M/s Louis Dreyfus Commodities India Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 3847/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6393 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 03-07-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 17-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Assessee Lawyers: M K GUPTA
• Keywords: Opportunity of being heard; Additional evidence
• Section: 143(3); 131; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A .NO.-3847/DEL/2013 (ASSESSMENT YEAR-2003-04) LOUIS DREYFUS COMMODITIES INDIA PVT. LTD. VS. DY. CIT 8 TH FLOOR, TOWER A, BUILDING NO.5 DLF CIRCLE 4(1), PHASE-III GURGAON-122002(HARYANA) NEW DELHI. PAN:AAACL7361E (APPELLANT) (RESPONDENT) ASSESSEE BY:-SH. M. K. GUPTA, ADV. REVENUE BY:-SH. S. N. BHATIA, DR ORDER PER C. M. GARG, JM. THIS APPEAL HAS BEEN PREFERRED AGAINST THE ORDER OF CIT (APPEALS) - VIII, NEW DELHI, DATED 31.03.2013 IN APPEAL NO.202/ 2011-12 FOR THE ASSESSMENT YEAR 2003-04. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ORDER PASSED BY THE LD. COMMISSIONER OF IN COME TAX (APPEALS)-VII [CIT (A)] UNDER SECTION 250(6) OF T HE INCOME TAX ACT, 1961 (THE ACT) CONFIRMING THE ORDER OF T HE LD. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(1), NEW DELHI PASSED UNDER SECTION 143(3)/254 OF THE ACT IS BAD I N LAW AND I.T.A .NO.-3847/DEL/2013 2 NOT IN CONFORMITY WITH MATERIAL ON RECORD. 2. THAT THE LD. CIT (A) ERRED ON FACTS AND IN LAW I N UPHOLDING THE DISALLOWANCE OF THE SUM OF INR 78,41,361 PAID TOWAR DS BROKERAGE/COMMISSION, ALLEGING THAT THE CLAIM FOR T HE AFORESAID EXPENSE HAS NOT BEEN SUBSTANTIATED BY THE APPELLANT IN COMPLETE DISREGARD TO FACTS OF THE CASE. 3. WITHOUT PREJUDICE, THE LD. CIT (A) ERRED ON FACT AND IN LAW IN NOT RESTRICTING THE DISALLOWANCE OF BROKERAGE/COMMI SSION TO THE AMOUNT PAID TO THOSE PARTIES FROM WHOM NO CONFIRMAT ION WAS RECEIVED BY THE ASSESSING OFFICER IN PURSUANCE TO T HE NOTICES ISSUED UNDER SECTION 131 OF THE ACT. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL IS AS UNDER: I. THE APPELLANT, A PRIVATE LIMITED COMPANY, IS ENG AGED IN THE BUSINESS OF TRADING OF AGRICULTURAL COMMODITIES, LI KE SUGAR, WHEAT, RICE, EDIBLE OILS AND INDIAN SOYA BEAN MEAL ETC. II. DURING THE RELEVANT PREVIOUS YEAR, THE APPELLAN T FILED RETURN OF INCOME ON 28.11.2003 AT A TOTAL INCOME OF RS.13,22, 06,212 AGAINST WHICH ORIGINAL ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.14,00,47,573/- BY THE ASSESSING OFFICER, VIDE ORDER DATED 29.03.2006, PASSED UNDER SECTION 143(3) OF THE INCO ME-TAX ACT, 1961 (THE ACT) AFTER MAKING DISALLOWANCE OF RS.78 ,41,361 ON ACCOUNT OF BROKERAGE AND COMMISSION EXPENSE INCURRE D BY THE APPELLANT. (PLEASE REFER PAGES 1 TO 5 OF THE PAPER BOOK) III. THE APPELLANT PREFERRED AN APPEAL BEFORE THE C IT (A) AGAINST THE ORIGINAL ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT. THE CIT (A) AFTER CONSIDERING THE ADDITIONAL EVIDEN CES FILED BY THE APPELLANT AND THE REMAND REPORT OF THE ASSESSIN G OFFICER I.T.A .NO.-3847/DEL/2013 3 DATED 12 MARCH 2007 (REFER PAGES 6 TO 7 OF THE PAPE R BOOK) ALLOWED THE APPELLANTS APPEAL. PLEASE REFER PAGES 8-12 OF PAPER BOOK FOR COPY OF ORDER OF CIT (A). IV. THEREAFTER, THE REVENUE PREFERRED FURTHER APPEA L BEFORE THE TRIBUNAL; VIDE ITA NO. 3811/DEL/2007, AGAINST THE O RDER OF THE CIT (A). THE TRIBUNAL WHILE DISPOSING OFF THE AFORE SAID APPEAL, SET ASIDE THE ORDER OF THE CIT (A), AND THE RESTORE D THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE MATTER AFRESH AFTER CONSIDERING THE ADD ITIONAL EVIDENCES FILED BY THE ASSESSEE (REFER PAGES 13-16 OF PAPER BOOK). THE TRIBUNAL HELD: SINCE LD. CIT (A) HAS ADMITTED ADDITIONAL EVIDENCE WITHOUT RECORDING REASONS REQUIRED UNDER RULE 46A(2) OF THE RULE AND HAS DECIDED THE ISSUE ON THE BASIS OF SUCH ADMISSION THOUGH HE HAS OBTAINED THE COMMENTS OF ASSESSING OFFICER, IN OUR CONSIDERED VIEW MATTER REQUIRES TO BE SET ASIDE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE ISSUE AFRESH AFTER CONSIDERING THE ADDITIONAL EVIDENCE FILED BEFORE LD. CIT (A). NEEDLESS TO SAY THE ASSESSING OFFICER SHALL PROVIDE PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. V. PURSUANT TO THE ABOVE DIRECTIONS OF THE TRIBUNAL , THE ASSESSING OFFICER IN THE IMPUGNED PROCEEDINGS, ASKED THE APPE LLANT TO PROVIDE THE DETAILS OF PARTIES ALONG WITH THEIR ADD RESSES, THE AMOUNT CLAIMED BY THE APPELLANT AND THE CORRESPONDI NG AMOUNT CONFIRMED BY THE PARTIES. THE APPELLANT FILED DETAI LS VIDE SUBMISSION DATED 15.11.2010 (PLEASE REFER PAGE 93 T O 105 OF I.T.A .NO.-3847/DEL/2013 4 THE PAPER BOOK) AND SUBMISSION DATED 18.11.2010 (PL EASE REFER PAGES 106 TO 107). VI. IT IS SUBMITTED THAT THE APPELLANT INCURRED AN EXPENDITURE OF RS.78,41,361/- ON ACCOUNT OF BROKERAGE AND COMMISSI ON PAID TO VARIOUS BROKERS. THE DETAILS OF BROKERAGE AND COMMI SSION ALONG WITH CONFIRMATIONS RECEIVED FROM THE BROKER A RE ENCLOSED AT PAGES 75-105 OF THE PAPER BOOK. VII. THE ASSESSING OFFICER ISSUED SUMMONS UNDER SEC TION 131 OF THE ACT TO THE 5 PARTIES WHOSE CONFIRMATION WERE NOT PL ACED ON RECORD IN THE ORIGINAL ASSESSMENT PROCEEDING. OUT O F ABOVE 5 PARTIES THE ASSESSING OFFICER RECEIVED CONFIRMATION FROM 3 PARTIES (NAMELY KC BAHETI, PYARE LAL NIRANJAN LAL, AND SHYAM SUNDER HARYANA PVT. LTD.). ON THE BASIS OF SAID CON FIRMATION THE ASSESSING OFFICER CONCLUDED THAT THERE WERE DIF FERENCES IN THE AMOUNT SHOWN BY THE APPELLANT AND THAT CONFIRME D BY THE PARTIES (WHICH ARE HIGHER DUE TO DIFFERENT METHOD O F ACCOUNTING/INCORRECT RECORDING). THUS THE CLAIM OF THE TOTAL COMMISSION AMOUNTING TO RS.78,41,361 IS DISALLOWED. VIII. THE APPELLANT FILED APPEAL BEFORE THE CIT(A) AGAINST THE AFORESAID DISALLOWANCE AND ALSO FILED CONFIRMATION FROM KRISHNA ALLOY CORPORATION, HARISH GOYAL & COMPANY, SHREERAM AGRI BROKERS AND CONFIRMATORY LETTER OF SH YAM SUNDER (HARYANA) LIMITED AS RECONCILING THE CONFIRM ATION OBTAINED BY THE ASSESSING OFFICER. IX. THE CIT (A) DISPOSED OFF THE APPEAL AGAINST THE APPELLANT HOLDING THAT THE PAYMENT OF COMMISSION AND BROKERAG E HAS NOT PROVED TO BE GENUINE. BEING AGGRIEVED BY THE ORDER OF THE CIT I.T.A .NO.-3847/DEL/2013 5 (A) DATED 31.03.2013 THE APPELLANT FILED AN APPEAL BEFORE THIS TRIBUNAL. 4. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND PERUSED THE RELEVANT MATERIAL PLACED ON RECORD BEFORE US. 5. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT T HE DISALLOWANCE OF BROKERAGE AND COMMISSION BASED ON THE MISMATCH OF T HE AMOUNT IS CLAIM OF THE ASSESSEE WITH THE CONFIRMATION PROVIDED BY 3 PA RTIES. THE LD. COUNSEL OF THE ASSESSEE ALSO POINTED OUT THAT SHRI K. C. BAHET I M/S PYARE LAL NIRANJAN LAL AND M/S SHYAM SUNDER HARYANA PVT. LTD. SUBMITTE D CONFIRMATION OF HIGHER AMOUNT OF COMMISSION DUE TO DIFFERENT METHOD OF ACCOUNTING AND INCORRECT RECORDING, BUT THE AMOUNT CLAIMED BY THE ASSESSEE WHICH WERE LESSER WAS NOT ALLOWED BY THE AUTHORITIES BELOW. IT WAS ALSO SUBMITTED, ON BEHALF OF THE ASSESSEE, THAT THE ASSESSEE FILED CON FIRMATION IN RESPECT OF 16 PARTIES BEFORE THE LD. CIT (A) IN THE FIRST ROUND O F LITIGATION AS AN ADDITIONAL EVIDENCE AND THE AO DID NOT RAISE ANY OBJECTION ABO UT THESE 16 PARTIES IN ITS REMAND REPORT DATED 12.3.2007 (PAPER BOOK PAGE 6-7) . 6. THE LD. COUNSEL OF THE ASSESSEE DRAWN OUR ATTENT ION TOWARDS PAGE NO. 197 TO 200 AND SUBMITTED THAT THE ASSESSEE APPELLAN T RECEIVED CONFIRMATION FROM M/S PYARE LAL NIRANJAN LAL SHYAM SUNDER HARYAN A INDUSTRIES PVT. LTD. & M/S KRISHNA ALLOY CORPORATION BUT CONFIRMATION FR OM SHRI K. C. BAHETI AND M/S INTRA OIL & GRAINS PVT. LTD. COULD NOT BE O BTAINED DESPITE OF ALL I.T.A .NO.-3847/DEL/2013 6 POSSIBLE EFFORTS. THE LD. COUNSEL OF THE ASSESSEE F URTHER SUBMITTED AND POINTED OUT THAT THERE IS NO REASON TO DOUBT THE TR ANSACTION AND THE AMOUNT OF COMMISSION ACTUALLY PAID AND TO DISALLOW THE LEGITI MATE CLAIM OF COMMISSION EXPENSES BECAUSE THE TRANSACTIONS HAVE B EEN ENTERED WITH THE PARTIES UNDER AGREEMENTS WITH THEM (SAMPLE COPIES O F AGREEMENTS HAVE BEEN PLACED AT PAGES 108 TO 160 OF THE PAPER BOOK) UNDER AGREEMENTS WITH THEM AND THE ASSESSEE RECORDED SUBSTANTIAL SALES DU RING THE YEAR AND THE SERVICES OF THE BROKERS HAVE BEEN DULY CONFIRMED BY THEM (CONFIRMATIONS HAVE BEEN PLACED AT PAGES 76 TO 105 OF THE PAPER BO OK). ON BEHALF OF THE ASSESSEE IT WAS FURTHER SUBMITTED THAT ALL PAYMENTS OF COMMISSION HAVE BEEN MADE TO THE SAID BROKERS THROUGH BANKING CHANNELS A FTER DEDUCTION OF TAX AT SOURCE IN ACCORDANCE WITH THE PROVISIONS OF THE INC OME TAX ACT 1961 (FOR SHORT THE ACT). 7. THE LD. COUNSEL OF THE ASSESSEE ALSO POINTED OUT THAT THE SUBSTANTIAL PORTION OF THE BROKERAGE/COMMISSION PAID HAVE BEEN CONFIRMED BY THE RELATED PARTIES WHICH WAS ALLOWED BY THE REVENUE IN THE EARLIER AND SUBSEQUENT YEARS IN THE COMPLETED ASSESSMENT PROCEE DINGS AND THE AO HAS NOT POINTED OUT ANY DEFECT OR INFIRMITY IN THE BOOK S OF ACCOUNTS OF THE ASSESSEE. THE LD. COUNSEL OF THE ASSESSEE CONCLUDED HIS ARGUMENTS WITH A LAST ALTERNATIVE SUBMISSION THAT THE AMOUNT OF COMMISSIO N PERTAINING TO 16 I.T.A .NO.-3847/DEL/2013 7 PARTIES SHOWN IN TABLE NO. 1 OF THE WRITTEN SUBMISS ION AMOUNTING TO RS.68,90,619/- AND AMOUNT OF COMMISSION SHOWN IN TA BLE NO. 2 PAID TO HARISH GOYAL & COMPANY AND SHREERAM AGRI BROKERS AM OUNTING TO RS.39,796/- AND RS.44,020/- RESPECTIVELY, HAVE NOT BEEN DISPUTED BY THE AUTHORITIES BELOW AT ANY POINT OF PROCEEDINGS. THER EFORE, THIS AMOUNT MAY KINDLY BE ALLOWED AS GENUINE EXPENDITURE OF THE ASS ESSEE ON PAYMENT OF COMMISSION/BROKERAGE. 8. REPLYING TO THE ABOVE, THE DEPARTMENTAL REPRESEN TATIVE (DR) FAIRLY ACCEPTED THAT THE AO AS WELL AS THE LD. CIT (A) HAS NOT RAISED THE DISPUTED AMOUNT OF BROKERAGE/COMMISSION PAID TO 16 PARTIES S HOWN IN TABLE NO. 1 AND ABOVE NAMED 2 PARTIES SHOWN IN TABLE NO. 2 AND HE H AS NO SERIOUS OBJECTION IF IT IS FOUND JUST AND PROPER TO ALLOW CLAIM OF TH E ASSESSEE IN REGARD TO PAYMENT OF COMMISSION RELATED TO THESE 18 PARTIES. THE DR FURTHER POINTED OUT THAT THIS IS NOT A CRITERIA TO ESTABLISH GENUIN ENESS OF PAYMENT WHEN ASSESSEE HAS CLAIMED LOW FIGURE AND THE RELATED PAR TIES WERE CONFIRMING THE AMOUNT ON A HIGHER FIGURE THE CLAIM SHOULD BE TREAT ED SACROSANCT BECAUSE ANY KIND OF MISMATCH IN THE CONFIRMATION RAISE SERI OUS DOUBTS ABOUT THE TRUTHFULNESS AND GENUINENESS OF THE CLAIM. THE LD. DR OTHERWISE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. I.T.A .NO.-3847/DEL/2013 8 9. ON A CAREFUL CONSIDERATION OF THE ABOVE SUBMISSI ONS OF BOTH THE SIDES, AT THE OUTSET WE OBSERVE THAT THE REVENUE AUTHORITI ES HAVE NOT RAISED ANY DOUBT OR DISPUTE PERTAINING TO THE PAYMENT MADE BY THE ASSESSEE TO THE 16 PARTIES HAS SHOWN IN TABLE NO. 1 OF THE WRITTEN SUB MISSIONS WHICH COMES TO RS.68,90,619/- AND PAYMENT OF COMMISSION MADE TO SH RI HARISH GOYAL & COMPANY AND SHREERAM AGRI BROKERS OF RS.39796/- AND RS.44,020/- RESPECTIVELY AS SHOWN IN TABLE NO. 2 OF WRITTEN SUB MISSIONS OF THE ASSESSEE AND THE TOTAL COMMISSION PAID TO THESE 18 PARTIES C OMES TO 69,72,435/-. WE FURTHER HELD THAT WHEN THE ASSESSEE HAS DISCHARGED HIS ONUS ABOUT PAYMENT OF COMMISSION MADE TO THESE 18 PARTIES THEN IT IS N OT FAIR ON THE PART OF REVENUE TO DISALLOW AND ENTIRE CLAIM OF COMMISSION ON THE GROUND THAT SOME CONFIRMATION ARE NOT MATCHING WITH THE AMOUNT OF CL AIM MADE BY THE ASSESSEE OR CONFIRMATION FROM SOME ANOTHER PARTIES HAVE NOT BEEN RECEIVED. 9. AT THE SAME TIME, WE ALSO HOLD THAT IT IS WELL A CCEPTED LEGAL PROPOSITION AND PRINCIPLE THAT THE ONUS IS ON THE A SSESSEE TO PROVE AND ESTABLISH ITS CLAIM PERTAINING TO THE EXPENSES THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE AMOUNT OF CLAIM WAS DISBURSED AFTER FOLLOWING RELEVANT PROVISIONS O F THE ACT, TO ENJOY BENEFIT OF SECTION 37 OF THE ACT. IN THE PRESENT CASE, DESP ITE OF TWO ROUNDS BEFORE THE AUTHORITIES BELOW THE ASSESSEE COULD NOT ESTABLISH AND SUBSTANTIATE AMOUNT OF I.T.A .NO.-3847/DEL/2013 9 COMMISSION SAID TO BE PAID TO SHRI K. C. BAHETI, M/ S KRISHNA ALLOY CORPORATION, M/S PYARE LAL NIRANJAN LAL, M/S SHYAM SUNDER HARYANA PVT. LTD. AND M/S INTRA OIL & GRAINS PVT. LTD. WHICH HAS SHOWN IN TABLE NO. 3 OF THE ASSESSEES WRITTEN SUBMISSIONS. WE ALSO NOTICE THAT THE CONFIRMATION RECEIVED FROM SHRI K. C. BAHETI, M/S PYARE LAL NIRA NJAN LAL AND M/S SHYAM SUNDER HARYANA PVT. LTD. IS HIGHER THAN THE AMOUNT CLAIM OF COMMISSION SUBMITTED BY THE ASSESSEE BUT WHILE THE REVENUE AUT HORITIES ARE UNABLE TO ACCEPT THIS CLAIM DUE TO MISMATCH AND ON ACCOUNT OF NON-RECEIPT OF CONFIRMATION THEN IT CANNOT BE SAID THAT THE REQUIR ED ONUS AS PER SECTION 37 OF THE ACT HAS BEEN DISCHARGED BY THE ASSESSEE DESP ITE TWO ROUNDS OF PROCEEDINGS. 10. ON THE BASIS OF FORGOING DISCUSSIONS, WE COME T O A CONCLUSION THAT THE REVENUE AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWI NG THE CLAIM OF THE ASSESSEE PERTAINING TO THE COMMISSION /BROKERAGE PA ID TO THE AFOREMENTIONED 18 PARTIES AMOUNTING TO RS.69,72,435/- AND WE HOLD THAT THE ASSESSEE HAS DISCHARGED ONUS LIES ON HIM AS PER SECTION 37 OF TH E ACT TO SUBSTANTIATE THIS PART OF THE CLAIM. AS WE HAVE DISCUSSED HEREINABOVE , THE REMAINING PART OF THE CLAIM COULD NOT BE SUBSTANTIATED BY THE ASSESSE E AND WE DECLINE TO HOLD THAT THE ASSESSEE HAS DISCHARGED ITS ONUS AS PER RE QUIREMENTS OF SECTION 37 OF THE ACT. THEREFORE, REMAINING PART OF THE CLAIM CAN NOT BE ALLOWED FOR THE I.T.A .NO.-3847/DEL/2013 10 ASSESSEE. IN THE RESULT, THE GROUND NO. 1, 2 & 3 OF THE ASSESSEE ARE PARTLY ALLOWED IN RELATION TO THE PAYMENT OF COMMISSION MA DE TO THE 18 PARTIES AMOUNTING TO RS.69,72,435/- AND THE AO IS DIRECTED TO ALLOW THE SAME. WE FURTHER HOLD THAT THE REMAINING PART OF THE CLAIM O F THE ASSESSEE IS NOT ALLOWABLE AS THE ASSESSEE COULD NOT DISCHARGE ITS O NUS AS REQUIRED U/S 37 OF THE ACT AND FINDINGS OF THE AUTHORITIES BELOW ARE P ARTLY UPHELD ABOUT THE REMAINING PORT OF THE CLAIM OF THE ASSESSEE. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS PER OUR ABOVE CONCLUSION AND FINDINGS. ORDER PRONOUNCED IN THE OPEN COURT ON 04/07/2014. SD/- SD/- (R. S. SYAL ) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04/07/2014 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR