ITO, New Delhi V. M/s Brainstreet Marketing Pvt. Ltd., New Delhi

ITA 6008/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77683 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H G SEMA
• Assessee Lawyers: R K SEHGAL
• Keywords: Business income; Assessment record; Sham transactions
• Section: 133(6); 131; 56

Judgement Text

ITA NOS. 5794 & 6008/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5794/DEL/2010 A.Y. : 2007-08 M/S BRAINSTREET MARKETING PVT. LTD., 1304, PRAGATI TOWER, 26, RAJENDRA PLACE, NEW DELHI 110008 (PAN: AACCCB4024G) VS. INCOME TAX OFFICER, WARD 3(1), NEW DELHI AND AND AND AND I.T.A. NO. 6008/DEL/2010 A.Y. : 2007-08 INCOME TAX OFFICER, WARD 3(1), ROOM NO. 385-A, CR BUILDING, NEW DELHI, VS. M/S BRAINSTREET MARKETING PVT. LTD., 1304, PRAGATI TOWER, 26, RAJENDRA PLACE, NEW DELHI 110008 (PAN: AACCCB4024G) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : S H. R.K. SEHGAL, CA DEPARTMENT BY : SH. H.G. SEMA , SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE E MANATE OUT OF ORDERS OF THE LD. CIT(A) DATED 15.10.2010 AND P ERTAIN TO ASSESSMENT YEAR 2007-08. ITA NOS. 5794 & 6008/DEL/2010 2 2. THE GROUNDS RAISED IN THE ASSESSEES APPEAL BEI NG ITA NO. 5794/DEL/2010 (A.Y. 2007-08) READ AS UNDER:- 1. THE DISALLOWANCE OF THE CLAIM OF SALARY PAYMENT S OF RS. 24,04,200/- AS EXPENSES BY THE ASSESSING OFFICE R AND CONFIRMATION OF THE DISALLOWANCE OF RS. 18,17,200/- OUT OF IT BY THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, NEW DELHI IS CONTRARY TO FACTS A ND LAW AND THEREFORE, THE DISALLOWANCE OF SALARY IS LI ABLE TO BE DELETED. 2. THE DISALLOWANCE OF COMMISSION EXPENSES OF RS. 5,79,800/- BY THE ASSESSING OFFICER AND CONFIRMATIO N OF IT BY THE COMMISSION OF INCOME TAX (APPEALS)-VI, NEW DELHI IS CONTRARY TO FACTS AND LAW AND THEREFOR E, THE DISALLOWANCE IS LIABLE TO BE DELETED. 3. THE DISALLOWANCE OF OTHER EXPENSES AMOUNTING TO RS. 2,21,646/- BY THE ASSESSING OFFICER CLAIMING THAT NO NE OF THE EXPENSES ARE ALLOWABLE IN VIEW OF HIS ASSES SING THE INCOME OF THE APPELLANT AS INCOME FROM OTHER SOURCES AS AGAINST THE BUSINESS INCOME DISCLOS ED BY THE APPELLANT, ARE LIABLE TO BE ALLOWED TO THE APPELLANT IN VIEW OF ASSESSMENT OF INCOME AS BUSINESS INCOME BY THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, NEW DELHI. 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY O F THE GROUNDS OF APPEAL. ITA NOS. 5794 & 6008/DEL/2010 3 3. THE GROUNDS RAISED IN THE REVENUES APPEAL BEING ITA NO. 6008/DEL/2010 (A.Y. 2007-08) READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED ON FA CTS AND IN LAW IN DIRECTING THAT THE RECEIPT OF RS. 37,09,000/- AS P URPORTED COMMISSION FROM TWO PARTIES BE ASSESSED UNDER THE HEAD OF 'BUS INESS INCOME INSTEAD OF UNDER THE HEAD OF INCOME FROM OTHER SOURCES' OR DERED IN THE ASSESSMENT ORDER AS THE ASSESSEE WAS FOUND TO BE NO T PROVIDING ANY SERVICES TO ITS PURPORTED PRINCIPLES AS PROVED CON CLUSIVELY FROM VARIOUS EVIDENCES COLLECTED DURING ASSESSMENT PROCEEDINGS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LA W IN ORDERING THAT THE RECEIPT OF RS. 37,09,000/- AS PURPORTED COMMISSI ON BE ASSESSED UNDER THE HEAD OF 'BUSINESS INCOME' INSTEAD OF UNDER THE HEAD OF 'INCOME FROM OTHER SOURCES' ORDERED IN THE ASSESSMENT ORDER IGNO RING VARIOUS EVIDENCES FOUND DURING ASSESSMENT PROCEEDINGS WHICH CONCLUSIV ELY PROVE THAT NO SERVICES WERE PROVIDED AND NOT GIVING ANY FINDING O N SUCH EVIDENCES. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW I N ALLOWING FOLLOWING EXPENSES DISREGARDING THE PROVISIONS OF SECTION 57 OF THE I.T. ACT WHICH PROVIDE THAT ONLY EXPENSES INCURRED WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF EARNING INCOME ASSESSED UNDER SECTION 56 CAN BE ALLOWED: (I) DIRECTOR'S REMUNERATION OF RS.2, 16,000/- (II) ADMINISTRATION AND OTHER EXPENSES OF RS. 1,47, 165/- ITA NOS. 5794 & 6008/DEL/2010 4 (III) SALARY EXPENSE OF RS. 5,87,000/- CLAIMED TO H AVE BEEN PAID THROUGH CHEQUE BASED UPON EVIDENCE OF BANK STATEMENT (IV) SENT OF RS. 1,32,OOO/- BASED UPON EVIDENCE OF B ANK STATEMENT. 4. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW I N ALLOWING THE EXPENSES MENTIONED ABOVE IGNORING THE JUDGMENT OF T HE HON'BLE SUPREME COURT IN THE CASE OF L.M. CHHABDA AND SONS VS. CIT (65 ITR 638), KERALA HIGH COURT IN S.P.V. BANK LTD VS. CIT (126 ITR 773) AND DELHI HIGH COURT IN DALMIA DAIRY INDUSTRIES LTD VS. CIT (241 ITR 9) IN WHICH IT HAS BEEN SAID THAT IF AN ASSESSEE DOES 'NOT CARRY OUT ANY BUSINESS, IT IS NOT ELIGIBLE FOR CLAIM OF ANY EXPENSE. 5. THE APPELLANT CRAVES LEAVE FOR RESERVING THE R IGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 4. IN THIS CASE THE ASSESSEE HAS DECLARED ITS BUSIN ESS TO BE CARRYING OUT MARKETING ACTIVITIES FOR M/S SARTHAK METALS MARKE TING PVT. LTD., BHILAI, CHHATISGARH AND M/S BHAYANA BUILDERS PVT. LTD ., NEW DELHI. THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE SHOWS GROSS RECEIPTS OF RS. 37,09,000/- AND PROFIT BEFORE TAX OF RS. 8,189 /-. THE ASSESSEE CLAIMED TO HAVE RECEIVED REMUNERATION OF RS. 18.24 LACS FROM M/S SARTHAK METALS MARKETING PVT. LTD. AND RS. 18.85 LACS FROM M/S BHAYANA BUILDERS PVT. LTD. DURING THE RELEVANT PREVI OUS YEAR. THE MAJOR EXPENSES SHOWN IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE ARE ON ACCOUNT OF SALARIES RS.24,04,200/-; COMMISSION RS.5,79,800/-; DIRECTORS REMUNERATION RS.2,16,000/-; RENT RS.1,32, 000/-; ADMINISTRATIVE AND OTHER EXPENSES RS. 1,47,165/-. ITA NOS. 5794 & 6008/DEL/2010 5 5. DURING THE ASSESSMENT PROCEEDINGS, AO PROCEEDED TO EXAMINE THE VERACITY OF COMMISSION EXPENSES, SALARY EXPENSES ETC. INCURRED BY THE ASSESSEE. HE ALSO EXAMINED AS TO WHETHER THE A SSESSEES CLAIM OF RECEIVING THE COMMISSION FROM THE ABOVE TWO PARTIES W AS CORRECT OR NOT. FROM THE ENQUIRY OF THE STATEMENTS OF THE PURPO RTED COMMISSION AGENTS OF THE ASSESSEE COMPANY, ALL OF WHICH WERE RE CORDED IN THE PRESENCE OF THE AUTHORIZED REPRESENTATIVE OF THE AS SESSEE, IN WHICH HE WAS ALSO GIVEN OPPORTUNITY TO CROSS EXAMINE THE DEP ONENTS, THE ASSESSING OFFICER GATHERED THAT THESE PERSONS DID N OT PROVIDE ANY SERVICES TO THE ASSESSEE COMPANY. NONE OF THEM COULD RECALL THE NAMES OF PARTIES TO WHOM GOODS WERE SOLD ON BEHALF O F THE ASSESSEE COMPANY. ON THE BASIS OF. THE INFORMATION GATHERED AN D STATEMENTS RECORDED, THE ASSESSING OFFICER CONCLUDED THAT THES E PERSONS WERE, IN FACT ONLY ASSISTING THE ASSESSEE IN INTRODUCING BOG US EXPENDITURE. 5.1 FURTHER, THE ASSESSING OFFICER REFERRED TO THE S TATEMENT OF SHRI AMIT KUMAR AGGARWAL, DIRECTOR OF THE ASSESSEE COMPANY DURING THE RELEVANT PREVIOUS YEAR, RECORDED ON OATH UNDER SECT ION 131 OF THE ACT. SHRI AMIT AGGARWAL IS A PRACTICING CHARTERED ACCOUNT ANT. DURING THE RELEVANT PREVIOUS YEAR, HE CLAIMED TO HAVE EARNED SA LARY OF RS. 1,08,000/- FROM THE ASSESSEE COMPANY. THE ASSESSING OFFICER HAD ISSUED SUMMONS UNDER SECTION 131 TO BOTH THE DIRECTO RS OF THE ASSESSEE COMPANY DURING THE RELEVANT PREVIOUS YEAR SHRI AMIT KUMAR AGGARWAL AND SHRI RAJINDER ADHIKARI. OUT OF THE TWO, ONLY SHRI AMIT KUMAR AGGARWAL APPEARED AND HIS STATEMENT WAS RECORD ED UNDER SECTION 131. SHRI AMIT AGGARWAL HAS STATED IN HIS ST ATEMENT THAT THERE WERE TWO CLIENTS OF THE ASSESSEE COMPANY DURING THE RELEVANT PREVIOUS YEAR FROM WHOM THEY EARNED COMMISSION M/S BHAYANA B UILDERS PVT. LTD. AND M/S SARTHAK METALS PVT. LTD. HE WAS ALSO ASK ED ABOUT THE ITA NOS. 5794 & 6008/DEL/2010 6 NAMES OF PARTIES TO WHOM GOODS WERE SOLD ON BEHALF OF THESE COMPANIES. IN RESPONSE TO THIS SPECIFIC QUESTION, HE STATED THAT HE DID NOT REMEMBER THE NAMES OF THESE PARTIES. HE ALSO STAT ED THAT THEY HAD AGREEMENT WITH M/S BHAYANA BUILDERS TO PROCURE ORDER ON THEIR BEHALF FOR SALE OF IMPORTED TILES. THEY ALSO PROCURED ORDER S FOR SALE OF WIRE BY M/S SARTHAK METALS PVT. LTD. THE INFORMATION OBTAINED F ROM M/S SARTHAK METALS MARKETING PVT. LTD. U/S 133(6) OF THE ACT SHOW ED THAT THE ASSESSEE COMPANY HAD RAISED BILLS FOR COMMISSION TO T HIS COMPANY FOR SALES MADE TO JUST ONE PARTY, WHICH WAS SAIL, BOKARO STEEL PLANT. THE BILLS WERE RAISED FOR 'SUPPLY AND FOLLOW UP OF CASI CORED WIRE TO SAIL BOKARO STEEEL PLANT AGAINST THREE DIFFERENT PURCHASE ORDERS. THROUGH THESE BILLS, THE ASSESSEE COMPANY CHARGED COMMISSION OF RS. 18,24,000/- THE ASSESSING OFFICER OBSERVED THAT SHR I AMIT AGGARWAL, WHO CLAIMED TO BE RUNNING DAY-TO-DAY AFFAIRS OF THE ASSESSEE COMPANY, COULD NOT RECALL THE NAME OF STEEL AUTHORITY OF IND IA LTD. IN HIS STATEMENT WHICH IS NOT JUST SURPRISING BUT LEAVES N O DOUBT THAT EVEN THE ASSESSEE COMPANY DID NOT PROVIDE ANY SERVICES T O ITS PURPORTED CLIENTS. 5.2 M/S BHAYANA BUILDERS PVT. LTD. HAD PAID COMMISSION TO THE ASSESSEE COMPANY PURPORTEDLY BASED ON SALES MADE TO T WELVE PARTIES OUT OF WHICH THE DIRECTOR OF THE ASSESSEE COMPANY CO ULD NOT RECALL EVEN ONE PARTY. NOT ONLY THIS, HE COULD NOT EVEN TE LL THE CITIES OF THE PARTIES TO WHOM SALES WERE MADE NOR COULD GIVE THE DESCRIPTION OF IMPORTED TILES FOR WHICH ORDERS WERE PROCURED. THE A SSESSING OFFICER, THEREFORE, CONCLUDED THAT THE ASSESSEE COMPANY DID N OT PROVIDE ANY SERVICES TO ANY OF ITS PURPORTED CLIENTS M/S SART HAK METALS MARKETING PVT. LTD. OR M/S BHAYANA BUILDERS PVT. LTD. ITA NOS. 5794 & 6008/DEL/2010 7 5.3 AO FURTHER OBSERVED THAT SH. AMIT KUMAR AGGARWAL , COULD NOT TELL ABOUT DESIGNATION OR DUTIES OF ANY OF THE EMPLOYEES . PURSUANT TO THE ENQUIRY IN THIS REGARD AO FORMED AN OPINION THAT T HE PERSONS SAID TO BE EMPLOYEES WERE NOT IN THE SERVICE OF THE ASSESSEE COMPANY. AO CONCLUDED THAT THE ASSESSEE COMPANY DID NOT PROVIDE ANY SERVICES TO ITS PURPORTED PRINCIPLES NOR ANY REAL BUSINESS WAS CONDUCTED BY IT DURING THE RELEVANT PREVIOUS YEAR. THE AMOUNT OF RS. 37,09,000/- RECEIVED FROM M/S SARTHAK METALS MARKETING PVT. LTD. AND M/S BHAYANA BUILDERS PVT. LTD. WAS, THEREFORE, ASSESSED UNDER TH E HEAD 'INCOME FROM OTHER SOURCES'. THE ASSESSING OFFICER FURTHER A DDED THAT SINCE THE TRUE NATURE OF INCOME RECEIVED BY THE ASSESSEE HAS N OT BEEN EXPLAINED BY THE ASSESSEE AND THEREFORE, THE EXPENSES CAN NOT BE SAID TO BE EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING SUCH INCOME. THEREFORE, NO EXPENSES WERE ALLOWED AGAINST SUCH INCOME. THE ASSESSING OFFICER ALSO STATED THAT, IN FACT, WH ILE EXAMINING BOOKS OF ACCOUNTS, THE ASSESSEE COULD NOT PRODUCE BILLS F OR MANY EXPENSES CLAIMED BY IT. NO BILL FOR TELEPHONE EXPENSE WAS PRO DUCED CLAIMING THAT ALL THE EXPENSE WAS FOR PRE-PAID MOBILE CARDS. THERE WAS NO AGREEMENT FOR RENT EXPENSE CLAIMED BY THE ASSESSEE A ND IT WAS ALL SHOWN TO HAVE BEEN PAID IN CASH. FOR MOST OF THE EX PENSES, THE ASSESSEE PRODUCED SELF MADE VOUCHERS. THEREFORE, AL L THE EXPENSES ITA NOS. 5794 & 6008/DEL/2010 8 CLAIMED BY THE ASSESSEE WERE DISALLOWED. INCOME WAS THUS ASSESSED AT AN AMOUNT OF RS. 37,09,000/-. 6. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED B EFORE THE LD. CIT(A). LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND THE ORDER OF THE AO AND HELD AS UNDER:- I) THE ASSESSING OFFICER HAS TREATED THE BUSINESS I NCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES' BY STATI NG THAT THE APPELLANT COMPANY DID NOT PROVIDE ANY SERVICES TO M/S SARTHAK METALS MARKETING PVT. LTD. AND M/S. BHAYANA BUILDERS PVT. LTD. HE HAS REFERRED TO THE STATEMENT O F SHRI AMIT KUMAR AGGARWAL AND HAS MENTIONED THAT SHRI AGGARWAL COULD NOT GIVE THE SPECIFIC DETAILS OF TH E SERVICES PROVIDED BY THE APPELLANT TO ABOVE SAID COMPANIES. A PERUSAL OF THE STATEMENT OF SHRI AMIT KUMAR AGGARWAL (ANNEXURE 'F' OF THE ASSESSMENT ORDER) SHOWS THAT HE HAS STATED BEFORE THE ASSESSING OFFICER THAT THE COMMISS ION WAS RECEIVED FROM THESE TWO PARTIES, HOWEVER, HE COULD NOT REMEMBER THE NAMES OF PARTIES FROM WHOM ORDERS WERE PROCURED FOR THESE PARTIES. BUT THIS IN ITSELF CANN OT LEAD TO THE CONCLUSION THAT THESE WERE SHAM TRANSACTIONS. TH E ASSESSING OFFICER HAS HIMSELF MENTIONED THAT INFORMA TION WAS GATHERED FROM M/S SARTHAK METALS MARKETING PVT. LTD. AND M/S BHAYANA BUILDERS PVT. LTD U/S 131/133(6) OF THE ACT WHEREIN THEY HAD CONFIRMED THE COMMISSION PAYMENTS TO THE APPELLANT COMPANY AND HAS ALSO GIVEN THE DETAIL S OF THE TRANSACTIONS AND WORK CARRIED OUT BY THE APPELLANT ITA NOS. 5794 & 6008/DEL/2010 9 COMPANY. M/S. BHAYANA BUILDERS PVT. LTD HAS ADMITTED T O HAVE PAID COMMISSION TO THE APPELLANT FOR SALES MADE TO 12 CONCERNS. NAMES OF THESE CONCERNS WERE ALSO PROVIDE D. SIMILARLY M/S SARTHAK METALS MARKETING PVT. LTD. HAS ADMITTED THAT THE COMMISSION PAYMENT WAS MADE TO APPELLANT COMPANY FOR SUPPLY AND FOLLOW UP OF CASI C ARED WIRE TO SAIL BOKARO STEEL PLANT AGAINST THREE DIFFER ENT PURCHASE ORDERS. THE ASSESSING OFFICER HAS NOT BROU GHT ANY EVIDENCE ON RECORD TO SHOW THAT THESE TRANSACTIONS WERE NOT, IN FACT, CARRIED OUT THROUGH THE APPELLANT COMP ANY, NOR IS THERE ANY MATERIAL TO SHOW THAT VARIOUS COMMISSION RECEIPTS ARE NOT LINKED UP WITH THE WORK CARRIED OU T ON BEHALF OF THE ABOVE SAID TWO CONCERNS. IN SUCH CIRCUMSTANCES, I FIND THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE 'BUSINESS INCOME' AS 'INCO ME FROM OTHER SOURCES' MERELY ON POSSIBLE INTERPRETATIONS O F THE STATEMENT OF SHRI AMIT KUMAR AGGARWAL GROUND NO.3 OF THE APPEAL IS, THEREFORE, TREATED AS ALLOWED. (II) IN GROUND NO.4, THE APPELLANT HAS RAISED OBJ ECTIONS TO DISALLOWANCE OF EXPENSES, WHICH MAINLY CONSIST OF S ALARIES, COMMISSION, DIRECTOR'S REMUNERATION, RENT AND ADMN. & OTHER EXPENSES. AS REGARDS DISALLOWANCE OF COMMISSI ON EXPENSES OF RS. 5,79,800/-, IT IS EVIDENT FROM THE R EADING OF STATEMENTS OF COMMISSION AGENTS AND THE LETTERS FILED BY THEM THAT THESE PERSONS HAVE GIVEN GENERAL REPLIES T O THE SPECIFIC QUERIES AND WERE NOT ABLE TO SUBSTANTIATE THAT WHAT WERE THE SPECIFIC ACTIVITIES CARRIED OUT BY THEM FO R WHICH THEY RECEIVED COMMISSION INCOME. THEY WERE ALSO NOT AB LE ITA NOS. 5794 & 6008/DEL/2010 10 TO PRODUCE BOOKS OF ACCOUNTS. NO PROPER BASIS OR AGREEMENT HAS BEEN PROVIDED FOR ASCERTAINING THE COMMISSION PAYMENTS NOR COULD IT BE PROVED THAT THEY HAD KNOWLEDGE/EXPERIENCE FOR PROVIDING SUCH SERVICES. T HE APPELLANT HAS CARRIED OUT LIMITED ACTIVITIES WITH RE GARD TO TRANSACTIONS ON BEHALF OF M/S BHAYANA BUILDERS PVT. LTD AND M/S SARTHAK METALS MARKETING PVT. LTD. THE ONUS IS ON THE ASSESSEE TO LINK UP THE COMMISSION PAYMENTS MADE TO VARIOUS PARTIES WITH THE PARTICULAR TRANSACTION. I N THE ABSENCE OF THE SAME, I FIND THAT THE ASSESSING OFFIC ER WAS JUSTIFIED IN DISALLOWING THESE COMMISSION PAYMENTS. (III) AS REGARDS DISALLOWANCE OF RS. 2,16,000/- ON ACCOUNT OF DIRECTOR'S REMUNERATION AND RS.1 ,47,165/- FOR ADMN . AND OTHER EXPENSES, THE ASSESSING OFFICER HAS NOT POINT ED OUT ANY SPECIFIC DISCREPANCY. THE ASSESSING OFFICER HAS HIMSELF MENTIONED THAT ADMN. & OTHER EXPENSES OF RS. 1,47,165 /- CONSISTED SOLELY OF REPAIR AND MAINTENANCE EXPENSES ON THREE DATES. A COPY OF SAID ACCOUNT AND VOUCHER AND BILLS WERE ADMITTEDLY PRODUCED BEFORE THE ASSESSING OFFICE R. HE HAS NOT RAISED ANY OBJECTION TO THESE EVIDENCES. IN SUCH CIRCUMSTANCES, I FIND THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE WITHOUT ANY BASI S OR MATERIAL. (IV) REGARDS SALARY OF RS. 24,04,200/-, THE ASSESS ING OFFICER HAS MENTIONED THAT ONE SHRI ANIRUDH SINGHAL HAS STA TED TO HAVE RECEIVED SALARY OF RS. 1,80,000/-. HOWEVER, RS . 1,00,000/- WAS RETURNED VIDE CHEQUE NO. 347550 ON ITA NOS. 5794 & 6008/DEL/2010 11 20.3.2007 TO SHRI BHIKARI, WHO IS THE BROTHER OF SH RI RAJENDER SINGH ADHIKARI, DIRECTOR. FROM THIS, THE A SSESSING OFFICER CONCLUDED THAT THE PART SALARY WAS RETURNED BY HIM. THE ID. AR'S SUBMISSION IS THAT THIS WAS THE RETURN OF LOAN. HOWEVER, THESE SUBMISSIONS ARE NOT SUBSTANTIATED BY EVIDENCE AND HENCE, DISALLOWANCE IS UPHELD TO THE E XTENT THE AMOUNT IS RETURNED BY SHRI ANIRUDH SINGHAL. FOR SALARY CLAIMED ON ACCOUNT OF PAWAN KUMAR, IT IS EVIDENT FROM PAGE 28 OF THE ORDER THAT HE HAS STATED THAT HE DID NOT WORK FOR THE COMPANY AND IN FACT, HAD NOT HEARD OF ANY SUCH COMPANY. THE APPELLANT HAS NOT RAISED A NY SPECIFIC ARGUMENT IN THIS REGARD AND HENCE THE DISA LLOWANCE ON ACCOUNT OF SALARY TO SHRI PAWAN KUMAR IS UPHELD. OTHERWISE ALSO, THE ASSESSING OFFICER SPECIFICALLY MENTIONED THAT NO SALARY REGISTER/ATTENDANCE REGISTE R HAS BEEN MAINTAINED BY THE APPELLANT AND EXCEPT FOR SHR I ANIRUDH SINGHAL AND SHRI VIJAY GOSAIN, ALL OTHERS HA VE CLAIMED TO HAVE RECEIVED SALARIES THROUGH CASH. IN S UCH CIRCUMSTANCES, THE GENUINENESS OF THE CASH PAYMENTS WHICH ARE NOT SUPPORTED BY SALARY REGISTER/ATTENDAN CE REGISTER CANNOT BE ASCERTAINED. IN HIS STATEMENT SH RI AMIT KUMAR AGGARWAL ALSO COULD NOT SPECIFY THE ACTIVITIE S CARRIED OUT BY VARIOUS EMPLOYEES. LD. AR HAS SUBMITTED THAT SALARIES OF 5 EMPLOYEES OTHER THAN SHRI ANIRUTH SIN GHAL WERE GIVEN BY ACCOUNT PAYEE CHEQUES AND NOT BY CASH . THE ASSESSING OFFICER IS DIRECTED TO VERIFY FROM HIS REC ORDS AND ITA NOS. 5794 & 6008/DEL/2010 12 ALLOW THE CLAIM OF THE APPELLANT TO THE EXTENT IT IS SUPPORTED BY BANK STATEMENTS. (V) AS REGARDS EXPENSES OF RS. 1,32,0001- ON ACCOUN T OF RENT, THE ASSESSING OFFICER HAS ADMITTED THAT SMT NE ELAM SINGHAL AND LT. BISHAN SINGH ADHIKARI TO WHOM RENT I S STATED TO BE PAID, HAS SHOWED THE SAME AS THEIR RENTAL INCO ME IN RESPONSE TO NOTICE U/S 133(6) OF THE ACT. HOWEVER, SINCE THERE WAS NO RENT AGREEMENT AND THE ENTIRE RENT WAS PAID IN CASH AND ALSO SINCE SHRI AMIT KUMAR AGGARWAL IN HIS STATEMENT U/S 131 COULD NOT GIVE DETAILS OF ADDRESS OF SMT. NEELAM SINGHAL, THE ASSESSING OFFICER DOUBTED THE GENUINENESS OF THESE EXPENSES. DURING THE PROCEEDING S BEFORE ME, IT WAS STATED THAT THE RENT IS NOT PAID I N CASH BUT BY ACCOUNT PAYEE CHEQUES AND THE SAME WAS PAID UNDE R VERBAL AGREEMENT AND IS CONFIRMED BY BOTH THE PAYEE U/S 133(6). IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO VERIFY FROM RECORDS AND ALLOW THE CLAIM TO THE EXTENT IT IS SUPPORTED BY BANK STATEMENTS. 7. AGAINST THE ABOVE ORDER THE ASSESSEE AND REVENUE ARE IN CROSS APPEALS BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD. DR IN HIS SUBMISSION PLACED RELIANCE UPON THE ORDER O F THE AO. HE CLAIMED THAT LD. CIT(A) SHOULD HAVE GIVEN OPPORTUNIT Y TO THE AO TO CANVASS HIS CASE PURSUANT TO THE SUBMISSIONS OF THE ASSESSEE BEFORE THE LD. CIT(A). 8.1 LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ON T HE OTHER HAND RELIED UPON THE ORDER OF THE LD. CIT(A) AS FAR AS T REATMENT OF INCOME ITA NOS. 5794 & 6008/DEL/2010 13 FROM COMMISSION FROM M/S SARTHAK METALS MARKETING AND B HAYANA BUILDERS IS CONCERNED. IN THIS REGARD, HE ALSO SU BMITTED BEFORE US THE ORDER OF THE LD. CIT(A) IN THE CASE OF THESE TWO PA RTIES. IN THESE ORDERS, THE LD. CIT(A) HAS ALLOWED THE EXPENDITURE CLAIMED BY THEM WHICH WAS TREATED AS COMMISSION BY THE ASSESSEE. L D. COUNSEL OF THE ASSESSEE POINTED OUT THAT THE ORDER OF THE LD. CIT( A) IN THE ABOVE TWO PARTIES WAS PASSED AFTER TAKING INTO COGNIZANCE TH E AOS OBSERVATION IN THE CASE OF THE PRESENT ASSESSEE. AS REGARDS THE CLAIM OF EXPENDITURE, LD. COUNSEL OF THE ASSESSEE CONTEN DED THAT LD. CIT(A) HAS NOT PROPERLY ADJUDICATED THE ISSUE AND HAS NOT D EALT WITH THE DETAILS OF EXPENDITURE AS MENTIONED IN THE PAPER BO OK PAGE. 43. APROPOS GROUND NO. 1 AND 2 OF THE REVENUES APPEAL APROPOS GROUND NO. 1 AND 2 OF THE REVENUES APPEAL APROPOS GROUND NO. 1 AND 2 OF THE REVENUES APPEAL APROPOS GROUND NO. 1 AND 2 OF THE REVENUES APPEAL 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE ASSESSEE HAS DEC LARED ITS BUSINESS TO BE CARRYING OUT THE MARKETING ACTIVITIES FOR M/S SAR THAK METALS MARKETING PVT. LTD., BHILAI, CHATISGARH AND BHAYANA B UILDERS PVT. LTD., NEW DELHI. THE ASSESSEE HAS CLAIMED TO HAVE RECEIVE D REMUNERATION OF RS. 18.24 LACSA FROM M/S SARTHAK METALS MARKETING P LTD . AND RS. 18.85 LACS FROM M/S BHAYANA BUILDERS PVT. LTD. DURING THE RE LEVANT PREVIOUS YEAR. THE AO HAS TREATED THE BUSINESS INCOME UNDE R THE HEAD INCOME FROM OTHER SOURCES BY STATING THAT THE ASSES SEE COMPANY DID NOT PROVIDE ANY SERVICE TO M/S SARTHAK METALS MARKE TING P LTD. AND M/S BHAYANA BUILDERS P LTD. HE REFERRED TO THE STATEMENT OF AMIT KUMAR AGGARWAL, A DIRECTOR OF THE COMPANY AND HAS MENTIONED THAT IN HIS STATEMENT SH. AGGARWAL COULD NOT GIVE THE SPECIFIC DETAILS OF SERVICE PROVIDED BY THE ASSESSEE TO THE ABOVE COMPANIES. IN THIS REGARD, WE NOTE THAT SH. AMIT KUMAR AGGARWAL HAS STATED THAT THE COMMISSION ITA NOS. 5794 & 6008/DEL/2010 14 WAS RECEIVED FROM THESE PARTIES, HOWEVER, HE COULD NOT REMEMBER THE NAMES OF THE PARTIES FROM WHOM ORDERS WERE PROCURED FOR THESE PARTIES. WE AGREE WITH THE LD. CIT(A) THAT THIS I TSELF CANNOT LEAD TO THE CONCLUSION THAT THESE WERE SHAM TRANSACTIONS. THE A O HAS HIMSELF MENTIONED THAT INFORMATION WAS GATHERED FROM M/S SAR THAK METALS MARKETING P LTD. AND BHAYANA BUILDERS P LTD. U/S. 131 /133(6) OF THE ACT, WHEREIN THEY HAD CONFIRMED THE COMMISSION PAYMENT TO THE ASSESSEE COMPANY AND HAVE ALSO GIVEN THE DETAILS OF THE TRANSACTIONS AND THE WORK CARRIED OUT BY THE ASSESSEE COMPANY. M/ S BHAYANA BUILDERS P LTD. HAS ADMITTED TO HAVE PAID COMMISSION TO THE ASSESSEE FOR SALES MADE TO 12 CONCERNS, NAMES OF THESE CONCERN S WERE ALSO PROVIDED. SIMILARLY, M/S SARTHAK METALS P LTD. HAS A DMITED THE COMMISSION PAYMENT WAS MADE TO THE ASSESSEE COMPANY F OR SUPPLY AND FOLLOW UP OF KASI CURED WIRE TO BOKARA STEEL P LANT AGAINST THREE DIFFERENT PURCHASE ORDERS. 9.1 FURTHERMORE, WE NOTE THAT LD. CIT(A) IN THE CASE OF M/S BHYANA BUILDERS P LTD. HAS REVERSED THE AOS ORDER, IN THAT CASE REGARDING DISALLOWANCE OF COMMISSION PAID TO M/S BRAIN STREET MA RKETING P LTD. OF RS. 18.85 LACS. THE LD. CIT(A) HAS GIVEN A FINDING IN THIS REGARD THAT THAT ASSESSEE (M/S BRAINSTREET MARKETING P LTD.) HAS PROVIDED SERVICES TO M/S BHAYANA BUILDERS P LTD. IN THIS REGARD, FOLL OWING FROM THE APPELLATE ORDER OF THE CIT(A) IN THE CASE OF BHAYAN A BUILDERS P LTD. DATED 27.2.2012 CAN BE GAINFULLY REFER HERE: THE UNDERSIGNED HAS SEEN THE ASSESSMENT RECORD. ORDERS FROM AS MANY AS 12 PARTIES WERE ARRANGED BY M/S BRAINSTREET MARKETING P LTD. FOR THE APPELLANT DETAILS AS TO THESE PARTIES IS AVAILABLE AT (PG. 37 OF ITA NOS. 5794 & 6008/DEL/2010 15 PB). THIS LIST PERTAINS TO CALCULATIONS OF AGENCY COMMISSION TO BE PAID TO BRAIN STREET MARKETING P LTD. BELOW THIS LIST, THERE IS A NOTHING KIND A TTEN. :- MR. NITIN BHAYANA, DIRECTOR. WE HAVE RECEVIED THE ABOVE ORDERS THROUGH BRAINSTREET PLEASE APPROVE TH E PAYMENT OF THEIR COMMISSION RS. 75 PER SQ.MTR. THIS IS SIGNED AS ON 2.6.2006. THERE ARE TWO INVOICES (PG. 35 & 36 OF PB) ISSUED BY M/S BRAINSTREET MARKETING PVT LTD. SHOWING COMMISSION CHARGES OF RS. 9,50,00,000/- AND RS. 9,35,000/-. SERVICE TAX @ 12% AND EDUCATION CESS @ 2% HAS BEEN CHARGED ON EACH OF THE AFORESAID AMOUNTS. THEN THERE IS CONFIRMATION (PG. 34 OF THE P B) OF ACCOUNTS SHOWING PAYMENTS TO M/S BRAINSTREET MARKETING PVT. LTD. AFTER DEDUCTING TDS OF RS. 59,818/ - AND RS. 58,874/- AT THE TIME OF CREDITING AMOUNT OF R S. 10,94,444/- AND RS. 10,66,280/-. TDS HAS BEEN DULY DEPOSITED IN GOVT. A/C. CERTIFICATE IN FORM NO. 16A IS AVAILABLE AT PAGE 112 OF PB. FROM THE AFORESAID IT MAY BE SEEN THAT TDS WAS DEDUCED FROM THE COMMISSION PAYMENT TO M/S BRAINSTREET MARKETING PVT. LTD. AND M/S BRAINSTREET MARKETING (P) LTD. HAVE ALSO CAHRGED SERVICE TAX ETC. ON THE PAYMENTS RECEIVED BY IT FOR THE SERVICES GIVEN TO THE APPELLANT. IN VIEW OF THE ABOVE THE CLAIM OF COMMISSION MADE BY THE APPELLANT, IT TREATED AS GENUINE AND THE ITA NOS. 5794 & 6008/DEL/2010 16 DISALLOWANCE MADE BY THE AO IS DELETED. THE GROUND OF APPEAL ALLOWED. 9.2 SIMILARLY, WE NOTE THAT LD. CIT(A) IN THE CASE O F SARTHAK METALS MARKETING PVT. LTD. VIDE ORDER DATED 23.12.2010 HAS R EVERSED THE ORDER OF AO DISALLOWING THE COMMISSION PAYMENT BY M/S SARTHA K METALS MARKETING PVT. LTD. TO M/S BRAINSTREET MARKETING PVT. L TD. 9.3 IN THE BACKGROUND OF THE AFORESAID DISCUSSION A ND THE APPELLATE ORDER OF THE LD. CIT(A) IN THE CASE OF M/S SARTHAK METALS MARKETING P LTD. AND BHAYANA BUILDERS P LTD. WHEREIN IT HAS BEE N GIVEN A FINDING THAT ASSESSEE HAS PROVIDED THE SERVICES TO THE AFOR ESAID PARTIES, WE FIND THAT LD. CIT(A)S ORDER IS REASONABLE IN THIS REGARD. UNDER THE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE SA ME. ACCORDINGLY, WE UPHOLD THE SAME. ACCORDINGLY, WE DISMISS THE GRO UND NO. 1 AND 2 OF THE REVENUES APPEAL. 10. NOW WE DEAL WITH THE CLAIM OF EXPENSES BY THE A SSESSEE AND ITS DISALLOWANCE BY THE AO WHICH WAS PARTLY SUSTAINED B Y THE LD. CIT(A) AGAINST WHICH REVENUE AND ASSESSEE ARE IN CROSS APP EALS. 11. COMMISSION EXPENSES COMMISSION EXPENSES COMMISSION EXPENSES COMMISSION EXPENSES ON THIS ISSUE FROM THE ENQUIRY OF THE STATEMENT OF THE PURPORTED COMMISSION AGENTS OF THE ASSESSEE COMPANY ALL OF WHIC H WERE RECORDED IN THE PRESENCE OF THE AUTHORISED REPRESEN TATIVE OF THE ASSESSEE IN WHICH HE WAS ALSO GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE DEPONENT, THE AO GATHERED THAT THESE PERSONS DI D NOT PROVIDE ANY SERVICE TO THE ASSESSEE COMPANY. NONE OF THEM COULD RECALL THE NAMES OF THE PARTIES TO WHOM GOODS WERE SOLD ON BEHA LF OF THE ASSESSEE COMPANY. ON THE BASIS OF INFORMATION GATH ERED AND ITA NOS. 5794 & 6008/DEL/2010 17 STATEMENT RECORDED THE ASSESSING OFFICER CONCLUDED THAT THESE PERSONS WERE INFACT ONLY ASSISTING THE ASSESSEE IN INTRODUC ING THE BOGUS EXPENDITURE. 12. UPON ASSESSEES APPEAL IN THIS REGARD LD. CIT(A ) HAS OBSERVED THAT IT IS EVIDENT FROM THE READING OF THE STATEMEN T OF THE COMMISSION AGENTS AND LETTERS FILED BY THEM THAT THESE PERSON S HAVE GIVEN THE GENERAL REPLIES TO THE SPECIFIC QUERIES AND WERE N OT ABLE SUBSTANTIATE AS TO WHAT WERE THE SPECIFIC ACTIVITIES CARRIED OUT BY THEM FOR WHICH THEY RECEIVE COMMISSION. THEY WERE ALSO NOT ABLE TO PRODUCE THE BOOKS OF ACCOUNTS. NO PROPER BOOKS OR AGREEMENTS WAS PROVIDED IN ASCERTAINING THE COMMISSION PAYMENT NOR IT COULD BE PR OVED THAT THEY HAVE KNOWLEDGE / EXPERIENCE IN PROVIDING SUCH SERVI CES. IN THESE CIRCUMSTANCES, THE LD. CIT(A) HELD THAT THE ONUS IS ON THE ASSESSEE TO LINK UP THE COMMISSION PAYMENT MADE TO VARIOUS PARTIE S WITH THE PARTICULAR TRANSACTIONS. IN THE ABSENCE OF THE SAME , LD. CIT(A) HELD THAT AO WAS JUSTIFIED IN DISALLOWING THESE COMMISSION PAYME NTS. FROM THE ABOVE DISCUSSION, WE FIND THAT THE ASSESSEE HAS FAI LED TO JUSTIFY THE COMMISSION EXPENSES PAID. LD. CIT(A) HAS PASSED REA SONABLE ORDER IN THIS REGARD, WHICH DOES NOT NEED ANY INTERFERENCE O N OUR PART. ACCORDINGLY, WE UPHOLD THE SAME. 13. OTHER EXPENSES OTHER EXPENSES OTHER EXPENSES OTHER EXPENSES WE FIND THAT WITH REGARD TO DISALLOWANCE OF THE OT HER EXPENSES INCURRED BY THE ASSESSEE, THE AO HAS OBSERVED THAT SINCE THE TRUE NATURE OF INCOME RECEIVED BY THE ASSESSEE HAS NOT B EEN EXPLAINED BY THE ASSESSEE, THEREFORE, THE EXPENSES CANNOT BE S AID TO BE EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF EARNING SU CH INCOME. HENCE, NO EXPENSES WERE ALLOWED AGAINST SUCH INCOME. WE FIND THAT THIS ITA NOS. 5794 & 6008/DEL/2010 18 BASIS OF AOS ARGUMENT IS NOT SUSTAINABLE, IN LIGH T OF OUR FINDING ON THE ISSUE OF TREATMENT OF INCOME RECEIVED BY THE A SSESSEE IN REVENUES GROUND NO. 1 AND 2 DEALT HEREINABOVE. 14. FURTHER THE AO HAS OBSERVED THAT WHILE EXAMINING THE BOOKS OF ACCOUNTS THE ASSESSSEE COULD NOT PRODUCE THE BILLS FOR MANY EXPENSES CLAIMED BY IT. NO BILL FOR TELEPHONE EXPENSES WAS PRODUCED CLAIMING THAT ALL THE EXPENSES WAS FOR PRE-PAID MOBILE CARD. THERE WAS NO RENT AGREEMENT FOR RENT EXPENSES CLAIMED BY THE ASSESSEE AND IT WAS ALL SHOWN TO HAVE BEEN PAID IN CASH. FOR MOST OF THE EX PENSES THE ASSESSEE PRODUCED SELF MADE VOUCHERS, THEREFORE, TH E EXPENSES CLAIMED BY THE ASSESSEE WERE DISALLOWED. 15. UPON ASSESSEES APPEAL IN THIS REGARD, LD. CIT( A) GAVE PART RELIEF TO THE ASSESSEE. 16. WE FIND THAT AO HAS MADE THE DISALLOWANCE BY MAK ING GENERAL OBSERVATIONS. LD. CIT(A) HAS ADJUDICATED THE ISSUE GRANTING PART RELIEF TO THE ASSESSEE. IN THIS REGARD, REVENUE AND ASSES SEE BOTH ARE IN APPEAL BEFORE US. IN THIS REGARD, WE NOTE THAT ASS ESSEE HAS CLAIMED THAT HE HAS SUBMITTED VOLUMINOUS DETAILS AND SUBMISS IONS BEFORE THE LD. CIT(A) WHICH HAVE NOT BEEN PROPERLY ADJUDICATED BY THE LD. CIT(A). ON PERUSAL OF THE LD. CIT(A)S FINDING REGARDING TH E ISSUE OF OTHER EXPENSES, WE AGREE THAT THE LD. CIT(A) HAS NOT PROP ERLY CONSIDERED ITA NOS. 5794 & 6008/DEL/2010 19 THE SUBMISSIONS OF THE ASSESSEE. IN THESE CIRCUMST ANCES, IN OUR CONSIDERED OPINION, THE INTEREST OF JUSTICE WILL BE SERVED IF THE ISSUE REGARDING THE CLAIM OF EXPENDITURE BY THE ASSESSEE E XCEPT FOR THE CLAIM OF COMMISSION EXPENSES IS REMITTED TO THE FILE OF THE AO. ACCORDINGLY, THE AO IS DIRECTED TO CONSIDER THIS IS SUE AFRESH, IN LIGHT OF THE DETAILED SUBMISSIONS OF THE ASSESSEE IN THIS REG ARD. 17. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE AND REVENUE STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25/4/2014. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 25/4/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NOS. 5794 & 6008/DEL/2010 20