Sri. Babulal Dharmichandji, Bangalore V. ACIT, Bangalore

ITA 254/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57450 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 10-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS SUSAN THOMAS JOSE
• Assessee Lawyers: H GURUSWAMY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER I.T.A. NO.254/BANG/2011 (ASSESSMENT YEAR : 2007-08) SRI BABULAL DHARMICHANDJI, PROP. M/S. MARUDHAR AGENCIES, NO.24, O.K. ROAD, AVENUE ROAD CROSS, BANGALORE-560 002 . APPELLANT. PAN AAMPD 7095A VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 3(1), BANGALORE. .. RESPONDENT. APPELLANT BY : MR. H. GURUSWAMY. RESPONDENT BY : MRS. SUSAN THOMAS JOSE. DATE OF HEARING : 24.1.2012. DATE OF PRONOUNCEMENT : 24.01.2012. O R D E R PER N.K. SAINI, A.M. : THIS IS AN APPEAL BY THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER DATED 22.11.2010 OF LEARNED COMMISSIONER OF INCOME T AX (APPEALS)-II, BANGALORE. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L : 1. THE APPELLATE ORDER DATED 29.12.2010 PASSED B Y THE LEARNED CIT(A)-II, BANGALORE, IS OPPOSED TO LAW, FACTS AND WEIGHT OF E VIDENCE. 2 ITA NO.254/BANG/11 2. THE LEARNED CIT(A)-II, BANGALORE OUGHT TO HAVE NOT CONFIRM THE ADDITION OF DISALLOWANCE OF COMMISSION RS.10,46,150 WITHOUT APP RECIATING THE FACTS THAT THE COMMISSION WAS ALREADY SUFFERED TAX IN THE RESP ECTIVE HANDS OF THE PAYEES. 3. THE LEARNED CIT(A)-II, BANGALORE OUGHT TO HAVE CONFIRM THE ADDITION WHICH AMOUNTS TO TAXING THE SAME INCOME TWICE TO THE TAX, WHICH IS AGAINST TO THE RULE OF TAXATION. 4. THE LEARNED CIT(A)-II, BANGALORE OUGHT TO HAVE NOT CONFIRMED THE CREDIT BALANCE DIFFERENCE RELATING TO 8 CREDITORS AMOUNTIN G TO RS.9,72,897 WITHOUT PROVIDING SUFFICIENT OPPORTUNITY TO RECONCILE THE D IFFERENCE, WHICH WAS NOT EVEN CARRIED OUT BY THE ASSESSING OFFICER DURING TH E COURSE OF ASSESSMENT PROCEEDINGS EVEN THOUGH SUCH CREDIT BALANCE DIFFERE NCE WAS ATTRIBUTABLE TO THE OPENING BALANCE RELATING TO THE EARLIER YEARS I N FEW CASES. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND DELETE ANY OF THE GROUNDS AT THE TIME OF HEARING. 3. GROUND NOS.1 & 5 ARE GENERAL IN NATURE, DO NOT R EQUIRE ANY COMMENTS ON OUR PART. THE GROUND NO.4 WAS NOT PRESSED, AS SUCH THE SAME I S DISMISSED AS NOT PRESSED. 4. NOW THE ONLY GRIEVANCE OF THE ASSESSEE VIDE GROU ND NOS.2 & 3 RELATES TO THE CONFIRMATION OF ADDITION OF RS.10,85,657 (WRONGLY M ENTIONED AS RS.10,46,150) MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISSION PAID TO THE EMPLOYEES. 5. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSEE FILED THE RETURN OF INCOME ON 31.10.2007 DECLARING AN INCOME OF RS.10,1 3,107 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED AS THE ACT). LATER ON THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD PAI D SALARY AND COMMISSION TO THE FOLLOWING RELATIVES: I) SHRI D. BHAWARLAL II) SHRI D. SURESH KUMAR III) SMT. KAVITHA K. JAIN 3 ITA NO.254/BANG/11 IV) SHRI D. PRAVEEN KUMAR V) SMT. SHILPA K. JAIN. WHEN THE ASSESSEE WAS ASKED TO EXPLAIN THE GENUINEN ESS OF THE CLAIM OF BOTH SALARY AND COMMISSION TO THE RELATIVES, THE ASSESSEE REQUESTED TO DISALLOW THE CLAIM OF PAYMENT OF COMMISSION AMOUNTING TO RS.10,85,657. THE ASSESSIN G OFFICER BY ACCEPTING THE REQUEST OF THE ASSESSEE DISALLOWED THE SAID AMOUNT BEING THE C LAIM OF THE COMMISSION PAID TO THE RELATIVES. 6. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED C IT(A) AND FILED WRITTEN SUBMISSION WHICH HAS BEEN REPRODUCED IN PARA 3.3 OF THE IMPUGNED ORDER AND READ AS UNDER: 3.3 VIDE WRITTEN SUBMISSION DATED 8.3.2010, THE APPELLANT HAS CONTENDED AS FOLLOWS : THE APPELLANT SUBMITS THAT THE RELATIVES NAME D ABOVE WERE EMPLOYED IN THE BUSINESS THROUGH OUT THE YEAR ENDING 31.3.2007 RELE VANT TO THE A.Y. 2007-08, IN FACT THE ABOVE PERSONS EVEN THOUGH RELATIVES OF THE APPELLANT, HAVE HONESTLY DEDICATED THEMSELVES FOR THE CAUSE OF BUSINESS AS F ULLTIME EMPLOYEES. IN VIEW OF THE SERVICES RENDERED BY THEM, THE APPELLANT HAS PA ID THE SALARY AND COMMISSION. IN FACT THE APPELLANT HAS ALSO DEDUCTED THE TAX AT SOURCE (TDS) IN RESPECT OF THE COMMISSION PAID TO THE SAID EMPLOYEES. THE APPELLANT FURTHER SUBMITS THAT THE EMPLOYEES NA MED ABOVE HAVE FILED THE RETURNS OF INCOME IN THEIR RESPECTIVE HANDS AND DEC LARED THE INCOME OF SALARY AND COMMISSION SO RECEIVED. THE COPIES OF RETURN OF IN COME FILED BY ALL THE ABOVE EMPLOYEES ARE SUBMITTED HEREWITH FOR KIND PERUSAL A ND CONSIDERATION OF YOUR HONBLE AUTHORITY. THE DETAILS OF SALARY AND COMMI SSION PAID TO THE EMPLOYEES WAS ALREADY DECLARED IN THEIR RESPECTIVE HANDS FOR THE A.Y. 2007-08 AS DETAILED BELOW: SL.NO. NAME OF THE EMPLOYEE ASST. YEAR SALARY RS. COMMISSION RS. A. SRI D. BHAWARLAL 2007 - 08 72000 269750 B. SRI D. SURESH KUMAR 2007 - 08 72000 270500 C. SMT. KAVITHA K. JAIN 2007 - 08 72000 106750 D. SRI D. PRAVEEN KUMAR 2007 - 08 72000 273500 E. SMT. SHILPA K. JAIN. 2007 - 08 60000 125650 4 ITA NO.254/BANG/11 THE APPELLANT SUBMITS THAT IN SPITE OF THE GENUINEN ESS OF THE PAYMENT OF SALARY AND COMMISSION, THE LEARNED ASSESSING OFFICER WAS N OT JUSTIFIED IN CAUSING DISALLOWANCE OF THE EXPENDITURE ON THE PRETEXT OF C ONSENSUS. THE APPELLANT SUBMITS THAT IT IS NOT A FACT THAT THE DISALLOWANCE OF SALARY AND COMMISSION AMOUNTING TO RS.1085657 WAS AGREED UPON. THE LEARN ED ASSESSING OFFICER WAS INCLINED TO MAKE SOME ADDITION FOR THE SAKE OF ADDI TIONS AND THEREFORE HE HAS COMPELLED THE APPELLANT AND HIS REPRESENTATIVE TO C ONCEDE FOR DISALLOWANCE OF SALARY AND COMMISSION WHICH WAS A GENUINE EXPENDITU RE OF THE APPELLANT. THE APPELLANT SUBMITS THAT THE LEARNED ASSESSING OFFICE R HAS NOT BROUGHT ON RECORD ANY JUSTIFIABLE MATERIAL EVIDENCE WHICH WARRANTED T HE DISALLOWANCE OF GENUINE EXPENDITURE INCURRED TOWARDS THE PAYMENT OF SALARY AND COMMISSION TO THE EMPLOYEES NAMED ABOVE. THE SALARY AND COMMISSION W AS DISALLOWED MERELY ON THE GROUND THAT THE ABOVE NAMED EMPLOYEES WERE FOUND TO BE THE RELATIVES OF APPELLANT. THE APPELLANT SUBMITS THAT THE RELATIVE S EMPLOYED IN THE BUSINESS HAVE IN FACT HONESTLY AND SINCERELY WORKED FOR THE BUSIN ESS. THE RELATIONSHIP OF THE EMPLOYEES COULD NOT HAVE BEEN USED AS A GROUND FOR DISALLOWANCE OF SALARY AND COMMISSION. THE SALARY AND COMMISSION HAS ALREADY BEEN DECLARED IN THE RESPECTIVE HANDS OF THE EMPLOYEES AND THE CORRESPON DING TAX LIABILITY ARISING THERE FROM WAS ALSO PAID. THEREFORE SUBJECTING THE SAME AMOUNT TO TAX BYWAY OF DISALLOWANCE IN THE HANDS OF APPELLANT AMOUNTS TO T AXING THE SAME INCOME TWICE WHICH IS OPPOSED TO PRINCIPLES OF TAXATION. THEREF ORE THE APPELLANT SUBMITS THAT THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFI CER IN RESPECT OF THE SALARY AND COMMISSION IS NOT SUSTAINABLE UNDER THE LAW ON THE PRETEXT OF CONSENSUS AND HENCE THE SAME IS LIABLE TO BE DELETED. 7. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD PAID THE SALARY AND COMMISSIO N TO THE RELATIVES AND THE DETAILS FURNISHED BY THE ASSESSEE REVEALED THAT THE PAYMENT OF COMMISSION HAD NOT BEEN CERTIFIED BY THE TAX AUDITORS. HE, FURTHER OBSERV ED THAT THE AMOUNTS HAD NOT BEEN ACTUALLY PAID AND REMAIN OUTSTANDING AS ON 31.3.200 7 IN THE BALANCE SHEET. THE LEARNED CIT(A) ALSO OBSERVED THAT THE COPIES OF THE TDS CER TIFICATES FURNISHED BY THE ASSESSEE REVEALED THAT THE COMMISSION WAS CREDITED ON 31.3.2 007 AND TDS WAS MADE AT THE RATE OF 5% UNDER THE PROVISIONS OF SECTION 194H OF THE ACT IN SPITE OF THE FACT THAT THE PERSONS WERE EMPLOYEES OF THE ASSESSEE AND HAD BEEN PAID SA LARY. THEREFORE, ANY INCENTIVE PAYABLE AS BONUS, COMMISSIONS SUFFERS DEDUCTION OF TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 192 OF THE ACT. ACCORDING TO THE LEARNED CIT(A), THE ASSESSEE HAD NOT FURNISHED 5 ITA NO.254/BANG/11 LETTER OF APPOINTMENT, ITS TERMS AND CONDITIONS ESP ECIALLY IN REGARD TO THE COMMISSION PAYABLE AND NO DETAILS HAD BEEN FURNISHED ABOUT THE NATURE OF SERVICE RENDERED OR SALES EFFECTED THROUGH THESE PERSONS. THE LEARNED CIT(A) FURTHER OBSERVED THAT FOR THOSE PERSONS MERELY TDS CERTIFICATES WERE ISSUED AND RE TURNS HAVE BEEN FURNISHED WHICH WAS NOT SUFFICIENT TO PROVE THE GENUINENESS OF SERVICE RENDERED AND PAYMENTS MADE. THE LEARNED CIT(A) POINTED OUT THAT THE COMMISSION PAID DURING THE YEAR WAS MORE THAN DOUBLE THAN WHAT WAS PAID IN THE EARLIER YEAR. THE LEARNE D CIT(A) CATEGORICALLY STATED THAT NO EVIDENCE WAS ADDUCED TO SHOW THE NATURE OF SERVICE RENDERED BY THEM AND ALSO NO AGREEMENT WAS PRODUCED TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE. ACCORDINGLY, THE LEARNED CIT(A) CONFIRMED THE ADDITION MADE BY THE A SSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE LE ARNED CIT(A) HAD NOT APPRECIATED THE FACT THAT THE ASSESSEE HAD DEDUCTED TDS OUT OF THE COMMISSION PAID TO THE EMPLOYEES AND THE TDS SO DEDUCTED AS REQUIRED UNDER THE PROVI SIONS OF INCOME TAX ACT WAS REMITTED TO THE ACCOUNT OF CENTRAL GOVERNMENT WITHI N THE PRESCRIBED TIME LIMIT AND THE CERTIFICATES OF TAX DEDUCTED AT SOURCE WERE ISSUED TO THE EMPLOYEES WHICH WERE ALSO PRODUCED BEFORE THE LEARNED CIT(A), HOWEVER, THE EV IDENCES PRODUCED WERE NOT APPRECIATED BY THE APPELLATE AUTHORITY. IT WAS FUR THER STATED THAT THE EMPLOYEES HAD ALREADY PAID THE TAX ON THE INCOME RECEIVED BY WAY OF COMMISSION FROM THE ASSESSEE AND AGAIN THE SAME INCOME WAS SUBJECTED TO TAX IN THE H ANDS OF THE ASSESSEE BY CAUSING DISALLOWANCE OF THE COMMISSION ON THE PRETEXT OF AG REED ADDITION. IT WAS ACCORDINGLY SUBMITTED THAT THE SAME INCOME WAS SUBJECTED TO TAX TWICE, ONCE IN THE HANDS OF THE EMPLOYEES AND AGAIN IN THE HANDS OF THE ASSESSEE WH ICH WAS OPPOSED TO THE RULES OF TAXATION BECAUSE DOUBLE TAXATION HAS NO SANCTION OF LAW. HE PRAYED FOR DELETION OF THE ADDITION CONFIRMED BY THE LEARNED CIT(A). 6 ITA NO.254/BANG/11 9. IN HER RIVAL SUBMISSION, THE LEARNED DEPARTMENTA L REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL ON RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF THE COMMISSION PAID TO THE RELATIVES AND THE ASSESSEE INSTEAD OF PROVING THE G ENUINENESS CONSIDERED IT BETTER TO SURRENDER THE CLAIM OF PAYMENT OF COMMISSION AMOUNT ING TO RS.10,85,657 AND REQUESTED THE ASSESSING OFFICER TO DISALLOW THE SAME. THE SA ID REQUEST OF THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER. LATER ON, THE A SSESSEE CONTESTED THAT ADDITION BEFORE THE LEARNED CIT(A) INSPITE OF THE FACT THAT THE ASS ESSING OFFICER HAD STOPPED FURTHER ENQUIRY WHEN THE ASSESSEE HIMSELF AGREED FOR THE AD DITION. IN THE PRESENT CASE, ONE OF THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSE E WAS THAT SINCE THE AMOUNT HAS BEEN OFFERED FOR TAXATION BY THE RECIPIENT, SO IT WAS A DOUBLE TAXATION. IN OUR OPINION, THE SAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS IRRELEVANT BECAUSE THE ONLY ISSUE AGITATED BY THE ASSESSEE BEFORE US RELATES TO THE G ENUINENESS OF THE CLAIM FOR PAYMENT IN THE HANDS OF THE ASSESSEE. IN THE PRESENT CASE, TH E ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HIMSELF AGREED FOR ADDITION WHICH SHOWS THAT THE ASSESSEE WAS NOT IN A POSITION TO PROVE THE GENUINENESS. WE ARE OF THE VIEW THAT MERELY ON THIS BASIS THAT THE RECIPIENT HAD INCLUDED CERTAIN INCOME IN T HEIR RESPECTIVE HANDS IS NOT SUFFICIENT TO HOLD THAT THE CLAIM OF THE ASSESSEE WAS GENUINE FOR PAYMENT OF COMMISSION. HAD IT BEEN SO, NOBODY STOPPED THE ASSESSEE TO FURNISH THE RELEVANT DOCUMENT BEFORE THE ASSESSING OFFICER FOR PROVING THE GENUINENESS OF TH E PAYMENT TO THE RELATIVES ON ACCOUNT OF COMMISSION BUT THAT HAS NOT BEEN DONE AND THE AS SESSEE IN HIS OWN WISDOM CONSIDERED IT FAIR TO SURRENDER THE CLAIM AND AGREED FOR ADDITION . IN THE PRESENT CASE, IT IS ALSO NOTICED THAT THE ASSESSEE HIMSELF ALONG WITH AUTHORIZED REP RESENTATIVE APPEARED BEFORE THE ASSESSING OFFICER ON 7.12.2009 AND WHEN THE ASSESS ING OFFICER HAD ASKED THE ASSESSEE TO EXPLAIN THE GENUINENESS OF THE CLAIM AGREED FOR ADDITION AND REQUESTED TO DISALLOW THE 7 ITA NO.254/BANG/11 CLAIM OF PAYMENT OF COMMISSION AMOUNTING TO RS.10,8 5,657 PAID TO THE RELATIVES. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE PRESENT CASE AS DISCUSSED HEREIN ABOVE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS J USTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THE APPEAL OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JAN., 2012.) SD/- SD/- (GEORGE GEORGE) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEM BER BANGALORE, DATED: 24.01.2012. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, -B BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R ASSTT. REGISTRAR, ITAT, BANGALORE .