The DCIT, Circle-2, Surat V. Shri Manojkumar Saraf(HUF), Surat

ITA 2446/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94463 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SIGH
• Assessee Lawyers: RAMESH KUMAR MA LPANI
• Keywords: Business expenditure; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE S/SHRI G. D. AGRAWAL, VP & RAJPAL YADAV, J M. ITA NO.2446/AHD/2012 ASST. YEAR 2009-10 .DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT. VS SHRI MANOJKUMAR SARAF (HUF), 644, AJANTA SHOPPING CENTRE, RING ROAD, SURAT. (APPELLANT) (RESPONDENT) PA NO. AADHM 7984C APPELLANT BY SHRI NARENDRA SIGH, SR. DR RESPONDENT BY SHRI RAMESH KUMAR MALPANI, AR DATE OF HEARING: 9/9/2015 DATE OF PRONOUNCEMENT:29/09/2015 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER. THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 22.8.2012 PASSED FOR AY 2009-10. IN TH E FIRST GROUND OF APPEAL REVENUE HAS PLEADED THAT LD. CIT(A) HAS ERRE D IN DELETING THE ADDITION OF RS.36,66,698/-. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAS FI LED HIS RETURN OF INCOME ON 18 TH AUGUST, 2009 DECLARING TOTAL INCOME OF RS.12,75,22 0/- THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) OF THE I.T. ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS ISSUED ON 17 TH AUGUST, 20010 WHICH WAS DULY SERVED UPON ITA NO.2446/AHD/2012 ASST. YEAR 2009-10 2 THE ASSESSEE. THE ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF DISTRIBUTORSHIP OF OIL. HE HAS ACHIEVED A TURNOVER OF RS.9,06,74,754/- AND EARNED GP OF RS.1,22,77,867/-. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT ASSESSEE H AD PAID COMMISSION OF RS.36,66,698/-. THE LD. AO HAS DIRECT ED THE ASSESSEE TO SUBMIT THE DETAILS IN RESPECT OF COMMISSION PAYM ENT IN THE SPECIFIC PERFORMA ATTACHED WITH THE SHOW CAUSE NOTICE. THE A SSESSEE HAS SUBMITTED THE DETAILS BUT STRICTLY NOT IN CONSONANC E WITH THE FORM GIVEN BY THE AO. THE LD. AO HAS DISALLOWED THE CLAI M OF ASSESSEE. 3. ON APPEAL, LD. FIRST APPELLATE AUTHORITY HAS DEL ETED THE DISALLOWANCE BY OBSERVING AS UNDER :- 2.4 I HAVE GONE THROUGH THE FACTS OF THE CASE AND FOUND THAT BASIS OF ADDITION MADE BY AO IS NOT JUSTIFIABLE. SIMPLY T HAT THE APPELLANT HAS NOT SUBMITTED DETAILS IN THE SPECIFIC FORMAT GI VEN BY AO CANNOT BE A REASON FOR DISALLOWANCE OF EXPENDITURE. THE AO HAS FAILED TO FIND ANY DEFECT IN THE DETAILS FURNISHED BY APPELLA NT OR BOOKS OF ACCOUNT AND OTHER SUPPORTING DOCUMENTS PRODUCED DUR ING ASSESSMENT PROCEEDINGS. IF DOUBTED, AO COULD HAVE I SSUED SUMMONS TO THE COMMISSION AGENTS TO VERIFY THE AUTH ENTICITY OF PAYMENTS MADE OR SERVICES RENDERED BY COMMISSION AG ENTS. RATHER, AO HIMSELF HAS ADMITTED THAT IF ASKED THESE COMMISS ION AGENTS ARE GOING TO CONFIRM THAT THEY HAVE RECEIVED COMMISSION . FURTHER, THE CONCLUSION DRAWN BY AO THAT THESE ARE ACCOMMODATION ENTRIES OF COMMISSION, IS WITHOUT ANY BASE NOT SUPPORTED WITH AY EVIDENCE. TO ARRIVE AT THIS CONCLUSION, ONUS IS ON THE AO TO EST ABLISH THAT THESE ARE ACCOMMODATION ENTRIES IN WHICH AO HAS COMPLETELY FA ILED. THE APPELLANT HAS FURNISHED THE COMPLETE DETAILS OF THE SE AGENTS SUCH AS NAME, ADDRESS, PAN, AMOUNT OF COMMISSION PAID, TDS DEDUCTED ALONG WITH CONFIRMATIONS OBTAINED FROM THESE AGENTS . APART FROM THESE, SALE INVOICES WERE ALSO PRODUCED IN WHICH AB BREVIATED NAMES OF AGENTS THROUGH WHOM THE SERVICES IN THE FORM OF SALES HAVE BEEN ITA NO.2446/AHD/2012 ASST. YEAR 2009-10 3 AFFECTED WERE MENTIONED. THE AO HAS FAILED TO FIND ANY DEFECT IN THESE DETAILS. THE APPELLANT HAS FURTHER SUBMITTED THAT IN EARLIER YEARS ALSO COMMISSION EXPENSES HAVE BEEN CLAIMED AGAINST THE SALES AND IN NONE OF THE YEARS IT HAS BEEN DISALLOWED. THE DE TAILS GIVEN BY APPELLANT FOR THE PREVIOUS FOUR YEARS ARE AS UNDER :- ASSESSMENT YEAR TURNOVER (RS.) COMMISSION PAID (RS. ) 2009-10 9,06,74,754/- 36,66,698/- 2008-09 8,49,39,742/- 39,75,763/- 2007-08 8,17,42,298/- 33,27,563/- 2006-07 5,45,99,695/- 39,14,528/- IT WAS FURTHER SUBMITTED BY APPELLANT THAT MOST OF THE AGENTS TO WHOM COMMISSION WAS PAID IN EARLIER YEARS ARE THE SAME A S ARE IN THE YEAR UNDER APPEAL AND THIS FACT PROVES THE GENUINENESS A ND BONA FIDE OF THESE EXPENDITURE. HOWEVER, THE COMMISSION EXPENSE CLAIMED BY APPELLANT AND ALLOWED BY DEPARTMENT IN THE EARLIER YEARS HAS NOT BEEN CONTROVERTED BY AO. THE CASE LAWS CITED BY APP ELLANT IN HIS SUBMISSIONS ALSO SUPPORT HIS CLAIMED. ALL THESE FAC TS CLEARLY ESTABLISH THAT THE COMMISSION EXPENSES CLAIMED BY APPELLANT A RE GENUINE BUSINESS EXPENDITURE WHICH ARE ALLOWABLE AS PER THE PROVISIONS OF LAW. THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. 4. THE LD. DR WHILE IMPUGNING THE ORDER OF CIT(A) C ONTENDED THAT ASSESSEE FAILED TO FURNISH REQUISITE DETAILS BEFORE THE AO IN THE REQUIRED FORMAT. THUS THE DETAILS WERE NOT SUBMITTE D. THE AO OBSERVED THAT ASSESSEE FAILED TO DEMONSTRATE THE SE RVICES RENDERED BY THE PERSONS TO WHOM ALLEGED COMMISSION WAS PAID. INSPITE OF THESE FACTS LD. FIRST APPELLANT AUTHORITY HAS DELET ED THE DISALLOWANCE. HE TOOK US THROUGH FINDING OF THE AO RECORDED IN PA RA 3.6 OF THE ASSESSMENT ORDER. ITA NO.2446/AHD/2012 ASST. YEAR 2009-10 4 5. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND, CONTENDED THAT COMPLETE DETAILS WERE SUBMITTED BEFORE THE AO IN RESPECT OF COMMISSION PAID BY THE ASSESSEE. FOR BUTTRESSING HI S CONTENTION HE TOOK US TO PAGE 9 OF THE PAPER BOOK. ON THIS PAGE D ETAILS OF THESE PERSONS TO WHOM COMMISSION WAS PAID, ARE AVAILABLE. THESE ARE 18 INDIVIDUALS/ENTITY. THE ASSESSEE HAS DISCLOSED THE IR PAN. HE HAS ALSO SHOWN THE COMMISSION PAID AND THE TDS DEDUCTED THERE ON. ON PAGE 10 IS THE CONFIRMATION GIVEN BY SHRI ANIL CHAN DRA MISHRA WHO IS AT SL.NO.1 OF THE DETAILS TO WHOM COMMISSION WAS PA ID. THIS CONFIRMATION WAS ALSO FILED . SIMILARLY ASSESSEE HA S ALSO FILED CONFIRMATION FROM ALL THE 18 PERSONS. THEREAFTER LD . COUNSEL FOR THE ASSESSEE TOOK US THROUGH COPY OF INVOICES. IN THE I NVOICES FOLLOWING NARRATION HAS BEEN MADE - SUPPLIERS REF. AM. ACC ORDING TO THE LD. COUNSEL FOR THE ASSESSEE A.M. REPRESENT ANIL KUMAR MISHRA. HE TOOK US TO THE NEXT INVOICE WHERE SUPPLIERS REF. IS WR ITTEN AS BPN ACCORDING TO HIM THIS REPRESENT BHADRESH PETROLEUM. THUS ASSESSEE HAS IDENTIFIED EACH INVOICE AND THE NAME OF THE PER SON WHO FACILITATED THE SAME. THESE DETAILS WERE SUBMITTED BEFORE THE A O. HE FURTHER CONTENDED THAT APART FROM THESE, ASSESSEE HAS MADE COMMISSION PAYMENT TO THESE PERSONS IN AYS 2006-07, 2007-08AND 2008-09. NO DISALLOWANCE WAS MADE THEREIN. SIMILARLY, THE COMMI SSION WAS PAID IN AY 2010-11 I.E. IMMEDIATELY SUBSEQUENT YEAR AND ASSESSMENT WAS MADE UNDER SECTION 143(3), AGAIN NO DISALLOWANCE WA S MADE. HE PLACED ON RECORD COPY OF THE ASSESSMENT ORDER DATED 28.01.2013. ITA NO.2446/AHD/2012 ASST. YEAR 2009-10 5 6. ON DUE CONSIDERATION OF THE ABOVE DETAILS COUPLE D WITH THE FINDING OF LD. CIT(A) EXTRACTED (SUPRA), WE DO NOT FIND ANY ERROR IN THE ORDER OF LD. CIT(A). THE ASSESSEE HAS DEMONSTRATED ON RECORD GENUINENESS AND JUSTIFICATION OF THE PAYMENT OF COM MISSION. THE AO HAS NOT GONE INTO THE DETAILS OBJECTIVELY RATHER PU T EMPHASIS ON THE PERFORMA. THEREFORE, THIS GROUND OF APPEAL IS REJEC TED. 7. IN GROUND NOS.2 & 3 REVENUE HAS CONTENDED THAT L D. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.,1,40,831/- AN D RS.1,57,677/- OUT OF STAFF WELFARE EXPENSES AND OUT OF REPAIR AND MAI NTENANCE EXPENSES. 8. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE H AVE GONE THROUGH THE RECORD CAREFULLY. THE LD. CIT(A) HAS OB SERVED THAT TWO BILLS AMOUNTING TO RS.880/- AND RS.504/- ARE BILLS OF RESTAURANTS WHICH PERTAIN TO FAMILY VISITS. THESE BILLS ARE OF PERSON AL NATURE. ON ACCOUNT OF THESE TWO BILLS LD. AO HAS DISALLOWED THE STAFF WELFARE EXPENSES TO THE EXTENT OF 50%. LD. CIT(A) ON APPRECIATION OF FA CTS AND CIRCUMSTANCES RESTRICTED THESE DISALLOWANCES TO 10% OF THE TOTAL EXPENDITURE. SIMILARLY, LD. FIRST APPELLATE AUTHORI TY FOUND THAT AO HAS DISALLOWED A SUM OF RS.1,57,677/- BEING 50% OF REPA IR AND MAINTENANCE. THE LD. AO WAS UNABLE TO POINT OUT ANY DEFECT IN THE DETAILS/EVIDENCES MAINTAINED BY THE ASSESSEE. BUT F OLLOWING THE CRITERIA AS ADOPTED IN THE CASE OF STAFF WELFARE EX PENSES LD. CIT(A) CONFIRMED THE DISALLOWANCE AT RS.15,767/-. ON DUE C ONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE FIND THAT AO HAS NO T POINTED OUT ANY CLEAR DEFETS IN THE DETAILS SUBMITTED BY THE ASSESS EE EXCEPT TWO BILLS ITA NO.2446/AHD/2012 ASST. YEAR 2009-10 6 WHICH WERE PERTAINING TO PERSONAL EXPENDITURE BUT D EBITED IN THE STAFF WELFARE EXPENSES. THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE AT RS.14,083/- OUT OF STAFF WELFARE EXPENSES AND RS.15 ,676/- OUT OF REPAIR AND MAINTENANCE. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE DO NOT SEE ANY REASON TO INTERFER E IN THE FINDING OF LD. CIT(A). THE DISALLOWANCE HAS BEEN MADE BY THE A O ON ESTIMATE BASIS BUT THE WORKING OF DISALLOWANCE BY 50% OF THE TOTAL EXPENDITURE IS NOT IN CONSONANCE WITH THE DEFECTS POINTED OUT B Y THE AO IN THE DETAILS SUBMITTED BY THE ASSESSEE. THE LD. AO COULD TRACE TWO BILLS OF VERY SMALL AMOUNT I.E. OF RS.880/- & RS.504/-. CONS IDERING THE ELEMENT OF INVOLVEMENT OF PERSONAL NATURE OF THIS M EAGER AMOUNT LD. FIRST APPELLATE AUTHORITY HAS RESTRICTED THE DISALL OWANCE AT RS.14,083/- AND RS.15,678/- WHICH IS A REASONABLE ONE. THUS THE SE GROUNDS OF APPEAL ARE REJECTED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/9/2015 SD/- SD/- (G. D. AGRAWAL) VICE PRESIDENT (RAJPAL YADAV) JUDICIAL MEMBER DATED 29/9/2015 MAHATA/- ITA NO.2446/AHD/2012 ASST. YEAR 2009-10 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 16/9/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 18/9/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 29/9/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: