERVICES WERE RENDERED BY THAT PARTY FOR CLAIMING THE COMMISSION. D. THE BOMBAY HIGH COURT IN THE CASE OF SURESH KUMAR G . HUNDIA V. ACIT (2015) 53 TAXMAN.COM 29 (BOM.) HAS HELD THAT WHERE THERE ARE N O SUPPORTING EVIDENCES FOR THE RENDERING OF SERVICES, THE DISALLOWANCE OF COMM ISSION PAID IN RESPECT OF SUCH SERVICES IS PROPER. E. THE CALCUTTA HIGH COURT IN THE CASE VISHNU AGENCIES (P) LTD. V. CIT (1979) 117 ITR 754 (CAL.) HAS HELD THAT WHERE THERE WAS NO EVIDENCE TO ESTABLISH THAT THE SOLE SELLING AGENT HAD RENDERED ANY SERVICE TO THE ASSES SEE, COMMISSION PAID TO SUCH AGENT BY THE ASSESSEE IS DISALLOWABLE. 7. IN ALL THESE DECISIONS, THE HONORABLE HIGH COURT HAVE HELD THAT IN THE ABSENCE OF THE SERVICES RENDERED, DISALLOWANCE OF PAYMENT IS JUSTIFIED. RESPECTFULLY FOLLOWING THE SAME, THIS GROUND OF APP EAL IS DISMISSED. ITA NO.2421/CHNY/2018 :- 5 -: 8. THUS, HAVING REGARD THE RATIO ENUNCIATED IN THE ABOVE DECISIONS, IN THE PRESENT CASE ALSO, THERE IS NO IOTA OF EVIDENCE BROUGHT ON RECORD SUBSTANTIATING THE RENDITION OF SERVICE BY THE COMM ISSION AGENTS UNDER TRANSPORT AGENCY AND THEREFORE, WE HOLD THAT THE LO WER AUTHORITIES WERE JUSTIFIED MAKING ADDITION ON ACCOUNT OF COMMISSION PAYMENTS AND TRANSPORT CHARGES. THUS, THE GROUNDS OF APPEAL FIL ED BY THE APPELLANT ARE DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 26 TH DECEMBER, 2018 IN CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 26 TH DECEMBER, 2018. TLN , *45 65 /COPY TO: 1. ) /APPELLANT 4. 7 /CIT 2. *+) /RESPONDENT 5. 5 * /DR 3. 7 ( ) /CIT(A) 6. /GF