SHILPA RE-ROLLERS PVT. LTD., (NOW KNOWN AS SHILPA STEEL & POWER LTD.), Nagpur V. THE ASSTT. C.I.T., CIRCLE 2, Nagpur

ITA 355/NAG/2014

• Counselvise Citation: [2014] 117 COUNSELVISE.COM (IT) 8859 (ITAT-NAGPUR)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 22-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 07-07-2014
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Assessee Lawyers: R V LOYA
• Keywords: Business expenditure; Accommodation entries; Reassessment proceedings; TDS
• Section: 143(3); 142(1); 234B; 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.355/NAG./2014 (ASSESSMENT YEAR : 200506 ) ITA NO.356/NAG./2014 (ASSESSMENT YEAR : 200607 ) ITA NO.357/NAG./2014 (ASSESSMENT YEAR : 200708 ) SHILPA REROLLERS PVT. LTD. (NOW KNOWN AS SHILPA STEEL & POWER LTD.), 1, 2, 3 & 4, WANJARA LAYOUT KAMPTEE ROAD, NAGPUR 440 001 PAN AABCS8627D . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE2, NAGPUR. . RESPONDENT ASSESSEE BY : SHRI R.V. LOYA REVENUE BY : SHRI A.R. NINAWE DATE OF HEARING 29.03.2017 DATE OF ORDER 31.03 .2017 O R D E R PER RAM LAL NEGI, J.M. THESE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE A GAINST THE THREE ORDERS DATED 13.6.2014, PASSED BY THE LEARNED COMMI SSIONER (APPEALS)I, NAGPUR, HEREINAFTER TO BE REFERRED AS CIT(A), WHE REBY THE LEARNED CIT(A) DISMISSED THE APPEALS FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDERS PASSED UNDER SECTION 143 READ WITH SECTION 147 OF T HE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) BY THE ASSESSING OFFICER. 2 SHILPA REROLLERS PVT. LTD. 2. SINCE, ALL THE THREE APPEAL PERTAIN TO THE SAME ASS ESSEE FOR THE DIFFERENT ASSESSMENT YEARS AND THE ISSUES INVOLVED IN ALL THE APPEALS ARE IDENTICAL, ALL THE APPEALS WERE CLUBBED, HEARD TOGE THER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. ITA NO 355/NAG/2014, A.Y. 2005-06 3. SINCE, THE FACTS OF ALL THE THREE CASES ARE IDENTIC AL EXCEPT THE AMOUNT INVOLVED, WE TAKE THE BRIEF FACTS OF THE CASE PERTA INING TO THE ASSESSMENT YEAR 2005-06. THE ASSESSEE ENGAGED IN THE BUSINESS OF HOT STEEL RE-ROLLER MANUFACTURING, ANGLES, CHANNELS ETC. FILED ITS RETU RN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON31.10.2005 DECLARING TOTAL IN COME OF RS.6,64,56,100/-. THE RETURN WAS PROCESSED AND ASSE SSMENT ORDER WAS PASSED UNDER SECTION 143(1) OF THE ACT ACCEPTING TH E RETURNED INCOME. THEREAFTER, THE ASSESSMENT WAS REOPENED AND ASSESSM ENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE A CT DETERMINING THE TOTAL INCOME OF RS.7,14,10,480/- AS AGAINST THE RETURNED INCOME OF RS.6,64,56,100/-. THE AO MADE ADDITION OF RS. 49,54 ,383/-ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE INVOLVEMENT O F M/S. NILESH STEEL & ALLOYS PVT. LTD., JALNA, TO WHOM COMMISSION WAS PAI D. 4. THE ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) R EAD WITH SECTION 147OF THE ACT WAS CHALLENGED BEFORE THE LEARNED CIT (A) WHO AFTER HEARING THE ASSESSEE CONFIRMED THE ADDITION AND DISMISSED T HE APPEAL OF THE ASSESSEE. THE ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL AGAINST THE ORDER PASSED BY THE LEARNED CIT(A) ON THE FOLLOWING EFFEC TIVE GROUNDS OF APPEAL:- (1) THAT THE NOTICE U/S 148 AND THE REASSESSMENT PROCEEDINGS THEREAFTER ARE BAD IN LAW AND WRONG ON FACTS AND TH E LEARNED CIT(A) ERRED IN NOT SETTING ASIDE THE SAME. ON THE FACTS OF THE CASE THE PROCEEDINGS ARE ILLEGAL. 3 SHILPA REROLLERS PVT. LTD. (2) THAT THE ORDERU/S 147 R.W.S. 143(3) PASSED BY THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 2, NAGPUR IS BAD IN LAW AND ON FACTS THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO. ON THE FACTS OF THE CASE THE ACTION OF THE AUTH ORITIES IS HIGHLY UNJUSTIFIED. (3) (A) THAT THE ASSESSING OFFICER ERRED IN LAW AN D ON FACTS IN DISALLOWING EXPENDITURE ON COMMISSIONER OF RS.49,54 ,383/-HOLDING THAT THE COMMISSION PAYMENT IS NOT GENUINE AND MERE LY AN ACCOMMODATION ENTRIES AND THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO. (B) THE ASSESSING OFFICER ERRED IN DISREGARDING THE EXPLANATION FURNISHED AND EVIDENCE PLACED BEFORE HIM THE REASSE SSMENT PROCEEDINGS AND FURTHER ERRED IN HOLDING THAT THE A SSESSEE HAS FAILED TO PROVE THE INVOLVEMENT OF M/S. NILESH STEELE AND ALLOYS PVT.LTD. IN THE TRANSACTIONS OF THE ASSESSEE WITH RELIANCE INDU STRIES LTD. AND RELIANCE INFOCOMM LTD. AND THE LEARNED CIT(A) ERRED IN CONFIRMING THE SAME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E ACTION OF THE AUTHORITIES IS ARBITRARY AND ON THE BASIS OF CONDEN SERS AND SURMISES. (C) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE A SSESSEE HAS FAILED TO PROVIDE SATISFACTORY EXPLANATION AND SUFFICIENT EVI DENCE IN SUPPORT OF THE EXPENSE ON ACCOUNT OF COMMISSION. ON FACTS OF T HE CASE THE ACTION OF THE LEARNED AUTHORITIES IS ARBITRARY AND UNJUSTI FIED. (4) THAT THE LEARNED ASSESSING OFFICER ACCORDING L AW AND ON FACTS IN CHARGING INTEREST UNDER SECTION 234B AND 234C. ON T HE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ACTION IS IMPROPER. 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE REOPENING OF THE CASE IS BAD IN LAW AS REOPENING PR OCEEDINGS CANNOT BE INITIATED ON THE BASIS OF VAGUE OR GENERAL INFORMAT ION RECEIVED FROM THIRD 4 SHILPA REROLLERS PVT. LTD. PARTY. RELYING ON THE VARIOUS DECISIONS OF THE INCO ME TAX TRIBUNALS AND JUDICIAL PRONOUNCEMENTS THE LEARNED COUNSEL SUBMITT ED THAT THE AO HAS INITIATED REASSESSMENT PROCEEDINGS MECHANICALLY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING AND WITHOUT AP PLICATION OF MIND. 6. ON MERITS THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT BROKERAGE AND COMMISSION WAS PAID TO M/S. NILESH ST EEL AND ALLOYS PRIVATE LTD AGAINST PROCUREMENT OF ORDER THROUGH THEM FOR S UPPLY OF MATERIAL TO VARIOUS PARTIES. THE TRANSACTION IS SUPPORTED BY CO GENT EVIDENCE AND HAS BEEN CONFIRMED BY THE PARTY. THE FINDING OF AO IS N OT BASED ON ANY COGENT REASON IN SPITE OF THAT THE LD CIT(A) CONFIRMED THE ORDER PASSED BY THE AO. AO HAS HELD THAT THE TRANSACTION IS NOT GENUINE AS THERE IS NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND M/S. NILESH STEE L AND ALLOYS PRIVATE LTD. WHEREAS, SIMILAR NATURE OF PAYMENTS OF COMMISS ION TO VARIOUS PARTIES WERE ALLOWED. THE LEARNED CIT(A) HAS PASSED THE IMP UGNED ORDER WITHOUT CONSIDERING THE SAID FACT. SIMILARLY, THE AO HAS HE LD THAT THE TRANSACTION IS NOT GENUINE BECAUSE IN THE SALE BILLS, DELIVERY CHA LLANS, TRANSPORTATION RECEIPT ETC. THE NAME OF COMMISSION AGENTS IS NOT M ENTIONED, WHERE AS IN CASE IN SIMILAR SITUATIONS THE PAYMENTS WERE ALLOWE D AS GENUINE. THE LEARNED COUNSEL FURTHER CONTENDED THAT THE EXPENDIT URE ON COMMISSION IS JUSTIFIED IN VIEW OF THE SUBSTANTIAL INCREASE IN TU RNOVER AND PROFITABILITY. 7. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESEN TATIVE RELYING ON THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW SU BMITTED THAT SINCE THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION THE LEARNED CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO DURING THE ASSESSMENT. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSE D THE MATERIAL PLACED BEFORE US INCLUDING THE DECISIONS/JUDGMENTS RELIED UPON BY THE ASSESSEE. WE NOTICE THAT REASSESSMENT PROCEEDINGS W ERE INITIATED IN THIS CASE ON THE BASIS OF INFORMATION RECEIVED FROM THE DIT(INV.) NAGPUR THAT THE COMMISSION PAID BY THE ASSESSEE TO M/S NILESH STEEL & ALLOYS IS NOT GENUINE 5 SHILPA REROLLERS PVT. LTD. AND IS MERELY AN ACCOMMODATION ENTRY. ACCORDINGLY, NOTICE UNDER SECTION 142(1) WAS ISSUED AND IN RESPONSE THEREOF THE ASSES SEE SUBMITTED THAT THE COMMISSION WAS PAID ON PER TON BASIS ON THE QUANTIT Y OF MATERIAL SOLD TO RELIANCE INDUSTRIES LTD. AND RELIANCE INFOCOMM LTD. AND IN SUCH BUSINESS TRANSACTIONS NO WRITTEN AGREEMENTS ARE EXECUTED FOR PAYMENT OF COMMISSION/BROKERAGE. REGARDING GENUINENESS OF TRAN SACTION FOR THE ASSESSMENT YEAR2005-06 THE ASSESSEE SUBMITTED THAT THERE WAS CAPACITY EXPANSION IN BUTIBORI UNIT AND TO GET ASSURED SALE FOR PRODUCTS THE ASSESSEE ENTERED INTO AN ARRANGEMENT WITH M/S. NILESH STEELE & ALLOYS PRIVATE LTD. TO IDENTIFY CUSTOMERS FOR ITS PRODUCTS AND SELL THE SA ME. THE ASSESSEE AGREED TO PAY COMMISSION ON SUCH SALE/TRANSACTION AND KEEP ING IN VIEW THE BENEFIT OBTAINED IN THE YEAR 2005- 06 THE ASSESSEE CONTINUE D ITS ARRANGEMENT WITH M/S. NILESH STEEL & ALLOYS PRIVATE LTD. 9. WE NOTICE THAT THE ASSESSEE HAS SUBMITTED THE AUDIT ED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, WITH NILESH STEELE AND ALLOYS PRIVATE LTD, COPY OF BROKERAGE BILL RECEIVED FROM NILESH STEEL AND ALLOY S LTD, COPY OF TDS ISSUED BY THE ASSESSEE AND COPY OF CONFIRMATION OF ACCOUNT FROM M/S NILESH STEELE AND ALLOYS PRIVATE LTD IN ORDER TO ESTABLISH THE TR ANSACTION OF PAYMENT OF COMMISSION CLAIMED AS BUSINESS EXPENDITURE BY THE A SSESSEE. WE ALSO NOTICE THAT THE NET PROFIT OF THE ASSESSEE COMPANY WAS 2.41 CR. IN 2004-05 AND IT INCREASED TO 16.23 CR. IN 2007-08. HENCE, IT CANNOT BE SAID THAT THE ASSESSEE HAS MADE THE ACCOMMODATION ENTRY TO REDUCE THE NET PROFIT OF THE COMPANY. AS POINTED OUT BY THE LEARNED COUNSEL SINC E SIMILAR NATURE OF PAYMENTS OF COMMISSION TO VARIOUS OTHER PARTIES WER E FOUND GENUINE IN SPITE OF THE FACT THAT NO WRITTEN AGREEMENTS WERE E NTERED INTO, THERE IS NO REASON TO HOLD THE SIMILAR TRANSACTION WITH M/S. NI LESH STEEL AND ALLOYS PRIVATE LTD. AS NOT GENUINE. THE AO HAS NOT POINTED OUT ANY COGENT AND CONVINCING EVIDENCE TO REBUT THE DOCUMENTARY AND CI RCUMSTANTIAL EVIDENCE ON RECORD WHICH PRIMA FACIE ESTABLISHES THAT COMMIS SION WAS PAID BY THE ASSESSEE TO THE SAID PARTY. 6 SHILPA REROLLERS PVT. LTD. 10. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONS IDERED OPINION THAT THERE IS NO REASON TO DISALLOW THE EXPENDITURE INCU RRED ON PAYMENT OF COMMISSION TO M/S. NILESSH STEEL AND ALLOYS PVT. LT D. WE, THEREFORE, DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. SINCE WE HAVE DECIDED THE ISSUE REGARDING PAYMENT OF COMMISSION ON MERITS, WE DO NO T CONSIDER IT NECESSARY TO ADJUDICATE THE ISSUE RELATING TO THE JURISDICTIO N RAISED BY THE ASSESSEE VIDE GROUND NO 1 AND 2 OF THE APPEAL. GROUND NO 4 I S CONSEQUENTIAL HENCE NO ADJUDICATION REQUIRED. ITA NO.356/NAG/2014, FOR A.Y. 2006-07 & ITA NO. 357/NAG/2014 FOR A.Y. 2007-08 11. THE FACTS AND THE ISSUES INVOLVED IN ITA NO 356/NAG /2014 & ITA NO 357/NAG/2014 ARE IDENTICAL TO THE FACTS AND ISSUES INVOLVED IN APPEAL NO. 355/NAG/2014, PERTAINING TO THE ASSESSMENT YEAR 200 5-06 AS AFORESAID (EXCEPT THE AMOUNT OF COMMISSION INVOLVED). SINCE, WE HAVE DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE AND ALLOW ED THE APPEAL OF THE ASSESSEE, WE ALSO ALLOW THE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08 FOR THE SAME REASONS. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2005-6, 2006-07 AND 2007-08 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.03.2017 SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER SD/ - RAM LAL NEGI JUDICIAL MEMBER NAGPUR, DATED: 31.03.2017 7 SHILPA REROLLERS PVT. LTD. COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, NAGPUR