R.R.PAPER PRODUCTS , MUMBAI V. JT. CIT. RANGE 24 (3), MUMBAI

ITA 2830/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4175 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 04-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Search and seizure; Initiation of penalty proceedings; TDS; Set aside
• Section: 271(1)(c); 143(3); 234B; 40(a)(ia); 143(1)

Judgement Text

P A G E | 1 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.2830/MUM/2018 (ASSESSMENT YEAR: 2012 - 13 ) M/S R.R. PAPER PRODUCTS 117, LAXMI PLAZA, NEW LINK ROAD, ANDHERI (WEST) MUMBAI - 400 053 VS. JT. CIT RANGE - 24(3), R. NO. 412, 4 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012 PAN AAIFR3853J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIMAL PUNMIYA , A.R RESPONDENT BY: SHRI D.G. PANSARI, D.R DATE OF HEARING: 18.07.2019 DATE OF PRONOUNCEMENT: 2 3 .0 8 .2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 36, MUMBAI, DATED 08.01.2018 WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 26.03.2015 FOR A.Y. 2012 - 13. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED IN CONFIRMING AND AD DING THE GENUINE PAYMENT MADE TO SISTER CONCERN M/S SHREE AGENCIES OF RS.1,71, 3 24/ - AND ADDED THE SAME TO THE TO TAL INCOME OF THE ASSESSEE IN VIEW O F SECTION 40 ( A ) (IA ) OF THE P A G E | 2 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) INCOME TAX ACT, 1961 AND ERRED IN CONFIRMING THE STATEMENT OF THE LD. AO THAT NO TDS HAS BEEN DEDUCTED ON THE PAYMENT TO SISTER CONCERN M/S SHREE AGENCIES. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.20,26,770/ - IN THE CASE OF THEFOLLOWING PARTIES ( 1) J.S. CORRUPACK PVT . LTD. - 241880, ( 2) P.R. PACKING SERVICE - 385220, 3) M/S CHAMBER PACKING RS. 1,48,057, ( 4) M/S ARIES PAPER 0 - 767010, (5) M/S SHREEJI INDL . ENGG . PVT. LTD. - 269150 AND ( 6) M/S VIVALA CARTOON PVT. LTD. - 215453 AND ERRED IN STATING THAT COMMISSION PAID ON SALES IN NON GENUINE EXPENDITURE. 3. THE LD. CIT(A) ERRED IN CONFIRMING THE CHARGING OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE INCOME T AX ACT 1961. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE INITIATION OF THE PENALTY PROCEEDING UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961. 5. THE ASSESSEE CRAVES LEAVE TO ADD FURTHER GROUNDS OR TO AMEND OR ALTER THE EXIST ING GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 2. BRIEFLY STATED, THE ASSESSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN DIFFERENT KINDS OF PAPERS HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2012 - 13 ON 02.08.2012, DISCLOSING ITS TOTAL INCOME AT RS.1,34,87,199 / - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE FIRM WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). THE A.O WHILE FRAMING THE ASSESSMENT MADE THE FOLLOWING A DDITIONS/DISALLOWANCES: SR. NO. PARTICULARS AMOUNT 1. DISALLOWANCE UNDER SEC.40(A)(IA) OF IMPUGNED COMMISSION PAYMENT TO SISTER CONCERN. RS.1,71,324/ - 2. DISALLOWANCE OF COMMISSION O N SALES. RS.38,73,644/ - 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE AS REGARDS THE DISALLOWANCE MADE BY THE A.O UNDER SEC. 40(A)(IA) WAS NOT PERSUADED TO SUBSCRIBE TO THE SAME AN D UPHELD THE VIEW TAKEN BY THE A.O. AS REGARDS THE DISALLOWANCE OF THE COMMISSION ON SALES , T HE CIT(A) AFTER OBTAINING THE REMAND REPORT FROM THE A.O DELETED THE DISALLOWANCE IN RESPECT OF 6 PARTIES. APART THERE FROM, IN CASE OF ONE OF THE PARTY VIZ. M/S CHAMBER PACKING THE A.O WAS DIRECTED TO RESTRICT THE DISALLOWANCE TO RS.1,48,057/ - AS AGAINST P A G E | 3 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) RS.4,46,163/ - THAT WAS MADE BY HIM. ACCORDINGLY, THE CIT(A) PARTLY ALLOWED THE APPEAL . 4. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, AS WELL AS THE JUDICIAL PRONOUNCEMENT S RELIED UPON BY THEM. WE FIND THAT OU R INDULGENCE IN THE PRESENT APPEAL HAS BEEN SOUGHT BY THE ASSESSEE AS REGARDS THE SUSTAINABILITY OF THE ORDER OF THE CIT(A) ON TWO ISSUES VIZ. (I) DISALLOWANCE UNDER SEC. 40(A)(IA): RS.1,71,324/ - ; AND (II) DISALLOWANCE OF COMMISSION ON SALES: RS.20,26,770/ - . 5 . WE SHALL FIRST ADVERT TO THE DISALLOWANCE MADE BY THE A.O UNDER SEC. 40(A)(IA) OF THE ACT. AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES, THE AFORESAID DISALLOWANCE WAS MADE FOR THE REASON THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SO URCE ON THE AMOUNT OF RS.1,71,324/ - THAT WAS PAID BY IT TO ITS SISTER CONCERN VIZ. M/S SHREE AGENCIES . IT IS THE CLAIM OF THE REVENUE THAT AS THE AFORESAID PAYMENT MADE BY THE ASSESSEE WAS TOWARDS COMMISSION, THEREFORE , IT WAS OBLIGATORY ON ITS PART TO HAVE DEDUCTED TAX AT SOURCE ON THE SAME. ON THE CONTRARY, IT IS THE CLAIM OF THE ASSESSEE THAT AS THE PAYMENT MADE TO ITS SISTER CONCERN WAS TOWARDS PURCHASE CONSIDERATION IN LIEU OF HIGH SEAS SALES MADE BY THE LATTER , T HEREFORE, IT WAS NOT OBLIGATED TO HAVE DEDUCTED ANY TAX AT SOURCE AT THE TIME OF MAKING OF THE PAYMENT TOWARDS SUCH PURCHASE CONSIDERATION . THE LD. A.R IN ORDER TO FORTIFY HIS AFORESAID CONTENTION HAD TAKEN US THROUGH CERTAIN DOCUMENTS VIZ. (I) COPY OF THE HIGH SEAS SALES AGREEMENT EXECUTED BETWEEN THE ASSESSEE AND ITS SISTER CONCERN VIZ. M/S SHREE AGENCIES; (II) COPIES OF THE INVOICES RAISED BY THE OVERSEAS SUPPLIER O N M/S SHREE AGENCIES ; (III) COPY OF THE INVOICES RAISED BY M/S SHREE AGENCIES ON THE P A G E | 4 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) A SSESSEE; (IV) COPY OF SALES TAX RETURN OF M/S SHREE AGENCIES; AND (V) COPY OF THE SALES TAX AUDIT REPORT OF M/S SHREE AGENCIES. WE HAVE PERUSED THE AFORESAID DOCUMENTS AND FIND SUBSTANTIAL FORCE IN THE CONTENTION ADVANCED BY THE LD. A.R THAT THE ASSESSEE H AD MADE HIGH SEAS PURCHASES FROM M/S SHREE AGENCIES (SISTER CONCERN). A S IS DISCERNIBLE FROM A PERUSAL OF THE HIGH SEAS SALES AGREEMENT , DATED 22.03.2011 , M/S SHREE AGENCIES (SISTER CONCERN) WAS TO MAKE SALES ON HIGH SEAS TO THE ASSESSEE FOR A CONSIDERATION OF C & F USD 620.00 PMT + 2%. ON A PERUSAL OF THE COPIES OF THE INVOICES RAISED BY THE OVERSEAS SUPPLIER VIZ. M/S FORTEX INTERNATIONAL , SWEDEN ON M/ S SHREE AGENCIES, IT STAND S ESTABLISHED BEYOND DOUBT THAT THE GOODS WERE ORIGINALLY PURCHASED BY THE SAID CONCERN FROM THE AFOREMENTIONED FOREIGN PARTY . FURTH ER , A PERUSAL OF THE HIGH SEAS SALES INVOICES RAISED BY M/S SHREE AGENCIES ON THE ASSESSEE THERE IN PROVES TO THE HILT THAT IT WAS ONLY PURSUANT TO THE SAID SALE TRANSA CTION S THAT THE TITLE IN THE GOODS WAS THEREAFTER TRANSFERRED TO THE ASSESSEE. IN SUM AND SUBSTANCE, THE FACT THAT THE ASSESSEE HAD PURCHASED THE GOODS UNDER CONSIDERATION FROM M/S SH REE AGENCIES (SISTER CONCERN) STANDS PROVED ON A PERUSAL OF THE AFORESAID DOCUMENTS. ALSO, THE FACT THAT THE IMPORT OF THE GOODS HAD DULY BEEN REFLECTED IN THE SALES TAX RETURN OF M/S SHREE AGENCIES FURTHER SUBSTANTIATES THE AFORESAID FACTUAL POSITION. IN FACT, A PERUSAL OF THE SALES TAX AUDIT REPORT OF M/S SHREE AGENCIES CLEARLY REVEALS THAT THE AFORESAID IMPORTS OF RS.1,75,29,051/ - AND THE SALES OF RS.1,78,79,654/ - MADE TO THE ASSESSEE FORMS PART OF THE P URCHASES AND SALES OF M/S SHREE AGENCIES . ACCORDINGLY, IN THE BACKDROP OF THE AFORESAID FACTS , WE ARE OF THE CONSIDERED VIEW THAT THE AMOUNT OF RS.1,78,79,636/ - (INCLUSIVE OF 2%) PAID BY THE ASSESSEE TO M/S SHREE AGENCIES WAS TOWARDS THE PURCHASE CONSIDERATION IN RESPECT OF THE AFORESTATED HIGH S EAS PURCHASES. WE THUS FINDING OURSELVES TO BE IN AGREEMENT WITH THE CONTENTION ADVANCED BY THE LD. P A G E | 5 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) A.R THAT AS NO OBLIGATION WAS CAST UPON THE ASSESSEE TO HAVE DEDUCTED TAX AT SOURCE ON THE PURCHASE CONSIDERATION THAT WAS PAID TO M/S SHREE AGENCIES , THERE FORE, NO DISALLOWANCE UNDER SEC. 40(A)(IA) WAS CALLED FOR IN ITS HANDS , THUS DELETE THE ADDITION OF RS.1,71,324/ - MADE BY THE A.O ON THE SAID COUNT. THE G ROUND OF APPEAL NO. 1 IS ALLOWED. 6 . WE SHALL NOW ADVERT TO THE SUSTAINING OF THE DISALLOWANCE OF COMMISSION ON SALES OF RS.20,26,770/ - BY THE CIT(A). BRIEFLY STATED, THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION CLAIMED DEDUCTION OF COMMISSION ON SALES AMOUNTING TO RS.80,30,064/ - . THE A.O IN ORDER TO VERIFY AS TO WHETHER ANY SERVICE S HAD ACTUAL LY BEEN RENDERED BY THE BROKERS ISSUED SUMMONS TO THE BUYERS TO WHOM S ALES WERE CLAIMED TO BE HAVE BEEN MADE. ON THE BASIS OF THE DETAILS GATHERED, THE A.O CATEGORISED THE BUYERS INTO THREE PARTS, VIZ. (I) WHERE THE BUYERS HAD CONFIRMED THE INVOLVEMENT OF THE BROKER; (II) WHERE THE BUYER S DENIED THE INVOLVEMENT OF ANY BROKER; (III) WHERE THERE WAS NO RESPONSE FROM THE BUYER S . THE DETAILS OF THE BUYERS WHO HAD EITHER DENIED THE INVOLVEMENT OF ANY BROKER IN RESPECT OF THEIR TRANSACTION S WITH THE ASSESSEE AND ALSO THOSE FROM WHOM NO RESPONSE WAS RECEIVED , ARE CULLED OUT AS UNDER : SR. NO. PARTY NAME BROKER AS PER ASSESSEE SALE/PURCHASE VALUE AS PER ASSESSEE COMMISSION AS PER ASSESSEE REMARKS 1. J.S. CORRUPACK PVT. LTD. SUPLIN S. PANCHAL 1,07,36,525 241880 DENI ED 2. P.R. PACKING BIPIN K. VORA 21254802 385220 DENIED 3. M/S AMIGO INDUSTRIES M.R. TEXTILE CORPORATION 14417973 597418 DENIED 4. M/S CHAMBER PACKING SHREE SALASAR CORPORATION 6363317 446163 DENIED 5. M/S ARIES PAPER CO. SHRI MANISH R. SHAH 36133606 767010 DENIED 6. M/S SHREEJI INDL. ENGG. PVT. LTD. SANDEEP TRADERS 14633864 269150 DENIED 7. M/S MAYUR PACKAGING SHREE SALASAR CORPORATION 6336547 153959 NO CONFIRMATION RECEIVED 8. M/S VIVALA CARTOON PVT. LTD. HOLASH KUMAR VERMA 8977130 215453 NO CONFIRMATION RECEIVED 9. M/S SIGMA PACKAGING HITESH G. RAJGOUR 6699061 160046 NO CONFIRMATION RECEIVED 10. BHAVESH PRODUCTS PVT. LTD. ARVIND KUMAR KASHLIWAL 4457002 38033 NO CONFIRMATION P A G E | 6 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) RECEIVED 11. M/S M.K. PRINT PACK PVT. LTD. HITESH G. RAJGOUR 12375690 292194 NO CONFIRMATION RECEIVED 12. M/S BHILOSA INDUSTRIES PVT. LTD. ARUN SALES CORPORATION 16583925 307118 NO CONFIRMATION RECEIVED ON THE BASIS OF THE AFORESAID DETAILS THE A.O DISALLOWED COMMISSION ON SALES AGGREGATING TO RS. 38,73,644/ - . IN THE COURSE OF THE PROCEEDINGS BEFORE THE CIT(A) THE ASSESSEE FURNISHED THE DETAILS ALONG WITH THE CONFIRMATIONS FROM CERTAIN BUYERS , BANK STATEMENTS AND OTHER RELEVANT DETAILS IN SUPPORT OF ITS AFORESAID CLAIM OF EXPENSES. THE CIT(A) CALLED FOR A REMAN D REPORT , AND AFTER RECEIVING THE SAME RESTRICTED THE ADDITION TO THE EXTENT OF RS.20,26,770/ - IN RESPECT OF THE FOLLOWING TRANSACTIONS: SR. NO. PARTY NAME BROKER AS PER ASSESSEE SALE/PURCHASE VALUE AS PER ASSESSEE COMMISSION AS PER ASSESSEE REMARKS 1. J.S. CORRUPACK PVT. LTD. SUPLIN S. PANCHAL 1,07,36,525 2 , 41 , 880 DENIED 2. P.R. PACKING BIPIN K. VORA 21254802 3 , 85 . 220 DENIED 3 . M/S CHAMBER PACKING SHREE SALASAR CORPORATION 6363317 * 1,48,057 DENIED 4 . M/S ARIES PAPER CO. SHRI MANISH R. SHAH 36133606 7 , 67 , 010 DENIED 5 . M/S SHREEJI INDL. ENGG. PVT. LTD. SANDEEP TRADERS 14633864 2 , 69 , 150 DENIED 6 . M/S VIVALA CARTOON PVT. LTD. HOLASH KUMAR VERMA 8977130 2 , 15 , 453 NO CONFIRMATION RECEIVED * RESTRICTED AS PER THE DIRECTIONS OF THE CIT( A) TO RS. 1,48,057/ - , AS AGAINST DISALLOWANCE OF RS. 4,46,163/ - MADE BY THE A.O. AS OBSERVED BY US HEREINABOVE, THE A.O IN ORDER TO VERIFY THE GENUINENESS OF THE CLAIM OF THE COMMISSION EXPENSES ON SALE S HAD MADE NECESSARY VERIFICATIONS FROM THE BUYERS. THE A.O HAD ISSUED SUMMONS TO THE BUYERS AND HAD CALLED UPON THEM TO INTER ALIA STATE THE NAME OF THE INTERMEDIARY THROUGH WHOM THEY HAD TRANSACTED WITH THE ASSESSEE. ON THE BASIS OF THE DETAILS GATHERED, THE A.O WAS OF THE VIEW THAT THE BUYERS WHO HAD DEN IED THE INVOLVEMENT OF ANY BROKER/INTERMEDIARY AND HAD STATED TO HAVE ENTERED INTO A DIRECT DEALING WITH THE ASSESSEE , THE COMMISSION EXPENSE S CLAIMED BY THE P A G E | 7 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) ASSESSEE IN RESPECT OF SUCH PARTIES WERE TO BE HELD AS BOGUS. ON A SIMILAR FOOTING THE COMMISSION EXPENSES IN RESPECT OF THE BUYERS FROM WHOM NO REPLY WAS RECEIVED BY THE A.O WERE ALSO HELD BY HIM TO BE INGENUINE. ACCORDINGLY, IT IS IN THE BACKDROP OF THE AFORESAID VIEW THAT THE CIT(A) HAD FINALLY UPHELD THE DISALLOWANCE OF COMMISSION ON SALES OF RS.20 ,26,770/ - . 7 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US IN THE BACKDROP OF THE CONTENTION S ADVANCED BY THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES . AT THE VERY OUTSET, WE MAY HEREIN OBSERVE THAT THE INFORMATION GATHERED BY TH E LOWER AUTHORITIES BY SUMMONING DETAILS FROM THE BUYERS COULD NOT HAVE CONCLUSIVELY PROVE D THE AUTHENTICITY OR OTHERWISE OF THE COMMISSION EXPENSES CLAIMED BY THE ASSESSEE IN RESPECT OF ITS SALE TRANSACTIONS. IN OUR CONSIDERED VIEW , THE A.O OUGHT TO HAVE SUMMONED THE COMMISSION AGENTS AND VERIFIED THE GENUINENESS OF THE TRANSACTIONS, SPECIFICALLY WHEN THE COMPLETE DETAILS ALONG WITH THE IR INCOME TAX CREDENTIALS WERE DULY AVAILABLE WITH HIM. IN FACT, AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES , THE COMMISSION AGENTS IN DISPUTE HAD CATEGORICALLY CONFIRMED THE RECEIPT OF COMMISSION FROM THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION . APART THERE FROM, THE COMPLETE DETAILS AS REGARDS THEIR ADDRESSES AND INCOME - TAX CREDENT IALS WERE ALSO FILED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS WITH THE A.O. WE ARE UNABLE TO COMPREHEND AS TO WHAT HAD STOPPED THE A.O FROM EXAMINING THE COMMISSION AGENTS IN ORDER TO VERIFY THE AUTHENTICITY OF THE COMMISSION EXPENSES WHICH WERE BOOK ED BY THE ASSESSEE. ADMITTEDLY, SUMMONING OF DETAILS FROM THE BUYERS WOULD HAVE SUPPLEMENTED THE EXERCISE THAT WAS CARRIED OUT BY THE A.O TO VERIFY THE AUTHENTICITY OF THE COMMISSION EXPENSES . HOWEVER, WE ARE AFRAID THAT THE STANDALONE INFORMATION GATHERED BY THE A.O FROM THE BUYERS CANNOT JUSTIFY DRAWING OF ADVERSE INFERENCES INSOFAR THE VERACITY OF THE CLAIM OF THE P A G E | 8 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) COMMISSION EXPENSES BOOKED BY THE ASSESSEE IN RESPECT OF THE SALES TRANSACTION S IS CONCERNED. IN FACT, WE ARE OF A STRONG CONVICTION THAT THE DEC LINING ON THE PART OF THE BUYERS OF HAVING TRANSACTED THROUGH ANY BROKER O R INTERMEDIARY OUGHT TO HAVE BEEN CONFRONTED BY THE A.O TO THE COMMISSION AGENT CONCERNED, SO THAT THE FACTUAL POSITION WOULD HAD EMERGED . WE ARE AFRAID THAT THE A.O HAD MOST CONVEN IENTLY SHIRKED FROM THE AFORESAID EXERCISE AND HAD MERELY HUSHED THROUGH THE MATTER WITHOUT MAKING ANY PROPER VERIFICATIONS , WHICH HE WAS SUPPOSED TO HAVE MADE. WE ARE SAYING SO FOR THE REASON THAT THE SERVICES RENDERED BY A COMMISSION AGENT (ON SALES) MAY NOT HAVE BEEN IN CERTAIN CASES IN THE ABSOLUTE KNOWLEDGE OF THE BUYER , FOR THE REASON , THAT SUCH BROKER/AGENT WAS BEING REMUNERATED BY THE ASSESSEE AND NOT BY THE BUYER. APART THERE FROM, WE ARE ALSO PERSUADED TO SUBSCRIBE TO THE CONTENTIONS ADVANCED BY T HE LD. A.R THAT PAYMENT OF BROKERAGE TO CERTAIN BROKERS/AGENTS FOR THEIR SERVICES RENDERED IN LOCATING BUYER S OR MAKING AVAILABLE CERTAIN INFORMATION IN RESPECT OF THE BUYERS WHICH WOULD HAD FACILITATED PROCURING OF ORDERS BY THE ASSESSEE, ALSO CANNOT BE R ULED OUT. ACCORDINGLY, IN CERTAIN CASES THE BUYER MAY NOT HAVE BE EN EITHER AWARE AT ALL OR FULLY AWARE ABOUT THE BROKER/ INTERMEDIARY AND THE SERVICES WHICH WOULD HAVE BEEN RENDERED BY THEM TO THE ASSESSEE SUPPLIER. OUR AFORESAID VIEW THAT THE BUYER PARTIES IN CERTAIN CASES MAY NOT HAVE ANY KNOWLEDGE OF THE PERSON TO WHOM COMMISSION HA D BEEN CLAIMED TO HAVE BEEN PAID BY THE SELLER , IS FORTIFIED BY A N ORDER OF A COORDINATE BENCH OF THE ITAT, MUMBAI IN THE CASE OF M/S C.H. JAVA & COMPANY VS . ACIT, RANGE 17(3), MUMBAI (ITA NO. 6390/MUM/2005/ DATED 01.12.2008) . THE TRIBUNAL IN ITS AFORESAID ORDER HAD OBSERVED, AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AN PERUSED THE COPIES OF VARIOUS DOCUMENTS FILED IN THE COMPILATION BY THE ASSESSEE. WE FIND THAT HE ASSESSEE HAS FILED CONFIRMATION FROM THE PAYEES OF THE COMMISSION AMOUNT AND THE AMOUNT OF COMMISSION WAS PAID PER C H E Q U E S O N L Y . T H E P A Y E E S O F T H E C O M M I S S I O N AMOUNT HAVE COMPLIED WITH THE SUMMONS ISSUED BY THE ASSESSING OFFICER AND HAS CONFIRMED THE PAYMENT OF COMMISSION TO THEM. PAN OF ALL P A G E | 9 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) THE PAYEES OF THE COMMISSION AMOUNT WAS FILED BEFORE THE ASSESSING OFFICER. IT IS NOT UNUSUAL THAT THE PARTIES TO WHOM THE SALES WERE MADE DO NOT HA VE KNOWLEDGE OF THE PERSON TO WHOM THE COMMISSION HAS BEEN CLAIMED BY THE ASSESSEE AS HAVING PAID FOR THE SERVICES RENDERED TO THE ASSESSEE COMPANY AND THIS FACTOR ALONE IS NOT SUFFICIENT TO HOLD THAT THE COMMISSION PAYMENTS EARNED BY TH E ASSESSEE ARE NOT GENUINE. IN SUCH CASE THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE HAS TO BE EXAMINED IN ORDER TO DECIDE THE GENUINENESS OR OTHERWISE OF THE COMM ISS ION PAYMENT CLAIMED BY THE ASSESSEE. ALL THE PAYEES OF THE COMMISSION AGENTS ARE EXISTING INCOME TAX ASSESSES AND HAVE CONFIRMED THE PAYMENT OF COMMISSION TO THEM AND THE PAYMENTS WERE MADE PER CHEQUES ONLY. THE PAYEES OF THE COMMISSION AMOUNTS IN THEIR CONFIRMATION FILED, BEFORE THE ASSESSING OFFICER HAVE DETAILED THE SERVICES REN DERED BY THEM TO THE ASSESSEE COMPANY IN THE MATTER OF SALES MADE BY THE ASSESSEE COMPANY. ONE OF THE PAYEES SHRI SACHIN D. PORWAL IN HIS CONFIRMATION LETTER MENTIONED THE SAME PAYMENTS OF COMMISSION RECEIVED BY HIM THROUGH THE ASSESSEE COMPANY IN THE PAST YEAR. LIKEWISE, SHRI S. P. GUPTA HAS CONFIRMED THAT THEY ARE REGULARLY ORGANIZING BUSINESS ON BEHALF OF THE ASSESSEE FIRM AND HAVE THEIR BUSINESS TRANSACTION IN THE PAST YEARS AS WELL AS IN THE NEXT YEAR. M/S. G.L BAL GRAPHIC (INDIA) HAS CONFIRMED THAT HE HAS PROVIDED A PACKAGE OF SERVICES TO THE ASSESSEE FIRM TO ENABLE THEM TO OBTAIN THE SALES DURING THE RELEVANT PERIOD AND A PROPRIETOR THEREOF IS A SCIENCE GRADUATE WITH THE 20 YEARS OF EXPERIENCE IN THE AREAS OF SURF ACE COATINGS ETC. M/S. R.M. ASSOCIATES HAS ALSO DETAILED THE SERVICES RENDERED TO THE ASSESSEE FIRM DURING THE RELEVANT PERIOD AND HE HAS ALSO CONFIRMED THAT HE IS A SCIENCE GRADUATE WITH 20 YEARS OF EXPERIENCE IN THE SURFACE COATINGS ETC. THE ASSESSEE HAS DECLARED THE RETURN OF INCOME TO RS.1.41 CRORES DURING THE YEAR. THE REVENUE COULD NOT PRODUCE ANY MATERIAL ON RECORD TO SUGGEST THAT THE COMMISSION PAYMENTS CLAIMED BY THE ASSESSEE ARE FICTITIOUS OR NOT GENUINE. 19 THESE FACTS OF THE CASE, WE HOLD THAT T HE ASSESSEE IS ENTITLED TO DEDUCTION OF THE COMMISSION AMOUNT CLAIMED BY IT AND ACCORDINGLY, THE GROUND NO. 1 OF THE ASS ESSEE IS ALLOWED. THE AFORESAID VIEW WAS THEREAFTER AGAIN FOLLOWED BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL IN THE CASE OF THE AFOREMENTIONED ASSESSEE VIZ. C.H. JAVA & CO. (SUPRA) FOR A.Y. 2003 - 04 IN ITA NO. 402/MUM/2008, DATED 06.08.2009. IN SUM AND SUBSTANCE, WE AR E OF A STRONG CONVICTION THAT IN ORDER TO VERIFY THE AUTHENTICITY OF THE CLAIM OF THE ASSESSEE THAT IT HAD AVAILED THE SERVICES OF THE RESPECTIVE BROKERS IN ORDER TO FACILITATE ITS SALE TRANSACTIONS, IT WAS INCUMBENT ON THE PART OF THE A.O TO HAVE SUMMONED THE BROKERS AND EXAMINED THEM AT THE FIRST STANCE. A S OBSERVED BY US HEREINABOVE, T H E A.O IN THE BACKDROP OF THE CONFIRMATIONS FILED BY THE BROKERS WHEREIN THEY HAD ACKNOWLEDGED RECEIPT OF COMMISSION FROM THE ASSESSEE SHOULD HAVE THEREAFTER CONFRONTED THEM WITH THE FACT THAT THE BUYERS HAD DECLINED OF HAVING CARRIED OUT ANY TRANSACTION WITH THE ASSESSEE THROUGH THEM. IN OUR CONSIDERED VIEW, IT WAS ONLY AFTER OBTAINING THE EXPLANATION OF THE BROKERS AS REGARDS THE AFORESAID CLAIM OF THE BUYERS THAT THE A .O COULD HAVE FAIRLY FORMED A VIEW AS REGARDS THE GENUINENESS OF THE COMMISSION CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID TO THE SAID P A G E | 10 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) BROKERS . OUR AFORESAID VIEW IS ALL THE MORE FORTIFIED BY THE CONFIRMATIONS OF THE BROKERS WHEREIN THE RECEIPT OF COMMISSIO N FROM THE ASSESSEE WAS ACKNOWLEDGED BY THEM . WE ARE UNABLE TO SUBSCRIBE TO THE SUMMARILY DISCARDING OF THE CONFIRMATIONS OF THE BROKERS BY THE A.O , SPECIFICALLY WHEN THEIR COMPLETE DETAILS ALONGWITH THE INCOME - TAX CREDENTIALS WERE AVAILABLE WITH HIM. APAR T THERE FROM, WE FIND THAT THE HEAVY RELIANCE PLACED BY THE A.O ON THE FACT THAT THE BUYERS HAD DECLINED THE INVOLVEMENT OF ANY BROKER/INTERMEDIARY ALSO CANNOT BE SAFELY GATHERED FROM A PERUSAL OF THE REPLIES FILED BY THEM. FOR INSTANCE, ONE OF THE BUYER V IZ. M/S J.S. CORRUPACKING PVT. LTD. ON IN ITS L ETTER ADDRESS ED TO THE A.O IN RESPONSE TO THE INFORMATION THAT WAS SOUGHT BY HIM , HAD SUBMITTED , THAT THEY HAD NOT APPOINTED ANY MIDDLEMAN/BROKER/INTERMEDIARY AND HAD DIRECTLY APPROACHED THE SUPPLIER FOR PURCH ASE OF MATERIAL. AS IS DISCERNIBLE FROM THE AFORESAID REPLY , THE SAID PARTY HAD STATED TWO FACTS VIZ. (I) THAT, THEY HAD MADE PURCHASES DIRECTLY FROM THE ASSESSEE WITHOUT APPOINTING ANY MIDDLEMAN/BROKER/INTERMEDIARY; AND (II), THEY HAD NOT APPOINTED ANY BR OKER FOR PURCHASE, AND HAD DIRECTLY APPROACHED THE SUPPLIER FOR PURCHASE OF MATERIALS. WE ARE UNABLE TO COMPREHEND THAT IN THE BACKDROP OF THE AFORESAID CLAIM OF THE BUYER PARTY HOW THE A.O COULD HAVE CONCLUSIVELY CONCLUDED THAT THE ASSESSEE WOULD NOT HAVE AVAILED ANY SERVICES OF THE COMMISSION AGENT VIZ. SHRI SUPLIN S. PANCHAL IN RESPECT OF THE SALE TRANSACTION WITH THE SAID PARTY. IN OUR CONSIDERED VIEW, THOUGH DOUBTS AS REGARDS THE VERACITY OF THE AFORESAID CLAIM OF COMMISSION EXPENSE BY TH E ASSESSEE MIGHT HAD SURFACED, BUT THEN, WE ARE OF A STRONG CONVICTION THAT THE A.O OUGHT TO HAVE MADE NECESSARY VERIFICATIONS BY SUMMONING THE COMMISSION AGENTS AND BROUGHT THE ISSUE TO A LOGICAL END . IN FACT, WE ARE OF A STRONG CONVICTION THAT THE A.O SH OULD NOT HAVE DRAWN ADVERSE INFERENCES AS REGARDS THE AUTHENTICITY OF THE CLAIM OF THE ASSESSEE ON THE BASIS OF PREMATURE P A G E | 11 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) OBSERVATIONS . BE THAT AS IT MAY, IN OUR CONSIDERED VIEW DOUBTS OR SUSPICIONS CANNOT LEAD TO DISALLOWANCE OF AN OTHERWISE DULY SUBSTANT IATED CLAIM OF EXPENSE RAISED BY AN ASSESSEE. AS A MATTER OF FACT, WE ARE OF THE CONSIDERED VIEW THAT NOTHING CONCRETE EMERGES FROM THE CONFIRMATIONS/LETTER S OF THE OTHER BUYERS ALSO WHICH COULD CONCLUSIVELY DISLODGE THE VERACITY OF CLAIM OF COMMISSION EXP ENSES (ON SALES) RAISED BY THE ASSESSEE IN CONTEXT OF THE AFOREMENTIONED PARTIES. IN FACT, WE FIND FROM A PERUSAL OF FINANCIAL ACCOUNTS OF THE ASSESSEE FOR A.Y. 2010 - 11 AND A.Y. 2011 - 12 , WHICH TOO AS BROUGHT TO OUR NOTICE HAD BEEN SUBJECTED TO SCRUTINY ASS ESSMENT UNDER SEC. 143(3), THAT CERTAIN BROKERS WHOSE SERVICES HAD BEEN DOUBTED BY THE A.O/CIT(A) WHILE FRAMING THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2012 - 13 HAD ALSO FIGURED IN THE SAID YEARS AND HAD BEEN ACCEPTED BY THE A.O , AS UNDER: ASSESSMENT YEAR 2010 - 11 ASSESSMENT YEAR 2011 - 12 (I) SHRI HOLASH KUMAR VERMA (II) M/S SANDEEP TRADERS (I)SHRI VIPIN KUMAR VORA (II) SHRI SUPLIN S. PANCHAL (III) SHRI MANISH R. SHAH (IV) M/S SANDEEP TRADERS (V) SHRI SALASAR CORPORATION (VI) SHRI HOLASH KUMAR VERMA INTERESTINGLY, WE FIND THAT THE CLAIM OF THE ASSESSEE THAT IT HAD PAID COMMISSION TO SOME OF THE AFOREMENTIONED BROKERS IN RESPECT OF SALES MADE TO THE ABOVEMENTIONED BUYERS HAD AFTER NECESSARY DELIBERATIONS ALSO BEEN ACCEPTED BY THE A.O IN THE ASSESSMENT FRAMED IN THE CASE OF THE ASSESSEE FOR A.Y 2013 - 14 UNDER SEC.143(3), DATED 28.01.2016 , AS UNDER: SR. NO. PARTY NAME BROKER AS PER ASSESSEE SALE/PURCHASE VALUE AS PER ASSESSEE COMMISSION ON AS PER ASSESSEE REMARKS 1. J.S CORRUPACK PVT. LTD. SUPLIN S. PANCHAL 2,74,64,370 5,07,008 CONFIRMED 2. M/S ARIES PAPER CO. SHRI MANISH R. 8,12,93,633 6,88,340 CONFIRMED P A G E | 12 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) RAJKOT SHAH 3. M/S CHAMBER PACKING SHREE SALASAR CORPORATION 29,89,855 50,385 CONFIRMED ON THE BASIS OF OUR AFORESAID OBSERVATIONS , WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE DISALLOWANCE OF THE ASSESSES CLAIM OF COMMISSION EXPENSES BY THE A.O, WHICH WE FIND IS BASED ON OBSERVATIONS THAT HAD BEEN ARRIVED AT ON THE BASIS OF A HALF HEARTED APPROACH ADOPTED BY HIM. IN FACT, WE FIND THAT THE CONFIRMATIONS FILED BY THE BROKERS/INTERMEDIARIES THEIR SUBSTANTIATING THE AUTHENTICITY OF THE CLAIM OF COMMISSION EXPENSES BY THE ASSESSEE , HAD NOT BEEN DISPROVED BY THE LOWER AUTHORITIES ON THE BASIS OF ANY IRREFUTABLE EVIDENCE . APART THERE FROM, THE FACT THAT THE COMMISSION PAID BY THE ASSESSEE TO SOME OF THE BROKERS/INTERMEDIARIES IN A.Y 2010 - 11, A.Y 2011 - 12 AND A.Y 2013 - 14, HAD NOT BEEN DOUBTED BY THE A.O WHILE FRAMING OF THE ASSESSMENTS UNDER SEC. 143(3) FOR THE SAID RESPECTIVE YEARS FURTHER ADDS TO THE CREDENCE OF THE AFORESAID CLAIM OF THE ASSESSEE. WE THUS BEING OF THE CONSIDERED VIEW THAT THE LOWER AUTHORITIES ON THE BASIS OF UNSUBST ANTIATED OBSERVATIONS HAD ERRED IN DISLODGING THE CLAIM OF COMMISSION EXPENSES RAISED BY THE ASSESSEE , THEREFORE, VACATE THE DISALLOWANCE OF RS.20,26,770 / - AS HAD BEEN SUSTAINED BY THE CIT(A). ACCORDINGLY, THE ORDER OF THE CIT(A) IN CONTEXT OF THE AFORESAI D ISSUE IS SET ASIDE. THE GROUND OF APPEAL NO. 2 IS ALLOWED. 8 . THE LEVY OF INTEREST U/SSS. 234A, 234B AND 234C ASSAILED BY THE ASSESSEE BEING CONSEQUENTIAL IN NATURE, THEREFORE, THE GROUND OF APPEAL NO. 3 IS RENDERED AS CONSEQUENTIAL TO OUR AFORESAID OR DER. 9 . THE ASSAILING OF THE INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) BY THE A.O IN THE ASSESSMENT ORDER BEING PREMATURE, THEREFORE, THE GROUND OF APPEAL NO. 4 IS DISMISSED AS SUCH . P A G E | 13 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3) 1 0 . THE GROUND OF APPEAL NO. 5 BEING GENERAL IS DISMISSED AS NOT PR ESSED. 1 1 . THE APPEAL OF THE ASSESSE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. O R DER PR ONOUNCED IN THE OPEN COURT ON 2 3 .0 8 .2019 S D / - S D / - ( N.K. PRADHAN) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 23 .0 8 .2019 *** PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 14 ITA NO.2830/MUM/2018 AY. 2012 - 13 M/S R.R. PAPER PRODUCTS VS. JT. CIT RANGE - 24 (3)