Shri Dharmesh Natubhai Shah, Ahmedabad V. The Jt.CIT, Range-10, Ahmedabad

ITA 348/AHD/2014

• Counselvise Citation: 34820514 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Keywords: Business income; Business expenditure; Opportunity of being heard; Principle of natural justice; Additional evidence; Assessment record
• Section: 143(3); 234B; 14A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH, AHMEDABAD BEFORE SHRI G.D. AGARWAL VICE PRESIDENT AND S.S. GODARA JUDICIAL MEMBER I.T.A. NO. 348/AHD/201 4 (ASS TT. YEAR 2008-09) SHRI DHARMESH NATUBHAI SHAH, 102, ANIKET BUILDING, NR.MUNICIPAL MARKET, NAVRANGPURA, AHMEDABAD-380009 PAN AFUPS 6407 C VS JOINT COMMISSIONER OF INCOME TAX, RANGE-10, AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY MS. URVASHI SODHAN REVENUE BY SHRI NARENDRA SINGH, SR.D.R. DATE OF HEARING : 15-07-2015 DATE OF PRONOUNCEMENT :24/7/2015 / O R D E R PER S.S. GODARA JUDICIAL MEMBER: THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-0 9 ARISES FROM ORDER OF THE CIT(A)-XVI, AHMEDABAD DATED 27-11-2013 , IN CASE NO.CIT(A)-XVI/JT.CIT/R.10/751/10-11,IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT,1961 IN SHORT THE ACT. ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 2 2. IN THIS APPEAL BY THE ASSESSEE FOLLOWING GROUNDS ARE RAISED:- 1. LD.CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRM ING TREATMENT BY A.O. OF SHORT TERM CAPITAL GAIN (STCG) OF RS.15, 31,682/- AS BUSINESS INCOME. LD. CIT (A) FAILED TO APPRECIAT E THAT PROFIT ON SHARES PURCHASED FROM OWN FUNDS REFLECTED AS INVESTMENT IN THE BALANCE SHEET WHEN SOLD IN EARLIE R YEARS WAS TREATED AND ACCEPTED BY THE REVENUE AUTHORITIES AS CAPITAL GAIN. LD. CIT (A) OUGHT TO HAVE ALLOWED CLA IM OF APPELLANT. IT BE SO HELD NOW. 2. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRM ING DISALLOWANCE MADE BY A.O. OF RS.9,44,312/- OF INTER EST PAID U/S. 36(1)(III) OF THE ACT. LD. CIT (A) ERRED IN NO T CONSIDERING SUBMISSIONS OF THE APPELLANT THAT INTER EST ON LOAN UTILIZED FOR PAYMENT OF HUGE LOSS INCURRED IN F & O TRANSACTIONS OUGHT TO HAVE BEEN ALLOWED. IT BE SO H ELD NOW. 3. LD. CIT (A) ERRED IN LAW AND ON FACTS IN PARTLY CONFIRMING DISALLOWANCE OF RS.54,659/- FROM TOTAL OF RS.76,230 /- MADE BY A.O. U/S. 14A OF THE ACT. LD. CIT (A) OUGHT TO H AVE DELETED TOTAL DISALLOWANCE. IT BE SO HELD NOW. 4. LD. CIT (A) ERRED IN LAW AND ON FACTS IN DISALLO WING COMMISSION EXPENSES OF RS.51,60,000/- INCURRED TO PROMOTE AND CANVASS BUSINESS OF THE APPELLANT. THIS ACTION OF LD. CIT (A) ENHANCING INCOME BY DISALLOWING GENU INE CLAIM OF EXPENSES IGNORING DETAILS OF SERVICES REND ERED AND BASIS OF COMMISSION PAYMENT IS UNLAWFUL AND AGAINST PRINCIPLES OF NATURAL JUSTICE THAT DESERVES TO BE Q UASHED. IT BE SO HELD NOW. 5. LD. CIT (A) ERRED IN LAW AND ON FACTS IN NOT ADM ITTING CONFIRMATIONS OF THE PARTIES RECEIVING COMMISSION B Y TREATING THE SAME AS ADDITIONAL EVIDENCE. LD. CIT (A) OUGHT TO HAVE ADMITTED CONFIRMATIONS PLACED ON RECORD AND ALLOWED GENUINE EXPENSES INCURRED BY THE APPELLANT. IT BE SO HELD NOW. 6. ALTERNATIVELY AND WITHOUT PREJUDICE TO ALLOW GEN UINE BUSINESS EXPENSES LD. CIT (A) OUGHT TO HAVE APPRECI ATED DOCUMENTARY EVIDENCE PLACED ON RECORD THAT RECEIPT OF COMMISSION INCOME SUBJECTED TO HIGHER RATE OF TAXAT ION AMOUNTED TO DOUBLE TAXATION BY ENHANCEMENT OF INCOM E OF THE APPELLANT. LD. CIT (A) OUGHT TO HAVE HELD THE ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 3 7. LEVY OF INTEREST U/S. 234A, 234B & 234C OF THE A CT IS UNJUSTIFIED. 8. INITIATION OF PENALTY U/S. 271(1)(C) OF THE ACT IS UNJUSTIFIED. 3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LD. COUNSEL THAT IN THIS CASE THE CIT (A) NOT ONLY SUST AINED THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER VARIOUS GROUNDS BUT HAS ALSO MADE THE ENHANCEMENT BY DISALLOWING THE COMMISSION OF RS .51,60,000/-. SHE SUBMITTED THAT THE ASSESSING OFFICER DID NOT MAKE A NY ENQUIRY RELATING TO PAYMENT OF COMMISSION BY THE ASSESSEE AND THEREF ORE, THE QUESTION OF FURNISHING OF CONFIRMATION FROM THE COMMISSION A GENTS BEFORE THE ASSESSING OFFICER DID NOT ARISE. THAT THE CIT (A) R AISED QUERY WITH REGARD TO ALLOWABILITY OF THE COMMISSION OF RS.51,6 0,000/- AND ALSO ISSUED ENHANCEMENT NOTICE. IN RESPONSE TO SUCH NOTI CE; ALONG WITH ASSESSEES EXPLANATION, THE ASSESSEE FURNISHED THE CONFIRMATION OF THE COMMISSION AGENTS. TE CIT (A), IN PARAGRAPH 8.8. OF HIS ORDER, REFUSED TO CONSIDER THOSE CONFIRMATIONS ON THE GROUND THAT THE CONFIRMATIONS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER AND THEREFORE, THEY FALL IN THE DOMAIN OF ADDITIONAL EVIDENCES UNDER RULE 46 A. SINCE NO SUCH REQUEST OF ADDITIONAL EVIDENCE WAS MADE BY THE ASSE SSING OFFICER, HE REFUSED TO ADMIT THE ADDITIONAL EVIDENCES. SHE SUBM ITTED THAT SINCE THE QUERY RELATING TO THE PAYMENT OF COMMISSION WAS RAI SED FOR THE FIRST TIME BEFORE THE CIT (A), THEREFORE, THE ASSESSEE FU RNISHED THE CONFIRMATION BEFORE THE CIT (A). DURING THE ASSESSM ENT PROCEEDINGS NO OCCASION AROSE FOR FURNISHING OF THE CONFIRMATION B ECAUSE, THE ASSESSING OFFICER NEVER ENQUIRED INTO THE ISSUE OF PAYMENT OF COMMISSION BY THE ASSESSEE. SHE SUBMITTED THAT WHEN THE CIT (A) RAISE D THE QUERY FOR THE FIRST TIME, HE WAS UNJUSTIFIED IN NOT CONSIDERING T HE EVIDENCES FURNISHED BY THE ASSESSEE TO EXPLAIN SUCH QUERY WHICH WAS RAI SED BY THE CIT (A). SHE ALSO REFERRED TO CLAUSE (4) OF RULE 46A WHICH P ERMITS THE CIT (A) TO ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 4 DIRECT THE PRODUCTION OF ANY DOCUMENT. SHE STATED T HAT THE ENHANCEMENT NOTICE ISSUED BY THE CIT (A) ASKING THE ASSESSEE TO FURNISH THE EXPLANATION AS WELL AS EVIDENCES IN SUP PORT OF CLAIM OF COMMISSION WOULD FALL WITHIN THE AMBIT OF RULE 46A( 4) AND THEREFORE, NO SEPARATE APPLICATION FROM THE ASSESSEE WAS REQUIRED . SHE ALSO SUBMITTED THAT EVEN IF IN THE OPINION OF CIT (A) AN Y SUCH APPLICATION WAS REQUIRED, E OUGHT TO HAVE DIRECTED THE ASSESSEE TO FILE THE APPLICATION. SHE STATED THAT THE MATTER MAY BE SET ASIDE TO THE FILE OF THE CIT (A) FOR RE-ADJUDICATION AFTER CONSIDERING A LL THE EVIDENCES FURNISHED BY THE ASSESSEE. 4. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED UPON THE ORDER OF THE CIT (A) AND HE SUBMITTED THAT THE ORDER OF THE CIT (A) IS A SPEAKING ORDER AND THEREFORE, IT SHOUL D BE SUSTAINED. HE ALTERNATIVELY SUBMITTED THAT IF AT ALL THE MATTER I S TO BE SET ASIDE ON THIS GROUND, THEN IT SHOULD BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER BECAUSE THESE EVIDENCES WERE NOT PRODUCED BEFORE TH E ASSESSING OFFICER AND IT WOULD BE IN THE INTEREST OF JUSTICE IF THE ASSESSING OFFICER FIRST EXAMINE THESE EVIDENCES AND THEN ARRIVE AT A CONCLUSION WITH REGARD TO THE ALLOWABILITY OF PAYMENT OF COMMISSION BY THE ASSESSEE. 5. IN THE REJOINDER, THE LD. COUNSEL FOR THE ASSES SEE HAS NO OBJECTION FOR SETTING ASIDE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. SHE ALSO SUGGESTED THAT IF THIS ISSUE IS S ET ASIDE TO THE FILE OF THE ASSESSING OFFICER, THEN THE OTHER GROUNDS OF AP PEAL RAISED IN THIS APPEAL BY THE ASSESSEE MAY ALSO BE SENT BACK TO THE FILE OF THE ASSESSING OFFICER SO THAT HE CAN RE-ADJUDICATE ALL THE ISSUES AFRESH AFTER CONSIDERING ASSESSEES EXPLANATION/EVIDENCES. ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 5 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE CIT (A) HAS DISCUSSED THIS ISSUE AT LENGTH WHICH READS AS UNDER :- 8.1 IT IS PERTINENT TO POINT OUT THAT IN THI S CASE UPON RECEIPT OF INITIAL SUBMISSIONS FILED BY THE APPELLANT MY LE ARNED PREDECESSOR HAD CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. MEANWHILE, UPON PERUSAL OF THE PAPER BOOK/ SUBMISSIONS FILED BY THE APPELLANT MY PREDECESSOR NOTED, FROM P AGE NUMBER 33 OF THE PAPER BOOK, THAT DURING THE YEAR UNDER CO NSIDERATION THE APPELLANT HAD SHOWN COUNSELING AND CONSULTANCY FEES OF RS 3,37,76,9387-AS AGAINST FIGURES OF RS-1,31,93,1057- IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. HE ALSO NOTE D THAT THE COMMISSION EXPENSES HAD INCREASED FROM RS. 6 50,000 IN THE PRECEDING YEAR TO RS. 51,60,0007-. THUS THERE WAS A N INCREASE IN THE COMMISSION EXPENSES BY ABOUT EIGHT TIMES. ASSUM ING THAT THE ASSESSING OFFICER MUST HAVE ENQUIRED INTO THIS ABNO RMAL INCREASE IN COMMISSION EXPENSES HE REQUIRED THE ASSESSING OF FICER WHILE HIS LETTER NUMBER CIT(A)-XVI/REMAND/2011-12 DATED 2 6/12/11 TO COMMENT AS TO WHETHER THESE EXPENSES WERE EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS OR NO T. THE ASSESSING OFFICER THROUGH HIS LETTER BEARING NO. AC IT/CIR 107REMAND REPORT/DNS/2011-12 DATED 971/12 INFORMED THAT THROUGH ITS SUBMISSION DATED 14/12/2010 THE APPELL ANT HAD FURNISHED A COMMISSION ACCOUNT WHICH HAD SHOWN ONLY ONE ENTRY IN THE NAME OF MR DEVANG SHAH OF RS. 5 LAKHS. THE A SSESSING OFFICER ATTACHED A COPY OF THE SAID COMMISSION PAID ACCOUNT WHICH WAS FILED BY THE APPELLANT THROUGH THE IMPUGNED SUB MISSION. THE ASSESSING OFFICER CATEGORICALLY INDICATED THAT THE SAID COMMISSION ACCOUNT DID NOT DISCLOSE ABOUT PAYMENT OF ANY COMMI SSION EXPENSES OF RS.51,60,000/-.THE ASSESSING OFFICER FU RTHER INDICATED THAT THERE IS NOTHING ON RECORD TO SUGGES T THAT THE ISSUE OF PAYMENT OF THESE COMMISSION EXPENSES WAS ENQ UIRED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS. 8.2 CONSEQUENTLY, MY LEARNED PREDECESSOR CONCLUDED THAT THE SAID COMMISSION EXPENDITURE OF RS. 5 1,60,000 HAS REMAINED UNINVESTIGATED ISSUE AND THEREFORE HE ISSU ED LETTER NO.CIT(A)-XVI/AHD/ENHANCEMENT/DNS/2010-11 DATED 12/ 01/12 TO THE APPELLANT REQUIRING HIM TO SHOW CAUSE AS TO FIRSTLY WHY THE EXCESS COMMISSION PAYMENT OF RS.46,60,000 DEBITED I N THE PROFIT AND LOSS ACCOUNT BE NOT DISALLOWED AND SECONDLY TO PROVIDE DETAILS OF SERVICES RENDERED BY MR DEVANG SHAH FOR WHICH HE HAD CHARGED ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 6 COMMISSION OF RS 5 LAKHS AND IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION ALONG WITH COGENT EVIDENCE COMING FROM THE APPELLANT WHY THE SAID AMOUNT OF RS. 5 LAKHS BE ALSO NOT DISA LLOWED. THUS MY LEARNED PREDECESSOR ISSUED AN ENHANCEMENT OF INC OME NOTICE TO THE APPELLANT FOR THE AMOUNT OF RS.51,60,000/- P ERTAINING TO COMMISSION WHICH HAD HITHERTO REMAINED UNENQUIRED B Y THE ASSESSING OFFICER. 8.3 IN RESPONSE TO THE ENHANCEMENT NOTICE, THE APPELLANT FILED A REPLY DATED 23/1/12 IN WHICH IT WAS SUBMITTED THA T THERE IS NO CASE FOR ENHANCEMENT OF INCOME IN THIS CASE AND THA T THE SAID NOTICE DESERVES TO BE WITHDRAWN. THE APPELLANT SUBM ITTED THAT ACTUALLY IT IS OPERATING FROM AHMEDABAD AND BARODA, THE LATTER BEING A BRANCH OFFICE. IT WAS SUBMITTED THAT DURING THE FINANCIAL YEAR UNDER CONSIDERATION THE APPELLANT HAS PAID COM MISSION OF RS. 5 LAKHS FOR THE AHMEDABAD BRANCH AND RS 46,60.000/- FOR THE BARODA BRANCH. IT HAS BEEN ARGUED THAT THE ASSESSIN G OFFICER IN HIS REPORT HAS POSSIBLY OVERLOOKED THE PAYMENT OF C OMMISSION FOR THE BARODA BRANCH. THE APPELLANT SUBMITTED THAT VID E ITS LETTER DATED 14/12/2010 IT HAD SUBMITTED THE ASSESSING OFF ICER DETAILS OF COMMISSION PAYMENT FOR BOTH THE PLACES AGGREGATING TO RS 51,60,000/- THROUGH ANNEXURE-10 OF THE SAID SUBMISS ION. THE APPELLANT SUBMITTED THAT PAYMENTS TO THE IMPUGNED R ECIPIENTS OF COMMISSION HAVE BEEN PAID THROUGH BANKING CHANNEL A ND TDS HAS BEEN DEDUCTED. IT WAS SUBMITTED THAT WITH A VIEW TO PROMOTE ITS BUSINESS THE APPELLANT HAS APPOINTED AGENTS AND SUB AGENTS WHO ARE PAID COMMISSION. IT WAS ARGUED THAT THE AGENTS AND SUBAGENTS ARE REQUIRED TO IDENTIFY STUDENTS, FACILI TATE ARRANGING OF SEMINARS, GUIDE THE STUDENTS, COLLECT FEES FROM THE SAID STUDENTS, AND SIMILAR ACTIVITIES. THE APPELLANT HAS SUBMITTED THAT IT HAS PAID AN AVERAGE COMMISSION FOR A STUDENT OF RS. 5000 TO ITS AGENTS AND SUBAGENTS. THE APPELLANT FURTHER ARGUED THAT TH E THEN AVAILABLE, ASSESSING OFFICER NAMELY ONE SHRI VAIBHA V JAIN HAD VERIFIED THE SUBMISSIONS MADE BY THE APPELLANT PERT AINING TO COMMISSION PAYMENTS AND THAT THE SAID OFFICER IS NO T THE CURRENT ASSESSING OFFICER AND THEREFORE THE ARGUMENT BY THE CURRENT ASSESSING OFFICER THAT THERE IS NO ELABORATE DISCUS SION ON THE PAYMENT OF COMMISSION DURING THE ORIGINAL ASSESSMEN T PROCEEDINGS IS INCORRECT. ACCORDINGLY, A REQUEST WA S MADE TO DROP THE NOTICE OF ENHANCEMENT OF INCOME ISSUED BY THIS OFFICE. 8.4 IN VIEW OF THE ABOVE REPLY OF THE APPELLANT, AN EFFORT WAS MADE TO RE-VERIFY THE PAYMENT OF COMMISSION CLAIMED TO HAVE BEEN PAID BY THE APPELLANT THROUGH THE A O AND THER EFORE A LETTER ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 7 DATED 1/3/2012 WAS SENT TO THE A O, WHICH IS REPROD UCED HEREUNDER :- '.....IN THE INSTANT CASE, AN ENHANCEMENT NOTICE BEARING NO CIT(A)-XVI/AHD/ENHANCEMENT/DNS/2010-11 DATED 12- 01-2012 WAS ISSUED TO THE ASSESSEE TOWARDS UNEXPLAI NED COMMISSION EXPENSES OF RS. 46,60,000/-. IN THE INST ANT CASE, THE ASSESSEE HAS DEBITED TOTAL COMMISSION EXP ENSES OF RS. 51,60,000/-AS AGAINST RS.6,50,000/- IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. FURTHER THE ASSESSEE HAS DISCLOSED TOTAL RECEIPTS OF RS.3,37,76,938/- AS AGAINST RS.1,31,93,105/-IN THE IMMEDIATELY PRECEDIN G ASSESSMENT YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD REPORTEDLY FURNISHED EVIDENCE ONLY WITH REFERENCE TO COMMISSION PAYMENT OF RS. 5,00,000/- TO ONE SHRI DEVANG SHAH. 2. AS SUBSTANTIAL AMOUNT OF COMMISSION PAYMENTS, DEBIT ED BY THE ASSESSES, REMAINED UNVERIFIED AS ALSO THE JUSTIFICATIONS THER EOF MY LEANED PREDECESSOR HAD ISSUED THE ENHANCEMENT NO TICE MENTIONED SUPRA. IN THE ENHANCEMENT NOTICE MY LEARN ED PREDECESSOR HAD ALSO REQUESTED THE ASSESSEE TO ALSO SUBMIT JUSTIFICATIONS FOR PAYMENTS MADE TO SHRI DEVANG SHA H. 3. BEFORE THE UNDERSIGNED, THE COUNSEL OF THE APPEL LANT HAS FILED HIS SUBMISSIONS DATED 23-01-2012, COPY ENCLOSED FOR YOUR IMMEDIATE READY REFERENCE. 4. YOU ARE HEREBY DIRECTED TO PERUSE THE SAME, REN DER NECESSARY OPPORTUNITY TO THE ASSESSEE AND EXAMINE THE JUSTIFI CATION FOR PAYMENT OF COMMISSION, INTER ALIA, CONSIDERING FOLL OWING:- A) WHETHER THE PARTIES HAVE ACTUALLY RENDERED ANY M EANINGFUL SERVICES TO THE APPELLANT SO AS TO JUSTIFY GENUINEN ESS OF THE EXPENSES. B) WHETHER THE PARTIES POSSESS REQUISITE SKILLS FOR RENDERING ANY MEANINGFUL SERVICES TO THE APPELLANT C) WHETHER THE PARTIES HAVE RENDERED ANY SIMILAR S ERVICES TO ANY OTHER ASSESSES ENGAGED IN THE SIMILAR LINE OF BUSIN ESS IF YES, DETAILS THEREOF D) WHETHER THE PARTIES ARE RELATED TO OR CONNECTED WITH THE ASSESSEE ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 8 E) WHETHER THE PARTIES HAVE ALSO RENDERED SIMILAR SERVICES TO THE APPELLANT IN EARLIER YEARS. IF YES DETAILS THEREOF F) WHETHER THE PARTIES HAVE DISCLOSED ABOVE COMMIS SION RECEIPTS IN THEIR RETURNS OF INCOME FOR RESPECTIVE YEARS AND ALSO PAID NECESSARY TAXES THEREON' 5. YOUR REPORT COVERING ABOVE ASPECTS AND OR ANY OTHER ASPECT DEEMED APPROPRIATE BY YOU FOR YOUR INQUIRIES NECESS ARY FOR OBJECTIVE APPRAISAL OF THE MATTER, SHOULD REACH THI S OFFICE ON OR BEFORE 23-03-2012.....' 8.5 IN RESPONSE TO THE ABOVE, THE ASSESSING OF FICER SUBMITTED ANOTHER REMAND REPORT VIDE LETTER DATED 27/9/2013 W HICH FOR THE PURPOSES OF CLARITY IS REPRODUCED HERE UNDER:- '.....KINDLY REFER TO ABOVE CAPTIONED SUBJECT. 2. AS DIRECTED BY YOU VIDE LETTER NO CIT(A)-XVI/REM AND/2011-12 DATED 01/03/2012 , TO CONDUCT INQUIRY IN RELATION T O COMMISSION EXPENSES CLAIMED BY THE ASSESSEE FOR AY 2008-09, A LIST OF EIGHT PARTIES WAS FURNISHED BY THE ASSESSEE TO WHOM COMMI SSION WAS PAID IN THE RELEVANT A.Y. ACCORDINGLY, SUMMONS WERE ISSUED TO SEVEN PARTIES (EXCLUDING MR. DEVANG SHAH) TO BE PER SONALLY PRESENT ON 23.09.2013 IN CASE OF DHARMESH N SHAH FO R AY 2008- 09. THEY WERE ALSO ASKED TO PRODUCE CERTAIN RELEVAN T DOCUMENT AND EVIDENCES IN RELATION TO THE SAME CASE. (A COPY OF SUMMONS IS ATTACHED HEREWITH) HOWEVER, ON THE DAY, NO ONE ATTENDED THE OFFICE. NE ITHER ANY ADJOURNMENT WAS SOUGHT BY ANY OF THE PARTIES NOR TH ERE ANY COMMUNICATION FOR SUCH ABSENCE. 3. IN ORDER TO PRESENT MY OBSERVATIONS AND FINDINGS IN RELATION TO THE GENUINENESS OF COMMISSION EXPENSES OF RS. 51.6 LAKS, FOLLOWING FACTS ARE PLACED HERE FOR YOUR HONOUR'S K IND PERUSAL- I. THERE WERE EIGHT PARTIES TO WHOM COMMISSION WAS PAI D. IF THE ADDRESSES OF THESE PARTIES ARE OBSERVED, IT IS SEEN THAT SIX OF THEM RESIDE ON THE SAME ADDRESS I.E. C-20/21 , SWAMINARAYAN NAQAR-1, HARM' ROACF, BARODA AND TWO OF THEM STAY TOGETHER IN PURSHOTTAM SOCIETY, NR. AKOTA STADIUM, BARODA. ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 9 II. AS PER THE INFORMATION AVAILABLE FROM ITD ABOUT FAT HER'S NAME AND MIDDLE NAME OF FEMALE PERSONS, IT APPEARS THAT- SHRI NATWARLAL PATEL AND SMT SUMATIBEN PATEL ARE HU SBAND AND WIFE, WHO ARE RESIDING AT PURSHOTTAM SOCIETY, N R. AKOTA STADIUM, BARODA. SHRI MITESH SHAH AND DEVANG SHAH ARE SONS OF S HRI HASMUKHBHAI SHAH. THEY ALL ARE RESIDING TOGETHER AT C-20/21, SWAMINARAYAN NAGAR-1, HARNI ROAD, BARODA. THREE LADIES WHO ARE ALSO SHOWN AS PARTIES, TO WHOM COMMISSION HAS BEEN PAID, ARE MEMBERS OF THIS FAMILY. A CHART IS PRESENTED HERE FOR YOUR READY REFERENCE:- IN ALL LIKELY POSSIBILITY THAT, NO SERVICES HAD BEE N PROVIDED BY_ ALL THE MEMBERS OF THIS FAMILY AND THEIR BANK ACCOUNTS HAVE BEEN USED TO TRANSFER FUNDS IN ORDER TO MAKE IT APPEAR LIKE A GENUINE TRA NSACTION FOR GENUINE SERVICES. A BANK STATEMENT COPY WAS ALSO.ASKED FROM THESE PA RTIES, THROUGH WHICH IT COULD HAVE BEEN TRIED TO TRACE FLO W OF DEPOSITS AND WITHDRAWALS IN THEIR ACCOUNTS. IT IS ALSO PLACED ON RECORD THAT RELATION BETWEEN DHARMESH N SHAH AND THESE PARTIES COULD NOT BE ASCERTAINED. III. IF THE DATE OF BIRTH OF ALL THE PARTIES IS OBSERVED , IT IS WORTH NOTING THAT SHRI NATWARLAL PATEL IS 83 YEARS OLD SM T. SUMATIBEN PATEL IS 85 YEARS OLD AT PRESENT. AS PER THE DETAILS PROV IDED BY THE ASSESSEE, NATWARBHAI PATEL HAS BEEN PAID COMMISSION AMOUNTING TO RS. 10,50,OOO/- AND SUMATIBEN PATEL HAS BEEN PAI D COMMISSION AMOUNTING TO RS. 5,00,OOO/-. IT BECOMES A VALID AREA TO INQUIRE WHETHER PERSONS OF THIS AGE ARE ACTUALLY INVOLVED IN PROVIDING SERVICES AS CLAIMED BY THE ASSESSEE OR NOT IN ALL LIKELY HASMUKHBHAI SHAH AND PADMABEN SHAH DEVANG SHAH A ND HARVI SHAH MITESH SHAH AND BHAVYA SHAH ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 10 POSSIBILITY, IT WILL EMERGE THAT THESE ENTRIES ARE BOGUS AND THEIR BANK ACCOUNTS HAVE BEEN USED TO TRANSFER FUNDS IN O RDER TO MAKE IT APPEAR LIKE A GENUINE TRANSACTION FOR GENUINE SE RVICES. NAME DATE OF BIRTH DEVANG SHAH 30-6-1975 MITESH SHAH 10-3-1958 HASMUKHBHAI SHAH 04-05-1949 BHAVYA SHAH 13-02-1980 NATWARLAL PATEL. 28-08-1933 PADMABEN SHAH 12-03-1946 SUMATIBEN PATEL 21-01-1931 HARVI SHAH 13-02-1976 IV. AS ALREADY MENTIONED ABOVE, NONE OF THE PARTIES TO WHOM SUMMONS WAS ISSUED WERE PRESENT FOR THE HEARING FIX ED ON 23.09.2013. 3. IN VIEW OF ABOVE FACTS AND OBSERVATIONS, IT AP PEARS THAT THE COMMISSION EXPENSES CLAIMED BY THE ASSESSEE ARE NOT GENUINE. AS ASSESSEE'S RECEIPTS HAD INCREASED BY RS. 2,05,76 ,404 AS PER HIS P & L ACCOUNT FOR THE AY 2008-09, HE HAS TRIED TO INFLATE HIS EXPENSES TO THE TUNE OF 51 LAKHS TO SET OFF THE PRO FIT CONSIDERABLY. HENCE, THESE COMMISSION EXPENSES SHOU LD NOT BE ALLOWED FOR THE A. Y. 2008-09.. 8.6 A PERUSAL OF THE ABOVE REPORT SHOWS THAT T HE RECIPIENTS OF THE COMMISSION HAVE, NO RESPONDED TO THE SUMMONS IS SUED UNDER SECTION 131 BY THE A O. THE A O HAS FURTHER INDICAT ED THAT THERE IS A SERIOUS DOUBT ON THE CAPACITY OF THE PERSONS TO R ENDER ANY SERVICE TO THE APPELLANT FOR EARNING THE COMMISSION GIVEN THE ADVANCED AGE. THE ASSESSING OFFICER HAS ALSO INDICA TED THAT ALL THE PERSONS BELONG TO ONE FAMILY AND ARE RELATED WI TH EACH OTHER AND ARE ALSO RESIDING IN THE SAME ADDRESS. THE ASSE SSING OFFICER THEREFORE CONCLUDED THAT THERE IS EVERY LIKELIHOOD THAT NO SERVICES WAS RENDERED BY THE SUCH RECIPIENTS OF COMMISSION A ND THAT THE EXPENDITURE THUS CLAIMED OF RS 51,60,OOO/- IS NOT A GENUINE ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 11 BUSINESS EXPENDITURE WHICH DESERVES TO BE ADDED BAC K TO THE TOTAL INCOME OF THE APPELLANT. 8.7 A COPY OF THE ABOVE REMAND REPORT DATED 27/9/1 3 OF THE ASSESSING OFFICER WAS PROVIDED TO THE APPELLANT IN COURSE OF HEARING ON 11/11/13 FOR FILING REJOINDER IF ANY. IN RESPONSE THE APPELLANT FILED A REJOINDER ON 22/11/13_ WHICH HAS BEEN REPRODUCED ABOVE. PERUSAL THEREOF SHOWS THAT THE AP PELLANT HAS OBJECTED TO THE COMMENTS GIVEN BY THE A O. THE APPE LLANT HAD ARGUED THAT SINCE SHRI DEVANG SHAH WAS NOT SUMMONED BY THE A O AND THEREFORE THE PAYMENT OF COMMISSION TO HIM TO THE EXTENT OF RS. 20.96.000/- HAS BEEN ACCEPTED AS A GENUINE P AYMENT BY THE DEPARTMENT. AS REGARDS THE REMAINING PARTIES TH E APPELLANT HAS SUBMITTED THAT THE A O HAD GIVEN A VERY SHORT T IME OF 3 TO 4 WORKING DAYS TO THE RECIPIENTS OF THE COMMISSION FO R PROVIDING DETAILS WHICH ARE VERY OLD AND THAT THE A O HAS ALS O NOT CARED TO CONFIRM WHETHER THE IMPUGNED SUMMONS WERE ACTUALLY SERVED ON THE PARTIES OR NOT. IT HAS BEEN ARGUED THAT THE ADV ANCED AGE OF THE COMMISSION RECIPIENTS CANNOT BE A YARDSTICK FOR RAISING THE ASSUMPTION OF IN GENUINE PAYMENT OF COMMISSION. THE APPELLANT FILED CONFIRMATIONS OF 8 PARTIES TO WHOM COMMISSION WAS PAID. IT HAS BEEN ONCE AGAIN SUBMITTED THAT ALL THE RECIPIEN TS ARE HOLDER OF PA NO., HAVE RECEIVED COMMISSION THROUGH BANKING CH ANNEL, HAVE DISCLOSED SAID COMMISSION IN THEIR RETURNS, TDS HAS BEEN DEDUCTED AND SOME OF THE PARTIES ARE ALSO EMPLOYEES OF THE APPELLANT WHO HAVE BEEN ENGAGED ON SALARY PLUS INCE NTIVE BASIS. THE APPELLANT NOW FILED CONFIRMATION OF SAID RECIPI ENTS OF COMMISSION. 8.8 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE IN THE LIGHT OF SUBMISSIONS MADE BY THE APPELLANT, THE ARGUMENTS TAKEN BY THE ASSESSING OFFICER AND MATERIAL AVAILABLE ON REC ORDS. BEFORE PROCEEDING FURTHER, IT IS PERTINENT TO POINT OUT TH AT DURING THE COURSE OF THE APPELLATE PROCEEDINGS ORIGINAL ASSESS MENT RECORDS AVAILABLE WITH THE A O WERE CALLED FOR AND HAVE BEE N EXAMINED BY THE UNDERSIGNED IN THE PRESENCE OF THE CURRENT A O. BEFORE PROCEEDING FURTHER IT IS PERTINENT TO ENUMERATE HER EUNDER THE DETAILS HITHERTO PROVIDED BY THE APPELLANT TOWARDS COMMISSION. NO. NAME OF THE PARTY NO OF STUDENTS FOR WHOM PAID AMT OF COMMISSION AS PER SUBMISSION RATE AT WHICH COMMISSION RECEIVED PER STUDENT AS PER RATE AT WHICH COMMISSION ADMITTEDLY PAID AS PER ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 12 DT 23-1- 2012 OF APPELLANT CONFIRMATION OF RECIPIENTS FILED VIDE SUBMISSION DT. 18-11-2013 SUBMISSION DT 23-1-2012 OF APPELLANT 1. SHRI DEVANG SHAH 70 20,96,000 @ 9,500 FOR 221 STUDENTS 5000 2 SHRI MITESH SHAH 70 3,50,000 9,500 FOR 37 STUDENTS 5,000 I I 3 SHRI HASMUKHBHAI SHAH 74 3,70,000 9,500 FOR 39 STUDENTS 5,000 4 BHAVYA SHAH 10 50,000 9,500 FOR 6 STUDENTS 5,000 5 SHRI NATVARBHAI PATEL 210 10,50,000 NO SEPARATE DETAILS PROVIDED 5,000 6 PADMABEN SHAH 70 3,50,000 9,500 FOR 7 STUDENTS 5,000 7 SUMATIBEN PATEL 100 5,00,000 NO SEPARATE DETAILS PROVIDED 5,000 8 HARVY SHAH 78 3,94,000 NO SEPARATE DETAILS PROVIDED 5,000 682 51,60,000 TOTAL NO OF STUDENTS 310 A PERUSAL OF THE ABOVE INFORMATION WHICH HAS BEEN E XTRACTED FROM THE SUBMISSIONS SUBMITTED BY APPELLANT ITSELF INDIC ATES THAT THERE EXIST SEVERAL DEFICIENCIES AND INCONSISTENCIES IN T HE ARGUMENTS TAKEN BY THE APPELLANT TOWARDS GENUINENESS AND JUST IFICATION OF IMPUGNED COMMISSION EXPENSES. AT THE OUTSET, IT IS PERTINENT TO POINT OUT THAT THE CONFIRMATIONS NOW PROVIDED BY TH E APPELLANT VIDE HIS REPLY DT 18-11-2013 CANNOT BE ACCEPTED FOR THE PURPOSES OF THIS APPEAL SINCE THEY WERE NOT PROVIDED TO THE AO AND HENCE FALL IN THE DOMAIN OF ADDITIONAL EVIDENCES UNDER RU LE 46A. RECORDS INDICATE THAT NO SUCH REQUEST FOR ADMISSION OF ADDI TIONAL EVIDENCES WAS EVER MADE BY THE APPELLANT UNDER RULE 46A. IT IS A SETTLED PRINCIPLE OF LAW, THAT-ADDITIONAL EVIDENCES CAN ONLY BE ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 13 ADMITTED UNDER RULE 46A FOR WHICH A REQUEST IN WRIT ING IS MADE BY THE APPELLANT. 8.9 ENUMERATED BELOW ARE SOME OBSERVATIONS DISCERNE D FROM THE MATERIAL AVAILABLE ON RECORDS WHICH INDICATE THAT T HE ARGUMENTS TAKEN BY THE APPELLANT ARE UNSATISFACTORY AND CANNO T BE ACCEPTED IN RESPECT OF GENUINENESS OF THE IMPUGNED COMMISSIO N EXPENSES OF RS 51,60,000/-. > THE ARGUMENT OF THE APPELLANT THAT THE DETAILS OF IMPUGNED COMMISSION EXPENSES OF RS. 51,60,0007- WAS FILED BY HIM BEFORE THE A O THROUGH HIS SUBMISSION DT 14-12-2010 TO THE THEN A O WHO HAD INQUIRED INTO THE SAME IS PATENTLY A FALSE AND INCORRECT STATEMENT. VERIFICATION OF ASSESSMENT RECORDS INDIC ATE THAT VIDE HIS SUBMISSION DT 14-12-2010, THE APPELLANT HAD FIL ED AN ANNEXURE-10 WHICH CONTAINED ONLY THE DETAILS OF COM MISSION EXPENSES OF RS.5,00,000/- PAID TO SAID SHRI DEVANG SHAH. THUS IT IS CRYSTAL CLEAR THAT NO DETAILS OF IMPUGNED COMMIS SION EXPENSES OF RS. 51,60,000/- WAS FILED BY HIM BEFORE THE A O. TO THE EXTENT THE ENHANCEMENT OF INCOME NOTICE OF MY PREDECESSOR ON THE PREMISE THAT THE IMPUGNED COMMISSION EXPENSES WERE NOT THE A O IS ABSOLUTELY CORRECT AND THERE IS NO INFIRMITY I N THE SAME. > THE ARGUMENT TAKEN BY THE APPELLANT VIDE HIS R EPLY DT 23-1-2012 THAT THE COMMISSION WAS PAID WITH A VIEW TO EXPAND THE BUSINESS AT BARODA IS ALSO INCORRECT. AS PER APPELLANT'S OWN ADMISSION NUMBER OF STUDENTS ENROLLED DURING F Y 2007-08 IN B ARODA WAS 673 AS AGAINST 148 IN PRECEDING YEAR THUS AN INCREA SE OF 525 STUDENTS. ASSUMING THAT COMMISSION WAS PAID FOR ALL THE 525 STUDENTS @ RS. 5,0007-, AGAIN ADMITTED BY APPELLANT IN HIS REPLY DT 23-1-2012, THEN THE TOTAL COMMISSION INCREASE WO ULD BE RS. 26,25,0007- ( 525 X 5000) AND SO QUESTION ARISES WH Y DOES THE APPELLANT CLAIMS TO HAVE PAID RS. 46,60,000/- FOR I TS BARODA BRANCH. > FURTHER THE APPELLANT SUBMITS IN HIS REPLY DT 23-1-2012 THAT IT HAS PAID COMMISSION 5.000/- PER STUDENT WHEREAS THE REC IPIENTS OF THE COMMISSION HAVE CONFIRMED IN THEIR CONFIRMATIONS DISCUSSED SUPRA THAT THEY ARE RECEIVING COMMISSION @ RS. 9.50 0/- PER STUDENT. THUS THE DIFFERENCE BETWEEN THE AMOUNT OF COMMISSION PER STUDENT CLAIMED BY THE APPELLANT AND RECIPIENTS OF THE COMMISSION IS ALMOST DOUBLE. > IT IS FURTHER SEEN THAT THERE ALSO EXISTS AS I NDICATED IN THE HART ABOVE, GLARING DEFECTS IN THE NUMBER OF STUDENTS F OR WHICH COMMISSION HAS BEEN PAID WHEN A COMPARISON IS MADE BETWEEN ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 14 DETAILS GIVEN BY THE APPELLANT IN ITS REPLY DT 23-1 -2012 AND CONFIRMATIONS OF THE SAID RECIPIENTS FILED VIDE REP LY DT 18-11-2013. THUS, AS AGAINST FIGURES OF 70 STUDENTS SHRI DEVANG SHAH IN HIS CONFIRMATION CONFIRMS RECEIPT OF FOR 221 STUDENTS, AS AGAINST FIGURE OF 70 STUDENTS SHRI MITESH SHAH IN HIS CONFI RMATION CONFIRMS RECEIPT OF COMMISSION FOR 37 STUDENTS, AS AGAINST FIGURE OF 74 STUDENTS SHRI HASRNUKHBHAI SHAH IN HIS CONFIR MATION CONFIRMS RECEIPT OF COMMISSION FOR 39 STUDENTS, AS AGAINST FIGURE OF 10 STUDENTS BHAVYA SHAH IN HIS CONFIRMATION CONF IRMS RECEIPT OF COMMISSION FOR 6 STUDENTS AND AS AGAINST FIGURE OF 70- STUDENTS SMT. PADMABEN SHAH IN HER CONFIRMATION CONFIRMS REC EIPT OF COMMISSION FOR 7 STUDENTS. THUS, THERE EXISTS AN AL ARMING AND INEXPLICABLE INCONSISTENCY, DEFICIENCY AND INACCURA CY IN THE SUBMISSIONS MADE BY THE APPELLANT. THE ARGUMENT OF THE APPELLANT THAT THE A.O. HAS GI VEN VERY LITTLE TIME OF THREE/FOUR WORKING DAYS TO THE RECIPIENTS O F THE CONFIRMATION FOR ATTENDING TO SUMMONS U/S.131 IS AL SO NOT CORRECT. AS PER RECORDS THE A.O. HAS GIVEN A CLEAR ONE WEEKS TIME TO THE RECIPIENTS OF THE COMMISSION TO PROVIDE DETAILS AND APPEAR FOR DEPOSITION. THE PERIOD IS CONSIDERED ADEQUATE FOR SOMEBODY STATIONED IN BARODA WHICH IS JUS ABOUT 1 OUR DISTAN CE FROM AHMEDABAD. ASSUMING WITHOUT CONCEDING THAT THE TIME GIVEN WAS CONSIDERED SHORT BY THE RECIPIENTS, THEY HAD ALL TH E RIGHTS TO ASK FOR AN ADJOURNMENT, WHICH WAS NOT DONE. THE ARGUMENT THAT THE A.O. DID NOT CARE TO SEE WHE THER THE NOTICES U/S.131 WERE SERVED OR NOT ARE ALSO INCORRE CT. AS PER RECORDS, THE SUMMONS WAS SENT THROUGH SPEED POST AN D ALL THE ACKNOWLEDGEMENTS RECEIPTS HAVE COME BACK SHOWING SE RVICE. THIS GOES ON TO PROVE THAT THE RECIPIENTS OF COMMISSION HAVE PURPOSEFULLY CHOSEN TO AVOID APPEARANCE BEFORE THE A.O. LEST THEY ARE EXPOSED. THE ARGUMENT THAT THE LD. A.O. HAS HARPED ON THE I SSUE OF AGE OF THE RECIPIENTS, THEIR RESIDENCE ON ONE ADDRESS AND THEIR FAMILY RELATIONSHIP WHICH HAS NO RELEVANCE IN THIS CASE IS ALSO INCORRECT. THE A.O. HAS WHILE GIVING THE SAID COMMENTS PRIMARI LY TRIED TO INDICATE THAT THE RECIPIENTS OF ADVANCED AGE DID NO T HAD THE REQUISITE CAPABILITY TO RENDER ANY SERVICE TO THE A PPELLANT. THROUGH THE ARGUMENT OF ALL BEING CONNECTED IN A FA MILY AND RESIDING ON AN ADDRESS, THE A.O. HAS RIGHTLY INDICA TED THAT THERE EXISTS A DOUBT OF CONNIVANCE. THERE DO NOT EXISTS A NY INFIRMITY IN THE ARGUMENTS OF THE A.O. ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 15 THE ARGUMENT OF THE APPELLANT THAT ASPECTS LIKE PA YMENT BY BANKING CHANNEL. DEDUCTION OF TDS, DECLARATION OF C OMMISSION IN RETURNS OF INCOME, NO EVIDENCE OF MONEY BEING ROUTE D BACK TO THE APPELLANT HAVE TO BE GIVEN WEIGHT AGE AND NOT MEREL Y ON ISSUE OF RENDERING OF SERVICE CAN BE A VALID ARGUMENT IN A P ARTICULAR SITUATION. HOWEVER, IN THIS CASE, THE SAID ARGUMENT CANNOT BE ACCEPTED IN VIEW OF THE TOTALITY OF INCONSISTENCIES , DEFICIENCIES AND INACCURACIES INDICATED ABOVE. 8.10 THE FOREGOING DISCUSSION, CLEARLY INDICATE THA T THE IMPUGNED COMMISSION OF RS. 51,60,0007- CLAIMED BY THE APPELL ANT IN ITS P & L A/C WAS NOT INVESTIGATED BY THE A O DURING THE CO URSE OF ORIGINAL ASSESSMENT PROCEEDINGS. IT IS ALSO ESTABLISHED THAT THE APPELLANT HAS NOT BEEN ABLE TO SATISFACTORILY EXPLAIN THE GEN UINENESS OF ITS CLAIM OF EXPENDITURE AND RATHER THEIR EXIST SEVERAL DEFICIENCIES IN THE SUBMISSIONS AND DETAILS PROVIDED BY THE APPELLA NT. CONSEQUENTLY, IT IS HELD THAT THE APPELLANT'S CLAIM RESTS UPON BOGUS AND IN-GENUINE PARAMETERS AND CANNOT BE ALLOW ED AS A GENUINE ADMISSIBLE BUSINESS EXPENDITURE. AT THIS ST AGE, IT WILL BE WORTHWHILE TO MENTION HERE THAT THE POWERS OF THE C IT (A) ARE NOT CONFINED TO THE SUBJECT MATTER OF APPEAL BUT EXTEND TO THE SUBJECT MATTER OF WHOLE ASSESSMENT. THE CIT (APPEALS) CAN H IMSELF ENTER INTO THE ARENA OF ASSESSMENT, EITHER BY PURSUING FU RTHER INVESTIGATION OR CAUSING FURTHER INVESTIGATION TO B E DONE. HE CAN DO SO ON HIS OWN INITIATIVE, WITHOUT BEING PRODDED BY ANY OF THE PARTIES. RELIANCE IS PLACED ON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. NIRBHERAM DELU RAM 224 IR 610 (SC), THE HONBLE KARNATAKA HIGH COURT IN THE C ASE OF CIT VS. K.S. DATTATREYA 197 TAXMAN 151 (KARN,), THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KASHI NATH CANDIW ALA 280 ITR 318 (ALL.) AND THE HON'BLE GUJRAT HIGH COURT IN THE CASE OF SMT. VIJAYKUNVERBA VS. CIT 114_CTR (GUJ.) 94. CONSEQUENT LY, THE IN- GENUINE, & INADMISSIBLE CLAIM OF EXPENDITURE ON ACC OUNT OF COMMISSION EXPENSES OF RS. 51,60,000/- IS HEREBY DI SALLOWED AND ORDERED TO BE ADDED TO THE TOTAL INCOME OF THE APPE LLANT. THUS, THE TOTAL INCOME OF THE APPELLANT FOR A.Y. 2008-09 FOR THE ACTION U/S. 143(3) TO THE EXTENT OF RS. 51,60,000/- STANDS ENHANCED. AS THE SAID CLAIM OF THE APPELLANT IS BASED UPON INCON SISTENT, DEFICIENT, AND INCORRECT PARAMETERS, IT IS HELD THA T THE APPELLANT SHALL BE LIABLE FOR PENALTY PROCEEDINGS U/S.271(L)( C) OF THE I T ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. N OTICE U/S. 271 (1)(C) IS SEPARATELY BEING ISSUED. ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 16 7. IT IS CLEAR FROM THE ABOVE EXTRACTED PORTION THA T THE ISSUE OF DISALLOWANCE OF COMMISSION EXPENSES OF RS.51,60,000 /- WAS RAISED BY THE CIT (A) FOR THE FIRST TIME. NO DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER AND NO ENQUIRY WAS MADE BY THE AS SESSING OFFICER IN THIS REGARD. IN THE ABOVE CIRCUMSTANCES, IN OUR OPI NION, WHEN THE ISSUE OF ALLOWABILITY OF THE COMMISSION WAS RAISED FOR TH E FIRST TIME BY THE CIT (A), HE OUGHT TO HAVE ACCEPTED THE EVIDENCES FURNIS HED BY THE ASSESSEE, I.E. THE CONFIRMATIONS OF COMMISSION AGEN TS IN SUPPORT OF THE CLAIM OF COMMISSION PAID BY IT. RULE 46A READS AS UNDER:- [PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE [DEP UTY COMMISSIONER (APPEALS)] [AND COMMISSIONER (APPEALS) ]. (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MA Y BE, THE COMMISSIONER (APPEALS)], ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODUCED BY HI M DURING THE COURSE OF PROCEEDINGS BEFORE THE [ASSESSING OFF ICER], EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY: (A) WHERE THE [ASSESSING OFFICER] HAS REFUSED TO AD MIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE [ASSESSING OFFICER]; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE [ASSESSING OFFICER] ANY EVIDEN CE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR (D) WHERE THE [ASSESSING OFFICER] HAS MADE THE ORDE R APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO TH E APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MA Y BE, THE ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 17 COMMISSIONER (APPEALS)] RECORDS IN WRITING THE REAS ONS FOR ITS ADMISSION. (3) THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)] SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE [AS SESSING OFFICER] HAS BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS -EXAMINE THE WITNESS PRODUCED BY THE APPELLANT; OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MA Y BE, THE COMMISSIONER (APPEALS)] TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENA BLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETH ER ON HIS OWN MOTION OR ON THE REQUEST OF THE [ASSESSING OFFI CER]) UNDER CLAUSE (A) OF SUB-SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271. 8. SUB-RULE (4) OF RULE 46A CLEARLY EMPOWERS THE CO MMISSIONER (APPEALS) TO DIRECT THE ASSESSEE TO PRODUCE ANY DOC UMENT. WHEN THE CIT (A) DIRECT THE ASSESSEE TO PRODUCE THE DOCUMENT /EXPLANATION WITH REGARD TO ALLOWABILITY OF COMMISSION AND IF THE ASS ESSEE HAS PRODUCED THE EVIDENCES IN SUPPORT OF SUCH COMMISSION PAYMENT S, THE CIT (A) OUGHT TO HAVE ACCEPTED THE SAME BY EXERCISING HIS P OWERS UNDER SUB- RULE (4) OF RULE 46A. THEREFORE, IN OUR OPINION, TH E CIT (A) WAS NOT JUSTIFIED IN NOT ADMITTING THE ADDITIONAL EVIDENCES . HOWEVER, AFTER CONSIDERING THE FACTS OF THE CASE AND THE SUBMISSIO NS OF BOTH THE SIDES AND TO AVOID THE MULTIPLICITY OF THE PROCEEDINGS, W E AGREE WITH THE SUGGESTION OF BOTH THE SIDES THAT INSTEAD OF SETTIN G ASIDE THE MATTER BACK TO THE FILE OF THE CIT (A), IT CAN BE SENT TO THE FILE OF THE ASSESSING OFFICER SO THAT HE CAN CONSIDER THE ALLOWABILITY OF PAYMENT OF COMMISSION AT HIS END. WE ALSO AGREE WITH THE SUGGE STION OF |LD. COUNSEL THAT ALL THE ISSUES CAN BE SENT BACK TO THE FILE OF THE ASSESSING ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 18 OFFICER FOR EXAMINING AFRESH. IN VIEW OF ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON ALL POINTS RAISED IN TH IS APPEAL BY THE ASSESSEE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. WE DIRECT HIM TORE-ADJUDICATE THE ISSUES IN ACCORDANCE WITH LAW AFTER ALLOWING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ALSO DIRECT THE ASSESSEE TO FURNISH ALL THE RELEVAN T EVIDENCES/EXPLANATION BEFORE THE ASSESSING OFFICER. 9. IN THE RESULT, THE ASSESSEES APPEAL IS DEEMED T O BE ALLOWED FOR STATISTICAL PURPOSES. THIS ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL P URPOSES. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 24 TH JULY, 2015 AT AHMEDABAD. SD/- SD/- AHMEDABAD. DATED 24 / 07 /2015 PATKI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)XVI, AHMEDABAD 5. , ! ', #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) ! '#$, &' / ITAT, AHMEDABAD ( G.D. AGARWAL) (G.D. AGARWAL) ( S. S.GODARA) VICE PRESIDENT JUDICIAL MEMBER ITA NO. 348/ AHD/2014 ASSESSMENT YEAR 2008-09 SHRI DHARMESH N. SHAH. 19 1. DATE OF DICTATION- ON COMPUTER 16-7-2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER :16-7-2015 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P .S./P.S. - 16-7-2015/17/7/15 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT : 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER