The ITO, Ward-5(3), Morbi V. Shri Murtuza B. Lokhandwala, Morbi

ITA 327/RJT/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67263 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-04-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: DM RINDANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH BEFORE: SHRI D.K. TYAGI , JUDICIAL MEMBER AND SHR I A. MOHAN ALANKAMONY , ACCOUNTANT MEMBER INCOME TAX OFFICER, RAJKOT WARD 5 (3 ), MORBI (APPELLANT) VS SRI MURTUZA B. LOKHANDWALA PROP. OF M/S. TRADE LINKS (RESPONDENT) REVENUE BY : SRI AVINASH KUMAR , D . R. ASSESSEE BY: SRI D.M. RINDANI , A.R. DATE OF HEARING : 26 - 04 - 2013 DATE OF PRONOUNCEMENT : 06 - 0 6 - 2013 / ORDER P ER : D.K. TYAGI , JUDICIAL MEMBER : - THIS IS THE REVENUE S APPEAL AG AINST THE ORDER OF LD. CIT(A) - IV RAJKOT DATED 30 - 03 - 2 012 . I T A NO . 327 / RJT /20 12 A SSESSMENT YEAR 2008 - 09 I.T.A NO. 327/RJT/2012 A.Y. 2008 - 09 PAGE NO ITO VS. MURTUZA B. LOKHANDWALA. PROP. OF M/S TRADE LINKS 2 2. THE ONLY EFFECTIVE GROUND TAKEN BY REVENUE READS AS UNDER : - 1 THE LD. CIT(A) - IV RAJKOT ERRED IN LAW AND ON FACT IN DELETING THE ADDITION OF RS. 24,09,206/ - MADE BY THE AO TREATING IT AS FICTITIOUS AND EXCESS COMMISSION PAID BY THE ASSESSEE , WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO. 3. BRIEF FACTS OF THE CASE ARE THAT DURING ASSESSMENT PROCEEDINGS ASSESSING OFFICER FOUND THAT ASSESSEE HAS SHOWN COMMISSION EXPENDITURE TO THE TUNE OF RS. 24,09,206/ - . I N ORDER TO VERIFY THE GENUINENESS OF THE EXPENDITURE ASSESSING OFFICER ISSUED SUMMONS U/S 131(1) TO VARIOUS PA RTIES WHO PURCHASED CEMENT SHEETS THROUGH THE ASSESSEE. ON THE BASIS OF STATEMENT S OF THESE PARTIES THE AO CONCLUDED THAT THERE WAS NO MEDIATORY O R ANY COMMISSION AGENT BETWEEN THE ASSESSEE AND THE PURCHASING PARTIES. THE ASSESSING OFFICER FURTHER SUMMONED SOME OF THE COMMISSION AGENTS TO WHOM THIS COMMISSION WAS CLAIMED TO HAVE BEEN PAID AND THEIR STATEMENTS WERE ALSO RECORDED AND ON THE BASIS OF THESE RECORDED STATEMENTS ASSESSING OFFICER WAS OF THE VIEW THAT COMMISSION AGENTS HAVE NOT PLAYED THE ROLE OF A MEDIATOR IN RESPECT OF SALES MADE BY THE ASSESSEE TO THE PARTIES. ASSESSING OFFICER HELD THAT THE COMMISSION PAID TO THE COMMISSION AGENTS WAS FACTIOUS AND AN ACT OF SUPPRESSING THE INCOME. HE THEREFORE DISALLOWED TH E COMMISSION EXPENDITURE OF RS. 24,09,206/ - AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE MATTER WAS CARRIED IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY AND ASSESSEE FIL ED DETAI LED SUBMISSION BEFORE HIM WHICH HAVE BEEN REPRODUCED BY THE LEARNED CIT(A) IN PARA 1 OF HIS ORDER . THE ASSESSING OFFICERS COMMENTS ON THESE SUBMISSIONS WERE ALSO ASKED FOR AND I.T.A NO. 327/RJT/2012 A.Y. 2008 - 09 PAGE NO ITO VS. MURTUZA B. LOKHANDWALA. PROP. OF M/S TRADE LINKS 3 A SSESSING O FFICER WAS ALSO DIRECTED TO ALLOW THE ASSESSEE TO CROSS EXAM INE THE WITNESSES AND SUBMIT ITS REPORT . THE ASSESSING O FFICER SUBMITTED THE RESULT OF CROSS - EXAMI NATION OF WITNESSES WHO PURCHASED CEMENT SHEET S F R O M THE ASSESSEE AND THE COMMENTS ON THE SUBMI SSIONS OF THE ASSESSEE WHICH HAVE DULY BEEN REPRODUCED BY THE LEARNED CIT(A) IN HIS ORDER . T HE COUNTER COMMENTS OF ASSESSEE ON THE AOS REPORT WERE ALSO OBTAINED BY T HE LD. CIT(A) WHICH HAVE ALSO BEEN REPRODUCED BY HIM IN HIS ORDER. AFTER TAKING INTO CONSIDERATION ALL THIS MATERIAL LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 6. I HAVE GONE THROUGH THE ASSESSMENT ORDER, SUBMISSIONS OF APPELLANT AND ASSESSING OFFICER. 1 F IND THAT APPELLANT HAS SOLD CEMENT SHEETS OF M/S RAMCO INDUSTR IES LTD TO VARIOUS PARTIES. TH E APPELLANT HAD ENGAGED COMMISSION AGENTS FOR REFERENCE OF POTENTIAL PURCHASERS OF THES E CEMENT SHEETS. APPELLANT COULD SELL SUCH CEMENT SHEETS TO ABOUT 150 PARTIES ON REFERENCE OF ABO UT 13 COMMISSION AGENTS. THE COMMISSION AGENTS HAVE UNDISPUT EDLY CONFIRM ED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDING AS WELL AS DURING EXAMINATION AT THE TIME OF REMAND THAT T HEY HAVE RECEIVED COMMISSION FROM APPELLANT FOR T HE REFEREN CE OF PURCHASE PARTIES OF CEMENT SHEETS. THESE COMMISSION AGENTS HAVE SUBM ITTED T HEIR AFFIDAVIT ALSO AND HAVE ALSO FILED RETURN OF INCOME REFLECTING THE COMMISSION RECEIVED FROM APPELLANT AS THEIR INCOME. AS FAR AS THE PURCHASE PARTIES ARE CONCERNED, ALL OF THEM HAVE CONFIRMED DURING THE CROSS EXAMINATION THAT T HEY WERE APPROACHED BY SOME PERSON ON BEHALF OF THE APPELLA NT FOR PURCHASE OF CEMENT SHEETS OF M/S RAMCO INDUSTRIES LTD . THEY DID NOT REMEMBER THE NAME OF SUCH PERSON DUE TO LAPSE OF TIME. ALL OF THEM CLARIFIED THAT THE WORD ' INTERMEDIARY,' USED IN THE EA RLIER STATEMENT RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ACCORD ING TO THEN UNDERSTANDING WAS WITH REFERENCE T O ANY REPRESENTATIVES FROM M/S RAMCO INDUSTRIES LTD WHOSE CEMENT SHEETS THEY HAD PURCHASED THROUGH APPELLANT. THE SUBMISSION OF ASSESSI NG I.T.A NO. 327/RJT/2012 A.Y. 2008 - 09 PAGE NO ITO VS. MURTUZA B. LOKHANDWALA. PROP. OF M/S TRADE LINKS 4 OFFICER THAT THESE PURCHASERS W ERE NOT AWA RE OF TH E COMMISSION PAID BY APPELLANT TO HIS COMMISSION AGENTS IS OF NO RELEVANCE. THI S I S SO BECAUSE THE COMMISSION AGENTS WERE APPOINTED BY APPELLANT AND NOT BY THE PURCHASERS AND FOR THE PURCHASERS IT IS IMM ATERIAL WHETHER AN Y EMPLOYEE OR ANY AGENT OF APPELLANT HAS CONTACT ED THE M . THE PURCHASER IS NOT REQUIRED TO KNOW THE ARRAN GEMENT OF COMMISSION PAYMENT BET WEEN APPELLANT AND HIS COMMISSION AGENTS. THE PURCHASERS HAVE CONFIRMED THE PURCHASE TRANSACTIONS FRO M APPELLANT. THE FACT THAT PERSONS ON BEHALF OF APPELLANT CONTACTED THE PURCHAS ERS HAS ALSO BEEN CONFIRMED BY T HE PURCHASERS AND COMMISSION AGENTS HAVE RECEIVED THE CORRESPONDING COMMISSION IS ALSO CONFIRMED WITH THE EVIDENCE OF OFFERING SUCH COMMISSION FO R TAXATION. I FIND THAT ON THESE FACTS AND THE DECISIONS RELIED UPON BY THE APPELLANT IT IS NOT POSSIBLE TO HOLD THAT THE COMMISSION OF RS. 24 ; 09 , 20 6/ - PAID BY THE APPELLANT IS BOGUS O R EXCESSIVE . 1 THEREFORE DIR ECT THE ASSESSING OFFICER TO DELETE T HE DIS ALLOWANCE OF RS 24,09,206/ - OF COMMISSION AND REDUCE THE TOTAL INCOME OF APPELLANT ACCORDINGLY. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT T H E ADDITION OF RS. 24,09,206/ - WAS MADE BY THE ASSESSING OFFICER BY HOLDING THAT THE ASSESSEE HAD SOLD THE CEMENT SHEETS OF M/S. RAMCO INDUSTRIES LTD. TO VARIOUS PARTIES WITHOUT THE COMMISSION AGENTS PLAYING ANY ROLE AS MEDIATOR BETWEEN THE ASSESSEE AND THE PARTIES ON THE BASIS OF STATEMENT S RECORDED BY HIM OF SOME OF THE PURCHASING PARTIE S AND THE COMMISSION AGENTS THEREBY TREATING THE COMMISSION PAID TO AGENTS AS BOGUS. BEFORE THE LEARNED CIT(A), THE COMMISSION AGENTS FILED AFFIDAVIT AND THEIR RETURN OF INCOME REFLECTING THEREIN THE COMMISSION RECEIVED FROM THE ASSESSEE. DURING THE REMAND PROCEEDINGS, THE COMMISSION AGENTS CONFIRMED THE FACT THAT THEY HAVE RECEIVED THE COMMISSION FROM THE ASSESSEE. AS FAR AS THE PURCHASING PARTIES ARE CONCERN ED , THEY HAVE ALSO CONFIRMED DURING CROSS EXAMINATION THAT THEY I.T.A NO. 327/RJT/2012 A.Y. 2008 - 09 PAGE NO ITO VS. MURTUZA B. LOKHANDWALA. PROP. OF M/S TRADE LINKS 5 WERE APPROACHED BY SOME PEOPLE ON B EHALF OF THE ASSESSEE TO PURCHASE CEMENT SHEETS FROM M/S. RAMCO INDUSTRIES LTD. THUS, THERE IS NO DISPUTE ABOUT THE FACT THAT (I) THE PURCHASES OF CEMENT SHEETS OF M/S. RAMCO INDUSTRIES WERE MADE BY THE PARTIES FROM THE ASSESSEE, (II) THE PARTIES WERE CONT ACTED BY SOME PERSONS ON B EHALF OF THE ASSESSEE TO MAKE THESE PURCHASES AND (III) COMMISSION WAS RECEIVED FROM THE ASSESSEE BY THE COMMISSION AGENTS AND THE SAME WAS OFFERED FOR TAXATION BY THEM IN THEIR RETURNS OF INCOME . IN THE LIGHT OF THESE FACTS OF TH E CASE, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.24,09,206/ - MADE BY HIM . ACCORDINGLY, WE HEREBY UPHOLD THE ORDER PASSED BY HIM ON THIS ISSUE. 5. REVENUES APPEAL IS DISMISSED. SD/ - SD/ - ( A.MOHAN ALANKAMONY ) ( D. K. TYAGI ) ACCOUNTANT MEM BER JUDICIAL MEMBER AHMEDABAD: DATED /05 /2013 A K / LK ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONED HEREINABOVE AT CAPTION PAGE SD/ - SD/ - (D. K. S RIVASTAVA) (T. K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER I.T.A NO. 327/RJT/2012 A.Y. 2008 - 09 PAGE NO ITO VS. MURTUZA B. LOKHANDWALA. PROP. OF M/S TRADE LINKS 6 O / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT THE I.T.O. , WARD - 5(3), MORBI 2 . / RESPONDENT SHRI MURTUZA B. LOKH ANDWALA, PROP. OF M/S. TRADE LINKS, 3, LATI PLO T, MORBI 3 . N I / CONCERNED CIT III, RAJKOT 4 . I - / CIT (A) IV, RAJKOT 5 . N , E N , / DR, ITAT, RAJKOT 6 . [ / GUARD FILE. BY ORDER/ , 9 N EN ,