Bimla Narang, New Delhi V. ITO, New Delhi

ITA 4628/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3186 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 31-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K JIWANI
• Keywords: Business expenditure; Salary income
• Section: 143(3); 142(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC, NEW DELHI BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 4628/DEL/2016 ASSESSMENT YEAR: 2012-13 BIMLA NARANG, VS. ITO, WARD 53(1), B-41, B.K. DUTT COLONY, NEW DELHI NEW DELHI (PAN: ABUPN9118P) (ASSESSEE) (RESPONDENT) A SSESSEE BY : SH. RANJAN CHOPRA, CA REVENUE BY : SH. V.K. JIWANI, SR. DR ORDER THIS APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER DATED 04.7.2016 PASSED BY THE LD. CIT(A)-18, NEW DELHI RELATING TO ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS:- 1. THAT THE APPELLATE ORDER AS PASSED IS AGAINST LAW A ND FACTS OF THE CASE. 2. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING DISALLOW ANCE OF RS. 6,02,000/- PAID AS COMMISSION TO ONE MR. SHASH I BHUSHAN FOR THE SERVICES PROVIDED BY HIM IN PROCURING THE D ISTRIBUTORSHIP OF M/S RECKITT AND BENCHKISER INDIA PVT. LTD. RESUL TING IN A JUMP IN THE SALES FROM RS. 2,55,45,450/- IN THE IMMEDIAT ELY PRECEDING YEAR TO RS. 14,21,78,796/- FOR THE YEAR UNDER APPEA L. 3. THAT THE LD. CIT(A) HAS ERRED NOT APPRECIATING THE FACTS BROUGHT BEFORE HIM OF THE SERVICES PROVIDED TO THE APPELLAN T BY SH. SHASHI BHUSHAN. 4. THAT THE LD. CIT(A) HAS UPHELD THE DISALLOWANCE BA SED ON THE JUDGMENT AS QUOTED IN THE APPELLATE ORDER WHERE THE FACTS ARE TOTALLY DIFFERED AND CANNOT BE COMPARED WITH THE F ACTS OF THE CASE. 2 5. THAT THE APPELLATE ORDER AS PASSED IS NOT SUSTAINAB LE ON THE FACST AND CIRCUMSTANCES OF THE CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSE FIL ED E-RETURN DECLARING TOTAL INCOME OF RS. 19,11,635/- ON 30.9.2012. THE R ETURN OF THE ASSESSEE WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED AS THE ACT). LATER, THE CASE OF THE ASSESS EE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY, THE STATUTORY NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 06.8.2014 AND SERVED UPON THE ASSESSEE. SUBSEQUENTLY, THE NOTICE U/S. 143(2) AND 142(1) ALO NGWITH QUESTIONNAIRE WERE ISSUED AND SERVED UPON THE ASSESSEE. IN RESPON SE THERETO, THE A.R. OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS AND FURNISHED WRITTEN SUBMISSIONS AND REQUISITE DETAILS / INFORMA TION AS CALLED FOR, WHICH WERE EXAMINED BY THE AO. DURING THE YEAR, THE ASS ESSEE HAS SHOWN RECEIPTS FROM INCOME FROM SALARY, INCOME FROM BUSIN ESS OR PROFESSION AND INCOME FROM OTHER SOURCES. THE ASSESSEE IS A PROPR IETOR OF M/S BHARTIYA SALES WHICH DEALS IN DISTRIBUTORSHIP OF VARIOUS PRO DUCTS. VIDE NOTICE DATED 23.3.2015 ISSUED U/S. 142(1) OF THE ACT, THE ASSESS EE WAS ASKED TO EXPLAIN AND JUSTIFY OF COMMISSION OF RS. 6,02,000/ - TO MR. SHASHI BHUSHAN. THE NATURE OF SERVICES RENDERED BY HIM, CO PY OF AGREEMENT AND PAYMENT DETAILS. THE ASSESSEE VIDE HIS SUBMISSION DATED 25.3.2015 HAS SUBMITTED ITS REPLY WHICH WAS CONSIDERED BY THE AO AND HE DID NOT FIND IT LOGICAL AND SATISFACTORY, BECAUSE THE AR OF THE ASS ESSEE SUBMITTED THAT IT WAS AGREED THAT COMMISSION AT CERTAIN PERCENTAGE W OULD BE PAID TO MR. SHASHI BHUSHAN. HE HAS NOT SUBMITTED ANY WRITTEN AG REEMENT THIS EFFECT, AS ANY THIRD PARTY WOULD INSIST FOR WRITTEN AGREEME NT IN THE CONDITIONS NARRATED BY THE AR OF THE ASSESSEE. FURTHER, IF THE COMMISSION WAS TO BE PAID AS A PERCENTAGE, WHAT WAS THE PERCENTAGE AS PE R AGREEMENT, IS ALSO NOT EXPLAINED. AO OBSERVED THAT AGREEMENT APPARENT LY STARTED FROM JUNE, 2011, IN THAT CASE WHY THE AMOUNT WAS PAID ON CE ONLY, ON 13.11.2011 AND NONE THEREAFTER, IF THERE WAS ANY AG REEMENT WITH HIM TO THIS EFFECT, HAS ALSO NOT BEEN EXPLAINED. THE ASSES SEE HAS ALSO NOT MADE ANY PROVISION FOR THE COMMISSION PAYABLE TO HIM FOR THE PERIOD AFTER THE 3 DATE OF PAYMENT OF RS. 6,02,000/- I.E. 13.11.2011 T ILL 31.3.2012. IN VIEW OF THE ABOVE, AO HELD THAT THERE IS NO JUSTIFICATIO N FOR THE ASSESSEE TO MAKE PAYMENT OF RS. 6,02,000/- TO MR. SHASHI BHUSHA N, AS COMMISSION ON SALES AND HENCE THE AMOUNT OF RS. 6,02,000/- WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE AND INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 36,34,300/- U/S. 143(3) OF THE ACT VIDE ORDER DATED 31.3.2015. AGGRIEVED WITH THE ASSESSMENT ORDER, T HE ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 04.7.2016 HAS UPHELD THE ACTION OF THE AO BY DISMISSING THE APPE AL OF THE ASSESSEE. 3. AGGRIEVED WITH THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASS ESSEE HAS REITERATED THE SUBMISSIONS AS MADE BEFORE THE LOWER AUTHORITI ES. HE SUBMITTED THAT THE TURNOVER OF THE ASSESSEE HAS BEEN INCREASED WHI CH FACT NOT DENIED BY THE AO. HE FURTHER STATED THAT PRUDENT BUSINESS DEC ISION, AO CANNOT PUT HIMSELF IN THE SEAT OF ASSESSEE- COMMERCIAL EXPED IENCY AND REFERRED THE CASE LAW CIT VS. DALMIA CEMENT (P) LTD. (2002) 121 TAXMAN 706 (DELHI) APPROVED BY THE APEX COURT IN SA BUILDERS VS. CIT (2007) 158 TAXMAN 74 (SC). IT WAS FURTHER STATED THAT SH. BHAS HI BHUSHAN, TO WHOM COMMISSION WAS PAID, HAS DULY DISCLOSED COMMISSION AT HIS INCOME AND THERE IS NO LOSS TO THE REVENUE AND THE SAME AO H AS ACCEPTED ASSESSEES COMMISSION PAYMENT IN SUCCEEDING YEAR. H E FURTHER STATED THAT CONDITIONS OF SECTION 37 FULFILLED (EXPENDITUR E NEITHER BEING CAPITAL IN NATURE NOR PERSONAL, EXPENDED WHOLLY FOR BUSINESS A ND NOT PROHIBITED BY LAW) AND AO HAS NOT MADE THE CASE OF BOGUS PAYMENT. IN VIEW OF THE ABOVE, HE REQUESTED THAT ADDITION IN DISPUTE MADE B Y THE AO AND CONFIRMED BY THE LD. CIT(A) MAY KINDLY BE DELETED BY ALLOWING THE APPEAL OF THE ASSESSEE. 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW AND OPPOSED THE REQUEST OF THE LD. COUNSEL OF THE ASSESSEE. 4 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS AVAILABLE WITH ME, ESPECIALLY THE IMPUGNED ORDER AND THE PAPE R BOOK FILED BY THE ASSESSEE. I FIND CONSIDERABLE COGENCY IN THE ARGUM ENT OF THE AR OF THE ASSESSEE THAT THE ASSESSEE NOT ONLY GOT THE DISTRIB UTORSHIP BECAUSE OF THE EFFORTS OF MR. SHASHI BHUSHAN BUT ALSO HELP IN THE FORM OF PROVISION OF THE BUYERS LIST, IN THE PROCESS MAKING A SALE OF RS. 1 1-12 CRORES AND IN THAT COMPARISON, THE COMMISSION PAYMENT OF RS. 6 LAKHS SHOULD NOT ELICIT ANY DOUBT. I FURTHER FIND THAT THE AR OF THE ASSESSEE WAS RIGHT IN CLAIMING THE FIGURE OF RS. 6 LACS WAS A ONE-TIME SETTLEMENT BET WEEN THE PARTIES, AFTER THE PARTY INSISTED FOR PAYMENT AND PROPER TDS HAS B EEN MADE ON SUCH PAYMENT AND PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQU E. IN THIS BEHALF, I HAVE PERUSED THE PAGE NOS. 14 & 48 OF TH E PAPER BOOK WHICH ARE THE COPIES OF THE PROFIT AND LOSS ACCOUNT T FO R THE PERIOD ENDING 31.3.2012 & 31.3.2013 OF M/S BHARTIYA SALES WHICH S HOW THAT THE ASSESSEE HAS PAID COMMISSION OF RS. 6,02,000/- AND RS. 8,00,350/- RESPECTIVELY. I HAVE ALSO PERUSED THE PAGE NO. 58 O F THE PAPER BOOK WHICH CLEARLY SHOWS THAT SH. SHASHI BHUSHAN, TO WHO M COMMISSION IN DISPUTE WAS PAID, HAS BEEN DULY DISCLOSED IN HIS RE TURN OF INCOME FOR THE AY 2012-13 IN THE STATEMENT OF INCOME OF RS. 6,02, 000/- BEING COMMISSION FROM BHARTIYA SALES. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED V IEW THAT LOWER AUTHORITIES WERE WRONG IN ADDING THE ADDITION IN D ISPUTE IN THE HANDS OF THE ASSESSEE, HOWEVER, THE ASSESSEE HAS PAID A COMM ISSION OF RS. 6,02,000/- TO MR. SHASHI BHUSHAN FOR THE SERVICES P ROVIDED BY HIM IN PROCURING THE DISTRIBUTORSHIP OF M/S RECKITT AND BE NCKISER INDIA PVT. LTD. 5 RESULTING IN A JUMP IN THE SALES FROM RS. 2,55,45,4 50/- IN THE IMMEDIATELY PRECEDING YEAR TO RS. 14,21,78,796/- FOR THE YEAR U NDER APPEAL, WHICH WAS NOT TREATED AS BOGUS BY THE AO, HOWEVER, THE SA ME WAS BUSINESS EXPENDITURE AND SPENT ON ACCOUNT OF COMMERCIAL EXPE DIENCY, HENCE, THE SAID EXPENDITURE IS A GENUINE ONE, THEREFORE, I D ELETE THE ADDITION OF RS. 6,02,000/- AND ALLOW THE GROUND RAISED BY THE A SSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 01/03/2018. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 01/03/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES