Smt. Ashima Hazra, Kolkata V. ACIT, Circle - 42, Kolkata, Kolkata

ITA 463/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9393 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 17-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 03-03-2010
• Court: TRIBUNAL

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH : KOLKATA () BEFORE . . . . . . . . , , , , , !' !' !' !' /AND . .. . . .. .! !! ! , # ) [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI C . D. RAO, AM] '$ '$ '$ '$ / IN I.T.A NO. 463/KOL/2010 %&' !() %&' !() %&' !() %&' !()/ // / ASSESSMENT YEAR : 2003-04 SMT. ASHIMA HAZRA -VS- ASSTT. COMMISSIONER OF INCOME-TAX, (PA NO. AABPH 5333 E) CIRCLE-42, KOLKATA. (! /APPELLANT ) (+,-/ RESPONDENT ) FOR THE APPLICANT : SRI SOMNATH GHOSH FOR THE RESPONDENT : SRI P. K. MISHRA . / ORDER PER D. K. TYAGI, JM ( . . . . . . . . , , , , ) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A), KOLKATA DATED 25.11.2005 FOR ASSESSMENT YEA R 2003-04 ON THE SOLE GROUND OF CONFIRMING THE DISALLOWANCE OF RS.6,53,878/- OUT OF EXPENSES CLAIMED ON ACCOUNT OF EARNING COMMISSION INCOME. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT DURING THE RELEVANT YEAR THE SOURCE OF INCOME OF THE ASSESSEE WAS SHOWN AS COMMISSION RECE IVED FROM M/S. CONY BIO HEALTH CENTRE (INDIA) PVT. LTD. THE ASSESSING OFFICER FOU ND FROM THE INCOME & EXPENDITURE ACCOUNT SUBMITTED BY THE ASSESSEE IN THE RETURN OF INCOME THAT THE ASSESSEE CLAIMED EXPENSES UNDER DIFFERENT HEADS OF RS.13,07,755/- AG AINST HIS COMMISSION INCOME OF RS.20,11,930/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESEE WAS UNABLE TO PRODUCE ANY EVIDENCE IN SUPPORT OF HER EXPENSES CLA IMED UNDER DIFFERENT HEADS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE 50% OF THE EXPENSES CLAIMED I.E. RS.6,53,878/- WAS DISALLOWED BY THE ASSESSING OFFIC ER AND ADDED TO THE INCOME OF THE ASSESSEE. IN APPEAL, THE LD. CIT(A) CONFIRMED THIS ACTION OF THE ASSESSING OFFICER. 3. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L OF THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE AUTHOR ITIES BELOW FURTHER SUBMITTED THAT THE ASSESSEE BEING AN AILING LADY OF 68 YEARS OLD W AS NOT ABLE TO CARRY ON THE ENTIRE 2 ACTIVITIES HERSELF WITH THE PRINCIPAL COMPANY AT CH ENNAI AND THUS IN ORDER TO EARN COMMISSION, SHE HAD TO UNDERTAKE INTENSE MARKETING ACTIVITIES THROUGHOUT INDIA BY ORGANIZING A TEAM TO WORK FOR PROMOTION, SALE, COLL ECTION OF ORDER AND TO EXECUTE THE SUPPLY AND IN CARRYING OUT SUCH EXTENSIVE ACTIVITIE S, CONSTANT COMMUNICATION WITH THE COMPANY AND THE TEAM MEMBERS DISPERSED ALL OVER IND IA, TOURS & TRAVELS AT DIFFERENT PLACES OF THE COUNTRY WERE PART OF HER ACTIVITIES I N EARNING COMMISSION. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD TO ORGANIZE MEETING S, CONFERENCES AND TO ENTERTAIN THE PERSONNEL DEPLOYED IN THE FIELD FOR THE PURPOSE OF KEEPING THEM UPDATED ON THE DUTIES TO BE CARRIED OUT BY THEM AND TO KEEP THEM ON THEIR TO ES WITH WELL-KNOWN MARKETING STRATEGY OF KEEPING THEM IN GOOD WORKING OF MIND BY OFFERING MINIMUM ENTERTAINMENT. THESE EXERCISES WERE NECESSARY FOR MOTIVATING THE T EAM TO FUNCTION WITH MAXIMUM EFFICIENCY IN DISCHARGING THEIR TASKS AND THE EXPEN DITURE INCURRED ON SUCH ARRANGEMENTS WERE ESSENTIAL FOR THE ASSESSEES EARNING COMMISSIO N INCOME FROM PRINCIPAL COMPANY. HE FURTHER SUBMITTED THAT THE ASSESSEE ALSO INCURRE D EXPENSES TOWARDS PAYMENTS OF SALARY AND BONUS TO ITS STAFF. HE ALSO POINTED OUT THAT THE ASSESSEE IN COURSE OF THE ASSESSMENT PROCEEDINGS EXPLAINED IN DETAILS THE REL EVANCE OF THE EXPENSES WHICH WERE INCURRED WHOLLY, NECESSARILY AND EXCLUSIVELY FOR TH E PURPOSE OF BUSINESS WHICH WAS NOT DISPUTED BY THE AO. THEREFORE, IN HIS OPINION, THE AO DID NOT DISPUTE THE HEADS OF EXPENSES AT ALL. ACCORDING TO HIM FURTHER, THE ASSE SSEE WAS NOT REQUIRED UNDER THE LAW TO MAINTAIN ACCOUNTS AS PER S. 44AA OF THE I.T. ACT, 1 961 AND AS SUCH NO ADVERSE INFERENCE IS, THEREFORE, TO BE DERIVED AS A MATTER OF COURSE FROM THE FACT OF LACK OF SUCH PRECISE DOCUMENTATION BY AN OLD AND AILING PERSON WHO WAS N OT ABLE IN THE VERY NATURE OF THINGS TO MAINTAIN AND PRODUCE THEM. IT WAS FURTHER CONTEN DED THAT THE NATURE AND ADEQUACY OF EXPENSES HAVE TO BE JUDGED WITH RELEVANCE TO THE PR EPONDERANCE OF PROBABILITY INVOLVED RATHER THAN BY WAY OF INSISTENCE ON PRODUCTION OF D OCUMENTS. ON SUCH BASIS, HE VEHEMENTLY ARGUED THAT THE DISALLOWANCE OF EXPENDIT URE CAPRICIOUSLY MADE TO THE EXTENT OF 50% WAS TOTALLY ARBITRARY AND WAS NOT IN CONSONA NCE WITH THE FACTS AND CIRCUMSTANCES OF THE CASE. HE FURTHER SUBMITTED THAT THERE CANNOT BE ANY PRESUMPTION IN LAW THAT SUCH EXPENSES WERE NOT INCURRED AND WHEN THE RESULTS OF SUCH OUTLAY ARE MANIFESTED IN RETURN RECEIVED BY THE ASSESSEE BY WAY OF COMMISSION, NO J USTIFICATION EXISTS TO PALPABLY DISALLOW SUCH EXPENSES IN AN ARBITRARY MANNER. REFE RRING TO A COMPARATIVE CHART FILED BEFORE US SHOWING COMMISSION EARNED, EXPENSES CLAIM ED ETC. FOR IMMEDIATELY PAST TWO ASSESSMENT YEARS AND SUBSEQUENT ASSESSMENT YEAR, TH E LD. COUNSEL SUBMITTED THAT IN ALL 3 THESE YEARS, THE DEPARTMENT HAS ACCEPTED THE RESULT S SHOWN BY THE ASSESSEE AND THE EXPENSES INCURRED IN THESE YEARS FOR EARNING COMMIS SION INCOME WERE IN PARITY WITH THE RESULTS OF THE ASSESSMENT YEAR UNDER CONSIDERATION. HE ALSO POINTED OUT THAT THE AO RESORTED TO THE AD-HOC DISALLOWANCE WHICH IS TO THE BEST OF JUDGMENT BUT IS NOT WITHIN THE FRAMEWORK TO LAW. HE RELIED ON THE RATIO IN THE CASE OF C.I.T. -VS- LAXMINARAIN BADRIDAS (1937) 5 ITR 170 (PC) AND SUBMITTED THAT T HE AO OUGHT TO HAVE CONSIDERED THE PREVIOUS RETURNS OF THE ASSESSEE BEF ORE RESORTING TO ESTIMATE THE INCOME. ON THESE FACTS, HE CONCLUDED THAT THE AO ACTED ARBI TRARILY IN MAKING ESTIMATED DISALLOWANCE OF THE EXPENDITURE TO THE EXTENT OF 50 % IN THE SUM OF RS.6,53,838/- WHICH WAS UPHELD BY THE LD. CIT(A) ON SIMILAR LINES, WITH OUT CONSIDERING THE FACTS OF THE CASE IN PROPER PERSPECTIVE WITH REFERENCE TO THE PRECEDE NT AND ALSO PAST AND SUBSEQUENT YEARS RESULT OF THE ASSESSEE, DESERVES TO BE DELET ED AND HE URGED BEFORE THE BENCH TO DELETE THE SAME 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES AND URGED BEFORE THE BENCH TO CONFIRM THE SAME. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL PLACED ON RECORD. THE ASSESSEE HAS FILED A PAPER BOOK WHICH, INTER ALIA, INCLUDED STATEMENT OF INCOME & EXPENDITURE, INTIMATION U/S. 143(1) OF THE ACT, TDS CERTIFICATES ISSUED BY CONYBIO HEALTHCARE (INDIA) P. LTD. AGAINST PAYMENTS OF COMM ISSION TO THE ASSESSEE, ETC. FOR ASSESSMENT YEARS 2001-02, 2002-03 AND 2004-05. THE LD. COUNSEL HAS ALSO FILED A COMPARATIVE CHART SHOWING THE DETAILS OF THE GROSS COMMISSION RECEIPTS, NET INCOME, EXPENSES CLAIMED, EXPENSES DISALLOWANCE FOR THE ASS ESSMENT YEARS 2001-2002 TO 2004- 2005. WE FIND THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEES EARNING FROM COMMISSION WAS MUCH HIGHER THAN PREVIO US AS WELL AS SUBSEQUENT YEARS. WE ALSO FIND THAT THE AO DID NOT DISPUTE THE QUANTU M OF GROSS COMMISSION IN THE SUM OF RS.20,11,930/-. ACCORDING TO THE ASSESSEE, SHE H AD INCURRED TOTAL EXPENDITURE UNDER VARIOUS HEADS TO THE TUNE OF RS.13,07,755/-, WHICH WERE DIRECTLY RELATED TO HER EARNING OF COMMISSION INCOME AND THIS HAS RESULTED IN NET C OMMISSION INCOME OF RS.7,04,175/- WHICH WAS ALSO NOT DISPUTED BY THE AO. WE FURTHER F IND THAT THE RATIO OF NET INCOME DURING THE YEAR UNDER CONSIDERATION WAS IN PARITY W ITH THE NET INCOME SHOWN AND ACCEPTED BY THE REVENUE IN PAST AND SUBSEQUENT YEAR S. THEREFORE, IN OUR CONSIDERED OPINION, THE AUTHORITIES BELOW DID NOT DISPUTE THE HEADS OF EXPENDITURE, BUT THEY MERELY 4 DOUBTED THE QUANTUM OF THE SAME FOR LACK OF SUPPORT ING EVIDENCE. WE ALSO FIND THAT THE ASSESSEE WAS NOT REQUIRED TO MAINTAIN ACCOUNTS AS P ER THE PROVISIONS OF S. 44AA OF THE I.T. ACT, 1961 AND AS SUCH NO ADVERSE INFERENCE ON THIS RESPECT IS WARRANTED. IT IS A FACT THAT EXCEPT FILING MONTH-WISE DETAILS OF EXPENDITUR E AND STATEMENTS OF ACCOUNTS, THE ASSESSEE ALSO COULD NOT PRODUCE ANY EVIDENCE IN SUP PORT OF THE EXPENDITURE. AT THE SAME TIME, AS STATED ABOVE, IT IS NOT THE CASE OF THE RE VENUE THAT THE ASSESSEE DID NOT INCUR THE EXPENDITURE AT ALL. THEREFORE, IN OUR CONSIDERED OP INION, SOME DISALLOWANCE IS NECESSARY IN THE CIRCUMSTANCES OF THE CASE. THEREFORE, WE FEE L IT PRUDENT TO ADJUDICATE THE MATTER IN LIGHT OF THE RATIO AS LAID DOWN IN THE CASE OF C.I. T. -VS- LAXMINARAIN BADRIDAS SUPRA WHEREIN IT WAS HELD AS UNDER : THE OFFICER IS TO MAKE AN ASSESSMENT TO THE BEST O F HIS JUDGMENT AGAINST A PERSON WHO IS IN DEFAULT AS REGARDS SUPPLYING INFORMATION. HE MUST NOT ACT DISHONESTLY, OR VINDICTIVELY OR CAPRICIOUSLY BECAUSE HE MUST EXERCI SE JUDGMENT IN THE MATTER. HE MUST MAKE WHAT HE HONESTLY BELIEVES TO BE A FAIR ESTIMAT E OF THE PROPER FIGURE OF ASSESSMENT, AND FOR THIS PURPOSE HE MUST BE ABLE TO TAKE INTO C ONSIDERATION LOCAL KNOWLEDGE AND REPUTE IN REGARD TO THE ASSESSEES CIRCUMSTANCES, A ND HIS OWN KNOWLEDGE OF PREVIOUS RETURNS BY AND ASSESSMENTS OF THE ASSESSEE, AND ALL OTHER MATTERS WHICH HE THINKS WILL ASSIST HIM IN ARRIVING AT A FAIR AND PROPER ESTIMAT E; AND THOUGH THERE MUST NECESSARILY BE GUESS-WORK IN THE MATTER, IT MUST BE HONEST GUES S-WORK. IN THAT SENSE, TOO, THE ASSESSMENT MUST BE TO SOME EXTENT ARBITRARY. CONSIDERING THE TOTALITY OF THE FACTS IN THE INSTAN T CASE AND KEEPING IN VIEW THE SUBMISSIONS OF THE PARTIES AND THE AFORESAID RATIO, WE ARE OF THE CONSIDERED VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE IF THIS DISALLOWANCE IS RESTRICTED TO 10% OF THE TOTAL EXPENSES CLAIMED. WE HOLD ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21.01.2 011 SD/- SD/- . . ! , # . . , (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( # # # #) )) ) DATED : 21 ST JANUARY, 2011 !/0 %&12 %3! JD.(SR.P.S.) 5 . 4 +%%5 65(7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT SMT. ASHIMA HAZRA, 7/1B/1, RAJA BAGAN LANE, KOLKATA-700 030 2 +,- / RESPONDENT, ACIT, CIRCLE-42, KOLKATA. 3 . %.& / THE CIT, KOLKATA. 4. %.& ( )/ THE CIT(A), KOLKATA. 5 . !=% +%& / DR, KOLKATA BENCHES, KOLKATA 5 +%/ TRUE COPY, .&>/ BY ORDER, ? '2 /DEPUTY REGISTRAR .