THE DCIT, 1(1), Indore V. M/S. MODERN LABORATORIES, Indore

ITA 277/IND/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2190 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S DESHPANDE
• Assessee Lawyers: MOHD JAVED
• Keywords: Unexplained cash credit; Depreciation; Question of law; Accommodation entries; Assessment record
• Section: 133(6); 68

Judgement Text

DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 1 OF 29 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .. , ..!, #$ # % BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER 1. DCIT 1(1) INDORE 2. MODERN LABORATORIES 45 SECTOR 45, SECTOR D-2, SANWER ROAD , INDUSTRIAL AREA INDORE PAN: .#..: AACFM5920B V. 1. MODERN LABORATORIES 45 SECTOR 45, SECTOR D-2, SANWER ROAD , INDUSTRIAL AREA INDORE PAN: .#..: AACFM5920B 2.DCIT 1(1) INDORE ' / // / APPELLANT ()' / // / RESPONDENT ' * # / // / APPELLANT BY SHRI S.S. DESHPANDE, CA ()' * # / // / RESPONDENT BY SHRI MOHD. JAVED, SR. D.R. + !,- * $ / DATE OF HEARING 11-07-2017 ./012 * $ / PRONOUNCED ON 10 -08-2017 #3 / // / O R D E R PER O.P.MEENA, ACCOUNTANT MEMBER. 1. THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 29 JA NUARY 2014 OF THE COMMISSIONER OF INCOME-TAX (APPEAL)-I, INDORE F OR THE ASSESSMENT YEAR 2008-09. . .. . . .. . ./ ./ ./ ./ I.T.A. NO.277 & CO.16/IND/2014 ! ,2 / // / ASSESSMENT YEAR:2008-09 DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 2 OF 29 2. GROUND NO. (I) OF REVENUE RELATES TO DIRECTION OF RESTRICTION TO 50% OF COMMISSION EXPENSES OF RS. 63,82,160/- BY THE LD. CIT (A). WHEREAS BY GROUND N O. 1 IN CROSS OBJECTION, OF THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF 50% COMMISSION EXPENSES AT RS. 31,91,080/-, EVEN THOUGH, IT WAS PROVED BEFORE CIT (A) THAT THE COMMISSION TO SHAFA A. M. CONSULTANTS WAS PAID AS BUSINESS EXPEDIENCY AND CONFIRMATION WAS DULY FILED . 3. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE IS IN THE BUSINES S OF MANUFACTURING AND SALES OF PHARMACEUTICALS PRODUCTS AND AROUND 95% SALES IS TO GOVERNMENT DEPARTMENTS. THE ASSESSEE SUPPLIES GOODS TO M. P. LAGHU UDHYOG NIGAM (MPLUN). THE ASSESSEE HAS DEBITED COMMISSION EXPENDITURE OF RS. 63,82,162 AND RS. 27,57557 UNDER THE HEAD COMMISSION ON SALES AND MPLUN COMMISSION RESPECTIVELY TO PROFIT & LOSS ACCO UNT. THE AO WAS OF THE VIEW THAT THERE IS NO SCOPE OF ANY MIDDL EMEN FOR GIVING ASSIGNMENT OF PURCHASE OF MEDICINES TO THE STATE GO VERNMENT DEPARTMENTS. THE AO THEREFORE, ALLOWED COMMISSION PAYMENTS TO MPLUN AND DISALLOWED THE ENTIRE COMMISSION PAYME NTS PAID TO OTHER AGAINST OF RS. 63,82,162 ON THE GROUND THA T MIDDLEMEN IS NOT ALLOWED IN SALES AND PRODUCTS MADE TO GOVERN MENT AGENCIES, AS GOVERNMENT TAKES SERIOUS VIEW OF THE S AME. THE AO DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 3 OF 29 ALSO OBSERVED THAT NO EXPLANATION WAS OFFERED AS RE GARDS THE SERVICE RENDERED BY SUCH COMMISSION AGENTS. THE AO NOTED THAT SOME STATE GOVERNMENT HAVE ASSIGNED THE TASK OF CAR RYING OUT ANY FORMALITIES RELATING TO PURCHASE TO GOVERNMENT BODY, LIKE MPLUN IN THE CASE OF GOVERNMENT OF MP. THIS ASPECT MAKES IT CLEAR EVEN IF ANY COMMISSION IS REQUIRES TO BE PAID IT GOES TO COFFERS OF A GOVERNMENT AGENCY ONLY OF WHICH BOOKS OF ACCOUNTS ARE SUBJECT TO AUDIT BY THE C&AG. AS PER AGREEMENT EXECUTED BETWEEN THE ASSESSEE AND MPLUN, WHICH IS SUBMITTED ONLY IN RESPECT OF ONE CONTRACT, SHOWS THAT MPLUN CHARGES 1 % SERVICE CHARGE +12% SERVICE TAX AND 1% ON INSPECTION CHARGE + 12% SERVICE TAX. ACCORDINGLY, THE AGGREGATE CHARGE PAYA BLE TO MPLUN WORKED OUT TO 2.24% OF THE SUPPLY AMOUNT. THE AO WA S OF THE VIEW THAT SAME HOLD GOOD TO DIFFERENT DEPARTMENTS O F GOVERNMENT OF MP THROUGH MPLUN. THE AO FOUND THAT THERE IS EXO RBITANT COMMISSION PAYMENTS VARYING FROM 0.5% TO 25% SHOWN IN RESPECT OF SOME PARTIES. THE AO NOTED THAT COMMISSI ON PAYMENTS OF RS. 24,14,034 TO M/S. SHAFA-E-AM CONSULTANTS, DE LHI RELATES TO SUPPLY OF GOODS TO DIRECTOR OF HEALTH SERVICES, GUWAHATI, DIRECTOR OF ANIMAL HUSBANDRY, DELHI, MEDICAL OFFICE R DELHI, MEDICAL SUPERINTENDENT, DELHI, SUPERINTENDENT HEALT H SERVICES, DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 4 OF 29 DIBRUGARH AND SILCHAR IN ADDITION TO SOME PRIVATE PARTIES. THE COMMISSION RANGING FROM 6% TO 25% IN CASE OF GOVERN MENT SUPPLY WHEREAS IN CASE OF PRIVATE PARTIES IT RANGIN G FROM 5, 8, AND 10%. IN CASE OF NAV ENTERPRISE, COMMISSION SHOW N @5% ON ONE OCCASION AND ON OTHER OCCASION IT IS 10%. FURTH ER, THE ASSESSEE HAS NOT FURNISHED COPY OF LEDGER ACCOUNT A ND DETAILS OF INTERMEDIATE GOVERNMENT BODIES LIKE MPLUN IN RESPEC T OF OTHER STATES. IN VIEW OF THESE FACTS, THE AO HOLD THAT CO MMISSION PAID IS NOTHING BUT ENTRY TO MINIMIZE THE INCIDENCE OF T AX. IN CASE OF MS. LEENA MOHANTY, BHUBNESHWAR THROUGH WHICH SUPPLY TO DY. DIRECTOR MEDICAL HEALTH SERVICES AT DIFFERENT PLACE S OF ORISSA TO WHOM COMMISSION RATE IS SHOWN AT 4% TO 11% AND TO D Y. DIRECTOR OF MEDICAL HEALTH SERVICES, BALASOR ON WHI CH DIFFERENT RATE OF COMMISSION OF 9% TO 11% IS CHARGED. THE AO FURTHER NOTED THAT THERE WERE CERTAIN INFIRMITIES LIKE BILL OF PREVIOUS YEAR DEBITED IN THIS YEAR AND BILLS WERE NOT TALLYING WI TH TDS CERTIFICATES AND THERE WAS HUGE VARIATION FROM 1% TO 25%. ACCORDINGLY, THE AO DISALLOWED THE ENTIRE COMMISSIO N OF RS. 63,82,162 CLAIMED IN RESPECT OF COMMISSION TO OTHER AGENTS. 4. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT (A). THE ASSESSEE FILED DETAILS SUBMISSIONS BE FORE THE CIT (A) DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 5 OF 29 WHICH ARE REPRODUCED BY THE CIT (A) AT PARA 2 ON PA GE NO 2 TO 6 OF HIS ORDER. THE CIT (A) HAS ALSO CALLED FOR REMAN D REPORT FROM THE AO ON THIS ISSUE. AFTER CAREFUL CONSIDERATION , THE CIT (A) OBSERVED THAT IT EMERGES THAT THE APPELLANT IS INTO BUSINESS OF MANUFACTURING AND SALES OF PHARMACEUTICALS PRODUCTS , WHERE SELLING IS ENTIRELY BASED ON CANVASSING DONE BY SEL LING AGENTS. HENCE, EXISTENCE OF SELLING AGENTS IS REALITY IS SU CH BUSINESS AND THIS IS PROVED FROM THE FACTS THAT ALL THESE PARTIE S ARE UNRELATED TO THE APPELLANT AND EACH ONE OF THEM HAVE CONFIRM ED TO THE AO THAT THEY WERE WORKING AS AGENTS TO THE APPELLANT T HE CIT (A) FURTHER OBSERVED THAT SUCH COMMISSION AGENTS ARE NO T MIDDLEMEN AS SO FAR NO PROOF HAS BEEN ADDUCED BY TH E AO THAT OUT OF SUCH PAYMENTS TO AGENTS ANY GRATIFICATION WA S PAID TO GOVERNMENT DEPARTMENTS FOR PROCURING SUCH ORDERS. B UT THESE COMMISSION PAYMENTS WERE FOR HELPING TO THE APPELLA NT FOR FILING VARIOUS TENDERS , PURSUING THE AUTHORITIES FOR PLAC EMENT OF ORDERS, HELPING IN SMOOTH SUPPLY OF GOODS AND RECOV ERY OF MONIES FROM THE GOVERNMENT. MPLUN ONLY DOING THE TENDERING JOB. BUT THE PRE TENDER AND POST TENDER ACTIVITY CAN VERY WE LL BE DONE BY THE COMMISSION AGENTS AS HELD IN THE CASE OF NESTOR PHARMACEUTICALS (P.) LTD. [2010] 33 DTR 293(DEL), B HARAT MEDICAL DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 6 OF 29 STORES [2009] 308 ITR 373(P&H) AND VOLTAMP TRANSFOR MERS PVT. LTD. [1981] 129 ITR 105 (GUJ). THIS EXPLAIN THE ROL E OF COMMISSION AGENTS IN GOVERNMENT CONTRACT AND DESCRI BES THE DETAILS OF SERVICE RENDERED BY THEM IN SUCH CONTRAC TS. ON MERITS, THE CIT (A) OBSERVED THAT THERE IS MISMATCH IN THE CASE OF M/S. APEX PHARMACEUTICALS, BHOPAL REGARDING BILLS AND TD S AND VARIATION OF COMMISSION PAYMENTS FROM 1% TO 25%. TH E APPELLANT EXPLAINED THAT THOUGH THE BILLS MAY PERTAINS TO EAR LIER YEAR BUT PAYMENT IS MADE DURING THE CURRENT YEAR, BUT THAT C OULD NOT BE VALID EXPLANATION AS THE ASSESSEE FOLLOWS MERCANTIL E SYSTEM OF ACCOUNTING. WITH REGARD TO HIGHER AMOUNT OF COMMISS ION, THE CIT (A) OBSERVED THAT THE APPELLANT HAS EXPLAINED THAT IT WAS PAID BECAUSE SUPPLIES WERE MADE IN REMOTE AREAS/ LOCATIO N AND DIFFERENT AGENCIES WERE INVOLVED AND IN SUCH SITUAT ION IT WAS NOT PRACTICALLY POSSIBLE TO MANGE AFFAIRS BY HIMSELF. B ESIDE, SOME LONG PENDING RECOVERIES WERE MADE FROM REMOTE LOCAT ION. BUT THE APPELLANT HAS FAILED TO PROVED SPECIFIC DETAILS AS TO WHAT WAS THE AMOUNT OF RECOVERY FROM THESE REMOTE AREAS WAS COLL ECTED. BESIDE IT WAS NOTICED THAT OUT OF TOTAL 20 COMMISSION AGEN TS COMMISSION WAS PAID RANGING BETWEEN 1% TO 5% IN CASE OF 16 CO MMISSION AGENTS , IN RESPECT OF 4 COMMISSION AGENTS NAMELY S HAFA- E-AM DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 7 OF 29 CONSULTANTS, MS. CHANCHAL JAIN, MR. RK JAIN, MS. LE ENA MOHANTY, COMMISSION RATE WAS RANGING AS HIGH UP TO 25%. NO SATISFACTORY EXPLANATION AND SPECIFIC DETAILS GIVEN AS TO WHAT SERVICE RENDERED BY THESE 4 COMMISSION AGENTS AND H OW THEY WERE SUPERIOR TO SERVICES RENDERED BY 16 COMMISSION AGENTS. CONSIDERING THESE FACTS, THE LD. CIT (A) HAS DISALL OWED 50% COMMISSION EXPENSES OUT OF RS. 63,82,160 AS CLAIMED BY THE APPELLANT. THUS, RELIEF OF RS. 31,91,080 WAS ALLOWE D ON THIS ACCOUNT. 5. BEING DISSATISFIED WITH RELIEF OF 50% OUT OF COMMIS SION PAYMENTS, THE REVENUE HAS FILED THIS APPEAL BEFORE US AND THE ASSESSEE HAS AGGRIEVED AGAINST THE SUSTENANCE OF 50 % DISALLOWANCE THROUGH CROSS OBJECTION. THE LD. SR. DR SUBMITTED THAT THE ASSESSEE IS SUPPLYING DRUGS THROUGH NODAL AGENCY MPLUN. THE COMMISSION PAYMENTS TO MPLUN WAS ALLOWED BY THE AO WHILE COMMISSION PAYMENTS TO OTHER PRIVATE PARTI ES WAS DISALLOWED AS THERE WAS NO SYSTEM KEEPING MIDDLEMA N IN SUPPLY TO GOODS TO GOVERNMENT DEPARTMENTS. THE LD. SR. D.R . CONTENDED THAT THE LD. CIT (A) HAS ACCEPTED THAT THE COMMISSI ON PAYMENTS TO 16 PARTIES WAS IN THE RANGE OF 1% TO 5% WHEREAS COMMISSION PAYMENTS TO 4 COMMISSION AGENTS WAS IN THE RANGE UP TO 25%. DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 8 OF 29 FURTHER, THE ASSESSEE WAS UNABLE TO PROVE THAT WHAT TYPE OF SERVICES WERE RENDERED BY THESE AGENTS. THEREFORE, THE LD. CIT (A) WAS NOT JUSTIFIED IS ALLOWING DEDUCTION OF 50% OUT OF TOTAL COMMISSION PAYMENTS. THE LD. SR. D.R. ALSO RELIED I N THE CASE OF DCIT V. SHRI NAUTMAL & SONS I.T.A. NO. 78/IND/2013 DATED 19- 07-2013 [INDORE-TRIBUNAL] WHEREIN SUCH EXORBITANT C OMMISSION PAYMENTS AT THE RATE OF 20% ALLOWED BY THE CIT (A) WAS SET-ASIDE TO THE FILE OF THE AO BY THE TRIBUNAL. THE LD. SR. D.R. FURTHER PLACE RELIANCE IN THE CASE OF DCIT V. MCDOWELL & CO LTD. [2007] 291 ITR 0107 (KARN) WHEREIN DISALLOWANCE OF COMMISS ION PAYMENTS FOR PROVIDING SERVICE OF SALE OF LIQUOR T O CANTEEN STORES DEPARTMENT OF INDIAN MILITARY BY THE ASSESSEE COMP ANY WAS UPHELD ON THE GROUND THAT SUCH CANVASSING WAS PROHI BITED BY THE GOVERNMENT CIRCULAR DTD. DTD. 13 TH JULY 1992 AND 24 TH JULY 1992. 6. ON THE OTHER HAND, THE LD. D.R. OF THE ASSESSEE SUB MITTED THE ASSESSEE SUPPLIES GOODS TO VARIOUS GOVERNMENT D EPARTMENT LIKE MPLUN, WHO IS AUTHORIZED TO PUT ORDERS FOR PUR CHASE OF GOODS ON BEHALF OF THE GOVERNMENT OF MADHYA PRADESH . FOR THE PURPOSE OF FLOATING TENDERS AND PLACING ORDERS FOR WHICH MPLUN CHARGE THE SERVICE CHARGE @ 2.24% AND FURTHER CHARG ES 5% FOR DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 9 OF 29 THE PERFORMANCE GUARANTEE. FOR FILING OF TENDERS, S UPPLY AND APPROVAL OF THE GOODS TO THE GOVERNMENT BODIES AND ESPECIALLY FOR THE RECOVERY OF THE AMOUNTS, THE ASSESSEE ENGAGES THE AGENCIES AND PAYS COMMISSION TO THEM. THE COMMISSION PAID TO SUCH AGENCIES RANGES APPROXIMATELY 7% TO 10%. FOR SOME L OCAL SALES COMMISSION IS PAID BETWEEN 1% TO 3%. IN SOME HARD C ASES, THE COMMISSION HAS BEEN PAID UP TO 18%. THE SUPPLIES AR E MADE NOT ONLY TO MP GOVERNMENT BODIES BUT TO OTHER STATE GOV ERNMENT BODIES ALSO. THE ASSESSEE HAD FILED COMPLETE DETAIL S OF COMMISSION AGENTS WITH PAN AND SALES EFFECTED THRO UGH THEM(PB34) THE DETAILS OF COMMISSION PAYMENT PARTY- WISE WITH BILLS WERE ALSO FILED BEFORE LOWER AUTHORITIES (PB3 6 TO 61) IT WAS EXPLAINED THAT COMMISSION WAS PAID AS BUSINESS EXPE DIENCY ON WHICH TDS WAS ALSO DEDUCTED UNDER SECTION194H. IN R EMAND REPORT PROCEEDINGS , THE AO ISSUED NOTICE UNDER SEC TION 133(6) TO ALL COMMISSION AGENTS AND ALL OF THEM HAVE CONFIRM ED RENDERING SERVICES AND RECEIVING COMMISSION. THE AO DISALLOWE D COMMISSION PAYMENT ON THE REASONS THAT IN SOME CASE S BILLS ARE OF DIFFERENT DATES AND RATE OF COMMISSION OF 2.24% TO MPLUN WHEREAS RATE OF COMMISSION TO OTHERS IS AT HIGHER R ATE. HOWEVER, THE AO FAILED TO APPRECIATE THAT THE PAYMENT OF MPL UN IS NOT DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 10 OF 29 COMMISSION BUT IS THE SERVICE CHARGE/ INSPECTION CH ARGED BY THEM ON THE BASIS OF CONDITION OF TENDER. IN SUPPOR T OF HIS CONTENTION, THE LD. AR ALSO PLACED RELIANCE IN THE CASE CIT VS. PURE PHARMA (P) LTD. [2005] 270 ITR 382(MP)/ [2005 ] 144 TAXMAN 364(MP) WHEREIN COMMISSION WAS FOUND PAID ON SUPPLIES MADE TO GOVERNMENT AND ITS AGENCIES AND AL L THE PAYMENTS WERE MADE TO VARIOUS PARTIES BY ACCOUNT PA YEE CHEQUES/DEMAND DRAFTS, THE IDENTITY OF EACH OF THE AGENTS WAS ESTABLISHED AND THE EXPENDITURE WAS FOUND INCURRED FOR BUSINESS PURPOSES. IT WAS HELD THAT SUCH EXPENSES WERE ALLOW ABLE AND CONSEQUENTLY THE ADDITION WAS DELETED. IN THE INSTA NT CASE ALSO, THE AGENTS HAVE CONFIRMED THE SERVICES RENDERED AND THE AO HAS NOT BROUGHT ON RECORD ANYTHING CONTRARY TO THE ADMI SSION OF THE AGENTS, WHETHER THE PAYMENTS HAVE BEEN MADE BY CHEQ UES AFTER DEDUCTION OF TDS. THE LD. AR ALSO CITED DECISION OF THIS TRIBUNAL IN THE CASE OF KRITI INDUSTRIES V. ACIT 4(1) INDORE IN I.T.A. NO. 268/IND/2016 DATED 27-10-2016(TRIBUNAL-INDORE) (PB- 16 PB-II), CIT V. BHARAT MEDICAL STORES [2009] 308 ITR 373 (P& H), PROCHEM LABORATORIES PVT. LTD. V. ACIT , I.T.A. NO. 86/IND /2010 DTD. 28- 11-2011, CIT V. SEPTU INDIA PVT. LTD. [2008] 305 I TR 295 (P&H) AND OTHER AS PER HIS WRITTEN SUBMISSIONS. DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 11 OF 29 7. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ONGOING THROUGH THE ASSESSMENT RECORD AS WELL AS FINDINGS OF THE LD. CI T(A), WE FIND THAT THE ASSESSEE HAS SUBMITTED DETAILED EVIDENCES LIKE NAMES OF THE AGENTS, PAN NUMBERS, DESCRIBING SERVICES RENDER ED BY THE AGENTS, CONFIRMING THE TRANSACTION, DETAILS OF THE TDS MADE. IN REMAND REPORT PROCEEDINGS, THE AO ISSUED NOTICE UND ER SECTION 133(6) TO THESE AGAINST WHO APPEARED BEFORE THE AO AND ADMITTED OF RENDERING SERVICES AS A RECEIPT OF COMMISSION FR OM THE ASSESSEE. WE ALSO NOTE THAT THE MPLUN WAS NODAL AGE NCY FOR SUPPLY OF GOODS BUT WAS NOT CHARGE AS COMMISSION IN STEAD IT WAS CHARGING SERVICE CHARGES AS PER AGREEMENT ENTERED I N TO BETWEEN THE ASSESSEE AND IT. WE ALSO NOTE THAT THE ASSESSEE IS DEALING IN SUPPLIES OF PHARMACEUTICALS PRODUCTS TO VARIOUS STA TES LIKE ORISSA, ASSAM, MEGHALAYA WHICH ARE FALLING IN REMOT E AREAS WHICH IS SPREAD OVER A LARGE GEOGRAPHICAL AREA. THE REFORE, REQUIREMENT OF REPRESENTATIVES FOR DOING SUCH JOBS CANNOT BE DENIED. FURTHER, THESE COMMISSION AGENTS HAVE FILED DETAILED REPLY BEFORE THE AO AND DESCRIBED THE VARIOUS FORMA LITIES AND SERVICES REQUIRED TO BE HANDLED BY THE ASSESSEE OR REPRESENTATIVES OF THE AGENTS. FURTHER M/S. SHAFA-E -AM DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 12 OF 29 CONSULTANTS TO WHOM COMMISSION OF RS. 24,14,786/- ( PB-37) PAID, HAS FILED COPIES OF BILLS (PB-62 TO 73). SIM ILARLY DETAILS OF COMMISSION AND BILLS AND SALES EFFECTED BY M/S. CHA NCHAL JAIN, MS. LEENA MOHANTY AND MR. R. K. JAIN WERE ALSO FILE D. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A ) WAS NOT JUSTIFIED IN DELETING ONLY 50% OF THE COMMISSION PA YMENTS PAID TO PRIVATE PARTIES DEBITED TO THE PROFIT AND LOSS ACCO UNT. WE ALSO FIND THAT PAYMENTS MADE TO COMMISSION AGENTS ARE UN RELATED TO THE ASSESSEE THEREFORE, THERE CANNOT BE SAID THAT T HE QUANTUM OF COMMISSION IS NOT JUSTIFIED. THE CASE LAWS OF NAUTA MLAL & SON (SUPRA) RELIED BY THE LD. SR. D.R. IS NOT APPLICABL E AS IN THAT CASE THE TRIBUNAL HAD SET-ASIDE THE ISSUE TO THE AO FOR FURTHER EXAMINATION OF FACTS. FURTHER THE CASE LAWS IN THE CASE OF MACDOWELL CO PVT. LTD. (SUPRA) IS IN RESPECT OF LI QUOR SUPPLY TO MILITARY CANTEEN , AN GOVERNMENT BODY IN WHICH CANV ASSING WAS PROHIBITED BY THE GOVERNMENT, HENCE, THERE WAS NO Q UESTION OF ANY COMMISSION AND COMMISSION PAYMENT WAS AGAINST T HE POLICY OF THE GOVERNMENT, WHEREAS IN THE CASE OF THE ASSES SEE, THE COMMISSION HAS BEEN PAID IN RESPECT OF SERVICE REND ERED FOR FACILITATING THE RECOVERIES, GIVING INFORMATION OF TENDERS ETC. WHICH ARE NOT PROHIBITED BY LAW. THIS VIEW IS ALSO SUPP ORTED BY THE DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 13 OF 29 DECISION OF THE JURISDICTIONAL HIGH COURT AS RELIED UPON BY THE LD. AR ON THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. PURE PHARMA, (2005) 144 TAXMAN 364 (MP) IN PARA 3 & 4 HE LD AS UNDER :- 3, A FEW FACTS MATERIAL FOR DECIDING THE SAID APPEA L, IN SHORT, MAY BE MENTIONED AS UNDER : THE RESPONDENT/ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING AND SALE OF PHARMACEUTICAL FORMULATIO NS. DURING THE PREVIOUS FINANCIAL YEAR, THE ASSESSEE HA D PAID TOTAL COMMISSION OF RS. 13,35,336/-. OUT OF THIS, A SUM OF RS. 10,24,290/- WAS PAID AS COMMISSION ON SALES MAD E TO THE GOVERNMENT AND ITS AGENCIES AND A SUM OF RS. 3,11,046/- WAS PAID AS COMMISSION TO NON-GOVERNMENT PURCHASES. SINCE, A DOUBT WAS RAISED WITH REGARD TO THE PAYMENTS MADE TO VARIOUS PARTIES AS COMMISSION, ENQ UIRY WAS HELD. IT WAS FOUND THAT ALL THE PAYMENTS HAVE B EEN MADE AS COMMISSION TO VARIOUS PARTIES BY DEMAND DRA FTS, WHEREIN THE IDENTITY OF EACH OF THE AGENTS WAS ALSO ESTABLISHED. IT HAS ALSO BEEN FOUND THAT THE COMMIS SION WAS PAID EXCLUSIVELY FOR BUSINESS PURPOSES ONLY. 4. ALL THESE ARE FINDINGS OF FACT AND NO SUBSTANTIA L QUESTION OF LAW, AS IS REQUIRED TO BE FORMULATED FO R DECIDING THE APPEAL, ARISES IN THE SAME. THE TRIBUN AL HAS ALSO PLACED RELIANCE ON A JUDGMENT OF THE DELHI HIG H COURT REPORTED IN CIT VS. ELECTRIC CONSTRUCTION EQUIPMENT CO. LTD., [1990] 182 ITR 510, WHEREIN THE DELHI HIGH CO URT DEALING WITH IDENTICAL QUESTION HAS ALREADY DECIDED THE MATTER AGAINST THE PRESENT APPELLANT-REVENUE. 8. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AN D RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTION AL HIGH COURT, WE ARE OF THE VIEW THAT NO DISALLOWANCE OF COMMISSI ON PAYMENT IS CALLED FOR. ACCORDINGLY, GROUND NO. (I) OF THE APPE AL OF THE DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 14 OF 29 REVENUE IS DISMISSED. FURTHER THE DISALLOWANCE OF RS. 31,91,080 AS SUSTAINED BY THE LD. CIT (A) ARE DELETED , ACCOR DINGLY, GROUND NO. 1 AND 1.1 OF CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 9. GROUND NO. (II) AND (III) OF REVENUE RELATES TO DE LETING ADDITION OF RS. 1,33,00,000 MADE UNDER SECTION 68 OF THE ACT AND GROUND NO. 2 OF CROSS OBJECTION OF THE ASSE SSEE RELATES TO CONFIRMING ADDITION OF RS. 15 LACS IN RE SPECT OF M/S. PLASIA LEASING & INVESTMENT PVT. LTD. 10. FACTS APROPOS OF THIS GROUND ARE THAT DURING THE YE AR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN UNSECURED LOAN WITH INTEREST IN THE BALANCE SHEET FROM M/S. ANEKANT SHA RES AND SECURITIES PVT. LTD., MUMBAI RS.5,00,000, M/S. EAS T WEST FINVEST INDIA LTD. BILASPUR, RS. 30,00,00, M/S. PUR VI FINVEST LTD. BILASPUR, RS.35,00,000, M/S. TRIMURTHI FINVEST LTD. BILASPUR, RS. 30,00,000, M/S. PALASIA LEASING AND INVESTMENT PVT. LTD., UJJAIN RS.15,00,000, M/S. SEA ENTERTAINMENT LTD. MU MBAI RS.5,00,000, M/S. SKYTOUCH INFRASTRUCTURE PVT. LTD . MUMBAI RS. 5,00,000 M/S. UNO INDUSTRIES, MUMBAI RS. 23,00,000 AGGREGATING TO RS.1,48,00,000 PLUS INTEREST THEREON OF RS. 1,46,660. IN ORDER TO PROVE THE GENUINENESS OF TRAN SACTION, THE ASSESSEE FILED COPY OF CONFIRMATION, COPY OF INCOME -TAX RETURN, COPY OF PAN ETC. HOWEVER, THE AO MADE ADDITION ON THE BASIS OF DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 15 OF 29 GENERAL OBSERVATION THAT SUCH CREDITORS HAVE BEEN F OUND TO BE PROVIDING ACCOMMODATION ENTRIES TO A LARGE NUMBER O F PERSONS. THE CONFIRMATION LETTERS AND COPY OF RETURNS OF SUC H DEPOSITORS WAS FURNISHED BEFORE THE AO, BUT THE AO WAS OF THE VIEW THAT THEY HAVE LOW INCOME AND THUS, HAVE NOT HAVING CRED IT- WORTHINESS TO PROVIDE SUCH UNSECURED LOAN. THE ASSE SSEE HAD FURNISHED CONFIRMATION ALONG WITH PAN NUMBERS. ALL THESE AMOUNTS, WERE RECEIVED BY CHEQUES. NOTICE UNDER SEC TION 133(6) ISSUED TO SUCH PARTIES WHO HAVE DIRECTLY CONFIRMED THE TRANSACTION. HOWEVER, THE AO MADE THE ADDITION OF R S.1,48,00, 000 UNDER SECTION 68 OF THE ACT. 11. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT (A). DURING THE COURSE OF APPELLATE PROCEEDINGS , CONFIRMATION LETTERS, COPY OF ACKNOWLEDGEMENT OF RETURNS, COPY O F BANK ACCOUNT OF DEPOSITORS, WERE FILED WHICH WERE FORWAR DED TO THE AO FOR HIS COMMENTS. THE CIT (A) NOTED THAT THE AO HAS MADE THREE OBSERVATION IN REMAND REPORT THAT DEPOSITORS HAVE SHOWN MEAGRE INCOME, THEY HAVE DEPOSITED SUBSTANTIAL AMOU NTS IN THEIR ACCOUNTS JUST PRIOR TO ADVANCING LOANS AND THEY HAV E FAILED TO PRODUCE DIRECTORS OF SUCH COMPANIES TO PROVE IDENTI TY. THE AO HAS RELIED ON THE DECISIONS IN THE CASE OF AGARWAL COAL DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 16 OF 29 CORPORATION LTD. V. ADDL. CIT [2011] 135 ITD 270 ( INDORE-TRIB) : 142 ITJ 409 :[2012} 13 ITR(T) 531 (INDORE-TRIBUNAL) I.T.A. NO. 151/IND/2009 DATED 31.01.2011(INDORE-TRIB). HOWEVER , THE ASSESSEE SUBMITTED THAT SAID DECISION IS NOT APPLIC ABLE IN THEIR CASE, AS THAT WAS REGARDING ADDITION OF SHARE CAPIT AL WHILE APPELLANTS IS THAT OF RECEIVING UNSECURED LOANS, W HEREIN IDENTITY OF ALL DEPOSITORS ARE ESTABLISHED, AS THEY ARE ASSE SSED TO TAX AND IN NUMBER OF CASES EVEN ASSESSMENT WERE MADE UNDER SECTION 143 (3) IN CASE OF DEPOSITORS IS ALSO FILED. IT WAS FURTHER SUBMITTED THAT THE AO FRAMED ASSESSMENT ASSUMING TH AT VARIOUS DEPOSITORS WERE OF LUNKAD GROUP, BUT NONE OF THESE COMPANIES BELONG TO LUNKAD GROUP. IT WAS FURTHER SUBMITTED T HAT AOS REMARKS THAT THERE WAS HUGE DEPOSITS IN THEIR BANK ACCOUNT IS CORRECT BUT THE AO HAD FORGOT TO MENTION THAT ALL T HOSE DEPOSITS WERE THROUGH CHEQUES AND NONE OF THEM WERE CASH DEPOSITS . CONSIDERING THESE FACTS, THE LD. CIT (A) HAS HELD AS UNDER: 15. I HAVE GONE THROUGH THE ARGUMENTS OF BOTH AO AS WELL AS THAT OF THE APPELLANT. SINCE ALL DEPOSITORS HAVE CONFIRMED ABOUT GIVING SUCH DEPOSITS, THE AMOUNTS W ERE GIVEN THROUGH ACCOUNT PAYEE CHEQUES, THE DEPOSITORS WERE ALL FILING RETURNS OF INCOME, PROOF OF WHICH IS FUR NISHED AND EVEN BANK STATEMENTS OF DEPOSITORS WERE FURNISHED E XCEPT THAT OF M/S. PLASIA LEASING & INVESTMENT PVT. LTD. AS PER REMAND REPORT OF THE AO, AND IN SUCH BANK ACCOUNTS OF DEPOSITORS, NO CASH DEPOSITS WERE SEEN. FURTHER, TH E DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 17 OF 29 REFERENCE OF AO TO SURVEY OF LUNKAD GROUP & TO THE TERM OF ACCOMMODATION ENTRIES PROVIDER DOES NOT HELP REVENU E`S CASE BECAUSE THAT SURVEY TOOK PLACE IN 2006 AND AFT ER CONSIDERING THE FINDINGS OF SURVEY THE HON`BLE ITAT , INDORE IN THE CASE OF M/S. NARMADA EXTRUSION PVT. LTD. CAME TO THE CONCLUSION THAT VARIOUS CREDITS PROVIDE D BY LUNKAD GROUP COULD BE CONSIDERED AS UNEXPLAINED ONL Y IF NAME OF SUCH PARTY APPEARED IN THE CASH-BOOK IMPOUN DED DURING SURVEY OF LUNKAD GROUP FAILED TO EXPLAIN THE SOURCE OF THE SAME. HOWEVER, THAT CASH-BOOK, WAS PERTAININ G TO A.Y.2007-08 AND THERE WERE NO ENTRIES FOR THE YEAR UNDER CONSIDERATION I.E. A.Y. 2008-09 AND THAT IS WHY AO DID NOT REFER TO ANY ADVERSE MATERIAL BUT MADE A BALD REMAR K WITHOUT ANY EVIDENCE. IN THE CIRCUMSTANCES THE APPE LLANT HAS DISCHARGED THE INITIAL ONUS AS HELD IN THE CASE OF M/S. KINETIC CAPITAL FINANCE LTD. [2013] 354 ITR 282(DEL ). 15.1 IN THE EVENT THE REVENUE STILL HAD A DOUBT WITH REGARD TO GENUINENESS OF TRANSACTION OR AS REGARD T O CREDITWORTHINESS OF CREDITORS, IT WOULD HAVE TO D ISCHARGE THE ONUS WHICH HAS SHIFTED ON IT. IF REVENUE HAS A NY DOUBTS WITH REGARDS TO CREDITWORTHINESS OF DEPOSITO RS, THE REVENUE COULD ALWAYS BRING IT TO TAX IN THE HANDS O F CREDITORS AS HELD IN CASE OF LOVELY EXPORTS (P) LTD . [2008] 216 CTR (SC)195 AND MOD CREATIONS (P) LTD. [2013] 3 54 ITR 282 (DEL). SINCE APPELLANT DISCHARGE INITIAL ON US, THE ONUS SHIFTED ON REVENUE AND THERE WAS NO LEGAL OBLI GATION ON THE APPELLANT TO PRODUCE DIRECTORS OF CREDITORS BEFORE AO AND IF AO HAD ANY DOUBT ABOUT IDENTITY OF SHARE APPLICANTS DESPITE THEIR FILING INCOME-TAX RETURNS, HE COULD HAVE SUMMONED THEM AS HELD IN CASE OF VICTOR ELECT RODES LTD. [2010] 329 ITR 271 (DEL). WHERE ROI (RETURN OF INCOME) WAS FILED BY THE CREDITORS OF THE APPELLANT AND WAS ACCEPTED BY THE AO AND PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES, GENUINENESS OF TRANSACTION CANNOT BE DOUBTED, AO HAS NOT CONDUCTED ANY ENQUIRY INTO THE SAME OR HAS NO MATERIAL IN HIS POS SESSION DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 18 OF 29 TO SHOW THOSE PARTICULARS ARE FALSE AND CANNOT BE A CTED UPON, THEN NO ADDITION CAN BE MADE IN HANDS OF THE APPELLANT U/S. 68 AS HELD IN CASE OF GANGESHWARI ME TAL PVT. LTD. [2013] 214 TAXMAN 423(DEL). IN THIS CASE IT WAS NOTED BY THE HON`BLE JUDGES THAT AO SAT WITH FOLDED HANDS TILL THE APPELLANT EXHAUSTED ALL THE EVIDENCE OR MATERIAL IN HIS POSSESSION AND THEN FORWARD TO MERE LY REJECT THE SAME ON THE PRESUMPTIONS. IN SUCH AN EVENTUALITY, NO ADDITION CAN BE MADE U/S. 68 OF I. T. ACT. 15.2 FOLLOWING THE AFORESAID DISCUSSION, THE ADDITION OF RS. 1,33,00,000/- OF UNSECURED LOAN FROM VARIOUS DE POSITS ADDED U/S. 68 OF THE I.T. ACT CANNOT BE SUSTAINED W HILE ADDITION OF SUCH UNSECURED LOAN OF RS. 15 LAKH RECE IVED FROM M/S. PLASIA LEASING & INVESTMENT PVT. LTD. IS CONFIRMED BECAUSE AS AO REPORTED IN A TABLE ANNEXED TO REMAND REPORT, THE APPELLANT SELECTIVELY AVOIDED TO FILE COPY OF BANK ACCOUNT OF THIS DEPOSITOR, WHILE BANK A/C OF ALL OTHER DEPOSITORS WERE FILED. THIS INDICATE STRO NG POSSIBILITY OF CASH DEPOSITS IN BANK A/C OF SUCH DE POSITOR WHICH SHIFTS BACK THE ONUS ON THE APPELLANT IN THI S CASE AND PUT HUGE QUESTION MARK ON GENUINENESS OF SUCH TRANSACTION, ALL MORE SO WHEN SUCH DEPOSITOR HAS DISCLOSED INCOME ONLY RS. 4,777/- IN ITS RETURN. DE POSIT OF CASH IN BANK ACCOUNT OF CREDITOR MAKE IT QUESTIONA BLE BECAUSE INCOME TAX ACT ITSELF HAS MONEY PROVISIONS RESTRICTING CASH TRANSACTION OF LOANS , PURCHASES A ND CONSEQUENTLY SALES ETC. BEYOND RS. 20,000/- . THERE FORE, IN CASE OF PLASIA LEASING & INVESTMENT PVT. LTD. T HERE ARE SUFFICIENT GROUNDS TO MAKE STRONG CSE3 OF ADDITION U/S. 68 OF INCOME TAX ACT. GR. NO.2 OF APPEAL IS THEREFORE, PARTLY ALLOWED IN SO FAR AS OUT OF TOTAL ADDITION OF RS. 1,48,00,000/- ADDITION OF RS. 15,00,000/- IS CONFIR MED AND BALANCE ADDITION OF RS. 1,33,00,000/- IS DELETE D. 16. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. DR SUBMITTED THAT THE ASSESSE E HAS FAILED DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 19 OF 29 TO PRODUCE THE DIRECTORS OF CREDITOR COMPANIES BEFO RE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALS O IN REMAND REPORT, HENCE, LD. CIT (A) WAS NOT JUSTIFIED IN DEL ETING THE ADDITION. THE LD. SR. D.R. FURTHER RELIED IN THE CA SE OF CIT V. RATHI FINLEASE LTD. [2008] 215 CTR (MP) 429 IN SUPP ORT OF HIS CONTENTIONS. THE LD. SR. D.R. FURTHER CONTENDED THA T DEPOSITORS DOES NOT HAVE SOURCE FOR SUCH LOAN AND BEFORE GIVIN G LOAN BY CHEQUE TO THE ASSESSEE. THUS, THE GENUINENESS OF LO AN TRANSACTION IS NOT PROVED HENCE, THE ORDER OF CIT ( A) BE QUASHED AND THAT OF THE AO BE RESTORED. 17. ON THE OTHER HAND, THE LD. AR FOR THE ASSESSEE SUBM ITTED THAT THE ADDITION OF RS. 1,48,00,000 WAS MADE ON AC COUNT OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE AC T. OUT OF THIS THE LD. CIT (A) DELETED ADDITION OF RS. 1,33,00,000 BY TREATING SAME AS GENUINE TRANSACTION. THE ASSESSEE HAS BORRO WED FUND FROM VARIOUS PARTIES OF WHICH CONFIRMATION, TOGETHE R WITH PAN NUMBERS, BANK STATEMENTS AND INCOME-TAX RETURNS WER E FURNISHED. IN MOST OF THE CASES, NOTICE UNDER SECTI ON 133(6) HAVE BEEN ISSUED AND MAJORITY OF THE PARTIES HAVE DIRECT LY CONFIRMED THE TRANSACTION WITH THE ASSESSEE. THE AO HAS NOT B OTHERED TO VERIFY THE CREDITWORTHINESS FROM THE PAN OF RESPECT IVE PARTIES, DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 20 OF 29 WHICH WOULD SHOW THAT CREDITORS WERE GENUINE. THE L D. AR SUBMITTED THAT THERE IS NO CASH DEPOSITS IN THE ACC OUNT OF CREDITORS BEFORE ISSUE OF CHEQUES, HENCE, IN THE LI GHT OF DECISION IN THE CASE OF GANGESHWARI METAL PVT. LTD. [2013] 214 TAXMAN 423(DEL). THE LD. AR SUBMITTED THAT THE RATIO OF TH E DECISION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE O F RATHI FINLEASE LIMITED (SUPRA) IS NOT APPLICABLE TO THE P RESENT CASE AS IT IS RELATED WITH SHARE APPLICATION MONEY AND THE SHA RE APPLICANTS WERE NOT FOUND TO BE IN EXISTENCE AND IN THAT CASE, AMOUNTS WERE PAID IN CASH ON THE SAME DATES ON WHICH THE AMOUNTS WERE CREDITED TO THE BANK ACCOUNTS OF SUCH APPLICANTS. T HE LD. AR FURTHER SUBMITTED THAT OTHER DECISIONS OF THE HON'B LE HIGH COURT, AS RELIED UPON BY THE LEARNED DR, DO NOT APPLY TO T HE PRESENT CASE HAVING DISTINCT FACTS AND CIRCUMSTANCES. THERE FORE, THE FIRST APPELLATE ORDER MAY KINDLY BE UPHELD AND SUSTAINED BY DISMISSING THE APPEAL OF THE REVENUE. THE LD. AR FU RTHER RELIED ON FOLLOWING DECISION VIZ: CIT V. TANIA INVESTMENT PVT. LTD. [2011] 322 ITR 394 (BOMBAY), CIT V. VARINDER RAWLEY [2014] 366 ITR 232 (P&H), CIT V. KINETIC CAPITAL FINANCE LTD. [2013] 354 ITR 296 (DEL), ACIT V. PRAVIN MITTAL [2016] 28 ITJ 473 (TRIB-INDORE), CIT V. METACHEM INDUSTRIES [2000] 245 ITR 160 (MP): 161 CTR DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 21 OF 29 444 (MP) : [2001] 116 TAXMAN 572 (MP), WERE CITED A ND SPECIAL ATTENTION WAS DRAWN IN THE CASE OF CIT V. PITHAMPU R CONZIMA (P) LTD. [2000] 244 ITR 442 (MP) WHEREIN IT WAS HELD T HAT WHERE IN APPEAL BEFORE THE TRIBUNAL, THE ASSESSEE SHOWED THA T THE CREDITS GIVEN TO THE ASSESSEE DULY DECLARED BY THE CREDITOR S IN THEIR RESPECTIVE RETURNS, WHERE UPON TRIBUNAL CONCLUDED T HAT THE INVESTMENT IN THE HANDS OF THE ASSESSEE-FIRM WAS DU LY EXPLAINED AND NO ADDITION WAS CALLED FOR IN THE HANDS OF THE ASSESSEE AND DELETED THE SAID ADDITION. HELD THAT DELETION OF AD DITION IN THE HANDS OF THE ASSESSEE ON THE BASIS OF SATISFACTION BY THE TRIBUNAL AND ON THE APPRECIATION OF MATERIAL BY THE TRIBUNAL AND ACCORDINGLY, NO QUESTION OF LAW AROSE FOR REFERENCE . 18. THE LD. AR SUBMITTED THAT THE RATIO OF THE DECISION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF RA THI FINLEASE LIMITED (SUPRA) IS NOT APPLICABLE TO THE PRESENT CA SE AS IT IS RELATED WITH SHARE APPLICATION MONEY AND THE SHARE APPLICANTS WERE NOT FOUND TO BE IN EXISTENCE AND IN THAT CASE, AMOUNTS WERE PAID IN CASH ON THE SAME DATES ON WHICH THE AMOUNTS WERE CREDITED TO THE BANK ACCOUNTS OF SUCH APPLICANTS. T HE LD. AR FURTHER SUBMITTED THAT OTHER DECISIONS OF THE HON'B LE HIGH COURT, AS RELIED UPON BY THE LEARNED DR, DO NOT APPLY TO T HE PRESENT DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 22 OF 29 CASE HAVING DISTINCT FACTS AND CIRCUMSTANCES. THERE FORE, THE FIRST APPELLATE ORDER MAY KINDLY BE UPHELD AND SUSTAINED BY DISMISSING THE APPEAL OF THE REVENUE. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE CREDITORS EXCEPT M/S. PLASIA LEASING & INVESTMENT PVT. LTD., WHEN WE ANALYZE THE FACTS OF THE CASE IN VIEW OF TH E CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE VIS--VIS THE FINDI NGS RECORDED BY THE AUTHORITIES BELOW THEN WE HOLD THAT THERE IS NO DISPUTE REGARDING EXISTENCE AND IDENTITY OF THE FIVE COMPAN IES AS THE ASSESSEE SUBMITTED THEIR NAMES, ADDRESSES AND PAN A LONG WITH ALL RELEVANT DOCUMENTS IN THE SHAPE OF RETURNS, FIN ANCIAL RESULTS AND ACCOUNTS OF THESE COMPANIES. SINCE UNDISPUTEDLY THE AMOUNTS WERE RECEIVED FROM ALL THE FIVE COMPANIES T HROUGH CHEQUES AND BANKING CHANNEL, THUS IDENTITY OF THE C REDITORS AND GENUINENESS OF THE LOAN TRANSACTIONS CANNOT BE DISP UTED. IN THE PRESENT CASE, WHEN WE ANALYSE THE COMPANY WISE FACT S THEN WE FIND THAT THESE COMPANIES HAVE FILED REPLY TO NOT ICE UNDER SECTION 133(6) TO THE AO DIRECTLY. THERE ARE NO C ASH DEPOSIT BEFORE ISSUE OF CHEQUE TO THE ASSESSEE. ALL THE CRE DITORS HAVE FILED COPY OF INCOME-TAX RETURN ACKNOWLEDGEMENT, CONFIRMA TION LETTERS, DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 23 OF 29 COPIES OF THE BANK STATEMENTS, COPIES OF ACCOUNTS, ACKNOWLEDGEMENT OF ITRS, COMPUTATION, AUDITED ANNUA L ACCOUNTS, ETC. WERE PLACED ON RECORD WHICH ARE AVAI LABLE FROM PAGE 11 TO 53 OF THE ASSESSEES PAPER BOOK-I AND AT PAGES 5 TO 9 AND 37 TO 41 OF THE DEPARTMENTAL PAPER BOOK. THE BA LANCE SHEET OF BOTH THE COMPANIES HAS BEEN SIGNED BY THE ASSESS EE HIMSELF AS DIRECTOR. FROM THE COPIES OF BANK STATEMENTS OF THESE TWO COMPANIES AVAILABLE AT PAGES 8 AND 40 OF THE DEPART MENTAL PAPER BOOK WE OBSERVE THAT THERE WERE NO CASH DEPOSITS DU RING THE ASSESSMENT YEAR UNDER CONSIDERATION IN THESE ACCOUN TS. THE AO HIMSELF IN HIS REMAND REPORT HAS NOT POINTED OUT AN Y MAJOR DISCREPANCIES. IN THE PRESENT CASE IN VIEW OF THE A BOVE FOREGOING DISCUSSION, WE OBSERVE THAT THE ASSESSEE FILED ALL POSSIBLE DOCUMENTS BEFORE THE AO WHICH WERE ALSO SUBMITTED T O THE AO BY THE RESPECTIVE COMPANIES IN RESPONSE TO NOTICES U/S 133(6) OF THE ACT ISSUED DURING REMAND PROCEEDINGS AND THUS WE CA N SAFELY HOLD THAT THE ASSESSEE DISCHARGED ITS ONUS LAY UPON ITS SHOULDERS TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE CRED ITORS AND GENUINENESS OF THE TRANSACTIONS. FROM THE RELEVANT PART OF THE ASSESSMENT ORDER, WE OBSERVE THAT THE AO MERELY PRO CEEDED TO MAKE ADDITION UNDER SECTION 68 OF THE ACT KEEPING A SIDE ALL THE DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 24 OF 29 RELEVANT DOCUMENTS, WHICH WERE FILED BY THE ASSESSE E AND THE ALLEGED COMPANIES. ACCORDINGLY, WE HAVE NO HESITAT ION TO HOLD THAT WE ARE UNABLE TO SEE ANY AMBIGUITY, PERVERSITY OR ANY OTHER REASON TO INTERFERE WITH THE FIRST APPELLATE ORDER WHICH GRANTED RELIEF TO THE ASSESSEE. HENCE, WE UPHOLD THE SAME. ACCORDINGLY, GROUND NOS. (II) AND (III) OF THE REVENUE, BEING DE VOID OF MERIT, ARE DISMISSED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. CROSS OBJECTION NO16/IND/2014/A.Y. 2008-09 BY THE ASSESSEE: 21. GROUND NO.1 RELATES TO MAINTAINING DISALLOWANCE OF RS. 31,90,080 BEING COMMISSION EXPENSES CLAIMED BY THE ASSESSEE. 22. THIS GROUND HAD BEEN DEALT WITH IN GROUND NO.(I) OF REVENUE APPEAL WHEREIN THE DISALLOWANCE MAINTAINED TO RS.31 ,90,080 BY THE LD. CIT (A) HAVE BEEN DIRECTED TO BE DELETED, H ENCE, FOR THE REASONS AS DISCUSSED THEREIN, THIS GROUND NO. 1 AND 1.1 OF APPEAL IN THE CROSS OBJECTION OF THE ASSESSEE IS AL LOWED. 23. GROUND NO. 2 RELATES TO MAINTAINING ADDITION OF RS. 15,00,000 ON ACCOUNT OF M/S. PLASIA LEASING & INVES TMENT PVT. LTD. WHEREAS THE CONFIRMED WAS FILED HENCE, CONFIRMATION OF ADDITION IS BAD-IN-LAW AND HENCE, B E DELETED. DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 25 OF 29 SIMILARLY DISALLOWANCE OF INTEREST OF RS. 30,685 MA Y ALSO BE DELETED. 24. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD SUBMITTE D THE COPY OF CONFIRMATION WITH PAN (PB-173-178) AND SAID COMPANY IS ASSESSED TO TAX AT UJJAIN. THE AMOUNT HAS BEEN RECE IVED BY CHEQUES ON WHICH INTEREST HAS BEEN PAID AND TDS WAS DONE, HENCE, NO ADDITION SHOULD HAVE BEEN SUSTAINED. FURT HER, THE TRIBUNAL IN THE CASE OF ACIT V. PRAVIN MITTAL [2016 ] 28 ITJ 473 (TRIB-INDORE) HAD ALLOWED THE APPEAL OF THE ASSESSE E FOR DEPOSIT FROM LUNKAD GROUP OF COMPANIES, BY THE TRIBUNAL, HE NCE, THE ADDITION OF MAINTAINED BY THE LD. CIT (A) DESERVE T O BE DELETED. THE LD. AR SUBMITTED THAT THE RATIO OF THE DECISION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF RATHI FINL EASE LIMITED (SUPRA) IS NOT APPLICABLE TO THE PRESENT CASE AS IT IS RELATED WITH SHARE APPLICATION MONEY AND THE SHARE APPLICANTS WE RE NOT FOUND TO BE IN EXISTENCE AND IN THAT CASE, AMOUNTS WERE P AID IN CASH ON THE SAME DATES ON WHICH THE AMOUNTS WERE CREDITED T O THE BANK ACCOUNTS OF SUCH APPLICANTS. THE LD. AR FURTHER SUB MITTED THAT OTHER DECISIONS OF THE HON'BLE HIGH COURT, AS RELIE D UPON BY THE LEARNED DR, DO NOT APPLY TO THE PRESENT CASE HAVING DISTINCT FACTS AND CIRCUMSTANCES. DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 26 OF 29 25. ON THE OTHER HAND, THE LD. SR. DR SUBMITTED THAT SA ID COMPANY IS FOUND TO BE PAPER COMPANY AND ADDITION R ELATED O SAID COMPANY IS ALSO UPHELD BY THE HON`BLE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT V. RATHI FINLEASE LTD. [20 08] 215 CTR (MP) 429. THEREFORE, THE LD. CIT (A) WAS JUSTIFIED IN CONFIRMING THE ADDITION IN THE CASE OF SAID CREDITOR. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. WE ALSO FIND THAT LD. CIT (A) HAS ALSO CONFIRMED THE ADDITION IN THE CASE OF THIS COMPANY ON THE GROUND THAT THE ASSESSEE HAS NOT ABLE TO FILE COPY OF BANK ACCOUNT AND OTHER DETAILS. WE ALSO OBSERVE THAT THE LD. SR. D.R . HAS CONTENDED THAT HON'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT V. RATHI FINLEASE LTD. [2008] 215 CTR ( MP) 429 HAS SUSTAINED THE ADDITION UNDER SECTION 68 OF THE ACT IN RESPECT OF M/S. PLASIA LEASING & INVESTMENT PVT. LTD. IN PAR A 11, THE HON'BLE HIGH COURT HELD THAT IN THE CASE OF PALASIA LEASING & FINANCE COMPANY, ENTRY WAS NOT ACCEPTED ON THE GROU ND THAT MERELY BY FILING THE CONFIRMATION LETTER, THE BURDE N COULD NOT BE DISCHARGED WHEN THE INQUIRIES REVEAL THAT THE COMPA NY WAS NOT IN EXISTENCE NOR ANY BOOKS OF ACCOUNTS OR DIRECTORS WERE TRACEABLE. THEREFORE, RESPECTFULLY FOLLOWING THE SA ME, IN AND IN DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 27 OF 29 ABSENCE OF RELEVANT DETAILS LIKE CONFIRMATIONS, COP Y OF ACCOUNT OF THIS COMPANY, COPY OF RELEVANT EXTRACT OF BANK ACCO UNT, COPY OF ACCOUNT IN THE BOOKS OF THE ASSESSEE, THE ASSESSEE HAS FAILED TO ESTABLISH THE IDENTITY, GENUINENESS OF TRANSACTION, EXISTENCE AND CREDITWORTHINESS OF THIS COMPANY AND FAILING TO RES POND TO NOTICE UNDER SECTION 133(6), WE UPHELD THE ADDITION ON ACC OUNT OF CASH CREDIT IN RESPECT OF THIS COMPANY AS UNEXPLAINED UN DER SECTION 68 OF THE ACT IN THE LIGHT OF THE RATIO OF THE DEC ISION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF R ATHI FINLEASE LIMITED (SUPRA). ACCORDINGLY, GROUND NO. 2 OF CROSS OBJECTION OF THE ASSESSEE IS THEREFORE, DISMISSED. 26. GROUND NO. 3 RELATED SUSTENANCE OF DISALLOWANCE OF AMOUNT OF INTEREST OF RS. 49,585 UNDER SECTION 36(1 )(III) OR IN THE ALTERNATIVE THE AO MAY BE DIRECTED TO ALLOW IN SUBSEQUENT YEARS. 27. FACTS APROPOS OF THIS GROUND ARE THAT THE ASSESSE E HAS RAISED LOANS DURING THE YEAR FOR CAPITAL WORK IN PR OGRESS OF BUILDING CONSTRUCTION OF RS. 4,95,856 AS THE BUILDI NG HAS NOT BEEN PUT TO USE DURING THE YEAR UNDER CONSIDERATION . HENCE, INTEREST ATTRIBUTABLE TO RS.4,985 BEING @10% ON CA PITAL WORK IN PROGRESS OF RS. 4,95,856 WAS DISALLOWED UNDER SECTI ON 36(1)(III) OF THE ACT. DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 28 OF 29 28. THE CIT (A) OBSERVED THAT THE APPELLANT HAS RAISED THIS GROUND FOR THE SAKE OF IT FOR WHICH NO DETAILS OF L OANS AND FOR THE PURPOSE FOR WHICH THESE WERE PROVIDED NOR ANY ARGUM ENT WERE FILED. HENCE, DISALLOWANCE OF INTEREST WAS CONFIRME D. 29. THE LD. AR SUBMITTED THAT DISALLOWANCE OF INTEREST IS BAD- IN-LAW AS THE BUILDING WAS NOT UNDER CONSTRUCTION B UT EXPENSES WERE DEBITED AFTER 30-09-2006. THE ASSESSEE HAS CLA IMED DEPRECIATION, WHICH HAS BEEN ALLOWED AS DEDUCTION B Y THE ASSESSEE. THE BUILDING HAS BEEN PUT TO USE DURING T HE YEAR UNDER CONSIDERATION AND AS SUCH, DISALLOWANCE OF INTEREST IS NOT CALLED FOR. 30. THE LD. SR. D.R. RELIED ON ORDER OF LOWER AUTHORITI ES. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE PERUS AL OF ANNEXURE -C, FORMING PART OF FORM NO. 3 CB (PB- 11 & 20 )SHOWED THAT THAT THE ASSESSEE HAD SHOWN ADDITION O F RS. 4,95,856 AFTER 30.09.2006 TO BUILDING ACCOUNT ON WH ICH DEPRECIATION HAS BEEN CLAIMED AND ALLOWED BY THE AO . THUS, IT IS DISCERNIBLE THAT THERE IS WORK IN PROGRESS ON ACCOU NT OF BUILDING CONSTRUCTION ACCOUNT; HENCE, DISALLOWANCE ON ACCOUN T OF INTEREST ON ADDITION TO BUILDING ACCOUNT IS NOT JUSTIFIED. T HEREFORE, THE AO DCIT V 1(1) V MODERN LABORATORIES / I. T. A. NO. 27 7/IND/2014& CO.NO.16/IND/2014/AY:08-09 PAGE 29 OF 29 IS DIRECTED TO DELETE SUCH DISALLOWANCE OF INTEREST EXPENSES. WE ORDER ACCORDINGLY. THIS GROUND OF APPEAL IS THUS, A LLOWED. 32. IN THE RESULT, THE CO OF THE ASSESSEE IS PARTLY ALL OWED. 33. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. 34. THE ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST 2017. SD/- SD/- ( C.M. GARG) (O.P. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :10 TH AUGUST 2017 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE