Sh. Navneet Bansal, Agra V. I.T.O.-1(3), Agra

ITA 537/AGR/2012

• Counselvise Citation: 53720314 RSA 2012
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 22-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANUJ SHARMA S RESP
• Keywords: Charitable institution
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NOS. 433 & 537/AGRA/ 2012 ASSESSMENT YEARS 2007-2008 SHRI NAVNEET BANSAL VS. INCOME TAX OFFICER 1(3) 1-PRAKASH ENCLAVE, BYE PASS ROAD, SANJAY PLACE, AGRA. AGRA. (PAN ABSPB 3698 N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJENDRA SHARMA & SHRI MANUJ SHARMA, ADVOCATES RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 07.08.2013 DATE OF PRONOUNCEMENT : 23.08.2013 ORDER PER A.L. GEHLOT,ACCOUNTANT MEMBER: BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDERS DATED 31.03.2012 AND 26.09.2012 PASSED BY THE LEARN ED CIT(A)-I, AGRA FOR THE A.YS. 2007-08.ONE APPEAL PERTAINS TO QUANTUM AND AN OTHER PERTAINS TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ITA NO. 433/AGRA/2012 BY THE ASSESSEE:- 2. THE ASSESSEE HAS RAISED AS MANY AS FOUR GROUNDS OF APPEAL, BUT THE EFFECTIVE GROUND IS IN RESPECT OF DISALLOWANCE OF T RAVELING ALLOWANCE OF ITA NOS.433 /AGRA/2012 537/AGRA/2012, A.YS. 2007-08 2 RS.34,160/- AND SECOND GROUND IS IN RESPECT OF ADDI TION ENHANCED BY THE CIT(A) TO THE EXTENT OF RS.5,70,000/- AS AGAINST TH E ADDITION MADE BY A.O. FOR RS.71,940/- BEING 10% COMMISSION EXPENSES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PROPRIETARY CONCERN ENGAGED IN TRADING OF VEHICLES & SPARE PARTS, COMMI SSION & WHOLE SELLER OF MOBILE PHONES. THE ASSESSEE PRODUCED THE BOOKS OF A CCOUNT BEFORE THE A.O. WHICH WERE EXAMINED BY THE A.O. THE A.O. NOTICED TH AT THE ASSESSEE HAS DEBITED TRAVELING EXPENSES OF RS.3,41,598/- AND RS. 7,19,409/- ON ACCOUNT OF COMMISSION EXPENSES. THE A.O. FOUND THAT THE ASSESS EE HAS CLAIMED THESE EXPENSES ON THE BASIS OF SELF MADE VOUCHERS AND THE SAME ARE NOT FULLY VERIFIABLE. THE A.O. DISALLOWED 10% OF THESE EXPENS ES OF WHICH CALCULATION COMES TO RS.34,160/- ON ACCOUNT OF TRAVELING EXPENS ES AND RS.71,940/- ON ACCOUNT OF COMMISSION EXPENSES. 4. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIES AND RECORDS PERUSED. THE A.O. HAS MADE THE AD-HOC ADDITION OF 10% OUT OF TRAVELLING EXPENSES WITHOUT FURNISHING ANY SPECIFIC EXPENSES, WHICH ARE NOT INCURRED FOR THE PURPOSE OF THE BUSINESS. SINCE THE ASSESSEE HAS INC URRED THE EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS OF THE ASSESSEE, THE AD- HOC DISALLOWANCE CANNOT BE MADE. WE, THEREFORE, FIN D THAT THE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS IS ALLOWABLE U NDER SECTION 37 OF THE ACT ITA NOS.433 /AGRA/2012 537/AGRA/2012, A.YS. 2007-08 3 AND ACCORDINGLY DELETE THE ADDITION OF RS.34,160/- MADE BY THE A.O. OUT OF THE TRAVELLING EXPENSES. 5. AS REGARDS, THE DISALLOWANCE OUT OF COMMISSION E XPENSES, THE A.O. DISALLOWED 10% OF THE COMMISSION EXPENSES. THE ASSE SSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ENHANCED THE ADDITION TO THE EXTENT OF RS.5,70,000/-. THE CIT(A) CARRIED OUT THE ENQUIRIES THROUGH A.O. D URING THE APPELLATE PROCEEDINGS, IT WAS FOUND THAT ALL THE PERSONS TO W HOM THE COMMISSION PAID, DURING THE INQUIRY, NONE OF THESE PERSONS EXCEPT M/ S ACTION AUTO FAB EARTH MOVERS (P) LTD. COULD TELL ANY DETAILS OF SERVICES RENDERED BY THEM IN CONNECTION WITH SALE OF VEHICLES. THESE PERSONS WER E FOUND TO BE EITHER RELATED TO THE ASSESSEE OR THEY WERE FRIENDS OF THE ASSESSEE WITH WHOM EVEN NO FORMAL AGREEMENT WAS EXECUTED FOR PROVIDING SERVICE S IN SELLING OF VEHICLES. 6. THE CIT(A) FOUND THAT THE COMMISSION PAID TO THE FOLLOWING PERSONS HAS NOT BEEN FOUND TO BE ALLOWABLE BECAUSE THE EXPE NDITURES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS :- (CIT(A) PAGE NO.23) NAME OF PERSON AMOUNT (RS.) SANJAY VAISHY 40000 KRISHNA KUMAR GOYAL 50000 NARENDRA VAISHY 50000 SANJAY VAISHY 60000 ANURADHA VAISHY 1200000 ITA NOS.433 /AGRA/2012 537/AGRA/2012, A.YS. 2007-08 4 RAJEEV AGARWAL 150000 NAVEEN KUMAR GOYAL 100000 TOTAL 570000 7. THE SUBMISSION OF THE ASSESSEE WAS THAT THE COMM ISSION WAS PAID ON ACCOUNT SERVICES RENDERED BY THE CONCERNED PERSONS. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS PAID COMMISSION TO THESE PARTIES IN EARLIER YEAR ALSO AND SAME HAS BEEN ACCE PTED BY THE DEPARTMENT. THE DETAILS OF THE PERSON WAS BY THE LD. AUTHORIZED REP RESENTATIVE ARE AS UNDER :- PARTICULARS 31.03.2007 31.03.2006 SANJAY VAISHYA (RS.60000+RS.40000) 1,00,000/- KRISHAN KUMAR GOYAL 50,000/- 50,000/- NARENDRA VAISHYA 50,000/- 40000/- ANURADHA VAISHYA GWALIOR 1,20,000/- 1,50,000/- RAJEEV AGARWAL 1,50,000/- 80,000/- NAVEEN KUMAR GOYAL 1,00,000/- 50,000/- 8. IT WAS SUBMITTED THAT THE COMMISSION TO SANJAY VAIS HYA WAS PAID ON ACCOUNT OF 41+STR SCHOOL BUS SUPPLY TO HINDUSTAN CO LLEGE OF TECHNICAL EDUCATION VIDE BILL NO. 002, DATED 05.05.2006. THE COMMISSION PAID TO KRISHAN KUMAR GOYAL WAS PAID ON ACCOUNT OF 41+1 STR SCHOOL BUSES SUPPLY TO HOLY PUBLIC SCHOOL, AGRA, HOLY NURSERY PUBLIC SCHOO L, AGRA AND HOLY ITA NOS.433 /AGRA/2012 537/AGRA/2012, A.YS. 2007-08 5 NURSERY PUBLIC SCHOOL, AGRA, VIDE BILLS NO. 11, 12 & 14. SIMILAR IS THE POSITION IN RESPECT OF OTHER PARTIES TO WHOM THE CO MMISSION WAS PAID. THE ASSESSEE HAS ESTABLISHED BILL NUMBERS AND SCHOOL BU SES OR OTHER SELLER AND TIPPER SUPPLIED TO THE PARTIES. DURING THE APPELLAT E PROCEEDINGS, THE STATEMENT OF THE CONCERNED PERSON WERE RECORDED BY THE A.O. W HEREIN ALL THE PARTIES ADMITTED THAT COMMISSION RECEIVED AGAINST THE SERVI CES RENDERED FOR SELLING THE VEHICLES OF THE ASSESSEE TO THE PARTIES. THEY A LL TAKE THE COMMISSION RECEIVED TO EVERY CHEQUES IN RESPECT OF TURN OF INC OME. THE DETAILS OF PERMANENT ACCOUNT NUMBER AND THE DETAILS OF WARD WH ERE THESE PARTIES WERE ASSESSED SUBMITTED BY THE ASSESSEE AND SAME HAS BEE N REPRODUCED BY THE CIT(A) IN HIS ORDER AT PAGE NO.4. THE ASSESSEE HAS ALSO DEDUCTED TAX AT SOURCE ON THE COMMISSION PAYMENT. THE DETAILS FILED BY THE ASSESSEE HAS BEEN REPRODUCED BY THE CIT(A) AT PAGE NO.4 OF HIS ORDER. SIMILARLY, THE NATURE OF SERVICES RENDERED BY THESE PARTIES, THE DETAILED CH ART HAVE BEEN FILED WHICH HAS BEEN REPRODUCED BY THE CIT(A) IN HIS ORDER AT PAGE NO.5. 9. THE MAIN REASON FOR ENHANCING THE ADDITION BY TH E CIT(A) WAS THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE SERVICE RENDER ED BY THESE PARTIES. IN THIS REGARD, IT IS RELEVANT TO SEE NATURE OF BUSINESS AC TIVITIES OF THE ASSESSEE. THE ASSESSEE IS AN AUTHORIZED DEALER OF VEHICLES, BUSES AND OTHERS EQUIPMENTS. CONSIDERING THE NATURE OF BUSINESS WIDE CONVINCING AND LIAISON WORK IS REQUIRED FOR SELLING THESE VEHICLES PARTICULARLY WH ICH ARE TO BE SUPPLIED TO ITA NOS.433 /AGRA/2012 537/AGRA/2012, A.YS. 2007-08 6 SCHOOLS COLLEGES AND CHARITABLE INSTITUTION ETC. TH E CONCERNED PARTIES HAVE CLEARLY ESTABLISHED AND IDENTIFIED THE VEHICLES SOL D THROUGH BILL NUMBER DATE AND PARTIES TO WHOM THE VEHICLES WERE SOLD. THE NAT URE OF ASSESSEES BUSINESS ARE THAT SUCH LIAISON WORK IS NECESSARY FOR SELLING AND SUCH LIAISON WORK IS IN THE FORM OF SERVICE RENDERED FOR SELLING THE VEHICL ES. ONCE IT IS FOUND THAT THESE PARTIES HAVE RENDERED SERVICES FOR SELLING TH E VEHICLES. THE COMMISSION EXPENSES ARE LIABLE TO BE INCURRED. APART FROM THE FACT THAT THESE PARTIES HAVE RENDERED SERVICES AGAINST THE COMMISSION RECEIVED, THE PARTIES HAVE ALSO ASSESSED TO TAX AND COMMISSIONS RECEIVED HAVE BEEN OFFERED TO TAX. AS REGARDS, THE OBSERVATION OF THE CIT(A) THAT THESE P ERSONS ARE RELATIVES AND FRIENDS OF THE ASSESSEE, MERELY HAVING FRIENDS AND RELATIVES, ADVERSE INFERENCE CANNOT BE DRAWN PARTICULAR BY UNDER THE CIRCUMSTANC ES OF THE CASE AND IT IS ESTABLISHED THAT THESE PERSONS HAVE RENDERED SERVIC E AGAINST THE COMMISSION PAID. 10. AS REGARDS, THE OBSERVATION OF THE CIT(A) REGAR DING STATEMENT THE CONCERNED PARTIES WHO PURCHASE THE VEHICLES THAT TH EY WERE NOT HAVING ANY AGENT, IN THIS REGARD, WE ARE OF THE VIEW THAT THES E PARTIES WERE RENDERING SERVICES TO THE ASSESSEE AND IT IS NOT NECESSARY TH AT THE PARTIES TO WHOM VEHICLES SOLD WERE ALSO HAVING THEIR BROKER OF THE SAME PARTIES. IN THIS LINE OF BUSINESS IT IS SUFFICIENT IF IT HAS BEEN POINTED OU T THAT INSTITUTION HINDUSTAN COLLEGE OF TECHNICAL EDUCATION, HOLY PUBLIC SCHOOL, AGRA, HOLY NURSERY ITA NOS.433 /AGRA/2012 537/AGRA/2012, A.YS. 2007-08 7 PUBLIC SCHOOL, AGRA AND HOLY NURSERY PUBLIC SCHOOL, AGRA REQUIRES SUCH BUSES AND CONVINCING THEM NOT NECESSARY THAT THE H EAD OF THE INSTITUTION HAVING VEHICLES IN WHICH THE ASSESSEE IS DEALING AS SUITABLE TO THEM. THEREFORE, MERELY ON EXAMINATION OF CIT(A) BY THE C ONCERNED PARTIES WHO PURCHASED THE VEHICLES DENIED ABOUT THE BROKER THE COMMISSION PAID CANNOT BE DISALLOWED PARTICULARLY WHEN THE ASSESSEE HAS ESTAB LISHED THAT CONSIDERING THEIR NATURE OF BUSINESS SUCH AS LIAISONING OR SERV ICES ARE NECESSARY FOR THE PURPOSE OF BUSINESS AND THE PARTIES HAVE ADMITTED T HAT THEY HAVE RENDERED THE SERVICES. THE ASSESSEE HAS FURNISHED DETAILS AND FR OM WHICH IT IS ESTABLISHED THAT THE COMMISSION WAS PAID AGAINST THE SERVICES R ENDERED. 11. WE, THEREFORE, FIND THAT THE CIT(A) IS NOT CORR ECT IN ENHANCING THE ADDITION AND A.O. HAS ALSO NOT CORRECT IN MAKING AD -HOC DISALLOWANCE. WE, THEREFORE, DELETE THE ENTIRE ADDITION MADE BY A.O. AND ENHANCED BY THE CIT(A). THE CLAIM OF THE ASSESSEE ON ACCOUNT OF COM MISSION IS ALLOWED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ITA NO. 537/AGRA/2012 BY THE ASSESSEE:- 12. THE GROUNDS RAISED IN THIS APPEAL ARE IN RESPECT OF LEVY OF PENALTY OF RS.1,74,420/- UNDER SECTION 271(1)(C) OF THE ACT. T HE CIT(A) ENHANCED THE ADDITION TO THE EXTENT OF RS.5,70,000 /- OUT OF THE DISALLOWANCE OF COMMISSION AS AGAINST THE ADDITION OF RS.71,940/- MADE BY THE A.O. THE CIT(A) ALSO LEVIED THE PENALTY UNDER SECTION 271(1)(C) ON ACCOU NT OF CONCEALING THE ITA NOS.433 /AGRA/2012 537/AGRA/2012, A.YS. 2007-08 8 INCOME TO THE EXTENT OF RS.5,70,000/-. THE CIT(A) L EVIED THE MINIMUM PENALTY OF WHICH CALCULATION COMES TO RS.1,74,420/- . IN THE LIGHT OF DETAILED DISCUSSIONS ABOVE THE ADDITION HAS BEEN DELETED. IN THE LIGHT OF THE FACT WHEN THE ADDITION ON THE BASIS OF WHICH THE CIT(A) CALCU LATED PENALTY IS NO MORE, THERE IS NO QUESTION OF LEVY OF PENALTY UNDER SECTI ON 271(1)(C) WE ACCORDINGLY DELETE THE PENALTY OF RS.1,74,420/- LEV IED BY THE CIT(A). IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 13. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNT ANT MEMBER AMIT/ COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY