India Craft Loom, New Delhi V. ACIT, New Delhi

ITA 5188/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6941 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC 3
• Next Hearing Date: 05-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 22-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: RAKESH K SEGAL
• Keywords: Additional evidence

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - 3 , NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 5188 /DEL/201 4 AY: 2008 - 09 INDIA CRAFT LOOM VS. ACIT, CIRCLE 32(1) 136 A, POCKET 12 NEW DELHI JASOLA NEW DELHI PAN: AAAF 17104B (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH K SEGAL, , C.A. RESPONDENT BY : SH. F.R.MEENA, SR. D.R. ORDER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 19, NEW DELHI DATED 19.3.2014 PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 2008 - 09. 2. FACTS IN BRIEF: - THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF EXPORT OF HAN DLOOM ITEMS UNDER THE NAME AND STYLE M/S INDIA CRAFT LOOMS. IT FILED ITS RETURN OF INCOME ON 26.9. 20 08 . THE GROUNDS OF APPEAL READ AS UNDER. 2 1. DISALLOWANCE OF COMMISSION EXPENSES OF RS.6,19,935/ - BY THE AO AND CONFIRMATION OF THE SAME BY LD.CIT(A) IS CONTRARY TO FACTS AND LAW AND THEREFORE, THE DISALLOWANCE IS LIABLE TO BE DELETED. 2. REJECTION OF ADDITIONAL EVIDENCE FILED BY THE APPELLANT BEFORE THE CIT(A) UNDER RULE 46A OF THE IT RULES, 1962 RELATING TO TRAVELLING EXPENSES INCURRED BY THE APPELLA NT AND SALARY PAID TO WORKING PARTNER IS CONTRARY TO FACTS AND LAW AND THEREFORE, THE DISALLOWANCE IS LIABLE TO BE DELETED. 3. DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES OF RS.5,83,420/ - @ 50% BY THE AO AND CONFIRMATION OF THE SAME BY LD.CIT(A) IS CONTRAR Y TO FACTS AND LAW AND THEREFORE, THE DISALLOWANCE IS LIABLE TO BE DELETED. 4. DISALLOWANCE OF PARTNER S SALARY OF RS.2,40,000/ - PAID TO SMT.PRABHA SHARMA BY THE AO AND CONFIRMATION OF THE SAME BY LD.CIT(A) IS CONTRARY TO FACTS AND LAW AND THEREFORE, THE DISALLOWANCE IS LIABLE TO BE DELETED. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY OF THE GROUNDS OF APPEAL. 3. A FTER HEARING RIVAL CONTENTIONS I HOLD AS FOLLOWS . 4. ON THE DISALLOWANCE OF COMMISSION EXPENSES CLAIMED BY THE ASSESSEE , THE FACTS REL ATING TO THIS GROUND AS FOLLOWS . 3 2.2. BRIEFLY, THE FACTS ARE THAT IN THE ASSESSMENT ORDER, THE AO HAS OBSERVED THAT COMMISSION OF 5% ON SALES HAS BEEN PAID TO VARIOUS PARTIES, HOWEVER, IN THE CASE OF SALE TO M/S ESSELUNGA SPA, ITALY, COMMISSION HAS BEEN P AID @ 15%. THE AO HAS POINTED OUT THAT AS PER THE BUSINESS PRACTICE FOLLOWED BY THE ASSESSEE FIRM, COMMISSION IS PAID @ 5% ONLY. THE AO HAS THEREFORE DISALLOWED THE COMMISSION IN EXCESS OF 5% CLAIMED IN THIS CASE. IN HIS SUBMISSIONS, THE APPELLANT HAS A RGUED THAT THIS WAS NOT THE ONLY CASE WHERE COMMISSION WAS PAID AT MORE THAN 5%. HE HAS STATED THAT IN CASE OF SALE TO THIS CONCERN, COMMISSION AT 5% WAS PAID TO THE DOMESTIC COMPANY M/S RUBY INTERNATIONAL P.LTD. AND A FURTHER COMMISSION OF 10% WAS PAID O N THE SAME SALES, TO THE FOREIGN AGENT M/S B&B GENERAL TRADING LTD. 4.1. THE LD.CIT(A) CONFIRMED THE DISALLOWANCE BY HOLDING THAT: ( A ) THE ASSESSEE FAILED TO SPECIFY AS TO WHAT WERE THE SERVICES RENDERED BY M/S RUBY INTERNATIONAL PVT.LTD. AND M/S B&B GENERAL TRADING LTD. ( B ) THE ASSESSEE FAILED TO SPECIFY THE ADDITIONAL SERVICES THAT WERE RENDERED BY M/S B&B GENERAL TRADING LTD. WHICH JUSTIFY THE COMMISSION OF 10% , WHEN COMMISSION WAS ALREADY PAID TO M/S RUBY INTERNATIONAL. THE ARGUMENT OF THE ASSESSEE THAT IT WAS FOR THE A.O. TO SHOW THAT HIGHER COMMISSION CLAIMED IN THIS CASE WAS NOT ALLOWABLE IS TO 4 BE REJECTED AS THE BURDEN IS ON THE ASSESSEE TO PROVE HIS CLAIM FOR DEDUCTION . ( C ) THE T AX WAS NOT DEDUCTED AT SOURCE ON THE PAYMENTS MADE TO M/S B&B GENERAL TRADING CO.LTD. AND HENCE THE SAME IS DISALLOWED U/S 40(A)(IA) OF THE ACT. 4.2. THE ASSESSEE SUBMITTED A CHART AT PAGE 1 OF THE PAPER BOOK AND CONTENDED THAT THE FINDINGS OF THE A.O. THAT , IT IS THE BUSINESS PRACTICE TO PAY ONLY 5% AS COM MISSION IS FACTUALLY INCORRECT . BE IT AS IT MAY AS THE LD.COUNSEL FOR THE ASSESSEE DID NOT ADVANCE ANY ARGUMENTS ON THE FINDING OF THE FIRST APPELLATE AUTHORITY AT PARA 2 .8 PAGE 4 OF HIS ORDER THAT NO T DS WAS MADE AND HENCE THE DISALLOWANCE IS SUSTAINED . HENCE I REJECT THIS GROUND OF THE APPEAL. EVEN OTHERWISE, THE NATURE OF SERVICES RENDERED BY THE EXPERTS WERE NOT EXPLAINED BY THE ASSESSEE. HENCE I FIND NO INFIRMITY IN THE FINDING OF THE LD.CIT(A). I UPHOLD THE SAME. IN THE RESULT GROUND NO.1 IS D ISMISSED. 5. GROUND NUMBER 2 IS AGAINST REJECTION OF THE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE FILED BY THE ASSESSEE UNDER RULE 46 A OF THE INCOME - TAX RULES 1962 BEFORE THE LD.CIT(A). 5.1. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT SUFFICIENT OPPORTUNITY HAS NOT BEEN GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO SHOW CAUSE NOTICE WAS ISSUED ON THIS 5 ISSUE OF FOREIGN TRAVEL EXPENSES BY THE A.O. BEFORE MAKING THE DISALLOWANCE. F ROM THE REPLY OF THE A.O. I FIND THAT ON 25.10. 20 1 0 DETAILS OF FOREIGN TRAVEL EXPENSES WERE CALLED FOR BY THE A.O. THE ASSESSEE IN HIS REJOINDER DATED 27.12 . 2013 AGREED WITH THE CONTENTION S OF THE A.O. THAT , DETAILS WERE CALLED FOR AND WERE NOT SUBMITTED TO THE A.O. DURING THE ASSESSMENT PROCEEDINGS. UNDER THESE CIRCUMSTANCES THE FINDING OF THE LD.CIT(A) AT PARA 3.5 OF HIS ORDER ARE UPHELD AND GROUND NO.2 OF THE ASSESSEE IS REJECTED. 6. GROUND NUMBER 3 IS ON THE DISALLOWANCE OF FOREIGN TRAVEL EXPENSES . LD.CIT(A) AT PARA 3.6 AND 3.7 HAD HELD AS FOLLOWS. 3.6 EVEN ON MERITS. IT IS SEEN THAT THE ADDITIONAL EVIDENCE SOUGHT TO BE FILED BY THE APPELLANT CONSISTS ONLY OF A COPY OF HIS OWN LEDGER A CCOUNT AND A COPY OF CERTAIN NOTINGS SAID TO BE MADE BY THE SPOUSES OF PARTNERS WHOSE TRAVELLING EXPENSES HAVE BEEN PARTLY DISALLOWED THE APPELLANT HAS NOT FILED ANY INDEPENDENT EVIDENCE, SUCH AS ANY CORRESPONDENCE BY FOREIGN BUYERS REFERRING TO THE BUSINESS VISIT OF THESE PERSONS. OR ANY OR DERS ETC., RECEIVED FROM OTHER PARTIES. AS A RESULT OF THE EFFORTS MADE BY T H ESE PERSONS IN A CASE WHERE SUCH DEDUCTIONS ARE CLAIMED BY FAMILY MEMBERS. MERE SELF - SERVING NOT INGS BY THE M CANNOT BE TAKEN AS SUFFICIENT PROOF AND SOME INDEPENDENT EVIDENCE IS R EQUIRED. THE ADDITIONAL EVIDENCE SOUGHT TO BE FILED 6 BY THE APPELLANT. EVEN IF ADMITTED. DOES NOT SUBSTANTIATE THE APPELLANT'S CLAIM. 3.7 THE APPELLANT HAS CLAIMED THAT FOREIGN TR AVEL BY THE SPOUSE OF PARTNERS WAS ENTIRELY FOR BUSINESS PURPOSES THEREFOR E. THE ENTIRE AMOUNT SHOULD BE ALLOWED AS DEDUCTION IN THE ASSESSMENT ORDER. THE A.O. HAS POINTED OUT THAT SHN N K SHARMA. HUSBAND OF SMT. PRABHA SHARMA. PARTNER IS NEITHER AN EMPLOYEE NOR A PARTNER IN THE ASSESSEE FIRM. AND DOES NOT RECEIVE ANY REMUNERATI ON FOR THE SERVICES CLAIMED TO HAVE BEEN RENDERED DURING HIS FOREIGN VISIT. THE APPELLANT WAS ASKED TO FILE A COPY OF THE COMPUTATION OF INCOME OF SHRI N.K. SHARMA. THE APPELLANT HAS FILED A COPY OF THE FORM NO 16 OF SHRI N .K. SHARMA. THIS SHOWS THAT SHRI SHARMA WORKS IN MI5 AOV EXPORTS (PROP SMT VANDANA SHARMA). IT WAS STATED THAT THIS CONCERN IS ENGAGED IN EXPORT OF MEAT PRODUCTS THE APPELLANT CONCERN IS A PART OF A GROUP OF SHN N.K. SHARMA WORKS IN A CONCERN ENGAGED IN MEAT EXPORT. HE DOES NOT RECEIVE A NY SALARY OR PROFIT. OR REMUNERATION. FROM THE APPELLANT FIRM IN SUCH A SITUATION, THE OBVIOUS CONCLUSION IS THAT SHN SNARMA'S FOREIGN VISIT WAS EITHER FOR P E RSONAL PURPOSES, OR FOR THE PURPOSE OF BUSINESS OF THE CONCERN IN WHICH HE WAS WORKING THERE IS NO REASON WHY SH RI SHARMA WOULD HAVE TAKEN THE TROUBLE TO TRAVEL ABROAD AND WORK FOR A CONCERN FROM WHICH HE DERIVED NO PERSONAL BENEFITS. THE APPELLANT HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO ESTABLISH THE BUSINESS PURPOSE OF THE VISITS OF SHRI N.K. SHARMA AND SHN ARUN MEHRA EVEN THE ADDITIONAL EVIDENCE 7 SOUGHT TO BE FILED,THOUGH NOT ADMITTED, DOES NOT SUBSTANTIATE THE APPELLANT'S CLAIM BECAUSE THIS DOES NOT CONTAIN ANY INDEPENDENT EVIDENCE IN SUPPORT OF APPELLANT'S CLAIM THE A 0 HAS ALREADY ALLOWED 50% OF THE EXPENSES AND MADE A DISALLOWANCE OF THE REMAINING 50%. IN VIEW OF THESE FACTS, THE DECISION OF THE A.O. IS JUSTIFIED AND IS UPHELD THE GROUND IS DISMISSED. 6.1. T HESE FINDINGS COULD NOT BE CONTR OVERTED BY THE LD. COUNSEL FOR THE ASSESSEE. IN THE ABSENCE OF THIRD PARTY EVIDENCES BEING PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CONTENTIONS, I UPHOLD THE FINDING OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF THE ASSESSEE. 7. GROUND NO.4 IS ON DISALLOWANCE OF SAL ARY OF RS.2,40,000/ - TO SMT.PRABHA SHARMA. AT PARA 4.2 AND 4.3 THE LD.CIT(A) HELD AS FOLLOWS. 4.2. THE APPELLANT HAS ARGUED THAT SMT.PRABHA SHARMA WAS A WORKING PARTNER AND THE CLAIM FOR SALARY IS JUSTIFIED. THE SUBMISSIONS OF THE APPELLANT AND THE FACT S HAVE BEEN CAREFULLY CONSIDERED. EXPLANATION 4 BELOW SECTION 40(B) SAYS THAT WORKING PARTNER MEANS AN INDIVIDUAL WHO IS ACTIVELY ENGAGED IN CONDUCTING THE AFFAIRS OF THE BUSINESS OR PROFESSION OF WHICH HE IS A PARTNER. IN THE ASSESSMENT ORDER, THE AO HAS POINTED OUT THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS SUBMITTED A MEDICAL CERTIFICATE FROM THE DOCTOR, MS.ANUPAMA ZUTSHI, STATING 8 MRS. PRABHA SHARMA IS UNDER ANY TREATMENT FOR TYPE I DIABETES AND NEPHROPATHY, NEUROPATHY. SHE HAS HAD AMPU TATION OF LEFT LEG AND HAS BEEN UNABLE TO ATTEND WORK FOR SEVERAL YEARS. SHE IS PRACTICALLY BED RIDDEN . CONSIDERING THE MEDICAL STATUS OF SMT. PRABHA MEHRA, SHE IS INELIGIBLE TO RECEIVE ANY SALARY AS WORKING PARTNER'. IN VIEW OF THE DOCTOR'S OBSERVATI ON IN THE MEDICAL CERTIFICATE, SMT. PRABHA SHARMA CANNOT BE SAID TO BE ACTIVELY ENGAGED IN CONDUCTING THE AFFAIRS OF THE BUSINESS IN TERMS OF EXPLANATION 4 BELOW SECTION 40(B). 4.3 AS DISCUSSED ABOVE, THE APPELLANT HAS SOUGHT TO FILE A COPY OF CERTAIN VOUCHERS SAID TO BE SIGNED BY SMT. PRABHA SHARMA AS ADDITIONAL EVIDENCE EVEN THE ADDITIONAL EVIDENCE SOUGHT TO BE FILED, THOUGH NOT ADMITTED DOES NOT SUBSTANTIATE THE APPELLANT'S CLAIM BECAUSE THE APPELLANT'S RELIANCE ON CERTAIN VOUCHERS HAVING BEEN SIGNE D BY SMT SHARMA IS NOT SUFFICIENT TO SHOW THAT SHE WAS ACTIVELY ENGAGED IN CONDUCTING THE AFFAIRS OF THE BUSINESS IN TERMS OF EXPLANATION 4. THIS IS PARTICULARLY IN VIEW OF THE FINDINGS REPORTED BY THE DOCTOR IN THE MEDICAL CERTIFICATE. IN VIEW OF THE SE FACTS, THE DISALLOWANCE MADE BY THE A.O IS JUSTIFIED AND IS UPHELD. THE GROUND IS DISMISSED. 7.1. A COPY OF THE DOCTOR CERTIFICATE DATED 15.12.2010 IS PLACED AT PAGE 56 OF THE ORDER. THOUGH THE LD.COUNSEL SUBMITS THAT SMT. PRABHA SHARMA WAS PHYSICAL LY FIT DURING THIS YEAR, THE MEDICAL CERTIFICATE SPEAKS OTHERWISE. UNDER THE 9 CIRCUMSTANCES I HAVE NO OTHER ALTERNATIVE TO UPHOLD THE FINDING OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF THE ASSESSEE. 8. GROUND NO.5 IS GENERAL IN NATURE. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY,2017. SD/ - (J.SUDHAKAR REDDY) ACCOUNTANTMEMBER DATED: THE 18 TH JANUARY, 2017 *MANGA 10 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR