Kemit Chemicals Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-2(1)(2), Ahmedabad

ITA 2882/AHD/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5473 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 14-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: S N DIVATIA
• Keywords: Principle of natural justice; Corroborative evidences
• Section: 143(3); 195

Judgement Text

ITA NO.2882/AHD/2015 ASSESSMENT YEAR: 2012-13 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR VICE PRESIDENT AND MAHAVIR PRA SAD JM] ITA NO.2882/AHD/2015 ASSESSMENT YEAR: 2012-13 KEMIT CHEMICALS PVT. LTD., .. APPELLANT 41, 4 TH FLOOR, EMPIRE TOWER, NR. ASSOCIATED PETROL PUMP, PANCHVATI, ELLISBRIDGE, C.G. ROAD, AHMEDABAD 380 006. [PAN: AAACK 5879 N] VS. INCOME TAX OFFICER, WARD 2(1)(2), AHMEDABAD. .......... RESPONDENT APPEARANCES BY S.N. DIVATIA FOR THE APPELLANT LALIT P. JAIN FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 02.08.2018 DATE OF PRONOUNCEMENT : 01.11.2018 O R D E R PER PRAMOD KUMAR, VICE PRESIDENT: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 16 TH SEPTEMBER 2015, PASSED BY THE LEARNED CIT(A), IN T HE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT 1961, FOR THE ASSESSMENT YEAR 2012-13. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S :- 1.1 THE ORDER PASSED U/S.250 ON 16.09.2015 FOR A.Y . 2012-13 BY CIT(A)-2, AHMEDABAD, CONFIRMING THE DISALLOWANCE OF RS.36,79,799/- IN RESPECT OF FOREIGN AGENTS COMMISS ION MADE BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRIN CIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE EXPLANATIONS FUR NISHED AND THE EVIDENCE PRODUCED BY THE APPELLANT. THE OBSERVATIO NS MADE AND ITA NO.2882/AHD/2015 ASSESSMENT YEAR: 2012-13 PAGE 2 OF 4 CONCLUSION REACHED BY CIT(A) WITH REGARD TO THE IMP UGNED DISALLOWANCE ARE NOT ADMITTED IN SO FAR AS THE SAME ARE CONTRARY TO THE EVIDENCE PRODUCED. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN CONFIRMING THE DISALLOWANCE OF FOREIGN AGENTS COMMI SSION OF RS.36,79,799/- 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN NOT ALLOWING THE FOREIGN AGENTS COMMISSION OF RS.36,79,799/- 5. THE LD. CIT(A) HAS COMPLETELY IGNORED THE EVIDEN CE PRODUCED BEFORE HIM WITH REGARD TO THE IMPUGNED COMMISSION P AYMENTS AND GROSSLY ERRED IN HOLDING THAT THE APPELLANT HAD FAILED TO REBUT THE CONTENTIONS OF AO BY FILING THE SUPPORTING EVID ENCES. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW UNDISPU TED MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS A MANUFACTURER OF C HEMICALS, AND IT HAS EXPORTED ITS PRODUCTS TO VARIOUS COUNTRIES. IT IS IN THIS CONNE CTION THAT THE ASSESSEE IS SAID TO HAVE PAID SALES COMMISSION, TO NON- RESIDENT AGENTS , AGGREGATING TO R.36,79,799/-. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER NOTICED THAT NEITHER THE ASSESSEE HAS FURNISHED INFORMATION , AS REQUIRED UNDER RULE 37BB, IN RESPECT OF THESE FOREIGN REMITTANCES, NOR THE ASSES SEE HAS FURNISHED SATISFACTORY DETAILS ABOUT THE NATURE OF SERVICES, COMPLETE DETA ILS OF AGENT AND EVIDENCES TO PROVE BONAFIDES OF CLAIM. IT WAS ALSO NOTED THAT T HERE IS NO CONSISTENT OR REASONABLE BASIS, SUCH AS RELATIONSHIP TO EXPORTS, IN RESPECT OF THESE PAYMENTS, AND THAT THERE WAS NO EVIDENCE, SUCH AS AGREEMENT OR EXCHANGE OF L ETTERS, TO SUBSTANTIATE THE AGENCY ARRANGEMENTS. THE FACT OF BANK PAYMENT, ACC ORDING TO THE ASSESSING OFFICER, COULD NOT BE TREATED AS PROOF OF BONAFIDES . IT WAS, INTER ALIA, IN THIS BACKDROP THAT THE COMMISSION OF RS.36,79,799/- WAS DISALLOWE D. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT ANY SUCCESS. WHILE CONFIRMING THE DISALLOWANCE, LEARNED CIT(A) OBSERVE D AS FOLLOWS :- 3.7 HAVING CONSIDERED THE FACTS AND SUBMISSION, IT IS NOTICED THAT THE AO HAS POINTED OUT VARIOUS DISCREPANCIES IN RESPECT OF THE CLAIM OF COMMISSION PAYMENTS TO FOREIGN AGENTS WHICH HAVE NOT BEEN MET OUT BY THE APPELLANT THROUGH SUBMISSION OF DETAILS AND EVIDENCES IN SUPP ORT. THE APPELLANT HAS NOT GIVEN ANY REASONS FOR NOT MAKING ANY UNDERTAKIN G IN FORM NO.15CA & OBTAINING THE CERTIFICATE IN FORM NO.15CB FROM THE ACCOUNTANT IN VIEW OF THE RBI GUIDELINES AND PROVISION OF SECTION 195 R.W. RU LE 37BB OF THE I.T. RULES. WITHOUT FURNISHING OF SUCH CERTIFICATES, THE FOREIG N REMITTANCES ARE NOT ITA NO.2882/AHD/2015 ASSESSMENT YEAR: 2012-13 PAGE 3 OF 4 PERMISSIBLE. FURTHER, THE APPELLANT HAS NOT PROVID ED COPIES OF ANY AGREEMENTS MADE WITH THE AGENTS SPECIFYING THE TERM S AND CONDITIONS OF THEIR SCOPE OF WORK AND RATE OF COMMISSION AND PAYMENT OF SUCH COMMISSION TO THEM. IT IS NEEDLESS TO MENTION THAT IN INTERNATIO NAL TRANSACTIONS SUCH KIND OF WRITTEN DOCUMENTS BECOMES MANDATORY TO AVOID ANY KI ND OF LITIGATIONS. IN THE INSTANT CASE, HAVING AGREEMENT BECOMES MORE IMPORTA NT IN VIEW OF THE FACT THAT THE RATES OF COMMISSION PAYMENT TO EACH OF AGE NTS WERE DIFFERENT. EVEN THE DECLARATIONS MADE BY THE AGENTS NAMELY; M/S TE HUI TRADING CO. & M/S. PERFECT PVT. LTD. BOTH WERE FOUND ON PLAIN PAPERS W ITH THE SAME LANGUAGE THAT ALSO CREATED A SUSPICION OVER THE GENUINENESS OF TH E CLAIM AND TO REMOVE SUCH SUSPICION THE APPELLANT HAS NOT PROVIDED ANY F URTHER DETAILS/EVIDENCES. FURTHERMORE, IN THE CASE OF M/S TE HUI TRADING CO., EVEN THE EMAIL ADDRESS WAS PROVIDED WITH REGARD TO A DIFFERENT COMPANY SIT UATED AT USA AND AS PER APPELLANTS CONNECTION, IT WAS THE ASSOCIATE CONCER N OF M/S. TE HUI TRADING CO., THEN ALSO THE NECESSARY EVIDENCES IN SUPPORT W OULD HAVE BEEN SUBMITTED. BUT THE ASSESSEE HAS FAILED TO REBUT TH E CONTENTION OF THE AO BY FILING ANY SUPPORTING EVIDENCES. FURTHER, THE APPE LLANTS CONTENTION THAT THE PAYMENTS TO THEM HAVE BEEN MADE THROUGH BANKING CHA NNELS CANNOT BE SAID TO CONCLUSIVE EVIDENCE IN VIEW OF THE JUDGEMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. P MOHANAKALA (2007) 291 ITR 278 (S C). THUS, THE IDENTITY OF THE AGENTS HAVE NOT BEEN ESTABLISHED AND THE APPELL ANT HAS ALSO NOT BEEN ABLE TO PROVE THAT ANY SERVICES HAVE ACTUALLY BEEN RENDERED BY THESE AGENTS. 3.8 IN VIEW OF THE AFORESAID DISCUSSION THE DISALLO WANCE OF THE COMMISSION PAYMENTS MADE BY THE AO FOR THE REASONS DISCUSSED I N THE ASSESSMENT ORDERS IS FOUND CORRECT AND JUSTIFIED AND THUS, THE SAME IS CONFIRMED. THE RELATED GROUNDS OF APPEAL ARE DISMISSED. 4. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLIC ABLE LEGAL POSITION. 6. WE FIND THAT THERE IS NO CONTEMPORANEOUS EVIDENC E ABOUT RENDITION OF SERVICES BY THE NON RESIDENT AGENTS NO AGREEMENTS , NO LETTERS, NOT EVEN EXCHANGE OF EMAILS OR ANY OTHER CONTEMPORANEOUS EVIDENCE WHA TSOEVER, WHICH COULD DEMONSTRATE THAT THESE AGENTS HAD RENDERED ANY SERV ICES TO THE ASSESSEE. WE HAVE ALSO NOTED THAT EVEN THE RATE OF COMMISSION IS NOT CONSISTENT OR UNIFORM. ALL THESE FACTORS HARDLY HELP THE ASSESSEE TO CLAIM BON AFIDES OF COMMISSION EXPENSE. THE ONUS OF DISCHARGING GENUINENESS OF COMMISSION, WHICH IS ON THE ASSESSEE, HAS NOT BEEN DISCHARGED. WHEN WE PUT OUR THIS UNDERSTA NDING TO THE LEARNED COUNSEL, HE SUBMITTED THAT THE ASSESSEE WAS NOT GIVEN SUFFIC IENT OPPORTUNITY TO DISCHARGE THIS ONUS AS CENTRAL POINT DISCUSSIONS BEFORE THE AUTHOR ITIES BELOW WAS TECHNICALITIES ITA NO.2882/AHD/2015 ASSESSMENT YEAR: 2012-13 PAGE 4 OF 4 REGARDING NON-COMPLIANCE WITH RULE 37BB AND NUANCES OF TAXATION OF INCOME IN THE HANDS OF NON-RESIDENT AGENT. HIS STAND THAT THE AS SESSEE WAS NEVER EVEN CALLED UPON TO PRODUCE CONTEMPORANEOUS EVIDENCE FOR RENDIT ION OF SERVICES, THIS PLEA IS CORRECT TO A FAIR EXTENT. THE QUESTION OF EXAMININ G TAXATION IN THE HANDS OF NON- RESIDENT, AND RESULTANT TAX WITHHOLDING OBLIGATIONS , OR THE COMPLIANCE WITH RULE 37BB, WHATEVER BE ITS RELEVANCE, IS A MUCH LATER STAGE. WHEN THE ASSESSEE IS NOT SPECIFICALLY ASKED TO GIVE EVIDENCE FOR RENDITION O F SERVICES, THAT FACT CANNOT BE PUT AGAINST THE ASSESSEE. HAVING SAID THAT, IT IS ALSO NECESSARY TO BEAR IN MIND THAT RENDITION OF SERVICE, AND EVIDENCE TO ESTABLISH THA T FACT, IS A FUNDAMENTAL ASPECT. WE, THEREFORE, DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER GIVING YET ANO THER OPPORTUNITY OF HEARING TO THE ASSESSEE, IN ACCORDANCE WITH THE LAW AND BY WAY OF A SPEAKING ORDER. WE ORDER SO. 7. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODA Y ON THE 1 ST DAY OF NOVEMBER, 2018. SD/- SD/- MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (VICE PRESIDENT) AHMEDABAD, DATED THE 1 ST DAY OF NOVEMBER, 2018 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD