Sri Janarthana Spinning Mills, Coimbatore V. ACIT, Coimbatore

ITA 366/CHNY/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6555 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 18-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIDYA RAMACHANDAN CIT
• Assessee Lawyers: N ARJUN RAJC A S SRIDHAR
• Keywords: Depreciation; Income from undisclosed sources; Search and seizure; Fair market value; TDS
• Section: 40A(3); 143(3); 143(1); 191

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH : CHENNAI , . , [BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] !' ./I.T.A. NO.366/CHNY/2016. #$% &$ / ASSESSMENT YEAR : 2011-2012 M/S. SRI JANARTHANA SPINNING MILLS, 187-1, KNP ROAD, KARAMADAI, COIMBATORE 641 104. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, SALARY CIRCLE 1, COIMBATORE [PAN AAMFS 4005M] ( / APPELLANT) ( /RESPONDENT) !' '( ) * / APPELLANT BY : SHRI. N. ARJUN RAJ, C.A. FOR S. SRIDHAR, ADVOCATE +,'( ) * /RESPONDENT BY : MS. VIDYA RAMACHANDAN, ADDL. CIT. # - ) . /DATE OF HEARING : 09-10-2019 /0&% ) . /DATE OF PRONOUNCEMENT : 21-10-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-3, COIMBATORE (CIT(A) FOR SHORT) DATED 16.11.2015 FOR THE ASS ESSMENT YEAR (AY) 2011-2012. ITA NO.366 /2016 :- 2 -: 2. T HE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY SRI JANARTHANA SPINNING MILLS IS A PARTNERSHIP FIRM CONSTITUTED UNDER THE PARTNERSHIP ACT. IT IS ENGAGED IN THE BUSINESS OF SPINNING COTTON. THE RETURN OF INCOME FOR THE AY 2011-12 WAS FILED ON 26.09.2011 DISCLOSING T OTAL INCOME OF RS. 1,67,89,015/-. AGAINST THE SAID RETURN OF INCOME, T HE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, SALARY CIRCLE I, COIMBATORE (HEREINAFTER CALLED AO) VID E ORDER DATED 26.03.2014 PASSED U/S. 143(3) OF THE INCOME TAX A CT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS. 2,28,32,255/-. W HILE DOING SO, THE AO MADE THE FOLLOWING ADDITIONS:- A) DISALLOWANCE OF DEPRECIATION ON WINDMILL : 2,03,87,136/- B) DISALLOWANCE OF PURCHASE EXPENSES U/S.40A(3) : 28,17,587/- C) DISALLOWANCE OF COMMISSION GIVEN TO M/S, BALAKRISHNAN MINOR HUF U/S.40A(2)(B) : 2,00,000/- 3. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER PARTLY ALLOWED THE APPEAL B Y DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF DEPRECIATIO N ON WINDMILL AND CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFIC ER U/S.40A(3) OF ITA NO.366 /2016 :- 3 -: THE ACT OF @28,17,587/- AND DISALLOWANCE OF COMMISS ION OF @2,00,000/- PAID TO BALAKRISHNAN MINOR HUF. 4. BEING AGGRIEVED BY THAT PART OF THE ORDER OF THE L D. CIT(A), THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 5. GROUND NO.2 RELATES TO DISALLOWANCE OF PURCHASE EXP ENSES OF @28,17,587/- MADE U/S.40A(3) OF THE ACT. DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON VERIFICATION OF THE LEDGER ACCOUNT OF THE ASSESSEE FOUND THAT THE FOLLOWING P AYMENTS WERE MADE BY THE PARTNERS OF THE ASSESSEE FIRM DIRECTLY TO THE PARTIES BY OTHERWISE THAN ACCOUNT PAYEE CHEQUE OR PAYEE BANK DRAFT. SL. NO. NAME OF CREDITOR/ SUPPLIER NATURE OF TRANSACT ION MODE OF PAYMENT BILLS OR CREDIT RAISED BY THE CREDITOR PAYMENT MADE 1 M/S.SAI COTTON CORPORATION. COTTON SUPPLIER PAID BY PARTNER SMT. JAYAMANI DIRECTLY TO PARTIES 390150 390150 2 M/S. SARADEVI COTTON ENTERPRISES COTTON SUPPLIER --DO-- 455098 455098 3 M/S. VENKATARAMANA TRADERS COTTON SUPPLIER PAID BY THE PARTNER V. BALAKRISHN AN TO THE PARTY 381430 381430 4 M/S. JAGADAMBA TRADERS COTTON SUPPLIER PAID BY THE PARTNER 584605 584605 ITA NO.366 /2016 :- 4 -: SMT. RAMPRIYA TO THE PARTY 5 M/S. SOUNDARYA COTTON INDUSTRIES PAID TO THE PARTNER V. BALAKRISHN AN TO THE PARTY 617301 617301 6 M/S.VIJAYALAKSHMI TRADERS COTTON SUPPLIER PAID BY THE PARTNER SMT. RAMPRIYA TO THE PARTY 389003 389003 THEREFORE, THE ASSESSING OFFICER DISALLOWED THE SAM E UNDER THE PROVISIONS OF SECTION 40A(3) OF THE ACT. EVEN BEFO RE THE LD. CIT(A), IT IS SUBMITTED THAT TRADE CREDIT BALANCE OF THE PARTI ES FROM WHOM PURCHASES WERE MADE WERE TRANSFERRED TO PARTNERS AC COUNT WHO IN TURN MADE PAYMENTS TO THE PARTIES. THUS, IT WAS S UBMITTED THAT THERE IS NO VIOLATION OF SECTION 40A(3) OF THE ACT, IN AS MUCH AS, THE FIRM HAD NOT MADE ANY PAYMENTS IN CASH TO THE PARTIES. HOWEVER, THE LD. CIT(A) HAS REJECTED THE ABOVE ARGUMENTS AND ACCORD INGLY CONFIRMED THE ADDITION. EVEN BEFORE US, IT IS SUBMITTED THA T THE PROVISIONS OF SECTION 40A(3) OF THE ACT CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE, AS ASSESSEE FIRM HAD NOT MADE ANY CASH PAYME NTS DIRECTLY TO THE PARTIES. IT IS FURTHER SUBMITTED THAT IT WAS N OT POSSIBLE FOR THE ITA NO.366 /2016 :- 5 -: ASSESSEE TO SORT OUT THE DISPUTES WITH THE PARTIES, HENCE THE PARTNERS HAD TAKEN UP THE RESPONSIBILITY OF RESOLVING THE DI SPUTES. LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT BOOK ADJUSTMENT WAS NOT MADE WITH THE INTENTION OF OVERCOMING THE PROVI SIONS OF SECTION 40A(3) OF THE ACT. LD. AUTHORISED REPRESENTATIVE FU RTHER SUBMITTED THAT IN TERM OF PROVISIONS OF SECTION 40A(3) OF THE ACT, IF THE PAYMENTS ARE MADE OTHERWISE THAN MODES PRESCRIBED U/S.40A(3 ) OF THE ACT THEN PAYMENTS SHOULD BE DEEMED TO BE INCOME OF THE ASSES SEE OF THE PREVIOUS YEAR IN WHICH THE CASH PAYMENTS ARE MADE. IN THE INSTANT CASE, THE PAYMENTS WERE MADE TO THE SUPPLIERS BY TH E PARTNERS OF THE ASSESSEE IN THE SUBSEQUENT YEARS AND THEREFORE THE QUESTION OF ADDITION FOR THE YEAR UNDER CONSIDERATION DOES NOT ARISE. 6. ON THE OTHER HAND, LD. SENIOR DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT PROVISIONS OF SECTION 40A(3) OF THE ACT ARE SQUARELY ATTRACTED AND THE LOWER AUTHORITIES HAD RIGHTLY MAD E THE ADDITION. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT GROUNDS OF APPEAL RELATES TO THE DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40A(3) OF THE ACT. UNDISPUTEDLY, THE PAYMENTS FOR PURCHASES ARE MADE I N CASH TO THE TUNE OF @28,17,587/-. IT IS THE CONTENTION OF THE ASSESSEE THAT ITA NO.366 /2016 :- 6 -: PROVISIONS OF SECTION 40A(3) OF THE ACT HAVE NO APP LICATION IN AS MUCH AS, THE CREDIT BALANCE OF THE PARTIES WERE TRANSFER RED TO THE PARTNERS ACCOUNT AND PARTNERS IN TURN SETTLED THE CLAIMS OF THE PARTIES IN CASH. SINCE ASSESSEE FIRM HAS NOT PAID CASH, THE PROVISIO NS OF SECTION 40A(3) OF THE ACT HAVE NO APPLICATION. WE ARE AFRAID TH IS SUBMISSION OF THE ASSESSEE CANNOT BE ACCEPTED FOR THE REASONS THAT U NDISPUTEDLY, THE PAYEES HAD RECEIVED MONEY IN CASH AND THEREBY DEFEA TING THE VERY PURPOSE OF ENACTING THE PROVISIONS OF SECTION 40A(3 ) OF THE ACT. THE HONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO, 191 ITR 667 WHEREIN IT WAS DECIDED THAT WHEN THERE IS DIRECT PAYMENT TO THE PAYEES IN CASH, THE PROVISIONS OF SE CTION 40A(3) OF THE ACT ARE ATTRACTED. RELEVANT PARA OF THE JUDGMENT I S ABSTRACTED BELOW:- ORIGINALLY, SECTION 40A(3) REQUIRED PAYMENTS IN R ESPECT OF EXPENDITURE, WHICH EXCEEDED RS. 2,500 TO BE MADE BY A CROSSED CHEQUE OR A CROSSED BANK DRAFT. ON FAILURE TO DO SO, THE PAYMENTS MADE WERE DISALLOWED IN THE COMPUT ATION OF INCOME. IN ORDER TO REMOVE HARDSHIP TO SMALLER ASSESSEES, THE AMENDING ACT, 1987, HAS RAISED THIS CEILING TO RS. 10,000. SECTION 40A(3) BEGINS WITH A NON-OBS TANTE CLAUSE. IT IS AN OVERRIDING PROVISION WHICH OPERATE S IN SPITE OF ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISION OF THE ACT RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THE LEGISLATURE HAS THUS MADE IT CLEAR THAT THE PROVISIONS OF SECTION 40A WILL APPLY IN SUPERSESSIO N OF OTHER CONTRARY PROVISIONS OF THE ACT RELATING TO THE COMP UTATION OF INCOME. SUB-SECTION (3) EMPOWERS THE ASSESSING O FFICER TO DISALLOW, AS A DEDUCTION, ANY EXPENDITURE IN RES PECT OF ITA NO.366 /2016 :- 7 -: WHICH PAYMENT IS MADE OF ANY SUM EXCEEDING RS. 10,0 00 OTHERWISE THAN BY A CROSSED CHEQUE OR CROSSED BANK DRAFT. RULE 6DD OF THE INCOME-TAX RULES, 1962, REFERS TO C ASES AND CIRCUMSTANCES IN WHICH PAYMENT OF A SUM EXCEEDI NG RS. 10,000 MAY BE MADE OTHERWISE THAN BY A CROSSED CHEQUE OR BY A CROSSED BANK DRAFT. THE RULE SO FAR AS IT IS RELEVANT READS: '6DD. CASES AND CIRCUMSTANCES IN WHICH PAYMENT IN A SUM EXCEEDING TEN THOUSAND RUPEES MAY BE MADE OTHERWISE THAN BY, A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT.-NO DISALLOWANCE UNDER SUB-SECTI ON (3) OF SECTION 40A SHALL BE MADE WHERE ANY PAYMENT IN A SUM EXCEEDING TEN THOUSAND RUPEES IS MADE OTHERWISE THA N BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BA NK DRAFT IN THE CASES AND CIRCUMSTANCES SPECIFIED HERE UNDER, NAMELY: ... (J) IN ANY OTHER CASE, WHERE THE ASSESSEE SATISFIES THE ASSESSING OFFICER THAT THE PAYMENT COULD NOT BE MAD E BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT- (1) DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES ; OR (2) BECAUSE PAYMENT IN THE MANNER AFORESAID WAS NOT PRACTICABLE, OR WOULD HAVE CAUSED GENUINE DIFFICULT Y TO THE PAYEE, HAVING REGARD TO THE NATURE OF THE TRANSACTI ON AND THE NECESSITY FOR EXPEDITIOUS SETTLEMENT THEREOF, AND ALSO FURNISHES EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER AS TO THE, GENUINENESS OF THE PAY MENT AND THE IDENTITY OF THE PAYEE.' AS TO THE VALIDITY OF SECTION 40A(3), IT WAS URGED THAT, IF THE PRICE OF THE PURCHASED MATERIAL IS NOT ALLOWED TO BE ADJUSTED AGAINST THE SALE PRICE OF THE MATERIAL SOL D FOR WANT OF PROOF OF PAYMENT BY A CROSSED CHEQUE OR A C ROSSED BANK DRAFT, THEN THE INCOME-TAX LEVIED WILL NOT BE ON THE INCOME BUT IT WILL BE ON AN ASSUMED INCOME. IT IS S AID THAT THE PROVISION AUTHORISING LEVY OF TAX ON AN ASSUMED INCOME WOULD BE A RESTRICTION ON THE RIGHT TO CARRY ON BUS INESS, BESIDES BEING ARBITRARY. IN OUR OPINION, THERE IS LITTLE MERIT IN THIS CONTE NTION. SECTION 40A(3) MUST NOT BE READ IN ISOLATION OR TO THE EXCLUSION OF RULE 6DD. THE SECTION MUST BE READ ALO NG WITH ITA NO.366 /2016 :- 8 -: THE RULE. IF READ TOGETHER, IT WILL BE CLEAR THAT T HE PROVISIONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIE S. THERE IS NO RESTRICTION ON THE ASSESSEE IN HIS TRADING ACTIV ITIES. SECTION 40A(3) ONLY EMPOWERS THE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RE SPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROS SED BANK DRAFT. THE PAYMENT BY CROSSED CHEQUE OR CROSSE D BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING A UTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHE THER IT WAS OUT OF THE INCOME FROM UNDISCLOSED SOURCES. THE TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE. CONSIDERA TIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONA FIDE TRANSACTIONS ARE NO T TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN T O THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSE SSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT I N THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTIC ABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WH O HAS RECEIVED THE CASH PAYMENT. RULE 6DD PROVIDES THAT A N ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT I N THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO P REVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS. ( MUDIAM OIL COMPANY V. ITO [1973] 92 ITR 519 (AP)). IF THE PAYMENT IS MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR A CROSS ED BANK DRAFT, THEN IT WILL BE EASIER TO ASCERTAIN, WH EN DEDUCTION IS CLAIMED, WHETHER THE PAYMENT WAS GENUI NE AND WHETHER IT WAS OUT OF THE INCOME FROM DISCLOSED SOURCES. IN INTERPRETING A TAXING STATUTE, THE COUR T CANNOT BE OBLIVIOUS OF THE PROLIFERATION OF BLACK MONEY WH ICH IS UNDER CIRCULATION IN OUR COUNTRY. ANY RESTRAINT INT ENDED TO CURB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY SHOULD NOT BE REGARDED AS CURTAILING THE FREE DOM OF TRADE OR BUSINESS. FURTHERMORE, WHAT IS NOT DIRECTLY PERMITTED CANNOT BE INDIRECTLY PERMITTED. THEREFORE, WE DO NOT FIND ANY REASON T O INTERFERE WITH THE ITA NO.366 /2016 :- 9 -: ORDERS OF THE LOWER AUTHORITIES. THUS, GROUND OF APPEAL NO.2 FILED BY THE ASSESSEE STANDS DISMISSED. 8. GROUND NO.3 RELATES TO DISALLOWANCE OF COMMISSION PAID TO BALAKRISHNAN MINOR (HUF) U/S.40A(2) (B) OF THE ACT FOR @2,00,000/-. THE ASSESSING OFFICER DISALLOWED THE COMMISSION PAY MENT OF @2,00,000/- PAID TO BALAKRISHNAN MINOR (HUF) UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT FOR TWO REASONS, FIRST THERE WAS NO PROOF OF RENDERING ANY SERVICES BY THE BALAKRISHNAN MINOR (HUF) AND SECONDLY THE SERVICES STATED TO HAVE BEEN RENDERED ONLY IN INDIVIDUAL CAPACITY. 9. EVEN ON APPEAL BEFORE THE LD. CIT(A), THE LD. CIT( A) CONFIRMED THE ADDITION FOR WANT OF EVIDENCE OF SERV ICES RENDERED. 10. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. THE LD. AUTHORISED REPRESENTATIVE S UBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE A DDITION WITHOUT BRINING ON RECORD WHAT IS THE FAIR MARKET VALUE OF THE SERVICES RENDERED. 11. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. ITA NO.366 /2016 :- 10 -: 12. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. IT IS SETTLED POSITION OF LAW THAT COMMIS SION PAYMENT CANNOT BE ALLOWED AS DEDUCTION IN THE ABSENCES OF ANY EVID ENCE ON RECORD ESTABLISHING RENDITION OF SERVICES. IN THIS CON NECTION, RELIANCE CAN BE PLACED ON THE DECISION OF BANGALORE BENCH OF THE TR IBUNAL IN THE CASE OF M/S. 3M INDIA LTD., VS. ASST. CIT, LTU, IN IT(TP )A 725/BANG/2011 DATED 13/05/2016, WHEREIN IT WAS HELD AS FOLLOWS:- THE ONUS LIES ON THE ASSESSEE TO PROVE THAT THE S ERVICES ARE ACTUALLY RENDERED BY THE AE. IN THIS CONTEXT, WE MAY POINT O UT TO THE DECISION IN THE CASE OF HONBLE SUPREME COURT IN THE CASE OF LAXMI NARAYAN MADANLAL VS. CIT (86 ITR 439) WHEREIN IT WAS HELD A S FOLLOWS THE MERE EXISTENCE OF AN AGREEMENT BETWEEN THE ASSE SSEE AND ITS SELLING AGENTS OR PAYMENT OF CERTAIN AMOUNT S AS COMMISSION, ASSUMING THERE WAS SUCH PAYMENT, DOES N OT BIND THE INCOME-TAX OFFICER TO HOLD THAT THE PAYMENT WAS MADE EXCLUSIVELY AND WHOLLY FOR THE PURPOSE OF THE ASSES SEE'S BUSINESS. THUS, FOR ALLOWABILITY OF THIS KIND OF EXPENDITURE, CONDITION SINE QUA NON IS PROOF OF ACTUAL SERVICES RENDERED. THE CO-OR DINATE BENCH OF THE TRIBUNAL, TO WHICH ONE OF US I.E. THE ACCOUNTANT ME MBER IS THE AUTHOR OF THE ORDER, IN THE CASE OF M/S.B FOURESS PVT. LTD . VS. DCIT IN ITA NOS.847 & 847/BANG/2014 DATED 30/12/2015 HELD AS FO LLOWS: ....................THUS, THE ASSESSEE FAILED TO DI SCHARGE THE BURDEN OF PROVING THAT THE EXPENDITURE LAID OUT WERE INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. WE MAY FURTHER ADD THAT THE HONBLE SUPREME COURT IN THE CASE OF C IT VS IMPERIAL CHEMICAL INDUSTRIES (IND.) PVT. LTD (1969) 74 ITR 17 HAS UNEQUIVOCALLY HELD THAT THE BURDEN OF PROVING T HAT A PARTICULAR EXPENDITURE HAD BEEN AID OUT OR INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ENTIRELY LI ES ON THE ASSESSEE. THE DISCHARGE OF THE BURDEN HAD TO BE EFF ECTIVE AND MEANINGFUL AND NOT TO COVER UP BY MERELY BOOK ENTRI ES AND PAPER WORK. THE MERE FACT OF PAYMENT OF COMMISSION BY ACCOUNT PAYEE CHEQUES AND COMPLIANCES WITH THE TDS PROVISIONS SHALL NOT ALONE ENABLE THE ASSESSEE TO C LAIM DEDUCTION UNLESS AND AMOUNT HAS BEEN EXPENDED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ITA NO.366 /2016 :- 11 -: 11. A CO-ORDINATE BENCH TRIBUNAL OF DELHI IN THE CA SE OF KANU KITCHEN KULTURE (P)LTD VS DCIT (2013) 28 ITR (T) 49 (DEL.- TRIB.) HELD THAT WHETHER THE ASSESSEE FAILED TO DEM ONSTRATE THE SERVICES RENDERED BY THE COMMISSION AGENT, THE COMM ISSION WAS DISALLOWED. THE RELEVANT PARAS OF THE JUDGMENT ARE REPRODUCED BELOW; 22. THUS THE ASSESSEE AS UTTERLY FAILED TO DEMONST RATE THE NATURE AND EXTENT OF SERVICE RENDERED BY THE AG ENT AND AVAILED OF BY THE ASSESSEE FOR ITS BUSINESS OF MODULAR KITCHEN. IN THIS SCENARIO WHAT APPEARS ON R ECORD IS MERELY BOOK ENTRIES COUPLED WITH TDS THE AMOUNT WHICH WILL BE CLAIMED AS A REFUND BY THE RECIPIENT BEING A LOSS MAKING CONCERN. IN OUR CONSIDERED VIEW THE ASSESSEE HAS PRODUCED ONLY SKELETAL PAPER WORK OF T HE ARRANGEMENT WITHOUT ANY IOTA OF EVIDENCE ABOUT ACTU AL BUSINESS SERVICES RENDERED. 23. THE ASSESSEES CLAIM FOR ALLOWING SIMILAR COMMISSION PAYMENT IN SUBSEQUENT YEAR CARIES NO MER IT INASMUCH AS THE LEARNED DR HAS RIGHTLY PLEADED THAT EACH AND EVERY YEAR OF ASSESSMENT IS SEPARATE AND INDEPENDENT UNIT AND PRINCIPLES OF RESJUDICATA DO N OT APPLY. THE ASSESSMENT FOR THE ASSESSMENT YEAR 2009- 10 IS UNDER SECTION 143(1) AND FOR THE ASSESSMENT Y EAR 2010-11 THERE IS NO MENTION OF THE COMMISSION AT AL L. THEREFORE, WE ARE UNABLE TO GIVE EVIDENCED TO THE F ACTS WHOSE RECORD IS NOT BEFORE US AND NOT REFERRED TO B EFORE THE LOWER AUTHORITIES. 12. SIMILARLY, THE HONBLE DELHI HIGH COURT IN THE CASE OF SCHNEIDER ELECTRIC (IND.) LTD VS CIT (21008) 304 IT R 360 (DEL.) HELD THAT IN THE ABSENCE OF MATERIAL ON RECORD SUGG ESTING THAT THE COMMISSION AGENTS HAD PROCURED THE SALE ORDERS, NO COMMISSION SHOULD BE ALLOWED. THE RELEVANT PARA OF THE JUDGMENT IS REPRODUCED BELOW; 13. WE AGREE WITH THE TRIBUNAL THAT THERE IS ABSOLUTELY NO MATERIAL ON RECORD TO SUGGEST THAT M/S RAM AGENCIES HAD PROCURED ANY SALE ORDERS FOR THE ASSESSEE. THE PRODUCTION OF A FEW BILLS OR PAYMENT HAVING BEEN MADE BY ACCOUNT PAYEE CHEQUES CANNOT BY ITSELF SHOW THAT M/S RAM AGENCIES HAD PROCURED SALE ORDERS FOR THE ASSESSEE. APART FROM AN INTERNAL NOTE, THERE IS NO EVIDENCE OF ANY CORRESPONDENCE OR ANY PERSONAL; MEETINGS ETC. BETWEEN THE ASSESSEE AND M/S ITA NO.366 /2016 :- 12 -: RAM AGENCIES TO SUGGEST THAT THE WAS ANY RELATIONSHIP ON THE BASIS OF WHICH M/S RAM AGENCIES PROCURED SOME ORDERS FOR THE ASSESSEE FOR WHICH IT WAS ENTITLED TO RECEIVE COMMISSION. MOREOVER, WE FIND THAT THE UNDERSTANDING BETWEEN THE PARTIES WAS AN ORAL UNDERSTANDING AND IT APPEARS TO BE DOUBTFUL THAT SUCH AN ORAL UNDERSTANDING CAN BE ARRIVED AT WITHOUT ANY LONG STANDING RELATIONSHIP HAVING BEEN ESTABLISHED BETWEEN THE ASSESSEE AND M/S RAM AGENCIES. IT SEEMS A BIT OUT OF PLACE THAT THE PARTIES ENTERED INTO AN ORAL BUSINESS RELATIONSHIP INVOLVING SUCH HUGE AMOUNTS OF MONEY OVER A PERIOD OF TIME. 13, THE CO-ORDINATE BENCH OF DELHI IN THE CASE OF P RINTER HOUSE PVT.LTD. VS DCIT (DEL.) AUTHORED BY ACCOUNTAN T MEMBER, AFTER REFERRING TO THE ABOVE PRECEDENCE ON THIS ISSUE HELD AS FOLLOWS: THUS, HAVING REGARD TO THE RATIO LAID DOWN IN THE ABOVE CASES THAT IN THE ABSENCE OF PROOF IN SUPPORT OF THE SERVICES RENDERED BY THE COMMISSION AGENT, NO COMMISSION CAN BE ALLOWED AS A DEDUCTION. THEREFORE, WE DISMISS THE APPEAL FILED BY THE ASSESSEE AND ALLOW THE APPEALS FILED BY THE REVENUE. 14. IN THE PRESENT CASE, THE LEARNED CIT(A) HAD NOT EXAMINED ANY EVIDENCE TO SHOW THAT THE AGENTS HAVE ACTUALLY RENDERED THEIR SERVICES. THE LEARNED CIT(A) HAD TOTALLY MISD IRECTED HIMSELF BY EXAMINING THE ISSUE FROM THE ANGLE OF TA X DEDUCTED AT SOURCE AND HE HAD FAILED TO EXAMINE WHETHER THE SERVICES ARE ACTUALLY RENDERED BY THE COMMISSION AGENTS OR N OT. THEREFORE, WE ARE UNABLE TO SUSTAIN THE ORDER OF TH E LEARNED CIT(A) AND HOLD THAT THE COMMISSION PAYMENTS IN QUE STION ARE NOT ALLOWABLE KEEPING IN VIEW THE RATIO LAID DOWN I N THE CASES CITED SUPRA. THE ASSESSEE COMPANY HAD MISERABLY FAI LED TO DEMONSTRATE THE ACTUAL SERVICES RENDERED BY THE AGE NTS TO WHOM THE COMMISSION PAYMENTS WERE MADE, DESPITE AMP LE OPPORTUNITY GRANTED BY THIS TRIBUNAL TO FURNISH EVI DENCE IN SUPPORT OF SERVICE RENDERED BY COMMISSION AGENT. EVEN BEFORE US, NO MATERIAL IS SHOWN ESTABLISHING R ENDITION OF ACTUAL SERVICES BY BALAKRISHNAN MINOR (HUF) AND THEREFORE COMMISSION ITA NO.366 /2016 :- 13 -: PAYMENT CANNOT BE ALLOWED AS DEDUCTION. GROUND NO. 3 FILED BY THE ASSESSEE IS ALSO STANDS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS D ISMISSED. ORDER PRONOUNCED ON 21 ST DAY OF OCTOBER, 2019, AT CHENNAI. SD/- SD/- ( . ! ) (DUVVURU RL REDDY) ' # /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER 1 #- / CHENNAI 2# / DATED:21ST OCTOBER, 2019. KV 3 ) +.4 5' !6 5&. / COPY TO: 1 . !' '( / APPELLANT 3. 7. (!' ) / CIT(A) 5. 5 :; +.#< / DR 2. +,'( / RESPONDENT 4. 7. / CIT 6. ;$ =- / GF