SANJAY KALSI, NEW DELHI V. ACIT, CIRLCE- 32(1), NEW DELHI

ITA 5197/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3287 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 10-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JIWANI
• Assessee Lawyers: M ANMOHAN SINGH
• Keywords: Depreciation
• Section: 133(6); 37(1); 131; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO. 5 197 /DEL/201 7 [A.Y. 20 1 1 - 1 2 ] SHRI SANJAY KALSI VS. THE ACIT I 48 - B, FIRST FLOOR CIRCLE 32(1) LA JPAT NAGAR - 2, NEW DELHI NEW DELHI PAN : AAF PK 9177 M [ ASSESSEE ] [RESPONDENT] DATE OF HEARING : 2 0 . 0 2 .201 8 DATE OF PRONOUNCEMENT : 06 .0 3 .201 8 ASS ESSEE BY : SHRI M ANMOHAN SINGH , ADV. REVENUE BY : SHRI JIWANI , SR. DR ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE LD. CIT(A) - 18 , NEW DELHI VIDE ORDER DATED 0 1 . 12 .201 6 FOR A.Y. 20 1 1 - 1 2 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1. THE HONBLE APPELLATE, COMMISSIONER ERRED TO ENHANCE THE DISALLOWANCE IN THE COMMISSION PAID TO THE PARTIES U/S 37(1) OF THE INCOME TAX ACT, 1961, THOUGH THE RELEVANT EVIDENCES OF PAYM ENTS WERE COMPLIED AND THE REQUIREMENTS OF SEC. 37(1) IS MET. 2 ITA NO. 5197 /DEL/201 7 2. THE HONBLE APPELLATE COMMISSIONER IS NOT JUSTIFIED TO MAKE 10% DISALLOWANCE OF EXPENSES CLAIMED IN P & L ACCOUNT IN THE HEAD OF TELEPHONE EXPENSES AND TOUR & TRAVELS OR VEHICLE MAINTENANCE, DEPRECIATION BEING OF PERSONAL NATURE. 3. THE HONBLE APPELLATE COMMISSIONER IS NOT JUSTIFIED TO UPHOLD 10% DISALLOWANCE MADE BY ASSESSING OFFICER OF DEPRECIATION IN RELATION EXPENSES BEING OF THE PERSONAL NATURE. 3. THE BRIEF FACTS OF THE CASE IN RESPE CT OF GROUND NO.1 ARE AS PER ORDER OF AO REPRODUCED HEREINBELOW: DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DEBITED COMMISSION EXPENSES OF RS.18,22,663/ - IN THE P & L A/C VIDE QUESTIONNAIRE DATED 30.07.2013 THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF COMMISSION PAID. IN RESPONSE THE ASSESSEE FILED DETAILS ON 20.01.2014 ALONG WITH THEIR COPY OF ACCOUNTS AND CONFIRMATIONS . THE ABOVE DETAILS WERE LOOKED INTO AND AGAIN VIDE ORDER SHEET ENTRY DATED 27.02.2014, THE ASSESSEE WAS ASKED TO ESTABL ISH THE GENUINENESS OF COMMISSION EXPENSES PAID. IN RESPONSE, THE ASSESSEE FILED COMPUTATION OF INCOME IN SOME CASES AND COPY OF ITR IN OTHER CASES OR COMMISSION RECEIVERS ON 05.03.2014. 3 ITA NO. 5197 /DEL/201 7 SIMULTANEOUSLY, TO VERIFY THE ABOVE DETAILS AND CONFIRMATIONS SUBMI TTED BY THE ASSESSEE, NOTICE U/S 133(6) WERE ISSUED ON 21.02.2014 TO THE FOLLOWING PERSONS: RAKHI DATTA KRISHNA DATTA URMIL DATTA JANINDER PRIYA MAMAYA RUCHIKA JAIN MADHUBALA MAMAYA IN RESPONSE TO THESE NOTICES REPLY WAS RECEIVED ONLY IN THE CASES OF RAKH I DATTA, KRISHNA DATTA, URMIL DATTA AND IN REST OF THE CASES THE REPLIES WERE NOT RECEIVED TILL THE END OF ASSESSMENT PROCEEDINGS. FURTHER, VIDE ORDER SHEET ENTRY DATED 25.03.2014, THE ASSESSEE WAS ASKED TO PRODUCE THE FOLLOWING COMMISSION RECEIVERS FOR V ERIFICATION: RAKHI DATTA KRISHNA DATTA URMIL DATTA BIMLA AGARWAL OM PRAKASH AGARWAL ON THE DATE FIXED I.E. 07.03.2014, THE ASSESSEE COULD PRODUCE OM PRAKASH AGARWAL, BIMLA AGARWAL, RAKHI DUTTA. THE STATEMENT OF ALL THE PRESENT PERSONS WAS RECORDED U/S 13 1 OF THE INCOME - TAX ACT, 1961. AS PER ALL THE DETAILS FILED BY THE ASSESSEE REGARDING COMMISSION EXPENSES, ENQUIRIES CONDUCTED AND STATEMENTS (COPY ENCLOSED) RECORDED FOLLOWING CONCLUSIONS CAN BE DRAWN: 4 ITA NO. 5197 /DEL/201 7 1 . THE ASSESSEE IN A PLANED MANNER HAS SELECTED FEW FAM ILIES FOR PAYING COMMISSION WHEREIN ALL THE MEMBERS OF THE FAMILY HAVE NOT ACTUALLY TENDERED ANY SERVICES TO THE ASSESSEE. 2 . THE STATEMENTS RECORDED REFLECT THAT THE COMMISSION RECEIVERS DONT HAVE MUCH KNOWLEDGE OF THE SERVICES RENDERED AND PAYMENTS BEING MADE TO THEM. 3 . THE STATEMENTS RECORDED ALSO REFLECT THAT MOST OF THE COMMISSION RECEIVERS COULD NOT RECOLLECT NAME OF THE CUSTOMERS SENT BY THEM TO THE ASSESSEE. 4 . THE COMMISSION RECEIVERS COULD NOT EVEN REPRODUCE THE YEAR/YEARS FOR WHICH THEY HAVE RECEIVED C OMMISSION. 5 . IN MOST CASES, THEY DID NOT EVEN KNOW THE NAME OF THE ASSESSEE. 6 . IN SOME CASES, THE COMMISSION RECEIVER HAD NOT EVEN VISITED THE SHOP OF THE ASSESSEE. 7 . EVEN WHEN ENQUIRIES WERE CONDUCTED U/S 133(6), 50% OF THE REPLIES WERE NOT RECEIVED. ALL THE A BOVE OBSERVATIONS WERE CONFRONTED TO THE ASSESSEE ON 07.03.2014 BUT THE ONLY SUPPORT ASSESSEE HAD WITH HIM IN RESPECT TO PAYMENT OF COMMISSION IS THAT PAYMENT HAS BEEN MADE THROUGH BANK. IN THIS REGARD, THE CASE OF NEMI CHAND KOTHARI V CIT (2003) 264 ITR 254 (GAU) IS QUOTED, WHEREIN IT HAS BEEN OBSERVED THAT IT CANNOT BE SAID THAT A TRANSACTION WHICH TAKE PLACE BY WAY OF CHEQUE IS INVARIABLY SACROSANCT. EVEN THOUGH THE DECISION IS ON A DIFFERENT ISSUE, THE RATIO IS IMPORTANT. THUS, 5 ITA NO. 5197 /DEL/201 7 THE PAYMENT MADE BY AS SESSEE AS COMMISSION EXPENSES OF RS.1822663/ - IS NOT SACROSANCT. AS F A R AS ALLOWABILITY OF COMMISSION EXPENSES IS CONCERNED, THE CLAIM SHOULD SATISFY THE REQUIREMENT OF SECTION 37(1) OF THE INCOME - TAX ACT, 1961. FOR CONSIDERING AN EXPENSES ELIGIBLE FOR D EDUCTION U/S 37(1), THE FIRST AND FOREMOST ISSUE IS THAT IT SHOULD NOT BE AN EXPENSES COVERED BY THE EXPLANATION TO SUB - SECTION 1 OR SECTION 37 OF THE INCOME - TAX ACT, 1961. THE NEXT ISSUE IS THAT THE EXPENSES SHOULD BE GENUINE AND PAID WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS. IT IS OBSERVED THAT NO AGREEMENT HAS BEEN ENTERED BY ASSESSEE WITH THE COMMISSION RECEIVERS. NEITHER THE ASSESSEE HAS ANY BILL IN THIS REGARD ISSUED BY THE RECI P IENT OF COMMISSION NOR THERE ANY EVIDENCE/RECEIPT FOR THIS PAYMENT. THE ONLY EVIDENCE THE ASSESSEE HAS IN THIS REGARD IS THAT THE PAYMENT HAVE BEEN ROUTED THROUGH BANKING CHANNELS. HERE, THE ASSESSEE FAILS TO PROVE THE GENUINENESS OF PAYMENT. THE CASE OF LACHMINARAYAN MADAN LAL V CIT [1972] 86 ITR 439 (SC) IS ALSO QUOTED, WHEREIN IT WAS HELD THAT ITO CAN EXAMINE WHETHER COMMISSION IS PROPERLY DEDUCTIBLE, EVEN IF IT IS PAID UNDER AGREEMENT. THE MERE EXISTENCE OF AN AGREEMENT BETWEEN THE ASSESSEE AND ITS SELLING AGENTS OR PAYMENT OF CERTAIN AMOUNTS AS COMMISSION , DOES NOT BIND THE ITO TO HOLD THAT THE PAYMENT WAS MADE EXCLUSIVELY AND HOLLY FOR THE PURPOSE OF THE ASSESSEES BUSINESS. IT IS STILL OPEN TO THE ITO TO CONSIDER THE RELEVANT FACTS AND DETERMINE FOR HIMSELF WHETHER THE 6 ITA NO. 5197 /DEL/201 7 COMMISSION SAID TO HAVE BEEN PAID TO THE SELLING AGENTS OR ANY PART THEREOF IS PROPERLY DEDUCTIBLE UNDER SECTION 37(1). IN A RECENT DECISION IN THE CASE OF SACHNEIDER ELECTRIC INDIA LTD. VS CIT (2008) 304 ITR 0360, THE HONBLE JURISDICTIONAL HIGH COURT HAS DISMISSED THE APPEAL OF THE ASS ESSEE WHERE ON THE SIMILAR FACTS AND CIRCUMSTANCES, DEDUCTION ON ACCOUNT OF COMMISSION PAYMENT WAS SOUGHT. IN VIEW OF THIS, THE CLAIM OF COMMISSION TO THE EXTENT OF 30% OF THE TOTAL EXPENSE INCURRED I.E. RS.5 , 46 , 799/ - IS SQUARELY DISALLOWABLE U/S 37(1) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF NON - GENUINENESS OF PAYMENT. ALSO BEING SATISFIED THAT ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME IN FILING OF RETURN OF INCOME, PENALTY PROCEEDINGS U/S 271(1)(C) IS SEPARATELY INITIATED ON THIS ACCOUNT. 4 . THE LD. CIT(A) AFTER ISSUING ENHANCEMENT NOTICE, ENHANCED THE ADDITION TO RS.12,77,006/ - FOR WHICH THE ASSESSEE IS IN APPEAL BEFORE ME. 5. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE THAT THE ASSESSEE HAS FILED THE NAMES, ADDRESSES OF THE PERSONS TO WHOM THE COMMISSIONS HAVE BEEN PAID. THE ASSESSEE HAS SUBMITTED THE PERMANENT ACCOUNT NUMBER, C OMMISSION PAID AND TDS DEDUCTED AND THERE IS NO DISPUTE TO THE 7 ITA NO. 5197 /DEL/201 7 SAME. THE ASSESSEE HAS PRODUCED THE CONFIRMATIONS FROM ALL THE PARTIES FOR HAVING RECEIVED THE COMMISSION. THE ASSESSEE HAS PRODUCED FEW PARTIES FOR EXAMINATION BY THE AO WHICH WERE EXAMINED. MOST OF THE PARTIES WERE SERVED WITH THE NOTICE OF THE AO AND WHO HAVE REPLIED AND CONFIRMED TO HAVE RECEIVED TH E COMMISSION. THE PARTIES EXAMINED HAVE ALSO CONFIRMED TO HAVE RENDERED SERVICES TO THE ASSESSEE FOR WHICH THEY HAVE EARNED THE COMMISSION. IF SOME PARTIES HAVE NOT BEEN PRODUCED BY THE ASSESSEE, THE ASSESSEE CANNOT BE PARALIZED FOR THE SAME. IT IS THE DUTY OF THE AO TO SUMMON SUCH PARTIES U/S 131 OF THE ACT, WHICH POWER VEST WITH THE AO AND NOT WITH THE PARTY. IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, NO ADDITION OR ANY ENHANCEMENT CAN BE MADE BY THE AO OR THE LD. CIT(A) AND ADDITIONS AND ENHANCEMEN TS SO MADE ARE DIRECTED TO BE DELETED. THUS GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 6. AS REGARDS GROUND NO.2 AND 3 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD MADE MOST OF THE PAYMENTS IN CASH FOR WHICH NO EVIDENCE HAS BEEN PLACED ON RECORD AN D NO RECORD FOR INCURRING THE EXPENSES FOR BUSINESS PURPOSE HAS BEEN MAINTAINED AND , THEREFORE , THE AO DISALLOWED 10% OF THE AMOUNT CLAIMED BY THE ASSESSEE WHICH WAS CONFIRMED BY THE LD. CIT(A). 8 ITA NO. 5197 /DEL/201 7 7. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS O F THE CASE. SINCE THE ASSESSEE HAS NOT PLACED ON RECORD ANY EVIDENCE TO ADDUCE THE AUTHENTICITY OF EXPENSES CLAIMED FOR THE PURPOSE OF BUSINESS AND THEREFORE PERSONAL ELEMENT CANNOT BE RULED OUT. THEREFORE , IN THE CIRCUMSTANCES AND FACTS OF THE CASE I FI ND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE AO. THUS GROUND NO. 2 AND 3 OF THE ASSESSEE ARE DISMISSED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.5197/D EL /17 IS PARTLY ALLOWED. THE ORDER IS PRO NOUNCE D IN THE OPEN COURT ON 06 . 0 3 .201 8 . SD/ - [B.P. JAIN] ACCOUNTANT MEMBER DATED: 06 TH MARCH, 2018 VL/ COPY FORWARDED TO: 1 . ASSESSEE 2 . RESPONDENT 3 . CIT ASSI STANT REGISTRAR 4 . CIT(A) ITAT, NEW DELHI 5 . DR