ACIT, New Delhi V. Shri Balasubramaniam Alagiri, New Delhi

ITA 5858/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4553 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 28-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Business income
• Section: 143(3); 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO S . 5858 & 5859 /DEL/201 5 A.YRS. : 2012-13 & 2011-12 ACIT, CIRCLE-49(1), NEW DELHI ROOM NO. 1504, 15 TH FLOOR, E-2 BLOCK DR. S.P. MUKHERJEE CIVIC CENTRE, NEW DELHI VS. SH. BALASUBRAMANIAM ALAGRI, PROP. ACE INSTRUMENTS, CC/18-A, DDA LIG FLATS, HARI NAGAR, NEW DELHI 110 058 (PAN: AABPA9497L) (ASSESSEE) (RESPONDENT) REVENUE BY : SH. SHRAVAN GOTRU, SR. DR ASSESSEE BY : NONE ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THESE TWO APPEALS AGAINST THE COMMON IMPUGNED ORDER DATED 26.8.2015 OF THE LD. CIT(A)-17, NEW DELHI RELEVANT TO ASSESSMENT YEAR 2012-13 & 2011-12 RESPECT IVELY. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON AND I DENTICAL, EXCEPT THE DIFFERENCE IN FIGURE, HENCE, THE APPEALS WE RE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORD ER FOR THE 2 SAKE OF CONVENIENCE, BY DEALING WITH ITA NO. 5859/DE L/2015 (AY 2011-12). 2. THE GROUNDS RAISED IN ITA NO. 5859/DEL/2015 (AY 2011-12) READ AS UNDER:- 1. WHETHER THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 32,90,089/- ON ACCOUNT OF ADVANCE COMMISSION BY TREATING IT WAS AN ADVANCE COMMISSION INSTEAD OF COMMISSION OF RELEVANT YEAR WITHOUT CONSIDERING THE FACT THAT THE WARRANTY OF THE EQUIPMENT IS BINDING ON THE ORIGINAL EQUIPMENT MANUFACTURER (OEM) AND NOT ON COMMISSION AGENT. IN CASE OF ANY DEFECTS OBSERVED, OEM IS THE AUTHORITY LIABLE TO PROVIDE SUCH SERVICES. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY / ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING. 3. THE GROUNDS RAISED IN ITA NO. 5858/DEL/2015 (AY 2012-13) READ AS UNDER:- 3 1. WHETHER THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 37,62,212/- ON ACCOUNT OF ADVANCE COMMISSION BY TREATING IT WAS AN ADVANCE COMMISSION INSTEAD OF COMMISSION OF RELEVANT YEAR WITHOUT CONSIDERING THE FACT THAT THE WARRANTY OF THE EQUIPMENT IS BINDING ON THE ORIGINAL EQUIPMENT MANUFACTURER (OEM) AND NOT ON COMMISSION AGENT. IN CASE OF ANY DEFECTS OBSERVED, OEM IS THE AUTHORITY LIABLE TO PROVIDE SUCH SERVICES. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY / ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING. 4. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILE D HIS E-RETURN OF INCOME ON 19.9.2011 DECLARING TOTAL INCOME OF RS. 37,72,458/-. THE CASE OF THE ASSESSEE FOR AY 2010-11 WAS COMPLETED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED A S THE ACT) AT AN INCOME OF RS. 1,00,67,907/- AGAINST RETURN INCOME OF RS. 34,67,890/- VIDE ORDER DATED 13.3.2013. DURING THE ASSESSMENT PROCEEDINGS FOR AY 2010-11 THE AO MADE ADDITION OF RS. 30,03,946/- ON ACCOUNT OF ADVANCE COMMISSION WHI CH WAS 4 BOOKED BY THE ASSESSEE UNDER THE HEAD SUNDRY CREDIT ORS FOR ADVANCE. THE AO HELD THAT THE ASSESSEE HAD INACCUR ATELY TREATED THE COMMISSION AS ADVANCE COMMISSION FOR THE YEAR TO DEFER THE LIABILITY OF TAX AND TO ADJUST THIS WILLFULLY IN FUT URE IN THE PROFIT AND LOSS ACCOUNT. FURTHER, AN ADDITION OF RS. 18,55,000/- WAS MADE ON ACCOUNT OF COMMISSION PAID. OUT OF THIS COMMISSION DISALLOWED, RS. 15,00,000/- WAS ON ACCOUNT OF COMMISSION PAID T O VARIOUS PARTIES AND RS. 3,55,000/- (50% OF COMMISSION) PAI D TO SPOUSE OF THE ASSESSEE. ON PERUSAL OF RECORD FOR AY 2011-12, I T WAS FOUND THAT THE ASSESSEE HAS AGAIN SHOWN THE ADVANCE COMMISSION RECEIVED OF RS. 32,90,089/- UNDER THE HEAD SUNDRY CREDITORS FOR ADVANCE. THE DIFFERENCE OF THIS ADVANCE FOR AY 2011-12 AND AY 20 10-11 COMES TO RS. 2,86,143/- (RS. 3290089-3003946). SECONDLY, THE ASSESSEE HAS AGAIN SHOWN COMMISSION PAID OF RS. 3,00,000/- U NDER THE HEAD OF DIRECT EXPENSES. THEREFORE, THE AO FORMED AN OP INION THAT INCOME CHARGEABLE TO TAX TO THE EXTENT OF RS. 5,86,143 /- (RS. 2,86,143 + 3,00,000/-) HAS ESCAPED ASSESSMENT. ACCOR DINGLY, AFTER RECORDING REASONS NOTICE U/S. 148 OF THE ACT WAS IS SUED ON 27.6.2013 AND SERVED UPON THE ASSESSEE THROUGH SPEE D POST. IN RESPONSE TO THE AFORESAID NOTICE, THE ASSESSEE FILED A LETTER DATED 17.2.2014, REQUESTING TO TREAT THE RETURN FILED EARLIER U/S. 139(1) OF THE ACT FOR AY 2011-12 AS COMPLIANCE TO THE NOTICE U/S. 148 OF THE 5 ACT. THE ASSESSEE ALSO MADE A REQUEST FOR INFORMING IT THE REASONS FOR REOPENING THE CASE FOR THE RELEVANT PERIOD. TH E ASSESSEE WAS PROVIDED THE REASON FOR REOPENING OF THE CASE ON 17.2 .2014. FURTHER, FOLLOW UP NOTICES U/S. 143(2) AND 142(1) OF THE ACT WERE ALSO DULY ISSUED AND SERVED UPON THE ASSESSEE. IN R ESPONSE TO THE SAME, THE AR OF THE ASSESSEE ATTENDED THE PROCEEDINGS F ROM TIME TO TIME AND SUBMITTED RELEVANT DETAILS. DURING THE YEAR, THE ASSESSEE HAS SHOWN INCOME FROM BUSINESS OR PROFESSION AND IN COME FROM OTHER SOURCES. THE ASSESSEE HAS ALSO SET OFF HOUSE PROPERTY LOSS WITH THE BUSINESS INCOME. DURING THE ASSESSMENT PROCE EDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN ADVANCE COMM ISSION AS ON 31.3.2011 AMOUNTING TO RS. 32,90,089/- AND THE SA ME HAS BEEN BOOKED UNDER THE HEAD SUNDRY CREDITORS FOR ADVANCE . SINCE, THIS WAS ONE OF THE REASONS FOR REOPENING OF THIS CASE U /S. 147/148 OF THE ACT, THE ASSESSEE WAS SPECIFICALLY ASKED TO FURN ISH COMPLETE DETAILS OF SUNDRY CREDITORS FOR ADVANCES AND ALSO ASK ED TO SHOW CAUSE AS TO WHY THIS SHOULD NOT BE TREATED AS INCOME O F THE ASSESSEE DURING THE YEAR. IN REPLY, THE ASSESSEE VID E LETTER DATED 19.12.2014 FILED SUBMISSION ON THIS ISSUE STATING TH EREIN AS FOLLOWS- THAT THE ASSESSEE HAD PREFERRED AN APPEAL AGAINST THE ADDITION OF RS. 30,03,946/- MADE BY THE AO FOR AY 2010-11 ON ACCOUNT OF ADVANCE COMMISSION. THE 6 CIT(A) DELETED THE ADDITION ON THIS ISSUE. FURTHER, THE ASSESSEE HAS SUBMITTED THAT THE GROSS RECEIPT OF THE YEAR UNDER REFERENCE INCLUDES OF RS. 30,03,946/- RECEIVED AS ADVANCE COMMISSION IN THE AY 2010-11 AND TREATED AS INCOME IN THE YEAR UNDER REFERENCE. 4.1 AO FURTHER OBSERVED THAT DEPARTMENT HAS NOT ACCEP TED THE ORDER OF THE LD. CIT(A) FOR AY 2010-11 AND THE DEPAR TMENTAL APPEAL IS PENDING BEFORE THE ITAT. DURING THE ASSESSMENT P ROCEEDINGS FOR AY 2010-11, THE AO HAD SHOW-CAUSED THE ASSESSEE ON T HIS ISSUE WHEREIN THE ASSESSEE HAD CONTENDED AS UNDER:- WE HAVE RECEIVED COMMISSION FROM OUR FOREIGN CUSTOMERS FOR SERVICES RENDERED BY US FOR SALE OF THEIR MACHINERIES TO INDIAN CUSTOMERS. THOUGH, WE ARE IN RECEIPT OF SOME PERCENTAGE OF COMMISSION AS PER THE MILESTONE EMBEDDED IN THE CONTRACT ENTERED INTO CUSTOMERS, SUCH CONTRACTS COMES INTO ONSITE MAINTENANCE, SERVICE BACKUP AND REPLACEMENT WARRANTIES AND SUCH PAYMENTS RECEIVED FROM CUSTOMERS ARE RECOGNIZED OVER THE PERIOD OF CONTRACT RECOGNIZING IT ON TIME BASIS AS A 7 STANDARD ACCOUNTING POLICY WHICH IS BEING REGULARLY FOLLOWED BY US. 4.2 THE AO FOUND THE ASSESSEE'S CONTENTION NOT TENAB LE AND HELD THAT THE ASSESSEE IS NOT THE ORIGINAL EQUIPMENT MANUFAC TURER (OEM). HE GETS COMMISSION FOR PROCURING ORDERS FROM THE CUSTOMERS ON THE BEHALF OF OEM. THE WARRANTY OF THE EQUIPMENT IS BINDING ON THE OEM AND IN CASE OF ANY DEFECT, OEM IS LIABLE TO RE CTIFY AND MAKE IT GOOD. OEMS HAVE THEIR OWN CUSTOMER CARE DEPARTMENTS TO TAKE CARE OF THEIR OF THEIR POST SALES PROBLEMS AND ASSE SSEE HAS NO ROLE IN IT. THE ASSESSEE HAS NO STAKE AND HAS INACCURATELY TRE ATED THE COMMISSION AS ADVANCE COMMISSION FOR THE YEAR TO DEF ER THE LIABILITY OF TAX AND TO ADJUST THIS WILL FULLY IN FUTU RE IN THE P&L ACCOUNT. ACCORDINGLY ADDITION ON THIS ISSUE WAS MADE BY THE ASSESSING OFFICER IN AY 2010-11. 4.3 FURTHER, FROM THE PERUSAL OF NOTES ON ACCOUNT, FIL ED ALONG WITH FORM 3CD OF THE AUDITOR, IT IS NOTICED THAT THE ASSESSEE FOLLOWS AS-9 ACCOUNTING STANDARD ISSUED BY THE ICAI ON 'REVENUE RECOGNITION. IT IS MENTIONED IN THE NOTES ON ACCOUNT THAT THE COMMISSIO N (OVERSEAS) ARE RECOGNIZED ON REALIZATION BASIS. IN CONTRAST TO THE SAME, THE ASSESSEE IS TREATING THE COMMISSION AS ADVA NCE 8 COMMISSION TO DEFER THE LIABILITY OF TAX AND TO ADJUST THIS WILL FULLY IN FUTURE IN THE P & L ACCOUNT. 4.4 FURTHER, THE ASSESSEE HAS SUBMITTED THAT ADVANCE COMMISSION AMOUNTING TO RS.30,03,946/-, PERTAINING TO AY 2010-11 , HAS BEEN TREATED AS INCOME IN THE AY 2011-12. IN VIEW OF THE AB OVE FACT, IT IS CLEAR THAT ADVANCE COMMISSION AMOUNTING TO RS. 32,90,08 9/- BOOKED UNDER THE HEAD 'SUNDRY CREDITORS FOR ADVANCE' SOLELY PERTAINS TO AY 2011-12. SINCE THE FACTS OF THE YEAR A Y 2011-12 ARE SIMILAR TO AY 2010-11, THE TREATMENT OF RS. 32,90,089 /- AS ADVANCE COMMISSION DURING THE YEAR IS NOT ACCEPTABLE AND THERE FORE, IT IS TREATED AS REGULAR AND NORMAL INCOME FOR THE YEAR AND ACCORDINGLY ADDED BACK TO THE INCOME OF THE ASSESSEE. THE PENALT Y PROCEEDINGS U/S. 271(1)(C) OF THE I.T. ACT, 1961 ARE INITIATED FO R CONCEALING/FURNISHING INACCURATE PARTICULARS OF INCO ME. ACCORDINGLY, THE AO COMPLETED THE ASSESSMENT AT RS. 72,32,110/- U/S . 147/143(3) OF THE I.T. ACT, 1961 ON 02/03/2015, AFTER MAKING ADDITIONS. AGAINST THE AFORESAID ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A)-XXVIII, NEW DELHI, W HO VIDE HIS COMMON IMPUGNED ORDER DATED 26.8.2015 HAS PARTLY ALL OWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION IN DI SPUTE BY RESPECTFULLY FOLLOWING THE DECISION OF THE LD. CIT(A) IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 2010-11. AGGRIEVED WITH THE 9 ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEF ORE THE TRIBUNAL. 5. LD. SR. DR RELIED UPON THE ORDER OF THE AO AND RE ITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 6. IN THIS CASE, NOTICE OF HEARING TO THE ASSESSEE W AS SENT BY THE REGISTERED AD POST, IN SPITE OF THE SAME, ASSESSEE, NOR HIS AUTHORIZED REPRESENTATIVE APPEARED TO PROSECUTE THE MATTE R IN DISPUTE, NOR FILED ANY APPLICATION FOR ADJOURNMENT. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE I SSUE INVOLVED IN THE PRESENT APPEAL, WE ARE OF THE VIEW THA T NO USEFUL PURPOSE WOULD BE SERVED TO ISSUE NOTICE AGAIN AND A GAIN TO THE ASSESSEE, THEREFORE, WE ARE DECIDING THE PRESENT AP PEAL EXPARTE QUA ASSESSEE, AFTER HEARING THE LD. DR AND PERUSING THE RECORDS. 7. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT RECORDS, ESPECIALLY THE IMPUGNED ORDER. WE FIND THAT THE ISSUE IN DISPUTE IS RELATING TO DELETION OF ADDITION OF RS. 32,90,089/- MADE BY THE AO ON ACCOUNT OF TREATING ADVANCE COMMISSION AS INCOME F OR THE YEAR. WE FURTHER FIND THAT THIS ISSUE HAS BEEN ADJUDICATED BY THE THEN LD. CIT(A)-XXIV, NEW DELHI IN THE ASSESSEES OWN CASE FO R THE AY 2010-11 IN DETAIL IN HIS FAVOUR. HENCE, THE LD. C IT(A)-17, NEW DELHI HAS RIGHTLY FOLLOWED THE DECISION OF THE THEN LD. CIT(A)-XXIV, 10 NEW DELHI IN THE ASSESSEES OWN CASE ON IDENTICAL SE T OF FACTS AND ALLOWED THE ISSUE IN DISPUTE, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE DECISION OF THE LD. CIT(A) AND REJECT THE GROUND RAISED BY THE REVENUE. AS A RESU LT, THE APPEAL OF THE REVENUE FOR AY 2011-12 STANDS DISMISSED. 8. FOLLOWING THE CONSISTENT VIEW, AS AFORESAID, THE ISSUE INVOLVED IN AY 2012-13 IS ALSO REJECTED AND ACCORDINGLY, THE APPEA L OF THE REVENUE RELEVANT FOR ASSESSMENT YEAR 2012-13 STANDS DISMISS ED. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE DEPARTM ENT STAND DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 06/09/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 06/09/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHE S