Jaisal Silk Mills Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(3), Surat

ITA 2799/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6722 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Section: 37

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI M.K. SHRAWAT, JM AND D.C.AGRAWAL, AM JAISAL SILK MILLS (P) LTD., 1001-1002, GOWALA MARKET, RING ROAD, SURAT. VS. INCOME-TAX OFFICER, WARD 1(3), SURAT. (APPELLANT) .. (RESPONDENT) AND INCOME-TAX OFFICER, WARD 1(3), SURAT. VS. JAISAL SILK MILLS (P) LTD., 1001-1002, GOWALA MARKET, RING ROAD, SURAT. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- WRITTEN SUBMISSIONS REVENUE BY:- SHRI R. K. DHANESTA, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE THE THREE APPEALS ONE FILED BY THE ASSE SSEE AND OTHER TWO ARE FILED BY THE REVENUE. SINCE ALL THESE APPEA LS INVOLVE COMMON ISSUE, THEY ARE TAKEN UP TOGETHER FOR THE SAKE OF C ONVENIENCE. ITA NO.2799/AHD/2009 ASST. YEAR 2006-07 (ASSESSEES APPEAL) 2. THE ASSESSEE HAS RAISED FOLLOWING GROUND IN THIS APPEAL :- ITA NO.2799/AHD/2009 ASST. YEAR 2006-07 1.ITA NO.2948/AHD/2009 ASST. YEAR 2004-05 2.ITA NO.2949/AHD/2009 ASST. YEAR 2005-06 ITA NOS.2799, 2948 & 2949/AHD/2009 ASST. YEARS 2006-07,2004-05 & 2005-06 2 (1) ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF COMMISSION EXPENSE S, AMOUNTING TO RS.9,95,960/- AS MADE BY THE AO. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROCESSING ART SILK CLOTH ON JOB WORK BASIS AND TRADING OF TEXTILE CLOTHS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY INCURRED C OMMISSION EXPENSES OF RS.9,95,960/- IN RESPECT OF CLOTH OF VARIOUS CUS TOMERS AS INTRODUCED BY DIFFERENT COMMISSION AGENTS FOR DYING AND PRINTING. ACCORDING TO THE ASSESSEE IT HAD DISCHARGED ENTIRE ONUS BY SUBMITTIN G NAMES AND ADDRESSES OF THE COMMISSION AGENTS, THEIR PANS, CONFIRMATIONS BY THE COMMISSION AGENTS, PROOF OF PAYMENTS BY ACCOUNT PAYEE CHEQUES AND DEDUCTION OF TDS ON COMMISSION PAYMENT. THE AO DID NOT ACCEPT TH E CLAIM OF THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS NOT FURNIS HED ANY EVIDENCE WITH REGARD TO THE EXACT NATURE OF SERVICES RENDERED BY THE COMMISSION AGENTS. IT HAS ALSO NOT FURNISHED ANY EVIDENCE TO SHOW THAT SALES HAVE BEEN EFFECTED THROUGH THESE AGENTS. NO COPY OF AGREEMENT EITHER WITH THE PARTIES OR WITH THE COMMISSION AGENTS HAS BEEN FURN ISHED. THE CLAIM OF COMMISSION PAYMENT HAS ALSO NOT BEEN JUSTIFIED WITH RELEVANT BILLS AS WELL AS SALES RELEVANT TURNOVER MADE THROUGH A PART ICULAR AGENT. ACCORDING TO HIM MERE SUBMISSION OF CONFIRMATION LE TTER IS NOT AN ENOUGH OF EVIDENCE TO PROVE THE PAYMENT OF RS.9,95, 960/- AS COMMISSION. ANOTHER ASPECT MENTIONED BY THE AO IS T HAT ASSESSEE HAS NOT GIVEN ANY DETAIL TO SHOW AS TO HOW THE AMOUNT OF CO MMISSION PAYMENT IN RESPECT OF EACH OF THE PERSON HAS BEEN WORKED OUT. 4. THE LD. CIT(A) CONFIRMED THE ADDITION BY HOLDING AS UNDER :- 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE AO. THE APPELLANT IS RELYING ON MORE CASE LAWS RATHER THAN ON FACTS. AS STATED BY THE HON. SUPREME COURT IN THE CASE OF LAXMINARAYAN MADANLAL 86 ITR 418 MERE EXISTENCE OF AGREEMENT ITA NOS.2799, 2948 & 2949/AHD/2009 ASST. YEARS 2006-07,2004-05 & 2005-06 3 BETWEEN THE ASSESSEE AND ITS SELLING AGENT OR PAYME NT OF COMMISSION DOES NOT TIE DOWN THE INCOME-TAX OFFICER TO HOLD THAT TH E PAYMENT WAS EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE HO N. SUPREME COURT FURTHER STATED THAT WHETHER THE COMMISSION PAID IS DEDUCTIBLE U/S 37 OR NOT HAS TO BE DECIDED ON THE FACTS AND CIRCUMSTANCE S OF THE CASE. IN THE PRESENT CASE, THE AO HAS BEEN ABLE TO CLEARLY POINT ED OUT THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE WITH REGARD TO THE NATURE OF SERVICES RENDERED. THE ASSESSEE HAS NOT FURNISHED A NY EVIDENCE TO SHOW WHICH WERE THE SALES WERE EFFECTED FOR THESE AGENTS . THE ASSESSEE HAS NOT FURNISHED ANY COPY OF AGREEMENT. THE ASSESSEE HAS F AILED TO JUSTIFY THE CLAIM OF COMMISSION/BROKERAGE BY PUTTING RELEVANT B ILLS OF SALE AS WELL AS RELEVANT TURNOVER OF PARTICULAR PERSON. IN VIEW OF THE ABOVE, I AGREE WITH THE AO THAT THE ASSESSEE HAS MISERABLY FAILED TO SU BSTANTIATE ITS CLAIM. THE DISALLOWANCE MADE BY THE AO IS, THEREFORE, CONF IRMED AND THIS GROUND OF APPEAL IS DISMISSED. 5. IN THE WRITTEN SUBMISSION ASSESSEE POINTED OUT T HAT UNDER SIMILAR CIRCUMSTANCES, THE TRIBUNAL HAS RESTORED THE MATTER IN THE CASE OF THE ASSESSEE IN ITA NOS. 1583/AHD/2008 FOR ASST. YEAR 2 004-05 BACK TO THE FILE OF AO BY OBSERVING AS UNDER :- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW WHAT ASSESSEE HAS DO NE IS TO COMPLETE PAPER WORK GIVING NAME AND ADDRESSES AND PAN OF THE COMMISSION AGENTS AND PAYMENT TO THEM THROUGH ACCOUNT PAYEE CH EQUE. THIS NO DOUBT SHOWS THE TRANSFER OF MONEY TO THE IDENTIFIED PERSONS BUT DOES NOT SHOW AS TO WHAT EXACTLY THE SERVICES HAVE DONE FOR THE ASSESSEE. THERE IS NO CONFIRMATION OR DETAILS OF SERVICES RENDERED BY THE AGENTS TO THE ASSESSEE SUCH AS CONFIRMATION FROM PARTIES WHO HAVE MADE PURCHASES FROM THE ASSESSEE THROUGH THESE AGENTS. WE WOULD, T HEREFORE, REQUIRE THE ASSESSEE TO PRODUCE THESE AGENTS BEFORE THE AO SO T HAT AO WOULD SATISFY HIMSELF AS TO WHAT EXACTLY HAS BEEN DONE FOR THE AS SESSEE. THE ASSESSEE IN TURN WILL PRODUCE CONFIRMATION FROM THE PARTIES WHO HAVE PURCHASED FROM THE ASSESSEE THROUGH THESE AGENTS AND AO WILL SATIS FY HIMSELF ABOUT GENUINENESS OF SUCH CLAIM. WE ACCORDINGLY RESTORE T HE MATTER TO THE FILE OF THE AO FOR SATISFYING HIMSELF ABOUT THE GENUINEN ESS OF THE CLAIM. THIS GROUND OF THE ASSESSEE IS ALLOWED ACCORDINGLY BUT F OR STATISTICAL PURPOSES. ITA NOS.2799, 2948 & 2949/AHD/2009 ASST. YEARS 2006-07,2004-05 & 2005-06 4 ACCORDING TO THE ASSESSEE IN WRITTEN SUBMISSIONS FA CTS AND CIRCUMSTANCES OF THE CASE ARE THE SAME AS IN ASST. YEAR 2004-05 & 2005-06, SIMILAR DECISION SHOULD BE TAKEN. 6. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE RESTO RE THE MATTER TO THE FILE OF AO FOLLOWING OUR ORDER FOR ASST. YEAR 2005- 06 & 2005-06 WITH THE SAME DIRECTION AS GIVEN IN THOSE YEARS. THE AO WILL GIVE OPPORTUNITY TO THE ASSESSEE TO PRODUCE NECESSARY EVIDENCE TO CO MPLY WITH THE DIRECTIONS OF THE TRIBUNAL. AS A RESULT, THIS GROUN D OF ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. AS A RESULT, APPEAL F ILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.2948 & 2949/AHD/2009 AYS 2004-05 & 2005-06 (REVENUES APPEALS) 8. IN ITA NO.2948/AHD/2009 THE REVENUE HAS RAISED T HE FOLLOWING GROUND :- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED BY THE AO OF RS.2,51,174/- U/S 271(1)9C) OF THE ACT. AND IN ITA NO.2949/AHD/2009 THE REVENUE HAS RAISED FOLLOWING GROUND: (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED BY THE AO OF RS.4,01,999/- U/S 271(1)(C) OF THE ACT. 9. THESE TWO APPEALS OF REVENUE HAVE BEEN FILED AGA INST THE ORDER OF LD. CIT(A) WHEREIN THE LD. CIT(A) HAS CANCELLED THE PENALTY LEVIED BY THE AO ON THE ADDITIONS MADE BY DISALLOWING COMMISSION PAYMENT. ITA NOS.2799, 2948 & 2949/AHD/2009 ASST. YEARS 2006-07,2004-05 & 2005-06 5 10. WE HAVE HEARD THE LD. DR AND PERUSED THE WRITTE N SUBMISSIONS FILED BY THE ASSESSEE. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR SUSTAINING THE LEVY OF PENALTY, ONCE ADDITION IN RE SPECT OF PENALTY LEVIED DOES NOT SURVIVE. THE PROPOSITION THAT NO PENALTY U NDER SECTION 271(1)(C) CAN BE LEVIED IF QUANTUM IN RESPECT OF WHICH LEVY O F PENALTY IS PROPOSED DOES NOT SURVIVE, HAS BEEN HELD BY SEVERAL AUTHORIT IES SUCH AS ADDL. CIT VS. BADRI PRASAD KASHI PRASAD (1993) 200 ITR 206 (A LL), PRABHAT OIL TRADERS VS. ITO (1996) 218 ITR (AT) 39 ITAT (AHD), CITY DRY FISH CO. VS. CIT (1999) 238 ITR 63 (A.P.), CIT VS. MD. BUX S AUKAT ALI (2004) 265 ITR 326 (RAJ) AND CIT VS. SHISHPAL (2002) 255 I TR 187 (RAJ). THE AO WOULD BE FREE TO CONSIDER TO INITIATE PENALTY PR OCEEDINGS IN THE FRESH ASSESSMENT PROCEEDINGS IN PURSUANCE TO ORDER OF THE TRIBUNAL. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDERS OF LD. C IT(A) IN CANCELING THE PENALTY ORDER. THE APPEALS FILED BY T HE REVENUE ARE DISMISSED. 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 29/04/11. SD/- SD/- (M. K. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 29/04/11. MAHATA/- ITA NOS.2799, 2948 & 2949/AHD/2009 ASST. YEARS 2006-07,2004-05 & 2005-06 6 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 20/4/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 21/4/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..