M/s. Hari Udyog Pvt. Ltd., Balasore V. JCIT, Balasore Range, Balasore, Balasore

ITA 435/CTK/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3771 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 13-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B N DAS
• Assessee Lawyers: P K MISHRA
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.435/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 M/S. HARI UDYOG PVT LTD., AT/PO: O.T.ROAD, DIST: BALASORE. VS. JCIT, BALASORE RANGE, BALASORE. PAN/GIR NO. AABCH 7243 Q (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.MISHRA, AR RE VE NUE BY : SHRI B.N. DAS, DR DATE OF HEARING : 08 /06 / 2017 DATE OF PRONOUNCEMENT : 12 /06 / 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 1, BHUBANESWAR , DATED 5.5.2014 , FOR THE ASSESSMENT YEAR 2009 - 2010 . 2. GROUND NOS.1,2 & 8 OF THE APPEAL ARE GENERAL IN NATURE AND HENCE REQUIRES NO SEPARATE ADJUDICATION BY US. 3. IN GROUND NOS.3,4, 5 & 6 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON C OMMISSION PAYMENT OF RS.8,80,447/ - . 2 ITA NO.435/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM MANUFACTURING AND SELLING OF PVC & HDPE PIPES, PVC & JDPE FITTINGS, TARA HAND PUMPS AND SPARE PARTS, ETC. THE ASSESSING OFFICER OBSERVED FROM THE PROF IT AND LOSS ACCOUNT THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.72,24,261/ - IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD SALES COMMISSION. THE ASSESSING OFFICER ADDED RS.8,80,447/ - AS BOGUS EXPENSES UNDER THE HEAD SALES COMMISSION PAID TO FOLLOWING PERSONS: SL.NO. NAME OF THE PARTY SALES COMMISSION (RS.) 1. PRAKASH KUMAR MOHANTY 6,53,240 2. PUSPALATA PARIDA 1,97,981 3. GOKUL & CO. 19,548 4. SUMITRA TRADERS 8,500 5. BINAKAR SUPPLY AGENCY 1,178 5. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PAID COMMISSION OF RS.6,53,240/ - TO ONE PRAKASH KUMAR MOHANTY, WHO APPEARED BEFORE THE ASSESSING OFFICER AND WAS EXAMINED ON OATH U/S.131 OF THE ACT. HE SUBMITTED BEFORE THE ASSESSING OFFICER THAT HE WORKS AS A GENERAL MANAGER IN ANOTHER CO MPANY AND, THEREFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT SHRI MOHANTY COULD HAVE NOT HAVE TIME TO PROMOTE THE GOODS OF THE ASSESSEE COMPANY AND, HENCE THE ASSESSING OFFICER DISALLOWED THE DEDUCTION FOR THE SAME. 6. REGARDING COMMISSION PAYMENT OF RS.1,97,981/ - TO SMT. PUSPALATA PARIDA, THE ASSESSING OFFICER OBSERVED THAT A LETTER WAS ISSUED BY RPAD, WHICH WAS RETURNED UNSERVED WITH THE POSTAL REMARKS NO SUCH ADDRESS. 3 ITA NO.435/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 THE ASSESSEE FAILED TO PRODUCE SMT. PARIDA BEFORE THE ASSESSING OFFICER TO PROV E THE IDENTITY OF THE COMMISSION AGENT AND GENUINENESS OF THE PAYMENT. THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT PAYMENT WAS BOGUS AND DISALLOWED THE DEDUCTION FOR THE SAME. 7. IN RESPECT OF COMMISSION PAYMENT OF RS.19,548/ - TO GOKUL & CO., AND RS.8 ,500/ - TO SUMITRA TRADERS AND RS.1,178 TO BINAKAR SUPPLY AGENCY, THE ASSESSING OFFICER OBSERVED THAT DETAILED PARTICULARS WERE NOT FURNISHED BY THE ASSESSEE AND, THEREFORE, HE HELD THAT THE GENUINENESS OF THE TRANSACTION HAS NOT BEEN ESTABLISHED AND DISALL OWED DEDUCTION FOR THE SAME. 8. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE ARGUED THAT THE DIRECTOR OF THE ASSESSEE COMPANY SHRI SANGRAM KUMAR DAS AND MR PRAKASH KUMAR MOHANTY HAS STATED BEFORE THE ASSESSING OFFICER THAT THE SERVICES RENDERED BY SHRI PRAKAS H KUMAR MOHANTY TO WHOM COMMISSION PAYMENT WAS MADE COMPRISED OF COLLECTION OF ORDERS OF THE COMPANY, FOLLOW UP WITH GOVERNMENT DEPARTMENTS FOR RELEASING PAYMENT IN FAVOUR OF THE ASSESSEE, EXISTENCE OF AN AGREEMENT WITH THE COMPANY FOR THE AFORESAID WORK, RECEIPT OF COMMISSION IN TERMS OF THE AGREEMENT FROM THE COMPANY BY CHEQUE. IT WAS FURTHER SUBMITTED THAT SHRI PRAKASH KUMAR MOHANTY WAS AN INCOME TAX ASSESSEE HAVING PAN NO.AJWPM 3507 F AND THE RECEIPT OF COMMISSION WAS FULLY AND TRULY DISCLOSED IN HIS R ETURN OF INCOME, COPY OF WHICH WAS SUBMITTED. IT WAS FURTHER SUBMITTED THAT APPLICABLE AMOUNT OF TDS WAS DEDUCTED FROM THE COMMISSION AND DULY DEPOSITED WITH THE I.T.AUTHORITIES. 4 ITA NO.435/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 FURTHER, REGARDING COMMISSION PAYMENT TO SMT. PUSPALATA PARIDA, THE ASSESSE E SUBMITTED THAT SHE HAS PROCURED ORDERS AND FOLLOWED UP WITH VARIOUS DEPARTMENTS FOR FACILITATING RELEASE OF PAYMENT. COPY OF THE AGREEMENT AND BILLS SUBMITTED WITH DETAILS OF INVOICES FOR WHOM SHE PROCURED THE ORDERS AND ALSO FOLLOWED UP FOR PAYMENTS WER E FILED. IT WAS SUBMITTED THAT PU SPA LATA PARIDA WAS AN INCOME TAX ASSESSEE HAVING PAN NO.AYGPP 2914 C AND HAS FILED THE RETURN OF INCOME DISCLOSING RECEIPT OF COMMISSION. COPY OF AGREEMENT AND BILLS WITH DETAILS OF INVOICES FOR WHOM SHE PROCURED THE ORDE RS WERE FILED. IT WAS SUBMITTED THAT THE APPLICABLE AMOUNT OF TDS WAS DEDUCTED FROM THE COMMISSION AND DULY DEPOSITED WITH THE I.T.AUTHORITIES . HENCE, IT WAS SUBMITTED THAT THE DISALLOWANCE SHOULD BE DELETED. REGARDING COMMISSION PAYMENT OF RS.19,548 TO GOKUL & CO., RS.8,500/ - TO SUMITRA TRADERS AND RS.1,178/ - TO BINAKAR SUPPLY AGENCY, IT WAS SUBMITTED THAT PAYMENTS WERE SMALL IN NATURE AND WAS NOT PRACTICAL TO PRODUCE THE PARTIES TO PROVE THEIR IDENTITY. 9. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE OBSERVED THAT IN VIEW OF DETAILED DISCUSSION BY THE ASSESSING OFFICER, IT IS ABUNDANTLY CLEAR THAT COMMISSION HAS BEEN PAID IN THE NAME OF SRI PRAKASH KUMAR MOHANTY FOR NO WORK DONE AND GENUINENESS OF THE PAYMENT HAS NOT BEEN ESTABLISHED BY THE ASSESSEE. IN THE CASE OF SMT. PUSPALATA PARIDA, BOTH EXISTENCE OF COMMISSION AGENT AND GENUINENESS OF PAYMENT HAS NOT BEEN ESTABLISHED BY THE ASSESSEE. IN THE CASE OF COMMISSION PAYMENT TO GOKUL & CO., SUMITRA TRADERS AND BINAKAR SUPPLY AGENCY, THE A SSESSEE FAILED TO PROVIDE VITAL PARTICULARS FOR WHICH NO ENQUIRIES COULD BE DONE AND 5 ITA NO.435/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 HENCE, EXISTENCE OF COMMISSION AGENTS AND GENUINENESS OF PAYMENT HAS NOT BEEN ESTABLISHED. THEREFORE, HE CONFIRMED THE DISALLOWANCE OF RS.8,80,447/ - . 10. BEFORE US, LD A. R. OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT PAYMENT OF COMMISSION OF RS.8,80,447/ - IS NOT IN DOUBT OR DEBATE. FURTHER, THE GENUINENESS OF PAYMENT IS PROVED FROM THE FACT THAT THE ASSESSEE HAS DEDUCTED TDS FROM THE COMMISSION PAYMENT MADE TO MR PRAKASH KUMAR MOHANTY AND SMT. PUSPALATA PARIDA AND DEPOSITED THE SAME WITH GOVERNMENT. THE ASSESSEE DURING THE COURSE OF HEARING HAS ALSO FILED COPIES OF INCOME TAX RETURNS OF BOTH THE PERSONS. THE ASSESSEE HAS FILED DETAILS SUCH AS BILLS, DETAILS OF ORDERS PROCURED BEFORE THE ASSESSING OFFIC ER AND ALSO SUBMITTED THAT THEY HAVE FOLLOWED UP FOR PAYMENT IN FAVOUR OF THE ASSESSEE FOR THE SALES MADE. THE ASSESSING OFFICER HAS NOT BROUGHT ANY COGENT AND POSITIVE MATERIALS ON RECORD AFTER VERIFYING THE DETAILS TO SHOW THAT SAME ARE NOT GENUINE WITH OUT BRINGING ANY ADVERSE MATERIALS ON RECORD, I N OUR CONSIDERED VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE DETAILS AND EVIDENCE FILED BEFORE HIM IN RESPECT OF COMMISSION PAYMENT. LD A.R. OF THE ASSESSEE FILED BEFORE US COPY OF ASSESSME NT ORDER FOR THE A SSESSMENT YEAR 2011 - 2012 IN THE CASE OF THE ASSESSEE , WHEREIN, 6 ITA NO.435/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 ASSESSMENT HAS BEEN MADE U/S.143(3)/147 OF THE ACT DATED 30.12.2016 AND SUBMITTED THAT COMMISSION PAYMENT MADE TO VERY SAME PERSONS HAS BEEN ALLOWED BY THE ASSESSING OFFICER HIMSELF. HENCE, IN OUR CONSIDERED VIEW ON THE VERY SAME SET OF FACTS WHEN COMMISSION HAS BEEN ACCEPTED BY THE REVENUE IN ONE YEAR AND IN ANOTHER YEAR, THEY CANNOT TURN AROUND AND SAY THAT COMMISSION PAYMENTS MADE TO THE VERY SAME PERSONS ARE NOT GENUINE A ND ARE BOGUS. OUR VIEW FINDS SUPPORT FROM THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. COMMISSIONER OF INCOME TAX, 193 ITR 321 (SC), WHEREIN, IT HAS BEEN HELD THAT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. TO THE SAME E FFECT IS THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. 358 ITR 295(SC), WHEREIN, IT HAS BEEN HELD AS UNDER: THAT A CONSISTENT VIEW HAD BEEN TAKEN IN FAVOUR OF THE ASSESSEE ON THE QUESTIONS RAISED, STARTING WITH THE ASSESSMENT YEAR 1992 - 93, THAT THE BENEFITS UNDER THE ADVANCE LICENCES OR UNDER THE DUTY ENTITLEMENT PASS BOOK DID NOT REPRESENT THE REAL INCOME OF THE ASSESSEE. THERE WAS NO REASON FOR THE COURT TO TAKE A DIFFERENT VIEW UNLESS THERE WERE VERY CONVINCING REASONS, WHICH THERE WERE NOT. 12. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF HONBLE SUPREME COURT AND KEEPING IN VIEW THE FACT THAT NO CHANGE IN FACTS HAS BEEN BROUGHT ON RECORD BY THE REVENUE DURING THE YEAR UNDER APPEAL, WE 7 ITA NO.435/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO ALLOW COMMISSION PAYMENT TO SHRI PRAKASH KUMAR MOHANTY AND SMT. PUSPALATA PARIDA. HOWEVER, IN RESPECT OF COMMISSION PAYMENT TO GOKU L & CO., SUMITRA TRADERS AND BINAKAR SUPPLY AGENCY, WE FIND THAT THE ASSESSEE HAS FAILED TO PROVIDE VITAL PARTICULARS REGARDING COMMISSION PAYMENT AND HENCE, WE CONFIRM THE ADDITION TO THAT EXTENT. HENCE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 13. IN G ROUND NO.7 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS,1,34,276/ - UNDER THE HEAD SALES PROMOTION EXPENSES. 14. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE H AS CLAIMED DEDUCTION OF RS.1,34,276/ - UNDER THE HEAD SALES PROMOTION EXPENSES WHICH COMPRISED OF PROVIDING HOTEL FACILITIES AND REFRESHMENT, ETC TO CIPET INSPECTORS AND, THEREFORE, HELD THAT SAME CANNOT BE TREATED AS BUSINESS EXPENDITURE AS CIPET WAS A C ENTRAL GOVERNMENT INSTITUTION. THE ASSESSEE SUBMITTED THAT IT WAS INCURRED IN THE NORMAL COURSE OF BUSINESS TO THE EXTEND OF COURTESY AND DUE TO BUSINESS EXIGENCY. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND DISALLOWED THE SA ME. 15. ON APPEAL, THE CIT(A) CONFIRMED THE SAME. 16. BEFORE US, LD A.R.OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 8 ITA NO.435/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIALS ON RECORD, WE FIND THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.1,34,276/ - AS SALES PROMOTION EXPENSES. THE SAID EXPENDITURE WAS INCURRED ON REFRESHMENT PROVIDED TO CIPET INSPECTORS. THE ASSESSING OFFICER DISALLOWED THE DEDUCTION O N THE GROUND THAT IT WAS NOT BUSINESS EXPENDITURE AND WAS SPENT FOR PROVIDING HOSPITALITY TO GOVERNMENT SERVANT. THE CLAIM OF THE ASSESSEE IS THAT THE EXPENDITURE HAS BEEN INCURRED FOR NORMAL COURSE OF BUSINESS AND IS BUSINESS NECESSITY AND HENCE, THE DE DUCTION SHOULD BE ALLOWED FOR THE SAME. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE AMOUNT HAS BEEN INCURRED FOR CARRYING OUT THE BUSINESS ACTIVITIES OF THE ASSESSEE AND FOR THE BUSINESS PURPOSES AND, THEREFORE , THE SAME IS ALLOWABLE AS DEDUCTION U/S.37(1) OF THE ACT. FURTHER, WE FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT GENUINE OR IS EXCESSIVE. HENCE, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AN D DELETE THE DISALLOWANCE OF RS.1,34,276/ - AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 18. THE ASSESSEE HAS ALSO FILED AN ADDITIONAL GROUND, WHICH READS AS UNDER: THAT THE LD FORUM BELOW SHOULD HAVE ALLOWED THE CREDIT OF TOTAL AMOUNT OF TDS CLAIMED B Y THE ASSESSEE AND SHOULD NOT HAVE DISALLOWED TDS TO THE TUNE OF RS.31,679/ - IGNORING THE FACT OF PRODUCTION OF TDS CERTIFICATE. 1 9. WE FIND THAT THE ASSESSEE HAD RAISED THIS GROUND AS GROUND NO.6 OF THE APPEAL BEFORE THE CIT(A) FILED IN FORM NO.35 OF APP EAL MEMO AND THE 9 ITA NO.435/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 CIT (A) HAS NOT ADJUDICATED THE SAME. HENCE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE CIT(A) TO ADJUDICATE THE ISSUE AS PER LAW. 20 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 12 /06 /2017 IN THE PRESENCE OF PARTIES. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 12 /06 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : M/S. HARI UDYOG PVT LTD., AT/PO: O.T.ROAD, DIST: BALASORE 2. THE RESPONDENT. JCIT, BALASORE RANGE, BALASORE. 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//