Mr. Puneet Kumar, Ghaziabad V. ITO, Hapur

ITA 4970/DEL/2013

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7350 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 05-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 27-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: K SAMPAT; V RAJ KUMAR
• Keywords: Business income; Relationship of principal and agent

Judgement Text

ITA NO.-4970/DEL/2013. PUNEET KUMAR. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: F: NEW DELHI) BEFORE SHRI K.N. CHARY, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO:- 4970/DEL/2013 ( ASSESSMENT YEAR: 2008-09) SHRI PUNEET KUMAR, M/S ANMOL TELECOM, DELHI GARH ROAD, OPP. RITU COLLECTION, PILKHUWA (GHAZIABAD). VS. COMMISSIONER OF INCOME TAX (APPEAL), MUZAFFARNAGAR. PAN NO: AAZPK8005A APPELLANT RESPONDENT ASSESSEE BY : SHRI K. SAMPAT, AND SHRI. V. RAJ KUMAR, ADV. REVENUE BY : SHRI SURENDER PAL, SR. DR ORDER PER ANADEE NATH MISSHRA, AM THIS APPEAL BY THE ASSESSEE IS FILED AGAINST THE OR DER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), MUZAFFARNAGAR DATED 05.06. 2013 FOR ASSESSMENT YEAR 2008- 09, ON THE FOLLOWING GROUNDS: I. THAT THE LD. AO HAD ERRED IN MAKING AN AGGREGATE DI SALLOWANCE OF RS. 8,88,480/- IN RESPECT OF PAYMENTS OF DISCOUNT/COMMI SSION TO CUSTOMERS AS DEBITED TO PROFIT AND LOSS ACCOUNT. ITA NO.-4970/DEL/2013. PUNEET KUMAR. PAGE 2 OF 6 II. THAT THE LD.CIT(A) ALSO ERRED IN LAW AND ON FAC TS IN MAINTAINING THE AFOREMENTIONED ADDITION OF RS. 8,88,480=00 SUBJECT TO ALLOWANCE OF PAYMENTS MADE BELOW RS. 2,500/- WITH THE OBSERVATIO NS THAT PROVISIONS OF SEC 194-H ARE NOT ATTRACTED ON SUCH PAYMENTS. III. THAT THE OBSERVATIONS MADE BY THE LD. CIT(A) I N MAINTAINING THE AFOREMENTIONED ADDITION AS SUBMITTED IN GROUND NO. 2 ABOVE ARE INCONSISTENT WITH THE FACTUAL AND LEGAL POSITION OF THE CASE. IV. THAT ON THE BASIS OF FACTS AND LEGAL POSITION O F THE CASE, THE ENTIRE ADDITION OF RS. 8,88,480/- MADE BY THE LD. AO AND A S MAINTAINED BY THE LD. CIT(A) DESERVED TO BE DELETED IN TOTO. V. THAT THE APPELLANT VERY HUMBLY PRAYERS TO RESERV ES HIS RIGHT TO ADD, AMEND OR MODIFY THE GROUNDS OF APPEAL. (2) THE ASSESSEE IS A DEALER OF IDEA MOBILE COMM. LTD. DURING THE YEAR, THE ASSESSEE RECEIVED COMMISSION AMOUNTING TO RS. 18,18 ,809/- ON SALES, WHICH WAS IN ADDITION TO THE GROSS PROFIT OF RS. 6,95,676/- EARN ED BY THE ASSESSEE, ON GROSS SALES OF RS. 3,50,37,283/-. THE ASSESSEE CLAIMED DEDUCTION OF RS. 8,88,480/- TOWARDS EXPENSES ON ACCOUNT OF DISCOUNT / COMMISSION. THE ASSESSING OFFICER (AO, FOR SHORT) DISALLOWED THE AFORESAID CLAIM OF RS. 8,88,480/-. T HE RELEVANT PORTION OF THE ASSESSMENT ORDER IS REPRODUCED AS UNDER: THE ASSESSEE IS A DEALER OF IDEA MOBILE COMM. LTD. HE ALSO ENJOYED INCOME FROM COMMISSION AND INCENTIVE ETC ON SALES. ON GROS S SALE RS.3,50,37,283/- GROSS PROFIT WAS SHOWN AT RS.6,95,676/- AND GROSS PROFIT RATE OF 1.99% AGAINST THE GROSS PROFIT RATE OF 1.97% LAST YEAR. P & L ACCOUNT REVEA LS THAT ASSESSEE HAS RECEIVED COMMISSION ON SALES AT RS. 18,18,809/- AND ACCORDIN GLY DISCOUNT/COMMISSION PAYMENT EXPENSES OF RS. 8,88,480/- HAVE BEEN CLAIME D IN P & L A/C. IT WAS STATED THAT DISCOUNT/COMMISSION HAS BEEN PAID AS PER DIREC TIONS BY THE TELECOM CO. BUT NO SUCH COPY/EVIDENCE OF DIRECTIONS WERE FURNISHED BEF ORE AO. ON BEING ASKED FOR DETAILS AND EVIDENCE REGARDING PAYMENTS ACTUALLY MA DE, THE COUNSEL OF THE ASSESSEE FILED COPIES OF VOUCHERS SAID TO BE SALE BILLS. IN THIS RESPECT CONSOLIDATED ACCOUNT HAS BEEN PREPARED. THE ASSESSEE WAS REQUIRED VIDE ORDER SHEET TO SHOW CAUSE WHY THE EXPENSES OF RS. 8,88,480/- MAY NOT BE DISALLOWED. S HRI SANDEEP GUPTA ADVOCATE ATTENDED AND FILED REPLY AND PHOTOCOPY OF SAID BILL S, IT IS OBSERVED THAT OUT OF RS. 8,88,480/- THE COPIES OF BILLS OF RS.4,16,373/- FIL ED BY THE ASSESSEE ARE PREPARED AGAINST TOTAL SALES DURING THE DAY AND MARKED DISCO UNT TO CUSTOMERS WHICH CANNOT BE VERIFIED IN VIEW OF THE FACTS THAT NOWHER E NAME AND ADDRESS OF ITA NO.-4970/DEL/2013. PUNEET KUMAR. PAGE 3 OF 6 THE RECIPIENTS OF DISCOUNT/COMMISSION MENTIONED/FURN ISHED. THUS NO GENUINENESS IS FOUND IN CLAIM BY ASSESSEE AND EXPEN SES OF RS. 4,16,373/- OUT OF TOTAL CLAIMED AT RS. 8,88,480/- ARE DISALLOWED. FURTHER I N REMAINING PORTION OF SAID EXPENSES- -I.E. RS.4,72,107/- COPIES OF SAID BILLS BEAR STAMP AND SIGN OF SOME CUSTOMERS BUT NEITHER NAMES AND ADDRESSES OF THESE SO CALLED CUSTOMERS RECEIVING DISCOUNT/COMMISSION HAVE BEEN MENTIONED IN THE LIST BILLS FURNISHED NOR ORIGINAL BILLS EVER PRODUCED BEFORE THE AO DURING THE COURSE OF AS SESSMENT PROCEEDINGS. IN VIEW OF THESE FACTS THIS AMOUNT OF RS. 4,72,107/- IS ALS O NOT VERIFIABLE AND DISALLOWED. THESE SO CALLED DISCOUNT/COMMISSION PAYMENTS OF RS. 8,88,480/- ALSO CONTAIN PAYMENTS OF MORE THAN RS. 2,500/- TO SINGLE CUSTOME RS BUT NO TDS HAS BEEN MADE AND PAYMENTS ARE SAID TO BE PAID IN CASH. SOME CASE S FOR EXAMPLE ARE AS UNDER: BILL NO. DATE AMOUNT 187 20-04-2007 RS. 2,550 204 -DO- RS. 4,250 213 21-04-2007 RS. 3,215 492 07-05-2007 RS. 6,035 545 11-05-2007 RS. 3,200 LIKEWISE THERE ARE NO. OF SO CALLED BILLS WHICH REV EAL THAT THE SAID PAYMENT IS ABOVE RS. 2,500/- BUT NO TDS MADE. THUS CLAIM OF THE REGARDIN G PAYMENTS OF RS. 8,80,480/- AGAINST DISCOUNT/COMMISSION IS TREATED AS BOGUS AND DISALLOWED. PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME AND ITS PARTICULARS U/S 2 71 (1) (C) OF THE INCOME TAX ACT, 1961 IS INITIATED SEPARATELY. [ADDITION: RS.8,88,480/-] (3) THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AG AINST THE AFORESAID ADDITION. VIDE ORDER DATED 05/06/2013, THE LD. CIT(A) HELD THAT TH E PROVISION OF SECTION 194H OF THE INCOME TAX ACT, 1961 (I.T. ACT, FOR SHORT) ARE AP PLICABLE IN RESPECT OF DISCOUNT / COMMISSION AMOUNTING TO OR EXCEEDING RS. 2,500/-. (3.1) THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE AFORESAID ORDER DATED 05/06/2013 OF LD. CIT(A). DURING THE APPELLATE PRO CEEDINGS, THE ASSESSEE FILED PAPER BOOK CONTAINING THE FOLLOWING PARTICULARS: 1. WRITTEN SUBMISSIONS FILED BEFORE CIT(A) ITA NO.-4970/DEL/2013. PUNEET KUMAR. PAGE 4 OF 6 2. COPY OF LETTER DATED 26.11.2010 FILED BEFORE A O. 3. COPY OF LETTER DATED 18.11.2010 FILED BEFORE A O. 4. COPY OF LETTER DATED 08.11.2010 FILED BEFORE A O. 5. COPY OF REPLY LETTER TO SHOW CAUSE 6. COPY OF AGREEMENT BETWEEN IDEA CO. & APPELLANT. (4) AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THE AFORESAID PAYMENTS TOTALING RS. 8,88,480/- WERE IN THE NATURE OF TRADE DISCOUNT AND NOT IN THE NATURE OF COMMISSION; AND ACCORDINGLY, HE CONTENDED THAT SECTION 194H OF THE I.T. ACT, HAD NO APPLICATION AND THE ASSESSEE W AS UNDER NO STATUTORY OBLIGATION TO DEDUCT TDS U/S 194H OF I.T. ACT. HE TOOK US THROUG H THE PAPER BOOK AND ORDERS OF THE LOWER AUTHORITIES TO MAKE THE POINT THAT THERE WAS NO RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN THE ASSESSEE AND THE PARTIES TO WHOM, THE AFORESAID PAYMENTS TOTALING RS. 8,88,480/- WERE MADE. ON THE OTHER SIDE, THE L D. DEPARTMENTAL REPRESENTATIVE (DR, FOR SHORT) RELIED ON THE ORDERS OF THE LD. C IT(A) AND THE AO; AND HE READ OUT PORTIONS FROM THESE ORDERS. (5) WE HAVE HEARD BOTH SIDES PATIENTLY AND WE HAVE CAR EFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE CONSIDERED THE JUDICI AL PRECEDENTS BROUGHT TO OUR ATTENTION. WE FIND THAT THE ORDER OF THE LD. CIT(A ) IS SILENT, ON HOW THE LD. CIT(A) CAME TO THE CONCLUSION THAT THE PAYMENTS MADE BY TH E ASSESSEE WERE COMMISSION AS ENVISAGED U/S 194H OF I.T. ACT5T6. THE ORDER OF TH E LD. CIT(A) IS ALSO SILENT ON HOW HE CONCLUDED THAT RELATIONSHIP BETWEEN THE ASSESSEE AN D THE PARTIES TO WHOM THE PAYMENTS WERE MADE WERE IN THE NATURE OF RELATIONSH IP OF PRINCIPAL AND AGENT. ITA NO.-4970/DEL/2013. PUNEET KUMAR. PAGE 5 OF 6 THEREFORE, HIS CONCLUSION THAT SECTION 194H OF I.T. ACT WAS APPLICABLE AND DISALLOWANCE U/S 40A(IA) OF I.T. ACT WAS ATTRACTED FOR AMOUNTS E QUAL TO OR EXCEEDING RS. 2,500/-; IS WITHOUT PROPER DISCUSSION OF RELEVANT FACTS. THE ORDER OF LD. CIT(A) IS NOT A SPEAKING ORDER, ON THESE RELEVANT ASPECTS OF THE CASE. THERE FORE, WE ARE OF THE VIEW THAT THE ISSUE IN DISPUTE REQUIRES FRESH CONSIDERATION AND D ENOVO ORDER AT THE LEVEL OF THE CIT(A). ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORD ER DATED 05/06/2013 OF LD. CIT(A) AND RESTORE THE DISPUTED ISSUE TO THE FILE OF THE L D. CIT(A) FOR A DENOVO ORDER, WHICH SHOULD BE A SPEAKING ORDER CONTAINING ADEQUATE DISC USSION ON RELEVANT ASPECTS OF THE CASE; AND IN ACCORDANCE WITH LAW. (6) IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF JANUARY, 2019. SD/- SD/- (K.N. CHARY) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15.01.2019 POOJA/- COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO.-4970/DEL/2013. PUNEET KUMAR. PAGE 6 OF 6 DATE OF DICTATION 14 /01/19 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15 /01/19 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER