ASHWIN B. SHAH (PROP.A B ENTERPRISE), MUMBAI V. INCOME TAX OFFICER 15(1)(4), MUMBAI

ITA 4596/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6057 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 25-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: FORUM N MEHTA
• Keywords: Fair market value
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4596 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 1 2 ) ASHWIN B. SHAH (PROP. A.B. ENTERPRISE) 89, 1 ST FLOOR, RAMESH BHAWAN, PYDHOONI TAMBAKANTA MUMBAI - 400 003. PAN : AAPPS1183H V S . ITO - 15(1)(4) AAYAKAR BHAWAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI FORUM N. MEHTA DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 9 . 7 . 201 9 DATE OF PRONOUNCEMENT 1.10 . 201 9 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LEARNED CIT (A) DATED 21.5.2018 AND PERTAINS TO ASSESSMENT YEAR 2011 - 12. 2. T HE GROUNDS OF APPEAL READ AS UNDER : - DISALLOWANCE OF COMMISSION PAID OF RS.13,16,273/ - UNDER SECTION 40A(2)(B) OF THE INCOME - TAX ACT. 1961 ('THE ACT'): 1. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE HON'BLE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE LD. ASSESSING OFFICER IN DISALLOWING THE COMMISSION OF RS. 13,16 ,273/ - PAID TO ITS SISTER CONCERNS UNDER SECTION 40A(2)(B) OF THE ACT. THE APPELLANT PRAYS THAT THE DISALLOWANCE MADE UNDER SECTION 40A(2)(B) OF THE ACT BE DELETED . 3. B RIEF FACTS OF THE CASE AS UNDER THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFA CTURING GREY CLOTH UNDER PROPRIET A RY CONCERN M/S. A.B. ENTERPRISES. THE APPELLANT FILED RETURN OF INCOME ON 26.09.2011 DECLARING TOTAL INCOME OF RS.9,59,250/ - . THE CASE WAS ASHWIN B. SHAH 2 SELECTED FOR SCRUTINY AND NOTICE WAS SERVED O N THE ASSESSEE . THE AO COMPLETED THE A SSESSMENT U/S. 1 43(3 ) DETERMINING THE TOTAL INCOME AT RS.22,75,520/ - BY DISALLOWING THE COMMISSION AMOUNTING TO RS.13,16,273/ - PAID BY THE ASSESSEE TO ITS SISTER CONCERNS BY APPLYING THE PROVISIONS OF SECTION 40A(2) OF THE I.T. ACT . THE ASSESSING OFFICER OB SERVED THAT : - (A) A SSESSEE WAS FAILED TO FURNISH THE DETAILS OF TRANSACTION ON WHICH THE COMMISSION WAS PAID TO COMMISSION AGENTS (B) IT IS FURTHER SEEN THAT YOU HAVE GIVEN COMMISSION TO THE ASSESSEES ASSOCIATED/RELATED PARTIES AND ASSESSEE HA S FA ILED TO JUSTIFY THE USE PAYMENT OF THE COMMISSION. (C) MOREOVER, ASSESSEE HAS FAILED TO FILE DOCUMENTARY EVIDENCE IN SUPPORT OF SERVICES RENDERED BY THE COMMISSION AGENTS. 4. THE ASSESSEE RESPONDED AS UNDER : - M/S. SAURABH ENTERPRISE IS PROPRIETORY CO NCERN OF MR. SAURABH A.SHAH. HE IS DAILY VISITING B HIWANDI WHERE THE PRODUCTION IS CARRIED OUT, COORDINATE WITH THE VARIOUS WEAVERS, DRAWS PLANS OF PRODUCTION AS PER THE REQUIREMENTS OF THE CUSTOMERS, ARRANGE DELIVERY OF THE CUSTOMERS AND FOLLOW UP FOR THE PAYMENTS. HE IS BEING PAID COMMISSION @ 1% ON THE TOTAL SALES. 5. M/S. MEET ENTERPRISE IS A PROPRIETORY CONCERN OF MR. MEET A. SHAH. HE IS ENGAGED TO LOOK AFTER THE PURCHASES. HE IS INQUIRING RATES FROM VARIOUS SUPPLIERS, PLACING ORDERS WITH THE SUPPLIER S, COORDINATING DELIVERY OF RAW MATERIALS, COORDINATE WITH THE VARIOUS WEAVERS, MONITORS THE SUPPLY AND CONSUMPTION OF RAW MATERIALS, DRAWS PLANS OF PRODUCTION AS PER THE REQUIREMENTS. HE IS BEING PAID COMMISSION @ 0.50% ON THE TOTAL PURCHASES . 6. HOWEVE R, THE ASSESSING OFFICER WAS NOT CONVINCED. HE REJECTED THE CONTENTIONS . U PON ASSESSEE'S APPEAL LEARNED CIT (A) CON FIRMED THE DISALLOWANCE BY INTER ALIA OBSERVING THAT IT CANNOT BE RULED OUT THAT ASSESSEE HAS MADE THESE PAYMENTS TO REDUCE THE PROFITS . 7. A GAINST THIS ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT . 8. I HAVE HEARD BOTH THE COUN SE L AND PERUSED THE RECORDS. I FIND THAT THE DISALLOWANCE IN THIS CASE HAS BEEN DONE ON THE BASIS OF SURMISE AND CONJECTURE. IT IS S ETTLED LAW THAT DISALLOWANCES BASED U PON SURMISE AND CONJECTURE S ARE NOT SUSTAINABLE. ASSESSEE HAS DULY EXPLAINED THE REASON FOR PAYMENT OF THE COMMISSION. THE PAYMENTS HAVE NOT BEEN FOUND TO BE BOGUS. ASHWIN B. SHAH 3 THE ASSESSING OFFICER WAS OF THE OPINION THAT THESE PAYMENTS WERE NOT REQUIRED. IT IS SETTL ED LAW THAT THE REVENUE AUTHORITIES SHOULD NOT S ET INTO THE SHOES OF THE BUSINESSMAN. WHILE MAKING DISALLOWANCE UNDER SECTION 40A(2)(B) OF THE ACT IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO BRING ON COGENT MATERIAL TO SHOW THAT THE AMOUNT PAID BY THE A SSESSEE WAS MORE THAN THE FAIR MARKET VALUE OF THE SERVICES. I FIND THAT NO SUCH EXERCISE HAS BEEN DONE BY THE ASSESSING OFFICER. THE LEARNED CIT (A) H AS ALSO SUSTAIN ED THE DISALLOWANCE PURELY ON CONJECTURE BY HOLDING THAT IT CANNOT BE RULED OUT THAT ASSESS EE S MOTIVE WAS TO REDUCE PROFIT . IN THIS VIEW OF THE MATTER IN MY CONSIDERED OPINION DISALLOWANCE IN THIS CASE IS LIABLE TO BE DELETED. I ORDER ACCORDINGLY . 9. I N THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED ORDER HAS BE EN PRONOUNCED IN THE COURT ON 1.10 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 1 / 10 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. TH E RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI