Shri Ghanshyam Mohanlal Lakhiani(Prop. Vimal Inds.), Ahmedabad V. The Income tax Officer, Ward-3(2), Ahmedabad

ITA 3364/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9082 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-08-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 24-11-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA
• Assessee Lawyers: SANJAY R SHAR
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI P.K.BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.3364/AHD/2004 ASSESSMENT YEAR: 2001-02 DATE OF HEARING:6.8.09 DRAFTED:13.8.09 SHRI GHANSHYAM M LAKHIANI , (PROP. VIMAL INDUSDTRIES). 38, SINDHI MARKET, REVDI BAZAR, AHMEDABAD PAN NO.AALP7642J V/S . INCOME TAX OFFICER, WARD-3(2), AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SANJAY R SHAR, AR RESPONDENT BY:- SHRI P.M. SHUKLA, SR. DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VII, AHMEDABAD IN APPEAL NO. C IT(A) VII/WD.3(2) /82/04-2005 DATED 05-10-2004. THE ASSESSMENT WAS FRAMED BY THE ITO, WARD-3(2), AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 16-03-2004 FOR THE ASSESSMENT YEAR 2001 -02. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF COMMISSION EXPENSES. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUND:- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF COMMISSION EXPENSES OF RS.3,10,967 PAID BY THE APPE LLANT TO VARIOUS PARTIES DURING THE YEAR UNDER CONSIDERATION FOR HIS BUSINES S PURPOSES. IT IS SUBMITTED THAT IT BE SO HELD NOW AND ADDITION BE DELETED. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT: ITA NO.3364/AHD/2004 A.Y. 2001-02 SH. GHANSHYAM M LAKHIANI V. ITO WD-3(2) ABD PAGE 2 I. NATURE OF SERVICES RENDERED BY COMMISSION AGENTS IS NOT CLEARLY ESTABLISHED. II. THE LETTERS FROM M/S. BHAIRAVNATH INDUSTRIES AN D M/S. BAIRAVNATH TEXTILE MILLS STATING THAT THEY WERE PURCHASING STE AM COAL DIRECTLY FROM THE APPELLANT ON THE BASIS OF DISCUSSION WITH SALES PERSONNEL OF THE APPELLANT IS AN AFTERTHOUGHT. IT IS SUBMITTED THAT LEARNED CIT(A) HAS WRONGLY CON FIRMED ABOVE ADDITION ON THE BASIS OF ABOVE INCORRECT FINDINGS AND THE AND M AY BE PLEASE BE DELETED. 3. THE LEARNED AO ERRED IN HOLDING THAT PAYMENT OF COMMISSION MADE TO VARIOUS PARTIES WERE BOGUS AND THAT APPELLANT HAS T RIED TO EVADE PAYMENT OF TAX BY SHOWING COLOURABLE DEVISE OF PAYMENT OF COMM ISSION TO VARIOUS AGENTS MAJORITY OF THEM BEING SISTER CONCERNS. IT IS SUBMITTED THAT THE ABOVE FINDINGS ARE FACTUAL LY INCORRECT AND HENCE BE DISAPPROVED AND ADDITIONS MADE ON THAT BASIS BE DEL ETED. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). TH E BRIEFLY STATED FACTS ARE THAT THE ASSESSEE-COMPANY IS CARRYING ON BUSINESS OF TRADING IN COAL ON WHOLESALE BASIS AND HAS BEEN DOING THIS BUSINESS SINCE ASSESSMENT YEAR 1999-00. IN THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER NOTED DURING T HE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE-COMPANY HAD MADE A PAYMENT OF RS.3,10, 967/- UNDER THE HEAD COMMISSION TO VARIOUS AGENTS IN RESPECT OF PROCUREM ENT OF SALE ORDERS OF STEAM COAL. THE AO HAS NOTED IN THE ASSESSMENT ORDER THA T THE COMMISSION HAS BEEN PAID TO SEVEN COMMISSION AGENTS FIVE OF WHOM ARE SISTE R CONCERNS OF THE ASSESSEE. THE REMAINING TWO ARE OUTSIDE PARTIES VIZ., M/S. MO SFI COAL CORPORATION AND SHRI DEVENDRA P JASODANI. THE AO ISSUED LETTERS U/S.133( 6) OF THE ACT TO THE BUYERS WHO WERE PURPORTED TO HAVE OBTAINED THE GOODS FOR THE A SSESSEE THROUGH ITS COMMISSION AGENTS. THE AO HAS LISTED AT LENGTH THAT IN THE CAS E OF M/S. KANORIA DYECHEM, ANKLESHWAR, THE LETTER U/S.133(6) WAS RETURNED UNSE RVED AND THE ASSESSEE WAS INFORMED OF THE SAME. IN THE CASE OF M/S. GOVIND & CO. THE BUYER CLEARLY STATED THAT THE TRANSACTIONS HAD BEEN MADE DIRECTLY WITH THE AS SESSEE SPECIFICALLY WITH SHRI GHANSHYAM LAKHIANI, PROP. OF VIMAL INDUSTRIES. SIM ILARLY, IN THE CASE OF M/S. KHANDELWAL & CO. JAIPUR, M/S. RAJASTHAN SYNTEX LTD. , UDAIPUR, M/S. KIRAN PROCESORS LTD. M/S. GLYSCOAL ENERGY P. LTD., M/S. BHAIRAVNATH TEXTILES MILLS P. LTD. IT WAS REPORTED BY THE BUYERS THAT TRANSACTIONS OF COAL WE RE MADE DIRECTLY WITH M/S. VIMAL ITA NO.3364/AHD/2004 A.Y. 2001-02 SH. GHANSHYAM M LAKHIANI V. ITO WD-3(2) ABD PAGE 3 INDUSTRIES WITHOUT ANY INTERMEDIARY / AGENT. IN FAC T, SHRI DILIPBHAI BHANSAL, DIRECTOR OF M/S KIRAN PROCESSORS LTD. STATED THAT HE HAD KNOWN THE PROPRIETOR OF M/S. VIMAL INDUSTRIES, SHRI GHANSHYAM LAKHIANI, FOR THE LAST T WO TO THREE YEARS AND THAT HE USED TO PLACE THE ORDERS FOR PURCHASE OF GOODS WITH SHRI GHANSHAYM LAKHANI ONLY. SIMILARLY, SHRI MANISH M SHAH, DIRECTOR OF GLYSCOAL ENERGY P. LTD. ALSO CONFIRMED THAT HE HAD KNOW SHRI. GHANSHYAM LAKHIANI, PROPRIET OR OF M/S. VIMAL INDUSTRIES FOR THE LAST THREE YEARS AND THAT STEAM COAL WAS BEING BROUGHT FROM HIM FOR THE SAME NUMBER OF YEARS AFTER PLACING ORDERS TELEPHONICALLY WITH MR. GHANSHYAM LAKHIANI. THE REPLY FROM M/S. BHAIRAVNATH TEXTILE MILLS P. LT D. ALSO STATED THAT ORDERS WERE GIVEN DIRECTLY TO M/S. VIMAL INDUSTRIES AND NOT THR OUGH ANY COMMISSION AGENT. THE AO FURTHER CONTACTED M/S. MOSFI COAL AND SHRI DEVEN DRA P. JASODANI THE TWO OUTSIDE COMMISSION AGENTS. M/S. MOSFI COAL SUBMITTED A COPY OF ACCOUNT OF M/S. VIMAL INDUSTRIES, INDICATING RECEIPT UNDER THE HEAD SERVI CE CHARGES OF RS.50,846/- AND SUMMONS U/S.131 OF THE ACT WERE ISSUED TO SHRI DEVE NDRA P JASODANI WHO IS THE SON OF ONE OF THE EMPLOYEES OF THE ASSESSEE. HE IS STATED TO HAVE INTRODUCED M/S. BHAIRAVNATH TEXTILES TO THE ASSESSEE-FIRM BUT HE CO ULD NOT RECALL THE EXACT LOCATION / ADDRESS OF M/S. BHIRAVNATH TEXTILES FACTORY AT CHA TRAL NOR HAD HE EVER VISITED THEIR AHMEDABAD OFFICE. AS PER THE CROSS-EXAMINATION AVAI LABLE ON RECORD, IT WAS STATED THAT HE USED TO PERSONALLY CONTACT ONE MRS. KETAKIB EN DAVE, PURCHASE OFFICER WITH WHOM HE USED TO NEGOTIATE THE RATE OF COAL. HOWEVE R, M/S. BHAIRAVNATH TEXTILES, VIDE LETTER DATED 19-12-2008 HAD CLARIFIED THAT NO PERSON OF THIS NAME WAS EMPLOYED BY THEM. THE AO FURTHER QUESTIONED SHRI JASODANI RE GARDING WHY HE WAS CONTINUING AS THE COMMISSION AGENT OF M/S. VIMAL INDUSTRIES WH EN THE BUYER M/S BHAIRAVNATH TEXTILES WAS VERY MUCH AWARE OF WHO IS THE SUPPLIER OF COAL, M/S. VIMAL INDUSTRIES WAS SINCE THE TWO PARTIES HAD BEEN ACQUAINTED WITH EACH OTHER AND WERE CONTINUING TO DO BUSINESS FOR THE LAST THREE YEARS. IN VIEW O F THE ABOVE FACTS, THE ASSESSING OFFICER DISALLOWED THE COMMISSION. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 4. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY GIVING FOLLOWING FINDINGS IN PARAS-4.1 TO 4.2 OF HIS APPELLATE ORDER:- 4.1 I HAVE CONSIDERED THE SUBMISSION OF BOTH SIDES AND IT SEEMS TO ME THAT THE NATURE OF SERVICES RENDERED BY THE COMMISSION A GENTS IN THIS CASE HAVE NOT BEEN CLEARLY ESTABLISHED, OR IS VAGUELY ESTABLI SHED BY THE APPELLANT. IT IS APPARENT THAT COMMISSION AGENTS ARE BEING PAID BY T HE APPELLANT SUMS ITA NO.3364/AHD/2004 A.Y. 2001-02 SH. GHANSHYAM M LAKHIANI V. ITO WD-3(2) ABD PAGE 4 RANGING FROM RS.14,000/- TO RS.70,000/- ONLY FOR PR OVIDING TELEPHONE NUMBERS AND OR ADDRESSES OF PROSPECTIVE BUYERS. THE REST OF THE WORK HAS BEEN DONE BY THE APPELLANT HIMSELF. IT SEEMS TO ME THAT IN TH IS DAY AND AGE THE SAME CAN BE DONE BY THE APPELLANT HIMSELF, OR AT BEST BY AN ASSISTANT, AFTER SEARCHING A COMMERCIAL DIRECTLY CONTAINING NAMES OF BOILER USER S AND BY WORKING THE TELEPHONES IN HIS OFFICE. IT IS MY UNDERSTANDING TH AT COMMISSION AGENTS SHOULD ACTUALLY BRING THE PARTY TO THE SELLER HAVING SO LD THE VENDOR AND PRODUCT TO IT; AFTER HAVING PROVIDING DETAILS OF THE SUPERIORI TY OF THE VENDORS PRODUCT, ITS COMPETITIVE PRICING ETC. AND HAVING PERSUADED THE P ROSPECTIVE CLIENTS TO BUY FROM THAT PARTICULAR VENDOR. IN EFFECT THE COMMISS ION AGENT SHOULD PRODUCE A READY-TO-BUY PARTY BEFORE THE VENDOR TO BE ALE TO EARN HIS COMMISSION. IT IS QUITE APPARENT THAT ALL AGENTS MENTIONED ON PAGE-2 OF THE ASSESSMENT ORDER ARE INVOLVED IN THE SAME LINE OF BUSINESS AS THE AP PELLANT FIRM AND CANNOT POSSIBLY BE TREATED AS COMMISSION AGENTS JUST FOR P ROVIDING A PARTICULAR NAME AND PHONE NUMBER OF THE POTENTIAL BUYER TO THE APPE LLANT. 4.2 FURTHER, THE APPELLANT SUBMISSION THAT COPIES O F LETTERS FROM M/S. BHIRAVNATH INDUSTRIES AND M/S BHIRAVNATH TEXTILES M ILLS STATING THAT WE HAD PURCHASED STEAM COAL DIRECTLY FROM YOU ON THE BASIS OF DISCUSSION WITH YOUR SALE PERSON IS VAGUE AND SEEMS TO BE AN AFTER THOU GHT, RESORTED TO LATER AS THESE LETTERS WERE PRODUCED MUCH AFTER THE ASSESSME NT ORDER HAD BEEN PASSED. EVEN THE LETTER FROM SHREE RAJASTHAN SYNTEX CLARIFYING THAT INITIAL INTRODUCTION HAD BEEN MADE BY MR. HARISH A LAKHIAN I, BUT, THEREAFTER PURCHASE WAS MADE DIRECTLY FROM M/S. VIMAL INDUSTRI ES IS NOT CONVINCING AS THERE IS NO INDICATION OF WHEN THAT INITIAL INTRODU CTION WAS MADE. THE FACT THAT COMMISSION IS PAID TO SHRI MOHAN LAKHIANI (APPELLAN TS FATHER), SHRI SURESH LAKHIANI (APPELLANTS BROTHER AND SHRI ASSANDAS TOP ANDAS (UNCLE) WHO HAVE SEPARATE BUSINESS AND SEPARATE RESIDENCE IS OF NO A CCOUNT WHAT MATTES IS THE NATURE OF SERVICE RENDERED, WHETHER IT IS DESER NING OF PAYMENT OF COMMISSION. THE APPELLANT ITSELF HAS STATED IN ITS SUBMISSION THAT SHRI DEVENDRA P JASODANI AHS INTRODUCED M/S. BHAIRAVNATH TEXTILES AND M/S. BHIRAVNATH INDUSTRIES IN A.Y. 2000-01. IN THAT CASE , WHY IS HE BEING PAID COMMISSION FOR THE SAME PURPOSE IN A.Y. 2001-02? TH E APPELLANTS SUBMISSION THAT THE COMMISSION PAYMENT WAS ACCEPTED IN THE PRECEDING ASSESSMENT YEAR BY THE AO CONCERNED ALSO CARRIES LI TTLE WEIGHT, AS EACH ASSESSMENT YEAR IS INDEPENDENT IN ITSELF, AND ANY O R ALL ISSUES IN A RELEVANT YEAR MAY BE TAKEN UP FOR EXAMINATION BY AN AO. IN V IEW OF THE ABOVE, THE DISALLOWANCE MADE BY THE AO. IS CONFIRMED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). WE FIND THAT THE THREE PARTIES, I.E. T. HIRANANDAN, DEVENARA P JOSODANI AND MOFI COAL CO RPORATION AHMEDABAD ARE NOT RELATED PARTIES, WHEREAS THREE OTHER PARTIES, NAMEL Y, DIRAJ ASSOCIATES, LAKHIAN ASSOCIATES AND MAHALAXMI COAL CORPORATION ARE RELA TED PARTIES. WE FIND THAT THE ASSESSEE HAS FILED DETAILS OF COMMISSION PAID BUT, THE CIT(A) HAS CONFIRMED THE ITA NO.3364/AHD/2004 A.Y. 2001-02 SH. GHANSHYAM M LAKHIANI V. ITO WD-3(2) ABD PAGE 5 ACTION OF THE ASSESSING OFFICER ON RELATED AS WELL AS NON-RELATED PARTIES. WE FURTHER FIND THAT THE SERVICES RENDERED BY NON-RELATED PART IES ARE SERVICE RENDERED BY THE ASSESSEE. WE CONFIRM THE DISALLOWANCE REGARDING RE LATED PARTIES. ACCORDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. 6. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF MOTOR CAR EXP ENSES AMOUNTING TO RS.12,736/- AS WELL AS MOTOR CAR DEPRECIATION AMOUNTING TO RS.1 0,070/-. 7. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE HAS N OT PRESSED THE ISSUE, HENCE, WE DISMISS THE SAME AS NOT PRESSED. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11/09/2009 SD/- SD/- (P.K.BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED :11/09/2009 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VII, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD