ACIT, Circle-33(1), New Delhi V. Lucky Exports, New Delhi

ITA 5502/DEL/2017

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2715 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2024
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 15-04-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 28-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DELETING DISALLOWANCE OF
• Keywords: Gift; Additional evidence; TDS; FORM 26AS
• Section: 131; 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE, SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.5502/Del/2017 (ASSESSMENT YEAR 2011-12) ITA No.7113/Del/2017 (ASSESSMENT YEAR 2012-13) Asst. CIT Circle-33(1) New Delhi Vs. M/s Lucky Exports UG-28, Som Dutt Chamber-II New Delhi-110066 PAN-AAAFL1147P (Appellant) (Respondent) Assessee by None Respondent by Mr. Vivek Vardhan, Sr. DR Date of Hearing 16/04/2024 Date of Pronouncement 30/04/2024 ORDER PER S.RIFAUR RAHMAN, AM: Both appeals have been filed by the Revenue against the orders of Learned Commissioner of Income Tax (Appeals)-11, New Delhi [“Ld. CIT(A”, for short], dated 09/06/2017 & 05/09/2017 for Assessment Years 2011-12 & 2012-13 respectively. 2 ITA No.5502 & 7113/Del/2017 ACIT vs. Lucky Exports 2. The grounds raised by the Revenue in both appeals are as under: ITA No.5502/Del/2017 “1. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting disallowance of commission expenses amounting to Rs. 2,51,21,886/- paid to M/s Synergy Petro Products Pvt. Ltd when there is no role of any agent as the contract was secured by the open tender process? 2. Whether in the facts and has erred in allowing the appeal of the circumstances of the case, the Ld. CIT(A) assessee by deleting disallowance of commission expenses amounting to Rs. 2,21,14,782/- paid to Non-resident viz. M/s Blesba Trade & M/s Societe Amar Consulting when the agents were also providing the assessee allied services and their services were in nature of technical services? 3. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting disallowance of legal & professional charges expenses amounting to Rs. 36,31,214/- when the services were emanated from India only and thus liable for deduction of tax in India only? 4 Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting disallowance of interest amounting to Rs. 33,24,072/ when the assessee failed to prove the business purpose of loans/advances given to sister concerns? 5. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing?” ITA No.7113/Del/2017 “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting disallowance of commission expenses amounting to Rs. 3 ITA No.5502 & 7113/Del/2017 ACIT vs. Lucky Exports 8,18,25,542/- paid to foreign agents even though it failed to prove actual delivery of services by these agents? 2. The Ld. CIT(A) has also erred in ignoring the fact that even if the services were rendered by these agents, the payments to these agents were in the nature of fee for technical services on which neither any TDS was deducted by the assessee nor any certificate for no deduction of TDS was furnished by the assessee? 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting disallowance of interest amounting to Rs.1,75,26,970/ when the AO has clearly established that the assessee has diverted its interest bearing funds to its sister concern for non-business purposes? 4 The appellant craves leave to add, alter or amend any grounds of appeal before or during the course of appellate proceedings before the Hon'ble ITAT.” 2. These two appeals are interconnected having common issues. Both these appeals are heard together and disposed off by this common order. We are taking ITA No.5502/Del/2027 as a lead case. 3. The case was called for hearing, but none was appeared on behalf of the assessee, even though, RPAD notice was issued to the assessee for the intimation of hearing and acknowledgment also received by acknowledging that the assessee or its representative have received it. On verification of the earlier order sheet, we noticed that on 28/06/2021, Mr. Ashok Krajan has appeared on 4 ITA No.5502 & 7113/Del/2017 ACIT vs. Lucky Exports behalf of the assessee. From the next date of hearing i.e. 18/08/2021, none appeared for the assessee. Fifteen occasions, the case was posted for hearing and in all the above said date of hearing, none appeared for the assessee or no request for adjournment was filed. 4. Considering the above facts on record, we proceeded to hear the case with the assistance of Ld. DR. The Ld. DR brought to our notice the brief facts of the case are, the assessee has filed its return of income for the Asst. Year 2011-12 on 29/09/2011 declaring income of Rs.17,55,95,534/-. The case was selected for scrutiny. Notices u/s 143(2) and 143(1) were issues and served on the assessee. In response, the AR of the assessee attended and submitted the relevant information as called for. 5. During the assessment proceedings, the Assessing Officer observed that the assessee has claimed gross commission expenses of Rs.4.72 crores. In order to verify the same, the assessee asked to furnish the copies of agreement, details and evidences of services provided by the sister concern parties and evidence of TDS 5 ITA No.5502 & 7113/Del/2017 ACIT vs. Lucky Exports deducted on commission expenses u/s 194/195 of the Act and why the above commission expenses should not be disallowed. In response, AR of the assessee submitted a detailed note on justification of claim of commission expenses vide letter dated 02/12/2013 and submitted the details of commission paid to the parties under consideration which were 8% to 15% range. 5. After considering the above submissions, the Assessing Officer asked the assessee to furnish necessary evidences of service provided by the commission agents. However, the assessee could not furnish any document or evidences of providing of services by any of the above said commission agents. In order to verify, the Assessing Officer issued summons u/s 131 of the Act to M/s Synergy Petro Products Pvt. Ltd., New Delhi. In this regard, the Assessing Officer was provided with an agreement in connection with the transactions with M/s Synergy Petro Products Pvt. Ltd. and subsequently, statement of the Director of the M/s Synergy Petro Products Pvt. Ltd. was recorded. After considering the statement, the Assessing Officer observed that it becomes clear that M/s Synergy Petro Products Pvt. Ltd. had no presence in the 6 ITA No.5502 & 7113/Del/2017 ACIT vs. Lucky Exports Republic of Benin and no services were provided by above said company. 6. Similarly, he verified commission payment to M/s Blesba Trade FZE and M/s Society Amar Consulting. After analyzing the facts on record, he came to the conclusion that commission expenses in respect of foreign commission agents for the export sales are not allowable, therefore, he disallowed and added to the income of the assessee. Accordingly, he has disallowed the total commission expenses claimed by the assessee. 7. Further, he disallowed Legal Profession Charges paid to following parties: (i) AIC Conseils (ii) Business Links Consulting Tianjin (iii) EL Tayeb Hassab EL Rasoul Abdall (iv) Sinrika Technologies. Apart from the above expenditure, the Assessing Officer also disallowed the following expenditure: (a) Addition of Rs.36,13,214/- on account of disallowance of legal & professional charges paid to foreign consultants; (b) Addition of Rs.33,24,072/- on account of disallowance of interest; 7 ITA No.5502 & 7113/Del/2017 ACIT vs. Lucky Exports (c) Addition of Rs.2,24,829/ on account of mismatch of interest receipts as per Form 26As; (d) Addition of Rs.32,30,806/- on account of disallowance of gift & business promotion expenses; (e) Addition of Rs.2,81,679/ on account of disallowance of car running & maintenance expenses; (f) Addition of Rs.1,52,992/ on account of disallowance of telephone expenses. 8. Aggrieved with the above order, the assessee preferred an appeal before the Ld. CIT(A) and filed detailed submissions along with additional evidences. The Ld. CIT(A) allowed the grounds raised by the assessee by relying on the letter of credit issued by M/s Synergy Petro Products Pvt. Ltd. and against the supply and installation of agricultural equipments, the assessee has received 95% of the payment and further, he observed that M/s Synergy Petro Products Pvt. Ltd. are not related to the assessee. 9. With regard to other commission paid to other parties, Ld. CIT(A) has relied on additional evidences submitted by the assessee 8 ITA No.5502 & 7113/Del/2017 ACIT vs. Lucky Exports under Rule 46A and various agreement, correspondence & proof of remittances. He held that the above one evidence establishing the genuineness of expenditure and not falling under Sec.195 of the Act. Further, he allowed the claim of the assessee on the legal and professional charges based on the evidences submitted by the assessee. 10. With regard to disallowance of interest expenditure, Ld. CIT(A) allowed the interest paid with the observation that assessee has sufficient interest free funds in form of capital and unsecured interest free advances are available with the assessee concern. 11. With regard to other disallowances also, the Ld. CIT(A) has allowed the claim of the assessee. 12. Aggrieved with the above order, the Revenue is in appeal before us by raising several grounds of appeal as listed above in para-2. 13. After careful consideration of the facts of record, we observed that the Ld. CIT(A) has allowed the ground of the assessee relying 9 ITA No.5502 & 7113/Del/2017 ACIT vs. Lucky Exports on the information submitted before him. However, the Revenue is in appeal before us raising the grounds of appeal that the Ld. CIT(A) erred in deleting the disallowance of commission paid to foreign agents even though it failed to prove actual delivery of services by these agents. Further ground was raised by the Revenue that payments to above said agents were in the nature of fee for technical services on which neither any TDS was deducted by the assessee nor any certificate for no deduction of TDS was furnished by the assessee. Further, the Ld. CIT(A) has deleted the disallowance of interest amount by the assessee, who has diverted its interest bearing funds to its sister concern for non-business purposes. All the above said issued were not clarified by the assessee by making proper representation and failed to utilize the several opportunities granted to the assessee. We are of the view also that the issue raised by the Revenue needs to be verified afresh and adjudicated accordingly. The issues raised by the Revenue apparently shows that the assessee has not justified in bringing on record the services rendered by the agents and how the percentage of payment of commission justified in this case. 10 ITA No.5502 & 7113/Del/2017 ACIT vs. Lucky Exports 13. With regard to interest bearing fund, the Ld. CIT(A) has observed that the assessee has enough interest free the funds, however, it has not been demonstrated how the interest free fund were actually diverted to sister concern and not interest bearing funds. Accordingly, both appeals filed by the Revenue are allowed due to non representation from the assessee side. 14. In the result, both appeals filed by the Revenue are allowed. Order pronounced in open Court on 30 th April, 2024. Sd/- Sd/- (VIMAL KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:30/04/2024 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI