Ashok Kumar Jalan, Kolkata V. ACIT Circle 39, Kolkata, Kolkata

ITA 577/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1671 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S K SONI
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE HONBLE SHRI P.M. JAGTAP] I.T.A. NO. 577/KOL/2017 ASSESSMENT YEAR : 2010-11 ASHOK KUMAR JALAN.............................APPELLANT C/O. CA S.K. SONI, 36, STRAND ROAD, 3 RD FLOOR, R NO. 11 KOLKATA - 700001 [PAN : ACOPJ1651N] ACIT, CIR 39........................................RESPONDENT 3, GOVT. PLACE (W) KOLKATA - 700001 APPEARANCES BY: SHRI S.K. SONI, CA APPEARING ON BEHALF OF THE ASSESSEE. SHRI BISWANATH DAS, ADDL CIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : AUGUST 09, 2017 DATE OF PRONOUNCING THE ORDER : AUGUST 16, 2017 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (APPEALS) - 11, KOLKATA DATED 27.12.2016. THE ISSUE RAISED IN GROUND NO 1 RELATES TO THE DISALLOWANCE OF RS. 4,00,000/- MADE BY THE ASSESSING OFFICER OUT OF COMMISSION EXPENSES WHICH IS CONFIRMED BY THE LD. CIT (A). 2. THE ASSESSEE IN THE PRESENT IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF TRADING IN STEEL TUBES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 09.10.2010 DECLARING A TOTAL INCOME OF RS. 27,82,197/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS. 28,41,178/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF SELLING OF DISTRIBUTION EXPENSES. DURING THE 2 I.T.A. NO. 577/KOL/2017 A.Y. 2010-11 ASHOK KUMAR JALAN COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR THE SAID EXPENSES WAS EXAMINED BY THE AO. IN THIS REGARD, HE FOUND FROM THE RELEVANT DETAILS FURNISHED BY THE ASSESSEE THAT A SUM OF RS. 15,41,304/- WAS PAID BY THE ASSESSEE AS COMMISSION TO MR. ALOK JALAN. HE, THEREFORE, REQUIRED THE ASSESSEE TO EXPLAIN THE SERVICES RENDERED BY MR. ALOK JALAN. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT MR. ALOK JALAN WAS LOOKING AFTER THE FINANCE, ACCOUNTS AND SALE FUNCTION OF HIS BUSINESS CONCERN FOR THE PAST MANY YEARS AND IN ADDITION TO THE SALARY, A COMMISSION WAS BEING PAID TO HIM REGULARLY ON THE BASIS SALES. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND TO BE FULLY SATISFACTORY BY THE AO. ACCORDING TO HIM, THE CLAIM OF THE ASSESSEE OF HAVING PAID TO MR. ALOK JALAN WAS NOT FULLY JUSTIFIED AND THE AMOUNT OF COMMISSION PAID TO MR. ALOK JALAN WAS NOT COMMENSURATE WITH THE SERVICES RENDERED BY HIM. THE AO ACCORDINGLY MADE A DISALLOWANCE OF RS. 4,00,000/- OUT OF THE COMMISSION CLAIMED TO BE PAID BY THE ASSESSEE TO MR. ALOK JALAN. ON APPEAL THE LD. CIT (A) CONFIRMED THE SAID DISALLOWANCE. 3. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, MR. ALOK JALAN WAS PAID REGULARLY IN ADDITION TO HIS SALARY, COMMISSION @ 1% OF THE TOTAL TURNOVER FOR LOOKING AFTER THE FINANCE, ACCOUNTS AND SALE FUNCTIONS OF THE ASSESSEES BUSINESS CONCERN AND THE SAME WAS ALLOWED BY THE AO IN THE PAST IN THE ASSESSMENTS COMPLETED UNDER SECTION 143(3) FOR A.Y. 2008-09 AND 2009-10. AS FURTHER SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, TAX AT SOURCE WAS DEDUCTED BY THE ASSESSEE FROM THE COMMISSION PAID TO MR. ALOK JALAN AND IN HIS RETURNS OF INCOME 3 I.T.A. NO. 577/KOL/2017 A.Y. 2010-11 ASHOK KUMAR JALAN REGULARLY FILED, THE COMMISSION INCOME WAS DULY DECLARED BY MR. ALOK JALAN. IT IS ALSO OBSERVED THAT THE FACT THAT THE RELEVANT SERVICES AS CLAIMED BY THE ASSESSEE HAVING BEEN RENDERED BY MR. ALOK JALAN FOR THE PURPOSE OF ASSESSEES BUSINESS HAS NOT BEEN DISPUTED EITHER BY THE AO OR BY THE LD. CIT (A). AS A MATTER OF FACT, THE COMMISSION PAID TO MR. ALOK JALAN FOR SUCH SERVICES HAS BEEN ALLOWED BY THEM SUBSTANTIALLY TO THE EXTENT OF RS. 11,41,304/- AND AN ADHOC DISALLOWANCE OF RS. 4,00,000/- IS MADE ON THE GROUND THAT THE PAYMENT OF COMMISSION TO MR. ALOK JALAN WAS NOT FOUND TO BE COMMENSURATE WITH THE SERVICES RENDERED BY HIM. KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE INCLUDING THE FACT THAT THE SIMILAR QUANTUM OF COMMISSION PAID TO MR. ALOK JALAN @ 1% OF THE TOTAL TURNOVER WAS ALLOWED BY THE AO HIMSELF IN THE ASSESSMENT, COMPLETED UNDER SECTION 143(3) FOR THE IMMEDIATELY PRECEDING TWO YEARS, I FIND THAT THE ADHOC DISALLOWANCE OF RS. 4,00,000/- MADE BY THE AO AND CONFIRMED BY THE ASSESSEE OUT OF COMMISSION PAID TO MR. ALOK JALAN IS NOT JUSTIFIED BEING ARBITRARY AND WITHOUT ANY BASIS. I, THEREFORE, DELETE THE SAME AND ALLOW GROUND NO 1 OF THE ASSESSEES APPEAL. 4. THE ISSUE IS RAISED GROUND NO 2 RELATES TO THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) OUT OF THE VARIOUS EXPENSES AS UNDER: HEAD OF EXPENDITURE TOTAL EXPENSES CLAIMED BY THE ASSESSEE (RS.) DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) (RS.) 1. CONVEYANCE 43,384/- 4,338/- 2. TELEPHONE EXPENSES 1,22,290/- 12,229/- 3. STAFF WELFARE EXPENSES 45,895/- 4,590/- 4 I.T.A. NO. 577/KOL/2017 A.Y. 2010-11 ASHOK KUMAR JALAN 4. COOLIE AND LABOUR CHARGES 10,24,939/- 1,02,494/- 5. ON-WARD FREIGHT8,68,415/- 8,68,415/- 86,841/- 6. SALES PROMOTION 77,201/- 7,720/- 7. TRAVELLING 99,469/- 9,947/- TOTAL 2,28,159/- 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE VARIOUS HEADS WERE VERIFIED BY THE AO ON TEST CHECK BASIS. ON SUCH VERIFICATION, HE FOUND THAT SOME OF THE EXPENSES CLAIMED BY THE ASSESSEE UNDER CERTAIN HEADS WERE NOT PROPERTY VOUCHED. HE ALSO FOUND THAT THE EXPENSES WERE NOT FULLY SUPPORTED BY THE RELEVANT DOCUMENTARY EVIDENCE AND INVOLVED PERSONAL ELEMENT. HE, THEREFORE, DISALLOWED THE SAID EXPENSES TO THE EXTENT OF 10% WHICH THE LD. CIT (A) CONFIRMED. 6. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS FAR AS THE EXPENSES CLAIMED BY THE ASSESSEE ON CONVEYANCE, TELEPHONE, STAFF WELFARE, SALES PROMOTION AND TRAVELLING ARE CONCERNED, I AM OF THE VIEW THAT THE INVOLVEMENT OF PERSONAL ELEMENT IN THE SAID EXPENSES CANNOT BE RULED OUT AND EVEN THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO DISPUTE THIS POSITION. SINCE THE DISALLOWANCE OF 10% MADE OF THESE EXPENSES FOR INVOLVEMENT OF PERSONAL ELEMENT, IN MY OPINION, IS QUITE FAIR AND REASONABLE, I CONFIRM THE SAME. AS REGARDS THE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF COOLIE AND LABOUR CHARGES, I FIND FROM THE RELEVANT DETAILS PLACED ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SAME ARE 0.69% OF THE TOTAL SALES AS AGAINST 5 I.T.A. NO. 577/KOL/2017 A.Y. 2010-11 ASHOK KUMAR JALAN 0.44%AND 0.48% OF THE TOTAL SALES CLAIMED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING TWO YEARS I.E. A.Y. 2008-09 AND 2009-10 RESPECTIVELY. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO OFFER ANY SATISFACTORY EXPLANATION AS REGARDS THIS SUBSTANTIAL INCREASE IN THE COOLIE AND LABOUR CHARGES CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. I THEREFORE FIND NO INFIRMITY IN THE DISALLOWANCE OF 10% MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) OF COOLIE AND LABOUR CHARGES. AS REGARDS THE EXPENSES ON ONWARD FREIGHT CLAIMED BY THE ASSESSEE, IT IS HOWEVER OBSERVED THAT THE SAME CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AT 0.58% OF THE TOTAL SALES ARE QUITE COMPARABLE WITH 0.59% AND 0.48% OF THE TOTAL SALES INCURRED BY THE ASSESSEE DURING THE IMMEDIATELY PRECEDING TWO YEARS. IN MY OPINION, THE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF ONWARD FREIGHT FOR THE YEAR UNDER CONSIDERATION, THEREFORE, CANNOT BE REGARDED AS EXCESSIVE OR UNREASONABLE JUSTIFYING ANY DISALLOWANCE. I, THEREFORE, DELETE THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) OUT OF ONWARD FREIGHT EXPENSES. GROUND NO 2 OF THE ASSESSEES APPEAL IS THUS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH AUGUST, 2017. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED: 16/08/2017 6 I.T.A. NO. 577/KOL/2017 A.Y. 2010-11 ASHOK KUMAR JALAN BISWAJIT COPY OF ORDER FORWARDED TO: 1. ASHOK KUMAR JALAN, C/O. CA S.K. SONI, 36, STRAND RAOD, 3 RD FLOOR, R. NO. 11, KOLKATA 700001. 2. ACIT, CIR 39, 3 GOVT. PLACE (W), KOLKATA - 700001 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA