I.T.O Wd - 9(1),kolkata, Kolkata V. M/s Shree Laminators Limited, Kolkata

ITA 414/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4671 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 24-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-03-2013
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Section: 143(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.414/KOL/2013 ASSESSMENT YEAR: 2009-10 INCOME-TAX OFFICER, WD-9(1), KOLKATA. VS. M/S. SH REE LAMINATORS LIMITED (PAN: AAKCS5342Q) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 24.05.2016 DATE OF PRONOUNCEMENT: 01.06.2016 FOR THE APPELLANT: SMT. RANU BISWAS, JCIT, SR. DR FOR THE RESPONDENT: SHRI RAJEEVA KUMAR, ADVOCATE ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-VIII, KOLKATA VIDE APPEAL NO. 267/CIT(A)-VIII/KOL/11-12 DATED 19.12.20 12. ASSESSMENT WAS FRAMED BY ITO, WD-9(1), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2009-10 VIDE HIS ORDER DATED 28.12.2011. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE TRADING LIABILITY STANDING IN THE NAME OF M/S PEEKAY ASSOCIATES AMOUN TING TO RS. 77,258/- COULD BE ADDED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE LD . AO FOUND THAT AN AMOUNT OF RS.77,258/- WAS SHOWN UNDER SUNDRY CREDITORS RELATI NG TO THE PARTY M/S. PEEKAY ASSOCIATES. INFORMATION AS TO GENUINENESS OF THE SA ID CREDIT AMOUNT WAS CALLED FOR FROM THE PARTY, M/S. PEEKAY ASSOCIATES BY ISSUING NOTICE U/S. 133(6) OF THE ACT. SINCE NO SATISFACTORY REPLY WAS RECEIVED FROM THE PARTY THE AO REQUIRED EXPLANATION IN THIS REGARD FROM THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THI S WAS THE BALANCE AMOUNT BEING CARRIED FORWARD FROM FY 2008-09. THE AO WITHOUT MA KING FURTHER REFERENCE IN THIS RESPECT TO THE ASSESSEE TREATED THE AMOUNT AS UNEXP LAINED AND THUS ADDED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CLAI MED THAT THERE WAS TRANSACTION IN THE NATURE OF PURCHASE FROM THE SAID PARTY M/S PEEKAY A SSOCIATES WHICH REMAINED UNPAID AS ON 31.3.2009 AND HENCE REFLECTED AS SUNDRY CREDITOR S IN THE BALANCE SHEET AS ON 31.3.2009. THE ASSESSEE STATED THAT THE SAME WAS F ULLY SETTLED IN THE SUBSEQUENT YEAR . 2 ITA NO.414/K/2013 M/S. SHREE LAMINATORS LTD.. AY 2009-10 THE LEARNED CITA HOWEVER PROCEEDED TO ADD THE SAME IN THE ASSESSMENT. IT WAS ARGUED THAT THE LEARNED AO HAD ACCEPTED THE PURCHASES MADE FROM THE SAID PARTY AS GENUINE AND IT WAS THE PARTYS FAULT FOR NOT MAINTAINING TH E ACCOUNTS PROPERLY. THE LEARNED CITA HELD THAT THE ASSESSEE HAD NOT DERIVED ANY BEN EFIT IN THE FORM OF REMISSION OF THIS LIABILITY AND HENCE THE PROVISIONS OF SECTION 41(1) OF THE ACT COULD NOT BE APPLIED ON THIS CREDIT BALANCE AND ACCORDINGLY DELETED THE ADDITION . AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 1. LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE AD DITION OF RS.77,258/- ON ACCOUNT OF TRADING LIABILITY TO M/S. PEEKAY ASSOCIATES CEASED DURING THE PREVIOUS YEAR. 2.2. THE LEARNED DR ARGUED THAT WHEN THE PARTY IN RESPONSE TO NOTICE U/S 133(6) OF THE ACT HAD STATED THAT THERE IS NO BALANCE OUTSTAN DING AS ON 31.3.2009 TOWARDS THE ACCOUNT OF THE ASSESSEE. HE ARGUED THAT THE LEARNE D CITA HAD SIMPLY BELIEVED THE STATEMENT OF THE ASSESSEE THAT THE SAID CREDITOR HA S BEEN SUBSEQUENTLY SETTLED IN THE NEXT FINANCIAL YEAR TOWARDS THE LIABILITY. IN RESPONSE TO THIS, THE LEARNED AR STATED THAT HE HAS GOT NO OBJECTION FOR THE BENCH TO SET ASIDE THI S ISSUE TO THE FILE OF THE LEARNED AO FOR VERIFICATION OF THE ASPECT OF SUBSEQUENT SETTLEMENT MADE TO THE CONCERNED SUNDRY CREDITOR. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE PROVISIONS OF SECTION 41(1 ) OF THE ACT COULD BE INVOKED TOWARDS CESSATION OF LIABILITY ONLY IN THE EVENT OF REVENUE PROVING THE FACT OF ASSESSEE DERIVING SOME BENEFIT OUT OF THIS TRANSACTION. IN THE INST ANT CASE , THE ASSESSEE CLAIMS THAT THE LIABILITY HAS BEEN SETTLED IN THE SUBSEQUENT FINANC IAL YEAR WHICH FACT HAS NOT BEEN VERIFIED BY THE LEARNED AO. HENCE IN THE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PL AY, TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO , WITH A DIRECTION TO VERIFY THE SUBSEQU ENT SETTLEMENT MADE BY THE ASSESSEE TO THE CONCERNED SUNDRY CREDITOR AND IF PROVED, NO ADDITION NEED TO BE MADE BY THE LEARNED AO. ACCORDINGLY, THE GROUND NO. 1 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 3 ITA NO.414/K/2013 M/S. SHREE LAMINATORS LTD.. AY 2009-10 3. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING THE BROKERAGE PAYMENT OF RS. 43,20,020/- TO M/S TIMESPAC INDIA LTD IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE MAKING THE ASSESSMENT THE LD. AO FOUND THAT AN AMOUNT OF RS.50,20,020/ WAS DEBITED TO THE ASSESSEE'S PROFIT & LOSS A/C. AS BROKERAGE/COMMISSION PAID TO M/S. TIMESPAC INDIA LTD. THE PAYMENT OF SUCH BROKERAGE WAS VERIFIED BY ISSUING SUMMONS U/S. 131 TO M/S. TIMESPAC INDIA LTD. THEN NOTICES U/S. 133(6) OF THE ACT WERE ISSUED TO ALL T HE SELLERS FROM WHOM THE ASSESSEE PURCHASED THROUGH BROKER. ALL THE SELLERS EXCEPT ON E INFORMED THAT THE SALE WAS MADE DIRECTLY TO THE ASSESSEE WITHOUT ANY BROKER. THE LD . AO CALLED FOR EXPLANATION IN THIS REGARD. THE ASSESSEE SUBMITTED THAT THE SALES WERE MADE THROUGH BROKERS AND BROKERAGE WAS PAID FOR RENDERING THEIR SERVICES. THE BILLS WE RE RAISED BY THE BROKERS AFTER CHARGING THE SERVICE TAXES AND THE SAME WERE DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHICH WAS DULY AUDITED B Y AN AUTHORIZED AUDITOR. ALL THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AN D THE NECESSARY TAX WAS DEDUCTED AT SOURCE. THE PARTIES BEING NOT AWARE OF THE EXISTENCE OF SUCH BROKERS INFORMED THAT THE SALES WERE MADE DIRECTLY TO THE A SSESSEE. THE LD. AO WAS NOT SATISFIED WITH THIS EXPLANATION AND TREATED THE PAYMENT OF BR OKERAGE OF RS. 43,20,020/- EXCEPT ONE PAID TO M/S. MODERN LAMINATORS LTD. AS BOGUS AN D FABRICATED WITH AN INTENTION TO CONCEAL THE ACTUAL INCOME. 3.2. BEFORE THE LEARNED CIT(A), THE ASSESSEE STATE D AS FOLLOWS:- I) THE ASSESSEE INTENDED TO PURCHASE GOODS WHICH FACT WAS BROUGHT TO THE KNOWLEDGE OF THE BROKER, M/S. TIMESPACT INDIA LTD. II) THE BROKER, M/S. TIMESPAC INDIA LTD., INTRODUCE D THE APPELLANT WITH THE PARTIES ( SELLERS) LIKE (I) M/S. SRI NARASIMHA PLASTIC INDUST RIES, (II) M/S. DECCAN POLYPACKS LTD., (III) M/S. SIPANI FIBRES LTD., (IV) M/S. SALGUTI IN DUSTRIES LTD. (V) M/S. SERVO PACKAGING LTD. ETC. III) THE PARTIES ( SELLERS) AGREED TO SELL TO THE A PPELLANT AS PER ITS REQUIREMENTS AND SUPPLIED THE GOODS DIRECTLY TO THE APPELLANT WHICH FACT IS APPARENT FROM THE DETAILS OF THE PURCHASES DULY ACCOUNTED FOR. IV) THERE WAS NO DISPUTE AS TO PURCHASES MADE WITH THE PARTIES AND THESE WERE PROVED GENUINE. FOR FACILITATING SUCH PURCHASES SERVICES I N THE NATURE OF INTRODUCTION WITH THE PARTIES WERE OBTAINED FROM THE ABOVE MENTIONED BROK ER M/S. TIMESPAC INDIA LTD. WHO 4 ITA NO.414/K/2013 M/S. SHREE LAMINATORS LTD.. AY 2009-10 WAS PAID BROKERAGE TO THE TUNE OF RS. 43,20,020/- F OR RENDERING THE SERVICES IN THE NATURE OF INTRODUCTION WHICH FACT WAS DISPUTED. V) INFORMATION WAS ASKED FROM THE PARTIES VIDE NOTI CE U/S. 133(6) OF THE ACT. THE PARTIES IN THEIR REPLY CONFIRMED THE PURCHASES AND THE MAKI NG OF INTRODUCTION WITH THE APPELLANT BY THE BROKER BUT NOT THE PAYMENT OF COMMISSION AS SUCH PAYMENT WAS NOT MADE BY THEM BUT THE APPELLANT DIRECTLY TO THE BROKER, M/S. TIME SPAC INDIA LTD. THE LETTERS ARE ALREADY IN RECORDS. WHEN THE PARTIES WERE NOT AT ALL LIABLE FOR PAYMENT OF COMMISSION HOW THEY WOULD CONFIRM THAT THE COMMISSION IN RESPECT OF SALES MAD E BY THEM WAS PAID. THE APPELLANT WAS LIABLE AND AS SUCH PAID THE NECESSARY COMMISSIO N TO M/S. TIMESPAC INDIA LTD. AND IT WAS IN THE COURSE OF ITS BUSINESS ACTIVITIES. T HE DETAILS OF SUCH PAYMENT ALONG WITH DOCUMENTARY EVIDENCES WERE SUBMITTED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3.3. THE LEARNED CITA OBSERVED THAT THE ASSESSEE H AD PAID BROKERAGE OF RS. 43,20,020/- TO M/S TIMESPAC INDIA LTD WHO HAD CONFI RMED THE RECEIPT OF COMMISSION FROM THE ASSESSEE. HE HELD THAT THE COMMISSION WA S PAID BY THE ASSESSEE TO M/S TIMESPAC INDIA LTD WHO HAD INTRODUCED THE ASSESSEE WITH THE SUPPLIERS OF GOODS. THE GENUINENESS OF PURCHASES MADE BY THE ASSESSEE FROM THOSE PARTIES WERE NOT DISPUTED BY THE LEARNED AO AND HE FURTHER OBSERVED THAT IT IS NOT THE CASE OF THE LEARNED AO THAT THE COMMISSION PAID TO THE PARTY HAS FLOWN BACK TO THE ASSESSEE. ACCORDINGLY HE DELETED THE ADDITION. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND :- II) LD. CIT(A) HAS FAILED TO APPRECIATE THE REASO N FOR CONSIDERING THE CLAIM OF BROKERAGE PAYMENT AMOUNTING TO RS.43,20,020/- AS NOT GENUINE AND HAS ERRONEOUSLY CONSIDERED THE REPORT OF THE SELLER OF MAKING DIRECT SALE WITHOUT INVOLVEMENT OF ANY BROKER AS THE ONLY REASON FOR MAKING SUCH DISALLOWANCE BY THE ASSESSIN G OFFICER AND AS SUCH HAS ERRED IN DELETING THE DISALLOWANCE OF CLAIM OF PAYMENT OF BR OKERAGE TO THE TUNE OF RS.43,20,020/- TO M/S. TIMESPAC INDIA LTD. 3.4. THE LEARNED DR VEHEMENTLY RELIED ON THE ORDER OF THE LEARNED AO. IN RESPONSE TO THIS, THE LEARNED AR SUBMITTED THE LIST OF DOCUM ENTS COMPRISING OF CONFIRMATION LETTERS OF VARIOUS SUPPLIERS WHICH WERE ADMITTEDLY CLAIMED TO BE FILED BEFORE THE LEARNED AO. IN THE SAID CONFIRMATION LETTERS, ALL THE SUP PLIERS HAD CATEGORICALLY STATED THAT THE ASSESSEE WAS INTRODUCED TO THEM THROUGH A BROKER AN D THEY HAD NOT PAID ANY BROKERAGE/COMMISSION TO THE SAID BROKER FOR THE SUP PLIES MADE TO ASSESSEE. IN DEFENCE, THE LEARNED DR ARGUED THAT THESE LETTERS WERE DATED IN THE FAG END OF DECEMBER 2011 AND OBVIOUSLY IT WOULD NOT HAVE REACHED THE LEARNED AO BEFORE THE COMPLETION OF ASSESSMENT PROCEEDINGS. 5 ITA NO.414/K/2013 M/S. SHREE LAMINATORS LTD.. AY 2009-10 3.5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD MADE PURCHAS E OF RAW MATERIALS FROM SIX SUPPLIERS. THE ASSESSEE CLAIMS THAT THESE SUPPLIER S WERE INTRODUCED TO HIM BY M/S TIMESPAC INDIA LTD TO WHOM THE ASSESSEE HAD PAID CO MMISSION AT AN AGREED RATE WHICH FACT HAS ALSO BEEN CONFIRMED BY M/S TIMESPAC INDIA LTD. IT IS NOT IN DISPUTE THAT THE LEARNED AO HAD ACCEPTED THE COMMISSION PAYMENT MADE TO M/S TIMESPAC INDIA LTD IN RESPECT OF PURCHASE MADE FROM ONE PARTY AND ALLOWED THE SAME AS DEDUCTION. IN RESPECT OF REMAINING 5 PARTIES FROM WHOM PURCHASES WERE MAD E BY THE ASSESSEE, THOUGH THE PURCHASES WERE ACCEPTED AS GENUINE, THE LEARNED AO HAD ONLY DISPUTED THE PAYMENT OF COMMISSION TO M/S TIMESPAC INDIA LTD IN RESPECT OF SUCH PURCHASES. WE FIND FROM THE CONFIRMATION LETTERS OF 5 SUPPLIERS THAT THEY HAD CATEGORICALLY STATED THAT THE ASSESSEE WAS INTRODUCED TO THEM THROUGH A BROKER. THE BROKE R IN THE INSTANT CASE NEEDS TO BE UNDERSTOOD ONLY AS M/S TIMESPAC INDIA LTD. THE REV ENUE WAS NOT ABLE TO PRODUCE ANY CONTRARY EVIDENCE IN THIS REGARD. HOWEVER, WE AGREE WITH THE CONTENTION OF THE LEARNED DR THAT THESE CONFIRMATIONS WERE DATED IN THE FAG E ND OF DECEMBER 2011 FROM DIFFERENT LOCATIONS IN INDIA, IT WOULD NOT HAVE REACHED THE L EARNED AO BEFORE THE COMPLETION OF ASSESSMENT PROCEEDINGS. HENCE, IN THESE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PL AY, TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO, WITH A DIRECTION TO THE LEARNED AO TO V ERIFY THE CONFIRMATIONS FILED BY THE 5 SUPPLIERS AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION THAT, THE ASSESSEE BE GIVEN REASONABLE OPPORTUNITY OF BEING H EARD. THE ASSESSEE IS ALSO AT LIBERTY TO FILE FRESH EVIDENCES IN SUPPORT OF ITS CONTENTIO NS BEFORE THE LEARNED AO. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES. 5. ORDER IS PRONOUNCED IN THE OPEN COURT ON 01.06.2 016 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 1 ST JUNE, 2016 JD.(SR.P.S.) 6 ITA NO.414/K/2013 M/S. SHREE LAMINATORS LTD.. AY 2009-10 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WARD-9(1), KOLKATA. 2 RESPONDENT M/S. SHREE LAMINATORS LIMITED, 68, COTT ON STREET, KOLKATA- 700 007. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .