M/s. Urvi Traders, Surat V. The Income Tax Officer, Ward-2(1), Surat

ITA 3016/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9217 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 17-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DIVYAKANT PARIKH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ./ ITA NO. 3016/AHD/2013 / ASSESSMENT YEAR : 2009-10 M/S. URVI TRADERS, 3 RD FLOOR, NIJANAND APPT., 11/2030, DARIYA MAHAL, CHOWK BAZAR, SURAT-395003 PAN : AABFU 9622 K VS ITO, WARD 2(1), SURAT / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI DIVYAKANT PARIKH, AR REVENUE BY : SHRI ASHISH POPHARE, DR DATE OF HEARING : 12 /01/2017 DATE OF PRONOUNCEMENT IN COURT : 17/02/20 17 / O R D E R THIS IS ASSESSEES APPEAL CHALLENGING CONFIRMATION OF DISALLOWANCE OF RS.9,66,828/- BEING 1% OF TURNOVER ONLY ON PRESUMPT IONS, IGNORING THE ITAT DECISION IN ASSESSEES OWN CASE FOR AY 2007-08 WHERE THE OBSERVATION HAS BEEN MADE THAT THE BROKERAGE RANGES FROM 2% TO 4%. 2. THE BRIEF FACTS ARE THE ASSESSEE HAD PAID TOTA L COMMISSION OF RS.29,00,532/- TO VARIOUS BROKERS WHO PROCURED THE BUSINESS FOR THE ASSESSEE AS WELL AS SHARED THE RESPONSIBILITY OF GU ARANTEE PAYMENTS AND SUPPLY OF GOODS. THE ASSESSING OFFICER ISSUED SUMM ONS TO BROKERS OUT OF WHICH FIVE BROKERS APPEARED AND CONFIRMED HAVING RE CEIVED THE COMMISSION OF 3%. ONE SHRI PANKAJ SOMANI STATED TO HAVE EARNED 1% COMMISSION AND ASHMA SHAH STATED THAT SHE DID NOT R EMEMBER HAVING DONE ANY BUSINESS WITH THE ASSESSEE-FIRM. THE ASSE SSING OFFICER PROPOSED TO DISALLOW PART OF THE COMMISSION. THE ASSESSEE R ELIED ON AY 2007-08 WHERE THE LD. ASSESSING OFFICER RESTRICTED THE COMM ISSION TO 1% BY FOLLOWING OBSERVATIONS:- SMC-ITA NO. 3016/AHD/2013 M/S URVI TRADERS VS. ITO AY : 2009-10 2 4.11 AS REGARDS THE ASSESSEE'S AR'S PLEA THAT IT I S NOT THE RESPONSIBILITY OF ASSESSEE TO SEE THAT BROKER TO WHOM SUMMONS ARE ISS UED ALSO ATTEND THE OFFICE, THE PRIMARY BURDEN IS ON THE ASSESSEE TO PRODUCE TH E PERSONS FOR VERIFICATION. FURNISHING THE NAMES AND ADDRESSES OF THE PERSONS D OES NOT MEAN THAT THE ASSESSEE HAS DISCHARGED HIS RESPONSIBILITY FULLY. 4.12 NOW COMING TO THE FACTS THAT IN THE A.Y. 2007- 08 WHEREIN THE CIT(A) HAS DELETED THE ADDITION MADE ON ACCOUNT OF DISALLO WANCE OUT OF BROKERAGE EXPENSES. IN THE SAID YEAR, THE A.O FLATLY DISALLOW ED THE BROKERAGE PAYMENT WITHOUT CROSS VERIFICATION OF THE PERSONS TO WHOM B ROKERAGE PAID. EVEN IN THE SAID ASSESSMENT YEAR, THE CIT(A) HAS DELETED THE AD DITION BECAUSE THE AO COULD NOT CITED ANY COMPARABLE CASE. HENCE, FOR THE YEAR UNDER CONSIDERATION, SUMMONS HAVE BEEN ISSUED AND SOME OF THE PERSONS TU RNED UP FOR VERIFICATION FOR WHICH THEIR STATEMENT IS NOT FOUND SATISFACTORY AND SOME OF THE PERSONS DID NOT TURNED UP. AS SUCH, EFFORTS HAVE BEEN MADE FOR THE CORRECTNESS AND JUSTIFICATION FOR PAYMENT OF BROKERAGE IS MADE AND FOR THE REASONS DISCUSSED IN FOREGOING PARAS, SAME ARE NOT FOUND REASONABLE. 4.13 AS REGARDS COMPARABLE CASE IT MAY BE MENTIONED THAT IN THE CASE OF M/S. D. S. SILK MILLS, PROP. UMADEVI FATEHPURIA (ASSESSE D IN THIS WARD), ENGAGED IN THE BUSINESS OF GREY CLOTH, BROKERAGE IS PAID @ 0.50% TO 1% FOR THE A.Y. 2009-10 AND IN THE CASE OF MOHIT RAYONS (ASSESSED I N THIS WARD), ENGAGED IN THE BUSINESS OF YARN, BROKERAGE IS PAID AT UNIFO RM RATE OF 1% FOR THE A.Y. 2009-10. 4.14 SO FAR AS ARGUMENT REGARDING HIGHER RATE OF G. P AND THEREBY REASONABLENESS OF BROKERAGE PAYMENT, IT IS TO BE ME NTIONED HERE THAT DISCLOSURE OF HIGHER RATE OF G.P WOULD NOT JUSTIFY THE BROKERAGE PAYMENT BECAUSE THE PAYMENT OF BROKERAGE HAS NO NEXUS WITH GROSS PROFIT MARGIN. HAVING REGARD TO ALL THESE FACTS OF THE CASE, I HER EBY CONSIDER THE BROKERAGE PAYMENT AT 1% AS REASONABLE. THEREFORE, BROKERAGE P AYMENT IN EXCESS OF 1% PAID TO ABOVE MENTIONED PARTIES AMOUNTING CO RS.19, 33,655/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE SEPARATELY INITIATED O N THIS ISSUE. 3. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL W HERE LD. CIT(A) CONSIDERED VARIOUS FACTS AND GAVE FINDINGS OF FACT THAT (I) THE FACTS OF THIS YEAR ARE CLEARLY DISTINGUISHABLE FROM AY 2007-08; (II) THE SERVICES RENDERED WERE NOT ESTABLISHED BY ASSES SEE; (III) THE IDENTITY OF SOME OF THE BROKERS COULD NOT BE ES TABLISHED BY THE ASSESSEE; SMC-ITA NO. 3016/AHD/2013 M/S URVI TRADERS VS. ITO AY : 2009-10 3 THEREFORE, PART RELIEF WAS GIVEN ALLOWING THE COMMI SSION TO 2% BY FOLLOWING OBSERVATIONS:- 6.10 CONSIDERING THE NATURE OF EVIDENCE AND THE FA CTS DISCUSSED ABOVE, THE ASSESSING OFFICERS ACTION IS UPHELD IN PRINCIPLE. HOWEVER, CONSIDERING THE RANGE OF COMMISSION PAID AND THE FACT THAT WHILE SO ME OF THE BROKERS EXISTED ONLY FOR THE APPELLANT, THERE ARE FEW BROKERS WHO H AVE DONE WORK FOR OTHER PARTIES AS WELL, THE ALLOWED COMMISSION IS INCREASE D FROM 1% TO 2% I.E. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS RESTR ICTED TO 1% AS AGAINST THE 2% MADE BY THE ASSESSING OFFICER. AS A RESULT, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.19,33,655/- IS REDUCED TO R S, 9,66,828/- AND THE APPEAL IS PARTLY ALLOWED IN FAVOUR OF THE APPELLANT. 4. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEF ORE THE TRIBUNAL. 5. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE F ACTS OF THE ASSESSEES CASE ARE SIMILAR TO AY 2007-08 WHERE ITAT HELD THAT 70% SALES OF ASSESSEES CLOTH WERE MADE THROUGH BOMBAY BROKERS WHO WERE DE L CREDERE AGENT WITH A RESPONSIBILITY OF PAYMENT; THEREFORE, THE RE VENUES APPEAL WAS DISMISSED VIDE ORDER DATED 21.06.2013 IN ITA NO.321 7/AHD/2010 FOR AY 2007-08. 6. LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HA ND, CONTENDS THAT BOTH THE LD. ASSESSING OFFICER AND CIT(A) HAS GIVEN CLEAR FINDING OF FACTS THAT THE FACTS OF AY 2007-08 ARE CLEARLY DISTINGUIS HABLE TO THE FACTS OF AY 2009-10. THE ASSESSING OFFICER HAS DEMONSTRATED IN PARAGRAPH 4.9 IN HIS ORDER THAT THE ASSESSEE HAS PURCHASED GOODS ONLY FR OM ONE PARTY M/S. KALPANA TEXTILE THROUGH FIVE BROKERS WHICH IS NOT A BUSINESS REALITY. A COMPARABLE CASE WAS ALSO CITED IN THE CASE OF M/S. D.S. SILK MILLS WHO PAID BROKERAGE 0.50% TO 1% IN AY 2009-10 AND IN THE CASE OF MOHIT RAYONS, THE BROKERAGE PAID WAS AT 1%. THE ASSESSEE HAS THUS NO T DEMONSTRATED ANY COMPARABLE INSTANCE AND HAS NOT DISPUTED THE FACTS MENTIONED BY ASSESSING OFFICER IN PARAGRAPH 4.9 AND 4.10 OF HIS ORDER. CO NSEQUENTLY, THE RATIO OF ITAT JUDGMENT IN AY 2007-08 CANNOT BE APPLIED. SMC-ITA NO. 3016/AHD/2013 M/S URVI TRADERS VS. ITO AY : 2009-10 4 7. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. IN MY CONSIDERED VIEW, THE FACTS OF AY 2007-08 AND YEAR I N QUESTION ARE CLEARLY DISTINGUISHABLE. THE ASSESSEE, EXCEPT SUMMARILY RE LYING ON ITAT JUDGMENT DATED 21.06.2013, COULD NOT DISLODGE THE FACTUAL OB SERVATIONS OF LD. AO AND CIT(A). IN MY CONSIDERED VIEW, THE INTEREST OF JUS TICE WILL BE SERVED IF THE DISALLOWANCE RETAINED BY THE LD. CIT(A) IS FURTHER REDUCED TO BY 50%. ACCORDINGLY, THE ASSESSEES APPEAL IS PARTLY ALLOWE D. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 17/02/2017 *BIJU T., SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD