The ITO, Ward-4(4), Ahmedabad V. Mahamantra Textile Mills Pvt.Ltd., Ahmedabad

ITA 260/AHD/2010

• Counselvise Citation: 26020514 RSA 2010
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-12-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 28-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SINGH SR DR
• Keywords: Business expenditure; Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.260/AHD/2010 ASSESSMENT YEAR :2006-07 INCOME TAX OFFICER, WARD-4(4), 1 ST FLOOR, NAVJIVAN TRUST BUILDING, AHMEDABAD V/S . MAHAMANTRA TEXTILE MILLS PVT. LTD., 466/2 1 ST FLOOR, PURSHOTTAM MARKET, SAKAR BAZAR, AHMEDABAD [ PAN NO.AABCM 0728P ] / APPELLANT .. / RESPONDENT) /BY APPELLANT SHRI D.K. SINGH, SR-DR /BY RESPONDENT SHRI VINIT MOONDRA, AR /DATE OF HEARING 03-12-2012 /DATE OF PRONOUNCEMENT 07-12-2012 / // / O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, AHMEDABA D (CIT(A) FOR SHORT) DATED 01-09-2009 FOR THE ASSESSMENT YEAR (AY) 2006- 07. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RES TRICTING THE DISALLOWANCE MADE U/S. 40A(2)(B) OF THE ACT TO RS.8 4,000/-. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE LADIES TO WHOM THE SALARY HAS BEEN PAID ARE NOT RENDERING ANY SERVICE AND HAVE NO TECHNICAL EXPERTISE. 2. THE CIT(A) HAS ERRED IN LAW A\W ADDITION ON FACT S IN DELETING THE DISALLOWANCE OF COMMISSION EXPENSES OF RS.34,92,649 /-. THE LD. ITA NO.260/AHD/2010 A.Y. 2006-07 ITO WD-4(4) ABD V. MAHAMANTRA TEXTILE MILLS P LT D. PAGE 2 CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE FACTUM OF RENDERING OF SERVICE HAS NOT BEEN PROVED BY THE ASS ESSEE. 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY ENGAGED IN WHOLESALE TRADING OF CLOTH. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT FOR THE AY 2006-07 AND T HE ASSESSMENT U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) WAS FRAMED WHEREBY THE ASSESSING OFFICER MADE THE ADDIT ION U/S. 40A(2)(B) OF RS.8.04 LAKHS AND DISALLOWANCE OF COMMISSION PAYMEN T OF RS.34,92,649/-. APART FROM DISALLOWANCE OF RS.8,36,428/- MADE U/S. 40(A)(IA) OF THE ACT. AGAINST THIS, ASSESSEE FILED APPEAL BEFORE LD. CIT( A) WHO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE PARTLY ALLOWED THE A PPEAL. 3. NOW, REVENUE IS IN APPEAL AGAINST ORDER OF LD. C IT(A). 4. FIRST GROUND IS AGAINST THE RESTRICTING THE DISA LLOWANCE MADE U/S. 40A(2)(B) OF THE ACT TO THE EXTENT OF RS.84,000/-. LD. SR-DR APPEARING ON BEHALF OF REVENUE SUBMITTED THAT LD. CIT(A) ERRED I N RESTRICTING THE DISALLOWANCE TO THE EXTENT OF RS.84,000/-. HE SUBMI TTED THAT LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT ASSESSEE FAILED TO ESTA BLISH THAT THE SERVICES WERE RENDERED BY THE RELATED PERSONS. ON THE CONTRARY, L D. COUNSEL APPEARING ON BEHALF OF ASSESSEE VEHEMENTLY ARGUED THAT DETAILS W ERE SUPPLIED BEFORE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE HAD GIVE N NARRATION OF DUTIES AND RESPONSIBILITIES OF SMT. LOONIDEVI, SMT. SHASHI JAI N AND SMT. MAMTA JAIN. HOWEVER, NO APPOINTMENT LETTER OR ANY OTHER EVIDENC ES WITH REGARD TO SUPPORTING THE FACT THAT PERSONS HAVE RENDERED SERV ICES TO THE ASSESSEE- COMPANY. THE LD. CIT(A) HAS NOT EXAMINED THE ANOTHE R ASPECT OF THE MATTER THAT WHETHER THE SIMILARLY PLACED PERSONS WERE PAID SIMILAR AMOUNT OR NOT. IN THIS VIEW OF THE MATTER, WE HEREBY SET ASIDE THE OR DER OF LD. CIT(A) AND REMIT ITA NO.260/AHD/2010 A.Y. 2006-07 ITO WD-4(4) ABD V. MAHAMANTRA TEXTILE MILLS P LT D. PAGE 3 BACK THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO DECIDE AFRESH AFTER VERIFYING THE DETAILS GIVEN BY THE ASSESSEE IN SUPPORT OF ITS SUBMISSIONS THAT SERVICES WERE RENDERED BY THE RELATED PERSONS OF THE DIRECTO RS, NAMELY, SMT. LOONIDEVI, SMT. SHASHI JAIN AND SMT. MAMTA JAIN AFT ER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 6. NEXT GROUND IS AGAINST THE DELETION OF DISALLOWA NCE OF COMMISSION EXPENSES OF RS.34,92,649/-. LD. SR-DR SUBMITTED THA T LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE AS THE ASSESSEE HAS NOT E STABLISHED THE NATURE OF SERVICE RENDERED AND IN SUPPORT OF ITS CONTENTION T HAT THE EXPENSES WERE DEBITED ONLY IN THE MONTH OF MARCH. HE FURTHER SUBM ITTED THAT IT IS ALSO NOT CLEAR THAT WHETHER ASSESSEE HAD EXECUTED ANY CONTRA CT WITH THE PERSONS WHO HAVE BEEN PAID COMMISSION. ON THE CONTRARY, LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT MERELY BECAUSE THE PAYMENTS WERE DEB ITED IN THE MONTH OF MARCH CANNOT BE THE ONLY GROUND FOR DISALLOWANCE OF THE COMMISSION EXPENSES. HE FURTHER SUBMITTED THAT THE AMOUNT WAS PAID BY CHEQUES AND THESE PERSONS WERE ASSESSED TO TAX. HE SUBMITTED TH AT ASSESSING OFFICER OUGHT TO HAVE VERIFIED FROM THE RECORDS OF THE DEPA RTMENT BUT HE FAILED TO MAKE ANY INQUIRY. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE HAS NOT FURNISHED ANY DOCUMENT OF CONTRACT PURPORTED TO HAVE BEEN EXECUTED BETWEEN AS SESSEE-COMPANY AND THE AGENT TO WHOM COMMISSION HAS BEEN PAID. SINCE I T IS SETTLED LAW THAT THE ASSESSEE HAS TO DISCHARGE ITS ONUS IN RESPECT OF AN Y EXPENDITURE CLAIMED AS BUSINESS EXPENDITURE. IN THE CASE IN HAND, THE ASSE SSEE HAS MERELY STATED THAT THE PAYMENTS HAVE BEEN PAID IN CHEQUE AND TDS HAVE BEEN DEDUCTED. HOWEVER, THE ASSESSEE HAS NOT FURNISHED ANY CONTRAC TUAL TERMS EXISTING BETWEEN THE ASSESSEE-COMPANY AND THE AGENTS. IN THI S VIEW OF THE MATTER, WE HEREBY SET ASIDE THE ORDER OF LD. CIT(A) AND THIS I SSUE IS REMITTED BACK TO THE ITA NO.260/AHD/2010 A.Y. 2006-07 ITO WD-4(4) ABD V. MAHAMANTRA TEXTILE MILLS P LT D. PAGE 4 FILE OF ASSESSING OFFICER TO DECIDE AFRESH AFTER GI VING SUFFICIENT OPPORTUNITY OF BEING HEARD TO ASSESSEE TO ESTABLISH ITS CLAIM. THI S GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP !' #- 07/12/2012 )*+ , --. --. --. --. /. /. /. /. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '+'-2 3 / CONCERNED CIT 4. 3- / CIT (A) 5. .67 ---2, -2 , )*+ / DR, ITAT, AHMEDABAD 6. 7:; <= / GUARD FILE. BY ORDER/ , /TRUE COPY/ >/) '? -2 , )*+ , STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 04/12 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 04/12 4) DATE OF CORRECTION 05/12 5) DATE OF FURTHER CORRECTION - - 6) DATE OF INITIAL SIGN BY MEMBERS 05/12 7) ORDER UPLOADED ON 07/12 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 07/12