M/s. Neel Kamal Rubber P.Ltd., Jalandhar city V. The Additional Commissioner of Income Tax, Jalandhar

ITA 254/ASR/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60643 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.254(ASR)/2010 ASSESSMENT YEAR:2006-07 PAN:AAACN4098G M/S. NEEL KAMAL RUBBER PVT. LTD. VS. ADDL. COMMR. O F INCOME-TAX, JALANDHAR. RANGE-1, JALANDHAR. (APPELLANT) (RESPONDENT) ITA NO.289(ASR)/2010 ASSESSMENT YEAR : 2006-07 DY. COMMR. OF INCOME-TAX, VS. M/S. NEEL KAMAL RUBBE R PVT. LTD. RANGE-1, JALANDHAR. JALANDHAR. ASSESSEE BY: SH. Y.K. SUD, CA DEPARTMENT BY:SH. TARSEM LAL, DR DATE OF HEARING :02/04/2012 DATE OF PRONOUNCEMENT:03/04/2012 ORDER PER BENCH; THESE CROSS APPEALS ONE BY THE ASSESSEE AND ANOT HER BY THE REVENUE ARISE OUT ORDER OF THE CIT(A), JALANDHAR, DATED 26. 03.2010 FOR THE ASSESSMENT YEAR 2006-07. 1. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: ITA NO.254 & 289 (ASR)/2010 2 1. THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.2 LACS OUT OF RS.5.69 LACS MADE BY THE ADDL. CIT OUT OF PACKING EXPENSES. WHILE SUSTAINING THIS ADDITION TH E CIT(A) CLEARLY IGNORED SUBMISSIONS ALONGWITH EVIDENCES FIL ED BY THE APPELLANT. 2. THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS.912956/- OUT OF THE DISALLOWANCE OF RS.196537 7/- MADE OUT OF COMMISSION PAID TO AGENTS. 3. THAT WHILE SUSTAINING THE DISALLOWANCE AS PER GR OUND NO.2 THE CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE COMMIS SIONS OF RS.875445/- PAID TO M/S. CALCUTTA TYRES TUBES, VIKA S JAIN, KAMAL KRISHAN, MALHOTRA, NITIN CHOPRA AND ARUN KUMA R DESPITE THEIR CONFIRMATIONS OF RECEIPTS OF THE COMM ISSION. 4. THAT OUT OF THE COMMISSION PAID TO SH. MANJIT SI NGH, GURDEEP SINGH, R.L. BHALLA AMOUNTING TO RS.6,11,879/- THE C IT(A) WAS NOT JUSTIFIED IN MAKING A DISALLOWANCE OF RS.37511/ - OUT OF THE COMMISSION PAID TO THEM BEING PAID ON ACCOUNT OF OR DERS BOOKED FROM CERTAIN PARTIES. 5. THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.7.5 LACS OUT OF ADDITIONS OF RS.1186040/- MADE B Y THE ADDL. CIT OUT OF OIL & GREASE EXPENSES. 6. THAT THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING T HE DISALLOWANCE OF RS.602978/- MADE BY THE A.O. OUT OF STOCK LOSS O F RS.848689/- CLAIMED BY THE ASSESSEE FROM THE INSURA NCE COMPANY ON ACCOUNT OF THE FIRE THAT OCCURRED IN THE FACTORY PREMISES OF THE INSURED. 7. THAT THE ORDER OF THE CIT(A) AND A.O. ARE AGAINS T LAW AND FACTS OF THE CASE. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN REDUCING THE DISALLOWAN CE OF RS.5,69,000/- TO RS.2,00,000/- MADE ON ACCOUNT OF P ACKING EXPENSES. ITA NO.254 & 289 (ASR)/2010 3 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN REDUCING THE DISALLOWAN CE OF RS.11,86,000/- TO RS.7,50,000/- MADE UNDER THE HEAD OIL AND GREASE. 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN REDUCING THE DISALLOWANC E OF RS.19,65,377/- TO RS.10,52,461/- MADE OUT OF COMMIS SION PAID TO AGENTS. 4. THAT IT IS PRAYED THAT THE ORDER OF THE LD. CIT( A) BE SET ASIDE AND THAT OF THE A.O. RESTORED. 5. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AN D DISPOSED OF. 3. IN GROUND NO.1 OF THE ASSESSEE AND GROUND NO.1 O F THE REVENUE, THE BRIEF FACTS ARE AS UNDER: THE ASSESSEE HAS CLAIMED EXPENSES OF RS.44,59,433/- ON ACCOUNT OF PACKING MATERIAL AS COMPARED TO EXPENSES OF RS.11,52,750/- CLAIMED IN THE LAST YEAR. DURING THE YEAR THE ASSESSEE HAS CLAIMED EXPENSES OF RS.25,80,138/- ON ACCOUNT OF PACKING FOR THE SALE OF RS.10,49,81,424/- (01.04.20 05 TO 25.11.2005) AGAINST CLAIM OF EXPENSES OF RS.18,59,2 94/- FOR THE SALE OF RS.5,08,80,512/- (26.11.2005 TO 31.03.2006) . THOUGH, THE SALE OF THE ASSESSEE HAS GONE UP TWICE AS COMPARED TO LAST YEAR THE CORRESPONDING INCREASE IN PACKING EXPENSES IS MORE THAN 285%. THE ASSESSEE HAS TRIED TO EXPLAIN T HAT THE PURCHASE OF PACKING MATERIAL HAS GONE UP TO RS.155 PER QTL. AGAINST RS.65 PER KG. LAST YEAR I.E. THE INCREASE O F 138%. THE RELEVANT PORTIONS OF SUBMISSION ARE AS UNDER: THAT FURTHER AS FAR AS THE PACKING MATERIAL IS CON CERNED, UNDER THIS HEAD TOO, THE COST OF THE MATERIAL, WHIC H WAS PAID @ RS.65/- PER KG. IN THE PRECEDING YEAR WAS PAID @ 15 0/- PER KG. ITA NO.254 & 289 (ASR)/2010 4 DURING THE YEAR UNDER REFERENCE, WHICH RESULTS INTO INCREASE IN THE EXPENSES. THE AO BEING NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE OBSERVED VIDE PARA 3.1 OF THE ORDER AS UNDER: THE ASSESSEE CLAIMED THAT THE COST OF THE MATERIAL HAS GONE UP TO 155 PER KG. AGAINST RS.65 PER KG. IN LAST YEAR. EXPENSE S ON ACCOUNT OF PACKING MATERIAL PRIOR TO SURVEY AND THE POST SURVE Y IS NOT COMMENSURATE WITH THE CORRESPONDING SALE OF RS.10.4 9 CRORES AND RS.5.08 CRORES RESPECTIVE. THE ASSESSEE HAS SHOWN T O HAVE INCURRED EXPENSES OF RS.25.80 LACS PRIOR TO SURVEY ON SALE O F RS.10.49 CRORES AGAINST EXPENSES OF RS.18.59 LACS ON SALE OF RS.5.0 8 CRORES, POST SURVEY. THE ASSESSE SUBMITS THAT THERE IS INCREASE IN PACKING MATERIAL COST THIS YEAR AGAINST LAST YEAR. THIS WILL HOLD GO OD IF WE ARE COMPARING EXPENSES WITH LAST YEAR BUT THIS WILL NOT BE TRUE FOR EXPENSES INCURRED DURING THE YEAR PRIOR TO SURVEY A ND POST SURVEY. EVEN IF THE SUBMISSION OF THE ASSESSEE OF INCREASE IN THE PRICE PF PACKING MATERIAL THIS YEAR IS CONSIDERED THIS SUBMI SSION OF THE ASSESSEE DOES NOT HOLD GOOD FOR HUGE INCREASE IN TH E PACKING EXPENSES POST SURVEY I.E. AFTER 25.11.2005 AS PER THE SALES /TURNOVER OF THE ASSESSEE PRIOR TO SURVEY AND POST SURVEY. POST SURV EY, THE EXPENSES SHOULD HAVE IN THE RANGE OF 12.9 LACS SINCE THE SAL ES IS HALF OF THE SALE PRIOR TO SURVEY WHEREAS ASSESSEE HAS SHOWN THE EXPE NSES AT RS.18.59 LACS. THE ASSESSEE HAS SHOWN THE EXPENSES MORE BY 5 .69 LACS. CONSIDERING THE SUBMISSION OF THE ASSESSEE AND SINC E THE ASSESSEE HAS FAILED TO CORRELATE THE EXPENSES WITH THE PRODUCTIO N/SALE, THE AMOUNT OF RS.5.69 LACS ON ACCOUNT OF PACKING EXPENSES IS D ISALLOWED. 2.2. THE LD. CIT(A) ACCEPTED THE EXPLANATION OF THE ASSESSEE PARTLY ABOUT CHANGE IN NATURE OF PACKING AND ACCORDINGLY RESTRIC TED THE DISALLOWANCE AT RS. 2 LACS BY GIVING RELIEF OF RS.3.69 LACS. 2.3. THE LD. COUNSEL FOR THE ASSESSEE, SH. Y.K. SUD , CA, RELIED UPON MAINLY ON THE SUBMISSION MADE BEFORE THE CIT(A) AVA ILABLE AT PB 2 & 6 . ITA NO.254 & 289 (ASR)/2010 5 2.4. THE LD. DR, SH. TARSEM LAL, ON THE OTHER HAND, POINTED OUT IN PARA 2.6 OF THE ORDER OF THE CIT(A), ON ONE HAND, THE LD . CIT(A) GAVE FINDING THAT THERE IS NO EVIDENCE WITH REGARD TO THE NATURE OF PACKING AND ON THE OTHER HAND, THE LD. CIT(A), HAD ALLOWED THE RELIEF ON ACCOUNT OF CHANGE IN NATURE OF PACKING. 2.7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THE EXPLANATION IS SUBMITTED BY THE ASSESSEE BEFOR E THE AO AND THE LD. CIT(A) THAT RATE OF PACKING MATERIAL HAD GONE UP CO NSIDERABLY FROM RS.65 PER KG. IN THE PRECEDING YEAR TO RS.155 PER KG IN A PRIL, 2005. THERE IS NO DISPUTE TO THE FACT THAT THE EXPENSES AFTER THE DAT E OF SURVEY I.E. 25.11.2005 ARE MORE IN QUANTUM THAN THE PRE-SURVEY PERIOD. BUT AT THE SAME TIME WHETHER THE EXPENDITURE CLAIMED IS GENUINE EXPENDIT URE OR NOT HAS TO BE FOUND OUT. THE AO WHILE COMING TO THE CONCLUSION HA S NOT POINTED OUT ANY BOGUS PURCHASE OF PACKING MATERIAL DURING THE YEAR. WHILE COMING TO THE CONCLUSION, THE AO HAS NOT CONSIDERED THE EFFECT OF OPENING STOCK AND CLOSING STOCK OF THE PACKING MATERIAL. MOREOVER, TH E AO HAS NOT CONSIDERED THE EXPLANATION WITH REGARD TO CHANGE IN SYSTEM OF PACKING. MOREOVER, IT IS THE PROFIT/INCOME OF THE YEAR WHICH IS TAXABLE AND NOT THE INCOME IN THE PRE- SURVEY PERIOD OR POST SURVEY PERIOD IS SEPARATELY T AXED. THE ARGUMENTS OF THE LD. DR THAT THE ASSESSEE HAD SURRENDERED INCOME DUR ING THE SURVEY AND, ITA NO.254 & 289 (ASR)/2010 6 THEREFORE, THE ASSESSEE HAD DEBITED VARIOUS EXPENDI TURE ON PACKING ACCOUNT AND OTHER ACCOUNTS LIKE OIL & GREASE AND COMMISSION ETC. TO NULLIFY THE SURRENDERED INCOME DURING THE SURVEY. HE RELIED UPO N THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE 82 ITR 540 (SC). THE SAID DECISION OF HONBLE SUPREME COUR T CANNOT BE MADE APPLICABLE IN THE PRESENT CASE. SINCE IN THE PRESEN T CASE, THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAD CLAIMED ANY BOGUS EXPENDITURE DURING THE POST SURVEY PERIOD, ONCE THE EXPENDITUR E HAS BEEN HELD TO BE GENUINE, THEN THE REVENUE CANNOT PLEAD THAT TO NULL IFY THE SURRENDER INCOME, THE ASSESSEE HAD CLAIMED THE EXCESS EXPENDITURE. NO T EVEN AN IOTA OF ANY EXPENDITURE HAS BEEN POINTED OUT BY ANY OF THE AUTH ORITIES BELOW THAT THE EXPENDITURE IS EXCESS OR BOGUS. THEREFORE, IN THE F ACTS AND CIRCUMSTANCES OF THE CASE, NO ADDITION ON THIS ACCOUNT IS CALLED FOR . THE ADDITION SUSTAINED BY THE LD. CIT(A) IS DIRECTED TO BE DELETED. THUS, GRO UND NO1. OF THE ASSESSEE IS ALLOWED AND GROUND NO.1 OF THE REVENUE IS DISMISSED . 3. AS REGARDS GROUND NO.5 OF THE ASSESSEE AND GROUN D NO.2 OF THE REVENUE, THE BRIEF FACTS AS ARISE OUT OF THE ORDER OF THE AO ARE AS UNDER: THE ASSESSEE HAS CLAIMED EXPENSES OF RS.31,38,196/- ON ACCOUNT OF OIL AND GREASE AS COMPARED TO EXPENSES OF RS.15,08, 903/- CLAIMED IN THE LAST YEAR. DURING THE YEAR THE ASSESSEE HAS CLA IMED EXPENSES OF RS.13,01,437/- ON ACCOUNT OF OIL AND GREASE FOR THE SALE OF RS.10,49,81,424/- (01.04.2005 TO 20.11.2005) AGAINS T CLAIM OF ITA NO.254 & 289 (ASR)/2010 7 EXPENSES OF RS.18,36,759/- FOR THE SALE OF RS.50,88 ,052/- ( 21.11.2005 TO 31.03.2006). THOUGH, THE SALE OF THE ASSESSEE HAS GONE UP TWICE AS COMPARED TO LAST YEAR THE CORRESPONDING INCREASE IN THE OIL AND GREASE IS MORE THAN 107%. FURTHER, IT HAS BEEN FOUND THAT THE ASSESSEE HAS PU RCHASED OIL AND GREASE ON 29 TH MARCH, 2006 AMOUNTING TO RS.226952/- AND HAS NOT ACCOUNTED THE SAME IN THE CLOSING STOCK AS THE SAME COULD NOT BE CONSUMED IN A DAY THOUGH THE ASSESSEE SUBMITTED THA T THERE IS STOCK OF RS.1.70 LACS UNDER THIS HEAD BUT IT IS ON DIFFERENT HEAD SINCE THE ASSESSEE HAS BEEN MAINTAINING TWO ACCOUNTS OF OIL A ND GREASE, THE STOCK OF RS.1.70 LACS PERTAINS TO FIRST STOCK AND T HE SECOND STOCK PERTAINS TO THE PURCHASE OF OIL AND GREASE OF RS.2, 60,952/- WHICH SHOULD HAVE BEEN GONE INTO THE CLOSING STOCK. BOTH COPY OF ACCOUNT OF OIL & GREASE IS ENCLOSED. THOUGH THE ASSESSEE SUBMI TS: THAT AS FAR AS THE PURCHASES MADE FOR AN AMOUNT OF RS.226952/--16 IN THE OIL & GREASE A/C IS CONCERNED , KINDLY NOTE THAT THERE IS A STOCK OF RS.1,70,000/- UNDER T HIS HEAD WHICH IS A PART OF THE BALANCE SHEET. 3.1. THE AO VIDE PARA 3.4 OF HIS ORDER OBSERVED AS UNDE R: THE EXPENSES ON ACCOUNT OF OIL AND GREASE POST SUR VEY IT HAS GONE UP BY 49% THOUGH THE SALES TURNOVER IS HALF OF THE TURNOVER, PRIOR TO SURVEY. ACCORDINGLY, AS PER SALE /TURNOVER EXPENSES ON ACCOUNT OF OIL & GREASE SHOULD HAVE BEE N RS.6,50,719/- WHEREAS THE ASSESSEE HAS CLAIMED RS.1 8,36,759/- AS EXPENSES. THE ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN AND SUBSTANTIATE WITH THE EVIDENCES AND SALE/PRODUCTION VIDE ORDER SHEET NOTING DATED 11.04.2005 BUT THE ASSESSEE FAIL ED TO DO SO. ACCORDINGLY, THE BALANCE EXCESS EXPENSES, AS CALCUL ATED ON THE BASIS OF TURNOVER PRE-SURVEY & POST SURVEY OF RS.11 ,86040/- (1836759-650719) IS DISALLOWED. PENALTY PROCEEDINGS U/S 271(1)(C) IS BEING INITIATED FOR FURNISHING INACCUR ATE PARTICULARS OF INCOME. FURTHER THE ASSESSEE HAS NOT ACCOUNTED FOR THE AMOUNT OF RS.2,26,952/- OF OIL AND GREASE P URCHASED ON 29.03.2006 AS CLOSING STOCK AS THE TOTAL OIL AND G REASE COULD NOT CONSUMED IN A DAY. THE ASSESSEE HAS WRONGLY SAI D THAT THE ITA NO.254 & 289 (ASR)/2010 8 STOCK OF RS.1.70 LAC IS ACCOUNTED FOR WHICH IS FROM THE OTHER ACCOUNT OF OIL & GREASE MAINTAINED BY THE ASSESSEE. BOTH COPY OF ACCOUNT IS ENCLOSED FOR READY REFERENCE. HE NCE, RS.2,26,952/- SHOULD HAVE BEEN PART OF THE CLOSING STOCK. HOWEVER, THE DISALLOWANCE ON THE BASIS OF SALES/TUR NOVER HAS ALREADY BEEN MADE, THE SAME HAS BEEN TAKEN INTO ACC OUNT AND NO DISALLOWANCE IS REQUIRED FOR. 4. THE LD. CIT(A) VIDE PARA 5.4. OF HIS ORDER REDUC ED THE ADDITION TO RS.7.50 LACS BY GIVING RELIEF OF RS.4,36,040/- BY A CCEPTING THE CONTENTION OF THE ASSESSEE TO SOME EXTENT THAT OIL AND GREASE CON SUMPTION WAS ALSO REQUIRED DURING THE MACHINE OVERHAULS. 5. THE LD. COUNSEL FOR THE ASSESSEE, SH. Y.K. SUD, CA, RELIED UPON THE SUBMISSION MADE BEFORE THE LD. CIT(A) AND THE LD. D R, ON THE OTHER HAND ARGUED THAT THE LD. CIT(A) HAD WRONGLY ALLOWED THE RELIEF ON ACCOUNT OF CONSUMPTION REQUIRED FOR MACHINE OVERHAULS, WHEN ON THE OTHER HAND, THE LD. CIT(A) IN THE SAME PARA HAD GIVEN THE FINDING THAT THERE IS NOTHING ON RECORD FOR USE OF THE MACHINES IN THE PRE-SURVEY PERIOD, W HICH REQUIRES MACHINE OVERHAUL. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT WAS POINTED OUT BY THE LD. COUNSEL FOR THE ASSES SEE THAT THE AUTHORITIES BELOW HAVE NOT TAKEN INTO CONSIDERATION THE EXPLAN ATION SUBMITTED WHICH IS ON RECORD THAT THERE ARE AS MANY AS 32 PUMP MACHIN ES IN WHICH OIL AND GREASE ARE CONSUMED DAILY. THERE ARE 20 MACHINES BE ING MIXING MACHINES AND EXTRUDERS AND IN THESE MACHINES THERE ARE GEARS AND TEETHS IN WHICH OIL ITA NO.254 & 289 (ASR)/2010 9 AND GREASE IS USED. ALL THE MACHINES REQUIRE CHANGE OF OIL WHEN THE OIL STARTS TO LOOSE ITS STRENGTH THEN THERE IS A LOT OF CONSUM PTION OF OIL AND GREASE. THERE IS ALWAYS POSSIBILITY OF LEAKAGE OR LOSS WHEN THERE IS CHANGE OF OIL. MOREOVER, THERE IS NO IOTA OF EXPENDITURE POINTED O UT BY ANY OF THE AUTHORITIES BELOW, WHICH IS BOGUS EXPENDITURE OR EX PENDITURE IS NOT SUPPORTED BY ANY VOUCHER. THE ASSESSEE HAD ALREADY DECLARED CLOSING STOCK OF RS.1.70 LAC, WHICH CANNOT BE DOUBTED. THE CASE M ADE OUT BY THE LD. DR ON HUMANE PROBABILITY IN THE ABSENCE OF ANYTHING CO NTRARY TO THE FACTS OF THE PRESENT CASE AND IN THE ABSENCE OF ANY BOGUS EXPEND ITURE OR EXCESS EXPENDITURE ON RECORD, NO ADDITION IS CALLED FOR. T HE ADDITION SO SUSTAINED BY THE LD. CIT(A) IS, THEREFORE, DIRECTED TO BE DELETE D. THUS, GROUND NO.5 OF THE ASSESSEE IS ALLOWED AND GROUND NO.2 OF THE REVENUE IS DISMISSED. 7. AS REGARDS GROUND NOS. 2,3 & 4 OF THE ASSESSEE A ND GROUND NO.3 OF THE REVENUE, THE BRIEF FACTS ARE AS PER AOS ORDER ARE AS UNDER: DURING THE YEAR, THE ASSESSEE COMPANY PAID COMMISS ION OF RS.30,11,226/- ON SALES OF RS.15,58,61,937/- TO 10 DIFFERENT AGENTS AS COMPARED TO THE COMMISSION OF RS.4,38,291/- ON THE SALES OF RS.7,41,61,943/-. THE TURNOVER OF THE ASSESSEE COMP ANY WAS INCREASED FROM RS.7,41,61,943/- TO RS.15,58,61,937/- AND COMM ISSION PAYMENT GONE UP FROM RS.43,82,912/- TO RS.30,11,226/-, THE SALES HAS GONE UP BY 110% WHEREAS THE COMMISSION PAYMENT HAS GONE UP TO THE EXTENT OF 587% WHICH IS EXCEPTIONALLY VERY HIGH. THE ASSES SEE WAS SPECIFICALLY ASKED TO EXPLAIN THE REASONS OF SUCH E XCEPTIONAL INCREASE IN PAYMENT OF COMMISSION. IT IS TO BE NOTED THAT TH ERE WAS A SURVEY CONDUCTED IN THE CASE OF THE ASSESSEE COMPANY ON 25 .11.2005 AND ITA NO.254 & 289 (ASR)/2010 10 DURING THE COURSE OF SURVEY STATEMENT IN THIS REGAR D WERE ALSO RECORDED AND HE HAS ASKED ABOUT THEIR NAMES, THE RE LEVANT PORTION OF THE STATEMENT RECORDED AT THE TIME OF SURVEY IS REP RODUCED HEREUNDER: Q.NO. ARE THEY YOUR REGULAR EMPLOYEE ? PLEASE GIVE THEIR NAMES. ANS. THEY ARE ONLY OUR COMMISSION AGENTS. THEIR NA MES ARE (I) JOGINDER SINGH (II) VIJAY KUMAR (III) R.R. BHALLA (IV) GURDEEP SINGH (V) MANJEET SINGH THUS, SH. RAJINDER PURI, MANAGING DIRECTOR OF M/S. NEEL KAMAL RUBBER P. LTD. HAS SUBMITTED AN OATH THAT THERE ARE FIVE COMMISSION AGENTS AND HE HAS GIVEN THE NAME OF FIVE COMMISSION AGENTS. ON PERUSAL OF THE DETAILS FURNISHED BY THE ASSESSEE, I T IS FOUND THAT THE ASSESSEE HAS SHOWN THE FOLLOWING PERSONS AS COMMISS ION AGENT, THE RELEVANT PORTION IS REPRODUCED AS UNDER: AGENT NAME SALE (2004-05) COMMISSION (2004-05) SALES (2005-06) COMMISSION (2005-06) SRD. JOGINDER SINGH 22,760,004 342,484 39,415,225 788,306 MR. VIJAY SINGH 6,387,103 95,807 25,135,587 502,997 SRD. MANJIT SINGH 17,248,672 344,973 MR. NITIN CHOPRA 7,618,286 152,366 M/S. CALCUTTA TYRES 4,518,250 90,365 MR. VIKAS JAIN 2,642,166 52,843 MR GURDEEP SINGH 13,345,236 266,905 MR. ARUN KUMAR 12,232,809 244,657 MR. R.L. BHALLA 11,630,024 232,600 MR. KAMAL 16,760,698 335,214 ITA NO.254 & 289 (ASR)/2010 11 KRISHAN MALHOTRA 29,147,107 438,291 150,546,956 3,011,226 ON PERUSAL OF THE NAME OF THE COMMISSION AGENTS, IT IS FOUND THAT THE NAME OF SH. NITIN CHOPRA, M/S. CALCUTTA TYRES, VIKA S JAIN, SH. ARUN KUMAR AND KAMAL KISHAN MALHOTRA WAS NOT THERE AND N OT MENTIONED BY THE MANAGING DIRECTOR AT THE TIME OF GIVING STAT EMENT DURING THE COURSE OF SURVEY AT THE PREMISES OF THE ASSESSEE. T HUS, THE ASSESSEE WAS SPECIFICALLY ASKED TO FURNISH THE EVIDENCE FOR RENDERING THE SERVICES IN BOOKING OF ORDERS FROM BUYERS AND OTHER SERVICES BUT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE EVIDENCE OF SERVICES RENDERED BY THEM IN PROCURING ORDERS EXCEPT GIVING THE COMPUTAT ION OF THE COMMISSION ON SALES CLAIMED TO HAVE SOLD BY THEM. I T IS TO BE NOTICED THAT EXCEPT SH. JOGINDER SINGH ANAND AND VIJAY GULA TI, ALL OTHER NAMES OF THE COMMISSION AGENTS ARE APPEARING FOR TH E FIRST TIME AND SHOWN TO HAVE MADE THE PAYMENT OF COMMISSION. IN TH E CASE OF SH. R.L. BHALLA ( SHOWN AS COMMISSION AGENT), THE COPY OF ACCOUNT GIVEN BY THE ASSESSEE COMPANY SHOWS THAT SH. R.L. BHALLA IS AN EMPLOYEE OF THE ASSESSEE COMPANY AND ON 31 ST MARCH, 2006, COMMISSION TO RS.232600/- IS SHOWN TO HAVE PAID TO HIM. SH. R.L. BHALLA HAS BEEN SHOWN TO BE RESIDING AT KANPUR. SH. R.L. BHALLA HAS BEEN SHOWN TO HAVE PAID THE COMMISSION FOR THE FIRST TIME. THE ADDRESS OF SH. VIKAS JAIN WAS GIVEN AT BORIVALI (MUMBAI) WEST BENGAL AND SHOWN TO HAVE MADE A PAYMENT OF COMMISS ION OF RS.52,843/- FOR THE FIRST TIME. THE MANAGING DIRECT OR HAS NOT MENTIONED THE SAME OF SH. VIKAS JAIN AS COMMISSION AGENT DURING THE COURSE OF SURVEY AND THE ADDRESS GIVEN BY THE ASSES SEE IS MISLEADING. FURTHER, THE ASSESSEE HAS FAILED TO FURNISH ANY EVI DENCE FOR RENDERING THE SERVICES BY SH. VIKAS JAIN EXCEPT GIVING THE CO MPUTATION OF COMMISSION ON SALES. SH. KAMAL MALHOTRA WAS SHOWN TO HAVE GIVEN THE PAYM ENT OF RS.3,35,214/- AS COMMISSION. ON PERUSAL OF THE COPY OF ACCOUNTS PRODUCED BY THE ASSESSEE COMPANY, IT IS FOUND THAT CASH PAYMENT OF RS.80,000/- P.M. HAS BEEN SHOWN TO HAVE PAID TO SH. KAMAL KRISHAN MALHOTRA. SH. RAJINDER PURI, M.D. HAS NOT GIVEN HIS NAME AT THE TIME OF SURVEY WHEN THE STATEMENT WAS RECORDED. FURTHER , THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE FOR RENDERING THE SE RVICES BY SH. KAMAL ITA NO.254 & 289 (ASR)/2010 12 KRISHAN MALHOTRA EXCEPT GIVING THE COMPUTATION OF C OMMISSION ON SALES. SIMILARLY, SH. ARUN KUMAR, M/S. CALCUTTA TYRES, S. GURDEEP SINGH, MANJIT SINGH CHHABRA AND SH. NITIN CHOPRA HAS BEEN SHOWN TO HAVE GIVEN PAYMENT OF COMMISSION OF RS.2,44,657-, RS.90, 365/-, RS.2,66,905/-, RS.3,44,973/- AND RS.1,52,366/- RESP ECTIVELY. SH. RAJINDER PURI, MD OF COMPANY HAS FAILED TO FURNISH ANY EVIDENCE FOR RENDERING THE SERVICES BY THESE PEOPLE AND COPY OF ACCOUNTS OF THESE PERSONS IN THE BOOKS OF THE ASSESSEE COMPANY SHOWN THAT COMMISSION HAS NOT BEEN GIVEN TO THEM LAST YEAR. THEY HAVE BEE N GIVEN COMMISSION THIS YEAR ONLY, AND THE ASSESSEE COMPANY HAS FAILED TO GIVE PLAUSIBLE REASONS FOR SUCH INCREASE IN THE COM MISSION GIVEN TO THE AGENTS. THE ASSESSEE HAS FAILED TO SUBSTANTIATE AND PRODUCE THE EVIDENCE OF RENDERING SERVICES BY THEM EXCEPT COMPU TATION OF COMMISSION ON SALE @ 2% (LAST YEAR IT WAS 1.5%) THO UGH PAYMENT IS SHOWN TO HAVE MADE THROUGH CHEQUE. FURTHER, IT HAS BEEN FOUND THAT S. JOGINDER SINGH AND VIJAY GULATI HAVE BEEN GIVEN COMMISSION @ 1.5% LAST YEAR. THIS YEAR THEY HAVE BEEN GIVEN A PAYMENT @ OF 2%. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASONS WHICH HE HAS FAILED TO GIVE PLA USIBLE REASONS AND THUS EXCESS AMOUNT OF COMMISSION PAID TO THEM @ 0.5 % IS BEING DISALLOWED WHICH COMES TO RS.119776 (S.JOGINDER SIN GH) AND RS.1,25,678/- (VIJAY GULATI). THUS, THE COMMISSION PAYMENT TO ALL THESE PERSONS OF RS.17,19,923/- AND EXCESS PAYMENT OF RS.2,45,454/- TO S.JOGINDER SINGH & SH. VIJAY GULATI IS ADDED BACK IN THE INCOM E OF THE ASSESSEE (TOTAL ADDITION RS.19,65,377/-). IN VIEW OF THE ABO VE, I AM SATISFIED THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME TO THIS EXTENT AND FOR THIS REASON PENALTY PROCEEDINGS U/S 271(1)(C) HAVE BEEN INITIATED SEPARATELY. 8. THE LD. CIT(A) SUSTAINED THE ADDITION OF RS.9,12 ,956/- I.E. RS.8,75,445/- ON ACCOUNT OF COMMISSION TO M/S. CALC UTTA TYRES TUBES, VIKAS JAIN, KAMAL KRISHAN MALHOTRA, NITIN CHOPRA AN D ARUN KUMAR AND ITA NO.254 & 289 (ASR)/2010 13 RS.37,511/- ON ACCOUNT OF SH. MANJIT SINGH, SH. GUR DEEP SINGH AND SH. R.L. BHALLA FOR THE REASONS MENTIONED IN HIS ORDER. 9. THE LD. COUNSEL FOR THE ASSESSEE, SH. Y.K. SUD, CA, RELIED UPON THE SUBMISSION MADE BEFORE THE LD. CIT(A). 10. THE LD. DR, SH. TARSEM LAL, ON THE OTHER HAND, HAD REPEATED HIS ARGUMENTS ON HUMANE PROBABILITY THAT THE ASSESSEE H AD CLAIMED EXCESS EXPENDITURE FOR NULLIFYING THE SURRENDER MADE. HE A LSO POINTED OUT THAT DURING THE COURSE OF SURVEY, IN THE STATEMENT; THE MANAGING DIRECTOR OF THE COMPANY HAD CLAIMED TO HAVE GIVEN COMMISSION TO 5 P ERSONS WHEREAS DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD CLAIMED COMMISSION GIVEN TO 10 PERSONS. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE T HAT THE ASSESSEE HAD PROVIDED COMPLETE DETAILS OF INVOICE-WISE SALES MAD E BY EACH OF THE AGENT AND COMMISSION PAYABLE ON THE SAME AND NO DEFECT HA S BEEN POINTED OUT BY ANY OF THE AUTHORITIES BELOW. THE ASSESSEE HAD SUBM ITTED CONFIRMATIONS FROM EACH AND EVERY COMMISSION AGENT WITH REGARD TO THE COMMISSION RECEIVED BY THEM AND ALSO INCOME-TAX PARTICULARS WHERE SUCH AGE NTS HAVE DECLARED THE RECEIPT OF COMMISSION AND WHICH HAS NOT BEEN DISPUT ED BY THEIR A.O. MOREOVER, SH. AMIT PURI ONE OF THE DIRECTORS IN TH E COMPANY HAD RESIGNED AND JOINED AN UPCOMING GROUPS DEALING IN SAME LINE OF BUSINESS. THEREFORE, ITA NO.254 & 289 (ASR)/2010 14 THERE WAS NO ALTERNATIVE BUT TO APPOINT NEW AGENTS TO TAKE CARE OF THE SALES. THE ASSESSEE HAD INCREASED SALES FROM RS.7.41 CRORE S TO RS.15.58 CRORES WITH THE EFFORTS OF THE SERVICES RENDERED BY THE AG ENTS. 11.1. THE ARGUMENT MADE BY THE LD. COUNSEL FOR THE ASSESSEE, APPEARS TO BE CONVINCING THAT WHEN THE ASSESSEE HAD PROVIDED EAC H AND EVERY DETAILS OF THE COMMISSION AGENTS AND THE NAME OF THE PARTY AND THE SALES EFFECTED THROUGH THEM AND NO DEFECT IN THE SAME HAS BEEN POI NTED OUT, THEN THE AO IS NOT PERMITTED TO DOUBT THE EXPLANATION GIVEN BY THE ASSESSE. THE ASSESSEE HAS SUBMITTED FURTHER EXPLANATION OF THE RESIGNATION OF THE DIRECTOR WHO HAD JOINED THE COMPETITOR COMPANY ALL THE MORE IT BECOM ES NECESSARY TO TAKE HELP OF THE AGENTS TO MAINTAIN AND TO INCREASE THE TURNOVER OF THE CONCERN, WHICH HAS ACTUALLY BEEN DONE BY THE ASSESSEE. THE A SSESSEE IS HAVING THE OLD AGENTS AND NEW AGENTS AS WELL. MOST OF THE AGENTS A RE WORKING IN FUTURE YEARS ALSO WHICH HAVE BEEN ACCEPTED BY THE DEPARTME NT AND THE ORDERS OF THE SAID FOLLOWING YEARS OF INCOME-TAX HAVE BEEN PLACED ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE. THE AO HAS NOT SUMMONED O R HAVE NOT EXAMINED ANY OF THE AGENTS AND AT THE SAME TIME HAS NOT POIN TED OUT ANY COMMISSION SO PAID TO BE BOGUS OR EXCESSIVE. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND EVEN ON HUMANE PROBABILITY, NO ADDI TION IS CALLED FOR ON THIS ACCOUNT AND ADDITION SO MADE BY THE LD. CIT(A) IS D IRECTED TO BE DELETED. ITA NO.254 & 289 (ASR)/2010 15 THUS, GROUND NOS. 2, 3 & 4 OF THE ASSESSEE ARE ALLO WED AND GROUND NO.3 OF THE REVENUE IS DISMISSED. 12. AS REGARDS GROUND NO.6, THE BRIEF FACTS, AS AR ISING OUT OF THE ORDER OF THE AO ARE AS UNDER: 4. DURING THE YEAR THE ASSESSEE HAS CLAIMED EXPENS ES OF RS.8,48,689/- ON ACCOUNT OF LOSS OF FIRE. THE ASSESSEE WAS ASKED FOR THE EVIDENCE OF THE QUA NTUM OF LOSS BY FIRE. IN THIS CASE, THE ASSESSEE HAS SUBMITTED A COPY OF DETAILS OF STOCK LOSS BY FIRE AT THE TOPE OF WHICH DETAILS OF ESTIMATE OF LOSS ALONGWITH THE LETTER WRITTEN TO THE DIVISIONAL MANAGER NATIONAL INSURANCE COMPANY LTD. DATED 19.06.2005. ACCORDINGLY, INSURANCE COMPANY HAS SANCTIONED AND GIVEN THE CLAIM OF RS.2,45,711/- LACS ONLY. 4.1. ON FURTHER ENQUIRY MADE, THE ASSESSEE HAS SUBM ITTED THE REPLY DATED 24.10.1988 THE RELEVANT PART OF THE SAME IS R EPRODUCED HEREUNDER: IN THIS RESPECT, IT IS SUBMITTED THAT DUE TO S HORT CIRCUIT OF THE ELECTRICITY, A FIRE BROKE OUT IN THE FACTORY PREMIS ES DURING THE YEAR UNDER REFERENCE, FOR WHICH LOSS HAS ASSESSED A ND VALUED AT RS.8,48,689/-, WHICH WAS CLAIMED FROM THE INSURANCE COMPANY BY PASSING THE NECESSARY ENTRIES IN THE BOOKS OF AC COUNTS. IT IS WORTH MENTIONING THAT THE ASSESSEE HAS HUGE STOCKS, BUT THE LOSS WAS ONLY CLAIMED TO THAT EXTENT OF RS.8,48,689/- AS OCCURRED DUE TO THE FIRE FOR WHICH IT IS NOT CORRECT TO PUT DOUBT ON THE BONAFIDES OF THE ASSESSEE. WE ARE TOTALLY UNAWARE O F THE RULES AND REGULATIONS AND THE WORKING OF THE INSURANCE CO MPANY FOR WHICH THE CLAIM WAS ONLY ALLOWED TO THE EXTENT OF R S.2,45,711/- WHICH IS TOTALLY THEIR INNER ASSESSMENT. THE LOSS T HAT OCCURRED IN THE STOCK HAS BEEN DULY REDUCED FROM THE STOCKS IN HAND. THE RELEVANT DOCUMENTS ARE WITH THE INSURANCE COMPANY, WHICH COULD NOT BE RECEIVED UPTIL NOW TO PLACE BEFORE YOU R GOODSELF. THERE WILL BE NO JUSTIFICATION FOR THE DISALLOWANCE OF THE DIFFERENCE BETWEEN THE LOSS CLAIMED AND THE LOSS AL LOWED BY THE INSURANCE COMPANY. 4.2. IT IS TO BE TAKEN INTO ACCOUNT THAT THE SURVEYOR H AS VISITED AND ASSESSED THE LOSS AT RS.2,45,711/- AN INDEPENDENT A UTHORITY TO ITA NO.254 & 289 (ASR)/2010 16 WHOM THE ESTIMATE OF LOSS OF RS.8,48,689/- WAS FURN ISHED. THE ASSESSEE HAS ONLY MADE AN ESTIMATE AND IT IS NOT EX ACT LOSS PUT UP BY THE ASSESSEE. FURTHER, THERE HAS BEEN NO STOC K REGISTER MAINTAINED BY THE ASSESSE AND COULD NOT BE VERIFIED BY THE ASSESSEE ITSELF. SINCE THE SURVEYOR, AN INDEPENDENT AUTHORITY AND ENTITY HAS MADE ON THE SPOT ASSESSMENT AND THE CLAI M OF RS.2,45,711/- WAS ALLOWED ON THE BASIS OF THE LOSS BY FIRE AND IT WAS ALSO ACCEPTED BY THE ASSESSEE, THE SAME IS BEIN G ALLOWED AND THE BALANCE OF RS.6,02,978/- IS DISALLOWED AS T HAT IS ESTIMATION OF LOSS THAT HAS NOT BEEN SUBSTANTIATED BY THE ASSESSEE. 13. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IN THE PRESENT CASE, THE ASSESSEE HAD MADE AN ESTIM ATE OF LOSS BY FIRE AMOUNTING TO RS.8,48,689/-. THE ASSESSEE IS NOT MAI NTAINING ANY STOCK REGISTER THOUGH THE ASSESSEE HAS STATED TO HAVE SUB MITTED DETAILS OF THE STOCK LOST IN FIRE BUT THE SAID DETAILS ARE NOT AVAILABLE ON RECORD BEFORE US AND THEY HAVE NOT BEEN MADE AVAILABLE BEFORE ANY OF THE AUTH ORITIES BELOW. SINCE THE ASSESSEE IS NOT MAINTAINING ANY STOCK REGISTER AND NO DETAILS OF THE CLAIM SO MADE BEFORE THE INSURANCE AUTHORITY IS ON RECORD, T HEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY CONFIRMED THE ORDER OF THE LD. CIT(A). THUS, GROUND NO.6 OF THE ASSESSEE IS DISMISSED. 15. GROUND NO.7 OF THE ASSESSEE AND GROUND NOS. 4 & 5 OF THE REVENUE ARE GENERAL IN NATURE AND, THEREFORE, DO NOT REQUIR E ANY ADJUDICATION. ITA NO.254 & 289 (ASR)/2010 17 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.254(ASR)/2010 IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IN ITA NO.289(ASR)/2010 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3RD APRIL, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3RD APRIL, 2012 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. NEEL KAMAL RUBBER PVT. LTD. JALAN DHAR. 2. THE ADDL CIT/DCIT RANGE-1, JALANDHAR. 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, ASR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.