The ACIT, Circle-2(1)(2), Ahmedabad V. M/s. Maxim Tubes Company Pvt. Ltd., Ahmedabad

ITA 45/AHD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9847 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 23-08-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 06-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Assessee Lawyers: M J SHAH
• Keywords: Bogus purchase; Advance ruling
• Section: 143(3); 37(1)

Judgement Text

I .T.A. N OS . 3244/AHD/2015 & 45/AHD/2016 ASSESSMENT Y EAR: 20 12 - 13 PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR , AM AND MAHAVIR PRASAD , JM ] I.T.A. NO. 3244 /AHD/201 5 ASSESSMENT YEAR: 20 12 - 13 MAXIM TUBES COMPANY PVT. LTD., ........ ..... ...... . ... . APPELLANT B - 92, RIVIERA A NTILIA, NR . PINNACLE CORPORAT ION ROAD, PRAHLADNAGAR, VEJALPUR, AHMEDABAD 380 051. [ PAN: AA ECM 8083 E ] VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(1) (2) , AHMEDABAD . ........ ............... . RESPONDENT I.T.A. NO . 45/AHD/2016 ASSESSMENT YEAR: 2012 - 13 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(2), AHMEDABAD. ............................ . APPELLANT VS. MAXIM TUBES COMPANY PVT. LTD., ........... ...... . ... . RESPO NDENT B - 92, RIVIERA ANTILIA, NR. PINNACLE CORPORATION ROAD, PRAHLADNAGAR, VEJALPUR, AHMEDABAD 380 051. [ PAN: AAECM 8083 E ] APPEARANCES BY: M.J. SHAH FOR THE A SSESSEE RAJESH MEENA FOR THE REVENUE DATE OF CONCLUDING THE HEARING : 23 .0 8 .2016 DATE OF PRONOUNC ING THE ORDER : 22 . 1 1 .2016 O R D E R PER PRAMOD KUMAR , AM : I .T.A. N OS . 3244/AHD/2015 & 45/AHD/2016 ASSESSMENT Y EAR: 20 12 - 13 PAGE 2 OF 9 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 12.10.2015 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSES SMENT YEAR 20 12 - 13 . 2. FIRST WE TAKE UP APPEAL FILED BY THE ASSESSEE. GRIEVANCE S RAISED BY A SSESSEE ARE AS UNDER : - 1. THE LEARNED C.I.T.(A) HAS ERRED IN CONFIRMING TH E ADDITION OF RS.13,235 BEING EMPLOYEES CONTRIBUTION UNDER SECTION 36(1)(VA) AS PER TA X AUDIT R EPORT IN ASMUCH AS IT IS PAID WITHIN THE SAME YEAR AND THEREFORE IT CANNOT BE ADDED AS INCOME. 2. THE LEARNED C.I.T . (A ) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF COMMISSION OF RS.22,48,659/ - ON THE GROUND THAT THERE IS NO EV IDENCES THOUGH FURNIS HED IN ASMUCH AS THE COMMISSION P A ID IS GENUINE. 3. GROUND NO.1 IS NOT PRESSED BY THE ASSESSEE AND IS ACCORDINGLY DISMISSED FOR WANT OF PROSECUTION. 4. AS REGARDS SECOND GROUND OF APPEAL, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF A SSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED EXPENDITURE OF RS.22,48,659/ - AS COMMISSION PAID TO NON - RESIDENT BUT TERMS AND CONDITIONS FOR COMMISSION PAYMENT, ROLE OF COMMISSION AGENT AND THE PROOF OF SERVICES RENDERED B Y THE COMMISSION AGENTS WAS NOT FURNISHED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT ROLE OF AGENT HAS NOT BEEN EXPLAINED BY THE ASSESSEE . WITH THESE OBSERVATIONS, THE ASSESSING OFFICER DISALLOWED THE ENTIRE COMMISSION PAYMENT ON THE GROUND THAT THE PRO OF OF IDENTITY OF COMMISSION AGENT , AGREEMENT ENTERED INTO WITH THE COMMISSION AGENT AND THE PROOF OF THE COMMISSION AGENT HAVE NOT BEEN FURNISHED BY THE ASSESSEE. THE ASSESSING O FFICER FURTHER NOTED I .T.A. N OS . 3244/AHD/2015 & 45/AHD/2016 ASSESSMENT Y EAR: 20 12 - 13 PAGE 3 OF 9 THAT THE ASSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE UN DER SECTION 195 FROM THE COMMISSION SO PAID TO NON - RESIDENT. HE WAS OF THE CONSIDERED VIEW THAT EVEN THOUGH THE SERVICES OF THE AGENT M UST HAVE RENDERED ABROAD , IN THE LIGHT OF RULING OF A UTHORITY FOR A DVANCE R ULING , IN THE CASE OF RAJIV E MALHOTRA [2006] 286 ITR 5 6 4 , THE INCOME ARISING ON ACCOUNT OF COMMISSION PAYABLE TO THE OVERSEAS AGENTS IS DEEMED TO ACCRUE AND ARISE IN INDIA, AND IS TAXABLE IN INDIA . SINCE THE TAX WAS NOT DEDUCTED FROM THE COMMISSION SO PAID TO NON - R ESIDE NT , ACCORDING TO THE ASSESSING OFFICER , AMOUNTS SO PAID WAS ANY WAY LIABLE TO BE SUBJECTED TO DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT . AGGRIEVED BY THE DISALLOWANCE SO MA D E, THE ASSESSING OFFICER CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CI T(A). LEARNED CIT(A) UPHELD THE ACTION OF THE ASSESSING O FFICER ON BOTH THE COUNTS AND THUS DECLINED TO INTERFERE IN THE MA T TER. ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL . 5. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. WE HAVE NOTED FROM THE MATERIAL PLACED BEFORE US IN THE PAPER BOOK THAT THERE WAS AGREEMENT BETWEEN THE ASSESSEE AND GRITEC H S TEEL P RODUCTS & S ERVICES, MILANO INASMUCH AS THE SAID COMMISSION AGENT VI DE LETTER DATED 01.12.2011 HAS CONFIRMED THAT THE SAID CONCERN IS ACTING AS SALE S AGENCY ON BEHALF OF MAXIM TUBES COMPANY PVT. LTD. AND THAT THE SALE S ACTIVITY IS BASED ON AN AGREED COMMISSION LEVEL . WE HAVE ALSO PERUSED COPIES OF E - MAILS EXCHANGED BETW EEN THE ASSESSEE AND THE AGENT WHICH CONSTITUTE CONTEMPORANEOUS EVIDENCE OF THE SERVICE RENDERED BY THE AGENT. THE DETAILS OF COMMISSION INVOICE AS ALSO THE SALE INVOICE IN RESPECT OF WHICH SAID COMMISSION WAS PAID IS PLACED ON RECORD IN THE PAPER BOOK FI LED BEFORE US. THE PAYMENT OF COMMISSION HAS BEEN MADE THROUGH BANKING CHANNELS . I N THESE I .T.A. N OS . 3244/AHD/2015 & 45/AHD/2016 ASSESSMENT Y EAR: 20 12 - 13 PAGE 4 OF 9 CIRCUMSTANCES , THE EXISTENCE OF COMMISSION AGENT OR HIS IDENTITY , AS ALSO THE FACT OF RENDITION OF SERVICE CANNOT BE DISPUTED . IN THIS VIEW OF THE MATTER , SO FAR A S DISALLOWANCE HAVING BEEN MADE UNDER SECTION 37(1) IS CONCERNED, THE SAME CANNOT BE SUSTAINED. 7 . AS REGARDS THE DISALLOWANCE UNDER SECTION 40(A ) (I), WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF A CO - ORDINATE BENCH OF TH IS TRIBUNAL IN THE CASE OF ITO VS . EXCELL CHEMICALS INDIA LIMITED (2016) 72 TAXMANN.COM 284 WHEREIN THE CO - ORDINATE BENCH HAS INTER ALIA OBSERVED AS FOLLOWS : - 5. THE BASIC CONTENTION OF THE ASSESSING OFFICER IS THAT IN VIEW OF THE SCOPE OF DEEMING FICTIO N UNDER SECTION 9(1)(I), WHICH INTER ALIA HOLDS THAT ANY INCOME 'ARISING DIRECTLY OR INDIRECTLY FROM ANY BUSINESS CONNECTION IN INDIA' WILL BE DEEMED TO ACCRUE OR ARISE IN INDIA, READ WITH THE SCOPE OF CHARGING SECTION 5(2), WHICH ENABLES TAXABILITY OF A N ON - RESIDENT IN RESPECT OF 'INCOME ACCRUING OR ARISING OR DEEMED TO ACCRUE OR ARISE, IN INDIA,, INCOME ARISING IN THE HANDS OF THE NON - RESIDENT COMMISSION AGENT IS TAXABLE IN INDIA. WHAT HE OVERLOOKS, HOWEVER, IS THE IMPACT OF EXPLANATION 1 TO SECTION 9 (1) (I) WHICH STATES THAT 'FOR THE PURPOSE OF THIS CLAUSE [I.E. 9(1)(I)], IN THE CASE OF A BUSINESS OF WHICH ALL THE OPERATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY SUCH PAR T OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA'. ONLY IF HE WAS TO TAKE INTO ACCOUNT THE SCOPE OF EXPLANATION 1 TO SECTION 9(1)(I), COUPLED WITH THE FACT THAT ADMITTEDLY NO PART OF OPERATIONS OF THE NON - RESIDENT COMMIS SION AGENT WERE CARRIED OUT IN INDIA, HE WOULD HAVE REALIZED THAT EVEN THOUGH DEEMING FICTION UNDER SECTION 9(1)(I) IS TRIGGERED ON THE FACTS OF THIS CASE, ON ACCOUNT OF COMMISSION AGENT'S BUSINESS CONNECTION IN INDIA, IT HAS NO IMPACT ON TAXABILITY IN THE HANDS OF COMMISSION AGENT BECAUSE ADMITTEDLY NO BUSINESS OPERATIONS WERE CARRIED OUT IN INDIA, AND, THEREFORE EXPLANATION 1 TO SECTION 9(1)(I) COMES INTO PLAY. THE SEEMINGLY ERUDITE ANALYSIS BY THE ASSESSING OFFICER IS BASED ON A HALF - BAKED LEGAL THEORY, AND THE CONCLUSIONS, THEREFORE, CLEARLY FALLACIOUS. 6. AS FOR THE AAR RULING IN THE CASE OF SKF BOILERS AND DRIERS (P.) LTD. (SUPRA), ON WHICH SO MUCH RELIANCE HAS BEEN PLACED BY THE ASSESSING OFFICER, WE FIND THAT THIS DECISION MERELY FOLLOWS THE EARLIER RULING IN THE CASE OF RAJIV MALHOTRA (SUPRA) WHICH, IN OUR CONSIDERED VIEW, DOES NOT TAKE INTO ACCOUNT THE IMPACT OF EXPLANATION 1 TO SECTION 9(1)(I) PROPERLY. THAT WAS A CASE IN WHICH THE NON - RESIDENT COMMISSION AGENT WORKED FOR PROCURING PARTICIPATION BY OTHER NON - RESIDENT ENTITIES IN A FOOD AND WINE SHOW IN INDIA, AND THE CLAIM OF THE ASSESSEE WAS THAT SINCE THE AGENT HAS NOT CARRIED OUT ANY BUSINESS OPERATIONS IN INDIA, THE COMMISSION AGENT WAS NOT CHARGEABLE TO TAX IN INDIA, AND, ACCORDINGLY, THE I .T.A. N OS . 3244/AHD/2015 & 45/AHD/2016 ASSESSMENT Y EAR: 20 12 - 13 PAGE 5 OF 9 ASSES SEE HAD NO OBLIGATION TO DEDUCT TAX AT SOURCE FROM SUCH COMMISSION PAYMENTS TO THE NON - RESIDENT AGENT. ON THESE FACTS, THE AUTHORITY FOR ADVANCE RULING, INTER ALIA, OPINED THAT 'NO DOUBT THE AGENT RENDERS SERVICES ABROAD AND PURSUES AND SOLICITS EXHIBITORS THERE IN THE TERRITORY ALLOTTED TO HIM, BUT THE RIGHT TO RECEIVE THE COMMISSION ARISES IN INDIA ONLY WHEN EXHIBITOR PARTICIPATES IN THE INDIA INTERNATIONAL FOOD & WINE SHOW (TO BE HELD IN INDIA), AND MAKES FULL AND FINAL PAYMENT TO THE APPLICANT IN INDIA AND THAT THE COMMISSION INCOME WOULD, THEREFORE, BE TAXABLE UNDER SECTION 5(2)(B) READ WITH SECTION 9(1)(I) OF THE ACT'. THE AUTHORITY FOR ADVANCE RULING ALSO HELD THAT THE FACT THAT THE AGENT RENDERS SERVICES ABROAD IN THE FORM OF PURSUING AND SOLICITING PARTICIPANTS AND THAT THE COMMISSION IS REMITTED TO HIM ABROAD ARE WHOLLY IRRELEVANT FOR THE PURPOSE OF DETERMINING SITUS OF HIS INCOME WE DO NOT CONSIDER THIS APPROACH TO BE CORRECT. WHEN NO OPERATIONS OF THE BUSINESS OF COMMISSION AGENT IS CARRIED ON IN INDIA, THE EXPLANATION 1 TO SECTION 9(1)(I) TAKES THE ENTIRE COMMISSION INCOME FROM OUTSIDE THE AMBIT OF DEEMING FICTION UNDER SECTION 9(1 )(I), AND, IN EFFECT, OUTSIDE THE AMBIT OF INCOME 'DEEMED TO ACCRUE OR ARISE IN INDIA' FOR THE PURPOSE OF SECTION 5(2 )(B). THE POINT OF TIME WHEN COMMISSION AGENT'S RIGHT TO RECEIVE THE COMMISSION FRUCTIFIES IS IRRELEVANT TO DECIDE THE SCOPE OF EXPLANATION 1 TO SECTION 9(1 )(I), WHICH IS WHAT IS MATERIAL IN THE CONTEXT OF THE SITUATION THAT WE ARE IN SEISIN OF. THE REVEN UE'S CASE BEFORE US HINGES ON THE APPLICABILITY OF SECTION 9(1)(I) AND, IT IS, THEREFORE , IMPORTANT TO ASCERTAIN AS TO WHAT EXTENT WOULD THE RIGOUR OF SECTION 9(1)(I) BE RELAXED BY EXPLANATION 1 TO SECTION 9(1)(I). WHEN WE EXAMINE THINGS FROM THIS PERSPECT IVE, THE INEVITABLE CONCLUSION IS THAT SINCE NO PART OF THE OPERATIONS OF THE BUSINESS OF THE COMMISSION AGENT IS CARRIED OUT IN INDIA, NO PART OF THE INCOME OF THE COMMISSION AGENT CAN BE BROUGHT TO TAX IN INDIA. IN THIS VIEW OF THE MATTER, VIEWS EXPRESSE D BY THE HON'BLE AAR, WHICH DO NOT FETTER OUR INDEPENDENT OPINION ANYWAY IN VIEW OF ITS LIMITED BINDING FORCE UNDER S. 245S OF THE ACT, DO NOT IMPRESS US, AND WE DECLINE TO BE GUIDED BY THE SAME. THE STAND OF THE REVENUE, HOWEVER, IS THAT THESE RULINGS, BE ING FROM SUCH A HIGH QUASI - JUDICIAL FORUM, EVEN IF NOT BINDING, CANNOT SIMPLY BE BRUSHED ASIDE EITHER, AND THAT THESE RULINGS AT LEAST HAVE PERSUASIVE VALUE. WE HAVE NO QUARREL WITH THIS PROPOSITION. WE HAVE, WITH UTMOST CARE AND DEEPEST RESPECT, PERUSED T HE ABOVE RULINGS RENDERED BY THE HON'BLE AUTHORITY FOR ADVANCE RULING. WITH GREATEST RESPECT, BUT WITHOUT SLIGHTEST HESITATION, WE HUMBLY COME TO THE CONCLUSION THAT WE ARE NOT PERSUADED BY THESE RULINGS. 7. IN VIEW OF THE ABOVE DISCUSSIONS, IN OUR CONSIDE RED VIEW, LEARNED CIT (A) WAS INDEED JUSTIFIED IN HOLDING THAT GIVEN THE UNDISPUTED AND UNCONTROVERTED FACTS OF THIS CASE, THE NON - RESIDENT COMMISSION AGENTS WERE NOT TAXABLE IN INDIA IN RESPECT OF THEIR COMMISSION EARNINGS FROM ORDERS PROCURED ABROAD. 8. IT IS ALSO NOW WELL SETTLED IN LAW THAT WHEN THE PAYMENT MADE TO A NON - RESIDENT DOES NOT HAVE AN ELEMENT OF INCOME, TAX DEDUCTION SOURCE REQUIREMENTS UNDER SECTION 195(2) DO NOT COME INTO PLAY AT ALL. HON'BLE SUPREME COURT, IN THE CASE OF G E INDIA TECHNOL OGY CENTRE (P.) LTD. V. CIT [2010] 327 ITR 456/193 TAXMAN 234/7 TAXMANN.COM 18 , HAS INTER ALIA OBSERVED AS FOLLOWS: IN OUR VIEW, SECTION 195(2) IS BASED ON THE 'PRINCIPLE OF PROPORTIONALITY'. THE SAID SUB - SECTION GETS ATTRACTED ONLY IN CASES WHERE THE PAYMENT MADE IS A COMPOSITE PAYMENT IN WHICH A CERTAIN PROPORTION OF PAYMENT HAS AN ELEMENT I .T.A. N OS . 3244/AHD/2015 & 45/AHD/2016 ASSESSMENT Y EAR: 20 12 - 13 PAGE 6 OF 9 OF 'INCOME' CHARGEABLE TO TAX IN INDIA. IT IS IN THIS CONTEXT THAT T HE SUPREME COURT STATED, 'IF NO SUCH APPLICATION IS FILED, INCOME - TAX ON SUCH SUM IS TO BE DEDUCTED AND IT IS THE STATUTORY OBLIGATION OF THE PERSON RESPONSIBLE FOR PAYING SUCH 'SUM' TO DEDUCT TAX THEREON BEFORE MAKING PAYMENT. HE HAS TO DISCHARGE THE OBLI GATION TO TDS'. IF ONE READS THE OBSERVATION OF THE SUPREME COURT, THE WORDS 'SUCH SUM' CLEARLY INDICATE THAT THE OBSERVATION REFERS TO A CASE OF COMPOSITE PAYMENT WHERE THE PAYER HAS A DOUBT REGARDING THE INCLUSION OF AN AMOUNT IN SUCH PAYMENT WHICH IS EX IGIBLE TO TAX IN INDIA. IN OUR VIEW, THE ABOVE OBSERVATIONS OF THIS COURT IN TRANSMISSION CORPORATION CASE (SUPRA) WHICH IS PUT IN ITALICS HAS BEEN COMPLETELY, WITH RESPECT, MISUNDERSTOOD BY THE KARNATAKA HIGH COURT TO MEAN THAT IT IS NOT OPEN FOR THE PAYE R TO CONTEND THAT IF THE AMOUNT PAID BY HIM TO THE NON - RESIDENT IS NOT AT ALL 'CHARGEABLE TO TAX IN INDIA', THEN NO TDS IS REQUIRED TO BE DEDUCTED FROM SUCH PAYMENT. THIS INTERPRETATION OF THE HIGH COURT COMPLETELY LOSES SIGHT OF THE PLAIN WORDS OF SECTION 195(1) WHICH IN CLEAR TERMS LAYS DOWN THAT TAX AT SOURCE IS DEDUCTIBLE ONLY FROM 'SUMS CHARGE ABLE' UNDER THE PROVISIONS OF THE I.T. ACT, I.E., CHARGEABLE UNDER SECTIONS 4, 5 AND 9 OF THE I.T. ACT. (EMPHASIS BY UNDERLINING SUPPLIED BY US) 9. CLEARLY, THER EFORE, FOR APPLICATION OF SECTION 195, IT IS SINE QUA NON THAT THE PAYMENT TO NO - RESIDENT MUST HAVE AN ELEMENT OF INCOME LIABLE TO BE TAXED UNDER THE INDIAN INCOME TAX ACT, 1961. ON THE FACTS OF THIS CASE, AS WE HAVE ALREADY CONCLUDED, NO PART OF THE REMIT TANCE TO THE COMMISSION AGENT WAS TAXABLE IN INDIA. THE ASSESSEE WAS, THEREFORE, NOT UNDER ANY OBLIGATION, ON THE FACTS OF THIS CASE, TO DEDUCT ANY TAX AT SOURCE FROM THE COMMISSION PAYMENTS TO THE NON - RESIDENTS. SINCE THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE, THE VERY FOUNDATION OF IMPUGNED DISALLOWANCE UNDER SECTION 40(A)(I) CEASES TO HOLD GOOD IN LAW. LEARNED CIT (A) WAS, THEREFORE, QUITE JUSTIFIED IN DELETING THE IMPUGNED DISALLOWANCE. WE UPHOLD HIS ACTION, AND DISMISS THE GRIEVANCE RAISED BY THE ASSESSING OFFICER. 8 . THE DECISION OF THE AUTHORITY FOR ADVANCE RULING, IN THE CASE OF IN THE CASE OF RAJIVE MALHOTRA [2006] 286 ITR 564, ON WHICH RELIANCE HAS BEEN PLACED BY THE AUTHORITIES BELOW HAS BEEN DISCUSSED AND DISTINGUISHED IN THE AFORESAID DE CISION. WE SEE NO REASON S TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE CO - ORDINATE BENCH . A CCORDINGLY , THE DISALLOWANCE UNDER SECTION 40(A) (I) WHICH HAS BEEN CONFIRMED BY THE LEARNED CIT(A) IS ALSO DEVOID OF LEGALLY SUSTAINABLE MERI TS. IN VIEW OF THESE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE C A SE, WE ARE OF THE CONSIDERED I .T.A. N OS . 3244/AHD/2015 & 45/AHD/2016 ASSESSMENT Y EAR: 20 12 - 13 PAGE 7 OF 9 VIEW THAT THE DISALLOWANCE OF RS. 22,48,659/ - IN RESPECT OF COMMISSION PAID TO THE NON - RESIDENT WHICH WAS UPHELD BY THE LEARNED CIT(A) DESERVES TO BE DELETE D. WE DIRECT SO. 9 . GROUND NO.2 IS THUS ALLOWED. 10 . IN THE RESULT , APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 1 1 . WE NOW TAKE UP THE APPEAL FILED BY TH E ASSESSING OFFICER. GRIEVANCES RAISED BY THE ASSESSING OFFICER ARE AS UNDER : - 1. THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF INFLATED SALES AND PURCHASES AMOUNTING TO RS.53,20,000/ - , WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGH T ON RECORD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C.I.T.(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. C.I.T.(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER MAY BE RESTORED TO THE ABOVE EXTENT. 1 2 . SO FAR AS THIS ISSUE IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSE SS MENT PROCEEDINGS , THE ASSESSING O FFICER TOOK NOTE OF CERTAIN INFORMATION RECEIVED FROM DDIT (INV) UNIIT II(2) PUNE REGARDING SEARCH PROCEEDINGS IN THE CASE OF WALCHANDNAGAR INDUSTRIES LIMITED. IN THE INFORMATION SO RECEIVED IT WAS APPARENTLY CONVEYED TO THE ASSESSING O FFICER TH A T WALCHANDNAGAR INDUSTRIES LIMITED (WIL IN SHORT) WAS INVOLVED IN PURCHASES OF MATERIAL WHICH WAS OVER - INVOICED. THE VENDORS, UNDER AN ARRANGEMENT WITH WIL, WAS PAYING BACK THE OVER - INVOICED AMOUNT TO W I L AFTER DEDUCTING THE SAME AMOUNT TOWARDS WHAT WAS TERMED AS CONVERSION CHARGES. IT WAS IN THIS BACK DROP ASSESSEE WAS ASKED TO SU BMIT DETAILS OF SALES TO WI L. IT WAS I .T.A. N OS . 3244/AHD/2015 & 45/AHD/2016 ASSESSMENT Y EAR: 20 12 - 13 PAGE 8 OF 9 EXPLAINED BY THE ASSESSEE THAT THE SALE OF RS.1,80,06,287/ - WAS MADE TO W I L THROUGH MAXIM TUBE S & ENGINEERING CO . WHICH WAS THE CONSIGNEE AGENT. THE ASSESSING O FFICER REJECTED THIS SALE ARRANGEMENT AS NOT GENUINE AND PROCEEDED TO MAKE AN ADDITION O F RS.53,20,000/ - AS INFLATED SALES AND CORRESPONDING BOGUS PURCHASE S . WHILE DOING SO , THE ASSESSING OFFICER ALSO OBSERVED FOLLOWS : - THE ASSESSEE WAS ASKED TO SUBMIT THE BILLS OF THE OTHER PARTIES TO WHOM SALES HAVE BEEN MADE THROUGH ITS CONSIGNEE AGENT M/S MAXIM TUBES & ENGINEERING CO. D URING THE YEAR UNDER CONSIDERATION AND T HE RATE PER KG/PER MTR AS CHARGED BY THE ASSESSEE. THE ASSESSEE DID NOT SUBMIT THE DETAILS OF THE PARTIES OTHER THAN M/S WIL THROUGH I TS CONSIGNEE AGENT M/ S MAXIM TUBES & ENGINEERING CO. PUNE FOR CO M PARISON. THE ASSESSEE HAS SUBMITTED THE DETAILS OF PAYMENT RECEIVED FROM M/S MAXIM TUBES & ENGINEERING CO. PUNE BUT HAS NOT SUBMITTED ANY BANK STATEMENT TO SUBSTANTIATE ITS CLAIM AND ITS SUBSEQUENT C A SH WITHDRAWALS AS PER T HE MODUS OPERANDI OF M/S WIL. FUR THER THE ASSESSEE WAS ASKED TO SUBMIT THE CORRESPONDING PURCHASES OF RAW MATERIAL FOR THE SALES INCURRED DURING THE YEAR TO M/S MAXIM TUBES & ENGINEERING CO. PUNE WHICH WERE NOT SUBMITTED BY THE ASSESSE E. 1 3 . AGGRIEVED BY THE DISALLOWANCE SO MADE, THE ASSESSEE CARRIED THE MA T TER IN APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) WAS OF THE VIEW THAT THE ASSESSING O FFICER HAS NOT PIN POINTED ANY SPECIFIC INVOICE OF BOGUS PURCHASE WHICH WAS CLAIME D AS EXPENDITURE AGAINST OVER - INVOICING OF SALES AND THAT THE ENTIRE ADDITION IS BASED ON SURMISES AND CONJECTURES . THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 1 4 . WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AN D DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 1 5 . WE FIND THAT , AS LEARNED CIT(A) HAS RIGHTLY POINTED OUT, NO SPECIFIC INSTANCE S OF BOGUS PURCHASE S OR INFLATED SALES HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER. AS A MATTER OF FACT, THERE ARE NO DIRECT SALES OR RECEIPT OF PAYMENT FROM WIL FROM THE I .T.A. N OS . 3244/AHD/2015 & 45/AHD/2016 ASSESSMENT Y EAR: 20 12 - 13 PAGE 9 OF 9 ASSESSEE INASMUCH AS THE TRANSACTIONS WERE BETWEEN MAXIM TUBES & ENGINEERING CO. AND W I L. THE ASSESSEE HAS MADE NO PURCHASE OR SALE WITH W I L IN THE RELEVANT PREVIOUS YEAR . IN THESE CIRCUMSTANCES , THE ADDITION OF RS .53,20,000/ - MADE IN THE HANDS OF THE ASSESSING O FFICER IS INDEED DEVOID OF ANY LEGAL OR FACTUAL BASIS. IT IS, IN OUR CONSIDERED VIEW, PURELY BASED ON SURMISES AND CONJECTURES AND THE LEARNED CIT(A ) WAS THEREFO RE PERFECTLY JUSTIFIED IN DELETING THE SAME. IN VIEW OF THESE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE CASE , WE UPHOLD THE ACTION OF THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 1 6 . IN THE RESULT , APPEAL FILED BY THE ASSESSING O FFICER IS DISMISSED. 1 7 . TO SUM UP, WHILE APPEAL FIL E D BY THE ASSESSEE IS PARTLY ALLOWED , APPEAL FIL E D BY THE ASSESSING OFFICER IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 22 ND DAY OF NOVEMBER , 2016. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 22 ND DAY OF NOVEMBER , 2016. COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD