Income Tax Officer, Kanpur V. M/s. Shalini Chemicals Pvt. Ltd., Kanpur

ITA 346/LKW/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83302 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-07-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 25-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ALOK MITRA D R SHRI P K KAPOOR
• Keywords: Business income; Business expenditure; Principle of natural justice; Wrong claim
• Section: 147

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.346/LKW/2012 ASSESSMENT YEAR:2001 - 02 INCOME TAX OFFICER, WARD - 6(2), KANPUR. VS. M/S SHALINI CHEMICALS PVT. LTD., 286 - D, DEFENCE COLONY, JAJMAU, KANPUR. PAN:AAFCS3775E (APPELLANT) (RESPONDENT) ITA NO.349/LKW/2012 ASSESSMENT YEAR:2001 - 02 M/S SHALINI CHEMICALS PVT. LTD., 286 - D, DEFENCE COLONY, JAJMAU, KANPUR. PAN:AAFCS3775E VS. INCOME TAX OFFICER, WARD - 6(2), KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER A. K. GARODIA, A.M. THESE ARE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE, WHICH ARE DIRECTED AGAINST THE ORDER OF CIT(A) - I, KANPUR DATED 23/03/2012 FOR ASSESSMENT YEAR 2001 - 2002. 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE I.E. I.T.A. NO.346/LKW/2012 FOR 2001 - 2002. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: REVENUE BY SHRI ALOK MITRA, D.R. ASSESSEE BY SHRI P. K. KAPOOR, C.A. DATE OF HEARING 21/07/2014 DATE OF PRONOUNCEMENT 0 5 /0 9 /2014 2 1. THAT THE LEARNED CIT(A) - II, KANPUR HAS ERRED IN LAW A ND ON FACTS IN NOT APPRECIATING THE FACT THAT THE ASSESSEES CLAIM FOR COMMISSION ON PURCHASES MADE BY IT FROM M/S AUCHTEL PRODUCTS LTD, MUMBAI A ND PAID THE SAME TO M/S ASIAN CHEMICAL PRODUCT COMPANY, PONCHAKANWALA ROAD, WORLI, MUMBAI IS BOGUS. 2. THAT THE CIT (A) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT WHILE REQUIRING INFORMATION IN RESPECT OF THE INVOLVEMENT OF ANY THIRD PARTY IN THE SALES OF CHEMICAL TO THE ASSESSEE COMPANY BY THE ASSESSING OFFICER VIDE ITS LETTER 05.02.2003 FROM M/S AUCHTEL PRODUCTS LTD. MUMBAI THE SAID COMPANY VIDE ITS REPLY DATED 17/02/2003 HAS INFORMED THAT (A) THE COMPANY HAS MADE SALES TO THEM DURING FINANCIAL YEAR 2000 - 01 (B) COPY OF ACCOUNT OF THE ABOVE PARTY IS ENCLOSED (C) THERE IS NO AGREEMENT IN WRITING WITH THE ABOVE PARTY (D) THE GOODS ARE SUPPLIED DIRECTLY TO THE ABOVE PARTY (E) BILLS ARE RAISED ON THE ABOVE PARTY (F ) PAYMENTS ARE RECEIVED FROM THE ABOVE PARTY. 3. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A), KANPUR BEING ERRONEOUS IN LAW AND ON FACTS DESERVES TO BE VACATED AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 3. LEARNED D.R. OF THE REVEN UE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT ( A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER PARA 5.4 TO 5.4.1 OF HIS ORDER, WHICH ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 5.4 I HAVE GONE THROUGH THE FINDING GIVEN BY THE ASSESSMENT ORDER IN THE ASSESSMENT ORDER AND ALSO THE OBSERVATIONS MADE IN THE REMAND REPORT CALLED BY MY PREDECESSOR. I HAVE ALSO CONSIDERED THE SUBMISSI ONS MADE BY THE LEARNED AUTHORIZED REPRESENTATIVE, APPEARING ON BEHALF OF THE APPELLANT. THE MUTE QUESTION TO BE DECIDED IS AS TO WHETHER THE PAYMENT OF COMMISSION ON PURCHASES MADE TO ASIAN CHEMICALS PRODUCTS COMPANY MUMBAI WAS INCIDENTAL TO THE BUSINESS OF THE APPELLANT? FROM THE RECORDS, IT IS SEEN THAT DURING THE YEAR 3 UNDER CONSIDERATION PURCHASES FROM M/S AUCHTEL PRODUCTS LTD MUMBAI WAS TO THE TUNE OF RS 1.24 CRORE APPROX AS AGAINST TOTAL PURCHASES OF 1.49 CRORE. IT IS ALSO SEEN THAT TIE APPELLANT H AD DEALINGS WITH M/S AUCHTEL PRODUCTS LTD MUMBAI SINCE 1997 & AND THE COMMISSION ON SUCH PURCHASES WAS BEING MADE TO M/S ASIAN CHEMICALS PRODUCTS COMPANY FROM EARLIER YEARS. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED A LETTER D ATED 13.07.2004 FROM M/S AUCHTEL PRODUCTS LTD CONFIRMING THE ROLE OF ASIAN'CHEMICALS PRODUCT COMPANY MUMBAI IN ITS DEALING WITH THE ASSESSEE COMPANY. FROM THE RECORDS, I FIND THAT M/S ASIAN CHEMICALS PRODUCTS LTD. MUMBAI IS CLOSELY RELATED TO M/S. AUCHTEL PRODUCTS LTD. SINCE TWO OF THE PARTNERS NAMELY, SHRI RAJIV TANDON & SMT DEEPA TANDON ARE THE DIRECTORS OF THE SAID COMPANY. IT IS ALSO SEEN THAT THE ADDRESS OF ASIAN CHEMICALS PRODUCTS AS PER THEIR BANK RECORDS IS THE REGISTERED OFFICE ADDRESS OF THE AUCH TAL PRODUCTS LTD WHO WERE ALSO THE INTRODUCER OF THE BANK ACCOUNT OF M/S ASIAN CHEMICALS PRODUCTS. FURTHER, THE AUTHORIZED PERSON OF M/S ASIAN CHEMICALS PRODUCTS COMPANY, SHRI V.N. ATHLEY HAS BEEN THE VICE PRESIDENT OF AUCHTEI PRODUCTS LTD. LOOKING TO THES E CLOSE LINKAGES, I HARBOURED THE SUSPICION THAT THE COMMISSION PAID BY THE. APPELLANT COMPANY TO M/S ASIAN CHEMICAL PRODUCT COMPANY WAS A FORCED PAYMENT & ACTUALLY IT WAS A PART OF THE SALE CONSIDERATION RECEIVABLE BY M/S AUCHTEL PRODUCT LTD., WHICH WAS BEING DIVERTED TO M/S ASIAN CHEMICALS PRODUCTS. CONSIDERING THESE FACTS, A LETTER DATED 02.05.2011 WAS SENT BY ME TO M/S AUCHTEL PRODUCTS LTD AND AN OPPORTUNITY U/S 150/153 OF IT ACT 1961 WAS AFFORDED. THE COMPANY WAS REQUIRED TO EXPLAIN AS TO WHY SUCH A MOUNT SHOULD NOT BE ASSESSED IN THEIR HAND AS PART OF THE SALE. THE COMPANY HAS SENT A REPLY IN WHICH VARIOUS OBJECTIONS ABOUT THE ASSESSIBILITY OF THE COMMISSION IN THEIR HANDS HAVE BEEN RAISED. COPY OF MY LETTER DATED 02/05/2011 AND REPLY RECEIVED FROM M/S AUCHTEL PRODUCTS LTD. ARE PRODUCED AS UNDER: COPY OF LETTER DT. 02/05/2011 THE PRINCIPAL OFFICER M/S. ANCHFEL PRODUCT LTD. 142/C, VICTOR HOUSE N.M. JOSHI MARG LOWER PAREI (W) MUMBAI - 400013 4 SIR, SUB: - NOTICE U/S 150/153 OF THE I .T. ACT 1961 REG - ON PERUSA L OF THE CASE RECORDS OF M/S. SHA L INI CHEMICA L S PVT. LTD., JAJMAU, KANPUR FOR ASSTT YEAR 2001 - 2002, I FIND THAT IT HAS CREDITED THE ACCOUNT OF ASIAN CHEMICALS PRODUCTS COMPANY, WORL I MUMBAI - 25 WITH A SUM OF RS . 1141105 / - ON ACCOUNT OF COMMISSION PAID/PAYABLE BY THEM TO ABOVE CONCERN FOR PURCHASES MADE BY SHA L INI CHEMICALS PVT. LTD. FROM YOUR COMPANY. FROM RECORDS, IT IS A L SO SEEN THAT M/S. ASIAN CHEMICALS PRODUCTS COMPANY I S CLOSELY ASSOCIATED WITH YOUR COMPANY; WITH TWO OF THE PARTNERS NAME L Y SHRI RAJ I V TANDON AND SMT. DEEPA TANDON BEING THE DIRECTOR OF YOUR COMPANY. AS PER THE BANK DETAI L S (BANK OF BARODA, WORL I BRANCH), THE ADDRESS OF ASIAN CHEMICALS PRODUCT COMPANY IS YOUR REGISTERED OFFICE ADDRESS AND THE INTRODUCER O F THAT ACCOUNTS IS A L SO YOUR COMPANY. THE AUTHORIZED PERSON OF M/S. ASIAN CHEMICALS PRODUCT COMPANY IS/WAS SHRI V.N. ATHALYE WHO IS/WAS, V.P. OF YOUR COMPANY. FURTHER, SHRI V.N. ATHA L YE IN HIS STATEMENT BEFORE THE INCOME - T AX AUTHORITIES HAD STATED: 'I HAV E NO EVIDENCE TO ESTABLISH THAT THE ABOVE SERVICES WERE RENDERED BY M/S. ASIAN CHEMICALS PRODUCTS COMPANY, IT IS ONLY OUR ORAL ASSERTION UNSUBSTANTIATED BY DOCUMENTARY EVIDENCE.' 2. UNDER THE FACTS AND CIRCUMSTANCES, I HAVE REASONS TO BELIEVE THAT THE SO CALLED COMMISSION PAID BY M/S. SHA L INI CHEMICALS PVT. LTD., KANPUR TO M/S. ASIAN CHEMICALS PRODUCT COMPANY, WAS A RUSE AND WAS ACTUALLY PART OF THE SALE CONS I DERATION RECEIVABLE B Y YOU ON ACCOUNT OF SALES MADE BY YOU TO M/S. SHA L INI CHEMICALS PVT. LTD. KANPUR. 3. I AM GIVING YOU AN OPPORTUNITY U/S 150/153 OF THE I.T. ACT 1961 TO EXPLAIN AS TO WHY SUCH CREDITS SHOULD NOT BE ASSESSED IN YOUR HANDS AS PART OF THE SALE CONSIDERATION. DATE FIXED FOR REPLY IS 18 TH MAY 2011. XXXXXXXXXXXXXXXXX REPLY DT.________RE C D FROM AUCHTEL PRODUCTS LTD. MUMBAI: FROM : AUCHTEL PRODUCTS LIMITED, MUMBAI . TO, 5 THE COMMISSIONER OF INCOME TAX (APPEALS) - I , 15/96 CIVIL LINES (COMPOUND JAGENDRA SWAROOP) KANPUR . SUB: REPLY TO NOTICE U/S 150/153 OF THE I. T. ACT 1961 HONORABLE SIR, WE ARE IN RECEIPT OF NOTICE U/S 150/153 OF THE I.T. ACT, 1961 DT. 02/05/2011 ISSUED BY YOUR HONOUR REQUIRING US TO EXPLAIN AS TO WHY COMMISSION PAID BY SHALINI CHEMICALS PVT. LTD. THE APPELLANT BEFORE YOU FOR ASSTT YEAR 2001 - 2002 TO M/S. ASIAN CHEMICALS PRODUCTS COMPANY SHOULD NOT BE ASSESSED AS PART OF SALE CONSIDERATION IN OUR HANDS. IN CONNECTION WITH THE ABOVE, WE RESPECTFULLY WISH TO SUBMIT THAT THE PROPOSAL TO ASSESS THE AMOUN T PAID/CREDIT BY SHALINI CHEMICALS PVT. LTD. AS COMMISSION TO A PARTNERSHIP FIRM M/S. ASIAN CHEMICALS PRODUCTS C O MPANY AS P ART OF OUR SALE CONSIDERATION SHALL NOT BE LAWFUL AND SHALL BE ARBITRARY AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. WITHOUT PREJUDICE IN THE FIRST PLACE, IT IS A TIME BARRED MATTER RELATING TO THE ASSTT YEAR 2001 - 2002. AS YOUR HONOUR WOULD KNOW THAT IT HAS BEEN HELD BY SEVERAL COURTS INCLUDING THE HON'BLE SUPREME COURT THAT THE PROVISIONS OF SECTION 150/153 WOULD APPLY ONLY TO SUCH PARTIES WHO ARE INTIMATELY CONNECTED TO THE APPELLANT'S ASSESSMENT. AS YOU WOULD KNOW THAT WE ARE NOT 'INTIMATELY CONNECTED' WITH SHALINI CHEMICALS PVT. LTD. ASSESSMENT HENCE PROVISIONS OF SECTION 150/153 WOULD NOT APPLY AND THE CASE WOULD BE CONSIDERED AS TIME BARRED. FURTHERMORE THE 'FINDING' BY THE APPELLATE AUTHORITY SHOULD A/SO NECESSARY FOR THE DISPOSAL OF THE APPEAL BEFORE IT. IN THE PRESENT CASE, THERE DOES NOT APPEAR TO BE A NECESSITY TO GIVE A FINDING THAT THIS INCOME BELONGED TO ONE OR THE OTHER PARTY. ISSUE IS WHETHER THIS IS ALLOWABLE AS EXPENDITURE TO THE APPELLANT OR NOT. WITHOUT PREJUDICE TO OUR SUBMISSION ABOVE, WE WISH TO SUBMIT FURTHER THAT BESIDES SHALINI CHEMICALS PVT. LTD. IS JUST ONE OF OUR SEVERAL CUSTOMERS WHO ALSO PURCHASE THE SAME CHEMICALS FROM US AS SHALINI CHEMICALS PVT. LTD. DID. WE HAVE CHARGED THE SAME PRICE FROM OTHER CUSTOMERS ALSO WHICH WE HAVE CHARGED FROM SHALINI CHEMICALS PVT. LTD. 6 AS WE KNOW, M/S. ASIAN CHEMICALS PRODUCTS COMPANY IS AN INDEPENDENT AND A SEPARATE ENTITY OF ITS OWN WITH WHICH SHALINI CHEMICALS PVT. LTD. HAD AN AGREEMENT UNDER WHICH IT PAID/CREDITED CERTAIN AMOUNT AS COMMISSION TO IT JUST BECAUSE M/S. ASIAN CHEMICALS PRODUCTS COMPANY HAPPENED TO HAVE SOME DIRECTORS OF OUR COMPANY AS ITS P ARTNERS AND THAT THEIR BANK ACCOUNT WAS INTRODUCED BY THE COMPANY , IT DOES NOT MEAN THAT AN INCOME WHICH BELONGED TO THEM WOULD BECOME OUR INCOME. UPON RECEIPT OF YOUR LETTER/NOTICE WE CONTACTED M/S. ASIAN CHEMICALS PRODUCTS COMPANY AND WERE INFORMED BY THEM THAT IN FACT ON AN ENQUIRY AND EXCHANGE OF INFORMATION MADE IN THE YEAR 2005 BY YOUR OFFICE ONLY WHILE DECIDING SHA L INI CHEMICALS PVT. LTD. APPEAL BEFORE YOUR HONOUR IN RESPECT OF PAYMENT OF COMMISSION BY SHALINI CHEMICALS PVT. LTD. TO M/S. ASIAN CHEM ICALS PRODUCTS COMPANY FOR THE INCOME TAX CASE OF M/S. ASIAN CHEMICALS PRODUCTS COMPANY FOR THE ASSTT YEAR 2001 - 02 WHICH HAD BEEN ASSESS E D WAS RE - OPENED BY ITS ASSESSING OFFICER IN MUMBAI AND AFTER FULLY SATISFYING ITSELF AN ASSESSMENT ORDER U/S 1.43 READ WITH SECTION 147 WAS PASSED ACCEPTING THE RETURNED INCOME WHICH INCLUDED THE AMOUNT OF COMMISSION RECEIVED BY M/S. ASIAN CHEMICALS COMPANY FROM SHALINI CHEMICALS PVT. LTD. NOW AFTER A PASSAGE OF ANOTHER 6 YEARS AFTER THE REOPENING AND ASSESSMENT OF PAYMEN TS RECEIVED BY M/S. ASIAN CHEMICALS PRODUCTS COMPANY FROM SHALINI CHEMICALS PVT. LTD. AS ITS INCOME FOR THE ASSESSMENT YEAR 2001 - 2002, IT WOULD BE ABSOLUTELY WRONG AND BASELESS TO NOW ASSESS THE SAME INCOME AS INCOME OF OUR COMPANY, A COPY OF THE ASSESSMEN T ORDER FOR THE ASSTT YEAR 2001 - 2002 PASSED HOLDING COMMISSION RECEIVED FROM SHALINI CHEMICALS PVT. LTD, AS ITS INCOME IS ENCLOSED HEREWITH FOR YOUR RECORDS. WE ARE SURE THAT YOUR HONOUR WOULD BE FULLY SATISFIED WITH OUR SUBMISSION ABOVE. THANKING YOU, YOURS FAITHFULLY, FOR AUCHTEL PRODUCTS LIMITED 5.4.1 AFTER GOING THROUGH ALL THESE FACTS AND THE MODUS OPERAND I OF THE PURCHASES MADE BY THE APPELLANT FROM IWS AUCHTEL PRODUCTS LTD & PAYMENT MADE TO M/S ASIAN CHEMICALS 7 PRODUCTS COMPANY, I AM OF THE VIEW THAT THE APPELLANT COMPANY, IN ORDER TO PROCURE MATERIAL FROM M/S AUCHTEL PRODUCTS LTD., WHO WAS THEIR MAIN SUPPLIER, HAD TO AGREE WITH THE TERMS AND CONDITIONS OF THE COMPANY AND TO COMPULSORILY PART WITH CERTAIN AMOUNT BY WAY BY 'COMMISSION' TO THEIR ASSOCIATE CONCERN, WHICH IN MY OPINION WAS NOTHING BUT PART OF THE SALE CONSIDERATION PAYABLE BY THE APPELLANT COMPANY TO THE SUPPLIER COMPANY. SINCE THE APPELLANT'S BUSINESS WAS MAINLY DEPENDENT ON THE SUPPLIES OF GOODS FROM AUCHTEL P RODUCTS LTD ., THE APPELLANT HAD TO PAY THE SAID AMOUNT OF 'COMMISSION' ON SUCH PURCHASES. SUCH EXPENSES INCURRED BY THE APPELLANT RELATING TO THESE PURCHASES (NO MATTER BY WHAT NAMES IT IS CALLED) ARE, THEREFORE, INCIDENTAL TO THE B USINESS OF THE APPELLANT COMPANY. AFTER CONSIDERING ALL THESE RELEVANT FACTORS, I HOLD THAT THE IMPUGNED PAYMENT OF RS . 11,41,105/ - MADE BY THE APPELLANT COMPANY IS AN ALLOWABLE DEDUCTION. THE APPELLANT GETS RELIEF OF RS.11,41,105/ - . 4.1 FROM THE ABOVE PARAS FROM THE ORDER OF CIT(A), WE FIND THAT HE HAS EXAMINED THE ISSUE IN GREAT DETAIL. IN FACT , HE HAS MADE ENQUIRY FROM THE SUPPLIERS AS WELL AS THE PARTY TO WHOM COMMISSION WAS PAID BY THE ASSESSEE IN RESPECT OF PURCHASES. THEREAFTER, HE HAS GIVEN A FINDING THAT THE ASSESSEES BUSINESS WAS MAINLY DEPENDENT ON THE SUPPLY OF GOODS FROM AUCHTEL PRODUCTS LTD. AND THEREFORE, THE ASSESSEE HAD TO PAY THE SAID AMOUNT OF COMMISSION ON SUCH PURCHASES. HE HAS ALSO NOTED THAT THE ASSESSEE HA D AGREED WITH THE TERMS AND CONDITIONS OF THE COMPANY AND TO COMPULSORILY PART WITH CERTAIN AMOUNT BY WAY OF COMMISSION TO THE SISTER CONCERN OF THE SUPPLIER COMPANY WHICH IN THE OPINION OF THE CIT(A) WAS NOTHING BUT PART OF THE SALE CONSIDERATION PAYABLE BY THE ASSESSEE COMPANY TO THE SUPPLIER COMPANY. THESE FINDINGS OF FACTS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND HENCE, ON THIS ASPECT , WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A). HENCE, WE DECLINE TO INTERFERE IN HIS ORDER ON THIS ISSUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 8 6. NOW WE TAKE UP THE ASSESSEES APPEAL I.E. I.T.A. NO.349/LKW/2012 FOR ASSESSMENT YEAR 2001 - 02. IN ITS APPEAL , THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) WAS WRONG IN LAW AND ON FACTS IN CONF IRMING THE FOLLOWING ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER IN THE ASSTT OF THE APPELLANT FOR ASSTT YEAR 2001 - 2002: - ( I ) RS.10,72,720/ - DISALLOWANCE OUT OF COMMISSION PAID ON SALES ( II ) RS.2,00,000/ - DISALLOWANCE OUT OF REMUNERATION PAID TO DIRECTORS 2. THAT LEARNED CIT(A) WHILE MAKING THE AFORESAID DISALLOWANCE HAS FAILED TO APPRECIATE THE FOLLOWING FACTS INTER ALIA: - (I) THAT IN RESPECT OF PAYMENT OF COMMISSION ON SALES NECESSARY EVIDENCES WAS FURNISHED. (II) THAT THE PAYMENT OF COMMISSION W AS INCIDENTAL TO BUSINESS. ( III ) THAT THE PAYMENTS MADE TO DIRECTORS WERE QUITE ADEQUATE LOOKING TO THEIR EXPERIENCE & SERVICES RENDERED FOR BUSINESS PURPOSES. ( IV ) THAT THE FINDING GIVEN BY THE AUTHORITIES BELOW IN RESPECT OF THESE PAYMENTS WERE ARBITRARY & UNJUSTIF IED. 3. IN ANY CASE & WITHOUT PREJUDICE TO THE ABOVE GROUNDS THE QUANTUM OF DISALLOWANCES IS MUCH TOO HIGH & EXCESSIVE. 4. THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW FACTS & PRINCIPLES OF NATURAL JUSTICE. 7. REGARDING THE DISALLOWANCE OF RS.10,72,720/ - OUT OF COMMISSION PAID ON SALES, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE DETAILS OF SALES AND COMMISSION IS AVAILABLE ON PAGE NO. 40 OF THE PAPER BOOK. AT THIS JUNCTURE, THE BENCH ASKED THE LE ARNED A.R. OF THE ASSESSEE TO FILE THE DETAILS OF COMMISSION PAID FOR THE PRESENT YEAR AS WELL AS IN THE PRECEDING TWO YEARS ALONG WITH PARTY - WISE SALES FOR THE PRESENT YEAR AS WELL AS FOR THE PRECEDING TWO YEARS. THESE DETAILS WERE FURNISHED BY LEARNED A .R. OF THE ASSESSEE 9 WHICH ARE AVAILABLE ON RECORD. HE SUBMITTED THAT NO DISALLOWANCE IS JUSTIFIED BECAUSE THE ASSESSEE HAS PRODUCED THE PERSON TO WHOM THE COMMISSION WAS PAID AND HE HAS ALSO CONFIRMED REGARDING RECEIPT OF COMMISSION. HE PLACED RELIANCE O N THE FOLLOWING JUDICIAL PRONOUNCEMENTS: ( I ) JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. Q.S.T. LTD. IN INCOME TAX APPEAL NO. 222 OF 2006 ( II ) JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF JASWANT SUGAR MILLS LTD. VS. CIT [1970] 78 ITR 154 (ALL.) ( III ) JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF J.K. WOOLLEN MANUFACTURERS VS. CIT [1969] 72 ITR 612 (SC) 8. AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL , WE REPRODUCE THE DETAILS OF SALES AND COMMISSION PAID BY THE ASSESSEE IN THE PRESENT YEAR AS AVAILABLE ON PAGE NO. 40 OF THE PAPER BOOK WHICH IS AS UNDER: S.NO. NAME OF THE PARTY AMOUNT(RS) ------ ---------------- -------- --------------- 1 . A LIG INDUSTRIES 1,87,934. 41 2 . A BDULLA TANNERY 5,58,255.00 3 . ALLIG INTERNATIONAL 14,33,070.00 4 . ALIG TANNERY 8,13,415.00 5 . BHARAT TANNING INDUSTRIES 28,16,131.45 6 . LEATHER AGE TANNERY 1,18,162.00 7 . LEATHER AGE NEPAL 12,870.00 8 . N.C. & S. INDIA 8,46,074.48 9 . RUSK INTERNATIONAL 4,65,340.00 10 . REHMAN EXP[ORTS 49,059.20 11 . SEEMA TANNING IND. 2,86,615.00 12 . SUPER TANNERY INDIA LTD. 2,68,002.00 13 . SUPER HOUSE LEATHER LTD. GOAT 2 2 ,0 4 , 653 . 62 14 . SUPER HOUSE LEATHER LTD GOAT 2 , 32,385.00 1,07,33,967.19 COMMISSION @ 10% 10,72,720.00 10 9.1 WE ALSO REPRODUCE THE DETAILS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE FOR THE PRESENT YEAR AS WELL AS FOR THE PRECEDING TWO YEARS IN RESPECT OF COMMISSION PAID ON SALES IN THESE THREE YEARS: S.NO NAME OF PARTY TO WHOM COMMISSION WAS PAID ON SALE A.Y.99 - 0 0 A.Y. 0 0 - 01 A.Y.01 - 02 1 SURYA SALES & MARKETING CO. 440900 - - 2 MR. HARINDER PAL ARORA 50000 - - 3 MR. VINAY ARORA - - 41600 4 KLASSIC ENTERPRISES PROP. SUBASH BGAGAT - 294387 1072720 5 MRV.K.MISRA 104500 219914 - 6 MR. GOPAIJI MISRA 107000 120320 116000 7 MRSHAKIL AHMED 52400 25692 40950 8 MR.SUHAL AHMED 42350 45889 50625 9 MR NITIN KU.JAIN 61000 - - 10 MR. ASFAQ AHMED 30000 - - 11 MR. VISHNUJI ARORA - - 222000 TOTAL COMMSSION 888150 706202 1543895 TOTAL SALE 12768928 14911083 20080776 % OF COMMISSION ON TOTAL SALES 6.96% 4.74% 7.69% 9.2 WE ALSO REPRODUCE THE PARTY - WISE DETAILS OF THE SALES DURING THE PRESENT YEAR AS WELL AS PRECEDING TWO YEARS ALONG WITH SALES FIGURE OF THE SAME PERIOD FOR THE CURRENT YEAR AS PER PAGE 40 OF THE PAPER BOOK: S.NO. NAME OF PARTY A.Y.99 - 00 A.Y.00 - 01 A.Y.01 - 02 A.Y. 2001 02 AS PER PAGE 40 OF PB 1. ABDULLA TANNERY 9,45,837.50 7,06,332.50 5,58,255.00 5,58,255.00 2. ALIG INDUSTRIES 99,390.92 3,18,739.81 1,87,934.30 1,87,934.30 3. ALIG INTERNATIONAL 1,35,000.00 4,93,950.00 14,33,070.00 14,33,070.00 4. ALIG TANNERY - - 9,52,970.00 8,13,415.00 5. BHARAT TANNING INDUSTRIES 2,54,925.70 16,87,009.15 30,16,227.35 28,16,131.45 11 6. LEATHER AGE TANNERY 3,19,551.00 2,22,539.00 4,00,687.60 1,18,162 7. LEATHER AGE NEPAL 81,500.00 4,290.00 12,870.00 12,870.00 8. N.C & S. INDIA 14,36,627.41 13,74,037.27 9,57,627.42 8,46,074.00 9. RUSK INTERNATIONAL - 3,46,981.50 4,65,340.00 4,65,340.00 10. REHMAN EXPORTS - 1,01,294.40 15,379.00 49,359.00 11. SEEMA TANNING IND. 8,07,166.10 1,61,125.00 3,39,655.00 2,86,615.00 12. SUPER TANNERY INDIA LTD. 59,502.00 5,31,414.00 2,68,002.00 2,68,002.00 13. SUPER HOUSE LEATHER LTD. GOAT 22,28,741.66 15,56,643.00 23,07,403.37 22,04,653.00 14. SUPER HOUSE LEATHER LTD. GOAT - 63,075.00 2,32,385.00 2,32,385.00 9.3 FROM THE ABOVE DETAILS, WE FIND THAT NO COMMISSION WAS PAID TO M/S KLASSIC ENTERPRISES PROP. SUBASH BHAGAT IN ASSESSMENT YEAR 1999 - 2000 AND THE AMOUNT OF COMMISSION PAID IN ASSESSMENT YEAR 2000 - 2001 WAS ONLY RS.2,94,387/ - AS AGAINST CURRENT YEAR OF RS.10,7 2,720/ - . AS PER THE DETAILS OF PARTY - WISE SALES IN THE PRESENT YEAR AS WELL AS PRECEDING TWO YEARS, WE FIND THAT IN MOST OF THE CASES, SALES WAS EFFECTED IN ASSESSMENT YEAR 1999 - 2000 ALSO TO THE SAME PARTIES BUT NO COMMISSION WAS PAID IN THAT YEAR TO M/S KLASSIC ENTERPRISES PROP. SUBASH BHAGAT. HENCE IT CANNOT BE SAID THAT THESE PARTIES WERE INTRODUCED BY SRI SUBHASH BHAGAT FOR THE FIRST TIME IN THE PRESENT YEAR OR IN ASSESSMENT YEAR 2000 - 2001 WHEN COMMISSION WAS PAID BY THE ASSESSEE TO HIM. WHEN THE ASSESSEE COMPANY WAS EFFECTING SALES TO THESE CUSTOMERS IN ASSESSMENT YEAR 1999 - 2000 ALSO , WHEN NO COMMISSION WAS PAID TO M/S KLASSIC ENTERPRISES PROP. SUBASH BHAGAT, IT CANNOT BE SAID THAT THESE PARTIES WERE INTRODUCED BY THIS COMMISSION AGENT TO THE ASSESSEE AND HENCE, THERE IS FORCE IN THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ASSESSEES CLAIM REGARDING PAYMENT OF COMMISSION TO THIS PERSON IS A BOGUS CLAIM. WHEN THE ASSESSEE IS EFFECTING SALES TO THIS PARTY IN ASSESSMENT YEAR 1 999 - 2000 WITHOUT PAYING ANY COMMISSION TO M/S KLASSIC ENTERPRISES PROP. SUBASH BHAGAT, IT CANNOT BE ACCEPTED THAT IN SUBSEQUENT YEARS , THERE IS NECESSITY TO PAY COMMISSION. ADMITTEDLY, FEW PARTIES ARE NEW TO WHOM NO SALES WAS EFFECTED IN ASSESSMENT YEAR 1 999 - 2000 BUT WHEN IN MAJORITY CASES , THE CLAIM OF COMMISSION PAYMENT IS FOUND BOGUS, IN RESPECT OF THESE 12 FEW NEW PARTIES ALSO, IT CANNOT BE SAID THAT ANY SERVICE WAS RENDERED BY THIS PERSON TO THE ASSESSEE COMPANY BECAUSE IT IS NO T POSSIBLE TO SAY THAT COM MISSION IS TO BE COMPULSORILY PAID FOR EFFECTING SALE TO A PARTY FOR THE FIRST TIME AND THEREFORE, COMMISSION PAID TO HIM IS ALLOWABLE AS BUSINESS EXPENDITURE IN THE HANDS OF THE ASSESSEE EVEN WHEN THE ASSESSEE IS NOT ABLE TO ESTABLISH THAT SERVICES WERE R ENDERED BY THE SAID AGENT . REGARDING THIS ARGUMENT THAT THE PARTY WAS PRODUCED AND HE ACCEPTED RECEIPT OF COMMISSION, WE WOULD LIKE TO OBSERVE THAT THESE MAY BE ADDITIONAL ARGUMENTS TO SUBSTANTIATE THE COMMISSION PAYMENT AFTER SATISFYING ABOUT RENDERING OF SERVICES BY THE COMMISSION AGENT BUT THESE ARGUMENTS CANNOT ESTABLISH RENDERING OF SERVICES PARTICULARLY WHEN SALES WERE AFFECTED BY THE ASSESSEE TO SAME CUSTOMERS IN EARLIER YEAR WITHOUT ANY PAYMENT OF COMMISSION. 9.4 NOW IN THE LIGHT OF ABOVE FACTUAL DISCUSSION, WE EXAMINE THE APPLICABILITY OF VARIOUS JUDGMENTS CITED BY LEARNED A.R. OF THE ASSESSEE. 9.4.1 THE FIRST JUDGMENT CITED BY LEARNED A.R. OF THE ASSESSEE IS THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. Q.S.T. LTD. (SUPRA). IN THIS CASE , IT IS NOTED BY HON'BLE ALLAHABAD HIGH COURT THAT THE TRIBUNAL FOLLOWED ITS EARLIER DECISION FOR ASSESSMENT YEAR 1994 - 95 AND HAS ALLOWED THE COMMISSION PAID TO VARIOUS PARTIES AND THE APPEAL RELATED TO THE EARLIER YEAR HAS BEEN DISMI SSED BY THIS COURT ON 25/09/2007 AND IN VIEW OF THIS , THE APPEAL FOR ASSESSMENT YEAR 1999 - 2000 WAS ALSO DISMISSED. HENCE, IT IS SEEN THAT THE COMMISSION PAYMENT WAS ALLOWED BY THE TRIBUNAL BY FOLLOWING ITS EARLIER DECISION FOR ASSESSMENT YEAR 94 - 95. IN T HE PRESENT CASE, NO SUCH TRIBUNAL DECISION HAS BEEN SHOWN BY THE ASSESSEE AS PER WHICH COMMISSION PAYMENT UNDER SIMILAR CIRCUMSTANCES WAS ALLOWED BY THE TRIBUNAL IN THE CASE OF THE PRESENT ASSESSEE AND THEREFORE, THIS JUDGMENT OF HON'BLE ALLAHABAD HIGH COU RT IS NOT APPLICABLE IN THE PRESENT CASE. 13 9.4.2 THE NEXT JUDGMENT CITED BY LEARNED A.R. OF THE ASSESSEE IS ALSO A JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF JASWANT SUGAR MILLS LTD. (SUPRA). IN THAT CASE , THE ISSUE IN DISPUTE BEFORE THE HON'BLE COURT WAS AS TO WHETHER COMMISSION PAYMENT TO SOLE AGENT IN RESPECT OF CONTROLLED SUGAR WAS ALLOWABLE EXPENDITURE OR NOT. UNDER THESE FACTS, IT WAS HELD BY HON'BLE ALLAHABAD HIGH COURT THAT SINCE THE VALIDITY OF TH E AGREEMENT OF 01/10/98 WAS NOT IN DISPUTE AND THE AGREEMENT REMAINED IN FORCE AT ALL MATERIAL TIMES UNDER CLAUSE 12 OF THE AGREEMENT , THE AGENT WAS ENTITLED TO RECEIVE COMMISSION EVEN THROUGH MUCH OF THE SUGAR WAS DISPATCHED TO DEALERS NOMINATED BY THE GO VERNMENT, COMMISSION WAS PAYABLE TO THE AGENTS BECAUSE THE AGREEMENT REMAINED IN FORCE AND THEREFORE, THIS EXPENDITURE IS ALLOWABLE. IN THE PRESENT CASE, THE FACTS ARE DIFFERENT BECAUSE THIS IS NOT THE CASE OF THE ASSESSEE BEFORE US THAT COMMISSION WAS PA ID COMPULSORILY UNDER AN AGREEMENT INSPITE OF THIS FACT THAT SUPPLIES WERE MADE TO DEALERS NOMINATED BY THE GOVERNMENT. IN THE PRESENT CASE, A COMMISSION AGREEMENT WAS ENTERED INTO BY THE ASSESSEE COMPANY ON 1 ST APRIL, 2000, COPY OF WHICH IS AVAILABLE ON PAGE NO. 38 AND 39 OF THE PAPER BOOK BUT WE HAVE SEEN THAT COMMISSION WAS PAID TO THIS PERSON IN RESPECT OF SALES TO THOSE PARTIES ALSO TO WHOM SALES WERE EFFECTED BY THE ASSESSEE IN ASSESSMENT YEAR 1999 - 2000 AND 2000 - 2001 ALSO. THE ASSESSEE HAS ALSO FAILE D TO BRING ON RECORD THE DETAILS OF SERVICES RENDERED BY THIS PERSON. THIS FINDING IS ALSO GIVEN BY THE AUTHORITIES BELOW THAT THIS COMMISSION AGENT NEVER VISITED ANY CUSTOMER AND IT HAS BEEN CLAIMED THAT ORDERS WERE RECEIVED ON TELEPHONE. THE AUTHORITIE S BELOW HAVE ALSO GIVEN FINDING THAT THIS PERSON WAS MERE ACCOUNTANT HAVING NO EXPERIENCE AND CONSIDERING ALL THESE FACTS, THIS AGREEMENT ITSELF CANNOT BE A BASIS TO HOLD THAT SERVICES WERE RENDERED BY THIS PERSON AND THEREFORE, COMMISSION PAYMENT IS ALLOW ABLE. UNDER THESE FACTS , THIS JUDGMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. 14 9.4.3 THE NEXT JUDGMENT CITED BY LEARNED A.R. OF THE ASSESSEE IS A JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF J.K. WOOLLEN MANUFACTURERS (SUPRA). IN THAT CASE, COMMISSION WAS PAID TO GENERAL MANAGER ON PROFITS WHICH WAS DISALLOWED IN PART. IT WAS T HE CASE OF THE ASSESSEE IN THAT CASE THAT THE MILL WAS OLD AND UNBALANCED AND IT NEVER WORKED SATISFACTORILY IN THE PAST AND THE COMMISSION ON PROFITS CLAUSE WAS INSERTED IN ORDER TO CREATE SPECIAL INTEREST OF GENERAL MANAGER FOR ACCOMPLISHMENT OF THE TASK ENTRUSTED TO HIM AND THE GENERAL MANAGER INTRODUCED FOR THE FIRST TIME A NEW DESIGN OF CIVILIAN RUGS MANUFACTURED IN ITS MILLS IN THE RELEVANT YEAR WHICH RESULTED IN LARGE PROFITS. UNDER THESE FACTS, IT WAS HELD BY HON'BLE APEX COURT THAT THE ENTIRE AMOU NT OF RS.75,645/ - PAID TO GENERAL MANAGER WAS AN AMOUNT LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES BUSINESS. IN THE PRESENT CASE, THE FACTS ARE ENTIRELY DIFFERENT AND IT IS NOT ESTABLISHED BY THE ASSESSEE THAT ANY SERVICE WAS RENDER ED BY SHRI SUBHASH BHAGAT RESULTING INTO PROFIT TO THE ASSESSEE COMPANY. IN FACT , WE HAVE SEEN THAT IN MOST OF THE CASES, THE ASSESSEE COMPANY WAS MAKING SALES TO THE CUSTOMERS IN EARLIER YEARS ALSO WHEN NO COMMISSION WAS PAID TO THIS PERSON AND HENCE, IT IS NOT ACCEPTABLE THAT THE SALES WAS EFFECTED TO THESE PARTIES IN THE PRESENT YEAR ONLY ON THE BASIS OF ANY SERVICE RENDERED BY THIS PERSON. HENCE, THIS JUDGMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. 9.5 AS PER THE ABOVE DISCUSSION WE HAVE SEEN TH AT NONE OF THE JUDGMENTS CITED BY LEARNED A.R. OF THE ASSESSEE IS RENDERING ANY HELP TO THE ASSESSEE AND MOREOVER , SINCE THE ASSESSEE COULD NOT ESTABLISH THE FACT OF RENDERING ANY SERVICE BY SUBHASH BHAGAT AND BECAUSE OF THIS REASON THAT THE ASSESSEE WAS A LREADY MAKING SALES TO MOST OF THE PARTIES, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER PASSED BY LEARNED CIT ( A) ON THIS ISSUE . ACCORDINGLY THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. 15 9.6 REGARDING THE DISALLOWANCE OUT OF REMUNERATION PAID TO DIR ECTORS OF RS.2 LAC, LEARNED A.R. OF THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF S. A. BUILDERS LTD. VS COMMISSIONER OF INCOME - TAX (APPEALS) [2007] 288 ITR 1 (SC) . HE ALSO PLACED RELIANCE ON A JUDGMENT OF HON'BLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS EDWARD KEVENTER (PVT.) LTD. [1972] 86 ITR 370 (CAL) . HE ALSO PLACED RELIANCE ON THE TRIBUNAL DECISION IN THE CASE OF DY CIT VS. MAYA PRODUCTA (P) LTD. IN I.T.A. NO.33/LKW/2012 DATED 27/05/2014. HE SUBMITTED COPY OF THE ORDER. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THE PRESENT CASE, TO TAL PAYMENT OF RS.4.5 LAC WAS MADE TO THREE DIRECTORS OF THE ASSESSEE COMPANY OUT OF WHICH THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.2 LAC. WITH REGARD TO THE PAYMENT OF REMUNERATION TO SMT. PREMLATA DUGGAR AND SMT. SHALINI DUGGAL, THE ASSESSING OFFIC ER HAS ALLOWED RS.50,000/ - EACH AS AGAINST RS.1,50,000/ - PAID TO EACH OF THEM. 11. NOW WE EXAMINE THE APPLICABILITY OF THE TRIBUNAL DECISION CITED BY LEARNED A.R. OF THE ASSESSEE IN THE CASE OF M AYA PRODUCTS (P) LTD. (SUPRA). THE RELEVANT PARA OF THIS TRI BUNAL DECISION IS PARA NO. 5.1, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 5.1 FROM THE ABOVE PARA OF CIT(A), WE FIND THAT A FINDING IS GIVEN BY CIT(A) THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT THE REMUNERATION PAID TO THE DIRECTORS OF THE ASSESSEE COMPANY WAS EXCESSIVE AS COMPARED LO REMUNERATI ON PAID TO OTHER SUCH DIRECTORS WITH SIMILAR QUALIFICATION AND PERFORMING SIMILAR DUTIES. NOW AT THIS STAGE, WE EXAMINE THE APPLICABILITY OF THE JUDGMENT CITED BY LEARNED D.R. OF THE REVENUE HAVING BEEN RENDERED IN THE CASE OF BENGAL ENAMEL WORKS LTD. VS COMMISSIONER OF INCOME - TAX (SUPRA). IN THAT CASE, IT WAS FOUND THAT PART OF THE REMUNERATION WAS PAID ON EXTRA COMMERCIAL CONSIDERATION AND THAT PART OF THE REMUNERATION, PAID TO THE DIRECTOR WAS 16 DISALLOWED. IN THE PRESENT CASE, IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY PART OF THE REMUNERATION PAID BY THE ASSESSEE COMPANY TO THE DIRECTORS WAS ON ACCOUNT OF EXTRA COMMERCIAL CONSIDERATION AND HENCE, THIS JUDGMENT OF HON'BLE APEX COURT CITED BY LEARNED D.R. OF THE REVENUE IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. WE ALSO FIND THAT IT IS NOTED BY CIT(A) THAT HIS PREDECESSOR HAS ALSO ADJUDICATED UPON THE SAME ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YEAR AND NOTHING HAS BEEN BROUGHT ON RECORD BEF ORE US BY LEARNED D.R. OF THE REVENUE THAT THE ORDER OF CIT(A) IN THE EARLIER YEAR WAS REVERSED OR MODIFIED BY THE TRIBUNAL. WE ALSO FIND THAT ALTHOUGH THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT BUT HE HAS NOT ESTABLI SHED THAT THE INCREASE IN REMUNERATION TO THE DIRECTORS IS EXCESSIVE OR UNREASONABLE. UNDER THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. ACCORDINGLY, THIS GROUND OF REVENUE IS REJECTED. 11.1 FROM THE ABOVE PARA FROM THE ORDER OF THE TRIBUNAL, WE FIND THAT IN THIS CASE , IT IS FOUND BY THE TRIBUNAL THAT ALTHOUGH THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 40A(2) OF THE ACT BUT HE HAS NOT ESTABLISHED THAT THE INCREASE IN REMUNERATION TO THE DIR ECTORS IS EXCESSIVE OR UNREASONABLE. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS COMPARED THE REMUNERATION PAID TO THESE LADY DIRECTORS WITH THE MAXIMUM SALARY PAID TO EMPLOYEES AND HAS NOTED IN PARA 30 OF THE ASSESSMENT ORDER THAT THE MAXIMUM SALARY G IVEN TO ONE OF THE EMPLOYEES IS RS.60,000/ - P.A. AND THE SALARY OF REMAINING EMPLOYEES IS IN THE RANGE OF RS.30,000/ - P.A. AND HE HELD THAT THE SALARY PAYABLE TO THESE DIRECTORS CAN BE ALLOWED UP TO RS.50,000/ - P.A. WE ALSO FIND THAT TO THE THIRD DIRECTOR I.E. SHRI V. K. DUGGAL, REMUNERATION WAS PAID TO THE EXTENT OF RS.1,50,000/ - AND THE SAME WAS ALLOWED BY THE ASSESSING OFFICER ALSO. THE ASSESSING OFFICER ALSO NOTED IN THE ASSESSMENT ORDER THAT A FEW VOUCHERS HAVE BEEN SIGNED BY THESE LADY DIRECTORS ALS O. HENCE, IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THESE DIRECTORS WERE NOT LOOKING AFTER THE BUSINESS AFFAIRS OF THE ASSESSEE COMPANY AT ALL . CONSIDERING ALL THESE FACTS AND THE TRIBUNAL DECISION CITED BY LEARNED 17 A.R. OF THE ASSESSEE, WE ARE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT O F THE DIRECTORS REMUNERATION ON THE BASIS OF COMPARISON OF SALARY PAID TO THE EMPLOYEES OF THE ASSESSEE IS NOT JUSTIFIED. HENCE, THIS DISALLOWANCE IS DELETED. 12. IN THE RESUL T, THE APPEAL OF THE ASSESSEE STANDS ALLOWED PARTLY. 13. IN THE COMBINED RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 5 /0 9 /2014 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR