The DCIT, Circle-2, Surat V. M/s. Komal Marketing, Surat

ITA 243/AHD/2012

• Counselvise Citation: 24320514 RSA 2012
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: MEHUL R SHAH
• Keywords: Unexplained cash credit; Business income; Assessment record
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL VICE PRESIDENT AND SHRI S.S. GODARA JUDICIAL MEMBER ITA S NO . 243 /AHD/ 2012 A. Y .20 0 8 - 09 DY. CIT, CIRCLE - 2, SURAT. VS M/S. KOMAL MARKETING 1020, JASH MARKET, RING ROAD, SURAT. PAN: AACFK 9632L (APPELLANT) (RESPONDENT) REVENUE BY : S HRI M.K. SINGH , SR. D.R. , ASSESSEE(S) BY : SHRI MEHUL R. SHAH , A.R. / DATE OF HEARING : 21 / 0 5 /201 5 / DATE OF PRONOUNCEMENT: 19 / 0 6 /201 5 / O R D E R PER S.S. GODARA , JUDICIAL MEMBER THIS REVENUE S APPEAL FOR A.Y. 200 8 - 0 9 , ARISE S FROM ORDER OF CIT (A) - II, SURAT DATED 17.10.2011 PASSED I N CASE NO . CAS - II/198/10 - 11 DELETING DISALLOWANCE OF BROKERAGE/COMMISSION EXPENSES OF RS.17,06,271/ - AND UNEXPLAINED CASH CREDIT ADDITION OF RS.1 LAC IN PROCEEDINGS UNDER SECTION 143(3 ) OF THE INCOME TAX ACT ,1961, IN SHORT THE ACT . 2. WE COME TO REVENUE S FORMER GROUND SEEKING TO RESTORE BROKERAGE DISALLOWANCE OF RS.17,06,271/ - . THE ASSESSEE - FIRM S ITA NO. 243 /AHD/20 1 2 M/S. KOMAL MARKETING FOR A.Y. 200 8 - 0 9 - 2 - BUSINESS IS IN TRADING AND BROKERAGE OF YARN. IT HA D SHOWN THE IMPUGNED BROKERAGE SUM IN ITS PROFIT AND LOSS ACCOUNT. I TS TURNOVER R EADS RS. 22,98,81,728/ - AS AGAINST PRECEDING ASSESSMENT YEARS TURNOVER OF RS.7,97,28,391/ - . IT DID NOT CLAIM ANY SUCH BROKERAGE IN THE PRECEDING ASSESSMENT YEAR. THE ASSESSING OFFICER VIEWED THE ASSESSEE S CLAIM OF BROKERAGE IN QUESTION AS AN ATTEMPT TO MINIMIZE PROFITS. HE INTER ALIA NOTICED THAT THE NECESSARY BILLS PLACED IN THE CASE FILE DID NOT PROVE ANY BROKERAGE SERVICE RENDERED, THERE WAS NO RATIONALITY OF THE AMOUNTS PAID AND MOST OF THE PAYEES WERE ASSESSEE S RELATED PARTIES. 3. THE ASSESSEE FILED REPLY STATING THEREIN THAT ITS TEXTILE BUSINESS ACTIVITIES WERE CARRIED OUT MAINLY THROUGH BROKERS, ITS PAYEES BILLS CONTAINED SUMMARY OF SALES AS WELL, THEIR DUTY WAS PROCUREMENT OF ORDERS, MONITORING OF TIMELY DELIVERY, COLLECTION OF PAYME NT, SETTLEMENT OF DISPUTES AND MAINTENANCE OF BUSINESS RELATIONS. THE ASSESSEE STRESSED THAT THE IMPUGNED BROKERAGE WAS AN ESTABLISHED BUSINESS PRACTICE. ALL THESE PLEADINGS FAILED TO IMPRESS UPON THE ASSESSING OFFICER. HE OBSERVED IN ASSESSMENT ORDER DATE D 13.12.2010 THAT THE PAYEE - AGENTS HAD ACTED AS STAND ALONE BROKERS FOR ASSESSEE ONLY WITHOUT HAVING ANY SKILLS IN THE CONCERNED FIELD, TERMED THE CLAIM AS BOGUS SINCE ALL BILLS WERE IN THE SAME FORMAT AND MOST OF THE PAYMENTS ITA NO. 243 /AHD/20 1 2 M/S. KOMAL MARKETING FOR A.Y. 200 8 - 0 9 - 3 - HAS BEEN SHOWN OUTSTANDING DU RING THE YEAR DESPITE THE FACT BROKERS IN NORMAL PARLANCE WOULD ASK FOR IMMEDIATE REIMBURSEMENT AND ALSO HELD THAT THE ASSESSEE S CUSTOMERS WERE ALREADY HAVING DIRECT CONTACT FOR WHICH DID NOT REQUIRE ANY BROKERAGE SERVICES. THE ASSESSING OFFICER WOULD ALS O CONCLUDE THAT ONCE THE ASSESSEE HAD FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING, IT OUGHT TO HAVE DEDUCTED TDS AT THE TIME OF CREDITING OF THE BROKERAGE PAYMENTS INSTEAD OF THAT MADE AT THE END OF THE YEAR. THIS RESULTED IN THE IMPUGNED DISALLOWANCE BEING M ADE IN THE ASSESSEE S BROKERAGE CLAIMED AMOUNTING TO RS.17,06,271/ - . 4. THE CIT(A) HAS ACCEPTED THE ASSESSEE S CORRESPONDING GROUNDS AS UNDER: 2.4. I HAVE GONE THROUGH THE FACTS OF THE CASE. THERE IS NO DISPUTE THAT THE APPELLANT'S BUSINESS HAS EXPANDED TREMENDOUSLY - THE TURNOVER GOING UP THREE TIMES, FROM APPROXIMATELY RS.8 CRORES TO APPROXIMATELY RS.23 CRORES. THE APPELLANT PROVIDED FULL DETAILS OF BROKERAGE EXPENSES INCURRED. THESE EVIDENCES INCLUDED, NAME, ADDRESS, PAN, RETURN OF INCOME, STATEMENT O F ACCOUNTS AND DETAILS OF SALES MADE THROUGH BROKERS. THE APPELLANT ALSO EXPLAINED THE SERVICES RENDERED BY THE BROKERS AND THE REASON WHY THE ACCOUNTS ARE SETTLED AT THE END OF THE ACCOUNTING PERIOD WHEN PAYMENTS WERE MADE AFTER DEDUCTING TAX AT SOURCE. TH E A.O. HAS NOT CARRIED OUT ANY INVESTIGATION TO SHOW THAT THE EVIDENCES PROVIDED BY THE APPELLANT WERE NOT CORRECT AND THAT THE CLAIM OF EXPENSES WAS NOT GENUINE. THE A.O. HAS RELIED ONLY ON DOUBTS WHICH MAY HAVE COME TO HIS MIND. DOUBTS CAN ONLY BE THE ST ARTING POINTS FOR AN INVESTIGATION BUT NOT CONCLUSIVE EVIDENCE. IN ABSENCE OF ANY EVIDENCE TO THE CONTRARY, THE CLAIM OF THE APPELLANT WHICH IS BASED ON EVIDENCE HAS TO BE ENTERTAINED. THE ADDITION MADE IS THEREFORE DELETED. THIS GROUND IS ALLOWED. ITA NO. 243 /AHD/20 1 2 M/S. KOMAL MARKETING FOR A.Y. 200 8 - 0 9 - 4 - 5. WE HAVE HEARD BOTH SIDES AND GONE THROUGH THE CASE FILE. THE REVENUE STRONGLY SUPPORTS THE ASSESSING OFFICER S FINDINGS MAKING THE IMPUGNED DISALLOWANCE OF BROKERAGE EXPENSES. WE HAVE ALREADY NARRATED THE ASSESSING OFFICER S REASON S FOR DISALLOWING THE CLAIM IN QUESTION. THE CIT(A) RIGHTLY POINTS OUT THAT THERE IS NO DISPUTE ABOUT THE IMPUGNED PAYMENTS HAVING BEEN MADE TO THE ASSESSEE S AGENTS OR SERVICES RENDERED IN LIEU THEREOF. IT HAS COME ON RECORD THAT THE ASSESSEE S TURNOVER HAS INCREASED TO ALMOST 300% IN THE IMPUGNED ASSESSMENT YEAR AS COMPARED TO THAT IN THE PRECEDING ASSESSMENT YEAR. ALL OTHER SUPPORTIVE MATERIAL IS ALREADY ON RECORD. THE REVENUE FAILS TO POINT OUT ANY EVIDENCE IN SUPPORT OF ITS PLEA SEEKING TO RESTORE THE IMPUGNED DISALLOWANCE. WE E XPRESS OUR AGREEMENT WITH THE CIT(A) FINDINGS UNDER CHALLENGE IN THESE CIRCUMSTANCES AND REJECT THE REVENUE S FIRST SUBSTANTIVE GROUND. 6. THIS LEAVES US WITH THE REVENUE S SECOND GROUND SEEKING TO RESTORE UNEXPLAINED CASH CREDIT ADDITION OF RS.1 LAC U/S. 68 OF THE ACT. THIS SUM COMPRISES AN AMOUNT OF RS. 60,000/ - CREDITED FROM AN HUF NAMELY HARSHADBHAI R. PANSURIA. THE REMAINING SUM OF RS.40,000/ - CAME FROM ANOTHER HUF RAMESHBHAI R. PANSURIA. THE ASSESSING OFFICER NOTICED THAT ITA NO. 243 /AHD/20 1 2 M/S. KOMAL MARKETING FOR A.Y. 200 8 - 0 9 - 5 - CASH DEPOSITS WERE MADE IN BOT H OF THEIR BANK ACCOUNTS AND ON THE NEXT, IMPUGNED LOANS WERE GIVEN. HE ALSO OBSERVED THE NATURE OF THEIR PROFIT AND LOSS ACCOUNT AS THEY HAD SHOWN TEXTILE BUSINESS INCOME IN INCOME SIDE AND CLAIMED CONVEYANCE, STATIONERY AND PROFESSIONAL FEES ON THE OTHER SIDE. BANK ACCOUNT OF THESE CREDITORS ALSO ALLEGEDLY DEMONSTRATED NOMINAL BALANCES EXCEPT IN THE LAST WEEK OF THE YEAR. THE ASSESSING OFFICER DOUBTED GENUINENESS / CREDITWORTHINESS OF THE ASSESSEE S EXPLANATION AND INVOKED SECTION 68 OF THE ACT FOR TREATI NG THE IMPUGNED DEPOSITS OF RS.1 LAC AS UNEXPLAINED CASH CREDITS. 7. THE CIT(A) HAS DELETED THE IMPUGNED ADDITION AS UNDER: 3.2. I HAVE GONE THROUGH THE FACTS OF THE CASE. ALL RELEVANT DETAILS REGARDING THE TRANSACTIONS OF LOAN WITH HARSHADBHAI R. PANSU RIYA (HUF) AND RAMESHBHAI R. PANSURIYA (HUF) WERE BEFORE THE A.O. THESE CREDITORS WERE REGULAR INCOME - TAX ASSESSES, THE LOAN GIVEN TO THE APPELLANT WAS REFLECTED IN THEIR ACCOUNTS, THE CREDITORS HAD RECEIVED INTEREST FROM THE APPELLANT AFTER TDS, THEY HAD S UFFICIENT CAPITAL BALANCE AND INCOME TO ADVANCE SMALL AMOUNTS OF LOAN THAT THEY DID. FURTHER, THE CREDITORS HAD SUFFICIENT CASH BALANCE TO MAKE THE DEPOSIT IN THE BANK ACCOUNT. THE APPELLANT HAD THEREFORE DISCHARGED ITS ONUS WITH RESPECT TO THE IDENTITY AN D CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF TRANSACTIONS. THE A.O. DID NOT CONDUCT ANY INVESTIGATION. HE DID NOT BRING ANY EVIDENCE TO SHOW THAT THE TRANSACTIONS WERE NOT GENUINE. THE ACTION OF THE A.O. APPEARS TO BE BASED ONLY ON DOUBTS AND THE REFORE CANNOT BE UPHELD, ESPECIALLY WHEN THERE IS SUFFICIENT EVIDENCE ON RECORD TO SHOW OTHERWISE. THE ADDITION MADE IS THEREFORE DELETED. THIS GROUND IS ALLOWED. 8. HEARD RIVAL CONTENTION. RECORDS PERUSED. THE REVENUE DRAWS SUPPORT FROM THE ASSESSMENT O RDER DOUBTING ITA NO. 243 /AHD/20 1 2 M/S. KOMAL MARKETING FOR A.Y. 200 8 - 0 9 - 6 - CREDITWORTHINESS OF THE ABOVESAID HUFS FROM WHOM THE IMPUGNED DEPOSIT OF RS.1 LAC HAVE COME IN ASSESSEE S ACCOUNT. THE CIT(A) REFERS TO THEIR ASSESSMENT RECORDS, BOOKS OF ACCOUNT, INTEREST CHARGED ALONG WITH TDS DEDUCTED AND ALSO SUFFICIENT C APITAL BALANCE FOR THE PURPOSE OF ADVANCING RS.60,000/ AND 40,000/ - TO THE ASSESSEE. THE REVENUE FAILS TO REBUT THE SAID FACTUAL FINDINGS BY REFERRING TO THE CASE RECORD AVAILABLE IN THE FILE. THUS, WE AFFIRM THE CIT(A) FINDINGS ACCEPTING THE ASSESSEE S PL EA OF GENUINENESS/CREDITWORTHINESS OF THE IMPUGNED DEPOSITS THEREBY DELETING THE IMPUGNED ADDITION OF UNEXPLAINED CASH CREDITS. THE REVENUE SECOND GROUND ALSO FAILS. 9. THE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS DAY, THE 19 TH JUNE, 201 5 AT AHMEDABAD . SD/ - SD/ - ( G.D. AGRAWAL ) ( S.S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 19 / 06/ 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5 . , , / DR, ITAT, AHMEDABAD ITA NO. 243 /AHD/20 1 2 M/S. KOMAL MARKETING FOR A.Y. 200 8 - 0 9 - 7 - 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD