Prasanta Karmakar, Kolkata V. JCIT, Range - 26, Kolkata, Kolkata

ITA 258/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1933 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 22-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOUMYAJIT DASGUPTA
• Assessee Lawyers: MONOJ DUTTA FCA S K ROY
• Keywords: Business income; Retrospective amendment; Wrong claim
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH KOLKATA BEFORE SHRI N.V. VASUDEVAN, JM &DR. A.L.SAINI, AM ./ITA NO.258/KOL/2016 ( / ASSESSMENT YEAR: 2011-12) PRASANTA KARMAKAR 41, BOSE PARA ROAD, BARISHA, KOLKATA 700 008. VS. JCIT, RANGE-26, KOLKATA R-26, KOL, AYKAR BHAWAN, DAKSHIN, DHAKURIA, KOLKATA 700 068. ./ ./PAN/GIR NO. : AGAPK 0496 Q (ASSESSEE) .. (RESPONDENT) ASSESSEE BY : SHRI MONOJ DUTTA, FCA, S.K. ROY, ADV. RESPONDENT BY: SHRI SOUMYAJIT DASGUPTA, ADDL. CIT / DATE OF HEARING : 22/11/2017 /DATE OF PRONOUNCEMENT : 10/01/2018 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2011-12, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)7, KOLKATA, IN APPEAL NO.359/CIT(A)-7/RANGE- 26/14-15, DATED 28.01.2016, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER U/S.144/143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT), DATED 17.03.2014. 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1.THAT THE LD. CIT(A) TOTALLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.10,98,184/- U/S.40(A)(IA)/194H WHICH WAS NOT THE ISSUE IN THE ORIGINAL ASST. ORDER WHEREIN THE A.O. MADE THE TOTAL DISALLOWANCE AS BOGUS COMMISSION PAYMENT AND REJECTED BOOKS U/S.145(3) AND SUCH ADDITION HAS TO BE DELETED BEING TOTALLY INJUDICIOUS AND OUT OF CONTEXT ESPECIALLY WHEN THE CIT(A) HIMSELF HAS ADMITTED THAT COMMISSION PAYMENT IS GENUINE AND IS REQUIRED TO BE ALLOWED. 2.THAT THE DISALLOWANCE OF RS.10,98,184/- IS TOTALLY BAD AND UNCALLED FOR IN VIEW OF THE FINDINGS IN THE ASST. ORDER DT. 20.01.2016 OF THE ASSESSEE U/S. 143(3) FOR THE ASST. YEAR 2013-2014 AND HENCE CANNOT BE SUSTAINED. 3. THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT THE RETAILER'S COMMISSION IS DETERMINED AND COMMUNICATED BY THE PRINCIPAL TTSL THROUGH E-MAIL EVERY MONTH PRASANTA KARMAKAR ITA NO.258/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 2 AND YOUR ASSESSEE HAS NO SAY THEREIN AND JUST PASS ON THE RETAILER'S COMMISSION AS DICTATED BY THE TTSL WHO HAS ALREADY APPLIED TDS ON THE GROSS AND THERE CANNOT BE SECOND TDS ON THE SAME. 4. THAT THE OBSERVATION AMENDMENT MADE TO SEC40(A)(IA) IS NOT RETROSPECTIVE EFFECT AT P.7(PARA 2.3) IS TOTALLY AGAINST THE I.T.A.T KOL 'C' BENCH DECISION IN ITA NO. 558/K/2013 AND ORDER DT.04.12.2015 AND HAS TO BE EXPUNGED. 5. THAT YOUR ASSESSEE CRAVES LEAVE TO RAISE ANY OTHER GROUND OR GROUNDS AT THE TIME OF HEARING OF THE APPEAL. 3.THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y 2011-12 ON 30.09.2011 SHOWING TOTAL INCOME OF RS.7,07,260/-. THE ASSESSEES RETURN WAS PROCESSED U/S 143(1) OF THE ACT. LATER, THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY U/S 143(2) OF THE ACT AND ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING THE ADDITION ON ACCOUNT OF BOGUS CLAIM OF COMMISSION PAID TO THE RETAILER OF RS.16,02,272/- AND ADDITION ON ACCOUNT OF GROSS PROFIT SUPPRESSION FROM SALES OF VISHAL VEDIO APPLIANCES AND ELEVEN COMMUNICATION(AT THE RATE OF 5% ON RS.92,49,032/- SALE OF GOODS) AT RS.4,62,451/-. THE ASSESSEE IS A DEALER OF TATA TELE SERVICES LTD., AND CALLED CHANNEL PARTNER, VIDE AGREEMENT DATED 14.09.2009. THE ASSESSEES MAIN BUSINESS WAS TO MARKET THE VARIOUS TALK TIME SCHEMES BY WAY OF PHYSICAL AND ELECTRONIC RECHARGE SERVICE TICKETS. THE DETAILS OF ASSESSEES PURCHASES AND COMMISSION WERE OBTAINED FROM TATA TELE SERVICES LTD. U/S 133(6) OF THE ACT. THE ASSESSEE WAS GIVEN A DISCOUNT OF 11% ON THE MRP BY THE COMPANY TO MARKET ITS SERVICE TICKETS. AS PER THE COMPANY DIRECTIONS THE ASSESSEE WAS SUPPOSED TO RETAIN AROUND 4% OF THE SAID DISCOUNT AND PASS ON THE REST TO THE RETAILERS. THE COMPANY MRP SALES TO THE ASSESSEE WERE RS.2,39,89,949/- AT A DISCOUNTED PRICE OF RS.2,13,98,845/-. THE COMPANY ALSO GAVE THE ASSESSEE A DEALERS COMMISSION OF RS.21,81,227/- SEPARATELY. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DECLARED A G.P OF RS.10,20,304/- ONLY ON TOTAL SALES OF RS.3,14,78,488/- AND A COMMISSION AND INCENTIVE INCOME OF RS.5,78,955/- AND RS.1,02,370/- RESPECTIVELY, ONLY AGAINST MUCH HIGHER RECEIPTS. THE ASSESSING OFFICER NOTED THAT AS PER THE DETAILS OBTAINED FROM TATA TELE SERVICES, THE PRASANTA KARMAKAR ITA NO.258/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 3 COMMISSION PAID TO THE ASSESSEE HAS BEEN PAID IN THE FORM OF SALEABLE STOCK BY ADJUSTING THE SAME AGAINST THE AMOUNTS RECEIVABLE AS SALE PROCEEDS. IN OTHER WORDS, THE STOCK OF THE VALUE OF RS.21,81,227/- OUT OF TOTAL PURCHASE OF RS.2,39,89,949/- WAS FOR THE KEEPING OF THE ASSESSEE AS HIS PROFITS. THE ASSESSEE HAS DECLARED A SUM OF RS.5,78,955/- ONLY OUT OF THIS SUM AS HIS COMMISSION INCOME SEPARATELY AND CLAIMED TO PAID TO SUM OF RS.4,08,263/- AS COMMISSION TO ONE SRI KAMALESHHAIT AND RS.11,05,463/- AS CASH COMMISSION TO UNKNOWN PERSONS AND ALL WITHOUT ANY TDS. THE GROSS PROFIT DECLARED BY THE ASSESSEE OF AROUND RS.10,00,000/- EQUALS TO THE NET G.P HE HAS EARNED FROM TATA TELE SERVICES OF AROUND 4%, WHICH MEANS THAT HE HAS NOT DECLARED ANY G.P FROM THE SALE OF GOODS WORTH RS.92,49,032/- OF OTHER COMPANIES LIKE ELEVEN COMMUNICATION AND VISHAL VIDEO & APPLIANCES. THE AO NOTED THAT THE MODUS OPERANDI OF THE ASSESSEE WAS TO SELL THE SERVICE TICKETS IN CASH TO VARIOUS RETAILERS THROUGH SALESMAN AND DESTROY THEIR CASH MEMO BOOKS AND RECORD OF FIGURE OF SALES IN THE P&L A/C AS PER HIS OWN CONVENIENCE. THEREFORE, AO NOTED THAT THIS WAS THE REASON THAT THE ASSESSEE WAS NOT ABLE TO PROVIDE THE QUANTITATIVE DETAILS OF PURCHASES, SALES AND STOCKS. IN OTHER WORDS, HE POCKETS THE COMMISSION INCOME EARNED THROUGH SELLABLE STOCK BY SUPPRESSING SALES FIGURES AND MAKING A BOGUS CLAIM OF HAVING PAID COMMISSION TO THE RETAILERS TO WHOM HE HAS ALREADY GIVEN A DISCOUNT OF 7% TO 8%. THIS WAY, THE AO MADE THE ADDITION ON ACCOUNT OF BOGUS CLAIM OF COMMISSION PAYMENT OF RS. 16,02,272/- (RS.21,81,227 -RS.5,78,955). 4.AGGRIEVED BY THE ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO HAS PARTLY ALLOWED THE ASSESSEES APPEAL. THE CIT (A) NOTED THATTHE AMENDMENT MADE TO SECTION 40(A)(IA) IS NOT WITH RETROSPECTIVE EFFECT, AS CLAIMED BY THE ASSESSEE. THEREFORE, CIT(A) HELD THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE AND THE COMMISSION PAYMENTS MADE TO THE RETAILERS AND NON DEDUCTION OF TAX AT SOURCE ATTRACTS DISALLOWANCE U/S 40(A)(IA). HOWEVER, CIT(A) NOTED THAT AS PER LIST SUBMITTED BY THE ASSESSEE BEFORE HIM, OUT OF THE TOTAL AMOUNT OF COMMISSION PAID TO PRASANTA KARMAKAR ITA NO.258/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 4 THE RETAILERS CERTAIN AMOUNTS WERE BELOW THE THRESHOLD LIMITS AND CERTAIN AMOUNTS WERE ABOVE THE LIMIT WHICH REQUIRED TO DEDUCT TAX AT SOURCE. AS PER INFORMATION AVAILABLE, THE COMMISSION AND BROKERAGE TO THE EXTENT OF RS.10,98,184/- WAS ABOVE THE LIMIT OF TDS U/S 194H OF THE ACT. ACCORDINGLY OUT OF THE TOTAL ADDITION MADE BY THE AO RS.16,02,272/- AN AMOUNT OF RS.10,98,184/- WAS CONFIRMED BY CIT(A) U/S 40(A)(IA) OF THE I.T. ACT AND THE BALANCE WAS DELETED. 5.NOT BEING SATISFIED WITH THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US.THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT AS PER DEALERSHIP COMMISSION SCHEME, THE ASSESSEE HAS TO PASS OVER THIS COMMISSION TO THE RETAILERS AS PER AGREEMENT MADE BY THE TATA TELE SERVICES LTD. THE ASSESSEE HAS TO PASS OVER THE COMMISSION TO THE RETAILERS AT RS.10,98,184/-, OUT OF TOTAL COMMISSION OF RS.16,02,272/-. THE COUNSEL FOR THE ASSESSEE ALSO POINTED OUT THAT TOTAL COMMISSION OF RS.16,02,272/- HAS ALREADY BEEN SUFFERED TDS. THE ASSESSEE HAS TRANSFERRED THE COMMISSION AS PER THE AGREEMENT, TO THE TUNE RS.10,98,184/- TO THE RETAILERS. THE ASSESSEE NEED NOT TO DEDUCT TDS ON RS.10,98,184/-, BECAUSE AS PER THE AGREEMENT, THE TDS ALREADY HAD BEEN DEDUCTED ON THE TOTAL SUM OF RS.16,02,272/-. THE ASSESSEE TRANSFERRED/PASSOVER, THE SAID COMMISSION OF RS.10,98,184/-, AS PER AGREEMENT WITH THE TATA TELE SERVICES LTD., THEREFORE, THERE IS NO ANY VIOLATION OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT.THAT IS, AS PER THE AGREEMENT WITH TATA TELE SERVICES LTD. THE ASSESSEE NEED NOT TO DEDUCT THE TDS ON RS.10,98,184/- BECAUSE IT WAS A KIND OF MONEY WHICH BELONGS TO THE RETAILERS AND DID NOT BELONG TO THE ASSESSEE. AS PER THE AGREEMENT WITH THE TATA TELE SERVICES LTD. THIS WAS AN INCENTIVE WHICH WAS TO BE GIVEN TO THE RETAILERS TO EXPAND THE BUSINESS BASE. TO SUPPORT HIS PLEA, THE ASSESSEE HAS ALSO RELIED ON THE JUDGMENT OF HONBLE ITAT KOLKATA IN ITA NO.558/KOL/2013 A.Y 2009-10 DATED 04.12.2015 IN THE CASE OF RANJANA ROY VS. ITO WHEREIN IT WAS HELD THAT ASSESSEE'S PART OF THE ROLE IS TO NEGOTIATE THE DEAL AND ACTS AS INTERMEDIARY IN SETTLING THE TERMS OF AGREEMENT DIRECTLY BETWEEN TWO SIDES WITHOUT MAKING PRASANTA KARMAKAR ITA NO.258/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 5 HERSELF AS ANY PARTY THEREIN. THE PERFORMERS (ARTISTES) AND THE ORGANIZERS ARE NOT KNOWN TO EACH OTHER AS SUCH. THE ASSESSEE RECEIVES THE PAYMENTS FROM THE ORGANIZERS AFTER TDS AND MAKE OVER THE NEGOTIATED AMOUNT WITHOUT TDS SINCE THE ASSESSEE IS REPRESENTING AND ACTING FOR AND ON BEHALF OF THE ORGANIZERS. ALL THE ARTISTES ARE VERY FAMOUS, WIDELY ACCLAIMED AND HAVE THEMSELVES FURNISHED DECLARATION WITH PAN THAT THEY WILL BE DIRECTLY RESPONSIBLE FOR THEIR RESPECTIVE TAX MATTERS AND ONE OF THEM, ALKAYAGNIK EVEN UNEQUIVOCALLY STATED THAT SHE HAD ALREADY PAID INCOME TAX ON SUCH INCOME. THE ARGUMENT OF THE ASSESSEE THAT THE RECIPIENT OF INCOME HAS PAID THE TAX IN THEIR RESPECTIVE HANDS HAS ALSO BEEN REGARDED. HOWEVER, TRIBUNALFOUND THAT THERE WAS AN AMENDMENT IN PROVISO TO SEC. 40(A)(IA) OF THE ACT, WITH RESPECT TO 1 ST PROVISO TO SECTION 201, WHEREIN, IF ANY PAYEE HAS PAID THE TAXES BY OFFERING / DISCLOSING THE SAID RECEIPT IN HIS/HER RETURN OF INCOME, THEN THE ITA NO.558/KOL/2013 A.Y. 2009-10 RANJANA ROY V. ITO WD.42(3) KOL. PAGE 7 PAYER (THE ASSESSEE HEREIN) SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT AND NO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT COULD OPERATE IN THAT SCENARIO. THE SAID PROVISO THOUGH INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013 HAS BEEN HELD TO BE RETROSPECTIVE IN OPERATION BY RECENT DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD. REPORTED IN (2015) TAXMANN.COM 45 (DEL). 6.ON THE OTHER HAND, LD DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7.WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, AND PERUSED THE MATERIALS AVAILABLE ON RECORD, WE NOTE THAT ASSESSEE IS A DEALER OF TATA TELE SERVICES LTD. AND IS A CHANNEL PARTNER, VIDE AGREEMENT DATED,14.09.2009 BETWEEN ASSESSEE AND TATA TELE SERVICES LTD. THE ASSESSEES MAIN BUSINESS WAS TO MARKET THE VARIOUS TALK TIME SCHEMES BY WAY OF PHYSICAL AND ELECTRONIC RECHARGE SERVICE TICKETS. THE DETAILS OF PRASANTA KARMAKAR ITA NO.258/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 6 ASSESSEES PURCHASES AND COMMISSION WERE OBTAINED BY THE AO. FROM TATA TELE SERVICES LTD. U/S 133(6) OF THE ACT IN THE REMAND PROCEEDINGS. THE ASSESSEE WAS GIVEN A DISCOUNT OF 11% ON THE MRP BY THE COMPANY TO MARKET ITS SERVICE TICKETS. AS PER THE COMPANY`S DIRECTIONS, THE ASSESSEE WAS SUPPOSED TO RETAIN AROUND 4% OF THE SAID DISCOUNT AND PASS ON THE REST TO THE RETAILERS. THE COMPANY MRP SALES TO THE ASSESSEE WERE RS.2,39,89,949/- AT A DISCOUNTED PRICE OF RS.2,13,98,845/-. THE COMPANY ALSO GAVE THE ASSESSEE A DEALERS COMMISSION OF RS.21,81,227/- SEPARATELY. AS PER THE ASSESSEES P & L ACCOUNT IT IS NOTED THAT THE ASSESSEE HAD DECLARED A G.P OF RS.10,20,304/-, ON TOTAL SALES OF RS.3,14,78,488/- AND A COMMISSION OF RS.5,78,955/-AND INCENTIVE OF RS.1,02,370/-. THE ASSESSING OFFICER DID NOT BRING ANY COGENT EVIDENCE ON RECORD TO SHOW THAT GROSS PROFIT DECLARED BY THE ASSESSEE IS FALSE. SO FAR COMMISSION INCOME IS CONCERNED, WE NOTE THAT THE ASSESSEE IS JUST PASSING ON DISCOUNT AND COMMISSION FROM THE PRINCIPALS TO THE RETAILERS AND THERE IS NO RELATION OF PAYER AND PAYEE. THE ASSESSEE UNDER CONSIDERATION HAS TO PASSOVER THE COMMISSION AS PER THE AGREEMENT TO THE TUNE OF RS.10,98,184/-. WE ALSO NOTE THAT THE RECIPIENT OF INCOME HAS PAID THE TAX IN THEIR RESPECTIVE HANDS THEREFORE, THE DISALLOWANCE UNDER SECTION 40(A)(IA) IS NOT WARRANTED. FOR THAT WE RELY OF THE JUDGMENT OF COORDINATE BENCH KOLKATA IN THE CASE OF RANJANA ROY (SUPRA), WHEREIN IT WAS HELD THAT IF ANY PAYEE HAS PAID THE TAXES BY OFFERING / DISCLOSING THE SAID RECEIPT IN HIS / HER RETURN OF INCOME, THEN ASSESSEE SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT AND NO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT COULD OPERATE IN THAT SCENARIO. WE ALSO NOTE THAT ASSESSING OFFICER HAS REJECTED THE BOOKS OF THE ASSESSEE BY RESORTING TO THE PROVISIONS OF SECTION 145(3) OF THE ACT AND THEN MADE ADDITION ON ACCOUNT OF BOGUS COMMISSION AT RS. 16,02,272/- WHICH IS NOT ALLOWED. AS PER OUR CONSIDERED VIEW THAT ONCE THE ASSESSING OFFICER REJECTS THE BOOKS OF THE ASSESSEE UNDER SECTION 145(3) OF THE ACT THEN COURSE AVAILABLE TO HIM IS TO MAKE THE ADDITION BASED OF ESTIMATE OF GROSS PROFIT OR NET PROFIT. ONE HAND THE ASSESSEE REJECTS THE BOOKS OF ACCOUNTS OF THE PRASANTA KARMAKAR ITA NO.258/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 7 ASSESSEE AND ON OTHER HAND HE MAKES ADDITION ITEM-WISE, WHICH IS NOT ALLOWED UNDER THE LAW. CONSIDERING THE FACTUAL POSITION AS EXPLAINED ABOVE, WE ARE OF THE VIEW THAT ADDITION CONFIRMED BY THE CIT(A) AT RS.10,98,184/- IS NOT JUSTIFIED AND NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADDITION. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE, IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10.01.2018. SD/- (N.V. VASUDEVAN) SD/- (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED 10/01/2018 [ RS SPS] / COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/D.D.O, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. / THE ASSESSEE PRASANTA KARMAKAR 2. / THE RESPONDENT-JCIT, RANGE-26, KOLKATA 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. / GUARD FILE.