Puran Chand Rahi, Delhi V. ITO Ward-21(3), New Delhi

ITA 5195/DEL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4342 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 03-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Principle of natural justice; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F , NEW DELHI BEFORE SMT. BEENA A PILLAI, JUDICIAL MEMBER AND SHRI MAHARISHI PRASHANT, ACCOUNTANT MEMBER ITA NO. 5195 /DEL/201 6 AY: 20 08 - 09 SH. PURAN CHAND RATHI R/O T - 108, STREET NO.1 SHIVAJI NAGAR NARELA DELHI 110 040 PAN: A GFPR5661M VS . ITO, WARD 21 (3) NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SMT. PREM LATA BANSAL, SR.ADV. SH. DIVYANSHU AGGARWAL, ADV. DEPARTMENT BY : SH. SURENDER PAL, SR. D.R. DATE OF HEARING : 30 .10.2018 DATE OF PRONOUNCEMENT : 31.10.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER OF LD.CIT(APPEALS) - 13, NEW DELHI DATED 11.07.2016 FOR A.Y 2008 - 09 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [LD. CIT(A)] HAS ERRED ON FACTS AN D IN LAW IN PARTLY ALLOWING THE APPELLANT APPEAL AGAINST ORDER OF LD. ASSESSING OFFICER (AO) ON A TOTAL INCOME OF RS. 1,21,45,869/ - . ITA NO.5195/DEL/2016 A.Y.2008 - 09 SH. PURAN CHAND RATHI VS. ITO 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A), HAS ERRED IN SUSTAINING OF ADDITION, OF RS. 1,08,76,349/ - ON ACCOUNT OF FOREIGN AGENT COMMISSION, MADE BY THE ASSESSING OFFICER. 3. THAT THE LD. CIT (A) HAS GROSSLY ERRED FACT AND ON LAW IN REDUCING THE ADDITION TO RS. 10,89,700/ - INSTEAD OF RS. NIL ON ACCOUNT OF UNEXPLAINED/UNVERIFIED CREDI TORS. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN AFFIRMING THE DECISION OF LD. AO FOR DISALLOWING COMMISSION PAYMENT OF RS.1,08,76,349/ - TO FOREIGN PARTIES WITHOUT APPRECIATING THE FACT AND AVAILABLE SUPPORTING. 5. THAT ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE ADDITION MADE BY THE ASSESSING OFFICER DUE TO NON - FURNISHING OF DESIRED INFORMATION AND DOCUMENTS. 6. THAT LD. CIT (A) HAVE ERRED IN LAW AND ON FACTS IN NOT PROPERLY APPRE CIATING AND CONSIDERING VAR IOUS SUBMISSIONS, EVIDENCES AND SUPPORTING FILED BY APPLICANT AND PLACED ON RECORD DURING THE COURSE OF THE PROCEEDINGS AND NOT PROPERLY APPRECIATING VARIOUS FACTS AND LAW IN ITS PROPER PERSPECTIVE AND FURTHER ERRED IN UNDERSTAN DING THE FACTS AND IN PASSING ORDERS IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. 7. THAT THE LD.CIT(A) & LD.AO HAS GROSSLY ERRED IN NOT PROVIDING SUFFICIENT AND ADEQUATE OPPORTUNITY TO THE ASSESSE E TO REPRESENT ITS CASE AS THE ASSESSE E WAS PR EVENTED BY SUFFICIENT CAUSE IN NOT BEING ABLE TO FURNISH THE REQUISITE DETAIL, EXPLANATION AND DOCUMENTS DURING THE COURSE OF APPELLATE STAGE AND EVEN NOT REQUESTED. 8. THAT ADDITIONS BY LD. AO ARE OF SUSPICION NATURE AND TOTALLY BASELESS AND FRAMED ON PR ESUMPTION BASIS. ACCORDINGLY, DESERVED TO BE DELETED. 9. THAT THE ID. AO AND ID. CIT CA) HAS ERRED, BOTH ON FACTS AND IN LAW, IN ASSUMING JURISDICTION UNDER PROVISIONS OF THE ACT AND ACCORDINGLY ENHANCEMENT MADE ON THAT BASIS IS VOID AB - INITIO AND WAS MAD E IN MECHANICAL MANNER AND CONTRARY TO FACTS, LAW AND THE PRINCIPLES OF NATURAL JUSTICE, AND IS VITIATED IN LAW. ITA NO.5195/DEL/2016 A.Y.2008 - 09 SH. PURAN CHAND RATHI VS. ITO 3 10. THE ORDER OF THE LD. CIT CA) IS ARBITRARY, BIASED BAD IN LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 11. THAT THE GROUNDS OF APPEAL AS H EREIN ARE WITHOUT PREJUDICE TO EACH OTHER. 12. THAT THE APPELLANT RESPECTFULLY CRAVES LEAVE TO SUPPLEMENT, TO CANCEL, TO A DD, TO AMEND AND/OR OTHERWISE TO ALTER/MODIFY AND/OR FOREGO ANY GROUND S) AT OR BEFORE THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,79,820/ - ON 30/09/08. THE SAME WAS PROCESSED UNDER SECTION 143 (1) OF THE INCOME TAX ACT, 1961 (THE A CT ) AND SUBSEQUENTLY WAS SELECTED FOR SCRUTINY. ACCORDINGLY NO TICE UNDER SECTION 143 (2) OF THE A CT WAS ISSUED TO ASSESSEE. UPON RECEIPT OF THE STATUTORY NOTICES, R EPRESENTATIVE OF ASSESSEE APPEARED BEFORE THE LD. AO AND FILED REQUISITE DETAILS AS CALLED FOR. 2.1 . LD. AO OBSERVED THAT ASSESSEE IS ENGAGED IN THE BUSI NESS OF EXPORT OF FABRIC, GARMENTS, CARPETS, SCARVES, SOCKS AND SHAWLS ETC . IN THE NAME AND STYLE OF M/S RATHI IMPEX. IT WAS OBSERVED THAT ASSESSEE HAS PAID A SUM OF RS.1,08,76,348.93/ - AS COMMISSION TO FOREIGN AGENT. IT WAS SUBMITTED BY ASSESSEE THAT THE PAYMENTS WERE MADE HAVING REGARD TO THE COMMERCIAL EXPEDIENCY FOR PROMOTING THE PRODUCTS BELONGING TO ASSESSEE ABROAD, PROCURING THE OVERSEAS ORDERS FOR ASSESSEE, FACILITATING THE RECEIPT OF SALE VALUE FROM ULTIMATE BUYER, SUBMIT ALL ENQUIRIES AND ORDERS T O ASSESSEE, RESOLVING BUYERS QUERY , ASSISTS CUSTOMERS AT ALL TIMES , INCLUDING WARRANTY PERIOD. IT WAS SUBMITTED THAT ASSESSEE HAS PAID A COMMISSION OF 12.5% AS PER THE AGREEMENT SINCE THE EXPORT HAS BEEN FACILITATED BY FOREIGN AGENT , WHICH IS V ERY CATEGOR ICALLY STATED IN PURCHASE ORDERS. IT ITA NO.5195/DEL/2016 A.Y.2008 - 09 SH. PURAN CHAND RATHI VS. ITO 4 WAS SUBMITTED THAT ASSESSEE FILED ALL REQUISITE DETAILS LIKE PURCHASE ORDER, INVOICE, CUSTOMS CERTIFICATE AND BANK CERTIFICATE ESTABLISHING PAYMENT MADE TO FOREIGN AGENT AS COMMISSION. 2.2 . LD.AO , HOWEVER , MADE ADDITION DIS REGARDING THE SUBMISSIONS MADE BY ASSESSEE TO THE EXTENT OF RS.1,08,76,349/ - . THE NEXT ADDITION MADE BY LD.AO IS IN RESPECT OF UNEXPLAINED/UNVERIFIED CR EDITORS AMOUNTING TO RS.1,62,20,735/ - . 3. AGGRIEVED BY THE ADDITIONS MADE BY LD.AO A SSESSEE PREFERRED APPEAL BEFORE LD.CIT(A). LD.CIT(A) CONFIRMED THE ADDITION MADE BY LD. AO IN RESPECT OF COMMISSION PAID TO FOREIGN AGENT. HOWEVER , AS REGARDS THE ADDITION IN RESPECT OF UNEXPLAINED/UNVERIFIED CREDITORS, RESTRICTED THE DISALLOWANCE TO RS.1 0,89, 700 / - SINCE ASSESSEE HAD NOT FURNISHED ANY CONFIRMATION OF THE THIRD PARTY BEING M/S HR & CA TRADERS. 4. AGGRIEVED BY THE ADDITIONS CONFIRMED BY LD.CIT (A), ASSESSEE IS IN APPEAL BEFORE US NOW. 5. GROUND NO. 1, 2 ARE GENERAL IN NATURE AND , THEREFO RE , DO NOT REQUIRE ANY ADJUDICATION. 6. GROUND NO.3(A) IS IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF COMMISSION PAID TO FOREIGN AGENT. 7. LD. C OUNSEL SUBMITTED THAT ASSESSEE PAID COMMISSION AT 12.5% OF THE INVOICE VALUE TO FOREIGN AGENT WHO UNDERTAKES ALL SERVICES RELATING TO MATERIALS/GOODS AND FOLLOW - UPS ON BEHALF OF FOREIGN CUSTOMER. IT WAS SUBMITTED THAT THE COMMISSION PAID TO M/S. ASIDA TRADING CO. LLC WHICH WAS COMMERCIALLY EXPEDIENT. SHE SUBMITTED THAT THE AGENT FACILITATED ASSESSEE IN MAKING EXP ORT SALES TO THE BUYERS AND ACTED AS A MEDIATOR FOR MAKING SALES TO THE FOREIGN BUYERS BEING, COMMODITIES INTERTRADE GENERAL ITA NO.5195/DEL/2016 A.Y.2008 - 09 SH. PURAN CHAND RATHI VS. ITO 5 TRADING CO. LLC AND MANOOBA TEXTILES LLC DUBAI. SHE PLACED RELIANCE UPON PAGE NO. 8 OF PAPER BOOK WHEREIN THE CONFIRMATION OF COMM ISSION PAID TO THE FOREIGN AGENT IN RESPECT OF THE EXPORTS MADE TO THE BUYERS HAVE BEEN ITEMISED INVOICE WISE. SHE ALSO PLACED RELIANCE UPON INVOICES, CUSTOM CERTIFICATES AND B R AND CONFIRMATION IN RESPECT OF EACH AND EVERY PAYMENTS MADE BY ASSESSEE, PLA C ED IN THE PAPER BOOK. 7.1. SHE THUS SUBMITTED THAT LD.A.O. AND LD. CIT (A) WITHOUT VERIFYING THESE DETAILS HAS CONFIRMED THE ADDITION WHICH IS NOT JUSTIFIABLE. 7.2. ON THE CONTRARY LD. SR. DR SUBMITTED THAT ALL THE DOCUMENTS RELIED UPON BY LD. C OUNSEL D O NOT DECIDE NATURE OF PAYMENT. HE SUBMITTED THAT IT IS SURPRISING THAT THERE IS NO COMMUNICATION IN THE FORM OF ANY AGREEMENT BETWEEN PRINCIPAL AND A GENT , IN RESPECT OF GOODS EXPORTED BY ASSESSEE. BY SUBMITTING SO , PLACING RELIANCE UPON THE ORDERS PASSED BY AUTHORITIES BELOW , LD. SR. DR PLACED SERIOUS DOUBTS UPON THE NATURE OF PAYMENT MADE TO FOREIGN AGENT TO BE COMMISSION AS ALLEGED BY THE ASSESSEE. HE ALSO SUBMITTED THAT ASSESSEE HAS NOT PROVED THE NATURE OF SERVICE S RENDERED BY AGENT TO ASSESSEE WHICH CAN BE SUPPORTED BY SOME EVIDENCE. 8. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 8.1 . ON PAGE 8 CONFIRMATION HAS BEEN ISSUED BY FOREIGN AGENT BEING ASIDA TRADING CO . LLC, REGARDING COMMISSION AMOUNT. FURTHER , THE INVOICES PLACED IN THE PAPER BOOK, THE SHIPPING BILL FOR EXPORTS ISSUED BY THE C USTOMS DEPARTMENT AND THE C ERTIFICATE OF EXPORT ISSUED BY THE BANK HAS NOT BEEN VERIFIED BY ITA NO.5195/DEL/2016 A.Y.2008 - 09 SH. PURAN CHAND RATHI VS. ITO 6 LD.AO AND ALSO HAS NOT BEEN DISPU TED IN ANY MANNER WHATSOEVER REGARDING ITS AUTHENTICITY. 8.2. IN THE WRITTEN SUBMISSIONS ASSESSEE SUBMITTED THAT FOREIGN AGENT HAS PROVIDED FOLLOWING SERVICES IN LIEU OF COMMISSION PAID BY ASSESSEE : I) PROMOTE THE PRODUCTS BELONGING TO THE ASSESSEE ABRO AD, II) PROCURE THE OVERSEAS ORDER FOR THE ASSESSEE, III) FACILITATING THE RECEIPT OF SALE VALUE FROM THE ULTIMATE BUYER, IV) SUBMIT ALL INQUIRIES AND ORDERS TO THE ASSESSEE, V) RESOLVING THE BUYERS QUERY, VI) ASSIST THE CUSTOMERS AT ALL TIMES INCLUDING THE WARRANTY PERIOD. HOWEVER, NO EVIDENCE HAS BEEN SUBMITTED IN REGARDS TO RECEIPT OF AFORESTATED SERVICES RENDERED BY FOREIGN AGENT. NO DOCUMENTS/EVIDENCES HAS BEEN FILED BEFORE US IN JUSTIFICATION OF COMMISSION PAID TO FOREIGN AGENT. LD.AO HA S ALSO NOT VERIFIED THIS ASPECT. WE ARE, THEREFORE, INCLINED TO SET ASIDE THE ISSUE BACK TO LD.A.O. ASSESSEE IS DIRECTED TO FILE AGREEMENT WITH FOREIGN AGENT TO PROVE THE NATURE OF SERVICES PROVIDED TO ASSESSEE. LD.AO SHALL THEN VERIFY THE SAME AND CONS IDER THE CLAIM OF ASSESSEE AS PER LAW. 8. 3 . ACCORDINGLY WE ALLOW THIS GROUND FOR STATISTICAL PURPOSES . 9. GROUND NO. 3 (B) IS IN RESPECT OF ADDITION MADE ON ACCOUNT OF UNEXPLAINED/UNVERIFIED CREDITORS. 9.1 . LD. C OUNSEL SUBMITTED THAT ASSESSEE HAD PURCHASED GOODS FROM 6 PARTIES DURING THE F INANCIAL Y EAR 2007 - 08 AND HAS MADE PAYMENT THROUGH ACCOUNT PAYEE CHEQUES IN THE SAME YEAR AND IN ITA NO.5195/DEL/2016 A.Y.2008 - 09 SH. PURAN CHAND RATHI VS. ITO 7 SUBSEQUENT ASSESSMENT YEAR. SHE SUBMITTED THAT CONFIRMATIONS OF MOST OF THE CRED ITORS ARE PLACED ON RECORD AND HAS BEEN FILED BEFORE LD. AO. IT WAS SUBMITTED BY LD. C OUNSEL THAT LD.A.O. VERIFIED THE CREDITORS DURING ASSESSMENT PROCEEDINGS. IN RESPECT OF M/S AS H OK SALES CORPORATION, LD. C OUNSEL SUBMITTED THAT THE PARTY FAILED TO RESPO ND TO NOTICE UNDER SECTION 133 (6) HOWEVER THE ASSESSEE PRODUCED CURRENT ADDRESS OF THE PARTY AND FURNISHED C ERTIFICATE FROM SBC BANK THAT THE ENTIRE BALANCE HAD BEEN SQUARED OFF IN THE FOLLOWING YEAR THROUGH RTGS TRANSFER. SHE SUBMITTED THAT THE REMAINING SUNDRY CREDITORS RESPONDED TO THE NOTICE ISSUED BY LD.AO AND ALSO FILED CONFIRMATION AND COPIES OF LEDGER ACCOUNTS AS CALLED FOR WHICH IS ALSO A PART OF REMAND REPORT DATED 13/10/14. SHE SUBMITTED THAT LD.CIT(A) HAS SUSTAINED THE ADDITION ONLY IN RESPECT OF 3 RD PARTY I.E. M/S HR& CA T RADERS FOR NON - FURNISHING OF CONFIRMATION. THE MAIN ARGUMENT ADVANCED BY LD. C OUNSEL IS THAT THE PURCHASES HAS NOT BEEN DISPUTED BY THE AUTHORITIES BELOW. IT HAS BEEN SUBMITTED THAT PURCHASES AND SALES RECORDED BY ASSESSEE IN THE BOOKS OF ACCOUNT S HAS NOT BEEN DOUBTED BY LD.AO. 9.2 . ON THE CONTRARY LD.SR DR PLACED RELIANCE UPON THE ORDERS PASSED BY AUTHORITIES BELOW. 10. W E HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 10.1 . LD. C OUNSEL HAS ARGUED THAT PURCHASES FROM THE PARTIES HAS NOT BEEN DISPUTED AND THE CORRESPONDING SALES HAVE ALSO BEEN ACCEPTED BY AUTHORITIES BELOW. IN THE PRESENT CASE THE LD.AO AND LD.CIT(A) HAS CO NFIRMED THE OUTSTANDING BALANCE WHICH HAS BEEN PAID I N SUBSEQUENT YEAR TO THE SUPPLIE R S B EING ITA NO.5195/DEL/2016 A.Y.2008 - 09 SH. PURAN CHAND RATHI VS. ITO 8 THIRD PARTY. BOTH THE LOWER AUTHORITIES HAVE NOT DOUBTED THE PURCHASES AS WELL AS THE PAYMENTS MADE BY ASSESSEE. MERELY BECAUSE THE PAYMENT HAS BEEN MADE TO THE SUPPLIER THE THIRD PARTY, ADDITION CANNOT BE MADE IN THE HANDS OF PURCHASE R OF GOODS . WE ARE THEREFORE INCLINED TO DELETE THE ADDITION IN HANDS OF ASSESSEE. 10.2. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED. 11. IN THE RESULT, APPEALS FILED BY ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 1 / 1 0 / 2 0 1 8 . S D / - S D / - (MAHARISHI PRASHANT) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 3 1 S T OCTOBER, 2018 * GMV COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA NO.5195/DEL/2016 A.Y.2008 - 09 SH. PURAN CHAND RATHI VS. ITO 9 DATE DRAFT DICTATED ON 30.10.2018 DRAFT PLACED BEFORE AUTHOR DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON & ORDER UPLOADED ON : FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.