Vipin Jayantilal doshi, Cuttack V. ACIT, Cuttack

ITA 564/CTK/2012

• Counselvise Citation: 56422114 RSA 2012
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 19-11-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: D K SHETHM SHETH ARS
• Keywords: Business expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 564/CTK/2012 / ASSESSMENT YEAR 2009 - 10 VIPIN JAYANTILAL DOSHI, PROP.CHANDRAKANT JAYANTILAL, NAYA SARAK, CUTTACK 753 002 PAN : AAZPD 0177 C - - - VERSUS - ASST.COMMI SSINER OF INCOME - TAX, CIRCLE 2(1), CUTTACK. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SHETH/M.SHETH,ARS / FOR THE RESPONDENT: / SHRI N.K.NEB, DR / DATE OF HEARING: 13.12.2012 / DATE OF PRONOUNCEMENT: 21.12.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS ON THE SOLITARY GROUND THAT A CLAIM OF EXPENDITURE UNDER THE HEAD COMMISSION HA S BEEN DISALLOWED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) INSPITE OF THE ASSESSEE COMPLYING WITH THE PROVISIONS OF SECTION 194H R.W.S. 40(A)(IA) OF THE I.T.ACT,1961. 2. THE BRIEF FACTS WHICH HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASS ESSEE IS AN INDIVIDUAL DEALS IN WEIGHT AND MEASUREMENT MACHINES FILED RETURN OF INCOME OF 24,88,612 WHICH WAS SCRUTINIZED U/S.143(3). THE ASSESSING OFFICER IN ORDER TO VERIFY THE COMMISSION PAID BY THE ASSESSEE CALLED FOR INFORMATION FROM THE REGULATED MARKET COMMITTEE AND ORISSA STATE AGRICULTURAL MARKETING BOARD WHICH INDICATED THAT THEY DO NOT HAVE ANY MIDDLE MAN FOR THEIR PROCUREMENT OF WEIGHT AND MEASUREMENT MACHINES. THE ASSESSING OFFICER THEREFORE FINDING A CLAIM OF 25,64,310 AS COMMISSION PAID TO COMMISSION AGENTS HELD THAT THE SAME COULD NOT BE I.T.A.NO. 564/CTK/2012 2 ALLOWED AS EXPENDITURE INSOFAR AS THE A SSESSEE HAD A TURNOVER OF 3.91 CRORES AGAINST PURCHASES OF 3.10 CRORES. HE STATED THAT AT TIMES THE COMMISSION APPEARED TO BE AT A HIGH PERCENTAGE OF SALES TO PARTICULAR PARTY AS PER BILLS BROUGHT ON RECORD BEING THE CONFIRMATION OF COMMISSION RECEIVED B Y THE AGENTS DULY SUBJECTED TO DEDUCTION OF TAX AT SOURCE UNDER THE PROVISIONS OF SECTION 194H. HE DISALLOWED THE WHOLE OF THE AMOUNT WHICH WAS APPEALED AGAINST BEFORE THE FIRST APPELLATE AUTHORITY. 3. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED BY THE ASSE SSEE THAT THE COMMISSION AGENTS ARE GENUINE AND IDENTIFIED INSOFAR AS THE COMMISSION WAS TO BE DECIDED ON COST TO COST BASIS AND NOT BECAUSE THE RMC AND OSAMB BEING SEMI GOVERNMENT UNDERTAKINGS WOULD DENY TO HAVE COMMISSION AGENTS TO PROCURE THE WEIGHT AND MEASUREMENT MACHINES FROM THE ASSESSEE. THE LEARNED CIT(A) HELD THESE AS EVIDENCES INSOFAR AS THE EXTERNAL EVIDENCES ARE MORE RELIABLE BEING SEMI - GOVERNMENT UNDERTAKINGS WHEN HE PROPOSED TO DEMOLISH THE EVIDENCES PRODUCED BY THE ASSESSEE APPELLANT BEFORE HIM AS SELF SAVING . HE CONFIRMED THE DISALLOWANCE. 4. THE LEARNED COUNSEL OF THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED A PAPER BOOK INTER ALIA CONTAINING THE DETAILS OF PAYMENTS OF COMMISSION TO 12 COMMISSION AGENTS WHO HAVE CONFIRMED RECEIPT OF TH E COMMISSION FROM THE ASSESSEE ON THE AMOUNT OF SALES MADE TO SEMI - GOVERNMENT UNDERTAKINGS AS BROUGHT ON RECORD BY THE ASSESSING OFFICER. HE POINTED OUT THAT THE TAX AT SOURCE HAD BEEN DEDUCTED U/S.194H AND THE RECIPIENTS IDENTITY, GENUINENITY AND CREDIT WORTHINESS HAVE BEEN ESTABLISHED. HE ALSO SUBMITTED THE FINANCIAL STATEMENTS DULY AUDITED WHICH CONFORMED THAT THE COMMISSION HAS BEEN PAID ON SALES AND NOT OTHERWISE WHICH THE LEARNED CIT(A) TRIED TO INDICATE THAT THE EXTERNAL EVIDENCES OF REGULATED MARKE T COMMITTEE AND ORISSA STATE AGRICULTURAL MARKETING BOARD I.T.A.NO. 564/CTK/2012 3 WERE VERY RELIABLE WHEN HE FAILED TO NOTICE THAT COMMISSION IS PAID ON SALES AND NOT ON PURCHASES WHEN THESE SEMI - GOVERNMENT ORGANIZATIONS WERE THE PURCHASERS. THEY WOULD NOT KNOW THAT EFFORTS HAV E BEEN MADE BY THESE INDIVIDUALS TO SUPPLY THE GOODS TO THEM WITHOUT ANY HINDRANCE WHICH THE ASSESSEE ACKNOWLEDGED BY PAYING COMMISSION INSOFAR AS THERE IS NO HARD AND FAST RULE ON THE PERCENTAGE OF COMMISSION WHICH IN ANY CASE WAS NOT MORE THAN .7 5% OF SA LES IN VIEW OF THE FACT THAT THE ASSESSEE HIMSELF GENERATES A GROSS MARGIN OF 3%. THE COMMISSION HAS BEEN PAID ON THE SALES THEREFORE COULD NOT BE DENIED ON WHIMS AND FANCY OF THE ASSESSING AUTHORITIES AS CAN BE PERUSED IN THEIR ORDERS. THE ASSESSEE IS NOT A MANUFACTURER OF THESE MACHINES AND THE ASSESSEE IS ABLE TO PURCHASE AND TECHNICALLY QUALIFIED TO INDICATE THE REPAIRS AND INSTALLATION OF THESE MACHINES AFTER THE SALES WHICH THE PURCHASERS HAVE GLADLY PAID TO THE ASSESSEE WHICH HAS BEEN SHOWN BY THE A SSESSEE AS INCOME THEREFORE COMPENSATE THE VERY VIEW OF THE ASSESSING OFFICER AND THE LEARNED CIT(A) OF THE COMMISSION BEING AT A HIGH PERCENTAGE ON SALES. THE COMMISSION AGENTS BEING INCOME - TAX ASSESSEES IN THEIR OWN WAY ACCEPTED THE PAYMENT AFTER DEDUCTI ON OF TAX AT SOURCE TO AVAIL CREDIT OF SUCH TAX AGAINST THEIR INCOME THEREFORE CANNOT BE HELD AGAINST THE ASSESSEE FOR DENYING THE CLAIM OF EXPENDITURE UNDER THE HEAD COMMISSION. THE LEARNED COUNSEL OF THE ASSESSEE PRAYED FOR DELETION OF THE DISALLOWANCE . 5. THE LEARNED DR OPPOSED THE CONTENTIONS OF THE LEARNED COUNSEL OF THE ASSESSEE CONTENDING THAT THIS IS AN ARRANGEMENT BETWEEN THE ASSESSEE AND THE SEMI - GOVERNMENT AGENCIES WHO PURCHASED THE GOODS FROM THE ASSESSEE. THE DENIAL OF THE EXPENDITURE UNDER T HE HEAD COMMISSION LED TO A FINDING THAT SUCH COMMISSION WAS NOT ON THE BASIS OF SALES MADE BY THE SEMI - GOVERNMENT AGENCIES BUT WERE INCURRED BY THE ASSESSEE BY GIVING IT A NAME I.T.A.NO. 564/CTK/2012 4 AS COMMISSION TO THE IDENTIFIABLE COMMISSION AGENTS. HE FULLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND ALSO THE MATERIAL ON RECORD. COMMISSION IS PAID ON THE SALES. WE ARE UNABLE TO SATISFY OURSELVES TO THE FINDING OF THE AUTH ORITIES BELOW IMPORTING A LOGIC THAT THE PURCHASERS WHO HAVE TO PAY THE FULL PRICE OF THE SALE BILLS RAISED ON THEM WERE NOT GIVEN ANY DISCOUNT TO DENY HOLDING OF A MIDDLE MAN FOR THE PURPOSE OF DENYING THE ASSESSEE THE CLAIM OF COMMISSION PAID WHICH HAS B EEN DOCUMENTED IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT AS SUBMITTED BY THE LEARNED COUNSEL OF THE ASSESSEE BEFORE US. IT IS NOBODYS CASE THAT THE RECIPIENTS OF THE COMMISSION ARE NOT ACTUALLY COMMISSION AGENTS BUT ARE MIDDLEMEN TO PROCURE THE ORD ER BUT NOT GRANT ANY DISCOUNT TO THE PURCHASERS OF THE GOODS TRADED IN BY THE ASSESSEE. IN OTHER WORDS, COMMISSION IA A FACILITY WHICH THE ASSESSEE ENJOY BY PAYING TO SPECIFIED PERSONS HAVING TECHNICAL KNOWLEDGE OF APPRISING THE SEMI - GOVERNMENT ORGANIZATI ONS WHO WOULD BE ABLE TO PAY THE SELLING PRICE IN ACCORDANCE WITH THE BILLS RAISED BY THE ASSESSEE. THAT WOULD NOT THEREFORE INDICATE A MIDDLEMAN TO HOLD THAT COMMISSION MAY BE PAID TO HIM WAS UNDISPUTED FACT WHICH ALONE WAS RELIED UPON BY THE AUTHORITIES BELOW TO DENY PAYMENT OF COMMISSION AS BUSINESS EXPENDITURE. THE ASSESSEE HAS BEEN ABLE TO FURNISH ALL THE DETAILS WITH RESPECT TO THE COMMISSION PAID TO THEM ON THE BASIS OF SALES PROCURED BY THEM BY COMPLYING TO THE PROVISIONS OF SECTION194H, IDENTIFIED THEM AS COMMISSION AGENTS THEREFORE COULD NOT HAVE BEEN DISALLOWED U/S.40(A)(IA) ALSO. THE DISALLOWANCE IS U/S.37(1) THEREFORE BECAUSE OF A REMOTE OPINION WHICH IN OUR VIEW DOES NOT HOLD TRUE ON THE FACTS AS HAVE BEEN CONSIDERED BY THE AUTHORITIES BELOW. FOR THE SAKE OF AVOIDING REPETITION, WE HOLD THAT THE AGENCIES BUYING THE GOODS CANNOT I.T.A.NO. 564/CTK/2012 5 INDICATE TO DENY PAYMENTS TO TECHNICAL PERSONS WHO HELP IN PROCURING THE DELICATE AND SENSITIVE MACHINES SUCH AS WEIGHT AND MEASUREMENT MACHINES WHICH IN THEIR OWN ARE A LSO TO BE APPROVED BY THE GOVERNMENT AGENCIES. THEREFORE, THE AUTHORITIES BELOW MISDIRECTED THEMSELVES TO HOLD A VIEW THAT THE COMMISSION INCURRED BY THE ASSESSEE WAS NOT TO BE ALLOWED INSOFAR AS THE BUYERS OF THE GOODS DENIED HAVING KNOWLEDGE OF THESE AGE NTS. IN THIS VIEW OF THE MATTER, THE DISALLOWANCE OF 25,64,310 UNDER THE HEAD COMMISSION IS DIRECTED TO BE DELETED BY SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D/ - S D/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 21.12.2012 - COPY OF THE ORDER F ORWARDED TO: 1 . / THE APPELLANT : VIPIN JAYANTILAL DOSHI, PROP.CHANDRAKANT JAYANTILAL, NAYA SARAK, CUTTACK 753 002 2 / THE RESPONDENT: ASST.COMMISSINER OF INCOME - TAX, CIRCLE 2(1), CUTTACK. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL T O BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 17.12.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18.12.2 012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.12.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 564/CTK/2012 6