SHRI ASHOK KUMAR MANTRI , KISHANGARH V. INCOME TAX OFFICER, WARD-1, KISHANGARH

ITA 568/JPR/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 5325 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 04-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Keywords: Business income; Capital expenditure

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 568/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2013-14 SHRI ASHOK KUMAR MANTRI KISHANGARH CUKE VS. INCOME TAX OFFICER, WARD-1 KISHANGARH LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAVPM6010F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI SANJAY JHANWAR JKTLO DH VKSJ LS @ REVENUE BY : SHRI J. C. KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 17/09/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 01/10/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), AJMER DATED 06.04.2017 FOR A.Y. 2013-14 WHE REIN THE ASSESSEE HAS TAKEN FOLLOWING TWO GROUNDS OF APPEAL. 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEAL), AJMER HAS ERRE D IN CONFIRMING THE ADDITION OF RS. 1,84,532/- MADE BY T HE LD. AO ON ACCOUNT OF INTEREST PAID ON UNSECURED LOANS. THE LD . CIT(A) FAILED TO APPRECIATE THE FACT THAT THE SAID LOAN WAS UTILI ZED FOR INVESTMENT IN PARTNERSHIP FIRM FROM WHICH THE ASSES SEE EARNED REMUNERATION AND INTEREST ON CAPITAL. ITA NO. 568/JP/2017 SHRI ASHOK KUMAR MANTRI, KISHANGARH VS. ITO, KISHA NGARH 2 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. COMMISSIONER OF INCOME TAX (APPEAL), AJMER HAS ERRE D IN CONFIRMING THE ADDITION OF RS. 3,12,000/- MADE BY T HE AO ON ACCOUNT OF PAYMENT OF COMMISSION TO SHRI ASHISH MAN TRI, SON OF THE APPELLANT. 2. AT THE OUTSET, IT IS NOTED THAT THE APPEAL WAS E ARLIER DISMISSED BY THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 19.12.20 17 FOR NON-PROSECUTION AND SUBSEQUENTLY, THE CO-ORDINATE B ENCH VIDE ITS ORDER DATED 13.04.2018 HAS RECALLED THE EARLIER ORDER. HE NCE, THE PRESENT APPEAL HAS COME UP FOR HEARING BEFORE US. 3. REGARDING GROUND NO. 1 WHEREIN THE AO HAS DISAL LOWED INTEREST PAID ON UNSECURED LOAN, THE LD. AR HAS CONTENDED TH AT THE ASSESSEE HAS EARNED REMUNERATION FROM M/S SHREE MAHESHWARI MARBL E AND INTEREST FROM M/S MANTRI MARBLE INDUSTRIES WHEREIN HE IS A P ARTNER AND SINCE THE LOAN WAS INVESTED IN THE PARTNERSHIP FIRM, INTEREST AND REMUNERATION EARNED FROM SUCH FIRM WAS OFFERED TO TAX. THEREFORE , THE INTEREST EXPENSE TO THE EXTENT SHOULD BE ALLOWED. IN SUPPORT , RELIANCE WAS PLACED ON THE DECISION OF THE CO-ORDINATE BENCH IN CASE OF ACIT VS. NOVEL ENTERPRISES [2012] REPORTED IN 22 TAXMANN.COM 116) AND DELITE ENTERPRISES (P.) LTD. V. INCOME TAX OFFICER, WARD 3 (1)(2), MUMBAI [2008] REPORTED IN 22 SOT 245. 4. IT WAS FURTHER SUBMITTED BY THE LD. AR THAT WHI LE FILING THE RETURN OF INCOME, THE ASSESSEE HAS WRONGLY CLAIMED THE INT EREST PAID ON UNSECURED LOAN UNDER THE HEAD INCOME FROM OTHER SO URCES. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED THAT THE ITA NO. 568/JP/2017 SHRI ASHOK KUMAR MANTRI, KISHANGARH VS. ITO, KISHA NGARH 3 SAME SHOULD BE ALLOWED AS THE FUNDS WERE BEING USED FOR INVESTING IN PARTNERSHIP FIRM WHEREFROM THE ASSESSEE HAS EARNED INTEREST AND OFFERED THE SAME UNDER THE HEAD BUSINESS INCOME. 5. IN ORDER TO APPRECIATE THE CONTENTIONS SO ADVAN CED BY THE LD. AR, ON PERUSAL OF THE ASSESSMENT ORDER, IT IS NOTED THAT THE ASSESSING OFFICER HAS OBSERVED THAT NO EVIDENCE HAS BEEN SUBM ITTED BY THE ASSESSEE TO PROVE THE NEXUS OF LOAN VIS- A- VIS THE INVESTMENTS MADE IN THE PARTNERSHIP FIRM. ACCORDINGLY, HE DISALLOWED TH E SAID CLAIM OF THE ASSESSEE. FURTHER, DURING THE COURSE OF APPELLATE P ROCEEDINGS BEFORE THE LD. CIT(A), HE HAS AGAIN STATED THAT THE ASSESS EE COULD NOT SUBSTANTIATE HIS ARGUMENT THAT INTEREST WAS PAID IN RESPECT OF LOAN UTILIZED FOR MAKING INVESTMENT IN THE PARTNERSHIP F IRM AND NO FUND FLOW STATEMENT WAS FILED WHICH SHOWS INTEREST BEARING FU ND, IF ANY WERE UTILIZED FOR MAKING INVESTMENT IN THE PARTNERSHIP F IRM. IN ABSENCE OF ANY NEXUS BEING ESTABLISHED BY THE ASSESSEE IN SUPP ORT OF HIS CONTENTION THAT THE BORROWED FUNDS HAVE BEEN UTILIZ ED FOR MAKING INVESTMENT IN THE PARTNERSHIP FUND, WE ACCORDINGLY DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES. FU RTHER, WE HAVE GONE THROUGH THE DECISIONS RELIED UPON BY THE LD AR AND FIND THAT THE SAME DOES NOT SUPPORT THE CASE OF THE ASSESSEE AS THE SA ME WERE RENDERED IN THEIR PECULIAR FACTS AND CIRCUMSTANCES OF THE CA SE. IN THE RESULT, GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED. 6. IN GROUND NO. 2 REGARDING DISALLOWANCE OF COMMIS SION PAID TO THE ASSESSEES SON MR. ASHISH MANTRI, THE LD. AR HAS CO NTENDED AS UNDER:- ITA NO. 568/JP/2017 SHRI ASHOK KUMAR MANTRI, KISHANGARH VS. ITO, KISHA NGARH 4 1. IN THIS REGARD WE MAY SUBMIT THAT THE APPELLANT GOT THE WORK FROM M/S TILECO PVT. LTD., FOR EXPORT OF MARBLE BLO CKS TO GUANGDONG YUNFU ZINGYUN FOREIGN. CHINA. THE APPELLANT OUTSOUR CE SUCH WORK TO MR. ASHISH MANTRI WHO WAS HAVING KNOWLEDGE OF IMPOR T EXPORT MATTERS. THE FACTS HAVE BEEN CONFIRMED BY MR. ASHISH MANTRI. THE APPELLANT RECEIVED COMMISSION OF RS. 4,16,000/- FROM M/S TILE CO PVT. LTD. AND CLAIMED THE COMMISSION OF RS. 3,12,000/- WHICH HE P AID TO MR. ASHISH MANTRI AND NET AMOUNT WAS OFFERED TO TAX. THUS SUCH EXPENDITURE IS INCURRED IN THE NATURE OF BUSINESS. AS PER THE PROV ISION OF SECTION 57 OF THE ACT, THE INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCE SHALL BE COMPUTED AFTER MAKING THE FOLLOWIN G DEDUCTIONS NAMELY: (III) ANY OTHER EXPENDITURE (NOT BEING IN THE NATUR E OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME. SINCE THE INCOME FROM COMMISSION WAS OFFERED TO TAX THUS THE EXPENSES RELATED TO THIS HAS TO BE ALLOWED. FURTHER IN RESPECT OF NON PRESENCE OF MR. ASHISH MANTRI, WE WOULD LIKE TO SUB MIT THAT THE ASSESSEE HAS GIVEN APPROPRIATE DETAILS IN THE FORM OF ACCOUNT CONFIRMATION, AFFIDAVIT, JOURNAL VOUCHER, FINANCIAL STATEMENTS AND PASSPORT OF MR. ASHISH MANTRI TO SHOW HIS IDENTITY. THUS THE ASSESSEE HAS DISCHARGED HIS ONUS AND MERELY NON-PRESENCE OF THE PARTY WOULD NOT LEAD TO AN INTERPRETATION THAT THE TRANSACTION IS NON-GENUINE. EVIDENCE HAS ALSO BEEN GIVEN REGARDING MR. ASHISH M ANTRS VISIT TO CHINA DURING THE RELEVANT PERIOD. THOUGH THE VISA IS FOR TOURIST PURPOSE, HOWEVER, HE WENT FOR BUSINESS PURPOSE ONLY WHICH IS A REGULAR PRACTICE. ITA NO. 568/JP/2017 SHRI ASHOK KUMAR MANTRI, KISHANGARH VS. ITO, KISHA NGARH 5 7. IN THIS REGARD, WE REFERRED TO THE FINDINGS OF T HE ASSESSING OFFICER WHICH ARE CONTAINED AT PARA 4.2 WHICH IS REPRODUCED AS UNDER:- 4.2 DISALLOWANCE OF OTHER EXPENSES:- AGAINST THE COMMISSION INCOME OF RS. 4,16,000/- THE ASSESSEE HAS CLAIMED EXPENSES UNDER THE HEAD OTHER EXPENSES OF R S. 3,58,500/-. THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF THIS E XPENDITURE. THE AIR FURNISHED PROFIT & LOSS A/C WHICH REFLECTED THA T EXPENDITURE AMOUNTING TO RS. 3,12,000/- WAS INCURRED AS COMMISS ION PAYMENT, RS. 24,000/- AS SALARY AND RS. 22,500/- AS TRAVELIN G EXPENSES. (312000 + 24000 + 22500 = 358500). IT WAS NOTICED T HAT A SUM OF RS. 312000/- WAS CLAIMED TO BE PAID TO HIS SON SHRI ASHISH MANTRI AS COMMISSION AGAINST EARNING COMMISSION INCOME. TH E ASSESSEE WAS ASKED TO SUBSTANTIATE HIS CLAIM AND PR ODUCE SHRI ASHISH MANTRI FOR VERIFICATION. THE ASSESSEE FURNIS HED HIS REPLY THROUGH HIS A/R ON 1/12/2015 STATING AS UNDER:- WITH REFERENCE TO ABOVE CITED SUBJECT ASSESSEE IS SUBMITTING AS UNDER:- 1. THAT DURING THE YEAR UNDER ASSESSMENT ASSESSEE HAS RECEIVED COMMISSION FOR RS. 416000/ FROM TILECO PRIVATE LIMI TED, JAIPUR FOR EXPORT OF MARBLE BLOCKS TO GUANGONG YUNFU ZINGY UN FOREIGN, AND CHINA. 2. THAT DURING THE COURSE OF EXPORT TRANSACTION WITH T ILEXO PRIVATE LTD. AND PARTY OF CHINA ASSESSEE HAS CONTAC T TO MR. ITA NO. 568/JP/2017 SHRI ASHOK KUMAR MANTRI, KISHANGARH VS. ITO, KISHA NGARH 6 ASHISH MANTRI AND OFFERED COMMISSION FOR THIS EXPOR T TRANSACTION AND TO VISIT TO CHINA TO CONTACT FROM P ARTY OF CHINA. 3. THAT AFTER DISCUSSION FOR THIS EXPORT TRANSACTION M R. ASHISH MANTRI VISITED TO CHINA AND DEAL THE EXPORT TRANSAC TION. THAT MR. ASHISH MANTRI IS HAVING VALID PASSPORT BEARING NO. H6805959 COPY ENCLOSED, AND HAVING KNOWLEDGE OF IMP ORT EXPORT MATTERS. THAT AFTER COMPLETION OF EXPORT TRA NSACTION ASSESSEE HAS PAID THE COMMISSION FOR RS. 312000/- T O MR. ASHISH MANTRI FOR THE EXPORT TRANSACTION. 4. THAT ASHISH MANTRI IS EXISTING ASSESSEE OF INCOM E TAX AND HE HAS SHOWN THE INCOME FROM COMMISSION IN HIS RETURN OF INCOME WHICH WAS RECEIVED FROM ASSESSEE, COPY OF RE TURN OF INCOME, BALANCE SHEET OF ASHISH MANTRI FOR THE ASSE SSMENT YEAR 2013-14 IS ENCLOSED HEREWITH. THEREFORE, IT IS PROVED FROM THE ABOVE EVIDENCE, DE TAILS, AND DOCUMENTS THAT COMMISSION WHICH WAS PAID TO ASHISH MANTRA IS GENUINE AND JUSTIFIED. THERE WAS A CONTRADICTION IN THE NATURE OF WORK FO R WHICH COMMISSION WAS GRANTED, AS M/S TILECO PRIVATE LIMIT ED CONFIRMED THE FACT THAT COMMISSION WAS PAID TO SHRI ASHOK MANTRI (THE ASSESSEE) FOR HELPING THEM IN PURCHASE OF MARBLE BLOCK WHICH WAS EXPORTED TO CHIN A. HOWEVER, THE STORY OF THE ASSESSEE REFLECTED THAT A LL AFFAIRS AT CHINA WERE MANAGED BY HIS SON SHRI ASHIS H MANTRI AND THUS COMMISSION WAS PAID TO HIM. LOOKING TO ITA NO. 568/JP/2017 SHRI ASHOK KUMAR MANTRI, KISHANGARH VS. ITO, KISHA NGARH 7 THIS CONTRADICTION, THE ASSESSEE WAS ASKED TO PRODU CE THE COPY OF PASSPORT. IT WAS NOTICED THAT THE VISA/PASSPORT REFLECT THE PURPOSE OF VISIT TO CHINA DURING THIS F.Y. AS 'F'. F VISA IS ISSUED TO THOSE WHO INT END TO GO TO CHINA FOR RESEARCH. LECTURE, SCIENTIFIC, CULTURA L EXCHANGE AND STUDY TOUR. THUS, IT IS A NON-COMMERIC AL VISA. THE AR WAS ASKED TO PRODUCE SHRI ASHISH MANTR I FOR VERIFICATION. DESPITE REPEATED REQUESTS FROM 1/12/2 015, SHRI ASHISH MANTRI WAS NOT PRODUCED AND ES AFFIDAVI T WAS PRODUCED ON 28/12/2015. SHRI ASHISH MANTRI WAS THE SON OF THE ASSESSEE AND IN TOUCH WITH THE ASSESSEE AT H IS ANCESTRAL VILLAGE KUCHAMAN CITY FROM WHERE THE AFFI DAVIT WAS PREPARED. THE CLAIM OF THE ASSESSEE THAT TAX WA S PAID ON COMMISSION INCOME BY SHRI ASHISH MANTRI WAS ALSO EXAMINED AND IT WAS NOTICED THAT THE ASSESSEE WOULD HAVE BEEN ASSESSED IN HIGHER TAX SLAB IF THE COMMISSION INCOME IS NOT DIVERTED TO HIS SON. 8. FURTHER, WE REFER TO THE FINDINGS OF THE LD. CIT (A) WHICH ARE CONTAINED AT PARA 5.3 OF HIS ORDER WHICH IS REPRODU CED AS UNDER: 5.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STAT EMENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAREFULLY. IT IS SEEN THAT EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS, THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT SHRI ASHISH MANTRI, THE SON OF THE APPELLANT HAS RENDERED ANY S ERVICES FOR GETTING THE COMMISSION OF RS. 3,12,00/-. THE AO REQUESTED T HE APPELLANT TO PRODUCE SHRI ASHISH MANTRI FOR EXAMINATION, BUT THE APPELLANT COULD NOT PRODUCE SHRI ASHISH MANTRI FOR EXAMINATION, BUT THE APPELLANT COULD NOT ITA NO. 568/JP/2017 SHRI ASHOK KUMAR MANTRI, KISHANGARH VS. ITO, KISHA NGARH 8 PRODUCE SHRI ASHISH MANTRI BEFORE THE AO. THE REASO N FOR DISALLOWANCE IN DETAIL HAS BEEN DISCUSSED BY THE AO AT PAGE 7 AN D 8 OF THE ASSESSMENT ORDER. IN VIEW OF THE FACTS DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. I AM OF THE CONSIDERED VIEW THAT THE AO HAS RIGHTLY DISALLOWED THE COMMISSION EXPENSES OF RS. 3,12,000/ - PAID BY THE APPELLANT TO SHRI ASHISH MANTRI THE SON OF THE APPE LLANT. ACCORDINGLY, THE DISALLOWANCE OF RS. 3,12,000/- MADE BY THE AO I S HEREBY CONFIRMED. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN ABSENCE OF DEMONSTRATING TH ROUGH VERIFIABLE EVIDENCE THAT SHRI ASHISH MANTRI HAS RENDERED THE S ERVICE IN CONNECTION WITH EARNING OF THE COMMISSION INCOME BY THE ASSESS EE AND IN ABSENCE OF THE NECESSARY NEXUS BETWEEN THE EARNING OF INCOM E AND RENDERING OF SERVICES, WE DO NOT SEE ANY INFIRMITY IN DISALLOWAN CE OF THE COMMISSION PAYMENT TO MR ASHISH MANTRI AND CONFIRM THE FINDING S OF THE AUTHORITIES BELOW WHICH REMAIN UNCONTROVERTED BEFORE US. IN THE RESULT GROUND NO. 2 OF THE ASSESSEE IS DISMISSED. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 01/10/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 01/10/2018. ITA NO. 568/JP/2017 SHRI ASHOK KUMAR MANTRI, KISHANGARH VS. ITO, KISHA NGARH 9 * GANESH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI ASHOK KUMAR MANTRI, KISHANGARH 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-1, KISHANGARH 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 568/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR