Aqua Submersible Pvt. Ltd., Ahmedabad V. The Income Tax Officer, A,bad Ward -1(3), Ahmedabad

ITA 3837/AHD/2004

• Counselvise Citation: 383720514 RSA 2004
• Duration Of Justice: 7 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-10-2012
• Assessment Year: 1992-1993
• Appeal Filed On: 24-12-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: K C THAKKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI G. C. GUPTA, VP AND SHRI A. MOHAN ALANKAMONY, AM) ITA NO.3837/AHD/2004 A. Y.: 1992-93 M/S. AQUA SUBMERSIBLE PVT. LTD., 504, HEMKOOT BUILDING, OPP. CAPITAL COMM. CENTRE, ASHRAM ROAD, AHMEDABAD P. A. NO. VS THE INCOME TAX OFFICER, WARD -1(3), AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K. C.THAKKAR, AR RESPONDENT BY SHRI D. K. SINGH, SR. DR DATE OF HEARING: 30-10-2012 DATE OF PRONOUNCEMENT14 -12-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED CIT( A)-V, AHMEDABAD IN APPEAL NO. CIT(A)-V/WARD 1(3)/121/2003-04 DATED 08- 10-2004, FOR THE ASSESSMENT YEAR 1992-93, CONFIRMING THE PENALTY OF RS.1,65,340/- LEVIED BY THE LEARNED AO U/S 271(1) ( C ) OF THE IT ACT. 2. THE LEARNED AR HAD FILED A LETTER BEFORE US DATE D 27-10-2012 WHEREIN HE HAS STATED AS FOLLOWS: SIR, SUB: AQUA SUBMERSIBLE PVT. LTD. VS ITA NO.3837/AHD/2004 (AY 1992-93) AQUA SUBMERSIBLE PVT. LTD. VS ITO, W-1 (3), AHMEDAB AD 2 I.T.O., WARD -1(3), AHMEDABAD I. T. A. NO.3837/A/2004 A. Y. 1992-93 THE ABOVE APPEAL IS FIXED FOR HEARING ON 30-10-2012 . THIS IS AN APPEAL AGAINST ORDER IMPOSING PENALTY U/S. 271(1) ( C) OF THE ACT. HOWEVER, WE HAVE TO SUBMIT THAT THE APPELLANTS M. A. BEARING NO.365/A/06 FILED WITH A REQUEST TO RECALL THE EX-P ARTE ORDER IN QUANTUM APPEAL (ITA NO.2088/A/1996) IS PENDING. THE SAID M. A. WAS LAST FIXED ON 10-12-2010. 2. I HAVE APPLIED FOR FIXING HEARING OF THE SAID M. A. BY LETTER DT. 7-3-2011, AND AGAIN ON 26-10-2012. COPIES OF BOTH T HESE APPLICATIONS DT. 26-10-2012 AND 7-3-2011 ARE ENCLOS ED HEREWITH FOR READY REFERENCE. 3. SINCE THE M. A. IN QUANTUM APPEAL IS PENDING I R EQUEST YOU TO KINDLY ADJOURN THE HEARING IN THE ABOVE MATTER CONC ERNING IMPOSITION OF PENALTY TILL DISPOSAL OF M. A. REFERRED TO ABOVE AND OBLIGE. HE FURTHER SUBMITTED BEFORE US THAT THE MISC. APPLI CATION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE TRIBUNAL IN THE Q UANTUM APPEAL OF THE ASSESSEE IN ITA NO.2088/AHD/1996 FOR THE ASSESSMENT YEAR 1992-93 IS STILL PENDING, THEREFORE, THE PENALTY ORDER PASSED BY THE LEARNED AO AND CONFIRMED BY THE LEARNED CIT(A) WILL NOT SURVIVE I F THE MISC. APPLICATION IS ALLOWED IN FAVOUR OF THE ASSESSEE. HE, THEREFORE, P LEADED THAT THE APPEAL OF THE ASSESSEE MAY BE ADJOURNED AND MAY BE HEARD A FTER THE DISPOSAL OF THE MISC. APPLICATION REFERRED SUPRA. HOWEVER, ON OUR PERUSAL OF THE FILE WE DECIDED TO HEAR THE CASE SINCE WE ARE OF THE OPI NION THAT FROM THE FACTS OF THIS CASE IT WOULD NOT BE RELEVANT TO AWAIT FOR THE DECISION OF THE MISC. APPLICATION. 3. BRIEF FACTS: - THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN SUBMERGIBLE PUMPS AND IT S SPARE PARTS SINCE 1988 IN THE STATE OF GUJARAT AS WELL AS OTHER STATE S OF THE COUNTRY. DURING THE PREVIOUS ASSESSMENT YEAR THE ASSESSEE COMPANY H AD MADE ITA NO.3837/AHD/2004 (AY 1992-93) AQUA SUBMERSIBLE PVT. LTD. VS ITO, W-1 (3), AHMEDAB AD 3 COMMISSION PAYMENT OF RS.2,87,549/- AS AGAINST RS.2 6,065/- PAID DURING THE PRECEDING PREVIOUS YEAR. OUT OF THE TOTAL AMOUN T OF COMMISSION PAID AMOUNTING TO RS.2,87,549/-, RS.1,78,989/- WAS PAID TO SAM ENGINEERING CO., AURANGABAD AND RS.1,08,562/- (SIC RS.1,08,560/ -) WAS PAID TO KUNAL MACHINERY STORES, AURANGABAD. THE ABOVE COMMISSION WAS PAID SUBSEQUENT TO THE DEBIT AND CREDIT NOTES ISSUED BY ALL THE RELEVANT PARTIES WHICH INDICATED THAT THE AMOUNT TO BE PAID BY THE A SSESSEE WAS WITH REGARD TO COMMISSION ON SALES ACCORDING TO THE AGRE EMENT SIGNED BY ALL THE CONCERN PARTIES. THE LEARNED AO DISALLOWED THE AMOUNT OF COMMISSION PAYMENT DUE TO THE FOLLOWING REASONS: I) THE GROSS PROFIT OF THE ASSESSEE COMPANY WAS RS. 4,21,190/- OUT OF WHICH AN AMOUNT OF RS.2,87,549/- IS PAID AS COMMISSION WHICH INDICATES THAT THE ASSESSEE HAS PA ID 68% OF ITS PROFIT AS COMMISSION. II) THERE WAS NOTHING TO SUGGEST THAT THE COMMISSIO N AGENTS HAVE RENDERED ANY SERVICE WITH REGARD TO THE SALE E FFECTED BY THE ASSESSEE. III) THE IDENTITY OF THE COMMISSION AGENTS WAS NOT PROVED. THE ASSESSEE HAD ARGUED BEFORE THE REVENUE AUTHORIT IES THAT THE COMMISSION PAID TO THE COMMISSION AGENTS WAS DUE TO THEIR EFFORTS FOR MAKING ENQUIRIES, COLLECTING TENDERS AND PROCURING SALES ORDERS FROM THE GOVERNMENT DEPARTMENTS AND AS WELL AS FOR COLLECTIO N OF PAYMENT AND SUPPLY OF PUMP SETS. 4. THE LEARNED AR FURTHER ARGUED BEFORE US THAT THE ASSESSEE HAD MADE THE COMMISSION PAYMENTS BY WAY OF CHEQUE PAYME NT AND THE REVENUE HAS NOT DISPUTED THE GENUINENESS OF THE PAY MENT. THE ONLY DISPUTE BY THE REVENUE WAS THAT THE EXPENDITURE INC URRED BY THE ASSESSEE IS NOT GENUINE AND BOGUS IN ORDER CLAIM EXPENDITURE AND TO AVOID PAYMENT ITA NO.3837/AHD/2004 (AY 1992-93) AQUA SUBMERSIBLE PVT. LTD. VS ITO, W-1 (3), AHMEDAB AD 4 OF TAX. THE LEARNED AR FURTHER SUBMITTED THAT THE N AMES AND ADDRESSES OF BOTH THE COMMISSION AGENTS WERE BEFORE THE REVENUE AND THEY COULD HAVE MADE ENQUIRIES AND OBTAINED INFORMATION FROM THOSE AGENTS REGARDING THE GENUINENESS OF THE TRANSACTIONS WHICH THE REVENUE F AILED TO DO. THE LEARNED AR FURTHER ARGUED STATING THAT THOUGH THE C ASE MAY BE A FIT CASE FOR MAKING ADDITION ON ACCOUNT OF UNEXPLAINED EXPEN DITURE, THE CASE IS NOT A FIT CASE FOR LEVY OF PENALTY. IT WAS THEREFORE, P RAYED THAT THE ORDER OF THE LEARNED AO AND THE LEARNED CIT(A) MAY BE SET ASIDE. 5. THE LEARNED DR RELIED UPON THE ORDERS OF THE REV ENUE AND ARGUED STATING THAT THE HONBLE TRIBUNAL HAD CONFIRMED THE QUANTUM APPEAL OF THE ASSESSEE IN FAVOUR OF THE REVENUE AND, THEREFORE, T HE PENALTY LEVIED BY THE LEARNED AO WHICH WAS FURTHER SUSTAINED BY THE LEARN ED CIT(A) MAY BE CONFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS PRODUCED BEFORE US. AS CLAIMED BY THE LEA RNED AR THERE IS NO DISPUTE WITH REGARD TO THE CHEQUE PAYMENT MADE BY T HE ASSESSEE COMPANY ON ACCOUNT OF COMMISSION PAYMENT TO SAM ENG INEERING CO. AND KUNAL MACHINERY STORES. THE AGREEMENTS BETWEEN THE ASSESSEE COMPANY AND THE COMMISSION AGENTS ARE ALSO NOT DISP UTED. THE ASSESSEE COMPANY HAS ALSO FILED THE NAMES AND ADDRESSES OF T HE COMMISSION AGENTS BEFORE THE REVENUE. IT APPEARS THAT THE ASSE SSEE WAS NOT ABLE TO ESTABLISH THE MANNER IN WHICH THE COMMISSION AGENTS HAD PERFORMED THEIR FUNCTION IN EFFECTING THE SALES OF THE ASSESSEE COM PANY. FURTHER, CONSIDERING THE NATURE OF THE TRADE, IT IS A COMMON PRACTICE TO OFFER COMMISSION ON SUCH SALES CANVASSED BY THE AGENTS, T HOUGH IN THE ASSESSEES CASE IT APPEARS TO BE EXORBITANT. THE RE VENUE HAD AN OPPORTUNITY TO EXAMINE THE COMMISSION AGENTS IN ORD ER TO ARRIVE AT THE ITA NO.3837/AHD/2004 (AY 1992-93) AQUA SUBMERSIBLE PVT. LTD. VS ITO, W-1 (3), AHMEDAB AD 5 GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSE SSEE. FROM THE FACTS OF THE CASE, IT APPEARS THAT THE REVENUE HAS FAILED TO DISCHARGE ITS DUTY TO MAKE SUCH EXAMINATION. IN THIS SITUATION, EVEN THOU GH IT MAY BE A FIT CASE TO CONFORM THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY TO BE NOT GENUINE, IT IS NOT A CASE FIT FOR LEVY OF PENALTY U /S 271 (1) ( C) OF THE ACT. THEREFORE, WE HEREBY DELETE THE PENALTY LEVIED BY T HE REVENUE. WE ALSO MAKE IT CLEAR THAT THIS DECISION OF OURS WILL SURVI VE EVEN IF THE MISC. APPLICATION OF THE ASSESSEE IS DISMISSED HOLDING AG AINST THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN ITS FAVOUR. ORDER PRONOUNCED IN THE OPEN COURT ON 14-12-2012 SD/- SD/- (G. C. GUPTA) VICE PRESIDENT (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANTA DEKA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 10-12-12 DIRECT ON COMPUTER 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 10-12-2012 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: