M/s Raj Kumar & Sons, Sunam V. ITO, Sangrur

ITA 378/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95508 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift; Business income; Opportunity of being heard
• Section: 6; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 378/CHD/2014 ASSESSMENT YEAR 2008-09 M/S RAJ KUMAR & SONS, VS. THE ITO, SUNAM, HQ SUNAM (PUNJAB) SANGRUR PAN NO. AAAFR8985K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : MS. RAJINDER KAUR DATE OF HEARING : 19.08.2015 DATE OF PRONOUNCEMENT : 31.08.2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A),PATIALA DATED 27.1.2014 RELATING TO ASSESSME NT YEAR 2008-09. 2. GROUND NO. 1 OF THE APPEAL READS AS UNDER:- 1. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS. 225866/- ON ACCOUNT OF PETTY COMMISSION IN THE ABSENCE OF EV IDENCE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT AS SESSEE DERIVES INCOME FORM WHOLESALE OF ELECTRIC GOODS AND IN THE YEAR UNDER C ONSIDERATION HAS ALSO STARTED BUSINESS OF SPICE TELECOM. DURING THE YEAR UNDER C ONSIDERATION THE ASSESSEE HAD PAID COMMISSION OF RS. 12,44,921/- AND OUT OF T HAT A SUM OF RS. 2,25,866/- WAS PAID TO PETTY PERSONS. A DAY WISE LIST OF COMMI SSION PAID OF RS. 2,25,866 2 FILED DURING THE ASSESSMENT PROCEEDINGS. NOT SATISF IED WITH THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER MADE THE ADDITI ON OF RS. 2,25,866/-. 4. ON APPEAL, THE CIT(A) CONFIRMED THE ADDITION STA TING THAT THE ASSESSEE HAS FAILED TO PROVIDE LIST OF PERSONS TO WHOM THE COMMI SSION HAS BEEN PAID. THEREFORE, THE GENUINENESS OF SUCH DISCOUNTS IS NOT PROVED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE THE TRIBUNAL. 6. I HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AT LENGTH AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. SHR I SUDHIR SEHGAL, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BE FORE LOWER AUTHORITIES. HE FURTHER SUBMITTED THAT A SUM OF RS. 2,25,866/- WAS PAID TO PETTY PERSONS SUCH AS SMALL TRADERS, TEA STALL OWNERS. THE PAYMENT OF CO MMISSION TO THOSE PERSONS WERE MADE AS AND WHEN THEY COME FOR GETTING THE TAL K TIME VALUE FROM THE ASSESSEE AND PURCHASE THE TALK TIME, ASSESSEE CHARG ED TALK TIME VALUE AT LESSER RATE AFTER DEDUCTING THE COMMISSION TO BE PAID TO S UCH PERSONS. HE FURTHER SUBMITTED THAT IF A PERSON PURCHASE TALK TIME OF RS . 1,000/- FROM THE ASSESSEE, THE ASSESSEE CHARGE RS. 950/- AND RS. 50/- WAS ALLO WED AS COMMISSION TO SUCH SHOP KEEPER. HE FURTHER SUBMITTED THAT COMMISSION PAID IS IN THE NATURE OF DISCOUNT TO THE PETTY PERSONS SUCH AS SMALL TRADERS , TEA STALL, OWNERS ETC. WHEN THEY COME FOR GETTING THE TALK TIME VALUE FROM THE ASSESSEE THE ASSESSEE CHARGES LESS TALK TIME AFTER GIVING DISCOUNT. HE FURTHER SU BMITTED THAT TO GIVE SUCH DISCOUNT IN THIS LINE OF BUSINESS IS GENERAL PRACTI CE. SHRI SUDHIR SEHGAL LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT ALTHOU GH THE ASSESSEE HAS NOT FILED NAME WISE LIST BUT A COMMISSION WAS PAID TO SMALL C USTOMERS IN TOTAL IN A SINGLE DAY WAS FILED DURING THE COURSE OF ASSESSMENT PROCE EDINGS. THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE ABOVE SUBMISSIONS OF LD . COUNSEL FOR THE ASSESSEE. IT 3 IS ALSO STATED THAT IT IS A VERY DIFFICULT TO MAINT AIN RECORD OF PETTY SMALL CUSTOMERS WHO BUY THE TALK TIME FROM THE ASSESSEE O NCE AND TWICE IN A YEAR AND AS SUCH ASSESSEE CHARGE LESS AMOUNT AFTER ALLOWING HIM COMMISSION AT THE FIRST TIME OF SELLING OF TALK TIME / BUCK TO SUCH CUSTOME RS AND NO RECORD OF THE SAID IS MAINTAINED BY THE ASSESSEE. IN MY OPINION, THIS TY PE OF EXPENDITURE ARE PART AND PARCEL OF ASSESSEES LINE OF BUSINESS, THEREFORE, T HE SAME IS ADMISSIBLE DEDUCTION. IT IS NOT THE CASE OF THE ASSESSING OFFI CER THAT ASSESSEE HAS NOT INCURRED SUCH EXPENSES. IT IS TRUE THAT ANY EXPENDI TURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIED U/S 30 TO 36 OF THE I.T. ACT 19 61) AND NOT BEING IN THE NATURE OF CAPITAL OR PERSONAL EXPENDITURE OF THE ASSESSEE, LAID OUT OR EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OR PRO FESSION HAS TO BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME CHARGED UNDER TH E HEAD PROFIT AND GAINS OF BUSINESS AND PROFESSION. IT IS ALSO NOT THE CASE O F THE ASSESSING OFFICER THAT THE CLAIM MADE BY THE ASSESSEE IS BOGUS. ON THE CONTRAR Y, THE CONTENTION OF THE ASSESSEE IS THAT THE AMOUNT IN QUESTION WAS INCURRE D WHOLLY AND EXCLUSIVELY FOR THE BUSINESS. THUS, CONSIDERING THE ENTIRE FACTS AN D CIRCUMSTANCES OF THE PRESENT CASE, I AM OF THE OPINION THAT THERE IS A MERIT IN THE ABOVE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND ACCORDINGLY I DELE TE THE ADDITION OF RS. 2,25,866/- MADE BY THE ASSESSING OFFICER AND CONFIR MED BY THE LD. CIT(A). 7. THUS, THE GROUND RAISED BY ASSESSEE STANDS ALLOW ED 8. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 1. THAT THE WORTHY CIT(A) HAS ERRED IN HOLDING THE ACT ION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS. 1,05 ,258/- BEING LESS COMMISSION SHOWN. 9. AT THE TIME OF HEARING OF THE APPEAL, SHRI SUDHI R SEGHAL, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR THIS GROUND OF APPEA L AND ACCORDINGLY I DISMISS THE SAME AS NOT PRESSED. 4 10. GROUND NO.3 OF THE APPEAL READS AS UNDER;- 1. THAT THE WORTHY CIT(A) HAS ERRED IN LAW IN ADDING O F UNSECURED LOANS OF RS. 116400 OUT OF RS. 172900 BY UPHOLDING THE ACTION OF THE ASSESSING OFFICER. 11 THE ASSESSING OFFICER MADE ADDITION OF RS. 1,16, 400/- U/S 68 OF THE ACT. THE ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDER CONSIDERATION UNDER THE HEAD UNSECURED LOANS THERE WAS NEW CREDITS IN THE ACCOUNTS OF THE FOLLOWING PERSONS:- I) ANKUR JAIN, SUNAM RS. 19,000/- II) KUSUM JAIN RS. 19,500/- III) MONOKA JAIN RS. 19,900/- IV) PRABHA JAIN RS. 19,500/- V) PAYAL JAIN 1S 19,000/- VI) REENA JAIN RS. 19,500/- TOTAL RS. 1,16,400/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER ASKED THE ASSESSEE TO PROVE THE IDENTITY, CREDITWORTHINESS AN D GENUINENESS OF THE ABOVE LOANS. IN RESPONSE TO THE QUERY THE ASSESSEE SUB MITTED THAT ANKUR JAIN, HAS ADVANCED RS. 19000/- OUT OF HER INCOME. SHE IS AN I NCOME TAX ASSESSEE. SMT. KUSUM JAIN IS MOTHER OF ONE OF THE PARTNERS, SHE IS A HOUSE WIFE. SHE HAS ADVANCED RS. 19,500/- TO THE ASSESSEE FROM HER PAST SAVINGS WHICH INCLUDE TRADITIONAL GIFT. THE ASSESSEE FURTHER CLAIMED THAT SMT. MONICA HAS ADVANCED RS. 19,900/- TO THE ASSESSEE OUT OF HER SAVINGS FROM TU ITION INCOME. SH. PRABHA JAIN IS ALSO STATED TO BE AN INCOME TAX ASSESSEE AND IS RUNNING A LABORATORY AT SUNAM AND HAS ADVANCED A LOAN OF RS. 19,600/- OUT OF HIS LAB INCOME. SMT. PAYAL JAIN WIFE OF PRABHA JAIN IS RUNNING A BOUTIQUE AND HAS A DVANCED LOAN TO THE ASSESSEE FROM HER PAST SAVINGS AND BUSINESS INCOME. THE ASS ESSEE FURTHER SUBMITTED THAT MS. RENA JAIN WIFE OF SHRI SHIV KUMAR HAS ADVANCED RS. 19,500/- OUT OF HER 5 INCOME. SHE WAS HAVING INCOME FROM TRAINING TO GIRL S OF VOCATIONAL JOB WORKS SUCH AS PAINTING, POT MAKING, CLAY WORK, COOKING CL ASSES ETC. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE OBSERVIN G THAT THE ASSESSEE HAS FAILED TO FILE CONFIRMATIONS FROM THE PERSONS IN ORDER TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. CONSEQUENTLY, THE ASSESSING OFFICER MADE THE IMPUGNED ADDITION U/S 6 8 OF THE ACT. 12. ON APPEAL, THE CIT(A) CONFIRMED THE ADDITION, A ND HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 13. AT THE VERY OUTSET SHRI SUDHIR SEHGAL LD. COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE OBSERVATIONS MADE BY THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER ARE FACTUALLY INCORRECT. THE ASSESSING OFFICE R HAS OBSERVED THAT ASSESSEE HAS FAILED TO FILE CONFIRMATIONS LETTER FROM THE AB OVE CREDITORS. SHRI SUDHIR SEHGAL LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT A DETAILED REPLY TO THE QUERY RAISED BY THE ASSESSING OFFICER REGARDING THE IDENT ITY OF THE CREDITOR, THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY AND THE G ENUINENESS OF THE TRANSACTIONS WAS FILED BEFORE THE ASSESSING OFFICER ALONG WITH COPIES OF CONFIRMATIONS FROM THE ABOVE CREDITORS. THEREFORE, THE ASSESSING OFFICER HAS WRONGLY STATED THAT NO CONFIRMATION LETTERS OF THE CREDITORS WERE FILED BY THE ASSESSEE. SHRI SUDHIR SEHGAL ALSO SUBMITTED THAT MS . ANKUR JAIN AND SH. PRABHA JAIN ARE INCOME TAX ASSESSEES. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSING OFFICER HAS NOT CONSIDERED THE EXPLAN ATION OF THE ASSESSEE AND ALSO THE CONFIRMATIONS FILED REGARDING UNSECURED LOANS O N BEHALF OF THE ABOVE DEPOSITORS. HE FURTHER POINTED OUT THAT IN PARA 4.2 OF THE IMPUGNED ORDER, THE CIT(A) HAS ALSO OBSERVED THAT NO CONFIRMATION REGAR DING UNSECURED LOANS WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS. THE CO PY OF REPLY AS GIVEN TO THE ASSESSING OFFICER ALONG WITH COPIES OF CONFIRMATIO NS ARE AVAILABLE IN ASSESSEES PAPER BOOK AT PAGES 3 TO 11. THE ASSESSING OFFICER HAS ALSO SUBMITTED A COPY OF 6 THE WRITTEN SUBMISSIONS FIELD BEFORE THE LD. CIT(A) WHEREIN THE ASSESSEE HAS CATEGORICALLY STATED THAT IT HAS FILED THE CONFIRMA TION LETTER BEFORE THE ASSESSING OFFICER. THE PHOTOCOPIES OF THE CONFIRMATION LETTER S WERE AGAIN FIELD BEFORE THE CIT(A). BOTH THE AUTHORITIES BELOW HAVE NOT TAKEN I NTO CONSIDERATION THE CONFIRMATION LETTERS SUBMITTED BY THE ASSESSEE. CON SIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, I SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND REMAND THE MATTER TO THE FILE OF ASSESSING OFFI CER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER AFFOR DING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 14. IN THE RESULT, APPEAL IS ALLOWED PARTLY AND PAR TLY FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31.08.2015. SD/- (H.L.KARWA) VICE PRESIDENT DATED : 31 ST AUGUST, 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR