M/s Northern Motors Pvt. Ltd., Jaandhar city V. THE Dy. Commissioner of Income Tax, Jalandhar

ITA 373/ASR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9587 (ITAT-AMRITSAR)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Charitable institution
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO.373(ASR)/2016 ASSESSMENT YEAR:2010-11 PAN : AABCN5973H M/S. NORTHERN MOTORS PVT. LTD. VS. DY. COMMR. OF INCOME TAX, G.T.ROAD, CIRCLE-3, JALANDHAR. JALNDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SANDEEP VIJH, CA RESPONDENT BY: SH. RAHUL DHAWAN, DR DATE OF HEARING: 08/09/2016 DATE OF PRONOUNCEMENT: 09/09/2016 ORDER PER N. K. CHOUDHRY, JM: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER OF THE LD. CIT(A)-2, JALANDHAR, DATED 24.05.2 016, RELATING TO ASSESSMENT YEAR 2010-11. THE SOLE GROUND RAISED BY THE ASSESSEE IS AS UNDER: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS), HAS ERRED IN CONFIRMING THE ESTIMATED AD-HOC DISALLOWAN CE OF RS.2,54,625/- FROM OUT OF COMMISSION EXPENSES. THE SUBMISSIONS MADE ON THE ISSUE HAVE NOT BEEN PROPERL Y APPRECIATED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY, WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN MOTOR VEHICLE S, HAD FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30.0 9.2009, DECLARING AN IT NO.373/ASR/2016 A.Y. 2010-11 2 INCOME OF RS.35,65,960/-. HOWEVER, THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AT AN ASSESSED INCOME OF RS.3 8,20,585/-. WHILE COMPLETING THE ASSESSMENT, THE AO MADE AN ADDITION OF RS.2,54,625/- TO THE RETURNED INCOME OF THE ASSESSEE ON ACCOUNT OF D ISALLOWANCE OF COMMISSION EXPENSES OUT OF TOTAL COMMISSION CLAIMED BY THE ASSESSEE COMPANY AT RS.15,74,193/-. 3. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE FILED THE APPEAL BEFORE THE LD CIT(A) AND THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE, OBSERVING AS UNDER: I HAVE CONSIDERED THE OBSERVATIONS OF THE AO AS MA DE BY HIM IN THE ASSTT. ORDER. I HAVE ALSO CONSIDERED THE WRITTEN SU BMISSIONS FILED BY THE ASSESSEE VIDE LETTER DATED 24.05.2016 ON THE IS SUE UNDER REFERENCE. I HAVE FURTHER CONSIDERED VARIOUS JUDICI AL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE AS WELL AS OTHER MATERI AL BROUGHT BY THE ASSESSEE ON RECORD. ON CAREFULLY CONSIDERATION OF T HE RIVAL CONTENTIONS, IT HAS BEEN NOTICED THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAS PAID COMMISSION TO DIFFEREN T PERSONS AT RS.15,74,193/- OUT OF WHICH COMMISSION TO THE EXTEN T OF RS.9,74,193/- HAS BEEN PAID TO THE DRIVERS. IT HAS ALSO BEEN NOTICED THAT PAYMENT OF COMMISSION TO DIRECTOR(S) OF THE CO MPANY (RS.6,00,000/-) AND TO THE FINANCERS OF VEHICLES HA S BEEN PAID THROUGH CHEQUE WHEREAS THE COMMISSION IN CASH WAS C LAIMED TO BE PAID MOSTLY TO DRIVERS OF PURCHASERS OF VEHICLES/CA RS. IT HAS FURTHER BEEN NOTICED THAT THE COMMISSION TO DRIVERS OF CUST OMERS HAS MOSTLY BEEN PAID RANGING FROM RS.1,500/- TO RS.3,000/-. WH EN ASKED FOR THE JUSTIFICATION OF PAYMENT IN CASH TO DRIVERS, IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT SIMILAR PAYMENT OF COMMISSION HAS BEEN ALLOWED IN EARLIER YEARS AFTER DEEP ENQUIRIES. DURI NG THE COURSE OF APPELLATE PROCEEDINGS SIMILAR SUBMISSIONS WERE MAD E AS WERE MADE DURING ASSESSMENT PROCEEDINGS. THE LD. AR ALSO CITED VARIOUS DECISIONS AND CONTENDED THAT THE AO SHOULD HAVE FOL LOWED CONSISTENCY WHILE CONSIDERING THE CLAIM OF COMMISSI ON EXPENSES. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, I A M OF THE OPINION THAT THE NECESSITY TO PAY COMMISSION TO THE DRIVERS OF CUSTOMERS DOES NOT ARISE AS THE DRIVERS DO NOT BRING THE CUSTOMERS TO THE ASSESSEE. MOREOVER, THE PAYMENT OF COMMISSION TO DRIVERS CANN OT BE CONSIDERED AS GENUINE BUSINESS EXPENSES. IT HAS BEE N NOTICED THAT IT NO.373/ASR/2016 A.Y. 2010-11 3 THE ASSESSEE HAS NEITHER PRODUCED THE DRIVERS NOR F ILED COMPLETED POSTAL ADDRESSES TO PROVE THE GENUINENESS OF COMMIS SION PAYMENTS TO DRIVERS. UNDER SUCH CIRCUMSTANCES, THE ACTION O F THE AO IN MAKING ADDITION OF RS.2,54,625/- ON ACCOUNT OF DISA LLOWANCE OUT OF COMMISSION PAYMENTS CANNOT BE SAID TO BE UNJUSTIFIE D. 5.3. IN VIEW OF THE ABOVE STATED FACTS AND IN THE C IRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE AO IS FULLY JUSTIFIED IN MAKING ADDITION OF RS.2,54,625/- ON ACCOUNT OF DISALLOWANC E OUT OF COMMISSION PAYMENTS. THE ADDITION OF RS.2,54,625/- MADE BY THE AO IN THIS CASE IS, THEREFORE, UPHELD. 4. NOW, AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THIS BENCH. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE DECISION OF THIS BENCH OF THE TRIBUNAL, DATED 12.07.2016, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10, IN ITA NO.296/ASR/ 2016. HOWEVER, HE REITERATED THE SUBMISSIONS MADE IN THE AFORESAID OR DER AND SUBMITTED THAT THE ASSESSEE FURNISHED THE DETAILS OF DRIVERS AND THEIR ADDRESSES TO WHOM THE ASSESSEE PAID THE COMMISSION 6. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORD ERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE W AS DIRECTED TO PRODUCE THE DRIVERS AND THEIR COMPLETE ADDRESSES T O THE SATISFACTION OF AO. 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAS ALREADY SUBMITTED THE NAMES OF THE DRIVERS ALONGWITH THEIR AVAILABLE ADDR ESSES AND AS SUCH HAS DISCHARGED ITS ONUS. EVEN OTHERWISE, THERE IS NOTHI NG ON RECORD TO SHOW AS TO WHY THE AO HAS NOT SUMMONED THE PERSONS INVO LVED IN ORDER TO IT NO.373/ASR/2016 A.Y. 2010-11 4 SATISFY HIMSELF. BESIDES, THE ASSESSEE HAS FURNISHE D ALL THE DETAILS BEFORE THE AO WITH REGARD TO AD-HOC DISALLOWANCE. THEREFOR E, THE ORDER PASSED BY THE LD. CIT(A) ON TWO LIMBS THAT THE ASSESSEE F AILED TO PRODUCE THE DRIVERS AND NON FURNISHING OF PROPER ADDRESSES DOE S NOT COME INTO PLAY FOR ALLOWING AD-HOC ALLOWANCES AS CLAIMED. EVEN OTH ERWISE, GENUINENESS OF THE AMOUNT PAID TO THE DRIVERS, AS COMMISSION CANNOT BE DOUBTED, SIMPLY ON THE FACT THAT THEIR ADDRESSES ARE NOT COM PLETE. RELIANCE BY THE ASSESSEE ON THE DECISION OF ITAT, AMRITSAR BENCH I N ASSESSEES OWN CASE, FOR THE A.Y. 2009-10, DATED 12.07.2016 (SUPR A), FULLY SUPPORTS THE CASE OF THE ASSESSEE FOR THE PRESENT ASSESSMENT YEA R ALSO. THE RELEVANT FINDINGS GIVEN BY THE TRIBUNAL, VIDE ITS AFORESAID ORDER ARE AS UNDER: 7. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF MOTOR CARS AND IS ALSO RUNNIN G A MOTOR SERVICE GARAGE. THE DETAILS OF COMMISSION PAID WERE DULY F URNISHED. A SUBSTANTIAL PORTION OF SUCH PAYMENT WAS MADE TO THE DIRECTORS OF THE COMPANY, AS PART OF THEIR SALARY. THE REST WAS PAID IN CASH. IT IS PERTINENT TO MENTION THAT UNDISPUTEDLY, SIMILAR EX PENDITURE OF CASH PAYMENT OF COMMISSION WAS ALLOWED IN THE ASSESSMENT YEAR 1996- 97. MOST OF THE COMMISSION WAS PAID TO THE DRIVERS IN CONNECTION WITH THE PURCHASE OF CARS AND TO PERSONS WHO INTRO DUCED CUSTOMERS. IT HAS NOT BEEN DISPUTED THAT THERE IS N OTHING ON RECORD TO SHOW THAT THE COMMISSION PAYMENT WAS NOT GENUINE . FURTHER, EVEN FOR THE ASSESSMENT YEAR 2004-05, NO DISALLOWAN CE WAS MADE IN SCRUTINY ASSESSMENT. THUS, CONSISTENCY ALSO CALL S FOR NO DISALLOWANCE ON THIS SCORE BEING MADE. 8. IN VIEW OF THE ABOVE, IT IS SEEN THAT THE ORDER OF THE LD. CIT(A) HAS BEEN PASSED WITHOUT TAKING INTO CONSIDERATION T HE ABOVE CONTENTION OF THE ASSESSEE, WHICH REMAINS UNREBUTTE D. AS SUCH, THE ESTIMATED AD-HOC DISALLOWANCE OUT OF COMMISSION IS FOUND TO BE ENTIRELY UNCALLED FOR. THE FOLLOWING CASE LAWS IN T HIS REGARD HAVE RIGHTLY BEEN RELIED ON BY THE ASSESSEE: I) CIT VS. LEADER VALVES LTD., 295 ITR 273 (P&H) II) CIT VS. J.K.CHARITABLE TRUST, 308 ITR 161 (S C) IT NO.373/ASR/2016 A.Y. 2010-11 5 III) ITO VS. J.M.P. ENTERPRISES, 101 ITD 324 (IT AT, AMRITSAR) 9. NO DECISION CONTRARY TO THE SAID CASE LAWS HAS BEEN PRESSED INTO SERVICE. 10. FOR THE ABOVE DISCUSSION, FINDING THE GRIEVANCE OF THE ASSESSEE TO BE JUSTIFIED, THE SAME IS ACCEPTED. THE ORDER UNDER APPEAL IS REVERSED. CONSEQUENTLY, THE ESTIMATED AD -HOC DISALLOWANCE OUT OF COMMISSION EXPENSE IS DELETED. 8. IN VIEW OF THE ABOVE DISCUSSION AND FOLLOWING TH E ORDER OF THE ITAT, AMRITSAR BENCH, DATED 12.07.2016, PASSED IN ITA NO. 296(ASR)/2016 FOR THE A.Y. 2009-10 IN ASSESSEES OWN CASE, WE ALLOW T HE APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/09/2 016. SD/- SD/- (T.S. KAPOOR) (N.K. CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 09/09/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. NORTHERN MOTORS PVT. LTD. JALANDH AR 2. THE DCIT, CIR.3, JALANDHAR 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.