DCIT 18(2), MUMBAI V. BURJOR BHARUCHA, MUMBAI

ITA 4603/MUM/2010

• Counselvise Citation: 460319914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 11-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Assessee Lawyers: M SUBRAMANIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO.4603/MUM/2010 (ASSESSMENT YEAR: 2006-07) DCIT, CIRCLE 18(2), ROOM NO.115, 1ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI -400 012 ....... APPELLANT VS SHRI BURJOR BHARUCHA, V-52, TWIN TOWERS, PRABHADEVI, MUMBAI -400 025 ..... RESPONDENT PAN: AACPB 1473 C APPELLANT BY: SHRI T.T. JACOB RESPONDENT BY: SHRI M. SUBRAMANIAN DATE OF HEARING: 11.10.2011 DATE OF PRONOUNCEMENT: 19.10.2011 O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A) -29, MUMBAI DATED 10.03.2010 FOR TH E A.Y. 2006-07. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUN D:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE DISALLOWANCE OF ` 900891/- MADE U/S.40A(2)(B) WITHOUT APPRECIATING TH E FACT THAT COMMISSION HAS ACTUALLY BEEN PAID @ 42% WHEREA S IT WAS PAYABLE @ 20% AS PER THE AGREEMENT DT.17-4-2002 . ITA 4603/MUM/2010 SHRI BURJOR BHARUCHA 2 2. THE FACTS PERTAINING TO THE ISSUE ARE IN NARROW COMPASS. THE ASSESSEE IS RUNNING A PROPRIETARY CONCERN BUSINESS AND EARNING AN INCOME BY WAY OF COMMISSION. THE RETURN FILED BY T HE ASSESSEE FOR THE A.Y. 2005-06 WAS SELECTED FOR SCRUTINY AND ASSESSME NT WAS COMPLETED U/S.143(3) OF THE ACT. AS NOTED BY THE A.O. THE AS SESSEE DECLARED THE COMMISSION OF ` 49,62,614/- AND ALSO SHOWN THE PAYMENT OF THE COMMISSION OF ` 21,14,558/- WHICH WAS ALMOST 42% OF COMMISSION RECEIVED. AS PER THE TAX AUDIT REPORT THE ENTIRE C OMMISSION WAS PAID TO HIS SON NAMELY SHRI HEMIN BHARUCHA. THE A.O., T HEREFORE, PROCEEDED TO MAKE THE DISALLOWANCE U/S.40A(2)(B) BY DETERMINING REASONABLENESS OF THE COMMISSION EXPENDITURE. IT A PPEARS THAT THE A.O. ISSUED SUMMONS TO SHRI HEMIN BHARUCHA, SON OF THE ASSESSEE AND HIS STATEMENT WAS ALSO RECORDED. AS PER THE ST ATEMENT GIVEN BY SHRI HEMIN BHARUCHA, HE JOINED ASSESSEES BUSINESS IN 1995 AND TILL 2002 HE WAS EMPLOYED BY THE ASSESSEE AND WAS PAID S ALARY OF ` 3 LAKHS PER ANNUM. FROM THE F.Y. 2002-03 HE IS WORKI NG WITH ASSESSEE ON THE COMMISSION BASIS, BUT THERE IS NO WRITTEN AG REEMENT BETWEEN HIM AND HIS FATHER I.E. THE PRESENT ASSESSEE. THE A.O., THEREFORE, CONSIDERED THE LAST SALARY DRAWN BY SHRI HEMIN BHAR UCHA AS A BASE AND BY GIVING 15% INCREASE IN EACH YEAR, HE DETERM INED THE REASONABLE COMMISSION TO BE PAID TO SHRI HEMIN AT ` 12,13,667/- AND DISALLOWED ` 9,00,891/- U/S.40A(2B) OF THE ACT. ASSESSEE CHALL ENGED THE ADDITION BEFORE THE LD. CIT (A) AND FOUND FAVOU R. APART FROM MERIT, THE LD. CIT (A) ALSO TOOK THE COGNIZANCE OF THE FACT THAT IN THE IMMEDIATE SUCCEEDING YEAR I.E. A.Y. 2007-08, IN ASS ESSMENT MADE U/S.143(3,) THE A.O. ALLOWED THE ENTIRE PAYMENT OF THE COMMISSION TO THE EXTENT OF 42%. NOW, THE REVENUE IS IN APPEAL B EFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. AS PER THE FACTS BEFORE US SHRI HEMIN BHARUCHA WHO IS A B.E. (ELECTRONICS) PASSED GRADUATE IN INTERNATIONAL FOREIGN TRADE AND ALSO DONE SHORT-TERM COURSE IN TEXTILE. SHRI HEMIN WAS WORKING WITH THE ASSESSEE FOR THE SPAN OF SIX YEARS FROM 1995-96 TO 2001-02 AND AS ITA 4603/MUM/2010 SHRI BURJOR BHARUCHA 3 AN EMPLOYEE AND HE WAS LOOKING AFTER THE ENTIRE BUS INESS OF THE ASSESSEE. DUE TO GROWING AGE OF THE ASSESSEE AND H EALTH PROBLEM SHRI HEMIN TOOK OVER THE ENTIRE RESPONSIBILITY OF THE AS SESSEES BUSINESS AND DECIDED TO WORK ON THE COMMISSION BASIS. NOTHI NG IS BROUGHT ON RECORD BY THE A.O. TO DEMONSTRATE THAT THE ASSESSEE HAD PAID LESSER COMMISSION TO THE OTHER PERSONS HAVING THE SAME COM MISSION & QUALIFICATION AND DISCHARGING THE SAME FUNCTIONS AS COMPARE TO MR. HEMIN. WE FAIL UNDERSTAND THE REASON BASIS ADOPTED BY GIVING 15% INCREASE IN SALARY BY THE A.O. MOREOVER, IN THE IM MEDIATE SUCCEEDING YEAR I.E. A.Y. 2007-08 EVEN IF THE ASSESSMENT IS CO MPLETED U/S.143(3) AND FACTS ARE IDENTICAL AS IN THIS YEAR, THE A.O. A LLOWED THE ENTIRE CLAIM OF THE ASSESSEE IN RESPECT OF THE COMMISSION PAID TO HIS SON I.E. SHRI HEMIN. IN OUR OPINION, THERE SHOULD BE CONSIS TENCY IN THE APPROACH OF THE A.O. MOREOVER, WE FIND THAT ON MER IT ALSO DISALLOWANCE U/S.40A(2)(B) IS NOT SUSTAINABLE. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) AND ACC ORDINGLY THE SAME IS CONFIRMED. 4. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 9TH OCTOBER 2011. SD/- SD/- ( RAJENDRA SINGH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : 19TH OCTOBER, 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-22, MUMBAI. 4) THE CIT-10, MUMBAI. 5) THE D.R. J BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 4603/MUM/2010 SHRI BURJOR BHARUCHA 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 10.10.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 10.10.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER