DATACOMP WEB TECHNOLOGIES (INDIA) PVT. LTD., MUMBAI V. ITO 8(1)(3), MUMBAI

ITA 2890/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1399 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 20-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHENDR
• Assessee Lawyers: MAHAVIR JAINAR
• Keywords: Business income; Business expenditure; Additional evidence

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -HBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./2890/MUM/2016 , /ASSESSMENT YEAR: 2011-12 M/S. DATACOMP WEB TECHNOLOGIES (INDIA) PVT.LTD,2ND FLOOR, TECHNIPLEX II, JN.VEER SAVARKAR MARG-FLYOVER & S.V. ROAD, GOREGAON (E),MUMBI-400 062. PAN:AABCD 1668 B VS. INCOME TAX OFFICER-8(1)(3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.C. OMI NINGSHEN-DR ASSESSEE BY: S/SHRI PRATEEK JAIN AND MAHAVIR JAIN-AR / DATE OF HEARING: 21.02.2017 / DATE OF PRONOUNCEMENT:07.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 05/02/2016 OF CIT(A)-16 ,MUMBAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF DEVELOPMENT OF COMPUTER SOFTWARE AND TRADING IN COMPUTER SOFTWARE/HARDWARE, FILED ITS RETURN OF INCOME ON 20/09/ 2011,DECLARING LOSS OF RS.29.44 LAKHS.THE AO COMPLETED THE ASSESSMENT U/S.143(3)ON30 03. 2014,DETERMINING ITS INCOME AT RS.37.91 LAKHS. 2. VIDE ITS LETTER,DTD.14.2.2017,THE ASSESSEE HAS FIL ED ADDITIONAL EVIDENCES STATING THAT SAME WERE NOT PRODUCED BEFORE THE LOWER AUTHORITIES, TH AT ONE OF THE GROUND FOR PART DISALLOWANCE FOR COMMISSION PAYMENT WAS NON VERIFICATION OF PAN AND ADDRESSES OF THE PARTIES, THAT THE AO HAD NOT VERIFIED THE DATA FROM THE TDS DATA BASE .THE ASSESSEE ,ALONGWITH ITS APPLICATION, ALSO SUBMITTED THE NAMES,PAN.S.,ADDRESSES OF THE PA RTIES TO WHOM COMMISSION WAS PAID,THE NET PROFIT COMPARATIVE CHART ; P&L ACCOUNTS FOR THE AY.S 2008-09, 2009-10 AND 2011-12. IT WAS ALSO STATED THAT THE EVIDENCE WOULD GO TO THE R OOT CAUSE OF THE MATTER.THE DR LEFT THE ISSUE OF ADMISSION OF ADDITIONAL EVIDENCES TO THE D ISCRETION OF THE BENCH. WE FIND THAT THE ASSESSEE HAD FILED DETAILS WITH R EGARD TO COMMISSION PAYMENT, FURNISHING THE DETAILS OF PA NO. AND ADDRESSES OF RECIPIENTS O F COMMISSION.THESE DOCUMENTS WERE NOT AVAILABLE TO AO/FAA.THEREFORE, WE ARE OF THE OPINIO N THAT SAME SHOULD BE ADMITTED AS ADDITIONAL EVIDENCES AS PER THE PROVISIONS OF RULE 29 OF THE ITAT RULES. 3. SOLITARY GROUND OF APPEAL IS ABOUT DISALLOWANCE OF COMMISSION OF RS.29.48 LAKHS. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE AS SESSEE HAD PAID COMMISSION ON SALES TO 2890/M/16(11-12) M/S. DATACOMP WEB TECHNOLOGIES (INDI A) PVT.LTD. 2 ITS DEALERS AND EMPLOYEES.AFTER COMPARING THE COMMI SSION PAYMENTS OF TWO ASSESSMENT YEARS LAST YEAR AND THE YEAR UNDER CONSIDERATION HE OBSERVED THAT THERE WAS DISPROPORTIONATE INCREASE IN COMMISSION PAYMENT, HE DIRECTED THE ASS ESSEE TO EXPLAIN AS TO WHY DISPROPORTONA -TE EXPENSES SHOULD NOT BE ALLOWED. AFTER CONSIDERI NG THE SUBMISSION OF THE ASSESSEE DTD., 24. 3.2014,THE AO HELD THAT THE ASSESSEE HAD COMPLIED WITH THE PROVISIONS OF SECTION 194H OF THE ACT AND MADE TDS ON COMMISSION PAID TO DEALERS AND TO THE EMPLOYEES, THAT MERELY COMPLYING WITH THE STATUTORY PROVISIONS WOULD NOT M AKE EXPENSES ALLOWABLE, THAT THE ASSESSEE HAD TO JUSTIFY THAT THE EXPENSES WERE INC URRED FOR BUSINESS PURPOSES, THAT IN THE PRECEEDING YEAR THE RATE OF COMMISSION TO THE EMPL OYEES WORKED OUT AT 4.67 % AND 14.95% FOR THE DEALERS, THAT DURING THE YEAR UNDER CONSIDE RATION THE ASSESSEE PAID COMMISSION TO THE EMPLOYEES AND DEALER @5.19 % AND 16.78% RESPECTIVEL Y, THAT GENERALLY THE COMMISSION RATE WERE FIXED, THAT THE INFLATION HAD NO BEARING ON TH E RATE OF COMMISSION, THAT THERE COULD NOT BE DISPROPORTIONATE INCREASE IN THE RATE OF COMMISS ION , THAT THE ASSESSEE HAD MERELY PROVIDED THE NAMES OF THE PARTIES, THAT IT DID NOT FURNISH ADDRESSES OF THE RECIPIENTS OF COMMISSION, THAT IT DID NOT FURNISH DETAILS OF SERV ICES RENDERED BY THEM. FINALLY HE HELD THAT 15% OF SALES WAS REASONABLE COMMISSION, THAT THE EX CESS AMOUNT HAD TO BE DISALLOWED AS NON BUSINESS EXPENDITURE. THE DISALLOWANCE ON ACCOUNT O F COMMISSION TO DEALERS WORKED OUT TO RS.23.70 LAKHS. HE FURTHER OBSERVED THAT COMMISSION WAS ALSO PAID TO 95 EMPLOYEES, THAT COMMISSION OF 4.75% WOULD BE REASONABLE.ACCORDINGLY ,HE ALLOWED COMMISSION OF RS.63.2 LAKHS AND BALANCE COMMISSION OF RS.5.77 LAKHS WAS D ISALLOWED.THUS,THE DISALLOWANCE WORKED OUT TO RS.29.48 LAKHS. 4. AGGRIEVED BY ORDER OF AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).THE ASSESSEE ARGUED THAT THE AO HAD DISALLOWED THE EXPENSES MERELY ON PRESUMPTIONS,THAT IT HAD FURNISHED ALL NECESSARY D ETAILS DURING THE ASSESSMENT PROCEEDINGS, THAT THE EXPENSES WERE MADE FOR BUSINESS PURPOSES, THAT EXPENSES WERE INCURRED THROUGH BANKING CHANNELS,THAT THE NATURE OF THE BUSINESS WA S SUCH THAT PERCENTAGE OF COMMISSION FROM DEALER TO DEALER BASIS WOULD VARY,THAT AFTER I TS APPROVAL COMMISSION TO DEALER/STAFF WAS FINALISED, THAT SAME COULD NOT BE COMPARED ON TOTAL SALES AND COMMISSION VALUE OF LAST YEAR. IT RELIED UPON CERTAIN CASE LAWS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER THE FAA HELD THAT THE AO HAD CALLED FOR DETAILS REGARDING NAMES OF DEALERS/STAFF MEMBERS,QUANTUM OF COMMISSIONS PAID ETC.,THAT NO CONVINCING EXPLANATIO N WAS FURNISHED BEFORE AO, THAT HE MADE PROPORTIONATE DISALLOWANCES OF RS.29.48 LAKHS,THAT DURING THE APPELLATE PROCEEDINGS NO 2890/M/16(11-12) M/S. DATACOMP WEB TECHNOLOGIES (INDI A) PVT.LTD. 3 CONVINCING EVIDENCES WERE FURNISHED, IN ABSENCE OF EXPLANATION SUPPORTED WITH DOCUMENTARY EVIDENCES CLAIM MADE BY ASSESSEE COULD NOT BE ACCE PTED.FINALLY,HE UPHELD THE ADDITION MADE BY THE AO. 5. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) STATED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AD TRIED TO FOCUS ON SOME NEW PRODUCTS WHEREIN IT HAD INCURRED THE ADDITIONAL EXPENSES FOR MARKETING AND SEMINARS, THAT ASSESSEE HAD SUBMITTED ALL THE SUPPORTING VOUCHERS, BILLS OF PAY MENT OF COMMISSION, THAT IN THE LAST YEAR ASSESSEE PAID COMMISSION @14.95%, THAT THIS YEAR P AYMENT TO AGENT WAS @ 16.78%, THAT THERE WAS NO ABNORMAL HIGHER PAYMENT DURING THE YEA R UNDER APPEAL. HE RELIED UPON THE CASES OF HERO CYCLES(P.) LTD. (63TAXMANN.COM308); IFB AGR O INDUSTRIES LTD.(63SOT207). THE DEPARTMENTAL REPRESENTATIVE (DR) STATED THAT COMMIS SION OF PAYMENT WAS EXCESSIVE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD MADE PAYMENT TO ITS EMPLOYEES/AGENTS A T CERTAIN PERCENTAGE, THAT THE REVENUE AUTHORITIES DID NOT ALLOW THE EXPENDITURE IN FULL, THAT THEY HELD THAT THE ASSESSEE HAD NOT JUSTIFIED THE PAYMENT OF FIRE COMMISSION, THAT THE ASSESSEE HAD FILED ADDITIONAL EVIDENCES BEFORE US, THAT THESE DETAILS WERE NOT AVAILABLE TO AO/FAA .CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO DECIDE THE ISSUE AFTER CONSIDERING THE ADDITIONAL EVIDENCES FILED BEFORE US AND AFTER AFFO RDING A REASONABLE OPPORTUNITY TO THE ASSESSEE. IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH APRIL, 2017. 07 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 07.04 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.