ACIT CIR 7(1), MUMBAI V. NIIRMAL DATACOMM P. LTD, MUMBAI

ITA 5073/MUM/2009

• Counselvise Citation: 507319914 RSA 2009
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 04-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI SHRI
• Assessee Lawyers: CULLA MUMBAI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SMT. ASHA VIJAYARAGHA VAN (JM) I.T.A.NO.5073/MUM/2009 (A.Y. 2003-04) ASSTT. COMMR. OF INCOME-TAX, CIR. 7(1), MUMBAI. VS. M/S. NIRMAL DATACOMM PVT. LTD., PREM ESTATE, C-WING, 3 RD FLOOR, SANT SAVTA CROSS RD. NO.1, MUSTAFA BAZAR, BYCULLA, MUMBAI-400 010. APPELLANT RESPONDENT APPELLANT BY SHRI G.P. TRIVEDI. RESPONDENT BY SHRI P ANKAJ R. TOPRANI. O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 15-06-2009. 2. THE ONLY ISSUE RAISED IN THIS APPEAL THROUGH VAR IOUS GROUNDS IS AGAINST THE DELETION OF ADDITION OF COMMISSION AMOUNTING TO RS. 38,56,711. 3. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE THA T THE ASSESSEE WAS ENGAGED IN THE BUSINESS AS RESELLER IN DATA COMMUNICATION A ND NET WORKING. ON A SCRUTINY OF THE PROFIT & LOSS ACCOUNT, IT WAS SEEN THAT THE ASSESSEE HAD CLAIMED SELLING OVERHEADS TO THE TUNE OF RS.1.77 CRORES. THESE EXP ENSES INCLUDED AMOUNT PAID AS COMMISSION TOTALING RS.1.29 CRORES. DETAILS OF THIS COMMISSION WERE CALLED FOR. IT WAS SEEN THAT TOTAL COMMISSION WAS PAID TO 17 PARTIES. THE AO NOTED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A.Y . 2001-02 DETAILED ENQUIRIES WERE MADE IN THE CASE OF CERTAIN PARTIES TO WHOM CO MMISSION WAS CLAIMED TO ITA NO.5073/M/09 NIRMAL DATACOMM P.LTD. 2 HAVE BEEN PAID. SUCH TRANSACTIONS WERE FOUND TO BE NON-GENUINE. THE AO OBSERVED THAT OUT OF 17 PARTIES TO WHOM THE ASSESSE E HAD CLAIMED TO HAVE PAID COMMISSION, THREE PARTIES ARE THOSE IN RESPECT OF W HICH DISALLOWANCE WAS MADE IN ASSTT. YEAR 2001-02 AS SUCH PARTIES WERE NOT FOUND TO BE GENUINE. THE NAMES OF SUCH PERSONS AND AMOUNTS PAID WERE NOTED BY THE AO AS UNDER : NAME AMOUNT 1. BHARAT (PVC) INDUSTRIES P.LTD. 16,00,000/ - 2. PRESTIGE TRAVELS AND TOURS P.LTD. 21,06,711/- 3. VORA INTERNATIONAL 1,50,00 0/- 38,56,711/- THE ASSESSEE WAS CALLED UPON TO PROVIDE EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTIONS. SINCE THERE WERE NO NEW FACTS COR ROBORATED BY EVIDENCE BY THE ASSESSEE, FOLLOWING THE VIEW TAKEN IN ASSTT. YEAR 2 001-02, WHICH WAS CONFIRMED BY THE LD. CIT(A), THE AO HELD THAT THERE WAS NO NE ED TO DEVIATE FROM SUCH VIEW. HE, THEREFORE, DISALLOWED COMMISSION OF RS.38.56 LA KHS CLAIMED TO HAVE BEEN PAID TO THE ABOVE REFERRED THREE PARTIES. 4. THE LD. CIT(A) DELETED THE SAID ADDITION BY CONS IDERING THE DETAILS FURNISHED BY THE ASSESSEE BEFORE HIM. HE OBSERVED THAT WHEN THE AO HAD ALLOWED COMMISSION PAYMENT TO THE TUNE OF RS.90.59 LAKHS, THERE WAS NO NEED FOR DISALLOWING THE REMAINING AMOUNT OF RS.38.56 LA KHS. THE REVENUE IS AGGRIEVED AGAINST THE DELETION OF ADDITION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED HAT IN ASSTT. YEAR 2001-02 T HE AO MADE DISALLOWANCE OF COMMISSION PAID TO THE ABOVE REFERRED THREE PARTIES . THE SAID ADDITION WAS CONFIRMED IN THE FIRST APPEAL. WHEN APPEAL WAS PREF ERRED BEFORE THE TRIBUNAL ON COMMISSION AS WELL AS OTHER DISALLOWANCES, THE MATT ER WAS RESTORED TO THE FILE OF ITA NO.5073/M/09 NIRMAL DATACOMM P.LTD. 3 CIT(A). THE LD. A.R. STATED BEFORE US THAT THE ASS ESSEE OPTED FOR SETTLEMENT OF THE CASE BY WAY OF PROCEEDINGS UNDER THE SETTLEMENT COMMISSION EXCEPT FOR THE ADDITION IN RESPECT OF COMMISSION PAID TO THESE PAR TIES. IT WAS, THEREFORE, ACCEPTED THAT THE COMMISSION PAID TO THESE PARTIES WAS EVENTUALLY NOT ALLOWED. IN THE PRESENT PROCEEDINGS, THE LD. A.R. TRIED TO I MPRESS US WITH THE GENUINENESS OF THE CLAIM FOR DEDUCTION BY PUTTING CERTAIN EVIDE NCE. WE ARE NOT CONVINCED WITH THE IMPUGNED ORDER ON THIS ISSUE FOR THE OBVIO US REASON THAT IN THE EARLIER YEAR COMMISSION PAID TO THESE THREE PARTIES WAS DIS ALLOWED BY THE AO AND THE AOS VIEW HAS NOT BEEN REVERSED BY ANY OF THE SUPER IOR AUTHORITIES, IT SHOWS THAT THE ADDITION SO MADE IN ASST. YEAR 2001-02 HAS BEEN FINALLY SUSTAINED, WHICH FACT HAS BEEN ADMITTED BY THE ASSESSEE. AS IN THE INSTA NT YEAR THE AO HAS RELIED ON HIS FINDING GIVEN IN ASSTT. YEAR 2001-02 FOR DISALL OWING THE COMMISSION TO THOSE VERY THREE PARTIES, WE ARE OF THE CONSIDERED OPINI ON THAT NO DEDUCTION COULD HAVE BEEN ALLOWED IN RESPECT OF SUCH COMMISSION. IT IS SEEN THAT WHEN THE GENUINENESS OF THE TRANSACTIONS WITH THE SAME PARTI ES WAS NOT ACCEPTED IN THE EARLIER YEAR, THERE WAS NO REASON WITH THE LD. CIT( A) FOR COMING TO A DIFFERENT CONCLUSION IN THE CURRENT YEAR. THE MERE FACT THA T THE ASSESSEE HAD MADE THE PAYMENTS THROUGH CHEQUES AFTER MAKING DEDUCTION OF TAX AT SOURCE, IS NOT THE ONLY RELEVANT CONSIDERATION FOR GRANTING DEDUCTION. IN ORDER TO CLAIM SUCH DEDUCTION FOR COMMISSION, THE FIRST AND FOREMOST CR ITERIA IS THAT THE ASSESSEE SHOULD PROVE THE FACTUM OF THE RECIPIENT HAVING REN DERED SERVICES WITH RELIABLE EVIDENCE. AS THE GENUINENESS OF THE TRANSACTIONS W ITH THESE THREE PARTIES HAS NOT BEEN ACCEPTED BY THE AUTHORITIES IN THE ASST. Y EAR 2001-02 , WHICH FACT HAS ATTAINED FINALITY, IN OUR CONSIDERATION OPINION, TH ERE IS NO LOGIC IN ALLOWING DEDUCTION IN THE INSTANT YEAR ON THE BASIS OF SAME FACTS. WE, THEREFORE, OVERTURN ITA NO.5073/M/09 NIRMAL DATACOMM P.LTD. 4 THE IMPUGNED ORDER ON THIS ISSUE AND RESTORE THE AC TION OF THE AO IN MAKING THE ADDITION. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THE 31ST DAY OF MAY, 201 1. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 31ST MAY, 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-VII,,MUMBAI. 4 CIT-7,MUMBAI. 5.DR,B BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.5073/M/09 NIRMAL DATACOMM P.LTD. 5 DETAILS DATE INITIALS DESIGNATION 1. DRAFT DICTATED ON 26-05-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 26-05-11 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *