Smt. Shashi Sharma, Dehradun V. DCIT, Dehradun

ITA 3716/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7118 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 28-11-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 21-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

1 N THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH SMC-II: NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 3716/DEL/2016 A.Y. : 2012-13 SMT. SHASHI SHARMA, VS. DCIT, CIRCLE-1, 8, DEV LOK COLONY, DEHRADUN SHIMLA BYE PASS ROAD, DEHRADUN (PAN: AQGPS6528P) (ASSESSEE ) (RESPONDENT) ASSESSEE BY : SH. SAYASACHI K. SAHAI, ADV. DEPARTMENT BY : SH. S.K. JAIN, SR. DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-, MUZAFFARNAGAR DATED 22.3.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. BECAUSE THE REJECTION OF THE APPEAL BY THE LEARNE D CIT(A) IS AGAINST THE FACTS ON RECORD AND IN LAW. 2. BECAUSE IT IS WRONG OF THE CIT(A) TO MENTION AT PA RA 7 OF HIS ORDER DATED 22/03/2016 THAT 'THE APPELLANT HAS NOT PRODUCED BEFORE THE AO AND DURING APPELLATE PROCEEDINGS THE NATURE OF SERVICES TAKEN FROM THE COMMISSION AGENTS. THIS OBSE RVATION IS NOT TRUE AS THE COMPLETE NATURE OF SERVICES AVAILED FROM THE 2 AGENTS AND REASON FOR PAYING THE COMMISSION WAS FIL ED BEFORE THE AO AND THIS FACT WAS ALSO DISCUSSED IN THE ASSE SSMENT ORDER AND NOT DISPUTED BY HIM. 3. BECAUSE IN SPITE OF PLACING ALL THE FACTS BEFORE THE CIT(A), IT IS WRONG OF THE CIT(A) TO SUSTAIN THE ADDITION OF RSA,3 6,684/- MADE BY THE AO ON ACCOUNT OF EXCESSIVE COMMISSION P AID TO AGENTS. 4. BECAUSE THE APPELLANT PAID COMMISSION TO AGENTS NOT AS A PERCENTAGE OF SALES VALUE, AS HAS BEEN PRESUMED BY THE AO AND THE CIT (A), BUT AS A UNIT OF VOLUME OF SALES AC HIEVED BY HIM AND THUS THE FACTS OF THE CASE HAVE BEEN WRONGLY IN TERPRETED. 5. BECAUSE THE FIGURE OF COMMISSION PAID IN THE PRE VIOUS YEAR CANNOT BE COMPARED WITH THE FIGURE OF COMMISSION PA ID DURING THE YEAR UNDER APPEAL AS COMMISSION WAS PAID ON VOL UME OF SALES FOR A PERIOD OF ONLY 4 MONTHS IN THE PREVIOUS YEAR AND FOR COMPLETE 12 MONTHS IN THE YEAR UNDER APPEAL. 6. BECAUSE THE SUBMISSIONS PLACED ON FILE HAVE NOT BEEN CONSIDERED, JUDICIALLY IN THE ORDER AND THE APPEAL DISMISSED SUMMARILY DENYING JUSTICE TO THE APPELLANT. 7. BECAUSE A SPEAKING ORDER HAS NOT BEEN PASSE D BY THE LEARNED CIT (A). 8. BECAUSE JUSTICE HAS NOT BEEN DONE WITH THE APPE LLANT AND THUS THE ORDER IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND BA D IN LAW. 3 3. THE FACTS OF THE CASE ARE THAT IN THIS CASE ASSES SMENT HAS BEEN COMPLETED ULS 143(3) OF THE I.T. ACT ON 27.6.2014. THE ASSESSEE DURING THE YEAR WAS ENGAGED IN THE TRADING OF SODA ASH (RS.6.21 CRORE AND PAPER (RS.1.27 CRORE) - REFLECTING TOTAL TURNOVER OF RS.8.28 CRORE IN THE P & L A/C. AO NOTE D THAT THE SALES WERE FOR RS.9.62 CRORE FOR ASSTT. YEAR 2011-12 (SALE OF RS.5.76 CRORE FOR SODA ASH AND RS.3.84 CRORE FOR PAPER) WHEREAS COMMISSION HAS BEEN CLAIMED FOR SODA ASH WAS RS.217000/- IN A.Y. 2011-12 AND RS.991800/- IN THE A.Y. 2012-L3 I.E. SALES HAVE GONE DOWN AND WHEREAS THE COMMISSION EXPENDITURE HAS INCREASE D. THE ASSESSEE WAS REQUIRED TO JUSTIFY THE INCREASE IN COMMISSION EXPENSE IN TH IS YEAR DURING THE ASSESSMENT PROCEEDINGS. IT WAS EXPLAINED BEFORE THE A.O. THAT T HE COMMISSION OF RS. 217000/- HAS BEEN PAID IN A.Y. 2011-12 FOR LAST FOUR MONTHS. WHEREAS, THE COMMISSION HAS BEEN PAID FOR THE ENTIRE ASSESSMENT YEAR 2012-13. THE ASSESSEE EXPLAINED THAT THE COMMISSION WAS PAID ONLY ON THE SALE OF SODA ASH AN D IT HAS BEEN PAID FOR THE COMPLETE FINANCIAL YEAR RELEVANT TO THE A.Y. 2012-13 AND SALE OF SODA ASH HAS INCREASED BY RS.50 LACS AS COMPARED TO THE LAST YEA R. HOWEVER THE A.O. WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND ALLOWED COMMISSION @ 0.67% (RELEVANT TO A.Y. 2011-12) AT RS.515116/- I.E. DISALL OWED BALANCE COMMISSION OF RS.436684/- AND ASSESSED THE TOTAL INCOME OF THE A SSESSEE AT RS. 31,44,130/- VIDE HIS ORDER DATED 27.6.2014 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. 4 4. AGGRIEVED WITH THE ASSESSMENT ORDER DATED 27.6.2 014, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 22.3.2016 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY CONFIRMING TH E ADDITION OF RS. 4,36,684/-. 5. AGAINST THE AFORESAID ORDER OF THE LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD. COUNSEL OF THE ASSESSEE HAS STATED THAT A SSESSEE PAID COMMISSION TO AGENTS NOT AS A PERCENTAGE OF SALES VALUE, AS HAS B EEN PRESUMED BY THE AO AND THE CIT(A), BUT AS A UNIT OF VOLUME OF SALES ACHIEVE D BY HIM AND THUS THE FACTS OF THE CASE HAVE BEEN WRONGLY INTERPRETED. HE FURTHER STAT ED THAT THE FIGURE OF COMMISSION PAID IN THE PREVIOUS YEAR CANNOT BE COMPARED WITH THE FIGURE OF COMMISSION PAID DURING THE YEAR UNDER APPEAL AS COMMISSION WAS PAI D ON VOLUME OF SALES FOR A PERIOD OF ONLY 4 MONTHS IN THE PREVIOUS YEAR AND F OR COMPLETE 12 MONTHS IN THE YEAR UNDER APPEAL. THEREFORE, HE STATED THAT THE AD DITION IN DISPUTE MAY BE DELETED. 7. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS AVAILABLE WITH ME, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES. TH E ASSESSEE IS ENGAGED IN THE TRADING OF SODA ASH-(A BY-PRODUCT OF THE PAPER INDU STRY) END PAPER (A VIRGIN PRODUCT). THE TOTAL SALES OF THE ASSESSEE DURING A.Y . 2011-2012 AND A.Y. 2012-2013 WAS AS FOLLOWS: A.Y. A.Y. A.Y. A.Y. SALE OF SODA ASH SALE OF SODA ASH SALE OF SODA ASH SALE OF SODA ASH SALE OF PAPER SALE OF PAPER SALE OF PAPER SALE OF PAPER TOTAL SALES TOTAL SALES TOTAL SALES TOTAL SALES 2011-2012 INR 5.76 CRORE INR 3.84 CRORE INR 9.62 CRORE 2012-2013 INR 6.21 CRORE INR 1.27 CRORE INR 8.28 CRORE 5 8.1 THEREFORE, IT IS CRYSTAL CLEAR FROM THE ABOVE TH AT WHILE TOTAL SALES DID INDEED DECREASE DURING A.Y. 2012-2013 AS COMPARED TO A.Y. 2011-2012, DUE TO SUBSTANTIAL DECREASE IN SALES OF PAPER, THE SALES O F SODA ASH ITSELF INCREASED BETWEEN THE TWO FINANCIAL YEARS. DURING THE F.Y. 20 10-2011, DUE TO RECURRENT ISSUES RELATED TO QUALITY OF PRODUCT OF SODA ASH-A BY-PROD UCT (NOT PAPER-A VIRGIN PRODUCT) WHICH OFTEN REQUIRED THE ASSESSEE TO INTERVENE PERS ONALLY AT ANY POINT OF TIME AS THE PROCESS OF THE USER IS CONTINUOUS, THE ASSESSEE APP OINTED VARIOUS AGENTS IN THE MONTH OF DECEMBER 2010 AND THE ASSESSEE FIXED THE CO MMISSION RATE OF THE AGENTS AT INR 200/MT OF SODA ASH. IT IS PERTINENT TO NOTE HER E THAT IRRESPECTIVE OF THE PRICE AT WHICH THE ASSESSEE SOLD THE SODA ASH TO THE CUST OMER, THE RATE OF THE COMMISSION PAYABLE TO THE AGENT WAS CONSTANT AT INR 200/MT. DURI NG F.Y. 2010-2011, THE ASSESSEE SOLD A TOTAL OF 5205 MT OF SODA ASH. DURING THE RELEVANT PERIOD OF DECEMBER 2010 TO MARCH 2011 (I.E. WHEN AGENTS WERE H IRED), THE ASSESSEE SOLD 1085 MT OF SODA ASH AND THEREFORE MADE A TOTAL PAYMEN T OF INR 2,17,000 (1085 MT X INR 200/MT) AS COMMISSION. IN F.Y. 2011-2012, THE A SSESSEE CONTINUED TO USE THE AGENTS IT HAD HIRED FOR THE ENTIRE YEAR AS OPPOSED TO THE 4 MONTH PERIOD IN THE PREVIOUS YEAR AND THE APPELLANT SOLD 4959 MT OF SODA ASH AND CONTINUED TO MAKE PAYMENT AT THE PRE-AGREED COMMISSION RATE OF IN R 200IMT, WHICH AMOUNTS TO INR 9,91,800/- AS COMMISSION. AS EVIDENT FROM ABOV E, THE HIRING OF AGENTS RESULTED IN AN INCREASE OF APPROXIMATELY INR 45 LAK HS. IN FACT, DURING F.Y. 2010- 2011 (INCLUDING DECEMBER 2010 TO MARCH 2011), THE AVE RAGE RETURN OF THE APPELLANT ON EACH MT OF SODA ASH WAS APPROXIMATELY INR 11,066 (I. E. INR 5.76 CRORE EARNED FOR THE SALE OF 5205 MT). IN CONTRAST, DUE T O THE SERVICES PROVIDED BY THE AGENTS, THE AVERAGE RETURN OF THE APPELLANT ON EACH MT OF SODA ASH WAS APPROXIMATELY INR 12,522 (I.E. INR 6.21 CRORE EARNED F OR THE SALE OF 4959 MT). 6 THIS IS AN INCREASE OF ABOUT INR 1,450 PER MT OF SODA A SH. FROM THE ABOVE, THE A.O. USED A WHOLLY BASELESS AND ERRONEOUS CALCULATI ON TO DETERMINE THE PERCENTAGE OF COMMISSION BY DIVIDING THE COMMISSIO N PAID BY THE TOTAL SALES AND NOT TAKE INTO ACCOUNT THE FACTORS MENTIONED ABOVE. IN VIEW OF THE ABOVE THERE IS NO GROUND OR BASIS FOR ANY DISALLOWANCE, HENCE, THE AD DITION IN DISPUTE IS DELETED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE S TANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/1/2017 . SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE: 03/1/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE 2. RESPONDENT 3. CIT 4.CIT (A) 5. D R, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES 7