ACIT-CIRCLE-2, Nagpur V. SMT. SHEFALI ANIL MALVIYA, Nagpur

ITA 261/NAG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3116 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KAPIL A HIRANI
• Keywords: Business income; Opportunity of being heard; Opportunity of cross examination
• Section: 143(3); 142(1); 133(6); 131

Judgement Text

1 ITA NO. 261/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. ITA NO. 261/NAG/2014 ASSESSMENT YEAR : 2009 - 10. ASSTT. COMMISSIONER OF INCOME - TAX, SMT. SHEFAILI ANIL MALVIYA, CIRCLE - 2, NAGPUR. VS. NAGPUR. PAN AHRPM6457D APPELLANT. RESPONDENT. APPELLANT BY : SHRI RAJESH GAWALI. RESPONDENT BY : SHRI KAPIL A. HIRANI. DATE OF HEARING : 08 - 12 - 2015 DATE OF PR ONOUNCEMENT : 25 TH FEBRUARY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 31 - 01 - 2014 AND THE GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS: GROUND NO. 1: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAYMENT OF RS.40,90,000/ - BY COMPLETELY IGNORING THE FACT THAT THE RECIPIENTS OF COMMISSION FAILED TO EXP LAIN THE SERVICES RENDERED BY THEM TO THE ASSESSEE. 2. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) DATED 26 - 12 - 2011 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS ENGAGED IN PROCURING MACHINERY AND INDUSTRIAL PRODUCTS AND DERIVING INCOME FROM TRADING AS WELL AS EARNING COMMISSION INCOME. THE ASSESSEE 2 ITA NO. 261/NAG/2014 DURING THE PERIOD STATED TO BE WORKING AS A LAISIONG AGENT FOR EMTICI ENGG. LTD. AGAINST THE COMMISSION INCOME EARNED, THE AO HAD MADE AN OBSERVATION THAT AS PER P & L ACCOUNT THE ASSESSEE HAD CLAIMED COMMISSION PAYMENT OF RS.40,90,800/ - . THE COMMISSION WAS PAID TO THE FOLLOWING PARTIES: SI . PARTY NAME ADDRESS . AMOUNT NO. 1 CHANDRALAXMI 8 , ANJUMAN COMP L EX , RS . 2 , 00 , 000 / - INFRASTRUCTURE PVT . SADAR, N AGPUR LTD . 2 FOOTLOOSE FASHION 8, ANJUMAN COMP L EX , RS . 5 , 15 , 000 / - PVT . LTD . SADAR , NAGPUR 3 HEERA LAXMI 8 , AN J UMAN COMPLEX, RS.2,00 , 000 / - INFRASTRUCTURE PVT . SADAR, N AGPUR LTD . 4 MERCURY ACCESSORIES 8, AN J UMAN COMPLEX, RS . 2 , 25 , 000 / - PVT . LTD. SADAR , NAGPU R 5 PLATINUM TOUCH 8 , AN J UMAN COMPLE X, RSA , 25 , 000 / - REALTORS PVT. LTD . SADAR, NAGPUR 6 RUBY TOUCH 8, ANJUMAN COMPLEX , RS . 3 , 75 , 000 / - INFRASTRUCTURE PVT . SADAR , NAGPUR LTD. 7 RUBY TOUCH 8, ANJUMAN COMPLEX, RS . 1 , 75 , 000 / - BUILDCON PVT. LTD . SADAR , N AGPUR 8 SILVER TOUCH REAL 8, ANJUMAN COMPLEX, RS.7,90 , 000 / - ESTATE PVT. LTD. SADAR, NAGPUR 9 JAWAHAR THEATRE 1174, JALALPURA , BEHIND RS . 2 , 45 , 200 / - PVT . LTD . BANK OF MAHARASH TRA, GANDHIBAGH, NAGPUR 10 RAWAL ENTERPRISES SHOP NO.74J75, MANGALWAR I RS . 9,40 , 600 J - COMPLEX , SADAR, NAGPUR - 1 3 ITA NO. 261/NAG/2014 SINCE THE ASSESSEE WAS NOT FURNISHING THE COMPLETE DETAILS, HENCE THE AO HAS ISSUED NOTICE U/S 133(6) TO THE SAID PARTIES. THE AO HAD ALSO MADE AN OBSERVATION THAT OUT OF THE 10 PARTIES 8 PARTIES WERE HAVING COMMON ADDRESS AS 8 - ANJUMAN COMPLEX, SADAR, NAGPUR . ON RECEIVING CERTAIN INFORMATION THE AO HAD FOUND THAT THE PARTIES FROM SR.NO. 1 TO 9 WERE EITHER SHOWING NIL INCOME OR A NOMINAL INCOME. ALL THE COMPANIES WERE HAVING ONLY THE COMMISSION INCOME RECEIVED FROM THE ASSESSEE. THE AO HAS ALSO OBSERVED THAT THE SAID PARTIES HAVE CLAIMED THE REFUND OF THE TDS DEDUCTED BY THE ASSESSEE AT SOU RCE ON PAYMENT OF COMMISSION. THE AO HAS ISSUED SUMMONS U/S 131. THEREAF T ER THE AO HAS DISCUSSED THE BACKGROUND OF THE PARTIES WHO HAVE RESPONDED TO THOSE SUMMONS AND ALSO REPRODUCED THE QUESTIONS WHICH WERE RAISED DURING THE INTERROGATION. KEEPING BREVITY IN MIND THE PARTY - WISE DISCUSSION AS MADE BY THE AO IN THE ASSESSMENT ORDER IS NOT REPRODUCED BY US. FINALLY, THE AO HAD CONCLUDED AS UNDER : 10. THUS, IT IS SEEN THAT NO GENUINE SERVICES WERE PROVIDED BY THE ABOVE PARTIES TO THE ASSESSEE. FURTHER, THE COMPANIES DID NOT HAVE ANY PRIOR EXPENENCE OF DOING SUCH LIASIONG WORK . THE ASSESSEE IS THE ONLY PARTY FOR WHICH THESE COMPANIES ARE DOING THE SO CALLED LIASIONG WORK . JUST A CURSORY LOOK AT THE NAMES OF THESE COMPAN IES SUCH AS FOOTLOOSE FASHION PVT . LTD , HEERA LAXMI INFRASTRUCTURE PVT. LTD., MERCURY ACCESSORIES PVT . LTD . ,JAWAHAR THEATRE PVT . LTD . ETC SHOWED THAT THESE COMPANIES COULD NOHAVPOSSIBLYE FORMED FOR PURPOSE OF LIASIONG ETC FURTHER, IT IS SEEN THAT THE C OMPANIE SAD BEEN PAID COMMISSION IN LUMP - SUM AND ALMOST IN ALL CASES ON 31 . 03.2011 OR TOWARDS THE END OF THE YEAR. IT IS PERTINENT TO NOTE HERE THAT, THE AUDITOR OF ALL THE PARTIES AS WELL AS ASSESSEE IS SAME. THERE IS NO AGREEMENT BETWEEN THE PARTIES . THE DIRECT ORS OF THE COMPANIES COMPLETELY FAILED TO EXPLAIN NATURE O F SERVICES PROVIDED BY THEM TO THE ASSESSEE . THE COUNSEL FOR THE ASSESSEE , SHRI T.S . RAWAL WAS GIVEN A COPY OF STATEMENT OF SHRI VED PRAKASHADHWANI AND SHRI ANIL SARDA. HE WAS GIVEN AN OPPORTUNITY T O CROSS EXAMINE BOTHOF THEM . HOWEVER THE ASSESSEE TILL DATE HAS NOT AVAILED OF THIS OPPORTUNITY . 11. THE ASSESSEE HERSELF HAS NOT PRODUCED SUFFICIENT EVIDENCES AND DETAILS REGARDING THE PAYMENT OF COMMISSION. IN NOTICE U/S 142(1) DATED 18 - 11 - 2011 AT POINT 6 IT WAS SPECIFICALLY ASKED TO PRODUCE DOCUMENTARY EVIDENCE ' , . 4 ITA NO. 261/NAG/2014 IN RESPECT OF VARIOUS SERVICES PROVIDED BY THE PERSONS TO WHOM COMMISSION HAS BEEN PAID (E.G. AGREEMENT, CORRESPONDENCE REGARDING WORK DONE, SUBMISSION OF BILLS ETC . ). HOWEVER NO SUCH DOCUMENTARY EVIDENCE HAS BEEN PRODUCED TILL DATE. THERE IS NO EVIDENCE OF ANY CORRESPONDENCE OR ANY PERSONAL MEETINGS ETC BETWEEN THE ASSESSEE AND THE COMPANIES TO SUGGEST THAT THERE WAS ANY RELATIONSHIP ON THE BASIS OF WHICH THESE COMPANIES PROCU RED ORDER FOR THE ASSESSEE FOR WHICH IT APPEARS TO BE . THE COUNSEL FOR THE ASSESSEE, SHRI T . S . RAWAL WAS GIVEN A COPY OF STATEMENT OF SHRI VED PRAKASH WADHWANI AND SHRI ANI! SARDA. HE WAS GIVEN AN OPPORTUNITY TO CROSS EXAMINE BOTH OF THEM. HOWEVER THE ASSE SSEE TILL DATE HAS NOT AVAILED OF THIS OPPORTUNITY. THE ONUS OF PROVING THAT THE COMMISSION PAID HAS BEEN WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE IS ON THE ASSESSEE. HOWEVER, ASSESSEE COMPLETELY FAILED TO PROVE THE GENUINENES S OF THE COMMISSION PAID. THE ASSESSEE FAILED TO DEMONSTRATE THAT THE SERVICES WERE RENDERED TO HER AND THUS FAILED TO DISCHARGE THE ONUS. THE ASSESSEE COMPANY HAS NOT ADDUCED ANY EVIDENCE BUT HAS MERELY EMPHASIS THAT SERVICES WERE PROVIDED TO HER BY THESE COMPANIES AND THE PAYMENT. THE EXPENDITURE CANNOT BE ALLOWED ONLY ON THE BASIS OF THE FACT THAT THE AMOUNT HAS BEEN PAID BY CHEQUE. HENCE, A DETAILED SHOW CAUSE NOTICE ENUMERATING THE ABOVE FINDINGS WAS ISSUED TO THE ASSESSEE ON 20.12.2011 ASKING HER TO S HOW CAUSE AS TO WHY THE COMMISSION OF RSAO, 90 ,800 / - SHOULD NOT BE DISALLOWED. HOWEVER, TILL DATE THE ASSESSEE HAS NOT SUBMITTED ANY REPLY . THUS, IT IS CLEAR THAT THE ASSESSEE HAS COMPLETELY FAILED TO PROVE THE EXPENDITURE IN THE FORM OF COMMISSION WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 12. FROM THE OVERALL CIRCUMSTANCES OF THE CASE, IT IS CLEAR THAT THE ASSESSEE UNDER THE GARB OF COMMISSION EXPENSES THE ASSEESSEE IS REDUCING ITS TAXABLE INCOME. FURTHER, THE PARTIES TO WHOM COMMISSION C HARGES ARE PAID ARE NOT PAYING ANY TAXES. ALSO, THE ASSEESSEE HAS COMPLETELY FAILED TO DISCHARGE THE ONUS OF PROVING THAT THE COMMISSION EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BSINESS. HENCE IN VIEW OF THE ABOVE THE COMMISS ION EXPENDITURE OF RSAO, 90 ,800/ - IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE . PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED SEPARATELY. 3. BEING AGGRIEVED, THE ASSESSEE HAS CHALLENGED THE ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 4. BEFORE THE LEARNED CIT(APPEALS) IT WAS VEHEMENTLY CONTESTED THAT THE AO HAS IGNORED FEW BASIC FACTS THAT THE COMMISSION WAS PAID TO THOSE PARTIES BY ACCOUNT PAYEE CHEQUES AND TDS WAS DEDUCTED AT SOURCE. IT WAS ALSO INFORMED TO LEARNED CIT(AP PEALS) THAT ALL THOSE PARTIES WERE INDEPENDENTLY 5 ITA NO. 261/NAG/2014 SUBJECT TO INCOME - TAX BY RESPECTIVELY FILING THEIR INCOME - TAX RETURNS. THE ASSESSEE HAS FURNISHED SUBMISSIONS BEFORE THE LEARNED CIT(APPEALS), ONLY A PORTION IS REPRODUCED BELOW : 5.1 THE APPELLANT IS AN IN DIVIDUAL, DOING BUSINESS UNDER THE NAME AND STYLE OF M/S S.R.S. ENGINEERS ENGAGED IN PROCURING MACHINERY AND OTHER INDUSTRIAL PRODUCTS INCLUDING ITS INSTALLATION ON CONTRACT / JOB WORK BASIS. THE APPELLANT IS ALSO WORKING AS A LIASIONING AGENT FOR M/S EMTICI AND HAS COMMISSION INCOME BESIDES BUSINESS INCOME FROM TRADING AND CONTRACT / JOB - WORKS. THE APPELLANT FILED HER RETURN OF INCOME ON 29.09.2009, DECLARING TOTAL INCOME OF RS. 3004,450/ - MAINLY FROM AFORESAID BUSINESS. THE REGULAR BOOKS OF ACCOUNT A RE MAINTAINED BY THE APPELLANT AND THE SAME ARE DULY AUDITED U/S 44AB OF THE INCOME TAX ACT, 1961. - - - - - - - - - - - - - - - - - - - - - 'AS REGARDS DETAILS OF SERVICES IT IS SUBMITTED THAT THE COMMISSION WAS RECEIVED FOR LIASIONING WORK IN MPSGLC KORADI AND OTHER ALLIED WORK AS PER NARRATION IN THE GENERAL ENTRY IN THE ACCOUNT OF SRS ENGINEERS' 'THAT THE ASSESSEE HEREBY STATES THAT COMMISSION RECEIVED FROM SRS ENGINEERS FOR LIASIONLNG WORK IN MSPGCL KHAPARKHEDA : A) SUBMISSION OF OFFERS B) FOLLOW UP WITH RESPECTIVE DEPARTMENT C) CONCURRENCE OF ORDERS D) FOR GETTING APPROVAL FOR MATERIAL SUPPLIED E) GETTING BILLS CLEARED FROM ACCOUNT SECTION F) CLEARANCE OF GOODS FROM TRANSPORTER G) FOR INSPECTION IN STORE H) COLLECTION OF 'C' FORM I) RELEASE OF EMD A ND SD' 4.1 ON EXAMINATION OF THE SUBMISSIONS AND AFTER A DETAILED DISCUSSION, LEARNED CIT(APPEALS) HAS ALLOWED THE CLAIM AFTER ASSIGNING THE FOLLOWING REASONS : 6. ON CAREFUL EXAMINATION OF THE FACTS, IT IS SEEN THAT THE APPELLANT IS IN THE BUSINESS OF PROCURING MACHINERY AND OTHER INDUSTRIAL PRODUCTS, INCLUDING ITS INSTALLATION ON CONTRACT/JOB WORK BASIS. THE APPELLANT HAS ALSO CLAIMED TO HAVE BEEN WORKING AS A LIA SIONING AGENT FOR M/S 6 ITA NO. 261/NAG/2014 EMTCI BESIDES INSTALLATION AND JOB WORK OF MACHINERY ON CONTRACT AND JOB WORK BASIS. THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS HAS EXAMINED THE MANAGING DIRECTORS OF COMPANIES TO WHOM THE APPELLANT HAS PAID COMMISSION. THE AO, HO WEVER, FOUND THAT THE MANAGING DIRECTORS OF RECIPIENT COMPANIES COULD NOT GIVE ANY PLAUSIBLE EXPLANATION AS REGARDS TO THE SERVICES RENDERED IN LIEU OF WHICH THE APPELLANT IS CLAIMED TO HAVE PAID COMMISSION. THE AO HAS ELABORATELY EXAMINED THE MANAGING DIR ECTORS SHRI WADHWANI U/S 131 OF THE ACT, HOWEVER, SHRI WADHWANI WHO IS DIRECTOR IN EIGHT COMPANIES AS DISCUSSED ABOVE, HAS NOT BEEN ABLE TO GIVE ANY PLAUSIBLE EXPLANATION AS REGARDS TO THE SERVICES RENDERED IN LIEU OF HAVING RECEIVED THE COMMISSION BY THE SAID EIGHT COMPANIES FROM THE APPELLANT. IT, HOWEVER, IS A FACT EMANATED FROM THE RECORDS THAT THE ENTIRE AMOUNT OF COMMISSION HAS BEEN PAID BY CHEQUE TO THE RECIPIENT PARTIES BY THE APPELLANT. IT IS ALSO UNDISPUTED THAT THE PARTIES TO WHOM COMMISSION HAS BEEN PAID ARE ASSESSED TO TAX AND THE RELEVANT DOCUMENTS AND PAPERS IN THIS REGARD SHOWING INCOME - TAX RECORDS OF THE RECIPIENT COMPANIES WERE FURNISHED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS ALSO PERUSED FROM THE RECORDS THAT THE DEPARTMENT THAT THE DEPARTMENT HAS ACCEPTED THE CLAIM OF THE APPELLANT IN THE PAST ASSESSMENT YEARS. THEREFORE, THE CLAIM OF THE APPELLANT AS REGARDS TO THE COMMISSION CANNOT HOLD TO BE TOTALLY UNJUSTIFIED. THE AR OF THE APPELLANT IN THE COURSE OF APPELLAT E PROCEEDINGS HAS FILED COPIES OF THE BALANCE SHEET AND TRADING AND PROFIT & LOSS ACCOUNT FOR THE RELEVANT FINANCIAL YEAR IN THE CASE OF THE APPELLANT. ON PERUSAL OF THE TRADING AND PROFIT & LOSS ACCOUNT, IT IS SEEN THAT THE TOTAL SALES DURING THE YEAR AR E RS. 5,42,37,979/ - AND THE GROSS PROFIT IS RS.1,52,34,572/ - . THE COMMISSION PAID DURING THE YEAR IS RS.40,90,800/ - WHICH CONSTITUTES 7% OF THE TOTAL TURNOVER OF THE APPELLANT FOR AY 2009 - 10, THE YEAR UNDER APPEAL. IT IS PERUSED FROM THE PAST ASSESSMENT RE CORDS OF THE APPELLANT THAT THE APPELLANT HAS PAID COMMISSION OF RS.17,34,912/ - (25%), RS.23,35,000/ - (14%), RS.37,33,075/ (20%) IN THE EARLIER ASSESSMENT YEARS 2006 - 07, 2007 - 08 & 2008 - 09 RESPECTIVELY, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. FURTHER TH AT, IN THE SUBSEQUENT ASSESSMENT YEAR 2010 - 11, THE APPELLANT HAS PAID THE COMMISSION OF RS.18,19,800/ - WHICH HAS ALSO BEEN ACCEPTED BY THE AO IN THE SCRUTINY ASSESSMENT COMPLETED U/S 143(3) WITHOUT ANY ADVERSE FINDING ON THE ISSUE OF PAYMENT OF COMMISSION RELATING TO THE BUSINESS OF THE ASSESSE AND THE SERVICES RENDERED TO THE APPELLANT BY SUCH RECIPIENT PARTIES. THUS, TAKING INTO CONSIDE R ATION THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE OF THE APPELLANT COUPLED WITH THE FACT THAT NOTHING CONTRARY HAS B EEN BROUGHT ON RECORD AS REGARDS TO THE PAYMENT OF COMMISSION BY THE LD. AO EXCEPT FORMING THE BELIEF ON THE MERE DEPOSITIONS OF THE MANAGING DIRECTORS OF THE RESPECTIVE RECIPIENT PARTIES, WHICH TO MY CONSIDERED OPINION , CANNOT BE TREATED TO BE THE SOLE B ASIS FOR DENIAL OF CLAIM FOR COMMISSION BY THE APPELLANT UNLESS THE SERVICES RENDERED BY RECIPIENT PARTIES ARE CONCLUSIVELY DISPROVED WITH MATERIAL DOCUMENTARY EVIDENCES. MOREOVER, THE COMMISSIONS PAID BY 7 ITA NO. 261/NAG/2014 THE APPELLANT TO THE PARTIES HAVE DULY BEEN OFFERED FOR TAXATION IN THEIR RESPECTIVE RETURNS OF INCOME FILED FOR THE RELEVANT YEARS, THOUGH THE PARTIES HAVE RECEIVED THE REFUND OF TDS DUE TO BROUGHT FORWARD LOSSES BUT THAT AGAIN CANNOT BE THE BASIS OF DISALLOWANCE OF COMMISSION. THE BOOKS OF ACCOUNT OF THE APPELLANT HAQVE DULY BEEN AUDITED AND PRODUCED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE BOOK RESULTS OF THE APPELLANT HAVE BEEN ACCEPTED WITHOUT POINTING OUT ANY INFIRMITY. THE APPELLANT HAS DULY MADE TDS ON THE PAYMENT OF COMMISSION TO THE PARTIES. IT IS ALSO SEEN FROM THE RECORDS THAT ADEQUATE OPPORTUNITY OF CROSS EXAMINATION HAS NOT BEEN CONFERRED UPON THE APPELLANT IN RESPECT OF THE MATERIAL EVIDENCES IN THE FORM OF STATEMENTS OF PARTIES RECORDED BY AO IN THE COURSE OF ASSESSMENT P ROCEEDINGS, WHICH HAVE BEEN USED BY THE LD. AO AGAINST THE APPELLANT. THE AR IN THE COURSE OF APPELLATE PROCEEDINGS HAS FILED ALL MATERIAL EVIDENCES IN SUPPORT OF HIS CLAIM, WHICH WERE AVAILABLE BEFORE THE LD. AO THE CONTENTION OF THE AO THAT THE RECIPIEN T PARTIES HAVE SET OFF THE COMMISSION INCOME AGAINST THE BROUGHT FORWARD LOSSES IS A MATTER OF INVESTIGATION IN THEIR CASES AND IF THE CLAIM IS GENUINE, SUCH SET - OFF IS ALLOWABLE AS PER LAW. THUS, UNLESS THE GENUINENESS OF SUCH BROUGHT FORWARD LOSSES IS PR OVED OTHERWISE IN THE RESPECTIVE HANDS OF SUCH RECIPIENT PARTIES, THE INFERENCE DRAWN BY THE LD. AO THAT SUCH PARTIES HAVE NOT PAID TAXES DOES NOT CARRY MUCH SUBSTANCE. IN VIEW THEREOF, THE ADDITION MADE BY AO ON ACCOUNT OF COMMISSION CANNOT BE UPHELD AND THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF COMMISSION IS DIRECTED TO BE DELETED. HENCE, THIS GROUND IS ALLOWED. 5. FROM THE SIDE OF THE REVENUE, LEARNED D.R. MR. RAJESH GAWALI APPEARED AND SUPPORTED THE ACTION OF THE AO BY STATING THAT THIS IS A CASE WHERE BOGUS PAYMENT OF COMMISSION WAS CLAIMED BY THE ASSESSEE. ACCORDING TO HIM, MERELY PAYMENT MADE BY CHEQUE IS NOT ENOUGH TO ALLOW THE CLAIM. THE ASSESSEE WAS NOT REQUIRED TO PAY COMMISSION TO THOSE PARTIES. IT WAS NOT AT ALL A BUSINESS REQUIREMENT AND THE ASSESSEE HAS ALSO FAILED TO ESTABLISH THE BUSINESS EXPEDIENCY. ACCORDING TO LEARNED D.R. THE ASSESSEE HAS NOT DEMONSTRATED THE KIND OF SERVICES RENDERED BY THOSE PARTIES. LEARNED D.R. HAS, THEREFORE, PLEADED THAT CONSIDERING THE STATEMENT RECORDED BY THE AO, HIS FINDINGS DESERVE TO BE CON FIRMED . 6. FROM THE SIDE OF THE RESPONDENT ASSESSEE, LEARNED A.R. MR. KAPIL HIRANI APPEARED AND SUPPORTED THE VIEW TAKEN BY THE LEARNED CIT(APPEALS) AND AGAIN PLEADED THAT THERE WAS NO DOUBT ABOUT THE PAYMENT OF COMMISSION BECAUSE THE 8 ITA NO. 261/NAG/2014 SAME WAS PAID THROUGH ACCOUNT PAYEE CHEQUES. SINCE THE PAYMENT OF COMMISSION WAS GENUINE, THEREFORE, THE ASSESSEE HAS ALSO DEDUCTED TDS AT SOURCE. LEARNED A .R. HAS INFORMED THAT WITHOUT THE HELP OF THOSE PARTIES THE ASSESSEE WAS NOT ABLE TO EARN THE COMMISSION INCOME WHICH WAS SUBSTANTIAL IN AMOUNT. THE PARTIES HAVE ALSO HELPED IN EARNING THE BETTER SALES DURING THE YEAR. THE TOTAL REVENUE GENERATED BY THE AS SESSEE FOR THE YEAR UNDER CONSIDERATION WAS TO THE TUNE OF RS.5,42,37,979/ - . THE GROSS PROFIT DECLARED WAS AT RS.1,52,34,572/ - . THEREFORE, THE COMMISSION PAID AMOUNTING TO RS.40,90,800/ - WHICH WAS DISALLOWED BY THE AO HAD IN FACT CONSTITUTED ONLY 7% OF THE TOTAL TURNOVER. LEARNED A.R. HAS ALSO PLEADED BEFORE US THAT THIS IS NOT THE FIRST YEAR IN WHICH THE ASSESSEE HAS CLAIMED THE COMMISSION. EVEN IN THE PAST I.E. IN EARLIER ASSESSMENT YEARS 2006 - 07, 2007 - 08 AND 2008 - 09 THE REVENUE DEPARTMENT HAD ACCEPTED TH E CLAIM OF PAYMENT OF COMMISSION ALTHOUGH IT WAS HIGHER IN PERCENTAGE THAN THE YEAR UNDER CONSIDERATION. LEARNED A.R. HAS ALSO INFORMED THAT IN THE SUBSEQUENT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2010 - 11 AN ORDER WAS PASSED U/S 143(3) OF THE I.T. ACT AND AFTER SCRUTINY OF THE CASE VIDE ORDER DATED 11 - 03 - 2013 NO SUCH DISALLOWANCE WAS MADE BY THE AO . HE HAS DRAWN OUR ATTENTION ON THE ORDER FOR ASSESSMENT YEAR 2010 - 11 TO DEMONSTRATE THAT THE TOTAL INCOME DECLARED WAS RS.38,68,110/ - AND AFTER NOMINAL DISALLOWA NCES SUCH AS PUJA EXPENSES, O FFICE EXPENSES, ADMINISTRATIVE EXPENSES ETC. THE INCOME WAS FINALLY ASSESSED AT RS.44,75,627/ - . LEARNED A.R. HAS, THEREFORE, STRONGLY PLEADED BEFORE US THAT THE VIEW TAKEN BY LEARNED CIT(APPEALS) DESERVES TO BE AFFIRMED. 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED. THE COMPILATION CONSISTED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND THE DETAILS OF THE COMMISSION PAID AS WELL A S THE NATURE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE IS STATED TO BE WORKING AS A LAISIONG AGENT FOR EMTICI ENGG. LTD. THE ASSESSEE 9 ITA NO. 261/NAG/2014 IS ALSO DERIVING INCOME BY TRADING IN MACHINERY AND OTHER INDUSTRIAL PRODUCTS. THE CLAIM OF THE ASSESSEE IS THAT TO RUN TH E BUSINESS EFFICIENTLY THE ASSESSEE WAS REQUIRED TO PAY THE COMMISSION TO CERTAIN PARTIES HAVING CONTACT WITH THOSE PARTIES. THE PARTIES ARE HELPING IN FOLLOW UP WITH CERTAIN DEPARTMENTS AND TO GET APPROVAL OF THE MATERIAL SUPPLIED. THESE PARTIES HAVE ALS O HELPING THE ASSESSEE FOR CLEARANCE OF THE GOODS AS WELL AS CLEARANCE OF THE BILLS. UNDISPUTEDLY THE ACCOUNTS OF THE ASSESSEE HAVE ALSO DEMONSTRATED THAT THE PAYMENTS IN QUESTION WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THEREFORE, AS FAR AS THE IDENTITY O F THOSE PARTIES WERE CONCERNED, THE SAME WAS NOT IN DOUBT. RATHER SOME OF THE PARTIES HAVE ALSO APPEARED BEFORE THE AO AND DULY CROSS EXAMINED. FACTS OF THE CASE HAVE FURTHER REVEALED THAT THE TDS WAS DEDUCTED ON PAYMENT OF COMMISSION WHICH WAS DULY REFLEC TED BY THOSE PARTIES IN THEIR RESPECTIVE INCOME - TAX RETURNS. 7.1 IN THE LIGHT OF THE ABOVE FACTUAL POSITION WE HAVE PERUSED THE ORDER OF THE LEARNED CIT(APPEALS) NOW CHALLENGED FROM THE SIDE OF THE REVENUE AND EXAMINED HIS FINDINGS ON FACTS. IT WAS RECOR DED INTER ALIA THAT THE CLAIM OF PAYMENT OF COMMISSION WAS DULY ACCEPTED BY THE REVENUE DEPARTMENT IN THE PAST ASSESSMENT YEARS. HE HAS ALSO RECORDED A FINDING THAT COMPARING TO THE PERCENTAGE OF COMMISSION CLAIMED IN THE PAST YEARS, THE ASSESSEE HAD CLAIM ED ONLY 7% COMMISSION OF THE TOTAL TURNOVER OF THE ASSESSEE. LEARNED CIT(APPEALS) HAS ALSO RECORDED A FINDING THAT EVEN IN THE SUBSEQUENT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2010 - 11 THE ASSESSEE HAD PAID COMMISSION OF RS.18,90,800/ - WHICH WAS NOT DISTURBE D BY THE ASSESSEE ALTHOUGH THE ASSESSMENT WAS COMPLETED AFTER SCRUTINY U/S 143(3) BY THE AO. THE COMPILATION PLACED BEFORE US CONTAINED THE COPY OF THE SAID ORDER. 7.2 THEREFORE, UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE SPECIALLY WHEN NO FURTHER CONTRARY MATERIAL HAS BEEN PLACED BY THE REVENUE 10 ITA NO. 261/NAG/2014 DEPARTMENT TO CONTRADICT THE FACTUAL FINDING OF LEARNED CIT(APPEALS) , WE HAVE NO OPTION BUT TO AFFIRM THOSE FINDINGS. RATHER IN SUCH CIRCUMSTANCES WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE FINDINGS OF LEARNED CIT(APPEALS). AS A RESULT, THE SAME ARE HEREBY CONFIRMED. THIS GROUND OF THE REVENUE IS, THEREFORE, DISMISSED. 8. GROUND NO. 2: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE DISALLO WANCE OF CONTRACT EXPENSES OF RS.31,23,989/ - AND JOB WORK EXPENSES OF RS.27,12,026/ - CLAIMED BY THE ASSESSEE TO BE ON ACCOUNT OF INSTALLATION AND COMMISSIONING OF MACHINERY SOLD, WHEN THE ENQUIRIES CONDUCTED BY THE AO WHILE FINALIZING THE ASSESSMENT TRANSP IRED THAT THE GOODS SUPPLIED BY THE ASSESSEE WERE ONLY SUPPLY ITEMS AND THEY DID NOT REQUIRE ANY SERVICES WITH REGARD TO INSTALLATION AND COMMISSIONING. THE AO HAS LISTED THE PARTIES TO WHOM THE ASSESSEE HAD MADE PAYMENT UNDER THE HEAD CONTRACT EXPENSES AND UNDER THE HEAD JOB WORK CHARGES. THE ASSESSEE HAS SUPPORTED THE CLAIM OF EXPENDITURE AS PER FOLLOWING REPLY: 1) THAT THE ASSESSEE SUPPLIES THE MACHINERY AND EQUIPMENTS TO CUSTOMERS WHICH REQUIRES THE SERVICES OF INSTALLATIONS. 2) THAT THE ASSESSEES CO NTRACT WORK INCLUDES PROVIDING MANPOWER, MACHINERY AND ACCESSORIES ALONG WITH EQUIPMENT, TOOLS, AND TACKLES REQUIRED FOR INSTALLATION, SYNCHRONIZING AND COMMISSIONING AT SITE, PAID ON CONTRACT BASIS. 3) THAT THE ASSESSEES JOB WORK INCLUDES PROVIDING SERVICES OF INSTALLATION AND COMMISSIONING AT SITE, PAID ON JOB WORK BASIS. 8.1 THE AO HAD ISSUED NOTICES U/S 133(6) TO THOSE PARTIES TO WHOM JOB WORK AND CONTRACT CHARGES WERE PAID. THE AO HAS ALSO ISSUED SUMMONS U/S 131. ACCORDING TO THE AO NO COMPLIANCE WAS MADE. FURTHER INVESTIGATIONS HAVE BEEN MADE AND THEREAFTER THE AO HAD ARRIV ED AT A CONCLUSION THAT THE PAYMENTS WERE NOT GENUINE AS THERE WAS NO REQUIREMENT OF ANY SUCH SERVICES IN RESPECT OF THE MACHINERY SUPPLIED BY THE ASSESSEE, THEREFORE, NOT A GENUINE CLAIM. JOB 11 ITA NO. 261/NAG/2014 WORK EXPENDITURE OF RS.27,12,026/ - AND THE CONTRACT EXPENSES OF RS.31,23,898/ - WERE DISALLOWED. 9. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(APPEALS) HAS GRANTED RELIEF IN THE FOLLOWING MANNER: 7.9 ON CAREFUL EXAMINATION OF THE FACTS, IT IS SEEN THAT THE SOLE BASIS ADOPTED BY HE AO TO DISALLOW THE JOB WORK CHARGES IS THE STATEMENT OF SHRI DATTARAY V. KATHALE, EXECUTIVE ENGINEER, CSTPS, URJANAGAR, CHANDRAPUR, WHO IN HIS STATEMENT RE CORDED U/S 131(1)(D) HAS DEPOSED THAT THE ITEMS SUPPLIED BY THE APPELLANT TO THE PARTIES TO WHOM THE JOB WORK CHARGES HAVE BEEN PAID DO NOT REQUIRE ANY INSTALLATION AND COMMISSIONING. THE APPELLANT HAS PAID JOB - WORK CHARGES OF RS.27,12,026/ - TO FIVE DIFFERENT PARTIES. THE AO HAS DISALLOWED THE CLAIM OF THE APPELLANT MAINLY ON TWO REASONS. FIRSTLY, THAT S OME OF THE PARTIES HAVE NOT RESPONDED TO THE NOTICES ISSUED U/S 133(6) AND SECONDLY, ON THE BASIS OF SHRI DATTARAY V. KATHALE, EXECUTIVE ENGINEER, CSTPS, URJANAGAR, CHANDRAPUR, WHO IN HIS STATEMENT RECORDED U/S 131(1)(D) OF THE ACT HAS STATED THAT THE ITEM S SUPPLIED BY THE APPELLANT DO NOT REQUIRE ANY INSTALLATION OR COMMISSIONING. IT IS SEEN FROM RECORDS THAT M/S NEXGEN ENGINEERS TO WHOM THE APPELLANT HAS PAID JOB - WORK CHARGES OF RS.8,45,951/ - HAS CONFIRMED THE RECEIPT OF SUCH CHARGES, HOWEVER, NO COGNIZAN CE OF THE SAME HAVE BEEN TAKEN BY THE LD. AO AND THE AMOUNT PAID TO THIS PARTY WAS ALSO DISALLOWED DESPITE REPLY RECEIVED. FURTHER, THE STATEMENT OF SHRI D.V. KATHALE, THE EXECUTIVE ENGINEER, CHANDRAPUR WAS RECORDED IN THE ABSENCE OF THE APPELLANT AND NO O PPORTUNITY OF CROSS EXAMINATION WAS CONFERRED ON THE APPELLANT TO REBUT THE STATEMENT GIVEN BY HIM, WHICH WAS USED AGAINST THE APPELLANT IN ISOLATION, WITHOUT THE KNOWLEDGE OF THE APPELLANT. THEREFORE, THE RATIO OF THE DECISION RELIED UPON BY THE APPELLANT IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. VS. CIT 26 ITR 775 (SC) IS APPLICABLE TO THE FACTS OF THE PRESENT APPELLANT. THOUGH, THE AO ASKED THE APPELLANT TO PRODUCE AN OFFICIAL FROM MSEB/MSPGCL TO EXPLAIN THE NEED OF INSTALLATION AND COMMISSIONING OF I NDUSTRIAL PRODUCT SUPPLIED BY THE APPELLANT BUT SINCE THERE WAS A MARRIAGE IN THE FAMILY OF THE APPELLANT AND ALSO THAT IT WAS NOT MANDATORY ON THE PART OF THE APPELLANT TO PRODUCE A GOVERNMENT OFFICIAL, ON SUCH A SHORT NOTICE, BUT THE LD. AO PROCEEDED TO MAKE THE DISALLOWANCE FOR WANT OF COMPLIANCE AFTER TAKING INTO CONSIDERATION THE STATEMENT MADE BY SHRI KATHALE , EXECUTIVE ENGINEER, CHANDRAPUR. IN THIS REGARD, THE OBJECTION RAISED BY THE APPELLANT THAT SHRI KATHALE, IS AN OFFICER OF CSTPS, URJANAGAR, CH ANDRAPUR AND IS NOT TECHNICAL OFFICER 12 ITA NO. 261/NAG/2014 FROM MSPGCL, COUPLED WITH THE FACT THAT NO COPY OF STATEMENT RECORDED WAS PROVIDED TO THE APPELLANT. THEREFORE, THE RATIO LAID DOWN IN THE JUDICIAL DECISION RELIED UPON BY THE APPELLANT ARE APPLICABLE TO THE APPELLANT S CASE SO FAR AS THE QUESTION OF PROVIDING AN ADEQUATE OPPORTUNITY OF BEING HEARD IS CONCERNED. 7.10 THE APPELLANT HAS ALSO MADE THE CONTRACT EXPENSES OF R.31,23,898/ - AND THE PAYMENTS HAVE BEEN MADE BY A/C PAYEE CHEQUE, AFTER MAKING TDS ON THE SAME. OUT OF THREE PARTIES TO WHOM THE APPELLANT HAS PAID THE CONTRACT CHARGES, SHRI DILIP SHAHANE, PROP.L OF M/S DILIP FABRICATORS, ATTENDED IN RESPONSE TO NOTICE U/S 133(6) AND CONFIRMED OF HAVING DONE THE WORK FOR THE APPELLANT. THE DIRECTOR OF M/S JAWAHAR THEATR ES PVT. LTD. TO WHOM THE APPELLANT HAS PAID THE CONTRACT CHARGES OF RS.10,65,424/ - HAS ALSO ATTENDED IN RESPONSE TO NOTICE U/S 133(6) AND HIS STATEMENT WAS RECORDED BY THE AO. IN RESPECT OF THIRD MUMBAI BASED PARTY VIZ., M/S RELIABLE METAL WORKS, TO WHOM T HE APPELLANT HAS PAID THE JOB WORK CHARGE OF RS.20,08,474/ - , THE NOTICE U/S 133(6) COULD NOT BE SERVED, THE AO INFERRED THAT THE SAID PARTY DOES NOT EXIST. THE AR HAS STRONGLY OBJECTED THAT INFERENCE DRAWN MERELY BY REASON OF NON - SERVICE OF NOTICE IS NOT J USTIFIED ON THE PART OF THE AO TO ARRIVE AT THE CONCLUSION THAT THE PAYMENT MADE IS NOT GENUINE. 8. IT IS A FACT EMANATED FROM RECORDS THAT THE PAYMENTS IN QUESTION HAVE BEEN MADE BY A/C PAYEE CHEQUE AND TDS HAS DULY BEEN MADE ON THE SAME IN RESPECT OF BO TH THE JOB - WORK CHARGES AND CONTRACT EXPENSES BY THE APPELLANT. THE JOB WORK CHARGES AND CONTRACT EXPENSES PAID BY THE APPELLANT TO THE PARTIES HAVE DULY BEEN OFFERED FOR TAXATION IN THEIR RESPECTIVE RETURNS OF INCOME FILED FOR THE RELEVANT YEARS. THE BOOK S OF ACCOUNT OF THE APPELLANT HAVE DULY BEEN AUDITED AND PRODUCED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE BOOK RESULTS OF THE APPELLANT HAVE BEEN ACCEPTED WITHOUT POINTING OUT ANY INFIRMITY IN THE BOOKS. OUT OF THREE PARTIES TO WHOM T HE APPELLANT HAS PAID THE JOB WORK CHARGES, TWO PARTIES HAVE COMPLIED WITH THE STATUTORY NOTICES AND APPEARED BEFORE THE AO. HOWEVER, THE THIRD MUMBAI BASED PARTY COULD NOT COMPLY WITH THE STATUTORY NOTICE FOR WANT OF SERVICE. THE CONTENTION OF THE APPELLA NT THAT NO COGNIZANCE HAVE BEEN TAKEN BY THE AO IN RESPECT OF PARTIES, WHO HAVE APPEARED IN RESPONSE TO THE STATUTORY NOTICES AND CONFIRMED OF HAVING RECEIVED THE JOB - WORK AND CONTRACT CHARGES FROM THE APPELLANT CARRIES MUCH SUBSTANCE. THE JOB WORK CHARGES AND THE CONTRACT EXPENSES OFFERED BY THE RECIPIENT PARTIES IN THEIR RESPECTIVE RETURNS HAVE BEEN ACCEPTED BY THE DEPARTMENT. 1) THAT THE ASSESSEE SUPPLIES THE MACHINERY AND EQUIPMENT TO 13 ITA NO. 261/NAG/2014 CUSTOMERS WHICH REQUIRES THE SERVICES OF INSTALLATIONS. 2) THAT THE ASSESSEES CONTRACT WORK INCLUDES PROVIDING MANPOWER, MACHINERY AND ACCESSORIES ALONGWITH EQUIPMENT, TOOLS, AND TACKLES REQUIRED FOR INSTALLATION, SYNCHRONIZING AND COMMISSIONING AT SITE, PAID ON CONTRACT BASIS. 3) THAT THE ASSESSEES JOB WORK INCLUDES P ROVIDING SERVICES OF INSTALLATION AND COMMISSIONING AT SITE, PAID ON JOB WORK BASIS. 8.1 THEREFORE, TO MY CONSIDERED OPINION THERE IS NO JUSTIFICATION TO DISALLOW THE ENTIRE JOB WORK CHARGES AND CONTRACT EXPENSES BY THE AO IN THE ABSENCE OF EVIDENCE TO T HE CONTRARY BROUGHT ON RECORD, EXCEPT THE STATEMENTS OF THE PARTIES WHICH CANNOT BE CONSIDERED TO BE THE SOLE AND CONCLUSIVE EVIDENCE TO DISPROVE THE PAYMENTS MADE MORE PARTICULARLY WHEN OPPORTUNITY OF CROSS EXAMINATION IS NOT GIVEN TO THE APPELLANT TO FIL E HIS REBUTTAL IN THE MATTER COUPLED WITH THE FACT THAT COGNIZANCE OF PARTIES WHO CONFIRMED THE WORK DONE AND PAYMENT RECEIVED IS OMITTED TO HAVE BEEN TAKEN INTO CONSIDERATION. IN VIEW THEREOF, THE DISALLOWANCE OF JOB WORK CHARGES AND CONTRACT EXPENSES ARE DIRECTED TO BE DELETED. HENCE, THIS GROUND IS ALLOWED. 10. AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES AND CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE LEARNED CIT(APPEALS) HAS DISCUSSED THE ISSUE AT LENGTH AND CAREFULLY EXAMINED THE FACTS OF THE CASE. IN THE FOREGOING PARAGRAPHS WE HAVE EXPRESSED OUR OPINION, THEREFORE, ON THE SAME LINES WE HEREBY HOLD THAT NO INTERFERENCE IS REQUIRED IN THE FACTUAL FINDING OF LEARNED CIT(APPEALS). THE SAME ARE HE REBY CONFIRMED AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. ORDER PRODUCED IN THE OPEN COURT ON THIS 25 TH DAY OF FEBRUARY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR , DATED: 25 TH FEBRUARY, 2016. 14 ITA NO. 261/NAG/2014 COPY FORWARDED TO : 1. SMT. SHEIFALI ANIL MALVIYA, RAMAYAN, RAJ NAGAR, KATOL ROAD, NAGPUR - 440013. 2. A.C.I.T., CIRCLE - 2, NAGPUR. 3. C.I.T., NAGPUR. 4. CIT(APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE. ASSISTANT REGISTRAR, ITAT, NAGPUR