GENNEX CRESA PARTNERS CONSULTANTS P.LTD, MUMBAI V. ITO WD 8(1)(4), MUMBAI

ITA 3856/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2395 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 05-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K P P R MURT HY
• Assessee Lawyers: FIROZE ANDHYARUJINAAR
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBA I BENCH G, MUMBAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3856/MUM/2014 ASSESSMENT YEAR: 2009-10 M/S GENNEX CRESA PARTNER CONSULTANTS PVT. LTD. , S-202, NIMBUS CENTRE, OBEROI COMPLEX, ANDHERI (W), MUMBAI-400053 PAN: AACCG6878K VS. DCIT CIRCLE- 8(1), 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI FIROZE ANDHYA RUJINA(AR) REVENUE BY : SHRI K.P.P.R. MURT HY (DR) DATE OF HEARING : 20.07.2016 DATE OF PRONOUNCEMENT : 22.07.2016 O R D E R PER PAWAN SINGH, JM: THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-16, MUMBAI DATED 27.03.2014 FOR AY2009-10. THE ASSESSEE HAS RAISED O NLY ONE GROUND OF APPEAL : GROUND NO.1 THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE LD AO, ON ACCOUNT OF FOLLOWING EXPENSES: DISALLOWED BY CIT(A) DISALLOWED BY ITO OUT OF POCKET EXPENSES RS. 2,40,000/- 2,40,0 00/- BUSINESS PROMOTION EXPENSES RS. 2,23,441/- 2, 23,441/- SALARY EXPENSES TO STAFF RS. 6,42,695/- 6,42, 695/- COMMISSION EXPENSES RS. 37,88,225/- 37,88,2 25/- 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-C OMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE ADVISORS AND CONSULTANTS, FILED ITS RET URN OF INCOME ON 26.09.2009 FOR AY- 2009-10 DECLARING TOTAL INCOME OF RS. 42,32,220/-. THE RETURN OF INCOME SELECTED FOR SCRUTINY. THE ASSESSING OFFICER (AO) WHILE FRAMING ASSESSMENT ORDER BESIDES OTHER ADDITIONS, DISALLOWED (I) OUT OF POCKET EXPENSES RS. 2,40,000/- (II)BUSINESS PROMOTION EXPENSES OF RS. 2,23,441/- (III) SALARY EXPENSES TO STAFF OF RS. 6,42,695/- AND 2 ITA NO.3856/M/2014 M/S GENNEX CRESA PARTNER CONSULTANTS PVT. LTD. COMMISSION EXPENSES OF RS. 37,88,225/- . AGGRIEVED BY THE ORDER OF AO ASSESSEE FILED APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. T HUS THE PRESENT APPEAL IS FILED BEFORE US. 3. WE HAVE HEARD LD. AR FOR ASSESSEE AND LD. DR FOR RE VENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE PROCEEDINGS BEFORE US IN CONNECTION WITH THE DISALLOWANCE NO. (I) TO (III) OF GROUND OF APPEAL, THE LD. AR OF THE ASSESSEE SUBMITS THAT DISALLOWANCE @ 20% IS AT HIGHER SIDE. IN SUPPO RT OF THE SAME LD AR CLAIMED THAT PERCENTAGES OF DISALLOWANCE OF VARIOUS EXPENSES BY AO IN ASSESSEES OWN CASE IN OTHER ASSESSMENT YEARS WERE AT LOWER SIDE. LD AR SUBMITS THAT NOTHING WAS DISALLOWED IN ASSESSMENT YEAR 2011-12, ONLY 5% WAS DISALLOWED IN ASSESSMENT YEAR 2005-06 AND 10% WAS DISALLOWED(ADOPTED) IN ASSESSMENT YEAR 2012-13. THEREFORE, THE 20% DISALLOWANCE OF THE EXPENSES IN THE YEAR UNDER CONSIDERATION IS ON HIGHER SIDE. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DEPARTMENT IS NOT CONSISTENT WHEN IT CAME TO THE EXTENT OF DISALLOWANCE ON THIS COUNTS. CONSIDERING THE PERCEN TAGE VARYING FROM 0% TO 5% AND ARISES TO 10%, WE ARE OF THE OPINION THAT 20% DISAL LOWANCE ADOPTED BY AO IS WITHOUT ANY SUSTAINABLE REASONS. THEREFORE, THE AO IS DIREC TED TO ADOPT 10% DISALLOWANCE AT PAR WITH ASSESSMENT YEAR 2012-13, WITH REGARD TO (I) OU T OF POCKET EXPENSES,(II) BUSINESS PROMOTION EXPENSES AND (III) SALARY EXPENSES TO STA FF. THUS THIS PART OF GROUND OF APPEAL IS PARTLY ALLOWED. 4. THE REMAINING PART (IV) OF GROUND OF APPEAL IS WITH REGARD TO COMMISSION EXPENSES OF RS. 37,88,225/-. LD. AR OF THE ASSESSEE ARGUED AS T HE ASSESSEE ENGAGED IN THE BUSINESS OF CORPORATE CONSULTANT SERVICES, OFFERING EXCLUSIV E TENANT REPRESENTATION SERVICE TO CORPORATE REAL ESTATE PORTFOLIO OF COMPANIES, ASSES SEE MADE EXPENSES FOR DELIVERING TRANSACTION MANAGEMENT AND PROFESSIONAL SERVICES TO VARIOUS CORPORATE CLIENTS THROUGH THEIR ASSOCIATE OF DIFFERENT LOCATIONS, THE COMMISS ION WAS PAID TO THE PARTIES TO IDENTIFY THE CITY, LOCATION AND BUSINESS PROSPECT ETC. EXPEN SES CLAIMED ARE GENUINE ONE. ALL THE PARTIES WERE GENUINE TO WHOM THE COMMISSION WAS PAI D. LD. AR FURTHER ARGUED THAT ASSESSEE HAS GIVEN ALL DETAILS OF THE PERSONS TO WH OM THE COMMISSION WAS PAID WHICH INCLUDED THEIR PAN CARD, ADDRESSES AND DETAILS OF B ANKING TRANSACTIONS. LD AR OF THE ASSESSEE ARGUED THAT FINDING OF AO AND OF LEARNED C IT (A) IS PERVERSE. LD DR FOR REVENUE ARGUED THAT THE NAME AND ADDRESS OF THE PER SON TO WHOM COMMISSION WAS PAID WAS NOT VERIFIED. FURTHER , AMONG THE PERSONS, WH OSE NAMES WERE FURNISHED, TWO OF THEM WERE CLOSELY RELATED WITH THE DIRECTOR OF THE ASSESSEE-COMPANY I.E. SMT. SUSHILA SINGH IS THE MOTHER OF ASHOK KUMAR( DIRECTOR) AND SMT. MANJU IS WIFE OF ASHOK KUMAR. LD DR FOR REVENUE ARGUED THAT THE CLAIM OF C OMMISSION OF ASSESSEE IS BOGUS. 3 ITA NO.3856/M/2014 M/S GENNEX CRESA PARTNER CONSULTANTS PVT. LTD. LD DR FOR REVENUE FURTHER ARGUED THAT DURING THE AS SESSMENT PROCEEDING, THE AO ISSUED NOTICE TO THE VARIOUS PARTIES U/S 133(6) OF THE ACT , OUT OF WHICH TWO NOTICES WERE RETURNED BACK, ONE NOTICE WAS DULY SERVED AND ONE R ETURNED BACK AS UNCLAIMED. LD DR FOR REVENUE VEHEMENTLY ARGUED THAT CLAIM OF COMMISS ION OF ASSESSEE IS BOGUS AND THE FINDINGS OF THE LOWER AUTHORITY DO NOT REQUIRE ANY INTERFERENCE OF THIS TRIBUNAL. IN THE REJOINDER ARGUMENTS LD AR FOR ASSESSEE ARGUED THA T PAYMENT MADE TO RELATIVES OF DIRECTORS IS ALLOWABLE FOR BUSINESS ACTIVITY 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIERS AND GONE THOUGH THE ORDER OF AUTHORITIES BELOW. DURING THE ASSESSMENT ASSESSEE C LAIMED TO HAVE MADE THE COMMISSION PAYMENTS OF RS. 83,97,720/-. THE ASSESSEE WAS ASKE D TO FURNISH THE DETAILS OF COMMISSION PAID ALONG WITH COPIES OF BILL ETC. ASSE SSEE FURNISHED PARTY-WISE DETAILS OF COMMISSION PAYMENTS MADE DURING THE YEAR INCLUDING THEIR PAN CARD AND ADDRESSES AND DETAILS OF PAYMENTS ALONG WITH CONFIRMATION. A O ISSUED NOTICE U/S 133(6) TO VARIOUS PARTIES INCLUDING TO MANBABU RAI, ANAND SINHA, R.N . SINGH AND PHULA RANI PRASAD. NOTICE ADDRESSES TO THESE PARTIES WERE RETURNED BY THE POSTAL AUTHORITIES. THREE NOTICES WERE RETURNED WITH THE REMARK NOT KNOWN AND NOTIC E ADDRESS TO PHULA RANI PRASAD AS UNCLAIMED. THE AO CONCLUDED THAT NO DETAILS/DOCUME NTS WERE FURNISHED TO JUSTIFY THE CLAIM OF COMMISSION, HENCE, THE AMOUNT OF COMMISSIO N OF RS. 9,98,000/- TO ANAND S. SINHA, RS. 8,50,500/- TO MANBABU RAI, RS. 9,68,775/ - TO PHULA RANI PRASAD AND RS. 9,70,950/- TO R.N. SINGH WAS DISALLOWED. THE LD. CI T(A) WHILE CONSIDERING THIS GROUND SOUGHT THE REMAND REPORT FROM AO. IN THE REMAND REP ORT IT WAS MENTIONED THAT AO CONDUCTED INVESTIGATION FROM THE RESPECTIVE BANK AC COUNTS WHEREIN THE COMMISSION PAYMENT MADE BY THE ASSESSEE WERE CREDITED IN THE F IRST INSTANCE. BUT IN FACT, THE AMOUNTS WERE SIPHONED OFF BY THE DIRECTORS, OR PAID OUT IN CASH ULTIMATELY. THERE WAS NO PROOF OF SERVICES RENDERED ACTUALLY. SMT. PHULA RANI PRASAD (PULA RANI PRASAD) IS THE MOTHER OF SMT. MANJU KUMAR, DIRECTOR OF THE ASSESSE E-COMPANY AND HER RESIDENTIAL ADDRESS IS ALSO OF THE DIRECTOR OF THE ASSESSEE-COM PANY. SHE HAS NO PAN CARD AND NOT ASSESSED TO TAX. SHE IS 63 YEARS OF AGE AND NO CAPA CITY TO RENDER SUCH PROFESSIONAL SERVICES AS CLAIMED BY ASSESSEE-COMPANY. ANOTHER PE RSON NAMELY SMT. SUSHILA SINGH IS THE MOTHER OF ASHOK KUMAR, DIRECTOR OF THE ASSESSEE -COMPANY. SHE ALSO DECLARED HER RESIDENTIAL ADDRESS AS OF ASHOK KUMAR. SHE IS 76 YE ARS OLD HAS NO PAN CARD. NOT ASSESSED TO TAX AND NO CAPACITY OR QUALIFICATION TO RENDER SUCH PROFESSIONAL SERVICES AS CLAIMED BY ASSESSEE-COMPANY. THE ASSESSEE-COMPANY H AS BEEN DEPOSITED THE AMOUNT IN THE JOINT ACCOUNT OF SMT. SUSHILA SINGH AND ASHOK K UMAR. FURTHER, THE PAYMENT TO R. N. SINGH HAS BEEN ENCHASED IN THE BANK ACCOUNT HELD IN THE JOINT NAME OF SMT. PHULA RANI 4 ITA NO.3856/M/2014 M/S GENNEX CRESA PARTNER CONSULTANTS PVT. LTD. PRASAD AND MANJU KUMAR. THE PAYMENT MADE TO SWETA S INGH IS IN FACT CASH WITHDRAWAL OR ULTIMATE TRANSFER TO THE DIRECTOR OF COMPANY. TH E LD CIT(A) CONFIRMED THE DISALLOWANCE OF COMMISSION MADE BY ASSESSING OFFICE R. 6. WE HAVE SEEN THAT, BY CONFIRMING THE FINDINGS OF AO , LD CIT APPEALS HAS NOT PASSED REASONED ORDER, AND LOT OF ERROR OCCURRED IN HIS ORDER, E.G. THE LEARNED CIT(A) OBSERVED THAT COMMISSION RECIPIENT HAS NO PAN, NOT ASSESSED TO INCOME TAX. IT IS THE SUBMISSION OF LD AR THAT THEY ARE ASSESSED TO TAX, COMMISSION WAS PAID AFTER EFFECTING TDS. WE HAVE ALSO NOTICED THAT COMMISSION PAYMENT W AS PAID BY CHEQUES, BANK STATEMENT SUPPORT THE SAME. THE DETAILS OF PAN AND CONFIRMATION WAS FILED BUT THE ORDER OF LD CIT(A) IS SILENT. MARE RELATIONSHIP WITH THE ASSESSEE AND THE COMMON ADDRESS SHOULD NOT PREJUDICE THE AO. WHEN THERE IS NO INCRI MINATING MATERIAL TO SUGGEST REPAYMENT OF COMMISSION PAYMENT TO ASSESSEE. THE ON US IS ON AO IN THIS REGARD, WHICH HAS NOT BEEN DISCHARGED. THE ASSESSEE DURING THE AS SESSMENT PROCEEDING SUBMITTED THE LIST OF PERSONS TO WHOM THE COMMISSION WAS PAID ALO NG WITH THEIR PAN NUMBER AND ADDRESSES. THE AO HAS NOT GIVEN ANY FINDING ABOUT T HE STATUS OF THESE FOUR PARTIES WITH REGARD TO THE COMMISSION PAYMENT DISALLOWED. WITH THESE OBSERVATIONS THE ORDER OF AO WITH REGARD TO DISALLOWANCE OF COMMISSION EXPENSES IS SET-ASIDE AND THE MATTER IS RESTORED TO THE FILE OF AO, WITH THE DIRECTIONS TO GIVE FRESH FINDING AFTER CONSIDERING THE ALL MATERIAL/EVIDENCE FILED BY ASSESSEE. THE AO IS DIRECTED TO EXAMINE THE CLAIM OF COMMISSION EXPENSES OF ASSESSEE AND PASSED THE ORDE R IN ACCORDANCE WITH LAW. WITH THESE OBSERVATIONS, THIS PART OF GROUND OF APPEAL I S ALLOWED FOR STATISTICAL PURPOSE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND JULY, 2016. SD/- SD/- (D.KARUNAKARA RAO) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI; DATED 22 /07/2016 S.K.PS 5 ITA NO.3856/M/2014 M/S GENNEX CRESA PARTNER CONSULTANTS PVT. LTD. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/