Shri Indravan G. Patel, Mehsana V. The Income Tax Officer, Ward-1, Mehsana

ITA 372/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4463 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 13-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T C MEENA
• Assessee Lawyers: BIREN SHAH
• Keywords: Accommodation entries; TDS
• Section: 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ./ITA NO.372/AHD/2017 ( / ASSESSMENT YEAR : 2013-14) SHRI INDRAVADAN G.PATEL PROP: VENUS INFRATECH 166, GIDC-2, DEDIYASAN MEHSANA-384 002 / VS. THE ITO WARD-1 MEHSANA ./ ./ PAN/GIR NO. : ABIPP 6502 B ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BIREN SHAH, AR / RESPONDENT BY : SHRI T.C. MEENA, SR.DR / DATE OF HEARING 15/05/2019 !'# / DATE OF PRONOUNCEMENT 31/05/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS), GANDHINAGAR, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)/GNR/450/2015-16 DATED 09/12/2016 ARISIN G IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 22/02/2016 RELEVANT TO ASSESSMENT YEAR (AY) 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: ITA NO.372/AHD/2017 INDRAVADAN G.PATEL VS. ITO ASS T.YEAR 2013-14 - 2 - (ALL THE GROUNDS OF APPEAL ARE INDEPENDENT OF AN WI THOUT PREJUDICE TO EACH OTHER) 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LE ARNED ASSESSING OFFICER AMOUNTING TO RS.9,96,278/- ON ACCOUNT OF CO MMISSION EXPENSES PAID BY THE APPELLANT WHICH WERE SOLELY EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS, HENCE IT DESERVES TO BE DELETE D. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ENTIRE DISALLOWANCE MAD E BY THE LEARNED ASSESSING OFFICER AMOUNTING TO RS.9,96,278/- ON ACC OUNT OF COMMISSION EXPENSES SOLELY ON THE BASIS OF ONE COMMISSION AGEN T WHICH IS TOTALLY UNJUSTIFIED AND AGAINST THE PRINCIPLES OF NATURAL J USTICE. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND/OR ALT ER THE GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF THE APPEAL. THE INTERCONNECTED ISSUE RAISED BY THE ASSESSEE IS THAT THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT OF COMMISSION EXPENSES. AT THE OUTSET, WE NOTE THAT THERE IS A DELAY IN FIL ING THE APPEAL BY THE ASSESSEE FOR 2 DAYS ONLY. NONE OF THE PARTY, I.E. T HE LEARNED AR AND THE DR ADVANCED ANY ARGUMENT FOR THE DELAY IN FILING TH E APPEAL. IN THE ABSENCE OF ANY ARGUMENT AND CONSIDERING THE LENGTH OF DELAY, WE ARE INCLINED TO CONDONE THE SAME AND ACCORDINGLY PROCEE D TO ADJUDICATE THE ISSUE ON MERIT. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF MANUFACTU RING OF ALL TYPES OF FABRICATION ITEM AND RESALE AND REPAIRING OF ROAD E QUIPMENT UNDER THE NAME AND STYLE OF M/S VENUS INFRATECH. ITA NO.372/AHD/2017 INDRAVADAN G.PATEL VS. ITO ASS T.YEAR 2013-14 - 3 - THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CL AIMED COMMISSION EXPENSES IN HIS PROFIT AND LOSS ACCOUNT IN THE NAME OF THE FOLLOWING PARTIES: S.NO. NAME OF THE PARTY AMOUNT OF COMMISSION 1. RAJESH ROHILA 3, 20,578 2. ANURADHA KHOLI 50,700 3. BASU DEV GHOSH 25 ,000 4. HASUMATIBEN J. PATEL 2,00, 000 5. JITENDRABHAI J.PATEL 2,00,000 6. JITENDRABHAI J.PATEL-HUF 2,00,00 0 THE ASSESSEE TO JUSTIFY THE COMMISSION EXPENSES SUB MITTED THAT SHRI JITENDRA J. PAL WAS WORKING AS A COMMISSION AGENT I N HIS INDIVIDUAL CAPACITY & ON BEHALF OF HIS WIFE, SMT. HASUMATIBEN J. PATEL AND HUF. ACCORDINGLY, THE COMMISSION WAS PAID BY THE ASSESSE E TO SHRI JITENDRA J. PAL, HIS WIFE, SMT. HASUMATIBEN J. PATEL AND HUF. T HE ASSESSEE IN SUPPORT OF HIS CLAIM FILED THE COPIES OF THE INCOME TAX RETURN OF ALL THREE PARTIES. THE AO TO VERIFY THE GENUINENESS OF THE COMMISSION EXPENSES ISSUED SUMMON UNDER SECTION 131 OF THE ACT SHRI JINTENDRA J PAL & HIS WIFE SMT. HASUMITABEN J PATEL WHO ACCEPTED THAT THEY HAD TAKEN THE ENTRY OF COMMISSION. THE AO FURTHER OBSERVED THAT THE ASSESS EE DID NOT FILE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE SERVICES REC EIVED FROM THESE PERSONS. AS SUCH, SHRI JITENDRA J PAL ALSO ACCEPTED THAT HIS WIFE AND HUF DO NOT WORK FOR THE ASSESSEE. ITA NO.372/AHD/2017 INDRAVADAN G.PATEL VS. ITO ASS T.YEAR 2013-14 - 4 - THE AO ALSO OBSERVED THAT THE COMMISSION PAID BY TH E ASSESSEE TO SHRI JITENDRA J. PAL, HIS WIFE, SMT. HASUMATIBEN J. PATE L AND HUF AS WELL AS SMT. ANURADHA KOHLI HAS RETURNED BACK TO THE ASSESS EE. SIMILARLY, THE NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT TO SHRI RAJESH ROHILLA WAS ALSO RETURNED. THUS, THE AO WAS OF THE VIEW THAT THE ASSESSEE BY M AKING ACCOMMODATION ENTRIES REDUCED ITS INCOME, AND BY DE DUCTING TDS, HE TRIED TO JUSTIFY THE SAME. THEREFORE THE AO DISALLO WED THE COMMISSION EXPENSES OF RS. 9,96,278/- AND ADDED TO THE TOTAL I NCOME OF THE ASSESSEE. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT (A). THE ASSESSEE BEFORE THE LD. CIT (A) SUBMITTED THAT HIS TURNOVER INCREASED BY RS. 40,88,690/-ONLY FOR SUCH COMMISSIO N EXPENSES. THE ASSESSEE FURTHER SUBMITTED THAT SHRI JITENDER J. PA L ALSO ADMITTED IN THE STATEMENT RECORDED BY THE AO U/S 131 THAT HE IS DOI NG THE JOB WITH M/S VINUS INFRATECH AND RECEIVED COMMISSION AGAINST WOR K. THE ASSESSEE ALSO CLAIMED THAT THE COMMISSION WAS P AID THROUGH A/C PAYEE CHEQUE AGAINST THE BILLS RAISED BY THE AGENTS . SUCH COMMISSION INCOME WAS DECLARED IN THE INCOME TAX RETURN FILED BY THEM. HOWEVER, THE LD. CIT (A) OBSERVED THAT ONLY PAYMENT THROUGH CHEQUE AND DEDUCTION OF TDS DOES NOT ITSELF PROVE THAT THE EXPENSES ARE GENUINE. ITA NO.372/AHD/2017 INDRAVADAN G.PATEL VS. ITO ASS T.YEAR 2013-14 - 5 - AS SUCH, THE ASSESSEE DID NOT FILE THE RELEVANT DET AILS EVIDENCING THAT THE PAYMENT WAS MADE AGAINST THE WORK DONE. THE LD. CIT (A) FURTHER FROM THE CHART SUBMITTED BY THE ASSESSEE OBSERVED THAT THE ASSESSEE PAID COMMISSION TO VARIO US PARTIES THROUGH WHICH SALES WERE MADE BUT DID NOT FILE ANY SALE BIL L WHERE COMMISSION AGENTS NAME WAS REFLECTED. THUS THE ASSESSEE DID N OT PRODUCE ANY DOCUMENT RELATING TO THE WORK DONE BY THE COMMISSIO N AGENT. THEREFORE THE LD. CIT (A) CONFIRMED THE ADDITION MADE BY THE AO. AGGRIEVE BY THE ORDER OF THE LD. CIT (A), THE ASSES SEE IS IN APPEAL BEFORE US. 4. THE LD. AR FILED A PAPER BOOK RUNNING FROM PA GES 1 TO 177 AND REITERATED THE SUBMISSION AS MADE BEFORE THE AUTHOR ITIES BELOW. 5. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUPPO RTED THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT CASE RELATES TO THE COMMISSION EXPENSES INCURRED BY THE ASSESSEE. T HE AO WAS OF THE VIEW THAT THE COMMISSION EXPENSES CLAIMED BY THE AS SESSEE WERE BOGUS IN NATURE. THE LEARNED CIT (A) SUBSEQUENTLY CONFIRM ED THE VIEW TAKEN BY THE AO. ITA NO.372/AHD/2017 INDRAVADAN G.PATEL VS. ITO ASS T.YEAR 2013-14 - 6 - FROM THE PRECEDING DISCUSSION, WE NOTE THAT THE ASS ESSEE IN SUPPORT OF COMMISSION EXPENSES HAS FURNISHED THE DETAILS AS ME NTIONED BELOW: I. COPIES OF THE ITR OF THE COMMISSION AGENTS. II. COPIES OF THE BILLS AGAINST WHICH THE COMMISSION WA S PAID. III. THE COMMISSION WAS PAID AFTER THE DEDUCTION OF TDS. IV. THE COMMISSION WAS PAID THROUGH ACCOUNT PAYEE CHEQU ES. WE FURTHER NOTE THAT THE STATEMENT RECORDED UNDER S ECTION 131 OF THE ACT OF SHRI JITENDRA J. PAL AND HIS WIFE SMT. HASUMATIB EN J. PATEL WAS NOT PROVIDED FOR THE CROSS-EXAMINATION TO THE ASSESSEE. THEREFORE IT IS CLEAR THAT THE STATEMENT WAS RECORDED AT THE BACK OF THE ASSESSEE AND USED FOR THE PURPOSE OF THE ADDITION. IN THIS REGARD WE NOTE THAT THE ADDITION BASED ON SUCH STATEMENT CANNOT BE SUSTAINED. WE FURTHER NOTE THAT IN THE STATEMENT RECORDED UNDE R SECTION 131 OF THE ACT, IT WAS SUBMITTED THAT SHRI SHRI JITENDRA J. PA L WAS WORKING AS A COMMISSION AGENT IN HIS INDIVIDUAL CAPACITY & ON BE HALF OF HIS WIFE SMT. HASUMATIBEN J. PATEL AND HUF. THEREFORE THE FINDING OF THE AO THAT SHRI SHRI JITENDRA J. PAL ADMITTED THAT THE ENTRY FOR TH E COMMISSION WAS JUST ON THE PAPERS TO REDUCE THE PROFIT APPEARS UNTRUE. REGARDING THE COMMISSION EXPENSES PAID TO SHRI RAJE SH ROHILLA, WE NOTE THAT THE ADDITION CANNOT BE SUSTAINED IN THE HANDS OF THE ASSESSEE MERELY ON THE GROUND THAT THE PARTY DID NOT RESPOND TO THE NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT. AS SUCH, THE ASSESSEE IS NOT UNDER THE OBLIGATION TO FORCE/ ENSURE THAT THE PARTY SHOULD T O MAKE A REPLY UNDER THE ITA NO.372/AHD/2017 INDRAVADAN G.PATEL VS. ITO ASS T.YEAR 2013-14 - 7 - PROVISIONS OF LAW. THE ASSESSEE HAS DISCHARGED HIS ONUS BY FURNISHING THE NECESSARY DETAILS ABOUT THE PARTIES TO WHOM THE COM MISSION WAS PAID. AS SUCH THE AO SHOULD HAVE TAKEN THE CLARIFICATION FRO M THE AO HAVING JURISDICTION OVER THE COMMISSION AGENTS BEFORE MAKI NG THE DISALLOWANCE OF THE COMMISSION EXPENSES PAID TO SUCH PARTIES/ AG ENTS. REGARDING THE COMMISSION PAID TO SMT. ANURADHA KOHL I, WE NOTE THAT THE AO HAS NOT BROUGHT ANYTHING ON RECORD SUGGESTING TH AT THE COMMISSION EXPENSES PAID BY THE ASSESSEE HAVE BEEN RETURNED BA CK BY THE PARTY. REGARDING THE COMMISSION PAID TO SHERRY BASU DEV GH OSH, WE NOTE THAT THERE WAS NO DISCUSSION IN THE ORDER OF THE AO AND THE LEARNED CIT (A). THEREFORE, WE ARE RELUCTANT TO UPHOLD THE DISALLOWA NCE OF SUCH COMMISSION EXPENSES. THE ALLEGATION OF THE AO THAT THE COMMISSION PAID T O THE PARTIES HAS COME BACK TO THE ASSESSEE WAS NOT BASED ON ANY TANG IBLE MATERIAL. THE LEARNED DR HAS ALSO NOT BROUGHT ANYTHING ON RECORD IN SUPPORT OF THE FINDING OF THE AUTHORITIES BELOW. WE ARE ALSO CONSCIOUS OF THE FACT THAT THE NON-AVAI LABILITY OF THE AGREEMENT AND ANY CORRESPONDENCE BETWEEN THE ASSESS EE AND THE COMMISSION AGENTS MAY CREATE SUSPICION ABOUT THE GE NUINENESS OF THE EXPENSES. BUT TO OUR MIND, THE DISALLOWANCES CANNOT BE MADE BASED ON SUCH SUSPICION. THEREFORE WE ARE RELUCTANT TO UPHOL D THE ORDER OF THE ITA NO.372/AHD/2017 INDRAVADAN G.PATEL VS. ITO ASS T.YEAR 2013-14 - 8 - LEARNED CIT (A) AND ACCORDINGLY DIRECT THE AO TO DE LETE THE ADDITION MADE BY HIM. HENCE, THE GROUND OF APPEAL OF THE ASS ESSEE IS ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/05/2019 SD/- SD/- (MS. MADHUMITA ROY) (WASEEM A HMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/05/2019 &.., .(.. / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-GANDHINAGAR, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) $%, / ITAT, AHMEDABAD 1. DATE OF DICTATION 28.5.19 (WORD PROCESSED BY HON BLE AM IN HIS COMPUTER BY DRAGON) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.5.19 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.31.5.2019 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.5.2019 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER