DCIT 8(3), MUMBAI V. VRITTI IMPEX P.LTD, MUMBAI

ITA 4262/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0887 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 14-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Keywords: Additional evidence
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI , , BEFORE MS. SUSHMA CH O WLA , JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 4262/MUM/2013 ( / ASSESSMENT YEAR : 2009 - 10 THE DCIT - 8(3), AAYAKAR BHAVAN, MUMBAI - 400 020 / VS. M/S. VRITTI IMPEX PVT. LTD., 202, FLORA 13 TH ROAD, KHAR (W), MUMBAI - 400 052 ./ ./ PAN/GIR NO. : AABCV 3176C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI PAWAN KUMAR BEERLA / RESPONDENT BY : NONE / DATE OF HEARING : 29 . 0 7 .2015 / DATE OF PRONOUNCEMENT : 31 .0 7 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 18 , MUMBAI D ATED . 28.3.2013 PERTAINING TO ASSESSMENT YEAR 200 9 - 1 0. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF COMMISSION OF RS. 1,36,42,566/ - BY HOLDING THAT THE ASSESSEE IS JUSTIFIED IN MAKING T HE ITA. NO . 4262/M/2013 2 PAYMENT WITHOUT TDS AS THE PROVISIONS OF SEC. 40A(I) R.W.S 9, 195 AND 200 OF THE I.T. ACT DO NOT APPLY TO THE FACTS OF THE CASE. 2.1. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PLYWOOD. W HILE SCRUTINIZING THE RETURN OF INCOME, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED PAYMENT OF COMMISSION OF RS. 1,36,42,565/ - TO ONE MR. JOHN SMITH. THE AO FURTHER OBSERVED THAT A SIMILAR PAYMENT OF COMMISSION OF RS. 1,13,24,831/ - TO THE S AME MR. JOHN SMITH WAS DISALLOWED IN ASSESSMENT YEAR 2008 - 09. THE AO FURTHER NOTICED THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CHANGED THE NOMENCLATURE OF THE PAYMENT AND HAS CLAIMED THE SAME UNDER THE HEAD TECHNICAL TESTING AND QUALITY CO NTROL CHARGES. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS CAMOUFLAGED ITS TRANSACTION TO CLAIM THE DEDUCTION. THE ASSESSEE WAS ASKED TO EXPLAIN ITS STAND. THE ASSESSEE FILED DOCUMENTS WHICH INCLUDED REMITTANCES, ADVICES ISSUED BY UNION BANK OF IND IA IN RESPECT OF EACH REMITTANCE. THE ADVICE INCLUDED THE DETAILS OF PERSON TO WHOM THE PAYMENTS WERE MADE AND NATURE OF PAYMENTS. THE AO FOUND THAT NONE OF THESE REMITTANCE AND ADVICES ISSUED BY THE BANKERS REFLECTED IN THE NAME OF SAID MR. JOHN SMITH BUT WERE IN THE FOLLOWING NAMES: 1) MRS. NATHALIE ABATE 2) FOREST TIMBER TRADE LTD 3) MLE SOPHIE KREBS 4) YOSSI NAGEL 5) VAN DEN HAAK FRANCISCUS 2.2. THE AO FURTHER FOUND THAT IN ALL THESE REMITTANCE AND ADVICES, THE NATURE OF PAYMENT IS MENTIONED AS COMMISSION. THE A O WAS CONVINCED THAT BY MAKING PAYMENT TO THE PERSONS OTHER THAN MR. JOHN SMITH ITA. NO . 4262/M/2013 3 ABSOLUTELY DID NOT PROVIDE ANY SERVICE TO THE ASSESSEE. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF TDS AND THEREFORE SEC. 40(A)(I) SQUAR ELY APPLY ON THE FACTS OF THE CASE. THE AO ACCORDINGLY DISALLOWED THE SUM OF RS. 1,36,42,566/ - . 3. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED ITS CLAIM. IT WAS EXPLAINED THAT THE PAYMENT MADE TO THE 5 PERSONS WAS ON THE DIRECTIONS OF MR. JOHN SMITH. IT WAS FURTHER POINTED OUT TO THE LD. CIT(A) THAT THE PR OVISIONS OF TDS IS NOT APPLICABLE AS SERVICES ARE RENDERED OUTSIDE INDIA. IT WAS ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE ADDITIONS MADE IN A.Y. 2008 - 09 WERE DELETED BY THE LD. CIT(A) ON WHICH BASIS THE AO HAS MADE THE ADDITION. 3.1. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, BEFORE THE LD. CIT(A) THE ASSESSEE WAS ASKED TO FILE THE DOCUMENTS TO PROVE THE SERVICES RENDERED BY MR. JOHN SMITH. IN RESPONSE TO WHICH THE ASSESSEE FILED COPIES OF THE DOCUMENTS WHICH WERE FORWARDED TO THE AO BY THE LD. CIT(A) FOR HIS COMMENTS. THE AO SUBMITTED HIS REPORT VIDE LETTER DT. 10.1.2013, THE GIST OF WHICH READS AS UNDER: THE ASSESSEE COMPANY HAD E - FILED ITS RETURN OF INCOME ON 26.09.2009 DECLARING TOTAL INCOME OF RS. 58,52. 130/ - . THE ASSESSMENT WAS FINALIZED U/S 143(3) OF THE I. T.ACT. 1961 ON 26.12 2011, AFTER MAKING DISALLOWANCE OF COMMISSION OF RS. 1.36,42.566/ - AND THE INCOME WAS ASSESSED AT RS. 1,94,94,700/ - . DURING THE REMAND PROCEEDINGS, THE ASSESSEE HAS PRODUCED ADDITIONAL EVIDENCE R AT HER FRESH EVIDENCE IN CONTRAVENTION OF RULE 46A. WHICH DESERVES NO COGNIZANCE HOWEVER WITHOUT PREJUDICE TO THE ABOVE REPORT IS SUBMITTED AS UNDER - ITA. NO . 4262/M/2013 4 AT THE OUTSET. IT IS SUBMITTED THAT THE ASSESSEE'S CLAIM OF COMMISSION PAYMENTS TO J . V SMITH WAS DENIED IN THE LIGHT OF FACTS A ND THE C IRC UMS TANCES ELABORATELY DISCUSSED IN P A R A 3 OF THE ASSESSMENT ORDER. AS MENTIONED IN THE ASSESSMENT ORDER ( I ) THE A SSESSEE HAS NOT GIVEN ANY CONCRETE EVIDENCE IN SUPPORT OF HIS CONTENTION THAT J V SMITH HAS RENDERED ANY SERVICES, ( II ) NO AMOUNT WAS REMITTED TO J V SMITH. IT HAS BEEN RE MI TTED TO 5 PERSONS MENIONED I N THE ASSESSMENT ORDER. THE ASSESSEE DURING THE APPE L LATE PR OCEEDINGS HAS CLAIMED THAT THE PAYMENTS HAVE BEEN REMIT T ED TO THE PERSONS AT THE INSTANCE OF THE J V SMITH. HOWEVER. THE IDENTITY OF J V SMITH REMAIN TOTALLY U NPROVED FOR WANTS OF ANY CONCRETE EVIDENCE AND THEREFORE HIS SO CALLED LE TTERS/ARGUMENTS HAS NO A UTHORITY EXCEPT THE ASSESSEE'S CLAIM. FURTHER, ASSESSEES CLAIM THAT MRS. NATHELIE ABATE IS J V SMIT H'S WIFE IS ALSO NOT PROVED . IN THE LIGHT OF ABOVE FACTS THE ASSESSEE'S CLAIM OF HAVING PAID COMMISSION TO J V SMITH REMAINED UNPROVED. THEREFORE , IT IS PRAYED THAT DISALLOWANCE MAY KINDLY BE SUSTAINED. AT THIS JUNCTURE, I T W ILL NOT BE OUT OF PLACE TO M ENTION THAT MAKING OF PAYMENTS DOES NOT PROVE THAT THE EXPENSES WERE INCU RRED FOR THE PURPOSE OF BUSINESS. 3.2. AFTER CONSIDERING THE SUBMISSIONS AND THE REMAND REPORT, THE LD. CIT(A) OBSERVED THAT THE PAYMENT OF COMMISSION TO MR. JOHN SMITH IS NOT FOR THE FIRST TIME BUT THIS IS THE 5 TH YEAR. THE LD. CIT(A) FURTHER OBSERVED THAT THE PAYMENT HAS BEEN MADE ON THE BASIS OF AN AGREEMENT DATED 13.11.2002. THE LD. CIT(A) FURTHER OBSERVED THAT THE ADDITION MADE ON THIS ACCOUNT IN A.Y. 2008 - 09 WAS DELETED BY THE LD. CIT(A). 3.3. IT WOULD NOT BE OUT OF PLACE TO EXTRACT THE RELEVANT FACTUAL FINDINGS OF THE LD. CIT(A) WHICH READ AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED COUNSEL AND IN VIEW OF THE FO LLOWI N G DECISIONS OF HON 'B L E SUPREME COURT I ) CIT VS. TOSHUKU LTD. 125 ITR 525 (SC) ITA. NO . 4262/M/2013 5 II) GE INDIA TECHNOLOGY CENTRE (P) LTD. VS. CIT & ANR. 327 ITR 456 (SC) THE ISSUE STANDS CLEARLY DECIDED IN FAVOUR OF THE APPELLANT. FU R T H ER. THE RECENT DECISION OF THE HON 'BLE DELHI HIGH CO URT DATED 08 - 11 - 2011 IN THE CASE OF CL T - IV NEW DELHI VS EON TECHNOLOGY P LTD IN APPEAL NO 1167 / 2011 IS ALSO IN FAVOUR OF THE APPELLANT ALS O CIRCULAR NO 786 DATED 07 - 02 - 2000 OF CB DT IS ALSO IN FAVOUR OF T HE APPEL L ANT HENCE, THE PLEA OF THE APPELLANT I S ACCEPTED AND IT IS CLEAR THAT THE PROVISION OF SECTION 40A(IA) R. W S. 9, 195 AND 200 OF THE M I . T ACT DO NOT APPLY IN APPELLANT'S CASE AND THEREFORE, APPELLANT WAS NOT REQUIRE D TO MAKE T D S ON TH ESE PAYMENTS, HENCE, THIS GROUND OF APPEAL IS ALLOWED' SI NCE THE ISSUE IS COVERED BY'THE DECISION OF MY PREDECESSOR AND THERE IS NO CHANGE IN FACTS & CIRCUMSTANCES EXCEPT THE PAYMENT WAS NOT MADE DIRECTLY TO MR J V.SMI TH BUT ON HIS DIRECTIONS, THE PAYMENT WAS MADE TO FIVE PERSONS INCLUDINQ HIS WIFE AND FOUR OTHE RS. THE CONFIRMATIONS FOR MAKING PAYMENTS TO ALL THESE PERSONS WERE ALSO SUBMITTED BY THE AR WHICH WERE SENT TO AO FOR VERIFICATION SINCE THE ASSESSEE IS EXPORTING MORE THAN 90% OF ITS MANUFACTURED PRODUCT OF PLYWOOD, DEFINITELY IT R EQUIRES SOME AGENTS TO COMPETE IN THE INTERNATIONAL MARKET . SINCE THE PAYMENT HAS BEEN MADE THROUGH NORMAL BANKING CHANNELS AND THE ASSESSEE HAS ALSO SUBMITTED THE DOCUMENTS TO PROVE THAT MR J V.SMITH HAS RENDERED SERVICES FOR WHICH THE PAYMENT HAS BEEN MADE AS CORN M ISSION. T HEREFORE , IN V IEW OF ALL THESE FACTS & CIRCUMSTANCES AND BY RELYING THE DECISION OF M Y PREDECESSOR I N THE LAST YEAR THE ADDITION MADE BY THE AO IS NOT SU ST AINABLE , HENCE DELETED. 'THUS, THE GROUND OF APPEAL IS ALLOWED . 4. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. ITA. NO . 4262/M/2013 6 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ASSESSMENT ORDER. 6. NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF THE KNOWLEDGE OF THE DATE OF HEARING AS PER OUR ORDER SHEET ENTRIES THEREFORE WE DECIDE TO PROCEED EX PARTE. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE AO HAS MADE THE ADDITIONS ON THE BASIS OF THE DISALLOWANCES MADE IN A.Y. 2008 - 09. IT IS ALSO AN ADMITTED FACT THAT THE ADDITIONS OF A.Y. 2008 - 09 WERE DELET ED BY THE LD. CIT(A). THE LD. DR COULD NOT BRING ANY DECISION IN FAVOUR OF THE REVENUE. THE FINDINGS OF THE LD. CIT(A) AS MENTIONED ELSEWHERE ARE PURELY BASED ON THE FACTS OF THE CASE. WE, THEREFORE DECLINE TO INTERFERE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT ON 31 ST JU LY , 2015 SD/ - SD/ ( SUSHMA CH O WLA ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 31 ST JU LY , 2015 . . ./ RJ , SR. PS ITA. NO . 4262/M/2013 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI