PRAGNESH J.PATEL, MUMBAI V. ACIT 24(3), MUMBAI

ITA 2474/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9320 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 06-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Gift
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 2474 / MUM/20 17 ( ASSESSMENT YEAR : 2012 - 13 ) SHRI PRAGNESH J PATEL 510 C WING, BHAKTI BUILDING OM NAGAR, ANDHERI (E) MUMBAI 400 099 VS. ACIT 24(3) AAYAKAR B HAVAN M.K. ROAD MUMBAI 400 020 PAN/GIR NO. AACPP0600R APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI DINKLE HARIYA REVENUE BY SHRI RAM TIWARI DATE OF HEARING 25 / 09 /201 7 DATE OF PRONOUNCEME NT 26 / 09 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 39, MUMBAI DATED 30/01/2017 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR DISALLOWANCE OF COMMISSION PAID TO THE HUFS. ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWANCE OF RS.17,136/ - U/S.14A. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVIDUAL AND HAS FILED RETURN OF INCOME ON 30 TH SEPTEMBER 2012 DECLARING TOTAL INCOME OF RS.20,31,390/ - . SUBSEQUENTLY ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) AT TOTAL INCOME OF RS.26,78,526/ - AFTER MAKING AN ADDITION ON ACCOUNT OF ITA NO. 2474/MUM/2017 SHRI PRAGNESH J PATEL 2 DISALLOWANCE OF COMMISSION AMOUNTING TO RS.6,30,000/ - AND ON ACCOU NT OF EXPENDITURE OF RS.17,136/ - UNDER SECTION 14A OF THE ACT. IN THE ASSESSMENT ORDER, IT WAS NOTED BY THE AO THAT THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF COMMISSION PAID AND THE NECESSITY OF INCURRENCE OF THESE PAYMENTS TO ABOVE HUFS. AS PER AO T HE ASSESSEE COULD NOT EXPLAIN THESE EXPENSES SATISFACTORILY. AS SUCH THE COMMISSION PAYMENT CLAIMED AT RS.6,30,000/ - WAS DISALLOWED . 4. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ADDITION AND ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. IT WAS ARGUED BY LE ARNED AR THAT THE ASSESSEE PROCURES WORK FROM EXISTING CLIENTS AS WELL AS THE ASSESSEE IS IN CONSTANT SEARCH OF NEW CONTRACTS TO EXPAND ITS ONGOING BUSINESS AND THAT HUGE AMOUNT IS SPENT ON SALES PROMOTION. COMMISSION IS PAID TO PARTIES THROUGH WHOM ORDERS ARE RECEIVED. DURING THE YEAR UNDER CONSIDERATION, THE COMMISSION WAS PAID TO THE SAID HUFS FOR SIMILAR REASON. LEARNED AR ALSO EMPHASIZED THAT TDS WAS MADE ON ALL SUCH PAYMENTS AND RESPECTIVE INCOME WAS SHOWN BY THE HUFS IN THEIR RETURN OF INCOME. 6. ON THE OTHER HAND , CONTENTION OF LEARNED DR WAS THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE SERVICES FOR WHICH COMMISSION WAS PAID BY ASSESSEE. 7 . RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECORD PERUSED. THE ASSESSEE IS IN THE BUSINESS OF PRINTING AND UNDE RTAKES PRINTING ORDERS OF ALL SORTS FROM BROCHURES, SLIP BOOKS, CHEQUE BOOKS OF VARIOUS BANKS, BANNERS, TO SUPPLY OF PRINTED STATIONERY TO OFFICES AND ALSO UNDERTAKES ITA NO. 2474/MUM/2017 SHRI PRAGNESH J PATEL 3 BINDING WORK AND TRADING OF ALL SORTS OF PRINTING PAPERS AND NOTEPADS. THE ASSESSEE PROCU RES WORK FROM EXISTING CLIENTELE AS WELL AS THE ASSESSEE IS IN CONSTANT SEARCH OF NEW CONTRACTS TO EXPAND HIS ONGOING BUSINESS. COMMISSION WAS PA ID TO PARTIES THROUGH WHOM NEW O RDERS WE RE RE CEIVED DU RING THE YEAR UNDER CONSIDERATION. COMMISSION WAS PAID TO VINAY BRAHMANIA (HUF), VIPUL SOLANKI (HUF) AND NIRANJAN TIRODKAR (HUF), OF RS.21,00,000/ - EACH AGGREGATING TO RS.6,30,000/ - . THE COMPANY HAD PROCURED HUGE ORDERS THROUGH THE CONCERNED PARTIES. TAX WAS DEDUCTED AT SOURCE AND WAS DULY PAID TO THE GOVERNMENT . A COPY OF THE TDS CHALLAN AND TD S RETURN FILED BY THE ASSESSEE WAS ALSO PLACED ON RECORD. 8 . I ALSO FOUND THAT THE SAID INCOME IS DULY DISCLOSED BY THE PARTIES IN THEIR RETURN OF INCOME, AND TAX HAS BEEN DULY PAID THEREON. HOWEVER, AO HAS DISALLOWED THE SAME ON THE PLEA THAT THE HUF DOES NOT POSSESS ANY QUALIFICATION SO AS TO EARN THE COMMISSION INCOME. HOWEVER, IT IS TO BE NOTED THAT NO PROFESSIONAL QUALIFICATION IS REQUIRED TO EARN THE SAID INCOME. COMMISSION IS PAID IN ORDER TO INTRODUCE NEW PARTIES TO THE ASSESSEE THROUGH THEIR CONTACTS IN ORDER TO SECURE NEW ORDERS. HUF IS A SEPARATE LEGAL ENTITY WHICH CAN PERFORM ITS BUSINESS THROUGH ITS KARTA AND OTHER MEMBERS. 9 . IT APPEARS THAT AO HAS NOT PROPERLY APPRECIATED THE PURPOSE FOR WHICH COMMISSION WAS P AID VIS - - VIS INC RE ASE IN SALES DUE TO SUCH PAYMENT OF COMMISSION. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR EXAMINING THE ITA NO. 2474/MUM/2017 SHRI PRAGNESH J PATEL 4 BUSINESS NECESSITY OF THE COMMISSION SO PAID , AFTER GI VING DUE OPPORTUNITY TO THE ASSESSEE. I DIRECT ACCORDINGLY. 10 . WITH REGARD TO DISALLOWANCE OF EXPENDITURE U/S.14A, IN THE ASSESSMENT ORDER, IT WAS NOTED BY THE LEARNED AO IN PARA 5.1 THAT WHILE GOING THROUGH THE RETURN OF INCOME IT IS SEEN THAT THE ASSESS EE HAS SHOWN INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME WHICH INCLUDED DIVIDEND AMOUNTING TO RS.12,047/ - , GIFTS FROM MOTHER AND FATHER OF RS.3,06,888/ - AND RS.1,00,000/ - RESPECTIVELY. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY DISALLOWANCE UNDER SECT ION 14A SHOULD NOT BE MADE. THE ASSESSEE VIDE LETTER DATED 12/02/2015 HAS FILED WORKING OF DISALLOWANCE UNDER SECTION 14A OF THE ACT R.W.RULE 8D OF THE RULES AT RS.17,136/ - . THE AO ACCEPTED THE DISALLOWANCE SO WORKED OUT BY ASSESSEE HIMSELF. ACCORDI N GLY, I DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF L OWER AUTHORITIES WITH RESPECT TO ACCEPTING THE DISALLOWANCE OFFERED BY THE ASSESSEE HIMSELF. 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 26 / 09 /2017 SD/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 26 / 09 /201 7 KARUNA SR. PS ITA NO. 2474/MUM/2017 SHRI PRAGNESH J PATEL 5 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBA I. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//