Shri Kishorbhai Devshibhai Iyava, Wanakbori V. The Income Tax Officer, Ward-2, Nadiad

ITA 2596/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9714 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 18-01-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 08-09-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B T THAKKAR
• Keywords: Salary income; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2596/AHD/2015 /BLOCK ASSTT. YEAR: 2011-2012 KISHOREBHAI DEVISHIBHAI IYAVA III, 73/4, GSECL COLONY WTPS, WANAKBORI 388 329 GUJARAT. PAN : AADPI 0457 Q VS ITO, WARD-1(4) BHAVNAGAR. %& / (APPELLANT) '( %& / (RESPONDENT) ASSESSEE BY : SHRI B.T. THAKKAR REVENUE BY : SHRI ALOK KUMAR, DR / DATE OF HEARING : 18/01/2016 / DATE OF PRONOUNCEMENT: 01/02/2016 )*/ O R D E R THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE LD.CIT(A)-2, BARODA DATED 15.6.2015 PASSED FOR THE ASSTT.YEAR 2011-12. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.FIRST APPELLATE AUTHORITY HAS ERRED IN CONFIRMING THE ADDITION OF R S.4,85,000/- . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ON 13.9.2011 DECLARING TOTAL INCOME AT RS.3, 77,040/-. THIS RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 17 .1.2012. THE ASSESSEE, THEREAFTER, REVISED THE RETURN ON 30.3.2012 AND DEC LARED TOTAL INCOME AT RS.9,71,910/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED ON 31.7.2012. THE ASSESSEE AT THE RELEVANT TIME WAS WORKING AS A PLANT OPERATOR WITH GUJARAT S TATE ELECTRICITY ITA NO.2596/AHD/2015 2 CORPORATION LTD. HE DERIVED INCOME FROM SALARY, IN COME FROM OTHER SOURCES AND INCOME FROM COMMISSION. ON SCRUTINY OF THE ACC OUNTS, IT REVEALED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF 10,79,871/- AS COMMISSION. THE ASSESSEE HAS CLAIMED EXPENSES OF RS.4,85,000/- AGAI NST THIS COMMISSION INCOME. THE LD.AO HAS CALLED FOR DETAILS OF THE CO MMISSION INCOME AND SERVICES RENDERED BY THE ASSESSEE. HE ALSO CALLED FOR THE DETAILS OF THE EXPENSES ALLEGED TO HAVE BEEN INCURRED BY THE ASSES SEE FOR EARNING THIS COMMISSION INCOME. ACCORDING TO THE AO, THE ASSESS EE FAILED TO SUBMIT REQUISITE DETAILS, AND THEREFORE, DISALLOWED THE CL AIM OF THE EXPENDITURE AT RS.4,85,000/-. 4. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. THE LD.CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS.4,85 ,000/- BY OBSERVING AS UNDER: 4.3. I HAVE CONSIDERED THE FACTS OF THE CASE, THE APPELLANT'S SUBMISSION AND THE AO'S OBSERVATIONS. AS STATED IN THE ASSESSM ENT ORDER, THE APPELLANT HAD CLAIMED TO HAVE MADE EXPENSES OF COMM ISSION TO HIS AGENTS FOR GETTING WORK DONE. THE AO HAS STATED THA T THE APPELLANT HAVING RECEIVED AN AMOUNT OF RS. 10,79,811/- AS COM MISSION, SHOULD HAVE MAINTAINED BOOKS OF ACCOUNTS TO SHOW WHAT AMOU NT HE HAS TO RECEIVE AND WHAT AMOUNT HE HAS PAID TO AGENTS. ON B EING ASKED TO PRODUCE THE BOOKS OF ACCOUNTS, THE APPELLANT ONLY S UBMITTED A COPY OF BANK ACCOUNT IN WHICH HE HAD WITHDRAWN AN AMOUNT OF RS.5,02,000/- IN CASH ON DIFFERENT DATES. THE AO HAS ALSO STATED THA T IT WAS DUTY OF THE APPELLANT TO FURNISH THE DETAILS OF THE SERVICES RE NDERED BY THE APPELLANT'S AGENTS, HOWEVER, NO SUCH INFORMATION WA S FURNISHED. THE AO ALSO HELD THAT NO COMMISSION HAS BEEN SHOWN IN T HE ORIGINAL RETURN OF INCOME AND APPELLANT HAD PAID COMMISSION ONLY AF TER GETTING LETTERS, FROM THE DEPARTMENT. ACCORDINGLY, THE AO HAS DISALL OWED THE COMMISSION CLAIMED TO HAVE BEEN PAID TO SUCH AGENTS . 4.3.1. NOW DURING THE COURSE OF THE CURRENT APPELLA TE PROCEEDINGS, THE AR HAS SUBMITTED THAT THE APPELLANT HAD FILED COMPL ETE DETAILS OF COMMISSION PAID ALONG WITH THE NAME, ADDRESS, PAN A ND COPY OF RETURN OF ALL THREE SUB-AGENTS. IT WAS ALSO CLAIMED THAT I N THE RETURN OF INCOME ITA NO.2596/AHD/2015 3 FILED BY ALL THREE SUB-AGENTS, AMOUNT PAID BY THE A PPELLANT WAS DECLARED AS COMMISSION INCOME. NO ENQUIRY WAS MADE BY THE AO AND HE DISALLOWED THE CLAIM ON SURMISES. 4.3.2 AS ALREADY REPRODUCED ABOVE, THE APPELLANT WA S ASKED VIDE THIS OFFICE LETTER DATED 30/01/2015 TO FURNISH THE NAME AND ADDRESS OF THE PERSONS TO WHOM THE APPELLANT HAD PAID COMMISSION A LONG WITH COMPLETE DETAILS OF SERVICES RENDERED BY THEM FOR T HIS PURPOSES. THE APPELLANT HAD BEEN ALSO ASKED THAT SUCH DETAILS SHO ULD ALSO INCLUDE THE DETAILS OF THE PARTIES TO WHOM SALE WERE MADE THROU GH SUCH COMMISSION AGENTS. IN THIS LETTER, DATE OF HEARING WAS GIVEN A S ON 10/02/2015. ON THAT DAY NO REPLY WAS SUBMITTED BY THE APPELLANT. H ENCE, FOR THE SAKE OF NATURAL JUSTICE, ANOTHER HEARING WAS FIXED ON 09/04 /2015. ON THAT DAY, THE APPELLANT DID 'NOT MAKE ANY COMPLIANCE. ON 16/0 4/2015 A LETTER WAS RECEIVED REQUESTING FOR ADJOURNMENT ON ACCOUNT OF FRACTURE IN RIGHT LEG OF THE AR. SUBSEQUENTLY, ANOTHER HEARING WAS FIXED ON 02/06/2015. ON THAT DAY, THE AR APPEARED AND FILED SUBMISSION ALONGWITH AFFIDAVIT OF THE PERSONS WHO HAD ALLEGEDL Y RECEIVED COMMISSION FROM THE APPELLANT. BUT IN THIS SUBMISSI ON, WHICH HAS BEEN REPRODUCED ABOVE, NO DETAILS OF SERVICES RENDERED B Y THESE PERSONS AND THE DETAILS OF PARTIES TO WHOM SALES WERE MADE THRO UGH THEM WAS FILED. THUS, EVEN AFTER ALMOST 04 MONTHS, THE APPELLANT FA ILED TO PROVIDE THE DETAILS AS ASKED FOR. THE DETAILS OF DATES OF PAY MENTS OF COMMISSION TO THESE PARTIES ALONGWITH ACCOUNTS WERE ALS O NO FILED. FURTHER, NO DOCUMENTARY EVIDENCES IN RESPECT OF-SERVICES REN DERED BY THE PERSONS TO WHOM THE APPELLANT HAD PAID COMMISSION W ERE FILED. THE AR ASKED FOR MORE OPPORTUNITY WHICH WAS PROVIDED ON 08 /06/2015. ON THAT DAY NO DETAILS WERE FILED AND THE AR STATED TH AT OTHER DETAILS LIKE DATE WISE PAYMENT DETAILS AND OTHER DOCUMENTARY EVI DENCES ETC. SHALL BE SUBMITTED AFTER OBTAINING SAME FROM THE APPELLAN T. THIS CLEARLY SHOWS THAT APPELLANT HAS NO DETAILS AVAILABLE WITH HIM OF ALLEGED SERVICES RENDERED BY THESE SUB-AGENTS. THE DETAIL S OF DATES OF PAYMENTS ALONG WITH AMOUNTS ALSO COULD NOT BE SUBMITTED. BESIDES THE PERUSAL OF THE BANK STATEMENT FURNISHED BY THE APPELLANT SHOWS THAT THE APPELLANT HAD MADE HUGE CASH WITHDRA WALS. ALSO THERE ARE SEVERAL BEARER CHEQUES ISSED TO ONE MR. MITESH H WAGHELA. HENCE WITHOUT PREJUDICE TO WHATEVER HAS BEEN STATED ABOVE , IT IS EVIDENT THAT THE APPELLANT, EVEN IF HE HAS ACTUALLY MADE ANY PAY MENT TO THESE SUB- AGENTS, HAS MADE SUCH PAYMENTS IN CASH AND HENCE IS NOT PROVIDING THE ITA NO.2596/AHD/2015 4 DETAILS, AS THE SAME MAY ENTAIL DISALLOWABILITY AS PER THE PROVISIONS OF SECTION 40A(3). EVEN THE AFFIDAVITS FILED BY THE SU B-AGENTS NOWHERE MENTION THE DATES OF RECEIPT OF PAYMENTS FROM THE A PPELLANT. BESIDES THESE THREE PERSONS HAVE ALSO FILED THEIR RETURN OF INCOME ON THE SAME DATE ON 10/03/2012 AFTER THE AO HAD ALREADY ISSUED LETTER TO THE APPELLANT REGARDING ALLOW/ABILITY OF SUCH EXPENDITU RE. MOREOVER, 2 OF THESE PERSONS JAYESH BHAI JAGDISH BHAI PARMAR AND J IGNESH KUMAR KANAIYALAL MASHIYAVA, HAVE ONLY SHOWN THE AMOUNTS A LLEGEDLY RECEIVED FROM THE APPELLANT AS THEIR ONLY SOURCE OF INCOME. IF THEY HAD EXPERIENCE IN MARKETING AND SELLING OF DIFFERENT PR ODUCTS, AS CLAIMED BY THEM, THEY SHOULD HAVE HAD INCOME FROM OTHER SOURCE S ALSO, THUS, THE RETURN OF INCOME FILED BY THEM IS JUST AN ATTEMPT B Y THE APPELLANT TO FABRICATE EVIDENCE IN SUPPORT OF HIS CLAIM. ALL THE SE FACTS ARE AGAINST HUMAN PROBABILITIES AND THEY SHOW THAT THESE PERSON S HAVE NOT RENDERED ANY SERVICE TO THE APPELLANT IN ORDER TO R ECEIVE THE COMMISSION FROM HIM. 4.3.3. IN THE DECISION IN THE CASE OF 46 TAXMANN.CO M 338 (BOMBAY) IN THE CASE OF UMAKANT B. AGRAWAL (SLP DISMISSED), THE COURT HAS HE!D AS FOLLOWS: '10, THE ASSESSING OFFICER HAD, BEFORE HIM, THE DETAILS OF PAYMENT OF COMMISSION OF M/S,GRASIM INDUSTRI ES TO THE APPELLANT. THEY WERE TO THE TUNE OF RS.ONE CRORE AN D FIFTY NINE LACS APPROXIMATELY. THE APPELLANT BOOKED THE EXPENSES OF RS.ONE CRORE TWENTY TWO LACS APPROXIMATELY I.E. PAY MENT TO CERTAIN ENTITIES WHO ASSISTED HIM IN PROCURING THE BUSINESS. THE CLAIM WAS OF SUB-AGENCY. IN PROBING SUCH CLAIMES, T HE ASSESSING OFFICER HAS FOUND THAT THE APPELLANT NAMED THE TWO ENTITIES, NAMELY, M/S.PANJON PHARMA AND M/S.SUVIDHA. THEREFO RE, THE ASSESSING OFFICER CALLED UPON THE APPELLANT TO PROV E THE NATURE OF THE SERVICES PROVIDED BY THESE TWO ENTITIES AND WITH THEIR DETAILS. THE ASSESSING OFFICER FOUND, AS A MATTER O F FACT, THAT THE DETAILS WERE FURNISHED, SAVE AND EXCEPT THE NATURE OF THE SERVICES........... 15. WE ARE OF THE OPINION, THAT THE INCOME TAX A PPELLATE TRIBUNAL, THEREFORE, DID NOT COMMIT ANY ERROR AND R ATHER APPLIED THE CORRECT TEST IN REVERSING THE ORDER OF COMMISSI ONER OF INCOME TAX (APPEALS). THE APPELLANT HAS NOT BEEN A BLE TO DISCHARGE THE BURDEN AND IT IS NOT IMPOSSIBLE. IT I S A PRIMARY ITA NO.2596/AHD/2015 5 ONUS AND WHICH WAS TO BE DISCHARGED AND WHICH HAS B EEN HELD AS NOT DISCHARGED BY PROVIDING THE REQUISITE DETAIL S. THESE ARE NOT MATTERS WHICH WERE TO THE KNOWLEDGE OF THE ASSE SSING OFFICER AND THE ASSESSEE WAS CALLED UPON TO CLARIFY THEM, I T WAS A MATTER SOLELY TO THE KNOWLEDGE OF THE APPELLANT. IT WAS P ERSONAL TO HIM. IT WAS THE ASSERTION OF THE APPELLANT AND WHICH WAS BEING PROBED, HOWEVER, IN GREATER DETAILS. IT WAS A CLEAR CASE WHERE THE ONUS WHICH WAS RESTING ON THE ASSESSEE IN LAW, HAS NOT BEEN DISCHARGED BY PRODUCING THE DETAILS WITH REGARD TO THE MATTERS WHICH ARE TO THE PERSONAL KNOWLEDGE ONLY OF THE ASS ESSEE.' 4.3.3.1. FURTHER, THE JURISDICTIONAL HIGH COUR T IN ITS DECISION IN THE CASE OF 40 TAXMANN.COM 166 (GUJARAT),GUJARAT INSECTICIDES LTD. HAS HELD AS FOLLOWS: '3. HAVING PERUSED THE DECISION OF THE TRIBUNAL ON THIS ISSUE, WE NOTICE THAT IN THE PREVIOUS YEAR AS WELL AS IN THE PRESENT YEAR, WHILE REJECTING THE ASSESSEE'S CLAIM FOR DEDUCTION OF COMMISSION PAYMENT, THE TRIBUNAL HEAVI LY RELIED ON THE FACTOR THAT THERE WAS NOTHING TO SUGG EST THAT THE RECIPIENT OF SUCH COMMISSION PAYMENT HAD RENDER ED ANY SERVICES TO THE ASSESSEE. THE TRIBUNAL NOTED TH AT THE ONUS WAS ON THE ASSESSEE, CLAIMING SUCH DEDUCTION, TO ESTABLISH THAT SUCH PAYMENTS WERE MADE FOR SERVICES RENDERED.' 4.4. HENCE, ON THE BASIS OF THESE DISCUSSIONS, IT I S HELD THAT THE AO'S ACTION OF DISALLOWING THE COMMISSION PAID TO T HESE 3 PERSONS IS CORRECT. AS A RESULT, THIS GROUND OF APP EAL IS DISMISSED. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONT ENDED THAT THE ASSESSEE HAS PAID SUB-BROKERAGE TO THREE PERSONS VIZ. NIRANJ AN ADROJA, JIGNESHKUMAR K. MASHIYAVA AND JAYEBHAI J. PARMAR. ALL THESE PER SONS HAVE EXPERIENCE IN MARKETING AND SELLING OF DIFFERENT PRODUCTS. HE SU BMITTED COPIES OF AFFIDAVITS TENDERED BY THESE PERSONS AND THEIR COPIES OF THE R ETURN. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THESE PERSONS HAVE SHOWN THE ALLEGED COMMISSION INCOME RECEIVED FROM THE ASSESSEE IN THE RETURN OF INCOME. AFFIDAVITS HAVE ITA NO.2596/AHD/2015 6 BEEN FILED BEFORE THE LD.CIT(A). THUS, THE RECIPIE NTS HAVE CONFIRMED THE RECEIPT OF COMMISSION FROM THE ASSESSEE. ON THE ST RENGTH OF THESE EVIDENCES, THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT THE PAYMENTS OF COMMISSION TO THESE PERSONS BY THE ASSESSEE OUGHT TO BE ALLOWED. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDER OF THE LD.CIT(A). 6. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. DURING THE COURSE OF HEARING, I CONFR ONTED THE LD. COUNSEL FOR THE ASSESSEE TO SHOW THE NATURE OF ACTIVITY WHICH HAS G IVEN RISE TO COMMISSION INCOME TO THE ASSESSEE, BECAUSE, THE ASSESSEE WAS W ORKING AS PLANT OPERATOR IN THE GUJARAT STATE ELECTRICITY CORPORATION LTD. AND A SALARIED EMPLOYEE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASS ESSEE HAS RECEIVED COMMISSION INCOME FROM JINDAL ALUMINUM AND BANCO AL UMINUM. THESE CONCERNS MUST HAVE MADE CERTAIN PURCHASES OF ALUMIN UM PRODUCTS AND THE ASSESSEE WITH THE ASSISTANCE OF THESE THREE PERSONS HELPED THESE CONCERNS. IN RESPECT OF THIS ACTIVITY, NOT A SINGLE DOCUMENT WAS BEING MAINTAINED BY THE ASSESSEE. HE COULD NOT PRODUCE ANY DETAILS FROM JI NDAL ALUMINUM OR BANCO ALUMINUM. THE CIT(A) HAS PROVIDED OPPORTUNITY TO TH E ASSESSEE TO DEMONSTRATE WHAT IS THE NATURE OF SERVICES THESE TH REE PERSONS HAVE GIVEN TO THE ASSESSEE. NOT TO TALK OF SERVICES PROVIDED BY THESE PERSONS, EVEN, THE ASSESSEE COULD NOT PRODUCE THE NATURE OF ACTIVITY F OR GIVING RISE TO THE COMMISSION INCOME. HE HAS RECEIVED SOME INCOME, BU T FAILED TO DEMONSTRATE THE ACTIVITY OF EARNING OF THIS COMMISSION INCOME. THE EXPENDITURE FOR EARNING ANY INCOME CAN BE CLAIMED BY THE ASSESSEE, IF HE IS ABLE TO DEMONSTRATE THAT THE EXPENDITURE WAS EXCLUSIVELY AN D WHOLLY INCURRED FOR THE PURPOSE OF BUSINESS ACTIVITY. THE FACTUM OF THE PAY MENT OF MONEY MAY NOT BE IN DOUBT, BUT THE FACTUM OF RENDERING OF SERVICES A T THE END OF THESE THREE PERSONS IS TOTALLY MISSING. THEREFORE, IN MY OPINI ON, THE LD.CIT(A) HAS ITA NO.2596/AHD/2015 7 RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE AO. NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD.CIT(A). IT IS UPHELD. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 1 ST FEBRUARY, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01/02/2016