The ACIT, Circle-2, Surat V. Shri Narendra D.Modh, Surat

ITA 3657/AHD/2008

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6429 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 07-11-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Commercial expediency
• Section: 133(6)

Judgement Text

ITA.NO.3657/A HD/2008 . ASSESSMENT YEAR: 200 4-05. 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH,AHM EDABAD. ( BEFORE SHRI BHAVNESH SAINI AND SHRI A. K. GARODIA) I.T .A. NO.3657/AHD/2008 (ASSESSMENT YEAR: 2004 -2005) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, ROOM NO.110, 1 ST FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT . (APPELLANT) VS. SHRI NARENDRA D. MODH, PROP. M/S.MINAXI FABRICS, 209-216,VAKHARIA TEXTILE MARKET, RING ROAD, SURAT. (RESPONDENT) PAN: ABOPM 3661 J APPELLANT BY : SHRI BHUVNESH KULSHRESTHA, SR. D.R. RESPONDENT BY : NONE (WRITTEN SUBMISSION) ( (( ( )/ )/)/ )/ ORDER PER: SHRI A.K. GARODIA , A.M. THIS IS A REVENUES APPEAL DIRECTED AGAINST THE OR DER OF LD. CIT (A)- II, SURAT DATED 27-8-2008 FOR ASSESSMENT YEAR 2004- 05. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF SERVICE OF NOTICE AS PER THE ACKNOWLEDGEMENT AVAILABLE ON RECORD. A WRIT TEN SUBMISSION FROM LD. A.R. OF THE ASSESSEE SURENDRA SHAH & ASSOCIATES , CHARTERED ACCOUNTANTS IS AVAILABLE ON RECORD AND HENCE WE PRO CEED TO DECIDE THIS APPEAL OF THE REVENUE AFTER CONSIDERING WRITTEN SUB MISSION AND AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R. OF THE REVENUE. ITA.NO.3657/A HD/2008 . ASSESSMENT YEAR: 200 4-05. 2 3. GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN HOLDING THAT THE ASSE SSEE HAD ESTABLISHED NOT ONLY THE GENUINENESS OF THE COMMISSION PAYMENT BUT HAS ALSO PROVED THE EXPEDIENCY FOR COMMISSION PAYMENT IN THE INTEREST OF HIS BUSINESS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT (A)-II, SURAT HAS ERRED IN DELETING THE ADDITIO N MADE BY ASSESSING OFFICER OF RS. 13,61,076/- ON ACCOUNT OF DISALLOWAN CE OF COMMISSION PAYMENT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. 4. BRIEF FACTS ARE THAT IT IS NOTED BY THE A.O. IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF CO MMISSION PAYMENT OF RS. 12,53,763/- TO MEENAXI EXPORTS AND OF RS. 1,07, 313/- TO METRO KRISTAL EXPORT, TOTAL RS. 13,61,076/-. THE A.O. ASKED THE A SSESSEE TO FURNISH VARIOUS DETAILS REGARDING THESE PAYMENTS WHICH INCLUDE NAME AND ADDRESS OF AGENTS, NATURE OF SERVICE RENDERED BY THE AGENTS, MODE OF P AYMENT TO THE AGENTS, PROOF OF PAYMENT ACTUALLY MADE, COPY OF AGREEMENT E ITHER WITH AGENT OR WITH BUYERS RELATING TO PAYMENT OF COMMISSION MENTIONING RATE OF COMMISSION AND OTHER MODUS OPERANDI AND CONFIRMATION LETTERS R ELATING TO PAYMENT OF COMMISSION. THE A.O. ALSO ASKED THE ASSESSEE TO EST ABLISH THAT THE SERVICES WERE ACTUALLY RENDERED BY THE AGENTS. IT IS NOTED B Y THE A.O. THAT NO REPLY HAS BEEN RECEIVED FROM THE ASSESSEE. HENCE THE A.O. , DRAWN AN ADVERSE INFERENCE THAT THE ASSESSEE HAS NOTHING TO SAY IN T HIS MATTER. THE AO OBSERVED THAT THE EXACT NATURE OF SERVICES PROVIDED BY THE PERSONS AND ITA.NO.3657/A HD/2008 . ASSESSMENT YEAR: 200 4-05. 3 BUSINESS CONNECTION OF THE CLAIM EXPENDITURE IS NOT ESTABLISHED BY THE ASSESSEE. HE DISALLOWED THIS ENTIRE CLAIM. BEING AG GRIEVE, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THIS DISALLOWANCE AFTER OBTAINING REMAND REPORT FROM THE AO AND NOW THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. D. R. OF THE REVENUE SUPPORTED THE ASSES SMENT ORDER. IT IS THE SUBMISSION OF THE LD. D.R. OF THE REVENUE THAT THIS WAS THE MAIN QUERY OF THE A.O. AS PER WHICH HE ASKED THE ASSESSEE TO E STABLISH THAT THE SERVICES WERE ACTUALLY RENDERED BY THE AGENT. IT IS ALSO SU BMITTED THAT, IN PARAGRAPH 14 OF THE ASSESSMENT ORDER, THE A.O. HAS GIVEN A CL EAR FINDING THAT THE ASSESSEE HAS FAILED TO ESTABLISH EXACT NATURE OF SE RVICE PROVIDED BY THE PERSONS AND THE PURPOSE AND BUSINESS CONNECTION OF THE CLAIMED EXPENDITURE IS NOT EXPLAINED. IT IS SUBMITTED THAT THERE IS NO FINDING OF THE LD. CIT (A) ON THIS ASPECT AND HIS ORDER BE REVERSED AND THAT OF T HE A.O. BE RESTORED. 6. IN THE WRITTEN SUBMISSIONS FILED LD. A.R. OF THE ASSESSEE WHICH IS AVAILABLE ON RECORD, IT IS SUBMITTED THAT IN COURSE OF REMAND PROCEEDINGS, THE A.O. HAD ISSUED NOTICES U/S. 133(6) TO BOTH THE PAR TIES AND THESE PARTIES HAVE REPLIED AND CONFIRMED THE SERVICES RENDERED AND COM MISSION PAYMENT AND HENCE, THE DISALLOWANCE MADE BY THE AO AND CONFIRME D BY THE CIT(A) IS NOT JUSTIFIED. THERE IS NO OTHER SUBMISSION OR EVIDENCE FURNISHED BEFORE US REGARDING THE NATURE OF SERVICES RENDERED BY THE CO MMISSION AGENTS AND WHETHER THE SERVICES WERE ACTUALLY RENDERED BY THEM . 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE REVENU E AND WRITTEN SUBMISSION OF THE ASSESSEE AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA.NO.3657/A HD/2008 . ASSESSMENT YEAR: 200 4-05. 4 8. WE FIND THAT THE MAIN BASIS OF MAKING DISALLOWAN CE BY THE A.O. IS THAT ASSESSEE HAS FAILED TO ESTABLISH EXACT NATURE OF SERVICES PROVIDED BY THE PERSONS AND THE ASSESSEE COULD NOT ESTABLISH THE PU RPOSE AND BUSINESS CONNECTION OF THE CLAIM OF EXPENDITURE. THE LD. CI T (A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE ON THIS BASIS THAT IT WAS SUBMITTED ASSESSEE BEFORE HIM THAT THE COMMISSION WAS PAID BECAUSE OF COMMERCIAL EXPEDIENCY AND THIS WAS THE FIRST YEAR OF EXPORT AND THE ASSES SEE HAD TO PAY COMMISSION TO THESE PARTIES WHO COULD INTRODUCE FOREIGN BUYER AND OBTAIN EXPORT ORDERS. IT IS STATED THAT THE AGREEMENT WITH THE SAID TWO P ARTIES WAS ONLY FOR THE FIRST YEAR OF EXPORT. THE LD. CIT(A) STATED IN PARAGRAPH 6 OF HIS ORDER THAT SINCE BOTH THE PARTIES HAVE REPLIED TO THE NOTICE ISSUED BY THE A.O. U/S. 133(6) AND THE ASSESSEES ACCOUNTS IN THEIR BOOKS HAVE BEEN CO NFIRMED BY THEM, THE COMMISSION PAYMENT TO THESE PARTIES STANDS SATISFAC TORILY EXPLAINED. HE HAS ALSO STATED IN THE SAME PARAGRAPH THAT THE PARTIES HAVE NOT ONLY CONFIRMED THE RECEIPT OF THE SAID AMOUNT BUT THEY HAVE ALSO C ONFIRMED THE SERVICES RENDERED. WE FAIL TO UNDERSTAND THE BASIS OF THE F INDING OF THE LD. CIT (A) BECAUSE IT IS A GENERAL REPLY THAT THE COMMISSION W AS PAID TO THESE PARTIES FOR INTRODUCING FOREIGN CUSTOMERS WITHOUT BRINGING ON R ECORD ANY CORRESPONDENCE TO THESE COMMISSION AGENTS WITH THE FOREIGN PARTIES OR WITH THE ASSESSEE IN THIS REGARD. IN THE ABSENCE OF ANY EVIDENCE REGARDING THE NATURE OF SERVICES RENDERED BY THE COMMISSION AGENT S AND SIMPLY ON THE BASIS OF GENERAL SUBMISSION THAT COMMISSION PAYMENT WAS MADE FOR INTRODUCING FOREIGN PARTIES, IT CANNOT BE ACCEPTED THAT THE ASSESSEE HAS ESTABLISHED THAT THE SERVICES ACTUALLY RENDERED BY THE COMMISSION AGENTS. WITHOUT SATISFYING THIS BASIC REQUIREMENT OF ACTUAL RENDERING SERVICES, OTHER THINGS SUCH AS CONFIRMATION AND PAYMENT BY CHEQUE O R DEDUCTION OF TDS IS ITA.NO.3657/A HD/2008 . ASSESSMENT YEAR: 200 4-05. 5 NOT SUFFICIENT TO ALLOW DEDUCTION OF THE IMPUGNED E XPENSES. MERELY BECAUSE THE PAYMENT WAS MADE AFTER TDS AND BY ACCOUNT PAYEE CHEQUE AND THE RECIPIENT HAVE CONFIRMED THE RECIPIENT OF SUCH PAYM ENT, IT CANNOT BE ACCEPTED THAT THE SERVICES WERE ACTUALLY RENDERED B Y THEM. THERE IS NO EVIDENCE ON RECORD REGARDING AGREEMENT WITH THESE A GENTS AND NO CORRESPONDENCE HAS BEEN BROUGHT ON RECORD OF THE CO MMISSION AGENTS WITH THE FOREIGN BUYERS OR WITH THE ASSESSEE TO ESTABLIS H THAT SOME SERVICES WERE RENDERED BY THESE AGENTS. HENCE, THE ORDER OF THE L D. CIT (A) IS NOT SUSTAINABLE. WE, THEREFORE, REVERSE THE SAME AND RE STORE THAT OF THE A.O. THE DISALLOWANCE MADE BY THE A.O. IS CONFIRMED IN THE A BSENCE OF ANY MATERIAL REGARDING RENDERING OF SERVICES. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 31 - 05 - 2011 . SD/- SD/- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER. ACCOUNTANT MEMBER. AHMEDABAD. DATED: 31 - 05 - 2011. S.A.PATKI. ITA.NO.3657/A HD/2008 . ASSESSMENT YEAR: 200 4-05. 6 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-II, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 11 - 5 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 16 / 5 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 31 - 5 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 31 - 5 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 31 - 5 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 3 1 - 5 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..