M/s. Flexican Bellows & Hoses Pvt. Ltd., Baroda V. The Dy.CIT, Circle-1(2), Baroda

ITA 2792/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5889 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT JHAVERI
• Keywords: Fair market value
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M/S. FLEXICAN BELLOWS & HOSES PVT. LTD, 283, GIDC ESTATE, MAKARPURA, BARODA - 390010 PAN: AAACF2871M (APPELLANT) VS THE DCIT, CIRCLE - 1(2), AAYAKAR BHAVAN, BARODA (RESPONDENT) REVENUE BY : DR. JAYANT JHAVERI , SR. D . R. ASSESSEE BY: S H RI MILIN MEHTA , A.R. DATE OF HEARING : 31 - 03 - 2 017 DATE OF PRONOUNCEMENT : 17 - 05 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - TH IS ASSESSEE S APPEAL FOR A.Y. 2009 - 10 , AR I SES FROM ORDER OF THE CIT(A) - I, BARODA DATED 01 - 09 - 2013 IN APPEAL NO. CAB/I - 267/2011 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING G ROUNDS OF APPEAL: - I T A NO . 2792 / A HD/20 13 A SSESSME NT YEAR 200 9 - 10 I.T.A NO. 2792 /AHD/20 13 A.Y. 2009 - 10 PAGE NO M/S. FLEXICAN BELLOWS & HOSES PVT. LTD. VS. DCIT 2 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN MAKING AN ADDITION OF RS. 8,49,877/ - U/S 40A(2)(B) OF THE INCOME TAX ACT 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN CHARGING INTEREST U/S. 234B OF THE INCOME TAX ACT, 1961. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN CHARG ING INTEREST U/S. 234C OF THE INCOME TAX ACT, 1961. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), BARODA ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 1 , 49 , 45 , 100/ - WAS FILED ON 17 TH AUGUST, 2009. THEREAFTER, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 2 3 TH SEPTEMBER, 2010. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD PAID COMMISSION OF RS. 4 , 16 , 759/ - AND RS. 4 , 33 , 118/ - RESPECTIVELY TO SMT. D.S. JANI AND SHRI S.R. JANI HUF . THE ASSESSING OFFICER FURTHER NOTICED THAT SMT. D.S. JANI WA S THE WIFE OF DIRECTOR SH RI S. R JANI AND S.R. JANI HUF WAS HUF OF THE DIRECTOR SHRI. SH A RAD R. JANI. THE ASSESSING OFFICER FURTHER STATED THAT ASSESSEE WAS ASKED TO PROVE THE CONTRIBUTION OF THE ABOVE STATED PERSON S ON THE BASIS OF WHICH THE COMMISSION WAS PAID TO THEM. THE ASSE SSING OFFICER FURTHER OBSERVED THAT THE SUPPORTING DOCUMENT SUBMITTED BY THE ASSESSEE COULD NOT DEMO NSTRATE THAT BOTH THESE PERSONS HAD FETCHED THE PURCHASE ORDERS FOR THE A SSESSEE. THE ASSESSING OFFICER STATED THAT ASSESSEE HAD GIVEN GENERAL REPLY THAT T HE WIFE OF THE DIRECTOR AND DIRECTOR I.T.A NO. 2792 /AHD/20 13 A.Y. 2009 - 10 PAGE NO M/S. FLEXICAN BELLOWS & HOSES PVT. LTD. VS. DCIT 3 HIMSELF IN HIS CAPACITY AS THE KARTA OF THE HUF ASSISTED THROUGH THEIR CONTACTS IN MAINTAINING LARGER ORDER FROM PRESTIGIOUS COMPAN IES . THEREAFTER, THE ASSESSING OFFICER CONCLUDE D THAT AMOUNT OF COMMISSION OF R S. 8 , 49 , 877/ - WAS PAID TO THE PERS ON DEFINE D U/S. 40A(2)(B) OF THE ACT WAS UNREASONABLE AND THE SAME WAS DISALLOWED IN VIEW OF THE PROVISION OF 40A(2)(A) . 4. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT( A). THE LD. CIT(A) HAS SUSTAINED THE APPEAL MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 8.3. BUT THE ABOVE ENTIRE SUBMISSION OF THE AR IS NOT FOUND TO BE TENABLE. THE AR HAS FURNISHED THE DETAILS OF ORDERS SECURED FROM VARIOUS COMPANIES AS PER PARA 9 OF THIS SUBMISSION AND HAS STATED THAT THE SALES REPRESENTATIVES HAD SECURED LARGE ORDERS FROM REPUTED AND PRESTIGIOUS COMPANIES. THE PLEA OF THE AR IS THAT THE APPELLANT WAS ABLE TO SECURE SUCH LARGE ORDERS DUE TO CONTINUOUS EFFORTS OF MRS. D S JANI AND S R JANI (HUF). HOWEVER IT IS NOT EXPLAI NED BY THE AR THAT WHAT WERE THE CONTINUOUS EFFORTS OF THESE TWO PERSONS IN SECURING THE ORDERS DETAILS OF WHICH ARE GIVEN AS PER PARA 9 OF THIS SUBMISSION. THOUGH THE DETAILS OF ORDERS SECURED FROM VARIO US COMPANIES ARE GIVEN BY THE AR BUT NO ANY EVIDENCES HAVE BEEN FILED BY HIM TO SHOW THAT THE ORDERS SECURED FROM VARIOUS COMPANIES WERE ONLY AS A RESULT OF EFFORTS MADE BY THE ABOVE TWO PERSONS. HOW THE ABOVE TWO PERSONS I.E. MRS. DS JANI AND SR JANI H AD ACTIVELY PARTICIPATED AND PLAYED THEIR ROLE AS SALES REPRESENTATIVES ARE NOT EXPLAINED AND IN THIS REGARD NO - ANY DOCUMENTARY PROOFS HAVE BEEN FILED. WHETHER THESE TWO PERSONS AS SALES REPRESENTATIVES HAD THEIR OWN INFRASTRUCTURE AND OFFICE ARE N OT EXPLAINED. HOW THESE TWO PERSONS AS SALES REPRESENTATIVES HAD CONTACTED VARIOUS COMPANIES AND WHETHE R THERE WERE CORRESPONDENCES BETWEEN THE ABOVE TWO PERSONS AND VARIOUS COMPANIES ARE ALSO NOT EXPLAINED. THOUGH THE ORDER SECURE FROM VARIOUS COMPANIES IN THE CASE OF APPELLANT ARE THERE, BUT THE SAME WERE AS A RESULT OF EFFORTS OF ONLY ABOVE TWO PERSONS .ARE NOT ESTABLISHED. AGAIN THERE IS NO AGREEMENT SUBMITTED BETWEEN THE I.T.A NO. 2792 /AHD/20 13 A.Y. 2009 - 10 PAGE NO M/S. FLEXICAN BELLOWS & HOSES PVT. LTD. VS. DCIT 4 ABOVE TWO PERSONS WITH THE APPELLANT WITH REGARD TO PAYMENT, OF COMMISS ION TO THEM FOR PLAYING THEIR ROLE AS SALES REPRESENTATIVES. IT IS ALSO NOT EXPLAINED AS TO HOW THESE TWO PERSONS SUBMITTED THEIR BILLS TO THE APPELLANT COMPANY FOR THE ORDERS Y SECURING FROM VARIOUS COMPANIES. THERE IS NOTHING ON RECORD TO SHOW THAT AS AN INDIVIDUAL AN AS SALES REPRESENTATIVE, THE ABOVE TWO PERSONS HAD CONTACTED THE VARIOUS COMPANIES TELEPHONICALLY AND. THROUGH VARIOUS CORRESPONDENCES FOR NEGOTIATING AND SECURING THE ORDERS. CONSIDERING ALL THESE FACTS, THE ABOVE SUBMISSION OF AR OF THE AP PELLANT IS NOT ACCEPTABLE. THE AR OF THE APPELLANT HAD PLEADED THAT SECTION 40A(2) OF THE ACT NOWHERE MENTIONS THAT PAYMENT TO RELATIVES IS NOT BE ALLOWED. AS PER THE AR THE ONLY REQUIREMENT OF SECTION 40A(2) IS THAT THE PAYMENT MADE T O RELATED PARTIES SHO ULD NOT BE EXCESSIVE OR UNREASONABLE AND SHOULD COMMENSURATE WITH THE FAIR MARKET VALUE. BUT I DO NOT AGREE WITH THIS SUBMISSION OF THE, AR OF THE APPELLANT. IF NO EVIDENCES ARE ADDUCED BY THE APPELLANT IN SUPPORT OF ITS CLAIM OF PAYMENTS OF COMMISSION ETC . TO THE PERSONS COVERED U/S 40A(2) OF THE IT ACT, THEN ENTIRE PAYMENTS ARE REQUIRED TO BE DISALLOWED BY CONSIDERING THE SAME AS NOT REASONABLE. THUS, THE VARIOUS CASE LAWS AS RELIED UPON BY THE APPELLANT'S AR ARE NOT APPLICABLE TO ITS CASE. 5 . WE HAVE H EARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE NOTICED THAT ASSESSEE HAD MADE COMMISSION PAYMENT TO THE SPECIFIED PERSONS WHO WERE CLOSELY CONNECTED TO THE ASSESSEE . WE HAVE ALSO GONE THROUGH THE PAPER BOOK FURNISHED BY THE LD. COUNSEL DURING THE COURSE OF APPELLATE PROCEEDINGS IN WHICH THE COPIES OF PURCHASE ORDER S WERE PLACED. WE HAVE NOTICED THAT IN THE PURCHASE ORDERS NOWHERE IT HAS BEEN CONFIRMED BY THE PURCHASE PART IES THAT THESE PURCHASES WERE MADE THROUGH THE TWO SPECIF IED PERSONS TO WHOM THE COMMISSION WERE MADE BY THE ASSESSEE. WE HAVE PERUSED THE MATERIAL ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES AND NOTICE D THAT WHILE REJECTING THE ASSESSEE'S CLAIM FOR DEDUCTION OF COMMISSION PAYMENT , THE LD. CIT(A) HEAVILY RELIED ON I.T.A NO. 2792 /AHD/20 13 A.Y. 2009 - 10 PAGE NO M/S. FLEXICAN BELLOWS & HOSES PVT. LTD. VS. DCIT 5 THE FACTOR THAT THERE WAS NOTHING TO SUGGEST THAT THE RECIPIENT OF SUCH COMMISSION PAYMENT HAD RENDERED ANY SERVICES. WE CONSIDERED THAT THE ONUS WAS ON THE ASSESSEE, CLAIMING SUCH DEDUCTION, TO ESTABLISH THAT SUCH PAYMENTS WERE MADE FOR SERVICE S RENDERED . WE CONSIDERED THAT THE ASSESSEE HAD NOT FURNISHED ANY CONCRETE EVIDENCE LIKE CONFIRMATION FROM THE PURCHASE PARTIES TO DEMONSTRATE THAT THESE PURCHASES WERE MADE THROUGH THESE TWO SPECIFIED PERSONS TO WHOM COMMISSION PAYMENTS WERE PAID. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE HAD NOT ESTABLISHED THAT THE PERSONS TO WHOM THE COMMISSION PAYMENT WAS MADE HAD RENDERED ANY SUCH SER VICES, THEREFORE, I N VIEW OF THE ABOVE MENTIONED FINDINGS AND FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDIN GS OF THE LD. CIT(A) . 6. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS DISMISSED. SD/ - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 17 /05 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,