DCIT, Circle - 1, Kolkata, Kolkata V. Shri Santanu Basu, Kolkata

ITA 53/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54496 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 11-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K SAHA
• Assessee Lawyers: S BANDYOPADHYAY
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND , . . !' ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I C. D. RAO, AM] # # # # / I.T.A NO. 53/KOL/2011 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF INCOME-TAX, VS. SHRI SANTA NU BASU CIRCLE-1, KOLKATA. (PAN AHJPB 3272 D) ()* /APPELLANT ) (+,)*/ RESPONDENT ) FOR THE APPELLANT: SHRI R. K. SAHA FOR THE RESPONDENT: SHRI S. BANDYOPADHYAY !- / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A)-1, KOLKATA IN APPEAL NO.69/CIT(A)-1/CIR-1/09-10 VIDE DATED 30.09.2010. T HE ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-1, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 15 .12.2008. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY ASSESSING OFFICER TO SUBSTANTIATE EXPENDITURE FOR EARNING COMMISSION INCOME. FOR THIS, REVENUE HAS RAISED FOLLOWING GRO UND NO.1: 1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF OF AN AMOUNT OF RS.10,50,000/- TOWA RDS EXPENDITURE FOR EARNING COMMISSION INCOME WHEN ASSESSEE FAILED TO DISCHARGE HIS ONUS TO SUBSTANTIATE THE CLAIM OF EXPENDITURE BY PRODUCING EVIDENCE. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE FILED RETURN OF INCOME FOR AS SESSMENT YEAR 2006-07 AND THE SAID RETURN WAS PROCESSED U/S. 143(1) ON 31.12.2007. ASSESSEE S CASE WAS TAKEN UP FOR SCRUTINY U/S. 143(2) OF THE ACT DATED 23.10.2007. THE ASSESSEE IS A DIR ECTOR OF A COMPANY AND RECEIVED RENTAL INCOME AND COMMISSION INCOME FROM VARIOUS PARTIES A S DECLARED UNDER THE HEAD INCOME FROM OTHER SOURCES. ASSESSEE HAS EARNED COMMISSION INC OME OF RS. 15,00,000/- FROM ELDYNE ELECTRO SYSTEMS PVT. LTD. ON TURNOVER BASIS AND OUT OF COMMISSION RECEIVED FROM THE SAID COMPANY, IT HAD INCURRED EXPENSES OF RS.12 LACS FOR NEGOTIATING WITH ALCATEL SEL, AG GERMANY 2 ITA 53/K/2011 SHRI SANTANU BASU A.Y.06-07 AND OTHER REPUTED MULTINATIONAL COMPANIES AND WITH INDIAN RAILWAYS, GOVT. OF INDIA FOR INTRODUCTION OF EXCEL AXEL COUNTER IN SIGNALING SYS TEM OF INDIAN RAILWAYS. ASSESSING OFFICER NOTED THAT THE ASSESSEE COULD NOT FURNISH EVIDENCE IN SUPPORT OF EXPENDITURE AND DISALLOWED OUT OF THE SAID COMMISSION INCOME RS.12,05,790/-. AGGR IEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFO RE US. 4. WE FIND THAT ASSESSEE IS A DIRECTOR OF A COMPANY VIZ. ELDYNE ELECTRO SYSTEMS PVT. LTD AND EARNED COMMISSION OF RS. 15,00,000/- FOR NEGOTI ATION WITH FOREIGN COMPANY ALCATEL SEL, AG, GERMANY AND OTHER REPUTED MULTINATIONAL COMPANI ES AND WITH INDIAN RAILWAYS FOR INTRODUCTION OF AXEL COUNTER IN SIGNALING SYSTEMS O F INDIAN RAILWAYS. IT IS A FACT THAT PARENT COMPANY ELDYNE ELECTRO SYSTEMS PVT. LTD BAGGED HUGE CONTRACTS FROM INDIAN RAILWAY FOR INSTALLATION OF SINGLE SYSTEM DIGITAL AXEL COUNTER AND MULTI SECTION DIGITAL AXEL COUNTER, WHICH WAS AN UNIQUE FEATURE IN THE SIGNALING SYSTEM OF INDIAN RAILWAY. WE FIND THAT ASSESSEE BY VIRTUE OF HIS VAST EXPERIENCE IN THE FIELD OF EL ECTRONICS SUCCESSFULLY NEGOTIATED THE CONTRACT AS CONSULTANT CUM AGENT BETWEEN INDIAN RAILWAYS AND EL DYNE ELECTRO SYSTEMS PVT. LTD AND DUE TO THIS NEGOTIATION, ELDYNE ELECTRO SYSTEMS PVT. LT D PAID COMMISSION OF RS. 15,00,000/- TO ASSESSEE AS AGREED UPON EARLIER. AS POINTED OUT BY LD. COUNSEL FOR ASSESSEE THAT IN ORDER TO EARN THIS COMMISSION, ASSESSEE HAD TO TRAVEL IN VAR IOUS PLACES, NEGOTIATE WITH THE FOREIGN SUPPLIERS AND HOLD CONFERENCE WITH FOREIGN SUPPLIER S IN INDIA AND ABROAD AS ALSO TO MAINTAIN OTHER ESTABLISHMENT EXPENSES. ASSESSEE HAD TO TRAVE L TO GERMANY AND OTHER FOREIGN COUNTRIES FOR NEGOTIATION / AND OR DEALING WITH THE FOREIGN M ULTINATIONAL COMPANIES AND FOR THIS HE INCURRED SUBSTANTIAL AMOUNT FOR FOREIGN TRAVEL. IN SUPPORT OF THE SAME, ASSESSEE SUBMITS PHOTOCOPIES OF PASSPORT. ACCORDING TO ASSESSEE, FOR EARNING COMMISSION INCOME OF RS. 15,00,000/-, HE HAD TO INCUR HUGE EXPENDITURE TO TH E TUNE OF RS. 12,05,790/-. IN VIEW OF ABOVE FACTS, WE FIND THAT NEITHER BEFORE AO NOR BEFORE CI T(A) AND EVEN NOW BEFORE US THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF HIS CL AIM OF EXPENDITURE ON COMMISSION RECEIVED. THERE IS NO EVIDENCE THAT THE ASSESSEE HAS INCURRED ANY EXPENDITURE IN THE SHAPE OF FOREIGN TRAVEL, LOCAL TRAVELLING OR ESTABLISHMENT EXPENSES. IT IS ALSO NOT THE CASE THAT THE ASSESSEE HAS MAINTAINED AN ESTABLISHMENT AND PAID RENT OR SALARI ES TO STAFF AND IN SUCH CASE, THERE IS NO ALTERNATIVE BEFORE THE AO EXCEPT TO DISALLOW THE EX PENDITURE. HOWEVER, THE CIT(A) ALLOWED THE EXPENDITURE COMPLETELY WITHOUT ANY BASIS AND RE STRICTED THE NET OF SURPLUS OUT OF GROSS COMMISSION AT 30% WITHOUT A COMPARABLE CASE. ACCOR DINGLY, WE HAVE NO ALTERNATIVE EXCEPT TO MAKE ESTIMATE THAT THE ASSESSEE MIGHT HAVE INCURRED SOME EXPENDITURE TO EARN THIS COMMISSION INCOME BUT THAT SHOULD BE SUPPORTED BY EVIDENCE. I N THE ABSENCE OF ANY EVIDENCE WE ESTIMATE 3 ITA 53/K/2011 SHRI SANTANU BASU A.Y.06-07 THIS EXPENDITURE AT 30% ONLY AND BALANCE 70% SHOULD HAVE BEEN NET INCOME. THE AO WILL RECOMPUTE THE COMMISSION INCOME, WE DIRECT ACCORDIN GLY. 5. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY A LLOWED. 6. ORDER PRONOUNCED IN OPEN COURT ON 12.08.2011 SD/- SD/- . . , !' , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ' ' ' ') )) ) DATED 12 TH AUGUST, 2011 ./ $01 2 JD.(SR.P.S.) !- 3 +4 5!4&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT DCIT, CIRCLE-1, KOLKATA. 2 +,)* / RESPONDENT, SHRI SANTANU BASU, P-21, ASHUTOSH CHO WDHURY AVENUE, KOLKATA-19.. 3 . -$ ( )/ THE CIT(A), KOLKATA 4. -$ / CIT, KOLKATA 5 . => +$ / DR, KOLKATA BENCHES, KOLKATA ,4 +/ TRUE COPY, !-$?/ BY ORDER, 1 /ASSTT. REGISTRAR .