The ACIT, Circle-6, Ahmedabad V. M/s. Gopal Fabrics, Ahmedabad

ITA 51/AHD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4383 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-09-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 06-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3); 147; 263

Judgement Text

ITA NO 51/A HD/2011 . A.Y. 2003 - 04 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, J.M. & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 51 /AHD/2011 (ASSESSMENT YE AR: 2003-04) THE A.C.I.T., CIRCLE-6, AHMEDABAD (APPELLANT) VS. M/S. GOPAL FABRICS, BEHIND INTERNATIONAL HOTEL, MOHAN HOUSING SOCY. ISANPUR, NAROL, AHMEDABAD (RESPONDENT) PAN: AABFG5396A APPELLANT BY : SHRI P.L. KUREEL, SR. D.R. RESPONDENT BY : SHRI S.N. SOPARKAR WITH URVAS HI SHODH AN ( )/ ORDER DATE OF HEARING : 27-09-2013 DATE OF PRONOUNCEMENT : 18 -10-2013 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-XI, AHMEDABAD DATED 22.10.2010 FOR A.Y. 2003-04. 2. THE FACTS AS CULLED OUT FROM THE ORDER OF LOWER AUT HORITIES ARE AS UNDER. 3. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF MANUF ACTURING AND EXPORT OF FABRICS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2003-04 ON ITA NO 51/A HD/2011 . A.Y. 2003 - 04 2 29.11.2003 DECLARING TOTAL INCOME OF RS 2,19,23,098 /-. THE ASSESSMENT WAS FINALIZED ON 31.3.2006 AND THE TOTAL INCOME WAS ASSESSED AT RS 2,33,41,970/-. SUBSEQUENTLY THE CASE WAS REOPENED U /S 147 AND THE ASSESSMENT WAS FINALIZED ON 29.11.2007 AND THE TOTA L INCOME WAS DETERMINED AT RS 3,61,75,007/-. THEREAFTER THE CASE WAS REVIEWED BY CIT AND PURSUANT TO ORDER OF CIT PASSED U/S 263 DATED 1 8.12.2008, THE ASSESSMENT WAS FRAMED U/S 143(3) RWS 263 VIDE ORDER DATED 26.8.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS 4,19,08,2 21/-. AGGRIEVED BY THE AFORESAID ORDER OF AO, ASSESSEE CARRIED THE MAT TER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 22.10.2010 ALLOWED THE APPE AL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A) ; THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFEC TIVE GROUND. 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 57,33,214/- BEING COMMISSION PA ID TO FOREIGN PARTIES. 4. DURING THE YEAR, THE ASSESSEE HAD PAID COMMISSION O F RS 57,33,214/- TO M/S ETS GOPAL AND GAOUSSOU LAH. CIT VIDE DIRECTIONS U/S 263 HAD DIRECTED THE AO TO MAKE FULL AND COMPLETE EXAMINATI ON OF THE AFORESAID COMMISSION. PURSUANT TO THE DIRECTIONS OF CIT, ASSE SSEE WAS ASKED TO FURNISH THE DETAILS AND TO JUSTIFY THE CLAIM OF EXP ENSES. ASSESSEE INTERALIA SUBMITTED THAT THE AFORESAID PARTIES WERE PARTIES B ELONGING TO AFRICA, THEY HAD GIVEN THE ASSESSEE GOOD BUSINESS FROM AFRICAN C OUNTRIES AND THEY ALSO GUARANTEED THE RECOVERY OF THE SALES REALIZATI ON DONE THROUGH THEM. IT WAS FURTHER SUBMITTED THAT THE COMMISSION WAS OU T RIGHTLY DEDUCTED FROM THE RECOVERIES AGAINST THE SALES AND THIS PRAC TICE WAS AN ACCEPTABLE BUSINESS PRACTICE. THE SUBMISSION OF THE ASSESSEE W AS NOT FOUND ITA NO 51/A HD/2011 . A.Y. 2003 - 04 3 ACCEPTABLE TO THE AO FOR THE REASONS THAT THE ASSES SEE SUBMITTED ONLY PART DETAILS CALLED BY THE ASSESSING OFFICER, ASSESSEE H AD FAILED TO FURNISH THE COPY OF THE AGREEMENT ENTERED BY THE ASSESSEE WITH 2 COMMISSION AGENTS, IT HAD FAILED TO PRODUCE ANY WRITTEN CONFIR MATION FROM THE PARTIES REGARDING THE SERVICES, FAILED TO ESTABLISH THAT TH E INCREASE IN SALES WAS ONLY DUE TO THE TWO AGENTS. HE ACCORDINGLY DISALLOW ED THE COMMISSION OF RS 57,33,214/-AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER: 2.3.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER. AS SEEN FROM INVOICE COPIES, SHIPPING BILL AND BANK CERTIFICATE OF REMITTANCE THE NAMES OF THE AGENTS AND THE COMMISSI ON AMOUNT ARE MENTIONED THEREIN. THE NAMES OF THE ACTUAL PURCHAS ES ARE ALSO FOUND ON THE INVOICES. IN FACT, THE COMMISSION WAS DEDUCTED BY THE TWO OVERSEAS AGENTS IN AFRICA FROM SALE PROCEEDS AND THE NET AMOUNT ONL Y WAS RECEIVED BY THE APPELLANT. THEREFORE, THE GENUINENESS OF PAYMENT I S BEYOND SUSPICION. A.O. ALSO NEVER DOUBTED THE PAYMENT OF COMMISSION. THE DISALLOWANCE WAS MADE APPARENTLY ON THE GROUND THAT PROOF FOR SERVICES RE NDERED WAS NOT CONVINCING AND THEREFORE THE PAYMENT OF COMMISSION WAS NOT JUSTIFIED. 2.3.2 HAVING CONSIDERED THE FACTS OF THE CASE, T HE CONTENTIONS OF THE APPELLANT AND THE CASE-LAWS RELIED ON, I AM INCLINE D TO ACCEPT THE CONTENTIONS OF THE APPELLANT. AS DEMONSTRATED BY T HE A.R., THERE IS A SUBSTANTIAL RISE IN THE TURNOVER AND NET PROFIT IN THE YEAR UNDER CONSIDERATION, JUSTIFYING THE PAYMENT OF COMMISSION . IT IS DIFFICULT TO INFER THAT THE PAYMENT OF COMMISSION WAS NOT FOR BUSINESS PURPOSES. THERE IS NO MATERIAL ON RECORD TO SHOW THE PAYMENT WAS FOR NON- BUSINESS CONSIDERATION. IN MY CONSIDERED VIEW, DISALLOWANCE OF COMMISSION P AID IS NOT JUSTIFIED. IT IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. ITA NO 51/A HD/2011 . A.Y. 2003 - 04 4 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US. 6. BEFORE US, THE LD. D. R. SUBMITTED THAT THE ASSESSE E HAS NOT JUSTIFIED THE PAYMENT OF COMMISSION. HE ALSO SUBMITTED THAT CIT(A ) HAD CALLED FOR CERTAIN ADDITIONAL EVIDENCE WHICH HAS BEEN STATED O N PAGE 8 OF CIT(A) ORDER BUT THE SAME WAS NOT MADE AVAILABLE TO ASSESS ING OFFICER FOR HIS EXAMINATION. HE THUS STRONGLY SUPPORTED THE ORDER O F AO. THE LD. A.R. ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAD P AID THE COMMISSION TO THE 2 PARTIES FOR THE BUSINESS DONE WITH PARTIES IN AFRICAN COUNTRIES. IT WAS FURTHER SUBMITTED THAT PAYMENT OF COMMISSION WA S AS PER THE ACCEPTED BUSINESS PRACTICE. THE LD. A.R. ALSO PLACE D ON RECORD SPECIMEN COPIES OF INVOICES, REMITTANCE CERTIFICATES ETC IN THE PAPER BOOK. HE FURTHER PLACED RELIANCE ON THE DECISION OF AHMEDABA D TRIBUNAL IN THE CASE OF BAJAJ OVERSEAS ITA NO 2363 & 2364 ORDER DAT ED 4.5.2012. HE THUS SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY DISPUTE IN THE PRESENT APPEAL IS WITH RESP ECT TO THE COMMISSION PAID TO FOREIGN PARTIES BY THE ASSESSEE. FROM THE O RDER OF CIT(A), IT IS SEEN THAT THE ASSESSEE HAD SUBMITTED ADDITIONAL EVI DENCE AS PER HIS DIRECTIONS (THE SAME IS PRODUCED AT CLAUSE (H) AT P AGE 8 OF THE ORDER). WE FIND CIT(A) HAS ASKED THE ASSESSEE TO PRODUCE THE A CKNOWLEDGEMENT FROM BOTH THE PARTIES TO WHOM COMMISSION WERE PAID, CONFIRMATION FROM AGENTS ABOUT THE RENDERING OF AGENCY SERVICES AS PE R THE CONDITIONS LAID DOWN IN THE UNDERSTANDING. WE FURTHER FIND THAT THE AFORESAID DOCUMENTS WERE NOT MADE AVAILABLE TO THE AO FOR HIS VERIFICAT ION AND NO COMMENTS ITA NO 51/A HD/2011 . A.Y. 2003 - 04 5 WERE CALLED ON THESE DOCUMENTS BY CIT(A). WE FURTHE R FIND THAT CIT(A) HAS NOTED THAT THE EXPORTS TURNOVER AND NET PROFITS OF THE ASSESSEE HAD GONE UP SUBSTANTIALLY DUE TO THE APPOINTMENT OF AGE NTS. BEFORE US, THE ANNUAL ACCOUNTS OF THE ASSESSEE WERE NOT PRODUCED B Y THE LD. A.R. IN THE ABSENCE OF THE PROFIT AND LOSS ACCOUNT AND THE DETA ILS, IT IS NOT CLEAR AS TO WHETHER THE ENTIRE TURNOVER OF THE ASSESSEE REPRESE NTED SALES ONLY TO AFRICAN PARTIES. 8. IN THE CASE OF CIT VS. UNITED TOWERS I.P. LTD. (200 8) 296 ITR 106 (DEL) HAD HELD AS UNDER:- APPEAL [CIT(A)] ADDITIONAL EVIDENCE- OPPORTUNIT Y OF BEING HEARD TO A.O- PRINCIPLES OF NATURAL JUSTICE REQUIRE THAT BEFORE A NY MATERIAL IS USED AGAINST A PARTY, IT SHOULD BE PUT TO IT- RULE (4) DOES NOT SP ECIFICALLY EXCLUDE THE PRINCIPLES OF NATURAL JUSTICE AND, THEREFORE, THESE PRINCIPLES ARE NECESSARILY TO BE READ INTO THE PROVISION OF THE RULE- CONSEQUENTLY, CIT(A) WAS OBLIGED TO PUT THE ADDITIONAL EVIDENCE TO THE A.O. BEFORE MAKING ANY D ECISION ON THE BASIS OF THAT MATERIAL-SINCE THAT HAS NOT BEEN DONE, THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS REMANDED TO THE CIT(A) TO BE DECIDED IN A CCORDANCE WITH LAW AFTER GIVING AN OPPORTUNITY TO THE A.O. TO RESPOND TO THE EVIDENCE TAKEN INTO CONSIDERATION BY THE CIT(A) 9. WE THEREFORE FEEL THAT IN THE INTEREST OF NATURAL J USTICE THE AO SHOULD BE GRANTED AN OPPORTUNITY TO EXAMINE THE ADDITIONAL EV IDENCE SUBMITTED BY THE ASSESSEE BEFORE CIT(A). WE THEREFORE REMIT THE ISSUE TO THE FILE OF CIT(A) SO THAT HE CAN DECIDE THE ISSUE AFRESH AFTER CALLING REMAND REPORT FROM THE A.O. ON THE ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE AND SUCH OTHER DETAILS REQUIRED AND AFTER GIVING A REAS ONABLE OPPORTUNITY OF ITA NO 51/A HD/2011 . A.Y. 2003 - 04 6 HEARING TO BOTH THE PARTIES. THUS THE GROUND OF REV ENUE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 18 - 10 - 2013. SD/- SD/- (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD