Smt. Malti Gupta, Jalandhar V. The Joint Commissioner of Income-tax, Phagwara

ITA 543/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0551 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Assessee Lawyers: J S BHASINADV
• Keywords: Rejection of books of accounts
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JA LANDHAR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.543(ASR)/2014 ASSESSMENT YEAR: 2009-10 SMT. MALTI GUPTA EG-958/2, MOHALI GOBINDGARH JALANDHAR. PAN: AAQPG3205M VS. JT.CIT , PHAGWARA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.S. BHASIN(ADV.) RESPONDENT BY: SH. BHAWANI SHANKAR (DR) DATE OF HEARING: 21.06. 2016 DATE OF PRONOUNCEMENT: 24.06.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LEARNED CIT(A), JALANDHAR, DATED 04.08.2014 FOR ASST. YEAR: 2009-10. 2. THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL, H OWEVER, THE CRUX OF GROUNDS OF APPEAL IS THE ACTION OF LEARNED CIT(A ) BY WHICH HE HAD UPHELD THE DISALLOWANCE OF COMMISSION EXPENSES @ 5 0% AMOUNTING TO RS.40,65,000/-. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT THE ASSESSEE IS ACTING AS AN AGENT FOR FOREIGN COLLEGES IN AUSTRALIA AND OTHER COUNTRIES FOR SENDING STUDENTS FROM INDIA AND HAS BEEN CHARGING COMMISSION PER STUDENT FROM THEM. DURING T HE YEAR THE ITA NO.54 3(ASR)/2014 ASST. YEAR: 2009-10 2 ASSESSEE HAS RECEIVED TOTAL COMMISSION OF RS.1,78,1 7,732/- AND OUT OF WHICH SHE CLAIMED TO HAVE PAID COMMISSION TO THE T UNE OF RS.81,30,000/- TO THE PERSONS WHO HAD REFERRED THE STUDENTS TO THE ASSESSEE. DURING ASSESSMENT PROCEEDINGS, THE AO REQ UIRED ASSESSEE TO PROVIDE LIST OF PERSONS FROM HIM COMMISSION WAS REC EIVED AND WAS ALSO REQUIRED TO SUBMIT INFORMATION IN RESPECT OF EACH S TUDENT AGAINST WHICH THE REFERRAL COMMISSION WAS PAID ALONG WITH FULL AD DRESSES OF RECIPIENTS OF COMMISSION. IN RESPONSE TO THE QUERY THE ASSESSE E FURNISHED WRITTEN REPLY STATING THEREIN THAT THE COMPLETE LIST OF STU DENTS WITH ADDRESS WAS NOT AVAILABLE AS THE HARD DISK OF COMPUTER CONTAINI NG THE RELEVANT DATA HAD CRASHED AND COULD NOT BE RETRIEVED. THE AO OBS ERVED THAT ASSESSEE HAD INTENTIONALLY WITHHELD THE INFORMATION WITH PUR POSES TO FORESTALL FURTHER INQUIRY AND VERIFICATION OF THE BONAFIDE OF THE HEFTY SUM OF TOTAL COMMISSION OF RS.81.30 LACS,. THE AO NOTED THAT THE AMOUNT OF COMMISSION TO VARIOUS PERSONS WAS CREDITED AT THE C LOSE OF THE YEAR I.E., 31.03.2009 AND TAX AT SOURCE WAS DEDUCTED AND DEPOS ITED IN SEPTEMBER, 2009. THE AO FURTHER NOTED AT PAGE 5,6,& 7 THAT ASS ESSEE HAD PAID COMMISSION TO VARIOUS PERSONS FALLING IN ONE FAMILY . THE AO IN THIS RESPECT RECORDED HIS OBSERVATIONS REGARDING COMMISS ION PAYMENTS TO MALHOTRA FAMILY, KAPOOR FAMILY, GUPTA FAMILY, KHANN A FAMILY AND SUD FAMILY. THE AO ON THE BASIS OF FURTHER ENQUIRIES TH ROUGH HIS INSPECTOR CAME TO KNOW THAT KAPOOR FAMILY AND MALHOTRA FAMILY WERE RUNNING GOOD BUSINESSES AND THESE PERSONS WERE NOT CONNECTED WIT H EDUCATION, ITA NO.54 3(ASR)/2014 ASST. YEAR: 2009-10 3 THEREFORE, KEEPING IN VIEW THE FACTS AND CIRCUMSTAN CES, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS,40,65,000/-REPRE SENTING 50% OF COMMISSION CLAIMED TO HAVE BEEN PAID BY ASSESSEE. 4. AGGRIEVED WITH THE ADDITION THE ASSESSEE FILED A PPEAL BEFORE LD. CIT(A) AND FILED VARIOUS SUBMISSIONS. THE LD. CIT(A ) SENT THE SUBMISSIONS TO ASSESSING OFFICER AND OBTAINED HIS REMAND REPORT . IN THE REMAND PROCEEDINGS, THE ASSESSING OFFICER ISSUED NOTICE U/ S 131 TO ALL THE 43 PERSONS WHO HAD RECEIVED THE COMMISSION FROM ASSESS EE AND IN RESPONSE TO THESE NOTICES ONLY 7 PERSON APPEARED IN HIS OFFI CE AND ASSESSING OFFICER RECORDED THEIR STATEMENTS. THE SEVEN PERSON S THOUGH ADMITTED BEFORE ASSESSING OFFICER THAT THEY HAD RECEIVED THE COMMISSION FROM MALTI GUPTA BUT COULD NOT FURNISH THE NAMES AND ADD RESS OF STUDENTS REFERRED TO HER. THE REMAND REPORT WAS CONFRONTED T O THE ASSESSEE AND ASSESSEE VIDE LETTER DATED 19.12.2013 SUBMITTED THA T ASSESSEE HAD APPROACHED FEW MORE PERSONS AND THEY HAD EXPRESSED THEIR WILLINGNESS TO APPEAR BEFORE THE ASSESSING OFFICER AND THEREFOR E, LEARNED CIT(A) ALLOWED FURTHER OPPORTUNITY TO ASSESSEE AND MATTER WAS AGAIN REMANDED TO ASSESSING OFFICER. IN SECOND ROUND OF REMAND PRO CEEDINGS THE ASSESSEE PRODUCED FOURTEEN OTHER PERSONS AND ALL TH ESE PERSONS ALSO STATED BEFORE THE ASSESSING OFFICER THAT THEY HAD R ECEIVED COMMISSION AND HAD FILED THE INCOME RECEIVED FROM ASSESSEE IN THEIR INCOME TAX RETURNS. THE ASSESSING OFFICER OBSERVED THAT DURING SECOND REMAND PROCEEDINGS ALSO THE RECIPIENTS COULD NOT FURNISH T HE NAMES AND ADDRESS ITA NO.54 3(ASR)/2014 ASST. YEAR: 2009-10 4 OF STUDENTS REFERRED TO BY THEM AND ASSESSEE WAS AL SO NOT ABLE TO FURNISH DETAILS OF COMPLETE ADDRESSES OF STUDENTS FOR FURTH ER VERIFICATIONS OF PAYMENT OF COMMISSION PAID TO VARIOUS PERSONS. THE LEARNED CIT(A) AFTER CONSIDERING ENTIRE FACTS AND CIRCUMSTANCES AND AFTE R TAKING INTO ACCOUNT THE REMAND REPORT UPHELD THE ADDITION. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LEARNED AR INVITED OUR ATTENT ION TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMITTED THAT THE AU THORITIES BELOW HAS MADE AN ARBITRARY DISALLOWANCE OF RS.40,65,000/-WIT HOUT EVEN REJECTING THE BOOKS OF ACCOUNTS. THE LEARNED AR SUBMITTED THA T IN THE PREVIOUS YEAR SIMILAR PAYMENTS WERE MADE THOUGH TO DIFFERENT PERSONS AND THE ASSESSMENT WAS COMPLETED U/S 143(3) AND NO SUCH ARB ITRARY DISALLOWANCE WAS MADE OTHER THAN SMALL SPECIFIC DIS ALLOWANCES. THE LEARNED AR FURTHER ARGUED THAT HAVING ALLOWED 50% O F THE EXPENSES, THE AUTHORITIES BELOW HAS NOT DOUBTED THE GENUINENESS O F EXPENSES AND HAS ONLY DOUBTED THE QUANTUM OF COMMISSION. IT WAS SUBM ITTED THAT HAD THE AUTHORITIES BELOW DOUBTED THE GENUINENESS OF THE EX PENSES THEY SHOULD HAVE DISALLOWED THE ENTIRE EXPENDITURE. HE SUBMITTE D THAT ALL THE PERSONS WHO HAD APPEARED BEFORE ASSESSING OFFICER HAD ACCEP TED IN THEIR STATEMENTS RECORDED BY AO THAT THEY HAD RECEIVED TH E COMMISSION AND FURTHER THEY HAD DECLARED THE INCOME IN THE INCOME TAX RETURNS. THEREFORE, IN VIEW OF ALL THE FACTS AND CIRCUMSTANC ES AND IN VIEW OF RULES ITA NO.54 3(ASR)/2014 ASST. YEAR: 2009-10 5 OF CONSISTENCY THE LEARNED AR ARGUED THAT THE SUSTE NANCE OF DISALLOWANCE WAS NOT WARRANTED. RELIANCE IN THIS RESPECT WAS PLA CED ON FOLLOWING CASE LAWS. (I) PAWAN KUMAR JAIN VS. CIT (2011) 334 ITR 23 (DEL ) (II) CIT VS. PRAKASH INDUSTRIES LTD.(2010) 324 ITR 391 9P&H) (III) CIT VS. SUZLON ENERGY LTD. (2012) 93 DTR (GUJ )50 7. THE LEARNED DR, ON THE OTHER HAND, HEAVILY RELIE D UPON THE ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS AN UN DISPUTED FACT THAT THE RECIPIENTS OF COMMISSION HAD ACCEPTED TO HAVE RECEI VED THE AMOUNTS FROM ASSESSEE. THE ASSESSEE HAS BEEN CLAIMING BEFOR E AUTHORITIES BELOW THAT SHE USED TO PAY RS.20,000/- PER STUDENT FOR AN Y REFERRAL BY ANY PERSON BUT NEITHER THE ASSESSEE NOR THE RECIPIENTS OF COMMISSION WERE ABLE TO REVEAL THE NAMES AND ADDRESSES OF STUDENTS FOR WHOM THE COMMISSION WAS PAID. SINCE, ASSESSEE HAD CREDITED T HE AMOUNTS AT THE CLOSE OF YEAR SHE MUST BE HAVING SOME RECORD FOR TH E PURPOSE OF CALCULATION OF COMMISSION PAYABLE TO EACH PERSON AS IN THE ABSENCE OF THIS INFORMATION HOW SHE COULD HAVE CREDITED THE AM OUNTS OF RS.7,00,000/- ONWARDS WHICH RELATES TO MORE THEN 35 STUDENTS WHEN CALCULATED @RS.20,000/- PER STUDENT AND HOW THE REC IPIENTS OF SUCH HUGE AMOUNTS REMBERED THE AMOUNT OF COMMISSION TO B E RECEIVED IN THE ITA NO.54 3(ASR)/2014 ASST. YEAR: 2009-10 6 IN THE ABSENCE OF ANY RECORD. THE FAILURE OF THE AS SESSEE AND RECIPIENTS TO PROVIDE SUCH INFORMATION ITSELF CREATES DOUBT ABOUT THE GENUINENESS OF SUCH EXPENDITURE. THE COMMISSION AMOUNT CREDITED IN THE ACCOUNTS OF VARIOUS PERSONS RANGES FROM RS,20,000/- TO RS.10,20 ,000/-. IN SOME CASES THE FIGURE OF COMMISSION TO A PARTICULAR PERS ON IS RS.7,00,000/- RS.7,50,000/- & RS.10,20,000/-. THEREFORE TO GIVE C REDIT OF THESE AMOUNTS AT THE CLOSE OF YEAR IN THE ACCOUNTS OF PAY EES @ RS.20,000/- PER STUDENT THERE MUST HAVE BEEN SOME RECORD AVAILABLE WITH THE ASSESSEE OR WITH THE PAYEES. THEREFORE, THE INCURRANCE OF SUCH HUGE EXPENDITURE WAS NOT ESTABLISHED BY ASSESSEE. THE ASSESSEE THOUGH HA D PAID THE AMOUNTS IN SUBSEQUENT YEARS BUT THAT DOES NOT MEAN THAT THI S WAS AN EXPENDITURE OF THE ASSESSEE AS ASSESSEE COULD NOT P ROVE THE GENUINENESS OF EXPENDITURE. THE PAYMENT OF EXPENDITURE THROUGH CHEQUES AND DEDUCTION OF TAX THEREFROM DOES NOT NECESSARY MEAN THAT ASSESSEE HAD INCURRED THE EXPENDITURE. THE HONBLE GAUHATI HIGH COURT IN THE CASE OF ASSAM PESTICIDES AND AGRO CHEMICALS VS. CIT 227 ITR 846 HAS HELD THAT MERE PAYMENT DOES NOT ENTITLE THE ASSESSEE TO DEDUC TION UNLESS IT IS PROVED THAT THE PAYMENT WAS FOR BUSINESS CONSIDERAT IONS. THE ASSESSEE MIGHT HAVE BOOKED THIS EXPENDITURE TO REDUCE THE IN CIDENCE OF TAXATION BY DISTRIBUTING THE INCOME IN THE HANDS OF OTHER PE RSONS HAVING LOWER BRACKET OF TAX AS THE PAYEES ARE INDIVIDUALS. WE AL SO OBSERVE FROM THE FINDINGS OF LD. CIT(A) THAT ASSESSEE HAD PAID COMMI SSION TO THE HUSBAND, DAUGHTER AND OTHER CLOSE RELATIVES OF ASSESSEE. FRO M THE FINDINGS OF ITA NO.54 3(ASR)/2014 ASST. YEAR: 2009-10 7 AUTHORITIES BELOW WE ALSO FIND THAT THE COMMISSION WAS PAID TO DIFFERENT MEMBERS OF A FAMILY. FOR EXAMPLE A COMMISSION OF RS .4 LACS HAS BEEN PAID TO MEMBERS OF MALHOTRA FAMILY ALL LIVING AT 24 DEFENCE COLONY, JALANDHAR. SIMILARLY, AN AMOUNT OF RS.5,60,000/- HA S BEEN PAID TO THREE MEMBERS OF KAPOOR FAMILY LIVING AT 131- A NEW JAWAH AR NAGAR, JALANDHAR. SIMILARLY, AN AMOUNT OF RS.3,20,000/- HA S BEEN PAID TO GUPTA FAMILY LIVING AT 25, GOLDEN COLONY, PHASE I, DEEP NAGAR, JALANDHAR CANTT. FURTHER AN AMOUNT OF RS.3,00,000/- HAS BEEN PAID TO KHANNA FAMILY LIVING AT H.NO.423/C, STREET NO.10, N EAR SAMSUNG SERVICE STATION, JALANDHAR AND RS.17,20,000/- HAS BEEN PAID TO SUD FAMILY LIVING AT CIVIL LINES, JALANDHAR. 9. THEREFORE, ALL THESE FACTS AND CIRCUMSTANCES PRO VE THAT ASSESSEE HAD NOT INCURRED THIS EXPENDITURE FOR THE PURPOSE O F BUSINESS AND THEREFORE, WERE NOT ALLOWABLE. THE ASSESSING OFFICE R SHOULD HAVE DISALLOWED WHOLE OF THE EXPENSES BUT WITH RESTRICTI ON OF DISALLOWANCE TO 50% IT CAN NOT BE CONCLUDED THAT ASSESSING OFFICER HAD ACCEPTED THE INCURRING OF THIS EXPENDITURE AND THEREFORE, THE GR OUND OF APPEAL OF ASSESSEE THAT AFTER ACCEPTANCE OF 50% OF EXPENSES T HE AUTHORITIES BELOW HAD ACCEPTED THE INCURRING OF EXPENDITURE DOES NOT CARRY ANY FORCE. THE GROUND OF APPEAL OF ASSESSE THAT IN EARLIER YEAR SI MILAR COMMISSION WAS PAID AND NO DISALLOWANCE WAS MADE ALSO DO NOT CARRY ANY FORCE AS EVERY YEAR IS AN INDEPENDENT YEAR AND IF THE ASSESSING OF FICER DID NOT MAKE ITA NO.54 3(ASR)/2014 ASST. YEAR: 2009-10 8 ANY ADDITION IN ONE YEAR IT WILL NOT BAR HIM TO MAK E ADDITION IN SUCCEEDING YEAR IF THE FACTS AND CIRCUMSTANCES INDI CATE THE ADDITION. 10. THE ARGUMENT OF ASSESSEE THAT DISALLOWANCE WAS MADE WITHOUT REJECTION OF BOOKS OF ACCOUNTS ALSO DO NOT CARRY AN Y FORCE AS THIS IS NOT A CASE WHERE ASSESSING OFFICER HAD FOUND DISCREPANCIE S IN THE BOOKS OF ACCOUNTS BUT THIS IS A CASE WHERE ASSESSING OFFICER FOUND CERTAIN EXPENDITURE WHICH HE FINDS TO BE NOT FOR THE PURPOS ES OF BUSINESS . 11. THE CASE LAWS RELIED UPON BY THE AR ARE DISTING UISHABLE FROM THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. IN THE CASE OF PAWAN KUMAR JAIN VS. CIT (SUPRA) THE PAYEE OF COMMISSION HAD PA ID TAXES AT THE MAXIMUM RATE AS THE PAYEE WAS A COMPANY WHEREAS IN THE PRESENT CASE THE ASSESSE HAD CLAIMED TO HAVE PAID COMMISSION TO VARIOUS INDIVIDUAL PERSONS AND THE INCIDENCE OF TAXATION TO INDIVIDUAL S IS QUITE LOW, SPECIALLY KEEPING IN VIEW THE EXEMPTION LIMIT AVAIL ABLE TO THEM. 12. THE CASE LAW OF CIT VS. PRAKASH INDUSTRIES (SUP RA) IS ALSO DISTINGUISHABLE AS IN THAT CASE THE ISSUE RELATED T O METHOD OF COMPUTATION OF BOOK PROFITS AND THE HONBLE HIGH CO URT HAS HELD THAT THE METHOD OF COMPUTATION SHOULD BE CONSISTENT, WHE REAS THE PRESENT CASE IS NOT FOR METHOD OF COMPUTATION, BUT FOR DISA LLOWANCE OF CERTAIN EXPENSES. 13. IN THE CASE OF CIT VS. SUZLON ENERGY LTD. (SUPR A) THE EXPENDITURE WAS FOUND TO BE GENUINE THEREFORE, THIS CASE LAW IS ALSO NOT APPLICABLE. ITA NO.54 3(ASR)/2014 ASST. YEAR: 2009-10 9 14. IN VIEW OF THE ABOVE GROUNDS OF APPEAL RAISED B Y ASSESSEE ARE DISMISSED. 15. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:24.06.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER