M/s Hyderabad Distelleries & Wineries Pvt. Ltd., Hyderabad V. DCIT, Hyderabad

ITA 59/HYD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2536 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 14-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 12-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Assessee Lawyers: KALYAN DAS
• Keywords: Business expenditure; Set aside
• Section: 131

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL HYDERABAD BENCH 'A' BEFORE SHRI N.R.S.GANESAN AND SHRI AKBER BASHA I.T.A.NO.59/HYD/2009 ASSESSMENT YEAR 2004-05 HYDERABAD DISTILLERIES & WINERIES (P) LTD., HYDERAB D. .. APPELLANT (PAN AAACH2679B) VERSUS DY. CIT, CIRCLE 2(2), HYDERABAD. ..RESPONDENT APPELLANT BY : SHRI KALYANDAS RESPONDENT BY : SHRI K.V.N.CHARYA O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT (APPEALS) III, HYDERABAD, DATED 20-11-2008, AND PER TAINS TO ASST. YEAR 2004- 05. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IS DISALLOWANCE OF RS.4,01,139 TOWARDS COMMISSION. 2. SHRI KALYANDAS, LEARNED REPRESENTATIVE FOR THE A SSESSEE, SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACT URE AND SALE OF IMFL. THE ASSESSEE APPOINTED VARIOUS MARKETING AGENTS AND PAI D COMMISSION AND INCENTIVE IN THE COURSE OF THE BUSINESS ACTIVITY. A CCORDING TO THE LEARNED REPRESENTATIVE, THE ASSESSEE PAID A SUM OF RS.7,55, 06,302 TOWARDS INCENTIVE AND COMMISSION FOR THE ASST. YEAR UNDER CONSIDERATI ON. THE ASSESSING OFFICER ACCEPTED THE ENTIRE PAYMENTS EXCEPT A SUM OF RS.4,0 1,139 PAID TO M/S PRATIBHA ENTERPRISES. ACCORDING TO THE LEARNED REPRESENTATIV E, THE AO DISALLOWED THE PAYMENT MADE TO M/S PRATIBHA ENTERPRISES ON THE GRO UND THAT THE ASSESSEE HAD 2 NOT FURNISHED CONFIRMATION LETTER. THE LEARNED REPR ESENTATIVE SUBMITTED THAT THE ASSESSEE HAD FILED CONFIRMATION LETTERS IN RESPECT OF ALL THE PAYMENTS MADE TO MARKETING AGENTS. COPIES OF THE CONFIRMATION LETTER S WERE ALSO FILED BEFORE THE CIT (A). THE CIT (A) CALLED FOR REMAND REPORT. REFE RRING TO PAGE 6 OF THE PAPER BOOK, THE LEARNED REPRESENTATIVE SUBMITTED THAT THE ENTIRE PAYMENTS WERE MADE THROUGH CHEQUES AND CANARA BANK CERTIFIED THAT THE CHEQUE ISSUED BY THE ASSESSEE TO M/S PRATIBHA ENTERPRISES WAS CLEARED IN FAVOUR OF M/S PRATIBHA ENTERPRISES. LIKEWISE, THE PAYMENTS MADE TO OTHER M ARKETING AGENTS WERE ALSO CLEARED. THEREFORE, ACCORDING TO THE LEARNED REPRES ENTATIVE, THE IDENTITY OF THE PAYEE WAS NOT IN DISPUTE AND THE GENUINENESS OF THE PAYMENT WAS ALSO NOT IN DISPUTE. THE CREDITWORTHINESS OF THE ASSESSEE IN MA KING THE PAYMENTS WAS ALSO NOT IN DISPUTE. REFERRING TO THE ASSESSMENT ORDER, THE LEARNED REPRESENTATIVE SUBMITTED THAT THE AO FOUND THAT THE SUMMONS ISSUED TO M/S PRATIBHA ENTERPRISES WAS NOT SERVED. ACCORDING TO THE LEARNE D REPRESENTATIVE, M/S PRATIBHA ENTERPRISES SHIFTED THEIR PREMISES, WHICH WAS EVIDENT BY THE LETTER OF THE AO DATED 24-10-2008 ADDRESSED TO THE ASSESSEE. THEREFORE, IT IS NOT CORRECT TO SAY THAT M/S PRATIBHA ENTERPRISES WAS NOT IN EXI STENCE. WHEN THE SUMMONS WAS NOT SERVED ON THE PAYEE, ACCORDING TO THE LEARN ED REPRESENTATIVE, IT IS FOR THE AO TO TAKE FURTHER STEPS TO FIND M/S PRATIBHA E NTERPRISES. PLACING RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V . ORISSA CORPORATION PVT. LTD., 159 ITR 78, THE LEARNED REPRESENTATIVE SUBMIT TED THAT MERELY BECAUSE THE SUMMONS COULD NOT BE SERVED ON M/S PRATIBHA ENTERPR ISES, THERE CANNOT BE ANY PRESUMPTION THAT M/S PRATIBHA ENTERPRISES WAS NOT I N EXISTENCE. THE FACT THAT THE CHEQUE DEPOSITED BY M/S PRATIBHA ENTERPRISES WA S CLEARED THROUGH THE 3 BANKER AS CERTIFIED BY THE BANK CLEARLY SHOWS THAT M/S PRATIBHA ENTERPRISES WAS IN EXISTENCE. THEREFORE, ACCORDING TO THE LEARNED R EPRESENTATIVE, THE DISALLOWANCE OF RS.4,01,139 OUT OF THE TOTAL PAYMEN T OF RS.7,55,06,302 IS NOT JUSTIFIED. THE LEARNED REPRESENTATIVE ALSO PLACED H IS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF LIFE INSURANCE CORPOR ATION OF INDIA V. CIT, 219 ITR 410, AND IN THE CASE OF BEDI AND COMPANY V. CIT , 230 ITR 580, THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF CI T V. A.S.K. RATHINASAMY NADAR, 212 ITR 527, AND THE JUDGMENT OF THE CALCUTT A HIGH COURT IN THE CASE OF CIT V. DEVAS SYNTHETICS PVT. LTD., 188 ITR 16. 3. ON THE CONTRARY, SHRI K.V.N.CHARYA, LEARNED DEPA RTMENTAL REPRESENTATIVE, SUBMITTED THAT WHEN THE ASSESSEE CLAIMS PAYMENT IT IS FOR THE ASSESSEE TO PROVE THE IDENTITY OF THE PAYEE AND GENUINENESS OF THE TRANSACTION. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE ASS ESSEE COULD NOT ESTABLISH THE IDENTITY OF M/S PRATIBHA ENTERPRISES. EVEN IN T HE REMAND PROCEEDING, THE NOTICE ISSUED BY THE AO WAS RETURNED WITH AN ENDORS EMENT 'NO SUCH PERSON IN THE ADDRESS'. THEREFORE, ACCORDING TO THE LEARNED D EPARTMENTAL REPRESENTATIVE, THE IDENTITY OF M/S PRATIBHA ENTERPRISES WAS NOT PR OVED. THEREFORE, THE GENUINENESS OF THE PAYMENT ALSO WAS NOT PROVED. ACC ORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE AO DISALLOWED ONLY A SUM OF RS.4,01,139 OUT OF TOTAL PAYMENTS OF RS.7,55,01,302. THEREFORE, THE CIT (A) HAS RIGHTLY CONFIRMED THE ORDER OF THE AO. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE PAID COM MISSION AND INCENTIVE TO FIVE MARKETING AGENTS. A SUM OF RS.4,01,139 WAS PAI D TO M/S PRATIBHA 4 ENTERPRISES, ONE OF THE MARKETING AGENTS. COPY OF T HE BANK CERTIFICATE AVAILABLE AT PAGE 6 OF THE PAPER BOOK SHOWS THAT THE PAYMENT WAS MADE BY CHEQUE DRAWN ON CANARA BANK IN FAVOUR OF M/S PRATIBHA ENTE RPRISES. M/S PRATIBHA ENTERPRISES DEPOSITED THE CHEQUE IN BANK OF BARODA, BARKATPURA BRANCH, HYDERABAD. THE CHEQUE WAS CLEARED IN FAVOUR OF M/S PRATIBHA ENTERPRISES. WHEN THE BANK CLEARED THE CHEQUE IN FAVOUR OF M/S PRATIB HA ENTERPRISES, WE HAVE NO REASON TO DOUBT THE IDENTITY OF M/S PRATIBHA ENTERP RISES. NO DOUBT THE SUMMONS ISSUED BY THE AO WAS RETURNED WITH AN ENDORSEMENT ' NO SUCH PERSON IN THE ADDRESS'. THE LETTER WRITTEN BY THE AO ON 24-10-200 8 TO THE ASSESSEE SHOWS THAT M/S PRATIBHA ENTERPRISES SHIFTED THE PREMISES. WHEN M/S PRATIBHA ENTERPRISES SHIFTED PREMISES EVEN ACCORDING TO THE AO, IT MAY NOT BE RIGHT TO SAY THAT THE IDENTITY OF THE AGENT WAS NOT ESTABLIS HED. UNDER IDENTICAL CIRCUMSTANCES, THE APEX COURT IN THE CASE OF ORISSA CORPORATION PVT. LTD. (SUPRA), CONSIDERED THE ISSUE ELABORATELY AND FOUND THAT WHEN THE ASSESSEE HAS GIVEN THE NAME AND ADDRESS OF THE CREDITOR, IT IS F OR THE AO TO PURSUE THE MATTER FURTHER. IN THAT CASE, THE SUMMONS ISSUED BY THE AO UNDER SEC. 131 OF THE INCOME-TAX ACT WAS RETURNED WITH AN ENDORSEMENT 'LEFT'. IN THOSE CIRCUMSTANCES, THE SUPREME COURT OBSERVED THAT THE AO HAS NOT MADE ANY EFFORTS TO PURSUE THE SO-CALLED ALLEGED CREDITOR. E XCEPT FOR FURNISHING THE NAME AND ADDRESS, THE ASSESSEE COULD NOT DO ANYTHING. IN VIEW OF THIS JUDGMENT OF THE APEX COURT, IT IS FOR THE AO TO PROCEED FURTHER WHEN THE RECIPIENT OF THE COMMISSION LEFT THE PREMISES. THE CERTIFICATE ISSUE D BY CANARA BANK, COPY OF WHICH IS AVAILABLE AT PAGE 6 OF THE PAPER BOOK, CLE ARLY SHOWS THAT M/S PRATIBHA ENTERPRISES ENCASHED THE CHEQUE BY DEPOSITING THE S AME IN THEIR ACCOUNT 5 MAINTAINED WITH BANK OF BARODA, BARKATPURA BRANCH. WHEN THE CHEQUE WAS CLEARED THROUGH BANKING CHANNEL AND THE RECIPIENT A DMITTEDLY SHIFTS ITS PREMISES IN THE YEAR 2005, IT CANNOT BE SAID THAT THE IDENTI TY WAS NOT PROVED. COMING TO GENUINENESS OF THE TRANSACTION, THE PAYMENT WAS DEB ITED IN THE ACCOUNT OF THE ASSESSEE AND IT WAS CREDITED IN THE ACCOUNT OF M/S PRATIBHA ENTERPRISES. IN THAT FACTUAL SITUATION, WE CANNOT DOUBT THE GENUINENESS OF THE PAYMENT. THEREFORE, IN OUR OPINION, THERE IS NO REASON TO DISALLOW THE SUM OF RS.4,01,139. WHEN THE ASSESSEE ENTERED INTO MARKETING ARRANGEMENT WITH AN AGENT, THE PAYMENT HAS TO BE ALLOWED AS BUSINESS EXPENDITURE WHILE COMPUTI NG THE TOTAL INCOME. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LOWER A UTHORITIES AND DELETE THE ADDITION OF RS.4,01,139. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 18-12-09. SD SD (AKBER BASHA) (N.R.S.GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, 18TH DECEMBER, 2009. RRRAO. COPY OF THE ORDER FORWARDED TO:- 1. M/S KALYANDAS & CO, CHARTERED ACCOUNTANTS, 15, VENK ATESHWARA COLONY, NARYANGUDA, HYDERABAD 500 029. 2. DCIT, CIRCLE 2(2), HYDERABAD. 3. CIT II, HYDERABAD. 4. CIT (A) III, HYDERABAD. 5. DR, ITAT, HYDERABAD.