M/s Dhoot Advisory Services Pvt Ltd, Kolkata V. D.C.I.T Cir - 6,kolkata., Kolkata

ITA 592/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100087 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2013
• Court: TRIBUNAL
• Department Lawyers: SARBARI MUKHERJEE JCIT SRDR
• Assessee Lawyers: A K TULSIYAN
• Keywords: Assessment record
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, KO LKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM] ITA NO.592/KOL/2013 ASSESSMENT YEAR : 2009-10 M /S. DHOOT ADVISORY SERVICES PVT. LTD. -VERSUS- D.C. I.T., CIRCLE-6, KOLKATA KOLKATA (PAN:AACCD 3661 R) (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI A.K.TULSIYAN, FCA FOR THE RESPONDENT : SMT. SARBARI MUKHERJEE, JCIT ,SR>DR DATE OF HEARING : 19.11.2015. DATE OF PRONOUNCEMENT : 02.12.2015. ORDER PER SHRI N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE DIREC TED AGAINST THE ORDER DATED 07.01.2013 OF CIT(A)-VI, KOLKATA RELATING TO A.Y.20 09-10. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE READS AS FOLLOWS :- 1. THAT THE LD. CIT(A)-VI/KOL ERRED IN CONFIRMING THE DISALLOWANCE OF SERVICE CHARGES AMOUNTING TO RS.67,62,207/- EXPENDED BY THE ASSESSE E WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. THE DISALLOWANCE IS UNJUST IFIED, ARBITRARY AND UNTENABLE IN LAW AND NEED TO BE DELETED. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING .. 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF MUTUAL FUND SCHEMES OF VARIOUS MUTUAL FUND HOUSES F OR WHICH IT EARNS COMMISSION FROM MUTUAL FUND HOUSES AT SPECIFIED PERCENTAGES FO R DIFFERENT SCHEMES. DURING THE PREVIOUS YEAR THE ASSESSEE EARNED TOTAL COMMISSION OF RS.1,01,93,430/- FROM THE MUTUAL FUND HOUSES. THE ASSESSEE PAID COMMISSION OF RS.67,62,027/- TO M/S. SPEEDFAST FINCO (P)LTD (HEREINAFTER REFERRED TO AS SFPL). THE AO WAS OF THE VIEW THAT ITA NO.592/KOL/2013 M/S. DHOOT ADVISORY S ERVICES PVT.LTD. A.YR.2009-10 2 THE AFORESAID COMMISSION PAYMENT WAS DISPROPORTIONA TE TO THE INCOME EARNED BY THE ASSESEE HIMSELF. THE AO SUMMONED THE DIRECTOR OF SF PL AND FOUND THAT THERE IS NO FORMAL AGREEMENT BETWEEN THE ASSESSEE AND SFPL REGA RDING THE PROCUREMENT OF BUSINESS BY SFPL FOR THE ASSESSEE. THE AO ALSO FURT HER NOTICED THAT THE BILLS WERE PRESENTED FOR THE COMMISSION PAYABLE OF THE PREVIOU S YEAR ON 31.03.2009. IN THE COURSE OF THE STATEMENT RECORDED OF SFPL IT WAS EXP LAINED BY SFPL THAT THERE IS NO SPECIFIC REASON THAT BILLS WERE RAISED ONLY ON 31.0 3.2009 EVEN THOUGH THE BUSINESS WERE PROCURED BY THEM DURING THE PERIOD FROM 01.04. 2008 TO 31.03.2009. THE AO FOR THE FOLLOWING REASONS DISALLOWED THE CLAIM OF THE A SSESSEE FOR DEDUCTION OF A SUM OF RS.67,62,207/-. 1.BOTH THE COMMISSION GIVING AND COMMISSION RECEIV ING COMPANY HAS TRANSACTION ONLY WITH EACH OTHER. THE ASSESSEE COMPANY M/S. DHOOT AD VISORY SERVICES (P)LTD HAS GIVEN COMMISSION ONLY TO M/S. SPEEDFAST FINCO (P)LTD AND TO NO OTHER COMPANY AND M/S SPEEDFAST FINCO (P) LTD HAS RECEIVED COMMISSION ONL Y AND ONLY FROM M/S. DHOOT ADVISORY SERVICES (P) LTD. 2. THEY COMMISSION GIVER AND TAKER DOES NOT HAVE A NY AGREEMENT WHATSOEVER REGARDING THE RATE OF COMMISSION TO BE PAID, VOLUME TO BE PRO CURED FOR ELIGIBILITY OF COMMISSION. 3. THE PERSON TO WHOM COMMISSION WAS GIVEN UNABLE T O PROVE WITH EVIDENCE AS TO HOW AND FROM HE HAS RECEIVED BUSINESS. 4. BOTH M/S DHOOT ADVISORY SERVICES (P) LTD THE ASS ESSEE COMPANY AND M/S SPEEDFAST FINCO (P) LTD IS NOT PRODUCE THE DATE WISE PROCUREM ENT OF BUSINESS FORM DIFFERENT PARTIES ALONG WITH EVIDENCE 5. AS PER CLAIM OF M/S SPEEDFAST FINCO (P) LTD THE BUSINESS WAS PROCURED THROUGHOUT THE YEAR BUT THE BILL WAS RAISED ONLY ON 31.03 2009 FOR THE WHOLE YEAR WHICH IS QUITE ABSURD CONSIDERING VOLUME OF BUSINESS GENERATED AS CLAIMED BY M/S SPEEDFAST FINCO (P) LTD. 6. THE PERSON RECEIVED ADVANCE ONLY ON 30/03/2009 O F RS 20,00,000/- AND THE ENTIRE AMOUNT ONLY ON JUNE 2009. THUS THE GENUINENESS OF THE TRANSACTION IS NOT PROV ED. FROM THE ABOVE IT IS AMPLY CLEAR THAT THE ASSESSEE COMPANY AT THE END OF THE YEAR HA S ENTERED INTO A BOGUS TRANSACTION WITH M/S SPEEDFAST FINCO (P) LTD TO REDUCE ITS TAXA BLE INCOME. BEFORE THE CIT(A) THE ASSESSEE POINTED OUT THAT TH E MODE OF PROCUREMENT OF BUSINESS UNDER THE MUTUAL FUND INDUSTRY WAS VERY METHODICAL AND THE FUND HOUSES EMPLOYED A BIG DISTRIBUTION CHAIN OF AGENTS AND CORPORATES ACR OSS THE COUNTRY TO TAP THE INVESTMENTS FROM THE RETAIL CUSTOMERS AT THE ROOT L EVEL RIGHT TILL THE HIGH NET WORTH INDIVIDUALS AND THE CORPORATE. THE ASSESSEE EXPLAIN ED THAT IT WAS ALSO A PART OF SUCH A CHAIN AS THE DISTRIBUTION AGENT AND REGISTERED WITH THE ASSOCIATION OF MUTUAL FUND IN INDIA (AMFI) HAVING BEEN ASSIGNED AMFI REGISTRATION NO.ARN-54995. THE ASSESSEE ITA NO.592/KOL/2013 M/S. DHOOT ADVISORY S ERVICES PVT.LTD. A.YR.2009-10 3 ALSO POINTED THAT THE COMMISSION WAS PAID TO SFPL A ND SMT. RASHMI AGARWAL AS AGENTS TO PROCURE MAJOR PART OF THE BUSINESS FOR TH E ASSESSEE. THE ASSESSEE ALSO POINTED OUT THAT THE TOTAL EXPENDITURE TOWARDS ADMINISTRATI ON WAS RS.81,37,559/- INCLUDING THE COMMISSION PAID TO SFPL OF RS.67,62,027/-. THE ASSE SSEE POINTED OUT THAT ADDITION HAS BEEN MADE BY THE AO PURELY ON ASSUMPTION AND SU RMISES. THE SUBMISSION MADE BY THE ASSESSEE DID NOT FIND FAVOUR TO CIT(A). THE CIT(A) WAS OF THE VIEW THAT THE REASONS GIVEN BY THE AO FOR MAKING THE IMPUGNED AD DITION WERE VALID. THE CIT(A) WAS ALSO OF THE VIEW THAT THE ARRANGEMENT BETWEEN T HE ASSESSEE AND SFPL WAS PURELY WITH A VIEW TO REDUCE THE TAX BURDEN OF THE ASSESSE E AS WELL AS THAT OF SFPL. THE FOLLOWING ARE THE RELEVANT OBSERVATIONS OF THE CIT( A) IN THIS REGARD : 10. THE PERUSAL OF THE ASSESSMENT RECORD OF THE AP PELLANT (M/S. DHOOT ADVISORY SERVICES PVT. LTD.) HAD THE COPY OF ACCOUNTS OF M/S . SPEEDFAST FINCO PVT. LTD. AND IT SHOWS THAT IT IS ASSESSED TO INCOME TAX ENDER PAN A AECS7551 F AS PER THE COPY OF INTIMATION U/S 143(1) OF THE ACT FOR AY. 2009-10. T HE AO HAS DULY ACCEPTED THE FACT THAT THE ASSESSEE HAS MADE PAYMENTS TO T E DISTRIBU TION AGENTS AND HAS NOT QUESTIONED THE AMOUNT OF SERVICE CHARGES (COMMISSION) PAID. THE IN TIMATION U/S 143(1) OF THE ACT OR A.Y. 2009-10 OF M/Z.SPEEDFAST FINCO PVT. LTD. SH OWS THAT IT HAD INCURRED A LOSS IN THE CURRENT YEAR (A.Y. 2009-10) TO BE CARRIED FORWA RD AMOUNTING TO RS.3,36,095/- AND THERE IS ONLY INCOME FROM CAPITAL GAIN OF RS.1,49,6 14/-. M/S. SPEEDFAST FINCO PVT. LTD., THE ADVISOR AND AGENT IN A.Y. 2009-10 HAS INCURRED A TRADING LOSS OF RS.7,65,873/- IN THE SHARE TRADING; LOSS IN EQUITY/COMMODITY! DERIVATIVE TRADING OF RS.46,95,446/-; SHORT TERM LOSS ON SALE OF INVESTMENT OF RS.3,43,802L-;LO NG TERM LOSS ON SALE OF INVESTMENT OF RS.1,21,304/-. IT HAS MERELY AN EXPENDITURE ON SALA RY AND BONUS OF RS.1,50,000/- AND GENERAL EXPENSES OF RS.23,182/-; TELEPHONE EXPENSES OF RS.12,560/-; BOOKS AND PERIODICALS OF RS.500/-; NO CONSULTANCY CHARGES, AC COUNTING CHARGES OF RS.48,000/- ETC. THE ACTIVITIES OF M/S. SPEEDFAST FINCO PVT. LTD. AN D THEIR ACCOUNTS DO NOT SHOW T RAT IT HAS DONE ANY ACTIVITY ON BEHALF OF THE APPELLANT AS SESSEE I.E. M/S. DHOOT ADVISORY SERVICES PVT. LTD. AND IT WOULD HAVE REALLY RECEIVE D ANY SERVICE FROM A LOSS MAKING COMPANY WHO HAS SKELETON STAFF WITH NO CONSULTANCY SERVICES PROVIDING INFRASTRUCTURE. THE MOTIVE OF THE APPELLANT IS CLEAR FROM THIS FACT THAT IT IS AVOIDING PAYMENT OF TAXES BY SHOWING PAYMENT TO A LOSS MAKING COMPANY WHO HAS NO T TO PAY TAXES ON THIS EXPENDITURE (COMMISSION) ULTIMATELY DURING THE YEAR . IT IS A CLEAR CASE OF AVOIDING OF PAYMENT OF TAXES. THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE IN THE INCOME TAX PROCEEDINGS AND ESPECIALLY WHEN THE MATTER HAS NOT BEEN INVESTIGATED IN THE EARLIER YEARS AS IN THE PRESENT YEAR ON THE ISSUE OF GENUINENESS OF PAYMENT OF COMMISSION BY APPELLANT TO A LOSS MAKING COMPANY AND THE VARIOUS FACTS AND CIRCUMSTANCES AS MENTIONED IN PARA 5 TO 10. AGGRIEVED BY THE ORDER OF THE CIT(A) ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.592/KOL/2013 M/S. DHOOT ADVISORY S ERVICES PVT.LTD. A.YR.2009-10 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE LD. C OUNSEL FOR THE ASSESSEE AND THE LD. DR. THE LEGAL REQUIREMENT FOR ALLOWING DEDUCTIO N OF ACCOUNT OF COMMISSION IS THAT THE ASSESSEE SUBMISSION THAT THE SERVICES ARE RENDE RED BY THE PERSON TO WHOM COMMISSION WAS PAID. THE EVIDENCE FILED BY THE ASSE SSEE IN THIS REGARD SHOWS THE FOLLOWING POSITION. 4.1. AT PAGE 36 IS A LETTER BY THE ASSESSEE THROUGH SFPL DATED 01.04.2008 WHEREBY THE SFPL WAS APPOINTED AS A SUB-BROKER OF THE ASSES SEE. AT PAGE 35 IS ANOTHER LETTER DATED 26.12.2008 AGREEING PAY BROKERAGE AT A PARTIC ULAR RATE FOR A PARTICULAR MUTUAL FUND SCHEME. AT PAGE 37 IS A LIST OF MUTUAL FUND SC HEMES AND THE PERCENTAGE OF SUB- BROKERAGE AGREED TO BE PAID TO SFPL BY THE ASSESSEE . BESIDES THE ABOVE COPY OF THE BILLS RAISED BY SFPL ON THE ASSESSEE AND THE DETAIL S OF BUSINESS PROCURED BY SFPL FOR THE ASSESSEE ARE PLACED AT PAGES 41 TO 45 OF THE AS SESSEES PAPER BOOK. AT PAGE 52 IS A LIST OF MUTUAL FUND SCHEMES FOR WHICH SFPL ACTED AS SUB-BROKER FOR WHICH COMMISSION WAS PAID TO IT BY THE ASSESSEE. THIS STA TEMENT ALSO GIVES THE NAMES OF THE CLIENTS FOR WHOM SFPL ACTED AS SUB-BROKER. NONE OF THESE DOCUMENTS WERE DISPUTED BY THE AO. IF THE AO HAD ENTERTAINED DOUBTS WITH RE GARD TO SFPL HAVING ACTED AS SUB- BROKER OF THE ASSESSEE HE SHOULD HAVE EXAMINED VARI OUS CLIENTS WHOSE NAMES ARE GIVEN AT PAGE 52 OF THE ASSESSEES PAPER BOOK TO FI ND OUT AS TO WHETHER SFPL ACTED AS SUB-BROKER IN THE MATTER OF INVESTMENTS MADE BY THE SE PARTIES IN VARIOUS MUTUAL FUND SCHEMES. THIS HAS NOT BEEN DONE BY THE AO. IN THE A BSENCE OF SUCH EXAMINATION BY THE AO IT IS NOT POSSIBLE TO DISREGARD THE EVIDENCE AVAILABLE ON RECORD FOR THE REASONS THAT THERE WAS A TAX EVASION TO THE ASSESSEE AS WEL L AS SFPL. BESIDES THE ABOVE SIMILAR COMMISSION PAID BY THE ASSESSEE IN A.Y.2008-09 TO S FPL HAS BEEN ACCEPTED IN THE PROCEEDINGS U/S 143(3) OF THE ACT FOR A.Y.2008-09. COPY OF THE ASSESSMENT ORDER FOR A.Y.2008-09 IS PLACED AT PAGE 57 AND 58 OF THE PAPE R BOOK. THE COMMISSION RECEIVED BY THE ASSESSEE WAS RS.1.4 CRORES AND THE COMMISSIO N PAID BY SFPL IS RS.66 LAKHS. IN THE LIGHT OF THE EVIDENCE ON RECORD IT IS NOT POSSI BLE TO ACCEPT THE CLAIM OF THE REVENUE THAT THE COMMISSION EXPENDITURE IN QUESTION IS NOT GENUINE OR THE ASSESSEE HAS FAILED TO PROVE THAT THE COMMISSION EXPENDITURE IN QUESTIO N IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES BUSINESS. THE HONBLE PUN JAB AND HARYANA HIGH COURT IN ITA NO.592/KOL/2013 M/S. DHOOT ADVISORY S ERVICES PVT.LTD. A.YR.2009-10 5 THE CASE OF CIT VS MANDEEP SINGH 328 ITR 169 HAS TA KEN A VIEW THAT COMMISSION PAID AND ALLOWED IN AN EARLIER YEAR CANNOT BE DISAL LOWED IN THE SUBSEQUENT YEAR WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. IN THE C ASE OF MOBILE COMMUNICATION (INDIA) (P)LTD VS DCIT 125 ITD 309 THE HONBLE ITAT DELHI BENCH HAS ALSO TAKEN THE SAME VIEW. WE ARE OF THE VIEW THAT WITH THE EVI DENCE ON RECORD THE ASSESSEE AHS ESTABLISHED THAT THE COMMISSION PAID TO SFPL WAS FO R THE PURPOSE OF SERVICES RENDERED BY SFPL AND THEREFORE THE SAME HAS TO BE ALLOWED AS DEDUCTION AS THE SAME IS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. WE, THEREFORE, DIRECT THE AO TO ALLOW THE DEDUCTION AS CLAIMED BY THE ASSESSEE. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ACCO RDINGLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 02.12.2015. SD/- SD/- [WASEEM AHMED] [N.V.VASUDEVAN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 02.12.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S. DHOOT ADVISORY SERVICES PVT. LTD., 113, N.S .ROAD, KOLKATA-700001. 2 THE D.C.I.T., CIRCLE-6, KOLKATA. 3. THE CIT-II, KOLKATA, 4 . THE CIT(A)-VI, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES